Final Course

Study Material
(Modules 1 to 4)

Paper 5
Indirect Tax Laws
Part – I: Goods and Services Tax
Module – 1
(Relevant for May 2026, September 2026 and
January 2027 examinations)

BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

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This Study Material has been prepared by the faculty of the Board of
Studies (Academic). The objective of the Study Material is to provide teaching
material to the students to enable them to obtain knowledge in the subject. In
case students need any clarification or have any suggestion for further
improvement of the material contained herein, they may write to the Joint
Director, Board of Studies (Academic).
All care has been taken to provide interpretations and discussions in a manner
useful for the students. However, the Study Material has not been specifically
discussed by the Council of the Institute or any of its committees and the views
expressed herein may not be taken to necessarily represent the views of the
Council or any of its Committees.
Permission of the Institute is essential for reproduction of any portion of this
material.

© THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

All rights reserved. No part of this book may be reproduced, stored in a retrieval
system, or transmitted, in any form, or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without prior permission, in writing, from the
publisher.

Basic draft of this publication was prepared by CA. (Dr.) Rashmi Goel.

Edition : September, 2025

Committee/Department : Board of Studies (Academic)

E-mail : bosnoida@[Link]

Website : [Link]

Price : ` /- (For All Modules)

ISBN No. : 978-93-48313-44-7

Published by : The Publication & CDS Directorate on behalf of

The Institute of Chartered Accountants of India,
ICAI Bhawan, Post Box No. 7100,
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Printed by :

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BEFORE WE BEGIN …

Indirect Tax Laws: Dynamic Subject Area

In the realm of chartered accountancy education, Indirect Tax Laws has emerged as
one of the most dynamically evolving subjects. At the Final level, this subject is
divided into two parts: Part I, which covers Goods and Services Tax (GST) for 80
marks, and Part II, which focuses on Customs & Foreign Trade Policy (FTP) for 20
marks. GST has brought a paradigm shift in the country's indirect tax landscape. It
aims to create a unified market with consistent tax rates and procedures, breaking
down economic barriers and promoting a more integrated national economy. By
subsuming most of the erstwhile Central (excise duty, service tax, central sales tax)
and State taxes (State-Level VAT) into a single tax and by allowing a set-off of prior-
stage taxes for the transactions across the entire value chain, it mitigates the ill
effects of cascading and improves competitiveness. It follows a multi-stage
collection mechanism where tax is collected at every stage and the credit of tax
paid at the previous stage is available as a set off at the next stage of transaction.
The nitty-gritties of this new tax law coupled with its inherent dynamism, makes
the learning, understanding, application and analysis of the provisions of this law
in problem solving both fascinating and challenging.

Know your Study Material

This Study Material is relevant for May 2026, September 2026 and January 2027
examinations. The subject matter of Part I: Goods and Services Tax of this
Study Material is based on the provisions of the Central Goods and Services
Tax Act, 2017 and Integrated Goods and Services Act, 2017 as amended by the
Finance Act, 2024 and Finance (No. 2) Act, 2024 including the significant
notifications and circulars issued and other legislative amendments made,
which have become effective upto 30.04.2025. These amendments have been
indicated in bold italics in this Study Material.
Further, the Finance Act, 2025 has come into force from 29.03.2025 after receiving
the assent of the President of India. However, the amendments made in the

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CGST Act, 2017 and the IGST Act, 2017 vide the Finance Act, 2025 have not become
effective till 30.04.2025. Therefore, the applicability or otherwise of the
amendments made by the Finance Act, 2025 for May 2026, September 2026 and/or
January 2027 examinations shall be announced by the ICAI only after the same
becomes effective.
The content discussed in Part II: Customs & FTP is based on the Customs laws
as amended by the Finance Act, 2025 including the significant notifications
and circulars issued and other legislative amendments made, which have
become effective upto 30.04.2025. The amendments are indicated in bold italics
in the Study Material.
The significant notifications and circulars issued in Part I: Goods and Services Tax
and Part II: Customs & FTP from 01.05.2025 to 31.10.2025 will be compiled and
web-hosted on the BoS Knowledge Portal as Statutory Update for May 2026
examination. Similarly, significant notifications and circulars issued from
01.05.2025 to 28.02.2026 will be compiled and web-hosted as Statutory Update for
September 2026 examination and significant notifications and circulars issued from
01.05.2025 to 30.06.2026 will be compiled and web-hosted as Statutory Update for
January 2027 examination.

Framework of Chapters: Uniform Structure comprising of specific components

Efforts have been made to present the complex indirect tax laws in a lucid manner.
Care has been taken to present the chapters in a logical sequence to facilitate easy
understanding by the students. The Study Material has been divided into four
modules for ease of handling by students. The first three modules are on GST and
the fourth module is on Customs and FTP.
The various chapters of this subject have been structured uniformly and comprise
of the following components:

Components of About the component

each Chapter

1. Learning Learning outcomes which you need to demonstrate

Outcomes after learning each topic have been detailed in the first
page of each chapter/unit. Demonstration of these

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learning outcomes will help you to achieve the desired

level of technical competence

2. Content The concepts and provisions of indirect tax laws are

explained in student-friendly manner with the aid of
examples/ illustrations/ diagrams/ flow charts.
Diagrams and flow charts would help you understand
and retain the concept/ provision learnt in a better
manner. Examples and illustrations would help you
understand the application of concepts/provisions.
These value additions would, thus, help you develop
conceptual clarity and get a good grasp of the topic.

3. Test Your This section comprises of variety of questions which

Knowledge will help you to analyse the provisions of indirect laws
and apply the same in problem solving, thus,
sharpening your application skills. In effect, it will test
your ability to analyse and apply the
concepts/provisions learnt in solving problems and
addressing issues. Questions aim to test your
analytical ability and interpretational skills.

4. Answers After you work out the problems/questions given

under the section “Test Your Knowledge”, you can
verify your answers with the answers given under this
section. This way you can self-assess your level of
understanding of the provisions or concepts of a
chapter.

5. Significant The recent significant select Supreme Court and High

Select Cases Court rulings in customs law have been reported at
the end of chapters of Part II Customs & FTP to help
you appreciate the interpretation of the provisions of
customs law by the Courts.

Students may make note of the following while reading the Study Material:
 For the sake of brevity, the “Goods and Services Tax”, “Central Goods and
Services Tax”, “State Goods and Services Tax”, “Union Territory Goods and

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Services Tax”, “Integrated Goods and Services Tax”, “Central Goods and
Services Act, 2017”, “Integrated Goods and Services Act, 2017”, “Union
Territory Goods and Services Act, 2017”, “Central Goods and Services Tax
Rules, 2017” and “Integrated Goods and Services Tax Rules, 2017” have been
referred to as “GST”, “CGST”, “SGST”, “UTGST”, “IGST”, “CGST Act”, “IGST Act”,
“UTGST Act”, “CGST Rules” and “IGST Rules” respectively in Part I: Goods and
Services Tax of the Study Material.
 Unless otherwise specified, the section numbers and rules referred to in the
chapters of Part I: Goods and Services Tax pertain to CGST Act and CGST Rules
respectively (except Chapter 3: Place of Supply, where the section numbers
and rule numbers pertain to IGST Act and IGST Rules).
 The illustrations, examples, questions and answers given under ‘Test Your
Knowledge’ in Part I: Goods and Services Tax and Part II: Customs & FTP are
solved/answered on the basis of the position of law, as existing on
30.04.2025. The reference to years/months subsequent to such date in the
examples, illustrations, questions and answers is only for the purpose of
explaining the concepts and provisions as the position of law may change
subsequently.
 Though all efforts have been taken in developing this Study Material, the
possibilities of errors/omissions cannot be ruled out. You may bring such
errors/omissions, if any, to our notice so that the necessary corrective action
can be taken.

We hope that these student-friendly features in the Study Material improves your
learning curve and sharpens your analytical and interpretational skills.

Happy Reading and Best Wishes!

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SYLLABUS

PAPER – 5 : Indirect Tax Laws

(One paper ─ Three hours – 100 Marks)

Part-I: Goods and Services Tax (80 Marks)

Objective:
To acquire the ability to analyse and interpret the provisions of the goods and
services tax law and recommend solutions to case scenarios.

Contents:
1. Goods and Services Tax (GST) Law as contained in the Central Goods
and Services Tax (CGST) Act, 2017 and Integrated Goods and
Services Tax (IGST) Act, 2017 including
(i) Case studies based on following:

Levy and collection of CGST and IGST – Application of CGST/IGST law;

Concept of supply, inter-State supply, intra-State supply, supplies in
territorial waters; Charge of tax including reverse charge; Classification;
Exemption from tax; Place of supply; Time of Supply; Value of supply;
Input tax credit; Computation of GST liability
(ii) Procedures under GST including registration, tax invoice, credit and
debit notes, electronic way-bill, accounts and records, returns, payment
of tax
(iii) Refunds and case studies based on refund provisions
(iv) Job work
(v) Liability to pay in certain cases
(vi) Administration of GST; Assessment and Audit
(vii) Inspection, Search, Seizure and Arrest

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(viii) Demand and Recovery; Offences and Penalties

(ix) Appeals and Revision
(x) Advance Ruling

(xi) Ethics under GST

(xii) Other provisions 1

Part-II: Customs & FTP (20 Marks)

Objective:
To develop an understanding of the customs laws and foreign trade policy and
acquire the ability to analyse and interpret the provisions of such laws/concepts.
Contents:
1. Customs Law as contained in the Customs Act, 1962 and the Customs
Tariff Act, 1975
(i) Introduction to customs law including Constitutional aspects
(ii) Levy of customs duties including application of customs law, taxable
event, charge of customs duty, exceptions to levy of customs duty,
exemption from custom duty
(iii) Types of customs duties
(iv) Classification and valuation of imported and export goods
(v) Import and Export Procedures including special procedures relating to
baggage, goods imported or exported by post, stores
(vi) Warehousing

(vii) Refund

1
The entire CGST and IGST laws are included in the syllabus at the Final level. Any residuary
provision under the CGST Act, 2017 and IGST Act, 2017, not covered under any of the above
specific provisions, would be covered under “Other provisions”. Further, if any new Chapter
is included in the CGST Act, 2017 and IGST Act, 2017, the syllabus will accordingly include
the provisions relating thereto.

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2. Foreign Trade Policy

(i) Introduction to FTP – legislation governing FTP, salient features of an
FTP, administration of FTP, contents of FTP and other related provisions
(ii) Basic concepts relating to import and export
(iii) Basic concepts relating to export promotion schemes provided under
FTP
Note – While covering the above laws, students should familiarise themselves with
the ethical considerations and information technology aspects involved in the
compliance of these laws.
If any new legislation(s) is enacted in place of an existing legislation(s), the syllabus
will accordingly include the corresponding provisions of such new legislation(s) in
place of the existing legislation(s) with effect from the date to be notified by the
Institute. Similarly, if any existing legislation ceases to have effect, the syllabus will
accordingly exclude such legislation with effect from the date to be notified by the
Institute. Students shall not be examined with reference to any particular State GST
Law.
Further, the specific inclusions/exclusions in any topic covered in the syllabus will
be effected every year by way of Study Guidelines, if required.

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CONTENTS

PART – I : GOODS AND SERVICES TAX

MODULE – 1
Chapter 1: Supply under GST
Chapter 2: Charge of GST
Chapter 3: Place of Supply

Chapter 4: Exemptions from GST

Chapter 5: Time of Supply
Chapter 6: Value of Supply

MODULE – 2
Chapter 7: Input Tax Credit
Chapter 8: Registration
Chapter 9: Tax Invoice, Credit and Debit Notes
Chapter 10: Accounts and Records; E-way Bill
Chapter 11: Payment of Tax
Chapter 12: Electronic Commerce Transactions
Chapter 13: Returns

MODULE – 3
Chapter 14: Import and Export under GST
Chapter 15: Refunds
Chapter 16: Job Work

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Chapter 17: Assessment and Audit

Chapter 18: Inspection, Search, Seizure and Arrest
Chapter 19: Demands and Recovery
Chapter 20: Liability to Pay Tax in Certain Cases
Chapter 21: Offences and Penalties and Ethical aspects under GST
Chapter 22: Appeals and Revision
Chapter 23: Advance Ruling
Chapter 24: Miscellaneous Provisions

PART – II: CUSTOMS & FTP

MODULE - 4
Chapter 1: Levy of and Exemptions from Customs Duty
Chapter 2: Types of Duty
Chapter 3: Classification of Imported and Export Goods
Chapter 4: Valuation under the Customs Act, 1962
Chapter 5: Importation and Exportation of Goods
Chapter 6: Warehousing
Chapter 7: Refund
Chapter 8: Foreign Trade Policy

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DETAILED CONTENTS : MODULE - 1

CHAPTER 1 – SUPPLY UNDER GST

Learning Outcomes....................................................................................................................................1.1

Contents:
1. Taxable Event under GST-Supply ...........................................................................................1.2

2. Relevant definitions ......................................................................................................................1.3

3. Concept of supply [Section 7 of CGST Act] ........................................................................1.9

4. Composite and mixed supplies [Section 8] .................................................................. 1.108

Let Us Recapitulate .............................................................................................................................. 1.118

Test Your Knowledge.......................................................................................................................... 1.128

Answers ...................................................................................................................................................... 1.133

Annexure-1............................................................................................................................................... 1.145

CHAPTER 2 – CHARGE OF GST

Learning Outcomes ............................................................................................................... 2.1

Contents:

1. Introduction ................................................................................................................. 2.2

2. Relevant definitions ............................................................................................................... 2.3

3. Extent & Commencement of GST Law .............................................................. 2.6

4. Levy & collection of CGST & IGST [Section 9 of the CGST

Act & Section 5 of the IGST Act] ...................................................................................... 2.8

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5. Composition levy [Section 10 of the CGST Act] .......................................................2.41

Let Us Recapitulate ................................................................................................................................. 2.66

Test Your Knowledge ......................................................................................................................2.77

Answers ................................................................................................................................................2.84

CHAPTER 3 – PLACE OF SUPPLY

Learning Outcomes ............................................................................................................... 3.1

Contents:

1. Introduction ................................................................................................................. 3.2

2 Relevant definitions ................................................................................................... 3.6

3. Place of supply of goods other than supply of goods

Imported into, or exported from India [Section 10] .................................. 3.12

4. Place of supply of goods imported into, or

exported from India [Section 11] ...................................................................... 3.20

5. Place of supply of services where location of supplier of service and the

location of the recipient of service is in India [Section 12] ..................... 3.22

6. Place of supply of services where location of supplier

or location of recipient is outside India [Section 13] ................................. 3.63

7. Clarifications on place of supply ....................................................................... 3.85

8. Inter-State Supply [Section 7 of The IGST Act] ............................................. 3.102

9. Intra-State Supply [Section 8 of The IGST Act] ............................................. 3.107

10. Supplies In Territorial Waters [Section 9 of The IGST Act] ........................ 3.111

Let Us Recapitulate .......................................................................................................... 3.112

Test Your Knowledge ...................................................................................................... 3.125

Answers ................................................................................................................................ 3.128

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CHAPTER 4 EXEMPTIONS FROM GST

Learning Outcomes .............................................................................................................. .4.1

Contents:

1. Introduction ................................................................................................................. 4.2

2. Power to Grant Exemption from Tax [Section 11 of

The CGST Act/Section 6 of The IGST Act]............................................................ 4.4

3. Goods Exempt from Tax ........................................................................................... 4.8

4. List of Services Exempt from Tax ........................................................................... 4.9

5. Power not to recover Goods and Services Tax not levied or short-levied as
a result of General Practice ............................................................................... 4.124

Let Us Recapitulate .......................................................................................................... 4.126

Test Your Knowledge ...................................................................................................... 4.148

Answers ................................................................................................................................ 4.157

CHAPTER 5 – TIME OF SUPPLY

Learning Outcomes ............................................................................................................... 5.1

Contents:

1. Introduction ................................................................................................................. 5.2

2. Relevant definitions ................................................................................................... 5.3

3. Time of Supply of Goods [Section 12] .................................................................. 5.7

4. Time of Supply of Services [Section 13] ........................................................... 5.23

5. Change in Rate of Tax in respect of Supply of Goods or Services

[Section 14] ................................................................................................................... 5.41

Let Us Recapitulate ..........................................................................................................................5.45

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Test Your Knowledge ......................................................................................................................5.50

Answers ................................................................................................................................................5.55

CHAPTER 6 VALUE OF SUPPLY

Learning Outcomes ............................................................................................................... 6.1

Contents:

1. Introduction ................................................................................................................. 6.2

2. Relevant definitions ................................................................................................... 6.3

3. Value of Supply [Section 15] ................................................................................... 6.8

4. Rules for Valuation of Supply of Goods and/or Services .............................. 6.31

Let Us Recapitulate ..........................................................................................................................6.82

Test Your Knowledge ......................................................................................................................6.86

Answers ................................................................................................................................................6.94

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CHAPTER 1

7
SUPPLY UNDER GST
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, 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 –

 comprehend the taxable event under GST
 analyse the taxable event – Supply – its meaning and scope.
 identify the transactions that will amount to supply even
without any consideration.
 identify the transactions which will be neither the supply of
goods nor the supply of services.
 classify the specified transactions either as supply of goods
or as supply of services.
 explain the meaning of composite and mixed supplies and
their taxability under GST.

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This chapter explains in detail the concept of taxable event under GST. However, it
is advisable to first go through the basic concepts of GST as introduced in India.
The same is given at the end of the chapter as Annexure -1. The same is only for
the understanding of the students and is not relevant from the examination
point of view.

1. TAXABLE EVENT UNDER GST - SUPPLY

A is any transaction or
occurrence that results in a tax consequence.
Before levying any tax, taxable event needs to
be ascertained. It is the foundation stone of
any taxation system; it determines the point
at which tax would be levied.
Under the earlier indirect tax regime, the
framework of taxable event in various statutes was prone to catena of
interpretations resulting in litigation since decades. The controversies largely
related to issues like whether a particular process amounted to manufacture or not,
whether the sale was pre-determined sale, whether a particular transaction was a
sale of goods or rendering of services etc.
The GST laws resolve
these issues by laying
down one comprehensive
taxable event i.e.
- Supply of goods or services or
both. Various taxable events namely
manufacture, sale, rendering of service,
purchase, entry into a territory of State etc.
that existed prior to introduction of GST
have been done away with in favour of just
one event i.e. .

The GST Law, by levying tax on the ‘supply’

of goods and/or services, departs from the historically understood concepts of

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‘taxable event’ under the State VAT Laws, Excise Laws and Service Tax Law i.e. sale,
manufacture and provision of services respectively.
In the GST regime, the entire value of supply of goods and/or services is taxed in
an integrated manner, unlike the earlier indirect taxes, which were charged
independently either on the manufacture or sale of goods, or on the provision of
services.

2. RELEVANT DEFINITIONS
 Goods: means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed
before supply or under a contract of supply. [Section 2(52)].
 Services: means anything other than goods, money and securities but
includes activities relating to the use of money or its conversion by cash
or by any other mode, from one form, currency or denomination, to
another form, currency or denomination for which a separate
consideration is charged.
Explanation: For the removal of doubts, it is hereby clarified that the
expression “services” includes facilitating or arranging transactions in
securities [Section 2(102)].
 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)].
 Competent authority: means such authority as may be notified by the
Government [Section 2(29].
 Family: means, —
(i) the spouse and children of the person, and
(ii) the parents, grand-parents, brothers and sisters of the person if they
are wholly or mainly dependent on the said person [Section 2(49)].
 Government: means the Central Government [Section 2(53)].

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 Local authority: means —

(a) a “Panchayat” as defined in clause (d) of article 243 of the

Constitution.
(b) a “Municipality” as defined in clause (e) of
article 243P of the Constitution.
(c) a Municipal Committee, a Zilla Parishad, a
District Board, and any other authority
legally entitled to, or entrusted by the
Central Government or any State
Government with the control or
management of a municipal or local fund.
(d) a Cantonment Board as defined in section 3 of the Cantonments Act,
2006.
(e) a Regional Council or a District Council constituted under the Sixth
Schedule to the Constitution.
(f) a Development Board constituted under article 371 and article 371J
of the Constitution.
(g) a Regional Council constituted under article 371A of the
Constitution [Section 2(69)].
 Consideration: in relation to the supply of goods or services or both
includes:
 any payment made or to be made, whether in money or otherwise,
in respect of, in response to, or for the inducement of, the supply of
goods or services or both, whether by the recipient or by any other
person but shall not include any subsidy given by the Central
Government or a State Government,
 the monetary value of any act or forbearance, in respect of, in
response to, or for the inducement of, the supply of goods or
services or both, whether by the recipient or by any other person but
shall not include any subsidy given by the Central Government or a
State Government.

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However, a deposit given in respect of the supply of goods or services or

both shall not be considered as payment made for such supply unless the
supplier applies such deposit as consideration for the said supply [Section
2(31)].
 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)].

 Actionable claim: means a claim to any debt, other than a debt secured by
mortgage of immovable property or by hypothecation or pledge of movable
property, or to any beneficial interest in movable property not in the
possession, either actual or constructive, of the claimant, which the civil courts

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recognise as affording grounds for relief, whether such debt or beneficial

interest be existent, accruing, conditional or contingent [Section 2(1) of CGST
Act read with section 3 of the Transfer of Property Act, 1882].
 Manufacture: means processing of raw
material or inputs in any manner that results
in emergence of a new product having a
distinct name, character and use and the
term “manufacturer” shall be construed
accordingly [Section 2(72)].
 Money: means the Indian legal tender or any foreign currency, cheque,
promissory note, bill of exchange, letter of credit, draft, pay order, traveller
cheque, money order, postal or electronic remittance
or any other instrument recognised by the Reserve
Bank of India when used as a consideration to settle an
obligation or exchange with Indian legal tender of
another denomination but shall not include any
currency that is held for its numismatic value [Section
2(75)].
 Taxable supply: means a supply of goods or services or both which is
leviable to tax under this Act [Section 2(108)].
 Taxable territory: means the territory to which the provisions of this Act
apply [Section 2(109)].
 Non-taxable territory: means the territory which is outside the taxable
territory [Section 2(79)].
 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)].

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 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)].

However, a person who organises or arranges, directly or indirectly, supply

of specified actionable claims, including a person who owns, operates or
manages digital or electronic platform for such supply, shall be deemed
to be a supplier of such actionable claims, whether such actionable claims
are supplied by him or through him and whether consideration in money
or money's worth, including virtual digital assets, for supply of such
actionable claims is paid or conveyed to him or through him or placed at
his disposal in any manner, and all the provisions of this Act shall apply to
such supplier of specified actionable claims, as if he is the supplier liable
to pay the tax in relation to the supply of such actionable claims [Section
2(105)].

 Recipient: of supply of goods and/or services 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)].

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 Person: includes [Section 2(84)]-

An individual A HUF A company A firm Trust

An association of persons or a
A Limited Liability body of individuals, whether
Partnership A local authority incorporated or not, in India or
outside India

Any corporation established Any body corporate Central

by/under any Central, State or incorporated by or under Government/State
Provincial Act or Government the laws of a country Government
company as defined in section outside India
2(45) of Companies Act, 2013

A co-operative society
Society as defined under
registered under any law Every artificial juridical
the Societies
relating to cooperative person, not falling above
Registration Act, 1860
societies

✪ Definitions in which the expression “means” has been used

are exhaustive definitions. Consequently, the scope of these
definitions cannot be expanded.

✪ Definitions in which the expression “includes” has been

used are inclusive and are not exhaustive definitions. Resultantly, the scope
of these definitions is wide.

Our discussion in this Study Material will principally be confined to the

provisions of CGST and IGST laws as the specific State GST laws 1 are outside
the scope of syllabus.

1
It may be noted that GST laws of all the States and Union Territories are largely based on
the CGST Act, 2017.

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3. CONCEPT OF SUPPLY [SECTION 7 OF THE

CGST ACT]
The concept of ‘ is the key stone of the GST architecture. The provisions
relating to the meaning and scope of supply are contained in Chapter III of the
CGST Act read with various Schedules given under the said Act.

Following sections and schedules shall be discussed in this chapter to understand

the concept of supply:

Section 7 Meaning and scope of supply

Section 8 Taxability of composite and mixed supplies

Schedule I Activities to be treated as supply even if made without

consideration

Schedule II Activities or transactions to be treated as supply of goods or

as supply of services

Schedule III Activities or transactions which shall be treated neither as

supply of goods nor as supply of services.

Provisions of section 7 containing the meaning and scope of supply are as follows:

STATUTORY PROVISIONS

Section 7 Meaning and Scope of Supply

Sub-section Clause Particulars

(1) Supply includes -

(a) all forms of supply of goods or services or both such

as sale, transfer, barter, exchange, licence, rental,

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1.10 GOODS AND SERVICES TAX

lease or disposal made or agreed to be made for a

consideration by a person in the course or
furtherance of business

(aa) the activities or transactions, by a person, other than an

individual, to its members or constituents or vice-versa,
for cash, deferred payment/other valuable
consideration.

Explanation.––For the purposes of this clause, it is

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

(b) importation of services, for a consideration whether

or not in the course or furtherance of business, and

(c) the activities specified in Schedule I, made or agreed

to be made without a consideration.

(1A) where certain activities or transactions, constitute a supply in

accordance with the provisions of sub-section (1), they shall be
treated either as supply of goods or supply of services as
referred to in Schedule II.

(2) Notwithstanding anything contained in sub-section (1),

(a) activities or transactions specified in Schedule III; or

(b) such activities or transactions undertaken by the

Central Government, a State Government or any local

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authority in which they are engaged as public

authorities, as may be notified by the Government on
the recommendations of the Council

shall be treated neither as a supply of goods nor a supply of

services.

(3) Subject to the provisions of sub-sections (1), (1A) & (2),

Government may, on the recommendations of the Council,
specify, by notification, the transactions that are to be treated
as —

(a) a supply of goods and not as a supply of services; or

(b) a supply of services and not as a supply of goods.

ANALYSIS

The definition of ‘supply’ as contained in section 7 is an inclusive definition and

does not define the term exhaustively. It defines the scope of supply in an inclusive
manner. Clause (a) of sub-section (1) illustrates the forms of supply, but the list is
not exhaustive. This is further substantiated by the use of words ‘such as’ in the
definition.

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

The meaning and scope of supply in terms of section 7 can be understood in terms
of following :

1. Supply should be of goods or services.

2. Supply should be made for a consideration.

3. Supply should be made in the course or furtherance of business.

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1.12 GOODS AND SERVICES TAX

in the course or of goods and

furtherance of services
business

for consideration
Parameters
of supply

Supply should be

Aforesaid parameters describe the concept of supply. However, there are a few
exceptions to 2nd and 3rd parameters [the requirement of supply being made for a
consideration and in the course or furtherance of business] in the GST law.

Few exceptions have been carved

out where a transaction is
deemed to be a supply even
without consideration [contained
in Schedule I – discussed later in
this Chapter].

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Similarly, the condition of supply to be made

in the course or furtherance of business has
been relaxed in case of import of services
[Import of services for a consideration,
whether or not in the course or furtherance of
business, is treated as supply].

Further, there are also cases where a

transaction is kept out of scope of supply

despite the existence of the above
parameters, i.e. there is a list of activities
which are treated neither as a supply of
goods nor as a supply of services [contained
in Schedule III – discussed later in this
Chapter].

In other words, they are outside the

scope of GST. Besides, GST law has
classified certain activities/transactions
either as supply of goods or as supply of
services in Schedule II [Discussed later
in this Chapter].

Government is also empowered to

notify transactions that are to be treated
as a supply of goods and not as a supply of services, or as a supply of services
and not as a supply of goods. In the subsequent paras, the above aspects of
supply have been extensively discussed. The discussion has been broadly
categorised into following:

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1.14 GOODS AND SERVICES TAX

Supply

includes excludes

Supply of Activities or Importation of Supply Activities to

goods or transaction services for without be treated
services for between a consideration consideration as supply of
consideration person, other whether or [Section goods or
in course or than an not in course 7(1)(c) supply of
furtherance individual, and or furtherance services
of business its members or + Schedule I] [Section
of business
constituents [Section 7(1A) +
[Section
for cash, 7(1)(b)] Schedule
7(1)(a)]
deferred II]
payment or
other valuable
consideration
[Section Non supplies under GST
7(1)(aa)] [Section 7(2) + Schedule III]

Supply should be Supply includes specified forms of supply,

of goods or should be for consideration and should be
services or both in course or furtherance of business

In course or furtherance of
Forms of supply Consideration
business

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SUPPLY OF GOODS OR SERVICES FOR CONSIDERATION IN

COURSE OR FURTHERANCE OF BUSINESS

SUPPLY SHOULD BE OF GOODS OR SERVICES OR BOTH

The definition of supply begins with the term ‘

, thus making it clear that CGST Act intends to
give an extensive meaning to the term ‘supply’.
Section
Supply includes all forms of supply of goods or services 7(1)(a)
or both. Supply of anything other than goods or services
like money, securities etc. does not attract GST.

Money

Anything
which is
Securities
neither
Goods goods nor
Supply

NOT Supply

services

Services

The terms goods and services as defined

under the CGST Act have been analysed by
way of a diagram on next page.

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1.16 GOODS AND SERVICES TAX

Goods Services

means
means

Anything other than goods

Every kind of movable property

excludes

Money and securities

includes includes

**
**

**Please refer the definitions of ‘actionable claims’ and ‘money’ as provided in

heading 2. – Relevant Definitions.

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SUPPLY INCLUDES SPECIFIED FORMS OF SUPPLY, SHOULD BE FOR

CONSIDERATION AND SHOULD BE IN COURSE OR FURTHERANCE OF
BUSINESS
The first part of section 7 [Clause (a) of sub-section (1)] includes all forms of supply
of goods or services or both such as sale, transfer, barter, exchange, license, rental,
lease or disposal made or agreed to be made for consideration in the course or
furtherance of business.
B
Sale
A for consideration
Transfer
Barter
Forms of Supply

Exchange
Licence
Rental in the course or
furtherance of business
Lease
C
Disposal

It is important to note that supply includes ALL forms of supply within its purview,
though have been enlisted in the definition.
Further, supply as contemplated in this first part has two pre-requisites:

 the supply should be for a consideration; and

 the supply should be in the course or furtherance of business.

We shall first discuss the various forms of supply as illustrated in section 7(1)(a) in
detail:

A. FORMS OF SUPPLY
Various forms of supply contemplated in section 7(1)(a) are sale, transfer, barter,
exchange, licence, rental, lease or disposal. These forms of supply are only
illustrative and not exhaustive. However, none of these terms have been defined
under the Act. In order to understand their meaning, we have taken recourse to
their dictionary meaning or otherwise and have explained them as follows:

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1.18 GOODS AND SERVICES TAX

I. Sale and Transfer: The dictionary meaning of term ‘sale’ is the act of selling;
specifically: the transfer of ownership of and title to
property from one person to another for a price 2. As
per the Sale of Goods Act, 1930, a contract of sale of
goods is a contract whereby the seller transfers or
agrees to transfer the property in goods to the buyer
for a price.
Further, the term ‘transfer’ has been defined in the
Black’s Law dictionary as to convey or remove from one place, person, etc., to
another; pass or hand over from one to another; specifically, to make over
the possession or control of.
(1) A shopkeeper sells a pen for ` 100 to the buyer. After the sale,
the pen belongs to the buyer and shopkeeper does not have any
right on the pen. This is a transaction of sale.

(2) A company transfers goods from its factory to the depot for sale
purposes. This is ‘transfer’ of goods where the sale has not yet taken
place.
II. Barter and Exchange: The dictionary meaning of term ‘barter’ is to exchange
goods or services for other goods or services instead of using money 3. Black’s
Law dictionary defines the term ‘exchange’ as an
act of giving or taking one thing for another.
While barter deals with a transaction which only
includes an exchange of goods/services, exchange
may cover a situation where the goods are paid
for partly in goods and partly in money. When there is a barter of goods or
services, same activity constitutes supply as well as consideration.
(3) When a new car worth ` 5,00,000 is purchased in exchange of an
old car alongwith the monetary consideration of ` 4,00,000 paid for
the said purchase. – Exchange transaction

2
[Link]
3
[Link]

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(4) A doctor got his hair cut from a barber and provides him medical
consultancy in return. In this transaction, the doctor provided the
medical consultancy services to the barber for which consideration was in the
form of hair cutting services provided by the barber. Similarly, the barber
provided hair cutting services to the doctor for which consideration was in
the form of medical consultancy services provided by the doctor. – Barter
transaction.
III. Licence, lease, rental and disposal: The dictionary meaning of the term
‘licence’ is a permission granted by competent authority to engage in a
business or occupation or in an activity otherwise
unlawful 4.
The dictionary meaning of ‘rental’ is an
arrangement to rent something, or the amount
of money that you pay to rent something 5 and
that of ‘lease’ is to make a legal agreement by
which money is paid in order to use land, a
building, a vehicle, or a piece of equipment for
an agreed period of time 6.
Black’s law dictionary defines disposal as the sale, pledge, giving away, use,
consumption or any other disposition of a thing.
Under GST, such licenses, leases and rentals of goods with or without transfer
of right to use are covered under the supply of service because there is no
transfer of title in such supplies. Such transactions are specifically treated as
supply of service in Schedule II of CGST Act [Schedule-II has been discussed in
detail in the subsequent paras].
As discussed earlier, one of the parameters to qualify as a supply of goods and/or
services is that a supply is made for a consideration. This parameter has been
explicated in the following paras:

4
[Link]
5
[Link]
6
[Link]

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1.20 GOODS AND SERVICES TAX

B. CONSIDERATION
The dictionary meaning of word ‘consideration’ is payment. Consideration need not
always be in the form of money. It can be in money or in kind. It covers anything
which might be possibly done, given or made in exchange for something else.
Further, a consideration need not always flow from the recipient of the supply. It
can also be made by a third person. However, any subsidy given by the Central
Government or a State Government is not considered as consideration.

A deposit given in respect of the supply of goods or services or both shall not be
considered as payment made for such supply unless the supplier applies such
deposit as consideration for the said supply. The term consideration is defined
under section 2(31) [Refer heading ‘Relevant Definitions’].
The said definition has been depicted in the form of a diagram as follows:

CONSIDERATION

Payment in money Monetary value of any

or otherwise for act or forbearance for the
the supply supply

By recipient or
Deposit to be any other person
considered as
payment

ONLY
Excluding subsidy
given by Central/
when the supplier applies State Governments
such deposit as consideration
for the said supply

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Let us examine the existence of consideration in the following three scenarios:

1. Donations received by charitable institutions from individual donors,

without quid pro quo (something for something)

2. Art works sent by artists to galleries for exhibition

3. ‘No Claim Bonus’ offered by an insurance company to the insured

1. Donations received by charitable institutions from individual donors,

without quid pro quo 7
An important feature of consideration is quid pro quo [something for
something]. Donations received by the charitable organisations are treated
as consideration only if there exists, quid pro quo, i.e., there is an obligation
on part of recipient of the donation or gift to do anything (supply a service).
Generally, institutions such as religious institutions, charitable organisations,
schools, hospitals, orphanages, old age homes etc. receive financial help or
any other support in the form of donation or gift from the individual donors.
In order to express the gratitude towards such help/support, the recipient
institutions place a name plate or similar such acknowledgement in their
premises.
When the name of the donor is displayed in recipient institution’s premises,
in such a manner, which can be said to be an expression of gratitude and
public recognition of donor’s act of philanthropy and is not aimed at giving
publicity to the donor in such manner that it would be an advertising or
promotion of his business, then it can be said that there is no supply of
service for the payment in the form of donation. In other words, there is no
obligation (quid pro quo) on part of recipient of the donation or gift to do
anything (i.e. supply a service). Therefore, there is no GST liability on such
payment made.
Some examples of cases where there would be no taxable supply are as
follows:-

7
any obligation to do anything in return of the donation

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(5) Bhushan donated a blackboard to Yoganisht Sansthan - a

charitable yoga institution. Yoganisht Sansthan printed underneath
the blackboard so donated - “Good wishes from Mr. Bhushan”.

(6) Smt. Durga Devi donated some money to a temple in the memory
of her late father. The Temple Trust constructed a room in the temple
complex from such donation and wrote “Donated by Smt. Durga Devi in the
memory of her father” on the door floor of the room.
In above examples, it may be noticed that there is no reference or mention
of any business activity of the donor which otherwise would have got
advertised.
Thus, GST is not leviable where the following three cumulative conditions are
satisfied namely:

Gift or donation is Purpose is philanthropic

Payment has the
made to a (i.e., it leads to no
character of gift or
charitable commercial gain) and not
donation
organization advertisement

[Circular No. 116/35/2019 GST dated 11.10.2019]

2. Art works sent by artists to galleries for exhibition is not a supply as no
consideration flows from the gallery to the artists
Artists give their work of art to galleries
where it is exhibited for supply. However,
no consideration flows from the gallery
to the artist when the art works are sent
to the gallery for exhibition and
therefore, the same is not a supply.
It is only when a buyer selects a particular art work displayed at the gallery,
that the actual supply takes place and applicable GST would be payable at
the time of such supply [Circular No. 22/22/2017 GST dated 21.12.2017].

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3. No supply of service by the insured to the insurance company in lieu of

‘No Claim Bonus’ offered by said insurance company to him

The issue which arose for consideration was whether the deduction on
account of ‘No Claim Bonus’ (NCB) allowed by the insurance company from
the insurance premium payable by the insured, can be considered as
consideration for the supply provided by the insured to the insurance
company, for agreeing to the obligation to refrain from the act of lodging
insurance claim during the previous year(s).

As per practice prevailing in the insurance sector, the insurance companies

deduct ‘No Claim Bonus’ from the gross insurance premium amount, when
no claim is made by the insured person during the previous insurance
period(s). The customer/ insured procures insurance policy to indemnify
himself from any loss/ injury as per the terms of the policy and is not under
any contractual obligation not to claim insurance claim during any period
covered under the policy, in lieu of NCB.

It is, therefore, clarified that there is no supply provided by the insured to

the insurance company in form of agreeing to the obligation to refrain from
the act of lodging insurance claim during the previous year(s) and NCB
cannot be considered as a consideration for any supply provided by the
insured to the insurance company.

[Circular No. 186/18/2022 GST dated 27.12.2022]

4. Salvage/wreck value earmarked in claim assessment of damage caused

to motor vehicle

In case of motor vehicle insurance

provided by the insurance companies
engaged in providing general insurance
services, such companies insure the cost
of repairs/damages of motor vehicles
incurred by the policyholders.
In case a claim is made by an insurer for
damage of the motor vehicle, while

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1.24 GOODS AND SERVICES TAX

settling said insurance claim, where the general insurance companies, as per
the pre-decided terms of the insurance contract:

(i) deduct the value of

salvage/wreckage of the motor
vehicle as deductibles from the
claim amount paid to the insured,
the salvage remains the property of
insured and insurance companies
are not liable to discharge GST
liability on the same.

(ii) do not deduct the value of

salvage/wreckage of the motor vehicle and pay the full amount of
insurance claim, the salvage becomes the property of the insurance
company and the insurance company will be obligated to discharge
GST on supply of salvage to the salvage buyer 8.

Any transaction involving supply of

goods and/or services without
consideration is not a supply unless it is
deemed to be a supply under law [in
Schedule I of the CGST Act**].

**Provisions of Schedule I have been discussed in detail later in this chapter.

Another parameter to qualify as supply of goods and/or services is that a supply is

made in course or furtherance of business. This parameter has been explained in
the following paras:
C. COURSE OR FURTHERANCE OF BUSINESS
GST is essentially a tax only on commercial transactions. Hence, only those supplies
that are in the course or furtherance of business qualify as supply under GST.

8
Circular No. 215/9/2024 GST dated 26.06.2024

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Resultantly, any supplies made by an individual in his personal capacity do not

come under the ambit of GST unless they fall within the definition of ‘business’.
Meaning of supply made in the course or furtherance of business: Any activity
undertaken in
course/ for
furtherance of
business would
constitute a supply.
In order to
understand the term ‘in the course or furtherance of
business’, we need to first understand the term ‘business’. Business as defined
under section 2(17), inter alia, includes any trade, commerce, manufacture,
profession, vocation etc. whether or not undertaken for a monetary benefit.
The definition of business has been summarised in the diagram below:

Any trade/commerce, manufacture, Any activity incidental/ ancillary to it

profession etc. even if there is no
monetary benefit Any activity of same nature even if
no volume/continuity
Supply/acquisition of goods including in connection with commencement /
capital goods & services closure of business
Business
includes

Provision of facilities by club/ association etc. to its members for consideration

Admission for consideration to any premises

Services as holder of office accepted in course/ furtherance of trade, profession

Activities of a race by way of totalisator or a license to book maker or activities

club including of a licensed book maker in such club

Any activity by Government /local authority as public authorities

Thus, business includes any activity/transaction which is incidental or ancillary to

any trade, commerce, manufacture, profession, vocation, adventure, wager [bet] or
any other similar activity. In addition, any activity undertaken by the Central
Government or a State Government or any local authority in which they are
engaged as public authority shall also be construed as business. For any trade,

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commerce, or any other similar activity to qualify as business, frequency, volume,

continuity or regularity of such transaction is not a pre-requisite.
Some of the examples of supply made/not made ‘in the course or furtherance of
business’ are as follows:
(7) Rishabh buys a car for his personal use and after a year sells it to a
car dealer. Sale of car by Rishabh to car dealer is not a supply under CGST
Act because said supply is not made by Rishabh in the course or
furtherance of business 9.

(8) Manikarnika sold her old gold bangles and earrings to ‘Aabhushan
Jewellers’. Sale of old gold jewellery by an individual to a jeweller will not
constitute supply as the same cannot be said to be in the course or
furtherance of business of the individual 10 11.
Since ‘business’ includes vocation, therefore supply of goods or service as a
vocation is also a supply under GST.
(9) Sundaram Acharya, a famous actor, paints some paintings and sells
them. The consideration from such sale is to be donated to a Charitable
Trust – ‘Kind Human’. The sale of paintings by the actor qualifies as supply
as it is made in course or furtherance of business.
Facilities provided by the club/association to its members for consideration are
provided in course or furtherance of business.

9
Clarified vide GST FAQs issued by CBIC
10
Clarified by CBIC vide press release dated 13.07.2017 and GST Flyer - ‘The meaning and
scope of supply’
11
The view taken in Examples 7 & 8 above is based on the view taken in the Departmental
FAQs/ press release. There is another school of thought according to which since the definition
of business includes trade, commerce, or any other similar activity, whether or not there is
frequency, volume, continuity or regularity of such transaction, on literal interpretation,
the transactions in the above examples can be considered to be made in the course or
furtherance of business and thus, will constitute supply. The taxability of such transactions,
however, will have to be examined under the provisions of section 9 [Discussed in detail in
Chapter 2 – Charge of GST in this Module of the Study Material]. However, since this view
may not always lead to logical conclusions, it is more prudent to take a purposive approach
as followed in Departmental FAQs/press release given above.

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(10) A Resident Welfare Association provides the service of depositing

the electricity bills of the residents in lieu of some nominal charges.
Provision of service by a club or association or society to its members is included
in the definition of ‘business’.

Admission of persons to any premises for a consideration is also included in

business.
(11) Services by way of admission to circus, cinema halls, amusement
parks including theme parks, water parks, etc. are considered as supply as
these are services by way of admission of persons to any premises for a
consideration.
Business includes activities of a race club including by way of totalisator or a license
to book maker 12 or activities of a licensed book maker in such club.
(12) Royal Turf Race Club is engaged in facilitating the wagering
(betting) transactions on horses placed through totalisator 13. For
providing the service of facilitating wagering transactions, Royal Turf Race Club
gets commission which is deducted and retained by the club from the total bet
value. Said services amount to supply as the activities of a race club are included in
business.

There is one exception to this ‘course

or furtherance of business’ rule i.e.,
import of services for a consideration.

From the above discussion, it can be inferred that if an activity

or transaction satisfies all the above parameters, as discussed
in points A, B and C above, said activity or transaction
qualifies as ‘Supply under GST’.

12
Book maker is a person that accepts and pays off bets on sporting and other events at
agreed-upon odds.
13
Totalisator is a device showing the number and amount of bets staked on a race, to
facilitate the division of the total among those backing the winner.

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After understanding the basic concept of supply, let us now examine taxability of
few transactions:

When an oil exploration & production contractor gets a license/lease to

explore/mine the petroleum crude and/or natural gas from the Government, it
enters into a Production Sharing Contract (PSC) with the
Government. The relationship of the contractors with the
Government is not that of partners but that of
licensor/lessor and licensee/lessee. As per these PSCs, when
a contractor discovers oil/gas, he is at first entitled to recover the contract cost
[expenses incurred in exploration, development, production and payment of royalty]
involved in the extraction of oil/gas from the total sale proceeds and thereafter, he
is expected to share with the Government the profit from his venture [known as
profit petroleum], as per the PSC.
The value of petroleum which the contractor is entitled to take in a year for recovery
of the contract costs is called the cost petroleum. Further, the total value of
petroleum produced and saved from the contract area in a particular period, as
reduced by cost petroleum, is called the profit petroleum. The Government’s
share of profit petroleum which is the consideration paid by the contractor to the
Central Government for the services of grant of license/lease to explore/mine
petroleum crude and/natural gas is exempt from GST 14.
The cost petroleum is not a consideration received by the
contractor for the services provided to Government and
thus not taxable per se. The reason for the same is that
the contractors carry exploration and production of petroleum for themselves
and not as a service to Government. They had acquired the right to explore,
exploit and sell petroleum in lieu of royalty and a share in profit petroleum [Circular
No. 32/06/2018 GST dated 12.02.2018].

14
Refer Chapter 4 – Exemptions from GST in this Module of the Study Material for detailed
discussion.

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Banks and financial institutions

provide a bouquet of financial
services relating to lending or
borrowing of money or
investments in money and other related services. For such services, invariably a
variety of instruments are used in the financial markets.
In the following paras, we have examined whether transactions in such instruments
qualify as supply? As seen earlier, the definitions of ‘goods’ and ‘services’
specifically exclude both money and securities.
The definition of ‘money’ includes
instruments like cheques, drafts, pay
orders, promissory notes, letters of
credit, etc. Therefore, activities that
are only transactions in such
instruments would be outside the definition of service.
Money would also include transactions in
Commercial Paper (‘CP’) and Certificate of Deposit
(‘CD’) 15 (as
they are in the
nature of promissory notes), issuance of drafts
or letters of credit, etc. While these transactions
are outside the ambit of supply, the related
activity for which a separate consideration is charged, is chargeable to GST if other
elements of taxability are present.

15
Commercial Paper (‘CP’) and Certificate of Deposit (‘CD’) are understood as unsecured
money market instruments which may be issued in the form of a promissory note or in a
dematerialized form through any of the depositories approved by and registered with SEBI.
CPs are normally issued by highly rated companies, primary dealers and financial institutions
at a discount to the face value. CDs can be issued by Scheduled Commercial Banks (excluding
RRBs and Local Area Banks) and All – India Financial Institutions (FIs) permitted by RBI.

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The term ‘securities’ shall have the same meaning as assigned to it in clause (h) of
section 2 of the Securities Contracts (Regulation) Act, 1956 (SCRA) 16 [Section
2(101)].
In this regard, there may arise a doubt as to whether a
‘derivative’ is included within the meaning of ‘securities’
above and whether derivatives are liable to GST? Before
that, let us understand what a derivative means in simple terms. Derivatives are
financial contracts/instruments that derive their value from something else, like an
underlying asset. They are kind of bets or agreements based on the
price/performance of the underlying asset, rather than owning that asset directly.
‘Derivatives’ 17 are included in the definition of ‘securities’ under SCRA. As
‘derivatives’ fall in the definition of securities, they are neither goods nor
services and hence, are not liable to GST.
Two most common types of derivatives are futures contracts and forward contracts.
In simple terms, forward and futures contracts are similar to making a promise to
buy or sell something, like a commodity (e.g., oil, wheat), financial asset (e.g., stocks,
bonds), or even a market index (e.g., S&P 500) at a specific price on a future date.
It's an agreement/contract between two parties to buy or sell that something at a
specific price on a specific date in the future. On the specified date in future, the

16
In terms of section 2(h) of SCRA, “securities” includes—
(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of
a like nature in or of any incorporated company or other body corporate;
(ia) derivative;
(ib) units or any other instrument issued by any collective investment scheme to the investors
in such schemes;
(ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
(id) units or any other such instrument issued to the investors under any mutual fund scheme;
(ii) Government securities;
(iia) such other instruments as may be declared by the Central Government to be securities; and
(iii) rights or interest in securities.
17
In terms of section 2(ac) of SCRA, “derivative” includes— (A) a security derived from a debt
instrument, share, loan, whether secured or unsecured, risk instrument or contract for
differences or any other form of security; (B) a contract which derives its value from the prices,
or index of prices, of underlying securities. The definition of ‘derivatives’ in SCRA is an
inclusive definition.

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contract needs to be settled. These contracts can either be settled by way of actual
physical delivery of the underlying asset or by way of net settlement of differential
rate with no actual delivery. The primary difference between the futures and
forward contract is that futures contracts are standardised derivative contracts,
traded on organised exchanges and marked-to-market daily whereas forward
contracts are customisable, over-the-counter derivative contracts, not traded on
organised exchanges but negotiated between two parties, without any daily mark-
to-market requirements.

Since
futures contracts are in the nature of derivatives,
these qualify as ‘securities’ and thus, are not subject
to GST. However, where the futures contracts have a delivery option and the
settlement of contract takes place by way of actual delivery of underlying
commodity/currency, then such futures contracts would be treated as normal
supply of goods and liable to GST.

Where the settlement takes place by way of

actual delivery of underlying
commodity/currency, then such forward contracts would be treated as normal
supply of goods and liable to GST. Where the settlement takes place by way of
net settlement of differential of the forward rate over the prevailing market rate on
the settlement date, the same would be falling within the purview of ‘securities’ and
thus, are not chargeable to GST.

Sale,
purchase, acquisition or assignment of a secured debt
does not constitute a transaction in money; it is in the
nature of a derivative and hence a security.

Transactions in instruments
like interest rate swaps, and foreign exchange swaps would be excluded from the
definition of ‘supply’ since such instruments are derivatives, being securities, based
on contracts of difference.

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1.32 GOODS AND SERVICES TAX

Services by way of extending deposits, loans or advances in so far as

the consideration is represented by way of interest or discount is exempt from the
levy of GST. The same has been discussed in detail in Chapter 4 – Exemptions from
GST in this Module of the Study Material.

It is important to note that GST would be levied on service

charges normally charged for various transactions in money
including charges for making drafts, issuance charges for
letter of credit, etc or service charges or service fees or
documentation fees or broking charges or such like fees or charges charged
on the derivatives/futures contracts/forward contracts, since the same
would be a consideration for provision of service.

Securities and Exchange Board of India (SEBI) has prescribed the Securities Lending
Scheme, 1997 (hereafter referred to as SLS) for the purpose of facilitating lending
and borrowing of securities. The security lending mechanism is depicted in the
diagram below: -

Securities
Approved
Intermediary

Lender Borrower
Securities

In the above diagram:

(i) is a person who deposits the securities registered in his name or in
the name of any other person duly authorised on his behalf with an approved
intermediary for the purpose of lending under the scheme.

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(ii) is a person who borrows the securities under the scheme through
an approved intermediary.
(iii) is a person duly registered by the SEBI under the
SLS through whom the lender will deposit the securities for lending and the
borrower will borrow the securities.
Under this scheme, lender of securities lends securities through an approved
intermediary to a borrower, under an agreement, temporarily for a specified period.
The lenders earn lending fee for lending their securities to the borrowers.
Securities are lent with a condition that the borrower will return equivalent
securities of the same type or class at the end of the specified period along with
the corporate benefits 18 accruing on the securities borrowed. The borrower of
securities can further sell or buy these securities.
In order to lend securities under SLS, lender enters into an agreement with the
approved intermediary and for the purpose of borrowing of securities, the
borrower enters into an agreement with the approved intermediary. Thus,
there is no direct agreement between the lender and borrower for the lending or
borrowing of securities and there is anonymity between them.
The transaction takes place through an electronic screen-based order matching
mechanism provided by the recognised stock exchange in India.
As seen earlier in this chapter, securities are neither covered in the definition of
goods nor covered in the definition of services. Therefore, a transaction in
securities which involves disposal of securities is not a supply in GST and hence not
taxable.
The SLS doesn’t treat lending of securities as disposal of securities and
therefore is not excluded from the definition of services. The charged
from the borrowers of securities
Apart from above, the activities of the intermediaries
facilitating lending and borrowing of securities for are also
[Circular No. 119/38/2019 GST dated 11.10.2019].

18
Corporate benefits include dividends (gross), rights, bonus, redemption benefits, interest, or
any other right or benefit accruing on the securities lent.

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Holds securities in

Since securities (including shares) 19 are considered neither as goods nor as services
[discussed in detail earlier], securities held by the holding company in the
subsidiary company are neither goods nor services. Further, purchase or sale of
shares or securities, in itself is neither a supply of goods nor a supply of services.

Merely because there is an entry in the scheme of classification of services to that

effect 20, the activity of holding of shares of subsidiary company by the holding
company per se cannot be treated as a supply of services by a holding company
to the said subsidiary company, unless there is a supply of services by the holding
company to the subsidiary company in accordance with section 7 21.

19
As per the definition of securities under clause (h) of section 2 of Securities Contracts
(Regulation) Act, 1956, securities include 'shares' as per definition of securities.
20
There is a specific SAC (Service Accounting Code entry '997171' in the scheme of
classification of services mentioning; "the services provided by holding companies, i.e. holding
securities of (or other equity interests in) companies and enterprises for the purpose of owning
a controlling interest”.
21
Circular No. 196/08/2023 GST dated 17.07.2023

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JV being an unincorporated temporary association constituted for the limited

purpose of carrying out a specified project within a time frame. Whether a cash call
is merely a transaction in money or in the nature of consideration for taxable
service, would depend on the terms of the Joint Venture Agreement, which may
vary from case to case.
are raised by an operating member of the joint venture on other
members in proportion to their participating interests in the joint venture
(unincorporated) to meet the expenditure on the operations to be carried out as
per the approved work programme and budget. Let us understand the taxability
of cash calls with the help of following examples:
(13) There are 4 members in the JV including the operating member and
each one contributes ` 100 as part of their share. A total amount of
` 400 is collected. The operating member purchases machinery for ` 400
for the JV to be used in oil production.
In above case, cash calls will not be subject to GST since the operating member is
not carrying out an activity for another for consideration. Here, the money paid for
purchase of machinery is merely in the nature of capital contribution and is
therefore a transaction in money.
(14) There are 4 members in the JV including the operating member and
each one contributes ` 100 as part of their share. A total amount of ` 400
is collected. The operating member thereafter uses its own machinery and
performs exploration and production activities on behalf of the JV.
In above case, the operating member uses its own machinery and is therefore
providing ‘service’ within the scope of ‘supply’ because here operating member is
recovering the cost appropriated towards machinery & services from other JV
members in their participating interest ratio 22.

22
Circular No. 35/9/2018 GST dated 05.03.2018

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In the subsequent paras, we have discussed the exceptions to the two parameters
of supply, namely, (i) supply made for consideration, but not in course or
furtherance of business and (ii) supply made without consideration.

IMPORTATION OF SERVICES FOR CONSIDERATION

WHETHER OR NOT IN COURSE OR FURTHERANCE OF
BUSINESS

The connotation of ‘supply’ gets expanded significantly

through the second part of section 7 i.e. 7(1)(b) which brings
within the ambit of ‘supply’, the importation of services for a Section
consideration whether or not in the course or furtherance 7(1)(b)
of business. This is the only exception to the condition of
supply being made in course or furtherance of business.

(15) Ramaiyaa, a proprietor, has received the architect services for his
personal residence from an architect located in New York at an agreed
consideration of $ 5,000. The import of services by Ramaiyaa is supply
under section 7(1)(b) though it is not in course or furtherance of business.

ACTIVITIES WITHOUT CONSIDERATION - DEEMED SUPPLY

STATUTORY PROVISIONS

Schedule-I Activities to be treated as supply even if made without

consideration

Para No. Particulars

(1) Permanent transfer or disposal of business assets where input tax

credit has been availed on such assets.

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(2) Supply of goods or services or both between related persons or

between distinct persons as specified in section 25, when made
in the course or furtherance of business.
Provided that gifts not exceeding fifty thousand rupees in value
in a financial year by an employer to an employee shall not be
treated as supply of goods or services or both.

(3) Supply of goods —

(a) by a principal to his agent where the agent undertakes to
supply such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to
receive such goods on behalf of the principal.

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

of his other establishments outside India, in the course or
furtherance of business.

ANALYSIS
As seen earlier, section 7(1)(c) provides that supply
includes the activities specified in Schedule I, made
or agreed to be made without a consideration.
Section 7(1)(c)
Thus, there are activities or transactions which are read with
treated as supply, even if they are made without Schedule I
consideration. These are specifically mentioned in
Schedule I appended to the CGST Act. The same
has been discussed in the subsequent paras:
As per Schedule I, in the following four cases, activities made without consideration
will be treated as supply under section 7:

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I. Permanent Transfer/Disposal of Business Assets [Para 1 of

Schedule I]: Any kind of disposal or transfer of
business assets made by an entity on permanent
basis even though without consideration qualifies as
supply. However, this provision shall apply only if
input tax credit has been availed on such assets.

Therefore, in order to qualify as supply under this para, following conditions

need to be satisfied cumulatively:

 There must be a disposal or transfer of

business assets**.

 Transfer/disposal must be permanent, and

 ITC must have been availed on such business

assets.

In view of the last condition stipulated above, permanent transfer/disposal of

following business assets, without consideration, will not be covered within
this para and thus will not be deemed as supply:

(i) Business assets on which ITC is blocked/not available under GST 23.
(ii) Business assets though eligible for ITC, ITC has not been availed by the
registered person.
It's important to note that under GST legislation, there is no specific definition
for the term "business asset." Nevertheless, business assets are generally
recognized as property or equipment acquired primarily for business
purposes. These assets can be grouped into various categories, including
current and non-current, short-term and long-term, operating and
capitalized, as well as tangible and intangible assets.
(16) Dhruv gives old laptops being used in his business to his friend
free of cost. This will qualify as supply provided input tax credit has
been availed by Dhruv on such laptops.

23
List of the goods and services in respect of which ITC is blocked has been elaborated in
Chapter 7 – Input Tax Credit in Module 2 of this Study Material.

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(17) A dealer of air-conditioners permanently transfers the motor

vehicle free of cost. ITC on said motor vehicle is blocked. The
transaction will not constitute a supply as the condition of availment of ITC
on the business asset transferred is not fulfilled.
This para is wide enough to cover transfer of business assets from holding to
subsidiary company for nil consideration.
II. Supply between related persons or distinct persons [Para 2 of
Schedule I]: Supply of goods or services or both between ‘related persons’
or between ‘distinct persons’ as specified in section 25, will qualify as supply
even if made without consideration provided the same is made in the
course or furtherance of business.
Let us understand the terms and .

(i) Related persons: A person who is under influence of another person is called
a related person like members of the same family or subsidiaries of a group
company etc. Under GST law various categories of related persons have been
specified. The term ‘related person’ has been defined in explanation to section
15. The said definition has been depicted by way of a diagram as follows:

Persons including legal person are deemed as related persons if

Such persons are officers/directors of one another’s business

Such persons are legally recognised partners

Such persons are employer & employee

A third person controls/ owns/ holds (directly/ indirectly) ≥ 25%
voting stock/shares of both of them
One of them controls (directly/indirectly) the other

A third person controls (directly/indirectly) both of them

Such persons together control (directly/indirectly) a third person

Such persons are members of the same family*

One of them is the sole agent/sole distributor/sole concessionaire
of the other

*See the definition of ‘family’ as provided in heading 2. – Relevant

Definitions.

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(18) Ms. Priya holds 30% shares of ABC Ltd. and 35% shares
of XYZ Ltd. ABC Ltd. and XYZ Ltd. are related.
(19) Q Ltd. has a deciding role in corporate policy, operations
management and quality control of R Ltd. It can be said that Q Ltd.
controls R Ltd. Thus, Q Ltd. and R Ltd. are related.
(ii) Distinct Persons specified under section 25: Before we go through
the statutory provisions of ‘distinct persons’, let us first have an
overview of the registration provisions for better understanding of
the concept of distinct persons. Detailed and in-depth analysis of the
registration provisions is contained in Chapter 8 – Registration in Module
2 of this Study Material.
Under GST law, a supplier is required to obtain State-wise registration.
He has to obtain registration in every State/UT from where he makes a
taxable supply provided his aggregate turnover exceeds a specified
threshold limit. Thus, he is not required to obtain registration from a
State/UT from where he makes a non-taxable/exempt supply.
Since registration under GST is PAN based, once a supplier is liable to
register, he has to obtain registration in each of the States/UTs in which
he operates [and makes a taxable supply] under the same PAN. Further,
he is normally required to obtain single registration in a State/UT.
However, where he has multiple places of business in a State/UT, he can
get a single registration for said State/UT. He may also get separate
registration for any place(s) of business in such State/UT.
Now, let us understand the concept of distinct persons in simple terms:
The establishments of a person with
separate registrations whether within
the same State/UT or in different
States/UTs are considered as distinct
persons. Where a person having one registered establishment in a
State/UT has another establishment in a different State/UT [not
necessarily registered], these establishments are considered as
establishments of distinct persons.

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Statutory provisions relating to ‘distinct persons’ are contained in

sub-sections (4) and (5) of section 25. They have been explained with
examples as follows:
A person who has obtained/is required to obtain more than one
registration, whether in one State/Union territory or more than one
State/Union territory shall, in respect of each such registration, be
treated as distinct persons [Section 25(4)].
(20) Mohan, a Chartered Accountant, has a registered head
office in Delhi. He has also obtained registration in the State
of West Bengal in respect of his newly opened branch office.
Mohan’s registrations under GST under same PAN in West Bengal and
Delhi shall be treated as distinct persons.

Distinct persons

Registered head Registered branch

office in Delhi office in West Bengal

Further, where a person who has obtained or is required to obtain

registration in a State or Union territory in respect of an establishment,
has an establishment in another State or Union territory, then such
establishments shall be treated as establishments of distinct persons
[Section 25(5)]. Further, Explanation 1 to section 8 of the IGST Act
stipulates that establishments of same entity shall be considered as
establishments of distinct persons where a person has:
(i) an establishment in India and any other establishment outside
India;
(ii) an establishment in a State or Union territory and any other
establishment outside that State or Union territory; or
(iii) an establishment in a State or Union territory and any other
establishment within that State or Union territory.

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(21) Rishabh Enterprises, a registered supplier, owns a

restaurant in Virar, Maharashtra. It has opened a liquor shop
in Raipur, Uttarakhand for trading of alcoholic liquor for
human consumption.

Since supply of alcoholic liquor for human consumption in Uttarakhand

is a non-taxable supply, Rishabh Enterprises is not required to obtain
registration with respect to the same in Uttarakhand.

In this case, restaurant in Maharashtra and liquor shop [though

unregistered] in Uttarakhand shall be treated as establishments of
distinct persons. Supply by Maharashtra restaurant to Uttarakhand
shop, in course or furtherance of business even without consideration will
qualify as supply.

Establishments of distinct persons

Registered restaurant Unregistered liquor

in Maharashtra shop in Uttarakhand

(iii) Stock transfers or branch transfers qualify as supply: It is a common

practice in business to transfer goods transferred amongst different
units of same entity, for instance, distribution of samples manufactured
in a factory to different branches or transfer of goods from factory to
depot/showroom for sale therefrom, from one warehouse to another
warehouse, from one branch to another branch where the demand of the
goods is higher. Since the transfer is within the same business, the
transferor unit would not charge any amount to the transferee unit.
Similarly, it is also possible that one branch supplies services to another
branch of the same entity without consideration. These transactions are
termed as self-supplies. Under GST, these transactions though undertaken
without consideration, will also qualify as supply, provided the transfer of
goods or services is between:
(i) different locations (with separate GST registrations) of same legal
entity as these are transactions between distinct persons, or
(ii) establishments of distinct persons.

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(22) Raghubir Fabrics transfers 1000 shirts from his factory

located in Lucknow to his retail showroom in Delhi so that
the same can be sold from there. The factory and retail
showroom of Raghubir Fabrics are registered in the States where they
are located. Although no consideration is charged, supply of goods
from factory to retail showroom constitutes supply.

Stock Transfer - Deemed

Registered Lucknow Registered Delhi

factory showroom
However, transfer between two units of a legal entity under single
registration (apparently within same State) will not be considered as
supply. This can be understood with the help of the following example:

(23) Raghubir Fabrics transfers 1000 shirts from his factory

located in Lucknow to his retail showroom in Kanpur so that
the same can be sold from there.
It has taken one registration in the State of Uttar Pradesh declaring
Lucknow factory as its principal place of business and Kanpur showroom
as its additional place of business.
Since no consideration is charged, supply of goods from factory to retail
showroom in same State under single registration does not constitute
supply.

Stock Transfer – Not a Supply

Lucknow factory
Kanpur showroom

Single registration in UP

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However, in the above example, if Raghubir Fabrics obtains separate

registrations for Lucknow factory and Kanpur showroom, stock transfer
between the Lucknow factory and Kanpur showroom will constitute
supply. The concept arising from the above discussion is summarised in
below diagram (assuming a case where there are two places of business
in a State):

Whether separate Whether transfer

Whether the
registrations have between them will be
establishments have
been obtained for considered as supply
same PAN?
two places of business under GST?
within same State?
YES NO NO

YES YES YES

Moulds and dies owned by Original Equipment

Manufacturers (OEM) that are sent free of cost
(FOC) to a component manufacturer, in course or
furtherance of business, do not constitute supply since they are not
related persons or distinct persons and there is no consideration
involved [Circular No. 47/21/2018 GST dated 08.06.2018].
(iv) Supply of goods or services or both between an employer and
employee: In terms of the definition of related person given above,
employer and employee are related persons.

However, services provided by an employee to the employer in the

course of or in relation to his employment are outside the scope of GST
(treated as neither supply of goods nor as supply of services) as per
Schedule III of the CGST Act (discussed subsequently in this chapter)].

Gifts by employer to employee

Further, proviso to Para 2 of Schedule I provides that gifts upto ` 50,000 in
value in a financial year by an employer to an employee shall not be treated

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as supply of goods or services or both. However, gifts of value more than

` 50,000 made without consideration are supply and are subject to GST, when
made in the course or furtherance of business.

What
constitutes a
‘gift’?

The term ‘gift’ has not been defined in the GST law. In common parlance, gift
is made without consideration, is voluntary in nature and is made
occasionally. It cannot be demanded as a matter of right by the employee
and the employee cannot move a court of law for obtaining a gift.

Perquisites by employer to employee

Since services by an employee to the employer in the course of or in relation

to his employment are outside the scope of GST, supply by the employer to
the employee in terms of contractual agreement entered into between the
employer and the employee will not be subjected to GST.
Any perquisites provided by the employer
to its employees in terms of contractual
agreement entered into between the
employer and the employee are in lieu of
the services provided by employee to the
employer in relation to his employment.
It follows therefrom that perquisites
provided by the employer to the employee in terms of contractual
agreement entered into between the employer and the employee will
not be subjected to GST 24.

24
Circular No. 172/04/2022 GST dated 06.07.2022

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Further, the input tax credit (ITC) scheme under GST does not allow ITC of
membership of a club, health and fitness centre 25. Consequently, if such
services are provided free of charge to all the employees by the employer
then the same will not be subjected to GST.
The same would hold true for free housing to the employees, when the same
is provided in terms of the contract between the employer and employee and
is part and parcel of the cost-to company (C2C) 27
III. Principal – Agent [Para 3 of Schedule I]: Supply of goods by a
principal to his agent, without consideration,
where the agent undertakes to supply such
goods on behalf of the principal is considered
as supply.
Similarly, supply of goods by an agent to his
principal, without consideration, where the
agent undertakes to receive such goods on
behalf of the principal is considered as supply.
Points which merit consideration, in this regard, are as follows:
• Only is covered here.

• Supply of goods between principal and agent

is also supply.

25
Complete list of the goods and services in respect of which ITC is blocked has been
elaborated in Chapter 7 – Input Tax Credit in Module 2 of this Study Material.
26
Circular No. 172/04/2022 GST dated 06.07.2022 read with Ministry of Finance’s Press
Release on 10.07.2017
27
It is possible to take an alternative view in this regard. This scenario, i.e. the employer
providing services (free of charge) to the employee in lieu of the services provided by the
employee to the employer in the course of employment, is an exchange transaction. In an
exchange transaction, both the parties independently assess their transaction status. Thus,
while service provided by employee to the employer being covered under Schedule III is not
a supply, service provided by employer to employee may constitute a supply in terms of
section 7(1)(c) read with para 2 of Schedule I since employer and employee are related
persons as per explanation to section 15. Provisions of section 15 have been discussed in
detail in Chapter 6 – Value of Supply in this Module of the Study Material.

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Thus, the supply of services between the principal and the agent and vice
versa would require “consideration” to be present so as to be considered as
supply and thus, making it liable to GST.
Let us first go through the meaning of terms ‘principal’ and ‘agent’.
Section 2(5) defines agent as 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.
As we can deduce from this definition of agent that (a) the term ‘agent’ is
defined in terms of the various activities being carried out by the person
concerned in the principal-agent relationship and (b) the supply/receipt of
goods/services has to be undertaken by the agent on behalf of the principal.
Further, the term principal has been defined under section 2(88) as a person
on whose behalf an agent carries on the business of supply or receipt of
goods or services or both.
In order to determine whether a particular principal-
agent relationship falls within the ambit of the
Para 3 of Schedule I as discussed above or not, the
DECIDING FACTOR is whether the invoice for the
further supply of goods on behalf of the principal is
being issued by the agent or not? In other words, the crucial point is
whether or not the agent has the authority to pass or receive the title of the
goods on behalf of the principal.
 Where the invoice for further supply is
being issued by the agent in his name then, Invoice for further
supply to customer
any provision of goods from the principal to
be issued in the
the agent would fall within the fold of Para 3
agent’s name.
above.
 However, where the invoice is issued by the agent to the customer
in the name of the principal, such agent shall not fall within the ambit
of Para 3 above.

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 Similarly, where the goods being

procured by the agent on behalf of the Goods procured on behalf
principal are invoiced in the name of of principal are invoiced
the agent then further provision of in the agent’s name.
the said goods by the agent to the
principal would be covered by Para 3 above [Circular No. 57/31/2018
GST dated 04.09.2018].

Where the invoice is issued Whether he will be an

by the agent to customer agent in terms of Para 3 of
in the name of: Schedule I?

Principal No

Agent Yes

The above clarification can be understood with the help of following scenario-
based examples:
(24) Anmol appoints Bholu to procure certain goods from the
market. Bholu identifies various suppliers who can provide the
goods as desired by Anmol and asks the supplier (Golu) to send
the goods and issue the invoice directly to Anmol.
In this scenario, Bholu is only acting as the procurement agent and has in no
way involved himself in the supply or receipt of the goods. Hence, in
accordance with the provisions of this Act, Bholu is not an agent of Anmol for
supply of goods in terms of Para 3 of Schedule I.

(25) Manimani Bank, a banking company, appoints Mandaar

(auctioneer) to auction certain goods. The auctioneer arranges for
the auction and identifies the potential bidders.
The highest bid is accepted and the goods are sold to the highest bidder by
Manimani Bank. The invoice for the supply of the goods is issued by Manimani
Bank to the successful bidder.

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In this scenario, the auctioneer is merely providing the auctioneering services

with no role played in the supply of the goods. Even in this scenario, Mandaar
is not an agent of Manimani Bank for the supply of goods in terms of Para 3
of Schedule I.

(26) Gautam, an artist, appoints Gambhir (auctioneer) to auction

his painting. Gambhir arranges for the auction and identifies the
potential bidders. The highest bid is accepted and the painting is
sold to the highest bidder.

The invoice for the supply of the painting is issued by Gambhir on the behalf
of Gautam but in his own name and the painting is delivered to the successful
bidder.

In this scenario, Gambhir is not merely providing auctioneering services, but

is also supplying the painting on behalf of Gautam to the bidder, and has the
authority to transfer the title of the painting on behalf of Gautam. This
scenario is covered under Para 3 of Schedule I.

(27) A C&F agent or commission agent takes possession of the

goods from the principal and issues the invoice in his own name.
In such cases, the C&F commission agent is an agent of the
principal for the supply of goods in terms of Para 3 of Schedule I. The
disclosure or non-disclosure of the name of the principal is immaterial in such
situations.

(28) Ravi sells agricultural produce by utilizing the services of Kavi

who is a commission agent as per the Agricultural Produce
Marketing Committee Act (APMC Act) of the State. Kavi identifies
the buyers and sells the agricultural produce on behalf of Ravi for which he
charges a commission from Ravi.
As per the APMC Act, the commission agent is a person who buys or sells the
agricultural produce on behalf of his principal, or facilitates buying and selling
of agricultural produce on behalf of his principal and receives, by way of
remuneration, a commission or percentage upon the amount involved in such
transaction.

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In cases where the invoice is issued by Kavi to the buyer, then he is an agent
covered under Para 3 of Schedule I 28. However, in cases where the invoice is
issued directly by Ravi to the buyer, the commission agent (Kavi) doesn’t fall
under the category of agent covered under Para 3

Clarification of issues pertaining to Del-credere agent (DCA)

A question was posed by the industry - whether supply between a principal
and a Del-credere agent would also get covered under Schedule I. The
Government clarified the doubt of the industry by way of following
clarification:
Before going through the clarification, let us first
understand what is meant by a DCA? In commercial Del-credere
trade parlance, a DCA is a selling agent who is engaged agent
by a principal to assist in supply of goods or services by
contacting potential buyers on behalf of the principal. The
factor that differentiates a DCA from other agents is that the DCA guarantees
the payment to the supplier.
In such scenarios where the buyer fails to make payment to the principal by
the due date, DCA makes the payment to the principal on behalf of the buyer
(effectively providing an insurance against default by the buyer), and for this
reason the commission paid to the DCA may be relatively higher than that
paid to a normal agent.
In order to guarantee timely payment to the supplier, the DCA can resort to
various methods including extending short-term transaction-based loans to
the buyer or paying the supplier himself and recovering the amount from the
buyer with some interest at a later date. This loan is to be repaid by the buyer
along with an interest to the DCA at a rate mutually agreed between DCA and
buyer.
Circular No. 73/47/2018 GST dated 05.11.2018 has clarified the following
issues in this regard:

28
It is important to note that services provided by the commission agent for sale or purchase
of agricultural produce are exempt supply under GST. Said exemption has been discussed in
detail in Chapter 4 Exemptions from GST in this Module of the Study Material.

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Sl. Issue Clarification

No.

1. Whether a DCA falls under As already clarified vide Circular No.

the ambit of agent under 57/31/2018 GST (discussed above),
Para 3 of Schedule I? whether or not the DCA will fall under
the ambit of agent under Para 3 of
Schedule I depends on the following
possible scenarios:
 In case where the invoice for
supply of goods is issued by the
supplier to the customer, either
himself or through DCA, the DCA
does not fall under the ambit of
agent.
 In case where the invoice for
supply of goods is issued by the
DCA in his own name, the DCA
would fall under the ambit of
agent.

2. Whether the temporary In such a scenario, following activities

short-term transaction are taking place:
based loan extended by
1. Supply of goods from supplier
the DCA to the recipient
(principal) to recipient;
(buyer), for which interest
is charged by the DCA, is 2. Supply of agency services from
to be included in the value DCA to the supplier or the
of goods being supplied recipient or both;
by the supplier (principal)
3. Supply of extension of loan
where DCA is not an agent
services by the DCA to the
under
recipient.
Para 3 of Schedule I?
It is clarified that in cases where the
DCA is not an agent under Para 3 of
Schedule I, the temporary short-term
transaction based loan being

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provided by DCA to the buyer is a

supply of service by the DCA to the
recipient on Principal to Principal
basis and is an independent supply 29.
Therefore, the interest being charged
by the DCA would not form part of
the value of supply of goods supplied
(to the buyer) by the supplier.

3. Where DCA is an agent In such a scenario following activities

under are taking place:
Para 3 of Schedule I and
1. Supply of goods by the supplier
makes payment to the
(principal) to the DCA;
principal on behalf of the
buyer and charges interest 2. Further supply of goods by the
to the buyer for delayed DCA to the recipient;
payment along with the 3. Supply of agency services by the
value of goods being DCA to the supplier or the
supplied, whether the recipient or both;
interest will form a part of
the value of supply of 4. Extension of credit by the DCA to
goods also or not? the recipient.
It is clarified that in cases where the
DCA is an agent under Para 3 of
Schedule I, the temporary short-term
transaction based credit being
provided by DCA to the buyer no
longer retains its character of an
independent supply and is subsumed
in the supply of the goods by the DCA
to the recipient. It is emphasised that
the activity of extension of credit by
the DCA to the recipient would not be

29
Services by way of extending deposits, loans or advances in so far as the consideration is
represented by way of interest or discount (other than interest involved in credit card services)
are exempt supply vide Entry 27 of Notification No. 12/2017 CT(R) dated 28.06.2017
[Discussed in detail in Chapter 4 – Exemptions from GST in this Module of the Study Material].

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considered as a separate supply as it

is in the context of the supply of
goods made by the DCA to the
recipient.
It is further clarified that the value of
the interest charged for such credit
would be required to be included in
the value of supply of goods by DCA
to the recipient as per section
15(2)(d) 30.

IV. Importation of services [Para 4 of Schedule I]: Import of services

by a person from a related person or from his establishments located outside
India, without consideration, in the course or furtherance of business shall be
treated as “supply”.
(29) Jhumroo Associates received legal consultancy services from
its head office located in Malaysia. The head office has rendered
such consultancy services free of cost to its branch office.
Since Jhumroo Associates and the head office are related persons, services
received by Jhumroo Associates will qualify as supply even though the head
office has not charged anything from it.

(30) Chakmak, a proprietor registered in Delhi, has sought

architect services from his son located in US, with respect to his
newly constructed house in Delhi.
Although services have been received by Chakmak without consideration
from his son - a related person, yet it will not qualify as supply since the same
has not been received in course or furtherance of business.
However, if in the above case, Chakmak receives architect services without
consideration from his son with respect to his office in Delhi, the same shall
be treated as supply because the same have been received in the course of
business.

30
Section 15 has been discussed in detail in Chapter 6 – Value of Supply in this Module of the
Study Material.

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1.54 GOODS AND SERVICES TAX

with
In the course of furtherance Supply
consideration
of business or not
Import of Services

Related /distinct person in

the course of furtherance of Supply
without business
consideration
Not a
Other Cases
supply

In the preceding paras, we have discussed the provisions of Schedule-I which

enumerates the cases where an activity is treated as supply even though it is
undertaken free of cost. In this backdrop, let us now examine whether the
items given free of cost in case of some of the sales promotion schemes
qualify as supply or not.
Clarification on Sales promotion schemes
A number of sales promotion schemes
are commonly employed by the
businesses to increase sales volume or to
encourage the use or trial of a product or
service so that new customers get attracted towards their
products. For instance, certain sections of trade and
industry, such as, pharmaceutical companies often provide
drug samples to their stockists, dealers, medical
practitioners, etc., or sometimes, companies announce
offers like ‘Buy One, Get One free’ - i.e. buy one soap and
get one soap free or get one tooth brush free along with
the purchase of tooth paste.

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As we have already seen that as per section 7(1)(a), the goods or services
which are supplied free of cost (without any consideration) shall not be
treated as “supply” except in case of activities mentioned in Schedule I of the
CGST Act. In view of the same, few sales promotion schemes have been
examined as under:

Free samples and gifts: Samples which are

FREE
supplied free of cost, without any consideration, do
SAMPLES
not qualify as “supply” under GST 31, except where the
activity falls within the ambit of Schedule I.

Buy one get one free offer: It may appear at first

glance that in case of offers like “Buy One, Get One
Free”, one item is being “supplied free of cost” Buy one
without any consideration. In fact, it is not an Get one
individual supply of free goods, but a case of two or
free
more individual supplies where a single price is being
charged for the entire supply. It can at best be treated as
supplying two goods for the price of one.
Taxability of such supply will be dependent upon as to whether the supply is
a composite supply or a mixed supply and the rate of tax shall be determined
accordingly – Concept of composite and mixed supply has been discussed
subsequently in this chapter.

[Circular 92/11/2019 GST dated 07.03.2019]

There has always been an ambiguity as to whether activities/ transactions involving
supply of goods/ services, by any person, other than an individual, to its members
or vice-versa fall within the purview of supply or not. Clause (aa) to section 7(1)
brings in the certainty that said activities/ transactions are covered within the scope
of supply under GST and ensures the levy of GST on such activities/transactions.
This has been discussed as under:

31
ITC on inputs, input services and capital goods to the extent they are used in relation to
the gifts/free samples shall be available to the supplier only where the activity of distribution
of gifts/free samples falls within the scope of supply supply. The same has been discussed in
detail in Chapter 7 – Input Tax Credit in Module 2 of this Study Material.

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ACTIVITIES/TRANSACTIONS BETWEEN A PERSON,

OTHER THAN AN INDIVIDUAL, AND ITS MEMBERS/
CONSTITUENTS FOR CONSIDERATION

The activities or transactions (involving supply of goods or

services) between a person, other than an individual, (i.e.
association, club, etc.) and its members or constituents, for Section
cash, deferred payment or other valuable consideration are 7(1)(aa)
covered within the ambit of ‘supply’ as per section 7(1)(aa).
Further, explanation to clause (aa) to section 7(1) clarifies
that for the purpose of this clause, such person (association, club, etc.) and its
members or constituents shall be deemed to be two separate persons and the
supply of activities or transactions between them shall be deemed to take place
from one such person to another. The explanation starts with a non-obstante
clause and shall therefore, shall have an overriding effect over anything
contained in any other law for the time being in force or any judgment, decree or
order of any Court, tribunal or authority.
The aforesaid explanation prevents the application of doctrine of mutuality by such
person(s) 32.
(31) Resident Welfare Association (RWA) of Sanskriti Society supplies air-
conditioners to its members at a concessional price.
(32) A Resident Welfare Association collects maintenance charges from its
members for services provided.
Here, in both the aforesaid examples, it shall be deemed that the Resident Welfare
Association (RWA) and its members are two separate persons and it shall be
deemed that the supply has taken place from Resident Welfare Association (RWA)
to its members.

32
Section 7(1)(aa), in effect, overrules the judgment of the Hon’ble Supreme Court in State of
West Bengal v. Calcutta Club Limited wherein it was held that the transactions between a
Club and its members cannot be taxed owing to the doctrine of mutuality, i.e., a person cannot
make a profit from himself.

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ACTIVITIES/TRANSACTIONS TO BE TREATED AS SUPPLY

OF GOODS OR SUPPLY OF SERVICES

Section 7(1A) classifies certain activities/ transactions

constituting supply, either as supply of goods or supply of
Section 7(1A)
services. Schedule II of the CGST Act contains the list of read with
activities or transactions which have been classified either as
Schedule II

supply of goods or supply of service.

This helps in mitigating the ambiguities which existed in earlier laws.

(33) Under earlier tax regime, the restaurants used to charge both
service tax and VAT on the value of food served. This is so because both
sale of goods and provision of service were involved and therefore
taxable event under both the Statutes i.e. respective VAT law and service tax law
got triggered.

Under GST, the supply by a restaurant is treated as composite supply [concept of

composite supply is discussed subsequently in this chapter] since supply of food and
service is naturally bundled in ordinary course of business. Further, para 6(b) of
Schedule II [refer table below] specifically provides that such composite supply shall
be treated as supply of service. Hence, the entire value of invoice shall be treated
as value of service and leviable to GST accordingly.

The matters listed out in Schedule II are primarily those which had been entangled
in litigation in the earlier regime owing to their complex nature and susceptibility
to double taxation. These are as follows:-

Para Activity/ Type Nature of

No. Transaction Supply

1. Transfer Any transfer of title in goods. Supply of

(34) Shivaji sells ready- Goods
made garments to its
customers.

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Any transfer of right in goods/ Supply of

undivided share in goods without Services
transfer of title thereof.
(35) Genius Equipments
Ltd. gives a machinery on
rent to Suhaasi
Manufacturers.

Any transfer of title in Supply of

goods under an Goods
agreement which
stipulates that property in goods
shall pass at a future date upon
payment of full consideration as
agreed.
(36) Dhruva Capitals supplied
goods on hire purchase basis to
customers.
(37) Optima Manufacturers
supplies toys to retailers on ‘sale or
return basis’.

2. Land and Any lease, tenancy, easement, Supply of

Building licence to occupy land 33. Services
(38) Lease agreement for
land.

Any lease or letting out of building Supply of

including a commercial, industrial Services
or residential complex for business
or commerce, wholly or partly.

33
Also refer Circular No.44/18/2018 CGST dated 02.05.2018 discussed subsequently.

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(39) A shop let out in a busy

market area.

3. Treatment or Any treatment or process which is Supply of

Process applied to another person’s goods Services
(40) Damani Dying House
dyes the clothes given by
Shubham Textiles Ltd. on job work
basis.

4. Transfer of Goods forming part of business Supply of

Business assets are transferred or disposed Goods
Assets of by/under directions of person
carrying on the business so as no
longer to form part of those assets.

Goods held/used for business are Supply of

put to private use or are made Services
available to any person for use for
any purpose other than business,
by/ under directions of person
carrying on the business.

(41) A person
manufacturing and selling
wooden furniture takes one chair
manufactured by him for use at his
house.

Goods forming part of assets of any Supply of

business carried on by a person Goods
who ceases to be a taxable person,
shall be deemed to be supplied by
him, in the course or furtherance
of his business, immediately

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before he ceases to be a taxable

person.
(42) Arun, a trader, is
winding up his business.
Any goods left in stock shall be
deemed to be supplied by him.
Exceptions:
 Business is transferred as a
going concern to another
person 34.
 Business is carried on by a
personal representative who
is deemed to be a taxable
person.

5. (a) Renting of immovable property

(43) Renting of a commercial
complex.
(44) Renting of precincts of a religious
place.
Supply of
(45) Renting of property to an educational Services
institution.
(46) Permitting use of immoveable property
for placing vending/dispensing machines.
(b) Construction of complex, building, civil
structure, etc.
Construction of a complex, building, civil
structure or a part thereof, including a
complex or building intended for sale to a

34
Services by way of transfer of a going concern, as a whole or an independent part thereof
are exempt supply under GST [Discussed in detail in Chapter 4 – Exemptions from GST in this
Module of the Study Material].

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buyer, wholly or partly, except where the

entire consideration has been received after
issuance of completion certificate, where
required, by the competent authority or after
its first occupation, whichever is earlier 35.
(47) Rathi Builders has
constructed individual residential
units for agreed consideration of ` 1.2 crore
per unit. ` 90 lakh per unit were received
before issuance of completion certificate by
the competent authority and its first
Supply of
occupation, and balance after completion.
Services
The term construction includes additions,
alterations, replacements, or remodeling of
any existing civil structure.
The expression competent authority means
the Government or any authority authorised
to issue completion certificate under any law
for the time being in force and in case of non-
requirement of such certificate from such
authority, from any of the following,
namely:—
(i) an architect registered with the Council
of Architecture constituted under the
Architects Act, 1972; or
(ii) a chartered engineer registered with
the Institution of Engineers (India); or
(iii) a licensed surveyor of the respective
local body of the city or town or village
or development or planning authority.

35
Also refer Circular No. 234/28/2024 CGST dated 11.10.2024 discussed subsequently.

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(c) Temporary transfer or permitting use or

enjoyment of any intellectual property right
(48) Temporary transfer of patent.

(d) Development, design, programming,

customisation, adaptation, upgradation,
enhancement, implementation of IT software
(49) Suvidha Solutions develops an
accounting software for a business Supply of
firm. Services

(e) Agreeing to obligation to refrain from an act,

or to tolerate an act or situation, or to do an
act.
(50) Cable operator - Sakharam
has entered into an agreement
with Cable operator - Aatmaram
that Sakharam will not provide cable
connections in the specified areas where
Aatmaram is providing the connections.
Non-compete agreements constitute supply
of service.
Please refer the detailed discussion on this
para of Schedule-II given at the end of the
Table.

(f) Transfer of right to use any goods for any

purpose (whether or not for specified period)
for cash, deferred payment or other valuable
consideration.

(51) Machinery given on hire.

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6. Following composite supplies :-

 Works contract
Works contract: means a contract for building,
construction, fabrication, completion, erection,
installation, fitting out, improvement,
modification, repair, maintenance, renovation,
alteration or commissioning of any immovable
property wherein transfer of property in goods
(whether as goods or in some other form) is Supply of
involved in the execution of such contract Services
[Section 2(119)].
 Supply, by way of or as part of any service or
in any other manner whatsoever, of goods,
being food or any other article for human
consumption or any drink (other than
alcoholic liquor for human consumption),
where such supply or service is for cash,
deferred payment or other valuable
consideration.

CBIC has clarified the taxability of tenancy rights, Joint Venture (JV) and Priority
Sector Lending Certificates (PSLCs) as under:
1. Taxability of ‘tenancy rights’ under GST
CBIC has clarified the taxability of ‘tenancy rights’ under GST as under:
Pagadi system, i.e. transfer of tenancy rights against
tenancy premium, is prevalent in some States. In
Pagadi system, the tenant acquires tenancy rights in
the property against payment of tenancy premium
(pagadi). The landlord may be owner of the property,
but the possession of the same lies with the tenant. The tenant pays periodic
rent to the landlord as long as he occupies the property. The tenant also
usually has the option to sell the tenancy right of the said property and in
such a case has to share a percentage of the proceeds with owner of land, as

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laid down in their tenancy agreement. Alternatively, the landlord pays to

tenant the prevailing tenancy premium to get the property vacated.
It has been clarified that the activity of transfer of tenancy right against
consideration [i.e. tenancy premium] is squarely covered under supply
of service liable to GST.
It is a form of lease or renting of property and such activity is specifically
declared to be a service in Para 2 of Schedule II as discussed in table above
i.e. any lease, tenancy, easement, licence to occupy land is a supply of
services. Although stamp duty and registration charges have been levied on
such transfer of tenancy rights, it shall be still subject to GST. Merely because
a transaction/supply involves execution of documents which may require
registration and payment of registration fee and stamp duty, would not
preclude them from the ‘scope of supply’ and from payment of GST.
The transfer of tenancy rights cannot be treated as sale of land/ building in
para 5 of Schedule III. Thus, it is not a negative
list activity [this concept is discussed under next
heading] and consequently, a consideration for
the said activity shall attract levy of GST.
To sum up, the activity of transfer of ‘tenancy
rights’ is squarely covered under the scope of
supply and taxable per-se. Transfer of tenancy rights to a new tenant against
consideration in the form of tenancy premium is taxable.
However, renting of residential dwelling for use as a residence to an
unregistered person or to a registered sole proprietor taking the residential
dwelling on rent on his own account in his personal capacity for use as his
residence is exempt [Entry 12 of Notification No. 12/2017 CT (R) dated
28.06.2017 – Discussed in Chapter 4 – Exemptions from GST in this Module of
the Study Material]. Hence, grant of tenancy rights in a residential dwelling
for use as residential dwelling against tenancy premium or periodic rent or
both (to above mentioned persons) is exempt. As regards services provided
by outgoing tenant by way of surrendering the tenancy rights against
consideration in the form of a portion of tenancy premium is liable to GST 36.

36
Circular No. 44/2018 CT dated 02.05.2018

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2. Priority Sector Lending Certificates (PSLCs)37

PSLCs are in the nature of goods 38. PSLC are not securities. PSLC are akin to
freely tradeable duty scrips, Renewable Energy Certificates, REP license or
replenishment license, which earlier attracted VAT.
In GST, there is no exemption available to trading in PSLCs. Thus, PSLCs are
taxable as goods. GST payable on the certificates would be available as ITC to
the bank buying the certificates [Circular No. 34/08/2018 GST dated 01.03.2018].
Further, nature of supply of PSLC between banks is supply of goods in the course
of inter-State trade or commerce. Accordingly, IGST shall be payable on the
supply of PSLC traded over e-Kuber portal of RBI [Circular No. 93/12/2019 GST
dated 08.03.2019].
3. Applicability of GST on liquidated damages, compensation and penalty
arising out of breach of contract or other provisions of law
CBIC has clarified issues with respect to GST applicability on liquidated
damages, compensation and penalty arising out of breach of contract or
other provisions of law.
Clarification: “Agreeing to the obligation to refrain from an act or to
tolerate an act or a situation, or to do an act” has been specifically declared
to be a supply of service in para 5(e) of Schedule II if the same constitutes a
“supply” within the meaning of the CGST Act.

Expression “Agreeing to the obligation to refrain

from an act or to tolerate an act or a situation, or to
do an act” has following three limbs

Agreeing to the Agreeing to the

Agreeing to the
obligation to refrain from obligation to tolerate an
obligation to do an act
an act act or a situation

37
Lending by a commercial bank for specified sectors which have been identified as “priority sector”
by RBI is called as Priority Sector Lending. Priority Sector Lending Certificates (PSLCs) are a mechanism
to enable banks to achieve the priority sector lending target and sub-targets by purchase of these
instruments in the event of shortfall. This also incentivizes surplus banks as it allows them to sell their
excess achievement over targets thereby enhancing lending to the categories under priority sector.
Under the PSLC mechanism, the seller sells fulfilment of priority sector obligation and the buyer buys
the obligation with no transfer of risk or loan assets.
38
RBI’s FAQ on PSLCs

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a. Agreeing to the obligation to REFRAIN from an act

(52) Non-compete agreements, where one party agrees not to compete
with the other party in a product, service or geographical area against a
consideration paid by the other party.

(53) A builder refraining from constructing more than a certain

number of floors, even though permitted to do so by the municipal
authorities, against a compensation paid by the neighbouring
housing project, which wants to protect its sunlight.
(54) An industrial unit refraining from manufacturing activity during certain hours
against an agreed compensation paid by a neighbouring school, which wants to
avoid noise during those hours.
b. Agreeing to the obligation to tolerate an act or a situation
This would include activities such a shopkeeper allowing a hawker to operate
from the common pavement in front of his shop against a monthly payment
by the hawker, or an RWA tolerating the use of loud speakers for early
morning prayers by a school located in the colony subject to the school
paying an agreed sum to the RWA as compensation.
c. Agreeing to the obligation to do an act
This would include the case where an industrial unit agrees to install
equipment for zero emission/discharge at the behest of the RWA of a
neighbouring residential complex against a consideration paid by such RWA,
even though the emission/discharge from the industrial unit was within
permissible limits and there was no legal obligation upon the individual unit
to do so.
Above three activities must comply with the following conditions:
(1) There must be an expressed or implied agreement or a contract
must exist
Above three activities must be under an “agreement” or a “contract”
(whether express or implied) to fall within the ambit of para 5(e) of
Schedule II. In other words, one of the parties to such
agreement/contract (the first party) must be under a contractual
obligation to either (a) refrain or (b) tolerate or (c) do.

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Such contractual arrangement must be an independent arrangement

in its own right. Such arrangement/agreement can take the form of an
independent stand- alone contract or may form part of another
contract.
Thus, a person (the first person) can be said to be making a supply by
way of refraining from doing something or tolerating some act or
situation to another person (the second person) if the first person was
under an obligation to do so and then performed accordingly.
Such a contract cannot be imagined or presumed to exist just because
there is a flow of money from one party to another. There must be an
expressed or implied promise by the recipient of money to agree to do
or abstain from doing something in return for the money paid to him.
(2) Consideration must flow in return to this contract/agreement
Some “consideration” must flow in return from the other party to this
contract/agreement (the second party) to the first party for such (a)
refraining or (b) tolerating or (c) doing.
Taxability of some of the transactions has been discussed in detail as
under:
(A) Liquidated Damages
It is common for the parties entering
into a contract, to specify in the
contract itself, the compensation that
would be payable in the event of the
breach of the contract. Black’s Law
Dictionary defines ‘Liquidated
Damages’ as cash compensation agreed to by a signed, written
contract for breach of contract, payable to the aggrieved party.
The taxability or otherwise of liquidated damages is clarified as
under:
It is argued that performance is the essence of a contract.
Liquidated damages cannot be said to be a consideration
received for tolerating the breach or non-performance of

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contract. They are rather payments for not tolerating the breach
of contract. Payment of liquidated damages is stipulated in a
contract to ensure performance and to deter non-performance,
unsatisfactory performance or delayed performance.
Liquidated damages are a measure of loss and damage that the
parties agree would arise due to breach of contract. They do not
act as a remedy for the breach of contract. They do not restitute
the aggrieved person.
A contract is entered into for execution and not for its breach. The
liquidated damages or penalty are not the desired outcome of the
contract. By accepting the liquidated damages, the party
aggrieved by breach of contract cannot be said to have permitted
or tolerated the deviation or non-fulfilment of the promise by the
other party.
Where the amount paid as ‘liquidated damages’ is an amount paid
only to compensate for injury, loss or damage suffered by the
aggrieved party due to breach of the contract and there is no
agreement, express or implied, by the aggrieved party receiving
the liquidated damages, to refrain from or tolerate an act or to do
anything for the party paying the liquidated damages, in such
cases liquidated damages are merely a flow of money from the
party who causes breach of the contract to the party who suffers
loss or damage due to such breach. Such payments do not
constitute consideration for a supply and are not taxable.
Examples of such cases are:
(54) Damages resulting from damage to property,
negligence, piracy, unauthorized use of trade name,
copyright,

(55) Penalty stipulated in a contract for delayed construction of

houses,
(56) Forfeiture of earnest money by a seller in case of breach of
‘an agreement to sell’ an immovable property by the buyer.

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(57) Forfeiture of earnest money by Government or local

authority in the event of a successful bidder failing to act
after winning the bid, for allotment of natural resources.
The key in such cases is to consider whether the impugned payments
constitute consideration for another independent contract envisaging
tolerating an act or situation or refraining from doing any act or
situation or simply doing an act. If the answer is yes, then it constitutes
a ‘supply’ irrespective of by what name it is called, otherwise it is not a
“supply”.
If the payment is merely an event in the course of the performance of
the agreement and it does not represent the ‘object’, as such, of the
contract then it cannot be considered ‘consideration’.
On the contrary, consider the following examples:
(58) A contract may provide that payment by the recipient of
goods or services shall be made before a certain date and failure to
make payment by the due date shall attract late fee or penalty.
(59) A contract for transport of passengers may stipulate that the
ticket amount shall be partly or wholly forfeited if the passenger does
not show up.
(60) A contract for package tour may stipulate forfeiture of security
deposit in the event of cancellation of tour by the customer.
(61) A contract for lease of movable or immovable property may
stipulate that the lessee shall not terminate the lease before a certain
period and if he does so he will have to pay certain amount as early
termination fee or penalty.
(62) Some banks similarly charge pre- payment penalty if the borrower
wishes to repay the loan before the maturity of the loan period.
In the above examples, amounts paid for acceptance of late payment,
early termination of lease or for pre-payment of loan or the amounts
forfeited on cancellation of service by the customer as contemplated by
the contract as part of commercial terms agreed to by the parties,
constitute consideration for the supply of a facility, namely, of acceptance
of late payment, early termination of a lease agreement, of prepayment

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of loan and of making arrangements for the intended supply by the tour
operator respectively.
Therefore, such payments, even though they may be referred to as fine
or penalty, are actually payments that amount to consideration for
supply, and are subject to GST, in cases where such supply is taxable.
Since these supplies are ancillary to the principal supply for which the
contract is signed, they shall be eligible to be assessed as the principal
supply. Naturally, such payments will not be taxable if the principal
supply is exempt.
(B) Cheque dishonor fine/ penalty
The supplier wants payment to be received
on time and does not want cheque to be
dishonoured. There is never an implied or
express offer or willingness on part of the
supplier that he would tolerate deposit of
an invalid, fake or unworthy instrument of payment against
consideration in the form of cheque dishonour fine or penalty.
The fine or penalty that the supplier or a banker imposes, for
dishonour of a cheque, is a penalty imposed not for tolerating the
act or situation but a fine, or penalty imposed for not tolerating,
penalizing and thereby deterring and discouraging such an act or
situation. Therefore, cheque dishonor fine or penalty is not a
consideration for any service and not taxable.
(C) Penalty imposed for violation of laws
Penalty imposed for violation of laws
such as traffic violations, or for violation
of pollution norms or other laws are also
not consideration for any supply
received and are not taxable.
Same is the case with fines, penalties imposed by the mining
Department of a Central or State Government or a local authority

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on discovering mining of excess mineral beyond the permissible

limit or of mining activities in violation of the mining permit.
Laws are not framed for tolerating their violation. They stipulate
penalty not for tolerating violation but for not tolerating,
penalizing and deterring such violations. There is no agreement
between the Government and the violator specifying that
violation would be allowed or permitted against payment of fine
or penalty. There cannot be such an agreement as violation of law
is never a lawful object or consideration.
In short, fines and penalty chargeable by Government or a
local authority imposed for violation of a statute, bye-laws,
rules or regulations are not leviable to tax.
(D) Forfeiture of salary or payment of bond amount in the event
of the employee leaving the employment before the
minimum agreed period
The provisions for forfeiture of salary or recovery of bond amount
in the event of the employee leaving the employment before the
minimum agreed period are incorporated in the employment
contract to discourage non-serious candidates from taking up
employment.
The said amounts are recovered by the employer not as a
consideration for tolerating the act of such premature quitting of
employment but as penalties for dissuading the non-serious
employees from taking up employment and to discourage and
deter such a situation.
Further, the employee does not get anything in return from the
employer against payment of such amounts.
Therefore, such amounts recovered by the employer are not
taxable as consideration for the service of agreeing to tolerate
an act or a situation.

