INTRODUCTION

TO GST
UNDERSTANDING THE BASICS OF GOODS AND SERVICES TAX
WHAT IS GST?

• GST stands for Goods and Services

Tax
• A comprehensive, multi-stage,
destination-based indirect tax
• Levied on the supply of goods and
services
• Implemented in India on 1st July 2017
 DEFINITION OF GST

"GST means any tax on supply of goods, or services or both, except taxes on the supply
of alcoholic liquor for human consumption."
– Article 366 (12A), Indian Constitution

• Unified tax replacing multiple indirect taxes

• Applicable at all stages of the supply chain
PRE-GST TAX SYSTEM

• Multiple taxes by Central and State governments:

• Central: Excise, Service Tax, CST, Customs
• State:VAT, Entry Tax, Octroi, Luxury Tax

• Issues:
• Cascading of taxes (tax on tax)
• Complex compliance
• Lack of uniformity across states
EVOLUTION OF GST IN INDIA

Year Event

2000 GST committee formed under Vajpayee govt

2006 Proposed in Budget by FM P. Chidambaram

2011 Constitutional Amendment Bill introduced

2016 Bill passed; GST Council formed

2017 GST implemented on 1st July 2017

KEY FEATURES OF GST

• Single tax for the entire country

• Based on supply, not manufacture or sale

• Destination-based tax

• Administered by GST Council

• Input Tax Credit (ITC) across the value chain

OBJECTIVES OF GST

• Simplification
• One nation, one tax
• Easy compliance through online portal (GSTN)

• Transparency
• Digital records reduce tax evasion
• System-based return filing and invoicing

• Unified Taxation
• Common national market
• Removes inter-state barriers
BENEFITS OF GST

• Reduced tax burden on consumers

• Boosts ease of doing business

• Encourages formalization of the economy

• Brings more businesses into the tax net

 SUMMARY TABLE

Feature Description
Full Form Goods and Services Tax
Effective From 1st July 2017
Levied On Supply of goods and services
Replaced VAT, Service Tax, Excise, etc.
Type Indirect, Destination-based
Governing Body GST Council
CONCLUSION

• GST is a milestone reform in India's tax structure

• Promotes efficiency, transparency, and uniformity
• Benefits the government, businesses, and consumers
IMPORTANT TERMS IN GST

• Taxable Person: A 'Taxable Person' refers to any individual,

company, partnership, or other legal entity that is registered
under GST and is required to collect and remit GST on taxable
transactions.
Who qualifies as a Taxable Person?
• Any business or individual: If you are carrying out business
activities involving taxable goods or services.
• Registered under GST: A person or business that has
voluntarily or mandatorily registered under the GST Act.
Criteria for Registration:
• Turnover Threshold: If a business exceeds the prescribed
annual turnover limit (which varies by country or state), it must
register for GST.
• Example: In India, the threshold for GST registration is ₹40 lakhs for
most businesses (₹20 lakhs for service providers).
• Nature of Business: Businesses engaged in the sale of goods, provision of services, or
both may qualify.

• Casual Taxable Person: Even if a person does not have a fixed place of business, they
may still need to pay GST if their activities are taxable.

• Non-resident Taxable Person: Foreigners or entities without a fixed place of business

in the country but carrying out taxable supply may also be classified as taxable persons.
• Taxable Event: A 'Taxable Event' is an event or occurrence that triggers the imposition
of GST on a supply of goods or services. GST is levied only when a taxable event
happens.
• Sale of Goods: A taxable event occurs when goods are sold, transferred, or exchanged.
Example: Selling raw materials to a manufacturer.
• Supply of Services: The supply of services, whether taxable or exempt, also qualifies as
a taxable event. Example: Consulting services provided to a client.
• Import of Goods or Services:
• Import of goods from another country or services from abroad triggers GST liability.
• Example: Importing goods from the USA or hiring foreign consultants.
• Export of Goods or Services: Exports are typically zero-rated (i.e., no GST is
charged), but they still constitute a taxable event. Example: Exporting textiles to another
country.
• Inter-state Supply of Goods or Services: When goods or services are supplied
between two different states, it is considered a taxable event and is subject to Integrated
GST (IGST). Example: A sale of products from Mumbai (Maharashtra) to Bengaluru
(Karnataka).
• Leasing and Renting: Leasing or renting goods or property is considered a taxable
event, subject to GST. Example: Renting office space to a tenant.
TAXABLE SUPPLY

