Theory Questions

1. What is GST ?
Goods and services tax means a tax on supply of goods or services, or both, except taxes on
supply of alcoholic liquor for human consumption (Article 366 (12A) of Constitution of India).
 GST is a value added tax levy on sale or service or both.
 GST is a destination based consumption tax.
 GST offers comprehensive and continuous chain of tax credit.
 GST where burden borne by final consumer.
 GST eliminate cascading effect of tax.
 GST brings uniform tax structure all over India.

Advantages of GST
 One Nation One Tax.
 Removal of bundled indirect taxes such as VAT, CST, Service tax, CAD, SAD, and Excise.
 Removal of cascading effect of taxes i.e. removes tax on tax
 Increased ease of doing business;
 Lower cost of production, increases demand will lead to increase supply. Hence, this will
ultimately lead to rise in the production of goods. Resultantly boost to make in India initiative.
 It will boost export and manufacturing activity, generate more employment and thus increase
GDP with gainful employment leading to substantive economic growth

2. GST COUNCIL
As per Article 279A of the Constitution of India, the President of India is empowered to
constitute Goods and Services Tax Council. The President of India constituted the GST Council
on 15th September, 2016. The GST Council shall consist of Union Finance Minster as a
Chairperson, Union Minister of State in charge of Finance as a member, the State Finance
Minister or State Revenue Minister or any other Minister nominated by each State as a member
of the Council. The GST Council shall select one of them as Vice Chairperson of Council.

Guiding principle of the GST Council:

The mechanism of GST Council would ensure harmonization on different aspects of GST
between the Centre and the States as well as among States. It has been provided in the
Constitution (101st Amendment) Act, 2016 that the GST Council, in its discharge of various
functions, shall be guided by the need for a harmonized structure of GST and for the
development of a harmonized national market for goods and services.

Functions of the GST Council:

GST Council is to make recommendations to the Central Government and the State
Governments on -
• Tax rates,
• Exemptions,
• Threshold limits,
• Dispute resolution,
• GST legislations including rules and notifications etc.
3. COMPOSITE AND MIXED SUPPLIES
Composite supply is when two or more goods are sold in a combination; it becomes difficult to
identify the rate of tax to be levied. For such goods or services, CGST Act, 2017 has provided
with two terms:
(i) Composite supply and
(ii) Mixed supply.
Composite supply is similar to the concept of “bundled service” as under service tax laws in the
existing regime. Both Composite supply and Mixed supply consist of two or more taxable
supplies of goods or services or both but the main difference between the two is that Composite
supply is naturally bundled i.e., goods or services are usually provided together in normal course
of business and cannot be separated. Whereas in Mixed supply, the goods or services can be sold
separately.
(1) Composite Supply: Composite supply consists of two or more goods/services, which is
naturally supplied with each other in the ordinary course of business and one of them is a
principal supply. The items cannot be supplied separately.
Note: Principal supply means the supply of goods or services, which constitute the predominant
element of a composite supply and to which another supply is ancillary/secondary.
Following two conditions are necessary for composite supply:
(a) Supply of two or more goods or services together, AND
(b) It should be a natural bundle and they cannot be separated.

Example: Booking of Air Tickets which involves cost of the meal to be provided during travel
will be Composite supply and tax will be calculated on the principle supply which in this case is
transportation of passengers through flight

(2) Mixed supply: In Mixed supply two or more individual supplies combination of goods or
services with each other for a single price. Each of these items can be supplied separately and is
not dependent on each other. In other words, the combinations of goods or services are not
bundled due to natural necessities, and they can be supplied individually in the ordinary course
of business.
For tax liability purpose, mixed supply consisting of two or more supplies shall be treated as a
supply of that item which has the highest tax rate.

Example : Diwali gift hamper which consist of different Items like sweets, chocolates, cakes, dry
fruits packed in one pack is Mixed supply as these items can be sold separately and it shall be
treated as a supply of that particular item which attracts the highest rate of tax.