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(E) Late payment surcharge or fee

The facility of accepting late payments

with interest or late payment fee, fine or
penalty is a facility granted by supplier
naturally bundled with the main supply. It
is not uncommon or unnatural for customers to sometimes miss
the last date of payment of electricity, water, telecommunication
services etc.
Almost all service providers across the world provide the facility
of accepting late payments with late fine or penalty.

Even if this service is described as a service of tolerating the act

of late payment, it is an ancillary supply naturally bundled and
supplied in conjunction with the principal supply, and
therefore should be assessed as the principal supply.
Since it is ancillary to and naturally bundled with the principal
supply such as of electricity, water, telecommunication, cooking
gas, insurance etc. it should be assessed at the same rate as the
principal supply.
However, the same cannot be said of cheque dishonor fine or
penalty as discussed earlier.
(F) Fixed charges for power
The price charged for electricity by the
power generating companies from the
State Electricity Boards (SEBs)/DISCOMS or
by SEBs/DISCOMs from individual
customers has two components, namely, a
minimum fixed charge (or capacity charge) and variable per unit
charge.

The fact that the minimum fixed charges remain the same whether
electricity is consumed or not or it is scheduled/consumed below
the contracted or available capacity or a minimum threshold, does
not mean that minimum fixed charge or part of it is a charge for

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tolerating the act of not scheduling or consuming the minimum

the contracted or available capacity or a minimum threshold.
Both the components of the price, the minimum fixed
charges/capacity charges and the variable/energy charges are
charged for sale of electricity and are thus not taxable as
electricity is exempt from GST.
(G) Cancellation charges
It is a common business practice for suppliers of services such as
hotel accommodation, tour and travel, transportation etc. to
provide the facility of cancellation of the intended supplies within
a certain time period on payment of cancellation fee.
Cancellation fee can be considered as the charges for the costs
involved in making arrangements for the intended supply and the
costs involved in cancellation of the supply, such as in cancellation
of reserved tickets by the Indian Railways.
Services such as transportation travel and tour constitute a bundle
of services. The transportation service, for instance, starts with
booking of the ticket for travel and lasts at least till the exit of the
passenger from the destination terminal.

All services such

as making
available an
online portal or
convenient
booking
counters with basic facilities
at the transportation terminal
or in the city, to reserve the
seats and issue tickets for
reserved seats much in
advance of the travel, giving
preferred seats with or
without extra cost, lounge and

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waiting room facilities at airports, railway stations and bus

terminals, provision of basic necessities such as soap and other
toiletries in the wash rooms, clean drinking water in the waiting
area etc. form part and parcel of the transportation service; they
constitute the various elements of passenger transportation
service, a composite supply.
The facilitation service of allowing cancellation against payment
of cancellation charges is also a natural part of this bundle. It is
invariably supplied by all suppliers of passenger transportation
service as naturally bundled and in conjunction with the principal
supply of transportation in the ordinary course of business.
Therefore, facilitation supply of allowing cancellation of an
intended supply against payment of cancellation fee or retention
or forfeiture of a part or whole of the consideration or security
deposit in such cases should be assessed as the principal supply.
(63) Cancellation charges of railway tickets for a class
would attract GST at the same rate as applicable to the
class of travel (i.e., 5% GST on first class or air-
conditioned coach ticket and nil for other classes such as second
sleeper class). Same is the case for air travel.
Accordingly, the amount forfeited in the case of non-refundable
ticket for air travel or security deposit or earnest money forfeited
in case of the customer failing to avail the travel, tour operator or
hotel accommodation service or such other intended supplies
should be assessed at the same rate as applicable to the service
contract, say air transport or tour operator service, or other such
services.
However, as discussed earlier, forfeiture of earnest money by a
seller in case of breach of ‘an agreement to sell’ an immovable
property by the buyer or such forfeiture by Government or local
authority in the event of a successful bidder failing to act after
winning the bid for allotment of natural resources, is a mere flow
of money, as the buyer or the successful bidder does not get
anything in return for such forfeiture of earnest money.

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Forfeiture of earnest money is stipulated in such cases not as a

consideration for tolerating the breach of contract but as a
compensation for the losses suffered and as a penalty for
discouraging the non-serious buyers or bidders. Such payments
being merely flow of money are not a consideration for any supply
and are not taxable 39.
4. Clarifications regarding applicability of GST on penal charges being levied by
the Regulated Entities (REs)
Regulated Entities (hereinafter referred as REs) such as banks and non-
banking financial companies (NBFCs) have been instructed, vide RBI
instructions dated 18.08.2023, to discontinue the use of penal interest for
non-compliance with loan terms.

As per the instructions, instead of penal interest, REs are to levy penal
charges for non-compliance with loan terms.
The intent of levying penal charges is essentially to inculcate a sense of
credit discipline. These instructions are effective from 01.01.2024, and
do not apply to credit cards, external commercial borrowings, trade
credits and structured obligations which are covered under product
specific directions.
Issue: The issue which arose for consideration was whether penal charges
so levied are in the nature of payment/consideration for tolerating an
act or situation.
Clarification: As clarified vide Circular No. 178/10/2022 GST dated
03.08.2022 discussed above that certain payments such as liquidated
damages for breach of contract are not a consideration for tolerating an
act or situation. They are rather amounts recovered to deter such acts;
such amounts are for preventing breach of contract or non-performance
and are thus mere 'events' in a contract. The essence of a contract is its
‘performance’ and not its ‘breach’, meaning thereby that parties enter
into a contract for execution and not for its breach.

39
Circular No. 178/10/2022 GST dated 03.08.2022

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Penal charges levied by REs, in compliance with RBI directions dated

18.08.2023, are essentially in the nature of charges for breach of terms
of contract and hence, it has been clarified that no GST is payable on the
penal charges levied by Regulated Entities, in compliance with RBI
directions dated 18.08.2023, for non-compliance with material terms and
conditions of loan contract by the borrower 40.
5. Applicability of GST in respect of warranty replacement of goods or its parts
and/ repair services during warranty period
As a commercial practice, the original equipment manufacturers/ suppliers
offer warranty for the goods / services supplied by them to the customers.
During the warranty period, goods /services are replaced to the customers
(either by manufacturer itself or by the distributor on behalf of the
manufacturer) and generally, no separate consideration is charged and
received at the time of replacement from the customer.
Following issues have been clarified in respect of warranty replacement of
goods or its parts and/ repair services provided during the warranty period:
SCENARIO 1
ORIGINAL EQUIPMENT MANUFACTURER OFFERING REPLACEMENT OF
GOODS OR ITS PARTS/ REPAIR SERVICES UNDER WARRANTY TO THE
CUSTOMER

Replaces
goods or
provides
repair services
Customer
Original Equipment
Manufacturer

40
Circular No. 245/02/2025 GST dated 28.01.2025

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Issue: Where the original equipment

manufacturer offers warranty for the
goods supplied by him to the customer
and provides replacement of goods or its
parts and/ or repair services to the
customer during the warranty period,
without separately charging any
consideration at the time of such
replacement/ repair services, whether GST
would be payable on such replacement of
goods or its parts or supply of repair
services, without any consideration from the customer, as part of
warranty?

Clarification: The value of original

supply of goods (provided along
with warranty) by the manufacturer to Value of original supply
the customer includes the likely cost includes likely cost of
replacement of goods/its
of replacement of goods or its
parts/ repair services to
parts and / or repair services to be be incurred during the
incurred during the warranty warranty period.
period, on which tax would have
already been paid at the time of
original supply of goods.

As such, where the manufacturer provides replacement of parts and/ or repair

services to the customer during the warranty period, without separately
charging any consideration at the time of such replacement/ repair services,
no further GST is chargeable on such replacement of goods or its parts
and/ or repair service during warranty period.

No separate charges for

such replacement/ repair No further GST payable
services

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However, if any additional consideration is charged by the manufacturer

from the customer, either for replacement of goods or its parts or for any
service, then GST will be payable on such supply with respect to such
additional consideration.

Additional consideration
charged for such GST will be payable
replacement/ repair services

SCENARIO 2
DISTRIBUTOR PROVIDES WARRANTY RELACEMENT AND/OR REPAIR
SERVICES TO THE CUSTOMER ON BEHALF OF THE MANUFACTURER

Replaces
goods or
provides
repair services
Distributor Customer

Taxability of the transaction/activitiy undertaken between Distributor

and Customer

Issue 1: Whether GST would be payable on replacement of goods or its parts

and/ or repair services provided by a distributor without any consideration
from the customer, as part of warranty on behalf of the manufacturer?

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Clarification: There may be instances

where a distributor of a company
provides replacement of goods or its
parts and/ or repair services to the
customer as part of warranty on behalf of
the manufacturer and no separate
consideration is charged by such
distributor in respect of the said
replacement and/ or repair services from
the customer.

In such cases, as no consideration is

being charged by the distributor from
the customer, no GST would be payable
by the distributor on the said activity of providing replacement of goods or
its parts and/ or repair services to the customer.

No separate charges for such

No further GST payable
replacement/ repair services

However, if any additional consideration is charged by the distributor from

the customer, either for replacement of goods or its parts or for any service,
then GST will be payable on such supply with respect to such additional
consideration. Additional consideration charged for such replacement/
repair services.

Taxability of the transaction/activitiy undertaken between Distributor

and Manufacturer

Issue 2: Whether any supply is involved

between the distributor and the manufacturer
in case of replacement of GOODS OR ITS
PARTS by distributor?
Clarification: There can be 4 instances as
discussed at the next page.

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In case where In such a case

Distributor replaces the goods or its GST would be payable by the

part(s) to the customer under warranty distributor on the said supply
either by using his stock or by purchasing by him to the manufacturer.
from a third party and charges the
consideration for the part(s) so
replaced from the manufacturer, by
issuance of a tax invoice, for the said
supply made by him to the manufacturer.

Distributor raises a requisition to the No GST is payable on such

manufacturer for the goods or its replacement of goods or its
part(s) to be replaced by him under part(s) by the manufacturer.
warranty and the manufacturer then
provides the said goods or its part(s)
to the distributor for the purpose of such
replacement to the customer as part of
warranty without separately charging
any consideration at the time of such
replacement.

Distributor replaces the goods or its Accordingly, the tax liability

part(s) to the customer under warranty may be adjusted by the
out of the supply already received by manufacturer subject to the
him from the manufacturer and the condition that such distributor
manufacturer issues a credit note in has reversed the ITC availed 42
respect of the goods or its part(s) so against such goods/parts.
replaced subject to provisions of section
34(2) 41.

41
Provisions of section 34(2) have been discussed in detail in Chapter 10: Tax invoice; Credit
and Debit Notes in Module 2 of this Study Material.
42
Provisions of ITC (Input Tax Credit) have been discussed in detail in Chapter 8: Input Tax
Credit in Module 2 of this Study Material.

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Distributor replaces the goods or its No GST is payable on such

parts to the customer under warranty by replenishment of goods or the
using his stock and then raises a parts.
requisition to the manufacturer for the
goods or the parts. The manufacturer
then provides the said goods or the parts
to the distributor through a delivery
challan, without separately charging any
consideration at the time of such
replenishment.

Issue 3: Where the distributor provides

repair service, in addition to
replacement of parts or otherwise, to
the customer without any
consideration, as part of warranty, on
behalf of the manufacturer but charges
the manufacturer for such REPAIR
SERVICES either by way of issue of tax
invoice or a debit note, whether GST
would be payable on such activity by the
distributor?
Clarification: In such scenario,
Distributor provides repair
there is a supply of service by
service, in addition to
the distributor and the
replacement of parts to
manufacturer is the recipient customer without any
of such supply of repair services consideration, as part of
in accordance with the warranty and charges the
provisions of section 2(93)(a) of manufacturer for such repair
the CGST Act, 2017. services.
Hence, GST would be payable
on such provision of service by the distributor to the manufacturer.

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SCENARIO 3
EXTENDED WARRANTY
Sometimes companies provide offers of
Extended warranty to the customers which can
be availed (i) at the time of original supply or (ii)
just before the expiry of the standard warranty
period. Whether GST would be payable in both
the cases?
Clarification:
(a) If a customer enters into an agreement of extended warranty with
the supplier of the goods at the time of original supply, then the
consideration for such extended warranty becomes part of the value of
the composite supply, the principal supply being the supply of goods,
and GST would be payable accordingly.
However, if the supply of extended warranty is made by a person
different from the supplier of the goods, then supply of extended
warranty will be treated as a separate supply from the original supply
of goods and will be taxable as supply of services.
(b) In case where a consumer enters into an agreement of extended
warranty at any time after the original supply, then the same shall
be treated as a supply of services distinct from the original supply of
goods and the supplier of the said extended warranty shall be liable to
discharge GST liability applicable on such supply of services 43 44.

Extended warranty Extended warranty

provided by supplier at becomes part of the
the time of original value of the composite
supply. supply of goods.

43
Circular No. 195/07/2023 GST dated 17.07.2023 read with Circular No. 216/10/2024 GST
dated 26.06.2024
44
The provisions pertaining to availability of input tax credit have been discussed in Chapter-
8: Input Tax Credit of Module 2 of this Study Material.

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Extended Extended warranty provided

warranty by a person different from
will be supplier at the time of
treated as original supply.
SUPPLY OF
SERVICES
distinct from Extended warranty
provided at any time
the original
after the original
supply. supply.

5. Applicability of GST on Location Charges or Preferential Location Charges

(PLC) collected along with consideration for sale/transfer of
residential/commercial properties
Allowing choice of location of the
apartment is integral part of supply
of construction services. Therefore,
PLC is part of consideration charged
for supply of construction services
before issuance of completion
certificate.
Therefore, PLC paid along with the
consideration for the construction services of residential/ commercial/
industrial complex forms part of composite supply where supply of
construction services is the main service and PLC is naturally bundled with it
and are eligible for same tax treatment as the main supply of construction
service 45.

45
Circular No. 234/28/2024 GST dated 11.10.2024

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NON-SUPPLIES UNDER GST

I. Activities/transactions specified under Schedule III: Section 7(2)(a)
provides activities or transactions specified in Schedule III shall be treated
neither as a supply of goods nor a supply of services. Schedule III specifies
transactions/ activities which shall be neither treated as supply of goods nor
as supply of services. Thus, the activities/transactions specified under this
schedule can be termed as Non-Supplies under the GST regime. In a way, it is a
“Negative list” for the purposes of taxation in GST.
It is important to note that apart from the activities specified in Schedule III,
some activities have been notified by the Government vide different
notifications, which are also to be considered as non-supplies. Further, some
circulars have been issued clarifying that certain transactions are to be
considered as non-supplies.
Hence, our discussion under this heading will revolve around the following:
A. Non-supplies listed in Schedule III

B. Non-supplies notified vide notification

C. Non-supplies clarified by way of circular

A. NON-SUPPLIES LISTED IN SCHEDULE III

Para Activities or transactions which shall be treated neither as a

No. supply of goods nor a supply of services

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

relation to his employment.
(64) Services provided by casual worker to employer
who gives wages on daily basis to the worker are services
provided by the worker in the course of employment.

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(65) Casual workers employed by a

construction contractor for execution of a
building contract for him are services in the
course of employment. Similarly, casual workers
employed by a security services agency for provision of security
services to a client are also services in the course of employment.
Only services that are provided by the employee to the
employer in the course of employment are outside the realm
of supply. However, services provided outside the ambit of
employment for a consideration would qualify as supply 46.
(66) Annapurna is a director in Nilgiri Ltd. receiving remuneration
which is declared as salaries in the books of the company and
subject to TDS under section 192 of the Income-tax Act, 1961. In
this case, services provided by Annapurna to Nilgiri Ltd. are in
course of her employment with the company.
(67) Services provided on contract basis by a person to
another i.e. principal-to-principal basis are not services
provided in the course of employment 47.
(68) Any amount paid by employer to employee for not joining a
competing business is paid for providing the service of forbearance
to act and cannot be considered for providing services in the
course of employment.
(69) Annapurna, an independent director in Nilgiri Ltd., receives a
sitting fee of ` 12,000. Since as per the Companies Act, 2013,
independent director should not have been an employee of the
company, services provided by Annapurna to Nilgiri Ltd. are not in
course of employment.

46
Also, refer Circular No. 213/07/2024 GST dated 26.06.2024 discussed at the end of the
Table.
47
Discussion based on Service Tax Education Guide issued under erstwhile under service tax
law.

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2. Services by any court or Tribunal

established under any law for the time
being in force.
Explanation – The term "Court" includes
District Court, High Court and Supreme
Court⏰.

Leviability of GST on amounts/fees charged by Consumer

⏰

Disputes Redressal Commission

In order to provide inexpensive, speedy and summary redressal of
consumer disputes, quasi-judicial bodies are set up in each District
and State and at the National level, called the District Forums, the
State Consumer Disputes Redressal Commissions and the National
Consumer Disputes Redressal Commission respectively.
Consumer Disputes Redressal Commissions (National/ State/ District)
may not be tribunals literally as they may not have been set up directly
under Article 323B of the Constitution. However, they are clothed with
the characteristics of a Tribunal 48.

48
Consumer Disputes Redressal Commissions are clothed with the characteristics of a Tribunal on
account of the following: -
(1) Statement of objects and reasons as mentioned in the Consumer Protection Bill state that one
of its objects is to provide speedy and simple redressal to consumer disputes, for which a quasi-
judicial machinery is sought to be set up at District, State and Central levels.
(2) The President of the District/State/National Disputes Redressal Commissions is a person who
has been or is qualified to be a District Judge, High Court Judge and Supreme Court Judge
respectively.
(3) These Commissions have been vested with the powers of a civil court under CPC for issuing
summons, enforcing attendance of defendants/witnesses, reception of evidence,
discovery/production of documents, examination of witnesses, etc.
(4) Every proceeding in these Commissions is deemed to be judicial proceedings as per sections
193/228 of IPC. The Commissions have been deemed to be a Civil Court under CrPC.
(5) Appeals against District Commissions lie to State Commission while appeals against the State
Commissions lie to the National Commission. Appeals against National Commission lie to the
Supreme Court.

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Consequently, fee paid by litigants while registering complaints to

said Commissions are not leviable to GST. Any penalty in cash
imposed by or amount paid to these Commissions will also not
attract GST [Circular No. 32/06/2018 GST dated 12.02.2018].

3. (a) Functions performed by the

Members of Parliament, Members
of State Legislature, Members of
Panchayats, Members of
Municipalities and Members of
other local authorities.
(b) Duties performed by any person who holds any post in
pursuance of the provisions of the Constitution in that
capacity.
(70) Duties performed by President of India, Vice
President of India, Prime Minister of India, Chief
Justice of India, Speaker of the Lok Sabha, Chief
Election Commissioner, C & AG, Chairman of Union Public
Service Commission, Attorney General of India, in that
capacity.
(c) Duties performed by any person as a Chairperson or a Member
or a Director in a body established by the Central Government
or a State Government or local authority and who is not
deemed as an employee before the commencement of this
clause.

4. Services of funeral, burial, crematorium or mortuary including

transportation of the deceased.

5. Sale of land and, subject to paragraph

5(b) of Schedule II, sale of building, (i.e.
in case, where entire consideration for
sale of building received after issuance of

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completion certificate or after its first occupation, whichever is

earlier).
Land may be sold either as it is or after some development such as
levelling, laying down of drainage lines, water lines, electricity lines,
etc. It is clarified that sale of such developed land is also sale of
land and is covered under this para and accordingly, does not
attract GST.
However, it may be noted that any service provided for
development of land, like levelling, laying of drainage lines (as may
be received by developers) shall attract GST at applicable rate for
such services 49.

6.
Actionable claims, other than specified actionable claims.
are specifically included in the definition of
goods under section 2(52) [Refer the definitions of ‘actionable
claims’ and ‘goods’ given under heading ‘Relevant Definitions].
However, this para of Schedule III specifically excludes actionable
claims, other than specified actionable claims from the ambit of
definition of supply.

Co-joint reading of said provisions implies that only specified

actionable claims are treated as supply. All other actionable
claims are outside the ambit of definition of supply.

Now the question arises, what are the specified actionable claims?
Specified actionable
claim means the
actionable claim
involved in or by way of—

49
Circular No. 177/09/2022 GST dated 03.08.2022

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(i) betting;
(ii) casinos;
(iii) gambling;
(iv) horse racing;
(v) lottery; or
(vi) online money gaming [Section 2(102A)].
Online money gaming means online gaming** in which players
pay or deposit money or money's
worth, including virtual digital
assets, in the expectation of
winning money or money's worth, including virtual digital assets 50,
in any event including
game, scheme, competition
or any other activity or
process, whether or not its
outcome or performance is
based on skill, chance or both and whether the same is permissible
or otherwise under any other law for the time being in force.

**Online gaming means offering of a

game on the internet or an electronic
network and includes
online money gaming
[Section 2(80A)].

(71) Some
of the
other
examples of
actionable claims are: Right to recover insurance money, claim for

50
Virtual digital asset shall have the same meaning as assigned to it in section 2(47A) of the
Income-tax Act, 1961 [Section 2(117A)].

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arrears of rent, claims for future rents (if these can be assigned),
unsecured loans, unsecured debentures, bills of exchange,
promissory notes, bank guarantee, Fixed Deposit Receipt, right to
the benefit of a contract, etc. These are not considered as supply
of goods or services. .

7. Supply of goods from a place in the non-

taxable territory to another place in the non-taxable territory
without such goods entering into India.
(72) Vivekanand purchased goods from USA and sold
it to George in Canada without bringing the goods in
India. This transaction is neither supply of goods nor
supply of services.

8. Supply of
warehoused goods to any person
before clearance for home
consumption.

(73) Radheyshyam imported some goods in India

but kept the goods in
without clearing it for home
consumption. In the meantime, Radheyshyam sold these
goods to Sitaram while they were in warehouse. This
transaction between Radheyshyam and Sitaram is neither
supply of goods nor supply of services.
Supply of goods
by the consignee to any other
person,

, after the goods have been

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dispatched from the port of origin located outside India but

before clearance for home consumption.

(74) Prasoon of India imported some goods from

Japan. While the goods were in high seas, Prasoon
sold the goods to Jinesh in India by way of
endorsement of documents of title of goods. This transaction
between Prasoon and Jinesh is neither supply of goods nor
supply of services.

9. Activity of apportionment of co-insurance premium by the lead

insurer to the co-insurer for the insurance services jointly
supplied by the lead insurer and the co-insurer to the insured in
co-insurance agreements, subject to the condition that the lead
insurer pays the central tax, the State tax, the Union territory
tax and the integrated tax on the entire amount of premium
paid by the insured.
Co-insurance is a practice where multiple insurance companies
jointly cover a single insurance policy. Instead of a single
insurer bearing the entire risk, the risk is shared between two
or more insurers (called co-insurers). In a co-insurance
agreement, each insurer agrees to cover a specific percentage
of the risk and in return receives a corresponding percentage
of the total premium. One of the co-insurers is designated as
lead insurer.

The lead insurer is responsible for managing the policy,

handling the administration such as claim processing and
communicating with the insured. The lead insurer collects the
total premium from the insured and then apportions the
premium between the co-insurers (known as co-insurance
premium) based on their respective shares of the risk,
alongwith paying applicable taxes.

10. Services by insurer to the reinsurer for which ceding commission

or the reinsurance commission is deducted from reinsurance
premium paid by the insurer to the reinsurer, subject to the

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condition that the central tax, the State tax, the Union territory
tax and the integrated tax is paid by the reinsurer on the gross
reinsurance premium payable by the insurer to the reinsurer,
inclusive of the said ceding commission or the reinsurance
commission.

Reinsurance is a risk management practice where an insurance

company (called the insurer) transfers part of its risk to
another insurance company (called reinsurer) in exchange for
a portion of the premium that insurer collects from its
policyholders, called reinsurance premium. This allows the
insurer to manage its risk and financial exposure. The reinsurer
often pays ceding commission (also known as the reinsurance
commission) to the insurer to compensate for administrative
costs, underwriting, and acquisition expenses related to issuing
and servicing the policies. By receiving this commission, the
insurer is compensated for expenses and reduces its overall
burden, making reinsurance financially viable. Generally,
while paying the reinsurance premium, insurer deducts the
ceding commission/ reinsurance commission payable by
reinsurer.

ESOP/ESPP/RSU provided by a company to its employees through its

overseas holding company
Some of the Indian companies provide the option to their employees for
allotment of securities/shares of their
foreign holding company as part of the
compensation package as per terms of
contract of employment. In such cases,
on exercising the option by the
employees of Indian subsidiary company,
the securities/shares of foreign holding
company are allotted directly by the
holding company to the concerned employees of Indian subsidiary company

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and the cost of such securities/shares is generally reimbursed by the

subsidiary company to the holding company.
In case where securities/shares of the foreign holding company are
transferred to the employees of domestic subsidiary company as Employee
Stock Purchase Plan (ESPP) or Employee Stock Option Plan (ESOP) or
Restricted Stock Unit (RSU) 51, GST is not leviable on the compensation paid
to the employee by the employer as per the terms of employment
contract since as seen earlier, the purchase or sale of securities/shares, in
itself, is neither a supply of goods nor a supply of services. Moreover, the
ESOP/ESPP/RSU is a part of remuneration of the employee by the
employer as per terms of employment and is covered under Para 1 of
Schedule III of the CGST Act.
When reimbursement for transfer of securities/shares (which is neither in
the nature of goods nor services) is done by domestic subsidiary company to
foreign holding company on cost-to-cost basis, the same cannot be treated
as import of services by the domestic subsidiary company from the foreign
holding company and hence, is not liable to GST.
If the foreign holding company charges any additional fee, markup, or
commission from the domestic subsidiary company for issuing
ESOP/ESPP/RSU to the employees of the domestic subsidiary company, then
the same shall be considered to be in nature of consideration for the supply
of services of facilitating/arranging the transaction in securities/shares
by the foreign holding company to the domestic subsidiary company. The
GST shall be payable by the domestic holding company on reverse charge
basis on such import of services from the foreign holding company 52.

51
ESPPs and ESOPs are typically presented as 'options' granted to employees, whereas RSUs
take the form of awards or rewards contingent upon the employee meeting specific
performance standards.
52
Circular No. 213/07/2024 GST dated 26.06.2024

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B. NON-SUPPLIES NOTIFIED VIDE NOTIFICATION

Government is empowered to notify the activities/ transactions
undertaken by the Central Government, a
State Government or any local authority in
which they are engaged as public Section 7(2)(b)

authorities as the activities/transactions

which shall be treated neither as supply of
goods nor as supply of services. Till now, following two
activities/transactions have been notified under said clause:
(i) Activity in relation to Panchayat/Municipality functions:
Services by way of
any activity in
Panchayat Municipality
relation to a
Functions Functions
function entrusted
to a Panchayat
under article 243G of the Constitution or to a Municipality under
article 243W of the Constitution are treated neither as a supply of
goods nor as a supply of service 53.
(ii) Grant of alcoholic liquor licence: Services by way of grant of
alcoholic liquor licence by the State Governments are treated
neither as a supply of goods nor as a supply of service 54.
Such licence is granted against consideration in the form of
licence fee or application fee or by whatever
name it is called.
This special dispensation is Grant of licence
applicable only to supply of for alcoholic
service by way of grant of liquor
liquor licenses by the State
Governments as an agreement

53
notified vide Notification No. 14/2017 CT (R) dated 28.06.2017/ Notification No. 11/2017
IT (R) dated 28.06.2017, as amended
54
notified vide Notification No. 25/2019 CT (R) dated 30.09.2019/ Notification No. 24/2019
IT (R) dated 30.09.2019

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between the Centre and States. Hence, this is not applicable/has

no precedence value in relation to grant of other licenses and
privileges for a fee in other situations, where GST is payable.
It may be noted that services provided by the Government to
business entities including by way of grant of privileges, licences,
mining rights, natural resources such as spectrum etc. against
payment of consideration in the form of fee, royalty etc. are
taxable under GST. Tax is required to be paid by the business
entities on such services under reverse charge 55 .
C. NON-SUPPLIES CLARIFIED BY WAY OF CIRCULAR
CBIC has clarified that following activities/transactions are non-
supplies:

(i) Inter-State movement of various modes of conveyance

Inter-State movement of various modes of conveyance, between
distinct persons including-
• Trains,
• Buses,
• Trucks,
• Tankers,
• Trailers,
• Vessels,
• Containers,
• Aircrafts,
(a) carrying goods or passengers or both; or
(b) for repairs and maintenance,
[except in cases where such movement is for further supply of the
same conveyance] shall be treated ‘neither as a supply of goods
or supply of service’ and therefore not be leviable to IGST.

55
Circular No. 121/40/2019 GST dated 11.10.2019

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However, applicable CGST/SGST/IGST, as the case may be, shall

be leviable on repairs and maintenance done for such conveyance
[Circular No. 1/1/2017 IGST dated 07.07.2017**].
(ii) Inter-State movement of rigs, tools and spares, and all goods
on wheels [like cranes]
**Above circular shall mutatis
mutandis apply to inter-State
movement of rigs, tools and
spares, and all goods on wheels
[like cranes], [except in cases
where movement of such goods is
for further supply of the same
goods], such inter-State
movement shall be treated ‘neither as a supply of goods or
supply of service,’ and consequently no IGST would be
applicable on such movements.

In this context, it is also reiterated that applicable

CGST/SGST/IGST, as the case maybe, is leviable on repairs and
maintenance done for such goods [Circular No. 21/21/2017-GST
dated 22.11.2017].
In the preceding paras, we have discussed, how to determine
whether a given activity or transaction constitutes a supply. Once
an activity or transaction qualifies as supply, one needs to
determine whether the same is leviable to GST or not.
Though the provisions relating to levy and collection of GST have
been discussed at length in Chapter 2 – Charge of GST in this
Module of the Study Material, a brief idea of the same is provided
hereunder.

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(iii) Clarification regarding transactions in vouchers 56

Voucher means an instrument where there is an obligation to
accept it as consideration or part consideration for a supply
of goods or services or both and
where the goods or services or
both to be supplied or the
identities of their potential
suppliers are either indicated
on the instrument itself or in
related documentation,
including the terms and
conditions of use of such instrument [Section 2(118)].

From this definition of voucher, it emerges that “voucher”

may be in nature of payment instrument which creates an
obligation on the supplier to accept it as a consideration or
part consideration for the supply of
goods and/or services.
Voucher is
The issuance of payment instruments, in the
including pre-paid instruments, in India nature of
is regulated by Reserve Bank of India payment
(RBI) in terms of the Payment and instrument
Settlement Act, 2007, RBI’s Master
Directions and the relevant Notifications/Circulars/
Communications issued by the RBI from time to time.

Pre-paid instruments (PPIs) as defined by RBI

 payment instruments that facilitate purchase of goods
and/or services against the value stored on such
instruments.
 The value stored on such instruments represents the
value paid for by the holder, by cash, by debit to a bank
account, or by credit card.

56
Circular No. 243/37/2024 GST dated 31.12.2024

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 The pre-paid instruments can be issued as cards, wallets

and in any such form/instrument which can be used to
access the PPI and to use the amount therein.
Further, as per section 2(75) of CGST Act, “money” includes an
instrument recognized by the Reserve Bank of India which is
used as a consideration to settle an obligation.
On combined reading of the definition of “voucher” as per
section 2(118), along with definition of “money” as per
section 2(75) and the description of “pre-paid instruments”
given by RBI, the following is observed:-

Case A: Where the voucher is covered as a pre-paid instrument

recognized by the RBI and is used as a consideration to settle
an obligation

 In such cases, the voucher will fall under the definition

of “money”.
 Thus, as “money” is excluded from the definition of
goods and services, the transactions in voucher would be
considered neither as a supply of goods nor as a supply
of services.
Case B: where voucher is not covered as a pre-paid instrument
recognized by RBI
 In such cases, voucher cannot be treated as money.
 The voucher will be in Voucher –
nature of an obligation on
Neither supply of
the supplier to receive it as
goods nor supply
consideration or part
of services
consideration and assure
the beneficiary/voucher
holder to claim certain
goods and/or services as specified on the voucher or in
the related documents.

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 In such cases, the voucher can be considered as an

"actionable claim".
 As vouchers are not covered under definition of specified
actionable claim, it appears that they are covered in
entry 6 of Schedule III of CGST Act as actionable claims,
other than specified actionable claims.
 Therefore, it appears that even in such a case,
transaction in vouchers would be treated neither as a
"supply of goods" nor as a "supply of services".
Issue - 1
Whether “transactions in vouchers” falls under the category
of supply of goods and/or services?
Clarification
It has been clarified that irrespective of whether voucher is
covered as a pre-paid instrument recognized by RBI or not, the
voucher is just an instrument which creates an obligation on
the supplier to accept it as consideration or part consideration
and the transactions in voucher themselves cannot be
considered either as a supply of goods or as a supply of
services.
However, supply of underlying goods and/or services, for
which vouchers are used as consideration or part
consideration, may be taxable under GST.
Issue - 2
What would be the GST treatment of transactions in vouchers
by distributors/ sub-distributors/ agents etc.?
Clarification
There are primarily two models for distribution of vouchers
through distributors/ sub distributors/ agents, etc.

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(i) Where vouchers are distributed through the distributors/

sub-distributors/ dealers on Principal-to-Principal(P2P)
basis:
In such cases, the distributor/ dealer purchases voucher
from the voucher issuer typically at a discounted rate
and subsequently sells the same to the sub-distributors,
corporates or end customers and generate revenue
through a trading margin, which is a difference between
the acquisition cost and the selling price of the vouchers
by the said distributor/ dealer.
In such cases, distributors/ dealers (including sub-
distributors) own the vouchers and operate
autonomously with full control over the process from
purchase to the final sale of the vouchers to the end user.
As per section 9 (1) of CGST
Act, GST is chargeable on Vouchers
the supply of goods and/or distribution on
services. As the transaction P2P basis - NO
in vouchers is neither supply GST
of goods nor supply of
services, therefore, pure trading of vouchers in this case
would not constitute either supply of goods or supply of
services.
Accordingly, such trading of vouchers would not be
leviable to GST as per section 9(1).
(ii) Where vouchers are distributed using distributors/ sub-
distributors/ agents on commission/ fee basis:
In such cases, the transactions between the voucher
issuer and the distributors/ sub-distributors/ agents are
on principal-agency basis.
These arrangements, as per contract/agreement
between distributor/sub-distributor/agents and the

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voucher issuer may specify a set of obligations on such

agents such as marketing & promotion and other related
support activities for distribution of vouchers against a
commission/fee or any other amount by whatever name
called, for such purpose.
In such cases, distributors/sub-distributors/agents do
not operate autonomously, do not own the vouchers and
only act as agent of the voucher issuer.
In such cases, GST would
be payable by such
Vouchers
distributor/sub-
distribution on
distributor/agent, acting
commission/fee
as an agent of the
basis-GST is payable
voucher issuer, on the
commission/fee or any
other amount by whatever name called, for such
purpose, as a supply of services to the voucher issuer.
Issue - 3
What would be GST treatment of additional services such as
advertisement, cobranding, marketing & promotion,
customization services, technology support services, customer
support services etc.

Clarification
In such a case, the said service fee/ service charge/ affiliate
charge or other amount for supply of
such additional services to the Additional
voucher issuer as per the terms of services -GST
contract/agreement, would be liable payable at
to GST at the applicable rate in the applicable rate
hands of the said service provider.

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Issue 4

What would be the GST treatment of unredeemed vouchers

(breakage)?
Clarification

In case vouchers remain unused/

unredeemed at the end of their Unredeemed
expiry period, the businesses Vouchers
generally make book adjustments [Breakage] -
and account the said amount on NO SUPPLY
account of unredeemed vouchers in
their statement of income. The value
of such unredeemed vouchers accounted for in the statement
of income is called breakage.
The issue which arose for consideration was whether the
amount attributed to the unredeemed voucher(breakage) can
be considered as “monetary value of any act or forbearance,
in respect of, in response to, or for the inducement of, the
supply of goods or services or both, whether by the recipient
or by any other person”.
As per section 9 (1) of the CGST Act, GST is leviable only on
the supply of goods and/or services. In the case of breakage,
there is no redemption of voucher and there is no supply of
underlying goods and/or services. Therefore, there is no
supply of goods and/or services on account of such
unredeemed vouchers (breakage). As there is no underlying
supply of goods and/or services in case of non-redemption of
vouchers by the customer, the amount retained for
unredeemed vouchers by the voucher issuer cannot be
construed as consideration for any supply. Accordingly, such
amount attributable to unredeemed vouchers (breakage)
would not be taxable as per the provisions of section 9(1) of
CGST Act.

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Circular No. 178/10/2022-GST dated 03.08.2022 clarifies that

agreement to do or refrain from an act should not be
presumed to exist, and that there must be an express or
implied agreement, oral or written, to do or abstain from
doing something against payment of consideration, for a
taxable supply to exist.
Considering the principle laid out in the said circular, it
emerges that where the voucher is issued for the purpose of
redemption in respect of a supply of goods and/or services and
there is no express or implied agreement, oral or written,
between the issuer of voucher and redeemer for payment of
any amount or charges by the redeemer to the voucher issuer
in case of non-redemption of the voucher, it cannot be
considered that non-redemption of voucher by the redeemer
tantamounts to supply of services.
Therefore, it appears that the amount attributable to non-
redemption of voucher (breakage) would not constitute as a
“monetary value of any act or forbearance, in respect of, in
response to, or for the inducement of, the supply of goods or
services or both, whether by the recipient or by any other
person”. Therefore, no GST appears to be payable on such
amount attributable to non-redemption of voucher
(breakage).
[Circular No. 243/37/2024 GST dated 31.12.2024]
The diagrammatic representation of the above circular is on
the next page.

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Vouchers

Pre-paid instruments Not a PPI

(PPIs) [Voucher is an instrument which
[Payment instruments that creates an obligation on supplier
facilitate purchase of goods to accept it as consideration/part
and/or services against the consideration and assure the
value stored on such beneficiary/voucher holder to
instruments.] claim certain goods and/or
services as specified on the
voucher or in the related
Said voucher will fall under documents.]
the definition of "money"
Said voucher will be
Excluded from the definition considered as an "actionable
of goods and services claim"

Actionable claims, other than

Transactions in specified actionable claims, is to
voucher would be be treated neither as a
considered neither "supply of goods" nor as a
as a supply of goods "supply of services" [Entry 6 of
nor as a supply of Schedule III of the CGST Act,
services 2017]

Thus, the transactions in voucher themselves cannot be

considered either as a supply of goods or as a supply of
services. However, supply of underlying goods and/or
services, for which vouchers are used as consideration or part
consideration, may be taxable under GST.

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Transactions in vouchers by distributors/ sub-

distributors/dealers/agents etc.

Vouchers distributed on
Vouchers distributed on
Principal-to-Principal
Principal–Agent basis
(P2P) basis
[Voucher issuer and the
[Distributors/sub-
Distributors/ Sub-distributors/
distributors/ dealers (DSDs)
Agents (DSAs) operate on a
purchase vouchers at
principal–agency basis. DSAs
discounted rate and sold to
do not own vouchers, but act
sub-distributors, corporates
as an agent of voucher issuer
or end customers. DSDs
and operate under specified
earn trading margin [Selling
obligations set by him (e.g.,
price - Acquisition cost].
marketing, promotion, other
Thus, DSDs own the
support services). DSAs earn
vouchers, retaining full
commission/fees which are
ownership and control of the
treated as a supply of services
vouchers throughout the
to the voucher issuer.]
process.]

This amounts to trading of GST applicable on the

vouchers. commission/ fee or any other
amount by whatever name
called, charged for such
purpose as a supply of services
to the voucher issuer.

Not be leviable to GST as per

section 9(1)

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Vouchers

Additional services
Unredeemed vouchers
[Ex., advertisement, co-branding, (breakage)
customization services,
[Vouchers unused/unredeemed
technology support services,
at the end of the expiry period.]
customer support services, etc.]

provided by either the No supply of underlying

distributor/sub- goods and/or services on
distributor/by another account of such
person to the voucher unredeemed vouchers
issuer (breakage)

against a service fee/service Amount attributable to

charge/affiliate charge or unredeemed vouchers
any other amount, by (breakage) would not be
whatever name called leviable to GST as per the
provisions of section 9(1) of
the CGST Act.
Such service fee etc. would
be liable to GST at the
applicable rate in the
hands of the said service
provider.

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In the preceding paras, we have discussed, how to determine

whether a given activity or transaction constitutes a supply. Once
an activity or transaction qualifies as supply, one needs to
determine whether the same is leviable to GST or not. Though the
provisions relating to levy and collection of GST have been
discussed at length in Chapter 2 – Charge of GST in this Module of
the Study Material, a brief idea of the same is provided hereunder.

For a supply to attract GST, primarily two additional conditions need to be satisfied.
These are – (i) supply must be made by a taxable person and (ii) supply must be a
taxable supply. These two additional conditions have been discussed hereunder:
(i) Supply by a taxable person
A supply to attract GST should be made by a taxable person.

A supply attracting GST can

be made TO a non-taxable
person also.

The restriction of being a taxable person is only on the supplier whereas the
recipient can be either taxable or non-taxable.

Meaning of taxable person: A “taxable person” is a person who is registered

or liable to be registered under section 22 or section 24 [The said sections and
the concept of taxable person thereto have been discussed in detail in Chapter
8 – Registration in Module 2 of the Study Material].

Hence, a person who is liable to be registered but does not take a registration
and remains an unregistered person shall be construed as a taxable person.
Similarly, a person not liable to be registered, but has taken got himself
registered by taking a voluntary registration and got himself registered is also
a taxable person.

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(ii) Taxable supply

For a supply to attract GST, the supply must be taxable. Taxable supply has
been broadly defined and means any supply of goods or services or both
which, is leviable to tax under the GST Law [Section 2(108)] [Refer Chapter-2:
Charge of GST in this Module of the Study Material for detailed discussion on
leviability of GST].

On the other hand, exempt supply means supply of any goods or services or
both which attract nil rate of tax or which may be wholly exempt from tax*
under section 11 of the CGST Act, or under section 6 of the IGST Act, and
includes non-taxable supply [Section 2(47)]

*Exemptions may be provided to the specified goods or services or to a specified

category of persons/ entities making supply [Refer Chapter-4: Exemptions from
GST in this Module of the Study Material for detailed discussion].

4. COMPOSITE AND MIXED SUPPLIES [SECTION 8]

STATUTORY PROVISIONS
Section 8 Tax liability on composite and mixed supplies
Clauses Particulars
The tax liability on a composite or a mixed supply shall be
determined in the following manner, namely:-
(a) a composite supply comprising two or more supplies, one of
which is a principal supply, shall be treated as a supply of such
principal supply; and
(b) a mixed supply comprising of two or more supplies shall be
treated as supply of that particular supply that attracts highest
rate of tax.

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ANALYSIS

GST is payable on goods or services or both at the notified rates. Classification of

any supply (whether as goods or services, the category of goods or services) is
essential to determine the applicable rate of GST on the particular supply. The
application of rates poses no problem if the supply is of individual goods or
individual services, which is clearly identifiable and such goods or services are
subject to a particular rate of tax.
However, in certain cases, supplies are not so simple and clearly identifiable.
Sometimes supplies are a combination of goods or combination of services or
combination of both goods and services and each individual component of such
supplies may attract a different rate of tax.
In such cases, the rate of tax to be levied on such supplies may be a challenge. It
is for this reason, that the GST Law identifies composite supplies and mixed supplies
and provides certainty in respect of tax treatment under GST for such supplies.
In order to determine whether the supplies are ‘composite supply’ or ‘mixed
supply’, one needs to determine whether the supplies are naturally bundled or
not naturally bundled in ordinary course of business. The concept of ‘naturally
bundled’ supplies is emanating from the definition of ‘composite supply’.

Composite supply means a supply made by a taxable person to a recipient and:

• comprises two or more taxable supplies of goods or services or both, or any
combination thereof.
• which are naturally bundled and supplied in conjunction with each other, in
the ordinary course of business
• one of which is a principal supply [Section 2(30)].
This means that in a composite supply, goods or services or both are bundled owing
to natural necessities. The elements in a composite supply are dependent on the
‘principal supply’.

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Principal supply means the supply of goods or services which constitutes the
predominant element of a composite supply and to which any other supply
forming part of that composite supply is ancillary. [Section 2(90)]
Works contract and restaurant services are classic examples of composite
supply, but the GST law identifies both as supply of services [as you would have
seen in the discussion on Schedule II of the CGST Act earlier in this Chapter] and
chargeable to specific rate of tax mentioned against each of such services (works
contract or restaurant).
However, in respect of other composite supplies (i.e. other than the two categories
mentioned above), the need to determine the supply as a composite one, will arise,
so as to determine the appropriate classification of such supply as supply of goods
or supply of services as also the appropriate rate of tax.
It will be necessary to determine as to whether a particular supply is naturally
bundled in the ordinary course of business and what constitutes principal supply in
such composite supplies.
How to determine whether the services are bundled in the ordinary course
of business?
Whether the services are bundled in the ordinary course of business or not, would
depend upon the normal or frequent practices followed in the area of business to
which services relate. Such normal and frequent practices adopted in a business
can be ascertained from several indicators some of which are listed below:
 The perception of the consumer or the service recipient - If large number
of service recipient of such bundle of services reasonably expect such services
to be provided as a package, then such a package could be treated as
naturally bundled in the ordinary course of business.
(75) Mobile phone is always sold with battery.
 Majority of service providers in a particular area of business provide
similar bundle of services.

(76) Bundle of services of catering on board and services of transport

by air is a bundle offered by a majority of airlines.

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 The nature of the various services in a bundle of services will also help in
determining whether the services are bundled in the ordinary course of
business. If the nature of services is such that one of the services is the main
service and the other services combined with such service are in the nature
of incidental or ancillary services which help in better enjoyment of a main
service, then it would be treated as services bundled in the ordinary course
of business.
(77) Service of stay in a hotel is often combined with provision of
breakfast and dinner provided free of cost during the stay. Such
service is an ancillary service to the provision of hotel
accommodation and the resultant package would be treated as services
naturally bundled in the ordinary course of business.

 Other illustrative indicators, not determinative but indicative of bundling of

services in the ordinary course of business are:

 There is a single price or the customer pays the same amount, no matter
how much of the package they actually receive or use.

 The elements are normally advertised as a package.

 The different elements are not available separately.

 The different elements are integral to one overall supply. If one or more
is removed, the nature of the supply would be affected.

No straight jacket formula can be laid down to determine

whether a service is naturally bundled in the ordinary course
of business. Each case has to be individually examined in the
backdrop of several factors some of which are outlined above.
The above principles explained in the light of what constitutes a naturally
bundled service can be gainfully adopted to determine whether a particular
supply constitutes a composite supply under GST and if so what constitutes
he principal supply so as to determine the right classification and rate of
tax of such composite supply.

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Some of the examples of composite supplies have been given below:

(78) A 5 star hotel is booked for a conference of 100 delegates on a

lump sum package with the following facilities:
– Accommodation for the delegates

– Breakfast for the delegates,

– Tea and coffee during conference
– Access to fitness room for the delegates
– Availability of conference room
– Business centre
As is evident a bouquet of services is being provided, many of them are chargeable
to different effective rates of tax. If the principal service is described as convention
service it is able to capture the entire essence of the package. Thus, the principal
service may be judged as convention service and charged to tax accordingly.
However, it will be fully justifiable for the hotel to charge individually for the
services as long as there is no attempt to offload the value of one service on to
another service that is chargeable at a concessional rate.
(79) Poshaak Manufacturers entered into a contract with Cheeku Ltd. for
supply of readymade shirts packed in designer boxes at Cheeku Ltd.’s
outlet. Further, Poshaak Manufacturers would also get them insured
during transit. In this case, supply of goods, packing materials, transport &
insurance is a composite supply wherein supply of goods is principal supply.

(80) When a consumer buys a television set and he also gets mandatory
warranty and a maintenance contract with the TV, this supply is a
composite supply. In this example, supply of TV is the principal supply,
warranty and maintenance services are ancillary.

(81) A travel ticket from Mumbai to Delhi may include service of food
being served on board, free insurance, and the use of airport lounge. In
this case, the transportation of passenger, constitutes the pre-dominant
element of the composite supply, and is treated as the principal supply and all other
supplies are ancillary.

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How to determine the tax liability on composite supply?: A composite supply

comprising of two or more supplies, one of which is a principal supply, shall be
treated as a supply of such principal supply. Accordingly, the entire value of
composite supply [i.e. main supply + ancillary supply(ies)] shall be classified
under the category of main supply and shall be taxed at the GST rate applicable
to the main supply. This can be better understood with the help of following
example:
(82) Rati Computers supplies laptop (worth ` 52,000) alongwith laptop
bag (worth ` 3,000) to a customer for ` 55,000. Being naturally bundled,
supply of laptop bag along with the laptop is composite supply which is
treated as the supply of the principal supply [viz. laptop]. Assuming that the rate of
tax applicable on laptop is 18% and on laptop bag is 28%, in the given case, rate
of principal supply, i.e. laptop @ 18% will be charged on the entire value of ` 55,000.
CBIC, in the following cases, has clarified issues as to whether the given supplies
are composite supply and if yes, what constitutes the principal supply in the given
composite supply:
1. Printing industry issues
The printing industry in India in particular
faced a dilemma in determining whether the
nature of supply provided was that of goods
or services. Another doubt was whether in
case where certain contracts involved both
supply of goods and services, whether the
same would constitute a supply of goods or
services or if it would be a composite supply
and in case it is, then what would constitute the principal supply.
Thus, it is clarified that supply of books, pamphlets, brochures, envelopes,
annual reports, leaflets, cartons, boxes etc. printed with logo, design, name,
address or other contents supplied by the recipient of such printed goods,
are composite supplies and the question, whether such supplies constitute
supply of goods or services would be determined on the basis of what
constitutes the principal supply.
In the case of printing of books, pamphlets, brochures, annual reports, and
the like, where only content is supplied by the publisher or the person who

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owns the usage rights to the intangible inputs while the physical inputs
including paper used for printing belong to the printer, supply of
printing [of the content supplied by the recipient of supply] is the principal
supply and therefore such supplies would constitute supply of service.
In case of supply of printed envelopes, letter cards, printed boxes, tissues,
napkins, wall paper etc. by the printer using its physical inputs including paper
to print the design, logo etc. supplied by the recipient of goods, predominant
supply is supply of goods and the supply of printing of the content [supplied
by the recipient of supply] is ancillary to the principal supply of goods and
therefore such supplies would constitute supply of goods 57.
2. Food supplied to the patients
Food supplied to the in-patients as advised by the doctor/nutritionists is a
part of composite supply of health care and not separately taxable. However,
other supplies of food by a hospital to patients (not admitted) or their
attendants or visitors are taxable 58.
3. Activity of bus body building

In the case of bus body building, there is supply of goods and services. Thus,
classification of this composite supply, as goods or service would depend on
which supply is the principal supply which may be determined on the basis
of facts and circumstances of each case 59.
4. Retreading of tyres
In retreading of tyres, which is a composite supply, the pre-dominant element
is process of retreading which is a supply of service. Rubber used for
retreading is an ancillary supply.
Supply of retreaded tyres 60, where the old tyres belong to the supplier of
retreaded tyres, is a supply of goods 61.

57
Circular No. 11/11/2017 GST dated 20.10.2017
58
Circular No. 32/6/2018 GST dated 12.02.2018
59
Circular No. 34/8/2018-GST dated 01.03.2018
60
Retread tyres are revamped tyres on which the worn out tread (the part of the tire that
makes contact with the surface of the road) is replaced using new tread.
61
Circular No. 34/8/2018-GST dated 01.03.2018

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5. Supply of food and beverages at cinema halls taxable as restaurant

service
Eating joint is a wide term which includes refreshment or eating stalls/ kiosks/
counters or restaurant at a cinema also.

The cinema operator:

(i) may run these refreshment/eating stalls/ kiosks/ counters/ restaurant
themselves
or
(ii) they may give it on contract to a third party.
The customer may like to avail the services supplied by these
refreshment/snack counters or choose not to avail these services. Further, the
cinema operator can also install vending machines, or supply any other
recreational service such as through coin-operated machines etc. which a
customer may or may not avail.
It is hereby clarified that:
(i) supply of food or beverages in a cinema hall is taxable as ‘restaurant
service’ as long as:
(a) the food or beverages are supplied by
way of or as part of a service, and

(b) supplied independent of the cinema

exhibition service.
(ii) where the sale of cinema ticket and supply of food and beverages
are clubbed together, and such bundled supply satisfies the test of
composite supply, the entire supply will attract GST at the rate
applicable to service of exhibition of cinema, the principal supply 62.

62
Circular No. 201/13/2023 GST dated 01.08.2023

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Mixed supply means:

 two or more individual supplies of goods or services, or any combination
thereof, made in conjunction with each other by a taxable person
 for a single price where such supply does not constitute a composite supply
[Section 2(74)].
The individual supplies are independent of each other and are not naturally
bundled.

How to determine if a particular supply is a mixed supply?: In order to identify

if the particular supply is a mixed supply, the first requisite is to rule out that the
supply is a composite supply. A supply can be a mixed supply only if it is not a
composite supply. As a corollary, it can be said that if the transaction consists of
supplies not naturally bundled in the ordinary course of business, then the
possibility of it being a mixed supply needs to be checked.

Once the amenability of the transaction as a composite supply is ruled out, and a
single consideration is charged for the entire supply of different components, it
would be treated as a mixed supply, classified in terms of supply of goods or
services attracting highest rate of tax.
(83) A supply of a package consisting of canned foods, sweets,
chocolates, cakes, dry fruits, aerated drink and fruit juices when supplied
for a single price is a mixed supply. Each of these items can be supplied
separately and is not dependent on any other. It shall not be a mixed supply if these
items are supplied separately or separate prices are charged.

(84) A shopkeeper selling storage water bottles along with refrigerator

for a single price. Bottles and the refrigerator can easily be priced and
sold independently and are not naturally bundled. So, such supplies are
mixed supplies.

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(85) A house is given on rent through a single rent deed - one floor of
which is to be used as residence and the other for housing a printing press,
at a lump sum rent amount. Such renting for two different purposes is not
naturally bundled in the ordinary course of business. Said supplies are mixed supply.
How to determine the tax liability on mixed supply?: A mixed supply
comprising of two or more supplies shall be treated as supply of that particular
supply that attracts highest rate of tax.
(86) Sringaar Enterprises supplies 10,000 kits (at ` 50 each) amounting
to ` 5,00,000 to Raghav General Store. Each kit consists of 1 face cream,
1 face tissue packet and 1 nail paint. It is a mixed supply and is treated
as supply of that particular supply which attracts highest tax rate. Assuming that
the rate of tax applicable on face cream is 18%, on face tissue packet is 28% and
on nail paint is 12%, in the given case, highest tax rate [viz. face tissue packet] @
28% will be charged on the entire value of ` 5,00,000.
More than one supply made together and taxed at the individual rates
There can also be a case where an activity/transaction involves more than one
supply of goods or services or both, but neither they are composite supplies nor
can be categorised as mixed supplies, that is, all supplies carry independent
significance. In such a case, if separate consideration is indicated against each
supply, each such supply shall be charged at the respective rate applicable to that
particular supply.
(87) In case of servicing of cars involving supply of both goods (spare
parts) and services (labour) where the value of goods and services are
shown separately, the goods and services would be liable to tax at the
rates as applicable to such goods and services separately 63.

63
Circular No. 47/21/2018 GST dated 08.06.2018

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LET US RECAPITULATE
 The taxable event under GST is supply. The scope of supply under GST can
be understood in terms of following parameters:

Supply should be of goods or Supply should be made for a

services consideration

Supply should be made in the

course or furtherance of business

 While these parameters describe the concept of supply, under certain

circumstances, transactions have been deemed as supply even when the
supply is made without consideration or not in the course or furtherance of
business. Activities specified in Schedule I are deemed to be a supply even
without consideration. Further, import of services for a consideration,
whether or not in the course or furtherance of business is treated as supply.
 Besides, some specified transactions/ activities are neither treated as supply
of goods nor a supply of services. Furthermore, certain activities have been
categorised as supply of goods or as supply of services.
 The discussion with respect to supply is broadly categorised into following:

Supply with consideration in course/furtherance of business.

Supply between a person (other than individual), and its

members or constituents for cash, deferred payment or other
valuable consideration
includes
Importation of services with consideration whether or not in
course or furtherance of business.
Supply

Supply without consideration

Activities/transactions to be treated as supply of goods or

supply of services
Activities/transactions neither the supply of goods nor the
excludes
supply of services

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Sub-sections of section 7 alongwith related Schedules have been summarised

as follows:
1. Supply for consideration in course or furtherance of business [Section
7(1)(a)]

Supply includes sale,

transfer, barter, exchange,
in the course or
licence, rental, lease, for consideration furtherance of
disposal business

Consideration

Supply
in course or furtherance of
business

2. Activities/transactions between a person, other than an individual,

and its members or constituents for valuable consideration [Section
7(1)(aa)]

Activities/transactions

Person (association, club, Members or Constituents

etc.)

Consideration

3. Importation of services for consideration whether or not in course or

furtherance of business [Section 7(1)(b)]
Supply should be in course or furtherance of business. The exception to said
rule is import of services is deemed as supply even if the same has been

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imported not in course/furtherance of business.

Importation of Consideration
services
Supply
in course or furtherance of
business

4. Supply without consideration – Deemed Supply [Section 7(1)(c) read

with Schedule I]
This includes all supplies made to a taxable or non-taxable person, even if the
same is without consideration. These are specifically mentioned in Schedule
I appended to the CGST Act.
As per Schedule I, in the following four cases, supplies made without
consideration will be treated as supply under section 7:
I. Permanent transfer/disposal of business assets

Business Input Tax Credit

Assets availed
Deemed Supply

Permanently
transferred/disposed

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II. Supply between related persons or distinct persons

Related/Distinct Related/Distinct

Deemed Supply
Person 1 Person 2
Supply of goods or services

in course or furtherance of business

Employer Employee

Gifts ≤ ` 50,000 in a FY
Not supply

III. Supply between principal and agent

Deemed Supply

supplies goods Agent

Principal

supplies goods on behalf of principal and

issues invoice to customer in his own
name
Third person

Third Person Agent

Deemed Supply

supplies
Agent receives goods on goods to
behalf of principal and principal
receives invoice in his own
name Principal

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IV. Importation of services

Related
persons

Deemed Supply
Person out Person in India
of India supplies services

In course or furtherance of business

The combined provisions of relating to import of services [as stipulated under

under section 7(1)(b) and section 7(1)(c) read with Schedule I] have been depicted
in the below mentioned diagram:
Import of services

Import of services

with consideration without consideration

in course or not in course or related person/distinct

Other
futherance of futherance of person + in course or
cases
business business futherance of business

Supply Not a supply

4. Activities or transactions to be treated as supply of goods or supply
of services [Section 7(1A) read with Schedule II]

Para Activity/ Type Supply of

No. Transaction goods/
services

1. Transfer (i) Title in goods Goods

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(ii) Title in goods under an

agreement that property shall
pass at a future date.

Right/undivided share in goods Services

without transfer of title in them

2. Land and Lease, tenancy, easement, licence to Services

Building occupy land

Lease/letting out of building including Services

a commercial/ industrial/ residential
complex for business/ commerce,
wholly/ partly.

3. Treatment Applied to another person’s goods Services

or Process

4. Transfer of Goods forming part of business assets Goods

Business are transferred/disposed of by/under
Assets directions of person carrying on
business so as no longer to form part
of those assets

Goods held/used for business are Services

put to private use or are made
available to any person for use for
any purpose other than business,
by/under directions of person
carrying on the business

Goods forming part of assets of any Goods

business carried on by a person who
ceases to be a taxable person, shall
be deemed to be supplied by him, in
the course or furtherance of his
business, immediately before he
ceases to be a taxable person.
Exceptions:

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 Business transferred as a going

concern.
 Business carried on by a
personal representative who is
deemed to be a taxable
person.

5. Renting of immovable property

Construction of complex, building, civil structure, etc.

Exception:
Services
Entire consideration received after issuance of
completion certificate or after its first occupation,
whichever is earlier.

Temporary transfer or permitting use or enjoyment

of any intellectual property right

Development, design, programming, Services

customisation, adaptation, upgradation,
enhancement, implementation of IT software

Agreeing to obligation to refrain from an act, or to

tolerate an act or situation, or to do an act.

Transfer of right to use any goods for any purpose

6. Following composite supplies:- Services

 Works contract
 Supply of goods, being food or any other article
for human consumption or any drink.

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5. Non-supplies under GST [Section 7(2)(a) read with Schedule III]

Para Activities or transactions which shall be treated neither as

No. a supply of goods nor a supply of services

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

relation to his employment.

2. Services by any court or Tribunal established under any law for

the time being in force.

3. (a) Functions performed by Members of Parliament,

Members of State Legislature, Members of Panchayats,
Members of Municipalities & Members of other local
authorities;

(b) Duties performed by any person who holds any post in

pursuance of the provisions of the Constitution in that
capacity; or

(c) Duties performed by any person as a Chairperson or a

Member or a Director in a body established by the Central
Government or a State Government or local authority and
who is not deemed as an employee before the
commencement of this clause.

4. Services of funeral, burial, crematorium or mortuary including

transportation of the deceased.

5. Sale of land and, subject to paragraph 5(b) of Schedule II, sale

of building.

6. Actionable claims, other than specified actionable claims.

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7. Supply of goods from a place in the non-taxable territory to

another place in the non-taxable territory without such goods
entering into India.

8. (a) Supply of warehoused goods to any person before

clearance for home consumption.

(b) Supply of goods by the consignee to any other person, by

endorsement of documents of title to the goods, after the
goods have been dispatched from the port of origin
located outside India but before clearance for home
consumption.

9. Activity of apportionment of co-insurance premium by the

lead insurer to co-insurers for jointly supplied insurance
services, provided the lead insurer pays full GST on the total
premium received from the insured.

10. Services by insurer to reinsurer with ceding commission

deducted from reinsurance premium are permitted,
provided the reinsurer pays GST on the gross premium
inclusive of such commission.

The diagram on next page summarises the steps to determine whether

an activity undertaken is supply or not.

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Is the activity a supply including supply of No

goods/services such as sale, transfer, barter,
exchange, licence, rental, lease or disposal?

Yes

Is it for a No Is it an activity No
consideration specified under
? Schedule I?

Yes Yes

Is it in course No
or furtherance

of business?
Is it in course Is it No
or furtherance import of

of business? No service?

Yes

Yes Yes

Is it an activity specified No
in Schedule III or Activity is
Activity is
section 7(2)(b)? Supply NOT
Supply

Yes

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6. Composite and mixed supplies

Composite Supply Mixed Supply

•Consist of two or more •Consist of two or more supply
supplies •Not naturally bundled
•Naturally bundled •Though can be supplied
•In conjunction with each independently, still supplied
other together
•One of which is principal •Tax liability shall be the rate
supply applicable to the supply that
•Tax liability shall be rate of attracts highest rate of tax
principal supply •Example: A gift pack comprising
•Example: Charger supplied of choclates, candies, sweets
alongwith mobile phones. and balloons.

TEST YOUR KNOWLEDGE

1. Satyamev Printers is a printing house registered under GST. It receives an order
for printing 5000 copies of a book on yoga and meditation authored by a well-
known yoga guru. The content of the book is to be provided by the yoga guru
to Satyamev Printers. It is agreed that Satyamev Printers will use its own paper
to print the said books.
You are required to determine the rate of GST applicable on supply of printed
books by Satyamev Printers assuming that rate of GST applicable on services is
18% whereas the rate of GST applicable on supply of goods is 12%.

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2. Sudama Associates, a registered supplier, disposes the computers owned by the

business without consideration and it has not claimed input tax credit on such
computers.
Examine whether the disposal of computers by Sudama Associates qualifies as
deemed supply under Schedule I of the CGST Act, 2017.
3. Shivaji Pvt. Ltd., a registered supplier, supplies the following goods and services
for construction of buildings and complexes -
- excavators for required period at a per hour rate
- manpower for operation of the excavators at a per day rate
- soil-testing and seismic evaluation at a per sample rate.

The excavators are invariably hired out along with operators. Similarly,
excavator operators are supplied only when the excavator is hired out.
For a given month, the receipts (exclusive of GST) of Shivaji Pvt. Ltd. are as
follows:
- Hire charges for excavators - ` 18,00,000
- Service charges for supply of manpower for operation of the excavator -
` 20,000
- Service charges for soil testing and seismic evaluation at three sites -
` 2,50,000
Compute the GST payable by Shivaji Pvt. Ltd. for the given month.
Assume the rates of GST to be as under:
Hiring out of excavators – 12%
Supply of manpower services and soil-testing and seismic evaluation services –
18%
4. Mr. Kanjilal Adani is an oil exploration & production contractor and is
registered under GST in the State of Gujarat. He entered into a Production
Sharing Contract (PSC) with Government of Gujarat wherein he gets a license
to explore, exploit and sell the petroleum crude and/or natural gas from the
Government in Aliabet Oilfield in lieu of royalty and a share in profit petroleum.

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In the month of June, Mr. Kanjilal Adani explored the petroleum reserves at
Aliabet Oilfield. He got a portion of the petroleum silt (non-taxable under GST)
worth ` 3,00,000 as part of compensation. This petroleum silt is part of cost
petroleum as per the contract entered with the Government.

Examine the taxability of the petroleum silt received by Mr. Kanjilal Adani under
the GST law.
5. Angad Private Ltd. is engaged in the business of distribution of construction
material. As an incentive, Angad Private Ltd. pays an amount of ` 75,000 to its
employees upon achieving a specified sales target. The incentive is part of the
salary of the employees and applicable tax is deducted at source as per relevant
income tax provisions. Angad Private Ltd. is of the view that GST is not leviable
on such incentive paid to the employees. Whether the view taken by Angad
Private Ltd. is correct?
6. XYZ Consultancy, registered in Bangalore, supplies technical consultancy
services to its clients. It has been providing technical services to BA Ltd.,
Mumbai since past 2 years. Consideration is settled by BA Ltd. assignment-wise.
BA Ltd. paid ` 37 lakh to XYZ Consultancy on 10th January for XYZ Consultancy
agreeing not to provide similar technical services to any other business entity
in India or abroad for a period of next 8 years. XYZ Consultancy is of the view
that ` 37 lakh is not chargeable to tax under GST law.
You are required to examine whether the view taken by XYZ Consultancy is
valid in law. It may be noted that BA Ltd. is not ready to pay any further amount
to XYZ Consultancy in addition to the amount already agreed.
7. Mokshabhumi Industries has its manufacturing unit in the State of
Maharashtra. It stores the finished goods manufactured by it at a depot located
in the State of Gujarat. The depot is owned by Punyabhumi Ltd. – a related
person of Mokshabhumi Industries. Punyabhumi Ltd. has not charged any
consideration from Mokshabhumi Industries for usage of depot for storage
purpose. Whether the storage of goods permitted by Punyabhumi Ltd. to
Mokshabhumi Industries qualifies as supply under GST?
8. Rob Shareholding Ltd., an approved intermediary, has entered into a agreement
wherein certain securities were to be lent to Dhandhan Bank, under Securities
Lending Scheme, 1997. Dhandhan Bank shall pay specified lending fee against

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such lending of securities to it. Explain the taxability of transactions involved in

the Securities Lending Scheme, 1997.
9. Krishnadev is a trader based in India. Ramakrishna, brother of Krishnadev, is
located in China and is also engaged in business of trading of goods.
Krishnadev places an order with Ramakrishna for procurement of certain goods
from local market in China. Before the shipment of goods from China to India,
Krishnadev sold such goods to Christiano, a trader located in Brazil. The goods
were subsequently shipped from China to Brazil. Comment on the taxability of
transaction between Krishnadev and Christiano under GST in India.
10. Mohandas International entered into a transaction for import of goods from a
vendor located in Italy. Due to financial issues, Mohandas International was
not in a situation to clear the goods upon payment of import duty. Mohandas
International sold the goods to Radhakrishnan Export House by endorsement
of title to the goods, while the goods were in high seas. The agreement further
provided that Mohandas International shall purchase back the goods in future
from Radhakrishnan Export House. Discuss the taxability of transaction(s)
involved, under the GST law.
11. Mr. Happy, registered under GST, has a huge residential property located at a
prime location in Mumbai, Maharashtra. He has let out the 1st and 2nd floor to
Mr. Peace for residential purposes in April. Mr. Peace, registered under GST,
surrenders his tenancy rights to Mr. Serene (unregistered under GST) for a
tenancy premium of ` 10,00,000 on 1st June. Mr. Serene has also paid the
applicable stamp duty and registration charges on transfer of tenancy rights.
Moreover, Mr. Serene has agreed to pay a monthly rent of ` 1,00,000 to
Mr. Happy from June.
You are required to ascertain whether GST is payable on (i) tenancy premium
paid by Mr. Serene to Mr. Peace and (ii) monthly rent paid by Mr. Serene to Mr.
Happy, for the month of June.
12. (a) Rudraksh Kapoor, owner of Rudraksh Publishing House, Ghaziabad, U.P.,
donated some money to Divyaprakash Charitable Trust in the memory of
his late father. The Divyaprakash Charitable Trust constructed a room in
the school run by it from such donation and wrote “Donated by Rudraksh
Kapoor in the memory of his father” on the door of the room so

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constructed. Examine whether the money donated by Rudraksh Kapoor is

leviable to GST.
(b) In the above question, if Divyaprakash Charitable Trust had written on
the door of the room constructed from the money donated by Rudraksh
Kapoor in the school run by it - “Donated by Rudraksh Publishing House,
Ghaziabad, U.P.”, would the given transaction/activity qualify as supply?
13. Mrs. Kajal, a registered supplier of Jaipur (Rajasthan), has made the following
supplies in the month of January:
(i) Supply of a laptop along with the laptop bag to a customer of Mumbai
for ` 55,000 (exclusive of GST).
(ii) Supply of 10,000 kits (at ` 50 each) amounting to ` 5,00,000 (exclusive of
GST) to Ram Fancy Store in Kota (Rajasthan). Each kit consists of
1 hair oil, 1 beauty soap and 1 hair comb.
(iii) 100 kits are given as free gift to Jaipur customers (all unrelated) on the
occasion of Mrs. Kajal's birthday. Each kit consists of 1 hair oil and
1 beauty soap. Cost of each kit is ` 35. Input tax credit has not been
taken on the goods contained in the kit.
(iv) Event management services provided free of cost to her brother (wholly
dependent on her) for his son’s marriage function in Indore (Madhya
Pradesh). Cost of providing said services is ` 80,000.
(v) 1,400 chairs and 100 coolers hired out to Function Garden, Ajmer
(Rajasthan) for ` 3,30,000 (exclusive of GST) including cost of transporting
the chairs and coolers from Mrs. Kajal's godown at Jaipur to Function
Garden, Ajmer. Since Mrs. Kajal is not a GTA, transportation services
provided by her are exempt vide Notification No. 12/2017 CT (R) dated
28.06.2017 64.

64
Notification No. 12/2017 CT(R) dated 28.06.2017 (containing the list of services exempt
from GST) has been discussed in Chapter 4 – Exemptions from GST in this Module of the Study
Material.

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Assume rates of GST to be as under:-

S. No. Particulars Rate of GST

1. Laptop 18%

2. Laptop bag 28%

3. Hair oil 18%

4. Beauty soap 28%

5. Hair comb 12%

6. Event management service 5

7. Service of renting of chairs and coolers 12%

8. Transportation service 5%

From the above information, examine each of the above supplies made by Mrs.
Kajal for the month of January and determine the rate of GST applicable on the
same.
14. Chandragupta Maurya is an artist who makes contemporary paintings. He is
registered in the State of Kolkata. Chandragupta Maurya appoints Dhruv
Kumar to auction his painting in Maharashtra. Dhruv Kumar arranges for the
auction and identifies the potential bidders. The highest bid is accepted and the
painting is sold to the highest bidder. The invoice for the supply of the painting
is issued by Dhruv Kumar on the behalf of Chandragupta Maurya but in his
own name and the painting is delivered to the successful bidder.
Examine whether Dhruv Kumar can be considered as an agent of Chandragupta
Maurya under Para 3 of Schedule I of the CGST Act, 2017.

ANSWERS

1. Section 2(30) provides that a composite supply means a supply made by a

taxable person to a recipient consisting of two or more taxable supplies of
goods or services or both, or any combination thereof, which are naturally

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bundled and supplied in conjunction with each other in the ordinary course
of business, one of which is a principal supply.
Circular No. 11/11/2017 GST dated 20.10.2017 has clarified that supply of
books, pamphlets, brochures, envelopes, annual reports, leaflets, cartons,
boxes etc. printed with logo, design, name, address or other contents
supplied by the recipient of such printed goods, are composite supplies.
Further, section 8(a) stipulates that a composite supply comprising two or
more supplies, one of which is a principal supply, is treated as a supply of
such principal supply. Hence, one needs to ascertain what constitutes the
principal supply in this supply. As per section 2(90), principal supply is the
supply of goods or services which constitutes the predominant element of a
composite supply and to which any other supply forming part of that
composite supply is ancillary.
The above circular further clarifies that in the composite supply of printing of
books, pamphlets, brochures, annual reports, and the like, where only content
is supplied by the publisher or the person who owns the usage rights to the
intangible inputs while the physical inputs including paper used for printing
belong to the printer, supply of printing [of the content supplied by the
recipient of supply] is the principal supply and therefore such supplies would
constitute supply of service.
Accordingly, in the given case, the supply of printed books by Satyamev
Printers is a composite supply wherein the principal supply is supply of
printing services. Thus, the rate of GST applicable thereon is the rate
applicable on supply of printing services, i.e. 18%.
2. As per section 7(1)(c) read with Schedule I of the CGST Act, 2017, permanent
transfer or disposal of business assets is treated as supply even though the
same is made without consideration. However, this provision would apply only
if input tax credit has been availed on such assets. Therefore, the disposal of
computers by Sudama Associates is not a supply as the input tax credit has
not been availed on the same.

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3. Computation of GST payable by Shivaji Pvt. Ltd.

Particulars Value of Rate GST payable

supply (`) of GST (`)

Hiring charges for excavators 18,00,000 12% 2,16,000

Service charges for supply of 20,000 12% 2,400

manpower for operation of
excavators [Refer Note 1]

Service charges for soil testing 2,50,000 18% 45,000

and seismic evaluation [Refer
Note 2]

GST liability 2,63,400

Notes:
1. Since the excavators are invariably hired out along with operators and
excavator operators are supplied only when the excavator is hired out,
it is a case of composite supply under section 2(30) wherein the
principal supply is the hiring out of the excavator.
As per section 8(a), the composite supply is treated as the supply of the
principal supply. Therefore, the supply of manpower for operation of
the excavators will also be taxed at the rate applicable for hiring out of
the excavator (principal supply), which is 12%.
2. Soil testing and seismic evaluation services being independent of the
hiring out of excavator will be taxed at the rate applicable to them,
which is 18%.
4. Compensation is received by Mr. Kanjilal Adani in the form of petroleum silt
which, as per the contract with the Government of Gujarat, is part of cost
petroleum.
As per Circular No. 32/06/2018 GST dated 12.02.2018, the cost petroleum is
not a consideration received by the oil exploration & production contractors
for the services provided to Government under a Production Sharing Contract
(PSC) and thus not taxable per se. The reason for the same is that the

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contractors carry exploration and production of petroleum for themselves

and not as a service to Government. They had acquired the right to explore,
exploit and sell petroleum in lieu of royalty and a share in profit petroleum.
Consequently, the cost petroleum received by Mr. Kanjilal Adani is not taxable
under GST.
5. Yes, Angad Private Ltd.’s view is correct. In terms of section 7(2) read with
Schedule III of the CGST Act, 2017, services by an employee to employer in
the course of or in relation to his employment shall not be treated as supply
under GST. Further, the amount paid as incentive by Angad Private Ltd. is not
in the nature of gift, and thus, is not covered under Schedule I. Infact, in the
given case, the incentive is part of the salary and is directly linked to the sales
target. Therefore, the services provided in course or in relation to
employment by the employees for which incentives are given to them shall
not be treated as a “supply”.
In the light of above discussion, GST is not leviable on the incentive paid by
Angad Private Ltd. to its employees.
6. In the given case, XYZ Consultancy is providing the service of agreeing to the
obligation to refrain from an act to BA Ltd. against a consideration of
` 37 lakh [Schedule II read with Circular No. 178/10/2022 GST dated
03.08.2022]. Therefore, the same is liable to tax under GST law. Thus, view
taken by XYZ Consultancy is incorrect.
7. As per section 7(1)(c) read with Schedule I, supply of goods or services or
both between related persons without consideration when made in the
course or furtherance of business qualifies as supply. Thus, the storage
services provided by Punyabhumi Ltd. to Mokshabhumi Industries in course
or furtherance of business qualify as supply under GST even though no
consideration has been charged for the same.
8. Securities Lending Scheme, 1997 (hereafter referred to as SLS) facilitates the
lending and borrowing of securities. Securities are neither covered in the
definition of goods nor covered in the definition of services. Therefore, a
transaction in securities which involves disposal of securities is not a supply
in GST and hence not taxable.

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However, SLS doesn’t treat lending of securities as disposal of securities and

therefore is not excluded from the definition of services. The lending fee
charged from the borrowers of securities has the character of consideration
and is taxable under GST. Apart from above, the activities of the
intermediaries facilitating lending and borrowing of securities for commission
or fee are also taxable separately [Circular No. 119/38/2019 GST dated
11.10.2019].

9. The transaction between Krishnadev and Christiano is in the nature of

merchant trading. As per Schedule III, transactions involving sale of goods
from a place in non-taxable territory to another place in non-taxable territory,
without such goods entering into India, shall be treated neither as supply of
goods nor as supply of services under GST. Therefore, the transaction
between Krishnadev and Christiano shall not be treated as supply and is thus
not leviable to GST.
10. As per Schedule III, high seas sale transactions i.e. 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 shall be treated
neither as supply of goods nor as supply of services under GST. Thus, the
sale of goods by Mohandas International to Radhakrishnan Export House in
high seas shall not be liable to GST.
Further, the import duty including IGST shall be payable by Radhakrishnan
Export House at the time of clearance of goods at port of import. In case the
goods are sold back by Radhakrishnan Export House to Mohandas
International at a subsequent point of time, the same shall be treated as
normal domestic sale transaction and GST shall be applicable on the same
subject to other conditions prescribed under GST Law.
11. Circular No. 44/2018 CT dated 02.05.2018 clarifies that the activity of transfer of
tenancy right against consideration [i.e. tenancy premium] is squarely covered
under supply of service liable to GST. It is a form of lease or renting of property
and such activity is specifically declared to be a service in Schedule II i.e. any
lease, tenancy, easement, licence to occupy land is a supply of services.

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Although stamp duty and registration charges have been levied on such
transfer of tenancy rights, it shall be still subject to GST. Merely because a
transaction/supply involves execution of documents which may require
registration and payment of registration fee and stamp duty, would not
preclude them from the ‘scope of supply’ and from payment of GST.
The transfer of tenancy rights cannot be treated as sale of land/ building in
Schedule III. Thus, it is not a non-supply under GST and consequently, a
consideration for the said activity shall attract levy of GST. Services provided
by outgoing tenant by way of surrendering the tenancy rights against
consideration in the form of a portion of tenancy premium is liable to GST.
Hence, in the given case, the tenancy premium of ` 10,00,000 received by Mr.
Peace for surrendering his tenancy rights to Mr. Serene is liable to GST.
The circular further clarifies that since renting of residential dwelling for use
as a residence to an unregistered person is exempt [Entry 12 of Notification
No. 12/2017 CT (R) dated 28.06.2017 65], grant of tenancy rights in a residential
dwelling for use as residence dwelling against tenancy premium or periodic
rent or both to an unregistered person is exempt. Consequently, monthly rent
` 1,00,000 received by Mr. Happy from Mr. Serene is exempt.
12. Circular No. 116/35/2019 GST dated 11.10.2019 has clarified that in case of
donations received by a charitable institution, when the name of the donor is
displayed in recipient institution’s premises, in such a manner, which can be
said to be an expression of gratitude and public recognition of donor’s act of
philanthropy and is not aimed at giving publicity to the donor in such manner
that it would be an advertising or promotion of his business, then it can be
said that there is no supply of service for a consideration (in the form of
donation). Donations received by the charitable organisations are treated as
consideration only if there exists, quid pro quo, i.e., there is an obligation on
part of recipient of the donation or gift to do anything (supply a service).
Thus, GST is not leviable where all the following three conditions are satisfied
namely:

65
Notification No. 12/2017 CT (R) dated 28.06.2017 (containing the list of services exempt
from CGST) has been discussed in Chapter 4 – Exemptions from GST in this Module of the
Study Material.

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 Gift or donation is made to a charitable organization

 Payment has the character of gift or donation

 Purpose is philanthropic (i.e., it leads to no commercial gain) and not
advertisement.

(a) In the backdrop of the above discussion, in the given case, the way the
name of Rudraksh Kapoor is displayed on the door of the room
constructed in the school run by Divyaprakash Charitable Trust, it is only
an expression of gratitude and public recognition of Rudraksh’s act of
philanthropy and is not aimed at advertising or promoting his business.
There is no reference/mention of his publishing house which otherwise
would have got advertised.
Thus, the money donated by Rudraksh Kapoor is not a leviable to GST.
(b) In the given case, since the name of Rudraksh Publishing House has
been displayed on the door of the room constructed in the school run
by Divyaprakash Charitable Trust, it might be aimed at advertising or
promoting his business. There is a direct mention of his publishing
house which is being advertised. In such a case, it is a supply of service
by Divyaprakash Charitable Trust for a consideration received in the
form of donation.
13.

S. Particulars Rate of
No. GST

(i) Supply of laptop bag along with laptop to Mumbai 18%

customer
[Being naturally bundled, supply of laptop bag along
with the laptop is a composite supply which is treated
as the supply of the principal supply [viz. laptop] in
terms of section 8(a). Accordingly, rate of principal
supply, i.e. laptop will be charged.]

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(ii) Supply of kits to Ram Fancy Store 28%

[It is a mixed supply and is treated as supply of that
particular supply which attracts highest tax rate [viz.
beauty soap] in terms of section 8(b).]

(iii) Free gifts to customers Nil

[Cannot be considered as supply under section 7 read
with Schedule I as the gifts are given to unrelated
customers without consideration.]

(iv) Event management services provided free of cost to 5%

her brother [who is a related person] for his son’s
marriage. Thus, said services shall fall within the
purview of Schedule I and shall be treated as supply
even if made without consideration. Since it is an
individual supply, it will be taxed at the rate applicable
on said service.

(v) Chairs and coolers hired out to Function Garden 12%

[Transportation services provided by Mrs. Kajal are
exempt. However, since chairs and coolers are hired
out along with their transportation, it is a case of
composite supply wherein the principal supply is hiring
out of chairs and coolers. Accordingly, transportation
service will also be taxed at the rate applicable for
renting of chairs and coolers*]

*Note: As per section 2(30), composite supply means a supply made by a

taxable person to a recipient consisting of two or more taxable supplies. Since
in point (v), service of hiring out of chairs & coolers is taxable while
transportation service is exempt, it is possible to take a view that this is not a
case of composite supply.
In that case, the two services will be treated as independent services and taxed
accordingly.
14. An activity/transaction qualifies as supply under GST only if it is undertaken
for a consideration and is in course/furtherance of business. However, supply

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of goods by a principal to his agent where the agent undertakes to supply

such goods on behalf of the principal is considered as supply even if made
without consideration provided the invoice for further supply is issued by the
agent in his own name [Section 7(1)(c) read with Para 3 of Schedule I of the
CGST Act, 2017].
Circular No. 57/31/2018 GST dated 04.09.2018 provides that where the
invoice for further supply of goods is being issued by the agent in his name
then, any provision of goods from the principal to the agent would fall within
the fold of Para 3 of Schedule I
In the given case, Dhruv Kumar is not merely providing auctioneering services
to Chandragupta Maurya, but is also supplying the painting on behalf of
Chandragupta Maurya to the successful bidder and has the authority to
transfer the title of the painting on behalf of Chandragupta Maurya. Dhruv
Kumar issued the invoice in his own name for supply of the painting on the
behalf of Chandragupta Maurya. Thus, Dhruv Kumar can be considered as an
agent of Chandragupta Maurya under Para 3 of Schedule I.

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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 2(69) 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 Remarks

No. amended by the
Finance Act, 2025
2(69) Local authority: Local authority: Sub-clause (c) of
means — means — clause (69) of
section 2 is
(a) a “Panchayat” (a) a “Panchayat”
proposed to be
as defined in clause as defined in clause
amended to
(d) of article 243 of (d) of article 243 of
replace
the Constitution. the Constitution.
"municipal or
(b) a (b) a “Municipality” local fund" with
“Municipality” as as defined in clause "municipal fund
defined in clause (e) (e) of article 243P of or local fund"
of article 243P of the the Constitution. and to insert an
Constitution. (c) a Municipal Explanation after
(c) a Municipal Committee, a Zilla the said sub-
Committee, a Zilla Parishad, a District clause, to
Parishad, a District Board, and any other provide for
Board, and any other authority legally definitions of
authority legally entitled to, or the terms ‘Local

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entitled to, or entrusted by the Fund’ and

entrusted by the Central Government ‘Municipal Fund’
Central Government or any State used in the
or any State Government with the definition of
Government with control or “local authority”
the control or management of a under the said
management of a municipal fund or clause so as to
municipal or local local fund. clarify the scope
fund. Explanation—For of the said
(d) a Cantonment the purposes of this terms.
Board as defined in sub-clause-
section 3 of the (i) "local fund"
Cantonments Act, means any fund
2006. under the control or
(e) a Regional management of an
Council or a District authority of a local
Council constituted self-government
under the Sixth established for
Schedule to the discharging civic
Constitution. functions in relation
(f) a Development to a Panchayat area
Board constituted and vested by law
under article 371 with the powers to
and article 371J of levy, collect and
the Constitution. appropriate any
tax, duty, toll, cess
(g) a Regional
or fee, by whatever
Council constituted
name called
under article 371A of
the Constitution (ii) "municipal
fund" means any
fund under the
control or
management of an
authority of a local
self-government
established for
discharging civic

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functions in relation
to a Metropolitan
area or Municipal
area and vested by
law with the powers
to levy, collect and
appropriate any
tax, duty, toll, cess
or fee, by whatever
name called.
(d) a Cantonment
Board as defined in
section 3 of the
Cantonments Act,
2006.
(e) a Regional
Council or a District
Council constituted
under the Sixth
Schedule to the
Constitution.
(f) a Development
Board constituted
under article 371 and
article 371J of the
Constitution.
(g) a Regional
Council constituted
under article 371A of
the Constitution.

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Annexure-1

Goods and Services Tax in India

Goods and Services Tax (GST) is a path breaking indirect tax reform which attempts
to create a common national market. GST has subsumed multiple indirect taxes
like excise duty, service tax, VAT, CST, luxury tax, entertainment tax, entry tax, etc.
VAT and GST are often used inter-changeably as the
latter denotes comprehensiveness of VAT by
coverage of goods and services. France was the first
country to implement VAT/GST in 1954. Presently,
more than 160 countries have implemented VAT/GST
in some form or the other because this tax has the
capacity to raise revenue in the most transparent
and neutral manner. Most of the countries follow
unified GST i.e., a single tax applicable `
throughout the country. However, in federal
polities like Brazil and Canada, a dual GST system
is prevalent. Under dual system, GST is levied by
both the federal and the State Governments.
India has adopted dual GST model because of its unique federal nature.
The idea of GST was mooted in the year 2000 when the
then Prime Minister set up a committee to design a Goods
and Services Tax (GST) model for the country. The talks of
ushering in GST, however, gained momentum in the year
2014 when the NDA Government tabled the Constitution
(122nd Amendment) Bill, 2014 on GST in the Parliament on
19th December, 2014. The Lok Sabha passed the Bill on 6th
May, 2015 and Rajya Sabha on 3rd August, 2016. Subsequent to ratification of the
Bill by more than 50% of the States, Constitution
(122nd Amendment) Bill, 2014 received the assent of the
President on 8th September, 2016 and became the
Constitution (101st Amendment) Act, 2016, which paved
the way for introduction of GST in India.

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In the following year, on 27th March, 2017, the Central GST legislations - Central
Goods and Services Tax Bill, 2017, Integrated Goods and Services Tax Bill, 2017,
Union Territory Goods and Services Tax Bill, 2017 and Goods and Services Tax
(Compensation to States) Bill, 2017 were introduced in Lok Sabha. Lok Sabha
passed these bills on 29th March, 2017 and with the receipt of the President’s assent
on 12th April, 2017, the Bills were enacted.
The enactment of the Central Acts was followed by the enactment of the State GST
laws by various State Legislatures. With effect from 1st July, 2017, the historic
indirect tax reform - GST was introduced. GST law was extended to Jammu and
Kashmir on 8th July, 2017.

In the year 2000, the then Prime The Constitution

Minister introduced the concept of (122nd Amendment)
GST and set up a committee to Bill was introduced in
design a GST model for the Sep 2016
2006 the Lok Sabha.
country.

Announcement by 2014 The

2000 Union Finance Minister, Constitution
during budget of 2006- (101st
07 that GST would Amendment)
introduced from 1 April GST Council Act was
2010. Recommends enacted
GST Council
CGST, SGST, IGST,
recommends
UTGST &
all the rules.
Compensation Cess
Apr 2017 Bill. Sep 2016

May 2017 1st GST

CGST, IGST, UTGST Mar 2017 Council
and Compensation
All States Meeting
Cess Acts passed.
except J & K
30th June 2017
passed their
SGST Act
1st July 2017 8th July 2017 Journey
continues
GST launched SGST Act passed by J&K;
CGST and IGST Ordinances
promulgated to extend
GST to J&K.

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Before we proceed with the finer nuances of Indian GST, let us first understand the
basic concept of GST.

What is GST?

 GST is a value added tax levied on supply i.e., manufacture or sale of goods
and provision of services.
 GST offers comprehensive and continuous chain of tax credits from the
producer's point/service provider's point upto the retailer's level/consumer’s
level thereby taxing only the value added at each stage of supply chain.
 The supplier at each stage is permitted to avail credit of GST paid on the
purchase of goods and/or services and can set off this credit against the GST
payable on the supply of goods and services to be made by him. Thus, only
the final consumer bears the GST charged by the last supplier in the supply
chain, with set-off benefits at all the previous stages.
 Since, only the value added at each stage is taxed under GST, there is no tax
on tax or cascading of taxes under GST system.

Framework of GST as introduced in India

I. Concurrent Dual GST:
India has a unique federal structure. In view of the same, India has adopted
a Concurrent Dual GST Model. Under Dual GST Model, the Centre and
States simultaneously levy GST on complete supply chain, i.e. starting from
production to distribution stage.
Thus, tax is imposed concurrently by the Centre and States, i.e. Centre and
States simultaneously tax goods and services.

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Now, the Centre also has the power to tax intra-State sales & States are also
empowered to tax services. GST extends to whole of India including the
Union Territory of Jammu and Kashmir.

II. CGST/SGST/UTGST/IGST
GST is a destination-based tax applicable on all transactions involving supply
of goods or services or both for a
consideration subject to exceptions
thereof. GST in India comprises of
Central Goods and Services Tax (CGST) - levied and collected by Central
Government, State Goods and Services Tax (SGST) - levied and collected by
State Governments/Union Territories with Legislatures and Union Territory
Goods and Services Tax (UTGST) - levied and collected by Union Territories
without Legislatures, on intra-State supplies of taxable goods and/or services.
As a general rule, where the location of the supplier and the place of supply
of goods or services are in the same State/Union territory, it is treated as
intra-State supply of goods or services respectively.

Further, where the location of the supplier and the place of supply of goods
or services are in (i) two different States or (ii) two different Union Territories
or (iii) a State and a Union territory, it is treated as inter-State supply of goods

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or services respectively. Inter-State supplies of taxable goods and/or services

are subject to Integrated Goods and Services Tax (IGST). IGST is the sum total
of CGST and SGST/UTGST and is levied by the Centre on all inter-State
supplies.

III. Legislative Framework

There is single legislation – CGST Act, 2017 - for levying CGST. Similarly,
Union Territories without Legislatures [i.e. Andaman and Nicobar Islands,
Lakshadweep, Ladakh, Dadra and
Nagar Haveli & Daman and Diu and
Chandigarh] are governed by UTGST
Act, 2017 for levying UTGST. States and Union territories with their own
legislatures [i.e. Delhi, Jammu and Kashmir and Puducherry] have their own GST
legislation for levying SGST.
In Ladakh, CGST and UTGST is levied on supply of goods or services
or both. In Delhi, CGST and SGST is levied on supply of goods or
services or both.

Though there are multiple SGST legislations, the basic features of law, such
as chargeability, definition of taxable event and taxable person, classification
and valuation of goods and services, procedure for collection and levy of tax

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and the like are uniform in all the SGST legislations, as far as feasible. This is
necessary to preserve the essence of dual GST.
IV. GST Common Portal
Before GST, since the Centre and State indirect tax administrations worked
under different laws, regulations, procedures and formats, their IT
infrastructure and systems were also independent of each other. Integrating
them for GST implementation was complex since it required integrating the
entire indirect tax ecosystem so as to bring all the tax administrations (Centre,
State and Union Territories) to the same level of IT maturity with uniform
formats and interfaces for taxpayers and other external stakeholders.
Besides, GST being a destination-based tax, the inter-State trade of goods
and services (IGST) needed a robust settlement mechanism amongst the
States and the Centre. A Common Portal was needed which could act as a
clearing house and verify the claims and inform the respective Governments
to transfer the funds. This was possible only with the help of a strong IT
infrastructure.
Resultantly, Common GST Electronic Portal – [Link] – a website
managed by Goods and Services Network (GSTN) [a wholly owned
Government Company] is set by the Government to establish a uniform
interface for the tax payer and a common and shared IT infrastructure
between the Centre and States.
The GST portal is accessible over
Internet (by taxpayers and their
CAs/Tax Advocates etc.) and Intranet
by Tax Officials etc. The portal is one single common portal for all GST related
services.
A common GST system provides linkage to all State/ UT Commercial Tax
Departments, Central Tax authorities, Taxpayers, Banks and other
stakeholders. The eco-system consists of all stakeholders starting from
taxpayer to tax professional to tax officials to GST portal to Banks to
accounting authorities.

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The functions of the GSTN include facilitating registration; forwarding the

returns to Central and State authorities; computation and settlement of IGST;
matching of tax payment details with banking network; providing various MIS
reports to the Central and the State Governments based on the taxpayer
return information; providing analysis of taxpayers' profile.
However, it is important to
note that the Common GST
Electronic Portal for furnishing
electronic way bill is
[Link]
[managed by the National
Informatics Centre, Ministry of
Electronics & Information
Technology, Government of India]. E-way bill is an electronic document
generated on the GST portal evidencing movement of goods.
Further, Invoice Registration
Portal (IRP) is the website for
uploading/reporting of e-invoices
by the notified persons*. It is
managed by the National
Informatics Centre, Ministry of
Electronics & Information
Technology, Government of India.

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*All registered businesses with an aggregate turnover (based on PAN) in any

preceding financial year from 2017-18 onwards greater than ` 5 crore are
required to issue e-invoices.

V. GSPs/ASPs

GSTN has selected certain Information Technology, Information Technology

enabled Services and financial technology
companies, to be called GST Suvidha Providers
(GSPs). GSPs have access to GST System and have
the capability to develop applications to be used by taxpayers for interacting
with the GSTN.

GSP develops applications having features like return filing, reconciliation of

purchase register data with auto populated data for
acceptance/rejection/modification, dashboards for
taxpayers for quick monitoring of GST compliance
activities. They may also provide role-based access to
divide various GST related activities like uploading invoice, filing returns etc.,
among different set of users inside a company (medium or large companies
will need it), applications for tax professional to manage their client’s GST
compliance activities, integration of existing accounting packages/ERP with
GST System, etc.

GSP is an additional channel being made available for facilitating the

taxpayers for performing some of the functions and use of their services is
optional. GSPs may take the help of Application Service Providers (ASPs) who
act as a link between taxpayers and GSPs.

VI. Compensation Cess

A GST Compensation Cess at specified rate is imposed under the Goods and
Services Tax (Compensation to States) Cess
Act, 2017 on the specified luxury items or
demerit goods, like pan masala, tobacco,
aerated waters, motor cars etc., computed

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on value of taxable supply. Compensation cess is leviable on intra-State

supplies and inter-State supplies with a view to
provide for compensation to the States for the loss
of revenue arising on account of implementation of
the GST. Initially, it was levied for a period of 5 years
upto 30th June, 2022. However, its levy and
collection is extended till 31st March, 2026.

Compensation is to be provided to a State for a period of 5 years from the

date on which the State brings its SGST Act into force.

VII. GST – A tax on goods and services

GST is levied on all goods and services, except alcoholic liquor for human
consumption and petroleum crude, diesel, petrol, ATF and natural gas.

 Alcoholic liquor for human consumption: is outside the realm of GST.

The manufacture/production of alcoholic
liquor continues to be subjected to State
excise duty and inter-State/intra-State sale
of the same is subject to CST/VAT
respectively.

 Petroleum crude, diesel, petrol, ATF and natural gas: As regards

petroleum crude, diesel, petrol, ATF and natural gas are concerned, they
are not presently leviable to GST. GST will be levied on these products
from a date to be notified on the recommendations of the GST Council.

Till such date, central excise duty continues to be levied on

manufacture/production of petroleum crude, diesel, petrol, ATF and
natural gas and inter-State/intra-State sale of the same is subject to
CST/ VAT respectively.

 Tobacco: Tobacco is within the purview of GST, i.e. GST is leviable on

tobacco. However, Union Government has also retained the power to
levy excise duties on tobacco and tobacco products manufactured in

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India. Resultantly, tobacco is subject to GST as well as central excise

duty.

 Opium, Indian hemp and other narcotic drugs and narcotics: Opium,
Indian hemp and other narcotic drugs and narcotics are within the
purview of GST, i.e. GST is leviable on them. However, State
Governments have also retained the power to levy excise duties on such
products manufactured in India. Resultantly, Opium, Indian hemp and
other narcotic drugs and narcotics are subject to GST as well as State
excise duties.

 Further, real estate sector has been kept out of ambit of GST, i.e. GST
will not be levied on sale/purchase of immovable property.

The various central, State and local levies were examined to identify their possibility
of being subsumed under GST. While identifying, the following principles were
kept in mind:

(i) Taxes or levies to be subsumed should be primarily in the nature of indirect

taxes, either on the supply of goods or on the supply of services.

(ii) Taxes or levies to be subsumed should be part of the transaction chain which
commences with import/ manufacture/ production of goods or provision of
services at one end and the consumption of goods and services at the other.

(iii) The subsuming of taxes should result in free flow of tax credit in intra and
inter-State levels. The taxes, levies and fees that were not specifically related
to supply of goods & services would not be subsumed under GST.

(iv) Revenue fairness for both the Union and the States individually would need
to be attempted.

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Taking the above principles into account, following taxes were subsumed in the
GST:
Central Taxes State Taxes
Central Excise Duty & Additional State surcharges and cesses in so far
Excise Duties as they relate to supply of goods &
Service Tax services
Entertainment Tax (except those
Excise Duty under Medicinal & Toilet
levied by local bodies)
Preparation Act, 1955
Tax on lottery, betting and gambling
CVD & Special CVD
Entry Tax (All Forms) & Purchase Tax
Central Sales Tax VAT/ Sales tax
Central surcharges & Cesses in so far Luxury Tax
as they relate to supply of goods & Taxes on advertisements
services

GST

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© The Institute of Chartered Accountants of India

CHAPTER 2

CHARGE OF GST
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, 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 –
 explain the extent and commencement of CGST Act, IGST Act,
SGST Act & UTGST Act.
 describe the provisions pertaining to levy and collection of
CGST & IGST.
 identify and analyse the services on which tax is payable
under reverse charge mechanism.
 comprehend and analyse the composition levy- eligibility
for the same and conditions to be fulfilled.

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1. INTRODUCTION
Power to levy tax is drawn from the Constitution
of India. To pave way for the introduction of
Goods and Services Tax (“GST”), 101st
Constitutional Amendment Act, 2016 was
passed. By virtue of this Act, enabling
provision was made to levy GST on supply of
goods or services or both in India. Central
excise duty, State VAT and certain State
specific taxes and service tax were subsumed
into a comprehensive GST.
The very basis for the charge of tax in any taxing
statute is the taxable event i.e the occurrence of the event which triggers levy of
tax. As discussed earlier, the taxable event under GST is SUPPLY [Discussed in detail
in Chapter – 1: Supply under GST in this Module of the Study Material]. CGST and
SGST/UTGST are levied on all intra-State supplies of goods and/or services while
IGST is levied on all inter-State supplies of goods and/ or services.
The provisions relating to levy and collection of CGST and IGST are contained in
section 9 of the CGST Act, 2017 and section 5 of the IGST Act, 2017, respectively.
Let us now have a fundamental idea of intra-State supply and inter-State supply.
As a general rule, where the location of the supplier and the place of supply of
goods or services are in the same State/Union territory, it is treated as intra-
State supply of goods or services respectively.
Similarly, where the location of the supplier and the place of supply of goods or
services are in (i) two different States or (ii) two different Union Territories or
(iii) a State and a Union territory, it is treated as inter-State supply of goods or
services respectively.

The concepts of ‘place of supply’ and meaning of the ‘location of the supplier’
have been elaborated in the next chapter, Chapter 3 – Place of Supply, in this
Module of the Study Material. Consequently, the meaning of terms ‘inter-State
supply’ and ‘intra-State supply’ has been explained in detail in that chapter.

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2. RELEVANT DEFINITIONS
 Central tax: means the central goods and services tax levied under section
9 of the CGST Act [Section 2(21)].

 Integrated tax: means the integrated goods and services tax levied under
the Integrated Goods and Services Tax Act [Section 2(58)].