• Definition: 'Taxable Supply' refers to any supply of goods or

services that is subject to GST. In simple terms, any transaction that
involves the exchange of goods or services that is liable to GST.
• This is the core concept around which GST is applied, as tax is
levied on the supply.
Components of Taxable Supply:
• Goods Sold: Any goods exchanged for money, bartered, or
transferred, including: Raw materials, finished goods,
consumables, and capital goods. Example: Selling a mobile
phone, clothing, or machinery.
• Services Provided: Any activity performed for a fee that
qualifies as a taxable service under GST law. Example: Providing
professional services such as legal, accounting, or consulting
services.
• Import of Goods or Services: Goods or services brought
into the country from outside or procured from foreign
suppliers. Example: Importing machinery from China or
subscribing to software services from the USA.
• Inter-state Supply: Movement of goods or services between different states, which
attracts Integrated GST (IGST).Example: A business in Delhi selling products to a
business in Chennai.
• Related Supplies: Activities like job work, reverse charge mechanism, and others that
are considered taxable supplies. Example: A manufacturer outsourcing part of its
production to a third party under the job work arrangement.
What is Not a Taxable Supply?
• Exempt Supplies: Some goods and services are exempted from GST.
Examples: Educational services, healthcare services, agricultural products.
• Non-Taxable Supplies: Certain activities that don’t fall under GST, such
as: Sale of used goods under specific conditions. Personal transactions not
related to business activities.
Taxable Supply vs. Non-Taxable Supply:
• Not all supplies are taxable under GST. It’s important to assess the nature
of each supply to determine if GST should be charged.
• Exempt goods/services may still be subject to other indirect taxes or have
a reverse charge mechanism.
CLASSIFICATION OF GST & CATEGORIES OF
GST RATES
TYPES OF GST

• India follows a Dual GST model

• Levied by both Central and State Governments

• Three main types:

1. CGST – Central Goods and Services Tax
2. SGST/UTGST – State/Union Territory GST
3. IGST – Integrated Goods and Services Tax
CGST – Central Goods and Services Tax
• Levied by: Central Government
• Applicable on: Intra-state transactions
• Revenue goes to: Central Government
• Charged alongside SGST/UTGST
SGST – State Goods and Services Tax
• Levied by: State Government
• Applies to: Intra-state supply
• Revenue goes to: State Government
UTGST – Union Territory GST
• Applicable in Union Territories (e.g., Chandigarh)
• Revenue goes to: UT Government
IGST – Integrated Goods and Services Tax
• Levied by: Central Government
• Applicable on:
• Inter-state transactions
• Imports & exports
• Revenue is shared between:
• Central and destination state governments
• Example: Sale from Gujarat to Maharashtra → 18% IGST
Categories of GST Rates
• Goods and services are categorized under different tax slabs
• Rates are decided by the GST Council
• Five primary GST rate slabs:
• 0%, 5%, 12%, 18%, 28%
GST Rate Category Examples
0% Essential goods/services Fresh vegetables, milk, education
5% Common-use items Packaged food, footwear under ₹1,000
12% Standard goods/services Mobile phones, processed food
18% Most goods & standard services ACs, Soaps, restaurant services
28% Luxury & demerit goods Cars, tobacco, aerated drinks
• Cess:
• Levied on luxury and sin goods
• Example: Cigarettes, luxury cars

• Reverse Charge Mechanism (RCM):

• GST paid by recipient instead of supplier in specific cases

• Input Tax Credit (ITC):

• Allows businesses to claim credit for tax paid on inputs
CONCEPT OF INPUT TAX CREDIT (ITC)

Definition of ITC
• Input Tax Credit (ITC) refers to the mechanism under the Goods and Services Tax
(GST) that allows taxpayers to claim a credit for the tax paid on inputs (goods or
services) used in the course or furtherance of business.
• In simple terms, ITC means reducing the taxes paid on inputs from taxes payable on
output.
• Formula:
Tax on Output – Tax on Input = Net Tax Liability.
SIGNIFICANCE OF ITC IN GST

• Avoids cascading effect (tax on tax) by allowing credit on previous

taxes paid.
• Ensures seamless flow of credit across the supply chain.
• Reduces the cost of goods and services, making them more
competitive.
• Promotes compliance by requiring proper invoicing and filing of returns.
ELIGIBILITY FOR CLAIMING ITC: CONDITIONS
AND REQUIREMENTS

To avail ITC, a registered taxpayer must fulfill the following conditions (as per Section 16 of
CGST Act):
• Must be a registered person under GST.
• Must possess a valid tax invoice, debit note, or other prescribed document.
• Goods or services must have been received by the taxpayer.
• The supplier must have paid tax to the government and filed GSTR-1.
• Taxpayer must have furnished GST return (GSTR-3B).
• ITC must be claimed within the time limit:
• Earlier of:
• Due date of September return of the following financial year, or
• Filing of annual return.

