CHAPTER 14

IMPORT AND EXPORT

UNDER GST
The section numbers referred to in the Chapter pertain to IGST Act, unless otherwise
specified. Examples/illustrations/Questions and Answers given in the Chapter are
based on the position of GST law existing as on 30.04.2025.

LEARNING OUTCOMES

After studying this Chapter, you will be able to –

 determine if a given transaction is an import of goods or services

 comprehend and analyse the taxability of import of goods and import of

services and appreciate the difference in the mechanism of levy and collection
of tax between the two

 explain and analyse the provisions relating to registration of importer of goods

and services and availing of credit in case of import of goods and services

 determine if a given transaction is an export of goods or services

 comprehend and analyse the concept of zero rating and the mechanism by
which it works under the GST law

 comprehend and analyse the taxability of exports and deemed exports

 explain and analyse the provisions relating to merchant exports

 apply the above concepts in problem solving

 1.2 14.2 GOODS AND SERVICES TAX

1. INTRODUCTION
India is well integrated into the
web of international business
transactions. There is inward as
well as outward flow of goods and
services between India and other
countries.
GST, being a business tax, impacts
import and export too. Provisions
in the GST laws seek to (i) provide
level playing field to domestic
suppliers vis a vis international
suppliers in case of import and (ii) make export more competitive.
The various provisions of GST law as applicable on import and export supplies are
discussed in this Chapter in detail. First, the provisions relating to import of goods
and services have been discussed followed by discussion on provisions relating to
export of goods and services.
The relevant statutory provisions have been extracted first followed by the analysis
thereof.
 IMPORT AND EXPORT UNDER GST 1.3 14.3

2. RELEVANT DEFINITIONS
 Customs frontiers of India means the limits of a customs area as defined in
section 2 of the Customs Act, 1962 [Section 2(4)].
 Customs area means the area of a customs station or a warehouse and
includes any area in which imported goods or export goods are ordinarily
kept before clearance by Customs Authorities [Section 2(11) of the Customs
Act, 1962].
 Customs station means any customs port, customs airport, international
courier terminal, foreign post office or land customs station [Section 2(13) of
the Customs Act, 1962].
 Deemed exports means such supplies of goods as may be notified under
section 147 [Section 2(39) of the CGST Act].
 Export of goods with its grammatical variations and cognate expressions,
means taking goods out of India to a place outside India [Section 2(5)].
 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;
(iv) the payment for such service has been received by the supplier of
service in convertible foreign exchange or in Indian rupees wherever
permitted by the Reserve Bank of India; and
(v) the supplier of service and the recipient of service are not merely
establishments of a distinct person in accordance with Explanation 1 in
section 8 [Section 2(6)].
 Fixed establishment means a place other than the place of business which
is characterised by a sufficient degree of permanence and suitable structure
in terms of human and technical resources to supply services, or to receive
and use services for its own needs [Section 2(7)].
 Import of goods with its grammatical variations and cognate expressions,
means bringing goods into India from a place outside India [Section 2(10)].
 1.4 14.4 GOODS AND SERVICES TAX

 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 [Section 2(11)].
 India means the territory of India as referred to in article 1 of the Constitution,
its territorial waters, seabed and sub-soil underlying such waters, continental
shelf, exclusive economic zone or any other maritime zone as referred to in
the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other
Maritime Zones Act, 1976, and the air space above its territory and territorial
waters [Section 2(56) of the CGST Act].
 Input tax in relation to a registered person, means the central tax, State tax,
integrated tax or Union territory tax charged on any supply of goods or
services or both made to him and includes—
(a) the integrated goods and services tax charged on import of goods;
(b) the tax payable under the provisions of sub-sections (3) and (4) of
section 9;
(c) the tax payable under the provisions of sub-sections (3) and (4) of
section 5 of the IGST Act;
(d) the tax payable under the provisions of sub-sections (3) and (4) of
section 9 of the respective State Goods and Services Tax Act; or

(e) the tax payable under the provisions of sub-sections (3) and (4) of
section 7 of the Union Territory Goods and Services Tax Act,
but does not include the tax paid under the composition levy [Section 2(62)
of the CGST Act].
 Intermediary means a broker, an agent or any other person, by whatever
name called, who arranges or facilitates the supply of goods or services or
both, or securities, between two or more persons, but does not include a
person who supplies such goods or services or both or securities on his own
account [Section 2(13)].
 IMPORT AND EXPORT UNDER GST 1.5 14.5

 Non-taxable online recipient means any unregistered person receiving

online information and database access or retrieval services located in taxable
territory.
Explanation—For the purposes of this clause, the expression "unregistered
person" includes a person registered solely in terms of section 24(vi) of the
CGST Act, 2017 [Section 2(16)].
 Location of the recipient of services means:
(a) where a supply is received at a place of business for which registration
has been obtained, the location of such place of business;
(b) where a supply is received at a place other than the place of business
for which registration has been obtained, that is to say, a fixed
establishment elsewhere, the location of such fixed establishment;
(c) where a supply is received at more than one establishment, whether the
place of business or fixed establishment, the location of the
establishment most directly concerned with the receipt of the supply;
and
(d) in absence of such places, the location of the usual place of residence
of the recipient [Section 2(14)].
 Location of the supplier of services means:
(a) where a supply is made from a place of business for which registration
has been obtained, the location of such place of business;
(b) where a supply is made from a place other than the place of business
for which registration has been obtained, that is to say, a fixed
establishment elsewhere, the location of such fixed establishment;
(c) where a supply is made from more than one establishment, whether the
place of business or fixed establishment, the location of the
establishment most directly concerned with the provision of the supply;
and
(d) in absence of such places, the location of the usual place of residence
of the supplier [Section 2(15)].
 1.6 14.6 GOODS AND SERVICES TAX

 Online information and database access or retrieval services means

services whose delivery is mediated by information technology over the
internet or an electronic network and the nature of which renders their supply
impossible to ensure in the absence of information technology and includes
electronic services such as,–
(i) advertising on the
internet;
(ii) providing cloud services;

(iii) provision of e-books,

movie, music, software
and other intangibles
through telecommunication networks or internet;
(iv) providing data or information, retrievable or otherwise, to any person
in electronic form through a computer network;

(v) online supplies of digital content (movies, television shows, music and
the like);
(vi) digital data storage; and
(vii) online gaming [Section 2(17)].
 Place of business includes-
(a) a place from where the business is ordinarily carried on, and includes a
warehouse, a godown or any other place where a taxable person stores
his goods, supplies or receives goods or services or both; or
(b) a place where a taxable person maintains his books of account; or
(c) a place where a taxable person is engaged in business through an
agent, by whatever name called [Section 2(85) of the CGST Act]
 Recipient of supply of goods or services or both, means—

• where a consideration is payable for the supply of goods or services or

both, the person who is liable to pay that consideration;
 IMPORT AND EXPORT UNDER GST 1.7 14.7

• where no consideration is payable for the supply of goods, the person

to whom the goods are delivered or made available, or to whom
possession or use of the goods is given or made available; and

• where no consideration is payable for the supply of a service, the person

to whom the service is rendered,

and any reference to a person to whom a supply is made shall be construed

as a reference to the recipient of the supply and shall include an agent acting
as such on behalf of the recipient in relation to the goods or services or both
supplied [Section 2(93) of the CGST Act].
 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 in relation to the goods or services or both
supplied [Section 2(105) of the CGST Act].

3. IMPORTS UNDER GST

Under the GST regime, Article 269A constitutionally mandates that supply of goods
and/or services in the course of
import into the territory of India
shall be deemed to be supply of
goods and/or services in the
course of inter-State trade or
commerce.
So, import of goods or services is
treated as inter-State supplies
and is subject to IGST. Supply of
goods and/or services to a Special Economic Zone (SEZ) unit/developer is also
treated as an inter-State supply and thus, is subject to levy of IGST.
In case of goods, the importer of goods pays IGST and in case of services, the
importer of services pays IGST on reverse charge basis. However, in respect of
import of online information and database access or retrieval (OIDAR) services by
unregistered, non-taxable recipients, the supplier located outside India is
 1.8 14.8 GOODS AND SERVICES TAX

responsible for payment of IGST. Either the supplier of OIDAR services has to take
registration or has to appoint a person in India for payment of taxes.
Importer Exporter Code (IEC): PAN of an entity is to be used as IEC. If importer
is registered under GST, he is required to declare only GSTIN as PAN is part of
GSTIN 1.

A. IMPORT OF GOODS

STATUTORY PROVISIONS

Section Particulars

Levy of IGST on imported goods

Section 5(1) Subject to the provisions of sub-section (2), there shall be levied
of the IGST a tax called the integrated goods and services tax on all inter-
Act State supplies of goods or services or both, except on the supply
of alcoholic liquor for human consumption, on the value
determined under section 15 of the Central Goods and Services
Tax Act and at such rates, not exceeding forty per cent., as may
be notified by the Government on the recommendations of the
Council and collected in such manner as may be prescribed and
shall be paid by the taxable person.

Proviso to Provided that the integrated tax on goods other than the goods
section 5(1) as may be notified by the Government on the recommendations
of the IGST of the Council imported into India shall be levied and collected
Act in accordance with the provisions of section 3 of the Customs
Tariff Act, 1975 on the value as determined under the said Act
at the point when duties of customs are levied on the said goods
under section 12 of the Customs Act, 1962.

1
DGFT’s Trade Notice No. 09 dated 12.06.2017
 IMPORT AND EXPORT UNDER GST 1.9 14.9

Inter-State supply

Section 7(2) Supply of goods imported into the territory of India, till they
of the IGST cross the customs frontiers of India, shall be treated to be a
Act supply of goods in the course of inter-State trade or commerce.

Place of supply

Section 11 of Place of supply of goods imported into, or exported from India

the IGST Act
[Refer Chapter 3: Place of Supply in Module 1 of this Study
Material for discussion on these provisions]

Levy of customs duty

Section 12 of (1) Except as otherwise provided in this Act, or any other law
the Customs for the time being in force, duties of customs shall be
Act, 1962 levied at such rates as may be specified under the
Customs Tariff Act, 1975, or any other law for the time
being in force, on goods imported into, or exported from,
India.
(2) The provisions of sub-section (1) shall apply in respect of
all goods belonging to Government as they apply in
respect of goods not belonging to Government.

Provisions for collection of IGST on imported goods and warehoused

goods sold from a customs warehouse as also for determination of their
value under section 3 of the Customs Tariff Act, 1975

Section 3(7) Any article which is imported into India shall, in addition, be
of the liable to integrated tax at such rate, not exceeding forty per cent.
Customs as is leviable under section 5 of the Integrated Goods and
Tariff Act, Services Tax Act, 2017 on a like article on its supply in India, on
1975 the value of the imported article as determined under sub-
section (8) or sub-section (8A), as the case may be.
 14.10
1.10 GOODS AND SERVICES TAX

Section 3(8) For the purposes of calculating the integrated tax under sub-
of the section (7) on any imported article where such tax is leviable at
Customs any percentage of its value, the value of the imported article
Tariff Act, shall, notwithstanding anything contained in section 14 of the
1975 Customs Act, 1962, be the aggregate of-
(a) the value of the imported article determined under sub-
section (1) of section 14 of the Customs Act, 1962 or the
tariff value of such article fixed under sub-section (2) of
that section, as the case may be; and
(b) any duty of customs chargeable on that article under
section 12 of the Customs Act, 1962, and any sum
chargeable on that article under any law for the time
being in force as an addition to, and in the same manner
as, a duty of customs, but does not include the tax referred
to in sub-section (7) or the cess referred to in sub-section
(9).

Section 3(8A) Where the goods deposited in a warehouse under the provisions
of the of the Customs Act, 1962 are sold to any person before
Customs clearance for home consumption or export under the said Act,
Tariff Act, the value of such goods for the purpose of calculating the
1975 integrated tax under sub-section (7) shall be,-
(a) where the whole of the goods are sold, the value
determined under sub-section (8) or the transaction value
of such goods, whichever is higher; or
(b) where any part of the goods is sold, the proportionate
value of such goods as determined under sub-section (8)
or the transaction value of such goods, whichever is
higher:
Provided that where the whole of the warehoused goods or any
part thereof are sold more than once before such clearance for
home consumption or export, the transaction value of the last
such transaction shall be the transaction value for the purposes
of clause (a) or clause (b):
 IMPORT AND EXPORT UNDER GST 1.11 14.11

Provided further that in respect of warehoused goods which

remain unsold, the value or the proportionate value, as the case
may be, of such goods shall be determined in accordance with
the provisions of sub-section (8).
Explanation.- For the purposes of this sub-section, the
expression “transaction value”, in relation to warehoused goods,
means the amount paid or payable as consideration for the sale
of such goods.

Section 3(11) The duty or tax or cess, as the case may be, chargeable under
of the this section shall be in addition to any other duty or tax or cess,
Customs as the case may be, imposed under this Act or under any other
Tariff Act, law for the time being in force.
1975

Section 14A Special provision for specified actionable claims supplied

of the IGST by a person located outside taxable territory.
Act

(1) A supplier of online money gaming as defined in clause (80B) of

section 2 of the Central Goods and Services Tax Act, 2017, not
located in the taxable territory, shall in respect of the supply of
online money gaming by him to a person in the taxable
territory, be liable to pay integrated tax on such supply.

(2) For the purposes of complying with provisions of sub-section (1),

the supplier of online money gaming shall obtain a single
registration under the Simplified Registration Scheme referred
to in sub-section (2) of section 14 of this Act:
Provided that any person located in the taxable territory
representing such supplier for any purpose in the taxable
territory shall get registered and pay the integrated tax on
behalf of the supplier:
Provided further that if such supplier does not have a physical
presence or does not have a representative for any purpose in
the taxable territory, he shall appoint a person in the taxable
 14.12
1.12 GOODS AND SERVICES TAX

territory for the purpose of paying integrated tax and such

person shall be liable for payment of such tax.

(3) In case of failure to comply with provisions of sub-section (1) or

sub-section (2) by the supplier of the online money gaming or a
person appointed by such supplier or both, notwithstanding
anything contained in section 69A of the Information
Technology Act, 2000, any information generated, transmitted,
received or hosted in any computer resource used for supply of
online money gaming by such supplier shall be liable to be
blocked for access by the public in such manner as specified in
the said Act.]

ANALYSIS
(i) IGST on imported goods in addition to duty of customs [Section 7(2)
read with section 5]

Import of goods means bringing goods in India [See definition under the
heading ‘Relevant Definitions’] from a place outside India [Section 2(10)].
Supply of goods imported into the territory of India till they cross the customs
frontiers of India is deemed to be an inter-State supply.

IGST on goods imported into India is levied and collected in accordance with
the provisions of section 3 of the Customs Tariff Act, 1975 [Proviso to section
5(1)]. Thus, though goods imported into India are leviable to IGST under the
IGST Act, machinery of the customs law is used to levy and collect the same.

However, in case of intangible goods, it may not be possible to levy

and collect IGST on imports in said manner, as the goods may not be
physically crossing customs frontiers. Resultantly, the Government is
empowered to notify certain goods for whom proviso to section 5(1)
may not be applicable for levy and collection of IGST and in whose case,
IGST shall be levied and collected in the manner specified in section
5(1) only. Supply of online money gaming has been notified for the said
 IMPORT AND EXPORT UNDER GST 1.13 14.13

purpose 2. This implies that import of specified actionable claim of

online money gaming will be taxed under IGST as import of goods
without applicability of customs duty.
The place of supply of goods, imported into India is the location of the
importer [Section 11]. Thus, if an importer say is located in Rajasthan, the
State tax component of the IGST accrues to the State of Rajasthan.

IGST on imported goods is levied in addition to other customs duties levied

on the imported goods but the same is not customs duty. In addition, GST
Compensation Cess, may also be leviable on import of certain luxury and de-
merit goods under the Goods and Services Tax (Compensation to States) Cess
Act, 2017.

Accordingly, goods imported into India are, in addition to the applicable

customs duties, liable to IGST at such rate as is leviable under the IGST Act
on a like article on its supply in India.
The bill of entry filed for import of goods now looks like this, with columns
for customs duty, additional duty, and IGST:

2
vide Notification No. 03/2023 IT dated 29.09.2023
 14.14
1.14 GOODS AND SERVICES TAX

(ii) Point when IGST is levied on imported goods [Proviso to section 5(1)]

IGST on goods imported into India is levied and collected at the point when
duties of customs are levied on the said goods under the Customs Act, 1962.
Customs duty is leviable when importation of goods gets complete, i.e. when the
goods become part of the mass of goods within the country; the taxable event
being reached at the time when the goods reach the customs barriers and bill of
entry for home consumption is filed. Thus, the point of levy and collection of
IGST is the point when the bill of entry for home consumption is filed.

(iii) Taxable value of imported goods for levying IGST [Section 3(8) of the
Customs Tariff Act, 1975]

The value of the goods for the purpose of levying IGST is the assessable value
of the imported goods determined under section 14 of the Customs Act, 1962
plus customs duty levied under that Act and any other sum chargeable on
the said goods under any law for the time being in force as customs duties
excluding IGST and GST Compensation Cess (wherever applicable).

Wherever the goods are also leviable to GST Compensation Cess, the same is
collected on the value taken for levying IGST. In other words, IGST paid shall
not be added to the value for the purpose of calculating GST Compensation
Cess. In cases where imported goods are liable to Anti-Dumping Duty or
Safeguard Duty, value for calculation of IGST as well as GST Compensation
Cess also includes Anti-Dumping Duty and Safeguard duty [Guidance Note
for Importers and Exporters issued by DGFT after introduction of GST].
 IMPORT AND EXPORT UNDER GST 1.15 14.15

Value for Value determined under section 14 of the Customs

levying IGST Act, 1962 + Basic customs duty + any other sum
=
on imported leviable under any law for the time being in force
goods as customs duties excluding IGST and GST
Compensation Cess

[For examples/illustrations showing calculation of IGST chargeable on imported

goods, Chapters 2 & 4 of Module 4 on Customs Laws may be referred to.]
(iv) Applicability of IGST on goods supplied while being deposited in a customs
bonded warehouse [Section 3(8A) of the Customs Tariff Act, 1975]
The Customs Act, 1962
The “transfer/sale of goods while being
permits goods that have
deposited in a customs bonded warehouse”
entered India to be is a common trade practice whereby the
deposited in a bonded importer files an into-bond bill of entry and
warehouse on filing ‘into- stores the goods in a customs bonded
bond’ bill of entry, without warehouse and thereafter, supplies such
payment of duty. The goods to another person who then files an
importer is at liberty to ex-bond bill of entry for clearing the said
transfer the ownership of goods from the customs bonded warehouse
such goods to another for home consumption.
person while the goods
remain deposited in the warehouse.
However, supply of warehoused goods to any person before clearance for
home consumption is neither a supply of goods nor a supply of services in
terms of paragraph 8(a) of Schedule III to the CGST Act. Here, warehoused
goods have the same meaning as assigned to it in the Customs Act, 1962.
Further, value of such activities or GST is not leviable when
transactions as may be prescribed in goods deposited in customs
respect of in-bond sales as specified in bonded warehouse are sold
Schedule III is included in the value of before clearance; the same is
exempt supply for the purpose of leviable when ex-bond bill of
reversal of ITC under rules 42 and 43 of entry is filed for clearing such
CGST Rules [Explanation to section 17(3) warehoused goods for home
of the CGST Act]. consumption.
 14.16
1.16 GOODS AND SERVICES TAX

It is to be noted that the basic customs duty paid on the warehoused goods
at the stage of ex-bonding is calculated on the value determined under
section 14 of the Customs Act, 1962 at the time of filing of the into-bond bill
of entry.
However, value of imported goods for levying IGST in case of supply of
warehoused goods is determined as under:

Value for (a) Transaction value (Sale value)

levying
= OR
IGST in case
of supply of (b) Value determined at the time of filing into-
warehoused bond bill of entry under section 14 of the
goods Customs Act, 1962 + Basic customs duty + any
other sum leviable under any law for the time
being in force as customs duties excluding
IGST and GST Compensation Cess
WHICHEVER IS HIGHER

If goods are sold more than once while being deposited in the warehouse,
the last transaction value is taken as the transaction value for the purpose of
determining the value for levying IGST in the manner given above.
If only a part of the goods are sold, the two values that are to be compared are
– (i) transaction value of the goods sold and (ii) proportionate value (of the goods
sold) determined at the time of filing into-bond bill of entry under section 14 of
the Customs Act, 1962 + Basic customs duty + any other sum leviable under any
law for the time being in force as customs duties excluding IGST and GST
Compensation Cess.
The remaining goods (which are not
sold) are assessed on the value
determined under section 14 of the
Customs Act plus basic customs duty
and any other sum leviable under any
law for the time being in force as
customs duties excluding IGST and GST
Compensation Cess.
 IMPORT AND EXPORT UNDER GST 1.17 14.17

(v) Taxability of High Sea Sale

'High Sea Sales' is a common trade practice whereby the original importer
sells the goods to a third person before the goods are entered for customs
clearance. After the high sea sale of the goods, the customs declarations, i.e.
bill of entry etc. is filed by the person who buys the goods from the original
importer during the said sale.
However, supply of goods by the
consignee to any other person, by GST is not leviable on high sea
endorsement of documents of title sales. IGST is leviable only
to the goods, after the goods have when the goods are cleared
been dispatched from the port of from customs for home
origin located outside India but consumption.
before clearance for home
consumption (high sea sale) is
neither treated as supply of goods nor supply of services in terms of
paragraph 8(b) of Schedule III to the CGST Act.
Further, value of such high sea sales is not included in the value of exempt
supply for the purpose of reversal of ITC under rules 42 and 43 of CGST Rules
[Explanation to section 17(3) of the CGST Act].

As per section 14 of the Customs Act, 1962, the value for the purpose of
charging customs duty on imported goods is the value at the time of
importation, i.e. at the time of filing of the bill of entry.

Further, IGST on imported goods is also levied at the time of filing of bill of
entry. Therefore, in case of high sea sales, the assessable value of imported
goods for levying customs duty and IGST is determined on the basis of the
price paid by the last high sea sales buyer who files the bill of entry for home
consumption.

Circular No. 33/2017 Cus dated 01.08.2017 has clarified that the importer (last
buyer in the chain) would be required to furnish the entire chain of
documents, such as original invoice, high seas sales contract, details of service
charges/commission paid etc. to establish a link between the first contracted
price of the goods and the last transaction.
 14.18
1.18 GOODS AND SERVICES TAX

(vi) Third country shipments

Third country shipments or triangular trade is a common practice in

international trade whereby goods move from one country to another
without touching India; only invoicing is done by the registered person in
India.

For example, ‘A’, a registered person in India, receives an order to supply

goods to ‘B’ in USA. ‘A’, finds a supplier ‘C’ in Singapore and asks him to
supply goods to ‘B’ in USA. Two invoices are raised here; one by ‘A’, the
registered person in India, on ‘B’ in USA and the other by ‘C’ in Singapore on
‘A’ in India. The point to be noted here is that goods do not touch Indian
shores; they are shipped by ‘C’ from Singapore to ‘B’ in USA.

Paragraph 7 of the Schedule III to CGST Act provides that supply of goods
from a place in the non-taxable territory to another place in the non-taxable
territory without such goods entering into India (third country shipments) is
treated neither as a supply of goods nor a supply of services. Thus, there is
no GST liability on such sales. Further, value of such third country shipments
is not included in the value of exempt supply for the purpose of reversal of
ITC under rules 42 and 43 of CGST Rules [Explanation to section 17(3) of the
CGST Act].

(vii) Taxability of goods imported by SEZ

Goods imported by a unit or a developer in the Special Economic Zone (SEZ)

for authorised operations are exempted from the whole of IGST leviable
under section 3(7) of the Customs Tariff Act, 1975 vide Notification No.
64/2017 Cus dated 05.07.2017.

(viii) Taxability of goods imported by EOU

Goods imported by Export Oriented Undertaking (EOU) attract liability to

customs duty. Import of goods by 100% EOU’s are governed by Notification
No. 52/2003 Cus as amended. EOUs are allowed duty free import of goods
(exempt from Customs duties, IGST & GST Compensation Cess) under the said
notifications. However, exemption from IGST will be subject to fulfilment of
specified conditions.
 IMPORT AND EXPORT UNDER GST 1.19 14.19

(ix) Import as baggage

Passenger baggage is exempted from IGST as well as GST Compensation

Cess. The basic customs duty at the rate of 35% and the applicable social
welfare surcharge is leviable on the value which is in excess of the duty-free
allowances provided under the Baggage Rules, 2016.

(x) Taxability of supply of online money gaming by a person located outside

the taxable territory to a person in India [Section 14A]

 Online money gaming is taxable by virtue of Entry 6 of Schedule III of

the CGST Act.

 Where a person located in India receives online money gaming from a

person located outside India, the supplier is liable to pay IGST on such
supply.

 For this purpose, said supplier will take a single registration under a
Simplified Registration Scheme 3. Further, they need to furnish return in
Form GSTR-5A by 20th day of the month succeeding the calendar
month/part thereof 4.

 If the overseas supplier has a representative in India for any purpose,

such person (representative in India) shall get registered and pay IGST
on behalf of the supplier.

 In case the overseas supplier neither has a physical presence nor has
any representative for any purpose in India, it may appoint a person in
India for the purpose of paying IGST.

3
Said Simplified Registration Scheme has been provided in rule 14 of the CGST Act. Rule 14 of
the CGST Act has been discussed in detail in Chapter 8 – Registration in Module 2 of this Study
Material.
4
Detailed provisions are contained in rule 64 of the CGST Act which has been discussed in detail
in Chapter 13 – Returns in Module 2 of this Study Material.
 14.20
1.20 GOODS AND SERVICES TAX

 In case of failure to comply with

the above provisions by the
supplier, any information
generated, transmitted, received
or hosted in any computer
resource used for supply of online
money gaming by such supplier
will be blocked for access by the
public.

B. IMPORT OF SERVICES

STATUTORY PROVISIONS

Activities to be treated as supply even if made without consideration

Paragraph (4) of Import of services by a person from a related person or from

Schedule I to the any of his other establishments outside India, in the course
CGST Act or furtherance of business.

Levy of IGST on importation of services

Section 5(1) of Subject to the provisions of sub-section (2), there shall be

the IGST Act levied a tax called the integrated goods and services tax on
all inter-State supplies of goods or services or both, except on
the supply of alcoholic liquor for human consumption, on the
value determined under section 15 of the Central Goods and
Services Tax Act and at such rates, not exceeding forty per
cent., as may be notified by the Government on the
recommendations of the Council and collected in such
manner as may be prescribed and shall be paid by the
taxable person.
 IMPORT AND EXPORT UNDER GST 1.21 14.21

Reverse charge

Section 5(3) of The Government may, on the recommendations of the

the IGST Act 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
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.

Services provided through electronic commerce operator (ECO)

Section 5(5) of The Government may, on the recommendations of the

the IGST Act Council, by notification, specify categories of services, the tax
on inter-State supplies of which shall be paid by the
electronic commerce operator if such services are supplied
through it, and all the provisions of this Act shall apply to
such electronic commerce operator as if he is the supplier
liable for paying the tax in relation to the supply of such
services:
Provided that where an electronic commerce operator does
not have a physical presence in the taxable territory, any
person representing such electronic commerce operator for
any purpose in the taxable territory shall be liable to pay tax:
Provided further that where an electronic commerce operator
does not have a physical presence in the taxable territory and
also 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.

Inter-State supply

Section 7(4) of Supply of services imported into the territory of India shall be
the IGST Act treated to be a supply of services in the course of inter-State
trade or commerce.
 14.22
1.22 GOODS AND SERVICES TAX

Supplies in territorial waters

Section 9 of the Notwithstanding anything contained in this Act,––

IGST 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

Section 13 of the Place of supply of services where location of supplier or

IGST Act location of recipient is outside India.
[Refer Chapter 3: Place of Supply in Module 1 for discussion
on these provisions]

Special provision for payment of tax by a supplier of online information

and database access or retrieval (OIDAR) services

Section 14(1) of On supply of online information and database access or

the IGST Act retrieval services by any person located in a non-taxable
territory and received by a non-taxable online recipient, the
supplier of services located in a non-taxable territory shall be
the person liable for paying integrated tax on such supply of
services:
Provided that in the case of supply of online information and
database access or retrieval services by any person located in
a non-taxable territory and received by a non-taxable online
recipient, an intermediary located in the non-taxable
territory, who arranges or facilitates the supply of such
services, shall be deemed to be the recipient of such services
from the supplier of services in non-taxable territory and
supplying such services to the non-taxable online recipient
except when such intermediary satisfies the following
conditions, namely:––
 IMPORT AND EXPORT UNDER GST 1.23 14.23

(a) the invoice or customer’s bill or receipt issued or made

available by such intermediary taking part in the
supply clearly identifies the service in question and its
supplier in non-taxable territory;
(b) the intermediary involved in the supply does not
authorise the charge to the customer or take part in its
charge which is that the intermediary neither collects
or processes payment in any manner nor is responsible
for the payment between the non-taxable online
recipient and the supplier of such services;
(c) the intermediary involved in the supply does not
authorise delivery; and
(d) the general terms and conditions of the supply are not
set by the intermediary involved in the supply but by
the supplier of services.

Section 14(2) of The supplier of online information and database access or

the IGST Act retrieval services referred to in sub-section (1) shall, for
payment of integrated tax, take a single registration under
the Simplified Registration Scheme to be notified by the
Government:
Provided that any person located in the taxable territory
representing such supplier for any purpose in the taxable
territory shall get registered and pay integrated tax on behalf
of the supplier:
Provided further that if such supplier does not have a physical
presence or does not have a representative for any purpose
in the taxable territory, he may appoint a person in the
taxable territory for the purpose of paying integrated tax and
such person shall be liable for payment of such tax.
 14.24
1.24 GOODS AND SERVICES TAX

ANALYSIS
(i) Taxability of import of service [Section 7 of the CGST Act read with
para 4 of Schedule I to the CGST Act]
To be taxable, the transaction of import of service needs to be a “supply”.
While the main definition of “supply” under section 7 of the CGST Act covers
supply of goods or services for a consideration in the course or furtherance
of business, clause (b) thereof includes services imported for a consideration
even if the import is not in the course or furtherance of business. Supply
under the IGST Act has been defined to mean the same as the supply under
section 7 of the CGST Act.
Significance of consideration and business test in taxability of
importation of services
As per section 7(1)(b) of the CGST Act, import of services for consideration
whether or not in the course or furtherance of business, is considered as a
supply. Thus, in general, import of services without consideration is not
considered as supply. However, business test is not required to be fulfilled
for treating import of service, made for a consideration, as supply.
Furthermore, in view of the provisions contained in Schedule I to the CGST
Act, the import of services by a person from a related person or from his
establishment located outside India, in the course or furtherance of business
is treated as supply even if it is made without any consideration.
A conjoint reading of aforesaid provisions with the provisions of section 14
(discussed in the subsequent paras of this Chapter), import of free services
from Google and Facebook by all of us, without any consideration, is not
considered as supply. Import (downloading) of a song for consideration for
personal use would be a supply of service, even though the same is not in the
course or furtherance of business. Import of some services by an Indian
branch from their parent company outside India, in the course or furtherance
of business, even if without consideration, will be a supply.
Thus, import of services can be considered as supply based on whether there
is consideration or not and whether the service is supplied in the course or
furtherance of business. The same has been explained in the table below:
 IMPORT AND EXPORT UNDER GST 1.25 14.25

Nature of Service Consideration Business Test

Import of services Necessarily Required Not required

Import of services by a Not required Necessarily

person from a related Required
person or from his
establishment outside India

Import of service into the territory of India is treated as inter-State supply in

terms of section 7(4) and thus, is liable to IGST under section 5.
(ii) Meaning of import of service [Section 2(11)]
IGST Act defines import of services as supply of any service where the supplier
is located outside India, the recipient is located in India, and the place of
supply of service is in India.

Import of services

Supply of any service where

Supplier of
Recipient Place of
service is
of service is supply of
located
located in service is in
outside
India, and India.
India,

Services supplied by a
supplier located outside
India to recipient located
in India and place of
supply is in India

Import of
services
 14.26
1.26 GOODS AND SERVICES TAX

The concept discussed above has been explained by way of following

examples:

Location of Location of Place of Whether

Supplier Recipient Supply qualifies as
import of
services?

Delhi Yes
London Delhi

Paris
No
London Paris

Delhi No
Delhi Paris

London
No
London Delhi

Thus, only where the location of supplier is outside India but the location of
recipient and the place of supply is in India, the transaction shall qualify as
import of services.
‘India’ is the sum of the territory of its States and also includes its territorial
waters and Exclusive Economic Zone. This is an extended definition of ‘India’
over and above the area denoted by the expression in Article 1 of the
Constitution and is enabled by the rights of nations under the United Nations
Convention on the Law of the Seas. The definition enables taxation of services
 IMPORT AND EXPORT UNDER GST 1.27 14.27

received from outside India into the area that is outside India as per the
definition in the Constitution but within the 200 nautical miles limit of the
Exclusive Economic Zone [Section 2(56) of the CGST Act].
The place of supply is to be determined in terms of section 13 of the IGST
Act. Section 13 provides for determination of place of supply in cases wherein
the location of the supplier of services or the recipient of services is outside
India. If the place of supply of service is in the territorial waters, the place of
supply is deemed to be in the coastal State/Union Territory where the nearest
point of the appropriate baseline is located [Section 9]. Thus, the State tax
component of the IGST accrues to such coastal State.
In addition to the place of supply being in India and the provider of service
being located outside India, the location of the recipient of service must be
in India for the transaction to qualify as import of service. This means that
the service should be received at the recipient’s place of business or fixed
establishment in India. In the absence of such a place, the usual place of
residence of the recipient is taken to be his location 5.
(iii) Person liable to pay tax on importation of service

 In case of importation of service, the recipient of imported service who

is located in India (other than non-taxable online recipient of OIDAR
service) is the person who has to pay IGST on the service under reverse
charge [Section 5(3) of the IGST Act read with Entry 1 of Notification No.
10/2017 IGST (R) dated 28.06.2017].

 In case of services supplied by a person located outside India by way of

transportation of goods by a vessel from a place outside India upto the
custom station of clearance in India, IGST is to be paid by the importer
located in India. In other words, in case of foreign shipping lines
providing inbound transportation of goods (from a place outside India
upto the customs station of clearance in India), IGST is to be paid by

5
Provisions relating to place of supply, location of supplier of service, location of recipient of
service, fixed establishment, place of business etc. have been discussed in detail in Chapter 3 –
Place of Supply in Module 1 of this Study Material.
 14.28
1.28 GOODS AND SERVICES TAX

the importer [Section 5(3) of the IGST Act read with Entry 10 of
Notification No. 10/2017 IGST (R) dated 28.06.2017] 6.

However, Supreme Court in case of Union of India vs. Mohit Minerals

Pvt. Ltd. 2022 (61) G.S.T.L. 257 has held that since the Indian importer is
liable to pay IGST on the ‘composite supply’, comprising of supply of
goods and supply of services of transportation, insurance, etc. in a CIF
contract, a separate levy on the Indian importer for the ‘supply of
services’ by the shipping line would be in violation of section 8 of the
CGST Act, 2017 and would amount to double taxation. Hence, there
cannot be a separate levy of IGST on the component of ocean freight
paid by the foreign exporter to the foreign shipping line in the CIF
contract.

 In case of importation of OIDAR services by a non-taxable online

recipient, supplier of OIDAR services is liable to pay IGST [Discussed in
detail in subsequent paragraphs].

 In case of importation of notified services through ECO, ECO is liable to

pay IGST [Discussed in detail in subsequent paragraphs].

(iv) Exemptions related to import of service

Exemptions from IGST in context of cross border transactions relating to

services are discussed in Chapter 4: Exemptions from GST in Module 1 of this
Study Material. The relevant exemptions may be referred to from that Chapter.

(v) Importation of OIDAR services [Section 14]

Online Information Database Access and Retrieval services (OIDAR) is a

category of services provided through the medium of internet and received
by the recipient online; such services cannot be rendered in the absence of
information technology [See definition].
(1) Download of an e-book online for a payment would amount to
receipt of OIDAR services by the consumer.

6
With effect from 01.10.2023, Entry 10 of Notification No. 10/2017 has been omitted vide Notification
No. 13/2023 IT (R) dated 26.09.2023, consequent to SC judgment in case of Mohit Minerals.
 IMPORT AND EXPORT UNDER GST 1.29 14.29

 Taxability of OIDAR services imported by business entity and non-

taxable online recipient
Importation of OIDAR services by a business entity
For any supply to be taxable under GST, the place of supply in respect of the
subject supply should be in India. In case, both the supplier of OIDAR service
and the recipient of such service are in India, the place of supply would be
the location of the recipient of service, i.e. it would be governed by the default
provision of place of supply and would be liable to GST under forward charge.
However, OIDAR services can also be provided online even from a remote
location outside the taxable territory. In such cases also - where the supplier
of OIDAR service is located outside India and the recipient is located in India
- the place of supply 7 would be India and the transaction would be amenable
to tax under reverse charge if the recipient is a business entity (excluding
Government, Governmental authority or Local authority). Thus, in such cases
the recipient located in India, will be liable to pay IGST under reverse charge
and undertake necessary compliances.
Importation of OIDAR services by non-taxable online recipient
Now what happens if the supplier is located outside India and the recipient
in India is an individual consumer! In such cases also, the place of supply
would be India and the transaction would be amenable to levy of GST, but
the problem would be, how such tax would be collected. It would be
impractical to ask the individual in India to register and undertake the
necessary compliances under GST for a one-off purchase on the internet.
However, if a similar service is provided by an Indian service provider, from
within the taxable territory, to individual consumer in India, the same would
be taxable under forward charge. Therefore, overseas suppliers of such
services would have an unfair tax advantage should the services provided by
them be left out of the tax net.
For such cases, the IGST Act provides that on supply of OIDAR services by any
person from a location outside India to an unregistered recipient in India [i.e.

7
Provisions relating to place of supply for OIDAR services under section 14 of the IGST Act have
been discussed in detail in Chapter 3: Place of Supply in Module 1 of this Study Material.
 14.30
1.30 GOODS AND SERVICES TAX

to a non-taxable online recipient (See definition)], the supplier who is outside

India is liable to pay IGST on the supply.

Provision or facilitation of OIDAR services by intermediary located

outside India: Now if an intermediary (See definition) located outside India
arranges or facilitates supply of such service to a non-taxable online recipient
in India, the intermediary would be treated as the supplier of the said service
who must get registered in India and pay IGST on the supply.
However, if the intermediary has nothing to do with the payment or
authorising the delivery of the service or setting of the terms and conditions
of the supply, and if his invoice clearly identifies the service and its supplier,
the responsibility for registration remains with the supplier.
Provisions enabling supplier of OIDAR services located outside India to
comply with the responsibilities entrusted under GST laws: The supplier
(or intermediary) of OIDAR services shall, for payment of IGST, take a single
registration under the Simplified Registration Scheme.
If the overseas supplier has a representative in India for any purpose, such
person (representative in India) shall get registered and pay IGST on behalf
of the supplier.
In case the overseas supplier neither has a physical presence nor has any
representative for any purpose in India, it may appoint a person in India for
the purpose of paying IGST.
 Examples of what could be or could not be OIDAR services
In order to determine whether a particular service is an OIDAR service, the
following tests need to be applied:

A B
Services whose delivery is OIDAR
mediated by information Services are impossible to
ensure in the absence of Services
technology over the
information technology
internet/electronic network

Thus, a service qualifies as OIDAR services if above two conditions have been
satisfied. The inclusive part of the definition is only indicative and not
exhaustive.
 IMPORT AND EXPORT UNDER GST 1.31 14.31

Service Whether Whether Whether

condition condition it is
‘A’ is ‘B’ is OIDAR
fulfilled? fulfilled? service or
not?

PDF document YES YES YES

automatically emailed by
provider’ s system

PDF document YES YES YES

automatically downloaded
from site

Stock photographs YES YES YES

available for automatic
download

Online course consisting YES YES YES

of pre-recorded videos
and downloadable PDFs

Indicative List of OIDAR Services

Website supply, web-hosting, distance maintenance of programmes and
equipment
 Website hosting and webpage hosting
 Automated, online and distance maintenance of programmes

 Remote systems administration

 Online data warehousing where specific data is stored and retrieved
electronically
 Online supply of on-demand disc space
Supply of software and updating thereof
 Accessing or downloading software (including procurement/
accountancy programmes and anti-virus software) plus updates
 14.32
1.32 GOODS AND SERVICES TAX

 Software to block banner adverts, otherwise known as Banner blockers

 Download drivers, such as software that interfaces computers with
peripheral equipment (such as printers)
 Online automated installation of filters on websites
 Online automated installation of firewalls
Supply of images, text and information and making available of
databases
 Accessing or downloading desktop themes

 Accessing or downloading photographic or pictorial images or

screensavers
 The digitised content of books and other electronic publications

 Subscription to online newspapers and journals

 Weblogs and website statistics
 Online news, traffic information and weather reports

 Online information generated automatically by software from specific

data input by the customer, such as legal and financial data, (in
particular, data such as continually updated stock market data, in real
time)
 The provision of advertising space including banner ads on a
website/web page
 Use of search engines and internet directories
Supply of music, films and games, including games of chance and
gambling games, and of political, cultural, artistic, sporting, scientific
and entertainment broadcasts and events
 Accessing or downloading of music on to computers and mobile
phones
 Accessing or downloading of jingles, excerpts, ringtones, or other sounds

 Accessing or downloading of films

 Downloading of games on to computers and mobile phones
 IMPORT AND EXPORT UNDER GST 1.33 14.33

 Accessing automated online games which are dependent on the

internet or other similar electronic networks, where players are
geographically remote from one another
(vi) Services provided through ECO located outside India [Section 5(5)]
An ECO is required to pay IGST on notified services if these are supplied
through its portal 8.
If the ECO does not have a physical presence in India but there is a person in
India representing such overseas supplier in India for any purpose, such
person (representative in India) is liable to pay IGST. However, if the ECO
does not have a physical presence in India and does not have a representative
here either, it is required to appoint a person in India for the purpose of
paying tax on such notified services.

C. REGISTRATION AND ITC IN CASE OF IMPORT OF

GOODS AND SERVICES
 Registration
Registration for importer of goods
Reverse charge provisions do not cover importers of goods. Importers
are also not listed among the categories of persons in section 24 of the
CGST Act for whom registration is compulsory. It may be noted here
that it is mandatory for the importers who are registered under GST to
quote GSTIN in the bill of entry for the purpose of payment of IGST on
import of goods as also for availing ITC of such IGST.
Registration in case of import of exempted goods
In terms of section 23 of the CGST Act, persons engaged exclusively in
the supply of goods (import and export) that is either not liable to tax
or is wholly exempt from tax under the CGST or IGST Acts are not
required to obtain registration. In such cases, PAN (which is authorized
as IEC by DGFT) of the importer and exporter would suffice [Instruction
No. 10/2017 Cus dated 06.07.2017].

8
Provisions relating to Electronic Commerce Operator are discussed in detail in Chapter 12:
Electronic Commerce Transactions in Module 2 of this Study Material.
 14.34
1.34 GOODS AND SERVICES TAX

Registration for importer of services

Section 24(iii) of the CGST Act mandates compulsory registration for
persons, without any benefit of the threshold limit for registration, who
are required to pay tax under reverse charge. Accordingly, importer of
services who are required to pay IGST under reverse charge have to
obtain compulsory registration under GST law so as to be able to pay
tax on imported services under reverse charge.
Thus, recipient of imported services other than non-taxable online
recipient must register compulsorily.
 Input Tax Credit
ITC of IGST paid on imported goods

The definition of “input tax” in relation to a registered person means inter

alia integrated tax and includes IGST charged on import of goods [Section
2(62) of the CGST Act (See definition)]. Thus, ITC of IGST paid at the time of
import is available to the importer subject to the conditions and restrictions
provided under sections 16 and 17 of the CGST Act for availing such credit.
Such ITC can be utilized by the registered person for payment of taxes on
his outward supplies. GST Compensation Cess paid on import of goods is
also available as ITC.
IGST and GST Compensation Cess paid at the time of import of goods
thus, in essence, are a pass through to this extent. The ITC of GST
Compensation Cess, however, can only be used for payment of GST
Compensation Cess. Furthermore, ITC of basic customs duty and social
welfare surcharge paid on the imported goods is not available.
ITC of IGST paid on importation of services
The definition of “input tax” in relation to a registered person means
inter alia integrated tax and includes tax payable under reverse charge
under sub-sections (3) and (4) of section 5 of the IGST Act [Section 2(62)
of the CGST Act (See definition)]. Therefore, IGST paid on importation
of services is available as ITC at par with IGST paid on any other supply
subject to conditions and restrictions prescribed under sections 16 and
17 of the CGST Act for availing such credit.
 IMPORT AND EXPORT UNDER GST 1.35 14.35

4. EXPORTS
One of the fundamental principle to make exports competitive in the international
market is that taxes should not be exported. Hence, export to destinations outside
India as well as supplies to SEZ have been ‘zero-rated’, i.e. the goods or services
exported are relieved of GST levied upon them either at the input stage or at the
final product stage by way of refund of taxes paid. Thus, it can be seen that supply
to SEZ unit/developer is treated at par with physical exports.
Supplies made for export through merchant exporters are taxed at 0.1% with ITC
benefit. Supplies of goods from Domestic Tariff Area (DTA) to EOU/ Electronic
Hardware Technology Park (EHTP) Unit/ Software Technology Park (STP) Unit/ Bio-
Technology Parks (BTP) Unit are considered as ‘deemed exports’ and are allowed
some of the benefits that actual export enjoy.

STATUTORY PROVISIONS

Inter-State supply

Section 7(5) Supply of goods or services or both,-

of the IGST (a) when the supplier is located in India and the place of
Act 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.

Establishments of distinct persons

Explanation For the purposes of this Act, where a person has,––

1 to section 8 (i) an establishment in India and any other establishment
of the IGST outside India;
Act (ii) an establishment in a State or Union territory and any other
establishment outside that State or Union territory; or
 14.36
1.36 GOODS AND SERVICES TAX

(iii) an establishment in a State or Union territory and any

other establishment registered within that State or Union
territory,
then such establishments shall be treated as establishments of
distinct persons.

Explanation 2 A person carrying on a business through a branch or an agency

to section 8 of or a representational office in any territory shall be treated as
the IGST Act having an establishment in that territory.

Place of supply

Section 11 of Place of supply of goods imported into, or exported from India

the IGST Act [Refer Chapter 3: Place of Supply in Module 1 for discussion on
these provisions]

Section 13 of Place of supply of services where location of supplier or location

the IGST Act of recipient is outside India
[Refer Chapter 3: Place of Supply in Module 1 for discussion on
these provisions]

Zero Rated Supply

Section 16 of (1) “Zero rated supply” means any of the following supplies of
the IGST Act goods or services or both, namely :-
(a) export of goods or services or both; or
(b) supply of goods or services or both for authorised
operations to a Special Economic Zone developer or
a Special Economic Zone unit.
(2) Subject to the provisions of sub-section (5) of section 17 of
the Central Goods and Services Tax Act, credit of input tax may
be availed for making zero-rated supplies, notwithstanding
that such supply may be an exempt supply.
(3) A registered person making zero rated supply shall be
eligible to claim refund of unutilised input tax credit on
supply of goods or services or both, without payment of
integrated tax, under bond or Letter of Undertaking, in
accordance with the provisions of section 54 of the CGST
 IMPORT AND EXPORT UNDER GST 1.37 14.37

Act or the rules made thereunder, subject to such

conditions, safeguards and procedure as may be
prescribed.
Provided that the registered person making zero rated
supply of goods shall, in case of non-realisation of sale
proceeds, be liable to deposit the refund so received under
this sub-section along with the applicable interest under
section 50 of CGST Act within 30 days after the expiry of
the time limit prescribed under the Foreign Exchange
Management Act, 1999 for receipt of foreign exchange
remittances, in such manner as may be prescribed.
(4) The Government may, on the recommendation of the
Council, and subject to such conditions, safeguards and
procedures, by notification, specify––
(i) a class of persons who may make zero rated supply
on payment of integrated tax and claim refund of
the tax so paid in accordance with the provisions
of section 54 of the Central Goods and Services
Tax Act or the rules made thereunder;
(ii) a class of goods or services or both, on zero rated
supply of which, the supplier may pay integrated
tax and claim the refund of tax so paid, in
accordance with the provisions of section 54 of
the Central Goods and Services Tax Act or the
rules made thereunder.

Deemed Exports

Section 147 The Government may, on the recommendations of the Council,

of the CGST notify certain supplies of goods as deemed exports, where goods
Act supplied do not leave India, and payment for such supplies is
received either in Indian rupees or in convertible foreign
exchange, if such goods are manufactured in India.

ANALYSIS
A supply of goods and/or services whose place of supply is outside India and is
made by a supplier in India is treated as inter-State supply under the IGST Act.
 14.38
1.38 GOODS AND SERVICES TAX

Further, supply of goods and/or services to a SEZ unit/developer or supply of goods

and/or services by a SEZ unit/developer are also treated as inter-State supply under
the IGST Act [Section 7(5)]. The place of supply of goods and services in cross
border transactions is determined in accordance with the provisions of sections 11
and 13 respectively.
Inter-State supplies of goods and/or services are liable to IGST in terms of
section 5. Hence, on a strict interpretation of section 5, IGST is payable on such
supplies where the supplier is located in India and the place of supply is outside
India. However, at the same time it can be argued that since IGST Act extends to
whole of India, IGST cannot be levied on a supply whose place of supply is outside
India. Also, fundamentally GST is a consumption tax and thus, tax cannot be levied
if goods and/or services are consumed outside India.
An inter-State supply under section 7(5)(a) cannot automatically be construed as
export of goods and/or services; only when the conditions stipulated in the
definitions of export of goods and export of services are fulfilled, will such
inter-State supplies be considered as exports and, in turn, be zero rated.

A. ZERO RATED SUPPLY [SECTION 16]

(i) What is Zero Rating?
By zero rating it is meant that the entire value chain of the supply is exempt
from tax. This means that in case of zero rating, not only is the outward
exempt from payment of tax but there is also no bar on taking/availing credit
of taxes paid on the input side for making/providing the outward supply.
Under GST Law, exports and supplies to SEZ units/developers are zero rated.
Supply to SEZ units/developers for authorised operations is zero-rated in
the same manner as is applicable for the physical exports.
(ii) What is the need of zero rating?
As per section 2(47) of the CGST Act, a supply is said to be exempt, when it
attracts nil rate of duty or is specifically exempted by a notification or kept
out of the purview of tax (i.e. a non-GST supply). But if a goods or service is
exempted from payment of tax, it cannot be said that it is zero rated. The
reason is not hard to find. The inputs and input services which go into the
making of the goods or provision of service have already suffered tax and
only the final product is exempted. Moreover, when the output is exempted,
 IMPORT AND EXPORT UNDER GST 1.39 14.39

tax laws do not allow availment/utilisation of credit on the inputs and input
services used for supply of the exempted output. Thus, in a true sense the
entire supply is not zero rated. Though the output suffers no tax, the inputs
and input services have suffered tax and since availment of tax credit on input
side is not permitted, it becomes a cost for the supplier. The concept of zero
rating of supplies aims to correct this anomaly

(iii) How does zero rating work?

As already seen, the concept of zero rating of outward supplies requires the outward
supplies as well as the inputs or input services used in supplying the outward
supplies to be free of GST. This is done by employing the following means:
a) The outward supplies which are zero rated can be made without
payment of integrated tax, under bond or Letter of Undertaking or
where such zero-rated supplies are exempted, they may be supplied
without payment of tax;
b) The refund of unutilized credit input tax credit on supply of goods or
services or both used in supplying the zero rated supply is allowed;
Thus, a registered person making zero rated supply may supply goods and/or
services under bond or Letter of Undertaking (LUT) without payment of IGST
and claim refund of unutilized ITC. Further, notified class of persons may
make zero-rated supply or notified class of goods or services may be
exported, on payment of IGST and refund of such tax paid on goods and/or
services supplied may be claimed. The goods/services/suppliers that have
been so notified have been given by way of Annexure to this Chapter. Same is
not relevant for the examination, but has been given only for the purpose of
information of the students.
Circular No. 01/ 2017 CC dated 26.07.2017 has clarified that the provisions of section
16 relating to zero rated supply will apply to GST Compensation Cess also. Hence,
(i) exporters can claim refund of GST Compensation Cess paid on goods exported
by him in case of notified class of persons making zero-rated supply or export of
notified class of goods or services, or (ii) GST Compensation Cess will not be charged
on goods exported under bond/LUT and he will be eligible for refund of ITC of GST
Compensation Cess relating to goods exported.
Refer Chapter 15: Refunds in this Module for detailed discussion on provisions
relating to refunds associated with zero rated supplies.
 14.40
1.40 GOODS AND SERVICES TAX

(iv) How do zero rated and exempt supplies differ?

The difference between zero rated supplies and exempted supplies is
tabulated as below:

Exempted Supplies Zero rated supplies

Exempt supply means supply of any Zero-rated supply means (i)

goods or services or both which export of goods and/or services
attracts nil rate of tax or which may be or (ii) supply of goods and/or
wholly exempt from tax and includes services for authorised
non-taxable supply. operations to SEZ unit/SEZ
developer.

No tax on the outward exempted No tax on the outward supplies;

supplies, however, the input supplies Input supplies also to be tax free
used for making exempt supplies to be (by way of refund of ITC)
taxed

Credit of input tax needs to be Credit of input tax may be

reversed, if taken. availed for making zero-rated
supplies, even if such supply is
No ITC on the exempted supplies.
an exempt supply.
ITC allowed on zero rated
supplies.

Value of exempt supplies, for Value of zero rated supplies

apportionment of ITC, shall include shall be added along with the
supplies on which the recipient is liable taxable supplies for
to pay tax on reverse charge basis, apportionment of ITC.
transactions in securities, sale of land
and, subject to clause (b) of paragraph
5 of Schedule II, sale of building.

Any person engaged exclusively in the A person exclusively making

business of supplying goods or services zero rated supplies needs to
or both that are not liable to tax or register as refund of unutilized
 IMPORT AND EXPORT UNDER GST 1.41 14.41

wholly exempt from tax under the CGST ITC or IGST paid shall have to be
or IGST Act shall not be liable to claimed.
registration.

A registered person supplying Normal tax invoice shall be

exempted goods and/or services shall issued.
issue, instead of a tax invoice, a bill of
supply.

Note: If exempt supplies are exported, they qualify as zero rated supplies.

B. EXPORT OF GOODS/SERVICES

Export of goods or services are treated as inter-State supply and zero rated. This
means that even if there is full
exemption for the supply, ITC is still
available to the exporter. The exporter
can export under Bond/LUT without
payment of IGST and claim refund of
ITC. The notified class of persons may
make zero-rated supply or notified
class of goods or services may be
exported, on payment of IGST and
refund of such tax paid on goods and/or services supplied may be claimed. The
objective is to make Indian exports competitive in the international market.
It may be noted that since exports are inter-State supplies, the tax associated with
them will always be IGST.

(i) Physical exports [Section 2(5)]

Export of goods requires taking the goods from India to a place outside India.
India is defined as extending to the limits of its maritime zone, which is 200
 14.42
1.42 GOODS AND SERVICES TAX

nautical miles from the coastal baseline. This is far beyond the normal
definition of India, which only includes its territorial waters, which in turn
extend 12 miles from the baseline. Given the extended meaning of India,
export would require that the goods must travel beyond 200 miles from the
baseline in order to qualify as having been exported.
Sending/ taking goods out of India for exhibition or on consignment
basis for export promotion: Circular No. 108/27/2019 GST dated 18.07.2019
has clarified that the activity of sending/ taking goods out of India for
exhibition or on consignment basis for export promotion, except when such
activity satisfy the tests laid down in Schedule I of the CGST Act, does not
constitute supply as the said activity does not fall within the scope of
section 7 of the CGST Act as there is no consideration at that point in time.
Since such activity is not a ‘supply’, the same cannot be considered as “zero
rated supply” as per the provisions contained in section 16 of the IGST Act.
Thus, activity of sending/ taking specified goods out of India is not a zero-
rated supply. That being the case, execution of a bond or LUT, as required
under section 16 of the IGST Act, is not required.
(ii) Deemed exports
Deemed exports refers to supplies of goods manufactured in India (and not
services) which are notified as deemed exports under section 147 of the CGST
Act. Such supplies do not leave India and the payment for the same is
received either in Indian rupees or in convertible foreign exchange.
Following categories of supply of goods have been notified as deemed
exports by the Government vide Notification No. 48/2017 CT dated
18.10.2017:
(a) Supply of goods by a registered person against Advance Authorisation
(AA)
If exports have already been made after availing ITC on inputs used in
manufacture of such exports, the goods so supplied should be used in
manufacture and supply of taxable goods (other than nil rated or fully
exempted goods) and a certificate to this effect from a Chartered
Accountant should be submitted to the jurisdictional Commissioner of
 IMPORT AND EXPORT UNDER GST 1.43 14.43

GST or any other officer authorised by him within 6 months of such

supply.

(b) Supply of capital goods by a registered person against Export

Promotion Capital Goods Authorisation (EPCG)
(c) Supply of goods by a registered person to Export Oriented Unit (EOU)

(d) Supply of gold by a bank or Public sector Undertaking specified in

Notification No. 50/2017 Cus dated 30.06.2017 (as amended) against AA

“AA” means an authorisation issued by the Director General of Foreign Trade

under Chapter 4 of the Foreign Trade Policy 2023 for import or domestic
procurement of inputs for physical exports.
“EPCG” means an authorisation issued by the Director General of Foreign
Trade under Chapter 5 of the Foreign Trade Policy 2023 for import of capital
goods for physical exports.
“EOU” means an EOU or Electronic Hardware Technology Park Unit or
Software Technology Park Unit or Bio-Technology Park Unit approved in
accordance with the provisions of Chapter 6 of the Foreign Trade Policy, 2023.
The above have been discussed in detail in Chapter 8: Foreign Trade Policy in
Module 4 of this Study Material.

Taxability of deemed exports

Deemed exports are not zero rated supplies by default, unlike the regular
exports. Hence, all supplies notified as supply for deemed export are subject
to levy of taxes, i.e. such supplies can be made on payment of tax and cannot
be supplied under a Bond/LUT. However, the refund of tax paid on the supply
regarded as deemed export is admissible to either the supplier or the
recipient. Thus, the application for refund has to be filed by the supplier or
the recipient (subject to certain conditions) of deemed export supplies, as the
case may be. [Refer Chapter 15: Refunds in this Module for detailed discussion
on these provisions].

(iii) Merchant exports

There is no specific provision in GST law for export through third parties,
commonly known as merchant exports. However, a low rate of GST of 0.1%
 14.44
1.44 GOODS AND SERVICES TAX

on supplies for export through third parties has been provided by way of
exemption notifications. [This is expressed as 0.1% IGST on inter-State supplies
or 0.05% CGST plus 0.05% SGST on intra-State supplies].
Circular No. 125/44/2019 GST dated 18.11.2019 has clarified that the exporter
receiving goods at concessional rate of tax @ 0.1% (0.05% CGST + 0.05%
SGST & 0.1% IGST) will be eligible to take credit of the concessional tax so
paid by him. The supplier who supplies goods at the concessional rate will
be eligible for refund of ITC on account of inverted tax structure as per the
provisions of section 54(3)(ii) of the CGST Act 9. However, it may be noted
that the exporter of such goods can export the goods only under LUT / bond
and cannot export on payment of IGST.
Circular No. 08/08/2017 dated 04.10.2017 has clarified that there is no
provision for issuance of CT-1 Form - which enables merchant exporters to
purchase goods from a manufacturer without payment of tax - under the GST
regime. The transaction between a manufacturer and a merchant exporter is
in the nature of supply and the same would be subject to GST.

Manufacturer exporter means a person who exports goods manufactured by

him or intends to export such goods. Merchant exporter means a person
engaged in trading activity and exporting or intending to export goods [As
defined under Foreign Trade Policy 2023].

A registered supplier can supply goods to a merchant exporter at low rate of

GST (0.1%) prescribed under Notification Nos. 41/2017 IT(R) and 40/2017
CT(R) both dated 23.10.2017 if following conditions (specified in the said
notifications) are fulfilled-
(a) the registered supplier (manufacturer) shall supply the goods to the
registered recipient (merchant exporter) on a tax invoice;

(b) the registered recipient shall export the said goods within a period of
90 days from the date of issue of a tax invoice by the registered supplier;

9
Provisions relating to refund of unutilized ITC on account of inverted duty structure have been
discussed in detail in Chapter 15: Refunds in this Module of the Study Material.
 IMPORT AND EXPORT UNDER GST 1.45 14.45

(c) the registered recipient shall indicate the GSTIN of the registered
supplier and the tax invoice number issued by the registered supplier
in respect of the said goods in the shipping bill or bill of export;
(d) the registered recipient shall be registered with an Export Promotion
Council;

(e) the registered recipient shall place an order on registered supplier for
procuring goods at concessional rate and a copy of the same shall also
be provided to the jurisdictional tax officer of the registered supplier;
(f) the registered recipient shall move the said goods from place of
registered supplier –
i. directly to the Port, Inland Container Depot, Airport or Land
Customs Station from where the said goods are to be exported;
or
ii. directly to a registered warehouse from where the said goods
shall be moved to the Port, Inland Container Depot, Airport or
Land Customs Station from where the said goods are to be
exported;

Registered principal place of business or registered additional

place of business are deemed to be a registered warehouse
[Circular No. 42/2017 Cus dated 07.11.2017].
(g) if the registered recipient intends to aggregate supplies from multiple
registered suppliers and then export, the goods from each registered
supplier shall move to a registered warehouse and after aggregation,
the registered recipient shall move goods to the Port, Inland Container
Deport, Airport or Land Customs Station from where they shall be
exported;

(h) in case of situation referred to in condition (g), the registered recipient

shall endorse receipt of goods on the tax invoice and also obtain
acknowledgement of receipt of goods in the registered warehouse from
the warehouse operator and the endorsed tax invoice and the
acknowledgment of the warehouse operator shall be provided to the
registered supplier as well as to the jurisdictional tax officer of such
supplier; and
 14.46
1.46 GOODS AND SERVICES TAX

(i) after goods have been exported, the registered recipient shall provide
copy of shipping bill or bill of export containing details of GSTIN and
tax invoice of the registered supplier along with proof of export general
manifest or export report having been filed, to the registered supplier
as well as jurisdictional tax officer of such supplier.
Merchant exporters may exclude commercially sensitive information
while providing copies of shipping bills to registered suppliers [Circular
No. 42/2017 Cus dated 07.11.2017].

Supply of service qualifies to be an ‘export of service’ if it fulfills the following

conditions:
(a) the service is supplied from India to a recipient located outside India,
(b) the place of supply of the service is outside India,
(c) the consideration for the service is received in freely convertible foreign
exchange or in Indian rupees wherever permitted by the Reserve Bank of
India, and
(d) the transaction is between separate entities, i.e. not merely between two
establishments of an entity
Branch and Head Office of one taxable person are not treated as two separate
entities for this purpose. In other words, provision of outbound services inter se
Head Office and Branch is not construed as export of service. However, Notification
No. 9/2017 IT(R) dated 28.06.2017 exempts the services provided by an Indian
establishment to its foreign establishment from IGST if the place of supply is
outside India – For details, refer Chapter 4: Exemptions from GST in Module 1 of this
Study Material.
Apparently, subsidiary and holding companies may not be treated as mere
establishments of one entity since these are two separate legal persons (with
different PAN). Thus, seemingly, provision of outbound services inter se subsidiary
company and holding company can be construed as export of service if all other
condition of export of services are fulfilled. Under service tax law, similar view was
taken by the Gujarat High Court in the case of Linde Engineering India Private
Limited Other vs. Union of India [R/Special Civil Application No. 12626 of 2018 dated
16.01.2020]. Service tax law had identical provisions on this aspect.
 IMPORT AND EXPORT UNDER GST 1.47 14.47

As in case of export of goods, in case of export of services also, India extends to the
limits of its maritime zone, which is 200 nautical miles from the coastal baseline.

For example, Raman of Delhi has supplied services to John of USA.

Place of supply is
outside India and John
and Raman are two
separate entities

John
John
Export of services

Payment for Raman

service is
received in
convertible
FOREX

In the given example, supplier of service – Raman – is located in India, recipient of

service – John – is located outside India and the place of supply of service is USA.
Payment for services provided by Raman has been received in convertible FOREX
and Raman and John are not merely establishments of a distinct person as per
explanation to section 8 of IGST Act. Since all the requisite conditions have been
satisfied, such services qualify as export of services.

In this regard, following circulars have been issued:

(A) Sub-contracting of services by an exporter of services to another person
located outside India - Circular No. 78/52/2018 GST dated 31.12.2018
If an exporter of services outsources a portion of the services contract to
another person located outside India, there may be instances where the full
consideration for the outsourced services is not received by the exporter in
India. The tax treatment of the said portion of the contract at the hands of
the exporter has been explained as under:
 14.48
1.48 GOODS AND SERVICES TAX

Where an exporter of services located in India is supplying certain services to

a recipient located outside India, either wholly or partly through any other
supplier of services located outside India, the following two supplies are
taking place: -
(a) Supply of services from the exporter of services located in India to the
recipient of services located outside India for the full contact value;
(b) Import of services by the exporter of services located in India from the
supplier of services located outside India with respect to the outsourced
portion of the contract.
Thus, the total value of services as agreed to in the contract between the
exporter of services located in India and the recipient of services located
outside India will be considered as export of services if all the conditions laid
down in section 2(6) read with section 13(2) are satisfied.
The supplier of services located in India would be liable to pay IGST on reverse
charge basis on the import of services on that portion of services which has
been provided by the supplier located outside India to the recipient of
services located outside India. Furthermore, the said supplier of services
located in India would be eligible for taking ITC of the IGST so paid.
Thus, even if the full consideration for the services as per the contract value
is not received in convertible foreign exchange in India due to the fact that
the recipient of services located outside India has directly paid to the supplier
of services located outside India (for the outsourced part of services), that
portion of the consideration shall also be treated as receipt of consideration
for export of services in terms of section 2(6)(iv) of the IGST Act, provided the:
(a) IGST has been paid by the supplier located in India for import of services
on that portion of the services which has been directly provided by the
supplier located outside India; and
(b) RBI by general instruction or by specific approval has allowed that part
of the consideration for such exports can be retained outside India.
(2) ABC Ltd. India has received an order for supply of services
amounting to $ 500,000/- to a US based client. ABC Ltd. India is
unable to supply the entire services from India and asks XYZ Ltd. Mexico (who
is not merely an establishment of a distinct person viz. ABC Ltd. India, in
 IMPORT AND EXPORT UNDER GST 1.49 14.49

accordance with the Explanation 1 in section 8 of the IGST Act) to supply a

part of the services (say 40% of the total contract value). ABC Ltd. India shall
be the exporter of services for the entire value if the invoice for the entire
amount is raised by ABC Ltd. India. The services provided by XYZ Ltd. Mexico
to the US based client shall be import of services by ABC Ltd. India and it
would be liable to pay IGST on the same under reverse charge and also be
eligible to take ITC of the IGST so paid.
Further, if the provisions contained in section 2(6) of the IGST Act are not
fulfilled with respect to the realization of convertible foreign exchange, say
only 60% of the consideration is received in India and the remaining amount
is directly paid by the US based client to XYZ Ltd. Mexico, even in such a
scenario, 100% of the total contract value shall be taken as consideration for
the export of services by ABC Ltd. India provided IGST on import of services
has been paid on the part of services provided by XYZ Ltd Mexico directly to
the US based client and RBI (by general instruction or by specific approval)
has allowed that a part of the consideration for such exports can be retained
outside India. In other words, in such cases, the export benefit will be
available for the total realization of convertible foreign exchange by ABC Ltd.
India and XYZ Ltd. Mexico.
(B) Supply from a company incorporated in India to its related
establishments outside India, which are incorporated under the laws
outside India qualifies as ‘export of services’ - Circular No. 161/17/2021
GST dated 20.09.2021
Generally, services are provided by a subsidiary/ sister concern/ group
concern, etc. of a foreign company in India, which is incorporated under the
laws in India, to the foreign company incorporated under laws of a country
outside India.
Definition of “export of services” (discussed herein), places a condition that
the services provided by one establishment of a person to another
establishment of the same person, considered as establishments of distinct
persons as per Explanation 1 of section 8 of the IGST Act, cannot be treated
as export. Thus, any supply of services by an establishment of a foreign
company in India to any other establishment of the said foreign company
outside India will not be covered under definition of export of services.
 14.50
1.50 GOODS AND SERVICES TAX

Further, perusal of the Explanation 2 to section 8 of the IGST Act suggests

that if a foreign company is conducting business in India through a branch or
an agency or a representational office (hereinafter referred to as RBA), then
the said RBA of the foreign company, located in India, shall be treated as
establishment of the said foreign company in India.
Similarly, if any company incorporated in India, is operating through a RBA in
any country outside India, then that RBA shall be treated as the establishment
of the said company in the said country.

In view of the above, it can be stated that supply of services made by a RBA
of a foreign company, not incorporated in India, to any establishment of the
said foreign company outside India, shall be treated as supply between
establishments of distinct persons and shall not be considered as “export of
services” in view of condition (v) of section 2(6) of IGST Act.

India Outside India

Establishments of distinct
persons

RBA of foreign Supply not

company not Establishment of the
considered as
incorporated in India export of services foreign company

Similarly, any supply of service by a company incorporated in India to its RBA,

located in any other country and not incorporated under the laws of the said
country, shall also be considered as supply between establishments of distinct
persons and cannot be treated as export of services.
 IMPORT AND EXPORT UNDER GST 1.51 14.51

India Outside India

Establishments of distinct
persons

RBA of Indian
company, not
Supply not
Company incorporated incorporated in
considered as
in India foreign country
export of services

From the perusal of the definition of “person” under section 2(84) of the CGST
Act and the definitions of “company” and “foreign company” under section 2
of the Companies Act, 2013 10, it is observed that a company incorporated

10
Section 2(84) of the CGST Act provides that “person” includes-
(a) ……..
(b) ……..
(c) a company;
(d) ……..
(e) ……..
(f) ……..
(g) ……..
(h) any body corporate incorporated by or under the laws of a country outside India;
(i) ……..
(j) ……..
(k) Central Government or a State Government;
(l) ……..
(m) ……..
(n) ……..
Definitions of company and foreign company as provided under section 2 of Companies Act
2013 are as under:
Company means a company incorporated under this Act or under any previous company
law.
 14.52
1.52 GOODS AND SERVICES TAX

in India and a foreign company incorporated outside India, are separate

“person” under the provisions of CGST Act and accordingly, are separate
legal entities.
Thus, a subsidiary/ sister concern/ group concern of any foreign company
which is incorporated in India, then the said company incorporated in India
will be considered as a separate “person” under the provisions of CGST Act
and accordingly, would be considered as a separate legal entity than the
foreign company.
In view of the above, it is clarified that a company incorporated in India and
a body corporate incorporated by or under the laws of a country outside
India, which is also referred to as foreign company under the Companies Act,
are separate persons under the CGST Act, and thus are separate legal entities.
Accordingly, these two separate persons would not be considered as “merely
establishments of a distinct person in accordance with Explanation 1 in
section 8”.
Therefore, supply of services by a subsidiary/ sister concern/ group concern,
etc. of a foreign company, which is incorporated in India under the
Companies Act, 2013 (and thus qualifies as a ‘company’ in India as per
Companies Act), to the establishments of the said foreign company located
outside India (incorporated outside India), would not be barred by the
condition (v) of section 2(6) for being considered as export of services, as it
would not be treated as supply between merely establishments of distinct
persons under Explanation 1 of section 8.
Similarly, the supply from a company incorporated in India to its related
establishments outside India, which are incorporated under the laws outside
India, would not be treated as supply to merely establishments of distinct
person under Explanation 1 of section 8.
Such supplies, therefore, would qualify as ‘export of services’, subject to
fulfilment of other conditions as provided under section 2(6).

Foreign company means any company or body corporate incorporated outside India
which—
(a) has a place of business in India whether by itself or through an agent, physically or
through electronic mode; and
(b) conducts any business activity in India in any other manner.
 IMPORT AND EXPORT UNDER GST 1.53 14.53

India Outside India

Not merely establishments of distinct

persons

Subsidiary/ sister Establishments of the

concern/ group Supply considered said foreign
concern of a foreign as export of company located
company, services outside India
incorporated in India (incorporated
under Companies Act, outside India)
2013

(i) Supplies to a SEZ unit or SEZ developer

Supply to a SEZ unit/developer is zero-rated but all the supplies are not zero-
rated. The supplies to a SEZ unit/developer shall be zero rated and the
supplier shall be eligible for refund of unutilized ITC or tax paid as the case
may be, only if such supplies have been received by the SEZ developer or SEZ
unit for authorised operations.

An endorsement to this effect shall have to be issued by the specified officer

of the Zone. Therefore, subject to the provisions of section 17(5) of the CGST
Act, if event management services, hotel, accommodation services,
consumables etc. are received by a SEZ unit/developer for authorised
operations, as endorsed by the specified officer of the Zone, the benefit of
zero rated supply shall be available in such cases to the supplier.
Services of short-term accommodation, conferencing, banqueting etc.
provided to a SEZ developer/SEZ unit – whether to be treated as an inter-
State supply or an intra-State supply
 14.54
1.54 GOODS AND SERVICES TAX

As per section 7(5)(b) of the IGST Act, the supply of goods or services or both
to a SEZ developer or a SEZ unit shall be treated to be a supply in the course
of inter-State trade or commerce.
However, as per section 12(3)(c) of the IGST Act, the place of supply of
services by way of accommodation in any immovable property for organising
any functions shall be the location at which the immovable property is located
[Please refer Chapter 3 – Place of Supply in Module 1 of this Study Material for
detailed discussion of said provisions]. Thus, in such cases, if the location of
the supplier and the place of supply is in the same State/ Union territory, it
would be treated as an intra-State supply.
It is an established principle of interpretation of statutes that in case of an
apparent conflict between two provisions, the specific provision shall prevail
over the general provision.
In the instant case, section 7(5)(b) of the IGST Act is a specific provision
relating to supplies of goods or services or both made to a SEZ developer or
a SEZ unit, which states that such supplies shall be treated as inter-State
supplies.
It is therefore, clarified that services of short term accommodation,
conferencing, banqueting etc., provided to a SEZ developer or a SEZ unit shall
be treated as an inter-State supply [Circular No. 48/22/2018 GST dated
14.06.2018].

(ii) Transactions with EOUs

Zero rating is not applicable to supplies to EOUs and there is no special
dispensation for them under GST regime. Therefore, supplies to EOUs are
taxable like any other taxable supplies. EOUs, to the extent of exports, are
eligible for zero rating like any other exporter [Circular No. 8/8/2017 GST
dated 04.10.2017 as amended].

However, supplies to EOUs are treated as deemed exports and refund of tax
paid on deemed exports is admissible either to the supplier or the recipient.

(iii) Procedure for export under bond/LUT without payment of tax

Procedure for merchant exports
Refer point (iii) under heading “Export of goods”.
 IMPORT AND EXPORT UNDER GST 1.55 14.55

Procedure for direct exports [Rule 96A of the CGST Rules]

(a) Exporter has to execute the bond or LUT prior to export, binding himself
to pay the tax due along with interest @ 18% within: -

Export of goods Export of services

15 days after the expiry of 15 days after the expiry of 1 year, or

3 months, or such further the period as allowed under FEMA 11
period as may be allowed including any extension of such period
by the Commissioner, as permitted by the RBI, whichever is
from the date of issue of later, from the date of issue of the
the invoice for export, if invoice for export or such further
the goods are not period as may be allowed by the
exported out of India. Commissioner, if the payment of
such services is not received by the
exporter in convertible foreign
exchange or in Indian rupees,
wherever permitted by the RBI.

These provisions are also applicable in respect of zero-rated supply of

goods and/or services to a SEZ unit/developer without payment of IGST.
Proviso to section 16(3) provides that the registered person making
zero rated supply of goods, without payment of tax shall, in case of non-
realisation of sale proceeds, be liable to deposit the refund so received
under section 16(3) along with the applicable interest under section 50
of the CGST Act within 30 days after the expiry of the time limit
prescribed under the Foreign Exchange Management Act, 1999 (FEMA)
for receipt of foreign exchange remittances, in such manner as may be
prescribed. Rule 96B prescribing the manner in relation to this, lays
down that proceeds of export of goods need to be realized within the
period allowed under FEMA for receipt of foreign exchange remittances.
Non/partial realization of such proceeds may result in recovery of any
refund paid to the taxpayer with interest under section 50 of the CGST

11
Foreign Exchange Management Act, 1999
 14.56
1.56 GOODS AND SERVICES TAX

Act. [Provisions of rule 96B have been discussed in detail in Chapter 15 -

Refunds in this Module of the Study Material.]

(b) Failure to export goods and pay the tax due along with interest within
the period specified in (a) above results in withdrawal of the facility of
export without payment of IGST and recovery of the said amount under
section 79 of the CGST Act. The facility, however, can be restored on
payment of the said amount [Notification No. 37/2017 CT dated
04.10.2017].

(c) All registered persons are eligible to furnish a LUT in place of a bond
except those who have been prosecuted for cases involving an amount
exceeding ` 250 lakh [Notification No. 37/2017 CT dated 04.10.2017].
(d) The details of the export invoices should be submitted in GSTR-1. These
details shall be electronically transmitted to the system designated by
Customs and a confirmation that the goods covered by the said invoices
have been exported out of India shall be electronically transmitted to
the common portal from the said system.

Clarification on furnishing of bond/LUT

Circular No. 08/08/2017 GST dated 04.10.2017 as amended vide Circular No.
40/14/2018 GST dated 06.04.2018 & Circular No. 88/07/2019 GST dated
01.02.2019 has clarified the following with regard to furnishing of bond/LUT
for export without payment of tax:
(a) Validity of LUT: The LUT shall be valid for the whole financial year in
which it is tendered. However, in case the goods are not exported
within the time specified in sub-rule (1) of rule 96A of the CGST Rules
(as given in the table above) and the registered person fails to pay the
amount mentioned in the said sub-rule, the facility of export under LUT
will be deemed to have been withdrawn. If the amount mentioned in
the said sub-rule is paid subsequently, the facility of export under LUT
shall be restored. As a result, exports, during the period from when the
facility to export under LUT is withdrawn till the time the same is
restored, shall be either on payment of the applicable IGST or under
bond with bank guarantee.
 IMPORT AND EXPORT UNDER GST 1.57 14.57

(b) Form for bond/LUT: The registered person (exporter) shall fill the
relevant form on the common portal. An LUT shall be deemed to be
accepted as soon as an acknowledgement for the same, bearing the
Application Reference Number (ARN), is generated online.
(c) Documents for LUT: No document needs to be physically submitted
to the jurisdictional office for acceptance of LUT.
(d) Acceptance of LUT/bond: A LUT shall be deemed to have been
accepted as soon as an acknowledgement for the same, bearing the
Application Reference Number (ARN), is generated online. If it is
discovered that an exporter whose LUT has been so accepted, was
ineligible to furnish a LUT in place of bond, then the exporter’s LUT will
be liable for rejection. In case of rejection, the LUT shall be deemed to
have been rejected ab initio.
(e) Bank guarantee: Since the facility of export under LUT has been
extended to all registered persons, bond will be required to be
furnished by those persons who have been prosecuted for cases
involving an amount exceeding ` 250 lakh. A bond, in all cases, shall
be accompanied by a bank guarantee of 15% of the bond amount.
(f) Clarification regarding running bond: The exporters shall furnish a
running bond where the bond amount would cover the amount of self-
assessed estimated tax liability on the export. The exporter shall ensure
that the outstanding integrated tax liability on exports is within the
bond amount. In case the bond amount is insufficient to cover the said
liability in yet to be completed exports, the exporter shall furnish a fresh
bond to cover such liability. The onus of maintaining the debit / credit
entries of integrated tax in the running bond will lie with the exporter.
The record of such entries shall be furnished to the Central tax officer
as and when required.
(g) Sealing by officers: Till mandatory self-sealing is operationalized,
sealing of containers, wherever required to be carried out under the
supervision of the officer, shall be done under the supervision of the
central excise officer having jurisdiction over the place of business
where the sealing is required to be done. A copy of the sealing report
 14.58
1.58 GOODS AND SERVICES TAX

would be forwarded to the Deputy/Assistant Commissioner having

jurisdiction over the principal place of business.
(h) Realization of export proceeds in Indian Rupee: Para A(v) Part-I of
RBI Master Circular No. 14/2015-16, dated 1st July, 2015 (updated as on
5th November, 2015) states that “there is no restriction on invoicing of
export contracts in Indian Rupees in terms of the Rules, Regulations,
Notifications and Directions framed under the Foreign Exchange
Management Act, 1999.
Further, in terms of Para 2.52 of the Foreign Trade Policy (2023), all
export contracts and invoices shall be denominated either in freely
convertible currency or Indian rupees, but export proceeds shall be
realized in freely convertible currency. However, export proceeds
against specific exports may also be realized in rupees, provided it is
through a freely convertible Vostro account of a non-resident bank
situated in any country other than a member country of Asian Clearing
Union (ACU) or Nepal or Bhutan”.
Further, section 2(6) of the IGST Act, 2017 allows realization of export
proceeds of services in INR, wherever allowed by the RBI.
Accordingly, it is clarified that the acceptance of LUT for supplies of
goods or services to countries outside India or SEZ developer or SEZ
unit will be permissible irrespective of whether the payments are made
in Indian currency or convertible foreign exchange as long as they are
in accordance with the applicable RBI guidelines.
(i) Jurisdictional officer: In exercise of the powers conferred by sub-
section (3) of section 5 of the CGST Act, it is hereby stated that the
LUT/Bond shall be accepted by the jurisdictional Deputy/Assistant
Commissioner having jurisdiction over the principal place of business
of the exporter. The exporter is at liberty to furnish the LUT/bond
before either the Central Tax Authority or the State Tax Authority till the
administrative mechanism for assigning of taxpayers to the respective
authority is implemented.
 IMPORT AND EXPORT UNDER GST 1.59 14.59

(iv) Export to Nepal and Bhutan

Export of goods: Export of goods to Nepal or
Bhutan falls within the definition of ‘export of
goods’ under the IGST Act as goods are taken from
India to a place outside India. India has rupee trade
with Nepal and Bhutan. The RBI regulations allow
receipt of payment in Indian rupees in case of
exports to Nepal and Bhutan.

In case of export of goods under GST law, receipt of export proceeds in

convertible foreign exchange is not a pre-requisite. [However, non-
realization of export proceeds within the time prescribed under FEMA may
result in recovery of any refund paid to the taxpayer.] Hence, export of goods
to Nepal and Bhutan will be treated as zero rated and consequently will also
qualify for all the benefits available to zero rated supplies under the GST
regime.
Export of services: In case of export of services, wherever permitted by the
Reserve Bank of India, receipt of payment in Indian rupees is allowed in terms
of section 2(6). As stated earlier, the RBI regulations allow receipt of payment
in Indian rupees in case of exports to Nepal and Bhutan. Consequently,
supply of services having place of supply in Nepal or Bhutan, against payment
in Indian Rupees is considered as
export of services subject to
fulfillment of other conditions.

Therefore, exports of both

goods and services to Nepal and
Bhutan are treated as ‘normal
exports’, i.e. goods and services
can be exported to Nepal and
Bhutan under LUT.
 14.60
1.60 GOODS AND SERVICES TAX

Clarification regarding admissibility of export remittances received in

Special Rupee Vostro account, as permitted by RBI, for the purpose of
consideration of supply of services to qualify as export of services
As discussed earlier, one of the conditions mentioned in sub-clause (iv) of
section 2(6) of the IGST Act in the definition of export of services (Refer
definition of export of services] is that the payment for such service has been
received by the supplier of service in
convertible foreign exchange or in Indian
rupees wherever permitted by the Reserve
Bank of India.
In this regard, it is clarified that when the
Indian exporters, undertaking export of
services, are paid the export proceeds in
Indian rupees from the Special Rupee
Vostro Accounts of correspondent bank(s)
of the partner trading country, opened by
Authorised Dealer (AD) banks, the same shall be considered to be fulfilling
the conditions of sub-clause (iv) of section 2(6) of the IGST Act, 2017, subject
to the conditions/ restrictions mentioned in Foreign Trade Policy, 2023 &
extant RBI Circulars 12 and without prejudice to the permissions / approvals, if
any, required under any other law .
[Circular No. 202/14/2023 GST dated 27.10.2023]

12
Settlement of trade transactions in INR (Indian Rupees), as per Foreign Trade Policy, 2023 &
extant RBI Circulars, shall take place through the Special Rupee Vostro Accounts opened by AD
banks in India, as under:
(a) Indian importers undertaking imports through this mechanism shall make payment in
INR which shall be credited into the Special Vostro account of the correspondent bank
of the partner country, against the invoices for the supply of goods or services from the
overseas seller /supplier.

(b) Indian exporters, undertaking exports of goods and services through this mechanism, shall
be paid the export proceeds in INR from the balances in the designated Special Vostro
account of the correspondent bank of the partner country.
 IMPORT AND EXPORT UNDER GST 1.61 14.61

LET US RECAPITULATE

GST, being a business tax,

Import and export

impacts import and export

provide level playing field to
under GST

too
domestic suppliers vis a vis
international suppliers in case
Provisions in the GST laws of import
seek to
make export more
competitive

1. IMPORTS UNDER GST

Imports of goods or
services under GST

Inter-State supplies

subject to IGST

Import of goods Importer of goods pays IGST

Imports under GST

Importer of services pays IGST on

Import of services
reverse charge basis

Exception
Import of OIDAR services Supplier located outside
by unregistered non- India pays IGST
taxable recipients
 14.62
1.62 GOODS AND SERVICES TAX

A. IMPORT OF GOODS

Import of goods
Not a
customs duty
Place of supply of imported IGST on imported
goods goods

Location of importer levied under IGST Act, 2017

levied and collected in accordance with

Customs Act, 1962

levied in addition to other customs duties

levied on the imported goods

leviable at such rate as is leviable under the

IGST Act on a like article on its supply in India

•when duties of customs are levied on the

said goods under the Customs Act, 1962
Point when IGST is levied and
•point when the bill of entry for home
collected on imported goods
consumption is filed

Value for levying IGST on imported goods

Value any other sum

determined leviable under IGST and GST
under section 14 Basic customs any law for the Compensation
of the Customs duty time being in
Cess
force as
Act, 1962
customs duties
 IMPORT AND EXPORT UNDER GST 1.63 14.63

Taxability of goods supplied while being deposited in a customs bonded

warehouse

Supply of warehoused
neither a supply of
goods to any person in terms of Schdeule
treated as goods nor a supply of
before clearance for services III
home consumption

When ex-bond bill of entry is filed for clearing such warehoused goods for
home consumption

Basic customs
IGST is leviable duty is payable

on the value determined

on the value as under section 14 of the
determined below Customs Act, 1962

value at the time of filing

of the into-bond bill of
entry

Value for levying IGST in case of supply of warehoused goods

Value determined any other sum

at the time of filing leviable under IGST and GST
into-bond bill of Basic any law for the Compensation
entry under section customs duty time being in Cess
14 of the Customs force as
Act, 1962 customs duties
whichever
is higher

OR

Transaction value (Sale value)

 14.64
1.64 GOODS AND SERVICES TAX

Taxability of High Sea Sales

‘High Sea Sales’ is a common trade practice whereby the original importer sells the
goods to a third person before the goods are entered for customs clearance.

neither a supply of
in terms of
High Sea Sales treated as goods nor a supply
of services Schdeule III

Value of such High Sea Sale not included in the value of exempt supply for
the purpose of reversal of ITC under rules 42 and 43

When bill of entry is filed for imported goods (High Sea Sales)

Basic customs duty is

IGST is payable on
payable on

Price paid by the last high sea sales buyer who files the bill of entry
for home consumption

Taxability of Third country shipments/ Triangular Trade

•goods move from one country to another

without touching India
Third country shipments
•only invoicing is done by the registered person
in India

Third country neither a supply of

shipments goods nor a supply in terms of
treated as
of services Schdeule III

Value of such Third country shipments not included in the value of

exempt supply for the purpose of reversal of ITC under rules 42 and 43
 IMPORT AND EXPORT UNDER GST 1.65 14.65

Taxability of supply of online money gaming by a person located outside the

taxable territory to a person in India [Section 14A]

Supplier of Online Gaming Services located outside Taxable Territory.

Such Supplier itself is liable to pay IGST after obtaining single registration under Simplified
Registration Scheme (SRS)*

If the Supplier of Online Gaming does not have a physical presence in India.

If person is available in India representing If person is not available in India representing

such overseas supplier of Online Gaming. such overseas supplier of Online Gaming.

Such person is Supplier of online gaming is required to appoint a person

liable to pay IGST. in India for the purpose of paying tax on such services.