 State tax: means the tax levied under any State Goods and Services Tax Act
[Section 2(104)].

 Goods: means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed
before supply or under a contract of supply [Section 2(52)].

 Aggregate turnover: means the aggregate value of all taxable supplies

(excluding the value of inward supplies on which tax is payable by a person
on reverse charge basis), exempt supplies, exports of goods or services or
both and inter-State supplies of persons having the same Permanent Account
be computed on all India basis but excludes central tax, State tax, Union
territory tax, integrated tax and cess [Section 2(6)].

 Customs frontiers of India: means the limits of a customs area [Section 2(4)
of the IGST Act]. ‘Customs Area’ is 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].

 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) of the IGST Act, 2017].

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 Prescribed: means prescribed by rules made under this Act on the

recommendations of the council [Section 2(87)].

 Registered Person: means a person who is registered under section 25 but

does not include a person having unique identity number [Section 2(94)].

 Reverse charge: means the liability to pay tax by the recipient of supply of
goods or services or both instead of the supplier of such goods or services
or both under section 9(3)/9(4), or under section 5(3)/5(4) of the IGST Act
[Section 2(98)].

 Services: means anything other than goods, money and securities but
includes activities relating to the use of money or its conversion by cash
or by any other mode, from one form, currency or denomination, to
another form, currency or denomination for which a separate
consideration is charged [Section 2(102)].

Explanation.––For the removal of doubts, it is hereby clarified that the

expression “services” includes facilitating or arranging transactions in
securities.

 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.

However, a person who organises or arranges, directly or indirectly, supply of

specified actionable claims, including a person who owns, operates or
manages digital or electronic platform for such supply, shall be deemed to
be a supplier of such actionable claims, whether such actionable claims are
supplied by him or through him and whether consideration in money or
money's worth, including virtual digital assets, for supply of such actionable
claims is paid or conveyed to him or through him or placed at his disposal in
any manner, and all the provisions of this Act shall apply to such supplier of
specified actionable claims, as if he is the supplier liable to pay the tax in
relation to the supply of such actionable claims. [Section 2(105)].

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 Taxable supply: means a supply of goods and/or services which is leviable

to tax under CGST Act [Section 2(108)].

 Non-taxable supply: means a supply of goods or services or both which

is not leviable to tax under CGST Act or under IGST Act [Section 2(78)].

 Taxable person: means a person who is registered or liable to be registered

under section 22 or section 24 of the CGST Act [Section 2(107)].

It is important to note that a person who is liable to be registered but

does not take a registration and remains an unregistered person shall be
construed as a taxable person. Similarly, a person not liable to be
registered, but has taken voluntary registration and got himself registered
is also a taxable person.

Section 22 enumerates the persons liable to be registered under CGST Act and section
24 lists the persons liable to be registered compulsorily under the GST law. The said
sections and the concept of taxable person thereto has been discussed in detail in
Chapter 8 – Registration in Module 2 of this Study Material.

 Recipient: of supply of goods and/or services 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)].

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3. EXTENT & COMMENCEMENT OF GST LAW

(i) Central Goods and Services Tax Act, 2017 extends to the whole of India
[Section 1 of the CGST Act].

India: “India” means [Section 2(56) of CGST Act]-

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

the air space above its territory and territorial waters

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24 200
12
NM NM
NM

Territorial
Waters
(TWI) Contiguous High Sea
Zone

Exclusive Economic Zone

Baseline

Continental Shelf

(ii) State GST law of the respective State/Union Territory with Legislature [Delhi,
Puducherry and Jammu & Kashmir]* extends to whole of that State/Union
Territory.

(1) Maharashtra GST Act, 2017 extends to whole of the State of the
Maharashtra.

*State: includes a Union territory with Legislature [Section 2(103) of the CGST
Act].

(iii) Integrated Goods and Services Tax Act, 2017 extends to the whole of India
[Section 1 of the IGST Act].

(iv) Union Territory Goods and Services Tax Act, 2017 extends to the Union
territories** of the Andaman and Nicobar Islands, Lakshadweep, Dadra and
Nagar Haveli and Daman and Diu, Ladakh 1, Chandigarh and other territory,
i.e. the Union Territories without Legislature [Section 1 of the UTGST Act].

1
Students may note that the erstwhile State of Jammu and Kashmir is reorganised into the
Union territory of Jammu and Kashmir (with Legislature) and Union territory of Ladakh vide
the Jammu and Kashmir Reorganisation Act, 2019. Further, the erstwhile Union territories of
Dadra and Nagar Haveli and Daman and Diu is merged into a new Union territory of Dadra
and Nagar Haveli and Daman and Diu vide the Dadra and Nagar Haveli and Daman and
Diu (Merger of Union Territories) Act, 2019.

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**Union territory: means the

territory of—

(a) the Andaman and Nicobar

Islands;

(b) Lakshadweep;

(c) Dadra and Nagar Haveli and

Daman and Diu;

(d) Ladakh

(e) Chandigarh; and

(f) other territory.

Explanation––For the purposes of this Act, each of the territories specified in

sub-clauses (a) to (f) shall be considered to be a separate Union territory
[Section 2(114)].

Our discussion in this Study Material will principally be confined to the

provisions of CGST and IGST laws as the specific State GST laws are outside
the scope of syllabus.

4. LEVY & COLLECTION OF CGST & IGST

[SECTION 9 OF THE CGST ACT & SECTION 5
OF THE IGST ACT]

STATUTORY PROVISIONS

Section 9 of Levy and collection (CGST)

the CGST
Act, 2017

Sub-section Particulars

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

a tax called the central goods and services tax on all intra-State

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supplies of goods or services or both, except on the supply of

alcoholic liquor for human consumption and un-denatured
extra neutral alcohol or rectified spirit used for
manufacture of alcoholic liquor, for human consumption,
on the value determined under section 15 and at such rates, not
exceeding twenty 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.

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

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

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

(4) The Government may, on the recommendations of the

Council, by notification, specify a class of registered persons
who shall, in respect of supply of specified categories of goods
or services or both received from an unregistered supplier, pay
the tax on reverse charge basis as the recipient of such supply
of goods or services or both, 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 such supply of goods or services
or both.

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Section 5 of Levy and collection of tax (IGST)

the IGST
Act, 2017

Sub-section Particulars

(1) Subject to the provisions of sub-section (2), there shall be 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, and un-denatured
extra neutral alcohol or rectified spirit used for
manufacture of alcoholic liquor, for human consumption,
on the value determined under section 15 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.

Provided that the integrated tax on goods other than the

goods as may be notified by the Government on the
recommendations of the Council imported into India shall
be levied and collected 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.

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

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

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

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(4) The Government may, on the recommendations of the Council,

by notification, specify a class of registered persons who shall, in
respect of supply of specified categories of goods or services or
both received from an unregistered supplier, pay the tax on
reverse charge basis as the recipient of such supply of goods or
services or both, 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 such supply of goods or services or both

ANALYSIS
Central Goods and Services Tax (CGST) shall be levied on all intra-State supplies
of goods or services or both 2.
The tax shall be collected in such manner as may be prescribed and shall be paid
by the taxable person. However, intra-State supply of alcoholic liquor for
human consumption is outside the purview of CGST.
Value for levy: Transaction value under section 15 of the CGST Act– Discussed in
detail in Chapter 6 – Value of supply in this Module of Study Material.
Rates of CGST: Rates for CGST are rates as may be notified by the Government on
the recommendations of the GST Council. [Discussed in detail subsequently in
this Chapter]. Maximum rate of CGST can be 20%.

💡💡In case of inter-State supplies of goods and/or services, Integrated Goods and
Services Tax (IGST) is levied on the transaction value under section 15 of the
CGST Act. Alcoholic liquor for human consumption and un-denatured extra
neutral alcohol or rectified spirit used for manufacture of alcoholic liquor, for
human consumption is outside the purview of GST law, IGST is also not leviable
on the same. IGST is the sum total of CGST and SGST/UTGST. Maximum rate of
IGST can be 40%.

2
IGST is leviable on import of goods and on import of services.

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However, CGST/IGST on supply of the following items has not yet been levied. It
shall be levied with effect from such date as may be notified by the Government on
the recommendations of the Council:
 petroleum crude
 high speed diesel
 motor spirit (commonly known as petrol)
 natural gas and
 aviation turbine fuel
Goods imported into India: All imports are
deemed as inter-State supplies and accordingly
IGST shall be levied on imported goods in
addition to the applicable custom duties.
The integrated tax on goods shall be in addition
to the applicable Basic Customs Duty (BCD) which is levied as per the Customs Tariff
Act. In addition, GST compensation cess, may also be leviable on certain luxury and
demerit goods under the Goods and Services Tax (Compensation to States) Cess
Act, 2017.
The integrated tax on goods other than the goods as may be notified by the
Government on the recommendations of the Council imported into India shall
be levied and collected in accordance with the provisions 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 the Customs Act, 1962.

Since in case of intangible goods, it is not possible to levy and collect IGST on
imports in the manner as provided in the proviso, as the goods may not be
physically crossing customs frontiers. Thus, Government is enabled to notify certain
goods for whom the proviso 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) of the IGST Act, 2017 only.

Consequently, supply of online money gaming has been notified 3 for the said
purpose. This implies that import of specified actionable claim of online money

3
Notification No. 03/2023 IT dated 29.09.2023

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 CHARGE OF GST 1.13avv 2.13

gaming will be taxed under IGST as import of goods without applicability of

customs duty.

CGST/IGST shall be paid by the recipient of goods or services or both, on reverse

charge basis, in the following cases:
 Supply of such goods or services or both, as notified by the Government
on the recommendations of the GST Council.
 Supply of specified categories of goods or services or both by an
unregistered supplier to specified class of registered persons, as notified by
the Government on recommendation of GST Council.
All the provisions of the CGST Act/IGST Act shall apply to the recipient in the
aforesaid cases as if he is the person liable for paying the tax in relation to the
supply of such goods or services or both. Let us first understand the concept of
reverse charge mechanism:

Generally, the supplier of goods or services is liable to pay GST. However, under
the reverse charge mechanism, the liability to pay GST is cast on the recipient of
the goods or services.
Reverse charge means the liability to pay tax is on the recipient of supply of goods
or services instead of the supplier of such goods or services in respect of notified
categories of supply [Section 2(98)].
It may be noted that the underlying principle of an indirect tax is that burden of tax
has to be ultimately passed on to the recipient. GST being an indirect tax, this
principle holds good for GST. Under normal circumstances, the statutory liability
to deposit GST and undertake compliances [i.e. to obtain registration under GST, deposit
the tax with the Government, filing returns, etc.] is on the supplier while he may recover
the same from its recipient. However, under reverse charge mechanism, the
statutory liability to deposit GST and undertaking compliance requirements, [i.e. to
obtain registration under GST, deposit the tax with the Government, filing returns, etc.] shifts
from supplier to recipient.

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 1.14 2.14 GOODS AND SERVICES TAX

There are two types of reverse charge scenarios provided in law.

(i) First scenario occurs in case of supply of specified categories of goods or
services, covered by section 9(3) of the CGST/ SGST (UTGST) Act. Similar
provisions are contained under section 5(3) of the IGST Act.
(ii) Second scenario occurs in case of supply of specified categories of goods
or services made by an unregistered supplier to specified class of
registered recipients, covered by section 9(4) of the CGST Act. Similar
provisions are contained under section 5(4) of the IGST Act. Goods
and services notified under this case have been discussed subsequently in
this chapter.

Goods and services notified under reverse charge mechanism under section
9(3) of the CGST Act/ section 5(3) of the IGST Act are as follows:

A. Supplies of goods taxable under reverse charge, i.e. supply of the

goods where tax is payable by the recipient:
Notification No. 4/2017 IT (R) dated 28.06.2017 as amended has notified the
following goods wherein whole of the tax shall be paid on reverse charge basis
by the recipient of supply:

S. Tariff item, Description of Supplier of Recipient of

No. sub- supply of Goods goods supply
heading,
heading or
Chapter

1. 0801 Cashew nuts, not Agriculturist Any

shelled or peeled registered
person

2. 1404 90 10 Bidi wrapper Agriculturist Any

leaves (tendu) registered
person

3. 2401 Tobacco leaves Agriculturist Any

registered
person

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 CHARGE OF GST 1.15avv 2.15

3A. 3301 24 00, Following Any Any

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

4. 5004 to Silk yarn Any person Any

5006 who registered
manufactures person
silk yarn from
raw silk or silk
worm cocoons

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 1.16 2.16 GOODS AND SERVICES TAX

for supply of
silk yarn

4A. 5201 Raw cotton Agriculturist Any

registered
person

5. - Supply of lottery State Lottery

Government, distributor or
Union selling agent.
Territory or Explanation.
any local —For the
authority purposes of
this entry,
lottery
distributor or
selling agent
has the same
meaning as
assigned to it
in clause (c) of
Rule 2 of the
Lotteries
(Regulation)
Rules, 2010,
made under
the provisions
of section
11(1) of the
Lotteries
(Regulation)
Act, 1998.

6. Any Chapter Used vehicles, Central Any

seized and Government registered
confiscated excluding person
goods, old and Ministry of
Railways
(Indian

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 CHARGE OF GST 1.17avv 2.17

used goods, waste Railways),

and scrap State
Government,
Union territory
or a local
authority

7. Any Chapter Priority Sector Any registered Any

Lending person registered
Certificate person

8. 72, 73, 74, Metal scrap Any Any

75, 76, 77, unregistered registered
78, 79, 80, person person.
or 81

B. Supply of services taxable under reverse charge under section 9(3) of

the CGST Act, i.e. the services where tax is payable by the recipient:
Notification No. 13/2017 CT (R) dated 28.06.2017 as amended has notified
the following categories of supply of services wherein whole of the tax
shall be paid on reverse charge basis by the recipient of services:

S. Category of supply Supplier of Recipient of Service

No. of services service
1 Supply of services by a Goods (a) Any factory
Goods Transport Transport registered under or
Agency (GTA) in Agency (GTA) governed by the
respect of [Please refer Factories Act, 1948;
transportation of the analysis or
goods by road to- given (b) any society
(a) any factory subsequently.] registered under
registered under the Societies
or governed by Registration Act,
the Factories Act, 1860 or under any
1948; or other law for the
(b) any society time being in force
registered under in any part of India;

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 1.18 2.18 GOODS AND SERVICES TAX

the Societies or
Registration Act, (c) any co-operative
1860 or under society established
any other law for by or under any
the time being in law; or
force in any part (d) any person
of India; or registered under
(c) any co-operative the CGST Act or the
society IGST Act or the
established by or SGST Act or the
under any law; or UTGST Act; or
(d) any person (e) any body corporate
registered under established, by or
the CGST Act or under any law; or
the IGST Act or (f) any partnership
the SGST Act or firm whether
the UTGST Act; registered or not
or under any law
(e) any body including
corporate association of
established, by persons; or
or under any law; (g) any casual taxable
or person; located in
(f) any partnership the taxable
firm whether territory.
registered or not [Hereinafter referred as
Specified recipients]
under any law
including
association of
persons; or
(g) any casual
taxable person.
However, reverse charge mechanism (RCM) shall not apply to services
provided by a GTA, by way of transport of goods in a goods carriage by
road to-
(a) a Department/ establishment of the Central Government/ State
Government/ Union territory; or
(b) local authority; or

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 CHARGE OF GST 1.19avv 2.19

(c) Governmental agencies,

which has taken registration under the CGST Act only for the purpose of
deducting tax under section 51 and not for making a taxable supply of
goods or services 4.
Further, nothing contained in this entry shall apply where, -
i. the supplier has taken registration under the CGST Act, 2017 and
exercised the option to pay tax on the services of GTA in relation to
transport of goods supplied by him under forward charge; and
ii. the supplier has issued a tax invoice to the recipient charging CGST
at the applicable rates and has made the prescribed declaration on
such invoice issued by him.
2 Services provided by An individual Any business entity
an individual advocate located in the taxable
advocate including a including a territory.
senior advocate or senior
firm of advocates by advocate or
way of legal services, firm of
directly or indirectly. advocates.
“Legal service” means
any service provided in
relation to advice,
consultancy or
assistance in any
branch of law, in any
manner and includes
representational
services before any
court, tribunal or
authority.
3 Services supplied by An arbitral Any business entity
an arbitral tribunal to tribunal. located in taxable
a business entity. territory.

4
These services have been simultaneously exempted from GST vide entry 21B of Notification
No. 12/2017 CT(R) dated 28.06.2017. Thus, there will be no tax liability in this case. [Refer
Chapter 4: Exemptions from GST in this Module of the Study Material for discussion on this
exemption].

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 1.20 2.20 GOODS AND SERVICES TAX

4 Services provided by Any person Any body corporate or

way of sponsorship to other than a partnership firm located
any body corporate or body in the taxable territory.
partnership firm. corporate.
5 Services supplied by Central Any business entity
the Central Government, located in the taxable
Government, State State territory.
Government, Union Government,
territory or local Union
authority to a territory or
business entity local
excluding, - authority
(1) renting of
immovable
property, and
(2) services
specified below-
(i) services by
the
Department
of Posts
and the
Ministry of
Railways
(Indian
Railways);
(ii) services in
relation to
an aircraft
or a vessel,
inside or
outside the
precincts
of a port or
an airport;
(iii) transport
of goods or
passengers

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 CHARGE OF GST 1.21avv 2.21

5A Services supplied by Central Any person registered

Central Government, Government, under the CGST Act, 2017
excluding the Ministry State [read with section 20(v)
of Railways (Indian Government, of IGST Act, 2017].
Railways), State Union
Government, Union territory or
territory/ local local
authority by way of authority
renting of immovable
property to a person
registered under CGST
Act, 2017
5AA Service by way of Any person Any registered person
renting of residential
dwelling to a
registered person
5AB Services by way of Any Any registered person
renting of any unregistered other than a person
immovable property person who has opted to pay
other than residential tax under composition
dwelling. levy.
5B Services supplied by Any person Promoter
any person by way of
transfer of
development rights
(TDR) or Floor Space
Index (FSI) (including
additional FSI) for
construction of a
project by a promoter.
5C Long term lease of Any person Promoter
land (30 years or more)
by any person against
consideration in the
form of upfront
amount (called as

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 1.22 2.22 GOODS AND SERVICES TAX

premium, salami, cost,

price, development
charges or by any
other name) and/or
periodic rent for
construction of a
project by a promoter 5
6 Services supplied by A director of a Company or a body
a director of a company or a corporate located in the
company/ body body taxable territory.
corporate corporate
to the said company/ [Please refer
body corporate. the analysis
given
subsequently.]
7 Services supplied by An insurance Any person carrying on
an insurance agent agent insurance business,
to any person carrying located in the taxable
on insurance business. territory.
8 Services supplied by a A recovery A banking company or a
recovery agent agent financial institution or a
to a banking company non-banking financial
or a financial institution company, located in the
or a non-banking taxable territory.
financial company.
9 Supply of services by a Music Music company, producer
music composer, composer, or the like, located in the
photographer, artist photographer, taxable territory.

5
Supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer are
exempt subject to the condition that the constructed flats are sold before issuance of
completion certificate and tax is paid on them.
Exemption of TDR, FSI, long term lease (premium) is withdrawn in case of flats sold after issue
of completion certificate, but such withdrawal shall be limited to 1% of value in case of
affordable houses and 5% of value in case of other than affordable houses. In such cases,
the liability to pay tax on TDR, FSI, long term lease (premium) has been shifted from land
owner to builder under the reverse charge mechanism (RCM) – as illustrated in table above.

© The Institute of Chartered Accountants of India

 CHARGE OF GST 1.23avv 2.23

or the like by way of artist, or the

transfer or permitting like
the use or enjoyment of
a copyright covered
under section 13(1)(a)
of the Copyright Act,
1957 relating to original
dramatic, musical or
artistic works to a
music company,
producer or the like.
9A Supply of services by an Author Publisher located in the
author by way of transfer taxable territory.
or permitting the use or
enjoyment of a copyright
covered under section
13(1)(a) of the Copyright
Act, 1957 relating to
original literary works to a
publisher.
However, an author can choose to pay tax under forward charge if-
(i) he has taken registration under the CGST Act and filed a
declaration, in the prescribed form, that he exercises the option
to pay CGST on the said service under forward charge in
accordance with section 9(1) and to comply with all the
provisions as they apply to a person liable for paying the tax in
relation to the supply of any goods and/or services and that he
shall not withdraw the said option within a period of 1 year from
the date of exercising such option;
(ii) he makes a declaration on the invoice issued by him in
prescribed form to the publisher.
10 Supply of services by Members of RBI
the members of Overseeing
Overseeing Committee Committee
to Reserve Bank of India constituted by
(RBI) RBI

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 1.24 2.24 GOODS AND SERVICES TAX

11 Services supplied by Individual A banking company or a

individual Direct Selling Direct Selling NBFC, located in the
Agents (DSAs) other Agents (DSAs) taxable territory
than a body corporate, other than a
partnership or limited body
liability partnership corporate,
(LLP) firm to bank or partnership or
non-banking financial LLP firm
company (NBFCs).
12 Services provided by Business A banking company,
business facilitator to a facilitator located in the taxable
banking company. territory
13 Services provided by an An agent of A business
agent of business business correspondent, located in
correspondent to correspondent the taxable territory.
business
correspondent.
14 Security services Any person A registered person,
(services provided by other than a located in the taxable
way of supply of body
territory.
security personnel) corporate
provided to a registered
person.
However, nothing
contained in this entry
shall apply to:
(i) (a) a Department
or
Establishment
of the Central
Government
or State
Government
or Union
territory; or
(b) local authority;
or

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 CHARGE OF GST 1.25avv 2.25

(c) Governmental
agencies;
which has
taken
registration
under the
CGST Act,
2017 only for
the purpose of
deducting tax
under section
51 of the said
Act and not for
making a
taxable supply
of goods or
services; or
(ii) a registered person
paying tax under
composition
scheme.
15 Services provided by Any person, Any body corporate
way of renting of any other than a located in the taxable
motor vehicle designed body territory.
to carry passengers corporate who
where the cost of fuel is supplies
included in the service to a
consideration charged body
from the service corporate &
recipient, provided to a doesn’t issue
body corporate. an invoice
charging
CGST @6% to
service
recipient.
[Please refer
the analysis

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 1.26 2.26 GOODS AND SERVICES TAX

given
subsequently.]
16 Services of lending of Lender i.e., a Borrower i.e., a person
securities under person who who borrows the
Securities Lending deposits securities under the
Scheme, 1997 securities Scheme through an
(“Scheme”) of Securities registered in approved intermediary
and Exchange Board of his name/in of SEBI.
India, as amended the name of
any other
person duly
authorised on
his behalf with
an approved
intermediary
for the
purpose of
lending under
Scheme of
SEBI

🔔🔔 All the above services have also been notified for reverse charge under
IGST Act vide Notification No. 10/2017 IT (R) dated 28.06.2017 as
amended. In addition to them, following additional services are also
notified by said notification for reverse charge under IGST purposes:

S. Category of Supplier of Recipient of Service

No. supply of service service

1. Any service Any person Any person located in

supplied by any located in a non- the taxable territory
person who is taxable territory other than non-taxable
located in a non- online recipient [see
taxable territory to definitions].
any person other
than non-taxable
online recipient.

For purpose of this above services, following explanations shall apply-

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 CHARGE OF GST 1.27avv 2.27

(a) The person who pays or is liable to pay freight for the transportation
of goods by road in goods carriage, located in the taxable territory shall
be treated as the person who receives the service for the purpose of
this notification.
(b) Body Corporate: has the same meaning as assigned to it in clause (11)
of section 2 of the Companies Act, 2013.
As per section 2(11) of the Companies Act, 2013, body corporate or
corporation includes a company incorporated outside India, but does
not include—
(i) a co-operative society registered under any law relating to co-
operative societies; and
(ii) any other body corporate (not being a company as defined in this
Act), which the Central Government may, by notification, specify
in this behalf.
(c) the business entity located in the taxable territory who is litigant,
applicant or petitioner, as the case may be, shall be treated as the
person who receives the legal services for the purpose of this
notification.
(d) the words and expressions used and not defined in reverse charge
notification but defined in the CGST Act, the IGST Act, and the UTGST
Act shall have the same meanings as assigned to them in those Acts.
(e) Limited Liability Partnership formed and registered under the
provisions of the Limited Liability Partnership Act, 2008 shall also be
considered as a partnership firm or a firm.
(f) Insurance agent means an insurance agent licensed under section 42
of the Insurance Act, 1938 who receives agrees to receive payment by
way of commission or other remuneration in consideration of his
soliciting or procuring insurance business including business relating
to the continuance, renewal or revival of policies of insurance [Section
2(10) of the Insurance Act, 1938].
(g) Renting of immovable property means allowing, permitting or granting
access, entry, occupation, use or any such facility, wholly or partly, in
an immovable property, with or without the transfer of possession or
control of the said immovable property and includes letting, leasing,

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 1.28 2.28 GOODS AND SERVICES TAX

licensing or other similar arrangements in respect of immovable

property.
(h) the provisions of reverse charge notification, in so far as they apply to
the Central Government, State Government, shall also apply to the
Parliament and State Legislature, Courts and Tribunals.

GTA services are taxable at the following two rates:

(i) @ 5% (2.5% CGST+2.5% SGST/UTGST or 5% IGST) where GTA
has not taken the Input Tax Credit (ITC) on goods
or services used in supplying GTA service (there
can be either of the cases - where GTA exercises the option to itself
pay GST at said rate or does not exercise the option to itself pay GST
at said rate, on services supplied by it) or
(ii) @ 12% (6% CGST+6% SGST/UTGST or 12% IGST) where GTA exercises the
option to itself pay GST at said rate on services supplied by it. In
this case, there is no restriction on availing ITC on goods or services
used in supplying GTA service by GTA.
In the following paras, we have explained as to who is the person liable to
pay tax in case of each of the above two rates:
Person liable to pay tax under GTA service where
Receipient** is one of the Specified Recipients

Registered GTA exercises GTA does not exercise the

the option to itself pay tax option to itself pay tax

@12% @ 5% GST is payable @ 5%

Forward Charge Forward Charge Reverse charge

Person liable to Person liable to Person liable to pay

pay GST is GTA pay GST is GTA GST is recipient

Note - Where recipient is other than the specified recipients (Unregistered

individual end consumer or unregistered casual taxable person), GST will
be exempt – Discussed in detail in Chapter 4 – Exemptions from GST in this
Module of the Study Material.

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 CHARGE OF GST 1.29avv 2.29

** Recipient of GTA service is the person who pays/is liable to pay freight for
transportation of goods by road in goods carriage, located in the taxable
territory.

Service by way of renting of any motor vehicle designed to carry

passengers where the cost of fuel is included in the consideration charged
from the service recipient are taxable at the following two rates:
(i) @ 5% (2.5% CGST+2.5% SGST/UTGST or 5% IGST) provided supplier
of services has taken only the limited ITC (of input services in the
same line of business) or
(ii) @ 12% (6% CGST+6% SGST/UTGST or 12% IGST) where supplier of
services opts to pay GST at said rate. In this case, there is no
restriction on availing ITC on goods or services used in supplying
renting of motor vehicles service by the supplier of service.
In the following paras, we have explained as to who is the person liable to
pay tax in case of each of the above two rates 6:
Person liable to pay tax under renting of motor vehicle service

Where GST is payable @ 5% Where GST is payable @ 12%

Supplier is other than Supplier is Body

Body Corporate Corporate

Recipient is a Body Recipient is other Forward charge

Corporate
than Body Corporate
Reverse charge Person liable to pay GST
is Supplier
**
Person liable to pay GST is Recipient
**
RCM is applicable here only when the supplier does not issue an invoice charging GST @12%
(6% CGST+6% SGST/UTGST or 12% IGST) from the service recipient.

6
Entry 15 of Notification No. 13/2017 CT (R) dated 28.06.2017 read with Circular No.
130/49/2019 GST dated 31.12.2019

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 1.30 2.30 GOODS AND SERVICES TAX

Now there may arise a doubt as to whether RCM is applicable on:

(i) service of renting of motor vehicle designed to carry passengers
or
(ii) service of transportation of passengers.
It is clarified 7 that there is a clear distinction between the two services which is
as under:
A. The two services fall under two different headings in the Tariff.
B. (i) Services of renting of motor vehicles designed to carry passengers
covers:
• renting of motor vehicle
• for transport of passengers
• for a period of time
• where the renter defines how and when the vehicles will be
operated, determining schedules, routes and other operational
considerations.
(ii) ‘Passenger transport services’ covers passenger transport services
over pre-determined routes on pre-determined schedules.
Accordingly, where the body corporate hires the motor vehicle (for transport of
employees etc.) for a period of time, during which the motor vehicle shall be at the
disposal of the body corporate, the service would fall under ‘services of renting
of motor vehicles designed to carry passengers’, and the body corporate shall
be liable to pay GST on the same under RCM.
Thus, reverse charge would apply on act of renting of vehicles by body corporate
subject to fulfilment of other conditions prescribed for this purpose and in such a
case, it is for the body corporate to use in the manner as it likes subject to
agreement with the person providing vehicle on rent.
However, where the body corporate avails the passenger transport service for
specific journeys or voyages and does not take vehicle on rent for any particular
period of time, the service would fall under ‘passenger transport services’ and the
body corporate shall not be liable to pay GST on the same under RCM.

7
vide Circular No. 177/09/2022 GST dated 03.08.2022

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 CHARGE OF GST 1.31avv 2.31

In order to determine the leviability of tax on the remuneration paid to the

directors, we first need to ascertain whether the director is an employee of the
company or not. Following two situations are possible:
(i) Services provided by the independent directors 8/those directors (by
whatever name called) who are not employees of the said company to such
company, in lieu of remuneration as the consideration for the said services,
are clearly outside the scope of Schedule III of the CGST Act 9 and are
therefore taxable. As seen in the table given above illustrating the reverse
charge services (Entry No. 6), such remuneration paid to the directors is
taxable in hands of the company, on reverse charge basis.

Independent Services
Directors/ provided in the
Reverse charge
Directors who capacity of a
applicable
are not director are
employees taxable

(ii) In case where it is ascertained that a director, irrespective of name and

designation, is an employee, next step would be to examine whether all the
activities performed by the director are in the course of employer-employee
relation (i.e. a “contract of service”) or is there any element of “contract for
service”.
The part of director’s remuneration which is declared as Salaries in the
books of a company and subjected to TDS under section 192 of the Income-

8
The definition of “independent directors” under section 149(6) of the Companies Act, 2013
read with rule 12 of Companies (Share Capital and Debentures) Rules, 2014 makes it amply
clear that the independent director should not have been an employee of the company.
9
As per Para 1 of Schedule III, services by an employee to the employer in the course of or in
relation to his employment are non-supplies, i.e. they are neither supply of goods nor supply
of services. The provisions of Schedule III have been discussed in detail in Chapter 1 – Supply
under GST in this Module of the Study Material.

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 1.32 2.32 GOODS AND SERVICES TAX

tax Act (IT Act), are not taxable being consideration for services by an
employee to the employer in the course of or in relation to his employment
in terms of Para 1 of Schedule III.
Further, the part of employee director’s remuneration which is declared
separately other than salaries in the company’s accounts and subjected to
TDS under section 194J of the IT Act as fees for professional or technical
services are treated as consideration for providing services which are
outside the scope of Schedule III and is therefore, taxable. Besides, as
already discussed, the recipient of the said services i.e. the company, is liable
to discharge the applicable GST on it on reverse charge basis 10.

Declared Not a
as salaries TDS supply as
Director's
in books deducted per
remuneration
of u/s 192 Schedule
company III

Tax on services supplied by director of a company in his personal

capacity such as renting of immovable property to the company/body
corporate not payable under revere charge
Tax on services supplied by director of a company/body corporate to the said
company or the body corporate is payable by the company/body corporate
under reverse charge mechanism (RCM). It is hereby clarified 11 that services
supplied by a director of a company/body corporate to the company/body
corporate in his private/personal capacity such as services supplied by way of
renting of immovable property are not taxable under RCM.
Only those services supplied by director of company/body corporate, which
are supplied by him as or in the capacity of director of that company or body
corporate shall be taxable under RCM in the hands of the company or body
corporate.

10
as clarified vide Circular No 140/10/2020 GST dated 10.06.2020
11
Circular No. 201/13/2023 GST dated 01.08.2023

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 CHARGE OF GST 1.33avv 2.33

Delhi Development Authority (DDA) -NOT a local authority under GST law
As seen earlier, tax on services supplied by local authority to a business entity
is payable under reverse charge. The issue which arose for consideration was
whether DDA can be treated as local authority under GST law.

It has been clarified that since local authority means an authority which is
similar to the elected self-governing body
such as Municipal Committee and which is
entrusted with the control and management
of municipal or local fund can be termed as
local authority, DDA cannot be treated as local authority
under GST law as DDA does not meet the requirement of local authority as per
section 2(69) 12.
Tax payable by the electronic commerce operator (ECO) on notified services:
The Government may, on the recommendations of the GST Council, notify specific
categories of services the tax [CGST/SGST/IGST] on supplies of which shall be paid
by the ECO if such services are supplied through it. ECO is any person who
owns/operates/manages an electronic platform for supply of goods/services/both.
The provisions relating to ECO will be discussed in detail in Chapter 12 – Electronic
Commerce Transactions in Module 2 of this Study Material.

In order to determine the rate applicable on a particular supply of goods or services,

one needs to first determine the classification of such goods or services.
Classification of goods and services assumes significance since there are different
rates prescribed for supply of different goods and services. Therefore, classification
is crucial for determining the rate of tax applicable on a particular product or
service.

12
Circular No. 245/02/2025 GST dated 28.01.2025

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 1.34 2.34 GOODS AND SERVICES TAX

Classification of goods means identification of the chapter, heading, sub-heading

and tariff item in which a particular product will be classified.

Sections

Chapter

Heading

Sub-heading

Tariff item

Chapter, heading, sub-heading and tariff item are referred in the Schedules of rate
notification for goods under GST are the Chapter, heading, sub-heading and tariff
item of the First Schedule to the Customs Tariff Act, 1975. Indian Customs Tariff is
based on HSN. HSN stands for Harmonized System of Nomenclature.

It is a multipurpose international product nomenclature developed by the World

Customs Organization (WCO) for the purpose of classifying goods across the World
in a systematic manner.

It comprises of about 5,000 commodity groups; each identified by a 6-digits code

[code can be extended], arranged in a legal and logical structure and is supported
by well-defined rules to achieve uniform classification. India has extended the HSN
codes upto 8-digits.

Along the lines of HSN, the Indian Customs Tariff has a set of Rules of Interpretation
of the First Schedule and General Explanatory notes. These rules and the general
explanatory notes give clear direction as to how the nomenclature in the schedule
is to be interpreted.

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 CHARGE OF GST 1.35avv 2.35

These Rules for Interpretation including section and chapter notes and the
General Explanatory Notes of the First Schedule 13 apply to the interpretation of
the rate notification for goods under GST also.
Consequently, under GST, goods are classified on the basis of HSN in accordance
with the Rules for the Interpretation of the Customs Tariff. The same have been
discussed in Chapter 3 – Classification of Imported and Export Goods in Module 4 of
this Study Material.
Once classification for a product has been determined on this basis, applicable rate has
to be determined as per the rate prescribed in the rate notification issued under GST.

A new Scheme of Classification of Services has been devised under GST. It is a

modified version of the United Nations Central Product Classification.
Under this scheme, the services of various descriptions have been classified under
various sections, headings and groups. Chapter 99 has been assigned for services.
This chapter has following sections:
Section 5 Construction Services
Section 6 Distributive Trade Services; Accommodation, Food and Beverage Service;
Transport Services; Gas and Electricity Distribution Services
Section 7 Financial and related services; real estate services; and rental and leasing
services
Section 8 Business and Production Services
Section 9 Community, social and personal services and other miscellaneous
services

13
Sections: A group of Chapters representing a particular class of goods.
Chapters: Each section is divided into various chapters and sub-chapters. Each chapter
contains goods of one class.
Chapter notes: They are mentioned at the beginning of each chapter. These notes are part
of the statute and hence have the legal authority in determining the classification of goods.
Heading: Each chapter and sub-chapter is further divided into various headings.
Sub-heading: Each heading is further divided into various sub-headings.

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 1.36 2.36 GOODS AND SERVICES TAX

Each section is divided into various headings which is further divided into Groups.
Its further division is made in the form of ‘Tariff item’/ Service Codes.

Chapter

Section

Heading

Group

Tariff item/Service Code

.
Rate of tax is determined in accordance with the Service Code in which the service
is classified.

Broadly, seven rates of CGST have been notified in seven

Schedules of rate notification for goods, viz., 0.125%,
0.75%, 1.5%, 2.5%, 6%, 9% and 14%. SGST/ UTGST at the
equivalent rate is also leviable.

With regard to IGST, broadly seven

rates have been notified in seven
Schedules of rate notification for
goods, viz., 0.25%, 1.5%, 3%, 5%, 12%, 18% and 28% 14.

14
Students may refer the CBIC website for the complete Schedule of GST Rates for goods for
knowledge purpose.

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 CHARGE OF GST 1.37avv 2.37

Certain specified goods have been exempted from tax.

Broadly, six rates of CGST have been notified for services, viz.,
0.75%, 2.5%, 3.75%, 6%, 9% and 14% 15. Equivalent rate of
SGST/ UTGST is also leviable.
For IGST, six rates have been notified for
services, viz., 1.5%, 5%, 7.5%, 12%, 18% and
28% 1617.
For certain specified services, nil rate of tax has been notified.
Services of gambling, services by way of admission to entertainment events/access
to amusement facilities including (a) casinos, or race club, clubs or any place having
casinos or race clubs or (b) sporting event such as IPL and the events like IPL,
services provided by a race club by way of totalisator or a license to bookmaker in
such club, gambling etc. attract the highest rate of 28% (CGST @ 14% and SGST @
14% or IGST @ 28%).
A number of services are subject to a lower rate of 5% (CGST @ 2.5% and SGST @
2.5% or IGST @ 5%). For instance, GTA service is taxed @ 5% subject to the
condition that credit of input tax charged on goods/services used in supplying said
service has not been taken. Similarly, tax rate for supply of restaurant service, other
than at ‘specified premises 18’, is 5% without any input tax credit.
Services not covered under any specific heading are taxed at the rate of 18%
(CGST @ 9% and SGST @9% or IGST @ 18%).
In the following paras, applicability of GST in real estate sector has been briefly
discussed:

15
notified vide Notification No. 11/2017 CT (R) dated 28.06.2017
16
notified vide Notification No. 8/2017 IT (R) dated 28.06.2017.
17
Students may refer the CBIC website for the complete Schedule of GST Rates for services
for knowledge purposes.
18
“Specified premises” means premises providing “hotel accommodation” services having
declared tariff of any unit of accommodation above ` 7,500 per unit per day or equivalent.

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 1.38 2.38 GOODS AND SERVICES TAX

GST rates in real estate sector

The effective rate of GST on real estate sector for the new projects by promoters
are as follows:
(i) 1% without ITC on construction of affordable houses (area 60 sqm in
metros/ 90 sqm in non-metros and value upto ` 45 lakh).
(ii) 5% without ITC is applicable on construction of:
(a) all houses other than affordable houses, and
(b) commercial apartments such as shops, offices etc. in a residential real
estate project (RREP) in which the carpet area of commercial apartments
is not more than 15% of total carpet area of all apartments.
Conditions:
Above tax rates shall be available subject to following conditions:
(a) ITC shall not be available.
(b) 80% of inputs and input services [other than services by way of grant of
development rights, long term lease of land (against upfront payment in the form of
premium, salami, development charges etc.) or FSI (including additional FSI), electricity,
high speed diesel, motor spirit, natural gas],
used in supplying the service shall
be purchased from registered persons 19.

However, if value of inputs and input services

purchased from registered supplier is less than Supply of services
notified under
80%, promoter has to pay GST on reverse charge
section 9(4)
basis, under section 9(4) [discussed earlier], at the
rate of 18% on all such inward supplies (to the
extent short of 80% of the inward supplies from registered supplier).

19
Discussion in above paras highlighted in brown is solely for the purpose of knowledge of
the students and is not meant for examination purposes.

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 CHARGE OF GST 1.39avv 2.39

Further, where cement is received from an unregistered person, the

promoter shall pay tax on supply of such cement on reverse charge basis,
under section 9(4), at the applicable rate which is 28% (CGST 14% + SGST
14%) at present.

Moreover, GST on capital goods shall be paid by the promoter on reverse

charge basis, under section 9(4) at the applicable rates [Notification No.
07/2019 CT (R) dated 29.03.2019/ Notification No. 07/2019 IT (R) dated
29.03.2019].

The authority managing the airport (airport operator 20) charges the airport
levies, namely, PSF 21 and UDF 22 from the embarking passengers at any airport.

In view of the definition of consideration under

section 2(31), PSF and UDF charged by airport
operators are consideration for providing services
to passengers.

Thus, services provided by an airport operator to

passengers against consideration in the form of
UDF and PSF are liable to GST.

PSF and UDF are levied by the airport operators but are collected by the airlines.
These charges are collected by the airline as an agent of passengers and is not
a consideration for any service provided by the airlines.

20
Generally, an airport licensee appoints an airport operator responsible for overseeing the
airport's day-to-day operations and facility management. However, in smaller airports, the
roles of airport licensee and airport operator may be fulfilled by the same entity.
21
PSF is the Passenger Service Fee (PSF) which the airport licensee may collect from the
embarking passengers at such rates as specified by the Central Government. The airport
licensee shall utilize the said fee for infrastructure and facilitation of the passengers.
22
UDF is the User Development Fee (UDF) which the airport licensee may levy and collect, at
a major airport, at the prescribed rate.

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 1.40 2.40 GOODS AND SERVICES TAX

Thus, the amount so recovered by airlines will be excluded from the value of
supplies made by the airline to its passengers. In other words, the airline shall
not be liable to pay GST on the PSF and UDF (for airport services provided by
airport licensee), provided the airline satisfies the conditions prescribed for a
pure agent under rule 33 of the CGST Rules 23. It is the airport operator which is
liable to pay GST on UDF and PSF.

The airline should separately indicate actual

amount of PSF and UDF and GST payable on
such PSF and UDF by the airport operator, in
the invoice issued by airlines to its
passengers.

The airline shall not take ITC of GST payable

or paid on PSF and UDF. The airline would
only recover the actual PSF and UDF and GST
payable on such PSF and UDF by the airline operator.

The registered passengers, who are the ultimate recipient of the airport
services, may take ITC of GST paid on PSF and UDF on the basis of pure agent’s
invoice issued by the airline to them.

The airport operators shall pay GST on the PSF and UDF collected by them from
the passengers through the airlines (at the time of issue of air ticket and the
same is remitted by airlines to airport operators).

Since, the airport operators are collecting PSF and UDF inclusive of GST, there
is no question of their not paying GST collected by them to the Government
[Circular No. 115/34/2019 GST dated 11.10.2019].

23
Rule 33 of the CGST Rules has been discussed in detail in Chapter 6 - Value of Supply in
this Module of the Study Material.

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 CHARGE OF GST 1.41avv 2.41

5. COMPOSITION LEVY [SECTION 10 OF THE

CGST ACT]

STATUTORY PROVISIONS
Section 10 Composition levy
Sub-section Particulars
(1) Notwithstanding anything to the contrary contained in this Act
but subject to the provisions of sub-sections (3) and (4) of section
9, a registered person, whose aggregate turnover in the preceding
financial year did not exceed fifty lakh rupees, may opt to pay, in
lieu of the tax payable by him under sub-section (1) of section 9,
an amount of tax calculated at such rate as may be prescribed,
but not exceeding,––
(a) one percent. 24 of the turnover in State or turnover in Union
territory in case of a manufacturer
(b) two and a half per cent. of the turnover in State or
turnover in Union territory in case of persons engaged in
making supplies referred to in clause (b) of paragraph 6
of Schedule II, and
(c) half per cent. of the turnover in State or turnover in Union
territory in case of other suppliers
subject to such conditions and restrictions as may be
prescribed.
Provided that the Government may, by notification, increase
the said limit of fifty lakh rupees to such higher amount, not

24
Rate of tax prescribed in case of a manufacturer is half percent of the turnover in State/UT.
The same has been discussed in detail in subsequent paras.

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 1.42 2.42 GOODS AND SERVICES TAX

exceeding one crore and fifty lakh rupees 25, as may be

recommended by the Council.
Provided further that a person who opts to pay tax under
clause (a) or clause (b) or clause (c) may supply services (other
than those referred to in clause (b) of paragraph 6 of Schedule
II), of value not exceeding ten percent. of turnover in a State or
Union territory in the preceding financial year or five lakh
rupees, whichever is higher.
Explanation - For the purposes of second proviso, the value of
exempt supply of services provided by way of extending deposits,
loans or advances in so far as the consideration is represented by
way of interest or discount shall not be taken into account for
determining the value of turnover in a State or Union territory.
(2) The registered person shall be eligible to opt under sub-section
(1), if––
(a) save as provided in sub-section (1), he is not engaged in
the supply of services
(b) he is not engaged in making any supply of services which
are not leviable to tax under this Act
(c) he is not engaged in making any inter-State outward
supplies of goods or services
(d) he is not engaged in making any supply of services through
an electronic commerce operator who is required to collect
tax at source under section 52; and
(e) he is not a manufacturer of such goods as may be notified
by the Government on the recommendations of the Council
(f) he is neither a casual taxable person nor a non-resident
taxable person.
Provided that where more than one registered persons are having
the same Permanent Account Number (issued under the Income-

25
The turnover limit for composition levy has been increased from ` 50 lakh to ` 1.5 crore
vide Notification No. 14/2019 CT dated 07.03.2019.

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 CHARGE OF GST 1.43avv 2.43

tax Act, 1961), the registered person shall not be eligible to opt
for the scheme under sub-section (1) unless all such registered
persons opt to pay tax under that sub-section.
(2A) Notwithstanding anything to the contrary contained in this Act,
but subject to the provisions of sub-sections (3) and (4) of section
9, a registered person, not eligible to opt to pay tax under sub-
section (1) and sub-section (2), whose aggregate turnover in the
preceding financial year did not exceed fifty lakh rupees, may opt
to pay, in lieu of the tax payable by him under sub-section (1) of
section 9, an amount of tax calculated at such rate as may be
prescribed, but not exceeding three per cent. of the turnover in
State or turnover in Union territory, if he is not––
(a) engaged in making any supply of goods or services which
are not leviable to tax under this Act;
(b) engaged in making any inter-State outward supplies of
services;
(c) engaged in making any supply of services through an
electronic commerce operator who is required to collect tax
at source under section 52;
(d) a manufacturer of such goods or supplier of such services as
may be notified by the Government on the
recommendations of the Council; and
(e) a casual taxable person or a non-resident taxable person.
Provided that where more than one registered person are having
the same Permanent Account Number issued under the Income-
tax Act, 1961, the registered person shall not be eligible to opt for
the scheme under this sub-section unless all such registered
persons opt to pay tax under this sub-section.
(3) The option availed of by a registered person under sub-section (1)
or sub-section (2A), as the case may be, shall lapse with effect
from the day on which his aggregate turnover during a financial
year exceeds the limit specified under sub-section (1) or sub-
section (2A), as the case may be.

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 1.44 2.44 GOODS AND SERVICES TAX

(4) A taxable person to whom the provisions of sub-section (1) or, as

the case may be, sub-section (2A) apply shall not collect any tax
from the recipient on supplies made by him nor shall he be
entitled to any credit of input tax.
(5) If the proper officer has reasons to believe that a taxable person
has paid tax under sub-section (1) or sub-section (2A), as the case
may be despite not being eligible, such person shall, in addition
to any tax that may be payable by him under any other provisions
of this Act, be liable to a penalty and the provisions of section 73
or section 74 or section 74A shall, mutatis mutandis, apply for
determination of tax and penalty.
Explanation 1 –– For the purposes of computing aggregate
turnover of a person for determining his eligibility to pay tax
under this section, the expression “aggregate turnover” shall
include the value of supplies made by such person from the 1st
day of April of a financial year upto the date when he becomes
liable for registration under this Act, but shall not include the
value of exempt supply of services provided by way of extending
deposits, loans or advances in so far as the consideration is
represented by way of interest or discount.
Explanation 2 –– For the purposes of determining the tax payable
by a person under this section, the expression “turnover in State
or turnover in Union territory” shall not include the value of
following supplies, namely:––
(i) supplies from the first day of April of a financial year upto
the date when such person becomes liable for registration
under this Act; and
(ii) exempt supply of services provided by way of extending
deposits, loans or advances in so far as the consideration is
represented by way of interest or discount.

ANALYSIS

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 CHARGE OF GST 1.45avv 2.45

(1) Overview of the Scheme

The composition levy is an alternative method of levy Voluntary and
of tax designed for small taxpayers whose turnover is optional scheme
up to a prescribed limit. The objective of composition
scheme is to bring simplicity and to reduce the compliance cost for the small
taxpayers.
Initially, the scheme was
designed to benefit the
small traders,
manufacturers and
restaurant service providers. So, the
scheme was fundamentally for the
suppliers of goods and only for restaurant
service providers (not supplying alcoholic liquor for human consumption).
However, subsequently, suppliers availing composition scheme were
permitted to supply other services also, though only upto a small specified
value. This scheme is contained in sub-sections (1) and (2) of section 10
[hereinafter referred to as composition scheme under section 10(1)].
Under this scheme, suppliers of goods have the option to pay tax at the
concessional rate of 1% (CGST + SGST/UTGST) of the turnover and restaurant
service providers (not supplying alcoholic liquor for human consumption)
have the option to pay tax @ 5% (CGST + SGST/UTGST) of the turnover. Small
taxpayers with an aggregate turnover in the preceding financial year up
to ` 1.5 crore are eligible to pay tax at these rates in the current financial
year upto an aggregate turnover of ` 1.5 crore. However, a person
engaged exclusively in supply of services other than restaurant service is
not eligible for this composition scheme stipulated under sub-sections (1)
and (2).

In order to provide benefit of composition

scheme to persons engaged in supply of services
other than restaurant service whose aggregate
turnover in the preceding financial year is up to
` 50 lakh, a scheme to pay tax @ 6% (CGST +

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 1.46 2.46 GOODS AND SERVICES TAX

SGST/UTGST)of the turnover was introduced subsequently. A mixed supplier

who is primarily engaged in supplying services other than restaurant
service along with marginal supply of goods could also avail the benefit
of this scheme. The provisions of this scheme are contained in sub-section
(2A) of section 10.
Essentially, the composition scheme under sub-section
(2A) of section 10 [hereinafter
referred to as composition under
10(2A)] is for small service providers
like salon stylist, tailors, etc. This
scheme provides an option to such suppliers to pay tax
@ 6% of the turnover in the current financial year upto
an aggregate turnover of ` 50 lakh.
Suppliers opting for composition levy need not worry about the classification
of their goods or services
Simple annual or both, the rate of GST
Easy compliance as
return applicable on their goods
no elaborate
Quarterly and/ or services, etc. They
accounts and records
payment of tax are not required to raise
to be maintained
any tax invoice, but simply
need to issue a Bill of Supply 26 wherein no tax will be charged from the
recipient.
An eligible person opting to pay tax under the composition scheme shall,
instead of paying tax on every invoice at the specified rate, pay tax at the
prescribed percentage of his turnover every quarter through prescribed form
[Form GST CMP 08]. At the end of a quarter, he would pay the tax, without
availing the benefit of input tax credit. Return is to be filed annually by a
composition supplier.
The provisions relating to composition levy are contained in section 10 of
CGST Act, 2017 and Chapter-II [Composition Levy] of Central Goods and
Services Tax (CGST) Rules, 2017. The said rules have been incorporated in the
discussion in the following paras at the relevant places.

26
Discussed in detail in Chapter-9: Tax Invoice, Credit and Debit Notes in Module-2 of this
Study Material.

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 CHARGE OF GST 1.47avv 2.47

As seen above, section 10 stipulates two types of composition schemes –

Composition scheme under

Composition scheme provided under
sections 10(1) & 10(2)
section 10

Composition scheme provided under

section 10(2A)

Provisions relating to these schemes have been discussed in detail in

subsequent paras:
(2) Turnover limit for opting for composition levy [Section 10(1), 10(2A)
& 10(3)]
Turnover limit in case of composition levy
Section 10(1) provides the turnover limit of ` 50 lakh
in the preceding financial year for becoming eligible
for composition levy under section 10(1). However, Turnover limit is

proviso to section 10(1) empowers the Government ` 1.5 crore

to increase the said limit of ` 50 lakh upto ` 1.5
crore, on the recommendation of the GST Council.
In view of said power of the Government, the turnover limit for composition
levy under section 10(1) has been increased from ` 50 lakh to ` 1.5 crore
vide Notification No. 14/2019 CT dated 07.03.2019.
However, the said notification further stipulates that the turnover limit for
composition levy under section 10(1) shall be ` 75 lakh in respect of 8 of
the Special Category States namely:

Special Category States

Arunachal Pradesh Mizoram

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 1.48 2.48 GOODS AND SERVICES TAX

Uttarakhand Nagaland

Manipur Sikkim

Meghalaya Tripura

In case of Special Category States of Assam, Himachal Pradesh and

Jammu and Kashmir, the turnover limit will be ` 1.5 crore only.
Thus, if the aggregate turnover of a supplier in a State/UT other than
Special Category States (except Assam, Himachal Pradesh and Jammu and
Kashmir) is upto ` 1.5 crore in the preceding financial year, said supplier
is eligible for composition scheme under section 10(1). Further, it is
important to note that the aggregate turnover is computed on all India basis
for a person having same Permanent Account Number (PAN) – Refer the
definition of aggregate turnover discussed in subsequent paras.

Arunachal Pradesh
Turnover Limit for composition levy

Uttarakhand
Manipur
Meghalaya
` 75 lakh
for goods

Mizoram
Nagaland
Sikkim
Tripura
` 1.5 crore All other States/UTs

(3) A shoes’ dealer ‘Prithviraj’ has offices in Maharashtra and Goa.

He makes intra-State supply of goods from both these offices.
In order to determine whether ‘Prithviraj’ is eligible to avail benefit of the
composition scheme under section 10(1), turnover of both the offices would
be taken into account and if the same does not exceed ` 1.5 crore in the
preceding financial year, ‘Prithviraj’ can opt to avail the composition levy
scheme (subject to fulfilment of other prescribed conditions) for goods for

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 CHARGE OF GST 1.49avv 2.49

both the offices in the current financial year.

Further, the option of a registered person to avail composition scheme
under section 10(1) shall lapse with effect from the day on which his
aggregate turnover during a financial year exceeds the threshold limit of
` 1.5 crore [` 75 lakh in 8 specified special category States] [Section 10(3)].
Turnover limit in case of composition levy for services under section
10(2A)
Section 10(2A) provides the turnover limit of ` 50 lakh in the preceding
financial year for becoming eligible for composition levy under section
10(2A).
(4) A hair stylist ‘Billoo Barber’ has his salon in Delhi and Haryana,
making intra-State supplies.
In order to determine whether ‘Billoo’ is eligible to avail benefit of the
composition scheme under section 10(2A), turnover of both the salons would
be taken into account and if the same does not exceed ` 50 lakh in the
preceding financial year, ‘Billoo’ can opt to avail the composition levy scheme
(subject to fulfilment of other prescribed conditions) for services for both the
salons in the current financial year.
Further, the option of a registered person to avail
composition scheme under section 10(2A) shall lapse
with effect from the day on which his aggregate
Turnover limit is
turnover during a financial year exceeds the ` 50 lakh
threshold limit of ` 50 lakh [Section 10(3)].
To summarise, a registered
person opting for composition scheme under section
Summary 10(1) should have an aggregate turnover upto ` 1.5
crore
[` 75 lakh in 8 specified Special Category States] in the
preceding FY and he can avail the benefit of said
scheme for the current FY till the time his aggregate turnover in the
27

current FY does not exceed ` 1.5 crore/` 75 lakh.

27
Intimation for opting to pay tax under composition scheme must be filed prior to the
commencement of the FY for which said option is exercised [Rule 3].

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Similarly, a registered person opting for composition scheme under

section 10(2A) should have an aggregate turnover upto ` 50 lakh in the
preceding FY and he can avail the benefit of said scheme for the current
FY till the time his aggregate turnover in the current FY does not exceed
` 50 lakh.

From the above discussion, it is apparent that the term aggregate

turnover is of utmost importance. So, let us understand this term in detail.
(3) Aggregate turnover under composition levy [Section 2(6) read with
explanation 1 to section 10]

The definition of aggregate turnover as contained in section 2(6) is

analysed as follows:
The aggregate turnover is the sum of value of all outward supplies falling in
the following four categories:
 Taxable supplies
 Exempt supplies
 Exports of goods or services or both
 Inter-State supplies
It excludes:
 The value of inward supplies on which tax is payable by a person on
reverse charge basis
 Taxes including cess paid under GST law.

It is computed on all India basis for a person having same Permanent Account
Number (PAN).
Further, explanation 1 to section 10 clarifies that for the purposes of
computing aggregate turnover of a registered person for determining his
eligibility to pay tax under this section, aggregate turnover includes value
of supplies from 1st April of a FY up to the date of his becoming liable for
registration and excludes value of exempt supply of services provided by way
of extending deposits, loans or advances in so far as the consideration is
represented by way of interest or discount.

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On combined reading of the aforesaid provisions, the method of computing

the aggregate turnover for the purpose of determining the eligibility of a
registered person for the composition scheme [for both goods and services]
can be depicted in a diagram as follows:

Includes Excludes
Value of all outward --CGST/ SGST/ UTGST/ IGST/ Cess
supplies
--Value of inward supplies on which tax
--Taxable supplies
--Exempt supplies is payable under reverse charge.
--Exports* --Value of exempt supply of services
--Inter-State supplies* provided by way of extending deposits,
of persons having the same PAN
loans or advances in so far as the
be computed on all India basis.
consideration is represented by way of
These also include interest or discount

Value of supplies made by registered person

from 1st April of a FY up to the date when he
becomes liable for registration under CGST Act
*Note: The value of exports and inter-State supplies are relevant only while
determining the aggregate turnover of the preceding FY. These values are not relevant
for determining the aggregate turnover of the current FY in which the composition
supplier has opted for composition levy as he is not permitted to make inter-State
supplies and exports in the said FY 28.

(4) Rates of tax under the composition levy scheme [Section 10(1) and
section 10(2A) read with rule 7]

Rule 7 prescribes the rates at which tax is payable by a registered person

opting for composition levy – composition levy under section 10(1) and
composition levy under section(2A).

28
Section 10(2)(c)

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 1.52 2.52 GOODS AND SERVICES TAX

Rates of tax in case of composition levy under section 10(1)

A registered person opting for composition levy under section 10(1) shall pay

While computing the threshold limit of ` 1.5 crore/ ` 75 lakh / ` 50

lakh, inclusions in and exclusions from ‘aggregate turnover’ are as
follows:
tax calculated at the prescribed rates [mentioned in table below] during the
current FY, in lieu of the tax payable by him under regular scheme:

S. No. Category of registered persons Rate of tax

1 Manufacturers, other than ½ % 29 of the

manufacturers of notified goods, i.e. ice turnover in the
cream, pan masala, tobacco, aerated State/Union territory
waters, fly ash bricks; fly ash aggregate,
fly ash blocks, bricks of fossil meals or
similar siliceous earths, building bricks,
earthen or roofing tiles.

2 Suppliers making supplies referred to in 2½ % 30 of the

clause (b) of paragraph 6 of Schedule II turnover in the
[referred to as “Restaurant service” in State/Union territory
discussion under this chapter]

3 Any other supplier eligible for ½ % 31 of turnover of

composition levy under section 10 of taxable supplies of
CGST Act and Chapter-II [Composition goods & services in
Levy] of CGST Rules. the State/Union
territory

Note - Students may note that the ‘aggregate turnover’ of preceding FY is relevant for
the purpose of determining eligibility to avail composition scheme, but the tax has to
be paid in accordance with the applicable rates on the ‘turnover’ (or ‘turnover of
taxable supplies’ in case of third category of registered persons above) in a State/UT.

29
Effective rate 1% (CGST+ SGST/UTGST)
30
Effective rate 5% (CGST+ SGST/UTGST)
31
Effective rate 1% (CGST+ SGST/UTGST)

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 CHARGE OF GST 1.53avv 2.53

The concept of ‘Turnover in the State/UT’ under the composition levy has been
explained subsequently in this chapter.

Rates of tax in case of composition levy for services under section 10(2A)
A registered person opting for composition levy under section 10(2A) shall
pay tax @ 3% [Effective rate 6% (CGST+ SGST/UTGST)] of the turnover of
supplies of goods and services in the State or Union territory.
As seen above, since the tax under composition scheme has to computed as
a specified % of the turnover in State or turnover in Union territory, it is
pertinent to understand what is turnover in State or turnover in Union
territory.
(5) Turnover in State or turnover in Union territory under composition
levy [Section 2(112) read with explanation 2 to section 10]

As per section 2(112), turnover in State/ turnover in Union territory means the
aggregate value of all taxable supplies (excluding the value of inward supplies
on which tax is
payable by a person
on reverse charge
basis) and exempt
supplies made within a State or Union territory by a taxable person, exports
of goods or services or both and inter-State supplies of goods or services or
both made from the State or Union territory by the said taxable person but
excludes central tax, State tax, Union territory tax, integrated tax and cess.

Further, explanation 2 to section 10 clarifies that for the purposes of

determining the tax payable by a person under this section, the
expression turnover in State or turnover in Union territory shall not include
the value of following supplies, namely:

(i) supplies from 1st April of a FY up to the date when such person becomes
liable for registration under this Act; and

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 1.54 2.54 GOODS AND SERVICES TAX

(ii) exempt supply of services provided by way of extending deposits, loans

or advances in so far as the consideration is represented by way of
interest or discount.

On combined reading of the aforesaid provisions, the method of computing

the turnover in a State/UT for paying tax under the composition scheme
can be depicted in a diagram as follows:

While computing the Turnover in a State/UT to pay tax under

composition levy, inclusions and exclusions are as follows:

Excludes
Includes --CGST/ SGST/ UTGST/ IGST/ Cess
--Value of inward supplies on
which tax is payable under reverse
charge.
--All taxable supplies and exempt
supplies made within the State/UT --Value of supplies from the first
day of April of a FY up to the date
(While computing turnover in a
when such person becomes liable
State/UT of a supplier, other than
for registration under this Act
manufacturer and restaurant
service provider, eligible for --Value of exempt supply of
composition levy for goods [eg- services provided by way of
trader], the exempt supplies will extending deposits, loans or
not be taken into consideration) advances in so far as the
consideration is represented by
way of interest or discount

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 CHARGE OF GST 1.55avv 2.55

(5) A photographer ‘Champak’ has commenced providing

photography services in Delhi from April this year. His turnover
for various quarters till December is as follows:
April-June ` 20 lakh
July-Sept ` 30 lakh
Oct-Dec ` 20 lakh
In the given case, since Champak has started the supply of services in the
current financial year, his aggregate turnover in the preceding FY is Nil.
Consequently, in the current FY, he is eligible for composition scheme under
section 10(2A). He becomes eligible for the registration when his aggregate
turnover exceeds ` 20 lakh.
While registering under GST, he opts for composition scheme under section
10(2A).
For determining his turnover of the State for payment of tax under
composition scheme under section 10(2A), turnover of April-June quarter
[` 20 lakh] shall be excluded as the value of supplies from the first day of April
of a financial year up to the date when such person becomes liable for
registration under this Act are to be excluded for this purpose.

On next ` 30 lakh [turnover of July-Sept quarter], he shall pay tax @ 6% [3%

CGST and 3% SGST], i.e. CGST ` 90,000 and SGST ` 90,000.
By the end of July-Sept quarter, his aggregate turnover reaches ` 50 lakh*.

Consequently, his option to avail composition scheme under section 10(2A)

shall lapse by the end of July-Sept quarter and thereafter, he is required
to pay tax at the normal rate of 18%. Thus, the tax payable for Oct-Dec
quarter is ` 20 lakh × 18%, i.e. ` 3,60,000.
*while computing aggregate turnover for determining Champak’s eligibility to
pay tax under composition scheme, value of supplies from the first day of April
of a financial year up to the date when such person becomes liable for
registration under this Act (i.e. turnover of April-June quarter), are included.

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 1.56 2.56 GOODS AND SERVICES TAX

(6) Who are NOT eligible to opt for composition scheme? [Section 10(2)
and (2A)]

Registered person who is not eligible for Registered person who is not eligible for
composition scheme under section 10(1) composition scheme under section 10(2A)

Supplier engaged in making any

Supplier engaged in making any supply of goods or services
supply of goods or services which are not leviable to tax
which are not leviable to tax

Supplier engaged in making any

Supplier engaged in making any inter-State outward supplies of
inter-State outward supplies of goods or services
goods or services

Person supplying any services

Person supplying any services through an electronic commerce
through an electronic commerce operator who is required to
operator who is required to collect tax at source under
collect tax at source under section 52
section 52

Manufacturer of ice cream,

panmasala, tobacco and aerated Manufacturer of notified goods
waters, fly ash bricks; fly ash or supplier of notified services
aggregate, fly ash blocks, bricks of
fossil meals or similar siliceous
earths, building bricks, earthen or
roofing tiles. Supplier who is either a casual
taxable person or a non-resident
taxable person.
Supplier who is either a casual
taxable person or a non-resident
taxable person

Supplier of services, save as

provided in section 10(1) [Refer
discussion below diagram]

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 CHARGE OF GST 1.57avv 2.57

There is no restriction on
composition supplier to receive
inter-State inward supplies of
goods or services

A person engaged in marginal supply of services other than

restaurant service also eligible for composition scheme under 10(1)
[Second proviso to section 10(1) read with section 10(2)(a)]
Fundamentally, the composition scheme under section 10(1) can primarily
be availed in respect of goods and only one service namely, restaurant
service. However, there are cases where a manufacturer/ trader is also
engaged in supply of services other than restaurant service though the
percentage of such supply of services is very small as compared to the
supplies of goods. There may also be cases where a restaurant service
provider is also engaged in supplying a small percentage of other services.
With a view to enable such taxpayers to avail of the benefit of composition
scheme under section 10(1), second proviso to section 10(1) permits
marginal supply of services [other than restaurant services – not supplying
alcoholic liquor for human consumption] for a specified value along with
the supply of goods and/or restaurant service, as the case may be. This
specified value is value not exceeding:
(a) 10% of the turnover in a State/UT in the preceding financial year

or
(b) ` 5 lakh,
whichever is higher.

Thus, it can be inferred that where the turnover of a registered person

opting for composition scheme under section 10(1) is upto ` 50 lakh in
the preceding financial year, he can supply services [other than restaurant
services] upto a maximum value of ` 5 lakh in the current financial year.
Further, where the turnover of a registered person opting for composition

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 1.58 2.58 GOODS AND SERVICES TAX

scheme is more than ` 50 lakh and upto ` 1.5 crore in the preceding
financial year, he can supply services [other than restaurant services] in
the current financial year upto a maximum value of 10% of the turnover
in a State/Union territory in the preceding financial year.
(6) Ramsewak is engaged in supply of goods. His turnover in
preceding FY is ` 60 lakh. Since his aggregate turnover in the
preceding FY does not exceed ` 1.5 crore, he is eligible for
composition scheme section 10(1) in current FY. Further, in current FY, he can
supply services [other than restaurant services] upto a value of not exceeding:
(a) 10% of ` 60 lakh, i.e. ` 6 lakh
or
(b) ` 5 lakh,
whichever is higher.
Thus, he can supply services upto a value of ` 6 lakh in current FY. If the value
of services supplied exceeds ` 6 lakh, he becomes ineligible for the
composition scheme under section 10(1) and has to opt out of the same.
Interest income to be excluded for determining the value of
turnover in a State or Union territory under second proviso to
section 10(1) [Explanation to second proviso to section 10(1)]
Generally, businesses tend to save and invest money in the form of deposits,
loans or advances. However, this way they get engaged in supply of service
by way of extending deposits, loans or advances 32 – a service other than
restaurant service. And where the income from such services cause the value
of services 33 supplied to exceed the value referred in second proviso to
section 10(1) 34 [10% of the turnover in the preceding FY in a State/Union
territory or ` 5 lakh, whichever is higher], said business would have become
ineligible for the composition scheme under section 10(1) and one has to

32
It is, however, pertinent to note that services by way of extending deposits, loans or
advances in so far as the consideration is represented by way of interest or discount are
exempt from GST – Discussed in detail in Chapter 4 – Exemptions from GST in this Module of
the Study Material.
33
other than restaurant services
34
as discussed in preceding paras

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 CHARGE OF GST 1.59avv 2.59

opt out of the composition scheme. This can cause a lot of hardship to small
businesses.
In view of the above, an explanation is inserted after second proviso to section
10(1) to clarify that for the purposes of second proviso to section 10(1), the
value of supply of exempt services by way of extending deposits, loans or
advances in so far as the consideration is represented by way of interest or
discount, shall not be taken into account for determining the value of
turnover in a State or Union territory.
Under second proviso to section 10(1), a registered person opting for
composition scheme may supply services [other than restaurant services] of
value not exceeding 10% of the turnover in the preceding financial year in a
State/Union territory or ` 5 lakh, whichever is higher. Thus, while computing
value of services [other than restaurant services] as referred in this
proviso, interest on loans/deposit/advances will not be taken into
account.
The provisions relating to composition levy discussed hereafter are
applicable to both composition levy under section 10(1) as well as
composition levy under section 10(2A).
(7) Conditions and restrictions for composition levy [Rule 5]
Person opting for composition levy has to comply with the following
conditions:

 he shall pay tax under section 9(3)/9(4) 35 (reverse charge) on inward

supply of goods or services or both.

 he is neither a casual taxable person nor a non-resident taxable

person

 he shall mention the words “composition taxable person, not eligible

to collect tax on supplies” at the top of the bill of supply issued by
him; and
 he shall mention the words “composition taxable person”
on every notice or signboard displayed at a prominent

35
wherever applicable

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 1.60 2.60 GOODS AND SERVICES TAX

place at his principal place of business and at every additional place or

places of business.
Further, where the goods held in stock by him are liable to be taxed under
reverse charge under section 9(4) 36, the tax thereon has been paid under
reverse charge under section 9(4).
In addition to the above conditions, a registered person opting for
composition scheme under section 10(1) must not be engaged in the
manufacture of goods as notified under section 10(2)(e), during the
preceding FY. The following goods have been hereby notified vide
Notification No. 14/2019 CT dated 07.03.2019 as amended:

Tariff item, Description

subheading, heading or
Chapter*

2105 00 00 Ice cream and other edible ice,

whether or not containing
cocoa

2106 90 20 Pan masala

Pan Masala

24 All goods, i.e. Tobacco and

manufactured tobacco
substitutes

2202 1010 Aerated Waters

36
This condition applies in case where a builder/promoter opting for composition scheme has
the stock of the goods on which he is required to pay GST on reverse charge basis under
section 9(4) in one or more of the following cases:
(i) Builder/promoter must purchase at least 80% of inputs and input services used in
supplying the service, from registered persons. In case of shortfall, he’s required to pay
tax under reverse charge on all such inward supplies (to the extent short of 80% of the
inward supplies from registered supplier).
(ii) Where cement is received from an unregistered person, promoter/builder has to pay tax
on supply of such cement under reverse charge and
(iii) GST on capital goods is payable by the promoter on reverse charge basis.

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 CHARGE OF GST 1.61avv 2.61

6815 Fly ash bricks; fly ash aggregate; Fly ash

blocks
6901 00 10 Bricks of fossil meals or similar siliceous
earths
6904 10 00 Building bricks
6905 10 00 Earthen or roofing tiles

* as specified in the First Schedule to the Customs Tariff Act, 1975

(8) Intimation of opting for composition levy [Rules 3 & 4]
(i) Intimation by person applying for registration: Any
person who is not registered and applies for registration
may be given an option to pay tax under composition
levy in Part B of the registration form, viz., Form GST REG-01. The
same shall be considered as an intimation to pay tax under composition
levy. Such intimation shall be considered only after the grant of
registration to the applicant. The option to pay tax under
composition levy shall be effective from the date from which
registration is effective.
(ii) Intimation by a registered person: A registered person who opts to
pay tax under the composition levy scheme shall electronically file an
intimation in prescribed form on the GST Common Portal
[[Link]]. The intimation shall be filed prior to the
commencement of the FY for which said option is exercised.
He shall also furnish the statement in prescribed form in accordance
with the provisions of rule 44(4) [Discussed in detail in Chapter 7 – Input
Tax Credit in Module 2 of this Study Material] within 60 days from the
commencement of the relevant FY.

Any intimation in respect of any place of business in a State/UT shall be

deemed to be an intimation in respect of all other places of business
registered on the same PAN.

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 1.62 2.62 GOODS AND SERVICES TAX

The option to pay tax under composition levy shall be effective

from the beginning of the FY 37.
A person applying for registration can opt for
composition at the time of applying for
registration [this time being any time of the Summary
financial year] and composition levy shall be
effective from the date from which registration is
effective.
A registered person can opt for composition scheme from the
beginning of any FY and composition levy shall be effective from the
beginning of said FY. Intimation for opting to pay tax under
composition scheme must be filed prior to the commencement of
the FY for which said option is exercised.

composition levy
can opt for shall be effective
composition levy from

•the date from

•at any time during the which registration
year while applying for is effective
registration
Person applying
for registration

37
Registration shall be effective from the date on which the person becomes liable to
registration where the application for registration has been submitted within a period of thirty
days from such date. Where an application for registration has been submitted by the
applicant after the expiry of thirty days from the date of his becoming liable to registration,
the effective date of registration shall be the date of the grant of registration. Discussed in
detail in Chapter 8 – Registration in Module 2 of this Study Material.

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 CHARGE OF GST 1.63avv 2.63

composition levy
can opt for shall be effective
composition from
levy
•the
•from the
beginning of
beginning of
said FY
Registered any FY
person

(9) Validity of composition levy [Section 10(3) read with rule 6 38]

I. Withdrawal from the composition scheme by a taxpayer who

ceases to satisfy any of the prescribed conditions

 The option exercised by a registered person to pay amount under

composition levy shall remain valid so long as he satisfies all the
conditions mentioned in the relevant section and rules. For
instance, the option to pay tax under composition scheme lapses
from the day on which aggregate turnover of a registered person
exceeds the specified limit (` 1.5 crore/ ` 75 lakh/ ` 50 lakh) during
the FY.

 Such person is required to pay tax under regular scheme under

section 9(1) from the day he ceases to satisfy any of the conditions
prescribed for composition levy. He shall issue tax invoice for
every taxable supply made thereafter. Further, he is required to
file an intimation for withdrawal from the scheme in prescribed
form within 7 days of the occurrence of such event.

 The effective date from which withdrawal from the

composition scheme shall take effect shall be the date
indicated by him in his intimation, but such date may not be prior
to the commencement of the financial year in which such
intimation is being filed.

38
read with Circular No. 77/51/2018 GST dated 31.12.2018

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 1.64 2.64 GOODS AND SERVICES TAX

II. Withdrawal from the composition scheme by a taxpayer who

intends to withdraw from the said scheme
 The registered person who intends to withdraw from the
composition scheme shall, before the date of such withdrawal, file
an application in prescribed form.
 The effective date from which withdrawal from the
composition scheme shall take effect shall be the date
indicated by him in his application, but such date may not be prior
to the commencement of the financial year in which such
application for withdrawal is being filed.
III. Denial of option to pay tax under the composition scheme by tax
authorities
 Where the proper officer has reasons to believe that the
registered person was not eligible to pay tax under composition
scheme or has contravened the provisions of the CGST Act or
provisions of this Chapter, he may issue a show cause notice (SCN)
to such person. Upon receipt of reply to SCN, the proper officer
shall pass an order either accepting the reply, or denying the
option to pay tax under composition scheme from the date of the
option or from the date of the event concerning such
contravention, as the case may be.
 In case of denial of option to pay tax under composition levy
by the tax authorities, the effective date of such denial shall be
from a date, including any retrospective date, as may be
determined by tax authorities. However, such effective date shall
not be prior to the date of contravention of the provisions of the
CGST Act/ CGST Rules 39.
In each of the above cases, such person may furnish a statement in prescribed
form containing details of the stock of inputs and inputs contained in semi-
finished or finished goods held in stock by him on the date on which the
option is withdrawn/denied, within a period of 30 days from the date from
which the option is withdrawn/ or from the date of the order denying
composition scheme.

39
Circular No. 77/51/2018 GST dated 31.12.2018

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 CHARGE OF GST 1.65avv 2.65

Any intimation or application for withdrawal or denial of the option to pay

tax under section 10 in respect of any place of business in any State or Union
territory, shall be deemed to be an intimation in respect of all other places of
business registered on the same PAN.
(7) A person availing composition scheme during a financial year
crosses the turnover of ` 1.5 crore on 9th of December. The option
availed shall lapse from the day on which his aggregate turnover
during the financial year exceeds ` 1.5 crore, i.e. on 9th December, in this case.
(10) Composition scheme to be adopted uniformly by all the registered
persons having the same PAN [Proviso to section 10(2) and proviso
to section 10(2A)]
All registered persons having the same Permanent Account Number (PAN)
have to opt for composition scheme. If one such registered person opts for
normal scheme, others become ineligible for composition scheme.
(8) A dealer ‘Kishorilal & Sons’ has two offices in Delhi and is
eligible for composition levy under section 10(1). If ‘Kishorilal &
Sons’ opts for the composition scheme under section 10(1), both
the offices would pay taxes under composition scheme and abide by all the
conditions as may be prescribed for the said composition scheme.
(11) Composition scheme supplier cannot collect tax [Section 10(4)]
Taxable person opting for the composition scheme shall not collect tax from
the recipient on supplies made by him. It implies that a composition scheme
supplier cannot issue a tax invoice.
(12) Composition scheme supplier cannot enter credit chain [Section
10(4)]
Taxable person opting for the composition scheme shall not be entitled to
any credit of input tax.
(13) Imposition of penalty in case of irregular availment of the
composition scheme [Section 10(5)]
If a taxable person has paid tax under the composition scheme though he
was not eligible for the scheme, the person would be liable to penalty and
the provisions of section 73 or 74 or section 74A of the CGST Act shall be
applicable for determination of tax and penalty.

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 1.66 2.66 GOODS AND SERVICES TAX

LET US RECAPITULATE

Extent & commencement of CGST Act/ SGST Act/ UTGST Act/ IGST
A

Applicability CGST SGST UTGST IGST

Intra-State supply Inter-State

supply

States of India

Union Territories
with Legislature

Union Territories
without Legislature

Levy and collection of CGST/IGST

Particulars CGST IGST

Levied on Intra-State supplies Inter-State supplies of

of goods/services/both
goods/services/both

Collected and paid by Taxable person

Supply outside Alcoholic liquor for human consumption and un-

purview of GST denatured extra neutral alcohol or rectified spirit
used for manufacture of alcoholic liquor, for
human consumption

Value for levy Transaction value under section 15 of the CGST

Act

Rates Rates as notified by IGST rate= CGST rate +

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 CHARGE OF GST 1.67avv 2.67

Government. SGST/UTGST rate

Maximum rate of Maximum rate of IGST can
CGST can be 20%. be 40%.

Supplies on which  petroleum crude

tax would be levied  high speed diesel
w.e.f. a notified date
 motor spirit (commonly known as petrol)
 natural gas and
 aviation turbine fuel

Tax payable under  Supply of goods or services or both, notified

reverse charge by the Government.
 Supply of specified categories of goods or
services or both by an unregistered supplier to
specified class of registered persons.

Tax payable by the The Government may notify specific categories of

electronic commerce services the tax on supplies of which shall be paid
operator by electronic commerce operator (ECO) as if such
services are supplied through it.

Services on which tax is payable under reverse charge

S. Category of supply of Supplier of Recipient of

Services Service Service
No.

1. Supply of services of Goods Any of the

transportation of goods by Transport following:
road by GTA except where Agency (GTA)
• Factory
GTA exercises the option to
pay tax under forward charge • Society
• Co-operative
society

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 1.68 2.68 GOODS AND SERVICES TAX

• Body
corporate
• Partnership
firm
• Casual taxable
person
• Registered
Person
(Referred as
Specified
recipient.}

Exception:
Services provided by a GTA to-
(a) Department/ Establishment of CG/SG/UT; or
(b) Local Authority (LA); or
(c) Governmental agencies (GA),
which has taken registration only for the purpose of deducting TDS.

2. Legal services An individual Business entity

advocate
including a
senior
advocate/firm
of advocates.

3. Services by an arbitral Arbitral tribunal Business entity

tribunal

4. Sponsorship services Any person Body corporate or

other than a partnership firm
body
corporate

5. Services by CG/SG/UT/LA CG/SG/UT/LA Business entity

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 CHARGE OF GST 1.69avv 2.69

excluding, -
(1) renting of immovable
property service, and
(2) (i) services by
Department of Posts/
Ministry of Railways
(ii) services in relation
to aircraft/vessel;
(iii) transport of
goods/passengers.

5A. Renting of immovable CG/SG/UT/LA Registered person

property service excluding the
Ministry of
Railways

5AA. Renting of residential Any person Registered person

dwelling service

5AB. Renting of any immovable Any Any registered

property other than unregistered person other
residential dwelling person than a person
who has opted to
pay tax under
composition
levy.

5B. Services supplied by way of Any person Promoter

TDR or FSI (including
additional FSI) for
construction of a project

5C. Long term lease of land (30 Any person Promoter

years or more) against
consideration in the form of

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 1.70 2.70 GOODS AND SERVICES TAX

upfront amount and/or

periodic rent for
construction of a project

6. Services by a director of a Director Company/ body

company/ body corporate corporate

7. Services supplied by an Insurance agent Person carrying on

insurance agent insurance business

8. Services supplied by a Recovery agent Banking company/

recovery agent financial
institution/NBFC

9. Services of transfer or Music Music company,

permitting the use or composer, producer or the
enjoyment of a copyright photographer, like
covered under section 13(1)(a) artist, or the like
of the Copyright Act, 1957
relating to original dramatic,
musical or artistic works

9A. Services of copyright covered Author Publisher

under section 13(1)(a) of the
Copyright Act, 1957 relating
to original literary works
except where the author
exercises the option to pay
tax under forward charge

10. Supply of services by the Members of RBI

members of Overseeing Overseeing
Committee Committee
constituted by
the RBI

11. Services supplied by Individual DSAs Banking

individual Direct Selling other than a

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 CHARGE OF GST 1.71avv 2.71

Agents (DSAs) body corporate, company/NBFC

partnership or
LLP firm

12. Services by business Business Banking company

facilitator facilitator

13. Services provided by an An agent of Business

agent of business business correspondent
correspondent correspondent

14. Security services Any person Registered person

other than a
Exceptions:
body corporate
Security services provided
to-
(I) (a) Department/
establishment of
CG/SG/UT; or
(b) LA; or
(c) GA,
which has taken
registration only for
the purpose of
deducting TDS.
(II) Registered
composition supplier

15. • Renting of motor vehicle Non-body Body corporate

service corporate who
doesn’t issue an
• Vehicle designed to carry
invoice charging
passengers
CGST @ 6% to
service recipient.

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 1.72 2.72 GOODS AND SERVICES TAX

• Cost of fuel is included in

consideration charged
from recipient

Lender
16. Services of lending of Borrower
securities under Securities
Lending Scheme, 1997

🔔🔔 All the above services have also been notified for reverse charge under
IGST Act vide Notification No. 10/2017 IT (R) dated 28.06.2017 as
amended. In addition to them, following additional services are also
notified by said notification for reverse charge under IGST purposes:

S. Category of Supplier of Recipient of Service

No. supply of service service

1. Any service Any person Any person located in

located in a non- the taxable territory
taxable territory other than non-taxable
online recipient.

Composition levy [Section 10]

Composition levy

Composition levy Advantages

•An option for specified •Low rates of tax

categories of small •Hassel free simple procedures for
taxpayers to pay GST at a such taxpayers
very low rate on the basis •Simple calculation of tax based on
of turnover. turnover
•A very simple annual return

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 CHARGE OF GST 1.73avv 2.73

Composition Levy

Composition levy provided under Composition levy provided under

section 10(1) and 10(2) section 10(2A)

Procedure for opting for the scheme

Category of How to exercise Effective date of

persons option composition levy

New registration Intimation in the From the effective date of

under GST registration form registration

Registered person Intimation in Beginning of the financial

opting for prescribed form year
composition levy

Turnover limit for composition levy

Turnover limit in preceding FY to opt for composition levy for goods

For Special Category States except

• ` 75 lakh
Assam, Himachal Pradesh and J&K

• ` 1.5 crore
For remaining States

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 1.74 2.74 GOODS AND SERVICES TAX

Turnover limit in preceding FY to opt for composition levy for services

Turnover for composition

levy for services • ` 50 lakh in preceding financial year

Conditions and restrictions for composition levy

Person opting for composition:

is neither a casual taxable person nor a non-resident taxable person

shall pay tax under section 9(3)/9(4) on inward supply

is not engaged in the manufacture of notified goods** [or notified services also in
case of composition scheme under section 10(2A)]

shall mention the words “composition taxable person, not eligible to collect tax
on supplies” at the top of the bill of supply issued by him

shall mention the words “composition taxable person” at a prominent place at his
place of business

** Goods notified for a registered person opting for composition scheme under
section 10(1) are ice cream, pan masala, tobacco, aerated waters fly ash bricks, fly
ash aggregate, fly ash blocks, bricks of fossil meals or similar siliceous earths,
building bricks, earthen or roofing tiles.

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 CHARGE OF GST 1.75avv 2.75

Rates of tax

Composition Category of Rate

scheme registered persons

For goods Manufacturer 1% (½% CGST + ½% SGST/UTGST) of

turnover

Restaurant service 5% (2½% CGST + 2½% SGST/UTGST)

providers of turnover

Others 1% (½% CGST + ½% SGST/UTGST) of

turnover of taxable supplies

For services All service providers 6% (3% CGST + 3% SGST/UTGST) of

except restaurant turnover
service providers

Who are NOT eligible to opt for composition scheme?

Registered person who is not Registered person who is not

eligible for composition scheme eligible for composition scheme
under section 10(1). under section 10(2A).

Supplier engaged in making any Supplier engaged in making any

supply of goods or services which are supply of goods or services which are
not leviable to tax i.e. non-taxable not leviable to tax i.e. non-taxable
supplies supplies

Supplier engaged in making any Supplier engaged in making any

inter-State outward supplies of inter-State outward supplies of goods
goods or services or services

Person supplying any services Person supplying any services

through an electronic commerce through an electronic commerce

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 1.76 2.76 GOODS AND SERVICES TAX

operator who is required to collect operator who is required to collect tax

tax at source under section 52 at source under section 52

Manufacturer of ice cream, pan Manufacturer of notified goods or

masala, tobacco, aerated waters fly supplier of notified services
ash bricks, fly ash aggregate, fly ash
blocks, bricks of fossil meals or
similar siliceous earths, building
bricks, earthen or roofing tiles.

Supplier who is either a casual Supplier who is either a casual taxable

taxable person or a non-resident person or a non-resident taxable
taxable person person.

Supplier of services, save as provided

in section 10(1)**

**A registered person opting for composition scheme under section 10 (1) is allowed to
supply services [other than restaurant services] alongwith supply of goods or supply of
restaurant services of value not exceeding 10% of the turnover in the preceding financial
year in a State/Union territory or ` 5 lakh, whichever is higher. Here, while computing
turnover in a State/UT, interest on loans/deposit/advances will not be taken into account.

Other points

Bill of supply shall be issued instead of tax invoice.

Tax shall not be collected from recipient of supply

Input tax credit shall not be availed

Composition Scheme if availed shall include all registered persons having same
PAN

Penalty shall be imposed in case of irregular availment of the composition

scheme

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 CHARGE OF GST 1.77avv 2.77

TEST YOUR KNOWLEDGE

1. Panini Private Limited, Jaipur, agrees to sponsor a sports event organized by
Pink City Club, a non-body corporate, in Jaipur. Panini Private Limited has paid
an amount of ` 5,00,000 for such sponsorship of the sports event.
Consequently, said event was named after the brand name of Panini Private
Limited. Examine who is the person liable to pay tax in the given case.
2. Arpan Singhania is an executive director in Narayan Limited, Haryana. The
company paid him the sitting fee amounting to ` 25,000, for the month of
January. Further, salary was paid to Arpan Singhania amounting to
` 1.5 lakh for the month of January on which TDS was also deducted as per
applicable provisions under Income-tax law. Tapasya & Associates, in which
Arpan Singhania is a partner, supplied certain professional services to Narayan
Limited in the month of January for an amount of ` 2 lakh. Discuss the person
liable to pay GST in each of the supplies involved in the given case.
3. Mr. Rajbeer, a registered person at Delhi, is in the business of selling goods
relating to interior decoration under the firm name M/s. Rajbeer & Sons. He
has opted for composition scheme for the financial year 2023-24.
His turnover for current FY ` 80 lakh and is expected to achieve ` 130 lakh in
financial year 2024-25. Discuss whether M/s Rajbeer & Sons can still enjoy the
benefits of composition scheme in financial year 2024-25.
His son Karan wants to start business of providing services relating to interior
decoration, after completing post-graduation course in interior decoration
under same firm name M/s Rajbeer & Sons with effect from 1st April of financial
year 2024-25 and wants to enjoy the benefits of composition scheme under
GST.
Advise Mr. Rajbeer and his son Karan.
4. Varun & Arun Associates started a partnership firm of architects in Bhopal
(Madhya Pradesh) on 1st April of the current financial year. The firm provides
architectural services in Madhya Pradesh only. It provided the following details
of its turnover during the current financial year:

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 1.78 2.78 GOODS AND SERVICES TAX

April - June ` 20 lakh

July - Sept ` 30 lakh
Oct - Dec ` 20 lakh
The firm has obtained the registration under section 22 with effect from
1st July and opts to pay tax under composition scheme. Determine the tax
liability of Varun & Arun Associates for the quarters: April – June, Jul-Sept and
Oct-Dec.
Note: The rates of tax on architectural services are CGST- 9% and SGST-9%.
5. Examine whether the suppliers are eligible for composition levy under
section 10 in the following independent cases in the beginning of financial year
2024-25:
(a) Technology Enterprises, registered in Jalandhar, Punjab, is engaged in
manufacturing and supplying computer systems. Its aggregate turnover
in the financial year 2023-24 is ` 125 lakh. Technology Enterprises
supplies the computer systems manufactured by it within the State of
Punjab only. With a view to expand its business operations, it will also
start providing the repairing services of computer systems in Punjab in
the financial year 2024-25.
(b) M/s. Siddharth & Sons, registered in Delhi, owns a restaurant ‘Tasty
Foods’ with a turnover of ` 112 lakh in the financial year 2023-24. In
view of the growing customer demand, it will also start intra-State
trading of juices in Delhi from financial year 2024-25.
(c) Sitaram Associates, registered in Sikkim, is engaged in running a
restaurant chain ‘Veg Kitchen’ in the State. It has a turnover of
` 73 lakh in the financial year 2023-24. In the financial year 2024-25, it
decides to shut down the food chain owing to huge losses being incurred
in the said business. Instead, it will start providing intra-State architect
services from financial year 2024-25.
(d) Deepti Services Ltd., registered in Uttarakhand, is exclusively providing
intra-State hair styling services. It has turnover of ` 34 lakh in the
financial year 2023-24.

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 CHARGE OF GST 1.79avv 2.79

Will your answer be different, if Deepti Services Ltd. also start intra-
State supply of beauty products alongwith providing hair styling
services in the financial year 2024-25?
6. B & D Company, a partnership firm, in Nagpur, Maharashtra is a wholesaler of
a taxable product ‘P’ and product ‘Q’ exempt by way of a notification. The firm
supplies these products only in the eastern part of Maharashtra. All the
procurements (both goods and services) of the firm are from the suppliers
registered under regular scheme in the State of Maharashtra. The firm pays tax
under composition scheme.
B & D Company has furnished the following details with respect to its turnover
(exclusive of taxes):

Particulars Turnover for the quarter Turnover for the quarter

ended 30th June (`) ended 30th September (`)

‘P’ 60,00,000 50,00,000

‘Q’ 17,65,000 17,00,000

The extract of the only bill book maintained by the firm showed the following
details-

Bill Date Value of products (exclusive of taxes)

No.
‘P’ (`) ‘Q’ (`) Total (`)

2306 1st October 2,00,000 3,000 2,03,000

2307 1st October 1,36,000 2,250 1,38,250

2308 2nd October 67000 39,250 1,06,250

2309 3rd October 58,750 33,750 92,500

2310 5th October 1,00,000 - 1,00,000

2311 6th October 94,000 6,000 1,00,000

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 1.80 2.80 GOODS AND SERVICES TAX

2312 6th October - 17,000 17,000

2313 8th October 50,000 6,000 56,000

2314 9th October 60,000 9,000 69,000

2315 …………….. …………….. …………….. ……………..

………. …………….. …………….. …………….. ……………..

Further, B & D Company paid freight of ` 1,40,000 to Goods Transport Agency

during the period April to October. Assume equal amount of freight is paid
each month on the 10th day of each month. Also, assume that the goods for
which the freight is paid on 10th day of the month are transported between 11th
to 20thday of the month.
All the above amounts are exclusive of taxes, wherever applicable.
Compute the GST liability (ignoring ITC provisions) of B & D Company for the
period April to October under composition scheme under sub-sections (1) and
(2) of section 10 showing calculations for each quarter separately.
Note: Make suitable assumptions wherever required. Rate of CGST and SGST
on service of transportation of goods by GTA is 2.5% each wherein GTA has not
opted to pay tax itself. Stock is valued at cost price.
7. Shubhlaxmi Foods is engaged in supplying restaurant service in Maharashtra.
In the financial year 2023-24, it had a turnover of ` 140 lakh from the
restaurant service. Further, it had earned the bank interest of ` 20 lakh from
the fixed deposits in said financial year. You are required to advise Shubhlaxmi
Foods whether it is eligible for the composition scheme under sub-sections (1)
and (2) of section 10 in the financial year 2024-25.
Further, assuming that in the financial year 2024-25, its turnover is ` 130 lakh
from the supply of restaurant services and ` 10 lakh from the supply of farm
labour in Maharashtra. It has also earned the bank interest of ` 30 lakh from
the fixed deposits. Compute the tax payable by Shubhlaxmi Foods in the
financial year 2024-25.

8. Bansal and Chandiok started a partnership firm of Chartered Accountants in

Jaipur (Rajasthan) on 1st April in the current financial year. The firm specializes

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 CHARGE OF GST 1.81avv 2.81

in providing audit services to banks in Rajasthan. It provided the following

details of its turnover:

Quarter Amount (in `)

Apr-Jun 10 lakh
Jul-Sep 20 lakh

It crossed the threshold limit of ` 20 lakh on 1st August. Bansal and Chandiok
wishes to opt to pay tax at concessional rate under section 10(2A). Examine
whether the firm is eligible for this scheme in the current financial year? If yes,
then determine the tax payable by it in quarters (i) Apr-Jun & (ii) Jul-Sep?
9. Mr. Prem is running a restaurant in New Delhi. In the financial year 2023-24,
it has an aggregate turnover of ` 120 lakh from the restaurant services. In the
financial year 2024-25, apart from restaurant service, he also wants to provide
food delivery services to other small restaurants. He estimated the turnover of
such services is upto ` 5 lakh.
Mr. Prem wishes to opt for composition scheme under sub-sections (1) and (2)
of section 10 in the financial year 2024-25. You are required to advise him for
same.
10. M/s Heeralal and Sons, registered in Karnataka, has opted to avail the benefit
of composition scheme under sub-sections (1) and (2) of section 10 from
1st April, 2025. It has furnished the following details for the quarter ended on
30th June, 2025.

S. No. Items `

(i) Taxable turnover of goods within the State 15,00,000

(ii) Exempted turnover of goods (exempted by way of

notification) within the State 17,00,000

Total Turnover 32,00,000

Using the above information, calculate tax to be paid by the firm for quarter
ended on 30th June, 2025 in following independent situations:

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 1.82 2.82 GOODS AND SERVICES TAX

(i) M/s Heeralal and Sons is a manufacturer

(ii) M/s Heeralal and Sons is a trader

11. M/s All-in-One, a partnership concern and a registered supplier under GST, is
engaged in providing various services under one roof. It is engaged in paying
tax under regular scheme under GST law. The concern provides the following
information pertaining to supply made/input services availed by it during the
month of March:

Particulars `

(i) Provided Direct Selling Agent service to Y Bank Ltd. 4,00,000

(ii) Provided security services (by way of supply of security 60,000

personnel) to ABC P. Ltd., a registered person under GST

(iii) Provided security services (by way of supply of security 1,00,000

personnel) to PSR Trust, an unregistered person under
GST

(iv) Provided renting of motor vehicle for transportation of 75,000

passengers to Amaze Tours Ltd. and value of supply
included cost of fuel

(v) Provided renting of motor vehicle for transportation of 40,000

passengers to Priti & Co., CA firm and value of supply
included cost of fuel

(vi) Availed representational service from PB and Co., a law 70,000

firm towards a Consumer Court case

Determine the GST liability of M/s All-in-One for the month of March by giving
necessary explanations for treatment of various items. Rates of GST for both
inward and outward supply is CGST/SGST@ 9% each except renting a vehicle,
for which CGST/SGST @ 2.5% each is applicable. M/s All-in-One commenced
its business from February. All the supplies are intra-State only. Ignore the
provisions relating to input tax credit.

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 CHARGE OF GST 1.83avv 2.83

12. MN Ltd. has two registered places of business in the State of Haryana. Its
aggregate turnover during the financial year 2023-24 was ` 62 lakh. It wishes
to opt for composition levy under sub-sections (1) and (2) of section 10 for one
of the place of business in the financial year 2024-25 and wants to continue
with registration under regular scheme and pay taxes at the normal rate for
the other place of business. Both the places of business are having the same
Permanent Account Number issued under the Income-tax Act, 1961. Can MN
Ltd. do so? Explain with reason.
13. Ranveer Industries, registered in Himachal Pradesh, is engaged in making inter-
State supplies of readymade garments. The aggregate turnover of Ranveer
Industries in the financial year 2023-24 is ` 70 lakh. It has opted for
composition levy under sub-sections (1) and (2) of section 10 in the financial
year 2024-25 and paid tax for the April – June quarter of financial year 2024-
25 under composition levy.
The proper officer has levied penalty for wrongly availing the scheme on
Ranveer Industries in addition to the tax payable by it.
Examine the validity of the action taken by proper officer.
14. Mr. Yash, doing business in the State of Kerala, commenced his business in the
month of April and provides the following further information.
(i) His intra-State turnover for the first two quarters was as follows:
April - June - ` 20 lakh
July - September - ` 100 lakh
(ii) In each of the quarters, exempt supply made by him was 25% of the total
turnover for the said quarter.

(iii) Since the product supplied by him was eligible for composition scheme,
he opted for registration under composition scheme with effect from 1st
July.

You are required to compute the tax payable by Mr. Yash under GST law from
the above information:
(i) If he is a manufacturer

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 1.84 2.84 GOODS AND SERVICES TAX

(ii) If he is a trader.

ANSWERS

1. Notification no 13/2017 CT (R) dated 28.06.2017 as amended (hereinafter

referred to as reverse charge notification), provides that sponsorship services
provided by any person other than body corporate to a body corporate or
partnership firm located in the taxable territory, shall be liable to GST under
reverse charge in the hands of recipient.
In the present case, Pink City Club is the supplier of sponsorship services
which is receiving the consideration in the form of sponsorship fee of
` 5,00,000 from Panini Private Limited, against the provision of sponsorship
service. Since the recipient of sponsorship services- Panini Private Limited is
a body corporate, GST on said services is payable by the recipient - Panini
Private Limited, under reverse charge.
2. Sitting fee paid to director – As per reverse charge notification, tax on
services supplied by a director of a company/ body corporate to the said
company/ body corporate, located in the taxable territory, is payable under
reverse charge. Hence, in the present case, the sitting fee amounting to
` 25,000, payable to Arpan Singhania by Narayan Limited, is liable to GST
under reverse charge and thus, recipient of service - Narayan Limited – is
liable to pay GST on the same.
Salary paid to director - As per Circular No.140/10/2020 GST dated
10.06.2020, the part of director’s remuneration which is declared as salary in
the books of a company and subjected to TDS under section 192 of the
Income-tax Act, are not taxable being consideration for services by an
employee to the employer in the course of or in relation to his employment
in terms of Schedule III. Therefore, in the given case, the salary received by
Arpan Singhania of ` 1.5 lakh is not liable to GST.
Services provided by Tapasya & Associates – Tapasya & Associates have
rendered certain professional services to Narayan Limited. The fact that Arpan
Singhania is a partner in Tapasya & Associates and a director in Narayan
Limited does not have any impact on the taxability of the professional services

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 CHARGE OF GST 1.85avv 2.85

supplied by Tapasya & Associates to Narayan Limited. The professional

services provided by Tapasya & Associates to Narayan Limited are liable to
GST under forward charge and thus, supplier - Tapasya & Associates – is liable
to pay GST on the same.
3. As per section 10, a registered person, whose aggregate turnover in the
preceding financial year did not exceed ` 1.5 crore in a State/UT may opt for
composition scheme, provided he is, inter alia, engaged in supply of goods
and/or restaurant service. However, a person who opts for composition
scheme is permitted to supply services other than restaurant service of value
not exceeding 10% of turnover in a State/UT in the preceding financial year
or ` 5 lakh, whichever is higher.
In the given case, M/s. Rajbeer & Sons, engaged in business of selling goods
relating to interior decoration, is eligible for composition scheme in the
financial year 2024-25 since its aggregate turnover in financial year 2023-24
(viz. ` 80 lakh) does not exceed ` 1.5 crore.
If Karan wishes to start the business of providing services relating to interior
decoration under the same firm name M/s Rajbeer & Sons, the sole
proprietorship needs to be first converted into a partnership firm. Further,
new GST registration under the new PAN is required to be obtained.
In such a case, the firm can provide services relating to interior decoration up
to a value of ` 5 lakh (10% of zero turnover of last year or ` 5 lakh, whichever
is higher) to continue enjoying the benefit of composition scheme in financial
year 2024-25.
4. The composition scheme under sub-sections (1) and (2) of section 10 is
available in case of goods and restaurant service. Further, marginal services
upto specified limit can be provided along with the supply of goods or
restaurant service, as the case may be. Since, in the given case, Varun & Arun
Associates is exclusively supplying services other than restaurant services, it
is not eligible to pay tax under sub-sections (1) and (2) of section 10.
However, section 10(2A) provides an option to a registered person, who is
not eligible to pay tax under sub-sections (1) and (2) of section 10, of paying
tax @ 6% (CGST-3% and SGST/UTGST-3%) provided his aggregate turnover
in the preceding financial year is upto ` 50 lakh. Said person can pay tax

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 1.86 2.86 GOODS AND SERVICES TAX

@ 6% of the turnover in State or turnover in Union territory up to an

aggregate turnover of ` 50 lakh, subject to specified conditions.

