GST Icai Boook

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
© The Institute of Chartered Accountants of India

ii
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.
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,
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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
No. 7100, Indraprastha Marg, New Delhi 110 002, India.
Printed by :

iii
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
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

8. Answers/Hints........................................................................................................................ 3.64
CHAPTER-4 EXEMPTIONS FROM GST
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
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
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
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

CHAPTER 1
GST IN INDIA – AN
INTRODUCTION
Examples/illustrations/Questions and Answers given in the Chapter are based on the
position of GST law existing as on 31.10.2020
LEARNING OUTCOMES
After studying this Chapter, you will be able to:
 explain the concept of tax and the objective for its levy
 describe the concept of direct and indirect tax and the
differences between the two types of taxes
 enumerate the basic features of indirect taxes and the
principal indirect taxes in India
 explain the concept of GST and the need for GST in India.
 discuss the framework of GST as introduced in India and
understand the various benefits to be accrued from
implementation of GST.
 explain the constitutional provisions pertaining to levy of
various taxes
 appreciate the need for constitutional amendment paving
way for GST.
 discuss the significant amendments made by the
Constitution (101st Amendment) Act, 2016.

1.2 INDIRECT TAXES
CHAPTER OVERVIEW
Direct and Indirect Taxes
Features of indirect taxes
Genesis of GST in india

GST in India
Concept of GST
Need for GST in India
Framework of GST as introduced in India
Benefits of GST
Constitutional provisions
1. BACKGROUND
In any Welfare State, it is the prime responsibility of the Government to fulfill the
increasing developmental needs of the country and its people by way of public
expenditure. India, being a developing economy, has been striving to fulfill the
obligations of a Welfare State with its limited resources; the primary source of
revenue being the levy of taxes. Though the collection of tax is to augment as
much revenue as possible to the Government to provide public services, over the
years it has been used as an instrument of fiscal policy to stimulate economic
growth. Thus, taxes are collected to fulfill the socio-economic objectives of the
Government.
What is a tax? A tax may be defined as a "pecuniary burden laid upon

individuals or property owners to support the Government, a payment exacted by
legislative authority. A tax "is not a voluntary payment or donation, but an
enforced contribution, exacted pursuant to legislative authority".
In simple words, tax is nothing but money that people have to pay to the
Government, which is used to provide public services.

GST IN INDIA – AN INTRODUCTION 1.3
2. DIRECT AND INDIRECT TAXES

Taxes are broadly classified into direct and indirect taxes.
Direct Taxes: A direct tax is a kind of charge, which is imposed directly on the
taxpayer and paid directly to the Government by the persons (juristic or natural)
on whom it is imposed. A direct tax is one that cannot be shifted by the taxpayer
to someone else. A significant direct tax imposed in India is income tax.
Indirect Taxes: If the taxpayer is just a conduit and at every stage the tax-
incidence is passed on till it finally reaches the consumer, who really bears the
brunt of it, such tax is indirect tax. An indirect tax is one that can be shifted by
the taxpayer to someone else.
Its incidence is borne by the consumers who ultimately consume the product or
the service, while the immediate liability to pay the tax may fall upon another
person such as a manufacturer or provider of service or seller of goods.
Also called consumption taxes, they are regressive in nature because they are not
based on the principle of ability to pay. All the consumers, including the
economically challenged bear the brunt of the indirect taxes equally.
Indirect taxes are levied on consumption, expenditure, privilege, or right but not
on income or property. Earlier, a number of indirect taxes were levied in India,
namely, excise duty, customs duty, service tax, central sales tax (CST), value added
tax (VAT), entry tax, purchase tax, entertainment tax, tax on lottery, betting and
gambling, luxury tax, tax on advertisements, etc.
However, indirect taxation in India witnessed a paradigm shift on July 01, 2017 with
usherance into a unified indirect tax regime wherein a large number of Central and
State indirect taxes were amalgamated into a single tax – Goods and Services Tax
(GST). The introduction of GST has been a very significant step in the field of indirect
tax reforms in India. Customs duty continues in post-GST regime.
Economists world over agree that direct and indirect taxes are complementary and
therefore, a rational tax structure should incorporate in itself both types of taxes.
At Intermediate level, we will study the basic concept of Goods and

Services Tax (GST) - concept of supply, charge of GST, exemptions,
basic concepts of time and value of supply, input tax credit,
registration, tax invoice, credit and debit notes, e-way bill, returns
and payment. Customs law will be discussed at the Final level

1.4 INDIRECT TAXES
TAX
INDIRECT TAX
DIRECT TAX
* The person paying the tax to the
* The person paying the tax to
Government collects the same
the Government directly
from the ultimate consumer.
bears the incidence of
Thus, incidence of the tax is
the tax.
shifted to the other person.
* Progressive in nature - high
* Regressive in nature - All the
rate of taxes for people
consumers equally bear the
having higher ability to
burden, irrespective of their
pay.
ability to pay.
Burden of tax borne Burden of tax shifted

by the person himself to another person
Direct Tax Indirect Tax
Goods and
Major direct and
Services Tax
indirect taxes
Indirect taxes
Customs Duty
Direct taxes Income tax

3. FEATURES OF INDIRECT TAXES

(i) An important source of revenue: Indirect taxes are a major source of tax
revenues for Governments worldwide and continue to grow as more
countries move to consumption oriented tax regimes. In India, indirect
taxes contribute more than 50% of the total tax revenues of Central and
State Governments.
(ii) Tax on commodities and services: It is levied on commodities at the time
of supply or manufacture or purchase or sale or import/export thereof.
Hence, it is also known as commodity taxation. It is also levied on supply of
services.
(iii) Shifting of burden: There is a clear shifting of tax burden in respect of
indirect taxes. For example, GST paid by the supplier of the goods is
recovered from the buyer by including the tax in the cost of the commodity.
(iv) No perception of direct pinch: Since, value of indirect taxes is generally
inbuilt in the price of the commodity, most of the time the tax
payer/consumer pays the same without actually knowing that he is paying
tax to the Government. Thus, tax payer does not perceive a direct pinch
while paying indirect taxes.
(v) Inflationary: Tax imposed on commodities and services causes an all-round
price spiral. In other words, indirect taxation directly affects the prices of
commodities and services and leads to inflationary trend.
(vi) Wider tax base: Unlike direct taxes, the indirect taxes have a wide tax base.
Majority of the products or services are subject to indirect taxes with low
thresholds.
(vii) Promotes social welfare: Higher taxes are imposed on the consumption of
harmful products (also known as ‘sin goods’) such as alcoholic products,
tobacco products etc. This not only checks their consumption but also
enables the State to collect substantial revenue.
(viii) Regressive in nature: Generally, the indirect taxes are regressive in nature.
The rich and the poor have to pay the same rate of indirect taxes on certain
commodities of mass consumption. This may further increase the income
disparities between the rich and the poor.

1.6 INDIRECT TAXES
4. GENESIS OF GST IN INDIA

In the year 2000, the then Prime Minister mooted the concept
of GST and set up a committee to design a Goods and `
Services Tax (GST) model for the country. In 2003, the Central
Government formed a task force on Fiscal Responsibility and
Budget Management, which in 2004 strongly recommended
fully integrated ‘GST’ on national basis.
Subsequently, the then Union Finance Minister, Shri P. Chidambaram, while
presenting the Union Budget (2006-2007), announced that GST would be
introduced from April 1, 2010. Since then, GST missed several deadlines and
continued to be shrouded by the clouds of uncertainty.
The talks of ushering in GST, however, gained
momentum in the year 2014 when the NDA Government
tabled the Constitution (122nd Amendment) Bill, 2014 on
GST in the Parliament on 19th December, 2014. The Lok
Sabha passed the Bill on 6th May, 2015 and Rajya Sabha
on 3rd August, 2016. Subsequent to ratification of the Bill
by more than 50% of the States, Constitution (122nd Amendment) Bill, 2014
received the assent of the President on 8th September, 2016 and became the
Constitution (101st Amendment) Act, 2016, which paved the way for
introduction of GST in India.
In the following year, on 27th March, 2017, the
Central GST legislations - Central Goods and
Services Tax Bill, 2017, Integrated Goods and
Services Tax Bill, 2017, Union Territory Goods and
Services Tax Bill, 2017 and Goods and Services Tax
(Compensation to States) Bill, 2017 were
introduced in Lok Sabha. Lok Sabha passed these
bills on 29th March, 2017 and with the receipt of the President’s assent on 12th
April, 2017, the Bills were enacted. The enactment of the Central Acts was
followed by the enactment of the State GST laws by various State Legislatures.
Telangana, Rajasthan, Chhattisgarh, Punjab, Goa and Bihar were among the first

ones to pass their respective State GST laws. By 30th June, 2017, all States and
Union Territories had passed their respective SGST and UTGST Acts except Jammu
and Kashmir. With effect from 1st July, 2017, the historic indirect tax reform - GST
was introduced. GST law was extended to Jammu and Kashmir on
8 July, 2017.
th
In the year 2000, the then Prime The Constitution

Minister introduced the concept of (122nd Amendment)
GST and set up a committee to design Bill was introduced in
a GST model for the country. 2006 the Lok Sabha.
Aug 2016
Announcement by Union 2014

2000 Finance Minister, during
The
Constitution
budget of 2006-07 that (101st
GST would introduced Amendment)
from 1 April 2010. GST Council Act was enacted
Recommends CGST,
GST Council SGST, IGST, UTGST &
recommends Compensation Cess
all the rules. Apr 2017 Bill. Sep 2016
1st GST
May 2017 CGST, IGST, UTGST Mar 2017
and Compensation Council
Cess Acts passed. Meeting
All States
except J & K 30th June
passed their
SGST Act
2017
1st July 2017 8th July 2017

Journey
SGST Act passed by J&K; continues
GST launched CGST and IGST
Ordinances promulgated
to extend GST to J&K.
GST is a path breaking indirect tax reform which attempts to create a common
national market. GST has subsumed multiple indirect taxes like excise duty,
service tax, VAT, CST, luxury tax, entertainment tax,
entry tax, etc.
VAT and GST are often used inter-changeably as the
latter denotes comprehensiveness of VAT by
coverage of goods and services. France was the first
country to implement VAT/GST in 1954. Presently,
more than 160 countries have implemented

1.8 INDIRECT TAXES
VAT/GST in some form or the other because this tax has the capacity to raise
revenue in the most transparent and neutral manner. Most of the countries follow
unified GST i.e., a single tax applicable throughout the country. However, in
federal polities like Brazil and Canada, a dual GST system is prevalent. Under dual
system, GST is levied by both the federal and the State Governments. India has
adopted dual GST model because of its unique federal nature.
5. CONCEPT OF GST
What is GST?
Before we proceed with the finer nuances of Indian GST, let us first understand
the basic concept of GST.
 GST is a value added tax levied on supply i.e.,
manufacture or sale of goods and provision of
services.
 GST offers comprehensive and continuous chain of tax credits from the
producer's point/service provider's point upto the retailer's level/consumer’s
level thereby taxing only the value added
at each stage of supply chain.
 The supplier at each stage is permitted to avail credit of GST paid on the
purchase of goods and/or services and can
set off this credit against the GST payable on
the supply of goods and services to be made by him. Thus, only the final
consumer bears the GST charged by the last supplier in the supply chain, with
set-off benefits at all the previous stages.
 Since, only the value added at each stage is
taxed under GST, there is no tax on tax or
cascading of taxes under GST system. The
same can be understood better with the help of the following example:

Manufacturer Distributor Retailer Consumer

(`) (`) (`) (`)
Cost: 1,00,000 Cost: 1,00,000 Cost: 1,11,200 Cost: 1,60,291.2

GST @ 18%= Profit: 11,200 Profit: 24,640 (1,35,840+24,451.2
18,000 0)
Sale Price: 1,11,200 Sale Price: 1,35,840
GST @ 18% GST@ 18%
20,016 24,451.20
Input Tax Credit= Input Tax Credit= Input Tax Credit= Input Tax Credit=
NIL 18,000 Rs. 20,016 NIL
Paid to Paid to Paid to Tax Borne by the

Government Government Government Consumer
18,000+2,016+4,4
GST = 18,000 GST = 2,016 GST= 4,435.20
35.20= 24,451.20
(Output tax – Input (Output tax – Input
tax) tax)
Value Addition = Value Addition= Value Addition= Value Addition=

1,00,000 11,200 24,640 NIL
GST @ 18% = GST @ 18%= GST @ 18%=
18,000 2,016 4,435.20
6. NEED FOR GST IN INDIA
Deficiencies in the A cure for ills of

has led to GST
erstwhile value added erstwhile indirect tax
taxation regime

1.10 INDIRECT TAXES
Under the earlier indirect tax regime, despite the introduction of the principle of
taxation of value added in India – at the Central level in the form of CENVAT
(Central Excise) and at the State level in the form of State VAT - its application
always remained piecemeal and fragmented on account of the following reasons:
 Certain transactions were subject to double taxation and were taxed as both
goods and services, since under the earlier regime, distinction between
goods and services was often blurred.
(1) Under earlier tax regime, software was subject to both service
tax and VAT. This was so because both sale of goods and
provision of service were involved and therefore taxable event
under both the Statutes i.e. respective VAT law and service tax law got
triggered. This aspect has been taken care of under GST law.
 CENVAT did not include chain of value addition in the distributive trade
after the stage of production. Similarly, in the State-level VAT, CENVAT load
on the goods was not removed leading to the cascading of taxes. Below
mentioned example illustrates that under earlier indirect tax regime, when
the goods were manufactured and sold, both central excise duty (CENVAT)
and State-Level VAT were levied.
(2) Under earlier tax regime, if goods were manufactured for
` 1000/- and excise duty was payable @ 12.5% and VAT was payable
@ 14.30%, the billing was being done as under:
Assessable value of goods under excise law ` 1,000
Excise duty @ 12.5% ` 125
Taxable value for VAT ` 1,125
VAT @ 14.30% ` 160.88
Total invoice value ` 1,285.88
 Though CENVAT and State-Level VAT were essentially value added taxes, set
off of one against the credit of another was not possible as CENVAT was a
central levy and State-Level VAT was a State levy.
 There were several taxes in the States, such as, Luxury Tax, Entertainment
Tax, etc. which were not subsumed in the VAT. Hence for a single
transaction, multiple taxes in multiple forms were required to be paid.

 VAT on goods was not integrated with tax on services, at the State level, to
remove the cascading effect of service tax. With service sector being the
fastest growing sector in the economy, the exclusion of services from the
tax base of the States potentially eroded their tax- buoyancy.
 CST was another source of distortion in terms of its cascading nature since
it was non-VATABLE. Being an origin based tax, CST was also against one of
the basic principles of consumption taxes that tax should accrue to the
jurisdiction where consumption takes place.
(3) Under earlier tax regime, if a dealer in Delhi purchases goods
from a manufacturer in Punjab for ` 1000 + ` 20 (2% CST)
= ` 1020/- and sells such goods within Delhi for ` 1200/-. The tax
rate on sales is 12.5% and hence output tax liability is ` 150/-. Credit of
` 20/- is not allowed while making payment of ` 150/- and hence the dealer
has to pay ` 150 as VAT.
Non-inclusion of several Cascading of taxes on account of (i) levy of

local levies in State VAT Non-VATable CST and (ii) inclusion of CENVAT
such as luxury tax, in the value for imposing VAT
entertainment tax, etc.
No CENVAT after Non-integration of Double taxation of a

manufacturing stage VAT & service tax transaction as both goods
and services

1.12 INDIRECT TAXES
A comprehensive tax structure covering both goods

and services viz. Goods and Services Tax (GST)
addresses most of the above stated issues.
Simultaneous introduction of GST at both Centre and
State levels has integrated taxes on goods and services
for the purpose of set-off relief and ensures that both
the cascading effects of CENVAT and service tax are removed and a continuous
chain of set-off from the original producer’s point/ service provider’s point upto
the retailer’s level/ consumer’s level is established.
In the GST regime, the major indirect taxes have been subsumed in the ambit of
GST. The erstwhile concepts of manufacture or sale of goods or rendering of
services are no longer applicable since the tax is now levied on “Supply of Goods
and/or services”.
7. FRAMEWORK OF GST AS INTRODUCED IN INDIA

I. Dual GST:
India has adopted a Dual GST model in view of the federal structure of the
country. Consequently, Centre and States simultaneously levy GST on
taxable supply of goods or services or both, which takes place within a State
or Union Territory. Thus, tax is imposed concurrently by the Centre and
States, i.e. Centre and States simultaneously tax goods and services. Now,
the Centre also has the power to tax intra-State sales & States are also
empowered to tax services. GST extends to whole of India including the
State of Jammu and Kashmir.

II. CGST/SGST/UTGST/IGST
GST is a destination- based tax
applicable on all transactions involving
supply of goods and services for a
consideration subject to exceptions thereof. GST in India comprises of
Central Goods and Services Tax (CGST) - levied and collected by Central
Government, State Goods and Services Tax (SGST) - levied and collected by
State Governments/Union Territories with Legislatures and Union Territory
Goods and Services Tax (UTGST) - levied and collected by Union Territories
without Legislatures, on intra-State supplies of taxable goods and/or
services. As a general rule, where the location of the supplier and the place
of supply of goods or services are in the same State/Union territory, it is
treated as intra-State supply of goods or services respectively.
Further, where the location of the supplier and the place of supply of goods
or services are in (i) two different States or (ii) two different Union
Territories or (iii) a State and a Union territory, it is treated as inter-State
supply of goods or services respectively. Inter-State supplies of taxable
goods and/or services are subject to Integrated Goods and Services Tax
(IGST). IGST is the sum total of CGST and SGST/UTGST and is levied by
Centre on all inter-State supplies.

1.14 INDIRECT TAXES
III. Legislative Framework

There is single legislation – CGST Act, 2017 - for levying
CGST. Similarly, Union Territories without Legislatures
[i.e. Andaman and Nicobar Islands, Lakshadweep,
Ladakh, Dadra and Nagar Haveli & Daman and Diu and Chandigarh] are
governed by UTGST Act, 2017 for levying UTGST. States and Union territories
with their own legislatures [i.e. Delhi, Jammu and Kashmir and Puducherry]
have their own GST legislation for levying SGST.
(4) In Ladakh, CGST and UTGST is levied on supply of goods or
services or both. In Delhi, CGST and SGST is levied on supply of
goods or services or both.
Though there are multiple SGST legislations, the basic features of law, such
as chargeability, definition of taxable event and taxable person,
classification and valuation of goods and services, procedure for collection
and levy of tax and the like are uniform in all the SGST legislations, as far as
feasible. This is necessary to preserve the essence of dual GST.
IV. Classification of goods and services
HSN (Harmonised System of
Nomenclature) is used for classifying
the goods under the GST. Chapters
referred in the Rate Schedules for goods are the Chapters of the First
Schedule to the Customs Tariff Act, 1975.
A new Scheme of Classification of Services has been devised wherein the
services of various descriptions have been classified under various sections,
headings and groups. Each group consists of various Service Codes (Tariff).
V. Registration
Every supplier of goods and/ or services is required to
obtain registration in the State/UT from where he makes
the taxable supply if his aggregate turnover exceeds the
threshold limit during a FY. Different threshold limits have been prescribed
for various States and Union Territories depending upon the fact whether
the supplier is engaged exclusively in supply of goods, or exclusively in
supply of services or in supply of both goods and services. The threshold
limit prescribed for various States/UTs are as follows:

States with States with States with

threshold limit of threshold limit of threshold limit of
` 10 lakh for both ` 20 lakh for both ` 20 lakh for
goods and goods and services and ` 40
services services lakh for goods**
•Manipur •Arunachal •Jammu and
•Mizoram Pradesh Kashmir
•Nagaland •Meghalaya •Assam
•Tripura •Sikkim •Himachal Pradesh
•Uttarakhand •All other States
•Puducherry
•Telangana
**persons engaged exclusively in intra-State supply of goods
VI. Composition Scheme

In GST regime, tax (i.e. CGST and SGST/UTGST for intra-State supplies and
IGST for inter-State supplies) is payable by every taxable person and in this
regard, provisions have been prescribed in the law.
However, for providing relief to small businesses,
primarily manufacturers, suppliers of food
articles, traders, etc., making intra-State supplies,
a simpler method of paying taxes is prescribed, known as Composition Levy.
The scope of this scheme has now been extended to small service
providers also.
VII. Exemptions
Apart from providing relief to small-scale business, the
law also contains provisions for granting exemption from
payment of tax on essential goods and/or services.
VIII. Seamless flow of credit
Since GST is a destination-based consumption tax,
revenue of SGST ordinarily accrues to the

1.16 INDIRECT TAXES
consuming States. The inter-State supplier in the exporting State is allowed

to set off the available credit of IGST, CGST and SGST/UTGST (in that order)
against the IGST payable on inter-State supply made by him.
The buyer in the importing State is allowed to avail the credit of IGST paid
on inter-State purchases made by him. Thus, unlike the earlier scenario
where the credit chain used to break in case of inter-State sales on account
of non-VATable CST, under GST regime there is a seamless credit flow in
case of inter-State supplies too.
The revenue of inter-State sale does not accrue to the exporting State and
the exporting State transfers to the Centre the credit of SGST/UTGST used in
payment of IGST.
The Centre transfers to the importing State the credit of IGST used in
payment of SGST/UTGST.
The seamless flow of credit under GST, in case of intra-State and inter-State
supplies, can be better understood with the help of the following
illustrations:
Intra-State Supply
ILLUSTRATION 1
In case of local supply of goods/ services, the supplier would charge dual
GST i.e., CGST and SGST at specified rates on the supply.
I. Supply of goods/ services by A to B
Amount (in `)
Value charged for supply of goods/ services 10,000
Add: CGST @ 9% 900
Add: SGST @ 9% 900
Total price charged by A from B for local supply 11,800

of goods/ services

The CGST & SGST charged on B for supply of goods/services will be

remitted by A to the appropriate account of the Central and State
Government respectively.
A is the first stage supplier of goods/services and hence, does not
have credit of CGST, SGST or IGST.
II. Supply of goods/services by B to C – Value addition @ 20%
B will avail credit of CGST and SGST paid by him on the purchase of
goods/ services and will utilise such credit for being set off against the
CGST and SGST payable on the supply of goods/services made by him
to C.
Amount
(in `)
Value charged for supply of goods/ services (` 10,000 x 12,000

120%)
Add: CGST @ 9% 1080
Add: SGST @ 9% 1080
Total price charged by B from C for local supply of goods/ 14160

services
Computation of CGST, SGST payable by B to Government
Amount (in `)
CGST payable 1080
Less: Credit of CGST 900
CGST payable to Central Government 180
SGST payable 1080
Less: Credit of SGST 900
SGST payable to State Government 180

1.18 INDIRECT TAXES
Note: Rates of CGST and SGST have been assumed to be 9% each for
the sake of simplicity.
Statement of revenue earned by Central and State Government
Transaction Revenue to Revenue to

Central State
Government Government
(`) (`)
Supply of goods/services by A to B 900 900
Supply of goods/services by B to C 180 180
Total 1080 1080
Inter-State Supply
ILLUSTRATION 2
In case of inter-State supply of goods/ services, the supplier would charge

IGST at specified rates on the supply.
I. Supply of goods/services by X of State 1 to A of State 1
Amount (in `)
Value charged for supply of goods/services 10,000
Add: CGST @ 9% 900
Add: SGST @ 9% 900
Total price charged by X from A for intra-State 11,800

supply of goods/services
X is the first stage supplier of goods/services and hence, does not

have any credit of CGST, SGST or IGST.

II. Supply of goods/services by A of State 1 to B of State 2 – Value

addition @ 20%
Amount
(in `)
Value charged for supply of goods/services (` 10,000 x 120%) 12,000
Add: IGST @ 18% 2,160
Total price charged by A from B for inter-State supply of 14,160

goods/services
Computation of IGST payable to Government
Amount (in `)
IGST payable 2,160
Less: Credit of CGST 900
Less: Credit of SGST 900
IGST payable to Central Government 360
The IGST charged on B of State 2 for supply of goods/services will be

remitted by A of State 1 to the appropriate account of the Central
Government. State 1 (Exporting State) will transfer SGST credit of
` 900 utilised in the payment of IGST to the Central Government.
III. Supply of goods/services by B of State 2 to C of State 2 – Value
addition @ 20%
B will avail credit of IGST paid by him on the purchase of
goods/services and will utilise such credit for being set off against the
CGST and SGST payable on the local supply of goods/services made
by him to C.
Amount (in `)
Value charged for supply of goods/ services 14,400

1.20 INDIRECT TAXES
(` 12,000 x 120%)
Add: CGST @ 9% 1,296
Add: SGST @ 9% 1,296
Total price charged by B from C for local supply of 16,992
goods/services
Computation of CGST, SGST payable to Government
Amount (in `)
CGST payable 1,296
Less: Credit of IGST 1,296
CGST payable to Central Government Nil
SGST payable 1,296
Less: Credit of IGST (` 2,160 - ` 1,296) 864
SGST payable to State Government 432
Central Government will transfer IGST credit of ` 864 utilised in the

payment of SGST to State 2 (Importing State).
Note: Rates of CGST, SGST and IGST have been assumed to be 9%, 9%
and 18% respectively for the sake of simplicity.
Statement of revenue earned by Central and State Governments
Transaction Revenue to Revenue to Revenue to

Central Government Government
Government of State 1 of State 2
(`) (`) (`)
Supply of goods/services 900 900

by X to A
Supply of goods/services 360

by A to B
Transfer by State 1 to 900 (900)

Centre
Supply of goods/services 432

by B to C
Transfer by Centre to (864) 864

State 2
Total 1,296 Nil 1,296

IX. GST Common Portal
Before GST, since, the Centre and State indirect tax administrations worked
under different laws, regulations, procedures and formats, their IT
infrastructure and systems were also independent of each other. Integrating
them for GST implementation was complex since it required integrating the
entire indirect tax ecosystem so as to bring all the tax administrations
(Centre, State and Union Territories) to the same level of IT maturity with
uniform formats and interfaces for taxpayers and other external
stakeholders.
Besides, GST being a destination-based tax, the inter-State trade of goods
and services (IGST) needed a robust settlement mechanism amongst the
States and the Centre. A Common Portal was needed which could act as a
clearing house and verify the claims and inform the respective Governments
to transfer the funds. This was possible only with the help of a strong IT
Infrastructure.
Resultantly, Common GST Electronic Portal – www.gst.gov.in – a website
managed by Goods and Services Network (GSTN) [a company incorporated
under the provisions of section 8 of the Companies Act, 2013] is set by the
Government to establish a uniform interface for the tax payer and a
common and shared IT infrastructure between the Centre and States.
The GST portal is accessible over Internet (by taxpayers and their CAs/Tax
Advocates etc.) and Intranet by Tax Officials etc. The portal is one single
common portal for all GST related services.

1.22 INDIRECT TAXES
A common GST system provides linkage

to all State/ UT Commercial Tax
Departments, Central Tax authorities, Taxpayers, Banks and other
stakeholders. The eco-system consists of all stakeholders starting from
taxpayer to tax professional to tax officials to GST portal to Banks to
accounting authorities.
The functions of the GSTN include facilitating registration; forwarding the

returns to Central and State authorities; computation and settlement of
IGST; matching of tax payment details with banking network; providing
various MIS reports to the Central and the State Governments based on the
taxpayer return information; providing analysis of taxpayers' profile.
However, it is important to note that the Common
GST Electronic Portal for furnishing electronic way
bill is www.ewaybillgst.gov.in [managed by the
National Informatics Centre, Ministry of Electronics
& Information Technology, Government of India].
E-way bill is an electronic document generated on
the GST portal evidencing movement of goods.
X. GSPs/ASPs
GSTN has selected certain Information Technology, Information Technology
enabled Services and financial technology companies,
to be called GST Suvidha Providers (GSPs). GSPs
develop applications to be used by taxpayers for
interacting with the GSTN.
They facilitate the tax-payers in uploading invoices as
well as filing of returns and act as a single stop shop for
GST related services.

They customize products that address the needs of

different segment of users. GSPs may take the help of
Application Service Providers (ASPs) who act as a link
between taxpayers and GSPs.
XI. Compensation Cess
A GST Compensation Cess at specified rate
has been imposed under the Goods and
Services Tax (Compensation to States) Cess
Act, 2017 on the specified luxury items or demerit goods, like pan masala,
tobacco, aerated waters, motor cars etc., computed on value of taxable
supply. Compensation cess is leviable on intra-State supplies and inter-
State supplies with a view to provide for compensation to the States for the
loss of revenue arising on account of implementation of the GST.
Compensation is to be provided to a State for a period of 5 years from the
date on which the State brings its SGST Act into force.
XII. GST – A tax on goods and services
GST is levied on all goods and services, except alcoholic liquor for human
consumption and petroleum crude, diesel, petrol, ATF and natural gas.
 Alcoholic liquor for human consumption:
is outside the realm of GST. The
manufacture/production of alcoholic liquor
continues to be subjected to State excise
duty and inter-State/intra-State sale of the
same is subject to CST/VAT respectively.
 Petroleum crude, diesel, petrol, ATF and natural gas: As regards
petroleum crude, diesel, petrol, ATF and natural gas are concerned,
they are not presently leviable to GST. GST will be levied on these
products from a date to be notified on the recommendations of the
GST Council.
 Till such date, central excise duty continues to be levied on
manufacture/production of petroleum crude, diesel, petrol, ATF and
natural gas and inter-State/intra-State sale of the same is subject to
CST/ VAT respectively.

1.24 INDIRECT TAXES
 Tobacco: Tobacco is within the purview of GST, i.e. GST is leviable on

tobacco. However, Union Government has also retained the power to
levy excise duties on tobacco and tobacco products manufactured in
India. Resultantly, tobacco is subject to GST as well as central
excise duty.
 Opium, Indian hemp and other narcotic drugs and narcotics:
Opium, Indian hemp and other narcotic drugs and narcotics are within
the purview of GST, i.e. GST is leviable on them. However, State
Governments have also retained the power to levy excise duties on
such products manufactured in India. Resultantly, Opium, Indian
hemp and other narcotic drugs and narcotics are subject to GST as
well as State excise duties.
 Further, real estate sector has been kept out of ambit of GST, i.e. GST
will not be levied on sale/purchase of immovable property.
The various central, state and local levies were examined to identify their
possibility of being subsumed under GST. While identifying, the following
principles were kept in mind:
(i) Taxes or levies to be subsumed should be primarily in the nature of indirect
taxes, either on the supply of goods or on the supply of services.
(ii) Taxes or levies to be subsumed should be part of the transaction chain
which commences with import/ manufacture/ production of goods or
provision of services at one end and the consumption of goods and services
at the other.
(iii) The subsuming of taxes should result in free flow of tax credit in intra and
inter-State levels. The taxes, levies and fees that were not specifically related
to supply of goods & services would not be subsumed under GST.
(iv) Revenue fairness for both the Union and the States individually would need
to be attempted.

Taking the above principles into account, following taxes were subsumed in the
GST:
Central Taxes State Taxes
 Central Excise Duty & Additional  State surcharges and cesses in so far
Excise Duties as they relate to supply of goods &
 Service Tax services
 Entertainment Tax (except those
 Excise Duty under Medicinal & Toilet
levied by local bodies)
Preparation Act
 Tax on lottery, betting and gambling
 CVD & Special CVD
 Entry Tax (All Forms) & Purchase Tax
 Central Sales Tax  VAT/ Sales tax
 Central surcharges & Cesses in so far  Luxury Tax
as they relate to supply of goods &  Taxes on advertisements
services
GST

1.26 INDIRECT TAXES
Alcohol for human Power to tax remains with the

consumption State
Five petroleum products GST Council to decide the date

– crude oil, diesel, petrol, from which GST will be
natural gas and ATF applicable
Entertainment tax levied Power to tax remains with the

by local bodies local bodies
Tobacco Within the purview of GST. Power

to levy excise duties, also
retained.
8. BENEFITS OF GST
GST is a win-win situation for the entire country. It brings benefits to all the
stakeholders of industry, Government and the consumer. The significant benefits
of GST are discussed hereunder:
Benefits to economy
 Creation of unified national market: 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.
 Boost to ‘Make in India' initiative: GST gives a major boost to the ‘Make
in India' initiative of the Government of India by
making goods and services produced in India
competitive in the national as well as international
market. This will create India as a ― Manufacturing
hub.

 Enhanced investment and employment: The subsuming of major Central

and State taxes in GST,
complete and comprehensive
setoff of input tax on goods
and services and phasing out
of Central Sales Tax (CST)
reduces the cost of locally manufactured goods and services and increases
the competitiveness of Indian goods and services in the international
market and thus, gives boost to investments and Indian exports. With a
boost in exports and manufacturing activity, more employment is generated
and GDP is increased.
Simplified tax structure
 Ease of doing business: Simpler tax regime

with fewer exemptions along with reduction in
multiplicity of taxes under GST has led to
simplification and uniformity in tax structure. The uniformity in laws,
procedures and tax rates across the country makes doing business easier.
 Certainty in tax administration: Common system of classification of goods

and services across the country ensures certainty in tax administration
across India.
Easy tax compliance
 Automated procedures with greater use of IT: There are simplified and
automated procedures for various
processes such as registration, returns,
refunds, tax payments. All interaction
is through the common GSTN portal,
therefore, less public interface between the taxpayer and the tax
administration.
 Reduction in compliance costs: The compliance cost is lesser under GST

as multiple record-keeping for a variety of taxes is not needed, therefore,
there is lesser investment of resources and manpower in maintaining

1.28 INDIRECT TAXES
records. The uniformity in laws, procedures and tax rates across the country
goes a long way in reducing the compliance cost.
Advantages for trade and industry
 Benefits to industry: GST has given more relief to trade and industry
through a more comprehensive and wider
coverage of input tax set-off and service tax
set-off, subsuming of several Central and State
taxes in the GST and phasing out of CST. The
transparent and complete chain of set-offs
which results in widening of tax base and better
tax compliance also leads to lowering of tax
burden on an average dealer in trade and
industry.
 Mitigation of ill effects of cascading: By subsuming most of the Central

and State taxes into a single tax and by allowing a set-off of prior-stage
taxes for the transactions across the entire value chain, it helps in mitigating
the ill effects of cascading, improving competitiveness and improving
liquidity of the businesses.
 Benefits to small traders and entrepreneurs: GST has increased the

threshold for GST registration for small businesses. Further, single
registration is needed in one State. Small businesses have also been
provided the additional benefit of composition scheme. With the creation of
a seamless national market across the country, small enterprises have an
opportunity to expand their national footprint with minimal investment.

9. CONSTITUTIONAL PROVISIONS
India has a three-tier federal structure, comprising the Union Government, the
State Governments and the Local Government.
The power to levy taxes and duties is distributed among the three tiers of
Governments, in accordance with the provisions of the Indian Constitution.
The Constitution of India is the supreme law of India. It consists of a Preamble,
25 parts containing 448 Articles and 12 Schedules.
Power to levy and collect taxes whether, direct or indirect emerges from the
Constitution of India. In case any tax law, be it an act, rule, notification or order is

1.30 INDIRECT TAXES
not in conformity with the Constitution, it is called ultra vires the Constitution and
is illegal and void.
Thus, a study of the basic provisions of the Constitution is essential for
understanding the genesis of the various taxes being imposed in India.
25 Parts
Preamble (containing
448 articles)
12
Schedules
Constitution of India
The significant provisions of the Constitution relating to taxation are:
I. Article 265: Article 265 of the Constitution of India prohibits arbitrary
collection of tax. It states that “no tax shall be levied or collected except
by authority of law”. The term “authority of law” means that tax proposed
to be levied must be within the legislative competence of the Legislature
imposing the tax.
II. Article 245: Part XI of the Constitution deals with relationship between the
Union and States. The power for enacting the laws is conferred on the
Parliament and on the Legislature of a State by Article 245 of the
Constitution. The said Article provides as under:
 Subject to the provisions of this Constitution, Parliament may make
laws for the whole or any part of the territory of India, and the
legislature of a State may make laws for the whole or any part of the
State.
 No law made by the Parliament shall be deemed to be invalid on the
ground that it would have extra-territorial operation.
III. Article 246: It gives the respective authority to Union and State
Governments for levying tax. Whereas Parliament may make laws for the

whole of India or any part of the territory of India, the State Legislature may
make laws for whole or part of the State.
IV. Seventh Schedule to Article 246: It contains three lists which enumerate
the matters under which the Union and the State Governments have the
authority to make laws.
LIST – I LIST – II LIST – III

UNION CONCURRENT
STATE LIST
LIST LIST
It contains It contains
the matters It contains the
the matters matters in
in respect in respect of
of which the respect of
which the which both
Parliament State
(Central the Central &
Government State
Government) has the
has the Governments
exclusive have power to
exclusive right to
right to make laws.
make laws .
make laws.
Entries 82 to 91 of List I enumerate the subjects where the Central

Government has power to levy taxes. Entries 45 to 63 of List II enumerate
the subjects where the State Governments have the power to levy taxes.
Parliament has a further power to make any law for any part of India not
comprised in a State even if such matter is included in the State List.
Income tax is levied by virtue of Entry 82 - Taxes on income other than
agricultural income and customs duty vide Entry 83 - Duties of customs
including export duties of the Union List.
Power to levy
Goods and
Services Tax (GST)
has been conferred by Article 246A of the Constitution which was
introduced by the Constitution (101st Amendment) Act, 2016. Before
discussing the significant provisions of the Constitution (101st Amendment)
Act, 2016, let us first understand why there arose a need for such
constitutional amendment.

1.32 INDIRECT TAXES
Need for the constitutional amendment

The Constitutional provisions hitherto had delineated separate powers for
the Centre and the States to impose various taxes. Whereas the Centre
levied excise duty on all goods produced or manufactured in India, the
States levied Value Added Tax once the goods entered the stream of trade
upon completion of manufacture.
In the case of inter-State sales, the Centre had the power to levy a tax (the
Central Sales Tax), but the tax was collected and retained entirely by the
States (from where the movement of goods start). Services were exclusively
taxed by the Centre together with applicable cesses, if any. Besides, there
were State specific levies like entry tax, Octroi, luxury tax, entertainment tax,
lottery and betting tax, local taxes levied by Panchayats etc.
With respect to goods imported from outside the country into India, Centre
levied basic customs duty and additional duties of customs together with
applicable cesses, if any.
Introduction of the GST required amendment in the Constitution so as to
enable integration of the central excise duty, additional duties of customs,
State VAT and certain State specific taxes and service tax into a
comprehensive Goods and Services Tax and to empower both Centre and
the States to levy and collect it.
Consequently, Constitution (101st Amendment Act), 2016 (hereinafter
referred to as Constitution Amendment Act) was passed. It has 20 sections.
Newly inserted Article 279A empowering President to constitute GST
Council was notified on 12.09.2016. Remaining provisions were notified
with effect from 16.09.2016.
Significant provisions of Constitution (101 st Amendment) Act, 2016

Significant amendments made by Constitution Amendment Act are
discussed below:
V. Article 246A: Power to make laws with respect to Goods and
Services Tax
Newly inserted Article 246A

(1) Notwithstanding anything contained in Articles 246 and 254,
Parliament, and, subject to clause (2), the Legislature of every

State, have power to make laws with respect to goods and

services tax imposed by the Union or by such State.
(2) Parliament has exclusive power to make laws with respect to
goods and services tax where the supply of goods, or of services,
or both takes place in the course of inter-State trade or
commerce.
Explanation.—The provisions of this article, shall, in respect of goods
and services tax referred to in clause (5) of article 279A, take effect
from the date recommended by the Goods and Services Tax Council.
 This article grants power to Centre and

State Governments to make laws with
respect to GST imposed by Centre or such
State.
 Centre has the exclusive power to make laws with respect to GST in
case of inter-State supply of goods and/or services.
 However, in respect to the following goods, the aforesaid provisions
shall apply from the date recommended by the GST Council:
motor
high spirit aviation
petroleum natural
speed ((commonly turbine
crude gas
diesel known as fuel
petrol)
 The provisions of Article 246A are notwithstanding anything contained

in Articles 246 and 254. Article 254 deals with the supremacy of the
laws made by Parliament.
VI. Article 269A: Levy and collection of GST on inter-State supply
 Article 269A stipulates that GST on
supplies in the course of inter-State trade
or commerce shall be levied and collected
by the Government of India and such tax
shall be apportioned between the Union and the States in the manner
as may be provided by Parliament by law on the recommendations of
the Goods and Services Tax Council.

1.34 INDIRECT TAXES
 In addition to above, import of goods or services or both into India

will also be deemed to be supply of goods and/ or services in the
course of Inter-State trade or Commerce.
 This will give power to Central Government to levy IGST on the import
transactions which were earlier subject to Countervailing duty under
the Customs Tariff Act, 1975.
 Where an amount collected as IGST has been used for payment of
SGST or vice versa, such amount shall not form part of the
Consolidated Fund of India. This is to facilitate transfer of funds
between the Centre and the States.
 Parliament is empowered to formulate the principles regarding place
of supply and when supply of goods, or of services, or both occurs in
inter-State trade or commerce.
VII. Definitions of ‘Goods and Services Tax’, ‘Services’ and ‘State’
incorporated under Article 366
 The terms Goods and Services Tax, services and State have been
defined under respective clauses of Article 366 as follows:
 Goods and services tax means any tax on
supply of goods, or services or both except
taxes on the supply of the alcoholic liquor for
human consumption. Consequently, GST can be levied on supply of
all goods and services except alcoholic liquor for human consumption.
 Services means anything other than
goods.
 State, with reference to articles 246A, 268, 269,
269A and article 279A, includes a Union territory
with Legislature.
 Definition of “goods”: The term goods has already been defined
under clause (12) of Article 366 in an inclusive manner to provide that
“goods includes all materials, commodities, and articles”.
VIII. GST Council: Article 279A
 Article 279A of the Constitution empowers the President to constitute
a joint forum of the Centre and States namely, Goods & Services Tax
Council (GST Council).

 The provisions relating to GST Council came into force on 12th

September, 2016. President constituted the GST Council on 15th
September, 2016.
 The Union Finance Minister is the
Chairman of this Council and Ministers
in charge of Finance/Taxation or any GST COUNCIL
other Minister nominated by each of
the States & UTs with Legislatures are
its members. Besides, the Union
Minister of State in charge of Revenue or Finance is also its member.
 The function of the Council is to make recommendations to the Union
and the States on important issues like tax rates, exemptions,
threshold limits, dispute resolution etc.
 It shall recommend the special provisions with respect to the Special
Category States. There are 11 Special Category States, namely, States
of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh
and Uttarakhand. Special threshold limits for registration,
composition, exemptions, etc. have been recommended for some or
all of these States.
 GST Council shall also recommend the date on which GST be levied on
petroleum crude, high speed diesel, motor spirit, natural gas and
aviation turbine fuel.
 Every decision of the GST Council is taken by a majority of not less
than three-fourths of the weighted votes of the members present and
voting. Vote of the Centre has a weightage of one-third of total votes
cast and votes of all the State Governments taken together has a
weightage of two-thirds of the total votes cast, in that meeting.
10. TEST YOUR KNOWLEDGE

1. Differentiate between direct and indirect taxes.
2. Enumerate major direct and indirect taxes.
3. Explain the salient features of indirect taxes.
4. Write a short note on various Lists provided under Seventh Schedule to the
Constitution of India.

1.36 INDIRECT TAXES
5 Discuss the deficiencies in the existing indirect taxes which led to the need for
ushering into GST regime.
6. Discuss the dual GST model as introduced in India.
7. List the Central and State levies which have been subsumed in GST in India.
8. Discuss the need and functions of the common GST portal.
9. Briefly explain the leviability of GST or otherwise on petroleum crude, diesel,
petrol, Aviation Turbine Fuel (ATF) and natural gas.
10. Elaborate the principles that were borne in mind while subsuming various
central, state and local levies, under GST.
11. GST is a simplified tax structure. Justify the statement.
12. List the advantages that GST accrues to the trade and industry.
13. List the special category States as prescribed in Article 279A of the
Constitution of India.
14. Discuss the leviabilty of GST or otherwise on tobacco.
11. ANSWERS/HINTS
1. Difference between direct taxes and indirect taxes:
Direct Taxes Indirect Taxes
The person paying the tax The person paying the tax to the
to the Government directly Government collects the same from the
bears the incidence of the ultimate consumer. Thus, incidence of the tax
tax. is shifted to the other person.
Progressive in nature - Regressive in nature - All the consumers

high rate of taxes for equally bear the burden, irrespective of their
people having higher ability to pay.
ability to pay.
2. Major indirect taxes are goods and services tax & customs duty and direct
tax is income tax.
3. Salient features of indirect taxes are:
(i) An important source of revenue: Indirect taxes are a major source of
tax revenues for Governments worldwide and continue to grow as

more countries move to consumption oriented tax regimes. In India,

indirect taxes contribute more than 50% of the total tax revenues of
Central and State Governments.
(ii) Tax on commodities and services: It is levied on commodities at the
time of supply or manufacture or purchase or sale or import/export
thereof. Hence, it is also known as commodity taxation. It is also
levied on supply of services.
(iii) Shifting of burden: There is a clear shifting of tax burden in respect of
indirect taxes. For example, GST paid by the supplier of the goods is
recovered from the buyer by including the tax in the cost of the
commodity.
(iv) No perception of direct pinch: Since, value of indirect taxes is
generally inbuilt in the price of the commodity, most of the time the
tax payer/consumer pays the same without actually knowing that he is
paying tax to the Government. Thus, tax payer does not perceive a
direct pinch while paying indirect taxes.
(v) Inflationary: Tax imposed on commodities and services causes an all-
round price spiral. In other words, indirect taxation directly affects the
prices of commodities and services and leads to inflationary trend.
(vi) Wider tax base: Unlike direct taxes, the indirect taxes have a wide tax
base. Majority of the products or services are subject to indirect taxes
with low thresholds.
(vii) Promotes social welfare: Higher taxes are imposed on the
consumption of harmful products (also known as ‘sin goods’) such as
alcoholic products, tobacco products etc. This not only checks their
consumption but also enables the State to collect substantial revenue.
(viii) Regressive in nature: Generally, the indirect taxes are regressive in
nature. The rich and the poor have to pay the same rate of indirect
taxes on certain commodities of mass consumption. This may further
increase the income disparities between the rich and the poor.
4. Seventh Schedule to Article 246 of the Constitution contains three lists
which enumerate the matters under which the Union and the State
Governments have the authority to make laws.

1.38 INDIRECT TAXES
(i) List -I (UNION LIST): It contains the matters in respect of which the
Parliament (Central Government) has the exclusive right to make laws.
(ii) List -II (STATE LIST): It contains the matters in respect of which the
State Government has the exclusive right to make laws.
(iii) List -II (CONCURRENT LIST): It contains the matters in respect of which
both the Central & State Governments have power to make laws.
5. Deficiencies in the erstwhile indirect tax regime:
(a) Certain transactions were subject to double taxation and were taxed
as both goods and services, since under the earlier regime, distinction
between goods and services was often blurred.
(b) CENVAT did not include chain of value addition in the distributive
trade after the stage of production. Similarly, in the State-level VAT,
CENVAT load on the goods was not removed leading to the cascading
of taxes.
(c) Though CENVAT and State-Level VAT were essentially value added
taxes, set off of one against the credit of another was not possible as
CENVAT was a central levy and State-Level VAT was a State levy.
(d) There were several taxes in the States, such as, Luxury Tax,
Entertainment Tax, etc. which were not subsumed in the VAT. Hence
for a single transaction, multiple taxes in multiple forms were required
to be paid.
(e) VAT on goods was not integrated with tax on services, at the State
level, to remove the cascading effect of service tax. With service
sector being the fastest growing sector in the economy, the exclusion
of services from the tax base of the States potentially eroded their tax-
buoyancy.
(f) CST was another source of distortion in terms of its cascading nature
since it was non-VATABLE. Being an origin based tax, CST was also
against one of the basic principles of consumption taxes that tax
should accrue to the jurisdiction where consumption takes place.
6. India has adopted a Dual GST model in view of the federal structure of the
country. Consequently, Centre and States simultaneously levy GST on
taxable supply of goods or services or both, which takes place within a State
or Union Territory. Thus, tax is imposed concurrently by the Centre and

States, i.e. Centre and States simultaneously tax goods and services. Now,
the Centre also has the power to tax intra-State sales & States are also
empowered to tax services. GST extends to whole of India including the
State of Jammu and Kashmir.
7. Central levies that are subsumed in GST are as follows:
 Central Excise Duty & Additional Excise Duties
 Service Tax
 Excise Duty under Medicinal & Toilet Preparation Act
 CVD & Special CVD
 Central Sales Tax
 Central surcharges & Cesses in so far as they relate to supply of goods
& services
State levies that are subsumed in GST are as follows:
 State surcharges and cesses in so far as they relate to supply of goods
& services
 Entertainment Tax (except those levied by local bodies)
 Tax on lottery, betting and gambling
 Entry Tax (All Forms) & Purchase Tax
 VAT/ Sales tax
 Luxury Tax
 Taxes on advertisements
8. GST being a destination-based tax, the inter-State trade of goods and
services (IGST) needed a robust settlement mechanism amongst the States
and the Centre. A Common Portal was needed which could act as a clearing
house and verify the claims and inform the respective Governments to
transfer the funds. This was possible only with the help of a strong IT
Infrastructure.
Resultantly, Common GST Electronic Portal – www.gst.gov.in – a website
managed by Goods and Services Network (GSTN) [a company incorporated
under the provisions of section 8 of the Companies Act, 2013] is set by the

1.40 INDIRECT TAXES
Government to establish a uniform interface for the tax payer and a

common and shared IT infrastructure between the Centre and States.
The functions of the GSTN include facilitating registration; forwarding the
returns to Central and State authorities; computation and settlement of
IGST; matching of tax payment details with banking network; providing
various MIS reports to the Central and the State Governments based on the
taxpayer return information; providing analysis of taxpayers' profile.
9. Petroleum crude, diesel, petrol, ATF and natural gas are presently not
leviable to GST. GST will be levied on these products from a date to be
notified on the recommendations of the GST Council. Till such date, central
excise duty continues to be levied on manufacture/production of petroleum
crude, diesel, petrol, ATF and natural gas and inter-State/intra-State sale of
the same is subject to CST/ VAT respectively.
10. The various central, state and local levies were examined to identify their
possibility of being subsumed under GST. While identifying, the following
principles were kept in mind:
(i) Taxes or levies to be subsumed should be primarily in the nature of
indirect taxes, either on the supply of goods or on the supply of
services.
(ii) Taxes or levies to be subsumed should be part of the transaction chain
which commences with import/ manufacture/ production of goods or
provision of services at one end and the consumption of goods and
services at the other.
(iii) The subsuming of taxes should result in free flow of tax credit in intra
and inter-State levels. The taxes, levies and fees that were not
specifically related to supply of goods & services should not be
subsumed under GST.
(iv) Revenue fairness for both the Union and the States individually would
need to be attempted.
11. GST is a simplified tax structure. The statement is justified. Simpler tax
regime with fewer exemptions along with reduction in multiplicity of taxes
under GST has led to simplification and uniformity in tax structure. The
uniformity in laws, procedures and tax rates across the country makes doing
business easier. Common system of classification of goods and services
across the country ensures certainty in tax administration across India.

12. GST accrues following advantages to the trade and industry

(i) Benefits to industry: GST has given more relief to trade and industry
through a more comprehensive and wider coverage of input tax set-
off and service tax set-off, subsuming of several Central and State
taxes in the GST and phasing out of CST. The transparent and
complete chain of set-offs which results in widening of tax base and
better tax compliance also leads to lowering of tax burden on an
average dealer in trade and industry.
(ii) Mitigation of ill effects of cascading: By subsuming most of the
Central and State taxes into a single tax and by allowing a set-off of
prior-stage taxes for the transactions across the entire value chain, it
helps in mitigating the ill effects of cascading, improving
competitiveness and improving liquidity of the businesses.
(iii) Benefits to small traders and entrepreneurs: GST has increased the
threshold for GST registration for small businesses. Further, single
registration is needed in one State. Small businesses have also been
provided the additional benefit of composition scheme. With the
creation of a seamless national market across the country, small
enterprises have an opportunity to expand their national footprint
with minimal investment.
13. There are 11 Special Category States, namely, States of Arunachal Pradesh,
Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland,
Sikkim, Tripura, Himachal Pradesh and Uttarakhand.
14. Tobacco is within the purview of GST, i.e. GST is leviable on tobacco.
However, Union Government has also retained the power to levy excise
duties on tobacco and tobacco products manufactured in India. Resultantly,
tobacco is subject to GST as well as central excise duty.

1.1
CHAPTER 2
SUPPLY UNDER GST

LEARNING OUTCOMES
After studying this Chapter, you will be able to –

 understand the taxable event under GST
 analyse the taxable event – Supply – its meaning and scope.
 identify the transactions that will amount to supply even
without any consideration.
 identify the transactions which will be neither the supply of
goods nor the supply of services.
 classify the specified transactions either as supply of goods
or as supply of services.
 explain the composite and mixed supplies and their taxability
under GST.

2.2 INDIRECT TAXES
CHAPTER OVERVIEW
Meaning of supply - Supply with consideration in course/
furtherance of business
Import of services with consideration whether or not in course/

furtherance of business treated as supply
Taxable Event
Activities treated as supply even without consideration

(Supply)
Activities classified as either Supply of goods or Supply of services
Activities neither the supply of goods nor the supply of services
Concept of Composite and Mixed Supplies
1. INTRODUCTION
A taxable event is any transaction or occurrence
that results in a tax consequence. Before levying
any tax, taxable event needs to be ascertained. It
is the foundation stone of any taxation system; it
determines the point at which tax would be
levied.
Under the earlier indirect tax regime, the
framework of taxable event in various statutes
was prone to catena of interpretations resulting
in litigation since decades. The controversies largely related to issues like whether
a particular process amounted to manufacture or not, whether the sale was pre-
determined sale, whether a particular transaction was a sale of goods or rendering
of services etc.
The GST laws resolve these issues by laying down one
comprehensive taxable event i.e. “Supply” - Supply of goods or
services or both. Various taxable events namely manufacture, sale,

SUPPLY UNDER GST 2.3
rendering of service, purchase, entry into a territory of State etc. have been done
away with in favour of just one event i.e. Supply.
GST Law, by levying tax on the ‘supply’ of goods and/or services, departs from the
historically understood concepts of ‘taxable event’ under the State VAT Laws, Excise
Laws and Service Tax Law i.e. sale, manufacture and service respectively.
In the GST regime, the entire value of supply of goods and/or services is taxed
in an integrated manner, unlike the earlier indirect taxes, which were charged
independently either on the manufacture or sale of goods, or on the provisions
of services.
2. RELEVANT DEFINITIONS
Goods: means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed
before supply or under a contract of supply. [Sec. 2(52) of CGST Act].
Principal: means a person on whose behalf an agent carries on the
business of supply or receipt of goods or services or both [Section 2(88)
of CGST Act].
Competent authority: means such authority as may be notified by the
Government [Section 2(29) of the CGST Act].
Family: means, —
(i) the spouse and children of the person, and
(ii) the parents, grand-parents, brothers and sisters of the person if they
are wholly or mainly dependent on the said person [Section 2(49) of
the CGST Act].

2.4 INDIRECT TAXES
Business: includes –
(a) any trade, commerce, manufacture, profession, vocation, adventure,

wager or any other similar activity, whether or not it is for a pecuniary
benefit;;
(b) any activity or transaction in connection with or incidental or ancillary
to (a) above;
(c) any activity or transaction in the nature of (a) above, whether or not
there is volume, frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital assets and services in

connection with commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a

subscription or any other consideration) of the facilities or benefits to its
members, as the case may be;
(f) admission, for a consideration, of persons to any premises; and
(g) services supplied by a person as the holder of an office which has

been accepted by him in the course or furtherance of his trade, profession
or vocation;
(h) activities of a race club including by way of totalisator or a license to

book maker or activities of a licensed book maker in such club
(i) any activity or transaction undertaken by the Central Government, a
State Government or any local authority in which they are engaged as
public authorities
[Section 2(17) of CGST Act].

Government: means the Central Government [Section 2(53) of the CGST Act].
Local authority: means —
(a) a “Panchayat” as defined in clause (d) of article 243 of the
Constitution.
(b) a “Municipality” as defined in clause (e) of article 243P of the
Constitution.

(c) a Municipal Committee, a Zilla Parishad, a District Board, and any

other authority legally entitled to, or entrusted by the Central
Government or any State Government with the control or
management of a municipal or local fund.
(d) a Cantonment Board as defined in section 3 of the Cantonments Act,
2006.
(e) a Regional Council or a District Council constituted under the Sixth
Schedule to the Constitution.
(f) a Development Board constituted under article 371 and article 371J
of the Constitution.
(g) a Regional Council constituted under article 371A of the
Constitution [Section 2(69) of the CGST Act].
Consideration: in relation to the supply of goods or services or both includes:
• any payment made or to be made, whether in money or otherwise,
in respect of, in response to, or for the inducement of, the supply of
goods or services or both, whether by the recipient or by any other
person but shall not include any subsidy given by the Central
Government or a State Government,
• the monetary value of any act or forbearance, in respect of, in
response to, or for the inducement of, the supply of goods or
services or both, whether by the recipient or by any other person but
shall not include any subsidy given by the Central Government or a
State Government.
However, a deposit given in respect of the supply of goods or services or
both shall not be considered as payment made for such supply unless the
supplier applies such deposit as consideration for the said supply. [Section
2(31) of CGST Act].
Actionable claim: means a claim to any debt, other than a debt secured by
mortgage of immovable property or by hypothecation or pledge of movable
property, or to any beneficial interest in movable property not in the
possession, either actual or constructive, of the claimant, which the civil courts
recognise as affording grounds for relief, whether such debt or beneficial
interest be existent, accruing, conditional or contingent [Section 2(1) of CGST
Act read with section 3 of the Transfer of Property Act, 1882].

2.6 INDIRECT TAXES
Manufacture: means processing of raw material or inputs in any manner

that results in emergence of a new product having a distinct name, character
and use and the term “manufacturer” shall be construed accordingly [Section
2(72) of CGST Act].
Money: means the Indian legal tender or any foreign currency, cheque,
promissory note, bill of exchange, letter of credit, draft, pay order, traveller
cheque, money order, postal or electronic remittance or any other instrument
recognised by the Reserve Bank of India when used as a consideration to settle
an obligation or exchange with Indian legal tender of another denomination
but shall not include any currency that is held for its numismatic value [Section
2(75) of CGST Act].
Taxable supply: means a supply of goods or services or both which is
leviable to tax under this Act [Section 2(108) of CGST Act].
Taxable territory: means the territory to which the provisions of this Act
apply [Section 2(109) of CGST Act].
Services: means anything other than goods, money and securities but
includes activities relating to the use of money or its conversion by cash
or by any other mode, from one form, currency or denomination, to
another form, currency or denomination for which a separate
consideration is charged.
Explanation: For the removal of doubts, it is hereby clarified that the
expression “services” includes facilitating or arranging transactions in
securities [Section 2(102) of CGST Act].
Supplier: in relation to any goods or services or both, shall mean the
person supplying the said goods or services or both and shall include an
agent acting as such on behalf of such supplier in relation to the goods
or services or both supplied [Section 2(105) of CGST Act].
Recipient: of supply of goods and/or services means-
(a) where a consideration is payable for the supply of goods or services
or both, the person who is liable to pay that consideration,
(b) where no consideration is payable for the supply of goods, the
person to whom the goods are delivered or made available, or to
whom possession or use of the goods is given or made available,
and

(c) where no consideration is payable for the supply of a service, the

person to whom the service is rendered,
and any reference to a person to whom a supply is made shall be
construed as a reference to the recipient of the supply
and shall include an agent acting as such on behalf of the recipient in
relation to the goods or services or both supplied. [Section 2(93) of CGST
Act]
Person: includes [Section 2(84) of CGST Act]-
An individual A HUF A company
An association of persons or
A Limited Liability a body of individuals,
A firm
Partnership whether incorporated or not,
in India or outside India
Any corporation established Any body corporate A co-operative society

by/under any Central, State or
incorporated by or registered under any
Provincial Act or Government
company as defined in section under the laws of a law relating to
2(45) of Companies Act, 2013 country outside India cooperative societies
Society as defined
Central Government/ under the Societies
A local authority
State Government Registration Act,
1860
Every artificial juridical

Trust person, not falling
above

2.8 INDIRECT TAXES
Our discussion in this Study Material will principally be confined to the provisions
of CGST and IGST laws as the specific State GST laws 1 are outside the scope of
syllabus.
3. CONCEPT OF SUPPLY [SECTION 7 OF CGST ACT]

The concept of ‘supply’ is the key stone of the GST architecture. The provisions
relating to meaning and scope of supply are contained in Chapter III of the CGST
Act read with various Schedules given under the said Act. Following sections and
schedules shall be discussed in this chapter to understand the concept of supply:
Section 7 Meaning and scope of supply
Section 8 Taxability of composite and mixed supplies
Schedule I Activities to be treated as supply even if made without

consideration
Schedule II Activities or transactions to be treated as supply of goods or as

supply of services
Schedule III Activities or transactions which shall be treated neither as

supply of goods nor as supply of services.
STATUTORY PROVISIONS
Section 7 Meaning and Scope of Supply
Sub Section Clause Particulars
(1) Supply includes -
(a) all forms of supply of goods or services or both such as

sale, transfer, barter, exchange, licence, rental, lease or
1
It may be noted that GST laws of all the States and Union Territories are largely based on
the CGST Act, 2017.

disposal made or agreed to be made for a consideration

by a person in the course or furtherance of business
(b) importation of services, for a consideration whether or

not in the course or furtherance of business, and
(c) the activities specified in Schedule I, made or agreed to

be made without a consideration,
(1A) where certain activities or transactions, constitute a supply in

accordance with the provisions of sub-section (1), they shall be
treated either as supply of goods or supply of services as referred to
in Schedule II.
(2) Notwithstanding anything contained in sub-section (1),
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central

Government, a State Government or any local authority in
which they are engaged as public authorities, as may be
notified by the Government on the recommendations of
the Council
shall be treated neither as a supply of goods nor a supply of services.
(3) Subject to sub-sections (1), (1A) & (2), the Government may, on the
recommendations of the Council, specify, by notification, the
transactions that are to be treated as —
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.
ANALYSIS
The definition of ‘supply’ as contained in section 7 of the CGST Act is an inclusive
definition and does not define the term exhaustively. It defines the scope of supply
in an inclusive manner. Clause (a) of sub-section (1) illustrates the forms of supply,
but the list is not exhaustive. This is substantiated by the use of words ‘such as’ in
the definition.

2.10 INDIRECT TAXES
Provisions of scope of supply under CGST Act have also been made applicable
to IGST Act vide section 20 of the IGST Act.
The meaning and scope of supply in terms of section 7 can be understood in terms
of following parameters:
1. Supply should be of goods or services. Supply of anything other than goods
or services like money, securities etc. does not attract GST.
Money
Anything 💸💸
which is Securities
neither
Goods goods nor
Supply
NOT Supply
services
Services
2. Supply should be made for a consideration.

3. Supply should be made in the course or furtherance of business.
in the of goods
course or and
furtherance services
of business
Parameters for
consideration
of supply
Supply should be
Aforesaid parameters describe the concept of supply. However, there are a few
exceptions to 2nd and 3rd parameters [the requirement of supply being made for a
consideration and in the course or furtherance of business] in the GST law. Few

exceptions have been carved out where a transaction is deemed to be a supply

even without consideration [contained in Schedule I of the CGST Act – discussed
later in this Chapter]. Similarly, the condition of supply to be made in the course
or furtherance of business has been relaxed in case of import of services [Import
of services for a consideration, whether or not in the course or furtherance of business,
is treated as supply].
Further, there are also cases where a transaction is kept out of scope of supply
despite the existence of the above parameters, i.e. there is a list of activities
which are treated neither as supply of goods nor as supply of services. In other
words, they are outside the scope of GST.
GST law has classified certain activities/transactions either as supply of goods or
as supply of services. Government is also empowered to notify transactions that
are to be treated as a supply of goods and not as a supply of services, or as a
supply of services and not as a supply of goods.
In the subsequent paras, the above aspects of supply have been extensively
discussed. The discussion has been broadly categorised into following:
Supply for consideration in course or furtherance of business

[Section 7(1)(a)]
Importation of services for consideration whether or not in
includes course or furtherance of business
[Section 7(1)(b)]
Supply without consideration [Section 7(1)(c)
Supply
+ Schedule I]
excludes Non-supplies [Section 7(2) + Schedule III]
Activities to be treated as supply of goods or supply of services

[Section 7(1A) + Schedule II]
SUPPLY SHOULD BE OF GOODS OR SERVICES OR

BOTH
The definition of supply begins with the term ‘Supply Section
7(1)(a)
includes’, thus making it clear that CGST Act intends to give an
extensive meaning to the term ‘supply’. Supply includes all

2.12 INDIRECT TAXES
forms of supply of goods or services or both. Supply of anything other than

goods or services does not attract GST. The terms goods and services as defined
under the Act have been analysed by way of a diagram on next page. Anything
supplied other than goods and services is outside the scope of supply.
Goods Services
means means
Every kind of movable Anything other than goods

property
excludes
Money and securities
includes includes
(i) actionable claim** Activities relating to:

(ii) growing crops, grass and (i) Use of money** or
things attached to/forming (ii) Conversion of money by cash/by
part of the land which are any other mode, from one form/
agreed to be severed before currency/ denomination, to
supply or under a contract of another, for which a separate
supply. consideration is charged.
**Please refer the definitions of ‘actionable claims’ and ‘money’ as provided in

heading 2. – Relevant Definitions.

The first part of section 7 [Clause (a) of sub-section (1)] includes all forms of supply
of goods or services or both such as sale, transfer, barter, exchange, license, rental,
lease or disposal made or agreed to be made for consideration in the course or
furtherance of business.
Supply includes
sale, transfer, in the course or
barter, exchange, for consideration furtherance of
licence, rental, business
lease, disposal
Thus, the forms of supply as contemplated in this first part have two pre-requisites:
 the supply should be for a consideration; and
 the supply should be in the course or furtherance of business.

We shall now discuss the various forms of supply as illustrated in section 7(1)(a) in
detail:
SUPPLY INCLUDES ALL FORMS OF SUPPLY
Various forms of supply contemplated in section 7(1)(a) are sale, transfer, barter,
exchange, licence, rental, lease or disposal. These forms of supply are only
illustrative and not exhaustive. However, none of these terms have been defined
under the Act. In order to understand their meaning, we have taken recourse to
their dictionary meaning or otherwise and have explained them as follows:
I. Sale and Transfer: The dictionary meaning of term ‘sale’ is the act of selling;
specifically: the transfer of ownership of and title to property from one person
to another for a price 2. As per the Sale of Goods Act, 1930, a contract of sale
of goods is a contract whereby the seller transfers or agrees to transfer the
property in goods to the buyer for a price.
2
www.merriam-webster.com

2.14 INDIRECT TAXES
Further, the term ‘transfer’ has been defined in the Black’s Law dictionary as
to convey or remove from one place, person, etc., to another; pass or hand
over from one to another; specifically, to make over the possession or control
of.
(1) A shopkeeper sells a pen for ` 100 to the buyer. After the sale,
the pen belongs to the buyer and shopkeeper does not have any
right on the pen. This is a transaction of sale.
(2) A company transfers goods from its factory to the depot for
sale purposes. This is ‘transfer’ of goods where the sale has not
taken place.
II. Barter and Exchange: The dictionary meaning of term ‘barter’ is to exchange
goods or services for other goods or services instead of using money 3. Black’s
Law dictionary defines the term ‘exchange’ as an act of giving or taking one
thing for another.
While barter deals with a transaction which only includes an exchange of
goods/services, exchange may cover a situation where the goods are paid for
partly in goods and partly in money. When there is a barter of goods or
services, same activity constitutes supply as well as consideration.
(3) When a new car worth ` 5,00,000 is purchased in exchange of
an old car alongwith the monetary consideration of ` 4,00,000
paid for the said purchase.
(4) A doctor got his hair cut from a barber and provides him
medical consultancy in return. In this transaction, the doctor
provided the medical consultancy services to the barber for which
consideration was in the form of hair cutting services provided by the barber.
Similarly, the barber provided hair cutting services to the doctor for which
consideration was in the form of medical consultancy services provided by
the doctor.
III. Licence, lease, rental and disposal: The dictionary meaning of the term
‘licence’ is a permission granted by competent authority to engage in a
business or occupation or in an activity otherwise unlawful 4. Black’s law
3
www.macmillandictionary.com
4
www.merriam-webster.com

dictionary defines disposal as the sale, pledge, giving away, use, consumption
or any other disposition of a thing.
The dictionary meaning of ‘rental’ is an arrangement to rent something, or
the amount of money that you pay to rent something 5 and that of ‘lease’ is
to make a legal agreement by which money is paid in order to use land, a
building, a vehicle, or a piece of equipment for an agreed period of time 6.
Under GST, such licenses, leases and rentals of goods with or without transfer
of right to use are covered under the supply of service because there is no
transfer of title in such supplies. Such transactions are specifically treated as
supply of service in Schedule-II of CGST Act [Schedule-II has been discussed
in detail in the subsequent paras].
As discussed earlier, one of the parameters to qualify as a supply of goods and/or

services is that a supply is made for a consideration. This parameter has been
explicated in the following paras:
SUPPLY SHOULD BE FOR CONSIDERATION
The dictionary meaning of word ‘consideration’ is payment. Consideration need

not always be in the form of money. It can be in money or in kind. It covers
anything which might be possibly done, given or made in exchange for something
else. Further, a consideration need not always flow from the recipient of the supply.
It can also be made by a third person.
However, any subsidy given by the Central Government or a State Government is

not considered as consideration.
A deposit given in respect of the supply of goods or services or both shall not be
considered as payment made for such supply unless the supplier applies such
deposit as consideration for the said supply.
The term consideration is defined under section 2(31) of the CGST Act [Refer
heading ‘Relevant Definitions].
5
www.dictionary.cambridge.org
6
www.dictionary.cambridge.org

2.16 INDIRECT TAXES
The said definition has been depicted in the form of a diagram as follows:
CONSIDERATION
Payment in money Monetary value of any

or otherwise for the act or forbearance for
supply the supply
By recipient or any
Deposit to be other person
considered as
payment
ONLY
Excluding subsidy given
by Central/ State
when the supplier Governments
applies such deposit
as consideration for
the said supply
Let us examine the existence of consideration in the following two scenarios:

1. Donations received by charitable institutions from individual donors, without
quid pro quo
2. Art works sent by artists to galleries for exhibition
U11. 1. Donations received by charitable institutions from individual donors,
without quid pro quo
An important feature of consideration is quid pro quo [something for
something]. Donations received by the charitable organisations are
treated as consideration only if there exists, quid pro quo, i.e., there is an
obligation on part of recipient of the donation or gift to do anything
(supply a service).

Generally, institutions such as religious institutions, charitable

organisations, schools, hospitals, orphanages, old age homes etc. receive
financial help or any other support in the form of donation or gift from
the individual donors.
In order to express the gratitude towards such help/support, the recipient
institutions place a name plate or similar such acknowledgement in their
premises.
When the name of the donor is displayed in recipient institution’s
premises, in such a manner, which can be said to be an expression of
gratitude and public recognition of donor’s act of philanthropy and is
not aimed at giving publicity to the donor in such manner that it would
be an advertising or promotion of his business, then it can be said that
there is no supply of service for a consideration (in the form of donation).
In other words, there is no obligation (quid pro quo) on part of recipient
of the donation or gift to do anything (supply a service). Therefore, there
is no GST liability on such consideration.
Some examples of cases where there would be no taxable supply are as
follows:-
(5) Bhushan donated a blackboard to Yoganisht Sansthan - a
charitable yoga institution. Yoganisht Sansthan printed
underneath the blackboard so donated - “Good wishes from
Mr. Bhushan”.
(6) Smt. Durga Devi donated some money to a temple in the

memory of her late father. The Temple Trust constructed a
room in the temple complex from such donation and wrote
“Donated by Smt. Durga Devi in the memory of her father” on
the door floor of the room.
In above examples, it may be noticed that there is no reference or
mention of any business activity of the donor which otherwise would
have got advertised.

2.18 INDIRECT TAXES
Thus, GST is not leviable where all the following three conditions are
satisfied namely:
Purpose is
Gift or donation
Payment has the philanthropic (i.e., it
is made to a
character of gift leads to no
charitable
or donation commercial gain) and
organization
not advertisement
[Circular No. 116/35/2019 GST dated 11.10.2019]

2. Art works sent by artists to galleries for exhibition is not a supply as no
consideration flows from the gallery to the
artists
Artists give their work of art to galleries where it
is exhibited for supply. However, no
consideration flows from the gallery to the artist
when the art works are sent to the gallery for
exhibition and therefore, the same is not a
supply.
It is only when a buyer selects a particular art work displayed at the gallery,
that the actual supply takes place and applicable GST would be payable at
the time of such supply [Circular No. 22/22/2017 GST dated 21.12.2017].
Any transaction involving

supply of goods and/or
services without consideration
is not a supply unless it is
deemed to be a supply under
Schedule I of the CGST Act**.
**Provisions of Schedule I of the CGST Act have been discussed in detail later in this chapter.
Another parameter to qualify as supply of goods and/or services is that a supply is

made in course or furtherance of business. This parameter has been expounded in
the following paras:

SUPPLY SHOULD BE IN COURSE OR FURTHERANCE OF BUSINESS

GST is essentially a tax only on commercial transactions. Hence, only those supplies
that are in the course or furtherance of business qualify as supply under GST.
Resultantly, any supplies made by an individual in his personal capacity do not
come under the ambit of GST unless they fall within the definition of ‘business’.
Meaning of supply made in the course or furtherance of business: Any activity
undertaken in course/ for furtherance
of business would constitute a supply.
In order to understand the term ‘in the
course or furtherance of business’, we
need to first understand the term
‘business’. Business as defined under section 2(17) of the CGST Act, inter alia,
includes any trade, commerce, manufacture, profession, vocation etc. whether or
not undertaken for a monetary benefit.
The definition of business has been summarised in the diagram below:
Any activity incidental/ ancillary to it

Any trade/commerce, manufacture,
profession etc. even if there is no
Any activity of same nature even if
monetary benefit
no volume/continuity
Supply/acquisition of goods including in connection with commencement /

capital goods & services closure of business
Provision of facilities by club/ association etc. to its members for consideration

Business
includes
Admission for consideration to any premises
Services as holder of office accepted in course/ furtherance of trade, profession
Activities of a race by way of totalisator or a license to book maker or activities

club including of a licensed book maker in such club
Any activity by Government /local authority as public authorities
Thus, business includes any activity/transaction which is incidental or ancillary to

any trade, commerce, manufacture, profession, vocation, adventure, wager [bet] or
any other similar activity. In addition, any activity undertaken by the Central Govt.
or a State Govt. or any local authority in which they are engaged as public authority

2.20 INDIRECT TAXES
shall also be construed as business. For any trade, commerce, or any other similar
activity to qualify as business, frequency, volume, continuity or regularity of
such transaction is not a pre-requisite.
Some of the examples of supply made/not made ‘in the course or furtherance of
business’ are as follows:
(7) Rishabh buys a car for his personal use and after a year sells it to a
car dealer. Sale of car by Rishabh to car dealer is not a supply under CGST
Act because said supply is not made by Rishabh in the course or
furtherance of business 7.
(8) Manikarnika sold her old gold bangles and earrings to ‘Aabhushan
Jewellers’. Sale of old gold jewellery by an individual to a jeweller will not
constitute supply as the same cannot be said to be in the course or
furtherance of business of the individual 8.
The view taken in above two examples is based on the view taken in the Departmental
FAQs/ press release. 9
Since ‘business’ includes vocation, therefore, sale of goods or service as a vocation
is also a supply under GST.
(9) Sundaram Acharya, a famous actor, paints some paintings and sells
them. The consideration from such sale is to be donated to a Charitable
Trust – ‘Kind Human’. The sale of paintings by the actor qualifies as
supply.
7
Clarified vide GST FAQs issued by CBIC
8
Clarified by CBIC vide press release dated 13.07.2017
9
There is another school of thought according to which since the definition of business
includes trade, commerce, or any other similar activity, whether or not there is frequency,
volume, continuity or regularity of such transaction, the transactions in the above
examples can be considered to be made in the course or furtherance of business and thus,
will constitute supply. The taxability of such transactions, however, will have to be examined
under the provisions of section 9 [Discussed in detail in Chapter 3 – Charge of GST]. This
view is based on literal interpretation of the law. However, since this view may not always
lead to logical conclusions, it is more prudent to take a purposive approach as followed in
Departmental FAQs/press release given above.

Services provided by the club/association to its members for consideration is a supply.

(10) A Resident Welfare Association provides the service of depositing
the electricity bills of the residents in lieu of some nominal charges.
Provision of service by a club or association or society to its members is
treated as supply as this is included in the definition of ‘business’.
Admission of persons to any premises for a consideration is also included in business.
(11) Services by way of admission to circus, cinema halls, amusement
parks including theme parks, water parks, etc. are considered as supply as
these are services by way of admission of persons to any premises for a
consideration.
Business includes activities of a race club including by way of totalisator or a license
to book maker or activities of a licensed book maker in such club.
(12) Royal Turf Race Club is engaged in facilitating the wagering
(betting) transactions on horses placed through totalisator 10. For
providing the service of facilitating wagering transactions, Royal Turf
Race Club gets commission which is deducted and retained by the club from the
total bet value. Said services amount to supply as the activities of a race club are
included in business.
There is one exception to this

‘course or furtherance of
business’ rule i.e., import of
services for a consideration.
From the above discussion, it can be inferred that if an activity or

transaction satisfies all the above parameters, as discussed in
points A., B. and C. above, said activity or transaction qualifies as
Supply under GST.
10
Totalisor is a computerised device that pools the wagers/bets (after deduction of charges
and statutory taxes) of various persons placing the bet and also divides the total wager
amount to be distributed to the winning persons.

2.22 INDIRECT TAXES
In the subsequent paras, we have discussed the exceptions to the two parameters
of supply, namely, (i) supply made for consideration, but not in course or
furtherance of business and (ii) supply made without consideration.
The connotation of ‘supply’ gets expanded significantly

through the second part of section 7 i.e. 7(1)(b) which brings
within the ambit of ‘supply’, the importation of services for Section
a consideration whether or not in the course or 7(1)(b)
furtherance of business. This is the only exception to the
condition of supply being made in course or furtherance of
business.
(13) Ramaiyaa, a proprietor, has received the architect services for his house
from an architect located in New York at an agreed consideration of $ 5,000.
The import of services by Ramaiyaa is supply under section 7(1)(b) though it
is not in course or furtherance of business.
Schedule-I Activities to be treated as supply even if made without

consideration
S. No. Particulars
1. Permanent transfer or disposal of business assets where input tax

credit has been availed on such assets.
2. Supply of goods or services or both between related persons or

between distinct persons as specified in section 25, when made in
the course or furtherance of business.

Provided that gifts not exceeding fifty thousand rupees in value in

a financial year by an employer to an employee shall not be
treated as supply of goods or services or both.
3. Supply of goods —
(a) by a principal to his agent where the agent undertakes to
supply such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to
receive such goods on behalf of the principal.
ANALYSIS
There are instances where an activity or transaction
is treated as supply, even if the same is made
without consideration. These are specifically
Section 7(1)(c)
mentioned in Schedule I appended to the CGST read with
Act. The same has been discussed in the Schedule I
subsequent paras:
In the past regime, in every tax statute,
“consideration” played the most important role for levying taxes. For instance, if
any service was provided for free to a person, such service was not subject to service
tax. However, under GST, the importance of consideration has been diluted in
certain cases – this is an important departure from the earlier indirect tax regime.
As per Schedule I, in the following four cases, activities made without consideration
will be treated as supply under section 7 of the CGST Act:
I. Permanent Transfer/Disposal of Business Assets [Para 1. of
Schedule I]: Any kind of disposal or transfer of business assets made by an
entity on permanent basis even though without consideration qualifies as
supply. However, it is important to note that this provision would apply only
if input tax credit has been availed on such assets.
Therefore, in order to qualify as supply under this para, following conditions
need to be satisfied:
 There must be a disposal or transfer of business assets**.
 Transfer/disposal must be permanent.

2.24 INDIRECT TAXES
 ITC must have been availed on such business assets.

In view of the last condition stipulated above, permanent transfer/disposal of
following business assets, without consideration, will not be covered within
this para and thus will not be deemed as supply:
(i) Business assets on which ITC is blocked/not available under GST 11.
(ii) Business assets though eligible for ITC, ITC has not been availed by the
registered person.
**It is important to note that the term business asset has not been defined under
the GST law.
(14) Dhruv gives old laptops being used in his business to his
friend free of cost. This will qualify as supply provided input tax
credit has been availed by Dhruv on such laptops.
(15) A dealer of air-conditioners permanently transfers the motor

vehicle free of cost. ITC on said motor vehicle is blocked. The
transaction will not constitute a supply as the condition of
availment of ITC on the business asset transferred is not fulfilled.
This clause is wide enough to cover transfer of business assets from holding
to subsidiary company for nil consideration.
II. Supply between related person or distinct persons [Para 2. of
Schedule I]: Supply of goods or services or both between ‘related persons’
or between ‘distinct persons’ as specified in section 25, will qualify as supply
even if made without consideration provided it is made in the course or
Let us understand the terms ‘related persons’ and ‘distinct persons’.
Related persons: A person who is under influence of another person is called
a related person like members of the same family [See definition of family
under ‘Relevant Definitions’] or subsidiaries of a group company etc. Under
GST law various categories of related persons have been specified. The term
‘related person’ has been defined in explanation to section 15. The said
definition has been depicted by way of a diagram as follows:
11
List of the goods in respect of which ITC is blocked has been elaborated in Chapter 6 – Input
Tax Credit.

Persons including legal person are deemed as related persons if
Such persons are officers/directors of one another’s business
Such persons are legally recognised partners
Such persons are employer & employee

A third person controls/ owns/ holds (directly/ indirectly) ≥ 25%
voting stock/shares of both of them
One of them controls (directly/indirectly) the other
A third person controls (directly/indirectly) both of them
Such persons together control (directly/indirectly) a third person
Such persons are members of the same family

One of them is the sole agent/sole distributor/sole concessionaire of
the other
(16) Ms. Priya holds 30% shares of ABC Ltd. and 35% shares of
XYZ Ltd. ABC Ltd. and XYZ Ltd. are related.
(17) Q Ltd. has a deciding role in corporate policy, operations
management and quality control of R Ltd. It can be said that Q Ltd. controls
R Ltd. Thus, Q Ltd. and R Ltd. are related.
Distinct Persons specified under section 25: Before we go through the

statutory provisions of ‘distinct persons’, let us first have an overview of the
registration provisions for better understanding of the concept of distinct
persons. Detailed and in-depth analysis of the registration provisions is
contained in Chapter 7 – Registration.
Under GST law, a supplier is required to obtain State-wise registration. He

has to obtain registration in every State/UT from where he makes a taxable
supply provided his aggregate turnover exceeds a specified threshold limit.
Thus, he is not required to obtain registration from a State/UT from where he
makes a non-taxable supply.

2.26 INDIRECT TAXES
Since registration in GST is PAN based, once a supplier is liable to register, he

has to obtain registration in each of the States/UTs in which he operates [and
makes a taxable supply] under the same PAN. Further, he is normally required
to obtain single registration in a State/UT. However, where he has multiple
places of business in a State/UT, he has the option either to get a single
registration for said State/UT or to get separate registrations for each place
of business in such State/UT.
Now, let us understand the concept of distinct persons in simple terms:
The establishments of a person with separate registrations whether within the

same State/UT or in different States/UTs are considered as distinct persons.
Where a person having one registered establishment in a State/UT has
another establishment in a different State/UT [not necessarily registered],
these establishments are considered as establishments of distinct persons.
Statutory provisions relating to ‘distinct persons’ are contained in sub-

sections (4) and (5) of section 25. They have been discussed as follows:
A person who has obtained/is required to obtain more than one registration,
whether in one State/Union territory or more than one State/Union territory
shall, in respect of each such registration, be treated as distinct persons
[Section 25(4) of the CGST Act].
(18) Mohan, a Chartered Accountant, has a registered head office in Delhi.
He has also obtained registration in the State of West Bengal in respect of
his newly opened branch office. Mohan shall be treated as distinct persons in
respect of registrations in West Bengal and Delhi.
Distinct persons
Registered head Registered branch

office in Delhi office in West Bengal
Further, where a person who has obtained or is required to obtain registration

in a State or Union territory in respect of an establishment, has an
establishment in another State or Union territory, then such establishments

shall be treated as establishments of distinct persons [Section 25(5) of the

CGST Act].
(19) Rishabh Enterprises, a registered supplier, owns an air-
conditioned restaurant in Virar, Maharashtra. It has opened a liquor
shop in Raipur, Uttarakhand for trading of alcoholic liquor for human
consumption. Since supply of alcoholic liquor for human consumption in
Uttarakhand is a non-taxable supply, Rishabh Enterprises is not required to
obtain registration with respect to the same in Uttarakhand. In this case, air-
conditioned restaurant in Maharashtra and liquor shop [though unregistered] in
Uttarakhand shall be treated as establishments of distinct persons. Supply by
Maharashtra restaurant to Uttarakhand shop, in course or furtherance of
business, even without consideration will qualify as supply.
Establishments of distinct persons
Registered restaurant Unregistered liquor

in Maharashtra shop in Uttarakhand
Stock transfers or branch transfers qualify as supply: It is a common practice

in business that one branch supplies services to another branch of same entity
without consideration. Similarly, goods are transferred among different units of
same entity free of cost, for instance, distribution of samples manufactured in
a factory to different branches or transfer of goods from factory to
depot/showroom for sale therefrom, from one warehouse to another warehouse,
from one branch to another branch where the demand of the goods is higher.
These transactions are termed as self-supplies. Under GST, these transactions
undertaken, without consideration, will also qualify as supply, provided the
transfer of goods or services is between:
(i) different locations (with separate GST registrations) of same legal entity as
these are transactions between distinct persons, or
(ii) establishments of distinct persons.
(20) Raghubir Fabrics transfers 1000 shirts from his factory located
in Lucknow to his retail showroom in Delhi so that the same can be
sold from there. The factory and retail showroom of Raghubir
Fabrics are registered in the States where they are located. Although no

2.28 INDIRECT TAXES
consideration is charged, supply of goods from factory to retail showroom

constitutes supply.
Stock Transfer - Deemed Supply
Registered Lucknow Registered Delhi

factory showroom
However, transfer between two units of a legal entity under single registration
(apparently within same State) will not be considered as supply. This can be
understood with the help of the following example:
(21) Raghubir Fabrics transfers 1000 shirts from his factory located
in Lucknow to his retail showroom in Kanpur so that the same can be
sold from there. It has taken one registration in the State of Uttar
Pradesh declaring Lucknow factory as its principal place of business and Kanpur
showroom as its additional place of business. Since no consideration is charged,
supply of goods from factory to retail showroom in same State under single
registration does not constitute supply.
Stock Transfer – Not a Supply
Lucknow factory Kanpur showroom
Single registration in UP
However, in the above example, if Raghubir Fabrics obtains separate

registrations for Lucknow factory and Kanpur showroom, stock transfer
between the Lucknow factory and Kanpur showroom will constitute supply.
Supply of goods or services or both between an employer and
employee:In terms of the definition of related person given above, employer
and employee are related persons. However, services provided by an
employee to the employer in the course of or in relation to his employment

are not treated as supply [Schedule III of CGST Act (discussed subsequently in
this chapter)].
Gifts by employer to employee
Further, proviso to Para 2. of Schedule I provides that gifts upto ` 50,000 in
value in a financial year by an employer to an employee shall not be treated
as supply of goods or services or both. However, gifts of value more than
` 50,000 made without consideration are supply and are subject to GST, when
made in the course or furtherance of business.
What
constitutes
a ‘gift’?
The term ‘gift’ has not been defined in the GST law. In common parlance, gift
is made without consideration, is voluntary in nature and is made
occasionally. It cannot be demanded as a matter of right by the employee
and the employee cannot move a court of law for obtaining a gift.
Perquisites by employer to employee
As already discussed, services by an employee to the employer in the course
of or in relation to his employment is outside the scope of GST (neither supply
of goods or supply of services).
It follows therefrom that payment made by the employer to the employee in
terms of contractual agreement entered into between the employer and the
employee, will not be subjected to GST.
Ministry of Finance has clarified in a Press Release on 10.07.2017 that if
services such as membership of a club, health and fitness centre etc. are
provided free of charge to all the employees by the employer, the same will
not be subjected to GST. The same would hold true for free housing to the
employees, when the same is provided in terms of the contract between the

2.30 INDIRECT TAXES
employer and employee and is part and parcel of the cost-to company
(C2C) 12.
III. Principal– Agent [Para 3. of Schedule I]: Supply of goods by a principal
to his agent, without consideration, where
the agent undertakes to supply such goods
on behalf of the principal is considered as
supply.
Similarly, supply of goods by an agent to his
principal, without consideration, where the
agent undertakes to receive such goods on
behalf of the principal is considered as
supply.
Points which merit consideration, in this regard, are as follows:
• Only supply of goods and not supply of services is covered here.
• Supply of goods between principal and agent without consideration
is also supply.
Thus, the supply of services between the principal and the agent and vice
versa would therefore require “consideration” to be considered as supply and
thus, to be liable to GST.
In order to determine whether a particular principal-
agent relationship falls within the ambit of the
Para 3. of Schedule I as discussed above or not, the
deciding factor is whether the invoice for the further
supply of goods on behalf of the principal is being
issued by the agent or not? In other words, the crucial
12
It is possible to take an alternative view in this regard. This scenario, i.e. the employer
providing services (free of charge) to the employee in lieu of the services provided by the
employee to the employer in the course of employment, is an exchange transaction. In an
exchange transaction, both the parties independently assess their transaction status. Thus,
while service provided by employee to the employer being covered under Schedule III to the
CGST Act is not a supply, service provided by employer to employee may constitute a supply
in terms of section 7(1)(c) read with para 2 of the Schedule I since employer and employee
are related persons as per explanation to section 15. Provisions of section 15 have been
discussed in detail in Unit 2 of Chapter 5 – Time and Value of Supply.

point is whether or not the agent has the authority to pass or receive the title
of the goods on behalf of the principal.
 Where the invoice for further supply is being
issued by the agent in his name then, any Invoice for further
provision of goods from the principal to the supply to customer
agent would fall within the fold of Para 3. above. be issued in the
agent’s name.
 However, where the invoice is issued by the
agent to the customer in the name of the principal, such agent shall
not fall within the ambit of Para 3. above.
 Similarly, where the goods being
procured by the agent on behalf of Goods procured on behalf
the principal are invoiced in the of principal are invoiced
name of the agent then further in the agent’s name.
provision of the said goods by the
agent to the principal would be covered by Para 3. above [Circular No.
57/31/2018 GST dated 04.09.2018].
The above clarification can be understood with the help of following scenario
based examples:
(22) Anmol appoints Bholu to procure certain goods from the
market. Bholu identifies various suppliers who can provide the
goods as desired by Anmol and asks the supplier (Golu) to send
the goods and to issue the invoice directly to Anmol.
In this scenario, Bholu is only acting as the procurement agent, and has in no
way involved himself in the supply or receipt of the goods. Hence, in
accordance with the provisions of this Act, Bholu is not an agent of Anmol for
supply of goods in terms of Para 3. of Schedule I.
(23) M/s Tintin, a banking company, appoints Mandaar

(auctioneer) to auction certain goods. The auctioneer arranges for
the auction and identifies the potential bidders.
The highest bid is accepted and the goods are sold to the highest bidder by M/s
Tintin. The invoice for the supply of the goods is issued by M/s Tintin to the
successful bidder.
In this scenario, the auctioneer is merely providing the auctioneering services
with no role played in the supply of the goods. Even in this scenario, Mandaar is

2.32 INDIRECT TAXES
not an agent of M/s Tintin for the supply of goods in terms of Para 3. of Schedule
I.
(24) Gautam, an artist, appoints Gambhir (auctioneer) to auction

his painting. Gambhir arranges for the auction and identifies the
potential bidders. The highest bid is accepted and the painting is
sold to the highest bidder.
The invoice for the supply of the painting is issued by Gambhir on the behalf of
Gautam but in his own name and the painting is delivered to the successful
bidder.
In this scenario, Gambhir is not merely providing auctioneering services, but is
also supplying the painting on behalf of Gautam to the bidder, and has the
authority to transfer the title of the painting on behalf of Gautam. This scenario
is covered under Para 3. of Schedule I.
(25) A C&F agent or commission agent takes possession of the goods

from the principal and issues the invoice in his own name. In such cases,
the C&F commission agent is an agent of the principal for the supply of
goods in terms of Para 3. of Schedule I. The disclosure or non-disclosure
of the name of the principal is immaterial in such situations.
(26) Ravi sells agricultural produce by utilizing the services of Kavi

who is a commission agent as per the Agricultural Produce
Marketing Committee Act (APMC Act) of the State. Kavi identifies the
buyers and sells the agricultural produce on behalf of Ravi for which
he charges a commission from Ravi.
As per the APMC Act, the commission agent is a person who buys or sells the
agricultural produce on behalf of his principal, or facilitates buying and selling
of agricultural produce on behalf of his principal and receives, by way of
remuneration, a commission or percentage upon the amount involved in such
transaction.
In cases where the invoice is issued by Kavi to the buyer, the former is an agent
covered under Para 3. of Schedule I 13. However, in cases where the invoice is
issued directly by Ravi to the buyer, the commission agent (Kavi) doesn’t fall
under the category of agent covered under Para 3.
13
It is important to note that services provided by the commission agent for sale or purchase
of agricultural produce are exempt from GST.

Clarification of issues pertaining to Del-credere agent (DCA)

A question was posed by the industry - whether supply between a principal
and a Del-credere agent would also get covered under Schedule I. The
Government clarified the doubt of the industry by way of following
clarification:
Before going through the clarification, let us first
understand what is meant by a DCA? In commercial trade Del-
parlance, a DCA is a selling agent who is engaged by a credere
principal to assist in supply of goods or services by agent
contacting potential buyers on behalf of the principal. The
factor that differentiates a DCA from other agents is that
the DCA guarantees the payment to the supplier.
In such scenarios where the buyer fails to make payment to the principal by
the due date, DCA makes the payment to the principal on behalf of the buyer
(effectively providing an insurance against default by the buyer), and for this
reason the commission paid to the DCA may be relatively higher than that
paid to a normal agent.
In order to guarantee timely payment to the supplier, the DCA can resort to
various methods including extending short-term transaction-based loans to
the buyer or paying the supplier himself and recovering the amount from the
buyer with some interest at a later date. This loan is to be repaid by the buyer
along with an interest to the DCA at a rate mutually agreed between DCA and
buyer.
Circular No. 73/47/2018 GST dated 05.11.2018 has clarified the following
issues in this regard:
Sl. Issue Clarification

No.
1 Whether a DCA As already clarified vide Circular No.

falls under the 57/31/2018 GST (discussed above), whether or
ambit of agent not the DCA will fall under the ambit of agent
under Para 3 of under Para 3 of Schedule I of the CGST Act
Schedule I of the depends on the following possible scenarios:

2.34 INDIRECT TAXES
CGST Act?  In case where the invoice for supply of

goods is issued by the supplier to the
customer, either himself or through DCA,
the DCA does not fall under the ambit of
agent.
 In case where the invoice for supply of
goods is issued by the DCA in his own
name, the DCA would fall under the ambit
of agent.
2 Whether the In such a scenario, following activities are

temporary short- taking place:
term transaction 1. Supply of goods from supplier (principal) to
based loan recipient;
extended by the
2. Supply of agency services from DCA to the
DCA to the
supplier or the recipient or both;
recipient (buyer),
for which interest 3. Supply of extension of loan services by the
is charged by the DCA to the recipient.
DCA, is to be It is clarified that in cases where the DCA is not
included in the an agent under Para 3 of Schedule I of the CGST
value of goods Act, the temporary short-term transaction based
being supplied by loan being provided by DCA to the buyer is a
the supplier supply of service by the DCA to the recipient on
(principal) where Principal to Principal basis and is an independent
DCA is not an supply 14.
agent under Para Therefore, the interest being charged by the
3 of Schedule I of DCA would not form part of the value of supply
the CGST Act? of goods supplied (to the buyer) by the
supplier.
14
Services by way of extending deposits, loans or advances in so far as the consideration is
represented by way of interest or discount (other than interest involved in credit card services)
are exempt vide Entry 27 of Notification No. 12/2017 CT(R) dated 28.06.2017 [Discussed in
detail in Chapter 4 – Exemptions under GST].

3. Where DCA is an In such a scenario following activities are taking

agent under Para place:
3 of Schedule I of 1. Supply of goods by the supplier (principal)
the CGST Act and to the DCA;
makes payment
2. Further supply of goods by the DCA to the
to the principal
recipient;
on behalf of the
buyer and 3. Supply of agency services by the DCA to the
charges interest supplier or the recipient or both;
to the buyer for 4. Extension of credit by the DCA to the
delayed payment recipient.
along with the It is clarified that in cases where the DCA is an
value of goods agent under Para 3 of Schedule I of the CGST
being supplied, Act, the temporary short-term transaction
whether the based credit being provided by DCA to the
interest will form buyer no longer retains its character of an
a part of the value independent supply and is subsumed in the
of supply of supply of the goods by the DCA to the
goods also or recipient. It is emphasised that the activity of
not? extension of credit by the DCA to the recipient
would not be considered as a separate supply
as it is in the context of the supply of goods
made by the DCA to the recipient.
It is further clarified that the value of the
interest charged for such credit would be
required to be included in the value of supply
of goods by DCA to the recipient as per section
15(2)(d) of the CGST Act 15.
IV. Importation of services [Para 4. of Schedule I]: Import of services by a

person from a related person or from his establishments located outside
15
Section 15 of the CGST Act, 2017 has been discussed in detail in Chapter 5 – Time and
Value of Supply.

2.36 INDIRECT TAXES
India, without consideration, in the course or furtherance of business shall be

treated as “supply”.
(27) Jhumroo Associates received legal consultancy services from
its head office located in Malaysia. The head office has rendered
such services free of cost to its branch office. Since Jhumroo
Associates and the head office are related persons, services received by
Jhumroo Associates will qualify as supply even though the head office has
not charged anything from it.
(28) Chakmak, a proprietor registered in Delhi, has sought architect

services from his son located in US, with respect to his newly
constructed house in Delhi. Although services have been received
by Chakmak without consideration from his son - a related person, yet it will
not qualify as supply since the same has not been received in course or
In the preceding paras, we have discussed the provisions of Schedule-I which

enumerates the cases where an activity is treated as supply even though it is
undertaken free of cost. Let us now examine whether the items given free of
cost in case of some of the sales promotion schemes qualify as supply or not.
Clarification on Sales promotion schemes
A number of sales promotion schemes
are commonly employed by the
businesses to increase sales volume or
to encourage the use or trial of a
product or service so that new
customers get attracted towards their products. For instance, certain sections
of trade and industry, such as, pharmaceutical companies
often provide drug samples to their stockists, dealers,
medical practitioners, etc., or sometimes, companies
announce offers like ‘Buy One, Get One free’ - buy one
soap and get one soap free or get one tooth brush free along with the
purchase of tooth paste.
As we have already seen that as per section 7(1)(a), the goods or services
which are supplied free of cost (without any consideration) shall not be
treated as “supply” except in case of activities mentioned in Schedule I

of the CGST Act. In view of the same, few sales promotion schemes have
been examined as under:
Free samples and gifts: Samples which are

FREE
supplied free of cost, without any consideration, do not
SAMPLES
qualify as “supply” under GST 16, except where the
activity falls within the ambit of Schedule I of the CGST
Act.
Buy one get one free offer: It may appear

at first glance that in case of offers like “Buy One,
Get One Free”, one item is being “supplied free
of cost” without any consideration. In fact, it is Buy one get
not an individual supply of free goods, but a one free
case of two or more individual supplies where a
single price is being charged for the entire
supply. It can at best be treated as supplying
two goods for the price of one.
Taxability of such supply will be dependent upon as to whether the supply
is a composite supply or a mixed supply and the rate of tax shall be
determined accordingly – Concept of composite and mixed supply has been
discussed subsequently in this chapter. [Circular 92/11/2019 GST dated
07.03.2019]
Section 7(1A) of the CGST Act classifies certain activities/

transactions constituting supply, either as supply of goods
or supply of services. Schedule II to the CGST Act contains Section 7(1A)
read with
the list of activities or transactions which have been Schedule II
classified either as supply of goods or supply of service.
16
ITC on inputs, input services and capital goods to the extent they are used in relation to
the gifts/free samples shall be available to the supplier only where the activity of distribution
of gifts/free samples falls within the scope of supply - Discussed in detail in Chapter 6 – Input
Tax Credit.

2.38 INDIRECT TAXES
This helps in mitigating the ambiguities which existed in earlier laws.

(29) Under earlier tax regime, the restaurants used to charge both
service tax and VAT on the value of food served. This so because both
sale of goods and provision of service were involved and therefore
taxable event under both the Statutes i.e. respective VAT law and service tax law
got triggered.
Under GST, the supply by a restaurant is treated as composite supply [concept of
composite supply is discussed subsequently in this chapter] since food and service is
naturally bundled in ordinary course of business. Further, Entry 6(b) of Schedule II
[refer table below] specifically provides that such composite supply shall be treated
as supply of service. Hence, the entire value of invoice shall be treated as value of
service and leviable to GST accordingly.
The matters listed out in Schedule II are primarily those which had been entangled
in litigation in the earlier regime owing to their complex nature and susceptibility
to double taxation.
These are as follows :-
S.No. Activity/ Type Nature of

Transaction Supply
1. Transfer Any transfer of title in goods. Supply of

(30) Shivaji sells ready- Goods
made garments to its
customers.
Any transfer of right in goods/ Supply of

undivided share in goods without Services
transfer of title in goods.
(31) Genius Equipments
Ltd. gives a machinery on
rent to Suhaasi Manufacturers.
Any transfer of title in goods under Supply of

an agreement which stipulates that Goods
property shall pass at a future date
upon payment of full consideration
as agreed.

(32) Dhruva Capitals

supplied goods on hire
purchase basis to customers.
(33) Optima Manufacturers
supplies toys to retailers on ‘sale or
return basis’.
2. Land and Any lease, tenancy, easement, Supply of

Building licence to occupy land 17. Services
(34) Lease agreement for
land.
Any lease or letting out of building Supply of

including a commercial, industrial Services
or residential complex for business
or commerce, wholly or partly.
(35) A shop let out in a
busy market area.
3. Treatment or Any treatment or process which is Supply of

Process applied to another person’s goods Services
(36) Damani Dying House
dyes the clothes given by
Shubham Textiles Ltd. on
job work basis.
4. Transfer of Goods forming part of business Supply of

Business assets are transferred or disposed Goods
Assets off by/under directions of person
carrying on the business so as no
longer to form part of those assets.
Goods held/used for business are Supply of

put to private use or are made Services
available to any person for use for
any purpose other than business,
17
Refer Circular No.44/18/2018 CGST dated 02.05.2018 discussed subsequently.

2.40 INDIRECT TAXES
by/ under directions of person

carrying on the business.
Goods forming part of assets of any Supply of

business carried on by a person Goods
who ceases to be a taxable person,
shall be deemed to be supplied by
him, in the course or furtherance of
his business, immediately before he
ceases to be a taxable person.
(37) Arun, a trader, is
winding up his business.
Any goods left in stock shall be
deemed to be supplied by him.
Exceptions:
 Business is transferred as a
going concern to another
person 18.
 Business is carried on by a
personal representative who is
deemed to be a taxable person.
5. (a) Renting of immovable property

(38) Renting of a commercial
complex.
(39) Renting of precincts of a religious Supply of
place. Services
(40) Renting of property to an educational
institution.
(41) Permitting use of immoveable property
for placing vending/dispensing machines.
18
Services by way of transfer of a going concern, as a whole or an independent part thereof
are exempt from GST [Discussed in detail in Chapter 4 – Exemptions from GST].

(b) Construction of complex, building, civil

structure, etc.
Construction of a complex, building, civil
structure or a part thereof, including a
complex or building intended for sale to a
buyer, wholly or partly, except where the entire
consideration has been received after issuance
of completion certificate, where required, by
the competent authority or after its first
occupation, whichever is earlier.
(42) Rathi Builders has constructed
individual residential units for agreed
consideration of ` 1.2 crore per unit.
` 90 lakh per unit were received before
issuance of completion certificate by the
competent authority and balance after
completion.
The term construction includes additions,

alterations, replacements, or remodeling of any
existing civil structure.
The expression competent authority means the
Government or any authority authorised to issue
completion certificate under any law for the time
being in force and in case of non-requirement of
such certificate from such authority, from any of
the following, namely:—
(i) an architect registered with the Council of

Supply of
Architecture constituted under the Architects
Services
Act, 1972; or
(ii) a chartered engineer registered with the
Institution of Engineers (India); or
(iii) a licensed surveyor of the respective local
body of the city or town or village or
development or planning authority.

2.42 INDIRECT TAXES
(c) Temporary transfer or permitting use or

enjoyment of any intellectual property right
(43) Temporary transfer of patent.
(d) Development, design, programming,

customisation, adaptation, upgradation,
enhancement, implementation of IT software
(44) Suvidha Solutions develops an
accounting software for a business.
(e) Agreeing to obligation to refrain from an act,

or to tolerate an act or situation, or to do an
act.
(45) Cable operator - Sakharam has Supply of
entered into an agreement with Cable Services
operator - Aatmaram that Sakharam
will not provide cable connections in the
specified areas where Aatmaram is providing
the connections. Non-compete agreements
constitute supply of service.
(46) Late delivery charges recovered from
supplier for non-fulfilment of contract within
stipulated time.
(47) Notice pay recovered from employee for
leaving the job before agreed period of notice
for leaving a job.
(f) Transfer of right to use any goods for any

purpose
(48) Machinery given on hire.
6. Following composite supplies :- Supply of

 Works contract services. Services
Works contract: means a contract for building,
construction, fabrication, completion, erection,

installation, fitting out, improvement, modification,

repair, maintenance, renovation, alteration or
commissioning of any immovable property
wherein transfer of property in goods (whether as
goods or in some other form) is involved in the
execution of such contract [Section 2(119) of CGST
Act].
 Supply by way of or as part of any service or in
any other manner whatsoever, of goods, being
food or any other article for human
consumption or any drink.
7. Supply of goods by an unincorporated association Supply of

or body of persons to a member thereof for cash, Goods
deferred payment or other valuable consideration.
(49) Resident Welfare Association (RWA) of
Sanskriti Society supplies air-conditioners
to its members at a concessional price.
CBIC has clarified Taxability of ‘tenancy rights’ under GST as under:

Pagadi system, i.e. transfer of tenancy rights against
tenancy premium, is prevalent in some States. In Pagadi
system, the tenant acquires tenancy rights in the property
against payment of tenancy premium (pagadi). The
landlord may be owner of the property, but the possession of the same lies with
the tenant. The tenant pays periodic rent to the landlord as long as he occupies
the property. The tenant also usually has the option to sell the tenancy right of the
said property and in such a case has to share a percentage of the proceed with
owner of land, as laid down in their tenancy agreement. Alternatively, the landlord
pays to tenant the prevailing tenancy premium to get the property vacated. Such
properties in Maharashtra are governed by Maharashtra Rent Control Act, 1999.
It has been clarified that the activity of transfer of tenancy right against
consideration [i.e. tenancy premium] is squarely covered under supply of
service liable to GST.
It is a form of lease or renting of property and such activity is specifically declared
to be a service in Para 2. of Schedule II as discussed in table above i.e. any lease,
tenancy, easement, licence to occupy land is a supply of services.

2.44 INDIRECT TAXES
Although stamp duty and registration charges have been levied on such transfer of
tenancy rights, it shall be still subject to GST. Merely because a
transaction/supply involves execution of documents which may
require registration and payment of registration fee and stamp
duty, would not preclude them from the ‘scope of supply’ and
from payment of GST.
The transfer of tenancy rights cannot be treated as sale of land/ building in para 5.
of Schedule III. Thus, it is not a negative list activity [this concept is discussed under
next heading] and consequently, a consideration for the said activity shall attract
levy of GST.
To sum up, the activity of transfer of ‘tenancy rights’ is squarely covered under the
scope of supply and taxable per-se. Transfer of tenancy rights to a new tenant
against consideration in the form of tenancy premium is taxable.
However, renting of residential dwelling for use as a residence is exempt [Entry 12
of Notification No. 12/2017 CT (R) dated 28.06.2017 – Discussed in Chapter 4 –
Exemptions from GST]. Hence, grant of tenancy rights in a residential dwelling for
use as residence dwelling against tenancy premium or periodic rent or both is
exempt. As regards services provided by outgoing tenant by way of surrendering
the tenancy rights against consideration in the form of a portion of tenancy
premium is liable to GST [Circular No. 44/2018 CT dated 02.05.2018].
I. Activities/transactions specified under Schedule

III of the CGST Act: Schedule III specifies Section 7(2)(a)
transactions/ activities which shall be neither treated read with
Schedule III
as supply of goods nor as supply of services. Thus, the
activities/transactions specified under this schedule
can be termed as Non-Supplies under the GST regime. In other words, it is a
“Negative list” for the purposes of taxation in GST.
It is important to note that apart from the activities specified in Schedule III,
some activities have been notified by the Government vide different
notifications, which are also to be considered as non-supplies. Further, some

clarifications have been issued clarifying that certain transactions are to be

considered as non-supplies.
Hence, our discussion under this heading will revolve around the following:
A. Non-supplies listed in Schedule III
B. Non-supplies notified vide notification
C. Non-supplies clarified by way of clarification
A. NON-SUPPLIES LISTED IN SCHEDULE III
S.No. Activities or transactions which shall be treated neither as a

supply of goods nor a supply of services
1. Services by an employee to the employer in the course of or in

relation to his employment.
(50) Amounts received by an employee
from the employer on premature
termination of contract of employment
are treatable as amounts paid in relation to services provided by
the employee to the employer in the course of employment.
(51) Services provided by casual worker to employer who gives
wages on daily basis to the worker are services provided by the
worker in the course of employment.
(52) Casual workers employed by a construction contractor for
execution of a building contract for him are
services in the course of employment. Similarly,
casual workers employed by a security services
agency for provision of security services to a client
are also services in the course of employment.
Only services that are provided by the employee to the
employer in the course of employment are outside the realm
of supply. However, services provided outside the ambit of
employment for a consideration would qualify as supply.

2.46 INDIRECT TAXES
(53) Services provided on contract basis by a person to

another i.e. principal-to-principal basis are not services
provided in the course of employment 19.
(54) Any amount paid by employer to employee for not joining
a competing business is paid for providing the service of
forbearance to act and cannot be considered for providing
services in the course of employment.
2. Services by any court or Tribunal established under any law for

the time being in force.
Explanation – The term "Court" includes District Court, High
Court and Supreme Court.
3. (a) Functions performed by the

Members of Parliament,
Members of State Legislature,
Members of Panchayats,
Members of Municipalities and Members of other local
authorities.
(b) Duties performed by any person who holds any post in
pursuance of the provisions of the Constitution in that
capacity.
(55) Duties performed by President of India, Vice
President of India, Prime Minister of India, Chief
Justice of India, Speaker of the Lok Sabha, Chief
Election Commissioner, Comptroller and Auditor General of
India, Chairman of Union Public Service Commission,
Attorney General of India, in that capacity.
(c) Duties performed by any person as a Chairperson or a
Member or a Director in a body established by the Central
Government or a State Government or local authority and
who is not deemed as an employee before the
commencement of this clause.
19
Discussion based on Service Tax Education Guide issued under erstwhile under service tax
law.

4. Services of funeral, burial, crematorium or mortuary including

transportation of the deceased.
5. Sale of land and, subject to paragraph 5(b) of

Schedule II, sale of building.
6. Actionable claims, other than lottery, betting and gambling.

‘Actionable claims’ are specifically included in the definition of
goods under section 2(52) of the CGST Act [Refer the definitions
of ‘actionable claims’ and ‘goods’ given under heading ‘Relevant
Definitions].
However, this para of Schedule III specifically excludes actionable
claims, other than lottery, betting and gambling from the ambit
of definition of supply. Co-joint reading of said provisions
implies that only lottery, betting and gambling are treated as
supply. All other actionable claims are outside the ambit of
definition of supply.
(56) Some of the other examples of actionable claims
are: Right to recover insurance money, claim for arrears
of rent, claims for future rents (if these can be assigned),
unsecured loans, unsecured debentures, bills of exchange,
promissory notes, bank guarantee, Fixed Deposit Receipt, right
to the benefit of a contract, etc. 20
20
Schedule III has two more entries - Entry 7 and 8 [as enumerated below]. These entries are
covered in the syllabus of Paper 8: Indirect Tax Laws at Final Level.
7. Supply of goods from a place in the non-taxable territory to another place in the non-
taxable territory without such goods entering into India.
8. (a) Supply of warehoused goods to any person before clearance for home consumption.
(b) Supply of goods by the consignee to any other person, by endorsement of
documents of title to the goods, after the goods have been dispatched from the port
of origin located outside India but before clearance for home consumption.

2.48 INDIRECT TAXES
B. NON-SUPPLIES NOTIFIED VIDE NOTIFICATION

Government is empowered to notify the
activities/ transactions undertaken by the Central
Government, a State Government or any local Section 7(2)(b)
authority in which they are engaged as public
authorities as the activities/transactions which
shall be treated neither as a supply of goods nor
a supply of services. Till now, following two activities/transactions have
been notified under said clause:
Services by way of any activity in relation to a function entrusted to a
Panchayat under article 243G of
the Constitution or to a
Panchayat Municipality under article Municipality
Functions 243W of the Constitution .
21 Functions
C. NON-SUPPLIES CLARIFIED BY WAY OF CLARIFICATION

CBIC has clarified that following three activities/transactions are non-
supplies:
(i) Grant of alcoholic liquor licence: Services by way of grant of
alcoholic liquor licence by the State Governments are treated
neither as a supply of goods nor a supply
of service 22. Such licence is granted Grant of
against consideration in the form of licence for
licence fee or application fee or by alcoholic
whatever name it is called. liquor
This special dispensation is applicable only to
supply of service by way of grant of liquor licenses by the State
Governments as an agreement between the Centre and States. Hence,
this is not applicable/has no precedence value in relation to grant of
21
notified vide Notification No. 14/2017 CT (R) dated 28.06.2017/ Notification No. 11/2017
IT (R) dated 28.06.2017 as amended
22
notified vide Notification No. 25/2019 CT (R) dated 30.09.2019/ Notification No. 24/2019
IT (R) dated 30.09.2019

other licenses and privileges for a fee in other situations, where GST
is payable.
It may be noted that services provided by the Government to
business entities including by way of grant of privileges, licences,
mining rights, natural resources such as spectrum etc. against
payment of consideration in the form of fee, royalty etc. are taxable
under GST. Tax is required to be paid by the business entities on
such services under reverse charge 23.
(ii) Inter-State movement of various modes of conveyance
Inter-State movement of various modes of conveyance, between
distinct persons including-
• Trains,
• Buses,
• Trucks,
• Tankers,
• Trailers,
• Vessels,
• Containers,
• Aircrafts,
(a) carrying goods or passengers or both; or
(b) for repairs and maintenance,
[except in cases where such movement is for further supply of the same
conveyance] was discussed in GST Council’s meeting held on 11th June,
2017 and the Council recommended that such inter-State movement
shall be treated ‘neither as a supply of goods or supply of service’ and
therefore not be leviable to IGST.
Thus, above activity may not be treated as supply and consequently
IGST will not be payable on such supply. However, applicable
CGST/SGST/IGST, as the case may be, shall be leviable on repairs and
maintenance done for such conveyance [Circular No. 1/1/2017 IGST
dated 07.07.2017**].
23
Circular No. 121/40/2019 GST dated 11.10.2019

2.50 INDIRECT TAXES
(iii) Inter-State movement of rigs, tools and spares, and all goods on
wheels [like cranes]
**Above circular shall mutatis mutandis apply to inter-
State movement of rigs, tools and spares, and all
goods on wheels [like cranes], [except in cases
where movement of such goods is for further supply
of the same goods], such inter-State movement
shall be treated ‘neither as a supply of goods or supply of service,’ and
consequently no IGST would be applicable on such movements. In this
context, it is also reiterated that applicable CGST/SGST/IGST, as the case
maybe, is leviable on repairs and maintenance done for such goods [Circular
No. 21/21/2017-GST dated 22.11.2017].
In the preceding paras, we have discussed, how to determine whether a given
activity or transaction constitutes a supply. Once an activity or transaction qualifies
as supply, one needs to determine whether the same is leviable to GST or not.
Though the provisions relating to levy and collection of GST have been discussed
at length in Chapter 3 – Charge of GST, a brief idea of the same is provided
hereunder.
For a supply to attract GST, primarily two additional conditions need to be satisfied.
These are – (i) supply must be made by a taxable person and (ii) supply must be a
taxable supply. These two additional conditions have been discussed hereunder:
(i) Supply by a taxable person
A supply to attract GST should be made by a taxable person. Hence, a
supply between two non-taxable persons does not constitute taxable supply
under GST.
A supply attracting GST can

be made TO a non-taxable
person also.
The restriction of being a taxable person is only on the supplier whereas the
recipient can be either taxable or non-taxable.

Meaning of taxable person: A “taxable person” is a person who is registered

or liable to be registered under section 22 or section 24 [The said sections and
the concept of taxable person thereto have been discussed in detail in Chapter
7 – Registration].
Hence, a person who is liable to be registered but does not take a
registration and remains an unregistered person shall be construed as a
taxable person. Similarly, a person not liable to be registered, but has
taken voluntary registration and got himself registered is also a taxable
person.
(ii) Taxable supply
For a supply to attract GST, the supply must be taxable. Taxable supply has
been broadly defined and means any supply of goods or services or both
which, is leviable to tax under the GST Law [Refer Chapter-3: Charge of GST
for detailed discussion on leviability of GST]. Exemptions may be provided to
the specified goods or services or to a specified category of persons/ entities
making supply [Refer Chapter-4: Exemptions from GST for detailed discussion].
4. COMPOSITE AND MIXED SUPPLIES [SECTION 8]
Section 8 Tax liability on composite and mixed supplies

Clauses Particulars
The tax liability on a composite or a mixed supply shall be
determined in the following manner, namely:-
(a) a composite supply comprising two or more supplies, one of
which is a principal supply, shall be treated as a supply of
such principal supply; and
(b) a mixed supply comprising of two or more supplies shall be
treated as supply of that particular supply that attracts
highest rate of tax.
ANALYSIS

2.52 INDIRECT TAXES
GST is payable on individual goods or services or both at the notified rates. The
application of rates poses no problem if the supply is of individual goods or
individual services, which is clearly identifiable and such goods or services are
subject to a particular rate of tax.
However, in certain cases, supplies are not such simple and clearly identifiable
supplies. Some of the supplies are a combination of goods or combination of
services or combination of goods and services both and each individual component
of such supplies may attract a different rate of tax.
In such a case, the rate of tax to be levied on such supplies may be a challenge. It
is for this reason, that the GST Law identifies composite supplies and mixed supplies
and provides certainty in respect of tax treatment under GST for such supplies.
In order to determine whether the supplies are ‘composite supplies’ or ‘mixed
supplies’, one needs to determine whether the supplies are naturally bundled or
not naturally bundled in ordinary course of business. The concept of ‘naturally
bundled’ supplies is emanating from the definition of ‘composite supply’.
Composite supply means a supply made by a taxable person to a recipient and:

• comprises two or more taxable supplies of goods or services or both, or any
combination thereof.
• are naturally bundled and supplied in conjunction with each other, in the
ordinary course of business
• one of which is a principal supply [Section 2(30) of the CGST Act].
This means that in a composite supply, goods or services or both are bundled owing
to natural necessities. The elements in a composite supply are dependent on the
‘principal supply’.

