GOODS AND SERVICE TAX (GST)

GST is tax on consumption of goods and services i.e. tax is borne by the consumer in the State
where goods and/or services are finally consumed.

GST is levied on all goods and services except

i) Alcoholic liquor for human consumption. It is subjected to State excise duty and is
subject to CST/VAT respectively.
ii) Petroleum Products
iii) Tobacco.

GST Rates for supply of goods

For Inter State Supply – IGST Rates are nil, 0.25%, 3%, 5%, 12%, 18%, 28%.

For Intra State Supply – CGST will be 50% plus SGST (or UTGST) will be 50%

GST Rates for supply of services

For Inter State Supply – IGST Rates are 18%. However in few cases services are taxed at 5%,12%,&
28%.

For Intra State Supply – CGST will be 50% plus SGST (or UTGST) will be 50%

GST Rates for Import of Goods

IGST and GST Compensation cess is applicable.

Export

Exports are zero rated i.e have nil rate of tax.

India has adapted Dual GST model which has the following features

a) CGST and SGST/UTGST on Intra State Supply

b) IGST on Inter State Supply and Imports.

Applicability of GST Laws

Applicability Intra State Supply Inter State

Supply
CGST SGST UTGST IGST
a) State of India Yes Yes Yes
b) UT with State Yes Yes Yes
Legislature (Delhi &
Puducherry
c) UT without State Yes Yes Yes
Legislature (#)
# Andaman & Nicobar Islands, Lakshadweep, Dadra & Nagar Haveli, Daman & Diu,
Chandigarh
SCOPE OF SUPPLY
Taxable event is that on happening of which the charge is fixed. It is that event which crates or
attracts the liability to tax.

Earlier there were many taxable events for eg Manufacture (excise), Sale (VAT). However inn
GST there is only one taxable event i.e supply. The taxable event under GST is

a) The taxable supply

b) Made by the taxable person
c) In the taxable territory.

Taxable Supply

Taxable supply means a supply of goods or services or both which is leviable to tax under the
Act.

To be supply the following element must be present:

a) Supply must be goods and/or services in any form such as sale etc
b) Supply should be made or agreed to be made
c) Supply should be for a consideration by a person
d) Supply should be in the course of or in furtherance of business.

Reverse Charge

Normally the liability to discharge tax is in the hands of the provider of the services or supplier
of the goods. However when the liability to pay tax is in the hands of the recipient of supply of
goods or services or both instead of the supplier of such goods or services is said to be reverse
charge mechanism for eg : services by an advocate, arbitral tribunal, sponsorship, import of
services etc.

TIME OF SUPPLY
The liability to pay tax on goods shall arise at the time of supply. In order to calculate and
discharge tax liability it is important to know the date when the tax liability arises i.e the date on
which the charging event has occurred. In GST law it is known as Time of Supply (TOS). TOS
determines the rate of tax. TOS also determines the due date of payment of tax. Thus TOS
determines when tax is to be levied, at what rate and when it should be paid.

Time of Supply in relation to goods

Section 12 (2) states time of supply in relation to goods as the date of invoice or the due date
of invoice whichever is earlier (As per N/N 66/2017)
Due date of invoice for supply of goods (S 31)

Where the supply involves movement of goods: A registered person supplying taxable goods
shall issue a tax invoice before or at the time of removal of goods for supply to the recipient.

Removal of goods means

i) Dispatch of the goods for delivery by the suppliers thereof or by any other person
acting on behalf of such supplies or
ii) Collection of the goods by the recipient thereof or by any other person acting on behalf
of such recipient.

Where the supply doesn’t involve movement of goods: A registered person supplying taxable
goods shall issue a tax invoice before or at the time of delivery of goods or making available
thereof to the recipient.

Continuous supply of goods

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 [S 31 (4)]

Goods on approval basis [S 31(7)]

Where the goods being sent or taken on approval for sale or return, the time of supply should be
earlier of the date of issuance of invoice or the last due date of issuance of invoice. The last date
of issuance of invoice will be the earlier of the confirmation of supply or six months from the date
of removal.

Receipt of goods taxable under reverse charge [S 12 (3)]

The time of supply for such goods will be the earliest of the following dates:

a) Date of receipt of goods

b) Date on which the payment is entered in the books of accounts of the recipient or the date
on which the payment is debited in his bank account whichever is earlier.
c) Date immediately following 30 days from the date of issue of invoice or any other legal
document in lieu of invoice by the supplier.

Time of supply in relation to service – Section 13

a) Invoice issued within 30 days

 Date of invoice
 Date of payment whichever is earlier
b) Invoice not issued within 30 days
 Date of Completion of service
 Date of payment whichever is earlier
c) If not (a) and (b); date on which receipt shown in books of accounts.
 Date of receipt of payment is the earlier of the date on which payment is
i) Recorded in the books of accounts of the supplier.
ii) Credited to the suppliers bank account.

Advance upto Rs 1,000: Tax is payable on any advance received for a supply of services however
it is provided that if a supplier of taxable services receives an amount upto Rs 1000 in excess of
the amount indicated on the tax invoice then the supplier has an option to take the date of issue
of invoice in respect of each such supply as time of supply.