In the given case, Varun & Arun Associates has started the supply of services
in the financial year 2022-23. Therefore, its aggregate turnover in the
financial year 2022-23 is Nil. Consequently, it is eligible to avail the benefit
of composition scheme under section 10(2A) of the CGST Act in the financial
year 2023-24. It becomes eligible for the registration when its aggregate
turnover exceeds ` 20 lakh. While registering under GST, it has to opt for
composition scheme under section 10(2A).
For determining its turnover of the State for payment of tax under
composition scheme under section 10(2A), turnover of April-June quarter
[` 20 lakh] shall be excluded as the value of supplies from the first day of April
of a financial year up to the date when such person becomes liable for
registration under this Act are to be excluded for this purpose.
On next ` 30 lakh [turnover of July-Sept quarter], it shall pay tax @ 6%
[3% CGST and 3% SGST], i.e. CGST ` 90,000 and SGST ` 90,000.
By the end of July-Sept quarter, its aggregate turnover reaches ` 50 lakh*.
Consequently, its option to avail composition scheme under section 10(2A)
shall lapse by the end of July-Sept quarter and thereafter, it is required to pay
tax at the normal rate. Thus, the tax payable for Oct-Dec quarter is
` 20 lakh × 9%, i.e. CGST - ` 1,80,000 and SGST - ` 1,80,000.
*Note - While computing aggregate turnover for determining Varun & Arun
Associates’ eligibility to pay tax under composition scheme, value of supplies
from the first day of April of a financial year up to the date when such person
becomes liable for registration under this Act (i.e. turnover of April-June
quarter), are also included.
5. As per section 10(1), the following registered persons, whose aggregate
turnover in the preceding financial year did not exceed ` 1.5 crore, may opt
to pay tax under composition levy:
(i) Manufacturers,
(ii) Persons engaged in making supplies referred to in clause (b) of
paragraph 6 of Schedule II (restaurant services), and

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 CHARGE OF GST 1.87avv 2.87

(iii) Any other suppliers eligible for composition levy.

The composition scheme under sub-sections (1) and (2) of section 10 can
essentially be availed in respect of goods and only one service namely,
restaurant service. However, the scheme permits supply of other marginal
services for a specified value along with the supply of goods and restaurant
service, as the case may be. Such marginal services can be supplied for a
value up to 10% of the turnover in the preceding year or ` 5 lakh, whichever
is higher. Further, the registered person should not be engaged in making
any inter-State outward supplies of goods or services.
Furthermore, newly inserted section 10(2A) provides an option to a registered
person, who is not eligible to pay tax under section 10(1) and 10(2), of paying
tax @ 6% (CGST-3% and SGST/UTGST-3%) provided his aggregate turnover
in the preceding financial year is upto ` 50 lakh. Said person can pay tax
@ 6% of the turnover in State or turnover in Union territory up to an
aggregate turnover of ` 50 lakh, subject to specified conditions. One of such
conditions is that the registered person should not be engaged in making
any inter-State outward supplies of goods or services.
In view of the above-mentioned provisions, the answer to the given
independent cases is as under:-
(a) The turnover limit for being eligible for composition scheme under
under sub-sections (1) and (2) of section 10 for Jalandhar (Punjab) is
` 1.5 crore in the preceding financial year. Thus, Technology
Enterprises can opt for said composition scheme in financial year
2024-25 as its aggregate turnover is less than ` 1.5 crore in the
financial year 2023-24 and it is making intra-State supplies. Further,
since the registered person opting for composition scheme can also
supply services (other than restaurant services) for a value up to 10%
of the turnover in the preceding year or ` 5 lakh, whichever is higher.
Thus, Technology Enterprises can supply repair services up to a value
of ` 12.5 lakh [10% of `125 lakh] in the financial year 2024-25.

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 1.88 2.88 GOODS AND SERVICES TAX

(b) In the given case:-

(i) the turnover in the preceding year is less than the eligible
turnover limit under composition scheme under sub-sections
(1) and (2) of section 10 for Delhi, i.e. ` 1.5 crore.
(ii) the supplier is engaged in providing restaurant service which
is an eligible supply under said composition scheme.
(iii) the supplier wants to engage in trading of goods which is also
an eligible supply under said composition scheme.

Thus, M/s. Siddharth & Sons is eligible for composition scheme

under sub-sections (1) and (2) of section 10 from the financial year
2024-25.
(c) The turnover limit for being eligible for composition scheme under
sub-sections (1) and (2) of section 10 for Sikkim is ` 75 lakh in the
preceding financial year. However, a registered person who is
exclusively engaged in supplying services other than restaurant
services are not eligible for said composition scheme. Thus, Sitaram
Associates cannot opt for composition scheme under sub-sections
(1) and (2) of section 10 in the financial year 2024-25.
The benefit of composition scheme under section 10(2A) is available
in case of a registered person who is not eligible to pay tax under
sub-sections (1) and (2) of section 10 provided its aggregate
turnover in the preceding financial year does not exceed ` 50 lakh.
Thus, in view of the above-mentioned provisions, Sitaram Associates
cannot avail the benefit of composition scheme under section 10(2A)
also as its aggregate turnover in the preceding financial year is more
than ` 50 lakh.
(d) A service provider can opt for the composition scheme under
sub-sections (1) and (2) of section 10 only if he is engaged in supply
of restaurant services. Said scheme permits supply of marginal
services for a specified value, but only when the same are supplied
along with goods and/ or restaurant service.

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 CHARGE OF GST 1.89avv 2.89

Since Deepti Services Ltd. is exclusively engaged in supply of services

other than restaurant services, it is not eligible for composition scheme
sub-sections (1) and (2) of section 10 even though its turnover in the
financial year 2023-24 is less than ` 75 lakh, the eligible turnover limit
for Uttarakhand.
However, since Deepti Services Ltd. is not eligible to opt for
composition scheme under sub-sections (1) and (2) of section 10 and
its aggregate turnover in the financial year 2023-24 does not exceed
` 50 lakh, Deepti Services Ltd. is entitled to avail benefit of composition
scheme under section 10(2A) in the financial year 2024-25.
Further, the answer will remain the same even if Deepti Services Ltd.
also start supplying beauty products alongwith providing hair styling
services in the financial year 2024-25 since it fulfils the conditions laid
down for availing the benefit of composition scheme under
section 10(2A). It can avail the benefit of composition scheme under
section 10(2A) till the time its aggregate turnover in the financial year
2024-25 doesn’t exceed ` 50 lakh.

6. As per section 10(3) read with Notification No.14/2019 CT dated 07.03.2019

as amended, the option availed by a registered person to pay tax under
composition scheme under sub-sections (1) and (2) of section 10 shall lapse
with effect from the day on which his aggregate turnover during a financial
year exceeds ` 1.5 crore [` 75 lakh in case of Special Category States except
Assam, Himachal Pradesh and Jammu and Kashmir].

As per section 2(6), aggregate turnover means the aggregate value of all
taxable supplies (excluding the value of inward supplies on which tax is
payable by a person on reverse charge basis), exempt supplies, exports of
goods or services or both and inter-State supplies of persons having the same
PAN, to be computed on all India basis but excludes CGST, SGST/UTGST, IGST
and GST Compensation Cess.

In the given case, the firm is registered under the composition scheme in the
State of Maharashtra. The aggregate turnover of the firm exceeds ` 1.5 crore
on 3rd October [aggregate of both taxable and exempt turnover from 1st April

© The Institute of Chartered Accountants of India

 1.90 2.90 GOODS AND SERVICES TAX

to 3rd October, i.e. ` 1,50,05,000 (` 1,44,65,000 + ` 2,03,000 + ` 1,38,250 +

` 1,06,250 + ` 92,500)]

The inward supplies of goods transportation services in respect of which the

firm has to pay tax under reverse charge have not been included in the
aggregate turnover in terms of section 2(6). The tax is payable under reverse
charge on such services as the applicable rate of tax on such services is given
as 5% and not 12%, in which case the GTA would have been liable to pay tax
under forward charge [Notification No. 13/2017 CT (R) dated 28.06.2017 as
amended].
Thus, the firm will have to pay tax under regular scheme (Section 9) from
3rd October.
Output tax liability of B & D Company under composition scheme
During the period when the firm pays tax under composition scheme, i.e. from
1st April to 2nd October, tax will be payable on quarterly basis and no ITC will
be available [Section 10(4) read with sub-sections (2) and (7) of section 39].
Further, since the firm is trading in goods, tax will be payable @ ½% [Effective
rate - 1% (½% CGST + ½% SGST)] of the turnover of taxable supplies of goods
and services (i.e. ‘P’) in the State [Section 10(1) read with rule 7].

The tax liability for the quarters ended June, September and December under
composition scheme will be computed as under-

Particulars Quarter Quarter Quarter ended

ended 30 th
ended 30 th
31 December
st

June September (`)

(`) (`)

Turnover of ‘P’ 60,00,000 50,00,000 4,03,000 [2,00,000

(Taxable supplies) + 1,36,000 +
67,000]

CGST @ 0.5% [A1] 30,000 25,000 2,015

SGST @ 0.5% [B1] 30,000 25,000 2,015

© The Institute of Chartered Accountants of India

 CHARGE OF GST 1.91avv 2.91

Inward supply on 60,000 60,000 Nil [Paid on 10th day

which tax is [(1,40,000/7) [(1,40,000/7) for goods
payable under x 3] x 3] transported
reverse charge between 11th to 20th
[Service of goods day of the month,
transportation so the same will be
availed from a GTA assessed under
@ 5%] regular scheme]

CGST @ 2.5% [A2] 1,500 1,500 -

SGST @ 2.5% [B2] 1,500 1,500 -

Total CGST [A1 + 31,500 26,500 2,015

A2]

Total SGST [B1 + 31,500 26,500 2,015

B2]

Total CGST liability for the period 60,015 [31,500 + 26,500 + 2015]
from 1st April to 2nd October

Total SGST liability for the period 60,015 [31,500 + 26,500 + 2015]
from 1st April to 2nd October

7. As per section 10(1) read with Notification No. 14/2019 CT dated 7.03.2019, a
registered person, whose aggregate turnover in the preceding financial year
did not exceed ` 1.5 crore, may opt to pay, in lieu of the tax payable by him,
an amount calculated at the specified rates if, inter alia, he is not engaged in
the supply of services other than restaurant services.

However, the scheme permits supply of other marginal services for a specified
value along with the supply of goods and restaurant service, as the case may
be. Such marginal services can be supplied for a value up to 10% of the
turnover in a State/Union Territory in the preceding year or ` 5 lakh,
whichever is higher [Second proviso to section 10(1)].

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 1.92 2.92 GOODS AND SERVICES TAX

Although exempt services are included in determining the value of turnover

in a State or Union territory, explanation to section 10(1) clarifies that for the
purposes of second proviso to section 10(1), the value of exempt supply of
services provided by way of extending deposits, loans or advances in so far
as the consideration is represented by way of interest or discount shall not
be taken into account for determining the value of turnover in a State or
Union territory.
Further, the exempt services are also included in the aggregate turnover
[Section 2(6)]. However, explanation 1 to section 10 excludes value of exempt
supply of services provided by way of extending deposits, loans or advances
in so far as the consideration is represented by way of interest or discount
from aggregate turnover.
In this backdrop, in the given case, the aggregate turnover of Shubhlaxmi
Foods in the financial year 2023-24 is ` 140 lakh (since bank interest of ` 20
lakh from the fixed deposits will not be taken into account for computing
aggregate turnover). Resultantly, it is eligible to opt for composition scheme
under sub-sections (1) and (2) of section 10 in the financial year 2024-25.
Further, apart from restaurant services, it can provide services upto ` 14 lakh
[i.e. 10% of ` 140 lakh or ` 5 lakh, whichever is higher], in the financial year
2024-25. As already seen, bank interest of ` 20 lakh from fixed deposits will
not be considered while determining this limit.
Further, tax payable @ 5% (2½% CGST+ 2½% SGST) of the turnover in the
State by Shubhlaxmi Foods in the financial year 2024-25 is as follows:
=5% of ` 1,40,00,000 [` 1,30,00,000 + ` 10,00,000]
[(Bank interest of ` 30 lakh from the fixed deposits is not considered while
computing turnover in the State for determining the tax payable under
composition scheme (In terms of explanation 2 to section 10)]
= ` 7,00,000 [CGST = ` 3,50,000 and SGST = ` 3,50,000]
8. The composition scheme under sub-sections (1) and (2) of section 10 is
available in case of goods and restaurant service. Further, marginal services
upto specified limit can be provided along with the supply of goods or
restaurant service, as the case may be. Since, in the given case, Bansal and
Chandiok is supplying services other than restaurant services, it is not eligible

© The Institute of Chartered Accountants of India

 CHARGE OF GST 1.93avv 2.93

to pay tax under sub-sections (1) and (2) of section 10. However,
section 10(2A) provides an option to a registered person, who is not eligible
to pay tax under sub-sections (1) and (2) of section 10, of paying tax @ 6%
(CGST-3% and SGST/UTGST-3%) provided his aggregate turnover in the
preceding financial year is upto ` 50 lakh. Said person can pay tax @ 6% of
the turnover in State or turnover in Union territory up to an aggregate
turnover of ` 50 lakh, subject to specified conditions.
In the given case, Bansal and Chandiok has started the supply of services in
the financial year 2023-24. Therefore, its aggregate turnover in the financial
year 2022-23 is Nil. Consequently, it is eligible to avail the benefit of
composition scheme under section 10(2A) of the CGST Act in the financial
year 2023-24. It becomes liable to the registration when its aggregate
turnover exceeds ` 20 lakh. While registering under GST, it has to opt for
composition scheme under section 10(2A).
Tax payable by the firm is as follows:
(i) Apr-Jun quarter: Tax payable by the firm in first quarter is nil since
the firm’s turnover [` 10 lakh] has not yet exceeded the threshold
limit of ` 20 lakh (viz. the threshold limit applicable for registration
in the State of Rajasthan).
(ii) July-Sep quarter: While computing the tax payable by the firm in
second quarter, the turnover from 1st April to the date from which
he becomes liable for registration under the Act is to be excluded.
Tax payable will be computed as under-
Total Turnover ` 30,00,000/-

Less: Threshold limit for registration ` 20,00,000/-

Taxable Turnover ` 10,00,000/-
Tax @ 6% ` 60,000/-*

*CGST = ` 30,000 and SGST = ` 30,000

9. As per section 10(1) read with Notification No.14/2019 CT dated 07.03.2019,
a registered person, whose aggregate turnover in the preceding financial year
did not exceed ` 1.5 crore, may opt to pay, in lieu of the tax payable by him,

© The Institute of Chartered Accountants of India

 1.94 2.94 GOODS AND SERVICES TAX

an amount calculated at the specified rates if, inter alia, he is not engaged in
the supply of services other than restaurant services.

However, the scheme permits supply of other marginal services for a specified
value along with the supply of goods and restaurant service, as the case may
be. Such marginal services can be supplied for a value up to 10% of the
turnover in a State/Union Territory in the preceding year or ` 5 lakh,
whichever is higher.
In the present case, since the aggregate turnover of Mr. Prem was ` 120 lakh
in financial year 2023-24 (i.e. it did not exceed ` 1.5 crore), he is eligible for
composition scheme in the financial year 2024-25. Further, in the financial
year 2024-25, he can also supply services other than restaurant services for a
value upto ` 12 lakh (10% of ` 120 lakh) or ` 5 lakh, whichever is higher. Thus,
till the time his turnover from food delivery services does not exceed
` 12 lakh, he is eligible for the scheme.
10. Computation of amount payable under composition scheme
(i) If M/s Heeralal and Sons is a manufacturer:
Tax is to be paid @ 1% (½% CGST+ ½% SGST) of the turnover in the
State as under:
1% of ` 32,00,000 [` 15,00,000 + 17,00,000]
= ` 32,000 [CGST

= ` 16,000 and SGST

= ` 16,000]
(ii) If M/s Heeralal and Sons is a trader:

Tax is to be paid @ 1% (½% CGST + ½%SGST) of the turnover of

taxable supplies of goods and services in the State as under:
= 1% of ` 15,00,000

= ` 15,000 [CGST
= ` 7,500 and SGST
= ` 7,500]

© The Institute of Chartered Accountants of India

 CHARGE OF GST 1.95avv 2.95

11. GST liability of M/s All-in-One

Particulars Value CGST SGST

[`] payable payable
[`] [`]

A. GST liability on outward supply

(i) Direct selling agent service to Y 4,00,000 36,000 36,000

Bank Ltd.
[4,00,000 [4,00,000
[Tax is payable under forward x 9%] x 9%]
charge since the supplier of such
service is a partnership firm and
not an individual.]

(ii) Security services to ABC P. Ltd., a -

registered person
[Tax is payable under reverse
charge by the recipient since
security services are provided by
a non-body corporate to a
registered person.]

(iii) Security services to PSR Trust, an 1,00,000 9,000 9,000

unregistered person
[1,00,000 [1,00,000
[Tax is payable under forward x 9%] x 9%]
charge since security services are
provided by a non-body
corporate to an unregistered
person.]

(iv) Renting of motor vehicle to -

Amaze Tours Ltd. where value
included cost of fuel

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 1.96 2.96 GOODS AND SERVICES TAX

[Tax is payable under reverse

charge by recipient since such
services are provided by a non-
body corporate to a body
corporate and GST is payable
@ 5%.]

(v) Renting of motor vehicle to Priti 40,000 1,000 1,000

& Co., CA firm, where supply
[40,000 x [40,000 x
value included cost of fuel
2.5%] 2.5%]
[Tax is payable under forward
charge since such services are
provided by a non-body
corporate to a non-body
corporate.]

Total GST liability on outward 46,000 46,000

supplies

B. GST liability on inward supplies under reverse charge

(vi) Availed representational service 70,000 - -

from PB and Co, a law firm
[Legal services provided by a
partnership firm of
advocates/individual advocate
other than a senior advocate to
a business entity with an
aggregate turnover up to such
amount in the preceding
financial year as makes it eligible
for exemption from registration,
are exempt from GST.
Since M/s All-in-One started its
business in February, its turnover
in the preceding financial year is

© The Institute of Chartered Accountants of India

 CHARGE OF GST 1.97avv 2.97

zero making it eligible for

exemption from registration in
the preceding financial year and
hence, the legal services
provided to it are exempt from
GST.]

GST liability on inward supplies - -

under reverse charge

12. As per proviso to section 10(2), where more than one registered persons are
having the same PAN issued under the Income-tax Act, 1961, the registered
person shall not be eligible to opt for the composition scheme under section
10(1) unless all such registered persons opt to pay tax under said composition
scheme.
In the given case, since MN Ltd. has two places of business (they are not
separate entities under the Income-tax Act, 1961), they would be registered
under the same PAN. Therefore, MN Ltd. cannot opt for composition levy for
only one of the places of business and pay tax under regular scheme for other
place of business.
13. As per section 10(1), a registered person, whose aggregate turnover in the
preceding financial year did not exceed ` 1.5 crore in a State/UT [` 75 lakh in
case of Special Category States except Assam, Himachal Pradesh and Jammu
and Kashmir], may opt for composition scheme.
However, he shall not be eligible to opt for composition scheme if, inter alia,
he is engaged in making any inter-State outward supplies of goods or
services.
In the given case, since Ranveer Industries is engaged in making inter-State
supplies of readymade garments, it is not eligible to opt for composition
scheme in current year irrespective of its turnover not exceeding the
threshold limit of ` 75 lakh in the preceding FY.
Further, if the proper officer has reasons to believe that a taxable person has
paid tax under composition scheme despite not being eligible, such person
shall, in addition to any tax payable, be liable to a penalty and the provisions

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 1.98 2.98 GOODS AND SERVICES TAX

of section 73 or section 74 or 74A shall, mutatis mutandis, apply for

determination of tax and penalty.
Thus, the action taken by the proper officer of levying the penalty for wrongly
availing the composition scheme is valid in law.
14. As per section 10 read with rule 7, a registered person opting for composition
levy for goods pays tax at the rates mentioned below during the current FY,
in lieu of the tax payable by him under regular scheme:

Manufacturers, other 1% (½% CGST+ ½% SGST/UTGST) of the turnover

than manufacturers in the State/ Union territory
of notified goods

Trader 1% (½% CGST+ ½% SGST/UTGST) of turnover of

taxable supplies of goods & services in the State/
Union territory

Turnover prior to getting registered will not be considered for determining

the turnover in a State/Union Territory.
(i) If Mr. Yash is a manufacturer
CGST = ` 100 lakh x 0.5% = ` 50,000
SGST = ` 100 lakh x 0.5% = ` 50,000
(ii) If Mr. Yash is a trader
CGST = ` 75 lakh (as 25% of turnover is exempt) x 0.5% = ` 37,500
SGST = ` 75 lakh (as 25% of turnover is exempt) x 0.5% = ` 37,500

© The Institute of Chartered Accountants of India

CHAPTER 3

PLACE OF SUPPLY
The section numbers referred to in the Chapter pertain to the IGST Act, 2017, 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–

 explain the provisions relating to determination of place of
supply of goods, both in case of domestic as well as cross-
border transactions and analyse the same to determine the
place of supply in a given situation
 explain the provisions relating to determination of place of
supply of services, both in case of domestic as well as cross-
border transactions and analyse the same to determine the
place of supply in a given situation

© The Institute of Chartered Accountants of India

 3.2 1.2 GOODS AND SERVICES TAX

1. INTRODUCTION
GST is a destination-based consumption
tax, i.e. the tax is levied on the
consumption of supply at the
destination thereof or at the point of
consumption of such supply. The ‘place
of supply’ denotes the place where the
supply is consumed. Thus, place of
supply determines the jurisdiction where
the tax revenue should reach.
Goods, usually being tangible do not
pose any significant problems for
determination of their place of
consumption. Services, usually being
intangible pose problems w.r.t determination of place of supply mainly due to
following factors:
 The manner of delivery of a service could be
altered easily.
For example, telecom service could change
from post-paid to pre-paid or billing address
of the customer could be changed, repair or
maintenance of software could be changed
from onsite to online; banking services earlier required customer to go to the
bank, now the customer can avail service from anywhere.
 Service provider, service receiver and the
service provided may not be
ascertainable or may easily be suppressed
as nothing tangible moves and there
would hardly be any trail.
 For supplying a service, a fixed location of
service provider is not mandatory and
even the service recipient may receive service while on the move. The
location of billing could be changed overnight.

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 PLACE OF SUPPLY 1.3 3.3

 Sometime the same element

may flow to more than one
location, for example,
construction or other
services in respect of a
railway line, a national
highway or a bridge on a
river which originate in one State and end in the other State.

Similarly, a copyright for distribution and

exhibition of film could be assigned for many
States in a single transaction or an
advertisement or a programme is broadcasted
across the country at the same time.
An airline may issue seasonal tickets,
containing say 10 vouchers which could be used for travel between any two
locations in the country.
The card issued by New Delhi metro could be
used by a person located in Noida, or New Delhi
or Faridabad, without the New Delhi metro being
able to distinguish the location or journeys at the
time of receipt of payment.
 Services are continuously evolving and thus, continue to pose newer
challenges. For example, 15-20 years back no one could have thought of
DTH, online information, online banking, online booking of tickets, internet,
mobile telecommunication etc.
Considering the difficulties in determining the actual place of consumption of
services, the various elements involved in a service transaction are used as proxies
for determining the place of consumption or place of supply of such services. A
proxy which gives more appropriate result than others for determining the place of
supply, could be used for determining the place of supply. The various elements
used for determining the place of supply of a service are:
(a) location of service provider

(b) location of service receiver

© The Institute of Chartered Accountants of India

 3.4 1.4 GOODS AND SERVICES TAX

(c) place where the activity takes place/ place of performance

(d) place where the service is consumed
(e) place/person to which/whom actual benefit flows

Location of
service
Proxy which gives provider
more appropriate
result than others Location of
is used for service
determining the receiver
place of supply
Proxies for
determining
place of supply
of services

Actual
Place of
beneficiary
performance
place/person

Place of
consumption

Separate rules for determining place of supply in respect of B2B and

B2C transactions
In respect of B2B (business to business) transactions, the supply is made by one
registered person to another registered person and the taxes paid are taken as
credit by the recipient. Therefore, such transactions are just pass through. GST
collected on B2B supplies effectively create a liability for the Government and an
asset for the recipient of such supplies in as much as the recipient is entitled to use
the input tax credit (ITC) for payment of future taxes. For B2B transactions, the
location of recipient takes care in almost all situations as further credit is to be
taken by recipient. The recipient usually further supplies to another customer.

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 PLACE OF SUPPLY 1.5 3.5

The supply is consumed only when a B2B transaction is further converted into B2C
(business to consumer) transaction. In respect of B2C transactions, the supply is
made to an unregistered person who consumes the same and the taxes paid
actually reach the Government.

B2B means business to B2C means business to

business transaction. In such consumer transaction. In such
type of transactions, the type of transactions, the
recipient is also a registered recipient is consumer or
supplier and hence, takes ITC. unregistered and hence, will
not take or cannot take ITC.

Provisions for determination of place of supply in GST law

Basis the above guiding principles, Chapter V of the IGST Act [Sections 10 to 13]
prescribes the provisions relating to place of supply of goods and services in
domestic as well as cross-border transactions. The provisions prescribe both
general and specific rules to determine place of supply of goods and services in
various circumstances.
The determination of ‘place of supply’ and the ‘location of the supplier’ is essential
to ascertain the nature of supply, i.e. whether a supply is intra-State or inter- State.
In other words, these two factors are required to determine whether a supply is
subject to SGST/UTGST plus CGST in a given State/ Union territory or else would
attract IGST if it is an inter-State supply.

If an inter-State transaction is wrongly treated as intra-State or vice-versa and tax

paid accordingly, the correct tax will need to be paid and refund claimed for tax
wrongly paid. Though no interest is levied in such a case, procedural requirements
increase and working capital gets blocked where the amount involved is huge.
Hence, determining correct place of supply is of paramount importance

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 3.6 1.6 GOODS AND SERVICES TAX

2. RELEVANT DEFINITIONS
 Continuous journey means a journey for which a single or more than one
ticket or invoice is issued at the same time, either by a single supplier of
service or through an agent acting on behalf of more than one supplier of
service, and which involves no stopover between any of the legs of the
journey for which one or more separate tickets or invoices are issued.
Explanation.––For the purposes of this clause, the term “stopover” means a
place where a passenger can disembark either to transfer to another
conveyance or break his journey for a certain period in order to resume it
at a later point of time [Section 2(3)].
The term conveyance has been defined in section 2(34) of the CGST Act to
include a vessel, an aircraft and a vehicle.
 Export of goods with its grammatical variations and cognate expressions,
means taking goods out of India to a place outside India [Section 2(5)].
This definition is similar to the definition of ‘export’ given under Customs
Act, 1962.
 Export of services means the supply of any service when
(a) the supplier of service is located in India,

(b) the recipient of service is located outside India,

(c) the place of supply of service is outside India,
(d) the payment for such service has been received by the supplier of
service in convertible foreign exchange or in Indian rupees wherever
permitted by the Reserve Bank of India; and
(e) the supplier of service and recipient of service are not merely
establishments of a distinct person in accordance with explanation 1
of section 8 [Section 2(6)].
As per Explanation 1 to Section 8, the following are treated as
establishments of distinct persons:
• an establishment in India and any other establishment outside India;

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 PLACE OF SUPPLY 1.7 3.7

• an establishment in a State or Union territory and any other

establishment outside that State or Union territory; or
• an establishment in a State or Union territory and any other
establishment registered within that State or Union territory
 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)].
This definition is again similar to the definition of ‘import’ under the
Customs Act, 1962.
In Kiran Spinning Mills v. CC 1999 (113) ELT 753 (SC 3 member bench), it has
been held that import is completed only when goods cross the customs barrier.
In Garden Silk Mills Ltd. UOI 1999 AIR SCW 4150 (SC 3 member bench), it has
been held that import of goods in India commences when they enter into
territorial waters but continues and is completed when the goods become
part of the mass of goods within the country.
 Import of services means the supply of any service, where
(a) the supplier of service is located outside India,
(b) the recipient of service is located in India, and
(c) the place of supply of service is in India [Section 2(11)].

 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)].
 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;

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 3.8 1.8 GOODS AND SERVICES TAX

(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)].
The definition of ‘fixed establishment’ for this purpose has been discussed
above. The definition of ‘place of business’ is discussed later.

The above definition relates only to services. The term

‘location of recipient of goods’ has not been defined in the
Act.

Place of business for

Location of such
which registration is
place of business
obtained
Location of recipient of services

Fixed establishment Location of such

Supply received at elsewhere fixed establishment

Location of the
More than one
establishment most
establishment, whether
directly concerned
place of business or
with the receipt of
fixed establishment
supply

In absence of such Usual place of residence

places of the recipient

 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;

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 PLACE OF SUPPLY 1.9 3.9

(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)].

The above definition relates only to services. The term

‘location of supplier of goods’ has not been defined in the Act.

Place of business for

Location of such
which registration is
place of business
obtained

Fixed establishment Location of such

Location of supplier of services

elsewhere fixed establishment

Supply made from
More than one Location of the
establishment, establishment most
whether place of directly concerned
business or fixed with the provision of
establishment supply

Usual place of
In absence of such
residence of the
places
supplier

 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;

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 3.10 1.10 GOODS AND SERVICES TAX

(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)].

This is an inclusive definition and is applicable for both goods

and services.

 Supply shall have the same meaning as assigned to it in section 7 of the

Central Goods and Services Tax Act [Section 2(21)].
 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;

© The Institute of Chartered Accountants of India

 PLACE OF SUPPLY 1.11 3.11

• 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.
However, a person who organises or arranges, directly or indirectly, supply of
specified actionable claims, including a person who owns, operates or
manages digital or electronic platform for such supply, shall be deemed to
be a supplier of such actionable claims, whether such actionable claims are
supplied by him or through him and whether consideration in money or
money's worth, including virtual digital assets, for supply of such actionable
claims is paid or conveyed to him or through him or placed at his disposal in
any manner, and all the provisions of this Act shall apply to such supplier of
specified actionable claims, as if he is the supplier liable to pay the tax in
relation to the supply of such actionable claims [Section 2(105) of the CGST
Act].
 Words and expressions used and not defined in the IGST Act but defined in
the after supplies Central Goods and Services Tax Act, the Union Territory
Goods and Services Tax Act and the Goods and Services Tax (Compensation
to States) Act shall have the same meaning as assigned to them in those Acts
[Section 2(24)].

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3. PLACE OF SUPPLY OF GOODS OTHER THAN

SUPPLY OF GOODS IMPORTED INTO, OR
EXPORTED FROM INDIA [SECTION 10]

STATUTORY PROVISIONS

Section 10 Place of supply of goods other than supply of goods

imported into, or exported from India

Sub-section Clause Particulars

(1) The place of supply of goods, other than supply of goods imported
into, or exported from India, shall be as under,––

(a) where the supply involves movement of goods, whether

by the supplier or the recipient or by any other person,
the place of supply of such goods shall be the location
of the goods at the time at which the movement of goods
terminates for delivery to the recipient;

(b) where the goods are delivered by the supplier to a

recipient or any other person on the direction of a third
person, whether acting as an agent or otherwise, before
or during movement of goods, either by way of transfer
of documents of title to the goods or otherwise, it shall
be deemed that the said third person has received the
goods and the place of supply of such goods shall be the
principal place of business of such person;

(c) where the supply does not involve movement of goods,

whether by the supplier or the recipient, the place of
supply shall be the location of such goods at the time of
the delivery to the recipient;

(ca) Where the supply of goods is made to a person other

than a registered person, the place of supply shall,
notwithstanding anything contrary contained in clause
(a) or clause (c), be the location as per the address of the

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said person recorded in the invoice issued in respect of

the said supply and the location of the supplier where
the address of the said person is not recorded in the
invoice.
Explanation-For the purposes of this clause, recording of
the name of the State of the said person in the invoice
shall be deemed to be the recording of the address of
the said person

(d) where the goods are assembled or installed at site, the

place of supply shall be the place of such installation or
assembly;

(e) where the goods are supplied on board a conveyance,

including a vessel, an aircraft, a train or a motor vehicle,
the place of supply shall be the location at which such
goods are taken on board.

(2) Where the place of supply of goods cannot be determined, the

place of supply shall be determined in such manner as may be
prescribed.

ANALYSIS
Section 10 prescribes the provisions for determining the place of supply of
goods in domestic transactions, i.e. within India. Sub-section (1) of section
10 sets out five rules to provide the place of supply of goods in the following
specific situations:
 Supply involving movement of goods
 Goods delivered on ‘bill to ship to’ model
 Supply not involving movement of goods
 Goods assembled/installed at site
 Goods supplied on board a conveyance
Each of the above situation is discussed below. For residual cases, sub-section
(2) of section 10 provides that where the place of supply of goods cannot be
determined, the Government may prescribe the manner to ascertain the same.

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It must be kept in mind that the provisions of section 10 discussed

hereunder are all in relation to domestic supply of goods.
(i) Supply involving movement of goods [Section 10(1)(a)]
In case of supply involving movement of goods, the place of supply is
the location of the goods at the time when the movement of goods
terminates (ends) for delivery to the recipient.
The ‘location of the goods’ is a question of fact to be ascertained by
observing the journey that the goods so supplied make from their origin
(from supplier) to termination (with the recipient). This movement,
however, can be undertaken by the supplier or recipient or even any other
person (like transporter) after having disclosed the destination of the
movement of goods.
It is important to understand that this provision does not apply in cases
where there is no movement of goods. Also, the provision does not link
itself to transfer of property in goods but to the movement of the goods.
(1) MA Pvt. Ltd. of Nasik, Maharashtra sells 10 refrigerators to MB
Pvt. Ltd. of Pune, Maharashtra for delivery at place of business of
MB Pvt. Ltd. in Pune. The place of supply is Pune in Maharashtra.

(2) MA Pvt. Ltd. of Nasik, Maharashtra sells 20 refrigerators to MC Pvt. Ltd.

of Ahmedabad, Gujarat for delivery at place of business of MC Pvt. Ltd. in
Ahmedabad. The place of supply is Ahmedabad.

(ii) Supply involving movement of goods where goods are

delivered to recipient on the instruction of third person – ‘Bill
to Ship to’ Supply [Section 10(1)(b)]
Clause (b) of section 10(1) lays down the provisions to determine the place
of supply in cases where there is a tripartite arrangement of supply,
commonly known as ‘bill to ship to’ transactions or where there is a sale of
goods in transit by the original buyer/ agents.
As per section 10(1)(b),

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If the goods are delivered to a recipient or any other person by the supplier

on the instructions of a third person (original buyer), who may be acting as an

agent or on his own account

before or during movement of goods (but not after the movement terminates)

whether or not there is a transfer of documents of title to the goods

it is deemed that the third person has received the goods and the place of supply
is the principal place of business of such third person

In simple words, where goods are delivered by the supplier to the

recipient at the instruction of a third person, the place of supply is the
principal place of business of such third person and not of the actual
recipient.
It is important to identify the two supplies involved in this transaction– one
supply is by supplier to third person and second supply is by third person to
recipient. This provision deals only with the first limb of supply, i.e. supply
by supplier to third person.
Second limb of supply, i.e. supply by third person to recipient will be
governed by the provisions of section 10(1)(a), i.e. the place of supply will
be the location of the goods at the time when the movement of goods
terminates (ends) for delivery to the recipient.

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Supply by supplier to third person

Gives instructions to
Supplier A in New Deemed to be received by Third person
Delhi B in Haryana
Issues invoice to B

Goods delivered
as per
instructions of B Place of supply: Location of
principal place of business of B
Recipient C in New (third person), i.e. Haryana –
Delhi Supply chargeable to IGST

Even though section 2(93) of CGST Act defines recipient, inter alia, as the
‘payer of the consideration’; in this provision, recipient’ is the one who
actually collects the goods and the third person is the one who enjoys
privity with the supplier to be able to direct him to deliver the goods and
also usually makes payment to the supplier.

Supply by third person to recipient

Supplier A in New Third person

Delhi B in Haryana

Place of supply: Location of

goods at the time when the
movement of goods terminates
Recipient C in New for delivery to C (recipient), i.e.
Delhi New Delhi – Supply chargeable to
IGST

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(3) X & Co. (a supplier registered in Uttar Pradesh having principal

place of business at Noida) asks Y & Co. of Ahmedabad, Gujarat to
deliver 50 washing machines to its buyer Z & Co. at Jaipur,
Rajasthan. In this case, two supplies are involved, one between X & Co. and
Z & Co. and other between Y & Co. and X & Co.
While the former supply is covered under clause (a) of section 10(1), the latter
one, i.e. between Y & Co. and X & Co. is covered under clause (b) of section
10(1). Accordingly, in this case, the place of supply of goods is not the
location of delivery of such goods (Jaipur) but the principal place of business
of third person, i.e. principal place of business of X & Co. located at Noida.
(iii) Supply not involving movement of goods [Section 10(1)(c)]
If the supply does not involve movement of goods, the place of supply
is the location of goods at the time of delivery to the recipient.
(4) MA Pvt. Ltd. (New Delhi) has leased its machine (cost ` 8,00,000)
to MB Pvt. Ltd. (Noida, Uttar Pradesh) for production of goods on a
monthly rent of ` 40,000. After 14 months MB Pvt. Ltd. requested MA
Pvt. Ltd. to sell the machine to it for ` 4,00,000, which is agreed to by MA Pvt.
Ltd. In this case, there will be no movement of goods and the same will be sold
on as is where is basis. Thus, the location of the machine at the time of such sale
will be the place of supply, i.e. Noida.
(5) XZ Ltd. (Mumbai, Maharashtra) opens a new
branch office at Gurugram, Haryana. It
purchases a building for office from KTS Builders
(Gurugram). It also enters into a separate
contract with KTS Builders for purchase of pre-
installed office furniture and fixtures in the
building.

Though there will be no GST liability on purchase of building (as sale of

building is covered under Schedule III to CGST Act), office furniture and
fixtures will be liable to GST. Since there is no movement of office furniture
and fixtures, the place of supply of such goods is their location at the time of
delivery to the recipient (XZ Ltd.), i.e. Gurugram.

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(iv) Supply of goods to an unregistered person [Section 10(1)(ca)]

Where the supply of goods is made to a person other than a registered
person, the place of supply shall be:
(i) the location as per the address of the said person recorded in the
invoice issued in respect of the said supply and
(ii) the location of the supplier where the address of the said person is
not recorded in the invoice.
For the purposes of this clause, recording of the name of the State of the
said person in the invoice shall be deemed to be the recording of the
address of the said person.
Place of supply in case of sales to unregistered persons is as follows:

Where the address of the •Place of supply is location as per

unregistered person is address of unregistered person
recorded in the invoice. recorded in the invoice**

Where the address of the

•Place of supply is location of the
unregistered person is not
supplier
recorded in the invoice.

**Simply mentioning the State of unregistered person instead of complete

address would be sufficient.
There are cases where an unregistered person purchases goods over the
counter (OTC) in one State and thereafter, transports the goods to another
State (generally, the State where he resides).
For instance, migrant workers, tourists, etc. who come to a State for work,
tourism, etc. and purchase goods in that State to take it to their respective
State. Similarly, in automobile sector, the residents of a State may travel to
another State to purchase vehicle from that State to take advantage of lower
registration charges and road tax, which vary from State to State and
thereafter, take the vehicle to their State.
In such cases, the place of supply will be determined as per above
mentioned provision.

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 PLACE OF SUPPLY 1.19 3.19

(v) Supply involving installation or assembly of goods [Section

10(1)(d)]
If the supply involves goods which are to be installed or assembled at
site, the place of supply is the place of such installation or assembly.
This is a case of composite supply of goods
wherein two supplies are involved, supply of
goods and ancillary supply of
installation/assembling service. The principal
supply is supply of goods which are being
installed.
(6) MA Pvt. Ltd. (New Delhi) purchases a
machine from MB Pvt. Ltd. (New Delhi) for
being installed in its factory at Noida, Uttar
Pradesh. The place of supply is the site at which the
machine is installed, i.e. Noida.
(7) Pure Refineries (Mumbai, Maharashtra) gives a contract to PQ Ltd. (Ranchi,
Jharkhand) to supply a machine which is required to be assembled in a power
plant in its refinery located in Kutch, Gujarat. The place of supply is the site of
assembly of machine, i.e. Kutch even though Pure refineries is located in
Maharashtra.
(vi) Goods supplied on board a conveyance [Section 10(1)(e)]
When goods are sold supplied during a journey on board a conveyance, it
becomes difficult to determine the place of supply of
goods – whether it is the location from where the
journey originates or whether it is the destination or
whether it is any of the locations covered by the
conveyance during the journey. Therefore, section
10(1(e) specifically provides for determination of place
of supply of goods supplied on board a conveyance.
Examples of goods supplied on board a conveyance can be books and
miscellaneous items supplied by the hawkers in train, supply of packaged
food items on payment basis in aeroplanes, etc.
Section 10(1)(e) lays down that place of supply of goods supplied on a
board a conveyance like aircraft, train, vessel, motor vehicle is the
location where such goods have been taken on board.

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Place of supply of goods supplied on board a conveyance is determined under

this provision even if the supply has been made by any of the passenger on
board the conveyance and not by the carrier of the conveyance.
(8) Mr. X (New Delhi) boards the New Delhi-Kota train at New
Delhi. He sells the goods taken on board by him (at New Delhi), in
the train, at Jaipur during the journey. The place of supply of goods
is the location at which the goods are taken on board, i.e. New Delhi and not
Jaipur where they have been sold.

4. PLACE OF SUPPLY OF GOODS IMPORTED

INTO, OR EXPORTED FROM INDIA
[SECTION 11]

STATUTORY PROVISIONS

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

Clause Particulars

The place of supply of goods,––

(a) imported into India shall be the location of the importer;

(b) exported from India shall be the location outside India.

ANALYSIS
Section 11 deals with the determination of place of supply in cases involving
import and export of goods 1.

1
The terms import and export of goods have been explained in detail in Chapter-14 : Import and
Export under GST in Module-3 of this Study Material. The definitions of terms “import of goods”
and “export of goods” have been given in this Chapter under the heading “Relevant Definitions”
for reference.

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It must be kept in mind that the provisions of section 11 discussed

hereunder are all in relation to cross border supply of goods.
(i) Import of goods [Section 11(a)]
The import of goods has been defined in section 2(10) of the IGST Act as
bringing goods into India from a place
outside India. All imports are deemed
as inter-State supplies and
accordingly IGST is levied in addition
to the applicable custom duties.
If the goods have been imported in
India, the place of supply of goods
is the place where the importer is located.
(9) MC Pvt. Ltd. imports electric kettles from China for its Kitchen
Store in Noida, Uttar Pradesh. MC Pvt. Ltd. is registered in Uttar
Pradesh. The place of supply is Noida.

(ii) Export of goods [Section 11(b)]

Section 2(5) defines export of goods to mean taking goods out of India to
a place outside India.
Under the GST Law, export of goods has been treated as:
• inter-State supply
• zero rated supply (i.e. the goods exported are relieved of GST levied
upon them either at the input stage or at the final product stage.)
The place of supply in case of export of goods is the place where they
have been exported, i.e. the destination outside India.
(10) MR Pvt. Ltd. (New Delhi) exports spices from New Delhi to
London, UK. The place of supply is London.

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5. PLACE OF SUPPLY OF SERVICES WHERE

LOCATION OF SUPPLIER OF SERVICE AND
THE LOCATION OF THE RECIPIENT OF
SERVICE IS IN INDIA [SECTION 12]

STATUTORY PROVISIONS

Section 12 Place of supply of services where location of supplier of

service and the location of the recipient of service is in
India

Sub-section Clause Particulars

(1) The provisions of this section shall apply to determine the place
of supply of services where the location of supplier of services
and the location of the recipient of services is in India.

(2) The place of supply of services, except the services specified in

sub-sections (3) to (14),––

(a) made to a registered person shall be the location of

such person;

(b) made to any person other than a registered person

shall be,––

(i) the location of the recipient where the address on

record exists; and

(ii) the location of the supplier of services in other

cases.

(3) The place of supply of services,––

(a) directly in relation to an immovable property,

including services provided by architects, interior
decorators, surveyors, engineers and other related
experts or estate agents, any service provided by way

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of grant of rights to use immovable property or for

carrying out or co-ordination of construction work; or

(b) by way of lodging accommodation by a hotel, inn,

guest house, home stay, club or campsite, by whatever
name called, and including a house boat or any other
vessel; or

(c) by way of accommodation in any immovable property

for organising any marriage or reception or matters
related thereto, official, social, cultural, religious or
business function including services provided in
relation to such function at such property; or

(d) any services ancillary to the services referred to in

clauses (a), (b) and (c),

shall be the location at which the immovable property or boat

or vessel, as the case may be, is located or intended to be
located:

Provided that if the location of the immovable property or boat

or vessel is located or intended to be located outside India, the
place of supply shall be the location of the recipient.

Explanation.––Where the immovable property or boat or vessel

is located in more than one State or Union territory, the supply
of services shall be treated as made in each of the respective
States or Union territories, in proportion to the value for services
separately collected or determined in terms of the contract or
agreement entered into in this regard or, in the absence of such
contract or agreement, on such other basis as may be
prescribed.

(4) The place of supply of restaurant and catering services, personal

grooming, fitness, beauty treatment, health service including
cosmetic and plastic surgery shall be the location where the
services are actually performed.

(5) The place of supply of services in relation to training and

performance appraisal to

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(a) a registered person, shall be the location of such

person;

(b) a person other than a registered person, shall be the

location where the services are actually performed.

(6) The place of supply of services provided by way of admission to

a cultural, artistic, sporting, scientific, educational,
entertainment event or amusement park or any other place and
services ancillary thereto, shall be the place where the event is
actually held or where the park or such other place is located.

(7) The place of supply of services provided by way of ,—

(a) organisation of a cultural, artistic, sporting, scientific,

educational or entertainment event including supply
of services in relation to a conference, fair, exhibition,
celebration or similar events; or

(b) services ancillary to organisation of any of the events

or services referred to in clause (a), or assigning of
sponsorship to such events,–

(i) to a registered person, shall be the location of

such person;

(ii) to a person other than a registered person, shall

be the place where the event is actually held and
if the event is held outside India, the place of
supply shall be the location of the recipient.

Explanation.––Where the event is held in more than one State

or Union territory and a consolidated amount is charged for
supply of services relating to such event, the place of supply of
such services shall be taken as being in each of the respective
States or Union territories in proportion to the value for services
separately collected or determined in terms of the contract or
agreement entered into in this regard or, in the absence of such
contract or agreement, on such other basis as may be
prescribed.

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(8) The place of supply of services by way of transportation of

goods, including by mail or courier to,––

(a) a registered person, shall be the location of such

person;

(b) a person other than a registered person, shall be the

location at which such goods are handed over for their
transportation.

(9) The place of supply of passenger transportation service to,—

(a) a registered person, shall be the location of such

person;

(b) a person other than a registered person, shall be the

place where the passenger embarks on the conveyance
for a continuous journey:

Provided that where the right to passage is given for future use
and the point of embarkation is not known at the time of issue
of right to passage, the place of supply of such service shall be
determined in accordance with the provisions of sub-section (2).

Explanation.––For the purposes of this sub-section, the return

journey shall be treated as a separate journey, even if the right
to passage for onward and return journey is issued at the same
time.

(10) The place of supply of services on board a conveyance, including

a vessel, an aircraft, a train or a motor vehicle, shall be the
location of the first scheduled point of departure of that
conveyance for the journey.

(11) The place of supply of telecommunication services including

data transfer, broadcasting, cable and direct to home television
services to any person shall,—

(a) in case of services by way of fixed telecommunication

line, leased circuits, internet leased circuit, cable or
dish antenna, be the location where the
telecommunication line, leased circuit or cable

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connection or dish antenna is installed for receipt of

services;

(b) in case of mobile connection for telecommunication

and internet services provided on post-paid basis, be
the location of billing address of the recipient of
services on the record of the supplier of services;

(c) in cases where mobile connection for

telecommunication, internet service and direct to
home television services are provided on pre-payment
basis through a voucher or any other means,––

(i) through a selling agent or a re-seller or a

distributor of subscriber identity module card or
re-charge voucher, be the address of the selling
agent or re-seller or distributor as per the record
of the supplier at the time of supply; or

(ii) by any person to the final subscriber, be the

location where such pre- payment is received or
such vouchers are sold;

(d) in other cases, be the address of the recipient as per

the records of the supplier of services and where such
address is not available, the place of supply shall be
location of the supplier of services:

Provided that where the address of the recipient as per the

records of the supplier of services is not available, the place of
supply shall be location of the supplier of services:

Provided further that if such pre-paid service is availed or the

recharge is made through internet banking or other electronic
mode of payment, the location of the recipient of services on the
record of the supplier of services shall be the place of supply of
such services.

Explanation.––Where the leased circuit is installed in more than

one State or Union territory and a consolidated amount is
charged for supply of services relating to such circuit, the place

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of supply of such services shall be taken as being in each of the

respective States or Union territories in proportion to the value
for services separately collected or determined in terms of the
contract or agreement entered into in this regard or, in the
absence of such contract or agreement, on such other basis as
may be prescribed.

(12) The place of supply of banking and other financial services,

including stock broking services to any person shall be the
location of the recipient of services on the records of the supplier
of services:

Provided that if the location of recipient of services is not on the

records of the supplier, the place of supply shall be the location
of the supplier of services.

(13) The place of supply of insurance services shall,––

(a) to a registered person, be the location of such person;

(b) to a person other than a registered person, be the

location of the recipient of services on the records of
the supplier of services.

(14) The place of supply of advertisement services to the Central

Government, a State Government, a statutory body or a local
authority meant for the States or Union territories identified in
the contract or agreement shall be taken as being in each of
such States or Union territories and the value of such supplies
specific to each State or Union territory shall be in proportion to
the amount attributable to services provided by way of
dissemination in the respective States or Union territories as
may be determined in terms of the contract or agreement
entered into in this regard or, in the absence of such contract or
agreement, on such other basis as may be prescribed.

ANALYSIS
Section 12 contains the provisions for determining the place of supply of services
where both the ‘location of supplier of services’ and the ‘location of recipient of

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services’ are in India. If either of the two persons (supplier or recipient) is outside
India, the place of supply is determined by section 13.
Section 12 lays down a default provision to determine the place of supply of
services as well as few other provisions to determine place of supply of certain
specific services. Thus, place of supply is determined as per default provision in
respect of services other than the ones covered by the specific provisions. It is
also important to note that in many cases, the section provides different places
of supply for a service supplied to registered and unregistered persons.
It must be kept in mind that the provisions of section 12 discussed
hereunder are all in relation to domestic supply of services.
(i) Default provision [Section 12(2)]
The default provision is applicable only if the supply of service does not fall
in any of the specific cases provided under section 12. It provides that the
place of supply of services made to a registered person is the location
of the person receiving the services. Since the supplier has the GSTIN of
the person receiving the service, the location of such GSTIN is the place of
supply.
However, if the services is supplied to an unregistered person, the place of
supply is:
a) the location of such unregistered person, if the address of the
unregistered person is available in the records of the supplier
b) the location of the supplier of services in other cases
The provision can be summarized as under:

Nature of Supply Place of Supply

Recipient is Recipient is unregistered
registered
Supply of services Location of a) If the address of the
other than the ones recipient unregistered person is
specified in sub- available in the records of
sections (3) to (14) the supplier, the location of
of section 12 such unregistered person.
b) In other cases, the location
of the supplier of services

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Clarification regarding place of supply of online services supplied by

the suppliers of services to unregistered recipients
It has been clarified that a conjoint reading of section 12(2)(b) of the IGST Act,
2017, section 31(2) of the CGST Act 2 and proviso to rule 46(f) of CGST Rules 3
leads to a conclusion that in respect of supply of services made to unregistered
persons, irrespective of the value of the said supply, the supplier is required to
mandatorily record the name of the State of the unregistered recipient on the
tax invoice, in cases involving supply of online money gaming or supply of
taxable services by or through an electronic commerce operator or supply of
online information and database access or retrieval (OIDAR) services.
Recording of the name of State of the unregistered recipient on the tax invoice
in respect of such supply of services shall
be deemed as the address on record of the
recipient for the purpose of determination
of place of supply of the said services under
section 12(2)(b) of the IGST Act, 2017.
Accordingly, in such cases, the place of
supply of such services shall be considered
as the location of the recipient of the
services as per provisions of clause (i) of section 12(2)(b) of the IGST Act, 2017.
Combined reading of the definitions of ‘electronic commerce’ and ‘electronic
commerce operator’ as per section 2(44) and section 2(45) of the CGST Act,
along with rule 46(f) of CGST Rules, provides an understanding that all
services supplied to unregistered recipients over digital or electronic
network, either by the supplier using his own digital or electronic facility /
platform or through any other electronic or digital platform owned and

2
Section 31(2) of the CGST Act, 2017 has been discussed in detail in Chapter-9 of Module-2 of
the Study material. It provides that a registered person must issue a tax invoice for taxable
services within a prescribed time, showing all required details. The Government may notify specific
service categories where any other document can serve as a tax invoice or where issuing a tax
invoice is not required.
3
Rule 46(f) of the CGST Rules, 2017 has been discussed in detail in Chapter-9 of Module-2 of the
Study material. It provides that recipient details may be mentioned on invoices if requested by
recipient for supplies below ₹ 50,000. However, it mandates mentioning the recipient's State in
cases of online gaming or certain e-commerce and digital services to unregistered recipients,
regardless of value.

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 3.30 1.30 GOODS AND SERVICES TAX

operated by an independent
electronic commerce operator, will
be covered under proviso to rule o Supplier of online services to
46(f) of CGST Rules, 2017. record name of State of
unregistered recipient
It is, accordingly, clarified that
irrespective of value of
provisions of proviso to rule 46(f) supply
of CGST Rules, 2017 shall be
o Name of State shall be
applicable in respect of all the
deemed as address on record
online supplies of services
supplied to an unregistered o Place of Supply-Location of
recipient, in addition to the supply Recipient
of online money gaming and
OIDAR services.
Some of the examples of such services are subscription of e-newspapers
and e-magazines, online subscription of entertainment services (e.g.
OTT platforms), online telecom services, digital services through mobile
applications etc.
Therefore, in respect of following cases of
supplies to unregistered recipients, the suppliers
are mandatorily required to record the name of
the State of the recipient on the tax invoice,
irrespective of the value of supply of such
services, and to declare place of supply of the said
services as the location of the recipient (based on
the name of state of the recipient) in their details
of outward supplies in form GSTR-1/1A.:-
(i) Supply of any such online/ digital services,
(ii) OIDAR services and
(iii) Online money gaming
[Circular no. 242/36/2024 GST dated 31.12.2024]

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 PLACE OF SUPPLY 1.31 3.31

✪ The default presumption for place of supply in respect of registered

recipients (B2B supply of services) is the location of such person. Since
the recipient is registered, address of recipient is always there and the
same can be taken as proxy for place of supply.
✪ The default presumption for place of supply in respect of unregistered
recipients (B2C supply of services) is also the location of recipient. However, in
many cases, the address of recipient is not available; in such cases, location of
the supplier of services is taken as proxy for place of supply. . For instance, there
are various B2C services where the address of the recipient is not recorded by
the supplier of services. For instance, a person may visit a bank branch where
he is not a regular customer and may get a demand draft against cash or request
for conversion of foreign currency into local currency. The bank branch charges
commission towards its consideration for the services supplied by it. The place
of supply in such cases would be determined based on the location of the branch
of the bank as the bank branch doesn’t have the address of the said service
recipient as a normal business practice.

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(11) Mr. A (a Chartered Accountant registered in New Delhi)

makes a supply of service to his client MB Pvt. Ltd. of Noida, Uttar
Pradesh (registered in Uttar Pradesh). In this case, since the
supply is made to a registered person, the place of supply is the location
of the registered recipient, i.e. Noida.
(12) Mr. A, a Chartered Accountant in Gurugram, Haryana, (registered in
Haryana) provides consultancy services to his client Mr. C who is a resident
of New Delhi but is not registered under GST.
If the address of Mr. C is available in the records of Mr. A, location of Mr.
C, i.e. New Delhi will be the place of supply, else the location of Mr. A, which
is Gurugram, will be the place of supply.

(ii) Services in relation to an immovable property or lodging

accommodation in a hotel/boat/vessel etc. [Section 12(3)]
Section 12(3) covers supplies of services which are (i) directly in relation to an
immovable property, or (ii) by way of lodging accommodation in a hotel, etc.
or a house-boat or vessel, or accommodation in any immovable property for
organizing social, business functions etc. Such services are classified in the
following major categories:
(a) Services provided directly in relation to an immovable property
including those by

• architects,

• interior decorators,

• surveyors,

• engineers and other related

experts,

• estate agents
(b) Service provided by way of grant of rights to use immovable
property or for carrying out or co-ordination of construction work
(c) Services provided by way of lodging accommodation by a

• hotel

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 PLACE OF SUPPLY 1.33 3.33

• inn

• guest house

• homestay

• club

• campsite

• house boat

• vessel
(d) Services provided by way of accommodation in an immovable
property for organizing

• any marriage/reception or matters related thereto,

• official, social, cultural, religious or business functions

• including services provided in

relation to such function at If the immovable
such property property/boat/vessel is
located outside India,
(e) Services ancillary to the above-
the location of recipient
mentioned services of the services is the
In all above cases, location of the place of supply.
immovable property or the boat or the
vessel or where such immovable
property or the boat or the vessel is intended to be located, is the place
of supply.
This provision is applicable on property already constructed/ developed as
well as on the property yet to be constructed/ developed.
For example, if the services have been supplied for an immovable property
which is yet to be constructed/developed (e.g. architect’s services for
drawing the plan of a building), the place where such immovable property
is intended to be located is the place of supply.

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(13) KTS Builders (Mumbai) is

constructing a factory building for
PLM Pvt. Ltd. (Kolkata), in New Delhi.
The place of supply is the location of the
immovable property, i.e. New Delhi.
(14) Shah and Shah, an architectural firm at Kolkata, has been
hired by MKF Builders of Mumbai to draw up a plan for a high rise
building to be constructed by them in Ahmedabad, Gujarat. The
place of supply is the place where the immovable property is intended to
be located, i.e. Ahmedabad.
(15) Mr. Ramesh, a Chartered Accountant, (New Delhi) travels to Mumbai
for business and stays in a hotel there. The place of supply of
accommodation service is the place where the hotel is located, i.e. Mumbai.
(16) Mr. X, a consulting engineer based in Mumbai, Maharashtra renders
professional services in respect of an immovable property of Mr. Y
(Bangalore) located in Australia. Since the immovable property is located
outside India, the place of supply of service is the location of recipient, i.e.
Bangalore and not the place where the immovable property is located
(Australia) 4.
The provision can be summarized as under:

Nature of Supply Location of Place of Supply

immovable
property/
boat/ vessel
Supply of services relating In India Location/intended
to immovable property or location of such
lodging accommodation in immovable property/
a hotel/ boat/ vessel or boat/ vessel
accommodation in an Outside India Location of the recipient
immovable property for
social/ business/ religious/
cultural functions

4
It is important to note that this case should not be confused with the case where either the
supplier or recipient is located outside India. Here, the property is located outside India
and both supplier and recipients are located in India.

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Immovable property/Boat/Vessel located in more than one

State/Union territory
Sometimes immovable property may extend to more than one location, for
example, a railway line, a national highway or a bridge on a river may originate
in one State and end in the other State or a house boat stay may traverse
more than one State.

In such cases, i.e. where the immovable

property or boat or vessel is located in
more than one State/Union territory, the
service is deemed to have been supplied
in each of the respective States/Union
territories, in proportion to the value for
the services determined in terms of the
contract or agreement entered into in this
regard.

Manner of determining proportionate value of service in the absence

of a contract or agreement

In the absence of a contract or agreement between the supplier and recipient

of services, the proportionate value of services supplied in different
States/Union territories (where the immovable property or boat or vessel is
located) is computed in accordance with rule 4 of IGST Rules as under:

S. Type of service in relation to Factor which

No. immovable property determines the
proportionate value of
service supplied in
different States/Union
territories

(a) Service provided by way of lodging Number of nights stayed

accommodation by hotel, inn, guest in such property
house etc. and its ancillary services (other
Refer Example 17
than the cases where such property is a

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single property located in 2 or more

contiguous States/ Union territories or
both)

(b) • All other services provided in Area of the immovable

relation to immovable property property lying in each
including services by way of State/ Union territories
accommodation in any immovable
Refer Example 18
property for organising any marriage
or reception etc. and in cases of
supply of accommodation by a hotel,
inn, guest house, club or campsite,
by whatever name called where such
property is a single property located
in 2 or more contiguous States
or/and Union territories

• Services ancillary to services

mentioned above

(c) Services by way of lodging Time spent by the boat

accommodation by a house boat or or vessel in each such
vessel and its ancillary services State/ Union territories,
to be determined on the
basis of declaration
made by the service
provider

Refer Example 19

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Example 17 - Lodging accommodation by hotel/inn/guest

house etc. and ancillary services excluding the property located
in 2 or more contiguous States/ Union territories or both

A hotel chain X charges a consolidated sum of

` 30,000/- for stay in its two establishments in
Delhi and Agra, where the stay in Delhi is for
2 nights and the stay in Agra is for 1 night.

The place of supply in this case is both in the

Union territory of Delhi and in the State of Uttar
Pradesh and the service shall be deemed to have been provided in the Union
territory of Delhi and in the State of Uttar Pradesh in the ratio 2:1
respectively.

The value of services provided will thus be apportioned as ` 20,000/- in the

Union territory of Delhi and ` 10,000/- in the State of Uttar Pradesh.

Example 18 - Other services provided in relation to immovable

property

There is a piece of land of area 20,000 square feet which is partly in State S1
say 12,000 square feet and partly in State S2, say 8000
square feet. Site preparation work has been
entrusted to T. The ratio of land in the two states
works out to 12:8 or 3:2 (simplified).
The place of supply is in both S1 and S2. The service
shall be deemed to have been provided in the ratio of 12:8 or 3:2 (simplified)
in the States S1 and S2 respectively.
The value of the service shall be accordingly apportioned between the States.
Example 19 - Lodging accommodation by a house boat or vessel and its
ancillary services
A company C provides the service of 24 hours accommodation in a
houseboat, which will transit both in Kerala and Karnataka in as much as the
guests board the house boat in Kerala and stay there for 22 hours but it also
moves into Karnataka for 2 hours (as declared by the service provider).

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 3.38 1.38 GOODS AND SERVICES TAX

The place of supply of this service is in the States of Kerala and Karnataka.
The service shall be deemed to have been provided in the ratio of 22:2 or
11:1 (simplified) in the states of Kerala and Karnataka, respectively.

The value of the service shall be accordingly apportioned between the States.
(iii) Restaurant and catering service, personal grooming, fitness,
beauty and health services [Section 12(4)]
The place of supply of restaurant and catering services, personal grooming,
fitness, beauty treatment, health service including cosmetic and plastic
surgery is the location where such services are actually performed.

Beauty
Treatment
Personal
Catering
Grooming

Fitness

Restaurant

(20) Mr. A, a businessman from Pune dines in a restaurant at

Mumbai while on a business trip. The place of supply of restaurant
service is the location where such service is performed, i.e. Mumbai.
(21) Mr. Timmy Ferreira, a makeup artist at Kolkata, goes to Jaipur,
Rajasthan for doing the makeup of Ms. Simran Kapoor, a Bollywood actress
based in Mumbai. The place of supply is the location where such service is
performed, i.e. Jaipur.
(iv) Training and performance appraisal services [Section 12(5)]
The place of supply of services in relation to training and performance
appraisal depends upon whether the supply is B2B or B2C.
In B2B supply, i.e. where the recipient of service is a registered person,
the place of supply is the location of such person.

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 PLACE OF SUPPLY 1.39 3.39

However, in case of B2C supply, i.e. where the recipient of service is

unregistered, the place of supply is the place where the service is
actually performed.
(22) DEO Consultants (Kolkata) impart GST training to accounts
and finance personnel of Sun Cements Ltd., Guwahati, Assam
(registered office) at the company’s Kolkata office which is also registered
under GST. Since the contract is entered with Guwahati office, and it being
a registered recipient, the place of supply is the location of the registered
person, i.e. Guwahati.
(23) Mr. Suresh (unregistered person based in Noida) signs up with
Excellent Linguistics (New Delhi) for training on English speaking at their
New Delhi Centre. Since the recipient is unregistered, the place of supply
is the location where services are provided, i.e. New Delhi.
(v) Services by way of ADMISSION to events/amusement
park/other places [Section 12(6)]
The place of supply of following services-
(i) services provided by way of ADMISSION to following types of events:

Entertainment

Sporting Artistic

Educational
Scientific

Cultural

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(ii) services provided by way of admission to

amusement park or any other place
(iii) services ancillary to the above-mentioned
services
is the place where the event is actually held or where the park or such
other place is located.
(24) Mr. A, a resident of Ghaziabad, Uttar Pradesh, buys a ticket
for a circus organized at Gurugram, Haryana by a circus company
based in New Delhi. The place of supply is the location where
the circus is held, i.e. Gurugram.
(25) Mr. B of New Delhi buys a ticket for an amusement park located in
Noida, Uttar Pradesh. The place of the supply is the location where the
park is located, i.e. Noida.
(vi) ORGANISATION of events [Section 12(7)]
For supplies related to ORGANIZATION of events or assigning sponsorship
to such events, the place of supply depends on whether the supply is made
to a registered person or an unregistered person.
When such service is provided to a registered person, the place of supply is
location of recipient.
When it is provided to an unregistered person, the place of supply is the
location where the event is actually held and if the event is held outside
India, the place of supply is the location of recipient.
The event can be a cultural, artistic, sporting, scientific, educational or
entertainment event. It can also be a conference, fair, exhibition,
celebration or other similar event.
Place of supply of services ancillary to organisation of such type of events
or assigning of sponsorship to such events is also determined under sub-
section (7) of section 12, i.e. in the manner described above. The provision
can be summarized as under:

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Nature of Supply Place of Supply

Recipient is Recipient is
registered unregistered
Organisation of events or services Location of Location where the
ancillary to the same or assigning recipient event is held
of sponsorship to such events
Organisation of events outside Location of recipient
India

(26) Mega Events, an event management company at New

Delhi, organizes an award function for Shah Diamond Merchants
of Ahmedabad (registered in Gujarat), at Mumbai. Since the
recipient is a registered person, the place of supply is the location of the
recipient, i.e. Ahmedabad.
(27) Mega Events, an event management company at New Delhi, organizes
an award function for Shah Diamond Merchants of Ahmedabad (registered
in Gujarat), in Mauritius. Since the recipient is a registered person, the place
of supply is the location of the recipient, i.e. Ahmedabad.
(28) Grand Wedding Planners (Chennai) is hired by Mr. Ramesh
(unregistered person based in Hyderabad) to plan and organise his
wedding at New Delhi. The recipient being an unregistered person, the
place of supply is the location where the event is held, i.e. New Delhi.
(29) Grand Wedding Planners (Chennai) is hired by Mr. Ramesh
(unregistered person based in Hyderabad) to plan and organise
his wedding in Seychelles. The recipient being an unregistered
person and the event held outside India, the place of supply is the location
of the recipient, i.e. Hyderabad and not the location where the event is held,
i.e. Seychelles.
Event held in more than one State/Union territory
If the event is held in more than one State/Union territory and a
consolidated amount is charged for services relating to such event, the
place of supply of such services is deemed to be in each of the respective
States/Union territories in proportion to the value for services determined
in terms of the contract or agreement entered into in this regard.

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The above provision is applicable only when the recipient is

unregistered, as for a registered recipient, the place of supply is the
location of such recipient.
Manner of determining proportionate value of service in the absence
of a contract or agreement
In the absence of a contract or agreement between the supplier and recipient
of services, the proportionate value of services made in different States/Union
territories (where the event is held) is computed in accordance with rule 5 of
the IGST Rules by the application of generally accepted accounting principles.
(30) An event management company E has
to organize some promotional events in
States S1 and S2 for a recipient R
(unregistered). 3 events are to be organized in S1 and
2 in S2. They charge a consolidated amount of
` 10,00,000 from R. The place of supply of this service
is in both the States S1 and S2. Say the proportion arrived at by the
application of generally accepted accounting principles is 3:2. The service
shall be deemed to have been provided in the ratio 3:2 in S1 and S2
respectively. The value of services provided will thus be apportioned as
` 6,00,000/- in S1 and ` 4,00,000/- in S2.

(vii) Transportation of goods including mail or courier [Section 12(8)]

The place of supply of services by way of transportation of goods, including
by mail or courier, etc. provided to a registered person, is the location of
such person.
However, where such services are provided to an unregistered person, the
place of supply is the location at which such goods are handed over for
their transportation.

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 PLACE OF SUPPLY 1.43 3.43

Where the goods are being transported outside India, i.e.

where the destination of goods transported is outside
India, and the supplier of services by way of
transportation of goods and its recipient are located in India, place of
supply will be determined as per above provisions only.

(31) M/s XYZ Pvt. Ltd. is a registered company in New Delhi. It

sends its courier to Pune through M/s Brue Air Courier Service.
The recipient being registered person, the place of supply is the
location of recipient, i.e. New Delhi.

(32) Mr. Y, an unregistered person, of New Delhi sends a courier to his

brother in Amritsar, Punjab. The recipient being unregistered person, the
place of supply is the location where goods are handed over for their
transportation, i.e. New Delhi.

(33) PR Pvt. Ltd., a Goods Transportation Agency based in Kanpur, Uttar

Pradesh, is hired by Hajela Enterprises (registered in Kanpur) to transport
its consignment of goods to a buyer in New Delhi. The recipient being
registered, the place of supply is the location of recipient, i.e. Kanpur.

(34) ST Pvt. Ltd., a Goods Transportation Agency based in Noida, Uttar

Pradesh, is hired by Chhaya Trade Links (registered in New Delhi) to
transport its consignment of goods to a buyer in Kanpur, Uttar Pradesh.
The recipient being registered, the place of supply is the location of
recipient, i.e. New Delhi.

(35) Mr. Srikant, a manager in a Bank, is transferred from Bareilly, Uttar

Pradesh to Bhopal, Madhya Pradesh. Mr. Srikant’s family is stationed in
Kanpur, Uttar Pradeh. He hires Goel Carriers of Lucknow, Uttar Pradesh
(registered in Uttar Pradesh), to transport his household goods from
Kanpur to Bhopal. The recipient being unregistered person, the place of
supply is the location where goods are handed over for their
transportation, i.e. Kanpur.

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(36) M/s JKL Pvt. Ltd. is a registered company in Chennai. It ships goods
to its customer in London, United Kingdom through M/s Strong Logistics,
a shipping company. The place of supply of services of transportation of
goods provided by M/s Strong Logistics to M/s JKL Pvt. Ltd. is the location
of the recipient, i.e. Chennai.
(viii) Passenger transportation service [Section 12(9)]

Nature of Supply Place of Supply

Recipient is Recipient is
registered unregistered

Passenger transportation Location of Location where the

the recipient passenger embarks on
the conveyance for a
continuous journey [See
definition under the
heading “Relevant
Definitions]

Issue of right to passage a) If the address of the

for future use and the point unregistered
of boarding not known at person is available in
the time of issue of right to the records of the
passage supplier, the
location of such
unregistered
person.
b) In other cases, the
location of the
supplier of services

The return journey is treated as a separate journey, even if the tickets for
onward and return journey are issued at the same time.

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(37) Mr. Amar (registered person in New Delhi) travels from

Mumbai to Bangalore in Airjet flight. Mr. Amar has bought the
tickets for the journey from Airjet’s office registered in New Delhi.
The place of supply is the location of recipient, i.e. New Delhi.
(38) Mr. Shyam, an unregistered person, based in Gurugram, Haryana
books a two-way air journey ticket from New Delhi to Mumbai on 5th
December. He leaves New Delhi on 10th December in a late-night flight
and lands in Mumbai the next day. He leaves Mumbai on 14th December
in a morning flight and lands in New Delhi the same day.
The return journey is treated as a separate journey, even if the tickets for
onward and return journey are issued at the same time. Thus, being an
unregistered person, the place of supply for the outward and return journeys
are the locations where the unregistered person embarks on the conveyance
for the continuous journey, i.e. New Delhi and Mumbai respectively.

Examples of issue of right to passage for future use-point of boarding

not known at the time of issue of right
(39) An airline may issue seasonal tickets, containing say 10 voucher which
could be used for travel between any two locations in the country.
(40) The card issued by New Delhi metro could be used by a person located
in Noida, or New Delhi or Faridabad, without the New Delhi metro being able
to distinguish the location or journeys at the time of receipt of payment.

(ix) Service supplied on board a conveyance [Section 12(10)]

Nature of Supply Place of Supply

Service supplied on Location of the first scheduled point of departure

board a conveyance* of that conveyance for the journey

* Note - Conveyance includes a vessel, an aircraft, a train or a motor vehicle.

You may recollect that the proxy for place of supply of goods on board a
conveyance is the location at which the goods are taken on board. Services
being intangible, the same proxy cannot be used for determining the place
of supply for services supplied on board a conveyance. Therefore, for

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 3.46 1.46 GOODS AND SERVICES TAX

services, the proxy is the location of the first scheduled point of departure of
that conveyance for the journey

However, for determining the place of supply of both goods and services
supplied on board a conveyance, no distinction is made between registered
and unregistered recipients.
(41) Mr. X is travelling from Delhi to Mumbai in an Airjet flight.
He desires to watch an English movie during the journey by
making the necessary payment. The place of supply of such
service of showing ‘movie on demand’ is the first scheduled point of
departure of the conveyance for the journey, i.e. Delhi.
(x) Telecommunication service [Section 12(11)]
Telecommunication services include the
services of telephone, data transfer
(internet), broadcasting, cable, DTH
(Direct to home) services, etc. Section
12(11) classifies the telecommunication
services into 3 categories for the purpose
of determining the place of supply as
under:
 Services provided using a fixed
telecommunication line, leased
circuits, internet leased circuit,
cable or dish antenna
 Post-paid mobile connection and
post-paid internet services
 Pre-paid mobile
connection and pre-paid
internet and DTH services

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Fixed Post-paid
telecommuni- mobile
cation line, connection
leased circuit, and internet
internet leased services
circuit, cable,
dish antenna Pre-paid
mobile
connection,
internet &
DTH
services

Telecommunication Services

The place of supply of the various types of telecommunication services is

tabulated as under:

Nature of Supply Place of Supply Recipient

 Fixed telecommunication Location where the
line telecommunication line,
 Leased circuits leased circuit or cable
 Internet leased circuit connection or dish antenna
 Cable or dish antenna is installed for receipt of
services
Post-paid mobile connection • Location of billing
ANY PERSON

and internet services address of the recipient

of services in the
records of the supplier
of services
• Location of the supplier
of services, if the
address is not available
Pre-paid mobile connection,
Address of the selling
internet services and DTH
agent/ re-seller/ distributor
services (recharge coupon,
at the time of supply
vouchers, net pack etc.)

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Services provided through a

 selling agent
 re-seller
 distributor of subscriber
identity module card or
recharge voucher

Services provided by any Location where such pre-

person to final subscriber payment is received or
such vouchers are sold
Pre-paid services, the payment Location of the recipient of
for which is made through services in the records of
internet banking/ other the supplier of services
electronic mode of payment
Other cases • The address of the
recipient as per the
records of the supplier
of services
• Location of the supplier
of services, if the
address is not available

(42) Mr. X (Kolkata) gets a landline phone installed at his home

from Skybel Ltd. The place of supply is the location where the
telecommunication line is installed, i.e. Kolkata.
(43) Mr. Y (Mumbai) gets a DTH installed at his home from RT Ltd. The
place of supply is the location where the DTH is installed, i.e. Mumbai.
(44) Mr. D (Mumbai) takes a post-paid mobile connection in Mumbai from
Skybel Ltd and gives his residence address at Mumbai as the address for
billing with supplier. The place of supply is the location of billing address
of the recipient, i.e. Mumbai.
(45) Mr. E (New Delhi) gets his post-paid mobile bill (billing address New
Delhi) paid online from Goa. The place of supply is the location of the
billing address of the recipient, i.e. New Delhi.

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(46) Mr. C (Pune) purchases a pre-paid card from a selling agent in

Mumbai. The place of supply is the address of the selling agent or re-seller,
i.e. Mumbai.
(47) Mr. F (Puducherry) gets a pre-paid mobile recharged from a grocery
shop in Chennai. The place of supply is the location where such pre-
payment is received, i.e. Chennai.
Leased circuit is installed in more than one State/Union territory
If the leased circuit is installed in more than one State/Union territory and
a consolidated amount is charged for supply of services, the place of supply
is deemed to be in each of the respective States/Union territories in
proportion to the value for services determined in terms of the contract or
agreement entered into in this regard.
Manner of determining proportionate value of service in the absence
of a contract or agreement
In the absence of a contract or agreement between the supplier and recipient
of services, the value of services supplied in different States/Union territories
(where the leased circuit is installed) is determined in accordance with rule 6
of the IGST Rules in proportion to the number of points lying in each such
State/ Union territory.
The number of points in a circuit is determined in the following manner-
(i) In the case of a circuit between two points or places, the starting point or
place of the circuit and the end point or place of the circuit will invariably
constitute two points – Refer Example 48
(ii) Any intermediate point or place in the circuit will also constitute a point
provided that the benefit of the leased circuit is also available at that
intermediate point – Refer Example 49 & 50

Example 48 – Circuit between two points or places

A company T installs a leased circuit between the Delhi and Mumbai
offices of a company C. The starting point of this circuit is in Delhi and the end
point of the circuit is in Mumbai. Hence, one point of this circuit is in Delhi and
another in Maharashtra. The place of supply of this service is in the Union territory

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of Delhi and the State of Maharashtra. The service shall be deemed to have been
provided in the ratio of 1:1 in the Union territory of Delhi and the State of
Maharashtra, respectively.
Example 49 – Intermediate point or place in the circuit
A company T installs a leased circuit between the Chennai,
Bengaluru and Mysuru offices of a company C. The starting point of this
circuit is in Chennai and the end point of the circuit is in Mysuru. The circuit
also connects Bengaluru. Hence, one point of this circuit is in Tamil Nadu
and two points in Karnataka. The place of supply of this service is in the
States of Tamil Nadu and Karnataka. The service shall be deemed to have
been provided in the ratio of 1:2 in the States of Tamil Nadu and Karnataka,
respectively.
Example 50 – Intermediate point or place in the circuit
A company T installs a leased circuit between the Kolkata, Patna
and Guwahati offices of a company C. There are 3 points in this circuit in
Kolkata, Patna and Guwahati. One point each of this circuit is, therefore, in
West Bengal, Bihar and Assam. The place of supply of this service is in the
States of West Bengal, Bihar and Assam. The service shall be deemed to
have been provided in the ratio of 1:1:1 in the States of West Bengal, Bihar
and Assam, respectively.

(xi) Financial and stock broking services [Section 12(12)]

The place of supply of banking and other
financial services, including stock broking
services to any person is the location of the
recipient of services in the records of the
supplier of services. However, if the
location of recipient of services is not
available in the records of the supplier, the
place of supply is the location of the
supplier of services.
(51) Mr. A (Chennai) buys shares from a broker in BSE (Mumbai). The place
of supply is the location of the recipient of services in the records of the
supplier, i.e. Chennai.

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(52) Mr. B (New Delhi) withdraws money from Best Bank’s ATM in Amritsar.
Mr. B has crossed his limit of free ATM withdrawals. The place of supply is the
location of the recipient of services in the records of the supplier, i.e. New Delhi.
(53) Mr. C from Varanasi, Uttar Pradesh, visits a bank registered in New
Delhi for getting a demand draft made. Mr. C does not have any account
with the said bank. Therefore, since the location of recipient is not available
in the records of the supplier, the place of supply is the location of the
supplier of services, i.e. New Delhi.
(xii) Insurance services [Section 12(13)]
The place of supply of insurance services is the location of recipient when
provided to a registered recipient.
If such services are provided to a person other than a registered person, the
place of supply is the location of the recipient of services in the records of
the supplier of services.
(54) Mr. A, CEO of XY Ltd., Mumbai (a company registered in
Maharashtra) buys insurance cover for the inventory stored in
company’s factory located at Mumbai, from Excellent Insurers,
Chennai (registered in Tamil Nadu). The place of supply is the location of the
registered recipient, i.e. Mumbai.
(55) Ms. B (unregistered resident of Kolkata) goes to her native place
Patna, Bihar and buys a medical insurance policy for her parents there from
Safe Insurers, Patna (registered in Bihar). The place of supply is the location
of the recipient of services in the records of the supplier, i.e. Patna.

(xiii) Advertisement service to the Government [Section 12(14)]

Nature of Supply Place of Supply

Advertisement service to the Central Each of such States/ Union

Government/ State Government/ Statutory territories where the
body/ Local authority meant for the advertisement is
State/Union territory identified in contract broadcasted/ run / played/
or agreement disseminated.

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The value of such supplies specific to each State/Union territory is in

proportion to the amount attributable to the services provided by way of
dissemination in the respective States/Union territories determined in terms
of the contract or agreement entered into in this regard.
Manner of determining proportionate value of service in the absence
of a contract or agreement
In the absence of a contract or agreement between the supplier and recipient
of services, the proportionate value of advertisement services attributable to
different States/Union territories (where the advertisement is broadcasted/
run /played/disseminated) is computed in accordance with rule 3 of IGST
Rules as under:

Sl. Type of Value of service attributable to

No. advertisement dissemination in different States/Union
territories where the advertisement is
broadcasted/ run /played/disseminated
1. Advertisements in Amount payable for publishing an
newspapers and advertisement in all the editions of a
publications newspaper or publication, which are
published in each State/Union territory
Refer Example 56
2. Advertisements Amount payable for the distribution of a
through printed specific number of such material in each
material like State/Union territory
pamphlets, leaflets, Refer Example 57
diaries, calendars, T-
shirts, etc.
3. Advertisements in Amount payable for the hoardings located
hoardings (other in each State/ Union territory
than those on trains) Refer Example 58

4. Advertisements on Amount attributable to each State/Union

trains territory calculated in the ratio of length of
the railway track in each of such
State/Union territory, for that train
Refer Example 60

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5. Advertisements on Amount payable to each State/Union

the back of utility territory for the advertisements on bills
bills of oil and gas pertaining to consumers having billing
companies, etc. addresses in each of such State/Union
territory
6. Advertisements on Amount attributable to each State/Union
railway tickets territory calculated in the ratio of number
of Railway Stations in each of such
State/Union territory
Refer Example 60
7. Advertisements on Amount payable to such radio station,
radio stations which by virtue of its name is part of each
State/Union territory
Refer Example 61
8. Advertisement on Amount attributable to each State/Union
television channels territory calculated basis the viewership of
such channel in each of such State/ Union
territory which shall be derived as under:
(a) Viewership can be ascertained from
the channel viewership figures
published by the Broadcast Audience
Research Council.
(b) Figures for the last week of a given
quarter is used for calculating
viewership for the succeeding
quarter.
(c) Where the channel viewership figures
relate to a region comprising of more
than one State/Union territory, the
viewership figures for a State/ Union
territory of that region, is calculated
in ratio of the populations of that
State/Union territory, as determined
in the latest Census.
(d) The ratio of the viewership figures for
each State or Union territory so

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calculated, when applied to the

amount payable for the service, shall
represent the portion of the value
attributable to the dissemination in
that State or Union territory
Refer Example 62
9. Advertisements in Amount payable to a cinema hall or screens
cinema halls in a multiplex in each State/ Union territory.
Refer Example 63
10. Advertisements on Amount attributable to each State/Union
internet territory calculated basis the internet
It is deemed that subscribers in each of such State/ Union
such service is territory which shall be derived in the
provided all over following manner:
India. (a) Internet subscribers can be
ascertained from the internet
subscriber figures published by the
(b) Telecom Regulatory Authority of India
(TRAI).
(c) Figures for the last quarter of a given
financial year will be used for
calculating the number of internet
subscribers for the succeeding
financial year.
(d) Where the internet subscriber figures
relate to a region comprising of more
than one State/Union territory, the
subscriber figures for a State/Union
territory of that region shall be
calculated in the ratio of the
populations of that State/Union
territory, as determined in the latest
census.
(e) The ratio of the subscriber figures for
each State or Union territory so
calculated, when applied to the
amount payable for the service, shall

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 PLACE OF SUPPLY 1.55 3.55

represent the portion of the value

attributable to the dissemination in
that State or Union territory
Refer Example 64
11. Advertisements Amount attributable to each State/Union
through SMS territory calculated on the basis of the
telecom subscribers in each of such State/
Union territory.
(a) Telecom subscribers in a telecom
circle can be ascertained from the
telecom subscribers figures published
by the TRAI.
(b) Figures for a given quarter will be used
for calculating the subscribers for the
succeeding quarter.
(c) Where such figures relate to a telecom
circle comprising of more than one
State/Union territory, the subscriber
figures for that State/Union territory
shall be calculated in the ratio of the
populations of that State/Union
territory, as determined in the latest
census.
Refer Examples 65-68

Example 56 - Advertisements in newspapers and publications

ABC is a government agency which deals with the all the
advertisement and publicity of the Government. It
has various wings dealing with various types of
publicity. In furtherance thereof, it issues release
orders to various agencies and entities.
These agencies and entities thereafter provide the
service and then issue invoices to ABC indicating the
amount to be paid by them.

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ABC issues a release order to a newspaper for an advertisement on ‘Beti

bachao beti padhao’, to be published in the newspaper DEF (whose head
office is in Delhi) for the editions of Delhi, Pune, Mumbai, Lucknow and
Jaipur. The release order will have details of the newspaper like the
periodicity, language, size of the advertisement and the amount to be paid
to such a newspaper.
The place of supply of this service shall be in the Union territory of Delhi,
and the States of Maharashtra, Uttar Pradesh and Rajasthan. The amounts
payable to the Pune and Mumbai editions would constitute the proportion
of value for the State of Maharashtra which is attributable to the
dissemination in Maharashtra.

Likewise, the amount payable to the Delhi, Lucknow and Jaipur editions
would constitute the proportion of value attributable to the dissemination
in the Union territory of Delhi and States of Uttar Pradesh and Rajasthan
respectively. DEF should issue separate State-wise and Union territory-wise
invoices based on the editions.
Example 57 - Advertisements through printed material like
pamphlets, leaflets, diaries, calendars, T-shirts, etc.
As a part of the campaign ‘Swachh Bharat’, ABC has engaged a company
GH for printing of 1,00,000 pamphlets (at a total cost
of ` 1,00,000) to be distributed in the States of
Haryana, Uttar Pradesh and Rajasthan. In such a case,
ABC should ascertain the breakup of the pamphlets
to be distributed in each of the three States, i.e.
Haryana, Uttar Pradesh and Rajasthan, from the
Ministry or department concerned at the time of giving the print order.

Let us assume that this breakup is 20,000, 50,000 and 30,000 respectively.
This breakup should be indicated in the print order.
The place of supply of this service is in Haryana, Uttar Pradesh and
Rajasthan. The ratio of this breakup, i.e. 2:5:3 will form the basis of value
attributable to the dissemination in each of the three States. Separate
invoices will have to be issued State-wise by GH to ABC indicating the value
pertaining to that State, i.e. ` 20,000 - Haryana, ` 50,000 - Uttar Pradesh
and ` 30,000 - Rajasthan.

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 PLACE OF SUPPLY 1.57 3.57

Example 58 - Advertisements in hoardings (other than those on

trains
ABC as part of the campaign ‘Saakshar Bharat’ has
engaged a firm IJ for putting up hoardings near the
Airports in the 4 metros, i.e. Delhi, Mumbai, Chennai
and Kolkata. The release order issued by ABC to IJ will
have the city-wise, location-wise breakup of the
amount payable for such hoardings.
The place of supply of this service is in the Union
territory of Delhi and the States of Maharashtra, Tamil Nadu and West
Bengal. In such a case, the amount actually paid to IJ for the hoardings in
each of the 4 metros will constitute the value attributable to the
dissemination in the Union territory of Delhi and the States of Maharashtra,
Tamil Nadu and West Bengal respectively. Separate invoices will have to
be issued State-wise and Union territory-wise by IJ to ABC indicating the
value pertaining to that State or Union territory.
Example 59 - Advertisements on trains
ABC places an order on KL for advertisements to be placed on a
train with regard to the ‘Janani Suraksha Yojana’. The length of a track in a
State will vary from train to train. Thus, for advertisements to be placed on
the Hazrat Nizamuddin Vasco Da
Gama Goa Express which runs through
Delhi, Haryana, Uttar Pradesh, Madhya
Pradesh, Maharashtra, Karnataka and
Goa, KL may ascertain the total length
of the track from Hazrat Nizamuddin to
Vasco Da Gama as well as the length of
the track in each of these States and
Union territory from the website [Link].
The place of supply of this service is in the Union territory of Delhi and
States of Haryana, Uttar Pradesh, Madhya Pradesh, Maharashtra Karnataka
and Goa.
The value of the supply in each of these States and Union territory
attributable to the dissemination in these States will be in the ratio of the

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 3.58 1.58 GOODS AND SERVICES TAX

length of the track in each of these States and Union territory. If this ratio
works out to say 0.5:0.5:2:2:3:3:1, and the amount to be paid to KL is `
1,20,000, then KL will have to calculate the State-wise and Union territory-
wise breakup of the value of the service, which will be in the ratio of the
length of the track in each State and Union territory.
In the given example, the State-wise and Union territory-wise breakup
works out to Delhi (` 5,000), Haryana (` 5,000), Uttar Pradesh
(` 20,000), Madhya Pradesh (` 20,000), Maharashtra (` 30,000), Karnataka
(` 30,000) and Goa (` 10,000). Separate invoices will have to be issued
State-wise and Union territory-wise by KL to ABC indicating the value
pertaining to that State or Union territory.

Example 60 - Advertisements on railway tickets

ABC has issued a release order to MN for display of advertisements
relating to the ‘Ujjwala’ scheme on the railway tickets that are sold from all
the Stations in the States of Madhya Pradesh and Chattisgarh.
The place of supply of this service is in
Madhya Pradesh and Chattisgarh. The
value of advertisement service
attributable to these two States will be in
the ratio of the number of railway stations
in each State as ascertained from the
Railways or from the website
[Link].

Let us assume that this ratio is 713:251 and the total bill is ` 9,640. The
breakup of the amount between Madhya Pradesh and Chattisgarh in this
ratio of 713:251 works out to ` 7,130 and ` 2,510 respectively. Separate
invoices will have to be issued State-wise by MN to ABC indicating the value
pertaining to that State.

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Example 61 - Advertisements on radio stations

For an advertisement on
‘Pradhan Mantri Ujjwala Yojana’,
to be broadcast on a FM radio
station OP, for the radio stations
advertisements
of OP Kolkata, OP Bhubaneswar,
OP Patna, OP Ranchi and OP
Delhi, the release order issued by
ABC will show the breakup of the
amount which is to be paid to
each of these radio stations. The
plac e of supply of this service is in West Bengal, Odisha, Bihar, Jharkhand
and Delhi. The place of supply of OP Delhi is in Delhi even though the
studio may be physically located in another State. Separate invoices will
have to be issued State-wise and Union territory-wise by MN to ABC
based on the value pertaining to each State or Union territory.
Example 62 - Advertisement on television channels

ABC issues a release order with QR channel for telecasting an

advertisement relating to the ‘Pradhan Mantri Kaushal Vikas Yojana’ in the
month of November, 2017. In the first phase, this will be telecast in the
Union territory of Delhi, States of Uttar Pradesh, Uttarakhand, Bihar and
Jharkhand.
The place of supply of this service is in Delhi,
Uttar Pradesh, Uttarakhand, Bihar and
Jharkhand. In order to calculate the value of
supply attributable to Delhi, Uttar Pradesh,
Uttarakhand, Bihar and Jharkhand, QR has to
proceed as under — I. QR will ascertain the viewership figures for their
channel in the last week of September 2017 from the Broadcast Audience
Research Council. Let us assume it is 1,00,000 for Delhi and 2,00,000 for
the region comprising of Uttar Pradesh and Uttarakhand and 1,00,000 for
the region comprising of Bihar and Jharkhand.
II. Since the Broadcast Audience Research Council clubs Uttar Pradesh
and Uttarakhand into one region and Bihar and Jharkhand into

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another region, QR will ascertain the population figures for Uttar

Pradesh, Uttarakhand, Bihar and Jharkhand from the latest census.
III. By applying the ratio of the populations of Uttar Pradesh and
Uttarakhand, as so ascertained, to the Broadcast Audience Research
Council viewership figures for their channel for this region, the
viewership figures for Uttar Pradesh and Uttarakhand can be
calculated.
Let us assume that the ratio of the populations of Uttar Pradesh and
Uttarakhand works out to 9:1. When this ratio is applied to the
viewership figures of 2,00,000 for this region, the viewership figures
for Uttar Pradesh and Uttarakhand work out to 1,80,000 and 20,000
respectively.
IV. In a similar manner, the breakup of the viewership figures for Bihar
and Jharkhand can be calculated. Let us assume that the ratio of
populations is 4:1 and when this is applied to the viewership figure of
1,00,000 for this region, the viewership figure for Bihar and Jharkhand
works out to 80,000 and 20,000 respectively.
V. The viewership figure for each State
works out to Delhi (1,00,000), Uttar
Pradesh (1,80,000), Uttarakhand (20,000),
Bihar (80,000) and Jharkhand (20,000).
The ratio is thus 10:18:2:8:2 or 5:9:1:4:1
(simplification).
VI. This ratio has to be applied when indicating the breakup of the
amount pertaining to each State. Thus, if the total amount payable
to QR by ABC is ` 20,00,000, the State-wise breakup is ` 5,00,000
(Delhi), ` 9,00,000 (Uttar Pradesh) ` 1,00,000 (Uttarakhand), ` 4,00,000
(Bihar) and ` 1,00,000 (Jharkhand). Separate invoices will have to be
issued State-wise and Union territory-wise by QR to ABC indicating
the value pertaining to that State or Union territory.
Example 63 - Advertisements in cinema halls
ABC commissions ST for an advertisement on ‘Pradhan Mantri
Awas Yojana’ to be displayed in the cinema halls in Chennai and Hyderabad.
The place of supply of this service is in the States of Tamil Nadu and
Telangana. The amount actually paid to the cinema hall or screens in a
multiplex, in Tamil Nadu and Telangana as the case may be, is the value of

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advertisement service in Tamil Nadu and Telangana respectively. Separate

invoices will have to be issued State-wise and Union territory-wise by ST to
ABC indicating the value pertaining to that State.
Example 64 - Advertisements on internet
ABC issues a release order to WX for a campaign over internet
regarding linking Aadhaar with one’s bank account and mobile number.
WX runs this campaign over certain websites. In order to ascertain the
State-wise breakup of the value of this service which is to be reflected in
the invoice issued by WX to ABC, WX has to first refer to the Telecom
Regulatory Authority of India figures for quarter ending March, 2017, as
indicated on their website [Link].

These figures show the service area wise internet

subscribers. There are 22 service areas. Some relate to
individual States some to two or more States and some
to part of one State and another complete State. Some
of these areas are metropolitan areas.
In order to calculate the State-wise breakup, first the State-wise breakup of
the number of internet subscribers is arrived at. (In case figures of internet
subscribers of one or more States are clubbed, the subscribers in each State
is to be arrived at by applying the ratio of the respective populations of
these States as per the latest census.).
Once the actual number of subscribers for each State has been determined,
the second step for WX involves calculating the State-wise ratio of internet
subscribers. Let us assume that this works out to 8:1:2….. and so on for
Andhra Pradesh, Arunachal Pradesh, Assam… and so on. The third step for
WX will be to apply these ratios to the total amount payable to WX so as
to arrive at the value attributable to each State. Separate invoices will have
to be issued State-wise and Union territory-wise by WX to ABC indicating
the value pertaining to that State or Union territory.

Advertisements through SMS

(65) In the case of the telecom circle of Assam, the amount attributed
to the telecom circle of Assam is the value of advertisement service in Assam.

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(66) The telecom circle of North East covers the States of

Arunachal Pradesh, Meghalaya, Mizoram, Nagaland,
Manipur and Tripura. The ratio of populations of each of
these States in the latest census will have to be
determined and this ratio applied to the total number of
subscribers for this telecom circle so as to arrive at the State-wise figures of
telecom subscribers. Separate invoices will have to be issued State-wise by the
service provider to ABC indicating the value pertaining to that State.

(67) ABC commissions UV to send short messaging service to voters asking

them to exercise their franchise in elections to be held in Maharashtra and Goa.
The place of supply of this service is in Maharashtra and Goa. The telecom circle
of Maharashtra consists of the area of the State of Maharashtra (excluding the
areas covered by Mumbai which forms another circle) and the State of Goa.
When calculating the number of subscribers pertaining to Maharashtra and
Goa, UV has to -

I. obtain the subscriber figures for Maharashtra circle and Mumbai circle and
add them to obtain a combined figure of subscribers;

II. obtain the figures of the population of Maharashtra and Goa from the latest
census and derive the ratio of these two populations;

III. this ratio will then have to be applied to the combined figure of subscribers
so as to arrive at the separate figures of subscribers pertaining to Maharashtra
and Goa;

IV. the ratio of these subscribers when applied to the amount payable for the
short messaging service in Maharashtra circle and Mumbai circle, will give
breakup of the amount pertaining to Maharashtra and Goa. Separate invoices
will have to be issued State-wise by UV to ABC indicating the value pertaining
to that State.

(68) The telecom circle of Andhra Pradesh consists of the areas of the States of
Andhra Pradesh, Telangana and Yanam, an area of the Union territory of
Puducherry. The subscribers attributable to Telangana and Yanam will have to
be excluded when calculating the subscribers pertaining to Andhra Pradesh.

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6. PLACE OF SUPPLY OF SERVICES WHERE

LOCATION OF SUPPLIER OR LOCATION OF
RECIPIENT IS OUTSIDE INDIA [SECTION 13]

STATUTORY PROVISIONS

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

location of recipient is outside India

Sub- Clause Particulars

section

(1) The provisions of this section shall apply to determine the place of
supply of services where the location of the supplier of services or
the location of the recipient of services is outside India.

(2) The place of supply of services except the services specified in sub-
sections (3) to (13) shall be the location of the recipient of services:

Provided that where the location of the recipient of services is not

available in the ordinary course of business, the place of supply
shall be the location of the supplier of services.

(3) The place of supply of the following services shall be the location
where the services are actually performed, namely:—

(a) Services supplied in respect of goods which are required

to be made physically available by the recipient of services
to the supplier of services, or to a person acting on behalf
of the supplier of services in order to provide the services:

Provided that when such services are provided from a

remote location by way of electronic means, the place
of supply shall be the location where goods are situated
at the time of supply of services:

Provided further that nothing contained in this clause

shall apply in the case of services supplied in respect of
goods which are temporarily imported into India for

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repairs or for any other treatment or process and are

exported after such repairs or treatment or process
without being put to any use in India, other than that
which is required for such repairs or treatment or
process.

(b) services supplied to an individual, represented either as

the recipient of services or a person acting on behalf of
the recipient, which require the physical presence of the
recipient or the person acting on his behalf, with the
supplier for the supply of services.

(4) The place of supply of services supplied directly in relation to an

immovable property, including services supplied in this regard by
experts and estate agents, supply of accommodation by a hotel,
inn, guest house, club or campsite, by whatever name called, grant
of rights to use immovable property, services for carrying out or
co-ordination of construction work, including that of architects or
interior decorators, shall be the place where the immovable
property is located or intended to be located.

(5) The place of supply of services supplied by way of admission to, or

organisation of a cultural, artistic, sporting, scientific, educational
or entertainment event, or a celebration, conference, fair,
exhibition or similar events, and of services ancillary to such
admission or organisation, shall be the place where the event is
actually held.

(6) Where any services referred to in sub-section (3) or sub-section (4)

or sub-section (5) is supplied at more than one location, including
a location in the taxable territory, its place of supply shall be the
location in the taxable territory.

(7) Where the services referred to in sub-section (3) or sub-section (4)

or sub-section (5) are supplied in more than one State or Union
territory, the place of supply of such services shall be taken as
being in each of the respective States or Union territories and the
value of such supplies specific to each State or Union territory shall
be in proportion to the value for services separately collected or
determined in terms of the contract or agreement entered into in

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this regard or, in the absence of such contract or agreement, on

such other basis as may be prescribed.