NOTE: In case of failure to comply with the above provisions by the supplier of the online money
gaming or a person appointed by such supplier or both, any information generated, transmitted,
received or hosted in any computer resource used for such supply shall be liable to be blocked for
access by the public.

* It is Simplified Registration Scheme, as referred to in section 14(2) of this CGST Act 2017.
 14.66
1.66 GOODS AND SERVICES TAX

Taxability of goods imported by SEZ

Goods imported by a
exempted
unit/developer in SEZ for Whole of IGST leviable
authorised operations from

Taxability of goods imported by EOU

Goods imported by BCD, additional customs duty,

100% EOU
without payment of IGST and compensation cess

Import as Baggage
Passenger baggage

exempted from IGST as well as GST

Compensation Cess
basic customs duty at
the rate of 35%
(in excess of the duty-free
allowances) liable to applicable social
welfare surcharge

B. IMPORT OF SERVICES

(i) Taxability of import of service

with In the course of

consideration Supply
furtherance of business or
not
Import
of
Related /distinct person in
Services Supply
the course of furtherance
without of business
consideration
Not a
Other Cases
supply
 IMPORT AND EXPORT UNDER GST 1.67 14.67

(ii) Meaning of import of service

Import of services

Supply of any service where

Supplier of
Recipient Place of
service is
of service is supply of
located
located IN service is
OUTSIDE
INDIA, and IN INDIA.
INDIA,

Services supplied by a
supplier located outside
India to recipient located
in India and place of
supply is in India

Import of
services
Supplier Recipient
+
POS
 14.68
1.68 GOODS AND SERVICES TAX

(iii) Person liable to pay tax on importation of service

Importation of OIDAR IGST is payable by

services by a non- supplier of OIDAR
taxable online recipient services

Importation of notified IGST is payable by ECO

services through ECO
Importation of services

Services of IGST is payable by

transportation of Contract is FOB basis importer located in
goods by a vessel from India
a place outside India
upto the custom
station of clearance in
India by a foreign No IGST is leviable on
Contract is CIF basis
shipping line the ocean freight

IGST is payable by
Residual cases of
recipient of imported
importation of services
services in India

UOI v. Mohit Minerals Pvt. Ltd.

Gist of this case: There cannot be a

separate levy of IGST on the component
of ocean freight paid by the foreign
exporter to the foreign shipping line in
the CIF contract, since it would be
treated as composite supply.
 IMPORT AND EXPORT UNDER GST 1.69 14.69

(iv) Importation of OIDAR services [Section 14]

BY NON TAXABLE ONLINE RECIPIENT

BY BUSINESS ENTITY
or NTOR (Unregistered Person)

Where both Where Supplier of Where both Where supplier of

Supplier of OIDAR OIDAR services is Supplier of OIDAR OIDAR services is
services and OUTSIDE INDIA services and OUTSIDE INDIA
recipient are in and Recipient IN recipient is in and Recipient IN
INDIA INDIA INDIA. INDIA

POS= Location of POS= INDIA POS= INDIA POS= INDIA

Recipient.
(Tax payable (Tax payable (Tax payable
(Tax payable by
by recipient by Supplier by Supplier
supplier under
under RCM) under forward outside India)
Forward Charge)
charge)

Provision or facilitation of OIDAR services by intermediary located outside India

Intermediary

Not involved in payment, terms &

Located outside India. Arranges conditions and delivery of service.
or facilitates supply of OIDAR
services to NTOR. Invoice clearly identifies the service and
its supplier.

• He would be treated as the supplier.

Responsibility for
• Required to obtain compulsory
registration remains
registration in India and pay IGST on
with the supplier.
the supply.
 14.70
1.70 GOODS AND SERVICES TAX

Provisions enabling supplier of OIDAR services located outside India to comply

with the responsibilities entrusted under GST laws

Supplier/intermediary of OIDAR Only single registration is

Services required under SRS

he shall get registered and

If representative available in India pay IGST on behalf of
supplier.

If the supplier has neither the

physical presence nor any OIDAR supplier may
representative in the taxable appoint a person in India
territory for paying IGST.

MEANING OF OIDAR SERVICES

A B

Services whose delivery is

Services are impossible to OIDAR
mediated by information
ensure in the absence of Services
technology over the
internet/electronic network information technology

(v) Services provided through ECO located outside India

ELECTRONIC COMMERCE OPERATOR (ECO) LOCATED OUTSIDE INDIA

If ECO supplies notified services through portal, ECO is required to pay IGST on notified
services**
 IMPORT AND EXPORT UNDER GST 1.71 14.71

Where the ECO does not have a physical presence in India

If person is available If person is not available in

in India representing India representing such
such overseas supplier. overseas supplier.

Such person is liable ECO is required to appoint a

to pay IGST person in India for paying tax
on such notified services.

**Services notified under section 9(5) of the CGST Act, 2017/ Section 5(5) of the IGST
Act, 2017.
Registration and ITC in case of import of goods and services
RCM does not cover
importer of goods.
No mandatory
registration required.
For Import of
goods
Mandatory to quote
If importers are GSTIN in the Bill of
registered under Entry for payment of
GST. IGST and for availing
ITC.
Registration

Persons engaged PAN (which is

exclusively in the authorized as IEC
Not required to
For import of import or export of by DGFT) of the
obtain
exempted goods goods which are importer &
registration.
not liable to tax or exporter would
are wholly exempt. suffice.

Required to Liable to pay

For importer of obtain IGST on import of
services. compulsory services under
registration. RCM.
 14.72
1.72 GOODS AND SERVICES TAX

Input Tax Credit (ITC) in case of import of goods and services

IGST paid on imported Can be used for paying tax

Available
good. on Outward Supplies.

GST Compensation Can be used only for payment

Available
Cess of GST Compensation Cess.
ITC of

BCD and social welfare

surcharge paid on the Not Available
imported good.

IGST paid on
Since input tax includes Tax
importation of services Available
payable under RCM.
is available

Inter State Supply [ Section 7(5) of IGST Act]

Supply of good or services

(G/S) or both

When supplier is
To or by SEZ located IN INDIA In the taxable territory,
developer/ SEZ unit. not being an intra-State
supply and not covered
POS= Outside elsewhere.
India
 IMPORT AND EXPORT UNDER GST 1.73 14.73

Establishments of Distinct Person

Where any person has:

Establishment in Establishment in a Establishment in a State /

India State/ UT UT.

any other any other any other establishment

establishment establishment outside registered within same
outside India. that State/ UT. State / UT.

Note: A person carrying on a business through a branch or an agency or a representational

office in any territory shall be treated as having an establishment in that territory.

Export of G/S or both

Means:
Supply of G/S or both for
authorized operations to
SEZ developer/ SEZ unit.
 14.74
1.74 GOODS AND SERVICES TAX

Options under ZRS

Notified class of persons may make

Supply of G/S or both under ZRS or notified class of G/S may be
bond/ LUT without payment of exported on payment of IGST
IGST. utilizing IGST.

Refund of unutilized ITC can be Refund of such IGST paid can be

claimed. claimed.

In case of non-realization of Along with interest within 30

sale proceeds, supplier of ZRS days after the expiry of the time
be liable to deposit the refund limit prescribed under FEMA for
so received. receipt of FOREX remittance.

Difference between Exempted Supplies and Zero Rated Supply

Exempted Supplies Zero rated supplies

Exempt supply means supply of any Zero-rated supply means (i) export of
goods and/or services which attracts goods and/or services or (ii) supply of
nil rate of tax or which may be wholly goods and/or services for authorised
exempt from tax and includes non- operations to SEZ unit/SEZ
taxable supply. developer.

No tax on the outward exempted No tax on the outward supplies; IS

supplies, however, the input supplies also to be tax free (by way of refund
used for making exempt supplies to of ITC)
be taxed

Credit of input tax needs to be Credit of input tax may be availed for
 IMPORT AND EXPORT UNDER GST 1.75 14.75

reversed, if taken. making ZRS, even if such supply is an

No ITC on the exempted supplies. exempt supply.
ITC allowed on ZRS.

Value of exempt supplies, for Value of ZRS shall be added along

apportionment of ITC, shall include with the taxable supplies for
supplies on which the recipient is apportionment of ITC.
liable to pay tax on reverse charge
basis, transactions in securities, sale
of land and, subject to clause (b) of
paragraph 5 of Schedule II, sale of
building.

Any person engaged exclusively in A person exclusively making ZRS

the business of supplying goods or needs to register as refund of
services or both that are not liable to unutilized ITC or IGST paid shall have
tax or wholly exempt from tax under to be claimed.
the CGST or IGST Act shall not be
liable to registration.

A registered person supplying Normal tax invoice shall be issued.

exempted goods and/or services
shall issue, instead of a tax invoice, a
bill of supply.

Treated as inter-State supply and zero rated.

Taxability of Export

ITC is still available to the exporter even if there is full exemption for
the supply.

Tax associated with exports is always IGST.

 14.76
1.76 GOODS AND SERVICES TAX

Physical Taking the goods from India

Exports to a place outside India.

Goods (not Such Payment for

services) supplies supplier is
Supplies
Deemed supplied are received either
do not
Exports are notified as in INR/
leave India.
manufactu deemed convertible
red in India exports. FOREX.

Categories of supply of goods notified as deemed exports

Supply of goods by a registered person against Advance Authorisation (AA)

Supply of Capital Goods (CG) by a registered person against Export Promotion Capital
Goods (EPCG) authorisation.
Supply of goods by a registered person to EOU.

Supply of gold by specified bank or PSU against AA.

Such supplies Such supplies can Refund of tax paid on

are subject be made on supply, regarded as
payment of tax and deemed export
to levy of cannot be supplied admissible to either the
taxes. under a bond/LUT. supplier or recipient.
 IMPORT AND EXPORT UNDER GST 1.77 14.77

Where a person who manufactures the goods

Merchant (Manufacturer Exporter) export these goods through
Exports Merchant Exporter who buys goods from manufacturer and
exports them outside India at concessional rate (CGST
0.05% CGST and SGST 0.05%) subject to the specified
conditions.

Export goods Exporter

Manufacturer Supplies Merchant under LUT/ Outside
goods @
Exporter Exporter Bond
0.01% to India

Get credit of
Gets refund of concessional tax
ITC on account paid.
of Inverted
Duty structure.
 14.78
1.78 GOODS AND SERVICES TAX

Conditions applicable on supplying goods by registered Manufacturer

Exporter (supplier) to a registered merchant exporter (Recipient) at
concessional rate of GST:

Supply must be made under a Tax Invoice.

Recipient export said goods within 90 days from date of invoice

by supplier.

Recipient shall indicate GSTIN of supplier and invoice number

issued by supplier in the shipping bill/ bill of export.

Recipient shall registered with an Export Promotion Council.

Recipient shall place order on supplier for procuring goods at

concessional rate and a shall provide a copy of it to jurisdictional
tax officer of supplier.

directly to the Port, ICD, Airport or Land

Custom Station (LCS) from where the said
Recipient shall
move the said OR
goods from place
directly to a registered warehouse**
from where the said goods shall be
moved to the Port, ICD, Airport or LCS

** Registered principal place of business or registered additional place of business are

deemed to be a registered warehouse.
 IMPORT AND EXPORT UNDER GST 1.79 14.79

Conditions to be satisfied to qualify as Export of

Services.

Supplier- in POS Transaction is between Consideration in

India separate entities not
= convertible FOREX
Recipient- between establishments of / INR.
Outside India
Outside India entities.

(i) Supplies to SEZ unit/ developer.

Supply to a SEZ unit/ developer is zero Condition - Such supplies are
rated. received for authorized operations
by SEZ unit/ developer.

Refund of Unutilized ITC or refund of

IGST paid is available. An endorsement from specified officer
of zone is required to be issued.

(ii) Transactions with EOUs

Supplies to EOUs
Exports of EOUs

eligible for
Zero rating Taxable like treated as deemed zero rating.
not any other exports and refund of tax
applicable. taxable paid on deemed exports
supplies. is admissible either to the
supplier or the recipient.
 14.80
1.80 GOODS AND SERVICES TAX

(iii) Procedure for direct exports [Rule 96A of the CGST Rules]

Exporter has to execute bond or LUT before export, and pay tax
with 18% Interest within:
(i) Export of Goods: 15 days after end of 3 months (or further
period as allowed by commissoner) from date of invoice issued, if
goods ot exported outside India; or
(ii) Export of Services: 15 days after end of 1 year (or further
period as allowed by commissoner) from date of invoice issued if
the payment not received by exporter in convertible FOREX or INR.
Note: If registered person is making ZRS without payment of tax,
then in case of non-realisation of sale proceeds, he would be be
liable to deposit the refund so received under section 16(3) along
with interest within 30 days after the expiry of time limit prescribed
under FEMA for receipt of FOREX remittances.

Failure to export and paying tax with interest leads to withdrawal

of facility of export without payment of IGST and recovery of the
said amount under section 79 of the CGST Act.
This facility can be restored after the payment of said amount.

Registered persons are eligible to furnish a LUT in place of a

bond. (Except those who have been prosecuted for cases involving
an amount> Rs. 250 lakh)

The details of the export invoices should be submitted in GSTR-1.

 IMPORT AND EXPORT UNDER GST 1.81 14.81

(iv) Export to Nepal and Bhutan

Export of goods: Export of services:

RBI allows receipt of payment in INR

Such Exports falls within the definition
in case of exports of services to Nepal
of ‘export of goods’ under the IGST
and Bhutan in case of supply of
Act.
services and such supply in Nepal or
Bhutan, against payment in INR is
RBI allow receipt of payment in INR in
considered as export of services
case of such exports.
subject to fulfillment of other
India has rupee trade with Nepal and conditions.
Bhutan.

Treated as zero rated and qualify for

all the benefits available to ZRS.

Non-realization of export proceeds

within the time prescribed under
FEMA may result in recovery of any
refund.

TEST YOUR KNOWLEDGE

1. Explain how imports are taxed under GST.
2. Describe how exports are taxed under GST.
3. Is it necessary to execute a bond for effecting zero rated supplies? Elucidate.
4. A Ltd. enters into an agreement for sale of goods with B Ltd., a company based
in UAE. B Ltd. requires the goods to be delivered by A Ltd. to C Ltd., a company
based in Karnataka.
Whether the transaction will qualify as export of goods under GST? Analyze the
scenario and offer your comments.
 14.82
1.82 GOODS AND SERVICES TAX

5. A Ltd. is making zero rated supplies which are also specifically exempt from
GST. The company has paid input tax of ` 2,00,000 on inputs and input services
which have been used exclusively in effecting such zero rated supplies.

Examine if A Ltd. can avail ITC of input tax of ` 2,00,000 paid on inputs and
input services used exclusively in effecting such zero-rated supplies.

6. Whether services of short-term accommodation, conferencing, banqueting etc.

provided to a SEZ unit/developer by a supplier located in the same State as that
of the SEZ unit/developer should be treated as an inter-State supply under
section 7(5)(b) or an intra-State supply in terms of section 8(2) read with section
12(3)(c)? Examine.

7. Mr. Amar Kant, a Chartered Accountant, being a partner in GST registered firm
orders a gaming software for his son from a company located in USA. He makes
the payment for the same from his personal bank account.

Examine whether the transaction will be liable to GST. If yes, in whose hands
the tax liability will arise?

8. ‘Separate LUT is to be furnished for every export supply.’

With reference to the provisions of the GST law, examine the veracity or
otherwise of the statement.

9. AXT Ltd. entered into a high sea sale transaction with BYU Ltd. for certain
goods. AXT Ltd. is of the view that GST on such sale transaction is payable at
the time of such sale and basic customs duty is payable at the time of filing the
bill of entry for import of goods.

Examine whether the view taken by AXT Ltd. is correct.

ANSWERS

1. All imports are deemed as inter-State supplies for the purposes of levy of GST
(IGST). The incidence of tax follows the destination principle and the tax
revenue accrues to the State where the imported goods and services are
consumed. IGST paid on import of goods and services is available as ITC for
 IMPORT AND EXPORT UNDER GST 1.83 14.83

set off against the output tax liability. IGST on import of goods is levied under
the IGST Act but the machinery of the customs law is used to levy and collect
the same.
2. Exports of goods and services are zero rated. The exporter can export under
bond/LUT without payment of IGST and claim refund of ITC. In case of
notified class of persons or notified goods or services, he may pay IGST at the
time of export and claim refund thereof.
3. No. The facility to export under LUT has been extended to all zero rated
suppliers (barring a few exceptions such as those who have been prosecuted
for an offence involving tax of ` 2.5 crore) vide Notification No. 37/2017 CT
dated 4.10.2017. The other conditions for executing LUT have been specified
in Circular No. 8/8/2017 GST dated 4.10.2017 as amended.
4. As per the definition of export of goods provided under section 2(5), export
of goods means taking goods out of India to a place outside India.
Since in the given case, the goods remain in India, i.e. with C Ltd. located in
Karnataka, the transaction between A Ltd. and B Ltd. cannot be treated as
export of goods under GST.
5. As per section 16(2), ITC may be availed for making zero rated supplies,
notwithstanding that such supplies are exempt supplies. However, the same
is subject to provisions u/s 17(5) of the CGST Act, i.e. blocked credit.
Hence, A Ltd. can take credit of ` 2,00,000 even if the outward zero rated
supply is exempt from GST. However, the credit would not be available in
respect of the inputs and input services, the credit on which is blocked under
section 17(5) of the CGST Act.
6. Circular No. 48/22/2018 GST has clarified on this issue as under:
As per section 7(5)(b), the supply of goods and/or services to a SEZ
unit/developer is treated as a supply of goods and/or services in the course
of inter-State trade or commerce. Whereas, as per section 12(3)(c), the place
of supply of services by way of accommodation in any immovable property
for organising any functions shall be the location at which the immovable
property is located. Thus, in such cases, if the location of the supplier and
the place of supply are in the same State/ Union territory, it would be treated
as an intra-State supply.
 14.84
1.84 GOODS AND SERVICES TAX

It is an established principle of interpretation of statutes that in case of an

apparent conflict between two provisions, the specific provision shall prevail
over the general provision. In the instant case, section 7(5)(b) is a specific
provision relating to supplies of goods and/or services made to a SEZ
unit/developer, which states that such supplies shall be treated as inter-State
supplies.
Further, proviso to section 8(2) also lays down that intra-State supply of
services do not include supply of services to a SEZ unit/developer. It is,
therefore, clarified that services of short-term accommodation, conferencing,
banqueting etc., provided to a SEZ unit/developer shall be treated as an inter-
State supply.
7. The supply of gaming software is in the nature of OIDAR service in terms of
section 2(17).
The transaction is for personal consumption of Mr. Amar Kant and the
payment has also been made from the personal bank account of Mr. Amar
Kant and not from the bank account of his GST registered firm. Therefore,
being an unregistered person receiving OIDAR service in taxable territory, Mr.
Amar Kant is a non-taxable online recipient in terms of section 2(16).
Services received from a provider of service located in a non- taxable territory
by an individual in relation to any purpose other than commerce, industry or
any other business or profession is exempt from IGST. However, such
exemption is not available in case of OIDAR services [Notification No. 9/2017
IT (R) dated 28.06.2017].
Therefore, being an OIDAR service provided by a supplier located outside
India and received by a non-taxable online recipient, the same is liable to GST.
Tax on service supplied by any person located in a non-taxable territory to
any person other than non-taxable online recipient is payable by the recipient
of such service under reverse charge. Therefore, tax on OIDAR services
provided by the company located in USA to Mr. Amar Kant, a non-taxable
online recipient, will be payable by such company under forward charge.
8. No, the statement is not correct.
The LUT remains valid for the whole financial year and there is no need to
furnish separate LUT for each export supply.
 IMPORT AND EXPORT UNDER GST 1.85 14.85

However, in case goods are not exported within the time limit specified in
rule 96A(1) of the CGST Rules and the registered person fails to pay the
amount mentioned in the said sub rule, the facility of export under LUT will
be deemed to have been withdrawn. However, if the amount mentioned in
the said sub-rule is paid subsequently, the facility of export under LUT shall
be restored. As a result, exports, during the period from when the facility to
export under LUT is withdrawn till the time the same is restored, shall be
either on payment of the applicable IGST or under bond with bank guarantee.

Rule 96A(1) provides inter alia that an exporter of goods has to execute the
bond or LUT prior to export, binding himself to pay the tax due along with
interest @ 18% within 15 days after the expiry of 3 months, or such further
period as may be allowed by the Commissioner, from the date of issue of the
invoice for export, if the goods are not exported out of India.
9. AXT Ltd.’s view is partially correct.
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 (high sea sale) is neither treated as supply of goods nor supply
of services in terms of paragraph 8(b) of Schedule III to the CGST Act.
Thus, GST is not leviable on high sea sales. Therefore, AXT Ltd.’s view that
GST is payable on a high-sea sale transaction at the time of sale, is not correct.
As per section 14 of the Customs Act, 1962, the value for the purpose of
charging customs duty on imported goods is the value at the time of
importation, i.e. at the time of filing of the bill of entry. Further, IGST on
imported goods is also levied at the time of filing of bill of entry. Therefore,
in case of high sea sales, the assessable value of imported goods for levying
customs duty and IGST is determined on the basis of the price paid by the
last high sea sales buyer who files the bill of entry for home consumption.
Therefore, AXT Ltd.’s view that basic customs duty is payable at the time of
filing the bill of entry for import of goods is correct.
 14.86
1.86 GOODS AND SERVICES TAX

AMENDMENTS MADE VIDE THE FINANCE ACT, 2025

The Finance Act, 2025 has come into force from 29.03.2025. However, most of the
amendments made under the CGST Act and the IGST Act vide the Finance Act, 2025
would become effective only from a date to be notified by the Central Government
in the Official Gazette. Such a notification has not been issued till 30.04.2025.
Therefore, the applicability or otherwise of such amendment for May 2026,
September 2026 and/or, January 2027 examinations shall be informed by the ICAI
by way of an announcement.
In the table given below, the existing provisions of paragraph 8 of Schedule III are
compared with the provisions as amended by the Finance Act, 2025.
Once the announcement for applicability of such amendments for examination(s)
is made by the ICAI, students should read the amended provisions given hereunder
in place of the related provisions discussed in the chapter.

Section Existing Provisions as Remarks

No. provisions amended by the
Finance Act, 2025
Paragraph (a) Supply of (a) Supply of Schedule III of the
8 of warehoused warehoused goods to CGST Act, 2017 is
Schedule goods to any any person before being amended, with
III of the person before clearance for home effect from 01.7.2017
CGST Act, clearance for consumption by inserting a new
2017 home clause (aa) in
consumption (aa) Supply of goods
paragraph 8 of
Explanation 2.— warehoused in a
Schedule III of the
For the purposes Special Economic
CGST Act, to provide
of paragraph 8, Zone or in a Free
that the supply of
the expression Trade Warehousing
goods warehoused in
"warehoused Zone to any person
a Special Economic
goods" shall have before clearance for
Zone or in a Free
the same exports or to the
Trade Warehousing
meaning as Domestic Tariff
Zone to any person
assigned to it in Area;”;
before clearance for
exports or to the
 IMPORT AND EXPORT UNDER GST 1.87 14.87

the Customs Act, Explanation 2.—For Domestic Tariff Area

1962 (52 of 1962). the purposes of shall be treated
clause (a) of neither as supply of
paragraph 8, the goods nor as supply
expression of services.
"warehoused goods"
shall have the same
meaning as assigned It further seeks to
to it in the Customs amend Explanation 2
Act, 1962 (52 of of Schedule III of
1962). CGST Act, w.e.f.
01.07.2017 to clarify
Explanation 3.––For
that the said
the purposes of
explanation would be
clause (aa) of
applicable in respect
paragraph 8, the
of clause (a) of
expressions “Special
paragraph 8 of the
Economic Zone”,
said Schedule.
“Free Trade
Warehousing Zone”
and “Domestic It further seeks to
Tariff Area” shall amend Schedule III of
have the same CGST Act, w.e.f.
meanings 01.07.2017 by
respectively as inserting Explanation
assigned to them in 3 to define the terms
section 2 of the ‘Special Economic
Special Economic Zone’, ‘Free Trade
Zones Act, 2005. Warehousing Zone’
and ‘Domestic Tariff
Area’, for the purpose
of the proposed
clause (aa) in
paragraph 8 of said
Schedule.
 14.88
1.88 GOODS AND SERVICES TAX

ANNEXURE
Class of persons who may make zero-rated supply or notified class of
goods or services which may be exported on payment of IGST and claim
refund thereof notified
As discussed in the chapter, as per section 16(4), a registered person making zero
rated supply may supply goods and/or services under bond or Letter of
Undertaking (LUT) without payment of IGST and claim refund of unutilized ITC.
Further, notified class of persons may make zero-rated supply or notified class of
goods or services may be exported, on payment of IGST and refund of such tax
paid on goods and/or services supplied may be claimed.
In pursuance of the same, following goods/services/suppliers have been notified:
(i) all goods or services (except the goods specified in note below) as the class
of goods or services which may be exported on payment of IGST and on which
the supplier of such goods/services may claim the refund of tax so paid; and
(ii) all suppliers to a Developer or a unit in SEZ undertaking authorised
operations as the class of persons who may make supply of goods or services
(except the goods specified in note below) to such Developer or a unit in SEZ
for authorised operations on payment of IGST and on which the said suppliers
may claim the refund of tax so paid.
[Notification No. 01/2023 IT dated 31.07.2023 as amended by Notification No.
05/2023 IT dated 26.10.2023]

Chapter / Heading/ Sub- Description of Goods

heading/ Tariff item

2106 90 20 Pan-masala

2401 Unmanufactured tobacco (without lime tube) –

bearing a brand name

2401 Unmanufactured tobacco (with lime tube) – bearing

a brand name

2401 30 00 Tobacco refuse, bearing a brand name

 IMPORT AND EXPORT UNDER GST 1.89 14.89

2403 11 10 'Hookah' or 'gudaku' tobacco bearing a brand name

2403 11 10 Tobacco used for smoking 'hookah' or 'chilam'

commonly known as 'hookah' tobacco or 'gudaku'
not bearing a brand name

2403 11 90 Other water pipe smoking tobacco not bearing

a brand name.

2403 19 10 Smoking mixtures for pipes and cigarettes

2403 19 90 Other smoking tobacco bearing a brand name

2403 19 90 Other smoking tobacco not bearing a brand name

2403 91 00 “Homogenised” or “reconstituted” tobacco, bearing

a brand name

2403 99 10 Chewing tobacco (without lime tube)

2403 99 10 Chewing tobacco (with lime tube)

2403 99 10 Filter khaini

2403 99 20 Preparations containing chewing tobacco

2403 99 30 Jarda scented tobacco

2403 99 40 Snuff

2403 99 50 Preparations containing snuff

2403 99 60 Tobacco extracts and essence bearing a brand name

2403 99 60 Tobacco extracts and essence not bearing a brand

Name

2403 99 70 Cut tobacco

2403 99 90 Pan masala containing tobacco ‘Gutkha’

 14.90
1.90 GOODS AND SERVICES TAX

2403 99 90 All goods, other than pan masala containing

tobacco
'gutkha', bearing a brand name

2403 99 90 All goods, other than pan masala containing

tobacco
'gutkha', not bearing a brand name

3301 24 00, Following essential oils other than those of citrus

3301 25 10, fruit namely:
3301 25 20, a) Of peppermint (Mentha piperita);
3301 25 30, b) Of other mints : Spearmint oil (ex-mentha
spicata), Water mint-oil (ex- mentha aquatic),
3301 25 40,
Horsemint oil (ex-mentha sylvestries), Bergament oil
3301 25 90
(ex- mentha citrate), Mentha arvensis

Note - The list of notified goods given below is only for the sake of knowledge. Students
are not expected to memorise the same for examination purpose.
CHAPTER 15

REFUNDS
The section numbers referred to in the Chapter pertain to CGST Act and rule numbers
referred to in the Chapter pertain to CGST Rules, unless otherwise specified.
Examples/Illustrations/Questions and Answers given in the Chapter are based on the
position of GST law existing as on 30.04.2025.

LEARNING OUTCOMES

After studying this Chapter, you will be able to –

 identify the situations leading to refund claim
 explain the time limit for claiming refund and concept of ‘relevant date’
to calculate such time limit
 identify the conditions to be satisfied and documents to be filed to
claim the refund in different circumstances
 illustrate the circumstances under which refund claim may be withheld
by the Department
 explain the ‘principle of unjust enrichment’
 describe the provisions relating to ‘Consumer Welfare Fund’.
 explain provisions relating to refund to UN Bodies, Embassies, etc.
 explain the provisions relating to refund of tax wrongfully collected and
paid to Central Government or State Government
 compute the interest payable to the applicant on delayed refunds

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 1.2 15.2 GOODS AND SERVICES TAX

1. INTRODUCTION
Timely refund mechanism is essential in tax
administration, as it facilitates trade through the
release of blocked funds for working capital,
expansion and modernisation of existing
business.
The provisions pertaining to refund contained in
the GST law aim to streamline and standardise
the refund procedures under GST regime. Under
the GST regime, there is a standardised form for making any claim for refunds. The
claim and sanctioning procedure is
primarily online and time bound, which is
a marked departure from the earlier time
consuming and cumbersome procedure.
Further, provisions relating to refund are
more transparent as compared to
provisions contained in the earlier indirect
tax regime.

Chapter XI - Refunds [Sections 54 to 58] of the CGST

Act, 2017 and Chapter X – Refund [Rule 89 to 97A] of
the CGST Rules, 2017 stipulates the provisions relating
to refunds. State GST laws also prescribe identical
provisions in relation to refunds. Further, section 15 of
the IGST Act, 2017 prescribes for the refund of
integrated tax paid on supply of goods to tourist leaving India.

Provisions of Refunds under CGST Act have also been made applicable to IGST
Act vide section 20 of the IGST Act.

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 REFUNDS 15.3

Following provisions have been discussed in this Chapter:

Chapter XI of CGST Act: Refunds

Section Section

54 Refund of tax

55 Refund in certain cases

56 Interest on delayed refunds

57 Consumer Welfare Fund

58 Utilisation of fund

Chapter VI of IGST Act: Refund of integrated tax to international tourist

Section Particulars

15 Refund of integrated tax paid on supply of goods to tourist leaving

India.

Chapter X of CGST Rules: Refund

Rule Particulars

89 Application for refund of tax, interest, penalty, fees or any other amount

90 Acknowledgement

91 Grant of provisional refund

92 Order sanctioning refund

93 Credit of the amount of rejected refund claim

94 Order sanctioning interest on delayed refunds

95 Refund of tax to certain persons

95B Refund of tax paid on inward supplies of goods received by Canteen

Stores Department

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 1.4 15.4 GOODS AND SERVICES TAX

96 Refund of integrated tax paid on goods or services exported out of

India

96A Export of goods or services under bond or Letter of Undertaking

96B Recovery of refund of unutilized input tax credit or integrated tax paid
on export of goods where export proceeds are not realized within
stipulated time

97 Consumer Welfare Fund

97A Manual filing and processing

Before proceeding into detailed provisions of the chapter, let us first go through
the relevant definitions.

2. RELEVANT DEFINITIONS
 Drawback: in relation to any goods manufactured in India and exported,
means the rebate of duty, tax or cess chargeable on any imported inputs or
on any domestic inputs or input services used in the manufacture of such
goods; [Section 2(42)]
 Refund: Refund includes refund of tax paid on zero-rated supplies of goods
or services or both or on inputs or input services used in making such zero-
rated supplies, or refund of tax on the supply of goods regarded as deemed
exports, or refund of unutilised input tax credit as provided under section
54(3) [Explanation 1 to section 54].
 Tourist: “Tourist” means a person not normally resident in India, who enters
India for a stay of not more than six months for legitimate non-immigrant
purposes [Explanation to section 15].

 Zero rated supply: Zero-rated supply shall have the meaning assigned to it
in section 16 [Section 2(23) of the IGST Act]. As per section 16(1) of IGST Act,
“zero rated supply” means any of the following supplies of goods or services
or both, namely:–

(a) export of goods or services or both; or

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 REFUNDS 15.5

(b) supply of goods or services or both for authorised operations to a

Special Economic Zone developer or a Special Economic Zone unit.
 Recipient of goods or services: “Recipient” of supply of goods or services
or both, means—
(a) where a consideration is payable for the supply of goods or services or
both, the person who is liable to pay that consideration;

(b) where no consideration is payable for the supply of goods, the person
to whom the goods are delivered or made available, or to whom
possession or use of the goods is given or made available; and
(c) where no consideration is payable for the supply of a service, the person
to whom the service is rendered,
and any reference to a person to whom a supply is made shall be construed
as a reference to the recipient of the supply and shall include an agent acting
as such on behalf of the recipient in relation to the goods or services or both
supplied [Section 2(93)].

3. REFUND OF TAX [SECTION 54 OF THE

CGST ACT]
A. Situations leading to refund claims

A claim for refund may arise in the following situations:

(i) Export/supply to SEZ developer/unit on payment of IGST
In case where notified class of goods and/or services
are exported or, notified class of persons export goods
and/or services or supply goods and/or services to an
SEZ developer/unit, on payment of IGST, subject to
such conditions, safeguards and procedure as may be prescribed, refund of
such IGST paid on goods and/or services supplied is available [Section 16(4)
of IGST Act].
(ii) Refund of unutilized ITC – In case of export/supply to SEZ developer/unit
without payment of IGST or in case of inverted duty structure, refund of
unutilized ITC is available.

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 1.6 15.6 GOODS AND SERVICES TAX

(iii) Refund of tax paid on the supply of goods regarded as deemed exports may
be claimed.
(iv) Refund of any balance in the electronic cash
ledger after payment of tax, interest, penalty, fee
or any other amount payable under this Act or the
rules made there under may be claimed [Section
49(6)].
(v) Refund on account of tax paid on a supply which
is not provided, either wholly or partially, and for which invoice has not been
issued (tax paid on advance payment).
(vi) Refund of tax wrongly collected and paid to the Government (i.e. CGST &
SGST paid by treating the supply as intra-State supply which is subsequently
held as inter-State supply and vice versa) [Section 77 of the CGST Act and
section 19 of the IGST Act].
(vii) Refund of the IGST paid by tourist leaving India on any supply of goods taken
out of India by him [Section 15 of IGST Act].
(viii) Tax becomes refundable as a consequence of judgment, decree, order or
direction of the Appellate Authority,
Appellate Tribunal or any Court.
(ix) On finalization of provisional assessment, if
any tax becomes refundable to taxpayer (on
account of assessed tax on final assessment
REFUN
being less than the tax deposited by the DS

taxpayer) [Section 60].

(x) Refund of taxes on purchases made by UN
bodies or embassies etc.
[Section 54(2)].
(xi) Refund of advance tax deposited by a casual taxable person/ Non-resident
taxable person [Section 54(13)].
(xii) Refund of additional IGST paid on account of upward revision in price of the
goods subsequent to exports, and on which the refund of IGST paid at the
time of export of such goods has already been sanctioned [Section 54(1)].
(xiii) Refund of excess payment of tax.

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 REFUNDS 15.7

The list is only indicative and not exhaustive. Detailed provisions relating to
some of the sections referred above have been discussed in the other chapters at
respective places.

B. Application for refund claim [Rule 89]

1. Application Form for claiming refund [Section 54(1) and 49(6) read
with rule 89]
 Any person 1 claiming refund of any tax, interest,
penalty, fees or any other amount paid by him Refund in
may file an application in Form GST RFD-01 general cases
electronically through GST common portal
[Section 54(1) read with rule 89(1)].
 Any person, claiming refund of additional IGST
paid on account of upward revision in price of Refund of
the goods subsequent to exports, and on which additional IGST
paid on account
the refund of IGST paid at the time of export of
of upward
such goods has already been sanctioned as
revision in price
per rule 96, may file an application for such
of goods
refund of additional IGST paid, electronically subsequent to
in Form GST RFD-01 through the common exports
portal. [Section 54(1) read with rule 89(1B)].

 A registered person claiming refund of any balance in the electronic

cash ledger in accordance with the
provisions of section 49(6), may claim such Refund in excess
refund in Form GST RFD-01 electronically balance of
electronic cash
through GST common portal [Section 49(6)
ledger.
and proviso to section 54(1) read with rule
89(1)].

1
except the persons covered by notification issued under section 55 like UN Bodies, Embassies
etc.

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 1.8 15.8 GOODS AND SERVICES TAX

Refund of TDS/TCS deposited in electronic cash ledger as excess

balance in cash ledger: The amount
deducted/collected as TDS/TCS by TDS/ TCS TDS/TCS credited
deductors/collectors under the provisions of to electronic cash
section 51 /52 and credited to electronic cash ledger can also be
ledger of the registered person, is equivalent claimed as refund.
to cash deposited in electronic cash ledger.
It is not mandatory for the registered person to utilise the TDS/TCS
amount credited to his electronic cash ledger only for the purpose of
discharging tax liability.
The registered person is at full liberty to discharge his tax liability in
respect of the supplies made by him during a tax period, either through
debit in electronic credit ledger or through debit in electronic cash
ledger, as per his choice and availability of balance in the said ledgers.
Any amount, which remains unutilized in electronic cash ledger, after
discharge of tax dues and other dues payable under the CGST Act and
rules made thereunder, can be refunded to the registered person as
excess balance in electronic cash ledger as above 2.
 Further, a registered person, who has been issued a certificate of
registration under GST, shall undergo Aadhaar authentication for filing
of refund application in Form GST RFD-01.
 However, in case of refund of IGST paid on
goods exported out of India 3, there is no need Refund of tax
for filing a separate refund application in Form paid on export
GST RFD-01 since the shipping bill filed by the of goods
exporter is itself treated as a refund claim.
Shipping bill filed by an exporter shall be deemed to be an application
for refund of integrated tax paid on the goods exported out of India
[Rule 96]. The provisions relating to refund of IGST on export of goods
outside India have been discussed in detail subsequently in this chapter.

2
Circular No. 166/22/2021 GST dated 17/12/2021
3
Refund of IGST paid on goods exported out of India is available either where class of goods
exported are notified or class of persons making zero-rated supply of goods are notified u/s
16(4).

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 REFUNDS 15.9

Filing of refund claim:

 Supplies regarded as deemed exports: In respect of supplies regarded
as deemed exports, either recipient or supplier are allowed to file the
refund application. The refund in respect of
deemed export supplies is the refund of tax Either supplier or
recipient allowed to
paid on such supplies. However, the supplier
file refund
can seek refund only in case where the application in case of
recipient does not avail of ITC on such deemed exports.
supplies and furnishes an undertaking to the
effect that the supplier may claim the refund [Second proviso to rule
89(1)].
In a case when the refund is claimed
by the recipients, the GST portal
requires them to first debit the
amount equivalent to the refund
claimed from their electronic credit
ledger. They have to furnish an
undertaking stating that refund has
been claimed only for those invoices
which have been detailed in Form GST RFD-01 for the tax period for
which refund is being claimed and the amount does not exceed the
amount of ITC availed in the valid return filed for the said tax period 4.
Entire amount paid by the recipient available as ITC even if blocked
in terms of section 17(5): Further, it is important to note that the ITC
of tax paid on deemed export supplies, allowed to the recipients for
claiming refund of such tax paid, is not ITC in terms of the provisions of
Chapter V of the CGST Act, 2017. Therefore, the ITC so availed by the
recipient of deemed export supplies would not be subjected to
provisions of section 17. This implies that entire amount paid by the

4
Circular No. 147/03/2021 GST dated 12.03.2021

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 1.10 15.10 GOODS AND SERVICES TAX

recipient will be available as ITC irrespective of the fact whether it is

blocked in terms of section 17(5) 56.
Further, there arose a question as
to whether the ITC availed by the
recipient of deemed export
supply for claiming refund of tax
paid on supplies regarded as
deemed exports is to be included
in the “Net ITC” for computation
of refund of unutilised ITC under
rule 89(4) & rule 89(5) (discussed
subsequently in this chapter). It is
clarified that as seen above, since
the ITC of tax paid on deemed
export supplies, allowed to the
recipients for claiming refund of such tax paid, is not ITC
in terms of the provisions of Chapter V of the CGST Act, such ITC
availed by the recipient of deemed export supply for claiming
refund of tax paid on supplies regarded as deemed exports is NOT
TO BE INCLUDED IN THE “NET ITC” FOR COMPUTATION OF
REFUND OF UNUTILISED ITC on account of zero-rated supplies
under rule 89(4) or on account of inverted rated structure under
rule 89(5) 7.
 Supplies to a Special Economic Zone unit or a Special Economic
Zone developer: In respect of supplies to a SEZ unit/developer, the
application for refund shall be filed by the -

(a) Supplier of goods after such goods have been admitted in full in
the SEZ for authorised operations, as endorsed by the specified
officer of the Zone.

5
Circular No. 172/04/2022 GST dated 06.07.2022
6
Provisions of Blocked Credit are discussed in detail in Chapter 7 – Input Tax Credit in Module 2
of this Study Material.
7
Circular No. 172/04/2022 GST dated 06.07.2022

© The Institute of Chartered Accountants of India

 REFUNDS 15.11

(b) Supplier of services along with such evidence regarding receipt of

services for authorised operations as endorsed by the specified
officer of SEZ [First proviso to rule 89(1)].
Explanation - For the purposes of this sub-rule, “specified officer”
means a “specified officer” (Joint/ Deputy/ Assistant Commissioner of
Customs for the time being posted in SEZ) or an “authorised officer”
(Inspector/ Preventive Officer/ Superintendent of Customs posted in
SEZ and authorised by specified officer to discharge any of his
functions) under SEZ Rules.
 Supplies by Casual taxable person (CTP) /Non-resident taxable
person (NRTP) 8: The amount of advance tax
deposited by a casual taxable person or a non- Refund to be
resident taxable person under section 27(2), claimed in the last
shall be refunded only when such person has, in return required to
respect of the entire period for which the be furnished by
certificate of registration granted to him had CTP/NRTP.
remained in force, furnished all the returns
required under section 39 [Section 54(13)].
Further, refund of
any amount, after
adjusting the tax
payable by the
applicant out of
the advance tax
deposited by him under section 27 at the time of registration, shall be
claimed in the last return required to be furnished by him [Third proviso
to rule 89(1)].
2. Time limit within which refund claim can be filed
Any person claiming refund of any tax, interest, if any,
paid on such tax or any other amount paid by him, may
make an application before the expiry of 2 years from
the ‘Relevant Date’ in prescribed form and manner [Section 54(1)].

8
The concept of casual taxable person and non-resident taxable person has been explained in
detail in Chapter 8 – Registration in Module 2 of this Study Material.

© The Institute of Chartered Accountants of India

 1.12 15.12 GOODS AND SERVICES TAX

✪ It has been clarified that time limit of 2 years is not

applicable in case of refund of excess balance in the
electronic cash ledger 9

✪ In case where proper officer has issued a Deficiency Memo to the

applicant requiring him to file a fresh refund claim, the time period
from the date of filing of the refund claim till the date of
communication of the deficiencies in the prescribed form by the
proper officer, shall be excluded from the above period of ‘2 years’
[Proviso to rule 90(3)].

Meaning of ‘Relevant Date’ [Explanation 2 to section 54]

‘Relevant Date’ has been defined in Explanation 2 to section
54. Accordingly it means:-

[Link]. Cases Relevant Date

1 In case of goods exported out of India 10 where a refund of tax

paid is available in respect of goods themselves or, as the case
may be, the inputs/input services used in such goods and

(i) goods are exported by date on which the ship or the aircraft
sea or air in which such goods are loaded,
leaves India

(ii) goods are exported by date on which such goods pass the
land frontier

(iii) goods are exported by date of dispatch of goods by the

post Post Office concerned to a place
outside India

9
Circular No. 166/22/2021 GST dated 17/12/2021
10
In case of upward revision of the price of the goods subsequent to exports, refund of additional
IGST paid on the same can be claimed within 2 years from the relevant date mentioned here.

© The Institute of Chartered Accountants of India

 REFUNDS 15.13

2 In case of supply of goods Date on which the return relating to

regarded as deemed such deemed exports is furnished,
exports where a refund of irrespective of the fact whether the
tax paid is available in refund claim is filed by the supplier
respect of the goods or by the recipient. As the tax on the
supply of goods, regarded as
deemed export, would be paid by
the supplier in his return, therefore,
the relevant date for purpose of
filing of refund claim for refund of
tax paid on such supplies would be
the date of filing of return, related to
such supplies, by the supplier 11.

3 In case of zero-rated Due date for furnishing of return

supply of goods or under section 39 in respect of such
services or both to a SEZ supplies
developer or a SEZ unit
where a refund of tax paid
is available in respect of
such supplies themselves
(in case of zero-rated
supply by notified class of
persons), or as the case
may be, the inputs or input
services used in such
supplies

4 In case of services exported out of India where a refund of tax

paid is available in respect of services themselves (in case of zero-
rated supply by notified class of persons or supply of notified class
of services), as the case may be, the inputs or input services used
in such services, and

(i) the supply of services Date of receipt of payment in

had been completed convertible foreign exchange or in

11
Circular No. 166/22/2021 GST dated 17/12/2021

© The Institute of Chartered Accountants of India

 1.14 15.14 GOODS AND SERVICES TAX

prior to the receipt of Indian rupees wherever permitted by

such payment the Reserve Bank of India

(ii) payment for the Date of issue of invoice

services had been
received in advance
prior to the date of
issue of the invoice

5 Where tax becomes Date of communication of such

refundable as a judgment, decree, order or direction
consequence of judgment,
decree, order or direction
of the Appellate Authority,
Appellate Tribunal/any
court

6 In case of refund of Due date for furnishing of return

unutilised ITC on account under section 39 for the period in
of inverted duty structure which such claim for refund arises

7 In the case where tax is Date of adjustment of tax after the

paid provisionally under final assessment thereof
this Act/rules made
thereunder

8 In the case of a person, Date of receipt of goods or services

other than the supplier or both by such person

9 Any other case Date of payment of tax

Clarification on bunching of refund claims across financial years

It has been clarified that while filing the refund claim, an applicant may, at his
option, file a refund claim for a tax period or by clubbing successive tax
periods. Earlier, there was a restriction on bunching of refund claims across
financial years; now said restriction has also been relaxed.

For instance, a registered person opting to file Form GSTR-1 on quarterly

basis can apply for refund on a quarterly basis or clubbing successive quarters
and these quarters may spread across different financial year. Thus, he can

© The Institute of Chartered Accountants of India

 REFUNDS 15.15

file refund claim for quarters: Jan-Mar, Apr-Jun and July-Sep, while filing the
refund claim 12.
3. Documentary evidences for filing refund claim
The applicant need not file elaborate documents
along with the refund claim. Standardised and easy
to understand documents have been prescribed.
Thus, for every claim the main document prescribed is a statement of relevant
invoices/shipping bills (NOT THE INVOICES THEMSELVES) pertaining to the
claim.
Documentary evidences required for filing refund claim has been provided
under the provisions of section 54(4) read with rule 89(2).
Section 54(4)
Section 54(4) stipulates that the application shall be accompanied by —
(a) such documentary evidence as may be prescribed to establish that a
refund is due to the applicant;
and
(b) such documentary or other
evidence (including the
documents referred to in section
33) as the applicant may furnish
to establish that there is no
unjust enrichment (i.e. the
amount of tax and interest, if
any, paid on such tax or any
other amount paid in relation to
which such refund is claimed was
collected from, or paid by, him and the incidence of such tax and
interest had not been passed on to any other person).

12
Circular No.135/05/2020 GST dated 31.03.2020

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 1.16 15.16 GOODS AND SERVICES TAX

However, where the amount claimed as refund is less than ` 2 lakh, it

shall not be necessary for the applicant to furnish any documentary and
other evidences but he may file a declaration,
based on the documentary or other
evidences available with him, certifying that
there is no unjust enrichment i.e. the
incidence of such tax and interest had not been
passed on to any other person.
Rule 89(2)

In pursuance of said provisions, rule 89(2) has provided that the application
for filing of refund claim shall be accompanied by any of the following
documentary evidences as applicable, in Annexure 1 of Form GST RFD-01 for
refund claim, to establish that a refund is due to the applicant:

In case where refund Documentary evidence to be submitted 13

is on account of

A judgment, decree, The reference number of the order and copy of the order
order/direction of passed by the proper officer or an Appellate Authority or
Appellate Authority, Appellate Tribunal or Court resulting in such refund or
Appellate Tribunal/any reference number of the payment of the amount specified
Court in section 107(6) and section 112(8) claimed as refund (i.e.
amount to be deposited at the time of filing of appeal
before Appellate Authority or Appellate Tribunal).

export of services statement containing the number and date of invoices

and the relevant Bank Realization Certificates or Foreign
Inward Remittance Certificates (BRC/FIRC), as the case
may be

export of goods, other a statement containing the number and date of shipping
than electricity bills or bills of export and the number and date of relevant
export invoices.
It is important to note that realization of convertible
foreign exchange or Indian Rupees wherever permitted by
RBI is one of the conditions for export of services whereas
in case of export of goods, realization of consideration is

13
The documentary evidences as prescribed under rule 89(2) given in this table are given here
only for the reference of the students. They are not relevant for the examination purpose.

© The Institute of Chartered Accountants of India

 REFUNDS 15.17

not a pre-condition. Consequently, documentary evidence

in the form of a statement containing no. and date of
relevant BRCs/FIRCs are not required here 14.
However, in case of non-realization of consideration in
terms of FEMA, the exporter shall deposit the amount so
refunded to the extent of non-realization of sale proceed
along with interest within 30 days [Rule 96B] [discussed in
detail subsequently in this chapter].

export of electricity (i) a statement containing:

 number and date of the export invoices,
 details of energy exported,
 tariff per unit for export of electricity as per
agreement,
(ii) copy of Statement of Scheduled Energy for exported
electricity by Generation Plants 15 and
(iii) the copy of agreement detailing the tariff per unit

upward revision in A statement containing:

price of the goods  number and date of export invoices along with copy
subsequent to exports of such invoices,
 the number and date of shipping bills or bills of
export along with copy of such shipping bills or bills
of export,
 the number and date of Bank Realisation Certificate
(BRC) or Foreign Inward Remittance Certificate
(FIRC) in respect of such shipping bills or bills of
export along with copy of such BRC/FIRC. 16
 the details of:
 refund already sanctioned,
 the number and date of relevant
supplementary invoices or debit notes issued
subsequent to the upward revision in prices

14
Circular No. 37/11/2018-GST dated 15.03.2018
15
This Statement is issued by the Regional Power Committee Secretariat as a part of the Regional
Energy Account (REA) under clause (nnn) of sub-regulation 1 of Regulation 2 of the Central
Electricity Regulatory Commission (Indian Electricity Grid Code) Regulations, 2010.
16
foreign inward remittance certificate issued by Authorised Dealer-I Bank in respect of additional
foreign exchange remittance received in respect of upward revision in price of exports.

© The Institute of Chartered Accountants of India

 1.18 15.18 GOODS AND SERVICES TAX

along with copy of such supplementary

invoices/debit notes.
 the details of:
 payment of additional amount of IGST,
 proof of payment of such additional amount
of integrated tax and interest paid thereon,
 number and date of FIRC in respect of
additional FOREX received in respect of
upward revision in price of exports alongwith
copy of such FIRC.
Certificate issued by a practicing-chartered accountant or
a cost accountant to the effect that the said additional
FOREX remittance is on account of such upward revision
in price of the goods subsequent to exports
Copy of contract or other documents, as applicable.
A reconciliation statement reconciling the value of
supplies declared in supplementary invoices, debit notes
or credit notes issued along with relevant details of BRC
or FIRC.

supply of goods is statement containing the number and date In addition,

made to a SEZ unit or a of invoices as provided in rule 46 along a
SEZ developer with the evidence regarding goods declaration
admitted in full for authorized operations to the effect
as endorsed by the specified officer of SEZ. that tax has
not been
supply of services statement containing the number and date
collected
made to a SEZ unit or a of invoices, the evidence regarding receipt
from the
SEZ developer of services for authorized operations as
SEZ unit/
endorsed by the specified officer of SEZ,
SEZ
and the details of payment, along with
developer is
proof thereof, made by the recipient to the
also
supplier for authorized operations as
required to
defined under the SEZ Act, 2005.
be
furnished.

deemed exports Statement containing the number and date of

invoices along with an:
(i) acknowledgment by the
jurisdictional Tax officer of the
Advance Authorisation (AA) holder
or Export Promotion Capital Goods

© The Institute of Chartered Accountants of India

 REFUNDS 15.19

(EPCG) Authorisation holder, as the case may be,

that the said deemed export supplies have been
received by the said AA/EPCG Authorisation holder,
or a copy of the tax invoice under which such
supplies have been made by the supplier, duly
signed by the recipient EOU that said deemed
export supplies have been received by it.
(ii) undertaking by the recipient of deemed export
supplies that no ITC on such supplies has been
availed of by him.
(iii) undertaking by the recipient of deemed export
supplies that he shall not claim the refund in
respect of such supplies and the supplier may claim
the refund 17.

refund of any a statement containing the number and the date of

unutilised ITC the invoices received and issued during a tax period
accumulated on
account of inverted
duty structure

finalisation of reference number of the final assessment order and

provisional assessment a copy of the said order
tax wrongly collected Statement showing the details of transactions
and paid to the considered as intra-State supply but which is
Government subsequently held to be inter-State supply
excess payment of tax Statement showing the details of the amount of
claim on account of excess payment of tax
agreement or contract Statement containing the details of invoices viz. number,
for supply of service date, value, tax paid and details of payment, in respect of
has been cancelled or which refund is being claimed along with copy of such
terminated and the invoices, proof of making such payment to the supplier,
refund is claimed by an the copy of agreement or registered agreement or
unregistered person contract, as applicable, entered with the supplier for
(Please refer the supply of service, the letter issued by the supplier for
cancellation or termination of agreement or contract for
supply of service, details of payment received from the

17
Notification No. 49/2017 CT dated 18.10.2017

© The Institute of Chartered Accountants of India

 1.20 15.20 GOODS AND SERVICES TAX

detailed discussion supplier against cancellation or termination of such

given after the Table**) agreement along with proof thereof

A certificate issued by the supplier to the effect that he has

paid tax in respect of the invoices on which refund is being
claimed by the applicant; that he has not adjusted the tax
amount involved in these invoices against his tax liability
by issuing credit note; and also, that he has not claimed
and will not claim refund of the amount of tax involved in
respect of these invoices.

Note - Documentary evidence pertaining to passing of incidence of tax

Further, a declaration needs to be furnished to

establish that there is no unjust enrichment in the case
of the applicant 18, in a case where the amount of
refund claimed does not exceed ` 2 lakh.

However, where the amount of refund claimed

exceeds ` 2 lakh, a Certificate in Annexure 2 of Form
GST RFD-01 needs to be furnished by a Chartered
Accountant or a Cost Accountant to the effect that
there is no unjust enrichment in the case of the applicant. However, said
certificate is not required to be furnished in cases where refund is claimed by
an unregistered person who has borne the incidence of tax.

Further, neither a declaration by the applicant nor

a certificate by a Chartered Accountant/Cost
Accountant is required to be furnished in the
following cases:

(a) refund of tax paid on export of goods or services or both or on inputs

or input services used in making such exports;

(b) refund of unutilised ITC in case of zero rated supplies made without
payment of tax or on account of inverted duty structure;

18
Establishing that there is no unjust enrichment means establishing that the incidence of tax,
interest or any other amount claimed as refund has not been passed on to any other person. This
concept has been discussed in detail later in this chapter.

© The Institute of Chartered Accountants of India

 REFUNDS 15.21

(c) refund of tax paid on a supply which is not provided,

either wholly or partially, and for which invoice has not
been issued, or where a refund voucher has been
issued. The expression “invoice” referred here means
invoice conforming to the provisions contained in section 31 19.

(d) refund of tax in pursuance of section 77, i.e. tax paid on a transaction
treating it as an intra-State supply, but which is subsequently held to
be an inter-State supply or vice-versa.

(e) the tax or interest borne by such other class of applicants as the
Government may, on the recommendations of the Council, by
notification, specify.

Further, neither a declaration by the applicant nor a certificate by a Chartered

Accountant/Cost Accountant is required to be furnished in case of refund of
excess balance in electronic cash ledger 20

19
Provisions relating to ‘invoice’ have been discussed in detail in Chapter 9 – Tax Invoice; Credit
and Debit Notes in Module 2 of this Study Material.
20
Circular No. 166/22/2021 GST dated 17/12/2021

© The Institute of Chartered Accountants of India

 1.22 15.22 GOODS AND SERVICES TAX

** Prescribing manner of filing an application for refund by unregistered

persons
There are cases where the unregistered buyers, who
had entered into an agreement/ contract with a builder
for supply of services of construction of flats/ building,
etc. and had paid the amount towards consideration
for such service, either fully or partially, along with
applicable tax, had to get the said contract/ agreement
cancelled subsequently due to non-completion or
delay in construction activity in time or any other reasons. In a number of such
cases, the period for issuance of credit note on account of such cancellation of
service under the provisions of section 34 may already have got expired by that
time. In such cases, the supplier may refund the amount to the buyer, after
deducting the amount of tax collected by him from the buyer.
Similar situation may arise in cases of long-term insurance policies where
premium for the entire period of term of policy is paid upfront along with
applicable GST and the policy is subsequently required to be terminated
prematurely due to some reasons. In some cases, the time period for issuing
credit note under the provisions of section 34 may have already expired and
therefore, the insurance companies may refund only the proportionate
premium net off GST 21.
Section 54(1) provides that ANY PERSON can claim refund, by making an
application upto 2 years from the relevant date. Further, in terms of section
54(8)(e), in cases where the unregistered person has borne the incidence of
tax and has not passed on the same to any other person, the said refund shall
be paid to him instead of being credited to Consumer Welfare Fund (CWF).

21
Where the time period for issuance of credit note under section 34 has not expired at the time of
cancellation/termination of agreement/contract for supply of services,the concerned suppliers can
issue credit note to the unregistered person. In such cases, the supplier would be in a position to
also pay back the amount of tax collected by him from the unregistered person and therefore,
there will be no need for filing refund claim by the unregistered persons in these cases.
Accordingly, the refund claim can be filed by the unregistered persons only in those cases where
at the time of cancellation/termination of agreement/contract for supply of services, the time
period for issuance of credit note under section 34 has already expired. Provisions relating to
credit note have been discussed in detail in Chapter 9 – Tax Invoice, Credit and Debit Notes in
Module 2 of this Study Material.

© The Institute of Chartered Accountants of India

 REFUNDS 15.23

Thus, in order to enable such unregistered person to file application for

refund under section 54(1) in the situations discussed above, a functionality
is available on the common portal which allows unregistered persons to take
a temporary registration and apply for refund under the category ‘Refund
for Unregistered person’ in Form GST RFD -01. Further, rule 89(2) provides
for the documents required to be furnished along with the application of
refund by the unregistered persons and the statement to be uploaded along
with the said refund application, as mentioned in Table given earlier.
Moreover, it has been provided that a certificate by a Chartered Accountant
or a Cost Accountant to the effect that there is no unjust enrichment in the
case of the applicant is not required to be furnished in cases where refund is
claimed by an unregistered person who has borne the incidence of tax even
if the amount of refund claimed exceeds ` 2 lakh.
Relevant date for filing of refund
As seen earlier, the relevant date in respect of cases of refund by a person
other than supplier is the date of receipt of goods or services or both by
such person. In the given cases of refund, the date of issuance of letter of
cancellation of the contract/ agreement for supply by the supplier will be
considered as the date of receipt of the services by the applicant.
In cases where the amount paid back by the supplier to the unregistered
person on cancellation/termination of agreement/contract for supply of
services is less than amount paid by such unregistered person to the
supplier, only the proportionate amount of tax involved in such amount paid
back shall be refunded to the unregistered person 22.

C. Procedure on receipt of refund claim

1. Acknowledgment of refund claim [Rule 90]

I. Where the application relates to:
(a) Claim for refund from the electronic cash ledger:
An acknowledgment in prescribed form Acknowledgement
shall be made available to the applicant 23, of refund

22
Circular No. 188/20/2022 GST dated 27.12.2022
23
through the Common Portal electronically

© The Institute of Chartered Accountants of India

 1.24 15.24 GOODS AND SERVICES TAX

clearly indicating the date of filing of the claim for refund [Rule
90(1)].
(b) Other refund claims:
 The application shall be forwarded to the proper officer.
 The proper officer shall, within a period of 15 days of filing
of the said application, scrutinize the application for its
completeness.
 Where the application is found to be complete in terms of
rule 89, an acknowledgement in prescribed form shall be
made available to the applicant through the common portal
electronically [Rule 90(2)]. Refund acknowledgment clearly
indicates the date of filing of the claim for refund.
II. Deficiencies in refund claim – Issuance of Deficiency Memo:

 Where any deficiencies are noticed, the

proper officer shall communicate the
deficiencies to the applicant in
Deficiency memo 24, requiring him to file a fresh refund
application after rectification of such deficiencies [Rule 90(3)].
The time period from the date of filing of the refund claim till the
date of communication of the deficiencies in the prescribed form
by the proper officer, shall be excluded from the period of ‘2
years’ as specified under section 54(1), in respect of any such fresh
refund claim filed by the applicant after rectification of the
deficiencies.
 Where deficiencies have been communicated to applicant under
the SGST Rules, 2017, the same shall also deemed to have been
communicated under this rule along with the deficiencies
communicated under CGST Rules, 2017 [Rule 90(4)].

24
through the Common Portal electronically

© The Institute of Chartered Accountants of India

 REFUNDS 15.25

III. Withdrawal of refund claim

 The applicant may, at any time before issuance of provisional
refund sanction order or final refund sanction order or payment
order or refund withhold order or show-cause notice, in respect
of any refund application filed, withdraw the said application for
refund by filing an application in the prescribed form [Rule 90(5)].
 On submission of such withdrawal application, any amount
debited by the applicant from electronic credit ledger or
electronic cash ledger, as the case may be, while filing refund
application, shall be credited back to the ledger from which such
debit was made [Rule 90(6)].

2. Grant of provisional refund [Section 54(6) read with rule 91]

GST law provides for grant of provisional refund of 90% of the total refund
claim, in case the claim relates for refund arising on
account of zero-rated supplies. The provisional refund
would be paid within 7 days after giving the
acknowledgement. The remaining 10% can be
refunded later after due verification of documents
furnished by the applicant. The provisional refund 90% of the total
would not be granted to such supplier who was, refund claim is paid
during any period of 5 years immediately within 7 days where
refund arises on
preceding the refund period, was prosecuted for
account of zero-
any offence where the amount of tax evaded
rated supplies
exceeds ` 2.5 crores.
Detailed provisions have been outlined hereunder:
Section 54(6) stipulates that:
 The proper officer may, in the case of any claim for refund on account
of zero-rated supply of goods or services or both made by registered
persons,
 other than such category of registered persons as may be notified by
the Government on the recommendations of the Council,
 refund on a provisional basis, 90% of the total amount so claimed,

© The Institute of Chartered Accountants of India

 1.26 15.26 GOODS AND SERVICES TAX

 in such manner and subject to such conditions, limitations and

safeguards as may be prescribed** and
 thereafter make an order under section 54(5) for final settlement of the
refund claim after due verification of documents furnished by the
applicant.
**Conditions, limitations and safeguards have been prescribed under
rule 91. It stipulates as following:
 The provisional refund shall be granted subject to the condition that
the person claiming refund has, during any period of 5 years
immediately preceding the tax period
to which the claim for refund relates,
not been prosecuted for any offence
under the Act or under an existing law
where the amount of tax evaded
exceeds ` 2.5 crores.
 The proper officer, after scrutiny of the
claim and the evidence submitted in
support thereof and on being prima
facie satisfied that the amount claimed
as refund is due to the applicant in
accordance with the provisions of
section 54(6), shall make an order in prescribed form, sanctioning the
amount of refund due to the said applicant on a provisional basis within
a period not exceeding 7 days from the date of the acknowledgement.
However, said order shall not be required to be revalidated by the
proper officer.
 The proper officer shall issue a payment order for the amount
sanctioned. The same shall be electronically credited to any of the bank
accounts of the applicant mentioned in his registration particulars and
as specified in the application for refund on the basis of a consolidated
payment advice.
However, the payment order shall be required to be revalidated where
the refund has not been disbursed within the same financial year in
which the said payment order was issued.

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 REFUNDS 15.27

 The Central Government shall disburse the refund based on the

consolidated payment advice.

3. Order of refund [Section 54(5), (7) read with rule 92]

 Section 54(5) stipulates that if, on receipt of any such application, the
proper officer is satisfied that the whole/part of the amount claimed as
refund is refundable, he may make an order accordingly and the
amount so determined shall be credited to the Consumer Welfare Fund
[discussed in detail subsequently].

 However, in certain specified circumstances, the refundable amount is

to be paid to the applicant instead of being credited to the Consumer
Welfare Fund [Section 54(8)] – Discussed in detail subsequently].

 Refund order: Rule 92(1) provides that

 where, upon examination of the

application, the proper officer is
satisfied that a refund under section
54(5) is due and payable to the
applicant,

 he shall make an order sanctioning the amount of refund to

which the applicant is entitled,

 mentioning therein the (i) amount, if any, refunded to him on a

provisional basis, (ii) amount adjusted against any outstanding
demand 25 and (iii) the balance amount refundable.

 Refund to be granted both in cash and credit, based on original

mode of payment: The refund of tax shall be made proportionately, in
cash and by recrediting the credit, based on original mode of payment.
The amount refundable in cash shall be paid by issuance of order in
prescribed from and the amount attributable to credit as ITC shall be
recredited in the electronic credit ledger by issuing prescribed form.

25
under the CGST Act or under any existing law

© The Institute of Chartered Accountants of India

 1.28 15.28 GOODS AND SERVICES TAX

Where, upon examination of a refund application, the proper officer is

satisfied that a refund under section 54(5) is due and payable to the
applicant:

(i) the proper officer shall make a refund order in prescribed form
sanctioning the amount of refund to be paid, in cash,
proportionate to the amount debited in cash against the total
amount paid for discharging tax liability for the relevant period,
mentioning therein the amount adjusted against any outstanding
demand under the Act or under any existing law and the balance
amount refundable and

(ii) for the remaining amount which has been debited from the
electronic credit ledger for making payment of such tax, the
proper officer shall issue prescribed form re-crediting the said
amount as ITC in electronic credit ledger.

The above provision shall not apply to the refund of tax paid on
zero-rated supplies or deemed export [Rule 92(1A)].

 Where the proper officer is satisfied that the amount refundable

under rule 92(1)/(1A)/(2) 26 is payable to the applicant 27 instead of
being credited to Consumer Welfare Fund, he shall make an refund
order in prescribed form and issue a payment order for the amount of
refund.

Amount of refund shall be electronically credited

to any of the bank accounts of the applicant
mentioned in his registration particulars and as
specified in the application for refund on the
basis of a consolidated payment advice.

The refund order issued in prescribed form shall not be required to be

revalidated by the proper officer.

26
Rule 92(2)- withholding of refund - has been discussed subsequently
27
under section 54(8)

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 REFUNDS 15.29

However, the payment order shall be required to be revalidated where

the refund has not been disbursed within the same financial year in
which the said payment order was issued [Rule 92(4)].
The Central Government shall disburse the refund based on the
consolidated payment advice [Rule 92(4A)].
 Where the proper officer is satisfied that the amount refundable
under rule 92(1)/(1A)/(2) is not payable to the
applicant 28, he shall make a refund order and
issue an payment order for the amount of refund
to be credited to the Consumer Welfare Fund
[Rule 92(5)].
 Time-limit for issuance of refund order: Refund order shall be issued
by the proper officer within 60 days from the date of receipt of
application complete in all respects [Section 54(7)].
The time limit of 60 days shall be counted from
the date of filing of the claim for refund as
mentioned on the acknowledgment made
available to the applicant [Section 54(7) read with
rule 90(1) and 90(2)].
4. Issue of SCN and rejection of refund claim [Rule 92(3)]
In case the claim is sought to be rejected by the proper officer, a notice has
to be given online to the applicant stating the ground on which the refund is
sought to be rejected. The applicant needs to respond online within
15 days from the receipt of such notice. Thus, no claim can be rejected
without putting the applicant to notice. The detailed provisions have been
discussed hereunder:
 Where the proper officer is satisfied, for reasons to be recorded in
writing, that the whole or any part of the amount
claimed as refund is not admissible or is not
payable to the applicant, he shall issue a notice to
the applicant in prescribed form.

28
under section 54(8)

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 1.30 15.30 GOODS AND SERVICES TAX

 Applicant will be required to furnish a reply within 15 days of the

receipt of such notice in prescribed form.
 The proper officer shall, after considering the reply furnished by
applicant and after giving him an opportunity of being heard, make an
order, sanctioning the amount of refund in whole or part, or rejecting
the said refund claim.
 The said order shall be made available to the applicant electronically
and the provisions of rule 92(1) relating to order sanctioning refund
shall, mutatis mutandis, apply to the extent refund is allowed.
 No application for refund shall be rejected without giving the applicant
an opportunity of being heard.

5. Withholding of refund claim [Section 54(10), (11) & (12)]

Where an order giving rise to a refund is the subject

matter of an appeal or further proceedings or where
any other proceedings under this Act is pending and
the Commissioner is of the opinion that grant of such
refund is likely to adversely affect the revenue in the
said appeal or other proceedings on account of malfeasance or fraud
committed, he may, after giving the taxable person an opportunity of being
heard, withhold the refund till such time as he may determine.

The detailed provisions are as under:

Rule 92(2) stipulates that where the proper officer/Commissioner is of the

opinion that the amount of refund is liable to be withheld under the
provisions of section 54(10)/(11), he shall pass an order informing the
applicant the reasons for withholding of such refund.

However, where the proper officer or the Commissioner is satisfied that the
refund is no longer liable to be withheld, he may pass an order for release of
withheld refund in prescribed form.

 Section 54(10) stipulates that where any refund is due to a registered

person who has defaulted in furnishing any return or who is required to
pay any tax, interest or penalty, which has not been stayed by any Court,

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 REFUNDS 15.31

Tribunal or Appellate Authority by the specified date**, the proper

officer may:
(a) withhold payment of refund due until the said person has
furnished the return or paid the tax, interest or penalty, as the
case may be;
(b) deduct from the refund due, any tax, interest, penalty, fee or any
other amount which the taxable person is liable to pay but which
remains unpaid under this Act or under the existing law.
**Specified date shall mean the last date for filing an appeal under this
Act.
 Section 54(11) stipulates that where an order giving rise to a refund is
the subject matter of an appeal or further proceedings or where any
other proceedings under this Act is pending and the Commissioner is
of the opinion that grant of such refund is likely to adversely affect the
revenue in the said appeal or other proceedings on account of
malfeasance or fraud committed, he may, after giving the taxable
person an opportunity of being heard, withhold the refund till such time
as he may determine.
 However, where a refund is withheld under section 54(11), the taxable
person shall, notwithstanding anything contained in section 56, be
entitled to interest @ 6% p.a.*, if as a result of the appeal or further
proceedings he becomes entitled to refund [Section 54(12)].
*as notified vide Notification No. 13/2017 CT dated 28.06.2017
6. Credit of the amount of rejected refund claim [Rule 93]
 Where any deficiencies in refund claim have been communicated under
rule 90(3) [Rule 90(3) is discussed earlier], the amount earlier debited
under rule 89(3) shall be re-credited to the electronic credit ledger [Rule
93(1)].
 Where any amount claimed as refund is rejected under rule 92, either
fully or partly, the amount debited, to the extent of rejection, shall be
re-credited to the electronic credit ledger by an order made in
prescribed form [Rule 93(2)].

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 1.32 15.32 GOODS AND SERVICES TAX

 For the purposes of this rule, a refund shall be deemed to be rejected,

if the appeal is finally rejected or if the claimant gives an undertaking
in writing to the proper officer that he shall not file an appeal
[Explanation to rule 93].

D. Principle of Unjust Enrichment [Section 54(8), (8A) & (9)]

1. Theory of unjust enrichment

 ‘Unjust enrichment’ means retention of a
benefit by a person that is unjust or inequitable. Theory of
‘Unjust enrichment’ occurs when a person unjust
retains money or benefits which in justice, equity enrichment
and good conscience, belong to someone else.
This principle stipulates that no person can be allowed to enrich
inequitably at the expense of another. A right of recovery under the
doctrine of ‘unjust enrichment’ arises where retention of a benefit is
considered contrary to justice or against equity 29.
 Theory of unjust enrichment, under GST, postulates that only the person
who has NOT passed the incidence of tax will be eligible to claim the
refund.
 Where the amount of tax has been recovered from the recipient, it shall
be deemed that ‘THE INCIDENCE OF TAX HAS BEEN PASSED ON TO
THE ULTIMATE CONSUMER’. [Explanation (ii) to rule 89]
 Under unjust enrichment, a presumption is always drawn that the
businessman will shift the incidence of tax to the final consumer. This
is because GST is an indirect tax whose incidence is to be borne by the
consumer. It is for this reason that every refund claim if sanctioned is
first transferred to the Consumer Welfare Fund.
 If the claim of refund (barring specified
exceptions) passes the test of unjust
enrichment, it is paid to the applicant. The GST
law makes this test inapplicable in case of
refund of unutilized ITC, refund on account of
exports, refund of payment of wrong tax (IGST

29
Sahakari Khand Udyog Mandal Ltd. v. Commissioner of Central Excise & Customs 2005 (181)
ELT 328 S.C

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 REFUNDS 15.33

instead of CGST + SGST and vice versa), refund of tax paid on a supply,
which is not provided or when refund voucher is issued or if the
applicant shows that he has not passed on the incidence of tax to any
other person [These cases have been given in detail in next point]. In all
other cases, the test of unjust enrichment needs to be satisfied for the
claim to be paid to applicant.
 As discussed earlier, for crossing the bar of
unjust enrichment, if the refund claim is
upto ` 2 lakh, then a self-declaration of the
applicant to the effect that the incidence of
tax has not been passed to any other
person will suffice to process the refund
claim. For refund claims exceeding ` 2 lakh, a certificate from a
Chartered Accountant/Cost Accountant will have to be given.

2. Cases where theory of unjust enrichment is not applicable

Section 54(8) stipulates that the refundable
amount shall, instead of being credited to the
Consumer Welfare Fund, be paid to the
applicant, if such amount is relatable to —
(a) refund of tax paid on export of goods or
services or both or on inputs or input
services used in making such exports;
(b) refund of unutilized ITC in case of zero-
rated supplies made without payment of
tax or accumulated ITC on account of inverted duty structure;
(c) refund of tax paid on a supply which is not provided, either wholly or
partially, and for which invoice has not been issued, or where a refund
voucher has been issued;
(d) refund of tax in pursuance of section 77, i.e. tax paid on a transaction
treated to be an intra-State supply, but which is subsequently held to
be an inter-State supply or vice-versa;

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 1.34 15.34 GOODS AND SERVICES TAX

(e) the tax and interest, if any, or any other amount paid by the applicant,
if he had not passed on the incidence of such tax and interest to any
other person; or
(f) the tax or interest borne by such other class of applicants as the
Government may, on the recommendations of the Council, by
notification, specify.
3. Disbursement of refund of State Tax
The Government may disburse the refund of the State tax in such manner as
may be prescribed [Section 54(8A)].
4. Refundable amount to be credited to Consumer Welfare Fund in all
other cases
Notwithstanding anything to the contrary contained in any judgment, decree, order
or direction of the Appellate Tribunal or any Court or in any other provisions of this
Act or the rules made thereunder or in any other law for the time being in force,
no refund shall be made except in accordance with the provisions of section 54(8).
Instead, refundable amount shall be credited to Consumer Welfare Fund [Section
54(9)]

E. Refund of unutilized ITC

The provisions relating to refund of unutilized ITC have been compiled and
discussed as under:
1. Accumulation of Input Tax Credit (ITC)
Accumulation of Input Tax Credit (ITC) happens when the tax paid on inward
supply is more than the tax liability on outward supply. Such accumulation
can be utilized by the registered person for payment of output tax liability.
However, the GST Law permits refund of unutilised ITC
at the end of a tax period in two scenarios, namely if
such credit accumulation is on account of zero rated
supplies or on account of inverted duty structure,
subject to certain exceptions. In such cases, the
Electronic Credit Ledger is to be debited by the
applicant by an amount equal to the refund so claimed [Rule 89(3)].

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 REFUNDS 15.35

2. Cases where refund of unutilized ITC is available

As per section 54(3), a registered person may claim refund, of any unutilised
ITC at the end of any tax period 30,in the following cases:
(a) Zero rated supplies without payment of tax: Zero Rated supply
means supply of goods and/ or services for authorised operations to an
SEZ developer/unit or export of goods and/or services. A registered
person making zero rated supply may supply goods and/or services
under bond or Letter of Undertaking (LUT) without payment of IGST and
claim refund of unutilized ITC 31.
(b) Inverted duty structure: The term ‘inverted duty structure’ has not
been defined in the GST, however it refers to a situation where the rate
of tax on inputs is higher than the rate of tax on output supplies (other
than nil rated or fully exempt supplies) except supply of goods or
services as may be notified by the government.

Suppliers who supply goods to merchant exporters at the concessional

rate of 0.1% [0.05% CGST and 0.05% SGST/UTGST or 0.1% IGST, as the case
may be], under Notification No. 40/2017 CT (R) dated 23.10.2017/
Notification No. 41/2017 IT (R) dated 23.10.2017, subject to certain
conditions specified in said notifications [Discussed in detail in
Chapter 14 – Import and Export under GST in this Module of the Study
Material], are also eligible for refund on account of inverted tax
structure.
Supply of specified goods/services where refund of unutilized ITC
on account of inverted duty structure is NOT allowed: Government
may, on the recommendations of the Council, notify supplies of certain
goods or services or both where no refund of unutilized ITC on account
of inverted duty structure is allowed.
For instance, supply of construction of complex services specified in
para 5(b) of Schedule II of the CGST Act, rail locomotives powered from

30
A tax period is the period for which return is required to be furnished [Section 2(106)].
31
It is important to note that notified class of persons may make zero-rated supply or notified
class of goods or services may be exported, on payment of IGST and refund of such tax paid on
goods and/or services supplied may be claimed.

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 1.36 15.36 GOODS AND SERVICES TAX

an external source of electricity or by electric accumulators, soya bean

oil, olive oil, palm oil, coal, lignite, peat etc 32.
However, it is clarified that this restriction on refund of unutilized ITC
of GST paid on inputs is not applicable in case of zero-rated supply of
specified goods or services, i.e. (a) exports of said goods or services or
both; or (b) supply of said goods or services or both to a SEZ
developer/unit [Circular No. 18/18/2017 GST dated 16.11.2017].
3. Application Form for claiming refund
The application for refund in such cases shall be filed in Form RFD-01.
4. Time-limit for claiming refund
Refund claim on account of inverted duty structure or on account of
accumulated ITC in case of exports of goods/ services made against LUT/
bond without payment of IGST, the refund claim can be filed within 2 years
from the relevant date; relevant date is discussed earlier in heading B in this
chapter.
5. Doctrine of unjust enrichment not applicable
In such cases, the refundable amount shall, instead of being credited to the
Consumer Welfare Fund, be paid to the applicant. In other words, doctrine
of unjust enrichment is not applicable in these cases.
6. Amount to be claimed as refund
(i) Rule 89(4) stipulates that in the case of zero-rated supply of goods
or services or both without payment of tax
under bond/LUT in accordance with the
provisions of section 16(3) of the IGST Act,
2017, refund of ITC shall be granted as per the
following formula:
(Turnover of zero-rated supply of
Refund goods + Turnover of zero-rated supply
Amount = of services) × Net ITC
Adjusted Total Turnover

32
Notification No. 15/2017 CT (R) dated 28.06.2017 and Notification No. 5/2017 CT (R) dated
28.06.2017. Examples given herein are only for information purpose.

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 REFUNDS 15.37

where,-
A. "Refund amount" means the maximum refund that is admissible;

B. "Net ITC" means ITC availed on inputs (see “Clarification on

the term input” given subsequently) and input services during the
relevant period.
C. "Turnover of zero-rated supply of goods" means
(i) the value of zero-rated supply of goods made during the
relevant period without payment of tax under bond/letter
of undertaking
or
(ii) value which is 1.5 times the value of like goods
domestically supplied by the same or, similarly placed,
supplier, as declared by the supplier,

whichever is less.
D. "Turnover of zero-rated supply of services" means the value of
zero-rated supply of services made without payment of tax under
bond or LUT, calculated in the following manner, namely:-
Zero-rated supply of services is the aggregate of the payments
received during the relevant period for zero-rated supply of
services and zero-rated supply of services where supply has been
completed for which payment had been received in advance in
any period prior to the relevant period reduced by advances
received for zero-rated supply of services for which the supply of
services has not been completed during the relevant period.

E. "Adjusted Total Turnover" means the sum total of the value of:
(a) the turnover in a State or a Union territory, as defined under
section 2(112), excluding turnover of services; &
(b) the turnover of zero-rated supply of services determined in
terms of clause (D) above and non-zero-rated supply of
services,

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 1.38 15.38 GOODS AND SERVICES TAX

excluding the value of exempt supplies other than zero-rated

supplies during the relevant period.

F. “Relevant period” means the period for which the claim has
been filed.
Explanation – For the purposes of this sub-rule, the value of goods
exported out of India shall be taken as –
(i) the Free on Board (FOB) value declared in the Shipping Bill or Bill
of Export form, as the case may be, as per the Shipping Bill and
Bill of Export (Forms) Regulations, 2017; or
(ii) the value declared in tax invoice or bill of supply,

whichever is less.
Clarifications regarding manner of calculation of ‘ADJUSTED
TOTAL TURNOVER’ under rule 89(4)

(1) Value of goods exported out of India

The value of goods exported out of India to be included while
calculating “Adjusted Total Turnover” WILL BE SAME as being
determined as per the above Explanation inserted in the said sub-
rule 33.

(2) Restriction of ‘Turnover of zero-rated supply of goods’ to

1.5 times the value of like goods domestically supplied
As seen above, “Adjusted Total Turnover” includes “Turnover in
a State/UT”. As per section 2(112), “Turnover in a State/UT”
includes turnover/ value of export/ zero-rated supplies of goods.
Now the definition of the term ‘Turnover of zero-rated supply of
goods’ used in the above formula restricts the same to 1.5 times
the value of like goods domestically supplied by the
same/similarly placed supplier/as declared by the supplier.

33
Circular No. 197/09/2023 GST dated 17.07.2023

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 REFUNDS 15.39

It is clarified that the same value of zero-rated/ export supply of

goods, as calculated as per the definition of “turnover of zero-
rated supply of goods”, needs to be taken into consideration
while calculating “turnover in a State or a Union Territory”, and
accordingly, in “adjusted total turnover” for the purpose of this
sub-rule.
Thus, the restriction of 1.5 times of the value of like goods
domestically supplied, as applied in “turnover of zero-rated
supply of goods”, would also apply to the value of “adjusted total
turnover” here.
In short, for the purpose of rule 89(4), the value of export/ zero-
rated supply of goods to be included while calculating “adjusted
total turnover” WILL BE SAME as being determined as per the
amended definition of “Turnover of zero-rated supply of goods”
in this sub-rule.
The same can explained by the following example where actual
value per unit of goods exported is more than 1.5 times the value
of same/ similar goods in domestic market, as declared by the
supplier:
Suppose a supplier is manufacturing only one type of
goods and is supplying the same goods in both
domestic market and overseas. During the relevant
period of refund, the details of his inward supply and outward
supply details are shown in the table below:
Net admissible ITC = ` 270

Outward Value No of Turnover Turnover as

Supply per unit units (`) per
supplied amended
(`)
definition
(`)

Local 200 5 1,000 1,000

(Quantity 5)

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 1.40 15.40 GOODS AND SERVICES TAX

Export 350 5 1,750 1,500

[1.5×(5×200)]
(Quantity 5)

Total 2,750 2,500

The formula for calculation of refund as per rule 89(4) is:

Refund Amount = (Turnover of zero-rated supply of goods +
Turnover of zero-rated supply of services) × Net ITC ÷Adjusted
Total Turnover
Turnover of zero-rated supply of goods (as per amended
definition) =
` 1,500
Adjusted Total Turnover= ` 1,000 + ` 1,500 = ` 2,500 [and not
` 1,000 + ` 1,750]
Net ITC = ` 270
Refund Amount = ` (1,500 × 270)/2,500 = ` 162
Thus, the admissible refund amount in the instant case is ` 162 34.
(iv) Rule 89(5) stipulates that in the case of refund on
account of inverted duty structure, maximum
refund of ITC shall be granted as per the following
formula –
Turnover of
inverted rated Tax payable
supply of goods on such
& services × Net inverted Net ITC
= x
ITC rated supply
of goods & ITC availed
Adjusted Total
services on inputs &
Turnover
input services

34
Circular No. 147/03/2021 GST dated 12.03.2021

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 REFUNDS 15.41

where,-

A. "Net ITC" means ITC availed on inputs during the

relevant period (See Notes – 1 & 2 and “Clarification on the term
input” given below); and

B. "Adjusted Total turnover and Relevant period" have the same

meaning as assigned in sub-rule (4) above.

Note - 1: It may be noted that in rule 89(5), in ‘Net ITC’, ITC availed
on only inputs is covered. Since the definition of inputs 35 doesn’t
include services or capital goods, it is apparent here that both the law
and the related rules clearly prevent the refund of tax paid on input
services and capital goods as part of refund of ITC accumulated on
account of inverted duty structure 36.

Note - 2: If there are multiple inputs attracting different rates of tax,

‘Net ITC’ in rule 89(5) covers the ITC availed on all inputs in the relevant
period, irrespective of their rate of tax. The calculation of refund of
accumulated ITC on account of inverted tax structure, in cases where
several inputs are used in supplying the final product/output, can be
clearly understood with help of the following example:

(i) Suppose a manufacturing process involves the use of an input A

(attracting 5% GST) and input B (attracting 18% GST) to
manufacture output Y (attracting 12% GST). No input services are
being availed.
(ii) The refund of accumulated ITC in the situation at (i) above, will be
available under section 54(3) read with rule 89(5), which
prescribes the formula for the maximum refund amount
permissible in such situations.
(iii) Further assume that the claimant supplies the output Y having
value of ` 3,000/- during the relevant period for which the refund

35
under section 2(59)
36
Circular No. 79/53/2018 GST dated 31.12.2018

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 1.42 15.42 GOODS AND SERVICES TAX

is being claimed. Therefore, the turnover of inverted rated supply

of goods and services will be ` 3,000/-. Since the claimant has no
other outward supplies, his adjusted total turnover will also be
` 3,000/-.
(iv) If we assume that Input A, having value of ` 500/- and Input B,
having value of ` 2,000/-, have been purchased in the relevant
period for the manufacture of Y, then Net ITC shall be equal to
` 385/- (` 25/- and ` 360/- on Input A and Input B respectively).
(v) Therefore, maximum refund amount, as per rule 89(5) is as
follows:
= [(` 3,000 × ` 385)/ ` 3,000] – (` 3,000 x 12% x 385/385) 37

(vi) Thus, maximum refund amount is ` 25/- 38.

There arose an issue for consideration as to whether an applicant can
seek refund of unutilized ITC on account of inverted duty structure,
under section 54(3)(ii), in a case where the inversion is due to change in
the GST rate on the same goods. For example, an applicant trading in
goods has purchased, say goods “X” attracting 18% GST. However,
subsequently, the rate of GST on “X” has been reduced to, say 12%.
It has been clarified that, in such cases, the input and output being the
same, though attracting different tax rates at different points in time,
do not get covered under section 54(3)(ii).
There may, however, be cases where though inputs and output goods
are same, but the output supplies are made under a concessional
notification due to which the rate of tax on output supplies is less than
the rate of tax on inputs.
In such cases, as the rate of tax of output supply is less than the rate of
tax on inputs at the same point of time due to supply of goods by the
supplier under such concessional notification, the credit accumulated
on account of the same is admissible for refund under the provisions of
clause (ii) of the first proviso to section 54(3), other than the cases where

37
Modified as per revised formula for determining refund under inverted duty structure.
38
Circular No. 79/ 53/ 2018 GST dated 31.12.2018

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 REFUNDS 15.43

output supply is either Nil rated or fully exempted, and also provided
that supply of such goods or services are not notified by the
Government for their exclusion from refund of accumulated ITC under
the said clause 39.
Suppliers who supply goods to merchant exporters at the concessional
rate of 0.1% [0.05% CGST and 0.05% SGST/UTGST or 0.1% IGST, as the case
may be], under Notification No. 40/2017 CT (R) dated 23.10.2017/
Notification No. 41/2017 IT (R) dated 23.10.2017, subject to certain
conditions specified in said notifications [Discussed in detail in Chapter
14 – Import and Export under GST in this Module of the Study Material],
are also eligible for refund on account of inverted tax structure as per
above clarification.