4. AGGREGATE TURNOVER AS PER SECTION 2(6) OF CGST ACT, 2017:

The term “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 Number, to be computed on all India basis but excludes central tax, state tax,
union territory tax, integrated tax and cess.
5. Composition Scheme
The Government of India provides for simplified and easy of doing business scheme for payment
of taxes and filling of returns to certain categories of taxable person. As a result such taxable
person is not required to maintain elaborate records and filing detailed returns. Section 10 of the
CGST Act, provides for composition levy to such person.

Person eligible for Composition Levy u/s 10 of CGST Act:

Who can opt for Composition Scheme?
A taxpayer whose turnover is below Rs 1.5 crore* can opt for Composition Scheme. In case of
North-Eastern states and Himachal Pradesh, the limit is now Rs 75* lakh. As per the CGST
(Amendment) Act, 2018, a composition dealer can also supply services to an extent of ten
percent of turnover, or Rs.5 lakhs, whichever is higher.

This amendment will be applicable from the 1st of Feb, 2019. Further, GST Council in its 32nd
meeting proposed an increase to this limit for service providers on 10th Jan 2019*. Turnover of
all businesses registered with the same PAN should be taken into consideration to calculate
turnover.

*CBIC has notified the increase to the threshold limit from Rs 1.0 Crore to Rs. 1.5 Crores.

Who cannot opt for Composition Scheme

The following people cannot opt for the scheme-
 Manufacturer of ice cream, pan masala, or tobacco.
 A person making inter-state supplies or exempt supplies.
 A casual taxable person or a non-resident taxable person.
 A person supplying services through an e-commerce operator who is required to collect
TCS under the CGST Section 52.
 A manufacturer of such goods or supplier of such services notified by the Government on
the recommendations of the GST Council.

6. Exempt Supply:
As per Section 2(47) of CGST Act, 2017 “exempt supply” means supply of any goods or
services or both which attracts nil rate of tax or which may be wholly exempt from tax under
section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-
taxable supply;
Exempt supply includes the supply of following type of goods and services:
(a) Supply attracting nil rate of tax;
(b) Supplies wholly exempt from tax;
(c) Non-taxable supply;

a) General Exemptions: As per sec. 11(1) of the CGST Act, 2017 and Sec. 6(1) of the IGST
Act, 2017 the Government of India on the recommendations of the GST 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
Example :
(1) General exemption granted where supply is in relation to supply of Indian National Flag
[vide Notification No.2/2017-Central Tax (Rate) Dt. 28-06-2017]. It is called as absolutely
exempt. GST rate is Nil.
(2) Services provided by a goods transport agency, by way of transport in a goods carriage for -
agricultural produce were exempted from GST [vide Notification No. 12/2017- Central Tax
(Rate) Dt 28-06-2017]. It is called as general exemption subject to such condition where supply
of service is in the nature of transport of agricultural produce.
b) Exemption by Special Order: As per sec. 11(2) of the CGST Act, 2017 and Sec. 6(2) of the
IGST Act, 2017 the Government of India on the recommendations of the GST Council by
Special Order, in each case, under circumstances of an exceptional nature to be stated in such
order, exempt from the payment of tax any goods or services or both on which tax is leviable.
Example :
Exemption granted by special order to all assesses registered in one State, from payment of GST
by reason, earthquake or assessees are affected in tsunami. Such special order can be issued
only in exceptional nature to be stated in such order.

7. E-Commerce Operators Guide to GST

Electronic commerce has been the subject of intense growth in India. India is behind many of the
other countries in terms of the market size for E-commerce, but soon in the future, it would grow
fast and predicted to become one of the largest in the world over the next decade. In this article,
we look at the impact of GST on e-commerce operators and major provisions relating to
ecommerce operators in India.
Electronic Commerce Operator under GST

"Electronic commerce operator is every person who, owns, operates or manages digital or
electronic facility or platform for electronic commerce." On the other hand, sale of a company's
products through its website would not be called an e-commerce activity. Hence, the basic
functions of an E-commerce operator are:

 To display the available products and services in the website.

