Intermediate Course

Study Material
(Modules 1 to 2)

PAPER 4
Taxation
Section – B: Indirect Taxes
(Relevant for May, 2021 and
November, 2021 examinations)

MODULE – 1

BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

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This study material has been prepared by the Faculty of the Board of Studies. The
objective of the study material is to provide teaching material to the students to
enable them to obtain knowledge in the subject. In case students need any
clarifications or have any suggestions for further improvement of the material
contained herein, they may write to the Director of Studies.
All care has been taken to provide interpretations and discussions in a manner
useful for the students. However, the study material has not been specifically
discussed by the Council of the Institute or any of its Committees and the views
expressed herein may not be taken to necessarily represent the views of the
Council or any of its Committees.
Permission of the Institute is essential for reproduction of any portion of this
material.

© The Institute of Chartered Accountants of India

All rights reserved. No part of this book may be reproduced, stored in a retrieval
system, or transmitted, in any form, or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without prior permission, in writing, from
the publisher.

Edition : October 2020

Website : www.icai.org

E-mail : bosnoida@icai.in

Committee/ : Board of Studies

Department

ISBN No. :

Price (All Modules) : `

Published by : The Publication Department on behalf of The Institute of

Chartered Accountants of India, ICAI Bhawan, Post Box
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Printed by :

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BEFORE WE BEGIN …

The traditional role of a chartered accountant restricted to accounting and

auditing, has now changed substantially and there has been a marked shift
towards strategic decision making and entrepreneurial roles that add value
beyond traditional financial reporting. The primary factors responsible for the
change are the increasing business complexities on account of plethora of laws,
borderless economies consequent to giant leap in e-commerce, emergence of
new financial instruments, emphasis on corporate social responsibility, significant
developments in information technology, to name a few. These factors
necessitate an increase in the competence level of chartered accountants to take
up the role of not merely an accountant or auditor, but a global solution provider.
Towards this end, the scheme of education and training is being continuously
reviewed so that it is in sync with the requisites of the dynamic global business
environment; the competence requirements are being continuously reviewed to
enable aspiring chartered accountants to acquire the requisite professional
competence to take on new roles.
Skill requirements at Intermediate Level
Under the Revised Scheme of Education and Training, at the Intermediate Level,
you are expected to not only acquire professional knowledge but also the ability
to apply such knowledge in problem solving. The process of learning should also
help you inculcate the requisite professional skills, i.e., the intellectual skills and
communication skills, necessary for achieving the desired level of professional
competence.
Goods and Services Tax: The game changer indirect tax
Taxation is one of the core competence areas of chartered accountants. The
subject of “Taxation” at the Intermediate level is divided into two sections,
namely, Section A: Income-tax law and Section B: Indirect Taxes. Indirect Taxes,
at the Intermediate level, cover goods and services tax (GST), the path breaking
indirect tax introduced in India from July 1, 2017.
With GST, there has been a paradigm shift in the indirect tax landscape of the
country. GST aims to make India a common market with common tax rates and
procedures and remove the economic barriers thus, paving the way for an
integrated economy at the national level. By subsuming most of the Central
(excise duty, service tax, central sales tax) and State taxes (State-Level VAT) into a

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single tax and by allowing a set-off of prior-stage taxes for the transactions across
the entire value chain, it would mitigate the ill effects of cascading and improve
competitiveness. It follows a multi-stage collection mechanism where tax is
collected at every stage and the credit of tax paid at the previous stage is
available as a set off at the next stage of transaction.
GST, at the Intermediate level, involves understanding and application of the
select provisions of the GST laws. The nitty-gritties of this new tax law coupled
with its inherent dynamism, makes the learning, understanding and application of
the provisions of this law in problem solving very interesting and challenging.
Know your Syllabus – Read the same along with Study Guidelines
The syllabus of Section B: Indirect Taxes covers select provisions of the Central
Goods and Services Tax Act, 2017 and Integrated Goods and Services Act, 2017.
Further, a concept of Study Guidelines has been introduced in the Revised
Scheme of Education and Training in this subject, in line with the international
best practices, to specify topic-wise exclusions from the syllabus. The Study
Guidelines for an examination is issued after the expiry of cut-off date for
amendments relevant for that examination. The Study Guidelines for this subject
are also applicable for the corresponding paper in the Old Course.
For understanding the coverage of syllabus, it is important to read the Study
Material as the content therein has been developed keeping in mind the extent of
coverage of various topics as envisaged in the syllabus. Therefore, the provisions
which do not form part of the syllabus are not discussed or explained in the Study
Material. However, while discussing the relevant applicable provisions, a
reference may have been made to some of these excluded provisions at certain
places, which has been highlighted either by way of a footnote or otherwise.
Further, the Study Material should also be read along with the Study Guidelines.
It may be noted that the Study Material is issued prior to the issuance of Study
Guidelines. Therefore, the Study Material may have discussion on certain
provisions which, post issuance of Study Material, get excluded from the syllabus
by way of Study Guidelines. Such provisions will, therefore, be not relevant from
the examination point of view.
Know your Study Material
This Study Material is relevant for May 2021 and November 2021 examinations. It
is based on the provisions of the Central Goods and Services Tax Act, 2017
and Integrated Goods and Services Act, 2017 as amended up to 31.10.2020.
The amendments made vide the Finance (No. 2) Act, 2019 and the Finance Act
2020, which have become effective till 31.10.2020, and significant notifications