Clarification on the term “input”

On certain occasions, ITC on stores and spares, packing materials, materials
purchased for machinery repairs, printing and stationery items, is not considered
as part of ‘Net ITC’ on the grounds that these are not directly consumed in the
manufacturing process and therefore, do not qualify as input.
There are also instances where stores and spares, although charged to
revenue, are considered as capital goods. Consequently, the ITC availed on
them is not included in ‘Net ITC’, even though the value of these goods has
not been capitalized in his books of account by the claimant.
In this regard, it is clarified that ITC of the GST paid on inputs shall be available
to a registered person as long as he/she uses or intends to use such inputs
for the purposes of his/her business and there is no specific restriction on the
availment of such ITC anywhere else in the GST law. The GST paid on inward
supplies of stores and spares, packing materials etc. shall be available as
ITC as long as these inputs are used for the purpose of the business
and/or for effecting taxable supplies, including zero-rated supplies, and
the ITC for such inputs is not restricted under section 17(5). Further,
capital goods have been clearly defined in section 2(19) as goods whose value

39
Circular No. 135/05/2020-GST dated 31.03.2020 as amended by Circular No. 173/05/2022
GST dated 06.07.2022

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 1.44 15.44 GOODS AND SERVICES TAX

has been capitalized in the books of account and which are used or intended
to be used in the course or furtherance of business. Hence, stores and
spares, the expenditure on which has been charged as a revenue expense
in the books of account, cannot be held to be capital goods 40.

7. Refund of ITC under section 54(3) restricted to the extent of invoice

details are reflected in Form GSTR-2B

In terms of sub-rule (4) to rule 36 [discussed in detail in Chapter 7 – Input Tax

Credit in Module 2 of this Study Material], the refund of accumulated ITC is
also restricted to ITC as per those invoices, the details of which are
uploaded by supplier in Form GSTR-1 and are reflected in Form GSTR-
2B of the applicant for the said tax period or for any of the previous tax
periods and on which the ITC is available to the applicant.
However, this does not in any way impact the refund of ITC availed on the
invoices / documents relating to imports, ISD invoices and the inward
supplies liable to Reverse Charge (RCM supplies) etc. ITC availed on imports,
ISD invoices, RCM etc. are not reflected in Form GSTR-2B of the applicant.
Therefore, it is clarified that refund of such ITC relating to imports, ISD
invoices and the inward supplies liable to Reverse Charge (RCM supplies) will
not be barred by not being reflected in Form GSTR 2B.
8. Determination of refundable amount in case of refund of unutilised ITC
on account of (i) exports without payment of tax, (ii) supplies made to
SEZ Unit/SEZ Developer without payment of tax or (iii) accumulation due
to inverted tax structure
In case of refund of unutilized input tax credit (ITC) on account of (i) exports
without payment of tax, (ii) supplies made to SEZ Unit/SEZ Developer without
payment of tax or (iii) accumulation due to inverted tax structure, the
common portal calculates the refundable amount as the least of the following
amounts:

a) The maximum refund amount as per the above formula specified in rule
89(4) or rule 89(5) [formula is applied on the consolidated amount of
ITC, i.e. Central tax + State tax/Union Territory tax +Integrated tax];

40
Circular No. 79/53/2018 GST dated 31.12.2018

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 REFUNDS 15.45

b) The balance in the electronic credit ledger of the applicant at the end
of the tax period for which the refund claim is being filed after the return
in Form GSTR-3B for the said period has been filed; and
c) The balance in the electronic credit ledger of the applicant at the time
of filing the refund application.

After calculating the least of the above 3 amounts, as detailed above, the
equivalent amount is to be debited from the electronic credit ledger of the
applicant in the following order:
a) Integrated tax, to the extent of balance available;
b) Central tax and State tax/Union Territory tax, equally to the extent of
balance available and in the event of a shortfall in the balance available
in a particular electronic credit ledger (say, Central tax), the differential
amount is to be debited from the other electronic credit ledger (i.e.,
State tax/Union Territory tax, in this case) 41.

9. Cases where refund of ITC is NOT allowed

(i) Refund of unutilized ITC shall not be allowed if the goods exported out
of India are subjected to export duty [Second proviso to section 54(3)].
The term ‘subjected to export duty’ means where the goods are
actually leviable to export duty and suffering export duty at the time of
export.
Therefore, goods in respect of which either Nil rate is specified in
Second Schedule to the Customs Tariff Act, 1975 or which are fully
exempted from payment of export duty by virtue of any customs
notification or which are not covered under Second Schedule to the
Customs Tariff Act, 1975, cannot be subjected to any export duty
under Customs Tariff Act, 1975.
Such goods would not be covered by the restriction imposed under the
second proviso to section 54(3) for the purpose of availment of refund
of accumulated ITC.

41
Master Circular on Refunds – Circular No. 125/44/2019 GST dated 18.11.2019

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 1.46 15.46 GOODS AND SERVICES TAX

Accordingly, it is clarified that only those goods which are actually

subjected to export duty i.e., on which some export duty has to be
paid at the time of export, will be covered under said restriction.
(ii) Refund of ITC shall not be allowed if the supplier of goods or services
or both avails of drawback in respect of CGST or claims refund of
the IGST paid on such supplies.
Thus, no refund of input tax credit shall be allowed in cases where the
supplier of goods or services or both avails of drawback in respect of
Central tax. It is clarified that if a supplier avails of drawback in respect
of duties rebated under the Customs and Central Excise Duties
Drawback Rules, 2017, he shall be eligible for refund of unutilized input
tax credit of Central tax/ State tax/ Union Territory tax / Integrated tax/
Compensation cess. It is also clarified that refund of eligible credit on
account of State tax shall be available if the supplier of goods or
services or both has availed of drawback in respect of Central tax 42.

F. Minimum refund claim [Section 54(14)]

No refund shall be paid to an applicant, if the amount is less than ` 1,000. The
limit of ` 1,000 shall apply for each tax head separately and not cumulatively.
Further, the limit would not apply in cases of refund of excess balance in the
electronic cash ledger 43.

G. Refund in case of goods or services exported out of India

As discussed in Chapter 14 – Import and Export under GST, exports of goods and
services are zero rated. A registered person making zero rated supply may supply
the goods and/or services under bond or Letter of Undertaking (LUT) without
payment of IGST and claim refund of unutilized ITC.
Further, notified class of persons may make zero-rated supply or notified class of
goods or services may be exported, on payment of IGST and refund of such tax
paid on goods and/or services supplied may be claimed. In the ensuing paras,
refund under each of these two cases has been discussed in detail:

42
Master Circular on Refunds – Circular No. 125/44/2019 GST dated 18.11.2019
43
Circular No. 59/ 33/ 2018 GST dated 04.09.2018

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 REFUNDS 15.47

(I) Refund on account of export of goods or services [with payment of

tax] [Rule 96]
In case where notified class of persons export goods and/or services or
notified class of goods or services are exported, on payment of IGST and
refund of such tax paid on goods and/or services supplied is claimed,
provisions relating to refund of IGST are as follows:
Export of goods

(1) Application for refund claim: The

shipping bill/ bill of export filed by the
exporter of goods shall be deemed to be
an application for refund and the taxpayer
is not required to file separate refund
application in this case.
Further, such application shall be deemed
to have been filed only when:
(a) the person in charge of the
conveyance carrying the export goods duly files a departure
manifest 44; or an export manifest or an export report covering
the number and the date of shipping bills/bills of export; and
(b) the applicant has furnished a valid return in
Form GSTR-3B.
If there is any mismatch between the data furnished by the
exporter of goods in Shipping Bill and those furnished in Form
GSTR-1, as amended in Form GSTR-1A if any,
such application for refund shall be deemed to
have been filed on such date when such
mismatch in respect of the said shipping bill is
rectified by the exporter.

44
Governed by Sea Cargo Manifest and Transhipment Regulations 2018 which has come into
force on 01.08.2019 vide Notification No. 38/2018 Cus (NT) dated 11.05.2018 as amended by
Notification No. 17/2019 Cus (NT) dated 27.02.2019.

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 1.48 15.48 GOODS AND SERVICES TAX

(c) the applicant has undergone Aadhaar authentication in the

manner provided in rule 10B.

The exporter of goods may file an application electronically in Form GST

RFD-01 through the common portal for refund of additional IGST paid
on account of upward
revision in price of goods
subsequent to export of
such goods and on which
the amount of IGST paid at
the time of export of such
goods has already been
refunded and such
application shall be dealt with in accordance with the provisions of rule
89.
GST portal shares the details of the relevant export invoices in respect
of export of goods contained in Form
GSTR-1, as amended in Form GSTR-1A, if
any, with the system designated by the
Customs viz. ICEGATE. The said system shall electronically transmit to
the common portal, a confirmation that the goods covered by the said
invoices have been exported out of India.
(2) Processing of refund claim: Upon receipt of the information regarding
the furnishing of a valid return in Form GSTR 3B from common portal,
ICEGATE system / proper officer of Customs, shall process the claim of
refund in respect of export of goods.
An amount equal to the IGST paid in
respect of each shipping bill/ bill of
export shall be electronically credited
to the bank account of the applicant
mentioned in his registration
particulars and as intimated to the
Customs authorities.

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 REFUNDS 15.49

(3) Withholding of refund of IGST: The claim for refund shall be withheld
where [Rule 96(4)]:

(a) a request has been received from the jurisdictional Commissioner

of Central Tax, State Tax or Union Territory Tax to withhold the
payment of refund due to the person claiming refund in
accordance with the provisions of section 54(10)/(11); or

(b) the proper officer of Customs determines that the goods were
exported in violation of the provisions of the Customs Act, 1962.

(c) the Commissioner in the Board or an officer authorised by the

Board, on the basis of data analysis and risk parameters, is of the
opinion that verification of credentials of the exporter, including
the availment of ITC by the exporter, is considered essential
before grant of refund, in order to safeguard the interest of
revenue.

Where refund is withheld in accordance with the provisions of clause

(a) or clause (c) above, such claim shall be transmitted to the proper
officer of Central tax, State tax or Union territory tax, as the case may
be, electronically through the common portal in a system generated
Form GST RFD-01 and the intimation of such transmission shall also be
sent to the exporter electronically through the common portal, and
notwithstanding anything to the contrary contained in any other rule,
the said system generated form shall be deemed to be the application
for refund in such cases and shall be deemed to have been filed on the
date of such transmission [Rule 96(5A)].

Where refund is withheld in accordance with the provisions of clause

(b) above and the proper officer of the Customs passes an order that
the goods have been exported in violation of the provisions of the
Customs Act, 1962, then, such claim shall be transmitted to the proper
officer of Central tax, State tax or Union territory tax, as the case may
be, electronically through the common portal in a system
generated Form GST RFD-01 and the intimation of such transmission
shall also be sent to the exporter electronically through the common

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 1.50 15.50 GOODS AND SERVICES TAX

portal, and notwithstanding anything to the contrary contained in any

other rule, the said system generated form shall be deemed to be the
application for refund in such cases and shall be deemed to have been
filed on the date of such transmission [Rule 96(5B)].

The application for refund in Form GST RFD-01 transmitted

electronically through the common portal in terms of sub-rules (5A) and
(5B) shall be dealt in accordance with the provisions of rule 89. [Rule
96(5C)]

(4) Refund to the Government of Bhutan on the exports to Bhutan: The

Central Government may pay
refund of the IGST to the
Government of Bhutan on the
exports to Bhutan for such class of
goods as may be notified in this
behalf. Where such refund is paid
to the Government of Bhutan, the
exporter shall not be paid any refund of the integrated tax.
Clarification on whether the refund claims can be preferred in respect of
specified goods sent / taken out of India but not brought back
The activity of sending / taking specified goods out of India is not a zero-
rated supply. That being the case, the sender of goods cannot prefer any
refund claim when the specified goods are sent / taken out of India 45.
Further, the supply would be deemed to have taken place:
(i) on the date of expiry of 6 months
from the date of removal, if the
specified goods are neither sold nor
brought back within the said period;
or

Discussed in detail in Chapter 14 – Import and Export under GST in this Module of the Study
45

Material.

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 REFUNDS 15.51

(ii) on the date of sale, in respect of such quantity of specified goods which
have been sold abroad within the specified period of 6 months 46.

It is clarified accordingly that the sender can prefer refund claim even when
the specified goods were sent / taken out of India without execution of a
bond or LUT, if he is otherwise eligible for refund as per the provisions
contained in section 54(3) read with rule 89(4), in respect of zero-rated supply
of goods after he has issued the tax invoice on the dates. It is further clarified
that refund claim cannot be preferred under rule 96 as supply is taking place
at a time after the goods have already been sent/taken out of India earlier 47.

The above position has been explained by way of example below:

M/s. ABC sends 100 units of specified goods out of India. The
activity of sending/ taking such specified goods out of India is not
a supply. No tax invoice is required to be issued in this case but the
specified goods shall be accompanied with a delivery challan issued in
accordance with the provisions contained in rule 55.

If 10 units of specified goods are sold abroad say after one month of sending/
taking out and another 50 units are sold say after two months of sending/
taking out, a tax invoice would be required to be issued for 10 units and 50
units, as the case may be, at the time of each of such sale in accordance with
the provisions contained in section 12 and section 31 read with rule 46.
If the remaining 40 units are not brought back within the stipulated period of
six months from the date of removal, a tax invoice would be required to be
issued for 40 units in accordance with the provisions contained in section 12
and section 31 read with rule 46.

Further, M/s ABC may claim refund of accumulated input tax credit in
accordance with the provisions contained in subsection (3) of section 54 read
with sub-rule (4) of rule 89 in respect of zero-rated supply of 60 units.

46
Discussed in detail in Chapter 9 – Tax Invoice, Credit and Debit Notes in Module 2 of this Study
Material.
47
Circular No. 108/27/2019 GST dated 18.07.2019

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 1.52 15.52 GOODS AND SERVICES TAX

Export of services

Refund application: Rule 96(9) provides that the application for refund of
IGST paid on the services exported out of India shall be filed in Form GST
RFD-01 and shall be dealt with in accordance with the provisions of rule 89
[as discussed earlier].
(II) Refund of ITC paid on export of goods or services under bond or
Letter of Undertaking (LUT) [Rule 96A]
In case where goods/services are exported by a class of persons other than
notified class of persons or where goods/services other than notified class of
goods or services are exported, only option available with the exporter of
goods or services or both is to export under bond/LUT without payment
of IGST and claim refund of ITC. The provisions relating to export of
goods/services without payment of IGST under bond/LUT [Rule 96A] have
already been discussed in detail in Chapter 14 – Import and Export under GST.
Further, as already discussed, in such cases, refund of unutilised ITC at the
end of any tax period, of amount determined under rule 89(4), shall be
granted to the applicant and the electronic credit ledger shall be debited by
the applicant by an amount equal to the refund so claimed [discussed earlier
in detail].
Clarification in respect of admissibility of refund where an exporter
applies for refund subsequent to compliance of the provisions of sub-
rule (1) of rule 96A

As per rule 96A(1) [as discussed in detail in Chapter 14 – Import and Export
under GST], a registered person availing of the option to export without
payment of IGST is required to furnish a bond/LUT, prior to export, binding
himself to pay the tax due along with applicable interest within a period of —

(a) 15 days after the expiry of 3 months, or such

further period as may be allowed by the Where the goods
are not exported
Commissioner, from the date of issue of the
out of India
invoice for export,

if the goods are not exported out of India; or

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 REFUNDS 15.53

(b) 15 days after the expiry of 1 year, or the period as allowed under FEMA 48
including any extension of such period as
Where payment for
permitted by the RBI, whichever is later, from
services is not
the date of issue of the invoice for export or received in
such further period as may be allowed by the convertible FOREX
Commissioner,

if the payment of such services is not received by the exporter in

convertible foreign exchange or in Indian rupees, wherever
permitted by the RBI.

There are instances where exporters have voluntarily made payment of due
IGST, along with applicable interest, in cases where goods could not be
exported or payment for export of services could not be received within time
frames specified above.

A doubt arose as to whether subsequent to export of the said goods or

realization of payment in case of export of services, the said exporters are
entitled to claim not only refund of unutilized ITC on account of export but
also refund of the IGST and interest so paid in compliance of the provisions
of rule 96A(1).

As long as goods are actually exported or payment is realized in case of

export of services, even if it is beyond the time frames as prescribed in rule
96A(1), the benefit of zero-rated supplies cannot be denied to the concerned
exporters. Accordingly, it is clarified that in such cases, on actual export of
the goods or as the case may be, on realization of payment in case of export
of services, the said exporters would be entitled to refund of unutilized ITC in
terms of section 54(3), if otherwise admissible.
It is also clarified that in such cases subsequent to export of the goods or
realization of payment in case of export of services, the said exporters would
be entitled to claim refund of the IGST so paid earlier on account of
goods not being exported, or the payment not being realized for export

48
Foreign Exchange Management Act, 1999

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 1.54 15.54 GOODS AND SERVICES TAX

of services, within the time frame specified above. However, no refund

of the interest paid in compliance of rule 96A(1) shall be admissible 49.
(III) Recovery of refund of unutilized input tax credit or integrated tax
paid on export of GOODS where export proceeds are not realized
within stipulated time [Proviso to section 16(3) read with rule 96B]
As per proviso to section 16(3), the registered person making zero rated
supply of goods, without payment of tax shall, in case of non-realisation of
sale proceeds, be liable to deposit the refund so received under section 16(3)
along with the applicable interest under section 50 within 30 days after the
expiry of the time limit prescribed under the Foreign Exchange Management
Act, 1999 (hereinafter referred to as FEMA) for receipt of foreign exchange
remittances, in such manner as may be prescribed.
Rule 96B prescribes the manner in relation to this. It provides that proceeds
of export of goods must be realised within the period allowed under FEMA.
In case of non-realisation/ partial realisation of such proceeds, any refund
paid would be subject to be recovered from the taxpayer with interest, except
in those cases wherein RBI writes off the requirement of such realization on
merits.
In case any refund is recovered on account of non-realisation of proceeds
and the realization was made later on within the extended period permitted
by the RBI, the proper officer (PO) shall refund the amount so recovered to
the taxpayer.
The detailed provisions of said rule are elaborated as follows:
Where any refund of unutilised input tax credit on account of export of goods
or of integrated tax paid on export of goods has been paid to an applicant
but the sale proceeds in respect of such export goods have not been realised,
in full or in part, in India within the period allowed under the FEMA, including
any extension of such period, the person to whom the refund has been made
shall deposit the amount so refunded, to the extent of non-realisation of sale
proceeds.

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Circular No. 197/09/2023 GST dated 17.07.2023

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 REFUNDS 15.55

The amount so refunded, to the extent of non-realisation of sale proceeds have

to be deposited along with applicable interest within 30 days of the expiry of the
said period or, as the case may be, the extended period. In case of failure to do
so, the amount refunded shall be recovered in accordance with the provisions of
sections 73 or 74 or section 74A, as the case may be, as is applicable for recovery
of erroneous refund, along with interest under section 50.
However, where sale proceeds, or any part thereof, in respect of such export
goods are not realised by the applicant within the period allowed under the
FEMA, but the RBI writes off the requirement of realisation of sale proceeds
on merits, the refund paid to the applicant shall not be recovered.
Where the sale proceeds are realised by the applicant, in full or part, after the
amount of refund has been recovered from him and the applicant produces
evidence about such realisation within a period of 3 months from the date of
realisation of sale proceeds, the amount so recovered shall be refunded by
the proper officer, to the applicant to the extent of realisation of sale
proceeds, provided the sale proceeds have been realised within such
extended period as permitted by RBI.

4. REFUND OF TAX WRONGLY COLLECTED AND

PAID [SECTION 77 READ WITH RULE 89(1A)]
Section 77 of the CGST Act, 2017 contains the provisions regarding tax wrongfully
collected and paid to Central Government or State Government. It provides that a
registered person who has paid the Central tax and State tax or, as the case may
be, the Central tax and the Union territory tax on a transaction considered by him
to be an intra-State supply, but which is subsequently held to be an inter-State
supply, shall be refunded the amount of taxes so paid in such manner and subject
to such conditions as may be prescribed.

A registered person who has paid integrated tax on a transaction considered by

him to be an inter-State supply, but which is subsequently held to be an intra-State
supply, shall not be required to pay any interest on the amount of central tax and
State tax or, as the case may be, the Central tax and the Union territory tax payable.
Similar provisions are contained in section 19 of the IGST Act, 2017. It provides
that a registered person who has paid integrated tax on a supply considered by

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 1.56 15.56 GOODS AND SERVICES TAX

him to be an inter-State supply, but which is subsequently held to be an intra-State

supply, shall be granted refund of the amount of integrated tax so paid in such
manner and subject to such conditions as may be prescribed.
A registered person who has paid central tax and State tax or Union territory tax,
as the case may be, on a transaction considered by him to be an intra-State supply,
but which is subsequently held to be an inter-State supply, shall not be required to
pay any interest on the amount of integrated tax payable. The provisions of
section 77 of the CGST Act and section 19 of the IGST Act have also been discussed
in Chapter 19 – Demands and Recovery in this Module of the Study Material.
Time Limit for filing refund claim
As per rule 89(1A), any person claiming refund of any tax paid under aforesaid
provisions may file an application in prescribed form, before the expiry of a period
of 2 years from the date of payment of tax under correct head on said supply.
Thus, said refund can be claimed before the expiry of 2 years from the date of
payment of tax under the correct head, i.e. IGST paid afterwards in respect of
subsequently held inter-State supply, or CGST and SGST paid afterwards in respect
of subsequently held intra-State supply, as the case may be. Refund would not be
available where the taxpayer has made tax adjustment through issuance of credit
note under section 34 in respect of the said transaction 50.

5. REFUND TO UN BODIES, EMBASSIES, ETC.

[SECTION 55 READ WITH SECTION 54(2) OF
CGST ACT]
Supplies made to UN bodies and embassies may be exempted from payment of
GST as per international obligations. However, this exemption has been
operationalized by way of a refund mechanism. So, a taxable person making
supplies to such bodies would charge the tax due and remit the same to
Government account.

However, the UN bodies and other entities notified under section 55 can claim
refund of the taxes paid by them on their inward supplies. The claim has to be made

50
Circular No. 162/18/2021 GST dated 25.09.2021

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 REFUNDS 15.57

before the expiry of 2 years from the last day of the quarter in which such supply
was received. Detailed provisions have been discussed hereunder:

A. Who is entitled to refund under section 55?

Government may, on the recommendations of the
Council, by notification, specify:

(i) any specialised agency of the United Nations

Organisation; or

(ii) any Multilateral Financial Institution and Organisation notified under

the United Nations (Privileges and Immunities) Act, 1947; or

(iii) Consulate or Embassy of foreign countries; and

(iv) any other person or class of persons as may be specified in this behalf,

who shall, subject to such conditions and restrictions as may be prescribed,

be entitled to claim a refund of taxes paid on the notified inward supplies of
goods or services or both received by them.

In exercise of above power, following persons have been notified, subject to

fulfilment of specified conditions:

(i) United Nations or a specified international

organization**; and

(ii) Foreign diplomatic mission or consular post in India,

or diplomatic agents or career consular officers
posted therein 51.

**Specified international organisation means an international organisation

declared by the Central Government in
pursuance of section 3 of the United Nations
(Privileges and Immunities Act) 1947, to
which the provisions of the Schedule to the
said Act apply.

51
Notification No. 16/2017 CT (R) dated 28.06.2017/ Notification No. 13/2017 IT (R) dated
28.06.2017

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 1.58 15.58 GOODS AND SERVICES TAX

Further, in exercise of said power, Canteen Stores Department (CSD), under

the Ministry of Defence, has been notified as a person who shall be entitled
to claim a refund of 50% of the applicable CGST/IGST paid by it on all inward
supplies of goods received by it for the purposes of subsequent supply of
such goods to the Unit Run Canteens of the CSD or to the authorized
customers of the CSD 52.

For the purpose of claiming the said refund, Canteen Stores Department:

 shall apply for refund

in different prescribed
form once in every quarter,
electronically on the
common portal.

 Such application shall be

dealt in a same manner as
application for refund filed
in Form GST RFD-01 in accordance with the provisions of rule 89.

 The refund of tax paid by the applicant shall be available, if-

(i) the inward supplies of goods were received from a registered

person against a tax invoice and details of such supplies have
been furnished by the said registered person in his details of
outward supply in Form GSTR-1

AND

supplier has furnished his return in Form GSTR-3B for the

concerned tax period;

(ii) name and GSTIN of the applicant is mentioned in the tax invoice;
and

52
Notification No. 6/2017 CT (R) dated 28.06.2017/ Notification No. 6/2017 IT (R) dated
28.06.2017

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 REFUNDS 15.59

(iii) goods have been received by CSD for the purpose of subsequent
supply to the Unit Run Canteens of the CSD or to the authorised
customers of the CSD [Rule 95B]

B. Time Limit for filing refund claim [Section 54(2) read with rule 95(1)]

Persons eligible to claim refund under section 55 [as mentioned in point A.

above], entitled to refund of tax paid by it on inward supplies of goods or
services or both, may make an application for such refund, in such form and
manner as may be prescribed, once in every quarter, but before the expiry of
2 years from the last day of the quarter in which such supply was received.

C. Form and documents for filing the refund claim [Rule 95(1)]
Persons eligible to claim refund under section 55 shall submit the application
for refund:
 in a prescribed form 53, once in every quarter
 along with a Statement of the Inward Supplies of goods or services
or both in Form GSTR-11 [discussed in detail in Chapter 13- Returns in
Module 2 of this Study Material].

D. Acknowledgment for refund claim [Rule 95(2)]

An acknowledgement for receipt of the application for refund shall be issued
in a prescribed form.
E. Conditions to be satisfied for sanction of refund [Rule 95(3) & (4)]
Refund of tax paid by the applicant shall be available if all the following
conditions are satisfied-
(a) the inward supplies of goods or services or both were received from a
registered person against a tax invoice.
(b) name and GSTIN/UIN of the applicant is mentioned in the tax invoice**.
(c) such other restrictions or conditions as may be specified in the
notification are satisfied.

53
electronically or otherwise on the common portal

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 1.60 15.60 GOODS AND SERVICES TAX

**However, where UIN of the applicant is not mentioned in a tax invoice, the
refund of tax paid by the applicant on such invoice shall still be available if
the copy of the invoice, duly attested by the authorised representative of the
applicant, is submitted along with the refund application in prescribed form.
In other words, if UIN is not mentioned in the tax invoice, then refund shall
be available to the applicant on submission of the attested copy of such
invoice in the prescribed form.
The provisions of rule 92, as discussed earlier in this chapter shall, mutatis
mutandis, apply for the sanction and payment of refund under this rule.
F. Supremacy provision in case of inconsistency [Rule 95(5)]
Where an express provision in a treaty or other international agreement, to
which the President or the Government of India is a party, is inconsistent with
the provisions of these rules, such treaty or international agreement shall
prevail.
G. Specialized agencies notified under section 55 entitled to refund of
IGST paid on import of goods
As seen above, section 55 provides refund of taxes paid on the notified
supplies of goods and/or services by notified specialized agencies like United
Nations or a specified international organisation. Section 3(7) of the Customs
Tariff Act, 1975 provides for a parity between the integrated tax rate attracted
on imported goods and the integrated tax applicable on the domestic
supplies of goods. Therefore, on this principle of parity, specialised agencies
ought to get the refund of the IGST paid on imported goods.

6. INTEREST ON DELAYED REFUNDS [SECTION

56 OF THE CGST ACT]
A. Interest on amount refundable consequent to order passed by Proper
Officer under section 54(5)
 Where any tax ordered to be refunded under section
54(5) to any applicant is not refunded within 60 days
from the date of receipt of application under section
54(1), interest shall be payable to the applicant.

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 REFUNDS 15.61

 Interest is payable on such refund @ 6% p.a.*.

 Interest is payable to the applicant for the period of delay beyond
60 days from the date of receipt of such application till the date of
refund of such tax, to be computed in such manner and subject to such
conditions and restrictions as may be prescribed [Section 56].
*as notified vide Notification No. 13/2017 CT dated 28.06.2017
B. Interest on amount refundable consequent to order passed in an
appeal or further proceedings
 Where any claim of refund arises from an order passed by an
Adjudicating Authority or Appellate Authority or Appellate Tribunal or
Court which has attained finality and the same is not refunded within
60 days from the date of receipt of application filed consequent to
such order, interest shall be payable on such refund.
 Interest is payable on such refund @ 9% p.a.*.
 Interest is payable from the date immediately after the expiry of 60 days
from the date of receipt of application till the date of refund. [Proviso
to Section 56].
*as notified vide Notification No. 13/2017 CT dated 28.06.2017
For the purpose of this section, the order of refund made by an Appellate
Authority, Appellate Tribunal or any court against an order of the proper
officer under section 54(5), shall also be deemed to be an order passed under
the said section 54(5) [Explanation to section 56].

C. Order sanctioning interest on delayed refunds [Rule 94]

 Where any interest is due and payable to the applicant under section
56, the proper officer shall make an order along
with a payment order in prescribed form.
 Such order shall specify therein:
 the amount of refund which is delayed,
 the period of delay for which interest is
payable and
 the amount of interest payable.

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 1.62 15.62 GOODS AND SERVICES TAX

 Such interest shall be electronically credited to any of the bank accounts

of the applicant mentioned in his registration particulars and as
specified in the application for refund.

7. CONSUMER WELFARE FUND [SECTIONS 57 &

58 OF THE CGST ACT]
Consumer Welfare Fund was created to promote and protect the welfare of
consumer, create consumer awareness and strengthen consumer movement in the
country, particularly in rural areas. Amount of refund which is not payable to the
applicant is credited to the Consumer Welfare Fund.
As already discussed in this chapter, amount of refund is paid to the applicant in
case where there is no unjust enrichment; i.e. the incidence of tax has not been
passed by the supplier to the recipient as also in the circumstances where the
principle of unjust enrichment is not applicable [specified in section 54(8)].
Otherwise, the said amount is credited to the Consumer Welfare Fund.
A. Amount to be credited to Consumer Welfare Fund
Section 57 stipulates that the Government shall constitute a
Fund, to be called the Consumer Welfare Fund and there
shall be credited to the Fund:
(a) Amount of refund determined by an order passed under section 54(5),
(b) any income from investment of the amount credited to the Fund; and
(c) such other monies received by it,
in such manner as may be prescribed. Such manner has been prescribed
under rule 97.
B. Amounts to be credited to/paid from Consumer Welfare Fund
[Rule 97]
 All amounts of duty/ CGST/ SGST/ IGST/ UTGST/ cess and income from
investment along with other monies specified in section 12C(2) of the
erstwhile Central Excise Act, 1944, section 57 of the CGST Act, 2017 read
with section 20 of the IGST Act, 2017, section 21 of the UTGST Act, 2017
and section 12 of the GST (Compensation to States) Act, 2017 shall be
credited to the Fund [discussed earlier in this chapter] [Rule 97(1)].

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 REFUNDS 15.63

 An amount equivalent to 50% of the amount of IGST determined under

section 54(5) of the CGST Act, read with section 20 of the IGST Act, shall
be deposited in the Fund [Proviso to rule 97(1)].
 An amount equivalent to 50% of the amount of compensation cess
determined under section 54(5) of the CGST Act, read with section 11
of the GST (Compensation to States) Act, shall be deposited in the Fund.
[Second Proviso to rule 97(1)]
 Any amount, having been credited to the Consumer Welfare Fund,
ordered or directed as payable to any claimant by orders of the proper
officer, Appellate Authority or Appellate Tribunal or Court, shall be paid
from the Fund [Rule 97(2)].
C. Utilisation of Consumer Welfare Fund [Section 58 read with rule 97]
 All sums credited to the Consumer Welfare
Fund shall be utilized by the Government for
the welfare of the consumers in such manner
as may be prescribed [Section 58(1)].
 The Government shall, by an order, constitute a Standing Committee
who shall make recommendations for proper utilisation of the money
credited to the Consumer Welfare Fund for welfare of the consumers
[Rule 97(4)].

8. REFUND OF INTEGRATED TAX PAID ON

SUPPLY OF GOODS TO TOURIST LEAVING
INDIA [SECTION 15 OF THE IGST ACT]
 The integrated tax paid by tourist leaving India on any supply of goods taken
out of India by him shall be refunded in such manner and subject to such
conditions and safeguards as may be prescribed.
 The term “tourist” means a person not normally resident in India, who enters
India for a stay of not more than 6 months for legitimate non-immigrant
purposes.
 As of now the manner, procedure and form has not been prescribed for the
refund made to the international tourist.

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 1.64 15.64 GOODS AND SERVICES TAX

Manual filing and processing

Notwithstanding anything contained in this Chapter, in respect of any process
or procedure prescribed herein, any reference to electronic filing of an
application, intimation, reply, declaration, statement or electronic issuance of a
notice, order or certificate on the common portal shall, in respect of that process
or procedure, include manual filing of the said application, intimation, reply,
declaration, statement or issuance of the said notice, order or certificate in such
Forms as appended to these rules [Rule 97A].

Clarification in respect of certain challenges faced by the registered persons in

implementation of provisions of GST laws

S. Issue Clarification
No.

1. An advance is received by a In case GST is paid by the supplier on

supplier for a service contract advances received for a future event
which subsequently got which got cancelled subsequently and
cancelled. The supplier has for which invoice is issued before
issued the invoice before supply of service, the supplier is
supply of service and paid the required to issue a “credit note” in
GST thereon. terms of section 34. He shall declare the
Whether he can claim refund of details of such credit notes in the return
tax paid or is he required to for the month during which such credit
adjust his tax liability in his note has been issued. The tax liability
returns? shall be adjusted in the return subject
to conditions of section 34. There is no
need to file a separate refund claim.
However, in cases where there is no
output liability against which a credit
note can be adjusted, registered
persons may proceed to file a claim
under “Excess payment of tax, if any”
through Form GST RFD-01.

2. An advance is received by a In case GST is paid by the supplier on

supplier for a Service contract advances received for an event which
which got cancelled got cancelled subsequently and for

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 REFUNDS 15.65

subsequently. The supplier has which no invoice has been issued in

issued receipt voucher and paid terms of section 31(2), he is required to
the GST on such advance issue a “refund voucher” in terms of
received. Whether he can claim section 31(3)(e) read with rule 51.
refund of tax paid on advance The taxpayer can apply for refund of
or he is required to adjust his GST paid on such advances by filing
tax liability in his returns? Form GST RFD-01 under the category
“Refund of excess payment of tax”.

3. Goods supplied by a supplier In such a case where the goods

under cover of a tax invoice are supplied by a supplier are returned by
returned by the recipient. the recipient and where tax invoice had
Whether he can claim refund of been issued, the supplier is required to
tax paid or is he required to issue a “credit note” in terms of
adjust his tax liability in his section 34. He shall declare the details
returns? of such credit notes in the return for the
month during which such credit note
has been issued. The tax liability shall
be adjusted in the return subject to
conditions of section 34.
There is no need to file a separate
refund claim in such a case.
However, in cases where there is no
output liability against which a credit
note can be adjusted, registered
persons may proceed to file a claim
under “Excess payment of tax, if any”
through Form GST RFD-01.

[Circular No. 137/07/2020 GST dated 13.04.2020]

TEST YOUR KNOWLEDGE

1. Is there any time limit for sanctioning of refund under section 54?
2. Discuss the provisions relating to refund of the amount of advance tax
deposited by a casual taxable person under section 27(2).

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 1.66 15.66 GOODS AND SERVICES TAX

3. In case of refund under exports of goods, whether BRC/FIRC is necessary for

granting refund?

4. When is a deficiency memo issued in respect of a refund claim made under

section 54?
5. State the exceptions to the principle of unjust enrichment as applicable to
refund claims.
6. Kailash Global (P) Ltd. supplies various goods in domestic and international
markets. It is engaged in both manufacturing and trading of goods. The
company is registered under GST in the State of Karnataka. The company
exports goods without payment of tax under letter of undertaking in accordance
with the provisions of section 16(3) of the IGST Act, 2017.

The company has made the following supplies during a tax period:

S. Particulars (` )
No.

(i) Export of product ‘A’ to UK for $ 10,000 (Assessable 7,00,000

value under customs in Indian rupees.)
[Export duty is payable on product ‘A’ at the time of
exports. Further, value of like goods domestically
supplied by the similarly placed supplier is
` 6,00,000]

(ii) Domestic supplies of taxable product ‘B’* during the 10,00,000

period [excluding tax @ 5%]
[Inputs used in manufacturing of such goods are taxable
@18%]
*not notified as a product, in respect of which refund of
unutilised ITC shall not be allowed under section 54(3)(ii)

(iii) Supply of goods to Export Oriented Unit [excluding tax 5,00,000

@ 18%]
[ITC has been claimed by the recipient]

(iv) Export of exempt supplies of goods (Value of like 6,00,000

goods domestically supplied by the similarly placed
supplier is ` 5,00,000)

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 REFUNDS 15.67

The ITC available for the above tax period is as follows:

[Link]. Particulars (` )

(i) On inputs 3,50,000

(ii) On input service 1,50,000

(iii) On capital goods 1,20,000

Determine the maximum amount of refund admissible to Kailash Global (P)

Ltd. for the given tax period.
7. Super Engineering Works, a registered supplier in Haryana, is engaged in
supply of taxable goods within the State. Given below are the details of the
turnover and applicable GST rates of the final products manufactured by Super
Engineering Works as also the input tax credit (ITC) availed on inputs used in
manufacture of each of the final products and GST rates applicable on the
same, during a tax period:

Products Turnover* Output GST ITC availed (`) Input GST

(` ) Rates Rates

A 500,000 5% 54,000 (Goods) 18%

B 350,000 5% 54,000 (Goods) 18%

C 100,000 18% 10,000 (Service) 18%

*excluding GST
Determine the maximum amount of refund of the unutilized input tax credit
that Super Engineering Works is eligible to claim under section 54(3)(ii)
provided that Product B is notified as a product, in respect of which no refund
of unutilised input tax credit shall be allowed under said section.
8. With reference to section 54(3), mention the cases where refund of unutilised
input tax credit is allowed.
9. State few cases where refundable amount shall be paid to the applicant, instead
of being credited to Consumer Welfare Fund under CGST Act, 2017.

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 1.68 15.68 GOODS AND SERVICES TAX

ANSWERS

1. Yes, refund has to be sanctioned within 60 days from the date of receipt of
application complete in all respects. If refund is not sanctioned within the said
period of 60 days, interest @ 6% p.a. will have to be paid in accordance with
section 56.
However, in case where provisional refund to the extent of 90% of the amount
claimed is refundable in respect of zero-rated supplies made by certain
categories of registered persons in terms of sub-section (6) of section 54, the
provisional refund has to be given within 7 days from the date of
acknowledgement of the claim of refund.

2. The amount of advance tax deposited by a casual taxable under section 27(2),
shall be refunded only when such person has, in respect of the entire period
for which the certificate of registration granted to him had remained in force,
furnished all the returns required under section 39 [Section 54(13)]. Further,
refund of any amount, after adjusting the tax payable by the applicant out of
the advance tax deposited by him under section 27 at the time of registration,
shall be claimed in the last return required to be furnished by him [Fourth
proviso to rule 89(1)].
3. In case of refund on account of export of goods, the refund rules do not
prescribe BRC/FIRC as a necessary document for filing of refund claim.
However, for export of services details of BRC/FIRC is required to be
submitted along with the application for refund.

However, in case of non-realization of consideration in terms of FEMA, the

exporter shall deposit the amount so refunded to the extent of non realization
of sale proceed along with interest within 30 days [Rule 96B].

4. Rule 90(3) provides for communication in prescribed form (deficiency memo)

where deficiencies are noticed. The said sub-rule also provides that once the
deficiency memo has been issued, the claimant is required to file a fresh
refund application after the rectification of the deficiencies.
Further the time period, from the date of filing of the refund claim in Form
GST RFD-01 till the date of communication of the deficiencies by the proper

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 REFUNDS 15.69

officer, shall be excluded from the period of two years as specified under
Section 54(1), in respect of any such fresh refund claim filed by the applicant
after rectification of the deficiencies.
5. The principle of unjust enrichment is applicable in all cases of refund except
in the following cases:-

(a) Refund of tax paid on export of goods or services or both or on inputs

or input services used in making such exports.
(b) Unutilized input tax credit in respect of (i) zero rated supplies made
without payment of tax or, (ii) where the credit has accumulated on
account of rate of tax on inputs being higher than the rate of tax on
output supplies.
(c) refund of tax paid on a supply which is not provided, either wholly or
partially, and for which invoice has not been issued.
(d) refund of tax in pursuance of section 77 of CGST/SGST Act i.e. tax
wrongfully collected and paid to Central Government or State
Government.
(e) if the incidence of tax or interest paid has not been passed on to any
other person.
(f) such other class of persons who has borne the incidence of tax as the
Government may notify.
6. Computation of maximum amount of refund admissible to Kailash
Global (P) Ltd.

Particulars (`)

Exports of product ‘A’ to UK [Note (i)] Nil

Domestic supplies of taxable product ‘B’ during the period 90,000

[Note (ii)]

Supply of goods to Export Oriented Unit [Note (iii)] Nil

Export of exempt supplies [Note (iv)] 1,07,143

Total refund claim admissible 1,97,143

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 1.70 15.70 GOODS AND SERVICES TAX

Notes:
(i) Export of goods is a zero-rated supply in terms of section 16(1)(a) of
the IGST Act, 2017. Further, Kailash Global (P) Ltd. exports goods
without payment of tax under letter of undertaking in accordance with
the provisions of section 16(3) of the IGST Act, 2017.
Therefore, as per clause (i) of first proviso to section 54(3), a registered
person may claim refund, of any unutilised ITC in the case of zero rated
supply made without payment of tax at the end of any tax period.
However, second proviso to section 54(3) lays down that refund of
unutilized ITC is not allowed if the goods exported out of India are
subjected to export duty.
(ii) Refund of unutilised ITC is allowed in case of inverted duty structure,
i.e. where the credit has accumulated on account of rate of tax on inputs
being higher than the rate of tax on output supplies (other than nil rated
or fully exempt supplies) except supplies of goods or services or both
as may be notified by the Government on the recommendations of the
GST Council [Clause (ii) of the first proviso to section 54(3)].
Rule 89(5) stipulates that in the case of refund on account of inverted
duty structure, refund of ITC is granted as per the following formula –
Turnover of Tax payable
inverted rated on such
supply of inverted rated
goods & supply of Net ITC
Maximum
Refund
Amount
= services × Net
ITC - goods &
services
x
ITC availed
Adjusted Total on inputs
Turnover and input
services
where-
“Net ITC” means ITC availed on inputs during the relevant period

“Adjusted total turnover” means the sum total of the value of:
(a) the turnover in a State/ Union territory, as defined under section
2(112), excluding turnover of services; &

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 REFUNDS 15.71

(b) the turnover of zero-rated supply of services determined in terms

of specified manner and non-zero-rated supply of services,

excluding:
(i) the value of exempt supplies other than zero-rated supplies
during the relevant period.

“Relevant period” means the period for which the claim has been filed.
Tax payable on inverted rated supply of goods = ` 10,00,000 × 5% =
` 50,000
Here, Net ITC = ` 3,50,000,
Adjusted Total Turnover = ` 28,00,000 [` 7,00,000 + ` 10,00,000 +
` 5,00,000 + ` 6,00,000] and Turnover of inverted rated supply of goods
= ` 10,00,000
Thus, maximum refund amount under rule 89(5) = ` 3,50,000 x
10,00,000/ ` 28,00,000 – (` 50,000×{` 3,50,000/(` 3,50,000+` 1,50,000)}
= ` 90,000
(iii) As per section 2(39), deemed exports means such supplies of goods as
may be notified under section 147. Supplies to EOU is notified as
deemed export under section 147 vide Notification No. 48/2017 CT
dated 18.10.2017. In respect of supplies regarded as deemed exports,
the application of refund can be filed by the supplier of deemed export
supplies only in cases where the recipient does not avail of ITC on such
supplies and furnishes an undertaking to the effect that the supplier
may claim the refund [Third proviso to rule 89(1)]. Therefore, since in
the given case, the recipient is claiming ITC, Kailash Global (P) Ltd.
(supplier of deemed exports) cannot claim refund of ITC.

(iv) Section 16(2) of the IGST Act, 2017 stipulates that subject to the
provisions of section 17(5) of the CGST Act, ITC may be availed for
making zero-rated supplies, notwithstanding that such supply may be
an exempt supply. Section 54(3) of the CGST Act, 2017 allows refund
of ITC in the case of zero rated supply made without payment of tax.
Rule 89(4) stipulates that in the case of zero-rated supply of goods or
services or both without payment of tax under bond/LUT in accordance

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 1.72 15.72 GOODS AND SERVICES TAX

with the provisions of section 16(3) of the IGST Act, 2017, refund of ITC
shall be granted as per the following formula:

(Turnover of zero-rated supply of goods +

Refund
= Turnover of zero-rated supply of services) × Net ITC
Amount
Adjusted Total Turnover
where-

“Net ITC” means ITC availed on inputs and input services during the
relevant period.
“Turnover of zero-rated supply of goods” means the value of zero-rated
supply of goods made during the relevant period without payment of
tax under bond/LUT, or the value which is 1.5 times the value of like
goods domestically supplied by the same or, similarly placed, supplier,
as declared by the supplier, whichever is less.
“Adjusted total turnover” means the same as explained in point ii above.
Here, Turnover of zero rated supply of goods = ` 6,00,000 (Lower of
` 6,00,000 or 1.5 times of ` 5,00,000 i.e. 7,50,000 whichever is lower),
Net ITC = ` 5,00,000 and Adjusted Total Turnover = ` 28,00,000 (as
computed in point ii above)
Thus, maximum refund amount under rule 89(4) = ` 5,00,000 x
` 6,00,000/ ` 28,00,000 = ` 1,07,143.
7. Section 54(3)(ii) allows refund of unutilized input tax credit (ITC) at the end of
any tax period to a registered person where the credit has accumulated on
account of inverted duty structure i.e. rate of tax on inputs being higher than
the rate of tax on output supplies (other than nil rated or fully exempt
supplies), except supplies of goods or services or both as may be notified by
the Government on the recommendations of the Council.
In the given case, the rates of tax on inputs used in Products A and B (18%
each) are higher than rates of tax on output supplies of Products A and B (5%
each). However, Product B is notified as a product, in respect of which no
refund of unutilised ITC shall be allowed under section 54(3)(ii). Further rate
of tax on input used in the product C is carrying same rate of tax on output

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 REFUNDS 15.73

supplies hence it is not the case of inverted duty structure. Therefore, no

refund on the Product C.

Therefore, only Product A is eligible for refund under section 54(3)(ii).

Further, rule 89(5) stipulates that in the case of refund on account of inverted
duty structure, refund of ITC shall be granted as per the following formula -
Turnover of
inverted rated
supply of goods tax payable on
Maximum and services × such inverted Net ITC
Refund
Amount
= Net ITC - rated supply of
goods and
x ITC availed
Adjusted Total services on inputs
Turnover and input
services
where,-

A. "Net ITC" means input tax credit availed on inputs during the relevant
period;

B. Adjusted Total Turnover means the sum total of the value of-

(a) the turnover in a State or a Union territory, as defined under

section 2(112), excluding the turnover of services; and

(b) the turnover of zero-rated supply of services determined in

specified manner and non-zero-rated supply of services,
excluding-

the value of exempt supplies other than zero-rated supplies

during the relevant period.

C. Relevant period means the period for which the claim has been filed.

In accordance with the aforesaid provisions, the maximum refund amount

which Super Engineering Works is eligible to claim shall be computed as
follows:

Tax payable on inverted rated supply of Product A = ` 5,00,000 × 5%

= ` 25,000

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 1.74 15.74 GOODS AND SERVICES TAX

Net ITC = ` 108000 (` 54,000 + ` 54,000) [Net ITC availed during the relevant
period needs to be considered irrespective of whether the ITC pertains to
inputs eligible for refund of inverted rated supply of goods or not - Circular
No. 79/53/2018-GST dated 31.12.2018]

Adjusted Total Turnover = ` 9,50,000 (` 5,00,000 + ` 3,50,000 + ` 1,00,000)

Turnover of inverted rated supply of Product A = ` 5,00,000

Maximum refund amount for Super Engineering Works is as follows:

= [(` 5,00,000 × ` 108000)/ ` 9,50,000] – (` 25,000 x 108,000/118,000)

= ` 33,961 (rounded off)

8. As per section 54(3), a registered person may claim refund of unutilised input
tax credit at the end of any tax period in the following cases:

(i) Zero rated supplies made without payment of tax: Supply of goods
or services or both for authorised operations to an SEZ developer/unit
or export of goods or services or both qualifies as zero rated supplies.

(ii) Accumulated ITC on account of inverted duty structure: Where the

credit has accumulated on account of rate of tax on inputs being higher
than the rate of tax on output supplies (other than nil rated or fully
exempt supplies), except supplies of goods or services or both as may
be notified by the Government on the recommendations of the Council.

However, refund of unutilized input tax credit shall not be allowed if:

♦ the goods exported out of India are subjected to export duty;

♦ the supplier of goods or services or both avails of drawback in respect

of CGST or claims refund of the IGST paid on such supplies.

9. Section 54(8) provides that the refundable amount shall be paid to the
applicant, instead of being credited to the Consumer Welfare Fund, if such
amount is relatable to —

(a) refund of tax paid on export of goods and/or services or on inputs or

input services used in making such exports;

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 REFUNDS 15.75

(b) refund of unutilized ITC in case of zero-rated supplies made without

payment of tax or accumulated ITC on account of inverted duty
structure;

(c) refund of tax paid on a supply which is not provided, either wholly or
partially, and for which invoice has not been issued, or where a refund
voucher has been issued;

(d) refund of tax paid on a transaction treating it to be an intra-State

supply, but which is subsequently held to be an inter-State supply or
vice-versa;

(e) the tax and interest, if any, or any other amount paid by the applicant,
if he had not passed on the incidence of such tax and interest to any
other person; or

(f) the tax or interest borne by notified class of applicants.

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India
CHAPTER 16

JOB WORK
The section numbers referred to in the Chapter pertain to the CGST Act, 2017 unless
otherwise specified. Examples/Illustrations/Questions and Answers, as the case may
be, given in the Chapter are based on the position of GST law existing as on
30.04.2025.

LEARNING OUTCOMES

After studying this chapter, you would be able to:

 comprehend the term ‘job work’.

 explain the various aspects including procedure pertaining to
removal of goods for the purposes of job work.
 understand the provisions relating to removal of processed
goods from job worker’s premises.
 understand the provisions relating to availing input tax
credits in relation to goods sent for job work.

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 1.2 16.2 GOODS AND SERVICES TAX

1. INTRODUCTION
Job-work sector constitutes a significant industry in the Indian economy. It
includes outsourced activities that may or
may not culminate into manufacture. The
term job-work itself explains the meaning.
It is processing of goods – inputs/ semi-
finished goods - supplied by the principal,
for further processing. Further, entry 3 of
Schedule II to the CGST Act, 2017 provides
that any treatment or process which is
applied to another person’s goods is a
supply of services.

Here, a Principal is a registered person who sends the

inputs/capital goods to a job worker for carrying out
the job work. Many facilities, procedural concessions
have been given to the job workers as well as the
principal supplier who sends goods for job-work. The
whole idea is to make the principal responsible for
meeting the compliances on behalf of the job-worker
on the goods processed by him (job worker),
considering the fact that typically the job-workers are
small persons/processing units who are unable to comply with the discrete
provisions of the law.
The GST law makes special provisions with regard to (i) removal of goods for
job-work and receiving the goods back after processing from the job-worker
without the payment of GST and (ii) removal of goods from the job worker’s
premises for supply to the ultimate customer. The benefit of these provisions
shall be available both to the principal and the job worker.

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 JOB WORK 16.3

Section 2(68) defines job work as ‘any treatment or process undertaken by a

person on goods belonging to another registered
person’. E.g. Painting, packing, fitting, etc. The person
who does the said job would be termed as ‘job
worker’. The job worker is expected to work on the
goods sent by the principal and whether the activity is
covered within the scope of job work or not would have
to be determined on the basis of facts and circumstances of each caseIt is
imperative to note that the ownership of the goods does not transfer to the job
worker, and it rests with the principal only.
There may arise a doubt as to whether any inputs, other
than the goods provided by the principal, can be used by
the job worker for providing the services of job work. In
this regard, it is clarified 1 that the job worker, in addition
to the goods received from the principal, can use his own
goods for providing the services of job work.

Where the principal and the job worker are located

in different States, the requirement for registration
flows from clause (i) of section 24 of the CGST
Act which provides for compulsory registration of
suppliers making any inter-State supply of services.
However, exemption from registration has been
granted in case the aggregate turnover of the inter-State supply of taxable
services does not exceed an amount of ` 20 lakh [` 10 lakh in case of Special
Category States of Mizoram, Tripura, Manipur and Nagaland] in a financial year.

In view of the above discussion, it can be inferred that the job worker is required
to obtain registration only in cases where his aggregate turnover, to be
computed on all India basis, in a financial year exceeds the above threshold limit
regardless of whether the principal and the job worker are located in the same
State or in different States.

1
Circular No. 38/12/2018 GST dated 26.03.2018

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 1.4 16.4 GOODS AND SERVICES TAX

The job worker, as a supplier of services, is liable to pay GST if he is liable to be

registered in view of the aforesaid criteria. He shall issue an invoice at the time of
supply of the services as determined in terms of section 13 read with section 31.
The value of services would be determined in terms of section 15 and would
include not only the service charges, but also the value of any goods or services
used by him for supplying the job work services, if recovered from the principal.
In certain cases, the principal may provide
specific items like moulds and dies, jigs and
fixtures or tools along with the inputs, to the job
worker for processing of inputs in a specified
manner. The question may arise whether value of
moulds and dies, jigs and fixtures or tools which
have been provided by the principal to the job worker and have been used by
the latter for providing job work services would be included in the value of job
work services?
Section 15(2)(b) [Discussed in detail in Chapter 6 – Value of Supply in Module 1
of the Study Material] stipulates that any amount that the supplier is liable to
pay in relation to the supply but which has been incurred by the recipient will
form part of the valuation for that particular supply, provided it has not been
included in the price for such supply.
Accordingly, it is clarified 2 that the value of such
moulds and dies, jigs and fixtures or tools may not be
included in the value of job work services provided
its value has been factored in the price for the supply
of such services by the job worker.
The provisions relating to job work are, inter alia, covered in section 19 and 143
of the CGST Act. State GST laws also prescribe identical provisions in relation to
job work.

Provisions of job work under CGST Act have also been made applicable to IGST
Act vide section 20 of the IGST Act.

2
Circular No. 38/12/2018 GST dated 26.03.2018

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 JOB WORK 16.5

2. RELEVANT DEFINITIONS
 Taxable supply: means a supply of goods or services or both which is
leviable to tax under this Act [Section 2(108)].
 Place of business: includes [Section 2(85)]:

a place from where the business is ordinarily carried on, and includes a
warehouse, a godown or any other place where a taxable person stores
his goods, supplies or receives goods or services or both; or

a place where a taxable person maintains his books of account; or

a place where a taxable person is engaged in business through an

agent, by whatever name called.

 Capital goods: means goods, the value of which is capitalized in the

books of account of the person claiming the ITC and which are used or
intended to be used in the course or furtherance of business
[Section 2(19)].
 Input: means any goods other than capital goods used or intended to be
used by a supplier in the course or furtherance of business [Section 2(59)].
 Registered person: means a person who is registered under section 25 but
does not include a person having a Unique Identity Number [Section 2(94)].

3. JOB WORK PROCEDURE [SECTION 143]

The provisions related to job work are encapsulated under section 143 of the
CGST Act. It is important to note that the provisions of said section are
applicable to a registered person. Thus, a principal, who can send the goods for
job work under the said provisions, must be a registered person.
However, the principal is not obligated to follow the said provisions. It is his
choice whether or not to avail the benefit of these special provisions. In case the
principal is not availing the benefit of provisions under section 143, the sending
of inputs for processing to be undertaken by the job worker will attract the
provisions relating to a normal supply on both the principal and the job worker.

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 1.6 16.6 GOODS AND SERVICES TAX

The provisions of section 143 have been discussed as follows:

Principal can send goods to job worker without payment of tax

 A registered person (Principal) is allowed to send
inputs/ capital goods without payment of tax to
a job-worker and from there to another job-
worker and after completion of job-work bring
back such goods without payment of tax or
remove the processed goods from the job
workers premises for supply to the customer.
Such goods need to be removed under intimation to proper officer and
subject to certain prescribed conditions.
The principal is not required to reverse the ITC availed on inputs or capital
goods dispatched to the job-worker without payment of tax.

Principal’s NO TAX Job-worker’s

premises premises

 The principal can also send inputs/capital

goods directly to the job-worker without
bringing them to his premises and can still
avail the credit of tax paid on such inputs or
capital goods.

Premises of the supplier NO TAX

from whom goods have
Job-worker’s
been purchased by the
premises
principal

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 JOB WORK 16.7

 However, inputs and/or capital goods [other than moulds and dies, jigs
and fixtures, or tools] sent to a job- worker are
required to be returned to the principal within 1
year and 3 years respectively, from the date of
sending such goods to the job-worker. However,
the period of 1 year and 3 years may, on sufficient
cause being shown, be extended by the
Commissioner for a further period not exceeding 1 year and 2 years
respectively. Extension of time is allowed to cover the situations where the
period of 1 year specified is not adequate in respect of job works such as hull
construction/ fabrication of vessels (for defense purposes), since these
processes complete in a period of around 14 to 16 months. The provision of
return of goods is not applicable in case of moulds and dies, jigs and
fixtures or tools supplied by the principal to job worker.

 After processing of goods, the job-worker may clear / dispatch the goods
under the instructions of the principal to-
 another job-worker for further processing, or

 any of the place of business of the principal without payment of tax,

or
 the ultimate customer against payment of tax by the principal as
applicable for supply.
Supply of goods directly from job worker’s place of business/premises
 After processing of goods, the principal also has the option to clear the
goods for supply to third party, directly from job-worker’s premises, on
payment of tax within India or without payment of tax for export outside
India on fulfilment of prescribed conditions.
 The facility of supply of goods by the
principal to the third party directly from the
premises of the job- worker, on payment of
tax in India likewise with or without
payment of tax for export, may be availed
by principal after declaring premise of the
job-worker as his additional place of

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 1.8 16.8 GOODS AND SERVICES TAX

business in his GST registration. However, such declaration is not

required by the principal where:
 job worker is registered under section 25; or
 principal is engaged in supply of notified goods.
 In such cases of direct supply, the supply of goods will be regarded as
supply by the principal and not by the job worker. Resultantly, it is clarified
that the time, value and place of supply would have to be determined in the
hands of the principal irrespective of the location of the job worker’s place of
business/premises. Further, the invoice would have to be issued by the
principal. It is also clarified 3 that in case of exports directly from the job
worker’s place of business/premises, the LUT or bond, as the case may be,
shall be executed by the principal. These principles would apply mutatis
mutandis in case of supply of waste and scrap generated during job work
[discussed subsequently in this heading].

(1) The principal is located in State A, the job worker in State B and
the recipient in State C. In case the supply is made from the job
worker’s place of business / premises, the invoice (along with
electronic way bill) will be issued by the supplier (principal) located in State
A to the recipient located in State C.
Procedure for sending goods to job worker
 Before supply of goods to the job-worker, the principal would be required to
send intimation the proper officer containing the details of the description of
inputs intended to be sent by the principal and the nature of processing to
be carried out by the job-worker. The said intimation shall also contain the
details of the other job-workers, if any. The inputs or capital goods shall be
sent to the job worker under the cover of a delivery challan issued by the
principal. The delivery challan shall be issued even for the inputs or capital
goods sent directly to the job worker. The delivery challan shall contain the
specified details. Along with the delivery challan, an electronic waybill shall
be issued as per the relevant provisions under GST Law and related rules 4.

3
Circular No. 38/12/2018 GST dated 26.03.2018
4
The documents and intimation required for movement of goods from principal to job
worker have been discussed in detail subsequently in this chapter.

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 JOB WORK 16.9

Responsibility for keeping accounts for inputs/capital

goods
 The responsibility for keeping proper accounts for the
inputs or capital goods lies with the principal.
Goods not received within the stipulated time deemed as supply
 In case the inputs/capital goods are not received back or not supplied from
the job worker’s premises, within specified time limit [1 year/3 years/extended
time period], it shall be deemed to be a supply from Principal to the Job
worker from the day when it was sent for job work. Accordingly, the principal
would be liable to tax along with interest as applicable.
 Thus, goods sent for job work acquire the character of supply when the
inputs/capital goods sent for job work are neither received back by the
principal nor supplied further by the principal from the place of
business/premises of the job worker within 1 year/3 years/extended
time-period, of being sent out. It may be noted that the responsibility for
sending the goods for job work in accordance with the prescribed procedure
as well as bringing them back or supplying them has been cast on the
principal.
 In such cases where the inputs or capital goods (other than moulds and dies,
jigs and fixtures or tools) are neither returned nor supplied from the job
worker’s place of business/ premises within the specified time period, the
principal would issue an invoice for the same and declare such supplies in his
return for that particular month in which the time period of 1 year/3 years or
extended time period has expired.
 Date of supply: The date of supply shall be the date on which such inputs or
capital goods were initially sent to the job worker. Further, interest for the
intervening period shall also be payable on the tax by the principal.
 If such goods are returned by the job worker after the stipulated
time-period, the same would be treated as a supply by
the job worker to the principal and the job worker
would be liable to pay GST if he is liable for registration
in accordance with the provisions contained in the CGST
Act read with the rules made thereunder.

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 16.10
1.10 GOODS AND SERVICES TAX

 Further, it may be reiterated that there is no requirement of either returning

back or supplying the goods from the job worker’s place of business/premises
as far as moulds and dies, jigs and fixtures, or tools are concerned.
For the purposes of job work, input includes intermediate goods arising from any
treatment or process carried out on the inputs by the principal or the job worker.

4. TAKING INPUT TAX CREDIT IN RESPECT OF

INPUTS AND CAPITAL GOODS SENT FOR
JOB WORK [SECTION 19]

STATUTORY PROVISIONS

Section 19 Taking input tax credit in respect of inputs and capital goods
sent for job work

Sub-section Particulars

(1) The principal shall, subject to such conditions and restrictions as

may be prescribed, be allowed input tax credit on inputs sent to a
job-worker for job-work.

(2) Notwithstanding anything contained in clause (b) of sub-section (2)

of section 16, the principal shall be entitled to take credit of input
tax on inputs even if the inputs are directly sent to a job worker for
job-work without being first brought to his place of business.

(3) Where the inputs sent for job work are not received back by the
principal after completion of job-work or otherwise or are not
supplied from the place of business of the job worker in accordance
with clause (a) or clause (b) of sub-section (1) of section 143 within
one year of being sent out, it shall be deemed that such inputs had
been supplied by the principal to the job-worker on the day when
the said inputs were sent out:

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 JOB WORK 16.11

Provided that where the inputs are sent directly to a job worker, the
period of one year shall be counted from the date of receipt of
inputs by the job worker.

(4) The principal shall, subject to such conditions and restrictions as

may be prescribed, be allowed input tax credit on capital goods sent
to a job worker for job work.

(5) Notwithstanding anything contained in clause (b) of sub-section (2)

of section 16, the principal shall be entitled to take credit of input
tax on capital goods even if the capital goods are directly sent to a
job worker for job-work without being first brought to his place of
business.

(6) Where the capital goods sent for job work are not received back by
the principal within a period of three years of being sent out, it shall
be deemed that such capital goods had been supplied by the
principal to the job worker on the day when the said capital goods
were sent out:

Provided that where the capital goods are sent directly to a job
worker, the period of three years shall be counted from the date of
receipt of capital goods by the job worker.

(7) Nothing contained in sub-section (3) or sub-section (6) shall apply

to moulds and dies, jigs and fixtures, or tools sent out to a job
worker for job work.

Explanation.–For the purpose of this section, “principal” means the person

referred to in section 143.

Chapter V: Input Tax Credit of CGST Rules

Rule 45 Conditions and restrictions in respect of inputs and capital

goods sent to the job worker

Sub-rule Particulars

(1) The inputs, semi-finished goods or capital goods shall be sent to

the job worker under the cover of a challan issued by the principal,

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 16.12
1.12 GOODS AND SERVICES TAX

including where such goods are sent directly to a job-worker, and

where the goods are sent from one job worker to another job
worker, the challan may be issued either by the principal or the job
worker sending the goods to another job worker:

Provided that the challan issued by the principal may be endorsed

by the job worker, indicating therein the quantity and description
of goods where the goods are sent by one job worker to another or
are returned to the principal:

Provided further that the challan endorsed by the job worker may
be further endorsed by another job worker, indicating therein the
quantity and description of goods where the goods are sent by one
job worker to another or are returned to the principal.

(2) The challan issued by the principal to the job worker shall contain
the details specified in rule 55.

(3) The details of challans in respect of goods dispatched to a job

worker or received from a job worker during the specified period
shall be included in FORM GST ITC-04 furnished for that period on
or before the twenty-fifth day of the month succeeding the said
period or within such further period as may be extended by the
Commissioner by a notification in this behalf:

Provided that any extension of the time limit notified by the

Commissioner of State tax or the Commissioner of Union territory
tax shall be deemed to be notified by the Commissioner.

Explanation.- For the purposes of this sub-rule, the expression "specified period"
shall mean. -
(a) the period of six consecutive moths commencing on the 1st
day of April and the 1st day of October in respect of a
principal whose aggregate turnover during the immediately
preceding financial year exceeds five crore rupees; and
(b) a financial year in any other case
(4) Where the inputs or capital goods are not returned to the principal
within the time stipulated in section 143, it shall be deemed that

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 JOB WORK 16.13

such inputs or capital goods had been supplied by the principal to

the job worker on the day when the said inputs or capital goods
were sent out and the said supply shall be declared in FORM GSTR-
1 and the principal shall be liable to pay the tax along with
applicable interest.

Explanation.- For the purposes of this Chapter,-

(1) the expressions “capital goods” shall include “plant and machinery”
as defined in the Explanation to section 17;
(2) for determining the value of an exempt supply as referred to in sub-
section (3) of section 17-
(a) the value of land and building shall be taken as the same
as adopted for the purpose of paying stamp duty; and
(b) the value of security shall be taken as one per cent. of the
sale value of such security.

ANALYSIS
Section 19 deals with ITC on inputs and capital goods sent for job work.
(i) Credit on inputs and/or capital goods sent for job work [Sub-
sections (1), (2), (4) and (5) of section 19]
 A principal is entitled to take the credit of input tax paid on inputs
and/or capital goods sent to the job-worker for the job work.
 The principal can also take ITC even when the
inputs and/or capital goods have been directly
sent to the job worker without being brought
into his premises. The principal need not wait
till the inputs and/or capital goods are first
brought to his place of business [See definition
of place of business].

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 16.14
1.14 GOODS AND SERVICES TAX

⛅ Job worker is also eligible to avail ITC on inputs, etc. used by him
in supplying the job work services if he is registered 5.

(ii) Time limits for the return of inputs/capital goods sent for job-
work or supply from job worker’s place of business after
required processing or treatment [Sub-sections (3), (6) and (7)
read with rule 45 of CGST Rules]
 Inputs and capital goods sent for job work should either be returned to
the principal or must be supplied from the job worker’s premises within
1 year and 3 years 6 respectively from the date of sending them to the
job worker*.

*Where inputs/capital goods are sent directly to a job worker, said period
shall be computed from the date of
receipt of inputs/ capital goods by the
job worker.
 As discussed earlier, if the above time-
lines are not met, it is deemed that the
inputs and capital goods were supplied
by the principal to the job worker (in
other words, tax will be payable on them by the principal along with
interest) on the day they were sent out to the job worker.
The said supply is required to be declared in GSTR-1 [Details of Outward
Supplies] and the principal is liable to pay tax along with applicable
interest.
In such a case, return of the inputs and capital goods by the job worker,
after the stipulated time, will be treated as a separate supply on which
tax shall be paid by the job worker as per normal provisions under the
GST Law.

5
Circular No. 38/12/2018 GST dated 26.03.2018
6
Extendible by further period not exceeding 1 year and 2 years respectively.

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 JOB WORK 16.15

(2) A supplier of notebooks for schools sends the paper of

required dimensions and GSM to a job worker for making the
notebooks as per the design given by him.
However, the Government changes the specifications of notebooks for
supply to its schools. The supplier sends a fresh stock of paper with fresh
instructions to the job worker and instructs him to hold the earlier
consignment in stock till a buyer is found. The new notebooks are easily
sold, but the paper and semi-finished notebooks of the old design lie in
the godown of the job worker for over a year and an extension from the
proper officer is not sought. Here, sending of paper by the notebook
supplier to the job worker in the first lot will be deemed as a supply and
thus, tax would be payable on the same.
(iii) Special procedure for sending goods for job work [Rule 45 of
CGST Rules]
The procedure for sending the goods for job work, in accordance with
rule 45 read with Circular No. 38/12/2018 dated 26.03.2018, has been
discussed below:
(a) Where goods are sent by principal to only one job worker: Principal has
to send the inputs and/or capital goods to the
job worker under the cover of a delivery challan
issued by him. Such delivery challan should
contain the details specified in rule 55 namely,
date & number of delivery challan, name, address
& GSTIN of consignor & consignee, HSN code & description of goods, quantity,
taxable value, tax rate and tax amount, place of supply and signature. [Refer
Chapter 9: Tax Invoice, Credit and Debit Notes in Module 2 of the Study Material,
for detailed discussion on rule 55].
The principal shall prepare in triplicate, the delivery challan
in terms of rules 45 and 55, for sending the goods to a job
worker. Two copies of the challan may be sent to the job
worker along with the goods. The job worker should send one
copy of the said delivery challan along with the goods, while
returning them to the principal.

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 16.16
1.16 GOODS AND SERVICES TAX

Further, the principal would be required to send an intimation the

Jurisdictional Officer. Form GST ITC-04 will serve as the intimation. The
intimation will contain the details of the description of inputs intended to be
sent by the principal and the nature of processing to be carried out by the
job-worker.
(b) Where goods are sent from one job worker to another job worker: In
such cases, the goods may move under the cover of a delivery challan issued
either by the principal or the job worker. Alternatively, the delivery challan
issued by the principal may be endorsed by the job worker sending the goods
to another job worker, indicating therein the quantity and description of
goods being sent. The same process may be repeated for subsequent
movement of the goods to other job workers, indicating therein the quantity
and description of goods.
(c) Where the goods are returned to the principal by the job worker: The job
worker should send one copy of the delivery challan [as received by him from
the principal] while returning the goods to the principal after carrying out the
job work.
(d) Where the goods are sent directly by the supplier of the principal to the
job worker: In this case, the goods may move from the place of business of
the supplier to the place of business/premises of the job worker with a copy
of the invoice issued by the supplier in the name of the buyer (i.e., the
principal). Job worker’s name and address should also be mentioned as the
consignee in such invoice.

Further, the buyer (i.e., the principal) shall issue the delivery challan 7 and send
the same to the job worker directly.
In case of import of goods by the principal which are then supplied directly
from the customs station of import, the goods may move from the customs
station of import to the place of business/premises of the job worker with a
copy of the Bill of Entry and the principal shall issue the delivery challan under
rule 45 and send the same to the job worker directly.
(e) Where goods are returned in piecemeal by the job worker: In case the
goods after carrying out the job work, are sent in piecemeal quantities by a

7
required to be issued under rule 45

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 JOB WORK 16.17

job worker to another job worker or to the principal, the challan issued
originally by the principal cannot be endorsed and a fresh delivery challan is
required to be issued by the job worker.
(f) Submission of intimation: It is clarified that it is the responsibility of the
principal to include the details of all the delivery challans relating to goods sent
by him to one or more job worker or from one job worker to another and its
return therefrom during the specified period in Form GST ITC-04 by the 25th
day of the month succeeding the said period. This period can be extended by
the Commissioner/Commissioner of State GST/Commissioner of UTGST. The
Form GST ITC-04 will serve as the intimation as envisaged under section 143.

Aggregate turnover of Form GST ITC-04 Due date(s) for

principal during preceding to be filed on filing Form GST
F.Y. ITC-04

upto ` 5 crore annual basis 25th April

greater than ` 5 crore half yearly basis 25th October &

25th April

(g) Requirement to generate E-way Bill: In case of job work, e-way bill 8 shall
be generated either by the principal or by the registered job worker
irrespective of the value of the consignment, where goods are sent by a
principal located in one State/Union territory to a job worker located in any
other State/ Union territory.
Further, the e-way bill shall be generated by the principal, wherever required,
in case the job worker is unregistered 9.

8
Rule 138, inter alia, stipulates that an e-way bill is required to be generated by every
registered person who causes movement of goods of consignment value exceeding
` 50,000 even in cases where such movement is for reasons other than for supply (e.g. in case
of movement for job work). However, in case of goods sent by a principal located in one
State/UT to a job worker located in any other State/UT, the e-way bill needs to be generated
irrespective of the value of the consignment. Provisions of e-way bill have been discussed in
detail in Chapter 10 – Accounts and Records; E-way Bill in Module 2 of the Study Material.
9
Since where the goods are supplied by an unregistered supplier to a registered recipient,
movement shall be said to be caused by such recipient if the recipient is known at the time
of commencement of the movement of goods [Rule 138].

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1.18 GOODS AND SERVICES TAX

5. REGISTRATION REQUIREMENTS
(i) Registration requirements when both the principal and the job worker
are located in the same State: The job worker is required to obtain
registration only if his aggregate turnover, to be computed on all India basis,
in a financial year exceeds the specified threshold limit (i.e., ` 20 lakh or ` 10
lakh in case of Special Category States of Mizoram, Tripura, Manipur and
Nagaland) in case both the principal and the job worker are located in the
same State [Section 22(1)].
(ii) Registration requirements when the job worker is located in a State
different from that of the principal: Where the principal and the job worker
are located in different States, the requirement for registration flows from
section 24(i) of the CGST Act, which provides for compulsory registration of
suppliers making any inter-State supplies. However, exemption from
registration has been granted in case the aggregate turnover of the
inter-State supply of taxable services does not exceed ` 20 lakh or ` 10 lakh
in case of Special Category States of Mizoram, Tripura, Manipur and Nagaland
in a financial year vide Notification No. 10/2017 IT dated 13.10.2017 as
amended.
Therefore, it is clarified that a job worker, being a supplier of service, is
required to obtain registration only in cases where his aggregate turnover, to
be computed on all India basis, in a financial year exceeds the threshold limit
regardless of whether the principal and the job worker are located in the same
State or in different States 10.
(iii) Value of goods, after completion of job work, supplied directly from the
premises of the registered job worker not to be included in its aggregate
turnover: As discussed earlier in this chapter, principal can supply the goods
directly from the premises of the job worker without bringing it back to his
own premises. It is clarified that the supply of goods by the principal from
the place of business/premises of the job worker will be regarded as supply
by the principal and not by the job worker 11.
Therefore, the value of such goods supplied will be included in the aggregate
turnover of the principal and not job worker [Explanation (ii) to section 22].

10
Circular No. 38/12/2018 GST dated 26.03.2018
11
Circular No. 38/12/2018 GST dated 26.03.2018

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 JOB WORK 16.19

6. SUPPLY OF WASTE & SCRAP [SECTION 143(5)]

Notwithstanding anything contained in aforesaid provisions, any waste and scrap
generated during the job work may be supplied by the job worker directly from his
place of business on payment of tax, if such job worker is registered, or by the
principal, if the job worker is not registered.

LET US RECAPITULATE

Job work Procedure

Sends goods for Job work – No Tax

Principal 1 Job Worker

Sends it back to principal after job 2

work in prescribed time – No Tax
2 2
Principal supplies
goods after 2 Goods are not returned/
receipt from job
supplied from job
worker
Principal worker’s premises
supplies goods within prescribed time
Export – No tax
Supply within India - directly from job
Deemed as supply
Principal to pay tax worker’s
by principal. Date of
premises within
supply is date on
prescribed time
which goods were
Export – No tax sent for job work.
Supply within India - Principal to pay tax Principal to pay tax
alongwith interest.

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1.20 GOODS AND SERVICES TAX

Time limits for the return of inputs/capital goods sent for job-work
or supply from job worker’s place of business after required
processing or treatment

 Principal can take credit on goods (inputs and capital goods) sent for job
work.
 Credit can be taken even if the said goods are sent directly to job worker
without being first brought to the principal's place of business.

Time limit for return of

On failing to comply with the Time-
goods sent for job
timelines, the goods will be lines do
work/supply from job
deemed to have been not apply
worker's place of business
supplied to the job worker on to
♦ Inputs - 1 year (extendable
the day they were sent out. moulds
by another 1 year)
Principal is liable to pay tax and dies,
♦ Capital goods - 3 years
along with applicable interest jigs and
(extendable by another 2
on such supply. fixtures
years)
Subsequent return of the or tools
from the date of sending the
goods by the job worker will sent out
same for job work or from the
be treated as a separate for job
date of receipt of the same by
supply. work.
the job worker.

TEST YOUR KNOWLEDGE

1. Under what circumstances, can the principal directly supply goods from the
premises of job worker without declaring the premises of job worker as his
additional place of business?
2. What happens when the inputs or capital goods are not received back or
supplied from the place of business of job worker within prescribed time period?
3. Who is responsible for the maintenance of proper accounts related to job work?
4. Genie Engineers had a mould delivered directly to a job worker from the
supplier for making certain precision parts for use in the factory of Genie
Engineers. As per agreement, the mould was to remain with the job worker as
long as work was being sent to him.

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 JOB WORK 16.21

After four years a departmental audit team that visited the job worker noticed
the mould and traced it to Genie Engineers. GST was demanded from Genie
Engineers for taking ITC without receiving the mould and furthermore for not
bringing the mould back after three years of delivery to the job worker.
How should they respond to this?

5. Sudama Industries Ltd., registered in the State of Jammu & Kashmir,

manufactures plastic pipes for other suppliers on job-work basis.
On 10th January, Plasto Manufacturers (registered in the State of Himachal
Pradesh) sent plastic worth ` 4 lakh and moulds worth ` 50,000, free of cost, to
Sudama Industries Ltd. to make plastic pipes. Sudama Industries Ltd. also used
its own material - a special type of lamination material for coating the pipes -
worth ` 1 lakh in the manufacture of pipes. It raised an invoice of ` 2 lakh as job
charges for making pipes and returned the manufactured pipes through delivery
challan to Plasto Manufacturers on 20th October in the same financial year.
The same quality and quantity of plastic pipes, as was made for Plasto
Manufacturers, were made by Sudama Industries Ltd. from its own raw material and
sold to Solid Pipes (registered in Jammu and Kashmir) for ` 7.5 lakh on 20th October.
Examine the scenario and offer your views on the following issues with
reference to the provisions relating to job work under the GST laws:
(i) Is there any difference between the manufacture of plastic pipes by
Sudama Industries Ltd. for Plasto Manufacturers and for Solid Pipes?
(ii) Whether Sudama Industries can use its own material even when it is
manufacturing the plastic pipes on job-work basis?
(iii) Whether sending the plastic and moulds to Sudama Industries Ltd. by
Plasto Manufacturers is a supply and a taxable invoice needs to be issued
for the same?

(iv) Whether Sudama Industries should include the value of free of cost plastic
and moulds supplied by Plasto Manufacturers in its job charges?
6. Alok Pvt. Ltd., a registered manufacturer, sent steel cabinets worth ` 50 lakh
under a delivery challan to M/s Prem Tools, a registered job worker, for job
work on 28th January. The scope of job work included mounting the steel
cabinets on a metal frame and sending the mounted panels back to Alok Pvt.

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1.22 GOODS AND SERVICES TAX

Ltd. The metal frame is to be supplied by M/s Prem Tools. M/s Prem Tools has
agreed to a consideration of ` 5 lakh for the entire mounting activity including
the supply of metal frame. During the course of mounting activity, metal waste
is generated which is sold by M/s. Prem Tools for ` 45,000. M/s Prem Tools sent
the steel cabinets mounted on the metal frame to Alok Pvt. Ltd. on 3rd December
in the same financial year.
Assuming GST rate for metal frame as 28%, for metal waste as 12% and standard
rate for services as 18%, you are required to compute the GST liability of M/s Prem
Tools. Also, give reason(s) for inclusion or exclusion of the value of cabinets in the
job charges for the purpose of payment of GST by M/s Prem Tools.
7. Bedi Manufacturers, a registered person, instructs its supplier to send the capital
goods directly to Rajesh Enterprises, who is a job worker, outside its factory
premises for carrying out certain operations on the goods. The goods were sent
by the supplier on 10th April and were received by the job worker on 15th April.
Rajesh Enterprises carried out the job work, but did not return the capital goods
to their principal - Bedi Manufacturers. Discuss whether Bedi Manufacturers are
eligible to retain the input tax credit availed by them on the capital goods. What
action under the GST Act is required to be taken by Bedi Manufacturers.
What would be your answer if in place of capital goods, jigs and fixtures are
supplied to the job worker and the same has not been returned to the principal?

8. Nandeeshwar Manufacturers, a registered person, sends certain category of yarn

for processing to the job worker in January. The job worker undertakes the
processing work on the yarn as per the requirement of Nandeeshwar
Manufacturers. During the process, the job worker uses his own material also. The
processed yarn is sold by Nandeeshwar Manufacturers directly from the job
worker’s premises in the month of March. The balance quantity of yarn and waste
material is sent back by the job worker to Nandeeshwar Manufacturers in April.
The accountant of job worker is of the opinion that since the job worker is using
his own material also in the processing, the supply being made by it to
Nandeeshwar Manufacturers is in the nature of supply of goods as well as services.
Do you agree with the opinion of accountant of the job worker?

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 JOB WORK 16.23

ANSWERS
1. The goods can be supplied directly from the place of business of job worker
without declaring it as additional place of business in two circumstances
namely (i) where the job worker is a registered taxable person or (ii) where
the principal is engaged in supply of such goods as may be notified by the
Commissioner.
2. If the inputs or capital goods are not received back by the principal or are not
supplied from the place of business of job worker within the prescribed time
limit, it would be deemed that such inputs or capital goods had been supplied
by the principal to the job worker on the day when the said inputs or capital
goods were sent out by the principal (or on the date of receipt by the job
worker where the inputs or capital goods were sent directly to the place of
business of job worker). Thus, the principal would be liable to pay tax
accordingly along with interest. Further, if the job worker is registered, when
the processed goods are sent back by it to the principal, the same shall also
be considered as a supply over and above the charges for job work.
3. It is completely the responsibility of the principal to maintain proper accounts
of job work related inputs and capital goods.
4. Genie Engineers should reply on the following lines:
Under section 19(6), the principal may take ITC on capital goods sent to a job
worker for job work without being first brought to his place of business.
The capital goods sent for job work should either be returned to the principal
or must be supplied from the job worker’s premises within 3 years [extendible
by another 2 years] from sending them to the job worker or direct receipt by
the job worker from the supplier. If the above time-lines are not met, it is
deemed that the capital goods were supplied by the principal to the job
worker (in other words, tax will be payable on them) on the day they were
sent out to the job worker [Section 19(6)].
However, sub-section (7) of section 19 provides that the time-limit of three
years in sub-section (6) for bringing back the capital goods from the job
worker does not apply to moulds.

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1.24 GOODS AND SERVICES TAX

Accordingly, Genie Engineers have correctly availed the ITC in respect of the
moulds delivered to their job worker and not brought back even after
completion of four years.
5. (i) As per section 2(68), job work means any treatment or process
undertaken by a person on goods belonging to another registered
person and the expression “job worker” shall be construed accordingly.
The registered person on whose goods (inputs or capital goods) job
work is performed is called the principal. Thus, the job worker is
expected to work on the goods sent by the principal.
Therefore, when the goods are manufactured by Sudama Industries Ltd.
for Plasto Manufacturers, it is job work as the process is undertaken on
inputs (plastic and moulds) supplied by the principal (Plasto
Manufacturers). However, when goods are manufactured for Solid
Pipes, it is manufacture by Sudama Industries Ltd on own account as
the pipes are manufactured from their own raw material. Further,
processing or treatment on job work basis is a supply of service in terms
of para 3 of Schedule II to the CGST Act, 2017 and manufacture and
selling of pipes on own account is a supply of goods.
(ii) It has been clarified vide Circular No. 38/12/2018 GST dated 26.03.2018
that the job worker, in addition to the goods received from the
principal, can use his own goods for providing the services of job work.
(iii) Section 143 provides that the registered principal may, without
payment of tax, send inputs or capital goods to a job worker for job
work. Subsequently, on completion of the job work, the principal shall
either bring back the goods to his place of business or supply (including
export) the same directly from the place of business/ premises of the
job worker within one year in case of inputs or within three years in case
of capital goods (except moulds and dies, jigs and fixtures or tools).
Thus, the provision relating to return of goods is not applicable in case
of moulds, dies, jigs, fixtures and tools.
If the time frame of one year/ three years for bringing back or further
supplying the inputs/ capital goods is not adhered to, the activity of
sending the goods for job work shall be deemed to be a supply by the
principal on the day when the said inputs/ capital goods were sent out

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by him. Thus, essentially, sending goods for job work is not a supply as
such, but it acquires the character of supply only when the inputs/
capital goods sent for job work are neither received back by the
principal nor supplied further by the principal from the place of
business/ premises of the job worker within one/ three years of being
sent out.
Therefore, the activity of sending of plastic and moulds by Plasto
Manufacturers to Sudama Industries Ltd. (job worker) is not supply as
the manufactured pipes are received back within the stipulated time
and the provisions relating to return of goods are not applicable in case
of moulds.
Rule 45 provides that the inputs, semi-finished goods or capital goods
being sent for job work shall be sent under the cover of a delivery
challan issued by the principal.
Therefore, Plasto Manufacturers need not issue a taxable invoice for
sending the inputs to Sudama Industries Ltd. but should send the inputs
under the cover of a challan.
(iv) As per section 15(2)(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, is includible in the value of supply. However,
Sudama Industries Ltd. should not include the value of free of cost
plastic and moulds supplied by Plasto Manufacturers in its job charges
as Sudama Industries Ltd. is manufacturing the plastic pipes on job work
basis. The scope of supply of Sudama Industries Ltd. is to manufacture
plastic pipes from the raw material supplied by the Plasto
Manufacturers. Thus, at no point of time was Sudama Industries Ltd.
(supplier of job work service) is liable to pay for the raw material and
therefore, the value thereof should not be included in its job charges
even though the same has been incurred by Plasto Manufacturers
(recipient of job work service).
6. As per para 3 of Schedule II to the CGST Act, any treatment or process which
is applied to another person’s goods is a supply of services and accordingly
is subject to GST rate applicable for services.

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1.26 GOODS AND SERVICES TAX

In the given case, M/s Prem Tools (job worker) undertakes the process of
mounting the steel cabinets of Alok Pvt. Ltd. (principal) on metal frames. In
view of para 3 of Schedule II to the CGST Act cited above, the mounting
activity classifies as a service even though the metal frames are also supplied
as a part of the mounting activity. Accordingly, the job charges will be
chargeable to GST at a rate of 18%, which is the applicable rate for services.
Further, the value of steel cabinets will not be included in the value of taxable
supply made by M/s Prem Tools as the supply of cabinets does not fall within
the scope of supply to be made by M/s Prem Tools. M/s Prem Tools is only
required to mount the steel cabinets, which are to be supplied by Alok Pvt.
Ltd., on metal frames, which are to be supplied by it.
As regards sale of waste generated during the job work, since M/s Prem Tools
is registered, the tax leviable on the supply will have to be paid by it in terms
of section 143(5). Such supply will be treated as supply of goods and subject
to GST rate applicable for metal waste.
Accordingly, the GST liability of M/s Prem Tools will be computed as under:

Particulars Amount (`)

Job charges 5,00,000

GST @ 18% (A) 90,000

Sale of metal waste 45,000

GST @ 12% (B) 5,400

Total GST payable (A) + (B) 95,400

7. As per section 19(5), the principal is entitled to take input tax credit of
capital goods sent for job work even if the said goods are directly sent to
job worker.
Further, section 19(6) stipulates that where the capital goods sent directly
to a job worker are not received back by the principal within a period of 3
years of the date of receipt of capital goods by the job worker, it shall be
deemed that such capital goods had been supplied by the principal to the

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job worker on the day when the said capital goods were received by the
job worker.