Time of supply of service in reverse charge

The time of supply of service in case of reverse charge is

a) Date of payment
b) 61st day from invoice date whichever is earlier.

Date of payment refers to the date on which the payment is recorded in the books of account of
the entity that receives the service (recipient of service) or the date on which the payment is
debited from the entity’s bank account whichever is earlier.

Import of services between Associated Enterprises

Associated Enterprises: 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 accounts of
the recipient of supply or the date of payment whichever is earlier. (In case of associated
enterprises provision of 61 days is not applicable).

Date of payment in the above situation refers to the date on which the payment is recorded in the
books of account of the entity that receives the service or the date on which the payment is debited
from the entity bank account whichever is earlier.

Continuous supply of service

Due date of invoice in case of continuous supply of service

Sr When Invoice shall be issued

a Due date of payment is ascertainable from the contract
On or before the due date of
payment
b Due date of payment is not ascertainable from the Before or on the receipt of
contract payment
c Payment is linked to the completion of an event On or before completion of that
event.
Changes in rate of tax in respect of supply of goods or services

Sr Supply is Invoice Payment Applicable Time of Supply

No completed issued received rate of tax
before the before the before the date
change in date of of change in
rate of tax change in tax rate
tax
1 Yes No No New Rate Earliest of the date of invoice
or payment
2 Yes Yes No Old Rate Date of issue of invoice
3 Yes No Yes Old Rate Date of receipt of payment
4 No Yes Yes Old Rate Earliest of the date of invoice
or payment
5 No Yes No New Rate Date of Receipt of payment
6 No No Yes New Rate Date of issue of invoice
Shortcut: Out of supply, invoice and payment if two are before date of change of rate; old rate is
applicable and if two are after date of change new rate is applicable.

INPUT TAX CREDIT

When Credit for ITC can be taken Section 16 (2)

The registered person will be entitled to ITC on supply only if ALL the following four main
conditions are fulfilled.

a) Tax Invoice/Debit Note/Other tax paying documents

b) He has received the goods and/or services
c) The tax charged in respect of such supply has been actually paid to the government
d) He has furnished the return on or before the due date

The following additional conditions also apply:

a) When goods are received in lots, ITC is availed only at the time of receipt of the last lot.
b) The invoice value including the tax has been paid to the supplier within 180 days of the
date of invoice. If payment is not made to the supplier within 180 days from the date of
invoice then the GST tax liability will be added to the output tax liability or ITC will be
reversed in the month in which 180 days is completed. Interest will be paid @ 18% from
the date of availing credit till the date when the payment is made to the supplier.
However the act states that the amount so reversed can be again taken as input credit
when the payment for receipt of goods or services has been actually made to the supplier.

Note: ITC not allowed if depreciation claimed on GST

COMPOSTION LEVY
Section 10(1) states that the eligible person may opt to pay in lieu of the CGST payable by him an
amount calculated at prescribed rate. This is known as Composition levy. After opting for this
scheme he cannot issue taxable invoice under GST law and nor can claim input tax credit on his
purchase.

Eligible Person Section 10(2)

Sec 10(2) specifies the benefit of composition scheme shall not be granted if a taxable person is

a) Engaged in the supply of services (other than restaurant and outdoor catering services)
b) Engaged in making any supply of goods which are not leviable to tax.
c) Engaged in making any inter state outward supplies of goods
d) Engaged in making any supply of goods through ECO who is required to collect tax at
source.
e) A manufacture of the following goods as notified by the Government.
i) Ice cream and other edible ice
ii) Pan Masala
iii) Tobacco and manufactured tobacco substitutes

Who can opt for composition scheme

Aggregate Turnover not exceeding the prescribed limit in the preceding financial year will be
eligible to opt for payment of tax under composition scheme.

Aggregate Turnover means 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, export of goods
or services or both and inter state supplies of persons having same PAN to be computed all India
basis but excludes Central tax, State tax, Union territory tax, Integrated tax and cess.

Limit of Aggregate Turnover

a) NE States : The threshold limit is Rs 75 lacs for Specified Category States

b) Rest of India : The threshold limit is Rs 150 lacs (including Uttarakhand and Jammu and
Kashmir.

Tax Rate

Particulars CGST SGST Total

Manufacture other than manufacture of 0.5% 0.5% 1%
such notified goods
Restaurant services and outdoor catering 2.5% 2.5% 5%
services
The option exercised by a registered person to pay amount under composition levy shall remain
valid as long as the condition is satisfied. The option lapses if turnover exceeds limit.
All register persons having the same PAN have to opt for composition scheme. If one such
registered person opts for normal scheme others becomes ineligible for composition scheme.

NATURE AND PLACE OF SUPPLY

Intra State Supply : Intra state supply are supply of goods or services within the state or UT.

Inter State Supply : The following supplies shall be the Inter State Supplies

a) Supply of goods from one state or UT to other state of UT

b) Supply of services from one state or UT to other state of UT
c) Import of goods till they clear customs frontier
d) Import of services
e) Export of goods or services
f) Supply of goods/services to/by SEZ.
g) Supply to international tourists

PLACE OF SUPPLY

GST is destination/consumption based levy. Place of supply provisions have been framed for
goods and services keeping in mind the destination/consumption principle. Separate provisions
for supply of goods and services have been made for determination of their place of supply.