• Payment to supplier must be made within 180 days from the date of invoice.
HOW ITC WORK
RESTRICTIONS ON ITC: GOODS AND SERVICES
ON WHICH ITC IS NOT AVAILABLE
CLAIMING ITC: PROCESS AND DOCUMENTS
REQUIRED
Process:
• Ensure supplier has uploaded invoice details in GSTR-1.
• Check ITC availability in GSTR-2B.
• Claim ITC in GSTR-3B return under the respective head (CGST, SGST, IGST).
• Maintain proper reconciliation of books with GSTR-2B.
• Documents Required for claim of ITC:
• Tax invoice or debit note.
• Bill of entry (for imports).
• Invoice issued under reverse charge mechanism.
• ISD (Input Service Distributor) invoice.
• Receipt voucher for advance payment.
MEANING AND SCOPE OF SUPPLY

• Definition of Supply (Section 7 of • License

CGST Act, 2017) : Supply includes all
• Rental
forms of supply of goods or services
such as: • Lease

• Sale • Disposal

• Transfer
• Barter
• Exchange
• Also includes:
• Import of services for a consideration whether or not in the course of business.
• Activities specified in Schedule I even without consideration.
Scope of Supply:
• Taxable Supply: Supply liable to tax under GST.
• Exempt Supply: Supply attracting 0% tax or fully exempt.
• Non-taxable Supply: Not covered under GST (e.g., alcohol for human consumption).
Inclusions under Supply
• Goods: Every kind of movable property (excluding money and securities).
• Services: Anything other than goods, money, and securities.
• Composite Supply:
• A natural bundle of goods/services supplied together.
• One is principal supply.
• Taxed at the rate of principal supply.
• Example: AC with installation service – taxed as service.
• Mixed Supply:
• A combination of two or more individual supplies.
• Not naturally bundled.
• Taxed at the highest rate applicable.
• Example: Diwali gift box with chocolates, dry fruits, and perfume.
Exclusions from Supply
• Activities specified in Schedule III (not considered as supply):
• Services by employee to employer in relation to employment.
• Functions of MPs, MLAs, etc.
• Services by courts or tribunals.
• Sale of land
Place of Supply under GST
• What is Place of Supply? It determines whether a
transaction is:
• Intra-state → CGST + SGST apply.
• Inter-state → IGST applies.
• It’s a key element in deciding the tax jurisdiction under GST.
Importance of Place of Supply
• Ensures the correct allocation of revenue between center and states.
• Helps determine tax liability (CGST/SGST or IGST).
PLACE OF SUPPLY FOR GOODS

Scenario Place of Supply

Movement of goods Location where movement ends for delivery

No movement Location of goods at the time of delivery

Goods on board (e.g., train,
Location at which goods are taken on board
ship)
Imports Location of the importer

Exports Location outside India

PLACE OF SUPPLY FOR SERVICES

When both supplier and recipient are in India:

• Registered recipient: Location of such person.
• Unregistered recipient:
• Address available → that address.
• No address → location of supplier.

When either party is outside India:

• Governed by Section 13 of IGST Act.
• Generally, place of supply = location of recipient.
• If recipient is not available, then location of supplier.
Type of Supply Place of Supply Tax Type

Import of goods Location of importer IGST

Import of services Location of recipient in India IGST

Export of goods Location outside India Zero-rated

Recipient outside India, payment in foreign

Export of services Zero-rated
currency, supplier in India

Inter-state supply Supplier & recipient in different states IGST

Intra-state supply Supplier & recipient in same state CGST + SGST

Topic Key Points
Supply Sale, barter, exchange, etc. for consideration in business
Goods Movable property (excl. money/securities)
Services Anything other than goods
Composite
Naturally bundled; taxed as principal supply
Supply
Mixed Supply Not naturally bundled; taxed at highest rate
Place of Supply Determines CGST/SGST or IGST
Imports IGST applies
Exports Zero-rated
Intra-state CGST + SGST
Inter-state IGST
ASSESSABLE VALUE
ASSESSABLE VALUE UNDER GST

• The assessable value of the price shall always be the Transaction Value (i.e., the price
agreed for the supply) provided the following 2 conditions should be satisfied:
• a. Both the supplier and recipient are not related; and