(8) The place of supply of the following services shall be the location
of the supplier of services, namely:––

(a) services supplied by a banking company, or a financial

institution, or a non-banking financial company, to
account holders;

(b) intermediary services;

(c) services consisting of hiring of means of transport,

including yachts but excluding aircrafts and vessels, up
to a period of one month.

Explanation.––For the purposes of this sub-section, the

expression,–

(a) “account” means an account bearing interest to the

depositor, and includes a non-resident external account
and a non-resident ordinary account;

(b) “banking company” shall have the same meaning as

assigned to it under clause (a) of section 45A of the
Reserve Bank of India Act, 1934;

(c) ‘‘financial institution” shall have the same meaning as

assigned to it in clause (c) of section 45-I of the Reserve
Bank of India Act, 1934;

(d) “non-banking financial company” means,––

(i) a financial institution which is a company;

(ii) a non-banking institution which is a company

and which has as its principal business the
receiving of deposits, under any scheme or
arrangement or in any other manner, or lending
in any manner; or

(iii) such other non-banking institution or class of

such institutions, as the Reserve Bank of India

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may, with the previous approval of the Central

Government and by notification in the Official
Gazette, specify.

(10) The place of supply in respect of passenger transportation services

shall be the place where the passenger embarks on the
conveyance for a continuous journey.

(11) The place of supply of services provided on board a conveyance

during the course of a passenger transport operation, including
services intended to be wholly or substantially consumed while on
board, shall be the first scheduled point of departure of that
conveyance for the journey.

(12) The place of supply of online information and database access or

retrieval services shall be the location of the recipient of services.

Explanation.––For the purposes of this sub-section, person

receiving such services shall be deemed to be located in the
taxable territory, if any two of the following non- contradictory
conditions are satisfied, namely:––

(a) the location of address presented by the recipient of

services through internet is in the taxable territory;

(b) the credit card or debit card or store value card or charge
card or smart card or any other card by which the recipient
of services settles payment has been issued in the taxable
territory;

(c) the billing address of the recipient of services is in the

taxable territory;

(d) the internet protocol address of the device used by the

recipient of services is in the taxable territory;

(e) the bank of the recipient of services in which the account

used for payment is maintained is in the taxable territory;

(f) the country code of the subscriber identity module card

used by the recipient of services is of taxable territory;

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(g) the location of the fixed land line through which the
service is received by the recipient is in the taxable
territory.

(13) In order to prevent double taxation or non-taxation of the supply

of a service, or for the uniform application of rules, the
Government shall have the power to notify any description of
services or circumstances in which the place of supply shall be the
place of effective use and enjoyment of a service.

ANALYSIS

Applicability of Section 13

Service recipient/Service
provider

Service provider/ Service

recipient

Section 13 provides for determination of place of supply of services in cases where

either the location of the supplier of services or the recipient of services is outside
India. Thus, this section provides the place of supply in relation to international or
cross-border supply of services. Place of supply of a service is one of the factors which
determines as to whether a service can be termed as import or export of service.
Similar to section 12, section 13 also lays down a default provision to determine
the place of supply of services as well as few other provisions to determine place
of supply of certain specific services. Thus, place of supply is determined as per

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default provision in respect of services other than the ones covered by the specific
provisions.
Further, sub-section (13) of section 13 empowers the Central Government to
notify services or circumstances for which the place of supply will be the place of
effective use and enjoyment of service so as to prevent double taxation/non-
taxation of the supply of a service.
It must be kept in mind that the provisions of section 13 discussed
hereunder are all in relation to cross border supply of services.
(i) Default provision [Section 13(2)]
The default provision is applicable only if the supply of service does not fall
in any of the specific cases provided in section 13.
This provision provides that the place of supply of services is the location
of the recipient of services.
However, if the location of the recipient of services is not available in
the ordinary course of business, the place of supply is the location of the
supplier of services.
The provision can be summarized as under:

Nature of Supply Place of Supply

Location of recipient Location of recipient is

is available not available

Supply of services Location of the Location of the supplier of

other than the ones recipient of services services
specified in sub-
sections (3) to (13) of
section 13

The principal exceptions to the above default provision relating to place of

supply of cross border services are:
 Performance-based services
 Services directly in relation to immovable property
 Admission to and/or organization of events, celebrations etc.

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 Services supplied by a banking company, financial institution, non-

banking financial company (NBFS) to account holders
 Intermediary services
 Hiring of means of transport other than aircrafts and vessels except
yachts, up to a period of one month
 Passenger transportation services
 Services on board a conveyance during the course of a passenger
transport operation
 Online information and database access or retrieval services
The place of supply of each of the above exceptions is discussed below.
(ii) Performance based services [Section 13(3)]

Nature of Supply Place of Supply

(i) Services requiring Location where the

physical presence of service is actually
goods on which the performed
services are to be
performed

Exceptions: Services supplied in respect of  Location of the

goods, that are temporarily imported into recipient
India for repairs or for any other treatment or
 Location of the
process and are exported after such
supplier if
repairs/treatment/process, without being put
location of
to any other use in India
recipient is not
available

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Services supplied in Location where

respect of goods, goods are situated
that are provided at the time of
from a remote supply of services
location by
electronic means

(ii) Services supplied to an individual, which Location where the

require the physical presence of the recipient service is actually
performed

(iii) Services at (i) and (ii) above supplied at more Location in the
than one location including a location in the taxable territory
taxable territory

Place of supply:
Location in taxable
territory

(iv) Services at (i) and (ii) supplied in more than one Each of State
State/Union territory /Union territory

In case of cutting and polishing activity on unpolished diamonds which are

temporarily imported into India and are not put to any use in India, the place
of supply would be determined as per the provisions contained in section
13(2) - Circular No. 103/22/2019 GST dated 28.06.2019.

(69) MX Pvt. Ltd. (New Delhi) imports a machine from Germany

for being installed in its factory at New Delhi. To install such
machine, MX Pvt. Ltd. takes the service of an engineer who comes
to India from Germany for this specific installation. The place of supply of
installation service, which requires the physical presence of machinery, is
the location where the service is actually performed, i.e. New Delhi.

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(70) A mobile company located in United States of America (USA) takes

services of a software company located in Bangalore for installation of a
software in its mobiles in USA. The Indian software company provides its
services through electronic means from its office in India. The place of
supply is the location where goods (mobile phones) are situated at the time
of supply of service, i.e. USA.
(71) ABC Ltd., Hyderabad has exported a machine to a company in
Indonesia. The machine stops functioning and is thus, imported by ABC
Ltd. for free repairs in terms of the sale contract. The machine is exported
after repairs without being put to any use in India. The place of supply of
repair service is the location of the recipient, i.e. Indonesia.

(72) QR Pvt. Ltd. imports raw diamonds from a diamond merchant in

Belgium for the purpose of cutting, polishing and finishing the same. After
the work is completed, the finished diamonds are exported to the diamond
merchant in Belgium. The place of supply of the services undertaken by
QR Pvt. Ltd. is the location of the recipient, i.e. Belgium.
(73) Mr. X, a hair stylist registered in New Delhi, travels to Singapore to
provide his services to Ms. Y, a resident of Singapore. The place of supply
is the location where the services are actually performed, i.e. Singapore.
(74) PQR Consultants, New Delhi, bags a contract for doing market
research for a vehicle manufacturing company based in South Korea, in
respect of its upcoming model of a car. The research is to be carried out in
five countries including New Delhi in India. Since the services are supplied
at more than one location including a location in the taxable territory, the
place of supply is the location in the taxable territory, i.e. New Delhi.
Value of supply of service supplied in more than one State/Union
territory
The value of services supplied
(i) in respect of goods requiring physical presence of such goods; and
(ii) to an individual requiring his physical presence
in each State or Union territory - where the service is performed - (when
such services are supplied in more than one State/union territory) is in

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proportion to the value for services determined in terms of the contract or

agreement entered into in this regard.
Manner of determining proportionate value of service in the absence
of a contract or agreement
In the absence of a contract or agreement between the supplier and recipient
of services, the proportionate value of services supplied in different
States/Union territories (where the service is performed) is computed in
accordance with rule 7 of IGST Rules in the following manner:

S. No. Cases Manner of computing the

proportionate value of service

(i) Services supplied on Equally dividing the value of service in

the same goods each of the States/ Union territory
where the service is performed
Refer Example 75

(ii) Services supplied on Considering the ratio of the invoice

different goods value of goods in each States/ Union
territory, on which service is performed,
as the ratio of the value of the service
performed in each State/Union territory
Refer Example 76

(iii) Services supplied to Applying generally accepted

individuals accounting principles.
Refer Example 77

Example 75 - Services supplied on the same goods

A company C which is located in Kolkata is providing the services of
testing of a dredging machine and the testing service on the machine is
carried out in Orissa and Andhra Pradesh. The place of supply is in Orissa
and Andhra Pradesh and the value of the service in Orissa and Andhra
Pradesh will be ascertained by dividing the value of the service equally
between these two States.

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Example 76 – Services supplied on different goods

A company C which is located in Delhi is providing the service of
servicing of two cars belonging to Mr. X. One car is of manufacturer J and is
located in Delhi and is serviced by its Delhi workshop. The other car is of
manufacturer A and is located in Gurugram and is serviced by its Gurugram
workshop. The value of service attributable to the Union territory of Delhi and
the State of Haryana respectively shall be calculated by applying the ratio of
the invoice value of car J and the invoice value of car A, to the total value of
the service.
Example 77 – Services supplied to individuals

A makeup artist M has to provide make up services to an actor A. A

is shooting some scenes in Mumbai and some scenes in Goa. M provides the
makeup services in Mumbai and Goa. The services are provided in
Maharashtra and Goa and the value of the service in Maharashtra and Goa
will be ascertained by applying the generally accepted accounting principles.
(iii) Services in relation to immovable property [Section 13(4)]

Nature of Supply Place of Supply

Services supplied Location of

directly in relation to immovable property
an immovable property located or intended
like to be located
 Services of experts
and estate agents
 Accommodation by
a hotel, inn, guest house, club or campsite
 Grant of rights to use immovable property
 Construction and
related services
 Services of
architects or
interior decorators

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Above services supplied at more than one Location in the

location, including a location in the taxable taxable territory
territory

Above services supplied in more than one Each of State/Union

State/Union territory territory

(78) Mr. C, an architect (New Delhi), provides professional services

to Mr. Z of New York in relation to his immovable property located
in Pune. The place of supply is the location of immovable
property, i.e. Pune.
(79) Mr. C, an architect (New Delhi), enters into a contract with Mr. Z of New
York to provide professional services in respect of immovable properties of
Mr. Z located in Pune and New York. Since the immovable properties are
located in more than one location including a location in the taxable territory,
the place of supply is the location in the taxable territory, i.e. Pune.
Manner of determining value of supply of service supplied in more than
one State/Union territory
The value of services supplied directly in relation to an immovable property
in each State or Union territory – where the service is supplied - (when such
services are supplied in more than one State/union territory) is in
proportion to the value for services determined in terms of the contract or
agreement entered into in this regard.
Manner of determining proportionate value of service in the absence
of a contract or agreement
In the absence of a contract or agreement between the supplier and recipient
of services, the proportionate value of services supplied in different
States/Union territories (where the service is supplied) is computed in
accordance with rule 8 of IGST Rules. Rule 8 lays down that in the absence
of any such contract or agreement, the value is determined by applying the
provisions of rule 4 of the said rules, mutatis mutandis.
Thus, the provisions for determining the proportionate value of services
provided directly in relation to an immovable property under section 12(3)

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[both the supplier and the recipient are located in India] are applicable for
determining the proportionate value of services directly provided in relation
to an immovable property under section 13(4) [either the supplier or the
recipient is located outside India] as well. [Rule 4 prescribing the provisions
for determining the proportionate value of services provided directly in relation
to an immovable property under section 12(3) is discussed earlier in this
chapter.]
(iv) Services by way of admission to and/or organization of events
or celebrations etc. [Section 13(5)]

Nature of Supply Place of Supply

Services supplied by way of admission to or Place where the event is

organisation of following: actually held
 Cultural, artistic,
sporting,
scientific,
educational,
entertainment
events
 Celebration, conference, fair, exhibition
 Similar events
Services ancillary to such admission or
organization of event

Above services supplied at more than one Location in the taxable

location, including a location in the taxable territory
territory

Above services supplied in more than one Each of State/Union

State/Union territory territory

(80) A circus team from Russia

organizes a circus in New Delhi. The
place of supply is the location where
the event is actually held, i.e. New Delhi.

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(81) An event management company registered in New Delhi organises an

art exhibition displaying works of an international painter based in Dubai.
The exhibition is organised in 3 countries including New Delhi in India.
Since the service is supplied at more than one location including a location
in the taxable territory, the place of supply is the location in the taxable
territory, i.e. New Delhi.
Manner of determining value of supply of service supplied in more than
one State/Union territory
The value of services supplied by way of admission to or organisation of an
event in each State or Union territory – where the service is supplied - (when
such services are supplied in more than one State/union territory) is in
proportion to the value for services determined in terms of the contract or
agreement entered into in this regard.
Manner of determining proportionate value of service in the absence
of a contract or agreement
In the absence of a contract or agreement between the supplier and recipient
of services, the proportionate value of services supplied in different
States/Union territories (where the service is supplied) is computed in
accordance with rule 9 of IGST Rules.
Rule 9 lays down that in the absence of any such contract or agreement, the
value is determined by applying the provisions of rule 5 of the said rules,
mutatis mutandis.
Thus, the provisions for determining the proportionate value of services
supplied by way of organization of an event under section 12(7) [both the
supplier and the recipient are located in India] are applicable for determining
the proportionate value of services supplied by way of admission to or
organization of an event under section 13(5) [either the supplier or the
recipient is located outside India] as well. [Rule 5 prescribing the provisions
for determining the proportionate value of services supplied by way of
organization of an event under section 12(7) discussed earlier in this chapter.]

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(v) Banking and financial services, intermediary services and hiring

of means of transport [Section 13(8)]

Nature of Supply Place of Supply

Services supplied by a banking company, or a Location of the

financial institution, or a non-banking financial supplier of services
company, to account holders [See definition of these
terms in Explanation to sub-section (8) of section 13]

Intermediary [See definition] services

Services consisting of
hiring of means of
transport, including yachts
but excluding aircrafts and
vessels, up to a period of 1
month

Services provided by an intermediary when location of both

supplier and recipient of goods is outside the taxable
territory is exempt from GST vide Notification No. 9/2017
IT(R) dated 28.06.2017 3.

(82) Mr. C, a non-resident, has an NRE

account with Varanasi Bank (registered
in Uttar Pradesh) in India. The place of
supply of banking services provided by the
Varanasi Bank to Mr. C, a non-resident customer,
is the location of the supplier of service, i.e.
Varanasi.

3
This exemption is subject to conditions specified in Notification No. 9/2017 IT(R) dated
28.06.2017 which has been discussed in detail in Chapter 4 – Exemptions from GST in this Module
of the Study Material.

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(83) XYZ & Sons, Kolkata, is an agent who facilitates supply of goods
between foreign customers and Indian sellers. The place of supply of
intermediary services is the location of the supplier of services, i.e. Kolkata.

(84) Mr. D, an unregistered person based in New Delhi

hires a yacht from a company based in London, UK for 20
days. The place of supply is the location of the supplier of
services, i.e. London.
(vi) Transportation services [Sub-sections (10) and (11) of
section 13]

Nature of Supply Place of Supply

Passenger transportation services Place where the passenger

embarks on the conveyance for a
continuous journey [See
definition]

Services provided on board a First scheduled point of

conveyance during passenger departure of that conveyance for
transportation including services the journey
intended to be wholly or substantially
consumed while on board

The place of supply of supply of services of transportation of goods, where

location of supplier or location of recipient is outside India will be governed
by the default provision section 13(2) [discussed earlier].
(85) Mr. A, a foreign tourist, has booked a ticket for New Delhi-Sri
Lanka flight from an airlines registered in New Delhi for a continuous
journey without any stopover. The place of supply of services by airlines is
the place where the passenger embarks on the conveyance for a continuous
journey, i.e. New Delhi.

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(vii) Online information and database access or retrieval services

(OIDAR) [Section 13(12)]
The place of supply of OIDAR [See definition] is the location of the
recipient of services.
It is difficult to determine the location of
the recipient in case of OIDAR as such
recipients normally access the services
online and are not required to disclose
their location.
The explanation to sub-section (12) lays
down 7 conditions. On satisfying any 2
non-contradictory conditions out of such seven conditions, the service
recipient is deemed to be located in the taxable territory, i.e. India.

The seven conditions are:

(a) the recipient gives an Indian address through internet;
(b) the payment is settled by an Indian credit card/debit card/other card;
(c) the recipient has an Indian billing address;
(d) the computer/other device used by the recipient has an Indian IP
address;
(e) the recipient uses an Indian bank account for payment;
(f) the country code of the subscriber identity module card used by the
recipient of services is of India;
(g) the recipient receives the service through an Indian fixed land line.
(viii)Notified services [Section 13(13)]
In order to prevent double taxation or non-taxation of supply of any service,
section 13(13) empowers the Government to notify any service for which the
place of supply shall be the place of effective use and enjoyment of service.

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The following services have been notified 4 in this regard:

(1) Research and development services related to pharmaceutical
sector
The following research and development services related to
pharmaceutical sector [as specified in columns (2) and (3) from Sl. No.
1 to 10 of the table given below] when supplied by a person located in
taxable territory to a person located in the non-taxable territory, have
been notified as the services for which the place of supply shall be the
place of effective use and enjoyment of a service as specified in the
corresponding entry in column (4) of the table given below:

Sl. Nature of General description Place of

No. supply of supply supply
(1) (2) (3) (4)
1. Integrated This process involves When research
discovery and discovery and and
development development of development
molecules by services
2. Integrated
pharmaceutical sector related to
development
for medicinal use. The pharmaceutical
steps include sector as
designing of specified in
compound, columns (2)
evaluation of the drug and (3) from Sl.
metabolism, No. 1 to 10 of
biological activity, this table are
manufacture of target supplied by a
compounds, stability person located
study and long-term in taxable
toxicology impact. territory to a
person located
3. Evaluation of the This is in vivo research
in the non-
efficacy of new (i.e. within the animal)
taxable
chemical/ and involves
territory, the
biological development of

4
vide Notification No. 04/2019 IT dated 30.09.2019

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entities in animal customized animal place of supply

models of model diseases and shall be the
disease administration of location of the
novel chemical in recipient of
doses to animals to services
evaluate the gene and subject to
protein expression in fulfillment of
response to disease. the following
In nutshell, this conditions:-
process tries to (i) Supply of
discover if a novel services
chemical entity that from the
can reduce or modify taxable
the severity of territory is
diseases. The novel provided
chemical is supplied as per a
by the service contract
recipient located in between
non-taxable territory. the service
provider
4. Evaluation of This is in vitro
located in
biological activity research (i.e. outside
taxable
of novel the animal). An assay
territory
chemical/ is first developed and
and
biological then the novel
service
entities in in-vitro chemical is supplied
recipient
assays by the service
located in
recipient located in
non-
non-taxable territory
taxable
and is evaluated in the
territory.
assay under
optimized conditions. (ii) Such
supply of
5. Drug metabolism This process involves services
and investigation whether fulfills all
pharmacokinetics a new compound other
of new chemical synthesized by conditions
entities supplier can be in the
developed as new

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drug to treat human definition

diseases in respect of of export
solubility, stability in of services,
body fluids, stability except the
in liver tissue and its condition
toxic effect on body that place
tissues. Promising of supply
compounds are is outside
further evaluated in India.
animal experiments
using rat and mice.
6. Safety Safety assessment
Assessment/ involves evaluation of
Toxicology new chemical entities
in laboratory research
animal models to
support filing of
investigational new
drug and new drug
application.
Toxicology team
analyses the potential
toxicity of a drug to
enable fast and
effective drug
development.
7. Stability Studies Stability studies are
conducted to support
formulation,
development, safety
and efficacy of a new
drug. It is also done to
ascertain the quality
and shelf life of the
drug in their intended
packaging
configuration.

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8. Bio-equivalence Bio-equivalence is a
and term in
Bioavailability pharmacokinetics
Studies used to assess the
expected in vivo
biological
equivalence of two
proprietary
preparations of a
drug. If two products
are said to be
bioequivalent it
means that they
would be expected to
be, for all intents and
purposes, the same.
Bioavailability is a
measurement of the
rate and extent to
which a
therapeutically active
chemical is absorbed
from a drug product
into the systemic
circulation and
becomes available at
the site of action.
9. Clinical trials The drugs that are
developed for human
consumption would
undergo human
testing to confirm its
utility and safety
before being
registered for
marketing. The
clinical trials help in
collection of

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information related to
drugs profile in
human body such as
absorption,
distribution,
metabolism,
excretion and
interaction. It allows
choice of safe dosage
10. Bio analytical Bio analysis is a sub-
studies discipline of analytical
chemistry covering
the quantitative
measurement of
drugs and their
metabolites, and
biological molecules
in unnatural locations
or concentrations and
macromolecules,
proteins, DNA, large
molecule drugs and
metabolites in
biological systems.

(2) B2B MRO services of aircrafts or aircraft engines/ components/

parts

Description of services or circumstances Place of supply

Supply of maintenance, repair or overhaul Location of the

service (hereinafter referred as MRO service) in recipient of service
respect of aircrafts, aircraft engines and other
aircraft components or parts supplied to a
person for use in the course or furtherance of
business

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(3) B2B MRO services of ships and other vessels, their engines and
other components

Description of services or circumstances Place of supply

Supply of MRO service in respect of ships and The place of supply

other vessels, their engines and other of services shall be
components or parts supplied to a person for the location of the
use in the course or furtherance of business recipient of service

7. CLARIFICATIONS ON PLACE OF SUPPLY

(1) Place of supply of the goods (particularly being supplied through e-
commerce platform) to unregistered persons where billing address is
different from the address of delivery of goods
Issue: Mr. A (unregistered person) located in X State places an order on an e-
commerce platform for supply of a mobile phone,
which is to be delivered at an address located in Y
State. Mr. A, while placing the order on the e-
commerce platform, provides the billing address
located in X State. In such a scenario, what would be
the place of supply of the said supply of mobile phone,
whether the State pertaining to the billing address i.e.
State X or the State pertaining to the delivery address i.e. State Y?
Clarification: As per the provisions of section 10(1)(ca) [discussed earlier in
this chapter], the place of supply of goods shall be the address of delivery
of goods recorded on the invoice i.e. State Y in the present case where the
delivery address is located.
Also, in such cases involving supply of
goods to an unregistered person, where
the billing address and delivery address
are different, the supplier may record the
delivery address as the address of the
recipient on the invoice for the purpose
of determination of place of supply of the
said supply of goods 5.

5
Circular No. 209/3/2024 GST dated 26.06.2024

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(2) Place of supply in respect of various cargo handling services provided by

ports to clients
The port authorities provide various services to its clients in relation to cargo
handling. Some of such services are in respect of arrival of wagons at port,
haulage of wagons inside port area up-to place of unloading, siding of
wagons inside the port, unloading of wagons, movement of unloaded cargo
to plot and staking hereof, movement of unloaded cargo to berth,
shipment/loading on vessel etc.
It is clarified that such services are ancillary
to or related to cargo handling services and
are not related to immovable property.
Accordingly, the place of supply of such
services will be determined as per the
provisions contained in section 12(2) or
section 13(2), as the case may be,
depending upon the terms of the contract between the supplier and recipient
of such services 6.
(3) Place of supply in case of software/ design services related to Electronics
Semi-conductor and Design Manufacturing (ESDM) industry
A number of companies that are part of the growing Electronics
Semiconductor and Design Manufacturing (ESDM) industry in India are
engaged in the process of developing software and designing integrated
circuits electronically for customers located overseas. The customer
electronically provides Indian development and design companies with
design requirements and Intellectual Property blocks (“IP blocks”, reusable
units of software logic and design layouts that can be combined to form
newer designs). Based on these, the Indian company digitally integrates the
various IP blocks to develop the software and the silicon or hardware design.
These designs are communicated abroad (in industry standard electronic
formats) either to the customer or (on behest of the customer) a
manufacturing facility for the manufacture of hardware based on such
designs.

6
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In addition, the software developed is also integrated upon or customized to

this hardware. On some occasions, samples of such prototype hardware are
then provided back to the Indian development and design companies to test
and validate the software and design that has been developed to ensure that
it is error free.
The question arose whether provision of hardware prototypes and samples
and testing thereon lends these services the character of performance-based
services in respect of “goods required to be made physically available by the
recipient to the provider”.
It is observed that in contracts where service provider is involved in a
composite supply of software development and design for integrated circuits
electronically, testing of software on sample prototype hardware is often an
ancillary supply, whereas, chip design/software development is the principal
supply of the service provider. The service provider is not involved in software
testing alone as a separate service. The testing of software/design is aimed
at improving the quality of software/design and is an ancillary activity. The
entire activity needs to be viewed as one supply and accordingly treated for
the purposes of taxation. Artificial vivisection of the contract of a composite
supply is not provided in law. These cases are fact based and each case
should be examined for the nature of supply contracted.
Therefore, Circular No. 118/37/2019 GST dated 11.10.2019 clarified that the
place of supply of software/design by supplier located in taxable territory to
service recipient located in non-taxable territory by using sample prototype
hardware / test kits in a composite supply, where such testing is an ancillary
supply, is the location of the service recipient as per section 13(2). Provisions
of section 13(3)(a) do not apply separately for determining the place of supply
for ancillary supply in such cases.
(4) Clarification on doubts related to scope of “Intermediary”
Circular No. 159/15/2021 GST dated 21.09.2021 has clarified the doubts
related to the intermediary [See definition] services. The circular clarifies
that the concept of intermediary services requires following basic
prerequisites:

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By definition, an intermediary is someone

who arranges or facilitates the supplies of goods or services or
securities between two or more persons.
It is thus a natural corollary that the arrangement requires a minimum
of three parties, two of them transacting in the supply of goods or
services or securities (the main supply) and one arranging or
facilitating (the ancillary supply) the said main supply. An activity
between only two parties can, therefore, NOT be considered as an
intermediary service.
An intermediary essentially “arranges or facilitates” another supply
(the “main supply”) between two or more other persons and, does not
himself provide the main supply.
As discussed above, there are two distinct
supplies in case of provision of intermediary services:
, between the two principals, which can be a supply
of goods or services or securities;
, which is the service of facilitating or arranging
the main supply between the two principals.
This ancillary supply is the supply of intermediary service and is
clearly identifiable and distinguished from the main supply.
A person involved in supply of main supply on principal-to-principal
basis to another person cannot be considered as supplier of
intermediary service.

The definition of “intermediary”

itself provides that “intermediary service provider means a broker, an
agent or any other person, by whatever name called….”.
This part of the definition is not inclusive but uses the expression
“means” and does not expand the definition by any known expression
of expansion such as “and includes”.

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The use of the expression “arranges or facilitates” suggests a

subsidiary role for the intermediary. It must arrange or facilitate some
other supply, which is the main supply, and does not himself provides
the main supply. Thus, the role of intermediary is only supportive.

The definition of intermediary

services specifically mentions that intermediary “does not include a
person who supplies such goods or services or both or securities on
his own account”.
Use of word “such” in the definition with reference to supply of goods
or services refers to the main supply of goods or services or both, or
securities, between two or more persons, which are arranged or
facilitated by the intermediary.
It implies that in cases wherein the person supplies the main supply,
either fully or partly, on principal-to-principal basis, the said supply
cannot be covered under the scope of “intermediary”.
The
supplier of main service may outsource the supply of the main service,
either fully or partly, to one or more sub-contractors.

Such sub-contractor provides the main supply, either fully or a part

thereof, and does not merely arrange or facilitate the main supply
between the principal supplier and his customers, and therefore,
clearly is not an intermediary.
(86) ‘A’ and ‘B’ have entered into a contract as per which ‘A’
needs to provide a service of, say, annual maintenance of tools
and machinery to ‘B’. ‘A’ subcontracts a part or whole of it to
‘C’. Accordingly, ‘C’ provides the service of annual maintenance to ‘A’
as part of such sub-contract, by providing annual maintenance of tools
and machinery to the customer of ‘A’, i.e. to ‘B’ on behalf of ‘A’.
Though ‘C’ is dealing with the customer of ‘A’, but ‘C’ is providing the
main supply of annual maintenance service to ‘A’ on his own account,
i.e. on principal to principal basis.

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In this case, ‘A’ is providing supply of annual maintenance service to

‘B’, whereas ‘C’ is supplying the same service to ‘A’. Thus, supply of
service by ‘C’ will not be considered as an intermediary.
The specific provision of place of supply of ‘intermediary services’
under section 13 shall be invoked only when either the location of
supplier of intermediary services or location of the recipient of
intermediary services is outside India.
Applying the abovementioned guiding principles, the issue of intermediary
services is clarified through the following examples:
(87) ‘A’ is a manufacturer and supplier of a machine. ‘C’ helps ‘A’ in
selling the machine by identifying client ‘B’ who wants to purchase
this machine and helps in finalizing the contract of supply of
machine by ‘A’ to ‘B’. ‘C’ charges ‘A’ for his services of locating ‘B’ and
helping in finalizing the sale of machine between ‘A’ and ‘B’, for which ‘C’
invoices ‘A’ and is paid by ‘A’ for the same. While ‘A’ and ‘B’ are involved in
the main supply of the machinery, ‘C’, is facilitating the supply of machine
between ‘A’ and ‘B’. In this arrangement, ‘C’ is providing the ancillary supply
of arranging or facilitating the ‘main supply’ of machinery between ‘A’ and
‘B’ and therefore, ‘C’ is an intermediary and is providing intermediary service
to ‘A’.
(88) ‘A’ is a software company which develops software for the
clients as per their requirement. ‘A’ has a contract with ‘B’ for
providing some customized software for its business operations.
‘A’ outsources the task of design and development of a particular module
of the software to ‘C’, for which “C’ may have to interact with ‘B’, to know
their specific requirements. In this case, ‘C’ is providing main supply of
service of design and development of software to ‘A’, and thus, ‘C’ is not an
intermediary in this case.
(89) An insurance company ‘P’, located outside India, requires to
process insurance claims of its clients in respect of the insurance
service being provided by ‘P’ to the clients. For processing
insurance claims, ‘P’ decides to outsource this work to some other firm. For
this purpose, he approaches ‘Q’, located in India, for arranging insurance
claims processing service from other service providers in India. ‘Q’ contacts
‘R’, who is in business of providing such insurance claims processing service,

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and arranges supply of insurance claims processing service by ‘R’ to ‘P’. ‘Q’
charges P a commission or service charge of 1% of the contract value of
insurance claims processing service provided by ‘R’ to ‘P’. In such a case,
main supply of insurance claims processing service is between ‘P’ and ‘R’,
while ‘Q’ is merely arranging or facilitating the supply of services between
‘P’ and ‘R’, and not himself providing the main supply of services.
Accordingly, in this case, ‘Q’ acts as an intermediary as per definition of
section 2(13).
(90) ‘A’ is a manufacturer and supplier of computers based in USA
and supplies its goods all over the world. As a part of this supply,
‘A’ is also required to provide customer care service to its
customers to address their queries and complains related to the said supply
of computers. ‘A’ decides to outsource the task of providing customer care
services to a BPO firm, ‘B’. ‘B’ provides customer care service to ‘A’ by
interacting with the customers of ‘A’ and addressing / processing their
queries / complains. ’B’ charges ‘A’ for this service. ‘B’ is involved in supply
of main service ‘customer care service’ to ‘A’, and therefore, ’B’ is not an
intermediary.
The examples given above are only indicative and not exhaustive. Whether
or not a specific service would fall under intermediary services within
the meaning of section 2(13), would depend upon the facts of the
specific case. While examining the facts of the case and the terms of
contract, the basic characteristics of intermediary services, as discussed
in preceding paras, should be kept in consideration.
(5) Place of supply in case of supply of service of transportation of goods,
including through mail and courier where either supplier/recipient is
outside India

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As seen earlier in this chapter, there is no specific provision for determining

the place of supply of service of transportation of goods, including through
mail and courier in cases where location of supplier of services or location
of recipient of services is outside India. Thus, the place of supply of said
services will be determined by the default rule under section 13(2).
Accordingly, in cases where the location of recipient of services is available,
the place of supply of such services shall be the location of recipient of
services and in cases where location of recipient of services is not available
in the ordinary course of business, the place of supply shall be the location
of supplier of services 7.
(6) Place of supply in case of supply of services in respect of advertising
sector
Advertising companies are often involved in procuring space on hoardings/ bill-
boards erected and mounted on buildings/land, in different States, from various
suppliers ("vendors") for providing advertisement services to its corporate
clients. There may be variety of arrangements between the advertising company
and its vendors as below:
(i) Issue: There may be a case wherein there is supply (sale) of space or supply
(sale) of rights to use the space on the hoarding/ structure (immovable
property) belonging to vendor to the client/advertising company for
display of their advertisement on the said hoarding/ structure. What will
be the place of supply of services provided by the vendor to the advertising
company in such case?
Clarification: The hoarding/structure erected on the land should be
considered as immovable
structure or fixture as it has
been embedded in earth.
Further, place of supply of any
service provided by way of
supply (sale) of space on an
immovable property or grant of
rights to use an immovable
property shall be governed by the provisions of section 12(3)(a).

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As per section 12(3)(a) discussed earlier in this chapter, the place of

supply of services directly in relation to an immovable property,
including services provided by architects, interior decorators,
surveyors, engineers and other related experts or estate agents, any
service provided by way of grant of rights to use immovable property
or for carrying out or coordination of construction work shall be the
location at which the immovable property is located. Therefore, the
place of supply of service provided by way of supply of sale of space
on hoarding/ structure for advertising or for grant of rights to use the
hoarding/ structure for advertising in this case would be the location
where such hoarding/ structure is located.
(ii) Issue: There may be another case where the advertising company
wants to display its advertisement on hoardings/ billboards at a
specific location availing the services of a vendor. The responsibility of
arranging the hoardings/ billboards lies with the vendor who may
himself own such structure or may be taking it on rent or rights to use
basis from another person. The vendor is responsible for display of
the advertisement of the advertisement company at the said location.
During this entire time of display of the advertisement, the vendor is
in possession of the hoarding/structure at the said location on which
advertisement is displayed and the advertising company is not
occupying the space or the structure. In this case, what will be the
place of supply of such services provided by the vendor to the
advertising company?
Clarification: In this case, as the service is being provided by the
vendor to the advertising
company and there is no supply
(sale) of space/ supply (sale) of
rights to use the space on
hoarding/structure (immovable
property) by the vendor to the
advertising company for display
of their advertisement on the
said display board/structure, the
said service does not amount to
sale of advertising space or supply by way of grant of rights to use
immovable property.

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Accordingly, the place of supply of the same shall not be covered

under section 12(3)(a). Vendor is in fact providing advertisement
services by providing visibility to an advertising company's
advertisement for a specific period of time on his structure
possessed/taken on rent by him at the specified location.
Therefore, such services provided by the vendor to advertising
company are purely in the nature of advertisement services in
respect of which place of supply shall be determined in terms of
section 12(2) [discussed earlier in this chapter] 8.
(7) Clarification on place of supply of custodial services 9 provided by
banks to Foreign Portfolio Investors (FPIs)
Banks enter into custodial agreements with the FPIs for the provision
of the custodial services. The main activity carried out by banks as a
custodian is maintaining the account of the securities held by the FPIs.
Custodial services to FPIs involve keeping their investments safe and
handling transactions, like buying and selling stocks. This makes it
easier for FPIs to invest in another country without worrying about the
regulatory requirements.
It is important to note that section 13(8)(a) covers a situation where
services are supplied by banking company or a financial institution or
a non-banking company to account holders. However, custodial
services are not considered to be covered under the services provided
by bank to account holders, but have been considered to be covered
under the services which are not provided to account holder.
Thus, the custodial services provided by banks or financial institutions
to FPIs are not to be treated as services provided to 'account holder'.
Therefore, the said services are not covered under section 13(8)(a) and

8
Circular No. 203/15/2023 GST dated 27.10.2023
9
According to the SEBI (Custodian of Securities) Regulations 1996:
'Custodial Services' in relation to securities means safekeeping of securities of a client and
providing services incidental thereto, and includes-
• maintaining accounts of securities of a client;
• collecting the benefits or rights accruing to the client in respect of securities;
• keeping the client informed of the actions taken or to be taken by the issuer of securities,
having a bearing on the benefits or rights accruing to the client; and
• maintaining and reconciling records of the services referred above.

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the place of supply of custodial services will not be determined under

section 13(8)(a). Therefore, the place of supply of such services is to
be determined under the default provision i.e., section 13(2) 10.
(8) Place of supply of advertising services provided to foreign clients
A foreign company or firm hires an advertising company/agency in
India for advertisement of its goods or services and may enter into a
comprehensive agreement with the advertising company/agency
encompassing all the issues related to advertising services ranging
from media planning, investment planning for the same, creating and
designing content, strategizing for maximum customer reach, the
identification of media owners, dealing with media owners, procuring
media space, etc. for displaying/broadcasting/printing of
advertisement including monitoring of the progress of the same. In
short, the advertising agency provides a one-stop solution to the
client who outsources the entire activity to the agency.
In this scenario, media owners raise invoice to the advertising agency
for inventory costs, which are then paid by the advertising agency.
Subsequently, the advertising agency raises invoice to the foreign
client for the rendered advertising services and receives the payments
in foreign exchange from the foreign client.

issues invoice Advertising

Media owner
for media space agency

Foreign client

In this regard, following has been clarified:

Issue 1 -Whether the advertising company can be considered as an
"intermediary" between the foreign client and the media owners as
per section 2(13)?

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Circular No. 220/14/2024 GST dated 26.06.2024

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Clarification: The advertising agency, in this case, enters into two

agreements:
I. With the client located outside India for providing a one stop
solution starting from designing the advertisement to its display
in the media as agreed to with the client. The advertising company
raises invoice to its foreign client for the above advertising
services and the payments of the same is received from the
foreign client in foreign exchange.
II. With the media company to procure media space for display of
the advertisement and to monitor campaign progress based on
data shared by the media company. The media company bills the
advertising agency and the payment for same is made by the
advertising agency to the media company.
Thus, the agreement, in the instant case, is in the nature of two distinct
principal-to-principal supplies and no agreement of supply of services
exists between the media company and the foreign client. Thus, the
advertising company is not acting as an agent but is providing the
services to the client on its own account. In view of above, it is clarified
that in the present scenario, the advertising company does not fulfil the
criteria of "intermediary" under section 2(13).
Issue-2 Whether the representative of foreign client in India or the
target audience of the advertisement in India can be considered as the
"recipient" of the services being supplied by the advertising company
under section 2(93) of the CGST Act, 2017?
Clarification: As per section 2(93)(a) of the CGST Act, the "recipient" of
the services means the person who is liable to pay consideration where
a consideration is payable for the supply of goods or services or both.
In the instant scenario, the foreign client is liable to pay the
consideration to advertising company for the supply of advertising and
not the consumers or the target audience that watches the
advertisement in India.
Further, even if a representative of the said foreign client based in India,
including a subsidiary or related person of the said foreign client, is
interacting with the advertising company on behalf of the said foreign
client, the said representative based in India can also not be considered

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as a recipient of the service, if the agreement is between the foreign

client and the advertising company, the invoice is being issued for the
said service by the advertising company to the foreign client and the
payment for the said service is received by the advertising company
directly from the said foreign client.
Therefore, in view of above, it is clarified that the recipient of the
advertising services provided by the advertising company in such cases
is the foreign client and not the Indian representative of the foreign
client based in India or the target audience of the advertisements, as
per section 2(93) of the CGST Act, 2017.
Issue-3 Whether the advertising services provided by the advertising
companies to foreign clients can be considered as performance-based
services as per section 13(3)?
Clarification: In the instant matter, there does not appear to be any
such involvement of goods which are required to be physically available
with the supplier of advertising services. Therefore, the provisions of
section 13(3)(a) [discussed earlier] cannot be made applicable for
determination of place of supply of advertising services. Further, the
supply of advertising services does not require physical presence of the
recipient (foreign client or representative or a person acting on his
behalf) with the advertising company for availing the said advertising
services. Thus, the said supply of advertising services cannot be
considered as being covered under section 13(3)(b) [discussed earlier].
In view of the above discussion, the place of supply of the said
advertising service being supplied by the advertising company to the
foreign clients can only be determined as per the default provision, i.e.
section 13(2), i.e. the location of the recipient of the services. Since the
recipient of the advertising services in such scenario is the foreign client,
who is located outside India, the place of supply of the said services
appears to be the location of the said foreign client i.e. outside India as
per section 13(2), and the said service can be considered to be export
of services, subject to the fulfilment of conditions mentioned in section
2(6) 11.

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(9) Place of supply in cases where the advertising company located in

India merely acts as an agent of the foreign client in engaging with
the media owner for providing media space to the foreign client
In cases where the advertising company located in India merely acts as
an agent of the foreign client in engaging with the media owner for
providing media space to the foreign client, the agreement/ contract
for providing the media space and broadcast of the advertisement is
directly between media owner and the foreign client.
The media owner directly invoices the foreign client for providing the
media space and broadcast of the advertisement and the foreign client
remits the payment for the said services directly to the media owner. In
such instances, the services of providing media space and broadcasting
the advertisement are directly provided by the media owner to the
foreign client. In such cases, the advertising company is merely
facilitating the provision of the said services of providing media space
and broadcasting the advertisement between the foreign client and the
media owner and does not provide the said services on its own account.
The advertising company invoices the foreign client for the facilitation
services provided by it.
Consequently, in such cases, the advertising company is an
"intermediary" in accordance with section 2(13) of the CGST Act, 2017,
[as elucidated in Circular No. 159/15/2021GST discussed above in
respect of the said services of facilitating the foreign client] and
accordingly, the place of supply in respect of the said services provided
by the advertising company to the foreign client is determinable as per
section 13(8)(b), i.e. the location of the supplier, i.e. the location of the
advertising company 12.
(10) Place of supply of data hosting services provided by service
providers located in India to cloud computing service providers
located outside India
Data Hosting Service Providers (DHSPs) in India offer storage space
and technical infrastructure to hold data for foreign Cloud Computing
Service Providers (CCSPs). These CCSPs rely on Indian data centers to
securely store and manage large amounts of information. This allows

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them to serve their clients without having their own physical storage
in India. Under this business model,
1. A contract is entered into between CCSPs and DHSPs wherein
CCSPs will use the data centres of DHSPs for hosting cloud
computing services.
DATA HOSTING SERVICES
2. DHSP either:
• owns premises for data centre or
• operates data centre on leased premises.
3. It independently:
• procures infrastructure and human resource, and
• handles all aspects of data centre like rent, software and
hardware infrastructure, power, net connectivity, security,
human resource, etc. (even in case where some hardware
is provided by CCSPs),
• handles operations like infrastructure monitoring, IT
management and equipment maintenance, etc.
to provide the said supply of data hosting services to CCSPs.
4. There is no contact between DHSP and the end
users/consumers/subscribers of the foreign CCSP.
5. DHSP provides data hosting services to the CCSPs:
• on a web platform through computing and networking
equipment
• for the purpose of:
 collecting,
 storing,
 processing,
 distributing or
 allowing access to
large amounts of data.

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 3.1001.100 GOODS AND SERVICES TAX

6. Data hosting services are:

• not passive supply of a service directly in respect of
immovable property,
• comprehensive services related to data hosting which
involves the supply of various services by DHSP like :
 operating data center,
 ensuring uninterrupted power supplies,
 backup generators, network connectivity, backup
facility,
 firewall services
 monitoring and surveillance service
for ensuring continuous operations of the servers and
related hardware, etc.
which are essential for CCSP to provide cloud computing
services to end users/ customer/ subscribers.
CLOUD COMPUTING SERVICES
7. CCSP provides cloud-based applications and software services
to various end users/ customers/ subscribers for data storage,
analytics, artificial intelligence, machine learning, processing,
database analysis and deployment services, etc.
8. The end users/ customers/ subscribers access cloud computing
services seamlessly over the internet through technology hosted
on data centers.
CLARIFICATION
With regard to data hosting services, it is observed that:
(a) DHSP provides data hosting services to the CCSP on principal-
to-principal basis on his own account and is not acting as a
broker or agent for facilitating supply of service between CCSPs
and their end users/consumers.
(b) Data hosting services provided by DHSP to the said CCSPs
cannot be considered in relation to the goods "made available"
by the said CCSPs to the DHSP in India.

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(c) Data hosting services cannot be considered as the services

provided directly in relation to immovable property or physical
premises.
In terms of the above discussion, it is inferred and clarified that the
place of supply in such cases needs to be determined according to the
default provision under section 13(2), i.e. the location of the recipient
of the services.
Thus, where the CCSP receiving the data hosting services are located
outside India, the place of supply will be considered to be outside
India. Accordingly, supply of data hosting services being provided by
a DHSP located in India to an overseas CCSP can be considered as
export of services, subject to the fulfilment of the other conditions
mentioned in section 2(6) 13.
The above discussion has been depicted by way of a diagram below:

CCSP Data hosting

(Recipient) services DHSP
(Supplier)

Place of Supply is
Location of
Recipient (CCSP),
i.e. outside India
[Section 13(2)]

Cloud computing
services to end Payment for
users/subscribers service is received
in convertible
FOREX

Qualifies as
Export of services

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 3.1021.102 GOODS AND SERVICES TAX

After understanding the concept of and meaning of the

, you will now be in a position to better appreciate
the meaning of the terms -
. Therefore, these terms have been discussed in
detail hereunder:

8. INTER-STATE SUPPLY [SECTION 7 OF THE

IGST ACT]

STATUTORY PROVISIONS

Section 7 Inter-State Supply

Sub-section Particulars

(1) Subject to the provisions of section 10, supply of goods, where

the location of the supplier and the place of supply are in––
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
shall be treated as a supply of goods in the course of inter-State
trade or commerce.

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

(3) Subject to the provisions of section 12, supply of services,

where the location of the supplier and the place of supply are
in––
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
shall be treated as a supply of services in the course of inter-
State trade or commerce.

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(4) Supply of services imported into the territory of India shall

be treated to be a supply of services in the course of inter-
State trade or commerce.

(5) Supply of goods or services or both,––

(a) when the supplier is located in India and the place of
supply is outside India;
(b) to or by a Special Economic Zone developer or a Special
Economic Zone unit; or
(c) in the taxable territory, not being an intra-State supply
and not covered elsewhere in this section,
shall be treated to be a supply of goods or services or both in
the course of inter-State trade or commerce.

ANALYSIS
This section provides as to when the supplies of goods and/or services shall be
treated as Supply in the course of inter-State trade/commerce.

Supply of goods/ services when location of the supplier and the place of
supply are in two different States / UTs
Inter-State Supplies

Supply of goods/ services imported into the territory of India

Supplier located in India and the place of supply is outside India

Supply to/by an SEZ developer or SEZ unit; or

Supply in the taxable territory, not being an intra-State supply & not
specified anywhere

A. SUPPLY OF GOODS’ in the course of inter-State trade/commerce [Section 7(1)

and (2)]

It primarily covers two kinds of supplies – Supply of goods

within India and supply of goods imported into India. The
two categories of supplies are discussed hereunder:

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 3.1041.104 GOODS AND SERVICES TAX

(i) Supplies within India

Supply of goods shall be considered as supply of goods in course of
inter-State trade or commerce in the following cases:

Location of the
AND Place of supply
supplier

two different a State and a

two different
Union Union
States
OR territories OR territory

The above concept can be easily understood with the help of following
examples. In each of the following cases, supplies of goods shall be treated
as supply of goods in course of inter-State trade/commerce.
Location of Supplier Place of Supply

Punjab Haryana

Punjab Daman and Diu

Daman and Diu Chandigarh

(ii) Supplies from outside India

Supply of goods imported into the
territory of India, till they cross the
customs frontiers of India, shall be
considered as supply of goods in the
course of inter-State trade or commerce.
Import of goods, means bringing goods into India from a place outside
India. Thus, all imports shall be deemed as inter-State supplies and
accordingly IGST shall be levied on the imported goods in addition to
the applicable custom duties.

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B. ‘SUPPLY OF SERVICES’ in the course of inter-State trade/commerce

[Section 7(3) and 7(4)]
It primarily covers two kinds of supplies – supply of services within India and
import of services into India. The two categories of supplies are discussed
hereunder:
(i) Supplies within India
Supply of services shall be considered as supply of services in course of
inter-State trade or commerce in the following cases:

Location of the
AND Place of supply
supplier

two different
two different a State and a
OR Union OR
States Union territory
territories

(ii) Import of services into India

Supply of services which are imported into territory of India, shall be

treated as supply of services in the course of inter-State trade or
commerce. The term ‘import of services’ has been defined under section
2(11) of the IGST Act 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.
From the aforesaid discussion, it can be inferred that import of goods
or services 14 shall be treated as inter-State supplies and would be
subject to IGST.

14
Provisions relating to import of goods/services have been discussed in detail in
Chapter 14 – Import and Export under GST in Module 3 of this Study Material.

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 3.1061.106 GOODS AND SERVICES TAX

C. SUPPLY OF GOODS OR SERVICES OR BOTH in the course of inter-

State trade or commerce [Section 7(5)]
Certain supplies are treated as supplies in the course of inter-State trade or
commerce, and shall equally apply to supply of goods and to supply of
services. These have been discussed hereunder:
I. Supply of goods or services or both when the supplier is located
in India and the place of supply is outside India

Services/goods supplied by
a supplier located in India
and place of supply is
outside India

Inter-State supply

It is important to note here that in this case, location of recipient is not

material to qualify as supply in the course of inter-State trade or
commerce. However, such supplies of goods and/or services need to
satisfy some more conditions to qualify as export of goods and/or
services 15.
II. Supply of goods or services or both to or by a Special Economic
Zone developer/ Special Economic Zone unit
SEZ is a geographically bound zone within India where the economic
laws relating to export and import are more liberal as compared to
other parts of the country. For all tax purposes, SEZ is considered to be
a place outside India. Any supplies made to SEZ unit/developer or vice
versa are inter-State supplies. It is noteworthy that place of supply is
not relevant in case of supplies to/from an SEZ unit or developer.
Further, supply of goods or services or both to a Special Economic Zone
developer or a Special Economic Zone unit are zero-rated supplies
[Section 16 of the IGST Act] – Discussed in detail in Chapter 14 – Import
and Export under GST.

15
Provisions relating to export of goods/services have been discussed in detail in Chapter 14 –
Import and Export under GST in Module 3 of this Study Material.

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The same can be understood with the help of the following example:

Services/goods supplied by/to a

SEZ developer/unit
SEZ in Uttar Pradesh

Person located outside SEZ in

Uttar Pradesh

III. Supply of goods and/or services in the taxable territory, not being
an intra-State supply & not covered elsewhere in this section
This is a residuary clause and shall cover all supplies in taxable territory
which are neither covered under any provisions [enumerated above]
determining inter-State supplies nor are intra-State supplies.

9. INTRA-STATE SUPPLY [SECTION 8 OF THE

IGST ACT]

STATUTORY PROVISIONS

Section 8 Intra-State Supply

Sub- Particulars
section

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

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Provided that the following supply of goods shall not be treated as

intra-State supply, namely:-
(i) supply of goods to or by a Special Economic Zone developer
or a Special Economic Zone unit;
(ii) goods imported into the territory of India till they cross the
customs frontiers of India; or
(iii) supplies made to a tourist referred to in section 15.

(2) Subject to the provisions of section 12, supply of services where the
location of the supplier and the place of supply of services are in the
same State or same Union territory shall be treated as intra-State
supply.
Provided that the intra-State supply of services shall not include
supply of services to or by a Special Economic Zone developer or a
Special Economic Zone unit.

Explanation 1. - For the purposes of this Act, where a person has, -

(i) an establishment in India and any other establishment outside
India;
(ii) an establishment in a State or Union territory and any other
establishment outside that State or Union territory; or
(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 or a representational office in any territory shall be
treated as having an establishment in that territory.

ANALYSIS
This section provides as to when the supplies of goods and/or services shall be
treated as intra-State supply.

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A. Which supplies of goods/services shall be treated as intra-State

supplies? [Section 8(1) and 8(2) of the IGST Act]
Supply of goods/services where the location of the
supplier and the place of supply of goods/services
are in the same State or same Union territory shall
be treated as intra-State supply. Such supplies are exigible to CGST and
SGST.

Location of the AND

Place of supply
supplier

Same State or Union Territory

The concept discussed above has been explained by way of following

examples:

(91)

Location of Supplier Place of Supply Whether qualifies as intra-

State supply?

Punjab Yes
Punjab

Delhi No
London

Gujarat No
Delhi

Puducherry Yes
Puducherry

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B. Exclusions [Proviso to section 8(1) and proviso to section 8(2) of the

IGST Act]
Certain supplies of goods/services shall not be treated as intra-State supplies
even when the location of supplier and place of supply fall within the same
State/ Union Territory. These supplies are as under:
 Supply of goods/services to or by SEZ Unit or SEZ Developer:
Supply of goods/services to/by a SEZ developer/unit or supply to a SEZ
developer/unit shall not be treated as intra-State supply. As already
discussed in this chapter, such supplies shall be treated as supply in
course of inter-State trade or commerce.
 Supply of goods made to a tourist [referred to in section 15 of the
IGST Act]: shall not be considered as intra-State supply. Explanation
to section 15 defines tourist as a person not normally resident in India,
who enters India for a stay of not more than 6 months for legitimate
non-immigrant purposes.
(95) George, a tourist from USA, visits India and purchases a
shawl in Delhi. In this case, even though the place of supply
and location of supplier are in the same State, it will be treated as inter-
State transaction and will be exigible to IGST.
 Goods imported in India: Goods imported into
the territory of India till they cross the customs
frontiers of India are supplies in course of inter-
State trade/commerce and thus, are excluded
from the definition of intra-State supplies.
C. Establishments of distinct persons
Establishments of same entity shall be considered as establishments of
distinct persons where a person has:
(i) an establishment in India and any other establishment outside India;
(ii) an establishment in a State or Union territory and any other
establishment outside that State or Union territory; or
(iii) an establishment in a State or Union territory and any other
establishment registered within that State or Union territory.

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Thus, any supply between any of the above establishments shall be treated
as supply between establishments of distinct persons. Further, 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.

10. SUPPLIES IN TERRITORIAL WATERS

[SECTION 9 OF THE IGST ACT]

STATUTORY PROVISIONS

Section 9 Supplies in territorial waters

Notwithstanding anything contained in this Act -

(a) where the location of the supplier is in the territorial waters, the
location of such supplier; or
(b) where the place of supply is in the territorial waters, the place of
supply,
shall, for the purposes of this Act, be deemed to be in the coastal State
or Union territory where the nearest point of the appropriate baseline is
located.

ANALYSIS
This section determines the location of supplier and/or the place of supply when such
location of supplier and/or the place of supply is in territorial waters. Before that, let
us understand the term “territorial waters”.
The term ‘Territorial waters’ has not been defined in the GST law. However, as
per United Nations Convention on the Law of the Sea, the term ‘territorial sea’ is
a belt of coastal waters extending atmost 12 nautical miles from the baseline of a
coastal state.
Section 3(2) of the Territorial Waters, Continental Shelf, Exclusive Economic Zone
and Other Maritime Zones Act, 1976 stipulates that the limit of territorial waters is

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 3.1121.112 GOODS AND SERVICES TAX

the line every point of which is at a distance of 12 nautical miles from the nearest
point of the appropriate base line. Refer the pictorial diagram showing ‘territorial
waters’ given on page 3.6 earlier in this chapter.
Section 9 of the IGST Act provides that where the location of the supplier is in the
territorial waters, it shall be deemed that location of such supplier is in the coastal
State or Union Territory where the nearest point of the appropriate baseline is
located. Similarly, in case where the place of supply is in territorial waters, the place
of supply shall be deemed to be in the coastal State or Union Territory where the
nearest point of the appropriate baseline is located.

LET US RECAPITULATE
A. Place of supply of goods other than import and export [Section 10]

S. No. Nature of Supply Place of Supply

1. Where the supply involves Location of the goods at the time

the movement of goods, at which, the movement of goods
whether by the supplier or terminates for delivery to the
the recipient or by any recipient
other person

2. Where the goods are Principal place of business of such

delivered to the recipient or third person
any person on the direction
of the third person by way
of transfer of title or
otherwise

3. Where there is no Location of such goods at the time

movement of goods either of delivery to the recipient
by supplier or recipient

4. Where supply is made to Location as per address of

unregistered persons and unregistered person recorded in
the address of such person the invoice
is recorded in the invoice.

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 PLACE OF SUPPLY 1.113 3.113

(Simply mentioning the State of

such person instead of complete
address would be sufficient.)

5. Where supply is made to Location of the supplier

unregistered persons and
the address of such person
is not recorded in the
invoice

6. Where goods are Place where the goods are

assembled or installed at assembled or installed
site

7. Where the goods are Place where such goods are taken
supplied on-board a on-board the conveyance
conveyance like a vessel,
aircraft, train or motor
vehicle

8. Where the place of supply To be determined in the

of goods cannot be prescribed manner
determined in terms of the
above provisions

B. Place of supply of goods imported into, or exported from India

[Section 11]

S. No. Nature of Supply of Goods Place of Supply

1. Import Location of importer
2. Export Location outside India

C. Place of supply of services where location of supplier AND

recipient is in India [Section 12]
(i) In respect of the following 12 categories of services, the place of supply
is determined with reference to a proxy; rest of the services are
governed by the default provision.

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 3.1141.114 GOODS AND SERVICES TAX

S. Nature of Service Place of Supply

No.
1. Immovable property  Location at which the
related-services immovable property or boat
including or vessel is located or
accommodation in intended to be located
hotel/boat/vessel  If located outside India:
Location of the recipient
If the immovable Each such State in proportion to
property or boat or the value of services provided in
vessel is located in more each State – Refer point (ii) below
than one State
2. Restaurant and catering Location where the services are
services, personal actually performed
grooming, fitness,
beauty treatment and
health service
3. Training and  B2B: Location of such
performance appraisal registered person
 B2C: Location where the
services are actually
performed
4. Admission to an event or Place where the event is actually
amusement park held or where the park or the
other place is located
5. Organisation of an event  B2B: Location of such
including ancillary registered person
services and assigning of  B2C: Location where the
sponsorship to such event is actually held
events
If the event is held outside India:
Location of the recipient

If the event is held in Each such State in proportion to

more than one State (in the value of services provided in

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 PLACE OF SUPPLY 1.115 3.115

cases of unregistered each State – Refer point (iii) below

recipient)
6. Transportation of goods,  B2B: Location of such
including mails or registered person
courier  B2C: Location at which such
goods are handed over for
their transportation
7. Passenger  B2B: Location of such
transportation registered person
 B2C: Place where the
passenger embarks on the
conveyance for a continuous
journey
8. Services on board a Location of the first scheduled
conveyance point of departure of that
conveyance for the journey
9. Banking and other  Location of the recipient of
financial services services in the records of
including stock broking supplier
 Location of the supplier of
services if location of
recipient of services is not
available
10. Insurance services  B2B: Location of such
registered person
 B2C: Location of the recipient
of services in the records of
the supplier
11. Advertisement services  Each of States/Union territory
to the Government where the advertisement is
broadcasted/ displayed/ run/
disseminated
 Proportionate value in case of
multiple States – Refer point
(iv) below

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 3.1161.116 GOODS AND SERVICES TAX

12. Telecommunication  Services involving fixed line,

services leased and internet leased
circuits, dish antenna etc:
Location of such fixed
equipment
 Post-paid mobile/ internet
services: Location of billing
address of the recipient and if
the same is not available,
location of supplier
 Pre-paid mobile/ internet/DTH
services provided:
• Through selling agent/ re-
seller/ distributor:
Address of such selling
agent/ re-seller/
distributor in the records
of supplier at the time of
supply
• By any person to final
subscriber: Location
where pre-payment is
received or place of sale of
vouchers
• When payment made
through electronic mode -
Location of recipient in
records of supplier
 Other cases: Address of the
recipient in the records of the
supplier and if the same is not
available, location of supplier
If the leased circuit is Each such State in proportion to
installed in more than the value of services provided in
one State each State – Refer point (v) below

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(ii) Manner of determining proportionate value of immovable property

related service attributable to different States/ Union territories –
where the immovable property/ boat/ vessel is located - in the
absence of a contract or agreement in this regard.

S. Type of service in relation to Factor determining the

No. immovable property proportionate value of
service

(a) Service provided by way of lodging Number of nights stayed

accommodation by hotel/ in such property
inn/guest house etc. and its
ancillary services (other than the
cases where such property is a
single property located in 2 or
more contiguous States/ Union
territories or both)

(b) All other services provided in Area of the immovable

relation to immovable property property lying in each
including organising any marriage State/ Union territories
or reception etc., accommodation
in a single property located in 2 or
more contiguous States or/and
Union territories, services ancillary
to such services

(c) Services by way of lodging Time spent by the boat

accommodation by a house boat or or vessel in each such
vessel and its ancillary services State/ Union territories,
to be determined on the
basis of declaration
made by the service
provider

(iii) Manner of determining proportionate value of service relating to

organization of event, attributable to different States/Union
territories – where the event is held - in the absence of a contract or
agreement in this regard

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Organization of
an event/
Proportionate
services Generally
value of such
ancillary accepted
service to be
thereto/ accounting
computed by
assigning of principles
application of
sponsorship to
such event

(iv) Manner of determining proportionate value of advertisement

service attributable to different States/Union territories – where the
advertisement is broadcasted/ run /played/disseminated - in the
absence of a contract or agreement in this regard

Sl. Type of Proportionate value of service

No. advertisement

1. Advertisements in Amount payable for publishing an

newspapers and advertisement in all the editions of a
publications newspaper or publication, which are
published in each State/Union
territory

2. Advertisements Amount payable for the distribution

through printed of a specific number of such material
material like in each State/Union territory
pamphlets, leaflets,
diaries, calendars, T-
shirts, etc.

3. Advertisements in Amount payable for the hoardings

hoardings (other located in each State/ Union territory
than those on trains)

4. Advertisements on Amount attributable to each

trains State/Union territory calculated in the
ratio of length of the railway track in
each of such State/Union territory, for
that train

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5. Advertisements on Amount payable to each State/Union

the back of utility territory for the advertisements on
bills of oil and gas bills pertaining to consumers having
companies, etc. billing addresses in each of such
State/Union territory

6. Advertisements on Amount attributable to each

railway tickets State/Union territory calculated in the
ratio of number of Railway Stations in
each of such State/Union territory

7. Advertisements on Amount payable to such radio station,

radio stations which by virtue of its name is part of
each State/Union territory

8. Advertisement on Amount attributable to each

television channels State/Union territory calculated on
the basis of the viewership of such
channel in each of such State/ Union
territory.
Viewership figures for the last week of
a given quarter as published by BARC
can be used for calculating viewership
for the succeeding quarter. Figures
pertaining to more than one
State/Union territory are apportioned
in ratio of the populations of those
States/Union territories, as per the
latest Census.

9. Advertisements in Amount payable to a cinema hall or

cinema halls screens in a multiplex in each State/
Union territory.

10. Advertisements on Amount attributable to each

internet State/Union territory calculated on
It is deemed that the basis of the internet subscribers in
such service is each of such State/ Union territory.

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 3.1201.120 GOODS AND SERVICES TAX

provided all over Internet subscriber figures for the last

India. quarter of a given financial year as
published by TRAI can be used for
calculating the subscribers for the
succeeding financial year. Figures
pertaining to more than one
State/Union territory are apportioned
in the ratio of the populations of those
States/Union territories, as per the
latest census.

11. Advertisements Amount attributable to each

through SMS State/Union territory calculated on
the basis of the telecom subscribers in
each of such State/ Union territory.
Telecom subscribers figures in a
telecom circle for a given quarter as
published by TRAI can be used for
calculating the subscribers for the
succeeding quarter. Figures pertaining
to a telecom circle comprising of more
than one State/Union territory are
apportioned in the ratio of the
populations of those States/Union
territories, as per the latest census.

(v) Manner of determining proportionate value of service relating to

installation of a leased circuit, attributable to different States/Union
territories – where the circuit is installed - in the absence of a
contract or agreement in this regard

Proportionate
Number of
value of such
Installation of points lying in
service
leased circuit the State/
computed on
Union territory
the basis of

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Starting point/place of
For a circuit
circuit and end
between two
point/place of circuit
points/places
constitute two points

the benefit of the Intermediate

leased circuit is also point/ place in
available at that circuit constitute
intermediate point a point if

(vi) For the rest of the services other than those specified above, the
default provision has been prescribed as under:

Default provision for the services other than the 12 specified

services

S. No. Description of Place of Supply

Supply

1. B2B Location of such registered person

2. B2C  Where the address on record

exists: Location of the recipient
 Other cases: Location of the
supplier of services

D. Place of supply of services where location of supplier OR location

of recipient is outside India [Section 13]
(i) In respect of the following categories of services, the place of supply
is determined with reference to a proxy; rest of the services are
governed by the default provision.

S. Nature of Service Place of Supply

No.

1. Services supplied in respect of Location where the

goods which are required to services are actually
be made physically available performed

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Services supplied in respect of Location where the goods

goods but from a remote are situated at the time of
location by way of electronic supply of services
means

Above provisions are not applicable in case of goods that are

temporarily imported into India for repairs/treatment/any
process and exported after such repairs/treatment/any
process without being put to any other use in India

2. Services which require the Location where the

physical presence of the services are actually
recipient or the person acting performed
on his behalf with the supplier
of services

3. Service supplied directly in Place where the

relation to an immovable immovable property is
property including located or intended to
accommodation in hotel, be located
boat, vessel

4. Admission to or organisation Place where the event is

of an event actually held

If the above services are supplied at more than one location, i.e.
(i) Goods & individual related
(ii) Immovable property-related
(iii) Event related

At more than one location, including a Location in the taxable

location in the taxable territory territory

In more than one State Each such State in

proportion to the value
of services provided in
each State – Refer point
(ii) below

5. Services supplied by a Location of the supplier

banking company, or a

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financial institution, or a NBFC of services

to account holders

Intermediary services

Services consisting of hiring of

means of transport, including
yachts but excluding aircrafts
and vessels, up to a period of
one month

6. Passenger transportation Place where the

passenger embarks on
the conveyance for a
continuous journey

7. Services provided on-board a First scheduled point of

conveyance departure of that
conveyance for the
journey

8. Online information and Location of recipient of

database access or retrieval service
services

(ii) Manner of determining proportionate value of service relating to (1)

goods & individual (2) immovable property (3) admission
to/organization of event attributable to different State/Union
territories– where such services are supplied - in the absence of a
contract or agreement in this regard

S. Cases Manner of computing the

No. proportionate value of service

1. Services relating to
goods & individual

(a) Services supplied Equally dividing the value of service

on the same goods in each of the States/ Union territory
where the service is performed

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(b) Services supplied Considering the ratio of the invoice

on different goods value of goods in each States/ Union
territory, on which service is
performed, as the ratio of the value
of the service performed in each
State/Union territory

(c) Services supplied Applying generally accepted

to individuals accounting principles.

2. Services directly In the same manner as is applicable

relating to for determining the proportionate
immovable property value of services provided in relation
to an immovable property under
section 12(3)

3. Services relating to In the same manner as is applicable

admission for determining the proportionate
to/organization of value of services provided in relation
event to organization of an event under
section 12(7)

(iii) For the rest of the services other than those specified above, a
default provision has been prescribed as under:

Default provision for the cross-border supply of services other

than nine specified services

S. No. Description of Place of Supply

supply

1. Any  Location of the recipient of service

 Location of the supplier of service, if
location of recipient is not available
in the ordinary course of business

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(iv) Place of supply of services notified under section 13(13)

S. Services notified Place of supply

No.

1. Specified research and development Location of

services related to pharmaceutical recipient of services
sector supplied by a person located in subject to
taxable territory to a person located in fulfillment of
the non-taxable territory specified conditions

2. B2B maintenance, repair or overhaul Location of

services of aircrafts, aircraft recipient of service
engines/components/parts

3. B2B MRO services of ships and other Location of

vessels, their engines and other recipient of service
components/ parts

TEST YOUR KNOWLEDGE

1. XY Ltd. (registered in Rajasthan) received legal services from an attorney in UK
(unrelated person) in relation to registration of a trademark in UK. A
consideration of £ 8,000 was paid by the company to the attorney in UK.
Determine the place of supply for the service and suggest if XY Ltd. is required
to pay tax under reverse charge on this transaction.
2. Damani Industries has recruited Super Events Pvt. Ltd., an event management
company of Gujarat, for organising the grand party for the launch of its new
product at Bangalore. Damani Industries is registered in Mumbai. Determine
the place of supply of the services provided by Super Events Pvt. Ltd. to Damani
Industries.
Will your answer be different if the product launch party is organised at Dubai?
3. Priyank Sales of Pune, Maharashtra enters into an agreement to sell goods to
Bisht Enterprises of Bareilly, Uttar Pradesh. While the goods were being packed
in Pune godown of Priyank Sales, Bisht got an order from Sahil Pvt. Ltd. of

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 3.1261.126 GOODS AND SERVICES TAX

Shimoga, Karnataka for the said goods. Bisht Enterprises agreed to supply the
said goods to Sahil Pvt. Ltd. and asked Priyank Sales to deliver the goods to
Sahil Pvt. Ltd. at Shimoga.
You are required to determine the place of supply(ies) in the above situation.
4. Musicera Pvt. Ltd. owned by Nitish Daani - a famous classical singer - wishes
to organise a ‘Nitish Daani Music Concert’ in Gurugram (Haryana). Musicera
Pvt. Ltd. (registered in Ludhiana, Punjab) enters into a contract with an event
management company, Supriya (P) Ltd. (registered in Delhi) for organising the
said music concert at an agreed consideration of ` 10,00,000. Supriya (P) Ltd.
books the lawns of Hotel Dumdum, Gurugram (registered in Haryana) for
holding the music concert, for a lump sum consideration of ` 4,00,000.
Musicera Pvt. Ltd. fixes the entry fee to the music concert at ` 5,000. 400 tickets
for ‘Nitish Daani Music Concert’ are sold.
You are required to determine the gross GST liability in respect of the
supply(ies) involved in the given scenario.
Will your answer be different if the price per ticket is fixed at ` 450?
Note: Rate of CGST and SGST is 9% each and IGST is 18%. All the amounts
given above are exclusive of taxes, wherever applicable.
5. RST Inc., a corn chips manufacturing company based in USA, intends to launch
its products in India. However, the company wishes to know the taste and
sensibilities of Indians before launching its products in India. For this purpose,
RST Inc. has approached ABC Consultants, Mumbai, (Maharashtra) to carry out
a survey in India to enable it to make changes, if any, in its products to suit
Indian taste.
The survey is to be solely based on the oral replies of the surveyees; they will
not be provided any sample by RST Inc. to taste. ABC Consultants will be paid
in convertible foreign exchange for the assignment.
With reference to the provisions of GST law, determine the place of supply of
the service. Also, explain whether the said supply will amount to export of
service?
6. ABC Pvt. Ltd., New Delhi, provides support services to foreign customers in
relation to procuring goods from India. The company identifies the prospective

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 PLACE OF SUPPLY 1.127 3.127

vendor, reviews product quality and pricing and then shares the vendor details
with the foreign customer.

The foreign customer then directly places purchase order on the Indian vendor
for purchase of the specified goods. ABC Pvt. Ltd. charges its foreign customer
cost plus 10% mark up for services provided by it.

The company has charged US $ 1,00,000 (exclusive of GST) to its foreign

customer for the services provided by it. With reference to the provisions of
GST law, examine whether the said supply will amount to export of service?
7. Mr. Murthy, an unregistered person and a resident of Pune, Maharashtra hires
the services of Sun Ltd. an event management company registered in Delhi, for
organising of the new product launch in Bengaluru, Karnataka.
(i) Determine the place of supply of services provided by Sun Ltd.
(ii) What would be your answer if the product launch takes place in Bangkok?
(iii) What would be your answer if Mr. Murthy is a registered person and
product launch takes place in-
(a) Bengaluru
(b) Bangkok?
8. Mr. Mahendra Goyal, an interior decorator provides professional services to Mr.
Harish Jain in relation to two of his immovable properties.
Determine the place of supply in the transactions below as per provisions of
GST law in the following independent situations:

Case Location of Mr. Location of Mr. Harish Property situated at

Mahendra Goyal Jain

I Delhi Maharashtra New York (USA)

II Delhi New York Paris (France)

Explain the relevant provisions of law to support your conclusions.

9. Asha Enterprises, supplier of sewing machines, is located in Kota (Rajasthan)
and registered for purpose of GST in the said State. It receives an order from

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 3.1281.128 GOODS AND SERVICES TAX

Deep Traders, located in Jalandhar (Punjab) and registered for the purpose of
GST in the said State. The order is for the supply of 100 sewing machines with
an instruction to ship the sewing machines to Jyoti Sons, located in Patiala
(Punjab) and registered in the said State for purpose of GST. Jyoti Sons is a
customer of Deep Traders. Sewing machines are being shipped in a lorry by
Asha Enterprises.
Briefly explain the following:
(a) the place of supply;

(b) the nature of supply:- whether inter-State or intra-State and

(c) whether CGST/SGST or IGST would be applicable in this case.
10. Determine the place of supply for the following independent cases:
(i) Grand Gala Events, an event management company at Kolkata, organises
two award functions for Narayan Jewellers of Chennai (Registered in
Chennai, Tamil Nadu) at New Delhi and at Singapore.
(ii) Perfect Planners (Bengaluru, Karnataka) is hired by Dr. Kelvin
(unregistered person based in Kochi, Kerala) to plan and organise his
son's wedding at Mumbai, Maharashtra.
Will your answer be different if the wedding is to take place in Malaysia?

ANSWERS

1. In the given case, the service provider is outside India, and the service
recipient is in India. Thus, the place of supply will be determined on the basis
of the provisions of section 13. Since the given service does not get covered
under any of the specific provisions of section 13, the place of supply thereof
will be governed by the default provision, i.e. place of supply of services will
be the location of the recipient of service, which in this case is Rajasthan
(India).
Further, the given case is import of service in terms of section 2(11) as the
supplier of service is located outside India, the recipient of service is located
in India and the place of supply of service is in India. Since the services are
imported for a consideration from an unrelated person, the same

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 PLACE OF SUPPLY 1.129 3.129

tantamounts to supply in terms of section 7(1)(b) of CGST Act and are liable
to GST.
As per reverse charge Notification No. 10/2017 IT(R) dated 28.06.2017, if a
service is supplied by a person located in a non-taxable territory to a person
located in the taxable territory, other than non-taxable online recipient, the
tax is payable by the recipient of service under reverse charge.
Therefore, XY Ltd. will pay GST under reverse charge on £ 8000 paid by it to
the attorney in UK.
2. Section 12(7)(a)(i) stipulates that when service by way of organization of an
event is provided to a registered person, place of supply is the location of
such person.
Since, in the given case, the product launch party at Bangalore is organized
for Damani Industries (registered in Mumbai), place of supply is the location
of Damani Industries, i.e. Mumbai, Maharashtra.
In case the product launch party is organised at Dubai, the answer will remain
the same, i.e. the place of supply is the location of recipient (Damani
Industries)– Mumbai, Maharashtra.
3. The supply between Priyank Sales (Pune) and Bisht Enterprises (Bareilly) is a
bill to ship to supply where the goods are delivered by the supplier [Priyank
Sales] to a recipient [Sahil Pvt. Ltd. (Shimoga)] or any other person on the
direction of a third person [Bisht Enterprises]. The place of supply in case of
domestic bill to ship to supply of goods is determined in terms of section
10(1)(b).
As per section 10(1)(b), where the goods are delivered by the supplier to a
recipient or any other person on the direction of a third person, whether
acting as an agent or otherwise, before or during movement of goods, either
by way of transfer of documents of title to the goods or otherwise, it shall be
deemed that the said third person has received the goods and the place of
supply of such goods shall be the principal place of business of such person.
Thus, in the given case, it is deemed that the Bisht Enterprises has received
the goods and the place of supply of such goods is the principal place of
business of Bisht Enterprises. Accordingly, the place of supply between
Priyank Sales (Pune) and Bisht Enterprises (Bareilly) will be Bareilly, Uttar
Pradesh.

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 3.1301.130 GOODS AND SERVICES TAX

This situation involves another supply between Bisht Enterprises (Bareilly) and
Sahil Pvt. Ltd. (Shimoga). The place of supply in this case will be determined
in terms of section 10(1)(a).
Section 10(1)(a) stipulates that where the supply involves movement of
goods, whether by the supplier or the recipient or by any other person, the
place of supply of such goods shall be the location of the goods at the time
at which the movement of goods terminates for delivery to the recipient.
Thus, the place of supply in second case is the location of the goods at the
time when the movement of goods terminates for delivery to the recipient
(Sahil Pvt. Ltd.), i.e. Shimoga, Karnataka.
4. In the given situation, three supplies are involved:
(i) Services provided by Musicera Pvt. Ltd. to audiences by way of
admission to music concert.
(ii) Services provided by Supriya (P) Ltd. to Musicera Pvt. Ltd. by way of
organising the music concert.
(iii) Services provided by Hotel Dumdum to Supriya (P) Ltd. by way of
accommodation in the Hotel lawns for organising the music concert.
The CGST and SGST or IGST liability in respect of each of the above supplies
is determined as under:
(i) As per the provisions of section 12(6), the place of supply of services
provided by way of admission to, inter alia, a cultural event shall be the
place where the event is actually held.
Therefore, the place of supply of services supplied by Musicera Pvt. Ltd.
(Ludhiana, Punjab) to audiences by way of admission to the music
concert is the location of the Hotel Dumdum, i.e. Gurugram, Haryana.
Since the location of the supplier (Ludhiana, Punjab) and the place of
supply (Gurugram, Haryana) are in different States, IGST will be leviable.
Therefore, IGST leviable will be computed as follows:
Consideration for supply (400 tickets @ ` 5,000 per ticket)
= ` 20,00,000
IGST @ 18% on value of supply = ` 20,00,000 x 18% = ` 3,60,000.

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 PLACE OF SUPPLY 1.131 3.131

(ii) Section 12(7)(a)(i) stipulates that the place of supply of services

provided by way of organization of, inter alia, a cultural event to a
registered person is the location of such person.
Therefore, the place of supply of services supplied by Supriya (P) Ltd.
(Delhi) to Musicera Pvt. Ltd. (Ludhiana, Punjab) by way of organising the
music concert is the location of the registered person, i.e. Ludhiana
(Punjab).
Since the location of the supplier (Delhi) and the place of supply
(Ludhiana, Punjab) are in different States, IGST will be leviable.
Therefore, IGST leviable will be computed as follows:
Consideration for supply = ` 10,00,000
IGST @ 18% on value of supply = ` 10,00,000 x 18% = ` 1,80,000
(iii) As per the provisions of section 12(3)(c) of the IGST Act, 2017, the
place of supply of services, by way of accommodation in any
immovable property for organizing, inter alia, any cultural function
shall be the location at which the immovable property is located.
Therefore, the place of supply of services supplied by Hotel Dumdum
(Gurugram, Haryana) to Supriya (P) Ltd. (Delhi) by way of
accommodation in Hotel lawns for organising the music concert shall
be the location of the Hotel Dumdum, i.e. Gurugram, Haryana.
Since the location of the supplier (Gurugram, Haryana) and the place of
supply (Gurugram, Haryana) are in the same State, CGST and SGST will
be leviable. Therefore, CGST and SGST leviable will be computed as
follows:
Consideration for supply = ` 4,00,000
CGST @ 9% on value of supply = ` 4,00,000 x 9% = ` 36,000
SGST @ 9% on value of supply = ` 4,00,000 x 9% = ` 36,000
If the price for the entry ticket is fixed at ` 450, answer will change in respect
of supply of service provided by way of admission to music concert, as
mentioned in point (i) above. There will be no IGST liability if the
consideration for the ticket is ` 450 as the inter-State services by way of
right to admission to, inter alia, musical performance are exempt from IGST

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 3.1321.132 GOODS AND SERVICES TAX

vide Notification No. 9/2017 IT (R) dated 28.06.2017, if the consideration for
right to admission to the event is not more than ` 500 per person. However,
there will be no change in the answer in respect of supplies mentioned in
point (ii) and (iii) above.
5. As per section 13(2), in case where the location of the supplier of services
or the location of the recipient of services is outside India, the place of
supply of services except the services specified in sub-sections (3) to (13)
shall be the location of the recipient of services. Sub-sections (3) to (13)
provide the mechanism to determine the place of supply in certain specific
situations.
The given case does not fall under any of such specific situations and thus,
the place of supply in this case will be determined under sub-section (2) of
section 13. Thus, the place of supply of services in this case is the location
of recipient of services, i.e. USA.
As per section 2(6), export of services means the supply of any service
when,–
(a) the supplier of service is located in India;
(b) the recipient of service is located outside India;
(c) the place of supply of service is outside India;
(d) the payment for such service has been received by the supplier of
service in convertible foreign exchange or in Indian rupees wherever
permitted by the Reserve Bank of India; and
(e) the supplier of service and the recipient of service are not merely
establishments of a distinct person in accordance with Explanation 1 in
section 8.
Since all the above five conditions are fulfilled in the given case, the same will
be considered as an export of service.
6. Section 2(13) defines “intermediary” to mean 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.

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 PLACE OF SUPPLY 1.133 3.133

In this case, since ABC Pvt. Ltd. is arranging or facilitating supply of goods
between the foreign customer and the Indian vendor, the said services can
be classified as intermediary services.
If the location of the supplier of services or the location of the recipient of
service is outside India, the place of supply is determined in terms of
section 13. Since, in the given case, the recipient of supply is located outside
India, the provisions of supply of intermediary services will be determined in
terms of section 13.

As per section 13(8)(b), the place of supply in case of intermediary services is

the location of the supplier, i.e. the location of ABC Pvt. Ltd. which is New
Delhi.
As per section 2(6) of the IGST Act, 2017, export of services means the supply
of any service when,–
(a) the supplier of service is located in India;

(b) the recipient of service is located outside India;

(c) the place of supply of service is outside India;
(d) the payment for such service has been received by the supplier of
service in convertible foreign exchange or in Indian rupees wherever
permitted by the Reserve Bank of India; and
(e) the supplier of service and the recipient of service are not merely
establishments of a distinct person in accordance with Explanation 1
in section 8.
Since, in the given case, place of supply is in India, this transaction does not
tantamount to export of service.
7. (i) As per section 12(7)(a)(ii), when service by way of organization of an
event is provided to an unregistered person, the place of supply is the
location where the event is actually held and if the event is held outside
India, the place of supply is the location of recipient.
Since, in the given case, the service recipient [Mr. Murthy] is
unregistered and event is held in India, place of supply is the location

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 3.1341.134 GOODS AND SERVICES TAX

where the event is actually held, i.e. Bengaluru, Karnataka. The location
of the supplier and the location of the recipient is irrelevant in this case.

(ii) However, if product launch takes place outside India [Bangkok], the
place of supply will be the location of recipient, i.e. Pune, Maharashtra.
(iii) When service by way of organization of an event is provided to a
registered person, place of supply is the location of such person in
terms of section 12(7)(a)(i).
Therefore, if Mr. Murthy is a registered person, then in both the cases,
i.e. either when product launch takes place in Bengaluru or Bangkok,
the place of supply will be the location of recipient, i.e. Pune,
Maharashtra.
8. Case I
As per section 12(3), where both the service provider and the service
recipient are located in India, the place of supply of services directly in
relation to an immovable property, including services provided by interior
decorators is the location of the immovable property. However, if the
immovable property is located outside India, the place of supply is the
location of the recipient.
Since in the given case, both the service provider (Mr. Mahendra Goyal) and
the service recipient (Mr. Harish Jain) are located in India and the immovable
property is located outside India (New York), the place of supply will be the
location of recipient, i.e. Maharashtra.
Case II
As per section 13(4), where either the service provider or the service
recipient is located outside India, the place of supply of services directly in
relation to an immovable property including services of interior decorators
is the location of the immovable property.
Since in the given case, service provider (Mr. Mahendra Goyal) is located in
India and service recipient (Mr. Harish Jain) is located outside India (New
York), the place of supply will be the location of immovable property, i.e.
Paris (France).
9. The supply between Asha Enterprises (Kota, Rajasthan) and Deep Traders
(Jalandhar, Punjab) is a bill to ship to supply where the goods are delivered

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 PLACE OF SUPPLY 1.135 3.135

by the supplier [Asha Enterprises] to a recipient [Jyoti Sons (Patiala, Punjab)]

on the direction of a third person [Deep Traders].
In case of such supply, it is deemed that the said third person has received
the goods and the place of supply of such goods is the principal place of
business of such person [Section 10(1)(b)]. Thus, the place of supply
between Asha Enterprises (Rajasthan) and Deep Traders (Punjab) will be
Jalandhar, Punjab.
Since the location of supplier and the place of supply are in two different
States, the supply is an inter-State supply in terms of section 7, liable to
IGST.
This situation involves another supply between Deep Traders (Jalandhar,
Punjab) and Jyoti Sons (Patiala, Punjab). In this case, since the supply
involves movement of goods, place of supply will be the location of the
goods at the time at which the movement of goods terminates for delivery
to the recipient, i.e. Patiala, Punjab [Section 10(1)(a)].
Since the location of supplier and the place of supply are in the same State,
the supply is an intra-State supply in terms of section 8, liable to CGST and
SGST.
10. (i) When service by way of organization of an event is provided to a
registered person, place of supply is the location of such person in
terms of section 12(7)(a)(i).
Since, in the given case, the award functions at New Delhi and
Singapore are organized for Narayan Jewellers (registered in Chennai),
place of supply in both the cases is the location of Narayan Jewellers,
i.e. Chennai, Tamil Nadu.
(ii) As per section 12(7)(a)(ii), when service by way of organization of an
event is provided to an unregistered person, the place of supply is the
location where the event is actually held and if the event is held
outside India, the place of supply is the location of recipient.
Since, in the given case, the service recipient [Dr. Kelvin] is
unregistered and event is held in India, place of supply is the location
where the event is actually held, i.e. Mumbai, Maharashtra.

However, if the wedding is to take place outside India [Malaysia], the

place of supply is the location of recipient, i.e. Kochi, Kerala.

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India
RIT
CHAPTER 4

EXEMPTIONS FROM
GST
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, 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 –

 describe the power of the Government to grant exemption
from CGST/IGST.
 provide an overview of the goods exempt from GST.
 identify and analyse various services exempt from GST.

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 1.2 4.2 GOODS AND SERVICES TAX

1. INTRODUCTION
When a supply of goods and/or
services falls within the purview of
charging section, such supply is
chargeable to GST. However, for
determining the liability to pay the
tax, one needs to further check
whether such supply of goods
and/or services are exempt from tax.
Exempt supply has been defined as
supply of any goods or services or
both which attracts nil rate of tax
or which may be wholly exempt
from tax and includes non-taxable
supply [Section 2(47)]. Non-
taxable supply means a supply of goods or services or both which is not leviable
to tax under CGST Act or under the IGST Act [Section 2(78)]. Thus, under GST, a
supply not leviable to tax is also included within the purview of ‘exempt supply’.
Supplies not leviable to tax are alcoholic liquor for human consumption, specified
petroleum products namely Petroleum Crude, High Speed Diesel, Motor spirit
(commonly known Petrol), Natural Gas and Aviation Turbine Fuel.
Power to grant exemption from GST has been granted vide section 11 of the CGST
Act and vide section 6 of the IGST Act. State GST laws also contain identical
provisions granting power to exempt SGST.
Under GST, essential goods/services, i.e.
public consumption products/services, have
been exempted. Items such as unpacked food
grains, milk, eggs, curd, lassi and fresh
vegetables are among the items exempted from
GST. Further, essential services like health care
services, education services, etc. have also been
exempted.

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 EXEMPTIONS FROM GST.3 4.3

It is important to note that exemption under GST may be provided in any of the
following manner:

(a) Exemption to specified activities or transactions

Sometimes, exemption is provided in respect of specified activities or
transactions. Consequently, the status of the supplier or recipient of the
activities/transactions becomes immaterial.
(1) Services by way of transfer of a going concern, as a whole
or an independent part thereof.
(2) Services by way of loading, unloading, packing, storage or
warehousing of rice.

(b) Exemption to specified suppliers

At times, exemption is given to specified suppliers only. Here, the status
of recipient of the activities or transactions becomes immaterial.
(3) Services provided by the Central Government, State
Government, Union territory or local authority where the
consideration for such services does not exceed ` 5,000.
(4) Services by an entity registered under section 12AA or 12AB of the
Income-tax Act, 1961 by way of charitable activities.

(c) Exemption to specified recipients

In some cases, exemption is given to specified recipient only. Here, the
status of supplier of the activities or transactions becomes immaterial.
(5) Services provided to the Central Government, State
Government, Union territory under any insurance scheme for
which total premium is paid by the Central Government, State
Government, Union territory.
(6) Services provided to the Central Government, State Government,
Union territory administration under any training programme, for which
75% or more of the total expenditure is borne by the Central
Government, State Government, Union territory administration.

(d) Exemption to specified suppliers and specified recipients

Sometimes, exemption is given only when activities or transactions are
carried out by specified suppliers for specified recipients only.

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 1.4 4.4 GOODS AND SERVICES TAX

(7) Services by the Employees’ State Insurance Corporation to

persons governed under the Employees’ State Insurance
Act, 1948.
(8) Services by National Pension System (NPS) Trust to its members
against consideration in the form of administrative fee.

In this chapter, we shall discuss the power to grant exemption from tax under CGST
Act/IGST Act, list of services exempt from GST in detail and an overview of the
goods exempt from tax.

2. POWER TO GRANT EXEMPTION FROM TAX

[SECTION 11 OF THE CGST ACT/SECTION 6 OF
THE IGST ACT]

STATUTORY PROVISIONS

Section 11 Power to grant exemption from tax

Sub-section Particulars

(1) Where the Government is satisfied that it is necessary in the

public interest so to do, it may, on the recommendations of the
Council, by notification, exempt generally, either absolutely or
subject to such conditions as may be specified therein, goods or
services or both of any specified description from the whole or
any part of the tax leviable thereon with effect from such date
as may be specified in such notification

(2) Where the Government is satisfied that it is necessary in the

public interest so to do, it may, on the recommendations of
the Council, by special order in each case, under
circumstances of an exceptional nature to be stated in such
order, exempt from payment of tax any goods or services or
both on which tax is leviable.

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 EXEMPTIONS FROM GST.5 4.5

(3) The Government may, if it considers necessary or expedient so

to do for the purpose of clarifying the scope or applicability of
any notification issued under sub-section (1) or order issued
under sub-section (2), insert an explanation in such notification
or order, as the case may be, by notification at any time within
one year of issue of the notification under sub-section (1) or
order under sub-section (2), and every such explanation shall
have effect as if it had always been the part of the first such
notification or order, as the case may be.

Explanation––For the purposes of this section, where an exemption in respect

of any goods or services or both from the whole or part of the tax leviable
thereon has been granted absolutely, the registered person supplying such
goods or services or both shall not collect the tax, in excess of the effective rate,
on such supply of goods or services or both.

ANALYSIS
(i) Exemption from payment of tax: GST law empowers the Central
Government or State Government as the case may be
to grant exemption from tax. The exemption is
Exemption can
granted on recommendation of the GST Council. be from whole of
Exemption can be from whole of the tax or part of tax or part of tax
the tax. It should be granted in public interest.
Exemption can be granted to goods or services or
Exemption can both of any specified description, by way of
be granted by a
issuance of notification either, absolutely [i.e.
notification or by
unconditional exemption; exemption is not subject to
a special order
any condition(s)] or conditionally [i.e. exemption is
subject to specified condition(s)]. Exemption may be granted by a special
order in case of the circumstances of an exceptional nature.

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 1.6 4.6 GOODS AND SERVICES TAX

The absolute/ unconditional exemption is

mandatory in nature. Where the supply of the goods Unconditional
exemption is
or services or both are unconditionally exempted
mandatory
from whole of the tax, the
Conditional registered person doesn’t have option to collect and pay
exemption is tax on such supply of goods or services or both. Where
optional the supply of the goods or services or both are
unconditionally exempted from part of the tax, the
registered person doesn’t have option to collect and pay the tax, in excess
of the effective rate, on such supply of goods or services or both.
However, where the exemption is conditional, it is at the option of the
registered person whether to avail the same or not.
The above provisions have been explained by way of a diagram as follows:

The Government may

on
generally exempt supply
recommendation BY
of goods and/ or
of the GST NOTIFICATION
services of any specified
council
description

with effect from

either absolutely or subject to
such date as may be wholly/
such conditions as may be
specified in such partly
specified in the notification
notification.

The Government may

BY
exempt any goods and/or on recommendation
SPECIAL
services on which tax is of the GST Council
ORDER
leviable from payment of tax

under circumstances of an
in the public
exceptional nature to be
interest
stated in such order

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 EXEMPTIONS FROM GST.7 4.7

(ii) Explanation inserted within 1 year, for the purpose of clarifying the
scope or applicability of any notification/order, to have retrospective
effect: Wherever the Government feels that there is a need to clarify the
scope or applicability of any notification/order issued under this section, it
can issue an explanation within 1 year of issue of said notification/ order.
Such explanation shall have effect as if it was there when first such
notification/ order was issued, i.e. explanation so inserted would be
effective retrospectively.
It is hereby clarified that the explanation so inserted for a particular entry in
the notification, is effective from the inception of the entry in notification and
not from the date from which the notification (that inserted said explanation)
becomes effective.
(9) Principal Notification No. 11/2017 CT (R) dated 28.06.2017 1 came
into force with effect from 01.07.2017. Thereafter, a new entry -
Entry no. 3(vi) was inserted w.e.f. 21.09.2017. Subsequently, an
explanation was also inserted with respect to entry no. 3(vi) by issue of a
notification on 26.07.2018 [i.e. within 1 year of the insertion of entry 3(vi)].

Although the effective date mentioned in the notification which inserted said
explanation was 27.07.2018, said explanation will be effective from the
inception of entry 3(vi) in notification i.e. 21.09.2017 and not 27.07.2018.
[Circular No. 120/39/2019 GST dated 11.10.2019]

Similar provisions granting power to exempt IGST have been

provided under section 6 of the IGST Act.

1
This notification notifies the rate of tax on services.

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 1.8 4.8 GOODS AND SERVICES TAX

3. GOODS EXEMPT FROM TAX

A list of items has been notified under section
11(1) of the CGST Act, 2017/ section 6(1) of
the IGST Act, 2017. These items have been
exempted from whole of the tax.
Under GST, everyday items used by the
common man have been included in the list of
exempted items.
Items such as unbranded atta/maida/besan, unpacked food grains, milk, eggs, curd,
lassi and fresh vegetables are among the items exempted from GST.
Some of the examples of the goods exempted from tax have been provided herein 2:

Live fish (0301) Fresh Milk (0401) Potatoes (0701)

Grapes (0806) Indian National Flag (63)

Plastic Bangles (3926)

2
Students may go through the complete list of goods exempt from GST on CBIC website –
[Link], for knowledge purposes.

© The Institute of Chartered Accountants of India

 EXEMPTIONS FROM GST.9 4.9

4. LIST OF SERVICES EXEMPT FROM TAX

Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 3 (hereafter

referred to as “the Notification”) unless otherwise specified, has exempted the
various services wholly from CGST. Each of the entries of the exemption notification
have been discussed below:
1. Services related to charitable and religious activities

Entry Description of services

No. 4

1 Services by an entity registered under section 12AA/12AB of the

Income-tax Act, 1961 by way of charitable activities.

13 Services by a person by way of-

(a) conduct of any religious ceremony;
(b) renting of precincts of a religious place meant for general public,
owned or managed by an entity registered as a charitable or
religious trust under section 12AA/12AB of the Income-tax Act,
1961 or a trust or an institution registered under section 10(23C)(v)
of the Income-tax Act or a body or an authority covered under
section 10(23BBA) of the said Income-tax Act.
However, nothing contained in entry (b) of this exemption shall apply
to-
(i) renting of rooms where charges are ` 1,000 or more per day;
(ii) renting of premises, community halls, kalyanmandapam or open
area, and the like where charges are ` 10,000 or more per day;

3
Exemption from IGST has been granted to various services vide Notification No. 9/2017 IT
(R) dated 28.06.2017. All the services exempted from CGST & SGST/UTGST have also been
exempted from IGST.
Apart from these, there are few additional services which have been exempted only under
IGST law. Such services have been discussed subsequently in this chapter.
4
Entry Nos. mentioned herein correspond to entries in Notification No. 12/2017 CT (R) dated
28.06.2017. However, these entry numbers have been given only for reference purposes and
are not relevant for examination purpose.

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 1.10 4.10 GOODS AND SERVICES TAX

(iii) renting of shops or other spaces for business or commerce where

charges are ` 10,000 or more per month.

60 Services by a specified organisation in respect of a religious pilgrimage

facilitated by the Government of India, under bilateral arrangement.

80 Services by way of training or coaching in-

(a) recreational activities relating to arts or culture, by an individual,
or
(b) sports by charitable entities registered under section 12AA or
12AB of the Income-tax Act.

ANALYSIS
A. SERVICES PROVIDED BY CHARITABLE/RELIGIOUS TRUST

Entry 1 of the Notification exempts services supplied by an entity registered

under section 12AA/12AB of the Income-tax Act, 1961 by way of charitable
activities. Thus, in order to claim exemption under Entry 1 of the Notification,
following two conditions must be satisfied:-
(i) The entity should be registered under section 12AA/12AB of the Income
tax Act, 1961, and
(ii) The entity must carry out one or more of the specified charitable activities.
Before proceeding further, let us first understand the meaning of term ‘charitable
activities’. The term ‘charitable activities’ mean activities relating to-
(i) PUBLIC HEALTH by way of-
(A) care or counseling of

(I) terminally ill persons or persons with severe

physical or mental disability;
(II) persons afflicted with HIV or AIDS;
(III) persons addicted to a dependence-forming
substance such as narcotics drugs or alcohol; or

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 EXEMPTIONS FROM GST.11 4.11

(B) public awareness of preventive health, family planning or prevention of

HIV infection;
(ii) ADVANCEMENT OF RELIGION, SPIRITUALITY OR YOGA;
(iii) ADVANCEMENT OF EDUCATIONAL PROGRAMMES / SKILL
DEVELOPMENT relating to,-
(A) abandoned, orphaned or homeless children;
(B) physically or mentally abused and traumatized persons;
(C) prisoners; or
(D) persons over the age of 65 years residing in a rural area;
(iv) PRESERVATION OF ENVIRONMENT including watershed, forests & wildlife.
Thus, only those services provided by a charitable and religious trusts [registered
under section 12AA/12AB of the Income-tax Act] which fall within the above
definition of charitable activities, are eligible for exemption from GST. There could
be many other services provided by such charitable and religious trusts which are
not covered by the definition of charitable activities and hence, such services would
attract GST.
For instance, grant of advertising rights to a person for publicity, on the premises
of the charitable/religious trust or on publications of the trust, or granting
admission to events, functions, celebrations, shows against admission tickets or fee
etc. would attract GST.
In the following paras, we have examined some of the services supplied by the
entities registered under section 12AA/12AB of the Income-tax Act:
Management of educational institutions by charitable trusts
 Activities of schools, colleges or any other educational institutions run by
charitable trusts by way of education or skill development of abandoned,
orphans, homeless children, physically or mentally abused persons,
prisoners or persons over age of 65 years or above residing in a rural area,
will be considered as charitable activities and income from such supplies will
be wholly exempt from GST.
 The term rural area means the area comprised in a village as defined in land
revenue records, excluding the area under any municipal committee,
municipal corporation, town area committee, cantonment board or notified

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 1.12 4.12 GOODS AND SERVICES TAX

area committee; or any area that may be notified as an urban area by the
Central Government or a State Government.
(10) Shiksha Academy, an educational institute run by Sarvsewa
Trust, a charitable trust registered under section 12AB of the
Income-tax Act, 1961, has organized a Skill Development
Programme for the old age people over the age of 65 years residing in
Bangalore city (an urban area).
Services provided by Shiksha Academy do not fall within the purview of
‘charitable activities’. The activities relating to advancement of skill
development relating to persons over the age of 65 years, are covered under
the definition of ‘charitable activities’ only when such persons are residing in
rural area.
 Activities of a school, college or an institution run by a trust which do not
come within the ambit of charitable activities will not be exempt under
Entry 1. However, such activities may be exempt under Entry 66 [discussed
later in this chapter] provided the school, college or institution qualifies as an
'educational institution'.
Hostel accommodation provided by trusts
 Hostel accommodation services provided by trusts to students do not fall
within the ambit of charitable activities as defined above.
Religious yatras or pilgrimage
 Religious yatras/pilgrimage organised by any charitable or religious trust are
not exempt.
 Only such services of religious pilgrimage as are provided by specified
organization in respect of a religious pilgrimage facilitated by the
Government of India (GoI), under bilateral arrangement, are exempt from
GST. [See Entry 60 in above table]. The term specified
organization as referred herein means-
• Kumaon Mandal Vikas Nigam Limited (KMVN), a
Government of Uttarakhand Undertaking; or

• ‘Haj Committee of India’ or ‘State Haj

Committee including Joint State Committee’.

