Module 07

The Central Goods and

Services Tax Act, 2017 - II:
Adv. Mahesh Tak
Section 12 Time of Supply of Goods under of the CGST Act, 2017

• Section 12 of the Central Goods and Services Tax (CGST) Act, 2017 provides the rules for

determining the time of supply for goods, which refers to the point when the liability to

pay tax arises.

• This section is essential to ensure that the correct time is identified for calculating and

paying GST on the supply of goods.

Basic Rule for Time of Supply (Sub-sections 1 & 2)

• According to Section 12(1), the liability to pay tax on goods arises at the time of supply, as

determined under this section. The primary rule to determine the time of supply for goods

is explained under Section 12(2), which states that the time of supply shall be the earlier of

the following two dates:

Date of Issue of Invoice or Last Date of Issue (Section 12(2)(a)):

• The time of supply will be the date on which the supplier issues the invoice.

• If the supplier fails to issue the invoice by the prescribed time (as required under Section

31), the time of supply will be the last date by which the invoice was required to be issued.
Date of Receipt of Payment (Section 12(2)(b)):

• The time of supply can also be the date on which the supplier receives the payment for the

goods.

• Explanation: "Receipt of payment" is defined as either the date on which the payment is entered

in the supplier’s books of account or the date on which the payment is credited to the supplier’s

bank account, whichever is earlier.

• Example: If goods are supplied on 10th September and the supplier issues the invoice on 12th

September but receives the payment on 9th September, the time of supply will be 9th September

(the earlier date).

Time of Supply for Reverse Charge (Sub-section 3)

• For supplies on which the recipient is liable to pay tax under reverse charge

(Section 9(3)), the time of supply is the earliest of the following dates:
A. Date of Receipt of Goods (Section 12(3)(a)): The time of supply can be the date on

which the recipient receives the goods.

B. Date of Payment (Section 12(3)(b)): It can also be the date on which the payment is

recorded in the recipient’s books of account or the date on which the payment is

debited from the recipient's bank account, whichever is earlier.

30 Days from the Date of Invoice (Section 12(3)(c)):

• If neither the date of receipt of goods nor the date of payment is available, the time of supply will be 30 days

from the date of issue of the invoice by the supplier.

Fallback Option (Section 12(3) Proviso):

• If it is not possible to determine the time of supply based on the above three options, the time of supply will be

the date of entry in the books of account of the recipient.

• Example: If goods are received by the recipient on 10th September, the payment is made on 15th September,

and the invoice was issued on 1st September, the time of supply will be 10th September (earliest of the dates).
Time of Supply for Vouchers (Sub-section 4)

• For supplies involving vouchers, the time of supply is determined based on the circumstances:

A. Date of Issue of Voucher (Section 12(4)(a)): If the supply is identifiable at the time of

issuing the voucher, the time of supply will be the date of issue of the voucher.

B. Date of Redemption of Voucher (Section 12(4)(b)): In all other cases (where the supply is

not identifiable at the time of issuing the voucher), the time of supply will be the date of

redemption of the voucher.

• Example: If a gift voucher is issued on 1st September and is redeemed on 10th September, and

the supply is not identifiable at the time of issue, the time of supply will be 10th September.
Fallback Provisions for Time of Supply (Sub-section 5)

• Where it is not possible to determine the time of supply under Section 12(2), 12(3), or 12(4), the
following fallback provisions apply:

A. For Periodical Returns (Section 12(5)(a)): If a periodical return is required to be filed, the
time of supply will be the date on which such return is filed.

B. In Other Cases (Section 12(5)(b)): In all other cases, the time of supply will be the date on
which the tax is paid.
Time of Supply for Interest, Late Fee, or Penalty (Sub-section 6)

• Any addition to the value of supply by way of interest, late fee, or penalty for delayed payment

of consideration will have its own time of supply. The time of supply for these additions will be

the date on which the supplier receives such additional value.

• Example: If a buyer delays payment and the supplier charges interest on the overdue amount, the

time of supply for the interest will be the date on which the interest is received.
Section 13 – Time of Supply of Services

(1) General Principle

• The liability to pay GST on services arises at the time of supply as determined
under this section. This ensures the Government gets tax at the correct time and
avoids deferment of liability.
(2) Forward Charge – Normal Services

• The time of supply is the earliest of:

a) Date of invoice (if issued within the prescribed time under Section 31) OR date of
payment, whichever is earlier;

b) If invoice is not issued within prescribed time, then date of provision of service OR date
of payment, whichever is earlier;

c) If neither applies → date on which the recipient records the service in books of account.
Example 1: Invoice issued on time

• Service provided: 10th April 2025

• Invoice issued: 20 April 2025 (within 30-day limit)

• Payment received: 25th May 2025

Time of supply = 20th April 2025 (earlier of invoice or payment).