Principal supply means the supply of goods or services which constitutes the
predominant element of a composite supply and to which any other supply
forming part of that composite supply is ancillary. [Section 2(90) of CGST Act]
(57) Works contract and restaurant services are classic examples of
composite supplies.
How to determine whether the services are bundled in the ordinary course
of business?
Whether the services are bundled in the ordinary course of business, would depend
upon the normal or frequent practices followed in the area of business to which
services relate. Such normal and frequent practices adopted in a business can be
ascertained from several indicators some of which are listed below:
 The perception of the consumer or the service recipient - If large number
of service recipient of such bundle of services reasonably expect such services
to be provided as a package, then such a package could be treated as
naturally bundled in the ordinary course of business.
(58) Mobile phone is always sold with battery.
 Majority of service providers in a particular area of business provide

similar bundle of services.
(59) Bundle of catering on board and transport by air is a bundle
offered by a majority of airlines.
 The nature of the various services in a bundle of services will also help in
determining whether the services are bundled in the ordinary course of
business. If the nature of services is such that one of the services is the main
service and the other services combined with such service are in the nature
of incidental or ancillary services which help in better enjoyment of a main
service.
(60) Service of stay in a hotel is often combined with provision of
breakfast and dinner provided free of cost during the stay. Such
service is an ancillary service to the provision of hotel
accommodation and the resultant package would be treated as services
naturally bundled in the ordinary course of business.

2.54 INDIRECT TAXES
 Other illustrative indicators, not determinative but indicative of bundling of

services in the ordinary course of business are:
 The elements are normally advertised as a package.
 The different elements are not available separately.
 The different elements are integral to one overall supply. If one or

more is removed, the nature of the supply would be affected.
⏰ No straight jacket formula can be laid down to determine whether a service is

naturally bundled in the ordinary course of business. Each case has to be
individually examined in the backdrop of several factors some of which are outlined
above.
The above principles explained in the light of what constitutes a naturally bundled
service can be gainfully adopted to determine whether a particular supply
constitutes a composite supply under GST and if so what constitutes the principal
supply so as to determine the right classification and rate of tax of such composite
supply.
Some of the examples of composite supplies have been given below:

(61) Poshaak Manufacturers entered into a contract with Cheeku Ltd. for
supply of readymade shirts packed in designer boxes at Cheeku Ltd.’s
outlet. Further, Poshaak Manufacturers would also get them insured
during transit. In this case, supply of goods, packing materials, transport &
insurance is a composite supply wherein supply of goods is principal supply.
(62) When a consumer buys a television set and he also gets mandatory
warranty and a maintenance contract with the TV, this supply is a
composite supply. In this example, supply of TV is the principal supply,
warranty and maintenance services are ancillary.
(63) A travel ticket from Mumbai to Delhi may include service of food
being served on board, free insurance, and the use of airport lounge. In
this case, the transportation of passenger, constitutes the pre-dominant
element of the composite supply, and is treated as the principal supply and all other
supplies are ancillary.

Supplies given in the below mentioned table are the composite supplies. CBIC has
clarified as to what constitutes the principal supply in the given composite supplies:
Activity/ Principal supply

transaction
Supply of printed In the case of printing of books, pamphlets, brochures,

books, annual reports, and the like, where only content is supplied
pamphlets, by the publisher or the person who owns the usage rights to
brochures, the intangible inputs while the physical inputs including
envelopes, paper used for printing belong to the printer, supply of
annual reports, printing [of the content supplied by the recipient of supply]
leaflets, cartons, is the principal supply and therefore such supplies would
boxes etc., constitute supply of service.
printed with
design, logo, In case of supply of printed envelopes, letter cards, printed
name, address or boxes, tissues, napkins, wall paper etc. by the printer using
other contents its physical inputs including paper to print the design, logo
supplied by the etc. supplied by the recipient of goods, predominant supply
recipient of such is supply of goods and the supply of printing of the content
printed goods [supplied by the recipient of supply] is ancillary to the
principal supply of goods and therefore such supplies would
constitute supply of goods. [Circular No. 11/11/2017 GST
dated 20.10.2017]
Activity of bus The principal supply may be determined on the basis of facts
body building and circumstances of each case [Circular No. 34/8/2018-GST
dated 01.03.2018].
Retreading of Pre-dominant element is process of retreading which is a

tyres supply of service. Rubber used for retreading is an ancillary
supply.
Supply of retreaded tyres, where the old tyres belong to the
supplier of retreaded tyres, is a supply of goods [Circular
No. 34/8/2018-GST dated 01.03.2018].
How to determine the tax liability on composite supplies?: A composite

supply comprising of two or more supplies, one of which is a principal supply,
shall be treated as a supply of such principal supply. Accordingly, the entire

2.56 INDIRECT TAXES
value of composite supply (i.e. main supply + ancillary supplies) shall be

classified under the category of main supply and shall be taxed at the GST rate
applicable to the main supply. This can be better understood with the help of
following example:
(64) Rati Computers supplies laptop (worth ` 52,000) alongwith laptop
bag (worth ` 3,000) to a customer for ` 55,000. Being naturally bundled,
supply of laptop bag along with the laptop is composite supply which is
treated as the supply of the principal supply [viz. laptop]. Assuming that the rate of
tax applicable on laptop is 18% and on laptop bag is 28%, in the given case, rate
of principal supply, i.e. laptop @ 18% will be charged on the entire value of `
55,000.
Mixed supply means:

 two or more individual supplies of goods or services, or any combination
thereof, made in conjunction with each other by a taxable person
 for a single price where such supply does not constitute a composite supply
The individual supplies are independent of each other and are not naturally
bundled.
How to determine if a particular supply is a mixed supply?: In order to identify

if the particular supply is a mixed supply, the first requisite is to rule out that the
supply is a composite supply.
A supply can be a mixed supply only if it is not a composite supply. As a corollary,
it can be said that if the transaction consists of supplies not naturally bundled in
the ordinary course of business then it would be a mixed supply.
Once the amenability of the transaction as a composite supply is ruled out, and a
single consideration is charged for the entire supply of different components, it
would be a mixed supply, classified in terms of supply of goods or services
attracting highest rate of tax.

(65) A supply of a package consisting of canned foods, sweets,

chocolates, cakes, dry fruits, aerated drink and fruit juices when supplied
for a single price is a mixed supply. Each of these items can be supplied
separately and is not dependent on any other. It shall not be a mixed supply if these
items are supplied separately.
(66) A shopkeeper selling storage water bottles along with refrigerator.

Bottles and the refrigerator can easily be priced and sold independently
and are not naturally bundled. So, such supplies are mixed supplies.
(67) A house is given on rent through a single rent deed - one floor of
which is to be used as residence and the other for housing a printing press,
at a lump sum rent amount. Such renting for two different purposes is not naturally
bundled in the ordinary course of business. Said supplies are mixed supply.
How to determine the tax liability on mixed supplies?: A mixed supply
comprising of two or more supplies shall be treated as supply of that particular
supply that attracts highest rate of tax.
(68) Sringaar Enterprises supplies 10,000 kits (at ` 50 each) amounting

to ` 5,00,000 to Raghav General Store. Each kit consists of 1 shampoo,
1 face wash and 1 kajal pencil. It is a mixed supply and is treated as
supply of that particular supply which attracts highest tax rate. Assuming that the
rate of tax applicable on shampoo is 18%, on face wash is 28% and on kajal pencil
is 12%, in the given case, highest tax rate [viz. face wash] @ 28% will be charged
on the entire value of ` 5,00,000.
More than one supply made together and taxed at the individual rates
There can be a case where an activity/transaction involves more than one supply of
goods or services or both, but neither they are composite supplies nor can be
categorised as mixed supplies, that is, all supplies carry independent significance.
In such a case, if separate consideration is indicated against each supply, each such
supply shall be charged at the respective rate applicable to that particular supply.
(69) In case of servicing of cars involving supply of both goods (spare
parts) and services (labour) where the value of goods and services are
shown separately, the goods and services would be liable to tax at the
rates as applicable to such goods and services separately [Circular No. 47/21/2018
GST dated 08.06.2018].

2.58 INDIRECT TAXES
5. LET US RECAPITULATE
 The taxable event under GST is supply. The scope of supply under GST can
be understood in terms of following parameters:
Supply should be of goods Supply should be made for a Supply should be made in the
or services consideration course or furtherance of business
 While these parameters describe the concept of supply, under certain

circumstances, transactions have been deemed as supply even when the
supply is made without consideration or not in the course or furtherance of
business. Activities specified in Schedule I are deemed to be a supply even
without consideration. Further, import of services for a consideration,
whether or not in the course or furtherance of business is treated as supply.
 Besides, some specified transactions/ activities are neither treated as supply
of goods nor a supply of services. Furthermore, certain activities have been
categorised as supply of goods or as supply of services.
 The discussion with respect to supply is broadly categorised into
following:
Supply with consideration in course or furtherance of

business.
Importation of services with consideration whether or

includes not in course or furtherance of business.
Supply without consideration

Supply
Activities neither the supply of goods nor the supply of

excludes
services
Activities to be treated as supply of goods or supply of services
Sub-sections of section 7 alongwith related Schedules have been summarised

as follows:

1. Supply for consideration in course or furtherance of business

[Section 7(1)(a)]
Supply includes sale,

transfer, barter, exchange,
in the course or
licence, rental, lease, for consideration furtherance of
disposal, etc. business
Consideration
Supply
in course or
furtherance of
business
2. Importation of services for consideration whether or not in course or

furtherance of business [Section 7(1)(b)]
Supply should be in course or furtherance of business. The exception to said
rule is import of services is deemed as supply even if the same has been
imported not in course/furtherance of business.
Consideration
Importation of
Supply
services
in course or furtherance
of business
3. Supply without consideration - Deemed Supply [Section 7(1)(c) read

with Schedule I]
This includes all supplies made to a taxable or non-taxable person, even if the
same is without consideration. These are specifically mentioned in
Schedule I appended to the CGST Act.
As per Schedule I, in the following four cases, supplies made without
consideration will be treated as supply under section 7 of the CGST Act:

2.60 INDIRECT TAXES
I. Permanent Transfer/Disposal of Business Assets
Input Tax Credit

Business
availed
Deemed Supply
Assets
Permanently
transferred/disposed
II. Supply between related persons or distinct persons
Related/Distinct Related/Distinct
Deemed
Supply
Person 1 Person 2
Supply of goods or services
in course or furtherance of business
Employer Employee
Gifts ≤ ` 50,000 in a FY
Not supply
III. Supply between principal and agent
Deemed Supply
supplies goods
Principal Agent
supplies goods on behalf of principal

and issues invoice to customer in his
own name
Buyer

Supplier Agent
Deemed Supply
Agent receives goods on behalf of
principal and receives invoice in supplies
his own name goods to
principal
Principal
IV. Importation of services
Related
persons
Deemed Supply
Person out Person in India
of India supplies services
in course or furtherance of business
The combined provisions of relating to import of services [as stipulated under

under section 7(1)(b) and section 7(1)(c) read with Schedule I] have been depicted
in the below mentioned diagram:
Import of services
Import of services
with consideration without consideration
in course or not in course or related person/distinct

Other
futherance of futherance of person + in course or
cases
business business futherance of business
Supply Not a supply

2.62 INDIRECT TAXES
4. Activities or transactions to be treated as Supply of goods or Supply

of services [Section 7(1A) read with Schedule II]
S.No. Activity/ Type Supply of

Transaction goods/
services
1. Transfer (i) Title in goods Goods

(ii) Title in goods under an
agreement that property shall pass
at a future date.
Right/undivided share in goods Services

without transfer of title in them
2. Land and Lease, tenancy, easement, licence Services

Building to occupy land
Lease/letting out of building Services

including a commercial/ industrial/
residential complex for business/
commerce, wholly/ partly.
3. Treatment Applied to another person’s goods Services

or Process
4. Transfer of Goods forming part of business Goods

Business assets are transferred/disposed off
Assets by/under directions of person
carrying on business so as no longer
to form part of those assets.
Goods held/used for business are Services

put to private use or are made
available to any person for use for
any purpose other than business,
by/under directions of person
carrying on the business.

Goods forming part of assets of any Goods

business carried on by a person
who ceases to be a taxable person,
shall be deemed to be supplied by
him, in the course or furtherance of
his business, immediately before he
ceases to be a taxable person.
Exceptions:
 Business transferred as a going
concern.
 Business carried on by a
personal representative who is
deemed to be a taxable person.
5. Renting of immovable property
Construction of complex, building, civil structure,

etc.
Temporary transfer or permitting use or Services

enjoyment of any intellectual property right
Development, design, programming,

customisation, adaptation, upgradation,
enhancement, implementation of IT software
Agreeing to obligation to refrain from an act, or

to tolerate an act or situation, or to do an act.
Transfer of right to use any goods for any purpose
6. Following composite supplies:- Services

 Works contract services.
 Supply of goods, being food or any other
article for human consumption or any drink.
7. Supply of goods by an unincorporated association Goods

or body of persons to a member thereof for cash,
deferred payment or other valuable consideration.

2.64 INDIRECT TAXES
5. Non-supplies under GST [Section 7(2)(a) read with Schedule III]
S. No. Activities or transactions which shall be treated neither as

a supply of goods nor a supply of services
1. Services by an employee to the employer in the course of or

in relation to his employment.
2. Services by any court or Tribunal established under any law for

the time being in force.
3. (a) Functions performed by the Members of Parliament,

Members of State Legislature, Members of Panchayats,
Members of Municipalities and Members of other local
authorities;
(b) Duties performed by any person who holds any post in
pursuance of the provisions of the Constitution in that
capacity; or
(c) Duties performed by any person as a Chairperson or a
Member or a Director in a body established by the Central
Government or a State Government or local authority and
who is not deemed as an employee before the
commencement of this clause.
4. Services of funeral, burial, crematorium or mortuary including

transportation of the deceased.
5. Sale of land and, subject to paragraph 5(b) of Schedule II, sale

of building.
6. Actionable claims, other than lottery, betting and gambling.
The diagram on the next page summarises the steps to determine

whether an activity undertaken is Supply or not.

Is the activity a supply including supply of

No
goods/services such as sale, transfer, barter,
exchange, licence, rental, lease or disposal?
Yes
No Is it an activity No
Is it for a
consideration? specified under
Schedule I?
Yes Yes
Is it in course No
or furtherance
of business?
Is it
No
Is it in course
or furtherance import of
of business? No service?
Yes
Yes Yes
Is it an activity specified No
in Schedule III or section Activity is
Activity is
7(2)(b)? Supply NOT
Supply
Yes

2.66 INDIRECT TAXES
6. Composite and mixed supplies
Composite Supply Mixed Supply

•Consist of two or more •Consist of two or more supplies
supplies for a single price
•Naturally bundled •Not naturally bundled
•In conjunction with each •Though can be supplied
other independently, still supplied
•One of which is principal together
supply •Tax liability shall be the rate
•Tax liability shall be rate of applicable to the supply that
principal supply attracts highest rate of tax
•Example: Charger •Example: A gift pack
supplied alongwith mobile comprising of choclates,
phones. candies, sweets and balloons.

1. Meghraj & Co. wishes to commence the business of supplying ready-made
garments within Punjab and in the neighbouring States of Delhi and Haryana.
Kindly state as to what is the taxable event under GST and leviability of CGST,
SGST/UTGST and IGST on the same?
2. Damodar Private Ltd., registered in Delhi, has transferred some goods to its
branch, registered in West Bengal, so that the goods can be sold from the
branch. The goods have been transferred without any consideration. The
company believes that the transaction undertaken by it does not qualify as

supply as no consideration is involved. Ascertain whether the transfer of goods

by Damodar Private Ltd. to its branch office qualifies as supply.
3. Prithvi Associates is engaged in supply of taxable goods. It enquires from its
tax advisor as to whether any activity can be treated as supply even if made
without consideration in accordance with the provisions of the CGST Act.
Enumerate such activities, if any.
4. Composite supply is treated as supply of that particular goods or services which
attracts the highest rate of tax. Examine the validity of the statement.
5. Transfer of title and/or possession is necessary for a transaction to constitute
supply of goods. Examine.
6. Examine whether the following activities would amount to supply under section
7 read with Schedule I of the CGST Act:
(a) Sulekha Manufacturers have a factory in Delhi and a depot in Mumbai.
Both these establishments are registered in respective States. Finished
goods are sent from factory in Delhi to the Mumbai depot without
consideration so that the same can be sold.
(b) Raman is an architect in Chennai. His brother who is settled in London
is a well-known lawyer. Raman has taken legal advice from him free of
cost with regard to his family dispute.
(c) Would your answer be different if in the above case, Raman has taken
advice in respect of his business unit in Chennai?
7. State whether the following supplies would be treated as supply of goods or
supply of services as per Schedule II of the CGST Act:
(a) Renting of immovable property.
(b) Goods forming part of business assets are transferred or disposed of
by/under directions of person carrying on the business.
(c) Transfer of right in goods without transfer of title in goods.
(d) Transfer of title in goods under an agreement which stipulates that
property shall pass at a future date.
8. Determine whether the following supplies would be treated as supply of goods
or supply of services as per Schedule II of the CGST Act:
(a) Temporary transfer or permitting use or enjoyment of any intellectual
property right.

2.68 INDIRECT TAXES
(b) Supply of goods by an unincorporated association or body of persons to

a member thereof for cash, deferred payment or other valuable
consideration.
(c) Any treatment or process which is applied to another person’s goods.
(d) Transfer of title in goods.
9. The goods supplied on hire purchase basis will be treated as supply of services.
Examine the validity of the statement.
10. Examine whether the activity of import of service in the following independent
cases would amount to supply under section 7 of the CGST Act, 2017:
(i) Miss Shriniti Kaushik received interior decoration services for her
residence located at Bandra, Mumbai from Mr. Racheal of Sydney
(Australia). The amount paid for the said service is 5,000 Australian
dollar.
(ii) Miss Shriniti Kaushik received interior decoration services for her
residence located at Bandra, Mumbai from her brother, Mr. Varun
residing in Sydney (Australia) [wholly dependent on Miss Shriniti].
Further, Miss Shriniti did not pay any consideration for the said service.
(iii) Will your answer change if in the above case, if Miss Shriniti has taken
interior decoration services with regard to her business premises and not
her residence?
Note: Any specific exemption by way of notification needs to be ignored.
11. Determine whether the following supplies amount to composite supplies:
(a) A hotel provides 4 days-3 nights package wherein the facility of breakfast
and dinner is provided alongwith the room accommodation.
(b) A toothpaste company has offered the scheme of free soap alongwith the
toothpaste.
12. Dumdum Electronics has sold the following electronic items to Akbar Retail
Store.
(i) Refrigerator (500 litres) taxable @ 18%
(ii) Stabilizer for refrigerator taxable @ 12%
(iii) LED television (42 inches) taxable @ 12%

(iv) Split air conditioner (2 Tons) taxable @ 28%

(v) Stabilizer for air conditioner taxable @12%
Dumdum Electronics has issued a single invoice, indicating price of each of the
above items separately in the same. Akbar Retail Store has given a single
cheque of ` 1,00,000/- for all the items as a composite discounted price. State
the type of supply and the tax rate applicable in this case.
13. Manikaran, a registered supplier of Delhi, has supplied 20,000 packages at
` 30 each to Mukhija Gift Shop in Punjab. Each package consists of 2
chocolates, 2 fruit juice bottles and a packet of toy balloons. Determine the
rate(s) of GST applicable in the given case assuming the rates of GST to be as
under:
Goods/services supplied GST rate
Chocolates 18%
Fruit juice bottles 12%
Toy balloons 5%
14. Gagan Engineering Pvt. Ltd., registered in Haryana, is engaged in providing

maintenance and repair services for heavy steel machinery. For carrying out
the repair work, Gagan Engineering Pvt. Ltd. sends its container trucks equipped
with items like repair equipments, consumables, tools, parts etc. from Haryana
workshop to its own repairing centres (registered under GST law) located in
other States across India where the clients’ machinery are being brought and
are being repaired.
Discuss the leviability of GST on the inter-State movement of trucks from the
workshop of Gagan Engineering Pvt. Ltd. in Haryana to its own repairing
centres located in other States across India.
15. PTL Pvt. Ltd. is a retail store of merchandise located in 25 States/UTs in the
country. For the purpose of clearance of stock of merchandise and to attract
consumers, PTL Pvt. Ltd. launched scheme of “Buy One Get One Free” for the
same type of merchandise, for instance, one shirt to be given free with purchase
of one shirt. Determine how the taxability of the goods supplied under “Buy
One Get One Free” scheme is determined.

2.70 INDIRECT TAXES
16. Sarvanna & Sons wishes to start supplying liquor in the State of Tamil Nadu.
Therefore, it applies for license for selling liquor to the Tamil Nadu Government
for it has charged specified fee from it. Examine whether the grant of alcoholic
liquor license by the Tamil Nadu Government to Sarvanna & Sons qualifies as
supply.
7. ANSWERS/HINTS
1. Taxable event under GST is supply of goods or services or both. CGST and
SGST/ UTGST will be levied on intra-State supplies. IGST will be levied on
inter-State supplies.
2. As per Schedule I of the CGST Act, supply of goods or services or both
between related persons or between distinct persons as specified in section
25, when made in the course or furtherance of business, is deemed as supply
even if made without consideration. In the given case, since the Damodar
Private Ltd. and its branch located in another State are distinct persons,
supply of goods between them qualifies as supply.
3. Section 7 stipulates that the supply should be for a consideration and should
be in the course or furtherance of business. However, Schedule I of the CGST
Act enumerates the cases where an activity is treated as supply, even if the
same is without consideration. These are as follows:
(i) Permanent transfer or disposal of business assets where input tax credit
has been availed on such assets.
(ii) Supply of goods or services or both between related persons or between
distinct persons as specified in section 25, when made in the course or
However, gifts not exceeding fifty thousand rupees in value in a financial
year by an employer to an employee shall not be treated as supply of
(iii) Supply of goods —
(a) by a principal to his agent where the agent undertakes to supply
such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive
such goods on behalf of the principal.

(iv) Import of services by a person from a related person or from any of his
other establishments outside India, in the course or furtherance of
business.
4. The statement is not correct. Composite supply is treated as supply of the
principal supply. It is the mixed supply that is treated as supply of that
particular goods or services which attracts the highest rate of tax.
5. Title as well as possession both have to be transferred for a transaction to be
considered as a supply of goods. In case title is not transferred, the
transaction would be treated as supply of service in terms of Schedule II(1)(b)
of the CGST Act. In some cases, possession may be transferred immediately,
but title may be transferred at a future date like in case of sale on approval
basis or hire purchase arrangement. Such transactions will also be termed as
supply of goods.
6. (a) Schedule I of CGST Act, inter alia, stipulates that supply of goods or
services or both between related persons or between distinct persons
as specified in section 25, is supply even without consideration provided
it is made in the course or furtherance of business. Further, a person
who has obtained more than one registration, whether in one
State/Union territory or more than one State/Union territory shall, in
respect of each such registration, be treated as distinct persons
In view of the same, factory and depot of Sulekha Manufacturers are
distinct persons. Therefore, supply of goods from Delhi factory of
Sulekha Manufacturers to Mumbai Depot without consideration, but in
course/furtherance of business, is supply under section 7 read with
Schedule I of the CGST Act.
(b) Schedule I of CGST Act, inter alia, stipulates that import of services by
a taxable person from a related person located outside India, without
consideration is treated as supply if it is provided in the course or
furtherance of business. Explanation to section 15, inter alia, provides
that persons shall be deemed to be “related persons” if they are
members of the same family. Further, as per section 2(49) of the CGST
Act, 2017, family means, —
(ii) the parents, grand-parents, brothers and sisters of the person if
they are wholly or mainly dependent on the said person.

2.72 INDIRECT TAXES
In the given case, Raman has received free of cost legal services from
his brother. However, in view of section 2(49)(ii) above, Raman and his
brother cannot be considered to be related as Raman’s brother is a well-
known lawyer and is not wholly/mainly dependent on Raman. Further,
Raman has taken legal advice from him in personal matter and not in
course or furtherance of business. Consequently, services provided by
Raman’s brother to him would not be treated as supply under section
7 read with Schedule I of the CGST Act.
(c) In the above case, if Raman has taken advice with regard to his business
unit, services provided by Raman’s brother to him would still not be
treated as supply under section 7 of the CGST Act read with Schedule I
as although the same are provided in course or furtherance of business,
such services have not been received from a related person.
7. (a) Supply of services
(b) Supply of goods
(c) Supply of services
(d) Supply of goods
8. (a) Supply of services
(b) Supply of goods
(c) Supply of services
(d) Supply of goods
9. The statement is not correct. Supply of goods on hire purchase shall be
treated as supply of goods as there is transfer of title, albeit at a future date.
10. (i) Supply, under section 7 of the CGST Act, 2017, inter alia,
 includes import of services for a consideration
 even if it is not in the course or furtherance of business.
Thus, although the import of service for consideration by Miss. Shriniti
Kaushik is not in course or furtherance of business [as the interior
decoration services have been availed in respect of residence], it would
amount to supply.
(ii) Schedule I of CGST Act, inter alia, stipulates that import of services by
a taxable person from a related person located outside India, without

consideration is treated as supply if it is provided in the course or

furtherance of business. Explanation to section 15, inter alia, provides
that persons shall be deemed to be “related persons” if they are
members of the same family. Further, as per section 2(49) of the CGST
Act, 2017, family means, —
(ii) the parents, grand-parents, brothers and sisters of the person if
they are wholly or mainly dependent on the said person.
In the given case, Miss Shriniti Kaushik has received interior decoration
services from her brother. In view of section 2(49)(ii) above, Miss Shriniti
and her brother shall be considered to be related as Miss Shriniti’s
brother is wholly dependent on her.
However, Miss Shrinti has taken interior decoration services for her
residence and not in course or furtherance of business. Consequently,
services provided by Miss Shrinti’s brother to her would not be treated
as supply under section 7 read with Schedule I of the CGST Act.
(iii) In the above case, if Miss Shriniti has taken interior decoration services
with regard to her business premises, services provided by Miss
Shriniti’s brother to her would be treated as supply under section 7 of
the CGST Act read with Schedule I of the CGST Act, 2017.
11. Under composite supply, two or more taxable supplies of goods or services or
both, or any combination thereof, are naturally bundled and supplied in
conjunction with each other, in the ordinary course of business, one of which is
a principal supply [Section 2(30) of the CGST Act]. In view of the same,
(a) since, supply of breakfast and dinner with the accommodation in the hotel
are naturally bundled, said supplies qualify as ‘composite supply’.
(b) since supply of soap alongwith the toothpaste are not naturally
bundled, said supplies do not qualify as ‘composite supply’.
12. In the given case, the items supplied by Dumdum Electronics are not naturally
bundled in the ordinary course of business. Therefore, such supply is not a
composite supply. Further, although Akbar Retail Store has paid a composite
discounted price for these goods, Dumdum Electronics has not charged a
single price for the said supply. Therefore, said supply is also not a mixed
supply.

2.74 INDIRECT TAXES
Supply of these goods is, therefore, supply of individual items which are
taxable at the respective rates applicable to them.
13. As per section 2(74) of the CGST Act, 2017, mixed supply means two or more
individual supplies of goods or services, or any combination thereof, made in
conjunction with each other by a taxable person for a single price where such
supply does not constitute a composite supply.
Supply of a package containing chocolates, fruit juice bottles and a packet of
toy balloons is a mixed supply as each of these items can be supplied
separately and is not dependent on any other. Further, as per section 8(b) of
the CGST Act, 2017, the mixed supply is treated as a supply of that particular
supply which attracts the highest rate of tax. Thus, in the given case, supply
of packages is treated as supply of chocolates [since it attracts the highest
rate of tax] and the rate of GST applicable on the package of ` 6,00,000
(20,000 × ` 30) is 18%
14. As per section 25(4) 24, a person who has obtained more than one registration,
whether in one State or Union territory or more than one State or Union
territory shall, in respect of each such registration, be treated as ‘distinct
persons’.
Schedule I to the CGST Act specifies situations where activities are to be
treated as supply even if made without consideration. Supply of goods and/or
services between ‘distinct persons’ as specified in section 25, when made in
the course or furtherance of business is one such activity included in
Schedule I under para 2.
However, in view of the GST Council’s recommendation, it has been clarified
that the inter-State movement of various modes of conveyance between
‘distinct persons’ as specified in section 25(4), not involving further supply of
such conveyance, including trucks carrying goods or passengers or both; or
for repairs and maintenance, may be treated ‘neither as a supply of goods
nor supply of service’ and therefore, will not be leviable to IGST [Circular No.
1/1/2017 IGST dated 07.07.2017].
24
Provisions of section 25(4) of the CGST Act have been discussed in detail in Chapter 7 –
Registration

Thus, in the given case, inter-State movement of trucks from the workshop of
Gagan Engineering Pvt. Ltd. located in Haryana to its repair centres located
in other States is ‘neither a supply of goods nor supply of service’.
15. As per section 7(1)(a), the goods or services which are supplied free of cost
(without any consideration) are not treated as “supply” except in case of
activities mentioned in Schedule I of the CGST Act. Under “Buy One Get One
Free” scheme, it may appear at first glance that in case of offers like “Buy One,
Get One Free”, one item is being “supplied free of cost” without any
consideration. However, it is not an individual supply of free goods, but a
case of two or more individual supplies where a single price is being charged
for the entire supply. It can at best be treated as supplying two goods for the
price of one.
Taxability of such supply will be dependent upon as to whether the supply is
a composite supply or a mixed supply and the rate of tax shall be determined
accordingly.
16. Services by way of grant of alcoholic liquor license by the State Governments
have been notified to be treated neither as a supply of goods nor as a supply
of service. Such licence is granted against consideration in the form of licence
fee or application fee or by whatever name it is called. This special
dispensation is applicable only to supply of service by way of grant of liquor
licenses by the State Governments as an agreement between the Centre and
States and is not applicable/has no precedence value in relation to grant of
other licenses and privileges for a fee in other situations, where GST is
payable.
Thus, in the given case, the grant of alcoholic liquor license by the Tamil Nadu
Government to Sarvanna & Sons is neither a supply of goods nor a supply of
service.

CHAPTER 3
CHARGE OF GST
Examples/illustrations/Questions and Answers given in the Chapter are based on
the position of GST law existing as on 31.10.2020
LEARNING OUTCOMES
 explain the extent and commencement of CGST Act, IGST
Act, SGST Act & UTGST Act.
 describe the provisions pertaining to levy and collection of
CGST & IGST.
 identify and analyse the services on which tax is payable
under reverse charge mechanism.
 understand and analyse the composition levy- eligibility for
the same and conditions to be fulfilled.

3.2 INDIRECT TAXES
CHAPTER OVERVIEW
collection of GST
Extent and commencement of CGST Act/

UTGST Act/ SGST Act/IGST Act
Levy and
in India
Levy and collection of CGST/IGST
Composition levy
1. INTRODUCTION
Power to levy tax is drawn from the Constitution of India. To pave way for the
introduction of Goods and Services Tax (“GST”), 101st Constitutional Amendment
Act, 2016 was passed. By virtue of this Act, enabling provision was made to levy
GST on supply of goods or services or both in India. Central excise duty, State
VAT and certain State specific taxes and service tax were subsumed into a
comprehensive GST [Discussed in detail in Chapter-1: GST in India – An
Introduction].
The very basis for the charge of tax in any taxing statute is the taxable event i.e
the occurrence of the event which triggers levy of tax. As discussed earlier, the
taxable event under GST is SUPPLY. CGST and SGST/UTGST are levied on all
intra-State supplies of goods and/or services while IGST is levied on all inter-
State supplies of goods and/ or services.
The provisions relating to levy and collection of CGST and IGST are contained in
section 9 of the CGST Act, 2017 and section 5 of the IGST Act, 2017, respectively.
Let us now have a fundamental idea of intra-State supply and inter-State supply.
As a general rule, where the location of the supplier and the place of supply of
goods or services are in the same State/Union territory, it is treated as intra-State
supply of goods or services respectively.

CHARGE OF GST 3.3
Similarly, where the location of the supplier and the place of supply of goods or
services are in (i) two different States or (ii) two different Union Territories or (iii) a
State and a Union territory, it is treated as inter-State supply of goods or
services respectively.
Central tax: means the central goods and services tax levied under
section 9 of the CGST Act [Section 2(21) of the CGST Act].
Integrated tax: means the integrated goods and services tax levied under
the Integrated Goods and Services Tax Act [Section 2(58) of the CGST Act].
State tax: means the tax levied under any State Goods and Services Tax Act
Goods: means every kind of movable property other than money and
attached to or forming part of the land which are agreed to be severed
before supply or under a contract of supply. [Sec. 2(52) of CGST Act].
Exempt supply: means supply of any goods or services or both which
attracts nil rate of tax or which may be wholly exempt from tax under
section 11, or under section 6 of the Integrated Goods and Services Tax
Act, and includes non-taxable supply [Section 2(47) of CGST Act].
Aggregate turnover: means the aggregate value of all taxable supplies
(excluding the value of inward supplies on which tax is payable by a person
on reverse charge basis), exempt supplies, exports of goods or services or
both and inter-State supplies of persons having the same Permanent
Account be computed on all India basis but excludes central tax, State tax,
Union territory tax, integrated tax and cess [Section 2(6) of CGST Act].

3.4 INDIRECT TAXES
Business: includes –
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or

any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to (a)

above;
(c) any activity or transaction in the nature of (a) above, whether or not there is
volume, frequency, continuity or regularity of such transaction;

(e) provision by a club, association, society, or any such body (for a subscription or any
other consideration) of the facilities or benefits to its members, as the case may be;
(g) services supplied by a person as the holder of an office which has been accepted
by him in the course or furtherance of his trade, profession or vocation;
(h) activities of a race club including by way of totalisator or a license to book

maker or activities of a licensed book maker in such club;
(i) any activity or transaction undertaken by the Central Government, a State

Government or any local authority in which they are engaged as public authorities

Consideration: in relation to the supply of goods or services or both
includes:
any payment made or to be made, whether in money or otherwise,
in respect of, in response to, or for the inducement of, the supply
of goods or services or both, whether by the recipient or by any
other person but shall not include any subsidy given by the Central
Government or a State Government,
the monetary value of any act or forbearance, in respect of, in
response to, or for the inducement of, the supply of goods or
services or both, whether by the recipient or by any other person

CHARGE OF GST 3.5
but shall not include any subsidy given by the Central Government
or a State Government.
However, a deposit given in respect of the supply of goods or services or
both shall not be considered as payment made for such supply unless
the supplier applies such deposit as consideration for the said supply.
Person: includes [Section 2(84) of CGST Act]-
An individual A HUF A company
An association of persons
or a body of individuals,
A Limited Liability
A firm whether incorporated or
Partnership
not, in India or outside
India
Any corporation established Any body corporate A co-operative society

by/under any Central, State or
incorporated by or registered under any
Provincial Act or Government
company as defined in section under the laws of a law relating to
2(45) of Companies Act, 2013 country outside India cooperative societies
Society as defined
Central
under the Societies
A local authority Government/State
Government Registration Act,
1860
Every artificial juridical

Trust person, not falling
above
Recipient: of supply of goods and/or services means-

(a) where a consideration is payable for the supply of goods or
services or both, the person who is liable to pay that consideration,

3.6 INDIRECT TAXES
(b) where no consideration is payable for the supply of goods, the

person to whom the goods are delivered or made available, or to
whom possession or use of the goods is given or made available,
and
(c) where no consideration is payable for the supply of a service, the
person to whom the service is rendered,
construed as a reference to the recipient of the supply and shall include
an agent acting as such on behalf of the recipient in relation to the
goods or services or both supplied. [Section 2(93) of CGST Act]
Reverse charge: means the liability to pay tax by the recipient of supply of
goods or services or both instead of the supplier of such goods or services
or both under section 9(3)/9(4), or under section 5(3)/5(4) of the IGST Act
Services: means anything other than goods, money and securities but
includes activities relating to the use of money or its conversion by cash
or by any other mode, from one form, currency or denomination, to
another form, currency or denomination for which a separate
consideration is charged [Section 2(102) of CGST Act].
Explanation.––For the removal of doubts, it is hereby clarified that the
securities.
Supplier: in relation to any goods or services or both, shall mean the
person supplying the said goods or services or both and shall include an
agent acting as such on behalf of such supplier in relation to the goods
or services or both supplied. [Section 2(105) of CGST Act]
Taxable supply: means a supply of goods and/or services which is

leviable to tax under CGST Act. [Section 2(108) of CGST Act]
Non-taxable supply: means a supply of goods or services or both which

is not leviable to tax under CGST Act or under IGST Act. [Section 2(78) of
CGST Act]
Taxable person: means a person who is registered or liable to be

registered under section 22 or section 24 of the CGST Act. [Section 2(107)
of CGST Act]

CHARGE OF GST 3.7
It is important to note that a person who is liable to be registered but

does not take a registration and remains an unregistered person shall be
construed as a taxable person. Similarly, a person not liable to be
registered, but has taken voluntary registration and got himself
registered is also a taxable person.
Section 22 enumerates the persons liable to be registered under CGST Act and section
24 lists the persons liable to be registered compulsorily under the GST law. The said
sections and the concept of taxable person thereto has been discussed in detail in
Chapter 7 – Registration.
3. EXTENT & COMMENCEMENT OF GST LAW

(i) Central Goods and Services Tax Act, 2017 extends to the whole of India
[Section 1 of the CGST Act].
India: “India” means-
territory of India as referred to in article 1 of the Constitution
its territorial waters, seabed and sub-soil underlying such

waters, continental shelf, exclusive economic zone or any
other maritime zone as referred to in the Territorial Waters,
Continental Shelf, Exclusive Economic Zone and other
Maritime Zones Act, 1976
the air space above its territory and territorial waters

3.8 INDIRECT TAXES
12 24 200
NM NM NM
Territorial
Waters
(TWI) Contiguous High Sea
Zone
Exclusive Economic Zone

Baseline
Continental Shelf
(ii) State GST law of the respective State/Union Territory with Legislature
[Delhi, Puducherry and Jammu & Kashmir]* extends to whole of that
State/Union Territory.
(1) Maharashtra GST Act, 2017 extends to whole of the State of the
Maharashtra.
*State: includes a Union territory with Legislature [Section 2(103) of the CGST
Act].
(iii) Integrated Goods and Services Tax Act, 2017 extends to the whole of
India [Section 1 of the IGST Act].
(iv) Union Territory Goods and Services Tax Act, 2017 extends to the Union
territories** of the Andaman and Nicobar Islands, Lakshadweep, Dadra and
Nagar Haveli and Daman and Diu, Ladakh 1, Chandigarh and other
1
Students may note that the erstwhile State of Jammu and Kashmir has been reorganised
into the Union territory of Jammu and Kashmir (with Legislature) and Union territory of
Ladakh vide the Jammu and Kashmir Reorganisation Act, 2019. Further, the erstwhile
Union territories of Dadra and Nagar Haveli and Daman and Diu have been merged into a
new Union territory of Dadra and Nagar Haveli and Daman and Diu vide the Dadra and
Nagar Haveli and Daman and Diu (Merger of Union Territories) Act, 2019.

CHARGE OF GST 3.9
territory, i.e. the Union Territories without Legislature [Section 1 of the

UTGST Act].
**Union territory: means the territory of—
(a) the Andaman and Nicobar Islands;
(b) Lakshadweep;
(c) Dadra and Nagar Haveli and Daman and Diu;
(d) Ladakh
(e) Chandigarh; and
(f) other territory.
Explanation––For the purposes of this Act, each of the territories specified in
sub-clauses (a) to (f) shall be considered to be a separate Union territory
Our discussion in this Study Material will principally be confined to the

provisions of CGST and IGST laws as the specific State GST laws are
outside the scope of syllabus.
4. L
LEVY & COLLECTION OF CGST & IGST [SECTION 9
OF THE CGST ACT & SECTION 5 OF THE IGST ACT]
Section 9 of Levy and collection

the CGST
Act
Sub-section Particulars
(1) Subject to the provisions of sub-section (2), there shall be levied

a tax called the central goods and services tax on all intra-State
supplies of goods or services or both, except on the supply of
alcoholic liquor for human consumption, on the value
determined under section 15 and at such rates, not exceeding
twenty per cent., as may be notified by the Government on the

3.10 INDIRECT TAXES
recommendations of the Council and collected in such manner

as may be prescribed and shall be paid by the taxable person.
(2) The central tax on the supply of petroleum crude, high speed
diesel, motor spirit (commonly known as petrol), natural gas
and aviation turbine fuel shall be levied with effect from such
date as may be notified by the Government on the
recommendations of the Council.
(3) The Government may, on the recommendations of the

Council, by notification, specify categories of supply of goods
or services or both, the tax on which shall be paid on reverse
charge basis by the recipient of such goods or services or
both and all the provisions of this Act shall apply to such
recipient as if he is the person liable for paying the tax in
relation to the supply of such goods or services or both.

Council, by notification, specify a class of registered persons
who shall, in respect of supply of specified categories of
goods or services or both received from an unregistered
supplier, pay the tax on reverse charge basis as the recipient
of such supply of goods or services or both, and all the
provisions of this Act shall apply to such recipient as if he is
the person liable for paying the tax in relation to such supply
of goods or services or both.

Council, by notification, specify categories of services the tax
on intra-State supplies of which shall be paid by the
electronic commerce operator if such services are supplied
through it, and all the provisions of this Act shall apply to
such electronic commerce operator as if he is the supplier
liable for paying the tax in relation to the supply of such
services.
Provided that where an electronic commerce operator does
not have a physical presence in the taxable territory, any
person representing such electronic commerce operator for

CHARGE OF GST 3.11
any purpose in the taxable territory shall be liable to pay tax:

Provided further that where an electronic commerce operator
does not have a physical presence in the taxable territory
and also he does not have a representative in the said
territory, such electronic commerce operator shall appoint a
person in the taxable territory for the purpose of paying tax
and such person shall be liable to pay tax.
ANALYSIS
Central Goods and Services Tax (CGST) shall be levied on all intra-State supplies
of goods or services or both.
The tax shall be collected in such manner as may be prescribed and shall be paid
by the taxable person. However, intra-State supply of alcoholic liquor for human
consumption is outside the purview of CGST.
Value for levy: Transaction value under section 15 of the CGST Act – Discussed in
detail in Chapter 5 – Time and Value of supply.
Rates of CGST: Rates for CGST are rates as may be notified by the Government
on the recommendations of the GST Council [Rates presently notified are 0%,
0.125%, 1.5%, 2.5%, 6%, 9% and 14%]. Maximum rate of CGST can be 20%.
💡💡On inter-State supplies of goods and/or services, Integrated Goods and Services
Tax (IGST) is levied on the transaction value under section 15 of the CGST Act 2.
Since alcoholic liquor for human consumption is outside the purview of GST law, IGST
is also not leviable on the same. IGST is the sum total of CGST and SGST/UTGST.
Maximum rate of IGST can be 40%.
However, CGST/IGST on supply of the following items has not yet been levied. It
shall be levied with effect from such date as may be notified by the Government
on the recommendations of the Council:
2
Goods imported into India: For the goods imported into India, the IGST shall be levied and
collected as per the section 3 of the Custom Tariff Act, 1975 i.e. the additional duty shall be
as per the Custom Tariff Act, 1975 and the value shall also be determined as per the said
Act. This aspect will be discussed in detail at the Final Level.

3.12 INDIRECT TAXES
 petroleum crude
 high speed diesel
 motor spirit (commonly known as petrol)
 natural gas and
 aviation turbine fuel
Tax payable on supply of goods or services or both under Reverse charge
CGST/IGST shall be paid by the recipient of goods or services or both, on reverse
charge basis, in the following cases:
 Supply of such goods or services or both, as notified by the Government on
the recommendations of the GST Council.
 Supply of specified categories of goods or services or both by an
unregistered supplier to specified class of registered persons, as notified by
the Government on recommendation of GST Council.
All the provisions of the CGST/IGST Act shall apply to the recipient in the
aforesaid cases as if he is the person liable for paying the tax in relation to the
supply of such goods or services or both. Let us first understand the concept
of reverse charge mechanism:
Generally, the supplier of goods or services is liable to pay GST. However, under
the reverse charge mechanism, the liability to pay GST is cast on the recipient of
the goods or services.
Reverse charge means the liability to pay tax is on the recipient of supply of
goods or services instead of the supplier of such goods or services in respect of
notified categories of supply.
It may be noted that the underlying principle of an indirect tax is that burden of
tax has to be ultimately passed on to the recipient. GST being an indirect tax, this
principle holds good for GST. Under normal circumstances, the statutory liability
to deposit GST and undertake compliances [i.e. to obtain registration under GST,
deposit the tax with the Government, filing returns, etc.] is on the supplier while he may
recover the same from its recipient. However, under reverse charge mechanism,
the statutory liability to deposit GST and undertaking compliance requirements,

CHARGE OF GST 3.13
[i.e. to obtain registration under GST, deposit the tax with the Government, filing returns,
etc.] shifts from supplier to recipient.
There are two type of reverse charge scenarios provided in law.

(i) First scenario occurs in case of supply of specified categories of goods
or services, covered by section 9(3) of the CGST/ SGST (UTGST) Act.
Similar provisions are contained under section 5(3) of the IGST Act.
(ii) Second scenario occurs in case of supply of specified categories of
goods or services made by an unregistered supplier to specified class of
registered recipients, covered by section 9(4) of the CGST Act. Similar
provisions are contained under section 5(4) of the IGST Act. Goods and
services notified under this case have been elaborated subsequently in this
chapter.
Goods and services notified under reverse charge mechanism under section
9(3) of the CGST Act/ section 5(3) of the IGST Act are as follows:
A. Supplies of goods taxable under reverse charge, i.e. supply of the
goods where tax is payable by the recipient: Goods like cashewnuts
[not shelled/peeled], bidi wrapper leaves, tobacco leaves, raw cotton
(when supplied by an agriculturist to any registered person), supply of
lottery (when supplied by State Government, Union Territory or any local
authority to lottery distributor or selling agent), silk yarn (when supplied
by manufacturer of silk yarn to any registered person), used vehicles,
seized and confiscated goods, old and used goods, waste and scrap
(when supplied by Central Government, State Government, Union
Territory or any local authority to any registered person), etc. are taxable
under reverse charge 3.
B. Supply of services taxable under reverse charge under section 9(3)
of the CGST Act, i.e. the services where tax is payable by the
recipient: Notification No. 13/2017 CT (R) dated 28.06.2017 as amended
has notified the following categories of supply of services wherein whole
of the tax shall be paid on reverse charge basis by the recipient of
services:
3
Examples of goods on which tax is payable by the recipient under reverse charge have
been given hereunder only for the knowledge of the students. These are not relevant for
examination purposes.

3.14 INDIRECT TAXES
S. Category of supply of Supplier of Recipient of

No. service service Service
1. Supply of services by a Goods Transport (a) Any factory

Goods Transport Agency (GTA) registered under
Agency (GTA) in respect who has not paid or governed by
of transportation of CGST @ 6% the Factories Act,
goods by road to- [Please refer the 1948; or
(a) any factory analysis given (b) any society
registered under or subsequently.] registered under
governed by the the Societies
Factories Act, 1948; or Registration Act,
(b) any society 1860 or under any
registered under the other law for the
Societies Registration time being in
Act, 1860 or under any force in any part
other law for the time of India; or
being in force in any part (c) any co-
of India; or operative society
(c) any co-operative established by or
society established by or under any law; or
under any law; or (d) any person
(d) any person registered under
registered under the the CGST Act or
CGST Act or the IGST Act the IGST Act or
or the SGST Act or the the SGST Act or
UTGST Act; or the UTGST Act; or
(e) any body (e) any body
corporate established, by corporate
or under any law; or established, by or
(f) any partnership under any law; or
firm whether registered (f) any
or not under any law partnership firm
including association of whether
persons; or registered or not
(g) any casual taxable under any law
person. including

CHARGE OF GST 3.15
association of
persons; or
(g) any casual
taxable person;
located in the
taxable territory.
[Hereinafter referred
as Specified
recipients]
However, reverse charge mechanism (RCM) shall not apply to

services provided by a GTA, by way of transport of goods in a
goods carriage by road to-
(a) a Department/ establishment of the Central Government/ State
Government/ Union territory; or
(b) local authority; or
(c) Governmental agencies,
which has taken registration under the CGST Act only for the
purpose of deducting tax under section 51 4 and not for making a
taxable supply of goods or services 5.
2. Services provided by an An individual Any business
individual advocate advocate entity located in
including a senior including a senior the taxable
advocate or firm of advocate or firm territory.
advocates by way of legal of advocates.
services, directly or
indirectly.
“Legal service” means
any service provided in
relation to advice,
4
Provisions relating to tax deducted at source contained in section 51 shall be discussed at
the Final Level.
5
These services have been simultaneously exempted from payment of GST. Thus, there will
be no tax liability in this case. [Refer Chapter 4: Exemptions from GST for discussion on this
exemption]

3.16 INDIRECT TAXES
consultancy or assistance
in any branch of law, in
any manner and includes
representational services
before any court, tribunal
or authority.
3. Services supplied by an An arbitral Any business
arbitral tribunal to a tribunal. entity located in
business entity. taxable territory.
4. Services provided by way Any person Any body
of sponsorship to any corporate or
body corporate or partnership firm
partnership firm. located in the
taxable territory.
5. Services supplied by Central Any business
the Central Government, entity located in
Government, State State the taxable
Government, Union Government, territory.
territory or local Union territory or
authority to a business local authority
entity excluding, -
(1) renting of
immovable property,
and
(2) services specified
below-
(i) services by
the Department of
Posts by way of
speed post, express
parcel post, life
insurance, and
agency services
provided to a person
other than Central
Government, State

CHARGE OF GST 3.17
Government or
Union territory or
local authority;
(ii) services in
relation to an aircraft
or a vessel, inside or
outside the precincts
of a port or an
airport;
(iii) transport of
goods or
passengers.
5A. Services supplied by Central Any person
Central Government, Government, registered under
State Government, Union State the CGST Act,
territory or local Government, 2017
authority by way of Union territory or
renting of immovable local authority
property to a person
registered under CGST
Act, 2017
5B. Services supplied by any Any person Promoter
person by way of transfer
of development rights
(TDR) or Floor Space
Index (FSI) (including
additional FSI) for
construction of a project
by a promoter.
5C. Long term lease of land Any person Promoter
(30 years or more) by any
person against
consideration in form of
upfront amount (called
as premium, salami, cost,
price, development

3.18 INDIRECT TAXES
charges or by any other

name) and/or periodic
rent for construction of a
project by a promoter 6
6. Services supplied by a A director of a Company or a
director of a company/ company or a body corporate
body corporate body corporate located in the
to the said company/ taxable territory.
body corporate.
7. Services supplied by an An insurance Any person
insurance agent agent carrying on
to any person carrying insurance
on insurance business. business, located
in the taxable
territory.
8. Services supplied by a A recovery agent A banking
recovery agent company/financial
to a banking company or institution or a
a financial institution or a non-banking
non- banking financial financial
company. company, located
in the taxable
territory.
9. Supply of services by a Music composer, Music company,
music composer, photographer, producer or the
6
Supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer are
exempt subject to the condition that the constructed flats are sold before issuance of
completion certificate and tax is paid on them.
Exemption of TDR, FSI, long term lease (premium) is withdrawn in case of flats sold after
issue of completion certificate, but such withdrawal shall be limited to 1% of value in case
of affordable houses and 5% of value in case of other than affordable houses. In such
cases, the liability to pay tax on TDR, FSI, long term lease (premium) has been shifted from
land owner to builder under the reverse charge mechanism (RCM) – as illustrated in table
above.

CHARGE OF GST 3.19
photographer, artist or artist, or the like like, located in

the like by way of the taxable
transfer or permitting territory.
the use or enjoyment of
a copyright covered
under section 13(1)(a)
of the Copyright Act,
1957 relating to
original dramatic,
musical or artistic
works to a music
company, producer or
the like.
9A. Supply of services by an Author Publisher
author by way of located in the
transfer or permitting taxable territory.
the use or enjoyment of
a copyright covered
under section 13(1)(a)
of the Copyright Act,
1957 relating to
original literary works
to a publisher.
However, an author can choose to pay tax under forward
charge if-
(i) he has taken registration under the CGST Act and filed a
declaration, in the prescribed form, that he exercises the
option to pay CGST on the said service under forward
charge in accordance with section 9(1) of the CGST Act
and to comply with all the provisions as they apply to a
person liable for paying the tax in relation to the supply
of any goods and/or services and that he shall not
withdraw the said option within a period of 1 year from
the date of exercising such option;
(ii) he makes a declaration on the invoice issued by him in
prescribed form to the publisher.

3.20 INDIRECT TAXES
10. Supply of services by the Members of RBI

members of Overseeing Overseeing
Committee to Reserve Committee
Bank of India (RBI) constituted by the
RBI
11. Services supplied by Individual Direct A banking
individual Direct Selling Selling Agents company or a
Agents (DSAs) other than (DSAs) other than NBFC, located in
a body corporate, a body corporate, the taxable
partnership or limited partnership or LLP territory
liability partnership (LLP) firm
firm to bank or non-
banking financial
company (NBFCs).
12. Services provided by Business A banking
business facilitator to a facilitator company, located
banking company. in taxable territory
13. Services provided by an An agent of A business
agent of business business correspondent,
correspondent to correspondent located in the
business correspondent. taxable territory.
14. Security services (services Any person other A registered
provided by way of supply than a body person, located in
of security personnel) corporate the taxable
provided to a registered territory.
person.
However, nothing
contained in this entry
shall apply to:
(i) (a) a Department or
Establishment of
the Central
Government or
State
Government or
Union territory; or

CHARGE OF GST 3.21

(c) Governmental
agencies; which
has taken
registration under
the CGST Act,
2017 only for the
purpose of
deducting tax
under section 51
of the said Act
and not for
making a taxable
supply of goods
or services; or
(ii) a registered person
paying tax under
composition scheme.
15. Services provided by Any person, other Any body
way of renting of any than a body corporate
motor vehicle designed corporate who located in the
to carry passengers supplies service to taxable territory.
where the cost of fuel is a body corporate
included in the & doesn’t issue an
consideration charged invoice charging
from the service CGST @6% to
recipient, provided to a service recipient.
body corporate.
16. Services of lending of Lender i.e., a Borrower i.e., a
securities under person who person who
Securities Lending deposits borrows the
Scheme, 1997 securities securities under
(“Scheme”) of Securities registered in his the Scheme
and Exchange Board of name/in the through an
India, as amended name of any approved
other person duly intermediary of
authorised on his SEBI.

3.22 INDIRECT TAXES
behalf with an
approved
intermediary for
the purpose of
lending under
Scheme of SEBI
🔔🔔 All the above services have also been notified for reverse charge under IGST
Act. In addition to them, two additional services are also notified for reverse
charge under IGST law. These services will be discussed at the Final level.
For purpose of this above services, following explanations shall apply-
(a) The person who pays or is liable to pay freight for the transportation of
goods by road in goods carriage, located in the taxable territory shall be
treated as the person who receives the service for the purpose of this
notification.
(b) Body Corporate: has the same meaning as assigned to it in clause (11) of
section 2 of the Companies Act, 2013.
As per section 2(11) of the Companies Act, 2013, body corporate or
corporation includes a company incorporated outside India, but does not
include—
(i) a co-operative society registered under any law relating to co-
operative societies; and
(ii) any other body corporate (not being a company as defined in this
Act), which the Central Government may, by notification, specify in
this behalf.
(c) the business entity located in the taxable territory who is litigant,
applicant or petitioner, as the case may be, shall be treated as the person
who receives the legal services for the purpose of this notification.
(d) the words and expressions used and not defined in this notification but
defined in the Central Goods and Services Tax Act, the Integrated Goods
and Services Tax Act, and the Union Territory Goods and Services Tax Act
shall have the same meanings as assigned to them in those Acts.
(e) Limited Liability Partnership formed and registered under the provisions
of the Limited Liability Partnership Act, 2008 shall also be considered as a
partnership firm or a firm.
(f) Insurance agent means an insurance agent licensed under section 42 of
the Insurance Act, 1938 who receives agrees to receive payment by way

CHARGE OF GST 3.23
of commission or other remuneration in consideration of his soliciting or

procuring insurance business including business relating to the
continuance, renewal or revival of policies of insurance [Section 2(10) of
the Insurance Act, 1938].
(g) Renting of immovable property means allowing, permitting or granting
access, entry, occupation, use or any such facility, wholly or partly, in an
immovable property, with or without the transfer of possession or control
of the said immovable property and includes letting, leasing, licensing or
other similar arrangements in respect of immovable property.
(h) the provisions of this notification, in so far as they apply to the Central
Government, State Government, shall also apply to the Parliament and
State Legislature.
GTA services are taxable at the following two rates:

(i) @ 5% (2.5% CGST+2.5% SGST/UTGST or 5% IGST) provided
GTA has not taken the Input Tax Credit (ITC) on
goods or services used in supplying GTA service or
(ii) @ 12% (6% CGST+6% SGST/UTGST or 12% IGST) where GTA opts to pay GST at
said rate on all the services of GTA supplied by it. In this case, there
is no restriction on availing ITC on goods or services used in
supplying GTA service by GTA.
In the following paras, we have explained as to who is the person liable
to pay tax in case of each of the above two rates:
Person liable to pay tax under GTA service
Where GST is payable @ 5% Where GST is payable @ 12%
Recipient** is one of Recipient** is other than Recipient** is one

the Specified of the Specified
Specified Recipients Recipients
Recipients (Unregistered Individual end consumer)
Reverse charge Forward charge

Exempt
from GST
Person liable to pay GST is Person liable to
such recipient pay GST is GTA

3.24 INDIRECT TAXES
** Recipient of GTA service is the person who pays/is liable to pay freight
for transportation of goods by road in goods carriage, located in the
taxable territory.
Service by way of renting of any motor vehicle

designed to carry passengers where the cost of fuel is
included in the consideration charged from the service
recipient are taxable at the following two rates:
(i) @ 5% (2.5% CGST+2.5% SGST/UTGST or 5% IGST) provided supplier of services
has taken only the limited ITC (of input services in the same line
of business) or
(ii) @ 12% (6% CGST+6% SGST/UTGST or 12% IGST) where supplier of services
opts to pay GST at said rate. In this case, there is no restriction
on availing ITC on goods or services used in supplying renting of
motor vehicles service by the supplier of service.
In the following paras, we have explained as to who is the person
liable to pay tax in case of each of the above two rates 7:
Person liable to pay tax under renting of motor vehicle service
Where GST is payable @ 5% Where GST is payable @ 12%
Supplier is other than Supplier is Body

Body Corporate Corporate
Recipient is a Body Recipient is other Forward charge

Corporate than Body Corporate
Person liable to pay GST

Reverse charge is Supplier
**
Person liable to pay GST is Recipient
7
Entry 15 of Notification No. 13/2017 CT (R) dated 28.06.2017 read with Circular No.
130/49/2019 GST dated 31.12.2019

CHARGE OF GST 3.25
**
It is important to note here that when any service is placed under RCM, the
supplier shall not charge any tax from the service recipient as this is the settled
procedure under RCM. RCM shall be applicable here only when the supplier does not
issue an invoice charging GST @12% (6% CGST+6% SGST/UTGST or 12% IGST) from the
service recipient.
In order to determine the leviability of tax on the remuneration paid to the

directors, we first need to ascertain whether the director is an employee of
the company or not. Following two situations are possible:
(i) Services provided by the independent directors 8/those directors (by
whatever name called) who are not employees of the said company to
such company, in lieu of remuneration as the consideration for the said
services, are clearly outside the scope of Schedule III of the CGST Act 9
and are therefore taxable. As seen in the table given above illustrating
the reverse charge services (S. No. 6), such remuneration paid to the
directors is taxable in hands of the company, on reverse charge basis.
(ii) In case where it is ascertained that a director, irrespective of name and
designation, is an employee, next step would be to examine whether all
the activities performed by the director are in the course of employer-
employee relation (i.e. a “contract of service”) or is there any element
of “contract for service”.
The part of director’s remuneration which are declared as Salaries in
the books of a company and subjected to TDS under section 192 of the
Income-tax Act (IT Act), are not taxable being consideration for services
by an employee to the employer in the course of or in relation to his
employment in terms of Schedule III.
8
The definition of “independent directors” under section 149(6) of the
Companies Act, 2013 read with rule 12 of Companies (Share Capital and Debentures) Rules,
2014 makes it amply clear that the independent director should not have been an employee
of the company.
9
As per Para I. of Schedule III of the CGST Act, services by an employee to the employer in
the course of or in relation to his employment are non-supplies, i.e. they are neither supply
of goods nor supply of services. The provisions of Schedule III of the CGST Act have been
discussed in detail in Chapter 2 – Supply under GST.

3.26 INDIRECT TAXES
Further, the part of employee director’s remuneration which is declared

separately other than salaries in the company’s accounts and subjected
to TDS under section 194J of the IT Act as fees for professional or
technical services are treated as consideration for providing services
which are outside the scope of Schedule III and is therefore, taxable.
Besides, as already discussed, the recipient of the said services i.e. the
company, is liable to discharge the applicable GST on it on reverse
charge basis 10.
Electronic Commerce Operator (ECO) 11 is any person

who owns/operates/manages an electronic platform for
supply of goods or services or both.
Sometimes, ECO itself supplies the goods or services
through its electronic portal. However, many a times, the
products/services displayed on the electronic portal are
actually supplied by some other person to the consumer. When a consumer
places an order for a particular product/ service on this electronic portal, the
actual supplier supplies the selected product/ service to the consumer. The
price/ consideration for the product/ service is collected by the ECO from the
consumer and passed on to the actual supplier after the deduction of commission
by the ECO.
The Government may, on the recommendations of the GST Council, notify specific
categories of services the tax [CGST/SGST/IGST] on supplies of which shall be paid
by the electronic commerce operator (ECO) if such services are supplied through
it. Few services have been so notified. For instance, service by way of transportation
of passengers by a radio-taxi, motorcab, maxicab and motor cycle, etc.
Broadly, six rates of CGST have been notified in six Schedules

of rate notification for goods, viz., 0.125%, 1.5%, 2.5%, 6%, GST rates
9% and 14%. SGST/ UTGST at the equivalent rate is also for goods
leviable. With regard to IGST, broadly six rates have been
10
as clarified vide Circular No: 140/10/2020 GST dated 10.06.2020
11
Detailed provisions relating to Electronic Commerce Operator shall be discussed at Final
level.

CHARGE OF GST 3.27
notified in six Schedules of rate notification for goods, viz., 0.25%, 3%, 5%, 12%,
18% and 28% 12. Certain specified goods have been exempted from tax.
In order to determine the rate applicable on a particular supply of goods or

services, one needs to first determine the classification of such goods or services.
Classification of goods and services assumes significance since there are different
rates prescribed for supply of different goods and services. Therefore,
classification is crucial for determining the rate of tax applicable on a particular
product or service.
Classification of goods means identification of the chapter, heading, sub-heading
and tariff item in which a particular product will be classified.
Sections
Chapter
Heading
Sub-heading
heading
Tariff item
Chapter, heading, sub-heading and tariff item are referred in the Schedules of
rate notification for goods under GST are the Chapter, heading, sub-heading and
tariff item of the First Schedule to the Customs Tariff Act, 1975. Indian Customs
Tariff is based on HSN. HSN stands for Harmonized System of Nomenclature. It
is a multipurpose international product nomenclature developed by the World
Customs Organization (WCO) for the purpose of classifying goods across the
World in a systematic manner. It comprises of about 5,000 commodity groups;
each identified by a 6 digit code [code can be extended], arranged in a legal and
logical structure and is supported by well-defined rules to achieve uniform
classification. India has extended the HSN codes upto 8-digits.
Along the lines of HSN, the Indian Customs Tariff has a set of Rules of
Interpretation of the First Schedule and General Explanatory notes. These rules
and the general explanatory notes give clear direction as to how the
12
Students may refer the CBIC website for the complete Schedule of GST Rates for goods for
knowledge purposes.

3.28 INDIRECT TAXES
nomenclature in the schedule is to be interpreted. These Rules for Interpretation

including section and chapter notes and the General Explanatory Notes of the
First Schedule 1314 apply to the interpretation of the rate notification for goods
under GST also.
Consequently, under GST, goods are classified on the basis of HSN in accordance
with the Rules for the Interpretation of the Customs Tariff.
Once classification for a product has been determined on this basis, applicable
rate has to be determined as per the rate prescribed in the rate notification issued
under GST.
A new Scheme of Classification of Services has been devised under GST. It is a

modified version of the United Nations Central Product Classification. Under this
scheme, the services of various descriptions have been classified under various
sections, headings and groups. Chapter 99 has been assigned for services. This
chapter has following sections:
Section 5 Construction Services
Section 6 Distributive Trade Services; Accommodation, Food and Beverage
Service; Transport Services; Gas and Electricity Distribution Services
Section 7 Financial and related services; real estate services; and rental and
leasing services
Section 8 Business and Production Services
Section 9 Community, social and personal services and other miscellaneous
services
13
The provisions relating to Customs Act and Customs Tariff Act will be discussed at Final
Level.
14
Sections: A group of Chapters representing a particular class of goods.
Chapters: Each section is divided into various chapters and sub-chapters. Each chapter
contains goods of one class.
Chapter notes: They are mentioned at the beginning of each chapter. These notes are part
of the statute and hence have the legal authority in determining the classification of goods.
Heading: Each chapter and sub-chapter is further divided into various headings.
Sub-heading: Each heading is further divided into various sub-headings.

CHARGE OF GST 3.29
Each section is divided into various headings which is further divided into Groups. Its
further division is made in the form of ‘Tariff item’/ Service Codes.
Chapter
Section
Heading
Group
Tariff item/Service Code
Rate of tax is determined in accordance with the Service Code in which the service
is classified.
Broadly, four rates of CGST have been notified for services,

viz., 2.5%, 6%, 9% and 14% 15. Equivalent rate of SGST/
GST rates
UTGST will also be levied. For IGST, four rates have been
for services
notified for services, viz., 5%, 12%, 18% and 28% 1617. For
certain specified services, nil rate of tax has been
notified.
Services of gambling, services by way of admission to entertainment
events/access to amusement facilities including casinos, race club, any sporting
event such as IPL and the like, services provided by a race club by way of
totalisator or a license to bookmaker in such club, attract the highest rate of 28%
(CGST @ 14% and SGST @ 14% or IGST @ 28%).
A number of services are subject to the lowest rate of 5% (CGST @ 2.5% and SGST
@ 2.5% or IGST @ 5%). For instance, GTA service is taxed @ 5% subject to the
15
notified vide Notification No. 11/2017 CT (R) dated 28.06.2017
16
notified vide Notification No. 8/2017 IT (R) dated 28.06.2017.
17
Students may refer the CBIC website for the complete Schedule of GST Rates for services
for knowledge purposes.

3.30 INDIRECT TAXES
condition that credit of input tax charged on goods/services used in supplying

said service has not been taken. Similarly, tax rate for restaurant service is 5%
without any input tax credit.
Services not covered under any specific heading are taxed at the rate of 18%
(CGST @ 9% and SGST @9% or IGST @ 18%).
In the following paras, applicability of GST in real estate sector has been briefly
discussed:
GST rates in real estate sector
The effective rate of GST on real estate sector for the new projects by promoters
are as follows:
(i) 1% without ITC on construction of affordable houses (area 60 sqm in
metros/ 90 sqm in non-metros and value upto ` 45 lakh).
(ii) 5% without ITC is applicable on construction of:
(a) all houses other than affordable houses, and
(b) commercial apartments such as shops, offices etc. in a residential real
estate project (RREP) in which the carpet area of commercial apartments is not
more than 15% of total carpet area of all apartments.
Conditions:
Above tax rates shall be available subject to following conditions:
(a) ITC shall not be available.
(b) 80% of inputs and input services [other than services by way of grant of
development rights, long term lease of land (against upfront payment in
the form of premium, salami, development charges etc.) or FSI (including

CHARGE OF GST 3.31
additional FSI), electricity, high speed diesel, motor spirit, natural gas], used
in supplying the service shall be purchased from registered persons 18.
However, if value of inputs and input services purchased from registered
supplier is less than 80%, promoter has to pay GST on reverse charge basis,
under section 9(4) of the CGST Act [discussed
earlier], at the rate of 18% on all such inward Supply of services
supplies (to the extent short of 80% of the inward notified under
supplies from registered supplier). section 9(4)
Further, where cement is received from an unregistered

person, the promoter shall pay tax on supply of such cement on reverse
charge basis, under section 9(4) of the CGST Act, at the applicable rate
which is 28% (CGST 14% + SGST 14%) at present.
Moreover, GST on capital goods shall be paid by the promoter on reverse
charge basis, under section 9(4) of the CGST Act at the applicable rates
[Notification No. 07/2019 CT (R) dated 29.03.2019/ Notification No. 07/2019
IT (R) dated 29.03.2019].
5. COMPOSITION LEVY [SECTION 10 OF THE CGST ACT]
Section 10 Composition levy
(1) Notwithstanding anything to the contrary contained in this Act
but subject to the provisions of sub-sections (3) and (4) of
section 9, a registered person, whose aggregate turnover in the
preceding financial year did not exceed fifty lakh rupees, may
opt to pay, in lieu of the tax payable by him under sub-section
(1) of section 9, an amount of tax calculated at such rate as
may be prescribed, but not exceeding,––
18
Discussion in above paras highlighted in green is solely for the purpose of knowledge of
the students and is not meant for examination purposes.

3.32 INDIRECT TAXES
a one percent. 19 of the turnover in State or turnover in

Union territory in case of a manufacturer
b two and a half per cent. of the turnover in State or
turnover in Union territory in case of persons engaged
in making supplies referred to in clause (b) of
paragraph 6 of Schedule II, and
c half per cent. of the turnover in State or turnover in
Union territory in case of other suppliers
subject to such conditions and restrictions as may be
prescribed.
Provided that the Government may, by notification, increase
the said limit of fifty lakh rupees to such higher amount, not
exceeding one crore and fifty lakh rupees 20, as may be
recommended by the Council.
Provided further that a person who opts to pay tax under clause
(a) or clause (b) or clause (c) may supply services (other than
those referred to in clause (b) of paragraph 6 of Schedule II), of
value not exceeding ten percent. of turnover in a State or Union
territory in the preceding financial year or five lakh rupees,
whichever is higher.
Explanation - For the purposes of second proviso, the
value of exempt supply of services provided by way of
extending deposits, loans or advances in so far as the
consideration is represented by way of interest or discount
shall not be taken into account for determining the value
of turnover in a State or Union territory.
(2) The registered person shall be eligible to opt under sub-section
(1), if–
19
Rate of tax prescribed in case of a manufacturer is half percent of the turnover in
State/UT. The same has been discussed in detail in subsequent paras.
20
The turnover limit for composition levy has been increased from ` 50 lakh to ` 1.5
crore vide Notification No. 14/2019 CT dated 07.03.2019.

CHARGE OF GST 3.33
(a) save as provided in sub-section (1), he is not engaged

in the supply of services
(b) he is not engaged in making any supply of goods which
are not leviable to tax under this Act
(c) he is not engaged in making any inter-State outward
supplies of goods
(d) he is not engaged in making any supply of goods through
an electronic commerce operator who is required to collect
tax at source under section 52;
(e) he is not a manufacturer of such goods as may be notified by
the Government on the recommendations of the Council;
and
(f) he is neither a casual taxable person nor a non-
resident taxable person.
Provided that where more than one registered persons are
having the same Permanent Account Number (issued under the
Income-tax Act, 1961), the registered person shall not be
eligible to opt for the scheme under sub-section (1) unless all
such registered persons opt to pay tax under that sub-section.
(2A) Notwithstanding anything to the contrary contained in this
Act, but subject to the provisions of sub-sections (3) and (4)
of section 9, a registered person, not eligible to opt to pay
tax under sub-section (1) and sub-section (2), whose
aggregate turnover in the preceding financial year did not
exceed fifty lakh rupees, may opt to pay, in lieu of the tax
payable by him under sub-section (1) of section 9, an
amount of tax calculated at such rate as may be prescribed,
but not exceeding three per cent. of the turnover in State or
turnover in Union territory, if he is not––
(a) engaged in making any supply of goods or services
which are not leviable to tax under this Act;
(b) engaged in making any inter-State outward supplies
of goods or services;

3.34 INDIRECT TAXES
(c) engaged in making any supply of goods or services

through an electronic commerce operator who is
required to collect tax at source under section 52;
(d) a manufacturer of such goods or supplier of such
services as may be notified by the Government on the
recommendations of the Council; and
(e) a casual taxable person or a non-resident taxable
person.
Provided that where more than one registered person are
having the same Permanent Account Number issued under
the Income-tax Act, 1961, the registered person shall not
be eligible to opt for the scheme under this sub-section
unless all such registered persons opt to pay tax under this
sub-section.
(3) The option availed of by a registered person under sub-section
(1) or sub-section (2A), as the case may be, shall lapse with
effect from the day on which his aggregate turnover during a
financial year exceeds the limit specified under sub-section (1)
or sub-section (2A), as the case may be.
(4) A taxable person to whom the provisions of sub-section (1) or,
as the case may be, sub-section (2A) apply shall not collect
any tax from the recipient on supplies made by him nor shall
he be entitled to any credit of input tax.
(5) If the proper officer has reasons to believe that a taxable person
has paid tax under sub-section (1) or sub-section (2A), as the
case may be despite not being eligible, such person shall, in
addition to any tax that may be payable by him under any
other provisions of this Act, be liable to a penalty and the
provisions of section 73 or section 74 shall, mutatis mutandis,
apply for determination of tax and penalty.
Explanation 1 –– For the purposes of computing aggregate
turnover of a person for determining his eligibility to pay
tax under this section, the expression “aggregate
turnover” shall include the value of supplies made by such

CHARGE OF GST 3.35
person from the 1st day of April of a financial year upto

the date when he becomes liable for registration under
this Act, but shall not include the value of exempt supply
of services provided by way of extending deposits, loans or
advances in so far as the consideration is represented by
way of interest or discount.
Explanation 2 –– For the purposes of determining the tax
payable by a person under this section, the expression
“turnover in State or turnover in Union territory” shall not
include the value of following supplies, namely:––
(i) supplies from the first day of April of a financial
year upto the date when such person becomes liable
for registration under this Act; and
(ii) exempt supply of services provided by way of
consideration is represented by way of interest or
discount.
ANALYSIS
(1) Overview of the Scheme
The composition levy is an alternative method of levy
of tax designed for small taxpayers whose turnover is
Voluntary and
up to a prescribed limit. The objective of composition
optional scheme
scheme is to bring simplicity and to reduce the
compliance cost for the small taxpayers.
Initially, the scheme was
designed to benefit the
small traders,
manufacturers and
restaurant service providers. So, the scheme
was fundamentally for the suppliers of
goods and only for restaurant service
providers. However, subsequently, suppliers availing composition scheme were
permitted to supply other services also, though only upto a small specified

3.36 INDIRECT TAXES
value. This scheme is contained in sub-sections (1) and (2) of section 10 of

the CGST Act (hereinafter referred to as composition scheme for goods).
Under this scheme, suppliers of goods have the option to pay tax at the
concessional rate of 1% (CGST + SGST/UTGST) of the turnover and restaurant
service providers have the option to pay tax @ 5% (CGST + SGST/UTGST) of the
turnover. Small taxpayers with an aggregate turnover in the preceding
financial year up to ` 1.5 crore are eligible to pay tax at these rates in the
current financial year upto an aggregate turnover of ` 1.5 crore. However,
a person engaged exclusively in supply of services other than restaurant
service is not eligible for this composition scheme stipulated under sub-
sections (1) and (2).
In order to provide benefit of composition
scheme to persons engaged in supply of
services other than restaurant service whose
aggregate turnover in the preceding financial
year is up to ` 50 lakh, a scheme to pay tax @
6% (CGST + SGST/UTGST) of the turnover was introduced with
effect from 1st April, 2019 vide Notification No. 2/2019
CT (R) dated 07.03.2019. A mixed supplier who is
primarily engaged in supplying services other than
restaurant service along with marginal
supply of goods could also avail the
benefit of this scheme. With effect from 01.01.2020, the
provisions of this scheme have been incorporated in
sub-section (2A) of section 10 vide the Finance (No. 2)
Act, 2019. It is important to note that Notification No. 2/2019 CT (R)
dated 07.03.2019 has not yet been rescinded and is still operational.
Essentially, the composition scheme under sub-section (2A)
(hereinafter referred to as composition scheme for services) is for small
service providers like salon stylist, tailors, etc. This scheme provides
an option to such suppliers to pay tax @ 6% of the turnover in the
current financial year upto an aggregate
turnover of ` 50 lakh. Easy compliance as
Suppliers opting for composition levy need not no elaborate
worry about the classification of their goods or accounts and records
services or both, the rate of GST applicable on their to be maintained
goods and/or services, etc. They are not required to raise any tax invoice, but

CHARGE OF GST 3.37
simply need to issue a Bill of Supply 21 wherein no tax will be charged from the
recipient.
An eligible person opting to pay tax under the
Simple annual
composition scheme shall, instead of paying tax on
return
every invoice at the specified rate, pay tax at the
Quarterly
prescribed percentage of his turnover every quarter.
payment of tax
At the end of a quarter, he would pay the tax,
without availing the benefit of input tax credit. Return is to be filed
annually by a composition supplier. Registration under GST law is
compulsory for opting for the composition scheme.
The provisions relating to composition levy are contained in section 10 of
CGST Act, 2017 and Chapter-II [Composition Levy] of Central Goods and
Services Tax (CGST) Rules, 2017. The said rules have been incorporated in
the discussion in the following paras at the relevant places.
As seen above, section 10 stipulates two types of composition schemes –
Composition scheme Hereinafter referred to as

provided under sections 10(1) Composition scheme for
scheme under
Composition
section 10
& 10(2) goods

Composition scheme Hereinafter referred to as
provided under section Composition scheme for
10(2A) services
Provisions relating to these schemes have been discussed in detail in

subsequent paras:
(2) Turnover limit for opting for composition levy [Section 10(1),
10(2A) & 10(3)]
Turnover limit in case of composition levy for goods
Section 10(1) of the CGST Act provides the turnover
limit of ` 50 lakh in the preceding financial year for
becoming eligible for composition levy for goods. Turnover limit is
However, proviso to section 10(1) empowers the ` 1.5 crore
Government to increase the said limit of ` 50 lakh
21
Discussed in detail in Chapter-8: Tax Invoice, Credit and Debit Notes; E-way Bill

3.38 INDIRECT TAXES
upto ` 1.5 crore, on the recommendation of the GST Council. In view of

said power of the Government to increase the turnover limit for
composition levy as granted by first proviso to section 10(1), the turnover
limit for composition levy for goods has been increased from ` 50 lakh
to ` 1.5 crore vide Notification No. 14/2019 CT dated 07.03.2019.
However, the said notification further stipulates that the turnover limit
for composition levy for goods shall be ` 75 lakh in respect of 8 of the
Special Category States namely:
Special Category States
Arunachal Pradesh Mizoram
Uttarakhand Nagaland
Manipur Sikkim
Meghalaya Tripura
In case of Special Category States of Assam, Himachal Pradesh and

Jammu and Kashmir, the turnover limit will be ` 1.5 crore only.
Thus, if the aggregate turnover of a supplier in a State/UT other than

Special Category States (except Assam, Himachal Pradesh and Jammu
and Kashmir) is upto ` 1.5 crore in the preceding financial year, said
supplier is eligible for composition scheme for goods. Further, it is
important to note that the aggregate turnover is computed on all India
basis for a person having same Permanent Account Number (PAN) – Refer
the definition of aggregate turnover discussed in subsequent paras.

CHARGE OF GST 3.39
Arunachal Pradesh
Uttarakhand
Manipur
Meghalaya
` 75 lakh
Mizoram
composition levy for
Turnover Limit for
Nagaland
goods
Sikkim
Tripura
` 1.5 crore All other States/UTs
Further, the option of a registered person to avail composition scheme

for goods shall lapse with effect from the day on which his aggregate
turnover during a financial year exceeds the threshold limit of ` 1.5
crore [` 75 lakh in 8 specified special category States] [Section 10(3)].
(2) A shoes’ dealer ‘Prithviraj’ has offices in Maharashtra and

Goa. He makes intra-State supply of goods from both these
offices.
In order to determine whether ‘Prithviraj’ is eligible to avail benefit of the

composition scheme for goods, turnover of both the offices would be
taken into account and if the same does not exceed ` 1.5 crore,
‘Prithviraj’ can opt to avail the composition levy scheme (subject to
fulfilment of other prescribed conditions) for goods for both the offices.
Turnover limit in case of composition levy for services
Section 10(2A) provides the turnover limit of ` 50 lakh in the preceding

financial year for becoming eligible for composition levy for services.

3.40 INDIRECT TAXES
(3) A hair stylist ‘Billoo Barber’ has his salon in Delhi and Haryana,
making intra-State supplies.
In order to determine whether ‘Billoo’ is eligible to avail benefit of the

composition scheme for services, turnover of both the salons would be
taken into account and if the same does not exceed ` 50 lakh, ‘Billoo’ can
opt to avail the composition levy scheme (subject to fulfilment of other
prescribed conditions) for both the salons.
Further, the option of a registered person to

avail composition scheme for services shall
lapse with effect from the day on which his Turnover limit is
aggregate turnover during a financial year ` 50 lakh
exceeds the threshold limit of ` 50 lakh [Section

10(3)].
To summarise, a registered person opting for

composition scheme for goods should have an
Summary aggregate turnover upto ` 1.5 crore [` 75 lakh in 8
specified Special Category States] in the preceding
FY and he can avail the benefit of said scheme in
the current FY till the time his aggregate turnover in
the current FY does not exceed ` 1.5 crore/` 75 lakh.
Similarly, a registered person opting for composition scheme for

services should have an aggregate turnover upto ` 50 lakh in the
preceding FY and he can avail the benefit of said scheme in the
current FY till the time his aggregate turnover in the current FY does
not exceed ` 50 lakh.
From the above discussion, it is apparent that the term aggregate turnover
is of utmost importance. So, let us understand this term in detail.
(3) Aggregate turnover under composition levy [Section 2(6) read with
explanation 1 to section 10]

CHARGE OF GST 3.41
The definition of aggregate turnover as contained in section 2(6) of the

CGST Act is analysed as follows:
The aggregate turnover is the sum of value of all outward supplies falling in
the following four categories:
 Taxable supplies
 Exempt supplies
 Exports of goods or services or both
 Inter-state supplies
It excludes:
 The value of inward supplies on which tax is payable by a person on

reverse charge basis
 Taxes including cess paid under GST law.
It is computed on all India basis for a person having same Permanent

Account Number (PAN).
Further, explanation 1 to section 10 clarifies that that for the purposes

of computing aggregate turnover of a registered person for
determining his eligibility to pay tax under this section, aggregate
turnover:
 includes value of supplies from the 1st April of a FY up to the

date of his becoming liable for registration and
 excludes value of exempt supply of services provided by way of

consideration is represented by way of interest or discount.
On combined reading of the aforesaid provisions, the method of

computing the aggregate turnover for the purpose of determining the
eligibility of a registered person for the composition scheme [for both
goods and services] can be depicted in a diagram as follows:

3.42 INDIRECT TAXES
While computing the threshold limit of ` 1.5 crore/ ` 75 lakh / ` 50 lakh,

inclusions in and exclusions from ‘aggregate turnover’ are as follows:
Includes Excludes
Value of all outward --CGST/ SGST/ UTGST/ IGST/ Cess
supplies
--Taxable supplies --Value of inward supplies on which tax
--Exempt supplies is payable under reverse charge.
--Exports* --Value of exempt supply of services
--Inter-State supplies* provided by way of extending deposits,
of persons having the same PAN
loans or advances in so far as the
be computed on all India basis.
consideration is represented by way of
These also include interest or discount
Value of supplies made by registered person

from 1st April of a FY up to the date when he
becomes liable for registration under this Act
*Note: The value of exports and inter-State supplies might be relevant only while
determining the aggregate turnover of the preceding FY. These values are not
relevant for determining the aggregate turnover of the current FY in which the
composition supplier has opted for composition levy as he is not permitted to
make inter-State supplies and exports in the said FY.
(4) Rates of tax under the composition levy scheme [Section 10(1) and
section 10(2A) read with rule 7]
Rule 7 of the CGST Rules, 2017 prescribes the rates at which tax is payable
by a registered person opting for composition levy – composition levy for
goods and composition levy for services.
Rates of tax in case of composition levy for goods
A registered person opting for composition levy for goods shall pay tax
calculated at the prescribed rates [mentioned in table below] during the
current FY, in lieu of the tax payable by him under regular scheme:

CHARGE OF GST 3.43
S. No. Category of registered persons Rate of tax
1 Manufacturers, other than ½ % 22 of the turnover in

manufacturers of notified goods, i.e. the State/Union territory
ice cream, pan masala, tobacco and
aerated waters.
2 Suppliers making supplies referred to 2½ % 23 of the turnover

in clause (b) of paragraph 6 of in the State/Union
Schedule II [referred to as territory
“Restaurant service” in discussion
under this chapter]
3 Any other supplier eligible for ½ % 24 of turnover of

composition levy under section 10 taxable supplies of goods
of CGST Act and Chapter-II & services in the
[Composition Levy] of CGST Rules. State/Union territory
Note - Students may note that while ‘aggregate turnover’ of preceding FY is

relevant for the purpose of determining eligibility to avail composition
scheme, the tax has to be paid in accordance with the applicable rates on
the ‘turnover’ (or ‘turnover of taxable supplies’, as the case may be) in a
particular tax period.
ILLUSTRATION 1
Taxpayer ‘Tolaram’ is a manufacturer who has opted for composition levy
for goods, having one unit – A1 in UP and another unit – A2 in MP. Total
turnover of two units in last FY was ` 115 lakh ( ` 85 lakh + ` 30 lakh).
Turnover of units A1 and A2 in the first quarter of current financial year is `
5 lakh and ` 10 lakh respectively. Compute the amount payable under
composition levy under section 10(1) & 10(2) of the CGST Act, 2017 by
‘Tolaram’.
22
Effective rate 1% (CGST+ SGST/UTGST)
23
24

3.44 INDIRECT TAXES
ANSWER
Unit Location Turnover in Turnover in 1st Total tax

previous FY quarter of this FY (@1%)
A1 U.P. ` 85 lakh ` 5 lakh ` 5,000
A2 M.P. ` 30 lakh ` 10 lakh ` 10,000
Total ` 115 lakh ` 15 lakh ` 15,000
ILLUSTRATION 2
Taxpayer ‘Bholaram’ is a trader, who has opted for composition levy for
goods, of both taxable and exempted goods. It has one retail showroom – A1
in Punjab and another retail showroom – A2 in Rajasthan, both selling
taxable as well as exempted goods. Total turnover (including taxable and
exempted goods) of the two showrooms in last FY was ` 115 lakh (` 85 lakh +
` 30 lakh). Turnover of showrooms A1 and A2 in the first quarter of current
financial year is ` 35 lakh [A1 - ` 15 lakh (` 5 lakh from sale of taxable goods
and ` 10 lakh from sale of exempted goods) and A2 - ` 20 lakh (` 10 lakh
from sale of taxable goods and ` 10 lakh from sale of exempted goods)].
Compute the amount payable under composition levy under section 10(1) &
10(2) of the CGST Act, 2017 by ‘Bholaram’.
ANSWER
Retail Location Turnover in Taxable turnover* Total tax

showroom previous FY in 1st quarter of (@1%)
this FY
A1 Punjab ` 85 lakh ` 5 lakh ` 5,000
A2 Rajasthan ` 30 lakh ` 10 lakh ` 10,000
Total ` 115 lakh ` 15 lakh ` 15,000
Note: A supplier, other than manufacturer and restaurant service provider, eligible for
composition levy under section 10(1) & 10(2) has to pay tax @ 1% (CGST+ SGST) of
the turnover of only taxable supplies of goods and services in the State.

CHARGE OF GST 3.45
Rates of tax in case of composition levy for services

A registered person opting for composition levy for services shall pay
tax @ 3% [Effective rate 6% (CGST+ SGST/UTGST)] of the turnover of
supplies of goods and services in the State or Union territory.
ILLUSTRATION 3
Taxpayer ‘Padmavati’ is a salon stylist, who has opted for composition levy for
services, having one branch – B1 in Vasant Kunj, Delhi and another branch –
B2 in Gurgaon, Haryana. Total turnover of two branches in last FY was ` 45
lakh (` 25 lakh + ` 20 lakh). Turnover of branches B1 and B2 in the first
quarter of current financial year is ` 5 lakh and ` 10 lakh respectively.
Compute the amount payable under composition levy under section 10(2A) of
the CGST Act, 2017 by ‘Padmavati’.
ANSWER
Branch Location Turnover in Turnover in 1st Total tax

previous FY quarter of this FY (@6%)
B1 Delhi ` 25 lakh ` 5 lakh ` 30,000
B2 Haryana ` 20 lakh ` 10 lakh ` 60,000
Total ` 45 lakh ` 15 lakh ` 90,000
As seen above, since the tax under composition scheme has to computed as a
specified % of the turnover in State or turnover in Union territory, it is pertinent
to understand what is turnover in State or turnover in Union territory.
(5) Turnover in State or turnover in Union territory under composition
levy [Section 2(112) read with explanation 2 to section 10]
As per section 2(112) of the CGST Act, 2017,

turnover in State/ turnover in Union territory means
the aggregate value of all taxable supplies
(excluding the value of inward supplies on
which tax is payable by a person on reverse
charge basis) and exempt supplies made within a State or Union territory by
a taxable person, exports of goods or services or both and inter-State
supplies of goods or services or both made from the State or Union territory

3.46 INDIRECT TAXES
by the said taxable person but excludes central tax, State tax, Union territory
tax, integrated tax and cess.
Further, explanation 2 to section 10 clarifies that for the purposes of
determining the tax payable by a person under this section, the
expression turnover in State or turnover in Union territory shall not
include the value of following supplies, namely:
(i) supplies from the first day of April of a FY up to the date when
such person becomes liable for registration under this Act; and
(ii) exempt supply of services provided by way of extending deposits,
loans or advances in so far as the consideration is represented by
way of interest or discount.
On combined reading of the aforesaid provisions, the method of computing
the turnover in a State/UT for paying tax under the composition
scheme can be depicted in a diagram as follows:
While computing the Turnover in a State/UT to pay tax under

composition levy, inclusions and exclusions are as follows:
Excludes
Includes --CGST/ SGST/ UTGST/ IGST/ Cess
All taxable supplies and
--Value of inward supplies on which tax
exempt supplies made within the
is payable under reverse charge.
State/UT
(While computing turnover in a --Value of supplies from the first day of
State/UT of a supplier, other than April of a FY up to the date when such
manufacturer and restaurant service person becomes liable for registration
provider, eligible for composition under this Act
levy for goods [eg-trader], the
exempt supplies will not be taken --Value of exempt supply of services
into consideration) provided by way of extending deposits,
loans or advances in so far as the
consideration is represented by way of
interest or discount

CHARGE OF GST 3.47
(4) A photographer ‘Champak’ has commenced providing

photography services in Delhi from April this year. His turnover
for various quarters till December is as follows:
April-June ` 20 lakh
July-Sept ` 30 lakh
Oct-Dec ` 20 lakh
In the given case, since Champak has started the supply of services in the
current financial year, his aggregate turnover in the preceding FY is Nil.
Consequently, in the current FY, he is eligible for composition scheme for
services. He becomes eligible for the registration when his aggregate
turnover exceeds ` 20 lakh.
While registering under GST, he opts for composition scheme for services.
For determining his turnover of the State for payment of tax under
composition scheme for services, turnover of April-June quarter [` 20 lakh]
shall be excluded as the value of supplies from the first day of April of a
financial year up to the date when such person becomes liable for
registration under this Act are to be excluded for this purpose.
On next ` 30 lakh [turnover of July-Sept quarter], he shall pay tax @ 6% [3%

CGST and 3% SGST], i.e. CGST ` 90,000 and SGST ` 90,000.
By the end of July-Sept quarter, his aggregate turnover reaches ` 50 lakh*.
Consequently, his option to avail composition scheme for services shall

lapse by the end of July-Sept quarter and thereafter, he is required to
pay tax at the normal rate of 18%. Thus, the tax payable for Oct-Dec
quarter is ` 20 lakh × 18%, i.e. ` 3,60,000.
*while computing aggregate turnover for determining Champak’s eligibility to

pay tax under composition scheme, value of supplies from the first day of
April of a financial year up to the date when such person becomes liable for
registration under this Act (i.e. turnover of April-June quarter), are included.

3.48 INDIRECT TAXES
(6) Who are NOT eligible to opt for composition scheme? [Section 10(2)
and (2A)]
Registered person who is not eligible Registered person who is not eligible
for composition scheme for goods for composition scheme for services
Supplier engaged in making any Supplier engaged in making

supply of goods which are not any supply of goods or services
leviable to tax which are not leviable to tax
Supplier engaged in making any Supplier engaged in making

inter-State outward supplies of any inter-State outward
goods supplies of goods or services
Person supplying any goods Person supplying any goods or

through an electronic commerce services through an electronic
operator who is required to commerce operator who is
collect tax at source under required to collect tax at
section 52* source under section 52*
Manufacturer of ice cream, Manufacturer of notified

panmasala, tobacco and goods [ice cream, panmasala,
aerated waters tobacco and aerated waters]
or supplier of notified services
Supplier who is either a casual Supplier who is either a

taxable person or a non- casual taxable person or a
resident taxable person non-resident taxable person.
Supplier of services, save as

provided in section 10(1) [Refer
discussion below diagram]
*Section 52 relating to tax collected at source has been discussed in detail at the Final
level.

CHARGE OF GST 3.49
There is no restriction on
composition supplier to receive
inter-State inward supplies of
goods or services.
A person engaged in marginal supply of services other than restaurant

service also eligible for composition levy for goods [Second proviso to
section 10(1) read with section 10(2)(a)]
Fundamentally, the composition scheme for goods can be availed in

respect of goods and only one service namely, restaurant service.
However, there are cases where a manufacturer/ trader is also engaged
in supply of services other than restaurant service though the
percentage of such supply of services is very small as compared to the
supplies of goods. There may also be cases where a restaurant service
provider is also engaged in supplying a small percentage of other
services.
With a view to enable such taxpayers to avail of the benefit of

composition scheme for goods, second proviso to section 10(1) permits
marginal supply of services [other than restaurant services] for a
specified value along with the supply of goods and/or restaurant service,
as the case may be. This specified value is value not exceeding:
(a) 10% of the turnover in a State/Union territory in the preceding
financial year
or
(b) ` 5 lakh,
Thus, it can be inferred that where the turnover of a registered person
opting for composition scheme for goods is upto ` 50 lakh in the
preceding financial year, he can supply services [other than restaurant
services] upto a maximum value of ` 5 lakh in the current financial year.

3.50 INDIRECT TAXES
Further, where the turnover of a registered person opting for

composition scheme is more than ` 50 lakh and upto ` 1.5 crore in the
preceding financial year, he can supply services [other than restaurant
services] in the current financial year upto a maximum value of 10% of
the turnover in a State/Union territory in the preceding financial year.
(5) Ramsewak is engaged in supply of goods. His turnover in
preceding FY is ` 60 lakh. Since his aggregate turnover in the
preceding FY does not exceed ` 1.5 crore, he is eligible for
composition scheme for goods in current FY. Further, in current FY, he can
supply services [other than restaurant services] upto a value of not
exceeding:
(a) 10% of ` 60 lakh, i.e. ` 6 lakh
or
(b) ` 5 lakh,
Thus, he can supply services upto a value of ` 6 lakh in current FY. If the
value of services supplied exceeds ` 6 lakh, he becomes ineligible for the
composition scheme for goods and has to opt out of the same.
Interest income to be excluded for determining the value of turnover
in a State or Union territory under second proviso to section 10(1)
[Explanation to second proviso to section 10(1)]
Generally, businesses tend to save and invest money in the form of
deposits, loans or advances. However, this way they get engaged in
supply of service by way of extending deposits, loans or advances 25 – a
service other than restaurant service. And where the income from such
services cause the value of services 26 supplied to exceed the value
referred in second proviso to section 10(1) 27 [10% of the turnover in the
25
It is, however, pertinent to note that services by way of extending deposits, loans or
advances in so far as the consideration is represented by way of interest or discount are
exempt from GST – Discussed in detail in Chapter 4 – Exemptions from GST.
26
other than restaurant services
27
as discussed in preceding paras

CHARGE OF GST 3.51
preceding FY in a State/Union territory or ` 5 lakh, whichever is

higher], said business would have become ineligible for the composition
scheme for goods and one has to opt out of the composition scheme.
This can cause a lot of hardship to small businesses.
In view of the above, an explanation is inserted after second proviso to
section 10(1) to clarify that for the purposes of second proviso to section
10(1), the value of supply of exempt services by way of extending
deposits, loans or advances in so far as the consideration is represented
by way of interest or discount, shall not be taken into account for
determining the value of turnover in a State or Union territory.
Under second proviso to section 10(1), a registered person opting for
composition scheme may supply services [other than restaurant services] of
value not exceeding 10% of the turnover in the preceding financial year in a
State/Union territory or ` 5 lakh, whichever is higher. Thus, while computing
value of services [other than restaurant services] as referred in this proviso,
interest on loans/deposit/advances will not be taken into account.
The provisions relating to composition levy discussed hereafter are
applicable to both composition levy for goods as well as composition levy
for services.
(7) Conditions and restrictions for composition levy [Rule 5]
Person opting for composition levy has to comply with the following
conditions:
 he was not engaged in the manufacture of goods as notified under
section 10(2)(e), during the preceding FY. The following goods
have been hereby notified vide Notification No. 14/2019 CT dated
07.03.2019 as amended:
Tariff item, subheading,

Description
heading or Chapter*
2105 00 00 Ice cream and other edible

ice, whether or not
containing cocoa

3.52 INDIRECT TAXES
2106 90 20 Pan masala

Pan Masala
24 All goods, i.e. Tobacco and

manufactured tobacco
substitutes
2202 1010 Aerated Waters
* as specified in the First Schedule to the Customs Tariff Act, 1975

 he shall pay tax under section 9(3)/9(4) 28 (reverse charge) on
inward supply of goods or services or both.
 he is neither a casual taxable person nor a non-resident taxable
person
 he shall mention the words “composition taxable person, not
eligible to collect tax on supplies” at the top of the bill of supply
issued by him; and
 he shall mention the words “composition taxable person” on every
notice or signboard displayed at a prominent place at his principal
place of business and at every additional place or places of business.
Further, where the goods held in stock by him are liable to be taxed under
reverse charge under section 9(4) 29, the tax thereon has been paid under
reverse charge under section 9(4).
28
wherever applicable
29
This condition applies in case where a builder/promoter opting for composition scheme
has the stock of the goods on which he is required to pay GST on reverse charge basis under
section 9(4) in one or more of the following cases:
(i) Builder/promoter must purchase at least 80% of inputs and input services used in
supplying the service, from registered persons. In case of shortfall, he’s required to
pay tax under reverse charge on all such inward supplies (to the extent short of 80%
of the inward supplies from registered supplier).
(ii) Where cement is received from an unregistered person, promoter/builder has to pay
tax on supply of such cement under reverse charge and
(iii) GST on capital goods is payable by the promoter on reverse charge basis.

CHARGE OF GST 3.53
(8) Intimation of opting for composition levy [Rules 3 & 4]

(i) Intimation by person applying for registration: Any person who
is not registered and applies for registration may give an option to
pay tax under composition levy in Part B of the registration
form, viz., Form GST REG-01. The same shall be considered as an
intimation to pay tax under composition levy. Such intimation shall
be considered only after the grant of registration to the applicant.
The option to pay tax under composition levy shall be effective
from the date from which registration is effective.
(ii) Intimation by a registered person: A registered person who opts to
pay tax under composition levy scheme shall electronically file an
intimation in prescribed form on the GST Common Portal
[www.gst.gov.in]. The intimation shall be filed prior to the
commencement of the FY for which said option is exercised.
He shall also furnish the statement in prescribed form in
accordance with the provisions of rule 44(4) of CGST Rules, 2017
[Discussed in detail in Chapter 6 – Input Tax Credit] within 60 days
from the commencement of the relevant FY.
Any intimation in respect of any place of business in a State/UT shall
be deemed to be an intimation in respect of all other places of
business registered on the same PAN.
The option to pay tax under composition levy shall be effective
from the beginning of the FY.
A person applying for registration can opt for composition at the time
of applying for registration [this time being any time of
the financial year] and composition levy shall be
Summary
effective from the date from which registration is
effective. A registered person can opt for composition
scheme from the beginning of any FY and composition
levy shall be effective from the beginning of said FY.

3.54 INDIRECT TAXES
composition levy
can opt for shall be effective
composition levy from
•at any time •the date from

during the year which
while applying registration is
for registration effective
Person applying
for registration
composition levy
can opt for shall be effective
composition levy from
•from the •the beginning of

beginning of said FY
any FY
Registered
person
(9) Validity of composition levy [Section 10(3) read with rule 6]
I. Withdrawal from the composition scheme by a taxpayer who

ceases to satisfy any of the prescribed conditions
 The option exercised by a registered person to pay amount under
composition levy shall remain valid so long as he satisfies all the
conditions mentioned in the relevant section and rules. For
instance, the option to pay tax under composition scheme lapses
from the day on which aggregate turnover of a registered person

CHARGE OF GST 3.55
exceeds the specified limit (` 1.5 crore/ ` 75 lakh/ ` 50 lakh) during

the FY.
 Such person is required to pay tax under regular scheme under
section 9(1) from the day he ceases to satisfy any of the
conditions prescribed for composition levy. He shall issue tax
invoice for every taxable supply made thereafter. Further, he is
required to file an intimation for withdrawal from the scheme in
prescribed form within 7 days of the occurrence of such event.
 The effective date from which withdrawal from the
composition scheme shall take effect shall be the date
indicated by him in his intimation, but such date may not be
prior to the commencement of the financial year in which such
intimation is being filed 30.
II. Withdrawal from the composition scheme by a taxpayer who
intends to withdraw from the said scheme
 The registered person who intends to withdraw from the
composition scheme shall, before the date of such withdrawal,
file an application in prescribed form.
 The effective date from which withdrawal from the
composition scheme shall take effect shall be the date
indicated by him in his application, but such date may not be
prior to the commencement of the financial year in which such
application for withdrawal is being filed 31.
III. Denial of option to pay tax under the composition scheme by tax
authorities
 Where the proper officer has reasons to believe that the
registered person was not eligible to pay tax under composition
scheme or has contravened the provisions of the CGST Act or
provisions of this Chapter, he may issue a show cause notice
(SCN) to such person. Upon receipt of reply to SCN, he shall
pass an order either accepting the reply, or denying the option
30
31

3.56 INDIRECT TAXES
to pay tax under composition scheme from the date of the

option or from the date of the event concerning such
contravention, as the case may be.
 In case of denial of option to pay tax under composition levy
by the tax authorities, the effective date of such denial shall be
from a date, including any retrospective date, as may be
determined by tax authorities. However, such effective date shall
not be prior to the date of contravention of the provisions of the
CGST Act/ CGST Rules 32.
In each of the above cases, such person may furnish a statement in
prescribed form containing details of the stock of inputs and inputs
contained in semi-finished or finished goods held in stock by him on the
date on which the option is withdrawn/denied, within a period of 30 days
from the date from which the option is withdrawn/ or from the date of the
order denying composition scheme.
(6) A person availing composition scheme during a financial year
crosses the turnover of ` 1.5 crore on 9th of December. The option
availed shall lapse from the day on which his aggregate turnover
during the financial year exceeds ` 1.5 crore, i.e. on 9th December, in this
case.
(10) Composition scheme to be adopted uniformly by all the registered

persons having the same PAN [Proviso to section 10(2) and proviso
to section 10(2A)]
All registered persons having the same Permanent Account Number (PAN)
have to opt for composition scheme. If one such registered person opts for
normal scheme, others become ineligible for composition scheme.
(7) A dealer ‘Kishorilal’ has two offices in Delhi and is eligible
for composition levy for goods. If ‘Kishorilal’ opts for the
composition scheme for goods, both the offices would pay
taxes under composition scheme and abide by all the
conditions as may be prescribed for the said composition scheme.
32

CHARGE OF GST 3.57
(11) Composition scheme supplier cannot collect tax [Section 10(4)]
Taxable person opting for the composition scheme shall not collect tax from
the recipient on supplies made by him. It implies that a composition scheme
supplier cannot issue a tax invoice.
(12) Composition scheme supplier cannot enter into credit chain [Section
10(4)]
Taxable person opting for the composition scheme is not entitled to any
credit of input tax.
(13) Imposition of penalty in case of irregular availment of the

composition scheme [Section 10(5)]
If a taxable person has paid tax under the composition scheme though he
was not eligible for the scheme, the person would be liable to penalty and
the provisions of section 73 or 74 of the CGST Act shall be applicable for
determination of tax and penalty.
1. Extent & Commencement of CGST Act/ SGST Act/ UTGST Act/ IGST Act
Applicability CGST SGST UTGST IGST
Intra-State supply Inter-State

supply
States of India
Union Territories with

Legislature
Union Territories
without Legislature

3.58 INDIRECT TAXES
2. Levy and collection of CGST/IGST
Particulars CGST IGST
Levied on Intra-State supplies of Inter-State supplies of

goods or services or goods or services or
both both
Collected and paid by Taxable person
Supply outside Alcoholic liquor for human consumption

purview of GST
Value for levy Transaction value under section 15 of the CGST Act
Rates Rates as notified by IGST rate= CGST rate +

Government. SGST rate
Maximum rate of CGST Maximum rate of IGST
can be 20%. can be 40%.
Supplies on which tax  petroleum crude

would be levied w.e.f.  high speed diesel
a notified date  motor spirit (commonly known as petrol)
 natural gas and
 aviation turbine fuel
Tax payable under  Supply of goods or services or both, notified

reverse charge by the Government.
 Supply of specified categories of goods or
services or both by an unregistered supplier
to specified class of registered persons.
Tax payable by the The Government may notify specific categories of

electronic commerce services the tax on supplies of which shall be paid
operator by electronic commerce operator (ECO) as if such
services are supplied through it.

CHARGE OF GST 3.59
3. Composition levy [Section 10]

Composition levy Advantages
•An option for specified •Low rates of tax
categories of small •Hassel free simple procedures for such taxpayers
taxpayers to pay GST at a
•Simple calculation of tax based on turnover
very low rate on the
basis of turnover. •A very simple annual return
Composition levy provided

•Referred in this chapter as composition levy for
under section 10(1) and
goods
10(2)
Composition levy provided •Referred in this chapter as composition levy

under section 10(2A) for services
Procedure for opting for the scheme
Category of persons How to exercise Effective date of

option composition levy
New registration under Intimation in the From the effective

GST registration form date of registration
Registered person opting Intimation in Beginning of the

for composition levy prescribed form financial year
Turnover limit for composition levy

Turnover limit in preceding FY to opt for composition levy for goods
For Special Category States except • ` 75 lakh

Assam, Himachal Pradesh and J&K
• ` 1.5 crore
For remaining States
Turnover limit in preceding FY to opt for composition levy for services

Turnover for composition • ` 50 lakh in preceding financial year
levy for services

3.60 INDIRECT TAXES
Rates of tax
Composition Category of Rate

scheme registered persons
Manufacturer 1% (½% CGST + ½% SGST/UTGST)

of turnover
For goods Restaurant service 5% (2½% CGST + 2½%

SGST/UTGST) of turnover
Others 1% (½% CGST + ½% SGST/UTGST)

of turnover of taxable supplies
For services 6% (3% CGST + 3% SGST/UTGST)
Conditions and restrictions for composition levy
Person opting for composition:
is neither a casual taxable person nor a non-resident taxable person
shall pay tax under section 9(3)/9(4) on inward supply
is not engaged in the manufacture of notified goods, namely, icecream, panmasala,

tobacco and aerated waters
shall mention the words “composition taxable person, not eligible to collect tax
on supplies” at the top of the bill of supply issued by him
shall mention the words “composition taxable person” at a prominent place at his
place of business

CHARGE OF GST 3.61
Who are NOT eligible to opt for composition scheme?
Registered person who is not Registered person who is not

eligible for composition scheme eligible for composition scheme for
for goods services
Supplier engaged in making any Supplier engaged in making any

supply of goods which are not supply of goods or services which
leviable to tax are not leviable to tax
Supplier engaged in making any Supplier engaged in making any

inter-State outward supplies of inter-State outward supplies of
goods goods or services
Person supplying any goods Person supplying any goods or

through an electronic commerce services through an electronic
operator who is required to collect commerce operator who is required
tax at source under section 52* to collect tax at source under section
52*
Manufacturer of ice cream, Manufacturer of notified goods [ice

panmasala, tobacco and aerated cream, panmasala, tobacco and
waters aerated waters] or supplier of
notified services
Supplier who is either a casual Supplier who is either a casual

taxable person or a non-resident taxable person or a non-resident
taxable person taxable person.
Supplier of services, save as

provided in section 10(1)**
**A registered person opting for composition scheme for goods is allowed to supply services
[other than restaurant services] alongwith supply of goods or supply of restaurant services of
value not exceeding 10% of the turnover in the preceding financial year in a State/Union
territory or ` 5 lakh, whichever is higher. Here, while computing turnover in a State/UT,
interest on loans/deposit/advances will not be taken into account.

3.62 INDIRECT TAXES
Other points
Bill of supply shall be issued instead of tax invoice.
Tax shall not be not collected from recipient of supply
Input tax credit shall not be availed

Composition Scheme if availed shall include all registered persons having same
PAN
Penalty shall be imposed in case of irregular availment of the composition scheme

1. State the person liable to pay GST in the following independent cases
provided recipient is located in the taxable territory:
(a) Services provided by an arbitral tribunal to any business entity.
(b) Sponsorship services provided by a company to an individual.
(c) Renting of immovable property service provided by the Central
Government to a registered business entity.
2. Vivek Goyal, director of A2Z Pvt. Ltd., has received sitting fee amounting to
` 1 lakh from A2Z Pvt. Ltd for attending the Board meetings. Who is the
person liable to pay tax in this case?
3. Raghu Associates provided sponsorship services to WE-WIN Cricket Academy,
an LLP. Determine the person liable to pay tax in this case.
4. 'Safe Trans', a Goods Transport Agency, transported goods of Kapil & Co., a
partnership firm, which is not registered under GST. Determine the person
liable to pay tax in this case.
5. Legal Fees is received by Sushrut, an advocate, from M/s. Tatva Trading
Company having turnover of ` 50 lakh in preceding F. Y. Who is the person
liable to pay tax in this case?
6. State the person liable to pay GST in the following independent cases
provided recipient is located in the taxable territory:
(a) Services supplied by an insurance agent to an Insurance Company.

CHARGE OF GST 3.63
(b) Services supplied by a recovery agent to a car dealer.

(c) Security services (services provided by way of supply of security
personnel) provided to a registered person.
7. Sultan & Sons, a partnership firm, in Nagpur, Maharashtra is a wholesaler of
a taxable product ‘P’ and product ‘Q’ exempt by way of a notification, in the
State of Maharashtra. Its aggregate turnover in the preceding financial year
is ` 130 lakh. The firm wishes to opt for composition scheme under sub-
sections (1) & (2) of section 10 of the CGST Act. However, its accountant is of
the view that a person engaged in making supply of exempt goods is not
eligible for the said scheme. Discuss.
Note: Assume that Sultan & Sons is not engaged in manufacture of goods as
notified under section 10(2)(e).
8. A person availing composition scheme, under sub-sections (1) & (2) of section
10 of the CGST Act, in Haryana during a financial year crosses the turnover of
` 1.5 crore in the month of December. Will he be allowed to pay tax under
composition scheme for the remainder of the year, i.e. till 31st March? Please
advise.
9. Determine whether the suppliers in the following cases are eligible for
composition levy, under section 10(1) & 10(2) of the CGST Act, 2017, provided
their turnover in preceding year does not exceed ` 1.5 crore:
(i) Mohan Enterprises is engaged in trading of pan masala in Rajasthan
and is registered in the same State.
(ii) Sugam Manufacturers has registered offices in Punjab and Haryana
and supplies goods in neighbouring States.
10. Subramanian Enterprises has two registered places of business in Delhi. Its
aggregate turnover for the preceding year for both the places of business was
` 120 lakh. It wishes to pay tax under composition levy, under section 10(1)
& 10(2) of the CGST Act, 2017, for one of the places of business in the current
year while under normal levy for other. You are required to advice
Subramanian Enterprises whether he can do so?
11. Mr. Ajay has a registered repair centre where electronic goods are
repaired/serviced. His repair centre is located in State of Rajasthan and he is
not engaged in making any inter-State supply of services. His aggregate
turnover in the preceding financial year (FY) is ` 45 lakh.

3.64 INDIRECT TAXES
With reference to the provisions of the CGST Act, 2017, examine whether Mr.
Ajay can opt for the composition scheme under section 10(1) &10(2) of the
CGST Act, 2017 in the current financial year? Or whether he is eligible to avail
benefit of composition scheme under section 10(2A)? Considering the option
of payment of tax available to Mr. Ajay, compute the amount of tax payable
by him assuming that his aggregate turnover in the current financial year is
` 35 lakh.
Will your answer be different if Mr. Ajay procures few items required for
providing repair services from neighbouring State of Madhya Pradesh?
12. M/s United Electronics, a registered dealer, is supplying all types of electronic
appliances in the State of Karnataka. Their aggregate turnover in the
preceding financial year by way of supply of appliances was ` 120 Lakh.
The firm also expects to provide repair and maintenance service of such
appliances from the current financial year.
With reference to the provisions of the CGST Act, 2017, examine:
(i) Whether the firm can opt for the composition scheme, under section
10(1) and 10(2) of the CGST Act, 2017, for the current financial year, as
the turnover may include supply of both goods and services?
(ii) If yes, up to what amount, the services can be supplied?
8. ANSWERS/HINTS
1. (a) Since GST on services provided or agreed to be provided by an
arbitral tribunal to any business entity located in the taxable territory
is payable under reverse charge, in the given case, GST is payable by
the recipient - business entity.
(b) GST on sponsorship services provided by any person to any body
corporate or partnership firm located in the taxable territory is
payable under reverse charge. Since in the given case, services
have been provided to an individual, reverse charge provisions will
not be attracted. GST is payable under forward charge by the
supplier – company.
(c) GST on services supplied by Central Government, State
Government, Union territory or local authority by way of renting of
immovable property to a person registered under CGST Act, 2017
is payable under reverse charge. Therefore, in the given case, GST

CHARGE OF GST 3.65
is payable under reverse charge by the recipient – registered

business entity.
2. GST on supply of services by director of a company to the said company
located in the taxable territory is payable on reverse charge basis.
Therefore, in the given case, person liable to pay GST is the recipient of
services, i.e., A2Z Pvt. Ltd.
3. In case of services provided by any person by way of sponsorship to any
body corporate or partnership firm, GST is liable to be paid under reverse
charge by such body corporate or partnership firm located in the taxable
territory. Further, for the reverse charge purposes, Limited Liability
Partnership formed and registered under the provisions of the Limited
Liability Partnership Act, 2008 is also be considered as a partnership firm.
Therefore, in the given case, WE-WIN Cricket Academy is liable to pay GST
under reverse charge.
4. In case of services provided by Goods Transport Agency (GTA) in respect of
transportation of goods by road to, inter alia, any partnership firm whether
registered or not under any law; GST is liable to be paid by such partnership
firm. Therefore, in the given case, Kapil & Co. is liable to pay GST under
reverse charge.
5. GST on legal services supplied by an advocate [Mr. Sushrut] to any business
entity [M/s. Tatva Trading Company] located in the taxable territory is
payable on reverse charge basis.
Therefore, in the given case, person liable to pay GST is the recipient of
services, i.e., M/s. Tatva Trading Company.
6. (a) GST on services supplied by an insurance agent to any person
carrying on insurance business located in the taxable territory is
payable under reverse charge. Therefore, in the given case, GST is
payable under reverse charge by the recipient – Insurance
Company.
(b) GST on services supplied by a recovery agent to a banking
company or a financial institution or a non- banking financial
company located in the taxable territory is payable under reverse
charge. However, since, in the given case, services are being
supplied by a recovery agent to a car dealer, GST is payable under
forward charge by the service provider - recovery agent.

3.66 INDIRECT TAXES
(c) GST on security services (services provided by way of supply of

security personnel) provided to a registered person, located in the
taxable territory is payable under reverse charge. Therefore, in the
given case, GST is payable under reverse charge by the recipient –
registered person receiving the services.
7. The view taken by the accountant of Sultan & Sons is not valid in law. A
registered person with an aggregate turnover in a preceding financial year
up to ` 1.5 crore is eligible for composition levy, under section 10(1) &
10(2), in Delhi. Further, such person must not be engaged in making any
supply of goods which are not leviable to tax under this Act and must not
be engaged in making any inter-State outward supplies of goods, for being
eligible to pay tax under said scheme.
In the given case, the aggregate turnover of Sultan & Sons does not exceed
` 1.5 crore. Further, it is engaged in making only intra-State supply of
goods and Product P supplied by it is taxable and Product Q supplied by it
is leviable to tax though exempted by way of notification. Therefore, it is
eligible for composition levy under section 10(1) & 10(2) in the current year.
8. No. The option to pay tax under composition scheme lapses from the day
on which the aggregate turnover of the person availing composition
scheme for goods during the financial year exceeds the specified limit (` 1.5
crore). Once he crosses the threshold, he is required to file an intimation for
withdrawal from the scheme in prescribed form within 7 days of the
occurrence of such event.
Every person who has furnished such an intimation, may electronically
furnish at the common portal, a statement in prescribed form containing
details of the stock of inputs and inputs contained in semi-finished or
finished goods held in stock by him on the date on which the option is
withdrawn, within a period of 30 days from the date from which the option
is withdrawn.
9. (i) A supplier engaged in the manufacture of goods as notified under
section 10(2)(e), during the preceding FY is not eligible for
composition scheme under section 10(1) and 10(2). Ice cream and
other edible ice, whether or not containing cocoa, Pan masala, Tobacco
and manufactured tobacco substitutes and aerated waters are notified
under this category. However, in the given case, since Mohan
Enterprises is engaged in trading of pan masala and not manufacture

CHARGE OF GST 3.67
and his turnover does not exceed ` 1.5 crore, he is eligible for
composition scheme subject to fulfilment of specified conditions.
(ii) Since supplier of inter-State outward supplies of goods is not
eligible for composition levy, Sugam Manufacturers is not eligible
for composition levy.
10. A registered person with an aggregate turnover in a preceding financial year
up to ` 1.5 crore is eligible for composition levy, under section 10(1) &
10(2), in Delhi. Since the aggregate turnover of Subramanian Enterprises
does not exceed ` 1.5 crore, it is eligible for composition levy in the current
year. However, all registered persons having the same Permanent Account
Number (PAN) have to opt for composition scheme. If one such registered
person opts for normal scheme, others become ineligible for composition
scheme. Thus, Subramanian Enterprises either have to opt for composition
levy for both the places of business or under normal levy for both the places
of business.
11. Section 10(1) provides that a registered person, whose aggregate turnover
in the preceding financial year did not exceed ` 1.5 crore (` 75 lakh in
Special Category States except Assam, Himachal Pradesh and Jammu and
Kashmir), may opt to pay, in lieu of the tax payable by him, an amount
calculated at the specified rates. However, as per proviso to section 10(1),
person who opts to pay tax under composition scheme may supply services
other than restaurant services, of value not exceeding 10% of the turnover
in a State or Union territory in the preceding financial year or ` 5 lakh,
In the given case, since Mr. Ajay is an exclusive supplier of services other
than restaurant services [viz. repair services], he is not eligible for
composition scheme under section 10(1) & 10(2).
However, section 10(2A) provides an option to a registered person
(subject to certain conditions) whose aggregate turnover in the
preceding financial year is upto ` 50 lakh and who is not eligible to pay
tax under composition scheme under section 10(1) & 10(2), to pay tax @
3% [Effective rate 6% (CGST+ SGST/UTGST)] of the turnover of supplies
of goods and services in the State or Union territory.
Thus, in view of the above-mentioned provisions, Mr. Ajay is eligible to
avail the composition scheme under section 10(2A) as his aggregate

3.68 INDIRECT TAXES
turnover in the preceding FY does not exceed ` 50 lakh and he is not

eligible to opt for the composition scheme under section 10(1) & 10(2).
Thus, the amount of tax payable by him as per the composition scheme
under section 10(2A) is ` 2,10,000 [6% of ` 35 lakh].
A registered person cannot opt for composition scheme under section
10(2A), if, inter alia, he is engaged in making any inter-State outward
supplies. However, there is no restriction on inter-State procurement of
goods. Hence, answer will remain the same even if Mr. Ajay procures few
items from neighboring State of Madhya Pradesh.
12. (i) The registered persons, whose aggregate turnover in the preceding
financial year did not exceed ` 1.5 crore, may opt to pay tax under
composition levy, under section 10(1) and 10(2).
The scheme can be availed by an intra-State supplier of goods and
supplier of restaurant service.
However, the composition scheme permits supply of marginal
services (other than restaurant services) for a specified value along
with the supply of goods and restaurant service, as the case may
be.
Thus, M/s United Electronics can opt for composition scheme for
the current financial year as its aggregate turnover is less than ` 1.5
crore in the preceding financial year and it is not engaged in inter-
State outward supplies.
(ii) The registered person opting for composition scheme, under
section 10(1) and 10(2), can also supply services (other than
restaurant services) for a value up to 10% of the turnover in the
preceding year or ` 5 lakh, whichever is higher, in the current
financial year.
Thus, M/s United Electronics can supply repair and maintenance
services up to a value of ` 12 lakh [10% of ` 20 lakh or ` 5 lakh,
whichever is higher] in the current financial year.