In view of aforementioned provisions, Bedi Manufacturers are eligible to

retain the input tax credit availed by them on the capital goods.
However, if the capital goods are not returned by Rajesh Enterprises within
3 years from 15 th April (date of receipt of capital goods by job worker), it
shall be deemed that such capital goods had been supplied by Bedi
Manufacturers to Rajesh Enterprises on 15 th April and Bedi Manufacturers
shall be liable to pay the tax along with applicable interest.
However, there is no time limit for return of moulds and dies, jigs and
fixtures or tools sent out to a job worker for job work [Section 19(7)].
However, if Rajesh Enterprises does not return the jigs and fixtures to Bedi
Manufacturers, it shall not be considered as a supply of jigs and fixtures
to Rajesh Enterprises by Bedi Manufacturers. In this case also, Bedi
Manufacturers will be eligible to retain the input tax credit availed by them.
8. No, the opinion of the accountant of the job worker is not correct. Section
7(1A) provides that when certain activities or transactions constitute a supply
in accordance with the provisions of section 7(1), they shall be treated either
as a supply of goods or supply of services as referred to in Schedule II. Any
processing activity carried on any other person’s goods is treated as supply
of service in terms of Schedule II. Circular No. 38/12/2018 GST dated
26.03.2018 has also clarified that the job worker, in addition to the goods
received from the principal, can use his own goods for providing the services
of job work. These goods are not supply per se, but are being used in the
processing activity carried out by it.
Thus, the activity undertaken by the job worker, in the given case, squarely
falls within the purview of Schedule II and shall be considered as supply of
service by the job worker to Nandeeshwar Manufacturers.

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India
CHAPTER 17

ASSESSMENT AND
AUDIT
The section numbers referred to in the Chapter pertain to the CGST Act, 2017 unless
otherwise specified. Examples/Illustrations/Questions and Answers, as the case may
be, given in the Chapter are based on the position of GST law existing as on
30.04.2025.

LEARNING OUTCOMES
After reading this chapter, you shall be equipped to:
 understand and explain the different types of assessment
which a registered or unregistered person may be subjected
to.
 describe the concept of self-assessment and provisional
assessment.
 identify and appreciate the different types of audit which may
be conducted against the registered person.
 gain knowledge pertaining to circumstances under which
special audit can be conducted.

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1. INTRODUCTION
What is the need for
assessment & audit?

Assessment means determination of tax liability. There are several types of

assessments in the GST regime i.e., self-assessment, provisional assessment,
summary assessment and best judgment assessment.
GST is a trust-based taxation regime wherein the assessee is first required to
self-assess his tax liability and furnish returns for declaring the taxable turnover,
tax payable or refundable, input tax credit availed etc. (i.e., self-assessment). At
this stage, there is no intervention by the tax officials.
Since the tax regime relies on self-assessment, there is a need to put in place a
robust ‘audit’ mechanism in order to measure and ensure proper compliances
of the provisions of law by the taxable person.

Chapter XII – Assessment [Sections 59 to 64] and Chapter XIII-Audit [Section 65

and 66] of the CGST Act contain the provisions relating to assessment and audit
respectively. State GST laws also contain identical provisions in relation to
assessment and audit.
Section 59 of the CGST Act requires each registered person to self-assess the
tax payable. Section 60 stands for provisional assessment. Sections 61 provides
for scrutiny of returns. Sections 62 to 64 give power to departmental officer for
carrying out assessment in different situations. Sections 65 and 66 pertain to
audit by tax authorities and by CA/CWA nominated by Commissioner,
respectively.
Before going through the detailed study of Assessment and Audit provisions, let
us first go through few relevant definitions.

Provisions of assessment and audit under CGST Act have also been made
applicable to IGST Act vide section 20 of the IGST Act.

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 ASSESSMENT & AUDIT 17.3

2. RELEVANT DEFINITIONS
 Assessment means determination of tax liability under this Act and includes
self-assessment, re-assessment, provisional assessment, summary
assessment and best judgment assessment. [Section 2(11)]
 Audit means the examination of records, returns and other documents
maintained or furnished by the registered person under this Act or the rules
made thereunder or under any other law for the time being in force to verify
the correctness of turnover declared, taxes paid, refund claimed and input tax
credit availed, and to assess his compliance with the provisions of this Act or
the rules made thereunder. [Section 2(13)]
 Chartered Accountant means a chartered accountant as defined in clause
(b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949;
[Section 2(23)]
 Cost Accountant means a cost accountant as defined in clause (b) of sub-
section (1) of section 2 of the Cost and Works Accountants Act, 1959; [Section
2(35]
 Prescribed means prescribed by rules made under this Act on the
recommendations of the Council. [Section 2(87)]
 Proper Officer in relation to any function to be performed under this Act,
means the Commissioner or the officer of the central tax who is assigned that
function by the Commissioner in the Board; [Section 2(91)]

3. SELF ASSESSMENT [SECTION 59]

Every person registered under the Act shall himself assess the tax payable by him
for a tax period and after such self-assessment, he shall file the return required
under section 39.

4. PROVISIONAL ASSESSMENT [SECTION 60]

Situations demanding Provisional Assessment
Provisional assessment provides a method for determining the tax liability in
case the taxable person is unable to

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 1.4 17.4 GOODS AND SERVICES TAX

(a) determine the value of taxable goods and/or services; or

(b) determine the rate of tax applicable thereto at the time of supply.
There might be situations when these two determinants might not be readily
possible and may be subject to the outcome of a process that requires
deliberation and time.

Thus, where the taxable person is unable to determine─

(a) value of goods or services or
both to be supplied by him; or
(b) the rate of tax applicable to the
goods or services or both to be
supplied by him,

he may furnish an application in

prescribed form stating therein the
reasons for payment of the tax on a provisional basis along with the
documents in support of his request, electronically through the common
portal, either directly or through a Facilitation Centre notified by the
Commissioner.

The proper officer may, on receipt of the application, issue a notice in the
prescribed form requiring the registered person to furnish additional
information or documents in support of his request and the applicant shall
file a reply to the notice in, and may appear in person before the said officer
if he so desires.
The proper officer shall issue an order, within a period not later than ninety
days from the date of receipt of such request, allowing payment of the tax on
a provisional basis indicating -
(a) the value or the rate or both on the basis of which the assessment is to
be allowed on a provisional basis, and
(b) the amount* for which the bond is to be executed and security to be
furnished. The value of security cannot exceed 25% of the amount*
covered under the bond.

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 ASSESSMENT & AUDIT 17.5

Furnishing of Bond and Security

The payment of tax on a provisional basis may be allowed, if the taxable
person executes a bond in the prescribed form along with the security.
The bond is a document whereby the taxpayer binds himself (i.e., agrees) to
pay the differential tax, if any, payable on finalization of the provisional
assessment. The security is required to be furnished in the form of a bank
guarantee for an amount* as the proper officer may deem fit (subject to 25%
of the amount* covered under the bond).
In order to save a taxpayer from the requirement of submitting separate
bonds for different taxes, the GST law provides that the bond furnished to the
proper officer under the Central/State Goods and Services Tax Act/Integrated
Goods and Services Tax Act shall be deemed to be a bond furnished under
the provisions of the other Acts and the rules made thereunder.
*the term “amount” shall include the amount of integrated tax, central tax,
State tax or Union territory tax and cess payable in respect of such
transaction.
Finalization of Provisional Assessment
The final assessment order has to be passed by the proper officer within a
period of 6 months from the date of the communication of the order of
provisional assessment. However, on sufficient cause being shown and for
reasons to be recorded in writing, the above period of 6 months may be
extended:

(a) by the Joint/Additional Commissioner for a further period not

exceeding 6 months, and
(b) by the Commissioner for such further period as he may deem fit not
exceeding 4 years
For finalization of assessment, proper officer shall issue a notice in prescribed
form, calling for such information and records, as may be required and shall
issue a final assessment order specifying the amount payable by the
registered person or the amount refundable, if any.

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 1.6 17.6 GOODS AND SERVICES TAX

Where the tax liability as per the final assessment is higher than
the provisional assessment, i.e. the tax becomes due consequent to
the order of final assessment: The registered person in addition to the
differential tax shall be liable to pay interest on the tax due but not paid,
at the rate specified under section 50(1) from the date the tax was due
to be paid originally till the date of actual payment.
In simple words, in case any tax amount becomes payable subsequent
to finalization of the provisional assessment, then interest at the
specified rate will also be payable by the taxable person from the first
day after the due date of payment of the tax till the date of actual
payment, whether such amount is paid before or after the issuance of
order for final assessment.

Where the tax liability as per the final assessment is less than in
provisional assessment i.e. tax becomes refundable consequent to the
order of final assessment, the registered person shall be paid interest
at the rate specified under section 56 for any period exceeding 60 days
from the date of receipt of application moved in accordance with the
provisions of Section 54(1), till the date of refund of such tax.
In simple words, in case any tax amount becomes refundable
subsequent to finalization of the provisional assessment, then interest
(subject to the eligibility of refund and absence of unjust enrichment)
is payable at the specified rate for the period of delay (i.e., beyond 60
days from the date of the final assessment order).
Release of Security
The applicant may file an application for release of the security furnished after
issue of the final assessment order.
The proper officer shall release the security after ensuring that applicant has
paid the amount specified in the final assessment order and issue an order
within a period of 7 working days from the date of receipt of the application.
Illustration 1
ABC Limited is a supplier of medical equipment to various hospitals. While
supplying the equipment ABC Limited is not sure about the rate of IGST

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 ASSESSMENT & AUDIT 17.7

applicable on such supplies, i.e. 18% or 28%. You are required to advise ABC
Ltd. in this situation.

Answer
In such an event, ABC Limited can move an application for provisional
assessment for seeking permission to discharge the tax liability provisionally
@ 18% upon the submission of bond and security and subject to finalization
of the assessment.
Upon finalization of the assessment, ABC Limited would be liable to pay the
differential tax liability along with applicable interest if it is found that the
applicable rate was 28% whereas ABC Limited paid the tax @ 18% pursuant
to the order passed initially on its application for seeking provisional
assessment.

5. SCRUTINY OF RETURNS [SECTION 61]

Verifying the correctness of return
The return furnished by a registered person may be selected for scrutiny by
proper officer to verify its correctness. Where any return furnished by a
registered person is selected for scrutiny, the proper officer shall scrutinize
the same with reference to the information available with him.
Issue of notice
In case any discrepancy is found during scrutiny of return, proper officer shall
issue a notice to the said person informing him of such discrepancy and
seeking his explanation thereto within such time, not exceeding 30 days from
the date of service of the notice, or such further period as may be permitted
by him and also, where possible, quantifying the amount of tax, interest and
any other amount payable in relation to such discrepancy.
Reply to notice
The registered person to whom notice is issued within a period of 30 days
from the date of service of the notice or such further period as may be
permitted by the proper officer may–

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 1.8 17.8 GOODS AND SERVICES TAX

 accept the discrepancy as mentioned in the notice and pay the tax,
interest and any other amount arising from such discrepancy and
inform the same; or
 furnish an explanation for the discrepancy to the proper officer
regarding non-acceptance of discrepancy.
Action by Proper Officer
Where the explanation furnished by the registered person or the information
submitted is found to be acceptable, the proper officer shall inform him
accordingly and no further action shall be taken in this regard.
In case no satisfactory explanation is furnished by registered person or where
the registered person, after accepting the discrepancies, fails to take the
corrective measure in his return for the month in which the discrepancy is
accepted, the proper officer may take recourse to any of the following
provisions, namely:
(a) proceed to conduct audit under section 65 of the Act;
(b) direct the conduct of a special audit under section 66 which is to be
conducted by a Chartered Accountant or a Cost Accountant nominated
for this purpose by the Commissioner; or
(c) undertake procedures of inspection, search and seizure under section
67 of the Act; or
(d) initiate proceeding for determination of tax and other dues under
Section 73 or 74 or 74A 1 of the Act.

1
The provisions of section 74A contain provisions relating to determination of tax not
paid/short paid or erroneously refunded or ITC wrongly availed/utilized for any
reason pertaining to Financial Year 2024-25 onward. Detailed provisions of this
section are discussed in Chapter-19 of this Module of the Study material. The
provisions of sections 73 and 74 are applicable for tax determination relating to the
past period up to the Financial Year 2023–24.

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 ASSESSMENT & AUDIT 17.9

6. ASSESSMENT OF NON-FILERS OF RETURNS

[SECTION 62]
Best Judgment Assessment
Notwithstanding anything to the contrary contained in section 73 or section
74 or 74A, where a registered person−
 fails to furnish the return under section 39 (monthly/quarterly) or under
section 45 (final return), and
 a notice under section 46 has been issued by proper officer to the defaulting
taxable person requiring him to furnish the return within a period of 15 days
and taxable person fails to file return within the given time;
the proper officer may proceed to assess the tax liability of said person (i.e.
Return Defaulter) to the best of his judgement taking into account all the
relevant material which is available or which he has gathered.
Time Limit for Assessment Order
The order of best judgment assessment shall be issued by proper officer in
the prescribed form and a summary thereof shall be uploaded electronically
in the prescribed form.
The Assessment Order shall be issued by Proper Officer within a period of 5
years from the date specified under section 44 for furnishing of the annual
return for the financial year to which the tax not paid relates (When the due
date is extended, the extended due date becomes the said date for
calculation of 5 years period).
1. Let’s assume that the due date of filing of Annual Return for F/Y
2024-25 is 31.12.2025. If a person defaults in filing of return for any
tax period falling in F/Y 2024-25, period of 5 years shall be reckoned
from the due date of filing of Annual Return for F/Y 2024-25 i.e. 31.12.2025.
Accordingly, the best judgment assessment can be made by Proper Officer
on or before 31.12.2030.
Withdrawal of Assessment Order
Where the registered person furnishes a valid return for the default period
within 60 days of the service of the assessment order passed on best
judgment basis, the said assessment order shall be deemed to have been

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1.10 GOODS AND SERVICES TAX

withdrawn but the liability for payment of interest under sub-section (1) of
section 50 or for payment of late fee under section 47 shall continue.
However, where the registered person fails to furnish a valid return within 60
days of the service of the assessment order, he may furnish the same within
a further period of 60 days on payment of an additional late fee of ` 100 for
each day of delay beyond 60 days of the service of the said assessment order
and in case he furnishes valid return within such extended period, the said
assessment order shall be deemed to have been withdrawn, but the liability
to pay interest under section 50(1) or to pay late fee under section 47 shall
continue.
Guidelines to ensure uniformity in the implementation of the
provisions of law in relation to non-filers of returns
(i) System generated message would be sent to all the registered persons
3 days before the due date to nudge them about the filing of return by
the due date.
(ii) Once the due date for furnishing return under section 39 is over, a
system generated mail/ message would be sent to all the defaulters
immediately after the due date to the effect that the said registered
person has not furnished his return for the said tax period; the said mail/
message is to be sent to the authorized signatory as well as the
proprietor/ partner/ director/ karta, etc.
(iii) After 5 days of due date of furnishing the return, notice under section
46 shall be issued electronically to the defaulters requiring then to
furnish return within 15 days.
(iv) If the return is not filed within 15 days of the said notice, the proper
officer may proceed to assess the tax liability of the said defaulter under
section 62, to the best of his judgment taking into account all the
relevant material which is available or which he has gathered and would
issue assessment order. The proper officer would upload the summary
of such order in the prescribed form.
(v) For the purpose of assessment of tax liability under section 62, the
proper officer may take into account the following:
 Details of outward supplies available in GSTR-1

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 ASSESSMENT & AUDIT 17.11

 Details of inward supplies auto-populated in GSTR-2A

 Information available from e-way bills
 Any other information available from any other source including
inspection under section 71 of the CGST Act
(vi) If the defaulter furnishes a valid return within 60 days of the service of
assessment order under section 62, the said assessment will be deemed
to have been withdrawn.
(vii) If the said return remains unfurnished within the statutory period of 60
days from the service of assessment order under section 62, the proper
officer may initiate proceedings under section 78 and recovery under
section 79 of the CGST Act.

Based on facts available, in some cases, the Commissioner may resort to

provisional attachment to protect revenue under section 83 of the CGST Act
before issuance of assessment order under section 62. Further, proper officer
would initiate action under section 29(2) of the CGST Act for cancellation of
registration in cases where the return has not been furnished for the period
specified in section 29
[Circular No. 129/48/2019 GST dated 24.12.2019]

7. ASSESSMENT OF UNREGISTERED PERSONS

[SECTION 63]
Best Judgment Assessment
Notwithstanding anything to the contrary contained in section 73 or section
74 or 74A ,where a taxable person−
 fails to obtain registration even though liable to do so; or
 whose registration has been cancelled under sub-section (2) of section
29, for any of the following reason, namely––
(a) a registered person has contravened such provisions of the Act or
the rules made thereunder as may be prescribed; or
(b) a person paying tax under composition levy under section 10 has

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1.12 GOODS AND SERVICES TAX

not furnished the return for a financial year beyond three months
from the due date of furnishing the said return; or

(c) any registered person, other than a person specified in clause (b),
has not furnished returns for such continuous tax period as may
be prescribed; or

(d) any person who has taken voluntary registration under sub-
section (3) of section 25 has not commenced business within six
months from the date of registration; or
(e) registration has been obtained by means of fraud, wilful
misstatement or suppression of facts:
but who was liable to pay tax, the proper officer may proceed to assess
the tax liability of said unregistered person to the best of his judgement
for the relevant tax periods.
Issue of Notice
Before making the assessment, proper officer shall issue a notice to a taxable
person containing the grounds on which the assessment is proposed to be
made on best judgment basis and shall also serve a summary thereof
electronically in the prescribed form. The taxable person shall be given 15
days’ time to furnish his reply, if any. Thereafter, an order shall be passed
and summary thereof shall be uploaded electronically in the prescribed form.
However, no such assessment order shall be passed without giving the person
an opportunity of being heard.
Time Limit for Assessment Order
The assessment order shall be issued by proper officer within a period of 5
years from the due date for furnishing the annual return for the financial year
to which non-payment of tax relates.
2. Let’s assume that the due date of filing of Annual Return for F/Y
2024-25 is 31.12.2025. If the liability of a person to take registration
arises at any time in the F/Y 2024-25 for the reason that his
turnover crosses the prescribed threshold limit, period of 5 years shall be
reckoned from the due date of filing of Annual Return for F/Y 2024-25 i.e.
31.12.2025. Accordingly, best judgment assessment can be made by proper
officer on or before 31.12.2030.

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 ASSESSMENT & AUDIT 17.13

8. SUMMARY ASSESSMENT IN CERTAIN

SPECIAL CASES [SECTION 64]
When Summary Assessment can be made
Summary assessments can be initiated to protect the interest of revenue with
the previous permission of Additional Commissioner/Joint Commissioner
when:
 the proper officer has evidence that a taxable person has incurred a
liability to pay tax under the Act, and
 the proper officer has sufficient grounds to believe that delay in passing
an assessment order may adversely affect the interest of revenue.
The summary assessment order and a summary thereof shall be uploaded
electronically in the prescribed form.
Withdrawal of Assessment Order
The Summary Assessment Order may be withdrawn by Additional
Commissioner/Joint Commissioner, –
(a) on an application filed by taxable person for withdrawal of the summary
assessment order within 30 days from the date of receipt of order; or
(b) on his own motion, where he finds such order to be erroneous and may
instead follow the procedures laid down in section 73 or section 74 or
74A to determine the tax liability of such taxable person.
Deemed taxable person in case of supply of goods
Where the taxable person to whom the liability pertains is not ascertainable
and such liability pertains to supply of goods, the person in charge of such
goods shall be deemed to be the taxable person liable to be assessed and
liable to pay tax and any other amount due under this section.
3. When tax evaded goods are under transportation or are stored
in a warehouse, and the taxable person in respect of such goods
cannot be ascertained, the person in charge of such goods shall be
deemed to be the taxable person and will be assessed to tax.

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 17.14
1.14 GOODS AND SERVICES TAX

9. AUDIT BY TAX AUTHORITIES [SECTION 65]

Who may conduct the audit?
Audit of any registered person may be undertaken by:
 the Commissioner; or
 any officer authorized by him, by way of a general or a specific order,

Audit may be carried out at the place of business of the registered person or
in their office. The period of audit could be for a financial year or part thereof
or multiples thereof.
Thus, the Commissioner or any officer authorized by him, by way of a general
or special order, may undertake audit of any registered person even for a part
of financial year or for multiple financial years.
Where it is decided to undertake the audit of a registered person, the proper
officer shall issue a notice not less than 15 working days prior to the conduct
of audit.
What is meant by commencement of audit?
The term ‘commencement of audit’ is important because audit has to be
completed within a given time frame in reference to this date of
commencement. Commencement of audit means the later of the following:
a) the date on which the records/accounts called for by the audit
authorities are made available to them, or
b) the actual institution of audit at the place of business of the taxpayer.
Time limit for completion of audit
The audit is required to be completed within 3 months from the date of
commencement of audit. The period is extendable for a further period of a
maximum of 6 months by the Commissioner.

How to conduct audit

The proper officer authorised to conduct audit of the records and books of
account of the registered person shall, with the assistance of the team of
officers and officials accompanying him may verify the following and record

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 ASSESSMENT & AUDIT 17.15

the observations in his audit notes:

- documents on the basis of which the books of account are maintained
and the returns and statements furnished under the Act and the rules
made thereunder;
- the correctness of the turnover, exemptions and deductions claimed, the rate
of tax applied in respect of supply of goods or services or both, the input tax
credit availed and utilized, refund claimed, and other relevant issues.
During the course of audit, the authorised officer may require the registered
person,—
a) to facilitate the verification of accounts/records available or
requisitioned by the authorities,
b) to provide such information as the authorities may require for the
conduct of the audit, and
c) to render assistance for timely completion of the audit.

Finalisation of Audit
The proper officer may inform the registered person of the discrepancies
noticed, if any, as observations of the audit and the said person may file his
reply.
The proper officer shall finalize the findings of the audit after due
consideration of the reply furnished by registered person to the audit
observations.
On conclusion of audit, the proper officer shall within 30 days inform the
registered person whose records are audited, about the audit findings and
the reasons for such findings. The proper officer shall also inform the said
person his rights and obligations against such observations.
Where the audit results in detection of tax not paid or short paid or
erroneously refunded, or input tax credit wrongly availed or utilised, the
proper officer may initiate action under section 73 or section 74 or 74A .
Practical points for reference:
(a) Unlike direct taxes regime, in the GST regime separate assessment order
is not passed by the tax authorities for each financial year. In the GST

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 17.16
1.16 GOODS AND SERVICES TAX

regime the tax authorities may conduct audit of a taxpayer involving

one or more financial year (including a part thereof). At the end of the
audit, the tax authorities are required to communicate the findings of
the audit for the entire audit period along with the reasons of such
finding to the registered person whose audit is undertaken.
(b) Further, in the GST regime audit exercise may be carried out at the place
of business of the office of the registered person. In such cases, a team
of department’s officials visits the premises of the registered person
and carries out the audit as per the audit schedule communicated to
the registered person.

10. SPECIAL AUDIT [SECTION 66]

When Special Audit may be directed and from whom?
If at any stage of scrutiny, inquiry, investigation
or any other proceedings before him, any
officer not below the rank of Assistant
Commissioner, having regard to the nature and
complexity of the case and the interest of
revenue, is of the opinion that –
 the value (of goods and/or services ) has not been correctly declared;
or
 the credit availed is not within the normal limits,
he may, with the prior approval of the Commissioner, issue a direction to the
registered person to get his records including books of account examined
and audited by a chartered accountant or a cost accountant as may be
nominated by the Commissioner and specified in the said direction.

The provisions of special audit shall have effect even if the accounts of the
registered person have been audited under any other provisions of the GST
Act or any other law for the time being in force.

Time limit within which audit to be completed

The Chartered Accountant or cost accountant as nominated by Commissioner
shall submit a report of such audit duly signed and certified by him within the

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 ASSESSMENT & AUDIT 17.17

period of 90 days to the said Assistant Commissioner mentioning there in

such other particulars as may be specified:

The Assistant Commissioner may extend the said period 90 days by a further
period of 90 days −
 on an application made to him in this behalf by the registered person
or the chartered accountant or cost accountant; or
 for any material and sufficient reason.
Who will bear the expenses of audit?
The expenses of the examination and audit of records including the
remuneration of such Chartered Accountant or Cost Accountant, shall be
determined and paid by the Commissioner and such determination shall be final.

How Special Audit Report to be dealt with?

The registered person shall be given an opportunity of being heard in respect
of any material gathered on the basis of special audit which is proposed to
be used in any proceedings against him under this Act or the rules made
thereunder.
On conclusion of special audit, the registered person shall be informed of the
findings of special audit.
Where the special audit results in detection of tax not paid or short paid or
erroneously refunded, or input tax credit wrongly availed or utilised, the
process of demand and recovery will be initiated against the registered
person under section 73 or section 74 or 74A.
Practical points for reference:
(a) Upon the conclusion of an audit under section 65 or special audit under
section 66, the registered person is communicated the proposed tax,
interest and other liabilities, if any, along with the audit findings and
the registered person is called upon to discharge the liabilities.
(b) In case the registered person discharges the liabilities as proposed, no
further action is taken. Otherwise, the authorities may initiate the
proceedings against the registered person under sections 73 or 74 or
74A for determination of the tax liability of the person audited.

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 17.18
1.18 GOODS AND SERVICES TAX

(c) Thus, non-payment of the liability proposed on the culmination of audit

or special audit does not automatically results in initiation of the
recovery proceedings under the law. In the case of such non-payment,
further proceedings are required to be initiated under section 73 or 74
or 74A for determination of the tax liability.

LET US RECAPITULATE

The discussion under this chapter are summarised by way of diagrams to help
students remember and retain the key provisions in a better and effective manner:
Different ways to assess the tax liability by a registered person

A registered person may assess his tax liability in two different ways
depending upon the circumstances warranting such an assessment.

Provisional Assessment Self-Assessment

Where the taxable person is unable to In all other

determine value; or rate of tax cases
applicable to the goods or services or
both to be supplied by him

For this –
• Taxable person shall furnish an application along with the
documents in support of his request.
• The proper officer after calling for additional information and
documents, if required, issue an order indicating therein-
o value or the rate or both on the basis of which the assessment is
to be allowed on a provisional basis;
o amount for which the bond is to be executed and security to be
furnished

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 ASSESSMENT & AUDIT 17.19

Assessment
under GST*

Self Provisional Scrutiny of Assessment

Assessment Summary
Assessment Assessment Returns of Non-filers
of Assessment in
of Return certain Special
unregistered
Person In order to persons Cases
Every unable to verify
registered determine accuracy of
If return is Proper officer
person value of return, the
not Proper may issue an
shall supply or Proper Officer
furnished officer to assessment
himself rate of tax. may examine
even after the best of order
assess tax return and
service of his imposing tax
liability seek
Payment of notice u/s judgment,
and explanations. liability on a
tax on 46, may issue an
furnish a person based
provisional assessment
return. on any
basis on If order, within evidence
execution of explanation Proper a period of 5 showing a tax
bond on a offered is officer shall years from liability.
request made. adequate, no assess the the date
further liability of specified
action. tax within a under
Final If person to
period of 5 section 44 whom liability
Assessment years from for pertains is not
the date furnishing ascertainable,
Time: 6 months If no
specified u/s of the the person in
from date of adequate
44 for annual charge of
communication explanatio
furnishing of return. goods shall be
of order n offered
annual assessed.
or no
return.
Extension: 6 corrective
months by measures.
Joint/Additiona
If order is
l Commissioner
erroneous, proper
Proper Action officer may
4 years by
u/s withdraw such
Commissioner
65,66,67,73 or order and follow
74 or 74A. the procedure laid
If short paid, down in section 73
pay with If excess paid, or section 74 or
interest refund with section 74A.
u/s 50 interest u/s 56

*
This is not an exhaustive list of assessments under the GST law. In addition to the types
of assessments listed herein above, determination of the liability of a taxpayer can be made
under Sections 73 or 74 or 74A of the CGST Act (discussed in detail separately).

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 17.20
1.20 GOODS AND SERVICES TAX

Audit

Audit by Tax Authorities Special Audit

• Commissioner or any officer • At any stage of scrutiny,

authorized by him may inquiry or investigation
undertake audit of any • Assistant Commissioner is of
registered person the opinion that the value has
• Audit may be conducted at the not been correctly declared or
place of business or in their the credit availed is not within
office the normal limits
• At least 15 days prior notice • May nominate a Chartered
should be given Accountant or Cost
Accountant
• Time Period : 3 months from the
date of conduct of audit • Time period : 90 days
• Extension : not exceeding six • Extension : further 90 days
months • Audit will be conducted even if
• On conclusion, registered accounts have already been
person shall be informed about audited
findings, rights and obligations • If results in demand of tax,
• If results in demand of tax, proceedings may be initiated
proceedings may be initiated under section 73 or 74 or 74A.
under section 73 or 74 or 74A.

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 ASSESSMENT & AUDIT 17.21

TEST YOUR KNOWLEDGE

1. Is summary assessment order to be necessarily passed against the registered
person?
2. Whether principal of natural justice is must to be followed before passing
assessment order against the unregistered person?
3. Explain in what cases, assessment order passed by proper officer may be
withdrawn under CGST Act, 2017?

4. Explain the difference between Audit by Tax Authorities under section 65 and
Special Audit under section 66 of the CGST Act, 2017.
5. Explain the recourse that may be taken by the officer in case proper explanation
is not furnished for the discrepancy detected in the return filed, while
conducting scrutiny of returns under section 61 of the CGST Act, 2017.
6. Write a brief note on Summary Assessment in certain special cases as per
section 64 of the CGST Act, 2017.
7. Kulbhushan & Sons has entered into a contract to supply a consignment of
certain taxable goods. However, since it is unable to determine the value of the
goods to be supplied by it, it applies for payment of tax on such goods on a
provisional basis along with the required documents in support of its request.
On 12thJanuary, the Assistant Commissioner of Central Tax issues an order
allowing payment of tax on provisional basis indicating the value on the basis
of which the assessment is allowed on provisional basis and the amount for
which the bond is to be executed and security is to be furnished.

Kulbhushan & Sons complies with the same and supplies the goods on
25thJanuary thereafter paying the tax on provisional basis in respect of said
consignment on 19thFebruary.
Consequent to the final assessment order passed by the Assistant
Commissioner of Central Tax on 21stMarch, a tax of ` 1,80,000 becomes due on
the consignment.
Kulbhushan & Sons pays the tax due on 9thApril. Determine the interest
payable, if any, by Kulbhushan & Sons in the above case.

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 17.22
1.22 GOODS AND SERVICES TAX

Assuming all the other facts remaining the same, if consequent to the final
assessment order passed on 21stMarch, a tax of ` 4,20,000 becomes refundable
on the consignment, refund of which is applied by Kulbhushan & Sons on
9thApril and tax was refunded to it on 5thJune, determine the interest receivable,
if any, by Kulbhushan & Sons in the given case.

ANSWERS

1. No. In certain cases, like when goods are under transportation or are stored
in a warehouse, and the registered person in respect of such goods cannot
be ascertained, the person in charge of such goods shall be deemed to be
the registered person and will be assessed to tax.
2. Yes, principal of natural justice is must to be followed before passing
assessment order against an unregistered person seeking to impose any
financial burden on him.
3. Assessment order passed by the proper officer may be withdrawn in following
cases:-
(i) Assessment of non-filers of returns-The best judgement order passed
by the proper officer under section 62 of the CGST Act shall
automatically stand withdrawn where a registered person files a valid
return within 60 days of the service of the best judgment assessment
order. However, the liability for payment of interest under section 50(1)
of the CGST Act, 2017 or for payment of late fee under section 47 of the
CGST Act, 2017 shall continue.
However, where the registered person fails to furnish a valid return
within 60 days of the service of the assessment order, he may furnish
the same within a further period of 60 days on payment of an additional
late fee of ` 100 for each day of delay beyond 60 days of the service of
the said assessment order and in case he furnishes valid return within
such extended period, the said assessment order shall be deemed to
have been withdrawn, but the liability to pay interest under section
50(1) or to pay late fee under section 47 shall continue.

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 ASSESSMENT & AUDIT 17.23

(ii) Summary assessment-As per section 64(2) of the CGST Act, 2017,a
taxable person against whom a summary assessment order has been
passed can apply for its withdrawal to the jurisdictional Additional/ Joint
Commissioner within 30 days of the date of receipt of the order.
If the said officer finds the order erroneous, he can withdraw it and
direct the proper officer to carry out determination of tax liability in
terms of section 73 or 74 or 74A of the CGST Act. The Additional/ Joint
Commissioner can follow a similar course of action on his own motion
if he finds the summary assessment order to be erroneous.
4. Audit by Tax authorities under section 65 of the CGST Act, 2017:-
1 The Commissioner or any officer authorized by him can undertake audit
of any registered person for such period, at such frequency and in such
manner as may be prescribed.
2 The audit shall be completed within a period of 3 months from the date
of commencement of audit. However, the Commissioner can extend this
period by a further period upto maximum 6 months.
Special Audit under section 66 of the CGST Act, 2017:-

1 The registered person can be directed to get his records including

books of account examined and audited by a chartered accountant or
a cost accountant during any stage of scrutiny, inquiry, investigation or
any other proceedings; depending upon the complexity of the case. Any
officer not below the rank of Assistant Commissioner may order special
audit, with the prior approval of the Commissioner, if he is of the
opinion that the value has not been correctly declared or the credit
availed is not within the normal limits.
2 Audit is to be completed within 90 days. However, the Assistant
Commissioner can extend this period by a further period of 90 days.
5. If proper explanation is not furnished for the discrepancy detected in return
filed, while conducting scrutiny of returns under section 61 of the CGST Act,
2017 of a registered person, the proper officer may:
(i) conduct audit of the registered person; or

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1.24 GOODS AND SERVICES TAX

(ii) direct the registered person to get his records including books of
account examined and audited by a Chartered Accountant or a Cost
Accountant nominated for this purpose by the Commissioner; or.
(iii) exercise the powers of inspection, search and seizure with respect to
the registered person, or

(iv) proceed to determine the tax and other dues of the registered person
under Sections 73 or 74 or 74A of the Act.
6. As per section 64 of the CGST Act, 2017, summary assessments can be
initiated to protect the interest of revenue with the previous permission of
Additional/Joint Commissioner when the proper officer has evidence that a
taxable person has incurred a liability to pay tax under the Act, and any delay
by him in passing an assessment order may adversely affect the interest of
revenue.
Additional/Joint Commissioner may withdraw summary assessment order on
an application filed by taxable person within 30 days from the date of receipt
of order or on his own motion, if he finds such order to be erroneous and
may instead follow the procedures laid down in section 73 or section 74 or
74A to determine the tax liability of such taxable person.
Where the taxable person to whom the liability pertains is not ascertainable
and such liability pertains to supply of goods, the person in charge of such
goods shall be deemed to be the taxable person liable to be assessed and
liable to pay tax and any other amount due under this section.
7. Section 60(4) of the CGST Act, 2017 stipulates that where the tax liability as
per the final assessment is higher than under provisional assessment i.e. tax
becomes due consequent to order of final assessment, the registered person
shall be liable to pay interest on tax payable on supply of goods but not paid
on the due date, at the rate specified under section 50(1) [18% p.a.], from the
first day after the due date of payment of tax in respect of the goods supplied
under provisional assessment till the date of actual payment, whether such
amount is paid before or after the issuance of order for final assessment.
In the given case, due date for payment of tax on goods cleared on
25th January under provisional assessment is 20th February.

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 ASSESSMENT & AUDIT 17.25

In view of the provisions of section 60(4), in the given case, Kulbhushan &
Sons is liable to pay following interest in respect of the consignment of goods
supplied:
= ` 1,80,000 × 18% × 48/365
= ` 4,261 (rounded off)

If, in the given case, it is assumed that consequent to the final assessment
order passed on 21 st March, a tax of ` 4,20,000 becomes refundable to
Kulbhushan & Sons, answer would be as follows:
Section 60(5) of the CGST Act, 2017 stipulates that where the tax liability as
per the final assessment is less than in provisional assessment i.e. tax becomes
refundable consequent to the order of final assessment, the registered person
shall be paid interest at the rate specified under section 56 [6% p.a.] from the
date immediately after the expiry of 60 days from the date of receipt of
application under section 54(1) till the date of refund of such tax.

However, since in the given case, refund has been made (05thJune) within 60
days from the date of receipt of application of refund (09thApril), interest is
not payable to Kulbhushan& Sons on tax refunded.

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India
CHAPTER 18

INSPECTION, SEARCH,
SEIZURE AND ARREST
The section numbers referred to in the Chapter pertain to CGST Act, unless otherwise
specified. Examples/Illustrations/Questions and Answers, as the case may be, given
in the Chapter are based on the position of GST law existing as on 30.04.2025.

LEARNING OUTCOMES
After studying this chapter, you would be able to:
❑ understand and explain the meaning of inspection, search,
seizure and summons.
❑ understand and describe the legislative power to arrest.
❑ identify and appreciate the rights and duties of persons
against such actions.
❑ gain knowledge pertaining to the procedural requirements to
be complied in this regard.

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 1.2 18.2 GOODS AND SERVICES TAX

1. INTRODUCTION

What is the need for

inspection, search,
seizure & arrest?

The provisions related to Inspection, Search, Seizure and Arrest are provided in tax
laws in order to protect the interest of genuine taxpayers (as the Tax evaders, by
evading the tax, get an unfair advantage over the genuine tax payers). These
provisions are also required to safeguard the Government’s legitimate dues.
Wherein , these provisions act as a deterrent and by checking evasion provide a
level playing field to all genuine taxpayers.
It may be mentioned that the options of Inspection, Search, Seizure and Arrest are
exercised only in exceptional circumstances and as a last resort, to protect the
Government revenue.
Chapter XIV – Inspection, Search, Seizure and Arrest [Sections 67 to 71] of the CGST
Act stipulates the provisions relating to inspection, search, seizure and arrest. State
GST laws also prescribe identical provisions in relation to inspection, search, seizure
and arrest.

Provisions of inspection, search, seizure and arrest under CGST Act have also
been made applicable to IGST Act vide section 20 of the IGST Act.

2. POWER OF INSPECTION, SEARCH AND

SEIZURE [SECTION 67]
The power of ‘Inspection’ enables officers to
access any place of business of a taxable person Inspection
and also any place of business of a person
engaged in transporting goods or who is an
owner or an operator of a warehouse or godown.

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 INSPECTION, SEARCH, SEIZURE AND ARREST 18.3
a

As per section 67, inspection can be carried out by a proper officer only upon a
written authorization given by an officer of the rank of Joint Commissioner or
above.

• Circumstances for carrying out inspection

An inspection can be carried out only after a Joint Commissioner or an officer
higher in rank gives such authorization to the proper officer. Such authorization
can be given by the Joint Commissioner or an officer higher in rank, only if he has
reasons to believe that:
(a) taxable person has done one of the following:-
i. suppressed any transaction of supply of goods or services;
ii. suppressed stock of goods in hand;
iii. claimed input tax credit in excess of his entitlement;
iv. contravened any provision of the Act to evade tax;
(b) any person engaged in transporting of goods or an owner or operator of a
warehouse or a godown or any other place has kept goods which have
escaped payment of tax or has kept his accounts or goods in a manner that
is likely to cause evasion of tax.
Reason to believe means having knowledge of the facts which, although not
amounting to direct knowledge, would cause a reasonable person, knowing the
same facts, to reasonably conclude the same thing. As per Section 26 of the IPC,
1860, “A person is said to have ‘reason to believe’ a thing, if he has sufficient
cause to believe that thing but not otherwise.” ‘Reason to believe’ contemplates
an objective determination based on intelligent care and evaluation as
distinguished from a purely subjective consideration. ‘Reason to believe’ is more
than a mere suspicion but less than evidence in possession about the violation of
law. It has to be and must be that of an honest and reasonable person based on
relevant material and circumstances.
Either pursuant to an inspection or otherwise, if it is felt that any goods which are
liable for confiscation (discussed below) under the Act
Meaning of Search , or any documents or books or things are secretly
stored are found or any documents/books of

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accounts are found, which may be useful for the department in the proceedings
for demand of tax, the department could search and seize such goods/documents
and books.
Any tax law should provide powers to the enforcing officers, to check the evasion
of tax. As per the dictionary meanings and as noted in different judicial
pronouncements, the term ‘search’, in simple language, denotes an action of a
government machinery to go, look through or examine carefully a place, area,
person, object etc. in order to find something concealed or for the purpose of
discovering evidence of a crime. The search of a person or vehicle or premises
etc. can only be done under proper and valid authority of law.
As per Section 67, a search and seizure can be carried out by a Joint Commissioner
or an officer higher in rank or by an officer authorized by such person not below
the rank of a Joint Commissioner only if he has reasons to believe that any
goods liable to confiscation or any documents or books or things, which in his
opinion shall be useful for or relevant to any proceedings under this Act, are
secreted in any place.
The term ‘seizure’ has not been specifically
defined in the GST law. In the Law Lexicon
Meaning of Seizure
Dictionary, ‘seizure’ is defined as the act of
taking physical custody (actual or
constructive) of property by an officer under legal process. It generally implies
taking custody forcibly / contrary to the wishes of the owner of the property or
who has lawful possession and who was unwilling to part with the possession.
Not only inputs and capital goods may be seized but all offending property
(movable and immovable), books and records, computer and database and
everything that aids and assists in the proceedings under the Act and in
protection of Government revenue including furthering investigation may be
seized.
The person from whom documents and books of accounts are seized, shall have
the right to take copies of such documents and books of accounts, subject to the
approval of the proper officer.

• Confiscation of goods
As per section 130, goods become liable to confiscation when any person does

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 INSPECTION, SEARCH, SEIZURE AND ARREST 18.5
a

the following:
(i) supplies or receives any goods in contravention of any of the provisions of
this Act or rules made thereunder with an intent to evade payment of tax;
(ii) does not account for any goods on which he is liable to pay tax under this
Act;
(iii) supplies any goods liable to tax under this Act without having applied for
the registration;
(iv) contravenes any of the provisions of the CGST Act or rules made thereunder
with an intent to evade payment of tax.
(v) uses any conveyance as a means of transport for carriage of goods in
contravention of the provisions of this Act or the rules made thereunder
unless the owner of the conveyance proves that it was so used without the
knowledge or connivance of the owner himself, his agent, if any, and the
person in charge of the conveyance,

• Powers of officer during search

An officer carrying out a search has the power to search for and seize goods
(which are liable to confiscation) and documents/books/things (relevant for any
proceedings under the Act) from the premises searched. However, if it is not
practicable to seize any such goods then the same may be detained i.e. he may
order the owner or the custodian to not remove or part with the goods except
with the permission of the officer. The person from whom these are seized shall
be entitled to take copies/extracts of seized records in the presence of any
authorized officer at a place and time indicated by the proper officer. Taking
copies / extract may be denied where in the opinion of the officer making such
copies or taking such extracts may prejudicially affect the investigation. During
search, the officer has the power to break open the door of the premises
authorized to be searched if access to the same is denied.
Similarly, while carrying out search within the premises, he can break open any
almirah or box if access to such almirah or box is denied and in which any goods,
account, registers or documents are suspected to be concealed. He can also seal
the premises if access to it denied.

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The seized documents/books/things shall be retained only till the time the same
are required for examination/enquiry/proceedings and if these are not relied on
for the case then the same shall be returned within 30 days from the issuance of
show cause notice.

• Manner of release of confiscated goods, documents

❖ Provisional basis:-The seized goods shall be released on a provisional basis,
on execution of bond and furnishing of prescribed amount of security or on
payment of applicable tax, interest and penalty.
❖ Actual return of goods:- In case of seizure of goods, a notice has to be
issued within six months, if no notice is issued within a period of six months
then all such goods shall be returned. However, this period of six months can
be extended by the proper officer for another six months on sufficient cause.
❖ Disposal of goods:-The Government may, having regard to the perishable or
hazardous nature of any goods, depreciation in the value of the goods with
the passage of time, constraints of storage space for the goods or any other
relevant considerations, notify the goods which shall be disposed by the
proper officer in the prescribed manner. If, during a search, such specified
goods have been seized, the proper officer shall prepare an inventory of such
goods in the prescribed manner.

• Procedure for conducting search

To ensure that the provisions for search and seizure are implemented in a proper
and transparent manner, the Act stipulates that the searches and seizures shall
be carried out in accordance with the provisions of Criminal Procedure Code,
1973. Section 100 of the Code of Criminal Procedure describes the procedure
for search.

• Basic requirements to be observed during search operations

The following principles should be observed during Search:
❖ No search of premises should be carried out without a valid search warrant
issued by the proper officer.

❖ There should invariably be a lady officer accompanying the search team to a

residence.

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❖ The officers before starting the search should disclose their identity by
showing their identity cards to the person in-charge of the premises.
❖ The search warrant should be executed before the start of the search by
showing the same to the person in-charge of the premises and his signature
should be taken on the body of the search warrant in token of having seen
the same. The signatures of at least two witnesses should also be taken on
the body of the search warrant.
❖ The search should be made in the presence of at least two independent
witnesses from the locality. If no such inhabitants are available /willing, the
inhabitants of any other locality should be asked to be witness to the search.
The witnesses should be briefed about the purpose of the search.
❖ Before the start of the search proceedings, the team of officers conducting
the search and the accompanying witnesses should offer for their personal
search to the person in-charge of the premises being searched. Similarly, after
the completion of the search all the officers and the witnesses should again
offer themselves for their personal search.
❖ A Panchnama / Mahazar of the proceedings of the search should necessarily
be prepared on the spot. A list of all goods, documents recovered and
seized/detained should be prepared and annexed to the
Panchnama/Mahazar. The Panchnama / Mahazar and the list of goods/
documents seized/detained should invariably be signed by the witnesses, the
in-charge/ owner of the premises before whom the search is conducted and
also by the officer(s) duly authorized for conducting the search.
❖ After the search is over, the search warrant duly executed should be returned
in original to the issuing officer with a report regarding the outcome of the
search. The names of the officers who participated in the search may also be
written on the reverse of the search warrant.
❖ The issuing authority of search warrant should maintain register of records of
search warrant issued and returned and used search warrants should be kept
in records.
❖ A copy of the Panchnama / Mahazar along with its annexure should be given
to the person incharge/owner of the premises being searched under
acknowledgement.

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• Search Warrant and its contents.

The written authority to conduct a search is generally called search warrant. The
competent authority to issue search warrant is an officer of the rank of Joint
Commissioner or above. A search warrant must indicate the existence of a
reasonable belief leading to the search. Search Warrant should contain the
following details:
❖ the violation under the Act,
❖ the premise to be searched,

❖ the name and designation of the person authorized for search,

❖ the name of the issuing officer with full designation along with his round seal,
❖ date and place of issue,
❖ serial number of the search warrant,
❖ period of validity i.e. a day or two days etc.

• Safeguards provided for in respect of Search or Seizure

Certain safeguards are provided in section 67 of CGST Act in respect of the power
of search or seizure. These are as follows:
❖ Seized goods or documents should not be retained beyond the period
necessary for their examination;
❖ Photocopies of the documents can be taken by the person from whose
custody documents are seized;

❖ For seized goods, if a notice is not issued within six months of its seizure,
goods shall be returned to the person from whose possession it was seized.
This period of six months can be extended on justified grounds up to a further
period of maximum six months;
❖ Certain specified categories of goods such as perishable, hazardous etc. can
be disposed of immediately after seizure. For instance, newspapers and
periodicals, menthol, camphor, saffron, petroleum products, red sander, cells,
batteries and rechargeable batteries, Re-fills for ball-point pens, etc. An
inventory of such goods, if seized, shall be made by the seizing officer.

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❖ The provisions of Code of Criminal Procedure 1973 relating to search and

seizure shall apply. However, one important modification is in relation to sub-
section (5) of section 165 of Code of Criminal Procedure – instead of sending
copies of any record made in course of search to the nearest Magistrate
empowered to take cognizance of the offence, it has to be sent to the
Principal Commissioner/ Commissioner of CGST.

3. INSPECTION OF GOODS IN MOVEMENT

[SECTION 68]
Inspection can also be carried out of a conveyance, carrying a consignment of
value exceeding specified limit. The person-in-charge of the conveyance has to
produce prescribed documents/devices for verification and allow inspection. E-
way Bill has been prescribed for the said purpose. The same has already been
discussed in detail in Chapter-10: Accounts and Records; E-way Bill. Inspection
during transit can be carried out even without authorization of Joint
Commissioner.

4. POWER TO ARREST [SECTION 69]

The term ‘arrest’ has not been defined in the GST law. However, as per judicial
pronouncements, it denotes ‘the taking into custody of a person under some
lawful command or authority’. In other

Arrest words, a person is said to be arrested when

he is taken and restrained of his liberty by
power or colour of a lawful warrant.
Arrests can be carried out only where the person is accused of offences specified
for this purpose and the tax amount involved is more than specified limit.
Further, the arrests under GST law can be made only under authorization from
the Commissioner. Whenever the Commissioner has reason to believe that any
person has committed any specified offence, he can authorize any other officer
subordinate to him, to arrest such person.
Various offences committed in connection with evasion of tax are also
punishable with imprisonment. For some offences liable to more number of

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years of imprisonment, the offender has to be prosecuted before appropriate

Court. The nature of offences which are thus punishable with imprisonment are
prescribed in section 132.

• Authorization of arrest by the proper officer

The Commissioner can authorize an officer to arrest a person if he has reasons
to believe that the person has committed an offence attracting a punishment
prescribed under section 132(1)(a)/(b)/(c)/(d) or under section 132(2). The
detailed provisions relating to section 132 have been discussed in detail in
Chapter-21: Offences and Penalties and Ethical aspects under GST. This
essentially means that a person can be arrested only where the tax evasion is
more than ` 2 crore. However, the monetary limit shall not be applicable if the
offences are committed again (even after being convicted earlier), i.e. repeat
offender of the specified offences can be arrested irrespective of the tax amount
involved in the case.

• Safeguards for a person who is placed under arrest

There are certain safeguards provided under section 69 for a person who is
placed under arrest. These are:
❖ If a person is arrested for a cognizable offence, he must be informed in
writing of the grounds of arrest and he must be produced before a
magistrate within 24 hours of his arrest;
❖ If a person is arrested for a non-cognizable and bailable offence, the
Deputy/ Assistant Commissioner can release him on bail and he will be
subject to the same provisions as an officer in-charge of a police station
under section 436 of the Code of Criminal Procedure, 1973;
❖ All arrest must be in accordance with the provisions of the Code of Criminal
Procedure,1973 relating to arrest.
Section 132 of the Act also prescribes which types of offences are cognizable
and non-bailable and which types of offences are non-cognizable and bailable.

• Meaning of cognizable offence.

Generally, cognizable offence means serious category of offences in respect of
which a police officer has the authority to make an arrest without a warrant and to
start an investigation with or without the permission of a court.

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• Meaning of non-cognizable offence.

Non-cognizable offence means relatively less serious offences in respect of which
a police officer does not have the authority to make an arrest without a warrant
and an investigation cannot be initiated without a court order.

• Cognizable and non-cognizable offences under CGST Act.

Section 132 provides that the offences relating to taxable goods and /or services
where the amount of tax evaded or the amount of input tax credit wrongly availed
or the amount of refund wrongly taken exceeds ` 5 crore shall be cognizable and
non-bailable and in such cases the bail can be considered by a Judicial Magistrate
only.
Other offences under the Act are non-cognizable and bailable and all arrested
persons shall be released on bail by Deputy/ Assistant Commissioner.

• Precaution taken during arrest

The provisions of the Code of Criminal Procedure, 1973 relating to arrest and the
procedure thereof must be adhered to in all situations amounting to arrest. It is
therefore necessary that all field officers of CGST be fully familiar with the
provisions of the Code of Criminal Procedure, 1973.
One important provision to be taken note of is Section 57 of Cr.P.C., 1973 which
provides that a person arrested without warrant shall not be detained for a period
longer than, under the circumstances of the case, is reasonable, but this shall not
exceed 24 hours (excluding the journey time from place of arrest to the Magistrate’s
court). Within this period, as provided under section 56 of Cr.P.C., the person
making the arrest shall send the person so arrested without warrant, before a
Magistrate having jurisdiction in the case.

• Guidelines for arrest

The decision to arrest needs to be taken on case-to case basis considering various
factors, such as, nature and gravity of offence, quantum of duty evaded or credit
wrongfully availed, nature and quality of evidence, possibility of evidence being
tampered with or witnesses being influenced, cooperation with the investigation,
etc. The power to arrest has to be exercised after careful consideration of the facts
of the case which may include:

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 1.12 18.12 GOODS AND SERVICES TAX

❖ to ensure proper investigation of the offence;

❖ to prevent such person from absconding;
❖ master minds or key operators effecting proxy/ benami imports/exports in
the name of dummy or non-existent persons/IECs, etc;
❖ master minds or key operators effecting proxy/ benami imports/exports in
the name of dummy or non-existent persons/IECs, etc.;
❖ where the intent to evade duty is evident and element of mens rea/guilty
mind is palpable;

❖ prevention of the possibility of tampering with evidence;

❖ intimidating or influencing witnesses; and
❖ large amounts of evasion of tax.

5. POWER TO SUMMON PERSONS TO GIVE

EVIDENCE AND PRODUCE DOCUMENTS
[SECTION 70]
During the course of any enquiry under this Act, the proper officer may summon
any person to appear before him and give evidence or produce documents. The
person to whom such summons has been issued is duty bound to appear before
the officer and bound to tender evidence / give statement on oath. He is also bound
to produce all documents which were required to be furnished.
Asking for ‘evidence’ or requiring ‘to produce a document’ does not permit calling
for entire set of books of accounts. It is important to call for specific evidence or
documents. Recording a statement on oath is not the conclusion of investigation
but to further the investigation that the evidence or document obtained in
summons proceedings will help in supporting charges against a person. Statements
made in summons proceedings are inherently unreliable for the reason that the
person may be anxious due to the nature of the proceedings. Such statements are
also not free from doubt due to any inimical relations between the person
recording the statement and the person or entity charged with offence. It is also
important to note that a person who has made a statement may modify or even
withdraw the statement made. However, such modification or withdrawal cannot
be done with an inordinate delay.

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Reliability of statements is discussed in section 136 where 5 circumstances are stated

wherein the statements ‘may be’ accepted by a Court as reliable [Section 136 has been
discussed in detail in Chapter 21: Offences and Penalties and Ethical aspects under GST].
In all other circumstances, the Court will administer oath again and record evidence.
Documents not otherwise available may be summoned and collected such as contracts
and other documents. Annual accounts which are anyway available on MCA website
should not be called for in summons proceedings.

• Responsibilities of the person so summoned

All persons summoned are bound to attend, either in person or by an
authorised representative, as such officer may direct, and the person so
appearing shall state the truth during examination or make statements or
produce such documents and other things as may be required .

• Consequences of non-appearance to summons

The proceeding before the official who has issued summons is deemed to be a
judicial proceeding. If a person does not appear on the date when summoned
without any reasonable justification, he can be prosecuted under section 174 of the
Indian Penal Code (IPC). If he absconds to avoid service of summons, he can be
prosecuted under section 172 of the IPC and in case he does not produce the
documents or electronic records required to be produced, he can be prosecuted
under section 175 of the IPC. In case he gives false evidence, he can be prosecuted
under section 193 of the IPC. In addition, if a person does not appear before a
CGST/ SGST officer who has issued the summons, he is liable to a penalty upto
` 25,000 under section 122(3)(d) of the Act.

• Guidelines for issuance of summons

The Central Board of Indirect taxes and Customs (CBIC) in the Department of
Revenue, Ministry of Finance has issued guidelines from time to time to ensure that
summons provisions are not misused in the field. Some of the important highlights
of these guidelines are given below:
❖ summons are to be issued as a last resort where assesses are not co-operating
and this section should not be used for summoning the top management;
❖ the language of the summons should not be harsh and legally worded in such
manner which causes unnecessary mental stress and embarrassment to the
receiver;

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 1.14 18.14 GOODS AND SERVICES TAX

❖ summons by Superintendents should be issued after obtaining prior written

permission from an officer not below the rank of Assistant Commissioner with
the reasons for issuance of summons to be recorded in writing;
❖ where for operational reasons, it is not possible to obtain such prior written
permission, oral/ telephonic permission from such officer must be obtained
and the same should be reduced to writing and intimated to the officer
according such permission at the earliest opportunity;
❖ in all cases, where summons is issued, the officer issuing summons should
submit a report or should record a brief of the proceedings in the case file
and submit the same to the officer who had authorized the issuance of
summons;
❖ senior management officials such as CEO, CFO, General Managers of a large
companies or a Public Sector Undertakings should not generally be issued
summons at the first instance. They should be summoned only when there
are indications in the investigation of their involvement in the decision-
making process which has led to loss of revenue.

• Precautions to be observed while issuing summons

The following precautions should generally be observed when summoning a
person: -
(i) A summons should not be issued for appearance where it is not justified. The
power to summon can be exercised only when there is an inquiry being
undertaken and the attendance of the person is considered necessary.
(ii) Normally, summons should not be issued repeatedly. As far as practicable,
the statement of the accused or witness should be recorded in minimum
number of appearances.
(iii) The time of appearance given in the summons should be respected and no
person should be made to wait for long hours before his statement is
recorded except when it has been decided very consciously as a matter of
strategy.
(iv) Preferably, statements should be recorded during office hours; however, an
exception could be made regarding the time and place of recording
statement having regard to the facts in the case.

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6. ACCESS TO BUSINESS PREMISES [SECTION 71]

An officer duly authorized by the Joint Commissioner or an officer higher in rank
can have access to any business premises which may be required for the purpose
of carrying out any audit, scrutiny, verification and checks as may be necessary to
safeguard the interest of revenue.. During such access, the officers can inspect the
books of accounts, documents, computers, computer programs, computer software
and such other things as may be required.

It is the duty of the persons-in-charge of such premises to furnish the required

documents within fifteen working days from the day when such demand is made.
Similarly, the persons in charge of business premises are also duty bound to furnish
such documents to the audit party deputed by the proper officer or the Chartered
Accountant or Cost Accountant, who has been deputed by the Commissioner to
carry out special audit under section 66. The following records are covered by this
provision and are to be produced, if called for.

(i) the records prepared and maintained by the registered person and declared
to the proper officer in the prescribed manner.

(ii) trial balance or its equivalent.

(iii) statements of annual financial accounts, duly audited.

(iv) cost audit report, if any.

(v) the income-tax audit report, if any.

(vi) any other relevant record.

The powers under section 71 may be contrasted with powers under section 67 to
inspect premises. It may be noted that circumstances when each of these sections
are applicable are not similar. Section 71 is more general in its scope and extent
which predominantly gives access to the place of business of a registered person
to inspect books of accounts, documents etc. for carrying out any audit, scrutiny,
verification and checks, whereas section 67 is applicable in specific instances and
applies to specific persons/places where the Government has reasons to believe
that there is an intent to evade taxes.

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7. OFFICERS TO ASSIST PROPER OFFICERS

[SECTION 72]
Under section 72, the following officers have been empowered and are required
to assist CGST officers in the execution of CGST Act. The categories specified
are as follows:

i. Police;

ii. Railways

iii. Customs;

iv. Officers of State/UT/ Central Government engaged in collection of GST;

v. Officers of State/UT/ Central Government engaged in collection of land revenue;

vi. All village officers;

vii. Any other class of officers as may be notified by the Central/State

Government.

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LET US RECAPITULATE
Summary of provisions relating to inspection, search and seizure

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TEST YOUR KNOWLEDGE

1. Explain the situation in which access to business premises is allowed under

section 71. Also, list the records which are to be produced during access to
business premises.
2. Explain the safeguards provided under section 69 to a person who is placed
under arrest.
3. Who can order for carrying out ‘inspection’ and under what circumstances?
4. Who can order for search and seizure under the provisions of the CGST Act?
5. Describe the powers that can be exercised by an officer during a valid search.
6. Discuss the responsibilities of the person to whom summons has been issued.
7. Explain the meaning of ‘arrest’.
8. State the circumstances when the proper officer can authorize ‘arrest’ of any
person under the CGST Act.

ANSWERS

1. The access to any place of business of a registered person is allowed to a

proper officer who authorized by an officer of the rank of Joint Commissioner
or higher for the purposes of carrying out any audit, scrutiny, verification and
checks as may be necessary to safeguard the interest of revenue. During such
access, the officers can inspect the books of accounts, documents, computers,
computer programs, computer software and such other things as may be
required.
It is the duty of the persons in charge of such premises to furnish the required
documents within fifteen working days from the day when such demand is
made. Similarly, the persons in charge of business premises are also duty
bound to furnish such documents to the audit party deputed by the proper
officer or the Chartered Accountant or Cost Accountant, who has been
deputed by the Commissioner to carry out special audit. The following
records are covered by this provision and are to be produced, if called for.

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(i) the records prepared and maintained by the registered person and
declared to the proper officer in the prescribed manner.

(ii) trial balance or its equivalent.

(iii) statements of annual financial accounts, duly audited.

(iv) cost audit report, if any.

(v) the income-tax audit report, if any.

(vi) any other relevant record.

2. Section 69 provides following safeguards to a person who is placed under arrest:

(a) If a person is arrested for a cognizable offence, he must be informed of the

grounds of arrest and be produced before a magistrate within 24 hours.

(b) If a person is arrested for a non-cognizable offence, he shall be admitted

to bail or in default of bail, forwarded to the custody of the Magistrate.

(c) All arrest must be in accordance with the provisions of the Code of Criminal
Procedure relating to arrest in terms of section 69(3).

3. As per section 67, an inspection can be carried out by an officer of CGST/SGST

only upon a written authorization given by an officer of the rank of Joint
Commissioner or above. A Joint Commissioner or an officer higher in rank can
give such authorization only if he has reasons to believe that the person
concerned has done one of the following to evade tax:

i. suppressed any transaction of supply;

ii. suppressed stock of goods in hand;

iii. claimed excess input tax credit;

iv. contravened any provision of the CGST Act to evade tax;

v. a transporter or an owner/operator of a warehouse/godown/any other

place has kept goods which have escaped payment of tax or has kept his
accounts or goods in a manner that is likely to cause evasion of tax.

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4. An officer of the rank of Joint Commissioner or above can authorize an officer in

writing to carry out search and seize goods, documents, books or things. Such
authorization can be given only where the Joint Commissioner/an officer above
his rank has reasons to believe that any goods liable to confiscation or any
documents or books or things relevant for any proceedings are hidden in any
place. The Joint Commissioner/an officer above his rank empowered to
authorize any officer to carry out search and seizure can himself also carry out
search and seize such goods, documents or books or things.

5. An officer carrying out a search has the power to search for and seize goods
(which are liable to confiscation) and documents, books or things (relevant
for any proceedings under the CGST Act) from the premises searched. During
search, the officer has the power to break open the door of the premises
authorized to be searched if access to the same is denied. Similarly, while
carrying out search within the premises, he can break open any almirah or
box if access to such almirah or box is denied and in which any goods,
account, registers or documents are suspected to be concealed. He can also
seal the premises if access to it denied. In case where it is not practicable to
seize any such goods, the officer can issue an order restricting the owner of
the goods to not remove / part / deal with the goods except with his prior
permission. The officer can also dispose of goods seized which are specified
by the Government in a notification having regard to the nature of such
goods.

6. A person who is issued summons is legally bound to attend either in person

or by an authorized representative and he is bound to state the truth before
the officer who has issued the summons upon any matter which is the subject
matter of examination and to produce such documents and other things as
may be required.

7. The term ‘arrest’ has not been defined in the CGST Act. However, as per
judicial pronouncements, it denotes ‘the taking into custody of a person
under some lawful command or authority’. In other words, a person is said to
be arrested when he is taken and restrained of his liberty by power or colour
of a lawful warrant.

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8. The Commissioner can authorize an officer to arrest a person if he has reasons

to believe that the person has committed an offence attracting a punishment
prescribed under section 132(1) (a), (b), (c), (d) or section 132(2) and the tax
evaded / input tax credit wrongly availed or utilized or refund wrongly taken
exceeds ` 2 crore. This essentially means that a person can be arrested only
where the tax evasion is more than ` 2 crore and the offences are specified
offences namely, making supply without any invoice; issue of invoice without
any supply; amount collected as tax but not paid to the Government beyond
a period of 3 months and taking input tax credit without receiving goods and
services. However, the monetary limit shall not be applicable if the offences
are committed again (even after being convicted earlier), i.e. repeat offender
of the specified offences can be arrested irrespective of the tax amount
involved in the case.

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India
CHAPTER 19

DEMANDS AND
RECOVERY
The section numbers referred to in the chapter pertain to CGST Act, unless otherwise
specified. Examples/Illustrations/Questions and Answers, as the case may be, given
in the Chapter are based on the position of GST law existing as on 30.04.2025.

LEARNING OUTCOMES
After studying this Chapter, you will be able to –
 understand the provisions relating to determination of tax not
paid or short paid or erroneously refunded or input tax credit
wrongly availed or utilised whether by reason of fraud or wilful-
misstatement or suppression of facts, or otherwise.
 explain the consequences in case where tax is collected but not
paid to Government.
 describe the provisions of tax wrongfully collected and paid to the
Government.
 explain the recovery proceedings.
 elaborate the facility of payment of tax and other amount in
instalments.
 identify the cases where the transfer of property is void.
 explain provisions relating to provisional attachment to protect
revenue.

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1. Introduction
Though it is the duty of every taxable person to self-assess and pay his GST
liabilities voluntarily, tax administration occasionally comes across situations where
the tax dues are not paid correctly by the taxpayers. While in most of these cases,
such non-payment is due to the bonafide belief of the person that his activities do
not attract any tax liability under the GST law; or he is entitled to certain exemption,
etc., in some cases, such non-payment is deliberate with an intention to evade
payment of such tax by way of short payment of tax, excess availment of input tax
credit, etc.

As per the relevant provisions, the self-assessed tax has to be paid by the due date
prescribed under the GST law and any non-compliance may affect the Input Tax
Credit (ITC) eligibility of the customers and also the tax
payer will not be able to file any return for further period
in certain circumstances. Effectually, these provisions
work as a self-policing system and take care of any
mismatch in the payment of taxes.

However, despite these provisions, there may arise some instances where the tax
was not paid correctly. To deal with such situations, Revenue must be empowered
to demand the tax liability and recover such tax from the defaulter.

On one hand, there is a dire need to have a robust demand and recovery
mechanism in place in order to empower the Revenue to exercise said powers, at
the same time, care must also be taken that there should not be arbitrary exercise
of such powers by the Revenue and same should be appropriately regulated.

Accordingly, the GST law contains elaborate provisions for the recovery of tax under
various situations, which can be broadly classified into following two categories:

Tax short paid or

erroneously refunded or Non-payment of self-assessed
ITC wrongly availed tax or amount collected as
representing the tax

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 19.3
DEMANDS AND RECOVERY

Chapter XV of the CGST Act 2017 [Sections 73 to 84 1] and Chapter XVIII [Rules 142
to 161] of the CGST Rules, 2017 contains various provisions relating to demands
and recovery. There are parallel provisions in SGST laws of various States. The
demand and recovery proceedings will be made either by Central GST Officer or
State GST Officer depending on their jurisdiction over particular taxable person.

Provisions of demands and recovery under CGST Act have also been made
applicable to IGST Act vide section 20 of the IGST Act.

Before proceeding to understand the demands and recovery provisions, let us first
go through few relevant definitions.

2. RELEVANT DEFINITIONS
 Appellate Authority: means an authority appointed or authorised to hear
appeals as referred to in section 107 [Section 2(8)].
 Appellate Tribunal: means the Goods and Services Tax Appellate Tribunal
constituted under section 109 [Section 2(9)].
 Commissioner: means the Commissioner of central tax and includes the
Principal Commissioner of central tax appointed under section 3 and the
Commissioner of integrated tax appointed under the Integrated Goods and
Services Tax Act [Section 2(24)].
 Market value: shall mean the full amount which a recipient of a supply is

1
Since sections 73 and 74 contain the provisions for determination of tax, pertaining to the period
upto Financial Year 2023-24, not paid or short paid or erroneously refunded or input tax credit
wrongly availed or utilised for any reason other than fraud or any wilful misstatement or
suppression of facts or by reason of fraud or wilful-misstatement or suppression of facts, said
provisions have not been discussed in detail in this Chapter and are not relevant for examination
purpose. However, brief references to said sections have been retained wherever they are referred
to in other sections/rules and in CBIC clarifications.
Newly introduced section 74A containing provisions relating to determination of tax not paid or
short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason
pertaining to Financial Year 2024-25 onward has been discussed in detail and will be relevant for
examination purposes.

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 1.4 19.4 GOODS AND SERVICES TAX

required to pay in order to obtain the goods or services or both of like kind
and quality at or about the same time and at the same commercial level where
the recipient and the supplier are not related [Section 2(73)].
 Proper officer: in relation to any function to be performed under this Act,
means the Commissioner or the officer of the central tax who is assigned that
function by the Commissioner in the Board [Section 2(91)].

3. DETERMINATION OF TAX NOT PAID OR

SHORT PAID OR ERRONEOUSLY REFUNDED
OR INPUT TAX CREDIT WRONGLY AVAILED
OR UTILISED FOR ANY
REASON PERTAINING TO
FINANCIAL YEAR 2024-25
ONWARD [SECTION 74A
READ WITH RULE 142]
 Section 74A stipulates the manner in which the tax liability of a person
should be determined in case of short payment/ non-payment of tax/
erroneous refund/ wrong availment/ utilization of ITC. It provides a
unified mechanism for both fraud and non-fraud cases, i.e. where such
short payment/ non-payment of tax/ erroneous refund/ wrong
availment/ utilization of ITC is by reason of fraud, or any wilful-
misstatement or suppression of facts to evade tax or by reasons other
than fraud or wilful-misstatement or suppression of facts.
 Limitation period: One of the core principles of law is that legal
proceedings must have an element of certainty. The law of limitation is
built on this principle, as any action under any law must be taken within
a prescribed time frame; otherwise, disputes would remain open-ended
and uncertain. The purpose of a limitation period under tax law is to fix
a definite time within which the tax authorities can take action, such as
raising a demand, issuing a notice or making an assessment.
It ensures that tax matters are not kept open indefinitely, giving

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DEMANDS AND RECOVERY

certainty and finality both to the taxpayer and the Department. The
provisions of limitation period gain all the more importance in the
legislation dealing with indirect taxes, where the tax burden is to be passed
on to the next level at every stage. Therefore, a tax law must have a
limitation period, beyond which demands cannot be raised.
 Principal of natural justice: In order to adhere to the principles of natural
justice, before raising any tax demand, a notice has to be issued [generally
referred to as Show Cause Notice(SCN)], asking the person chargeable
with tax to show cause as to why the specified amount of tax, interest and
penalty should not be demanded from him.
The issuance of SCN grants an opportunity to such person to defend
himself before adjudication. The person to whom such notice has been
issued can contest the demand by filing a reply to the SCN and also by
appearing before the adjudicating authority personally. After
considering the reply filed by the person as well as the submissions made
during the personal hearing, the adjudicating authority shall pass a
speaking order, either confirming the tax demand or dropping the same.
 Section 74A provides standardized timelines and procedures for both
types of cases, thereby bringing efficiency in handling the cases and
promoting better understanding in following manner:
 Show cause notice (hereinafter referred as SCN) can be issued
within 42 months (3.5 years), from the due date of furnishing the
annual return or from the date of erroneous refund.
 The order must be passed within 1 year, from the date of SCN or
from the date of erroneous refund.
 The incidence of short payment/non-payment
of tax or erroneous refund or wrong
availment/utilisation of ITC may be because of
an inadvertent bonafide mistake, i.e. by reasons
other than fraud or wilful-misstatement or suppression of facts
(hereafter referred as Non-fraud cases) or it may be a deliberate attempt
to evade the tax, i.e. by reason of fraud, or any wilful-misstatement or
suppression of facts (hereinafter referred as Fraud cases).

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 1.6 19.6 GOODS AND SERVICES TAX

The provisions contained in section 74A have been discussed in detail below.
A. Issuance of SCN [Section 74A(1), (3)and (4)]
 SCN is issued in any of the following cases:

 Tax has not been paid,

 Tax has been short paid,
 Tax has been erroneously refunded, or
 ITC has been wrongly availed/utilised.
 SCN requires the person chargeable with tax to show cause as to why
he should not pay the amount specified in SCN along with interest
payable thereon under section 50 (interest on delayed payment of
tax) 2 and a penalty leviable under the provisions of the GST law.
Thus, SCN would clearly state the amount of tax, interest and
penalty that the person is liable to pay.
 Needless to say, the notice should clearly state the grounds based
on which such demand is raised, so that the person against whom
the notice is served is made aware of the basis of the demand.
 SCN is to be issued in both fraud cases and non-fraud cases.
 Exception: No SCN shall be issued if the disputed amount 3 is less
than ` 1,000 in a financial year.
 Pre-SCN intimation: The proper officer may, before serving of such
SCN, communicate the details of any tax, interest and penalty as
ascertained by him, in the prescribed form, to the person
chargeable with tax, interest and penalty. It is important to note
that issuance of pre-SCN intimation is not mandatory.

Where such person has made partial payment of the amount

communicated to him or desires to file any submissions against the
proposed liability, he may make such submission and thereafter the

2
Notification No. 13/2017 CT dated 28.06.2017 has notified the rate of interest as 18% per annum
under section 50.
3
Disputed amount here refers the tax which has not been paid or short paid or erroneously
refunded or where input tax credit has been wrongly availed or utilised

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DEMANDS AND RECOVERY

proper officer may issue an intimation, accepting the payment or

the submissions or both, as the case may be, made by the said
person.
 Statement in lieu of SCN for subsequent periods: Where a SCN has
been issued for any period, the proper officer may serve a statement
instead of SCN for the subsequent periods.
Such statement shall contain the details of:
 Tax not paid
 Tax short paid
 Tax erroneously refunded, or
 ITC wrongly availed/utilised.
Statement shall be served for the periods other than those covered
under the SCN earlier issued.
The service of such statement for subsequent periods shall be
deemed to be service of SCN on the person chargeable with tax.
This is subject to the condition that the grounds relied upon for
subsequent tax periods are the same as are mentioned in the earlier
SCN.
This provision ensures that the Department’s time is saved by
avoiding repetitive re-typing of demand notices.

B. Time limit for issuance of SCN [Section 74A(2)]

SCN must be issued within 42 months (3.5 years)

from:

 the due date for furnishing of annual return 4

or

 the date of erroneous refund.

4
Annual return here refers to annual return for the financial year to which the tax not paid or
short paid or input tax credit wrongly availed or utilised relates to.

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C. Quantum of penalty [Section 74A(5)]

What is the penalty amount?

Fraud Case Non-Fraud Case

Penalty is the tax due Penalty is higher of:
from the person (i) 10% of tax due
chargeable with tax. or
(ii) ₹10,000**.

**` 10,000 each under CGST and SGST/UTGST or ` 20,000 under IGST

D. Issuance of order [Section 74A(6) and (7)]

The person chargeable with tax may give the representation to proper
officer and the proper officer shall, after considering the representation,
determine the amount of tax, interest and penalty due from such person
and issue an order.
Time limit for issuance of order: The proper officer shall issue said order
within 12 months from date of issuance of the SCN.
However, if the officer is unable to issue order within this time, the
Commissioner or any officer authorised by the Commissioner who is
senior in rank to the proper officer, but not below the rank of Joint
Commissioner of Central Tax, may extend this period.

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DEMANDS AND RECOVERY

Such extension can be given for a maximum of 6 months, provided

reasons for the delay in issuance of order are recorded in writing, before
the expiry of the original 12 months’ period.
E. Payment of tax and interest and penalty 5 before issuance of SCN [Section
74A(8)(i), 74A(9)(i) & 74A(10)]
The law provides an opportunity to the person chargeable with tax to pay
tax, interest and penalty before issuance of SCN. In that case, in non-
fraud cases, penalty will be completely waived off and in fraud cases,
penalty will be reduced to 15% of the tax.

The detailed provisions are as under:

 Non-fraud cases: In case of non-fraud cases, the person chargeable
with tax may pay the alongwith interest payable under section 50
(interest on delayed payment of tax), before the issue of
SCN/statement:
 on the basis of his own ascertainment of tax, or
 the tax as ascertained by the proper officer
and inform the proper officer in writing of such payment in
prescribed form - Form DRC-03. An acknowledgement shall be
made available to such person through the common portal
electronically.
The proper officer, on receipt of such information, shall not serve
any SCN/statement, as the case may be, in respect of the tax so paid
or any penalty payable under the provisions of GST law.
 Fraud cases: In case of fraud cases, the person chargeable with tax
may pay the alongwith interest payable under section 50 (interest
on delayed payment of tax) and a penalty equivalent to 15% of such
tax, before the issue of SCN/ statement:
 on the basis of his own ascertainment of tax, or
 the tax as ascertained by the proper officer

5
In case of payment of tax and interest before issuance of SCN, penalty is payable only in fraud
cases.

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 1.1019.10 GOODS AND SERVICES TAX

and inform the proper officer in writing of such payment in

prescribed form - Form DRC-03. An acknowledgement shall be
made available to the person through the common portal
electronically.
The proper officer, on receipt of such information, shall not serve
any SCN in respect of the tax so paid or any penalty payable under
the provisions of GST law.
Where amount paid falls short of amount actually payable: Where
the proper officer is of the opinion that the amount paid as above
in fraud/non-fraud cases falls short of the amount actually
payable, he shall proceed to issue SCN in respect of such amount
which falls short of the amount actually payable.
 The option of paying tax and interest and penalty (in case of fraud
cases) before issuance of SCN so as to avoid the issuance of SCN is
available in both fraud as well as non-fraud cases.
F. Payment of tax and interest and penalty 6 within 60 days of issuance of
SCN [Section 74A(8)(ii) & 74A(9)(ii)]
 Non-fraud cases: In case of non-fraud cases, the person chargeable
with tax may pay the alongwith interest payable under section 50
(interest on delayed payment of tax), within 60 days of issuance of
SCN/statement,
and inform the proper officer of such payment in prescribed form.
In such cases, no penalty shall be payable and all proceedings in
respect of the said SCN shall be deemed to be concluded. The proper
officer shall issue an intimation in prescribed form concluding the
proceedings in respect of the said SCN.
 Fraud cases: In case of fraud cases, the person chargeable with tax
may pay the alongwith interest payable under section 50 (interest
on delayed payment of tax) and a penalty equivalent to 25% of such

6
In case of payment of tax and interest within 60 days of issuance of SCN, penalty is payable only
in fraud cases.

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DEMANDS AND RECOVERY

tax, within 60 days of issuance of SCN/statement,

and inform the proper officer of such payment in prescribed form.
 In such cases, all proceedings in respect of the said SCN shall be
deemed to be concluded. The proper officer shall issue an intimation
in prescribed form concluding the proceedings in respect of the said
SCN.
G. Payment of tax, interest and penalty within 60 days of communication
of order [Section 74A(9)(iii)]
 In case of fraud cases, the person chargeable with tax may pay the
alongwith interest payable under section 50 (interest on delayed
payment of tax) and a penalty equivalent to 50% of such tax, within
60 days of communication of order, and all proceedings in respect
of the said SCN shall be deemed to be concluded.
H. Penalty in case of non-payment of self-assessed tax or amount collected
as tax, within 30 days of due date [Section 74A(11)]
In case of non-fraud cases, if the amount of self-assessed tax or any
amount collected as tax has not been paid within a period of 30 days from
the due date of payment of such tax, then following penalty shall be
payable:
(i) 10% of tax
or

(ii) ` 10,000 7
whichever is higher.
This provision is notwithstanding anything contained in clause (i) or
clause (ii) of sub-section (8) of section 74A. In other words, in such cases,
imposition of penalty is mandatory with no option of waiver [as offered
under section 74A(8)].

In case of non-payment of self-assessed tax and the amount collected as

representing the tax, the only opportunity for paying the same without
incurring any penalty is, if it is paid, with interest, within 30 days from

7
` 10,000 each under CGST and SGST/UTGST or ` 20,000 under IGST

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 1.1219.12 GOODS AND SERVICES TAX

the due date of payment. The option to pay such tax before issuance of
scn or within 30 days of issuance of SCN and avoid penalty consequences
is not available. Penalty under section 74A(5)(i) shall be payable where
any amount of self-assessed tax or any amount collected as tax has not
been paid within a period of 30 days from the due date of payment of
such tax.

For the purposes of section 74A:

(i) the expression “all proceedings in respect of the said notice” shall not
include proceedings under section 132. Section 132 is in relation to
prosecution. Thus, the person can be prosecuted under GST law even if
no further demand can be raised for tax, interest or penalty. Prosecution
in criminal court is independent of and can be in addition to, penalty
imposed under GST law.
(ii) where the notice under the same proceedings is issued to the main person
liable to pay tax and some other persons, and such proceedings against
the main person have been concluded under section 74A, the proceedings
against all the persons liable to pay penalty under sections 122 and 125 8
are deemed to be concluded. Sometimes, if a notice is issued to a
company, notice may be also issued to its executive director, employees,
transporter etc. for same cause of action. These are termed as ‘co-
noticees’, while company is the ‘main noticee’. Conclusion of
proceedings against main noticee would be deemed to be conclusion of
proceedings against all co-noticees also and the entire case will stand
closed.
(iii) For the purposes of this Act, the expression “suppression” shall mean
non-declaration of facts or information which a taxable person is
required to declare in the return, statement, report or any other
document furnished under this Act or the rules made thereunder, or
failure to furnish any information on being asked for, in writing, by the
proper officer. Thus, definition of ‘suppression’ is very clear that only if
information that was required to be disclosed under the GST law (e.g. in
return, statement or report or when specific query was raised) is not

8
Provisions relating to sections 122 & 125 have been discussed in detail in Chapter 21 – Offences
and Penalties and Ethics under GST in this Module of the Study Material.

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DEMANDS AND RECOVERY

disclosed, that would amount to ‘suppression’. It is not duty of a taxable

person to disclose each material fact to the Department, if it is not asked
for.

The above provisions have been summarized in the following table:

Section 74A Demand and recovery in fraud and non-fraud cases

(Applicable from FY
2024-25 onwards)
Power to serve show Proper Officer (PO) shall serve the SCN to a person
cause notice (SCN) chargeable with tax in case of tax not paid or short paid
or erroneously refunded, or ITC wrongly availed or
utilized.
No SCN to be issued if the amount involved is less than
` 1,000.
Time limit for 42 months from the
issuance of notice (i) due date of furnishing annual return of the FY, to
which such non-payment/short payment of tax or
ITC wrongly availed/utilized relates or
(ii) date of erroneous refund
Issuance of statement PO may serve a statement containing details of tax not
for subsequent paid or short paid or erroneously refunded, or ITC
periods wrongly availed or utilized, for subsequent periods
other than covered under the original notice.
Deemed SCN if Such statement shall be deemed to be the SCN but
grounds for issuing grounds for discrepancies in statement must be the
statement are same same as those in original SCN
as in case of SCN
Penalty Non Fraud Cases Fraud Cases
10% of the tax due or Equivalent to the tax due
` 10,000 9 whichever is
higher

9
` 10,000 each under CGST and SGST/UTGST or ` 20,000 under IGST

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 1.1419.14 GOODS AND SERVICES TAX

In case where Penalty in Penalty in

Non Fraud Fraud Cases
Cases
Tax and Interest NIL 15% of Tax
paid before SCN Due
Tax and Interest NIL 25% of Tax
paid within 60 days Due
of SCN
Tax and Interest paid within 60 days 50% of Tax
of communication of order Due

Issue of order PO shall determine the tax, interest and penalty after
considering representation made by person chargeable
with tax and issue an order.
Time Limit for • 12 months from the date of issue of SCN
issuance of order • Extension upto 6 months permitted
Penalty in case of Self If in non-fraud cases, self-assessed tax or amount
Assessed Tax or collected as tax is not paid within 30 days from the due
amount collected as date, penalty shall be levied as follows:
tax 10% of the tax due or ` 10,000 10, whichever is higher.

4. GENERAL PROVISIONS RELATING TO

DETERMINATION OF TAX [SECTION 75]
General provisions relating to determination of tax are contained in section 75 of
CGST Act. These provisions are applicable both in case of determination of tax not
paid/short paid/ erroneously refunded/ITC wrongly availed/ utilised whether by
reason of fraud/any wilful misstatement/suppression of facts or otherwise.

10
` 10,000 each under CGST and SGST/UTGST or ` 20,000 under IGST

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DEMANDS AND RECOVERY

These provisions have been discussed are as follows:

A. Period of stay order to be excluded in computing the limitation
period [Section 75(1)]
Where the service of notice or issuance of order
is stayed by an order of a Court or Appellate
Tribunal, the period of such stay shall be
excluded in computing the period for issuance of
notice and issuance of adjudication order**, as the
case may be.
**period as specified in sub-sections (2) and (7) of section 74A 11.
B. In case charges of fraud/any wilful misstatement/suppression of
facts are not established for a notice issued in a fraud case, penalty
prescribed for non-fraud cases is payable [Section 75(2A)]
Where any Appellate Authority or Appellate Tribunal or Court concludes
that the penalty prescribed for fraud cases under section 74A is not
sustainable for the reason that the charges of fraud or any wilful-
misstatement or suppression of facts to evade tax has not been
established against the person to whom the notice was issued, the
penalty prescribed for non-fraud cases under section 74A shall be
payable by such person.
C. Adjudication order issued in pursuance of Appellate Authority/
Appellate Tribunal/ Court’s direction be issued with 2 years [Section
75(3)]
Where any order is required to be issued in pursuance of the direction of the
Appellate Authority or Appellate Tribunal or a court, such order shall be
issued within 2 years from the date of communication of the said direction.
D. Opportunity of being heard [Section 75(4)]
An opportunity of hearing shall be granted where a request is received in
writing from the person chargeable with tax or penalty, or where any adverse
decision is contemplated against such person.

11
sub-sections (2) and (10) of section 73 or sub-sections (2) and (10) of section 74

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 1.1619.16 GOODS AND SERVICES TAX

Adjournment of hearing to grant time to person chargeable with tax

[Section 75(5)]
The proper officer shall, if sufficient cause is shown by the person chargeable
with tax, grant time to the said person and adjourn the hearing for reasons
to be recorded in writing.
However, such adjournment shall be granted for a maximum of 3 times to
a person during the proceedings.
E. Adjudication order should be a speaking order
[Section 75(6)]
The proper officer, in his order, shall set out the
relevant facts and the basis of his decision.
F. Tax, interest and penalty demanded in order not to exceed amount
specified in notice [Section 75(7)]
The amount of tax, interest and penalty demanded in the order shall not be
in excess of the amount specified in the notice and no demand shall be
confirmed on the grounds other than the grounds specified in the notice.
G. In case of modification of tax by the Appellate Authority/ Tribunal/
Court, penalty and interest to be modified accordingly [Section
75(8)]
Where the Appellate Authority or Appellate Tribunal or court modifies the
amount of tax determined by the proper officer, the amount of interest and
penalty shall stand modified accordingly, taking into account the amount of
tax so modified.
H. Payment of interest mandatory even if not specified in the
adjudication order [Section 75(9)]
The interest on the tax short paid or not paid shall be payable whether or not
specified in the order determining the tax liability.
I. Adjudication order to be passed mandatorily within stipulated time
[Section 75(10)]
The GST law ensures timely disposal of cases by providing that if the
adjudication order is not issued within the stipulated time limit of 1 year
of issuance of SCN, the adjudication proceedings shall be deemed to be
concluded.

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J. In case of appeal filed by Department against prejudicial decision of

the Appellate Authority/ Appellate Tribunal/ High Court, period
between the date of decision of the higher authority and that of the
lower authority to be excluded [Section 75(11)]
An issue on which the Appellate Authority or the Appellate Tribunal or the
High Court has given its decision which is prejudicial to the interest of
revenue in some other proceedings and an appeal to the Appellate Tribunal
or the High Court or the Supreme Court against such decision of the
Appellate Authority or the Appellate Tribunal or the High Court is pending,
the period spent between the date of the decision of the Appellate Authority
and that of the Appellate Tribunal or the date of decision of the Appellate
Tribunal and that of the High Court or the date of the decision of the High
Court and that of the Supreme Court shall be excluded in computing the time
limit for passing adjudication order, where proceedings are initiated by way
of issue of a SCN under the sections 73 and 74 or section 74A.
K. Amount of self-assessed tax or interest remaining unpaid to be
recovered under section 79 [Section 75(12)]
Notwithstanding anything contained in section 73 or section 74 or section
74A, where any amount of self-assessed tax in accordance with a return
furnished under section 39 remains unpaid, either wholly or partly, or any
amount of interest payable on such tax remains unpaid, the same shall be
directly recovered under the provisions of section 79 [discussed subsequently
in this chapter].
The expression "self-assessed tax" shall include the tax payable in respect
of details of outward supplies furnished under section 37, but not included in
the return furnished under section 39.
The scope of the term “self-assessed tax” is wide enough and hence the
recovery proceedings can straight away be initiated by the proper officer for
the outward supplies shown in the Form GSTR-1, if not reflecting in Form
GSTR-3B. In other words, where the tax payable in respect of details of
outward supplies furnished in Form GSTR-1, has not been paid through Form
GSTR-3B, either wholly/partly, or any amount of interest payable on such tax
remains unpaid, then in such cases, the tax short paid on such self-assessed
and thus self-admitted liability, and the interest thereon, are liable to be
recovered under section 79.

