Goods and Service Tax

• GST means a tax on supply of goods or services or both except taxes on supply of
alcoholic liquor for human consumption. It is a comprehensive tax structure
under which the indirect tax is levied not only on supply of goods but also on
supply of services.
• The GST have subsumed many indirect taxes that existed in pre GST Era.

Features of GST
• Extends to whole of India
• The tax is payable in the state where goods and services are finally consumed.
• The GST is imposed concurrently by the centre and states on taxable supply of
goods or services or both.
• The inter state supply of taxable goods or services are subject to IGST. It is levied
by Centre on all inter state supplies.
• In case of Intra state supply of goods and services both CGST as well as SGST are
levied.
• IN case of Union Territories, which do not have their own legislature, UTGST is
levied in place of SGST.
Legislation Governing GST
• For levy of UTGST in those Union Territories which do not have their state
legislatives – Anamam Nichobar, Lakshadweep, Dadra & Nagar Haveli , Daman &
Diu, Chandigarh, Ladakh
• Three union territories Delhi, Pudichery and Jammu & Kashmir have their own
legislature and they have passed their own SGST.
• All the 28 states have passed their own SGST.
• All the provisions of SGST are identical with CGST.

Supply under GST

• Under GST Supply includes all forms of supply of goods or services or both.
• 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 served before supply or under a
contract of supply.
• Service 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.
Components of Supply
Place of Supply - This component determines whether a transaction is an intra-state
supply, an inter-state supply, or an external trade, which determines the type of GST
that will be associated with it.
Value of Supply - This component decides the taxable value of supply made, and thus
the amount of tax that needs to be paid for it.
Time of Supply - This component determines when the associated taxes and GST
returns are due.
Types of supply under GST
Under the GST, supply of goods and/or services can be classified into two major
categories - Taxable supplies and Non-taxable supplies. These are further classified into
different types based on the nature of supply made.
 Taxable Supplies - These refer to supply of goods and/or services that are
taxable under GST. Registered taxpayers can claim refunds on tax paid during
purchases (in other words, they are eligible for ITC).
o Regular taxable supplies - Whenever you supply an item or service which
attract a GST rate greater than 0% within India, it becomes a regular
taxable supply.
o Nil-rated supplies - Whenever you supply goods which attract 0% GST by
default, such supplies are known as nil rated supplies.
o Zero-rated supplies - Whenever you make exports, supplies to a SEZ unit
or deemed exports, the GST associated with the items or services involved
becomes 0 even though the same would attract a GST rate greater than
0% when sold within India. Such supplies are deemed as zero rated
supplies
 Non Taxable Supplies
 o Exempt Supplies - The supply of exempt goods or services do not attract
GST even though they are within the purview of GST. That said, the
registered taxpayer cannot claim ITC on inputs used for making such
supplies.
o Non-GST supplies - This refers to supply of items which are outside the
purview of the GST law.
Composite and Mixed Supply
While goods and services can be supplied individually, one can also supply them as a
bundle or a set using one of the following methods of supply:
 If the goods and services supplied together are a natural bundle (wherever it
makes more sense to provide them together than to sell them individually), then
it is known as a composite supply.
 If the goods and services supplied together are not naturally bundled together
(they are not interdependent and can also be sold separately), then such a supply
is known as mixed supply.
Constitutional frame work
Constitution (122nd Amendment) Bill, 2014 received the assent of the President of
India on 8th September, 2016 and became Constitution (101st Amendment) Act, 2016,
which paved the way for introduction of GST in India.
Constitution (101st Amendment) Act, 2016 was enacted on 8th September, 2016, with
following significant amendments:
• Concurrent powers on Parliament and State Legislatures to make laws governing
goods and services. It means there will be dual control of State and Central
authorities for all assessees.
• As per Article 246A, the power to levy GST has been given to the Parliament as
well as to Legislature of every State.
CGST – enacted by Central Government of India.
IGST – enacted by Central Government of India.
SGST – enacted by respective State Governments
UTGST – enacted by Central Government of India
 IGST will be apportioned between Centre and the States in the manner provided
by Parliament by Law as per the recommendation of the GST Council.
  GST will be levied on all supply of goods and services except alcoholic liquor for
human consumption.
 The explanation to Article 269A of Constitution of India provides that the import
of goods or services will be deemed as supply of goods or services or both in the
course of inter-State trade or commerce. In case of import of goods IGST will be
levied along with the Basic Customs duty. It means IGST is levied in replacement
of CVD + Spl. CVD. In case of import of services only IGST will be levied.
 Principles for determining the place of supply and when a supply takes place in
the course of inter-state trade or commerce shall be decided by the Parliament.
The power to levy Central Excise duty on goods manufactured or produced in India is
available in respect of the following products:
o Petroleum crude;
o High speed diesel;
o Motor spirit (commonly known as petrol);
o Natural gas;
o Aviation turbine fuel; and
o Tobacco and tobacco products.
However, once GST is imposed there will be no duty on manufacture of these goods.