Example 2: Invoice not issued on time

• Service provided: 10th April 2025

• Invoice issued: 20th May 2025 (beyond 30 days)

• Payment received: 15th May 2025

Time of supply = 10th April 2025 (earlier of service date or payment date).

Example 3: Books of recipient If neither invoice nor payment dates are traceable properly → time of supply = date when

recipient records service in his books.

(3) Reverse Charge Services

• For services covered under Reverse Charge Mechanism (RCM):Time of supply = earliest of:

a) Date of payment (entry in books or debit in bank, whichever is earlier);

b) 60 days from the date of supplier’s invoice;

c) In some cases, date of invoice issued by recipient (e.g., import of services).

• If not determinable → date of entry in recipient’s books.

Example 4: Reverse charge on legal services

• Invoice issued by advocate: 1st April 2025

• Payment entered in books: 20th May 2025

• Payment actually made: 25th May 2025

• Time of supply = 20th May 2025 (earlier of entry in books / debit).

Example 5: Payment not made within 60 days

• Invoice: 1st April 2025

• Payment not made till 10th June 2025

• Time of supply = 31st May 2025 (60 days from invoice date).
(4) Supply of Vouchers

• If voucher identifies the supply → time of supply = date of issue of voucher.

• If not identifiable → time of supply = date of redemption.

Example 6: Spa voucher

• Voucher issued for a “hair spa service” → identifiable → date of voucher issue is time of supply.

• Voucher issued for “₹2,000 services” (not specific) → date of redemption is time of supply.

(5) Residual Rule

• If not determinable under (2), (3), or (4):

• If periodic return is required → date return is to be filed.

• [Link] → date on which tax is actually paid.

(6) Interest, Late Fee, Penalty

• For additions in value due to interest, late fee, or penalty for delayed payment → time of supply
= date when supplier actually receives such payment.

Example 7: Late fee

• Original invoice: 1st April 2025

• Payment delayed → penalty ₹2,000 received on 10th June 2025

• Time of supply for penalty = 10th June 2025 (separate liability).

Situation Time of Supply (Services)

Forward charge (invoice issued in time) Earlier of invoice date or payment date

Invoice not issued in time Earlier of service date or payment date

If not determinable Date of entry in recipient’s books

Earliest of payment, 60 days from invoice, or invoice

Reverse charge
by recipient

Vouchers (specific) Date of issue

Vouchers (general) Date of redemption

Late fee/interest/penalty Date of receipt of such amount

Section 14 – Change in Rate of Tax

• This section applies notwithstanding Section 12 (goods) and Section 13 (services).

• It specifically deals with situations where tax rates change between supply, invoice, and payment

dates.

Rule

• The time of supply (i.e., when GST is payable) depends on:

1. Date of supply of goods/services

2. Date of invoice

3. Date of payment

• If these events happen before and after the rate change, Section 14 tells us which rate applies.
Two Broad Scenarios

(A) Supply made before the change in rate

1. Invoice + Payment after change → Time of supply = Earlier of invoice/payment date (i.e., new rate applies).

2. Invoice before change + Payment after change → Time of supply = Invoice date (old rate applies).

3. Payment before change + Invoice after change → Time of supply = Payment date (old rate applies).

Example 1 (Supply before change):

• GST rate increases from 12% → 18% on 01.04.2025.

• Goods supplied on 28.03.2025.

• Invoice issued 05.04.2025, Payment received 06.04.2025.

• Supply before change, invoice + payment after change → Time of supply = 05.04.2025 (invoice date).

Rate = 18% (new rate).

Example 2 (Supply before change):
• Goods supplied on 30.03.2025.

• Invoice issued 29.03.2025, Payment received 05.04.2025.

• Supply before change, invoice before change, payment after change →

• Time of supply = 29.03.2025.

• Rate = 12% (old rate).