• b. Price is the sole consideration

Note: 'Price is the sole consideration' means the supplier for the supply shall receive entire consideration only
by way of the price charged by him and shall not receive any other benefit or facilities from the receiver.e
INCLUSIONS TO THE TAXABLE VALUE - SEC.
15(2)
• The taxable value of supply shall include the following:
(a) any taxes, duties, cess, fees and charges levied under any law for the time being in
force other than this Act (i.e, CGST Act), the SGST Act, the UTGST Act and the GST
(Compensation to States) Act, if charged separately by the supplier;
(b) any amount that the supplier is under contractual liability to pay in relation
to such supply but which has been incurred by the recipient of the supply and
not included in the price actually paid or payable for the goods or services or both;
(c) Incidental expenses, including commission, packing, inspection/certification
charges, installation/ testing charges, loading, weighment and designing charges
charged by the supplier to the recipient of a supply and any amount charged for anything
done by the supplier in respect of the supply of goods or services or both at the time of, or
before delivery of goods or supply of Services. In case of a composite supply, outward
freight, transit insurance will also form part of value of supply
(d) interest or late fee or penalty for delayed payment of any consideration for any supply;
and

(e) subsidies directly linked to the price excluding subsidies provided by the Central
Government and State Governments.

It may be noted that the amount of subsidy shall be included in the value of supply of the
supplier who receives the subsidy.
`

Exclusions to the taxable value - Sec. 15(3)

• The taxable value of supply shall exclude any discount which is given:
(a) before or at the time of the supply if such discount has been duly recorded in the invoice
issued in respect of such supply; and
(b) after the supply has been effected, if
(i) such discount is established in terms of an agreement entered into at or before the time of
such supply and specifically linked to relevant invoices; and
(ii) input tax credit as is attributable to the discount on the basis of document issued by the
supplier has been reversed by the recipient of the supply.
• A Limited from Agra has supplied goods of premium quality to B Limited
of Bangalore on 25/10/2023. You are required to compute the taxable
value as per Sec. 15 based on the information given below:
Particulars Amount
Cost of goods supplied 2,50,000
Entry taxes and toll (Charged separately) 5,000
Packaging and Administration charges (Not charged 3,000
separately)
Amount payable by the supplier under a contractual obligation 50,000
for urgent delivery of goods under special circumstances.
Subsidies (Rs. 20,000 being linked to the price) 1,00,000
Discount:
a) It has been provided in the invoice raised on 13/10/2023 5,000
b) b) It has been provided for on 05/11/2023 and is also not 10,000
established in the terms of agreement.
 • Computation of taxable value of supply of A Ltd.
Particulars Amount
Taxable value 2,50,000
Inclusions:
a) Entry tax & toll 5,000
b) Amount paid by supplier (for urgent delivery of goods ) 50,000
c) Subsidies 20,000 3,25,000

Exclusions:
a) Discount (5,000)
Total Taxable Value 3,20,000
 • XYZ Pvt. Ltd. Provided the following particulars relating to goods sold by it to ABC Pvt.
Ltd.
Particulars Amount (Rs.)
List Price of the goods (exclusive of taxes and discount) 50,000
Tax levied by the Municipal Authority on the sale of such goods 6,000
Packing charges (not included in the list price above) 2,500
Subsidy received from an NGO, Directly linked to price (included in the list 3,000
price above)
Paid to one of vendors by ABC Pvt. Ltd. In relation to the service provided by 2,000
vendor to XYZ Pvt. Ltd. ( not included in the list price above)
 COMPUTATION OF VALUE OF TAXABLE SUPPLY
MADE BY XYZ PVT. LTD.
Particulars Amount (Rs.)
List Price (Given) 50,000
Tax levied by the Municipal Authority 6,000
Packing Charges 2,500
Subsidy received from NGO directly linked to price Nil
Payment made to vendor of XYZ Ltd. 2,000
Taxable Value of Supply 60,500
GST RETURNS FILING

• Form GSTR-1 is a monthly Statement of Outward Supplies to be furnished by all normal

and casual registered taxpayers making outward supplies of goods and services or both
and contains details of outward supplies of goods and services.
• Form GSTR-1 needs to be filed even if there is no business activity (Nil Return) in the
tax period.
• Form GSTR-1 can be prepared using the following modes through:
1. Online entry on the GST Portal.
2. Uploading of invoice and other Form GSTR-1 data using Returns Offline Tool.
3. Using third party application of Application Software Provider (ASPs) through GST Suvidha
Providers (GSPs).
GSTR 2A

• GSTR-2A is a purchase-related dynamic tax return that is automatically generated for

each business by the GST portal.
• When a seller files his GSTR-1, the information is captured in GSTR 2A. It takes the
information of goods and/or services that have been purchased in a given month from
the seller’s GSTR-1.
• As a GST registered buyer, you may refer to the GSTR-2A for input tax credit details
while filing GSTR-3B and GSTR-9. However, since August 2020, for GSTR-3B preparation,
taxpayers must refer to GSTR-2B which is a static version of GSTR-2A.
GSTR2B