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 1.1819.18 GOODS AND SERVICES TAX

However, the difference/mismatch between details of Form GSTR-1 and Form

GSTR-3B may arise due genuine reasons:
For instance,
 a typographical error/wrongly reported details in Form GSTR-1 or Form
GSTR-3B which may be rectified in subsequent Form GSTR-1 or Form
GSTR-3B, or
 where a supply could not be declared in GSTR-1 of an earlier tax period,
though the tax on the same was paid by correctly reporting the same
in Form GSTR-3B of said tax period; details may now be reported in the
Form GSTR-1 of the current tax period.
Therefore, Instruction No. 01/2022 GST dated 07/01/2022 provides that in
case of mismatch between Form GSTR-1 and Form GSTR-3B, the proper
officer may first send a communication to the registered person to pay the
self-assessed tax short paid/not paid, or to explain the reasons for the same,
within a reasonable time prescribed in the communication.
Recovery proceedings under section 79 will be initiated by the proper officer
only when the said person either (i) fails to reply to the proper officer, or (ii)
fails to make the payment of such amount short paid/not paid within the
prescribed time or (iii) fails to explain the reasons for such amount short
paid/not paid.
L. In case of penalty being imposed under section 73/74 or 74A, no other
penalty to be imposed for the same act/omission [Section 75(13)]
Where any penalty is imposed under section 73 or section 74 or 74A, no
penalty for the same act or omission shall be imposed on the same person
under any other provision of this Act.

5. TAX COLLECTED BUT NOT DEPOSITED

[SECTION 76]
The provisions of this section are based on the principle
that nobody should be unjustly enriched in the name of
Revenue. If any amount is collected in the name of tax, the
same must be deposited with the Government.

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Such situation may arise in case where tax is collected on supplies on which the tax
is leviable, but such tax is not deposited with the Government or where tax is
collected on supplies on which tax is not leviable at all, and thus, tax collected is
not deposited with the Government.
The detailed provisions of this section have been discussed hereunder:
A. Amount representing tax collected from any person to be paid to the
Central Government [Section 76(1)]
Notwithstanding anything to the contrary contained in any order or direction
of any Appellate Authority or Appellate Tribunal or Court or in any other
provisions of this Act or the rules made thereunder or any other law for the
time being in force, every person who has collected from any other person
any amount as representing the tax under this Act, and has not paid the said
amount to the Government, shall forthwith pay the said amount to the
Government, irrespective of whether the supplies in respect of which such
amount was collected are taxable or not.
B. Issue of SCN [Section 76(2)]
Where any amount is required to be paid to the Government under sub-
section (1), and which has not been so paid, the proper officer may serve on
the person liable to pay such amount a notice requiring him to show cause
as to why the said amount as specified in the notice, should not be paid by
him to the Government and why a penalty equivalent to the amount specified
in the notice should not be imposed on him under the provisions of this Act.
C. Determination of amount due [Section 76(3)]
The proper officer shall, after considering the representation, if any, made by
the person on whom SCN is served, determine the amount due from such
person and thereupon such person shall pay the amount so determined.
D. Interest payable on the amount [Section 76(4)]
 The person who has collected any amount as representing the tax, but
not deposited the same with the Government shall in addition to paying
the said amount determined by the proper officer shall also be liable to
pay interest thereon.
 Interest is payable at the rate specified under section 50.
 Interest is payable from the date such amount was collected by him to
the date such amount is paid by him to the Government.

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 1.2019.20 GOODS AND SERVICES TAX

E. Opportunity of being heard [Section 76(5)]

An opportunity of hearing shall be granted where a request is received in
writing from the person to whom SCN was issued.
F. Time limit for issuance of order [Section 76(6) & (7)]
The proper officer shall issue an order within 1 year from the date of issue of
the notice.
Where the issuance of order is stayed by an order of the Court or Appellate
Tribunal, the period of such stay shall be excluded in computing the period
of 1 year.
G. Order must be a speaking order [Section 76(8)]
The proper officer, in his order, shall set out the relevant facts and the basis
of his decision.
H. Adjustment of amount payable under section 76(1) and (3) [Section
76(9), (10) & (11)]
The amount paid to the Government under sub-section (1) or sub-section (3)
shall be adjusted against the tax payable, if any, by the person in relation to
the supplies referred to in sub-section (1).
Where any surplus is left after the adjustment under sub-section (9), the
amount of such surplus shall either be credited to the Consumer Welfare Fund
or refunded to the person who has borne the incidence of such amount.
The person who has borne the incidence of the amount, may apply for the
refund of the same in accordance with the provisions of section 54.

6. TAX WRONGFULLY COLLECTED AND PAID

TO CENTRAL GOVERNMENT OR STATE
GOVERNMENT [SECTION 77]
A registered person who has paid the CGST and SGST or, as the case may be, the
CGST and the UTGST on a transaction considered by him to be an intra-State
supply, but which is subsequently held to be an inter-State supply, shall be
refunded the amount of taxes so paid in such manner and subject to such
conditions as may be prescribed.

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DEMANDS AND RECOVERY

A registered person who has paid IGST on a transaction considered by him to be

an inter-State supply, but which is subsequently held to be an intra-State supply,
shall not be required to pay any interest on the amount of CGST and SGST or, as
the case may be, the CGST and the UTGST tax payable.
Similar provisions are contained in section 19 of the IGST Act, 2017.
Section 19 provides that a registered person who has paid IGST on a supply
considered by him to be an inter-State supply, but which is subsequently held to
be an intra-State supply, shall be granted refund of the amount of IGST so paid in
such manner and subject to such conditions as may be prescribed. A registered
person who has paid CGST and SGST or, as the case may be, the CGST and the
UTGST, on a transaction considered by him to be an intra-State supply, but which
is subsequently held to be an inter-State supply, shall not be required to pay any
interest on the amount of IGST payable.
Clarification in respect of refund of tax specified in section 77 of the CGST Act
and section 19 of the IGST Act
It is clarified that the term “subsequently held” in said sections covers both the
cases where the inter-State or intra-State supply made by a taxpayer, is either
subsequently found by taxpayer himself as intra-State or inter-State respectively or
where the inter-State or intra-State supply made by a taxpayer is subsequently
found/ held as intra-State or inter-State respectively by the tax officer in any
proceeding, for instance, scrutiny/ assessment/ audit/ investigation, or as a result
of any adjudication, appellate or any other proceeding. Accordingly, refund claim
under the said sections can be claimed by the taxpayer in both the above-
mentioned situations, provided the taxpayer pays the required amount of tax in the
correct head.
(1) Ram Associates, a registered person, pays IGST on a transaction
treating the same as inter-State supply by mistake, though it was an intra-
state supply. In this case, Ram Associates has to pay CGST and
SGST/UTGST, without any interest. He can thereafter claim refund of IGST which
was erroneously paid.

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 1.2219.22 GOODS AND SERVICES TAX

7. RECOVERY PROCEEDINGS [SECTIONS 78 & 79]

The recovery proceedings are final steps towards the realisation of any tax or any
other amount, which has been confirmed as payable after following the due process
of adjudication by the proper officer. These recovery provisions under the
CGST Act, 2017 lay down a well-defined procedure which is as follows:

A. Initiation of recovery proceedings [Section 78]

Any amount payable by a taxable person in
pursuance of an order passed under this Act must be
paid by such person within a period of 3 months
from the date of service of such order. If a taxable
person fails to do so, recovery proceedings are
initiated against him.
However, where the proper officer considers it expedient in the interest of
revenue, he may, for reasons to be recorded in writing, require the said
taxable person to make such payment within such period less than a period
of 3 months as may be specified by him.
B. Recovery of tax [Section 79]
If the payable amount is not paid by a person within the specified time limit
of 3 months, recovery proceedings shall be initiated and various actions may
be taken by the recovery officer, for realisation of Government dues.
Recovery of taxes can also be made from distinct persons [referred to in
section 25(4) & (5) 12] present in different States/ UTs.
The options for recovery of Government dues include deduction of money
from any amount payable to such tax payer, detaining and selling any goods,
directing any other person from whom the money is due to such person,
attaching any property belonging to the defaulter etc.

Concept of distinct persons has been explained in detail in Chapter 1 – Supply under GST in
12

Module 1 of the Study Material.

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DEMANDS AND RECOVERY

MODES OF RECOVERY OF TAX [SECTION 79(1)]

Where any amount payable by a person to the
Government under any of the provisions of this Act
or the rules made thereunder is not paid, the proper
officer shall proceed to recover the amount by one
or more of the following modes, namely:
(i) Recovery by deduction from any money owed [Section 79(1)(a)
read with rule 143]
The proper officer may deduct or may require any other specified officer
to deduct the amount so payable from any money owing to such person
[referred as ‘defaulter’] which may be under the control of the proper
officer or such other specified officer.

Specified officer shall mean any officer of the Central Government or

a State Government or the Government of a Union territory or a local
authority, or of a Board or Corporation or a company owned or
controlled, wholly or partly, by the Central Government or a State
Government or the Government of a Union territory or a local authority.

(ii) Recovery by sale of goods under the control of proper officer

[Section 79(1)(b) read with rule 144]
 The proper officer may recover or may require any other specified
officer to recover the amount so payable from a defaulter by
detaining and selling any goods [through a process of auction,
including e-auction] belonging to such person which are under
the control of the proper officer or such other specified officer.
 The proper officer shall prepare an inventory and estimate the
market value of such goods and proceed to sell only so much of
the goods as may be required for recovering the amount payable
along with the administrative expenditure incurred on the
recovery process.
 Where the defaulter pays the amount under recovery, including
any expenses incurred on the process of recovery, before the issue
of the notice for auction, the proper officer shall cancel the
process of auction and release the goods.

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(iii) Garnishee proceedings - Recovery from a third person [Section

79(1)(c) read with rule 145]
 The proper officer may, by a notice in prescribed form, in writing,
require any other person:
 from whom money is due/may become due to such person
or
 who holds/may subsequently hold money for/on account of
such person to pay to the Government
 either forthwith upon the money becoming due or being
held, or
 within the time specified in the notice not being before the
money becomes due or is held,
so much of the money as is sufficient to pay the amount due from
such person or the whole of the money when it is equal to or less
than that amount.
 Every person to whom the notice is issued hereunder shall be
bound to comply with such notice.
 Where any such notice is issued to a post office, banking
company or an insurer, it shall not be necessary to produce any
pass book, deposit receipt, policy or any other document for the
purpose of any entry, endorsement or the like being made before
payment is made, notwithstanding any rule, practice or
requirement to the contrary.
 In case the person to whom notice is issued hereunder, fails to
make the payment in pursuance thereof to the Government, he
shall be deemed to be a defaulter in respect of the amount
specified in the notice and all the consequences of this Act or the
rules made thereunder shall follow.
 The officer issuing such notice may, at any time, amend or revoke
the notice or extend the time for making any payment in
pursuance of the notice.
 Any person making any payment in compliance with the notice

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DEMANDS AND RECOVERY

issued hereunder shall be deemed to have made the payment

under the authority of the person in default.
 Further, such payment being credited to the Government shall be
deemed to constitute a good and sufficient discharge of the
liability of such person to the person in default to the extent of
the amount specified in the receipt.
 Any person discharging any liability to the person in default after
service on him of the notice shall be personally liable to the
Government to the extent of the liability discharged or to the
extent of the liability of the person in default for tax, interest and
penalty, whichever is less.
 Where a person on whom a notice is served hereunder proves to
the satisfaction of the officer issuing the notice that:
 the money demanded/any part thereof was not due to the
person in default or
 he did not hold any money for/on account of the person in
default, at the time the notice was served on him, nor is the
money demanded or any part thereof, likely to become due
to the said person/be held for/on account of such person,
nothing contained in this section shall be deemed to require the
person on whom the notice has been served to pay to the
Government any such money or part thereof.
 Where the third person makes the payment of the amount
specified in the notice, the proper officer shall issue a certificate
in prescribed form to the third person clearly indicating the details
of the liability so discharged.
(iv) Recovery by sale of movable/immovable property [Section 79(1)(d)
read with rules 147, 148, 149, 150 and 154]
 The proper officer may, in accordance with the rules to be made
in this behalf, distrain any movable or immovable property
belonging to or under the control of such person, and detain the
same until the amount payable is paid; and in case, any part of
the said amount payable or of the cost of the distress or keeping

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 1.2619.26 GOODS AND SERVICES TAX

of the property, remains unpaid for a period of 30 days next after

any such distress, may cause the said property to be sold [through
auction including e-auction] and with the proceeds of such sale,
may satisfy the amount payable and the costs including cost of
sale remaining unpaid and shall render the surplus amount, if any,
to such person [Section 79(1)(d)].
 The proper officer shall prepare a list of movable and immovable
property belonging to the defaulter, estimate their value as per
the prevalent market price and issue an order of attachment or
distraint and a notice for sale prohibiting any transaction with
regard to such movable and immovable property as may be
required for the recovery of the amount due.

In case of attachment/
distraint of

an immovable property order shall be affixed on the

property till the confirmation of sale

a movable property proper officer shall seize the

property and take its custody.

 Stamp duty/any other tax/fee payable on transfer of such

property shall be paid by the transferee to the Government.
 Any property in a debt not secured by a negotiable instrument, a
share in a corporation, or other movable property not in the
possession of the defaulter except for property deposited in/in
the custody of any Court shall be attached in the manner provided
in rule 151 [discussed subsequently in this chapter].
 Where any claim is preferred/any objection is raised with regard
to the attachment/distraint of any property by a person claiming
that he had some interest in/was in possession of, the property in
question, proper officer shall investigate the same and postpone
the sale till such time.
 If proper officer finds merit in his claims/objection upon

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DEMANDS AND RECOVERY

investigation, proper officer will release the property, wholly or

partly. Otherwise, the proper officer will reject the claim and
proceed with the process of sale through auction.
 Where the defaulter pays the amount under recovery, including
any expenses incurred on the process of recovery, before the issue
of the notice for auction, the proper officer shall cancel the
process of auction and release the goods.
 The amounts so realised from the sale of goods or conveyance,
movable or immovable property, for the recovery of dues from a
defaulter or for recovery of penalty payable under section 129(3)
shall,-
(a) first, be appropriated against the administrative cost of the
recovery process;
(b) next, be appropriated against the amount to be recovered
or to the payment of the penalty payable under section
129(3), as the case may be;
(c) next, be appropriated against any other amount due from
the defaulter under the CGST Act/IGST Act/UTGST Act/any
of the SGST Act and the rules made thereunder; and
(d) the balance, if any, shall be credited to the electronic cash
ledger of the owner of the goods or conveyance as the case
may be, in case the person is registered under the GST law,
and where the said person is not required to be registered
under the GST law, the said amount shall be credited to the
bank account of the person concerned;
 Where it is not possible to pay the balance of sale proceeds, as per
clause (d) of sub-rule (1), to the person concerned within a period of
6 months from the date of sale of such goods or conveyance or such
further period as the proper officer may allow, such balance of sale
proceeds shall be deposited with the Fund.
 Where the property to be sold is a negotiable instrument or a
share in a corporation, the proper officer may, instead of selling it
by public auction, sell such instrument or a share through a broker

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 1.2819.28 GOODS AND SERVICES TAX

and the said broker shall deposit to the Government so much of

the proceeds of such sale, reduced by his commission, as may be
required for the discharge of the amount under recovery and pay
the amount remaining, if any, to the owner of such instrument or
a share.
 Any officer/other person who has a duty to perform in connection
with such sale will not acquire any interest in property sold.
 No such sale will take place on Sundays/other general holidays
recognized by Government.
 Proper officer may seek assistance from jurisdictional police
station.
(v) Recovery as arrears of land revenue [Section 79(1)(e) read with rule
155]
 The proper officer may prepare a certificate in prescribed form
signed by him specifying the amount due from such person and
send it to the Collector of the district in which such person owns
any property or resides or carries on his business or to any officer
authorised by the Government and the said Collector or the said
officer, on receipt of such certificate, shall proceed to recover
from such person the amount specified thereunder as if it were an
arrear of land revenue.
(vi) Recovery as fine imposed by Magistrate [Section 79(1)(f) read with
rule 156]
Notwithstanding anything contained in the Code of Criminal Procedure,
1973, the proper officer may file an application to the appropriate
Magistrate in prescribed form to recover from the person concerned
the amount specified thereunder and such Magistrate shall proceed to
recover from such person amount specified thereunder as if it were a
fine imposed by him.
(vii) Recovery through execution of a decree, etc. [Rule 146]
Where any amount is payable to the defaulter in the execution of a
decree of a Civil Court for the payment of money or for sale in the
enforcement of a mortgage or charge, the proper officer shall send a

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request to the said court and the court shall, subject to the provisions
of the Code of Civil Procedure, 1908, execute the attached decree, and
credit the net proceeds for settlement of the amount recoverable.
(viii) Recovery through surety [Rule 157]
Where any person has become surety for the amount due by the
defaulter, he may be proceeded against under this Chapter as if he were
the defaulter.
(ix) Recovery from company in liquidation [Rule 160]
Where the company is under liquidation as specified in section 88, the
Commissioner shall notify the liquidator for the recovery of any amount
representing tax, interest, penalty or any other amount due under the
Act in prescribed form.

Other provisions governing recovery of tax [Section 79(2), (3) & (4)]
 Where the terms of any bond or other instrument executed under this Act or
any rules or regulations made thereunder provide that any amount due under
such instrument may be recovered in the manner laid down in sub-section
(1), the amount may, without prejudice to any other mode of recovery, be
recovered in accordance with the provisions of that sub-section [Section
79(2)].
 Where any amount of tax, interest or penalty is payable by a person to the
Government under any of the provisions of this Act or the rules made
thereunder and which remains unpaid, the proper officer of State tax or Union
territory tax, during the course of recovery of said tax arrears, may recover
the amount from the said person as if it were an arrear of State tax or Union
territory tax and credit the amount so recovered to the account of the
Government [Section 79(3)].
 Where the amount recovered under sub-section (3) is less than the amount
due to the Central Government and State Government, the amount to be
credited to the account of the respective Governments shall be in proportion
to the amount due to each such Government [Section 79(4)].

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 1.3019.30 GOODS AND SERVICES TAX

Clarification on the legal position of voluntary payment of taxes during

the course of inspection, search or investigation
During the course of search, inspection or investigation, sometimes the taxpayers
opt for deposit of their partial/full GST liability arising out of the issue pointed out
by the Department during the course of such search, inspection or investigation.
Instances have been noticed where some of the taxpayers after voluntarily
depositing GST liability have alleged use of force and coercion by the officers for
making recovery during the course of search, inspection or investigation.
Consequently, the legal position of voluntary payment of taxes has been clarified
for ensuring correct application of law and for protecting the interest of the
taxpayers.
Under the CGST Act, the taxpayers have an option to make voluntary payment of
tax. Such voluntary payment of tax before issuance of show cause notice is
permitted under section 73(5) and section 74(5) 13. This helps the taxpayers in
discharging their admitted liability, self-ascertained or as ascertained by the tax
officer, without having to bear the burden of interest under section 50 for delayed
payment of tax and may also save him from higher penalty imposable on him
subsequent to issuance of show cause notice under section 73 or section 74, as the
case may be.
Recovery of taxes not paid or short paid, can be made under the provisions of
section 79 only after following due legal process of issuance of notice and
subsequent confirmation of demand by issuance of adjudication order. Therefore,
there may not arise any situation where “recovery” of the tax dues has to be made
by the tax officer from the taxpayer during the course of search, inspection or
investigation, on account of any issue detected during such proceedings.
However, the law does not bar the taxpayer from voluntarily making payment of
any tax liability ascertained by him or the tax officer in respect of such issues, either
before or during the course of such proceedings or subsequently. The tax officer

13
Sections 73 and 74 contain the provisions for determination of tax, pertaining to the period
upto Financial year 2023-24, not paid or short paid or erroneously refunded or input tax credit
wrongly availed or utilised for any reason other than fraud or any wilful misstatement or
suppression of facts .

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should however, inform the taxpayers regarding the provisions of voluntary tax
payments.
[Instruction No. 01/2022-23 [GST-Investigation] dated 25.05.2022]

8. PAYMENT OF TAX AND OTHER AMOUNT IN

INSTALMENTS [SECTION 80]
Considering various business aspects, the provisions for
payment of all such amounts, other than self-assessed
tax, in instalments have also been made in the Act.
A person can avail this benefit of payment in instalments, by making an application
to the Commissioner by specifying reasons for such request.
On receipt of application, the Commissioner may allow the payment of amount in
instalments, subject to maximum 24 monthly instalments and on payment of
applicable interest.
If there is default in payment of any one instalment then the whole outstanding
balance shall become due and payable immediately.
Provisions of section 80 read alongwith rule 158 have been explained in detail as
under:
 A taxable person, seeking extension of time for the payment of taxes or any
amount due under the Act or for allowing payment of such taxes or amount
in instalments, shall furnish an application for the same in prescribed form.
 Commissioner shall call for a report from the jurisdictional officer about the
financial ability of the taxable person to pay the said amount.
 Commissioner may, upon consideration of the same, for reasons to be
recorded in writing, extend the time for payment or allow payment of any
amount due under this Act, other than the amount due as per the liability
self-assessed in any return, by such person in monthly instalments not
exceeding 24, subject to payment of interest under section 50 and subject to
such conditions and limitations as may be prescribed.
 However, where there is default in payment of any one instalment on its due
date, the whole outstanding balance payable on such date shall become due
and payable forthwith and shall, without any further notice being served on

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the person, be liable for recovery.

 Facility of payment in instalments not allowed in certain cases: The facility
of payment in instalments shall not be allowed where -
(a) the taxable person has already defaulted on the payment of any amount
under the CGST Act or IGST Act or UTGST Act or any of the SGST Act,
for which the recovery process is on;
(b) the taxable person has not been allowed to make payment in
instalments in the preceding financial year under the Act or the IGST
Act or UTGST Act or any of the SGST Act;

(c) the amount for which instalment facility is sought is less than ` 25,000.

9. TRANSFER OF PROPERTY TO BE VOID IN

CERTAIN CASES [SECTION 81]
 Where a person, after any amount has become due from him, creates a charge
on or parts with the property belonging to him or in his possession by way of
sale, mortgage, exchange, or any other mode of transfer
whatsoever of any of his properties in favour of any other
person with the intention of defrauding the Government
revenue, such charge or transfer shall be void as against any
claim in respect of any tax or any other sum payable by the said person.
 However, such charge or transfer shall not be void if it is made for adequate
consideration, in good faith and without notice of the pendency of such
proceedings under this Act or without notice of such tax or other sum payable
by the said person, or with the previous permission of the proper officer.

10. TAX TO BE FIRST CHARGE ON PROPERTY

[SECTION 82]
Notwithstanding anything to the contrary contained in any law for the time being
in force, save as otherwise provided in the Insolvency and Bankruptcy Code, 2016,
any amount payable by a taxable person or any other person on account of tax,
interest or penalty which he is liable to pay to the Government shall be a first charge

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on the property of such taxable person or such person.

11. PROVISIONAL ATTACHMENT TO PROTECT

REVENUE IN CERTAIN CASES [SECTION 83]
 Where, after the initiation of any proceeding under
Chapter XII, Chapter XIV or Chapter XV, the
Commissioner is of the opinion that for the purpose of
protecting the interest of the Government revenue, it is
necessary so to do, he may, by order in writing attach
provisionally any property, including bank account, belonging to the taxable
person or any person specified in sub-section (1A) of section 122, in such
manner as may be prescribed [Section 83(1)].
 Every such provisional attachment shall cease to have effect after the expiry
of a period of one year from the date of the order made under sub-section
(1) [Section 83(2)].
The related provisions contained in CGST Rules are as follows:
(i) Provisional attachment of property [Rule 159]
 Where the Commissioner decides to attach any property, including
bank account in accordance with aforesaid provisions, he shall pass an
order to that effect mentioning therein, the details of property which is
attached.
 The Commissioner shall send a copy of the order of attachment to the
concerned Revenue Authority or Transport Authority or any such
Authority to place encumbrance on the said movable or immovable
property, which shall be removed:

(i) on the written instructions from the Commissioner to that effect

or

(ii) on expiry of a period of 1 year from the date of issuance of order

of provisional attachment of property,

whichever is earlier.

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 1.3419.34 GOODS AND SERVICES TAX

 A copy of the order of provisional attachment of the property including

bank account shall also be sent to the person whose property is being
attached.
 Where the property attached is of perishable or hazardous nature, and
if the taxable person pays:
(i) an amount equivalent to the market price of such property
or
(ii) the amount that is or may become payable by the taxable person
whichever is lower
then such property shall be released forthwith, by an order in prescribed
form, on proof of payment.
 However, where the taxable person fails to pay the amount referred
above in respect of the said property of perishable/hazardous nature,
the Commissioner may dispose of such property and the amount
realized thereby shall be adjusted against the tax, interest, penalty, fee
or any other amount payable by the taxable person.
 Any person whose property is attached may at any time of the
attachment, file an objection to the effect that the property attached
was or is not liable to attachment, and the Commissioner may, after
affording an opportunity of being heard to the person filing the
objection, release the said property by an order.
 The Commissioner may, upon being satisfied that the property was, or is
no longer liable for attachment, release such property by issuing an order.
(ii) Attachment of debts and shares, etc. [Rule 151]
 A debt not secured by a negotiable instrument, a share in a corporation,
or other movable property not in the possession of the defaulter except
for property deposited in, or in the custody of any court shall be
attached by a written order in prescribed form prohibiting:
(a) in the case of a debt, the creditor from recovering the debt and
the debtor from making payment thereof until the receipt of a
further order from the proper officer;

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DEMANDS AND RECOVERY

(b) in the case of a share, the person in whose name the share may be
standing from transferring the same or receiving any dividend thereon;
(c) in the case of any other movable property, the person in
possession of the same from giving it to the defaulter.
 A copy of such order shall be affixed on some conspicuous part of the
office of the proper officer, and another copy shall be sent, in the case
of debt, to the debtor, and in the case of shares, to the registered
address of the corporation and in the case of other movable property,
to the person in possession of the same.
 A debtor, prohibited hereunder, may pay the amount of his debt to the
proper officer, and such payment shall be deemed as paid to the
defaulter.
(iii) Attachment of property in custody of courts or Public Officer [Rule 152]
 Where the property to be attached is in the custody of any Court or
Public Officer, the proper officer shall send the order of attachment to
such court or officer, requesting that such property, and any interest or
dividend becoming payable thereon, may be held till the recovery of
the amount payable.
(iv) Attachment of interest in partnership [Rule 153]
 Where the property to be attached consists of an interest of the
defaulter, being a partner, in the partnership property, the proper
officer may make an order charging the share of such partner in the
partnership property and profits with payment of the amount due under
the certificate, and may, by the same or subsequent order, appoint a
receiver of the share of such partner in the profits, whether already
declared or accruing, and of any other money which may become due
to him in respect of the partnership, and direct accounts and enquiries
and make an order for the sale of such interest or such other order as
the circumstances of the case may require.
 The other partners shall be at liberty at any time to redeem the interest
charged or, in the case of a sale being directed, to purchase the same.

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12. CONTINUATION AND VALIDATION OF

CERTAIN RECOVERY PROCEEDINGS
[SECTION 84]
Where any notice of demand in respect of any tax, penalty, interest or any other
amount payable under this Act, (hereafter in this section referred to as Government
dues), is served upon any taxable p erson or any other person and any appeal or
revision application is filed or any other proceedings is initiated in respect of such
Government dues, then:
(a) where such Government dues are enhanced in such appeal, revision or other
proceedings, the Commissioner shall serve upon the taxable person or any
other person another notice of demand in respect of the amount by which
such Government dues are enhanced and any recovery proceedings in
relation to such Government dues as are covered by the notice of demand
served upon him before the disposal of such appeal, revision or other
proceedings may, without the service of any fresh notice of demand, be
continued from the stage at which such proceedings stood immediately
before such disposal;
(b) where such Government dues are reduced in such appeal, revision or in other
proceedings ––
(i) it shall not be necessary for the Commissioner to serve upon the taxable
person a fresh notice of demand;
(ii) the Commissioner shall give intimation of such reduction to him and to
the appropriate authority with whom recovery proceedings is pending;
(iii) any recovery proceedings initiated on the basis of the demand served
upon him prior to the disposal of such appeal, revision or other
proceedings may be continued in relation to the amount so reduced
from the stage at which such proceedings stood immediately before
such disposal.
Proceedings conducted under IBC covered under the term ‘other
proceedings’ in section 84
The word ‘other proceedings’ is not defined in CGST Act. It is to be mentioned
that the adjudicating authorities and appellate authorities under IBC are
quasi-judicial authorities constituted to deal with civil disputes pertaining to

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DEMANDS AND RECOVERY

insolvency and bankruptcy. For instance, under IBC, NCLT serves as an

adjudicating authority for insolvency proceedings which are initiated on
application from any stakeholder of the entity like the firm, creditors, debtors,
employees etc. and passes an order approving the resolution plan. As the
proceedings conducted under IBC also adjudicate the government dues pending
under the CGST Act or under existing laws against the corporate debtor, the same
appear to be covered under the term ‘other proceedings’ in section 84.
[Circular No. 187/19/2022 GST dated 27.12.2022]

TEST YOUR KNOWLEDGE

1. Mohan Enterprises is entitled for exemption from tax under GST law. However,
it collected tax from its buyers worth ` 50,000 in the month of August. It has
not deposited the said amount collected as GST with the Government. You are
required to brief to Mohan Enterprises the consequences of collecting tax, but
not depositing the same with Government as provided under section 76.

2. Discuss briefly the time limit for issue of show cause notice as contained under
section 74A in case where (i) the short payment is on account of fraud, and (ii)
the short payment is on account of a bonafide error.
3. Is there any time limit prescribed for adjudication of the cases under the CGST
Act, 2017? If yes, discuss the same.
4. A person is chargeable with tax in case of fraud. He decides to pay the amount
of demand alongwith interest and penalty before issuance of show cause notice.
Is any option of reduced penalty available to such person?
5. Briefly discuss the modes of recovery of tax available to the proper officer.
6. Enlist the circumstances under which a show cause notice can be issued by the
proper officer under section 74A. Specify the time limit for issuance of such
show cause notice as also the time period for issuance of order by the proper
officer under section 74A.
7. Subharti Enterprises collected GST on the goods supplied by it from its
customers on the belief that said supply is taxable. However, later it discovered
that goods supplied by it are exempt from GST.

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 1.3819.38 GOODS AND SERVICES TAX

The accountant of Subharti Enterprises advised it that the amount mistakenly

collected by Subharti Enterprises representing as tax was not required to be
deposited with Government. Subharti Enterprises has approached you for
seeking the advice on the same. You are required to advise it elaborating the
relevant provisions.
8. Anant & Co. self-assessed its CGST liability as ` 90,000 for the month of April,
but failed to make the payment.
Subsequently, the Department initiated penal proceedings against Anant & Co.
for recovery of penalty under section 74A for failure to pay GST and issued show
cause notice on 10th August.
Anant & Co. deposited the tax along with interest on 25th August and informed
the Department on the same day.
Department is contending that he is liable to pay a penalty of ` 45,000 (i.e.
50% of ` 90,000) under the CGST Act.
Examine the correctness of the stand taken by the Department with reference
to the provisions of the CGST Act. Explain the relevant provisions in brief.
9. Arnav Enterprises, a registered supplier located in Madhya Pradesh, has duly
filed its monthly GST returns for the financial year 2024–25. During the scrutiny
of its returns for the said financial year in August 2025, the proper officer
noticed an inadvertent short payment of CGST and SGST totaling ` 4,60,000 in
the month of October 2024, on account of a bonafide error. Before issuance of
the show cause notice by the proper officer, Arnav Enterprises paid the tax of
` 1,00,000 (` 50,000 CGST and ` 50,000 SGST) on the basis of its own
ascertainment along with applicable interest and with penalty, if any, on 15th
September 2025 and informed the proper officer in writing of such payment.
Based on the facts above, answer the following:
(1) Ascertain the last date by which show cause notice can be issued by the
proper officer for the amount of tax short paid by Arnav Enterprises.
(2) Determine the amount of penalty, if any, payable on the payment of tax
of ` 1,00,000 by Arnav Enterprises on the basis of its own ascertainment
along with applicable interest on 15th September 2025.

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DEMANDS AND RECOVERY

(3) Assuming that the proper officer decides to issue a show cause notice
under section 74A on 10th October 2025, determine the maximum
amount of tax for which he can issue the show cause notice. Ascertain
the last date by which the proper officer should issue order under section
74A assuming that show cause notice is issued by proper officer on said
date.
(4) In continuation of sub-part (3) above, if proper officer issues a show cause
notice under section 74A on 10th October, 2025 for the amount of tax so
allowed and Arnav Enterprises decides to pay said tax along with
applicable interest, on 5th December, 2025, you are required to determine
penalty, if any, payable by Arnav Enterprises.
In each of the above cases, will your answer be different if the short
payment of tax is on account of fraud, other facts remain the same?
Note – Assume that the due date for furnishing annual return has not
been extended and limitation period for issuance of order under section
74A has not been extended by the Commissioner. Ignore computation of
interest in the above question.

ANSWERS

1. It is mandatory to pay amount, collected from other person representing tax

under GST law, to the Government. Every person who has collected from any
other person any amount as representing the tax under GST law, and has not
paid the said amount to the Government, shall forthwith pay the said amount
to the Government, irrespective of whether the supplies in respect of which
such amount was collected are taxable or not.
For any such amount not so paid, proper officer may issue SCN for recovery
of such amount and penalty equivalent to amount specified in notice.
The proper officer shall, after considering the representation, if any, made by
the person on whom SCN is served, determine the amount due from such
person and thereupon such person shall pay the amount so determined
alongwith interest at the rate specified under section 50 from the date such

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amount was collected by him to the date such amount is paid by him to the
Government.
2. The proper officer can issue a show cause notice within 42 months from the
due date of furnishing the annual return for relevant financial year to which
short payment relates to [Section 74A(2)]. It is important to note that section
74A stipulates the same limitation period for issuance of show cause notice
whether the short payment is on account of fraud or on account of a bonafide
error.
3. The proper officer shall issue said order within 12 months from date of
issuance of the SCN. However, if the officer is unable to issue order within
this time, the Commissioner or any officer authorised by the Commissioner
who is senior in rank to the proper officer, but not below the rank of Joint
Commissioner of Central Tax, may extend this period.
Such extension can be given for a maximum of 6 months, provided reasons
for the delay in issuance of order are recorded in writing, before the expiry of
the original 12 months’ period.
4. Yes. In case of fraud cases, the person chargeable with tax may pay the
alongwith interest payable under section 50 (interest on delayed payment of
tax) and a penalty equivalent to 15% of such tax, before the issue of SCN/
statement, on the basis of his own ascertainment of tax, or the tax as
ascertained by the proper officer, and inform the proper officer in writing of
such payment in prescribed form - Form DRC-03. An acknowledgement shall
be made available to the person through the common portal electronically.
The proper officer, on receipt of such information, shall not serve any SCN in
respect of the tax so paid or any penalty payable under the provisions of GST
law.
5. The proper officer may recover the dues in following manner:
(a) Deduction of dues from the amount owned by the tax authorities
payable to such person.
(b) Recovery by way of detaining and selling any goods belonging to such
person;

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DEMANDS AND RECOVERY

(c) Recovery from other person, from whom money is due or may become
due to such person or who holds or may subsequently hold money for
or on account of such person, to pay to the credit of the Central or a
State Government;
(d) Distrain any movable or immovable property belonging to such person,
until the amount payable is paid. If the dues not paid within 30 days,
the said property is to be sold and with the proceeds of such sale the
amount payable and cost of sale shall be recovered.
(e) Through the Collector of the district in which such person owns any
property or resides or carries on his business, as if it was an arrear of
land revenue.
(f) By way of an application to the appropriate Magistrate who in turn shall
proceed to recover the amount as if it were a fine imposed by him.
(g) By enforcing the bond/instrument executed under this Act or any rules
or regulations made thereunder.
(h) CGST arrears can be recovered as an arrear of SGST and vice versa
[Section 79].
6. As per section 74A, a show cause notice can be issued by the proper officer
if it appears to him that:
 tax has not been paid; or
 tax has been short paid; or
 tax has been erroneously refunded; or
 input tax credit has been wrongly availed or utilized,
whether by reason of fraud or any wilful misstatement or suppression of facts
to evade tax or for reason other than fraud or any wilful misstatement or
suppression of facts to evade tax.
In either of the cases as enumerated above, the SCN should be issued within
42 months or 3.5 years from due date for furnishing of annual return for the
financial year to which the tax not paid or short paid, etc. relates to, or the
date of erroneous refund.

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 1.4219.42 GOODS AND SERVICES TAX

The proper officer shall issue said order within 12 months from date of
issuance of the SCN. However, if the officer is unable to issue order within
this time, the Commissioner or any officer authorised by the Commissioner
who is senior in rank to the proper officer, but not below the rank of Joint
Commissioner of Central Tax, may extend this period.
Such extension can be given for a maximum of 6 months, provided reasons
for the delay in issuance of order are recorded in writing, before the expiry of
the original 12 months’ period.
7. The provisions of section 76 make it mandatory on Subharti Enterprises to
pay amount collected from other person representing tax under this Act, to
the Government.
Section 76 stipulates that notwithstanding anything to the contrary contained
in any order or direction of any Appellate Authority or Appellate Tribunal or
Court or in any other provisions of the CGST Act or the rules made thereunder
or any other law for the time being in force, every person who has collected
from any other person any amount as representing the tax under this Act,
and has not paid the said amount to the Government, shall forthwith pay the
said amount to the Government, irrespective of whether the supplies in
respect of which such amount was collected are taxable or not.
Where any amount is required to be paid to the Government as mentioned
above, and which has not been so paid, the proper officer may serve on the
person liable to pay such amount a notice requiring him to show cause as to
why the said amount as specified in the notice, should not be paid by him to
the Government and why a penalty equivalent to the amount specified in the
notice should not be imposed on him under the provisions of this Act.
The proper officer shall, after considering the representation, if any, made by
the person on whom show cause notice (SCN) is served, determine the
amount due from such person and thereupon such person shall pay the
amount so determined.
The person who has collected any amount as representing the tax, but not
deposited the same with the Government shall in addition to paying the said
amount determined by the proper officer shall also be liable to pay interest
thereon. Interest is payable at the rate specified under section 50. Interest is

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DEMANDS AND RECOVERY

payable from the date such amount was collected by him to the date such
amount is paid by him to the Government.
The proper officer shall issue an order within 1 year [excluding the period of
stay order] from the date of issue of the notice. The proper officer, in his
order, shall set out the relevant facts and the basis of his decision.
8. Due date for payment of tax for the month of April is 20th May.
As per section 74A, where self-assessed tax is not paid within 30 days from
due date of payment of such tax, penalty equivalent to 10% of tax or ` 10,000,
whichever is higher, is payable. Thus, option to pay tax within 60 days of
issuance of SCN to avoid penalty, is not available in case of self-assessed tax.
Since in the given case, Anant & Co. has not paid the self-assessed tax within
30 days of due date [i.e. 20th May], penalty equivalent to:
(i) 10% of tax, viz., ` 9,000 (10% of ` 90,000) or
(ii) ` 10,000,
whichever is higher, is payable by him under CGST Act. Equivalent amount of
penalty is payable under SGST/UTGST Act.
Hence, the stand taken by the Department that penalty will be levied on
Anant & Co. is correct, but the amount of penalty of ` 45,000 under the CGST
Act is not correct.
9. (1) The proper officer can issue a show cause notice within 42 months from
the due date of furnishing the annual return for relevant financial year
to which short payment relates to [Section 74A(2)]. For the financial year
2024–25, the due date for furnishing the annual return is 31st December,
2025. Therefore, the last date by which show cause notice can be issued
by the proper officer for the amount of tax short paid by Arnav
Enterprises is 30th June 2029.
Further, section 74A stipulates the same limitation period for issuance
of show cause notice whether the short payment is on account of fraud
or on account of a bonafide error. Thus, answer will remain same if the
short payment of tax is on account of fraud.

(2) The person chargeable with tax where any tax has been short paid, may,
before service of show cause notice, pay the amount of tax along with

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 1.4419.44 GOODS AND SERVICES TAX

interest payable under section 50 of such tax on the basis of his own
ascertainment of such tax and inform the proper officer in writing of
such payment, and the proper officer, on receipt of such information
shall not serve any show cause notice in respect of the tax so paid or
any penalty payable under the provisions of the CGST Act or the rules
made thereunder [Section 74A(8)(i)].
Thus, no penalty is payable by Arnav Enterprises in respect of payment
of tax of ` 1,00,000 before issuance of show cause notice. No show
cause notice will be issued by the proper officer in respect of the tax of
` 1,00,000 so paid.
However, in case where the short payment of tax is on account of fraud,
the person chargeable with tax, may before service of show cause
notice, pay the amount of tax along with interest payable under section
50 and a penalty equivalent to 15% of such tax on the basis of his own
ascertainment of such tax or the tax as ascertained by the proper officer
and inform the proper officer in writing of such payment, and the
proper officer, on receipt of such information, shall not serve any show
cause notice, in respect of the tax so paid or any penalty payable under
the provisions of the CGST Act or the rules made thereunder [Section
74A(9)(i)].
Thus, a penalty of ` 15,000 [` 1,00,000 × 15%] is payable by Arnav
Enterprises alongwith payment of tax of ` 1,00,000 with applicable
interest, before issuance of show cause notice. No show cause notice
will be served by the proper officer after payment of tax alongwith
interest and penalty, in respect of the tax so paid.
(3) Since Arnav Enterprises has paid the tax of ` 1,00,000 alongwith interest
before issuance of show cause notice, no show cause notice will be
issued by the proper officer in respect of the tax so paid [Section
74A(8)(i)].
However, where the proper officer is of the opinion that the amount
paid under section 74A(8)(i) falls short of the amount actually payable,
he shall proceed to issue the show cause notice in respect of such
amount which falls short of the amount actually payable [Section
74A(10)].

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DEMANDS AND RECOVERY

Thus, in the given case, the proper officer will issue the notice for the
remaining tax of ` 3,60,000 [` 4,60,000 - ` 1,00,000].
In case where the short-payment is on account of fraud, answer will be
as follows:
Since Arnav Enterprises has paid the tax of ` 1,00,000 alongwith
applicable interest and penalty before issuance of show cause notice,
no show cause notice will be issued by the proper officer in respect of
the tax so paid [Section 74A(9)(i)].
However, where the proper officer is of the opinion that the amount
paid under section 74A(9)(i) falls short of the amount actually payable,
he shall proceed to issue the show cause notice in respect of such
amount which falls short of the amount actually payable [Section
74A(10)].
Thus, in the given case, the proper officer will issue the notice for the
remaining tax of ` 3,60,000 [` 4,60,000 - ` 1,00,000].
Further, the proper officer is required to issue the order within 12
months from the date of issuance of show cause notice, in both fraud
and non-fraud cases [Section 74A(7)]. Thus, in the given case, the
proper officer has to issue the order on or before 10th October, 2026,
whether the short payment is on account of fraud or on account of a
bonafide error.
(4) Where the person chargeable with tax, where any tax has been short
paid, pays the said tax along with interest payable under section 50
within 60 days of issue of show cause notice, and on doing so, no
penalty shall be payable and all proceedings in respect of the said
notice shall be deemed to be concluded [Section 74A(8)(ii)].
Thus, in the given case, since Arnav Enterprises has paid the tax of
` 3,60,000 alongwith applicable interest within 60 days of issuance of
show cause notice, i.e. on or before 9th December, 2025, no penalty shall
be payable and all proceedings in respect of the said notice shall be
deemed to be concluded.

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 1.4619.46 GOODS AND SERVICES TAX

In case where the short-payment is on account of fraud, answer will be

as follows:
Where the person chargeable with tax, where any tax has been short
paid, pays the said tax along with interest payable under section 50 and
a penalty equivalent to 25% of such tax within 60 days of issue of the
notice, and on doing so, all proceedings in respect of the said notice
shall be deemed to be concluded [Section 74A(9)(ii)].
Thus, in the given case, Arnav Enterprises has to pay penalty of ` 90,000
[` 3,60,000 ×25%]. If Arnav Enterprises has paid the tax of ` 3,60,000
alongwith applicable interest and penalty of ` 90,000 [` 3,60,000 ×25%]
on 5th December, 2025, which is within 60 days of issuance of show
cause notice, i.e. on or before 9th December, 2025, all proceedings in
respect of the said notice shall be deemed to be concluded.

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DEMANDS AND RECOVERY

AMENDMENTS MADE VIDE THE FINANCE (NO. 2)

ACT, 2019

The Finance (No. 2) Act, 2019 came into force from 01.08.2019. However, the
amendments made in section 2(4) of the CGST Act vide the Finance (No. 2) Act,
2019 would become effective only from a date to be notified by the Central
Government in the Official Gazette. Such a notification has not been issued till the
30.04.2025. Therefore, the applicability or otherwise of such amendment for May
2026, September 2026 and/or January 2027 examinations shall be announced by
the ICAI only after such notification is issued by the Central Government.
In the table given below, the existing provisions of section 2(4) are compared with
the provisions as amended by the Finance (No. 2) Act, 2019.

Once the announcement for applicability of such amendments for examination(s)

is made by the ICAI, students should read the amended provisions given hereunder
in place of the related provisions discussed in the Chapter.

Existing provisions Provisions as amended by the Remarks

Finance (No. 2) Act, 2019
Section 2(4) Section 2(4) The definition of
“adjudicating authority” “adjudicating authority” means adjudicating
means any authority, any authority, appointed or authority
appointed or authorised to authorised to pass any order or proposed to be
pass any order or decision decision under this Act, but amended to
under this Act, but does not does not include the Central exclude the
include the Central Board of Board of Indirect Taxes and proposed
Indirect Taxes and Customs, Customs, the Revisional National
the Revisional Authority, the Authority, the Authority for Appellate
Authority for Advance Advance Ruling, the Appellate Authority for
Ruling, the Appellate Authority for Advance Ruling, Advance Ruling
Authority for Advance National Appellate Authority from the purview
Ruling, the Appellate for Advance Ruling, the of adjudicating
Authority, the Appellate Appellate Authority, the authority.
Tribunal and the Authority Appellate Tribunal and the
referred to in sub-section Authority referred to in sub-
(2) of section 171; section (2) of section 171;

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 1.4819.48 GOODS AND SERVICES TAX

ANNEXURE
As discussed earlier, sections 73 and 74 prescribe the provisions for determining tax,
pertaining to the period upto Financial year 2023-24, not paid or short paid or
erroneously refunded or input tax credit wrongly availed or utilised for any reason
other than fraud or any wilful misstatement or suppression of facts or by fraud or
reason of wilful misstatement or suppression of facts. Several circulars have been
issued in pursuance of these provisions. While these circulars seem prima facie relevant
under the new section 74A as well, the CBIC has not yet clarified the same. Once CBIC
issues guidance on the applicability of those circulars under section 74A, the
applicability of these circulars for the relevant examination will be clarified by the ICAI
by way of Statutory Update. These circulars are as follows:
1. Clarification on levy of penalty under section 73(11) in case of delayed
filing of return
Issue: Whether penalty in accordance with section 73(11) should be levied in
cases where the return in Form GSTR-3B has been filed after the due date of
filing such return?
Clarification: The provisions of section 73(11) can be invoked only when the
provisions of section 73 are invoked and the provisions of section 73 are
generally not invoked in case of delayed filing of the return in Form GSTR‐3B
because tax along with applicable interest has already been paid.
It is accordingly clarified that penalty under the provisions of section 73(11)
is not payable in such cases. It is further clarified that since the tax has been
paid late in contravention of the provisions of the CGST Act a general penalty
under section 125 may be imposed after following the due process of law
[Circular No. 76/50/2018 GST dated 31.12.2018].
2. Monetary limits prescribed for issuance of SCNs by different level of
officers
Board has assigned the officers mentioned in table below, the functions as
the proper officers in relation to issue of SCNs and orders under sections 73
and 74 14, up to the prescribed monetary limits of tax (including cess) not paid/
short paid/ erroneously refunded/ ITC of CGST wrongly availed/utilized for
issuance of SCNs and passing of orders under sections 73 and 74:

14
made applicable to matters in relation to IGST vide section 20 of the IGST Act

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DEMANDS AND RECOVERY

CGST Officer Monetary limit Monetary Monetary limit

of CGST limit of IGST of CGST and
IGST

Superintendent of Not exceeding Not exceeding Not exceeding

Central Tax ` 10 lakh ` 20 lakh ` 20 lakh

Deputy or Above ` 10 lakh Above ` 20 Above ` 20 lakh

Assistant and not lakh and not and not
Commissioner of exceeding ` 1 exceeding ` 2 exceeding ` 2
Central Tax crore crores crores

Additional or Joint Above ` 1 crore Above ` 2 Above ` 2

Commissioner of without any limit crores without crores without
Central Tax any limit any limit

The central tax officers of Audit Commissionerates and Directorate General

of Goods and Services Tax Intelligence (hereinafter referred to as “DGGSTI”)
shall exercise the powers only to issue SCNs. An SCN issued by them shall be
adjudicated by the competent central tax officer of the Executive
Commissionerate in whose jurisdiction the noticee is registered.
In case SCNs have been issued on similar issues to a noticee(s) and made
answerable to different levels of adjudicating authorities within a
Commissionerate, such SCNs should be adjudicated by the adjudicating
authority competent to decide the case involving the highest amount of
central tax and/or integrated tax (including cess) [Circular No. 31/05/2018
GST dated 09.02.2018]
3. Clarification on various issues relating to applicability of demand and
penalty provisions under CGST Act in respect of transactions involving
fake invoices
A number of cases have been noticed where the registered persons are found
to be involved in issuing tax invoice (fake invoices), without actual supply of
goods or services or both, in order to enable the recipients of such invoices
to avail and utilize ITC fraudulently.
Circular No. 171/03/2022 GST dated 06.07.2022 clarifies the applicability of
demand and penalty provisions under the CGST Act, in respect of such
transactions involving fake invoices as follows:

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 1.5019.50 GOODS AND SERVICES TAX

Sl. Issues Clarification

No.

1. In case where a registered Since there has only been an

person “A” has issued tax issuance of tax invoice by the
invoice to another registered person ‘A’ to
registered person “B” registered person ‘B’ without the
without any underlying underlying supply of goods or
supply of goods or services services or both, therefore, such
or both, an activity does not satisfy the
criteria of “supply”, as defined
(i) whether such transaction
under section 7.
will be covered as supply
under section 7? As there is no supply by ‘A’ to ‘B’
in respect of such tax invoice in
(ii) whether any demand and
terms of the provisions of
recovery can be made from
section 7, no tax liability arises
‘A’ in respect of the said
against ‘A’ for the said
transaction under the
transaction, and accordingly, no
provisions of section 73 or
demand and recovery is required
section 74?
to be made against ‘A’ under the
(iii) whether any penal provisions of section 73/section
action can be taken against 74 in respect of the same.
registered person ‘A’ in such
Besides, no penal action under
cases?
the provisions of section
73/section 74 is required to be
taken against ‘A’ in respect of
the said transaction.
The registered person ‘A’ shall,
however, be liable for penal
action under section 122(1)(ii) for
issuing tax invoices without actual
supply of goods or services or
both.

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2. A registered person “A” has Since the registered person ‘B’

issued tax invoice to another has availed and utilized
registered person “B” fraudulent ITC on the basis of the
without any underlying said tax invoice, without
supply of goods or services receiving the goods or services
or both. ‘B’ avails ITC on the or both, in contravention of the
basis of the said tax invoice. provisions of section 16(2)(b), he
shall be liable for the demand
B further issues invoice
and recovery of the said ITC,
along with underlying
along with penal action, under
supply of goods or services
the provisions of section 74,
or both to his buyers and
along with applicable interest
utilizes ITC availed on the
under provisions of section 50.
basis of the above
mentioned invoices issued Further, as per provisions of
by ‘A’, for payment of his tax section 75(13), if penal action for
liability in respect of his said fraudulent availment or
outward supplies. utilization of ITC is taken against
‘B’ under section 74, no penalty
Whether ‘B’ will be liable for
for the same act, i.e. for the said
the demand and recovery of
fraudulent availment or
the said ITC, along with
utilization of ITC, can be
penal action, under the
imposed on ‘B’ under any other
provisions of section
provisions of the CGST Act,
73/section 74 or any other
including under section 122.
provisions of the CGST Act?

3. A registered person ‘A’ has In this case, the ITC availed by ‘B’
issued tax invoice to another in his electronic credit ledger on
registered person ‘B’ the basis of tax invoice issued by
without any underlying ‘A’, without actual receipt of
supply of goods or services goods or services or both, has
or both. ‘B’ avails ITC on the been utilized by ‘B’ for passing
basis of the said tax invoice on of ITC by issuing tax invoice
and further passes on the to ‘C’ without any underlying
said ITC to another supply of goods or services or
registered person ‘C’ by both.
issuing invoices without
As there was no supply of goods
or services or both by ‘B’ to ‘C’ in

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 1.5219.52 GOODS AND SERVICES TAX

underlying supply of respect of the said transaction,

goods or services or both. no tax was required to be paid
by ‘B’ in respect of the same. The
Whether ‘B’ will be liable for
ITC availed by ‘B’ in his electronic
the demand and recovery
credit ledger on the basis of tax
and penal action, under the
invoice issued by ‘A’, without
provisions of section 73 or
actual receipt of goods or
section 74 or any other
services or both, is ineligible in
provisions of the CGST Act.
terms of section 16(2)(b). In this
case, there was no supply of
goods or services or both by ‘B’
to ‘C’ in respect of the said
transaction and also no tax was
required to be paid in respect of
the said transaction.
Therefore, in these specific
cases, no demand and recovery
of either input tax credit
wrongly/ fraudulently availed by
‘B’ in such case or tax liability in
respect of the said outward
transaction by ‘B’ to ‘C’ is
required to be made from ‘B’
under the provisions of section
73/section 74.
However, in such cases, ‘B’ shall
be liable for penal action both
under section 122(1)((ii) and
section 122(1)(vii), for issuing
invoices without any actual
supply of goods and/or services
as also for taking/ utilizing input
tax credit without actual receipt
of goods and/or services.

The fundamental principles that have been outlined in the above scenarios
may be adopted to decide the nature of demand and penal action to be taken

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against a person for such unscrupulous activity. Actual action to be taken

against a person will depend upon the specific facts and circumstances of the
case which may involve a complex mixture of above scenarios or even may
not be covered by any of the above scenarios.
Any person who has retained the benefit of transactions specified under
section 122(1A), and at whose instance such transactions are conducted, shall
also be liable for penal action under section 122(1A).
It may also be noted that in such cases of wrongful/ fraudulent availment or
utilization of ITC, or in cases of issuance of invoices without supply of goods
or services or both, leading to wrongful availment or utilization of ITC or
refund of tax, provisions of section 132 may also be invokable, subject to
conditions specified therein, based on facts and circumstances of each case.

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India
R
CHAPTER 20
09
LIABILITY TO PAY IN
CERTAIN CASES
The section numbers referred to in the chapter pertain to CGST Act, unless otherwise
specified. Examples/Illustrations/Questions and Answers, as the case may be, given
in the Chapter are based on the position of GST law existing as on 30.04.2025.

LEARNING OUTCOMES

After studying this Chapter, you will be able to –

❑ understand the liability to pay in case of transfer of business.
❑ determine the liability of agent and principal.
❑ explain the liability in case of amalgamation or merger of companies.
❑ describe the liability in case of company in liquidation.
❑ understand the liability of directors of private company.
❑ explain the liability of partners of firm to pay tax.
❑ identify the liability of guardians, trustees, etc.
❑ explain the liability of Court of Wards, etc.
❑ explain the special provisions regarding liability to pay tax, interest or
penalty in certain cases

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 1.2 20.2 GOODS AND SERVICES TAX

1. INTRODUCTION
✓ For certain transactions like liquidation, business transfer, partition of HUF,
amalgamation or merger of companies, etc., it is difficult to determine the
liability to pay outstanding tax, interest, penalty and any other dues.

✓ Chapter XVI – Liability to pay in certain cases [Sections 85 to 94] of the CGST
Act, 2017 determines person liable to pay tax under certain specified
transactions (like liquidation, transfer, etc.). State GST laws also prescribe
identical provisions.

Provisions relating to liability to pay in certain cases under CGST Act have
also been made applicable to IGST Act vide section 20 of the IGST Act.

Before proceeding to understand the aforesaid provisions, let us first go

through few relevant definitions.

2. RELEVANT DEFINITIONS
❖ 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, who carries on the business of supply or receipt of goods or
services or both on behalf of another [Section 2(5)].

❖ Principal: means a person on whose behalf an agent carries on the business

of supply or receipt of goods or services or both [Section 2(88)].

❖ Commissioner: means the Commissioner of central tax and includes the

Principal Commissioner of central tax appointed under section 3 and the
Commissioner of integrated tax appointed under the Integrated Goods and
Services Tax Act [Section 2(24)].

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 LIABILITY TO PAY IN CERTAIN CASES 20.3
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❖ 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 (a)
above;

(c) any activity or transaction in the nature of (a) above, whether or not there is
volume, frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital assets 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, as the case may
be;

(f) admission, for a consideration, of persons to any premises; and

(g) services supplied by a person as the holder of an office which has been accepted
by him in the course or furtherance of his trade, profession or vocation;
(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

(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

[Section 2(17)].

3. LIABILITY TO PAY IN CASE OF TRANSFER OF

BUSINESS [SECTION 85 OF THE CGST ACT]
❑ Where a taxable person, liable to pay tax
under CGST Act, transfers his business [this
includes transfer or change in the
ownership of business due to death of the
sole proprietor1] in whole or in part, by sale,
gift, lease, leave and license, hire or in any
other manner whatsoever, the taxable
person and the person to whom the business is so transferred shall, jointly and

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 1.4 20.4 GOODS AND SERVICES TAX

severally, be liable wholly or to the extent of such transfer, to pay the tax, interest
or any penalty due from the taxable person upto the time of such transfer,
whether such tax, interest or penalty has been determined before such transfer,
but has remained unpaid or is determined thereafter [Section 85(1)].
❑ Where the transferee of a business referred to in sub-section (1) carries on
such business either in his own name or in some other name, he shall be liable
to pay tax on the supply of goods or
services or both effected by him
with effect from the date of such
transfer [Section 85(2)].
❑ Further, if he is a registered person
under this Act, he shall apply within
the prescribed time for amendment
of his certificate of registration
[Section 85(2)].
❑ The transferee shall be liable to pay any tax, interest or any penalty due from
the transferor in cases of transfer of business due to death of sole proprietor 2.

4. LIABILITY OF AGENT AND PRINCIPAL

[SECTION 86 OF THE CGST ACT]
Where an agent supplies
or receives any taxable
goods on behalf of his
principal, such agent and
his principal shall, jointly
and severally, be liable to
pay the tax payable on
such goods under this Act.

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5. LIABILITY TO PAY IN CASE OF AN

AMALGAMATION/MERGER OF COMPANIES
[SECTION 87 OF THE CGST ACT]
❑ When:
❖ two or more companies are amalgamated or merged in pursuance of
an order of court or of Tribunal or otherwise and

❖ the order is to take effect from a date earlier to the date of the order and
❖ any two or more of such companies have supplied or received any
goods or services or both to or from each other during the period
commencing on the date from which the order takes effect till the date
of the order, then such transactions of supply and receipt shall be
included in the turnover of supply or receipt of the respective
companies and they shall be liable to pay tax accordingly [Section
87(1)].
❑ For the purposes of this Act, the said two or more companies shall be
treated as distinct companies for the period up to the date of the said
order [Section 87(2)].
❑ The registration certificates of the said companies shall be cancelled with
effect from the date of the said order [Section 87(2)].

6. LIABILITY IN CASE OF COMPANY IN

LIQUIDATION [SECTION 88 OF THE CGST
ACT]
❑ Initiation by liquidator of a company
of his appointment to Commissioner:
When any company is being wound up
whether under the orders of a court or
Tribunal or otherwise, every person
appointed as receiver of any assets of a
company (hereafter referred to as the

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 1.6 20.6 GOODS AND SERVICES TAX

“liquidator”), shall, within 30 days after his appointment, give intimation of

his appointment to the Commissioner [Section 88(1)].

❑ Estimation of any tax, interest or penalty payable/likely to become

payable by the company in liquidation by Commissioner: The
Commissioner shall,

❖ after making such inquiry or calling for such information as he may

deem fit,

❖ notify the liquidator within 3 months from the date on which he receives
intimation of the appointment of the liquidator,

❖ the amount which in the opinion of the Commissioner would be

sufficient to provide for any tax, interest or penalty which is then, or is
likely thereafter to become, payable by the company [Section 88(2)].

❑ Director of a private company to be jointly and severally liable for

the payment of such tax, interest or penalty not recovered: When any
private company is wound up and any tax,
interest or penalty determined under CGST Act
on the company for any period, whether before
or in the course of or after its liquidation, cannot
be recovered, then every person who was a
director of such company at any time during the
period for which the tax was due shall, jointly and
severally, be liable for the payment of such tax, interest or penalty.

However, director shall not be so liable if he proves to the satisfaction of the

Commissioner that such non-recovery cannot be attributed to any gross
neglect, misfeasance or breach of duty on his part in relation to the affairs of
the company [Section 88(3)].

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7. LIABILITY OF DIRECTORS OF PRIVATE

COMPANY [SECTION 89 OF THE CGST ACT]
❑ Director of a private company to be jointly and severally liable for
the payment of any tax, interest or penalty due from the company &
not recovered: Notwithstanding anything contained in the Companies Act,
2013,

❖ where any tax, interest or penalty due from a private company in respect
of any supply of goods or services or both for any period cannot be
recovered,

❖ then, every person who was a director of the private company during
such period shall, jointly and severally, be liable for the payment of such
tax, interest or penalty

❖ unless he proves that the non-recovery cannot be attributed to any

gross neglect, misfeasance or breach of duty on his part in relation to
the affairs of the company [Section 89(1)].

❑ Director not jointly and severally liable for the payment of any tax,
interest or penalty due from a private company & not recovered, if
such private company gets converted into a public company: Where
a private company is converted into a public company and the tax, interest
or penalty in respect of any supply of goods or services or both for any period
during which such company was a private company cannot be recovered
before such conversion, then, nothing contained in sub-section (1) shall apply
to any person who was a director of such private company in relation to any
tax, interest or penalty in respect of such supply of goods or services or both
of such private company.

However, nothing contained in this sub-section shall apply to any personal

penalty imposed on such director [Section 89(2)].

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 1.8 20.8 GOODS AND SERVICES TAX

8. LIABILITY OF PARTNERS OF FIRM TO PAY

TAX [SECTION 90 OF THE CGST ACT]
❑ Partners of the firm jointly and severally liable to pay any tax,
interest or penalty of the firm: Notwithstanding any contract to the
contrary and any other law for the time being in force, where any firm is liable
to pay any tax, interest or penalty under this Act, the firm and each of the
partners of the firm shall, jointly and severally, be liable for such payment.

❑ Retiring partner liable to pay any tax, interest or penalty of the firm
due up to the date of his retirement: Where any partner retires from the
firm, he or the firm, shall intimate the date of retirement of the said partner
to the Commissioner by a notice in that behalf in writing and such partner
shall be liable to pay tax, interest or penalty due up to the date of his
retirement whether determined or not, on that date.
However, if no such intimation is given within 1 month from the date of
retirement, the liability of such partner shall continue until the date on which
such intimation is received by the Commissioner.

9. LIABILITY OF GUARDIANS, TRUSTEES ETC.

[SECTION 91 OF THE CGST ACT]
❑ Where the business in respect of which any tax, interest or penalty is payable
under this Act is carried on by any guardian, trustee or agent of a minor or
other incapacitated person on behalf of and for the benefit of such minor or
other incapacitated person, the tax, interest or penalty shall be levied upon
and recoverable from such guardian, trustee or agent.
❑ Tax, interest or penalty shall be levied and recoverable in like manner and to
the same extent as it would be determined and recoverable from any such
minor or other incapacitated person, as if he were a major or capacitated
person and as if he were conducting the business himself and all the
provisions of this Act or the rules made thereunder shall apply accordingly.

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10. LIABILITY OF COURT OF WARDS ETC.

[SECTION 92 OF THE CGST ACT]
❑ Where the estate or any portion of the estate of a
taxable person owning a business in respect of
which any tax, interest or penalty is payable under
this Act is under the control of the Court of Wards,
the Administrator General, the Official Trustee or
any receiver or manager (including any person, whatever be his designation,
who in fact manages the business) appointed by or under any order of a court,
the tax, interest or penalty shall be levied upon and be recoverable from such
Court of Wards, Administrator General, Official Trustee, receiver or manager.
❑ Tax, interest or penalty shall be levied and recoverable in like manner and to
the same extent as it would be determined and be recoverable from the
taxable person as if he were conducting the business himself and all the
provisions of this Act or the rules made thereunder shall apply accordingly.

11. SPECIAL PROVISIONS REGARDING LIABILITY

TO PAY TAX, INTEREST OR PENALTY IN
CERTAIN CASES [SECTION 93 OF THE CGST
ACT]
Special provision regarding liability to pay tax, interest or penalty in certain cases
have been discussed as under:
A. On death of a person liable to pay tax, interest or penalty [Section
93(1)]:
Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016,
where a person, liable to pay tax, interest or penalty under CGST Act,
dies, then:
❑ business is continued after his death: if a business carried on by the
person is continued after his death by his legal representative or any
other person, such legal representative or other person, shall be liable
to pay tax, interest or penalty due from such person under this Act.

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 1.10 20.10 GOODS AND SERVICES TAX

❑ business is discontinued after his death: if the business carried on

by the person is discontinued, whether before or after his death, his
legal representative shall be liable to pay, out of the estate of the
deceased, to the extent to which the estate is capable of meeting the
charge, the tax, interest or penalty due from such person under this Act,
whether such tax, interest or penalty has been determined before his
death but has remained unpaid or is determined after his death.
The successor shall be liable to pay any tax, interest or any penalty due from
the transferor in cases of transfer of business due to death of sole proprietor 3.
B. On partition of HUF or AOP [Section 93(2)]:
❑ Save as otherwise provided in the
Insolvency and Bankruptcy Code, 2016,
❑ where a taxable person, liable to pay
tax, interest or penalty under CGST Act,
is a Hindu Undivided Family (HUF) or
an association of persons (AOP) and
❑ property of the HUF or AOP is partitioned amongst the various
members or groups of members,
❑ then, each member/group of members shall, jointly and severally,
be liable to pay the tax, interest or penalty due from the taxable person
under said Act.
❑ up to the time of the partition
❑ whether such tax, penalty or interest has been determined before
partition but has remained unpaid or is determined after the partition.
C. On dissolution of a firm [Section 93(3)]:
❑ Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016,
❑ where a taxable person, liable to pay tax, interest or penalty under CGST
Act, is a firm, and
❑ such firm is dissolved,

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 LIABILITY TO PAY IN CERTAIN CASES 20.11
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❑ then, every person who was a partner shall, jointly and severally, be
liable to pay the tax, interest or penalty due from the firm under said Act
❑ up to the time of dissolution
❑ whether such tax, interest or penalty has been determined before the
dissolution, but has remained unpaid or is determined after dissolution.
D. On termination of guardianship or trust [Section 93(4)]:
❑ Save as otherwise provided in the Insolvency and Bankruptcy
Code, 2016,
❑ where a taxable person liable to pay tax, interest or penalty under this
Act, —
❖ is the guardian of a ward on whose behalf the business is carried
on by the guardian; or
❖ is a trustee who carries on the business under a trust for a
beneficiary,
❑ then, if the guardianship or trust is terminated,
❑ the ward or the beneficiary shall be liable to pay the tax, interest or
penalty due from the taxable person
❑ upto the time of the termination of the guardianship or trust,
❑ whether such tax, interest or penalty has been determined before the
termination of guardianship or trust but has remained unpaid or is
determined thereafter.

12. LIABILITY IN OTHER CASES [SECTION 94 OF

THE CGST ACT]
A. Discontinuation of business by a firm/AOP/HUF [Section 94(1)]:
Where a taxable person is a firm/AOP/HUF and such firm, association or
family has discontinued business —
❑ the tax, interest or penalty payable under this Act by such firm,
association or family up to the date of such discontinuance may be
determined as if no such discontinuance had taken place; and

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 1.12 20.12 GOODS AND SERVICES TAX

❑ every person who, at the time of such discontinuance, was a partner of

such firm, or a member of such association or family, shall,
notwithstanding such discontinuance, jointly and severally, be liable for
the payment of tax and interest determined and penalty imposed and
payable by such firm, association or family, whether such tax and
interest has been determined or penalty imposed prior to or after such
discontinuance and subject as aforesaid, the provisions of this Act shall,
so far as may be, apply as if every such person or partner or member
were himself a taxable person.

B. Change in the constitution of the firm or AOP [Section 94(2)]:

❑ Where a change has occurred in the constitution of a firm or an
association of persons, the partners of the firm or members of
association, as it existed before and as it exists after the reconstitution,
shall, without prejudice to the provisions of section 90, jointly and
severally, be liable to pay tax, interest or penalty due from such firm or
association for any period before its reconstitution.
C. Dissolution of firm/AOP or partition of HUF [Section 94(3)]:
❑ The provisions of section 94(1) shall, so far as may be, apply where the
taxable person, being a firm/AOP is dissolved or where the taxable
person, being an HUF, has effected partition with respect to the
business carried on by it and accordingly references in that sub-section
to discontinuance shall be construed as reference to dissolution or to
partition.

Explanation — For the purposes of this Chapter, —

(i) A Limited Liability Partnership formed and registered under the provisions
of the Limited Liability Partnership Act, 2008 shall also be considered as a
firm.
(ii) Court: means the District Court, High Court or Supreme Court.

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LET US RECAPITULATE

LIABILITY TO PAY IN CASE OF TRANSFER OF BUSINESS

(SECTION 85)

Where transfer of business (wholly or partly) is made by way of sale, gift,

lease, leave and license, hire or in any other manner,

UPTO THE TIME OF SUCH TRANSFER

Transferor and transferee are jointly and severally liable wholly or to the
extent of transfer, to pay tax, interest or any penalty.

Where transferee carries on such business either in his own name or in some
other name.

Transferee shall be liable to pay tax on the supply of goods or services or both
effected by him with effect from the date of such transfer.

Note: In case of death of sole proprietor, transferee shall be liable to pay any tax,
interest or any penalty due from the transferor.

LIABILITY OF AGENT AND PRINCIPAL (SECTION 86)

Agent
Agent and
supplies/
Principal are to pay tax
receives
jointly and payable on
taxable goods
severally such goods
on behalf of
liable
principal.

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 1.14 20.14 GOODS AND SERVICES TAX

LIABILITY TO PAY IN CASE OF AN AMALGAMATION/MERGER

OF COMPANIES (SECTION 87)

Where two or more companies amalgamated or

merged

due to order of Court/Tribunal or otherwise, AND

order is to take effect from the date earlier than date of

that order.

Supply/receipt of goods and/goods between any two or more

of such companies to or from each other
amalgamation/merger is

amalgamation/merger
• Such transactions shall be included in
court/Tribunal for
Date from which

Date of order of
the turnover of supply or receipt of

of companies
effective

the respective companies.

• They shall be liable to pay tax
accordingly.

• These companies shall be treated as distinct companies

for the period till date of such order.

• Registration certificates of said companies shall be

cancelled with effect from the date of the said order

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LIABILITY IN CASE OF COMPANY IN LIQUIDATION (SECTION 88)

Liquidator shall give the intimation of his appointment to the Commissioner

within 30 days of his appointment

The Commissioner may make such inquiry or call for such information as he
may deem fit.

Commissioner shall notify the liquidator the amount sufficient to provide for
any tax, interest or penalty payable or likely to be payable by the company,
within 3 months of receipt of intimation of liquidator.

If such tax, interest or penalty cannot be recovered from the company, every
director during the period is jointly and severely liable to pay it unless he
proves that the non-recovery cannot be attributed to any gross neglect,
misfeasance or breach of duty on his part

LIABILITY OF DIRECTORS OF PRIVATE COMPANY (SECTION 89)

Where any tax, interest or penalty (TIP) due from a private company in
respect of any supply for any period cannot be recovered

Director(s) of such private company during such period to be jointly and severally

liable to pay such TIP not liable to pay such TIP

unless he proves that, non- if such private company gets

recovery cannot be attributed to converted into a public company
his gross neglect, misfeasance or and non- recovery pertains to the
breach of duty. period before conversion.

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LIABILITY OF PARTNERS OF FIRM TO PAY TAX (SECTION 90)

General Where any partner retires

Scenario • He/firm, shall intimate date of retirement of said
Firm and each partner to Commissioner by a written notice.
of the partners • Such partner shall be liable to pay TIP dues only
of the firm shall, upto:
jointly and ✓ date of his retirement, if above intimation
severally, be given within 1 month of retirement
liable to pay TIP ✓ or date of intimation, if above intimation
in case of firm. given after 1 month of retirement

LIABILITY OF GUARDIANS, TRUSTEES ETC. (SECTION 91)

Where business is carried on by any guardian, trustee or agent on behalf

of and for benefit of a minor or other incapacitated person.

TIP shall be levied and recoverable from such guardian, trustee or agent.

Such TIP shall be determined, levied and recoverable in a like manner and to
the same extent as it would be recoverable from minor or incapacitated
person as if he were a major/capacitated person and as if he were conducting
the business himself & all provisions of GST law shall apply accordingly.

LIABILITY OF COURT OF WARDS ETC. (SECTION 92)

Court of Wards (COW),

Administrator General
TIP shall be levied
Where the (AG), Official Trustee
and recoverable
estate/portion of (OT) or any receiver or
from such COW,
estate is under the manager or any such
AG, OT, receiver or
control of: person appointed
manager.
by/under a order of
court

Such T.I.P. shall be determined, levied and recoverable from above mentioned persons
in same manner and to same extent if he were conducting the business himself and
& all provisions of GST law shall apply accordingly.

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SPECIAL PROVISIONS REGARDING LIABILITY TO PAY TAX, INTEREST OR

PENALTY IN CERTAIN CASES

(i) ON DEATH OF A PERSON liable to pay TIP [SECTION 93(1)]

If business is continued after his Business is discontinued after his

death by legal representative death:
(LR) or any other person : LR shall be liable to pay TIP out of
Such LR/other person, shall be the estate of deceased person to the
liable to pay TIP due from extent to which his estate is capable
deceased person. of meeting TIP due.

The successor shall be liable to pay any TIP due from the transferor in cases of transfer
of business due to death of sole proprietor.

(ii) ON PARTITION OF PROPERTY OF HUF OR AOP [SECTION 93(2)]

Where property of the HUF or AOP is partitioned amongst

the various members or groups of members

Each member/group of members shall, jointly and

severally, be liable to pay TIP due

up to the time of the partition

(iii) On dissolution of a firm [SECTION 93(3)]

Where a firm is dissolved

every person partner shall, jointly and severally, be

liable to pay TIP due

up to the time of dissolution

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TEST YOUR KNOWLEDGE

1. Avataar Industries, a registered person under GST, has sold whole of its business
to Rolex Manufacturers. Determine the person liable to pay GST, interest or any
penalty under GST law [determined before sale, but still unpaid] due from
Avataar Industries upto the time of such transfer.
2. ABC Manufacturers Ltd. engages Raghav & Sons as an agent to sell goods on
its behalf. Raghav & Sons sells goods to Swami Associates on behalf of ABC
Manufacturers Ltd. Determine the liability to pay GST payable on such goods
as per the provisions of section 86.

3. A person, liable to pay GST, interest and penalty under GST law, dies.
Determine the person liable to pay the GST, interest and penalty due from such
person under GST law determined after his death if the business carried on by
such person is continued after his death by his legal representative.
4. In the question 3. above, would your answer be different if the business carried
on by the person who has died, is discontinued after his death.

5. What happens to the GST liability when the estate of a taxable person is under
the control of Court of Wards?
6. Discuss the liability to pay tax in case of an amalgamation/merger, under
section 87.
7. Discuss the liability to pay tax, interest or penalty on death of a person liable
to pay tax, interest or penalty as per the provisions of section 93(1).

8. With reference to the provisions of CGST Act, 2017, explain the liability of
partners of firm to pay tax?
9. Explain the provisions relating to liability for GST in case of company in
liquidation (section 88).
10. Discuss the liability of the retiring partner of a firm to pay any tax, interest or
penalty, if any, leviable on the firm under CGST/ lGST/ SGST Act.

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ANSWERS

1. Where a taxable person, liable to pay tax under this Act, transfers his business
in whole or in part, by sale, gift, lease, leave and license, hire or in any other
manner whatsoever, the taxable person and the person to whom the business
is so transferred shall, jointly and severally, be liable wholly or to the extent
of such transfer, to pay the tax, interest or any penalty due from the taxable
person upto the time of such transfer, whether such tax, interest or penalty
has been determined before such transfer, but has remained unpaid or is
determined thereafter.
Thus, in the given case, Avataar Industries and Rolex Manufacturers shall,
jointly and severally, be liable wholly or to the extent of such transfer, to pay
GST, interest or any penalty [determined before sale, but still unpaid] due
from Avataar Industries upto the time of such transfer.
2. As per provisions of Section 86, where an agent supplies or receives any
taxable goods on behalf of his principal, such agent and his principal shall,
jointly and severally, be liable to pay the tax payable on such goods under
this Act.

Thus, in the given case, ABC Manufacturers Ltd. and Raghav & Sons shall,
jointly and severally, be liable to pay GST payable on such goods.
3. Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016,
where a person, liable to pay tax, interest or penalty under this Act, dies, then
if a business carried on by the person is continued after his death by his legal
representative or any other person, such legal representative or other person,
shall be liable to pay tax, interest or penalty due from such person under this
Act, whether such tax, interest or penalty has been determined before his
death but has remained unpaid or is determined after his death.

4. Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016,

where a person, liable to pay tax, interest or penalty under this Act, dies, then
if a business carried on by the person is discontinued, whether before or after
his death, his legal representative shall be liable to pay, out of the estate of
the deceased, to the extent to which the estate is capable of meeting the

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charge, the tax, interest or penalty due from such person under this Act,
whether such tax, interest or penalty has been determined before his death
but has remained unpaid or is determined after his death.
5. Where the estate of a taxable person owning a business in respect of which
any tax, interest or penalty is payable is under the control of the Court of
Wards/Administrator General/Official Trustee/Receiver or Manager
appointed under any order of a Court, the tax, interest or penalty shall be
levied and recoverable from such Court of Wards/Administrator General/
Official Trustee/Receiver or Manager to the same extent as it would be
determined and recoverable from a taxable person.
6. Section 87 stipulates that when two or more companies are amalgamated/
merged in pursuance of an order of court or Tribunal or otherwise and the
order is to take effect from a date earlier to the date of the order and any two
or more of such companies have supplied/ received any goods and/or
services to or from each other during the period commencing on the date
from which the order takes effect till the date of the order, then such
transactions of supply and receipt shall be included in the turnover of supply
or receipt of the respective companies and they shall be liable to pay tax
accordingly.
For the purposes of the CGST Act, 2017, the said two or more companies shall
be treated as distinct companies for the period up to the date of the said
order. The registration certificates of the said companies shall be cancelled
with effect from the date of the said order.

7. As per provision of Section 93(1), save as otherwise provided in the Insolvency

and Bankruptcy Code, 2016, where a person, liable to pay tax, interest or
penalty under CGST Act, dies, then:

❑ Business is continued after his death: if a business carried on by the

person is continued after his death by his legal representative or any
other person, such legal representative or other person, shall be liable
to pay tax, interest or penalty due from such person under this Act.
❑ Business is discontinued after his death: if the business carried on by
the person is discontinued, whether before or after his death, his legal
representative shall be liable to pay, out of the estate of the deceased,

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 LIABILITY TO PAY IN CERTAIN CASES 20.21
a

to the extent to which the estate is capable of meeting the charge, the
tax, interest or penalty due from such person under this Act,

whether such tax, interest or penalty has been determined before his death
but has remained unpaid or is determined after his death.
8. Section 90 explains the liability of partners of firm to pay tax as under:-

Partners of the firm jointly and severally liable to pay any tax, interest
or penalty of the firm: Notwithstanding any contract to the contrary and
any other law for the time being in force, where any firm is liable to pay any
tax, interest or penalty under this Act, the firm and each of the partners of the
firm shall, jointly and severally, be liable for such payment.
Retiring partner liable to pay any tax, interest or penalty of the firm due
up to the date of his retirement: Where any partner retires from the firm,
he or the firm, shall intimate the date of retirement of the said partner to the
Commissioner by a notice in that behalf in writing and such partner shall be
liable to pay tax, interest or penalty due up to the date of his retirement
whether determined or not, on that date.
However, if no such intimation is given within 1 month from the date of
retirement, the liability of such partner shall continue until the date on which
such intimation is received by the Commissioner.
9. The provisions relating to liability for GST in case of company in liquidation
provided under section 88 are:-
➢ Where any company is being wound up whether under the orders of
a court or Tribunal or otherwise, every person appointed as a
liquidator/receiver of assets of a company shall give the intimation
of his appointment to the Commissioner within 30 days of his
appointment.

➢ The Commissioner shall ascertain the amount which in the opinion

of the Commissioner would be sufficient to provide for any tax,
interest or penalty which is then, or is likely thereafter to become,
payable by the company.
➢ He shall communicate the details of amount to the liquidator within
3 months of the receipt of intimation of appointment of liquidator.

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 1.22 20.22 GOODS AND SERVICES TAX

➢ When any private company is wound up and any tax, interest or

penalty determined under the CGST Act on the company for any
period, whether before or in the course of or after its liquidation,
cannot be recovered, then every person who was a director of such
company at any time during the period for which the tax was due
shall, jointly and severally, be liable for the payment of such tax,
interest or penalty.
However, director shall not be liable if he proves to the satisfaction of the
Commissioner that the non-recovery cannot be attributed to any gross
neglect, misfeasance or breach of duty on his part in relation to the affairs of
the company.

10. Where any partner retires from the firm, he or the firm, shall intimate the date
of retirement of the said partner to the Commissioner by a notice in that
behalf in writing. Such partner shall be liable to pay tax, interest or penalty
due up to the date of his retirement whether determined or not, on that date.
However, if no such intimation is given within 1 month from the date of
retirement, the liability of such partner shall continue until the date on which
such intimation is received by the Commissioner [Section 90].

© The Institute of Chartered Accountants of India

CHAPTER 21
OFFENCES AND PENALTIES
AND ETHICAL ASPECTS
UNDER GST
The section numbers referred to in the chapter pertain to CGST Act, unless otherwise
specified. Examples/Illustrations/Questions and Answers, as the case may be, given
in the Chapter are based on the position of GST law existing as on 30.04.2025.

LEARNING OUTCOMES
After Studying This Chapter, You Will Be Able To –

 understand and explain what will constitute the offence and the quantum of penalty
for different types of offences in different circumstances.
 identify and appreciate general disciplines to be followed for imposing penalty.
 analyse and apply the circumstances in which penalty may be waived
 examine the circumstances in which detention, seizure and release of goods and
conveyances in transit may be initiated.
 comprehend the circumstances in which confiscation of goods or conveyances and
levy of penalty may be initiated.
 list offences for enforcing prosecution provisions.
 categorize the offences within cognizable and non-bailable and non-cognizable and
bailable offences.
 understand and describe the meaning of ‘culpable mental state’ and its significance
in enforcing prosecution provisions.
 identify the person who is liable in case of offences by companies,
firm/LLP/HUF/trust and association of individuals.
 analyse and apply the offences that may be compounded and provisions relating
thereto.
 discuss the ethical aspects under GST law.

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 1.2 21.2 GOODS AND SERVICES TAX

1. INTRODUCTION

What is penalty and

prosecution?

Penal provisions are important aspects

of any legal framework to ensure
efficient enforcement of laws and to
motivate the genuine taxpayers to make
the required compliances. The word
“penalty” has not been defined in the
CGST Act, but judicial pronouncements
and principles of jurisprudence have laid
down the nature of a penalty as:
 a temporary punishment or a sum
of money imposed by statute, to
be paid as punishment for the
commission of a certain offence;
 a punishment imposed by law or
contract for doing or failing to do
something that was the duty of a party
to do.
‘Offence’ in general means a
violation/breach of law that is punishable OFFENCES AND PENALTIES
under law by way of penalties, fines,
imprisonment, or other legal actions based
on the severity of the violation.
Generally, the quantum of penalty to be
levied depends upon the intention of
person committing the offence. A person with a fraudulent intention to evade

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payment of taxes will be subjected to higher amount of penalty whereas a relatively

less amount of penalty will be levied for non-fraudulent
offences. It is important to note that in certain specified
cases of levy of penalty, the presence of mens rea is a
pre-requisite. The term "mens rea" is a Latin legal
phrase that means "guilty mind" or culpable mental
state. "Mens" means "mind," and "rea" means "guilty"
or "crime". It refers to a mental state, intention, or
knowledge of a person when he commits an offence. While committing an act, a
“culpable mental state” is a state of mind wherein-

 the act is intentional;

 the act and its implications are understood and controllable;

 the person committing the act was not coerced and even overcomes hurdles
to the act committed;

 the person believes or has reasons to believe that the act is contrary to law

‘Prosecution’ is the institution or commencement of

legal proceeding; the process of exhibiting formal
charges against the offender. Section 198 of the
Criminal Procedure Code defines “prosecution” as the
institution and carrying on of the legal proceedings
against a person.

Further, to institute the prosecution, offences are classified into cognizable (serious
category of offences) and non-cognizable offences (relatively less serious category
of offences). Cognizable offences are non-bailable offences and non-cognizable
offences are bailable offences.

Chapter XIX – Offences and Penalties [Sections 122 to 138 of the CGST Act] contains
the provisions relating to offences and penalties, detention, seizure and
confiscation of goods and compounding of offences. State GST laws also prescribe
identical provisions in relation to offences and penalties. In this chapter, we would
first discuss the offences and penalties prescribed under GST law. Thereafter, ethical
aspects to be considered by a Chartered Accountant while undertaking compliance
functions, advisory functions and furnishing certifications/reports, under GST law

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have been discussed in detail followed by few case studies which give the small
scenarios explaining the significance of ethics under GST law.

Provisions of offences and penalties under CGST Act have also been made
applicable to IGST Act vide section 20 of the IGST Act.
Further, in cases where the penalty is leviable under the CGST Act and the
SGST Act/ UTGST Act, the penalty leviable under the IGST Act shall be the
sum total of the said penalties.
It may be noted that the penalties payable by a registered person for the
specified offences are with reference to the CGST Act only. An equal
amount of penalty would be payable by such person under the respective
SGST/ UTGST Act as well.

However, before proceeding to understand the provisions, let us first go through

few relevant definitions.

2. RELEVANT DEFINITIONS
 Conveyance includes a vessel, an aircraft and a vehicle; [Section 2(34)].
 Person includes —
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;
(e) a Limited Liability Partnership;
(f) an association of persons or a body of individuals, whether
incorporated or not, in India or outside India;
(g) any corporation established by or under any Central Act, State Act or
Provincial Act or a Government company as defined in clause (45) of
section 2 of the Companies Act, 2013;
(h) any body corporate incorporated by or under the laws of a country
outside India;

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 OFFENCES AND PENALTIES AND ETHICAL
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(i) a co-operative society registered under any law relating to co-operative

societies;
(j) a local authority;
(k) Central Government or a State Government;
(l) society as defined under the Societies Registration Act, 1860;
(m) trust; and
(n) every artificial juridical person, not falling within any of the above;
[Section 2(84)]
 Registered Person means a person who is registered under section 25 but
does not include a person having a Unique Identity Number. [Section 2(94)]
 Taxable person means a person who is registered or liable to be registered
under section 22 or section 24 [Section 2(107)];
 Regulations means the regulations made by the Board under this Act on the
recommendations of the Council [Section 2(95)].
 Proper Officer in relation to any function to be performed under this Act,
means the Commissioner or the officer of the central tax who is assigned that
function by the Commissioner in the Board [Section 2(91)].