(B) Supply made after the change in rate

1. Payment after change + Invoice before change → Time of supply = Payment date (new rate applies).

2. Invoice + Payment both before change → Time of supply = Earlier of invoice/payment (old rate applies).

3. Invoice after change + Payment before change → Time of supply = Invoice date (new rate applies).

Example 3 (Supply after change):

• Goods supplied on 05.04.2025 (after change).

• Invoice issued 28.03.2025, Payment received 06.04.2025.

• Supply after change, invoice before change, payment after change → Time of supply = 06.04.2025
(payment date).

• Rate = 18% (new rate).

Special Rule for Payment Date

• If payment is credited to supplier’s bank account after 4 working days from the date of rate
change → the credit date is considered as the “date of receipt of payment.”

• Otherwise → entry date in supplier’s books OR bank credit date, whichever is earlier.

Example 4 (Special payment rule):

• Rate changes on 01.04.2025.

• Payment credited to supplier’s bank on 08.04.2025 (7 days later).

• Even if books showed earlier entry, bank credit date (08.04.2025) is considered.
Section 15 Value of Taxable Supply

• Section 15 of the Central Goods and Services Tax (CGST) Act, 2017 lays down the
principles for determining the value of taxable supply of goods or services or both.

• The value of a supply is important because GST is levied on this value.

• The section explains how to compute the taxable value and what inclusions and
exclusions are considered while determining this value.
Transaction Value (Section 15(1))

• The primary method for determining the value of a supply is the transaction
value, which is defined as:

• The price actually paid or payable for the supply of goods or services, where:

• The transaction value is the amount paid between two parties under normal
market conditions where no additional factors (such as family relations, or control
by third parties) influence the price.
Inclusions in the Value of Supply (Section 15(2))

• The value of supply shall include the following additional elements:

Taxes, Duties, and Cesses (Section 15(2)(a)):

• Any taxes, duties, fees, or charges levied under laws other than:

• The CGST Act, SGST Act, UTGST Act, and

Expenses Incurred by the Recipient (Section 15(2)(b)):

• Any amount that the supplier is liable to pay but has been incurred by the recipient of the
supply and not included in the price paid or payable must be added to the value of supply.

Incidental Expenses (Section 15(2)(c)):

• This includes any incidental expenses, such as commission, packing charges, or other charges
related to the supply of goods or services incurred before or at the time of delivery or supply.

Interest, Late Fee, or Penalty (Section 15(2)(d)):

• If there is any interest, late fee, or penalty charged for delayed payment of consideration, it
will also be included in the value of the supply.
Subsidies (Section 15(2)(e)):

• Subsidies directly linked to the price of the supply, except those provided by the
Central or State Governments, are also included in the value of supply.

• Explanation: Any subsidies received by the supplier (other than government

subsidies) will be considered part of the supply value.
Exclusions from the Value of Supply (Section 15(3))

• Certain discounts can be excluded from the value of supply under the following conditions:

Discounts Given Before or at the Time of Supply (Section 15(3)(a)):

• If the discount is provided before or at the time of the supply, it must be duly recorded in the
invoice to be excluded from the value of the supply.

Discounts Given After Supply (Section 15(3)(b)):

• Discounts given after the supply can be excluded if:

• The discount is in accordance with an agreement entered into at or before the time of

supply, and

• The discount is specifically linked to relevant invoices.

Cases where Value cannot be determined (Sec. 15(4))

• If transaction value cannot be applied (e.g., related party transactions, non-

monetary consideration), valuation will be done as per Valuation Rules (like open
market value, cost plus, etc.).
Special Valuation for Notified Supplies (Section 15(5))

• The government may, on the recommendation of the GST Council, notify certain types of
supplies for which the value will be determined in a manner prescribed under separate rules.

• This ensures that some special supplies, which may not fit into the general valuation
framework, are valued correctly.

• Example: Foreign currency exchange, air travel agent services, life insurance, second-hand
goods – all have special valuation rules.
Explanation – Related Persons

• Two persons are deemed “related” if:

• They are directors/officers of each other’s businesses.

• Partners, employer-employee.

• One holds ≥ 25% of voting power in the other.

• One controls the other directly/indirectly.

• Both are controlled by a third person.

• Together control a third person.

• Members of same family.

• Sole agent, distributor, or concessionaire of the other.

• If they are related, transaction value is not accepted; Valuation Rules apply instead.
 Input Tax Credit (ITC)

• Input Tax Credit (ITC) means the credit of GST paid on purchases (inputs, input services, and
capital goods) which can be used to pay GST on sales (output tax liability).