• GSTR-2B provides eligible and ineligible Input Tax Credit (ITC) for each month, similar
to GSTR-2A but remains constant or unchanged for a period.
• whenever a GSTR-2B for a month is accessed on the GST portal, the data in it remains the
same without being changed for subsequent changes by their suppliers in later months.
• GSTR-2B is available to all normal, SEZ and casual taxpayers. Every recipient can generate it
on the basis of the GSTR-1, GSTR-5 and GSTR-6 furnished by their suppliers.
• The statement will clearly show document-wise details of ITC eligibility. ITC information will
be covered from the filing date of GSTR-1 for the preceding month (M-1) up to the filing date
of GSTR-1 for the current month (M).
GSTR3B

• Form GSTR-3B is a simplified summary return and the purpose of the return is for taxpayers
to declare their summary GST liabilities for a particular tax period and discharge these
liabilities.A normal taxpayer is required to file Form GSTR-3B returns for every tax period.
• All normal taxpayers and casual taxpayers are required to file Form GSTR-3B.
• For monthly filers, due date for filing of Form GSTR-3B is 20th day of the month following the
month (tax period) for which the return pertains .
• For quarterly filers, due date for filing of Form GSTR-3B, as notified for different States/UTs, is
22nd and 24th day of the month following the quarter for which the return pertains.
• However, due date for filing of Form GSTR-3B can be extended by Government through
notification.
 DUE DATES FOR RETURN FILING
Return Type Applicability Frequency General Due Date (FY 2025-
26)
Monthly: 11th of next month /
GSTR-1 Details of outward supplies Monthly / Quarterly (QRMP) Quarterly: 13th of the month
following the quarter
Monthly: 20th of next month /
Summary of outward supplies &
GSTR-3B Monthly / Quarterly (QRMP) Quarterly: 22nd or 24th of month
ITC, tax payment
following quarter
18th of the month succeeding the
CMP-08 Composition scheme taxpayers Quarterly
quarter
Annual return for regular 31st December following the end
Annually
GSTR-9 taxpayers of the financial year
Annual reconciliation and audit for 31st December following the end
GSTR-9C Annually
turnover Above ₹5 crore of the financial year
Final return upon Within 3 months from the date of
GSTR-10 cancellation/surrender of GST Once (one-time) cancellation or date of cancellation
registration order, whichever is later
COMMON OFFENCES UNDER GST AND THEIR
PENALTIES
Type of offence Amount of penalty

Penalty for delay in filing The late fee is Rs. 50 per day per Act. So it is 25 under CGST & 25 under SGST. Total will be
GSTR Rs. 50/day. The maximum is Rs. 5,[Link] is no late fee on IGST.

Penalty for not filing GSTR Penalty 10% of the tax due or Rs. 10,000 – whichever is higher

Penalty for committing a Penalty 100% of the tax due or Rs. 10,000 – whichever is higher (High-value fraud cases also
fraud have jail term)

Penalty for helping a person

Penalty extending up to Rs. 25,000
to commit fraud

Penalty for opting for Demand & recovery provisions of sections 73 & 74 will apply.
composition scheme even (i) Fraud case- Penalty 100% of the tax due or Rs. 10,000 – whichever is higher
though he is not eligible (ii) Non-fraud case - Penalty 10% of the tax due or Rs. 10,000 – whichever is higher
Penalty for wrongfully
Penalty 100% of the tax due or Rs. 10,000 -whichever is higher (if
charging GST rate—
the additional GST collected is not submitted with the govt)
charging a higher rate

Penalty for not issuing an

Penalty 100% of the tax due or Rs. 10,000 – whichever is higher
invoice

Penalty for not registering

Penalty 100% of the tax due or Rs. 10,000 – whichever is higher
under GST

Penalty for incorrect

A penalty of Rs. 25,000
invoicing
SITUATIONS WHERE INTEREST MAY APPLY

Type of offence Action

Penalty for incorrect type of

No penalty. Pay the correct GST and get a refund of the wrong type of
GST charged (IGST instead
of CGST/SGST) GST paid earlier

Penalty for incorrect filing of

GST return
No penalty. But interest @18% on shortfall amount

Penalty for delay in payment

of invoice.
ITC will be reversed if not paid within 6 months. No penalty as such

Penalty for wrongfully

charging GST rate— Interest @18% applicable on the shortfall
charging a lower rate