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 EXEMPTIONS FROM GST.13 4.13

 In short, as per Entry 60, the services provided by the Haj Committee and
KMVN in relation to pilgrimage to Mecca and Kailash- Mansarovar
respectively are not liable to GST.
(11) KMVN supplies numerous services, namely, medical facilities,
catering services, security, accommodation services, etc. to the pilgrims
undertaking Kailash-Mansarovar pilgrimage. Such services provided by
KMVN in respect of the religious pilgrimage to Kailash-Mansarovar are covered
under entry 60 and thus, are exempt.
Arranging yoga and meditation camp by charitable trusts
 As discussed above, services provided by entity registered under section
12AA/12AB of the Income-tax Act, 1961 by way of advancement of religion,
spirituality or yoga are exempt as such activities are covered in definition of
charitable activities.
 Fee or consideration charged in any other form from the
participants for participating in a religious, yoga or meditation
programme or camp meant for advancement of religion,
spirituality or yoga shall be exempt.
 Residential programmes or camps where the fee charged includes cost of
lodging and boarding shall also be exempt as long as the primary and
predominant activity, objective and purpose of such residential programmes
or camps is advancement of religion, spirituality or yoga.
 However, if charitable or religious trusts merely or primarily provide
accommodation or serve food and drinks against consideration in any form
including donation, such activities will be taxable. Similarly, activities such as
holding of fitness camps or classes such as those in aerobics, dance, music
etc. will be taxable 5.
(12) Bhavyajyoti Foundation, a charitable trust registered under section
12AB of the Income-tax Act, 1961, has organized a ‘Meditation Camp’ for
the old age people. GST would be exempt on the same as services
provided by entity registered under section 12AB of the Income-tax Act, 1961 by
way of advancement of religion, spirituality or yoga are exempt.

5
Circular No. 66/40/2018 GST dated 26.09.2018

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 1.14 4.14 GOODS AND SERVICES TAX

Hospitals managed by charitable trusts

Exemption available to health care services under Entry 74 [discussed later in this
chapter] is also applicable to the health care services provided by a clinical
establishment, an authorised medical practitioner or paramedics of a religious
or charitable trust also.
Training or coaching in arts, culture or sports
As per Entry 80, services by way of training or coaching in-
(a) recreational activities relating to arts or culture, by an individual, or
(b) sports by charitable entities registered under section 12AA or 12AB of the
Income-tax Act
are exempt from GST.
It is important to note that the exemption with regard to services provided by way
of training or coaching in recreational activities relating to arts or culture is
available when the same is provided by an individual. Similarly, services of training
or coaching in sports are exempt only when such services are provided by a
charitable entity registered under section 12AA or 12AB of Income-tax Act.
Let us now analyse the term
‘recreational activities’. The
term recreational activities is
very wide. However, under this
entry, the scope of training or
coaching in recreational activities is restricted to the area of arts and culture.
Hence, the training or coaching in recreational activities relating to the areas
other than arts or culture is outside the purview of this entry.
Further, training or coaching in all forms of arts, culture or sports is covered
under this entry, namely, dance, music, painting, sculpture making, literary
activities, theatre, etc. of any school, tradition or language or any of the sports.
(13) Manavtaa Sansthaan, a charitable trust registered under section
12AB of the Income-tax Act, 1961, has organized a ‘Basketball Training
Camp’ for teenagers. GST would be exempt on the same as services
provided by entity registered under section 12AB of the Income-tax Act, 1961 by
way of training or coaching in sports are exempt.

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 EXEMPTIONS FROM GST.15 4.15

GST on services provided TO charitable trusts

Services provided to charitable or religious trusts are not outside the ambit of GST.
Unless specifically exempted, all goods and services supplied to charitable or
religious trusts are leviable to GST.
B. CONDUCT OF ANY RELIGIOUS CEREMONY
Going through Entry 13(a), it can be inferred that the amount charged, by
whatever name called, for the conduct of any religious ceremony is exempt from
GST. Religious ceremonies are life-cycle rituals including special religious poojas
conducted in terms of religious texts by a person so authorized by such religious
texts. Occasions like birth, marriage, and death involve elaborate religious
ceremonies.
(14) Raamanand Joshi, a priest, charges ` 12,000 for conducting a
religious ceremony on the birthday of Ghanshyam’s son. The amount
charged for the conduct of any religious ceremony is exempt from GST.
C. RENTING OF PRECINCTS OF RELIGIOUS PLACE MEANT FOR GENERAL
PUBLIC
 Entry 13(b) exempts renting of precincts of a religious place meant
for general public owned by an entity registered under any of the
specified sections of the Income Tax Act provided the consideration
charged for such renting does not exceed the prescribed ceiling limits as
given in said entry. Thus, this exemption is determined on the basis of
amount of consideration charged for such renting. Let us understand the
meaning of the terms ‘religious place’, ‘general public’ and ‘precincts’ referred
herein.
 Religious place means a place which is primarily meant for conduct of
prayers or worship pertaining to a religion, meditation, or spirituality.
 General public means the body of people at large sufficiently defined by
some common quality of public or impersonal nature.
 The word 'precincts' is not to be interpreted in a restricted manner and all
immovable property of the religious place located within the outer
boundary walls of the complex (of buildings and facilities) in which the
religious place is located, is to be considered as being located in the precincts

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 1.16 4.16 GOODS AND SERVICES TAX

of the religious place. The immovable property located in the immediate

vicinity and surrounding of the religious place and owned by the religious
place or under the same management as the religious place, may be
considered as being located in the precincts of the religious place and
extended the benefit of above exemption.
 Activities other than conduct of religious ceremony and renting of precincts
of religious place will be taxable irrespective of the manner or the name in
which the consideration is received.
 For example, if donation is received with specific instructions/ mutual
understanding between the donor and the receiver that religious place will
host an advertisement promoting business of the donor, such donation will
be subject to GST. However, where the donation is received without such
instructions or when the name of the donor is displayed in recipient
institution’s premises, in such a manner, which can be said to be an expression
of gratitude and public recognition of donor’s act of philanthropy and is not
aimed at giving publicity to the donor in such manner that it would be an
advertising or promotion of his business, then it can be said that there is no
supply of service for a consideration (in the form of donation). In other words,
there is no obligation (quid pro quo) on part of recipient of the donation or
gift to do anything (supply a service). Therefore, there is no GST liability on
such consideration 6.
(15) Durgadevi Trust, a religious trust registered under section 12AB of
the Income-tax Act, owns and manages a temple in their locality. It rents
the commercial shops located in the precincts of the temple for a rent of
` 10,000 per month per shop. The consideration so received is liable to GST as such
services are exempt only when the consideration is less than ` 10,000 per month.

(16) Sarvodaya Trust, a religious trust, registered under section 10(23BBA)

of the Income-tax Act, owns and manages a gurudwara. It rents the
community hall located in the precincts of the gurudwara for a rent of
` 9,000 per day for a marriage function. The consideration so received is exempt
from GST as the consideration is less than ` 10,000 per day.

6
Discussion under this heading is primarily based on CBIC GST Flyer – Chapter 39 - GST on
Charitable and Religious Trusts and other clarifications issued by CBIC.

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 EXEMPTIONS FROM GST.17 4.17

2. Agriculture related services

Entry Description of services

No.

24 Services by way of loading, unloading, packing, storage or warehousing

of rice.

24A Services by way of warehousing of minor forest produce.

24B Services by way of storage/ warehousing of cereals, pulses, fruits and

vegetables.

54 Services relating to cultivation of plants and rearing of all life forms of

animals, except the rearing of horses, for food, fibre, fuel, raw material
or other similar products or agricultural produce by way of—
(a) agricultural operations directly related to
production of any agricultural produce including
cultivation, harvesting, threshing, plant
protection or testing;
(b) supply of farm labour;
(c) processes carried out at an agricultural farm including tending,
pruning, cutting, harvesting, drying, cleaning, trimming, sun drying,
fumigating, curing, sorting, grading, cooling or bulk packaging and
such like operations which do not alter the essential characteristics
of agricultural produce but make it only marketable for the primary
market;
(d) renting or leasing of agro machinery or vacant land with or
without a structure incidental to its use;
(e) loading, unloading, packing, storage or warehousing of
agricultural produce;
(f) agricultural extension services;
(g) services by any Agricultural Produce Marketing Committee or
Board or services provided by a commission agent for sale or
purchase of agricultural produce.

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 1.18 4.18 GOODS AND SERVICES TAX

55 Carrying out an intermediate production process as job work in relation

to cultivation of plants and rearing of all life forms of animals, except
the rearing of horses, for food, fibre, fuel, raw material or other similar
products or agricultural produce.

55A Services by way of artificial insemination of livestock (other than horses).

ANALYSIS

The words ‘Services relating to cultivation of plants and rearing of all life forms
of animals, except the rearing of horses, for food,
fibre, fuel, raw material or other similar products’ used
in Entry 54 include activities like breeding of fish
(pisciculture), rearing of silk worms (sericulture),
cultivation of ornamental flowers (floriculture) and
horticulture, forestry, etc.
Further, the term ‘agricultural produce’ means any produce
out of cultivation of plants and rearing of
all life forms of animals, except the rearing
of horses, for food, fibre, fuel, raw material
or other similar products, on which either
no further processing is done or such processing is done as is usually done by a
cultivator or producer which does not alter its essential
characteristics, but makes it marketable for primary
market. It is important to note that agricultural produce is
either subject to no further processing at all or if any
processing is undertaken on the agricultural produce it
should not alter its essential characteristics but may make it marketable for primary
market. Few instances of such processes are the processes carried out at an
agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning,
trimming, etc.

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 EXEMPTIONS FROM GST.19 4.19

Let us examine what is exempt under Entry 54.

Entry 54 exempts the agricultural operations directly related to production of any
agricultural produce such as cultivation, harvesting, threshing, plant protection or
testing. Further, processes carried out at an agricultural farm including tending,
pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating,
curing, sorting, grading, cooling or bulk packaging and such like operations which
do not alter the essential characteristics of agricultural produce but make it
only marketable for the primary market are also exempt. In view of the same,
following processes are outside the purview of this entry and thus, are liable to
GST:-
(a) Process which alters the essential characteristics of the agricultural
produce: For instance, potato chips or tomato ketchup, etc. are manufactured
through processes which alter the essential characteristic of farm produce
(potatoes and tomatoes in this case).
(b) Process which makes agricultural produce marketable in the retail
market: The processes of grinding, sterilizing, extraction packaging in retail
packs of agricultural products, which make the agricultural products
marketable in retail market, would NOT be covered in this entry. Only such
processes are covered in this entry which makes agricultural produce
marketable in the primary market and not retail market.
Apart from this, supply of farm labour is also exempt from GST.
Renting or leasing of agro machinery or vacant land
Item (d) of the entry exempts renting or leasing of agro
machinery or vacant land with or without a structure
incidental to its use.
(17) Moolchand has leased out to a farmer – Tulsidas - a vacant land for
agriculture. The land has a greenhouse and a storage shed which are
incidental to its use for agriculture. Such service of leasing of vacant land
with a greenhouse and a storage shed which is incidental to its use for agriculture
is exempt from GST.
Agricultural extension services
Item (f) of the entry exempts Agricultural Extension Services (AES). Said services
have been defined under the notification to mean the application of scientific
research and knowledge to agricultural practices through farmer education or
training.

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 1.20 4.20 GOODS AND SERVICES TAX

The main objective of AES is to transmit latest technical know-how to farmers. It also
focuses on enhancing farmers' knowledge about crop techniques and help them to
increase productivity. This is done through training courses, kisan call centres, farm
visits, on farm trials, kisan melas, kisan clubs, advisory bulletins and the like.
Agricultural Produce Marketing Committee services
Services by any Agricultural Produce Marketing Committee or Board or services
provided by a commission agent for sale or
purchase of agricultural produce are not
liable to GST. Agricultural Produce
Marketing Committee or Board means any
committee or board set up under a State
Law for the time being in force for purpose
of regulating the marketing of agricultural produce.
Such marketing committees or boards have been set up in most of the States and
provide a variety of support services for facilitating the marketing of agricultural
produce by provision of facilities and amenities like, sheds, water, light, electricity,
grading facilities etc. They also take measures for prevention of sale or purchase of
agricultural produce below the minimum support price. APMCs collect market fees,
license fees, rents etc.
Services provided by such Agricultural Produce Marketing Committee or Board are
covered in item (g) of entry 54. However, any service provided by such bodies
which is not directly related to cultivation of plants and rearing of all life forms of
animals, except the rearing of horses, for food, fibre, fuel, raw material or other
similar products or agricultural produce, will be liable to tax e.g. renting of shops
or other property for commercial purposes.
Warehousing of agriculture produce
Item (e) of Entry 54 exempts loading, unloading, packing, storage or warehousing
of agricultural produce. In this regard, following may be noted:
 Processed Tea and coffee
Tea used for making the beverage, such as black tea, green tea, white tea is
a processed product made in tea
factories after carrying out several
processes, such as drying, rolling,
shaping, refining, oxidation, packing etc.
on green leaf and is the processed

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 EXEMPTIONS FROM GST.21 4.21

output of the same. Thus, green tea leaves and not tea is the “agricultural
produce” eligible for exemption under entry 54 where such exemption is
available for loading, unloading, packing, storage or warehousing of
agricultural produce. Same is the case with coffee obtained after processing
of coffee beans.
 Jaggery
Similarly, processing of sugarcane into
jaggery changes its essential
characteristics. Thus, jaggery is also not
an agricultural produce.
 Pulses
Pulses commonly known as dal are obtained after
dehusking or splitting or both. The process of dehusking
or splitting is usually not carried out by farmers or at farm
level but by the pulse millers. Therefore pulses (dehusked
or split) are also not agricultural produce. However, whole pulse grains such as
whole gram, rajma etc. are covered in the definition of agricultural produce.
In view of the above, it is inferred that processed products such as tea (i.e. black
tea, white tea etc.), processed coffee beans or powder, pulses (dehusked or split),
jaggery, processed spices, processed dry fruits, processed cashew nuts etc. fall
outside the definition of agricultural produce and therefore do not fall within item
(e) of entry 54 7.

Custom milling of paddy into rice

Carrying out an intermediate production process as job
work in relation to cultivation of plants and rearing of all
life forms of animals, except the rearing of horses, for
food, fibre, fuel, raw material or other similar products or
agricultural produce is exempt under GST.

7
Circular No. 16/16/2017 GST dated 15.11.2017

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 1.22 4.22 GOODS AND SERVICES TAX

Milling of paddy is not an intermediate production

process in relation to cultivation of plants. It is a process
carried out after the process of cultivation is over and
paddy has been harvested.
Further, processing of paddy into rice is not usually
carried out by cultivators, but by rice millers. Milling of
paddy into rice also changes its essential characteristics.
Therefore, milling of paddy into rice cannot be considered as an intermediate
production process in relation to cultivation of plants for food, fibre or other similar
products or agricultural produce.
In view of the above, it is clarified that milling of paddy into rice is not eligible for
exemption under Entry 55 8.

3. Educational services

Entry No. Description of services

66 Services provided -
(a) by an educational institution to its students, faculty
and staff;
(aa) by an educational institution by way of conduct of
entrance examination against consideration in the
form of entrance fee;
(b) to an educational institution, by way of,-
(i) transportation of students, faculty and staff;
(ii) catering, including any mid-day meals scheme
sponsored by the Central Government, State
Government or Union territory;
(iii) security or cleaning or house-keeping services
performed in such educational institution;
(iv) services relating to admission to, or conduct of
examination by, such institution;

8
Circular No. 19/19/2017 GST dated 20.11.2017

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 EXEMPTIONS FROM GST.23 4.23

(v) supply of online educational journals or

periodicals.
However, nothing contained in sub-items (i), (ii) and (iii) of
item (b) shall apply to an educational institution other
than an institution providing services by way of pre-school
education and education up to higher secondary school
or equivalent.
Further, nothing contained in sub-item (v) of item (b) shall
apply to an institution providing services by way of,-
(i) pre-school education and education up to higher
secondary school or equivalent; or
(ii) education as a part of an approved vocational
education course.

66A Services of affiliation provided by a Central or State

Educational Board or Council or any other similar body, by
whatever name called, to a school established, owned or
controlled by the Central Government, State Government,
Union Territory, local authority, Governmental authority or
Government entity.

ANALYSIS
Education is fundamental to the nation building process.
The term “Education” is not defined
in the CGST Act, 2017, but as per
Apex Court decision in “Loka
Shikshana Trust v. CIT”, education is process of training and
developing knowledge, skill and character of students by normal schooling.
Taxing the Education Sector has always been a sensitive issue, as education is seen
more as a social activity than a business one. The
Government has a constitutional obligation to
provide free and compulsory elementary education to
every child. Thus, to promote education, it would be
beneficial if educational services are exempted from
tax.

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 1.24 4.24 GOODS AND SERVICES TAX

However, commercialization of education is also a reality. The distinction between

core and ancillary education is blurring and education is now an organised industry
with huge revenues. The GST law tries to maintain a fine balance whereby core
educational services provided and specified services received by educational
institutions are exempt and other services are sought to be taxed.
Exemption from GST granted vide Entry 66 stated above can be discussed under
two broad categories –output services and input services of an educational
institution. The discussion in succeeding paras fundamentally revolves around
these two areas:

Services provided by an educational institution to its students, faculty and staff

and by way of conduct of entrance examination against consideration in the
form of entrance fee are exempt from GST.
 Since exemption with respect to said services is
available only when these services are provided
BY ‘educational institution’, it is important to
analyse the term EDUCATIONAL INSTITUTION
first:
Educational institution means an institution providing services by way of,-
(i) pre-school education and education up to higher secondary school
or equivalent;
(ii) education as a part of a curriculum for obtaining a qualification
recognised by any law for the time being in force;
(iii) education as a part of an approved vocational education course.
 It is to be noted that only those institutions, whose operations conform to
the specifics given in the definition of the term “educational institution”,
would be treated as one entitled to avail exemptions provided by the law.

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 EXEMPTIONS FROM GST.25 4.25

 Sub-clause (ii): The term ‘education as a part of curriculum for obtaining

a qualification recognised by any law for the time being in force’ means
the education delivered as ‘a part’ of the curriculum
that has been prescribed for
obtaining a qualification
prescribed by law. Thus, in order
to be covered under Entry 66, the
education service should be
delivered as part of curriculum. In view of same, it can be inferred that:

Education services provided Covered in Reasons

sub-clause (ii)
Conduct of degree courses These courses lead to
by colleges, universities or  grant of qualifications
institutions recognized by law
Training given by private Such training does not
coaching institutes  lead to grant of a
recognized
qualification.

Education as a part of a Only a course

prescribed curriculum for  recognized by an Indian
obtaining a qualification law is covered herein.
recognized by a law of a foreign
country

(18) ‘Dharam Institute of Technology’ (DIT), a private engineering

college in M.P., offers post graduate engineering programmes. All
the engineering courses including the distance learning post
graduate engineering programme offered by DIT are recognised by the law
[The All India Council for Technical Education (AICTE)]. Since DIT imparts
education as a part of a curriculum for obtaining a qualification recognised
by the Indian law, the same is an educational institution.
 Sub-clause (i): An institution providing pre-school education and education
up to higher secondary school or equivalent qualify as an educational
institution.

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 1.26 4.26 GOODS AND SERVICES TAX

(19) ‘Littleways Public School’ is a school loacted in Tamil Nadu.

The school has two branches – one is a pre-school and another is a
higher secondary school affiliated to CBSE. A pre-school and a
higher secondary school are educational institutions. Thus, Littleways Public
School qualifies as an educational institution.
 Sub-clause (iii): covers institutions providing services by way of education
as a part of approved vocational education course.
An approved vocational education course means, -
 a course run by an ITI/ ITC 9 affiliated to the National
Council for Vocational Education and Training
(NCVET) or State Council for Vocational Training
(SCVT)offering courses in designated trades** notified under the
Apprentices Act, 1961 or
 a Modular Employable Skill Course, approved
by the NCVET, run by a person registered with the
Directorate General of Training, Ministry of Skill
Development and Entrepreneurship. The Modular
Employable Skills is the minimum skill set which is
sufficient for gainful employment or self-employment in the world of
work. It provides employable skills to early school drop-outs, existing
workers seeking skill upgradation, workers seeking certification of their
skills acquired informally, etc. to improve their employability and
provides certification after completion of the course.

**Designated trade means any trade or occupation or any subject field in

engineering or non-engineering or technology or any vocational course
which the Central Government, after consultation with the Central
Apprenticeship Council, may, by notification in the Official Gazette, specify as
a designated trade for the purposes of Apprentices Act, 1961 10.

9
Industrial Training Institute/ Industrial Training Centre
10
Some of the designated trades notified under the Apprentices Act, 1961 are electrician,
wireman, carpenter, plumber, mason, mechanic, tool and die maker, baker and confectioner,
weaver, tailor, footwear maker, photographer, beautician, painter, desk top publishing
operator, gardener, cable television operator, library assistant, etc.

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 EXEMPTIONS FROM GST.27 4.27

(20) ‘Kaladrishti ITI, Gorakhpur is engaged in providing skill

development courses in other than designated trades notified under
the Apprentices Act, 1961. Since courses offered by Kaladrishti ITI
are not in designated trades notified under the Apprentices Act, 1961,
education provided by it is not approved as vocational educational course as
defined above. Resultantly, it doesn’t qualify as an educational institution.
In view of the above definition, some of the institutions providing education
services have been examined as under:

 Private ITls qualify as an educational institution if the

education provided by these ITls is
approved as vocational
educational course as defined
above.
Accordingly, services provided by a private ITI only in
respect of designated trades
notified under Apprentices
Act, 1961 are exempt from GST
under this entry. Services in
respect of other than designated
trades are liable to GST.
Further, in case of designated trades, services provided
by private ITI by way of conduct of entrance
examination against consideration in the form of
entrance fee will also be exempt.
Moreover, in respect of such designated trades, services provided TO
private ITIs relating to admission to or conduct of examination by a private
ITI will also be exempt.
In case of other than designated trades in private ITIs, GST is payable on
the aforesaid services provided by/to the private ITIs 11.

11
Circular No. 55/29/2018 GST dated 09.08.2018

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 1.28 4.28 GOODS AND SERVICES TAX

As far as Government ITls are concerned, services provided by a Government

ITI to individual trainees/students, are exempt under Entry 6 as these are in
the nature of services provided by the Central or State Government to
individuals [Entry 6 is discussed in detail subsequently]. Such exemption in
relation to services provided by Government ITI would cover both - vocational
training and examinations conducted by these Government ITls 12.

 Private coaching centres or other unrecognized institutions, though self-

styled as educational institutions, would not be treated as educational
institutions under GST and thus cannot avail exemptions available to an
educational institution.
(21) ‘Super Minds’, a coaching institute in Raipur, provides coaching
for Institute of Banking Personnel Selection (IBPS) Probationary
Officers Exam. Super Minds, being a coaching centre which trains
candidates to secure a banking job, is not an educational institution in terms
of the exemption notification.

 By virtue of Entry 66, educational institutions up to Higher Secondary School

level do not suffer GST on output services and also on specified input services
[discussed in subsequent paras]. However, some of the input services like
repairs and maintenance etc. provided by private players to educational
institutions are subject to GST.
 Output services of lodging/boarding in hostels provided by such educational
institutions which are providing pre-school education and
education up to higher secondary school or equivalent or
education leading to a qualification recognised by law, are
fully exempt from GST. Annual subscription/fees charged as
lodging/boarding charges by such educational institutions
from its students for hostel accommodation shall therefore, not attract GST.

12
Circular No. 55/29/2018 GST dated 09.08.2018

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 EXEMPTIONS FROM GST.29 4.29

 Boarding schools provide service of education coupled with other services

like providing dwelling units for residence and food. This may be a case of
composite supply if the charges for education and lodging and boarding are
inseparable. Their taxability will be determined in terms of the principles laid
down in section 2(30) read with section 8 13.
Such services in the case of boarding schools are naturally bundled and
supplied in the ordinary course of business. Therefore, the bundle of services
will be treated as consisting entirely of the principal supply, which means the
service which forms the predominant element of such a bundle.
In this case since the predominant nature is determined by the service of
education, the other service of providing residential dwelling will not be
considered for the purpose of determining the tax liability and in this case
the entire consideration for the supply will be exempt.

 We have already seen that the institutions providing services by way of

education as a part of a curriculum for obtaining a qualification recognised
by any law for the time being in force qualify as educational institutions.
However, the question arises that in case where a course in a college leads
to dual qualification only one of which is recognized by law, would service
provided by the college by way of such education be covered by the
exemption notification?
 Provision of dual qualifications is in the nature of two separate services as the
curriculum and fees for each of such qualifications are prescribed separately.
Service in respect of each qualification would, therefore, be assessed
separately.
If an artificial bundle of service is created by clubbing two courses together,
when only single fee is charged for both, only one of which leads to a
qualification recognized by law, then by application of the rule of
determination of taxability of a supply which is not bundled in the ordinary

13
Section 2(30) provides the definition of composite supply and section 8 contains the
provisions relating to tax liability on composite and mixed supplies. The concept of composite
and mixed supply has been discussed in detail in Chapter 1 – Supply under GST in this Module
of the Study Material.

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 1.30 4.30 GOODS AND SERVICES TAX

course of business, it shall be treated as a mixed supply as per provisions

contained in section 2(74) 14 read with section 8.
The taxability will be determined by the supply which attracts highest rate of
GST.
 However, incidental auxiliary courses provided by way of hobby classes
or extra-curricular activities in furtherance of overall well-being will be
an example of naturally bundled
course, and therefore treated as
composite supply. One relevant
consideration in such cases will be
the amount of extra billing being
done for the unrecognized
component viz-a-viz the recognized course. If extra billing is being done, it
may be a case of artificial bundling of two different supplies, not supplied
together in the ordinary course of business, and therefore will be treated as
a mixed supply, attracting the rate of the higher taxed component for the
entire consideration 15.
 Indian Institutes of Management Act, 2017 (IIM
Act, 2017) empowers IIMs to (i) grant degrees,
diplomas, and other academic distinctions or
titles, (ii) specify the criteria and process for
admission to courses or programmes of study,
and (iii) specify the academic content of
programmes.
 Resultantly, all the IIMs fall under purview of “educational institutions” as they
provide education as a part of a curriculum for obtaining
a qualification recognized by law for the time being in
force.

14
Section 2(74) provides the definition of mixed supply.
15
The view taken in the preceding paras, that education coupled with other incidental services
is a composite supply and is exempt since the principal supply [education service] is exempt,
is based on the CBIC Flyer - Chapter 40 – ‘GST on Education Services’. However, it is also
possible to take a different view since as per the definition of composite supply under section
2(30), composite supply consists of two or more taxable supplies.

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 EXEMPTIONS FROM GST.31 4.31

 IIMs provide various long duration

programs (1 year or more) for which they
award diploma/ degree certificate duly
recommended by Board of Governors as
per the power vested in them under the IIM Act, 2017. Services provided by
IIMs to their students- in all such long duration programs (one year or more)
are exempt from levy of GST.
 IIMs also provide various short duration/
short term programs (less than 1 year) for
which they award participation certificate to
the executives/ professionals as they are
considered as “participants” of the said programmes. These participation
certificates are not any qualification recognized by law.
 Such participants are also not considered as students of IIM. Services
provided by IIMs as an educational institution to such participants is not
exempt from GST and GST is payable on the same 16.

Any authority, board or body set up by the Central

Government or State Government (including National
Testing Agency) for conduct of entrance examination for
admission to educational institutions shall be treated as
educational institution for the limited purpose of providing
services by way of conduct of entrance examination for
admission to educational institutions.

It is important to note that the Central and State Educational Boards shall be treated
as ‘Educational Institution’ for the limited purpose of providing services by way of
conduct of examination to the students. In this regard, following is clarified:

16
Circular No. 82/01/2019 GST dated 01.01.2019

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 1.32 4.32 GOODS AND SERVICES TAX

 Various services are supplied by Centre and State Boards such as National
Board of Examination (NBE). These services include entrance examination (on
charging a fee) for admission to educational institution, input services for
conducting such entrance examination for students, accreditation of
educational institutions or professional so as to authorise them to provide
their respective services.
 For example, NBE provides services of
conducting entrance examinations for admission
to courses including Diplomat National Board
(DNB) and Fellow of National Board (FNB),
prescribes courses and curricula for PG medical
studies, holds examinations and grant degrees,
diplomas and other academic distinctions. It
carries out all functions as are normally carried out by central or state
educational boards and is thus a central educational board. “Central and
State Educational Boards” are treated as educational institutions for the
limited purpose of providing services by way of conduct of examination to
the students. Therefore, NBE is an ‘educational institution’ in so far as it
provides services by way of conduct of examination, including any entrance
examination, to the students.
 It is clarified that:
(i) GST is exempt on services provided by Central or State Boards
(including the boards such as NBE) by way of conduct of examination
for the students, including conduct of entrance examination for
admission to educational institution under Entry 66(aa). Therefore, GST
shall not apply to any fee or any amount charged by such Boards for
conduct of such examinations including entrance examinations.
(ii) GST is also exempt on input services relating to admission to, or
conduct of examination, such as online testing service, result
publication, printing of notification for examination, admit card and
questions papers etc, when provided to such Boards under Entry
66(b)(iv).

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 EXEMPTIONS FROM GST.33 4.33

(iii) GST is applicable to other services provided by such Boards, namely of

providing accreditation to an institution or to a professional
[accreditation fee or registration fee such as fee for FMGE (Foreign
Medical Graduate Examination) screening test] so as to authorise them
to provide their respective services 17.

 Educational institutions generally have mess facility for providing food to

their students and staff.
Such facility is
(i) either run by the institution/ students themselves
or
(ii) is outsourced to a third person.
 If the catering services is one of the services provided by an educational
institution to its students, faculty and staff and the said educational
institution is covered by the definition of ‘educational institution’ as
given above, then the same is exempt. [covered under item (a) of entry 66].
 If the catering services, i.e., supply of food or drink in a mess or canteen,
is provided by anyone other than the educational institution, i.e. the
institution outsources the catering activity to an outside contractor, then it is
a supply of service to the concerned educational institution by such outside
caterer and attracts GST.
However, said services when provided to an educational institution providing
pre-school education or education up to higher secondary school or
equivalent are exempt from tax [covered under item (b)(ii) of Entry 66].

 An anganwadi, inter alia, provides pre-school non-formal education. Hence,

anganwadi is covered by the definition of educational institution (as pre-
school).

17
Circular No. 151/07/2021 GST dated 17.06.2021

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 1.34 4.34 GOODS AND SERVICES TAX

 As seen above that as per entry 66(b)(ii), any catering service provided to an
educational institution (pre-school and schools) is exempt from GST and it
includes mid- day meal service also. The scope of this entry is thus wide
enough to cover any serving of any food to a school (including pre-
school).
 It is further clarified that services provided to an educational institution by
way of serving of food (catering including mid- day meals) is exempt from
levy of GST irrespective of its funding from government grants or corporate
donations.
 Hence, serving of food to anganwadi shall also be covered by said
exemption, whether sponsored by government or through donation
from corporates 18.

 As discussed earlier, Entry 66 exempts, inter alia, services provided –

(a) by an educational institution to its students, faculty and staff;
(aa) by an educational institution by way of conduct of entrance
examination against consideration in the form of entrance fee.
 Therefore, it can be seen that all services supplied by an ‘educational
institution’ to its students are exempt from GST. Consideration charged by
the educational institutes by way of entrance fee for conduct of entrance
examination is also exempt.
 The exemption is wide enough to cover the amount or fee charged for
admission or entrance, or amount charged for application fee for entrance,
or the fee charged from prospective students for issuance of eligibility
certificate to them in the process of their entrance/admission to the
educational institution.
 Services supplied by an educational institution by way of issuance of
migration certificate to the leaving or ex-students are also covered by the
exemption. Accordingly, such activities of educational institutions are also
exempt 19.

18
Circular No. 149/05/2021 GST dated 17.06.2021
19
Circular No. 177/09/2022 GST dated 03.08.2022

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 EXEMPTIONS FROM GST.35 4.35

Educational institutes such as IITs, IIMs charge a fee from prospective employers
like corporate houses/MNCs, who come to the institutes for recruiting candidates
through campus interviews in relation to campus recruitments. Such services shall
also be liable to tax.

Maritime Training Institutes and their training courses are approved by the Director
General of Shipping which are duly recognised under the provisions of the
Merchant Shipping Act, 1958 read with the Merchant Shipping (Standards of
training, certification and watch-keeping for Seafarers) Rules, 2014.
Therefore, Maritime Training Institutes are educational institutions and the courses
conducted by them are exempt subject to fulfilment of other conditions specified
herein 20.

Directorate General of Civil Aviation (DGCA) approves Flying Training Organizations

(FTOs) as well as also approves flying training courses and mandates the
requirement of course completion certificates to be issued to successful candidates
in terms of the Aircraft Act, 1934 and the rules prescribed thereunder.
Therefore, the approved flying training courses conducted by FTOs approved by
DGCA, wherein the DGCA mandates the requirement of a completion certificate are
exempt as services provided by educational institutions (an institution providing
services by way of education as a part of a curriculum for obtaining a qualification
recognized by any law for the time being in force) to its students, faculty and staff
are exempt from levy of GST. [Circular No. 234/28/2024 GST dated 11.10.2024]

Issue of
completion
approves
DGCA Approved certificate Successful
Courses run by FTO Candidates

Exempt
20
Circular No. 117/36/2019 GST dated 11.10.2019

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 1.36 4.36 GOODS AND SERVICES TAX

 Regarding, input services, it may be noted that where output services are
exempted, the educational institutions may not be able to avail credit of tax
paid on the input side. The auxiliary education services [services which educational
institutions ordinarily carry out themselves but may obtain as outsourced services from any
other person]specified in item (b) of entry 66 only have been exempted [Sub-
items (i) to (v) of item (b) of Entry 66].
 However, the said exemption comes with a rider.
Auxiliary services of (i) transportation of
students, faculty, and staff, (ii) catering including
any mid-day meals scheme sponsored by
Government and (iii) security or cleaning or
housekeeping services are exempt only if such
auxiliary education services are provided to
educational institutions providing services by
way of education up to higher secondary or
equivalent, (from pre-school to HSC).
 Thus, if such auxiliary education services are provided to educational
institutions providing degree or higher education or institutions providing
approved vocational education course, the same would not be exempt.
 Similarly, services of supply of online educational journals/periodicals are
exempt only if they are provided to an institution providing services by way
of education as a part of a curriculum for obtaining a qualification recognised
by any law for the time being in force 21.
(22) Little Millennium – a pre school in outskirts of Mumbai – has
subscribed the online journals on child development and experiential
learning. Services of supply of online educational journals or periodicals
provided, inter alia, to an institution providing services by way of pre-school
education are not exempt.

21
The discussion in the foregoing paras is primarily based on CBIC Flyer - Chapter 40 – ‘GST
on Education Services’ unless otherwise specified.

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 EXEMPTIONS FROM GST.37 4.37

(23) SM Transporters has provided services of transportation of

students and faculty from their residence to school and back, to
Pathwheels School - a higher secondary school. Services of
transportation of students, faculty and staff provided, inter alia, to an institution
providing services by way of education up to higher secondary school or equivalent
are exempt.

(24) Shiksha College, offering degree courses (recognised by law), has

to conduct its half yearly examination in November. For this purpose, it
has paid the honorarium to paper setters and examiners (not on the rolls
of Shiksha College) for their services. Further, it availed the printing services for
printing the question papers (paper and content are provided by Shiksha College)
for conducting examination. Services provided to an educational institution
relating to admission to, or conduct of examination by, such institution are exempt.
Therefore, services of paper setters and examiners and printing services availed by
Shiksha College are exempt.

(25) Gyaani Public School – a higher secondary school – has hired

Suvidha Services Ltd. for security and housekeeping services in the
school. Security and housekeeping services provided within the
premises of, inter alia, a higher secondary school are exempt. Therefore, said
services provided by Suvidha Services Ltd. are exempt. The school susbequently
hired Suvidha Services Ltd. for providing the security and housekeeping services at
School’s Annual Day function organised in an auditorium outside the school
campus. Security and housekeeping services provided to Gyaani Public School for
School’s Annual Day function organised outside the school campus will be taxable
as only the security and housekeeping services performed within the premises of
the higher secondary school are exempt.

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 1.38 4.38 GOODS AND SERVICES TAX

The exemptions available in respect of input and output services of an educational

institution have been tabulated as follows:

Type of educational institution

Educational institution Educational Educational
providing pre-school institution institution
education and education providing providing
up to higher secondary education as a part education as a
school or equivalent of a curriculum for part of
obtaining a approved
recognised vocational
qualification education
course
Exempt (i) transportation of (i) services relating Services relating
input students, faculty and to admission to, to admission to,
services staff; or conduct of or conduct of
(ii) catering, including any examination by, examination by,
mid-day meals such institution such institution.
scheme sponsored by (ii) supply of online
the Central educational
Government, State journals or
Government or Union periodicals
territory;
(iii) security or cleaning or
house-keeping
services performed in
such educational
institution;
(iv) services relating to
admission to, or
conduct of
examination by, such
institution
Exempt Services provided by an educational institution -
output (a) to its students, faculty and staff;
services (aa) by way of conduct of entrance examination against consideration
in the form of entrance fee.

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 EXEMPTIONS FROM GST.39 4.39

 The activity of affiliation is to monitor and ensure whether the institution

possesses the required infrastructure in terms of space, technical prowess,
financial liquidity, faculty strength, etc. and is thereby eligible for the
privileges to conduct the course/program of study for the degree/title
extended by the University to the students enrolled in such institutions.
 The affiliation services provided by the universities are not related to the
admission of students to such colleges or the conduct of examinations by
such colleges.
 It has been clarified by CBIC that the affiliation services provided by
universities to their constituent colleges are not covered within the ambit of
exemptions provided to educational institutions. [Circular No. 234/28/2024
GST dated 11.10.2024]

 The activity of affiliation carried out by educational boards or councils, or other

similar bodies, is to monitor and ensure whether the schools possess the
required infrastructure, finances, faculty strength etc. and are thereby eligible for
the privileges to operate under the aegis of said boards or councils.
 The affiliation services are not related to the admission of students to such
schools or the conduct of examinations by such schools.
 It has been clarified by CBIC that such services of affiliation, provided to
schools by Central or State educational boards or councils, or other similar
bodies, by whatever name called, are taxable [Circular No. 234/28/2024 GST
dated 11.10.2024].
However, it may be noted that the affiliation services provided by Central and State
educational boards or Councils, or other similar bodies to GOVERNMENT SCHOOLS
i.e. schools established, owned or controlled by the Central Government, State
Government, Union Territory, local authority, Governmental authority or
Government entity are exempt vide Entry 66A of Exemption Notification.

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 1.40 4.40 GOODS AND SERVICES TAX

4. Health care services

Entry Description of services

No.

46 Services by a veterinary clinic in relation to health

care of animals or birds.

74 Services by way of-

(a) health care services by a clinical
establishment, an authorised medical
practitioner or para-medics;
However, nothing in this entry shall apply to
the services provided by a clinical
establishment by way of providing room [other than Intensive Care
Unit (ICU)/Critical Care Unit (CCU)/Intensive Cardiac Care Unit
(ICCU)/Neo natal Intensive Care Unit (NICU)] having room charges
exceeding ` 5000 per day to a person receiving health care services.
(b) services provided by way of transportation of a patient in an
ambulance, other than those specified in (a) above.

ANALYSIS
Entry 74 - Health care services
by a clinical establishment, an
authorised medical
practitioner or para-medics
are exempt from GST [Entry
74(a)].
However, services provided by a clinical establishment by way of providing room
[other than Intensive Care Unit (ICU)/Critical Care Unit (CCU)/Intensive Cardiac Care
Unit (ICCU)/Neo natal Intensive Care Unit (NICU)] having room charges exceeding
` 5000 per day to a person receiving health care services will not be exempt.

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 EXEMPTIONS FROM GST.41 4.41

The term ‘health care services’ is defined as follows:

Health care services
 means any service by way of diagnosis
or treatment or care for illness, injury,
deformity, abnormality or pregnancy in
any recognised system of medicines in
India and
 includes services by way of transportation of the patient to and from a
clinical establishment, but
 does not include hair transplant or cosmetic or plastic surgery, except
when undertaken to restore or to reconstruct anatomy or functions of body
affected due to congenital defects, developmental abnormalities, injury or
trauma.
(26) Healthy Nursing Home specializes in undertaking plastic surgeries.
One such surgery is conducted to repair cleft lip of a newborn baby. In
view of above definition, plastic surgeries are not included in health care
services. However, plastic surgery conducted to repair a cleft lip will be included in
health care services as it reconstructs anatomy or functions of body affected due
to congenital defects (i.e. cleft lip).

(27) Aarogya Multispecialty Hospital provides palliative care to patients facing

serious and life-threatening illness. Palliative care is given to improve the quality
of life of patients who have a serious or life-threatening disease, but the goal of
such care is not to cure the disease.
On request, such care is also provided to patients at their homes. Health care
service means any service by way of diagnosis or treatment or care for illness, injury,
deformity, abnormality or pregnancy in any recognized system of medicines in
India. It is immaterial whether such service is provided at the clinical establishment
or at the home of the patient or at any other place.
Thus, palliative care for terminally ill patients provided at their homes is included
in health care services.
As it is apparent from the definition of health care services, only services in
recognized systems of medicines in India are exempt under this entry. Following

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 1.42 4.42 GOODS AND SERVICES TAX

systems of medicines are the recognized systems of medicines in India 22:-

 Allopathy
 Yoga
 Naturopathy
 Ayurveda
 Homeopathy
 Siddha
 Unani

 Any other system of medicine that may be recognized by Central

Government.
(28) Reiki healing treatment is not a recognized system of medicinces.
Therefore, it is not included in health care services.
Let us now understand the meaning of terms - ‘clinical establishment’, ‘authorised
medical practitioner’ and ‘paramedics’.
 Clinical establishment: means a hospital, nursing home,
clinic, sanatorium or any other institution by, whatever
name called, that offers services or facilities requiring
diagnosis or treatment or care for illness, injury,
deformity, abnormality or pregnancy in any recognised
system of medicines in India, or a place established as an independent entity or
a part of an establishment to carry out diagnostic or investigative services of
diseases. Thus, diagnostic or investigative services of diseases provided by
pathological labs are not liable to GST.
 Authorised medical practitioner: means a medical practitioner registered
with any of the councils of recognised system of medicines
established/recognised by law in India & includes a medical professional
having requisite qualification to practice in any recognised system of
medicines in India as per any law for the time being in force.

22
Section 2(h) of the Clinical Establishments (Registration and Regulation) Act, 2010

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 EXEMPTIONS FROM GST.43 4.43

Further, Paramedics are trained health care professionals, for

example, nursing staff, physiotherapists, technicians, lab assistants
etc. Services by them in a clinical establishment would be in the
capacity of employee and not provided in independent capacity and
will thus be considered as services by such clinical establishment. Similar services
in independent capacity are also exempted.

Rent of rooms provided to in-patients

Rent of the rooms having room charges upto ` 5,000 per day to a person receiving
health care services in hospitals is exempt 23.
Services provided by senior doctors/ consultants/ technicians
 Hospitals hire senior doctors/ consultants/
technicians independently. Such persons do
not have any contract with the patient.
Hospitals pay them consultancy charges and
there is no employer-employee relationship
between them.
 It is clarified by CBIC that services provided by such senior doctors/
consultants/ technicians, whether employees or not, are healthcare services
which are exempt from GST [Circular No. 32/06/2018 GST dated 12.02.2018].
Amount charged by hospitals from the patients
 In above cases, suppose hospitals charge the patients, say, ` 10,000/- and pay
to the consultants/technicians only ` 7,500/- and keep the balance for
providing ancillary services which include nursing care, infrastructure
facilities, paramedic care, emergency services, checking of temperature,
weight, blood pressure, etc. Going through the definition of health care
services [given above], it can be inferred that hospitals also provide
healthcare services.
 The entire amount charged by them from the patients including the retention
money and the fee/payments made to the doctors etc., is towards the
healthcare services provided by the hospitals to the patients and is exempt
[Circular No. 32/06/2018 GST dated 12.02.2018].

23
Circular No. 27/01/2018 GST dated 04.01.2018 read with proviso to Entry 74(a)

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 1.44 4.44 GOODS AND SERVICES TAX

Food supplied to the patients

 Health care services provided by the clinical
establishments will include food supplied to
the patients; but such food may be prepared
by the canteens run by the hospitals or may
be outsourced by the hospitals from
outdoor caterers.
 When outsourced, there is no ambiguity that the suppliers shall charge tax as
applicable and hospital will get no ITC.
 Food supplied to the in-patients as advised by the doctor/nutritionists is a
part of composite supply of healthcare and not separately taxable.
 Other supplies of food by a hospital to patients (not admitted) or their
attendants or visitors are taxable [Circular No. 32/06/2018 GST dated
12.02.2018]24.
Ambulance services provided National Health Mission (NHM)
 National Health Mission (NHM) is a flagship programme of the Government
of India wherein the Central Government provides technical and financial
support to States to strengthen healthcare systems including for free
ambulance services (Dial 102/108 services).

24
The view taken in the preceding paras, that health care services coupled with other
incidental services is a composite supply and is exempt since the principal supply [health care
service] is exempt, is based on Circular No. 32/06/2018 GST dated 12.02.2018. However, it
is also possible to take a different view since as per the definition of composite supply under
section 2(30) of the CGST Act, composite supply consists of two or more taxable supplies.

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 EXEMPTIONS FROM GST.45 4.45

 Dial 108 is the emergency response system primarily designed to attend to

patients of critical care, trauma and accident victims etc. while Dial 102
services essentially are for basic patient transport aimed to cater the needs
of pregnant women and children, though other categories are also taking
benefit and are not excluded.

 Some State Governments themselves provide the free ambulance services to the
patients while many States are operating the
ambulance service on an outsourced model, i.e.,
services are provided by a private service provider
(PSP) on behalf of State Government and it charges a
fee from the State Governments for said ambulance
services. However, in both the cases, ambulance
services are provided free of cost to the patients.

 Services provided by State Governments and Private Service Providers (PSPs)

by way of transportation of patients in ambulance are exempt under Entry 74
above.

 As regards ambulance services provided by PSPs [under NHM] on behalf of

State Governments against consideration in the form of fee or otherwise
charged from State Government, since ambulance services are an activity in
relation to ‘health and sanitation’ and ‘public health’ functions entrusted to
Panchayats and Municipalities under Article 243G and 243W of the
Constitution of India 25, same would be exempt as under:
a. Entry 3 if it is a pure service and not a composite supply involving supply
of any goods, and
b. Entry 3A if it is a composite supply of goods and services in which the
value of supply of goods constitutes not more than 25% of the value of
the said composite supply [Circular No. 51/25/2018 GST dated
31.07.2018]. [Refer Entry 3 and 3A discussed in detail subsequently under
heading ‘Services provided to Government’].

25
An illustrative list of functions entrusted to Panchayat and Municipality under Article 243G
and 243W respectively of the Constitution of India has been provided subsequently in this
chapter under heading ‘Services provided by Government’.

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 1.46 4.46 GOODS AND SERVICES TAX

Services other than health care services in clinical establishment’s premises

 Supply of services other than healthcare services such as renting of shops,
auditoriums in the premises of the clinical establishment, display of
advertisements etc. will be subject to GST 26.
Services by way of Assisted Reproductive Technology (ART) procedures such
as In vitro fertilization (IVF)
 As per the definition of health care services given earlier, it means any service
by way of diagnosis or treatment or care for illness, injury, deformity,
abnormality or pregnancy in any recognised system of medicines in India and
includes services by way of transportation of the patient to and from a clinical
establishment, but does not include hair transplant or cosmetic or plastic
surgery, except when undertaken to restore or to reconstruct anatomy or
functions of body affected due to congenital defects, developmental
abnormalities, injury or trauma.
 Since, the abnormality/disease/ailment of infertility is treated using ART
procedure such as IVF, it is clarified that services by way of IVF are also
covered under the definition of health care services 27.
5. Services provided by Government

Entry Description of services

No.
4 Services by governmental authority by way of any activity in relation
to any function entrusted to a municipality under article 243W of the
Constitution are exempt.
5 Services by a governmental authority by way of any activity in relation
to any function entrusted to a Panchayat under article 243G of the
Constitution.
6 Services by the Central Government, State Government, Union territory
or local authority excluding the following services—
(a) services by the Department of Posts and the Ministry of
Railways (Indian Railways);

26
As clarified by the CBIC GST Flyer – Chapter 39 - GST on Charitable and Religious Trusts
27
Circular No. 177/09/2022 GST dated 03.08.2022

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 EXEMPTIONS FROM GST.47 4.47

(b) services in relation to an aircraft or a vessel, inside or outside the

precincts of a port or an airport;
(c) transport of goods or passengers; or
(d) any service, other than services covered under entries (a) to (c)
above, provided to business entities.
7 Services provided by the Central Government, State Government, Union
territory or local authority to a business entity with an aggregate
turnover of up to such amount in the preceding financial year as makes
it eligible for exemption from registration under the Central Goods and
Services Tax Act, 2017
Explanation - For the purposes of this entry, it is hereby clarified that
the provisions of this entry shall not be applicable to following services:-
(i) item (a), (b) and (c) of Entry 6 above.
(ii) services by way of renting of immovable property.
8 Services provided by the Central Government, State Government, Union
territory or local authority to another Central Government, State
Government, Union territory or local authority.
However, nothing contained in this entry shall apply to services referred
in item (a), (b) and (c) of Entry 6 above.
9 Services provided by Central Government, State Government, Union
territory or a local authority where the consideration for such services
does not exceed ` 5,000.
However, nothing contained in this entry shall apply to services
referred in item (a), (b) and (c) of Entry 6 above
Further, in case where continuous supply of service* is provided by
the Central Government, State Government, Union territory or a local
authority, the exemption shall apply only where the consideration
charged for such service does not exceed ` 5,000 in a FY.
*as defined in section 2(33)
9C Supply of service by a Government Entity to Central Government, State
Government, Union territory, local authority or any person specified by
Central Government, State Government, Union territory or local authority
against consideration received from Central Government, State
Government, Union territory or local authority, in the form of grants.

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 1.48 4.48 GOODS AND SERVICES TAX

9D Services by:
an old age home
run by:
 Central Government, State Government or
 an entity registered under section 12AA/12AB
of Income-tax Act, 1961
to its residents (aged 60 years or more)
against consideration upto ` 25,000 per month per member,
provided that the consideration charged is inclusive of charges for
boarding, lodging and maintenance.
9E Services provided by Ministry of Railways (Indian Railways) to
individuals by way of –
(a) sale of platform tickets
(b) facility of retiring rooms/waiting rooms;
(c) cloak room services;
(d) battery operated car services
9F Services provided by one zone/division under Ministry of Railways
(Indian Railways) to another zone(s)/division(s) under Ministry of
Railways (Indian Railways).
9G Services provided by Special Purpose Vehicles (SPVs) to Ministry of
Railways (Indian Railways) by way of allowing Ministry of Railways
(Indian Railways) to use the infrastructure built and owned by them
during the concession period against consideration and services of
maintenance supplied by Ministry of Railways (Indian Railways) to SPVs
in relation to the said infrastructure built and owned by the SPVs during
the concession period against consideration.
24C Services by the Department of Posts by way of post card, inland letter,
book post and ordinary post (envelopes weighing less than 10 grams).
34A Services supplied by Central Government, State Government, Union
territory to their undertakings or Public Sector Undertakings (PSUs) by
way of guaranteeing the loans taken by such undertakings or PSUs from
the banking companies and financial institutions 28.

28
Circular No.154/10/2021 GST dated 17.06.2021 reiterates that guaranteeing of loans by
Central or State Government for their undertaking or PSU is specifically exempt under Entry
34A.

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 EXEMPTIONS FROM GST.49 4.49

47 Services provided by the Central Government, State Government, Union

territory or local authority by way of-
(a) registration required under any law for the time being in force;
(b) testing, calibration, safety check or certification relating to protection
or safety of workers, consumers or public at large, including fire
license, required under any law for the time being in force.
61 Services provided by the Central Government, State Government, Union
territory or local authority by way of issuance of passport, visa,
driving license, birth certificate or death certificate.
62 Services provided by the Central Government, State Government, Union
territory or local authority by way of tolerating non-performance of a
contract for which consideration in the form of fines or liquidated
damages is payable to the Central Government, State Government,
Union territory or local authority under such contract.
63 Services provided by the Central Government, State Government, Union
territory or local authority by way of assignment of right to use
natural resources to an individual farmer for cultivation of plants
and rearing of all life forms of animals, except the rearing of horses,
for food, fibre, fuel, raw material or other similar products.
65 Services provided by the Central Government, State Government,
Union territory by way of deputing officers after office hours or on
holidays for inspection or container stuffing or such other duties
in relation to import export cargo on payment of Merchant Overtime
charges.
65B Services supplied by a State Government to Excess Royalty Collection
Contractor (ERCC) by way of assigning the right to collect royalty on
behalf of the State Government on the mineral dispatched by the
mining lease holders.
However, at the end of the contract period, ERCC shall submit an
account to the State Government and certify that amount of GST
deposited by mining lease holders on royalty is more than GST
exempted on the service provided by State Government to the ERCC of
assignment of right to collect royalty and where such amount of GST
paid by mining lease holders is less than the amount of GST exempted,
the exemption shall be restricted to such amount as is equal to the
amount of GST paid by the mining lease holders and the ERCC shall pay

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 1.50 4.50 GOODS AND SERVICES TAX

the difference between GST exempted on the service provided by State

Government to the ERCC of assignment of right to collect royalty and
GST paid by the mining lease holders on royalty.
Explanation- Mining lease holder means a person who has been
granted mining lease, quarry lease or license or other mineral
concession under the Mines and Minerals (Development and
Regulation) Act, 1957, the rules made thereunder or the rules made by
a State Government under section 15(1) of the said Act.
74A Services provided by rehabilitation
professionals recognised under the
Rehabilitation Council of India Act,
1992 by way of rehabilitation,
therapy or counselling and such
other activity as covered by the said Act at medical establishments,
educational institutions, rehabilitation centers established by Central
Government, State Government or Union territory or an entity
registered under section 12AA or 12AB of the Income-tax Act, 1961.

ANALYSIS
Relevant definitions are as under:
 Business entity: means any person
carrying out business.
 Governmental authority: means an
authority or a board or any other
body,

(i) set up by an Act of Parliament

or a State Legislature; or

(ii) established by any Government,

with 90%, or more participation by way of equity or control, to carry out any
function entrusted to a Municipality under article 243W of the Constitution
or to a Panchayat under article 243G of the Constitution.

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 EXEMPTIONS FROM GST.51 4.51

 Government Entity: means an authority or a board or any other body

including a society, trust, corporation,

(i) set up by an Act of Parliament or State Legislature; or

(ii) established by any Government,

with 90%, or more participation by way of equity or control, to carry out a

function entrusted by the Central Government, State Government, Union
Territory or a local authority.

 Aircraft: means any machine which can derive support in the atmosphere
from reactions of the air, other than reactions of the air against the earth's
surface and includes balloons, whether fixed or free, airships, kites, gliders
and flying machines [Section 2(1) of the Aircraft Act, 1934].

 Airport: means a landing and taking off area for aircrafts, usually with
runways and aircraft maintenance and passenger facilities and includes
aerodrome as defined in section 2(2) of the Aircraft Act, 1934 [Section 2(b) of
the Airports Authority of India Act, 1994].

Exemption to services provided by Government

 Not all services provided by the Government or a local

authority are exempt from tax. As for instance, following
services are not exempt:

(a) services by the Department of Posts and the Ministry

of Railways (Indian Railways);

(b) services in relation to an aircraft or a vessel, inside or outside the

precincts of an airport or a port;

(c) transport of goods or passengers; or

(d) any service, other than services covered under (a) to (c) above, provided
to business entities [with aggregate turnover exceeding such amount in
the preceding financial year as makes it eligible for exemption from
registration under CGST Act].

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 1.52 4.52 GOODS AND SERVICES TAX

Services mentioned in clause (a) to (c) above have been referred to as

“specified services” in discussion hereunder.
Accommodation services supplied by Air Force Mess and other similar
messes to its personnel
Accommodation services provided by Air Force Mess and other similar
messes, such as, Army mess, Navy mess, Paramilitary and Police forces mess
to their personnel or any person other than a business entity are covered by
Entry 6 provided the services supplied by such messes qualify to be
considered as services supplied by Central Government, State Government,
Union Territory or local authority 29.
Let us first understand what does ‘Government’ and ‘local authority’ mean?
Meaning of Government
 As per section 2(53), ‘Government’ means the
Central Government.
 Various State/ Union Territories (with Legislatures)
GST Acts define ‘Government’ as Government of
respective State Government/ Union Territory. For
Union Territories (without State Legislatures), ‘Government’ means the
Administrator or any Authority or officer authorized to act as Administrator
by the Central Government.
 Regulatory bodies/agencies, for instance, Competition Commission of India,
Press Council of India, Directorate General of Civil Aviation, Forward Market
Commission, Inland Water Supply Authority of India, Central Pollution Control
Board, Securities and Exchange Board of India, do not fall under the definition
of Government.
Meaning of local authority
 Local authority is defined in section 2(69) and means the following:
 a “Panchayat” as defined in clause (d) of article 243 of the Constitution;

29
Circular No. 190/02/2023 GST dated 13.01.2023

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 EXEMPTIONS FROM GST.53 4.53

 a “Municipality” as defined in clause (e) of article 243P of the

Constitution;
 a Municipal Committee, a Zilla Parishad, a District Board, and any
other authority legally entitled to, or entrusted by the Central
Government or any State Government with the control or management
of a municipal or local fund;
 a Cantonment Board as defined in section 3 of the Cantonments Act,
2006;
 a Regional Council or a District Council constituted under the Sixth
Schedule to the Constitution;
 a Development Board constituted under article 371 and article 371J of
the Constitution; or
 a Regional Council constituted under article 371A of the Constitution.
Thus, ‘local authority’ includes only those bodies which are listed in the above
definition. It would not include other body which is merely described as a ‘local
body’ by virtue of a local law. For example, local developmental authorities -
setup by State Governments to undertake developmental works - like Delhi
Development Authority, Ahmedabad Development Authority, Bangalore
Development Authority, etc. are not qualified as local authorities.
In the subsequent paras, we have examined some of the Government services:
Statutory collections made by the Real Estate Regulatory Authority
(RERA)
RERA is constituted under the Real Estate (Regulation and Development) Act,
2016. RERA performs function of regulating the real estate development and
construction of the building entrusted to them which fall under Entry No.1 and
2 of the 12th Schedule of the Indian Constitution.
RERA is a 'governmental authority' and is covered under the scope of entry no.
4. It is hereby clarified 30 that statutory collections made by RERA are covered
under the entry no. 4 and thus, exempt from GST.

30
Circular No. 228/22/2024 GST dated 15.07.2024

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 1.54 4.54 GOODS AND SERVICES TAX

Services provided to a business entity

 Entry 7 provides that services provided to a business entity are exempt if its
aggregate turnover is upto such amount in the preceding financial year as
makes it eligible for exemption from registration under the CGST Act.
 However, this exemption is not applicable to specified services and renting
of immovable property services. Renting in relation to immovable
property means allowing, permitting or granting access, entry, occupation,
use or any such facility, wholly or partly, in an immovable property, with or
without the transfer of possession or control of the said immovable property
and includes letting, leasing, licensing or other similar arrangements in
respect of immovable property.
 GST on services, other than specified services, supplied by the Central
Government, State Government, Union territory or local authority to a
business entity [whose turnover exceeds such amount in the preceding FY as
makes it eligible for exemption from registration under the CGST Act] is
payable under reverse charge by such business entity.
However, reverse charge provisions are not applicable to renting of
immovable property services provided to unregistered persons and where
‘specified services’ are being provided to such business entity [See the
reverse charge provisions as discussed in Chapter – 2: Charge of GST in this
Module of the Study Material].
Services provided by the Department of Posts

 Department of Posts provide basic mail services known

as postal services such as post card, inland letter, book
post, registered post provided exclusively by the
Department of Posts to meet the universal postal
obligations. It also provides services of transfer of
money through money orders, operation of savings
accounts, issue of postal orders, pension payments
and other such services.

 Moreover, it provides services like distribution of mutual funds, bonds,

passport applications, collection of telephone and electricity bills on
commission basis. These services are in the nature of intermediary and are
generally called agency services.

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 EXEMPTIONS FROM GST.55 4.55

 Entry 6 stipulates that the services provided by the

Central Government, State Government, Union territory
or local authority are exempt excluding the services by
the Department of Posts and the Ministry of Railways
(Indian Railways). Further, entry 24C exempts the
services provided by the Department of Posts by way of post card, inland
letter, book post and ordinary post (envelopes weighing less than 10 grams).
Thus, on remaining services provided by the Department of Posts, it is liable
to pay tax without the application of reverse charge.
Services provided by one Department of the Government to another
Department of the Government
 Services (except specified services) provided by one Department of the
Central Government/ State Government to another Department of the Central
Government/ State Government are exempt under Entry 8.
Services by governmental authority by way of any activity in relation to
any function entrusted to Panchayat/ Municipality

Services provided by governmental authority by way of any activity in relation

to any function entrusted to a
municipality under Article
243W of the Constitution 31
and services by a
governmental authority by
way of any activity in relation to any function
entrusted to a Panchayat under article 243G of the
Constitution 32 are exempt vide Entry 4 and Entry 5 respectively.

31
The functions entrusted to municipality under the 12th Schedule to Article 243W of the
Constitution include urban planning including town planning, roads and bridges, public
health, sanitation conservancy and solid waste management, fire services, slum improvement
and upgradation, promotion of cultural, educational and aesthetic aspects, provision of urban
amenities and facilities such as parks, gardens, playgrounds, public amenities including street
lighting, parking lots, bus stops and public conveniences, etc.
32
The functions entrusted to Panchayat under the 11th Schedule to Article 243G of the
Constitution include Agriculture, including agricultural extension, Animal husbandry,

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 1.56 4.56 GOODS AND SERVICES TAX

Services provided by police/security agencies of Government to

PSUs/corporate entities/sports events held by private entities
 Services provided by Police/security agencies of Government to PSU/private
business entities are not exempt from GST.
 Such services are taxable supplies and the
recipients are required to pay the tax under
reverse charge mechanism on the amount of
consideration paid to Government for such supply
of services [See the reverse charge provisions as
discussed in Chapter – 2: Charge of GST in this
Module of the Study Material].
(29) The Karnataka Cricket Association, Bangalore requests the
Commissioner of Police, Bangalore to provide security in and
around the Cricket Stadium for the purpose of conducting the
cricket match. The Commissioner of Police arranges the required security for
an agreed consideration. In this case, services of providing security by the
police personnel are not exempt. As the services are provided by Government,
Karnataka Cricket Association is liable to pay the tax on the consideration
paid, albeit under reverse charge mechanism.
Services provided by way of tolerating non-performance of a contract

 In case of supplies made to Government, services [provided by

Government] by way of tolerating the non-performance of contract by
the supplier of service is covered under the exemption under Entry 62.
Thus, any consideration received by the Government from any person or
supplier for non-performance of contract is exempted from tax.
(30) Public Works Department of Karnataka entered into an
agreement with M/s. ABC, a construction company, for
construction of its office complex for an agreed consideration. In
the agreement dated 10th July, it was agreed by both the parties that M/s.

dairying and poultry, Fisheries, Small scale industries, including food processing industries,
Drinking water, Fuel and fodder, Rural electrification, including distribution of electricity,
Health and sanitation, including hospitals, primary health centres and dispensaries, Women
and child development, Public distribution system, etc.

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ABC shall complete the construction work and handover the project on or
before 31st December.
It was further agreed that any breach of the terms of contract by either party
would give right to the other party to claim for damages or penalty. M/s.
ABC did not complete the construction and did not handover the project by
the specified date i.e., on or before 31st December. As per the contract, the
Department asked for damages/penalty from M/s. ABC and threatened to go
to the court if not paid. Resultantly, M/s. ABC paid an amount of ` 10,00,000/-
to the Department for non-performance of contract. Amount paid by M/s.
ABC to Department is exempt from payment of tax 33.
General Insurance policies provided by a State Government
 Services provided by State Government by way of general insurance
(managed by government) to employees of the State government/Police
personnel, employees of Electricity Department or students of
colleges/private schools etc. wherein the total premium for insurance
policy is paid by employees, students etc. are exempt vide entry 6 of the
Notification which exempts services by Central Government, State
Government, Union territory or local authority to individuals.
 General Insurance policies provided to employees of the State Government/
Police personnel, employees of Electricity Department or students of
colleges/private schools etc. wherein the total premium for insurance
policy is paid by the Central Government, State Government, Union
territory are exempt from GST under Entry 40 34 which exempts services
provided to the Central Government, State Government, Union territory
under any insurance scheme are exempt from GST [Circular No. 16/16/2017
GST dated 15.11.2017].

33
As per Circular No. 178/10/2022 GST dated 03.08.2022, liquidated damages do not
constitute consideration for a supply and are not taxable.
34
Entry 40 has been discussed subsequently in this chapter under heading ‘Services provided
to the Government’.

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 1.58 4.58 GOODS AND SERVICES TAX

6. Construction services

Entry Description of services

No.

10 Services provided by way of pure

labour contracts of construction,
erection, commissioning,
installation, completion, fitting out,
repair, maintenance, renovation, or
alteration of a civil structure or any
other original works pertaining to
the beneficiary-led individual house
construction or enhancement under the Housing for All (Urban)
Mission or Pradhan Mantri Awas Yojana.

10A Services supplied by Electricity Distribution Utilities by way of

construction, erection, commissioning, or installation of infrastructure
for extending electricity distribution network upto the tube well of the
farmer or agriculturalist for agricultural use.

11 Services by way of pure labour contracts of construction, erection,

commissioning, or installation of original works pertaining to a single
residential unit otherwise than as a part of a residential complex.

41A Supply of TDR, FSI, long term lease (premium) of land by a landowner
and to a developer are exempted subject to the condition that the
41B constructed flats are sold before issuance of completion certificate and
tax is paid on them.
Exemption of TDR, FSI, long term lease (premium) shall be withdrawn
in case of flats sold after issue of completion certificate, but such
withdrawal shall be limited to 1% of value in case of affordable houses
and 5% of value in case of other than affordable houses 35.

35
These entries have been stated here in simplified form.

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 EXEMPTIONS FROM GST.59 4.59

ANALYSIS

Housing for All (Urban) Mission or Pradhan Mantri

Awas Yojana (hereinafter referred to as PMAY) is a
programme launched by the Ministry of Housing and
Urban Poverty Alleviation (MoHUPA) which envisions
provision of Housing for All by 2022 when the nation
completes 75 years of its independence.
The mission seeks to address the housing requirement of urban poor including
slum dwellers through following, inter alia, programme verticals:
 Slum rehabilitation of Slum Dwellers with participation of private developers
using land as a resource.
 Promotion of Affordable Housing for weaker section through credit linked
subsidy.
 Affordable Housing in Partnership with Public & Private sectors.
 Subsidy for beneficiary-led individual house construction/enhancement.
Last component of the mission is assistance to individual eligible families belonging
to Economically Weaker Section (EWS) categories to either construct new houses
or enhance existing houses on their own to cover the beneficiaries who are not able
to take advantage of other components of the mission. Such families may avail
specified amount of central assistance for construction of new houses or for
enhancement of existing users under the mission.
Entry 10 exempts the services provided by way of pure labour contracts of
construction, erection, commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of a civil structure or any other original
works pertaining to the beneficiary-led individual house construction or
enhancement under the PMAY from GST.

The term ‘original works’ means- all new constructions;

 all types of additions and alterations to abandoned
or damaged structures on land that are required to
make them workable;

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 1.60 4.60 GOODS AND SERVICES TAX

 erection, commissioning or installation of plant, machinery or equipment or

structures, whether pre-fabricated or otherwise.
Entry 11 exempts the services by way of pure labour contracts of construction,
erection, commissioning, or installation of original works pertaining to a single
residential unit otherwise than as a part of a residential complex from GST.
The term ‘residential complex’ means any complex comprising of a building or
buildings, having more than one single residential unit. Further, ‘single residential
unit’ means a self-contained residential unit which is designed for use, wholly or
principally, for residential purposes for one family.
7. Passenger transportation services

Entry Description of services

No.

15 Transport of passengers, with/ without accompanied belongings, by –

(a) air, in economy class, embarking from or
terminating in an airport located in the
State of Arunachal Pradesh, Assam,
Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim, or Tripura or at Bagdogra located in West
Bengal;
(b) non-air conditioned contract carriage other than radio taxi, for
transportation of passengers, excluding tourism, conducted tour,
charter or hire; or
(c) stage carriage other than air- conditioned stage carriage.
However, nothing contained in items (b) and (c) above shall apply to
services supplied through an electronic commerce operator, and
notified under sub-section (5) of Section 9 of the CGST, 2017.

16 Services provided to the Central Government,

by way of transport of passengers with or without
accompanied belongings, by air, embarking from or
terminating at a RCS (Regional Connectivity Scheme)
airport, against consideration in the form of viability
gap funding.

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 EXEMPTIONS FROM GST.61 4.61

However, nothing contained in this entry shall apply on or after the

expiry of a period of 3 years from the date of commencement of
operations of the RCS airport as notified by the Ministry of Civil
Aviation.

17 Service of transportation of passengers, with or without accompanied

belongings, by—
(a) railways in a class other than—
(i) first class; or
(ii) an air-conditioned coach;
(b) metro, monorail or tramway;
(c) inland waterways;
(d) public transport, other than predominantly for
tourism purpose, in a vessel between places located
in India; and
(e) metered cabs or auto rickshaws (including e-
rickshaws).
However, nothing contained in item (e) above shall apply to services
supplied through an electronic commerce operator, and notified under
sub-section (5) of Section 9 of the CGST, 2017.

ANALYSIS
Services of transportation of passengers are usually chargeable to GST. Entry 6
[Services provided by Government - discussed earlier] specifically excludes the
transport of passengers’ services provided by the Government or local authority
from its purview, which implies that transport of passengers’ services provided by
the Government or local authority services provided by the Government are also
liable to GST.
However, services of transportation of passengers specified in Entries 15, 16 and 17
mentioned above are exempt from GST (whether provided by Government or
otherwise) with or without accompanied belongings.

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Services provided by way of transportation of passengers have been analysed as

follows:

Clause (a)
 Transport of passengers by air, embarking from or terminating in an airport
located in the States of North-East India or at Bagdogra located in West
Bengal is exempt from GST provided said transportation is in economy class.
(31) Rituraj has booked air tickets in economy class of a flight from
Delhi to Guwahati, Assam. Transport of passengers by air terminating
in an airport located in Assam is exempt from GST.
Clause (b)

 Passenger transportation service provided by a non-air conditioned contract

carriage other than radio taxi, for transportation of passengers, excluding
tourism, conducted tour, charter or hire are exempt from GST. Conducted
tour is a short visit to a place in which someone shows you around and tells
you information about it 36.
The term contract carriage means a motor vehicle which carries a passenger
or passengers for hire or reward and is engaged under a contract, whether
expressed or implied, for the use of such vehicle as a whole for the carriage
of passengers mentioned therein and entered into by a person with a holder
of a permit in relation to such vehicle or any person authorised by him in this
behalf on a fixed or an agreed rate or sum-
(a) on a time basis, whether or not with reference to any route or distance;
or
(b) from one point to another, and in either case, without stopping to pick
up or set down passengers not included in the contract anywhere
during the journey, and includes--
(i) a maxicab; and
(ii) a motor cab notwithstanding that separate fares are charged for
its passengers [Section 2(7) of Motor Vehicles Act, 1988].

36
[Link]

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 EXEMPTIONS FROM GST.63 4.63

Further, radio taxi means a taxi including a radio cab, by whatever name
called, which is in two-way radio communication with a central control office
and is enabled for tracking using the Global Positioning System or General
Packet Radio Service.
(32) Subroto has hired a non-air conditioned bus from Mohit Travels
for organising a recreation tour from Delhi to Jaipur. Transport of
passengers by a non-air-conditioned contract carriage are exempt from GST.
However, said transportation of passengers for tourism purposes is excluded
therefrom. Therefore, in the given case, passenger transportation services are
taxable.
Hiring of non-air conditioned contract carriages by firms for
transportation of their employees to and from work
Exemption under this clause would apply to passenger transportation services
by non-air conditioned contract carriages where transportation takes
place over pre-determined route on a pre-determined schedule. The
exemption shall not be applicable where contract carriage is hired for a
period of time, during which the contract carriage is at the disposal of the
service recipient and the recipient is thus free to decide the manner of usage
(route and schedule) subject to conditions of agreement entered into with
the service provider 37.
Clause (c)
 Passenger transportation services provided by a stage carriage other than air-
conditioned stage carriage are also exempt.
The term stage carriage means a motor vehicle constructed or adapted to
carry more than 6 passengers excluding the driver for hire or reward at
separate fares paid by or for individual passengers, either for the whole
journey or for stages of the journey [Section 2(40) of the Motor
Vehicles Act, 1988].
(33) The non-air conditioned buses are being operated by a State
Transport Corporation for carrying passengers within the State. The
passengers are being picked and dropped from and to various points by

37
Circular No. 177/09/2022 GST dated 03.08.2022

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 1.64 4.64 GOODS AND SERVICES TAX

issuing individual tickets to the passengers. Such services provided by said

State Transport Corporation are exempt from GST.
Proviso
It is important to note that in case where services of transport of passengers,
by non-air conditioned contract carriage other than radio taxi excluding
tourism, conducted tour, charter or hire or by non-air conditioned stage
carriage, are supplied through Electronic Commerce Operator (ECO) 38, such
services are not exempt from GST. Further, tax on such services shall be paid
by ECO.

 Services provided to the Central Government, by way of transport of

passengers by air, embarking from or terminating at a RCS airport, against
consideration in the form of viability gap funding are exempt.
A Regional Connectivity Scheme is introduced to facilitate / stimulate
regional air connectivity by making it affordable by supporting airline
operators through (1) concessions by Central Government/State
Governments and airport operators to reduce the cost of airline operations
on regional routes/other support measures and (2) financial (viability gap
funding or VGF) support to meet the gap, if any, between the cost of airline
operations and expected revenues on such routes.
Under RCS, the underserved airports of India are aimed to be connected to key
airports through cheap air flights that will cost ` 2,500 for per hour flight.

 Transportation of passengers by following specified modes of transport is

exempt:
(a) railways in a class other than—
(i) first class; or
(ii) an air-conditioned coach;

38
Provisions relating to ECOs have been discussed in detail in Chapter 12 –Electronic
Commerce Transactions in Module 2 of this Study Material.

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 EXEMPTIONS FROM GST.65 4.65

(b) metro, monorail or tramway;

(c) inland waterways;
(d) public transport, other than predominantly for tourism purpose, in a
vessel between places located in India; and
(e) metered cabs or auto rickshaws (including e-rickshaws).
The term metered cab means any contract carriage on which an automatic
device, of the type and make approved under the relevant rules by the State
Transport Authority, is fitted which indicates reading of the fare chargeable
at any moment and that is charged accordingly under the conditions of its
permit issued under the Motor Vehicles Act, 1988 and the rules made
thereunder (but does not include radio taxi).
The term E-rickshaw means a special purpose
battery powered vehicle of power not
exceeding 4000 watts, having three wheels for
carrying goods or passengers, as the case may
be, for hire or reward, manufactured,
constructed or adapted, equipped and
maintained in accordance with such
specifications, as may be prescribed in this behalf.
It is important to note that in case where service of
transport of passengers by metered cabs or auto
rickshaws (including e-rickshaws) are supplied through
ECO, such services are not exempt from GST. Further,
tax on such services shall be paid by ECO.
Clause (d) of Entry 17
As regards transportation of passengers by vessels in clause (d) of Entry 17
[See the table given above], the words ‘other than predominantly for
tourism purpose’ qualify the preceding words “public transport”.
This implies that to qualify for exemption under this entry, the public
transport by a vessel between places located in India should not be
predominantly for tourism purposes.
Normal public ships or other vessels that sail between places located in India
would be covered in this entry even if some of the passengers on board are

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 1.66 4.66 GOODS AND SERVICES TAX

using the service for tourism because predominantly, such service is not for
tourism purpose.

However, services provided by leisure/charter vessels/a cruise ship,

predominant purpose of which is tourism, would not be covered in here even
if some of the passengers in such vessels are not tourists.
(34) Services by way of transportation of passengers [not
predominantly for tourism purpose] on a vessel, from Kolkata to Port
Blair (mainland to island) or Port Blair to Neil Island (inter island) is covered
in clause (d) of Entry 17 since such transportation is between two places
located in India.
Where such public transport is owned by private operators, for instance,
private ferries used as means of transport from one island to another in
Andaman and Nicobar Islands, exemption under Entry 17(d) would apply to
tickets purchased for transportation from one point to another irrespective
of whether the ferry is owned or operated by a private sector enterprise or by
a PSU/government.
The expression ‘public transport’ used in this Entry only means that the
transport should be open to public. It can be privately or publicly owned. Only
exclusion is on transportation which is predominantly for tourism, such as
services which may combine with transportation, sightseeing, food and
beverages, music, accommodation such as in shikara, cruise etc 39.
8. Goods transportation services

Entry Description of services

No.

18 Services by way of transportation of goods-

(a) by road except the services of—
(i) a goods transportation agency;
(ii) a courier agency;
(b) by inland waterways.

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 EXEMPTIONS FROM GST.67 4.67

20 Services by way of transportation by rail or a vessel from one place

in India to another of the following goods –
(a) relief materials meant for victims of
natural or man-made disasters, calamities,
accidents or mishap;
(b) defence or military equipments;
(c) newspaper or magazines registered
with the Registrar of Newspapers;
(e) agricultural produce;
(f) milk, salt and food grain including flours, pulses and rice; and
(g) organic manure.

Goods Transport Agency (GTA) Service

21 Services provided by a goods transport agency, by

way of transport in a goods carriage of –
(a) agricultural produce;
(d) milk, salt and food grain including flour,
pulses and rice;
(e) organic manure;
(f) newspaper or magazines registered with the Registrar of
Newspapers;
(g) relief materials meant for victims of natural or man-made
disasters, calamities, accidents or mishap; or
(h) defence or military equipments.

21A Services provided by a GTA to an unregistered person, including an

unregistered casual taxable person, other than the following
recipients, namely: -
(a) any factory registered under/governed by the Factories Act, 1948; or
(b) any Society registered under the Societies Registration Act, 1860
or under any other law for the time being in force in any part of
India; or
(c) any Co-operative Society established by or under any law for the
time being in force; or
(d) any body corporate established, by or under any law for the time
being in force; or

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 1.68 4.68 GOODS AND SERVICES TAX

(e) any partnership firm whether registered or not under any law
including association of persons;
(f) any casual taxable person registered under the Central Goods
and Services Tax Act or the Integrated Goods and Services Tax Act
or the State Goods and Services Tax Act or the Union Territory
Goods and Services Tax Act.

21B Services provided by a GTA, by way of transport of goods in a goods

carriage, to, -
(a) a Department or Establishment of the Central Government or
State Government or Union territory; or
(b) local authority; or
(c) Governmental agencies, which has taken registration under the
Central Goods and Services Tax Act, 2017 only for the purpose
of deducting tax under section 51 and not for making a taxable
supply of goods or services.

ANALYSIS

Exemptions granted to transport of

specified goods through rail or a vessel or
a by GTA in goods carriage** are presented
in the following table:

Transportation of the following goods by rail / vessel / GTA in goods

carriage is exempt

(a) agricultural produce

(b) milk, salt and food grain including flours, pulses and
rice
(c) organic manure
(d) newspaper or magazines registered with the Registrar of
Newspapers

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 EXEMPTIONS FROM GST.69 4.69

(e) relief materials meant for victims of natural or man-

made disasters, calamities, accidents or mishap
(f) defence or military equipments

**Goods carriage means any motor vehicle constructed or adapted for use solely
for the carriage of goods, or any motor vehicle not so constructed or adapted when
used for the carriage of goods.

 The services of transportation of goods by road are

exempt from GST under Entry 18. Services of GTA
and courier services are an exception to this
exemption. However, GTA services provided to an
unregistered person [including unregistered casual
taxable person 40] are exempt from GST by virtue of Entry 21A.
 Further, GTA services provided to registered casual taxable person and
following persons, whether being a casual taxable person or not, even if
unregistered under GST law, are liable to tax:
(i) a factory registered under Factories Act,
(ii) society registered under Societies Act,
(iii) Co-operative society,
(iv) body corporate and
(v) partnership firm including AOP.
 In other words, the GTA services provided to only an unregistered individual
end consumer and unregistered casual taxable persons are exempt from GST.
 Thus, GTA services provided to:
 person registered under GST law & registered casual taxable person,
and

40
The concept of ‘casual taxable person’ has been discussed in detail in Chapter 8 –
Registration in Module 2 of this Study Material.

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 1.70 4.70 GOODS AND SERVICES TAX

 a factory registered under Factories Act, society registered under

Societies Act, Co-operative society, body corporate and partnership
firm including AOP – whether or not registered under GST law,
are liable to tax.
 Transportation of goods service provided by GTA in a goods carriage, to a
Central/State Government (Union Territory) Department or Establishment or
local authority or Governmental agencies which has taken registration under
GST law only for the purpose of deducting TDS under section 51 and not for
making a taxable supply of goods or services are exempt under Entry 21B.
Before proceeding further, we shall now understand the meaning of GTA:

Who is a GTA?

Who is a GTA – Goods Transport Agency?

Let us understand the meaning of Goods Transport agency (GTA). Goods
transport agency has been defined in the Notification to mean any person
who:
 provides service in relation to transport of goods by road and
 issues consignment note, by whatever name called.
 Thus, it can be seen that issuance of a consignment note is the sine-qua-
non for a supplier of service to be considered as a GTA. If such a
consignment note is not issued by the transporter, the service provider will
not come within the ambit of GTA.
 If a consignment note is issued, it indicates that the lien on the goods
has been transferred (to the transporter) and the transporter becomes
responsible for the goods till its safe delivery to the consignee. It is only the
services of such GTA, which assumes agency functions, that has been brought
into the GST net.

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 EXEMPTIONS FROM GST.71 4.71

 Individual truck/tempo operators who do not issue any consignment

note are not covered within the meaning of the term GTA. As a result, the
services provided by such individual transporters who do not issue a
consignment note will be covered by the entry at Entry 18, which are exempt
from GST.
(35) Hari Prasad owns a single truck and operates it himself. He
carries the goods booked for his truck without issuance of
consignment note. Services provided by Hari Prasad by way of
transportation of goods by road are exempt under Entry 18.
 Consignment note means a document, issued by a GTA against the receipt
of goods for the purpose of transport of goods by road in a goods carriage,
which is serially numbered, and contains:
 the name of the consignor and consignee,
 registration number of the goods carriage in which
the goods are transported,
Consignment
 details of the goods transported, Note
 details of the place of origin and destination,

 gross weight of the consignment;

 GSTIN of the person liable for paying tax whether consignor, consignee
or GTA
 other particulars as prescribed for a tax invoice 41.
Significance of the term ‘in relation to’ in the definition of GTA
The use of the phrase ‘in relation to’ has extended the scope of the definition of
GTA. It includes not only the actual transportation
of goods, but also various intermediary and
ancillary services, such as, loading/ unloading,
packing/ unpacking, transshipment and temporary warehousing, which are
provided in the course of transport of goods by road.

41
Meaning of GTA and consignment note elaborated in foregoing paras is primarily based
on CBIC GST flyer - Chapter 38 – Goods Transport Agency in GST.

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 1.72 4.72 GOODS AND SERVICES TAX

These services are not provided as independent services

but as ancillary to the principal service, namely,
transportation of goods by road. The invoice issued by
the GTA for providing the said service includes the value
of intermediary and ancillary services.

It is clarified by CBIC that ancillary or incidental services provided by GTA in the

course of transportation of goods by road, such as loading/unloading,
packing/unpacking, transshipment, temporary warehousing etc. will be treated as
composite supply of transport of goods.

The method of invoicing used by GTAs will not generally alter the nature of the
composite supply of service.

However, if such services are not provided in the course of transportation of goods
and are invoiced separately, then these services will not be treated as composite
supply of transport of goods 42.
What is courier agency?
Courier agency has been defined in the Notification to
mean any person engaged in the door-to-door
transportation of time-sensitive documents, goods or
articles utilising the services of a person, either directly or
indirectly, to carry or accompany such documents, goods or
articles.
Express cargo service: Some transporters undertake door-to-door transportation
of goods or articles and they have made special arrangements for speedy
transportation and timely delivery of such goods or articles.
Such services are known as ‘Express Cargo Service’ with assurance of timely
delivery. The nature of service provided by ‘Express Cargo Service’ falls within the
scope and definition of the courier agency. Hence, the said service relating to
transportation of goods by road is not exempt.

42
As clarified in answer to question no. 6 of CBIC FAQs on Transport & Logistics read with
Circular No. 234/28/2024 GST dated 11.10.2024.

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 EXEMPTIONS FROM GST 4.73

Transport of minerals within a mining area by vehicles deployed with driver

for a specific duration of time
The issue which arose for consideration was whether
transport of minerals within a mining area, say from
mining pit head to railway siding, beneficiation plant
etc., by vehicles deployed with driver for a specific
duration of time would be covered under Entry 18 which
exempts transport of goods by road except by a GTA.
Usually in such cases the vehicles such as tippers,
dumpers, loader, trucks etc., are given on hire to
the mining lease operator. Expenses for fuel are
generally borne by the recipient of service. The
vehicles with driver are at the disposal of the
mining lease operator for transport of minerals
within the mine area (mining pit to railway siding,
beneficiation plant etc.) as per his requirement
during the period of contract.

Such services are nothing but “rental services of

transport vehicles with operator”. The person
who takes the vehicle on rent defines how and
when the vehicles will be operated, determines
schedules, routes and other operational
considerations.
The person who gives the vehicles on rent with
operator cannot be said to be supplying the service by way of transport of goods.
Accordingly, it is clarified that such

Consequently, it
is not eligible for exemption under Entry 18 42.

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9. Banking and financial services

Entry Description of services

No.
27 Services by way of—
(a) extending deposits, loans or advances in so far as the
consideration is represented by way of interest or discount (other
than interest involved in credit card services);
(b) inter se sale or purchase of foreign currency amongst banks or
authorised dealers of foreign exchange or amongst banks and such
dealers.
27A Services provided by a banking company to Basic Saving Bank Deposit
account holders under Pradhan Mantri Jan Dhan Yojana (PMJDY).
34 Services by an acquiring bank, to any person in relation to settlement of an
amount upto ` 2,000 in a single transaction transacted through credit
card, debit card, charge card or other payment card service.
Explanation.— For the purposes of this entry, “acquiring bank” means any
banking company, financial institution including non-banking financial
company or any other person, who makes the payment to any person who
accepts such card.
39A Services by an intermediary of financial services located in a multi services
SEZ with International Financial Services Centre (IFSC) status to a customer
located outside India for international financial services in currencies other
than Indian rupees (INR).
Explanation.- For the purposes of this entry, the intermediary of financial
services in IFSC is a person,-
(i) who is permitted or recognised as such by the Government of India
or any Regulator appointed for regulation of IFSC; or
(ii) who is treated as a person resident outside India under the Foreign
Exchange Management (International Financial Services Centre)
Regulations, 2015; or
(iii) who is registered under the Insurance Regulatory and Development
Authority of India (International Financial Service Centre) Guidelines,
2015 as IFSC Insurance Office; or
(iv) who is permitted as such by Securities and Exchange Board of India
(SEBI) under the Securities and Exchange Board of India
(International Financial Services Centres) Guidelines, 2015.

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 EXEMPTIONS FROM GST 4.75

ANALYSIS
Banks and financial institutions provide a bouquet of
financial services relating to lending or borrowing of
money or investments in money.
Specified banking services exempt from GST vide Entry 27
have been discussed below:
(A) Services by way of extending deposits, loans or advances in so far as
the consideration is represented by way of interest or discount: This
entry covers any such service wherein moneys due are
allowed to be used or retained on payment of interest or
on a discount. The words used are ‘deposits, loans or
advances’ and have to be taken in the generic sense.
They would cover any facility by which an amount of money is lent or
allowed to be used or retained on payment of what is commonly called
the time value of money which could be in the form of an interest or a
discount. This entry would not cover investments by way of equity or any
other manner where the investor is entitled to a share of profit.
Interest: means interest payable in any manner in
respect of any moneys borrowed or debt incurred
(including a deposit, claim or other similar right or
obligation) but does not include any service fee or
other charge in respect of the moneys borrowed or debt incurred or in respect
of any credit facility which has not been utilized.
 Illustrations of services exempt under Entry 27 are -
 Fixed deposits or saving deposits or any other such
deposits in a bank or a financial institution for
which return is received by way of interest.
 Providing a loan or overdraft facility or a credit limit
facility in consideration for payment of interest.
 Mortgages or loans with a collateral security to the
extent that the consideration for advancing such
loans/advances are represented by way of interest.

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 Corporate deposits to the extent that the

consideration for advancing such loans or advances
are represented by way of interest or discount.
 Invoice discounting/cheque discounting or any other
similar form of discounting is covered only to the extent consideration
is represented by way of discount as such discounting is a manner of
extending a credit facility or a loan.
 Service charges/ fees, documentation fees, broking charges,
administrative charges, entry charges or such like fees or charges
collected over and above interest on loan, advance or a deposit are
not exempt and liable to GST.
Similarly, if some service charges or service fees or documentation fees
or broking charges or such like fees or charges are charged on a
derivative/ future contract/ forward contract/ invoice or cheque
discounting, the same would be a consideration for supply of service
and liable to GST.
(36) Subhashini Bank has collected processing fees from its
customers on sanction of loan to them. Interest does not
include processing fee on sanction of the loan. Hence, the processing
fee is not covered in Entry 27 and is thus, taxable.
Similarly, minimum balance charges collected by the bank from current
account and saving account holders are considered as charges collected
over and above interest on loan. Hence, the same are not covered in
Entry 27 and is thus, taxable.
 Any interest/ delayed payment charges charged to clients for delay
in payment of brokerage amount/
settlement obligations/ margin
trading facility: is exempt from GST
since settlement obligations/ margin
trading facilities are transactions
which are in the nature of extending
loans or advances and are covered by
Entry 27 43.

43
As clarified vide FAQs on Banking, Insurance and Stock Brokers Sector issued by CBIC.

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 EXEMPTIONS FROM GST 4.77

 Charges for late payment of

outstanding dues on credit card:
Interest charged on outstanding
credit card balances has been
specifically excluded from Entry 27.
Hence, the same is liable to GST.
(37) Tanatan Bank collects interest on credit card issued to its
customers by it. Interest involved in credit card services is
specifically excluded from Entry 27 & is thus, taxable.
 Collateralized Borrowing
and Lending Obligations
(CBLO) transactions: In CBLO
transaction, the borrowing
bank pays an amount as
consideration to the lending
bank for funds provided by it
for a short term. Such amount would qualify as 'consideration represented
by way of interest or discount' and hence, would exempt from GST under
Entry 27.
However, if any charges or fees are levied for such transactions, the
same would be a consideration and would be liable to GST.
 Instruments like repos and reverse repos: Repos and reverse repos 44
are financial instruments of short-term call
money market that are normally used by banks
to borrow from or lend money to RBI. The
margins, called the repo rate or reverse repo
rate, in such transactions are nothing but
interest charged for lending or borrowing of
money. Thus, they have the characteristics of loans and deposits for
interest and are accordingly exempt from GST under Entry 27.

44
Section 45U(c) of the RBI Act, 1934 defines ‘repos’ as an instrument for borrowing funds by
selling securities with an agreement to repurchase the securities on a mutually agreed future
date at an agreed price which includes interest for the funds borrowed. Section 45U (d) of the
RBI Act, 1934 defines ‘reverse repos’ as an instrument for lending funds by buying securities
with an agreement to re-sell the securities on a mutually agreed future date at an agreed
price which includes interest for the funds lent.

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 Income from Commercial Paper (CP) or

Certificates of Deposit (CD): As already
seen in Chapter 1 – Supply under GST in
this Module of the Study Material, the
transactions in Commercial Paper (‘CP’)
and Certificate of Deposit (‘CD’) are in the
nature of promissory notes. Consequently,
they are included in the term ‘money’ and
hence, are not chargeable to GST.
With regard to income from CPs or CDs, since these are the instruments
for lending or borrowing money wherein consideration is represented
by way of a discount or subscription to CPs or CDs, the same would be
covered by entry 27 and is not liable to GST.
However, if some service charges or service
fees or documentation fees or broking
charges or such like fees or charges are
charged, the same would be a consideration
for supply of services and liable to GST.
 Assignment or sale of secured or unsecured debts: As seen in
Chapter 1 – Supply under GST in this Module of the
Study Material, only actionable claims in respect of
lottery, betting and gambling would be taxable
under GST. Where sale, transfer or assignment of
debts falls within the purview of actionable claims,
the same .

Further, any charges collected in the course of transfer or assignment

of a debt would be chargeable to GST, being in the nature of
consideration for supply of services.
 Interest on debt instruments: As debt instruments such as
debentures, bonds etc. are in the nature of loans, interest thereon will
be .

 Interest on a finance lease transaction: A finance lease is a method

of borrowing against the asset. The interest represents the time value
of the money expended by the bank in financing the asset.

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 EXEMPTIONS FROM GST 4.79

However, in a financial lease the ownership of the asset is with the bank.
In essence, it is a ‘purchase the asset and lend it further’ transaction for
bank.

Therefore, neither the services are purely in the nature of extending

loans nor the consideration for a financial lease is purely in the nature
of interest. Thus, interest on finance lease transactions
under GST.
 Transactions where loan of one bank is taken over by another bank:
GST will be payable on any transaction processing fees levied for such
takeover of loans, but not on the interest component (as interest is
exempted).
 Interchange fees on card settlement fees paid/ shared by banks:
Fees charged for card settlement is a consideration which is part of a
separate transaction between the banks which are parties to this
transaction and shall be .

 Securitization transactions undertaken by banks: Securitized assets

are in the nature of securities and
hence are not subject to GST.
However, if some service charges or
service fees or documentation fees or
broking charges or such like fees or
charges are charged, the same would
be a consideration for provision of
services related to securitization and
would be liable to GST.
 Additional/ penal interest on the overdue loan: In cases where the
Equated Monthly Instalment (EMI) 45 is not paid at the scheduled time,
there is a levy of additional/ penal interest on account of delay in
payment of EMI.

45
An Equated Monthly Instalments (EMI) is a fixed amount paid by a borrower to a lender at
a specified date every calendar month. EMIs are used to pay off both interest and principal
every month, so that over a specified period, the loan is fully paid off along with interest.

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There may arise a doubt as to whether this additional / penal interest

on the overdue loan is exempt under Entry 27 or such penal interest is
to be treated as consideration for liquidated damages [amounting to a
separate taxable supply of services under GST covered under para 5(e)
of Schedule II of the CGST Act, 2017 i.e. “agreeing to the obligation to
refrain from an act, or to tolerate an act or a situation, or to do an act”].
There are two transaction options involving EMI that are prevalent in
the trade. These two options, alongwith the GST applicability on them,
have been explained with the help of illustrations as under -
(38) X sells a mobile phone to Y. The cost of mobile phone is
` 40,000. However, X gives Y an option to pay in installments,
` 11,000 every month before 10th day of the following month,
over next four months (` 11,000 × 4 = ` 44,000). As per the contract, if
there is any delay in payment by Y beyond the scheduled date, Y would
be liable to pay additional/ penal interest amounting to ` 500/- per
month for the delay.
In some instances, X is charging Y ` 40,000 for the mobile and is
separately issuing another invoice for providing the services of
extending loans to Y, the consideration for which is the interest of 2.5%
per month and an additional/ penal interest amounting to ` 500 per
month for each delay in payment.
In this case, the amount of penal interest is to be included in the value
of supply 46. The transaction between X and Y is for supply of taxable
goods i.e. mobile phone. Accordingly, the penal interest would be
taxable as it would be included in the value of the mobile, irrespective
of the manner of invoicing.
(39) X sells a mobile phone to Y. The cost of mobile phone is
` 40,000. Y has the option to avail a loan at interest of 2.5%
per month for purchasing the mobile from M/s. ABC Ltd. The
terms of the loan from M/s. ABC Ltd. allows Y a period of four months
to repay the loan and an additional/ penal interest @ 1.25% per month
for any delay in payment.

46
Here, the amount of penal interest is to be included in the value of supply in terms of the
provisions of section 15(2)(d). Section 15(2)(d) provides that the value of supply shall include
interest or late fee or penalty for delayed payment of any consideration for any supply. The
provisions of section 15 have been discussed in detail in Chapter 6: Value of Supply in this
Module of the Study Material.

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 EXEMPTIONS FROM GST 4.81

Here, the additional/ penal interest is charged for a transaction between

Y and M/s. ABC Ltd., and the same is getting covered under exemption
Entry 27. Consequently, in this case the 'penal interest' charged thereon
on a transaction between Y and M/s. ABC Ltd. would not be subject to
GST as the same would be covered under said exemption entry.
However, any service fee/ charge or any other charges, if any, are levied
by M/s. ABC Ltd. in respect of the transaction related to extending
deposits, loans or advances does not qualify to be interest as defined
in exemption notification, and accordingly will not be exempt.
Moreover, the value of supply of mobile by X to Y would be
` 40,000 for the purpose of levy of GST.
Since this levy of additional/ penal interest satisfies the definition of
“interest” as contained in Entry 27 above, the same cannot be treated
as consideration for liquidated damages. Consequently, transaction of
levy of additional/ penal interest does not fall within the ambit of
Schedule II i.e. “agreeing to the obligation to refrain from an act, or to
tolerate an act or a situation, or to do an act” 47 [Circular No.
102/21/2019-GST dated 28.06.2019].
Granting of loan by a person to a related person or by an
overseas affiliate to its Indian entity, where the consideration
being paid is only by way of interest or discount48
In case where loan is granted by a person to a related person or by an
overseas affiliate to its Indian entity, it may not require to follow credit
assessment processes as are followed by an independent lender; i.e.,
there may not be the activity of 'processing' the loan, and no
consideration in the nature of processing fee/administrative
charges/loan granting charges etc. is involved in granting such a loan.
Therefore, services of processing the loans by banks/independent
lenders vis-à-vis the loans provided by a related party cannot be placed
on equal footing. Accordingly, in the cases, where no consideration is
charged by the person from the related person, or by an overseas
affiliate from its Indian party, for extending loan/credit, other than by
way of interest/discount, it cannot be deemed to be a “Supply of

47
Schedule II of the CGST Act, 2017 has been discussed in detail in Chapter 1 – Supply under GST in
this Module of the Study Material.
48
Circular No. 218/12/2024 GST dated 26.06.2024

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 1.82 4.82 GOODS AND SERVICES TAX

service” between the said related persons in the form of

processing/facilitating/administering the loan in terms of section 7(1)(c)
read with paras 2 and 4 of Schedule I of the CGST Act, 2017 49.
(B) Services provided by banks or authorized dealers of foreign exchange
by way of sale of foreign exchange: The term ‘authorised dealer of
foreign exchange’ means an authorised dealer,
money changer, off-shore banking unit or any
other person for the time being authorised under
section 10(1) of FEMA, 1999 to deal in foreign
exchange or foreign securities [Section 2(c) of the Foreign Exchange Management Act,
1999] .

It is important to note that such services provided to general public will not
be covered in this entry as this entry only covers sale or purchase of foreign
exchange:-
(i) amongst banks or
(ii) amongst authorized dealers of foreign exchange or
(iii) amongst banks and such dealers.
Services provided by commercial banks to RBI would be taxable as these are
not covered by any of the exemptions/exclusions under the GST law
Clarification in respect of exemption to payment aggregators in
relation to settlement of an amount, up to ` 2,000 in a single
transaction, transacted through credit card, debit card, charge card
or other payment card services
Issue
Whether exemption under Entry 34 of exemption notification is available
to payment aggregators in relation to settlement of an amount, up to
` 2,000 in a single transaction, transacted through credit card, debit card,
charge card or other payment card services?
Clarification
Payment Aggregators (PAs) are entities that facilitate ecommerce sites
and merchants to accept various payment instruments from their

49
Section 7 of the CGST Act, 2017 and Schedule I has already been discussed in Chapter-2
”Supply under GST” in this Module of the Study material.

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 EXEMPTIONS FROM GST 4.83

customers without the need for the e-commerce sites and merchants to
create a separate payment integration system of their own. In the
process, PAs receive payments from customers, pool and transfer them
on to the merchants within a specified time period.
Entry 34 provides exemption to services by an acquiring bank, to any
person in relation to settlement of an amount upto ` 2,000 in a single
transaction transacted through credit card, debit card, charge card or
other payment card service.
Here, “Acquiring bank” means any banking company, financial
institution including non-banking financial company or any other
person, who makes the
payment to any person
who accepts such card.
PAs receive payments
from customers in an
escrow account and are
obligated to do the final
settlement with the
merchant within time
periods specified by
RBI 50. Therefore, the RBI
regulated PAs, involved
in the settlement
process of making
payments to the
merchant, are covered
by the second part of the
definition of acquiring bank, i.e. "any other person, who makes the
payment to any person who accepts such card”.
Payment Gateways (PGs) are defined as entities that provide technology
infrastructure to route and facilitate processing of an online payment
transaction without any involvement in handling of funds.

50
Clause 8 of the RBI's Guidelines on Regulation of Payment Aggregators and
Payment Gateways, dated 17-3-2020, pertaining to 'Settlement and Escrow Account
Management'

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 1.84 4.84 GOODS AND SERVICES TAX

Since they handle

settlements, RBI
regulates PAs.
PAs fall under the acquiring
bank category. “Any person
who makes the payment to
the person who accepts
such card”.

Payment Merchant
Aggregator
Customer
Customer makes a payment Within RBI-specified
using a card or UPI timelines, the PA settles
the payment to the
merchant

Escrow Account
The PA receives the payment
into an escrow account

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 EXEMPTIONS FROM GST 4.85

It has been clarified that PAs fall within

the definition of ‘acquiring bank’ given in Exemption
the Explanation to the said exemption available to RBI
entry as they make the payment to the regulated Payment
merchants who accept credit cards, debit Aggregators.
cards, charge cards or other payment card
services. Consequently, exemption under Entry 34 is available to RBI
regulated Payment Aggregators (PAs) in relation to settlement of an
amount, up to ` 2,000 in a single transaction, transacted through credit
card, debit card, charge card or other payment card services.
It is also clarified that this exemption is limited to payment settlement
function only, which involves handling of money, and does not cover
Payment Gateway (PG) services.