CHARGE OF GST 3.69
AMENDMENTS MADE VIDE THE FINANCE ACT, 2020

The Finance Act, 2020 has become effective from 27.03.2020. However, most of
the amendments made in the CGST Act and IGST Act vide the Finance Act, 2020
would become effective only from a date to be notified by the Central
Government in the Official Gazette. Such a notification has not been issued 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 such notification is
issued by the Central Government.
In the table given below, the existing provisions 33 relating to section 10 are
compared with the provisions as amended by the Finance Act, 2020.
Once the announcement for applicability of such amendments for examination(s)
is made by the ICAI, students should read the provisions given hereunder in place
of the related provisions discussed in the Chapter.
Existing provisions Provisions as amended by Remarks

the Finance Act, 2020
Sub-section (2) Sub-section (2) Section 10(2) is

“The registered person “The registered person shall being amended to
shall be eligible to opt be eligible to opt under sub- harmonise the
under sub-section (1), section (1), if– conditions for
if– (a)……………. eligibility for opting
(a)……………. to pay tax under
(b) he is not engaged in
composition scheme
(b) he is not engaged making any supply of
under sub-sections
in making any goods or services which
(1) and (2) and
supply of goods are not leviable to tax
under sub-section
which are not under this Act
(2A) of the CGST Act.
leviable to tax (c) he is not engaged in
under this Act making any inter-State
(c) he is not engaged outward supplies of
in making any goods or services
inter-State outward (d) he is not engaged in
supplies of goods making any supply of
33

3.70 INDIRECT TAXES
(d) he is not engaged goods or services

in making any through an electronic
supply of goods commerce operator who
through an is required to collect tax
electronic at source under section
commerce 52; and
operator who is (e)…….
required to collect (f)………”
tax at source under
section 52; and
(e)…….
(f)………”

CHAPTER 4
EXEMPTIONS FROM GST

LEARNING OUTCOMES
 describe the power of the Government to grant exemption
from CGST/IGST.
 provide an overview of the goods exempt from GST.
 identify and analyse various services exempt from GST.
CHAPTER OVERVIEW
Exemption from GST
Power of the Government to grant exemption

from tax
in India
Goods exempt from tax
Services exempt from tax

4.2 INDIRECT TAXES
1. INTRODUCTION
When a supply of goods and/or services falls within the purview of charging
section, such supply is chargeable to GST. However, for determining the liability
to pay the tax, one needs to further check whether such supply of goods and/or
services are exempt from tax.
Exempt supply has been
defined as supply of any goods
or services or both which
attracts nil rate of tax or which
may be wholly exempt from tax
and includes non-taxable
supply [Section 2(47) of the
CGST Act, 2017]. Non-taxable
supply means a supply of
goods or services or both which
is not leviable to tax under
CGST Act or under the IGST Act
[Section 2(78) of the CGST Act,
2017]. Thus, under GST, a
supply not leviable to tax is also
included within the purview of
‘exempt supply’.
(1) Examples of supply not leviable to tax are alcoholic liquor for human
consumption, specified petroleum products namely Petroleum Crude, High
Speed Diesel, Motor spirit (commonly known Petrol), Natural Gas and
Aviation Turbine Fuel.
Power to grant exemption from GST has been granted vide section 11 of the
CGST Act and vide section 6 of the IGST Act. State GST laws also contain identical
provisions granting power to exempt SGST. Under GST, essential goods/services,
i.e. public consumption products/services, have been exempted. Items such as
unbranded atta/maida/besan, unpacked food grains, milk, eggs, curd, lassi and
fresh vegetables are among the items exempted from GST. Further, essential
services like health care services, education services, etc. have also been
exempted.
It is important to note that exemption under GST may be provided in any of the
following manner:

EXEMPTIONS FROM GST 4.3
(a) Exemption to specified activities or transactions

Sometimes, exemption is provided in respect of specified activities or
transactions. Consequently, the status of the supplier or recipient
becomes immaterial.
(2) Services by way of transfer of a going concern, as a
whole or an independent part thereof.
(3) Services by way of renting of residential dwelling for use as
residence.
(b) Exemption to specified suppliers

At times, exemption is given to specified suppliers only. Here, the status
of recipient becomes immaterial.
(4) Services provided by the Central Government, State
Government, Union territory or local authority where the
consideration for such services does not exceed ` 5,000.
(5) Services by the Reserve Bank of India.
(c) Exemption to specified recipients

In some cases, exemption is given to specified recipient only. Here, the
status of supplier becomes immaterial.
(6) Services provided to the Central Government, State
Government, Union territory under any insurance scheme for
which total premium is paid by the Central Government, State
Government, Union territory.
(7) Services provided to the Central Government, State Government,
Union territory administration under any training programme, for which
total expenditure is borne by the Central Government, State Government,
Union territory administration.
(d) Exemption to specified suppliers and specified recipients

Sometimes, exemption is given only when activities or transactions are carried
out by specified suppliers for specified recipients only.
(8) Services by the Employees’ State Insurance Corporation to
persons governed under the Employees; State Insurance Act, 1948.

4.4 INDIRECT TAXES
(9) Services provided by the Insurance Regulatory and Development

Authority of India to insurers under the Insurance Regulatory and
Development Authority of India Act, 1999.
In this chapter, we shall discuss the power to grant exemption from tax under
CGST Act/IGST Act, list of services exempt from GST in detail and an overview of
the goods exempt from tax.
2. P
POWER TO GRANT EXEMPTION FROM TAX [SECTION
11 OF THE CGST ACT/SECTION 6 OF IGST ACT]
Section 11 Power to grant exemption from ta x

(1) Where the Government is satisfied that it is necessary in the
public interest so to do, it may, on the recommendations of the
Council, by notification, exempt generally, either absolutely
or subject to such conditions as may be specified therein,
goods or services or both of any specified description from the
whole or any part of the tax leviable thereon with effect from
such date as may be specified in such notification
(2) Where the Government is satisfied that it is necessary in the
public interest so to do, it may, on the recommendations of
the Council, by special order in each case, under
circumstances of an exceptional nature to be stated in such
order, exempt from payment of tax any goods or services or
both on which tax is leviable.
(3) The Government may, if it considers necessary or expedient so
to do for the purpose of clarifying the scope or applicability of
any notification issued under sub-section (1) or order issued
under sub-section (2), insert an explanation in such
notification or order, as the case may be, by notification at any
time within one year of issue of the notification under sub-

section (1) or order under sub-section (2), and every such

explanation shall have effect as if it had always been the part
of the first such notification or order, as the case may be.
Explanation––For the purposes of this section, where an exemption in respect of
any goods or services or both from the whole or part of the tax leviable thereon has
been granted absolutely, the registered person supplying such goods or services or
both shall not collect the tax, in excess of the effective rate, on such supply of goods
or services or both.
ANALYSIS
(i) Exemption from payment of tax: GST law empowers the Central Government
or State Government, as the case may be, to grant
exemption from tax. The exemption is granted on
Exemption can be
recommendation of the GST Council.
from whole of tax
Exemption can be from whole of the tax or part of the or part of tax
tax. It should be granted in public interest.
Exemption can be granted to goods or services or both of
Exemption can be any specified description, by way of issuance of
granted by a notification, either absolutely [i.e. unconditional
notification or by exemption; exemption is not subject to any condition(s)] or
a special order conditionally [i.e. exemption is subject to specified
condition(s)]. Exemption may be granted by a special
order in case of the circumstances of an exceptional nature.
The absolute/ unconditional exemption is mandatory in
nature. Where the supply of the goods or services or Unconditional
both are unconditionally exempted from whole of exemption is
the tax, the registered person mandatory
doesn’t have option to collect and
Conditional
pay tax on such supply of goods or services or both.
exemption is
Where the supply of the goods or services or both are
optional
unconditionally exempted from part of the tax, the
registered person doesn’t have option to collect and pay the tax, in excess
of the effective rate, on such supply of goods or services or both.

4.6 INDIRECT TAXES
However, where the exemption is conditional, it is at the option of the

registered person whether to avail the same or not.
The above provisions have been explained by way of a diagram as follows:
The Government may

generally exempt on
BY
supply of goods and/ recommendation
NOTIFICATION
or services of any of the GST council
specified description
with effect from either absolutely or subject

such date as may wholly/ to such conditions as may
be specified in partly be specified in the
such notification. notification
The Government may

BY
exempt any goods and/or on recommendation
SPECIAL
services on which tax is of the GST Council
ORDER
leviable from payment of tax
under circumstances of an in the

exceptional nature to be public
stated in such order interest
(ii) Explanation inserted within 1 year, for the purpose of clarifying the
scope or applicability of any notification/order, to have retrospective
effect: Wherever the Government feels that there is a need to clarify the
scope or applicability of any notification/order issued under this section,
it can issue an explanation within 1 year of issue of said notification/
order. Such explanation shall have effect as if it was there when first such
notification/ order was issued, i.e. explanation so inserted would be
effective retrospectively.
It is hereby clarified that the explanation so inserted for a particular
entry in the notification, is effective from the inception of the entry in
notification and not from the date from which the notification (that
inserted said explanation) becomes effective.

(10) Principal Notification No. 11/2017 CT (R) dated 28.06.2017 1

came into force with effect from 01.07.2017. Thereafter, a new
entry - Entry no. 3(vi) was inserted w.e.f. 21.09.2017.
Subsequently, an explanation was also inserted with respect to
entry no. 3(vi) by issue of a notification on 26.07.2018 [i.e. within 1 year of the
insertion of entry 3(vi)].
Although the effective date mentioned in the notification which inserted said
explanation was 27.07.2018, said explanation will be effective from the
inception of entry 3(vi) in notification i.e. 21.09.2017 and not 27.07.2018.
Similar provisions granting power to exempt IGST have been

provided under section 6 of the IGST Act.
3. GOODS EXEMPT FROM TAX

A list of items has been notified under section
11(1) of the CGST Act, 2017/ section 6(1) of
the IGST Act, 2017. These items have been
exempted from whole of the tax.
Under GST, everyday items used by the
common man have been included in the list of
exempted items. Items such as unbranded
atta/ maida/ besan, unpacked food grains,
milk, eggs, curd, lassi and fresh vegetables are
among the items exempted from GST.
Some of the examples of the goods exempted from tax have been provided herein 2:
1
This notification notifies the rate of tax on services.
2
Students may go through the complete list of goods exempt from GST on CBIC website –
www.cbic.gov.in, for knowledge purposes.

4.8 INDIRECT TAXES
Live fish (0301) Fresh Milk (0401) Potatoes (0701)
Grapes (0806) Indian National Flag (63) Plastic Bangles (3926)
4. LIST OF SERVICES EXEMPT FROM TAX

L
I. SPECIFIC SERVICES EXEMPT FROM CGST AND IGST
Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 3 (hereafter

referred to as “the Notification”) unless otherwise specified, has exempted
various services wholly from CGST. Each of the entries of the exemption
notification have been discussed below:
1. Services related to charitable and religious activities
Entry Description of services

No. 4
1 Services by an entity registered under section 12AA of the Income-tax

Act, 1961 by way of charitable activities.
3
Exemption from IGST has been granted to various services vide Notification No. 9/2017
Integrated Tax (Rate) dated 28.06.2017. All the services exempted from CGST &
SGST/UTGST have also been exempted from IGST. Apart from these, there are few
additional services which have been exempted only under IGST law. Such services will be
discussed at the Final Level.
4
Entry Nos. mentioned herein correspond to entries in Notification No. 12/2017 Central Tax
(Rate) dated 28.06.2017. However, these entry numbers have been given only for reference
purposes and are not relevant for examination purpose.

13 Services by a person by way of-

(a) conduct of any religious ceremony;
(b) renting of precincts of a religious place meant for general public,
owned or managed by an entity registered as a charitable or
religious trust under section 12AA of the Income-tax Act, 1961 or
a trust or an institution registered under section 10(23C)(v) of the
Income-tax Act or a body or an authority covered under section
10(23BBA) of the said Income-tax Act.
However, nothing contained in entry (b) of this exemption shall apply
to-
(i) renting of rooms where charges are ` 1,000 or more per day;
(ii) renting of premises, community halls, kalyanmandapam or open
area, and the like where charges are ` 10,000 or more per day;
(iii) renting of shops or other spaces for business or commerce where
charges are ` 10,000 or more per month.
60 Services by a specified organisation in respect of a religious

pilgrimage facilitated by the Government of India, under bilateral
arrangement.
80 Services by way of training or coaching in recreational activities

relating to-
(a) arts or culture, or
(b) sports by charitable entities registered under section 12AA of
the Income-tax Act.
ANALYSIS
A. SERVICES PROVIDED BY CHARITABLE/RELIGIOUS TRUST
Entry 1 of the Notification exempts services supplied by an entity registered
under section 12AA of the Income-tax Act, 1961 by way of charitable activities.
Thus, in order to claim exemption under Entry 1 of the Notification, following two
conditions must be satisfied:-
(i) The entity should be registered under section 12AA of the Income-tax
Act, 1961, and

4.10 INDIRECT TAXES
(ii) The entity must carry out one or more of the specified charitable activities.
Before proceeding further, let us first understand the meaning of term ‘charitable
activities’. The term ‘charitable activities’ mean activities relating to-
(i) PUBLIC HEALTH by way of-
(A) care or counseling of
(I) terminally ill persons or persons with severe physical or mental
disability;
(II) persons afflicted with HIV or AIDS;
(III) persons addicted to a dependence-forming substance such as
narcotics drugs or alcohol; or
(B) public awareness of preventive health, family planning or prevention
of HIV infection;
(ii) ADVANCEMENT OF RELIGION, spirituality or yoga;
(iii) ADVANCEMENT OF EDUCATIONAL PROGRAMMES/SKILL
DEVELOPMENT relating to,-
(A) abandoned, orphaned or homeless children;
(B) physically or mentally abused and traumatized persons;
(C) prisoners; or
(D) persons over the age of 65 years residing in a rural area;
(iv) PRESERVATION OF ENVIRONMENT including watershed, forests & wildlife.
Thus, only those services provided by a charitable and religious trusts [registered
under section 12AA of the Income-tax Act] which fall within the above definition
of charitable activities, are eligible for exemption from GST. There could be many
other services provided by such charitable and religious trusts which are not
covered by the definition of charitable activities and hence, such services would
attract GST.
For instance, grant of advertising rights to a person on the premises of the
charitable/religious trust or on publications of the trust, or granting admission to
events, functions, celebrations, shows against admission tickets or fee etc. would
attract GST.
In the following paras, we have examined some of the services supplied by the
entities registered under section 12AA of the Income-tax Act:

Management of educational institutions by charitable trusts

Activities of schools, colleges or any other educational institutions run by
charitable trusts by way of education or skill development of abandoned,
orphans, homeless children, physically or mentally abused persons, prisoners or
persons over age of 65 years or above residing in a rural area, will be considered
as charitable activities and income from such supplies will be wholly exempt from
GST.
The term rural area means the area comprised in a village as defined in land
revenue records, excluding the area under any municipal committee, municipal
corporation, town area committee, cantonment board or notified area committee;
or any area that may be notified as an urban area by the Central Government or a
State Government.
(11) Sarvsewa Trust, a charitable trust registered under section 12AA of
the Income-tax Act, 1961, has organized a Skill Development
Programme for the old age people over the age of 65 years residing in
Bangalore city (an urban area).
Services provided by Sarvsewa Trust do not fall within the purview of ‘charitable
activities’. The activities relating to advancement of skill development relating to
persons over the age of 65 years, are covered under the definition of ‘charitable
activities’ only when such persons are residing in rural area.
Activities of a school, college or an institution run by a trust which do not come
within the ambit of charitable activities will not be exempt under
Entry 1 of the Notification. However, such activities may be exempt under Entry
66 of the Notification [discussed later in this chapter] provided the school, college
or institution qualifies as an 'educational institution'.
Hostel accommodation provided by trusts
Hostel accommodation services provided by trusts to students do not fall within
the ambit of charitable activities as defined above.
However, accommodation service in hostels including such services provided by trusts

having value of supply upto ` 1,000 per day is exempt under Entry 14 of the

4.12 INDIRECT TAXES
Notification 5 [discussed later in this chapter] [Circular No. 32/06/2018-GST dated

12.02.2018].
Religious yatras or pilgrimage
Religious Yatras/pilgrimage organised by any charitable or religious trust are not
exempt.
Only such services of religious pilgrimage as are provided by specified organization
in respect of a religious pilgrimage facilitated by the Government
of India (GoI), under bilateral arrangement, are exempt from GST. [See
Entry 60 in above table]. The term specified organization as referred
herein means-
 Kumaon Mandal Vikas Nigam Limited (KMVN), a Government of
Uttarakhand Undertaking; or
 ‘Haj Committee of India’ or ‘State Haj Committee
including Joint State Committee’.
In short, as per Entry 60, the services provided by the Haj Committee and KMVN
in relation to pilgrimage to Mecca and Kailash- Mansarovar respectively are not
liable to GST.
(12) KMVN supplies numerous services, namely, medical facilities,
catering services, security, accommodation services, etc. to the
pilgrims undertaking Kailash-Mansarovar pilgrimage. Such services
provided by KMVN in respect of the religious pilgrimage to Kailash-Mansarovar
are covered under entry 60 and thus, are exempt.
Arranging yoga and meditation camp by charitable trusts
As discussed above, services provided by entity registered under section 12AA of
the Income-tax Act, 1961 by way of advancement of religion,
spirituality or yoga are exempt as such activities are covered in
definition of charitable activities.
Fee or consideration charged in any other form from the
participants for participating in a religious, yoga or meditation programme or
camp meant for advancement of religion, spirituality or yoga shall be exempt.
5
Entry 14 has been amended after issuance of this circular. Discussion hereunder has been
suitably adapted to take into consideration the amended entry

Residential programmes or camps where the fee

charged includes cost of lodging and boarding
shall also be exempt as long as the primary and
predominant activity, objective and purpose of
such residential programmes or camps is
advancement of religion, spirituality or yoga.
However, if charitable or religious trusts merely or primarily provide
accommodation or serve food and drinks against consideration in any form
including donation, such activities will be taxable. Similarly, activities such as
holding of fitness camps or classes such as those in aerobics, dance, music etc.
will be taxable 6.
(13) Bhavyajyoti Foundation, a charitable trust registered under
section 12AA of the Income-tax Act, 1961, has organized a ‘Yoga
Meditation Camp’ for the old age people. GST would be exempt on the
same as services provided by entity registered under section 12AA of the Income-
tax Act, 1961 by way of advancement of religion, spirituality or yoga are exempt.
Hospitals managed by charitable trusts
Exemption available to health care services under
Entry 74 of the Notification [discussed later in this
chapter] is also applicable to the services provided
by a clinical establishment, an authorised medical
practitioner or paramedics of a religious or
charitable trust also.
Training or coaching in recreational activities
Services by way of training or coaching in recreational activities relating to-
(a) arts or culture, or
(b) sports by charitable entities registered under section 12AA of the
Income-tax Act are exempt from GST.
It is important to note that the exemption
with regard to services provided by way of
training or coaching in recreational activities
relating to sports has a restricted scope.
Here, said exemption is available only when
6

4.14 INDIRECT TAXES
said services are provided by a charitable entity registered under section 12AA of
Income-tax Act 7.
Let us now analyse the term ‘recreational
activities’. The term recreational activities is very
wide. However, under this entry, the scope of
training or coaching in recreational activities is
restricted to the area of arts, culture and sports.
Hence, the training or coaching in recreational
activities in the areas other than arts, culture
or sports is outside the purview of this entry.
Further, training or coaching relating to all forms
of arts, culture or sports is covered under this
entry, namely, dance, music, painting, sculpture
making, literary activities, theatre, etc. of any
school, tradition or language or any of the sports.
(14) Manavtaa Sansthaan, a charitable trust registered under section
12AA of the Income-tax Act, 1961, has organized a ‘Basketball Training
Camp’ for teenagers. GST would be exempt on the same as services
provided by entity registered under section 12AA of the Income-tax Act, 1961 by
way of training or coaching in sports are exempt.
GST on services provided TO charitable trusts
Services provided to charitable or religious trusts are not outside the ambit of
GST. Unless specifically exempted, all goods and services supplied to charitable or
religious trusts are leviable to GST.
B. CONDUCT OF ANY RELIGIOUS CEREMONY
Going through Entry 13(a) of the Notification, it can be inferred that the
amount charged, by whatever name called, for the conduct of any religious
ceremony is exempt from GST. Religious ceremonies are life-cycle rituals
including special religious poojas conducted in terms of religious texts by a
7
In this regard, CBIC GST Flyer – Chapter 39 - GST on Charitable and Religious Trusts has
stipulated that the services provided by way of training or coaching in recreational activities
relating to arts or culture or sports such as dance, music, painting, literary activities, drama
etc. of any school, tradition or language or any of the sports, by a charitable entity are
exempt from GST.

person so authorized by such religious texts. Occasions like birth, marriage, and
death involve elaborate religious ceremonies.
(15) Raamanand Joshi, a priest, charges ` 12,000 for conducting a
religious ceremony on the birthday of Ghanshyam’s son. The amount
charged for the conduct of any religious ceremony is exempt from GST.
C. RENTING OF PRECINCTS OF RELIGIOUS PLACE MEANT FOR GENERAL
PUBLIC
Entry 13(b) of the Notification exempts renting of precincts of a religious
place meant for general public owned by an entity registered under any of the
specified sections of the Income Tax Act provided the consideration charged for
such renting does not exceed the prescribed ceiling limits as given in said entry.
Thus, this exemption is determined on the basis of amount of consideration
charged for such renting. Let us understand the meaning of the terms ‘religious
place’, ‘general public’ and ‘precincts’ referred herein.
 Religious place means a place which is primarily meant for
conduct of prayers or worship pertaining to a religion,
meditation, or spirituality.
 General public means the body of people at large sufficiently defined by
some common quality of public or impersonal nature.
 The word 'precincts' is not to be interpreted in a restricted manner and all
immovable property of the religious place located within the outer
boundary walls of the complex (of buildings and facilities) in which the
religious place is located, is to be considered as being located in the
precincts of the religious place. The immovable property located in the
immediate vicinity and surrounding of the religious place and owned by the
religious place or under the same management as the religious place, may
be considered as being located in the precincts of the religious place and
extended the benefit of above exemption.
Activities other than - conduct of religious ceremony and renting of precincts of
religious place - will be taxable irrespective of the manner or the name in which
the consideration is received. For example, if donation is received with specific
instructions/mutual understanding between the donor and the receiver that
religious place will host an advertisement promoting business of the donor, such
donation will be subject to GST. However, if donation is received without such

4.16 INDIRECT TAXES
instructions or without a quid pro quo in the form of supply of any goods or
services or both by the receiver to the donor, it shall not be subject to GST 8.
(16) Durgadevi Trust, a religious trust registered under section 12AA of
the Income-tax Act, owns and manages a temple in their locality. It rents
the commercial shops located in the precincts of the temple for a rent of
` 10,000 per month per shop. The consideration so received is liable to GST as
such services are exempt only when the consideration is less than ` 10,000 per
month.
(17) Sarvshiksha Foundation, an educational institution registered under

section 10(23C)(v) of the Income-tax Act, owns and manages a gurudwara.
It rents the community hall located in the precincts of the gurudwara for a rent of
` 9,000 per day for a marriage function. The consideration so received is exempt
from GST as the consideration is less than ` 10,000 per day.
2. Agriculture related services

No.
24 Services by way of loading, unloading, packing, storage or

warehousing of rice.
24A Services by way of warehousing of minor forest produce.
24B Services by way of storage/ warehousing of cereals, pulses, fruits,

nuts and vegetables, spices, copra, sugarcane, jaggery, raw
vegetable fibres such as cotton, flax, jute etc., indigo,
unmanufactured tobacco, betel leaves, tendu leaves, coffee and
tea.
53A Services by way of fumigation in a warehouse of

agricultural produce.
8
Discussion herein is primarily based on CBIC GST Flyer – Chapter 39 - GST on Charitable
and Religious Trusts and other clarifications

54 Services relating to cultivation of plants and rearing

of all life forms of animals, except the rearing of
horses, for food, fibre, fuel, raw material or other
similar products or agricultural produce by way of—
(a) agricultural operations directly related to production of any

agricultural produce including cultivation, harvesting, threshing,
plant protection or testing;
(b) supply of farm labour;
(c) processes carried out at an agricultural farm including tending,
pruning, cutting, harvesting, drying, cleaning, trimming, sun
drying, fumigating, curing, sorting, grading, cooling or bulk
packaging and such like operations which do not alter the
essential characteristics of agricultural produce but make it only
marketable for the primary market;
(d) renting or leasing of agro machinery or vacant land with or
without a structure incidental to its use;
(e) loading, unloading, packing, storage or warehousing of
agricultural produce;
(f) agricultural extension services;
(g) services by any Agricultural Produce Marketing Committee or
Board or services provided by a commission agent for sale or
purchase of agricultural produce.
(h) services by way of fumigation in a warehouse of agricultural
produce.
55 Carrying out an intermediate production process as job work in

relation to cultivation of plants and rearing of all life forms of animals,
except the rearing of horses, for food, fibre, fuel, raw material or other
similar products or agricultural produce.
55A Services by way of artificial insemination of livestock (other than

horses).
ANALYSIS

4.18 INDIRECT TAXES
ENTRY 54
 The words ‘Services relating to cultivation of plants and rearing of all

life forms of animals, except the rearing of horses, for food, fibre, fuel,
raw material or other similar products’ used in Entry 54
include activities like breeding of fish (pisciculture), rearing
of silk worms (sericulture), cultivation of ornamental
flowers (floriculture) and horticulture, forestry, etc.
 Further, the term ‘agricultural produce’ means any produce out of
cultivation of plants and rearing of all life forms of animals, except the rearing
of horses, for food, fibre, fuel, raw material or other similar products, on
which either no further processing is done or such processing is done as
is usually done by a cultivator or producer which does
not alter its essential characteristics, but makes it
marketable for primary market. It is important to note
that agricultural produce is either subject to no further
processing at all or if any processing is undertaken on
the agricultural produce it
should not alter its essential
characteristics but may make
it marketable for primary
market. Few instances of
such processes are the
processes carried out at an
agricultural farm including tending, pruning,
cutting, harvesting, drying, cleaning, trimming, etc.
Let us examine what is exempt under Entry 54.
 Entry 54 exempts the agricultural operations directly related to production
of any agricultural produce such as cultivation, harvesting, threshing, plant
protection or testing. Further, processes carried out at an agricultural farm
including tending, pruning, cutting, harvesting, drying, cleaning, trimming,
sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging
and such like operations which do not alter the essential characteristics
of agricultural produce but make it only marketable for the primary
market are also exempt. In view of the same, following processes are
outside the purview of this entry and thus, are liable to GST:-

(a) Process which alters the essential characteristics of the

agricultural produce: For instance, potato chips or tomato ketchup
are manufactured through processes which alter the essential
characteristic of farm produce (potatoes and tomatoes in this case).
(b) Process which makes agricultural produce marketable in the retail
market: The processes of grinding, sterilizing, extraction packaging in
retail packs of agricultural products, which make the agricultural
products marketable in retail market, would NOT be covered in this
entry. Only such processes are covered in this entry which makes
agricultural produce marketable in the primary market.
 Apart from this, supply of farm labour is also exempt from GST.
Renting or leasing of agro machinery or vacant land
 Item (d) of the entry exempts renting or leasing of agro
machinery or vacant land with or without a structure
incidental to its use.
(18) Moolchand has leased out to a farmer – Tulsidas - a vacant land for
agriculture. The land has a greenhouse and a storage shed which are
incidental to its use for agriculture. Leasing of vacant land with a greenhouse and
a storage shed which is incidental to its use for agriculture is exempt from GST.
Agricultural extension services
 Item (f) of the entry exempts Agricultural Extension Services (AES). Said
services have been defined under the notification to mean the application
of scientific research and knowledge to agricultural practices through
farmer education or training.
The main objective of AES is to transmit latest technical know-how to
farmers. It also focuses on enhancing farmers' knowledge about crop
techniques and help them to increase productivity. This is done through
training courses, kisan call centres, farm visits, on farm trials, kisan melas,
kisan clubs, advisory bulletins and the like.
Agricultural Produce Marketing Committee services
 Services by any Agricultural Produce Marketing
Committee or Board or services provided by a
commission agent for sale or purchase of agricultural
produce are not liable to GST. Agricultural Produce

4.20 INDIRECT TAXES
Marketing Committee or Board means any committee or board set up under

a State Law for the time being in force for purpose of regulating the
marketing of agricultural produce.
 Such marketing committees or boards have been set up in most of the States
and provide a variety of support services for facilitating the marketing of
agricultural produce by provision of facilities and amenities like, sheds, water,
light, electricity, grading facilities etc. They also take measures for prevention
of sale or purchase of agricultural produce below the minimum support price.
APMCs collect market fees, license fees, rents etc.
 Services provided by such Agricultural Produce Marketing Committee or
Board are covered in item (g) of entry 54. However, any service provided by
such bodies which is not directly related to cultivation of plants and
rearing of all life forms of animals, except the rearing of horses, for food,
fibre, fuel, raw material or other similar products or agricultural produce, will
be liable to tax e.g. renting of shops or other property for commercial
purposes.
Warehousing of agriculture produce
 Item (e) of entry 54 exempts loading, unloading, packing, storage or
warehousing of agricultural produce. In this regard, following may be noted:
 Processed Tea and coffee
Tea used for making the beverage, such as
black tea, green tea, white tea is a processed
product made in tea factories after carrying
out several processes, such as drying, rolling,
shaping, refining, oxidation, packing etc. on green leaf and is the processed
output of the same. Thus, green tea leaves and not tea is the “agricultural
produce” eligible for exemption under entry 54 where such exemption is
available for loading, unloading, packing, storage or warehousing of
agricultural produce. Same is the case with coffee obtained after processing
of coffee beans 9.
9
Storage/ warehousing of coffee and tea are nevertheless exempted by entry 24B.

 Jaggery
Similarly, processing of sugarcane into jaggery
changes its essential characteristics. Thus,
jaggery is also not an agricultural produce 10.
 Pulses
Pulses commonly known as dal are obtained after
dehusking or splitting or both. The process of
dehusking or splitting is usually not carried out by
farmers or at farm level but by the pulse millers.
Therefore pulses (dehusked or split) are also not
agricultural produce. However, whole pulse grains
such as whole gram, rajma etc. are covered in the definition of agricultural
produce.
In view of the above, it is inferred that processed products such as tea (i.e. black
tea, white tea etc.), processed coffee beans or powder, pulses (dehusked or split),
jaggery, processed spices, processed dry fruits, processed cashew nuts etc. fall
outside the definition of agricultural produce and therefore do not fall within item
(e) of entry 54 [Circular No. 16/16/2017 GST dated 15.11.2017].
ENTRY 55
Custom milling of paddy into rice

Carrying out an intermediate production process as job work in relation to cultivation
of plants and rearing of all life forms of animals, except the rearing of horses, for
food, fibre, fuel, raw material or other similar products or agricultural produce is
exempt under GST.
Milling of paddy is not an intermediate production process in
relation to cultivation of plants. It is a process carried out after the
process of cultivation is over and paddy has been harvested.
Further, processing of paddy into rice is not
usually carried out by cultivators, but by rice
millers. Milling of paddy into rice also changes its essential
characteristics. Therefore, milling of paddy into rice cannot be
considered as an intermediate production process in relation to
10
Storage/ warehousing of jaggery is nevertheless exempted by entry 24B.

4.22 INDIRECT TAXES
cultivation of plants for food, fibre or other similar products or agricultural

produce.
In view of the above, it is clarified that milling of paddy into rice is not eligible for
exemption under Entry 55 [Circular No. 19/19/2017 GST dated 20.11.2017].
ILLUSTRATION 1
Dukhiya Das is enaged in providing following services. With the help of
information given below, determine which of the services provided by Dukhiya Das
are exempt from GST:
(1) Packaging of the onions purchased from village farmers into small packets of
1 kg each, in Dukhiya Das warehouse, so that same can be sold in a nearby
city mall.
(2) Warehousing of jaggery and tea.
(3) Renting of warehouse for storage of agricultural produce.
ANSWER
(1) Entry 54, inter alia, exempts the processes/operations carried out at an
agricultural farm on the agricultural produce which do not alter the
essential characteristics of agricultural produce, but make it marketable only
for the primary market. In the given case, though the packaging of onions
does not alter their essential characteristic, it makes them marketable for
retail market and not for the primary market and further, such packaging is
being done at the warehouse of Dukhiya Das and not at an agricultural
farm. Hence, said services are not exempt.
(2) Entry 54, inter alia, exempts the warehousing of agricultural produce. However,
entry 24B exempts warehousing of certain specified items some of which are
not agricultural produce. Although jaggery and tea do not qualify as
agricultural produce, their warehousing is specifically exempt under entry 24B.
(3) Entry 54, inter alia, exempts the services of loading, unloading, packing,
storage or warehousing of agricultural produce. Thus, warehousing of
agricultural produce, per se, is exempt. However, in the given case, services
being provided are not warehousing services but renting of immovable
property services. Such services are not exempt.

3. Education services

No.
66 Services provided -
(a) by an educational institution to its students, faculty and staff;
(aa) by an educational institution by way of conduct of entrance
examination against consideration in the form of entrance fee;
(b) to an educational institution, by way of,-
(i) transportation of students, faculty and staff;
(ii) catering, including any mid-day meals scheme sponsored
by the Central Government, State Government or Union
territory;
(iii) security or cleaning or house-keeping services performed
in such educational institution;
(iv) services relating to admission to, or conduct of examination
by, such institution;
(v) supply of online educational journals or periodicals.
However, nothing contained in sub-items (i), (ii) and (iii) of item (b)
shall apply to an educational institution other than an institution
providing services by way of pre-school education and education up to
higher secondary school or equivalent.
Further, nothing contained in sub-item (v) of item (b) shall apply to an
institution providing services by way of,-
(i) pre-school education and education up to higher secondary
school or equivalent; or
(ii) education as a part of an approved vocational education course.
ANALYSIS

4.24 INDIRECT TAXES
Education is fundamental to the nation building process.

The term “Education” is not defined in the CGST Act, 2017,
but as per Apex Court decision in “Loka Shikshana Trust v.
CIT”, education is process of training and developing
knowledge, skill and character of students by normal
schooling.
Taxing the Education Sector has always been a sensitive issue, as education is
seen more as a social activity than a business one. The Government has a
constitutional obligation to provide free and compulsory elementary education to
every child. Thus, to promote education, it would be beneficial if educational
services are exempted from tax.
However, commercialization of education is also a reality. The distinction between
core and ancillary education is blurring and education is now an organised
industry with huge revenues. The GST law tries to
maintain a fine balance whereby core educational
services provided and specified services received by
educational institutions are exempt and other services
are sought to be taxed.
Exemption from GST granted vide Entry 66 stated above can be discussed under two
broad categories –output services and input services of an educational institution.
The discussion in succeeding paras fundamentally revolves around these two areas:
 Services provided by an educational institution to its

students, faculty and staff and by way of conduct of
entrance examination against consideration in the
form of entrance fee are exempt from GST.
Since exemption with respect to said services is available only when these
services are provided BY ‘educational institution’, it is important to analyse
the term EDUCATIONAL INSTITUTION first:
Educational institution means an institution providing services by way of,-
(i) pre-school education and education up to higher secondary school
or equivalent;
(ii) education as a part of a curriculum for obtaining a qualification
recognised by any law for the time being in force;
(iii) education as a part of an approved vocational education course.

 It is to be noted that only those institutions, whose operations conform to

the specifics given in the definition of the term “educational
institution”, would be treated as one entitled to avail
exemptions provided by the law.
 Sub-clause (ii) : The term ‘education as a part of

curriculum for obtaining a qualification recognised by
any law for the time being in force’ means the education delivered as ‘a
part’ of the curriculum that has been prescribed for obtaining a
qualification prescribed by law. Thus, in order to be covered under Entry 66,
the education service should be delivered as part of curriculum. In view of
same, it can be inferred that:
Education services provided Covered in Reasons

sub-clause (ii)
Conduct of degree courses by These courses lead to
colleges, universities or  grant of qualifications
institutions recognized by law
Training given by private Such training does not
coaching institutes  lead to grant of a
recognized qualification.
Education as a part of a prescribed Only a course
curriculum for obtaining a  recognized by an
qualification recognized by a law Indian law is covered
of a foreign country herein.
(19) ‘Dharam Institute of Technology’ (DIT), a private engineering

college in M.P., offers post graduate engineering programmes. All
the engineering courses including the distance learning post graduate
engineering programme offered by DIT are recognised by the law [The All
India Council for Technical Education (AICTE)]. Since DIT imparts education
as a part of a curriculum for obtaining a qualification recognised by the
Indian law, the same is an educational institution.
 Sub-clause (ii) : An institution providing pre-school education and

education up to higher secondary school or equivalent qualify as an
educational institution.

4.26 INDIRECT TAXES
(20) ‘Littleways Public School’ is a school loacted in Tamil Nadu.

The school has two branches – one is a pre-school and another is
a higher secondary school affiliated to CBSE. A pre-school and a
higher secondary school are educational institutions. Thus, Littleways Public
School qualifies as an educational institution.
 Sub-clause (iii) covers institutions providing services by way of education

as a part of approved vocational education course. An approved
vocational education course means, -
 a course run by an ITI/ ITC 11 affiliated to the National
Council for Vocational Training (NCVT) or State Council for
Vocational Training (SCVT) offering courses in designated
trades notified under the Apprentices Act, 1961 or
 a Modular Employable Skill Course, approved by the
NCVT, run by a person registered with the Directorate
General of Training, Ministry of Skill Development and
Entrepreneurship. The Modular Employable Skills is the
minimum skill set which is sufficient for gainful employment or self-
employment in the world of work. It provides employable skills to
early school drop-outs, existing workers seeking skill upgradation,
workers seeking certification of their skills acquired informally, etc. to
improve their employability and provides certification after
completion of the course.
(21) ‘Kaladrishti ITI, Gorakhpur is engaged in providing skill
development courses in other than designated trades notified
under the Apprentices Act, 1961. Since courses offered by
Kaladrishti ITI are not in designated trades notified under the Apprentices
Act, 1961, education provided by it is not approved as vocational
educational course as defined above. Resultantly, it doesn’t qualify as an
11
Industrial Training Institute/ Industrial Training Centre

In view of the above definition, some of the institutions providing education

services have been examined as under:
Private ITIs
 Private ITls qualify as an educational institution if the
education provided by these ITls is approved as vocational
educational course as defined above.
It implies that services provided by a
private ITI only in respect of designated
trades notified under Apprentices Act, 1961 12 are exempt from GST
under Entry 66. Services in other than designated trades are liable to GST**.
Government ITIs
As far as Government ITls are concerned, services provided
by a Government ITI to individual trainees/ students, are
exempt under Entry 6 as these are in the nature of services
provided by the Central or State Government to individuals
[Entry 6 is discussed in detail subsequently]. Such exemption in
relation to services provided by Government ITI would cover both -
vocational training and examinations conducted by these Government ITls
[Circular No. 55/29/2018 GST dated 09.08.2018].
**As regards the services provided TO private ITIs, only services relating to
admission to or conduct of examination received by a private ITI in respect of
such designated trades are exempt. All other services provided to such
institutions is liable to GST.
It is important to note that the Central and State Educational Boards shall
be treated as ‘Educational Institution’ for the limited purpose of providing
services by way of conduct of examination to the students.
Unrecognized educational institutions
 Private coaching centres or other unrecognized institutions, though self-
styled as educational institutions, would not be treated as educational
12
Some of the designated trades notified under the Apprentices Act, 1961 are electrician,
wireman, carpenter, plumber, mason, mechanic, tool and die maker, baker and confectioner,
weaver, tailor, footwear maker, photographer, beautician, painter, desk top publishing operator,
gardener, cable television operator, library assistant, etc.

4.28 INDIRECT TAXES
institutions under GST and thus cannot avail exemptions available to an

(22) ‘Super Minds’, a coaching institute in Raipur, provides
coaching for Institute of Banking Personnel Selection (IBPS)
Probationary Officers Exam. Super Minds, being a coaching centre
which trains candidates to secure a banking job, is not an educational
institution in terms of the exemption notification.
Educational institutions up to Higher secondary schools
 By virtue of Entry 66, educational institutions up to Higher Secondary
School level do not suffer GST on output services and also on specified
input services [discussed in subsequent paras]. However, some of the input
services like repairs and maintenance etc. provided by private players to
educational institutions are subject to GST.
 Output services of lodging/boarding in hostels provided
by such educational institutions which are providing
pre-school education and education up to higher
secondary school or equivalent or education leading to
a qualification recognised by law, are fully exempt from GST. Annual
subscription/fees charged as lodging/boarding charges by such educational
institutions from its students for hostel accommodation shall therefore, not
attract GST.
 Boarding schools provide service of education coupled with other services
like providing dwelling units for residence and food. This may be a case of
composite supply if the charges for education and lodging and boarding
are inseparable. Their taxability will be determined in terms of the principles
laid down in section 2(30) read with section 8 of the CGST Act, 2017.
Such services in the case of boarding schools are naturally bundled and
supplied in the ordinary course of business. Therefore, the bundle of
services will be treated as consisting entirely of the principal supply, which
means the service which forms the predominant element of such a bundle.
In this case since the predominant nature is determined by the service of
education, the other service of providing residential dwelling will not be
considered for the purpose of determining the tax liability and in this case
the entire consideration for the supply will be exempt.

Educational institutions providing qualification recognized by law

 We have already seen that the institutions providing services by way of
education as a part of a curriculum for obtaining a qualification recognised
by any law for the time being in force qualify as educational institutions.
However, the question arises that in case where a course in a college leads
to dual qualification only one of which is recognized by law, would
service provided by the college by way of such education be covered by the
exemption notification?
 Provision of dual qualifications is in the nature of two separate services as
the curriculum and fees for each of such qualifications are prescribed
separately. Service in respect of each qualification would, therefore, be
assessed separately.
If an artificial bundle of service is created by clubbing two courses together,
when only single fee is charged for both, only one of which leads to a
qualification recognized by law, then by application of the rule of
determination of taxability of a supply which is not bundled in the ordinary
course of business, it shall be treated as a mixed supply as per provisions
contained in section 2(74) read with section 8 of the CGST Act, 2017. The
taxability will be determined by the supply which attracts highest rate of
GST.
 However, incidental auxiliary courses provided by way of hobby classes
or extra-curricular activities in furtherance of overall well-being will be
an example of naturally bundled course, and therefore treated as composite
supply. One relevant consideration in such cases will be the amount of
extra billing being done for the unrecognized component viz-a-viz the
recognized course. If extra billing is being done, it may be a case of
artificial bundling of two different supplies, not supplied together in the
ordinary course of business, and therefore will be treated as a mixed supply,
attracting the rate of the higher taxed component for the entire
consideration 13.
13
The view taken in the preceding paras, that education coupled with other incidental services is
a composite supply and is exempt since the principal supply [education service] is exempt, is
based on the CBIC Flyer - Chapter 40 – ‘GST on Education Services’. However, it is also possible
to take a different view since as per the definition of composite supply under section 2(30) of the
CGST Act, composite supply consists of two or more taxable supplies.

4.30 INDIRECT TAXES
IIMs
 Indian Institutes of Management Act, 2017 (IIM
Act, 2017) empowers IIMs to (i) grant degrees,
diplomas, and other academic distinctions or
titles, (ii) specify the criteria and process for
admission to courses or programmes of study,
and (iii) specify the academic content of programmes.
 Resultantly, all the IIMs fall under purview of “educational institutions” as
they provide education as a part of a curriculum for obtaining a
qualification recognized by law for the time being in force.
 IIMs provide various long duration programs (1 year or more) for which they
award diploma/ degree certificate duly recommended by Board of
Governors as per the power vested in them under the IIM Act, 2017.
Services provided by IIMs to their students- in all such long duration
programs (one year or more) are exempt from levy of GST.
 IIMs also provide various short duration/ short term programs (less than 1
year) for which they award participation certificate to the executives/
professionals as they are considered as “participants” of the said
programmes. These participation certificates are not any qualification
recognized by law.
Such participants are also not considered as students of IIM. Services
provided by IIMs as an educational institution to such participants is not
exempt from GST and GST is payable on the same [Circular No. 82/01/2019
GST dated 01.01.2019].
Supply of food in a mess or canteen
 Educational institutions generally have mess facility for
providing food to their students and staff. Such facility
is (i) either run by the institution/ students themselves
or (ii) is outsourced to a third person.
 If the catering services is one of the services provided
by an educational institution to its students, faculty and staff and the said
educational institution is covered by the definition of ‘educational
institution’ as given above, then the same is exempt [covered under item (a)
of entry 66 of the Notification].

 If the catering services, i.e., supply of food or drink in a mess or canteen,

is provided by anyone other than the educational institution, i.e. the
institution outsources the catering activity to an outside contractor, then it is a
supply of service to the concerned educational institution by such outside
caterer and attracts GST.**
**Note: Said services when provided to an educational institution providing pre-
school education or education up to higher secondary school or equivalent are
exempt from tax [covered under item (b)(ii) of entry 66 of the Notification].
Fees charged from prospective employers
Educational institutes such as IITs, IIMs charge a fee from prospective employers
like corporate houses/MNCs, who come to the institutes for recruiting candidates
through campus interviews in relation to campus recruitments. Such services
shall also be liable to tax
Maritime courses approved by DG Shipping
Maritime Training Institutes and their training courses are approved by the
Director General of Shipping which are duly recognised under the provisions
of the Merchant Shipping Act, 1958 read with the Merchant Shipping
(standards of training, certification and watch-keeping for Seafarers) Rules,
2014.
Therefore, Maritime Training Institutes are educational institutions and the
courses conducted by them are exempt subject to fulfilment of other
conditions specified herein [Circular No. 117/36/2019 GST dated 11.10.2019].
 Regarding, input services, it may be noted that where

output services are exempted, the educational institutions
may not be able to avail credit of tax paid on the input side.
The auxiliary education services [services which educational
institutions ordinarily carry out themselves, but may obtain as outsourced
specified in item (b) of entry 66 only have been
services from any other person]
exempted [Sub-items (i) to (v) of item (b) of Entry 66].
 However, the said exemption comes with a rider. Auxiliary services of (i)
transportation of students, faculty, and staff, (ii) catering including any mid-
day meals scheme sponsored by Government and (iii) security or cleaning or
housekeeping services are exempt only if such auxiliary education services

4.32 INDIRECT TAXES
are provided to educational institutions providing services by way of

education up to higher secondary or equivalent, (from pre-school to HSC).
Thus, if such auxiliary education services are provided to educational
institutions providing degree or higher education or institutions providing
approved vocational education course, the same would not be exempt.
 Similarly, services of supply of online educational journals/periodicals are
exempt only if they are provided to an institution providing services by way
of education as a part of a curriculum for obtaining a qualification
recognised by any law for the time being in force 14.
(23) Little Millennium – a pre school in outskirts of Mumbai – has
subscribed the online journals on child development and experiential
learning. Services of supply of online educational journals or
periodicals provided, inter alia, to an institution providing services by way of pre-
school education are not exempt.
(24) SM Transporters has provided services of transportation of

students and faculty from their residence to school and back, to
Pathwheels School - a higher secondary school. Services of
transportation of students, faculty and staff provided, inter alia, to an institution
providing services by way of education up to higher secondary school or
equivalent are exempt.
(25) Shiksha College, offering degree courses, has to conduct its half
yearly examination in November. For this purpose, it has paid the
honorarium to paper setters and examiners (not on the rolls of Shiksha
College) for their services. Further, it availed the printing services for printing the
question papers (paper and content are provided by Shiksha College) for
conducting examination. Services provided to an educational institution relating
to admission to, or conduct of examination by, such institution are exempt.
Therefore, services of paper setters and examiners and printing services availed
by Shiksha College are exempt.
14
The discussion in the foregoing paras is primarily based on CBIC Flyer - Chapter 40 – ‘GST on
Education Services’ unless otherwise specified.

(26) Gyaani Public School – a higher secondary school – has hired

Suvidha Services Ltd. for security and housekeeping services in the
school. Security and housekeeping services provided within the
premises of, inter alia, a higher secondary school are exempt. Therefore, said
services provided by Suvidha Services Ltd. are exempt.
The school susbequently hired Suvidha Services Ltd. for providing the security
and housekeeping services at School’s Annual Day function organised in an
auditorium outside the school campus. Security and housekeeping services
provided to Gyaani Public School for School’s Annual Day function organised
outside the school campus will be taxable as only the security and housekeeping
services performed within the premises of the higher secondary school are
exempt.
The exemptions available in respect of input and output services of an
educational institution have been tabulated as follows:
Type of educational institution
Educational institution Educational Educational

providing pre-school institution institution
education and education up providing education providing
to higher secondary school as a part of a education
or equivalent curriculum for as a part of
obtaining a approved
recognised vocational
qualification education
course
Exempt (i) transportation of (i) services relating

Services
input students, faculty and to admission to,
relating to
services staff; or conduct of
admission
(ii) catering, including any examination by,
to, or
mid-day meals scheme such institution
conduct of
sponsored by the Central (ii) supply of online examination
Government, State educational by, such
Government or Union journals or institution.
territory; periodical
(iii) security or cleaning or

4.34 INDIRECT TAXES
house-keeping services
performed in such
educational institution;
(iv) services relating to
admission to, or conduct
of examination by, such
institution
Exempt Services provided by an educational institution -

output (a) to its students, faculty and staff;
services
(aa) by way of conduct of entrance examination against
consideration in the form of entrance fee.
4. Health care services

No.
46 Services by a veterinary clinic in relation to health care of animals or

birds.
74 Services by way of-

(a) health care services by a clinical
establishment, an authorised medical
practitioner or para-medics;
(b) services provided by way of transportation
of a patient in an ambulance, other than
those specified in (a) above.
73 Services provided by the cord blood banks by way of preservation of

stem cells or any other service in relation to such preservation.
ANALYSIS

Entry 74 - Health care services by a clinical establishment, an

authorised medical practitioner or para-medics are exempt
from GST [Entry 74(a) of the Notification]. The term ‘health
care services’ is defined as follows:
Health care services
 means any service by way of diagnosis or treatment or care
for illness, injury, deformity, abnormality or pregnancy in any recognised system
of medicines in India and
 includes services by way of transportation of
the patient to and from a clinical establishment, but
 does not include hair transplant or cosmetic or plastic surgery, except
when undertaken to restore or to reconstruct anatomy or functions of body
affected due to congenital defects, developmental abnormalities, injury or
trauma.
As it is apparent from the definition of health care services, only services in
recognized systems of medicines in India are exempt under this entry.
Following systems of medicines are the recognized systems of medicines in
India 15:-
 Allopathy
 Yoga
 Naturopathy
 Ayurveda
 Homeopathy
 Siddha
 Unani
 Any other system of medicine that may be recognized by Central
Government
Let us now understand the meaning of terms - ‘clinical establishment’, ‘authorised
medical practitioner’ and ‘paramedics’.
15
Section 2(h) of the Clinical Establishments Act, 2010

4.36 INDIRECT TAXES
Clinical establishment: means a hospital, nursing

home, clinic, sanatorium or any other institution by,
whatever name called, that offers services or
facilities requiring diagnosis or treatment or care
for illness, injury, deformity, abnormality or
pregnancy in any recognised system of medicines
in India, or a place established as an independent
entity or a part of an establishment to carry out diagnostic or investigative
services of diseases. Thus, diagnostic or investigative services of diseases
provided by pathological labs are not liable to GST.
Authorised medical practitioner: means a medical
practitioner registered with any of the councils of
recognised system of medicines established/recognised
by law in India & includes a medical professional having
requisite qualification to practice in any recognised
system of medicines in India as per any law for the time
being in force.
Further, Paramedics are trained health care professionals, for
example, nursing staff, physiotherapists, technicians, lab assistants
etc. Services by them in a clinical establishment would be in the
capacity of employee and not provided in independent capacity
and will thus be considered as services by such clinical
establishment. Similar services in independent capacity are also exempted.
Rent of rooms provided to in-patients
 Rent of rooms provided to in-patients in hospitals is exempt
Services provided by senior doctors/ consultants/ technicians
 Hospitals hire senior doctors/ consultants/ technicians independently. Such
persons do not have any contract with the patient. Hospitals pay them
consultancy charges and there is no employer-employee relationship between
them.
 It is clarified by CBIC that services provided by such senior doctors/
consultants/ technicians, whether employees or not, are healthcare services
which are exempt from GST [Circular No. 32/06/2018 GST dated 12.02.2018].

Amount charged by hospitals from the patients

 In above cases, suppose hospitals charge the
patients, say, ` 10,000/- and pay to the
consultants/technicians only ` 7,500/- and keep the
balance for providing ancillary services which
include nursing care, infrastructure facilities,
paramedic care, emergency services, checking of
temperature, weight, blood pressure, etc. Going through the definition of
health care services [given above], it can be inferred that hospitals also provide
healthcare services.
 The entire amount charged by them from the patients including the retention
money and the fee/payments made to the doctors etc., is towards the
healthcare services provided by the hospitals to the patients and is exempt
Food supplied to the patients
 Health care services provided by the clinical
establishments will include food supplied to the
patients; but such food may be prepared by the
canteens run by the hospitals or may be outsourced
by the hospitals from outdoor caterers.
 When outsourced, there is no ambiguity that the
suppliers shall charge tax as applicable and hospital will get no ITC.
 Food supplied to the in-patients as advised by the doctor/nutritionists is a part
of composite supply of healthcare and not separately taxable.
 Other supplies of food by a hospital to patients (not admitted) or their
attendants or visitors are taxable [Circular No. 32/06/2018 GST dated
12.02.2018] 16.
16
The view taken in the preceding paras, that health care services coupled with other incidental
services is a composite supply and is exempt since the principal supply [health care service] is
exempt, is based on Circular No. 32/06/2018 GST dated 12.02.2018. However, it is also
possible to take a different view since as per the definition of composite supply under section
2(30) of the CGST Act, composite supply consists of two or more taxable supplies.

4.38 INDIRECT TAXES
Services other than health care services in clinical establishment’s premises

 Supply of services other than healthcare services such as renting of shops,
auditoriums in the premises of the clinical establishment, display of
advertisements etc. will be subject to GST 17.
ILLUSTRATION 2
Good Health Medical Centre, a clinical establishment, offers the following services:
(i) Reiki healing treatments.
(ii) Plastic surgeries. One such surgery was conducted to repair cleft lip of a new
born baby.
(iii) Air ambulance services to transport critically ill patients from distant locations
to the Medical Centre.
(iv) Palliative care for terminally ill patients. On request, such care is also
provided to patients at their homes. (Palliative care is given to improve the
quality of life of patients who have a serious or life-threatening disease but the goal
of such care is not to cure the disease).
(v) Alternative medical treatments by way of yoga.

Good Health Medical Centre also operates a cord blood bank which provides
services in relation to preservation of stem cells.
Good Health Medical Centre is of the view that since it is a clinical establishment,
all the service provided by it as well as all the services provided to it are exempt
from GST.
You are required to examine the situation in the light of relevant statutory
provisions.
ANSWER
Health care services provided by a clinical establishment, an authorised medical
practitioner or para-medics are exempt from GST under Entry 74. In light of the
same, the eligibility to exemption in respect of each service offered by Good
Health Medical Centre is examined below:
17
As clarified by the CBIC GST Flyer – Chapter 39 - GST on Charitable and Religious Trusts

(i) Not Exempt. Since reiki healing is not a recognized system of medicine in
terms of section 2(h) of Clinical Establishments Act, 2010, it would not be
exempt and thus, GST would be payable thereon.
(ii) Exempt. Health care service does not include, inter alia, cosmetic or plastic
surgery, except when undertaken to restore or to reconstruct anatomy or
functions of body affected due to congenital defects, developmental
abnormalities, injury or trauma.
Therefore, plastic surgeries will not be entitled to the said exemption and
thus, GST would be payable thereon. However, plastic surgery conducted to
repair a cleft lip will be eligible for exemption as it reconstructs anatomy or
functions of body affected due to congenital defects (cleft lip).
(iii) Exempt. Health care service includes services by way of transportation of
the patient to and from a clinical establishment. Thus, air ambulance service
to transport critically ill patients to Good Health Medical Centre would be
eligible for exemption under the said notification.
(iv) Exempt. Health care service means any service by way of diagnosis or
treatment or care for illness, injury, deformity, abnormality or pregnancy in
any recognized system of medicines in India. It is immaterial whether such
service is provided at the clinical establishment or at the home of the
patient or at any other place. Thus, palliative care for terminally ill patients
is exempt.
(v) Exempt. Since Yoga is a recognized system of medicine in terms of section
2(h) of Clinical Establishments Act, 2010, the same would be eligible for
exemption under the said notification.
Further, services provided by cord blood banks by way of preservation of stem
cells or any other service in relation to such preservation are exempt from GST
under Entry 73. Therefore, services provided in relation to preservation of stem
cells by the cord blood bank operated by Good Health Medical Centre will be
exempt from GST.
It is important to note that Entry 74 of the exemption notification grants
exemption to health care services provided BY a clinical establishment and not to
services provided TO a clinical establishment. Therefore, Good Health Medical
Centre’s contention that since it is a clinical establishment, all the services
provided to it are also exempt from GST is not correct in law.

4.40 INDIRECT TAXES
5. Services provided by Government

No.
4 Services by governmental authority by way of any activity in relation

to any function entrusted to a municipality under article 243 W of
the Constitution are exempt.
5 Services by a governmental authority by way of any activity in relation

to any function entrusted to a Panchayat under article 243G of the
Constitution.
6 Services by the Central Government, State Government, Union territory

or local authority excluding the following services—
(a) services by the Department of Posts by way of speed post,
express parcel post, life insurance, and agency services provided
to a person other than the Central Government, State
Government, Union territory;
(b) services in relation to an aircraft or a vessel, inside or outside
the precincts of a port or an airport;
(c) transport of goods or passengers; or
(d) any service, other than services covered under entries (a) to (c)
above, provided to business entities.
7 Services provided by the Central Government, State Government,

Union territory or local authority to a business entity with an
aggregate turnover of up to such amount in the preceding
financial year as makes it eligible for exemption from registration
under the Central Goods and Services Tax Act, 2017.
Explanation - For the purposes of this entry, it is hereby clarified that
the provisions of this entry shall not be applicable to following
services:-
(i) item (a), (b) and (c) of Entry 6 above.
(ii) services by way of renting of immovable property.


Union territory or local authority to another Central Government,
State Government, Union territory or local authority.
However, nothing contained in this entry shall apply to services referred
in item (a), (b) and (c) of Entry 6 above.
9 Services provided by Central Government, State Government, Union

territory or a local authority where the consideration for such
services does not exceed ` 5,000.
However, nothing contained in this entry shall apply to services referred
in item (a), (b) and (c) of Entry 6 above
Further, in case where continuous supply of service* is provided by
the Central Government, State Government, Union territory or a local
authority, the exemption shall apply only where the consideration
charged for such service does not exceed ` 5,000 in a FY.
*as defined in section 2(33) of the CGST Act, 2017
9C Supply of service by a Government Entity to Central Government, State

Government, Union territory, local authority or any person specified by
Central Government, State Government, Union territory or local
authority against consideration received from Central Government,
State Government, Union territory or local authority, in the form of
grants.
9D Services by:
an old age home
run by:
 Central Government, State Government or
 an entity registered under section 12AA of the Income-tax Act,
1961
to its residents (aged 60 years or more)
against consideration upto ` 25,000 per month per member,
provided that the consideration charged is inclusive of charges for
boarding, lodging and maintenance.

4.42 INDIRECT TAXES
34A Services supplied by Central Government, State Government, Union

territory to their undertakings or Public Sector Undertakings(PSUs) by
way of guaranteeing the loans taken by such undertakings or PSUs
from the banking companies and financial institutions.

Union territory or local authority by way of-
(a) registration required under any law for the time being in force;
(b) testing, calibration, safety check or certification relating to protection
or safety of workers, consumers or public at large, including fire
license, required under any law for the time being in force.

Union territory or local authority by way of issuance of passport,
visa, driving license, birth certificate or death certificate.

Union territory or local authority by way of tolerating non-
performance of a contract for which consideration in the form of
fines or liquidated damages is payable to the Central Government,
State Government, Union territory or local authority under such
contract.

Union territory or local authority by way of assignment of right to
use natural resources to an individual farmer for cultivation of
plants and rearing of all life forms of animals, except the rearing of
horses, for food, fibre, fuel, raw material or other similar products.
65 Services provided by the Central Government, State Government, Union

territory by way of deputing officers after office hours or on holidays
for inspection or container stuffing or such other duties in relation to
import export cargo on payment of Merchant Overtime charges.
65B Services supplied by a State Government to Excess Royalty Collection

Contractor (ERCC) by way of assigning the right to collect royalty on
behalf of the State Government on the mineral dispatched by the
mining lease holders.

However, at the end of the contract period, ERCC shall submit an

account to the State Government and certify that the amount of GST
deposited by mining lease holders on royalty is more than the GST
exempted on the service provided by State Government to the ERCC of
assignment of right to collect royalty and where such amount of GST
paid by mining lease holders is less than the amount of GST exempted,
the exemption shall be restricted to such amount as is equal to the
amount of GST paid by the mining lease holders and the ERCC shall
pay the difference between GST exempted on the service provided by
State Government to the ERCC of assignment of right to collect royalty
and GST paid by the mining lease holders on royalty.
Explanation- Mining lease holder means a person who has been
granted mining lease, quarry lease or license or other mineral
concession under the Mines and Minerals (Development and
Regulation) Act, 1957, the rules made thereunder or the rules made by
a State Government under section 15(1) of the Act.
74A Services provided by rehabilitation professionals

recognised under the Rehabilitation Council of India
Act, 1992 by way of rehabilitation, therapy or
counselling and such other activity as covered by the
said Act at medical establishments, educational
institutions, rehabilitation centers established by Central Government,
State Government or Union territory or an entity registered under
section 12AA of the Income-tax Act, 1961.
ANALYSIS
Relevant definitions are as under:

Business entity: means any person
carrying out business.
Governmental authority: means an
authority or a board or any other body,
(i) set up by an Act of Parliament or a State
Legislature; or

4.44 INDIRECT TAXES
(ii) established by any Government,

with 90%, or more participation by way of equity or control, to carry out any
function entrusted to a Municipality under article 243W of the Constitution
or to a Panchayat under article 243G of the Constitution.
Government Entity: means an authority or a board or any other body
including a society, trust, corporation,
(i) set up by an Act of Parliament or State Legislature; or
(ii) established by any Government,
with 90%, or more participation by way of equity or control, to carry out a
function entrusted by the Central Government, State Government, Union
Territory or a local authority.
Aircraft: means any machine which can derive support in the atmosphere
from reactions of the air, other than reactions of the air against the earth's
surface and includes balloons, whether fixed or free, airships, kites, gliders
and flying machines [Section 2(1) of the Aircraft Act, 1934].
Airport: means a landing and taking off area for aircrafts, usually with
runways and aircraft maintenance and passenger facilities and includes
aerodrome as defined in section 2(2) of the Aircraft Act, 1934 [Section 2(b) of the
Airports Authority of India Act, 1994].
Exemption to services provided by Government

 Not all services provided by the Government or a local
authority are exempt from tax. As for instance, following services
are not exempt:
(a) services by the Department of Posts by way of speed post,
express parcel post, life insurance, and agency services
provided to a person other than Government;
(b) services in relation to an aircraft or a vessel, inside or
outside the precincts of an airport or a port;
(c) transport of goods or passengers; or
(d) any service, other than services covered under (a) to (c)
above, provided to business entities [with aggregate turnover
exceeding such amount in the preceding financial year as makes it
eligible for exemption from registration under CGST Act].

Services mentioned in clause (a) to (c) above have been referred to as

“specified services” in discussion hereunder.
Let us first understand what does ‘Government’ and ‘local authority’ mean?
Meaning of Government
 As per section 2(53) of the CGST Act, 2017,
‘Government’ means the Central Government.
 Various State/ Union Territories (with Legislatures)
GST Acts define ‘Government’ as Government of
respective State Government/ Union Territory. For
Union Territories (without State Legislatures), ‘Government’ means the
Administrator or any Authority or officer authorized to act as Administrator
by the Central Government.
 Regulatory bodies/agencies, for instance, Competition Commission of India,
Press Council of India, Directorate General of Civil Aviation, Forward Market
Commission, Inland Water Supply Authority of India, Central Pollution
Control Board, Securities and Exchange Board of India, do not fall under the
definition of Government.
Meaning of local authority
 Local authority is defined in section 2(69) of the CGST Act, 2017 and means
the following:
 a “Panchayat” as defined in clause (d) of article 243 of the Constitution;
 a “Municipality” as defined in clause (e) of article 243P of the
Constitution;
 a Municipal Committee, a Zilla Parishad, a District Board, and any
other authority legally entitled to, or entrusted by the Central
Government or any State Government with the control or
management of a municipal or local fund;
 a Cantonment Board as defined in section 3 of the Cantonments Act,
2006;
 a Regional Council or a District Council constituted under the Sixth
Schedule to the Constitution;
 a Development Board constituted under article 371 and article 371J
of the Constitution;

4.46 INDIRECT TAXES
 a Regional Council constituted under article 371A of the Constitution.

Thus, ‘local authority’ includes only those bodies which are listed in the above
definition. It would not include other body which is merely described as a
‘local body’ by virtue of a local law. For example, local developmental
authorities - setup by State Governments to undertake developmental works -
like Delhi Development Authority, Ahmedabad Development Authority,
Bangalore Development Authority, etc. are not qualified as local authorities.
In the subsequent paras, we have examined some of the Government
services:
Services provided to a business entity
 Entry 7 provides that services provided to a business entity are exempt if its
aggregate turnover is upto such amount in the preceding financial year as
makes it eligible for exemption from registration under the CGST Act.
 However, this exemption is not applicable to specified services and renting
of immovable property services. Renting in relation to immovable
property means allowing, permitting or granting access, entry, occupation,
use or any such facility, wholly or partly, in an immovable property, with or
without the transfer of possession or control of the said immovable
property and includes letting, leasing, licensing or other similar
arrangements in respect of immovable property.
 GST on services supplied by the Central Government, State Government,
Union territory or local authority to a business entity [whose turnover
exceeds such amount in the preceding FY as makes it eligible for
exemption from registration under the CGST Act] is payable under reverse
charge by such business entity.
However, reverse charge provisions are not applicable to renting of
immovable property services provided to unregistered persons and where
‘specified services’ are being provided to such business entity [See the
reverse charge provisions as discussed in Chapter – 3: Charge of GST].
(27) A small business entity is carrying on a business relating to
consulting engineer services in Delhi. The aggregate turnover of
the entity in the preceding financial year does not exceed the
limit of ` 20 lakh. Thus, no tax is payable on the services received by it
from Government or a local authority.

Services provided by the Department of Posts

 Entry 6 stipulates that the services by way of speed post, express parcel
post, and life insurance, provided by the Department of
Posts to a person other than the Government or Union
territory are not exempt.
 The Department of Posts also provides services like
distribution of mutual funds, bonds, passport applications,
collection of telephone and electricity bills on commission
basis.
 These services are in the nature of intermediary and generally called
agency services. On agency services, the Department of Posts is liable
to pay tax without the application of reverse charge.
 However, the following services provided by the Department of
Posts are not liable to tax:
(a) Basic mail services known as postal services
such as post card, inland letter, book post,
registered post provided exclusively by the
Department of Posts to meet the universal
postal obligations.
(b) Transfer of money through money orders, operation of savings

accounts, issue of postal orders, pension payments and other such
services.
Services provided by one Department of the Government to another
Department of the Government
 Services (except specified services) provided by one Department of the
Central Government/ State Government to another Department of the
Central Government/ State Government are exempt under Entry 8.

4.48 INDIRECT TAXES
Services by governmental authority by way of any activity in relation to

any function entrusted to Panchayat/ Municipality
Services provided by governmental authority
by way of any activity in relation to any
function entrusted to a municipality under
Article 243W of the Constitution 18 and
services by a governmental authority by way of any activity in
relation to any function entrusted to a Panchayat under article 243G of the
Constitution 19 are exempt vide Entry 4 and Entry 5 respectively.
Services provided by Police/security agencies of Government to
PSUs/corporate entities/sports events held by private entities
 Services provided by Police/security agencies of Government
to PSU/private business entities are not exempt from GST.
 Such services are taxable supplies and the recipients are
required to pay the tax under reverse charge mechanism on
the amount of consideration paid to Government for such supply of services
[See the reverse charge provisions as discussed in Chapter – 3: Charge of
GST].
(28) The Karnataka Cricket Association, Bangalore requests the
Commissioner of Police, Bangalore to provide security in and
around the Cricket Stadium for the purpose of conducting the
cricket match. The Commissioner of Police arranges the required security for
an agreed consideration. In this case, services of providing security by the
police personnel are not exempt. As the services are provided by
18
The functions entrusted to municipality under the Twelfth Schedule to Article 243W of the
constitution include urban planning including town planning, roads and bridges, public health,
sanitation conservancy and solid waste management, fire services, slum improvement and
upgradation, promotion of cultural, educational and aesthetic aspects, provision of urban
amenities and facilities such as parks, gardens, playgrounds, public amenities including street
lighting, parking lots, bus stops and public conveniences, etc.
19
The functions entrusted to Panchayat under the Eleventh Schedule to Article 243G of the
constitution include Agriculture, including agricultural extension, Animal husbandry, dairying
and poultry, Fisheries, Small scale industries, including food processing industries, Drinking
water, Fuel and fodder, Rural electrification, including distribution of electricity, Health and
sanitation, including hospitals, primary health centres and dispensaries, Women and child
development, Public distribution system, etc.

Government, Karnataka Cricket Association is liable to pay the tax on the

consideration paid, albeit under reverse charge mechanism.
Services provided by way of tolerating non-performance of a contract
 Non-performance of a contract or breach of contract is one of the
conditions normally stipulated in the Government contracts for supply of
goods or services. The agreement entered into between the parties
stipulates that both the service provider and service recipient abide by the
terms and conditions of the contract.
 In case any of the parties breach the contract for any reason including non-
performance of the contract, then such person is liable to pay damages in
the form of fines or penalty to the other party. Tolerating non-
performance of a contract is an activity or transaction which is treated
as a supply of service [as per Schedule II of CGST Act – as explained in
Chapter 2 – Supply under GST] and the person is deemed to have received
the consideration in the form of fines or penalty and is, accordingly,
required to pay tax on such amount.
 However, in case of supplies made to Government, services [provided
by Government] by way of tolerating the non-performance of contract
by the supplier of service is covered under the exemption under Entry
62 of the Notification. Thus, any consideration received by the
Government from any person or supplier for non-performance of contract is
exempted from tax.
(29) Public Works Department of Karnataka entered into an
agreement with M/s. ABC, a construction company, for construction of
its office complex for an agreed consideration. In the agreement
dated 10th July, it was agreed by both the parties that M/s. ABC shall complete
the construction work and handover the project on or before
31st December.
It was further agreed that any breach of the terms of contract by either party
would give right to the other party to claim for damages or penalty. M/s. ABC
did not complete the construction and did not handover the project by the
specified date i.e., on or before 31st December. As per the contract, the
Department asked for damages/penalty from M/s. ABC and threatened to go
to the court if not paid. Resultantly, M/s. ABC paid an amount of ` 10,00,000/-
to the Department for non-performance of contract. Amount paid by M/s. ABC
to Department is exempt from payment of tax.

4.50 INDIRECT TAXES
6. Construction services

No.
10 Services provided by way of pure labour contracts

of construction, erection, commissioning,
installation, completion, fitting out, repair,
maintenance, renovation, or alteration of a civil
structure or any other original works pertaining to the beneficiary-led
individual house construction or enhancement under the Housing for
All (Urban) Mission or Pradhan Mantri Awas Yojana.
10A Services supplied by Electricity Distribution Utilities by way of

construction, erection, commissioning, or installation of infrastructure
for extending electricity distribution network upto the tube well of the
farmer or agriculturalist for agricultural use.
11 Services by way of pure labour contracts of construction, erection,

commissioning, or installation of original works pertaining to a single
residential unit otherwise than as a part of a residential complex.
41A Supply of TDR, FSI, long term lease (premium) of land by a landowner
and to a developer are exempted subject to the condition that the
41B constructed flats are sold before issuance of completion certificate and
tax is paid on them.
Exemption of TDR, FSI, long term lease (premium) shall be withdrawn
in case of flats sold after issue of completion certificate, but such
withdrawal shall be limited to 1% of value in case of affordable houses
and 5% of value in case of other than affordable houses 20.
ANALYSIS
20
These entries have been stated in simplified form.

Housing for All (Urban) Mission or Pradhan Mantri Awas Yojana (hereinafter
referred to as PMAY) is a programme launched by the Ministry of Housing and
Urban Poverty Alleviation (MoHUPA) which envisions provision of Housing for All
by 2022 when the nation completes 75 years of its independence.
The mission seeks to address the housing requirement of urban poor including
slum dwellers through following, inter alia, programme verticals:
 Slum rehabilitation of Slum Dwellers with participation of private developers
using land as a resource.
 Promotion of Affordable Housing for weaker section through credit linked
subsidy.
 Affordable Housing in Partnership with Public & Private sectors.
 Subsidy for beneficiary-led individual house construction/enhancement.
Last component of the mission is assistance to individual eligible families
belonging to Economically Weaker Section (EWS) categories to either construct
new houses or enhance existing houses on their own to cover the beneficiaries
who are not able to take advantage of other components of the mission. Such
families may avail specified amount of central assistance for construction of new
houses or for enhancement of existing users under the mission.
Entry 10 of the Notification exempts the services provided by way of pure
labour contracts of construction, erection, commissioning, installation,
completion, fitting out, repair, maintenance, renovation, or alteration of a civil
structure or any other original works pertaining to the beneficiary-led individual
house construction or enhancement under the PMAY from GST.
The term ‘original works’ means-
 all new constructions;
 all types of additions and alterations to
abandoned or damaged structures on land that
are required to make them workable;
 erection, commissioning or installation of plant,
machinery or equipment or structures, whether pre-fabricated or
otherwise.
Entry 11 of the Notification exempts the services by way of pure labour
contracts of construction, erection, commissioning, or installation of original

4.52 INDIRECT TAXES
works pertaining to a single residential unit otherwise than as a part of a

residential complex from GST.
The term ‘residential complex’ means any complex comprising of a building or
buildings, having more than one single residential unit. Further, ‘single
residential unit’ means a self-contained residential unit which is designed for
use, wholly or principally, for residential purposes for one family.
7. Passenger transportation services

No.
15 Transport of passengers, with/ without accompanied belongings, by –

(a) air, embarking from or terminating in an airport located in the
State of Arunachal Pradesh, Assam, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra
located in West Bengal;
(b) non-air conditioned contract carriage other than radio taxi, for
transportation of passengers, excluding tourism, conducted tour,
charter or hire; or
(c) stage carriage other than air- conditioned stage carriage.
16 Services provided to the Central Government,

by way of transport of passengers with or without accompanied
belongings, by air,
embarking from or terminating at a RCS (Regional Connectivity
Scheme) airport, against consideration in the form of viability gap
funding.
However, nothing contained in this entry shall apply on or after the expiry
of a period of 3 years from the date of commencement of operations of
the RCS airport as notified by the Ministry of Civil Aviation.
17 Service of transportation of passengers, with or without accompanied

belongings, by—
(a) railways in a class other than—
(i) first class; or
(ii) an air-conditioned coach;

(b) metro, monorail or tramway;

(c) inland waterways;
(d) public transport, other than predominantly for tourism purpose, in a
vessel between places located in India; and
(e) metered cabs or auto rickshaws (including e-rickshaws).
ANALYSIS
Services of transportation of passengers are usually chargeable to GST. Entry 6
[Services provided by Government - discussed earlier] specifically excludes the
transport of passengers’ services provided by the Government or local authority
from its purview, which implies that said services are liable to GST.
However, services of transportation of passengers specified in Entries 15, 16 and
17 mentioned above are exempt from GST (whether provided by Government or
otherwise) with or without accompanied belongings.
As regards transportation of passengers by vessels in item (d) of Entry 17 [See the
table given above], the words ‘other than predominantly for tourism purpose’
qualify the preceding words “public transport”. This implies that to qualify for
exemption under this entry, the public transport by a vessel between places
located in India should not be predominantly for tourism purposes.
Normal public ships or other vessels that sail between places located in India
would be covered in this entry even if some of the passengers on board are using
the service for tourism because predominantly, such service is not for tourism
purpose. However, services provided by leisure/charter vessels/a cruise ship,
predominant purpose of which is tourism, would not be covered in here even if
some of the passengers in such vessels are not tourists.
(30) Services by way of transportation of passengers [not
predominantly for tourism purpose] on a vessel, from Kolkata to Port
Blair (mainland to island) or Port Blair to Rose Island (inter island) is
covered in item (d) of Entry 17 since such transportation is between two places
located in India.
Relevant definitions of these entries are as follows:
Contract carriage: means a motor vehicle which carries a passenger or
passengers for hire or reward and is engaged under a contract, whether

4.54 INDIRECT TAXES
expressed or implied, for the use of such vehicle as a whole for the carriage
of passengers mentioned therein and entered into by a person with a holder
of a permit in relation to such vehicle or any person authorised by him in
this behalf on a fixed or an agreed rate or sum-
(a) on a time basis, whether or not with reference to any route or
distance; or
(b) from one point to another, and in either case, without stopping to
pick up or set down passengers not included in the contract anywhere
during the journey, and includes--
(i) a maxicab; and
(ii) a motor cab notwithstanding that separate fares are charged for
its passengers [Section 2(7) of Motor Vehicles Act, 1988].
Metered cab: means any contract carriage on which an automatic device, of
the type and make approved under the relevant rules by the State Transport
Authority, is fitted which indicates reading of the fare chargeable at any
moment and that is charged accordingly under the conditions of its permit
issued under the Motor Vehicles Act, 1988 and the rules made thereunder
(but does not include radio taxi).
Radio taxi: means a taxi including a radio cab, by whatever name called, which is
in two-way radio communication with a central control office and is enabled for
tracking using the Global Positioning System or General Packet Radio Service;
Stage carriage: means a motor vehicle constructed or adapted to carry
more than 6 passengers excluding the driver for hire or reward at separate
fares paid by or for individual passengers, either for the whole journey or
for stages of the journey [Section 2(40) of the Motor Vehicles Act, 1988].
State Transport Undertaking: means any undertaking providing road
transport service, where such undertaking is carried on by-
i. the Central Government or a State Government;
ii. any Road Transport Corporation established under section 3 of the
Road Transport Corporations Act, 1950.
iii. any municipality or any corporation or company owned or controlled
by the Central Government or one or more State Governments, or by
the Central Government and one or more State Governments.

Explanation-For the purposes of this clause, road transport service means a

service of motor vehicles carrying passengers or goods or both by road for
hire or reward [Section 2(42) of the Motor Vehicles Act, 1988].
E-rickshaw: means a special purpose battery powered
vehicle of power not exceeding 4000 watts, having three
wheels for carrying goods or passengers, as the case may
be, for hire or reward, manufactured, constructed or
adapted, equipped and maintained in accordance with
such specifications, as may be prescribed in this behalf.
8. Goods transportation services

No.
18 Services by way of transportation of goods-

(a) by road except the services of—
(i) a goods transportation agency;
(ii) a courier agency;
(b) by inland waterways.
20 Services by way of transportation by rail or a vessel from one place

in India to another of the following goods –
(a) relief materials meant for victims of
natural or man-made disasters, calamities,
accidents or mishap;
(b) defence or military equipments;
(c) newspaper or magazines registered with
the Registrar of Newspapers;
(d) railway equipments or materials;
(e) agricultural produce;
(f) milk, salt and food grain including flours, pulses and rice; and
(g) organic manure.

4.56 INDIRECT TAXES
Goods Transport Agency (GTA) Service
21 Services provided by a goods transport agency, by

way of transport in a goods carriage of –
(a) agricultural produce;
(b) goods, where consideration charged for the
transportation of goods on a consignment
transported in a single carriage does not exceed ` 1,500;
(c) goods, where consideration charged for transportation of all
such goods for a single consignee does not exceed ` 750;
(d) milk, salt and food grain including flour, pulses and rice;
(e) organic manure;
(f) newspaper or magazines registered with the Registrar of
Newspapers;
(g) relief materials meant for victims of natural or man-made
disasters, calamities, accidents or mishap; or
(h) defence or military equipments.
21A Services provided by a GTA to an unregistered person, including an

unregistered casual taxable person, other than the following recipients,
namely: -
(a) any factory registered under/governed by the Factories Act,
1948; or
(b) any Society registered under the Societies Registration Act, 1860
or under any other law for the time being in force in any part of
India; or
(c) any Co-operative Society established by or under any law for the
time being in force; or
(d) any body corporate established, by or under any law for the time
being in force; or
(e) any partnership firm whether registered or not under any law
including association of persons;

(f) any casual taxable person registered under the Central Goods
and Services Tax Act or the Integrated Goods and Services Tax
Act or the State Goods and Services Tax Act or the Union
Territory Goods and Services Tax Act.
21B Services provided by a GTA, by way of transport of goods in a goods

carriage, to, -
(a) a Department or Establishment of the Central Government or State
Government or Union territory; or
(c) Governmental agencies, which has taken registration under the
Central Goods and Services Tax Act, 2017 only for the purpose of
deducting tax under section 51 and not for making a taxable supply
of goods or services.
ANALYSIS
 The services of transportation of goods by road are exempt from GST under
Entry 18. Services of GTA and courier services are an exception to this
exemption. However, GTA services provided to an unregistered person
[including unregistered casual taxable person 21] are exempt from GST by
virtue of Entry 21A.
 Further, GTA services provided to registered casual taxable person and
following persons, even if unregistered under GST law, are liable to tax:
(i) a factory registered under Factories Act,
(ii) society registered under Societies Act,
(iii) Co-operative society,
(iv) body corporate and
(v) partnership firm including AOP.
21
The concept of ‘casual taxable person’ has been discussed in detail in Chapter 7 - Registration

4.58 INDIRECT TAXES
 In other words, the GTA services provided to only an unregistered individual

end consumer are exempt from GST.
 Thus, GTA services provided to:
 person registered under GST law & registered casual taxable person,
and
 a factory registered under Factories Act, society registered under
Societies Act, Co-operative society, body corporate and partnership
firm including AOP – whether or not registered under GST law,
are liable to tax. Further, it is important to note that in such cases, if tax is
charged @ 5%, the tax liability falls on said recipients under the reverse
charge mechanism. Before proceeding further, we shall now understand the
meaning of GTA:
Who is a
GTA?
Who is a GTA – Goods Transport Agency?

Let us understand the meaning of Goods Transport agency (GTA). Goods
transport agency has been defined in the Notification to mean any person
who:
 provides service in relation to transport of goods by road and
 issues consignment note, by whatever name called.
 Thus, it can be seen that issuance of a consignment note is the sine-qua-
non for a supplier of service to be considered as a GTA. If such a
consignment note is not issued by the transporter, the service provider will
not come within the ambit of GTA.
 If a consignment note is issued, it indicates that the lien on the goods
has been transferred (to the transporter) and the transporter becomes
responsible for the goods till its safe delivery to the consignee. It is only the
services of such GTA, which assumes agency functions, that has been
brought into the GST net.
 Individual truck/tempo operators who do not issue any consignment
note are not covered within the meaning of the term GTA. As a result,

the services provided by such individual transporters who do not issue a

consignment note will be covered by the entry at Entry 18 of Notification,
which are exempt from GST.
(31) Hari Prasad owns a truck and operates it himself. He carries
the goods booked for his truck without issuance of consignment
note. Services provided by Hari Prasad by way of transportation of
goods by road are exempt under Entry 18 of the Notification.
 Consignment note means a document, issued by a

GTA against the receipt of goods for the purpose of
Consignment
transport of goods by road in a goods carriage, which
Note
is serially numbered, and contains:
 the name of the consignor and consignee,
 registration number of the goods carriage in which the goods are

transported,
 details of the goods transported,
 details of the place of origin and destination,

 gross weight of the consignment;
 GSTIN of the person liable for paying tax whether consignor,
consignee or GTA
 other particulars as prescribed for a tax invoice 22.
Significance of the term ‘in relation to’ in the definition of GTA

The use of the phrase ‘in relation to’ has extended the
scope of the definition of GTA. It includes not only the
actual transportation of goods, but also various
intermediary and ancillary services, such as, loading/
unloading, packing/ unpacking, transshipment and
temporary warehousing, which are provided in the course of
22
Meaning of GTA and consignment note elaborated in foregoing paras is primarily based on
CBIC GST flyer - Chapter 38 – Goods Transport Agency in GST.

4.60 INDIRECT TAXES
transport of goods by road.
These services are not provided as independent services but as ancillary to the
principal service, namely, transportation of goods by road. The invoice issued by
the GTA for providing the said service includes the value of intermediary and
ancillary services.
In view of this, if any intermediary and ancillary service is provided in relation to
transportation of goods by road, and charges, if any, for such services are
included in the invoice issued by the GTA, such service would form part of the
GTA service, being a composite supply, and would not be treated as a separate
supply.
However, if such incidental services are provided as separate services and charged
separately, whether in the same invoice or separate invoices, they shall be treated
as separate supplies 23.
What is courier agency?
Courier agency has been defined in the Notification to mean any person engaged
in the door-to-door transportation of time-sensitive documents, goods or articles
utilising the services of a person, either directly or indirectly, to carry or
accompany such documents, goods or articles.
Express cargo service: Some transporters undertake door-to-door transportation
of goods or articles and they have made special arrangements for speedy
transportation and timely delivery of such goods or articles.
Such services are known as ‘Express Cargo Service’ with assurance of timely
delivery. The nature of service provided by ‘Express Cargo Service’ falls within the
scope and definition of the courier agency. Hence, the said service relating to
transportation of goods by road is not exempt.
23
As clarified in answer to question no. 6 of CBIC FAQs on Transport & Logistics.

Exemptions granted to transport of specified goods through rail or a vessel

or a by GTA in goods carriage** are presented in the following table:
Transportation of the Transportation of the following goods by a GTA

following goods by in a goods carriage is exempt
rail / vessel is exempt
Railway equipments or (i) goods, where consideration charged for the

materials transportation of goods on a consignment
transported in a single carriage does not
exceed ` 1,500;
(ii) goods, where consideration charged for

transportation of all such goods for a single
consignee does not exceed ` 750.
Transportation of the following goods by rail / vessel / GTA in goods

carriage is exempt
(a) agricultural produce

(b) milk, salt and food grain including flours, pulses and rice
(c) organic manure
(d) newspaper or magazines registered with the Registrar of Newspapers
(e) relief materials meant for victims of natural or man-made disasters,
calamities, accidents or mishap
(f) defence or military equipments
**Goods carriage means any motor vehicle constructed or adapted for use
solely for the carriage of goods, or any motor vehicle not so constructed or
adapted when used for the carriage of goods.

4.62 INDIRECT TAXES
ILLUSTRATION 3
Discuss whether GST is payable in respect of transportation services provided by
Raghav Goods Transport Agency in each of the following independent cases:
Customer Nature of services provided Amount charged

A Transportation of milk ` 20,000
B Transportation of books on a ` 3,000
consignment transported in a single
goods carriage
C Transportation of chairs for a single ` 600
consignee in the goods carriage
ANSWER
Customer Nature of Taxability

services provided
A Transportation of Exempt. Transportation of milk by goods
milk transport agency is exempt.
B Transportation of GST is payable. Exemption is available for
books on a transportation of goods only where the
consignment consideration for transportation of goods
transported in a on a consignment transported in a single
single goods goods carriage does not exceed ` 1,500.
carriage
C Transportation of Exempt. Transportation of goods where
chairs for a single consideration for transportation of all
consignee in the goods for a single consignee does not
goods carriage exceed ` 750 is exempt.
9. Banking and financial services

No.
26 Services by the Reserve Bank of India.

27 Services by way of—

(a) extending deposits, loans or advances in so far as the
consideration is represented by way of interest or discount (other
than interest involved in credit card services);
(b) inter se sale or purchase of foreign currency amongst banks or
authorised dealers of foreign exchange or amongst banks and
such dealers.
27A Services provided by a banking company to Basic Saving Bank Deposit

(BSBD) account holders under Pradhan Mantri Jan Dhan Yojana
(PMJDY).
34 Services by an acquiring bank, to any person in relation to settlement

of an amount upto ` 2,000 in a single transaction transacted through
credit card, debit card, charge card or other payment card service.
Explanation.— For the purposes of this entry, “acquiring bank” means
any banking company, financial institution including non-banking
financial company or any other person, who makes the payment to any
person who accepts such card.
39A Services by an intermediary of financial services located in a multi services

SEZ with International Financial Services Centre (IFSC) status to a
customer located outside India for international financial services in
currencies other than Indian rupees (INR).
Explanation.- For the purposes of this entry, the intermediary of financial
services in IFSC is a person,-
(i) who is permitted or recognised as such by the Government of
India or any Regulator appointed for regulation of IFSC; or
(ii) who is treated as a person resident outside India under the
Foreign Exchange Management (International Financial Services
Centre) Regulations, 2015; or
(iii) who is registered under the Insurance Regulatory and
Development Authority of India (International Financial Service
Centre) Guidelines, 2015 as IFSC Insurance Office; or

4.64 INDIRECT TAXES
(iv) who is permitted as such by Securities and Exchange Board of

India (SEBI) under the Securities and Exchange Board of India
(International Financial Services Centres) Guidelines, 2015.
ANALYSIS
Banks and financial institutions provide a bouquet of financial
services relating to lending or borrowing of money or
investments in money.
All services provided by the Reserve Bank of India are covered
under Entry 26 and are thus, exempt from GST. However, services provided to
the Reserve Bank of India are not covered under said entry and would be taxable
unless otherwise covered in any other entry of the Notification.
Specified banking services exempt from GST vide Entry 27 have been discussed
below:
(A) Services by way of extending deposits, loans or advances in so far as
the consideration is represented by way of interest or discount: This
entry covers any such service wherein moneys due are allowed to be used or
retained on payment of interest or on a discount. The words used are
‘deposits, loans or advances’ and have to be taken in the generic sense.
They would cover any facility by which an amount of money
is lent or allowed to be used or retained on payment of
what is commonly called the time value of money which
could be in the form of an interest or a discount. This entry
would not cover investments by way of equity or any other manner
where the investor is entitled to a share of profit.
Interest: means interest payable in any manner in respect of any
moneys borrowed or debt incurred (including a deposit, claim or
other similar right or obligation) but does not include any
service fee or other charge in respect of the moneys borrowed or debt
incurred or in respect of any credit facility which has not been utilized.
 Illustrations of services exempt under Entry 27 are -
 Fixed deposits or saving deposits or any other
such deposits in a bank or a financial institution

for which return is received by way of interest.

 Providing a loan or overdraft facility or a credit limit
facility in consideration for payment of interest.
 Mortgages or loans with a collateral security to the
extent that the consideration for advancing such loans or
advances are represented by way of interest.
 Corporate deposits to the extent that the consideration for
advancing such loans or advances are represented by way of
interest or discount.
 Service charges/ fees, documentation fees, broking charges,
administrative charges, entry charges or such like fees or charges
collected over and above interest on loan, advance or a deposit are
not exempt and thus, represent taxable consideration.
 Invoice discounting/ cheque discounting or any other similar form
of discounting is covered only to the extent consideration is
represented by way of discount as such discounting is a manner of
extending a credit facility or a loan.
 Any interest/ delayed payment charges charged to clients for
delay in payment of brokerage amount/ settlement obligations/
margin trading facility: is exempt from GST since settlement
obligations/ margin trading facilities are transactions which are in the
nature of extending loans or advances and are covered by Entry 27 24.
 Charges for late payment of outstanding dues on credit card:
Interest charged on outstanding credit card balances has been
specifically excluded from Entry 27. Hence, the same is liable to GST.
 Additional/ penal interest on the overdue loan: In cases where the
Equated Monthly Instalment (EMI) 25 is not paid at the scheduled
time, there is a levy of additional/ penal interest on account of
delay in payment of EMI.
24
As clarified vide FAQs on Banking, Insurance and Stock Brokers Sector issued by CBIC.
25
An Equated Monthly Instalments (EMI) is a fixed amount paid by a borrower to a lender
at a specified date every calendar month. EMIs are used to pay off both interest and
principal every month, so that over a specified period, the loan is fully paid off along with
interest.

4.66 INDIRECT TAXES
There may arise a doubt as to whether this additional / penal

interest on the overdue loan is exempt under Entry 27 or such
penal interest is to be treated as consideration for liquidated
damages [amounting to a separate taxable supply of services
under GST covered under entry 5(e) of Schedule II of the CGST Act,
2017 i.e. “agreeing to the obligation to refrain from an act, or to
tolerate an act or a situation, or to do an act”]
There are two transaction options involving EMI that are prevalent
in the trade. These two options, alongwith the GST applicability
on them, have been explained with the help of illustrations as
under -
(32) X sells a mobile phone to Y. The cost of mobile phone
is ` 40,000. However, X gives Y an option to pay in
installments, ` 11,000 every month before 10th day of the
following month, over next four months (` 11,000/- × 4 =
` 44,000/-). As per the contract, if there is any delay in payment by
Y beyond the scheduled date, Y would be liable to pay additional/
penal interest amounting to ` 500/- per month for the delay.
In some instances, X is charging Y ` 40,000/- for the mobile and is
separately issuing another invoice for providing the services of
extending loans to Y, the consideration for which is the interest of
2.5% per month and an additional/ penal interest amounting to
` 500/- per month for each delay in payment.
In this case, the amount of penal interest is to be included in the
value of supply 26. The transaction between X and Y is for supply
of taxable goods i.e. mobile phone. Accordingly, the penal interest
would be taxable as it would be included in the value of the
mobile, irrespective of the manner of invoicing.
(33) X sells a mobile phone to Y. The cost of mobile phone
is ` 40,000/-. Y has the option to avail a loan at interest
of 2.5% per month for purchasing the mobile from M/s.
ABC Ltd. The terms of the loan from M/s. ABC Ltd. allows Y a
26
Here, the amount of penal interest is to be included in the value of supply in terms of the
provisions of section 15(2)(d) of the CGST Act. Section 15(2)(d) provides that the value of supply
shall include interest or late fee or penalty for delayed payment of any consideration for any
supply. The provisions of section 15 have been discussed in detail in Unit-II: Value of Supply of
Chapter 5: Time and Value of Supply.

period of four months to repay the loan and an additional/ penal

interest @ 1.25% per month for any delay in payment.
Here, the additional/ penal interest is charged for a transaction
between Y and M/s. ABC Ltd., and the same is getting covered
under exemption Entry 27. Consequently, in this case the 'penal
interest' charged thereon on a transaction between Y and M/s.
ABC Ltd. would not be subject to GST as the same would be
covered under said exemption entry. However, any service fee/
charge or any other charges, if any, are levied by M/s. ABC Ltd. in
respect of the transaction related to extending deposits, loans or
advances does not qualify to be interest as defined in exemption
notification, and accordingly will not be exempt.
Moreover, the value of supply of mobile by X to Y would be
` 40,000/- for the purpose of levy of GST.
Since this levy of additional/ penal interest satisfies the definition
of “interest” as contained in Entry 27 above, the same cannot be
treated as consideration for liquidated damages. Consequently,
transaction of levy of additional/ penal interest does not fall
within the ambit of Schedule II of the CGST Act, 2017 i.e.
“agreeing to the obligation to refrain from an act, or to tolerate
an act or a situation, or to do an act” 27 [Circular No. 102/21/2019-
GST dated 28.06.2019].
(B) Services provided by banks or authorized dealers of foreign
exchange by way of sale of foreign exchange: The term
‘authorised dealer of foreign exchange’ means an authorised
dealer, money changer, off-shore banking unit or any other
person for the time being authorised under section 10(1) of
FEMA, 1999 to deal in foreign exchange or foreign securities [Section 2(c) of
the Foreign Exchange Management Act, 1999].
It is important to note that such services provided to general

public will not be covered in this entry as this entry only covers
sale and purchase of foreign exchange between banks and
authorized dealers of foreign exchange or between banks and
such dealers.
27
Schedule II of the CGST Act, 2017 has been discussed in detail in Chapter 2 – Supply under GST.

4.68 INDIRECT TAXES
Services provided by commercial banks to RBI would be taxable as these are

not covered by any of the exemptions/exclusions under the GST law.
ILLUSTRATION 4
M/s. Apna Bank Limited, a scheduled commercial bank, has furnished the
following details for the month of August:
Particulars Amount [` in
crores]
(excluding GST)
Extended housing loan to its customers 100
Processing fees collected from its customers on 20
sanction of loan
Commission collected from its customers on bank 30
guarantee
Interest income on credit card issued by the bank 40
Interest received on housing loan extended by the 25
bank
Minimum balance charges collected from current 01
account and saving account holder
Compute the value of taxable supply.
ANSWER
Computation of value of taxable supply of M/s. Apna Bank Limited for

the month of August:
Particulars Amount
in crores
(` )
Housing loan extended to customers Nil

[Since money does not constitute goods, extending housing
loan is not a supply.]

Processing fee collected on sanction of loan 20

[Interest does not include processing fee on sanction of the
loan. Hence, the same is taxable.]
Commission collected on bank guarantee 30

[Any commission collected over and above interest on loan,
advance or deposit are not exempt.]
Interest income on credit card issued by the bank 40

[Services by way of extending loans in so far as the
consideration is represented by way of interest are exempt
from tax. However, interest involved in credit card services is
specifically excluded from this exemption entry.]
Interest received on housing loan Nil

[Services by way of extending loans in so far as the consideration
is represented by way of interest are exempt from tax.]
Minimum balance charges collected from current account 01

and saving account holder
[Any charges collected over and above interest on loan,
advance or deposit are not exempt.]
Value of taxable supply 91
10. Life insurance business services

No.
28 Services of life insurance business provided by way of annuity under

the National Pension System regulated by the Pension Fund
Regulatory and Development Authority of India under the Pension
Fund Regulatory and Development Authority Act, 2013.
29 Services of life insurance business provided or agreed to be provided

by the Army, Naval and Air Force Group Insurance Funds to
members of the Army, Navy and Air Force, respectively, under the
Group Insurance Schemes of the Central Government.

4.70 INDIRECT TAXES
29A Services of life insurance provided or agreed to be provided by the

Naval Group Insurance Fund to the personnel of Coast Guard under
the Group Insurance Schemes of the Central Government.
29B Services of life insurance provided/agreed to be provided by the

Central Armed Police Forces (under Ministry of Home Affairs)
Group Insurance Funds to their members under the Group
Insurance Schemes of the concerned Central Armed Police Force.
36 Services of life insurance business provided under following schemes-

(a) Janashree Bima Yojana;
(b) Aam Aadmi Bima Yojana;
(c) Life micro-insurance product** as approved by the Insurance
Regulatory and Development Authority, having maximum
amount of cover of ` 2,00,000;
(d) Varishtha Pension BimaYojana;
(e) Pradhan Mantri Jeevan Jyoti BimaYojana;
(f) Pradhan Mantri Jan DhanYogana;
(g) Pradhan Mantri Vaya Vandan Yojana.
**Life micro-insurance product means any term insurance contract
with/without return of premium, any endowment insurance contract or
health insurance contract, with/without an accident benefit rider, either
on individual/group basis, as per terms stated in Schedule-II appended
to the regulations [Regulation 2(e) of the Insurance Regulatory and Development
Authority (Micro-insurance) Regulations, 2005].
11. Services provided by specified bodies

No.
30 Services by the Employees’ State Insurance Corporation to

persons governed under the Employees’ State Insurance Act,
1948.

31 Services provided by the Employees Provident Fund

Organisation to the persons governed under the Employees
Provident Funds and the Miscellaneous Provisions Act, 1952.
31A Services by Coal Mines Provident Fund Organisation to persons

governed by the Coal Mines Provident Fund and Miscellaneous
Provisions Act, 1948.
31B Services by National Pension System (NPS) Trust to its

members against consideration in the form of administrative fee.
32 Services provided by the IRDAI (Insurance Regulatory and

Development Authority of India) to insurers under IRDAI Act,
1999.
33 Services provided by the SEBI (Securities and Exchange Board

of India) set up under the SEBI Act, 1992 by way of protecting
the interests of investors in securities and to promote the
development of, and to regulate, the securities market.
12. General insurance business services

No.
35 Services of general insurance business provided under following
schemes –
(a) Hut Insurance Scheme;
(b) Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna 28;
(c) Scheme for Insurance of Tribals;
(d) Janata Personal Accident Policy and Gramin Accident Policy;
(e) Group Personal Accident Policy for Self-Employed Women;
(f) Agricultural Pumpset and Failed Well Insurance;
28
earlier known as Integrated Rural Development Programme

4.72 INDIRECT TAXES
(g) premia collected on export credit insurance;

(h) Restructured Weather Based Crop Insurance Scheme (RWCIS),
approved by the Government of India and implemented by the
Ministry of Agriculture;
(i) Jan Arogya Bima Policy;
(j) Pradhan Mantri Fasal Bima Yojana (PMFBY);
(k) Pilot Scheme on Seed Crop Insurance;
(l) Central Sector Scheme on Cattle Insurance;
(m) Universal Health Insurance Scheme;
(n) Rashtriya Swasthya Bima Yojana;
(o) Coconut Palm Insurance Scheme;
(p) Pradhan Mantri Suraksha BimaYojna;
(q) Niramaya Health Insurance Scheme implemented by the Trust
constituted under the provisions of the National Trust for the
Welfare of Persons with Autism, Cerebral Palsy, Mental
Retardation and Multiple Disabilities Act, 1999.
(r) Bangla Shasya Bima
36A Services by way of reinsurance of the insurance schemes specified in

serial number 35 or 36.
13. Pension schemes

No.
37 Services by way of collection of contribution under the Atal Pension
Yojana.
38 Services by way of collection of contribution under any pension
scheme of the State Governments.

14. Business facilitator/correspondent

Entry 39: Services by the following persons in respective capacities –
(a) business facilitator or a business correspondent to a banking company with
respect to accounts in its rural area branch;
(b) any person as an intermediary to a business facilitator or a business
correspondent with respect to services mentioned in entry (a); or
(c) business facilitator or a business correspondent to an insurance company in
a rural area.
ANALYSIS
It is still a big challenge for India to make the financial services accessible in rural
areas. In many rural areas, either there are no banks or number of banks is
insufficient. In order to counter this problem and ensure greater financial
inclusion, the Reserve Bank of India (RBI) introduced the Business Correspondents
and Business Facilitator Model through guidelines in 2006 allowing banks to
employ two categories of intermediaries – known as Business facilitators (BFs) and
Business correspondents (BCs).
BCs/BFs help villagers to open bank accounts and provide other banking services
to them. They act as an intermediary between the bank and its customers. Banks,
in turn, pay commission/ fee to the BCs/BFs.
According to the RBI guidelines, while the BCs are permitted to carry out
transactions on behalf of the bank as agents, the BFs can refer clients, pursue the
clients’ proposal and facilitate the bank to carry out its transactions, but cannot
transact on behalf of the bank 29.
29
BFs provide a wide range of services including identification of borrowers and fitment of
activities, collection and preliminary processing of loan applications, processing and
submission of applications to banks, follow-up for recovery, etc. BCs, in addition to these
activities, also undertake disbursal of small value credit, recovery of principal / collection of
interest, collection of small value deposits, sale of micro insurance/ mutual fund products/
pension products/ other third party products, receipt and delivery of small value
remittances/ other payment instruments, etc.

4.74 INDIRECT TAXES
Similarly, insurance companies engage the BCs/BFs to provide the insurance

services in remote areas.
Entry 39 exempts the services provided by BF/BC to a banking company with
respect to accounts in its rural area branch and services provided by any person
as an intermediary to a BF/BC with respect to said services are exempt from GST.
Further, the services provided by BF/BC to an insurance company in a rural area
are also exempt.
It is important to note that for the purpose of availing exemption from GST under
this Entry, services provided by a BF/BC to a banking company in their respective
individual capacities should be with respect to accounts in a branch located in the
rural area of the banking company.
Wherever the services provided by BF/BC to banking company and services
provided by intermediary of BF/BC to BF/BC do not fall within the scope of this
entry, GST is payable on such services.
However, the banking company is the person liable to pay GST under reverse
charge in respect of commission/fees charged for the taxable services provided
by BF to a banking company. Similarly, GST on taxable services provided by an
agent of BC to BC is payable under reverse charge by the BC.
Further, as seen above, as per RBI’s guidelines, banks may pay reasonable
commission/fee to the BC. The agreement of banks with the BC specifically
prohibits them from directly charging any fee to the customers for services
rendered by them on behalf of the bank. On the other hand, banks (and not BCs)
are permitted to collect reasonable service charges from the customers for such
service in a transparent manner.
The arrangements of banks with the BCs specify the requirement that the
transactions are accounted for and reflected in the bank's books by end of the
day or the next working day, and all agreements/contracts with the customer shall
clearly specify that the bank is responsible to the customer for acts of omission
and commission of the BF/BC.
Hence, banking company is the service provider to the ultimate customer in the
BF model/BC model. The banking company is liable to pay GST on the entire
value of service charge or fee charged to customers whether or not received via
BF/BC.

Other relevant definitions under this entry are as follows:

Insurance company: means a company carrying on life insurance business
or general insurance business.
Intermediary means a broker, an agent or any other person, by whatever
name called, who arranges or facilitates the supply of goods or services or
both, or securities, between two or more persons, but does not include a
person who supplies such goods or services or both or securities on his own
account [Section 2(13) of the IGST Act, 2017].
Rural area: means the area comprised in a village as defined in land
revenue records, excluding the area under any municipal committee,
municipal corporation, town area committee, cantonment board or notified
area committee; or any area that may be notified as an urban area by the
Central Government or a State Government.
Exemption Notification defines BF/BC as an intermediary appointed under
the BF model or BC model by a banking company or an insurance company
under the guidelines issued by the RBI.
15. Services provided to Government

No.
3 Pure services provided TO Government:

 Pure services (excluding works contract service or other
composite supplies involving supply of any goods)
 provided to the Central Government, State Government or Union
territory or local authority or a Governmental authority or a
Government Entity
 by way of any activity:
 in relation to any function entrusted to a Panchayat under
article 243G of the Constitution or
 in relation to any function entrusted to a Municipality
under article 243W of the Constitution.
3A Composite supply of goods and services TO Government:

4.76 INDIRECT TAXES
 Composite supply of goods and services in which the value of

supply of goods constitutes not more than 25% of the value of
the said composite supply
 provided to the Central Government, State Government or Union
territory or local authority or a Governmental authority or a
Government Entity
 by way of any activity:
 in relation to any function entrusted to a Panchayat under
article 243G of the Constitution or
 in relation to any function entrusted to a Municipality
under article 243W of the Constitution.
11A Service provided by Fair Price Shops to Central

Government, State Government or Union
territory by way of sale of food grains, kerosene,
sugar, edible oil, etc. under Public Distribution
System against consideration in the form of
commission or margin.
40 Services provided to the Central Government, State Government,

Union territory under any insurance scheme for which total premium
is paid by the Central Government, State Government, Union territory.
72 Services provided to the Central Government, State Government,

Union territory administration under any training programme for
which total expenditure is borne by the Central Government, State
Government, Union territory administration.
51 Services provided by the GSTN (Goods and Services Tax Network) to

the Central Government or State Governments or Union territories for
implementation of Goods and Services Tax.
ANALYSIS
Entry 3 exempts the supply of ‘pure services’ to Government. Supply of ‘pure
services’ means supply of services without involving any supply of goods.

Further, ‘composite supply of goods and services’* to Government is exempted

vide Entry 3A.
*in which value of supply of goods constitutes not more than 25% of value of such
composite supply.
Let us understand the concept of supply of ‘pure services’ and ‘composite supply
of goods and services’ to Government by following examples:
(34) Supply of manpower for cleanliness of roads, public places,
architect services, consulting engineer services, advisory services, and
like services provided by business entities not involving any supply of
goods would be treated as supply of pure services.
(35) A governmental authority awards the work of maintenance of street-

lights in a Municipal area to an agency which involves apart from
maintenance, replacement of defunct lights and other spares. In this case,
the scope of the service involves maintenance work and supply of goods, i.e.
composite supply of goods and services 30.
16. Leasing services

No.
41 Upfront amount (called as premium, salami, cost, price, development

charges or by any other name) payable in respect of service by way of
granting of long term lease of 30 years, or more) of industrial plots or
plots for development of infrastructure for financial business, provided
by the State Government Industrial Development Corporations or
Undertakings or by any other entity having 20% or more ownership of
Central Government, State Government, Union territory to the industrial
units or the developers in any industrial or financial business area.
Explanation - For the purpose of this exemption, the Central Government,
State Government or Union territory shall have 20% or more ownership
in the entity directly or through an entity which is wholly owned by the
30
As clarified vide question 25 of CBIC FAQs on Government Services

4.78 INDIRECT TAXES
Central Government, State Government or Union territory.

Aforesaid exemption is admissible irrespective of whether such upfront
amount is payable/paid in one/more instalments, provided the amount
is determined upfront 31.
Conditions:
1. The leased plots shall be used for the purpose for which they
are allotted, that is, for industrial or financial activity in an
industrial or financial business area.
2. State Government concerned shall monitor and enforce the
above condition as per the order issued by the State Government in
this regard.
3. In case of any violation or subsequent change of land use, due
to any reason whatsoever, the original lessor, original lessee as
well as any subsequent lessee/ buyer/ owner shall be jointly and
severally liable to pay such amount of central tax, as would have
been payable on the upfront amount charged for the long term
lease of the plots but for the exemption contained herein, along
with the applicable interest and penalty.
4. The lease agreement entered into by the original lessor with
the original lessee or subsequent lessee, or sub- lessee, as well as
any subsequent lease/ sale agreements, for lease or sale of such
plots to subsequent lessees or buyers or owners shall incorporate
in the terms and conditions, the fact that the central tax was
exempted on the long term lease of the plots by the original lessor
to the original lessee subject to above condition and that the
parties to the said agreements undertake to comply with the same.
43 Services of leasing of assets (rolling stock assets including wagons,

coaches, locos) by the Indian Railways Finance Corporation to Indian
Railways.
31
As clarified vide Circular No. 101/20/2019-GST, dated 30.04.2019

17. Legal services

Entry 45: Services provided by-
(a) an arbitral tribunal to –
(i) any person other than a business entity; or
(ii) a business entity with an aggregate turnover up to such amount in
the preceding FY as makes it eligible for exemption from
registration under the CGST Act, 2017;
(iii) the Central Government, State Government, Union territory, local
authority, Governmental Authority or Government Entity.
(b) a partnership firm of advocates or an individual as an advocate other than a
senior advocate, by way of legal services to-
(i) an advocate or partnership firm of advocates providing legal services;
(ii) any person other than a business entity; or
(iii) a business entity with an aggregate turnover up to such amount in
registration under the CGST Act, 2017;
(iv) the Central Government, State Government, Union territory, local
(c) a senior advocate by way of legal services to-
(i) any person other than a business entity; or
(ii) a business entity with an aggregate turnover up to such amount in
registration under the CGST Act, 2017.
(iii) the Central Government, State Government, Union territory, local
ANALYSIS
Relevant definitions are as under:
Legal service: means any service provided in relation to advice, consultancy
or assistance in any branch of law, in any manner and includes
representational services before any court, tribunal or authority.

4.80 INDIRECT TAXES
Advocate means an advocate entered in any roll under the provisions of

the Advocates Act, 1961 [Section 2(1)(a) of the Advocates Act, 1961].
Arbitral tribunal means a sole arbitrator or a panel of arbitrators [Section 2(d)
of the Arbitration and Conciliation Act, 1996].
Senior advocate: An advocate may, with his consent, be designated as

senior advocate if the Supreme Court or a High Court is of opinion that by
virtue of his ability standing at the Bar or special knowledge or experience
in law he is deserving of such distinction. Senior advocates shall, in the
matter of their practice, be subject to such restrictions as the Bar Council of
India may, in the interest of the legal profession, prescribe.
Under Entry 45, following services are exempt from GST
--Arbitral tribunal --any person other than BE

Legal services
--Partnership firm of --Business Entity with an

provided by
provided to
advocates or an individual as aggregate turnover up to such

an advocate other than a amount in the preceding FY as
senior advocate by way of makes it eligible for exemption
legal services from registration under the
CGST Act, 2017
--Senior advocate by way of
legal services --CG/SG/UT/LA/GA/GE
Legal services provided by a partnership firm of advocates/ individual as an

advocate other than a senior advocate to another advocate/ partnership firm of
advocates providing legal services.
Thus, legal services provided to a business entity with an aggregate turnover

exceeding such amount in the preceding FY as makes it eligible for exemption
from registration under the CGST Act, 2017 are liable to GST. Further, tax is
payable by the business entity on such services under reverse charge.
(36) Pyarelal & Co. has obtained registration under GST in the
preceding financial year. In the current FY, it sought legal consultancy
services for its business from Nyay Advocates – a partnership firm of
advocates. The legal services so received by Pyarelal & Co. are not exempt
because its aggregate turnover exceeds the threshold exemption limit of
registration in the preceding financial year. Further, the tax on the said legal
services is payable by Pyarelal & Co. under reverse charge.

18. Sponsorship of sports events

Entry 53: Services by way of sponsorship of sporting events organised -
(a) by a national sports federation, or its affiliated federations, where the
participating teams or individuals represent any district, State, zone or
Country;
(b) by Association of Indian Universities, Inter-University Sports Board, School
Games Federation of India, All India Sports Council for the Deaf, Paralympic
Committee of India or Special Olympics Bharat;
(c) by the Central Civil Services Cultural and Sports Board;
(d) as part of national games, by the Indian Olympic Association; or
(e) under the Panchayat Yuva Kreeda Aur Khel Abhiyaan Scheme.
19. Skill Development services

No.
69 Any services provided by, _

(a) the National Skill Development Corporation set up by the
Government of India;
(b) a Sector Skill Council approved by the National Skill
Development Corporation;
(c) an assessment agency approved by the Sector Skill Council or the
National Skill Development Corporation;
(d) a training partner approved by the National Skill Development
Corporation or the Sector Skill Council,
in relation to-
(i) the National Skill Development Programme implemented by the
National Skill Development Corporation; or
(ii) a vocational skill development course under the National Skill
Certification and Monetary Reward Scheme; or
(iii) any other Scheme implemented by the National Skill
Development Corporation.

4.82 INDIRECT TAXES
70 Services of assessing bodies empanelled centrally by the Directorate

General of Training, Ministry of Skill Development and
Entrepreneurship by way of assessments under the Skill Development
Initiative Scheme.
71 Services provided by training providers (Project implementation

agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana
(DDUGKY) implemented by the Ministry of Rural Development,
Government of India by way of offering skill or vocational training
courses certified by the National Council for Vocational Training.
20. Performance by an artist

Entry 78: Services by an artist by way of a performance in folk or classical art
forms of-
(a) music, or
(b) dance, or
(c) theatre,
if the consideration charged for such performance is not more than
` 1,50,000 are exempt from GST.
The activities by a performing artist in folk or classical art forms of music, dance,
or theatre are exempt if consideration does not exceed ` 1,50,000. However, if
consideration from such activities exceeds ` 1,50,000, entire consideration is
subject to GST.
Further, all other activities by an artist in other art forms e.g. western music or
dance, modern theatres, performance of actors in films or television serials would
be taxable. Similarly activities of artists in still art forms e.g. painting, sculpture
making etc. are taxable.
However, the exemption shall not apply to service provided by such artist as a
brand ambassador. ‘Brand ambassador’ means a person engaged for promotion
or marketing of a brand of goods, service, property or actionable claim, event or
endorsement of name, including a trade name, logo or house mark of any person.

ILLUSTRATION 5
Determine the GST payable, if any, in each of the following independent cases,
assuming that the rate of GST is 18% and that the service providers are registered:
(a) Bollywood dance performance by a film actor in a film and consideration
charged is ` 1,45,000.
(b) Carnatic music performance by a classical singer to promote a brand of
readymade garments and consideration charged is ` 1,30,000.
(c) Carnatic music performance by a classical singer in a music concert and
consideration charged is ` 1,55,000.
(d) Kathak dance performance by a classical dancer in a cultural programme and
consideration charged is ` 1,45,000.
ANSWER
(a) Bollywood Dance performance by a film actor in a film is not exempt from
GST even though the consideration charged is less than threshold limit of
` 1,50,000. The reason for the same is that the dance performance by an
artist is exempt only if it is a performance in folk or classical art forms of
dance.
(b) Carnatic music performance by a classical singer to promote a brand of
readymade garments is not exempt from GST even though, the
consideration charged is less than threshold limit of ` 1,50,000 and it is a
performance in classical art forms of music. The reason for the same is that
the said exemption is not applicable to service provided by such artist as a
brand ambassador.
(c) Carnatic music performance by a classical singer in a music concert is not
exempt from GST even though it is a performance in classical art forms of
music. The reason for the same is the consideration charged for the service
exceeds ` 1,50,000. Consequently, entire consideration charged is subject
to GST as follows:
= ` 1,55,000 × 18% = ` 27,900
(d) Kathak dance performance by a classical dancer in a cultural programme is
exempt from GST as it is a performance in classical art forms of dance and
consideration charged does not exceed ` 1,50,000 [i.e. ` 1,45,000].