• GST paid on purchases (input tax) can be adjusted against GST payable on sales.

• ITC avoids "tax on tax" and ensures GST works as a value-added tax.
Section 16(1): Entitlement of ITC

• Every registered person is entitled to take ITC of GST paid on goods or services received, provided
they are used in the course or furtherance of business.

• The ITC amount is credited to the Electronic Credit Ledger.

• Example: A trader buys goods worth ₹1,00,000 + 18% GST (₹18,000).

• He sells them for ₹1,50,000 + 18% GST (₹27,000).

• Output GST = ₹27,000

• Input GST = ₹18,000 (credit available)

• Net GST payable = ₹27,000 – ₹18,000 = ₹9,000

Section 16(2): Conditions for availing ITC

• Possession of Tax Invoice/Debit Note: You must have a valid tax invoice from a registered supplier.

• Example: If you buy goods without a proper GST invoice, ITC is not available.

• Receipt of Goods/Services: ITC can only be taken if goods/services are actually received.

• Example: If goods are delivered to your warehouse on your direction, it is considered as received.

• Tax paid to the Government

• Supplier must have paid the GST to the government (either in cash or through ITC).

• If supplier defaults, ITC may be blocked.

• Return filed under Section 39: You must file GSTR-3B return to claim ITC.
Section 16(3): ITC not allowed with Depreciation

• If depreciation is claimed on GST component of capital goods under Income Tax Act, ITC cannot
be claimed on that portion.

• Example: A machine worth ₹10,00,000 + GST ₹1,80,000.

• If depreciation is claimed on ₹11,80,000 (including GST), then ITC of ₹1,80,000 cannot be

claimed.
• If depreciation is only on ₹10,00,000 (excluding GST), then ITC of ₹1,80,000 is available.
Section 16(4): Time Limit for Claiming ITC
• ITC must be claimed before the earlier of:

• 30 November of the following financial year, OR

• Filing of annual return.

Section 22 – Persons Liable for Registration

• Section 22 of the CGST Act deals with who must take GST registration. It is one of the most important

compliance provisions, because without registration, a person cannot collect GST or claim input tax credit.

General Rule – Turnover Threshold

• Any supplier is required to register under GST in the State/UT from where he makes taxable supply, if his

aggregate turnover in a financial year exceeds:

• ₹20 lakh → Normal States/UTs.

• ₹10 lakh → Special Category States.

• This ensures small businesses below the threshold are exempt from GST compliance.
Enhanced Thresholds – Relaxations

• The law gives flexibility to the Government (on GST Council recommendation) to enhance limits:

• For Special Category States → The threshold of ₹10 lakh can be increased up to ₹20 lakh.

• For suppliers exclusively engaged in supply of goods → The threshold of ₹20 lakh can be

increased up to ₹40 lakh (if notified by Govt., subject to conditions).

• Explanation: Even if a person is engaged in exempt supply of services like interest/discount on

loans/deposits, he will still be considered engaged exclusively in supply of goods.

Migration from Old Law (Sub-section 2)

• Any person who was already registered or held a license under the old tax laws (VAT, Excise, Service Tax, etc.)

immediately before GST came into force must be registered under GST from the appointed day (1 July 2017).

Succession/Transfer of Business (Sub-section 3)

• If a registered business is transferred (by sale, succession, etc.) as a going concern, the transferee or

successor is liable to register from the date of transfer/succession.

Amalgamation/Demerger (Sub-section 4)

• If two or more companies are amalgamated or demerged by order of a High Court/Tribunal, the transferee

company must be registered from the date of issue of the incorporation certificate by the Registrar of

Companies (ROC).

• This ensures continuity of GST compliance in restructuring.

Special Category States under Article 279A(4)(g) of the Constitution

• Originally, 11 states were treated as Special Category States for GST purposes.

• But through amendments and notifications, the scope was reduced.

As per the latest position (2025):

• Currently, the following Special Category States remain for GST threshold purposes:

1. Mizoram

2. Manipur

3. Nagaland

4. Tripura
States that were earlier included but later excluded (now treated as normal category states):
• Arunachal Pradesh

• Assam

• Himachal Pradesh

• Meghalaya

• Sikkim

• Uttarakhand

• Jammu & Kashmir (post-reorganisation, GST laws apply to UTs of J&K and Ladakh separately)

• Effect of this classification:

• In the 4 Special Category States (Mizoram, Manipur, Nagaland, Tripura), the GST registration threshold is ₹10

lakh for services and ₹20 lakh for goods.