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and circulars issued upto 31.10.2020 have been incorporated in this Study
Material. The amendments made vide the Finance (No. 2) Act, 2019, the Finance
Act, 2020 and the latest notifications/circulars are indicated in bold italics in the
Study Material.
The significant notifications and circulars issued from 01.11.2020 to 30.04.2021
will be compiled as Statutory Update for November 2021 examination and web-
hosted on the BoS Knowledge Portal.
It may be noted that most of the amendments made in the CGST Act and the IGST
Act vide the Finance Act, 2020 have not become effective till the time this Study
Material is being released for printing. Therefore, the applicability or otherwise of
such amendments for May 2021 and/or November 2021 examinations shall be
announced by the ICAI only after the same become effective. In the Study
Material the existing provisions 1 are compared with the provisions as amended by
the Finance Act, 2020 (which have not become effective till the time this Study
Material is being released for printing) at the end of each chapter, wherever
relevant. Once the announcement for applicability of such amendments for
examination(s) is made by the ICAI, students should read the amended provisions
in place of the related provisions discussed in the main body of the Chapter.
Efforts have been made to present the complex law of GST in a lucid manner.
Care has been taken to present the chapters in a logical sequence to facilitate
easy understanding by the students. The Study Material has been divided into
two modules for ease of handling by students. Module 1 covers Chapters 1-5 and
Module 2 covers Chapters 6-10.
The various chapters/units of this subject have been structured uniformly and
comprise of the following components:

Components About the component

of each
Chapter

1. Learning Learning outcomes which you need to demonstrate after

Outcomes learning each topic have been detailed in the first page of
each chapter/unit. Demonstration of these learning
outcomes will help you to achieve the desired level of
technical competence

1
Provisions existing as on the date when the Study Material was released for printing

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2. Chapter As the name suggests, the flow chart/table/diagram given

Overview at the beginning of each chapter will give a broad outline
of the contents covered in the chapter

3. Content The GST law has been explained by following a systematic

approach of first extracting the statutory provisions
followed by their analysis. Going through the statutory
provisions will develop a legal aptitude in you which is a
pre-requisite to study any law. The analysis of the
statutory provisions given thereafter will give you an idea
as to how the law is interpreted to arrive at meaningful
conclusions and find answers to problems. You should
read statutory provisions and analysis conjointly to have a
holistic and complete understanding of the provisions.
The concepts and provisions of GST laws are explained in
student-friendly manner with the aid of
examples/illustrations/ diagrams/flow charts. Diagrams
and flow charts will help you understand and retain the
concept/provision learnt in a better manner. Examples
and illustrations will help you understand the application
of concepts/provisions. These value additions will, thus,
help you develop conceptual clarity and get a good grasp
of the topic.

4. Let Us A summary of the chapter, in the form of

Recapitulate tables/diagrams/flow charts, is given at the end to help
you revise what you have learnt. It will especially facilitate
quick revision of the chapter the day before the
examination. However, please note that such summaries
are not a substitute for in-depth study. You should read
the summaries only after you have finished reading the
discussions in the chapter.

5. Test Your This section comprises of variety of questions which will

Knowledge help you to apply what you have learnt in problem solving,
and, thus, sharpen your application skills. In effect, it will
test your understanding of concepts/ provisions as well as
your ability to apply the concepts/provisions learnt in
solving problems and addressing issues.

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6. Answers After you work out the problems/questions given under

the section “Test Your Knowledge”, you can verify your
answers with the answers given under this section. This
way you can self-assess your level of understanding of the
provisions or concepts of a chapter.