4.84 INDIRECT TAXES
21. Right to admission to various events

No.
79 Services by way of admission to a museum, national park, wildlife

sanctuary, tiger reserve or zoo**.
**Zoo means an establishment, whether stationary or mobile, where
captive animals are kept for exhibition to the public but does not
include a circus and an establishment of a licensed dealer in captive
animals [Section 2(39) of the Wild Life (Protection) Act, 1972].
79A Services by way of admission to a protected monument so declared

under the Ancient Monuments and Archaeological Sites & Remains Act
1958 or any of the State Acts, for the time being in force.
81 Services by way of right to admission to-

(a) circus, dance, or theatrical performance including drama or
ballet;
(b) award function, concert, pageant, musical performance or any
sporting event other than a recognised sporting event🕙🕙;
(c) recognised sporting event;
(d) planetarium,
where the consideration for right to admission to the events or places
as referred to in items (a), (b), (c) or (d) above is not more than ` 500
per person.
🕙🕙 Recognised sporting event means any sporting event,-
(i) organised by a recognised sports body⌨ where the
participating team or individual represent any district, state, zone
or country;
(ii) organized
(A) by a national sports federation, or its affiliated federations,
where the participating teams or individuals represent any
district, State or zone;
(B) by Association of Indian Universities, Inter-University Sports
Board, School Games Federation of India, All India Sports
Council for the Deaf, Paralympic Committee of India or

Special Olympics Bharat;

(C) by Central Civil Services Cultural and Sports Board;
(D) as part of national games, by Indian Olympic Association; or
(E) under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA)
Scheme.
⌨ Recognised sports body means –
(i) the Indian Olympic Association;
(ii) Sports Authority of India;
(iii) a national sports federation recognised by the Ministry of Sports and
Youth Affairs of the Central Government, and its affiliate federations;
(iv) national sports promotion organisations recognised by the
Ministry of Sports and Youth Affairs of the Central Government;
(v) the International Olympic Association or a federation recognised
by the International Olympic Association; or
(vi) a federation or a body which regulates a sport at international
level and its affiliated federations or bodies regulating a sport in
India.
22. Services by an unincorporated body or a non- profit entity

No.
77 Service by an unincorporated body or a non- profit entity registered

under any law for the time being in force, to its own members by way
of reimbursement of charges or share of contribution –
(a) as a trade union
(b) for the provision of carrying out any activity which is exempt
from the levy of Goods and Services Tax; or
(c) up to an amount of ` 7,500 per month per member for
sourcing of goods or services from a third person for the
common use of its members in a housing society or a
residential complex.

4.86 INDIRECT TAXES
77A Services provided by an unincorporated body or a non-profit entity

registered under any law for the time being in force, engaged in,-
(i) activities relating to the welfare of industrial or agricultural
labour or farmers; or
(ii) promotion of trade, commerce, industry, agriculture, art,
science, literature, culture, sports, education, social welfare,
charitable activities and protection of environment,
to its own members against consideration in the form of membership
fee upto an amount of ` 1000/- per member per year.
ANALYSIS
Co-operative Housing Society
Co-operative Housing Societies are entities registered under

the co-operative laws of the respective States. A Co-operative
Housing Society is a collective body of persons, who stay in a
residential society and as a collective body, they supply certain
services to its members, like collecting statutory dues from its members and
remitting to statutory authorities, maintenance of the building, security etc.
A Co-operative Housing Society is akin to a club, which is composed of its

members. Service provided by a Housing Society [Resident Welfare Association
(RWA)] to its members is treated as service provided by one person to another.
The activities of the housing society/RWA would attract the levy of GST and the
housing society would be required to register and comply with the GST Law,
unless specifically exempted.
Cooperative
Housing supplies services
Society
Members

GST exemption on services provided by a Co-operative Housing Society

If the aggregate turnover of housing society/RWA providing services to its members is
above the applicable threshold limit for registration 32, it needs to take registration
under GST in terms of section 22 of the CGST Act, 2017 [Refer Chapter-7: Registration
for detailed discussion on registration]. However, taking registration does not mean
that the housing society has to compulsorily charge GST in the monthly maintenance
bills raised on its members. If the services provided by it are exempt under an
exemption notification, then it is not required to charge GST on the said services, even
if it is registered under GST.
For instance, in view of entry 77(c) above, supply of service by a RWA
(unincorporated body or a non- profit entity registered under any law) to its own
members by way of reimbursement of charges or share of contribution up to an
amount of ` 7500 per month per member for providing services and goods for
the common use of its members in a housing society/a residential complex are
exempt from GST.
So, there can be case where a society is registered under GST, but the monthly
contribution received from all the members is less than ` 7,500/- per member
(and the amount is for the purpose of sourcing of goods and services from a third
person for the common use of its members). In such a case, no GST is to be
charged by the housing society on the monthly bill raised by the society.
(37) RWA of Chulbul Housing Society, registered under GST, collected
the maintenance charges of ` 6,000 per month per member. In this
case, no GST is to be charged by the RWA.
However, in above case, if the monthly contribution exceeds ` 7,500/- per
member, entire contribution is taxable.
(38) If, in above example, other things remaining the same, the RWA
of Chulbul Housing Society collected the maintenance charges of
` 9,000 per month per member, GST @18% shall be payable on the
entire amount of ` 9,000 and not on [` 9,000 - ` 7,500] = ` 1,500.
There can also be a case where the aggregate turnover of the society/RWA is less
than the applicable threshold limit for registration and the monthly contribution
of all the individual members towards maintenance is less than ` 7,500/- (such
32
Threshold limit is ` 10 lakh for specified Special Category States, namely, Manipur, Mizoram,
Nagaland and Tripura and ` 20 lakh for all other States.

4.88 INDIRECT TAXES
services being exempt). Further, the society is providing no other taxable service
to its members or outsiders. In this case, the society (essentially exclusively
providing wholly exempt services) need not take registration under GST.
(39) The turnover of RWA of Bulbul Housing Society located in New
Delhi in a financial year is ` 15 lakh. It has collected the maintenance
charges of ` 6,000 per month per member. RWA is not providing any
other taxable service to its members. In this case, RWA is not required to take
registration under GST since its aggregate turnover is less than the applicable
threshold limit of ` 20 lakh.
However, an RWA is not required to obtain registration even though the amount
of maintenance charges exceeds ` 7500/- per month per member but the
aggregate turnover of the RWA in a financial year does not exceed the threshold
limit for registration.
(40) In the above example, other things remaining the same, if the
maintenance charges collected by the RWA are ` 8,000 per month per
member, RWA is still not required to take registration under GST since
its aggregate turnover is less than the applicable threshold limit of ` 20 lakh.
The above discussion has been summarized as under:
RWA/Housing society
Is unregistered RWA’s No Are monthly

No
annual turnover in a maintenance charges >
FY> ` 20 lakh*? ` 7,500 per member?
Yes
Yes
Are monthly
No
maintenance charges Tax not
> ` 7,500 per
member? payable
Yes
Tax payable
* ` 10 lakh in case of Special Category States of Manipur, Mizoram, Nagaland and Tripura

Thus, RWA shall be required to pay GST on monthly subscription/ contribution

charged from its members, only if such subscription is more than ` 7500/- per
month per member and the annual aggregate turnover of RWA by way of
supplying of services and goods is also more than ` 20 lakh.
In other words,
Annual turnover of RWA Monthly maintenance charge Whether exempt?
More than ` 20 lakh* More than ` 7500/- No
` 7500/- or less Yes
More than ` 7500/- Yes

` 20 lakh or less
` 7500/- or less Yes
* ` 10 lakh in case of Special Category States of Manipur, Mizoram, Nagaland and

Tripura
There may also be cases where a person owns 2 or more flats in the housing
society/residential complex. The question arises whether the ceiling of ` 7500/-
per month per member on the maintenance for the exemption to be available
shall be applied per residential apartment or per person.
As per general business sense, a person who owns 2 or more residential
apartments in a housing society or a residential complex shall normally be a
member of the RWA for each residential apartment owned by him separately.
Consequently, the ceiling of ` 7500/- per month per member shall be applied
separately for each residential apartment owned by him.
(41) Gareeb Chand owns two residential apartments in a residential
complex and pays ` 15,000/- per month as maintenance charges
towards maintenance of these two apartments to the RWA (` 7,500/-
per month in respect of each residential apartment). In this case, the exemption
from GST shall be available with respect to maintenance charges paid for each
apartment.
It is important to note that RWA is entitled to take ITC of GST paid by them on
capital goods (generators, water pumps, lawn furniture etc.), goods (taps, pipes,

4.90 INDIRECT TAXES
other sanitary/hardware fillings etc.) and input services such as repair and
maintenance services, used by it for making supplies to its members and use such
ITC for discharge of GST liability on such supplies where the amount charged for
such supplies is more than ` 7,500 per month per member.
(42) RWA of Tintin Housing Society, registered under GST, has
collected the maintenance charges of ` 9,000 per month per member
from 1,000 members of the society in the month of May. For paying
the GST of ` 16,20,000 [payable @ 18% on the amount of ` 90,00,000], RWA can
utilise the ITC of GST of ` 1,00,000 paid by it on purchase of swings for garden,
ITC of ` 20,000 on electric cables and ITC of ` 15,000 on plumbing services.
✪ Statutory dues such as property tax, electricity charges etc. forming part of the
monthly maintenance bill raised by the society on its members would be excluded
while computing the aforesaid monthly limit of ` 7,500 33.
23. Other exempt services

No.
2 Services by way of transfer of a going concern, as a whole or an

independent part thereof.
Transfer of a going concern means transfer of a running business
which is capable of being carried on by the purchaser as an
independent business, but shall not cover mere or predominant
transfer of an activity comprising a service. Transfer of business for a
lump sum consideration commonly referred to as slump sale is covered
under this entry.
Such sale of business as a whole will comprise comprehensive sale of
immovable property, goods and transfer of unexecuted orders,
employees, goodwill etc. Since the transfer in title is not merely a
transfer in title of either the immovable property or goods or even
both it may amount to service and has thus been exempted.
33
Discussion under this entry in forgoing paras is primarily based on Circular No. 109/28/2019
GST dated 22.07.2019, CBIC GST Flyer ‘GST on Co-Operative Housing Societies’ and CBIC FAQs
on levy of GST on Supply of Services to Co-operative Society.

(43) Royal Hotel Group is in the business of running a chain

of restaurants. It intends to sell its business as a going
concern. It would not be required to pay GST on such sale
of its business.
9AA Services provided by and to Fédération Internationale de Football

Association (FIFA) and its subsidiaries directly or indirectly related
to any of the events under FIFA U-17 Women’s World Cup 2020 to
be hosted in India.
Condition to be fulfilled:
Director (Sports), Ministry of Youth Affairs and Sports have to
certify that the services are directly or indirectly related to any of
the events under FIFA U-17 Women’s World Cup 2020.
9B Supply of services associated with transit cargo to Nepal and Bhutan

(landlocked countries).
12 Services by way of renting of residential dwelling for use as residence.
14 Services by a hotel, inn, guest house, club or campsite, by

whatever name called, for residential or lodging purposes,
having Value of Supply of a unit of accommodation
below or equal to ` 1,000 per day or equivalent.
19C Satellite launch services supplied by Indian Space Research

Organisation, Antrix Corporation Limited or New Space India
Limited.
22 Services by way of giving on hire –

(a) to a state transport undertaking (STU), a motor vehicle meant to
carry more than 12 passengers**; or
This exemption is applicable to services provided to State
Transport Undertaking and not to other departments of
Government or local authority.
Generally, such State Transport Undertakings/ Corporations are
established with a view to providing public transport facility to the
commuters. If transport undertakings hire the buses on lease basis
from private persons on payment of consideration, the services by

4.92 INDIRECT TAXES
way of supply of motor vehicles to such STU are exempt from

payment of tax. However, supplies of motor vehicles to Government
Departments other than the STUs are taxable34.
(aa) to a local authority, an Electrically operated vehicle (EOV)
meant to carry more than 12 passengers;
EOV means vehicle falling under Chapter 87 in the First
Schedule to the Customs Tariff Act, 1975 which is run solely
on electrical energy derived from an external source or from
one/more electrical batteries fitted to such road vehicle.
(b) to a goods transport agency, a means of transportation of goods.
(44) Nishant owns a truck which he has rented to Sindhu
and Bansal Transport Agency - a GTA. Services by way of
giving on hire a means of transportation of goods [truck in
the given case] to a GTA [Sindhu and Bansal Transport Agency], are
exempt from tax. However, if Nishant had rented a vehicle designed to
carry passengers, said activity is not exempt under this entry.
(c) motor vehicle for transport of students, faculty and staff, to a
person providing services of transportation of students, faculty
and staff to an educational institution providing services by way
of pre-school education and education upto higher secondary
school or equivalent.
23 Service by way of access to a road or a bridge on payment of toll charges.
23A Service by way of access to a road or a bridge on payment of annuity.
25 Transmission/distribution of electricity by an electricity

transmission / distribution utility.
However, in this regard CBIC has clarified that the other
services provided by DISCOMS (distribution companies)
to consumer against charges are liable to GST such as,-
i. Application fee for releasing connection of electricity;
ii. Rental Charges against metering equipment;
34
As clarified vide question 26 of CBIC FAQs on Government Services

iii. Testing fee for meters/transformers, capacitors etc.;

iv. Labour charges from customers for shifting of meters or shifting
of service lines;
v. charges for duplicate bill [Circular No. 34/8/2018 GST dated
01.03.2018].
44 Services provided by an incubatee up to a total turnover of ` 50 lakh

in a financial year subject to the following conditions, namely:-
(a) the total turnover had not exceeded ` 50 lakh during the
preceding financial year; and
(b) a period of 3 years has not elapsed from the date of entering
into an agreement as an incubatee.
Incubatee: means an entrepreneur located within the premises of a
Technology Business Incubator (TBI)/ Science and Technology
Entrepreneurship Park (STEP) recognised by the National Science and
Technology Entrepreneurship Development Board of the Department
of Science and Technology, Government of India (NSTEDB) and who
has entered into an agreement with the TBI/STEP to enable himself to
develop and produce hi-tech and innovative products.
47A Services by way of licensing, registration and analysis or testing of

food samples supplied by the Food Safety and Standards Authority of
India (FSSAI) to Food Business Operators.
48 Taxable services, provided or to be provided, by a TBI/STEP recognised

by NSTEDB or bio- incubators recognised by the Biotechnology
Industry Research Assistance Council, under the Department of
Biotechnology, Government of India (BIRAC).
49 Services by way of collecting or providing news by an independent

journalist, Press Trust of India or United News of India.
50 Services of public libraries by way of lending of books, publications or

any other knowledge-enhancing content or material.
52 Services by an organiser to any person in respect of a business

exhibition held outside India.

4.94 INDIRECT TAXES
56 Services by way of slaughtering of animals.
57 Services by way of pre-conditioning, pre- cooling, ripening, waxing,

retail packing, labelling of fruits and vegetables which do not change
or alter the essential characteristics of the said fruits or vegetables.
58 Services provided by the National Centre for Cold Chain

Development under the Ministry of Agriculture, Cooperation and
Farmer’s Welfare by way of cold chain knowledge dissemination.
59 Services by a foreign diplomatic mission located in India.
65A Services by way of providing information under the RTI Act (Right
to Information Act, 2005).
68 Services provided to a recognised sports body by-

(a) an individual as a player, referee, umpire, coach or team manager
for participation in a sporting event organised by a recognized
sports body;
(b) another recognised sports body.
However, services by individuals such as selectors, commentators,
curators, technical experts are taxable. The service of a player to a
franchisee which is not a recognized sports body is also taxable. The
term ‘recognised sports body’ has been defined earlier in this chapter.
75 Services provided by operators of the common bio-medical waste

treatment facility to a clinical establishment by way of treatment or
disposal of bio-medical waste or the processes incidental thereto.
76 Services by way of public conveniences such as provision of facilities

of bathroom, washrooms, lavatories, urinal or toilets.
82A Services by way of right to admission to the events organised

under FIFA U-17 Women's World Cup 2020.
Note: For the purpose of this exemption notification, a “Limited Liability

Partnership” formed and registered under the provisions of the Limited Liability
Partnership Act, 2008 shall also be considered as a partnership firm or a firm.

Students may note that some of the entries granting exemption from GST are
similar to the negative list entry/entry granting exemption under the erstwhile
service tax law.
Therefore, clarification pertaining to said negative list entry/exemption provided
in the ‘Service Tax Education Guide’ – an educational aid released for facilitating
the stakeholders to obtain preliminary understanding of the provisions, wherever
it seems relevant under the GST law, have been incorporated at relevant places.
1. Power to exempt from tax [Section 11 of the CGST Act/ section 6 of
IGST Act]
Power to exempt from tax
by way of issuance of
Notification Special order
• exempt generally exempt from payment of tax

• either absolutely or subject to such under circumstances of an
conditions as may be specified,
exceptional nature to be stated in
• goods and/or services of any
such order, in public interest.
specified description.
2. List of services exempt from GST
Services Exempt Services

Services Charitable activities BY an entity registered under section
related to 12AA of Income-tax Act.
charitable and
Services by a person by way of-
religious
(a) conduct of any religious ceremony;
activities
(b) renting of precincts of a religious place meant for
general public, owned/managed by
institutions/entities/trusts, registered under section
12AA/10(23C)(v) of the Income tax Act or
body/authority covered under section 10(23BBA) of the

4.96 INDIRECT TAXES
said Act, except where-

(i) charges for renting of rooms ≥ ` 1,000 per day;
(ii) charges for renting of premises, community
halls, kalyanmandapam, open area, etc. are ≥ `
10,000 per day;
(iii) charges for renting of shops/spaces for
business/commerce are ≥ ` 10,000 per month.
Services by a specified organisation [KMVN/Haj Committee]
in respect of a religious pilgrimage [Haj and Kailash
Mansarovar Yatra].
Training/coaching in recreational activities relating to (a)
arts/culture, or (b) sports by charitable entities registered
under section 12AA of the Income-tax Act.
Agriculture Loading, unloading, packing, storage or warehousing of rice.
related
Warehousing of minor forest produce.
services
Services by way of storage/ warehousing of cereals,
pulses, fruits, nuts and vegetables, spices, copra,
sugarcane, jaggery, raw vegetable fibres such as cotton,
flax, jute etc., indigo, unmanufactured tobacco, betel
leaves, tendu leaves, coffee and tea.
Fumigation in a warehouse of agricultural produce.
Artificial insemination of livestock (other than horses).
Carrying out an intermediate production process as job
work in relation to cultivation of plants & rearing of animals
[except horses], for food, fibre, fuel, raw material or other
similar products or agricultural produce.
Services relating to cultivation of plants & rearing of animals
similar products or agricultural produce by way of –
(a) agricultural operations directly related to production of
any agricultural produce including cultivation,
harvesting, threshing, plant protection or testing;
(b) supply of farm labour;

(c) processes carried out at an agricultural farm including

tending, pruning, etc. and such like operations which do
not alter the essential characteristics of agricultural
produce but make it only marketable for the primary
market;
(d) renting or leasing of agro machinery or vacant land
with/without a structure incidental to its use;
(e) loading, unloading, packing, storage or
warehousing of agricultural produce;
(f) agricultural extension services;
(g) services by any Agricultural Produce Marketing
Committee or Board or services provided by a
commission agent for sale/purchase of agricultural
produce.
(h) services by way of fumigation in a warehouse of
agricultural produce.
Education Services provided BY an educational institution (EI):
services • to its students, faculty and staff;
• by way of conduct of entrance examination against
consideration in form of entrance fee
Services provided TO an EI, by way of,- These exemptions
(i) transportation of students, are only applicable
faculty and staff; to an institution
(ii) catering, including any mid-day providing services
meals scheme sponsored by the by way of pre-
Central Government (CG), State school education &
Government (SG) or Union education up to
Territory (UT); higher secondary
(iii) security/cleaning/house-keeping school or
services performed in such EI; equivalent.
(iv) services relating to admission to, or conduct of

examination by, such EI;
(v) supply of online educational journals or periodicals.
This exemption is only applicable to an institution
providing services by way of education as part of a

4.98 INDIRECT TAXES
curriculum for obtaining qualification recognised by

any law for time being in force.
Health care • Health care services BY a clinical establishment/
services authorized medical practitioner/ para-medics
• Transportation of a patient in an ambulance BY any
person other than specified above.
Stem cells preservation BY Cord Blood Banks or any other
service in relation to such preservation.
Service BY a veterinary clinic in relation to Health care of
animals/birds
Services Services by Governmental Authority (GA) by way of any
provided by activity in relation to any function entrusted to a
Government Municipality /Panchayat under article 243W/ 243G of
Constitution
Services by the CG/SG/UT/Local Authority (LA) excluding
following services—
(a) services by Department of Posts by way of
referred as ‘ specified
(a) to (c) hereinafter
speed post, express parcel post, life
insurance, & agency services provided to a
person other than CG, SG, UT; services’
(b) services in relation to an aircraft/a vessel,
inside/outside precincts of a port/airport;
(c) transport of goods/passengers; or
(d) any service, other than ‘specified services’
above, provided to business entities.
Services provided by CG/SG/UT/LA to a business entity
(BE) with an aggregate turnover of up to such amount in
registration under the CGST Act, 2017. This exemption is
not applicable to specified services and renting of
immovable property service.
Services provided by CG/SG/UT/LA to another CG/SG/UT/LA.
This exemption is not applicable to specified services.

Services provided by CG/SG/UT/LA** where consideration

for such services does not exceed ` 5,000. This exemption
is not applicable to specified services.
**In case of continuous supply of service*, the exemption
shall apply only where the consideration charged for such
service does not exceed ` 5,000 in a FY.
Supply of service by a Government Entity (GE) to
CG/SG/UT/LA/any person specified by CG/SG/UT/LA against
consideration received from CG/SG/UT/LA, in the form of
grants.
Services by an old age home run by CGS/SG/an entity
registered under section 12AA of Income-tax Act to its
residents (aged ≥60 years) against consideration upto
` 25,000 per month per member, provided that the
consideration charged is inclusive of charges for boarding,
lodging and maintenance.
Services supplied by CG/SG/UT to their undertakings or PSUs
by way of guaranteeing the loans taken by such undertakings
or PSUs from the banking companies and financial
institutions.
Services provided by CG/SG/UT/LA by way of-
(a) registration required under any law for the time being
in force;
(b) testing, calibration, safety check or certification relating
to protection or safety of workers, consumers or public
at large, including fire license, required under any law
for the time being in force.
Services provided by CG/SG/UT/LA by way of issuance of
passport, visa, driving license, birth certificate or death
certificate.
Services provided by CG/SG/UT/LA by way of tolerating
non-performance of a contract for which consideration in
the form of fines or liquidated damages is payable to
CG/SG/UT/LA under such contract.

4.100 INDIRECT TAXES
Services provided by CG/SG/UT/LA by way of assignment of

right to use natural resources to an individual farmer for
cultivation of plants & rearing of all life forms of animals
similar products.
Services provided by CG/SG/UT by way of deputing officers
after office hours or on holidays for inspection or
container stuffing or such other duties in relation to import
export cargo on payment of Merchant Overtime charges.
Services supplied by a SG to Excess Royalty Collection
Contractor (ERCC) by way of assigning the right to collect
royalty on behalf of SG on the mineral dispatched by the
mining lease holders subject to specified conditions.
Services provided by rehabilitation professionals recognised
under the RCI Act, 1992 by way of rehabilitation, therapy or
counselling and such other activity as covered by the said Act
at medical establishments, educational institutions,
rehabilitation centers established by CG/SG/UT/an entity
registered under section 12AA of the Income-tax Act, 1961.
Construction Pure labour contracts of construction, erection,
services commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of a civil structure or any
other original works pertaining to the beneficiary-led individual
house construction or enhancement under the Housing for All
(Urban) Mission/Pradhan Mantri Awas Yojana.
Services supplied by Electricity Distribution Utilities by way
of construction, erection, commissioning, or installation of
infrastructure for extending electricity distribution network
upto the tube well of the farmer/agriculturalist for
agricultural use.
Pure labour contracts of construction, erection,
commissioning, or installation of original works pertaining to
a single residential unit otherwise than as a part of a
residential complex.

Supply of TDR, FSI, long term lease (premium) of land by a

landowner to a developer are exempted subject to the
condition that the constructed flats are sold before issuance
of completion certificate and tax is paid on them.
Exemption of TDR, FSI, long term lease (premium) shall be
withdrawn in case of flats sold after issue of completion
certificate, but such withdrawal shall be limited to 1% of
value in case of affordable houses and 5% of value in case of
other than affordable houses.
Services of Such services provided by –
transport of (a) air, embarking from or terminating in an airport located
passengers in North Eastern States of India or at Bagdogra in West
(with/ Bengal;
without (b) non-air conditioned contract carriage other than radio
accompanied taxi, for transportation of passengers, excluding tourism,
belongings) conducted tour, charter or hire; or
(c) stage carriage other than air- conditioned stage
carriage.
Such services provided to CG by air, embarking from or
terminating at a Regional Connectivity Scheme (RCS) airport,
against consideration in the form of viability gap funding. This
exemption shall apply only till expiry of a period of 3 years
from date of commencement of operations of the RCS airport
as notified by the Ministry of Civil Aviation.
Such services provided by—

(a) railways in a class other than first class/an air-conditioned
coach;
(b) metro, monorail or tramway;
(c) inland waterways;
(d) public transport, other than predominantly for tourism
purpose, in a vessel between places located in India; and
(e) metered cabs or auto rickshaws (including e-rickshaws).
Goods Services by way of transportation of goods-
transportatio (a) by road except the services of—
n services (i) a goods transportation agency (GTA);

(ii) a courier agency;

(b) by inland waterways.
Railway Transportation of goods exempt when
equipments transported by goods carriage
/materials
where consideration where consideration
exempt
charged for the charged for
when
transportation of goods transportation of all
transported
on a consignment such goods for a
by
transported in a single single consignee ≤
rail/vessel
carriage ≤ ` 1,500 ` 750
Exempt • Agricultural produce • Defence/
transportati • milk, salt and food military
on of grain including equipments
goods by flours, pulses and • relief materials
rail/ rice meant for
vessel/ by • organic manure victims of
GTA in a • newspaper or natural or man-
goods magazines registered made disasters,
carriage with the Registrar of calamities,
Newspapers accidents or
mishap
Services provided by a GTA to an unregistered person,
including an unregistered casual taxable person, except
following recipients, namely: -
(a) a factory registered under Factories Act,
(b) society registered under Societies Act,
(c) Co-operative society,
(d) body corporate and
(e) partnership firm including AOP;
(f) registered casual taxable person.
Services provided by a GTA, by way of transport of goods in a

goods carriage, to, -
(a) a Department or Establishment of the CG/SG/UT; or


(c) Governmental agencies, which has taken registration only
for the purpose of deducting tax under section 51 and
not for making a taxable supply of goods or services.
Banking and Services by RBI
financial
Services by way of—
(a) extending deposits, loans or advances in so far as the
consideration is represented by way of interest or discount
(other than interest involved in credit card services);
(b) inter se sale or purchase of foreign currency amongst
banks or authorised dealers of foreign exchange or
amongst banks and such dealers.
Services provided by a banking company to Basic Saving Bank
Deposit (BSBD) account holders under Pradhan Mantri Jan
Dhan Yojana (PMJDY).
Services by an acquiring bank, to any person in relation to
settlement of an amount upto ` 2,000 in a single transaction
transacted through credit card, debit card, charge card or
other payment card service.
Services by an intermediary of financial services located in a
multi services SEZ with International Financial Services Centre
(IFSC) status to a customer located outside India for
international financial services in currencies other than Indian
rupees.
Services of Such services by way of annuity under the National Pension
Life insurance System by Pension Fund Regulatory and Development
business Authority of India (PFRDAI) under PFRDA Act, 2013.
Such services by the Army, Naval and Air Force Group
Insurance Funds to members of the Army, Navy and Air
Force, respectively, under the Group Insurance Schemes of
CG.
Services of life insurance provided/agreed to be provided
by the Central Armed Police Forces (under Ministry of

Home Affairs) Group Insurance Funds to their members

under the Group Insurance Schemes of the concerned
Central Armed Police Force.
Such services by the Naval Group Insurance Fund to the
personnel of Coast Guard under the Group Insurance
Schemes of CG.
Such services under following schemes- (A)
(a) Janashree Bima Yojana;
(b) Aam Aadmi Bima Yojana;
(c) Life micro-insurance product** as approved by the
Insurance Regulatory and Development Authority
(IRDA), having maximum amount of cover of `
2,00,000;
(d) Varishtha Pension BimaYojana;
(e) Pradhan Mantri Jeevan Jyoti BimaYojana;
(f) Pradhan Mantri Jan DhanYogana;
(g) Pradhan Mantri Vaya Vandan Yojana.
General Such services under following schemes –
(B)
insurance (a) Hut Insurance Scheme;
business (b) Cattle Insurance under Swarnajaynti Gram Swarozgar
Yojna 35;
(c) Scheme for Insurance of Tribals;
(d) Janata Personal Accident Policy and Gramin Accident
Policy;
(e) Group Personal Accident Policy for Self-Employed
Women;
(f) Agricultural Pumpset and Failed Well Insurance;
(g) premia collected on export credit insurance;
(h) Restructured Weather Based Crop Insurance Scheme
(RWCIS), approved by the Government of India and
implemented by the Ministry of Agriculture;
(i) Jan Arogya Bima Policy;
35
earlier known as Integrated Rural Development Programme

(j) Pradhan Mantri Fasal Bima Yojana (PMFBY);

(k) Pilot Scheme on Seed Crop Insurance;
(l) Central Sector Scheme on Cattle Insurance;
(m) Universal Health Insurance Scheme;
(n) Rashtriya Swasthya Bima Yojana;
(o) Coconut Palm Insurance Scheme;
(p) Pradhan Mantri Suraksha BimaYojna;
(q) Niramaya Health Insurance Scheme implemented by
the Trust constituted under the provisions of the
National Trust for the Welfare of Persons with Autism,
Cerebral Palsy, Mental Retardation and Multiple
Disabilities Act, 1999;
(r) Bangla Shasya Bima.
Services by way of reinsurance of the insurance schemes

specified in (A)
(A) and (B)
(B) above.
Services Services by the Employees’ State Insurance (ESI)

provided by Corporation to persons governed under the ESI Act, 1948.
specified
Services provided by the EPFO to the persons governed
bodies
under the Employees Provident Funds (EPF) & Miscellaneous
Provisions Act, 1952.
Services by CMPFO to persons governed by Coal Mines
Provident Fund and Miscellaneous Provisions Act, 1948.
Services by NPS Trust to its members against consideration
in the form of administrative fee.
Services provided by the IRDAI to insurers under IRDAI Act,
1999.
Services provided by the SEBI by way of protecting the
interests of investors in securities and to promote the
development of, and to regulate, the securities market.
Pension Services by way of collection of contribution under:
schemes • Atal Pension Yojana
• any pension scheme of SG

Business Services by the following persons in respective capacities –

facilitator/cor (a) business facilitator/business correspondent to a Banking Co.
respondent with respect to accounts in its rural area branch;
(b) any person as an intermediary to a business facilitator
or a business correspondent with respect to services
mentioned in entry (a); or
(c) business facilitator/business correspondent to an
insurance company in rural area.
Services Following services provided to the CG/SG/UT/LA/GA/GE by
provided to way of any activity in relation to any function entrusted to a
Government Panchayat/Municipality under articles 243G/243W of the
Constitution:
 Pure services
 Composite supply of goods and services in which the
value of supply of goods constitutes not more than
25% of the value of the said composite supply.
Service provided by Fair Price Shops to CG/SG/UT by way of
sale of food grains, kerosene, sugar, edible oil, etc. under
Public Distribution System (PDS) against commission/margin.
Services provided to CG/SG/UT under any insurance
scheme for which total premium is paid by CG/SG/UT.
Services provided to CG/SG/UT administration under any
training programme for which total expenditure is borne by
CG/SG/UT administration.
Services provided by GSTN to CG/SG/UT for implementation
of GST.
Leasing Upfront amount payable in respect of service by way of
services granting of long term lease of 30 years, or more of industrial
plots/plots for development of infrastructure for financial
business, provided by the State Government Industrial
Development Corporations or Undertakings or by any other
entity having 20% or more ownership of CGS/SG/UT to the
industrial units/developers in any industrial/financial business
area, subject to specified conditions.

Services of leasing of assets (rolling stock assets including

wagons, coaches, locos) by the Indian Railways Finance
Corporation to Indian Railways.
Legal services Service provided by To
 Arbitral tribunal any person other than BE
 Partnership firm of
BE with an aggregate turnover
advocates or an
up to such amount in the
individual as an
preceding FY as makes it
advocate other than a
eligible for exemption from
senior advocate by way
registration under the CGST
of legal services
Act
 Senior advocate by way
of legal services CG/SG/UT/LA/GA/GE
Legal services provided by a partnership firm of advocates/

individual as an advocate other than a senior advocate to
another advocate/ partnership firm of advocates providing legal
services
Sponsorship Sponsorship of sporting events organised -
of sports (a) by a national sports federation, or its affiliated
events federations, where the participating teams or
individuals represent any district, State, zone or
Country;
(b) by Association of Indian Universities, Inter-University
Sports Board, School Games Federation of India, All
India Sports Council for the Deaf, Paralympic
Committee of India or Special Olympics Bharat;
(c) by the Central Civil Services Cultural and Sports Board;
(d) as part of national games, by the Indian Olympic
Association; or
(e) under Panchayat Yuva Kreeda Aur Khel Abhiyaan Scheme.
Skill Services provided by, _
Development (a) National Skill Development Corporation (NSDC) set up
services by GoI;
(b) Sector Skill Council (SSC) approved by NSDC;

(c) assessment agency approved by SSC/NSDC

(d) a training partner approved by SSC/NSDC
in relation to-
(i) the National Skill Development Programme
implemented by NSDC; or
(ii) a vocational skill development course under the
National Skill Certification and Monetary Reward
Scheme; or
(iii) any other Scheme implemented by NSDC.
Services of assessing bodies empanelled centrally by DGT,
Ministry of Skill Development and Entrepreneurship by way
of assessments under the SDI Scheme.
Services provided by training providers (Project
implementation agencies) under DDUGKY implemented by
Ministry of Rural Development, GoI by way of offering skill or
vocational training courses certified by the National Council
for Vocational Training (NCVT).
Performance Services by an artist by way of a performance in folk or
by an artist classical art forms of music/ dance/ theatre, if the
consideration charged for such performance is not more than
` 1,50,000. This exemption shall not apply to service
provided by such artists as a brand ambassador.
Right to Services by way of admission to:
admission to (i) museum, national park, wildlife sanctuary, tiger reserve
various or zoo
events (ii) protected monument declared under the Ancient
Monuments and Archaeological Sites & Remains Act
1958/any of the State Acts, for the time being in force.
(iii) following events/places where the consideration for
right to admission is not more than ` 500 per person:
(a) circus, dance, or theatrical performance including
drama or ballet;
(b) award function, concert, pageant, musical
performance or any sporting event other than a
recognised sporting event;

(c) recognised sporting event;

(d) planetarium.
Services by an Services by unincorporated body/ non- profit entity to its
unincorporate own members as reimbursement/share of contribution:
d body or a
(i) As a trade union (ii) for providing exempt
non- profit
activity
entity
registered (iii) up to an amount of ` 7,500 per month per member for
under any law sourcing of goods/services from a third person for the
for the time common use of its members in a housing society/residential
being in force complex
Services provided by such entity/body engaged in-
(i) activities relating to the welfare of
industrial/agricultural labour or farmers; or
(ii) promotion of trade, commerce, industry, agriculture,
art, science, literature, culture, sports, education, social
welfare, charitable activities and protection of
environment,
to its own members against membership fee upto ` 1000/-
per member per year.
Other exempt Transfer of a going concern, as a whole or an independent part
services thereof.
Services provided by and to FIFA and its subsidiaries
directly or indirectly related to any of the events under
FIFA U-17 Women’s World Cup 2020 to be hosted in India.
Condition to be fulfilled:
Director (Sports), Ministry of Youth Affairs and Sports
have to certify that the services are directly/indirectly
related to any of the events under FIFA U-17 Women’s
World Cup 2020.
Services associated with transit cargo to Nepal and Bhutan
(landlocked countries).
Services by way of renting of residential dwelling for use as
residence.

Services by a hotel, inn, guest house, club or campsite, by

whatever name called, for residential or lodging purposes, having
value of supply of a unit of accommodation below or equal to
` 1,000 per day or equivalent.
Services by way of giving on hire –

(a) to a state transport undertaking (STU), a motor vehicle
meant to carry more than 12 passengers;
(aa) to a local authority, an Electrically operated vehicle
(EOV) meant to carry more than 12 passengers; or
(b) to a GTA, a means of transportation of goods.
(c) motor vehicle for transport of students, faculty and
staff, to a person providing services of transportation of
students, faculty and staff to an educational institution
providing services by way of pre-school education and
education upto higher secondary school or equivalent.
Service by way of access to a road or a bridge on payment of

toll charges/annuity.
Transmission/distribution of electricity by an electricity

transmission/ distribution utility.
Services provided by an incubatee up to a total turnover of

` 50 lakh in a FY provided:-
(a) total turnover had not exceeded ` 50 lakh during the
preceding FY; and
(b) a period of 3 years has not elapsed from the date of
entering into an agreement as an incubate.
Services by way of licensing, registration and analysis or

testing of food samples supplied by the FSSAI to Food
Business Operators.
Taxable services, provided or to be provided, by a
Technology Business Incubator/ Science and Technology
Entrepreneurship Par (TBI/STEP) recognised by NSTEDB or
bio- incubators recognised by BIRAC.

Services by way of collecting or providing news by an

independent journalist, Press Trust of India or United News
of India.
Services of public libraries by way of lending of books,
publications or any other knowledge-enhancing content or
material.
Services by an organiser to any person in respect of a
business exhibition held outside India.
Services by way of slaughtering of animals.
Services by way of pre-conditioning, pre- cooling,
ripening, waxing, retail packing, labelling of fruits and
vegetables which do not change or alter the essential
characteristics of the said fruits or vegetables.
Services provided by the National Centre for Cold Chain
Development under the Ministry of Agriculture, Cooperation
and Farmer’s Welfare by way of cold chain knowledge
dissemination.
Services by a foreign diplomatic mission located in India.
Services by way of providing information under the RTI Act.
Services provided to a recognised sports body (RSB) by-
(a) an individual as a player, referee, umpire, coach or team
manager for participation in a sporting event organised
by a RSB;
(b) another RSB.
Services provided by operators of the common bio-
medical waste treatment facility to a clinical establishment
by way of treatment/disposal of bio-medical waste/
incidental processes.
Services by way of public conveniences such as provision of
facilities of bathroom, washrooms, lavatories, urinal or toilets.
Services by way of right to admission to the events
organised under FIFA U-17 Women's World Cup 2020.


1. Exempt supply includes supply of any goods or services or both which attracts
nil rate of tax and which may be wholly exempt from tax, but excludes
non-taxable supply. Discuss the validity of the statement.
2. Services provided by an entity registered under section 12AA of the Income-
tax Act, 1961 are exempt from GST if such services are provided by way of
charitable activities. Elaborate the term ‘charitable activities’.
3. Examine which of the following independent services are exempt from GST:
(a) Food supplied by the canteen run by a hospital to the in-patients as
advised by the doctors.
(b) An RWA, registered under GST, collects the maintenance charges of
` 6,500 per month per member.
4. An individual acts as a referee in a football match organized by Sports
Authority of India. He has also acted as a referee in another charity football
match organized by a local sports club, in lieu of a lump sum payment.
Discuss whether any GST is payable on the activities undertaken by him?
5. RXL Pvt. Ltd. manufactures a beauty soap with the brand name ‘Forever
Young’. RXL Pvt. Ltd. has organized a concert to promote its brand.
Ms. Ahana Kapoor, its brand ambassador, who is a leading film actress, has
given a classical dance performance in the said concert. The proceeds of the
concert worth ` 1,20,000 will be donated to a charitable organization.
Examine whether Ms. Ahana Kapoor will be required to pay any GST?
6. Determine the taxable value of supply under GST law with respect to each of
the following independent services provided by the registered persons:
Particulars Gross amount

charged (` )
Fees charged for yoga camp conducted by a charitable trust 50,000

registered under section 12AA of the Income-tax Act, 1961
Amount charged by business correspondent from banking 1,00,000

company for the services provided to the rural branch of a
bank with respect to Savings Bank Accounts

Amount charged by cord blood bank for preservation of 5,00,000

stem cells
Amount charged for service provided by selectors to a 5,20,000

recognized sports body
7. Examine whether GST is exempted on the following independent supplies of

services:
(i) Service provided by a private transport operator to Scholar Boys Higher
Secondary School in relation to transportation of students to and from
the school.
(ii) Services provided by way of vehicle parking to general public in a
shopping mall.
8. A State Transport Undertaking has hired motor vehicles meant to carry 8 - 10
passengers from Fast Cab Renting, a motor vehicle renting company. Give
your comments as to whether any GST is payable in this case.
9. Indiana Engineering College, a recognised educational institution, has
conducted an entrance test examination for various courses run by it and
charged entrance fees from the applicants. Determine whether Indiana
Engineering College is liable to pay GST on the same.
10. Ram, an agriculturist, has stored sugarcane in a warehouse. He has taken
fumigation services in the said warehouse from Gupta Pest Control Co. for
which he paid the consideration of ` 6,000. He seeks your advise on the
taxability or otherwise of the service so availed by him.
11. Poorva acts as a Team Manager for Indian Sports Authority (ISA), a
recognised sports body, for a tennis tournament organised by a multinational
company and received a remuneration of ` 2,00,000. Determine whether GST
is payable on the remuneration received by Poorva.
12. Babloo Transporters, a Goods Transport Agency, transported relief materials
meant for victims of Kerala floods, a natural disaster, by road from Delhi to
Ernakulam, for a company. Babloo Transporters is of the view that it is not
liable to pay GST on the said services provided as said services are exempt.
You are required to advice it on the said issue.
13. Keyan Enterprises, an event organizer, provided services to Breathing Wall
Ltd. by way of organizing business exhibition in New Delhi as part of Make in

India initiative. Keyan Enterprises claims that it is not required to pay GST as
the services provided by way of organizing business exhibition are exempt
from GST. Examine the technical veracity of the claim of Keyan Enterprises, in
the given case.
14. Ekta Charitable trust, registered under section 10(23C)(v) of the Income-tax
Act, 1961, manages a temple in Rohini, Delhi. It has given on rent a
community hall, located within temple premises, to public for celebration of
Teej Mela. Rent charged is ` 9,500. You are required to determine whether
the services provided by Ekta Charitable trust are liable to GST.
15. ST Ltd. has given on hire 5 trucks to Titu Transporters of Delhi (a goods
transport agency) for transporting goods in Central and West Delhi. The
hiring charges for the trucks are ` 7,500 per truck per day. Examine whether
GST is payable in the given case.
8. ANSWERS/HINTS
1. The statement is not fully valid in law. Exempt supply has been defined as
supply of any goods or services or both which attracts nil rate of tax or
which may be wholly exempt from tax and includes non-taxable supply.
2. The term ‘charitable activities’ mean activities relating to-
(i) public health by way of-
(A) care or counseling of
(I) terminally ill persons or persons with severe physical or mental
disability;
(II) persons afflicted with HIV or AIDS;
(III) persons addicted to a dependence-forming substance such
as narcotics drugs or alcohol; or
(B) public awareness of preventive health, family planning or
prevention of HIV infection;
(ii) advancement of religion, spirituality or yoga;
(iii) advancement of educational programmes/skill development relating
to,-
(A) abandoned, orphaned or homeless children;
(B) physically or mentally abused and traumatized persons;

(C) prisoners; or
(D) persons over the age of 65 years residing in a rural area;
(iv) preservation of environment including watershed, forests & wildlife.
3. (a) Services by way of health care services by a clinical establishment, an
authorised medical practitioner or para-medics are exempt from GST.
Food supplied to the in-patients by a canteen run by the hospital, as
advised by the doctor/nutritionists, is a part of composite supply of
healthcare and not separately taxable.
(b) Supply of service by a RWA (unincorporated body or a non- profit
entity registered under any law) to its own members by way of
reimbursement of charges or share of contribution up to an amount of
` 7500 per month per member for providing services and goods for
the common use of its members in a housing society/a residential
complex are exempt from GST. Hence, in the given case, services
provided by the RWA are exempt from GST since the maintenance
charges collected per month per member do not exceed ` 7500.
4. Services provided to a recognized sports body by an individual, inter alia, as
a referee in a sporting event organized by a recognized sports body is
exempt from GST.
Since in the first case, the football match is organized by Sports Authority of
India, which is a recognized sports body, services provided by the individual
as a referee in such football match will be exempt.
However, when he acts as a referee in a charity football match organized by
a local sports club, he would not be entitled to afore-mentioned exemption
as a local sports club is not a recognized sports body and thus, GST will be
payable in this case.
5. Services by an artist by way of a performance in folk or classical art forms of
(i) music, or (ii) dance, or (iii) theatre are exempt from GST, if the
consideration charged for such performance is not more than ` 1,50,000.
However, such exemption is not available in respect of service provided by
such artist as a brand ambassador.
Since Ms. Ahana Kapoor is the brand ambassador of ‘Forever Young’ soap
manufactured by RXL Pvt. Ltd., the services rendered by her by way of a
classical dance performance in the concert organized by RXL Pvt. Ltd. to
promote its brand will not be eligible for the above-mentioned exemption

and thus, be liable to GST. The fact that the proceeds of the concert will be
donated to a charitable organization will not have any bearing on the
eligibility or otherwise to the above-mentioned exemption.
6. Computation of value of taxable supply
Particulars (` )
Fees charged for yoga camp conducted by a charitable trust Nil
registered under section 12AA of the Income-tax Act, 1961
[Note-1]
Amount charged by business correspondent for the services Nil
provided to the rural branch of a bank with respect to
Savings Bank Accounts [Note-2]
Amount charged by cord blood bank for preservation of Nil
stem cells [Note-3]
Service provided by selectors to a recognized sports 5,20,000
body [Note-4]
Notes:
1. Services by an entity registered under section 12AA of the Income-tax
Act, 1961 by way of charitable activities are exempt from GST. The
activities relating to advancement of yoga are included in the
definition of charitable activities. So, such activities are exempt from
GST.
2. Services by business facilitator or a business correspondent to a
banking company with respect to accounts in its rural area branch
have been exempted from GST.
3. Services provided by cord blood banks by way of preservation of stem
cells or any other service in relation to such preservation are exempt
from GST.
4. Services provided to a recognized sports body only by an individual as
a player, referee, umpire, coach or team manager for participation in a
sporting event organized by a recognized sports body are exempt
from GST. Thus, services provided by selectors are liable to GST.

7. (i) Yes. Services provided TO an educational institution by way of

transportation of students are exempted from GST.
(ii) No. Services provided by way of vehicle parking to general public are
not exempted from GST. Therefore, GST is payable on the same.
8. Services by way of giving on hire, inter alia, to a State Transport
Undertaking, a motor vehicle meant to carry more than 12 passengers is
exempt from GST.
Since the motor vehicles given on hire by Fast Cab Renting to the State
Transport Undertaking are meant to carry 8-10 passengers, the same would
not be eligible for exemption and would thus, be liable to GST.
9. Services provided by an educational institution by way of conduct of
entrance examination against consideration in the form of entrance fee are
exempt from GST.
Since in the given case, services provided by Indiana Engineering College -
an educational institution - are by way of conduct of entrance examination
against entrance fee, the same is exempt and thus, GST is not payable in
this case.
10. Services by way of fumigation in a warehouse of agricultural produce are
exempt from GST. In the present case, since Gupta Pest Control Co.
provides services by way of fumigation in the warehouse of sugarcane
[being an agricultural produce], said services are exempt and GST is not
payable on the same.
11. Services provided by a team manager to a recognised sports body for
participation in a sporting event are exempt from GST provided said
sporting event is organised by a recognized sports body.
In the given case, the services are being provided by a team manager to a
recognised sports body, but the sporting event is not organised by a
recognised sports body. Therefore, the services provided by Poorva are not
exempt from GST.
12. Services provided by a goods transport agency, by way of transport in a
goods carriage of relief materials meant for victims of, inter alia, natural or
man-made disasters, calamities, are exempt from GST. Therefore, services
provided by Babloo Transporters will be exempt from GST.

13. No, the claim made by Keyan Enterprises that it is not required to pay GST is
not correct. Services provided by an organiser to any person in respect of a
business exhibition are exempt from GST only when such business
exhibition is held outside India. However, since in the given case, the
exhibition is being organized in India, the services of organization of event
by Keyan Enterprises will not be exempt from GST.
14. Services by a person by way of renting of precincts of a religious place
meant for general public, owned or managed by an entity registered as a
trust or an institution under section 10(23C)(v) of the Income-tax Act are
exempt provided renting charges of premises, community halls,
kalyanmandapam or open area are not ` 10,000 or more per day. Thus, in
the given case, renting of community hall by Ekta Charitable Trust is exempt
from GST, as rent is less than ` 10,000 per day.
15. GST is not payable in case of hiring of trucks to Titu Transporters. Services
by way of giving on hire, inter alia, to a goods transport agency, a means of
transportation of goods are exempt.

CHAPTER
5
TIME AND VALUE OF

SUPPLY
Examples/Illustrations/Questions and Answers given in the Chapter are based on the
position of GST law existing as on 31.10.2020.
UNIT – I : Time of Supply
LEARNING OUTCOMES
After studying this Unit, you will be able to identify the

point in time when the liability to pay GST arises -
 on supply of goods or services where GST is payable under forward
charge
 on supply of goods or services where GST is payable under reverse charge
 on supply of vouchers exchangeable for goods and services
 on supply of goods and services in residual cases
 in case of enhancement of value of supply on account of interest, late
fee/penalty paid for delay in payment of consideration
 apply the concepts relating to time of supply of goods and/or services
in problem solving

5.2 INDIRECT TAXES
Time of supply under forward

charge
Time of supply under reverse

charge
Time of supply of goods
Time of supply of vouchers
exchangeable for goods
Time of Supply
Time of supply in residual cases
Time of supply under forward

charge
Time of supply under reverse

charge
Time of supply of services
Time of supply of vouchers
exchangeable for services
Time of supply in residual cases
1. INTRODUCTION
GST is payable on supply of goods or services. A supply consists of elements that
can be separated in time, like purchase order / agreement, despatch (of goods),
delivery (of goods) or provision or performance of service, entry in the records,
payment, and entry of the payment in the records or deposit in the bank.

TIME & VALUE OF SUPPLY 5.3
So, the question is - at what point of time in the

aforesaid transaction, the GST becomes payable?
Does it become payable when an agreement to
supply goods or services is made, or when the
goods are shipped or the services are provided, or
when the invoice is issued or when payment is
made? What if the goods are shipped over a
period of time? What if the service is provided over
a period of time? Provisions relating to ‘time of supply’ provide answers to all such
and other questions that arise with respect to the time when the liability to pay
CGST and SGST/UTGST (intra-State supply) and IGST (inter-State supply) arises. In
other words, time of supply indicates the point in time when the liability to pay tax
arises. It is important to note here that though the liability to pay tax arises at
the time of supply, the same can be paid to the Government by the due date
prescribed with reference to the said ‘time of supply’. For instance, if time of supply
of a given supply is 25th May, the tax leviable thereon would be payable latest by
20th June, which is the due date prescribed in the CGST Act. 1
The CGST Act provides separate provisions for time of supply for goods and services
vide sections 12 and 13. Section 14 provides for the method of determining the
time of supply in case there is a change in the rate of tax on supply of goods or
services. 2 Sections 12 and 13 employ the provisions of section 31 relating to issue of
tax invoice as a reference point. Therefore, it will be useful to refer to Chapter 8: Tax
Invoice, Credit and Debit Notes; E-Way Bill in conjunction with this Unit.
Events like issue of invoices, receipt of payment, provision of service, receipt of services
as recorded in books of account need to be analysed to determine the time of supply
when the tax on supply is payable under forward charge. When the tax on supply is
payable under reverse charge, events like date of receipt of goods, date of making
payment, date of issue of invoice etc. need to be analysed to determine the time of
supply. The provisions relating to time of supply essentially fix the tax collection event
to the earliest possible time.
1
Provisions relating to due date for payment of tax have been discussed in Chapter 9: Payment
of Tax in Module 2 of this Study Material.
2
Provisions of section 14 relating to determination of time of supply in case of change in rate of
tax in respect of supply of goods or services will be discussed at the Final level.

5.4 INDIRECT TAXES
In the subsequent pages of this Unit, sections 12 and 13 are extracted, followed by
their analysis, to understand how to determine the time of supply of goods and
services respectively. When studying the statutory provisions, the definitions
(extracted first) must also be referred to simultaneously, so as to understand the
precise meaning of the terms used.
Provisions of time of supply under CGST Act have also been made
applicable to IGST Act vide section 20 of the IGST Act.
Associated enterprises shall have the same meaning as assigned to it in
section 92A of the Income-tax Act, 1961 [Section 2(12)].
Broadly, an associated enterprise in relation to another enterprise, means an
enterprise which participates, directly or indirectly, or through one or more
intermediaries, in the management or control or capital of the other
enterprise.
Document includes written or printed record of any sort and electronic
record as defined in clause (t) of section 2 of the Information Technology Act,
2000 [Section 2(41)].
Invoice or tax invoice means the tax invoice referred to in section 31 [Section
2(66)].
Goods means every kind of movable property other than money and
attached to or forming part of the land which are agreed to be severed before
supply or under a contract of supply [Section 2(52)].

GOODS
MEANS
All kind of movable property EXCLUDES Money & Securities
INCLUDES
Actionable claim, Growing Crops, Grass & Things

forming part of land agreed to be severed before
supply or under a contract of supply
Prescribed means prescribed by rules made under this Act on the

recommendations of the Council [Section 2(87)].
Reverse charge means the liability to pay tax by the recipient of supply of
goods or services or both instead of the supplier of such goods or services or
both under sub-section (3) or sub-section (4) of section 9, or under sub-
section (3) or sub- section (4) of section 5 of the Integrated Goods and
Services Tax Act [Section 2(98)].
Services means anything other than goods, money and securities but
includes activities relating to the use of money or its conversion by cash or
by any other mode, from one form, currency or denomination, to another
form, currency or denomination for which a separate consideration is
charged.
Explanation.––For the removal of doubts, it is hereby clarified that the
securities [Section 2(102)].

5.6 INDIRECT TAXES
SERVICES
MEANS
Activities
relating to use
Anything INCLUDING of money or its
conversion for a
consideration
EXCLUDING Activities
facilitating or
arranging
transactions in
Goods Money Securities securities
Recipient of supply of goods or services or both, means—

(a) where a consideration is payable for the supply of goods or services or
both, the person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the person
to whom the goods are delivered or made available, or to whom
possession or use of the goods is given or made available; and
(c) where no consideration is payable for the supply of a service, the person
to whom the service is rendered,
and any reference to a person to whom a supply is made shall be construed as
a reference to the recipient of the supply and shall include an agent acting as
such on behalf of the recipient in relation to the goods or services or both
supplied [Section 2(93)].

Recipient
If consideration is
Person liable to pay the
payable for supply of
consideration
goods and/or services
Person to whom goods are

If no consideration is delivered/made available or to
payable for supply of whom possession/use of the
goods goods is given/ made available
If no consideration is Person to whom the service is

payable for the supply of rendered
services
Recipient includes an agent acting on behalf of the recipient in relation to

the goods and/or services supplied
Supplier in relation to any goods or services or both, shall mean the person
supplying the said goods or services or both and shall include an agent acting
as such on behalf of such supplier in relation to the goods or services or both
and includes
an agent
means the acting on
person behalf of such
Supplier in supplying the supplier in
relation to any said goods relation to the
goods and/or and/or goods and/or
services services services
Voucher means an instrument where there is an obligation to accept it as

consideration or part consideration for a supply of goods or services or both
and where the goods or services or both to be supplied or the identities of
their potential suppliers are either indicated on the instrument itself or in
related documentation, including the terms and conditions of use of such
instrument [Section 2(118)].

5.8 INDIRECT TAXES
3. TIME OF SUPPLY OF GOODS [SECTION 12]
Section 12 Time of supply of goods

Sub-section Clause Particulars
(1) The liability to pay tax on goods shall arise at the time of supply
as determined in terms of the provisions of this section.
(2) The time of supply of goods shall be the earlier of the following
dates, namely:-
(a) the date of issue of invoice by the supplier or the last date
on which he is required, under section 31, to issue the
invoice with respect to the supply; or
the date on which the supplier receives the payment with
(b)
respect to the supply 3:
Provided that where the supplier of taxable goods receives an
amount up to one thousand rupees in excess of the amount
indicated in the tax invoice, the time of supply to the extent of such
excess shall, at the option of the said supplier, be the date of issue
of invoice in respect of such excess amount.
Explanation 1. For the purposes of clauses (a) and (b), the “supply”
shall be deemed to have been made to the extent it is covered by
the invoice or, as the case may be, the payment.
Explanation 2. For the purpose of clause (b), “the date on which the
supplier receives the payment” shall be the date on which the
payment is entered in his books of account or the date on which
the payment is credited to his bank account, whichever is earlier.
3
Practically, in case of goods, the date of receipt of payment by the supplier is no longer a
criterion for determination of time of supply for payment of tax. Refer the ‘Analysis’ of section
12 given in the ensuing pages for detailed discussion in this regard.

(3) In case of supplies in respect of which tax is paid or liable to be paid

on reverse charge basis, the time of supply shall be the earliest of the
following dates, namely:
(a) the date of the receipt of the goods, or
(b) the date of payment as entered in the books of account
of the recipient or the date on which the payment is
debited in his bank account, whichever is earlier, or
(c) the date immediately following thirty days from the date
of issue of invoice or any other document, by whatever
name called, in lieu thereof by the supplier:
Provided that where it is not possible to determine the time of
supply under clause (a), (b), or (c), the time of supply shall be the
date of entry in the books of account of the recipient of supply.
(4) In case of supply of vouchers by a supplier, the time of supply shall be
(a) the date of issue of voucher, if the supply is identifiable at
that point; or
(b) the date of redemption of voucher, in all other cases.
(5) Where it is not possible to determine the time of supply under the
provisions of sub-section (2) or sub-section (3) or sub-section (4),
the time of supply shall––
(a) in a case where a periodical return has to be filed, be the
date on which such return is to be filed; or
(b) in any other case, be the date on which the tax is paid.
(6) The time of supply to the extent it relates to an addition in the
value of supply by way of interest, late fee or penalty for delayed
payment of any consideration shall be the date on which the
supplier receives such addition in value.
Section 31 Tax invoice (to the extent relevant to the time of supply of goods)
(1) A registered person supplying taxable goods shall, before or at the
time of,—

5.10 INDIRECT TAXES
(a) removal of goods for supply to the recipient, where the

supply involves movement of goods; or
(b) delivery of goods or making available thereof to the
recipient, in any other case,
issue a tax invoice showing the description, quantity and value of
goods, the tax charged thereon and such other particulars as may
be prescribed:
Provided that the Government may, on the recommendations of
the Council, by notification, specify the categories of goods or
supplies in respect of which a tax invoice shall be issued, within
such time and in such manner as may be prescribed.
(4) 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.
(7) Notwithstanding anything contained in sub-section (1), where the
goods being sent or taken on approval for sale or return are
removed before the supply takes place, the invoice shall be issued
before or at the time of supply or six months from the date of
removal, whichever is earlier.
Section 12 must be read with section 31, which prescribes in

detail the date on which tax invoice for a supply of goods must
be issued in various situations.
ANALYSIS
Section 12 provides for the determination of time of supply in the following situations:
 Supply of goods under forward charge;
 Supply of goods under reverse charge;
 Supply of vouchers that can be used to pay for goods;
 Residual cases;

 Addition to value of supply of goods by way of interest or late fee or penalty

for delayed payment.
We consider below how the time of supply is determined in each of these situations.
(i) Time of supply of goods under forward charge [Section 12(2) read
with section 31]
As per section 12(2), the time of supply of goods that are taxable under
forward charge, is the earlier of the following two dates:
 Date of issue of invoice by the supplier or the last date on which the
invoice ought to have been issued in terms of section 31, to the extent
the invoice covers the supply of goods; or
 Date of receipt of payment by the supplier, to the extent the payment
covers the supply of goods.
Tax not payable at the time of receipt of advance for supply of goods
– Special procedure for payment of tax in case of supply of goods
In exercise of the powers conferred by section 148 4, the Central Government,
on the recommendation of the GST Council, has issued Notification No.
66/2017 CT dated 15.11.2017 to specify that a registered person (excluding
composition supplier) should pay GST on the outward supply of goods at the
time of supply as specified in section 12(2)(a), i.e. date of issue of invoice or the
last date on which invoice ought to have been issued in terms of section 31.
In simple words, all taxpayers under forward charge (except composition
suppliers) are not required to pay GST at the time of receipt of advance in
relation to supply of goods. The entire GST shall be payable only when the
invoice for the supply of such goods is issued or ought to have been issued.
Thus, time of supply of goods for the purpose of payment of tax is
the date of issue of invoice or the last date when the invoice ought to
have been issued under section 31.
4
Provisions of section 148 will be discussed at the Final level. Section 148 provides that the
Government may, on the recommendations of the Council, and subject to such conditions and
safeguards as may be prescribed, notify certain classes of registered persons, and the special
procedures to be followed by such persons including those with regard to registration, furnishing
of return, payment of tax and administration of such persons.

5.12 INDIRECT TAXES
(1) A Ltd. enters into an agreement with B Ltd. to supply 100 kg of raw
material. However, A Ltd. supplies only 80 kg of raw material and issues
the invoice for the same. Here, the supply would be deemed to have
been made in respect of 80 kg of raw material, i.e. to the extent covered by the
invoice. Therefore, the provisions relating to time of supply will also be applicable
to supply of 80 kg of raw material and not for entire 100 kg of raw material.
The relief of not paying GST at the time of receipt of advance

is available only in case of supply of goods and not for
supply of services.
Meaning of “Date of receipt of payment”

“Date of receipt of payment” in the above situation refers to the date on which
the payment is recorded in the books of account of the entity (supplier of
goods) that receives the payment, or the date on which the payment is
credited to the entity’s bank account, whichever is earlier.
Significance of “to the extent the invoice or payment covers the
supply of goods”
Suppose a part of the consideration is paid in advance or invoice is issued for
part payment, the time of supply will not cover the full supply. The supply is
deemed to have been made to the extent it is covered by the invoice or the
part advance payment.
However, it may be noted that in case of goods (except for composition supplier),
tax is payable only on the basis of issuance of invoice/last date for the purpose of
issuance of invoice even if any advance or part payment has been received
before the issuance of invoice/last date for the purpose of issuance of invoice.
Time limit for issuance of invoice for supply of goods under
section 31
Section 12(2) refers to the last date on which a supplier is required to issue
the invoice under section 31. Following are the relevant provisions of section
31 in this regard.
 As per section 31(1), the invoice needs to be issued either before or at

the time of removal of goods (where supply involves movement of

goods) or delivery of goods/ making goods available to recipient (in

any other case).
 In case of continuous supply of goods, the invoice should be issued

before or at the time of issuance of periodical statement/receipt of
periodical payment [Section 31(4)].
Continuous supply of goods is a supply of goods provided or agreed to

be provided continuously or on recurring basis, under a contract, and
for which the supplier issues an invoices to the recipient on a regular or
periodic basis [Section 2(32)]. The said term has been discussed in
Chapter 8: Tax Invoice; Credit and Debit Notes; E-Way Bill in Module 2 of
this Study Material.
 In case of goods sent or taken on approval for sale or return, invoice

should be issued before or at the time of supply or 6 months from the
date of removal, whichever is earlier [Section 31(7)].
(2) Sphinx Pvt. Ltd. enters into a contract for supply of 100 office
chairs @ ` 15,000 with Joy Sales on 21st August. Chairs are removed
from the warehouse of Sphinx Pvt. Ltd. on 5th September along with
the invoice of even date. Joy Sales has paid 30% of the total contract value on
21st August; balance 70% is paid after delivery of chairs on 10th September. Since
the invoice is issued on the date of removal of goods, it is issued within the
prescribed time limit and hence, time of supply for payment of tax on entire
contract value of ` 15,00,000 is the date of issue of invoice, i.e. 5th September.
No GST will be payable on advance of ` 4,50,000 received on 21st August.
The provisions relating to time of supply of goods as contained in section 12
in case of forward charge read with Notification No. 66/2017 CT dated
15.11.2017, have been depicted by way of a diagram given at next page.

5.14 INDIRECT TAXES
TIME OF SUPPLY OF GOODS UNDER FORWARD CHARGE AS

PER SECTION 12
Date of issue of invoice /

Last date of issue of invoice
under section 31
Whichever is earlier
Date on which the payment
is recorded in the books of
account of the supplier –
presently irrelevant for the
purpose of payment of tax
Date on which the payment
BANK
is credited to the supplier’s
bank account - presently
irrelevant for the purpose
of payment of tax
SPECIAL PROCEDURE UNDER SECTION 148 FOR PAYMENT OF TAX

IN CASE OF GOODS
GST to be paid at the

As specified in section 12(2)(a)
time of supply
Date of issue of invoice

/ Last date of issue of
invoice under section 31
Effectively, in case of goods, no GST is payable at the time of receipt

of advance for supply of goods.

ILLUSTRATION 1
A machine has to be supplied at site. It is done by sourcing various components
from vendors and assembling the machine at site. The details of the various
events are:
17th September Purchase order with advance of ` 50,000 is received for

machine worth ` 12 lakh and entry duly made in the seller’s
books of account
20th October The machine is assembled, tested at site, and accepted by
buyer
23rd October Invoice raised
4th November Balance payment of ` 11,50,000 received
Determine the time of supply(ies) in the above scenario for the purpose of
payment of tax.
ANSWER
As per Notification No. 66/2017 CT dated 15.11.2017, a registered person
(excluding composition supplier) has to pay GST on the outward supply of goods
at the time of supply as specified in section 12(2)(a) i.e., date of issue of invoice or
the last date on which invoice ought to have been issued in terms of section 31.
Therefore, the time of supply for the purpose of payment of tax for the entire
amount of ` 12,00,000 is 20th October which is the date on which the goods
were made available to the recipient as per section 31(1)(b), and the invoice
should have been issued on this date [Section 12(2)(a)].
ILLUSTRATION 2
Gas is supplied by a pipeline to the recipient. The supply is to be made for a
period of one year. Monthly payments are to be made by the recipient as per
the contract. The details of the payment made are:
July 5, August 5, September 5 Payments of ` 2 lakh made in each month

Determine the time of supply for the purpose of payment of tax.
ANSWER
As per Notification No. 66/2017 CT dated 15.11.2017, a registered person
(excluding composition supplier) has to pay GST on the outward supply of
goods at the time of supply as specified in section 12(2)(a), i.e. date of issue

5.16 INDIRECT TAXES
of invoice or the last date on which invoice ought to have been issued in
terms of section 31. As per section 31(4), in case of continuous supply of
goods, where successive statements of accounts or successive payments are
involved, the invoice is issued before or at the time of each such statement is
issued or, as the case may be, each such payment is received. Therefore,
invoices should be issued for ` 2 lakh each on or before July 5, August 5 and
September 5, when monthly payments of ` 2 lakh are received.
Thus, assuming that the invoice is issued on July 5, August 5 and September
5, the time of supply for the purpose of payment of tax will be July 5, August
5 and September 5 respectively for goods valued at ` 2 lakh each.
Excess payment upto ` 1000: Option of taking invoice date as time of
supply
In terms of the proviso to sub-section (2) of section 12, for a payment of up
to ` 1,000 received in excess of the value of the goods invoiced, the supplier
can choose to take the date of invoice issued with respect to such excess
amount as the time of supply of goods for such excess value.
Since, w.e.f. 15.11.2017, GST on supply of goods is payable only on the basis
of issuance of invoice, this provision is practically irrelevant for supply of
goods.
If neither the date of invoice nor the date of payment is available, the
time of supply is determined in terms of the residual provisions under sub-
section (5) of section 12 [discussed under point (iv)].
(ii) Time of supply of goods under reverse charge [Section 12(3)]

The time of supply of goods on which GST is payable on reverse charge basis
under sub-sections (3) and (4) of section 9 of CGST Act is determined in terms
of section 12(3)(a), (b) and (c), as follows:
The time of supply for such goods will be the earliest of the following dates:
 Date on which the goods are received, or
 Date on which payment is recorded in the books of account of the
recipient, or the date on which the same is debited in his bank account,
whichever is earlier, or
 Date immediately following 30 days from the date of issue of invoice
(or document by some other name in lieu of invoice) by the supplier.

If it is not possible to determine the time of supply by using these parameters,

then the time of supply will be the date of entry of goods in the books of
account of the recipient of supply.
The relief of not paying GST at the time of receipt of

advance is available only in case of supply of goods, the tax
on which is payable under forward charge. In case of
reverse charge, GST is payable at the time of payment, if payment is
recorded/made before receipt of goods (advance payment).
The provisions relating to time of supply of goods in case of reverse charge are
depicted by way of a diagram given at next page.
ILLUSTRATION 3
Determine the time of supply from the given information.
May 4 Supplier invoices goods taxable on reverse charge basis to Bridge &
Co. (30 days from the date of issuance of invoice elapse on June 3)
May 12 Bridge & Co receives the goods
May 30 Bridge & Co makes the payment
ANSWER
Here, May 12 will be the time of supply, being the earliest of the three stipulated
dates namely, receipt of goods, date of payment and date immediately following
30 days of issuance of invoice [Section 12(3)]. (Here, date of invoice is relevant
only for calculating thirty days from that date.)
ILLUSTRATION 4
May 4 Supplier invoices goods taxable on reverse charge basis to Pillar &
Co. (30 days from the date of issuance of invoice elapse on June 3)
June 12 Pillar & Co receives the goods, which were held up in transit
July 3 Payment made for the goods

5.18 INDIRECT TAXES
TIME OF SUPPLY OF GOODS UNDER REVERSE CHARGE
Date on which goods

are received
Date on which the

payment is recorded in
the books of account
of the recipient of
goods
Date on which the

BANK
payment is debited
from the bank account
of the recipient of
goods
31st day from the issue

st DAY
of invoice by the
supplier
If it is not possible to determine the time of supply through above parameters,

THEN
TIME OF SUPPLY WILL BE
Date on which goods are recorded in

the books of account of the
recipient of supply

ANSWER
Here, June 4, 31st day from the date of supplier’s invoice, will be the time of
supply, being the earliest of the three stipulated dates namely, receipt of
goods, date of payment and date immediately following 30 days of issuance
of invoice [Section 12(3)].
(iii) Time of supply of vouchers exchangeable for goods [Section 12(4)]
As commonly understood, vouchers are instruments that can be exchanged
as payment for goods or services of the designated value. As per the
definition, they are instruments, that certain persons (potential suppliers) are
obliged to accept as consideration, part or full, for goods and/or services.
The instrument or its related documentation sets out the terms and
conditions of use, the goods and/or services covered, and the identity of the
potential suppliers of such goods and/or services.
As per section 12(4), the time of supply of vouchers exchangeable for goods
is-
 Date of issue of the voucher, if the supply that it covers is identifiable
at that point, or
 Date of redemption of the voucher in other cases.
The provisions relating to time of supply of vouchers exchangeable for goods
are depicted by way of diagram given at next page.
(3) Acmesales Limited sells food coupons to a company. The
company gives these coupons to its employees as part of the
agreed perquisites. The coupons can be redeemed for purchase of
any item of food /provisions in the outlets that are part of the program.
As the supply against which the coupon will be redeemed is not known on
the date of the sale of the coupon, the time of supply of the coupon will be
the date on which the employee redeems it against food / provision items of
his choice.
(4) With each purchase of a large pizza during the Christmas week from
Perfect Pizza, one can buy a voucher for ` 20 which will be redeemable till 5th
Jan for a small pizza. As the supply against which the voucher will be
redeemed is known on the date of issue of the vouchers, the time of supply
is the date of issue of the voucher.

5.20 INDIRECT TAXES
TIME OF SUPPLY OF VOUCHERS EXCHANGEABLE FOR GOODS
Supply is
not
Any food
identifiab DATE OF
item can be
le at the REDEMPT-
purchased
time of ION OF
from the
issue of VOUCHER
food pass
the
voucher
Supply is
Only a shirt
identifiab
can be DATE OF
le at the
purchased ISSUE OF
time of
from the VOUCHER
issue of
shirt coupon
voucher
(iv) Time of supply of goods in residual cases [Section 12(5)]

If the situation is not covered by any of the provisions discussed above, the
time of supply is fixed under sub-section (5) of section 12, in the following
manner:
 Due date for filing of the periodical return, or
 In any other case, date on which GST is paid.
The provisions relating to time of supply of goods in residual cases are depicted
by way of diagram given at next page.

TIME OF SUPPLY OF GOODS IN RESIDUAL CASES

Where a periodical return
is to be filed
DATE ON WHICH RETURN IS

REQUIRED TO BE FILED
DATE ON WHICH GST IS PAID
(v) Time of supply in case of enhancement in value on account of

interest/late fee etc. for delayed payment of consideration
[Section 12(6)]
Commercially, most of the contract of supplies stipulate payment of
interest/late fee/penalty etc. in case of payment of consideration beyond the
agreed time period. Such interest/late fee/penalty etc. is includible in value
of taxable supply [This concept has been discussed in detail in Unit II: Value of
Supply in the subsequent pages of this Chapter]. So, the point to consider here is
that when the liability to pay GST would arise in such cases of addition in value.
Section 12(6) prescribes that time of supply in case of addition in value on
account of interest/ late fee/penalty for delayed payment of consideration for
goods is the date on which the supplier receives such addition in value.
(5) Radha Traders sold goods to Shyam Sales on 6th June with a
condition that interest @ 2% per month will be charged if Shyam
Sales failed to make payment within 15 days of the delivery of the
goods. Goods were delivered as also the invoice was issued on 6th June. Shyam
Sales paid the consideration for the goods on 6th July along with applicable
interest.
Time of supply for the goods sold is the date of issue of invoice i.e., 6th June and
the time of supply for addition in value by way of interest is the date when such
addition in value is received by Radha Traders i.e., 6th July.

5.22 INDIRECT TAXES
The provisions relating to time of supply of goods as contained in section 12

are summarised in the diagram given below
Time of supply of goods Time of supply of goods Time of supply of vouchers

under forward charge under reverse charge exchangeable for goods
Date of issue/ due date of Date of issue of voucher, if the

issue of tax invoice under Date of receipt of goods supply is identifiable at that
section 31 point
Date of recording the payment
Date of recording the payment in the books of accounts of Date of redemption of voucher
in the books of accounts of the recipient of goods in other cases
the supplier
Date on which payment is
Date on which payment is debited from the bank account
credited in the bank account of the recipient of goods
of the supplier
31st day from supplier’s
whichever is earlier invoice
whichever is earlier
No GST at the time of receipt

of advance for supply of
goods: GST to be paid on date If the above events are
of issue/due date of issue of UNASCERTAINABLE
tax invoice under section 31 Time of supply = Date of entry of good in
books of account of recipient of goods
Residual case (If all of Where a periodical return is to be

the above do not work Time of supply filed, due date of such return
for a situation) OR
In any other case, the date on
which tax is paid
Addition in value by
way of interest, late
fee/penalty for delayed
payment of Date on which the supplier
Time of supply
consideration for receives such addition in value
goods

4. TIME OF SUPPLY OF SERVICES [SECTION 13]
Section 13 Time of supply of services
(1) The liability to pay tax on services shall arise at the time of supply, as
determined in terms of the provisions of this section.
(2) The time of supply of services shall be the earliest of the following
dates, namely:-
(a) the date of issue of invoice by the supplier, if the invoice is

issued within the period prescribed under section 31 or the
date of receipt of payment, whichever is earlier; or
(b) the date of provision of service, if the invoice is not issued

within the period prescribed under section 31 or the date of
receipt of payment, whichever is earlier; or
(c) the date on which the recipient shows the receipt of services
in his books of account, in a case where the provisions of
clause (a) or clause (b) do not apply:
Provided that where the supplier of taxable service receives an amount

up to one thousand rupees in excess of the amount indicated in the
tax invoice, the time of supply to the extent of such excess amount
shall, at the option of the said supplier, be the date of issue of invoice
relating to such excess amount.
Explanation - For the purposes of clauses (a) and (b) -
(i) the supply shall be deemed to have been made to the extent
it is covered by the invoice or, as the case may be, the
payment.

5.24 INDIRECT TAXES
(ii) “the date of receipt of payment” shall be the date on which

the payment is entered in the books of account of the
supplier or the date on which the payment is credited to his
bank account, whichever is earlier.
(3) In case of supplies in respect of which tax is paid or liable to be paid

on reverse charge basis, the time of supply shall be the earlier of the
following dates, namely-
(a) the date of payment as entered in the books of account of

the recipient or the date on which the payment is debited in
his bank account, whichever is earlier; or
(b) the date immediately following sixty days from the date of
issue of invoice or any other document, by whatever name
called, in lieu thereof by the supplier:
Provided that where it is not possible to determine the time of supply

under clause (a) or clause (b), the time of supply shall be the date of
entry in the books of account of the recipient of supply:
Provided further that 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 account of the recipient of supply
or the date of payment, whichever is earlier.
(4) In case of supply of vouchers by a supplier, the time of supply shall be-
(a) the date of issue of voucher, if the supply is identifiable at

that point; or
(b) the date of redemption of voucher, in all other cases;
(5) Where it is not possible to determine the time of supply of services

under the provisions of sub-section (2) or sub-section (3) or sub-
section (4), the time of supply shall
(a) in a case where a periodical return has to be filed, be the date

on which such return is to be filed; or
(b) in any other case, be the date on which the tax is paid.

(6) The time of supply to the extent it relates to an addition in the value
of supply by way of interest, late fee or penalty for delayed payment
of any consideration shall be the date on which the supplier receives
such addition in value.
Section 31 Tax invoice (to the extent relevant to time of supply of services)
A registered person supplying taxable services shall, before or after the

provision of service but within a prescribed period, issue a tax invoice,
showing the description, value, tax charged thereon and such other
particulars as may be prescribed:
Provided that the Government may, on the recommendations of the

(2) Council, by notification and subject to such conditions as may be
mentioned therein, specify the categories of services in respect of which–
(a) any other document issued in relation to the supply shall be

deemed to be a tax invoice; or
(b) tax invoice may not be issued.
Subject to the provisions of clause (d) of sub-section (3), in case of

continuous supply of services,––
(a) where the due date of payment is ascertainable from the

contract, the invoice shall be issued on or before the due date
of payment;
(5) (b) where the due date of payment is not ascertainable from the
contract, the invoice shall be issued before or at the time
when the supplier of service receives the payment;
(c) where the payment is linked to the completion of an event,

the invoice shall be issued on or before the date of
completion of that event.
(6) In a case where the supply of services ceases under a contract before
the completion of the supply, the invoice shall be issued at the time
when the supply ceases and such invoice shall be issued to the extent
of the supply made before such cessation.

5.26 INDIRECT TAXES
Chapter VI: Tax Invoice, Credit and Debit Notes of CGST Rules
Time limit for issuing tax invoice
The invoice referred to in rule 46, in case of taxable supply of services,
shall be issued within a period of thirty days from the date of supply
of service:
Provided that where the supplier of services is an insurer or a banking
company or a financial institution, including a non-banking financial
company, the period within which the invoice or any document in lieu
thereof is to be issued shall be forty five days from the date of supply
Rule 47 of service:
Provided further that an insurer or a banking company or a financial
institution, including a non- banking financial company, or a telecom
operator, or any other class of supplier of services as may be notified
by the Government on the recommendations of the Council, making
taxable supplies of services between distinct persons as specified in
section 25, may issue the invoice before or at the time such supplier
records the same in his books of account or before the expiry of the
quarter during which the supply was made.
Section 13 must be read with section 31 and rule 47 of CGST Rules,

which prescribe in detail the date on which tax invoice for a supply
of service must be issued in various situations.
ANALYSIS
Section 13 provides for the determination of the time of supply in the following situations:
 Supply of service under forward charge,
 Supply of service taxable under reverse charge,
 Supply of vouchers that can be used to pay for services,
 Residual cases,
 Addition to value of supply of services by way of interest or late fee or penalty
for delayed payment.

Below we shall consider these in detail.

(i) Time of supply of service under forward charge [Section 13(2) read
with section 31 and rule 47 of CGST Rules]
For supply of service on which the supplier is liable to pay tax, the time of
supply will be the earlier of the dates arrived at by methods (A) and (B), as
follows:
(A) Date of invoice or date of receipt of payment (to the extent the invoice
or payment covers the supply of services), whichever is earlier, if the
invoice is issued within the time prescribed under section 31;
(B) Date of provision of service or date of receipt of payment (to the extent
the payment covers the supply of services), whichever is earlier, if the
invoice is not issued within the time prescribed under section 31,
If the above two methods [(A) and (B)] are not applicable, the time of supply
will be the date on which the recipient of service shows receipt of the service
in his books of account.
Meaning of “date of receipt of payment”
“Date of receipt of payment” in the above situation refers to the date on which
the payment is recorded in the books of account of the entity (supplier of
service) that receives the payment, or the date on which the payment is
credited to the entity’s bank account, whichever is earlier.
Significance of “to the extent the invoice or payment covers the
supply of services”
Suppose a part of the consideration is paid in advance or invoice is issued for
part payment, the time of supply will not cover the full supply. The supply
shall be deemed to have been made to the extent it is covered by the invoice
or the part payment.
The provisions relating to time of supply of services in case of forward charge
can be depicted by way of a diagram given at 5.30.
Time limit for issuance of invoice for supply of services under
section 31
The criteria to determine the time of supply of services depend upon whether
the invoice is issued within the time prescribed under section 31. Following
are the relevant provisions in this regard:

5.28 INDIRECT TAXES
 As per section 31(2) read with rule 47 of CGST Rules, the tax invoice needs
to be issued either before the provision of service or within 30 days (45
days in case of insurance companies/ banking companies/ financial
institutions including NBFCs) from the date of supply of service.
 In case of insurance companies/ banking companies/ financial
institutions including NBFCs/ telecom companies/ notified supplier of
services making taxable supplies between distinct persons as specified
in section 25 5, invoice may be issued before or at the time of recording
such supply in the books of account or before the expiry of the quarter
during which the supply was made [Second proviso to rule 47].
 In case of continuous supply of services, the invoice should be issued
either (i) on/ before the due date of payment or (ii) before/ at the time
when the supplier of service receives the payment, if the due date of
payment is not known (iii) on/ before the date of completion of the
milestone event when the payment is linked to completion of an event
[Section 31(5)].
Continuous supply of services are provided, or agreed to be provided,
continuously or on recurrent basis, under a contract, for a period
exceeding 3 months with periodic payment obligations and includes
supply of such services as the Government may notify [Section 2(33)].
The said term has been discussed in Chapter 8: Tax Invoice; Credit and
Debit Notes; E-Way Bill in Module-2 of this Study Material.
 In case of cessation of supply of services before completion of supply,
the invoice (to the extent of the supply made before such cessation)
should be issued at the time when the supply ceases [Section 31(6)].
(6) Mohit Khanna & Sons is a firm of management consultants.
The firm enters into a contract with Spark Pvt. Ltd. on 1st September
for providing consultancy services. Provision of service gets
completed on 15th September. Invoice for the service is issued on 20th
September and payment is received on 10th October. Since invoice is issued
within 30 days from the date of supply of service, time of supply is the date
of issue of invoice, i.e. 20th September being earlier than the date of receipt
of payment.
5
Concept of distinct persons has been discussed in Chapter 7: Registration

(7) If in the above example, invoice is issued on 5th October, the

time of supply will be the date of provision of service, i.e. 15th
September being earlier than the date of receipt of payment. This
would be so as the invoice is not issued within 30 days from the date of supply
of service.
ILLUSTRATION 5
Determine the time of supply from the following particulars:
6th May Booking of convention hall, sum agreed ` 15000, advance of

` 3000 received
15th September Function held in convention hall
27th October Invoice issued for ` 15000, indicating balance of ` 12000 payable
3rd November Balance payment of ` 12000 received
ANSWER
As per section 31(2) read with rule 47 of CGST Rules, the tax invoice is to be
issued within 30 days of supply of service. In the given case, the invoice is
not issued within the prescribed time limit. As per section 13(2)(b), in a case
where the invoice is not issued within the prescribed time, the time of supply
of service is the date of provision of service or receipt of payment, whichever
is earlier.
Therefore, the time of supply of service to the extent of ` 3,000 is 6th May as
the date of payment of ` 3000 is earlier than the date of provision of service.
The time of supply of service to the extent of the balance ` 12,000 is
15th September which is the date of provision of service.
ILLUSTRATION 6
Investigation shows that ABC & Co carried out service of cleaning and repairs
of tanks in an apartment complex, for which the Apartment Owners’
Association showed a payment in cash on 4th April to them against work of this
description. The dates of the work are not clear from the records of ABC & Co.
ABC & Co have not issued invoice or entered the payment in their books of
account.

5.30 INDIRECT TAXES
TIME OF SUPPLY OF SERVICES UNDER FORWARD CHARGE
Is invoice
YES Time of
issued within Date of issue of
Supply
the time invoice
specified u/s
31? Date on which the
NO payment is
recorded in the
Time of
Supply books of account of
the supplier
BANK
Date on which the
payment is credited
to the supplier’s
bank account
Date of Date on which the Date on

provision of payment is which the
service recorded in the payment is
books of account of credited to
the supplier the supplier’s
bank account
If time of supply
cannot be Date of receipt of services in
determined by the books of account of the
both the above recipient
methods, then

ANSWER
The time of supply cannot be determined vide the provisions of clauses (a)
and (b) of section 13(2) as neither the invoice has been issued nor the date
of provision of service is available as also the date of receipt of payment in
the books of the supplier is also not available. Therefore, the time of supply
will be determined vide clause (c) of section 13(2) i.e., the date on which the
recipient of service shows receipt of the service in his books of account.
Thus, time of supply will be 4th April, the date on which the Apartment
Owners’ Association records the receipt of service in its books of account.
Excess payment upto ` 1000: Option of taking invoice date as

time of supply
In terms of the proviso to sub-section (2) of section 13, for a payment of up

to
` 1,000 received in excess of the invoice value, the supplier can choose to
take the date of invoice issued with respect to such excess amount as the
time of supply of services in relation to this excess value.
This provision facilitates the supplier to defer payment of tax on small

amounts typically received by him in excess of the invoice amount.
(8) A telephone company receives ` 5000 against an invoice of `

4800. The excess amount of ` 200 can be adjusted against next
invoice. The company has the option to take date of next invoice as
the time of supply of service in relation to the amount of ` 200 received in
excess against earlier invoice.
(ii) Time of supply of services under reverse charge [Section 13(3)]
The time of supply of service on which GST is payable on reverse charge basis
(except on services received from associated enterprises located outside
India) under sub-sections (3) and (4) of section 9 is determined in terms of
section 13(3)(a) and (b) as follows:

5.32 INDIRECT TAXES
The time of supply for such service will be the earlier of the following:
 Date of payment, or
 Date immediately following 60 days since issue of invoice (or any other
document in lieu of invoice) by the supplier.
If it is not possible to determine the time of supply by using these parameters,

then the time of supply will be the date of entry of the service in the books
of account of the recipient of supply.
Meaning of “Date of payment”
“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 (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
In the case of service received from an associated enterprise located outside

India, the time of supply will be the date of payment for the service, or the
date of entry of the service in the books of account of the recipient, whichever
is earlier.
The provisions relating to time of supply of services in case of reverse charge

can be depicted by way of a diagram given at the next page.

TIME OF SUPPLY OF SERVICES UNDER REVERSE CHARGE
Date on which the

payment is recorded in
the books of account of
the recipient of services
Date on which the

payment is debited from
the bank account of the
recipient of services
st DAY 61st day from issue of

invoice by the supplier
If it is not possible to determine the time of supply through above parameters,

THEN
TIME OF SUPPLY WILL BE
Date of entry of service in the books

of account of the recipient of supply
Supply of services
from AE located
outside India
Date of payment for the

service
Date of
Associated Enterprises (AE) entry of the
service in
the books
of account
of the
recipient

5.34 INDIRECT TAXES
ILLUSTRATION 7
Determine the time of supply from the given information. (Assume that service
being supplied is taxable under reverse charge)
May 4 The supplier of service issues invoice for service provided.

There is a dispute about amount payable, and payment is
delayed.
August 21 Payment made to the supplier of service
ANSWER
Here, July 4 will be the time of supply, being the earliest of the two stipulated
dates namely, date of payment and date immediately following 60 days since
issue of invoice.
ILLUSTRATION 8
May 4 A German company issues email informing its associated company

ABC Ltd. of the cost of technical services provided to it.
July 2 ABC Ltd transfers the amount to the account of the German company
ANSWER
As there is no prior entry of the amount in the books of account of ABC Ltd.,
July 2 will be the time of supply, being the date of payment in terms of second
proviso to section 13(3).
(iii) Time of supply of vouchers exchangeable for services [Section 13(4)]
The term voucher has already been explained under the Heading “Time of
Supply of Goods”. The time of supply of vouchers that are exchangeable for
services is stipulated as the date of issue of the voucher if the supply is
identifiable at that point, or the date of redemption of the voucher in other cases.

(9) Best Hospitality Services enters into agreement with Drive

Marketing Ltd by which Drive Marketing Ltd. markets Best
Hospitality Services’ hotel rooms and sells coupons / vouchers
redeemable for a discount against stay in the hotel.
As the supply against which the voucher will be redeemed is identifiable, the
time of supply of the voucher will be its date of issue.
(iv) Residual case [Section 13(5)]

If the situation is not covered by any of the provisions discussed above, the
time of supply is fixed under sub-section (5) of section 13, in the following
manner:
 Date on which periodical return for the period is required to be filed, or
 In any other case, date on which GST is paid.
(v) Enhancement of value on account of interest/late fee etc. for delayed

payment of consideration [Section 13(6)]
The provisions for time of supply in case of addition in value by way of
interest, late fee/penalty for delayed payment of consideration are the same
for goods and services.
Section 13(6) prescribes that time of supply in case of addition in value by

way of interest/ late fee/penalty for delayed payment of consideration for a
service is the date on which the supplier receives such addition in value.

5.36 INDIRECT TAXES
The provisions relating to time of supply of services as contained in section

13 are summarised in the diagram given below
Time of supply of services Time of supply of services

Time of supply of Time of supply of
under forward charge when under forward charge when
services under vouchers exchangeable for
the invoice is issued within the invoice is not issued
reverse charge services
the time specified u/s 31 within the time specified u/s
31
Date of recording the
payment in the books of Date of issue of voucher,
Date of issue of tax Date of provision of if the supply is
accounts of the recipient of
invoice service identifiable at that point
services
Date of recording the Date on which payment is

Date of recording the
payment in the books of debited from the bank Date of redemption of
payment in the books of
accounts of the supplier account of the recipient of voucher in other cases
accounts of the supplier
services
Date on which payment is Date on which payment is 61st day from supplier’s
credited in the bank credited in the bank invoice
account of the supplier account of the supplier
whichever is earlier whichever is earlier whichever is earlier
If the above events are UNASCERTAINABLE If the above events are

UNASCERTAINABLE
Time of Supply = Date of receipt of services in the
books of account of the recipient of supply Time of supply = Date of entry of
services in books of account of the
recipient of supply
Residual case (If all the Where a periodical return is to be filed,

above do not work for a due date of such return
situation) Time of supply OR
In any other case, the date on which tax
is paid
Addition in value by way of
interest, late fee/penalty for
Date on which the supplier receives
delayed payment of Time of supply
such addition in value
consideration for services

The provisions relating to time of supply of goods and services can be better
understood if the same are studied simultaneously appreciating the similarities and
differences between the two. Therefore, such provisions have been summarised by
way of a comparison table to help students remember and retain the provisions in
a better and effective manner:
TIME OF SUPPLY WHERE TAX IS PAYABLE UNDER FORWARD CHARGE
Time of supply of goods [Section Time of supply of services [Section

12(2)] 13(2)]
Earliest of the following: (a) Invoice issued within the time

(a) Date of issue of invoice by the period prescribed under section
supplier or the last date on which 31
he is required under section 31, Earliest of the following:
to issue the invoice with respect to  Date of issue of invoice by the
the supply supplier
(b) Date on which the supplier  Date of receipt of payment
receives the payment (entering (entering the payment in books
the payment in books of account or of account or crediting of
crediting of payment in bank payment in bank account,
account, whichever is earlier) with whichever is earlier)
respect to the supply (b) Invoice not issued within the time
No GST at the time of receipt of period prescribed under section
advance for supply of goods: In case 31
of supply of goods by a registered Earliest of the following:
person under forward charge (excluding
 Date of provision of service
composition supplier), GST is to be paid
 Date of receipt of payment
on the outward supply of goods on the
(entering the payment in books
date of issue of invoice or the last date
of account or crediting of
on which invoice ought to have been
payment in bank account,
issued in terms of section 31
whichever is earlier)
[Notification No. 66/2017 CT dated
15.11.2017].

5.38 INDIRECT TAXES
(c) When the above events are

unascertainable
 Date on which the recipient
shows the receipt of services in
his books of account
TIME LIMIT FOR RAISING INVOICES
Supply of goods [Section 31(1)] Supply of services [Section 31(2)]
Before or at the time of,- Before or after the provision of service

(a) removal of goods for supply to but within 30 days [45 days in case of
the recipient, where the supply insurance companies/banking and
involves movement of goods, or financial institutions including NBFCs]
(b) delivery of goods or making from the date of supply of services
available thereof to the
recipient, in any other case
TIME OF SUPPLY WHERE TAX IS PAYABLE UNDER REVERSE CHARGE
Time of supply of goods [Section Time of supply of services [Section

12(3)] 13(3)]
Earliest of the following: Earliest of the following:

(a) Date of receipt of goods, or (a) Date of payment as entered in the
(b) Date of payment as entered in the books of account of the recipient or
books of account of the recipient or the date on which the payment is
the date on which the payment is debited from his bank account,
debited from his bank account, whichever is earlier, or
whichever is earlier, or (b) 61st day from the date of issue of
(c) 31st day from the date of issue of invoice by the supplier
invoice by the supplier
Where the above events are not ascertainable, the time of supply shall be the
date of entry in the books of account of the recipient of supply

- Import of service from associated

enterprise Date of entry in the books of
account of the recipient or the date of
payment, whichever is earlier
TIME OF SUPPLY OF VOUCHERS EXCHANGEABLE FOR GOODS AND SERVICES
Supply of vouchers exchangeable for goods and services [Sections 12(4) and
13(4)]
(a) Supply of goods or services is identifiable at the time of issue of voucher

 Date of issue of the voucher
(b) Other cases
 Date of redemption of the voucher
TIME OF SUPPLY OF GOODS AND SERVICES IN RESIDUAL CASES
Supply of goods and services in residual cases [Sections 12(5) and 13(5)]
(a) Where a periodical return is required to be filed

 Due date of filing such return
(b) Other cases
 Date of payment of tax
TIME OF SUPPLY FOR ADDITION IN VALUE BY WAY OF INTEREST/ LATE

FEE/PENALTY FOR DELAYED PAYMENT OF CONSIDERATION
Addition in value by way of interest, late fee/penalty for delayed payment of

consideration
Time of Supply Date on which the supplier receives such addition in value

5.40 INDIRECT TAXES
The provisions relating to time of supply of vouchers that are

exchangeable for goods are same as that of the vouchers that are
exchangeable for services. Similarly, the provisions relating to time
of supply of goods falling in the residual category are same as that of
the time of supply of services falling in the residual category. Also, provisions
relating to time of supply for addition in value by way of interest, late fee/penalty
for delayed payment of consideration are same for goods and services.
Furthermore, concepts like option of taking invoice date as time of supply in
case of receipt of excess payment upto ` 1000, meaning of “Date of receipt of
payment”, significance of words “to the extent the invoice or payment covers
the supply” are also same for goods and services.
Students may make a note of the above points as it will help them in
understanding and remembering the provisions in a better manner.

1. Explain the significance of time of supply under GST law.
2. GST is payable on advance received for supply of goods and services taxable
under forward charge.
Do you agree with the statement? Support your answer with legal provisons.
3. Determine the time of supply in the following cases assuming that GST is
payable under reverse charge:
S. Date of Date of payment by the Date of issue of

No. receipt of recipient of goods invoice by the
goods supplier of goods
(i) July 1 August 10 June 29
(ii) July 1 June 25 June 29
(iii) July 1 Part payment made on June June 29

30 and balance amount paid
on July 20

(iv) July 5 Payment is entered in the June 1

books of account on June 28
and debited in recipient’s
bank account on June 30
(v) July 1 Payment is entered in the June 29

books of account on June 30
and debited in recipient’s
bank account on June 26
(vi) August 1 August 10 June 29
4. Determine the time of supply in the following cases assuming that GST is
payable under reverse charge:
S. Date of payment by the recipient for Date of issue of invoice by

No. supply of services the supplier of services
(i) August 10 June 29
(ii) August 10 June 1
(iii) Part payment made on June 30 and June 29

balance amount paid on September 1
(iv) Payment is entered in the books of June 1

account on June 28 and debited in
recipient’s bank account on June 30
(v) Payment is entered in the books of June 29

account on June 30 and debited in
recipient’s bank account on June 26
5. Kabira Industries Ltd engaged the services of a transporter for road transport
of a consignment on 17th June and made advance payment for the transport
on the same date, i.e. 17th June. However, the consignment could not be sent
immediately on account of a strike in the factory, and instead was sent on
20th July. Invoice was received from the transporter on 22nd July.
What is the time of supply of the transporter’s service?

5.42 INDIRECT TAXES
6. Raju Pvt Ltd. receives the order and advance payment on 5th January for
carrying out an architectural design job. It delivers the designs on 23rd April.
By oversight, no invoice is issued at that time, and it is issued much later, after
the expiry of prescribed period for issue of invoice.
When is the time of supply of service?
7. Investigation shows that 150 cartons of ceramic capacitors were dispatched on
2nd August but no invoice was raised and the transaction (dispatch of cartons)
were not entered in the accounts. There was no evidence of receipt of payment.
What is the time of supply of 150 cartons for the purpose of payment of tax?
8. An order is placed on Ram & Co. on 18th August for supply of a consignment of
customized shoes. Ram & Co. gets the consignment ready and informs the
customer and issues the invoice on 2nd December. The customer collects the
consignment from the premises of Ram & Co. on 7th December and
electronically transfers the payment on the same date, which is entered in the
accounts on the next day, 8th December.
What is the time of supply of the shoes for the purpose of payment of tax?
9. Meal coupons are sold to a company on 9 th August for being distributed to the
employees of the said company. The coupons are valid for six months and can
be used against purchase of food items. The employees use them in various
stores for purchases of various edible items on different dates throughout the
six months.
What is the date of supply of the coupons?
10. A firm of advocates issues invoice for services to ABC Ltd. on 17th Feb. The
payment is contested by ABC Ltd. on the ground that on account of negligence
of the firm, the company’s case was dismissed by the Court for non-appearance,
which necessitated further appearance for which the firm is billing the
company. The dispute drags on and finally payment is made on 3 rd November.
Identify the time of supply of the legal services.
11. Modern Security Co. provides service of testing of electronic devices. In one
case, it tested a batch of devices on 4th and 5th September but could not raise
invoice till 19th November because of some dispute about the condition of the
devices on return. The payment was made in December.
What is the method to fix the time of supply of the service?

12. M/s XYZ & Co., a firm of Chartered Accountants, issued invoice for services
rendered to Mr. A on 7th September. Determine the time of supply in the
following independent cases:
(1) The provision of service was completed on 1 st August and payment was
received on 28th September.
(2) The provision of service was completed on 14th August and payment was
received on 28th September.
(3) Mr. A made the payment on 3rd August. However, provision of service
was remaining to be completed at that time.
(4) Mr. A made the payment on 15th September. However, provision of
service was remaining to be completed at that time.
13. M/s Pranav Associates, a partnership firm, provided recovery agent services to
Newtron Credits Ltd., a non-banking financial company and a registered
supplier, on 15th January. Invoice for the same was issued on 7th February and
the payment was made on 18 th April by Newtron Credits Ltd. Bank account of
the company was debited on 20 th April.
Determine the following:
(i) Person liable to pay GST
(ii) Time of supply of service
14. Mr. X supplied goods for ` 50,000 to its customer Miss Diyana on 1st January
on the condition that payment for the same will be made within a week.
However, Miss Diyana made payment for the said goods on 2nd February and
thus, paid interest amounting to ` 2,000.
What is the time of supply with regard to addition in the value by way of
interest in lieu of delayed payment of consideration?
15. M/s Mansh & Vansh Trading Company, a registered supplier, is liable to pay
GST under forward charge. It has furnished the following information:
(i) Goods were supplied on 3rd October
(ii) Invoice was issued on 5th October
(iii) Payment received on 9th October
Determine the time of supply of goods for the purpose of payment of tax.

5.44 INDIRECT TAXES
7. ANSWERS/HINTS
1. GST is payable on supply of goods or services. Time of supply indicates the
point in time when the liability to pay tax arises. However, it is important to
note that though the liability to pay tax arises at the time of supply, the
same can be paid to the Government by the due date prescribed with
reference to the said ‘time of supply’. The CGST Act provides separate
provisions for time of supply for goods and services vide sections 12 and 13.
2. The statement is not correct. While GST is payable on advance received for
supply of services taxable under forward charge, the same is not payable in
case of advance received for supply of goods taxable under forward charge.
As per section 13, the time of supply of services taxable under forward charge
is –
 Date of issue of invoice or date of receipt of payment, whichever is
earlier, if the same is issued within 30 days from the date of supply of
service;
OR
 Date of provision of service or date of receipt of payment, whichever is
earlier, if the invoice is not issued within 30 days from the date of supply
of service.
Thus, in case of services, if the supplier receives any payment before the
provision of service or before the issuance of invoice for such service, the time
of supply gets fixed at that point in time and the liability to pay tax on such
payment arises. However, the tax can be paid by the due date prescribed with
reference to such time of supply.
As regards time of supply of goods taxable under forward charge is concerned,

Notification No. 66/2017 CT dated 15.11.2017 provides that a registered person
(excluding composition supplier) should pay GST on the outward supply of goods
at the time of supply as specified in section 12(2)(a), i.e. date of issue of invoice or
the last date on which invoice ought to have been issued in terms of section 31.
Therefore, in case of goods, tax is not payable on receipt of advance payment.

3.
S. Date of Date of Date of Date Time of

No. receipt payment by issue of immediate supply of
of the recipient invoice ly goods
goods of goods by the following [Earlier of (1),
supplier 30 days (2) & (4)]
of from the
goods date of
invoice
(1) (2) (3) (4) (5)
(i) July 1 August 10 June 29 July 30 July 1

(ii) July 1 June 25 June 29 July 30 June 25
(iii) July 1 Part payment June 29 July 30 June 30 for
made on June part payment
30 and made and July
balance 1 for balance
amount paid amount
on July 20
(iv) July 5 Payment is June 1 July 2 June 28 (i.e.,
entered in the when
books of payment is
account on entered in the
June 28 and books of
debited in account of the
recipient’s recipient)
bank account
on June 30
(v) July 1 Payment is June 29 July 30 June 26 (i.e.,
entered in the when
books of payment is
account on debited in the
June 30 and recipient’s
debited in bank account)

5.46 INDIRECT TAXES
recipient’s
bank account
on June 26
(vi) August August 10 June 29 July 30 July 30 (i.e.,
1 31st day from
issuance of
invoice)
4.
S. Date of payment by Date of Date Time of

No. the recipient for issue of immediately supply of
supply of services invoice by following 60 goods
the days from [Earlier of
supplier of invoice (1) & (3)]
services
(1) (2) (3)
(i) August 10 June 29 August 29 August 10
(ii) August 10 June 1 August 1 August 1
(iii) Part payment made June 29 August 29 June 30 for

on June 30 and part
balance amount paid payment
on September 1 and August
29 for
balance
amount
(iv) Payment is entered in June 1 August 1 June 28 (i.e.

the books of account when
on June 28 and payment is
debited in recipient’s entered in
bank account on June the books
30 of account
of the
recipient)

(v) Payment is entered in June 29 August 29 June 26 (i.e.

the books of account when
on June 30 and payment is
debited in recipient’s debited in
bank account on June the
26 recipient’s
bank
account)
5. Time of supply of service taxable under reverse charge is the earlier of the
following two dates in terms of section 13(3):
• Date of payment
• 61st day from the date of issue of invoice
In this case, the date of payment precedes 61st day from the date of issue of
invoice by the supplier of service. Hence, the date of payment, i.e. 17th June,
will be treated as the time of supply of service [Section 13(3)(a)].
6. Since the invoice has not been issued within the prescribed time period, time
of supply of service will be the earlier of the following two dates in terms of
section 13(2)(b):
• Date of provision of service
• Date of receipt of payment
The payment was received on 5th January and the service was provided on
23rd April. Therefore, the date of payment, i.e. 5th January is the time of supply
of the service in this case.
7. As per Notification No. 66/2017 CT dated 15.11.2017, a registered person
terms of section 31.
In this case since the invoice has not been issued, the time of supply for the
purpose of payment of tax will be the last date on which the invoice is
required to be issued.

5.48 INDIRECT TAXES
The invoice for supply of goods must be issued on or before the dispatch of
goods, i.e. on 2nd August. Therefore, the time of supply for the purpose of
payment of tax for the goods will be 2nd August, the date when the invoice
should have been issued.
In this case, the invoice is issued before the removal of the goods and is thus,
within the time limit prescribed under section 31(1). Therefore, the time of
supply for the purpose of payment of tax is the date of issue of invoice, which
is 2nd December.
9. As the coupons can be used for a variety of food items, which are taxed at
different rates, the supply cannot be identified at the time of purchase of the
coupons. Therefore, the time of supply of the coupons is the date of their
redemption in terms of section 12(4).
10. Tax on services supply by a firm of advocates by way of legal services to any
business entity is payable under reverse charge by such firm of advocates.
Time of supply of services that are taxable under reverse charge is earliest of
the following two dates in terms of section 13(3):
• Date of payment [3rd November]
• 61st day from the date of issue of invoice [19th April]
The date of payment comes subsequent to the 61st day from the issue of
invoice by the supplier of service. Therefore, the 61st day from the date of
supplier’s invoice has to be taken as the time of supply. This fixes 19th April
as the time of supply.
11. The time of supply of services, if the invoice is not issued in time, is the date
of payment or the date of provision of service, whichever is earlier [Section
13(2)(b)]. In this case, the service is provided on 5th September but not
invoiced within the prescribed time limit. Therefore, 5th September, the date
of provision of service, being earlier than the date of payment, will be the
time of supply.

12. The time of supply of services is the date of issue of invoice if the same is
issued within 30 days from the date of supply of service OR the date of receipt
of payment, whichever is earlier [Section 13(2)(a)].
In case the invoice is not issued within 30 days from the date of supply of
service, time of supply is the date of provision of service OR the date of
receipt of payment, whichever is earlier [Section 13(2)(b)].
In accordance with the aforesaid provisions, the time of supply in the four
independent cases will be:
(1) 1st August since the invoice is not issued within 30 days of supply of
service.
(2) 7th September since the invoice is issued within 30 days of supply of
service and the payment is received after the issuance of invoice.
(3) 3rd August viz., earlier of date of issuance of invoice (7th September) or
date of receipt of payment (3rd August)
(4) 7th September viz., earlier of date of issuance of invoice (7th September)
or date of receipt of payment (15th September)
13. (i) Tax on services supplied by a recovery agent to, inter alia, a non-
banking financial company (NBFC) is payable under reverse charge by
such non-banking financial company.
Therefore, in the given case, person liable to pay GST is the NBFC -
Newton Credits Ltd.
(ii) As per section 13(3), the time of supply of service on which GST is
payable under reverse charge is earlier of the following:-
• Date of payment as entered in the books of account of the
recipient (18th April) or the date on which the payment is debited
in his bank account (20th April), whichever is earlier;
• Date immediately following 60 days since issue of invoice by the
supplier, i.e. 9th April.
Thus, time of supply of service is 9th April.
14. As per section 12(6), the time of supply with regard to an addition in value
on account of interest, late fee or penalty or delayed payment of

5.50 INDIRECT TAXES
consideration is the date on which the supplier received such additional

consideration.
Thus, time of supply in respect of interest would be the date on which the
supplier has received such additional consideration, i.e. 2nd February.
Further, a registered person is required to issue a tax invoice before or at the
time of removal of goods for supply to the recipient. Thus, in the given case,
the invoice for supply of goods should have been issued on or before the
removal of goods i.e., on 3rd October.
However, since the invoice has not been issued within the prescribed time,
the time of supply for the purpose of payment of tax will be the last date on
which the invoice is required to be issued i.e., 3rd October.

UNIT – II : Value of Supply
LEARNING OUTCOMES
After studying this Unit, you will be able to-
 understand what constitutes the value of a taxable supply of
goods / services when the supply is made to an unrelated
person and price is the sole consideration for the supply
 identify the various inclusions in/exclusions from the value of
supply
 pinpoint the situations when discount will be included /not
included in the value of supply
 ascertain who are related persons
 compute the value of taxable supply when price is the sole
consideration for the supply and the supplier and recipient are
not related
VALUE OF SUPPLY
Value of supply made

Inclusions
to unrelated person
in/exclusions from Discount
with price as the sole
value of supply
consideration

5.52 INDIRECT TAXES
1. INTRODUCTION
GST is payable (i) on supply of goods and / or services for a consideration in the
course of or furtherance of business; (ii) on certain supplies made without a
consideration as specified in Schedule I to the CGST Act.
As GST is an ad valorem levy, i.e. it is levied as a
percentage of the value of supply of goods
and/or services, it becomes important to know
how to arrive at the value on which tax is to be
paid. Provisions relating to ‘value of supply’ set
out the mechanism to compute such value basis
which CGST and SGST/UTGST (intra-State supply)
and IGST (inter-State supply) should be paid.
Section 15 of the CGST Act supplemented with rules under Chapter IV:
Determination of Value of Supply of CGST Rules 1 prescribes the provisions for
determining the value of supply of goods and services.
Section 15 of the CGST Act provides common provisions for determining the
value of supply of goods and services. It provides the mechanism for determining
the value of a supply which is made between unrelated persons and when price
and only the price is the sole consideration for the supply. When value cannot be
determined under section 15 as also in certain specific cases, the same is
determined using Chapter IV: Determination of Value of Supply of CGST Rules.
Provisions of value of supply under CGST Act have also been made applicable
to IGST Act vide section 20 of the IGST Act.
Agent means a person, including a factor, broker, commission agent, arhatia,
del credere agent, an auctioneer or any other mercantile agent, by whatever
name called, who carries on the business of supply or receipt of goods or
services or both on behalf of another [Section 2(5)].
1
Chapter IV: Determination of Value of Supply of CGST Rules will be discussed at the Final level.

Factor Who
carries on
business of
Broker
supply of
goods and
Commission agent /or
services
AGENT
Arhatia
Del Credre agent
On behalf
Auctioneer of another
Mercantile agent
Cess shall have the same meaning as assigned to it in the Goods and
Services Tax (Compensation to States) Act [Section 2(22)].
Consideration in relation to the supply of goods or services or both includes –
(a) any payment made or to be made, whether in money or otherwise, in
respect of, in response to, or for the inducement of, the supply of
goods or services or both, whether by the recipient or by any other
person but shall not include any subsidy given by the Central
Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in
response to, or for the inducement of, the supply of goods or services
or both, whether by the recipient or by any other person but shall not
include any subsidy given by the Central Government or a State
Government;
Provided that a deposit given in respect of the supply of goods or services
or both shall not be considered as payment made for such supply unless the
supplier applies such deposit as consideration for the said supply [Section
2(31)].

5.54 INDIRECT TAXES
CONSIDERATION
Payment in money or Monetary value of

otherwise for the any act or
supply forbearance for the
By recipient or supply
any other person
Deposit to be considered
as payment
ONLY Excluding subsidy given

by Central/State
When the supplier applies Governments
such deposit as
consideration for the said
supply
Person includes-
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;
(e) a Limited Liability Partnership;
(f) an association of persons or a body of individuals, whether
incorporated or not, in India or outside India;
(g) any corporation established by or under any Central Act, State Act or
Provincial Act or a Government company as defined in section 2(45) of
the Companies Act, 2013;
(h) any body corporate incorporated by or under the laws of a country
outside India;
(i) a co-operative society registered under any law relating to
cooperative societies;
(j) a local authority;
(k) Central Government or a State Government;

(l) society as defined under the Societies Registration Act, 1860;

(m) trust; and
(n) every artificial juridical person, not falling within any of the above
[Section 2(84)].
Money means the Indian legal tender or any foreign currency, cheque,
promissory note, bill of exchange, letter of credit, draft, pay order, traveller
cheque, money order, postal or electronic remittance or any other instrument
recognised by the Reserve Bank of India when used as a consideration to settle an
obligation or exchange with Indian legal tender of another denomination but
shall not include any currency that is held for its numismatic value [Section 2(75)].
Indian legal tender
Foreign Currency
Cheque
Promissory note
Bill of Exchange When used as a

consideration
Letter of Credit to settle an
obligation or Currency
EXCLUDING held for its
exchange with
Money Draft Indian legal numismatic
tender of value
another
Pay Order
denomination
Traveller Cheque
Money Order
Postal or electronic
remittance
Any other instrument

recognised by RBI

5.56 INDIRECT TAXES
Other relevant definitions like that of recipient, supplier etc. may be referred from
the definitions given in Unit-I of this chapter.
3. VALUE OF SUPPLY [SECTION 15]
Section 15 Value of taxable supply
(1) The value of a supply of goods or services or both shall be the

transaction value, which is the price actually paid or payable for the
said supply of goods or services or both where the supplier and the
recipient of the supply are not related and the price is the sole
consideration for the supply.
(2) The value of supply shall include-
(a) any taxes, duties, cesses, fees and charges levied under any law
for the time being in force other than this Act, the State Goods
and Services Tax Act, the Union Territory Goods and Services
Tax Act and the Goods and Services Tax (Compensation to
States) Act, if charged separately by the supplier;
(b) any amount that the supplier is liable 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 and packing,

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;

(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.
Explanation.––For the purposes of this sub-section, the amount of

subsidy shall be included in the value of supply of the supplier who
receives the subsidy.
(3) The value of the supply shall not include 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.
(4) Where the value of the supply of goods or services or both cannot be
determined under sub-section (1), the same shall be determined in
such manner as may be prescribed.
(5) Notwithstanding anything contained in sub-section (1) or sub-section

(4), the value of such supplies as may be notified by the Government
on the recommendations of the Council shall be determined in such
manner as may be prescribed.
Explanation—For the purposes of this Act,––
(a) persons shall be deemed to be “related persons” if––
(i) such persons are officers or directors of one another’s

businesses;

5.58 INDIRECT TAXES
(ii) such persons are legally recognised partners in business;
(iii) such persons are employer and employee;
(iv) any person directly or indirectly owns, controls or holds

twenty-five per cent or more of the outstanding voting stock or
shares of both of them;
(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third

person;
(vii) together they directly or indirectly control a third person; or
(viii) they are members of the same family;
(b) the term “person” also includes legal persons;
(c) persons who are associated in the business of one another in that one is
the sole agent or sole distributor or sole concessionaire, howsoever
described, of the other, shall be deemed to be related
ANALYSIS
The CGST law has different provisions for determining the value of a supply of
goods / services in the following situations:
 Supplies made solely for a price in money (monetary consideration), to
unrelated persons  Sub-section (1) of section 15;
 Supplies made solely for non-monetary consideration, or for part monetary
consideration and part non-monetary consideration, or involving additional
consideration, or to related persons, or for specific classes of supply  Sub-
sections (4) and (5) of section 15 read with the Chapter IV: Determination of
Value of Supply of CGST Rules.
The definition of ‘related person’ under the explanation to section 15 covers
various situations of control, including sole agent, sole distributor and sole

concessionaire. The concept of related person has been presented in a diagram

given below.
Related persons [Explanation to section 15]
DEEMED AS IF Such persons are

Persons including RELATED
officers/directors of one
Legal Persons PERSONS another’s business
Such persons are legally

recognised partners in business
Such persons are employer &

employee
A third person controls

(directly/indirectly) or own/
holds ≥ 25% voting
stock/shares of both of them
One of them controls

(directly/indirectly) the other
A third person controls

(directly/indirectly) both of
them
Such persons together control

(directly/indirectly) a third
person
Such persons are members of

the same family
One of them is the sole

agent/sole distributor/sole
concessionaire of the other

5.60 INDIRECT TAXES
A. Supplies to unrelated persons where price is the sole

consideration
(i) Transaction value [Section 15(1)]
When a transaction of supply of goods / services is made
 between two persons (see definition of “person”) who are not related
to each other (see definition of “related person” in ‘Explanation’ to
section 15), and
 price is the sole consideration (see definition of consideration) for the
supply,
the value of supply is the “transaction value”.
Price is the Value of

Supply is
sole supply will
between
considerati be
unrelated Transaction
-on for the
persons value
supply
Under section 15(1), the transaction value which is applicable between

unrelated persons where price is the sole consideration for the supply is -
the price actually paid or payable for the said supply of goods or
services or both.
This is the price for the specific supply that is being valued. It includes the
amount already paid at the time the supply is being valued for tax, as well
as the amount payable and not yet paid at that time. The word ‘payable’
refers to price that is agreed to be paid for the goods / services.
(1) Wholesale price for 1 MT of cement sold by X Ltd. in the
ordinary course of business : ` 7,000. Price of 1 MT of cement
sold by X Ltd. to unrelated customer Y: ` 6,700.
Value of supply made by X Ltd. to Y is ` 6,700 which is the price actually
paid or payable and not the wholesale price.

The value of taxable supply of goods and services shall

ordinarily be the ‘transaction value’ which is the price
paid or payable, when the parties are not related and
price is the sole consideration. Section 15 of the CGST Act
further elaborates various inclusions and exclusions from the ambit of
transaction value. For example, the transaction value shall not include
discount allowed subject to certain conditions.
(ii) Inclusions in value [Section 15(2)]

The value of supply includes certain elements which are enumerated and
discussed below.
 Taxes, duties, cesses, fees and charges other than CGST, SGST, UTGST,
GST Compensation Cess, if charged separately
 Payments to third parties  Any amount that the supplier is liable to
pay in relation to supply but which has been incurred by the recipient
of the supply and not already included in the price.
 Incidental expenses, such as, commission and packing, charged by the
supplier to the recipient of a supply
 Any amount charged for anything done by the supplier in respect of
the supply of goods and/or services at the time of, or before delivery
of goods /supply of services
 Interest or late fee or penalty for delayed payment of consideration
 Subsidies, directly linked to the price, other than subsidies given by
the State or Central Governments
The above elements are discussed below.
Taxes other than GST & GST Compensation Cess [Section 15(2)(a)]
Any taxes, duties, cesses, fees and charges levied under any law for the time
being in force except the CGST Act, the SGST Act, the UTGST Act and the
GST (Compensation to States) Act, if charged separately by the supplier, are
includible in the value of supply. In case of inter-State sale liable to IGST,
the value of supply will include taxes other than IGST and the GST
Compensation Cess in terms of third proviso to section 20 of IGST Act. In

5.62 INDIRECT TAXES
effect, all the taxes, duties etc. which are not subsumed in GST form part of
the taxable value for the purpose of levying GST.
For instance, if a supplier of goods pays municipal tax in relation to the
goods being supplied and charges the same separately, such tax will form
part of the value of supply.
TCS under Income-Tax Act, 1961 not includible in the taxable value for
the purpose of GST: The CBIC vide Circular No. 76/50/2018 GST dated
31.12.2018 (amended vide corrigendum dated 7.03.2019) has clarified that
for the purpose of determination of value of supply under GST, tax collected
at source (TCS) under the provisions of the Income Tax Act, 1961 would not
be includible as it is an interim levy not having the character of tax.
Payments made to third parties by the recipient on behalf of the

supplier in relation to the supply [Section 15(2)(b)]
A supplier may need to incur various expenses in order to make a particular
supply of goods / services. In the normal course, he would pay these
amounts and they would form part of the price that he charges from the
customer (recipient of supply). However, even if the customer makes direct
payment of some of such liabilities (of the supplier) to the third parties, and the
supplier does not include this amount in his bill, it would still form part of the
value of the supply.
A point to note here is that amount paid by the recipient to third parties will be
added to the value under this clause only when the supplier is under
contractual liability to make payment to such third parties and the said
payment is in relation to such supply.
(2) Grand Biz contracts with ABC Co. to conduct a dealers’ meet. In
furtherance of this, Grand Biz contracts with vendors to deliver
goods / services, like water, soft drinks, audio system, projector,
catering, flowers etc. at the venue on the stipulated dates at the
stipulated prices. Grand Biz is liable to make these payments as contracted.
The soft drinks supplier wants payment upon delivery; ABC Co. agrees to pay the
bill raised by the soft drinks vendor on Grand Biz, on receiving the crates of soft
drinks. This amount is not billed by Grand Biz to ABC Co. However, it would be
added to the value of supply provided by Grand Biz to ABC Co. for payment of
GST.