• In all other states/UTs, the higher thresholds apply (₹20 lakh for services, ₹40 lakh for goods).
Section 35 – Accounts and Other Records

Duty of Every Registered Person [Sub-section (1)]

• Every registered person under GST must maintain true and correct accounts at the principal place of

business (as per GST registration).

• These records should cover:

• Production/manufacture of goods → Records of raw materials consumed, goods manufactured, wastage, etc.

• Inward supply → Purchases of goods or services (with invoices).

• Outward supply → Sales of goods or services.

• Stock of goods → Quantity and value of opening/closing stock.

• Input Tax Credit (ITC) availed → All documents showing ITC claims.

• Output tax payable & paid → GST liability and payment records.

• Other prescribed particulars → As per CGST Rules (e.g., Rule 56).

• Important provisos: If multiple business locations exist, separate accounts must
be kept at each location.

• Records can be kept electronically in prescribed manner.

• Example: A textile manufacturer must keep production records of fabric, inward

supply of yarn, outward supply of garments, ITC availed on raw material
purchases, and GST paid on sales.
• Consequences of Failure If a registered person fails to maintain proper accounts, then:

• The tax officer will determine the tax liability on such unaccounted goods or services as if
they had been supplied.

• Sections 73, 74 or 74A (dealing with demand & recovery of tax, interest, penalty) will apply.

• Example:
If during audit it is found that 500 units of finished goods are missing from stock and not
accounted for, GST will be levied treating them as “deemed supply,” even if they were lost,
stolen, or consumed.
GST Returns

• A GST return is a statement containing details of a taxpayer’s income, sales, purchases, input tax
credit (ITC), and tax liability filed with the GST authorities.

• It helps the government:

• Assess tax liability of businesses,

• Ensure proper input tax credit flow, and

• Maintain compliance records.

Types of GST Returns

• Here are the main returns required under GST:

(a) GSTR-1 (Outward Supplies)

• Filed by: All regular registered taxpayers.

• Contains: Details of outward supplies (sales) of goods/services.

• Frequency: Monthly (or quarterly).

• Example: If a trader sells goods worth ₹10 lakh in April, he must report these sales in GSTR-1 for

April.
(b) GSTR-3B (Summary Return & Tax Payment)

• Filed by: All regular taxpayers.

• Contains:
• Summary of outward and inward supplies,

• ITC claimed,

• Net tax liability payable.

• Frequency: Monthly (or quarterly under QRMP scheme).

• Example: If total sales are ₹10 lakh (tax = ₹1.8 lakh) and purchases ₹8 lakh (ITC = ₹1.44
lakh), then net tax payable = ₹36,000, declared in GSTR-3B.
(c) GSTR-9 (Annual Return)

• Filed by: All regular taxpayers (except composition scheme, casual/non-resident taxable persons,

ISD, TDS/TCS deductors).

• Contains: Consolidated details of outward & inward supplies, ITC, and tax paid during the year.

(d) GSTR-4 (Composition Scheme Dealers)

• Filed annually by composition taxpayers.

• Contains summary of turnover and tax paid at composition rates.

(f) GSTR-5 (Non-Resident Taxable Person)

• Filed by non-resident taxable persons (NRTPs) registered under GST.

• Contains details of imports, supplies made, and tax paid.

(g) GSTR-6 (Input Service Distributor – ISD)

• Filed by ISD to distribute ITC among branches/units.

(h) GSTR-7 (TDS Return)

• Filed by persons required to deduct TDS under GST (e.g., government departments, notified entities).

• Contains details of TDS deducted, deposited, and refunds (if any).

(i) GSTR-8 (TCS Return)

• Filed by e-commerce operators collecting TCS on supplies made through their platform.
Annual Return (GSTR-9):

• Still mandatory for taxpayers with turnover > ₹2 crore.

• Optional for those with turnover up to ₹2 crore.

Section 49 – Payment of Tax, Interest, Penalty and Other Amounts

• Section 49 lays down the manner of payment of GST, interest, penalty, fees, and other dues. All

payments are made through the electronic modes prescribed under GST.

• Electronic Ledgers: To manage payments and credits, three electronic ledgers are maintained on

the GST portal:

• Electronic Cash Ledger (Section 49(1))

• Reflects amounts deposited in cash by the taxpayer (via challan).