Students may make note of the following while reading the Study Material:
 For the sake of brevity, the “ Goods and Services Tax”, “Central Goods and
Services Tax”, “State Goods and Services Tax”, “Union Territory Goods and
Services Tax”, “Integrated Goods and Services Tax”, “Central Goods and
Services Act, 2017”, “Integrated Goods and Services Act, 2017” and “Union
Territory Goods and Services Act, 2017”, “Central Goods and Services Tax
Rules, 2017” have been referred to as “GST”, “CGST”, “SGST”, “UTGST”,
“IGST”, “CGST Act”, “IGST Act”, “UTGST Act” and “CGST Rules” respectively in
this Study Material.
 Unless otherwise specified, the section numbers and rules referred to in the
chapters pertain to CGST Act and CGST Rules respectively.
 The examples/illustrations/questions and answers given under ‘Test Your
Knowledge’ in various chapters are based on the position of GST law
existing as on 31.10.2020. The reference to years/months subsequent to
such date, if any, in the examples, illustrations, questions and answers is
only for the purpose of explaining the concepts and provisions as the
position of law may change subsequently.
Though all efforts have been taken in developing this Study Material, the possibilities
of errors/omissions cannot be ruled out. You may bring such errors/omissions, if
any, to our notice so that the necessary corrective action can be taken.
We hope that the new student-friendly features in the Study Material makes your
learning process more enjoyable, enriches your knowledge and sharpens your
application skills.

Since the entire syllabus of subject of indirect taxes forming part of paper on
Taxation is same for both New and Old Course, this Study Material is also relevant
for IIPCC (Old) Paper 4 Taxation Section B: Indirect Taxes.

Happy Reading and Best Wishes!

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SYLLABUS

PAPER – 4 : TAXATION
(One paper ─ Three hours – 100 Marks)

Objective:

To develop an understanding of the provisions of income-tax law and goods and

services tax law and to acquire the ability to apply such knowledge to make
computations and address application-oriented issues.

SECTION A: INCOME TAX LAW (60 MARKS)

Contents:
1. Basic Concepts
(i) Income-tax law: An introduction
(ii) Important definitions in the Income-tax Act, 1961
(iii) Concept of previous year and assessment year
(iv) Basis of Charge and Rates of Tax
2. Residential status and scope of total income
(i) Residential status
(ii) Scope of total income
3. Incomes which do not form part of total income (other than
charitable trusts and institutions, political parties and electoral
trusts)
(i) Incomes not included in total income
(ii) Tax holiday for newly established units in Special Economic Zones
4. Heads of income and the provisions governing computation of
income under different heads
(i) Salaries
(ii) Income from house property

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(iii) Profits and gains of business or profession

(iv) Capital gains
(v) Income from other sources
5. Income of other persons included in assessee's total income
(i) Clubbing of income: An introduction
(ii) Transfer of income without transfer of assets
(iii) Income arising from revocable transfer of assets
(iv) Clubbing of income of income arising to spouse, minor child and
son’s wife in certain cases
(v) Conversion of self-acquired property into property of HUF
6. Aggregation of income; Set-off, or carry forward and set-off of
losses
(i) Aggregation of income
(ii) Concept of set-off and carry forward and set-off of losses
(iii) Provisions governing set-off and carry forward and set-off of
losses under different heads of income
(iv) Order of set-off of losses
7. Deductions from gross total income
(i) General provisions
(ii) Deductions in respect of certain payments
(iii) Specific deductions in respect of certain income
(iv) Deductions in respect of other income
(v) Other deductions
8. Computation of total income and tax liability of individuals
(i) Income to be considered while computing total income of
individuals
(ii) Procedure for computation of total income and tax liability of
individuals

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9. Advance tax, tax deduction at source and introduction to tax

collection at source
(i) Introduction
(ii) Direct Payment
(iii) Provisions concerning deduction of tax at source
(iv) Advance payment of tax
(v) Interest for defaults in payment of advance tax and deferment of
advance tax
(vi) Tax collection at source – Basic concept
(vii) Tax deduction and collection account number
10. Provisions for filing return of income and self-assessment
(i) Return of Income
(ii) Compulsory filing of return of income
(iii) Fee and Interest for default in furnishing return of income
(iv) Return of loss
(v) Provisions relating to belated return, revised return etc.
(vi) Permanent account number
(vii) Persons authorized to verify return of income
(viii) Self-assessment

SECTION B – INDIRECT TAXES (40 MARKS)

Contents:
1. Concept of indirect taxes
(i) Concept and features of indirect taxes
(ii) Principal indirect taxes
2. Goods and Services Tax (GST) Laws
(i) GST Laws: An introduction including Constitutional aspects
(ii) Levy and collection of CGST and IGST