3. PENALTY FOR CERTAIN OFFENCES [SECTION

122 OF CGST ACT]

STATUTORY PROVISIONS

Section 122 Penalty for certain offences

Sub-section Particulars

(1) Where a taxable person who -

(i) supplies any goods or services or both without issue of

any invoice or issues an incorrect or false invoice with
regard to any such supply;

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 1.6 21.6 GOODS AND SERVICES TAX

(ii) issues any invoice or bill without supply of goods or

services or both in violation of the provisions of this Act
or the rules made thereunder;

(iii) collects any amount as tax but fails to pay the same to
the Government beyond a period of three months from
the date on which such payment becomes due;

(iv) collects any tax in contravention of the provisions of this

Act but fails to pay the same to the Government beyond
a period of three months from the date on which such
payment becomes due;

(v) fails to deduct the tax in accordance with the provisions

of sub-section (1) of section 51, or deducts an amount
which is less than the amount required to be deducted
under the said sub-section, or where he fails to pay to the
Government under sub-section (2) thereof, the amount
deducted as tax;

(vi) fails to collect tax in accordance with the provisions of

sub-section (1) of section 52, or collects an amount which
is less than the amount required to be collected under
the said sub-section or where he fails to pay to the
Government the amount collected as tax under sub-
section (3) of section 52;

(vii) takes or utilises input tax credit without actual receipt of

goods or services or both either fully or partially, in
contravention of the provisions of this Act or the rules
made thereunder;

(viii) fraudulently obtains refund of tax under this Act;

(ix) takes or distributes input tax credit in contravention

of section 20, or the rules made thereunder;

(x) falsifies or substitutes financial records or produces fake

accounts or documents or furnishes any false
information or return with an intention to evade
payment of tax due under this Act;

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(xi) is liable to be registered under this Act but fails to obtain

registration;

(xii) furnishes any false information with regard to

registration particulars, either at the time of applying for
registration, or subsequently;

(xiii) obstructs or prevents any officer in discharge of his duties

under this Act;

(xiv) transports any taxable goods without the cover of

documents as may be specified in this behalf;

(xv) suppresses his turnover leading to evasion of tax under

this Act;

(xvi) fails to keep, maintain or retain books of account and

other documents in accordance with the provisions of this
Act or the rules made thereunder;

(xvii) fails to furnish information or documents called for by an

officer in accordance with the provisions of this Act or the
rules made thereunder or furnishes false information or
documents during any proceedings under this Act;

(xviii) supplies, transports or stores any goods which he has

reasons to believe are liable to confiscation under this
Act;

(xix) issues any invoice or document by using the registration

number of another registered person;

(xx) tampers with, or destroys any material evidence or

document;

(xxi) disposes off or tampers with any goods that have been
detained, seized, or attached under this Act,

he shall be liable to pay a penalty of ten thousand rupees or an

amount equivalent to the tax evaded or the tax not deducted
under section 51 or short deducted or deducted but not paid to the
Government or tax not collected under section 52 or short

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 1.8 21.8 GOODS AND SERVICES TAX

collected or collected but not paid to the Government or input tax

credit availed of or passed on or distributed irregularly, or the
refund claimed fraudulently, whichever is higher

(1A) Any person who retains the benefit of a transaction covered under
clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose
instance such transaction is conducted, shall be liable to a penalty
of an amount equivalent to the tax evaded or input tax credit
availed of or passed on.

(1B) Any electronic commerce operator who—

(i) allows a supply of goods or services or both through it by

an unregistered person other than a person exempted from
registration by a notification issued under this Act to make
such supply;

(ii) allows an inter-State supply of goods or services or both

through it by a person who is not eligible to make such
inter-State supply; or

(iii) fails to furnish the correct details in the statement to be

furnished under sub-section (4) of section 52 of any
outward supply of goods effected through it by a person
exempted from obtaining registration under this Act,

shall be liable to pay a penalty of ten thousand rupees, or an

amount equivalent to the amount of tax involved had such supply
been made by a registered person other than a person paying tax
under section 10, whichever is higher.

(2) Any registered person who supplies any goods or services or both
on which any tax has not been paid or short-paid or erroneously
refunded, or where the input tax credit has been wrongly availed
or utilised, —

(a) for any reason, other than the reason of fraud or any
wilful misstatement or suppression of facts to evade tax,
shall be liable to a penalty of ten thousand rupees or ten
per cent. of the tax due from such person, whichever is
higher;

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(b) for reason of fraud or any wilful misstatement or

suppression of facts to evade tax, shall be liable to a
penalty equal to ten thousand rupees or the tax due from
such person, whichever is higher.

(3) Any person who -

(a) aids or abets any of the offences specified in clauses (i)

to (xxi) of sub-section (1);

(b) acquires possession of, or in any way concerns himself in

transporting, removing, depositing, keeping, concealing,
supplying, or purchasing or in any other manner deals
with any goods which he knows or has reasons to believe
are liable to confiscation under this Act or the rules made
thereunder;

(c) receives or is in any way concerned with the supply of, or

in any other manner deals with any supply of services
which he knows or has reasons to believe are in
contravention of any provisions of this Act or the rules
made thereunder;

(d) fails to appear before the officer of central tax, when

issued with a summon for appearance to give evidence
or produce a document in an inquiry;

(e) fails to issue invoice in accordance with the provisions of

this Act or the rules made thereunder or fails to account
for an invoice in his books of account,

shall be liable to a penalty which may extend to twenty five

thousand rupees.

ANALYSIS

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 1.10 21.10 GOODS AND SERVICES TAX

Section 122 levies penalty on following persons:

Section Penalty leviable on

Section 122(1) Taxable Person

Section 122(1A) Any Person

Section 122(1B) Electronic Commerce Operator

Section 122(2) Registered Person

Section 122(3) Any Person

(i) Penalty under section 122(1)

Penalty under section 122(1) is leviable on a taxable person. Taxable person means
a person who is registered or liable to take registration. Registered Person means
the person who is registered in the GST law.
Section 122(1) illustrates 21 offences which are punishable under law. First, we
would analyse the quantum of penalty and then will analyse the offences –
(A) Quantum of Penalty

CGST/SGST/UTGST law IGST law

(i) ` 10,000/-; or (iii) ` 20,000/-; or

(ii) Amount equivalent to, any of (iv) Amount equivalent to, any of
the following (applicable as the following (applicable as
the case may be): the case may be):
 Tax evaded; or  Tax evaded; or
 Tax not deducted under  Tax not deducted under
section 51 or short section 51 or short
deducted or deducted deducted or deducted
but not paid to the but not paid to the
Government; or Government; or
 Tax not collected under  Tax not collected under
section 52 or short section 52 or short
collected or collected collected or collected

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but not paid to the but not paid to the

Government; or Government; or
 Input tax credit availed  Input tax credit availed
of or passed on or of or passed on or
distributed irregularly; distributed irregularly;
or or
 Refund claimed  Refund claimed
fraudulently fraudulently
whichever is higher. whichever is higher.

It may be noted that the penalty payable under section 122 is

with reference to only the CGST Act. An equal amount of penalty
is payable under the respective SGST/UTGST Act as well.
Similarly, under IGST Act, penalty payable will be sum of penalty
payable under the CGST Act and penalty payable under SGST/UTGST Act.

(B) Specified Offences

Section 122(1) gives the list of 21 different offences which can be divided in
the following broad categories to have the better understanding –
(A) Offences related to invoice

(i) supplies any goods or services or both without issue of any

invoice or issues an incorrect or false invoice with regard to any
such supply;

(ii) issues any invoice or bill without supply of goods or services or

both in violation of the provisions of this Act or the rules made
thereunder;

(xix) issues any invoice or document by using the registration

number of another registered person;

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(B) Offences related to tax evasion / relating to TCS / TDS

(iii) collects any amount as tax but fails to pay the same to the
Government beyond a period of three months from the date on
which such payment becomes due;

(iv) collects any tax in contravention of the provisions of this Act

but fails to pay the same to the Government beyond a period of
three months from the date on which such payment becomes
due;

(v) fails to deduct the tax in accordance with the provisions of sub-
section (1) of section 51, or deducts an amount which is less
than the amount required to be deducted under the said sub-
section, or where he fails to pay to the Government under sub-
section (2) thereof, the amount deducted as tax;

(vi) fails to collect tax in accordance with the provisions of sub-

section (1) of section 52, or collects an amount which is less
than the amount required to be collected under the said sub-
section or where he fails to pay to the Government the amount
collected as tax under sub-section (3) of section 52;

(xv) suppresses his turnover leading to evasion of tax under this Act;
(C) Offences related to ITC

(vii) takes or utilises input tax credit without actual receipt of

goods or services or both either fully or partially, in
contravention of the provisions of this Act or the rules made
thereunder;

(ix) takes or distributes input tax credit in contravention

of section 20, or the rules made thereunder;

(D) Offence related to refund

(viii) fraudulently obtains refund of tax under this Act;

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(E) Offences related to records, documents, books of accounts etc.

(x) falsifies or substitutes financial records or produces fake

accounts or documents or furnishes any false information
or return with an intention to evade payment of tax due
under this Act;
(xvi) fails to keep, maintain or retain books of account and other
documents in accordance with the provisions of this Act or
the rules made thereunder;
(xvii) fails to furnish information or documents called for by an
officer in accordance with the provisions of this Act or the
rules made thereunder or furnishes false information or
documents during any proceedings under this Act;

(F) Offences related to registration

(xi) is liable to be registered under this Act but fails to obtain

registration;
(xii) furnishes any false information with regard to registration
particulars, either at the time of applying for registration,
or subsequently;
(G) Offence related to transportation and storage

(xiv) transports any taxable goods without the cover of documents

as may be specified in this behalf;
(xviii) supplies, transports or stores any goods which he has reasons
to believe are liable to confiscation under this Act;

(H) Other offences

(xiii) obstructs or prevents any officer in discharge of his duties

under this Act;

(xx) tampers with, or destroys any material evidence or

document;

(xxi) disposes off or tampers with any goods that have been
detained, seized, or attached under this Act,

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(ii) Penalty under section 122(1A)

Section 122(1A) enables the levy of penalty on a taxable person as well as any
other person who retains the benefit arising out of the following offences or
at whose instance such offences are conducted:
 Supply of goods or services without invoice or incorrect/false invoice
 Invoice with supply of goods or services

 ITC taken or utilised without receipt of goods or services, fully or

partially
 Irregular distribution of credit by ISD
Therefore, it makes the beneficiary of the above transactions to penalty,
similar to penalty leviable on the taxable person who commits such offences
under sub-section (1).
It is important to note that the Commissioner may provisionally attached any
property, including bank account, belonging to the beneficiary of the
transactions specified above in accordance with section 83. The provisions
relating to provisional attachment under section 83 are discussed in detail in
Chapter 19 – Demands and Recovery in this Module of the Study Material.
Quantum of Penalty
Penalty of an amount equivalent to the tax evaded or input tax credit availed
of or passed on.
(iii) Penalty under section 122(1B)
This sub-section makes an E-commerce operator (ECO), who is liable to
collect tax at source under section 52, liable to penalty if it permits the
supply through it by an unregistered person (other than notified persons,
making supply through ECO, exempted from registration), allows inter-State
supply through it by a person not so eligible or fails to furnish the correct
details in Form GSTR-8 with respect to any outward supply of goods through
it by a person exempted from registration under CGST Act.

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Quantum of Penalty

CGST/SGST/UTGST law IGST law

(i) ` 10,000/-; or (i) ` 20,000/-; or

(ii) Amount equivalent to, (ii) Amount equivalent to,
amount of tax involved had amount of tax involved had
such supply been made by a such supply been made by a
registered person other than registered person other than
composition supplier composition supplier
whichever is higher. whichever is higher.

(iv) Penalty under section 122(2)

Section 122(2) levies penalty on a registered person person –
(i) who supplies any goods or services or both on which any tax has not
been paid or short-paid or erroneously refunded, or
(ii) where the input tax credit has been wrongly availed or utilised,
Quantum of Penalty

CGST/SGST/UTGST IGST law

law
(a) For any reason, Shall be liable to a Shall be liable to a
other than the penalty for an amount penalty for an amount
reason of fraud equal to– equal to–
or any wilful (a) ` 10,000/-; or (c) ` 20,000/-; or
misstatement or (b) 10% of the tax due (d) 10% of the tax due
suppression of from such person from such person
facts to evade whichever is higher whichever is higher
tax
(b) For reason of Shall be liable to a Shall be liable to a
fraud or any penalty for an amount penalty for an amount
wilful equal to– equal to–
misstatement or (a) ` 10,000/-; or (c) ` 20,000/-; or
suppression of (b) Tax due from such (d) Tax due from such
facts to evade person person
tax whichever is higher whichever is higher

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(v) Penalty under section 122(3)

Section 122(3) levies penalty on any person who commits any of the below
mentioned offences. Thus, a person is liable to penalty under this sub-section if he:

1. aids or abets any of the 21 offences specified in sub-section (1) of

section 122;
2. acquires possession of, or in any way concerns himself in transporting,
removing, depositing, keeping, concealing, supplying, or purchasing or
in any other manner deals with any goods which he knows or has
reasons to believe are liable to confiscation under this Act or the rules
made thereunder;
3. receives or is in any way concerned with the supply of, or in any other
manner deals with any supply of services which he knows or has reasons
to believe are in contravention of any provisions of this Act or the rules
made thereunder;
4. fails to appear before the officer of central tax, when issued with a
summon for appearance to give evidence or produce a document in an
inquiry;
5. fails to issue invoice in accordance with the provisions of this Act or the
rules made thereunder or fails to account for an invoice in his books of
account.
Quantum of Penalty
Penalty is leviable for an amount which may extend to ` 25,000/- (each under
CGST and SGST/UTGST) or `50,000 (under IGST).

4. PENALTY FOR FAILURE TO FURNISH

INFORMATION RETURN [SECTION 123]
The provisions relating to information return and penalty for failure to furnish
information return have already been discussed in Chapter 13 – Returns in Module 2
of this Study Material.

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5. FINE FOR FAILURE TO FURNISH STATISTICS

[SECTION 124]
If any person required to furnish any information or return under section 151**,
• fails to furnish such information or return as may be required under that
section without reasonable cause; or
• willfully furnishes or causes to furnish any information or return which he
knows to be false,
he shall be punishable with a fine which may extend to ` 10,000.
In case of a continuing offence, he shall also be punishable to a further fine which
may extend to:
(i) ` 100 for each day after the first day during which the offence continues
or
(ii) ` 25,000
whichever is lower.
An equal amount of fie is payable under the respective SGST/UTGST Act as well.
** Section 151 provides that the Commissioner/officer authorised by him may, by
an order, direct any person to furnish information relating to any matter dealt with
in connection with CGST Act, in prescribed time, form, and manner.
Provision of section 124 has been tabulated as under:

Particulars CGST/SGST/UTGST law IGST law

Fine may extend to

Offence ` 10,000/- ` 20,000/-

committed
first time

In case of (i) ` 100 for each day after (i) ` 200 for each day after
continuing the first day during the first day during
offence which the offence which the offence
continues continues

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or or
(ii) ` 25,000 (ii) ` 50,000
whichever is lower whichever is lower

6. GENERAL PENALTY [SECTION 125]

Any person who contravenes any of the provisions of this General Penalty
Act or any rules made thereunder for which no penalty is ` 25,000
separately provided for in this Act, shall be liable to a
penalty which may extend to ` 25,000.
Penalty amount is discretionary in nature and hence it depends upon the nature of
the offence and its severity. Mere contravention of any of the provision of the law
will not result into the penalty of ` 25,000 always; the gravity of the offences should
be considered. General disciplines related to penalty as given in section 126 are to
be considered by the proper officer while imposing the penalty under section 125.

7. GENERAL DISCIPLINES RELATED TO

PENALTY [SECTION 126]
The levy of penalty is subject to a certain disciplinary regime which is based on
jurisprudence, principles of natural justice and principles governing international
trade and agreements. Such general discipline is enshrined in section 126 of the
Act. According to which –
(1) No penalty shall be imposed by any officer under this Act for –
• Minor breaches of tax regulations, or

• procedural requirements of the law, or

• any omission or mistake in documentation which is easily rectifiable and
made without fraudulent intent or gross negligence,

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As per Explanation to section 126(1),

(a) a breach shall be considered a ‘minor
A breach shall be
breach’ if the amount of tax involved is considered a ‘minor
less than ` 5,000; breach’ if the amount
(b) an omission or mistake in of tax involved is less
documentation shall be considered to than ` 5,000
be easily rectifiable if the same is an
error apparent on the face of record.
(2) The penalty imposed under this Act shall depend on the facts and
circumstances of each case and shall be commensurate with the degree and
severity of the breach.
(3) No penalty shall be imposed on any person without giving him an
opportunity of being heard i.e. issue of SCN and proper hearing in the matter,
affording an opportunity to the person proceeded against is must to rebut
the allegations levelled against him.
(4) The officer under this Act shall while imposing penalty in an order for a breach
of any law, regulation or procedural requirement, specify the nature of the
breach and the applicable law, regulation or procedure under which the
amount of penalty for the breach has been specified.
(5) When a person voluntarily discloses to an officer under this Act the
circumstances of a breach of the tax law, regulation or procedural
requirement prior to the discovery of the breach by the officer under this Act,
the proper officer may consider this fact as a mitigating factor when
quantifying a penalty for that person.
(6) The provisions of this section shall not apply in such cases where the penalty
specified under this Act is either a fixed sum or expressed as a fixed
percentage. For instance, penalty under section 125 is being prescribed as
upto ` 25,000 means neither as a fixed sum nor as a fixed percentage hence
general disciplines given under section 126, should be considered while
imposing any penalty.

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8. POWER TO IMPOSE PENALTY IN CERTAIN

CASES [SECTION 127]
This section empowers the proper officer to impose penalty even if the penalty is
not covered under any of the following proceedings-
(i) Assessment of non-filers of Returns, under section 62
(ii) Assessment of unregistered persons, under section 63
(iii) Summary Assessment in certain special cases under section 64
(iv) Determination of tax not paid or short paid or erroneously refunded or ITC
wrongly availed or utilized for any reason other than fraud or any willful
misstatement or suppression of facts under section 73
(v) Determination of tax not paid or short paid or erroneously refunded or ITC
wrongly availed or utilized by reason of fraud or any willful misstatement or
suppression of facts under section 74
(vi) Determination of tax not paid or short paid or erroneously refunded or
input tax credit wrongly availed or utilised for any reason pertaining to
Financial Year 2024-25 onward under section 74A.
(vii) Detention, seizure and release of goods and conveyances in transit under
section 129
(viii) Confiscation of goods or conveyances and levy of penalty under section 130
If proper officer is of the view that such person is liable to a penalty, he may issue
an order levying such penalty after giving a reasonable opportunity of being heard
to such person.

9. POWER TO WAIVE PENALTY OR FEE OR

BOTH [SECTION 128]
The Government may, by notification, waive in part or full, any penalty referred to
(in section 122 or section 123 or section 125 or any late fee referred to in
section 47) for such class of taxpayers and under such mitigating circumstances as
may be specified therein on the recommendations of the Council.

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10. DETENTION, SEIZURE AND RELEASE OF

GOODS AND CONVEYANCES IN TRANSIT
[SECTION 129]

STATUTORY PROVISIONS

Section 129 Detention, seizure and release of goods and conveyances in

transit

Sub-section Particulars

(1) Notwithstanding anything contained in this Act, where any person

transports any goods or stores any goods while they are in transit
in contravention of the provisions of this Act or the rules made
thereunder, all such goods and conveyance used as a means of
transport for carrying the said goods and documents relating to
such goods and conveyance shall be liable to detention or seizure
and after detention or seizure, shall be released,—

(a) on payment of penalty equal to two hundred per cent of

the tax payable on such goods and, in case of exempted
goods, on payment of an amount equal to two per cent
of the value of goods or twenty-five thousand rupees,
whichever is less, where the owner of the goods comes
forward for payment of such penalty;

(b) on payment of penalty equal to fifty per cent of the value

of the goods or two hundred per cent of the tax payable
on such goods, whichever is higher, and in case of
exempted goods, on payment of an amount equal to five
per cent of the value of goods or twenty-five thousand
rupees, whichever is less, where the owner of the goods
does not come forward for payment of such penalty;

(c) upon furnishing a security equivalent to the amount

payable under clause (a) or clause (b) in such form and
manner as may be prescribed:

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Provided that no such goods or conveyance shall be detained or

seized without serving an order of detention or seizure on the
person transporting the goods.

(3) The proper officer detaining or seizing goods or conveyance shall

issue a notice within seven days of such detention or seizure,
specifying the penalty payable, and thereafter, pass an order
within a period of seven days from the date of service of such
notice, for payment of penalty under clause (a) or clause (b) of
sub-section (1).

(4) No penalty shall be determined under sub-section (3) without

giving the person concerned an opportunity of being heard.

(5) On payment of amount referred in sub-section (1), all proceedings

in respect of the notice specified in sub-section (3) shall be deemed
to be concluded.

(6) Where the person transporting any goods or the owner of such
goods fails to pay the amount of penalty under sub-section (1)
within fifteen days from the date of receipt of the copy of the order
passed under sub-section (3), the goods or conveyance so detained
or seized shall be liable to be sold or disposed of otherwise, in such
manner and within such time as may be prescribed, to recover the
penalty payable under sub-section (3):
Provided that the conveyance shall be released on payment by the
transporter of penalty under sub-section (3) or one lakh rupees,
whichever is less:
Provided further that where the detained or seized goods are
perishable or hazardous in nature or are likely to depreciate in
value with passage of time, the said period of fifteen days may be
reduced by the proper officer.

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ANALYSIS
Section 129 provides for detention, seizure and release of goods and conveyances
in transit. The provision starts with a non-obstante clause. It provides as follows:
(i) Detention/seizure of goods, conveyance and/or documents [Section
129(1) and proviso to section 129(1)]
It provides that if any person transports any goods or stores any goods while
they are in transit in contravention of the provisions of GST law, then:
 all such GOODS and
 CONVEYANCE used as a means
of transport for carrying the said
goods and
 DOCUMENTS relating to such
goods and conveyance,
shall be liable to detention or seizure.
Thus, it covers the situations where a person transports any goods or stores
any such goods while in transit without the documents prescribed under GST
law (i.e. invoice and a declaration) or supplies or stores any goods that have
not been recorded in the books or accounts maintained by him.
Distinction between ‘Seizure’ and ‘Detention’
The term ‘seizure’ has not been specifically defined in the GST Law. In Law
Lexicon Dictionary,
‘seizure’ is defined
as the act of taking
possession of property by an officer
under legal process. It generally implies
taking possession forcibly contrary to
the wishes of the owner of the property
or who has the possession and who was
unwilling to part with the possession.

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The difference between ‘Seizure’ and ‘Detention’ is as follows:

(i) Denial of access to the owner of the property or the person who
possesses the property at a particular point of time by a legal
order/notice is called detention. Seizure is taking
over of actual possession of the goods by the
department.
(ii) Detention order is issued when it is suspected that the goods are liable
to confiscation. Seizure can be made only on the reasonable belief
which is arrived at after inquiry/investigation that the goods are liable
to confiscation.
No such goods or conveyance shall be detained or seized without serving an
order of detention or seizure on the person transporting the goods.
Release of goods, conveyance and/or documents on payment of
specified penalty [Section 129(1)]

After detention or seizure, the above goods, conveyance and/or documents

shall be released on payment of specified amount of penalty. The penalty
amount is given in the table below.

When owner of goods COMES FORWARD for payment of penalty

[Section 129(1)(a)]:

Taxable goods CGST/SGST/UTGST law IGST law

Penalty equal to 200% of Penalty equal to 200% of

tax payable IGST payable

Exempted goods Lower of the following: Lower of the following:

 2% of the value of  4% of the value of
goods or goods or
 ` 25,000  ` 50,000

When owner of goods DOES NOT COME FORWARD for payment of

penalty [Section 129(1)(b)]:

Taxable goods Penalty equal to higher Penalty equal to higher

of the following of the following

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 50% of value of  100% of value of

goods or goods or
 200% of the tax  200% of the IGST
payable on such payable on such
goods goods

Exempted goods Lower of Lower of

 5% of the value of  10% of the value of
goods or goods or
 ` 25,000  ` 50,000

It is important to note that the goods, conveyance and/or documents

may also be released on furnishing security equivalent to amount
payable in the above table.

It may be noted that the penalty payable under section 129 is

with reference to only the CGST Act. An equal amount of
penalty is payable under the respective SGST/UTGST Act as well.

Similarly, under IGST Act, penalty payable will be sum of penalty payable
under the CGST Act and penalty payable under SGST/UTGST Act.
(ii) Issuance of notice as well as passing of order for payment of penalty
[Section 129(3) & (4)]
The proper officer detaining/seizing goods or conveyance shall issue a notice
within 7 days of such detention/seizure, specifying the penalty payable.
Thereafter, the proper officer shall pass an order within a period of 7 days
from the date of service of such notice, for payment of penalty given in
above table.

Thus, time-limit of 7 days each has been prescribed for issue of notice and
passing of order for payment of penalty after detention/seizure of
goods/conveyances.
An opportunity of being heard must be given to the person concerned before
determining the penalty payable.

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(iii) Conclusion of proceedings on payment of penalty payable [Section

129(5)]

All proceedings in respect of the notice issued shall be deemed to be

concluded on payment of prescribed penalty.
(iv) Non-payment of penalty amount [Section 129(6)]

Where the person transporting any goods/ owner of such goods fails to pay
the specified amount of penalty within 15 days from the date of receipt of
the copy of the order levying penalty, the goods or conveyance so
detained/seized shall be liable to be sold or disposed of otherwise, in the
prescribed time and manner, to recover the penalty so payable 1.
However, where the detained/seized goods are perishable or hazardous in
nature or are likely to depreciate in value with passage of time, the said period
of 15 days may be reduced by the proper officer.
Further, now, the transporter can get the conveyance released on payment of:
 penalty under sub-section (3)
or
 ` 1 lakh (each under CGST and SGST/UTGST law and ` 2 lakh under IGST
law)
whichever is less.
(v) Procedure for interception of conveyances for inspection of goods in
movement, and detention and release of such goods and conveyances
During the movement of goods, the proper officer, empowered to intercept
and inspect a conveyance, may intercept any conveyance for verification of
documents and/or inspection of goods. On being intercepted, the person in
charge of the conveyance shall produce the documents related to the goods
and the conveyance. The proper officer shall verify such documents.
Where, prima facie, no discrepancies are found, the conveyance shall be
allowed to move further.

1
The manner of sale/disposal of the goods or conveyance so detained/seized for recovery of
penalty has been prescribed in rule 144A.

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Where the person in charge of the

conveyance fails to produce any
prescribed document or where the
proper officer intends to undertake an
inspection, he shall record a statement of
the person in charge of the conveyance
and shall issue an order for physical
verification/inspection of the
conveyance, goods and documents,
requiring the person in charge of the
conveyance to station the conveyance at
the place mentioned in such order and allow the inspection of the goods.

The proper officer shall conclude the inspection proceedings, either by

himself or through any authorised proper officer within a period of 3 days (or
extended time) from the date of issue of the order for inspection.

On completion of the physical verification/inspection of the conveyance and

the goods in movement, the proper officer shall prepare a report of such
physical verification and upload on common portal and serve a copy of the
said report to the person in charge.

Where no discrepancies are found, the proper officer shall issue forthwith a
release order and allow the conveyance to move further. However, where the
proper officer is of the opinion that the goods and conveyance need to be
detained under section 129, he shall issue an order of detention and serve
a notice under section 129(3) on the person in charge, specifying the penalty
payable.

On payment of the penalty under section

129(1) or upon furnishing of security
equivalent to the said amount, the goods
and conveyance shall be released forthwith
by a release order. Where the person
transporting any goods or the owner of such
goods fails to pay the amount of penalty

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under section 129(1) within 15 days from the date of receipt of the copy of
the order for detention, the goods or conveyance so detained or seized shall
be liable to be sold or disposed of otherwise 2.
(vi) Cases where detention/seizure may not be initiated

In case where a consignment of goods is accompanied with an invoice or any

other specified document and also an e-way bill, proceedings under
section 129 may not be initiated, in the following situations:

a) Spelling mistakes in the name of the consignor or the consignee but

the GSTIN, wherever applicable, is correct;

b) Error in the pin-code but the address of the consignor and the
consignee mentioned is correct, subject to the condition that the error
in the PIN code should not have the effect of increasing the validity
period of the e-way bill;

c) Error in the address of the consignee to the extent that the locality and
other details of the consignee are correct;

d) Error in one or two digits of the document number mentioned in the

e-way bill;

e) Error in 4 or 6 digit level of HSN where the first 2 digits of HSN are
correct and the rate of tax mentioned is correct;

f) Error in one or two digits/characters of the vehicle number.

In above situations, penalty to the tune of ` 500/- each under section 125 and
the respective SGST Act should be imposed (`1,000/- under the IGST Act) 3.

2
Circular No. 41/15/2018 GST dated 13.04.2018
3
Circular 64/38/2018 GST dated 14.09.2018

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11. CONFISCATION OF GOODS OR

CONVEYANCES AND LEVY OF PENALTY
[SECTION 130]

STATUTORY PROVISIONS

Section 130 Confiscation of goods or conveyances and levy of penalty

Sub-section Particulars

(1) Where any person,—

(i) supplies or receives any goods in contravention of any of

the provisions of this Act or the rules made thereunder
with intent to evade payment of tax; or

(ii) does not account for any goods on which he is liable to

pay tax under this Act; or

(iii) supplies any goods liable to tax under this Act without
having applied for registration; or

(iv) contravenes any of the provisions of this Act or the rules

made thereunder with intent to evade payment of tax; or

(v) uses any conveyance as a means of transport for carriage

of goods in contravention of the provisions of this Act or
the rules made thereunder unless the owner of the
conveyance proves that it was so used without the
knowledge or connivance of the owner himself, his agent,
if any, and the person in charge of the conveyance,

then, all such goods or conveyances shall be liable to confiscation

and the person shall be liable to penalty under section 122.

(2) Whenever confiscation of any goods or conveyance is authorised

by this Act, the officer adjudging it shall give to the owner of the
goods an option to pay in lieu of confiscation, such fine as the said
officer thinks fit:

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Provided that such fine leviable shall not exceed the market value
of the goods confiscated, less the tax chargeable thereon:
Provided further that the aggregate of such fine and penalty
leviable shall not be less than the penalty equal to hundred per
cent of the tax payable on such goods:
Provided also that where any such conveyance is used for the
carriage of the goods or passengers for hire, the owner of the
conveyance shall be given an option to pay in lieu of the
confiscation of the conveyance a fine equal to the tax payable on
the goods being transported thereon.

(4) No order for confiscation of goods or conveyance or for imposition

of penalty shall be issued without giving the person an opportunity
of being heard.

(5) Where any goods or conveyance are confiscated under this Act, the
title of such goods or conveyance shall thereupon vest in the
Government.

(6) The proper officer adjudging confiscation shall take and hold
possession of the things confiscated and every officer of Police, on
the requisition of such proper officer, shall assist him in taking and
holding such possession.

(7) The proper officer may, after satisfying himself that the confiscated
goods or conveyance are not required in any other proceedings
under this Act and after giving reasonable time not exceeding three
months to pay fine in lieu of confiscation, dispose of such goods or
conveyance and deposit the sale proceeds thereof with the
Government.

ANALYSIS
Section 130 stipulates 5 scenarios in which the goods or conveyances carrying such
goods can be confiscated. However, before going through these scenarios, let us
first understand what is ‘confiscation’.

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The word ‘confiscation’ has not been defined in

the CGST Act. The concept is derived from
Roman law wherein it meant seizing or taking
into the hands of emperor and transferring to
Imperial “fiscus” or Treasury.
The word “confiscate” has been defined in Aiyar’s Law Lexicon as to “appropriate
(private property) to the public treasury by way of penalty; to deprive of property
as forfeited to the State.”

In short, it means transfer of the title to the goods to the Government.

(i) Scenarios where goods or conveyances are liable to confiscation [Section
130(1)]
Where any person—
(i) supplies or receives any goods in contravention of any of the provisions
of this Act or the rules made thereunder with intent to evade payment
of tax;
(ii) does not account for any goods on which he is liable to pay tax under
this Act; or
(iii) supplies any goods liable to tax under this Act without having applied
for registration; or
(iv) contravenes any of the provisions of this Act or the rules made
thereunder with intent to evade payment of tax; or
(v) uses any conveyance as a
means of transport for
carriage of goods in
contravention of the
provisions of this Act or the
rules made thereunder
unless the owner of the
conveyance proves that it
was so used without the
knowledge or connivance of
the owner himself, his agent,
CONFISCAT ION OF
if any, and the person in GOODS
charge of the conveyance,

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then, all such goods or conveyances shall be liable to confiscation and the
person shall be liable to penalty under section 122.
(ii) Redemption fine [Section 130(2)]
In case of confiscation of any goods or conveyance, the officer adjudging it
shall give to the owner of the goods an option to pay in lieu of confiscation,
such fine as the said officer thinks fit. This fine shall be in addition to the tax
and other charges payable in respect of such goods.

≥
Where any such conveyance is used for the carriage of the goods or
passengers for hire, the owner of the conveyance shall be given an option
to pay in lieu of the confiscation of the conveyance a fine equal to the tax
payable on the goods being transported thereon.

(iii) Opportunity of being heard [Section 130(4)]

No order for confiscation of goods or conveyance or for imposition of penalty

shall be issued without giving the person an opportunity of being heard.

(iv) Title and possession of confiscated goods [Section 130(5) & (6)]

The title of confiscated goods or conveyance shall thereupon vest in the

Government. Further, the proper officer adjudging confiscation shall take and
hold possession of the things confiscated and every officer of Police, on the
requisition of such proper officer, shall assist him in taking and holding such
possession.

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(v) Disposal of confiscated goods [Section 130(7)]

The proper officer may, after satisfying himself that the confiscated goods or
conveyance are not required in any other proceedings under this Act and
after giving reasonable time not exceeding 3 months to pay fine in lieu of
confiscation, dispose of such goods or conveyance and deposit the sale
proceeds thereof with the Government.

12. CONFISCATION OR PENALTY NOT TO

INTERFERE WITH OTHER PUNISHMENTS
[SECTION 131]
Without prejudice to the provisions contained in the Code of Criminal Procedure,
1973, no confiscation made or penalty imposed under the provisions of this Act or
the rules made thereunder shall prevent the infliction of any other punishment to
which the person affected thereby is liable under the provisions of this Act or under
any other law for the time being in force. Such other punishment can be arrest,
prosecution, cancellation of registration, etc.

13. PUNISHMENTS FOR CERTAIN OFFENCES

[SECTION 132]

STATUTORY PROVISIONS

Section 132 Punishment for certain offences

Sub-section Clause/sub Particulars
clause
(1) Whoever commits, or causes to commit and retain the benefits arising
out of, any of the following offences, namely:—
(a) supplies any goods or services or both without issue of
any invoice, in violation of the provisions of this Act or

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the rules made thereunder, with the intention to evade

tax;
(b) issues any invoice or bill without supply of goods or
services or both in violation of the provisions of this Act,
or the rules made thereunder leading to wrongful
availment or utilisation of input tax credit or refund of
tax;
(c) avails input tax credit using the invoice or bill referred
to in clause (b) or fraudulently avails input tax credit
without any invoice or bill;
(d) collects any amount as tax but fails to pay the same to
the Government beyond a period of three months from
the date on which such payment becomes due;
(e) evades tax or fraudulently obtains refund and where
such offence is not covered under clauses (a) to (d);
(f) falsifies or substitutes financial records or produces fake
accounts or documents or furnishes any false
information with an intention to evade payment of tax
due under this Act;
(h) acquires possession of, or in any way concerns himself
in transporting, removing, depositing, keeping,
concealing, supplying, or purchasing or in any other
manner deals with, any goods which he knows or has
reasons to believe are liable to confiscation under this
Act or the rules made thereunder;
(i) receives or is in any way concerned with the supply of,
or in any other manner deals with any supply of services
which he knows or has reasons to believe are in
contravention of any provisions of this Act or the rules
made thereunder;
(l) attempts to commit, or abets the commission of any of
the offences mentioned in clauses (a) to (f) and clauses
(h) and (i) of this section,
shall be punishable—

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(i) in cases where the amount of tax evaded or the amount

of input tax credit wrongly availed or utilised or the
amount of refund wrongly taken exceeds five hundred
lakh rupees, with imprisonment for a term which may
extend to five years and with fine;
(ii) in cases where the amount of tax evaded or the amount
of input tax credit wrongly availed or utilised or the
amount of refund wrongly taken exceeds two hundred
lakh rupees but does not exceed five hundred lakh
rupees, with imprisonment for a term which may extend
to three years and with fine;
(iii) in the case of an offence specified in clause (b), where
the amount of tax evaded or the amount of input tax
credit wrongly availed or utilised or the amount of
refund wrongly taken exceeds one hundred lakh rupees
but does not exceed two hundred lakh rupees, with
imprisonment for a term which may extend to one year
and with fine;
(iv) in cases where he commits or abets the commission of
an offence specified in clause (f), he shall be punishable
with imprisonment for a term which may extend to six
months or with fine or with both.
(2) Where any person convicted of an offence under this section is again
convicted of an offence under this section, then, he shall be punishable
for the second and for every subsequent offence with imprisonment for
a term which may extend to five years and with fine.
(3) The imprisonment referred to in clauses (i), (ii) and (iii) of sub-section
(1) and sub-section (2) shall, in the absence of special and adequate
reasons to the contrary to be recorded in the judgment of the Court, be
for a term not less than six months.
(4) Notwithstanding anything contained in the Code of Criminal
Procedure, 1973, all offences under this Act, except the offences referred
to in sub-section (5) shall be non-cognizable and bailable.

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(5) The offences specified in clause (a) or clause (b) or clause (c) or clause
(d) of sub-section (1) and punishable under clause (i) of that sub-section
shall be cognizable and non-bailable.
(6) A person shall not be prosecuted for any offence under this section
except with the previous sanction of the Commissioner.
Explanation For the purposes of this section, the term "tax" shall include the amount
of tax evaded or the amount of input tax credit wrongly availed or
utilised or refund wrongly taken under the provisions of this Act, the
State Goods and Services Tax Act, the Integrated Goods and Services
Tax Act or the Union Territory Goods and Services Tax Act and cess
levied under the Goods and Services Tax (Compensation to States) Act.

ANALYSIS
Prosecution is the institution or commencement of legal proceeding; the process
of exhibiting formal charges against the offender. Section 198 of the Criminal
Procedure Code defines “prosecution” as the institution and carrying on of the legal
proceedings against a person. ‘Mens rea’ or culpable mental state is necessary for
prosecution under GST law.
(i) Cases where prosecution can be initiated and punishment thereof
[Section 132(1), (2), (3) & (6)]

Supply without invoice

Issuance of invoice without supply

Wrongful/fraudulent availment of ITC

Cases where Tax collected but not paid beyond 3 months
prosecution
can be Tax evasion/fraudulent refund
initiated
False information/records etc. with an intention to evade tax

Dealing in goods liable to confiscation

Dealing in services in contravention of GST law

Attempts to commit or abets any offence mentioned above

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Anyone who commits or causes to commit and retain the benefits arising out
of, any of the above offences can be prosecuted as under:

Offence Amount Punishment

Involved
(AI) (in `)
Tax evaded or input AI > 5 with imprisonment
Imprisonment
tax credit wrongly crores upto 5 Years and
shall be for a
availed or utilised or with fine minimum
refund wrongly taken period of 6
2 crores < with imprisonment
months in the
AI ≤ 5 upto 3 Years and
absence of
crores with fine
special and
Issuance of invoice 1 crores < with imprisonment adequate
without supply in AI ≤ 2 upto 1 year and reasons to the
violation of GST law crores with fine contrary to be
leading to wrongful recorded in
availment/utilisation the judgment
of ITC/refund of tax of the Court
Falsification of with imprisonment upto 6 months
information or or with fine or with both
records etc. with an
intention to evade tax
or abetting the
commission of said
offence
For second and every No limit with Imprisonment
subsequent offence imprisonment shall be for a
under section 132 upto 5 Years minimum period
and with fine of 6 months in the
absence of
special and
adequate reasons
to the contrary to
be recorded in
the judgment of
the Court.

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Thus, generally, arrests can be made under GST law only where the amount
involved exceeds ` 2 crores or where a person commits any of the offences
second time or subsequently thereafter. However, whoever issues, or causes
to issue and retain the benefits arising out of issuance of any invoice/bill
without supply of goods and/or services in violation of the provisions of GST
law leading to wrongful availment or utilisation of ITC or refund of tax and
amount of such tax evaded/ITC wrongly availed or utilised or refund wrongly
taken exceeds ` 1 crore but does not exceed ` 2 crore, he shall be punishable
with imprisonment for a term which may extend to 1 year and with fine.
A person shall not be prosecuted for any offence under this section except
with the previous sanction of the Commissioner.

(ii) Offences classified as cognizable offences and non- cognizable offences

[Section 132(4) & (5)]
Let us first understand the meaning of the terms, cognizable offences and
non- cognizable offences.
 Cognizable Offences - Cognizable offences means serious category of
offences in respect of which a police officer has the authority to make
an arrest without a warrant and to start an investigation with or without
the permission of a Court.
 Non-cognizable offences - Non cognizable offences means relatively
less serious offences in respect of which a police officer does not have
the authority to make an arrest without a warrant and an investigation
cannot be initiated without a Court order, except as may be authorized
under special legislation.
Let us see which offences under GST law are classified as cognizable and non-
bailable and which offences are classified as non-cognizable and bailable:

Punishable
Offences under clause (i)
specified in Cognizable
of section
clause (a) or (b)
132(1) [Amount and Non-
or (c) or (d) of bailable
section 132(1) Involved > ` 5
crores]

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All offences other than

those, specified in clause Non-
(a) or (b) or (c) or (d) of
section 132(1) & cognizable
punishable under clause and Bailable
(i) of section 132(1)

Just to reiterate, offences specified in clause (a) or (b) or (c) or (d) of section
132(1) are as follows-
(a) supplies any goods or services or both without issue of any invoice, in
violation of the provisions of this Act or the rules made thereunder, with
the intention to evade tax;
(b) issues any invoice or bill without supply of goods or services or both in
violation of the provisions of this Act, or the rules made thereunder
leading to wrongful availment or utilisation of input tax credit or refund
of tax;
(c) avails input tax credit using the invoice or bill referred to in clause (b)
or fraudulently avails input tax credit without any invoice or bill
(d) collects any amount as tax but fails to pay the same to the Government
beyond a period of three months from the date on which such payment
becomes due;
(ii) Meaning of ‘Tax’ for the purpose of section 132 [Explanation to section
132]
The term “tax” shall include the amount of tax evaded or the amount of input
tax credit wrongly availed or utilised or refund wrongly taken under the
provisions of this Act, the SGST Act, IGST Act or the UTGST Act and cess levied
under the GST (Compensation to States) Act.

14. LIABILITY OF OFFICERS AND CERTAIN

OTHER PERSONS [SECTION 133]
 Where any person engaged in connection with the collection of statistics
under section 151 or compilation or computerisation thereof or if any officer
of central tax having access to information specified under sub-section (1) of
section 150, or if any person engaged in connection with the provision of

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service on the common portal or the agent of common portal, willfully

discloses any information or the contents of any return furnished under this
Act or rules made thereunder otherwise than –
 in execution of his duties under the said sections; or
 for the purposes of prosecution for an offence under this Act or under
any other Act for the time being in force,
he shall be punishable with imprisonment for a term which may extend to 6
months or with fine which may extend to ` 25,000, or with both.
 A Person shall be prosecuted for any offence under this section –
• In case of Government Servant – With the previous sanction of
Government only;
• In case of person other than Government Servant - With the previous
sanction of Commissioner only.

15. COGNIZANCE OF OFFENCES [SECTION 134]

No court shall take cognizance of any offence punishable under this Act or the rules
made thereunder except with the previous sanction of the Commissioner, and no
court inferior to that of a Magistrate of the First Class, shall try any such offence.

16. PRESUMPTION OF CULPABLE MENTAL

STATE [SECTION 135]
 In any prosecution for an offence under this
Act which requires a culpable mental state on
the part of the accused, the court shall
presume the existence of such mental state. As
per Explanation (i) to section 135, the
expression “culpable mental state” includes
intention, motive, knowledge of a fact, and
belief in, or reason to believe, a fact.
 It shall, however, be a defense for the accused
to prove the fact that he had no such mental state with respect to the act

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charged as an offence in that prosecution. As per explanation (ii) to section

135, a fact is said to be proved only when the court believes it to exist beyond
reasonable doubt and not merely when its existence is established by a
preponderance of probability.

17. RELEVANCY OF STATEMENTS UNDER

CERTAIN CIRCUMSTANCES [SECTION 136]
A statement made and signed by a person on appearance in response to any
summons issued under section 70 during the course of any inquiry or proceedings
under this Act shall be relevant for the purpose of proving the truth of the facts
which it contains, in any prosecution for an offence under this Act,–
(a) when the person who made the statement is dead or cannot be found, or is
incapable of giving evidence, or is kept out of the way by the adverse party,
or whose presence cannot be obtained without an amount of delay or
expense which, under the circumstances of the case, the court considers
unreasonable; or
(b) when the person who made the statement is examined as a witness in the
case before the court and the court is of the opinion that, having regard to
the circumstances of the case, the statement should be admitted in evidence
in the interest of justice.

18. OFFENCES BY COMPANIES [SECTION 137]

 Where an offence under this Act has been
committed by a person being a company
(means a body corporate and includes a
firm or other association of individuals),
every person who, at the time the offence
was committed was in charge of, and was
responsible to, the company for the
conduct of business of the company, as
well as the company, shall be deemed to
be guilty of the offence and shall be liable to be proceeded against and
punished accordingly [Sub-section (1) of section 137].

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However, where an offence that has been committed by the company and it
is proved that the offence has been committed –
• with the consent or connivance of, or
• is attributable to any negligence on the part of, any director, manager,
secretary or other officer of the company,
such director, manager, secretary or other officer shall also be deemed to be
guilty of that offence and shall be liable to be proceeded against and
punished accordingly [Sub-section (2) of section 137]
 Where an offence under this Act has been committed by a taxable person
being a partnership firm or a Limited Liability Partnership or a Hindu
Undivided Family or a trust, the partner or karta or managing trustee shall be
deemed to be guilty of that offence and shall be liable to be proceeded
against and punished accordingly and the provisions of sub-section (2) shall,
mutatis mutandis, apply to such persons. [Sub-section (3) of section 137].
 As per Explanation (ii) to Section 137 “director”, in relation to a firm means
a partner in the firm.
 Nothing contained in this section shall render any such person liable to any
punishment provided in this Act, if he proves that the offence was committed
without his knowledge or that he had exercised all due diligence to prevent
the commission of such offence. [Sub-section (4) of section 137].

19. COMPOUNDING OF OFFENCES [SECTION 138

READ WITH RULE 162]

STATUTORY PROVISIONS

Section Compounding of offences

138

Sub- Particulars
section

(1) Any offence under this Act may, either before or after the institution
of prosecution, be compounded by the Commissioner on payment,

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by the person accused of the offence, to the Central Government or

the State Government, as the case may be, of such compounding
amount in such manner as may be prescribed:

Provided that nothing contained in this section shall apply to—

(a) a person who has been allowed to compound once in

respect of any of the offences specified in clauses (a) to
(f), (h), (i) and (l) of sub-section (1) of section 132

(c) a person who has been accused of committing an offence

under clause (b) of sub-section (1) of section 132

(d) a person who has been convicted for an offence under this
Act by a court;

(f) any other class of persons or offences as may be

prescribed:

Provided further that any compounding allowed under the

provisions of this section shall not affect the proceedings, if any,
instituted under any other law:
Provided also that compounding shall be allowed only after making
payment of tax, interest and penalty involved in such offences.

(2) The amount for compounding of offences under this section shall
be such as may be prescribed, subject to the minimum amount not
being less than twenty-five percent of the tax involved and the
maximum amount not being more than one hundred per cent. of
the tax involved.

(3) On payment of such compounding amount as may be determined

by the Commissioner, no further proceedings shall be initiated
under this Act against the accused person in respect of the same
offence and any criminal proceedings, if already initiated in respect
of the said offence, shall stand abated.

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 1.44 21.44 GOODS AND SERVICES TAX

ANALYSIS
 As per the provisions of section 138(1), any offence may be compounded by
the Commissioner, either before or after the institution of prosecution, upon
payment of such compounding amount in such manner as may be prescribed,
by the person accused of the offence, to the Central Government or the State
Government, as the case be.
 On receipt of the application from the applicant, the commissioner shall call
for a report from the concerned officer with reference to the particulars
furnished in the application, which may be considered relevant for the
examination of such application.
 On being satisfied that the
applicant has made full and true
disclosure of facts relating to the
case, the Commissioner may, by
order, allow the application
indicating the compounding
amount (discussed in subsequent
paras) and grant him immunity from
prosecution or reject such
application within 90 days of the
receipt of the application.
 The application shall not be decided
without affording an opportunity of being heard to the applicant and
recording the grounds of such rejection.
 The application shall not be allowed unless the tax, interest and penalty liable
to be paid have been paid in the case for which the application has been
made.
 The applicant shall, within a period of 30 days from the date of the receipt of
the order, pay the compounding amount as ordered by the commissioner and
shall furnish the proof of such payment to him.
 In case the applicant fails to pay the compounding amount within 30 days,
the order of compounding shall be vitiated and be void.

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 However, the following offences shall not be compounded-

(a) a person who has been allowed to compound once in respect of any of
the offences specified in clauses (a) to (f),(h),(i) and (l) of sub-section (1)
of section 132 ;
(c) a person who has been accused of committing an offence under section
132(1)(b);
(d) a person who has been convicted for an offence under this Act by a
court;
(f) any other class of persons or offences as may be prescribed:
 Compounding shall be allowed only after making payment of tax, interest and
penalty involved in such offences. Further, any compounding allowed under
the provisions of this section shall not affect the proceedings, if any, instituted
under any other law [Proviso to Section 138(1)].
 The amount for compounding of offences under this section shall be such as
may be prescribed, subject to –
(i) The minimum limit for compounding amount is 25% of tax involved.
(ii) The upper limit for compounding amount is 100% of tax involved [Sub-
section (2) of section 138].
The said compounding amount has been prescribed by sub-rule (3) to rule
162. The compounding amount shall be determined in the following manner:

S. No. Offence Compounding Compounding

amount if offence is amount if offence is
punishable under punishable under
section 132(1)(i) section 132(1)(ii)

1 Offence Up to 75% of the Up to 60% of the

specified in amount of tax evaded amount of tax evaded
section 132(1)(a) or the amount of ITC or the amount of ITC

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wrongly availed or wrongly availed or

2 Offence
utilised or the amount utilised or the amount
specified in
of refund wrongly of refund wrongly
section 132(1)(c)
taken, subject to taken, subject to

3 Offence minimum of 50% of minimum of 40% of

specified in such amount of tax such amount of tax

section 132(1)(d) evaded or the amount evaded or the amount
of ITC wrongly of ITC wrongly

4 Offence availed/ utilised or the availed/ utilised or the

specified in amount of refund amount of refund

section 132(1)(e) wrongly taken. wrongly taken.

5 Offence Amount equivalent to Amount equivalent to

specified in 25% of tax evaded. 25% of tax evaded.
section 132(1)(f)

6 Offence
specified in
section 132(1)(h)

7 Offence
specified in
clause (i) of
section 132(1)

8 Attempt to Amount equivalent to Amount equivalent to

commit the 25% of such amount 25% of such amount
offences or abets of tax evaded or ITC of tax evaded or ITC
the commission wrongly availed/ wrongly availed/
of offences utilised or refund utilised or refund
mentioned in wrongly taken. wrongly taken.

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clause (a), (c) to

(f)and clauses (h)
and (i) of sub-
section (1) of
section 132

However, where the offence committed by the person falls under more than
one category specified in the Table above, the compounding amount, in such
case, shall be the amount determined for the offence for which higher
compounding amount has been prescribed.
 On payment of such compounding amount as may be determined by the
Commissioner, no further proceedings shall be initiated under this Act against
the accused person in respect of the same offence and any criminal
proceedings, if already initiated in respect of the said offence, shall stand
abated [Sub-section (3) of section 138].
 Immunity granted to a person may, at any time, be withdrawn by the
commissioner, if he is satisfied that such person had, in the course of the
compounding proceedings, concealed any material particulars or had given
false evidence. Thereupon such person may be tried for the offence with
respect to which immunity was granted or for any other offence that appears
to have been committed by him in connection with the compounding
proceedings and the provisions of the Act shall apply as if no such immunity
had been granted.

20. ETHICS UNDER GST

(i) Meaning of Ethics
The Oxford Dictionary defines the term “Ethics” as the moral principle that
governs a person's behavior or how an activity is conducted. Ethics provides
a framework for distinguishing between right and wrong, guiding decision-
making, and determining what is considered morally acceptable in a given
context.

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Ethics are fundamental to the effective functioning of any taxation system;

this also holds true for the Goods and Services Tax (GST) regime in India.
Ethical conduct contributes to increased regulatory compliance and reduced
tax evasion which in turn leads to increased Government revenue collection.
This tax revenue can be used for public welfare and development projects.
It also helps in creating a fair, transparent, and trustworthy tax environment
and reduces uncertainty that supports economic growth and development.
Unethical practices like issuing bogus invoice without underlying supply,
wrongful availment of ITC, etc. not only undermine the tax revenues, but also
create an uneven playing field for honest taxpayers. Ethical behavior may
also reduce tax-related disputes and litigations.
(ii) Role of Chartered Accountant in ensuring ethics under GST
The professional behaviour of a Chartered Accountant is governed by a set
of ethical guidelines and principles - known as Code of Ethics - laid down by
the ICAI.
Every Chartered Accountant has to abide by this code of ethics. It encourages
the Chartered Accountants to be honest, fair, and professional in their
working and advocates to follow the rules to ensure that they are doing the
right thing for their clients and the public at large.
The fundamental principles are: integrity, objectivity, professional
competence and due care, confidentiality, and professional behaviour.
The Chartered Accountants Act, 1949 prescribes the disciplinary action if a
Chartered Accountant is found guilty of any Professional or Other Misconduct
(as defined in Schedules to the Chartered Accountants Act). The same have
been discussed in detail in Chapter 19 - Professional Ethics & Liabilities of
Auditors in Paper 3 - Advanced Auditing, Assurance and Professional Ethics at
Final level.

A Chartered Accountant in practice would be deemed to be guilty of

professional misconduct under clause (7) of Part I of the Second Schedule
to the Chartered Accountant Act, 1949, if he does not exercise due diligence,
or is grossly negligent in the conduct of his professional duties. Further, as
per clause (8) of Part I of the Second Schedule to the Chartered

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Accountants Act, 1949, a chartered accountant in practice shall be deemed to

be guilty of professional misconduct, if he fails to obtain sufficient
information which is necessary for expression of an opinion or its exceptions
are sufficiently material to negate the expression of an opinion.
A Chartered Accountant needs to follow ethical conduct while discharging his
professional duties under the Goods and Services Tax (GST) law, namely,
compliance functions, furnishing certifications/reports and advisory roles, by
adhering to a set of principles and practices that promote integrity,
transparency, and compliance.
He should maintain professional knowledge and skill at the level required to
ensure that a client or employer receives competent professional service
based on latest applicable positions of GST law. In case of any violation of law
in performing the compliance, certifications/reporting and advisory functions,
he shall also be liable to applicable penalty and prosecution (in some cases)
under GST law.
Chartered Accountants play a crucial role in ensuring GST compliance within
their clients’ organizations. This involves assisting in the process of obtaining
registration, structuring the transactions and conditions stipulated in
agreements for making /receiving supply, optimizing tax positions, ensuring
the necessary GST compliances including e-way bill, payment of taxes,
TDS/TCS compliances, compliances with anti-profiteering provisions and
timely filing of periodic returns.
Generally, Chartered Accountants are responsible for ensuring the
maintenance of accurate and detailed records of all GST-related transactions.
This includes invoices, receipts, and other relevant documents. Such
meticulous record-keeping is a legal requirement as well as an ethical duty of
the Chartered Accountant.
Another major responsibility of a Chartered Accountant in the realm of GST
is to act as a tax advisor to their clients. This entails a comprehensive
understanding of the client's business operations and goals.
Chartered Accountants must assess the impact of GST on various aspects of
the business, including supply chain, pricing strategies and financial
reporting.

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A Chartered Accountant, who holds a certificate of practice and who has not
been debarred from practice, can also appear on behalf of his client before a
GST officer, GST Appellate Authority or GST Appellate Tribunal in connection
with any proceedings under GST law, as an authorised representative of the
client.
Furthermore, Chartered Accountants play a vital role in the GST ecosystem by
providing certifications that affirm compliance with GST laws and regulations.
These certifications are mandatory in specific situations and are required to
ensure compliance with GST regulations.
They primarily aim at curbing the unethical practices and preventing the
leakage of revenue. Thus, it is the duty of every Chartered Accountant to
exercise utmost care and due diligence while granting these certifications.
While providing said certification, the Chartered Accountant has to comply
with the ethical requirements of the Code of Ethics issued by the ICAI, the
relevant applicable requirements of the Standard on Quality Control (SQC -
1), Quality Control for Firms that Perform Audits and Reviews of Historical
Financial Information, and Other Assurance and Related Services
Engagements.
The certifications/reports required to be furnished by a Chartered Accountant
under GST law have been explained in detail hereunder:
(iii) Certifications/reports to be furnished by a Chartered
Accountant required under the GST law
1. Certification of the amount of ITC claimed at the time of
registration/voluntary registration or switching to regular tax
paying status or coming into tax-paying status [Sub-section (1) of
section 18 read with rule 40]
The credit on inputs held in stock and contained in semi-finished goods
or finished goods held in stock and capital goods at the time of
registration/voluntary registration or coming into regular tax/tax-
paying status is available in the following manner:

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Section Persons Goods entitled to ITC

No. eligible to
take credit Inputs held as on
in stock/
capital
goods

(1) (2) (3) (4)

Section Person who Inputs held The day immediately

18(1)(a) has applied in stock and preceding the date from
for inputs which he becomes liable
registration contained in to pay tax
within 30 semi-
days from finished or
the date on finished
which he goods held
becomes in stock
liable to
registration
and has
been
granted
such
registration

Section Person who Inputs held The day immediately

18(1)(b) is not in stock and preceding the date of
required to inputs registration
register, but contained in
obtains semi-
voluntary finished or
registration finished
goods held
in stock

Section Registered Inputs held The day immediately

18(1)(c) person who in stock and preceding the date from
ceases to inputs which he becomes liable

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pay contained in to pay tax under regular

compositio semi- scheme
n tax and finished or
switches to finished
regular goods held
scheme in stock and
capital
goods

Section Registered Inputs held The day immediately

18(1)(d) person in stock and preceding the date from
whose inputs which such supply
exempt contained in becomes taxable
supplies semi-
become finished or
taxable finished
supplies goods held
in stock
relatable to
such exempt
supply and
capital
goods
exclusively
used for
such
exempt
supply

In all the above cases, the registered person has to make an electronic
declaration in Form ITC-01 on the common portal, clearly specifying
the details relating to the inputs held in stock, inputs contained in semi-
finished or finished goods held in stock and capital goods on the days
mentioned in column (4) of table above. The declaration is to be filed
within 30 days (extendable by Commissioner/Commissioner of State
GST/Commissioner of UTGST) from the date when the registered person
becomes eligible to avail ITC. If the claim of ITC pertaining to CGST,
SGST/UTGST, IGST put together exceeds ` 2,00,000, the declaration

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needs to be certified by a practicing Chartered Accountant or Cost

Accountant.
A Chartered Accountant is required to examine the books of accounts
and other relevant documents / records of the taxpayer and to provide
a reasonable assurance that the amounts declared in the Form GST ITC-
01 have been accurately drawn from the books of accounts and other
relevant documents / records of the taxpayer and is claimed as ITC.
2. Certification that the sale, merger, demerger, amalgamation, lease
or transfer of business done with a specific provision for the
transfer of liabilities [Section 18(3) read with rule 41]
In case of sale, merger, demerger, amalgamation, transfer or change in
ownership of business etc., the ITC that remains unutilized in the
electronic credit ledger of the registered person can be transferred to
the new entity, provided there is a specific provision for transfer of
liabilities in such change of constitution. The registered person should
furnish the details of change in constitution in Form ITC - 02 on the
common portal. Further, he needs to submit a certificate from
practicing Chartered Accountant or Cost Accountant certifying that
the change in constitution has been done with a specific provision for
transfer of liabilities.
A Chartered Accountant is required to examine the books of accounts
and other relevant documents / records of the taxpayer and to provide
a reasonable assurance that the sale, merger, demerger, amalgamation,
lease or transfer or business has been done with a specific provision for
the transfer of liabilities.
3. Certification that in case of refund claim exceeding ` 2 lakh by the
applicant, there is no unjust enrichment [Section 54 read with rule
89(2)(m)]
A certificate in Annexure 2 of Form GST RFD-01 is to be issued by a
Chartered Accountant or Cost Accountant to the effect that the
incidence of tax, interest or any other amount claimed as refund has not
been passed on to any other person (i.e., there is no unjust enrichment
in the case of the applicant) in a case where the amount of refund
claimed exceeds ` 2 lakh.

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The certification by the Chartered Accountant should be based on

meticulous examination of the books of accounts and other relevant
documents / records supporting the refund claim thereby providing a
reasonable assurance that the incidence of tax, interest or any other
amount claimed as refund, has not been passed on to any other person.
4. Certification of the amount of ITC to be reversed on cancellation of
registration or on switching to composition levy/exit from tax-
paying status, in respect of inputs for which tax invoices are not
available [Section 29(5)/section 18(4) read with rule 44(5)]
Section 29(5) requires reversal of ITC on cancellation of registration of
a registered person. Similarly, section 18(4) requires reversal of ITC
when a registered person who has availed ITC switches to composition
levy or when his supplies get wholly exempted from tax.
ITC on inputs should be reversed proportionately on the basis of
corresponding invoices on which credit had been availed on such
inputs. If invoices are not available, ITC can be reversed on the basis of
the prevailing market price of such goods on the date of switch
over/exemption/cancellation of registration. The details so furnished
on the basis of prevailing market value need to be duly certified by a
practicing Chartered Accountant or Cost Accountant.
The certification by the Chartered Accountant should be based on
meticulous examination of the books of accounts and other relevant
documents / records of the taxpayer thereby providing a reasonable
assurance as regards the correctness of the quantum of the amount of
ITC to be reversed in case where the tax invoices related to the inputs
held in stock are not available.
5. Audit report under section 66
Section 66 provides that if at any stage of scrutiny, inquiry, investigation
or any other proceedings before him, any officer not below the rank of
Assistant Commissioner, having regard to the nature and complexity of
the case and the interest of revenue, is of the opinion that –
 the value (of goods and/or services) has not been correctly
declared; or

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 the credit availed is not within the normal limits,

he may, with the prior approval of the Commissioner, issue a direction
to the registered person to get his records including books of account
examined and audited by a Chartered Accountant or a Cost Accountant
as may be nominated by the Commissioner and specified in the said
direction.
The Chartered Accountant or Cost Accountant shall submit a report of
such audit duly signed and certified by him within the period of 90 days
to the said Assistant Commissioner mentioning therein such other
particulars as may be specified:
The Assistant Commissioner may extend the said period 90 days by a
further period of 90 days −
 on an application made to him in this behalf by the registered
person or the Chartered Accountant or Cost Accountant; or
 for any material and sufficient reason.
The expenses of the examination and audit of records including the
remuneration of such Chartered Accountant or Cost Accountant, shall
be determined and paid by the Commissioner and such determination
shall be final. On conclusion of special audit, the registered person shall
be informed of the findings of special audit.

Upon the conclusion of special audit under section 66, the registered
person is communicated the proposed tax, interest and other liabilities,
if any, along with the audit findings and the registered person is called
upon to discharge the liabilities.
In case the registered person discharges the liabilities as proposed, no
further action is taken. Otherwise, the authorities may initiate
proceedings against the registered person under sections 73 or 74 or
74A for determination of the tax liability of the person audited.
A Chartered Accountant must approach the Special Audit with an
unbiased and impartial mindset, free from any external influences or
conflicts of interest. This ensures that the audit findings are based on
factual evidence and professional judgment, rather than personal

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biases. He should first go through the terms of reference provided by the

GST authorities to understand the scope and objectives of the special
audit. This document outlines the specific areas and tax periods to be
audited. He should conduct a comprehensive review of all relevant
documents, including financial statements, invoices, transaction records,
and any other documentation provided by the taxpayer. This ensures that
the audit findings are based on accurate and reliable information. He
should take steps to identify and mitigate any potential conflicts of
interest that may arise during the special audit. This includes refraining
from engaging in any activities or relationships that could compromise
their objectivity or independence. If a conflict of interest does arise, it
should be promptly disclosed to the relevant parties.
Apart from the aforesaid specific roles defined in the GST Law for Chartered
Accountants, there may be specific scenarios where the attested documents,
certificates issued by the Chartered Accountants are relied during the
proceedings under GST Law by the tax authorities and also judicial forums, as
a general practice while dealing with the GST Law related disputes.

CASE STUDIES
Case Studies have been incorporated to exemplify some of the ethical
considerations that a Chartered Accountant should bear in mind when issuing
various certificates/reports under relevant GST provisions as well as while giving
GST related advise to the client, ensuring GST compliances at the same time. This
is intended to encourage the students to act ethically while discharging any GST
related function and abstain themselves from inadvertently indulging in any
unethical practices. We have discussed the significant implications that would
arise under the GST law in such cases. Students may also refer the relevant
provisions of demands and recovery, offences, penalties and prosecution under
the GST law for ascertaining the consequences of the unethical practices being
followed. Further, a Chartered Accountant in practice may be deemed to be guilty
of the professional misconduct in such cases, primarily under clause (7)/ clause
(8) of Part I of the Second Schedule to the Chartered Accountant Act, 1949, in
such cases. All the case studies pertain to Financial Year 2024-25 onwards.

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Case Study 1
Facts of the case
M/s L and Co., a partnership firm with two partners – Mr. X and Mr. Y, is registered
under GST in Kolkata, West Bengal. It is engaged in supplying the materials used
for construction related activity. Mr. X and Mr. Y are friends and each of them also
have their own separate sole proprietorship firms engaged in supplying
construction material; these firms are registered under GST. Mr. A 4 is the tax
consultant of the firm - M/s L and Co.
Mr. X gets an offer from a customer - M/s W Pvt. Ltd., (hereinafter referred to as
WPL) - to issue some supply related bills to meet the budget allocated to WPL by
their management in relation to civil works. Mr. X shall earn a commission of 20%
of the value of supply charged in the supply bills accepted by WPL. Mr. X agrees
to share 50% of his earnings with Mr. Y for undertaking the above project.
M/s L and Co. needs a bank loan for expanding its business operations and the
supply bills issued to WPL will inflate the turnover of M/s L and Co. Mr. X and
Mr. Y sought advice from their tax consultant Mr. A as to how to execute the above
project for the supply bills to be issued to WPL. Based on the guidance provided
by Mr. A, it is executed as follows:
 M/s L and Co. shall issue supply related bills for steel, jelly stone and cement
for ` 280 lakh to Mr. X wherein the delivery site shall be of WPL (Bill to Ship
to Model).
 Mr. X shall avail and utilise the input tax credit (ITC) on the bill of ` 280 lakh
and shall separately enter into a contract with WPL for supply of steel, jelly
stone and cement (to be used for construction of foundation of Plant and
Machinery) for ` 280 lakh. Further, Mr. X, in his individual capacity, shall issue
labour work related bills for ` 40 lakh for the assembly and erection work
relating to construction of foundation of Plant and Machinery undertaken at
the site of WPL, without actually providing any service. WPL will avail and
utilise the ITC on the bills of ` 280 lakh and ` 40 lakh used for underlying
supply of goods.

4
Mr. A is not a Chartered Accountant.

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 All inventory registers are updated duly by M/s L and Co. without any actual
movement/supply of the material and some e-way bills are also generated on
behalf of Mr. X for the supplies made to the work site of WPL.
Mr. A assures Mr. X and Mr. Y that:
 Inventory registers are up to date for material movement.
 Compliances pertaining to e-way bill have been taken care of.
 Money shall be duly realised as per the bills issued.
Mr. X approached his friend - Mr. P, a practicing Chartered Accountant, for seeking his
help in above arrangement. However, Mr. P makes Mr. X conversant with the following
GST implications that may arise in above arrangement:
GST implications

1. Issue of invoice by M/s L and Co. to Mr. X: Since there has only been an
issuance of tax invoice by the registered person - M/s L and Co. - to registered
person ‘Mr. X’ without the underlying supply of steel, jelly stone and cement,
therefore, such an activity does not satisfy the criteria of “supply”, as defined
under section 7. As there is no supply by M/s L and Co. to Mr. X in respect of
such tax invoice in terms of the provisions of section 7, no tax liability arises
against M/s L and Co. for the said transaction, and accordingly, no demand
and recovery is required to be made against M/s L and Co. under the
provisions of section 74A in respect of the same. The registered person -
M/s L and Co. - shall, however, be liable for penal action under
section 122(1)(ii) for issuing tax invoices without actual supply of goods. This
offence is also punishable with imprisonment for a term which may extend to
3 years and with fine in terms of section 132(1)(ii).
2. Issue of invoice by Mr. X to WPL: The registered person - Mr. X has availed
and utilized fraudulent ITC on the basis of the tax invoice issued in
contravention of the provisions of section 16(2)(b), without receiving the
supply of steel, jelly stone and cement. Further, there was no supply of steel,
jelly stone and cement and labour work related services by Mr. X to WPL.
Thus, in respect of the said transactions, no tax was required to be paid. In
these specific cases, no demand and recovery of either ITC wrongly/
fraudulently availed by Mr. X in such case or tax liability in respect of the said
outward transaction by Mr. X to WPL is required to be made from Mr. X under

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the provisions of section 74A. However, in such cases, Mr. X shall be liable
for penal action both under section 122(1)(ii) and section 122(1)(vii), for
issuing invoices without any actual supply of goods and/or services as also
for taking/ utilizing input tax credit without actual receipt of goods and/or
services. This offence is also punishable with imprisonment for a term which
may extend to 3 years and with fine in terms of section 132(1)(ii) subject to
specified conditions.
WPL will be liable for the demand and recovery of the ITC availed and utilised
by it, along with penal action applicable for fraud cases under section 74A
along with applicable interest under provisions of section 50, for taking/
utilizing ITC without actual receipt of steel, jelly stone and cement and
without receiving the assembly and erection services, used for underlying
supply of goods. This offence is also punishable with imprisonment for a term
which may extend to 3 years and with fine in terms of section 132(1)(ii) subject
to specified conditions.
3. GST implications on Mr. A: Mr. A who advised for designing the above
business practice shall also be liable to a penalty in terms of the provisions of
122(3) since in the given case, he has aided or abetted the offences specified
above. This offence is also punishable with imprisonment subject to specified
conditions.

Mr. P apprised Mr. X that if any Chartered Accountant advises Mr. X on above
arrangement, then he will also be punishable with penalty in terms of the provisions
of 122(3) for aiding/abetting the offences specified above and may also be
punishable with imprisonment subject to specified conditions. Further, he may also
be held guilty of professional misconduct.
Case Study 2
Facts of the case
Doodle LLC is an entity registered in Germany and is engaged in providing online
services across multiple countries including India. The service offerings include
certain services which are covered within the purview of online information and
database access or retrieval services i.e. OIDAR services liable to GST in India. Since
Doodle LLC does not have any place of business in India, it appointed one of its

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employee - Mr. X 5 as its authorized representative for all the purposes in India
which includes undertaking GST compliances and also as an authorized signatory
for any other regulatory compliances in India. Mr. X is a partner in XYZ & Associates
LLP. Post appointment of Mr. X, following chain of events unfolded:
1. Mr. X, being an authorized representative of Doodle LLC, made an application
for registration as an OIDAR service provider in India and undertook other
GST compliances. Subsequently, Mr. X started filing the monthly GST returns
and made payment of applicable GST in India on behalf of Doodle LLC. In
lieu of such services, Mr. X was being remunerated a fixed sum on monthly
basis as professional fee. The appointment of Mr. X was in his personal
capacity and not a professional service contract with his partnership firm -
XYZ & Associates LLP. However, for recovery of amount of fixed monthly
remuneration from Doodle LLC, the invoices as ‘export of services’ were
issued by Mr. X in the name of his partnership firm. The corresponding refund
benefit was claimed by the partnership firm of Mr. X for input tax credit
against such export of service invoices.
2. Doodle LLC appointed influencers in India to promote its services in India.
The tax invoices of such influencers were received by Mr. X in name of XYZ &
Associates LLP and input tax credit was availed by the partnership firm for
such services. Said ITC was utilised for further supply of services. However,
the actual service recipient in such case was Doodle LLC.
3. Subsequently, Doodle LLC was required to submit certain affidavits and
accounting records before the office of the Enforcement Directorate. Being
an authorized representative/ signatory of Doodle LLC, Mr. X approached
Mr. P, a practicing Chartered Accountant, to prepare the affidavits and
accounting records which included critical financial information and data of
Doodle LLC. He elaborated the entire arrangement among Doodle LLC,
Mr. X and XYZ & Associates LLP to Mr. P. He further requested Mr. P to certify
and attest such records, which would be prepared and compiled by Mr. P in
capacity of a practicing Chartered Accountant for submission before
Enforcement Directorate.

5
Mr. X is not a Chartered Accountant.

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Mr. P apprised Mr. X of the following GST implications:

GST implications
1. Incorrect issuance of invoice for export of services and claim of refund
of input tax credit on the basis of such export of service related invoices
Mr. X was appointed as authorized representative and signatory of Doodle
LLC in his personal capacity to undertake the compliances enumerated under
the GST law in India. However, the consideration for such services was
received at the behest of invoices issued in the name of his partnership firm.
Further, such invoices were issued as ‘export of service’ invoices and
corresponding refund of input tax credit was claimed by the firm of Mr. X.
This act of Mr. X alongwith his firm is punishable as follows:
- Since Mr. X supplied services to Doodle LLC without any invoice, he shall
also be liable for the demand and recovery of tax on said supply, along
with penal action applicable for fraud cases under section 74A. Even if
the contention is made that invoice was issued for such services by the
firm of Mr. X, the same shall be treated as an incorrect invoice or false
invoice as both, Mr. X and XYZ & Associates LLP are separate persons
as per GST Law.
- Since both, Mr. X and XYZ & Associates LLP are different persons, the
invoice issued by the firm shall be construed as issuance of invoice
without supply of services viz. an offence punishable under
section 122(1)(ii).
- Incorrect refund was claimed by XYZ & Associates LLP for input tax
credit on the basis of incorrect invoice for export of services to Doodle
LLC. This is an offence under section 122(1)(viii).
- All the above offences may also be punishable with imprisonment and
fine under section 132(1) depending on the amount of default involved
and subject to specified conditions.
2. Availment of input tax credit without actual receipt of services

XYZ & Associates LLP received invoices from the influencers who were
actually providing services to Doodle LLC. Further, the input tax credit related
to such invoices was availed by XYZ & Associates LLP in contravention of the

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provisions of section 16. Accordingly, the input tax credit availed and utilised
by XYZ & Associates LLP for further supply of services is incorrect. Thus, XYZ
& Associates LLP will be liable for the demand and recovery of the said ITC,
along with penal action applicable for fraud cases under section 74A
alongwith interest under section 50 as the actual service recipient was Doodle
LLC and not XYZ & Associates LLP.
This offence may also be punishable with imprisonment and fine under
section 132(1) depending on the amount of default involved and subject to
specified conditions.
3. GST implications on Mr. X
Mr. X was fully involved in wrongdoings in terms of the business transactions
of Doodle LLC in India. Further, he was the authorized representative and
signatory of Doodle LLC in India. Mr. X is liable to penalty under
section 122(1A) and section 122(3) since he is involved in aiding and abetting
the offences committed hereunder at his instance and has also derived
monetary benefits from such practices. This offence may also be punishable
with imprisonment and fine under section 132(1) depending on the amount
of default involved and subject to specified conditions.
If a Chartered Accountant takes up the assignment offered by Mr. X and also
attests/certifies the Doodle LLC’s accounting records that would be prepared by
him, for submission before the Enforcement Directorate in India, he may be held
guilty of professional misconduct.
Case Study 3
Facts of the Case:
ABC & Associates LLP (ABC), a firm of Chartered Accountants, was empanelled with
the Commissioner of GST for appointment as Special Auditor under section 66.
X Ltd., a registered person under GST, was selected by the Office of the
Commissioner for special audit under section 66 for a financial year on account of
irregularities noticed during scrutiny of returns. ABC was nominated by the Office
of the Commissioner for special audit of X Ltd. Assume that the following events
unfolded in relation to the appointment and audit procedure:
1. The appointment of special auditor was based on the undertaking furnished
by the firm that the partners of the firm or any of their relatives are not

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directly or indirectly related to the auditee. However, while submitting the

declaration in relation to such appointment, if ABC fails to disclose the fact
that spouse of one of the partners of ABC is working under full time
employment as a Head of Tax Department of the auditee i.e. X Ltd., what will
be its implications?
2. Material discrepancies in the valuation of stock transfer to related parties by
the auditee were noticed by ABC. If ABC fails to disclose these material
discrepancies in the audit report submitted to the Office of Commissioner,
what will be its implications?
3. The input tax credit claim by X Ltd. i.e. the auditee, under Form GST ITC- 01,
was certified by one of the associate firms of ABC in favour of X Ltd. Such
certificate was based on incorrect facts and against the eligibility criteria for
input tax credit as per section 18. However, if ABC fails to exercise the due
diligence and the certificate is taken on record by ABC as an audit procedure
and is relied upon at the time of finalization of audit report and submission
of findings, what will be its implications?
4. ABC receives a consideration of ` 5 lakh from X Ltd. in the name of special
audit conducted.
GST implications
Following implications may arise in the above cases:

1. False undertaking submitted before the Office of Commissioner GST and

the audit engagement undertaken on the basis of such undertaking
The essential terms of the appointment as special auditor included that the
partners or any of the relatives of the partners are not directly or indirectly
linked to X Ltd. i.e. the auditee. If the spouse of one of the partners of ABC
is working as Head of Tax Department of the auditee. Non-disclosure of said
fact in the undertaking and other engagement documents and accepting such
engagement tantamount to submission of false undertaking by a Chartered
Accountant firm to the Government Authorities. Further, a question may be
raised about the independence of the audit team considering the fact that
spouse of one of the partners of the firm is holding a key position in X Ltd.
i.e. the auditee.

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2. Non-reporting of material discrepancies noticed during the audit

procedure and reliance upon incorrect certificates and information

ABC audit team did not exercise due diligence to ascertain that the input tax
credit availed by X Ltd. is not in compliance with the GST provisions. Instead,
ABC relied on the certificate issued by its own associate firm which justified
the incorrect input tax credit claim by X Ltd. In such a scenario both ABC and
the associate firm, which issued the certificate to justify the input tax credit
claim, were aiding and abetting X Ltd. in wrongful availment of credit, which
is an offence punishable with penalty under 122(3). This offence may also be
punishable with imprisonment and fine under section 132(1) depending on
the amount of default involved and subject to specified conditions. Further,
ABC as well as its associate firm may be held guilty of professional
misconduct.
3. Receiving consideration for special audit from the auditee
The consideration for special audit under section 66 is payable by the Office
of Commissioner and cannot be directly recovered from the auditee. In the
present case the receipt of ` 5 lakh from the X Ltd., i.e. the auditee by ABC is
an offence under GST provisions. The same is liable to penalty under general
penalty under section 125 apart from other penal provisions under the GST
Law. Further, this will also have an impact on the independence of the
auditor – ABC.
Case Study 4
Facts of the Case:

A Ltd. is engaged in the business of manufacturing cotton yarn, wherein cotton is

the principal raw material in the manufacturing process. The price of cotton varies
depending upon the market conditions and is dependent on various external
factors. Mr. X 6 is tax consultant of A Ltd. Mr. X advises A Ltd. on GST compliances.
In order to meet expansion related expenditure, A Ltd. sought a term loan and
working capital loan from banks. As per the bank, the turnover and profitability
criteria of A Ltd. were not meeting the benchmarks of bank for sanction of any loan

6
Mr. X is not a Chartered Accountant.

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facility. Accordingly, following actions were undertaken by Mr. X being the tax
consultant of A Ltd.:

1. A separate entity i.e. B Ltd. was incorporated and the Directors of A Ltd. were
appointed as Directors in B Ltd. This ensured that the control of B Ltd.
remains with the Directors of A Ltd. Further, B Ltd. obtained GST registration
as a manufacturer of yarn wherein Mr. X assisted B Ltd. in obtaining such GST
registration. Mr. X obtained registration providing fake documents for
registration.

2. Subsequently, A Ltd. started issuing tax invoices for supply of yarn to B Ltd.
However, there was no actual movement of goods by A Ltd. to B Ltd. The tax
invoices were issued and the same were reported in the GST returns by A Ltd.
Further, B Ltd. availed the input tax credit of all such tax invoices reported by
A Ltd. The finished goods related to such tax invoices were sold in the local
market by A Ltd. in cash without charging any GST and without issuance of
tax invoice.
3. B Ltd. issued tax invoices for provision of certain services to A Ltd. in form of
testing of cotton, repairs and maintenance of machinery installed at A Ltd.
apart from other services. However, no such services were actually provided
by B Ltd. to A Ltd. The input tax credit appearing in the books of B Ltd. (which
was availed on the basis of fake yarn invoices) was utilized by B Ltd. at the
time of discharging GST liability in relation to the alleged tax invoices issued
against provision of services to A Ltd.
4. Further, B Ltd. issued tax invoices for sale of yarn (allegedly purchased from
A Ltd.) to other group entities to ensure that the stock of yarn becomes zero
in the books of accounts at the year end. The tax invoices were issued at a
rate lowered by 90% of the actual tax invoice received from A Ltd. contending
that the quality of yarn had deteriorated during the storage.
5. Mr. X was aware of the aforesaid actions of A Ltd. and B Ltd. Further, the GST
returns were filed by Mr. X for both the companies.

6. A Ltd. approached Mr. P, a practicing Chartered Accountant to issue relevant

certificates to the bank certifying the turnover of A Ltd. and B Ltd. as genuine
turnover to ensure that the required loan amount is sanctioned to A Ltd. A
Ltd. elaborated the entire arrangement made by it with regard to B Ltd.

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Mr. P apprised A Ltd. of the following GST implications that may arise in the given
case:

GST implications
1. GST registration of B Ltd. sought on the basis of fake documents
As per section 122(1)(xii), furnishing of false information with regard to
registration particulars is an offence liable to penalty under GST Law. Thus,
B Ltd is liable to penalty under section 122(1)(xii).
2. Issuance of tax invoice without actual supply of goods or services

Following instances happened wherein there was no actual supply of goods

or services, however, tax invoice was issued:
- Fake issuance of tax invoice for supply of yarn by A Ltd. to B Ltd. (Para 2)
- Fake issuance of tax invoice for supply of services by B Ltd. to A Ltd.
(Para 3)
- Fake issuance of tax invoice for supply of goods by B Ltd to group
entities (Para 4)
The aforesaid actions are liable for penal action under section 122(1)(ii) for
issuing tax invoices without actual supply of goods and services. This offence
may also be punishable with imprisonment and fine under section 132(1)
depending on the amount of default involved and subject to specified
conditions.
3. Fraudulent input tax credit availment
B Ltd. availed fraudulent input tax credit of the goods (yarn) which were not
at all received by B Ltd. and the same was used in discharge of the tax liability
related to invoices issued without any underlying supply of goods or services.
B Ltd. has availed and utilized fraudulent ITC on the basis of the said tax
invoice, in contravention of the provisions of section 16(2)(b), without
receiving the supply of goods and accordingly. In this case, there was no
supply of by B Ltd. to A Ltd. in respect of the said transaction and also no
tax was required to be paid in respect of the said transaction. Therefore, in
these specific cases, no demand and recovery of either input tax credit
wrongly/ fraudulently availed by B Ltd. in such case or tax liability in respect
of the said outward transaction by B Ltd. to A Ltd. is required to be made

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from B Ltd. under the provisions of section 74A. However, in such cases, B
Ltd. shall be liable for penal action both under section 122(1)(ii) and section
122(1)(vii), for issuing invoices without any actual supply of goods and/or
services as also for taking/ utilizing input tax credit without actual receipt of
goods and/or services.
This offence may also be punishable with imprisonment and fine under
section 132(1) depending on the amount of default involved and subject to
specified conditions.
4. Incorrect information in GST returns and falsification of books of
accounts
The GST returns filed by A Ltd. and B Ltd. were not backed by correct
information in terms of supply of goods and services. Knowing that there
was no supply of goods or services and input tax credit is not available, the
returns were filed by both the companies. The books of accounts and
financial records were also falsified in terms of information related to sales
and inventory. This act of furnishing incorrect information in GST return and
falsifying financial records is an offence under section 122(1)(x). This offence
may also be punishable with imprisonment and fine under section 132(1)
depending on the amount of default involved and subject to specified
conditions.
5. GST implications on Mr. X
Mr. X, being a consultant of A Ltd., had adequate knowledge of the fraud and
wilful misrepresentation of the facts in terms of maintaining the financial
records and submission of information in GST returns. In fact, Mr. X himself
was filing the GST returns and was aware of the fake invoices and ineligible
input tax credit availment by the companies. Mr. X shall be liable to a penalty
in terms of the provisions of 122(3) since in the given case, he has aided or
abetted the offences specified above. This offence may also be punishable
with imprisonment and fine under section 132(1) depending on the amount
of default involved and subject to specified conditions.
If a Chartered Accountant undertakes the assignment of issuing relevant certificates
to the bank thereby certifying the turnover of A Ltd. and B Ltd., he may be held
guilty of professional misconduct. Further, he shall also be liable to a penalty in
terms of the provisions of 122(3). This offence may also be punishable with
imprisonment and fine under section 132(1) depending on the amount of default
involved and subject to specified conditions.

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TEST YOUR KNOWLEDGE

1. What is the quantum of penalty for an offence mentioned under section 122(1),
122(1A) and section 122(2)?
2. Mr. X, an unregistered person under GST, purchases the goods supplied by
Mr. Y who is a registered person without receiving a tax invoice from Mr. Y and
thus helps in tax evasion by Mr. Y. A disciplinary action is taken against Mr. X
and an adhoc penalty of ` 20,000/- is imposed by passing an order without
describing contravention for which penalty is going to be imposed and without
mentioning the provisions under which penalty is going to be imposed. Should
Mr. X proceed to pay for penalty or challenge the order passed by Department?
4. Examine the implications as regards the bailability and quantum of punishment
on prosecution, in respect of the following cases pertaining to the month of
December under CGST Act, 2017-
(i) 'X' collects ` 245 lakh as tax from its clients and deposits ` 241 lakh with
the Central Government. It is found that he has falsified financial records
and has not maintained proper records.
(ii) 'Y' collects ` 550 lakh as tax from its clients but deposits only
` 30 lakh with the Central Government.
What will be the implications with regard to punishment on prosecution of 'X'
and 'Y' for the offences? What would be the position, if 'X' and 'Y' repeat the
offences?
It may be assumed that offences are proved in the Court.
5. Discuss the cognizable and non-cognizable offences under section 132?
6. Bindusar CEO of Ashoka Solution Ltd is issued a summon to appear before the
central tax officer to produce the books of accounts of Ashoka Solution Ltd in
an enquiry conducted on said company. Determine the amount of penalty if
any that may be imposed on Bindusar under the CGST Act, 2017 if he fails to
appear before the central tax officer.

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 OFFENCES AND PENALTIES AND ETHICAL
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ANSWERS

1. Section 122(1) provides that any taxable person who has committed any of
the specified offences mentioned thereunder, shall be liable to a penalty
which shall be higher of the following amounts:

(a) ` 10,000/-; or

(b) An amount equivalent to, any of the following (Applicable as the case
may be) –

(i) Tax evaded; or

(ii) Tax not deducted under section 51 or short deducted or deducted

but not paid to the Government; or

(iii) Tax not collected under section 52 or short collected or collected

but not paid to the Government; or

(iv) Input tax credit availed of or passed on or distributed irregularly;

or

(v) Refund claimed fraudulently

Further, section 122(1A) provides that any person who retains the benefit of
a transaction covered under clauses (i), (ii), (vii) or clause (ix) of section 122(1)
and at whose instance such transaction is conducted, shall be liable to a
penalty of an amount equivalent to the tax evaded or input tax credit availed
of or passed on.

Moreover, section 122(2) provides that if any registered person who supplies
any goods and/or services on which any tax has not been paid or short paid
or erroneously refunded or where the ITC has been wrongly availed or
utilized:-

(i) for any reason other than the reason of fraud or any willful
misstatement or suppression of facts to evade tax, he shall be liable to
a penalty of ` 10,000 or 10% of the tax due from such person, whichever
is higher.

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 1.70 21.70 GOODS AND SERVICES TAX

(ii) for reason of fraud, or any willful misstatement or suppression of facts

to evade tax, penalty shall be equal to ` 10,000 or the tax due from such
person, whichever is higher.

2. The levy of penalty is subject to a certain disciplinary regime which is based

on jurisprudence, principles of natural justice and principles governing
international trade and agreements. Such general discipline is enshrined in
section 126. Accordingly—

• no penalty is to be imposed without affording an opportunity of being

heard to the person proceeded against to rebut the allegations levelled
against him,

• the penalty is to depend on the totality of the facts and circumstances

of the case, the penalty imposed is to be commensurate with the degree
and severity of breach of the provisions of the law or the rules alleged,

• the nature of the breach is to be specified clearly in the order imposing

the penalty,

• the provisions of the law under which the penalty has been imposed is
to be specified.