Incidental expenses [Section 15(2)(c)]

Incidental expenses, such as, commission and packing charged by the supplier
or anything else done by the supplier in relation to the supply at the time of or
before delivery of goods or supply of services must be added to value.
(3) Commission: This may be paid to an agent and recovered from
the buyer of the goods / services; this is part of the value of the
supply.
(4) Packing, if charged by the supplier to the recipient, is similarly part of the
value of the supply.
(5) Inspection or certification charges is another element that will be
added to the value, if incurred before/at the time of supply and billed to the
recipient of supply.
(6) Installation and testing charges at the recipient’s site will also be added,
being an amount charged for something done by the supplier in respect of the
supply, at the time of making the supply.
(7) Weighment charges, loading charges, designing charges etc.
incurred before/at the time of supply will be added to the value, if billed
to the recipient of supply.
Outward freight, transit insurance
Where the supplier agrees to deliver the goods at the buyer’s premises and
arranges for transport and insurance, the contract of supply becomes a
composite supply; the principal supply being the supply of goods.
Therefore, outward freight and transit insurance become part of the value of
the composite supply and GST is payable thereon at the same rate as
applicable for the relevant goods. However, if the contract for supply is on
ex-factory basis where buyer pays the outward freight and insurance, the
same will not be included in the value of supply of goods.
Interest, late fee or penalty for delayed payment [Section 15(2)(d)]
The value for a supply will include not only the base price but also the charges
for delay in payment.
(8) A supply priced at ` 2,000 is made, with a credit period of 1
month for payment. Thereafter, interest @ 12% p.a. is chargeable.
The payment is received after the lapse of two months from the
date of supply. The amount of interest @ 12% p.a. (i.e. 1% per month) on `

5.64 INDIRECT TAXES
2,000 for one month after the free credit period of one month, is ` 20. Such
interest will be added to the value and thus, the value of supply will work
out to be ` 2,020, assuming the interest to be exclusive of GST.
Time of supply for such interest/ late fee/ penalty is the

date when such amount is received by the supplier. Further,
since such charges are an addition in the value of supply,
same rate of tax as applicable on the main supply of goods / service
are applicable on such charges as well.
Subsidies [Section 15(2)(e)]

Subsidy is a sum of money given to keep the price of a service or
commodity low. If the subsidy is given by the State or Central Government;
the lower price, after adjusting the subsidy, is the value. If the subsidy is
given by a person or entity other than the State or Central Government, it
does not lower the value. The subsidy is added to the value of supply of the
supplier who receives the subsidy. It must be noted that only subsidies
directly linked to the price of goods/services are added to the value.
Blanket subsidy/donation received are not includible in the value.
(9) The selling price of a notebook is ` 50. For notebooks sold to
students in Government schools, a company uses its CSR funds to
pay the seller ` 30, so that the students pay only ` 20 per
notebook. The value of the notebook will be ` 50, as this is a non-
government subsidy. If the same subsidy is paid by the Central Government
or State Government, the value of the notebook would be ` 20.
(iii) Exclusion of discounts from value [Section 15(3)]
Discounts are a common phenomenon for businesses. Numerous kinds of
discounts are given by the suppliers to their customers namely, trade
discounts, cash discounts, quantity/volume/performance discounts etc.
Such discounts are reduced from the sale price of the supply. Since, the
value of a taxable supply is the transaction value, GST is leviable on the
value after deducting the discounts.
However, not all discounts offered by the supplier to their customers are
allowed as a deduction from the value. Only such discounts which satisfy
the conditions prescribed in section 15(3), are allowed as deduction from

the value. The essence of the conditions prescribed in section 15(3) is that
the price as established at the time of supply should form the basis of value.
The discounts which do not fulfill the conditions specified in section 15(3)
are not deductible from the value, i.e. GST in such a case is levied on the
gross value of the supply without considering the discount.
Discounts that are allowed as deduction from the value are as follows:
(a) Discounts given before or at the time of supply and shown in the
invoice – Example for such discount can be discounts that are offered
for making the payment at the time of supply itself. Such discounts
are thus, recoded in the invoice and thus, GST is charged on the gross
value less discount recorded in the invoice.
(b) Post supply discounts- It is not always commercially feasible to
determine all discounts before or at the time of supply or record them
in the invoice. For instance, cash discount given for making the
payment within a stipulated time. Even though the discount is
established before/at the time of supply, the supplier cannot record
such discount in the invoice as he does not know if the buyer will
make the payment within the stipulated time. Likewise, in case of
quantity/volume/performance discount also, the supplier is not aware
before/at the time of supply as to whether the buyer would purchase
the requisite quantity within the stipulated time. Therefore, in this
case also, the discount cannot be recorded in the invoice. In such
cases, initially the GST is paid on the gross value indicated in the
invoice without considering the discount. The supplier, however,
passes the discount to the buyers subsequently by issuing credit
notes.
Post supply discounts, i.e. the discounts that are given after supply is
made, are allowed as a deduction from the value of supply if the
following two conditions are satisfied:
 Discount is in terms of an agreement that existed at the time of
supply and can be worked out invoice-wise; and
 Proportionate input tax credit is reversed by the recipient - The
buyer would have availed input tax credit (ITC) of GST payable
on the gross value specified in the invoice. Thus, when a credit

5.66 INDIRECT TAXES
note 2 is issued to him by the supplier for the discount, the buyer
will reverse the proportionate credit; consequent to which, the
supplier’s output tax liability will be reduced by the same
amount.
If the any of the above conditions are not satisfied, the GST liability of
supplier cannot be reduced. The supplier, however, can issue a
commercial credit note 3 for the value of discount. In such a scenario,
the buyer will not be required to reverse any input tax credit.
The provisions relating to allowability of discount as a deduction from the
value have been depicted by way of a diagram given below.
At the time of supply

+ Yes
Shown in the
+
No
invoice
Discounts given Before the supply
Discounts
In terms of an not
+
agreement that
included in
After the supply existed at the
the value
time of supply
+
of supply
Can be linked
to invoices Discounts
+
included in
the value of
Proportionate supply
ITC reversed
by recipient
No
Yes
2
Credit notes governed under GST law are issued under section 34. Provisions of section 34 are
discussed in Chapter 8: Tax Invoice; Credit & Debit Notes; E-Way Bill
3
A commercial credit note is not governed under GST law and is issued only for the value of
discount/reduction in value of the supply, without any GST.

Allowability of certain specific types of discounts offered by the suppliers

as clarified vide Circular No. 92/11/2019 GST dated 07.03.2019
(i) Staggered discounts (‘Buy more, Save more’ offers): In case of
staggered discounts, rate of discount increases with increase in
purchase volume. For example - Get 10 % discount for purchases
above ` 5,000/-, 20% discount for purchases above ` 10,000/- and
30% discount for purchases above ` 20,000/-. Such discounts are
shown on the invoice itself.
Such discounts are excluded to determine the value of supply.
(ii) Periodic/year ending discounts/volume discounts: These discounts
are offered by the suppliers to their stockists, etc. For example- Get
additional discount of 1% if you purchase 10,000 pieces in a year, get
additional discount of 2% if you purchase 15,000 pieces in a year.
Such discounts are established in terms of an agreement entered into
at or before the time of supply though not shown on the invoice as
the actual quantum of such discounts gets determined after the
supply has been effected and generally at the year end. In commercial
parlance, such discounts are colloquially referred to as “volume
discounts”. Such discounts are passed on by the supplier through
credit notes.
Such discounts are excluded to determine the value of supply
provided they satisfy the parameters laid down in section 15(3),
including the reversal of ITC by the recipient of the supply as is
attributable to the discount on the basis of document (s) issued by the
supplier.
(iii) Secondary discounts: These are the discounts which are not known
at the time of supply or are offered after the supply is already over.
For example, M/s A supplies 10,000 packets of biscuits to M/s B at
` 10/- per packet. Afterwards, M/s A re-values it at ` 9/- per packet.
Subsequently, M/s A issues credit note to M/s B for ` 1/- per packet.
Such secondary discounts shall not be excluded while determining the
value of supply as such discounts are not known at the time of supply
and the conditions laid down in section 15(3)(b) are not satisfied.

5.68 INDIRECT TAXES
It may be noted that financial / commercial credit note(s) can be

issued by the supplier even if the conditions mentioned in section
15(3)(b) are not satisfied.
Examples of discount deductible from value of supply
(10) Royal Biscuit Co. gives a discount of 30% on the list price to
its distributors. Thus, for a carton of Spice bisk, in the invoice the
list price is mentioned as ` 200, on which a discount of 30% is given to
arrive at the final price of ` 140. The value is ` 140, as the discount is
allowed at the time of supply and shown in the invoice.
Post supply discounts
(11) The agreement of Raju Electrical Appliances with its dealers is that
purchase of rice cookers over 1000 pieces in the Diwali month will entitle
them to discount of 5% per cooker. Therefore, the quantum of discount can
be determined only at the end of Diwali month. However, since the
agreement relating to discount was in existence at the time of supply, and
the discount can be worked out for each invoice, such post supply discount
will be allowed as a deduction from the value of supply of rice cookers.
Raju Electrical Appliances can issue credit note for 5% of the value of goods
along with GST and claim adjustment of excess tax paid. The dealer must
reverse the proportionate input tax credit on the relevant stock to bring it in
line with the reduced tax.
(12) Pink and Blue Pvt. Ltd. (PBPL) sold goods to Orange Pvt. Ltd. (OPL) on
15th January at ` 50,000 (exclusive of taxes and discounts) and charged `
9,000 as IGST @ 18%. The terms of supply stipulated that discount @ 2%
will be given to OPL if it makes the payment within one month of the
supply. OPL avails the input tax credit of ` 9,000 in the month of January
and makes the payment for the goods on 10th February. PBPL issues credit
note for ` 1180 [` 1,000 for value of discount and ` 180 for proportionate
IGST leviable thereon] to OPL on 11th February. After receiving credit note,
OPL reverses the input tax credit of ` 180 attributable to the discount given
by the PBPL. PBPL can reduce its GST liability of the month of February by
` 180. OPL would have paid ` 57,820 (` 50,000 + ` 9,000 - ` 1,000 - ` 180)
to PBPL on 10th February.

Examples of discount not deductible from value of supply

(13) In the above example, if the terms of supply did not provide
for discount @ 2% for payment within one month but PBPL offers
such discount to OPL at the time of payment after negotiation, the discount
will not be allowed as a deduction from the value. PBPL will issue a
commercial credit note for only the value of discount, i.e. for ` 1,000. OPL
will not reverse any input tax credit and PBPL will also not be able to reduce
its GST liability for the month of February. In this case, OPL would pay
` 58,000 (` 50,000 + ` 9,000 - ` 1,000) to PBPL on 10th February.
(14) A company announces turnover discounts after reviewing dealer
performance during the year. The discounts are based on performance slabs
and are given as cash-back. As these discounts were not known at the time
of supply of the goods, they will not be deducted from value of those
goods. Hence, the company will not be able to adjust excess tax paid from
its tax liability.
B. Supplies where value cannot be determined u/s 15(1) and notified
supplies [Sub-sections (4) and (5) of section 15]
Section 15(4) lays down that where sub-section (1) is not applicable, that is,
if the transaction is with a related party, and/or price is not the sole
consideration for the supply of goods / services, then the value will be
determined in the manner as prescribed, which means as stipulated in the
rules for valuation [See the definition of ‘prescribed’]. Further, section 15(5)
lays down that in respect of certain notified supplies also, the value will be
determined in the manner as stipulated in the rules for valuation. As stated
earlier, these rules will be discussed at the Final level.
ILLUSTRATION 1
Black and White Pvt. Ltd. has provided the following particulars relating to goods
sold by it to Colourful Pvt. Ltd.
Particulars `
List price of the goods (exclusive of taxes and discounts) 50,000

5.70 INDIRECT TAXES
Tax levied by Municipal Authority on the sale of such goods 5,000
Packing charges (not included in price above) 1,000
Black and White Pvt. Ltd. received ` 2000 as a subsidy from a NGO on sale of such
goods. The price of ` 50,000 of the goods is after considering such subsidy. Black
and White Ltd. offers 2% discount on the list price of the goods which is recorded in
the invoice for the goods.
Determine the value of taxable supply made by Black and White Pvt. Ltd.
ANSWER
Computation of value of taxable supply
Particulars `
List price of the goods (exclusive of taxes and discounts) 50,000
Tax levied by Municipal Authority on the sale of such goods 5,000

[Includible in the value as per section 15(2)(a)]
Packing charges [Includible in the value as per section 15(2)(c)] 1,000
Subsidy received from a non-Government body [Since subsidy is 2,000

received from a non-Government body, the same is included in the
value in terms of section 15(2)(e)]
Total 58,000
Less: Discount @ 2% on ` 50,000 [Since discount is known at the 1,000

time of supply and recorded in invoice, it is deductible from the
value in terms of section 15(3)(a)]
Value of taxable supply 57,000

ILLUSTRATION 2
Samriddhi Advertisers conceptualised and designed the advertising campaign for a
new product launched by New Moon Pvt Ltd. for a consideration of ` 5,00,000.
Samriddhi Advertisers owed ` 20,000 to one of its vendors in relation to the
advertising service provided by it to New Moon Pvt Ltd. Such liability of Samriddhi
Advertisers was discharged by New Moon Pvt Ltd. New Moon Pvt Ltd. delayed the
payment of consideration and thus, paid ` 15,000 as interest. Assume the rate of
GST to be 18%.
Determine the value of taxable supply made by Samriddhi Advertisers.
ANSWER
Computation of value of taxable supply
Particulars `
Service charges 5,00,000
Payment made by New Moon Pvt. Ltd to vendor of Samriddhi 20,000

Advertisers [Liability of the supplier being discharged by the
recipient, is includible in the value in terms of section 15(2)(b)]
Interest for delay in payment of consideration [Includible in the 12,712

value in terms of section 15(2)(d) – Refer note below] (rounded
off)
Value of taxable supply 5,32,712
Note: The interest for delay in payment of consideration will be includible in the
value of supply but the time of supply of such interest will be the date when such
interest is received in terms of section 13(6). Such interest has been assumed to be
inclusive of GST and thus, the value has been computed by making back
 Interest 
calculations  × 100  . It is also possible to assume the interest to be
 100 + tax rate 
exclusive of GST. In that case, the value of supply will work out to be ` 5,35,000.

5.72 INDIRECT TAXES
The scheme of valuation as provided under section 15 is depicted by way of a

diagram given below:
Value of supply under section 15
Supply to be valued as
No per Chapter IV:
Whether price is the sole
Determination of Value of
consideration for supply?
Supply of CGST Rules
Yes
Whether supplier and the Yes

recipient are related?
No
Yes
Whether the supply is a
notified supply u/s 15(5)?
No
Value of supply =
Transaction value u/s 15(1)

VALUE OF SUPPLY
Supply made to
Supply where price Supply is a
unrelated person Supply made to
is not the sole notified supply
where price is the related person
consideration u/s 15(5)
sole consideration
Value of supply
=
Transaction value u/s 15(1) Value to be determined under Chapter IV:
Determination of Value of Supply of CGST
Rules
Inclusions in value u/s 15(2)

⇒ Taxes other than GST
⇒ Third party payments made by recipient in relation to supply, which supplier was
liable to pay and were not included in the price
⇒ Incidental expenses including anything done by the supplier in respect of the
supply till delivery of goods/ supply of services, if charged to recipient
⇒ Subsidies directly linked to price of supply other than the ones given by
Central/State Governments
⇒ Interest/late fee/penalty for delay in payment of consideration
Exclusions from value u/s 15(2)

⇒ Discounts given before or at the time of supply and recorded in the invoice
⇒ Post supply discount/incentive, if known in advance & linked with invoices and
proportionate input tax credit reversed by the recipient

5.74 INDIRECT TAXES

1. Are post-supply discounts eligible for deduction from the value of supplies in
all situations? Explain.
2. ‘Consideration under GST law includes both monetary and non-monetary
considerations.’
Discuss the correctness or otherwise of the statement with reference to the
definition of term ‘consideration’ provided under the CGST Act.
3. Sharp Minds Institute provides coaching for engineering entrance
examinations. Monthly fee charged by the Institute from a student is
` 10,000. The Institute is known for its commitment to provide education to
underprivileged children. It trains 10 students every year for entrance
examinations free of cost.
The Institute has received ` 3,00,000 as coaching fees during a month. Nav
Jeevan, an NGO working in the area of education for underprivileged
children, has given a subsidy of ` 10,000 (in lumpsum) during the month to
the Institute as it is serving the cause of underprivileged children.
Determine the value of supply of education services made by Sharp Minds
Institute during the month.
4. Furniture Wala is a chain of retail showrooms selling both modern and classic
furniture. In order to build strong customer association, the showroom
provides free delivery of the furniture at the premises of the customers if the
distance between the showroom and the customer’s premises is upto 20 kms.
Where the distance is more than 20 kms, the showroom charges a
concessional freight of ` 10 for every additional km.
Ms. Leena Kapoor purchases a double bed, a dressing table and a centre table
for ` 2,00,000 from Furniture Wala. Ms. Leena gets free delivery of the
furniture as her residence is located at a distance of 18 km from the
showroom. The showroom incurs an expenditure of ` 1000 for delivering the
furniture at Ms. Leena’s residence.
Determine the value of taxable supply made by Furniture Wala. Will your
answer change if residence of Ms. Leena is 50 km away from the showroom?
5. AKJ Foods Pvt. Ltd. gets an order for supply of processed food from a
customer. The customer wants the consignment tested for gluten and

specified chemical residues. AKJ Foods Pvt. Ltd. does the testing before the
supply and charges a testing fee for the same from the customer. AKJ Foods
Pvt. Ltd. argues that such testing fess should not form part of the
consideration for the sale as it is a separate activity.
Is the company’s argument correct in the light of section 15?
6. A philanthropic association makes a substantial donation each year to a
reputed private management institution to subsidize the education of low-
income group students who have gained admission there. The fee for these
individuals is reduced thereby coming to ` 3 lakh a year compared to ` 5 lakh
a year for other students.
What would be the value of the service of coaching and instruction provided
by the institution to the low-income group students?
7. Mezda Banners, an advertising firm, gives its customers an interest-free credit
period of 30 days for payment. Its customer ABC paid for the supply 32 days
after the supply of service. Mezda Banners waived the interest payable for
delay of two days.
The Department wants to add interest for two days to the value of supply.
Should notional interest be added to the value?
8. Crunch Bakery Products Ltd sells biscuits and cakes through its dealers, to
whom it charges the list price minus standard discount and pays GST
accordingly. When goods remain unsold with the dealers, it offered
additional discounts on the stock as an incentive to push the sales.
Can this additional discount be reduced from the price at which the goods
were sold, and concomitant tax adjustments made?
9. Red Pepper Ltd., Delhi, a registered supplier, is manufacturing taxable goods.
It provides the following details of taxable inter-State supply made by it
during the month of March.
S. Particulars Amount
No. (` )
(i) List price of taxable goods supplied inter-state (exclusive 15,00,000

of taxes)

5.76 INDIRECT TAXES
(ii) Subsidy received from the Central Government for supply 2,10,000
of taxable goods to Government School (exclusively
related to supply of goods included at S. No. 1)
(iii) Subsidy received from an NGO for supply of taxable 50,000

goods to an old age home (exclusively related to supply
of goods included at S. No. 1)
(iv) Tax levied by Municipal Authority 20,000
(v) Packing charges 15,000
(vi) Late fee paid by the recipient of supply for delayed 6,000
payment of consideration (Recipient has agreed to pay
` 6,000 in lump sum and no additional amount is
payable by him)
The list price of the goods is net of the two subsidies received. However, the
other charges/taxes/fee are charged to the customers over and above the list
price.
Calculate the total value of taxable supplies made by Red Pepper Ltd. during
the month of March. Rate of IGST is 18%.
10. M/s. Flow Pro, a registered supplier, sold a machine to BP Ltd. It provides the
following information in this regard: -
No. (` )
(i) Price of the machine [excluding taxes and other charges 25,000
mentioned at S. Nos. (ii) and (iii)]
(ii) Third party inspection charges 5,000

[Such charges were payable by M/s Flow Pro but the
same have been directly paid by BP Ltd. to the
inspection agency. These charges were not recorded in
the invoice issued by M/s Flo Pro.]
(iii) Freight charges for delivery of the machine 2,000

[M/s Flow Pro has agreed to deliver the goods at BP

Ltd.’s premises]
(iv) Subsidy received from the State Government on sale of 5,000

machine under Skill Development Programme
[Subsidy is directly linked to the price]
(v) Discount of 2% is offered to BP Ltd. on the price

mentioned at S. No. (i) above and recorded in the
invoice
Note: Price of the machine is net of the subsidy received.

Determine the value of taxable supply made by M/s Flow Pro to BP Ltd.
11. Shri Krishna Pvt. Ltd., a registered supplier, furnishes the following
information relating to goods sold by it to Shri Balram Pvt. Ltd.-
No. (` )
(i) Price of the goods [excluding taxes and other charges 1,00,000
mentioned at S. Nos. (iii), (v) and (vi)]
(ii) Municipal tax 2,000
(iii) Inspection charges 15,000
(iv) Subsidy received from Shri Ram Trust 50,000

[Subsidy is directly linked to the goods supplied]
(v) Late fees for delayed payment inclusive of GST 1,000

[Shri Balram Pvt. Ltd. paid the late fees. However, these
charges were ultimately waived by Shri Krishna Pvt. Ltd.
and the amount was refunded to Shri Balram Pvt. Ltd.
during the same month]
(vi) Weighment charges 2,000

[Such charges were paid by Shri Balram Pvt. Ltd. to
Radhe Pvt. Ltd. on behalf of Shri Krishna Pvt. Ltd.]

5.78 INDIRECT TAXES
Note: Price of the goods is net of the subsidy received.

Determine the value of taxable supply made by Shri Krishna Pvt. Ltd. to Shri
Balram Pvt. Ltd.
12. Koli Ltd., a registered supplier, has supplied machinery to Ghisa Ltd. (a
supplier registered in the same State). It provides following particulars
regarding the same:
No. (` )
(i) Price of machinery (exclusive of taxes and discounts) 5,50,000
(ii) Part fitted in the machinery at the premises of Ghisa 20,000

Ltd.
[Amount has been paid by Ghisa Ltd. directly to the
supplier. However, it was Koli Ltd.’s liability to pay
the said amount. The said amount has not been
recorded in the invoice issued by Koli Ltd.)
(iii) Installation and testing charges for machinery, not 25,000

included in price
(iv) Discount @ 2% on price of the machinery mentioned at

S. No. (i) above (recorded in the invoice)
(v) Koli Ltd. provides additional discount @ 1% at year

end, based on additional purchase of other machinery
for which adjustment is made at the end of the
financial year without any change in individual
transactions.
Determine the value of taxable supply made by Koli Ltd. to Ghisa Ltd.
6. ANSWERS/HINTS
1. No, the post-supply discounts are not eligible for deduction from the value
of supplies in all situations. Such discounts are allowed as a deduction from
the value of supply only in the situations where the following two
conditions are satisfied:

(i) The discount is in terms of an agreement that existed at the time of

supply and can be worked out invoice-wise; and
(ii) Proportionate input tax credit (ITC) is reversed by the recipient - The
buyer would have availed ITC of GST payable on the gross value
specified in the invoice. Thus, when a credit note is issued to him by
the supplier for the discount, the buyer will reverse the proportionate
credit; consequent to which, the supplier’s output tax liability will be
reduced by the same amount.
If any of the above conditions are not satisfied, post-supply discount is not
allowed as a deduction from the value of supply and consequently, GST
liability of the supplier does not get reduced.
2. The statement is correct. As per the definition of the term ‘consideration’
provided under the CGST Act, consideration under the GST law includes
both payment in money or otherwise made by the recipient or any other
person and also takes within its sweep the monetary value of any act or
forbearance for the supply by the recipient or any other person. Further, it
includes within its ambit any deposit which is applied as a consideration for
the supply but excludes the subsidies provided by the State or Central
Government.
The term money has also been defined under the CGST Act and it not only
includes cash (Indian as well as foreign currency) but also cheque,
promissory note, bill of exchange, letter of credit, draft, pay order, traveler’s
cheque, money order, postal/electronic remittance or any such similar
instrument recognized by RBI. Non-monetary consideration essentially
means consideration in kind.
3. As per section 15(2)(e), the value of a supply includes subsidies directly
linked to the price, excluding subsidies provided by the State Governments
and the Central Government.
In the given case, though the subsidy is given by a non-Government body,
the same is not includible in the value as it is given in lumpsum and not
directly linked to the price of the supply being valued. Therefore, the value
of supply made by Sharp Minds during the month is ` 3,00,000.
4. In the given case, the showroom is not charging any amount towards freight
from Ms. Leena but incurring the same out of its own pocket. Therefore, the

5.80 INDIRECT TAXES
same should not be added to the value. Hence, the value of supply will be
` 2,00,000.
However, the answer will change in the second case when the showroom
will charge ` 300 for freight [(50km – 20 km) x ` 10] from Ms. Leena. In this
case, the supply will be a composite supply (principle supply being the
supply of furniture) and value thereof will be ` 2,00,300.
5. Section 15(2) mandates addition of certain elements in the value of supply.
Clause (c) of section 15(2) specifies that amount charged for anything done
by the supplier in respect of the supply at the time of or before delivery of
goods or supply of services shall be included in the value of supply.
Since AKJ Foods Pvt. Ltd. does the testing before the delivery of goods, the
charges therefor will be included in the value of the consignment.
Therefore, AKJ Foods Pvt. Ltd.’s argument is not correct. The testing fee
should be added to the price to arrive at value of the consignment.
6. As per section 15(2)(e), the value of a supply includes subsidies directly
linked to the price, excluding State Government and Central Government
subsidies. In this case, the subsidy is not received from the Government but
from a philanthropic association. Therefore, the subsidy is to be added
back to the price to arrive at the value, which comes to ` 5 lakh a year.
7. This is a supply that is valued as per transaction value under section 15(1) as
the price is the sole consideration for the supply and the supply is made to
unrelated person. The value of a supply includes certain elements like
interest which are actually payable. Once waived, the interest is not payable
and is therefore, not to be added to the value.
8. The discounts were not known or agreed for at the time of supply of goods
to the dealers. Therefore, in terms of section 15(3), such discounts cannot
be reduced from the price on which tax had been paid.
9. Computation of total value of taxable supplies made by Red Pepper
Ltd. during the month of March
Particulars Amount (`)
List price of the goods 15,00,000
Subsidy amounting to ` 2,10,000 received from the Central NIL

Government
[Since the subsidy is received from the Government, the
same is not includible in the value in terms of section
15(2)(e)]
Subsidy received from NGO 50,000
[Since the subsidy is received from a non-Government
body and directly linked to the supply, the same is
includible in the value in terms of section 15(2)(e)]
Tax levied by the Municipal Authority 20,000
Packing charges 15,000
[Being incidental expenses, the same are includible in the
value as per section 15(2)(c)]
Late fees paid by recipient of supply for delayed payment 5,085
[Includible in the value as per section 15(2)(d) - As the
amount of interest received is a lump sum amount, the
same has to be taken as inclusive of GST] [` 6,000 x
100/118] rounded off
Total value of taxable supplies 15,90,085
10. Computation of value of taxable supply made by M/s. Flo Pro to BP Ltd.
Price of the machine 25,000

[Since the subsidy is received from the State Government,
the same is not includible in the value of supply in terms of
section 15(2)(e)]
Third party inspection charges 5,000

[Any amount that the supplier is liable to pay in relation to
the supply but has been incurred by the recipient and not
included in the price actually paid or payable for the

5.82 INDIRECT TAXES
goods, is includible in the value of supply in terms of

section 15(2)(b)]
Freight charges for delivery of the machine value 2,000

[Since arranging freight is the liability of supplier, it is a
case of composite supply and thus, freight charges are
added in the value of principal supply.]
Total 32,000
Less: Discount @ 2% on ` 25,000 being price charged to BP 500

Ltd.
[Discount given before or at the time of supply if duly
recorded in the invoice is deductible from the value of
supply in terms of section 15(3)(a)]
Value of taxable supply 31,500
11. Computation of value of taxable supply made by Shri Krishna Pvt. Ltd.
to Shri Balram Pvt. Ltd.
Price of the goods 1,00,000
Municipal tax 2,000

Inspection charges 15,000

[Any amount charged for anything done by the supplier in
respect of the supply of goods at the time of/before
delivery of goods is includible in the value as per section
15(2)(c)]
Subsidy received from Shri Ram Trust 50,000

[Since the subsidy is received from a non-Government
body and directly linked to the supply, the same is
includible in the value in terms of section 15(2)(e)]

Late fees for delayed payment Nil

[Not includible since the same is waived off]
Weighment charges paid to Radhe Pvt. Ltd. on behalf of 2,000

Shri Krishna Pvt. Ltd.
the supply but has been incurred by the recipient and not
included in the price actually paid or payable for the
goods, is includible in the value of supply in terms of
section 15(2)(b)]
12. Computation of value of taxable supply made by Koli Ltd. to Ghisa Ltd.
Price of machinery (exclusive of taxes and discounts) 5,50,000
Amount paid by Ghisa Ltd. directly to the supplier for the 20,000
part fitted in the machinery
a 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 is includible in the value of supply in
terms of section 15(2)(b).]
Installation and testing charges 25,000

[Any amount charged for anything done by the supplier in
respect of the supply of goods at the time of/before
delivery of goods is includible in the value of supply in
terms of section 15(2)(c).]
Less: Discount @ 2% on the price of machinery [` 5,50,000 11,000

x 2%]
[Since discount is given at the time of supply of machinery
and recorded in the invoice, the same is deductible from

5.84 INDIRECT TAXES
the value of the supply in terms of section 15(3)(a).]
Less: Additional 1% discount at year end Nil

[Though the additional discount is established before/at
the time of supply, it is not deductible from the value of
supply in terms of section 15(3)(b) as the same is not
linked to any specific transaction and is adjusted by the
parties at the end of the financial year.]

Intermediate Course
Study Material
(Modules 1 to 2)
PAPER 4
Taxation
Section – B: Indirect Taxes
(Relevant for May, 2021 and
November, 2021 examinations)
MODULE – 2
BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

ii
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.
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
No. 7100, Indraprastha Marg, New Delhi 110 002, India.
Printed by :

iii
CONTENTS
CHAPTER-6: INPUT TAX CREDIT

Chapter Overview ................................................................................... 6.2
1. Introduction .................................................................................................................... 6.2
2. Relevant Definitions ...................................................................................................... 6.4
3. Eligibility and Conditions for taking
Input Tax Credit [Section 16] .................................................................................... 6.8
4. Apportionment of Credit & Blocked
Credits [Section 17] .................................................................................................... 6.23
5. Credit in Special Circumstances [Section 18] .................................................... 6.59
6. How ITC is utilized ...................................................................................................... 6.72
7. Let Us Recapitulate .................................................................................................... 6.84
8. Test Your Knowledge .............................................................................................…6.99
9. Answers/Hints ........................................................................................................... 6.104
CHAPTER-7: REGISTRATION

1. Introduction............................................................................................................................. .7.2
3. Concept of taxable person [Section 2(107)] ............................................................... 7.5
4. Persons Liable for Registration [Section 22] ................................................................ 7.6
5. Compulsory Registration in Certain Cases [Section 24] ........................................7.17
6. Persons Not Liable for Registration [Section 23] .....................................................7.19
7. Procedure for Registration [Sections 25, 26 & 27] ..................................................7.27
8. Amendment of Registration [Section 28] ...................................................................7.51

iv
9. Cancellation or Suspension of Registration and Revocation of

Cancellation [Sections 29 & 30]......................................................................................7.55
10. Let Us Recapitulate ..............................................................................................................7.69
11. Test Your Knowledge ........................................................................................................7.78
12. Answers/Hints........................................................................................................................7.80
CHAPTER 8 – TAX INVOICE; CREDIT AND DEBIT NOTES; E-WAY BILL

1. Introduction............................................................................................................................. .8.2
3. Tax Invoice [Section 31] ....................................................................................................... 8.5
4. Credit and Debit Notes [Section 34] .............................................................................8.43
5. Prohibition of Unauthorized Collection of Tax [Section 32] ................................8.48
6. Amount of Tax to be Indicated in Tax Invoice
and other documents [Section 33] ................................................................................8.49
7. E-Way Bill [Section 68 read with relevant CGST Rules, 2017] .............................8.49
8. Let Us Recapitulate ..............................................................................................................8.66
9. Test Your Knowledge ..........................................................................................................8.78
10. Answers/Hints........................................................................................................................8.81
CHAPTER 9 – PAYMENT OF TAX

1. Introduction............................................................................................................................. .9.2
3. Payment of Tax, Interest, Penalty and Other
Amounts [Section 49] ........................................................................................................... 9.8
4. Interest on Delayed Payment of Tax [Section 50] ....................................................9.22

v
5. Transfer of input tax credit [section 53 of

CGST Act & section 18 of IGST act]...............................................................................9.26
6. Let Us Recapitulate .............................................................................................................9.27
7. Test Your Knowledge ..........................................................................................................9.36
8. Answers/Hints........................................................................................................................9.37
CHAPTER 10- RETURNS
Learning Outcomes ................................................................................ 10.1

Chapter Overview .................................................................................. 10.2
1. Introduction............................................................................................................................10.2
2. Relevant Definitions ............................................................................................................10.7
3. Furnishing Details of Outward Supplies
[Section 37 read with rule 59 of CGST Rules] ............................................................10.9
4. Furnishing of Returns under Section 39 ................................................................... 10.20
5. Other Returns……………………………………… .............................................. ……………….10.32
6. Default/Delay in Furnishing Return [Sections 46 & 47]...................................... 10.35
7. Goods and Services Tax Practitioners [Section 48] .............................................. 10.36
8. Let Us Recapitulate ........................................................................................................... 10.40
9. Test Your Knowledge ....................................................................................................... 10.44
10. Answers/Hints..................................................................................................................... 10.45

CHAPTER 6
INPUT TAX CREDIT

For the sake of brevity, input tax credit has been referred to as ITC in this Chapter.
position of GST law existing as on 31.10.2020.
LEARNING OUTCOMES
After studying this Chapter, you will be able to:
 describe what are inputs, input services, capital goods and other
relevant terms in relation to ITC.
 explain the various conditions, timelines, restrictions and processes
for taking ITC on goods and services in general and special
circumstances.
 identify the items on which ITC is available as also the blocked items
on which ITC is not available.
 explain the concept relating to availing of proportionate ITC when
common inputs or input service or capital goods are used or
intended to be used for exempted and taxable supplies or business
and non-business activities.
 comprehend and apply the above provisions as also the provisions
relating to utilization of ITC to compute the GST liability of a
registered person payable in cash.

6.2 INDIRECT TAXES
Relevant definitions
Input Tax credit
Eligibility and conditions

for taking ITC
Apportionment of credit
and blocked credits
Availability of credit in
special circumstances
How ITC is utilised
1. INTRODUCTION
In earlier indirect tax regime, the
credit mechanism for indirect taxes
levied by the Union Government,
(central excise duty and service tax) was governed by the CENVAT Credit Rules,
2004; and the credit mechanism for state-level VAT on sale of goods was governed
by the States under their respective VAT laws. The VAT legislations allowed ITC of
VAT on inputs and capital goods in transactions within the state, but not on inputs
and capital goods coming in the State from outside the state, on which central sales
tax was paid. CENVAT Credit Rules, 2004 allowed availing and utilization of credit
of duty/tax paid on both goods (capital goods and inputs) and services by the
manufacturers and the service providers across the country.

INPUT TAX CREDIT 6.3
The credit across goods and services was integrated vide the CENVAT Credit Rules,
2004 in the year 2004 to mitigate the cascading effects of central levies namely,
central excise duty and service tax. However, the credit chain remained fragmented
on account of State-Level VAT as the credit of central taxes could not be set off
against a State levy and vice versa. The chain further got distorted as ITC was not
available on inter-State purchases. This resulted in cascading of taxes leading to
increase in costs of goods and services.
The GST regime promises seamless credit on goods and services across the entire
supply chain with some exceptions like supplies charged to tax under composition
scheme and supply of exempted goods and/or services. ITC is considered to be
the lifeline of the GST regime. In fact, it is the provisions of ITC, which essentially
make GST a value added tax i.e., collection of tax at all points of supply chain after
allowing credit of tax paid at earlier points.
Chapter V of the CGST Act [Sections 16 to 21] & Chapter V: Input Tax Credit of the
CGST Rules [Rules 36-45] prescribe the provisions relating to ITC. State GST laws also
prescribe identical provisions in relation to ITC. In this Chapter, provisions of sections
16, 17 and 18 have been discussed; 1 first the statutory provisions of these sections
together with the relevant rules have been extracted followed by their analysis.
Provisions of ITC under the CGST Act have also been made applicable to
the IGST Act vide section 20 of the IGST Act.
Scheme of ITC - At a Glance

Given below are the salient features of the scheme of ITC as contained in the
provisions of sections 16, 17 and 18 read with the relevant rules. The scheme has
been discussed in detail in the ensuing pages of this Chapter.
 The scheme is designed to avoid cascading effect of taxes and make GST a
destination-based tax.
 Broadly, ITC is available on all inputs, input services and capital goods used
for purposes of business of a taxable person. The exception is ‘blocked
credit’, where ITC is not available even when these goods or services are used
for purposes of business.
1
Provisions of ITC relating to job work and input service distributor [Sections 19, 20 and 21]
will be discussed at the Final level.

6.4 INDIRECT TAXES
 ITC is used for payment of tax on taxable output supply to avoid cascading
effect of taxes.
 GST law does not require ‘one to one’ co-relation between inputs/input
services and final products/services. Any eligible ITC can be used for payment
of tax on any taxable output supply.
 IGST is another core aspect of GST. It is a transitory tax to enable transfer of
ITC when goods or services move from one State to another. This is a unique
feature of Indian GST.
 Since ITC can be availed for payment of tax on taxable output supply, as a
natural corollary, ITC is not available when tax is not payable on output
supply, i.e. on exempt supply.
 The exception to the above principle is ‘zero rated supply’ 2, i.e. exports or
supplies to a special economic zone (SEZ) developer/unit, where ITC is
available even if no tax is payable on output supply. Such ITC can be used
either for payment of tax on supplies made with tax or refund of the same
can be obtained. This simple mechanism is used to make exports and
supplies to SEZ completely tax free.
 If a taxable person is making both taxable and exempt supply, he is entitled
to full credit of ITC in respect of inputs, input services and capital goods
exclusively used for taxable supply and no credit at all for inputs, input
services and capital goods exclusively used for exempt supply.
 If common inputs, input services and capital goods are used for taxable as
well as exempt supply, only proportionate ITC attributable to the taxable
supply is available. The common ITC is apportioned in the ratio of value of
taxable supply and exempt supply. Elaborate provisions have been made in
the GST law to prescribe the manner of calculation of proportionate ITC.
Before proceeding to understand the provisions of section 16, 17, 18 and the
relevant rules let us first go through few relevant definitions.
2
The concept of zero rated supply and the refund of ITC will be dealt in detail at the Final level.

Business includes
benefit;
to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or
not there is volume, frequency, continuity or regularity of such
transaction;
(d) supply or acquisition of goods including capital goods and services in
subscription or any other consideration) of the facilities or benefits to
its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been
accepted by him in the course or furtherance of his trade, profession or
vocation;
(h) activities of a race club including by way of totalisator or a licence to
book maker or activities of a licenced book maker in such club; and
public authorities [Section 2(17)].
Capital goods means goods, the value of which is capitalized in the books of
account of the person claiming the ITC and which are used or intended to be
used in the course or furtherance of business [Section 2(19)].
Conveyance includes a vessel, an aircraft and a vehicle [Section 2(34)].
Exempt supply means supply of any goods or services or both which attracts
nil rate of tax or which may be wholly exempt from tax under section 11, or
under section 6 of the IGST Act, and includes non-taxable supply [Section
2(47)].
Input means any goods other than capital goods used or intended to be used
by a supplier in the course or furtherance of business [Section 2(59)].

6.6 INDIRECT TAXES
Input service means any service used or intended to be used by a supplier

in the course or furtherance of business [Section 2(60)].
Input tax in relation to a registered person, means the central tax, State tax,
integrated tax or Union territory tax charged on any supply of goods or
services or both made to him and includes—
(a) the integrated goods and services tax charged on import of goods;
(b) the tax payable under the provisions of sub-sections (3) and (4) of
section 9;
(c) the tax payable under the provisions of sub-section (3) and (4) of
section 5 of the IGST Act;
(d) the tax payable under the provisions of sub-section (3) and sub-section
(4) of section 9 of the respective State Goods and Services Tax Act; or
(e) the tax payable under the provisions of sub-section (3) and sub-section
(4) of section 7 of the Union Territory Goods and Services Tax Act,
but does not include the tax paid under the composition levy [Section 2(62)].
Input tax credit means the credit of input tax [Section 2(63)].
Inward supply in relation to a person, shall mean receipt of goods or services
or both whether by purchase, acquisition or any other means with or without
consideration [Section 2(67)].
Motor vehicle shall have the same meaning as assigned to it in clause (28)
of section 2 of the Motor Vehicles Act, 1988 [Section 2(76)].
Motor vehicle or vehicle under the Motor Vehicles Act, 1988 means any
mechanically propelled vehicle adapted for use upon roads whether the
power of propulsion is transmitted thereto from an external or internal source
and includes a chassis to which a body has not been attached and a trailer;
but does not include a vehicle running upon fixed rails or a vehicle of a special
type adapted for use only in a factory or in any other enclosed premises or a
vehicle having less than four wheels fitted with engine capacity of not
exceeding twenty five cubic centimetres. [Section 2(28) of Motor Vehicles
Act, 1988].
Non-resident taxable person means any person who occasionally
undertakes transactions involving supply of goods or services or both,
whether as principal or agent or in any other capacity, but who has no fixed
place of business or residence in India [Section 2(77)].

Principal means a person on whose behalf an agent carries on the business

of supply or receipt of goods or services or both [Section 2(88)].
Quarter shall mean a period comprising three consecutive calendar months,
ending on the last day of March, June, September and December of a
calendar year [Section 2(92)].
and any reference to a person to whom a supply is made shall be construed
as a reference to the recipient of the supply and shall include an agent acting
as such on behalf of the recipient in relation to the goods or services or both
Taxable supply means a supply of goods or services or both which is leviable
to tax under CGST Act [Section 2(108)].
Works contract means a contract for building, construction, fabrication,
completion, erection, installation, fitting out, improvement, modification, repair,
maintenance, renovation, alteration or commissioning of any immovable
property wherein transfer of property in goods (whether as goods or in some
other form) is involved in the execution of such contract [Section 2(108)].
Zero-rated supply means any of the following supplies of goods or services
or both, namely:––
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone (SEZ)
developer or a Special Economic Zone unit [Section 16(1) of the IGST Act].

6.8 INDIRECT TAXES
3. ELIGIBILITY AND CONDITIONS FOR TAKING INPUT

TAX CREDIT [SECTION 16]
Section 16 Eligibility and conditions for taking input tax credit
(1) Every registered person shall, subject to such conditions and

restrictions as may be prescribed and in the manner specified in
section 49, be entitled to take credit of input tax charged on any supply
of goods or services or both to him which are used or intended to be
used in the course or furtherance of his business and the said amount
shall be credited to the electronic credit ledger of such person.
(2) Notwithstanding anything contained in this section, no registered

person shall be entitled to the credit of any input tax in respect of
any supply of goods or services or both to him unless,–
(a) he is in possession of a tax invoice or debit note issued by

a supplier registered under this Act, or such other tax
paying documents as may be prescribed;
(b) he has received the goods or services or both.
Explanation.—For the purposes of this clause, it shall be

deemed that the registered person has received the goods
or, as the case may be, services–
(i) where the goods are delivered by the supplier to

a recipient or any other person on the direction
of such registered person, whether acting as an
agent or otherwise, before or during movement
of goods, either by way of transfer of documents
of title to goods or otherwise;

(ii) where the services are provided by the supplier

to any person on the direction of and on account
of such registered person.
(c) subject to the provisions of section 41, the tax charged in

respect of such supply has been actually paid to the
Government, either in cash or through utilisation of input
tax credit admissible in respect of the said supply; and
(d) he has furnished the return under section 39:
Provided that where the goods against an invoice are received in

lots or instalments, the registered person shall be entitled to take
credit upon receipt of the last lot or instalment:
Provided further that where a recipient fails to pay to the supplier of goods
or services or both, other than the supplies on which tax is payable on
reverse charge basis, the amount towards the value of supply along with
tax payable thereon within a period of one hundred and eighty days from
the date of issue of invoice by the supplier, an amount equal to the input
tax credit availed by the recipient shall be added to his output tax liability,
along with interest thereon, in such manner as may be prescribed:
Provided also that the recipient shall be entitled to avail of the credit
of input tax on payment made by him of the amount towards the value
of supply of goods or services or both along with tax payable thereon.
(3) Where the registered person has claimed depreciation on the tax
component of the cost of capital goods and plant and machinery
under the provisions of the Income-tax Act, 1961, the input tax
credit on the said tax component shall not be allowed.
(4) A registered person shall not be entitled to take input tax credit in
respect of any invoice or debit note for supply of goods or services
or both after the due date of furnishing of the return under section
39 for the month of September following the end of financial year
to which such invoice or invoice relating to such debit note pertains
or furnishing of the relevant annual return, whichever is earlier.

6.10 INDIRECT TAXES
Chapter V: Input Tax Credit of the CGST Rules
Rule 36 Documentary requirements and conditions for claiming input

tax credit
(1) The input tax credit shall be availed by a registered person,

including the Input Service Distributor, on the basis of any of the
following documents, namely:-
(a) an invoice issued by the supplier of goods or services or

both in accordance with the provisions of section 31;
(b) an invoice issued in accordance with the provisions of

clause (f) of sub-section (3) of section 31, subject to the
payment of tax;
(c) a debit note issued by a supplier in accordance with the

provisions of section 34;
(d) a bill of entry or any similar document prescribed under

the Customs Act, 1962 or rules made thereunder for the
assessment of integrated tax on imports;
(e) an input service distributor invoice or input service

distributor credit note or any document issued by an
input service distributor in accordance with the provisions
of sub-rule (1) of rule 54.
(2) Input tax credit shall be availed by a registered person only if all the
applicable particulars as specified in the provisions of Chapter VI are
contained in the said document, and the relevant information, as
contained in the said document, is furnished in FORM GSTR-2 3 by
such person.
Provided that if the said document does not contain all the specified
particulars but contains the details of the amount of tax charged,
description of goods or services, total value of supply of goods or
3
Filing of GSTR-2 has been deferred by the GST Council.

services or both, GSTIN of the supplier and recipient and place of

supply in case of inter-State supply, input tax credit may be availed
by such registered person.
(3) No input tax credit shall be availed by a registered person in respect

of any tax that has been paid in pursuance of any order where any
demand has been confirmed on account of any fraud, willful
misstatement or suppression of facts.
(4) Input tax credit to be availed by a registered person in respect

of invoices or debit notes, the details of which have not been
uploaded by the suppliers under sub-section (1) of section 37,
shall not exceed 10 per cent. of the eligible credit available in
respect of invoices or debit notes the details of which have
been uploaded by the suppliers under sub-section (1) of
section 37.
Rule 37 Reversal of input tax credit in the case of non-payment of

consideration
(1) A registered person, who has availed of input tax credit on any
inward supply of goods or services or both, but fails to pay to the
supplier thereof the value of such supply along with the tax payable
thereon within the time limit specified in the second proviso to sub-
section (2) of section 16, shall furnish the details of such supply, the
amount of value not paid and the amount of input tax credit availed
of proportionate to such amount not paid to the supplier in FORM
GSTR-2 for the month immediately following the period of one
hundred and eighty days from the date of the issue of the invoice.
Provided that the value of supplies made without consideration as

specified in Schedule I of the said Act shall be deemed to have been paid
for the purposes of the second proviso to sub-section (2) of section 16.
Provided further that the value of supplies on account of any amount

added in accordance with the provisions of clause (b) of sub-section
(2) of section 15 shall be deemed to have been paid for the purposes
of the second proviso to sub-section (2) of section 16.

6.12 INDIRECT TAXES
(2) The amount of input tax credit referred to in sub-rule (1) shall be
added to the output tax liability of the registered person for the
month in which the details are furnished.
(3) The registered person shall be liable to pay interest at the rate
notified under sub-section (1) of section 50 for the period starting
from the date of availing credit on such supplies till the date when
the amount added to the output tax liability, as mentioned in sub-
rule (2), is paid.
(4) The time limit specified in sub-section (4) of section 16 shall not
apply to a claim for re- availing of any credit, in accordance with
the provisions of the Act or the provisions of this Chapter, that had
been reversed earlier.
ANALYSIS
(i) Eligibility for taking ITC [Section 16(1)]
(a) Registration under GST
Every registered person shall be entitled to ITC of GST charged on
inward supply of goods and / or services. This is subject to the
provisions relating to use of ITC under section 49 and the conditions
and restrictions in the rules. [Section 49 prescribes provisions relating to
payment of tax, interest, penalty & other amounts. The same has been
discussed in detail in Chapter 9: Payment of Tax.]
(b) Goods/services to be used for business purposes
ITC of GST will be available on goods and/or services which are used in
the course or furtherance of the business [See definition of business].
The “intention to use” the goods and/or services in the course or
furtherance of business would also suffice for availing ITC on such
goods and/or services. Thus, tax paid on goods and or/services which
are used or intended to be used for non-business purposes cannot be
availed as credit. ITC will be credited in electronic credit ledger.

(ii) Conditions for taking ITC [Section 16(2)]

The registered person will be entitled to ITC on a supply only if ALL the
following four conditions are fulfilled:
(a) Possession of tax paying document [Section 16(2)(a) read with
rule 36 of the CGST Rules]
ITC can be availed on the basis of any of the following documents:
(i) Invoice issued by the supplier of goods and/or services
(ii) Invoice issued by the recipient receiving goods and/or services
from unregistered supplier along with proof of payment of tax, in
case of reverse charge
(iii) Debit note issued by the supplier
(iv) Bill of entry or similar document prescribed under the Customs
Act
(v) Revised invoice
(vi) Document issued by input service distributor 4
The documents basis which ITC is being taken should contain at least
the following details:
(i) Amount of tax charged
(ii) Description of goods or services
(iii) Total value of supply of goods and/or services
(iv) GSTIN of the supplier and recipient
(v) Place of supply in case of inter-State supply
No ITC of tax paid towards demands involving fraud [Rule
36(3)]: Tax paid in pursuance of any order where any demand has
been confirmed on account of any fraud, willful misstatement or
suppression of facts cannot be availed as ITC.
4
Concept of Input Service Distributor will be dealt with at the Final level.

6.14 INDIRECT TAXES
Restricted ITC on invoices/debit notes not uploaded by supplier in

his GSTR-1 5 [Rule 36(4) read with Circular No. 123/42/2019 GST,
dated 11.11.2019]: It is observed that some taxpayers take inflated
or bogus ITC, even if proper tax invoices or debit notes in respect of
inputs or input services are not available. To exercise control over
the malpractice of availing bogus ITC by the taxpayers, certain
restrictions have been placed on availment of ITC.
ITC on all invoices/debit notes which are uploaded by the suppliers
in their GSTR-1s can be availed in full. The recipient gets details of
tax invoices and debit notes uploaded by the suppliers in their
GSTR-1s, in his (recipient’s) GSTR-2A and GSTR-2B.
GSTR-1 is a monthly/quarterly statement containing details of outward

supplies made by a registered supplier. Such details of outward
supplies furnished by the supplier are communicated and made
available electronically (auto populated) to the respective recipient(s) in
GSTR- 2A5. GSTR-2B is an auto-drafted ITC statement generated for
every registered person based on GSTR-1 filed by supplier.
However, in respect of invoices/debit notes the details of which are

not uploaded by the suppliers in their GSTR-1s (and hence cannot
be seen in GSTR-2A and GSTR-2B of the recipient), ITC can be
availed only upto 10% of the eligible credit available in respect of
invoices/debit notes the details of which have been uploaded by the
suppliers in their GSTR-1s under section 37(1).
In other words, the ITC claimed should not exceed 110% of ITC
reflecting in GSTR-2A on the due date of filing of GSTR-1 of the
suppliers for the said tax period. The taxpayer has to avail the ITC
on self-assessment basis as the restriction is not imposed through
the common portal.
The above concept has been illustrated in a diagram given at the
next page.
The balance ITC may be claimed by the taxpayer in any of the
succeeding months provided details of requisite invoices are
uploaded by the suppliers. He can claim proportionate ITC as and
5
The provisions relating to filing of GSTR-1 and GSTR-2A have been discussed in detail in
Chapter 10: Returns.]

when details of some invoices are uploaded by the suppliers

provided that ITC on invoices, the details of which are not uploaded
in GSTR-1 remains under 10% of the eligible ITC, the details of
which are uploaded by the suppliers. In other words, taxpayer may
avail full ITC in respect of a tax period, as and when the invoices
are uploaded by the suppliers to the extent eligible [ITC/ 1.1].
ITC on invoices/debit 100% ITC can be

notes which have claimed on such
been uploaded by the invoices/debit notes, if
suppliers in their all other conditions of
GTSR-1s availing ITC are fulfilled
ITC on invoice/debit 10% of the eligible ITC

note which have not available on
been uploaded by invoices/debit notes
suppliers in their uploaded by suppliers
GTSR-1s in their GSTR-1s can be
claimed on such
invoices/debit notes.
✪ Restricted amount of ITC claimed on invoices/debit

notes not uploaded by suppliers in their GSTR-1s
should not exceed the actual eligible ITC available in
respect of the invoices not uploaded.
✪ Invoices on which ITC is not available under any of the
provisions e.g., under section 17(5), are not to be considered for
calculation of 10% of the eligible credit available.
✪ Full ITC can be availed in respect of IGST paid on imports,
documents issued under reverse charge, credit received from
ISD etc., which are outside the ambit of section 37(1).
✪ Restricted ITC (10%) is calculated on a consolidated basis
on total eligible ITC from all suppliers against all supplies
whose details have been uploaded by the suppliers.

6.16 INDIRECT TAXES
ILLUSTRATION 1
Vijay Sales, a registered supplier, receives 100 invoices (for inward
supply of goods/ services) involving GST of ` 10 lakh, from various
suppliers during the month of October. Out of 100 invoices, 80
invoices involving GST of ` 6 lakh have been uploaded by the
suppliers in their respective GSTR-1s filed on the prescribed due
date therefor.
Compute the ITC that can be claimed by Vijay Sales in its GSTR-3B
for the month of October to be filed by 20th November assuming
that GST of ` 10 lakh is otherwise eligible for ITC.
ANSWER
ITC to be claimed by Vijay Sales in its GSTR-3B for the month of
October to be filed by 20th November will be computed as under-
Invoices Amount of ITC Amount of ITC

involved in the that can be
invoices (`) availed (`)
80 invoices uploaded in 6 lakh 6 lakh
GSTR-1 [Refer Note 1]
20 invoices not uploaded in 4 lakh 0.6 lakh
Total 10 lakh 6.6 lakh
Notes:
(1) 100% ITC can be availed on invoices uploaded by the suppliers
in their GSTR-1.
(2) As per rule 36(4), the ITC in respect of invoices not uploaded
by the suppliers in their GSTR-1s is restricted to 10% of
eligible ITC in respect of invoices uploaded in GSTR-1s. Thus,
in respect of 20 invoices not uploaded in GSTR-1s, the ITC has
been restricted to ` 0.6 lakh [10% of ` 6 lakh].
ILLUSTRATION 2
Ajay Sales, a registered supplier, receives 100 invoices (for inward
supply of goods/ services) involving GST of ` 10 lakh, from various
suppliers during the month of October. Out of 100 invoices, 85

invoices involving GST of ` 9.5 lakh have been uploaded by the

suppliers in their respective GSTR-1s filed on the prescribed due
date therefor.
Compute the ITC that can be claimed by Ajay Sales in its GSTR-3B
for the month of October to be filed by 20th November assuming
that GST of ` 10 lakh is otherwise eligible for ITC:
ANSWER
ITC to be claimed by Ajay Sales in its GSTR-3B for the month of
October to be filed by 20th November will be computed as under-
Invoices Amount of ITC Amount of ITC

involved in the that can be
invoices (`) availed (`)
85 invoices uploaded in 9.5 lakh 9.5 lakh
15 invoices not uploaded in 0.5 lakh 0.5 lakh
Total 10 lakh 10 lakh
Notes:
(1) 100% ITC can be availed on invoices uploaded by the suppliers
in their GSTR-1.
(2) As per rule 36(4), the ITC in respect of invoices not uploaded
by the suppliers in their GSTR-1s is restricted to 10% of
eligible ITC in respect of invoices uploaded in GSTR-1s.
However, since in this case, 10% of the eligible ITC in respect
of invoices uploaded in GSTR-1s [` 0.95 lakh (10% of ` 9.5
lakh)] exceeds the actual ITC [` 0.5 lakh] in respect of 15
invoices not uploaded in GSTR-1, ITC availed should be
limited to actual amount of ITC.
(b) Receipt of the goods and / or services [Section 16(2)(b)]
The registered person taking the ITC must have received the goods
and / or services.
“Bill to Ship to” Model: Under this model, the goods are delivered to

6.18 INDIRECT TAXES
a third party - ‘Ç’ on the direction of the customer (registered person)

– ‘B’ who purchases the goods from the vendor (supplier) – ‘A’. In other
words, ‘A’ bills to ‘B’ but ships the goods to ‘Ç’ on direction of ‘B’. In
effect, two supplies take place in this scenario viz., from ‘A’ to ‘B’ and
from ‘B’ to ‘Ç’. Thus, under this model, the customer (registered person)
who purchases such goods does not receive the said goods.
For such cases, by virtue of explanation to section 16(2)(b), it is deemed
that the registered person (customer) has received the goods. In other
words, goods delivered to another person on the direction of the
registered person by way of transfer of documents of title or otherwise,
either before or during the movement, are deemed to have been received
by such registered person. So, ITC will be available to the registered
person, on whose order the goods are delivered to a third person.
Similarly, services may also be provided to a third party by the service
provider (supplier) on the direction of the service recipient (registered
person). In this case also, though the service recipient (registered person)
does not receive the service, by virtue of explanation to section 16(2)(b) it
is deemed that the registered person (service recipient) has received the
service. In other words, service provided to any person on the direction of
and on account of the registered person, is deemed to have been received
by such registered person. So, ITC will be available to the registered
person, on whose direction the services are provided to a third person.
Supply by A to B B entitled to avail
A A bills to B
B
ITC basis the
invoice issued by
A as
goods/services
Supply by B to C deemed to be
B bills to C received by B
Goods/services
Goods shipped/Services being received, C
provided by A to C on entitled to avail ITC
directions of B C basis the invoice
issued by B

(1) A is a trader who places an order on B for a consignment

of soda ash. A receives a buying order from C for the same
quantity of soda ash. A instructs B to deliver the goods to C,
and in turn he raises an invoice on C. Though the goods are not
physically received at the premises of A, section 16(2)(b) allows ITC of
such goods to A.
(2) The registered head office (New Delhi) of ABC Pvt. Ltd.
enters into a contract with DEF Pvt. Ltd. of New Delhi for
repair and maintenance of computers systems installed at its
registered branch office in Bengaluru, Karnataka. DEF Pvt. Ltd. issues
an invoice on ABC Pvt. Ltd., New Delhi for the services provided by it.
Though the actual services are received by the branch office and not by
the head office, section 16(2)(b) allows ITC of such repair and
maintenance services to head office.
(c) Tax leviable on supply actually paid to Government [Section
16(2)(c)]
The supplier should have actually paid the tax charged on the goods
and/or services, for which ITC is being taken, either in cash or by
utilizing ITC. However, section 41 allows the taxpayer (recipient) to take
ITC provisionally on self-assessment basis. The self-assessed ITC gets
credited to the taxpayer’s electronic credit ledger on provisional basis
in terms of section 49(2).
Thus, even if the recipient has paid the tax to the supplier his claim for
ITC gets confirmed only when the supplier deposits the tax so collected
by him to the Government.
One of the significant features of the Indian GST is the ‘matching
concept’, i.e. ITC claimed by the recipient of supply is matched with the
tax paid by the supplier in relation to that supply. Matching seeks to
ensure that only legit ITC is claimed by the recipient. This was intended
to be achieved through a sophisticated automated return filing
mechanism. Initially, the GST law provided for an elaborate system of
return filing whereby the outward supplies of a supplier uploaded in
GSTR-1 were to be auto-populated as inward supplies in the recipient’s
GSTR-2 and ITC could be availed only on such matched inward supplies.
Basis GSTR-1 and GSTR-2 of the taxpayer, the consolidated return viz,
GSTR-3 was to be auto-generated (for most part), and tax liability paid.
However, the envisaged system could not be operationalized.

6.20 INDIRECT TAXES
Presently, suppliers are required to file GSTR-1 (Statement of details of

outward supplies), the details of which get auto-populated in GSTR-2A
of the recipient for viewing. Further, GSTR-2B, an auto-drafted ITC
statement, is also generated for the taxpayer based on GSTR-1 filed
by the supplier. Basis the details available in GSTR-2A and GSTR-2B,
the taxpayer takes provisional ITC on self-assessment basis in GSTR-3B
for discharging the tax liability.
(d) Filing of return [Section 16(2)(d)]
The registered person taking the ITC must have filed his return under
section 39. Presently, a summary return in form GSTR-3B is being filed
on monthly basis. Thus, a taxpayer should file GSTR-3B to avail ITC on
eligible inward supplies.
(iii) Goods received in lots: ITC available only on receipt of last lot
[First proviso to section 16(2)]
In case the goods covered under an invoice are not received in a single
consignment but are received in lots / instalments, ITC can be taken only upon
receipt of the last lot / instalment.
(3) XYZ enters into a contract with ABC for supply of 10 MT of a
chemical for ` 1,18,000 (inclusive of GST of ` 18,000) in the month
of August. The chemical is to be delivered in lots over a period of
three months. ABC raises the invoice for the entire amount in August and
XYZ also makes the payment in the same month but the supply is completed
in November. Though XYZ paid the full tax as early as August, it can take the
ITC of the same only on receipt of last instalment of the chemical in the month
of November.
(iv) Payment for the invoice to be made within 180 days [Second
proviso to section 16(2) read with rule 37 of CGST Rules]
The registered person must pay to the supplier, the value of the goods and/or
services along with the tax within 180 days from the date of issue of invoice. In
the event of failure to do so, the corresponding credits availed by the registered
person would be added to his output tax liability, with interest. Interest will be
paid @ 18% from the date of availing credit till the date when the amount
added to the output tax liability is paid.
However, once the recipient makes the payment of value of goods and/or
services along with tax, he will be entitled to avail the credit again without

any time limit [See discussion on time limit for availing credit under point (vi)].
In case part-payment has been made, proportionate credit would be allowed.
Exceptions
This condition of payment of value of supply plus tax within 180 days does
not apply in the following situations:
a. Supplies on which tax is payable under reverse charge
b. Deemed supplies without consideration
c. Additions made to the value of supplies on account of supplier’s liability,
in relation to such supplies, being incurred by the recipient of the supply
Under situations given in points (b) & (c), the value of supply is deemed to
have been paid.
(4) Due to a quality dispute, PZP Ltd withheld payment on a
machine supplied by a vendor till it could be rectified. Over 180
days went by in this dispute. The credit taken by PZP on the
invoice got added to the output tax liability of PZP and thus, it had
to pay back the credit. Only after the vendor rectified the machine and PZP
released the payment, could PZP take the credit again.
(v) If depreciation claimed on tax component, ITC not allowed
[Section 16(3)]
If the person taking the ITC on capital goods and plant and machinery has
claimed depreciation on the tax component of the cost of the said items
under the Income-tax Act 1961, the ITC on the said tax component shall not
be allowed. Thus, in respect of the tax paid on such items, dual benefit cannot
be claimed under Income-tax Act, 1961 and GST laws simultaneously. In other
words, either depreciation on the tax component can be claimed under
Income Tax Act or ITC of such tax paid can be availed under GST laws.
(vi) Time limit for availing ITC: Due date of filing of return for the
month of September of succeeding financial year or date of
filing of annual return, whichever is earlier [Section 16(4)]
ITC on invoices pertaining to a financial year or debit notes relating to
invoices pertaining to a financial year can be availed any time till the due date
of filing of the return for the month of September of the succeeding financial
year or the date of filing of the relevant annual return, whichever is earlier.
It may be noted that the return for the month of September is to be filed by

6.22 INDIRECT TAXES
20th October and annual return of a financial year is to be filed by 31st

December of the succeeding financial year.
So, the upper time limit for taking ITC is 20th October of the next financial
year or the date of filing of annual return, whichever is earlier. The underlying
reasoning for this restriction is that no change in return is permitted after
September of next financial year. If annual return is filed before the month
of September, then no change can be made after filing of annual return.
Exception
The time limit u/s 16(4) does not apply to claim for re-availing of credit that
had been reversed earlier.
(5) Hercules Machinery delivered a machine to XYZ in the month
of January under Invoice no. 49 dated 28th January for ` 4,15,000
plus GST and undertook trial runs and calibration of the machine
as per the requirements of XYZ. The amount chargeable for the
post-delivery activities was covered in a debit note raised in the month of
April for ` 50,000 plus GST. XYZ did not file its annual return till the month
of October.
Though the debit note is received in the next financial year, it relates to an
invoice received in the preceding financial year. Therefore, the time limit for
taking ITC available on ` 50,000 as well as on ` 4,15,000 is 20th October, earlier
of the date of filing the annual return for the preceding financial year or the
return for the month of September.
(vii) Restriction of ITC in proportion of (i) taxable supplies (ii)
business purposes [Sub-sections (1) and (2) of section 17]
ITC is restricted in proportion of the use of the goods and/or services (i) in
the taxable and / or zero-rated part of the supply (ii) for business purposes.
This is elaborated in heading (4) below.
(viii)ITC not allowed on certain supplies [Section 17(5)]
ITC has been blocked for specified goods and services. This is elaborated in
heading (4) below.

4. APPORTIONMENT OF CREDIT & BLOCKED CREDITS

[SECTION 17]
Section 17 Apportionment of credit and blocked credits

Sub-section Clause Apportionment of credit and blocked credits
(1) Where the goods or services or both are used by the registered
person partly for the purpose of any business and partly for other
purposes, the amount of credit shall be restricted to so much of the
input tax as is attributable to the purposes of his business.
(2) Where the goods or services or both are used by the registered
person partly for effecting taxable supplies including zero-rated
supplies under this Act or under the Integrated Goods and Services
Tax Act and partly for effecting exempt supplies under the said Acts,
the amount of credit shall be restricted to so much of the input tax
as is attributable to the said taxable supplies including zero-rated
supplies.
(3) The value of exempt supply under sub-section (2) shall be such as
may be prescribed, and shall include supplies on which the recipient
is liable to pay tax on reverse charge basis, transactions in
securities, sale of land and, subject to clause (b) of paragraph 5 of
Schedule II, sale of building.
Explanation.— For the purposes of this sub-section, the expression
‘‘value of exempt supply’’ shall not include the value of activities or
transactions specified in Schedule III, except those specified in
paragraph 5 of the said Schedule.
(4) A banking company or a financial institution including a non-
banking financial company, engaged in supplying services by way
of accepting deposits, extending loans or advances shall have the
option to either comply with the provisions of sub-section (2), or
avail of, every month, an amount equal to fifty per cent. of the
eligible input tax credit on inputs, capital goods and input services
in that month and the rest shall lapse:

6.24 INDIRECT TAXES
Provided that the option once exercised shall not be withdrawn

during the remaining part of the financial year:
Provided further that the restriction of fifty per cent. shall not apply to
the tax paid on supplies made by one registered person to another
registered person having the same Permanent Account Number.
(5) Notwithstanding anything contained in sub-section (1) of section
16 and sub- section (1) of section 18, input tax credit shall not be
available in respect of the following, namely:—
(a) motor vehicles for transportation of persons having
approved seating capacity of not more than thirteen
persons (including the driver), except when they are used
for making the following taxable supplies, namely:—
(A) further supply of such motor vehicles; or
(B) transportation of passengers; or
(C) imparting training on driving such motor vehicles;
(aa) vessels and aircraft except when they are used––
(i) for making the following taxable supplies,
namely:—
(A) further supply of such vessels or aircraft; or
(B) transportation of passengers; or
(C) imparting training on navigating such vessels;
or
(D) imparting training on flying such aircraft;
(ii) for transportation of goods;
(ab) services of general insurance, servicing, repair and
maintenance in so far as they relate to motor vehicles,
vessels or aircraft referred to in clause (a) or clause (aa):
Provided that the input tax credit in respect of such
services shall be available—
(i) where the motor vehicles, vessels or aircraft referred
to in clause (a) or clause (aa) are used for the
purposes specified therein;

(ii) where received by a taxable person engaged—

(I) in the manufacture of such motor vehicles,
vessels or aircraft; or
(II) in the supply of general insurance services in
respect of such motor vehicles, vessels or
aircraft insured by him;
(b) the following supply of goods or services or both—
(i) food and beverages, outdoor catering, beauty
treatment, health services, cosmetic and plastic
surgery, leasing, renting or hiring of motor vehicles,
vessels or aircraft referred to in clause (a) or clause
(aa) except when used for the purposes specified
therein, life insurance and health insurance:
goods or services or both shall be available where
an inward supply of such goods or services or both
is used by a registered person for making an
outward taxable supply of the same category of
goods or services or both or as an element of a
taxable composite or mixed supply;
(ii) membership of a club, health and fitness centre;
and
(iii) travel benefits extended to employees on vacation
such as leave or home travel concession:
goods or services or both shall be available, where
it is obligatory for an employer to provide the same
to its employees under any law for the time being
in force.
(c) works contract services when supplied for construction of
an immovable property (other than plant and machinery)
except where it is an input service for further supply of
works contract service;

6.26 INDIRECT TAXES
(d) goods or services or both received by a taxable person for

construction of an immovable property (other than plant
or machinery) on his own account including when such
goods or services or both are used in the course or
furtherance of business
Explanation.––For the purposes of clauses (c) and (d), the
expression “construction” includes re-construction,
renovation, additions or alterations or repairs, to the
extent of capitalisation, to the said immovable property
(e) goods or services or both on which tax has been paid
under section 10;
(f) goods or services or both received by a non-resident
taxable person except on goods imported by him;
(g) goods or services or both used for personal consumption;
(h) goods lost, stolen, destroyed, written off or disposed of by
way of gift or free samples; and
(i) any tax paid in accordance with the provisions of sections
74, 129 and 130.
(6) The Government may prescribe the manner in which the credit
referred to in sub-sections (1) and (2) may be attributed.
Explanation.–– For the purposes of this Chapter and Chapter VI, the
expression “plant and machinery” means apparatus, equipment, and
machinery fixed to earth by foundation or structural support that are
used for making outward supply of goods or services or both and
includes such foundation and structural supports but excludes—
(i) land, building or any other civil structures;
(ii) telecommunication towers; and
(iii) pipelines laid outside the factory premises.
Chapter V: Input Tax Credit of the CGST Rules
Rule 38 Claim of credit by a banking company or a financial
institution
A banking company or a financial institution, including a non-
banking financial company, engaged in the supply of services by

way of accepting deposits or extending loans or advances that

chooses not to comply with the provisions of sub-section (2) of
section 17, in accordance with the option permitted under sub-
section (4) of that section, shall follow the following procedure,
namely,-
(a) the said company or institution shall not avail the credit of,-
(i) the tax paid on inputs and input services that are
used for non-business purposes; and
(ii) the credit attributable to the supplies specified in
sub-section (5) of section 17, in FORM GSTR-2;
(b) the said company or institution shall avail the credit of tax
paid on inputs and input services referred to in the second
proviso to sub-section (4) of section 17 and not covered
under clause (a);
(c) fifty per cent. of the remaining amount of input tax shall
be the input tax credit admissible to the company or the
institution and shall be furnished in FORM GSTR-2;
(d) the amount referred to in clauses (b) and (c) shall, subject
to the provisions of sections 41, 42 and 43, be credited to
the electronic credit ledger of the said company or the
institution.
Rule 42 Manner of determination of input tax credit in respect of
inputs or input services and reversal thereof
(1) The input tax credit in respect of inputs or input services, which
attract the provisions of sub-section (1) or sub-section (2) of section
17, being partly used for the purposes of business and partly for
other purposes, or partly used for effecting taxable supplies
including zero rated supplies and partly for effecting exempt
supplies, shall be attributed to the purposes of business or for
effecting taxable supplies in the following manner, namely,-
(a) the total input tax involved on inputs and input services in
a tax period, be denoted as ‘T’;

6.28 INDIRECT TAXES
(b) the amount of input tax, out of ‘T’, attributable to inputs

and input services intended to be used exclusively for the
purposes other than business, be denoted as ‘T1’;
(c) the amount of input tax, out of ‘T’, attributable to inputs
and input services intended to be used exclusively for
effecting exempt supplies, be denoted as ‘T2’;
(d) the amount of input tax, out of ‘T’, in respect of inputs and
input services on which credit is not available under sub-
section (5) of section 17, be denoted as ‘T3’;
(e) the amount of input tax credit credited to the electronic
credit ledger of registered person, be denoted as ‘C1’ and
calculated as-
C1 = T- (T1+T2+T3);
(f) the amount of input tax credit attributable to inputs and
input services intended to be used exclusively for effecting
supplies other than exempted but including zero rated
supplies, be denoted as ‘T4’;
(g) ‘T1’, ‘T2’, ‘T3’ and ‘T4’ shall be determined and declared by
the registered person at the invoice level in FORM GSTR-2
and at summary level in FORM GSTR-3B;
(h) input tax credit left after attribution of input tax credit
under clause (f) shall be called common credit, be denoted
as ‘C2’ and calculated as-
C2 = C 1- T4;
(i) the amount of input tax credit attributable towards exempt
supplies, be denoted as ‘D1’ and calculated as-
D1= (E ÷ F) × C2
where,
‘E’ is the aggregate value of exempt supplies during the tax
period, and
‘F’ is the total turnover in the State of the registered person
during the tax period:
Provided that where the registered person does not have
any turnover during the said tax period or the aforesaid
information is not available, the value of ‘E/F’ shall be

calculated by taking values of ‘E’ and ‘F’ of the last tax

period for which the details of such turnover are available,
previous to the month during which the said value of ‘E/F’
is to be calculated;
Explanation: For the purposes of this clause, it is hereby
clarified that the aggregate value of exempt supplies and
the total turnover shall exclude the amount of any duty or
tax levied under entry 84 and entry 92A of List I of the
Seventh Schedule to the Constitution and entry 51 and 54
of List II of the said Schedule;
(j) the amount of credit attributable to non-business purposes
if common inputs and input services are used partly for
business and partly for non-business purposes, be denoted
as ‘D2’, and shall be equal to five per cent. of C2; and
(k) the remainder of the common credit shall be the eligible
input tax credit attributed to the purposes of business and
for effecting supplies other than exempted supplies but
including zero rated supplies and shall be denoted as ‘C3’,
where,-
C3 = C2 - (D1+D2);
(l) the amount ‘C3’, ‘D1’ and ‘D2’ shall be computed separately
for input tax credit of central tax, State tax, Union territory
tax and integrated tax and declared in FORM GSTR-3B or
through FORM GST DRC-03;
(m) the amount equal to aggregate of ‘D1’ and ‘D2’ shall be
reversed by the registered person in FORM GSTR-3B or
through FORM GST DRC-03:
Provided that where the amount of input tax relating to inputs or
input services used partly for the purposes other than business and
partly for effecting exempt supplies has been identified and
segregated at the invoice level by the registered person, the same shall
be included in ‘T1’ and ‘T2’ respectively, and the remaining amount of
credit on such inputs or input services shall be included in ‘T4’.
(2) The input tax credit determined under sub-rule (1) shall be
calculated finally for the financial year before the due date for

6.30 INDIRECT TAXES
furnishing of the return for the month of September following the

end of the financial year to which such credit relates, in the manner
specified in the said sub-rule and,-
(a) where the aggregate of the amounts calculated finally in
respect of ‘D1’ and ‘D2’ exceeds the aggregate of the
amounts determined under sub-rule (1) in respect of ‘D1’
and ‘D2’, such excess shall be reversed by the registered
person in FORM GSTR-3B or through FORM GST DRC-03
in the month not later than the month of September
following the end of the financial year to which such credit
relates and the said person shall be liable to pay interest on
the said excess amount at the rate specified in sub-section
(1) of section 50 for the period starting from the first day of
April of the succeeding financial year till the date of
payment; or
(b) where the aggregate of the amounts determined under sub-
rule (1) in respect of ‘D1’ and ‘D2’ exceeds the aggregate of
the amounts calculated finally in respect of ‘D1’ and ‘D2’,
such excess amount shall be claimed as credit by the
registered person in his return for a month not later than
the month of September following the end of the financial
year to which such credit relates.
Rule 43 Manner of determination of input tax credit in respect of
capital goods and reversal thereof in certain cases
(1) Subject to the provisions of sub-section (3) of section 16, the input
tax credit in respect of capital goods, which attract the provisions
of sub-sections (1) and (2) of section 17, being partly used for the
purposes of business and partly for other purposes, or partly used
for effecting taxable supplies including zero rated supplies and
partly for effecting exempt supplies, shall be attributed to the
purposes of business or for effecting taxable supplies in the
following manner, namely,-
(a) the amount of input tax in respect of capital goods used or
intended to be used exclusively for non-business purposes
or used or intended to be used exclusively for effecting
exempt supplies shall be indicated in FORM GSTR-2 and

FORM GSTR-3B and shall not be credited to his electronic

credit ledger;
(b) the amount of input tax in respect of capital goods used or
intended to be used exclusively for effecting supplies other
than exempted supplies but including zero-rated supplies
shall be indicated in FORM GSTR-2 and FORM GSTR-3B
and shall be credited to the electronic credit ledger;
(c) the amount of input tax in respect of capital goods not
covered under clauses (a) and (b), denoted as ‘A’, being
the amount of tax as reflected on the invoice, shall credit
directly to the electronic credit ledger and the validity of
the useful life of such goods shall extend upto five years
from the date of the invoice for such goods:
Provided that where any capital goods earlier covered
under clause (a) is subsequently covered under this
clause, input tax in respect of such capital goods denoted
as ‘A’ shall be credited to the electronic credit ledger
subject to the condition that the ineligible credit
attributable to the period during which such capital
goods were covered by clause (a), denoted as ‘Tie’, shall
be calculated at the rate of five percentage points for
every quarter or part thereof and added to the output tax
liability of the tax period in which such credit is claimed;
Provided further that the amount ‘Tie’ shall be
computed separately for input tax credit of central tax,
State tax, Union territory tax and integrated tax and
declared in FORM GSTR-3B.
Explanation.- An item of capital goods declared under
clause (a) on its receipt shall not attract the provisions of
sub-section (4) of section 18, if it is subsequently covered
under this clause.
(d) the aggregate of the amounts of ‘A’ credited to the
electronic credit ledger under clause (c) in respect of
common capital goods whose useful life remains

6.32 INDIRECT TAXES
during the tax period, to be denoted as ‘Tc’, shall be the

common credit in respect of such capital goods:
Provided that where any capital goods earlier covered
under clause (b) are subsequently covered under clause
(c), the input tax credit claimed in respect of such
capital good(s) shall be added to arrive at the
aggregate value ‘Tc’;
(e) the amount of input tax credit attributable to a tax period
on common capital goods during their useful life, be
denoted as ‘Tm’ and calculated as:-
Tm= Tc÷60
Explanation.- For the removal of doubt, it is clarified
that useful life of any capital goods shall be considered
as five years from the date of invoice and the said
formula shall be applicable during the useful life of the
said capital goods.
(g) the amount of common credit attributable towards
exempted supplies, be denoted as ‘Te’, and calculated as:
Te= (E÷ F) x Tr 6
where,
‘E’ is the aggregate value of exempt supplies, made, during
the tax period, and
‘F’ is the total turnover in the State of the registered person
during the tax period:
Provided further that where the registered person does not
have any turnover during the said tax period or the
aforesaid information is not available, the value of ‘E/F’
shall be calculated by taking values of ‘E’ and ‘F’ of the last
tax period for which the details of such turnover are
available, previous to the month during which the said
value of ‘E/F’ is to be calculated;
6
Clause (f) of the rule which contained the provisions for computation of ‘Tr’ has been omitted
vide Notification No. 16/2020 CT dated 23.03.2020. This has rendered the formula given in
clause (g) otiose as the term ‘Tr’ is now nowhere defined in the amended rule.

Explanation: For the purposes of this clause, it is hereby

clarified that the aggregate value of exempt supplies and
the total turnover shall exclude the amount of any duty or
tax levied under entry 84 and entry 92A of List I of the
Seventh Schedule to the Constitution and entry 51 and 54
of List II of the said Schedule;
(h) the amount Te along with the applicable interest shall,
during every tax period of the useful life of the concerned
capital goods, be added to the output tax liability of the
person making such claim of credit.
(i) The amount Te shall be computed separately for central tax,
State tax, Union territory tax and integrated tax and declared
in FORM GSTR-3B.
Explanation:-For the purposes of rule 42 and this rule, it is hereby clarified that the
aggregate value of exempt supplies shall exclude:-
(b) the value of services by way of accepting deposits, extending loans
or advances in so far as the consideration is represented by way of
interest or discount, except in case of a banking company or a
financial institution including a non-banking financial company,
engaged in supplying services by way of accepting deposits,
extending loans or advances; and
(c) the value of supply of services by way of transportation of goods by
a vessel from the customs station of clearance in India to a place
outside India.
Explanation.- For the purposes of this Chapter,-
(1) the expressions “capital goods” shall include “plant and machinery”
as defined in the Explanation to section 17;
(2) for determining the value of an exempt supply as referred to in sub-
section (3) of section 17-
(a) the value of land and building shall be taken as the same
as adopted for the purpose of paying stamp duty; and
(b) the value of security shall be taken as one per cent. of the
sale value of such security.

6.34 INDIRECT TAXES
ANALYSIS
Section 17 requires apportionment and concomitant restriction of ITC in two
situations as also blocking of ITC on specified inward supplies.
A. Apportionment of ITC [Sub-sections (1) and (2) of section 17

read with rule 42 and rule 43 of CGST Rules]
The fundamental principle of credit scheme under value added tax is that tax
paid on inputs, input services and capital goods can be availed as credit only
when the output is taxable. Thus, when tax is not payable on output, credit
cannot be availed.
Accordingly, ITC under GST can be availed and utilised for payment of tax on
output supply. Consequently, ITC cannot be availed when tax is not payable
on output supply, i.e. on exempt supply. The only exception to the above
principle is ‘zero rated supply, where ITC is available even if no tax is payable
on output supply.
If a taxable person is making both taxable and exempt supply, he is entitled
to full credit of ITC in respect of inputs, input services and capital goods
exclusively used for taxable supply and no credit at all for inputs, input
services and capital goods exclusively used for exempt supply. If common
inputs, input services and capital goods are used for taxable as well as exempt
supply, only proportionate ITC attributable to the taxable supply is available.
The common ITC is apportioned in the ratio of value of taxable supply and
exempt supply. Elaborate provisions have been made in sub-sections (1) and
(2) of section 17 and rules 42 and 43 for calculation of such proportionate
ITC. Such provisions are discussed in detail in the ensuing pages.
The situations requiring apportionment are as follows:
(a) when the goods and / or services are used by the registered person
partly for the purpose of business (see the definition of business) and
partly for other purposes [Section 17(1)]; and
(b) when the goods and / or services are used by the registered person
partly for making taxable supplies including zero-rated supplies and
partly for making exempt supplies (see the definition of exempt
supplies) [Section 17(2)].

In both the above situations, full ITC on inward supplies cannot be taken; only
proportionate ITC is allowed in such scenarios. Where goods and/or services
are used partly for non-business purposes and partly for business purposes,
ITC attributable only to business purposes can be taken by the registered
person. Similarly, where goods and/or services are partly used for making
exempt supplies including zero rated supplies and partly for taxable supplies,
ITC attributable to taxable supplies and zero rated supplies can be taken by
the registered person.
Section 16(2) of the IGST Act specifies that ITC may be

availed on inward supplies for making zero-rated supply,
notwithstanding the exempt nature of the zero-rated
supply. Zero-rated supply is an expression that covers two
kinds of supplies: (i) exports, and (ii) supplies to a SEZ unit or SEZ
developer. Therefore, ITC is available on goods and / or services used
for supplies made in the course of export or to an SEZ unit or SEZ
developer.
(6) A registered person is in the business of manufacturing shoes.

He gave 50 pairs of shoes to his friends free of cost. ITC on inputs
and input services attributable to such 50 pair of shoes being used
for non-business purposes will not be available.
(7) A registered person manufactures a product ‘X’ chargeable to

18% GST, a product ‘Y’ chargeable to NIL rate of tax and a product ‘Z’
which is exported without payment of tax under bond. All the three
products are manufactured from common inputs and input services. ITC on
inputs and input services attributable to product ‘Y’ being an exempt supply, will
not be available.
(i) Methodology of apportionment of credit on inputs and input
services and reversal thereof [Rule 42 of the CGST Rules]
In many situations, the amount of input tax involved in exempt /non-
business use is not easily discernible, as common goods and/or services
are used for (i) making taxable supplies including zero rated supplies
and exempt supplies and (ii) business and non-business purposes.

6.36 INDIRECT TAXES
Rule 42 of the CGST Rules provides the methodology for apportionment

of ITC on inputs and input services and reversal of ineligible credit as
follows:
Step 1 – Compute common credit
Total input tax involved on inputs & input services in a T

tax period
Less: Input tax on inputs & input services that are (T1)
intended to be used exclusively for non-business
purposes
Less: Input tax on inputs & input services that are (T2)
intended to be used exclusively for exempt supplies
Less: Input tax on inputs & input services which are (T3)
ineligible for credit [blocked credits- see discussion
under point (B)]
ITC credited to Electronic Credit Ledger C1
Less: ITC on inputs & input services that are intended (T4)
to be used exclusively for taxable supplies including
zero rated supplies
Common ITC available for apportionment C2
 T1, T2, T3 and T4 will be determined and declared by the registered

person at the invoice level in GSTR 2 and summary level in GSTR-
3B.
 Where ITC on inputs and input services used partly for non-
business purposes and exempt supplies can be segregated at
invoice level, the same will be added to T1 and T2 respectively and
the balance credit will be added in T4.
 The portion identified as pertaining to taxable supplies in C2 will
be allowed as ITC.
Example on how to arrive at the amount of common credit C2
Making an assumption that Hawai slippers are exempted, take a case of
Eezee Footwear, manufacturer of two varieties of Hawai slippers and

five varieties of other sandals and shoes. Dyes are used in the
manufacture of all footwear. However, bright pink is used only for one
of the Hawai varieties, and black is used only for the sandals and shoes.
Blue and yellow are used for all the varieties. Brown is used for non-
business purposes.
In inward supplies during the month -
Input tax on brown dye: ` 10,000 (This is T1)
Input tax on bright pink dye: ` 90,000. (This is T2)
Input tax on black dye: ` 40,000. (This is T4)
Input tax on blue dye: ` 1,00,000
Input tax on yellow dye: ` 15,000
Total input tax: ` 2,55,000 (This is T)
Total input tax reduced by (T1 + T2 + T4, i.e., by ` 1,40,000) is ` 1,15,000.
Amount of common credit (C2) is ` 1,15,000. This has to be apportioned
as given below in Step 2.
Step 2 – Compute credit attributable to exempt supplies
(ineligible credit) by apportionment of common credit
 Apportion C2 into credit attributable to exempt supplies D1 as under:
D1 = (E/F) x C2
Where
E = Aggregate value of exempt supplies during the tax period
F = Total turnover in the State during the tax period
Notes:
(i) If the registered person does not have any turnover during the said
tax period, or the above information is not available, the values for
the last tax period may be used.
(ii) Here, exempt supplies include reverse charge supplies, transactions
in securities, sale of land and sale of building when entire
consideration is received either after issuance of completion
certificate by the competent authority or its first occupation,
whichever is earlier. Thus, ITC attributable to such supplies will need
to be reversed.

6.38 INDIRECT TAXES
(iii) Here, exempt supplies exclude-

(a) transactions/activities specified in Schedule III except
sale of land and sale of building as specified in point (ii)
above.
(b) supply of services by way of accepting deposits,
extending loans or advances where the consideration is
either interest or discount. However, value of such
services is included in the exempt supply when the same
are provided by a banking company or a financial
institution including a NBFC.
(c) transportation of goods by a vessel from the customs
station of clearance in India to a place outside India.
Thus, ITC attributable to such supplies need not be reversed.
(iv) Aggregate value of exempt supplies and total turnover excludes
the central excise duty, State excise duty, central sales tax and
VAT.
(v) The value of exempt supply in respect of land and building is the
value adopted for paying stamp duty and for security is 1% of the
Presently, (i) central excise duty is leviable on manufacture/production

of tobacco, petroleum crude, diesel, petrol, ATF and natural gas (ii) State
excise duty is leviable on manufacture/production of alcoholic liquor,
opium, Indian hemp and narcotics, and (iii) VAT/CST is leviable on intra-
State/inter-State sale of petroleum crude, diesel, petrol, ATF, natural
gas and alcoholic liquor. Petroleum crude, diesel, petrol, ATF, natural
gas are presently not taxable under GST and alcoholic liquor is outside
the ambit of GST. Thus, supply of both these products
(petrol/petroleum products and alcoholic liquor) being non-taxable
under GST, will be exempt supplies u/s 2(47) and taxes/duties (as
mentioned above) leviable thereon will be excluded from the value
thereof for the purpose of apportionment of credit.
Example on how to apportion common credit into credit
attributable to exempt supplies
Ezee Footwear, which manufactures two varieties of exempt Hawai
slippers and five varieties of taxable sandals and shoes, has the

following turnover in October and has ` 1,15,000 common credit that

has to be apportioned:
Turnover of Hawai 1 plus Hawai 2: ` 3 crores (This is ‘E’)
Turnover of all varieties of taxable shoes and sandals: ` 2 crore
Total turnover of all footwear during the month: ` 5 crores (This is ‘F’)
No inputs/input services are used for non-business purposes.
(3,00,00,000 /5,00,00,000) x 1,15,000= ` 69,000 is the input tax that
pertains to exempt supply (D1).
 Compute credit attributable to non-business purposes D2 as under
D2 = 5% of C2 (common credit)
Step 3 – Compute eligible credits
Compute C3 attributable to business purposes and taxable supplies
including zero rated supplies as under:
C3 = C2 - (D1 + D2)
Step 4 – Restrict ineligible credits
Reverse D1 + D2
 Compute C3 separately for ITC of CGST, SGST/ UTGST and IGST.

 Compute ∑ (D1 + D2) for the whole financial year, by taking
exempted turnover and aggregate turnover for the whole
financial year, before the due date for filing the return for
September in the following financial year.
 If ∑ (D1 + D2) > the amount already reversed every month, the
differential amount has to be reversed in any month till
September in the following financial year and interest @ rate 18%
should be paid on such differential amount from 1st April of
succeeding year till the date of payment.
 If the amount reversed every month > ∑ (D1 + D2), the additional
amount paid has to be claimed back as credit in the return of the
month not later than September in the next financial year.

6.40 INDIRECT TAXES
(ii) Methodology of apportionment of credit of capital goods and

reversal thereof [Rule 43 of the CGST Rules]
Rule 43 of the CGST Rules provides the methodology for apportionment
of ITC on capital goods and reversal of ineligible credit as follows:
Step 1 - Determine common credit ‘Tc’ on capital goods as under:
(i) Identify input tax on capital goods used/ intended to be used

exclusively for non-business purposes or making exempt supplies
and declare the same in GSTR 2. Such amount will not be credited
to electronic credit ledger [ECrL].
(ii) Identify input tax on capital goods used/ intended to be used
exclusively for making taxable supplies including zero rated
supplies and declare the same in GSTR 2 and GSTR-3B. Such
amount will be credited to ECrL.
(iii) Identify input tax on capital goods not covered under (i) and
(ii) above [i.e., the capital goods which are used/intended to
be used commonly for making taxable and/or zero rated
supplies as well as exempt supplies and/or non-business
purposes] and denote the same as ‘A’. Such amount (as
reflected on the invoice) will be credited to ECrL. The useful
life of such capital goods will be taken as 5 years from the
date of invoice.
(iv) Change from exclusive use for non-business purpose/exempt
supplies to common use: Where capital goods which were
initially covered under (i) above get subsequently covered
under (iii), credit input tax in respect of the same, denoted as
‘A’, in the ECrL.
Simultaneously, compute the ineligible credit attributable to
the period during which such capital goods were used for non-
business purpose/making exempt supplies @ 5% per quarter
or part thereof and denote the same as ‘Tie’. Add such ‘Tie’ to
the output tax liability of the tax period in which credit on
such capital goods is claimed.
(v) Add together the amounts of ‘A’ credited to ECrL in respect of
common capital goods whose useful life remains during the
tax period to arrive at common credit ‘Tc’.

(vi) Change from exclusive use for taxable including zero rated
supplies to common use: Where capital goods which were
initially covered under (ii) above get subsequently covered
under (iii), add input tax claimed in respect of the same to
aggregate value of ‘Tc’.
Step 2 - Determine common credit during the useful life of capital

goods for a tax period as under and denote the same as ‘Tm’:
Tm = Tc ÷ 60
Step 3 - Apportion common credit attributable to exempt

supplies as under:
Te = (E ÷ F) x Tr
Where
E = Aggregate value of exempt supplies made during the tax period
F = Total turnover in the State during the tax period
Notes:
(i) Tm is to be computed during the useful life of capital goods
which is five years from the date of invoice.
(ii) If the registered person does not have any turnover during the said
tax period, or the above information is not available, the values for
the last tax period may be used.
(iii) Here, exempt supplies include reverse charge supplies, transactions
in securities, sale of land and sale of building when entire
consideration is received either after issuance of completion
certificate by the competent authority or its first occupation,
whichever is earlier. Thus, ITC attributable to such supplies will need
to be reversed.
(iv) Here, exempt supplies exclude-
(a) transactions/activities specified in Schedule III except
sale of land and sale of building as specified in point (ii)
above.

6.42 INDIRECT TAXES
(b) supply of services by way of accepting deposits,

extending loans or advances where the consideration is
either interest or discount. However, value of such
services is included in the exempt supply when the same
are provided by a banking company or a financial
institution including a NBFC.
(c) transportation of goods by a vessel from the customs
station of clearance in India to a place outside India.
Thus, ITC attributable to such supplies need not be reversed.
(v) Aggregate value of exempt supplies and total turnover excludes the
central excise duty, State excise duty, central sales tax and VAT.
(vi) Amount of Tie and Te are to be computed separately for CGST,
SGST/UTGST and IGST and declared in GSTR 3B.
(vii) The value of exempt supply in respect of land and building is the
value adopted for paying stamp duty and for security is 1% of the
Step 4: Restrict ineligible credit

Add Te to the output tax liability along with applicable interest during
every tax period of the useful life of the capital goods concerned.
(iii) Optional method for banks etc. [Section 17(4) read with rule 38]
 As an alternative to the above method, a banking company or a
financial institution including a NBFC, which accepts deposits, or
extends loans or advances, has the option to limit its availment of
ITC to 50% of the eligible ITC on inputs, capital goods and input
services each month and the remaining ITC shall lapse.
 Credit of tax paid on inputs and input services that are used for
non-business purposes and items mentioned u/s section 17(5)
[blocked credits] cannot be availed.
 The restriction of availing 50% ITC shall not apply to the tax paid
on supplies procured from another registration within the same
entity i.e., 100% credit of such tax can be availed.
 The option once exercised cannot be changed during the
remaining part of the financial year.

B. Blocked credits [Section 17(5)]

ITC of tax paid on almost every inputs and input services used for supply of
taxable goods and/or services is allowed under GST except a small list of items
provided u/s 17(5). Thus, ITC on such items is not allowed even though the same
may qualify as inputs, input services or capital goods and are used in the course
or furtherance of business.
The negative list covers mainly items of personal consumption, inputs and input
services use of which results into formation of an immovable property (except
plant and machinery), telecommunication towers, pipelines laid outside the
factory premises, etc. and taxes paid as a result of detection of evasion of taxes.
The various goods and/or services on which credit is blocked are discussed
hereunder:
(i) Motor vehicles and other conveyances and related services
(insurance, servicing and repair and maintenance)
Motor vehicles and conveyances have been defined in the CGST Act [See
definition under the heading Relevant Definitions]. Motor vehicles exclude –
 vehicle running upon fixed rails
 special purpose vehicles for being used in a factory or any
enclosed premises
 vehicle with less than 4 wheels fitted with engine capacity of upto
25cc – (Thus, railways, two/three wheelers with engine capacity of
upto 25cc, bicycle etc. do not fall in the definition of motor
vehicle.)
Broadly, ITC is blocked on motor vehicles, vessels and aircrafts used for
passenger transportation with certain exceptions. Further, ITC is also
blocked on certain services relating to motor vehicles, vessels and
aircrafts namely, insurance, servicing and repair and maintenance. The
basic principle here is that the motor vehicles, aircrafts and vessels on
which ITC is blocked, the ITC on services of insurance, servicing and
repair and maintenance pertaining to such motor vehicles, vessels and
aircrafts is also blocked.
The blocked credits relating to motor vehicles, vessels, aircrafts and
related services are discussed hereunder:

6.44 INDIRECT TAXES
S. Goods and/or Exceptions to goods Remarks

No. services on and/or services
which credit is mentioned in
blocked column (2) on which
credit is allowed
(1) (2) (3) (4)
(i) Motor vehicles Ineligible motor  ITC on ineligible

for vehicles when used motor vehicles
transportation for any of the used for any
of persons with following eligible purpose other
seating purposes - than the eligible
capacity ≤ 13  making further purposes is not
persons taxable supply of allowed.
(including the such motor  ITC on motor
driver) – vehicles; vehicles for
Referred to as transportation of
 making taxable
ineligible persons with
supply of
motor vehicle seating capacity >
transportation of
in this table 13 persons
passengers;
(including the
 making taxable
driver) used for
supply of
any purpose is
imparting training
allowed.
on driving such
motor vehicles.  ITC on motor
vehicles other
than ineligible
motor vehicles
(e.g. motor vehicle
used for
transportation of
goods, dumpers,
tippers etc.) used
for any purpose is
allowed.
(ii) Vessels and Vessels and aircraft ITC on vessels and

aircrafts when used for any of aircrafts used for any

the following eligible purpose other than

purposes- the eligible purposes
 making further
taxable supply of
such vessels or
aircraft;
 making taxable
supply of
transportation of
passengers;
 making taxable
supply of
imparting training
on navigating
such vessels;
 making taxable
supply of
imparting training
on flying such
aircrafts;
 transportation of
goods.
(iii) General  Such services  ITC is not allowed

insurance, relating to on services of
servicing, ineligible motor general insurance,
repair and vehicles, vessels servicing, repair
maintenance or aircraft when and maintenance
relating to: used for eligible relating to motor
 Ineligible purposes vehicles, vessels or
motor  Such services aircraft, ITC on
vehicles when received by- which is not
allowed.
 Vessels o Manufacturer
of ineligible  ITC is allowed on
 Aircraft services of general
motor vehicles,
insurance,

6.46 INDIRECT TAXES
vessels or servicing, repair

aircraft; or and maintenance
o Supplier of relating to motor
general vehicles, vessels or
insurance aircraft, ITC on
services in which is allowed.
respect of
ineligible
motor vehicles,
vessels or
aircraft insured
by him
(iv) Leasing,  Such services  ITC on leasing,

renting or when used for renting or hiring
hiring of motor making an of motor vehicles,
vehicles, outward taxable vessels or aircraft
vessels or supply of the on which ITC is
aircraft on same category of allowed, is also
which ITC is not services or as an allowed.
allowed element of a  ITC on such
taxable composite services is allowed
or mixed supply in the case of sub-
 Such services contracting, i.e.
when provided by when such
an employer to its services are used
employees under by the taxpayer
a statutory who is in the same
obligation line of business.
(8) ITC on cars purchased by a manufacturing company for

official use of its employees is blocked.
(9) ITC on cars purchased by a car dealer for sale to
customers is allowed.
(10) ITC on cars purchased by a company engaged in renting out cars
for transportation of passengers, is allowed.
(11) ITC on cars purchased by a car driving school is allowed.

(12) ITC on buses (seating capacity for 24 persons) purchased by a

company for transportation of its employees from their residence to
office and back, is allowed.
(13) ITC on trucks purchased by a company for transportation of its
finished goods is allowed.
(14) ITC on aircraft purchased by a manufacturing company for official
use of its CEO is blocked.
(15) ITC on aircraft purchased by an Aviation School providing training
on non-flying aircrafts, is allowed.
(16) ITC on general insurance taken on a car used by employees of a
manufacturing company for official purposes, is blocked.
(17) ITC on maintenance & repair services availed by a company for a
truck used for transporting its finished goods, is allowed.
(18) ITC on general insurance services taken on cars manufactured by
a car manufacturing company is allowed.
(ii) Food & beverages, outdoor catering, health services and other
services
S. Goods and/or Exceptions to Remarks

No. services on goods and/or
which credit is services
blocked mentioned in
column (2) on
which credit is
allowed
(1) (2) (3) (4)
(i)  Food and  Such goods  ITC on such goods
beverages and/or services and/or services is
 Outdoor when used by a allowed in the case
catering registered of sub-contracting,
 Beauty person for i.e. when such
treatment making an goods and/or
 Health outward taxable services are used by
services supply of the the taxpayer who is
same category in the same line of

6.48 INDIRECT TAXES
 Cosmetic of goods and/or business, e.g.

and plastic services or as an outdoor catering
surgery element of a service availed by
 Life taxable another outdoor
insurance composite or caterer.
and health mixed supply  When such goods
insurance  Such goods and/or services are
and/or services provided by the
when provided employer to its
by an employer employees without
to its employees any statutory
under a statutory obligation, ITC
obligation thereon is blocked.
(ii) Membership of Such services when When such goods

a club, health provided by an and/or services are
and fitness employer to its provided by the
centre employees under a employer to its
statutory employees without
obligation any statutory
obligation, ITC
thereon is blocked.
(iii) Travel benefits Such services when When such goods
extended to provided by an and/or services are
employees on employer to its provided by the
vacation such employees under a employer to its
as leave or statutory employees without
home travel obligation any statutory
concession obligation, ITC
thereon is blocked.
(19) A manufacturing company purchases food items for

being served to its customers, free of cost. ITC on such
goods is blocked.
(20) AB & Co., a caterer of Amritsar, has been awarded a contract for
catering in a marriage to be held at Ludhiana. The firm has given the
contract for supply of snacks, to be served in the marriage, to CD &
Sons, a local caterer of Ludhiana. ITC on such outdoor catering services
availed by AB & Co., is allowed.

(21) ITC on outdoor catering services availed by a garment exporter for a

marketing event organised for its prospective customers, is blocked.
(22) Outdoor catering service is availed by a company to run a free
canteen in its factory. The Factories Act, 1948 requires the company to
set up a canteen in its factory. ITC on such outdoor catering is allowed.
(23) The Managing Director of a company has taken membership of a club,
the fees for which is paid by the company. ITC on such service is blocked.
(24) A company avails services of a travel agency for organizing a free
vacation for its top performing employees. ITC on such services is blocked.
(iii) Works contract services for construction of immovable property
[Clause (c) of section 17(5)]
One major input service ITC on which is blocked is input service relating
to construction activity like office building, factory building etc. (except
in case of persons like builders, developers and contractors who are
undertaking construction for others). However, ITC is available for
routine construction related services like repairs, maintenance,
renovation etc. of office and factory building. Thus, broadly, ITC in
respect of construction services is not available when the expenses are
capitalised in books of account. Here, it needs to be noted that
capitalisation of an expense does not depend on whether the taxpayer
intends to avail ITC, but on the basis of Accounting Standards and GAAP.
Works contract has been defined in the CGST Act [See definition under
the heading Relevant Definitions]. Essentially works contract is a
composite supply involving both goods and services. Under the
erstwhile laws, definition of works contract included work in relation to
both movable and immovable properties. However, under GST law, the
ambit of works contract has been confined only to immovable
property.
Meaning of immovable property

Immovable property has not been defined under the GST law. Therefore,
we will have to look for the definition of immovable property in other
laws. Section 3(26) of the General Clauses Act, 1897, defines the term
immovable property to include land, benefits to arise out of land, and
things attached to the earth, or permanently fastened to anything
attached to the earth.

6.50 INDIRECT TAXES
The term “attached to the earth” is defined in section 3 of the Transfer of

Property Act, 1882 to mean:
(a) rooted in the earth, as in the case of trees and shrubs; [However,
the term "immovable property" under the Transfer of Property Act
does not cover standing timber, growing crops or grass.]
(b) embedded in the earth, as in the case of walls or buildings.
(c) attached to what is so embedded for the permanent beneficial
enjoyment of that to which it is attached.
Under GST law, a composite supply of works contract is treated as

supply of services in terms of para 6(a) of Schedule II to the CGST Act.
ITC on works contract services for construction of an immovable
property is blocked EXCEPT WHEN
 It is an input service for further supply of works contract service
(sub-contracting);
[ITC on works contract services can be availed only by that taxpayer
who is in the same line of business, i.e. only a works contractor can
avail ITC on works contract services received by him.]
 Immovable property is plant and machinery
[Plant and machinery affixed permanently to the earth constitutes
an immovable property. However, ITC on works contract services
used for construction of such plant and machinery is allowed as an
exception.]
Meaning of construction
“Construction” includes re-construction, renovation, additions or
alterations or repairs, to the extent of capitalization, to the said
immovable property.
Thus, if re-construction, renovation, additions or alterations or repairs
are not capitalized, it would not tantamount to construction under GST
law. Consequently, ITC on works contract services availed for such
construction (which is not capitalized) whether for any immovable
property or for any plant and machinery, would be allowed to all the
recipients irrespective of their line of business.

Meaning of plant and machinery

“Plant and machinery” means apparatus, equipment, and machinery
fixed to earth by foundation or structural supports that are used for
making outward supply of goods and/or services and includes such
foundation or structural support
but excludes
land, building or other civil structures, telecommunication towers, and
pipelines laid outside the factory premises.
Thus, ITC on works contract services availed for construction of eligible
plant and machinery is allowed to the recipient irrespective of the line
of business of such recipient.
For instance, ITC on works contract services for construction of
machinery fixed to earth by a foundation, would be allowed. However,
ITC on works contract services for construction of telecommunication
towers, would be blocked.
(25) ITC on works contracts services availed by a software

company for construction of its office, is blocked.
(26) CD & Co., a works contractor of Noida, has been awarded
a contract for construction of a commercial complex in Lucknow. The
firm avails services of EF & Co., a local works contractor of Lucknow, for
the construction of complex. ITC on such works contract services
availed by CD & Co., is allowed.
(27) ITC on works contract services availed by an automobile company
for construction of a foundation on which a machinery (to be used in
the production process) is to be mounted permanently, is allowed.
(28) ITC on works contract services availed by a manufacturing
company for construction of pipelines to be laid outside its factory, is
blocked.
(29) A consulting firm has availed services of a works contractor for
repair of its office building. The company has booked such expenditure
in its profit and loss account. ITC on such services is allowed.
(30) A telecommunication company has availed services of a works
contractor for repair of its office building. The company has capitalized
such expenditure. ITC on such services is blocked.

6.52 INDIRECT TAXES
ITC on works contract services for construction of

immovable property is available only in the following
three situations:
(i) When the works contract service is availed by a works
contractor for being used in providing the works contract
service.
(ii) For construction of plant and machinery. In this case, ITC is
allowed to all recipients irrespective of their line of business.
(iii) When the value of works contract service is not capitalized.
In this case, ITC is allowed to all recipients irrespective of their
line of business.
(iv) Self-construction of immovable property [Clause (d) of

section 17(5)]
So now we know that ITC on works contract services availed by a
taxpayer, other than a works contractor, for construction of immovable
property (other than plant and machinery) is not available. But what
happens if a taxpayer procures goods and services and constructs an
immovable property, for being used in the course or furtherance of
business, without availing services of a works contractor? Will ITC be
allowed in such a case?
The answer is No. ITC is not allowed on goods and/or services received
by a taxable person for construction of an immovable property (other
than plant and machinery) on his own account even though such
goods and/or services are used in the course or furtherance of business.
Thus, ITC on goods and/or services used in the construction of an
immovable property is blocked only in those cases where the taxable
person constructs the immovable property for his own use even if the
immovable property being constructed is used in the course or
furtherance of his business.
The discussion on terms, ‘construction’ and ‘plant and machinery’

for works contract services [Elaborated in point (iii) above] applies
to construction on own account also.

ITC on goods and/or services used in construction of

immovable property is available only in the following
three situations:
(i) For construction of plant and machinery
(ii) When the value of goods and/or services is not capitalized
(iii) When the construction is not on own account
(31) A company buys cement, tiles etc. and avails the services
of an architect for construction of its office building. ITC on
such goods and services is blocked.
(32) MN & Constructions procures cement, paint, iron rods and
services of architects and interior designers for construction of a
commercial complex for one of its clients. ITC on such goods and
services is allowed to MN & Co.
(33) A company buys cement, tiles etc. and avails the services of an
architect for renovation of its office building. The company has booked
such expenditure in its profit and loss account. ITC on such goods and
services is allowed.
(34) ITC on goods and/or services used by an automobile company for
construction of a foundation on which a machinery (to be used in the
production process) is to be mounted permanently, is allowed.
(v) Inward supplies charged to tax under composition levy [Clause
(e) of section 17(5)]
A supplier registered under composition scheme cannot collect tax
from its customers. Thus, such supplier issues bill of supply and not a
tax invoice. A composition supplier pays a lumpsum tax at a specified
rate on its quarterly turnover.
Tax paid on goods and/or services under composition scheme is not
available as ITC.
Since a composition supplier cannot collect any tax on its supplies, from
the recipient of its supplies, it is obvious that no ITC can be availed in
respect of such supplies by the recipients. Nevertheless, section

6.54 INDIRECT TAXES
17(5)(e) specifically blocks the ITC on inward supplies received by a

taxable person from a composition supplier.
(vi) Inward supplies received by a non-resident taxable person
[Clause (f) of section 17(5)]
Non-resident taxable person has been defined in the CGST Act [See the
definition under the heading Relevant Definitions]. Essentially, a non-
resident taxable person has no fixed place of business in India but he
sporadically supplies goods or services in India.
Tax paid on goods and/or services received by such non-resident
taxable person, is not available as ITC. However, tax paid by him on
imported goods is allowed as ITC.
Whereas ITC on goods imported by a non-resident

taxable person is allowed, ITC on services imported
by him is blocked.
(vii) Inward supplies used for personal consumption [Clause (g) of

section 17(5)]
One of the foremost conditions laid down in section 16 for availing ITC
on goods and/or services is that such goods and/or services should be
used in the course or furtherance of business. Further, where goods
and/or services are used partly for the purpose of any business and
partly for other purposes, section 17(1) restricts the credit to so much
of the ITC as is attributable to business purposes.
Furthermore, section 17(5)(g) also specifically blocks the ITC on goods
and/or service used for personal consumption.
The term ‘personal consumption’ has not been defined in the GST law.
Thus, it may be understood in the general sense which would mean
non-business use.
(35) Mr. X owns a grocery store. He procures rice, wheat and
biscuits for being sold in its store. Out of the inventory so
purchased, he gives 10 kgs each of rice and wheat to his wife
for household use. Being used for personal consumption, ITC on 10 kg
of rice and 10 kg of wheat is blocked.

(viii) Free samples, gifts, goods lost/stolen etc. [Clause (h) of

section 17(5)]
Goods that are disposed

of by way of gift
Goods that are disposed
Clause (h) of section 17(5)

of by way of free samples
blocks ITC on
Lost goods
Stolen goods
Destroyed goods
Goods that are written off
ITC in respect of goods that are disposed of by way of gift or free

samples is not available. Also, ITC is blocked on lost goods, stolen
goods, destroyed goods and goods that are written off. This is because
principally, ITC is available only for payment of tax on output supply. If
no tax is payable on output supply, ITC on inputs/input services/capital
goods relating to such output supply is not eligible. Hence, ITC on gifts
and free samples is blocked as no tax is payable on its outward supply.
In case of lost/destroyed/stolen written off goods also, ITC is not
available as these goods cannot be said to have been used for making
a taxable supply.
Meaning of ‘gift’
The terms gift has not been defined in the GST law. Therefore, we will
have to look for the definition of gift in other laws. Section 122 of the
Transfer of Property Act, 1882, defines gift as transfer of certain existing
moveable or immoveable property made voluntarily and without

6.56 INDIRECT TAXES
consideration, by one person, called the donor, to another, called the

donee, and accepted by or on behalf of the donee.
In common parlance, gift is made without consideration, is voluntary in
nature and is made occasionally. It cannot be demanded as a matter of
right.
Meaning of ‘sample’
Sample is also not defined in the GST law. The dictionary meaning of
sample is “a small part or quantity intended to show what the whole is
like”. In commercial parlance, samples are given to prospective
customers to enable them to test the quality of the item before making a
decision to buy the same.
ITC in the hands of the supplier in respect of sales promotional

schemes
Circular No. 92/11/2019 GST dated 28.03.2019 has clarified the
entitlement of ITC in the hands of supplier in respect of various sales
promotional schemes as under [Taxability of such schemes has been
discussed at relevant places in Chapter 2: Supply Under GST and
Unit II : Value of Supply of Chapter 5 : Time and Value of Supply]:
A. Samples and free gifts
Samples which are supplied free of cost, without any
consideration, do not qualify as “supply” under GST, except where
the activity falls within the ambit of Schedule I of the CGST Act.
ITC shall not be available to the supplier on the inputs, input
services and capital goods to the extent they are used in relation
to the gifts or free samples distributed without any consideration.
However, where the activity of distribution of gifts or free samples
falls within the scope of “supply” on account of the provisions
contained in Schedule I of the said Act, the supplier would be
eligible to avail the ITC.
B. Buy one get one free offer
This is not an individual supply of free goods, but a case of two or
more individual supplies where a single price is being charged for
the entire supply. It can at best be treated as supplying two goods
for the price of one.

Taxability of such supply will be dependent upon as to whether

the supply is a composite supply or a mixed supply and the rate
of tax shall be determined as per the provisions of section 8.
ITC shall be available to the supplier for the inputs, input services
and capital goods used in relation to supply of goods or services
or both as part of such offers.
C. Discounts including ‘Buy more, save more’ offers
Discounts offered by the suppliers to customers (including
staggered discount under “Buy more, save more” scheme and
post supply / volume discounts established before or at the time
of supply) shall be excluded to determine the value of supply
provided they satisfy the parameters laid down in section 15(3),
including the reversal of ITC by the recipient of the supply as is
attributable to the discount on the basis of document (s) issued
by the supplier.
However, the supplier shall be entitled to avail the ITC for such
inputs, input services and capital goods used in relation to the
supply of goods or services or both on such discounts.
D. Secondary discounts
These are the discounts which are not known at the time of supply
or are offered after the supply is already over. Such discounts shall
not be excluded while determining the value of supply. There is no
impact on availability or otherwise of ITC in the hands of supplier in
this case.
ITC reversal when return of time expired medicines/drugs are
treated as fresh supply
The common trade practice in the pharmaceutical sector is that the
drugs or medicines (hereinafter referred to as “goods”) are sold by the
manufacturer to the wholesaler and by the wholesaler to the retailer on
the basis of an invoice/bill of supply as case may be. Such goods have
a defined life term which is normally referred to as the date of expiry.
Such goods which have crossed their date of expiry are colloquially
referred to as time expired goods and are returned to the manufacturer,
on account of expiry, through the supply chain.
Circular No. 72/46/2018 GST dated 26.10.2018 has clarified that the

6.58 INDIRECT TAXES
retailer/ wholesaler can return the time expired goods, either by

treating the same as fresh supply or by issuing credit notes 7.
Return of time-expired goods by treating the same as fresh supply
In case the person returning the time expired goods is a registered
person (other than a composition taxpayer), he may, at his option,
return the said goods by treating it is as a fresh supply and thereby
issuing an invoice for the same (hereinafter referred to as the, “return
supply”). The value of the said goods as shown in the invoice on the
basis of which the goods were supplied earlier may be taken as the
value of such return supply. The wholesaler or manufacturer, as the
case may be, who is the recipient of such return supply, shall be eligible
to avail ITC of the tax levied on the said return supply subject to the
fulfillment of the conditions specified in section 16.
In case the person returning the time-expired goods is a composition
taxpayer, he may return the said goods by issuing a bill of supply and
pay tax at the rate applicable to a composition taxpayer. In this scenario
there will not be any availability of ITC to the recipient of return supply.
In case the person returning the time-expired goods is an unregistered
person, he may return the said goods by issuing any commercial
document without charging any tax on the same.
Where the goods returned by the retailer/wholesaler as a fresh supply,
are destroyed by the manufacturer, he/she is required to reverse the
ITC availed on the return supply in terms of section 17(5)(h). It is
pertinent to mention here that the ITC which is required to be reversed
in such scenario is the ITC availed on the return supply and not the ITC
that is attributable to the manufacture of such time expired goods.
The clarification may also be applicable to return of goods for reasons
other than being time expired.
(36) If a manufacturer has availed ITC of ` 10/- at the time of
manufacture of medicines valued at ` 100/-. At the time of
return of such medicine on the account of expiry, the ITC
available to the manufacturer on the basis of fresh invoice issued by
wholesaler is ` 15/-. So, when the time expired goods are destroyed by
7
The procedure for return of time expired drugs or medicines by issuing credit note is covered
in Chapter 8: Tax Invoice; Credit and Debit Notes; E-Way Bill.

the manufacturer, he would be required to reverse ITC of ` 15/- and not

of ` 10/.
(ix) Tax paid in fraud cases, detention, confiscation etc. [Clause (i)
of section 17(5)]
Tax paid under sections 74, 129 and 130 8 is not available as ITC. These
sections prescribe the provisions relating to tax paid as a result of
evasion of taxes, or upon detention of goods or conveyances in transit,
or towards redemption of confiscated goods/conveyances.
5. CREDIT IN SPECIAL CIRCUMSTANCES [SECTION 18]
Section 18 Availability of credit in special circumstances
(1) Subject to such conditions and restrictions as may be prescribed—
(a) a person who has applied for registration under this Act
within thirty days from the date on which he becomes
liable to registration and has been granted such
registration shall be entitled to take credit of input tax in
respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the day
immediately preceding the date from which he becomes
liable to pay tax under the provisions of this Act;
(b) a person who takes registration under sub-section (3) of

section 25 shall be entitled to take credit of input tax in
respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the day
immediately preceding the date of grant of registration;
(c) where any registered person ceases to pay tax under

section 10, he shall be entitled to take credit of input tax
8
These provisions will be discussed at the Final level.