10. Life insurance business services

Entry Description of services

No.

28 Services of life insurance business provided by way

of annuity under the National Pension System
regulated by the Pension Fund Regulatory and
Development Authority of India (PFRDA) under the
Pension Fund Regulatory and Development Authority Act, 2013.

29 Services of life insurance business provided or agreed to be provided

by the Army, Naval and Air Force Group Insurance Funds to
members of the Army, Navy and Air Force, respectively, under the
Group Insurance Schemes of the Central Government.

29A Services of life insurance provided or agreed to be provided by the

Naval Group Insurance Fund to the personnel of Coast Guard under
the Group Insurance Schemes of the Central Government.

29B Services of life insurance provided/agreed to be provided by the

Central Armed Police Forces (under Ministry of Home Affairs) Group
Insurance Funds to their members under the Group Insurance Schemes
of the concerned Central Armed Police Force.

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 1.86 4.86 GOODS AND SERVICES TAX

36 Services of life insurance business provided under following schemes-

(a) Janashree Bima Yojana;
(b) Aam Aadmi Bima Yojana;
(c) Life micro-insurance product** as approved by the Insurance
Regulatory and Development Authority, having maximum amount
of cover of ` 2,00,000;
(d) Varishtha Pension Bima Yojana;
(e) Pradhan Mantri Jeevan Jyoti Bima Yojana;
(f) Pradhan Mantri Jan Dhan Yojana;
(g) Pradhan Mantri Vaya Vandan Yojana.
**Life micro-insurance product means any term insurance contract
with/without return of premium, any endowment insurance contract
or health insurance contract, with/without an accident benefit rider,
either on individual/group basis, as per terms stated in Schedule-II
appended to the regulations [Regulation 2(e) of the Insurance Regulatory and
Development Authority (Micro-insurance) Regulations, 2005].

11. Services provided by specified bodies

Entry Description of services

No.

30 Services by the Employees’ State Insurance Corporation to

persons governed under the Employees’ State Insurance Act,
1948.

31 Services provided by the Employees Provident Fund

Organisation to the persons governed under the Employees
Provident Funds and the Miscellaneous Provisions Act, 1952.

31A Services by Coal Mines Provident Fund Organisation to

persons governed by the Coal Mines Provident Fund and
Miscellaneous Provisions Act, 1948.

31B Services by National Pension System (NPS) Trust to its

members against consideration in the form of
administrative fee.

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 EXEMPTIONS FROM GST 4.87

12. General insurance business services

Entry Description of services

No.

35 Services of general insurance business provided under following

schemes –
(a) Hut Insurance Scheme;
(b) Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna 51;
(c) Scheme for Insurance of Tribals;
(d) Janata Personal Accident Policy and Gramin Accident Policy;
(e) Group Personal Accident Policy for Self-Employed Women;
(f) Agricultural Pumpset and Failed Well Insurance;
(g) premia collected on export credit insurance;
(h) Restructured Weather Based Crop Insurance Scheme (RWCIS),
approved by the Government of India and implemented by the
Ministry of Agriculture;
(i) Jan Arogya Bima Policy;
(j) Pradhan Mantri Fasal Bima Yojana (PMFBY);
(k) Pilot Scheme on Seed Crop Insurance;
(l) Central Sector Scheme on Cattle Insurance;
(m) Universal Health Insurance Scheme;
(n) Rashtriya Swasthya Bima Yojana;
(o) Coconut Palm Insurance Scheme;
(p) Pradhan Mantri Suraksha Bima Yojna;
(q) Niramaya Health Insurance Scheme implemented by the Trust
constituted under the provisions of the National Trust for the
Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation
and Multiple Disabilities Act, 1999.
(r) Bangla Shasya Bima

51
earlier known as Integrated Rural Development Programme

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36A Services by way of reinsurance of the insurance schemes specified in

serial number 35 or 36 or 40 52.
“Retrocession” means a re-insurance transaction whereby a part of
assumed reinsured risk is further ceded to another Indian Insurer or a
CBR (Cross Border Re-insurer). It has been clarified 53 that the term
“reinsurance” includes “retrocession” services.
36B Services of insurance provided by the Motor Vehicle Accident Fund,
constituted under section 164B of the Motor Vehicles Act, 1988,
against contributions made by insurers out of the premiums
collected for third party insurance of motor vehicles.

13. Pension schemes

Entry Description of services

No.
37 Services by way of collection of contribution under the
Atal Pension Yojana.

38 Services by way of collection of contribution under any pension scheme

of the State Governments.

14. Business facilitator/correspondent

Entry 39: Services by the following persons in respective capacities –
(a) business facilitator or a business correspondent to a banking company with
respect to accounts in its rural area branch;
(b) any person as an intermediary to a business facilitator or a business
correspondent with respect to services mentioned in entry (a); or
(c) business facilitator or a business correspondent to an insurance company in
a rural area.

52
Entry 40 is discussed subsequently under heading 15. ‘Services provided to Government’.
53
Circular No. 228/22/2024 GST dated 15.07.2024

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 EXEMPTIONS FROM GST 4.89

ANALYSIS
It is still a big challenge for India to make the financial services accessible in rural
areas. In many rural areas, either there are no banks or number of banks is
insufficient. In order to counter this problem and ensure greater financial inclusion,
the Reserve Bank of India (RBI) introduced the Business Correspondents and
Business Facilitator Model through guidelines in 2006 allowing banks to employ
two categories of intermediaries – known as Business facilitators (BFs) and Business
correspondents (BCs).
BCs / BFs help villagers to open bank accounts and provide other banking services
to them. They act as an intermediary between the bank and its customers. Banks,
in turn, pay commission/ fee to the BCs/BFs.
According to the RBI guidelines, while the BCs are permitted to carry out
transactions on behalf of the bank as agents, the BFs can refer clients, pursue the
clients’ proposal and facilitate the bank to carry out its transactions, but cannot
transact on behalf of the bank 54.
Similarly, insurance companies engage the BCs/BFs to provide the insurance
services in remote areas.
Entry 39 exempts the services provided by BF/BC to a banking company with
respect to accounts in its rural area branch and services provided by any person as
an intermediary to a BF/BC with respect to said services are exempt from GST.
Further, the services provided by BF/BC to an insurance company in a rural area are
also exempt.
It is important to note that for the purpose of availing exemption from GST under
this Entry, services provided by a BF/BC to a banking company in their respective
individual capacities should be with respect to accounts in a branch located in the
of the banking company.

54
BFs provide a wide range of services including identification of borrowers and fitment of
activities, collection and preliminary processing of loan applications, processing and
submission of applications to banks, follow-up for recovery, etc. BCs, in addition to these
activities, also undertake disbursal of small value credit, recovery of principal / collection of
interest, collection of small value deposits, sale of micro insurance/ mutual fund products/
pension products/ other third-party products, receipt and delivery of small value remittances/
other payment instruments, etc.

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 1.90 4.90 GOODS AND SERVICES TAX

Wherever the services provided by BF/BC to banking company and services

provided by intermediary of BF/BC to BF/BC do not fall within the scope of this
entry, GST is payable on such services.
However, the banking company is the person liable to pay GST under reverse
charge in respect of commission/fees charged for the taxable services provided by
BF to a banking company. Similarly, GST on taxable services provided by an agent
of BC to BC is payable under reverse charge by the BC 55.

Liable to
pay tax
Business facilitator Services provided to Banking Company

Agent of Business Services provided to

Business Liable to
Correspondent Correspondent pay tax

Further, as seen above, as per RBI’s guidelines, banks may pay reasonable
commission/fee to the BC. The agreement of banks with the BC specifically
prohibits them from directly charging any fee to the customers for services
rendered by them on behalf of the bank. On the other hand, banks (and not BCs)
are permitted to collect reasonable service charges from the customers for such
service in a transparent manner.
The arrangements of banks with the BCs specify the requirement that the
transactions are accounted for and reflected in the bank's books by end of the day
or the next working day, and all agreements/contracts with the customer shall
clearly specify that the bank is responsible to the customer for acts of omission and
commission of the BF/BC.
Hence, banking company is the service provider to the ultimate customer in the BF
model/BC model. The banking company is liable to pay GST on the entire value of
service charge or fee charged to customers whether or not received via BF/BC 56..

55
Provisions relating to reverse charge mechanism have been discussed in detail in
Chapter 2 – Charge of GST in this Module of the Study Material.
56
Circular No. 86/05/2019 GST dated 01.01.2018

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 EXEMPTIONS FROM GST 4.91

Some relevant definitions under this entry are as follows:

 Insurance company: means a company carrying on life insurance business
or general insurance business.
 Insurer : "Insurer" has the same meaning as assigned to it in sub-section
(9) of section 2 of the Insurance Act, 1938.
As per Section 2(9) of the Insurance Act, 1938, "Insurer" means—
(a) an Indian Insurance Company, or
(b) a statutory body established by an Act of Parliament to carry on
insurance business, or

(c) an insurance co-operative society, or

(d) a foreign company engaged in re-insurance business through a
branch established in India. Explanation — For the purposes of this
sub-clause, the expression “foreign company” shall mean a
company or body established or incorporated under a law of any
country outside India and includes Lloyd’s established under the
Lloyd’s Act, 1871 (United Kingdom) or any of its Members
 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) of the IGST Act, 2017].
 Rural area: means the area comprised in a village as defined in land revenue
records, excluding the area under any municipal committee, municipal
corporation, town area committee, cantonment board or notified area
committee; or any area that may be notified as an urban area by the Central
Government or a State Government.
 Exemption Notification defines BF/BC as an intermediary appointed under the
BF model or BC model by a banking company or an insurance company under
the guidelines issued by the RBI.

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 1.92 4.92 GOODS AND SERVICES TAX

15. Services provided to Government

Entry Description of services

No.

3 Pure services provided TO Government:

 Pure services (excluding works contract service or other
composite supplies involving supply of any goods)
 provided to the Central Government, State Government or Union
territory or local authority
 by way of any activity:
 in relation to any function entrusted to a Panchayat under
article 243G of the Constitution or
 in relation to any function entrusted to a Municipality under
article 243W of the Constitution.

3A Composite supply of goods and services TO Government:

 Composite supply of goods and services in which the value of
supply of goods constitutes not more than 25% of the value of
the said composite supply
 provided to the Central Government, State Government or Union
territory or local authority
 by way of any activity:
 in relation to any function entrusted to a Panchayat under
article 243G of the Constitution or
 in relation to any function entrusted to a Municipality under
article 243W of the Constitution.

3B Services provided to a Governmental Authority by way of —

(a) water supply;
(b) public health;
(c) sanitation conservancy;
(d) solid waste management; and
(e) slum improvement and upgradation.

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 EXEMPTIONS FROM GST 4.93

11A Service provided by Fair Price Shops to Central

Government, State Government or Union territory by way
of sale of food grains, kerosene, sugar, edible oil, etc.
under Public Distribution System against consideration in
the form of commission or margin.

40 Services provided to the Central Government, State Government, Union

territory under any insurance scheme for which total premium is paid
by the Central Government, State Government, Union territory.

72 Services provided to the Central Government, State Government, Union

territory administration under any training programme for which 75%
or more of the total expenditure is borne by the Central Government, State
Government, Union territory administration.
It is clarified 57 that free coaching services provided
by coaching institutions and NGOs under the
central scheme of “Scholarships for students with
Disabilities” where 75% or more of the
expenditure 58 is borne by the Government to coaching institutions by way
of grant in aid is covered under this entry and hence is exempt from GST.

ANALYSIS
Broadly speaking, Entry 3 exempts the supply of ‘pure services’ and Entry 3A
exempts ‘composite supply goods and services’, made to Government. Let us first
understand what ‘supply of pure services’ and ‘composite supply of goods and
services’ mean under these entries.

57
vide Circular No. 164/20/2021 GST dated 06.10.2021
58
This circular was issued prior to amendment in Entry 72 when the exemption was available
only when total expenditure under the training programme was borne by the Central
Government, State Government, Union territory administration.
However, as seen earlier in this chapter, Entry 72 has subsequently been amended and now
exemption is available even when 75% or more of the total expenditure under the training
programme is borne by the Central Government, State Government, Union territory
administration.
Hence, the words “total expenditure” have been substituted with “75% or more of the total
expenditure” in the above discussion pertaining to circular.

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 1.94 4.94 GOODS AND SERVICES TAX

Supply of ‘pure services’ means supply of services without involving any supply of
goods. ‘Composite supply of goods and services’ means supply of both goods
and services. Entry 3A exempts composite supply goods and services to
Government provided the value of supply of goods constitutes not more than 25%
of value of such composite supply.
Let us understand the concept of supply of ‘pure services’ and ‘composite supply
of goods and services’ to Government by following examples:

(40) Supply of manpower for cleanliness of roads, public places, architect

services, consulting engineer services, advisory services, and like services
provided by business entities not involving any supply of goods would be treated
as supply of pure services.
(41) A local authority awards the work of maintenance of street-lights in
a Municipal area to an agency which involves apart from maintenance,
replacement of defunct lights and other spares. In this case, the scope of the service
involves maintenance work and supply of goods, i.e. composite supply of goods
and services 59.
Moreover, such services (whether pure or composite) must be provided to the
Central Government, State Government or Union territory or local authority by way
of any activity in relation to any function entrusted to a:
(i) Panchayat under article 243G of the Constitution (listed in 11th Schedule to
the Constitution) or
(ii) Municipality under article 243W of the Constitution (listed in 12th Schedule
to the Constitution).
In view of the same, it is clarified that if pure services & composite supplies procured
by Indian Army or any other Government Ministry/Department which does not
perform any functions listed in the 11th and 12th Schedule above, in the manner as a
local authority does for the general public, the same are not eligible for exemption
under Entries 3 and 3A 60.

59
As clarified vide question 25 of CBIC FAQs on Government Services
60
Circular No. 177/09/2022 GST dated 03.08.2022

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 EXEMPTIONS FROM GST 4.95

Clarification in respect of applicability of GST on facility management

services provided to Municipal Corporation of Delhi (MCD) Headquarters.
Issue
MCD is receiving the services such as housekeeping, civil maintenance, furniture
maintenance and horticulture, from facility management agency, for the
upkeep of their office. The issue which arose for consideration was whether
such services received by them are exempt from GST in terms of Sr. No.3A of
the exemption Notification.
Clarification
The services of facility management such as housekeeping, civil maintenance,
furniture maintenance and horticulture agency for the
upkeep of office of MCD are not supplied in relation to
performing any functions entrusted to a Municipality under
Article 243W of the Constitution of India. Such services are
not covered under the scope of entry at Sr. No. 3A.
Thus, it has been clarified that GST is applicable on the services provided by
facility management agency to MCD, Delhi HQ for upkeep of its head quarter
building at applicable rates as these services are not covered under the scope of
entry at Sr. No. 3A.
[Circular No. 245/02/2025-GST dated 28.01.2025]
Milling of wheat into flour/paddy into rice for distribution by State
Governments under PDS exempt from GST

Public Distribution specifically figures at entry 28 of the 11th Schedule. Thus,

composite supply of service by way of milling of wheat and fortification thereof by
miller, or of paddy into rice, by any person to a State Government for distribution
of such wheat flour under Public Distribution System (PDS) is eligible for exemption
under Entry 3A provided that value of goods supplied in such composite supply
(goods used for fortification, packing material etc) does not exceed 25% of the
value of composite supply. It is a matter of fact as to whether the value of goods
in such composite supply is up to 25% and requires ascertainment on case-to-case
basis 61.

61
Circular No. 153/09/2021GST dated 17.06.2021

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 1.96 4.96 GOODS AND SERVICES TAX

Supply of pure services and composite supplies by way of

horticulture/horticulture works (where the value of goods constitutes not
more than 25% of total value of supply) made to CPWD are exempt from
GST

Public parks in government residential colonies, government offices and other

public areas are developed and maintained by CPWD. Maintenance of community
assets, urban forestry, protection of the environment and promotion of ecological
aspects are functions entrusted to Panchayats and Municipalities under Articles
243G and 243W read with Sr. No. 29 of 11th Schedule and Sr. No. 8 of 12th Schedule
of the constitution.

Sr. Nos. 3 and 3A of exemption notification exempt pure services and composite
supply of goods and services in which value of goods does not constitute more
than 25%, that are provided to the Central Government, State Government or Union
territory or local authority by way of any activity in relation to any function
entrusted to a Panchayat under article 243G of the Constitution or in relation to
any function entrusted to a Municipality under article 243W of the Constitution.
Accordingly, it is clarified that supply of pure services and composite supplies by
way of horticulture/horticulture works (where the value of goods constitutes not
more than 25% of the total value of supply) made to CPWD are eligible for
exemption from GST under Sr. Nos. 3 and 3A of exemption notification 62.

District Mineral Foundations Trusts (DMFTs) set up by the State

Governments are Governmental Authorities and eligible for the same
exemptions from GST as available to any other Governmental Authority

DMFTs work for the interest and benefit of persons and areas affected by mining
related operations by regulating receipt and expenditure from the respective
Mineral Development Funds created in the concerned district. They provide services
related to drinking water supply, environment protection, health care facilities,
education, welfare of women and children, supply of medical equipment etc.

These activities are similar to activities that are enlisted in 11th Schedule and 12th
Schedule of the Constitution. The ultimate users of the various schemes under DMF

62
Circular No. 206/18/2023 GST dated 31.10.2023

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 EXEMPTIONS FROM GST 4.97

are individuals, families, women and children, farmers/producer groups, SHGs of

the mining affected areas etc. The services/supplies out of DMF fund are provided
free of charge and no consideration is realized from the beneficiaries by DMF
against such services.

Accordingly, it is clarified that DMFT set up by the State Governments are

Governmental Authorities and thus eligible for the same exemptions from GST as
available to any other Governmental Authority 63.
16. Leasing services

Entry Description of services

No.

41 Upfront amount (called as premium, salami, cost, price, development

charges or by any other name) payable in respect of service by way of
granting of long term lease of 30 years, or more) of industrial plots or
plots for development of infrastructure for financial business, provided
by the State Government Industrial Development Corporations or
Undertakings or by any other entity having or more ownership of
Central Government, State Government, Union territory to the
industrial units or the developers in any industrial or financial business
area.
Upfront amount paid in instalments
Aforesaid exemption is admissible irrespective of whether such upfront
amount is payable/paid in one/more instalments, provided the amount
is determined upfront 64.
Location charges or preferential location charges (PLC) collected
in addition to the lease premium for long term lease
As seen above, is exempt from GST. Allowing
choice of location of plot is integral part of supply of long-term lease
of plot and therefore, location charge is nothing, but part of
consideration charged for long term lease of plot. Being charged
upfront along with the upfront amount for the lease, the same is
exempt.

63
As clarified vide Circular No. 206/18/2023 GST dated 31.10.2023
64
As clarified vide Circular No. 101/20/2019- GST, dated 30.04.2019

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 1.98 4.98 GOODS AND SERVICES TAX

Accordingly, it is clarified that location charges or preferential location

charges (PLC) paid upfront in addition to the lease premium for long
term lease of land constitute part of upfront amount charged for long
term lease of land and are eligible for the same tax treatment, and thus
eligible for exemption under Entry 41 65.
Explanation - For the purpose of this exemption, the Central
Government, State Government or Union territory shall have 20% or
more ownership in the entity directly or through an entity which is
wholly owned by the Central Government, State Government or Union
territory.
Conditions:
1. The leased plots shall be used for the purpose for which they are
allotted, that is, for industrial or financial activity in an industrial
or financial business area.
2. State Government concerned shall monitor and enforce the
above condition as per the order issued by the State Government
in this regard.
3. In case of any violation or subsequent change of land use, due
to any reason whatsoever, the original lessor, original lessee as
well as any subsequent lessee/ buyer/ owner shall be jointly and
severally liable to pay such amount of central tax, as would have
been payable on the upfront amount charged for the long term
lease of the plots but for the exemption contained herein, along
with the applicable interest and penalty.
4. The lease agreement entered into by the original lessor with the
original lessee or subsequent lessee, or sub- lessee, as well as
any subsequent lease/ sale agreements, for lease or sale of such
plots to subsequent lessees or buyers or owners shall
incorporate in the terms and conditions, the fact that the central
tax was exempted on the long term lease of the plots by the
original lessor to the original lessee subject to above condition
and that the parties to the said agreements undertake to comply
with the same.

65
As clarified vide Circular No. 177/09/2022 GST dated 03.08.2022

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 EXEMPTIONS FROM GST 4.99

17. Legal services

Entry 45: Services provided by-
(a) an arbitral tribunal to –
(i) any person other than a business entity; or
(ii) a business entity with an aggregate turnover
up to such amount in the preceding FY as
makes it eligible for exemption from
registration under the CGST Act, 2017;
(iii) the Central Government, State Government,
Union territory, local authority, Governmental Authority or Government
Entity.
(b) a partnership firm of advocates or an individual as an advocate other than a
senior advocate, by way of legal services to-
(i) an advocate or partnership firm of advocates providing legal services;
(ii) any person other than a business entity; or
(iii) a business entity with an aggregate turnover up to such amount in the
preceding FY as makes it eligible for exemption from registration under
the CGST Act, 2017;
(iv) the Central Government, State Government, Union territory, local
authority, Governmental Authority or Government Entity.
(c) a senior advocate by way of legal services to-
(i) any person other than a business entity; or
(ii) a business entity with an aggregate turnover up to such amount in the
preceding FY as makes it eligible for exemption from registration under
the CGST Act, 2017;
(iii) the Central Government, State Government, Union territory, local
authority, Governmental Authority or Government Entity.

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 1.100 4.100 GOODS AND SERVICES TAX

ANALYSIS

Relevant definitions are as under:

 Legal service: means any service provided in relation to
advice, consultancy or assistance in any branch of law, in
any manner and includes representational services before
any court, tribunal or authority.
 Advocate: means an advocate entered in any roll under the provisions of the
Advocates Act, 1961 [Section 2(1)(a) of the Advocates Act, 1961].
 Arbitral tribunal: means a sole arbitrator or a panel of arbitrators [Section 2(d)
of the Arbitration and Conciliation Act, 1996].

 Senior advocate: An advocate may, with his consent, be

designated as senior advocate if the Supreme Court or a High
Court is of opinion that by virtue of his ability standing at the
Bar or special knowledge or experience in law he is deserving
of such distinction.
Senior advocates shall, in the matter of their practice, be subject to such
restrictions as the Bar Council of India may, in the interest of the legal
profession, prescribe.
Under Entry 45, following services are exempt from GST

--Arbitral tribunal --any person other than BE

Legal services

--Partnership firm of --Business Entity with an

provided by

provided to

advocates or an individual as aggregate turnover up to such

an advocate other than a amount in the preceding FY as
senior advocate by way of makes it eligible for exemption
legal services from registration under GST.

--Senior advocate by way of --CG/SG/UT/LA/GA/GE

legal services

Legal services provided by a partnership firm of advocates/ individual as an

advocate other than a senior advocate to another advocate/ partnership firm
of advocates providing legal services.
Thus, legal services provided to a business entity with an aggregate turnover

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 EXEMPTIONS FROM GST 4.101

exceeding such amount in the preceding FY as makes it eligible for exemption from
registration under the CGST Act, 2017 are liable to GST. Further, tax is payable by
the business entity on such services under reverse charge.
(42) Pyarelal & Co. has obtained registration under GST in the
preceding financial year as its aggregate turnover exceeded the
threshold exemption limit. In the current FY, it sought legal
consultancy services for its business from Nyay Advocates – a partnership firm of
advocates.
The legal services so received by Pyarelal & Co. are not exempt because its
aggregate turnover exceeds the threshold exemption limit of registration in the
preceding financial year. Further, the tax on the said legal services is payable by
Pyarelal & Co. under reverse charge.

18. Sponsorship of sports events

Entry 53: Services by way of sponsorship of sporting events organised -

(a) by a national sports federation, or its affiliated federations, where the

participating teams or individuals represent any district, State, zone or
Country;
(b) by Association of Indian Universities, Inter-University Sports Board, School
Games Federation of India, All India Sports Council for the Deaf, Paralympic
Committee of India or Special Olympics Bharat;

(c) by the Central Civil Services Cultural and Sports Board;

(d) as part of national games, by the Indian Olympic Association; or
(e) under the Panchayat Yuva Kreeda Aur Khel Abhiyaan Scheme.
(43) Central Civil Services Cultural and Sports Board organised a
cricket tournament for promotion of sports and cultural activities
amongst the Central Government Employees. Reliable Industries
sponsored said cricket tournament. In the given case, services by way of
sponsorship of sporting events organized by the Central Civil Services Cultural and
Sports Board are exempt from GST.

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 1.102 4.102 GOODS AND SERVICES TAX

19. Skill Development services

Entry Description of services

No.

69 Any services provided by –

(a) the National Skill Development
Corporation set up by the Government
of India;
(b) the National Council for Vocational
Education and Training;
(c) an Awarding Body recognized by the National Council for
Vocational Education and Training;
(d) an Assessment Agency recognized by the National Council for
Vocational Education and Training;
(e) a Training Body accredited with an Awarding Body that is
recognized by the National Council for Vocational Education and
Training,
(f) a training partner approved by the National Skill
Development Corporation,
in relation to-
(i) the National Skill Development
Programme or any other scheme
implemented by the National Skill
Development Corporation; or
(ii) a vocational skill development course
under the National Skill Certification and
Monetary Reward Scheme; or
(iii) any National Skill Qualification Framework aligned qualification
or skill in respect of which the National Council for Vocational
Education and Training has approved a qualification package.

70 Services of assessing bodies empanelled centrally by the Directorate

General of Training, Ministry of Skill Development and
Entrepreneurship by way of assessments under the Skill Development
Initiative Scheme.

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 EXEMPTIONS FROM GST 4.103

71 Services provided by training providers

(Project implementation agencies)
under Deen Dayal Upadhyaya
Grameen Kaushalya Yojana (DDUGKY)
implemented by the Ministry of Rural
Development, Government of India by
way of offering skill or vocational Education and training courses
certified by the National Council for Vocational Training.

20. Performance by an artist

Entry 78: Services by an artist by way of a performance in folk or classical art forms
of-
(a) music, or
(b) dance, or
(c) theatre,
if the consideration charged for such performance is not
more than ` 1,50,000 are exempt from GST.
The activities by a performing artist in folk or classical art
forms of music, dance, or theatre are exempt if consideration
does not exceed ` 1,50,000. However, if consideration from
such activities exceeds ` 1,50,000, entire consideration is subject to GST.
Further, all other activities by an artist in other art forms e.g. western music or
dance, modern theatres, performance of actors in films or television serials would
be taxable. Similarly activities of artists in still art forms e.g. painting, sculpture
making etc. are taxable.
However, the exemption shall not apply to service provided by such artist as a
brand ambassador.
‘Brand ambassador’ means a person engaged for promotion or marketing of a
brand of goods, service, property or actionable claim, event or endorsement of
name, including a trade name, logo or house mark of any person.

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21. Right to admission to various events

Entry Description of services

No.

79 Services by way of admission to a museum, national park, wildlife

sanctuary, tiger reserve or zoo**.
**Zoo means an establishment, whether stationary or mobile, where
captive animals are kept for exhibition to the public and includes a
circus and rescue centres but does not include an establishment of a
licensed dealer in captive animals [Section 2(39) of the Wild Life (Protection)
Act, 1972] .

79A Services by way of admission to a protected

monument so declared under the Ancient
Monuments and Archaeological Sites & Remains
Act 1958 or any of the State Acts, for the time
being in force.

81 Services by way of right to admission to-

(a) circus, dance, or theatrical performance including drama or ballet;
(b) award function, concert, pageant, musical performance or any
sporting event other than a recognised sporting event🕙🕙;
(c) recognised sporting event;
(d) planetarium,
where the consideration for right to admission to the events or places
as referred to in items (a), (b), (c) or (d) above is not more than ` 500
per person.
🕙🕙 Recognised sporting event means any sporting event,-
(i) organised by a recognised sports body where the
participating team or individual represent any district, state, zone
or country;
(ii) organized

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 EXEMPTIONS FROM GST 4.105

(A) by a national sports federation, or its affiliated federations,

where the participating teams or individuals represent any
district, State or zone;
(B) by Association of Indian Universities, Inter-University Sports
Board, School Games Federation of India, All India Sports
Council for the Deaf, Paralympic Committee of India or
Special Olympics Bharat;
(C) by Central Civil Services Cultural and Sports Board;
(D) as part of national games, by Indian Olympic Association; or
(E) under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA)
Scheme.
 Recognised sports body means –
(i) the Indian Olympic Association;
(ii) Sports Authority of India;
(iii) a national sports federation recognised by the Ministry of Sports
and Youth Affairs of the Central Government, and its affiliate
federations;
(iv) national sports promotion organisations recognised by the
Ministry of Sports and Youth Affairs of the Central Government;
(v) the International Olympic Association or a federation recognised
by the International Olympic Association; or
(vi) a federation or a body which regulates a sport at international
level and its affiliated federations or bodies regulating a sport in
India.

22. Services by an unincorporated body or a non- profit entity

Entry Description of services

No.

77 Service by an unincorporated body or a non- profit entity registered

under any law for the time being in force, to its own members by way
of reimbursement of charges or share of contribution –
(a) as a trade union

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 1.106 4.106 GOODS AND SERVICES TAX

(b) for the provision of carrying out any activity which is exempt from
the levy of GST; or
(c) up to an amount of ` 7,500 per month
per member for sourcing of goods or
services from a third person for the
common use of its members in a
housing society or a residential
complex.

77A Services provided by an unincorporated body or a non-profit entity

registered under any law for the time being in force, engaged in,-
(i) activities relating to the welfare of industrial or agricultural labour
or farmers; or
(ii) promotion of trade, commerce, industry, agriculture, art, science,
literature, culture, sports, education, social welfare, charitable
activities and protection of environment,
to its own members against consideration in the form of membership
fee upto an amount of ` 1000/- per member per year.

ANALYSIS
Co-operative Housing Society
Co-operative Housing Societies are entities
registered under the co-operative laws of the
respective States. A Co-operative Housing Society is
a collective body of persons, who stay in a residential
society and as a collective body, they supply certain
services to its members, like collecting statutory dues from its members and
remitting to statutory authorities, maintenance of the building, security etc.
A Co-operative Housing Society is akin to a club, which is composed of its
members. Service provided by a Housing Society [Resident Welfare Association
(RWA)] to its members is treated as service provided by one person to another. The
activities of the housing society/RWA would attract the levy of GST and the housing
society would be required to register if its aggregate turnover exceeds the
threshold limit and comply with the GST Law, unless specifically exempted.

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GST exemption on services provided by a Co-operative Housing Society

If the aggregate turnover of housing society/ RWA providing services to its members is
above the applicable threshold limit for registration 66, it needs to take registration under
GST in terms of section 22 [Refer Chapter-8: Registration in Module 2 of this Study
Material for detailed discussion on registration]. However, taking registration does not
mean that the housing society has to compulsorily charge GST in the monthly
maintenance bills raised on its members. If the services provided by it are exempt under
an exemption notification, then it is not required to charge GST on the said services, even
if it is registered under GST.
For instance, in view of entry 77(c) above, supply of service by a RWA (unincorporated
body or a non- profit entity registered under any law) to its own members by way of
reimbursement of charges or share of contribution up to an amount of ` 7500 per month
per member for providing services and goods for the common use of its members in a
housing society/a residential complex are exempt from GST.
So, there can be case where a society is registered under GST, but the monthly
contribution received from all the members is less than ` 7,500/- per member (and
the amount is for the purpose of sourcing of goods and services from a third person
for the common use of its members). In such a case, no GST is to be charged by
the housing society on the monthly bill raised by the society.
(44) RWA of Chulbul Housing Society, registered under GST, collected the
maintenance charges of ` 6,000 per month per member. In this case, no
GST is to be charged by the RWA.
However, in above case, if the monthly contribution exceeds ` 7,500/- per member,
entire contribution is taxable.
(45) If, in above example, other things remaining the same, the RWA of
Chulbul Housing Society collected the maintenance charges of
` 9,000 per month per member, GST @18% shall be payable on the entire amount
of ` 9,000 and not on [` 9,000 - ` 7,500] = ` 1,500.
There can also be a case where the aggregate turnover of the society/RWA is less
than the applicable threshold limit for registration and the monthly contribution of
all the individual members towards maintenance is less than ` 7,500/- (such services
being exempt). Further, the society is providing no other taxable service to its

66
Threshold limit is ` 10 lakh for specified Special Category States, namely, Manipur,
Mizoram, Nagaland and Tripura and ` 20 lakh for all other States.

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 1.108 4.108 GOODS AND SERVICES TAX

members or outsiders. In this case, the society (essentially exclusively providing

wholly exempt services) need not take registration under GST.
(46) The turnover of RWA of Bulbul Housing Society located in New Delhi
in a financial year is ` 15 lakh. It has collected the maintenance charges
of ` 6,000 per month per member. RWA is not providing any other taxable service
to its members. In this case, RWA is not required to take registration under GST
since its aggregate turnover is less than the applicable threshold limit of ` 20 lakh.
However, an RWA is not required to obtain registration even though the amount
of maintenance charges exceeds ` 7500 per month per member but the aggregate
turnover of the RWA in a financial year does not exceed the threshold limit for
registration.
(47) In the above example, other things remaining the same, if the
maintenance charges collected by the RWA are ` 8,000 per month per
member, RWA is still not required to take registration under GST since its aggregate
turnover is less than the applicable threshold limit of ` 20 lakh.
The above discussion has been summarized as under:

RWA/Housing society

Is unregistered RWA’s
Are monthly
annual turnover in a
No maintenance No
FY> ` 20 lakh*?
charges > ` 7,500
Yes per member?

Yes
Are monthly
No
Tax not
maintenance
charges > ` 7,500
per member?
payable

Yes * ` 10 lakh in case of Special Category States of

Manipur, Mizoram, Nagaland and Tripura
Tax payable

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 EXEMPTIONS FROM GST 4.109

Thus, RWA shall be required to pay GST on monthly subscription/ contribution

charged from its members, only if such subscription is more than ` 7500/- per
month per member and the annual aggregate turnover of RWA by way of supplying
of services and goods is also more than ` 20 lakh.
In other words,

Annual turnover of Monthly maintenance charge Whether exempt?

RWA

More than ` 7500/- No

More than ` 20 lakh*
` 7500/- or less Yes

More than ` 7500/- Yes

` 20 lakh or less
` 7500/- or less Yes

* ` 10 lakh in case of Special Category States of Manipur, Mizoram, Nagaland and

Tripura
There may also be cases where a person owns 2 or more flats in the housing
society/residential complex. The question arises whether the ceiling of ` 7500/-
per month per member on the maintenance for the exemption to be available shall
be applied per residential apartment or per person.
As per general business sense, a person who owns 2 or more residential apartments
in a housing society or a residential complex shall normally be a member of the
RWA for each residential apartment owned by him separately. Consequently, the
ceiling of ` 7500/- per month per member shall be applied separately for each
residential apartment owned by him.
(48) Gareeb Chand owns two residential apartments in a residential
complex and pays ` 15,000/- per month as maintenance charges towards
maintenance of these two apartments to the RWA (` 7,500/- per month
in respect of each residential apartment). In this case, the exemption from GST
shall be available with respect to maintenance charges paid for each apartment.

It is important to note that RWA is entitled to take ITC of GST paid by them on
capital goods (generators, water pumps, lawn furniture etc.), goods (taps, pipes,

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other sanitary/hardware fillings etc.) and input services such as repair and
maintenance services, used by it for making supplies to its members and use such
ITC for discharge of GST liability on such supplies where the amount charged for
such supplies is more than ` 7,500 per month per member. [Refer Chapter-7: Input
Tax Credit in Module 2 of this Study Material for detailed discussion on ITC provisions]
(49) RWA of Tintin Housing Society, registered under GST, has collected
the maintenance charges of ` 9,000 per month per member from 1,000
members of the society in the month of May. For paying the GST of `
16,20,000 [payable @ 18% on the amount of ` 90,00,000], RWA can utilise the ITC
of GST of ` 1,00,000 paid by it on purchase of swings for garden, ITC of ` 20,000
on electric cables and ITC of ` 15,000 on plumbing services, which were
made/availed during the month of May.
✪ Statutory dues such as property tax, electricity charges etc. forming part of the
monthly maintenance bill raised by the society on its members would be excluded
while computing the aforesaid monthly limit of ` 7,500.
Taxability of various charges collected by societies
A society may collect the following charges from the members on quarterly basis
as follows:
1. Property Tax-actual as per Municipal Corporation of Greater Mumbai (MCGM)
2. Water Tax-Municipal Corporation of Greater Mumbai (MCGM)
3. Non-Agricultural Tax-Maharashtra State Government
4. Electricity charges
5. Sinking Fund-mandatory under the Bye-laws of the Co-operative Societies
6. Repairs & maintenance fund

7. Car parking Charges

8. Non-Occupancy Charges
9. Simple interest for late payment.
CBIC has clarified the taxability of above charges as follows:
1. Services provided by the Central Government, State Government, Union
territory or local authority to a person other than business entity, is exempted

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from GST. So, Property Tax, Water Tax, if collected by the RWA/Co-operative
Society on behalf of the MCGM from individual flat owners, then GST is not
leviable.
2. Similarly, GST is not leviable on Non-Agricultural Tax, Electricity Charges etc.,
which are collected under other statutes from individual flat owners.
However, if these charges are collected by the Society for generation of
electricity by Society’s generator or to provide drinking water facility or any
other service, then such charges collected by the society are liable to GST.

3. Sinking fund, repairs & maintenance fund, car parking charges, Non-
occupancy charges or simple interest for late payment, attract GST, as these
charges are collected by the RWA/Co-operative Society for supply of services
meant for its members 67.
23. Other exempt services

Entry Description of services

No.
2 Services by way of transfer of a going concern, as a whole or an
independent part thereof.
Transfer of a going concern means transfer of a running business
which is capable of being carried on by the purchaser as an
independent business, but shall not cover mere or predominant
transfer of an activity comprising a service. Transfer of business for a
lump sum consideration commonly referred to as slump sale is covered
under this entry.
Such sale of business as a whole will comprise comprehensive sale of
immovable property, goods and transfer of unexecuted orders,
employees, goodwill etc. Since the transfer in title is not merely a
transfer in title of either the immovable property or goods or even
both it may amount to service and has thus been exempted.
(50) Royal Hotel Group is in the business of running a chain of
restaurants. It intends to sell its business as a going concern. It
would not be required to pay GST on such sale of its business.

67
Discussion under this entry in forgoing paras is primarily based on Circular No.
109/28/2019 GST dated 22.07.2019, CBIC GST Flyer ‘GST on Co-Operative Housing Societies’
and CBIC FAQs on levy of GST on Supply of Services to Co-operative Society.

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9B Supply of services associated with transit cargo to Nepal and Bhutan

(landlocked countries).
In this regard, it is clarified that this entry covers services associated
with transit cargo both to and from Nepal and Bhutan.
The movement of empty containers from Nepal and Bhutan, after
delivery of goods there, is a service associated with the transit cargo
to Nepal and Bhutan and is therefore covered by the exemption 68.
12 Services by way of renting of residential dwelling for use as
residence except where the residential dwelling is rented to a
registered person.
Explanation — For the purpose of exemption under this entry, this
entry shall cover services by way of renting of residential dwelling to a
registered person where, –
(i) the registered person is proprietor of a proprietorship concern
and rents the residential dwelling in his personal capacity for use
as his own residence; and
(ii) such renting is on his own account and not that of the
proprietorship concern.
Explanation 2.- Nothing contained in this entry shall apply to-
(a) accommodation services for students in student residences;
(b) accommodation services provided by Hostels, Camps, Paying
Guest accommodations and the like.
Thus, renting of residential dwelling either by a registered person or
an unregistered person for use as residence to UNREGISTERED
PERSON is exempt from GST.
Renting of residential dwelling for use as residence to a registered
person (other than proprietor covered in explanation above) as well as
renting of residential dwelling for commercial use to registered or
unregistered person is liable to GST.
Further, tax on renting of residential dwelling to a registered person is
payable by the registered person under reverse charge 69 whether such

68
Circular No. 177/09/2022 GST dated 03.08.2022
69
Provisions relating to reverse charge mechanism are contained in Notification No. 13/2017
CT (R) dated 28.06.2017 which has been discussed in detail in Chapter 2 – Charge of GST in
this Module of Study Material.

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 EXEMPTIONS FROM GST 4.113

residential dwelling is being used for commercial purposes or

residential purposes.
12A Supply of accommodation services having value of supply less than or
equal to twenty thousand rupees per person per month provided that
the accommodation service is supplied for a minimum continuous
period of ninety days.
19 Services by way of transportation of goods by an aircraft from a place
outside India upto the customs station of clearance in India.
19C Satellite launch services.

22 Services by way of giving on hire –

(a) to a State Transport Undertaking (STU), a motor vehicle meant
to carry more than 12 passengers**; or
State Transport Undertaking: means any undertaking
providing road transport service, where such undertaking is
carried on by-
i. the Central Government or a State Government;
ii. any Road Transport Corporation established under
section 3 of the Road Transport Corporations Act, 1950.
iii. any municipality or any corporation or company owned or
controlled by the Central Government or one or more State
Governments, or by the Central Government and one or
more State Governments.
Explanation-For the purposes of this clause, road transport
service means a service of motor vehicles carrying passengers or
goods or both by road for hire or reward [Section 2(42) of the Motor
Vehicles Act, 1988] .
Generally, such STUs/ Corporations are established with a view
to providing public transport facility to the commuters. If
transport undertakings hire the buses on lease basis from private
persons on payment of consideration, the services by way of
supply of motor vehicles to such STU are exempt from payment
of tax. However, supplies of motor vehicles to Government
Departments other than the STUs are taxable 70.

70
As clarified vide question 26 of CBIC FAQs on Government Services

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(aa) to a local authority, an Electrically operated vehicle (EOV) meant

to carry more than 12 passengers;
EOV means vehicle falling under Chapter 87 in the First Schedule
to the Customs Tariff Act, 1975 which is run solely on electrical
energy derived from an external source or from one/more
electrical batteries fitted to such road vehicle.
The expression in this entry includes renting of
vehicles.
Accordingly, where the said vehicles are rented or given on hire to
STUs or Local Authorities, said services are eligible for above
exemption irrespective of whether such vehicles are run on routes,
timings as decided by the STUs or Local Authorities and under effective
control of STUs or Local Authorities which determines the rules of
operation or plying of vehicles 71.
(b) to a goods transport agency, a means of transportation of goods.
(51) Nishant owns a truck which he has rented to
Sindhu and Bansal Transport Agency - a GTA. Services
by way of giving on hire a means of transportation of
goods [truck in the given case] to a GTA [Sindhu and Bansal
Transport Agency], are exempt from tax.
However, if Nishant had rented a vehicle designed to carry
passengers to such GTA, said activity is not exempt under this
entry.
(c) motor vehicle for transport of students, faculty and staff, to a
person providing services of transportation of students, faculty
and staff to an educational institution providing services by way
of pre-school education and education upto higher secondary
school or equivalent.
23 Service by way of access to a road or a bridge on payment of toll
charges.
With regard to said entry, following issues have been
clarified:
(i) Ministry of Road Transport and Highways
(MORTH) permitted the overloaded vehicles to
ply on the national highways after payment of

71
Circular No. 164/20/2021 GST dated 06.10.2021

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 EXEMPTIONS FROM GST 4.115

higher toll charges. It has been clarified 72 that overloading

charges at toll plazas would get the same treatment as given to
toll charges.
(ii) MORTH73 has directed to collect additional amount from the users of
the road to the extent of two times of the fees applicable to that
category of vehicle which is not having a valid functional Fastag.
Essentially, the additional amount collected from the users of the road
not having a functional Fastag, is in the nature of toll charges and
should be treated as additional toll charges. Therefore, it is clarified 74
that additional fee collected in the form of higher toll charges from
vehicles not having Fastag is essentially payment of toll for allowing
access to roads or bridges to such vehicles and may be given the same
treatment as given to toll charges.
25 Transmission/distribution of electricity by an
electricity transmission/ distribution utility.
However, in this regard CBIC has clarified that
the other services provided by DISCOMS
(distribution companies) to consumer against
charges are liable to GST such as,-
i. Application fee for releasing connection of electricity;
ii. Rental Charges against metering equipment;
iii. Testing fee for meters/transformers, capacitors etc.;
iv. Labour charges from customers for shifting of meters or shifting
of service lines;
v. charges for duplicate bill 75.
25A Supply of services by way of providing metering equipment on rent,
testing for meters/transformers/capacitors etc., releasing electricity
connection, shifting of meters/service lines, issuing duplicate bills etc.,
which are incidental or ancillary to the supply of transmission or
distribution of electricity provided by electricity transmission or
distribution utilities to their consumers.

72
vide Circular No. 164/20/2021 GST dated 06.10.2021
73
vide circular dated 16.02.2021
74
vide Circular No. 177/09/2022 GST dated 03.08.2022
75
Circular No. 34/8/2018 GST dated 01.03.2018

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 1.116 4.116 GOODS AND SERVICES TAX

44 Services provided by an incubatee up to a total turnover of ` 50 lakh

in a financial year subject to the following conditions, namely:-
(a) the total turnover had not exceeded ` 50 lakh during the
preceding financial year; and
(b) a period of 3 years has not elapsed from the date of entering into
an agreement as an incubatee.
Incubatee: means an entrepreneur located within the premises of a
Technology Business Incubator (TBI)/ Science and Technology
Entrepreneurship Park (STEP) recognised by the National Science and
Technology Entrepreneurship Development Board of the Department
of Science and Technology, Government of India (NSTEDB) and who
has entered into an agreement with the TBI/STEP to enable himself to
develop and produce hi-tech and innovative products.
44A Research and development services against consideration received in
the form of grants supplied by –
(a) a Government Entity; or
(b) a research association, university, college or other institution,
notified under clauses (ii) or (iii) of sub-section (1) of section 35 of the
Income Tax Act, 1961.
The condition to be fulfilled in this case is that the research association,
university, college or other institution, notified under clauses (ii) or (iii)
of sub-section (1) of section 35 of the Income Tax Act, 1961 is so
notified at the time of supply of the research and development service.
48 Taxable services, provided or to be provided, by a TBI/STEP recognised
by NSTEDB or bio- incubators recognised by the Biotechnology
Industry Research Assistance Council, under the Department of
Biotechnology, Government of India (BIRAC).
49 Services by way of collecting or providing news by
an independent journalist, Press Trust of India or
United News of India.
50 Services of public libraries by way of lending of
books, publications or any other knowledge-
enhancing content or material.

52 Services by an organiser to any person in respect of a business

exhibition held outside India.

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52A Tour operator service, which is performed partly in India and partly
outside India, supplied by a tour operator to a foreign tourist, to the
extent of the value of the tour operator service which is performed
outside India.
However, value of the tour operator service performed outside India
shall be such proportion of the total consideration charged for the
entire tour which is equal to the proportion which the number of days
for which the tour is performed outside India has to the total number
of days comprising the tour, or 50% of the total consideration charged
for the entire tour, whichever is less.
Further, in making the above calculations, any duration of time equal
to or exceeding 12 hours shall be considered as one full day and any
duration of time less than 12 hours shall be taken as half a day.
Explanation. - 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.
(52) A tour operator provides a tour operator service to a foreign
tourist as follows: -
(a) 3 days in India, 2 days in Nepal; Consideration charged for the
entire tour: ` 1,00,000/-
Exemption: ` 40,000/- (=`1,00,000/- x 2/5) or, ` 50,000/- (= 50%
of ` 1,00,000/-) whichever is less, i.e., ` 40,000/-(i.e., Taxable
value: ` 60,000/-);
(b) 2 days in India, 3 nights in Nepal; Consideration charged for the
entire tour: ` 1,00, 000/-
Exemption: ` 60,000 (=` 1,00,000/- x 3/5) or, ` 50,000/- (= 50%
of ` 1,00,000/-) whichever is less, i.e., ` 50,000/-(i.e., Taxable
value: ` 50,000/-);
(c) 2.5 days in India, 3 days in Nepal; Consideration charged for the
entire tour: ` 1,00,000/-
Exemption: ` 54,545 (=` 1,00,000/- x 3/5.5) or, ` 50,000/- (= 50%
of ` 1,00,000/-) whichever is less, i.e., ` 50,000/-(i.e., Taxable
value: ` 50,000/-).
57 Services by way of pre-conditioning, pre- cooling, ripening, waxing,
retail packing, labelling of fruits and vegetables which do not change
or alter the essential characteristics of the said fruits or vegetables.

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58 Services provided by the National Centre for Cold

Chain Development under the Ministry of
Agriculture, Cooperation and Farmer’s Welfare by way of cold chain
knowledge dissemination.
59 Services by a foreign diplomatic mission located in India.

61A Services by way of granting National Permit to a goods carriage to

operate through-out India/ contiguous States.
65A Services by way of providing information under the
RTI Act (Right to Information Act, 2005).

68 Services provided to a recognised sports body by-

(a) an individual as a player, referee, umpire, coach or team manager
for participation in a sporting event organised by a recognized
sports body;
(b) another recognised sports body.
However, services by individuals such as selectors, commentators,
curators, technical experts are taxable. The service of a player to a
franchisee which is not a recognized sports body is also taxable. The
term ‘recognised sports body’ has been defined earlier in this chapter.
76 Services by way of public conveniences such as provision of facilities
of bathroom, washrooms, lavatories, urinal or toilets.

Note: For the purpose of this exemption notification, a “Limited Liability

Partnership” formed and registered under the provisions of the Limited Liability
Partnership Act, 2008 shall also be considered as a partnership firm or a firm.
GST on payment of honorarium to the Guest Anchors
Circular No. 177/09/2022 GST dated 03.08.2022
clarifies the applicability of GST on honorarium paid
to Guest Anchors. Sansad TV and other TV channels
invite guest anchors to participate in their shows and
pay remuneration to them in the form of
honorarium.

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It is clarified that supply of all goods & services are taxable unless exempt or
declared as ‘neither a supply of goods nor a supply of service’. Services provided
by the guest anchors in lieu of honorarium attract GST liability.
However, guest anchors whose aggregate turnover in a financial year does not
exceed ` 20 lakh (` 10 lakh in case of specified Special Category States) shall not
be liable to take registration and pay GST.

Above services have been exempted from both CGST/SGST/UTGST and

IGST 76. Apart from these services, list of services exempt from IGST by
Notification No. 9/2017 IT (R) dated 28.06.2017 as amended also include
following services:

[Link]. Description of services

1 Services received from a provider of service located in a non- taxable

territory by –
(a) the Central Government, State Government, Union territory, a
local authority, a governmental authority or an individual in
relation to any purpose other than commerce, industry or any
other business or profession;
(b) an entity registered under section 12AA/12AB of the Income-tax
Act, 1961 for the purposes of providing charitable activities; or
(ba) way of supply of online educational journals or periodicals to an
educational institution other than an institution providing
services by way of-

(i) pre-school education and education up to higher

secondary school or equivalent; or
(ii) education as a part of an approved vocational education
course;

by virtue of Notification No. 12/2017 CT (R) dated 28.06.2017 as amended (for CGST) and
76

Notification No. 9/2017 IT (R) dated 28.06.2017 as amended (for IGST)

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 1.120 4.120 GOODS AND SERVICES TAX

(c) a person located in a non-taxable territory.

However, the exemption shall not apply to online information and
database access or retrieval services received by persons specified in
entry (a) or entry (b).

2 Import of services by an establishment of a foreign company in India,

which is an airline company, from a related person or from any of its
other establishments outside India, when made without consideration.
Explanation: Foreign company shall have the same meaning as
assigned to it in sub-section (42) of section 2 of Companies Act, 2013.
Conditions to be fulfilled:
(i) GST at applicable rates is paid by the establishment of the foreign
airline company in India on transport of goods and passengers as
may be applicable.
(ii) Ministry of Civil Aviation certifies that the establishment of the
foreign company in India is that of an airline company which has
been designated by the foreign government under the applicable
bilateral air services agreement with India.
(iii) Ministry of Civil Aviation certifies that on a reciprocal basis,
designated Indian airlines are not subject to levy of similar taxes by
whatever name called for the same services appearing under the
entry, by the Government of the country designating the foreign
airline company.
3 Services provided by a tour operator to a foreign tourist in relation to
a tour conducted wholly outside India.

4
, which are
treated as establishments of distinct persons [in accordance with
Explanation 1 in section 8 of the IGST Act]

provided the place of supply of the service is outside India [in

accordance with section 13 of IGST Act].

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 EXEMPTIONS FROM GST 4.121

5
of the United
Nations or the specified international organisation.

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.

6
, or diplomatic agents or career consular
officers posted therein shall be exempt from IGST, subject to the
conditions, -
(i) that the foreign diplomatic mission or consular post in India, or
diplomatic agents or career consular officers posted therein, are
entitled to exemption from integrated tax, as stipulated in the
certificate issued by the Protocol Division of the Ministry of
External Affairs, based on the principle of reciprocity;
(ii) that the services imported are for official purpose of the said
foreign diplomatic mission or consular post; or for personal use of
the said diplomatic agent or career consular officer or members of
his or her family.
(iii) that in case the Protocol Division of the Ministry of External Affairs,
after having issued a certificate to any foreign diplomatic mission
or consular post in India, decides to withdraw the same
subsequently, it shall communicate the withdrawal of such
certificate to the foreign diplomatic mission or consular post;
(iv) that the exemption from the whole of the integrated tax granted
to the foreign diplomatic mission or consular post in India for
official purpose or for the personal use or use of their family
members shall not be available from the date of withdrawal of
such certificate.

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 1.122 4.122 GOODS AND SERVICES TAX

7 Services when location of both supplier

and recipient of goods is outside the taxable territory.
Conditions to be fulfilled:
Following documents shall be maintained for a minimum duration of
5 years:
(1) Copy of Bill of Lading
(2) Copy of executed contract between Supplier/Seller and
Receiver/Buyer of goods
(3) Copy of commission debit note raised by an intermediary service
provider in taxable territory from service recipient located in
non-taxable territory
(4) Copy of certificate of origin issued by service recipient located in
non-taxable territory

(5) Declaration letter from an intermediary service provider in

taxable territory on company letter head confirming that
commission debit note raised relates to contract when both
supplier and receiver of goods are outside the taxable territory.

[Link]. Description of services

1 Intra-State supplies received by a TDS deductor from any

unregistered supplier exempt from CGST
Intra-State supplies of goods or services or both received by a
deductor under section 51, from any unregistered supplier,
is exempt from the whole of the central tax leviable thereon under
section 9(4),

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 EXEMPTIONS FROM GST 4.123

subject to the condition that the deductor is not liable to be

registered otherwise than under section 24(vi) [Notification No.
9/2017 CT (R) dated 28.06.2017].

2 Services imported by unit/developer in SEZ exempt from IGST

All services imported by a unit/developer in the Special Economic
Zone (SEZ) for authorised operations
are exempt from the whole of the integrated tax leviable thereon
under section 3(7) of the Customs Tariff Act, 1975 read with section 5
of the IGST Act, 2017 [Notification No. 18/2017 IT (R) dated
05.07.2017].

3 Central Government’s share of profit petroleum exempted from

CGST
Intra-State supply of services by way of
grant of license or lease to explore or
mine petroleum crude or natural gas or
both, has been exempted from so much
of CGST as is leviable on the
consideration paid to the Central Government in the form of Central
Government’s share of profit petroleum as defined in the contract
entered into by the Central Government in this behalf.
[Notification No. 5/2018 CT (R) dated 25.01.2018]
Parallel exemption from IGST has been extended to inter-State supply
of such services vide Notification No. 5/2018 IT (R) dated
25.01.2018.

4 IGST exempted to the extent it is paid on the consideration

attributable to royalty and license fee included in transaction
value under rule 10(1)(c) of Customs Valuation (Determination of
value of imported Goods) Rules, 2007
IGST leviable on import of services in relation to temporary transfer
or permitting the use or enjoyment of any intellectual property right
has been exempted to the extent of the aggregate of the duties of
customs leviable under section 3(7) of the Customs Tariff Act, 1975, on
the consideration declared under section 14(1) of the Customs Act,

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 1.124 4.124 GOODS AND SERVICES TAX

1962 towards royalties and license fees included in the transaction

value as specified under rule 10(1)(c) of the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007 on which the
appropriate duties of customs have been paid [Notification No.
6/2018 IT (R) dated 25.01.2018].

5. POWER NOT TO RECOVER GOODS AND

SERVICES TAX NOT LEVIED OR SHORT-
LEVIED AS A RESULT OF GENERAL PRACTICE.

STATUTORY PROVISIONS
Section 11A Power not to recover Goods and Services Tax not levied or
short-levied as a result of general practice.
Particulars
Notwithstanding anything contained in this Act, if the
Government is satisfied that-
(a) a practice was, or is, generally prevalent regarding levy of
central tax (including non-levy thereof) on any supply of
goods or services or both; and
(b) such supplies were, or are, liable to,-
(i) central tax, in cases where according to the said
practice, central tax was not, or is not being, levied, or
(ii) a higher amount of central tax than what was, or is
being, levied, in accordance with the said practice,
the Government may, on the recommendation of the Council, by
notification in the Official Gazette, direct that the whole of the
central tax payable on such supplies, or, as the case may be, the
central tax in excess of that payable on such supplies, but for the
said practice, shall not be required to be paid in respect of the
supplies on which the central tax was not, or is not being levied,
or was, or is being, short-levied, in accordance with the said
practice.

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ANALYSIS
Regularization of non-levy/short levy of GST on account of generally followed
practice
The Government is empowered to issue a retrospective exemption from GST
under specific circumstances. If the Government is satisfied that there was, or
is, a generally followed practice where GST was not levied or levied at a lower
rate on certain goods or services—despite such supplies being actually liable
to GST or a higher rate of GST—then, on the recommendation of the GST
Council, the Government may issue a notification in the Official Gazette.
This notification can state that the GST which was not paid or short-paid due
to the prevalent practice shall not be required to be paid.
This provision aims to provide relief to taxpayers who have followed industry
practice in good faith, based on commonly accepted practices, even if those
practices were not legally accurate.

Similar provisions granting power to exempt IGST have been

provided under section 6A of the IGST Act.

Students may note that some of the entries granting exemption from GST are
similar to the negative list entry/entry granting exemption under the erstwhile
service tax law. Therefore, clarification pertaining to said negative list
entry/exemption provided in the ‘Service Tax Education Guide’ – an educational aid
released for facilitating the stakeholders to obtain preliminary understanding of the
provisions, wherever it seems relevant under the GST law, have been incorporated
at relevant places.

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 1.126 4.126 GOODS AND SERVICES TAX

LET US RECAPITULATE

1. Power to exempt from tax [Section 11 of the CGST Act/ section 6 of IGST
Act]

Power to exempt from tax

Notification Special Order

Exempt generally

either absolutely or exempt from payment of tax

subject to such under circumstances of an
conditions as may be exceptional nature to be stated
specified. in such order, in public interest.

goods and/or services of

any specified description

2. Power not to recover GST not levied or short-levied as a result of general

practice. [Section 11A of the CGST Act/ Section 6A of IGST Act]

If the Government is satisfied that

These supplies were

A generally prevalent practice actually liable to tax
existed regarding non- or higher rate of tax,
levy/short-levy of tax on any and but the tax was not
supplies of goods/services. levied or short levied

The Government may issue a notification stating that the

full/differential amount of tax that would otherwise be payable shall not
be recovered for such supplies.

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3. List of services exempt from GST

Exempt Services

Services Charitable activities BY an entity registered under section

related to 12AA/12AB of Income-tax Act.
charitable
and religious Services by a person by way of-
activities (a) conduct of any religious ceremony;
(b) renting of precincts of a religious place meant for
general public, owned/managed by
institutions/entities/trusts, registered under section
12AA/12AB/10(23C)(v) of the Income tax Act or
body/authority covered under section 10(23BBA) of the
said Act, except where-
(i) charges for renting of rooms ≥ ` 1,000 per day;
(ii) charges for renting of premises, community halls,
kalyanmandapam, open area, etc. are ≥
` 10,000 per day;
(iii) charges for renting of shops/spaces for
business/commerce are ≥ ` 10,000 per month.

Services by a specified organisation [KMVN/Haj Committee] in

respect of a religious pilgrimage [Haj and Kailash
Mansarovar Yatra].

Training/coaching in
(a) recreational activities relating to arts/culture, by an
individual or
(b) sports by charitable entities registered under section
12AA or 12AB of the Income-tax Act.

Agriculture Loading, unloading, packing, storage or warehousing of rice.

related services
Warehousing of minor forest produce.

Services by way of storage/ warehousing of cereals, pulses,

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 1.128 4.128 GOODS AND SERVICES TAX

fruits & vegetables.

Artificial insemination of livestock (other than horses).

Carrying out an intermediate production process as job

work in relation to cultivation of plants & rearing of animals
[except horses], for food, fibre, fuel, raw material or other
similar products or agricultural produce.

Services relating to cultivation of plants & rearing of animals

[except horses], for food, fibre, fuel, raw material or other
similar products or agricultural produce by way of –
(a) agricultural operations directly related to production of
any agricultural produce including cultivation,
harvesting, threshing, plant protection or testing;
(b) supply of farm labour;
(c) processes carried out at an agricultural farm including
tending, pruning, etc. and such like operations which do
not alter the essential characteristics of agricultural
produce but make it only marketable for the primary
market;
(d) renting or leasing of agro machinery or vacant land
with/without a structure incidental to its use;
(e) loading, unloading, packing, storage or warehousing
of agricultural produce;
(f) agricultural extension services;
(g) services by any Agricultural Produce Marketing
Committee or Board or services provided by a
commission agent for sale/purchase of agricultural
produce.

Education Services provided BY an educational institution (EI):

services • to its students, faculty and staff;
• by way of conduct of entrance examination against
consideration in form of entrance fee

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Services provided TO an EI, by way of,- These exemptions

(i) transportation of students, faculty are only applicable
and staff; to an institution
providing services
(ii) catering, including any mid-day
by way of pre-
meals scheme sponsored by the
school education &
Central Government (CG), State
education up to
Government (SG) or Union Territory
higher secondary
(UT);
school or
(iii) security/cleaning/housekeeping equivalent.
services performed in such EI;

(iv) services relating to admission to, or conduct of

examination by, such EI;

(v) supply of online educational journals or periodicals. This

exemption is only applicable to an institution
providing services by way of education as part of a
curriculum for obtaining qualification recognised by any
law for time being in force.

Services of affiliation provided by a Central or State

Educational Board or Council or any other similar body,
by whatever name called, to a school established, owned
or controlled by the Central Government, State
Government, Union Territory, local authority,
Governmental authority or Government entity.

Health care • Health care services BY a clinical establishment/

services authorized medical practitioner/ para-medics
However, nothing in this entry shall apply to the services
provided by a clinical establishment by way of providing
room [other than Intensive Care Unit (ICU)/Critical Care
Unit (CCU)/Intensive Cardiac Care Unit (ICCU)/Neo natal
Intensive Care Unit (NICU)] having room charges
exceeding ` 5000 per day to a person receiving health
care services.

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• Transportation of a patient in an ambulance BY any

person other than specified above.

Service BY a veterinary clinic in relation to Health care of

animals/birds

Services Services by Governmental Authority (GA) by way of any

provided by activity in relation to any function entrusted to a
Government Municipality /Panchayat under article 243W/ 243G of
Constitution

Services by the CG/SG/UT/Local Authority (LA) excluding

following services—
(a) services by Department of Posts and

referred as ‘ specified
(a) to (c) hereinafter
the Ministry of Railways (Indian Railways);
(b) services in relation to an aircraft/a vessel,

services’
inside/outside precincts of a port/airport;
(c) transport of goods/passengers; or
(d) any service, other than ‘specified services’
above, provided to business entities.

Services by the Department of Posts by way of post card,

inland letter, book post and ordinary post (envelopes
weighing less than 10 grams).

Services provided by CG/SG/UT/LA to a business entity (BE)

with an aggregate turnover of up to such amount in the
preceding FY as makes it eligible for exemption from
registration under the CGST Act, 2017. This exemption is not
applicable to specified services and renting of immovable
property service.

Services provided by CG/SG/UT/LA to another CG/SG/UT/LA.

This exemption is not applicable to specified services.

Services provided by CG/SG/UT/LA where consideration for

such services does not exceed ` 5,000. This exemption is
not applicable to specified services**.

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**In case of continuous supply of service*, the exemption

shall apply only where the consideration charged for such
service does not exceed ` 5,000 in a FY.

Supply of service by a Government Entity (GE) to

CG/SG/UT/LA/any person specified by CG/SG/UT/LA against
consideration received from CG/SG/UT/LA, in the form of grants.

Services by an old age home run by CG/SG/an entity

registered under section 12AA/12AB of Income-tax Act to its
residents (aged ≥60 years) against consideration upto
` 25,000 per month per member, provided that the
consideration charged is inclusive of charges for boarding,
lodging and maintenance.

Services provided by Ministry of Railways (Indian Railways) to

individuals by way of –
(a) sale of platform tickets
(b) facility of retiring rooms/waiting rooms;
(c) cloak room services;
(d) battery operated car services

Services provided by one zone/division under Ministry of Railways

(Indian Railways) to another zone(s)/division(s) under Ministry of
Railways (Indian Railways).

Services provided by SPVs to Ministry of Railways (Indian

Railways) by way of allowing it to use the infrastructure built
and owned by them during the concession period against
consideration and services of maintenance supplied by
Ministry of Railways (Indian Railways) to SPVs in relation to the
said infrastructure built and owned by the SPVs during the
concession period against consideration.

Services supplied by CG/SG/UT to their undertakings or PSUs

by way of guaranteeing the loans taken by such undertakings
or PSUs from the banking companies and financial institutions.

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Services provided by CG/SG/UT/LA by way of-

(a) registration required under any law for the time being in
force;
(b) testing, calibration, safety check or certification relating
to protection or safety of workers, consumers or public
at large, including fire license, required under any law for
the time being in force.

Services provided by CG/SG/UT/LA by way of issuance of

passport, visa, driving license, birth certificate or death
certificate.

Services provided by CG/SG/UT/LA by way of tolerating non-

performance of a contract for which consideration in the
form of fines or liquidated damages is payable to
CG/SG/UT/LA under such contract.

Services provided by CG/SG/UT/LA by way of assignment of right

to use natural resources to an individual farmer for cultivation
of plants & rearing of all life forms of animals [except horses],
for food, fibre, fuel, raw material or other similar products.

Services provided by CG/SG/UT by way of deputing officers

after office hours or on holidays for inspection or
container stuffing or such other duties in relation to import
export cargo on payment of Merchant Overtime charges.

Services supplied by a SG to Excess Royalty Collection

Contractor (ERCC) by way of assigning the right to collect
royalty on behalf of SG on the mineral dispatched by the
mining lease holders subject to specified conditions.

Services provided by rehabilitation professionals recognised

under the RCI Act, 1992 by way of rehabilitation, therapy or
counselling and such other activity as covered by the said Act at
medical establishments, educational institutions, rehabilitation
centers established by CG/SG/UT/an entity registered under
section 12AA/12AB of the Income-tax Act, 1961.

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Construction Pure labour contracts of construction, erection, commissioning,

services installation, completion, fitting out, repair, maintenance,
renovation, or alteration of a civil structure or any other original
works pertaining to the beneficiary-led individual house
construction or enhancement under the Housing for All
(Urban) Mission/Pradhan Mantri Awas Yojana.

Services supplied by Electricity Distribution Utilities by way

of construction, erection, commissioning, or installation of
infrastructure for extending electricity distribution network
upto the tube well of the farmer/agriculturalist for agricultural
use.

Pure labour contracts of construction, erection,

commissioning, or installation of original works pertaining to
a single residential unit otherwise than as a part of a
residential complex.

Supply of TDR, FSI, long term lease (premium) of land by a

landowner to a developer are exempted subject to the
condition that the constructed flats are sold before issuance
of completion certificate and tax is paid on them.
Exemption of TDR, FSI, long term lease (premium) shall be
withdrawn in case of flats sold after issue of completion
certificate, but such withdrawal shall be limited to 1% of value
in case of affordable houses and 5% of value in case of other
than affordable houses.

Services of Such services provided by –

transport of (a) air in economy class, embarking from or terminating in
passengers an airport located in the state of Arunachal Pradesh,
(with/ without Assam, Manipur, Meghalaya, Mizoram, Nagaland,
accompanied Sikkim, or Tripura or at Bagdogra located in West Bengal;
belongings)
(b) non-air conditioned contract carriage other than radio
taxi, for transportation of passengers, excluding tourism,
conducted tour, charter or hire; or

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(c) stage carriage other than air- conditioned stage

carriage.
However, nothing contained in items (b) and (c) above shall
apply to services supplied through an ECO, and notified under
section 9(5) of the CGST Act.

Such services provided to CG by air, embarking from or

terminating at a Regional Connectivity Scheme (RCS) airport,
against consideration in the form of viability gap funding. This
exemption shall apply only till expiry of a period of 3 years
from date of commencement of operations of the RCS airport
as notified by the Ministry of Civil Aviation.

Such services provided by—

(a) railways in a class other than first class/an air-
conditioned coach;
(b) metro, monorail or tramway;
(c) inland waterways;
(d) public transport, other than predominantly for tourism
purpose, in a vessel between places located in India; and
(e) metered cabs or auto rickshaws (including e-rickshaws).
However, nothing contained in item (e) above shall apply to
services supplied through an ECO, and notified under section
9(5) of the CGST Act.

Goods Services by way of transportation of goods-

transportation (a) by road except the services of—
services
(i) a goods transportation agency (GTA);
(ii) a courier agency;
(b) by inland waterways.

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Exempt transportation of goods by rail/ vessel/ by GTA in a

goods carriage
• Agricultural produce
• milk, salt and food grain including flours, pulses and rice
• organic manure
• newspaper or magazines registered with the Registrar of
Newspapers
• Defence/ military equipments
• relief materials meant for victims of natural or man-made
disasters, calamities, accidents or mishap

Services provided by a GTA to an unregistered person,

including an unregistered casual taxable person, except
following recipients, namely: -
(a) a factory registered under Factories Act,
(b) society registered under Societies Act,
(c) Co-operative society,
(d) body corporate and
(e) partnership firm including AOP;
(f) registered casual taxable person.

Services provided by a GTA, by way of transport of goods in a

goods carriage, to, -
(a) a Department or Establishment of the CG/SG/UT; or
(b) local authority; or
(c) Governmental agencies, which has taken registration
only for the purpose of deducting tax under section 51
and not for making a taxable supply of goods or services.

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Banking and Services by way of—

financial (a) extending deposits, loans or advances in so far as the
consideration is represented by way of interest or
discount (other than interest involved in credit card
services);
(b) inter se sale or purchase of foreign currency amongst
banks or authorised dealers of foreign exchange or
amongst banks and such dealers.

Services provided by a banking company to Basic Saving Bank

Deposit (BSBD) account holders under Pradhan Mantri Jan
Dhan Yojana (PMJDY).

Services by an acquiring bank, to any person in relation to

settlement of an amount upto ` 2,000 in a single transaction
transacted through credit card, debit card, charge card or
other payment card service.

Services by an intermediary of financial services located in a multi

services SEZ with International Financial Services Centre (IFSC)
status to a customer located outside India for international
financial services in currencies other than Indian rupees.

Services of Life Such services by way of annuity under the National Pension
insurance System by Pension Fund Regulatory and Development
business Authority of India (PFRDAI) under PFRDA Act, 2013.

Such services by the Army, Naval and Air Force Group

Insurance Funds to members of the Army, Navy and Air Force,
respectively, under the Group Insurance Schemes of CG.

Services of life insurance provided/agreed to be provided by

the Central Armed Police Forces (under Ministry of Home
Affairs) Group Insurance Funds to their members under the
Group Insurance Schemes of the concerned Central Armed
Police Force.

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Such services by the Naval Group Insurance Fund to the

personnel of Coast Guard under the Group Insurance Schemes
of CG.

Such services under following schemes-

(A)
(a) Janashree Bima Yojana;
(b) Aam Aadmi Bima Yojana;
(c) Life micro-insurance product** as approved by the
Insurance Regulatory and Development Authority
(IRDA), having maximum amount of cover of
` 2,00,000;
(d) Varishtha Pension BimaYojana;
(e) Pradhan Mantri Jeevan Jyoti BimaYojana;
(f) Pradhan Mantri Jan DhanYogana;
(g) Pradhan Mantri Vaya Vandan Yojana.

General Such services under following schemes –

insurance (a) Hut Insurance Scheme;
business
(b) Cattle Insurance under Swarnajaynti Gram Swarozgar
Yojna 77;
(c) Scheme for Insurance of Tribals;
(d) Janata Personal Accident Policy and Gramin Accident
Policy;
(e) Group Personal Accident Policy for Self-Employed
Women;
(B)
(f) Agricultural Pumpset and Failed Well Insurance;
(g) premia collected on export credit insurance;
(h) Restructured Weather Based Crop Insurance Scheme
(RWCIS), approved by the Government of India and
implemented by the Ministry of Agriculture;
(i) Jan Arogya Bima Policy;

77
earlier known as Integrated Rural Development Programme

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(j) Pradhan Mantri Fasal Bima Yojana (PMFBY);

(k) Pilot Scheme on Seed Crop Insurance;
(l) Central Sector Scheme on Cattle Insurance;
(m) Universal Health Insurance Scheme;
(n) Rashtriya Swasthya Bima Yojana;
(o) Coconut Palm Insurance Scheme;
(p) Pradhan Mantri Suraksha BimaYojna;
(q) Niramaya Health Insurance Scheme implemented by the
Trust constituted under the provisions of the National
Trust for the Welfare of Persons with Autism, Cerebral
Palsy, Mental Retardation and Multiple Disabilities Act,
1999.
(r) Bangla Shasya Bima.

Services provided to CG/SG/UT under any insurance

(C)
scheme for which total premium is paid by CG/SG/UT.

Services by way of reinsurance of the insurance schemes

specified in (A) (B) or (C) above.
(A) or (B)

Services of insurance provided by the Motor Vehicle

Accident Fund against contributions made by insurers out
of the premiums collected for third party insurance of
motor vehicles.

Services Services by the Employees’ State Insurance (ESI)

provided by Corporation to persons governed under the ESI Act, 1948.
specified
bodies Services provided by the EPFO to the persons governed under
the Employees Provident Funds (EPF) & Miscellaneous
Provisions Act, 1952.

Services by CMPFO to persons governed by Coal Mines

Provident Fund and Miscellaneous Provisions Act, 1948.

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Services by NPS Trust to its members against consideration in

the form of administrative fee.

Pension Services by way of collection of contribution under:

schemes • Atal Pension Yojana
• any pension scheme of SG

Business Services by the following persons in respective capacities –

facilitator/corr (a) business facilitator/business correspondent to a Banking
espondent Co. with respect to accounts in its rural area branch;
(b) any person as an intermediary to a business facilitator or
a business correspondent with respect to services
mentioned in entry (a); or
(c) business facilitator/business correspondent to an
insurance company in rural area.

Services Following services provided to the CG/SG/UT/LA/GA/GE by

provided to way of any activity in relation to any function entrusted to a
Government Panchayat/Municipality under articles 243G/243W of the
Constitution:
• Pure services
• Composite supply of goods and services in which the
value of supply of goods constitutes not more than 25%
of the value of the said composite supply.

Services provided to a Governmental Authority by way of—

(a) water supply;
(b) public health;
(c) sanitation conservancy;
(d) solid waste management; and
(e) slum improvement and upgradation.

Service provided by Fair Price Shops to CG/SG/UT by way of

sale of food grains, kerosene, sugar, edible oil, etc. under
Public Distribution System (PDS) against commission/margin.

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Services provided to CG/SG/UT under any insurance scheme

for which total premium is paid by CG/SG/UT.

Services provided to CG/SG/UT administration under any

training programme for which 75% or more of the total
expenditure is borne by CG/SG/UT administration.

Leasing Upfront amount payable in respect of service by way of

services granting of long term lease of 30 years, or more of industrial
plots/plots for development of infrastructure for financial
business, provided by the State Government Industrial
Development Corporations or Undertakings or by any other
entity having 20% or more ownership of CGS/SG/UT to the
industrial units/developers in any industrial/financial business
area subject to specified conditions.

Legal services Service provided by To

• Arbitral tribunal any person other than BE

• Partnership firm of
advocates or an BE with an aggregate turnover
individual as an up to such amount in the
advocate other than a preceding FY as makes it
senior advocate by way eligible for exemption from
of legal services registration under the CGST
Act
• Senior advocate by way
of legal services CG/SG/UT/LA/GA/GE

Legal services provided by a partnership firm of advocates/

individual as an advocate other than a senior advocate to another
advocate/ partnership firm of advocates providing legal services

Sponsorship of Sponsorship of sporting events organised -

sports events (a) by a national sports federation, or its affiliated
federations, where the participating teams or individuals
represent any district, State, zone or Country;

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(b) by Association of Indian Universities, Inter-University

Sports Board, School Games Federation of India, All India
Sports Council for the Deaf, Paralympic Committee of
India or Special Olympics Bharat;
(c) by the Central Civil Services Cultural and Sports Board;
(d) as part of national games, by the Indian Olympic
Association; or
(e) under the Panchayat Yuva Kreeda Aur Khel Abhiyaan
Scheme.

Skill Any services provided by –

Development (a) the National Skill Development Corporation (NSDC) set
services up by the GoI;
(b) the National Council for Vocational Education and
Training (NCVET);
(c) an Awarding Body recognized by the NCVET;
(d) an Assessment Agency recognized by the NCVET;
(e) a Training Body accredited with an Awarding Body that
is recognized by NCVET,
(f) a training partner approved by NSDC,
in relation to-
(i) the National Skill Development Programme or any other
scheme implemented by the NSDC; or
(ii) a vocational skill development course under the National
Skill Certification and Monetary Reward Scheme; or
(iii) any National Skill Qualification Framework aligned
qualification or skill in respect of which NCVET has
approved a qualification package

Services of assessing bodies empanelled centrally by DGT,

Ministry of Skill Development and Entrepreneurship by way of
assessments under the SDI Scheme.

Services provided by training providers (Project

implementation agencies) under DDUGKY implemented by

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Ministry of Rural Development, GoI by way of offering skill or

vocational training courses certified by the National Council
for Vocational Education and Training (NCVET).

Performance Services by an artist by way of a performance in folk or classical

by an artist art forms of music/ dance/ theatre, if the consideration
charged for such performance is not more than ` 1,50,000.
This exemption shall not apply to service provided by such
artists as a brand ambassador.

Right to Services by way of admission to:

admission to (i) museum, national park, wildlife sanctuary, tiger reserve
various events or zoo
(ii) protected monument declared under the Ancient
Monuments and Archaeological Sites & Remains Act
1958/any of the State Acts, for the time being in force.
(iii) following events/places where the consideration for
right to admission is not more than ` 500 per person:
(a) circus, dance, or theatrical performance including
drama or ballet;
(b) award function, concert, pageant, musical
performance or any sporting event other than a
recognised sporting event;
(c) recognised sporting event;
(d) planetarium.

Services by an Services by unincorporated body/ non- profit entity to its

unincorporate own members as reimbursement/share of contribution:
d body or a
non- profit (i) As a trade union (ii) for providing exempt
entity activity
registered
under any law (iii) up to an amount of ` 7,500 per month per member
for the time for sourcing of goods/services from a third person for
being in force the common use of its members in a housing
society/residential complex

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Services provided by such entity/body engaged in-

(i) activities relating to the welfare of industrial/agricultural
labour or farmers; or
(ii) promotion of trade, commerce, industry, agriculture, art,
science, literature, culture, sports, education, social
welfare, charitable activities and protection of
environment,
to its own members against membership fee upto ` 1000/-
per member per year.

Other exempt Transfer of a going concern, as a whole or an independent part

services thereof.

Services associated with transit cargo to Nepal and Bhutan

(landlocked countries).

Services by way of renting of residential dwelling for use as

residence except where the residential dwelling is rented to a
registered person.
Explanation 1 — For the purpose of exemption under this
entry, this entry shall cover services by way of renting of
residential dwelling to a registered person where, –
(i) the registered person is proprietor of a proprietorship
concern and rents the residential dwelling in his personal
capacity for use as his own residence; and
(ii) such renting is on his own account and not that of the
proprietorship concern.
Explanation 2.- Nothing contained in this entry shall apply to-
(a) accommodation services for students in student
residences;
(b) accommodation services provided by Hostels, Camps,
Paying Guest accommodations and the like.

Supply of accommodation services having value of supply less

than or equal to ` 20,000 per person per month provided that

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the accommodation service is supplied for a minimum

continuous period of 90 days.

Satellite launch services

Services by way of transportation of goods by an aircraft from a

place outside India upto the customs station of clearance in India.

Services by way of giving on hire –

(a) to a state transport undertaking (STU), a motor vehicle
meant to carry more than 12 passengers;
(aa) to a local authority, an Electrically operated vehicle (EOV)
meant to carry more than 12 passengers; or
(b) to a GTA, a means of transportation of goods.
(c) motor vehicle for transport of students, faculty and staff,
to a person providing services of transportation of
students, faculty and staff to an educational institution
providing services by way of pre-school education and
education upto higher secondary school or equivalent.

Service by way of access to a road or a bridge on payment of

toll charges.

Transmission/distribution of electricity by an electricity

transmission/ distribution utility.

Supply of services by way of providing metering equipment on rent,

testing for meters/transformers/capacitors etc., releasing electricity
connection, shifting of meters/service lines, issuing duplicate bills
etc., which are incidental or ancillary to the supply of transmission
or distribution of electricity provided by electricity transmission or
distribution utilities to their consumers.

Services provided by an incubatee up to a total turnover of

` 50 lakh in a FY provided:-
(a) total turnover had not exceeded ` 50 lakh during the
preceding FY; and

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(b) a period of 3 years has not elapsed from the date of

entering into an agreement as an incubate.

Research and development services against consideration

received in the form of grants supplied by –
(a) a Government Entity; or
(b) a research association, university, college or other
institution, notified under clauses (ii) or (iii) of sub-section
(1) of section 35 of the Income Tax Act, 1961.
The condition to be fulfilled in this case is that the research
association, university, college or other institution, notified
under clauses (ii) or (iii) of sub-section (1) of section 35 of the
Income Tax Act, 1961 is so notified at the time of supply of the
research and development service.

Taxable services, provided or to be provided, by a Technology

Business Incubator/ Science and Technology Entrepreneurship
Par (TBI/STEP) recognised by NSTEDB or bio- incubators
recognised by BIRAC.

Services by way of collecting or providing news by an

independent journalist, PTI or United News of India.

Services of public libraries by way of lending of books,

publications or any other knowledge-enhancing content or
material.

Services by an organiser to any person in respect of a business

exhibition held outside India.

Tour operator service, which is performed partly in India and

partly outside India, supplied by a tour operator to a foreign
tourist, to the extent of the value of the tour operator service
which is performed outside India.
However, value of the tour operator service performed outside
India shall be such proportion of the total consideration
charged for the entire tour which is equal to the proportion
which the number of days for which the tour is performed

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outside India has to the total number of days comprising the

tour, or 50% of the total consideration charged for the entire
tour, whichever is less.
Further, in making the above calculations, any duration of time
equal to or exceeding 12 hours shall be considered as one full
day and any duration of time less than 12 hours shall be taken
as half a day.

Services by way of pre-conditioning, pre- cooling, ripening,

waxing, retail packing, labelling of fruits and vegetables
which do not change or alter the essential characteristics of
the said fruits or vegetables.

Services provided by the National Centre for Cold Chain

Development under the Ministry of Agriculture, Cooperation
and Farmer’s Welfare by way of cold chain knowledge
dissemination.

Services by a foreign diplomatic mission located in India.

Services by way of granting National Permit to a goods

carriage to operate through-out India/ contiguous States.

Services by way of providing information under the RTI Act.

Services provided to a recognised sports body (RSB) by-

(a) an individual as a player, referee, umpire, coach or team
manager for participation in a sporting event organised
by a RSB;
(b) another RSB.

Services by way of public conveniences such as provision of

facilities of bathroom, washrooms, lavatories, urinal or toilets.

Above services have been exempted from both CGST and IGST. Apart from
these services, list of services exempt from IGST also include following services:

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Services received from a provider of service located in a non-

taxable territory by –
(a) CG/SG/UT/LA/GA/ an individual in relation to any purpose
other than commerce, industry or any other business or
profession;
(b) an entity registered under section 12AA/12AB of the Income-
tax Act, 1961 for the purposes of providing charitable
activities; or
(ba) way of supply of online educational journals or periodicals to
an educational institution other than an institution providing
services by way of-
(i) pre-school education and education up to higher
secondary school or equivalent; or
(ii) education as a part of an approved vocational education
course;
(c) a person located in a non-taxable territory.
However, the exemption shall not apply to OIDAR services received
by persons specified in entry (a) or entry (b).

Import of services by an establishment of a foreign company in

India, which is an airline company, from a related person or from
any of its other establishments outside India, when made without
consideration subject to specified conditions.

Services provided by a tour operator to a foreign tourist in relation

to a tour conducted wholly outside India.

Services supplied by an establishment of a person in India to any

establishment of that person outside India, which are treated as
establishments of distinct persons provided the place of supply of
the service is outside India.

Import of services by UN or a specified international organisation

for official use of UN or the specified international organisation.

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Import of services by Foreign diplomatic mission or consular post

in India, or diplomatic agents or career consular officers posted
therein subject to specified conditions.

Services provided by an intermediary when location of both

supplier and recipient of goods is outside the taxable territory
subject to specified conditions.

TEST YOUR KNOWLEDGE

1. Examine whether the following independent intra-State services are exempt

from GST:
(a) Legal services provided by BMC & Partners, Delhi, a partnership firm of
advocates, to Vastukaar Enterprises, Delhi, providing architect services
(with preceding financial year’s aggregate turnover as ` 21 lakh).
(b) Minimum balance charges collected by Dhanvarsha Bank from current
account and saving account holders.
2. Shiva Medical Centre, a Multi-speciality hospital, is a registered supplier in
Mumbai. It hires senior doctors and consultants independently, without
entering into any employer-employee agreement with them. These doctors and
consultants provide consultancy to the in-patients (patients who are admitted
to the hospital for treatment) without there being any contract with such
patients. In return, they are paid the consultancy charges by Shiva Medical
Centre.
However, the money actually charged by Shiva Medical Centre from the
in-patients is higher than the consultancy charges paid to the hired doctors and
consultants. The difference amount retained by the hospital, i.e. retention
money, includes charges for providing ancillary services like nursing care,
infrastructure facilities, paramedic care, emergency services, checking of
temperature, weight, blood pressure, etc.
The Department took a stand that senior doctors and consultants are providing
services to Shiva Medical Centre and not to the patients. Hence, their services

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are not the health care services and must be subject to GST. Further, GST is
applicable on the retention money kept by Shiva Medical Centre.

You are required to examine whether the stand taken by the Department is
correct.
3. Vedanta Hospital, Gurgaon has its own restaurant in the basement of hospital
premises - Annapurna Bhawan - which supplies food to its in-patients (patients
admitted in the hospital) as per the advice of the doctor/nutritionist. Annapurna
Bhawan also supplies food to other patients (who are not admitted) or their
attendants or visitors. The food is prepared by the employees of the hospital
and nothing is outsourced to any third-party vendors. Vedanta Hospital is of
the view that all services provided by a clinical establishment are exempt from
GST and thus, it is not liable to pay any tax. You are required to test the
correctness of the view taken by Vedanta Hospital.
4. Indian Institutes of Management (IIM), Indore organizes a placement drive for
the students studying in the campus. Many multinational companies register
for the placement program and pay the registration fee of ` 1,00,000. IIM,
Indore is of the view that such consideration received from multinational
companies for participating in the placement program is exempt from GST.
Explain whether the view taken by IIM, Indore is correct.
5. India Corporations Ltd., a Public Sector Undertaking (PSU), has taken loan from
a banking company - Wellness Bank Ltd. The loan was guaranteed by the
Central Government. India Corporations Ltd. defaulted in the repayment of
such loan. Examine whether the services of guaranteeing of loan by the Central
Government, in the given case, is liable to GST.
6. British High Commission, chief diplomatic mission of the United Kingdom, is
located in India and is providing advisory services to the students willing to
travel to UK for further studies. The mission has organized a seminar for such
students and a registration fee of ` 5,000 per student has been charged from
the students for the same. You are required to determine whether the advisory
services provided by British High Commission are liable to GST.
7. Explain in brief whether the below mentioned independent cases of supply of
services provided are exempt or taxable under GST law, providing very brief
reasoning:

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(i) Himalayan Wanderers Campsite, a registered entity under GST, has fixed
up various tents in Shimla, for lodging purposes being offered to tourists
and trekkers. The details of tents rented by Himalayan Wanderers
Campsite on 8th December is as under:

No. of tents Amount of rent charged Nature of

rented per tent per day occupancy
10 ` 600 Single
15 ` 1000 Double

(ii) Fables Infotech LLP, a limited liability partnership firm having registered
place of business in Hyderabad under GST, entered into a contract with
Neeta Services for providing air-conditioned mini vans for 1 year for
transportation of its female employees working in night shifts to be picked
up from designated spots every day at 9.00 p.m. except weekends and
dropped to the office. The same female employees were again picked up
from office at 6.30 a.m. every morning except weekends and dropped
back at the same spots from where they were picked up.
(iii) HumTum Services Limited, registered under GST, provided catering
services to Baljatan Anganwadi, an educational institute providing pre-
school education amounting to ` 2,50,000 in the month of February.
(iv) 50 women from different cities pursuing diploma in management
courses, participated in the 'Leadership Program' designed especially for
women for a duration of 9 months by IIM, Bangalore (a certificate as to
their participation was awarded to each one of them after the completion
of the programme).
(v) Mr. Ashok rented his residential flat to his friend Dr. Kishore, who is not
registered under GST for use as his medical clinic at a monthly rent of
` 15000.
8. Determine whether GST is payable in respect of each of the following
independent services provided by the registered persons:

(1) Fees of ` 10,000 charged from office staff for in-house personality
development course conducted by Mungerilal College providing
education as part of a curriculum for obtaining a qualification recognised
by Indian law.

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(2) Bus fees of ` 2,500 per month collected from students by Rosemary
College providing education as part of a curriculum for obtaining a
qualification recognised by Indian law.
(3) Housekeeping service provided by M/s. Clean Well to Himavarsha
Montessori school, a play school, for cleaning its playground and
classrooms for ` 25,000 per month.
(4) Info link supplied ‘Tracing Alphabets’, an online educational journal, to
students of UKG class of Sydney Montessori School for ` 2,000.
9. Sarva Sugam Charitable Trust, a trust registered under section 12AB of the
Income – tax Act, 1961, provides the following information relating to supply
of its services for the month of August:

Particulars Amount
(`)

Renting of residential dwelling for use as a residence to 18,00,000

Mr. Soham, an unregistered person

Renting of rooms for devotees (Charges per day ` 750) 6,00,000

Renting of kalyanamandapam (Charges per day ` 15,000) 12,00,000

Renting of community halls and open space (Charges per day 10,75,000
` 7,500)

Renting of shops for business (Charges per month ` 9,500) 4,75,000

Renting of shops for business (Charges per month ` 12,000) 7,50,000

Compute the GST liability of Sarva Sugam Charitable Trust for the month of
August assuming that the above amounts are exclusive of GST and rate of GST,
wherever applicable, is 18%.
Note: The rooms/ Kalyanamandapam/ halls/ open space/ shops owned by the
trust are located within the precincts of a religious place, meant for general
public, owned by the trust.

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10. Mr. Nagarjun, a registered supplier of Chennai, has received the following
amounts in respect of the activities undertaken by him during the month of
September:

S. No. Particulars Amount

(` )

(i) Amount charged for service provided to recognized 50,000

sports body as selector of national team

(ii) Commission received as an insurance agent from 65,000

insurance company

(iii) Amount charged as business correspondent for the 15,000

services provided to the urban branch of a
nationalized bank with respect to savings bank
accounts

(iv) Service to foreign diplomatic mission located in India 28,000

(v) Funeral services 30,000

He received the services from an unregistered goods transport agency for his
business activities and paid freight of ` 45,000.
Note: All the transactions stated above are inter-State transactions and also
are exclusive of GST.
You are required to calculate gross GST liability (ignoring ITC provisions) of
Mr. Nagarjun for the month of September assuming that the rate of GST,
wherever applicable, is 18% except the GTA services where the applicable rate
of GST is 5%. Working notes should form part of your answer.
11. Vividh Pvt. Ltd. is a supplier of goods and services at Bangalore, registered in
the State of Karnataka, having turnover of ` 200 lakh in the last financial year.
It has furnished the following information for the month of June.

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Particulars Amount (`)

excluding GST

Services provided by way of a labour contract for 13,00,000

repairing a single residential unit otherwise than as a
part of residential complex

Fee received from students of a competitive exam 5,40,000

training academy run by Vividh Pvt. Ltd.

4 buses each with a seating capacity of 72 passengers 6,00,000

given on hire to State Transport Undertaking

Rent paid to Local Municipal Corporation for premises 2,50,000

taken on rent for competitive exam training academy

Goods transport services received from a registered GTA 1,80,000

which has opted to pay tax itself @ 12%

Compute gross GST liability including tax payable under reverse charge
(ignoring ITC provisions) of Vividh Pvt. Ltd. for the month of June assuming that
the above amounts are exclusive of GST and rate of GST, wherever applicable,
is 18% unless otherwise mentioned.

12. “Chanakya Academy” is registered under GST in the State of Uttar Pradesh.
The Academy runs the following educational institutions:
(i) ‘Keshav Institute of Technology’ (KIT), a private engineering college in
Ghaziabad. KIT also runs distance learning post graduate engineering
programmes. Exams for such programmes are conducted in select cities
at centres appointed by the KIT. All the engineering courses including the
distance learning post graduate engineering programme run by KIT are
recognised by the law [The All India Council for Technical Education
(AICTE)].
(ii) ‘Little Millennium’, a pre-school in Lucknow.
(iii) ‘Bright Minds’, a coaching institute in Kanpur. The Institute provides
coaching for Institute of Banking Personnel Selection (IBPS) Probationary
Officers Exam.
(iv) ‘Spring Model’ a higher secondary school affiliated to CBSE Board.

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The Academy provides the following details relating to the expenses incurred
by the various institutions run by it during the period April to September:

S. Particulars KIT Little Bright Spring

No. Millennium Minds Model

(`) (`) (`) (`)

(i) Printing services for 2,50,000 1,50,000 2,00,000

printing the question
papers (paper and
content are provided
by the Institutions)

(ii) Paper procured for 4,30,000 2,58,000 3,44,000

printing the question
papers

(iii) Honorarium to paper 5,00,000

setters and
examiners (not on
the rolls of the
Institution)

(iv) Rent for exam 8,00,000 1,00,000

centers taken on rent
like schools etc., for
conducting
examination

(v) Subscription for 4,00,000 80,000 2,20,000 2,40,000

online educational
journals
[Little Millennium
has taken the
subscription for
online periodicals on
child development
and experiential
learning]

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 EXEMPTIONS FROM GST 4.155

(vi) Hire charges for 4,80,000 5,50,000 1,30,000 7,50,000

buses used to
transport students
and faculty from
their residence to the
institutions and back

(vii) Catering services for 3,20,000 2,60,000 1,80,000 5,00,000

running a canteen in
the campus for
students
(Catering services for
KIT include a sum of
` 60,000 for catering
at a student event
organised in a
banquet hall outside
the campus)

(viii) Security and 6,00,000 4,00,000 3,75,000 4,65,000

housekeeping
services for the
institution(s)
(Security and
housekeeping
services for Spring
Model include a sum
of ` 80,000 payable
for security and
housekeeping at the
student event
organised in a
banquet hall outside
the campus)

With the help of the above details, determine the amount of GST payable, if
any, (ignoring ITC provisions) on goods and services received during April to
September by the various educational institutions run by the ‘Chanakya

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 1.156 4.156 GOODS AND SERVICES TAX

Academy’; all the amounts given above are exclusive of taxes, wherever
applicable.
Note: Rate of GST on goods is 12%, catering service is 5% and on other services is
18%.
13. M/s A2Z, a proprietary firm registered under GST, is engaged in providing various
services under one roof. The firm provides the following information pertaining to
supplies made/input services availed by it during the month of March:

S. Particulars Amount
No. (` )

1. Amount collected for loading, unloading, packing and 15,000

warehousing of potato chips

2. Fees paid for yoga camp conducted by a charitable 20,000

trust registered under section 12AB of the Income-tax
Act, 1961 for employees of the firm

3. Interest received on fixed deposits with APNA Bank by 30,000

the firm

4. Professional services provided to foreign diplomatic 50,000

mission located in India

5. Recovery agent services provided to ABC Finance Ltd. - 1,00,000

an NBFC located in Delhi

6. Security services (by way of supply of security 80,000

personnel) provided to XYZ Ltd. - a registered person
under GST

7. Receipts from running an educational institution (a 35,00,000

Senior Secondary School) for services provided to its
students (including receipts for providing residential
dwelling service of ` 18,20,000 by the institution to the
students)

8. Supply value including cost of fuel for provision of 88,000

renting of motor vehicle for transportation of
passengers’ service to NPS Ltd.

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 EXEMPTIONS FROM GST 4.157

Determine the GST liability (inclusive of liability for the supplies received also)
of M/s A2Z for the month of March with necessary explanation for treatment of
each item. Rate of tax for both inward and outward supply is CGST and SGST
@ 9% each except for the service of renting a vehicle for transportation of
passengers for which CGST and SGST @ 2.5% each is applicable. All the
supplies are intra-State only. All amounts given hereunder are exclusive of
GST.
14. A2X Services Limited, registered under GST, is engaged in providing various
services to various educational institutions. The company provides the
following information in respect of services provided during the month of April:

S. No. Description of services provided

(i) Transportation of students & staff of ‘Shiksha University', a

Deemed University

(ii) Catering services provided to 'Rank CBSE School'

(iii) Security personnel services provided to 'Win CBSE School', for its
annual sports day held at SAI Sports Complex owned by
Government of India

(iv) Supply of online periodical science journal to 'Merit CBSE School'

for its higher secondary students

(v) Services, in relation to placement of students, to 'SKILL', a

Government recognized vocational training college

Comment on the taxability or otherwise of the above transactions under GST

law. State the correct legal provisions for the same.

ANSWERS

1. (a) Services provided by a partnership firm of advocates or an individual as

an advocate other than a senior advocate, by way of legal services to a
business entity with an aggregate turnover up to such amount in the
preceding financial year as makes it eligible for exemption from

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 1.158 4.158 GOODS AND SERVICES TAX

registration under the CGST Act, 2017, are exempt from GST vide
Notification No. 12/2017 CT (R) dated 28.06.2017 (hereinafter referred
to as exemption notification).
Since in the given case, services are being provided by the partnership
firm of advocates - BMC & Partners to a business entity - Vastukaar
Enterprises whose aggregate turnover in the preceding FY exceeded
` 20 lakh i.e. the threshold limit for registration applicable to a service
provider in Delhi, said services are not exempt from GST.
(b) Services by way of extending deposits, loans or advances in so far as
the consideration is represented by way of interest or discount (other
than interest involved in credit card services) are exempt from GST vide
exemption notification.
However, service charges/ fees, documentation fees, broking charges,
administrative charges, entry charges or such like fees or charges
collected over and above interest on loan, advance or a deposit are not
exempt and are liable to GST.
In view of the above, minimum balance charges collected by
Dhanvarsha Bank from current account and saving account holders are
not exempt and are liable to GST.
2. No, the stand taken by the Department is not correct.
Services by way of health care services by a clinical establishment, an
authorised medical practitioner or para-medics are exempt from GST vide
exemption notification.
Health care services have been defined to mean any service by way of
diagnosis or treatment or care for illness, injury, deformity, abnormality or
pregnancy in any recognised system of medicines in India and includes
services by way of transportation of the patient to and from a clinical
establishment, but does not include hair transplant or cosmetic or plastic
surgery, except when undertaken to restore or to reconstruct anatomy or
functions of body affected due to congenital defects, developmental
abnormalities, injury or trauma.
Circular No. 32/06/2018 GST dated 12.02.2018 has clarified that the entire
amount charged by the hospitals from the patients including the retention

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 EXEMPTIONS FROM GST 4.159

money and the fee/payments made to the doctors etc., is towards the
healthcare services provided by the hospitals to the patients and is exempt
from GST. In view of the same, GST is not applicable on the retention money
kept by Shiva Medical Centre.
The circular also clarifies that services provided by senior doctors/
consultants/ technicians hired by the hospitals, whether employees or not,
are also healthcare services exempt from GST. Hence, services provided by
the senior doctors and consultants hired by Shiva Medical Centre, being
healthcare services, are also exempt from GST.
3. Services by way of health care services by a clinical establishment, an
authorised medical practitioner or para-medics are exempt from GST vide
exemption notification. Circular No. 32/06/2018 GST dated 12.02.2018 has
clarified that food supplied by the hospital canteen to the in-patients as
advised by the doctor/nutritionists is a part of composite supply of healthcare
services and is not separately taxable. Thus, it is exempt from GST. However,
other supplies of food by a hospital to patients (not admitted) or their
attendants or visitors are taxable.
In view of the same, GST is not applicable on the food supplied by Annapurna
Bhawan to in-patients as advised by doctors/nutritionists while other supplies
of food by it to patients (not admitted) or their attendants/visitors are taxable.
4. Indian Institutes of Management Act, 2017 (IIM Act, 2017) empowers IIMs to
(i) grant degrees, diplomas, and other academic distinctions or titles, (ii)
specify the criteria and process for admission to courses or programmes of
study, and (iii) specify the academic content of programmes. Resultantly, all
the IIMs fall under purview of “educational institutions” as they provide
education as a part of a curriculum for obtaining a qualification recognized
by law for the time being in force.