• Used for payment of: Tax, Interest, Penalty, Fees, and Any other amount.

• Example: If you deposit ₹50,000 via challan → it shows in cash ledger → you can use it to pay GST

dues.
Electronic Credit Ledger (ECL) (Section 49(2))

• Reflects Input Tax Credit (ITC) self-assessed in returns (GSTR-3B).

• ITC can be used only for payment of output tax (NOT for interest, penalty, or late fee).

Utilisation Rules (Section 49(5)):

• IGST credit → first for IGST, then CGST, then SGST/UTGST.

• CGST credit → first for CGST, then IGST (not for SGST).

• SGST/UTGST credit → first for SGST/UTGST, then IGST (not for CGST).

• Cross-utilisation of CGST & SGST is not allowed.

3. Electronic Liability Register (Section 49(7))

3. Reflects all liabilities of the taxpayer (tax, interest, penalty, etc.).

4. Whenever liability arises, it is updated.

5. Payment is discharged by debiting cash ledger or credit ledger.

Section 54 – Refund of Tax

• The purpose of Section 54 is to provide a mechanism for taxpayers (and certain notified entities) to claim

refunds of tax, interest, penalty, fees, or any other amount paid under GST, thereby preventing

unnecessary blockage of working capital and ensuring fairness in cases of excess or wrongful tax

payments.

Who can claim a refund?

• Any registered person

• Even unregistered persons (in limited cases, like wrong tax payment)

• Time Limit

• Refund application must be filed within 2 years from the relevant date.

• “Relevant date” differs by situation (export, deemed export, service export, judgment, provisional

assessment, etc.).
Situations where a refund is allowed

• Refund may be claimed in cases such as:

• Excess payment of tax or interest

• Balance in electronic cash ledger (Section 49(6))

• Export of goods/services (zero-rated supplies)

• With payment of IGST → refund of IGST paid

• Without payment of IGST → refund of unutilised ITC

• Supplies not made (but tax already paid; e.g., advance received but service cancelled)

• Wrong tax paid (e.g., CGST+SGST paid instead of IGST or vice versa, Section 77)
 Assessment under GST (Sections 59–64)

Section 59 – Self-Assessment

• Every registered person shall self-assess the taxes payable under GST and furnish a return under
Section 39.

• Taxpayer computes his own tax liability.

• Files GSTR-3B (and other returns like GSTR-1).

• Adjusts ITC (input tax credit) against output tax liability.

• Example: A dealer has GST liability of ₹1,80,000 and ITC of ₹50,000. He self-assesses net tax =
₹1,30,000 and pays it via return.
Section 60 – Provisional Assessment

If a taxpayer is unable to determine the value of the supply or the applicable tax rate.

• Process:

• Taxpayer applies to the proper officer.

• Officer allows provisional payment of tax at a rate/value determined.

• Final assessment is done within 6 months (extendable by a further 4 years).

• Interest:

• If additional tax is payable after final assessment → Interest from the due date.

• If excess tax is paid → Refund with interest.

Section 61 – Scrutiny of Returns

• To check the correctness of returns filed (GSTR-3B, GSTR-1).

• Process:

• Proper officer scrutinizes returns with data available in GSTN system (e.g., GSTR-2B, e-way
bills).
• If discrepancy found → Taxpayer informed → Asked to explain or correct.

• If not satisfied → Further proceedings under Sec 65 (audit), Sec 66 (special audit), Sec 67
(inspection), or Sec 73/74 (demand & recovery).

• Example: Taxpayer reports outward supplies in GSTR-3B as ₹50 lakh but in GSTR-1 as ₹60 lakh.

Officer issues notice for mismatch.

Section 62 – Assessment of Non-Filers of Returns

• Registered person fails to file returns even after notice.

• Process:

• Officer makes best judgment assessment based on available data (e-way bill, past returns,
information from suppliers/customers).
• Order issued within 5 years from the due date of annual return.

• If taxpayer files a valid return within 30 days of service of order → Order is withdrawn.

• Example: A GST-registered trader stops filing GSTR-3B. Officer assesses liability based on GSTR-1 +
e-way bills and raises demand.
Section 64 – Summary Assessment in Special Cases

• Officer has sufficient grounds to believe that any delay in assessment may lead to loss of revenue.

• Condition: Approval of Additional Commissioner/Joint Commissioner required.