6.60 INDIRECT TAXES
in respect of inputs held in stock, inputs contained in

semi-finished or finished goods held in stock and on
capital goods on the day immediately preceding the date
from which he becomes liable to pay tax under section 9:
Provided that the credit on capital goods shall be reduced

by such percentage points as may be prescribed;
(d) where an exempt supply of goods or services or both by a

registered person becomes a taxable supply, such person
shall be entitled to take credit of input tax in respect of
inputs held in stock and inputs contained in semi-finished
or finished goods held in stock relatable to such exempt
supply and on capital goods exclusively used for such
exempt supply on the day immediately preceding the
date from which such supply becomes taxable:
Provided that the credit on capital goods shall be reduced

by such percentage points as may be prescribed.
(2) A registered person shall not be entitled to take input tax credit
under sub-section (1) in respect of any supply of goods or services
or both to him after the expiry of one year from the date of issue of
tax invoice relating to such supply.
(3) Where there is a change in the constitution of a registered person

on account of sale, merger, demerger, amalgamation, lease or
transfer of the business with the specific provisions for transfer of
liabilities, the said registered person shall be allowed to transfer the
input tax credit which remains unutilised in his electronic credit
ledger to such sold, merged, demerged, amalgamated, leased or
transferred business in such manner as may be prescribed.
(4) Where any registered person who has availed of input tax credit
opts to pay tax under section 10 or, where the goods or services or
both supplied by him become wholly exempt, he shall pay an
amount, by way of debit in the electronic credit ledger or electronic
cash ledger, equivalent to the credit of input tax in respect of inputs
held in stock and inputs contained in semi-finished or finished
goods held in stock and on capital goods, reduced by such
percentage points as may be prescribed, on the day immediately

preceding the date of exercising of such option or, as the case may
be, the date of such exemption:
Provided that after payment of such amount, the balance of input

tax credit, if any, lying in his electronic credit ledger shall lapse.
(5) The amount of credit under sub-section (1) and the amount payable
under sub-section (4) shall be calculated in such manner as may be
prescribed.
(6) In case of supply of capital goods or plant and machinery, on which

input tax credit has been taken, the registered person shall pay an
amount equal to the input tax credit taken on the said capital goods
or plant and machinery reduced by such percentage points as may
be prescribed or the tax on the transaction value of such capital
goods or plant and machinery determined under section 15,
whichever is higher:
Provided that where refractory bricks, moulds and dies, jigs and
fixtures are supplied as scrap, the taxable person may pay tax on
the transaction value of such goods determined under section 15.
Chapter V: Input Tax Credit of CGST Rules
Rule 40 Manner of claiming credit in special circumstances
(1) The input tax credit claimed in accordance with the provisions of
sub-section (1) of section 18 on the inputs held in stock or inputs
contained in semi-finished or finished goods held in stock, or the
credit claimed on capital goods in accordance with the provisions
of clauses (c) and (d) of the said sub-section, shall be subject to the
following conditions, namely -
(a) the input tax credit on capital goods, in terms of clauses

(c) and (d) of sub-section (1) of section 18, shall be
claimed after reducing the tax paid on such capital goods
by five percentage points per quarter of a year or part
thereof from the date of the invoice or such other
documents on which the capital goods were received by
the taxable person.

6.62 INDIRECT TAXES
(b) the registered person shall within a period of thirty days

from the date of becoming eligible to avail the input tax
credit under sub-section (1) of section 18, or within such
further period as may be extended by the Commissioner
by a notification in this behalf, shall make a declaration,
electronically, on the common portal in FORM GST ITC-
01 to the effect that he is eligible to avail the input tax
credit as aforesaid:
Provided that any extension of the time limit notified by

the Commissioner of State tax or the Commissioner of
Union territory tax shall be deemed to be notified by the
Commissioner.
(c) the declaration under clause (b) shall clearly specify the
details relating to the inputs held in stock or inputs
contained in semi-finished or finished goods held in stock,
or as the case may be, capital goods–
(i) on the day immediately preceding the date from

which he becomes liable to pay tax under the
provisions of the Act, in the case of a claim under
clause (a) of sub- section (1) of section 18;
(ii) on the day immediately preceding the date of the

grant of registration, in the case of a claim under
clause (b) of sub-section (1) of section 18;
(iii) on the day immediately preceding the date from

which he becomes liable to pay tax under section
9, in the case of a claim under clause (c) of sub-
section (1) of section 18;
(iv) on the day immediately preceding the date from

which the supplies made by the registered person
becomes taxable, in the case of a claim under
clause (d) of sub- section (1) of section 18;
(d) the details furnished in the declaration under clause (b)

shall be duly certified by a practicing chartered
accountant or a cost accountant if the aggregate value of

the claim on account of central tax, State tax, Union

territory tax and integrated tax exceeds two lakh rupees;
(e) the input tax credit claimed in accordance with the

provisions of clauses (c) and (d) of sub-section (1) of section
18 shall be verified with the corresponding details furnished
by the corresponding supplier in FORM GSTR-1 or as the
case may be, in FORM GSTR- 4, on the common portal.
(2) The amount of credit in the case of supply of capital goods or plant
and machinery, for the purposes of sub-section (6) of section 18,
shall be calculated by reducing the input tax on the said goods at
the rate of five percentage points for every quarter or part thereof
from the date of the issue of the invoice for such goods.
Rule 41 Transfer of credit on sale, merger, amalgamation, lease or

transfer of a business
(1) A registered person shall, in the event of sale, merger, de-merger,

amalgamation, lease or transfer or change in the ownership of
business for any reason, furnish the details of sale, merger, de-
merger, amalgamation, lease or transfer of business, in FORM GST
ITC-02, electronically on the common portal along with a request
for transfer of unutilized input tax credit lying in his electronic credit
ledger to the transferee:
Provided that in the case of demerger, the input tax credit shall be
apportioned in the ratio of the value of assets of the new units as
specified in the demerger scheme.
Explanation: - For the purpose of this sub-rule, it is hereby clarified

that the “value of assets” means the value of the entire assets of the
business, whether or not input tax credit has been availed thereon.
(2) The transferor shall also submit a copy of a certificate issued by a

practicing chartered accountant or cost accountant certifying that the
sale, merger, de-merger, amalgamation, lease or transfer of business
has been done with a specific provision for the transfer of liabilities.
(3) The transferee shall, on the common portal, accept the details so
furnished by the transferor and, upon such acceptance, the un-

6.64 INDIRECT TAXES
utilized credit specified in FORM GST ITC-02 shall be credited to

his electronic credit ledger.
(4) The inputs and capital goods so transferred shall be duly accounted
for by the transferee in his books of account.
Rule 41A Transfer of credit on obtaining separate registration for

multiple places of business within a State or Union territory
(1) A registered person who has obtained separate registration for

multiple places of business in accordance with the provisions of rule
11 and who intends to transfer, either wholly or partly, the
unutilised input tax credit lying in his electronic credit ledger to any
or all of the newly registered place of business, shall furnish within
a period of thirty days from obtaining such separate registrations,
the details in FORM GST ITC-02A electronically on the common
portal, either directly or through a Facilitation Centre notified in
this behalf by the Commissioner:
Provided that the input tax credit shall be transferred to the newly
registered entities in the ratio of the value of assets held by them at
the time of registration.
Explanation.- For the purposes of this sub-rule, it is hereby clarified

that the ‘value of assets’ means the value of the entire assets of the
business whether or not input tax credit has been availed thereon.
(2) The newly registered person (transferee) shall, on the common

portal, accept the details so furnished by the registered person
(transferor) and, upon such acceptance, the unutilised input tax
credit specified in FORM GST ITC-02A shall be credited to his
electronic credit ledger.
Rule 44 Manner of reversal of credit under special circumstances
(1) The amount of input tax credit relating to inputs held in stock,
inputs contained in semi-finished and finished goods held in stock,
and capital goods held in stock shall, for the purposes of sub-section
(4) of section 18 or sub-section (5) of section 29, be determined in
the following manner, namely,-

(a) for inputs held in stock and inputs contained in semi-

finished and finished goods held in stock, the input tax
credit shall be calculated proportionately on the basis of
the corresponding invoices on which credit had been
availed by the registered taxable person on such inputs;
(b) for capital goods held in stock, the input tax credit involved
in the remaining useful life in months shall be computed
on pro-rata basis, taking the useful life as five years.
(2) The amount, as specified in sub-rule (1) shall be determined

separately for input tax credit of central tax, State tax, Union
territory tax and integrated tax.
(3) Where the tax invoices related to the inputs held in stock are not
available, the registered person shall estimate the amount under sub-
rule (1) based on the prevailing market price of the goods on the effective
date of the occurrence of any of the events specified in sub-section (4) of
section 18 or, as the case may be, sub-section (5) of section 29.
(4) The amount determined under sub-rule (1) shall form part of the
output tax liability of the registered person and the details of the
amount shall be furnished in FORM GST ITC-03, where such
amount relates to any event specified in sub-section (4) of section
18 and in FORM GSTR-10, where such amount relates to the
cancellation of registration.
(5) The details furnished in accordance with sub-rule (3) shall be duly
certified by a practicing chartered accountant or cost accountant.
(6) The amount of input tax credit for the purposes of sub-section (6)
of section 18 relating to capital goods shall be determined in the
same manner as specified in clause (b) of sub-rule (1) and the
amount shall be determined separately for input tax credit of
central tax, State tax, Union territory tax and integrated tax:
Provided that where the amount so determined is more than the tax
determined on the transaction value of the capital goods, the
amount determined shall form part of the output tax liability and
the same shall be furnished in FORM GSTR-1.

6.66 INDIRECT TAXES
ANALYSIS
Section 18 provides for
(1) entitlement of ITC on inputs in stock and contained in finished goods or work-
in-progress and capital goods (i) at the time of registration/voluntary
registration, (ii) on coming into regular tax-paying status by exiting
composition levy, (iii) on coming into tax-paying status on account of exempt
supply becoming taxable supply
(2) reversal of ITC on inputs in stock and contained in finished goods or work-
in-progress and capital goods (i) at the time of exit from regular tax-paying
status by opting for composition levy, (ii) at the time of exit from tax-paying
status on account of taxable supply becoming exempt supply
(3) amount payable on supply of capital goods or plant and machinery on which
ITC has been taken
(4) transfer of ITC on account of change in constitution of the registered person
(i) Entitlement of ITC at the time of registration/voluntary registration
or switching to regular tax paying status or coming into tax-paying
status [Sub-sections (1) and (2) of section 18 read with rule 40 of
CGST Rules]
The credit on inputs held in stock and contained in semi-finished goods or
finished goods held in stock and capital goods at the time of
registration/voluntary registration or coming into regular tax/tax-paying
status is available in the following manner:
S. Persons Goods entitled to ITC Restriction/condit

No eligible to ions
take credit Inputs held As on
in
stock/capital
goods
(1) (2) (3) (4) (5)
1. Person who Inputs held in The day  ITC to be availed

has applied stock and immediately within 1 year from

for inputs preceding the date of the

registration contained in the date issue of the tax
within 30 semi-finished from which invoice by the
days from or finished he becomes supplier.
the date on goods held in liable to pay
which he stock tax
becomes
liable to
registration
and has been
granted such
registration
2. Person who Inputs held in The day

is not stock and immediately
required to inputs preceding
register, but contained in the date of
obtains semi-finished registration
voluntary or finished
registration goods held in
stock
3. Registered Inputs held in The day  ITC on capital

person who stock and immediately goods will be
ceases to inputs preceding reduced by 5%
pay contained in the date per quarter of a
compositio semi-finished from which year or part of the
n tax and or finished he becomes year from the
switches to goods held in liable to pay date of invoice.
regular stock and tax under  ITC claimed shall
scheme capital goods regular be verified with
scheme the
corresponding
4. Registered Inputs held in The day details furnished
person stock and immediately by the
whose inputs preceding corresponding
exempt contained in the date supplier.
supplies semi-finished from which

6.68 INDIRECT TAXES
become or finished such supply  ITC to be availed

taxable goods held in becomes within 1 year from
supplies stock relatable taxable the date of the
to such issue of the tax
exempt supply invoice by the
and capital supplier.
goods
exclusively
used for such
exempt
supply
In all the above cases, the registered person has to make an electronic
declaration in the prescribed form on the common portal, clearly specifying
the details relating to the inputs held in stock, inputs contained in semi-
finished or finished goods held in stock and capital goods on the days
mentioned in column (4) of table above. The declaration is to be filed within
30 days (extendable by Commissioner/Commissioner of State
GST/Commissioner of UTGST) from the date when the registered person
becomes eligible to avail ITC. If the claim of ITC pertaining to CGST,
SGST/UTGST, IGST put together exceeds ` 2,00,000, the declaration needs to
be certified by a practicing Chartered Accountant/Cost Accountant.
(37) ‘Z’ becomes liable to pay tax on 1st August and has obtained
registration on 15th August. ‘Z’ is eligible for ITC on inputs held in
stock and as part of semi-finished goods or finished goods held in
stock as on 31st July. ‘Z’ cannot take ITC on capital goods.
(38) ‘A’ applies for voluntary registration on 5th June and obtains
registration on 22nd June. ‘A’ is eligible for ITC on inputs held in
stock and as part of semi-finished goods or finished goods held in
stock as on 21st June. ‘A’ cannot take ITC on capital goods.
(39) ‘B’, a registered taxable person, was paying tax under

composition scheme upto 30th July. However, w.e.f. 31st July, ‘B’
becomes liable to pay tax under regular scheme. ‘B’ will be eligible
for ITC on inputs held in stock and inputs contained in semi-finished or
finished goods held in stock and on capital goods as on 30th July. ITC on
capital goods will be reduced by 5% per quarter from the date of the invoice.

(ii) Reversal of ITC on switching to composition levy or exit from tax-

paying status [Section 18(4) read with rule 44 of CGST Rules]
 Section 18(4) requires reversal of ITC when a registered person who has
availed ITC switches to composition levy or when his supplies get wholly
exempted from tax.
 ITC on inputs should be reversed proportionately on the basis of
corresponding invoices on which credit had been availed on such
inputs. If invoices are not available, ITC can be reversed on the basis of
the prevailing market price of such goods on the date of switch
over/exemption. The details furnished on the basis of prevailing market
value need to be duly certified by a practicing Chartered Accountant/
Cost Accountant.
 ITC involved in the remaining useful life (in months) of the capital goods
should be reversed on pro-rata basis, taking the useful life as 5 years.
(40) Capital goods have been in use for 4 years, 6 month and
15 days. The useful remaining life in months = 5 months
ignoring a part of the month.
ITC taken on such capital goods = C
ITC attributable to remaining useful life = C x 5/60
 The registered person has to debit the electronic credit or cash ledger
by the reversal amount in respect of inputs held in stock and inputs
contained in semi-finished or finished goods held in stock and capital
goods on the day immediately preceding the date of switch over/ date
of exemption.
 Balance of ITC, if any, lying in the electronic credit ledger lapses.
 Cancellation of registration also requires reversal of ITC on inputs held
in stock/ contained in semi-finished goods or finished goods held in
stock, capital goods or plant and machinery on the day immediately
preceding the cancellation date. The amount to be reversed on inputs
and capital goods is computed in the manner as applicable for sub-
sections (4) and (6) of section 18 (discussed above). Such amount is
then compared with the output tax payable on such goods, and the
higher of the two amounts is finally paid by the registered person.

6.70 INDIRECT TAXES
 ITC to be reversed on inputs and capital goods is calculated separately

for ITC of CGST, SGST/UTGST and IGST.
 The reversal amount is added to the output tax liability of the registered
person.
(iii) Amount payable on supply of capital goods or plant and machinery
on which ITC has been taken [Section 18(6) read with rule 40(2) & rule
44(6) of CGST Rules]
 If capital goods or plant and machinery on which ITC has been taken
are supplied outward by the registered person, he must pay an amount
that is the higher of the following:
 ITC taken on such goods reduced by 5% per quarter of a year or
part thereof from the date of issue of invoice for such goods (i.e.,
ITC pertaining to remaining useful life of the capital goods), or
 tax on transaction value
 ITC pertaining to remaining useful life of the capital goods should be
computed separately for ITC of CGST, SGST/UTGST and IGST.
 Where the amount so determined exceeds the tax payable on the
transaction value of the capital goods, such amount need to be paid
and thus, should be added to the output tax liability.
 If refractory bricks, moulds and dies, jigs and fixtures are supplied as
scrap, the taxable person may pay tax on the transaction value.
*Note: Under rule 44(6), ITC involved in the remaining useful life (in months) of
the capital goods is reversed on pro rata basis, taking the useful life as 5 years.
(iv) Transfer of ITC on account of change in constitution of registered
person [Section 18(3) read with rule 41 of CGST Rules]
In case of sale, merger, demerger, amalgamation, transfer or change in
ownership of business etc., the ITC that remains unutilized in the electronic
credit ledger of the registered person can be transferred to the new entity,
provided there is a specific provision for transfer of liabilities in such change
of constitution. Circular No. 96/15/2019 GST dated 28.03.2019 has clarified
that transfer or change in the ownership of business includes transfer or
change in the ownership due to death of the sole proprietor.

The above provisions have been explained with the help of the following diagram:
3 ITC remaining unutilized in the

electronic credit ledger is transferred to
the newly constituted entity
2 Provision for transfer

of liabilities
1 •Sale
Change in constitution of •Merger
registered person •Demerger
•Amalgamtion
•Lease
•Transfer or change in ownership of
business
In the case of demerger, ITC will be apportioned in the ratio of the value of
assets of the new units as specified in the demerger scheme. Here, “value of
assets” means the value of the entire assets of the business irrespective of
whether ITC has been availed thereon or not.
The registered person should furnish the details of change in constitution on

the common portal and submit a certificate from practicing Chartered
Account/Cost Accountant certifying that the change in constitution has been
done with a specific provision for transfer of liabilities. Upon acceptance of
such details by the transferee on the common portal, the unutilized ITC gets
credited to his electronic credit ledger. The transferee should record the
inputs and capital goods so transferred in his books of account.
(v) Transfer of ITC on obtaining separate registrations for multiple

places of business within a State/ Union Territory [Rule 41A of CGST
Rules]
Section 25 enables a taxpayer to obtain separate registrations for multiple

places of business in a State/ Union territory [Provisions of section 25 are
discussed under Chapter 7: Registration]. The registered person (transferor),
having separate registrations for multiple places of business within a

6.72 INDIRECT TAXES
State/Union Territory, can transfer the unutilised ITC (wholly or partly) lying
in his electronic credit ledger to any or all of the newly registered place(s) of
business in the ratio of the value of assets held by them at the time of
registration. Here, the ‘value of assets’ means the value of the entire assets
of the business irrespective of whether ITC has been availed thereon or not.
The registered person should furnish the prescribed details on the common
portal within a period of 30 days from obtaining such separate registrations.
Upon acceptance of such details by the newly registered person (transferee)
on the common portal, the unutilised ITC gets credited to his electronic credit
ledger.
6. HOW ITC IS UTILISED
Section 49 Payment of tax, interest, penalty and other amounts

(Relevant extract)
(5) The amount of input tax credit available in the electronic credit
ledger of the registered person on account of––
(a) integrated tax shall first be utilised towards payment of

integrated tax and the amount remaining, if any, may be
utilised towards the payment of central tax and State tax,
or as the case may be, Union territory tax, in that order;
(b) the central tax shall first be utilised towards payment of

central tax and the amount remaining, if any, may be
utilised towards the payment of integrated tax;
(c) the State tax shall first be utilised towards payment of

State tax and the amount remaining, if any, may be
utilised towards payment of integrated tax;
Provided that the input tax credit on account of State

tax shall be utilised towards payment of integrated tax

only where the balance of the input tax credit on

account of central tax is not available for payment of
integrated tax;
(d) the Union territory tax shall first be utilised towards

payment of Union territory tax and the amount
remaining, if any, may be utilised towards payment of
integrated tax;
Provided that the input tax credit on account of Union

territory tax shall be utilised towards payment of
integrated tax only where the balance of the input tax
credit on account of central tax is not available for
payment of integrated tax;
(e) the central tax shall not be utilised towards payment of

State tax or Union territory tax; and
(f) the State tax or Union territory tax shall not be utilised
towards payment of central tax.
Section 49A Utilisation of input tax credit subject to certain conditions
Notwithstanding anything contained in section 49, the input tax

credit on account of central tax, State tax or Union territory tax shall
be utilised towards payment of integrated tax, central tax, State tax or
Union territory tax, as the case may be, only after the input tax credit
available on account of integrated tax has first been utilised fully
towards such payment.
Section 49B Order of utilisation of input tax credit
Notwithstanding anything contained in this Chapter and subject to

the provisions of clause (e) and clause (f) of sub-section (5) of
section 49, the Government may, on the recommendations of the
Council, prescribe the order and manner of utilisation of the input
tax credit on account of integrated tax, central tax, State tax or
Union territory tax, as the case may be, towards payment of any
such tax.

6.74 INDIRECT TAXES
Chapter IX: Payment of Tax of the CGST Rules
Rule 88A Order of utilization of input tax credit
Input tax credit on account of integrated tax shall first be utilised

towards payment of integrated tax, and the amount remaining, if
any, may be utilised towards the payment of central tax and State
tax or Union territory tax, as the case may be, in any order.
Provided that the input tax credit on account of central tax, State
tax or Union territory tax shall be utilised towards payment of
integrated tax, central tax, State tax or Union territory tax, as the
case may be, only after the input tax credit available on account of
integrated tax has first been utilised fully.
ANALYSIS
ITC is credited to a registered person’s electronic credit ledger. A taxable person
is entitled for ITC of CGST, SGST/UTGST and IGST depending upon the nature of
supplies received by him.
To illustrate, a supplier making intra-State, inter-State and imported purchases (of
goods) is eligible for ITC as under:
Intra-State purchases Inter-State purchases Import of goods
Taxes paid Taxes paid Taxes paid
CGST BCD
IGST
SGST IGST
ITC ITC ITC

CGST
IGST IGST
SGST
The person may use the ITC to pay his output tax liability. As we know that Indian
GST is a dual GST wherein two taxes viz, CGST and SGST/UTGST are levied
concurrently on a supply transaction. While the CGST revenue accrues to Central
Government, SGST and UTGST revenue accrue to respective State Government and

Union Territory respectively. Hence, ITC of CGST and SGST/UTGST is not inter-
changeable and thus, cross utilisation of CGST and SGST/UTGST is not permissible.
IGST is a transitory tax. IGST paid by taxpayer initially goes to the Central Clearing
Authority. ITC of IGST can be utilised for payment of CGST or SGST/UTGST (or vice
versa). Thus, cross utilization of IGST and CGST, SGST/UTGST is permissible.
Flexibility has been provided to the taxpayer to utilise ITC of IGST for payment of
CGST and/or SGST/UTGST in any proportion and in any order. If ITC of IGST is used
for payment of SGST/UTGST (or vice versa), corresponding debit/credit is made to
respective State Government/Union Territory.
Sections 49(5), 49A, 49B, rule 88A and Circular No. 98/17/2019 GST dated
23.04.2019 together prescribe the sequence of utilisation of ITC. A combined
reading of such provisions shows that the order of utilization of ITC is as per the
order (of numerals) given below:
ITC of Output IGST Output CGST Output SGST/ UTGST

liability liability liability
IGST (I) (II) – In any order and in any proportion
(III) ITC of IGST to be completely exhausted mandatorily
CGST (V) (IV) Not permitted
SGST/UTGST (VII) Not permitted (VI)

Only after ITC
of CGST has
been utilized
fully
The numerals given above can be further explained in the following manner:
(I) IGST credit should first be utilized towards payment of IGST.
(II) Remaining IGST credit, if any, can be utilized towards payment

of CGST and SGST/UTGST in any order and in any proportion,
i.e. remaining ITC of IGST can be utilized –
• first towards payment of CGST and then towards payment
of SGST; or

6.76 INDIRECT TAXES
• first towards payment of SGST and then towards payment

of CGST; or
• towards payment of CGST and SGST simultaneously in any
proportion e.g. 50: 50, 30: 70, 40: 60 and so on.
(III) Entire ITC of IGST should be fully utilized before utilizing the ITC
of CGST or SGST/UTGST.
(IV) & (V) ITC of CGST should be utilized for payment of CGST and IGST in
that order. ITC of CGST cannot be utilized for payment of
SGST/UTGST
(VI) & (VII) ITC of SGST /UTGST should be utilized for payment of
SGST/UTGST and IGST in that order. However, ITC of
SGST/UTGST should be utilized for payment of IGST, only after
ITC of CGST has been utilized fully. ITC of SGST/UTGST cannot
be utilized for payment of CGST.
• Cross-utilization of credit is available only between CGST - IGST and

SGST/UTGST - IGST.
• CGST credit cannot be utilized for payment of SGST/UTGST and
SGST/UTGST credit cannot be utilized for payment of CGST.
• ITC of IGST need to be exhausted fully before proceeding to utilize
the ITC of CGST and SGST in that order.
(41) Amount of ITC available and output tax liability under different
tax heads
Head Output tax liability (`) ITC (`)

IGST 1000 1300
CGST 300 200
SGST/UTGST 300 200
Total 1600 1700

Option 1
ITC of Discharge of Discharge of Discharge of output Balance
output IGST output CGST SGST/UTGST of ITC
liability (`) liability (`) liability (`) (`)
IGST 1000 200 100 0
ITC of IGST has been completely exhausted
CGST 0 100 - 100
SGST/UTGST 0 - 200 0
Total 1000 300 300 100
Option 2
ITC of Discharge of Discharge Discharge of Balance
output IGST of output output of
liability (`) CGST SGST/UTGST ITC (`)
liability (`) liability (`)
IGST 1000 100 200 0
ITC of IGST has been completely exhausted
CGST 0 200 - 0
SGST/UTGST 0 - 100 100
Total 1000 300 300 100
There can be other options also for utilization of ITC of IGST against CGST and SGST
liabilities. In this example, two options for utilizing ITC of IGST against CGST and
SGST liabilities are shown.
Restrictions on utilisation of ITC [Rule 86A]

The Commissioner/ an officer (not below the rank of an Assistant
Commissioner) authorised by him is empowered to impose restrictions on
utilization of ITC available in the electronic credit ledger if he has reasons to
believe that such ITC has been fraudulently availed or is ineligible.
The restrictions can be imposed in the following circumstances:
(i) ITC has been availed on the basis of tax invoices/valid documents -
● issued by a non-existent supplier or by a person not conducting any
business from the registered place of business; or

6.78 INDIRECT TAXES
● without receipt of goods or services or both; or

● the tax in relation to which has not been paid to the Government
(ii) the registered person availing ITC has been found non-existent or not to
be conducting any business from the registered place of business; or
(iii) the registered person availing ITC is not in possession of tax
invoice/valid document.
If the ITC is so availed, the restrictions can be imposed by not allowing such
ITC to be used for discharging any liability under section 49 or not allowing
refund of any unutilised amount of such ITC. Such restrictions can be imposed
for a period up to 1 year from the date of imposing such restrictions. However,
the Commissioner/officer authorised by him, can withdraw such restriction if
he is satisfied that conditions for imposing the restrictions no longer exist.
ILLUSTRATION 3
ABC Co. Ltd., registered under GST, is engaged in the manufacture of heavy
machinery. It procured the following items during the month of July.
S. No. Items GST (`)

(i) Electrical transformers to be used in the 5,20,000
manufacturing process
(ii) Trucks used for the transport of raw material 1,00,000
(iii) Raw material 2,00,000
(iv) Confectionery items. These items were supplied free 25,000
of cost to the customers in a customer meet organized
by the company
Determine the amount of ITC available with ABC Co. Ltd., for the month of July by
giving necessary explanations for treatment of various items. Subject to the
information given above, assume that all the other conditions necessary for availing
ITC have been fulfilled.

ANSWER
Computation of ITC available with ABC Co. Ltd. for the month of July
S. No. Items ITC (`)
(i) Electrical transformers 5,20,000

[Being goods used in the course or furtherance of
business, ITC thereon is available in terms of section
16(1)]
(ii) Trucks used for the transport of raw material 1,00,000

[ITC on motor vehicles used for transportation of goods
is not blocked under section 17(5)(a)]
(iii) Raw material 2,00,000

[Being goods used in the course or furtherance of
business, ITC thereon is available in terms of section
16(1)]
(iv) Confectionery items for consumption of customers at Nil

customers meet
[ITC on food or beverages is specifically disallowed unless
the same is used for making outward taxable supply of
the same category or as an element of the taxable
composite or mixed supply-Section 17(5)(b)(i)]
Total ITC 8,20,000
ILLUSTRATION 4
XYZ Ltd., registered under GST, is engaged in manufacture of taxable goods.

Compute the ITC available with XYZ Ltd. for the month of October from the following
particulars:-
S. No. Inward supplies GST (`) Remarks
(i) Inputs ‘A’ 1,00,000 One invoice on which GST payable

was ` 10,000, is missing

6.80 INDIRECT TAXES
(ii) Inputs ‘B’ 50,000 Inputs are to be received in two

instalments. First instalment has been
received in October
(iii) Capital goods 1,20,000 XYZ Ltd. has capitalised the capital
goods at full invoice value inclusive of
GST as it will avail depreciation on the
full invoice value.
(iv) Input services 2,25,000 One invoice dated 20th January on

which GST payable was ` 50,000 has
been received in October
Note:
(i) Subject to the information given above, assume that all the other conditions
necessary for availing ITC have been fulfilled.
(ii) The annual return for the previous financial year was filed on 15th September.
ANSWER
Computation of ITC available with XYZ Ltd. for the month of October
S. No. Inward supplies ITC (`)
(i) Inputs ‘A’ 90,000

[ITC cannot be taken on missing invoice. The registered
person should have the invoice in its possession to claim
ITC-Section 16(2)(a)]
(ii) Inputs ‘B’ Nil

[When inputs are received in instalments, ITC can be
availed only on receipt of last instalment-First proviso to
section 16(2)]
(iii) Capital goods Nil

[Input tax paid on capital goods cannot be availed as ITC,
if depreciation has been claimed on such tax component
– Section 16(3)]

(iv) Input services 1,75,000

[As per section 16(4), ITC on an invoice cannot be availed
after the due date of furnishing of the return for the
month of September following the end of financial year
to which such invoice pertains or the date of filing
annual return, whichever is earlier.
Since the annual return for the previous financial year
has been filed on 15th September (prior to due date of
filing the return for the month of September, i.e. 20th
October), ITC on the invoice pertaining to previous
financial year cannot be availed after 15th September.
Total ITC 2,65,000
ILLUSTRATION 5
XT Pvt. Ltd., a supplier of goods, pays GST under regular scheme. It has made the
following outward taxable supplies in a tax period:
Intra-State supply of goods 8,00,000
Inter-State supply of goods 3,00,000
It has also furnished the following information in respect of purchases made by it in

that tax period:
Intra-State purchases of goods 2,00,000
Inter-State purchases of goods 50,000
The company has following ITCs with it at the beginning of the tax period:
CGST 57,000

6.82 INDIRECT TAXES
SGST Nil
IGST 70,000
Note:
(i) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively.
(ii) Both inward and outward supplies are exclusive of taxes, wherever applicable.
(iii) All the conditions necessary for availing the ITC have been fulfilled.
Compute the minimum GST, payable in cash, by XT Pvt. Ltd. for the tax period. Make
suitable assumptions as required.
ANSWER
Computation of GST payable on outward supplies
S. Particulars CGST @ SGST @ IGST @ Total (`)

No. 9% (`) 9% (`) 18% (`)
(i) Intra-State supply of goods 72,000 72,000 1,44,000

for ` 8,00,000
(ii) Inter-State supply of 54,000 54,000

goods for ` 3,00,000
Total GST payable 1,98,000
Computation of total ITC
Particulars CGST @ SGST @ IGST @

9% (`) 9% (`) 18% (`)
Opening ITC 57,000 Nil 70,000
Add: ITC on Intra-State purchases of 18,000 18,000 Nil

goods valuing ` 2,00,000

Add: ITC on Inter-State purchases of Nil Nil 9,000

goods valuing ` 50,000
Total ITC 75,000 18,000 79,000
Computation of minimum GST payable from electronic cash ledger
Particulars CGST @ SGST @ IGST @ Total

9% (`) 9% (`) 18% (`) (`)
GST payable 72,000 72,000 54,000 1,98,000
Less: ITC [First ITC of IGST (Nil) (25,000) (54,000) 79,000

should be utilized in full - first IGST IGST IGST
against IGST liability and then
against CGST and SGST liabilities
in a manner to minimize cash
outflow]
(72,000) (18,000) 90,000

CGST SGST
Minimum GST payable in cash Nil 29,000 Nil 29,000
Note : Since sufficient balance of ITC of CGST is available for paying CGST liability
and cross utilization of ITC of CGST and SGST is not allowed, ITC of IGST has been
used to pay SGST (after paying IGST liability) to minimize cash outflow.

6.84 INDIRECT TAXES
I. Definitions of certain key terms are summarized by way of
diagrams as under:
BUSINESS
includes
Any activity incidental/ancillary
to it
Any trade/commerce, manufacture,
profession, vocation etc. even if
there is no monetary benefit Any activity of same nature even if
no volume/continuity/frequency
Supply/acquisition of goods
in connection with commencement/
including capital goods & services
closure of business
Provision of facilities by
to its members for consideration
club/association/society etc.
for a consideration
Admission to any premises
accepted in course/ furtherance

Services as holder of an office of trade, profession/vocation
Activities of a race club including totalisator or a licence to book

by way of maker or activities of a licensed
book maker in such club
Any activity by Government /local

authority as public authorities Government includes both Central
and State Governments

EXEMPT SUPPLY
means includes
Non-taxable
supply
Supply attracting NIL rate of Supply wholly exempt
tax from
CGST IGST
Goods Services
CAPITAL GOODS INPUTS INPUT SERVICES
means means means
goods value of which is capitalized

goods other than services
in the books of account of person
capital goods
claiming ITC
used/intended to be used in
the course/ furtherance of
business

6.86 INDIRECT TAXES
INPUT TAX
Means Includes Excludes
IGST
Tax payable Tax payable
leviable on Composition
under forward under reverse
import of tax
charge charge
goods
CGST SGST UTGST IGST
NON-RESIDENT TAXABLE PERSON
Principal
means
Agent
any person supplying goods and/or as

services occasionally
In any other
capacity
having NO fixed place of

business/residence in India

INWARD SUPPLY
means
receipt of goods and/or services by
purchase acquisition any other means
with/without consideration
ZERO-RATED SUPPLY
Supply of goods and /or services to

Export of goods and/or services
SEZ developer/ SEZ unit

6.88 INDIRECT TAXES
II. Provisions of section 16 relating to eligibility and

conditions for taking ITC read with relevant rules are
summarized below:
Registered person to take used/ intended to be used in if the following four

credit of tax paid on inward the course or furtherance of conditions are fulfilled:
supplies of goods and/or business
services
He has valid tax

Tax on such supply He has invoice/debit
He has furnished
has been paid either received goods note/prescribed
return u/s 39
in/by and/or services tax paying
document
Time limit for

Goods delivered / availing ITC - ITC
Utilisation of services provided to pertaining to a
Cash
ITC third person on the particular FY can
direction of the be availed by 20th
registered person October of next FY
Goods received deemed to be received or filing of annual
If depreciation
in lots – ITC by the registered return, whichever
claimed on tax
allowed upon person ⇒ ITC available is earlier.
component, ITC not
receipt of last lot to registered person Exception: Re-
allowed
[Bill to Ship to Model] availment of ITC
reversed earlier
• Reverse charge supplies

 ITC to be added to the output tax liability
• Deemed supplies
with interest @ 18% if value + tax of goods
without consideration
and /or services is not paid within 180 days
of the issuance of invoice.
EXCEPTIONS • Additions made to value
of supplies on account
 On payment, the ITC could be re-availed
of supplier’s liability
without any time limit.
being incurred by the
recipient of the supply
Restriction on availment of credit

ITC to be availed in respect of invoices or debit notes, the details of which have not been uploaded by
the suppliers in GSTR-1, cannot exceed 10% of eligible ITC available in respect of invoices or debit notes
the details of which have been uploaded by the suppliers in GSTR-1.

III. Provisions of section 17 relating to apportionment of

credit and blocked credits read with relevant rules are
summarized as under:
A. Apportionment of credit
Attributable to
Used partly for business
business purposes
and partly for non-
business purposes
Goods and/or
services ITC available
only as
Used partly for making
taxable (including zero
rated supplies) supplies Attributable to taxable
& partly for exempt supplies including
supplies zero rated supplies
Exempt supplies include reverse charge supplies & transactions in securities and exclude
activities specified in Schedule III except sale of land and sale of building when entire
consideration is received post completion certificate/first occupation, whichever is earlier.
B. Special provisions for banking companies and NBFCs
• Remaining 50% ITC

will lapse.
• Restriction of 50%
shall not apply to the
Option 1: Avail Option 2: Avail tax paid on supplies
proportionate 50% of eligible received from
another registration
ITC ITC within the same
entity.
• Option once
exercised cannot be
withdrawn during
remaining part of the
year.

6.90 INDIRECT TAXES
C. Apportionment of common credit in case of inputs and input

services T
Total IT on I + IS
T1 T2 T3 C1
IT on I+IS used IT on I+IS used Remaining ITC

exclusively for exclusively for Blocked credits u/s credited to ECrL
non-business exempt supplies 17(5) = T- (T1 + T2 + T3)
purposes
C2 T4
Common credit Credit attributable to I + IS

= C1 – T4 used exclusively in taxable
supplies including ZRS
D1 D2 C3
Credit attributable to exempt supplies- Remaining

Credit attributable to non- common credit
D1 = x C2
business purpose if common I + = C2 – (D1 + D2)
E = Value of ES during tax period IS used partly for business + non
F = Total turnover in the State during tax -business purposes
period D2 = 5% x C 2
If no turnover during the tax period/values
Eligible ITC
not available, values for last period may be
attributable to
used.
business &
taxable supplies
Ineligible ITC including ZRS
Total eligible ITC

To be reversed = T4 + C3

• C3 will be computed separately for ITC of CGST, SGST/ UTGST and IGST.
• ∑ (D1 + D2) will be computed for the whole financial year, by taking
exempted turnover and aggregate turnover for the whole financial year.
If this amount is more than the amount already reversed every month,
the differential amount will be reversed in any of the month till
September of succeeding year along with interest @ 18% from 1st April
of succeeding year till the date of payment.
• If this amount is less than the amount reversed every month, the
additional amount paid has to be claimed back as credit in the return of
any month till September of the succeeding year.
• Exempt supplies include reverse charge supplies & transactions in

securities.
• Exempt supplies exclude (i) activities specified in Schedule III except sale
of land and sale of building when entire consideration is received post
completion certificate/first occupation, whichever is earlier, (ii) services
of accepting deposits, extending loans/advances where the
consideration is interest/discount and the same are provided by persons
other than banking company/financial institution including NBFC, and
(iii) outbound (overseas) transportation of goods by a vessel.
• Aggregate value of exempt supplies and total turnover exclude central
excise duty, state excise duty, central sales tax and VAT.
• Value of exempt supply in respect of land and building is the stamp duty
value and for security is 1% of the sale value of such security.
IT = Input tax
I = Inputs
IS = Input services
ECrl = Electronic Credit Ledger
ZRS = Zero rated supply
ES = Exempt supplies

6.92 INDIRECT TAXES
D. Apportionment of common credit on capital goods
Total input tax (IT) on capital goods (CG)
(a) (b) (c)
IT on CG used exclusively for IT on CG used IT on CG not covered under (a) & (b)
non-business/exempt supplies exclusively for taxable denoted as ‘A’ and useful life of such
supplies including zero CG → 5 years from date of invoice
rated supply (ZRS)
Not credited in Electronic Credited to EcrL

Credit Ledger (ECrL) Credited to ECrL
Tc
Common credit on CG ⇒ T c = ∑ (A of
common CG whose useful life remains
Tm
during the tax period)
⇒ If CG under (a) subsequently gets covered
under (c), then ‘A’ = IT on CG under (a), and ‘A’ to
be credited to ECrL. T ie = 5% of ‘A’ for every
quarter or part thereof when CG was under (a)
and T ie to be added to output tax liability of the
Common credit of CG for a tax
tax period when ‘A’ is claimed.
period during their useful life ⇒ If CG under (b) subsequently gets covered
Tm = Tc/60 under (c), then IT claimed on CG under (b) to be
added to Tc
Te
Common credit towards exempted supplies

Te = x Tr
E → Aggregate value of exempt supplies during the

Added to output tax liability tax period; F → Total turnover in State during the tax
along with interest period. If no turnover during the tax period/values
not available, values for last tax period may be used.

• Tm is to be computed during the useful life of capital goods which

is five years from the date of invoice.
• Tie and Te are to be computed separately for ITC of CGST, SGST/
UTGST and IGST and declared in GSTR-3B
• Exempt supplies include reverse charge supplies & transactions in
securities.
• Exempt supplies exclude (i) activities specified in Schedule III
except sale of land and sale of building when entire consideration
is received post completion certificate/first occupation, whichever
is earlier, (ii) services of accepting deposits, extending
loans/advances where the consideration is interest/discount and
the same are provided by persons other than banking
company/financial institution including NBFC, and (iii) outbound
(overseas) transportation of goods by a vessel.
• Aggregate value of exempt supplies and total turnover exclude
central excise duty, state excise duty, central sales tax and VAT.
• Value of exempt supply in respect of land and building is the stamp
duty value and for security is 1% of the sale value of such security.

6.94 INDIRECT TAXES
BLOCKED CREDITS PART-A
GI, Servicing, R&M Leasing/renting/hiring F&B, Outcat,

Ineligible Ves & AC relating to ineligible of MV, Ves or AC on BT, HS, C&PS,
MV
MV, Ves, AC which ITC is disallowed LI & HI
EXCEPTIONS EXCEPTIONS EXCEPTIONS EXCEPTIONS EXCEPTIONS
When used for When used for- (i) When used for (i) Where a
(i) When ineligible
making (i) making further making an particular category
MV, Ves or AC are
taxable taxable supply of outward taxable of such inward
used for eligible
supplies of- such Ves or AC supply of the supplies is used for
purposes
(i) such MV (ii) passenger same category making an outward
(ii) When received
(ii) trptn of trptn service (sub- taxable supply of
by manufacturer of
passengers (iii) imparting contracting) or the same category
ineligible MV, Ves
(iii) imparting training on as an element of - [Sub-contracting]
or AC
training on navigating/flying a taxable or as an element of
(iii) When received
driving such such Ves/AC composite or a taxable
by a GI service
ineligible MV (iv) trptn of mixed supply. composite or
provider in respect
goods (ii) When mixed supply
of such ineligible
provided by an (ii) When provided
MV, Ves or AC
employer to its by an employer to
insured by it
employees its employees
under statutory under a statutory
obligation obligation
Credit available on the above exceptions
Travel benefits to Inward supplies Tax paid u/s 74 (Tax

Membership of club & short / not paid or
employees on vacation received by NRTP
health & fitness Centre erroneously refunded
(LTC/HT)
due to fraud etc.,) 129
EXCEPTION (Amount paid for release
EXCEPTION EXCEPTION
of goods and
conveyances in transit
Goods which are detained) and
When provided by an When provided by an
imported 130 (Fine paid in lieu of
employer to its employer to its
by him confiscation)
employees under a employees under a
statutory obligation statutory obligation

BLOCKED CREDITS PART-B
WCS for construction of Inward supplies received by taxable person for

immovable property construction of immovable property on his own
account including when such supplies are used in the
course or furtherance of business
EXCEPTIONS
EXCEPTIONS
Credit available on
such exceptions
(A) WCS for P & M
(B) WCS availed by a works (A) Construction of P & M
contractor for further supply of (B) Construction of
WCS [Sub-contracting] immovable property for
(C) Where value of WCS is not others
capitalized (C) Value of construction
is not capitalised
Inward supplies charged to Goods lost/ stolen/ destroyed/ Inward supplies

composition levy written off or disposed of by used for personal
way of gift or free samples consumption
Ineligible MV-Motor vehicle for transportation of (A) Construction includes re-construction/

persons with seating capacity of ≤ 13 persons renovation/ addition/ alterations/ repairs to
(including driver); Ves & AC-Vessel & Aircraft;
the extent of capitalisation to said immovable
GI-General insurance; R&M-Repairs &
maintenance; F&B-Food & beverages; Outcat-
property.
Outdoor catering; BT-Beauty treatment; HS- (B) P & M means apparatus, equipment, &
Health services; C&PS-Cosmetic & plastic machinery fixed to earth by foundation or
surgery; LI-Life insurance; HI-Health insurance; structural supports but excludes land,
NRTP-Non-resident taxable person; WCS-Works
building/ other civil structures,
contract service; LTC-Leave Travel Concession;
HT-Home town; trptn-transportation; P & M-
telecommunication towers, and pipelines laid
Plant & machinery outside the factory premises.

6.96 INDIRECT TAXES
III. Provisions of section 18 read with relevant rules are

A. Special circumstances enabling availing of credit
Special circumstances enabling availing of credit
Registered person
switching from Registered person's Person applying for Person obtaining
composition levy to exempt supplies registration within 30 voluntary
regular scheme of becoming taxable days of becoming registration
payment of taxes liable for registration
Credit entitled on
Credit entitled on
• Inputs as such held in stock
• Inputs as such held in stock
• Inputs contained in semi-finished goods held in
• Inputs contained in semi-
stock
finished goods held in stock
• Inputs contained in finished goods held in stock
• Inputs contained in finished
• Capital goods [In case of exempt supply
goods held in stock
becoming taxable Capital goods used
exclusively for such exempt supply] reduced
by 5% per quarter or part thereof from the
date of invoice
Note: ITC claimed shall be verified with the
corresponding details furnished by the corresponding
supplier.
On the day On the day On the day

immediately preceding On the day immediately immediately immediately
the date from which he preceding the date preceding the preceding the
becomes liable to pay from which such supply date from which date of
tax under regular becomes taxable he becomes registration
scheme liable to pay tax
ITC, in all the above cases, is to be availed within 1 year from the date of issue of invoice
by the supplier.

Conditions for availing above credit:

(i) Filing of electronic declaration giving details of inputs held in stock/contained in
semi-finished goods and finished goods held in stock and capital goods on the
days immediately preceding the day on which credit becomes eligible.
(ii) Declaration has to be filed within 30 days from becoming eligible to avail credit.
(iii) Details in (i) above to be certified by a CA/ Cost Accountant if aggregate claim
of CGST, SGST/ IGST credit is more than ` 2,00,000.
B. Special circumstances leading to reversal of credit/payment of amount

Special circumstances leading to reversal
of credit /payment of amount
Registered person (who has Supplies of registered Cancellation of Supply of capital goods
availed ITC) switching from person getting wholly registration (CG)/ plant and machinery
regular scheme of payment exempted from tax (P& M) on which ITC has
of tax to composition levy been taken
Amount to be paid is
Amount to be reversed is equivalent to ITC on : equivalent to higher of
• Inputs held in stock/ inputs contained in semi-finished or finished goods the following:
held in stock (i) ITC on CG or P&M
• Capital goods less 5% per quarter or
on the day immediately preceding the date of switch over/ date of part thereof from the
exemption/date of cancellation of registration date of invoice
(ii) Tax on transaction
value of such CG or P &
M
• If amount at (i)
Manner of reversal of credit on inputs and capital goods & other exceeds (ii), then
conditions reversal amount will
(i) Inputs ⇒ Proportionate reversal based on corresponding invoices. If such be added to output
invoices not available, prevailing market price on the effective date of switch tax liability.
over/ exemption/cancellation of registration should be used with due • Separate ITC reversal
certification by a practicing CA/ Cost Accountant is to be done for
(ii) Capital goods ⇒ Reversal on pro rata basis pertaining to remaining useful CGST, SGST/UTGST
life (in months), taking useful life as 5 years. and IGST
(iii) ITC to be reversed will be calculated separately for ITC of CGST, • Tax to be paid on
SGST/UTGST and IGST. transaction value
(iv) Reversal amount will be added to output tax liability of the registered when refractory
person. bricks, moulds, dies,
(v) Electronic credit/cash ledger will be debited with such amount. Balance jigs & fixtures are
ITC, if any, will lapse. supplied as scrap.

6.98 INDIRECT TAXES
Transfer of unutilised ITC on account of change in

In case of sale, merger, amalgamation, lease or transfer of business,
unutilised ITC can be transferred to the new entity if there is a specific
provision for transfer of liabilities to the new entity. The inputs and
capital goods so transferred should be duly accounted for by the
transferee in his books of accounts.
In case of demerger, ITC is apportioned in the ratio of value of entire

assets (including assets on which ITC has not been taken) of the new
constitution of registered person
units as per the demerger scheme.
Details of change in constitution are to be furnished on common

portal along with request to transfer unutilised ITC. CA/Cost
Accountant certificate is to be submitted certifying that change in
constitution has been done with specific provision for transfer of
liabilities.
Upon acceptance of such details by the transferee on the common

portal, the unutilized ITC is credited to his Electronic Credit Ledger.
registrations for multiple places of business
Transfer of unutilised ITC on obtaining separate
Registered person having separate registrations for multiple places of

business can transfer the unutilised ITC to any or all of the newly
registered place(s) of business in the ratio of the value of assets held
by them at the time of registration.
Value of assets means the value of the entire assets of the business
irrespective of whether ITC has been availed thereon or not.
The resgistered person should furnish the prescribed details on the

common portal within a period of 30 days from obtaining such
separate registrations.
within a State/UT
Upon acceptance of such details by the newly registered person

(transferee) on the common portal, the unutilised ITC is credited to
his electronic credit ledger.

IV. Provisions relating to utilization of ITC are

I. II.
III.
ITC of ITC of
IGST ITC of
CGST
IGST CGST SGST
SGST
CGST/SGST in
any order & in IGST
IGST, only
any proportion when ITC of
CGST = NIL
ITC of IGST =
NIL
ITC of ITC of
CGST SGST/
SGST/ UTGST
CGST
UTGST

1. What is input tax?
2. What are the conditions necessary for availing ITC?
3. Can a person take ITC without payment of consideration for the supply along
with tax?
4. What is the time limit for taking ITC and reasons therefor?
5. What is the ITC entitlement of a newly registered person?
6. What is the tax implication of supply of capital goods by a registered person
who had taken ITC on such capital goods?

7. A registered person transfers its business to another person.

Is such registered person allowed to transfer the unutilized ITC lying in its
electronic credit ledger to such transferred business? Discuss.
8. Swastik Pvt. Ltd. is a manufacturer of taxable goods. It purchased a machinery
for ` 8,00,000 on which IGST of ` 14,400 is paid. The company has claimed
depreciation under the Income-tax Act, 1961 on the full value of the machine,
i.e. including the IGST component as also availed ITC of ` 14,400 paid by it as
IGST.
Examine if the stand taken by the company is correct in law.
9. Sigma Consultants, an LLP of finance professionals, provides financial
consultancy services. It made an advance payment of ` 1,18,000 (inclusive of
IGST @ 18%) in the month of October to Azuro Computer Services for
developing a software. The software would be used by the LLP to enhance the
precision of the financial advice given by it to various clients. The balance
payment is to be made after the successful test run of the software in the month
of December. Sigma Consultants has availed ITC of IGST of ` 18,000 in the
month of October.
Do you think Sigma Consultants can avail such ITC? Examine the scenario with
reference to the relevant legal provisions.
10. A taxable person is in the business of information technology. He buys a car
(maximum seating capacity – 5 persons) for use of his Executive Directors.
Can he avail the ITC in respect of GST paid on purchase of such car?
11. A technical testing agency tests and certifies each batch of machine tools before
dispatch by BMT Ltd. Some of these tools are dispatched to a unit in a SEZ
without payment of GST as these supplies are not taxable.
The finance personnel of BMT Ltd. want to know whether they need to carry out
reversal of ITC on the testing agency’s services to the extent attributable to the
SEZ supplies. Give your comments.
12. ‘AB’, a registered person, was paying tax under composition scheme up to
30th July. However, w.e.f. 31st July, ‘AB’ becomes liable to pay tax under regular
scheme.
Is ‘AB’ eligible for any ITC?

13. Babla Enterprises is exclusively engaged in making exempt supply of goods and
is thus, not registered under GST. On 1st October, the exemption available on
its goods gets withdrawn. On that day, the turnover of Babla Enterprises was
` 50 lakh.
Examine the eligibility of Babla Enterprises for availing ITC, if any.
14. Mamta Trade Links trades in exempt goods and provides taxable services. It is
registered under GST. On 1st October, the exemption available on its goods
gets withdrawn.
Analyze the scenario and determine the eligibility of Mamta Trade Links for
availing ITC, if any, on inputs and/or capital goods used in the supply of exempt
goods.
15. Harshgeet Pvt. Ltd., a registered supplier, is engaged in the manufacture of
taxable goods. The company provides the following information pertaining to
purchases made/services availed by it during the month of July:
S. No Particulars GST (`)
(1) Raw material (to be received in the month of 2,50,000

September)
(2) Membership of a club availed for employees working in 1,45,000

the factory
(3) Inputs to be received in 5 lots, out of which 3rd lot was 80,000
received during the month
(4) Trucks used for transport of raw material 40,000
(5) Capital goods (out of 3 items, invoice for 2 items is 1,50,000

missing and GST paid on those items is ` 80,000)
Determine the amount of ITC available with Harshgeet Pvt. Ltd. for the month
of July by giving the necessary explanation for treatment of various items.
Subject to the information given above, all the other conditions necessary for
availing ITC have been fulfilled.
16. Jamku Ltd., a registered person, is engaged in the business of spices. It provides
following details in relation to GST paid on inward supplies procured by it
during the month of October.

S. No. Particulars GST (`)
(1) Raw spices purchase

- Raw spices sold to customers 50,000
- Raw spices used for personal use of directors 20,000
(2) Electric machinery purchased for being used in the 25,000

(3) Motor vehicle used for transportation of the employee 55,000
(4) Payment made to contractor for construction of staff 1,25,000

quarter
Determine the amount of ITC available with Jamku Ltd. for the month October
by giving the necessary explanation for treatment of various items. Subject to
the information given above, all the other conditions necessary for availing ITC
have been fulfilled.
17. Dina Ltd., a registered supplier from Maharashtra, is engaged in the
manufacture of passenger autos. The company provides the following details
of purchases made/services availed by it during the month of March:
S. No. Particulars GST (`)
(1) Purchase of iron which is used as a raw material 2,50,000

[Goods were received in two instalments - first in
March and the second in April]
(2) Purchase of accessories which were delivered 90,000

directly to the dealers of the company on the
direction of Dina Ltd.
[Only invoice was received by Dina Ltd.]
(3) Purchase of bus (seating capacity 15) for the 1,97,000

transportation of employees from their residence to
company and back
(4) General insurance taken on a car used by executives 5,200

of the company for official purposes

You are required to determine the ITC available with Dina Ltd. for the month
of March, by giving brief explanations for treatment of various items. Subject
to the information given above, all the other conditions necessary for availing
ITC have been fulfilled.
18. Comfortable (P) Ltd. is registered under GST in the State of Odisha. It is
engaged in the business of manufacturing of iron and steel products. It has
received IT engineering services from High-Fi Infotech (P) Ltd. for
` 11,00,000/- (excluding GST @ 18%) on 28th October. Invoice for service
rendered was issued on 5th November.
Comfortable (P) Ltd. made part payment of ` 4,20,000/- on 30th November.
Being unhappy with service provided by High-fi Infotech (P) Ltd., it did not make
the balance payment. Deficiency in service rendered was made good by High-
Fi Infotech (P) Ltd. by 15th April of next year. Comfortable (P) Ltd. made the
balance payment on 6th July of next year.
Examine the availability of ITC with Comfortable (P) Ltd. in respect of IT
engineering services received by it from High-Fi Infotech (P) Ltd.
19. M/s. Diwan & Sons of New Delhi, has placed an order for 250 kg of plastic
granules @ ` 50 per kg (exclusive of GST) on M/s. Karim & Bros. of Noida, U.P.
M/s. Karim & Bros. has agreed to deliver the goods at the warehouse of M/s.
Diwan & Sons at New Delhi.
While the order was getting packed at the factory of M/s. Karim & Bros., M/s.
Diwan & Sons got an order from Shubhkamna Sales of Hapur, U.P. for 250 kg
of plastic granules @ ` 60 per kg (exclusive of GST). In order to save on
transportation cost, M/s. Diwan & Sons asks M/s. Karim & Bros. to directly
deliver the plastic granules to Shubhkamna Sales at its godown located in
Hapur. Accordingly, M/s. Karim & Bros. has delivered the plastic granules at
the godown of Shubhkamna Sales at Hapur.
Examine the availability of ITC with M/s. Diwan & Sons & M/s. Karim & Bros.
Note: All the parties are registered under GST and rate of GST is 18%.
20. Paritosh & Co., a supplier of goods, pays GST under regular scheme. It has made
the following outward taxable supplies in a tax period:
Intra-State supply of goods 10,00,000

Inter-State supply of goods 8,00,000
It has also furnished the following information in respect of purchases made by

it in that tax period:
Intra-State purchases of goods 3,00,000
Inter-State purchases of goods 2,50,000
Paritosh & Co. has following ITCs with it at the beginning of the tax period:
CGST 57,000
SGST 60,000
IGST 1,40,000
Note:
(i) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively.
(ii) Both inward and outward supplies are exclusive of taxes, wherever
applicable.
(iii) All the conditions necessary for availing ITC have been fulfilled.
Compute the minimum GST, payable in cash, by Paritosh & Co. for the tax
period and the ITC to be carried forward to the next month. Make suitable
assumptions as required.
9. ANSWERS/HINTS
1. Input tax means the central tax (CGST), State tax (SGST), integrated tax (IGST)
or Union territory tax (UTGST) charged on supply of goods or services or both
made to a registered person. It also includes tax paid on reverse charge basis
and integrated goods and services tax charged on import of goods. It does
not include tax paid under composition levy.

2. Following four conditions are to be satisfied by the registered taxable person

for obtaining ITC:
(a) he is in possession of tax invoice or debit note or such other tax paying
documents as may be prescribed;
(b) he has received the goods or services or both;
(c) subject to section 41, the supplier has actually paid the tax charged in
respect of the supply to the Government; and
(d) he has furnished the return under section 39.
3. Yes, the recipient can take ITC. However, he is required to pay the
consideration along with tax within 180 days from the date of issue of invoice.
This condition is not applicable where tax is payable on reverse charge basis.
4. Refer point (vi) “Time limit for availing ITC: Due date of filing return for the
month of September of succeeding financial year or date of filing of annual
return, whichever is earlier” under Heading No. 3 “Eligibility and Conditions
for Taking Input Tax Credit [Section 16]”.
5. A person applying for registration can take input tax credit of inputs held in
stock and inputs contained in semi- finished or finished goods held in stock
on the day immediately preceding the date of grant of registration. If the
person was liable to take registration and he has applied for registration
within thirty days from the date on which he became liable to registration,
then ITC of inputs held in stock and inputs contained in semi- finished or
finished goods held in stock on the day immediately preceding the date on
which he became liable to pay tax can be taken.
In case of voluntary registration, ITC of such goods held in stock on the day
immediately preceding the date of registration can be taken.
6. In case of supply of capital goods or plant and machinery on which ITC has
been taken, the registered person shall pay an amount equal to the ITC taken
on the said capital goods or plant and machinery reduced by 5% per quarter
or part thereof from the date of invoice or the tax on the transaction value of
such capital goods, whichever is higher.
However, in case of refractory bricks, moulds and dies, jigs and fixtures when
these are supplied as scrap, the person can pay tax on the transaction value.
7. As per section 18(3), in case of sale, merger, demerger, amalgamation,
transfer or change in ownership of business etc., the ITC that remains

unutilized in the electronic credit ledger of the registered person can be

transferred to the new entity, provided there is a specific provision for transfer
of liabilities in such change of constitution.
The registered person should furnish the details of change in constitution on
the common portal and submit a certificate from practicing Chartered
Account/Cost Accountant certifying that the change in constitution has been
done with a specific provision for transfer of liabilities. Upon acceptance of
such details by the transferee on the common portal, the unutilized ITC gets
credited to his electronic credit ledger. The transferee should record the
inputs and capital goods so transferred in his books of account.
8. As per section 16(3), if the person taking the ITC on capital goods and plant
and machinery has claimed depreciation on the tax component of the cost of
the said items under the Income-tax Act 1961, the ITC on the said tax
component shall not be allowed.
Since in the given case, Swastik Pvt. Ltd. has claimed depreciation on the tax
component of the cost of the machine, it cannot claim ITC of IGST of ` 14,400
paid by it on the machine. It can either claim depreciation on the tax
component or avail ITC of such tax but cannot avail both the benefits
simultaneously.
9. As per section 16(2)(b), tax paid on supply of goods and/or services can be
availed as ITC only if such goods and/or services are received by the
registered person.
In the given case, Sigma Consultants has paid IGST of ` 18,000, in the month
of October, on advance for IT services intended to be used in the course or
furtherance of business. However, it cannot avail ITC of such tax in the month
of October as the services in relation to which the advance payment has been
made have not been received in that month.
10. No. ITC on motor vehicles for transportation of persons with seating capacity
of up to 13 persons (including driver), can be availed only if the taxable person
is in the business of transport of passengers or is providing the services of
imparting training on driving such motor vehicles or is in the business of
supply of such motor vehicles.
11. ITC is disallowed only to the extent it pertains to supplies used for non-
business purposes or supplies other than taxable and zero-rated supplies.
Supplies to SEZ units are zero rated supplies in terms of section 16(1) of the

IGST Act. Thus, full ITC is allowed on inward supplies of BMT Ltd. used for
effecting supplies to the unit in the SEZ.
12. ‘AB’ is eligible for ITC on inputs held in stock and inputs contained in semi-
finished or finished goods held in stock and capital goods as on 30th July. ITC
on capital goods will be reduced by 5% per quarter or part thereof from the
date of invoice.
13. Since the exemption available on goods being supplied by Babla Enterprises
gets withdrawn, it becomes liable to registration as its turnover has crossed
the threshold limit on the day when the exemption is withdrawn.
Assuming that Babla Enterprises applies for registration within 30 days of
1st October and it obtains such registration, it will be entitled to take credit
of input tax in respect of inputs held in stock and inputs contained in semi-
finished or finished goods held in stock on the day immediately preceding
the date from which it becomes liable to pay tax, i.e. 30th September [Section
18(1)(a)]. Input tax paid on capital goods will not be available as ITC in this
case.
14. If the exempt supply made by a registered person becomes a taxable supply,
provisions of section 18(1)(d) become applicable. In the given case, since
Mamta Trade Links is a registered person, section 18(1)(d) will be applicable.
As per section 18(1)(d), Mamta Trade Links will be entitled to take credit of
input tax in respect of inputs held in stock and inputs contained in semi-
finished or finished goods held in stock relatable to such exempt supply and
on capital goods exclusively used for such exempt supply on the day
immediately preceding the date from which such supply becomes taxable, i.e.
30th September. ITC on capital goods will be reduced by 5% per quarter or
part thereof from the date of invoice.
15. Computation of ITC available with Harshgeet Pvt. Ltd. for the month of
July
Particulars ITC (`)
Raw Material Nil

[ITC not available as raw material is not received in July]
Membership of a club availed for employees working in Nil

the factory

[Blocked credit in terms of section 17(5)]
Inputs to be received in 5 lots, out of which 3rd lot was Nil

received during the month
[In case of goods received in lots, ITC can be taken only
upon receipt of the last lot]
Trucks used for transport of raw material 40,000

[ITC of GST paid on motor vehicles used for transportation
of goods is allowed unconditionally]
Capital goods 70,000

[ITC can be availed only on the basis of a valid document
(invoice). Thus, GST paid on items for which invoice is
missing, i.e. ` 80,000, is not available.]
Total ITC 1,10,000
16. Computation of ITC available with Jamku Ltd. for the month of October
Particulars ITC (`)
Purchase of raw spices which are sold to customers 50,000

[Every registered person is entitled to take credit of input tax
charged on any supply of goods to him which are used or
intended to be used in the course or furtherance of his
business.]
Purchase of raw spices for personal use of directors Nil

[ITC is not available on goods used for personal consumption.]
Electric machinery purchased for being used in the 25,000

[Every registered person is entitled to take credit of input tax
charged on any supply of goods to him which are used or
intended to be used in the course or furtherance of his
business.]
Motor vehicle used for transportation of employee Nil

[ITC on motor vehicles for transportation of persons with

seating capacity ≤ 13 persons (including the driver) is blocked
except when the same are used for (i) making further taxable
supply of such motor vehicles (ii) making taxable supply of
transportation of passengers (iii) making taxable supply of
imparting training on driving such motor vehicles.
In the given case, since the supplier is in the business of spices,
ITC on motor vehicle used for transportation of the employee
is blocked credit. ]
Payment made to contractor for construction of staff quarter Nil

[ITC is not available on goods or services or both received by
a taxable person for construction of an immovable property
(other than plant or machinery) on his own account including
when such goods or services or both are used in the course or
furtherance of business.]
Total ITC 75,000
17. Computation of ITC available with Dina Ltd. for the month of
March
Particulars ITC (`)
Purchase of iron used as a raw material Nil

[When inputs are received in instalments, ITC can be availed
only on the receipt of last instalment. Hence, since last
instalment is received in April, ITC cannot be availed in March.]
Purchase of accessories delivered directly to the dealers of the 90,000

company
[Goods delivered to another person on the direction of the
registered person by way of transfer of documents of title or
otherwise, either before or during the movement, are deemed
to have been received by such registered person. Thus, ITC is
available to the registered person, on whose order/direction
the goods are delivered to a third person.]

Bus for the transportation of employees 1,97,000

seating capacity > 13 persons (including the driver) used for
any purpose is allowed.
General insurance taken on car used by executives of the Nil

company for official purpose
seating capacity ≤ 13 persons (including the driver) is blocked
except when the same are used for (i) making further taxable
supply of such motor vehicles (ii) making taxable supply of
transportation of passengers (iii) making taxable supply of
imparting training on driving such motor vehicles. Further,
ITC is not allowed on services of general insurance relating to
such ineligible motor vehicles.
Since, the car is not used for any of the eligible purposes, ITC
thereon is blocked and thus, ITC on general insurance taken
on such car is also blocked.]
Total ITC 2,87,000
18. Every registered person is entitled to take credit of input tax charged on any
supply of goods and/or services which are used or intended to be used in the
course or furtherance of his business if, inter alia, he is in possession of a tax
invoice issued by a supplier and he has received the goods and/or services.
The registered person must pay to the supplier, the value of the goods and/or
services along with the tax within 180 days from the date of issue of invoice.
In the event of failure to do so, the corresponding credits availed by the
registered person would be added to his output tax liability, with interest.
However, once the recipient makes the payment of value of goods and/or
services along with tax, he will be entitled to avail the credit again without
any time limit. In case part-payment has been made, proportionate credit
would be allowed.
In the given case, High-fi Infotech (P) Ltd. provides the service in the month
of October and Comfortable (P) Ltd. receives the invoice in the month of
November. Therefore, in view of the above provisions and assuming all other

conditions required for availing ITC having been fulfilled, ITC of ` 1,98,000
(` 11,00,000 x 18%) will be availed by Comfortable (P) Ltd. in the month of
November when it receives the invoice issued by High-fi Infotech (P) Ltd.
However, proportionate ITC amounting to ` 1,33,932 ⇒ [(` 12,98,000 -
` 4,20,000)/118] x 18] will be added to the output tax liability of Comfortable
(P) Ltd. as full payment has not been made within 180 days of issuance of the
invoice, i.e. by 4th May of next year. ITC of ` 1,33,932 can, however, be availed
again by Comfortable (P) Ltd. in the month of July next year when it makes
the balance payment.
19. One of the conditions for availing ITC is that the registered person taking the ITC
must have received the goods and / or services. However, goods delivered to a
third person on the direction of the registered person by way of transfer of
documents of title or otherwise, either before or during the movement, are
deemed to have been received by such registered person. So, ITC is available to
the registered person, on whose order the goods are delivered to a third person
even though the registered person does not receive the goods.
In the given case, goods have been delivered by M/s. Karim & Bros. (supplier)
to Shubhkamna Sales (third person) on the direction of M/s. Diwan & Sons
(registered person). Therefore, in view of the above provisions, ITC of ` 2,250
(` 50 x 250 x 18%) will be available to M/s. Diwan & Sons (registered person)
on the purchase of 250 kg of plastic granules @ 50 per kg.
Further, in this case there is another supply between Diwan & Sons (supplier)
and Shubhkamna Sales (recipient). Therefore, Shubhkamna Sales can avail
ITC of ` 2,700 (` 60 x 250 x 18%) on the purchase of 250 kg of plastic granules
@ 60 per kg.
20. Computation of GST payable on outward supplies
S.No. Particulars CGST @ SGST @ IGST @ Total (`)

9% (`) 9% (`) 18% (`)
(i) Intra-State supply 90,000 90,000 1,80,000

of goods for
` 10,00,000

(ii) Inter-State supply 1,44,000 1,44,000

of goods for
` 8,00,000
Total GST payable 3,24,000
Computation of total ITC
Particulars CGST @ SGST @ IGST @

9% (`) 9% (`) 18% (`)
Opening ITC 57,000 60,000 1,40,000
Add: ITC on Intra-State purchases of 27,000 27,000 Nil

Add: ITC on Inter-State purchases of Nil Nil 45,000

Total ITC 84,000 87,000 1,85,000
Computation of minimum GST payable from electronic cash ledger
Particulars CGST @ SGST @ IGST @ Total (`)

9% (`) 9% (`) 18% (`)
GST payable 90,000 90,000 1,44,000 3,24,000
Less: ITC [First ITC of IGST (38,000) (3,000) (1,44,000) 1,85,000

should be utilized in full - IGST IGST IGST
first against IGST liability
and then against CGST
and SGST liabilities in a
manner to minimize cash
outflow]
(52,000) (87,000) 1,39,000

CGST SGST

Nil Nil Nil Nil

Minimum GST payable
in cash
ITC balance to be 32,000 Nil Nil 32,000

carried forward next
month
Note : The above computation is one of the many ways to set off the ITC of
IGST (` 41,000-after set off against IGST liability) against CGST and SGST
liability to compute minimum GST payable in cash. To illustrate, IGST of
` 10,000 can be set off against SGST payable and IGST of ` 31,000 can be set
off against CGST payable. In this situation also, the net GST payable will be
nil but the ITC of CGST and SGST to be carried forward will be ` 25,000 and
` 7,000 (totaling to ` 32,000) respectively. However, if the entire ITC of `
41,000 is set off against CGST payable, then SGST of ` 3,000 will be payable
in cash thus, increasing the cash outflow. Therefore, such a set off would not
be advisable for computing the minimum GST payable.


The Finance Act, 2020 has become effective from 27.03.2020. However, most of the
amendments made in the CGST Act and the IGST Act vide the Finance Act, 2020 would
become effective only from a date to be notified by the Central Government in the
Official Gazette. Such a notification has not been issued 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 such notification is issued by the Central Government.

Sub-section (4) Sub-section (4) Date of issuance of
A registered person shall A registered person shall debit note and date
not be entitled to take not be entitled to take of issue of underlying
input tax credit in respect input tax credit in respect invoice is being de-
of any invoice or debit of any invoice or debit note linked for the purpose
note for supply of goods or for supply of goods or of availing input tax
services or both after the services or both after the credit. Therefore,
due date of furnishing of due date of furnishing of under the amended
the return under section 39 the return under section 39 position, ITC can be
for the month of for the month of availed on a debit
September following the September following the note raised after 30th
end of financial year to end of financial year to September following
which such invoice or which such invoice or debit the end of the
invoice relating to such note pertains or furnishing financial year to
debit note pertains or of the relevant annual which the invoice
furnishing of the relevant return, whichever is earlier. linked to such debit
annual return, whichever is note pertains.
earlier.
9

CHAPTER 7
REGISTRATION
LEARNING OUTCOMES
This Chapter will equip you to –

 understand the concept of the taxable person
 explain when a person becomes liable to get registered under
GST.
 identify the scenarios where registration is compulsory.
 identify the persons who are not liable for registration.
 describe the procedure for obtaining registration under GST.
 explain the procedure for amendment of registration.
 describe the cancellation of registration and revocation of
cancellation of registration in specified circumstances.

7.2 INDIRECT TAXES
8.2
Persons liable for registration
Compulsory registration in certain cases
Persons not liable for registration

Registration
Procedure for registration
Amendment of registration
Cancellation of registration
Revocation of cancellation of registration
1. INTRODUCTION
Under any taxation law, registration is the most
fundamental requirement for identification of tax payers
ensuring tax compliance in the economy. It is the first
step towards becoming GST complaint. Under indirect
tax regime, without registration, a person can neither collect tax from his
customers nor claim any credit of tax paid by him.
Registration legally recognizes a person as supplier of
goods or services or both and legally authorizes him to
collect taxes from his customers and pass on the credit of
the taxes paid on the goods or services supplied to the
purchasers/recipients. He can claim the input tax credit of taxes paid and can
utilize the same for payment of taxes due on supply of goods
or services. Registration ensures the seamless flow of input
tax credit from suppliers to recipients at the national level. PAN based
registration
Under GST law, a supplier is required to obtain State-wise
registration. There is no concept of a centralized registration under GST like the
erstwhile service tax regime. A supplier has to obtain registration in every
State/UT from where he makes a taxable supply provided his aggregate turnover

REGISTRATION 7.3
exceeds a specified threshold limit. Thus, he is not required to obtain registration

from a State/UT from where he makes a non-taxable supply.
Since registration in GST is PAN based, once a supplier is liable to register, he has
to obtain registration in each of the States/UTs in which he operates under the
same PAN. Further, he is normally required to obtain single registration in a
State/UT. However, where he has multiple places of business in a State/UT, he
has the option either to get a single registration for said State/UT [wherein it can
declare one place as principal place of business (PPoB) and other branches as
additional place(s) of business (APoB)] or to get separate registrations for each
place of business in such State/UT.
Registration under GST is not tax specific, which means that there is single
registration for all the taxes i.e. CGST, SGST/UTGST, IGST and GST compensation
cess.
Chapter VI - Registration [Sections 22 to 30] of the CGST Act and Chapter III –
Registration [Rules 8 to 26] of the CGST Rules contain the provisions relating to
registration. State GST laws also prescribe identical provisions in relation to
Registration.
Provisions of registration under CGST Act have also been made applicable to
IGST Act vide section 20 of the IGST Act.
Before proceeding to understand the registration provisions, let us first go

through few relevant definitions.
Agent: means a person, including a factor, broker, commission agent,

arhatia, del credere agent, an auctioneer or any other mercantile agent,
by whatever name called, who carries on the business of supply or
receipt of goods or services or both on behalf of another [Section 2(5)].

7.4 INDIRECT TAXES
8.4
Common portal: means the common goods and services tax electronic
portal referred to in section 146 [Section 2(26)].
Taxable supply: means a supply of goods or services or both which is
leviable to tax under this Act [Section 2(108)].
Taxable territory: means the territory to which the provisions of this Act
apply [Section 2(109)].
Place of business: includes [Section 2(85)]:
a place from where the business is ordinarily carried on, and includes a
warehouse, a godown or any other place where a taxable person stores his
goods, supplies or receives goods or services or both; or
a place where a taxable person maintains his books of account; or
a place where a taxable person is engaged in business through an agent,

by whatever name called.
Appellate Authority: means an authority appointed or authorised to

hear appeals as referred to in section 107 1 [Section 2(8)].
Fixed establishment: means a place (other than the registered place of
business) which is characterised by a sufficient degree of permanence and
suitable structure in terms of human and technical resources to supply
services, or to receive and use services for its own needs [Section 2(50)].
Principal place of business: means the place of business specified as the
principal place of business in the certificate of registration [Section 2(89)].
Proper officer: in relation to any function to be performed under this
Act, means the Commissioner or the officer of the central tax who is
assigned that function by the Commissioner in the Board [Section 2(91)].
Registered person: means a person who is registered under section 25, but
does not include a person having a Unique Identity Number [Section 2(94)].
Tax period: means the period for which the return is required to be
furnished [Section 2(106)].
Business: includes [Section 2(17)]–
1
Section 107 contains the provisions relating to ‘Appeals to Appellate Authority’. The same shall
be discussed in detail at final level.

REGISTRATION 7.5
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager

or any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to (a)
above;
(c) any activity or transaction in the nature of (a) above, whether or not there is
volume, frequency, continuity or regularity of such transaction;


subscription or any other consideration) of the facilities or benefits to its
members, as the case may be;
vocation;
(h) activities of a race club including by way of totalisator or a license to book
maker or activities of a licensed book maker in such club
(i) any activity or transaction undertaken by the Central Government, a State
Government or any local authority in which they are engaged as public
authorities.
3. CONCEPT OF TAXABLE PERSON [SECTION 2(107)]

Under GST law, the concept of taxable
person is significant since tax on supplies
of goods and/or services, is to be paid by
a taxable person. So, let us understand
the concept of taxable person. As per
section 2(107) of the CGST Act, taxable person means a person
who is registered or liable to be registered under section 22 or section 24 [These
sections have been discussed in detail subsequently in this Chapter].
Thus, even an unregistered person who is liable to be registered is a taxable
person. Similarly, a person not liable to be registered, but has taken voluntary
registration and got himself registered is also a taxable person.

7.6 INDIRECT TAXES
8.6
In the subsequent paras, we will see when does a person becomes liable to get
registered, what is the procedure for getting registered under GST and how to get
the registration application amended, when can registration be cancelled and when
the cancellation of the registration by the Department be revoked.
Following sections of Chapter VI – Registration of the CGST Act shall be discussed
in this chapter to understand the registration provisions:
Section 22 Persons liable for registration.
Section 23 Persons not liable for registration
Section 24 Compulsory registration in certain cases

Section 25 Procedure for registration.
Section 26 Deemed registration
Section 27 Special provisions relating to casual taxable person and
non-resident taxable person
Section 28 Amendment of registration
Section 29 Cancellation or suspension of registration
Section 30 Revocation of cancellation of registration
4. PERSONS LIABLE FOR REGISTRATION [SECTION 22]
Section 22 Persons liable for registration

(Relevant
Extract)
(1) Every supplier shall be liable to be registered under this Act in the
State or Union territory, other than special category States, from

REGISTRATION 7.7
where he makes a taxable supply of goods or services or both, if his

aggregate turnover in a financial year exceeds twenty lakh rupees.
Provided that where such person makes taxable supplies of goods
or services or both from any of the special category States, he
shall be liable to be registered if his aggregate turnover in a
financial year exceeds ten lakh rupees.
Provided further that the Government may, at the request of a
special category State and on the recommendations of the
Council, enhance the aggregate turnover referred to in the first
proviso from ten lakh rupees to such amount, not exceeding
twenty lakh rupees and subject to such conditions and limitations,
as may be so notified.
Provided also that the Government may, at the request of a
State and on the recommendations of the Council, enhance
the aggregate turnover from twenty lakh rupees to such
amount not exceeding forty lakh rupees in case of supplier
who is engaged exclusively in the supply of goods, subject to
such conditions and limitations, as may be notified.
Explanation––For the purposes of this sub-section, a person
shall be considered to be engaged exclusively in the supply
of goods even if he is engaged in exempt supply of services
provided by way of extending deposits, loans or advances in
so far as the consideration is represented by way of interest
or discount.
(2) Every person who, on the day immediately preceding the

appointed day, is registered or holds a license under an existing
law, shall be liable to be registered under this Act with effect from
the appointed day.
(3) Where a business carried on by a taxable person registered under

this Act is transferred, whether on account of succession or
otherwise, to another person as a going concern, the transferee or
the successor, as the case may be, shall be liable to be registered

7.8 INDIRECT TAXES
8.8
with effect from the date of such transfer or succession.
(4) Notwithstanding anything contained in sub-sections (1) and (3),

in a case of transfer pursuant to sanction of a scheme or an
arrangement for amalgamation or, as the case may be, de-
merger of two or more companies pursuant to an order of a High
Court, Tribunal or otherwise, the transferee shall be liable to be
registered, with effect from the date on which the Registrar of
Companies issues a certificate of incorporation giving effect to
such order of the High Court or Tribunal.
Explanation––For the purposes of this section, ––
(i) the expression “aggregate turnover” shall include all

supplies made by the taxable person, whether on his
own account or made on behalf of all his principals
(iii) the expression “special category States” shall mean the

States as specified in sub-clause (g) of clause (4) of
article 279A of the Constitution except the State of
Jammu and Kashmir and States of Arunachal Pradesh,
Assam, Himachal Pradesh, Meghalaya, Sikkim and
Uttarakhand.
ANALYSIS
(i) Threshold limit for registration
 Every supplier of goods or services or both is required to obtain
registration
 in the State or the Union territory from where he makes the taxable
supply
 if his aggregate turnover exceeds specified threshold limit in a FY.

REGISTRATION 7.9
Aggregate Turnover
Before, we study what is the applicable threshold
limit for various States/ UTs, let us first
understand the concept of aggregate turnover.
Aggregate turnover is a crucial parameter for
deciding the eligibility of a supplier to avail the
benefit of threshold exemption from registration,
eligibility for composition scheme [Discussed in
Chapter 3 – Charge of GST].
‘Turnover’ in common parlance is the total
volume of business. The term ‘aggregate
turnover’ as defined under section 2(6) of the CGST Act has been presented
in the diagrammatic form as follows:
Aggregate turnover
Includes Excludes
Value of all outward supplies
--Taxable supplies --CGST/ SGST/ UTGST/ IGST/
--Exempt supplies Cess
--Exports --Value of inward supplies on
--Inter-State supplies which tax is payable under
of persons having the same PAN reverse charge.
be computed on all India basis.
Section 2(6) [definition of ‘aggregate turnover’ as given above] read with

explanation (i) to section 22 has been analysed as follows:
(A) Aggregate turnover to exclude inward supplies on which tax is
payable under reverse charge: It may be noted that the inward
supplies on which recipient is required to pay tax under Reverse
Charge Mechanism (RCM) do not form part of the ‘aggregate
turnover’. The law stipulates certain supplies like, Goods Transport
Agency services, legal services, sponsorship services, to name a few,
where the recipient of service is made to pay the tax – Discussed in
detail in Chapter 3 – Charge of tax. The value of such supplies would
not form part of the ‘aggregate turnover’ of recipient of such supplies.

7.10 INDIRECT TAXES
8.10
Outward Supplies taxable

under reverse charge would
continue to be part of the
‘aggregate turnover’ of the
supplier of such supplies
(1) Raghubir Private Ltd. pays GST on sitting fees paid to its
directors for the services rendered by them, under reverse
charge. Value of services provided by the directors to
Raghubir Private Ltd. will form part of the aggregate turnover of the
directors and not of Raghubir Private Ltd.
(B) Aggregate turnover excludes the element of CGST, SGST, UTGST,
and IGST and compensation cess.
(C) Aggregate turnover to include total turnover of all branches
under same PAN
Aggregate turnover is calculated by taking together the value in
respect of the activities carried out on all-India basis.
(2) A dealer ‘X’ has two offices – one in Delhi and another in
Haryana. In order to determine whether ‘X’ is liable for
registration, turnover of both the offices would be taken into
account and only if the same exceeds the applicable threshold limit, X is
liable for registration.
(D) Value of exported goods/services, exempted goods/services,
inter-State supplies between distinct persons having same PAN,
to be included in aggregate turnover.
(3) Madhur Oils, Punjab, is engaged in supplying machine oil
as well as petrol. Supply of petrol is not leviable to GST, but
supply of machine oil is taxable. In order to determine
whether Madhur Oils is liable for registration, turnover of
both non-taxable as well as taxable supplies would be taken into account
and if the same exceeds the applicable threshold limit, Madhur Oils is
liable for registration.

REGISTRATION 7.11
(E) Aggregate turnover to include all supplies made by the taxable

person, whether on his own account or made on behalf of all his
principals.
(4) Mohini Enterprises has appointed M/s Bestfords &
Associates as its agent. M/s Bestfords & Associates makes
supply of goods on its own account as well as on behalf of
Mohini Enterprises.
All the supplies of goods made by M/s Bestfords & Associates as agent
of Mohini Enterprises as well as on its own account will be included in the
aggregate turnover of M/s Bestfords & Associates.
(F) ‘Aggregate turnover’ Vs. ‘Turnover in a State’: The aggregate
turnover is different from turnover in a State. The former is used for
determining the threshold limit for registration and eligibility for
composition scheme [Discussed in Chapter 3 – Charge of GST].
However, once a person is eligible for composition levy, the amount
payable under composition levy would be calculated as a specified %
of ‘turnover in the State/UT’.
Applicable threshold limit
The threshold limit prescribed under section 22(1) is ` 20 lakh in a FY, i.e.
every supplier, whose aggregate turnover in a financial year exceeds ` 20
lakh, is liable to be registered under GST in the State/ Union territory from
where he makes the taxable supply of goods and/or services.
However, the limit of ` 20 lakh will be reduced to ` 10 lakh if the person is
carrying out business in Special Category States. As per Article 279A(4)(g)
of the Constitution, there are 11 Special Category States, namely, States of
Arunachal Pradesh, Assam, Jammu and Kashmir 2, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.
However, as per the explanation (iii) to section 22, for the purposes of
registration, only Mizoram, Tripura, Manipur and Nagaland are Special
Category States. Therefore, the threshold limit ` 10 lakh is applicable for
Mizoram, Tripura, Manipur and Nagaland.
2
The erstwhile State of Jammu and Kashmir has been reorganised into the Union territory of
Jammu and Kashmir (with Legislature) and Union territory of Ladakh vide the Jammu and
Kashmir Reorganisation Act, 2019.

7.12 INDIRECT TAXES
8.12
If a person with places of business in

different States across India has one
branch in a Special Category State
from which it makes a taxable supply,
the threshold limit for GST
registration will be reduced to ` 10
lakh.
Government is empowered to enhance the threshold limit of ` 20 lakh

upto ` 40 lakh for a supplier engaged exclusively in the supply of
goods, at the request of a State and on the recommendations of the
Council. This shall be subject to such conditions and limitations, as
may be notified.
For the purposes of section 22(1), a person shall be considered to be
engaged exclusively in the supply of goods even if he is engaged in
exempt supply of services provided by way of extending deposits, loans
or advances in so far as the consideration is represented by way of
interest or discount.
Further, Notification No. 10/2019 CT dated 07.03.2019 exempts any
person who is engaged in exclusive supply of goods and whose
aggregate turnover in the financial year does not exceed ` 40 lakh,
from registration requirement.
Exceptions to this exemption are as follows:
(a) Persons required to take compulsory registration under section 24 of
the CGST Act.
(b) Persons engaged in making supplies of ice cream and other edible ice,
whether or not containing cocoa [2105 00 00], Pan masala [2106 90
20] and all goods of Chapter 24, i.e. Tobacco and manufactured
tobacco substitutes.
(c) Persons engaged in making intra-State supplies in the States of
Arunachal Pradesh, Uttarakhand, Meghalaya, Sikkim, Telangana,
Puducherry and Special Category States as per section 22 [Nagaland,

REGISTRATION 7.13
Mizoram, Manipur, Tripura]. Inter-State supplies of goods are

nevertheless liable to compulsory registration and are already covered
in exception (a) above.
(d) Person who has opted for voluntary registration or such registered
persons who intend to continue with their registration under the CGST
Act.
In view the above discussion, the registration requirements under GST can
be summarised as follows:
Threshold limit for persons

engaged
exclusively in exclusively in
supply of supply of
goods services/ both
goods &
services
States/UTs other Puducherry ` 20 lakh ` 20 Lakh

than Special
Category States Telangana ` 20 lakh ` 20 Lakh
Others ` 40 lakh ` 20 Lakh
Special Special Manipur ` 10 lakh ` 10 Lakh

Category Category
States/ States as Mizoram ` 10 lakh ` 10 Lakh
UTs as per Nagaland ` 10 lakh ` 10 Lakh
per section
Constitu 22 Tripura ` 10 lakh ` 10 Lakh
tion
Other Jammu and ` 40 lakh ` 20 Lakh
States/U Kashmir
Ts
Assam ` 40 lakh ` 20 Lakh
Himachal ` 40 lakh ` 20 Lakh

Pradesh
Arunachal ` 20 Lakh ` 20 Lakh

Pradesh

7.14 INDIRECT TAXES
8.14
Meghalaya ` 20 Lakh ` 20 Lakh
Sikkim ` 20 Lakh ` 20 Lakh
Uttarakhand ` 20 Lakh ` 20 Lakh
States with threshold States/UTs with States/UTs with

limit of ` 10 lakh for threshold limit of ` 20 threshold limit of ` 20
both goods and lakh for both goods lakh for services and
services and services ` 40 lakh for goods**
Arunachal
Jammu and
Manipur Pradesh
Kashmir
Meghalaya
Mizoram Assam
Sikkim
Uttarakhand Himachal
Nagaland
Pradesh
Puducherry
Tripura All other States
Telangana
**persons engaged exclusively in intra-State supply of goods

(5) Prithiviraj of Assam is exclusively engaged in intra-State supply
of shoes. His aggregate turnover in the current financial year is
` 22 lakh. In view of the discussion in the above paras, the
applicable threshold limit for registration for Prithviraj in the given case is ` 40
lakh. Thus, he is not liable to get registered under GST.
If in above example, all other things remaining the same, Prithiviraj is
exclusively engaged in supply of pan masala instead of shoes, he will not be
eligible for higher threshold limit of ` 40 lakh and the applicable threshold limit
for registration in that given case will be ` 20 lakh. Thus, Prithiviraj will be
liable to get registered under GST.
If instead of pan masala, Prithiviraj is exclusively engaged in supply of taxable
services, the applicable threshold limit for registration will still be ` 20 lakh.
Thus, Prithiviraj will be liable to get registered under GST.

REGISTRATION 7.15
Further, if Prithiviraj is engaged in supply of both taxable goods and services,

the applicable threshold limit for registration will be ` 20 lakh only. Thus,
Prithiviraj will be liable to get registered under GST.
(6) Shivaji of Telangana is exclusively engaged in intra-State supply

of toys. Its aggregate turnover in the current financial year is ` 22
lakh. Since Shivaji is making taxable supplies from Telangana, he will
not be eligible for higher threshold limit available in case of exclusive supply of
goods. The applicable threshold limit for registration for Shivaji in the given
case is ` 20 lakh. Thus, he is liable to get registered under GST.
If in above example, all other things remaining the same, Shivaji is exclusively
engaged in supply of taxable services instead of toys, the applicable threshold
limit for registration will still be ` 20 lakh. Thus, Shivaji will be liable to get
registered under GST.
Further, if Shivaji is engaged in supply of both taxable goods and services, the
applicable threshold limit for registration will be ` 20 lakh only. Thus, Shivaji
will be liable to get registered under GST.
(7) Ashoka of Manipur is exclusively engaged in intra-State supply

of paper. Its aggregate turnover in the current financial year is
` 12 lakh. Since Ashoka is making taxable supplies from Manipur
which is a Special Category State, the applicable threshold limit for registration
for Ashoka in the given case is ` 10 lakh. Thus, he is liable to get registered
under GST.
If in above example, all other things remaining the same, Ashoka is exclusively
engaged in supply of taxable services instead of paper, the applicable
threshold limit for registration will still be ` 10 lakh. Thus, Ashoka will be liable
to get registered under GST.
Further, if Ashoka is engaged in supply of both taxable goods and services, the
applicable threshold limit for registration in that given case will be ` 10 lakh
only. Thus, Ashoka will be liable to get registered under GST.
(8) Raghav of Assam is exclusively engaged in intra-State supply of

readymade garments. Its turnover in the current FY from Assam
showroom is ` 28 lakh. It has another showroom in Tripura with a
turnover of ` 11 lakh in the current FY. Since Raghav is engaged in supplying
garments from a Special Category State as per section 22, the applicable

7.16 INDIRECT TAXES
8.16
threshold limit for him gets reduced to ` 10 lakh. Further, Raghav is liable to
get registered under GST in both Assam and Tripura on his aggregate turnover
crossing the threshold limit of ` 10 lakh.
(ii) Registration required only for a place of business from where taxable
supply takes place
A person is required to obtain registration with respect to his each place of
business in India from where a taxable supply has taken place. However, a
supplier is not liable to obtain registration in a State/UT from where he
makes an exempt/non-taxable supply.
Further, the threshold limit of a person having places of business in more
than one State/UT in India gets reduced to ` 10 lakh only when such person
makes taxable supplies of goods or services or both from any of the
Special Category States as per section 22. However, in case he makes
exempt/non-taxable supply from a Special Category State and taxable
supplies from a State other than Special Category State, the threshold limit
shall not be so reduced.
(9) Uday Enterprises is engaged in supply of taxable goods in
Maharashtra. It also supplies alcoholic liquor for human
consumption from Nagaland. Its turnover in the current financial
year is ` 34 lakh in Maharashtra and ` 8 lakh in Nagaland.
Since Uday Enterprises is exclusively engaged in making taxable supplies of
goods from Maharashtra, the applicable threshold limit for obtaining
registration is ` 40 lakh. However, the threshold limit will not be reduced to
` 10 lakh in this case, as supply of alcoholic liquor for human consumption
from Nagaland (one of the Special Category States) are non-taxable supplies 3.
In the given case, since the aggregate turnover of Uday Enterprises exceeds the
applicable threshold limit of ` 40 lakh, it is liable to obtain registration. It will
obtain registration in Maharashtra, but is not required to obtain registration in
Nagaland as he is not making any taxable supplies from said State.
(iii) Person liable for registration in case of transfer of business
Where a business is transferred, whether on account of
succession/any other reason [including transfer/change in
the ownership of business due to death of the sole
3
in terms of section 9(1)

REGISTRATION 7.17
proprietor 4], to another person as a going concern, the

transferee/successor, is to be registered with effect from the date of such
transfer/succession. Where the business is transferred, pursuant to sanction
of a scheme/ arrangement for amalgamation/ de-merger of two or more
companies, pursuant to an order of a High Court/Tribunal, the transferee is
to be registered with effect from the date on which the Registrar of
Companies issues a certificate of incorporation giving effect to such order.
5. COMPULSORY REGISTRATION IN CERTAIN CASES

[SECTION 24]
As we have seen above that a supplier is liable to be registered under GST
in the State/ Union territory from where he makes the taxable supply of
goods and/or services only if his aggregate turnover in a financial year
exceeds the applicable threshold limit. However, there are certain cases
wherein a supplier is mandatorily required to obtain registration irrespective
of the quantum of his aggregate turnover. In other words, these are the
cases wherein a supplier is compulsorily required to obtain registration even
though his aggregate turnover does not exceed the applicable threshold
limit.
However, certain exemptions from registration have also been provided
under section 23. These exceptions have been incorporated briefly at the
relevant places in the discussion under this heading in order to provide a
holistic picture. The exceptions have also been explained in detail in the
next heading 6. Persons not liable for registration.
The category of persons requiring compulsory registration under GST have
been enlisted below:
(1) Persons making any inter-State taxable supply. However, threshold
limit of ` 20 lakh (` 10 lakh in case of Special Category States of Mizoram,
Tripura, Manipur and Nagaland) is available in case of inter-State supply
of taxable services and of notified handicraft goods.
(2) Casual taxable persons (CTP) making taxable supply. However,
threshold limit of ` 20 lakh (` 10 lakh in case of Special Category States of
Mizoram, Tripura, Manipur and Nagaland) is available in case of CTP
who is making inter-State taxable supplies of notified handicraft goods
4
clarified vide Circular No. 96/15/2019 GST dated 28.03.2019

7.18 INDIRECT TAXES
8.18
and availing the benefit of exemption from registration as mentioned in
point (i) above.
(3) Persons who are required to pay tax under reverse charge on
inward supplies received. However, persons engaged exclusively in
making outward supplies, tax on which is liable to be paid on reverse
charge basis are exempt from registration.
(4) Non-resident taxable persons (NRTP) making taxable supply.
(5) E-commerce:
(i) Every ECO (Electronic Commerce Operator) who is required to
collect tax at source under section 52, ECO means any person
who owns, operates or manages digital or electronic facility or
platform for electronic commerce.
(ii) Persons who supply goods and/or services, other than supplies
specified under section 9(5), through such ECO who is required
to collect tax at source under section 52. However, threshold
limit of ` 20 lakh (` 10 lakh in case of Special Category States of
Mizoram, Tripura, Manipur and Nagaland) is available in case of
suppliers supplying services through ECO.
(6) Persons who are required to deduct tax under section 51, whether or
not separately registered under this Act.
(7) Persons who make taxable supply of goods or services or both on
behalf of other taxable persons whether as an agent or otherwise.
(8) Input Service Distributor, whether or not separately registered under this
Act.
(9) Every person supplying online information and data base access or
retrieval (OIDAR) services from a place outside India to a person in
India, other than a registered person 5;
(10) Persons who are required to pay tax under reverse charge under
section 9(5) and
5The provisions relating to tax deduction at source under section 51, collection of tax at source under
section 52, Input Service Distributor, electronic commerce operators and OIDAR services will be
discussed in detail at the Final Level. Hence, text shaded in green here is only for the purpose of
knowledge of the students.

REGISTRATION 7.19
(11) such other person or class of persons as may be notified by the

Government on the recommendations of the Council.
Note: Concept of CTP and NRTP is explained subsequently in this chapter.
ILLUSTRATION 1
Examine, with reason, whether registration is required, under CGST Act, in the
following independent cases:
(i) Aadhav Computers of Gujarat is providing computer maintenance service.
Aggregate turnover of Aadhav Computers is ` 15 lakh which comprises both
inter-State and intra-State supply.
(ii) Soft Wings of West Bengal, exclusively trading in garments, supplies its
taxable goods in various States of India from its outlet in West Bengal.
Aggregate turnover of Soft Wings is ` 35 lakh.
ANSWER
(i) Registration is compulsory for suppliers engaged in inter-State supply.
However, as per Notification No. 10/2017 IT dated 13.10.2017, threshold
exemption of ` 20 lakh [` 10 lakh in case of Special Category States of
Mizoram, Tripura, Manipur and Nagaland] is available in case of inter-State
supply of taxable services.
Therefore, Aadhav Computers (aggregate turnover ` 15 lakh) is not required
to obtain registration even though it is engaged in inter-State supply of
taxable services.
(ii) The threshold limit for registration in the State of West Bengal for the
persons engaged exclusively in supply of goods, is ` 40 lakh. However,
registration is compulsory if the supplier is engaged inter-State supply of
goods irrespective of the quantum of aggregate turnover. The threshold
exemption is not available in case of inter-State supply of taxable goods.
Thus, Soft Wings is required to obtain registration.
6. PERSONS NOT LIABLE FOR REGISTRATION

[SECTION 23]
(i) Persons not liable to registration
Section 23 lists the persons who are not liable to registration. Thus, the
persons so listed will not be the ‘taxable persons’.

7.20 INDIRECT TAXES
8.20
(A) Person engaged exclusively in the business of supplying goods and
/or services not liable to tax/wholly exempt from tax: As per
section 23, any person engaged exclusively in the business of supplying
goods or services or both that are not liable to tax or wholly exempt
from tax under CGST Act/IGST Act shall not be liable to registration.
This provision can be understood with the help of following examples:
(10) Madhur Oils, Punjab, is exclusively engaged in supplying
petrol. Supply of petrol is not leviable to GST. Thus, Madhur Oils
is not liable for registration as it is engaged exclusively in
supplying goods not leviable to tax.
(11) Bhavyajyoti Foundation, a charitable trust registered under
section 12AA of the Income-tax Act, 1961, is exclusively engaged
in supply of services by way of charitable activities. Services by an
entity registered under section 12AA of the Income-tax Act, 1961 by way of
charitable activities are exempt from GST. Thus, Bhavyajyoti Foundation is
not liable for registration as it is exclusively engaged in supplying services
exempt from tax.
(B) An agriculturist, to the extent of supply of produce out of
cultivation of land: An agriculturist to the extent of supply of produce
out of cultivation of land is also not liable to registration. The term
agriculturist has been defined under section 2(7) of
the CGST Act as an individual/Hindu Undivided Family
(HUF) who undertakes cultivation of land—
(a) by own labour, or
(b) by the labour of family, or
(c) by servants on wages payable in cash or kind or
by hired labour under personal supervision or the
personal supervision of any member of the family.
From the above definition, it is clear that the benefit of
not being liable to registration is only restricted to the agriculturists who
are individuals or HUFs. Further, if an agriculturist is also engaged in
making any supply other than supply of produce out of cultivation of land,
he shall be liable to registration based on applicable threshold limit.
(12) Deshbandhu is an agriculturist engaged in cultivation of
wheat in his field in the State of Punjab. He was exclusively
engaged in supply of wheat cultivated in his field in the previous

REGISTRATION 7.21
year. Thus, he was not liable to registration as he was exclusively engaged

in supply of produce out of cultivation of land.
In the current year, he decides to start trading in rice apart from supplying
his wheat produce. His turnover in the current year is ` 32 lakh from supply
of wheat produced and ` 9 lakh from trading of rice.
Since he is engaged in trading of rice also, he is not covered under section 23
above. The threshold limit for registration applicable to a person exclusively
engaged in supply of goods in the State of Punjab is ` 40 lakh. The aggregate
turnover of Deshbandhu in the current year is ` 41 lakh [` 32 lakh + ` 9 lakh]
which exceeds the threshold limit. Thus, he will be liable to registration.
(ii) Specified category of persons notified by the Government exempted
from obtaining registration
Following category of persons have been notified as being exempted from
obtaining registration under GST law:
A. Persons making only reverse charge supplies
Persons who are only engaged in making supplies of taxable goods or
services or both, the total tax on which is liable to be paid on reverse
charge basis by the recipient of such goods or services or both under
section 9(3) have been exempted from obtaining registration
[Notification No. 5/2017 CT dated 19.06.2017].
(13) Manikaran Transporters is a Goods Transport Agency
(GTA) engaged exclusively in supplying GTA services liable to
tax under reverse charge [since tax is being paid on GTA
services @ 5% in the given case]. Thus, it is exempt from registration as
it is engaged exclusively in making supplies, tax on which is liable to be
paid on reverse charge basis.
Further, Manikaran Transporters supplies said service to Diwakar
Manufacturing Pvt. Ltd. whose aggregate turnover does not exceed the
applicable threshold limit. However, since Diwakar Manufacturing Pvt. Ltd.
has to pay tax on GTA services [@ 5%] under reverse charge, it is required
to obtain registration mandatorily irrespective of its aggregate turnover.
B. Persons making inter-State supplies of taxable services up to ` 20 lakh
The persons making inter-State supplies of taxable services and having an
aggregate turnover, to be computed on all India basis, not exceeding an
amount of ` 20 lakh in a financial year have been exempted from obtaining
compulsory registration. However, the aggregate value of such supplies,

7.22 INDIRECT TAXES
8.22
computed on all India basis, should not exceed an amount of ` 10 lakh in
case of Special Category States of Mizoram, Tripura, Manipur and Nagaland
[Notification No. 10/2017 IT dated 13.10.2017].
(14) Dhola & Co., located in Delhi, is engaged in supply of
taxable goods 6 in the neighbouring States of Punjab and
Haryana. Its aggregate turnover in current FY is ` 10 lakh. Since
it is engaged in making inter-State taxable supply of goods, it is required
to register mandatorily under GST irrespective of its aggregate turnover.
However, if in the above case, Dhola & Co. is engaged in inter- State
supply of taxable services instead of goods, it will be eligible for exemption
from registration till its aggregate turnover does not exceed ` 20 lakh.
C. Persons making inter-State taxable supplies of notified handicraft
goods up to ` 20,00,000
As we have seen earlier that as per section 24

read with Notification No. 10/2017 IT, a person
making inter-State supplies of goods is liable to
be registered compulsorily under GST
irrespective of the threshold limit.
However, in the following cases, persons making inter-State supplies

of goods have been exempted from obtaining registration:
(a) Persons making inter-State taxable supplies of notified 7

handicraft goods.
6
other than notified handicraft goods
7
Handicraft goods referred herein are goods as defined and notified in Notification No. 21/2018 CT
(R) dated 26.07.2018. This notification notifies the handicraft items which are eligible for
concessional rate of tax, for instance, handcrafted candles, articles made of paper mache, coir
articles, handbags including pouches and purses; jewellery box, hand embroidered articles, art ware
of iron/aluminium, etc. These examples are only for the purpose of knowledge and are not relevant
for examination purposes. Handicraft goods are defined under said notification as goods
predominantly made by hand even though some tools or machinery may also have been used in the
process; such goods are graced with visual appeal in the nature of ornamentation or in-lay work or
some similar work of a substantial nature; possess distinctive features, which can be aesthetic,
artistic, ethnic or culturally attached and are amply different from mechanically produced goods of
similar utility.

REGISTRATION 7.23
(b) Persons making inter-State taxable supplies of notified

products 8 , when made by craftsmen predominantly by hand
even though some machinery may also be used in the process.
Conditions to be fulfilled:
1. The aggregate value of such supplies, to be computed on all
India basis, does not exceed an amount of ` 20 lakh [` 10 lakh in
case of Special Category States of Mizoram, Tripura, Manipur
and Nagaland] in a FY.
2. Such persons have obtained a PAN and have generated an
se-way bill [Notification No. 3/2018 IT dated 22.10.2018].
(15) Ariza Pvt. Ltd., located in Madhya Pradesh, is a supplier of
taxable and notified handicraft goods. It supplies these goods
in the neighbouring States of Uttar Pradesh and Orissa. Its
aggregate turnover in the month of April is ` 15 lakh. Although Ariza Pvt.
Ltd. is engaged in making inter-State supplies of taxable goods, it is not
liable to obtain registration till its aggregate turnover does not exceed
` 20 lakh as it has availed the exemption from registration under
Notification No. 03/2018 IT 9.
D. Casual Taxable Persons making inter-State taxable supplies of
notified handicraft goods up to ` 20 lakh
As we have seen earlier that as per section 24, a CTP is liable to be
registered compulsorily under GST irrespective of the threshold limit.
However, following categories of CTPs have been exempted from
obtaining registration:
(a) CTPs making inter-State taxable supplies of notified handicraft
goods, [as referred in Point C. above] or
(b) CTPs making inter-State taxable supplies of notified products
[as referred in Point C. above], when made by the craftsmen
8
Some of the notified products are leather articles, carved wood products, wood turning and
lacquer ware, bamboo products, textiles hand printing, theatre costumes, musical instruments,
dolls and toys, etc. These examples are only for the purpose of knowledge and are not relevant for
examination purpose.
9
Subject to fulfilment of other conditions prescribed under said notification.

7.24 INDIRECT TAXES
8.24
predominantly by hand even though some machinery may also
be used in the process.
Conditions to be fulfilled:
1. CTPs are availing benefit of Notification No. 03/2018 IT dated
22.10.2018 [discussed above].
2. The aggregate value of such supplies, to be computed on all
India basis, does not exceed an amount of ` 20 lakh [` 10 lakh in
case of Special Category States of Mizoram, Tripura, Manipur
and Nagaland] in a FY.
3. Such persons have obtained a PAN and have generated an
e-way bill [Notification No. 56/2018 CT dated 23.10.2018].
Liability to register in respect of services provided by the commission agent
for sale/ purchase of agricultural produce
Circular No. 57/31/2018 GST dated 04.09.2018, inter alia, clarifies as follows:
Mr. A sells agricultural produce by utilizing the services of Mr. B who is a
commission agent as per the Agricultural Produce Marketing Committee Act
(APMC Act) of the State 10. Mr. B identifies the buyers and sells the agricultural
produce on behalf of Mr. A for which he charges a commission from Mr. A. In
cases where the invoice is issued by Mr. B to the buyer, Mr. B is an agent as
covered under Para 3. of Schedule I to the CGST Act. Hence, in such cases, the
services supplied by commission agent Mr. B on behalf of the principal without
consideration shall be deemed to be a supply – Concept of Deemed Supply under
Schedule-I has been discussed in detail in Chapter 2 – Supply under GST.
The registration requirements of the commission agents in such cases have been
examined and clarified as follows:
(i) Since the services provided by the commission agent for sale or purchase of
agricultural produce are exempt from GST vide Notification No. 12/2017 CT
(R) dated 28.06.2017 [Discussed in Chapter 4 – Exemptions from GST], such
commission agents (even when they qualify as agent under Schedule I) are
10
As per the APMC Act, the commission agent is a person who buys or sells the agricultural
produce on behalf of his principal, or facilitates buying and selling of agricultural produce on
behalf of his principal and receives, by way of remuneration, a commission or percentage upon
the amount involved in such transaction.

REGISTRATION 7.25
not liable to be registered in accordance with provisions of section 23(1)(a) [as

discussed above].
(ii) As we have already seen, as per section 24, a person is liable for mandatory
registration if he makes taxable supply of goods or services or both on
behalf of other taxable persons.
Accordingly, a commission agent will be liable to get mandatorily registered
under this provision only when both the following conditions are satisfied:
(a) the principal should be a taxable person; and
(b) the supplies made by the commission agent should be taxable.
However, generally, a commission agent under APMC Act makes supplies on
behalf of an agriculturist who is not a taxable person if he supplies produce
out of cultivation of land [as seen above].
Thus, a commission agent, who is making supplies on behalf of non-taxable
person [viz. agriculturist], is not liable for compulsory registration under this
provision.
(iii) However, where a commission agent is liable to pay tax under reverse
charge, such an agent will be required to get registered compulsorily (We
have already seen under previous heading that persons liable to pay tax
under reverse charge are required to obtain registration mandatorily).
The provisions of section 23 can be summarized in the following diagram:
Person engaged exclusively in the Person engaged exclusively in the

business of supplying goods/ services/ business of supplying goods/ services/
both not liable to tax both wholly exempt from tax
Persons not liable for

registration
Specified category of persons notified

Agriculturist to the extent of supply of
by the Government on GST Council
produce out of cultivation of land
recommendation
ILLUSTRATION 2
Examine whether the liability to register compulsorily under section 24 arises in
each of the independent cases mentioned below:

7.26 INDIRECT TAXES
8.26
(1) Meenu, a supplier in Maharashtra, is exclusively engaged in supply of
potatoes produced out of cultivation of her own land, within Maharashtra and
also outside Maharashtra.
(2) Jinu Oils, Gujarat, is engaged in supplying machine oil as well as petrol.
Further, it provides services of refining of oil to customers. Total turnover of
supply of machine oil is ` 10 lakh, supply of petrol is ` 5 lakh and supply of
services is ` 6 lakh.
(3) Tilu is working as an agent, he is supplying taxable goods as an agent of Tiku
(who is registered taxable person) and its aggregate turnover does not exceed
` 20 lakh during the financial year.
ANSWER
(1) Section 24 of the CGST Act provides that persons making any inter-State
taxable supply of goods are required to obtain registration compulsorily
under GST laws irrespective of the quantum of aggregate turnover.
However, as per section 23, an agriculturist, to the extent of supply of
produce out of cultivation of land, is not liable to registration.
Meenu is exclusively engaged in cultivation and supply of potatoes. Thus,
she is not liable to registration irrespective of the fact that she is engaged in
making inter-State supply of goods. Further, Meenu will not be liable to
registration, in the given case, even if her turnover exceeds the threshold
limit.
(2) Section 24 of the CGST Act specifies the categories of persons who are
required to be mandatorily registered under GST irrespective of the
quantum of their aggregate turnover.
In the given case, Jinu Oils does not fall in any of the specified categories.
Therefore, it is not required to obtain registration compulsorily under GST.
However, as per section 22 read with Notification No. 10/2019 CT dated
07.03.2019, a supplier is liable to be registered in the State/Union territory
from where he makes a taxable supply of goods and/or services, if his
aggregate turnover in a financial year exceeds the threshold limit. The
threshold limit for a person making supply of both goods and services is `
10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland and ` 20
lakh for the rest of India. Thus, the applicable threshold limit for the State of
Gujarat is ` 20 lakh for supply of both goods and services. Further,
aggregate turnover includes exempted turnover of goods or services.

REGISTRATION 7.27
Accordingly, Jinu Oils is liable obtain registration since its aggregate

turnover [` 21 lakh (including turnover of exempt supply of petrol)] exceeds
the threshold limit of ` 20 lakh.
(3) Section 24 of the CGST Act provides that persons who make taxable supply
of goods and/or services on behalf of other taxable persons whether as an
agent or otherwise are required to obtain registration compulsorily under
GST laws irrespective of the quantum of aggregate turnover.
Therefore, Tilu will be mandatorily required to obtain registration.
7. PROCEDURE FOR REGISTRATION [SECTIONS 25,

26 & 27]
Section 25 Procedure for registration
(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.
Provided that a casual taxable person or a non-resident taxable
person shall apply for registration at least five days prior to the
commencement of business.
Provided further that a person having a unit, as defined in the
Special Economic Zones Act, 2005, in a Special Economic Zone or
being a Special Economic Zone developer shall have to apply for
a separate registration, as distinct from his place of business
located outside the Special Economic Zone in the same State or
Union territory.
(2) A person seeking registration under this Act shall be granted a

single registration in a State or Union territory.
Provided that a person having multiple places of business in a
State or Union territory may be granted a separate registration

7.28 INDIRECT TAXES
8.28
for each such place of business, subject to such conditions as
may be prescribed.
(3) A person, though not liable to be registered under section 22 or

section 24 may get himself registered voluntarily, and all
provisions of this Act, as are applicable to a registered person,
shall apply to such person.
(4) A person who has obtained or is required to obtain more than one
registration, whether in one State or Union territory or more than
one State or Union territory shall, in respect of each such registration,
be treated as distinct persons for the purposes of this Act
(5) Where a person who has obtained or is required to obtain

registration in a State or Union territory in respect of an
establishment, has an establishment in another State or Union
territory, then such establishments shall be treated as
establishments of distinct persons for the purposes of this Act.
(6) Every person shall have a Permanent Account Number issued

under the Income- tax Act, 1961 in order to be eligible for grant
of registration:
Provided that a person required to deduct tax under section 51
may have, in lieu of a Permanent Account Number, a Tax
Deduction and Collection Account Number issued under the said
Act in order to be eligible for grant of registration.
(6A) Every registered person shall undergo authentication, or

furnish proof of possession of Aadhaar number, in such
form and manner and within such time as may be
prescribed.
Provided that if an Aadhaar number is not assigned to the
registered person, such person shall be offered alternate
and viable means of identification in such manner as
Government may, on the recommendations of the Council,
prescribe.
Provided further that in case of failure to undergo
authentication or furnish proof of possession of Aadhaar
number or furnish alternate and viable means of

REGISTRATION 7.29
identification, registration allotted to such person shall be

deemed to be invalid and the other provisions of this Act
shall apply as if such person does not have a registration.
(6B) On and from the date of notification, every individual shall,

in order to be eligible for grant of registration, undergo
authentication, or furnish proof of possession of Aadhaar
number, in such manner as the Government may, on the
recommendations of the Council, specify in the said
notification.
Provided that if an Aadhaar number is not assigned to an
individual, such individual shall be offered alternate and
viable means of identification in such manner as the
Government may, on the recommendations of the Council,
specify in the said notification.
(6C) On and from the date of notification, every person, other

than an individual, shall, in order to be eligible for grant of
registration, undergo authentication, or furnish proof of
possession of Aadhaar number of the Karta, Managing
Director, whole time Director, such number of partners,
Members of Managing Committee of Association, Board of
Trustees, authorised representative, authorised signatory
and such other class of persons, in such manner, as the
Government may, on the recommendation of the Council,
specify in the said notification
Provided that where such person or class of persons have
not been assigned the Aadhaar Number, such person or
class of persons shall be offered alternate and viable means
of identification in such manner as the Government may, on
the recommendations of the Council, specify in the said
notification.
(6D) The provisions of sub-section (6A) or sub-section (6B) or

sub-section (6C) shall not apply to such person or class of
persons or any State or Union territory or part thereof, as
the Government may, on the recommendations of the
Council, specify by notification.
Explanation—For the purposes of this section, the expression

7.30 INDIRECT TAXES
8.30
“Aadhaar number” shall have the same meaning as assigned
to it in clause (a) of section 2 of the Aadhaar (Targeted
Delivery of Financial and Other Subsidies, Benefits and
Services) Act, 2016
(7) Notwithstanding anything contained in sub-section (6), a non-

resident taxable person may be granted registration under sub-
section (1) on the basis of such other documents as may be
prescribed
(8) Where a person who is liable to be registered under this Act fails
to obtain registration, the proper officer may, without prejudice
to any action which may be taken under this Act or under any
other law for the time being in force, proceed to register such
person in such manner as may be prescribed
(9) Notwithstanding anything contained in sub-section (1),––
(a) any specialised agency of the United Nations Organisation

or any Multilateral Financial Institution and Organisation
notified under the United Nations (Privileges and
Immunities) Act, 1947, Consulate or Embassy of foreign
countries ; and
(b) any other person or class of persons, as may be notified by

the Commissioner,
shall be granted a Unique Identity Number in such manner and

for such purposes, including refund of taxes on the notified
supplies of goods or services or both received by them, as may be
prescribed.
(10) The registration or the Unique Identity Number shall be granted

or rejected after due verification in such manner and within such
period as may be prescribed
(11) A certificate of registration shall be issued in such form and with

effect from such date as may be prescribed
(12) A registration or a Unique Identity Number shall be deemed to

have been granted after the expiry of the period prescribed under

REGISTRATION 7.31
sub-section (10), if no deficiency has been communicated to the

applicant within that period.
Section 26 Deemed registration
(1) The grant of registration or the Unique Identity Number under

the State Goods and Services Tax Act or the Union Territory
Goods and Services Tax Act shall be deemed to be a grant of
registration or the Unique Identity Number under this Act subject
to the condition that the application for registration or the
Unique Identity Number has not been rejected under this Act
within the time specified in sub-section (10) of section 25.
(2) Notwithstanding anything contained in sub-section (10) of

section 25, any rejection of application for registration or the
Unique Identity Number under the State Goods and Services Tax
Act or the Union Territory Goods and Services Tax Act shall be
deemed to be a rejection of application for registration under
this Act.
Section 27 Special provisions relating to casual taxable person and

(1) The certificate of registration issued to a casual taxable person or

a non- resident taxable person shall be valid for the period
specified in the application for registration or ninety days from
the effective date of registration, whichever is earlier and such
person shall make taxable supplies only after the issuance of the
certificate of registration.
Provided that the proper officer may, on sufficient cause being
shown by the said taxable person, extend the said period of
ninety days by a further period not exceeding ninety days.
(2) A casual taxable person or a non-resident taxable person shall,

at the time of submission of application for registration under
sub-section (1) of section 25, make an advance deposit of tax in
an amount equivalent to the estimated tax liability of such
person for the period for which the registration is sought.
Provided that where any extension of time is sought under sub-
section (1), such taxable person shall deposit an additional

7.32 INDIRECT TAXES
8.32
amount of tax equivalent to the estimated tax liability of such
person for the period for which the extension is sought.
(3) The amount deposited under sub-section (2) shall be credited to

the electronic cash ledger of such person and shall be utilised in
the manner provided under section 49.
ANALYSIS
Procedure for registration is governed by section 25 of the CGST Act read with
relevant CGST Rules. Relevant provisions of CGST Rules have been incorporated
at the relevant places. Further, special provisions have been provided for
registration of casual taxable person and non-resident taxable person under
section 27. Concept of deemed registration has been elaborated under section
26. Under GST, the application for registration has to be submitted electronically
at the GST Common Portal – www.gst.gov.in, duly signed or verified.
A large number of forms/formats relating to registration have been prescribed in
the CGST Rules. For every process in the registration chain such as application for
registration, acknowledgment, query, rejection, registration certificate, show cause
notice for cancellation, reply, cancellation, amendment, field visit report etc., there
are separate standard formats 11. This makes the process uniform all over the
country. The decision-making process has also been expedited. Strict time-lines
have been stipulated for completion of different stages of registration process.
(i) Where and by when to apply for registration? [Section 25(1)]
Particulars Where When
Person who is liable to be in every such within 30 days from the

registered under section 22 State/UT in date on which he becomes
or section 24 which he is liable to registration
so liable
A casual taxable person or a at least 5 days prior to
11
Students are advised to go through various forms/formats relating to registration at
http://www.gst.gov.in. for knowledge purposes.