Since the order suffers from lack of clarity about nature of breach which has
taken place and about applicable law under which penalty has been imposed,
such order passed by the department should be challenged.

4. (i) Failure to pay any amount collected as tax beyond 3 months from due
date of payment is a specified offence as per clause (d) of Section
132(1).

In the present case, failure to deposit the tax ` 4 lakh (` 245 lakh –
` 241 lakh). As the amount of failure does not exceed ` 200 lakh
therefore, failure to deposit ` 4 lakh collected as tax by ‘X’ will not be
punishable with imprisonment as per section 132(1).

Further, falsification of financial records by ‘X’ is a specified offence as

per section 132(1)(d) and punishable with imprisonment upto 6 months
or with fine or both as per clause (iv) of section 132(1) assuming that

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ASPECTS UNDER GST

falsification of records is with an intention to evade payment of tax due

under the CGST Act, 2017 and the said offence is bailable in terms of
section 132(4).

(ii) Failure to pay any amount collected as tax beyond 3 months from due
date is punishable with imprisonment upto 5 years and with fine, if the
amount of tax evaded exceeds ` 500 lakh in terms of section 132(1)(d)
read with clause (i) of section 132(1).

Since the amount of tax evaded by ‘Y’ exceeds ` 500 lakh (` 550 lakh -
` 30 lakh), ‘Y’ is punishable with an imprisonment for a term which may
extend to 5 years and with fine. It has been assumed that amount of `
520 lakh collected as tax is not paid to the Government beyond 3
months from the due date of payment of tax.

Such offence is non-bailable in terms of section 132(5).

If ‘X ’and ‘Y’ repeat the offence, they shall be punishable for second and for
every subsequent offence with imprisonment upto 5 years and with fine in
terms of section 132(2) of the CGST Act, 2017.

Such imprisonment shall also be of at least 6 months in the absence of special

and adequate reasons to the contrary to be recorded in the judgment of the
Court.

5. As per section 132(5), following offences are cognizable offences, provided

amount of tax evaded or input tax credit wrongly availed/ utilised or refund
wrongly taken exceeds ` 5 crores, namely:

(a) Supply without issuance of invoice with the intention to evade tax

(b) Issuance of any invoice/ bill without supply leading to wrongful

availment/ utilisation of ITC or refund of tax

(c) Availment of ITC using invoice/ bill against which no supplies have been
made or fraudulent availment of ITC without any invoice or bill.

(d) Failure to pay the amount collected as tax to the Government beyond
a period of 3 months from the due date of payment.

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Further, section 132(4) provides that all offences specified under section 132
are non-cognizable offences except the cognizable offences specified as
aforesaid.

6. Sec 122(3)(d) stipulates that any person who fails to appear before the officer of
central tax, when issued with a summon for appearance to give evidence or
produce a document in an enquiry is liable to a penalty which may extend to
` 25,000. Therefore, penalty upto ` 25,000 can be imposed on Bindusar under
the CGST Act, 2017 in the given case.

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AMENDMENTS MADE VIDE THE FINANCE ACT, 2025

The Finance Act, 2025 has come into force from 29.03.2025. However, most of the
amendments made under the CGST Act and the IGST Act vide the Finance Act, 2025
would become effective only from a date to be notified by the Central Government
in the Official Gazette. Such a notification has not been issued till 30.04.2025.
Therefore, the applicability or otherwise of such amendment for May 2026,
September 2026 and/or, January 2027 examinations shall be informed by the
ICAI by way of an announcement.
In the table given below, the provisions of new section 122B of the CGST Act, 2017
are given as amended by the Finance Act, 2025.

Once the announcement for applicability of such amendments for examination(s)

is made by the ICAI, students should read the amended provisions given hereunder
in place of the related provisions discussed in the chapter.

Provisions as amended by the Finance Act, 2025 Remarks

New section 122B: Penalty for failure to comply with

New section 122B
track and trace mechanism
is being inserted
Notwithstanding anything contained in this Act, where in the CGST Act
any person referred to in clause (b) of sub-section (1) of so as to provide
section 148A acts in contravention of the provisions of penalty for
the said section, he shall, in addition to any penalty contraventions of
under Chapter XV or the provisions of this Chapter, be provisions
liable to pay a penalty equal to an amount of one lakh related to the
rupees or ten per cent of the tax payable on such goods, Track and Trace
whichever is higher. Mechanism
provided under
section 148A.

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India
CHAPTER 22

APPEALS AND
REVISION
For the sake of brevity, the terms ‘Appellate Authority’, ‘Revisional Authority’, ‘input tax credit’
have been referred to as ‘AA’, ‘RA’ and ‘ITC’ respectively in this Chapter. The section numbers
referred to in the Chapter pertain to CGST Act, unless otherwise specified.
Examples/Illustrations/Questions and Answers, as the case may be, given in the Chapter are
based on the position of GST law existing as on 30.04.2025.

LEARNING OUTCOMES
After studying this Chapter, you will be able to –
 identify the various kinds of appellate forums available under the CGST Act and
their hierarchy
 understand various aspects relating to filing of an appeal before the Appellate
Authority by the taxpayer as well as by the Department and the provisions
relating to revision of orders by the Revisional Authority
 appreciate and understand the provisions relating to constitution and structure
of Appellate Tribunal as also the various aspects relating to filing of an appeal
before it by the taxpayer as well as by the Department
 understand and comprehend the concept of mandatory pre-deposit for filing
appeals
 understand various aspects relating to filing of an appeal before the High Court
and the Supreme Court
 apply the above and other provisions relating to appeals and revision in problem
solving

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 1.2 22.2 GOODS AND SERVICES TAX

1. INTRODUCTION
Tax laws impose various obligations on taxpayers. Such
obligations are broadly of two kinds: levy-related (e.g.
scope of levy, taxable value, tax rate etc.) and
procedure-related (e.g., obtaining registration, filing of
returns, manner of depositing tax etc.). The taxpayer’s
compliance with these obligations is verified by tax
authorities (by exercising various powers such as
undertaking scrutiny, audit, anti-evasion proceedings, etc.). As a result of which,
sometimes there are situations of actual or perceived non-compliances. If the
difference in the views persists, it results into a dispute, which is then required to
be resolved.

Under tax laws, on any given set of facts and legal provisions there can be different
opinions or viewpoints. Hence, it is likely that the taxpayer may not agree with the
“adjudication order” passed by a tax authority. It is equally possible that the Tax
Department may itself not agree with the adjudication order. It is for this reason
that the tax statutes provide for an appellate mechanism to both the sides. In legal
parlance, appeal is a timely resort for reconsideration by a higher authority, where
aggrieved party request a formal change to an existing decision wholly or partially
as the case may be.
Since the right to appeal is a statutory right (i.e. a right conferred by the statute),
the statute also places fetters on the exercise of this right. The time limits
prescribed by the statute for filing of appeals, the requirement of making pre-
deposit of a certain sum before the appeal can be heard by the competent authority
are the examples of such fetters on the statutory right.
India has adopted a dual GST, i.e. GST is levied by both Centre and State
Governments concurrently on a transaction. Does this mean that if a taxpayer is
aggrieved by any proceedings, he will have to approach both the authorities
separately for exercising his right of appeal? The answer is ‘no’.
GST law makes provisions for cross empowerment between CGST and SGST/UTGST
officers to ensure that a proper officer under the CGST Act is also treated as the
proper officer under the SGST/UTGST Act and vice versa. Thus, a proper officer can
issue orders with respect to both, the CGST as well as the SGST/UTGST laws. GST

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 APPEALS AND REVISION 22.3

law also provides that where a proper officer under one Act (say CGST) has passed
an order, any appeal/review/ revision/rectification against the said order will lie
only with the proper officers of that Act (CGST Act). Accordingly, if any order is
passed by the proper officer under, say Haryana SGST Act, any
appeal/review/revision/rectification against the said order will lie only with the
proper officer under the Haryana SGST Act.
Chapter XVIII [Sections 107 to 121] of the CGST Act supplemented with Chapter XIII
[Rules 108 to 116] of the CGST Rules prescribe the provisions relating to appeals
and revision. State GST laws also prescribe identical provisions.

Provisions of appeals and revision under CGST Act have also been made
applicable to IGST Act vide section 20 of the IGST Act.

A brief overview of the provisions covered under the aforesaid sections 107 to 121,
are outlined in this chapter.

HIERARCHY OF APPEALS AND REVISION

Chapter XVIII of CGST Act – Appeals and Revision

Order passed by an Adjudicating Order passed by an officer subordinate to a Revisional

Authority Authority

APPELLATE AUTHORITY REVISIONAL AUTHORITY

APPELLATE TRIBUNAL

Orders passed by the Principal

HIGH COURT
Bench of the Tribunal

SUPREME COURT

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 1.4 22.4 GOODS AND SERVICES TAX

2. RELEVANT DEFINITIONS
 Adjudicating authority means any authority, appointed or authorised to
pass any order or decision under this Act, but does not include the Central
Board of Indirect Taxes and Customs, the Revisional Authority, the Authority
for Advance Ruling, the Appellate Authority for Advance Ruling, the Appellate
Authority, the Appellate Tribunal and the Authority referred to in sub-section
(2) of section 171 [Section 2(4)].
 Appellate Authority means an authority appointed or authorised to hear
appeals as referred to in section 107 [Section 2(8)].
 Appellate Tribunal means the Goods and Services Tax Appellate Tribunal
constituted under section 109 [Section 2(9)].
 Authorised representative means the representative as referred to in
section 116 [Section 2(15)].
 Board means the Central Board of Indirect Taxes and Customs constituted
under the Central Boards of Revenue Act, 1963 [Section 2(16)].
 Commissioner means the Commissioner of central tax and includes the
Principal Commissioner of central tax appointed under section 3 and the
Commissioner of integrated tax appointed under the Integrated Goods and
Services Tax Act [Section 2(24)].
 Revisional Authority means an authority appointed or authorised for
revision of decision or orders as referred to in section 108 [Section 2(99)].

3. APPEALS TO APPELLATE AUTHORITY

[SECTION 107]
A. Appeal to Appellate Authority (AA) by aggrieved person
(taxpayer)
(i) Orders appealable to AA
An appeal against any decision/order passed by any adjudicating
authority under the CGST Act or SGST Act/UTGST Act lies before the AA.
It is important to note that it is only the aggrieved person who can file

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 APPEALS AND REVISION 22.5

the appeal. Also, the appeal must be against a decision or order passed
under the Act.
(ii) Time limit for filing appeal
A person aggrieved by any decision/order of an adjudicating authority
can file an appeal to the AA within 3 months from the date of
communication of such decision/order.
(1) The adjudicating authority issued the adjudication order
on 23rd September and the same is communicated to the
taxpayer on 28th September. The relevant date for computing
the period of 3 months (for filing the appeal to AA) is 28th September
(date of communication of order) and not 23rd September.
The AA can condone the delay in filing of appeal by 1 month if it is
satisfied that there was sufficient cause for such delay [Section 107(4)].
(iii) Form for appeal to AA by the aggrieved person (taxpayer) and date
of filing appeal
An appeal is to be filed by aggrieved person to the Appellate Authority
in Form GST APL-01 along with the relevant documents electronically.
A provisional acknowledgement is issued to the appellant immediately.
However, an appeal to the Appellate Authority may be filed manually in
FORM GST APL-01, along with the relevant documents, only if-
(i) the Commissioner has so notified, or
(ii) the same cannot be filed electronically due to non-availability of
the decision or order to be appealed against on the Common
portal,
and in such case, a provisional acknowledgement shall be issued to the
appellant immediately.
Where the decision or order appealed against is uploaded on the
common portal, a final acknowledgment, indicating appeal number,
shall be issued by the Appellate Authority or an officer authorised by
him in this behalf in Form GST APL-02. The date of issue of the
provisional acknowledgment shall be considered as the date of filing of
appeal.
However, where the decision/order appealed against is not uploaded
on the common portal, the appellant shall submit a self-certified copy

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 1.6 22.6 GOODS AND SERVICES TAX

of the said decision or order within a period of 7 days from the date of
filing of Form GST APL-01. The final acknowledgment, indicating appeal
number, shall be issued by the Appellate Authority or an officer
authorised by him in this behalf in Form GST APL-02. The date of issue
of the provisional acknowledgment shall be considered as the date of
filing of appeal.
Further, where the said self-certified copy of the decision/order is not
submitted within a period of 7 days from the date of filing of Form GST
APL-01, the date of submission of such copy shall be considered as the
date of filing of appeal.
The appeal shall be treated as filed only when the final
acknowledgement is issued.
(2) The appeal is filed and provisional acknowledgement
issued on 10th September. The taxpayer submits the certified
copy of the order sought to be appealed against on 15th
September (within 7 days as decision/order appealed against is not
uploaded on the common portal). The date of filing appeal is 10th
September.
(3) The appeal is filed and provisional acknowledgement
issued on 10th September. The taxpayer submits the certified
copy of the order sought to be appealed against on 25th
September (after seven days) as decision/order appealed against is not
uploaded on the common portal. The date of filing appeal is 25th
September.
(iv) Mandatory pre-deposit for filing appeal
No appeal can be filed before the AA unless a specified amount of pre-
deposit is made by the appellant. The concept of pre-deposit is discussed
separately under Heading No. 7.
B. Application before the AA by the Department
At times, the Department itself may not agree with the
decision or order passed by the adjudicating authority.
Section 107(2) provides that in such cases, the
Department can also file an application (as if it were

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 APPEALS AND REVISION 22.7

an appeal made against the decision or order of the adjudicating authority)

before the AA.
(i) Orders against which the application can be filed before the AA
The Commissioner may, on his own motion, or upon request from the
SGST/UTGST Commissioner, call for and examine the record of any
proceedings in which an adjudicating authority has passed any
decision/order under the CGST Act or SGST Act/UTGST Act to satisfy
himself about the legality or propriety of such decision/order [Section
107(2)].
(ii) Time limit for filing the application
The Commissioner may, by order, direct any officer subordinate to him
to apply to the AA within 6 months from the date of communication of
the decision/order for the determination of such points arising out of
the said decision/order as may be specified by him in his order.
The AA can condone the delay in filing of appeal by 1 month if it is
satisfied that there was sufficient cause for such delay.
(4) The adjudicating authority passed the order on 23rd
January (communicated same day to the Commissioner). The
Commissioner directs his subordinate officer to file a review
application with the AA till 23rd July (within 6 months from the date of
communication of order). However, the application could be filed only
on 3rd August. The AA can condone the delay in filing of appeal upto
23rd August (up to 1 month) if it is satisfied that there was sufficient
cause for such delay.
(iii) Form for application

An application to the AA shall be filed in Form GST APL-03, along with

the relevant documents, electronically and a provisional
acknowledgment shall be issued to the appellant immediately.
However, an appeal to the Appellate Authority may be filed manually in
FORM GST APL-03, along with the relevant documents, only if-
(i) the Commissioner has so notified, or

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 1.8 22.8 GOODS AND SERVICES TAX

(ii) the same cannot be filed electronically due to non-availability of

the decision or order to be appealed against on the Common
portal,

and in such case, a provisional acknowledgement shall be issued to the

appellant immediately.
Where the decision/order appealed against is uploaded on the common
portal, a final acknowledgment, indicating appeal number, shall be
issued by the Appellate Authority or an officer authorised by him in this
behalf in Form GST APL-02. The date of issue of the provisional
acknowledgment shall be considered as the date of filing of appeal.
However, where the decision or order appealed against is not uploaded
on the common portal, the appellant shall submit a self-certified copy
of the said decision or order within a period of 7 days from the date of
filing of Form GST APL-03.
The final acknowledgment, indicating appeal number, shall be issued
by the Appellate Authority or an officer authorised by him in this behalf
in Form GST APL-02. The date of issue of the provisional
acknowledgment shall be considered as the date of filing of appeal.
Further, where the said self-certified copy of the decision or order is not
submitted within a period of 7 days from the date of filing of Form GST
APL-03, the date of submission of such copy shall be considered as the
date of filing of appeal.
(iv) Application to be treated as appeal
Such application shall be dealt with by the AA as if it were an appeal
made against the decision/order of the adjudicating authority [Section
107(3)].
There is no requirement of making a pre-deposit in the case of departmental
appeal.

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 APPEALS AND REVISION 22.9

C. Appeal process followed by AA

(i) Duties of the AA
The AA has to follow the principles of natural justice – such as hearing
the appellant, allowing reasonable adjournments (not more than 3),
permitting additional grounds of appeal (if the omission of that ground
from the grounds of appeal was not wilful and is found reasonable), etc.
(ii) Orders of the AA
 The AA can make further inquiry and pass its order (i.e. Order-in-
Appeal) which may confirm, modify or annul the decision/order
appealed against. However, the AA shall not refer the case back
to the adjudicating authority that passed the said decision/order.
 The AA can also increase the “rigour” of the order appealed
against by enhancing any fee or penalty or fine in lieu of
confiscation or confiscating goods of greater value or reducing
the amount of refund or ITC, but this can only be done after the
AA has given to the appellant a reasonable opportunity of
showing cause against the proposed order.
 If the AA is of the opinion that any tax
has not been paid or short-paid or
erroneously refunded, or where ITC has
been wrongly availed or utilized, no
order requiring the appellant to pay
such tax or ITC shall be passed unless
the appellant is given notice to show
cause against the proposed order and
the order is passed within the time limit specified under section
73 or section 74 or section 74A.
 The appellant may, at any time before issuance of said show cause
notice or before issuance of the order (i.e. Order-in-Appeal),
whichever is earlier, in respect of any appeal filed in Form GST
APL-01 or Form GST APL-03, file an application for withdrawal of
the said appeal by filing an application in Form APL-01/03W.

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 22.10
1.10 GOODS AND SERVICES TAX

 However, where the final acknowledgment has been issued in

Form GST APL-02, the withdrawal of the said appeal would be
subject to the approval of the AA and such application for
withdrawal of the appeal shall be decided by the AA within
7 days of filing of such application.
 Further, any fresh appeal filed by the appellant pursuant to such
withdrawal shall be filed within the time limit specified in (A) and
(B) points above, as the case may be.
 The Order-in-appeal shall be a “speaking order” i.e., it shall state
the points for determination, the decision thereon and the
reasons for the decision.
 The law provides an advisory time limit of 1 year from date of
filing of appeal for the AA to decide the appeal. The period of
stay ordered by any Court or Tribunal shall be excluded in
computing the period of 1 year.
(5) The adjudicating authority passed the order on
23rd January 2025 and it was communicated to the
taxpayer on the same day. The taxpayer filed the appeal
against the order with the AA on 16th February 2025. The AA
should decide the appeal by 16th February 2026 where it is
possible to do so.

(6) The adjudicating authority passed the order on 23rd

January 2025 and it was communicated to the taxpayer
on the same day. The taxpayer filed the appeal against
the order with the AA on 16th February 2025. The appeal
proceedings before the AA are stayed by an order of a Court for
the period between 1st May 2025 and 30th June 2025. The period
of 61 days during which the stay was in operation will be excluded
for computing the period of 1 year within which the AA should
decide the appeal. Thus, the AA, as per the advisory time limit
prescribed, can pass the order by 18th April 2026.

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 APPEALS AND REVISION 22.11

 On disposal of the appeal, the AA shall communicate the order

passed by it to the appellant, respondent and to the adjudicating
authority.
 A copy of the order passed by the AA shall also be sent to the
jurisdictional Commissioner or the authority designated by him in
this behalf and the jurisdictional SGST/UTGST Commissioner or an
authority designated by him in this behalf.
 Every order passed by the AA shall be final and binding on the
parties unless the dispute is taken to a higher appellate forum.
D. Appointment of Appellate Authority
Any person aggrieved by any decision/order passed under GST law or an
officer directed to appeal against any decision/order passed under said law,
may appeal within 3 months (6 months in case of appeal by the Department)
from the date of communication of said decision/order as follows:

If the decision/order
against which the Appellate Commissioner
appeal is to be filed, is Authority (Appeals)
passed by the
Additional or Joint
Commissioner

If the decision/order
against which the Any officer not
appeal is to be filed, is Appellate
below the rank of
passed by the Deputy Authority
Joint
or Assistant Commissioner
Commissioner or (Appeals)
Superintendent

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1.12 GOODS AND SERVICES TAX

A summary of the provisions of section 107 is given below.

Summary of the provisions of Section 107

APPEALS TO APPELLATE AUTHORITY [SECTION 107]

Any person aggrieved by any

The Commissioner may direct decision/order passed by an
any Officer subordinate to him adjudicating authority passed
to apply to the AA to determine under the GST laws
specified points relating to
legality and propriety of an
Time limit - Within 3 months from the
order of any adjudicating
date of communication of the said
authority passed under the GST
decision/order to the appellant.
laws
Delay of 1 month can be condoned by
Time limit - Within 6 months the AA
from the date of
Form of Appeal – GST APL 01
communication of the said
decision/order. Delay of 1
month can be condoned by the Payment of tax, interest, fine, fee, and
AA penalty arising from the impugned order,
as admitted by the appellant along with
Form of Application – GST APL
mandatory pre-deposit as specified
03

The AA will give the appellant a chance to be heard.

The AA may allow the appellant during the hearing to add any ground of
appeal not specified in the grounds of appeal in specified cases and can
grant up to 3 adjournments.

The AA may confirm, modify, annul the decision or order appealed against
after making further inquiry, as necessary.

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 APPEALS AND REVISION 22.13

4. POWERS OF REVISIONAL AUTHORITY

[SECTION 108]
A. Orders which can be revised
(i) The GST laws also provide a mechanism of revision by the Revisional
Authority (RA) of the orders passed by its subordinate officers.
(ii) The RA may, on his own motion, or upon information received by him
or on request from the SGST/ UTGST Commissioner, call for and
examine the record of any proceedings. Here, ‘record’ includes all
records relating to any proceedings under the CGST Act available at the
time of examination by the RA.
(iii) On examination of the case records, if RA is of the view that the decision
or order passed under the CGST Act/ SGST Act/ UTGST Act by any
officer subordinate to him
• is erroneous, in so far as it is prejudicial to the interest of the
revenue and is illegal or improper;
• has not taken into account material facts, whether available at the
time of issuance of the said order or not;
• in consequence of an observation by the Comptroller and Auditor
General of India
he may, if necessary, stay the operation of such decision or order for
such period as he deems fit.
(iv) Thereafter, the RA after making such further inquiry as may be
necessary, pass such order, as he thinks just and proper, including
enhancing or modifying or annulling the said decision or order. Here,
‘decision’ includes intimation given by any officer lower in rank than the
RA.
Along with the order, the RA shall also issue a summary of the order
clearly indicating the final amount of demand confirmed.
(v) If the RA decides to pass an order which is likely to affect the person
adversely, he shall serve a notice on such person and give him a
reasonable opportunity of being heard.

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1.14 GOODS AND SERVICES TAX

(vi) Every revision order shall, subject to further appeal to the Tribunal, High
Court or Supreme Court, be final and binding on the parties.
B. Fetters to the powers of revision
The power of revision is subject to the condition that non-appealable orders and
decisions under section 121 cannot be revised [Section 121 which provides for
such orders/decisions is discussed under Heading 15 of this Chapter].
The RA shall not exercise the power of revision if:
(a) the order sought to be revised has been subject to an appeal before AA
or Tribunal or High Court or Supreme Court*; or
(b) the period of 6 months (from the date of communication of order) has
not yet expired or more than 3 years have expired after the passing of
the decision/order sought to be revised; or
(c) the order has already been taken for revision at an earlier stage; or
(d) the order sought to be revised is itself a revisional order.
*The RA may still pass an order on any point which has not been raised and
decided in an appeal before AA/Tribunal/High Court/Supreme Court, before
the expiry of a period of 1 year from the date of the order in such appeal or
before the expiry of a period of 3 years from the date of initial order,
whichever is later.
(7) A taxpayer is served with an adjudication order on
25 May 2025. The RA can revise the order during the period
th

between 26th November 2025 (after expiry of 6 months) and

25th May 2028.

(8) ABC Pvt. Ltd. manufactures product ‘P’ and ‘Q’. The company
avails benefit of exemption notification in respect of product ‘P’ and
pays tax on product ‘Q’ @ 12%. Show cause notice was issued to the
company alleging that product ‘P’ was not eligible for exemption and product
‘Q’ was liable to tax @ 18%. The adjudicating authority concluded that the
rate of tax in respect of product ‘Q’ was correct but the exemption on product
‘P’ was being availed wrongly. Consequently, an order confirming demand of
` 10 lakh was passed by the adjudicating authority on 15th January 2025.

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 APPEALS AND REVISION 22.15

The company filed an appeal against the order before the AA on

16th February 2025. The AA passed the order in favour of the company in
respect of product ‘P’ on 31st October 2025.
The RA can pass the revised order in respect of tax rate on product ‘Q’ before
31st October 2026 (1 year from the date of order passed by the AA) or
15th January 2028 (3 years from the date of adjudication order), whichever is
later. Thus, the RA can pass the revised order by 15th January 2028.
C. Period to be excluded in computing limitation period of 3 years
(i) If the decision/order sought to be revised involves an
issue on which the Appellate Tribunal or the High
Court has given its decision in some other
proceedings and an appeal to the High Court or the
Supreme Court against such decision of the Appellate
Tribunal or the High Court is pending, the period spent between:

• the date of the decision of the Appellate Tribunal and the date of
the decision of the High Court or
• the date of the decision of the High Court and the date of the
decision of the Supreme Court
shall be excluded in computing the period of limitation of 3 years
where proceedings for revision have been initiated by way of issue of
a notice under section 108 [Section 108(4)].
(ii) When the issuance of a revision order is stayed by the order of a Court
or Tribunal, the period of such stay shall be excluded in computing the
period of limitation of 3 years [Section 108(5)].
(9) The adjudicating authority passed the order on
23 January 2025 and it was communicated to the taxpayer
rd

on the same day. The RA calls for the records of the proceedings on 1st
August 2025 (after expiry of 6 months) and started examining the same.
The revision order to be passed by the RA is stayed by an order of the
High Court for the period between 1st September 2025 and 31st October
2025. The period of 61 days during which the stay was in operation will
be excluded for computing the period of 3 years within which the RA
should pass the revision order. Thus, the RA can pass the order by 25th
March 2028.

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1.16 GOODS AND SERVICES TAX

✪ The provisions related to revision empower the superior

authorities to revise the orders or decisions passed by their sub-
ordinate officers which are found to be improper.

✪ Since AA also has the power to annual, enhance etc. (as discussed in
Heading 3), in order to avoid any duplication of proceedings, an order which
is subject to appeal cannot be revised. However, the revisional order can be
passed on the points that are not raised or decided in an appeal.
Accordingly, the law provides for extension of the time limit for revising the
orders that are subject matter of an appeal. Extension to the prescribed
limitation also applies where the revision proceedings are stayed.

✪ Revision proceedings can only be taken once with respect to an order

and a revision order cannot be revised.

D. Officers authorized as Revisional Authority

The CBIC has authorized the following officers as Revisional Authority:

For decisions/orders passed by the Revisional Principal

Additional/Joint Commissioner Authority Commissioner/
Commissioner

For decisions/orders passed by the Additional/Joint

Revisional
Deputy Commissioner /Assistant Commissioner
Authority
Commissioner/ Superintendent

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 APPEALS AND REVISION 22.17

5. APPELLATE TRIBUNAL UNDER GST LAWS

[SECTIONS 109-111]
The Tribunal is the second level of appeal, where appeals can be filed against
the orders-in-appeal passed by the AA or order in revision passed by RA, by
any person aggrieved by such an Order-in-Appeal/ Order-in-Revision.

A. Constitution of Appellate Tribunal and Benches thereof

[Section 109]
Constitution
The Government shall, on the recommendations of the Council, by notification,
establish with effect from such date as may be specified therein, an Appellate
Tribunal known as the Goods and Services Tax Appellate Tribunal for hearing
appeals against the orders passed by the Appellate Authority or the Revisional
Authority or for conducting an examination or adjudicating the cases referred to
in section 171(2), if so notified under the said section.

• The jurisdiction, powers and authority conferred on the Appellate

Tribunal shall be exercised by the Principal Bench and the State
Benches.

• The Government shall, by notification, constitute a Principal Bench of

the Appellate Tribunal at New Delhi which shall consist of the President,
a Judicial Member, a Technical Member (Centre) and a Technical
Member (State).

• On the request of the State, the Government may, by notification,

constitute such number of State Benches at such places and with such
jurisdiction as may be recommended by the Council, which shall consist
of two Judicial Members, a Technical Member (Centre) and a Technical
Member (State).

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1.18 GOODS AND SERVICES TAX

A diagrammatic representation of the composition of the Appellate Tribunal

is shown below.

Goods And Services Tax Appellate

Tribunal

Principal
State Bench
Bench

Technical Technical
Judicial Member 2 Judicial Technical Technical
President Member
Member (Centre) Members Member Member
(State)
(Centre) (State)

Jurisdiction [Section 109(5)]:

• The Principal Bench and the State Bench shall hear appeals against the
orders passed by the Appellate Authority or the Revisional Authority.

• However, the cases in which any one of the issues involved relates to
the place of supply, shall be heard only by the Principal Bench.

• Further, matters referred to in section 171(2) shall be examined or

adjudicated only by the Principal Bench:

• Government may, on the recommendations of the Council, notify other

cases or class of cases which shall be heard only by the Principal Bench.
Transfer of cases
Subject to above jurisdiction given in section 109(5), the President shall, from
time to time, by a general or special order, distribute the business of the
Appellate Tribunal among the Benches and may transfer cases from one Bench
to another.
Vice president for State Benches
The senior-most Judicial Member within the State Benches, as may be notified,
shall act as the Vice-President for such State Benches and shall exercise such
powers of the President as may be prescribed, but for all other purposes be
considered as a Member.

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 APPEALS AND REVISION 22.19

Single member bench:

Appeals, where the tax or ITC involved or the amount of fine, fee or penalty
determined in any order appealed against, does not exceed ` 50,00,000 and
which does not involve any question of law may, with the approval of the
President, and subject to prescribed conditions on the recommendations of the
Council, be heard by a single Member, and in all other cases, shall be heard
together by one Judicial Member and one Technical Member.

Accordingly, the cases can be heard by a bench consisting of a single member,

if following conditions are fulfilled:

• Amount of tax or ITC involved or the amount of fine, fee or penalty

determined does not exceed ` 50,00,000

• Matter does not involve any question of law

• Prior approval of the President has been obtained

• Any other prescribed conditions.

Majority rule in case of difference of opinion

If, after hearing the case, the Members differ in their opinion on any point or
points, such Member shall state the point or points on which they differ, and the
President shall refer such case for hearing,—

• where the appeal was originally heard by Members of a State Bench,

to another Member of a State Bench within the State or, where no such
other State Bench is available within the State, to a Member of a State
Bench in another State;

• where the appeal was originally heard by Members of the Principal

Bench, to another Member from the Principal Bench or, where no such
other Member is available, to a Member of any State Bench,

and such point or points shall be decided according to the majority opinion
including the opinion of the Members who first heard the case.

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1.20 GOODS AND SERVICES TAX

Transfer of members for administration efficiency

• The Government may, in consultation with the President, for the

administrative efficiency, transfer Members from one Bench to another
Bench:

• However, a Technical Member (State) of a State Bench may be transferred

to a State Bench only of the same State in which he was originally
appointed, in consultation with the State Government.
Defect in constitution not to render proceedings invalid
No act or proceedings of the Appellate Tribunal shall be questioned or shall be
invalid merely on the ground of the existence of any vacancy or defect in the
constitution of the Appellate Tribunal.

The President and members of Appellate Tribunal their qualification,

appointment, conditions of service, etc. shall be in the manner prescribed
under section 110 of the CGST Act.

B. Procedure before Appellate Tribunal [Section 111]

(i) The Appellate Tribunal shall not be bound by the procedure laid down
in the Code of Civil Procedure, 1908. However, it shall be guided by the
principles of natural justice and shall have power to regulate its own
procedure.

(ii) The Appellate Tribunal shall have the same powers as are vested in a
civil court under the Code of Civil Procedure, 1908 while trying a suit in
respect of the following matters, namely:—
(a) summoning and enforcing the attendance of any person and
examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) subject to the provisions of sections 123 and 124 of the Indian
Evidence Act, 1872, requisitioning any public record or document
or a copy of such record or document from any office;
(e) issuing commissions for the examination of witnesses or
documents;

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 APPEALS AND REVISION 22.21

(f) dismissing a representation for default or deciding it ex parte;

(g) setting aside any order of dismissal of any representation for
default or any order passed by it ex parte; and
(h) any other matter which may be prescribed.
(iii) Order of the Appellate Tribunal may be enforced in the same manner
as if it were a decree made by a court in a suit pending therein. The
Appellate Tribunal can send for execution of its orders to the court
within the local limits of whose jurisdiction,—
(a) in the case of an order against a company, the registered office of
the company is situated; or
(b) in the case of an order against any other person, the person
concerned voluntarily resides or carries on business or personally
works for gain.
(iv) All proceedings before the Appellate Tribunal shall be deemed to be
judicial proceedings within the meaning of sections 193 and 228, and
for the purposes of section 196 of the Indian Penal Code. The Appellate
Tribunal shall be deemed to be civil court for the purposes of section
195 and Chapter XXVI of the Code of Criminal Procedure, 1973.

The Indian Penal Code (IPC) has been replaced with the Bharatiya Nyaya
Sanhita, the Code of Criminal Procedure with Nagarik Suraksha Sanhita and
the Indian Evidence Act has been replaced with the Bharatiya Sakshya
Adhiniyam from 1st July 2024, however the corresponding changes is yet to
be made in the GST Law.

6. APPEAL TO APPELLATE TRIBUNAL

[SECTIONS 112 & 113]
A. Appeal by the aggrieved person (taxpayer)
(i) Orders appealable to Appellate Tribunal
Any person aggrieved by an order passed against him by an AA or RA
under CGST Act/SGST Act/ UTGST Act may appeal to the Appellate
Tribunal.

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1.22 GOODS AND SERVICES TAX

(ii) Time limit for filing appeal

The appeal can be filed before the Appellate Tribunal
(a) within 3 months from the date on which the order sought to be
appealed against is communicated to the person preferring the
appeal or
(2) the date, as may be notified by the Government, on the
recommendations of the Council, for filing appeal before the
Appellate Tribunal under this Act,
whichever is later.

The Tribunal can condone the delay of up to 3 months beyond the

specified time period of 3 months if it is satisfied that there was
sufficient cause for the delay.
(iii) Form for filing appeal
An appeal to the Appellate Tribunal shall be filed in FORM GST APL-05,
along with the relevant documents, electronically and provisional
acknowledgement shall be issued to the appellant immediately:

An appeal to the Appellate Tribunal may be filed

manually in FORM GST APL-05, along with the
relevant documents, only if the Registrar allows
the same by issuing a special/general order to
that effect, subject to such conditions and
restrictions as specified in the said order, and in
such case, a provisional acknowledgement shall
be issued to the appellant immediately.
(iv) Power of Tribunal to refuse to admit an appeal
The Appellate Tribunal can refuse to admit an appeal if
 the tax or ITC involved or

 the difference in tax or ITC involved or

 the amount of fine, fee or penalty determined by such order
does not exceed ` 50,000.

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 APPEALS AND REVISION 22.23

(v) Memorandum of cross objections

The law also provides for filing of cross-objections by the respondent
against such part of the order against which the respondent may
initially not have chosen to file an appeal.
It is provided that on receipt of
notice that an appeal has been
filed (by the appellant), the
The Principal Bench of the
party against whom the appeal
Tribunal has jurisdiction to
has been preferred (i.e. the
entertain appeal if the
respondent) may,
dispute or one of the issues
notwithstanding, that he may
in dispute involves place
not have appealed against
of supply.
such order or any part thereof,
file within 45 days a
memorandum of cross-
objections against any part of the order appealed against and such
memorandum shall be disposed of by the Appellate Tribunal as if it were
an appeal presented within the time specified for filing the initial
appeal.
The Tribunal can condone the delay of up to 45 days beyond the
specified time period of 45 days, if it is satisfied that there was sufficient
cause for the delay.
(vi) Fees for filing appeal
The fees for filing of appeal or restoration of appeal shall be ` 1,000 for
every ` 1,00,000 of tax or ITC involved or the difference in tax or ITC
involved or the amount of fine, fee or penalty determined in the order
appealed against. However, the fee shall not exceed ` 25,000 and a
minimum of ` 5,000.
Fees for filing of an appeal in respect of an order not involving any
demand of tax, interest, fine, fee or penalty shall be ` 5,000.
There shall be no fee for application made before the Appellate Tribunal
for rectification of errors.

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1.24 GOODS AND SERVICES TAX

(vii) Mandatory pre-deposit for filing appeal

No appeal can be filed before the Appellate Tribunal unless a specified
amount of pre-deposit is made by the appellant. The concept of pre-
deposit is discussed separately under Heading No. 7.
B. Departmental appeal
(i) The Commissioner may, on his own motion, or upon request from the
SGST/UTGST Commissioner, examine the record of any order passed by
the AA or RA under the CGST Act/SGST Act/ UTGST Act for the purpose
of satisfying himself as to the legality or propriety of such order.
(ii) The Commissioner may, by order, direct any officer subordinate to him
to apply to the Appellate Tribunal within 6 months from the date on
which the said order has been passed or the date, as may be notified
by the Government, on the recommendations of the Council, for the
purpose of filing application before the Appellate Tribunal under this
Act, whichever is later, for determination of such points arising out of
the said order as may be specified him.
The Tribunal can permit the filing of an application within three
months after the expiry of the specified time period of 6 months, if
it is satisfied that there was sufficient cause for the delay.
(iii) An application to the Appellate Tribunal shall be filed in Form GST APL-
07, along with the relevant documents, electronically and a provisional
acknowledgement shall be issued to the appellant immediately.
Such application may be filed manually in FORM GST APL-07, along with
the relevant documents, only if the Registrar allows the same by issuing
a special/general order to that effect, subject to such conditions and
restrictions as specified in the said order, and in such case, a provisional
acknowledgement shall be issued to the appellant immediately.
(iv) Such application shall be dealt with by the Appellate Tribunal as if it
were an appeal made against the order of the AA or RA.
(v) There is no requirement of making a pre-deposit in the case of
departmental appeal.

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 APPEALS AND REVISION 22.25

Common provisions in case of appeal by the aggrieved person

(taxpayer) and Departmental appeal
(I) Memorandum of cross objections
A memorandum of cross-objections to the Appellate Tribunal, if any, shall be
filed electronically in FORM GST APL-06.
However, the memorandum of cross-objections may be filed manually in
FORM GST APL-06, only if the Registrar allows the same by issuing a
special/general order to that effect, subject to such conditions and
restrictions as specified in the said order.
(II) Date of filing appeal
(i) Where the order appealed against is uploaded on the common portal

a final acknowledgement, indicating appeal number, shall be issued in

FORM GST APL-02 on removal of defects, if any, and the date of issue of
the provisional acknowledgement shall be considered as the date of filing
of appeal.
(ii) If the order appealed against is not uploaded on the common portal
the appellant shall submit/ upload a self-certified copy of the said order
within a period of 7 days from the date of filing of FORM GST APL-05/
FORM GST APL-07 and a final acknowledgement, indicating appeal
number, shall be issued in FORM GST APL-02 on removal of defects, if any,
and the date of issue of the provisional acknowledgment shall be
considered as the date of filing of appeal.
(iii) Where the said self-certified copy of the order is submitted/uploaded
after a period of 7 days from the date of filing of FORM GST APL-05/
FORM GST APL-07
a final acknowledgement, indicating appeal number, shall be issued in
FORM GST APL-02 on removal of defects, if any, and the date of
submission/uploading of such self-certified copy shall be considered as
the date of filing of appeal.

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1.26 GOODS AND SERVICES TAX

The appeal shall be treated as filed only when the final

acknowledgement, indicating the appeal number, is issued.
The appeal and the memorandum of cross objections shall be signed
in the prescribed manner.

'Registrar' shall mean a Registrar appointed by the Government for

this purpose, and shall include Joint Registrar, Deputy Registrar
and Assistant Registrar.

C. Orders of the Appellate Tribunal [Section 113]

(i) The Tribunal, after hearing both sides may
 pass such orders thereon as it thinks fit, confirming, modifying
or annulling the decision or order appealed against or
 refer the case back to the AA or to the RA, or to the original
adjudicating authority, with such directions as it may think fit, for
a fresh adjudication or decision after taking additional evidence,
if necessary.
(ii) Tribunal may, if sufficient cause is shown, grant up to 3 adjournments
to hearing of appeal to either side for reason to be recorded in writing.
(iii) The law provides an advisory time limit of 1 year from the date of filing
of appeal for the Tribunal to decide the appeal.
(iv) The Tibunal shall send a copy of its order to

• AA/RA/Original adjudicating authority

• Appellant

• Jurisdictional Commissioner or the SGST/UTGST Commissioner

(v) Every order passed by the Tribunal shall be final and binding on the
parties unless the dispute is taken to a higher appellate forum.

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 APPEALS AND REVISION 22.27

Rectification of errors [Section 113(3)]

 The Tribunal can correct its own order for any apparent mistakes, but it
has no power of review.
 The Tribunal may amend any order passed by it so as to rectify any error
apparent on the face of the record if such error is noticed in the order
by its own accord, or is brought to its notice by the Commissioner or
SGST/UTGST Commissioner or the other party to the appeal within a
period of 3 months from the date of the order.
 No amendment which has the effect of enhancing an assessment or
reducing a refund or ITC or otherwise increasing the liability of the other
party, shall be made, unless the party has been given an opportunity of
being heard.
D. Withdrawal of appeal or application filled before the Appellate
Tribunal [Rule 113A]
The appellant may, at any time before the issuance of the order, in respect of
any appeal filed in FORM GST APL-05 or any application filed in FORM GST
APL-07, file an application for withdrawal of the said appeal/application, by
filing an application in Form GST APL-05/07W.
Where the final acknowledgment in GST APL-02 has been issued, the
withdrawal of the said appeal/application, would be subject to the approval
of the Appellate Tribunal within 15 days of filing of such application.
Any fresh appeal/application, as the case may be, filed by the appellant
pursuant to such withdrawal shall be filed within the time limit specified in A
or B above.

7. MANDATORY PRE-DEPOSIT
The right to appeal is a statutory right which operates within the limitation placed
on it by the law. One such limitation that is generally applied basis this principle in
tax statutes is that an appellant must first deposit the adjudged dues before his
appeal can be heard.

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1.28 GOODS AND SERVICES TAX

However, an appellant may succeed in his appeal, and hence it would (in
retrospect) be unfair to saddle him with this financial burden. To balance
these factors, tax laws generally mandate “pre-deposits” so as to
discourage frivolous appeals and also safeguard the interest of revenue.
Section 107(6) provides that no appeal shall be filed before the AA, unless the
appellant has paid—
(a) full amount of tax, interest, fine, fee and penalty arising from the impugned
order, as is admitted by him; and
(b) a sum equal to 10% of the remaining amount of tax in dispute arising from
the impugned order in relation to which the appeal has been filed, subject to
a maximum of ` 20 crore (` 40 crore in case of IGST*).
* As per section 20 of the IGST Act.

However, no appeal shall be filed before (AA) against an order under section
129(3) 1, unless a sum equal to 25% of the penalty has been paid by the appellant.
The payment of pre-deposit ensures deemed stay on the recovery proceedings for
the balance amount of demand in dispute.
(10) ABC Pvt. Ltd. received a show cause notice demanding IGST of ` 600 crore,
penalty of ` 100 crore and interest of ` 10 crore. The adjudicating authority passed
the order confirming the entire demand. While ABC Pvt. Ltd. admits the tax liability,
penalty and interest of ` 50 crore, ` 10 crore and ` 1 crore respectively, it wishes to
file an appeal to litigate the balance demand amount. The amount of pre-deposit
to be made by ABC Pvt. Ltd. for filing the appeal to the AA is computed as under-
(i) Full amount of tax, interest and penalty as admitted by the company, i.e. ` 61
crore
(ii) 10% of the tax in dispute, i.e. ` 55 crore (10% of ` 550 crore) subject to a
maximum of ` 40 crore.
Therefore, total pre-deposit to be made by the company is ` 61 crore
(total liability admitted by the company) plus ` 40 crore, i.e. ` 101 crore.
Till the time of final disposal of appeal, there shall be no recovery of demand
in dispute from Appellant.

1
Provisions relating to section 129(3) have been discussed in detail in Chapter 21 – Offences and
Penalties and Ethical aspects under GST in this Module of the Study Material.

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 APPEALS AND REVISION 22.29

Section 112(8) lays down that no appeal can be filed before the Tribunal, unless the
appellant deposits
(a) full amount of tax, interest, fine, fee and penalty arising from the impugned
order, as is admitted by him, and
(b) 10% of the remaining amount of tax in dispute, in addition to the amount
deposited before the AA, arising from the said order, subject to a
maximum of ` 20 crore (` 40 crore* in case of IGST), in relation to which
appeal has been filed.
* As per section 20 of the IGST Act

Where the appellant has made the pre-deposit, the recovery proceedings for the
balance amount of demand in dispute shall be deemed to be stayed till the disposal
of the appeal. 2

2
It is important to note that if any person files an appeal in accordance with the requirement
of section 112(8) (i.e., on payment of prescribed pre-deposit), the recovery proceedings for the
balance amount is deemed to be stayed till disposal of the appeal as per section 112(9).
However, as the taxpayers were not able to file appeal under section 112 in Appellate Tribunal
against the orders of Appellate Authority and therefore, were not able to make the pre-
deposit, the tax officers were taking a view that there is no stay against recovery as per section
112(9).
For this purpose, it has been clarified vide Circular No. 224/18/2024 GST dated 11.07.2024 that
taxpayer can make the payment of an amount equal to the amount of pre-deposit by navigating
to Services >> Ledgers>> Payment towards demand, from his dashboard on GST portal. The
said amount deposited by the taxpayer will be adjusted against the amount of pre-deposit
required to be deposited at the time of filing appeal before the Appellate Tribunal.
Consequently, the recovery of the remaining amount of confirmed demand as per the order of
the appellate authority will stand stayed.
The taxpayer also needs to file an undertaking/ declaration with the jurisdictional proper
officer that he will file appeal against the said order of the appellate authority before the
Appellate Tribunal, as and when it comes into operation, within the prescribed timelines. On
providing the said undertaking and on payment of an amount equal to the amount of pre-
deposit, the recovery of the remaining amount of confirmed demand as per the order of the
appellate authority will stand stayed.
If any taxpayer has already paid the full amount that was intended to have been paid towards
a demand, through a prescribed form. In such cases, the said person can file an application
electronically on the common portal, to adjust the payment made towards the said demand.
Till the time such functionality is made available on the common portal, the concerned
taxpayer may intimate the proper officer about the same, and on such intimation, the proper
officer may not insist on recovery.

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1.30 GOODS AND SERVICES TAX

Pre-deposit
Authority
When the tax involved is CGST When the tax involved is IGST

AA Admitted CGST liability in full + Admitted IGST liability in full +

10% of the CGST in dispute, 10% of the IGST in dispute,
subject to a maximum of 20 subject to a maximum of 40
crore rupees* crore rupees

Appellate Admitted CGST liability in full + Admitted IGST liability in full +

Tribunal 10% of the CGST in dispute, 10% of the IGST in dispute,
in addition to the amount in addition to the amount
deposited before AA as pre- deposited before AA as pre-
deposit, subject to a deposit, subject to a
maximum of 20 crore rupees* maximum of 40 crore rupees

*Equivalent amount of SGST is also required to be deposited. Therefore, whether the

appeal involves CGST+SGST or IGST, in both the cases, the aggregate amount of tax
to be deposited or maximum amount (excluding the admitted liability) is the same.
For example, for the appeal before AA involving intra-state supplies, the maximum
amount of pre-deposit (excluding the admitted liability) would be ` 20 crore
for CGST + ` 20 crore for SGST (i.e. total ` 40 crore); whereas for the appeal
involving inter-state supplies it would be ` 40 crore for IGST.
(11) ABC Pvt. Ltd. received an adjudication order demanding CGST and
SGST of ` 200 crore each. ABC Pvt. Ltd. filed an appeal to AA contesting
the entire demand. The amount of pre-deposit made by the company for
filing the appeal to the AA is ` 20 crore [10% of ` 200 crore (tax in dispute)].
Equivalent amount has been paid for SGST too. Thus, a total of ` 40 crore has been
paid by the company as pre-deposit for filing the appeal to the AA. The AA heard
the appeal and decided in favour of the department confirming the entire demand.
The company filed an appeal to the Appellate Tribunal. The amount of pre-
deposit made by the company for filing the appeal before the Tribunal is ` 20
crore [10% of ` 200 crore (tax in dispute)]. Equivalent amount has been paid
for SGST too. Thus, a total of ` 40 crore (CGST plus SGST) has been paid by
the company as pre-deposit for filing the appeal to the Appellate Tribunal.

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 APPEALS AND REVISION 22.31

(12) ABC Pvt. Ltd. wishes to file an appeal with the Appellate Tribunal
against an order of the AA demanding IGST of ` 1,200 crore. The
company admits the liability of ` 100 crore but wishes to litigate the
balance demand amount and thus, files an appeal with the Appellate Tribunal. The
amount of pre-deposit to be made by ABC Pvt. Ltd. for filing the appeal to the
Appellate Tribunal is computed as under-
(i) Full amount of tax, interest and penalty as admitted by the company, i.e.
` 100 crore
(ii) 10% of the tax in dispute, i.e. ` 110 crore (10% of ` 1,100 crore) subject
to a maximum of ` 40 crore
Therefore, total pre-deposit to be made by the company before filing an
appeal in the Appellate Tribunal is ` 100 crore (total liability admitted by the
company) plus ` 40 crore, i.e. ` 140 crore.
Interest on refund of pre-deposit [Section 115]
If the pre-deposit made by the appellant before the AA or the Tribunal is required
to be refunded consequent to any order of the AA or of the Tribunal, as the case
may be, interest as provided under section 56 shall be payable from the date of
payment of the amount (and not from the date of the order of the AA or of the
Tribunal) till the date of refund of such amount.

8. PRODUCTION OF ADDITIONAL EVIDENCE

BEFORE THE APPELLATE AUTHORITY OR
THE APPELLATE TRIBUNAL
(i) Rule 112 of the CGST Rules lays down that the appellant shall not be allowed
to produce before the AA or the Tribunal any evidence, whether oral or
documentary, other than the evidence produced by him during the course of
the proceedings before the adjudicating authority or, as the case may be, the
AA.
(ii) Exceptions
However, the rule provides the following exceptional circumstances where
the production of additional evidence before the AA or the Tribunal could be
allowed:

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1.32 GOODS AND SERVICES TAX

(a) where the adjudicating authority or, as the case may be, the AA has
refused to admit evidence which ought to have been admitted; or

(b) where the appellant was prevented by sufficient cause from producing
the evidence which he was called upon to produce by the adjudicating
authority or, as the case may be, the AA; or

(c) where the appellant was prevented by sufficient cause from producing
before the adjudicating authority or, as the case may be, the AA any
evidence which is relevant to any ground of appeal; or
(d) where the adjudicating authority or, as the case may be, the AA has
made the order appealed against without giving sufficient opportunity
to the appellant to adduce evidence relevant to any ground of appeal.
(iii) No additional evidence shall be admitted unless the AA or the Appellate
Tribunal records in writing the reasons for its admission.
(iv) The AA or the Appellate Tribunal shall not take any additional evidence unless
the adjudicating authority or an officer authorised in this behalf by the said
authority has been allowed a reasonable opportunity -
(a) to examine the evidence or document or to
cross-examine any witness produced by the
appellant; or
(b) to produce any evidence or any witness in
rebuttal of the additional evidence produced by the appellant.
(v) The provisions of this rule shall not affect the power of the AA or the
Appellate Tribunal to direct the production of any document, or the
examination of any witness, to enable it to dispose of the appeal.

9. APPEARANCE BY AUTHORISED
REPRESENTATIVE [SECTION 116]
Any person who is entitled or required to appear before a GST Officer or the AA or
the Tribunal, in connection with any proceedings under the CGST Act, may appear
through authorised representative (except when he is required under the Act to
appear personally for examination on oath or affirmation)

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 APPEALS AND REVISION 22.33

(i) Who can be authorized representative?

Broadly an authorised representative can be a relative, a regular employee, an
advocate, a chartered accountant, a cost accountant, a company secretary, or
a GST Practitioner. It is also provided that specified indirect tax gazetted
officers having served for atleast 2 years, can appear as authorised
representative after one year from the date of their retirement/resignation.

(ii) Disqualifications for authorized representative

The GST law also provides some disqualifications for an authorised
representative. Section 116(3) lays down that no person,—
(a) who has been dismissed or removed from Government service; or
(b) who is convicted of an offence connected with any proceedings under
the CGST Act/ SGST Act/ UTGST Act/IGST Act or under the earlier law
or under any of the Acts passed by a State Legislature dealing with the
imposition of taxes on sale of goods or supply of goods and/or services;
or
(c) who is found guilty of misconduct by the prescribed authority;
(d) who has been adjudged as an insolvent,
shall be qualified to represent any person—

(i) for all times in case of persons referred to in clauses (a), (b) and (c); and
(ii) for the period during which the insolvency continues in the case of a
person referred to in clause (d).
(iii) Any person who has been disqualified under the provisions of the SGST Act/
UTGST Act shall be deemed to be disqualified under the CGST Act also.

10. FINANCIAL AND ADMINISTRATIVE POWERS

OF PRESIDENT [SECTION 114]
The president shall exercise the prescribed financial and administrative powers over
the appellate tribunal.

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1.34 GOODS AND SERVICES TAX

11. APPEAL TO THE HIGH COURT

[SECTION 117]
(i) Appealable orders
The law provides that any person (whether
The Appellate
department or other person), aggrieved by any
Tribunal is the
order passed by the State Benches of the Tribunal,
final fact finding
may file an appeal to the High Court.
authority.
The High Court may admit such appeal if it is
satisfied that the case involves a substantial
question of law.

✪ Substantial question generally

mean question that must be
answered by applying relevant legal
principles to interpret the law. This is
distinct from a question of fact that must be
answered by evaluating the relevant facts
or evidences as well as inferences arising from those facts.

✪ Unlike answer to question of facts which are dependent on

particular circumstances or factual situations, answers to
questions of law being based on legal principles, can be applied
to many situations.

Recently, the Supreme Court, in the matter of Nazir Mohamed v. J. Kamala

And Ors. on 27 August, 2020 pronounced that to be “substantial”, a question
of law must be debatable, not previously settled by the law of the land or any
binding precedent, and must have a material bearing on the decision of the
case and/or the rights of the parties before it, if answered either way.

For instance, the question as regards applicability of an exemption

notification to a taxpayer due to two possible interpretations of the
notification could be a question of law. Conversely, determination of the
quantum of the exemption available to a taxpayer could be a question of fact.

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 APPEALS AND REVISION 22.35

(ii) Time limit for filing appeal

Appeals to the High Court are to be filed within 180 days from the date on
which the order appealed against is received by the aggrieved person.
However, the High Court has the power to condone the delay on being
satisfied of sufficient cause for the same.
(iii) Form of appeal
The appeal shall be filed in form GST APL 08.
(iv) Decision of the High Court
On being satisfied that a substantial question of law is involved, the High
Court shall formulate that question, and the appeal shall be heard only on
the question so formulated. However, the High Court has the power to hear
the appeal on any other substantial question of law, if it is satisfied that the
case involves such question.

The High Court shall decide the questions of law so formulated and deliver
such judgment thereon containing the grounds on which such decision is
founded and may award such cost as it deems fit. The High Court may
determine any issue which has not been determined by the Tribunal (State
Benches) or has been wrongly determined by the State Benches, by reason of
a decision on such question of law.

The Code of Civil Procedure relating to appeals to High Court shall apply to
the appeals before the High Court under this section.
The appeal shall be heard by a bench of not less than two judges, and the
points on which they differ, if any, shall, then, be heard, upon that point only
by one or more judges of the High Court. The final judgment on the point
shall be decided by majority of all Judges who heard the case, including those
first heard it.
Deposit of all tax dues is required to be made; otherwise the inherent powers
of the High Court have to be invoked for obtaining a stay pending disposal
of the appeal.

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1.36 GOODS AND SERVICES TAX

12. APPEAL TO THE SUPREME COURT

[SECTION 118]
The law provides for appeals to the Supreme Court from any judgment or order
passed by the High Court, in any case which, on its own motion or on an
application made by or on behalf of the party aggrieved, immediately after passing
of the judgment or order, the High Court certifies to be a fit one, for appeal to
the Supreme Court.
A (direct) appeal shall also lie to the Supreme Court from any orders passed by
the Principal Bench of the Tribunal.
The provision of the Code of Civil Procedure relating to appeals to the Supreme
Court shall apply to appeals before the Supreme Court under this section.
The Supreme Court can vary, confirm or reverse the judgement of the High Court
or the Tribunal as the case may be and may award costs. It can also remand the
matter for fresh consideration.

13. SUMS DUE TO BE PAID NOTWITHSTANDING

APPEAL ETC. [SECTION 119]
Sums due to the Government as a result of an order passed by the Principal
Bench/State Benches of the Appellate Tribunal or the High Court, notwithstanding
that an appeal has been preferred to the High Court or the Supreme Court, shall
be payable in accordance with the order so passed.

14. APPEAL NOT TO BE FILED IN CERTAIN CASES

[SECTION 120]
In tax disputes, the tax department is always an opposite party. From a practical
standpoint, many appeals at the tribunal, High Court, Supreme Court levels are
instituted by the tax department.
This section contains provisions that aim at limiting the filing of appeals by the
CGST officers in non-complex matters or the matters involving small tax amount.
While providing for non-filing of appeal by the CGST officers in certain cases, this

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 APPEALS AND REVISION 22.37

section also provides that such steps should not stop the tax department to file
appeal in other similar cases.

(i) The Board may, on the recommendations of the GST Council, issue orders or
instructions or directions fixing monetary limits for regulating filing of appeal
or application by the CGST officer.

(ii) Non-filing of appeal/application by a CGST officer on account of such

monetary limits fixed by the Board shall not preclude such officer from filing
appeal or application in any other case involving the same or similar issues
or questions of law.
(iii) No person, who is a party in application or appeal can contend that the CGST
Officer has acquiesced in the decision on the disputed issue by not filing an
appeal or application (on account of monetary limits).
(iv) The Appellate Tribunal or Court hearing such appeal or application shall have
regard to circumstances for non-filing of appeal or application by the CGST
officer on account of monetary limits fixed by the Board.
Clarification regarding monetary limits for filing appeals or applications or
Special Leave Petition by the Department before GSTAT, High Courts and
Supreme Court 3
Following monetary limits have been fixed for filing appeals/ applications/ Special
Leave Petition by the Department before GSTAT, High Courts and Supreme Court
subject to specified exclusions:-

Appellate Forum Monetary Limit (amount involved in `)

GSTAT 20 Lakh

High Court 1 Crore

Supreme Court 2 Crore

Amount to be considered for applying the monetary limit for filing appeal has been
explained in the below table in relation to the category of disputes:-–

3
Circular No. 207/1/2024 GST dated 26.06. 2024.

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1.38 GOODS AND SERVICES TAX

S. Dispute pertains to Amount to be considered for applying

No. demand of the monetary limit for filing appeal

1. Tax (with or without penalty Aggregate of the amount of tax in

and/or interest) only dispute (including CGST, SGST/ UTGST,
IGST and Compensation Cess)

2. Interest only Amount of interest

3. penalty only Amount of penalty

4. late fee only Amount of late fee

5. Interest, penalty and/or late Aggregate of amount of interest, penalty

fee (without involving any and late fee
disputed tax amount)

6. Erroneous refund Amount of refund in dispute (including

CGST, SGST/UTGST, IGST and
Compensation Cess)

Monetary limit shall be applied on the disputed amount of tax/interest/penalty/late

fee, as the case may be, in respect of which appeal or application is contemplated
to be filed in a case
In a composite order which disposes more than one appeal/demand notice, the
monetary limits shall be applicable on the total amount of tax/interest/penalty/late
fee, as the case may be, and not on the amount involved in individual appeal or
demand notice.

Exclusions - Monetary limits specified above shall not be applicable in the following
circumstances where the decision to file appeal shall be taken on merits irrespective
of the said monetary limits:
i. Where any provision of GST law has been held to be ultra vires to the
Constitution of India; or
ii. Where any rules/regulations made under GST law have been held to be ultra
vires the parent Act; or

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 APPEALS AND REVISION 22.39

iii. Where any order, notification, instruction, or circular issued by the

Government or the Board has been held to be ultra vires of the GST law or
the Rules made there under; or
iv. Where the matter is related to -
a. Valuation of goods/services; or
b. Classification of goods/services; or
c. Refunds; or
d. Place of Supply; or
e. Any other issue, which is recurring in nature and/or involves
interpretation of the provisions of the Act /the Rules/ notification/
circular/order/instruction etc.; or
v. Where strictures/adverse comments have been passed and/or cost has been
imposed against the Government/Department or their officers; or
vi. Any other case or class of cases, where it is necessary to contest in the interest
of justice or revenue.
Non-filing of appeal based on the above monetary limits, shall not preclude the tax
officer from filing appeal or application in any other case involving the same/similar
issues in which the tax in dispute exceeds the monetary limit or case involving the
questions of law.

15. NON APPEALABLE DECISIONS AND ORDERS

[SECTION 121]
Section 121 lays down that no appeals whatsoever can be filed against the
following orders:-
(a) an order of the Commissioner or other authority empowered to direct transfer
of proceedings from one officer to another officer;
(b) an order pertaining to the seizure or retention of books of account, register
and other documents; or
(c) an order sanctioning prosecution under the Act; or
(d) an order passed under section 80 (payment of tax in instalments).

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1.40 GOODS AND SERVICES TAX

TEST YOUR KNOWLEDGE

1. Does CGST law provide for any appeal to a person aggrieved by any order or
decision passed against him by an adjudicating authority under the CGST Act?
Explain the related provisions under the CGST Act.
2. Describe the provisions relating to Departmental appeal to Appellate Authority
under section 107.

3. With reference to sections 107(6) and 112(8), specify the amount of mandatory
pre-deposit which should be made along with every appeal made before the
Appellate Authority and the Appellate Tribunal. Does making the pre-deposit
have any impact on recovery proceedings?
4. With reference to section 108, elaborate whether a CGST/SGST authority can
revise an order passed by his subordinates.
5. The Appellate Tribunal has the discretion to refuse to admit any appeal.
Examine the correctness of the above statement.
6. In an order dated 20th August issued to GH (P) Ltd., the Joint Commissioner of
CGST has confirmed IGST demand of ` 280 crore. The company is disputing
the entire demand of IGST and wants to know the amount of pre-deposit it has
to make under the IGST Act for filing an appeal before the Appellate Authority
against the order of the Joint Commissioner.
Assuming that the Appellate Authority also confirms the order of the Joint
Commissioner and the company wants to file an appeal before the Appellate
Tribunal against the order of the Appellate Authority, determine the amount of
pre-deposit to be made by the company for filing the said appeal.
7. With reference to the provisions of section 121, specify the orders against which
no appeals can be filed.
8. Mr. A had filed an appeal before the Appellate Tribunal against an order of the
Appellate Authority where the issue involved relates to place of supply. The
order of Appellate Tribunal is also in favour of the Department. Mr. A now
wants to file an appeal against the decision of the Appellate Tribunal as he
feels the stand taken by him is correct.

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 APPEALS AND REVISION 22.41

You are required to advise him suitably with regard to filing of an appeal before
the appellate forum higher than the Appellate Tribunal.

9. With reference to the provisions of section 120, list the cases in which appeal is
not to be filed and also specify other relevant provisions in this respect.

ANSWERS

1. Yes, any person aggrieved by any order or decision passed by an adjudicating

authority under the CGST Act has the right to appeal to the Appellate
Authority under section 107. The appeal should be filed within 3 months from
the date of communication of such order or decision. However, the Appellate
Authority has the power to condone the delay of up to 1 month in filing the
appeal if there is sufficient cause for the delay. The appeal can be filed only
when the admitted liability and 10% of the disputed tax amount, subject to a
maximum of ` 20 crore. (` 40 crore in case of IGST) is paid as pre-deposit by
the appellant.
However, no appeal shall be filed before (AA) against an order under section
129(3), unless a sum equal to 25% of the penalty has been paid by the
appellant.
Further, no appeal can be filed against the following orders in terms of
section 121:-
(a) an order of the Commissioner or other authority empowered to direct
transfer of proceedings from one officer to another officer;
(b) an order pertaining to the seizure or retention of books of account,
register and other documents; or

(c) an order sanctioning prosecution under the Act; or

(d) an order passed under section 80 (payment of tax in installments).
2. Section 107(2) provides that Department can file a “review
application/appeal” with the Appellate Authority.
The Commissioner may, on his own motion, or upon request from the
SGST/UTGST Commissioner, examine the record of any proceedings in which
an adjudicating authority has passed any decision/order to satisfy himself as

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1.42 GOODS AND SERVICES TAX

to the legality or propriety of the said decision /order. The Commissioner

may, by order, direct any officer subordinate to him to apply to the Appellate
Authority within 6 months from the date of communication of the said
decision/order for the determination of such points arising out of the said
decision/order as may be specified him.
The AA can condone the delay in filing of appeal by 1 month if it is satisfied
that there was sufficient cause for such delay [Section 107(4)].
Such application shall be dealt with by the AA as if it were an appeal made
against the decision/order of the adjudicating authority [Section 107(3)].
There is no requirement of making a pre-deposit in case of departmental
appeal.
3. Section 107(6) provides that no appeal shall be filed before the Appellate
Authority, unless the appellant has paid—
(a) full amount of tax, interest, fine, fee and penalty arising from the
impugned order, as is admitted by him; and
(b) a sum equal to 10% of the remaining amount of tax in dispute arising
from the impugned order, subject to a maximum of ` 20 crore. (` 40
crore in case of IGST)
However, no appeal shall be filed before (AA) against an order under section
129(3), unless a sum equal to 25% of the penalty has been paid by the
appellant.
Section 112(8) lays down that no appeal can be filed before the Appellate
Tribunal, unless the appellant deposits
(a) full amount of tax, interest, fine, fee and penalty arising from the
impugned order, as is admitted by him; and
(b) 10% of the remaining amount of tax in dispute, in addition to the
amount deposited before the AA, arising from the said order, subject
to a maximum of ` 20 crore (` 40 crore in case of IGST), in relation to
which appeal has been filed.
The above limits are applicable for the pre-deposits to be made under the
CGST Act. Equal amount of pre-deposit is payable under the respective SGST
Act as well.

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 APPEALS AND REVISION 22.43

Where the appellant has made the pre-deposit, the recovery proceedings for
the balance amount shall be deemed to be stayed till the disposal of the
appeal.
4. Section 2(99) defines “Revisional Authority” as an authority appointed or
authorised under the CGST Act for revision of decision or orders referred to
in section 108.
Section 108 of the Act authorizes such “revisional authority” to call for and
examine any order passed by his subordinates and in case he considers the
order of the lower authority to be erroneous in so far as it is prejudicial to
revenue and is illegal or improper or has not taken into account certain
material facts, whether available at the time of issuance of the said order or
not or in consequence of an observation by the Comptroller and Auditor
General of India, he may, if necessary, can revise the order after giving
opportunity of being heard to the person concerned. The “revisional
authority” can also stay the operation of any order passed by his subordinates
pending such revision.
The “revisional authority” shall not revise any order if-
(a) the order has been subject to an appeal under section 107 or under
section 112 or under section 117 or under section 118; or
(b) the period specified under section 107(2) has not yet expired or more
than 3 years have expired after the passing of the decision or order
sought to be revised.
(c) the order has already been taken up for revision under this section at
any earlier stage.
(d) the order is a revisional order
5. The statement is incorrect.
Though the Appellate Tribunal does have the power to refuse to admit an
appeal, it has the discretion of refusing the admission of an appeal in the
following specific cases where –
o the tax or input tax credit involved or
o the difference in tax or the difference in input tax credit involved or
o the amount of fine, fees or penalty determined by such order,
does not exceed ` 50,000.

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1.44 GOODS AND SERVICES TAX

6. Section 107(6) read with section 20 of the IGST Act provides that no appeal
shall be filed with the Appellate Authority unless the applicant has paid in full,
such part of the amount of tax, interest, fine, fee and penalty arising from the
impugned order, as is admitted by him and a sum equal to 10% of the
remaining amount of tax in dispute arising from the said order subject to a
maximum of ` 40 crore. Thus, the amount of pre-deposit for filing an appeal
with Appellate Authority cannot exceed ` 40 crore (for tax in dispute) where
IGST demand is involved.

In the given case, the amount of pre-deposit for filing an appeal with the
Appellate Authority against the order of Joint Commissioner, where entire
amount of tax is in dispute, is:
(i) ` 28 crore [10% of the amount of tax in dispute, viz. ` 280 crore]
or
(ii) ` 40 crore,

whichever is less.
= ` 28 crore.
Further, section 112(8) provides that no appeal shall be filed with the
Appellate Tribunal unless the applicant has paid in full, such part of the
amount of tax, interest, fine, fee and penalty arising from the impugned order,
as is admitted by him and a sum equal to 10% of the remaining amount of
tax in dispute, in addition to the amount paid as pre-deposit while filing
appeal to the Appellate Authority, arising from the said order subject to a
maximum of ` 40 crores.
Thus, in the given case, the amount of pre-deposit for filing an appeal with
the Appellate Tribunal against the order of the Appellate Authority, where
entire amount of tax is in dispute, is:
(i) ` 28 crores [10% of the amount of tax in dispute, viz. 280 crores]
or
(ii) ` 40 crores,
whichever is less.
= ` 28 crores.

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 APPEALS AND REVISION 22.45

7. As per section 121, no appeal shall lie against any decision taken or order
passed by a CGST officer if such decision taken or order passed relates to any
one or more of the following matters, namely:—
(a) an order of the Commissioner or other authority empowered to direct
transfer of proceedings from one officer to another officer; or
(b) an order pertaining to the seizure or retention of books of account,
register and other documents; or
(c) an order sanctioning prosecution under the CGST Act; or
(d) an order passed under section 80 (payment of tax in instalments).
8. As per section 117(1), an appeal against orders passed by the State Benches
of the Tribunal would lie to the High Court if the High Court is satisfied that
such an appeal involves a substantial question of law.
However, appeal against orders passed by the Principal Bench of the Tribunal
would lie to the Supreme Court and not High Court. As per section 109(5) of
the Act, only the Principal Bench of the Tribunal can decide appeals where
one of the issues involved relates to the place of supply.
Since the issue involved in Mr. A’s case relates to place of supply, the appeal
in his case would have been decided by the Principal Bench of the Tribunal.
Thus, Mr. A will have to file an appeal with the Supreme Court and not with
the High Court.
9. (1) The Board may, on the recommendations of the GST Council, issue
orders or instructions or directions fixing monetary limits for regulating
filing of appeal or application by the CGST officer.
(2) Non-filing of appeal/application by a CGST officer on account of such
monetary limits fixed by the Board shall not preclude such officer from
filing appeal or application in any other case involving the same or
similar issues or questions of law.
(3) No person, who is a party in application or appeal can contend that the
CGST Officer has acquiesced in the decision on the disputed issue by
not filing an appeal or application (on account of monetary limits).
(4) The Appellate Tribunal or Court hearing such appeal or application shall
have regard to circumstances for non-filing of appeal or application by
the CGST officer on account of monetary limits fixed by the Board.

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1.46 GOODS AND SERVICES TAX

AMENDMENTS MADE VIDE THE FINANCE (NO. 2)

ACT, 2019
The Finance (No. 2) Act, 2019 has come into force from 01.08.2019. However, the
amendments made in section 2(4) of the CGST Act vide the Finance (No. 2) Act, 2019
would become effective only from a date to be notified by the Central Government in
the Official Gazette. Such a notification has not been issued till 30.04.2025.
Therefore, applicability or otherwise of such amendment for May 2026, September
2026 and/or January 2027 examinations shall be informed by the ICAI by way of an
announcement.
In the table given below, the existing provisions of section 2(4) are compared with
the provisions as amended by the Finance (No. 2) Act, 2019.
Once the announcement for applicability of such amendments for examination(s)
is made by the ICAI, students should read the amended provisions given hereunder
in place of the related provisions discussed in the Chapter.

Existing provisions Provisions as amended by the Remarks

Finance (No. 2) Act, 2019
Section 2(4) Section 2(4) The definition
“adjudicating authority” “adjudicating authority” means of
means any authority, any authority, appointed or adjudicating
appointed or authorised to authorised to pass any order or authority
pass any order or decision decision under this Act, but does proposed to
under this Act, but does not not include the Central Board of be amended
include the Central Board of Indirect Taxes and Customs, the to exclude the
Indirect Taxes and Customs, Revisional Authority, the proposed
the Revisional Authority, the Authority for Advance Ruling, the National
Authority for Advance Ruling, Appellate Authority for Advance Appellate
the Appellate Authority for Ruling, National Appellate Authority for
Advance Ruling, the Authority for Advance Ruling, Advance
Appellate Authority, the the Appellate Authority, the Ruling from
Appellate Tribunal and the Appellate Tribunal and the the purview
Authority referred to in sub- Authority referred to in sub- of
section (2) of section 171; section (2) of section 171; adjudicating
authority.

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AMENDMENTS MADE VIDE THE FINANCE ACT, 2025

The Finance Act, 2025 has come into force from 29.03.2025. However, most of the
amendments made under the CGST Act and the IGST Act vide the Finance Act, 2025
would become effective only from a date to be notified by the Central Government
in the Official Gazette. Such a notification has not been issued till 30.04.2025.
Therefore, the applicability or otherwise of such amendment for May 2026,
September 2026 and/or, January 2027 examinations shall be informed by the ICAI
by way of an announcement.
In the table given below, the existing provisions of section 107 and 112 of the CGST
Act, 2017 are compared with the provisions as amended by the Finance Act, 2025.
Once the announcement for applicability of such amendments for examination(s)
is made by the ICAI, students should read the amended provisions given hereunder
in place of the related provisions discussed in the chapter.

Section Existing provisions Provisions as amended by Remarks

No. the Finance Act, 2025

107(6) No appeal shall be No appeal shall be filed Section

filed under sub- under sub-section (1), unless 107(6) is
section (1), unless the the appellant has paid- being
appellant has paid- (a) in full, such part of the amended to
(a) in full, such part of amount of tax, interest, fine, provide for
the amount of tax, fee and penalty arising from 10%
interest, fine, fee and the impugned order, as is mandatory
penalty arising from admitted by him; and pre-deposit
the impugned order, of penalty
as is admitted by him; amount for
(b) a sum equal to ten per
and appeals
cent. of the remaining
before
amount of tax in dispute Appellate
(b) a sum equal to ten arising from the said
Authority in
per cent of the order subject to a maximum
cases
remaining amount of of twenty crore rupees, in
involving
tax in dispute arising relation to which the appeal
only demand
from the said has been filed.
of penalty
order subject to a
without any

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1.48 GOODS AND SERVICES TAX

maximum Provided that in case of demand for

of twenty crore any order demanding tax.
rupees, in relation to penalty without involving
which the appeal has demand of any tax, no
been filed. appeal shall be filed
against such order unless a
sum equal to ten per cent of
Provided that no
the said penalty has been
appeal shall be filed
paid by the appellant.
against an order
under sub-section (3)
of section 129, unless
a sum equal to
twenty-five per cent
of the penalty has
been paid by the
appellant.

112(8) No appeal shall be No appeal shall be filed under Section

filed under sub- sub-section (1), unless the 112(8) is
section (1), unless the appellant has paid–– being
appellant has paid–– (a) in full, such part of the amended to
(a) in full, such part of amount of tax, interest, fine, provide for
the amount of tax, fee and penalty arising from 10%
interest, fine, fee and the impugned order, as is mandatory
penalty arising from admitted by him, and pre-deposit
the impugned order, of penalty
(b) a sum equal to ten per
as is admitted by him, amount for
cent. of the remaining
and appeals
amount of tax in dispute, in
before
(b) a sum equal to ten addition to the amount paid
Appellate
per cent. of the under sub-section (6) of
Tribunal in
remaining amount of section 107, arising from the
cases
tax in dispute, in said order subject to a
involving
addition to the maximum of twenty crore
only demand
amount paid under rupees, in relation to which
of penalty
sub-section (6) of the appeal has been filed.
without any
section 107, arising
demand for
from the said
tax.
order subject to a

© The Institute of Chartered Accountants of India

 APPEALS AND REVISION 22.49

maximum of twenty Provided that in case of any

crore rupees, in order demanding penalty
relation to which the without involving demand
appeal has been filed. of any tax, no appeal shall
be filed against such order
unless a sum equal to ten
per cent of the said penalty,
in addition to the amount
payable under the proviso to
sub-section (6) of section
107 has been paid by the
appellant.

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India
 23
a
CHAPTER

9
a

ADVANCE RULING
For the sake of brevity, the terms “Authority for Advanced Ruling”, “Appellate
Authority for Advance Ruling”, have been referred to as AAR and AAAR respectively
in this Chapter. The section numbers referred to in the chapter pertain to CGST Act,
unless otherwise specified. Examples/Illustrations/Questions and Answers, as the
case may be, given in the Chapter are based on the position of GST law existing as
on 30.04.2025.

LEARNING OUTCOMES
After studying this chapter, you would be able to:
❑ comprehend and explain the terms-advance ruling, applicant,
application, authority and appellate authority for the purpose
of advance ruling with reference to the statutory definitions
of such terms.
❑ understand and describe the various aspects relating to
procedure to be followed for filing an application for advance
ruling and apply it in practical scenario.
❑ list the matters on which advance ruling can be sought.
❑ gain knowledge regarding the applicability of advance ruling.
❑ identify and appreciate the powers of Authority and
Appellate Authority.

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 1.2 23.2 GOODS AND SERVICES TAX

1. INTRODUCTION

What is the role of

Advance Ruling?

An advance ruling helps the applicant in planning his activities which are liable for
payment of GST, well in advance. It also brings certainty in determining the tax
liability, as the ruling given by the Authority for Advance Ruling is binding on the
applicant as well as concerned Officer or the Jurisdictional Officer in respect of the
applicant. Further, it helps in avoiding long drawn and expensive litigation at a later
date. Seeking an advance ruling is inexpensive and the procedure is simple and
expeditious.
It thus provides certainty and transparency to a taxpayer with respect to an issue
which may potentially cause a dispute with the tax administration. A legally
constituted body called Authority for Advance Ruling (AAR) can give a binding
ruling to an applicant who is a registered under GST or is desirous to be registered.
The advance ruling given by the Authority can be appealed before an Appellate
authority for Advance Ruling (AAAR). There are time lines prescribed for passing an
order by AAR and by AAAR.
The broad objectives for setting up a mechanism of Advance Ruling are:
❖ provide certainty in tax liability in advance in relation to an activity proposed
to be undertaken by the applicant;
❖ attract Foreign Direct Investment (FDI) by ensuring certainty in taxation
aspects of transactions
❖ reduce litigation
❖ pronounce ruling expeditiously in a transparent and inexpensive manner
Chapter XVII – Advance Ruling [Sections 95 to 106] of the CGST Act and
Chapter XII – Advance Ruling [Rules 103 to 107A], stipulate the provisions relating to
advance ruling. State GST laws also prescribe identical provisions in relation to
advance ruling.

Provisions of advance ruling under CGST Act have also been made applicable
to IGST Act vide section 20 of the IGST Act.

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 ADVANCE RULING 23.3
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2. RELEVANT DEFINITIONS
❖ Advance ruling means a decision provided by the Authority or the
Appellate Authority to an applicant on matters or on questions specified
in sub-section (2) of section 97 or sub-section (1) of section 100, in relation
to the supply of goods or services or both being undertaken or proposed
to be undertaken by the applicant; [Section 95(a)].
❖ Appellate Authority means the Appellate Authority for Advance Ruling
referred to in section 99. [Section 95(b)].

❖ Applicant means any person registered or desirous of obtaining

registration under this Act; [Section 95(c)].
❖ Application means an application made to the Authority under sub-
section (1) of section 97; [Section 95(d)].
❖ Authority means the Authority for Advance Ruling referred to in section
96; [Section 95(e)].

3. QUESTIONS FOR WHICH ADVANCE RULING

CAN BE SOUGHT [SECTION 97]
The definition of advance ruling given under the Act is a broad one. Under GST,
advance ruling can be obtained on a proposed transaction as well as a transaction
already undertaken by the appellant.

Advance Ruling can be sought for the following questions:-

(a) classification of any goods or services or both

(b) applicability of a notification issued under the provisions of CGST Act

(c) determination of time and value of supply of goods or services or both

(d) admissibility of input tax credit of tax paid or deemed to have been paid

(e) determination of the liability to pay tax on any goods or services or both

(f) whether applicant is required to be registered

(g) whether any particular thing done by the applicant with respect to any goods

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 1.4 23.4 GOODS AND SERVICES TAX

or services or both amounts to or results in a supply of goods or services or

both, within the meaning of that term.

Note: Matters which cannot be questioned before AAR are:-

❖ Question already pending in any proceedings in the case of an applicant under
any of the provisions of the Act
❖ Question already decided in any proceedings in the case of an applicant under
any of the provisions of the Act

4. AUTHORITY FOR ADVANCE RULING (AAR)

AND APPELLATE AUTHORITY FOR ADVANCE
RULING (AAAR) [SECTION 96 AND 99]
❖ The Authority for advance ruling constituted under the provisions of State
Goods and Services Tax Act or Union Territory Goods and Services Tax Act
shall be deemed to be the Authority for advance ruling in respect of that State
or Union territory under the CGST Act, 2017 also.
❖ The Government shall appoint officers not below the rank of Joint
Commissioner as member of the Authority for Advance Ruling. [Rule 103]
❖ The Appellate Authority for Advance Ruling constituted under the provisions
of a State Goods and Services Tax Act or a Union Territory Goods and Services
Tax Act shall be deemed to be the Appellate Authority in respect of that State
or Union territory under the CGST Act, 2017 also.
❖ Thus, it can be seen that both the Authority for Advance Ruling (AAR) & the
Appellate Authority for Advance Ruling (AAAR) is constituted under the
respective State/Union Territory Act and not the Central Act. This would
mean that the ruling given by the AAR & AAAR will be applicable only within
the jurisdiction of the concerned state or union territory. It is also for this
reason that questions on determination of place of supply cannot be raised
with the AAR or AAAR.

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 ADVANCE RULING 23.5
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5. PROCEDURE FOR OBTAINING ADVANCE

RULING [SECTION 98]
❖ The applicant desirous of obtaining advance ruling should make an
application to the AAR in a prescribed form and manner (on the common
Portal) and shall be accompanied by a fee of five thousand rupees (` 5,000
each towards CGST and SGST)
❖ The application, verification contained therein and all relevant documents
accompanying such application needs to be signed in the prescribed manner.

❖ Upon receipt of an application, the AAR shall send a copy of application to

the concerned officer and, if necessary, call for all relevant records from the
concerned officer. The relevant records called for by AAR shall be returned to
the concerned Officer, as soon as possible.
❖ The AAR may then examine the application along with the records called for
and after hearing the applicant or his authorized representative will pass an
order either admitting or rejecting the application.
❖ Application for advance ruling will not be admitted in the cases where the
question raised in the application is already pending or decided in any
proceedings in the case of an applicant under any of the provisions of this Act.
❖ If the application is rejected, it should be by way of a speaking order giving
the reasons for rejection and the application shall not be rejected unless an
opportunity of hearing has been given to the applicant.
❖ The copy of Order admitting or rejecting the application shall be sent to the
applicant and to the concerned officer.
❖ On admission of the application, the AAR shall pronounce its ruling within 90
days of receipt of the application. Before giving its ruling, it shall examine the
application and any further material placed before it by the applicant or
obtained by the Authority.
❖ Before pronouncing the Ruling, the AAR provides an opportunity of being
heard to the applicant or his authorized representative as well as the
concerned officer or his authorized representative.

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 1.6 23.6 GOODS AND SERVICES TAX

❖ If there is a difference of opinion between the two members of AAR, they

shall refer the point or points on which they differ to the AAAR for hearing
the issue. If the members of AAAR are also unable to come to a common
conclusion in regard to the point(s) referred to them by AAR, then it shall be
deemed that no advance ruling can be given in respect of the question on
which difference persists at the level of AAAR.
❖ A copy of the advance ruling duly signed by members and certified in
prescribed manner shall be sent to the applicant, the concerned officer and
the jurisdictional officer.

6. APPEALS AGAINST ORDER OF AAR TO THE

APPELLATE AUTHORITY [SECTION 100 AND 101]
❖ If the applicant is aggrieved with the finding of the AAR, he can file an appeal
with AAAR. Similarly, if the concerned or jurisdictional officer of CGST/SGST does
not agree with the finding of AAR, he can also file an appeal with the AAAR.
❖ Any appeal must be filed within 30 days from the receipt of the Order of the
Advance Ruling Authority. The Appellate Authority may allow for an
additional 30 days for filing an appeal, if it is satisfied that there was a
sufficient cause for delay in presenting the appeal.
❖ The appeal has to be in the prescribed form and has to be verified in the
prescribed manner. An appeal has to be filed by the applicant along with fee
of ` 10,000/- each under CGST and SGST Act. However, if the concerned
officer or jurisdictional officer is aggrieved by the decision of AAR, then no
fee is required to be paid.
❖ The appeal, the verification contained therein and all the relevant documents
accompanying such appeal shall be signed-
(a) in the case of the concerned officer or jurisdictional officer, by an officer
authorised in writing by such officer; and
(b) in the case of an applicant, in the specified manner.
❖ The Appellate Authority shall pass an order after hearing the parties to the
appeal within a period of 90 days of the filing of an appeal.
❖ If members of AAAR differ on any point referred to in appeal, it shall be deemed
that no advance ruling can be issued in respect of the question under appeal.

© The Institute of Chartered Accountants of India

 ADVANCE RULING 23.7
a

❖ The said authority can pass such order as it thinks fit, confirming or modifying
the ruling appealed against or referred to by the Advance Ruling Authority in
the case of the difference of opinion.
❖ A copy of the advance ruling pronounced by the Appellate Authority should
be signed by the members, certified in the prescribed manner, and
communicated to the applicant, the concerned officer, the jurisdictional
officers and to the Authority.

7. RECTIFICATION OF MISTAKES [SECTION 102]

❖ The law gives power to AAR and AAAR to amend their order to rectify any
mistake apparent from the record within a period of 6 months from the date
of the order.
❖ Such mistake may be noticed by the authority on its own accord or may be
brought to its notice by the applicant or the concerned or the jurisdictional
officer.
❖ If a rectification has the effect of enhancing the tax liability or reducing the
quantum of input tax credit, the applicant must be heard before the order is
passed.

8. APPLICABILITY OF ADVANCE RULING

[SECTION 103]
❖ An advance ruling pronounced by AAR or AAAR shall be binding only on the
applicant and on the concerned officer or the jurisdictional officer in respect
of the applicant. This clearly means that an advance ruling is not applicable
to similarly placed other taxable persons in the State. It is only limited to the
person who has applied for an advance ruling.
❖ The law does not provide for a fixed time period for which the ruling shall
apply. Instead, it has been provided that advance ruling shall be binding till
the period when the law, facts or circumstances supporting the original
advance ruling have not changed.

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 1.8 23.8 GOODS AND SERVICES TAX

9. ADVANCE RULING TO BE VOID IN CERTAIN

CIRCUMSTANCES [SECTION 104]
❖ Section 104 states the circumstances under which the ruling would be
considered as void and hence would lose its binding value.
❖ If the Authorities (AAR and Appellate Authority) finds that the advance ruling
pronounced has been obtained by the applicant/appellant by fraud or
suppression of material facts or misrepresentation of facts, it may, by order,
declare such ruling to be void ab-initio.
❖ Consequently, all the provisions of the CGST Act shall apply to the applicant
as if such advance ruling had never been made.
❖ An order declaring advance ruling to be void can be passed only after hearing
the applicant / appellant.
❖ The period beginning with the date of such advance ruling and ending with
the date of order shall be excluded while computing the period specified in
sub-sections (2) and (10) of section 73 or sub-sections (2) and (10) of section
74 or sub-sections (2) and (7) of section 74A.
❖ A copy of the order so made shall be sent to the applicant, the concerned
officers and the jurisdictional officer.

10. POWERS AND PROCEDURE OF AAR AND

AAAR [SECTION 105 AND 106]
❖ Both the AAR and AAAR are vested with the powers of a civil court under
Code of Civil Procedure, 1908, for discovery and inspection, enforcing the
attendance of a person and examining him on oath, issuing commissions and
compelling production of books of account and other records.
❖ Both the authorities are deemed to be a civil court for the purposes of section
195 of the Code of Criminal Procedure, 1973. Both the authorities are
however not treated as civil court for the purpose of Chapter XXVI of the
Code of Criminal Procedure, 1973.
❖ Any proceeding before the authority shall be deemed to be judicial
proceeding under section 193 and 228 and for the purpose of section 196, of
the Indian Penal Code, 1860. The AAR and AAAR also have the power to
regulate their own procedure.