The power to impose tax on sale of the following products is still provided to the State
Governments:
1. Petroleum crude;
2. High speed diesel;
3. Motor spirit (commonly known as petrol);
4. Natural gas;
5. Aviation turbine fuel; and
6. Alcoholic liquor for human consumption.
However, once GST Council is recommend the date from which GST is imposed on these
products (except alcoholic liquor for human consumption), and no sales tax will be
imposed on these products.
The Central Government notified 1st July 2017 as the date from which the much awaited
indirect tax reform in India, that is GST had to be implemented. Accordingly GDT had
been implemented in India 1st July 2017.
• CGST: CGST levied and collected by Central Government. It is a revenue source
to the Central Government of India, on intra-state supplies of taxable goods or
services or both.
• SGST: SGST levied and collected by State Governments/Union Territories with
State Legislatures (namely Delhi and Pondicherry) on intra-state supplies of
taxable goods or services or both. It is a revenue source of the respective State
Government.
• Union Territory Goods and Services Tax (UTGST): UTGST levied and collected by
Union Territories without State Legislatures, on intra-state supplies of taxable
goods or services or both.
• IGST: IGST is a mechanism to monitor the inter-state trade of goods and services
and ensure that the SGST component accrues to the Consumer State. It would
maintain the integrity of ITC chain in inter-state supplies. The IGST rate would
broadly be equal to CGST rate plus SGST rate. IGST would be levied and collected
by the Central Government on all inter-State transactions of taxable goods or
services.

GSTN
Goods and Services Tax Network (GSTN) is a [Section 8 of the Companies Act, 2013, (i.e.
not for profit companies)], non-Government, private limited company. Technology
backbone for GST in India. GST being a destination based tax, the inter- state trade of
goods and services (IGST) would need a robust settlement mechanism amongst the
States and the Centre. This is possible only when there is a strong IT Infrastructure and
Service back bone which enables capture, processing and exchange of information
amongst the stakeholders (including tax payers, States and Central Governments,
Accounting Offices, Banks and RBI). As a result Goods and Services Tax Network
(GSTN) has been set up.
Functions of the GSTN (i.e. Role assigned to GSTN):
• Creation of common and shared IT infrastructure for functions facing taxpayers
has been assigned to GSTN and these are:
 • filing of registration application,
• filing of return,
• creation of challan for tax payment,
• settlement of IGST payment (like a clearing house),
• generation of business intelligence and analytics etc.
• All statutory functions to be performed by tax officials under GST like approval of
registration, assessment, audit, appeal, enforcement etc. will remain with the
respective tax departments.
Supply of Goods
The term, “supply” has been inclusively defined in the Act. The meaning and scope of
supply under GST can be understood in terms of following six parameters, which can be
adopted to characterize a transaction as supply:
1. Supply of goods or services. Supply of anything other than goods or services does
not attract GST.
2. Supply should be made for a consideration.
3. Supply should be made in the course or furtherance of business.
4. Supply should be made by a taxable person.
5. Supply should be a taxable supply.
6. Supply should be made within the taxable territory
Outward and Inward Supply
• Inward supply in relation to a person shall mean receipt of goods and / or
services, whether by purchase acquisition or any other means and whether or
not for any consideration.
• Outward Supply in relation to a person mean supply of goods and or services
whether by sale, transfer. Barter, exchange, license, rental, lease or disposal
made or agreed to be made by such person, in the course or furtherance of
business.
Continuous Supply
• A supply of goods which is provided or agreed to be provided continuously or on
recurring basis under a contract. Whether or not by means of a wire, cable or
pipeline or other conduit. For which the supplier invoices the recipient on a
regular or periodic basis and includes supply of such goods as the Central or a
 State Government may, whether or not subject to any condition by notification
specify.
• A supply of services which is provided or agreed to be provided continuously or
on recurring basis under a contract for a period exceeding 3 months with
periodic payment obligations and includes supply of such services as the Central
or State Government may whether or not subject to any condition by notification
specify.