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 1.160 4.160 GOODS AND SERVICES TAX

Further, the services provided by an educational institution to its students 78,

faculty and staff are exempt from GST vide exemption notification.

However, in the given case, services have been provided by the educational
institution (viz. IIM, Indore), to the multinational companies. Therefore, the
same is not exempt from GST.

5. Services supplied by Central Government, State Government, Union territory

to their undertakings or Public Sector Undertakings (PSUs) by way of
guaranteeing the loans taken by such undertakings or PSUs from the banking
companies and financial institutions are exempt from GST vide exemption
notification.
In the present case, Central Government has guaranteed the loan taken by
India Corporations Ltd. [a PSU], from Wellness Bank Ltd., [a banking
company]. Consequently, services provided by the Central Government, in the
form of guarantee of loan, are exempt from tax.

6. Services by a foreign diplomatic mission located in India are exempt from GST
vide exemption notification. Hence, in the given case, advisory services by
British High Commission located in Delhi to the students are exempt from
GST.

7. (i) Taxable: Since there is no specific exemption with respect to services

provided by a campsite for lodging purposes, services provided by
Himalayan Wanderers Campsite are liable to GST.

(ii) Taxable: Service of transport of passengers provided by Neeta Services

are liable to GST since such services are being provided in a contract
carriage which is air-conditioned.

(iii) Exempt: Since catering services provided to an educational institution

providing pre-school education are exempt from GST, HumTum
Services Limited is not liable to pay GST.

78
As per Circular No. 82/01/2019 GST dated 01.01.2019, services provided by IIMs to their
students who are enrolled for long duration programs (1 year or more) for which they are
awarded diploma/ degree certificate duly recommended by Board of Governors as per the
power vested in them under the IIM Act, 2017, under such long duration programs are exempt
from GST.

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 EXEMPTIONS FROM GST 4.161

(iv) Taxable: Since short duration programs provided by IIMs are not any
qualification recognized by law, GST is payable in the given case.

(v) Taxable: Since residential dwelling is rented for use other than
residence, GST is payable on the same.
8. (1) Services provided by an educational institution to its students, faculty
and staff are exempt from GST vide exemption notification. Educational
Institution has been defined to mean, inter alia, an institution providing
services by way of education as a part of a curriculum for obtaining a
qualification recognised by any law for the time being in force.
Since Mungerilal College provides education as part of a curriculum for
obtaining a qualification recognised by Indian law, the services
provided by it to its staff by way of conducting personality development
course would be exempt from GST, it being an educational institution.
(2) Since Rosemary College provides education as a part of a curriculum
for obtaining a qualification recognised by Indian law, the transport
services provided by Rosemary College to its students are exempt from
GST.
(3) Services provided to an educational institution, by way of, inter alia,
house-keeping services performed are exempt from GST vide
exemption notification provided such services are performed in such
educational institution. However, such exemption is available only
when the said services are provided to an educational institution
providing services by way of pre-school education and education up to
higher secondary school or equivalent.
In view of the above discussion, house-keeping services provided to
Himavarsha Montessori Play School are exempt from GST since
housekeeping services have been performed in such play school itself.
(4) Services provided to an educational institution by way of supply of
online educational journals or periodicals is exempt from GST vide
exemption notification. However, such exemption is not available to an
educational institution providing services by way of pre-school
education and education up to higher secondary school or equivalent.
Therefore, supply of online journal to students of UKG class of Sydney
Montessori School is not exempt from GST.

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 1.162 4.162 GOODS AND SERVICES TAX

9. Renting of precincts of a religious place meant for general public,

owned/managed by, inter alia, an entity registered as a charitable trust under
section 12AA/12AB of the Income-tax Act are exempt from GST vide
exemption notification. However, said exemption is not available if:
(i) charges for rented rooms are ` 1,000 per day or more;
(ii) charges for rented community halls, Kalyan mandapam, open area are
` 10,000 per day or more;
(iii) charges for rented shops are ` 10,000 per month or more.
Further, services by way of renting of residential dwelling for use as residence
to an unregistered person are also exempt vide exemption notification.
Computation of GST liability of Sarva Sugam Charitable Trust for August

Particulars Value (`) GST @

18% (`)

Renting of residential dwelling for use as 18,00,000 Nil

residence to an unregistered person
[Exempt vide exemption notification]

Renting of rooms for devotees 6,00,000 Nil

[Exempt since charges per day are below `1,000]

Renting of Kalyanamandapam 12,00,000 2,16,000

[Taxable since charges per day exceed `10,000]

Renting of community halls and open spaces 10,75,000 Nil

[Exempt since charges per day are below ` 10,000]

Renting of shops for business 4,75,000 Nil

[Exempt since charges per month are below
`10,000]

Renting of shops for business 7,50,000 1,35,000

[Taxable since charges per month exceed
` 10,000]

Total 3,51,000

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 EXEMPTIONS FROM GST 4.163

10. Computation of gross GST liability of Mr. Nagarjun

Particulars Value (`) IGST (`)

Supplies on which Mr. Nagarjun is liable to pay

GST under forward charge

Amount charged for service provided to 50,000 9,000

recognized sports body as selector of national
team [Note 1]

Commission received as an insurance agent Nil Nil

from insurance company [Note 2]

Amount charged as business correspondent for 15,000 2,700

the services provided to the urban branch of a
nationalised bank with respect to savings bank
accounts [Note 3]

Services provided to foreign diplomatic mission 28,000 5,040

located in India [Note 4]

Funeral services [Note 5] Nil Nil

Supplies on which Mr. Nagarjun is liable to pay

GST under reverse charge

Services received from GTA [Note 6] 45,000 2,250

IGST payable (Since all the transactions are 18,990

inter-State transactions, IGST is payable on the
same.)

Notes:
(1) Services provided to a recognized sports body by an individual only as
a player, referee, umpire, coach or team manager for participation in a
sporting event organized by a recognized sports body are exempt from
GST vide exemption notification. Thus, service provided as selector of
team is liable to GST.
(2) Commission for providing insurance agent’s services is liable to GST.
However, the tax payable thereon is to be paid by the recipient of

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 1.164 4.164 GOODS AND SERVICES TAX

service i.e., insurance company, under reverse charge in terms of

Notification No. 13/2017 CT (R) dated 28.06.2017 79. Thus, Mr. Nagarjun
will not be liable to pay GST on such commission.
(3) Services provided by business correspondent to a banking company
with respect to accounts in its rural area branch are exempt from GST
vide exemption notification. Thus, such services provided in respect of
urban area branch will be taxable.
(4) While services provided by a foreign diplomatic mission located in India
are exempt from GST vide exemption notification, services provided to
such mission are taxable.
(5) Funeral services being covered in Schedule III of CGST Act are not a
supply and thus, are outside the ambit of GST.
(6) GST on services provided by a GTA to, inter alia, a registered person is
payable by the recipient of service i.e., the registered person, under
reverse charge in terms of Notification No. 13/2017 CT (R) dated
28.06.2017 except where GTA is registered and has exercised the option
to itself pay tax on said services 80. Since in the given case, GTA is
unregistered, it could not have exercised the option to pay tax and thus,
GST is payable @ 5% under reverse charge mechanism by the recipient
– Mr. Nagarjun.
11. Computation of gross GST liability of Vividh Pvt. Ltd.

Particulars Value of GST @

supply (`) 18% (`)
Services provided by way of labour contracts 13,00,000 2,34,000
for repairing a single residential unit
otherwise than as a part of residential
complex
[Services by way of pure labour contracts of
construction, erection, commissioning, or
installation of original works pertaining to a

79
Provisions relating to reverse charge mechanism have already been discussed in detail in
Chapter 2 – Charge of GST in this Module of the Study Material.
80
Provisions relating to reverse charge mechanism have already been discussed in detail in
Chapter 2 – Charge of GST in this Module of the Study Material.

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 EXEMPTIONS FROM GST 4.165

single residential unit otherwise than as a part

of a residential complex are exempt vide
exemption notification. Labour contracts for
repairing, are thus, taxable.]

Fee received from students of competitive 5,40,000 97,200

exam training academy
[Fee received from students of competitive
exam training academy is taxable as it is not
an educational institution since competitive
exam training does not lead to grant of a
recognized qualification.]
Buses each with seating capacity of 72 6,00,000 Nil
passengers given on hire to State Transport
Undertaking
[Services by way of giving on hire to a state
transport undertaking (STU), a motor vehicle
meant to carry more than 12 passengers, are
exempt from GST vide exemption
notification.]

Services on which tax is payable under reverse

charge:
Rent paid to Local Municipal Corporation 2,50,000 45,000
[GST is payable under reverse charge in case
of renting of immovable property services
supplied by a local authority to a registered
person.]

GTA services availed 1,80,000 Nil

[Since GTA has opted to pay tax @ 12%, tax
is payable under forward charge by GTA only
and not by Vividh Pvt. Ltd.]
Gross GST payable 3,76,200

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 1.166 4.166 GOODS AND SERVICES TAX

12. Exemption notification exempts select services provided to an educational

institution. Here, the “educational institution” means an institution
providing services by way of-
(i) pre-school education and education up to higher secondary school or
equivalent;

(ii) education as a part of a curriculum for obtaining a qualification

recognised by any law for the time being in force;
(iii) education as a part of an approved vocational education course;
The select services which are exempt when provided to an educational
institution are-
(i) transportation of students, faculty and staff;
(ii) catering, including any mid-day meals scheme sponsored by the Central
Government, State Government or Union territory;
(iii) security or cleaning or house-keeping services performed in such
educational institution;
(iv) services relating to admission to, or conduct of examination by, such
institution;
(v) supply of online educational journals or periodicals.
However, the services mentioned in points (i), (ii) and (iii) are exempt only
when the same are provided to an educational institution providing services
by way of pre-school education and education up to higher secondary school
or equivalent.
Also, the supply of online educational journals or periodicals is not exempt
from GST when provided to-
(i) pre-school education and education up to higher secondary school or
equivalent; or
(ii) education as a part of an approved vocational education course.
Further, services by way of giving on hire motor vehicle for transport of
students, faculty and staff, to a person providing services of transportation of
students, faculty and staff to an educational institution providing services by

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 EXEMPTIONS FROM GST 4.167

way of pre-school education and education upto higher secondary school or

equivalent is exempt 81.
In the given case, all the engineering courses including the distance learning
post graduate engineering programme run by KIT are recognised by the law
[The All India Council for Technical Education (AICTE)]. Therefore, since KIT
imparts education as a part of a curriculum for obtaining a qualification
recognised by the Indian law, the same is an educational institution in terms
of the exemption notification.
Similarly, Little Millennium and Spring Model, being a pre-school and a higher
secondary school respectively are also educational institutions in terms of the
exemption notification.
However, Bright Minds, being a coaching centre, training candidates to secure
a banking job, is not an educational institution in terms of the exemption
notification. Hence, none of the select services (mentioned above) will be
exempt when provided to Bright Minds.
In the light of the foregoing provisions, the amount of GST payable on goods
and services received by these educational institutions during April to
September is computed as under:

Particulars KIT Little Bright Spring

Millennium Minds Model
(`) (`) (`) (`)
Printing services for Exempt 27,000 Exempt
printing the [Services [1,50,000
question papers provided to x 18%]
(paper and content educational
are provided by the institution in
Institutions) relation to
conduct of
examination]
Paper procured for 51,600 30,960 41,280
printing the [4,30,000 x [2,58,000 [3,44,000
question papers 12%] x 12%] x 12%]

81
as per Entry 22 of Notification No. 12/2017 CT (R)

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 1.168 4.168 GOODS AND SERVICES TAX

[Supply of select
services to
educational
institutions is
exempt and not
supply of goods to
such educational
institutions]
Honorarium to Exempt
paper setters and [Services
examiners (not on provided to
the rolls of the educational
educational institution in
institution) relation to
conduct of
examination]
Rent for exam Exempt 18,000
centres taken on [Services [1,00,000
rent like schools provided to x 18%]
etc., for conducting educational
examination institution in
relation to
conduct of
examination]
Subscription for Exempt 14,400 39,600 43,200
online educational [80,000 x [2,20,000 [2,40,000
journals 18%] x 18%] x 18%]
[Little Millennium
has taken the
subscription for
online periodicals
on child
development and
experiential
learning]

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 EXEMPTIONS FROM GST 4.169

Hire charges for 86,400 Exempt 23,400 Exempt

buses used to [4,80,000 x [1,30,000
transport students 18%] x 18%]
and faculty from
their residence to
the institutions and
back
Catering services for 16,000 Exempt 9,000 Exempt
running a canteen in [3,20,000 x [1,80,000
the campus for 5%] x 5%]
students
[Catering service
provided to pre-
school and the
higher secondary
school is exempt
irrespective of
whether the same is
provided within or
outside the
premises of the pre-
school and the
higher secondary
school]
Security and 1,08,000 Exempt 67,500 14,400
housekeeping [6,00,000 x [3,75,000 [80,000 x
services for the 18%] x 18%] 18%]
institution(s)
[Security and
housekeeping
service provided to
pre-school and the
higher secondary
school for the
student event
organised in a
banquet hall will be

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 1.170 4.170 GOODS AND SERVICES TAX

taxable as only the

security and
housekeeping
service provided
within the premises
of the pre-school
and the higher
secondary school
are exempt.]
Total GST payable 2,62,000 14,400 2,15,460 98,880
on goods and
services received

13. Computation of GST liability of M/s A2Z for the month of March:

S. Particulars CGST SGST

No. (`) (`)
1. Loading, unloading, packing and 1,350 1,350
warehousing of potato chips [15,000 × [15,000 ×
[Loading, unloading, packing and 9%] 9%]
warehousing of agricultural produce is
exempt. However, potato chips is not an
agricultural produce.]
2. Fees paid for yoga camp -- --
[Services provided by a charitable trust
registered under section 12AB of the
Income-tax Act by way of advancement
of yoga are exempt.]
3. Interest received on fixed deposits -- --
[Services of extending fixed deposits in
so far as the consideration is
represented by way of interest are
exempt.]
4. Professional services provided to 4,500 4,500
foreign diplomatic mission located in [50,000 × [50,000 ×
India 9%] 9%]
[Not specifically exempt.]

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 EXEMPTIONS FROM GST 4.171

5. Recovery agent services provided to -- --

ABC Finance Ltd., an NBFC
[Since such services are being provided
to an NBFC, tax on the same is payable
by recipient - ABC Finance Ltd. - under
reverse charge (RCM). 82]
6. Security services provided to XYZ Ltd., a -- --
registered person
[Since such services are being provided
by a non-body corporate to a registered
person, tax on the same is payable by
recipient - XYZ Ltd. - under reverse
charge (RCM) 83.]
7. Receipts from running an educational -- --
institution (including receipts for
residential dwelling service)
[Services provided by an educational
institution and services by way of
renting of residential dwelling for use as
residence are exempt.]
8. Renting of motor vehicle service
[Since services of renting of motor
vehicle including cost of fuel with tax -- --
payable @ 2.5% CGST/SGST is being
provided by a non-body corporate to a
body corporate, tax on the same is
payable by recipient – NPS Ltd. – under
RCM 84.]
Total GST liability 5,850 5,850

82
Provisions relating to reverse charge mechanism have already been discussed in detail in
Chapter 2 – Charge of GST.
83
Provisions relating to reverse charge mechanism have already been discussed in detail in
Chapter 2 – Charge of GST in this Module of the Study Material.
84
Provisions relating to reverse charge mechanism have already been discussed in detail in
Chapter 2 – Charge of GST in this Module of the Study Material.

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 1.172 4.172 GOODS AND SERVICES TAX

14.

S. No. Particulars Taxability

(i) Transportation of students and staff of deemed Taxable
university
[Taxable since transportation services provided to an
educational institution are exempt only if such
institution provides pre-school education or education
up to higher secondary school or equivalent.]
(ii) Catering services provided to “Rank CBSE School” Exempt
[Catering services provided to an educational
institution providing pre-school education or
education up to higher secondary school or equivalent
are exempt.]
(iii) Security services to “Win CBSE School” for its annual Taxable
sports day held at SAI Sports complex
[Security services provided to an educational
institution providing pre-school education or
education up to higher secondary school are exempt
provided such services are performed in the premises
of such institution. However, in this case, security
services are being provided outside the school
campus, and hence the same are taxable.]
(iv) Supply of online periodical science journal to school Taxable
for its higher secondary students
[Taxable since educational institutions providing
service by way of pre-school education and education
upto higher secondary school or equivalent are not
eligible for exemption in respect of supply of online
educational journals.]
(v) Services in relation to placement of students, to Taxable
Government recognized vocational training college
[Taxable since only services related to admission and
conducting exams are exempt for vocational
educational institutions.]

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 EXEMPTIONS FROM GST 4.173

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 2(69) of the CGST Act,
2017 is 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

2 (69) Local authority: Local authority: means — The sub-

means - clause (c) of
(a) a “Panchayat” as
clause (69) of
(a) a “Panchayat” defined in clause (d) of
section 2 is
as defined in article 243 of the
being
clause (d) of Constitution.
proposed to
article 243 of (b) a “Municipality” as
be amended
the defined in clause (e) of so as to
Constitution. article 243P of the substitute
(b) a Constitution. the term
“Municipality” (c) a Municipal “municipal or
as defined in Committee, a Zilla local fund”
clause (e) of Parishad, a District Board, with the
article 243P of and any other authority terms
the legally entitled to, or “municipal
Constitution. entrusted by the Central fund or local
Government or any State fund” and to

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 1.174 4.174 GOODS AND SERVICES TAX

(c) a Municipal Government with the insert an

Committee, a control or management of Explanation
Zilla Parishad, a municipal fund or local after the said
a District fund. sub-clause,
Board, and any to provide
Explanation.—For the
other the
purposes of this sub-
authority definitions of
clause-
legally entitled the terms
to, or (i) "local fund" means “local fund”
entrusted by any fund under the and
the Central control or management “municipal
Government of an authority of a local fund” used in
or any State self-government the definition
Government of “local
established for
with the authority”
discharging civic
control or under the
functions in relation to a
management said clause so
of a municipal Panchayat area and as to clarify
or local fund. vested by law with the the scope of
powers to levy, collect the said
(d) a Cantonment
and appropriate any tax, terms.
Board as
defined in duty, toll, cess or fee, by
section 3 of whatever name called
the (ii) "municipal fund"
Cantonments means any fund under
Act, 2006.
the control or
(e) a Regional management of an
Council or a authority of a local self-
District government established
Council for discharging civic
constituted
functions in relation to a
under the
Metropolitan area or
Sixth Schedule
to the Municipal area and
Constitution. vested by law with the
powers to levy, collect
(f) a
and appropriate any tax,
Development

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 EXEMPTIONS FROM GST 4.175

Board duty, toll, cess or fee, by

constituted whatever name called.
under article
(d) a Cantonment Board
371 and article
as defined in section 3 of
371J of the
the Cantonments Act,
Constitution.
2006.
(g) a Regional
(e) a Regional Council or
Council
a District Council
constituted
constituted under the Sixth
under article
Schedule to the
371A of the
Constitution.
Constitution
(f) a Development
Board constituted under
article 371 and article 371J
of the Constitution.
(g) a Regional Council
constituted under article
371A of the Constitution

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India
CHAPTER 5

TIME OF SUPPLY
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, 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 reading this Chapter, you will be able to

 identify the point in time when the liability to pay GST arises -
 on supply of goods or services where GST is payable under
forward charge
 on supply of goods or services where GST is payable under
reverse charge
 on supply of vouchers exchangeable for goods and services
 on supply of goods and services in residual cases
 in case of enhancement of value of supply on account of
interest, late fee/penalty paid for delay in payment of
consideration
 pinpoint the applicable rate of GST in case there is a change in rate
of GST in respect of supply of goods or services
 apply the concepts relating to time of supply of goods and/or
services in problem solving

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 5.2 GOODS AND SERVICES TAX

1. INTRODUCTION
GST is payable on supply of goods or
services. A supply consists of elements
that can be separated in time, like
purchase order / agreement,
despatch (of goods), delivery (of
goods) or provision or performance
of service, entry in the records,
payment, and entry of the payment
in the records or deposit in the bank.
So, the question that arises is - at what
point of time in the aforesaid transaction, the GST
becomes payable? Does it become payable when an agreement to supply goods
or services is made, or when the goods are shipped or the services are provided,
or when the invoice is issued or when payment is made? What if the goods are
shipped over a period of time? What if the service is provided over a period of
time?
Provisions relating to ‘time of supply’ provide
answers to all such and other questions that arise
with respect to the time when the liability to pay
CGST and SGST/UTGST (intra-State supply) or
IGST (inter-State supply) arises. In other words,
time of supply indicates the point in time when
the liability to pay tax arises. It is important to note here that though the liability
to pay tax arises at the time of supply, the same can be paid to the Government
by the due dates prescribed with reference to the said ‘time of supply’. For
instance, if time of supply of a given supply is 25th May, the tax leviable thereon
would be payable latest by 20th June, which is the due date prescribed in the CGST
Act for suppliers filing GST return on monthly basis. 1
The CGST Act provides separate provisions for time of supply for goods and
services vide sections 12 and 13 respectively. Section 14 provides for the method

1
Provisions relating to due date for payment of tax have been discussed in Chapter 11: Payment
of Tax in Module 2 of this Study Material.

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 TIME OF SUPPLY 1.3 5.3

of determining the time of supply in case there is a change in the rate of tax on
supply of goods or services. Sections 12 and 13 employ provisions of section 31
relating to issue of tax invoice as a reference point. Therefore, it will be useful to
read this Chapter in conjunction with the provisions relating to tax invoice
discussed in detail in Chapter 9: Tax Invoice, Credit and Debit Notes in Module 2 of
this Study Material.
Events like issuing of invoices, receipt of payment, provision of service, receipt of
services as recorded in books of account need to be analysed to determine the
time of supply when the tax on supply is payable under forward charge. When
the tax on supply is payable under reverse charge, events like date of receipt of
goods or services, date of making payment, date of issue of invoice etc. need to
be analysed to determine the time of supply. The provisions relating to time of
supply essentially fix the tax collection event to the earliest possible time.
In the subsequent pages of this Chapter, sections 12, 13 and 14 are extracted,
followed by their analysis, to understand how to determine the time of supply of
goods and services respectively. When studying the statutory provisions, the
definitions (extracted first) must also be referred to simultaneously, so as to
understand the precise meaning of the terms used.

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

2. RELEVANT DEFINITIONS
 Associated enterprises shall have the same meaning as assigned to it in
section 92A of the Income-tax Act, 1961 [Section 2(12)].
Broadly, an associated enterprise in relation to another enterprise, means
an enterprise which participates, directly or indirectly, or through one or
more intermediaries, in the management or control or capital of the other
enterprise. [The detailed definition of associated enterprise may be referred
to from Chapter 24: Transfer Pricing and other provisions to check avoidance
of tax in the Study Material of Paper 4: Direct Tax Laws and International
Taxation.]

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 5.4 GOODS AND SERVICES TAX

 Document includes written or printed record of any sort and electronic

record as defined in clause (t) of section 2 of the Information Technology
Act, 2000 [Section 2(41)].
 Invoice or tax invoice means the tax invoice referred to in section 31 [Section
2(66)].
 Goods means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed
before supply or under a contract of supply [Section 2(52)].

GOODS

MEANS

Money &
All kind of movable property EXCLUDES
Securities

INCLUDES

Actionable claim, Growing Crops, Grass

& Things forming part of land agreed
to be severed before supply or under a
contract of supply

 Services means anything other than goods, money and securities but includes
activities relating to the use of money or its conversion by cash or by any
other mode, from one form, currency or denomination, to another form,
currency or denomination for which a separate consideration is charged.

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 TIME OF SUPPLY 1.5 5.5

Explanation––For the removal of doubts, it is hereby clarified that the

expression “services” includes facilitating or arranging transactions in
securities [Section 2(102)].

SERVICES Activities
relating to use
of money or its
conversion for a
MEANS
consideration

Anything INCLUDING

Activities
facilitating or
arranging
transactions in
EXCLUDING securities

Goods Money Securities

 Prescribed means prescribed by rules made under this Act on the

recommendations of the Council [Section 2(87)].
 Reverse charge means the liability to pay tax by the recipient of supply of
goods or services or both instead of the supplier of such goods or services or
both under sub-section (3) or sub-section (4) of section 9, or under sub-
section (3) or sub- section (4) of section 5 of the Integrated Goods and
Services Tax Act [Section 2(98)].
 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.

© The Institute of Chartered Accountants of India

 5.6 GOODS AND SERVICES TAX

However, a person who organises or arranges, directly or indirectly, supply

of specified actionable claims, including a person who owns, operates or
manages digital or electronic platform for such supply, shall be deemed to
be a supplier of such actionable claims, whether such actionable claims are
supplied by him or through him and whether consideration in money or
money's worth, including virtual digital assets, for supply of such
actionable claims is paid or conveyed to him or through him or placed at
his disposal in any manner, and all the provisions of this Act shall apply to
such supplier of specified actionable claims, as if he is the supplier liable
to pay the tax in relation to the supply of such actionable claims. [Section
2(105)].

and includes
an agent
means the acting on
person behalf of such
Supplier in supplying the supplier in
relation to any said goods relation to the
goods and/or and/or services goods and/or
services 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)].

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 TIME OF SUPPLY 1.7 5.7

Recipient

If consideration is payable
Person liable to pay the
for supply of goods and/or
consideration
services

Person to whom goods are

If no consideration is payable delivered/made available or to
for supply of goods whom possession/use of the
goods is given/ made available

If no consideration is payable
Person to whom the service is
for the supply of services
rendered

Recipient includes an agent acting on behalf of the recipient in relation to

the goods and/or services supplied

 Voucher means an instrument where there is an obligation to accept it as

consideration or part consideration for a supply of goods or services or both
and where the goods or services or both to be supplied or the identities of
their potential suppliers are either indicated on the instrument itself or in
related documentation, including the terms and conditions of use of such
instrument [Section 2(118)].

3. TIME OF SUPPLY OF GOODS [SECTION 12]

STATUTORY PROVISIONS

Section 12 Time of supply of goods

Sub-section Clause Particulars

(1) The liability to pay tax on goods shall arise at the time of supply as
determined in terms of the provisions of this section.

(2) The time of supply of goods shall be the earlier of the following
dates, namely:-

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 5.8 GOODS AND SERVICES TAX

(a) the date of issue of invoice by the supplier or the last date
on which he is required, under section 31, to issue the
invoice with respect to the supply; or

(b) the date on which the supplier receives the payment with
respect to the supply 2:

Provided that where the supplier of taxable goods receives an

amount up to one thousand rupees in excess of the amount
indicated in the tax invoice, the time of supply to the extent of such
excess shall, at the option of the said supplier, be the date of issue
of invoice in respect of such excess amount.

Explanation 1. For the purposes of clauses (a) and (b), the “supply”
shall be deemed to have been made to the extent it is covered by
the invoice or, as the case may be, the payment.

Explanation 2. For the purpose of clause (b), “the date on which the
supplier receives the payment” shall be the date on which the
payment is entered in his books of account or the date on which
the payment is credited to his bank account, whichever is earlier.

(3) In case of supplies in respect of which tax is paid or liable to be

paid on reverse charge basis, the time of supply shall be the earliest
of the following dates, namely:

(a) the date of the receipt of the goods, or

(b) the date of payment as entered in the books of account

of the recipient or the date on which the payment is
debited in his bank account, whichever is earlier, or

(c) the date immediately following thirty days from the date
of issue of invoice or any other document, by whatever
name called, in lieu thereof by the supplier:

2
Practically, in case of goods, the date of receipt of payment by the supplier is no longer
a criterion for determination of time of supply for payment of tax. Refer the ‘Analysis’ of
section 12 given in the ensuing pages for detailed discussion in this regard.

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 TIME OF SUPPLY 1.9 5.9

Provided that where it is not possible to determine the time of

supply under clause (a), (b), or (c), the time of supply shall be the
date of entry in the books of account of the recipient of supply.

(4) In case of supply of vouchers by a supplier, the time of supply shall be –

(a) the date of issue of voucher, if the supply is identifiable at

that point; or

(b) the date of redemption of voucher, in all other cases 3.

(5) Where it is not possible to determine the time of supply under the
provisions of sub-section (2) or sub-section (3) or sub-section (4),
the time of supply shall––

(a) in a case where a periodical return has to be filed, be the

date on which such return is to be filed; or

(b) in any other case, be the date on which the tax is paid.

(6) The time of supply to the extent it relates to an addition in the

value of supply by way of interest, late fee or penalty for delayed
payment of any consideration shall be the date on which the
supplier receives such addition in value.

Section 31 Tax invoice (to the extent relevant to the time of supply of
(Relevant goods)
Extract)

(1) A registered person supplying taxable goods shall, before or at the time of,—

(a) removal of goods for supply to the recipient, where the

supply involves movement of goods; or

(b) delivery of goods or making available thereof to the

recipient, in any other case,

3
It may be noted that the Finance Act, 2025 has omitted the provisions relating to time of supply
of vouchers. Provisions of the Finance Act, 2025 have not become effective as on the date of
printing of this Study Material. Once the said amendment comes into effect, students will no
longer be required to study the provisions relating to the time of supply of vouchers.

© The Institute of Chartered Accountants of India

 5.10 GOODS AND SERVICES TAX

issue a tax invoice showing the description, quantity and value of goods,
the tax charged thereon and such other particulars as may be prescribed:

Provided that the Government may, on the recommendations of

the Council, by notification, specify the categories of goods or
supplies in respect of which a tax invoice shall be issued, within
such time and in such manner as may be prescribed.

(4) In case of continuous supply of goods, where successive statements

of accounts or successive payments are involved, the invoice shall
be issued before or at the time each such statement is issued or, as
the case may be, each such payment is received.

(7) Notwithstanding anything contained in sub-section (1), where the

goods being sent or taken on approval for sale or return are
removed before the supply takes place, the invoice shall be issued
before or at the time of supply or six months from the date of
removal, whichever is earlier.

Section 12 must be read with section 31, which prescribes in detail

the date on which tax invoice for a supply of goods must be issued
in various situations.

ANALYSIS

Section 12 provides for the determination of time of supply in the following

situations:

 Supply of goods under forward charge;

 Supply of goods under reverse charge;

 Supply of vouchers that can be used to pay for goods;

 Residual cases

 Addition to value of supply of goods by way of interest or late fee or penalty

for delayed payment.

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 TIME OF SUPPLY 1.11 5.11

We consider below how the time of supply is determined in each of these situations.
(i) Time of supply of goods under forward charge [Section 12(2) read
with section 31]
As per section 12(2), the time of supply of goods that are taxable under
forward charge, is the earlier of the following two dates:
 Date of issue of invoice by the supplier or the last date on which the
invoice ought to have been issued in terms of section 31, to the extent
the invoice covers the supply of goods; or
 Date of receipt of payment by the supplier, to the extent the payment
covers the supply of goods.
No tax payable at the time of receipt of advance for supply of goods
– Special procedure for payment of tax in case of supply of goods
In exercise of the powers conferred by section 148 4, the Central Government,
on the recommendation of the GST Council, has issued Notification No.
66/2017 CT dated 15.11.2017 to specify that a registered person (excluding
composition supplier and registered persons making supply of specified
actionable claims) should pay GST on the outward supply of goods at the
time of supply as specified in section 12(2)(a), i.e. date of issue of invoice or
the last date on which invoice ought to have been issued in terms of section
31, including in the situations attracting the provisions of section 14.
In simple words, all taxpayers under forward charge (except composition
suppliers and registered persons making supply of specified actionable
claims) are not required to pay GST at the time of receipt of advance in
relation to supply of goods. The entire GST shall become payable only when
the invoice for the supply of such goods is issued or ought to have been
issued. Thus, time of supply of goods for the purpose of payment of tax

4
Section 148 provides that the Government may, on the recommendations of the Council, and
subject to such conditions and safeguards as may be prescribed, notify certain classes of registered
persons, and the special procedures to be followed by such persons including those with regard
to registration, furnishing of return, payment of tax and administration of such persons. The same
is discussed in Chapter 24 - on Miscellaneous Provisions of Module 3 of this Study Material.

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 5.12 GOODS AND SERVICES TAX

is the date of issue of invoice or the last date when the invoice ought to
have been issued under section 31.

The relief of not paying GST on receipt of advance is available

only in case of supply of goods and not for supply of services.

Meaning of “Date of receipt of payment”

“Date of receipt of payment” in the above situation refers to the date on which
the payment is recorded in the books of account of the entity (supplier of
goods) that receives the payment, or the date on which the payment is
credited to the entity’s bank account, whichever is earlier.
Significance of “to the extent the invoice or payment covers the supply
of goods”
Suppose a part of the consideration is paid in advance or invoice is issued for
part payment, in such cases the time of supply will not cover the full supply.
The supply shall be deemed to have been made only to the extent it is
covered by the invoice or the part advance payment.
However, it may be noted that in case of goods (except for composition
supplier and registered persons making supply of specified actionable
claims), tax is payable only on the basis of issuance of invoice/last date for
the purpose of issuance of invoice even if any advance or part payment has
been received before the issuance of invoice/last date for the purpose of
issuance of invoice.
(1) A Ltd. enters into an agreement with B Ltd. to supply 100 kg
of raw material. However, A Ltd. supplies only 80 kg of raw
material and issues the invoice for the same.
Here, the supply would be deemed to have been made in respect of 80 kg of
raw material, i.e. to the extent covered by the invoice. Therefore, the
provisions relating to time of supply will only be applicable to supply of 80
kg of raw material and not for entire 100 kg of raw material.
The provisions relating to time of supply of goods as contained in section 12
in case of forward charge read with Notification No. 66/2017 CT dated
15.11.2017, have been depicted by way of a diagram given at a subsequent
page.

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 TIME OF SUPPLY 1.13 5.13

Time limit for issuance of invoice for supply of goods under

section 31
Section 12(2) refers to the last date on which a supplier is required to issue
the invoice under section 31. Following are the relevant provisions of section
31 in this regard:
 As per section 31(1), the invoice needs to be issued either before or at
the time of removal of goods (where supply involves movement of
goods) or delivery of goods/ making goods available to recipient (in
any other case).
 In case of continuous supply of goods, the invoice should be issued
before or at the time of issuance of periodical statement/receipt of
periodical payment [Section 31(4)].
Continuous supply of goods is a supply of goods provided or agreed to
be provided continuously or on recurring basis, under a contract, and
for which the supplier issues an invoices to the recipient on a regular or
periodic basis and includes supply of such goods as the Government
may, subject to such conditions, as it may, by notification, specify
[Section 2(32)].
The said term has been discussed in Chapter 9: Tax Invoice; Credit and
Debit Notes in Module 2 of this Study Material.
 In case of goods sent or taken on approval for sale or return, invoice
should be issued before or at the time of supply or 6 months from the
date of removal, whichever is earlier [Section 31(7)].
(2) B Ltd. sells goods to C Ltd. on 10th June. The invoice for the
same is issued on the same day. Payment for the goods is
received on 20th June.

Time of supply of goods for the purpose of payment of tax is 10th June being
the date of issue of invoice in terms of section 31.
(3) B Ltd. sells goods to C Ltd. on 10th June. The invoice for the same is
issued on 10th June. Payment for the goods is received on 5th June.
Time of supply of goods for the purpose of payment of tax is 10th June being
the date of issue of invoice in terms of section 31.

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 5.14 GOODS AND SERVICES TAX

TIME OF SUPPLY OF GOODS UNDER FORWARD CHARGE AS

PER SECTION 12
Date of issue of invoice /
Last date of issue of
invoice under section 31

Date on which the

payment is recorded in

Whichever is earlier
the books of account of
the supplier [presently
irrelevant for the purpose
of payment of tax]
Date on which the
BANK
payment is credited to
the supplier’s bank
account [presently
irrelevant for the purpose
of payment of tax]

SPECIAL PROCEDURE5 FOR PAYMENT OF TAX

IN CASE OF GOODS
GST to be paid at the As specified in section 12(2)(a)
time of supply

Date of issue of
invoice / Last date of
issue of invoice under
section 31

Effectively, in case of goods, no GST is payable at the time of receipt

of advance for supply of goods.

5
under section148 of the CGST Act

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 TIME OF SUPPLY 1.15 5.15

(4) B Ltd. sells goods to C Ltd. on 10th June. The invoice for the
same is issued on 12th June. Payment for the goods is received on
20th June. Time of supply of goods for the purpose of payment of
tax is 10th June being the last date on which invoice ought to have been issued
in terms of section 31.

(5) B Ltd. enters into a contract with C Ltd. for supply of goods over
a period of one year starting from the month of January. As per the
contract, C Ltd. makes payment on 10th day of each month. B Ltd.
issues the invoice on the same day. Time of supply of the goods for the
purpose of payment of tax will be 10th day of each month.

(6) B Ltd. sends goods to C Ltd. for sale on approval basis on 10th
January. C Ltd. approves the goods on 15th August. B Ltd. should
issue the invoice on 10th July as the supply gets fructified after six
months from the date of removal. Time of supply of the goods for the
purpose of payment of tax is 10th July being the last date on which invoice
ought to have been issued in terms of section 31.

Excess payment upto ` 1000: Option of taking invoice date as time of

supply

In terms of the proviso to sub-section (2) of section 12, for a payment of up

to ` 1,000 received in excess of the value of the goods invoiced, the supplier
can choose to take the date of invoice issued with respect to such excess
amount as the time of supply of goods for such excess value. Since GST on
supply of goods is payable only on the basis of issuance of invoice6, this
provision is practically irrelevant for supply of goods.

If neither the date of invoice nor the date of payment is available,

the time of supply is determined in terms of the residual provisions
under sub-section (5) of section 12 [discussed under point (iv)].

6
as per Notification No. 66/2017 CT dated 15.11.2017

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 5.16 GOODS AND SERVICES TAX

(ii) Time of supply of goods under reverse charge [Section 12(3)]

The time of supply of goods on which GST is payable on reverse charge basis
under sub-sections (3)
and (4) of section 9 of
CGST Act is determined in
terms of section 12(3)(a),
(b) and (c), as follows:

The time of supply for such goods will be the earliest of the following dates:

 Date on which the goods are received, or

 Date on which payment is recorded in the books of account of the

recipient, or the date on which the same is debited in his bank account,
whichever is earlier, or

 Date immediately following 30 days from the date of issue of invoice

(or document by some other name in lieu of invoice) by the supplier.

If it is not possible to determine the time of supply by using these parameters,

then the time of supply will be the date of entry of goods in the books of
account of the recipient of supply.

The provisions relating to time of supply of goods in case of reverse charge

are depicted by way of a diagram given at a subsequent page.

The relief of not paying GST at the time of receipt of advance is

available only in case of supply of goods, the tax on which is
payable under forward charge. In case of reverse charge, GST is payable
at the time of payment, if payment is recorded/made before receipt of
goods (advance payment).

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 TIME OF SUPPLY 1.17 5.17

(7) B Ltd. sells goods to C Ltd. on 4th June. The goods are taxable
under reverse charge. Invoice for the same is issued on 4th June. C
Ltd. receives the goods on 12th June.

C Ltd. records the payment in the books of account on 30th June and the same
is debited from the bank account of C Ltd. on 2nd July.

Time of supply of the goods is 12th June being the earliest of the three
stipulated dates namely:

 date of receipt of goods,

 date of payment and

 date immediately following 30 days of issuance of invoice.

(8) B Ltd. sells goods to C Ltd. on 4th June. The goods are taxable
under reverse charge. Invoice for the same is issued on 4th June. C
Ltd. receives the goods on 6th July.
C Ltd. records the payment in the books of account on 21st July and the same
is debited from the bank account of C Ltd. on 31st July.

Time of supply of the goods is 5th July being the earliest of the three
stipulated dates namely, date of receipt of goods, date of payment and date
immediately following 30 days of issuance of invoice.

(9) B Ltd. sells goods to C Ltd. on 4th June. The goods are taxable
under reverse charge. Invoice for the same is issued on 4th June. C
Ltd. receives the goods on 27th June.

C Ltd. records the payment in the books of account on 10th June and the same
is debited from the bank account of C Ltd. on 2nd July.

Time of supply of the goods is 10th June being the earliest of the three
stipulated dates namely, date of receipt of goods, date of payment and date
immediately following 30 days of issuance of invoice.

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 5.18 GOODS AND SERVICES TAX

TIME OF SUPPLY OF GOODS UNDER REVERSE CHARGE

Date on which
goods are
received

Date on which the

payment is
recorded in the
books of account

Whichever is earlier
of the recipient of
goods

Date on which the

BANK payment is
debited in the
bank account of
the recipient of
goods

31st day from the

st DAY issue of invoice
by the supplier

If it is not possible to determine the time of supply through above

parameters,
THEN
TIME OF SUPPLY WILL BE

Date on which goods are

recorded in the books of
account of the recipient of
supply

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 TIME OF SUPPLY 1.19 5.19

(iii) Time of supply of vouchers exchangeable for goods 7 [Section 12(4)]

As commonly understood, vouchers are instruments that can be exchanged
as payment for goods or services of the designated value. As per the
definition, vouchers are instruments, that certain persons (potential suppliers)
are obliged to accept as consideration, part or full, against supply of goods
and/or services. The instrument or its related documentation sets out the
terms and conditions of use, the goods and/or services covered, and the
identity of the potential suppliers of such goods and/or services.
As per section 12(4), the time of supply of vouchers exchangeable for goods
is-
 Date of issue of the voucher, if the supply that it covers is identifiable
at that point, or
 Date of redemption of the voucher in other cases.
The provisions relating to time of supply of vouchers exchangeable for goods
are depicted by way of diagram given below.

TIME OF SUPPLY OF VOUCHERS EXCHANGEABLE FOR GOODS

Supply is Time of
Any food
not supply is
item can be
identifiable DATE OF
purchased
at the time REDEMPT-
from the
of issue of ION OF
food pass
voucher VOUCHER

Only a shirt Supply is Time of

can be identifiable supply is
purchased at the time DATE OF
from the of issue of ISSUE OF
shirt coupon voucher VOUCHER

7
It may be noted that the Finance Act, 2025 has omitted the provisions relating to time of supply
of vouchers. Provisions of the Finance Act, 2025 have not become effective as on the date of
printing of this Study Material. Once the said amendment comes into effect, students will no
longer be required to study the provisions relating to the time of supply of vouchers.

© The Institute of Chartered Accountants of India

 5.20 GOODS AND SERVICES TAX

(10) A Ltd. sells food coupons to B Ltd. The company gives these
coupons to its employees as part of the agreed perquisites. The
coupons can be redeemed for purchase of any item of food
/provisions in the outlets that are part of the program.
As the supply against which the coupon will be redeemed is not known on
the date of the sale of the coupon, the time of supply of the coupon will be
the date on which the employee redeems it against food / provision items of
his choice.
(11) With each purchase of a large pizza during the Christmas week
from Perfect Pizza, one can buy a voucher for ` 20 which will be
redeemable till 5th Jan for a small pizza. As the supply against which
the voucher will be redeemed is known on the date of issue of the vouchers,
the time of supply is the date of issue of the voucher.

(iv) Time of supply of goods in residual cases [Section 12(5)]

If the situation is not covered by any of the provisions discussed above, the
time of supply is fixed under sub-section (5) of section 12, in the following
manner:

 Due date for filing of the periodical return, or

 In any other case, date on which GST is paid.

TIME OF SUPPLY OF GOODS IN RESIDUAL CASES

Where a periodical
return is to be filed

TIME OF SUPPLY IS THE DATE

ON WHICH RETURN IS
REQUIRED TO BE FILED

TIME OF SUPPLY IS THE DATE

ON WHICH GST IS PAID

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 TIME OF SUPPLY 1.21 5.21

(v) Time of supply in case of enhancement in value on account of

interest/late fee etc. for delayed payment of consideration [Section
12(6)]

Commercially, most of the contracts of

supplies stipulate payment of
interest/late fee/penalty etc. in case of
payment of consideration beyond the
agreed time period. Such interest/late
fee/penalty etc. is includible in value of
taxable supply [This concept has been
discussed in detail in Chapter 6 - Value of Supply in this Module of the Study
Material]. So, the point to consider here is that when the liability to pay GST
would arise in such cases of addition in value.

Section 12(6) prescribes that time of supply in case of addition in value on

account of interest/ late fee/penalty for delayed payment of consideration for
goods is the date on which the supplier receives such addition in value.
(12) A Ltd. sold goods to B Ltd. on 6th June with a condition that
interest @ 2% per month will be charged if B Ltd. failed to make
payment within 15 days of the delivery of the goods. Goods were
delivered as also the invoice was issued on 6th June. B Ltd. paid the
consideration for the goods on 6th July along with applicable interest.

Time of supply for the goods sold is the date of issue of invoice, i.e. 6th June
and the time of supply for addition in value by way of interest is the date
when such addition in value is received by A Ltd., i.e. 6th July.

The provisions relating to time of supply of goods as contained in section 12

are summarised in the diagram given on next page.

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 5.22 GOODS AND SERVICES TAX

Time of supply of Time of supply of goods Time of supply of

goods under under reverse charge vouchers
forward charge exchangeable for
goods

Date of issue/ due Date of receipt of goods

date of issue of tax
invoice under
Date of recording the
section 31 Date of issue of
payment in the books of
voucher, if the
accounts of the recipient of
Date of recording supply is
goods
the payment in the identifiable at that
books of accounts point
of the supplier Date on which payment is
debited from the bank
Date on which account of the recipient of Date of redemption
payment is credited goods of voucher in other
in the bank account cases
of the supplier 31st day from the date of
supplier’s invoice
whichever is earlier
whichever is earlier

No GST at the time of

receipt of advance for If the above events are
supply of goods: GST to be UNASCERTAINABLE
paid on date of issue/due Time of supply = Date of
date of issue of tax invoice entry of good in books of
under section 31 account of recipient of goods

Residual cases (If all Where a periodical return is to

the above do not Time of supply be filed, due date of such return
OR
work for a situation)
In any other case, the date on
Addition in value by way which tax is paid
of interest, late
fee/penalty for delayed Date on which the supplier
payment of consideration Time of supply receives such addition in value
for goods

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 TIME OF SUPPLY 1.23 5.23

4. TIME OF SUPPLY OF SERVICES [SECTION 13]

STATUTORY PROVISIONS

Section 13 Time of supply of services

Sub- Clause Particulars

section

(1) The liability to pay tax on services shall arise at the time of supply,
as determined in terms of the provisions of this section.

(2) The time of supply of services shall be the earliest of the following
dates, namely:-

(a) the date of issue of invoice by the supplier, if the invoice

is issued within the period prescribed under section 31 or
the date of receipt of payment, whichever is earlier; or

(b) the date of provision of service, if the invoice is not issued

within the period prescribed under section 31 or the date
of receipt of payment, whichever is earlier; or

(c) the date on which the recipient shows the receipt of

services in his books of account, in a case where the
provisions of clause (a) or clause (b) do not apply:

Provided that where the supplier of taxable service receives an

amount up to one thousand rupees in excess of the amount
indicated in the tax invoice, the time of supply to the extent of such
excess amount shall, at the option of the said supplier, be the date
of issue of invoice relating to such excess amount.

Explanation - For the purposes of clauses (a) and (b) -

(i) the supply shall be deemed to have been made to the

extent it is covered by the invoice or, as the case may be,
the payment.

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 5.24 GOODS AND SERVICES TAX

(ii) “the date of receipt of payment” shall be the date on which

the payment is entered in the books of account of the
supplier or the date on which the payment is credited to
his bank account, whichever is earlier.

(3) In case of supplies in respect of which tax is paid or liable to be paid

on reverse charge basis, the time of supply shall be the earlier of
the following dates, namely-

(a) the date of payment as entered in the books of account of

the recipient or the date on which the payment is debited
in his bank account, whichever is earlier; or

(b) the date immediately following sixty days from the date
of issue of invoice or any other document, by whatever
name called, in lieu thereof by the supplier:

(c) the date of issue of invoice by the recipient, in cases

where invoice is to be issued by the recipient.

Provided that where it is not possible to determine the time of

supply under clause (a) or clause (b), the time of supply shall be the
date of entry in the books of account of the recipient of supply:

Provided further that in case of supply by associated enterprises,

where the supplier of service is located outside India, the time of
supply shall be the date of entry in the books of account of the
recipient of supply or the date of payment, whichever is earlier.

(4) In case of supply of vouchers by a supplier, the time of supply shall

be-

(a) the date of issue of voucher, if the supply is identifiable at

that point; or

(b) the date of redemption of voucher, in all other cases 8;

8
It may be noted that the Finance Act, 2025 has omitted the provisions relating to time of supply
of vouchers. Provisions of the Finance Act, 2025 have not become effective as on the date of

© The Institute of Chartered Accountants of India

 TIME OF SUPPLY 1.25 5.25

(5) Where it is not possible to determine the time of supply of services

under the provisions of sub-section (2) or sub-section (3) or sub-
section (4), the time of supply shall

(a) in a case where a periodical return has to be filed, be the

date on which such return is to be filed; or

(b) in any other case, be the date on which the tax is paid.

(6) The time of supply to the extent it relates to an addition in the value
of supply by way of interest, late fee or penalty for delayed payment
of any consideration shall be the date on which the supplier receives
such addition in value.

Section 31 Tax invoice (to the extent relevant to time of supply of

services)

(2) A registered person supplying taxable services shall, before or after

the provision of service but within a prescribed period, issue a tax
invoice, showing the description, value, tax charged thereon and
such other particulars as may be prescribed:

Provided that the Government may, on the recommendations of the

Council, by notification,—

(a) specify the categories of services or supplies in respect of

which a tax invoice shall be issued, within such time and
in such manner as may be prescribed;

(b) subject to the condition mentioned therein, specify the

categories of services in respect of which—

(i) any other document issued in relation to the supply

shall be deemed to be a tax invoice; or

(ii) tax invoice may not be issued.

printing of this Study Material. Once the said amendment comes into effect, students will no
longer be required to study the provisions relating to the time of supply of vouchers.

© The Institute of Chartered Accountants of India

 5.26 GOODS AND SERVICES TAX

(3) (f) a registered person who is liable to pay tax under sub-
section (3) or sub-section (4) of section 9 shall within
the period as may be prescribed issue an invoice in
respect of goods or services or both received by him
from the supplier who is not registered on the date of
receipt of goods or services or both

(5) Subject to the provisions of clause (d) of sub-section (3), in case of

continuous supply of services,––

(a) where the due date of payment is ascertainable from the

contract, the invoice shall be issued on or before the due
date of payment;

(b) where the due date of payment is not ascertainable from

the contract, the invoice shall be issued before or at the
time when the supplier of service receives the payment;

(c) where the payment is linked to the completion of an

event, the invoice shall be issued on or before the date of
completion of that event.

(6) In a case where the supply of services ceases under a contract before
the completion of the supply, the invoice shall be issued at the time
when the supply ceases and such invoice shall be issued to the
extent of the supply made before such cessation.

Chapter VI: Tax Invoice, Credit and Debit Notes of CGST Rules

Rule 47 Time limit for issuing tax invoice

The invoice referred to in rule 46, in case of taxable supply of

services, shall be issued within a period of thirty days from the date
of supply of service:

Provided that where the supplier of services is an insurer or a

banking company or a financial institution, including a non-
banking financial company, the period within which the invoice or
any document in lieu thereof is to be issued shall be forty five days
from the date of supply of service:

© The Institute of Chartered Accountants of India

 TIME OF SUPPLY 1.27 5.27

Provided further that an insurer or a banking company or a

financial institution, including a non- banking financial company,
or a telecom operator, or any other class of supplier of services as
may be notified by the Government on the recommendations of the
Council, making taxable supplies of services between distinct
persons as specified in section 25, may issue the invoice before or
at the time such supplier records the same in his books of account
or before the expiry of the quarter during which the supply was
made.

Rule 47A Notwithstanding anything contained in rule 47, where an

invoice referred to in rule 46 is required to be issued under
clause (f) of sub-section (3) of section 31 by a registered
person, who is liable to pay tax under sub-section (3) or sub-
section (4) of section 9, he shall issue the said invoice within
a period of thirty days from the date of receipt of the said
supply of goods or services, or both, as the case may be.

ANALYSIS

Section 13 must be read with section 31 and rule 47 and 47A of CGST
Rules, which prescribe in detail the date on which tax invoice for a
supply of service must be issued in various situations.

Section 13 provides for the determination of the time of supply in the following
situations:
 Supply of service taxable under forward charge,
 Supply of service taxable under reverse charge,
 Supply of vouchers that can be used to pay for services,
 Residual cases,
 Addition to value of supply of services by way of interest or late fee or penalty
for delayed payment.

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 5.28 GOODS AND SERVICES TAX

Below we shall consider these in detail.

(i) Time of supply of services under forward charge [Section 13(2) read
with section 31 and rule 47 of CGST Rules]
For supply of service on which the supplier is liable to pay tax, the time of
supply will be the earlier of the dates arrived at by methods (A) and (B), as
follows:
(A) Date of issue of invoice or date of receipt of payment (to the extent the
invoice or payment covers the supply of services), whichever is earlier,
if the invoice is issued within the time prescribed under section 31;
(B) Date of provision of service or date of receipt of payment (to the extent
the payment covers the supply of services), whichever is earlier, if the
invoice is not issued within the time prescribed under section 31,
If the above two methods [(A) and (B)] are not applicable, the time of supply
will be the date on which the recipient of service shows receipt of the service
in his books of account.
Meaning of “date of receipt of payment”
“Date of receipt of payment” in the above situation refers to the date on which
the payment is recorded in the books of account of the supplier that receives
the payment, or the date on which the payment is credited to the supplier’s
bank account, whichever is earlier.

Significance of “to the extent the payment covers the services”

Suppose a part of the consideration is paid in advance or invoice is issued for
part payment, the time of supply will not cover the full supply. The supply
shall be deemed to have been made to the extent it is covered by the invoice
or the part payment and time of supply shall be determined accordingly.

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 TIME OF SUPPLY 1.29 5.29

The provisions relating to time of supply of services in case of forward charge

can be depicted by way of a diagram given hereunder.

TIME OF SUPPLY OF SERVICES UNDER FORWARD CHARGE

Date of issue of
Is invoice YES Time of invoice
issued within Supply
the time
specified u/s Date on which the
payment is

Whichever is earlier
NO
recorded in the
Time of books of account of
the supplier
Supply

BANK

Date on which the

payment is credited
to the supplier’s
bank account

Date of Date on which the Date on

provision of payment is which the
service recorded in the payment is
books of account of credited to
the supplier the supplier’s
bank account

Whichever is earlier

If time of supply
cannot be
determined by Date of receipt of services in
both the above the books of account of the
methods, then recipient

© The Institute of Chartered Accountants of India

 5.30 GOODS AND SERVICES TAX

Time limit for issuance of invoice for supply of services under section 31

The criteria to determine the time of supply of services depend upon whether
the invoice is issued within the time prescribed under section 31.
Following are the relevant provisions in this regard:
 As per section 31(2) read with rule 47, the tax
invoice needs to be issued either before the
provision of service or within 30 days (45 days in
case of insurance companies/
banking companies/ financial institutions
including NBFCs) from the date of supply of service.
 In case of insurance companies/ banking companies/ financial
institutions including NBFCs/ telecom companies/ notified supplier of
services making taxable supplies between distinct persons as specified
in section 25 9, invoice may be issued before or at the time of recording
such supply in the books of account or before the expiry of the quarter
during which the supply was made [Second proviso to rule 47].
 In case of continuous supply of services, the invoice should be issued
either:
(i) on/ before
the due date
of payment -
where the due
date of payment is ascertainable from the contract or

(ii) before/ at the time when the supplier of service receives the
payment - where the due date of payment is not known
(iii) on/ before the date of completion of the milestone event - where
the payment is linked to completion of an event [Section 31(5)].
Continuous supply of services are provided, or agreed to be provided,
continuously or on recurrent basis, under a contract, for a period

9
Concept of distinct persons has been discussed in Chapter 1: Supply under GST in this
Module of the Study Material.

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 TIME OF SUPPLY 1.31 5.31

exceeding 3 months with periodic payment obligations and includes

supply of such services as the Government may notify [Section 2(33)].
The said term has been discussed in Chapter 9: Tax Invoice; Credit and
Debit Notes in Module 2 of this Study Material.
 In case of cessation of supply of
services before completion of
supply, the invoice should be issued
at the time when the supply ceases
to the extent of the supply made
before such cessation. [Section 31(6)].
Clarification on time of supply in respect of supply of services of
construction of road and maintenance thereof of National Highway
Projects of National Highways Authority of India (NHAI) in Hybrid
Annuity Mode (HAM) model 10
Issue: Under the Hybrid Annuity Mode (HAM) model of National
Highways Authority of India (NHAI), the concessionaire has to construct
the new road and provide Operation & Maintenance of the same which
is generally over a period of 15-17 years and the payment of the same
is spread over the years. What is the time of supply for the purpose of
payment of tax on the said service under the HAM model?

Clarification: Under the Hybrid Annuity Model (HAM) of concession

agreements, the highway development projects are under Design, Build,
Operate and Transfer model (DBOT), wherein the concessionaire is
required to undertake new construction of Highway, as well as the
Operation and Maintenance (O&M) of Highways. The payment terms
for the construction portion as well as the O&M portion of the contract
are provided in the agreement between National Highways Authority of
India (NHAI) and the concessionaire.
A HAM contract is a single contract for construction as well as operation
and maintenance of the highway. The payment terms are so staggered that
the concessionaire is held accountable for the Single
repair and maintenance of the highway as well. contract

10
Circular No. 221/15/2024 GST dated 26.06.2024

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 5.32 GOODS AND SERVICES TAX

The contract needs to be looked at holistically based on the services to be

performed by the concessionaire and cannot be artificially split into two
separate contracts for construction and operation and maintenance, based
on the payment terms. The concessionaire is bound contractually to
complete not only the construction of the highway but also to operate and
maintain the same.
In HAM contract, the payment is made spread over the contract period in
installments and payment for each installment is to be made after specified
periods, or on completion of an event, as specified in the contract. The
same appears to be covered under the ‘Continuous supply of services’
as defined under section 2(33).
Accordingly, as per section 13(2) read with section 31(5), time of supply of
services under HAM contract, including
Invoice is
construction and O&M portion if the
issued on or
invoice is issued on or before the specified before the
date or the date of completion of the event specified date
specified in the contract, as applicable,
would be EARLIER of the following dates:-
(a) date of issuance of such invoice, or
(b) date of receipt of payment

However, in cases, where the invoice is not issued on or before the

specified date or the date of completion of
the event specified in the contract, as per Invoice is NOT
issued on or
section 13(2)(b), time of supply should be
before the
EARLIER of the following dates:- specified date
(a) date of provision of the service (i.e.,
the due date of payment as per the contract), or
(b) date of receipt of payment.
In case of continuous supply of services, the date of provision of service
may be deemed as the due date of payment as per the contract, as the
invoice is required to be issued on or before the due date of payment as
per the provisions of Section 31(5) of CGST Act.

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 TIME OF SUPPLY 1.33 5.33

It is also clarified that as the installments/annuity payable by NHAI to

the concessionaire also includes some interest component, the amount
of such interest shall also be includible in the taxable value for the
purpose of payment of tax on the said annuity/installment in view of
the provisions of section 15(2)(d) of the CGST Act, 2017 11.
(13) A Ltd. provides services to B Ltd. on 10th June. A Ltd. issues
the invoice for the services on 15th June. Payment is received in
the bank account of A Ltd. on 20th June and is recorded in the
books of account of A Ltd. on 30th June.
Date of receipt of payment is 20th June being the earlier of two stipulated
dates namely, date on which the payment is recorded in the books of account
of the supplier and date on which the payment is credited to the supplier’s
bank account.
Since the invoice is issued within 30 days from the date of supply of service,
time of supply of services is 15th June being the earlier of the two stipulated
dates namely, date of issuance of invoice and date of receipt of payment.
(14) A Ltd. provides services to B Ltd. on 10th June. A Ltd. issues the invoice
for the services on 7th July. Payment is received in the bank account of A Ltd.
on 20th June and is recorded in the books of account of A Ltd. on 30th June.
Date of receipt of payment is 20th June being the earlier of two stipulated
dates namely, date on which the payment is recorded in the books of account
of the supplier and date on which the payment is credited to the supplier’s
bank account.

Since the invoice is issued within 30 days from the date of supply of service,
time of supply of services is 20th June being the earlier of the two stipulated
dates namely, date of issuance of invoice and date of receipt of payment.

11
Section 15 shall be discussed in detail in Chapter-6: Value of supply of this Study material.

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 5.34 GOODS AND SERVICES TAX

(15) A Ltd. provides services to B Ltd. on 10th June. A Ltd. issues the invoice for
the services on 15th July. Payment is received in the bank account of A Ltd. on
20th June and is recorded in the books of account of A Ltd. on 30th June.

Here, invoice is not issued within 30 days of provision of service. Therefore,

time of supply of services is 10th June being the earlier of the two stipulated
dates namely, date of provision of service and date of receipt of payment.

Excess payment upto ` 1000: Option of taking invoice date as

time of supply
In terms of the proviso to sub-section (2) of section 13, for a payment of up
to ` 1,000 received in excess of the invoice value, the supplier can choose to
take the date of invoice issued with respect to such excess amount as the
time of supply of services in relation to this excess value. In other words, if
advance upto ` 1,000 is received with respect to any services, GST is not
payable at that stage; GST will be payable when invoice is raised. This
provision facilitates the supplier to defer payment of tax on small amounts
typically received by him in excess of the invoice amount.

This provision has been made as in case of monthly/periodical bills like

telephone bills or electricity bills, customers often pay slightly higher
amounts than bill amounts. It would have been very cumbersome to pay GST
on such petty advances and adjust them later, as legally, ‘receipt voucher’ is
required to be issued under GST when advance against services is received.
(16) A telephone company receives ` 5000 against an invoice of
` 4800. The excess amount of ` 200 can be adjusted against the next
invoice.
The company has the option to take the date of the next invoice as the time
of supply of service in relation to the amount of ` 200 received in excess
against the earlier invoice.

(ii) Time of supply of services taxable under reverse charge [Section

13(3)]
The time of supply of service on which GST is payable on reverse charge basis
(except on services received from associated enterprises located outside

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 TIME OF SUPPLY 1.35 5.35

India) under sub-sections (3) and (4) of section 9 is determined in terms of

section 13(3)(a) and (b) and (c) as follows:
The time of supply for such service will be the earlier of the following:
 Date of payment, or
 Date immediately following 60 days from the date of issue of invoice
(or any other document in lieu of invoice) by the supplier, in cases
where invoice is required to be issued by the supplier
 Date of issue of invoice by the recipient, in cases where invoice is
to be issued by the recipient.
If it is not possible to determine the time of supply by using these parameters,
then the time of supply will be the date of entry of the service in the books
of account of the recipient of supply.
Meaning of “Date of payment”
“Date of payment” in the above situation
refers to the date on which the payment is
recorded in the books of account of the
recipient of service, or the date on which the
payment is debited from the recipient’s bank account, whichever is earlier.
Time limit for issuance of invoice by recipient for supply of services in
case of reverse charge mechanism [Section 31(3)(f) read with rule 47A]
Where an invoice referred to in rule 46 is required to be issued under
section 31(3)(f) by a registered person, who is liable to pay tax under
section 9(3)/(4), he shall issue the said invoice within a period of 30 days
from the date of receipt of the said supply of goods and/or services, as
the case may be.
Thus, invoice is to be issued within a period of 30 days from the date of
receipt of the said supply of goods and/or services, as the case may be.

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 5.36 GOODS AND SERVICES TAX

Clarification on time of supply of services of spectrum usage and other

similar services under GST 12
Under the spectrum 13 allocation model followed by Department of
Telecommunications (DoT), bidder (the telecom operator) bids for securing the right
to use spectrum offered by the Government. Here, service provider is the
Government of India (through DoT) and service recipient is the bidder/telecom
operator. The GST is to be discharged on the supply of spectrum allocation services
by the recipient of services (the telecom operator) on reverse charge basis 14.
In case where full upfront payment is made by the telecom operator, GST would
be payable when the payment of the said upfront amount is made or is due,
whichever is earlier.
In case where deferred payment is made by the telecom operator in specified
installments, same shall be considered as 'continuous supply of services' as
defined under section 2(33), since the supply of services (spectrum usage) is
agreed to be provided by the supplier (DoT) to the recipient (telecom operator)
continuously for a period which is exceeding three months with periodic
payment obligations.
Further, in the given case, since the date of payment to be made by the telecom
operator to DoT is clearly ascertainable from the relevant documents, invoice
shall be issued in accordance with the provisions of section 31(5)(a). As per this
section, in cases of continuous supply of services, where the due date of payment
is ascertainable from the contract, the invoice shall be issued on or before such
due date of payment. Accordingly, tax invoice will be required to be issued in
respect of the said supply of services, on or before such due date of payment as
per the option exercised by the telecom operator. Thus, in this case, GST would
be payable as and when the payments are due or made, whichever is earlier.
It is also clarified that the similar treatment regarding the time of supply, may apply
in other cases also where any natural resources are being allocated by the
Government to the successful bidder/ purchaser for right to use the said natural
resource over a period of time, constituting continuous supply of services, with the

12
Circular No. 222/16/2024 GST dated 26.06.2024
13
Spectrum services refer to services that use radio waves, or "spectrum," to send data wirelessly.
This includes services like mobile phone networks, Wi-Fi, TV broadcasts, and radio.
14
Vide entry 5 of Notification No. 13/2017 CT(R) dated 28.06.2017

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 TIME OF SUPPLY 1.37 5.37

option of payments for the said services either through an upfront payment or in
deferred periodic installments over the period of time.
Import of services between associated enterprises
In the case of service received from an associated enterprise 15 located outside
India, the time of supply will be the date of payment for the service, or the date of
entry of the service in the books of account of the recipient, whichever is earlier.
The provisions relating to time of supply of services in case of reverse charge can
be depicted by way of a diagram given on next page.
(17) A Ltd. provides services to B Ltd. on 10th June. The services are
taxable under reverse charge. A Ltd. issues the invoice for the services
on 15 June. Payment is debited from the bank account of B Ltd. on 20th June and
th

is recorded in the books of account of B Ltd. on 30th June.

Time of supply of services is 20th June being the earliest of the three stipulated dates
namely, date on which payment is recorded in the books of account of recipient of
services, date on which payment is debited from the bank account of the recipient
of services and date immediately following 60 days since issue of invoice.
(18) A Ltd. provides services to B Ltd. on 10th June. The services are taxable
under reverse charge. A Ltd. issues the invoice for the services on 15th June.
Payment is debited from the bank account of B Ltd. on 20th September and is
recorded in the books of account of B Ltd. on 15th September.
Time of supply of services is 15th August being the earliest of the three stipulated dates
namely, date on which payment is recorded in the books of account of recipient of
services, date on which payment is debited from the bank account of the recipient of
services and date immediately following 60 days since issue of invoice.
(19) A Inc., a foreign company, and B Ltd., an Indian company, are
associated enterprises. A Inc. provides technical services to B Ltd. Vide
an email dated June 4th, A Inc. informs B Ltd. the cost of technical services provided
to it. B Ltd. transfers the payment to A Inc. on 12th August.
Time of supply of services is 12th August being the date of payment as there is no
prior entry of the amount in the books of account of B Ltd.

15
Associated enterprises shall have the same meaning as assigned to it in section 92A of the
Income-tax Act, 1961. Broadly, an associated enterprise in relation to another enterprise,
means an enterprise which participates, directly or indirectly, or through one or more
intermediaries, in the management or control or capital of the other enterprise.

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 5.38 GOODS AND SERVICES TAX

TIME OF SUPPLY OF SERVICES UNDER REVERSE CHARGE

Date on which the payment is
recorded in the books of account of
the recipient.

Whichever is earlier
Date on which the payment is
debited from the bank account of
the recipient of services
61st day from issue of invoice by the
st DAY supplier, in cases where invoice is
required to be issued by the supplier

Date of issue of invoice by the

recipient, in cases where invoice is
required to be issued by the recipient
i.e. within 30 days of receipt of
services.

If it is not possible to determine the time of supply through above

parameters, THEN TIME OF SUPPLY WILL BE

Date of entry of service in the books of account

of the recipient of supply

TIME OF SUPPLY IN CASE OF IMPORT OF SERVICES FROM ASSOCIATED

ENTERPRISES
Supply of
services from AE
located outside
Whichever is earlier

India Date of payment for the service

Date of entry of service
in books of account of
recipient

Associated Enterprises
(AE)

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 TIME OF SUPPLY 1.39 5.39

(iii) Time of supply of vouchers exchangeable for services16 [Section 13(4)]

The term voucher has already been explained under the Heading “Time of Supply
of Goods”. The time of supply of vouchers that are exchangeable for services is
stipulated as:-
 the date of issue of the voucher - if the supply is identifiable at that point,
or
 the date of redemption of the voucher - in other cases.
(20) A Ltd., a company providing hospitality services, enters into agreement
with B Ltd. by which B Ltd. markets A Ltd.’s hotel rooms and sells coupons /
vouchers redeemable for a discount against stay in the hotel.
As the supply against which the voucher will be redeemed is identifiable, the time
of supply of the voucher will be its date of issue.
(iv) Time of supply of services in residual cases [Section 13(5)]
If the situation is not covered by any of the provisions discussed above, the time
of supply is fixed under sub-section (5) of section 13, in the following manner:
 Date on which periodical return for the period is required to be filed, or
 In any other case, date on which GST is paid.
(v) Time of supply in case of enhancement of value on account of interest/late
fee etc. for delayed payment of consideration [Section 13(6)]
The provisions for time of supply in case of addition in value by way of interest, late
fee/penalty for delayed payment of consideration are the same for goods and
services.
Section 13(6) prescribes that time of supply in case of addition in value by way of
interest/ late fee/penalty for delayed payment of consideration for a service is the
date on which the supplier receives such addition in value.

The provisions relating to time of supply of services as contained in section

13 are summarised in the diagram given on next page.

16
It may be noted that the Finance Act, 2025 has omitted the provisions relating to time of supply
of vouchers. Provisions of the Finance Act, 2025 have not become effective as on the date of
printing of this Study Material. Once the said amendment comes into effect, students will no
longer be required to study the provisions relating to the time of supply of vouchers.

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 5.40 GOODS AND SERVICES TAX

Time of supply of services Time of supply of

Time of supply of services Time of supply of
under forward charge when vouchers exchangeable for
under forward charge when services under
the invoice is not issued services
the invoice is issued within reverse charge
within the time specified u/s
the time specified u/s 31 31
Date of recording the Date of issue of voucher,
Date of provision of payment in the books of if the supply is
Date of issue of tax identifiable at that point
service accounts of the recipient of
invoice
services

Date of recording the Date of recording the Date on which payment is

payment in the books of payment in the books of debited from the bank Date of redemption of
accounts of the supplier accounts of the supplier account of the recipient of voucher in other cases
services

Date on which payment is Date on which payment is 61st day from issue of
credited in the bank credited in the bank invoice by supplier, in
account of the supplier account of the supplier cases where invoice is
required to be issued by
the supplier
whichever is earlier whichever is earlier

Date of issue of invoice by

the recipient, in cases
where invoice is to be
issued by the recipient

If the above events are UNASCERTAINABLE

Time of Supply = Date of receipt of services in the whichever is earlier
books of account of the recipient of supply

If the above events are

UNASCERTAINABLE
Time of supply = Date of entry of
services in books of account of the
recipient of supply

Where a periodical return is to be filed, due date of such return

OR
In any other case, the date on which the tax is paid

Addition in value by
Date on which the
way of interest, late
supplier receives such
fee/penalty for Time of supply addition in value
delayed payment of
consideration for
services

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 TIME OF SUPPLY 1.41 5.41

5. CHANGE IN RATE OF TAX IN RESPECT OF

SUPPLY OF GOODS OR SERVICES [SECTION 14]

STATUTORY PROVISIONS

Section 14 Change in rate of tax in respect of supply of goods or services

Clause Particulars

Notwithstanding anything contained in section 12 or section 13, the time of supply,

where there is a change in the rate of tax in respect of goods or services or both,
shall be determined in the following manner, namely:––

(a) in case the goods or services or both have been supplied before the
change in rate of tax,––

(i) where the invoice for the same has been issued and the
payment is also received after the change in rate of tax, the
time of supply shall be the date of receipt of payment or the
date of issue of invoice, whichever is earlier; or

(ii) where the invoice has been issued prior to the change in
rate of tax but payment is received after the change in rate
of tax, the time of supply shall be the date of issue of invoice;
or

(iii) where the payment has been received before the change in
rate of tax, but the invoice for the same is issued after the
change in rate of tax, the time of supply shall be the date of
receipt of payment;

(b) in case the goods or services or both have been supplied after the
change in rate of tax,––

(i) where the payment is received after the change in rate of

tax but the invoice has been issued prior to the change in
rate of tax, the time of supply shall be the date of receipt of
payment; or

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 5.42 GOODS AND SERVICES TAX

(ii) where the invoice has been issued and payment is received
before the change in rate of tax, the time of supply shall be
the date of receipt of payment or date of issue of invoice,
whichever is earlier; or

(iii) where the invoice has been issued after the change in rate
of tax but the payment is received before the change in rate
of tax, the time of supply shall be the date of issue of invoice:

Provided that the date of receipt of payment shall be the date of credit in the bank
account if such credit in the bank account is after four working days from the date
of change in the rate of tax.

Explanation –– For the purposes of this section, “the date of receipt of payment”
shall be the date on which the payment is entered in the books of account of the
supplier or the date on which the payment is credited to his bank account,
whichever is earlier.

ANALYSIS

When there is a change in effective rate of tax, we have to identify -

 the date of change in rate of tax,
 the date of supply of goods or services,
 the date of issue of invoice, and
 the date of receipt of payment
The time of supply is determined according to a combination of these dates.

When the rate of tax is changed before, and a transaction of supply of goods or
services gets completed in all its documentary and financial aspects, the law makes
specific provisions for ascertaining the time of supply of the goods or service for
the purpose of payment of tax.
The three markers for identifying time of supply are actual supply, invoice and
payment. These can occur in differing sequences. Their occurrence before and
after the change of effective rate of tax determines the time of supply of the service.

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 TIME OF SUPPLY 1.43 5.43

Of the three markers (supply, invoice, payment), -

 if issue of invoice and receipt of payment are both before the change in rate,
the time of supply is the date of the earlier of these two events;
 if supply and issue of invoice are before the change in rate, the date of issue
of invoice is the time of supply;

 if supply and receipt of payment are before the change in rate, the date of
receipt of payment is the time of supply.
 If supply and receipt of payment are after the change in rate, the date of
receipt of payment is the time of supply;
 If issue of invoice and receipt of payment are after the change in rate, the
date of the earlier of these two events is the time of supply;

 If supply and issue of invoice are after the change in rate, the date of issue of
invoice is the time of supply.
It can be seen from a study of these provisions, that the timing of two out of the
three markers (supply, invoice, payment) determines the time of supply. If any two
of them occur before the change in rate of tax, the time of supply will fall in the
period prior to change in rate of tax i.e., old rate will be applicable. However, if any
two of them occur after the change in rate of tax, the time of supply will fall in the
period after the change in rate of tax i.e., new rate will be applicable.
Further, it may be noted that for supply of goods by a registered person (excluding
composition supplier and registered persons making supply of specified actionable
claims), GST is to be paid on the outward supply of goods on the date of issue of
invoice or the last date on which invoice ought to have been issued in terms of
section 31 - Notification No. 66/2017 CT dated 15.11.2017 (Refer point (i) of Analysis
under Heading 3: Time of Supply of Goods [Section 12]).

Meaning of “Date of receipt of payment”

Here, “date of receipt of payment” refers to the date on which the payment is
entered in the books of accounts of the supplier, or the date on which the payment
is credited in his bank account, whichever is earlier.

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 5.44 GOODS AND SERVICES TAX

(21) Mr. A, an interior decorator, designs and renovates the office of XYZ
in June. The invoice is to be raised after approval of the work. In the
meantime, the rate of tax is changed on 5th July. Invoice is raised and payment
made later in July. Here, the time of supply is after the change in rate of tax, though
the service was completed prior to the change.

CHANGE IN RATE OF TAX

Issuance of invoice
Any two Any two
events before events after
change in Supply of goods/services change in
rate of tax rate of tax

Receipt of payment
OLD RATE NEW RATE

(22) A Ltd. makes custom-made precision tools for which it takes full
advance with the purchase order. One such order is received on 13th April
and full amount is paid with the order. The tools are manufactured and
delivered on 22nd May. Invoice is also issued on the same day. In the meanwhile,
rate of tax was increased on the tools of this description from 20th May onwards.
Here, increased rate of tax will be applicable as goods are supplied and invoice
issued after 20th May.
Date of crediting of payment in bank account to be the “date of receipt of
payment” if such crediting takes place after 4 working days of change in rate
of tax
Where the payment is credited in the bank account after 4 working days from the
date of change in the rate of tax, the date of receipt of payment will be the date of
credit in the bank account. In other words, in such a case, the date of recording
the payment in the books of account will not be considered as the date of receipt
of payment even though if the same precedes the date of crediting of payment in
the bank account.

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 TIME OF SUPPLY 1.45 5.45

Payment
entered Change
in books in rate Date of
of of tax Payment crediting
Date of
account credited of
receipt of
in bank payment in
payment
account bank
account
After 4
working days

(23) Rate of tax is changed on 10th July. Receipt of payment is recorded

in the books of account of the supplier on 8th July. The payment is
credited in the supplier’s bank account on 15th July. The Bank was open
all days between 10th and 15th July. Here, the date of receipt of payment is
15th July.

LET US RECAPITULATE

The provisions relating to time of supply of goods and services can be better
understood if the same are studied simultaneously appreciating the similarities and
differences between the two. Therefore, such provisions have been summarised by
way of a comparison table to help students remember and retain the provisions in
a better and effective manner:

TIME OF SUPPLY WHERE TAX IS PAYABLE UNDER FORWARD CHARGE

Time of supply of goods [Section Time of supply of services [Section

12(2)] 13(2)]

Earliest of the following: (a) Invoice issued within the time

 Date of issue of invoice by the period prescribed under section
supplier or the last date on which 31
he is required under section 31, Earliest of the following:
to issue the invoice under

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 5.46 GOODS AND SERVICES TAX

section 31(1) with respect to the  Date of issue of invoice by the

supply supplier
 Date on which the supplier  Date of receipt of payment
receives the payment (entering (entering the payment in
the payment in books of account or books of account or crediting
crediting of payment in bank of payment in bank account,
account, whichever is earlier) with whichever is earlier)
respect to the supply – presently (b) Invoice not issued within the
irrelevant for purpose of payment of time period prescribed under
tax section 31
No GST at the time of receipt of Earliest of the following:
advance for supply of goods: In case
 Date of provision of service
of supply of goods by a registered
 Date of receipt of payment
person under forward charge
(entering the payment in
(excluding composition supplier and
books of account or crediting
registered persons making supply of
specified actionable claims), GST is to of payment in bank account,
be paid on the outward supply of whichever is earlier)
goods on the date of issue of invoice (c) When the above events are
or the last date on which invoice ought unascertainable
to have been issued in terms of  Date on which the recipient
section 31 [Notification No. 66/2017 shows the receipt of services in
CT dated 15.11.2017]. his books of account

TIME LIMIT FOR RAISING INVOICES

Supply of goods [Section 31(1)] Supply of services [Section 31(2)]

Before or at the time of,- Before or after the provision of service

(a) removal of goods for supply to but within 30 days [45 days in case of
the recipient, where the supply insurance companies/banking and
involves movement of goods, or financial institutions including NBFCs]
from the date of supply of services
(b) delivery of goods or making
available thereof to the
recipient, in any other case

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 TIME OF SUPPLY 1.47 5.47

TIME OF SUPPLY WHERE TAX IS PAYABLE UNDER REVERSE CHARGE

Time of supply of goods Time of supply of services [Section 13(3)]

[Section 12(3)]

Earliest of the following: Earliest of the following:

 Date of receipt of goods, or  Date of payment as entered in the books
 Date of payment as entered of account of the recipient or the date on
in the books of account of the which the payment is debited from his
recipient or the date on which bank account, whichever is earlier, or
the payment is debited from  61st day from the date of issue of
his bank account, whichever is invoice by the supplier, in cases where
earlier, or invoice is required to be issued by the
 31 day from the date of
st supplier
issue of invoice by the  Date of issue of invoice by the
supplier recipient, in cases where invoice is
required to be issued by the recipient.
[Invoice is to be issued within 30 days
from the date of receipt of services.]

Where the above events are not ascertainable, the time of supply shall be the
date of entry in the books of account of the recipient of supply

Import of service from associated

enterprise Date of entry in the books of
account of the recipient or the date of
payment, whichever is earlier

TIME OF SUPPLY OF VOUCHERS EXCHANGEABLE FOR GOODS AND SERVICES

Supply of vouchers exchangeable for goods and services [Sections 12(4) and 13(4)]

(a) Supply of goods or services is identifiable at the time of issue of voucher

 Date of issue of the voucher
(b) Other cases
 Date of redemption of the voucher

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 5.48 GOODS AND SERVICES TAX

TIME OF SUPPLY OF GOODS AND SERVICES IN RESIDUAL CASES

Supply of goods and services in residual cases [Sections 12(5) and 13(5)] i.e
where it is not possible to determine the time of supply under the other
provisions

(a) Where a periodical return is required to be filed

 Due date of filing such return
(b) Other cases
 Date of payment of tax

TIME OF SUPPLY FOR ADDITION IN VALUE BY WAY OF INTEREST/ LATE

FEE/PENALTY FOR DELAYED PAYMENT OF CONSIDERATION

Addition in value by way of interest, late fee/penalty for delayed payment of

consideration
Time of Supply Date on which the supplier receives such addition in value

The provisions relating to time of supply of goods falling in the

residual category are same as that of the time of supply of
services falling in the residual category. Also, the provisions
relating to time of supply for addition in value by way of interest, late
fee/penalty for delayed payment of consideration are same for goods and
services.
Furthermore, concepts like option of taking invoice date as time of supply
in case of receipt of excess payment upto ` 1000, meaning of “Date of
receipt of payment”, significance of words “to the extent the invoice or
payment covers the supply” are also same for goods and services.
Students may make a note of the above points as it will help them in
understanding and remembering the provisions in a better manner.

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 TIME OF SUPPLY 1.49 5.49

CHANGE IN RATE OF TAX

In case of change in rate of tax, determination of rate of tax depends upon three
events namely,-
 Date of supply of goods or services,
 Date of invoice; and
 Date of receipt of payment
If any two of the above events occur before the change of rate, the time of
supply is before the change of rate. If any two of them occur after the change
of rate, the time of supply is after the change of rate and the new rate becomes
applicable to the supply. However, in case of supply of goods by a registered
person (excluding composition supplier and registered persons making supply
of specified actionable claims), GST is to be paid on the date of issue of invoice
or the last date on which invoice ought to have been issued in terms of section
31 [Notification No. 66/2017 CT dated 15.11.2017].
Using this principle, time of supply of services, in case of change in rate of tax,
can be determined as under:

Supply Issue of Receipt of Time of supply

invoice payment

BEFORE BEFORE AFTER Date of issue of invoice

BEFORE AFTER BEFORE Date of receipt of payment

BEFORE AFTER AFTER Date of issue of invoice or

date of receipt of payment,
whichever is earlier

AFTER AFTER BEFORE Date of issue of invoice

AFTER BEFORE AFTER Date of receipt of payment

AFTER BEFORE BEFORE Date of issue of invoice or

date of receipt of payment,
whichever is earlier

© The Institute of Chartered Accountants of India

 5.50 GOODS AND SERVICES TAX

The provisions relating to time of supply of vouchers that are

exchangeable for goods are same as that of the vouchers that are
exchangeable for services. Similarly, the provisions relating to time
of supply of goods falling in the residual category are same as that of the time of
supply of services falling in the residual category. Also, the provisions relating
to time of supply for addition in value by way of interest, late fee/penalty for
delayed payment of consideration are same for goods and services.
Furthermore, concepts like meaning of “Date of receipt of payment”,
significance of words “to the extent the invoice or payment covers the supply”
are also same for goods and services.
Students may make a note of the above points as it will help them in
understanding and remembering the provisions in a better manner.

TEST YOUR KNOWLEDGE

1. Kanchenjunga Pvt. Ltd. supplies taxable goods to Sutlej Pvt. Ltd. for ` 2,50,000
on 23rd June and issues the invoice on 25th June. Payment for the goods is made
by Sutlej Pvt. Ltd. on 15th July.
Determine the time of supply of goods for the purpose of payment of tax.
2. I buy a set of modular furniture from a retail store. Invoice is issued to me and
I make the payment. The furniture is to be delivered to me later in the week
when a technician is available to assemble and install it. The next day the rate
of tax applicable to modular furniture is revised upward, and the store sends
me a supplementary invoice with the delivery note accompanying the furniture
to collect the differential amount of tax.
Is this correct on store’s part? Explain.

3. An online portal, Best Info, raises invoice for database access on

21st February on Roy & Bansal Ltd. The payment is made by Roy & Bansal Ltd.
by a demand draft sent on 25th February, which is received and entered in the

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 TIME OF SUPPLY 1.51 5.51

accounts of Best Info on 28th February. Best Info encashes the demand draft
and thereafter, gives access to the database to Roy & Bansal Ltd from 3rd March.
In the meanwhile, the rate of tax is changed from 1st March.
Determine the time of supply of the service of database access by Best Info.
4. Trust Industries Ltd. has entered into a contract with VST Ltd. to supply gas by
a pipeline to VST Ltd. for a period of one year. As per the terms of the contract-
(i) VST Ltd. shall make monthly payments [Payment for a month shall be
made by 7th day of the next month]
(ii) Every quarter, Trust Industries Ltd. shall issue a statement of account
showing the quantity and value of goods dispatched, payments received
and payment due.
(iii) The differential amount, if any, as mentioned in the statement of account
shall be paid by VST Ltd.
The details of the various events are:

August 5, Payments of ` 2 lakh made in each month for the quarter July-
September 5, September
October 6
October 3 Statement of accounts for the quarter July – September issued
by the supplier showing amount of ` 2,56,000 as unpaid
October 17 Balance payment of ` 56,000 received by supplier for the
quarter July – September

Determine the time of supply of goods for the purpose of payment of tax.
5. Renudhoot Ltd. enters into a contract with XYZ Ltd. on 2nd July 2023 for a period
of 2 years for construction of a new building - to be used for commercial
purposes - for a total consideration of ` 150 lakh. As per the terms of contract,
Renduhoot Ltd. is required to make payment at different stages of completion
of the building namely, 50%, 75% and 100%.

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 5.52 GOODS AND SERVICES TAX

Determine the time of supply using relevant details given as under:

Stage Date of Date of Date of Amount

various issuance of payment paid (`)
stages invoice

Initial booking 02.07.2023 02.07.2023 02.07.2023 15 lakh

50% completion 15.03.2024 22.03.2024 29.03.2024 60 lakh

of building

75% completion 20.06.2024 24.07.2024 23.07.2024 35 lakh

of building

100% 30.09.2024 30.09.2024 20.09.2024 40 lakh

completion of
building

6. Mint Industries Ltd., a registered supplier, imports business support services

from Green Inc. of USA on 13th August. The self-invoice is raised for the
transaction by Mint Industries Ltd. on 28th August. Mint Industries Ltd. makes
the payment against the said invoice as follows:

Case I 22nd September

Case II 27th August
Determine time of supply in each of the aforesaid cases.
7. Kothari Ltd., Mumbai, holds 51% of shares of Wilson Inc., a USA based company.
Wilson Inc. provides business auxiliary services to Kothari Ltd. From the
following details, determine the time of supply of service provided by Wilson
Inc:

Agreed consideration US $1,00,000

Date on which services are provided by Wilson Inc. 16th June

Date on which invoice is issued by Wilson Inc. 19th August

Date of debit in the books of account of Kothari Ltd. 30th September

Date on which payment is made by Kothari Ltd. 23rd December

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 TIME OF SUPPLY 1.53 5.53

8. Basis the following information, determine the time of supply:

S. No. Event Date

(1) Commencement of provision of service 05th June

(2) Completion of service 10th October

(3) Invoice issued 20th October

(4) Payment received by cheque and entered in the 15th October

books

(5) Amount credited in Bank account 18th October

(6) Rate changed from 12% to 18% 16th October

Note: Assume that all the days covered in the above case are working days.
9. KLM Ltd., a publishing and printing house registered in Maharashtra, is
engaged in supply of books, letter cards, envelopes, guides and reference
materials. The following information is provided by the company:

Event Printing of Printing of

books envelopes

Date of entering into printing contract 16th March 20th March

Date of receipt of advance 20th March 25th March

Date of completion of printing 10th April 5th April

Date of issue of invoice 15th May 10th April

Date of removal of books and letter heads to 13th May 7th April
buyer

Date of receipt of balance payment 31st May 30th April

In respect of printing of books, content was supplied by the author. For printing
of envelopes, the design and logo were supplied by the buyer.
Determine the time of suppl(ies) for the purpose of payment of tax.

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 5.54 GOODS AND SERVICES TAX

10. Andes Pvt. Ltd., a registered supplier, manufactures product ‘A’ and ‘B’. While
‘A’ is taxable under forward charge, ‘B’ is taxable under reverse charge. The
following details are provided in relation to two individual supplies of products
‘A’ and ‘B’ made by the company:

S. No. Date Event

(i) 10th February Payment of ` 1,00,000 made by buyer for supply

of ‘A’ to be delivered in the month of March

(ii) 13th February Receipt of ` 1,00,000 [as mentioned in point (i)

above]

(iii) 17th February Payment of ` 2,00,000 made by buyer for supply

of ‘B’ to be delivered in the month of March

(iv) 20th February Receipt of ` 2,00,000 [as mentioned in point (iii)

above]

(v) 5th March Product ‘A’ manufactured and removed

(vi) 6th March Receipt of product ‘A’ [as mentioned in point (v)
above] by the buyer

(vii) 10th March Product ‘B’ manufactured and removed

(viii) 23rd March Receipt of product ‘B’ [as mentioned in point (vii)
above] by the buyer

(ix) 4th March Invoice for ` 2,00,000 issued for supply of ‘A’

(x) 11th March Invoice for ` 4,00,000 issued for supply of ‘B’

(xi) 25th March Payment made by the buyer of ‘A’

(xii) 31st March Payment [as mentioned in point (xi) above]

received

(xiii) 1st April Payment made by the buyer of ‘B’

(xiv) 4th April Payment [as mentioned in point (xiii) above]

received

Determine the time of suppl(ies) of goods for the purpose of payment of tax.

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ANSWERS

1. In terms of section 12(2), the time of supply of goods is the earlier of, the
date of issue of invoice/last date on which the invoice is required to be issued
or date of receipt of payment. However, Notification No. 66/2017 CT dated
15.11.2017 specifies that a registered person (excluding composition supplier
and registered persons making supply of specified actionable claims) has to
pay GST on the outward supply of goods at the time of supply as specified in
section 12(2)(a), i.e. date of issue of invoice or the last date on which invoice
ought to have been issued in terms of section 31.
As per section 31(1), invoice for supply of goods should be issued before or
at the time of removal of goods for supply to the recipient, where supply
involves movement of goods. Therefore, time of supply of goods is 23 rd June
being the last date on which invoice ought to have been issued and not
25th June when the invoice is actually issued.
2. No, the store is not correct in issuing supplementary invoice with revised rate
of tax. The revised rate of tax is not applicable to the transaction, as the
issuance of invoice as well as receipt of payment occurred before the supply.
Therefore, in terms of section 14(b)(ii), the time of supply is earlier of the two
events namely, issuance of invoice or receipt of payment, both of which are
before the change in rate of tax, and thus, the old rate of tax remains
applicable.
3. As issuance of invoice and receipt of payment (entry of the payment in Best
Info’s accounts) occurred before the change in rate of tax, the time of supply
of service by the online portal is earlier of the date of issuance of invoice
(21st February) or date of receipt of payment (28th February) i.e., 21st February.
This would be so even though the service commences after the change in rate
of tax [Section 14(b)(ii)].
4. As per Notification No. 66/2017 CT dated 15.11.2017, a registered person
(excluding composition supplier and registered persons making supply of
specified actionable claims) has to pay GST on the outward supply of goods
at the time of supply as specified in section 12(2)(a), i.e. date of issue of
invoice or the last date on which invoice ought to have been issued in terms

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 5.56 GOODS AND SERVICES TAX

of section 31. As per section 31(4), in case of continuous supply of goods,

where successive statements of accounts or successive payments are
involved, the invoice is issued before or at the time of each such statement is
issued or, as the case may be, each such payment is received.
Therefore, invoices should be issued for ` 2 lakh each on or before August 5,
and September 5, when monthly payments of ` 2 lakh are received. Further,
invoice should also be issued for differential payment of ` 2,56,000 on or
before October 3, when statement of account is issued
Thus, assuming that the invoice is issued on August 5, September 5 and
October 3, the time of supply for the purpose of payment of tax will be August
5 and September 5 respectively for goods valued at ` 2 lakh each and October
3 for the goods valued at ` 2,56,000.

5. As per section 13, the time of supply of services is the earlier of the dates
arrived at by methods (A) and (B), as follows:
(A) Date of invoice or date of receipt of payment (to the extent the invoice
or payment covers the supply of services), whichever is earlier, if the
invoice is issued within the time prescribed under section 31;
(B) Date of provision of service or date of receipt of payment (to the extent
the payment covers the supply of services), whichever is earlier, if the
invoice is not issued within the time prescribed under section 31
Since in the present case, the construction services are provided under a
contract for a period exceeding three months with periodic payment
obligations, such services would fall within the ambit of term “continuous
supply of services” as defined under section 2(33).
As per section 31(5), in case of continuous supply of services, the invoice
should be issued either (i) on/ before the due date of payment or (ii) before/
at the time when the supplier of service receives the payment, if the due date
of payment is not known (iii) on/ before the date of completion of the
milestone event when the payment is linked to completion of an event
[Section 31(5)].

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 TIME OF SUPPLY 1.57 5.57

Accordingly, the time of supply with respect to each of the stages of completion
is as follows:

Stages of Time of supply

completion

Initial Since invoice is issued within the prescribed time limit,

booking earlier of the date of issue of invoice or date of receipt of
payment is the time of supply. However, date of issuance
of invoice (02.07.2023) and date of receipt of payment
(02.07.2023) are the same. Therefore, time of supply is
02.07.2023.

50% Since invoice has not been issued on or before the date of
50% completion, earlier of date of provision of service
(15.03.2024) or date of receipt of payment (29.03.2024), i.e.
15.03.2024 is the time of supply.

75% Since invoice has not been issued on or before the date of
75% completion, earlier of date of provision of service
(20.06.2024) or date of receipt of payment (23.07.2024), i.e.
20.06.2024 is the time of supply.

100% Since invoice is issued within the prescribed time limit,

earlier of the date of issue of invoice (30.09.2024) or date of
receipt of payment (20.09.2024), i.e. 20.09.2024 is the time
of supply.

6. In case of services supplied by any person located in a non-taxable territory

to any person other than non-taxable online recipient, tax is payable under
reverse charge by the person located in the taxable territory [Notification No.
10/2017 IT (R) dated 28.06.2017]. Hence, in the given case, since the business
support services are provided by Green Inc (located in non-taxable territory)
to Mint Ltd. (person other than non-taxable online recipient and located in
taxable territory), tax is payable under reverse charge by Mint Ltd. Further,
since Green Inc. is not registered in India, invoice has been issued by recipient,
i.e. Mint Industries Ltd.

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 5.58 GOODS AND SERVICES TAX

The time of supply of services taxable under reverse charge is the earlier of
the following:
 Date of payment, or
 Date of issue of invoice by the recipient, since invoice is issued by the
recipient.
If it is not possible to determine the time of supply by using these parameters,
then the time of supply will be the date of entry of the service in the books
of account of the recipient of supply.
In view of the aforesaid provisions, the time of supply in each of the given
cases will be as under:

CASE Time of supply

CASE I The time of supply is earlier of the date of payment,

i.e. 22nd September or date of issue of invoice, i.e. 28th August, i.e.
28th August.

CASE II The time of supply is earlier of the date of payment,

i.e. 27th August or date of issue of invoice, i.e. 28th August, i.e. 27th
August.

7. Since Kothari Ltd. holds 51% shares of Wilson Inc., Kothari Ltd. and Wilson
Inc. are ‘associated enterprises’ as per section 92A of the Income-tax Act,
1961. As per second proviso to section 13(3), in case of supply by associated
enterprises, where the supplier of service is located outside India, the time of
supply is the earlier of the following two dates:

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 TIME OF SUPPLY 1.59 5.59

Date of entry in the books of 30th September

account of the recipient of supply
[which is Kothari Ltd. in the
present case]

OR OR

Date of payment [by Kothari Ltd. 23rd December

in the present case]

Thus, time of supply is 30th September.

8. The explanation to section 14 lays down that the date of receipt of payment
is the date on which the payment is entered in the books of account of the
supplier or the date on which the payment is credited to his bank account,
whichever is earlier. However, the date of receipt of payment is the date of
credit in the bank account if such credit in the bank account is after 4 working
days from the date of change in the rate of tax.
In the given case, the payment has been credited in the bank account within
4 working days from the date of change in the rate of tax. Therefore, the date
of receipt of payment is 15th October being the date of entry in the books of
account of the supplier which is earlier than the date of credit of the payment
in the bank account (18th October).
As per section 14(a)(iii), in case of change in rate of tax, if the service is
supplied before the change in rate of tax and the invoice is issued after the
change in rate of tax but the payment is received before such change in rate
of tax, the time of supply is the date of receipt of payment.
Therefore, applying the provisions of section 14(a)(iii) to the given case, the
time of supply is 15th October.
9. As per Circular No. 11/11/2017 GST dated 20.10.2017, in case of printing of
books where only content is supplied by the person who owns the usage
rights to the intangible inputs while the physical inputs including paper used
for printing belong to the printer, supply of printing [of the content supplied
by the recipient of supply] is the principal supply and therefore, such supplies
would constitute supply of service.

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 5.60 GOODS AND SERVICES TAX

In case of supply of printed envelopes by the printer using its physical inputs
including paper to print the design, logo etc. supplied by the recipient of
goods, predominant supply is supply of goods and the supply of printing of
the content [supplied by the recipient of supply] is ancillary to the principal
supply of goods and therefore, such supplies would constitute supply of
goods.
Accordingly, the time of supply of books and envelopes will be governed by
sections 12 and 13 respectively.

In terms of section 12(2), the time of supply of goods is the earlier of, the
date of issue of invoice/last date on which the invoice is required to be issued
or date of receipt of payment. However, Notification No. 66/2017 CT dated
15.11.2017 specifies that a registered person (excluding composition supplier
and registered persons making supply of specified actionable claims) has to
pay GST on the outward supply of goods at the time of supply as specified in
section 12(2)(a), i.e. date of issue of invoice or the last date on which invoice
ought to have been issued in terms of section 31.
As per section 31(1), invoice for supply of goods should be issued before or
at the time of removal of goods for supply to the recipient, where supply
involves movement of goods. Therefore, in the given case, the last date by
which invoice ought to have been issued is 7th April. Thus, the time of supply
of envelopes for the purpose of payment of tax is 7th April.
As per section 13, the time of supply of services is the earlier of the dates
arrived at by methods (A) and (B), as follows:
(A) Date of invoice or date of receipt of payment (to the extent the invoice
or payment covers the supply of services), whichever is earlier, if the
invoice is issued within the time prescribed under section 31;

(B) Date of provision of service or date of receipt of payment (to the extent
the payment covers the supply of services), whichever is earlier, if the
invoice is not issued within the time prescribed under section 31.
Since in the given case, invoice for the services is not issued within 30 days,
the time of supply for the advance received is the date of receipt of payment,
i.e. 20th March being earlier than the date of provision of service. However,

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 TIME OF SUPPLY 1.61 5.61

the time of supply for the balance payment is the date of provision of service,
i.e. 10th April being earlier than the date of receipt of balance payment.
10. In terms of section 12(2), the time of supply of goods is the earlier of, the
date of issue of invoice/last date on which the invoice is required to be issued
or date of receipt of payment. However, Notification No. 66/2017 CT dated
15.11.2017 specifies that a registered person (excluding composition supplier
and registered persons making supply of specified actionable claims) has to
pay GST on the outward supply of goods at the time of supply as specified in
section 12(2)(a), i.e. date of issue of invoice or the last date on which invoice
ought to have been issued in terms of section 31.
Also, it is important to note that the relief of not paying GST at the time of
receipt of advance is available only in case of supply of goods, the tax on
which is payable under forward charge. In case of reverse charge, GST is
payable at the time of payment, if payment is recorded/made before receipt
of goods (advance payment) [Section 12(3)].
Therefore, time of supply of product ‘A’, which is taxable under forward
charge, is 4th March being the date of issue of invoice. However, time of
supply of product ‘B’, which is taxable under reverse charge, is 17th February
to the extent of ` 2,00,000 paid as advance being the earliest of the three
stipulated dates namely, date of receipt of goods (23rd March), date of
payment (17th February) and date immediately following 30 days of issuance
of invoice (11th April). For balance ` 2,00,000, the time of supply of product
‘B’ is 23rd March being the earliest of the three stipulated dates namely, date
of receipt of goods (23rd March), date of payment (1st April) and date
immediately following 30 days of issuance of invoice (11th April).

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India