REGISTRATION 7.33
non-resident taxable person commencement of business
(16) Sugam Services Ltd. is engaged in taxable supply of services in

Delhi. The turnover of Sugam Services Ltd. exceeded ` 20 lakh on
1st November. It is liable to apply for registration by 1st December in
Delhi.
(ii) State-wise registration [Section 25(2) read with rule 11]
(A) One registration per State
 Registration needs to be taken State-wise, i.e. there is no
centralized registration under GST. A business entity having its
branches in multiple States will have to take separate State-wise
registration for its branches in different States.
 Further, within a State, an entity with different branches shall be
granted single registration wherein it can declare one place as
principal place of business (PPoB) and other branches as additional
places of business (APoB).
(B) Separate registration for different places of business within a
State/UT may be granted
 Although a taxpayer having multiple places of business in one
State is not mandatorily required to obtain separate registration
for each such place of business in the State, he has an option to
obtain independent registrations with respect to each such
separate place of business.
 However, separate registration for each place of business shall
be granted provided all separately registered places of business
of such person pay tax on supply of goods/services/both made
to another registered place of business, of such person and issue
a tax invoice/bill of supply, for such supply. Separate
registration application needs to be filed for each place of
business.
 A registered person opting to obtain separate registration for a
place of business shall submit a separate application in
Form GST REG 01 in respect of such place of business.

7.34 INDIRECT TAXES
8.34
 The provisions of rules 9 and 10 [Discussed in subsequent paras]
relating to verification and grant of registration shall mutatis
mutandis apply to an application submitted under this rule.
(17) Meethalal & Sons - a supplier in Maharshtra - has three
branches in Mumbai, Pune and Mahabaleshwar. Mumbai and
Pune branches are engaged in supply of garments and
Mahabaleshwar branch engaged in supply of shoes. Either it can obtain
single registration for Mahrashtra declaring one of the branches as PPoB
(let’s say Mumbai) and other two branches (Pune and Mahabaleshwar) as
APoB or it can obtain separate GST registration for each of the three
branches in Mumbai, Pune and Mahabaleshwar as separate places of
business.
In case Meethalal & Sons opts to have separate registrations for its all
three branches and Mumbai branch sends some garments [subject to
GST] for sale to Pune branch, Mumbai branch must raise a tax invoice
and pay tax on such transfer of garments to Pune branch.
(C) Composition levy in case of separate registration for multiple
places of business within a State/UT
 If a person is paying tax for one of his places of business under
normal scheme, he shall not pay tax under composition levy for any
other place of business.
 If one of the places of business [separately registered] of a
registered person becomes ineligible to pay tax under
composition levy, all other registered places of business of said
person would also become ineligible to pay tax under
composition levy.
 The provisions of rules 9 and 10 [Discussed in subsequent paras]
relating to verification and grant of registration shall mutatis
mutandis apply to an application submitted under this rule.
(iii) Voluntary registration [Section 25(3)]
A person who is not liable to be registered under section 22 or section 24
may get himself registered voluntarily. In case of voluntary registration, all
provisions of this Act, as are applicable to a registered person, shall apply to
voluntarily registered person. However, once a person obtains voluntary
registration, he has to pay tax even though his aggregate turnover does not
exceed ` 40 lakh/` 20 lakh/` 10 lakh, as the case may be.

REGISTRATION 7.35
Voluntary registration is usually obtained by the business for ensuring

seamless flow of credit to their customers.
(iv) Distinct Persons/ establishments of distinct persons [Section 25(4) & (5)]
A person who has obtained/ is required to obtain more than one
registration, whether in one State/ Union territory or more than one
State/Union territory shall, in respect of each such registration, be treated as
distinct persons.
Further, where a person who has obtained or is required to obtain registration
in a State or Union territory in respect of an establishment, has an
establishment in another State or Union territory, then such establishments
shall be treated as establishments of distinct persons. These concepts have
already been discussed in detail in Chapter 2– Supply under GST.
(v) PAN must for obtaining registration [Section 25(6) & (7)]
Permanent Account Number is mandatory to be eligible for grant of registration.
🌟🌟 A Non-Resident Taxable Person (NRTP) may be granted registration on the

basis of other prescribed documents [Elaborated in subsequent paras].
(vi) Unique Identity Number (UIN) [Section 25(9) & (10) read with rule 17]
Any specialized agency of the United Nations Organization or
any Multilateral Financial institution and organization as
notified under the United Nations (Privileges and Immunities)
Act, 1947, consulate or embassy of foreign countries and any
other person notified by the Commissioner, is required to obtain a UIN from
the GSTN portal.
This UIN is needed for claiming refund of taxes paid on notified
supplies of goods and/or services received by them, and for
such other purpose as may be notified. UIN granted is a
centralized UIN i.e. it shall be applicable to the territory of India. A person
having UIN is not registered person and thus, is not a taxable person.
The proper officer may, upon submission of an application in prescribed form
or after filling up the said form or after receiving a recommendation from the
Ministry of External Affairs, Government of India, assign a UIN to the said
person and issue a certificate in Form GST REG 06 within 3 working days
from the date of submission of application.

7.36 INDIRECT TAXES
8.36
(vii) Suo-motu registration by the proper officer [Section 25(8) read with
rule 16]
Where, pursuant to any survey, enquiry, inspection, search or any other
proceedings under the Act, the proper officer finds
that a person liable to registration under the Act** Temporary
has failed to apply for such registration, such officer registration
may register the said person on a temporary basis
and issue an order in prescribed form.
**Such person shall either:
(i) submit an application for registration in prescribed form within 90
days from the date of grant of temporary registration, or
(ii) file an appeal against such temporary registration.
In case (ii), if the Appellate Authority upholds the liability to registration,
application for registration shall be submitted within 30 days from the date of
issuance of such order of the Appellate Authority.
Provisions relating to verification and issue of registration certificate [as
contained in rules 9 and 10] [discussed in subsequent paras] shall, mutatis
mutandis, apply to such application submitted by the person granted
temporary registration. GSTIN thereafter granted shall be effective from the
date of order of proper officer granting temporary registration.
(viii) Procedure for registration [Section 25 read with rules 8, 9 & 10]
Provisions relating to procedure for application for registration, verification
of the application and approval & issue of registration certificate are
contained in the rules 8, 9 and 10 respectively. The same have to be read in
conjunction with section 25 provisions. The procedure for registration
prescribed under rules 8, 9 and 10 are also applicable to a person paying tax
under composition levy, every person seeking voluntary registration as well
as a casual taxable person.
However, procedure so laid down will not apply to:
• Non-resident taxable person (NRTP)
• A person required to deduct tax at source under section 51
• A person required to collect tax at source under section 52

REGISTRATION 7.37
• A person supplying OIDAR services from a place outside India to a

non-taxable online recipient referred to in section 14 of IGST Act.
Separate registration forms and procedure have been prescribed for each of the
aforesaid persons. Procedure relating to NRTP has been discussed subsequently,
but procedure for other three persons has been covered at the Final level.
Such persons shall apply for registration in Form GST REG 01. The
application for registration in GST Form REG 01 is divided into two parts –
Part A and Part B.
In order to cater to the needs of tax payers who are not IT savvy, Facilitation
centres have been established which help the taxpayer in submitting the
application for registration, amending the registration certificate, submitting
application for cancellation of registration, revocation of cancellation of
registration, etc. Facilitation Centre shall be responsible for the digitization
and/or uploading of the forms and documents.
Application for registration by Special Economic Zone (SEZ) [Second

proviso to section 25(1): A person
having unit in SEZ/an SEZ developer will SEZ is a geographically bound
have to make a separate application for zone where the economic laws
registration as distinct from his place of relating to export and import are
more liberal as compared to
business located outside SEZ in the
other parts of the country. SEZ is
same State/UT. Thus, there may be a considered to be a place outside
case where two units of a tax payer are India for all tax purposes.
located in same State/UT - one in SEZ
and another outside SEZ. In that case, separate registrations have to be
obtained for each of the two units as separate places of business.
(18) Suvarna Industries is engaged in manufacturing activities in
Uttar Pradesh. It has two manufacturing units in UP - one in SEZ
and another outside SEZ. Under GST, one registration per State
is required. However, since in this case, one of the two units of Suvarna
Industries is located in SEZ, SEZ unit will have to compulsorily make a
separate application for registration as a place of business distinct from unit
located outside SEZ in the same State.
Procedure for registration has been depicted by way of a diagram below:

7.38 INDIRECT TAXES
8.38
Procedure for registration
Part I
Every person liable to get registered and person seeking voluntary registration shall, before
applying for registration, declare his Permanent Account Number (PAN), mobile number,
e-mail address, State/UT in Part A of FORM GST REG-01 on GST Common Portal.
PAN, mobile number PAN validated online by Mobile number and email
& e-mail address are Common Portal from verified through one time
validated. CBDT database password sent to it.
Temporary Reference Number (TRN) is generated and communicated to the applicant

on the validated mobile number and e-mail address.
Using TRN, applicant shall electronically submit application in Part B of application

form, along with specified documents at the Common Portal.
While submitting the application, the applicant shall undergo authentication of

Aadhaar number for grant of registration. (discussed in detail afterwards)
Part B of application contains the details, such as, constitution of business,
jurisdiction, option for composition, date of commencement of business, reason to
obtain registration, address of PPoB and nature of activity carried out therein,
details of APoB, details of bank account(s), details of authorized signatory, etc.
On receipt of such application, an acknowledgement in the prescribed form shall be

issued to the applicant electronically. A Causal Taxable Person (CTP) applying for
registration gets a TRN for making an advance deposit of tax in his electronic cash
ledger and an acknowledgement is issued only after said deposit.*
Application shall be forwarded to the Proper Officer.
The procedure after receipt of application by the Proper Officer is depicted in Part II.
* Discussed in detail in subsequent paras.

REGISTRATION 7.39
Part II
Proper Officer examines the application and

accompanying documents.
Proper Officer issues notice electronically,

If same are within 3 working days✥ from application
No submission date thereby seeking
found in
clarification**, information or documents
order?
from the applicant.
✥ notice may be issued not later than
Yes 21 days from application submission
date in case where a person fails to
undergo Aadhaar authentication/does
within 3 not opt for Aadhaar authentication
working days
from the date
of submission Yes the clarification**, No
If applicant has furnished
of application information or documents within 7 working
days from receipt of notice?
No
If proper officer is satisfied with it?
Yes
Proper officer will grant
registration certificate in within 7 working days from the
Form GST REG-06 date of receipt of information/
clarification/ documents
Proper officer may reject the

application for reasons to be
recorded in writing.
**Clarification includes modification/correction of particulars declared in the application for

registration, other than PAN, State, Mobile No. & E-mail address.
✮ Deemed Approval of Application

(discussed below separately)

7.40 INDIRECT TAXES
8.40
✮ Deemed Approval of Application
If the proper officer fails to take any action in the following cases within the
stipulated time, the application for grant of registration shall be deemed to
have been approved-
in cases where a person
successfully undergoes •within a period of 3 working days from
authentication of Aadhaar the date of submission of application
number or is exempt from
Aadhaar authentication
in cases where a person fails to •within a period of 21 days from the date
undergo Aadhaar authentication of submission of application
or does not opt for Aadhaar
authentication
in cases where Proper Officer •within 7 working days from the date of
issues notice seeking clarification, receipt of clarification, information or
information or documents from documents furnished by the applicant
the applicant
Thus, in case of successful authentication of Aadhaar, registration will be

deemed approved within 03 working days. However, if Aadhar authentication is
not opted for or if authentication fails in validation and no SCN is issued within
21 days by tax official, registration will be deemed approved.
Tax Officer can issue SCN within the period specified for grant of registration,
like in cases of successful Aadhar authentication i.e. 3 working days, or in cases
when taxpayer do not opt to provide Aadhaar or when Aadhar authentication
fails i.e. 21 working days. Applicants can submit their reply within 7 working
days from issue of SCN.
Aadhaar authentication
[Section 25(6A), (6B), (6C) & (6D) read with rules 8, 9 and 25]
As seen above, there’s a simplified registration procedure under GST.
However, this easy registration procedure was unduly misused by
fly-by-night operators. Thus, in an endeavor to curb/check such operators
and to increase compliance, aadhaar e-KYC based registration has been
introduced under the GST law. With effect from 21.08.2020, aadhaar
authentication is mandatory for the new applicants (whether an individual
applicant or an applicant other than individual) in order to be eligible for
grant of registration. Aadhaar Authentication process has been introduced,

REGISTRATION 7.41
for the persons applying for GST registration as normal taxpayer/

composition/ casual taxable person/ Input Service Distributor (ISD)/ SEZ
Developer/ SEZ Unit etc, in Form GST REG 01.
Applicants, who, either do not provide Aadhaar, while applying for new
registration or whose Aadhar authentication fails in validation, would be
subjected to site verification by the tax department. However, tax authority,
based on the documents produced, can grant registration.
Subsequently, existing registrants (those who are already registered under
GST) will also be required to undergo aadhaar authentication otherwise their
registration shall be deemed to be invalid. However, no notification has
been issued yet prescribing the manner of undergoing aadhaar
authentication of already registered persons.
A. Persons required to undergo aadhaar authentication
As per section 25(6A), (6B) and (6C), following persons are required to
undergo aadhaar authentication:
(i) New applicant
Every (i) individual applicant or (ii) an applicant, other than an
individual, shall undergo authentication/furnish proof of
possession of Aadhaar number, in the manner prescribed in
rule 8 12. Rule 8(4A) provides that where an applicant opts for
authentication of Aadhaar number, he shall, while submitting an
application for registration, undergo authentication of Aadhaar
number. Said authentication is required to be eligible for grant of
registration.
Date of submission of the application in such cases shall be earlier
of:
(a) the date of authentication of the Aadhaar number,
or
(b) 15 days from the submission of the application in Part B of
Form GST REG-01
12
vide Notification No. 18/2020 CT dated 23.03.2020

7.42 INDIRECT TAXES
8.42
In case applicant is an individual, he shall undergo authentication
of his own aadhaar number.
In case applicant is other than individual, the authentication will
be of aadhaar number of the Karta, Managing Director, whole
time Director, such number of partners, Members of Managing
Committee of Association, Board of Trustees, authorised
representative, authorised signatory and such other notified class
of persons [authorised signatory of all types, Managing and
Authorised partners of a partnership firm and Karta of a Hindu
Undivided Family, have been so notified 13].
(ii) Persons already registered
Every registered person shall undergo authentication/furnish
proof of possession of Aadhaar number, in prescribed form and
manner and within the prescribed time.
B. Where Aadhaar number is not assigned
(i) In case of new applicant
If an aadhaar number is not assigned to a new applicant – either
(i) an individual or (ii) person/class of persons (other than
individual), such individual/person/class of persons shall be
offered alternate and viable means of identification in the manner
specified in rule 9 14.
First proviso to rule 9(1) provides that where a person fails to
undergo authentication of aadhaar number or does not opt for
authentication of Aadhaar number, the registration shall be
granted only after physical verification of the principal place of
business in the prescribed manner (specified in rule 25 discussed
subsequently).
However, in lieu of the physical verification of the place of
business, the proper officer may carry out the verification of such
documents as he may deem fit. For this, he needs to record the
13
14
Provisos to section 25(6B) and 25(6C) read with Notification No.s 18 and 19/2020 CT both
dated 23.03.2020

REGISTRATION 7.43
reasons in writing and needs to take the approval of an officer not

below the rank of Joint Commissioner [Second proviso to rule 9(1)].
Further, in such case, a notice (in prescribed form) seeking
clarifications/ information/ documents from the applicant may be
issued by the proper officer not later than 21 days from the
submission of the application for registration [Proviso to rule 9(2)].
(ii) In case of an already registered persons
If an Aadhaar number is not assigned to an existing registered
person, such person shall be offered alternate and viable means of
identification in the prescribed manner 15.
In case of failure to undergo aadhaar authentication/furnish proof of
possession of Aadhaar number/furnish alternate and viable means
of identification, registration allotted to such person shall be
deemed to be invalid and the other provisions of this Act shall apply
as if such person does not have a registration 16.
C. Persons/class of persons exempt from aadhaar authentication
Section 25(6D) stipulates that above provisions shall not apply to such
person or class of persons or any State or Union territory or part thereof,
as may be notified.
Following have been notified in this regard 17:
(i) A person who is not a citizen of India
(ii) A class of persons other than the following class of persons:
 Individual
 Authorised signatory of all types
 Managing and Authorised partner
 Karta of a Hindu Undivided Family
15
First proviso to section 25(6A)
16
Second proviso to section 25(6A)
17

7.44 INDIRECT TAXES
8.44
authentication shall
Individual who is a citizen of India
Persons to whom Authorised signatory of all types

aadhaar
apply
Managing and Authorised partner
Karta of an Hindu undivided family
How aadhaar authentication is done?

Once registration application is submitted, GST system sends "link" to
the concerned persons at their GST registered mobile numbers and
email ids mentioned in the GST application, for the aadhaar
authentication.
On clicking the verification link, a window for Aadhaar Authentication
will open where they have entered Aadhaar Number and the OTP
received by them on the mobile number linked with Aadhaar.
Taxpayers need to complete Aadhaar authentication of all Promoters/
Partners/ Authorized Signatories/ Karta etc. as mentioned in the
application to avail this option.
On successful authentication, demographic data of the persons is
fetched from Aadhaar to GST System.
Furnishing of bank account details [Rule 10A]

As seen in the diagram outlining the procedure for registration, while
filing the application for registration on GST portal, in Part B of the
application form, a person is required to furnish the details of his bank
account. Rule 10A relaxes this requirement to a limited extent. In
pursuance to the same, the registered person is allowed to furnish
information with respect to details of bank account, or any other
information, as may be required on the common portal in order to
comply with any other provision, soon after obtaining certificate of
registration and a GSTIN, but not later than 45 days from the date of
grant of registration or the date on which the return required under
section 39 is due to be furnished, whichever is earlier.

REGISTRATION 7.45
In short, a taxpayer has an option to give his bank account details after
obtaining registration, within 45 days from the date of grant of
registration or the due date of furnishing return, whichever is earlier.
However, this relaxation is not available for those who have been
granted registration as TDS deductor/ TCS collector under rule 12 18 or
who have obtained suo-motu registration under rule 16. They are
mandatorily required to furnish the bank account details at the time of
filing the application for registration.
Physical verification of business premises in certain cases [Rule 25]
Where the proper officer is satisfied that the physical verification of the
place of business of a person is required due to failure of Aadhaar
authentication or due to not opting for Aadhaar authentication before the
grant of registration, or due to any other reason after the grant of
registration, he may get such verification of the place of business, in the
presence of the said person, done. The verification report along with the
other documents, including photographs, shall be uploaded in prescribed
form on the common portal within a period of 15 working days following
the date of such verification.
Issuance of registration certificate [Rule 10]
Where the application for grant of registration has been approved, a certificate
of registration [duly signed or verified through EVC by the proper officer] in
Form GST REG-06 showing the PPoB and APoB is made available to the
applicant on the Common Portal and a Goods and Services Tax Identification
Number (hereinafter referred to as “GSTIN”) i.e. the GST registration no. is
communicated to applicant, within 3 days after the grant of registration.
GSTIN format
State Code PAN Entity Check sum
Code character
Display of registration certificate and GSTIN on the name board [Rule 18]
Every registered person shall display his registration certificate in a
prominent location at his PPoB and at every APoB. Further, his GSTIN also
18
Provisions relating to TDS and TCS have been discussed in detail at Final level.

7.46 INDIRECT TAXES
8.46
has to be displayed on the name board exhibited at the entry of his PPoB
and at every APoB.
(ix) Effective date of registration [Rule 10]
Where an applicant submits effective date of registration is

application for registration
within 30 days from the date the date on which he becomes

he becomes liable to liable to registration
registration
after 30 days from the date he date of grant of registration

becomes liable to registration
(19) Sugam Services Ltd. is engaged in taxable supply of services in

Madhya Pradesh. The turnover of Sugam Services Ltd. exceeded
` 20 lakh on 1st November. It is liable to get registered by
1 December [30 days] in the State of Madhya Pradesh. It applies for
st
registration on 28th November and is granted registration certificate on

5th December. The effective date of registration of Sugam Services Ltd. is
1st November.
(20) In above example, if Sugam Services Ltd. applies for registration

on 3rd December and is granted registration certificate on
10th December. The effective date of registration of Sugam Services
Ltd. is 10th December.
ILLUSTRATION 3
Determine the effective date of registration under CGST Act in respect of the
following cases with proper explanation:
(i) The aggregate turnover of Varun Industries of Mumbai has exceeded
` 40 lakh on 1st August. Varun Industries manufactures LED TVs in
Mumbai and sells them in Pune. It submits the application for
registration on 20th August. Registration certificate granted on
25th August.
(ii) Sweta InfoTech Services is the provider of internet services in Pune. Its
aggregate turnover exceeds ` 20 lakh on 25th September. It submits the
application for registration on 27th October. Registration certificate is
granted on 5th November.

REGISTRATION 7.47
ANSWER
As per section 22 read with Notification No. 10/2019 CT dated 07.03.2019, a

supplier is liable to be registered in the State/Union territory from where he
makes a taxable supply of goods and/or services, if his aggregate turnover
in a financial year exceeds the threshold limit. The threshold limit for a
person making exclusive intra-State taxable supplies of goods is as under:-
(a) ` 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland.
(b) ` 20 lakh for the States of States of Arunachal Pradesh, Meghalaya,
Puducherry, Sikkim, Telangana and Uttarakhand.
(c) ` 40 lakh for rest of India. However, the higher threshold limit of
` 40 lakh is not available to persons engaged in making supplies of ice
cream and other edible ice, whether or not containing cocoa, Pan
masala and Tobacco and manufactured tobacco substitutes.
The threshold limit for a person making exclusive taxable supply of services
or supply of both goods and services is as under:-
(a) ` 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland.
(b) ` 20 lakh for the rest of India.
As per rule 10, where a person submits the application for registration
within 30 days of becoming liable for registration, the effective date of
registration is the date on which the person becomes liable to registration;
otherwise it is the date of grant of registration.
In the light of the above provisions, in the given cases, the applicable
turnover limit for registration will be ` 40 lakh and ` 20 lakh respectively in
case (i) and (ii).
(i) Since Varun Industries applied for registration within 30 days of

becoming liable to registration, the effective date of registration is
1st August.
(ii) Since Sweta InfoTech Services applied for registration after the expiry
of 30 days from the date of becoming liable to registration, the
effective date of registration is 5th November.

7.48 INDIRECT TAXES
8.48
(x) Special provisions for grant of registration in case of Non-Resident

Taxable Person (NRTP) and Casual Taxable Person (CTP) [Sections 25 &
27 read with rules 13 & 15]
(A) Meaning of casual taxable person and non-resident taxable
person
Before going into nuances of the registration provisions of CTP and
NRTP, let us first understand the meaning of casual taxable person
and non-resident taxable person:
Casual Taxable Person
There may be case where a person has a
registered business in some State in
India, but wants to effect supplies from
some other State in which he does not
have any fixed place of business. Such
person needs to register in the State from where he seeks to supply as
a ‘casual taxable person’.
CGST Act defines a casual person as a person who occasionally
undertakes transactions involving supply of goods or services or both
in the course or furtherance of business, whether as principal, agent or
in any other capacity, in a State/UT where he has no fixed place of
business [Section 2(20)]. Further, he cannot exercise the option to pay
tax under composition levy.
(21) Krishnadev & Co., engaged in supplying taxable
goods, is registered in Rajasthan. It wishes to participate in
a 5 days’ business exhibition being held in Delhi. However,
it does not have a fixed place of business in Delhi. In this case,
Krishnadev & Co. has to obtain registration as a casual taxable person
in Delhi.
Non-Resident Taxable Person
A person who is a foreigner and
occasionally wants to effect taxable
supplies from any State in India needs
GST registration for the same. Such
person needs to register in the State

REGISTRATION 7.49
from where he seeks to supply as a non-resident taxable person. CGST

Act defines non-resident taxable person as any person who
occasionally undertakes transactions involving supply of goods or
services or both, whether as principal or agent or in any other
capacity, but who has no fixed place of business or residence in
India [Section 2(77)]. He cannot exercise the option to pay tax under
composition levy.
Based on the aforesaid definitions, following points merit
consideration:
 A CTP does not have a fixed place of business in the State/UT
where he undertakes supply though he might be registered with
regard to his fixed place of business in some other State/UT,
while a NRTP does not have fixed place of business/residence in
India at all.
 A CTP has to undertake transactions in the course or furtherance
of business whereas the business test is absent in the definition
of NRTP.
(B) Special registration provisions of casual taxable person and
GST law prescribes special procedure for registration, as also for
extension of the operation period of such casual or non-resident
taxable persons. They have to apply for registration at least 5 days in
advance before making any supply. Also, registration is granted to
them or period of operation is extended, only after they make advance
deposit of the estimated tax liability. The special registration
procedure pertaining to CTP and NRTP are as follows:
(A) Both CTP 19 and NRTP have to compulsorily get registered under
GST irrespective of the threshold limit, at least 5 days prior to
commencement of business.
(B) As per section 25(6), every person must have a PAN to be
eligible for registration. Since NRTP will generally not have a
PAN of India, he may be granted registration on the basis of
other prescribed documents.
19
Subject to exemption from registration under Notification No. 56/2018 CT dated 23.10.2018

7.50 INDIRECT TAXES
8.50
Thus, a NRTP has to submit a self-attested copy of his valid
passport along with the application signed by his authorized
signatory who is an Indian Resident having valid PAN. However,
in case of a business entity incorporated or established outside
India, the application for registration shall be submitted along
with its tax identification number or unique number on the basis
of which the entity is identified by the Government of that
country or its PAN, if available.
Application will be submitted by NRTP in a different prescribed form
whereas CTP will submit the application for registration in the normal
form for application for registration i.e. Form GST REG 01 and his
registration of CTP will be a PAN based registration.
(C) Period of validity of registration certificate granted to CTP/NRTP
Registration Certificate granted to
CTP/NRTP will be valid for:
CTP and NRTP will
(i) Period specified in the registration
make taxable
application, or
supplies only after
(ii) 90 days from the effective date of the issuance of the
registration [can be extended certificate of
further by a period not exceeding registration.
90 days by making an application
before the end of the validity of
registration granted to him**]
whichever is earlier.
Provisions relating to verification of application and grant of
registration [under rules 9 and 10] will apply mutatis mutandis, to an
application for registration filed by NRTP.
(D) Advance deposit of tax
At the time of submitting the registration application, CTP/NRTP are
required to make an advance deposit of tax in an amount equivalent
to the estimated tax liability of such person for the period for which
the registration is sought.
Further, CTP/NRTP will get a Temporary Reference Number (TRN) for
making an advance deposit of tax which shall be credited to his

REGISTRATION 7.51
electronic cash ledger. An acknowledgement of receipt of application

for registration is issued only after said deposit.
**Where extension of time is sought, CTP/NRTP will deposit an additional
amount of tax equivalent to the estimated tax liability of such person for
the period for which the extension is sought.
(xi) Deemed registration [Section 26]
Registration under GST is not tax specific, which means that there is single
registration for all the taxes i.e. CGST, SGST/UTGST, IGST and cesses.
Grant of registration/UIN under any SGST Act/ UTGST Act is deemed to be
registration/UIN granted under CGST Act provided application for
registration has not been rejected under CGST Act.
Further, rejection of application for registration/UIN under SGST Act/UTGST
Act is deemed to be rejection of application for registration under CGST Act.
8. AMENDMENT OF REGISTRATION [SECTION 28]

A registered person may need to make some changes/amendments in the
registration application. There are two categories of details in registration
application – core and non-core fields.
Core fields are name of the business, (legal name) if there is no change in PAN,
addition / deletion of stakeholders, principal place of business (other than change
in State) or additional place of business (other than change in State).
All other fields are non-core fields like name of day to day functionaries, e-mail
ids, mobile numbers, etc.
In case the change is in core information in the registration application, the

taxable person will apply for amendment within 15 days of the event
necessitating the change. The proper officer, then, will approve the amendment
within next 15 days.
For other changes – non-core information, no approval of the proper officer is

required, and the amendment can be affected by the taxable person on his own
on the common portal.
The provisions relating to amendment of registration are contained in section 28

read with rule 19.

7.52 INDIRECT TAXES
8.52
The significant aspects of the same are discussed hereunder:
 Where there is any change in the particulars furnished in registration

application/UIN application, registered person shall submit an application in
prescribed manner, either at the time of obtaining registration or Unique
Identity Number or as amended from time to time, within 15 days of such
change, along with documents relating to such change at the Common
Portal.
 In case of amendment of core fields of information, the proper officer

may, on the basis of information furnished or as ascertained by him,
approve or reject amendments in the registration particulars in the
prescribed manner. Such amendment shall take effect from the date of
occurrence of event warranting such amendment.
 However, where change relates to non-core fields of information,

registration certificate shall stand amended upon submission of the
application for amendment on the Common Portal.
 The proper officer shall not reject the application for amendment in the
registration particulars without giving the person an opportunity of being
heard.
 Any rejection or approval of amendments under the SGST/UTGST Act shall

be deemed to be a rejection or approval under the CGST Act.
 Any particular of the application for registration shall not stand amended
with effect from a date earlier than date of submission of application for
amendment on common portal except with order of Commissioner for
reasons to be recorded in writing and subject to conditions specified by
Commissioner in the said order.
 Application for amendment of registration cannot be filed for change in

PAN because GST registration is PAN-based. One needs to make fresh
application for registration in case there is change in PAN. Thus. where a
change in the constitution of any business results in change of PAN of a
registered person, the said person shall apply for fresh registration.

REGISTRATION 7.53
 Similarly, application for amendment of registration form cannot be filled if

there is change in place of business from one State to the other because
GST registrations are State-specific. If one wishes to relocate his business to
another State, he must voluntarily cancel his current registration and apply
for a fresh registration in the State he is relocating his business.
Core fields of information
Permission of proper officer required if change

relates to core fields of information
And such change does not warrant cancellation of registration under

section 29
Addition, deletion or retirement of

partners or directors, Karta,
Legal name Address of Managing Committee, Board of
of business PPoB/APoB Trustees, Chief Executive Officer or
equivalent, responsible for day to
day affairs of the business
Change of these two particulars shall be applicable for all registrations

of a registered person obtained under provisions of this Chapter on
same PAN.
Mobile no./e-mail address of authorised signatory can be amended only after online
verification through GST Portal.

7.54 INDIRECT TAXES
8.54
Submission of
Core areas application within 15
days of change
Registered
Person/ UIN
GST
holder
Common Portal
Non-core areas
Amendment carried out on GST

Common Portal
Proper Officer (PO)
Permission to be
granted within next 15 No
Registration certificate days
amended Is PO of the opinion
that amendment is
unwarranted/
Yes documents furnished
PO will serve an SCN why
are incomplete/
application for amendment within 15 working days of
incorrect?
should not be rejected? receipt of application
If registered person replies

to the notice within 7
No working days?
Yes
Yes
No If reply is
satisfactory? within 7 working days of
receipt of reply
Application for amendment
shall be rejected.
within 7 working days of
receipt of reply

REGISTRATION 7.55
If the proper officer fails to take any action,-

(a) within a period of 15 working days from the date of submission of the
application, or
(b) within a period of 7 working days from the date of the receipt of the reply to the
show cause notice,
the certificate of registration shall stand amended to the extent applied for and the
amended certificate shall be made available to the registered person on the common
portal.
(22) Varun Enterprises, a sole proprietorship firm, is engaged in supply of

electrical goods in Delhi. The firm is registered under GST. Varun is the
proprietor of the firm. He wishes to expand his business and his friend –
Arun - approaches him to provide additional capital for his business if he is made a
partner in Varun’s business.
Varun agrees and changes the constitution of his business and form a partnership firm –
Varun Arun & Co. Since the change in constitution of business from sole proprietorship
firm to partnership firm results in change in PAN of the registered person, the
partnership firm has to apply for fresh registration. The reason for the same is that
GSTIN is PAN based. Any change in PAN would warrant a new registration.
9. CANCELLATION OR SUSPENSION OF
REGISTRATION AND REVOCATION OF
CANCELLATION [SECTIONS 29 & 30]
Section 29 Particulars
Sub-section Cancellation or suspension of registration
(1) The proper officer may, either on his own motion or on an

application filed by the registered person or by his legal heirs, in
case of death of such person, cancel the registration, in such
manner and within such period as may be prescribed, having
regard to the circumstances where:

7.56 INDIRECT TAXES
8.56
(a) the business has been discontinued, transferred fully for
any reason including death of the proprietor,
amalgamated with other legal entity, demerged or
otherwise disposed of
(b) there is any change in the constitution of the business
(c) the taxable person, other than the person registered under
sub-section (3) of section 25, is no longer liable to be
registered under section 22 or section 24
Provided that during pendency of the proceedings relating to

cancellation of registration filed by the registered person, the
registration may be suspended for such period and in such
manner as may be prescribed.
(2) The proper officer may cancel the registration of a person from such
date, including any retrospective date, as he may deem fit, where,––
(a) a registered person has contravened such provisions of the

Act or the rules made thereunder as may be prescribed
(b) a person paying tax under section 10 has not furnished

returns for three consecutive tax periods
(c) any registered person, other than a person specified in

clause (b), has not furnished returns for a continuous
period of six months
(d) any person who has taken voluntary registration under

sub-section (3) of section 25 has not commenced business
within six months from the date of registration
(e) registration has been obtained by means of fraud, wilful

misstatement or suppression of facts
Provided that the proper officer shall not cancel the registration
without giving the person an opportunity of being heard.

REGISTRATION 7.57
Provided further that during pendency of the proceedings relating

to cancellation of registration, the proper officer may suspend the
registration for such period and in such manner as may be
prescribed.
(3) The cancellation of registration under this section shall not affect
the liability of the person to pay tax and other dues under this Act
or to discharge any obligation under this Act or the rules made
thereunder for any period prior to the date of cancellation
whether or not such tax and other dues are determined before or
after the date of cancellation.
(4) The cancellation of registration under the State Goods and

Services Tax Act or the Union Territory Goods and Services Tax
Act, as the case may be, shall be deemed to be a cancellation of
registration under this Act.
(5) Every registered person whose registration is cancelled shall pay

an amount, by way of debit in the electronic credit ledger or
electronic cash ledger, equivalent to the credit of input tax in
respect of inputs held in stock and inputs contained in semi-
finished or finished goods held in stock or capital goods or plant
and machinery on the day immediately preceding the date of
such cancellation or the output tax payable on such goods,
whichever is higher, calculated in such manner as may be
prescribed.
Provided that in case of capital goods or plant and machinery,
the taxable person shall pay an amount equal to the input tax
credit taken on the said capital goods or plant and machinery,
reduced by such percentage points as may be prescribed or the
tax on the transaction value of such capital goods or plant and
machinery under section 15, whichever is higher.
(6) The amount payable under sub-section (5) shall be calculated in

such manner as may be prescribed.

7.58 INDIRECT TAXES
8.58
Section 30 Revocation of cancellation of registration
(1) Subject to such conditions as may be prescribed, any registered

person, whose registration is cancelled by the proper officer on his
own motion, may apply to such officer for revocation of
cancellation of the registration in the prescribed manner within
thirty days from the date of service of the cancellation order.
Provided that the registered person who was served notice under
sub- section (2) of section 29 in the manner as provided in clause
(c) or clause (d) of sub-section (1) of section 169 and who could
not reply to the said notice, thereby resulting in cancellation of
his registration certificate and is hence unable to file application
for revocation of cancellation of registration under sub-section (1)
of section 30 of the Act, against such order passed up to 31-3-
2019, shall be allowed to file application for revocation of
cancellation of the registration not later than 22-7-2019.
(2) The proper officer may, in such manner and within such period as
may be prescribed, by order, either revoke cancellation of the
registration or reject the application.
Provided that the application for revocation of cancellation of
registration shall not be rejected unless the applicant has been
given an opportunity of being heard.
(3) The revocation of cancellation of registration under the State

Goods and Services Tax Act or the Union Territory Goods and
Services Tax Act, as the case may be, shall be deemed to be a
revocation of cancellation of registration under this Act.
ANALYSIS
The provisions relating to cancellation of registration and its revocation are
contained in sections 29 & 30 respectively read with rules 20 to 23. The
registration granted under GST can be cancelled for specified reasons. The
cancellation can either be initiated by the Department on their own motion or the
registered person can apply for cancellation of their registration.

REGISTRATION 7.59
Where the For example, in case

Voluntary registered of death of
Cancellation of registration
cancellation by person no registered person,

registered person more requires the legal heirs can
the registration apply for cancellation
Where the For example, when

Proper Officer the registrant is not
doing business from
considers the
Suo-motu the registered place
registration of a
cancellation by of business or if he
person liable
the Department issues tax invoice
for cancellation without making the
in view of supply of goods or
certain defaults services.
(i) Circumstances where registration is liable to be cancelled [Section

29(1) & (2)]
A. Circumstances when the registration can be cancelled either suo
motu by proper officer or on an application of the registered
person or his legal heirs (in case death of such person)
Cancellation by the registered person on its own or by the Department
--Business discontinued
--Transferred fully for
Taxable person (other
any reason including
death of the proprietor than voluntarily
Change in the
registered person) who
--Amalgamated with constitution of the
is no longer liable to be
other legal entity business
registered under
--Demerged or section 22 or section 24.
--Otherwise disposed of
B. Circumstances when the proper officer can cancel registration on

his own
In the following cases, registration can be cancelled by the proper
officer from such date, including any retrospective date, as he may
deem fit:

7.60 INDIRECT TAXES
8.60
A registered person
has contravened
the prescribed
provisions (Refer I
below)
Proper
Registration was A registered person
officer can
obtained by means has not filed returns
cancel
of fraud, wilful for continuous 6
registration months (Refer II
misstatement or
on his own below)
suppression of facts
if
Voluntarily registered
person has not
commenced the
business within 6
months from the
date of registration
(I) Prescribed contraventions which make a registred person liable

to cancellation of registration [Rule 21]: The registered person-
(a) does not conduct any business from the declared place of
business, or
(b) issues invoice/bill without supply of goods/services in
violation of the provisions of this Act, or the rules made
thereunder.
(c) violates the provisions of section 171. Section 171 contains
provisions relating to anti-profeetering measure 20.
(d) violates the provision of rule 10A (discussed earlier in
this chapter).
(II) 3 consecutive tax periods in case of a person who opted for
composition levy.
20
Anti-profeetering measure shall be discussed at Final Level.

REGISTRATION 7.61
C. Suspension of registration [First proviso to section 29(1) and

second proviso to section 29(2) read with rule 21A]
Once a registered person has applied for
cancellation of registration or the proper officer
seeks to cancel his registration, the proper officer
may suspend his registration during pendency of
the proceedings relating to cancellation of registration filed. In this
way, a taxpayer is freed from the routine compliances, including filing
returns, under GST law during the pendency of the proceedings related
to cancellation of registration.
The period and manner of suspension of registration is as follows:
1. Where registered person has applied for cancellation of
registration: Where a registered person has applied for
cancellation of registration, the registration shall be deemed to
be suspended from:
(a) the date of submission of the application
or
(b) the date from which the cancellation is sought,
whichever is later,
pending the completion of proceedings for cancellation of
registration.
2. Where cancellation of the registration has been initiated by the
Department on its own motion: Where the proper officer has
reasons to believe that the registration of a person is liable to be
cancelled, he may, after giving the said person a reasonable
opportunity of being heard, suspend the registration of such
person with effect from a date to be determined by him,
pending the completion of the proceedings for cancellation of
registration.
3. A registered person, whose registration has been suspended as
above:
• shall not make any taxable supply** during the period of
suspension and
• shall not be required to furnish any return under
section 39.

7.62 INDIRECT TAXES
8.62
**The expression “shall not make any taxable supply” shall
mean that the registered person shall not issue a tax invoice
and, accordingly, not charge tax on supplies made by him
during the period of suspension.
4. The suspension of registration shall be deemed to be revoked
upon completion of the cancellation proceedings by the proper
officer. Such revocation shall be effective from the date on
which the suspension had come into effect.
5. Where any order having the effect of revocation of suspension
of registration has been passed, the provisions of section
31(3)(a) [revised tax invoices] and section 40 [first return] in
respect of the supplies made during the period of suspension
and the procedure specified therein shall apply.
(ii) Procedure for cancellation of registration [Rules 20 and 22]
(a) Voluntary cancellation by registered person
Application
 A registered person seeking cancellation of registration 21 shall
electronically submit the application for cancellation of registration in
prescribed form within 30 days of occurrence of the event warranting
cancellation.
 He is required to furnish in the application the details of inputs held in
stock or inputs contained in semi-finished/finished goods held in
stock and of capital goods held in stock on the date from which
cancellation of registration is sought, liability thereon, details of the
payment, if any, made against such liability and may furnish relevant
documents thereof.
Order
 Where a person who has submitted an application for cancellation of
his registration is no longer liable to be registered, proper officer shall
issue the order of cancellation of registration within 30 days from the
date of submission of application for cancellation.
21
under section 29(1)

REGISTRATION 7.63
(b) Suo-motu cancellation by the Department

 Where the proper officer cancels the registration suo-motu, he shall
not cancel the same without giving a show cause notice and without
giving a reasonable opportunity of being heard, to the registered
person. The reply to such show cause notice (SCN) has to be
submitted within 7 days of service of notice.
 If reply to SCN is satisfactory, proper officer shall drop the proceedings
and pass an order in prescribed form. However, where the person
instead of replying to the SCN served for failure to furnish returns for a
continuous period of 6 months (3 months in case of composition
scheme supplier) 22 furnishes all the pending returns and makes full
payment of the tax dues along with applicable interest and late fee, the
proper officer shall drop the proceedings and pass an order.
Where registration of a person is liable to be cancelled, proper officer
shall issue the order of cancellation of registration within 30 days from
the date of reply to SCN.
(c) Effective date of cancellation

 The cancellation of registration shall be effective from a date to be
determined by the proper officer and mentioned in the cancellation
order. He will direct the taxable person to pay arrears of any tax,
interest or penalty including the amount liable to be paid under
section 29(5).
(iii) Amount payable on cancellation of registration [Section 29(5) & (6)]
A registered person whose registration is cancelled will have to debit the

electronic credit or cash ledger by an amount equivalent to:
(i) input tax credit (ITC) in respect of:

 stock of inputs and inputs contained in semi-finished/finished
goods’ stock or
 capital goods or plant and machinery

on the day immediately preceding the date of cancellation, or
(ii) the output tax payable on such goods
22
viz. contravention of the provisions contained in section 29(2)(b)/(c) of the CGST Act.

7.64 INDIRECT TAXES
8.64
whichever is higher, calculated in such manner as may be prescribed.
However, in case of capital goods or plant and machinery, the taxable
person shall pay an amount equal to the input tax credit taken on the said
capital goods or plant and machinery, reduced by such percentage points as
may be prescribed or the tax on the transaction value of such capital goods
or plant and machinery under section 15, whichever is higher.
The manner of determination of amount of credit to be reversed is
prescribed under rule 44. On conjoint reading of section 29(5) and rule 44,
it can be inferred as follows:
Amount of credit to be reversed in respect of INPUTS:
ITC on inputs computed

ITC in respect of
proportionately on the basis of
inputs calculated in
corresponding invoices** on
accordance with rule whichever
which credit had been availed
44 of the CGST Rules*
on such inputs. is higher
Output tax payable on such goods
* Discussed in detail in Chapter-6: Input Tax Credit
**If tax invoices are not available, the ITC to be reversed will be based on
the prevailing market price (MP) of such goods on the date of cancellation.
 Amount of credit to be reversed in respect of CAPITAL GOODS OR
PLANT & MACHINERY:
ITC in respect of ITC involved in the

capital goods or remaining useful life in
plant & months of the capital
machinery goods computed on
calculated in pro-rata basis, taking
whichever is
accordance with the useful life as
higher
rule 44 5 years
Tax on the transaction value of such capital

goods or plant and machinery under section 15

REGISTRATION 7.65
(23) Capital goods have been in use for 4 years, 6 month and
15 days. The useful remaining life in months = 5 months
ignoring a part of the month.
ITC taken on such capital goods = C
ITC attributable to remaining useful life = C x 5/60
(iv) Other points about cancellation
 A person to whom a UIN has been granted under rule 17 cannot apply
for cancellation of registration [Rule 20]
 The cancellation of registration will not affect liability of registered
person to pay tax and other dues under the Act for any period prior to
the date of cancellation 23 [Section 29(3)].
(24) The proper officer cancelled the registration of
Naman Associates on 11th October. The tax dues of
Naman Associates for July-September quarter (determined
by the proper officer on 16th December) are ` 50,000. The
cancellation of registration of Naman Associates shall have no effect
on his liability of tax dues of ` 50,000 even though the tax dues are
determined after the cancellation of registration.
 The cancellation of registration under either SGST Act/UTGST Act shall
be deemed to be a cancellation of registration under CGST Act
[Section 29(4)].
 Once registration is cancelled by the tax authority, the taxpayer will be
intimated about the same via sms and email. Order for cancellation of
registration will be issued and intimated to the primary authorized
signatory by email and sms.
 Taxpayer would not be allowed by the Common portal to file return
for the period after date of cancellation mentioned in the cancellation
order. However, he can submit returns of the earlier period (i.e. for the
period before date of cancellation mentioned in the cancellation order
for which registration was active).
23
whether or not such tax and other dues are determined before or after the date of
cancellation.

7.66 INDIRECT TAXES
8.66
(v) Revocation of cancellation of registration [Section 30 read with rule 23]
(A) Procedure for revocation of cancellation
 Where the registration of a person is cancelled suo-motu by the
proper officer, such registered person may apply for revocation
of the cancellation to such proper officer, within 30 days from
the date of service of the order of cancellation of registration.
 If the proper officer is satisfied that there are sufficient grounds
for revocation of cancellation, he may revoke the cancellation of
registration, by an order within 30 days of receipt of application
and communicate the same to applicant.
 Otherwise, he may reject the revocation application. However,
before rejecting the application, he has to first issue SCN to the
applicant who shall furnish the clarification within 7 working
days of service of SCN. The proper officer shall dipose the
application (accept/reject the same) within 30 days of receipt of
clarification.
(B) Where registration was cancelled for failure of registered person
to furnish returns
Where registration was cancelled for failure of registered person to
furnish returns, before applying for revocation, the person has to
make good the defaults, i.e. the person needs to file such returns and
pay any amount due as tax along with any amount payable towards
interest, penalty and late fee in respect of the said returns. However,
the registration may have been cancelled by the proper officer either
from the date of order of cancellation of registration or from a
retrospective date.
(1) Where the registration has been cancelled with effect from
the date of order of cancellation of registration
As we have already seen that the common portal does not allow
furnishing of returns for the period after the effective date of
cancellation, but returns for the earlier period (i.e. for the period
before date of cancellation mentioned in the cancellation order)
can be furnished after cancellation.
Where the registration is cancelled with effect from the date of
order of cancellation of registration, person applying for

REGISTRATION 7.67
revocation of cancellation has to furnish all returns due till the

date of such cancellation before the application for revocation
can be filed and has to pay any amount due as tax, in terms of
such returns along with any amount payable towards interest,
penalties or late fee payable in respect of the said returns.
However, since the portal does not allow to furnish returns for
the period after the date of cancellation of registration, all
returns due for the period from the date of order of cancellation
till the date of order of revocation of cancellation of registration
have to be furnished within a period of 30 days from the date of
the order of revocation.
(25) The registration of Naman Associates was
cancelled by the proper officer by an order dated
1st June for its failure to furnish returns. The
registration was cancelled with effect from 1 Junest
itself. It applied for revocation of cancellation of registration and

the order for revocation of cancellation of Naman Associates is
passed on 31st July. In this case, Naman Associates shall be
required to furnish all the returns for the period from 1st June to
31st July within a period of 30 days from 31st July, i.e. by 30th
August.
Returns for this period to be Returns for this period to be filed

filed before applying for within 30 days of the order of
revocation of cancellation revocation of cancellation
revocation of cancellation
Date from which returns
Date of order of
cancellation of
Date of order of
not furnished
of registration
registration
Effective date
of cancellation
of registration

7.68 INDIRECT TAXES
8.68
(2) Where the registration has been cancelled with retrospective
effect
Where the registration has been cancelled with retrospective
effect, it is not possible to furnish the returns before filing the
application for revocation of cancellation of registration. In that
case, the application for revocation of cancellation of registration
is allowed to be filed, subject to the condition that all returns
relating to the period from the effective date of cancellation of
registration till the date of order of revocation of cancellation of
registration shall be filed within a period of 30 days from the date
of order of such revocation of cancellation of registration.
(26) The registration of Naman Associates was
cancelled by the proper officer by an order dated
1st June for its failure to furnish returns. The
registration was cancelled with effect from 1st January
itself. It applied for revocation of cancellation of registration and
the order for revocation of cancellation of Naman Associates is
passed on 31st July. In this case, Naman Associates shall be
required to furnish all the returns for the period from 1st January to
31st July within a period of 30 days from 31st July, i.e. by 30th
August.
Returns for this period to be filed within 30 days of the order of

Date of order of cancellation
Date from which returns
of cancellation of registration
Date of order of revocation
not furnished
of registration
Effective date of
cancellation of
registration

REGISTRATION 7.69
Points to be noted
UIN Holders (i.e. UN Bodies, Embassies and Other Notified Persons),

GST Practitioner cannot apply for revocation of cancelled registration.
In case the registration is cancelled on the request of the taxpayer or

his legal heir, one cannot apply for revocation of cancelled registration.
The revocation of cancellation of registration under the SGST Act/

UTGST Act, as the case may be, shall be deemed to be a revocation of
cancellation of registration under CGST Act

1. Nature of registration
The registration in GST is PAN based and State specific.
One registration per State/UT.
However, a business entity having separate places of business in a State

may obtain separate registration for each of its places of business .
GST identification number called “GSTIN” - a 15-digit number and a

certificate of registration incorporating therein this GSTIN is made
available to the applicant on the GSTN common portal.
Registration under GST is not tax specific, i.e. single registration for all
the taxes i.e. CGST, SGST/UTGST, IGST and cesses.

7.70 INDIRECT TAXES
8.70
2. Persons liable to registration
•Threshold limit elaborated separately in the

Those who exceed threshold diagram below.
limit
In case of transfer of •Transferee liable to be registered from the date

business on account of of succession of business
succession, etc.
•Transferee liable to be registered from the date

In case of amalgamation/ on which Registrar of Companies issues
demerger by an order of incorporation certificate giving effect to order
High Court etc. of High Court etc.
Taxable Exempt Inter State Aggregate

Exports
Supplies supplies supplies Turnover
Aggregate Turnover will be computed on All-India basis for same PAN
Applicable threshold limit

States with threshold limit •Manipur, Mizoram, Nagaland and
of ` 10 lakh for both goods Tripura
and services
States with threshold limit •Arunachal Pradesh, Meghalaya, Sikkim,

of ` 20 lakh for both goods Uttarakhand, Puducherry and Telangana
and services
States with threshold limit
of ` 20 lakh for services and •Jammu and Kashmir, Assam, Himachal
` 40 lakh for goods Pradesh, All other States
(exclusive)

REGISTRATION 7.71
3. Compulsory registration in certain cases
Person receiving supplies

on which tax is payable
Inter-State supplier Casual taxable person
by recipient on reverse
charge basis
A person who supplies Person/class of persons

Non-resident taxable on behalf of some other notified by the
persons taxable person (i.e. an Central/State
Agent of some Principal) Government
4. Persons not liable for registration
Person engaged exclusively

Agriculturist limited
in supplying Persons making only
to supply of produce
goods/services/both not reverse charge
out of cultivation of
liable to tax/wholly exempt supplies
land
from tax
Persons making inter-

Persons making inter-State State taxable supplies
supplies of taxable services of notified handicraft
up to ` 20 lakh** goods up to ` 20
lakh**
Casual Taxable Persons

making inter-State taxable
supplies of notified
handicraft goods up to
` 20 lakh**
**` 10 lakh in case of Special Category States of Mizoram, Tripura, Manipur &
Nagaland

7.72 INDIRECT TAXES
8.72
5. Where and by when to apply for registration?
Person who is liable to be registered A casual taxable person or a non-

under section 22 or section 24 resident taxable person
•in every such State/UT in which he is •in every such State/UT in which he is
so liable so liable
•within 30 days from the date on •at least 5 days prior to the
which he becomes liable to commencement of business
registration
6. Voluntary Registration and UIN
•Person not liable to be registered under

Voluntary Registration sections 22/24 may get himself registered
voluntarily.
•In respect of supplies to some notified

Unique Identification agencies of United Nations organisation,
Number (UIN) multinational financial institutions and
other organisations, a UIN is issued.
7. Effective date of registration
Application submitted
within 30 days of the •Effective date is the date on which he
applicant becoming liable becomes liable to registration
to registration
Application submitted
after 30 days of the •Effective date is date of grant of
applicant becoming liable registration
to registration

REGISTRATION 7.73
8. Procedure for registration

Procedure for registration has been depicted by way of a diagram as
follows:
Part I
Every person liable to get registered and person seeking voluntary registration shall,
before applying for registration, declare his PAN, mobile number, e-mail address,
State/UT in Part A of FORM GST REG-01 on GST Common Portal.
PAN, mobile number PAN validated online by Mobile number and email
& e-mail address are Common Portal from verified through one-time
validated. CBDT database password sent to it.
Temporary Reference Number (TRN) is generated and communicated to the applicant

on the validated mobile number and e-mail address.
Using TRN, applicant shall electronically submit application in Part B of

application form, along with specified documents at the Common Portal, after
undergoing aadhaar authentication for grant of registration.
On receipt of such application, an acknowledgement in the prescribed form shall be

issued to the applicant electronically. A Causal Taxable Person (CTP) applying for
registration gets a TRN for making an advance deposit of tax in his electronic cash
ledger and an acknowledgement is issued only after said deposit.
Application shall be forwarded to the Proper Officer (PO).
The procedure after receipt of application by PO is depicted in Part II.

7.74 INDIRECT TAXES
8.74
Part II
Proper Officer examines the application and

accompanying documents.
Proper Officer issues notice electronically,

If same are within 3 working days✥ from application
found in submission date thereby seeking
No
order? clarification, information or documents
from the applicant.
✥ notice may be issued not later than
Yes 21 days from application submission
date in case where a person fails to
undergo Aadhaar authentication/does
within 3
working days
from the date
If applicant has furnished the clarification**, No
information or documents within 7 working days
of submission
from receipt of notice?
of application
Yes
If proper officer is satisfied with it?
No
Yes
Proper officer will grant within 7 working days from the date
registration certificate in of receipt of information/
Form GST REG-06 clarification/ documents
Proper officer may reject the

application for reasons to be
recorded in writing.
Deemed Approval of Application

If PO fails to take any action -
• within 3 working days from the date of submission of application in case of
**Clarification
successful includes
Aadhaar modification/correction
authentication of particulars
or exemption fromdeclared in the application
applicability for
of Aadhaar
registration, other than PAN, State, Mobile No. & E-mail address.
authentication, or
• within 21 days from the date of submission of application where a person fails to
undergo Aadhaar authentication or doesn’t opt for the same, or
• within 7 working days from the date of receipt of clarification, information or
documents furnished by the applicant,
the application for grant of registration shall be deemed to have been approved.

REGISTRATION 7.75
9. Special procedure for registration of CTD and NRTD
Casual Taxable Person Non-resident Taxable Person
A Casual taxable person is one

who has a registered business in
some State in India, but wants to A Non-Resident taxable
effect supplies from some other person is one who is a
State in which he is not having any foreigner and occasionally
fixed place of business. wants to effect taxable
supplies from any State in
Such person needs to register in India, and for that he needs
the State from where he seeks to GST registration.
supply as a Casual taxable person.
Casual Taxable Person Non-resident taxable person
GST law prescribes special procedure for registration, as also for extension of the
operation period of such Casual or Non-Resident taxable persons.
They have to apply for registration at least 5 days in advance before making any
supply.
Registration is granted to them or period of operation is extended only after

they make advance deposit of the estimated tax liability.
Registration is granted to them for the period specified in the registration

application or 90 days from the effective date of registration.

7.76 INDIRECT TAXES
8.76
10. Amendment of Registration
Except for the changes in some core information in the registration application,
a taxable person shall be able to make amendments without requiring any
specific approval from the tax authority.
In case there is change in core fields of information, the taxable person will
apply for amendment within 15 days of the event necessitating the change.
The Proper Officer, then, will approve the amendment within the next 15 days.
For changes in non-core fields, no approval of the Proper Officer is required,

and the amendment can be affected by the taxable person on his own on the
common portal.
11. Cancellation or suspension of registration and revocation of

cancellation of registration
Registration
can be --
--Business Registration
cancelled can be A registered person has
discontinued/ contravened the prescribed
either by cancelled
proper Transferred/ provisions
by the
officer or Amalgamated with
proper
on an other legal entity/ officer on A registered person has not
application Demerged or his own filed returns for continuous 6
of the Otherwise disposed of months (3 months for
registered composition supplier)
person Change in the
constitution of the Voluntarily registered person
business has not commenced the
business within 6 months
from the date of registration
Taxable person no
longer liable to be Registration was obtained by
registered means of fraud, wilful
misstatement or suppression
of facts

REGISTRATION 7.77
Once a registered person has applied for cancellation of registration or the proper officer
seeks to cancel his registration, proper officer may suspend his registration during
pendency of proceedings relating to cancellation of registration filed by such registered
person.
Procedure for cancellation
Where the registered person Where the proper officer cancels

applies for cancellation the registration
Registered person seeking cancellation shall PO shall issue a SCN to the registered
apply for the same within 30 days of person who has to reply to said notice
occurrence of the event warranting within 7 days.
cancellation, in prescribed form, furnishing
the details of inputs held in stock or inputs
contained in semi-finished/finished goods Proceedings shall be Cancellation
held in stock and of capital goods held in dropped order shall
stock on the date from which cancellation of be issued
registration is sought, liability thereon, within 30
payment, if any made & relevant documents. If reply Where instead of days of reply
to SCN replying to SCN, person to SCN
is furnishes all pending where
Proper officer (PO) shall issue the order satisfa returns & makes full registration
of cancellation within 30 days of ctory payment of tax along is liable to
submission of application for the same. with interest & late fee. be cancelled
Revocation of cancellation
In case where registration is cancelled suo-motu by the proper officer, the taxable person
can apply within 30 days of service of cancellation order, requesting the officer for revoking
the cancellation ordered by him.
However, before so applying, the person has to make good the defaults (by filing all
pending returns, making payment of all dues and so) for which the registration was
cancelled by the officer.
If satisfied, the proper officer will revoke the cancellation earlier ordered by him.
However, if the officer concludes to reject the request for revocation of cancellation, he will
first observe the principle of natural justice by way of issuing notice to the person and
hearing him on the issue.

7.78 INDIRECT TAXES
8.78
1. Determine the effective date of registration in following cases:
(a) The aggregate turnover of Dhampur Footwear Industries of Delhi has
exceeded the applicable threshold limit of ` 40 lakh on 1st September. It
submits the application for registration on 20th September. Registration
certificate is granted to it on 25th September.
(b) Mehta Teleservices is an architect in Lucknow. Its aggregate turnover
exceeds ` 20 lakh on 25th October. It submits the application for
registration on 27th November. Registration certificate is granted to it
on 5th December.
2. In order to be eligible for grant of registration, a person must have a
Permanent Account Number issued under the Income- tax Act, 1961. State
one exception to it.
3. State which of the following suppliers are liable to be registered:
(a) Agent supplying taxable goods on behalf of some other taxable person
and its aggregate turnover does not exceed the applicable threshold
limit during the financial year.
(b) An agriculturist who is only engaged in supply of produce out of
cultivation of land and its aggregate turnover exceeds the applicable
threshold limit during the financial year.
4. Pure Oils, Delhi has supplied machine oil and high-speed diesel in the month of
April as per the details given in table below. Pure Oils is not yet registered.
Sl. Particulars Amount (`)*

No.
(i) Supply of machine oil in Delhi 15,00,000
(ii) Supply of high speed diesel in Delhi 10,00,000
(iii) Supply of machine oil made in Punjab by Pure 10,00,000
Oils from its branch located in Punjab
*excluding GST
Determine whether Pure Oils is liable for registration.
5. What will be your answer if in question 8 above, in S.No. (ii), Pure Oils supplies
the high speed diesel in Delhi in the capacity of an agent of Mixed Oils Ltd.?

REGISTRATION 7.79
6. Examine whether the supplier of goods is liable to get registered in the

following independent cases:-
(i) Raghav of Assam is exclusively engaged in intra-State taxable supply of
readymade garments. His turnover in the current financial year (FY)
from Assam showroom is ` 33 lakh. He has another showroom in
Tripura with a turnover of ` 11 lakh in the current FY.
(ii) Pulkit of Panjim, Goa is exclusively engaged in intra-State taxable
supply of shoes. His aggregate turnover in the current financial year is
` 22 lakh.
(iii) Harshit of Himachal Pradesh is exclusively engaged in intra-State
supply of pan masala. His aggregate turnover in the current financial
year is ` 24 lakh.
7. Examine whether the supplier is liable to get registered in the following
independent cases:-
(i) Ankit of Assam is exclusively engaged in intra-State supply of taxable
services. His aggregate turnover in the current financial year is ` 25
lakh.
(ii) Sanchit of Assam is engaged in intra-State supply of both taxable goods
and services. His aggregate turnover in the current financial year is `
30 lakh.
8. What are the advantage of taking registration in GST?
9. Can a person without GST registration collect GST and claim ITC?
10. If a person is making taxable supplies from different States, with the same
PAN number, can he operate with a single registration?
11. Can a person having multiple places of business in a State obtain separate
registrations for each place of business?
12. Is there a provision for a person to get himself voluntarily registered though
he may not be liable to pay GST?
13. Can the Department, through the proper officer, suo-moto proceed to register
a person under GST?
14. Whether the registration granted to any person is permanent?
15. Is it necessary for the UN bodies to get registration under GST?

7.80 INDIRECT TAXES
8.80
16. What is the responsibility of the taxable person making supplies to UN
bodies?
17 What is the validity period of the registration certificate issued to a casual
taxable person and non- resident taxable person?
18. What happens when the registration is obtained by means of willful mis-
statement, fraud or suppression of facts?
19 Is there an option to take centralized registration for services under GST Law?
20. What could be the liabilities (in so far as registration is concerned) on transfer
of a business?
21. At the time of registration, will the assessee have to declare all his places of
business?
22. Does cancellation of registration impose any tax obligations on the person
whose registration is so cancelled?
12. ANSWERS/HINTS
1. (a) Every supplier becomes liable to registration if his turnover exceeds
the applicable threshold limit [` 40 lakh in this case] in a finacial year
[Section 22 read with Notification No. 10/2019 CT dated 07.03.2019].
Since in the given case, the turnover of Dhampur Industries exceeded
` 40 lakh on 1st September, it becomes liable to registration on said
date.
Further, since the application for registration has been submitted
within 30 days from such date, the registration shall be effective from
the date on which the person becomes liable to registration
[Section 25 read with rule 10]. Therefore, the effective date of
registration is 1st September.
(b) Since in the given case, the turnover of Mehta Teleservices exceeds
the applicable threshold limit [` 20 lakh] on 25th October, it becomes
liable to registration on said date.
Further, since the application for registration has been submitted after
30 days from the date such person becomes liable to registration, the
registration shall be effective from the date of grant of registration.
Therefore, the effective date of registration is 5th December.

REGISTRATION 7.81
2. A Permanent Account Number is mandatory to be eligible for grant of

registration. One exception to this is a non-resident taxable person. A non-
resident taxable person may be granted registration on the basis of other
prescribed documents instead of PAN. He has to submit a self-attested copy
of his valid passport along with the application signed by his authorized
signatory who is an Indian Resident having valid PAN and application will be
submitted in a different prescribed form [Section 25(6) & (7)].
3. (a) Section 22 stipulates that every supplier becomes liable to registration
if his turnover exceeds the applicable threshold limit in a financial
year. However, as per section 24, a person making taxable supply of
goods/services or both on behalf of other taxable persons whether as
an agent or not is liable to be compulsorily registered even if its
aggregate turnover does not exceed the applicable threshold limit
during the financial year.
(b) As per section 23, an agriculturist who is only engaged in supply of
produce out of cultivation of land is not required to obtain registration
even if his turnover exceeded the applicable threshold limit for
registration.
4. As per section 22 read with Notification No. 10/2019 CT dated 07.03.2019, a
makes a taxable supply of goods and/or services, if his aggregate turnover in a
financial year exceeds the threshold limit. The threshold limit for a person
making exclusive intra-State taxable supplies of goods is as under:-
(a) ` 10 lakh for the Special Category States of Mizoram, Tripura, Manipur
and Nagaland.
(b) ` 20 lakh for the States, namely, States of Arunachal Pradesh,
Meghalaya, Puducherry, Sikkim, Telangana and Uttarakhand.
(c) ` 40 lakh for rest of India except persons engaged in making supplies of
ice cream and other edible ice, whether or not containing cocoa, Pan
masala and Tobacco and manufactured tobacco substitutes.
The threshold limit for a person making exclusive taxable supply of services
or supply of both goods and services is as under:-
and Nagaland.

7.82 INDIRECT TAXES
8.82
As per section 2(6), aggregate turnover includes the aggregate value of:
(i) all taxable supplies,
(ii) all exempt supplies,
(iii) exports of goods and/or services and
(iv) all inter-State supplies of persons having the same PAN.
The above is computed on all India basis. Further, the aggregate turnover
excludes central tax, State tax, Union territory tax, integrated tax and cess.
Moreover, the value of inward supplies on which tax is payable under reverse
charge is not taken into account for calculation of ‘aggregate turnover’.
Section 9(2) provides that CGST is not leviable on five petroleum products i.e.
petroleum crude, motor spirit (petrol), high speed diesel, natural gas and
aviation turbine fuel. As per section 2(47), exempt supply includes non-
taxable supply. Thus, supply of high speed diesel in Delhi, being a non-
taxable supply, is an exempt supply and is, therefore, includible while
computing the aggregate turnover.
In the backdrop of the above-mentioned discussion, the aggregate turnover
of Pure Oils for the month of April is computed as under:
S. No. Particulars Amount

(in `)
(i) Supply of machine oils in Delhi 15,00,000
(ii) Add: Supply of high speed diesel in Delhi 10,00,000
(iii) Add: Supply of machine oil made by Pure Oils 10,00,000

from its branch located in Punjab
Aggregate Turnover 35,00,000
Pure Oils is making exclusive supply of goods and hence the threshold limit
for registration would be ` 40,00,000. Since the aggregate turnover does not
exceed ` 40,00,000, Pure Oils is not liable to be registered.
5. In case Pure Oils makes the supply in capacity of an agent of Mixed Oils
Ltd.:
Section 24 provides that an agent who is engaged in making taxable
supplying of goods on behalf of other taxable persons, shall be liable to

REGISTRATION 7.83
obtain registration irrespective of the threshold turnover limit. However, in

the present case, if Pure Oils supply high speed diesel on behalf of Mixed
Oil Ltd. in Delhi as its agent, it shall still not be liable to obtain registration
in Delhi since section 24 comes into play only when agent is making taxable
supply of goods on behalf of principal whereas in the given case, Pure Oils
is supplying non-taxable goods on behalf of Mixed Oils Ltd.
person making exclusive intra-State taxable supplies of goods is as under:-
and Nagaland.
(b) ` 20 lakh for the States, namely, States of Arunachal Pradesh,
Meghalaya, Puducherry, Sikkim, Telangana and Uttarakhand.
(c) ` 40 lakh for rest of India except persons engaged in making supplies
of ice cream and other edible ice, whether or not containing cocoa,
Pan masala and Tobacco and manufactured tobacco substitutes.
In the light of the afore-mentioned provisions, the answer to the
independent cases is as under:-
(i) Raghav is eligible for higher threshold limit of turnover for
registration, i.e. ` 40 lakh as he is exclusively engaged in intra-State
supply of goods. However, since Raghav is engaged in supplying
readymade garments from a Special Category State i.e. Tripura, the
threshold limit gets reduced to ` 10 lakh. Thus, Raghav is liable to get
registered under GST as his turnover exceeds `10 lakh. Further, he is
required to obtain registration in both Assam and Tripura as he is
making taxable supplies from both the States.
(ii) The applicable threshold limit for registration for Pulkit in the given
case is ` 40 lakh as he is exclusively engaged in intra-State taxable
supply of goods in Goa. Thus, he is not liable to get registered under
GST as his turnover is less than the threshold limit.
(iii) Harshit being exclusively engaged in supply of pan masala is not
eligible for higher threshold limit of `40 lakh. The applicable
threshold limit for registration in this case is `20 lakh. Thus, Harshit is
liable to get registered under GST.

7.84 INDIRECT TAXES
8.84
person making exclusive taxable supply of services or supply of both goods
and services is as under:-
and Nagaland.
(i) Though Ankit is dealing in Assam, he is not entitled for higher
threshold limit for registration as the same is applicable only in case of
exclusively supply of goods and he is exclusively engaged in providing
services. Thus, the applicable threshold limit for registration in this
case is ` 20 lakh and hence, Ankit is liable to get registered under GST.
(ii) Since Sanchit is engaged in supply of both taxable goods and services,
the applicable threshold limit for registration in his case is ` 20 lakh.
Thus, Sanchit is liable to get registered under GST as his turnover is
more than the threshold limit.
8. Registration will confer following advantages to the business:
 Legally recognized as supplier of goods or services.
 Proper accounting of taxes paid on the input goods or services which can
be utilized for payment of GST due on supply of goods or services or
both by the business.
 Legally authorized to collect tax from his purchasers and pass on the
credit of the taxes paid on the goods or services supplied to purchasers
or recipients.
 Become eligible to avail various other benefits and privileges rendered
under the GST laws.
9. No, a person without GST registration can neither collect GST from his
customers nor can claim any input tax credit of GST paid by him.
10. No. Every person who is liable to take a registration will have to get
registered separately for each of the States where he has a business
operation (and making taxable supplies) provided his aggregate turnover
exceeds applicable threshold limit.

REGISTRATION 7.85
11. Yes. In terms of the proviso to sub-section (2) of section 25, a person having
multiple places of buiness in a State may obtain a separate registration for
each place of business, subject to such conditions as may be prescribed.
12. Yes. In terms of sub-section (3) of section 25, a person, though not liable to
be registered under sections 22 or 24 may get himself registered voluntarily,
and all provisions of this Act, as are applicable to a registered taxable
person, shall apply to such person.
13. Yes. In terms of sub-section (8) of section 25, where a person who is liable
to be registered under GST law fails to obtain registration, the proper officer
may, without prejudice to any action which may be taken under CGST Act,
or under any other law for the time being in force, proceed to register such
person in the manner as is prescribed in the CGST Rules.
14. Yes, the registration certificate once granted is permanent unless
surrendered, cancelled, suspended or revoked.
15. In terms of section 25(9) of the CGST Act, all notified UN bodies, Consulate
or Embassy of foreign countries and any other class of persons so notified
would be required to obtain a unique identification number (UIN) from the
GST portal.
The structure of the said ID would be uniform across the States in
conformity with GSTIN structure and the same will be common for the
Centre and the States. This UIN will be needed for claiming refund of taxes
paid on notified supplies of goods and services received by them, and for
any other purpose as may be notified.
16. The taxable supplier making supplies to UN bodies is expected to mention
the UIN on the invoices and treat such supplies as supplies to another
registered person (B2B).
17. In terms of section 27(1) read with proviso thereto, the certificate of
registration issued to a “casual taxable person” or a “non-resident taxable
person” shall be valid for a period specified in the application for
registration or 90 days from the effective date of registration, whichever is
earlier. However, the proper officer, at the request of the said taxable
person, may extend the validity of the aforesaid period of 90 days by a
further period not exceeding 90 days.
18. In such cases, the registration may be cancelled with retrospective effect by
the proper officer [Section 29(2)(e)].

7.86 INDIRECT TAXES
8.86
19. No, the tax paper has to take separate registration in every State from
where he makes taxable supply of services.
20. The transferee or the successor shall be liable to be registered with effect
from such transfer or succession and he will have to obtain a fresh
registration with effect from the date of such transfer or succession [Section
22(3)].
21. Yes. The principal place of business and place of business have been
separately defined under section 2(89) & 2(85) of the CGST Act respectively.
The taxpayer will have to declare the principal place of business as well as
the details of additional places of business in the registration form.
22. Yes, as per section 29(5) of the CGST Act, every registered taxable person
whose registration is cancelled shall pay an amount, by way of debit in the
electronic cash ledger, equivalent to the credit of input tax in respect of
inputs held in stock and inputs contained in semi-finished or finished goods
held in stock or capital goods or plant and machinery on the day
immediately preceding the date of such cancellation or the output tax
payable on such goods, whichever is higher.

REGISTRATION 7.87
AMENDMENTS MADE VIDE THE FINANCE (NO. 2) ACT, 2020

The Finance Act, 2020 has become effective from 27.03.2020. However, most of the
amendments made in the CGST Act and IGST Act vide the Finance Act, 2020 would
become effective only from a date to be notified by the Central Government in the
Official Gazette. Such a notification has not been issued 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 such notification is issued by the Central
Government.
In the table given below, the existing provisions 24 relating to sections 29 and 30 are
Once the announcement for applicability of such amendments for examination(s) is
made by the ICAI, students should read the provisions given hereunder in place of
the related provisions discussed in the Chapter.

Section 29(1) Section 29(1) Section 29(1)(c) is

“The proper officer may, “The proper officer may, being amended to
either on his own motion either on his own motion enable the proper
……………….where: ……………….where: officer to cancel
(c) the taxable person, (c) the taxable person is the registration of
other than the person no longer liable to be a person who has
registered under sub- registered under section 22 taken voluntary
section (3) of section 25, is or section 24 or intends to registration under
no longer liable to be optout of the registration section 25(3) and
registered under section voluntarily made under wants to optout
22 or section 24.” sub-section (3) of section from the
25.” registration so
taken.
24

7.88 INDIRECT TAXES
8.88
Section 30(1) Section 30(1) Proviso to section
Subject to such conditions Subject to such conditions 30(1) is being
………………………cancellation ………………………cancellation substituted so as
order. order. to empower the
Provided that the Provided that such period jurisdictional tax
registered person who may, on sufficient cause authorities to
was served notice under being shown, and for extend the period
sub- section (2) of section provided to file an
reasons to be recorded in
29 in the manner as application for
writing, be extended,—
provided in clause (c) or revocation of
(a) by the Additional
clause (d) of sub-section cancellation of
Commissioner or the Joint
(1) of section 169 and who registration.
Commissioner, as the
could not reply to the said
case may be, for a period
notice, thereby resulting
not exceeding thirty days;
in cancellation of his
(b) by the Commissioner,
registration certificate and
for a further period not
is hence unable to file
exceeding thirty days,
application for revocation
of cancellation of beyond the period specified
registration under sub- in clause (a).”
section (1) of section 30 of
the Act, against such
order passed up to 31-3-
2019, shall be allowed to
file application for
of the registration not
later than 22-7-2019.

CHAPTER 8
TAX INVOICE; CREDIT
AND DEBIT NOTES;
E-WAY BILL
LEARNING OUTCOMES
 describe and analyse the provisions relating to tax invoice in case of taxable
supply of goods and in case of taxable supply of services - time-limit and
manner of issuing the same
 enumerate the particulars of a tax invoice
 understand the provisions relating to e-invoicing
 explain the provisions relating to revised tax invoice, bill of supply, receipt
voucher, refund voucher, payment voucher, etc.
 identify the cases where no tax invoice is required to be issued and identify
the suppliers of taxable service who are permitted to issue any document
other than tax invoice
 explain the provisions relating to transportation of goods without issuance
of invoice
 describe the provisions relating to issuance of credit and debit notes
 explain the provisions relating to prohibition of unauthorised collection of tax
 describe the provisions relating to amount of tax to be indicated in tax
invoice and other documents.
 explain the provisions of e-way bill

8.2 INDIRECT TAXES
Revised Tax
Invoice
Consolidated
Tax Invoice
Tax Invoice, Credit and Debit Notes; E-way Bill
Bill of Supply
Receipt
Tax invoice
Voucher
Payment
Credit and Debit notes
Voucher
Prohibition of unauthorised collection fo tax Refund Voucher
Amount of tax to be indicated in tax invoice

Delivery challan
and other documents
E-way Bill
1. INTRODUCTION
An invoice is a commercial
instrument issued by a supplier of
goods/services to a recipient. It
identifies both the parties
involved, and lists, describes the goods sold/services supplied,

quantifies the items sold, shows the date of shipment and mode
of transport, prices and discounts, if any, and the delivery and
payment terms (in case of supply of goods).

TAX INVOICE; CREDIT AND DEBIT NOTES; E-WAY BILL 8.3
Invoicing is very crucial aspect for ensuring tax compliance under any indirect
taxation system. In order to ensure transparency, issuance of invoice for every
taxable transaction is a pre-requisite. In case of supply of goods or provision of
services, an invoice is raised by the supplier of such goods or services to the
recipient of the same. Tax invoice acts as a document evidencing the payment
of the value of the goods or services or both as also the tax portion in the same.
In certain cases, an invoice serves as a demand for payment and becomes a
document of title when paid in full.
Under the GST regime, an “invoice” or “tax invoice” means the tax invoice referred to
in section 31 of the CGST Act, 2017. This section mandates the issuance of an invoice
or a bill of supply for every supply of goods or services.
Under GST, a tax invoice is an important document. It not only evidences supply of
goods or services, but is also an essential document for the recipient to avail Input
Tax Credit (ITC). A registered person cannot avail input tax credit unless he is in
possession of a tax invoice or a debit note.
The provisions relating to tax invoices, debit and credit notes are contained in
Chapter VII - Tax Invoice, Credit and Debit Notes [Sections 31 to 34] of the CGST
Act and Chapter-VI: Tax Invoice, Credit and Debit Notes [Rules 46 to 55A] of
Central Goods and Services (CGST) Rules, 2017. Further, E-way Bill provisions
discussed in this chapter are contained in section 68 read with rules 138, 138A,
138B, 138C, 138D & 138E [Chapter XVI] of the CGST Rules, 2017. State GST laws
also prescribe identical provisions in relation to Tax Invoice; Credit and Debit
Notes; E-way Bill.
Provisions of Tax invoice; Credit and Debit Notes; E-way Bill under CGST Act
have also been made applicable to IGST Act vide section 20 of the IGST Act.
Before proceeding to understand the provisions of Tax Invoice, Credit and Debit
Notes, E-way Bill, let us first go through few relevant definitions.

8.4 INDIRECT TAXES
Credit note: means a document issued by a registered person under

sub-section (1) of section 34 [Section 2(37)].
Debit note: means a document issued by a registered person under
Continuous supply of goods: means [Section 2(32):
a supply of goods which is provided, or agreed to be provided,

continuously or on recurrent basis
under a contract
whether or not by means of a wire, cable, pipeline or other conduit, and
for which the supplier invoices the recipient on a regular or periodic basis
and
includes supply of such goods as the Government may, subject to such
conditions, as it may, by notification, specify
Continuous supply of services: means [Section 2(33)]:
supply of services which is provided, or agreed to be provided,

continuously or on recurrent basis
under a contract
for a period exceeding 3 months with periodic payment obligations and
includes supply of such services as the Government may, subject to such

conditions, as it may, by notification, specify
Document: includes written or printed record of any sort and electronic

record as defined in clause (t) of section 2 of the Information
Technology Act, 2000 [Section 2(41)].

Exempt supply: means supply of any goods or services or both which

attracts nil rate of tax or which may be wholly exempt from tax under
section 11, or under section 6 of the Integrated Goods and Services Tax
Act, and includes non-taxable supply [Section 2(47)].
Invoice or tax invoice: means the tax invoice referred to in section 31
[Section 2(66)].
Quarter: shall mean a period comprising three consecutive calendar
months, ending on the last day of March, June, September and
December of a calendar year [Section 2(92)].
Return: means any return prescribed or otherwise required to be furnished
by or under this Act or the rules made thereunder [Section 2(97)].
3. TAX INVOICE [SECTION 31]
Section 31 Tax invoice
(1) A registered person supplying taxable goods shall, before or at

the time of,—
(a) removal of goods for supply to the recipient, where the
supply involves movement of goods; or
(b) delivery of goods or making available thereof to the recipient,
in any other case
issue a tax invoice showing the description, quantity and value of
goods, the tax charged thereon and such other particulars as may
be prescribed:
the Council, by notification, specify the categories of goods or
supplies in respect of which a tax invoice shall be issued, within
such time and in such manner as may be prescribed.

8.6 INDIRECT TAXES
(2) A registered person supplying taxable services shall, before or

after the provision of service but within a prescribed period, issue
a tax invoice, showing the description, value, tax charged thereon
and such other particulars as may be prescribed:
the Council, by notification and subject to such conditions as may
be mentioned therein, specify the categories of services in respect
of which––
(a) any other document issued in relation to the supply shall be
deemed to be a tax invoice; or
(3) Notwithstanding anything contained in sub-sections (1) and (2)–

(a) a registered person may, within one month from the date of
issuance of certificate of registration and in such manner as
may be prescribed, issue a revised invoice against the invoice
already issued during the period beginning with the effective
date of registration till the date of issuance of certificate of
registration to him;
(b) a registered person may not issue a tax invoice if the value of
the goods or services or both supplied is less than two hundred
rupees subject to such conditions and in such manner as may
be prescribed;
(c) a registered person supplying exempted goods or services or
both or paying tax under the provisions of section 10 shall
issue, instead of a tax invoice, a bill of supply containing such
particulars and in such manner as may be prescribed:
Provided that the registered person may not issue a bill of
supply if the value of the goods or services or both supplied is
less than two hundred rupees subject to such conditions and in
such manner as may be prescribed;
(d) a registered person shall, on receipt of advance payment with
respect to any supply of goods or services or both, issue a receipt
voucher or any other document, containing such particulars as
may be prescribed, evidencing receipt of such payment;

(e) where, on receipt of advance payment with respect to any

supply of goods or services or both the registered person
issues a receipt voucher, but subsequently no supply is
made and no tax invoice is issued in pursuance thereof, the
said registered person may issue to the person who had
made the payment, a refund voucher against such payment;
(f) a registered person who is liable to pay tax under sub-
section (3) or sub-section (4) of section 9 shall issue an
invoice in respect of goods or services or both received by
him from the supplier who is not registered on the date of
receipt of goods or services or both;
(g) a registered person who is liable to pay tax under sub-section
(3) or sub-section (4) of section 9 shall issue a payment
voucher at the time of making payment to the supplier.
(4) 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.
(5) (5) Subject to the provisions of clause (d) of sub-section (3), in

case of continuous supply of services,––
(a) where the due date of payment is ascertainable from
the contract, the invoice shall be issued on or before
the due date of payment;
(b) where the due date of payment is not ascertainable
from the contract, the invoice shall be issued before or
at the time when the supplier of service receives the
payment;
(c) where the payment is linked to the completion of an
event, the invoice shall be issued on or before the
date of completion of that event.
(6) In a case where the supply of services ceases under a contract

before the completion of the supply, the invoice shall be issued at
the time when the supply ceases and such invoice shall be issued
to the extent of the supply made before such cessation.

8.8 INDIRECT TAXES
(7) Notwithstanding anything contained in sub-section (1), where the

goods being sent or taken on approval for sale or return are
removed before the supply takes place, the invoice shall be issued
before or at the time of supply or six months from the date of
removal, whichever is earlier.
Explanation.––For the purposes of this section, the expression “tax invoice” shall
include any revised invoice issued by the supplier in respect of a supply made earlier.
Section 31A Facility of digital payment to recipient
The Government may, on the recommendations of the

Council, prescribe a class of registered persons who shall
provide prescribed modes of electronic payment to the
recipient of supply of goods or services or both made by him
and give option to such recipient to make payment
accordingly, in such manner and subject to such conditions
and restrictions, as may be prescribed.
ANALYSIS
The provisions relating to Tax Invoice are
provided under section 31 of the CGST Act as
well as Chapter-VI: Tax Invoice, Credit and Debit
Notes of Central Goods and Services (CGST)
Rules, 2017. The provisions contained in these
rules have been incorporated at the relevant
places.
There is no format prescribed for the Tax Invoice. Only certain fields have been
prescribed as mandatory fields.
A. TAX INVOICE ISSUED BY A SUPPLIER OF TAXABLE GOODS/ TAXABLE
SERVICES
A tax invoice shall be issued by a registered person supplying taxable goods
or taxable services or both. Such tax invoice shall show the prescribed
particulars.

(i) Time limit for issuance of invoice [Sections 31(1), (2), (4) & (5) read
with rule 47]
The time for issuing an invoice would depend on the
nature of supply viz. whether it is a supply of goods or
supply of services.
A registered person supplying taxable goods shall issue

a tax invoice, before or at the time of removal of goods
(where supply involves movement of goods) or in any
other case, before or at the time of delivery or making available thereof to
the recipient.
The Government may, on the recommendations

of the Council, by notification, specify the
categories of goods or supplies in respect of
which a tax invoice shall be issued, within such
time and in such manner as may be prescribed.
In case of supply of taxable services, tax invoice may be issued before or
after the provision of services, but within the specified period. Government
may notify the categories of services in respect of which any other
document issued in relation to supply shall be deemed to be a tax invoice or
tax invoice may not be issued.
In case of taxable In case of taxable supply of services

supply of goods
Invoice shall be issued Invoice shall be issued before or after the

before or at the time provision of service, but within a period of 30
of,— days* from the date of supply of service.
*45 days in case of an insurer or banking
(a) removal of goods company or financial institution, including a
for supply to the non- banking financial company (NBFC)
recipient, where
the supply
involves

8.10 INDIRECT TAXES
movement of An insurer or a banking company or a

goods; or financial institution, including NBFC, or a
telecom operator, or any other class of
(b) delivery of goods supplier of services as may be notified by
or making the Government, making taxable supplies
available thereof of services between distinct persons as
to the recipient, in specified in section 25
any other case.
In case of continuous In case of continuous supply of services

supply of goods
Where successive Where the invoice shall be

statements of issued
accounts/ successive
payments are involved, (a) due date of payment on or before the
the invoice shall be is ascertainable from due date of
issued before/at the the contract payment
time each such
(b) due date of before or at the
statement is issued or
payment is not time when the
each such payment is
ascertainable from the supplier of service
received.
contract receives the
payment
(c) payment is linked to on or before the

the completion of an date of completion
event of that event.

Ritu Manufacturers, Delhi supplies goods to Prakhar Electronics,

Haryana. The goods were removed from its factory in Delhi on
23rd September. Ritu Manufacturers needs to issue a tax invoice
on or before 23rd September.
Katyani Security Services Ltd. provides security services to Royal
Jewellers for their Jewellery Exhibition to be organized on 5th
October. Katyani Security Services Ltd. needs to issue a tax invoice
within 30 days of supply of security services, i.e. on or before 4th November.
(ii) Where supply of services ceases before its completion [Section 31(6)]
In a case where the supply of services ceases
under a contract before the completion of the
supply, the invoice shall be issued at the time
when the supply ceases and such invoice shall be
issued to the extent of the supply made before
such cessation.
(iii) Goods sent on sale or return basis [Section 31(7)]
Where the goods being sent or taken on approval for sale or return are
removed before the supply takes place, the invoice shall be issued:
(i) before/at the time of supply
or
(ii) 6 months from the date of removal
(iv) Particulars of a tax invoice [Sections 31(1) & (2) read with rule 46]
As discussed earlier, there is no format prescribed for an invoice, but rules
make it mandatory for an invoice to have the following fields (only
applicable fields are to be filled):
Name, address and GSTIN of the supplier;
A consecutive serial number not exceeding 16 characters, in one

or multiple series, containing alphabets/numerals/special
characters hyphen or dash and slash, and any combination
thereof, unique for a FY;

8.12 INDIRECT TAXES
Date of its issue;
If recipient is registered - Name, address and GSTIN or UIN of

recipient
If recipient is unregistered Particulars of invoice

and value of supply is
` 50,000 or more Name and address of the recipient

and the address of delivery, along
with the name of State and its
code
less than ` 50,000 unregistered recipient may still

request the aforesaid details to be
recorded in the tax invoice
HSN code for goods or services;
Description of goods or services;
Quantity in case of goods and unit or Unique Quantity Code

thereof;
Total value of supply of goods or services or both;
Taxable value of supply of goods or services or both taking into

account discount or abatement, if any;
Rate of tax (central tax, State tax, integrated tax, Union territory
tax or cess);
Amount of tax charged in respect of taxable goods or services

(central tax, State tax, integrated tax, Union territory tax or cess);
Place of supply along with the name of State, in case of a supply

in the course of inter-State trade or commerce;
Address of delivery where the same is different from the place of

supply;

Whether the tax is payable on reverse charge basis; and
Signature or digital signature of the supplier or his authorized

representative (not required in case of issuance of an electronic
invoice in accordance with the provisions of the Information
Technology (IT) Act, 2000).
Quick Response code, having embedded Invoice Reference

Number (IRN) in it, in case e-invoice has been issued 1
(v) Number of HSN digits required on tax invoice and class of registered
person not required to mention HSN [Rule 46]
Board may, on the recommendations of the Council, by notification, specify:
(i) the number of digits of Harmonised System of Nomenclature
(HSN) code for goods or services that a class of registered persons
shall be required to mention; or
(ii) a class of supply of goods or services for which specified number
of digits of HSN code shall be required to be mentioned by all
registered taxpayers; and
(iii) the class of registered persons that would not be required to
mention the HSN code for goods or services.
This provision is also applicable to Bill of Supply [The concept of Bill of Supply
is discussed in subsequent paras].
In view of above powers, following has been notified vide Notification No.
12/2017 CT dated 28.06.2017 as amended:
Position effective till 31.03.2021 2
S.No. Annual Turnover (AT) in the Number of Digits of HSN

preceding FY Code
1. AT ≤` 1.5 crores Nil
1
in the manner prescribed under rule 48(4)
2
applicable only for students appearing in May, 2021 examination.

8.14 INDIRECT TAXES
2. ` 5 crores ≥AT >` 1.5 crores 2
3. AT >` 5 crores 4
Position with effect from 01.04.2021 3
S.No. Annual Turnover (AT) Number of Digits of HSN Code

in the preceding FY
1. AT ≤` 5 crores For B2B supply - 4

For B2C supply – 4 (optional)*
2. AT >` 5 crores For B2B supply and B2C supply – 6
*As mentioned above, a registered person having aggregate turnover up

to ` 5 crores in the previous financial year has been exempted from the
requirement of mentioning the HSN Code in the manner specified in
above table in a tax invoice issued by him under the said rules in
respect of supplies made to unregistered persons.
(vi) Manner of issuing the invoice [Sections 31(1) & (2) read with rule 48]
In case of taxable supply of In case of taxable supply of

goods services
Invoice shall be prepared in Invoice shall be prepared in

TRIPLICATE DUPLICATE
3
Notification No. 78/2020 CT dated 15.10.2020 has amended Notification No. 12/2017 CT dated
28.06.2017 thereby revising the HSN requirements in the invoice in the above specified manner.
However, since this amendment will be effective from 01.04.2021, it will not be applicable for May,
2021 examination. It will be applicable for November, 2021 examination. For May, 2021
examination, position of law effective till 31.03.2021 (as given in the preceding table) is applicable.

Triplicate Duplicate
Original copy
Original copy
Duplicate copy
Duplicate copy
Triplicate copy
The serial number of invoices issued during a tax period shall be furnished
electronically [through the Common Portal – www.gst.gov.in], in FORM
GSTR-1 [Details of outward Supplies of goods or services].
Key points from aforesaid discussion have been summarized as follows:

1. All GST taxpayers are free to design their own Tax Invoice Format.
2. The law requires that only certain fields as mandatory fields in the Tax
Invoice. The same have been listed under heading (iv) above. The
mandatory fields have also been circled in the following Sample Tax
Invoice.
3. The time period for issuance of invoice is different for goods and services.
For goods, it is any time before or at its delivery and for services, it is
within 30 days from the date of supply of services.
4. In order to keep the compliance burden low for the small taxpayers,
taxpayers with annual turnover of `1.5 crores need not mention the HSN
code of the goods in the invoices.

8.16 INDIRECT TAXES
Sample Tax Invoice
E-invoicing
The GST Council approved the proposal to introduce electronic-invoice
(hereinafter called as e-invoice) in a phased manner in its 37th meeting
held on 20th September, 2019.
Accordingly, steps have been
taken to introduce 'e-invoicing'
for reporting of business to
business (B2B) invoices to GST
System, beginning from 1st
January 2020 on voluntary
basis. With effect from
1st October, 2020, there is a
switch from voluntary to mandatory e-invoicing for certain notified
category of taxpayers 4.
4
A relaxation has been provided to these notified category of taxpayers till 31.10.2020 vide
Notification No. 73/2020 dated 01.10.2020. In respect of invoices raised by them between
1.10.2020 and 31.10.2020, they are permitted to upload these invoices on e-invoicing portal
within 30 days from the date of invoice.

All registered businesses with an

aggregate turnover (based on PAN)
in any preceding financial year from
2017-18 onwards greater than ` 500
crore (hereinafter referred to as
‘notified persons’) will be required
to issue e-invoices.
Before we proceed further, let us first understand what is ‘e-invoicing’?

E-invoicing is not generation of invoice by a Government portal.
Taxpayers will continue to create their GST invoices on their own
Accounting/Billing/ERP Systems as per e-invoice schema. These
invoices will then be reported to ‘Invoice Registration Portal (IRP)’. On
such reporting, IRP will generate a unique ‘Invoice Reference Number
(IRN)’, digitally sign it and return the e-invoice to the supplier. A GST
e-invoice will be valid only with a valid IRN.
Presently, invoices, credit notes and debit notes, when issued by

notified persons (to registered persons (B2B) or for the purpose of
exports) are covered
under e-invoice.
Though different
documents are
covered, for ease of
reference and
understanding, the
system is referred as
‘e-invoicing’.
Advantages of e-invoicing
E-invoice has many advantages for businesses. One such advantage is

auto-reporting of invoices into GST return and auto-generation of
e-way bill (wherever required). Under e-invoicing, business has to
report the B2B invoice data only once in the e-invoice form and the
same is reported in multiple forms (GSTR-1, e-way bill etc.). E-way bill
can be auto-generated using e-invoice data. GSTR-1 can also be auto-

8.18 INDIRECT TAXES
populated with the e-invoice data. It will become part of the business
process of the taxpayer.
Consequently, there will be a substantial reduction in transcription

errors as same data will get reported to tax department as well as to
the buyer to prepare his inward supplies (purchase) register. On receipt
of information through GST System, buyer can do reconciliation with
his Purchase Order.
Thus, it will facilitate

standardisation and inter-
operability leading to reduction
of disputes among transacting
parties, improve payment
cycles, reduction of processing
costs and thereby greatly
improving overall business
efficiency.
Further, since a complete trail

of B2B invoices is available
with the Department, it will
enable the system-level matching of input tax credit and output tax
thereby reducing the tax evasion.
Last but not the least, e-invoicing will eliminate the fake invoices.
Claiming fictitious input tax credit (ITC) by raising fake invoices is also
one of the biggest challenges currently faced by tax-authorities. The
e-invoice system will help to curb the actions of unscrupulous taxpayers
and reduce the number of fraud cases as the tax authorities will have
access to data in real-time.
E-invoicing statutory provisions
Rule 48(4) stipulates that the e-invoice shall be prepared by notified

class of registered persons, by uploading such particulars as contained

in Form GST INV-01 on the Common GST Electronic Portal 5 and obtain
an IRN (Invoice Reference Number), in prescribed manner and subject
to prescribed conditions and restrictions.
However, the Commissioner may, on the recommendations of the Council,

by notification, exempt a person or a class of registered persons from
issuance of e-invoice under
rule 48(4) for a specified
period, subject to such
conditions and restrictions as
may be specified in the said
notification.
Every invoice, issued by

above persons, in any manner other than the manner specified in the
rule 48(4) shall not be treated as an invoice. Where e-invoicing is
applicable, there is no need of issuing invoice copies in
triplicate/duplicate.
Class of persons notified to mandatorily issue e-invoice
In view of said powers, a registered person (except specified class of

persons 6), whose aggregate turnover in any preceding financial year from
2017-18 onwards exceeds ` 500 crores, has been notified as class of persons
who shall prepare e-invoice in respect of B2B supplies (supply of goods or
services or both to a registered person) or for exports 7. Thus, presently, such
notified persons are not required/allowed to report B2C invoices. However,
they will be brought under e-invoice in the next phase. Further, e-invoicing
5
10 dedicated Invoice Reference Portals have been notified as Common Goods and Service Tax
(GST) Electronic Portal for the purpose of preparing e-invoice. These portals are enlisted in
subsequent paras.
6
Special Economic Zones and insurer or banking company or financial institution including
NBFC, GTA, supplier of passenger transportation service, person supplying services by way of
admission to exhibition of cinematograph films in multiplex screens
7
vide Notification No. 13/2020 CT dated 21.03.2020 as amended

8.20 INDIRECT TAXES
is also not applicable to invoices issued by Input Service Distributor

(ISD).
If the invoice issued by a notified person is in respect of supplies made by

him tax on which is payable under reverse charge under section 9(3),
e-invoicing is applicable.
A taxpayer (say a firm of advocates) having aggregate turnover in

a FY of more than ` 500 crore is supplying services to a company
(who will be discharging tax liability as recipient under reverse
charge mechanism), such invoices have to be reported by said tax payer
(since it is a notified person) to IRP.
On the other hand, where specified category of supplies are received by

notified person from unregistered persons [attracting reverse charge under
section 9(4)] or through import of services, e-invoicing doesn’t arise/ not
applicable. E-invoicing is also not applicable for import of goods (Bills of
Entry).
Exemption from e-invoicing
Following entities are exempt from the mandatory requirement of

e-invoicing:
 Special Economic Zone units**
 Insurer or banking company or financial institution including

NBFC
 GTA supplying services in relation to transportation of goods by

road in a goods carriage
 Supplier of passenger transportation service
 Person supplying services by way of admission to exhibition of

cinematograph films in multiplex screens
Thus, above mentioned entities are not required to issue e-invoices even
if their turnover exceeds ` 500 crore in the preceding financial year
from 2017-18 onwards.

**It is important to note here that only SEZ units and not SEZ
developers are exempt from issuing e-invoices. Thus, SEZ developers
whose turnover exceeds ` 500 crores in any preceding financial year
from 2017-18 onwards are mandatorily required to issue e-invoices.
Further, in case of supplies made by notified persons to SEZ units, e-invoices
need to be issued.
Maharaja Private Limited has an SEZ unit and a regular DTA unit
(both having same PAN). The aggregate total turnover of
Maharaja Private Limited is more than ` 500 crores (considering
both the GSTINs). However, the turnover of DTA unit is below ` 100 crores
for FY 2019-20.
In this scenario, SEZ unit is exempt from e -invoicing. However, e-invoicing

will be applicable to DTA Unit because the aggregate turnover of the legal
entity in this case is > ` 500 crores. The eligibility is based on aggregate
annual turnover on the common PAN.
How e-invoice is generated?
The taxpayer first prepares and generates his invoice using his own
ERP/ accounting/ billing system or manual system 8. The invoice must
conform to the e-invoice schema (standard notified format - discussed
in detail subsequent paras) and must have the mandatory parameters.
The details of this invoice are uploaded/reported by the taxpayer to the

Invoice Registration Portal (IRP). This way taxpayer registers his
supply transaction on IRP. On uploading, IRP returns the e-invoice with
a unique ‘Invoice Reference Number (IRN)’ (explained in detail
subsequent paras) after digitally signing the e-invoice and adding a QR
Code (Quick Response Code). Then, the supplier shares the e-invoice
with the receiver (along with QR Code).
8
For entities not having their own ERP/Software solutions, they can use the free offline utility
(‘bulk generation tool’) downloadable from the e-invoice portal. Through this, invoice data can
be easily reported to IRP and obtain IRN/signed e-invoice

8.22 INDIRECT TAXES
How e-invoice data is consumed by GST System for generation of e-way

bill or populating relevant parts GST Returns?
IRP sends the e-invoice data along with IRN 9 to the GST System as well as
to E-Way Bill System.
The GST system will auto-populate them into GSTR-1 of the supplier and
GSTR-2A of respective receivers. With source marked as ‘e-invoice’, IRN
and IRN date will also be shown in GSTR-1 and GSTR-2A.
The e-invoice schema (discussed subsequently) includes parameters e.g.
‘Transporter ID’ and ‘Vehicle Number’, etc. that are required for creating
and generating e-way bills. These can be entered if available with seller,
at the time of generation of e-invoice so that e-way bill can be created
using this data without any further requirement of data entry by the user.
The e-invoice reporting software already allows reporting of e-invoice and
generation of e-way bill with same data.
9
same as that has been returned by the IRP to the seller

Cancellation/amendment of reported invoice

Where needed, the seller can cancel IRN for an e-invoice already reported
by reporting it on IRP within specified time. Amendment of e-invoice
already uploaded on IRP will be done only on GST portal. Amendment of
invoices is not possible through the IRP.
Implications for businesses
As can be inferred from the above discussion, e-invoicing does not
mean that the invoice needs to be prepared/generated on the
Government portal. It is only intimating the Government portal that
invoice has been issued to the buyer, by registering that particular
invoice on the Government portal. Consequently, businesses will
continue to issue invoices as they were doing earlier. Necessary changes
on account of e-invoicing requirement (i.e. to enable reporting of
invoices to IRP and obtain IRN), be made by ERP/Accounting and
Billing Software providers in their respective software. They need to get
the updated version having this facility.
Important terms
E-invoice Schema
Businesses use various accounting/billing software, each generating and
storing invoices in their own electronic formats. These different formats
are neither understood by GST System nor by the systems of suppliers and
receivers.
An invoice generated by SAP system cannot be read by a machine
which is using ‘Tally’ system, unless a connector is used. With
more than 300 accounting/billing software products, there was no
way to have connectors for all.
In this scenario, ‘e-invoicing’ was introduced aiming at machine-
readability and uniform interpretation. To ensure this complete
‘inter-operability’ of e-invoices across the entire GST eco-system, an
invoice standard is a must. By this, e-invoices generated by one software
can be read by any other software, thereby eliminating the need of
fresh/manual data entry. Since, there was no such standard for e-invoice
available earlier, as a first step, a standard/format for e-invoice has been
finalized.

8.24 INDIRECT TAXES
This uniform standard format (containing specified fields) applicable

for all the businesses across the country is known as ‘e-invoice schema’.
It is notified as Form GST INV-1. E-invoice schema mandates what
particulars shall be reported in electronic format to IRP.
Invoice Registration Portal (IRP)
IRP is the website for uploading/reporting of invoices by the notified
persons. Following IRPs have been notified for the purpose of preparation
of the e-invoice:
www.einvoice1.gst.gov.in
Invoice Reference Number
As seen earlier, GST invoice will be valid only with a valid IRN. IRN is
different from invoice number. Invoice no. (e.g. ABC/1/2019-20) is
assigned by supplier and is internal to business. Its format can differ
from business to business and also governed by relevant GST rules. IRN,
on other hand, is a unique reference number (hash) generated and
returned by IRP, on successful registration of e-invoice, for instance,
35054cc24d97033afc24f49ec4444dbab81f542c555f9d30359dc75794e06bbe
The overall work flow of e-invoice generation, its reporting/registration
and receipt of confirmation is depicted in the diagrams below:
A. Interaction between the business (supplier) and the Invoice
Registration Portal (IRP).

B. Interaction between the IRP and the GST/E-Way Bill Systems and
the Buyer.
Other points:
 The e-invoicing system is also available for the E-Commerce
Operators (ECO) to report the invoices to the Invoice Registration
portal, generated by them on behalf of the suppliers.
 Bulk uploading of invoices to IRP is also possible.

8.26 INDIRECT TAXES
Quick Response (QR) code

Upon successful registration of invoice on IRP, it will
return a signed e-invoice to the supplier with IRN and QR
Code. IRN is embedded in the QR Code which shall be
extracted and printed on the invoice. The QR code
enables quick view, validation and access of the invoices
from the GST system from hand-held devices. The digitally signed QR
code will have a unique IRN which can be verified on the central portal
as well as by an offline app by the officer. This will be helpful for tax
officers checking the invoice offline on the roadside where internet may
not be available all the time.
Dynamic QR code
All B2C invoices issued by a registered person whose aggregate
turnover in any preceding financial year from 2017-18 onwards exceeds
` 500 crores are proposed to have a QR code from December 1, 2020.
Sixth proviso to rule 46 has empowered the Government to specify that
the tax invoice shall have Quick Response (QR) code. Resultantly, it has
been notified 10 that invoice issued by a registered person (except
specified class of persons 11), whose aggregate turnover in a financial
year exceeds ` 500 crores, in respect of B2C supplies (supply of goods or
services or both to an unregistered person) shall have Dynamic QR code.
A Dynamic Quick Response (QR) code made available to buyer by such

registered person through digital display (with payment cross-
reference) shall be deemed to be having QR code. The purpose of this
provision is to enable and encourage digital payments where buyer can
scan the dynamic QR code and make payment from mobile wallet
directly. Today, many shops have static QR code at the payment counter
10
vide Notification No. 14/2020 CT dated 21.03.2020. This notification shall be effective from
01.12.2020.
11
insurer or banking company or financial institution including NBFC, GTA, supplier of passenger
transportation service, person supplying services by way of admission to exhibition of cinematograph
films in multiplex screens, supplier of online information and database access or retrieval (OIDAR)
services. Provisions relating to OIDAR services have been discussed at the Final level.

which is scanned by the buyer, but the buyer has to enter the amount to
be paid to the shop in the mobile payment App. The dynamic QR code,
on the other hand, will have the payment details and thus ‘scan and
pay’ in one go is possible. This has no relevance or applicability to the
e-invoicing in respect to B2B supplies by notified class of taxpayers.
Dynamic QR Code will be generated by the seller himself either on the
Point of Sale (PoS) machine or the invoice issued 12.
B. SPECIAL CASES
(i) Revised Tax Invoice [Section 31(3)(a) read with rule 53]
When issued?
Every registered person who has been
For the purposes of section 31,
granted registration with effect from a
the expression “tax invoice”
date earlier than the date of issuance of
shall include any revised
certificate of registration to him, may
invoice issued by the supplier in
issue Revised Tax Invoices. Such invoices
i respect of a supply made earlier
shall be issued against the invoices
[Explanation to section 31].
already issued during said period.
Revised Tax Invoices shall be issued within 1 month from the date of
issuance of certificate of registration. The words “Revised Invoice” shall
be indicated prominently on such invoices.
This provision is necessary, as a person who becomes
liable for registration has to apply for registration within
30 days of becoming liable for registration. When such
an application is made within the stipulated time period
and registration is granted, the effective date of registration is the date on
which the person became liable for registration.
Thus, there would be a time lag between the date of grant of certificate of
registration and the effective date of registration. For supplies made by such
person during this intervening period, the law enables the issuance of a
revised invoice, so that ITC can be availed by the recipient on such supplies.
12
Discussion on e-invoicing is primarily based on the relevant rules, notifications and FAQS on
e-invoicing hosted on GSTN website.

8.28 INDIRECT TAXES
Revised Tax Invoices to be issued in respect of taxable

supplies effected during this period
Effective date of registration Date of issuance of certificate of

registration
Sarabhai Private Ltd. commenced business of supply of goods on 1st April in

Delhi. Its turnover exceeded the applicable threshold limit on
3rd September. Thus, it became liable to registration on 3rd September. It applied
for registration on 29th September and was granted registration certificate on 5th
October. Since it applied for registration within 30 days of becoming liable to
registration, registration granted is effective from 3rd September. Sarabhai Private
Ltd. may issue Revised Tax Invoices on or before 4th November in respect of taxable
supplies effected between 3rd September and 5th October.
Consolidated Revised Tax Invoices in certain cases
A registered person may issue a Consolidated Revised Tax Invoice in respect
of all taxable supplies made to an unregistered recipient during such period.
Supply 1
Supply 2
Mr.A Supply 3 Mr. B
Consolidated Revised
Registered Supply 4 Tax Invoice Unregistered
Supplier Recipient
Supplies between date of grant of certificate of registration & effective date of registration
However, in case of inter-State supplies, a consolidated Revised Tax Invoice

cannot be issued in respect of all unregistered recipients if the value of a
supply exceeds ` 2,50,000.
Particulars of Revised Tax Invoice
A consecutive serial number not exceeding 16 characters, in one or

multiple series, containing alphabets or numerals or special characters -
hyphen or dash and slash and any combination thereof, unique for a FY;

Date of issue of the document;
Name, address and GSTIN or UIN, if registered, of the recipient;
Name and address of the recipient and the address of delivery, along with
the name of State and its code, if such recipient is un-registered;
Serial number and date of the corresponding tax invoice or, as the case
may be, bill of supply;
Signature/digital signature of the supplier/his authorized representative.
ILLUSTRATION 1
Luv & Kush Pvt. Ltd. of Meghalaya engaged in the supply of gifts items and
repair services, provides you the following details:-
S. No. Particulars Date
1. Commencement of the business of supplying 01st August

goods and services
2. Turnover exceeds ` 10,00,000 on 15th August
3. Turnover exceeds ` 20,00,000 on 05th September
4. Application for registration made on 28th September
5. Registration certificate granted on 06th October
The company seeks your advice as to how it should raise revised tax invoices for
supplies made. Is there any specific provision for issuance of revised tax invoices
to unregistered customers? Explain.
ANSWER
A supplier of both goods and services whose aggregate turnover in a
financial year exceeds ` 20 lakh in a State/UT [` 10 lakh in specified Special
Category States] is liable to apply for registration within 30 days from the
date of becoming liable to registration (i.e., the date of crossing the
threshold limit of ` 20 lakh/ ` 10 lakh) in terms of section 22. Since
Meghalaya is not a specified Special Category State, applicable threshold
limit is ` 20 lakh.

8.30 INDIRECT TAXES
Further, where the application is submitted within said period, the effective
date of registration is the date on which the person becomes liable to
registration; otherwise it is the date of grant of registration.
Every registered person who has been granted registration with effect from
a date earlier than the date of issuance of registration certificate to him,
may issue revised tax invoices within 1 month from the date of issuance of
registration certificate in respect of taxable supplies effected during this
period i.e. from the effective date of registration till the date of issuance of
registration.
Since Luv & Kush Pvt. Ltd. has made the application for registration within
30 days of becoming liable for registration, the effective date of registration
becomes the date on which the company becomes liable to registration i.e.
5th September.
Thus, Luv & Kush Pvt. Ltd. may issue revised tax invoices against the
invoices already issued during the period between effective date of
registration (5th September) and the date of issuance of registration
certificate (6th October), within 1 month from 6th October.
Further, Luv & Kush Pvt. Ltd may issue a consolidated revised tax invoice in
respect of all taxable supplies made to unregistered dealers during such
period. However, in case of inter-State supplies made to unregistered
dealers, a consolidated revised tax invoice cannot be issued in respect of all
the recipients located in a State, if the value of a supply exceeds ` 2,50,000.
(ii) No Tax Invoice required to be issued if value < ` 200 – A consolidated
Tax Invoice can be issued [Section 31(3)(b) read with fourth proviso to
rule 46]
A registered person may not issue a Tax Invoice if:
(i) Value of the goods/services/both supplied < `200,
(ii) the recipient is unregistered; and
(iii) the recipient does not require such invoice.
Instead such registered person shall issue a Consolidated Tax Invoice for
such supplies at the close of each day in respect of all such supplies.
Thus, small taxpayers, like small retailers, doing a large number of small
transactions for upto a value of ` 200 per transaction to unregistered customers

need not issue invoice for every such transaction. They can issue one
consolidated invoice at the end of each day for all transactions done during the
day. However, they need to issue an invoice when the customer demands.
However, this option is not available to a
supplier engaged in making supply of services by
way of admission to exhibition of
cinematograph films in multiplex screens.
Above provision is also applicable to Bill of Supply.
ILLUSTRATION 2
Jain & Sons is a trader dealing in stationery items. It is registered under GST
and has undertaken following sales during the day:
S. No. Recipient of supply Amount (`)

1. Raghav Traders - a registered retail dealer 190
2. Dhruv Enterprises – an unregistered trader 358
3. Gaurav – a painter [unregistered] 500
4. Oberoi Orphanage – an unregistered entity 188
5. Aaradhya – a student [unregistered] 158
None of the recipients require a tax invoice [Raghav Traders being a
composition dealer].
Determine in respect of which of the above supplies, Jain & Sons may issue a
Consolidated Tax Invoice instead of Tax Invoice, at the end of the day.
ANSWER
In the given illustration, Jain & Sons can issue a Consolidated Tax Invoice
only with respect to supplies made to Oberoi Orphanage [worth ` 188] and
Aaradhya [worth ` 158] as the value of goods supplied to these recipients is
less than ` 200 as also these recipients are unregistered and don’t require a
tax invoice.
As regards the supply made to Raghav Traders, although the value of goods
supplied to it is less than ` 200, Raghav Traders is registered under GST. So,
Consolidated Tax Invoice cannot be issued.

8.32 INDIRECT TAXES
Consolidated Tax Invoice can also not be issued for supplies of goods made to
Dhruv Enterprises and Gaurav although both of them are unregistered. The
reason for the same is that the value of goods supplied is not less than ` 200.
(iii) Bill of Supply [Section 31(3)(c) read with rule 49]
Section 31(3)(c) stipulates that a registered person supplying exempted
goods or services or both or a registered person paying tax under
composition levy, shall issue a bill of supply instead of a tax invoice 13.
Person opting for composition levy shall mention the words “composition
taxable person, not eligible to collect tax on supplies” at the top of the bill
of supply issued by him 14.
Supplying exempted goods
or services or both
Tax Bill of
Paying tax under Invoice Supply
Registered
composition levy
Person
Particulars of Bill of Supply
A registered person opting for the composition levy does
not collect tax from the recipient on outward supplies
made by him. Similarly, in case of a registered person supplying exempted
goods and/or services, no tax implications are there. Recipients should not
expect Tax Invoice from such suppliers as they cannot issue tax invoice.
Since no tax is collected from the recipient by a registered person opting for
the composition levy and a registered person supplying exempted goods
and/or services, Bill of Supply issued by such persons does not contain the
details pertaining to rate of tax and amount of tax. Further, value to be
mentioned in the Bill of Supply is not also taxable value.
13
Order No. 3/2019 CT dated 08.03.2019 has stipulated that a person paying tax under
Notification No. 2/2019 will also issue a bill of supply instead of tax invoice.
Fourth proviso to rule 49 has been inserted stipulating the Bill of supply shall have a
14
Quick Response Code. However the same is not yet made effective.

A consecutive serial number not exceeding 16 characters, in one or more

hyphen or dash and slash and any combination thereof, unique for a FY;
Date of its issue;
HSN Code for goods or services;
Description of goods or services or both;
Value of supply of goods or services or both taking into account

discount/ abatement, if any; and
Signature/ digital signature of supplier/his authorized representative.

However, signature or digital signature of the supplier or his authorized
representative shall not be required in the case of issuance of an
electronic bill of supply in accordance with the provisions of the
Information Technology Act, 2000.
Note: Any tax invoice or any other similar document issued under any other
Act for the time being in force in respect of any non-taxable supply shall be
treated as bill of supply for the purposes of the Act.
Patel & Sons is a manufacturer of goods who has opted for
composition levy under section 10(1) and 10(2). It will issue a Bill of
Supply to the buyers of goods and not the tax invoice.
Invoice-cum-bill of supply [Rule 46A]
Where a registered person is supplying taxable as well as exempted goods
or services or both to an unregistered person, a single “invoice-cum-bill of
supply” may be issued for all such supplies. Rule 46A is notwithstanding
anything contained in rule 46 or rule 49 or rule 54 of CGST Rules.
(iv) Receipt Voucher [Section 31(3)(d) read with rule 50]
A registered person shall, on receipt of advance payment
with respect to any supply of goods or services or both,
issue a Receipt Voucher evidencing receipt of such payment.

8.34 INDIRECT TAXES
Particulars of Receipt Voucher

hyphen or dash and slash and any combination thereof, unique for a FY
Date of its issue;
Amount of advance taken;
Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
Amount of tax charged in respect of taxable goods or services (central
tax, State tax, integrated tax, Union territory tax or cess);
Place of supply along with the name of State and its code, in case of a
supply in the course of inter-State trade or commerce;
Signature/digital signature of supplier/his authorized representative
Where at the time of receipt of advance, rate of tax and/or nature of

supply is not determinable
Where at the time of receipt

of advance
(i) rate of tax is not tax shall be paid at the rate of 18%
determinable
(ii) nature of supply is not same shall be treated as inter-State

determinable supply
(v) Refund Voucher [Section 31(3)(e) read with rule 51]
Where, on receipt of advance payment with respect to any supply of goods
or services or both the registered person issues a Receipt Voucher, but
subsequently no supply is made and no tax invoice is issued in pursuance
thereof, the said registered person may issue to the person who had made
the payment, a Refund Voucher against such payment.

Advance payment
Receipt Voucher
Supply
Tax Invoice
Supplier Recipient
Refund Voucher
Particulars of Refund Voucher
A consecutive serial number not exceeding sixteen characters, in one

or multiple series, containing alphabets or numerals or special
characters -hyphen or dash and slash and any combination thereof,
unique for a FY;
Date of its issue;
Number and date of Receipt Voucher issued
Description of goods/services in respect of which refund is made
Amount of refund made
Rate of tax (central tax, State tax, integrated tax, Union territory tax or
cess)
Amount of tax paid in respect of such goods or services (central tax,

State tax, integrated tax, Union territory tax or cess)

8.36 INDIRECT TAXES
(vi) Invoice and Payment Voucher [Section 31(3)(f) & (g) read with second
proviso to rule 46 and rule 52]
The recipient is liable to pay tax on reverse charge basis
where he receives supply of such goods/services/both
which are notified for reverse charge purposes under
section 9(3). Such supplies can be received from a
registered or an unregistered supplier.
Further, a builder/promoter is required to pay GST on reverse charge basis
under section 9(4) in one or more of the following cases:
(i) A builder/promoter must purchase 80% of inputs and input services
used in supplying the service from registered persons. In case of
shortfall, he’s required to pay tax under reverse charge on all such
inward supplies (to the extent short of 80% of the inward supplies
from registered supplier).
(ii) Where cement is received from an unregistered person,
promoter/builder has to pay tax on supply of such cement on reverse
charge basis and
(iii) GST on capital goods is payable by the promoter on reverse charge
basis.
Invoice to be issued by recipient if he is liable to pay tax under
section 9(3)/(4) and receives supplies from an unregistered person
A registered person who is liable to pay tax under reverse charge [under
section 9(3)/9(4) of the CGST Act] shall issue an Invoice in respect of goods
or services or both received by him from the supplier who is not registered
on the date of receipt of goods or services or both. Thus, a recipient liable
to pay tax by virtue of section 9(3) has to issue invoice only when supplies
have been received from an unregistered supplier.
Payment voucher to be issued by recipient at the time of making
payment if he is liable to pay tax under section 9(3)/(4)
Besides, a registered person who is liable to pay tax
under reverse charge [under section 9(3)/9(4) of the
CGST Act] shall issue a Payment Voucher at the time of
making payment to the supplier.