 Arrange for dispatch through any of the vendors.

 Post the successful supply by the vendors, the e-commerce operator proceeds to settle the
payment of the vendor on a periodical basis.

Ecommerce Operator GST Registration

All E-commerce operators need to obtain GST registration once the turnover crosses the
threshold limit. GST registration for ecommerce operators was mandatory irrespective of
turnover criteria, until the 23rd GST Council meeting. The GST Council in the 23rd GST
Council Meeting, implemented the threshold limit benefit to e-commerce operators. The
threshold limit for every businesses is 20 lakhs, and 10 lakhs for special category states, except
Jammu and Kashmir which is fully exempt.

Tax Collection at Source (TCS)

E-commerce operator not being an agent should collect TCS - an amount at the rate of 1% from
the net value of taxable supplies made through the ecommerce platform. The amount so deducted
and collected is known as Tax collection at source. E-commerce operators must collect this along
with the taxes applicable. This tax will have to be collected on payment to vendors which will be
subject to reconciliation at a later stage. The TCS amount collected by the e-commerce operator
must be deposited to the Government by the operator within a period of 10 days after the end of
the month in which the amount was collected. The concerned operator must also file an
electronic statement containing details of all amounts collected by him for the outward supplies
made through his portal. There are a few exceptions to this rule, where TCS need not be
collected:

 If the operator is acting as an agent.

 Consideration has been paid directly from the recipient to the supplier.

 Services provided are notified under Section 8(4) by which the operator is liable to pay
service tax.
8. Input Tax Credit under GST
India’s taxation system has evolved over the years. The latest significant development in this
sphere is the Goods and Services Tax (GST). A crucial component of GST is the Input Tax
Credit (ITC), which is designed to allow effortless credit flow.
Here we have entailed input tax credit meaning, its features, importance and much more.

What is Input Tax Credit (ITC) under GST

The amount of GST paid by a registered person on the purchase of goods or services used for
business purposes is known as input tax credit, or ITC. The input tax credit mitigates the
registered person's GST liability for the sale of goods or services.

Let's understand input tax credit under GST with example.

Suppose your firm purchased goods with an input tax component of Rs 20,000 and sold goods
with an input tax component of Rs 40,000. Your firm would owe Rs 20,000 in net tax (which is
determined by deducting the input tax credit from the output tax collected).

Therefore, businesses, such as manufacturers, traders, e-commerce, and others mentioned in the
GST Act, can benefit from the input tax credit. It lowers tax payment obligations by enabling
people to get a reimbursement for the taxes they paid on their purchases. This practice helps
promote tax compliance, avoids double taxation, and simplifies the taxation journey for
individuals and firms.

In short, the total tax outgo is reduced to the extent of the input tax credit. The taxpayer needs to
pay only the balance.

Who can Claim Input Tax Credit under GST - Eligibility Criteria

One can claim the input tax credit for taxes paid on supplies of goods or services, provided the
individual or firm has -

 Valid Tax Invoice

The registered individual must have a valid tax invoice or other official tax-paying document to
be eligible for the credit.

 Paid Tax

For an individual to be eligible for the credit, the supplier must have paid the tax amount.

 Received the Products

The credit can only be used once the registered individual has received the goods or services.

 Filed and Submitted the Return

To be eligible for ITC, the registered person must file and submit the required return.

 Paid the Vendor Within 180 days

The recipient is required to pay the supplier the total cost of the products or services taken on
credit plus applicable taxes within 180 days of the invoice date. If left unpaid, the recipient's
output tax due will be increased by the credit amount plus interest. Nevertheless, the beneficiary
can reclaim the credit after payment is received.

Time Limit to Claim Input Tax Credit under GST

As per Section 16(4) of the CGST Act, 2017, the last date to avail ITC for the invoices of a
particular financial year would be the earlier of the two dates below:

 30th November, following the end of the relevant financial year

 Annual Return for the relevant financial year