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 ADVANCE RULING 23.9
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LET US RECAPITULATE

ADVANCE RULING
Means

Decision provided by
the Authority for on
undertaken or proposed to
advance ruling specified related to supply of
be undertaken by the
/Appellate Authority for matters/ goods and/or services
applicant.
advance ruling to questions
applicant

Questions for which advance ruling can be sought [Section 97]

Classification of any goods and/or services

Questions for seeking advance ruling

Applicability of a notification

Determination of time & value of supply of goods and/or services.

Admissibility of ITC of tax paid or deemed to have been paid.

Determination of the liability to pay tax.

Whether applicant is required to be registered.

Whether any particular thing with respect to goods and/or services

amounts to supply within the meaning of that term.

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 1.10 23.10 GOODS AND SERVICES TAX

PROCEDURE FOR OBTAINING ADVANCE RULING (AR) [SECTION 98]

AAR would send a copy of

The application, verification
Make an application in application to concerned
contained therein and all
prescribed form to the AAR officer and, if necessary, call
relevant documents to be
with fees of Rs. 5000/- each for all relevant records from
signed in prescribed
for CGST and SGST. the concerned officer.
manner.
Records to be returned asap.

Application not be
AAR may examine If application is rejected,
admitted in the cases
application & records and only by way of a speaking
where the question raised
after hearing applicant or order giving the reasons for
is already pending or
his authorized rejection, application not to
decided in any proceedings
representative, pass an be rejected unless an
in the case of an applicant
order either admitting or opportunity of being heard
under any of the provisions
rejecting the application. given to applicant.
of GST law.

Opportunity of being heard

Copy of Order
If application admitted, to be given to
admitting/rejecting the
ruling to be pronounced applicant/authorized
application to be sent to
within 90 days of receipt of representative and
the applicant and to the
the application by AAR. officer/authorized
concerned officer.
representative.

In case of difference of opinion between 2

members of AAR, points to be referred to
AAAR. Copy of the advance ruling duly signed by
members and certified in prescribed manner
• If AAAR also unable to come to a common to be sent to the applicant, the concerned
conclusion in regard to the point(s), it shall officer and the jurisdictional officer.
be deemed that no advance ruling can be
given in respect of that question.

© The Institute of Chartered Accountants of India

 ADVANCE RULING 23.11
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RECTIFICATION OF MISTAKES [SECTION 102]

AAR & AAAR can amend their order within 6 months from date of order.

Such mistake may be noticed by authority on its own or brought to notice

by applicant or the concerned officer /jurisdictional officer.

If tax liability increases or ITC reduces due to such rectification, applicant

must be heard.

APPLICABILITY OF ADVANCE RULING [SECTION 103]

• Binding only on applicant and concerned officer/jurisdictional officer.

Not applicable to similarly placed other taxable persons in the State.
Advance
• ruling
Binding toperiod
till the be void
wheninlaw,
certain circumstances
facts/circumstances supporting the
[section 104]
original advance ruling have not changed.

Copy of
If obtained order to be
It will be
by fraud Order to be sent to
deemed that
/suppression passed only applicant,
such advance
of material after hearing concerned
ruling had
facts/ the applicant/ officers and
never been
misrepresent appellant. the
made.
ation of facts jurisdictional
officer.

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 1.12 23.12 GOODS AND SERVICES TAX

TEST YOUR KNOWLEDGE

1. Which are the questions for which advance ruling can be sought?
2. What is the objective of having a mechanism of Advance Ruling?
3. To whom will the Advance Ruling be applicable?
4. What is the time period for applicability of Advance Ruling?
5. Can an advance ruling given be nullified?
6. Ranjan intends to start selling certain goods in Delhi. However, he is not able
to determine (i) the classification of the goods proposed to be supplied by him
[as the classification of said goods has been contentious] and (ii) the place of
supply if he supplies said goods from Delhi to buyers in U.S.
Ranjan’s tax advisor has advised him to apply for the advance ruling in respect
of these issues. He told Ranjan that the advance ruling would bring him
certainty and transparency in respect of the said issues and would avoid
litigation later. Ranjan agreed with his view, but has some apprehensions.
In view of the information given above, you are required to advise Ranjan with
respect to following:
(i) The tax advisor asks Ranjan to get registered under GST law before
applying for the advance ruling as only a registered person can apply for
the same. Whether Ranjan needs to get registered?
(ii) Ranjan is apprehensive that if at all advance ruling is permitted to be
sought, he has to seek it every year. Whether Ranjan’s apprehension is
correct?
(iii) The tax advisor is of the view that the order of Authority for Advance
Ruling (AAR) is final and is not appealable. Whether the tax advisor’s view
is correct?
(iv) Sambhav - Ranjan’s friend - is a supplier registered in Delhi. He is
engaged in supply of the goods, which Ranjan proposes to supply at the
same commercial level that Ranjan proposes to adopt.
He intends to apply the classification of the goods as decided in the advance
ruling order to be obtained by Ranjan, to the goods supplied by him in Delhi.
Whether Sambhav can do so?

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 ADVANCE RULING 23.13
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7. Briefly explain the procedure to be followed by the Authority for Advance Ruling
on receipt of the application for Advance Ruling under section 98.
8. Briefly explain whether an appeal could be filed before the Appellate Authority
against order of Authority for Advance Ruling (AAR), with reference to
sections 100 and 101.

ANSWERS

1. Advance Ruling can be sought for the following questions:

(a) classification of any goods or services or both;
(b) applicability of a notification issued under provisions of the GST Act(s);
(c) determination of time and value of supply of goods or services or both;
(d) admissibility of input tax credit of tax paid or deemed to have been
paid;
(e) determination of the liability to pay tax on any goods or services under
the Act;
(f) whether applicant is required to be registered under the Act;
(g) whether any particular thing done by the applicant with respect to any
goods or services amounts to or results in a supply of goods or services,
within the meaning of that term.
2. The broad objective for setting up such an authority is to:

(i) provide certainty in tax liability in advance in relation to an activity

being undertaken or proposed to be undertaken by the applicant;
(ii) helps taxpayer in financial planning and making new investments

(iii) attract Foreign Direct Investment (FDI);

(iv) reduce litigation;
(v) pronounce ruling expeditiously in transparent and inexpensive manner.

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 1.14 23.14 GOODS AND SERVICES TAX

3. The advance rulings are given in personem and not in rem, that is, not to the
whole world and therefore, rulings cannot apply to other similar cases.
Section 103 provides that an advance ruling pronounced by AAR or AAAR
shall be binding only on the applicant who sought it in respect of any matter
referred to in section 97(2) and on the jurisdictional tax authority of the
applicant. This clearly means that an advance ruling is not applicable to
similarly placed taxable persons in the State. It is only limited to the person
who has applied for an advance ruling.

4. The law does not provide for a fixed time period for which the ruling shall
apply. Instead, in section 103(2), it is provided that advance ruling shall be
binding till the period when the law, facts or circumstances supporting the
original advance ruling have changed. Thus, a ruling shall continue to be in
force so long as the transaction continues and so long as there is no change
in law, facts or circumstances.

5. Section 104(1) provides that an advance ruling shall be held to be ab initio

void if the AAR or AAAR finds that the advance ruling was obtained by the
applicant by fraud or suppression of material facts or misrepresentation of
facts. In such a situation, all the provisions of the GST Act(s) shall apply to the
applicant as if such advance ruling had never been made. An order declaring
advance ruling to be void can be passed only after hearing the applicant.

6. (i) Advance ruling under GST can be sought by a registered person or a

person desirous of obtaining registration under GST law [Section 95(c)].
Therefore, it is not mandatory for a person seeking advance ruling to
be registered.

(ii) Section 103(2) stipulates that the advance ruling shall be binding unless
the law, facts or circumstances supporting the original advance ruling
have changed. Therefore, once Ranjan has sought the advance ruling
with respect to an eligible matter/question, it will be binding till the
time the law, facts and circumstances supporting the original advance
ruling remain same.

(iii) No, the tax advisor’s view is not correct. As per section 100, if the
applicant is aggrieved with the finding of the AAR, he can file an appeal

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 ADVANCE RULING 23.15
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with Appellate Authority for Advance Ruling (AAAR). Similarly, if the

concerned/ jurisdictional officer of CGST/SGST does not agree with the
findings of AAR, he can also file an appeal with AAAR.

Such appeal must be filed within 30 days from the date on which the
ruling sought to be appealed against is communicated. The Appellate
Authority may allow additional 30 days for filing the appeal, if it is
satisfied that there was a sufficient cause for delay in presenting the
appeal.

(iv) Section 103 provides that an advance ruling pronounced by AAR is

binding only on the applicant who had sought it and on the concerned
officer or the jurisdictional officer in respect of the applicant. This
implies that an advance ruling is not applicable to similarly placed other
taxable persons in the State. It is only limited to the person who has
applied for an advance ruling.

Thus, Sambhav will not be able to apply the classification of the goods
that will be decided in the advance ruling order to be obtained by
Ranjan, to the goods supplied by him in Delhi.

7. The procedure to be followed by the Authority for Advance Ruling (AAR) on

receipt of the application for advance ruling under section 98 is as under:-

1. Upon receipt of an application, the AAR shall send a copy of application

to the officer in whose jurisdiction the applicant falls and call for all
relevant records.

2. The AAR may then examine the application along with the records and
may also hear the applicant. Thereafter he will pass an order either
admitting or rejecting the application.

3. Application for advance ruling will not be admitted in cases where the
question raised in the application is already pending or decided in any
proceedings in the case of an applicant under any of the provisions of
this Act.

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4. If the application is rejected, it should be by way of a speaking order

giving the reasons for rejection and only after giving an opportunity of
being heard to the applicant.

5. If the application is admitted, the AAR shall pronounce its ruling on the
question specified in the application. Before giving its ruling, it shall
examine the application and any further material furnished by the
applicant or by the concerned departmental officer.

6. Before giving the ruling, AAR must hear the applicant or his authorized
representative as well as the jurisdictional officers of CGST/ SGST.

7. If there is a difference of opinion between the two members of AAR,

they shall refer the point or points on which they differ to the Appellate
Authority for hearing the issue

8. The Authority shall pronounce its advance ruling in writing within 90

days from the date of receipt of application.

9. A copy of the advance ruling duly signed by members and certified in

prescribed manner shall be sent to the applicant, the concerned officer
and the jurisdictional officer.

8. Yes, the concerned officer, jurisdictional officer or applicant aggrieved by any

advance ruling may appeal to the Appellate Authority for Advance Ruling
(AAAR) within 30 days [extendible by another 30 days] from the date on which
such ruling is communicated to him in the prescribed form and manner.

The AAAR must pass an order confirming or modifying the ruling appealed
against within a period of 90 days of the filing of an appeal, after hearing the
parties to the appeal.

If members of AAAR differ on any point referred to in appeal, it shall be

deemed that no advance ruling can be issued in respect of the question under
appeal. A copy of the advance ruling pronounced by the AAAR is sent to
applicant, concerned officer, jurisdictional officer and to the Authority.

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 ADVANCE RULING 23.17
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AMENDMENTS MADE VIDE THE FINANCE (NO. 2)

ACT, 2019
The Finance (No. 2) Act, 2019 had come into force from 01.08.2019. However, the
amendments made in the advance ruling provisions of the CGST Act vide the
Finance (No. 2) Act, 2019 would become effective only from a date to be notified
by the Central Government in the Official Gazette. Such a notification has not been
issued till 30.04.2025. Therefore, applicability or otherwise of such amendment for
May 2026, September 2026 and/or January 2027 examinations shall be informed
by the ICAI by way of an announcement.
In the table given below, the relevant existing provisions of the advance ruling are
compared with the provisions as amended by the Finance (No. 2) Act, 2019.
Once the announcement for applicability of such amendments for examination(s)
is made by the ICAI, students should read the amended provisions given hereunder
in place of the related provisions discussed in the Chapter.

Existing provisions Provisions as amended Remarks

by the Finance (No. 2)
Act, 2019

Section 95(a) Section 95(a) New clause (f) is

“advance ruling” means a “advance ruling” means a being inserted in
decision provided by the decision provided by the section 95 of the
Authority or the Appellate Authority or the Appellate CGST Act to define
Authority to an applicant on Authority or the National the “National
matters or on questions Appellate Authority to an Appellate Authority
specified in sub-section (2) applicant on matters or on for Advance Ruling”.
of section 97 or sub-section questions specified in sub- Definition of advance
(1) of section 100, in relation section (2) of section 97 or ruling is being
to the supply of goods or sub-section (1) of section amended to provide
services or both being 100 or of section 101C, in that the decision
undertaken or proposed to relation to the supply of given by the National
be undertaken by the goods or services or both Appellate Authority
applicant; being undertaken or will also be an
proposed to be undertaken advance ruling.
by the applicant;

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New clause (f) in section 95

National Appellate Authority” means the National

Appellate Authority for Advance Ruling referred to in
section 101A.

New section 101A: Constitution of National Appellate New sections 101A,

Authority for Advance Ruling 101B and 101C are
being inserted in the
(1) The Government shall, on the recommendations CGST Act so as to
of the Council, by notification, constitute, with effect provide for
from such date as may be specified therein, an constitution,
Authority known as the National Appellate Authority qualification,
for Advance Ruling for hearing appeals made under appointment, tenure,
section 101B. conditions of
(2) The National Appellate Authority shall consist of- services of the
(i) the President, who has been a Judge of the National Appellate
Supreme Court or is or has been the Chief Justice of a Authority for
High Court, or is or has been a Judge of a High Court Advance Ruling; to
for a period not less than five years; provide for
(ii) a Technical Member (Centre) who is or has been a procedures to be
member of Indian Revenue (Customs and Central followed for hearing
Excise) Service, Group A, and has completed at least appeals against
fifteen years of service in Group A; conflicting advance
(iii) a Technical Member (State) who is or has been an rulings pronounced
officer of the State Government not below the rank of on the same
Additional Commissioner of Value Added Tax or the question by the
Additional Commissioner of State tax with at least Appellate Authorities
three years of experience in the administration of an of two or more States
existing law or the State Goods and Services Tax Act or or Union territories
in the field of finance and taxation. in case of distinct
(3) The President of the National Appellate Authority persons; and to
shall be appointed by the Government after provide that the
consultation with the Chief Justice of India or his National Appellate
nominee : Authority shall pass
order within a period
Provided that in the event of the occurrence of any
of ninety days from
vacancy in the office of the President by reason of his
the date of filing of
death, resignation or otherwise, the senior most

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 ADVANCE RULING 23.19
a

Member of the National Appellate Authority shall act the appeal

as the President until the date on which a new respectively.
President, appointed in accordance with the provisions
of this Act to fill such vacancy, enters upon his office :
Provided further that where the President is unable to
discharge his functions owing to absence, illness or any
other cause, the senior most Member of the National
Appellate Authority shall discharge the functions of the
President until the date on which the President resumes
his duties.
(4) The Technical Member (Centre) and Technical
Member (State) of the National Appellate Authority
shall be appointed by the Government on the
recommendations of a Selection Committee consisting
of such persons and in such manner as may be
prescribed.
(5) No appointment of the Members of the National
Appellate Authority shall be invalid merely by the
reason of any vacancy or defect in the constitution of
the Selection Committee.
(6) Before appointing any person as the President or
Members of the National Appellate Authority, the
Government shall satisfy itself that such person does
not have any financial or other interests which are likely
to prejudicially affect his functions as such President or
Member.
(7) The salary, allowances and other terms and
conditions of service of the President and the Members
of the National Appellate Authority shall be such as
may be prescribed :
Provided that neither salary and allowances nor other
terms and conditions of service of the President or
Members of the National Appellate Authority shall be
varied to their disadvantage after their appointment.
(8) The President of the National Appellate Authority
shall hold office for a term of three years from the date
on which he enters upon his office, or until he attains

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 1.20 23.20 GOODS AND SERVICES TAX

the age of seventy years, whichever is earlier and shall

also be eligible for reappointment.
(9) The Technical Member (Centre) or Technical
Member (State) of the National Appellate Authority
shall hold office for a term of five years from the date
on which he enters upon his office, or until he attains
the age of sixty-five years, whichever is earlier and shall
also be eligible for reappointment.
(10) The President or any Member may, by notice in
writing under his hand addressed to the Government,
resign from his office :
Provided that the President or Member shall continue
to hold office until the expiry of three months from the
date of receipt of such notice by the Government, or
until a person duly appointed as his successor enters
upon his office or until the expiry of his term of office,
whichever is the earliest.
(11) The Government may, after consultation with the
Chief Justice of India, remove from the office such
President or Member, who -
(a) has been adjudged an insolvent; or
(b) has been convicted of an offence which, in the
opinion of such Government involves moral turpitude;
or
(c) has become physically or mentally incapable of
acting as such President or Member; or
(d) has acquired such financial or other interest as is
likely to affect prejudicially his functions as such
President or Member; or
(e) has so abused his position as to render his
continuance in office prejudicial to the public interest:
Provided that the President or the Member shall not be
removed on any of the grounds specified in clauses (d)
and (e), unless he has been informed of the charges
against him and has been given an opportunity of
being heard.

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 ADVANCE RULING 23.21
a

(12) Without prejudice to the provisions of sub-

section (11), the President and Technical Members of
the National Appellate Authority shall not be removed
from their office except by an order made by the
Government on the ground of proven misbehaviour or
incapacity after an inquiry made by a Judge of the
Supreme Court nominated by the Chief Justice of India
on a reference made to him by the Government and
such President or Member had been given an
opportunity of being heard.
(13) The Government, with the concurrence of the
Chief Justice of India, may suspend from office, the
President or Technical Members of the National
Appellate Authority in respect of whom a reference has
been made to the Judge of the Supreme Court under
sub-section (12).
(14) Subject to the provisions of article 220 of the
Constitution, the President or Members of the National
Appellate Authority, on ceasing to hold their office,
shall not be eligible to appear, act or plead before the
National Appellate Authority where he was the
President or, as the case may be, a Member.

New section 101B: Appeal to National Appellate

Authority

(1) Where, in respect of the questions referred to in

sub-section (2) of section 97, conflicting Advance
Rulings are given by the Appellate Authorities of two
or more States or Union territories or both under sub-
section (1) or sub-section (3) of section 101, any officer
authorised by the Commissioner or an applicant, being
distinct person referred to in section 25 aggrieved by
such advance ruling, may prefer an appeal to National
Appellate Authority :
Provided that the officer shall be from the States in
which such advance rulings have been given.

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 1.22 23.22 GOODS AND SERVICES TAX

(2) Every appeal under this section shall be filed

within a period of thirty days from the date on which
the ruling sought to be appealed against is
communicated to the applicants, concerned officers
and jurisdictional officers :
Provided that the officer authorised by the
Commissioner may file appeal within a period of ninety
days from the date on which the ruling sought to be
appealed against is communicated to the concerned
officer or the jurisdictional officer :
Provided further that the National Appellate Authority
may, if it is satisfied that the appellant was prevented
by a sufficient cause from presenting the appeal within
the said period of thirty days, or as the case may be,
ninety days, allow such appeal to be presented within a
further period not exceeding thirty days.
Explanation. - For removal of doubts, it is clarified that
the period of thirty days or as the case may be, ninety
days shall be counted from the date of communication
of the last of the conflicting rulings sought to be
appealed against.
(3) Every appeal under this section shall be in such
form, accompanied by such fee and verified in such
manner as may be prescribed.

New section 101C: Order of National Appellate

Authority

(1) The National Appellate Authority may, after

giving an opportunity of being heard to the applicant,
the officer authorised by the Commissioner, all
Principal Chief Commissioners, Chief Commissioners of
Central tax and Chief Commissioner and Commissioner
of State tax of all States and Chief Commissioner and
Commissioner of Union territory tax of all Union
territories, pass such order as it thinks fit, confirming or
modifying the rulings appealed against.

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(2) If the members of the National Appellate

Authority differ in opinion on any point, it shall be
decided according to the opinion of the majority.
(3) The order referred to in sub-section (1) shall be
passed as far as possible within a period of ninety days
from the date of filing of the appeal under section
101B.
(4) A copy of the Advance Ruling pronounced by the
National Appellate Authority shall be duly signed by
the Members and certified in such manner as may be
prescribed and shall be sent to the applicant, the officer
authorised by the Commissioner, the Board, the Chief
Commissioner and Commissioner of State tax of all
States and Chief Commissioner and Commissioner of
Union territory tax of all Union territories and to the
Authority or Appellate Authority, as the case may be,
after such pronouncement.

Section 102 Section 102 Section 102 of the

The Authority or the The Authority or the CGST Act is being
Appellate Authority may Appellate Authority or the amended so as to
amend any order passed by National Appellate allow the National
it under section 98 or Authority may amend any Appellate Authority
section 101, so as to rectify order passed by it under to amend any order
any error apparent on the section 98 or section 101 or passed by it so as to
face of the record, if such section 101C, respectively, rectify any error
error is noticed by the so as to rectify any error apparent on the face
Authority or the Appellate apparent on the face of the of the record, within
Authority on its own accord, record, if such error is a period of six
or is brought to its notice by noticed by the Authority or months from the
the concerned officer, the the Appellate Authority or date of the order,
jurisdictional officer, the the National Appellate except under certain
applicant or the appellant Authority on its own specified
within a period of six accord, or is brought to its circumstances.
months from the date of the notice by the concerned
order: officer, the jurisdictional
officer, the applicant,
appellant, the Authority or

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 1.24 23.24 GOODS AND SERVICES TAX

the Appellate Authority

within a period of six
months from the date of the
order:

New sub-section (1A) of section 103

(1A) The Advance Ruling pronounced by the National Section 103 of the
Appellate Authority under this Chapter shall be binding CGST Act is being
on - amended so as to
(a) the applicants, being distinct persons, who had provide that the
sought the ruling under sub-section (1) of section 101B advance ruling
and all registered persons having the same Permanent pronounced by the
Account Number issued under the Income-tax Act, National Appellate
1961 (43 of 1961); Authority shall be
(b) the concerned officers and the jurisdictional binding, unless there
officers in respect of the applicants referred to in clause is a change in law or
(a) and the registered persons having the same facts, on the
Permanent Account Number issued under the Income- applicants, being
tax Act, 1961. distinct person and
all registered
Section 103(2) Section 103(2) persons having the
The advance ruling referred The advance ruling referred same Permanent
to in sub-section (1) shall be to in sub-section (1) and Account Number and
binding unless the law, facts sub-section (1A) shall be on the concerned
or circumstances supporting binding unless the law, facts officers or the
the original advance ruling or circumstances supporting jurisdictional officers
have changed. the original advance ruling in respect of the said
have changed. applicants and the
registered persons
having the same
Permanent Account
Number.

Section 104(1) Section 104(1) Section 104 of the

Where the Authority or the Where the Authority or the CGST Act is being
Appellate Authority finds Appellate Authority or the amended so as to
that advance ruling National Appellate provide that advance
pronounced by it under Authority finds that ruling pronounced

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 ADVANCE RULING 23.25
a

sub-section (4) of section 98 advance ruling pronounced by the National

or under sub-section (1) of by it under sub-section (4) Appellate Authority
section 101 has been of section 98 or under sub- shall be void where
obtained by the applicant or section (1) of section 101 or the ruling has been
the appellant by fraud or under section 101C has obtained by fraud or
suppression of material been obtained by the suppression of
facts or misrepresentation applicant or the appellant material facts or
of facts, it may, by order, by fraud or suppression of misrepresentation of
declare such ruling to be material facts or facts.
void ab-initio and misrepresentation of facts, it
thereupon all the provisions may, by order, declare such
of this Act or the rules made ruling to be void ab-initio
thereunder shall apply to and thereupon all the
the applicant or the provisions of this Act or the
appellant as if such advance rules made thereunder shall
ruling had never been made: apply to the applicant or the
appellant as if such advance
ruling had never been made:

Section 105: Powers of Section 105: Powers of Section 105 of the

Authority and Appellate Authority, Appellate CGST Act is being
Authority Authority and National amended so as to
(1) The Authority or the Appellate Authority provide that the
Appellate Authority shall, for
(1) The Authority or the National Appellate
the purpose of exercising its
Appellate Authority or the Authority shall have
powers regarding— National Appellate all the powers of a
(a) discovery Authority shall, for the
and civil court under the
inspection; purpose of exercising its Code of Civil
Procedure, 1908 for
(b) enforcing the powers regarding—
the purpose of
attendance of any person (a) discovery and
inspection; exercising its powers
and examining him on oath;
under the Act.
(c) issuing commissions (b) enforcing the
and compelling production attendance of any person
of books of account and and examining him on oath;
other records, (c) issuing commissions
have all the powers of a civil and compelling production
court under the Code of Civil of books of account and
Procedure, 1908. other records,

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 1.26 23.26 GOODS AND SERVICES TAX

(2) The Authority or the have all the powers of a civil

Appellate Authority shall be court under the Code of Civil
deemed to be a civil court Procedure, 1908.
for the purposes of section (2) The Authority or the
195, but not for the Appellate Authority or the
purposes of Chapter XXVI of National Appellate
the Code of Criminal Authority shall be deemed
Procedure, 1973, and every to be a civil court for the
proceeding before the purposes of section 195, but
Authority or the Appellate not for the purposes of
Authority shall be deemed Chapter XXVI of the Code of
to be a judicial proceedings Criminal Procedure, 1973,
within the meaning of and every proceeding
sections 193 and 228, and before the Authority or the
for the purpose of section Appellate Authority shall be
196 of the Indian Penal deemed to be a judicial
Code. proceedings within the
meaning of sections 193
and 228, and for the
purpose of section 196 of
the Indian Penal Code.

Section 106: Procedure of Section 106: Procedure of Section 106 of the

Authority and Appellate Authority, Appellate CGST Act is being
Authority. Authority and National amended so as to
The Authority or the Appellate Authority. provide that the
Appellate Authority shall, The Authority or the National Appellate
subject to the provisions of Appellate Authority or the Authority shall have
this Chapter, have power to National Appellate power to regulate its
regulate its own procedure. Authority shall, subject to own procedure.
the provisions of this
Chapter, have power to
regulate its own procedure.

© The Institute of Chartered Accountants of India

CHAPTER 24

MISCELLANEOUS
PROVISIONS
The words ‘the Act’ wherever used in the Chapter refer to the CGST Act, unless otherwise
specified. The section numbers referred to in the Chapter pertain to CGST Act, unless
otherwise specified. Examples/Illustrations/Questions and Answers, as the case may be,
given in the Chapter are based on the position of GST law existing as on 30.04.2025.

LEARNING OUTCOMES
After studying this Chapter, you will be able to–
 understand and explain the miscellaneous provisions relating to
documents namely, presumption as to documents in certain cases,
admissibility of microfilms, facsimile copies of documents and
computer printouts as documents and as evidence etc.
 understand and explain the miscellaneous provisions relating to
furnishing, collection and publication of information namely, bar on
disclosure of information, disclosure of information by a public servant,
publication of information in respect of person in certain cases etc.
 understand and explain the miscellaneous provisions relating to
removal of difficulties, delegation of powers, omission repeal and
saving and other provisions
 appreciate and explain the provisions relating to administration of
CGST and IGST.

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 1.2 24.2 GOODS AND SERVICES TAX

1. INTRODUCTION
Chapter XXI of the CGST Act and Chapter IX of the IGST Act contain the
miscellaneous provisions. State GST laws also prescribe identical miscellaneous
provisions. Following provisions of said chapters have been discussed in this
Chapter:

Chapter XXI of the CGST Act: Miscellaneous

Category Section Particulars

Documents 144 Presumption as to documents in certain cases

145 Admissibility of micro films, facsimile copies of

documents and computer printouts as documents
and as evidence

Furnishing, 150 Obligation to furnish information return 1

collection and
publication of 151 Power to call for information
information
152 Bar on disclosure of information

158 Disclosure of information by a public servant

158A Consent based sharing of information furnished by

taxable person

159 Publication of information in respect of persons in

certain cases

Removal of 153 Taking assistance from an expert

difficulties
160 Assessment proceedings, etc., not to be invalid on
certain grounds

161 Rectification of errors apparent on the face of

record

1
Section 150 is discussed in Chapter 13: Returns in Module 2 of this Study Material.

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 MISCELLANEOUS PROVISIONS 24.3

170 Rounding off of tax, etc.

172 Removal of difficulties

Delegation of 164 Power of Government to make rules

powers
165 Power to make regulations

166 Laying of rules, regulations and notifications

167 Delegation of powers

168 Power to issue instructions or directions

Omission and 173 Amendment of Act 32 of 1994

repeal of
earlier laws 174 Repeal and saving

Other 143 Job work procedure 2

provisions
146 Common Portal

147 Deemed Exports 3

148 Special procedure for certain processes

149 Goods and services tax compliance rating

154 Power to take samples

155 Burden of proof

156 Persons deemed to be public servants

157 Protection of action taken under this Act

162 Bar on jurisdiction of civil courts

2
Section 143 is discussed in Chapter 16: Job Work in this Module of the Study Material.
3
Section 147 is discussed in Chapter 14: Import and Export under GST in this Module of the Study
Material.

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 1.4 24.4 GOODS AND SERVICES TAX

163 Levy of fee

169 Service of notice in certain circumstances

171 Anti-profiteering measure

Chapter VIII of the IGST Act: Apportionment of Tax and Settlement of

Funds & Chapter IX of the IGST Act: Miscellaneous

Apportionment 17 Apportionments of tax and settlement of funds

and settlement
18 Transfer of input tax credit

19 Tax wrongfully collected and paid to Central

Government or State Government

Removal of 20 Application of provisions of Central Goods and

difficulties Services tax Act

25 Removal of difficulties

Delegation of 22 Power to make rules

powers
23 Power to make regulations

24 Laying of rules, regulations and notifications

Other 21 Import of services made on or after the appointed

provisions day

Apart from the above provisions, provisions of Chapter II: Administration [Sections
3-6] of the CGST Act and the manner of determination of commencement and
termination of time as per section 9 of the General Clauses Act, have also been
discussed in this Chapter.

Miscellaneous provisions under Chapter XXI of the CGST Act have also been
made applicable to IGST Act vide section 20 of the IGST Act.

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 MISCELLANEOUS PROVISIONS 24.5

Documents

2. PRESUMPTION AS TO DOCUMENTS IN
CERTAIN CASES [SECTION 144]
Presumption generally means ‘an act of accepting that something is true until it is
proved not true’. Section 144 lays down presumptions that are taken cognizance
of by the Court when certain documents (given below in the diagram) are submitted
as evidence by the prosecution in a proceeding under the GST law against any
person.

Documents

Produced by any Seized from the custody Received from any

person under the CGST or control of any person place outside India in
Act or any other law under the CGST Act or the course of any
any other law proceedings

Tendered by the prosecution in evidence against such person or

any other person who is tried jointly with such person.

As per the Evidence Act, 1872, the contents of a

document must be proved by evidence and
signature or handwriting of a person on the
document must be proved to be of the person of
whom it is alleged to be. Further, a document which
is required by law to be attested shall not be used
as evidence until at least one attesting witness has
been called for the purpose of proving its execution,
except in certain cases.

Section 144 enables the court of law to make departure from the above general
principles, in respect of the documents given in the diagram above, and presume:
 truth of the contents of the document

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 1.6 24.6 GOODS AND SERVICES TAX

 that the signature which purports to be in the handwriting of any particular

person is in that person’s handwriting
 execution or attestation in the document has been made by the person by
whom it purports to have been so executed or attested
This implies that in case of such documents, if the said person claims that the
document is not true or not signed or handwritten by him or not attested or
executed by him, the burden of proof in respect of the same shall lie on him.
Further, the Stamp Act, 1899 provides that a document which is not duly stamped
shall be inadmissible in evidence. However, section 144 allows the Court to depart
from such general provision by providing that a document shall be admissible in
evidence even if it is not duly stamped.

3. ADMISSIBILITY OF MICRO FILMS, FACSIMILE

COPIES OF DOCUMENTS AND COMPUTER
PRINTOUTS AS DOCUMENTS AND AS
EVIDENCE [SECTION 145]
‘Document’ has been defined in section 2(41) of the CGST Act to include written or
printed record of any sort and electronic record as defined in the Information
Technology Act, 2000.
Deemed documents

Deemed Documents

Computer Information stored

Micro film Fascimile copy
printout electronically

As per section 145(1), the following shall be deemed as ‘documents’:

 A micro film of a document or the reproduction of the image(s) embodied
in such micro film, whether enlarged or not;

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 MISCELLANEOUS PROVISIONS 24.7

Microfilms are films containing microphotographs of a document. Such

images are generally provided as negatives.

 A facsimile copy of a document;

A facsimile is a copy or reproduction of a document that is as true to the

original source as possible. An exact copy of a document is a facsimile.

 A statement contained in a document and included in a printed material

produced by a computer;

 Information stored electronically in any device or media, including any

hard copies made of such information.

It refers to the information stored in digital form, which requires the use
of computer hardware and software. Also, such information is normally
created and altered in the digital form. This category would include the
information stored in ERP systems that are employed by most businesses
presently. It also includes printouts of such digital information.

Such documents shall be admissible in any proceedings under the Act, without
further proof or production of the original, as evidence of any contents of the
original or of any fact stated therein of which direct evidence would be admissible.
Certification
As per section 145(2), a certificate,—

(a) identifying the document containing the statement and describing the
manner in which it was produced;

(b) giving such particulars of any device involved in the production of that
document as may be appropriate for the purpose of showing that the
document was produced by a computer,

shall constitute evidence of any matter stated in the certificate.

It may be noted that it shall be sufficient for a matter to be stated to the best of
the knowledge and belief of the person stating it.

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 1.8 24.8 GOODS AND SERVICES TAX

Furnishing, Collection and Publication of

Information

4. POWER TO CALL FOR INFORMATION & BAR

ON DISCLOSURE OF INFORMATION
[SECTIONS 151 & 152]
Section 151 lays down as under:
 The Commissioner or an officer authorised by him
may, by an order, direct any person to furnish
information.
 Information may be sought relating to any matter dealt
with in connection with this Act, within such time, in
such form, and in such manner, as may be specified
therein.
Bar on disclosure of information [Section 152]
 No information with respect to any matter given for the purposes of sections
150 or 151 shall, without the previous consent in writing of the concerned
person or his authorised representative, be published in such manner as to
enable any particulars to be identified as referring to a particular person
without giving an opportunity of being heard to the person concerned.
 No such information shall be used for the purpose of any proceedings under
the Act without giving an opportunity of being heard to the person concerned.
Exception reporting
No restriction shall apply to the publication of any information relating to a class
of taxable persons or class of transactions, if in the opinion of the Commissioner, it
is desirable in the public interest, to publish such information.

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 MISCELLANEOUS PROVISIONS 24.9

5. DISCLOSURE OF INFORMATION BY A PUBLIC

SERVANT [SECTION 158]
Section 158 lays down the provisions for disclosure of information by a public
servant as also maintaining the confidentiality of the same and related penal
provisions in the event of contravention of the same.
(i) Information/ documents to be treated as confidential [Section 158(1)]
The following shall be treated as confidential:
(i) all particulars contained in any statement made, return furnished or
accounts or documents produced in accordance with the Act, or
(ii) all particulars contained in any record of evidence given in the course
of any proceedings under the Act (other than proceeding before a
Criminal Court), or
(iii) all particulars contained in any record of any proceedings under the Act.
(ii) Exceptions to section 158(1) - Particulars that can be disclosed [Section
158(3)]
Section 158(3) lays down that notwithstanding anything contained in section
158, the following information may be disclosed:
• For prosecution: Any particulars in respect of any such statement,
return, accounts, documents, evidence, affidavit or deposition, for the
purpose of any prosecution under the Indian Penal Code or the
Prevention of Corruption Act, 1988, or the Act, or any other law for the
time being in force; or
• For carrying out the objects of the Act: Any particulars to the Central
Government or the State Government or to any person acting in the
implementation of the Act, for the purpose of carrying out the object
of the Act; or
• For service of notice or recovery of demand: Any particulars when
such disclosure is occasioned by the lawful exercise under the Act of
any process for the service of any notice or the recovery of any demand;
or

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1.10 GOODS AND SERVICES TAX

• For furnishing information to Court in a proceeding where

Government is a party: Any particulars to a Civil Court in any suit or
proceeding, to which the Government or any authority under the Act is
a party, which relates to any matter arising out of any proceeding under
the Act or under any other law for the time being in force authorising
any such authority to exercise any powers thereunder; or
• For audit of tax receipts or refunds: Any particulars to any officer
appointed for the purpose of audit of tax receipts or refunds of the tax
imposed by the Act; or
• For inquiry into the conduct of GST officer: Any particulars where
such particulars are relevant the purposes of any inquiry into the
conduct of any GST officer, to any person or persons appointed as an
inquiry officer under any relevant law; or
• For enabling levy/realisation of any tax or duty: Any such particulars
to an officer of the Central Government/ by a public servant/ statutory
authority/ State Government, as may be necessary for the purpose of
enabling that Government to levy or realise any tax or duty; or
• By lawful exercise of powers: Any particulars, when such disclosure is
occasioned by the lawful exercise by a public servant or any other
statutory authority, of his or its powers under any law for the time being
in force; or
• For inquiry into a charge of misconduct by any professional: Any
particulars relevant to any inquiry into a charge of misconduct in
connection with any proceedings under the Act against a practising
advocate, a tax practitioner, a practising cost accountant, a practising
chartered accountant, a practising company secretary to the authority
empowered to take disciplinary action against the members practising
the profession of a legal practitioner, a cost accountant, a chartered
accountant or a company secretary, as the case may be; or
• For data entry on automated system: Any particulars to any agency
appointed for the purposes of data entry on any automated system or
for the purpose of operating, upgrading or maintaining any automated
system where such agency is contractually bound not to use or disclose
such particulars except for the aforesaid purposes; or

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 MISCELLANEOUS PROVISIONS 24.11

• For any other law: Any particulars to an officer of the Government as

may be necessary for the purposes of any other law in force in India;
and
• In public interest: Any information relating to any class of taxpayers
or class of transactions for publication, if, in the opinion of the
Commissioner, it is desirable in the public interest, to publish such
information.
(iii) Restriction on Courts [Section 158(2)]
Section 158(2) overrides the provisions contained in the Indian Evidence Act,
1872. It states that Court shall not require any GST officer to produce before
it or to give evidence before it in respect of the particulars referred to in
section 158(1). However, this restriction will not apply in respect of
disclosures mentioned under sub-section (3).

6. CONSENT BASED SHARING OF

INFORMATION FURNISHED BY TAXABLE
PERSON. [SECTION 158A]
 The following details furnished by a registered person may, be shared by the
common portal with such other systems as may be notified by the
Government, in the prescribed manner and subject to prescribed conditions
namely:—

(a) particulars furnished in the application for registration under

section 25 or in the return filed under section 39 or under section
44 [Annual Return];

(b) the particulars uploaded on the common portal for preparation of

invoice, the details of outward supplies furnished under section 37
and the particulars uploaded on the common portal for generation
of documents under section 68 [Inspection of goods in
movement];

(c) such other details as may be prescribed.

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1.12 GOODS AND SERVICES TAX

 For the purposes of sharing details, the consent shall be obtained, of—

(a) the supplier, in respect of details furnished above and

(b) the recipient, in respect of details furnished under (b), and under (c)
only where such details include identity information of the recipient,

in the prescribed form and manner.

 No action shall lie against the Government or the common portal with respect
to any liability arising consequent to information shared under this section.
 There shall be no impact on the liability to pay tax on the relevant supply or
as per the relevant return.
 This section overrides the following sections:-

Section No.

133 Liability of officers and certain other persons

152 Bar on disclosure of information

158 Disclosure of information by a public servant

The said provision is implemented by rule 163 which provides that where a
registered person opts to share the information furnished in—
(a) application for registration in Form GST REG-01 as amended from time
to time;
(b) return in Form GSTR-3B for certain tax periods;
(c) Form GSTR-1, as amended in Form GSTR-1A if any, for certain tax
periods, pertaining to invoices, debit notes and credit notes issued by
him, as amended from time to time**,
with a system referred to in section 158A(1) (hereinafter referred to as
"requesting system"), the requesting system shall obtain the consent of the
said registered person for sharing of such information and shall communicate
the consent along with the details of the tax periods, where applicable, to the
common portal.

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**The registered person shall give his consent for sharing of information
furnished in Form GSTR-1 above only after he has obtained the consent of all
the recipients, to whom he has issued the invoice, credit notes and debit
notes during the said tax periods, for sharing such information with the
requesting system and where he provides his consent, the consent of such
recipients shall be deemed to have been obtained.
The common portal shall communicate the information referred in this rule
with the requesting system on receipt from the said system-

(a) the consent of the said registered person, and

(b) the details of the tax periods or the recipients, as the case may be, in
respect of which the information is required.
Central Government has notified following as the systems with which
information may be shared by the common portal based on consent:-
(1) Account Aggregator
(2) Public Tech Platform for Frictionless Credit
“Account Aggregator” means an NBFC which undertakes the business of an
Account Aggregator in accordance with the policy directions issued by the
RBI 4 and defined as such in the NBFC-Account Aggregator (Reserve Bank)
Directions, 2016.
“Public Tech Platform for Frictionless Credit” means an enterprise-grade open
architecture information technology platform, conceptualised by the Reserve
Bank of India as part of its “Statement on Developmental and Regulatory
Policies” dated the 10th August, 2023 and developed by its wholly owned
subsidiary, Reserve Bank Innovation Hub, for the operations of a large
ecosystem of credit, to ensure access of information from various data
sources digitally and where the financial service providers and multiple data
service providers converge on the platform using standard and protocol
driven architecture, open and shared Application Programming Interface
(API) framework.

4
under section 45JA of the Reserve Bank of India (RBI) Act, 1934

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1.14 GOODS AND SERVICES TAX

This provision can be helpful in many cases as follows –

(a) where the recipient of goods or services wants to confirm whether
supplier of goods or services has filed returns and has paid the tax. This
is because if the supplier does not pay tax, recovery can be made from
recipient. In such cases, after obtaining consent from supplier, the
recipient can check whether supplier as filed returns and paid taxes,
before releasing his payment. At present, there is no mechanism by
which recipient can know whether supplier has paid the taxes and filed
returns
(b) This provision will also be helpful to buyer for vendor registration,
rating of vendors and verifying credentials of vendors
(c) Suppliers of goods and services can judge credit worthiness of recipient,
before extending him credit.
(d) Bankers can use this provision while making assessment of loan
applications.

7. PUBLICATION OF INFORMATION IN
RESPECT OF PERSONS IN CERTAIN CASES
[SECTION 159]
Section 159 confers powers on the Commissioner for publishing names and other
particulars of persons in certain cases.

What type of information can The name of any person and any other
be published? particulars relating to any proceedings or
prosecutions under the Act in respect of such
person.

Who can publish such Commissioner, or any other officer authorised

information? by him in this behalf

What is the manner of The information shall be published in such

publication of information? manner as the Commissioner/authorised
officer thinks fit.

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When can the information be Such information shall be published if

published? Commissioner/any other officer authorised by
him in this behalf is of the opinion that it is
necessary/expedient in public interest to do so.

Is there any additional In cases of firm, company or association of

information which can be persons, names of the partners of the firm,
published? directors, managing agents, secretaries and
treasures or managers of the company, or the
members of the association, as the case may
be may also be published, if in the opinion of
the Commissioner/authorised officer,
circumstances of the case justify it.

What is the limitation on No publication under this section shall be

publication of information made in relation to any penalty imposed under
relating to penalty? the Act:
• until the time for presenting an appeal to
the Appellate Authority under section 107
has expired (three months extendable to
further one month) without an appeal
having been presented; or
• the appeal, if presented, has been disposed
of.

8. TAKING ASSISTANCE FROM AN EXPERT

[SECTION 153]
Section 153 enables an officer, not below the rank of Assistant commissioner, to
take assistance of any expert at any stage of scrutiny, inquiry, investigation or any
other proceedings before him. It may be noted that such decision shall be taken
having regard to the nature and complexity of the case and the interest of revenue.
(1) An IT professional’s assistance may be sought where the officer is of
the view that information pertaining to a taxable person stored on a
computer system does not reveal correct details.

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1.16 GOODS AND SERVICES TAX

9. ASSESSMENT PROCEEDINGS, ETC. NOT TO

BE INVALID ON CERTAIN GROUNDS
[SECTION 160]
Sometimes, proceedings are challenged for their validity merely for reasons of
mistakes etc. This provision aims at saving the proceedings from such challenges.

Which proceedings are covered The following proceedings done, accepted,

under this provision? made, issued, initiated, or purported to
have been done, accepted, made, issued,
initiated in pursuance of any provisions of
the Act are covered:
• Assessment
• Re-assessment
• Adjudication
• Review
• Revision
• Appeal
• Rectification
• Notice
• Summons
• Other proceedings

On which grounds, will such Such proceedings shall not be held invalid
proceedings be not held as for mere reason of:
invalid? • Mistake
• Defect
• Omission
if such proceedings are in substance and
effect in conformity with or according to
the intents, purposes and requirements of
the Act or any earlier law.

When will the service of any The service of any

notice, order, or communication

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be not called in question? • Notice

• Order
• Communication
shall not be called in question if:
• the notice, order or communication has
already been acted upon by the person
to whom it is issued or
• where such service has not been called
in question at or in the earliest
proceedings commenced, continued or
finalised pursuant to such notice,
communication or order.

10. RECTIFICATION OF ERRORS APPARENT ON

THE FACE OF RECORD [SECTION 161]
Section 161 provides for rectification of mistakes/errors apparent on the face of
record by any authority. It may be noted that this section overrides the entire Act,
except for the provisions of section 160 (discussed above).

Which documents are • Decision

covered under section • Order
161?
• Any notice
• Certificate
• Any other document

Who can rectify the errors • Any authority who has passed or issued any
apparent on the face of decision or order or notice or certificate or
record? any other document may rectify any error
which is apparent on the face of record in
such documents.

What type of mistakes or Errors or mistakes which are apparent on the face
errors can be rectified? of record may be rectified. Rectification can only
be of error apparent from record. It is a settled

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1.18 GOODS AND SERVICES TAX

law that a decision on a debatable point of law is

not a mistake apparent from the record.

When does the Authority The authority may rectify the mistake/error:
rectify the • suo moto
mistakes/errors?
• when such error or mistake is brought to its
notice by a GST officer
• when such error or mistake is brought to
notice by the affected person within a period
of 3 months from the date of issue of such
decision or order or notice or certificate or
any other document, as the case may be.

What is the time limit for No rectification can be made after a period of six
rectification? months from the date of issue of such decision/
order/ notice/ certificate/ any other document.
However, such time limit does not apply in cases
where the rectification is purely in the nature of
correction of a clerical or arithmetical error or
mistake, arising from any accidental slip or
omission.

What type of precautions Principles of natural justice should be followed

should be taken at the time by the authority carrying out such rectification,
of rectification? if such rectification adversely affects any person.

11. ROUNDING OFF OF TAX ETC. [SECTION 170]

Amounts covered
The principle of rounding off laid out in section 170 applies to:
 tax
 interest

 penalty
 fine

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 any other sum payable under the provisions of the Act

 refund
 any other sum due under the provisions of the Act.
It may be noted that this provision does not apply to tax invoices. Thus, it is not
required to round up figures in tax invoices. Only consolidated payment to
Government has to be rounded off.
Rounding off principle

Amount contains part of a rupee consisting of paise, and Increase to one

such part is fifty paise or more rupee

Amount contains part of a rupee consisting of paise, and Ignore such part
such part is less than fifty paise

Delegation of Powers

12. POWER OF GOVERNMENT TO MAKE RULES &

REGULATIONS [SECTIONS 164 & 165]
Section 164 empowers the Government to make rules on the recommendations of
the GST Council for carrying out the provisions of the Act.
The following are noteworthy in this regard:
 The Government may make rules for all or any of the matters which by the
Act are required to be, or may be, prescribed or in respect of which provisions
are to be or may be made by rules.
 The rules may also be issued with retrospective effect but not from a date
earlier than the date on which the provisions of the Act have come into force.
 The rules may provide for a penalty not exceeding ` 10,000 for committing
breach of any rule.
Section 165 empowers the Board to make regulations consistent with the Act and
the rules made thereunder to carry out the provisions of the Act.

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1.20 GOODS AND SERVICES TAX

Thus, while the rule making power lies with the Government, the regulation making
power has been delegated to the CBIC (Board).
The Central Government and the Board have been vested with the similar
powers of making rules and regulations respectively under sections 22 & 23
of the IGST Act also.

13. LAYING OF RULES, REGULATIONS AND

NOTIFICATIONS [SECTION 166]
Section 166 provides that the following delegated legislation under the Act shall
be laid before each house of the Parliament, while it is in session, for a total period
of 30 days which may be comprised in one session, or in two or more successive
sessions:
 every rule made by the Government
 every regulation made by the Board
 every notification issued by the Government
If both the Houses agree that
 any modification be made in the rule / regulation / notification; or
 rule or regulation or notification should not be made,
the rule or regulation or notification shall thereafter have effect only in such
modified form or be of no effect, as the case may be. However, any such
modification or annulment shall be without prejudice to the validity of anything
previously done under that rule or regulation or notification.
Similar provisions relating to laying of rules, regulations and notification etc.
have also been prescribed under section 24 of the IGST Act.

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14. DELEGATION OF POWERS [SECTION 167]

Section 167 prescribes that the powers conferred on any authority/officer can also
be exercised by another authority/officer, if the Commissioner so directs by way of
notification, subject to such conditions as may be specified in the notification.
Many notifications have been issued under this provision to delegate powers to lower
officers, officers of State Government (by Central Government) and officers of Central
Government (by State Government).

15. POWER TO ISSUE INSTRUCTIONS OR

DIRECTIONS [SECTION 168]
Section 168 empowers the Board (CBIC) to issue orders, instructions or directions
to the CGST officers for the purpose of uniformity in the implementation of the Act.
All officers and all other persons employed in the implementation of the Act
observe and follow such orders, instructions or directions.
The binding nature of such orders, instructions and directions has been a matter of
debate and scrutiny. The general understanding that prevails now is that a circular
is binding on the officers, but not on the assessee. However, in case such circular
states something contrary to the law, the law shall prevail over the circular.
The meaning of Commissioner for the purposes of following provisions is
Commissioner or Joint Secretary posted in the Board and such Commissioner or
Joint Secretary shall exercise the powers specified in these said sections with the
approval of the Board:

Section Particulars

Section 2(91) Meaning of ‘proper officer’

Section 5(3) Delegation of powers by Commissioner

Section 25(9)(b) Notification of person or class of persons for

grant of Unique Identity Number

Section 35(3) Notification of class of taxable persons required

to maintain additional accounts or documents

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1.22 GOODS AND SERVICES TAX

Section 35(4) Notification of class of taxable persons

permitted to maintain accounts in a prescribed
manner where the Commissioner considers that
such persons are not in a position to keep and
maintain accounts in accordance with the
general provisions

Section 37(1) Details of outward supplies (extension of time

limit)

Section 39(6) Return (extension of time limit)

Section 44 Annual return

Sub-sections (4) and (5) of Statement for tax collection at source and
section 52 Annual Statement by Electronic Commerce
Operator (extension of time limit)

Section 143(1) except second Job-work procedure (except extension of time

proviso thereof limits of 1 year and 3 years)

Section 158(3)(l) Exceptions to bar on disclosure of information

by public servant

Section 167 Delegation of powers

16. POWER OF GOVERNMENT TO EXTEND TIME

LIMIT IN SPECIAL CIRCUMSTANCES
[SECTION 168A]
The Government is empowered to extend the time limits provided under the CGST
Act in respect of actions which cannot be completed or complied with due to force
majeure. Here, force majeure means war, epidemic, flood, drought, fire, cyclone,
earthquake or any other calamity caused by nature affecting the implementations
of provisions of the CGST Act. This power can also be exercised retrospectively.

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Omission, Repeal and Saving

17. OMISSION AND REPEAL OF EARLIER LAWS

[SECTIONS 173 AND 174]
Amendment of Act 32 of 1994 [Section 173]
Chapter V of the Finance Act, 1994 laid down the provisions for service tax. Since
service tax has been subsumed in GST, such provisions are no more required and
hence have been omitted and are not in force.
Repeal and saving [Section 174]
The following legislations stand repealed from July 1, 2017, i.e. the date of
commencement of the CGST Act:
• The Central Excise Act, 1944 (except in respect of goods included in Entry 84
of Union List – petroleum crude, high speed diesel, motor spirit, natural gas,
aviation turbine fuel, tobacco and tobacco products)
• The Medicinal and Toilet Preparations (Excise Duties) Act, 1955
• The Additional Duties of Excise (Goods of Special Importance) Act, 1957
• The Additional Duties of Excise (Textiles and Textile Articles) Act, 1978
• The Central Excise Tariff Act, 1985
The repeal under section 174 or amendment under section 173 shall not:
 revive anything not in force or existing at the time of such amendment or
repeal - No new effect
 affect the previous operation of the amended Act or repealed Acts and orders
or anything duly done or suffered thereunder - No effect on previous
position
 affect any right, privilege, obligation, or liability acquired, accrued or incurred
under the previous law - No effect on rights or liabilities under previous
law
Any tax exemption granted as an incentive against investment through a
notification shall not continue as privilege if the said notification is rescinded

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1.24 GOODS AND SERVICES TAX

on or after the appointed day.

 affect any duty, tax surcharge, fine, penalty, interest as are due or may
become due or any forfeiture or punishment incurred or inflicted in respect
of any offence or violation committed against the provisions of the previous
law - No effect on tax etc. due under previous law
 affect any investigation inquiry, verification, adjudication and assessment
proceedings, recovery proceedings, other legal proceedings or tax, penalty
etc. and any such proceedings that may be instituted, continued or enforced
and tax, penalty etc. that may be levied or imposed as if these Acts had not
been so amended or repealed - No effect on legal proceedings and tax,
penalty etc. under previous law
 affect any proceedings including that relating to an appeal, review or
reference, instituted before, on or after the appointed day under the previous
law - No effect on any appellate proceeding under previous law.
 The provisions of section 6 of the General Clauses Act, 1897 with regard to
the effect of repeal will apply for repeal provided under section 174.

Section 6 of the General Clauses Act, 1897 is given hereunder:

Effect of repeal. Where this Act, or any Central Act or Regulation made after the
commencement of this Act, repeals any enactment hitherto made or hereafter to be
made, then, unless a different intention appears, the repeal shall not
(a) revive anything not in force or existing at the time at which the repeal takes
effect; or
(b) affect the previous operation of any enactment so repealed or anything duly
done or suffered thereunder; or
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred
under any enactment so repealed; or
(d) affect any penalty, forfeiture or punishment incurred in respect of any offence
committed against any enactment so repealed; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right,
privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid,
and any such investigation, legal proceeding or remedy may be instituted,
continued or enforced, and any such penalty, forfeiture or punishment may be
imposed as if the repealing Act or Regulation had not been passed.

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Other Provisions

18. COMMON PORTAL [SECTION 146]

Section 146 enables the Government to notify the GST Common Portal on
recommendation of the GST Council for facilitating the following:
• Registration
• Payment of Tax

• Furnishing of returns
• Computation and settlement of integrated tax
• Electronic way bill

• Other functions and prescribed purposes

CBIC has notified [Link] as the GST common portal to carry out the above
stated functions. However, the Common GST Electronic Portal for furnishing
electronic way bill is [Link]. Further, Invoice Registration Portal
(IRP) is the website for uploading/reporting of e-invoices by the notified persons
for whom e-invoicing is mandatory.

19. SPECIAL PROCEDURE FOR CERTAIN

PROCESSES [SECTION 148]
Section 148 is an enabling provision for prescribing special procedures for certain
processes. The following are noteworthy in this regard:
 Such procedures shall be prescribed by way of a notification issued by the
Government, on recommendations of the GST Council.
 The conditions and safeguards and the classes of registered persons to whom
such procedures will be applicable shall be stated in the notification itself.
 The special procedures may be prescribed with regard to the following
matters:
• Registration

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1.26 GOODS AND SERVICES TAX

• Filing of returns
• Payment of tax
• Administration
Some notifications issued by the Government under this section are:

Notification No. Description

Notification No. 66/2017 CT Seeks to exempt all taxpayers from

dated 15.11.2017 payment of tax on advances received in
case of supply of goods

Notification No. 04/2018 CT Seeks to provide special procedure with

dated 25.01.2018 respect to payment of tax by registered
person supplying service by way of
construction against transfer of
development rights and vice versa.

Note: The above list is illustrative and not exhaustive.

20. GOODS AND SERVICES TAX COMPLIANCE

RATING [SECTION 149]
As per section 149, every registered person shall be assigned a compliance rating
based on the record of compliance in respect of specified parameters. Such ratings
shall not be permanent and will be revised from time to time. The ratings shall be
intimated to the taxable person and will also be placed in the public domain.
A prospective client will be able to see the compliance ratings of suppliers and take
a decision as to whether to deal with a particular supplier or not. This will create
healthy competition amongst taxable persons.

21. POWER TO TAKE SAMPLES [SECTION 154]

Section 154 authorizes the Commissioner, or an officer authorized by him to take
samples of goods from the possession of any taxable person, where he considers
it necessary. Such officer shall provide a receipt for any samples so taken.

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22. BURDEN OF PROOF [SECTION 155]

‘Burden of proof’ normally refers to the obligation to prove one’s assertion. Section
155 lays down that where any person claims that he is eligible for input tax credit
under this Act, the burden of proving such claim shall lie on such person.
Thus, where a presumption is raised that a person is not eligible for input tax credit
then the onus shall be on such person to rebut the same.

23. PERSONS DEEMED TO BE PUBLIC SERVANTS

[SECTION 156]
Section 156 deems all persons discharging functions under the Act as public
servants within the meaning of section 21 of the Indian Penal Code, 1860. This
means that such persons shall qualify as public servants for the purpose of Indian
Penal Code, wherever applicable.

24. PROTECTION OF ACTION TAKEN UNDER

THIS ACT [SECTION 157]
Section 157 grants immunity to the following persons against legal proceedings for
anything done or intended to be done in good faith:
 President of the Appellate Tribunal
 State President of the Appellate Tribunal
 Members of the Appellate Tribunal

 Officers or other employees of the Appellate Tribunal

 Any other person authorised by the Appellate Tribunal
 Any officer appointed or authorised under the Act

It provides immunity from personal liability for decisions, acts, or omissions that
are made within the scope of their official duties, and not made in a wanton or
reckless manner.

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25. BAR ON JURISDICTION OF CIVIL COURTS

[SECTION 162]
Taxes are a civil liability. The basic rule is that every dispute which is civil in nature
can be tried by the Civil Court. However, since tax laws generally provide a specific
machinery for assessment, appeals and recovery etc, in terms of a special
legislation, the jurisdiction of civil courts is barred in matters relating to tax laws.
Therefore, as per section 162, no civil court shall have jurisdiction to deal with or
decide any question arising from or relating to anything done or purported to be
done under the Act. However, this bar does not apply in case of appeals to High
Court and Supreme Court as provided under sections 117 and 118 respectively.

26. LEVY OF FEE [SECTION 163]

Section 163 provides that a copy of any order or document can be provided to any
person on an application made by him for that purpose after paying a prescribed fee.

27. SERVICE OF NOTICE IN CERTAIN

CIRCUMSTANCES [SECTION 169]
Any notice, decision, order, summons, or any other communication under the Act
and the related rules are to be served on the assessee in accordance with the
provisions of section 169.
Modes of service [Section 169(1)]
Sub-section (1) of section 169 provides that a notice, decision, order, summons, or
any other communication can be served by any one of the following methods:
(a) Giving/tendering directly: By giving or tendering it directly or by a
messenger including a courier to the addressee or the taxable person or to
his manager or authorised representative or an advocate or a tax practitioner
holding authority to appear in the proceedings on behalf of the taxable
person or to a person regularly employed by him in connection with the
business, or to any adult member of family residing with the taxable person;
or

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(b) Registered post/speed post/courier: By registered post or speed post or

courier with acknowledgement due, to the person for whom it is intended or
his authorised representative, if any, at his last known place of business or
residence; or
(c) Email: By sending a communication to his e-mail address provided at the
time of registration or as amended from time to time; or
(d) At common portal: By making it available on the common portal; or
(e) Publication in newspaper: By publication in a newspaper circulating in the
locality in which the taxable person or the person to whom it is issued is last
known to have resided, carried on business or personally worked for gain; or
(f) Affixing at place of business etc: If none of the modes aforesaid is
practicable, by affixing it in some conspicuous place at his last known place
of business or residence and if such mode is not practicable for any reason,
then by affixing a copy thereof on the notice board of the office of the
concerned officer or authority who or which passed such decision or order or
issued such summons or notice.
Deemed date of serving [Section 169(2)]
Every decision/order/summons/notice/communication shall be deemed to have
been served on the date on which it is tendered or published or a copy thereof is
affixed in the manner provided in sub-section (1).
Deemed date of receipt [Section 169(3)]
When a decision, order, summons, notice or any communication is sent by
registered post or speed post, it shall be deemed to have been received by the
addressee at the expiry of the period normally taken by such post in transit unless
the contrary is proved.

28. ANTI-PROFITEERING MEASURE [SECTION 171]

The burden of indirect taxation ultimately falls on the consumers. It is expected
that the GST regime will result in an increased flow of input tax credit. In such a
scenario, the concern that benefit of such increased input tax credit may not be
passed on by certain entities to the consumers is not unreasonable.

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Section 171 makes it mandatory that any reduction in

rate of tax on any supply of goods or services or the
benefit of input tax credit shall be passed on to the
recipient by way of commensurate reduction in prices.
Anti-profiteering Authority
The Central Government may, on recommendations of the Council, by notification,
constitute an Authority*, or empower an existing Authority constituted under any law
for the time being in force, to examine whether input tax credits availed by any
registered person or the reduction in the tax rate have actually resulted in a
commensurate reduction in the price of the goods or services or both supplied by him:
*"Authority" includes the "Appellate Tribunal". Consequently, the Principal Bench of
the Appellate Tribunal, constituted under section 109(3) has been empowered 5 to
examine whether ITC availed by any registered person or the reduction in the tax rate
have actually resulted in a commensurate reduction in the price of the goods and/or
services supplied by that registered person.

Further, a sunset clause had been introduced in section 171 to empower the
Government to notify the date from which the said Authority shall not accept any
request for examination as to whether ITC availed by any registered person or the
reduction in the tax rate have actually resulted in a commensurate reduction in the
price of the goods and/or services supplied by him 6.
The term "request for examination" mean the written application filed by an applicant
requesting for examination as to whether input tax credits availed by any registered
person or the reduction in the tax rate have actually resulted in a commensurate
reduction in the price of the goods and/or services supplied by him.
Chapter XV: Anti-profiteering of CGST Rules, 2017 prescribe the provisions relating
to functions of the authority, orders of the authority etc. The same are discussed
hereunder.

5
Vide Notification No. 18 /2024 CT dated 30.09.2024
6
In this regard, Notification No. 19/2024 CT dated 30.09.2024 had notified the sunset date as
01.04.2025.

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Functions of the Authority

The authority shall discharge the following functions, namely:-

(i) to determine whether the reduction in tax rate or the benefit of input tax
credit has been passed on by the seller to the buyer (hereinafter collectively
referred to as ‘benefit’) by reducing the prices

(ii) to identify the taxpayer who has not passed on the benefit
(iii) to order
(a) reduction in prices
(b) return to the recipient, an amount equivalent to the amount not passed
on by way of commensurate reduction in prices along with interest @
18% from the date of collection of the higher amount till the date of
the return of such amount or recovery of the amount not returned, as
the case may be, in case the eligible person does not claim return of the
amount or is not identifiable, and depositing the same in the Consumer
Welfare Fund;
(c) imposition of penalty
(d) cancellation of registration

(iv) to furnish a performance report to the GST Council by the 10th day of the
month succeeding each quarter.
Process followed by the Authority
Application to the Authority: All applications from interested parties on issues
of local nature or those forwarded by Standing Committee shall first be examined
by the State Level Screening Committee. On being satisfied that the supplier has
not passed on the benefit, the Screening Committee within 2 months from the date
of receipt of a written application (further extendable up to 1 month for reasons to
be recorded in writing as may be allowed by the Authority) will forward the
application with its recommendations to the Standing Committee on
Anti-profiteering.
If the Standing Committee is satisfied that there is a prima facie evidence to show
that the supplier has not passed on the benefit, it shall refer the matter to the
Director General of Anti-Profiteering (DGAP) for a detailed investigation within 2

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1.32 GOODS AND SERVICES TAX

months from the date of receipt of a written application (further extendable up to

1 month for reasons to be recorded in writing as may be allowed by the Authority).

Investigation: The DGAP shall conduct investigation and collect evidence

necessary to determine undue profiteering and before initiation of the
investigation, issue a notice to the interested parties (and to such other persons as
deemed fit for a fair enquiry into the matter).
The evidence or information presented to the DGAP by one interested party can be
made available to the other interested parties, participating in the proceedings.
The evidence provided will be kept confidential and the provisions of section 11 of
the Right to Information Act, 2005, shall apply mutatis mutandis to the disclosure
of any information which is provided on a confidential basis.
The DGAP can seek opinion of any other agency or statutory authorities in the
discharge of his duties. The Authority, DGAP, or an officer authorised by him will
have the power to summon any person either to give evidence or to produce a
document or any other thing. He will also have same powers as that of a civil court
and every such inquiry will be deemed to be a judicial proceeding.
The DGAP will complete the investigation within a period of 6 months or within
such extended period not exceeding a further period of 3 months for reasons to be
recorded in writing as allowed by the Authority. Upon completion of the
investigation, the DGAP will furnish to the Authority, a report of its findings along
with the relevant records.
Order of the Authority
Where the Authority determines that a registered person has not passed on the
benefit, the Authority may order-
(a) reduction in prices;
(b) return to the recipient, an amount equivalent to the amount not passed on
by way of commensurate reduction in prices along with interest @ 18% from
the date of collection of the higher amount till the date of the return of such
amount or recovery of the amount including interest not returned, as the case
may be
(c) the deposit of an amount equivalent to 50% of the amount determined under
the above clause along with interest @ 18% from the date of collection of the

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higher amount till the date of deposit of such amount in the Consumer
Welfare Fund of Centre and the remaining 50% of the amount in the
Consumer Welfare Fund of the concerned State*, where the eligible person
does not claim return of the amount or is not identifiable
*State or Union Territory in respect of which the authority passes an order
(d) imposition of penalty as specified under the Act; and
(e) cancellation of registration under the Act.
If the report of the DGAP recommends that there is contravention or even non-
contravention of the provisions of section 171 or these rules, but the Authority is
of the opinion that further investigation or inquiry is called for in the matter, it may,
for reasons to be recorded in writing, refer the matter to the DGAP to cause further
investigation or inquiry in accordance with the provisions of the Act and these rules.
Where upon receipt of the report of the DGAP, the Authority has reasons to believe
that there has been contravention of the provisions of section 171 in respect of
goods and/or services other than those covered in the said report, it may, for
reasons to be recorded in writing, within a period of six months, direct the DGAP
to cause investigation or inquiry with regard to such other goods and/or services.

Such investigation or enquiry shall be deemed to be a new investigation or enquiry

and all the provisions of rule 129 shall mutatis mutandis apply to such investigation
or enquiry.

The following are noteworthy in this regard:

 Any order passed by the Authority shall be immediately complied with by the
registered person failing which action shall be initiated to recover the
amount.
 The Authority will pass order within 6 months from the date of the receipt of
the report from the DGAP.
 An opportunity of being heard will be given, if the interested parties request
for it in writing.
 Authority can now seek a clarification from DGAP on the Investigation report
submitted by it during the process of determining as to whether the benefit has
been passed on to the recipient by way of commensurate reduction in prices.

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1.34 GOODS AND SERVICES TAX

 Period of interest will be calculated from the date of collection of higher

amount till the date of return of such amount.
 If the eligible person (i.e. the buyer) does not claim the return of the amount
or the person is unidentifiable then the amount must be deposited to the
Consumer Welfare Fund along with applicable interest.

Penalty for profiteerings

A registered person who is found to have profiteered is liable to pay a penalty of
10% of such profiteered amount if the profiteered amount is not deposited within
30 days of the date of passing of the order by the Authority.
Here, “profiteered” means the amount determined on account of not passing the
benefit to the recipient by way of commensurate reduction in the price of the goods
or services or both.

Note: For the purposes of this section, the expression "Authority" includes the
"Appellate Tribunal".

Application by the Consumer

State Screening Committee Standing Committee

Confirm prima facie evidence of Confirm prima facie evidence of
profiteering profiteering

Director General of Anti-Profiteering

For investigation into profiteering

Anti-Profiteering Authority*
For determining the quantum of profiteering and passing appropriate
order to ensure consumers benefit from the reduced prices.

* Authority includes the Appellate Tribunal.

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29. APPLICATION OF PROVISIONS OF CENTRAL

GOODS AND SERVICES TAX ACT [SECTION 20
OF THE IGST ACT]
The following provisions of CGST Act apply to IGST Act also-
(i) scope of supply;
(ii) composite supply and mixed supply;
(iii) time and value of supply;
(iv) input tax credit;
(v) registration;
(vi) tax invoice, credit and debit notes;
(vii) accounts and records;
(viii) returns, other than late fee;
(ix) payment of tax;
(x) tax deduction at source [TDS rate under IGST – 2%];
(xi) collection of tax at source [TCS rate under IGST – not exceeding 2%];
(xii) assessment;
(xiii) refunds;
(xiv) audit;
(xv) inspection, search, seizure and arrest;
(xvi) demands and recovery;

(xvii) liability to pay in certain cases;

(xviii) advance ruling;
(xix) appeals and revision;

(xx) presumption as to documents;

(xxi) offences and penalties;
(xxii) job work;

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(xxiii) electronic commerce;

(xxiv) transitional provisions; and
(xxv) miscellaneous provisions including the provisions relating to the imposition
of interest and penalty

When the tax involved is IGST, the rate of TDS shall be 2% and the rate of TCS
shall not exceed 2%. Presently, the notified rate for TCS in case of IGST is
0.5%.
Where the penalty is leviable under the CGST Act and the SGST/UTGST Act, the
penalty leviable under the IGST Act shall be the sum total of the said penalties.

The words and expressions used and not defined in the IGST Act but defined in the
CGST Act shall have the same meaning as assigned to them in the said Act.
Similarly, the words and expressions used and not defined in the CGST Act but
defined in the IGST Act shall have the same meaning as assigned to them in the
said Act.

30. APPORTIONMENT OF TAX AND

SETTLEMENT OF FUNDS [CHAPTER VIII OF
THE IGST ACT]
Since central tax (CGST) and state tax (SGST) are
separate taxes levied concurrently on a transaction, the
same are identifiable and can be transferred to the CGST
account and SGST account of the concerned State
Governments respectively. However, this is not possible
in case of integrated tax (IGST). Therefore, it becomes
necessary to apportion IGST into components that can be transferred to CGST
account and SGST account of the State Governments concerned.
Apportionment of tax and settlement of funds [Section 17 of the
IGST Act]
Section 17 of the IGST Act prescribes the provisions for such apportionment of IGST
and settlement of funds between the Central Government and the State
Governments.

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A. Apportionment of IGST paid on supplies where ITC cannot be availed

[Section 17(1)]

Sub-section (1) of section 17 lays down that in respect of the IGST paid on
the following supplies of goods and/or services, the IGST shall be
apportioned:

(a) inter-State supply to an unregistered person or to a registered person

paying tax under composition scheme;
(b) inter-State supply where the registered person is not eligible for input
tax credit;
(c) inter-State supply made in a financial year to a registered person, where
he does not avail of the input tax credit within the specified period and
thus the tax remains in the integrated tax account after expiry of the
due date for furnishing of annual return for such year in which the
supply was made;
(d) import by an unregistered person or by a registered person paying tax
under composition scheme;
(e) import where the registered person is not eligible for input tax credit;

(f) import made in a financial year by a registered person, where he does

not avail of the said credit within the specified period and thus the tax
remains in the integrated tax account after expiry of the due date for
furnishing of annual return for such year in which the supply was
received.
Methodology of apportionment [Section 17(2)]
The IGST paid on the supplies mentioned above shall be apportioned as
under:
I. The amount of tax calculated at the rate equivalent to the CGST on
similar intra-State supply shall be apportioned to the Central
Government.
II. The balance amount of IGST remaining in the integrated tax account
shall be apportioned to the State where such supply takes place and to
the Central Government if such supply takes place in a Union territory.

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1.38 GOODS AND SERVICES TAX

III. If the place of such supply made by any taxable person cannot be
determined separately, the balance amount shall be apportioned to
each of the States/Central Government (in relation to Union territories)
in proportion to the total supplies made by such taxable person to each
of such States/Union territories in a financial year.
IV. If the taxable person making such supplies is not identifiable, the said
balance amount shall be apportioned to all States and the Central
Government in proportion to the amount collected as SGST/UTGST by
the respective State/ the Central Government during the immediately
preceding financial year.
Apportionment of interest, penalty and compounding amount realised
in connection with the IGST [Section 17(3)]
The interest, penalty and compounding amount realised in connection with
the IGST shall also be apportioned in the similar manner.

Transfer of apportioned tax to the accounts of Central/State

Governments [Section 17(4)]
The Central Government shall transfer the amount apportioned to it to the
CGST account or UTGST account, as the case may be, and the amount
apportioned to the State Government(s) to the SGST account of the
respective States.

B. Apportionment of IGST in respect of B2B supplies wherein ITC is taken

by the recipients [Section 17(2A)]
Amount of IGST in respect of B2B supplies wherein ITC is taken by the
recipients [i.e. IGST not apportioned above] may, for the time being, on the
recommendations of the GST Council, be apportioned at the rate of 50% to
the Central Government and 50% to the State Governments/Union territories
on ad hoc basis. Such amount shall be adjusted against the amount
apportioned under sub-sections (2) and (3).
IGST apportioned to a State/Central Government on account of a Union
territory, if subsequently found to be refundable to any person and refunded
to such person, shall be reduced from the amount to be apportioned under
this section, to such State/ Central Government on account of such Union
territory.

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31. ADMINISTRATION UNDER GST

The provisions regarding administrative set up under CGST and IGST laws, are
contained in Chapter II – Administration [Sections 3 to 6] of the CGST Act, 2017 and
Chapter II - Administration [Sections 3 and 4] of the IGST Act, 2017 respectively.
State GST laws also prescribe identical provisions in relation to administration.
These provisions have been discussed below:
A. Officers under CGST Act [Section 3 of the CGST Act]
The Government has appointed the following classes of officers and the
officers subordinate to them for the purposes of CGST Act, namely:

(a) Principal Chief Commissioners of Central Tax or Principal Directors General of Central Tax

(b) Chief Commissioners of Central Tax or Directors General of Central Tax

(c) Principal Commissioners of Central Tax or Principal Additional Directors General of Central Tax

(d) Commissioners of Central Tax or Additional Directors General of Central Tax

(e) Additional Commissioners of Central Tax or Additional Directors of Central Tax

(f) Joint Commissioners of Central Tax or Joint Directors of Central Tax

(g) Deputy Commissioners of Central Tax or Deputy Directors of Central Tax

(h) Assistant Commissioners of Central Tax or Assistant Directors of Central Tax

(i) Commissioner of Central Tax (Audit)

(j) Commissioner of Central Tax (Appeals)

(k) Additional Commissioner of Central Tax (Appeals)

(l) Joint Commissioner of Central Tax (Appeals)

Further, the officers appointed under the Central Excise Act, 1944 shall be
deemed to be the officers appointed under the provisions of CGST Act.

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1.40 GOODS AND SERVICES TAX

B. Appointment of officers under CGST Act [Section 4 of the CGST Act]

The Board may, in addition to the officers as may be notified by the
Government under section 3 above, appoint such persons as it may think fit
to be the officers under CGST Act [Section 4(1)].
Without prejudice to the provisions of section 4(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 CGST Act [Section 4(2)].
C. Powers of officers under CGST Act [Section 5 of the CGST Act]
Subject to such conditions and limitations as the Board may impose, an officer
of central tax may exercise the powers and discharge the duties conferred or
imposed on him under CGST Act [Section 5(1)].
An officer of central tax may exercise the powers and discharge the duties
conferred or imposed under CGST Act on any other officer of central tax who
is subordinate to him [Section 5(2)].
The Commissioner may, subject to such conditions and limitations as may be
specified in this behalf by him, delegate his powers to any other officer who
is subordinate to him [Section 5(3)].
Notwithstanding anything contained in this section, an Appellate Authority
shall not exercise the powers and discharge the duties conferred or imposed
on any other officer of central tax [Section 5(4)].
D. Authorisation of officers of State tax or Union territory tax as proper
officer in certain circumstances [Section 6 of the CGST Act]

Without prejudice to the provisions of CGST Act, the officers appointed under
the SGST Act or the UTGST Act are authorised to be the proper officers for
the purposes of CGST Act, subject to such conditions as the Government shall,
on the recommendations of the Council, by notification, specify [Section 6(1)].
Subject to the conditions specified in the notification issued under section 6(1):
(a) where any proper officer issues an order under CGST Act, he shall also
issue an order under the SGST Act or the UTGST Act, as authorised by

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 MISCELLANEOUS PROVISIONS 24.41

the SGST Act or the UTGST Act, as the case may be, under intimation to
the jurisdictional officer of SGST or UTGST;

(b) where a proper officer under the SGST Act or the UTGST Act has
initiated any proceedings on a subject matter, no proceedings shall be
initiated by the proper officer under CGST Act on the same subject
matter [Section 6(2)].
Any proceedings for rectification, appeal and revision, wherever applicable,
of any order passed by an officer appointed under CGST Act shall not lie
before an officer appointed under the SGST Act or the UTGST Act [Section
6(3)].
E. Appointment of officers under IGST Act [Section 3 of the IGST Act]

The Board may appoint such central tax officers as it thinks fit for exercising
the powers under IGST Act.
F. Authorisation of officers of State tax or Union territory tax as proper
officer in certain circumstances [Section 4 of the IGST Act]
Without prejudice to the provisions of IGST Act, the officers appointed under
the SGST Act or the UTGST Act are authorised to be the proper officers for
the purposes of IGST Act, subject to such exceptions and conditions as the
Government shall, on the recommendations of the Council, by notification,
specify.

32. SPECIAL PROCEDURE FOR CORPORATE

DEBTORS UNDERGOING THE CORPORATE
INSOLVENCY RESOLUTION PROCESS
As per Insolvency Bankruptcy Code (IBC), 2016, once an entity defaults certain
threshold amount, Corporate Insolvency Resolution Process (CIRP) gets triggered
and the management of such entity (Corporate Debtor) and its assets vest with an
interim resolution professional (IRP) or resolution professional (RP). The IRP/RP
continues to run the business and operations of the said entity as a going concern
and is responsible for compliance with all the laws till the insolvency proceeding is
over and an order is passed by the National Company Law Tribunal (NCLT). The

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1.42 GOODS AND SERVICES TAX

definitions of the terms, corporate debtor, CIRP, IRP and RP can be referred from
IBC, 2016.

The Government has prescribed special procedure under section 148 of the CGST
Act for the corporate debtors who are undergoing CIRP under the provisions of IBC
and the management of whose affairs are being undertaken by IRP/RP. Notification
No. 11/2020 CT dated 21.03.2020 as amended issued under section 148 read with
Circular No. 138/08/2020 GST provides as under:
The corporate debtor who is undergoing CIRP is to be treated as a distinct person
of the corporate debtor and shall be liable to take a new registration in each State
or Union territory where the corporate debtor was registered earlier, within thirty
days of the appointment of the IRP/RP. However, corporate debtors who have not
defaulted in furnishing statements (GSTR-1) and returns under GST would not be
required to obtain a separate registration with effect from the date of appointment
of IRP/RP.
The new registration by IRP/RP shall be required only once, and in case of any
change in IRP/RP after initial appointment under IBC, it would be deemed to be
change of authorized signatory and it would not be considered as a distinct person
on every such change after initial appointment.
The IRP/RP will be liable to furnish returns, make payment of tax and comply with
all the provisions of the GST law during CIRP period.

33. MANNER OF DETERMINATION OF

COMMENCEMENT AND TERMINATION OF
TIME [SECTION 9 OF THE GENERAL
CLAUSES ACT, 1897]
Section 9 of the General Clauses Act, 1897 lays down the provision relating to
commencement and termination of time. It stipulates that in any Central Act or
Regulation made after the commencement of this Act, it shall be sufficient, for the
purpose of excluding the first in a series of days or any other period of time, to use
the word from, and, for the purpose of including the last in a series of days or any
other period of time, to use the word to.

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In simple words, while computing time, the rule is to exclude the first day and to
include the last day. Courts have held that the word “from” is akin to “after” and
that the word “from” if used for the purpose of and in reference to the computation
of time, as for example, from a stated date, that stated date is prima facie excluded
from computation. Although on some occasions, Courts have a taken a view that
the question as to whether the stated date should or should not be so excluded,
should be decided according to the context in which the word “from” occurs.
It is worthwhile to mention here that the Supreme Court, in case of M/s. Econ Antri
Ltd v. M/s. Rom Industries Ltd. & Anr, had also taken a similar view on this point and
decided that while computing the period of limitation, the day on which the offence
is committed/ date of cause of action has to be excluded.
Another point which needs a mention here is that section 3(35) of the General
Clauses Act, 1897 defines the expression “month” to mean a month reckoned
according to the British calendar. Further, Allahabad High Court in case of CCus &
CEx. v. Ashok Kumar Tiwari 2015 (37) STR 727 (All.) has held that where the
legislature has stipulated the period of limitation in terms of months, such a
stipulation can only mean a calendar month and not 30 days.

TEST YOUR KNOWLEDGE

1. Briefly explain how the GST compliance rating score is determined.

2. When shall the particulars relating to any proceedings or prosecution be

published under GST laws? Discuss the relevant provisions.

3. Explain the provisions relating to rectification of errors apparent on the face of

record under section 161.

4. State the various modes of service of a notice, decision, order, summons, or any
other communication under the CGST Act, on the taxable person or any other
person to whom it is intended.

5. Section 158(1) lays down that the information obtained by a public servant
from the record of any proceeding under the CGST Act is confidential and
cannot be disclosed.

Is there any exception to this rule? Discuss in brief.

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1.44 GOODS AND SERVICES TAX

6. Explain the scope of circulars and instructions issued by the Board.

7. ‘The time limits provided under the CGST Act cannot be extended.’

Do you agree with the statement? Give your views with reference to
section 168A.

ANSWERS

1. As per section 149(2), the GST compliance rating is determined on a scale of

ten on the basis of prescribed parameters.

2. When the Commissioner/authorised officer is of opinion that it is necessary

or expedient in the public interest to publish the name of any person and any
other particulars relating to any proceedings or prosecution under the CGST
Act in respect of such person, it may cause to be published such name and
particulars [Section 159(1)].

No publication under this section shall be made in relation to any penalty

imposed under the CGST Act until the time for presenting an appeal to the
Appellate Authority under section 107 has expired without an appeal having
been presented or the appeal, if presented, has been disposed of [Section
159(2)].

3. Section 161 lays down that any authority, who has passed or issued any
decision or order or notice or certificate or any other document, may rectify
any error which is apparent on the face of record in such decision or order or
notice or certificate or any other document, either on its own motion or where
such error is brought to its notice by any GST officer or by the affected person
within a period of three months from the date of issue of such decision or
order or notice or certificate or any other document, as the case may be.

However, no such rectification shall be made after a period of six months

from the date of issue of such decision or order or notice or certificate or any
other document. Further, the said period of six months shall not apply in

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such cases where the rectification is purely in the nature of correction of a

clerical or arithmetical error, arising from any accidental slip or omission.

Principles of natural justice should be followed by the authority carrying out

such rectification, if it adversely affects any person.
4. Section 169(1) provides that any decision, order, summons, notice or other
communication under the CGST Act and the rules made thereunder can be
served by any one of the following methods:
(a) Giving/tendering directly including by a courier to the addressee or
authorised representative or to any adult member of family residing
with the taxable person; or

(b) By Registered post/speed post/courier with acknowledgement due at

the last known place of business or residence; or
(c) By Email to the e-mail address provided at the time of registration or
as amended from time to time; or
(d) By making the same available at common portal; or

(e) Publication in newspaper circulating in the locality in which the

addressee is last known to have resided, carried on business or
personally worked for gain; or

(f) If none of the above modes is practicable then by Affixing at last known
place of business or residence and if such mode is not practicable for
any reason, then by affixing a copy thereof on the notice board of the
office of the concerned officer or authority concerned.

5. Yes, the confidential information can be disclosed by the public servant for
certain specific purposes in terms of section 158(3). Such specific purposes
are given in brief hereunder:

(i) For prosecution

(ii) For carrying out the objects of the CGST Act

(iii) For service of notice or recovery of demand

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1.46 GOODS AND SERVICES TAX

(iv) For furnishing information to Court in a proceeding where Government

is a party

(v) For audit of tax receipts or refunds

(vi) For inquiry into the conduct of a GST officer

(vii) For enabling levy, realisation of any tax or duty

(viii) In lawful exercise of powers

(ix) For enquiry into a charge of misconduct by any professional

(x) For data entry on automated system

(xi) For fulfilling the requirement under any other law and in public interest.

6. Section 168 empowers the Board (CBIC) to issue orders, instructions or

directions to the CGST officers for the purpose of uniformity in the
implementation of the CGST Act. All officers and all other persons employed
in the implementation of the Act observe and follow such orders, instructions
or directions.
The binding nature of such orders, instructions and directions has been a
matter of debate and scrutiny. The general understanding that prevails now
is that a circular is binding on the officers, but not on the assessee. However,
in case such circular states something contrary to the law, the law shall prevail
over the circular.
7. The statement is not correct.
The Government has power to extend the time limits provided under the
CGST Act. However, such powers are not unbridled powers. Section 168A
empowers the Government to extend the time limits only when the actions
cannot be completed or complied with due to force majeure. Here, force
majeure means war, epidemic, flood, drought, fire, cyclone, earthquake or any
other calamity caused by nature affecting the implementations of provisions
of the CGST Act. This power can also be exercised retrospectively.

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AMENDMENTS MADE VIDE THE FINANCE ACT, 2025

The Finance Act, 2025 has come into force from 29.03.2025. However, most of the
amendments made under the CGST Act and the IGST Act vide the Finance Act, 2025
would become effective only from a date to be notified by the Central Government
in the Official Gazette. Such a notification has not been issued till 30.04.2025.
Therefore, the applicability or otherwise of such amendment for May 2026,
September 2026 and/or, January 2027 examinations shall be informed by the ICAI
by way of an announcement.
In the table given below, the provisions of new section 2(116A) and section 148A
of the CGST Act, 2017 are given as inserted by the Finance Act, 2025.
Once the announcement for applicability of such amendments for examination(s)
is made by the ICAI, students should read the amended provisions given hereunder
in place of the related provisions discussed in the chapter.

Provisions as amended by the Finance Act, 2025 Remarks

Section 2(116A): Unique identification marking A new clause (116A) is

unique identification marking means the unique being inserted in section
identification marking referred to in clause (b) of 2 to provide definition of
sub-section (2) of section 148A and includes a unique identification
digital stamp, digital mark or any other similar marking for
marking, which is unique, secure and non- implementation of track
removable; and trace mechanism.

New Section 148A: Track and trace mechanism New section 148A is
for certain goods being inserted to provide
(1) The Government may, on the for an enabling
recommendations of the Council, by mechanism for Track and
notification, specify,— Trace Mechanism for
specified commodities.
(a) the goods;
(b) persons or class of persons who are in
possession or deal with such goods,
to which the provisions of this section shall apply.

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1.48 GOODS AND SERVICES TAX

(2) The Government may, in respect of the

goods referred to in clause (a) of sub-
section (1),––
(a) provide a system for enabling
affixation of unique identification
marking and for electronic storage
and access of information contained
therein, through such persons, as may
be prescribed; and
(b) prescribe the unique identification
marking for such goods, including the
information to be recorded therein.
(3) The persons referred to in sub-section (1),
shall,––
(a) affix on the said goods or packages
thereof, a unique identification
marking, containing such information
and in such manner;
(b) furnish such information and details
within such time and maintain such
records or documents, in such form
and manner;
(c) furnish details of the machinery
installed in the place of business of
manufacture of such goods, including
the identification, capacity, duration
of operation and such other details or
information, within such time and in
such form and manner;
(d) pay such amount in relation to the
system referred to in sub-section (2),
as may be prescribed.

© The Institute of Chartered Accountants of India

 Note
The discussion on the GST law in Modules 1-3 of this
Study Material incorporates the content and images made
available by the CBIC on its website [Link]
namely, FAQs on GST, e-fliers issued on various aspects of
GST, sectoral FAQs as also the user manuals and FAQs
available on the GST common portal [Link], to
the extent relevant to such discussion.

© The Institute of Chartered Accountants of India