• Nature: Direct summary assessment order against taxpayer or person in charge of goods.

• Safeguard: If assessee feels order is unjustified, he can apply for withdrawal.

• Example: Truck carrying goods is intercepted without invoice. Officer suspects evasion and passes
summary assessment order immediately to protect revenue.
Section 65 – Audit by Tax Authorities

• This section empowers the Commissioner or any authorised officer to conduct an audit of a registered

person’s accounts to ensure proper compliance and tax payment under GST.

• Authority – The Commissioner or any authorised officer (general or specific order) can order an audit.

• Location – Audit can be conducted at the registered person’s place of business or at the tax office.

• Notice – At least 15 working days’ prior notice must be given before starting the audit.

• Time limit –

• Audit must be completed within 3 months from the date of commencement of audit.

• Can be extended up to 6 months with written reasons by the Commissioner.

• Duties of Taxpayer – During audit, the registered person must:

• Provide facilities to examine books & records.

• Furnish information and assistance.

• Findings – Within 30 days of audit conclusion, the officer must inform the taxpayer about:

• Findings,

• Rights & obligations,

• Reasons for such findings.

• Action after audit – If tax not paid/short paid, ITC wrongly claimed/utilised, or refund wrongly given, action

can be taken under:

• Section 73 (for non-fraud cases), or

• Section 74/74A (for fraud, suppression, or wilful misstatement).

Section 66 – Special Audit

• Special Audit is ordered when the case involves complexity in valuation or abnormal ITC claims,

requiring deeper examination by an independent professional.

• Authority – An officer not below the rank of Assistant Commissioner may order, with prior approval

of Commissioner.

• Grounds – If:

• Value has not been correctly declared, OR

• ITC availed is beyond normal limits.

• Who conducts – Audit must be done by a Chartered Accountant (CA) or Cost Accountant nominated

by the Commissioner.
• Time limit –

• Report to be submitted within 90 days by the CA/Cost Accountant.

• Can be extended by another 90 days (on application and reasons).

• Expenses – Audit expenses (including CA/Cost Accountant fees) are borne by the department, not the

taxpayer.

• Rights of taxpayer –

• Taxpayer must be given an opportunity of being heard before any findings are used against him.

• Effect – Even if accounts are already audited under other laws (e.g., Companies Act, Income Tax Act), GST

authorities can still order a special audit.

• Post-audit action – If irregularities are found (tax not paid, ITC wrongly claimed, refund wrongly given),

action can be initiated under Sections 73, 74 or 74A.

Section 122 – Penalty for Certain Offences

• Section 122 is one of the most important penalty provisions under GST. It covers specific offences
committed by a taxable person and prescribes penalties.

Liablity

• Any taxable person who commits any offence listed under Section 122(1).

• In some cases, even directors, officers, or persons in charge may be held responsible.
Nature of Offences

Some common offences under Section 122 include:

1. Supply-related Offences

1. Supplying goods or services without issuing an invoice.

2. Issuing invoice without actual supply (fake invoice).

3. Collecting tax but failing to deposit with the Government.

2. ITC-related Offences

1. Availing input tax credit (ITC) without receipt of goods or services.

2. Availing or distributing ITC in contravention of the law.

• Registration-related Offences

• Failure to obtain GST registration when liable.

• Furnishing false information at the time of registration.

• Other Compliance Offences

• Failure to maintain books of accounts/documents.

• Obstructing officers during inspection/search.

• Transporting goods without proper documents.

Penalty Structure

• General Cases (non-fraudulent)

• Penalty = 10% of tax due or ₹10,000, whichever is higher.

• Fraud Cases (intent to evade tax, deliberate misstatement, suppression of facts, fake invoices,
etc.)
• Penalty = 100% of tax due.

• Example: If tax evasion = ₹2,00,000 →

• Non-fraud case penalty = ₹20,000 (10% of tax).

• Fraud case penalty = ₹2,00,000 (100% of tax).

Section 122(2) – For Persons Other than Taxable Person

• Any person aiding, abetting, or dealing in goods/services liable for confiscation is also liable to a
penalty of up to ₹25,000.

• AI-based Invoice Scrutiny: From late 2024, GSTN matches invoices with e-invoices to detect fake
ITC and penalizes under Section 122.

• Penalty-Only Appeals: If penalty under Section 122 is imposed, taxpayer must pre-deposit 10% of
penalty for appeal (Finance Act 2025).
Thank You…