Place of supply for Goods

Place of supply is based on the place of consumption of goods and services. As goods are tangible
the determination of their place of supply based on the consumption principle is not difficult.
Generally the place of delivery of goods becomes place of supply.

Place of supply for services

In respect of certain categories of services the place of supply is determined with reference to
location of supplier or receiver, place where services is performed or consumed.

Situations under Place of Supply

a) Supply involving movement of goods: Where supply involves movement of goods then
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) Goods delivered by supplier to recipient on direction of a third person whether acting as
an agent or otherwise by way of transfer of documents of title of the goods it shall be
deemed that the said third person has receive the goods and the place of supply of such
goods shall be the principal place of business of such person.
c) Where supply not involving movement of goods: Where supply doesn’t involve
movement of goods the place of supply shall be the location of such goods at the time of
the delivery to the recipient.
 d) Where the goods are assembled or installed at site, then the place of supply shall be the
place of such installation or assembly.
e) Goods supply on board a conveyance: Where the goods are supplied on board a
conveyance including a vessel, aircraft, a train or a motor vehicle then the place of supply
shall be the location at which such goods are taken on board.

Registration under GST (Section 22,23,24)

Registration is the most fundamental requirement for identification of taxpayers ensuring tax
compliance in the economy. Without registration, a person can neither collect tax from his
customers nor claim any input tax credit of tax paid by him. Registration of any business entity
under the GST Law implies obtaining a unique number (GSTIN) from the concerned tax
authorities for the purpose of collecting tax on outward supplies, on behalf of the government
and to avail input tax credit for the taxes on his inward supplies.

a) Person liable for registration (Sec 22)

b) Person not liable for registration (Sec 23)
c) Compulsory Registration ( Sec 24)

Person liable for registration (Sec 22)

Every person will be liable for registration if

a) The total aggregate turnover excess the threshold limit of Rs 40 lacs/20 lacs/10 lacs.
b) Those who are already registered under earlier law shall be liable to be registered under
GST.
c) In case of transfer of business on account of succession then the transferee is liable to
registered from the date of succession of business.
d) In case of amalgamation/demerger by an order of High Court then the transferee is liable
to registered from the date on which ROC issues incorporation certificate giving effect to
order of High Court.

Aggregate Turnover means the aggregate value of all taxable supplies (excluding the value of
inwards supplies on which tax is payable by a person on reverse charge basis), exempt supplies,
exports of goods or services or both and interstate supplies of persons having the same PAN, to
be computed on all India basis but excludes Central tax, State tax, Union territory tax, Integrated
tax and cess. It also includes supplies made by the taxable person on his own account or on behalf
of all his principals.

If the assessee is exclusively dealing in goods than the limit is Rs 40 lacs. If the assessee is
exclusively dealing in services or dealing in goods and services than the limit is Rs 20 lacs. The
limit of Rs 20 lacs will be reduced to Rs 10 lacs if the person is making taxable supplies from the
Special Category States (SCS) viz States of Assam, Arunachal Pradesh, Himachal Pradesh,
Uttarakhand, Manipur, Mizoram, Sikkim, Meghalaya, Nagaland or Tripura.
Person not liable to registration (Sec 23)

The following persons shall not be liable to registration

a) Person engaged exclusively in supplying goods/services/both not liable to tax

b) Person engaged exclusively in supplying goods/services/ both wholly exempt from tax.
c) Agriculturist to the extent of supply of produce out of cultivation of land
d) Specified category of persons notified by the Government

Compulsory Registration (Sec 24)

The following person shall be liable for compulsory registration.

a) Person making any inter state taxable supply of goods. In case of inter state taxable supply
of service it will fall under Sec 22 for the purpose of aggregate turnover.
b) Casual taxable person making taxable supply
c) Persons who are required to pay tax under reverse charge
d) Non resident taxable persons making taxable supply
e) Persons who make taxable supply of goods or services or both on behalf of other taxable
persons whether as an agent or otherwise
f) Every electronic commerce operator (E.C.O)
g) Every person supplying online information and data base access or retrieval services from
a place outside India to a person in India, other than a registered person

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

Non resident taxable person means any person who occasionally undertakes transactions
involving supply of goods or services or both, whether as principal, agent or in any other
capacity but who has no fixed place of business or residence in India.

The certificate of registration shall be valid for the period specified in the application for
registration or ninety days from the effective date of registration, whichever is earlier for a
casual taxable person or the non resident taxable person. The validity period of ninety days
can be extended by a further period not exceeding ninety days in both the cases.

Who shall apply for registration – Where and When (S 25(1))

Every person who is liable to be registered under Section 22 or section 24 shall apply for
registration in every such state or union territory in which he is so liable within thirty days
from the date on which he becomes liable to registration in such manner and subject to such
conditions as may be prescribed.

A casual taxable person or a non resident taxable person shall apply for registration at least
five days prior to commencement of business.