Person
• Person includes the following;
• An Individual
• A Hindu Undivided Family
• A Company
• A Firm
• An AOP/BOI whether incorporated or not, in India or outside India
• Any Corporation established under any Central Act, State Act or
Provincial Act or a Government Company.
• Any body incorporated under the law of a country outside
• A co-operative society registered under any law relating to cooperative
societies
• A local authority
• Central or State Government
• Society
• Trust
• Every Artificial Juridical Person, not falling within any of the above

Taxable Person
• taxable person’ under GST is a person who carries on any business at any place
in India and who is registered or required to be registered under the GST Act.
Any person who engages in economic activity including trade and commerce is
treated as a taxable person.
 • Any business involved in the supply of goods whose turnover in a financial year
exceeds Rs.40 lakhs for Normal Category states (Rs.20 lakhs for Special Category
states)
• Any business involved in the supply of services whose turnover in a financial
year exceeds Rs.20 lakhs for Normal Category states (Rs.10 lakhs for Special
Category states)
• Every person who is registered under an earlier law (i.e., Excise, VAT, Service
Tax etc.) needs to register under GST, too.
Related Person
As per Explanation to Section 15, persons shall be deemed to be “related persons” if––
• such persons are officers or directors of one another’s businesses;
• such persons are legally recognized partners in business;
• such persons are employer and employee;
• any person directly or indirectly owns, controls or holds 25% or more of
the outstanding voting stock or shares of both of them;
• one of them directly or indirectly controls the other;
• both of them are directly or indirectly controlled by a third person;
• together they directly or indirectly control a third person; or
• they are members of the same family;
The term “person” also includes legal persons;
• persons who are associated in the business of one another in that one is the sole
agent or sole distributor or sole concessionaire, howsoever described, of the
other, shall be deemed to be related.
Business
As per section 2(17) of the CGST Act 2017, the term 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 commerce with or incidental or ancillary to sub
clause (a)
c) Any activity or transaction in the nature of sub clause (a) whether or not there is
volume, frequency, continuity or regularity of such transaction.
d) Supply of acquisition of goods including capital goods and services in connection
with commencement or closure of business.
 e) Provision by a club, association, society or any such body for a subscription or
any other consideration of the facilities or benefits to its members.
f) Admission, for a consideration, or persons to any premises.
g) Services supplied by a person as the holder of an office, which has been accepted
by him in the course or furtherance of his trade, profession or vocation.
h) Services provided by a race club by way of a licence to 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

Place of Business
• As per section 2(85) of the CGST Act 2017, the term place of business includes;
• A place from where the business is ordinarily carried on, and includes a
warehouse, a godown or any other place where a taxable person stores his
goods, supplies or receives goods or services or both, or
• A place where a taxable person maintains his books of account, or
• A place where a taxable person is engaged in business through an agent, by
whatever name called.
Business Vertical
• “Business vertical” means a distinguishable component of an enterprise that is
engaged in supplying an individual product or service or a group of related
products or services and that is subject to risks and returns that are different
from those of other business verticals.
Factors that should be considered in determining whether products or services are
related include:

(a) the nature of the products or services;

(b) the nature of the production processes;
(c) the type or class of customers for the products or services;
(d) the methods used to distribute the products or provide the services; and
(e) if applicable, the nature of the regulatory environment, for example, banking,
insurance, or public utilities.
Consideration
 • Consideration in GST is the basis for deciding upon the value of supply of goods
or supply of services.
• Section 2(31) ‘consideration‘ in relation to the supply of goods or services or
both includes––
a) any payment made or to be made, whether in money or otherwise, in respect of,
in response to, or for the inducement of, the supply of goods or services or both,
whether by the recipient or by any other person but shall not include any
subsidy given by the Central Government or a State Government;
b) 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:
Provided that 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;
Capital Goods
• Capital goods – Section 2(19)
• “Capital goods” means: - goods, the value of which is capitalised in the books of
accounts of the person claiming the credit and which are used or intended to be
used in the course or furtherance of business
Input and Output Tax
• Output tax is the total amount of tax charged at current rate on taxable sales
made during the month i.e. total sales excluding exempt and zero-rated
supplies.
• Input tax is the amount paid by the registered person on business purchases and
imports. He can claim a deduction for the sales tax paid as input tax if used in the
manufacture of taxable supplies.
• Tax Due for a particular tax period will be the output tax minus input tax during
that tax period

Deemed Export
• Deemed exports are to be treated similar to exports, these supplies are not zero-
rated supplies by default. Thus, GST shall be applicable on all the deemed export
 at the point of supply. Furthermore, these Supplies cannot be made under Bond /
LUT without payment of tax.
• However, the supplier or the recipient of the goods can claim a refund of the tax
paid on such supply. But once the refund has been claimed by the supplier, the
recipient will not be eligible to claim the ITC on the same.
Recipient
• 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
Reverse Charge Mechanism
• The supplier of goods or services pays the tax on supply. Under the reverse
charge mechanism, the recipient of goods or services becomes liable to pay the
tax, i.e., the chargeability gets reversed.
• The objective of shifting the burden of GST payments to the recipient is to widen
the scope of levy of tax on various unorganized sectors, to exempt specific
classes of suppliers, and to tax the import of services (since the supplier is based
outside India).
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 involved in the execution of such contract.”
Time of Supply
• Time of supply means the point in time when goods/services are considered
supplied’. When the seller knows the ‘time’, it helps him identify due date for
payment of taxes.
• CGST/SGST or IGST must be paid at the time of supply. Goods and services have a
separate basis to identify their time of supply. Let’s understand them in detail.
• For non-continuous supply
• The earliest of the following:
• Date of Receipt of goods
• Date of payment
• Date of invoice issued by the supplier
• For continuous supply –
• Date of issue of statement of account or receipt of payment will be considered as
time of supply
Place of Supply
 • Usually, in case of goods, the place of supply is where the goods are delivered. So,
it is the place where the ownership of goods changes.
• What if there is no movement of goods. In this case, the place of supply is the
location of goods at the time of delivery to the recipient. For example: In case of
sales in a supermarket, the place of supply is the supermarket itself.
• Place of supply in cases where goods that are assembled and installed will be the
location where the installation is done.
Value of Supply
• Value of supply means the money that a seller would want to collect the goods
and services supplied.
• The amount collected by the seller from the buyer is the value of supply.
• But where parties are related and a reasonable value may not be charged, or
transaction may take place as a barter or exchange; the GST law prescribes that
the value on which GST is charged must be its ‘transactional value’. This is the
value at which unrelated parties would transact in the normal course of
business. It makes sure GST is charged and collected properly, even though the
full value may not have been paid.