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a) Application of CGST/IGST law

b) Concept of supply including composite and mixed supplies
c) Charge of tax including reverse charge
d) Exemption from tax
e) Composition levy
(iii) Basic concepts of time and value of supply
(iv) Input tax credit
(v) Computation of GST liability
(vi) Registration
(vii) Tax invoice; Credit and Debit Notes; Electronic way bill
(viii) Returns
(ix) Payment of tax
Note – If any new legislation(s) is enacted in place of an existing legislation(s),
the syllabus will accordingly include the corresponding provisions of such new
legislation(s) in place of the existing legislation(s) with effect from the date to be
notified by the Institute. Similarly, if any existing legislation ceases to have effect,
the syllabus will accordingly exclude such legislation with effect from the date to
be notified by the Institute. Students shall not be examined with reference to any
particular State GST Law.
Consequential/corresponding amendments made in the provisions of the Income-
tax law and Goods and Services Tax laws covered in the syllabus of this paper
which arise out of the amendments made in the provisions not covered in the
syllabus will not form part of the syllabus. Further, the specific
inclusions/exclusions in the various topics covered in the syllabus will be effected
every year by way of Study Guidelines. The specific inclusions/exclusions may also
arise due to additions/deletions every year by the annual Finance Act.

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CONTENTS

CHAPTER-1: GST IN INDIA–AN INTRODUCTION

Learning Outcomes .................................................................................................. 1.1
Chapter Overview ..................................................................................................... 1.2
1. Background .............................................................................................................................. 1.2
2. Direct and Indirect Taxes..................................................................................................... 1.3
3. Features of Indirect Taxes ................................................................................................... 1.5
4. Genesis of GST in India ........................................................................................................ 1.6
5. Concept of GST ....................................................................................................................... 1.8
6. Need for GST in India ........................................................................................................... 1.9
7. Framework of GST as introduced in India................................................................... 1.12
8. Benefit of GST ........................................................................................................................ 1.26
9. Constitutional Provisions................................................................................................... 1.29
10. Test Your Knowledge .......................................................................................................... 1.35
11. Answers/Hints........................................................................................................................ 1.36
CHAPTER-2: SUPPLY UNDER GST
Learning Outcomes ................................................................................... 2.1
Chapter Overview .................................................................................... 2.2
1. Introduction.............................................................................................................................. 2.2
2. Relevant Definitions ............................................................................................................. 2.3
3. Concept of Supply [Section 7 of CGST Act] ................................................................. 2.8
4. Composite and Mixed Supplies [Section 8] ............................................................... 2.51
5. Let Us Recapitulate .............................................................................................................. 2.58
6. Test Your Knowledge .......................................................................................................... 2.66
7. Answers/Hints........................................................................................................................ 2.70

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CHAPTER-3: CHARGE OF GST

Learning Outcomes .................................................................................... 3.1
Chapter Overview .................................................................................... 3.2
1. Introduction.............................................................................................................................. 3.2
2. Relevant Definitions ............................................................................................................. 3.3
3. Extent & Commencement of GST Law ......................................................................... 3.7

4. Levy & Collection of CGST & IGST [Section 9 of the

CGST Act & Section 5 of the IGST Act] .......................................................................... 3.9
5. Composition Levy [Section 10 of the CGST Act] ...................................................... 3.31
6. Let Us Recapitulate ............................................................................................................. 3.57

7. Test Your Knowledge .......................................................................................................... 3.62

8. Answers/Hints........................................................................................................................ 3.64
CHAPTER-4 EXEMPTIONS FROM GST
Learning Outcomes ................................................................................... 4.1
Chapter Overview ..................................................................................... 4.1
1. Introduction.............................................................................................................................. 4.2
2. Power of Grant Exemption from Tax [Section 11
of the CGST Act/Section 6 of IGST Act] ......................................................................... 4.4
3. Goods exempt from tax ....................................................................................................... 4.7
4. List of Services exempt from tax ...................................................................................... 4.8
5. Let Us Recapitulate .............................................................................................................. 4.95
6. Test Your Knowledge ....................................................................................................... 4.112
7 Answers/Hints..................................................................................................................... 4.114

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CHAPTER-5 TIME AND VALUE OF SUPPLY

Unit-I: Time of Supply
Learning Outcomes ................................................................................... 5.1
Unit Overview .......................................................................................... 5.2
1. Introduction.............................................................................................................................. 5.2
2. Relevant Definitions .............................................................................................................. 5.4
3. Time of Supply of Goods [Section 12] ........................................................................... 5.8
4. Time of Supply of Services [Section 13] ...................................................................... 5.23
5. Let Us Recapitulate .............................................................................................................. 5.37
6. Test Your Knowledge .......................................................................................................... 5.40
7. Answers/Hints........................................................................................................................ 5.44
Unit– II: Value of Supply
Learning Outcomes ................................................................................. 5.51
Unit Overview ......................................................................................... 5.51
1. Introduction ................................................................................................................ 5.52
2. Relevant Definitions .................................................................................................. 5.52
3. Value of Supply [Section 15] ................................................................................. 5.56
4. Let Us Recapitulate ................................................................................................... 5.73
5. Test Your Knowledge ................................................................................................ 5.74
6. Answers/Hints ............................................................................................................ 5.78

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