Particulars of Payment Voucher
Name, address and GSTIN of the supplier if registered;
A consecutive serial number not exceeding 16 characters, in one or multiple

series, containing alphabets or numerals or special characters -hyphen or
dash and any combination thereof, unique for a FY
Date of its issue;
Name, address and GSTIN of the recipient;
Amount paid;
Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
Amount of tax payable in respect of taxable goods or services (central

tax, State tax, integrated tax, Union territory tax or cess);
Place of supply along with the name of State and its code, in case of a
supply in the course of inter-State trade or commerce; and

(vii) Supplier permitted to issue any document other than tax invoice
[Section 31(2) and proviso to section 31(1) read with rules 54 and 55]
Government may, on the recommendations of
the Council, by notification and subject to such
conditions as may be mentioned therein, specify
the categories of services in respect of which––
(a) any other document issued in relation to

the supply shall be deemed to be a tax invoice; or
Following suppliers may issue a tax invoice, but they are also permitted to
issue any other document in lieu of tax invoice, by whatever name called:

8.38 INDIRECT TAXES
Supplier of Document in lieu of the tax invoice

taxable service
Optional Mandatory information
information
Insurer/Banking  Serial number (It Other information (other

company/Financial is not than serial no. and address of
institution, mandatory for a recipient) as prescribed for a
including NBFC bank/ insurance Tax Invoice, under rule 46.
company to
serially number A customer may avail
the invoices/ numerous services from the
document). bank / insurer in a given tax
period. Such entities may issue
 Address of the
a consolidated tax invoice/
recipient of
statement/ advice, any other
taxable service.
document in lieu thereof, by
whatever name called may
be issued/ made available,
physically/ electronically, for
supply of services made
during a month at the end of
the month.
However, the signature or
digital signature of the
supplier/his authorised
representative shall not be
required in the case of
issuance of a consolidated
tax invoice or any other
document in lieu thereof in
accordance with the
provisions of the Information
Technology Act, 2000.
Goods Transport Gross weight of the

Agency (GTA) consignment
supplying services

in relation to Name of the consignor and

transportation of the consignee
goods by road in
a goods carriage Registration number of
goods carriage in which the
goods are transported
Details of goods transported
Details of place of origin and

destination
GSTIN of the person liable for

paying tax whether as
consignor, consignee or GTA
Other information as
prescribed for a tax invoice,
under rule 46
Supplier of  Serial number Tax invoice shall include

passenger  Address of the ticket in any form, by
transportation recipient of whatever name called.
service taxable service
Other information (other than
serial no. and address of
recipient) as prescribed for a
tax invoice, under rule 46.
However, signature or digital
signature of the supplier or his
authorized representative shall
not be required in the case of
issuance of ticket in accordance
with the provisions of the
Information Technology Act,
2000.
Registered person Details of Supplier is required to issue

supplying services recipient of service an electronic ticket and the
by way of said electronic ticket shall be

8.40 INDIRECT TAXES
admission to deemed to be a tax invoice.

exhibition of
cinematograph Other information (other
films in multiplex than details of recipient of
screens service) as prescribed for a
tax invoice, under rule 46.
It is important to note here that keeping in view the large number of

transactions in banking, insurance and passenger transportation sector,
taxpayers need not mention the address of the customer and the serial
number in their invoices.
Delivery challan
Rule 55 specifies the cases where at the time of removal of goods, goods
may be removed on delivery challan and invoice may be issued after
delivery. These are provided in the following table:
Nature of Deliver challan Particulars of Delivery Challan

supply to be issued
(1) Supply of • serially Date and number of the

liquid gas numbered not delivery challan
where the exceeding 16 Name, address and GSTIN of
quantity at characters the consigner, if registered
the time of • in one or
removal from multiple Name, address and GSTIN or
the place of series UIN of the consignee, if
business of • at the time of registered
the supplier is removal of HSN code and description of
not known, goods for goods,
(2) Transportation transportation
Quantity (provisional, where
of goods for
the exact quantity being
job work,
supplied is not known)
(3) Transportation
of goods for Taxable value
reasons other Tax rate and tax amount –
than by way of central tax, state tax,

supply, or integrated tax, union territory

(4) Such other tax or cess, where the
supplies as transportation is for supply to
may be the consignee
notified by the Place of supply, in case of
Board inter-state movement
Signature
A. Delivery challan in Triplicate

The delivery challan shall be prepared in TRIPLICATE, in case of supply of
goods, in the following manner:
Original copy
Duplicate copy
Triplicate copy
B. Declaration in E-way Bill

Where goods are being transported on a delivery challan in lieu of invoice,
the same shall be declared in E-Way Bill.
C. Tax invoice to be issued after delivery of goods
Where the goods being transported are for the purpose of supply to the
recipient but the tax invoice could not be issued at the time of removal of
goods for the purpose of supply, the supplier shall issue a tax invoice after
delivery of goods.
D. Goods transported in SKD/CKD condition or in batches or lots
Where the goods are being transported in a semi knocked down or
completely knocked down condition or in batches or lots,
(a) the supplier shall issue the complete invoice before dispatch of the
first consignment;
(b) the supplier shall issue a delivery challan for each of the subsequent
consignments, giving reference of the invoice;
(c) Copies of the corresponding delivery challan shall accompany each
consignment along with a duly certified copy of the invoice; and

8.42 INDIRECT TAXES
(d) the original copy of the invoice shall be sent along with the last
consignment.
Goods may be moved within the State/from the State of registration to
another State for supply on approval basis and art works may be sent
by artists to galleries for exhibition on delivery challan along with
e-way bill wherever applicable
Suppliers of jewellery etc. who are registered in one State may have to visit
other States (other than their State of registration) and need to carry the
goods (such as jewellery) along for approval. In such cases if jewellery etc.
is approved by the buyer, then the supplier issues a tax invoice only at the
time of supply.
Since the suppliers are not able to ascertain their actual supplies
beforehand and while ascertainment of tax liability in advance is a
mandatory requirement for registration as a casual taxable person, the
supplier is not able to register as a casual taxable person. Such goods are
also carried within the same State for the purposes of supply.
In view of relevant provisions of rule 55, it is clarified that the goods which are
taken for supply on approval basis can be moved from the place of business
of the registered supplier to another place within the same State or to a
place outside the State on a delivery challan along with the e-way bill
wherever applicable and the invoice may be issued at the time of delivery of
goods.
For this purpose, the person carrying the goods for such supply can carry
the invoice book with him so that he can issue the invoice once the supply
is fructified [Circular No. 10/10/2017 GST dated 18.10.2017].
Likewise, in case where artists supply art works in different States - other
than the State in which they are registered as a taxable person and if the art
work is selected by the buyer, then the supplier issues a tax invoice only at
the time of supply, it is clarified that the art work for supply on approval
basis can be moved from the place of business of the registered person
(artist) to another place within the same State or to a place outside the
State on a delivery challan along with the e-way bill wherever applicable
and the invoice may be issued at the time of actual supply of art work

4. CREDIT AND DEBIT NOTES [SECTION 34]
Section 34 Credit and Debit Notes

(1) Where one or more tax invoices have been issued for supply of
any goods or services or both and the taxable value or tax
charged in that tax invoice is found to exceed the taxable value
or tax payable in respect of such supply, or where the goods
supplied are returned by the recipient, or where goods or services
or both supplied are found to be deficient, the registered person,
who has supplied such goods or services or both, may issue to
the recipient one or more credit notes for supplies made in a
financial year containing such particulars as may be prescribed
(2) Any registered person who issues a credit note in relation to a
supply of goods or services or both shall declare the details of
such credit note in the return for the month during which such
credit note has been issued but not later than September
following the end of the financial year in which such supply was
made, or the date of furnishing of the relevant annual return,
whichever is earlier, and the tax liability shall be adjusted in such
manner as may be prescribed:
Provided that no reduction in output tax liability of the supplier
shall be permitted, if the incidence of tax and interest on such
supply has been passed on to any other person.
(3) Where one or more tax invoices have been issued for supply of
any goods or services or both and the taxable value or tax
charged in that tax invoice is found to be less than the taxable
value or tax payable in respect of such supply, the registered
person, who has supplied such goods or services or both, shall
issue to the recipient one or more debit notes for supplies made
in a financial year containing such particulars as may be
prescribed.

8.44 INDIRECT TAXES
(4) Any registered person who issues a debit note in relation to a

supply of goods or services or both shall declare the details of
such debit note in the return for the month during which such
debit note has been issued and the tax liability shall be adjusted
in such manner as may be prescribed.
Explanation.––For the purposes of this Act, the expression “debit
note” shall include a supplementary invoice.
ANALYSIS
(i) Issuance of Credit Note: During the course of trade or commerce, after the
invoice has been issued, there can be situations like:
 The supplier has erroneously declared a value which is more than the
actual value of the goods or services provided.
 The supplier has erroneously declared a higher tax rate than what is
applicable for the kind of the goods or services or both supplied.
 The quantity received by the recipient is less than what has been
declared in the tax invoice.
 The quality of the goods or services or both supplied is not to the

satisfaction of the recipient thereby necessitating a partial or total
reimbursement on the invoice value
 Any other similar reasons.

In order to regularize these kinds of situations, the supplier is allowed to
issue a document called as credit note to the recipient. Once the credit
note has been issued, the tax liability of the supplier will reduce.
The credit note is a convenient and legal method by which the value of the
goods or services in the original tax invoice can be amended or revised.
The issuance of the credit note easily allows the supplier to decrease his tax
liability in his returns without requiring him to undertake any tedious
process of refunds.

Section 34(1) provides that where one or more tax invoices have been
issued for supply of any goods or services or both and the taxable value or
tax charged in that/those tax invoice(s) is found to exceed the taxable value
or tax payable in respect of such supply, or where the goods supplied are
returned by the recipient, or where goods or services or both supplied are
found to be deficient, the registered person, who has supplied such goods
or services or both, may issue to the recipient one or more credit notes for
supplies made in a financial year containing the prescribed particulars.
It is important to note that credit note(s) are not
permitted to be issued in case secondary discounts 15 are Secondary
allowed by the supplier since the tax liability of the discounts
supplier does not get reduced in such case. However,
supplier can issue financial/ commercial credit note(s) to reduce the value of
supply payable by the recipient to the supplier [Circular 92/11/2019 GST
dated 07.03.2019].
(ii) Issuance of Debit Note: There can be situations when after the invoice has
been issued:
 The supplier has erroneously declared a value which is less than the
actual value of the goods or services or both provided.
 The supplier has erroneously declared a lower tax rate than what is
applicable for the kind of the goods or services or both supplied.
 The quantity received by the
Debit note shall include a
recipient is more than what has
been declared in the tax invoice. supplementary invoice.
 Any other similar reasons.

In order to regularize these kinds of situations, the supplier is allowed to
issue a document called as debit note to the recipient.
15
Secondary discounts are the discounts which are not known at the time of supply/are offered
after the supply is already over. These discounts are not excluded from the value of supply since
conditions laid down in section 15(3)(b) of the CGST Act are not satisfied. Provisions of
section 15 have been discussed in detail in Unit-II of Chapter 5- Time and Value of Supply.

8.46 INDIRECT TAXES
Section 34(3) provides that where one or more tax invoices have been
issued for supply of any goods or services or both and the taxable value or
tax charged in that tax invoice is found to be less than the taxable value or
tax payable in respect of such supply, the registered person, who has
supplied such goods or services or both, shall issue to the recipient one or
more debit notes for supplies made in a financial year containing the
prescribed particulars.
The issuance of a debit note/supplementary invoice creates additional tax
liability. The treatment of a debit note/supplementary invoice is identical to
the treatment of a tax invoice as far as returns and payment are concerned.
The debit note/supplementary invoice is a convenient and legal method by
which the value of the goods and/or services in the original tax invoice can
be enhanced. The issuance of the debit note allows the supplier to pay his
enhanced tax liability in his returns without requiring him to undertake any
other tedious process.
(iii) Details of Debit Note/Credit Note to be declared in Return
I. Credit Note:
Any registered person who issues a credit note in
relation to a supply of goods or services or both
shall declare the details of such credit note in the
return for the month during which such credit note
has been issued but not later than:
(i) September following the end of the financial year in which such
supply was made,
or
(ii) the date of furnishing of the relevant annual return,
The tax liability shall be adjusted in such manner as may be
prescribed. However, no reduction in output tax liability of the
supplier shall be permitted, if the incidence of tax and interest on such
supply has been passed on to any other person.
II. Debit Note:
Any registered person who issues a debit note in relation to a supply
of goods or services or both shall declare the details of such debit
note in the return for the month during which such debit note has

been issued. The tax liability shall be adjusted in such manner as may
be prescribed.
III. Particulars of the Debit and Credit Notes [Rule 53(1A)]
There is no prescribed format, but credit and debit note issued by a
supplier must contain the following particulars, namely:–
Name, address and GSTIN of the supplier.
Nature of the document.

multiple series, containing alphabets or numerals or special
characters -hyphen or dash and slash and any combination thereof,
unique for a FY.
Date of issue of the document.
Name, address and GSTIN or UIN, if registered, of the recipient.
Name and address of the recipient and the address of delivery,

along with the name of State and its code, if such recipient is un-
registered.
Serial number(s) and date(s) of the corresponding tax invoice(s) or,

as the case may be, bill(s) of supply.
Value of taxable supply of goods or services, rate of tax and the

amount of the tax credited or, as the case may be, debited to the
recipient
Signature/digital signature of the supplier/his authorized

representative.
ILLUSTRATION 3
Kartik & Co., a registered supplier under GST, provides the following
information regarding various tax invoices issued by it during the month of
March:

8.48 INDIRECT TAXES
(i) Value of supply charged in invoice no. 1 was ` 2,50,000 against the
actual taxable value of ` 2,30,000.
(ii) Tax charged in invoice no. 4 was ` 32,000 against the actual tax liability
of ` 68,000 due to wrong HSN code being chosen while issuing invoice.
(iii) Value charged in invoice no. 8 was ` 3,20,000 as against the actual
value of ` 4,20,000 due to wrong quantity considered while billing.
Kartik & Co. asks you to answer the following:
(1) Who shall issue a debit/credit note under CGST Act?
(2) Whether debit note or credit note has to be issued in each of the above
circumstances?
(3) What is the maximum time-limit available for declaring the credit note
in the GST Return?
ANSWER
(1) The debit/credit note shall be issued by the registered person who has
supplied the goods and/or services, i.e. Kartik & Co.
(2) Yes, debit/credit note need to be issued in each of the circumstances
as under:
(i) A credit note is required to be issued as the taxable value in
invoice no. 1 exceeds the actual taxable value.
(ii) A debit note is required to be issued as the tax charged in the
invoice no. 4 is less than the actual tax payable.
(iii) A debit note is required to be issued as the value of supply
charged in the invoice no. 8 is less than the actual value.
(3) The details of the credit note cannot be declared later than the return
for the month of September following the end of the financial year in
which such supply was made or the date of furnishing of the relevant
5. PROHIBITION OF UNAUTHORISED COLLECTION

OF TAX [SECTION 32]
A person who is not a registered person shall not collect in respect of any
supply of goods or services or both any amount by way of tax under this Act.

No registered person shall collect tax except in accordance with the provisions
of this Act or the rules made thereunder.
Rujuta is engaged in providing grooming services. She is not registered
under GST law as her turnover is below the threshold limit. Rujuta cannot
collect tax on the grooming services provided by her as a person who is
not a registered person cannot collect any amount by way of tax under this Act in
respect of any supply of goods or services or both.
6. AMOUNT OF TAX TO BE INDICATED IN TAX

INVOICE AND OTHER DOCUMENTS [SECTION 33]
Notwithstanding anything contained in this Act or any other law for the time
being in force, where any supply is made for a consideration, every person who
is liable to pay tax for such supply shall prominently indicate in all documents
relating to assessment, tax invoice and other like documents, the amount of tax
which shall form part of the price at which such supply is made.
7. E-WAY BILL [SECTION 68 READ WITH RELEVANT

CGST RULES, 2017]
Under GST regime, for quick and easy movement of goods across India without
any hindrance, all the check posts across the country are abolished. However, in
order to monitor the movement of goods for controlling any tax evasion, e-way
bill system has been introduced. Under this system, a taxpayer - prior to
movement of goods via a conveyance - would inform each transaction’s details to
the tax department, obtain an acknowledgement number for having thus
informed, and then use this acknowledgement number as a valid document
accompanying the conveyance carrying goods. The idea is that the taxpayer be
made to upload the details of each transaction to a common portal through the
Internet, and once uploaded, the common portal would automatically generate a
document which can be tracked and verified easily by any stakeholder.
Statutory requirement
Section 68 of the CGST Act stipulates that the Government may require the person
in charge of a conveyance carrying any consignment of goods of value exceeding
such amount as may be specified to carry with him such documents and such

8.50 INDIRECT TAXES
devices as may be prescribed. Rule 138 prescribes e-way bill as the document to
be carried for the consignment of goods in certain prescribed cases.
What is e-way bill?
A waybill is a receipt or a document issued by a carrier giving details and
instructions relating to the shipment of a consignment of goods and the details
include name of consignor, consignee, the point of origin of the consignment, its
destination, and route. Electronic Way Bill (E-Way Bill) is a compliance mechanism
wherein by way of a digital interface the person causing the movement of goods
uploads the relevant information prior to the commencement of movement of goods
and generates e-way bill on the GST portal. In other words, E-way bill is an
electronic document generated on the GST portal evidencing movement of
goods.
What are the benefits of e-way bill?
Following are the benefits of e-way bill mechanism:
(i) Physical interface to pave way for digital interface resulting in elimination of
state boundary check-posts
(ii) It will facilitate faster movement of goods
(iii) It will improve the turnaround time of trucks and help the logistics industry
by increasing the average distances travelled, reducing the travel time as
well as costs.
E-way Bill is generated electronically in Form GST EWB 01 on the common
portal (www.ewaybillgst.gov.in). The facility of generation, cancellation, updation
and assignment of e-way bill is available to the supplier, recipient and the
transporter, as the case may be. E-way Bill can be generated through various
modes like Web (Online), Android App, SMS, using Bulk Upload Tool and API
(Application Program Interface) based site to site integration etc.
The pre-requisite for generation of e-way bill is that the person who generates e-
way bill should be a registered person on GST portal and he should register on
the e-way bill portal. If the transporter is not registered person under GST it is
mandatory for him to get enrolled on e-waybill portal (https://ewaybillgst.gov.in)
before generation of the e-way bill.
E-way Bill provisions [as contained in rules 138, 138A, 138B, 138C, 138D and
138E– Chapter XVI of the CGST Rules, 2017] are elaborated as under:

(1) When is e-way bill required to be generated? [Rule 138(1)]

Whenever there is a movement of goods of consignment value exceeding
` 50,000:
(i) in relation to a supply; or
(ii) for reasons other than supply; or
(iii) due to inward supply from an unregistered person,
the registered person who causes such movement of goods shall furnish the
information relating to the said goods as specified in Part A of Form GST
EWB-01 before commencement of such movement.
It is important to note that “information is to be furnished prior to the
commencement of movement of goods” and “is to be issued whether
the movement is in relation to a supply or for reasons other than
supply”.
Who causes movement of goods?
If supplier is registered and undertakes to transport the goods, movement
of goods is caused by the supplier. If recipient arranges transport,
movement is caused by him. If goods are supplied by an unregistered
supplier to a registered known recipient, movement shall said to be caused
by such recipient.
Meaning of consignment value of goods

Consignment value of goods shall be the value:
 determined in accordance with the provisions of section 15,
 declared in an invoice, a bill of supply or a delivery challan, as the case
may be, issued in respect of the said consignment and
 also includes the Central tax, State or Union territory tax, integrated
tax and cess charged, if any, in the document and
 shall exclude the value of exempt supply of goods where the invoice is
issued in respect of both exempt and taxable supply of goods.
As discussed earlier in this chapter, in case of movement of goods for reasons other
than supply, the movement is occasioned by means of a delivery challan which has

8.52 INDIRECT TAXES
to necessarily contain the value of goods. The value given in the delivery challan
should be adopted in the e-way bill 16.
Bhanupratap Shoe Manufacturers, registered in Punjab, sold shoes

to a retail seller in Gujarat, at a value of ` 48,000 (excluding GST
leviable @ 18%) and wants to send the consignment of such
shoes to Gujarat. The consignment value will be ` 56,640 [` 48,000 × 118%].
Since the movement of goods is in relation to supply of goods and the
consignment value exceeds ` 50,000, e-way bill is mandatorily required to
be issued in the given case.
Sindhi Textiles of Ludhiana, registered in Punjab, sends cloth to a job

worker in Jalandhar, Punjab on a delivery challan. The value of cloth
mentioned in the delivery challan is ` 48,000. Since the movement
of goods is for reasons other than supply, the value given in the delivery
challan is adopted for the purposes of the e-way bill. Such value does not
exceed ` 50,000. Consequently, e-way bill is not required to be issued in this
case.
Special situations where e-way bill needs to be issued even if the value
of the consignment is less than ` 50,000:
(i) Inter-State transfer of goods by principal to job-worker
Where goods are sent by a principal located in one State or Union
territory to a job worker located in any other State or Union territory,
the e-way bill shall be generated either by the principal or the job
worker, if registered, irrespective of the value of the consignment
[Third proviso to rule 138(1)].
(ii) Inter-State transfer of handicraft goods by a person exempted
from obtaining registration
Where handicraft goods* are transported from one State or Union
territory to another State or Union territory by a person who has been
exempted from the requirement of obtaining registration [under
clauses (i) and (ii) of section 24], the e-way bill shall be generated by
16
As clarified by CBIC FAQs on E-way Bill.

the said person irrespective of the value of the consignment [Fourth

proviso to rule 138].
*Handicraft goods are the goods specified in Notification No.
56/2018 CT dated 23.10.2018 which exempts the casual taxable
persons making inter-State taxable supplies of such handicraft goods
from obtaining registration upto specified turnover limit [Refer
Chapter 7 – Registration].
E-way Bill in case of ‘Bill To Ship To’ Model
In a “Bill To Ship To” model of supply, there are three persons involved in a
transaction, namely:
‘A’ is the person who has ordered ‘B’ to send goods directly to ‘C’.
‘B’ is the person who is sending goods directly to ‘C’ on behalf of ‘A’.
‘C’ is the recipient of goods.
In this complete scenario. two supplies are involved and accordingly two tax
invoices are required to be issued:
Invoice -1: which would be issued by ‘B’ to ‘A’.
Invoice -2: which would be issued by ‘A’ to ‘C’.
It is clarified that as per the CGST Rules, either A or B can generate the e-
Way Bill but it may be noted that only one e-Way Bill is required to be
generated [Press Release dated 23.04.2018]
(2) Information to be furnished in e-way bill:
An e-way bill Form GST EWB-01 contains two parts:
(I) Part A [comprising of details of GSTIN of supplier & recipient, place of
delivery (indicating PIN Code also), document (Tax invoice, Bill of
Supply, Delivery Challan or Bill of Entry) number and date, value of
goods, HSN code, and reasons for transportation, etc.]: to be

8.54 INDIRECT TAXES
furnished by the registered person** who is causing movement of

goods of consignment value exceeding ` 50,000/- and
(II) Part B (transport details) [Transporter document number (Goods
Receipt Number or Railway Receipt Number or Airway Bill Number or
Bill of Lading Number) and Vehicle number, in case of transport by
road]: to be furnished by the person who is transporting the goods.
**However, information in Part-A may be furnished:
 by the transporter, on an authorization received from such registered
person [First proviso to rule 138(1)] or
 by the e-commerce operator or courier agency, where the goods to be
transported are supplied through such an e-commerce operator or a
courier agency, on an authorization received from the consignor
[Second proviso to rule 138(1)].
(3) Who is mandatorily required to generate e-way bill?
 Where the goods are transported by a registered person -
whether as consignor or recipient as the consignee (whether in his
own conveyance or a hired one or a public conveyance, by road), the
said person shall have to generate the e-way bill (by furnishing
information in part B on the common portal) [Rule 138(2)].
 Where the e-way bill is not generated by the registered person
and the goods are handed over to the transporter, for
transportation of goods by road, the registered person shall furnish
the information relating to the transporter in Part B on the common
portal and the e-way bill shall be generated by the transporter on the
said portal on the basis of the information furnished by the registered
person in Part A [Rule 138(3)].
 Where the goods are transported by railways or by air or vessel,
the e-way bill shall be generated by the registered person, being the
supplier or the recipient, who shall, either before or after the
commencement of movement, furnish, information in part B [viz
transport document number (Goods Receipt Number or Railway Receipt
Number or Airway Bill Number or Bill of Lading Number)] on the common
portal [Rule 138(2A)].

Other important points:

 Where the goods are transported by railways: there is no
requirement to carry e-way bill along with the goods, but railways has
to carry invoice or delivery challan or bill of supply as the case may be
along with goods. Further, e-way bill generated for the movement is
required to be produced at the time of delivery of the goods.
Railways shall not deliver goods unless the e-way bill required under
rules is produced at the time of delivery [Proviso to rule 138(2A)].
 The registered person or, the transporter may, at his option, generate
and carry the e-way bill even if the value of the consignment is less
than ` 50,000 [First proviso to rule 138(3)].
 Where the movement is caused by an unregistered person either
in his own conveyance or a hired one or through a transporter, he
or the transporter may, at their option, generate the e-way bill
[Second proviso to rule 138(3)].
 Where the goods are supplied by an unregistered supplier to a
recipient who is registered, the movement shall be said to be caused by
such recipient if the recipient is known at the time of commencement of
the movement of goods [Explanation 1 to rule 138(3)].
(4) When is it not mandatory to furnish the details of conveyance in Part-B?
Explanation 2 to rule 138(3) stipulates that e-way bill is valid for movement
of goods by road only when the information in Part-B is furnished.
However, details of conveyance may not be furnished in Part-B of the e-way
bill where the goods are transported for a distance of upto 50 km within
the State/Union territory:
 from the place of business of the consignor to the place of business of
the transporter for further transportation [Third proviso to rule 138(3)]
or
 from the place of business of the transporter finally to the place of
business of the consignee [Proviso to rule 138(5)].
(5) Unique e-way bill number (EBN)
Upon generation of the e-way bill on the common portal, a unique e-way
bill number (EBN) shall be made available to the supplier, the recipient and
the transporter on the common portal [Rule 138(4)].

8.56 INDIRECT TAXES
(6) Transfer of goods from one conveyance to another

Where the goods are transferred from one conveyance to another, the
consignor or the recipient, who has provided information in Part A, or the
transporter shall, before such transfer and further movement of goods,
update the details of conveyance in Part B of the e-way bill on the common
portal [Rule 138(5)].
The consignor/recipient, who has furnished the information in Part A, or the
transporter, may assign the e-way bill number to another
registered/enrolled transporter for updating the information in Part B for
further movement of the consignment [Rule 138(5A)]. However, once the
details of the conveyance have been updated by the transporter in Part B,
the consignor or recipient, as the case may be, who has furnished the
information in Part A shall not be allowed to assign the e-way bill number
to another transporter [Proviso to rule 138(5A)].
ILLUSTRATION 4
Mr. Shah, a consignor, is required to move goods from Ahmedabad (Gujarat) to
Nadiad (Gujarat). He appoints Mehta Transporter for movement of goods.
Mehta Transporter moves the goods from Ahmedabad (Gujarat) to Kheda
(Gujarat). For completing the movement of goods from Kheda (Gujarat) to
Nadiad (Gujarat), Mehta Transporter now hands over the goods to Parikh
Transporter.
Explain the procedure regarding e-way bill to be followed by consignor and
transporter as per provisions of GST law and rules made thereunder.
ANSWER
In the given scenario, only one e-way bill is required to be issued.
Part A can be filled by either Mr. Shah or recipient of goods or Mehta
Transporter on the appropriate authorisation.
Where the goods are transferred from one conveyance to another, the
consignor or the recipient, who has provided information in Part A, or the
transporter shall, before such transfer and further movement of goods,
update the details of conveyance in the e-way bill on the common portal in
Part B.
Thus, on reaching Kheda, Mr. Shah or the recipient of the goods, who has
filled Part A of the e-way bill, or Mehta Transporter can, before the transfer

and further movement of goods, update the details of conveyance in Part B

of the e-way bill.
The consignor or the recipient, who has furnished the information in Part A,
or the transporter, may assign the e-way bill number to another registered
or enrolled transporter for updating the information in Part B for further
movement of the consignment.
Thus, on reaching Kheda, Mr. Shah or the recipient of the goods, or Mehta
Transporter can assign the said e-way bill to Parikh Transporter who will
thereafter update the details of conveyance in Part B.
However, upon updation of the details of the conveyance by Parikh
transporter in Part B, Mr. Shah or recipient, as the case may be, who has
furnished the information in Part A shall not be allowed to assign the e-way
bill number to another transporter.
(7) Consolidated E-way bill
After e-way bill has been generated, where multiple consignments are
intended to be transported in one conveyance, the transporter may indicate
the serial number of e-way bills generated in respect of each such
consignment electronically on the common portal and a consolidated e-way
bill in Form GST EWB-02 may be generated by him on the said common
portal prior to the movement of goods [Rule 138(6)].
Consolidated e-way bill is a document containing the multiple e-way bills
for multiple consignments being carried in one conveyance (goods vehicle).
That is, the transporter carrying multiple consignments of various
consignors and consignees in a single vehicle can generate and carry a
single document - consolidated e-way bill instead of carrying separate
document for each consignment in a conveyance.
Consolidated EWB is like a trip sheet and it contains details of different
e-way bills in respect of various consignments being transported in one
vehicle and these e-way bills will have different validity periods.
Hence, Consolidated EWB does not have any independent validity period.
Further, individual consignment specified in the Consolidated EWB should
reach the destination as per the validity period of the individual EWB.
Further, where the consignor/consignee has not generated the e-way bill in
Form GST EWB-01 and the aggregate of the consignment value of goods
carried in the conveyance is more than ` 50,000, the transporter, except in

8.58 INDIRECT TAXES
case of transportation of goods by railways, air and vessel, shall, in respect

of inter-State supply, generate the e-way bill in Form GST EWB-01 on the
basis of invoice or bill of supply or delivery challan, as the case may be, and
may also generate a consolidated e-way bill in Form GST EWB-02 on the
common portal prior to the movement of goods [Rule 138(7)].
However, where the goods to be transported are supplied through an
e-commerce operator or a courier agency, the information in Part A of Form
GST EWB-01 may be furnished by such e-commerce operator or courier
agency [Proviso to rule 138(7)]. This provision is not yet effective.
(8) Information submitted for e-way bill can be used for filing GST Returns
The information furnished in Part A of the e-way bill shall be made
available to the registered supplier on the common portal who may utilize
the same for furnishing the details in Form GSTR-1 [Rule 138(8)].
However, when the information has been furnished by an unregistered
supplier/unregistered recipient, he shall be informed electronically, if the
mobile number or the e-mail is available [Proviso to rule 138(8)].
(9) Cancellation of e-way bill
Where an e-way bill has been generated, but goods are either not
transported or are not transported as per the details furnished in the e-way
bill, the e-way bill may be cancelled electronically on the common portal
within 24 hours of generation of the e-way bill [Rule 138(9)].
However, an e-way bill cannot be cancelled if it has been verified in transit
in accordance with the provisions of rule 138B [First proviso to rule 138(9)].
Further, unique EWB number generated is valid for a period of 15 days for
updation of Part B [Second proviso to rule 138(9)].
(10) Validity period of e-way bill/consolidated e-way bill [Rule 138(10)]
Sl. Distance within Validity period from relevant date*

No. country
1. Upto 100 km One day in cases other than Over
Dimensional Cargo or multimodal
shipment in which at least one leg
involves transport by ship
2. For every 100 km or One additional day in cases other than

part thereof Over Dimensional Cargo or multimodal

thereafter shipment in which at least one leg
3. Upto 20 km One day in case of Over Dimensional
Cargo or multimodal shipment in
which at least one leg involves
transport by ship
4. For every 20 km or One additional day in case of Over
part thereof Dimensional Cargo or multimodal
thereafter shipment in which at least one leg
*Relevant date means the date on which the e-way bill has been generated and
the period of validity shall be counted from the time at which the e-way bill has
been generated and each day shall be counted as the period expiring at
midnight of the day immediately following the date of generation of e-way bill.
This can be explained by following examples –
(i) Suppose an e-way bill is generated at 00:04 hrs. on 14th March. Then first
day would end on 12:00 midnight of 15 -16 March. Second day will end
on 12:00 midnight of 16 -17 March and so on.
(ii) Suppose an e-way bill is generated at 23:58 hrs. on 14th March. Then first
day would end on 12:00 midnight of 15 -16 March. Second day will end on
12:00 midnight of 16 -17 March and so on 17.
The validity of the e-way bill starts when first entry is made in Part-B i.e. vehicle
entry is made first time in case of road transportation or first transport document
number entry in case of rail/air/ship transportation, whichever is the first entry. It
may be noted that validity is not re-calculated for subsequent entries in Part-B18.
A consignor hands over his goods for transportation on Friday to
transporter. However, the assigned transporter starts the movement of
goods on Monday. The validity period of e-way bill starts only after
the details in Part B are updated by the transporter for the first time.
17
As clarified by FAQs on E-way Bill by CBIC.
18
As clarified by FAQs on E-way Bill web portal.

8.60 INDIRECT TAXES
In the given situation, Consignor can fill the details in Part A on Friday and
handover his goods to the transporter. When the transporter is ready to move
the goods, he can fill Part B i.e. the assigned transporter can fill the details in
Part B on Monday and the validity period of the e-way bill will start from
Monday [CBIC Press Release dated 31.03.2018].
**Over dimensional cargo means a cargo carried as a single indivisible unit
and which exceeds the dimensional limits prescribed in rule 93 of the
Central Motor Vehicle Rules, 1989, made under the Motor Vehicles
Act, 1988.
Extension of validity period
Extension by Commissioner for certain categories of goods:
Commissioner may, on the recommendations of the Council, by notification,
extend the validity period of an e-way bill for certain categories of goods as
may be specified therein.
Extension by transporter in exceptional circumstances: Where, under

circumstances of an exceptional nature, including trans-shipment, the goods
cannot be transported within the validity period of the e-way bill, the
transporter may extend the validity period after updating the details in Part
B, if required. Transporter can extend the validity of the e-way bill, if the
consignment is not being reached the destination within the validity period
due to exceptional circumstance like natural calamity, law and order issues,
trans-shipment delay, accident of conveyance, etc. He needs to explain this
reason in details while extending the validity period 19. The validity of the
e-way bill may be extended within 8 hours from the time of its expiry.
(11) Acceptance of e-way bill
The details of the e-way bill generated shall be made available to the -
(a) supplier, if registered, where the information in Part A has been
furnished by the recipient/transporter; or
(b) recipient, if registered, where the information in Part A has been

furnished by the supplier/transporter,
19
As clarified by FAQs on E-way Bill web portal.

on the common portal, and the supplier/recipient, as the case may be, shall
communicate his acceptance or rejection of the consignment covered by
the e-way bill [Rule 138(11)].
In case, the person to whom the information in Part-A is made available,

does not communicate his acceptance or rejection within the specified time,
it shall be deemed that he has accepted the said details. The time-limit
specified for this purpose is:
(i) 72 hours of the details being made available to him on the common
portal
or
(ii) the time of delivery of goods,
whichever is earlier [Rule 138(12)].

(12) E-way bill generated in one State is valid in another State
The e-way bill generated under this rule or under rule 138 of the Goods and
Services Tax Rules of any State or Union territory shall be valid in every
State and Union territory [Rule 138(13)].
📝📝 Points to remember
1. E-way bill is not valid for movement of goods without vehicle number on it.
2. Once E-way bill is generated, it cannot be edited for any mistake. However,
it can be cancelled within 24 hours of generation.
3. E- Way Bill may be updated with vehicle number any number of times.
4. The latest vehicle number should be available on e-way bill and should
match with the vehicle carrying it in case checked by the department.
(13) Situations where E-way Bill is not required to be generated

Notwithstanding anything explained above, no e-way bill is required to be
generated in the following cases:
(a) where the goods being transported are the ones given below:
S. No. Description of Goods
1. Liquefied petroleum gas for supply to household and

8.62 INDIRECT TAXES
non-domestic exempted category (NDEC) customers
2. Kerosene oil sold under PDS
3. Postal baggage transported by Department of Posts
4. Natural or cultured pearls and precious or semi-precious

stones; precious metals and metals clad with precious metal
(Chapter 71)
5. Jewellery, goldsmiths’ and silversmiths’ wares and other

articles (Chapter 71)
6. Currency
7. Used personal and household effects
8. Coral, unworked (0508) and worked coral (9601)]

(b) where the goods are being transported by a non-motorised conveyance
(c) where the goods are being transported from the customs port, airport,
air cargo complex and land customs station to an inland container
depot or a container freight station for clearance by Customs
(d) in respect of movement of goods within such areas as are notified
under of rule 138(14)(d) of the State or Union territory GST Rules in that
particular State or Union territory
(e) where the goods [other than de-oiled cake], being transported, are
exempt from tax vide Notification No. 2/2017 CT(R) dated 28.06.2017
(f) where the goods being transported are alcoholic liquor for human
consumption, petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas or aviation turbine fuel
(g) where the supply of goods being transported is treated as no supply
under Schedule III of the Act
(h) where the goods are being transported -
(i) under customs bond from an inland container depot or a
container freight station to a customs port, airport, air cargo
complex and land customs station, or from one customs station
or customs port to another customs station or customs port, or

(ii) under customs supervision or under customs seal

(i) where the goods being transported are transit cargo from or to Nepal
or Bhutan
(j) where the goods being transported are exempt from tax under
Notification No. 7/2017 CT (R) 28.06.2017 [Supply of goods by the CSD
to the Unit Run Canteens or to the authorized customers and supply of
goods by the Unit Run Canteens to the authorized customers] and
Notification No. 26/2017 CT (R) 21.09.2017 [Supply of heavy water and
nuclear fuels by Department of Atomic Energy to Nuclear Power
Corporation of India Ltd. (NPCIL)]
(k) any movement of goods caused by defence formation under Ministry of
defence as a consignor or consignee
(l) where the consignor of goods is the Central Government, Government
of any State or a local authority for transport of goods by rail
(m) where empty cargo containers are being transported
(n) where the goods are being transported upto a distance of 20 km from
the place of the business of the consignor to a weighbridge for
weighment or from the weighbridge back to the place of the business of
the said consignor subject to the condition that the movement of goods
is accompanied by a delivery challan issued in accordance with rule 55.
(o) where empty cylinders for packing of liquefied petroleum gas are being
moved for reasons other than supply
(14) Documents and devices to be carried by a person-in-charge of a
conveyance [Section 138A]
The person-in-charge of a conveyance shall carry -
(a) the invoice or bill of supply or delivery challan, as the case may be; and
(b) a copy of the e-way bill in physical form or the e-way bill number in
electronic form or mapped to a RFID** embedded on to the conveyance
[except in case of movement of goods by rail or by air or vessel] in such
manner as may be notified by the Commissioner [Rule 138A(1)].
**RFIDs are Radio Frequency Identification Device used for identification.

8.64 INDIRECT TAXES
Invoice Reference Number in lieu of tax invoice

In case, e-invoice is issued 20, the Quick Response (QR) code having an
embedded Invoice Reference Number (IRN) in it, may be produced
electronically, for verification by the proper officer in lieu of the
physical copy of such tax invoice [Rule 138A(2)].
In such a case, the registered person will not have to upload the information
in Part A of E-way bill for generation of e-way bill and the same shall be
auto-populated by the common portal on the basis of the information
furnished in the prescribed form [Rule 138A(3)].
Documents in lieu of e-way bill
Where circumstances so warrant, the Commissioner may, by notification,
require the person-in-charge of the conveyance to carry the following
documents instead of the e-way bill:
(a) tax invoice or bill of supply 21; or
(b) a delivery challan, where the goods are transported for reasons other
than by way of supply [Rule 138A(5)].
(15) Verification of documents and conveyances [Rule 138B]
The Commissioner or an officer empowered by him in this behalf may
authorize the proper officer to intercept any conveyance to verify the e-way
bill in physical or electronic form for all inter-State and intra-State
movement of goods.
The Commissioner shall get RFID readers installed at places where the
verification of movement of goods is required to be carried out and
verification of movement of vehicles shall be done through such device
readers where the e-way bill has been mapped with the said device.
The physical verification of conveyances shall be carried out by the proper
officer as authorised by the Commissioner or an officer empowered by him
in this behalf.
20
in the manner prescribed under sub-rule (4) of rule 48
21
In case of import of goods, bill of entry needs to be carried in lieu of e-way bill. The concept
of bill of entry for imported goods under customs will be discussed at Final Level.

However, on receipt of specific information on evasion of tax, physical

verification of a specific conveyance can also be carried out by any other
officer after obtaining necessary approval of the Commissioner or an officer
authorised by him in this behalf.
(16) Inspection and verification of goods [Rule 138C]
A summary report of every inspection of goods in transit shall be recorded
online by the proper officer in Part A of a prescribed form within 24 hours
of inspection and the final report in Part B of said form shall be recorded
within 3 days of such inspection.
However, where the circumstances so warrant, the Commissioner, or any
other officer authorised by him, may, on sufficient cause being shown,
extend the time for recording of the final report in Part B of said form, for a
further period not exceeding 3 days. The period of 24 hours or, as the case
may be, three days shall be counted from the midnight of the date on which
the vehicle was intercepted.
Where the physical verification of goods being transported on any
conveyance has been done during transit at one place within the
State/Union territory or in any other State/Union territory, no further
physical verification of the said conveyance shall be carried out again in the
State/Union territory, unless a specific information relating to evasion of tax
is made available subsequently.
(17) Facility for uploading information regarding detention of vehicle
[Rule 138D]
Where a vehicle has been intercepted and detained for a period exceeding
30 minutes, the transporter may upload the said information in specified
form on the common portal.
(18) Restriction on furnishing of information in Part A of Form GST EWB-01
[Rule138E]
No person (including a consignor, consignee, transporter, an e-commerce
operator or a courier agency) shall be allowed to furnish the
information in Part A of Form GST EWB-01 in respect of following
registered persons, whether as a supplier or a recipient:
(i) A person paying tax under composition scheme or under Notification
No. 2/2019 CT (R) dated 07.03.2019 has not furnished the statement
for payment of self-assessed tax for 2 consecutive quarters, or

8.66 INDIRECT TAXES
(ii) A person paying tax under regular scheme has not furnished the
returns for 2 consecutive months, or
(iii) A person paying tax under regular scheme has not furnished GSTR-1
(Statement of outward supplies) for any 2 months or quarters, as the
case may be.
However, Commissioner (jurisdictional commissioner) may, on receipt
of an application from a registered person in prescribed form, on
sufficient cause being shown and for reasons to be recorded in writing,
by order, in prescribed form allow furnishing of the said information in
Part A of Form GST EWB-01, subject to prescribed conditions and
restrictions. An order rejecting said request shall not be passed without
giving the said person a reasonable opportunity of being heard. The
permission granted or rejected by the Commissioner of State tax or
Commissioner of Union territory tax shall be deemed to be granted or,
as the case may be, rejected by the Commissioner.
(19) It may be noted that the expressions ‘transported by railways’,
‘transportation of goods by railways’, ‘transport of goods by rail’ and
‘movement of goods by rail’ used in the provisions discussed above does
not include cases where leasing of parcel space by Railways takes place.
Tax invoice or bill of supply to accompany transport of goods [Rule 55A]
Person-in-charge of the conveyance shall carry a copy of the tax invoice or the bill
of supply issued in accordance with the provisions of rules 46, 46A or 49 in a case
where such person is not required to carry an e-way bill under these rules.
1. Who can raise a tax invoice?
Registered Person
Receiving taxable goods or
Supplying taxable goods or
services from unregistered
services
supplier

2. Time limit for issuance of invoice
Taxable supply
Goods Services
Involving Within 30 days

No movement Sale or return
movement of from the supply
of goods supplies
goods of services
Before or at the time

Insurance,
At the time of At the time of of supply, or within
Banking - 45
removal delivery 6 months from the
days
removal – whichever
is earlier
In case of •before/at the time each successive statements of

continuous accounts is issued or each successive payment is
supply of goods received
due date of payment is on/before due date of payment

ascertainable from the contract
In case of
continuous not so ascertainable before/at the time of receipt of
supply of payment
services
payment is linked to the on/before the date of
completion of an event completion of that event

8.68 INDIRECT TAXES
3. Important contents of tax invoice
Name &
Consecutive GSTIN of
GSTIN of address of
Serial Number recipient, if
supplier recipient, if not
& date of issue registered
registered
Description of
Quantity in Total Value of
HSN goods or
case of goods supply
services
Tax rate –
Central tax &
Taxable Value Amount of tax
State tax or Place of supply
of supply charged
Integrated tax,
cess
Address of
Tax payable on Signature of
delivery where
reverse charge authorised
different than
basis signatory
place of supply
4. Manner of issuing the invoice
Supply of Goods Supply of services
Triplicate Duplicate
Original copy for recipient Original copy for recipient; and

Duplicate copy for transporter; and Duplicate copy for supplier
Triplicate copy for supplier
The serial number of invoices issued during a month / quarter shall be

furnished electronically in FORM GSTR-1.

5. Revised Tax
Revised Tax Invoices to be issued in respect of taxable
supplies effected during this period
Effective date of Date of issuance of

registration certificate of registration
Consolidated Tax Invoice (CTRI) may be issued in respect of taxable supplies

made to an unregistered recipient during this period
In case of inter-State supplies, CTRI cannot be issued in respect of all

unregistered recipients if the value of a supply exceeds ` 2,50,000 during this
period.
6. Consolidated Tax Invoice

Tax invoice is not required to
Consolidated Tax
Invoice shall be
Value of supply < `200
issued for such
be issued
supplies at the close

Recipient is unregistered of each day in
respect of all such
Recipient does not require such invoice supplies

8.70 INDIRECT TAXES
7. Bill of Supply
Registered Person
Supplying exempted goods or services

or both Bill of
Tax Invoice
Supply
Paying tax under composition levy
8. Receipt Voucher
Advance payment
Supplier Recipient
Receipt Voucher
Where at the time of receipt of advance, rate of tax/ nature of supply is

not determinable
Where at the time of receipt of

advance
(i) rate of tax is not tax shall be paid at the rate of 18%
determinable
(ii) nature of supply is not same shall be treated as inter-State

determinable supply
9. Refund Voucher
Advance payment
Receipt Voucher
Supplier Supply Recipient
Tax Invoice
Refund Voucher

10. Invoice and Payment Vouchers to be issued by recipient of

supply liable to pay tax under reverse charge
Payment Voucher
Receives the supplies taxable

Where Recipient
on Reverse Charge basis
is registered
under section 9(4)

under section 9(3)
Supplier is Supplier is Supplier is

registered unregistered unregistered
Recipient will issue a Payment Voucher at the time of making payment to supplier.
Invoice
Where Recipient Receives the supplies taxable

is registered on Reverse Charge basis
under section 9(4)

under section 9(3)
Supplier is Supplier is
Supplier is
unregistered unregistered
registered
Recipient shall issue Invoice

8.72 INDIRECT TAXES
11. Credit Notes
Where one or more tax invoices have issued for supply of any goods or services
or both
Taxable value in invoice > where goods or

where the
Taxable value in respect services or both
goods
of such supply OR supplied are
supplied are
Tax charged in invoice >
OR returned by found to be
Tax payable in respect of the recipient deficient
such supply
Registered Supplier Recipient of goods or

may issue one or more
of goods or services services or both
credit notes for
or both supplies made in a FY
12. Debit Notes

Where one or more tax invoices have been issued for supply of any goods or
services or both
Taxable value in invoice < Taxable value in respect of such

supply
Tax charged in invoice < Tax payable in respect of such supply
Registered Supplier may issue one or more

of goods or services debit notes for supplies
or both made in a FY

13. E-Way Bill
Meaning of e-way E-way bill is an electronic document generated on the

bill and why is it GST portal evidencing movement of goods.
required? Section 68 mandates that the Government may require
the person in charge of a conveyance carrying any
consignment of goods of value exceeding such
amount as may be specified to carry with him such
documents and such devices as may be prescribed.
Rule 138 prescribes e-way bill as the document to be
carried for the consignment of goods in certain
prescribed cases.
When is required to E-way Bill is mandatory in case of movement of goods

of consignment value exceeding ` 50,000.
be generated?
Movement should be:
(i) in relation to a supply; or
(ii) for reasons other than supply; or
(iii) due to inward supply from an unregistered
person,
Registered person causing movement of goods shall

furnish the information relating to the said goods in Part
A of Form GST EWB-01 before commencement of such
movement.
Exceptions to minimum consignment value of

` 50,000
 Inter-State transfer of goods by principal to job-
worker
 Inter-State transfer of handicraft goods by a person
exempted from obtaining registration

8.74 INDIRECT TAXES
Who causes If supplier is registered and undertakes to transport the

movement of goods? goods, movement of goods is caused by the supplier. If
recipient arranges transport, movement would be caused
by him.
If goods are supplied by an unregistered supplier to a
registered known recipient, movement shall be caused
by such recipient.
Information to be Part A: to be furnished by Part B: to be furnished by

furnished in e-way the registered person** the person who is
bill who is causing movement transporting the goods.
of goods.
**However, information in Part-A may be furnished:

 by the transporter if so authorised or
 by the e-commerce operator/courier agency, where
the goods are supplied through them.
Who can generate E-way bill is to be generated by the registered

the e-way bill? consignor or consignee (if the transportation is being
done in own/hired conveyance or by railways by air or by
vessel) or the transporter (if the goods are handed over
to a transporter for transportation by road). Where
neither the consignor nor consignee generates the e-
way bill and the value of goods is more than
` 50,000/- it shall be the responsibility of the
transporter to generate it.
Other points  Goods transported by railways shall be delivered only

on production of e-way bill.
 E-way bill can be generated even if consignment
value is less than ` 50,000.

Details of In case of intra-State movement of goods upto 50 km

conveyance may not distance:
be furnished in Part-  from place of business (PoB) of consignor to PoB of
B transporter for further transportation or
 from PoB of transporter finally to PoB of the
consignee.
Transfer of goods to In such cases, the transporter or generator of the e-way

another conveyance bill shall update the new vehicle number in Part B of the
EWB before such transfer and further movement of
goods.
Consolidated E-way After e-way bill has been generated, where multiple
Bill in case of road consignments are intended to be transported in one
transport conveyance, the transporter may indicate the serial
number of e-way bills generated in respect of each such
consignment electronically on the common portal and a
consolidated e-way bill in Form GST EWB-02 may be
generated by him on the said common portal prior to the
movement of goods.
Where the consignor/consignee has not generated the e-
way bill in Form GST EWB-01 and the aggregate of the
consignment value of goods carried in the conveyance is
more than ` 50,000, the transporter shall generate
individual Form GST EWB-01 on the basis of invoice or bill
of supply or delivery challan and may also generate a
consolidated e-way bill in Form GST EWB-02 prior to the
movement of goods [This provision is not yet effective].
Cancellation of e- E-way bill can be cancelled if either goods are not

way bill transported or are not transported as per the details
furnished in the e-way bill. The e-way bill can be
cancelled within 24 hours from the time of generation.

8.76 INDIRECT TAXES
Validity period of e- Sl. Distance within Validity period from

way No. country relevant date
bill/consolidated e- 1. Upto 100 km One day in cases other than
way bill Over Dimensional Cargo or
multimodal shipment in
which at least one leg
2. For every 100 One additional day in cases

km or part other than Over
thereof Dimensional Cargo or
thereafter multimodal shipment in
3. Upto 20 km One day in case of Over

Dimensional Cargo or
multimodal shipment in
4. For every 20 km One additional day in case

or part thereof of Over Dimensional Cargo
thereafter or multimodal shipment
in which at least one leg
Acceptance/rejection The person causing movement of goods shall generate

of e-way bill the e-way bill specifying the details of other person as a
recipient who can communicate the acceptance or
rejection of such consignment specified in the e-way bill.
If the acceptance or rejection is not communicated within
72 hours from the time of generation of e-way Bill or the
time of delivery of goods whichever is earlier, it will be
deemed that he has accepted the details.

Is e-way bill required E-way bill is not required to be generated in certain

in all cases? specified cases. [Discussed in detail earlier in this chapter]
Documents/ devices  invoice or bill of supply or delivery challan

to be carried by a  copy of the e-way bill in physical form or the e-way
person-in-charge of bill number in electronic form or mapped to a RFID**
a conveyance embedded on to the conveyance
Verification of Commissioner or an officer empowered by him in this

documents and behalf may authorise the proper officer to intercept any
conveyances conveyance to verify the e-way bill or the e-way bill
number in physical form for all inter-State and intra-State
movement of goods.
Physical verification of a specific conveyance can also be
carried out by any officer, on receipt of specific
information on evasion of tax, after obtaining necessary
approval of the Commissioner or an officer authorised by
him in this behalf.
Inspection and A summary report of every inspection of goods in transit

verification of goods shall be recorded online on the common portal by the
proper officer within 24 hours of inspection and the final
report shall be recorded within 3 days of such inspection.
Once physical verification of goods being transported on
any conveyance has been done during transit at one
place within the State or in any other State, no further
physical verification of the said conveyance shall be
carried out again in the State, unless a specific
information relating to evasion of tax is made available
subsequently. Where a vehicle has been intercepted and
detained for a period exceeding 30 minutes, the
transporter may upload the said information in on the
common portal.

8.78 INDIRECT TAXES
Restriction on No person (including a consignor, consignee,

furnishing of transporter, an e-commerce operator or a courier
information in Part agency) shall not be allowed to furnish the
A of Form GST EWB- information in Part A of Form GST EWB-01 in respect
01 of following registered persons, whether as a supplier
or a recipient:
(i) A composition supplier has not furnished the
statement for payment of self-assessed tax for 2
consecutive quarters, or
(ii) A person paying tax under regular scheme has
not furnished the returns for 2 consecutive
months, or
(iii) A person paying tax under regular scheme has
not furnished GSTR-1 for any 2 months or
quarters, as the case may be.
However, Commissioner (jurisdictional commissioner)
may, on sufficient cause being shown and for reasons
to be recorded in writing, allow furnishing of the said
information in Part A of Form GST EWB-01, subject to
prescribed conditions and restrictions. .

1. Sultan Industries Ltd., Delhi, entered into a contract with Prakash
Entrepreneurs, Delhi, for supply of spare parts of a machine on 7th September.
The spare parts were to be delivered on 30th September. Sultan Industries Ltd.
removed the finished spare parts from its factory on 29th September.
Determine the date by which invoice must be issued by Sultan Industries Ltd.
under GST law.
2. MBM Caretakers, a registered person, provides the services of repair and
maintenance of electrical appliances. On April 1, it has entered into an
annual maintenance contract with P for its Air Conditioner and Washing
Machine. As per the terms of contract, maintenance services will be provided
on the first day of each quarter of the relevant financial year and payment for

the same will also be due on the date on which service is rendered. During
the year, it provided the services on April 1, July 1, October 1, and January 1
in accordance with the terms of contract. When should MBM Caretakers issue
the invoice for the services rendered?
3. The aggregate turnover of Sangri Services Ltd., Delhi, exceeded ` 20 lakh on
12th August. He applied for registration on 3rd September and was granted
the registration certificate on 6th September. You are required to advice Sangri
Services Ltd. as to what is the effective date of registration in its case. It has
also sought your advice regarding period for issuance of Revised Tax Invoices.
4. Shyam Fabrics has opted for composition levy scheme in the current financial
year. It has approached you for advice whether it is mandatory for it to issue
a tax invoice. You are required to advise him regarding same.
5. Royal Fashions, a registered supplier of designer outfits in Delhi, decides to
exhibit its products in a Fashion Show being organised at Hotel Park Royal,
Delhi on 4th January. For the occasion, it gets the service by way of
makeover of its models from Aura Beauty Services Ltd., Ashok Vihar, for which
a consideration is ` 5,00,000 (excluding GST) has been charged. Aura Beauty
Services Ltd. issued a duly signed tax invoice on 10th February showing the
lumpsum amount of ` 5,90,000 inclusive of CGST and SGST @ 9% each for
the services provided. Answer the following questions:
(i) Examine whether the tax invoice has been issued within the time limit
prescribed under law.
(ii) Tax consultant of Royal Fashions objected to the invoice raised
suggesting that the amount of tax charged in respect of the taxable
supply should be shown separately in the invoice raised by Aura Beauty
Services Ltd. However, Aura Beauty Services Ltd. contended that there is
no mandatory requirement of showing tax component separately in the
invoice. You are required to examine the validity of the objection raised
by tax consultant of Royal Fashions.
6. Kidzee Toys Ltd., a wholesaler of toys registered in Chandigarh, is renowned
in the local market for the variety of toys and their reasonable prices. Kidzee
Toys Ltd. makes supply of 100 pieces of baby’s learning laptops and chat
learning phones to Nancy General Store on 25th September by issuing a tax
invoice amounting to ` 1,00,000.

8.80 INDIRECT TAXES
However, the said toys were returned by Nancy General Store on 30th September.
Discuss which document Kidzee Toys Ltd. is required to issue in such a case?
7. Rana Sanga Ltd., a registered supplier has made following taxable supplies to
its customer Babur in the quarter ending 30th June.
Date Bill No. Particulars Invoice value

(including GST) [` ]
5th April 102 Notebooks [10 in 1,200

numbers]
10th May 197 Chart Paper [4 in 600

number]
20th May 230 Crayon colors [2 500

packets]
2nd June 254 Poster colors [5 900

packets]
22nd June 304 Pencil box [4 sets] 700

Goods in respect of bill no. 102, 230 and 254 have been returned by Babur.
You are required to advise Rana Sanga Ltd. whether it can issue a
consolidated credit note against all the three invoices?
8. Chidanand Products Pvt. Ltd. is a registered supplier who has opted for
composition levy in the current financial year. He wishes to know whether
the issue of a bill of supply can be dispensed with under any circumstances.
You are required to advise him.
9. A registered person has to mandatorily issue separate invoices for taxable and
exempted goods when supplying both taxable as well as exempted goods to
an unregistered person. Examine the validity of the statement.
10. A non-banking financial company can issue a consolidated tax invoice at the
end of every month for the supply made during that month. Examine the
validity of the statement.
11. Sakthi Enterprises, Kolkata entered into a contract with Suraj Enterprises, Surat
for supply of goods and the delivery shall be made on or before 31st October. The
goods were removed from the factory at Kolkata on 11th October. As per the

agreement, the goods were to be delivered on or before 31st October. Suraj

Enterprises has received the goods on 14th October. Determine the time of issue
of invoice as per the provisions of CGST Act.
12. Trust and Fun Ltd., an event management company, has provided its services for
an event at Kapoor Film Agencies, Mumbai on 5th June. Payment for the event
was made on 19th June. Determine the time of issue of invoice as per the
provisions of CGST Act.
13. Udai Singh, a registered supplier, has received advance payment with respect
to services to be supplied to Sujamal. His accountant asked him to issue the
receipt voucher with respect to such services to be supplied. However, he is
apprehensive as to what would happen in case a receipt voucher is issued, but
subsequently no services are supplied. You are required to advise Udai Singh
regarding the same.
14. Bhoj Raj, a registered person, has availed GTA services on which he is liable to
pay tax under reverse charge. He wishes to know whether he is required to
issue an invoice. Please advise him discussing the relevant provisions under
CGST Act and rules thereunder.
15. Sitaram Textiles has to send cloth for dyeing to its job-worker. It wishes to
know whether it needs to issue a tax invoice at the time of sending the goods
to job-worker. Please advise him with reference to the provisions of the CGST
Act.
10. ANSWERS/HINTS
1. As per the provisions of section 31, invoice shall be issued before or at the
time of removal of goods for supply to the recipient, where the supply
involves movement of goods. Accordingly, in the given case, the invoice
must be issued on or before 29th September.
2. Continuous supply of service means, inter alia, supply of any service which
is provided, or agreed to be provided continuously or on recurrent basis,
under a contract, for a period exceeding 3 months with the periodic
payment obligations.
Therefore, the given situation is a case of continuous supply of service as
repair and maintenance services have been provided by MBM Caretakers on
a quarterly basis, under a contract, for a period of one year with the
obligation for quarterly payment.

8.82 INDIRECT TAXES
In terms of section 31, in case of continuous supply of service, where due

date of payment is ascertainable from the contract (as in the given case),
invoice shall be issued on or before the due date of payment.
Therefore, in the given case, MBM Caretakers should issue quarterly invoices
on or before April 1, July 1, October 1, and January 1.
3. As per section 25 read with CGST Rules, where an applicant submits
application for registration within 30 days from the date he becomes liable
to registration, effective date of registration is the date on which he
becomes liable to registration. Since, Sangri Services Ltd.’s turnover
exceeded ` 20 lakh on 12th August, it became liable to registration on same
day. Further, it applied for registration within 30 days of so becoming liable
to registration, the effective date of registration is the date on which he
becomes liable to registration, i.e. 12th August.
As per section 31 read with CGST Rules, every registered person who has
been granted registration with effect from a date earlier than the date of
issuance of certificate of registration to him, may issue Revised Tax Invoices.
Revised Tax Invoices shall be issued within 1 month from the date of
issuance of certificate of registration. Revised Tax Invoices shall be issued
within 1 month from the date of issuance of registration in respect of
taxable supplies effected during the period starting from the effective date
of registration till the date of issuance of certificate of registration.
Therefore, in the given case, Sangri Services Ltd. has to issue the Revised
Tax Invoices in respect of taxable supplies effected during the period
starting from the effective date of registration (12th August) till the date of
issuance of certificate of registration (6th September) within 1 month from
the date of issuance of certificate of registration, i.e. on or before 6th
October.
4. A registered person paying tax under the provisions of section 10
[composition levy] shall issue, instead of a tax invoice, a bill of supply
containing such particulars and in such manner as may be prescribed
[Section 31(3)(c) read with CGST Rules, 2017].
Therefore, in the given case, Shyam Fabrics cannot issue tax invoice.
Instead, it shall issue a Bill of Supply.
5. (i) As per section 31 read with the CGST Rules, in case of taxable supply
of services, invoices should be issued before or after the provision of

service, but within a period of 30 days [45 days in case of insurer/

banking company or financial institutions including NBFCs] from the
date of supply of service.
In view of said provisions, in the present case, the tax invoice should
have been issued in the prescribed time limit of 30 days from the date
of supply of service i.e. upto 3rd February. However, the invoice has
been issued on 10th February.
(ii) Section 31 read with the CGST Rules, inter alia, provides that tax
invoice in addition to other mandatory details shall also contain the
amount of tax charged in respect of taxable goods or services (central
tax, State tax, integrated tax, Union territory tax or cess). Further,
where any supply is made for a consideration, every person who is
liable to pay tax for such supply shall prominently indicate in all
documents relating to assessment, tax invoice and other like
documents, the amount of tax which shall form part of the price at
which such supply is made.
The objection raised by the tax consultant of Royal Fashions
suggesting that the amount of tax charged in respect of the taxable
supply of makeover services should be shown separately in the invoice
raised by Aura Beauty Services Ltd., is valid in law.
6. Kidzee Ltd. is required to issue a credit note in such a case.
As per section 34, where one or more tax invoices have been issued for
supply of any goods or services or both and the goods supplied are
returned by the recipient the registered person, who has supplied such
goods or services or both, may issue to the recipient one or more credit
notes for supplies made in a financial year containing such particulars as
may be prescribed. Therefore, Kidzee Ltd. is required to issue a credit note
to Nancy General Store for the good returned.
7. Where one or more tax invoices have been issued for supply of any goods
and/or services and
(a) the taxable value/tax charged in that tax invoice is found to exceed
the taxable value/tax payable in respect of such supply, or
(b) where the goods supplied are returned by the recipient, or
(c) where goods and/or services supplied are found to be deficient,

8.84 INDIRECT TAXES
the registered person, who has supplied such goods and/or services, may
issue to the recipient one or more credit notes for supplies made in a
financial year containing prescribed particulars.
Thus, one (consolidated) or more credit notes can be issued in respect of
multiple invoices issued in a financial year without linking the same to
individual invoices.
Hence, in view of the above-mentioned provisions, Rana Sanga Ltd. can
issue a consolidated credit note for the goods returned in respect of all the
three invoices.
8. Yes. Chidanand Products Pvt. Ltd. may not issue a bill of supply if the value
of the goods or services or both supplied is less than ` 200 subject to the
condition that:
(a) the recipient is not a registered person; and
(b) the recipient does not require such bill of supply,
and he shall issue a consolidated bill of supply for such supplies at the close
of each day in respect of all such supplies.
9. The statement is not valid in law. As per the CGST Rules, where a registered
person is supplying taxable as well as exempted goods or services or both
to an unregistered person, a single “invoice-cum-bill of supply” may be
issued for all such supplies.
10. The said statement is valid in law. A customer may avail numerous services
from a non-banking financial company in a given tax period. It may issue a
consolidated tax invoice/ statement/ advice, any other document in lieu
thereof, by whatever name called may be issued/ made available,
physically/ electronically, for supply of services made during a month at
the end of the month.
11. 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, where the
supply involves movement of goods.
Therefore, in the given case, invoice has to be issued on or before,
11th October (the time of removal of goods).
12. A registered person [other than an insurer/banking company/financial
institution, including an NBFC] supplying taxable services shall issue a tax

invoice before or after the provision of service, but within a period of 30

days from the date of supply of service.
Thus, in the given case, invoice has to be issued within 30 days of 5th June
(date of supply of service), i.e. on or before, 5th July.
13. Udai Singh is required to issue a receipt voucher at the time of receipt of
advance payment with respect to services to be supplied to Sujamal. A
receipt voucher is a document evidencing receipt of advance money
towards a supply of goods and/or services or both. A registered person, on
receipt of advance payment with respect to any supply of goods or services
or both, shall issue a receipt voucher or any other document, evidencing
receipt of such payment.
Where, on receipt of advance payment with respect to any supply of goods or
services or both the registered person issues a receipt voucher, but
subsequently no supply is made and no tax invoice is issued in pursuance
thereof, the said registered person may issue to the person who had made the
payment, a refund voucher against such payment. Therefore, in case
subsequently no services are supplied by Udai Singh, and no tax invoice is
issued in pursuance thereof, Udai Singh may issue a refund voucher against
such payment to Sujamal.
14. Bhoj Raj is required to issue an invoice with regard to the GTA services
availed by him. A registered person who is liable to pay tax under sub-
section (3) or sub-section (4) of section 9 (i.e. where the recipient is liable to
discharge GST on reverse charge basis) shall issue an invoice in respect of
goods or services or both received by him from the supplier on the date of
receipt of goods or services or both.
15. Sitaram Textiles has to issue a delivery challan and not the tax invoice at the
time of sending the goods to job-worker. Rule 55, inter alia, stipulates that
for the purposes of transportation of goods for job work, the consignor may
issue a delivery challan, serially numbered, in one or multiple series, in lieu
of invoice at the time of removal of goods for transportation, containing the
following details, namely:-
(i) date and number of the delivery challan;
(ii) name, address and Goods and Services Tax Identification Number of
the consigner, if registered;

8.86 INDIRECT TAXES
(iii) name, address and Goods and Services Tax Identification Number or
Unique Identity Number of the consignee, if registered;
(iv) Harmonised System of Nomenclature code and description of goods;
(v) quantity (provisional, where the exact quantity being supplied is not
known);
(vi) taxable value;
(vii) tax rate and tax amount – central tax, State tax, integrated tax, Union
territory tax or cess, where the transportation is for supply to the
consignee;
(viii) place of supply, in case of inter-State movement; and
(ix) signature.
The delivery challan shall be prepared in triplicate, in case of supply of
goods, in the following manner, namely:–
(a) the original copy being marked as ORIGINAL FOR CONSIGNEE;
(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER;
and
(c) the triplicate copy being marked as TRIPLICATE FOR CONSIGNER.


The Finance Act, 2020 has become effective from 27.03.2020. However, most of
the amendments made in the CGST Act and IGST Act vide the Finance Act, 2020
would become effective only from a date to be notified by the Central
Government in the Official Gazette. Such a notification has not been issued 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 such notification is
issued by the Central Government.

Proviso to sub-section Proviso to sub-section (2) Section 31 is being

(2) “Provided that the amended so as to
“Provided that the Government may, on the empower the
Government may, on recommendations of the Government to
the recommendations Council, by notification— notify the categories
of the Council, by (a) specify the categories of of services or
notification and subject services or supplies in supplies in respect
to such conditions as respect of which a tax of which tax invoice
may be mentioned invoice shall be issued, can be issued in the
therein, specify the within such time and in prescribed time and
categories of services in such manner as may be manner.
respect of which–– prescribed;
(a) any other (b) subject to the condition
document issued in mentioned therein,
relation to the specify the categories of
22

8.88 INDIRECT TAXES
supply shall be services in respect of

deemed to be a tax which—
invoice; or (i) any other document
(b) tax invoice may not issued in relation to
be issued.” the supply shall be
deemed to be a tax
invoice; or
(ii) tax invoice may not
be issued.

CHAPTER 9
PAYMENT OF TAX
LEARNING OUTCOMES
 describe three kinds of ledgers/register to be maintained by
the taxable person-electronic cash ledger, electronic credit
ledger and electronic liability register.
 understand the methodology of cross utilization of credit.
 comprehend and apply the chronological order in which the
liability of a taxable person has to be discharged.
 identify and analyse the circumstances in which penal interest
is levied.
 procedure for transfer of input tax credit between Central and
State Government

9.2 INDIRECT TAXES
Relevant Definitions
Electronic Cash Ledger

Payment of Tax
Electronic Credit Ledger
Electronic Liability Register
Interest on delayed payment of tax
Transfer of input tax credit
1. INTRODUCTION
In the GST regime, for any intra-state supply, taxes to be paid are the Central GST
(CGST), going into the account of the Central
Government and the State GST(SGST)/UTGST, going
into the account of the concerned State Government.
For any inter-state supply, tax to be paid is Integrated
GST (IGST) having components of both CGST and SGST.
In addition, certain categories of registered persons will be required to pay to the
Government account tax deducted at source (TDS) and tax collected at source

PAYMENT OF TAX 9.3
(TCS) 1. In addition, wherever applicable, interest, penalty, fees and any other
payment will also be required to be made.
The introduction of E-ledgers is a unique feature under the GST regime. Electronic
Ledgers or E-Ledgers are of two types. One set is prepared and updated by the Tax
payer – Electronic Cash Ledger and Electronic Credit Ledger. Second set is prepared
and updated on the basis of returns furnished by the Registered person or Tax
authority i.e. Electronic Liability register.
Once a taxpayer is registered on common portal (GSTN), two e-ledgers (Cash & Input
Tax Credit ledger) and an electronic tax liability register will be automatically opened
and displayed on his dash board at all times.
Chapter X of the CGST Act, 2017 prescribes the provisions relating to payment of tax
containing sections 49 to 53A. Bird’s eye view of coverage under these sections is as
under-
section 49 discusses the three ledgers namely the electronic cash ledger,
electronic credit ledger and electronic liability register,
section 50 discusses about the interest on delayed payment of tax.
Section 51 lays down the circumstances in which tax deduction at source (TDS)
becomes mandatory.
Section 52 deals with the circumstances when tax is to be collected at source
(TCS) by the Electronic Commerce Operator.
Further, the manner of transfer of ITC is laid down in section 53 and
transfer of certain amounts is discussed in section 53A.
Chapter IX of CGST Rules, 2017 deals with provisions relating to payment of tax.
Provisions of payment of tax under CGST Act, 2017 have also been made
applicable to IGST Act, 2017 vide section 20 of the IGST Act, 2017.
Before proceeding to understand the provisions of section 49, 50, 53, 53A & the
relevant rules, let us first go through few relevant definitions.
1
It may be noted that sections 51 & 52 dealing with provisions relating to TDS & TCS will be dealt
in detail at the Final Level.

9.4 INDIRECT TAXES
Definitions

Authorised bank shall mean a bank or a branch of a bank authorised by the
Government to collect the tax or any other amount payable under this Act
[Section 2(14)].
Business includes
benefit;
to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or
not there is volume, frequency, continuity or regularity of such
transaction;
(d) supply or acquisition of goods including capital goods and services in
subscription or any other consideration) of the facilities or benefits to
its members;
(f) admission, for a consideration, of persons to any premises;
vocation;
(h) activities of a race club including by way of totalisator or a license to
bookmaker or activities of a licensed bookmaker in such club; and

PAYMENT OF TAX 9.5

public authorities [Section 2(17)].
Central Tax means the central goods and services tax levied under Section 9
[Section 2(21)].
Common portal means the common goods and services tax electronic portal
referred to in section 146 [Section 2(26)].
Council means the Goods and Services Tax Council established under article
279A of the Constitution [Section 2(36)].
Electronic Cash ledger means the electronic cash ledger referred to in sub-
section (1) of Section 49 [Section 2(43)].
Electronic Credit ledger means the electronic credit ledger referred to in sub-
section (2) of section 49 [Section 2(46)].
Integrated tax means the integrated goods and services tax levied under the
Integrated Goods and Services Tax Act [Section 2(58)].
Input tax in relation to a registered person, means the central tax, State tax,
integrated tax or Union territory tax charged on any supply of goods or
services or both made to him and includes—
the integrated goods and services tax charged on import of goods;
the tax payable under the provisions of sub-sections (3) and (4) of
section 9;
the tax payable under the provisions of sub-section (3) and (4) of section
5 of the IGST Act;
the tax payable under the provisions of sub-section (3) and sub-section
(4) of section 9 of the respective State Goods and Services Tax Act; or
the tax payable under the provisions of sub-section (3) and sub-section
(4) of section 7 of the Union Territory Goods and Services Tax Act,
but does not include the tax paid under the composition levy [Section 2(62)].
Input Tax Credit means the credit of input tax [Section 2(63)].
local authority means-
a “Panchayat” as defined in clause (d) of article 243 of the Constitution;

9.6 INDIRECT TAXES
a “Municipality” as defined in clause (e) of article 243P of the

Constitution;
a Municipal Committee, a Zilla Parishad, a District Board, and any other
authority legally entitled to, or entrusted by the Central Government or
any State Government with the control or management of a municipal
or local fund;
a Cantonment Board as defined in section 3 of the Cantonments Act,
2006;
a Regional Council or District Council constituted under the Sixth
Schedule to the Constitution;
a Development Board constituted under article 371 and article 371J of
the Constitution; or
a Regional Council constituted under article 371A of the Constitution.
[Section 2(69)].
Notification means a notification published in the Official Gazette and the
expression “notify” and “notified” shall be construed accordingly
[Section 2(80)].
Output tax in relation to a taxable person, means the tax chargeable under
this Act on taxable supply of goods or services or both made by him or by his
agent but excludes tax payable by him on reverse charge basis[Section 2(82)].
Person includes:-
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;
(e) a limited liability Partnership;
(f) an association of persons or a body of individuals, whether incorporated

or not, in India or outside India;
(g) any corporation established by or under any Central Act, State Act, or
Provincial Act or a Government Company as defined in clause (45) of
section 2 of the Companies Act, 2013;

PAYMENT OF TAX 9.7
(h) any body corporate incorporated by or under the laws of a country outside
India;
(i) a co-operative society registered under any law relating to co-operative

societies;
(j) a local authority;
(k) Central Government or a State Government;
(l) society as defined under the Societies Registration Act,1860;
(m) trust; and

(n) every artificial juridical person, not falling within any of the above
[Section 2(84)].


construed as a reference to the recipient of the supply and shall include
an agent acting as such on behalf of the recipient in relation to the
goods or services or both supplied [Section 2(93)].
State Tax means the tax levied under any State Goods and Services Tax Act
[Section2(104)].
Taxable person means a person who is registered or liable to be registered

under Section 22 or section 24[Section 2(107)].

9.8 INDIRECT TAXES
Valid return means a return furnished under sub-section (1) of section 39 on

which self-assessed tax has been paid in full [Section 2(117)].
After going through the various definitions relevant to this Chapter, let us discuss
the provisions of Chapter X of the CGST Act, 2017.
3. PAYMENT OF TAX, INTEREST, PENALTY AND

OTHER AMOUNTS [SECTION 49]
Section 49 Payment of tax, interest, penalty and other amounts
Sub-Section Clause Particulars
(1) Every deposit made towards tax, interest, penalty, fee or any other
amount by a person by internet banking or by using credit or debit
cards or National Electronic Fund Transfer or Real Time Gross
Settlement or by such other mode and subject to such conditions and
restrictions as may be prescribed, shall be credited to the electronic
cash ledger of such person to be maintained in such manner as may
be prescribed.
(2) The input tax credit as self-assessed in the return of a registered

person shall be credited to his electronic credit ledger, in accordance
with section 41, to be maintained in such manner as may be
prescribed.
(3) The amount available in the electronic cash ledger may be used for
making any payment towards tax, interest, penalty, fees or any other
amount payable under the provisions of this Act or the rules made
there under in such manner and subject to such conditions and
within such time as may be prescribed.
(4) The amount available in the electronic credit ledger may be used for
making any payment towards output tax under this Act or under the

PAYMENT OF TAX 9.9
Integrated Goods and Services Tax Act in such manner and subject
to such conditions and within such time as may be prescribed.
(5) The amount of input tax credit available in the electronic credit
ledger of the registered person on account of––
(a) integrated tax shall first be utilised towards payment of

integrated tax and the amount remaining, if any, may be
utilised towards the payment of central tax and State tax, or as
the case may be, Union territory tax, in that order;
(b) the central tax shall first be utilised towards payment of central
tax and the amount remaining, if any, may be utilised towards
the payment of integrated tax;
(c) the State tax shall first be utilised towards payment of State tax
and the amount remaining, if any, may be utilised towards
payment of integrated tax;
Provided that the input tax credit on account of State tax shall
be utilised towards payment of integrated tax only where the
balance of the input tax credit on account of central tax is not
available for payment of integrated tax;
(d) the Union territory tax shall first be utilised towards payment
of Union territory tax and the amount remaining, if any, may
be utilised towards payment of integrated tax;
Provided that the input tax credit on account of Union territory
tax shall be utilised towards payment of integrated tax only
where the balance of the input tax credit on account of central
tax is not available for payment of integrated tax
(e) the central tax shall not be utilised towards payment of State
tax or Union territory tax; and
(f) the State tax or Union territory tax shall not be utilised towards
payment of central tax.
(6) The balance in the electronic cash ledger or electronic credit ledger
after payment of tax, interest, penalty, fee or any other amount

9.10 INDIRECT TAXES
payable under this Act or the rules made thereunder may be

refunded in accordance with the provisions of section 54.
(7) All liabilities of a taxable person under this Act shall be recorded and
maintained in an electronic liability register in such manner as may
be prescribed.
(8) Every taxable person shall discharge his tax and other dues under
this Act or the rules made thereunder in the following order, namely:–
(a) self-assessed tax, and other dues related to returns of previous

tax periods;
(b) self-assessed tax, and other dues related to the return of the
current tax period;
(c) any other amount payable under this Act or the rules made
thereunder including the demand determined under section 73
or section 74;
(9) Every person who has paid the tax on goods or services or both under
this Act shall, unless the contrary is proved by him, be deemed to
have passed on the full incidence of such tax to the recipient of such
(10) A registered person may, on the common portal, transfer any

amount of tax, interest, penalty, fee or any other amount
available in the electronic cash ledger under this Act, to the
electronic cash ledger for integrated tax, central tax, State tax,
Union territory tax or cess, in such form and manner and
subject to such conditions and restrictions as may be prescribed
and such transfer shall be deemed to be a refund from the
electronic cash ledger under this Act.
(11) Where any amount has been transferred to the electronic cash
ledger under this Act, the same shall be deemed to be deposited
in the said ledger as provided in sub-section(1).

PAYMENT OF TAX 9.11
Explanation.––For the purposes of this section,—
(a) the date of credit to the account of the Government in the

authorised bank shall be deemed to be the date of deposit in
the electronic cash ledger;
(b) the expression,—
(i) “tax dues” means the tax payable under this Act and does
not include interest, fee and penalty; and
(ii) “other dues” means interest, penalty, fee or any other

amount payable under this Act or the rules made there
under.
Section 53A Transfer of certain amounts
Where any amount has been transferred from the electronic

cash ledger under this Act to the electronic cash ledger under
the State Goods and Services Tax Act or the Union territory
Goods and Services Tax Act, the Government shall, transfer to
the State tax account or the Union territory tax account, an
amount equal to the amount transferred from the electronic
cash ledger, in such manner and within such time as may be
prescribed.
ANALYSIS
A. ELECTRONIC CASH LEDGER [SECTION 49(1), (3), (6), (10)& (11)

READ WITH RULE 87 OF CGST RULES]
The Electronic Cash Ledger contains a summary of all the deposits/payments made
by a tax payer. Electronic Cash Ledger is maintained on the GST Portal.
Any deposit made towards payment of tax, interest, penalty, late fee or any other
amount will be credited to the electronic cash ledger. Any debit to the electronic
cash ledger represents payment therefrom towards tax, interest, penalty, late fee
or any other amount.

9.12 INDIRECT TAXES
The deposit in the electronic cash ledger shall be made through any of the
following modes, namely:-
(i) Internet Banking through authorised banks;
(ii) Credit card or Debit card through the authorised bank;
(iii) National Electronic Fund Transfer or Real Time Gross Settlement from any
bank; or
(iv) Over the Counter payment through authorized banks for deposits up to ten
thousand rupees per challan per tax period, by cash, cheque or demand draft:
Mode of Deposit in Electronic Cash Ledger
Online Payment Offline Payment
*NEFT stands for National Electronic Fund Transfer.

**RTGS stands for Real Time Gross Settlement.
***any amount as per FAQs on “offline payments: over the counter” web-
hosted on https://www.gst.gov.in.

PAYMENT OF TAX 9.13
It may be noted that the restriction for deposit up to ten thousand rupees per
challan in case of an Over the Counter payment will not apply to deposit to be
made by –
(a) Government Departments or any other deposit to be made by persons
as may be notified by the Commissioner in this behalf;
(b) Proper officer or any other officer authorised to recover outstanding
dues from any person, whether registered or not, including recovery
made through attachment or sale of movable or immovable properties;
(c) Proper officer or any other officer authorised for the amounts collected
by way of cash, cheque or demand draft during any investigation or
enforcement activity or any ad hoc deposit.
Non-applicability of Over the Counter payment limit on deposits to be made

by
Proper officer or any other officer authorized

Government
Departments
to collect the amount by

to recover outstanding way of
dues including cash/cheque/demand
attachment proceedings draft during any
or sale of moveable/ Persons notified by
investigation/enforceme Commissioner
immoveable properties nt activity /any ad hoc
deposit
Payment by Challan
What is CPIN, CIN, BRN and E-FPB?
CPIN stands for Common portal Identification Number. It is created for
every Challan successfully generated by the taxpayer. It is a 14-digit
unique number to identify the challan. CPIN remains valid for a period of
15 days.
CIN or Challan Identification Number is generated by the banks, once
payment in lieu of a generated Challan is successful. It is a 17-digit number
that is 14-digit CPIN plus 3-digit Bank Code.

9.14 INDIRECT TAXES
CIN is generated by the authorized banks/Reserve Bank of India (RBI) when

payment is actually received by such authorized banks or RBI and credited
in the relevant Government account held with them. It is an indication that
the payment has been realized and credited to the appropriate
Government account. CIN is communicated by the authorized bank to
taxpayer as well as to GSTN.
BRN or Bank Reference Number is the transaction number given by the
bank for a payment against a Challan
E-FPB stands for Electronic Focal Point Branch. These are branches of
authorized banks which are authorized to collect payment of GST. Each
authorized bank will nominate only one branch as its E-FPB for PAN India
transaction.
The E-FPB will have to open accounts under each major head for all
governments. Any amount received by such E-FPB towards GST will be
credited to the appropriate account held by such E-FPB. For NEFT/RTGS
Transactions, RBI will act as E-FPB.
Are manual Challans applicable as allowed earlier under the VAT regimes?
Manual or physical Challans are not allowed under the GST regime. It is
mandatory to generate Challans online on the GST Portal.
How many types of Challans are prescribed for various taxes and payments
to be paid under the GST regime?
There is single Challan prescribed for all taxes, fees, penalty, interest, and
other payments to be made under the GST regime.
Other Aspects relating to Challan
Any person, or a person on his behalf, can generate a challan in prescribed form
on the common portal and enter the details of the amount to be deposited by
him towards tax, interest, penalty, fees or any other amount.
E- challan validity is for 15 days. The commission for
Validity of
making payment through e-challan has to be borne
challan-15 days
by the person making the payment.
Any unregistered person has to make payment on the basis of temporary
identification number generated through common portal.

PAYMENT OF TAX 9.15
The mandate form obtained after making NEFT/RTGS payment has to be

submitted in the Bank. The validity of the mandate form is 15 days.
On successful credit of amount in the concerned (Central/State) Government
Account maintained in the authorized bank, a Challan Identification Number
(CIN) will be generated by the collecting bank which will be indicated in the
challan.
On receipt of the CIN from the collecting bank, the said amount is credited into
the electronic cash ledger of the person on whose behalf the deposit is made
and the common portal will generate a receipt to this effect.
If CIN is not generated even after making payment and submission of mandate
form or when after generation, it has not been reflected in the common portal,
the person making the deposit or the person on whose behalf the deposit has
been made, can make a representation in prescribed form i.e. FORM GST PMT-
07 through the common portal or e-gateway through which the payment has
been made.
Date of credit into the treasury of the State Government/Central Government is
deemed to be the date of debit in the electronic cash ledger and not the actual
date of deposit of amount in the electronic cash ledger of the taxable person.
In case any discrepancy is noticed in electronic cash ledger, the registered person
shall communicate the same to the officer exercising jurisdiction in the matter,
through the common portal in prescribed form.
Manner of utilization of amount reflected in Electronic Cash Ledger
Sub-section 3 of section 49 of the CGST Act lays down the following:
The amount reflected in the electronic cash ledger may be used for making any payment
towards tax, interest, penalty, fee, or any other amount in the prescribed manner.
In the e-ledger, information is kept minor head-wise for each major head. The ledger
is displayed major head-wise i.e., IGST, CGST, SGST/UTGST, and CESS. Each major head
is divided into five minor heads: Tax, Interest, Penalty, Fee, and Others.
A registered taxpayer can make cash deposits in the recognized Banks through the
prescribed modes to the Electronic Cash Ledger using any of the Online or Offline
modes permitted by the GST Portal. The Cash deposits can be used for making
payment(s) like tax liability, interest, penalties, fee, and others.

9.16 INDIRECT TAXES
Major Heads Minor Heads

IGST Tax
CGST Interest
Penalty
SGST/UTGST
Fee
CESS
Others
New sub-sections (10) and (11) inserted in section 49 of the CGST Act, 2017
w.e.f 01.01.2020 vide Finance Act, 2019 provides a facility to the registered
person to transfer an amount from one (major/minor) head to another
(major/minor) head in the electronic cash ledger.
The amount available in the electronic cash ledger can be utilised for payment
of any liability for the major and minor heads. For instance, if the registered
person has made a deposit of tax erroneously i.e. by virtue of human error,
under a particular head instead of a specific head, the same can be transferred
to the respective intended head vide Form GST PMT-09.
This Form can be used either for
(i) transfer of erroneous deposits under any minor head of a major head to
any other minor head of same or other major heads or
(ii) for any of the amounts already lying unutilised under any of the minor
heads in Electronic Cash ledger.
For instance, a registered person has deposited a sum of ` 1,000 under the
head of “Interest” column of CGST & ` 1,000 under the head of “Interest”
column of SGST, instead of the head “Fee”. Such amount can be transferred
using Form GST PMT-09 for making a transfer to the head “Fee”. The said
transfer is required using the above Form, because when the Registered person
has to make the remittance of Tax/Interest/Penalty/ Fee/ Other amount at a
stage “Offset Liabilities” in any of the GST Returns/ Forms for Tax payments
through Electronic Cash Ledger, adequate amount should be available under
the respective head of account.

PAYMENT OF TAX 9.17
Prior to the above amendment, the Registered person has to claim a refund of
such erroneous deposit or unutilized amounts using the prescribed Form and
make a fresh deposit of tax for utilization under the appropriate head
The new section 53A provides for transfer of amount between Centre and States
consequential to amendment in section 49 of the CGST Act allowing transfer of
an amount from one head to another head in the electronic cash ledger of the
registered person.
ILLUSTRATION 1
M/s. Daksha Enterprises has made a cash deposit of ` 10,000 under minor head 'tax'
of major head 'SGST’. It has a liability of ` 2,000 for minor head "Interest" under the
major head "SGST".
State whether M/s. Daksha Enterprises can utilise the amount available for payment
of interest.
ANSWER
The Registered person is allowed to transfer the amount available under any minor
head of a major head to any of the minor head of the same or other major head as
per Section 49(10) of the CGST Act vide Form PMT-09.
Therefore, in the given case, amount of ` 10,000 available under minor head ‘tax’
of major head ‘SGST’ can be utilised for payment of liability of ` 2,000 under minor
head ‘interest’ of the same major head, after making a due transfer entry using
Form GST PMT-09 from the minor head of ‘tax’ to ‘interest’.
B. ELECTRONIC CREDIT LEDGER [SECTION 49(2),(4)&(5), SECTION 49A,

SECTION 49B READ WITH RULE 86, RULE 86A AND RULE 88A OF CGST
RULES]
Sub-section (2) of section 49 of the CGST Act provides that the self-assessed input
tax credit (ITC) by a registered person shall be credited to its Electronic Credit
Ledger

9.18 INDIRECT TAXES
Non-utilisation of ITC for tax liability under reverse charge mechanism

The amount available in the electronic credit ledger may be used for making
any payment towards output tax
under CGST or IGST. It is pertinent Input Tax Credit as self-assessed in
to note that “output tax” in relation monthly returns will be reflected in
to a taxable person, means the tax the Electronic Credit Ledger. The
chargeable under this Act on credit in this ledger can be used to
taxable supply of goods and/or make payment of ONLY TAX and
services made by him or by his not for other amounts such as
agent but excludes tax payable by interest, penalty, fees etc.
him on reverse charge basis. Thus,
ITC cannot be utilised for tax payable under reverse charge mechanism.
Manner of utilisation of ITC [Combined reading of section 49(5), 49A,
49B, rule 88A and Circular No. 98/17/2019 GST dated 23.04.2019] 2
IGST CGST SGST/UTGST
IGST (1) (2) [refer1(i)] (2) [refer1(i)]

CGST (2) (1) Not allowed
[refer 2 & 3(i)] [refer 2 & 3]
SGST/ UTGST (2) Not allowed (1)
[refer 2 & 4(i)] [refer 2 & 4]
1. Available IGST credit in the credit ledger should first be utilized towards
payment of IGST.
(i) Remaining amount if any, can be utilized towards the payment of
CGST and SGST/UTGST in any order and in any proportion, i.e. ITC
of IGST can be utilized either against CGST or SGST.
2. Entire ITC of IGST is to be fully utilised first before the ITC of CGST or
SGST/UTGST can be utilized.
3. Available CGST Credit in the credit ledger shall first be utilized for
payment of CGST.
2
The detailed provisions have already been discussed in Chapter-6: “Input tax credit”.

PAYMENT OF TAX 9.19
(i) Remaining amount if any, will be utilized for payment of IGST

4. Available SGST /UTGST credit in the credit ledger shall first be utilized
for payment of SGST/UTGST.
(i) Remaining amount if any, will be utilized for payment of IGST, only
when credit of CGST is not available for payment of IGST
CGST credit cannot be utilized for payment of SGST/UTGST.

Similarly, SGST/UTGST credit cannot be utilized for payment of CGST.
Conditions of use of amount available in electronic credit ledger [Rule 86A]
In case the Commissioner or an officer authorised by him in this behalf, not
below the rank of an Assistant Commissioner, has reasons to believe that ITC
available in the electronic credit ledger has been fraudulently availed or is
ineligible, he may prohibit use of ITC for discharge of any liability under
section 49 or for claim of any refund of any unutilised amount. [Such
provisions have been discussed in detail in Chapter 6: Input Tax Credit under
Heading : How ITC is Utilized.]
Common Points for Electronic Cash & Credit Ledger

Where a person has claimed refund of any amount from the electronic cash
or credit ledger, the said amount shall be debited to the electronic cash or
credit ledger.
If the refund so claimed is rejected, either fully or partly, the amount debited
earlier, to the extent of rejection, shall be credited to the electronic cash or credit
ledger by the proper officer by an order made in prescribed form
C. ELECTRONIC LIABILITY REGISTER [SECTION 49(7), (8) & (9) READ

WITH RULE 85 OF CGST RULES]
Sub-section (7) of section 49 enumerates

about the third kind of ledger [Auto Electronic Liability Register
updated on common portal] viz. Electronic will reflect the total tax liability
Liability Register. While the terms of a taxpayer for a particular
“Electronic Cash Ledger” and “Electronic tax period.
Credit Ledger” are defined in the Act, the
term “Electronic Liability Register” is not

9.20 INDIRECT TAXES
defined. The Section lays down that all liabilities of a taxable person will be maintained
in a separate register.
Order of discharge of tax and other dues
Sub-section (8) prescribes the chronological order in which the liability of a
taxable person has to be discharged:
self -assessed tax and other dues for the previous tax periods have to
be discharged first.
the self -assessed tax and other dues for the current period have to be
discharged next.
Once these two steps are exhausted, thereafter any other amount
payable including demand determined under section 73 or section
74 to be discharged. In other words, the liability if any, arising out of
demand notice and adjudication proceedings comes last. This sequence
has to be mandatorily followed.
The expression “other dues” referred above mean interest, penalty, fee or any
other amount payable under the Act or the rules made there under.
Presumption that incidence of tax is passed on
Sub-section (9) of Section 49 contains a deeming clause. This part of the
section provides that when a taxable person has paid the GST under the
corresponding Act, the taxable person is deemed to have passed on the
incidence of such payment of tax to the recipient of such goods and /or
services. Thus, if tax has been paid under the CGST Act, 2017 then the taxable
person is deemed to have passed on the incidence of such payment of CGST
to the recipient. This is subject to the contrary being proved. Onus to
establish that incidence of tax has not been passed on to the recipient,
becomes relevant in case of Section 54 dealt with “Refund of Tax”
Chapter IX of CGST Rules provide the following:
(I) Debit to electronic liability register:
all amounts payable towards tax, interest, late fee and any other
amount as per return filed;
all amounts payable towards tax, interest, penalty and any other
amount determined in a proceeding by an Assessing authority or as
ascertained by the taxable person;
interest payable under Section 50.

PAYMENT OF TAX 9.21
any interest amount that may accrue from time to time.

(II) Debit to Electronic Credit/Cash ledger:
Debit to Electronic Credit Debit to Electronic Cash Ledger

Ledger and Credit to and Credit to Electronic Liability
Electronic Liability Register Register
Payment of all the liabilities of a Payment of all the liabilities of a

registered person as per his registered person as per his return
return subject to section 49 or subject to section 49 or section 49A
section 49A or section 49B. or section 49B.
Payment of TDS deducted under
section 51, TCS deducted by e-
commerce operator under section
52, amount payable under reverse
charge basis, amount payable under
section 10, amount payable towards
payment of interest, penalty, fee or
any other amount under the Act.
How do the new payment systems benefit the taxpayer and the Commercial
Tax Department?
No more queues and waiting for making payments as payments can be
made online 24 X 7.
Instant online receipts for payments made online.
Tax Consultants can make payments on behalf of the clients.
Single Challan form to be created online, replacing the three or four copy
Challan.
Revenue will come earlier into the Government Treasury as compared to
the old system.
Greater transparency.
Online payments made after 8 pm will be credited to the taxpayer’s
account on the same day.

9.22 INDIRECT TAXES
4. INTEREST ON DELAYED PAYMENT OF TAX

[SECTION 50]
Section 50 Interest on delayed payment of tax

(1) Every person who is liable to pay tax in accordance with the
provisions of this Act or the rules made thereunder, but fails to pay
the tax or any part thereof to the Government within the period
prescribed, shall for the period for which the tax or any part thereof
remains unpaid, pay, on his own, interest at such rate, not
exceeding eighteen per cent., as may be notified by the
Provided that the interest on tax payable in respect of
supplies made during a tax period and declared in the return
for the said period furnished after the due date in accordance
with the provisions of section 39, except where such return is
furnished after commencement of any proceedings under
section 73 or section 74 in respect of the said period, shall be
levied on that portion of the tax that is paid by debiting the
electronic cash ledger 3.
(2) The interest under sub-section (1) shall be calculated, in such
manner as may be prescribed, from the day succeeding the day on
which such tax was due to be paid.
(3) A taxable person who makes an undue or excess claim of input tax
credit under sub-section (10) of section 42 or undue or excess
reduction in output tax liability under sub-section (10) of section
43, shall pay interest on such undue or excess claim or on such
undue or excess reduction, as the case may be, at such rate not
exceeding twenty-four per cent., as may be notified by the
3
The new Proviso has been inserted in Section 50(1) of the CGST Act vide the Finance
(No. 2) Act 2019, which has become effective from 1st September 2020.

PAYMENT OF TAX 9.23
ANALYSIS
The tax dues which are not paid within the stipulated time are liable to interest
payment. This mechanism is automatic in nature by virtue of the provisions
laid under any tax laws. On similar lines, section 50 of the CGST Act, 2017
provides for applicability of interest for default in payment of taxes within the
stipulated time. Under GST law, a registered person, can make the payment of
tax through electronic credit ledger or electronic cash ledger in terms of
section 49 of CGST Act, 2017. Usually, the balance in electronic credit ledger
is exhausted first before utilizing the balance available in the electronic cash
ledger. This practice is adopted for a better working capital management.
In case a registered person does not have sufficient amount available in
electronic credit ledger to pay the tax dues for a particular tax period. Also,
the registered person does not have sufficient money for making deposit of
balance tax amount in electronic cash ledger. In such a situation, GST common
portal doesn’t have a mechanism to allow a registered person to make part
payment of taxes.
If the law maker demands tax dues along with interest on the gross payments
i.e. tax paid through electronic cash ledger and credit ledger, it may be an
unhealthy practice from business perspective. To counter such recovery
mechanism, a proviso has been inserted under Section 50 to provide that when
a registered person has paid his taxes through a return specified under Section
39 of CGST Act, 2017 belatedly, interest shall be applicable only on the net
taxes paid through electronic cash ledger and not on the gross taxes paid for
such tax period
Proviso to sub -section(1) has been inserted vide Section 100 of Finance Act, 2019
and effect of such insertion has been given effect from 01.09.2020. However,
corresponding retrospective amendment in CGST Act, 2017 is yet to be brought in
by the suitable legislation. However, CBIC has issued F. No. CBEC-
20/01/08/2019-GST dated: 18th September, 2020 for giving instructions to the
filed formations for giving effect to 39th GST Council decision of collecting interest
under Section 50(1) only on the net tax liability paid through cash w.e.f.
01.07.2017. Accordingly, Interest if any payable by the registered person for delay
in remittance of taxes beyond the stipulated due date on account of delay in filing
of return under section 39, shall be demanded only on the net cash liability of
taxes and not on the gross tax liability

9.24 INDIRECT TAXES
When interest is payable?

Interest is payable in case of delay in payment of tax, in full or in part within
the prescribed period.
Rate of interest
The rate of interest shall be notified by the Government on the basis of
recommendation of the Council. However, such rate to be notified shall not exceed
18% in case of belated payment of tax i.e. on failure to pay tax (or part of tax)
to the Government’s account. [Notification No. 13/2017 CT dated 28.06.2017
has notified the rate of interest as 18% per annum].
Computation of period for calculation of interest
The period of interest will be from the date following the due date of payment
to the actual date of payment of tax.
Other relevant points relating to interest
The term “tax” here means the tax payable under the Act or Rules made
thereunder.
The payment of interest in case of belated payment of tax should be
made voluntarily i.e. even without a demand.
The interest payable under this section shall be debited to the Electronic
Liability Register.
The liability for interest can be settled by adjustment with balance in
Electronic Cash Ledger but not with balance in electronic credit ledger.
Note: Since the provisions of section 42(10) and 43(10) of the CGST Act are practically
not in operation, the provisions relating to interest payment under section 50(3) have not
been discussed.
ILLUSTRATION 2
Mr. Alok, a registered supplier of taxable goods, filed GSTR 3B for the month of
January, 2020 on 15thApril, 2020. The prescribed due date to file the said GSTR3B
was 20thFebruary, 2020. The amount of net GST payable, in Cash i.e. Electronic Cash
Ledger on supplies made by him for the said month worked out to be ` 36,500 which
was paid on 15thApril, 2020. Briefly explain the related provisions and compute the
amount of interest payable under the CGST Act, 2017 by Mr. Alok. Ignore the effect
of leap year, if applicable in this case.

PAYMENT OF TAX 9.25
ANSWER
Interest is payable in case of delayed payment of tax @ 18% per annum from the
date following the due date of payment to the actual date of payment of tax.
Thus, the amount of interest payable by Mr. Alok is as under:-
Period of delay = 21st February, 2020 to 15th April, 2020 = 54 days
Hence, amount of interest = ` 36,500 x 18% x 54/365 = ` 972
ILLUSTRATION 3
M/s ABC Ltd., have filed their GSTR3B for the month of July, 2020 within the
due date prescribed under Section 39 i.e. 20.08.2020. Post filing of the return,
the registered person has noticed during September 2020 that tax dues for the
month of July, 2020 have been short paid for ` 40,000. M/s ABC Ltd., has paid
the above shortfall of ` 40,000, through GSTR3B of September 2020, filed on
20.10.2020 [payment through Cash ledger - ` 30,000 and Credit ledger
` 10,000]. Examine the Interest payable under the CGST Act, 2017.
What would be your answer if, GSTR3B for the month of July 2020 has been
filed belatedly on 20.10.2020 and the self-assessed tax of ` 40,000/- has been
paid on 20.10.2020 [payment through electronic cash ledger - ` 30,000 and
electronic credit ledger ` 10,000]
Notes:
 There exists adequate balance in Electronic Cash & Credit ledger as on
31.07.2020 for the above short fall
 No other supply has been made nor tax payable for the month of July,
2020 other than ` 40,000/- missed out to be paid on forward charge basis
 Ignore the effect of leap year, if applicable in this case.
ANSWER
Interest is payable under Section 50 of the CGST Act, 2017 in case of delayed
payment of tax @ 18% per annum from the date following the due date of
payment to the actual date of payment of tax.
As per proviso to sub-section (1) of Section 50, interest is payable on the net
tax liability paid in cash, only if the return to be filed for a tax period under
Section 39, has been filed after the due date to furnish such return.

9.26 INDIRECT TAXES
In the above scenario, M/s ABC Ltd., has defaulted in making the payment for
` 40,000 on self-assessment basis in the return for the month of July, 2020.
Accordingly, interest is payable on the gross liability and proviso of sub-
section 50(1) shall not be applicable.
Thus, the amount of interest payable by M/s ABC Ltd., is as under:-
Period of delay = 21st August, 2020 to 20th October, 2020 = 60 days
Hence, amount of interest = ` 40,000 x 18% x 60/365 = ` 1,184
Alternatively, if M/s ABC Ltd., have filed the return for the month of July,2020
on 20.10.2020, beyond the stipulated due date of 20.08.2020 and if the self-
assessed tax for July, 2020 has been paid on 20.10.2020, Interest under
proviso to Section 50(1) shall be payable on the tax paid through Electronic
Cash Ledger only.
Hence Interest is payable from 21st August 2020 till 20th October 2020 =
60days
Amount of Interest = ` 30,000 x 18% x 60/365 = ` 888
5. TRANSFER OF INPUT TAX CREDIT [SECTION 53 OF

CGST ACT & SECTION 18 OF IGST ACT]
If the amount of CGST is utilised towards dues of IGST then, in terms of section 53
of the CGST Act, there shall be reduction in the amount of CGST, equal to the credit
so utilized, and the Central Government shall transfer such amount equivalent to
the amount so reduced in CGST account to the IGST account.
Similarly, if the amount of IGST is utilised towards dues of CGST/UTGST then, in terms
of section 18 of the IGST Act, there shall be reduction in the amount of IGST, equal to
the credit so utilized, and the Central Government shall transfer such amount
equivalent to the amount so reduced in IGST account to the CGST/UTGST account.
However, if the amount of IGST is utilised towards dues of SGST then, in terms of
section 18 of the IGST Act, there shall be reduction in the amount of IGST, equal to
the credit so utilized, and will be apportioned to the appropriate State Government
and the Central Government shall transfer the amount so apportioned to the
account of the respective State Government.

PAYMENT OF TAX 9.27
The provisions relating to payment of tax, interest and other amounts have been
summarised by way of table and diagrams to help students remember and retain
the provisions in a better and effective manner:-
DEFINITIONS OF CERTAIN KEY TERMS
Output
Tax
tax
means excludes payable
on
reverse
CGST on taxable supply of charge
goods and /or services
by taxable by agent of taxable

person person
Taxable
Person
means
a person
liable to be
who is registered
registered
under section under section

22 of CGST Act 24 of CGST Act

9.28 INDIRECT TAXES
Payments to be made in GST regime
CGST & SGST

For Intra-state supply
are to be paid.
IGST to be paid,
For Inter-state supply having components of
both CGST & SGST
Interest, penalty,
fees and any other
Wherever applicable
amount also to be
paid
Key Features of Payment process

Electronically generated challan from GSTN common portal in all modes of
payment and no use of manually prepared challan;
Facilitation for the tax payer by providing hassle free, anytime, anywhere mode
of payment of tax;
Convenience of making payment online;
Realtime data for tax collection in electronic format;
Faster remittance of tax revenue to the Government Account;
Paperless transactions;
Speedy Accounting and reporting;
Electronic reconciliation of all receipts;
Simplified procedure for banks;
Warehousing of Digital Challan.
What are E-Ledgers/register?
Electronic ledgers or E-Ledgers are statements of cash and input tax credit in
respect of each registered taxpayer. In addition, each taxpayer shall also have an
electronic liability register.

PAYMENT OF TAX 9.29
Types of Electronic ledgers/register
Electronic Cash Ledger
Electronic
Ledgers
Electronic Liability
Register Electronic Credit Ledger
A. Electronic Cash Ledger

9.30 INDIRECT TAXES
Modes of Deposit in Electronic Cash Ledger
Major and Minor Heads of Payment
Each of these Major

Major Heads Heads have the five
following Minor Heads
• IGST
Minor Heads
•CGST
• Tax
• SGST/UTGST
• Interest
•CESS
• Penalty
• Fee
• Others
Cross utilization of funds across major or minor heads - Possible
Date of deposit of tax dues
Which date is considered as date of deposit of the tax dues ?
(i) Date of presentation of cheque ×
(ii) Date of payment ×
(iii) Date of credit of amount in the account of √

government by Debit of Electronic Cash
Ledger/Electronic credit ledger

PAYMENT OF TAX 9.31
B. Electronic credit ledger

Order of utilisation of input tax credit available in electronic
credit ledger
ITC Order of utilisation

(1) (2)
IGST IGST CGST/SGST/UTGST- any proportion
ITC of IGST to be completely exhausted mandatorily
CGST CGST IGST
ITC of CGST has been utilized fully before utilizing SGST for payment of IGST
SGST/UTGST SGST/UTGST IGST
The CGST credit cannot be utilized for payment of SGST/UTGST.

The SGST/UTGST credit cannot be utilized for payment of CGST.
C. Electronic liability register

Order of discharge of liability of taxable person
3. All dues
including
2. All dues demand
related to determined
current tax under section
period 73 and 74
1. All dues
related to
previous tax
period

9.32 INDIRECT TAXES
Manner of making payment
Through debit of Electronic Credit In cash, by debit in the Electronic

Ledger Cash Ledger
Through debit of Credit Ledger of Payment can be made in cash, by debit
the tax payer maintained on the in the Cash Ledger of the tax payer
Common portal – ONLY Tax can be maintained on the common portal.
paid.
E-Ledgers/Register
•It will reflect all deposits made in cash, and TDS/TCS made
on account of the tax payer.
Electronic Cash Ledger •This ledger can be used for making ANY PAYMENT
towards tax, interest, penalty, fees or any other amount
on account of GST.
•It will reflect Input Tax Credit as self-assessed in monthly

returns and credited on Provisional basis.
Electronic Credit Ledger •The credit in this ledger can be used to make payment of
ONLY TAX i.e. output tax and not other amounts such as
interest, penalty, fees etc.
Electronic Liability •Electronic Liability Register will reflect the total tax liability
Register of a taxpayer (after netting) for the particular month.
Interest on delayed payment of tax [Section 50]
If person pays the

unpaid amount on Interest Rate is 18% per annum
his own

PAYMENT OF TAX 9.33
Interest payable on the net cash liability of taxes [Section 50]
Interest payable on tax declared and paid in GSTR-3B filed after due date
Interest
Tax paid Tax Paid applicable
through through Cash only on the
Credit Ledger Ledger Cash portion
of Tax
Interest payable on the gross tax liability [Section 50]
Interest payable on tax paid subsequent to payment of self-assessed tax

in GSTR-3B filed within due date
Interest
applicable on
Tax paid Tax Paid
the tax paid
through Credit through Cash
through Cash
Ledger Ledger
and Credit
Ledger

9.34 INDIRECT TAXES
Payment of Tax via Electronic Ledger

A. Electronic Cash Ledger
(Assume it as an account statement provided by bank, for easy understanding)
Debit Amount (DR) Credit Amount (CR)

• Credit amount of this ledger may be used • Any deposit made towards tax,
for payment of tax, interest, fees etc. interest, penalty, late fee etc.
• Remaining credit balance amount after via internet banking, RTGS,
payment of above tax etc. will be fund transfer etc.
refunded to taxable person. • TDS/TCS claimed
B. Electronic Credit ledger

• Credit amount of this ledger may be • Input Tax credit as self-assessed

used for payment of output tax viz in the return in the form of IGST,
IGST, CGST, SGST, UTGST , CESS CGST, SGST, UTGST, CESS
C. Electronic Liability Register

• Amount payable towards tax, interest, • Electronic cash ledger
fees etc.
• Tax or interest payable
• Any other dues
• Amount payable towards output tax • Electronic credit ledger

PAYMENT OF TAX 9.35
Transfer of input tax credit [Section 53 of CGST Act & section

18 of IGST Act]
Amount equivalent
to ITC so used is
transferred by
Used for payment Central
ITC of CGST
of IGST Government (CG)
from CGST
account to IGST
account.
used for
payment of CGST Amount equivalent to
ITC so used is
used for transferred by CG from
payment of IGST account to
UTGST CGST/UTGST account.
ITC of IGST
Amount equivalent to ITC so

used is transferred by CG
used for
from IGST account to the
payment of SGST
respective SGST account of
the State Government .

9.36 INDIRECT TAXES

1. Examine the authority vested under CGST Act, 2017 for preventing a
registered person from utilising the input tax credit availed in a fraudulent
manner?
2. Mr. A has deposited a sum of ` 30,000 under minor head of “Interest” column
for the major head “IGST”. At the time of filing GSTR-3B for a particular tax
period, he noticed that there is no sufficient amount under the minor head
‘Tax’ towards payment of ` 30,000. When approached with the Jurisdictional
Tax officer, Mr. A was guided to deposit the tax amount under proper head
of account and claim a refund for the remittance of amount deposited under
head ”interest”. Examine the relevant provisions of CGST Act, 2017 towards
payment of tax and compliance with the law.
3. M/s PPC Ltd., has availed Input Tax credit for ` 54,000/- IGST during February
2020 on a particular purchase. Accounting records for the above purchase,
indicate that IGST paid to the supplier is ` 45,000/- as per the bill received.
GSTR1 uploaded by the supplier for the above supply indicates ` 45,000/- as
tax paid. Examine as per GST provisions, what value shall be updated in the
ledgers maintained on behalf of M/s PPC Ltd., on the common portal
4. M/s ABC & Co., have defaulted in filing the return under Section 39 of CGST
Act, 2017 i.e. GSTR-3B for the month of March, 2020 within the specified due
date . Reason for such delay is attributable to delay in closure of Books for
March 2020, which have been finalised during May 2020. The GST Common
portal prompted for payment of late fees payable under Section 47 of CGST
Act, 2017 for a sum of ` 2,000 under CGST and SGST each. Accountant, of
M/s ABC & Co., sought your confirmation for payment of such late fees
through the balance available in Electronic Credit Ledger for the late fees.
Give your guidance in this regard
5. How many types of electronic ledger/register are there?
6. What are the main features of GST payment process?
7. Are principles of unjust enrichment applicable for payment made under GST?
8. State the name of output tax under GST, where any of the input tax credit
under GST can be availed?
9. Sahil is a supplier of taxable goods in Karnataka. He got registered under
GST in the month of September, 2020 and wishes to pay his IGST liability for

PAYMENT OF TAX 9.37
the month. Since he is making the GST payment for the first time, he is of
the view that he needs to mandatorily have the online banking facility to
make payment of GST; offline payment is not permitted under GST. You are
required to apprise Sahil regarding the various modes of deposit in the
electronic cash ledger. Further, advise him with regard to following issues:
(a) Are manual challans allowed under GST?
(b) What is the validity period of the challan?
(c) Is cross utilization among Major and Minor heads of the electronic cash
ledger permitted?
10. Suhasini is a registered software consultant. On account of her ill health, she
could not provide any services during the month of October. However, she
had to incur all the expenses relating to her office. She paid ` 75,000 to
various vendors. The total input tax involved on the goods and services
procured by her is ` 13,500. Out of the total bills paid by her, one bill for
` 15,000 relates to security services availed for security of her office, tax on
which is payable under reverse charge. Input tax involved in such bill is
` 2,700.
Suhasini is of the opinion that for the month of October, no GST is payable
from electronic cash ledger as she has sufficient balance of ITC for payment
of GST under reverse charge on security services.
Do you think Suhasini is right? Explain with reasons.
8. ANSWERS/HINTS
1. Every registered person, shall avail the input tax credit through a return filed
under Section 39 of CGST Act, 2017. Input Tax credit availed shall be credited
to electronic credit ledger under section 41 of the CGST Act, 2017 on a
provisional basis. As per provisions contained in Rule 86A, In case the
Commissioner or an officer authorised by him in this behalf, not below the
rank of an Assistant Commissioner, has reasons to believe that ITC available
in the electronic credit ledger has been fraudulently availed or is ineligible,
he may prohibit use of ITC for discharge of any liability under section 49 or
for claim of any refund of any unutilised amount.
2. Provisions of Section 49(10) of CGST Act, 2017 permit a registered person for
transferring the amount deposited under any of the minor head i.e. tax,
interest, penalty, fees or others to any of the heads under

9.38 INDIRECT TAXES
IGST/CGST/SGST/UTGS and make the payment of taxes there upon.

Accordingly, Mr. A need not deposit the tax amount under head “ tax” and
claim a refund for the remittance of amount deposited under head ”interest.
Rather, using the Form GST PMT09, such amount can be transferred suo-
moto on the common portal from “interest” to “tax” head and tax liability be
paid
3. M/s PPC Ltd., have accounted and paid ` 45,000/- as IGST to the supplier
concerned. However, availment of input tax credit has been made for
` 54,000/-.
As per Section 49(2) of CGST Act, 2017 ”The input tax credit as self-assessed
in the return of a registered person shall be credited to his electronic credit
ledger, in accordance with section 41, to be maintained in such manner as
may be prescribed.”
Accordingly, electronic credit ledger of M/s PPC Ltd., shall be updated with a
value of ` 54,000/- as per self- assessed return to be filed for February 2020,
though the input tax credit shown by the supplier is only for ` 45,000/-.
4, Section 49(3) of the CGST Act, 2017 provides that the amount available in the
electronic cash ledger may be used for making any payment towards tax,
interest, penalty, fees or any other amount payable under the provisions of
this Act or the rules made there under in prescribed manner.
Further, section 49(4) provides that the amount available in the electronic
credit ledger may be used for making any payment towards output tax under
this Act or under the Integrated Goods and Services Tax Act in prescribed
manner.
Accordingly, as per the combined reading of the above provisions, late fees
shall be paid only through electronic cash ledger and not possible through
electronic credit ledger. Thus, contention of the accountant of M/s ABC & Co.,
is not correct and the above amount shown on the common portal has to be
deposited in Electronic Cash Ledger under appropriate minor head, through
any of the specified modes .
5. (a) Electronic cash ledger
(b) Electronic credit ledger
(c) Electronic liability register

PAYMENT OF TAX 9.39
6. The main features of GST payment process are as follows:-

(a) Electronically generated challan from GSTN common portal in all modes
of payment and no use of manually prepared challan;
(b) Facilitation for the tax payer by providing hassle free, anytime,
anywhere mode of payment of tax;
(c) Convenience of making payment online;
(d) Realtime data for tax collection in electronic format;
(e) Faster remittance of tax revenue to the Government Account;
(f) Paperless transactions;
(g) Speedy Accounting and reporting;
(h) Electronic reconciliation of all receipts;
(i) Simplified procedure for banks;
(j) Warehousing of Digital Challan.
7. Yes, as per Section 49(9) of the CGST Act, 2017 every person who has paid
the tax on goods or services or both under this Act shall, unless the contrary
is proved by him, be deemed to have passed on the full incidence of such tax
to the recipient of such goods or services or both.
8. IGST. IGST, CGST, SGST, UTGST i.e. all input tax credit can be availed against
output tax liability known as IGST.
9. As per the provisions of CGST Act, 2017 read with relevant rules, the deposit
in electronic cash ledger can be made through any of the following modes,
namely:-
(i) Internet Banking through authorised banks;
(ii) Credit card or Debit card through the authorised bank;
(iii) National Electronic Fund Transfer or Real Time Gross Settlement from
any bank; or
(iv) Over the Counter payment through authorised banks for deposits up to
ten thousand rupees per challan per tax period, by cash, cheque or
demand draft.
Thus, offline mode is also permitted under GST subject to specified
conditions.

9.40 INDIRECT TAXES
(a) Manual or physical Challans are not allowed under the GST regime. It is
mandatory to generate Challans online on the GST Portal.
(b) Challan is valid for a period of 15 days.
(c) A registered person may, on the common portal, transfer any amount
of tax, interest, penalty, fee or any other amount available in the
electronic cash ledger under the CGST Act, 2017 to the electronic cash
ledger for integrated tax, central tax, State tax or Union territory tax or
cess.
10. The amount available in the electronic credit ledger, i.e. ITC may be used for
making any payment towards output tax [Section 49(4)]. Output tax in
relation to a taxable person, means the tax chargeable on taxable supply of
goods or services or both made by him or by his agent but excludes tax
payable by him on reverse charge basis [Section 2(82)].
Therefore, ITC cannot be used to pay the tax liability under reverse charge.
The same is always required to be paid through electronic cash ledger and
not electronic credit ledger. Thus, Suhasini is wrong and she will need to pay
the GST of ` 2,700 on security service through electronic cash ledger.

CHAPTER 10
RETURNS
For the sake of brevity, the term input tax credit has been referred to as ITC in this Chapter. The
section numbers referred to in the Chapter pertain to CGST Act, unless otherwise specified.
Examples/Illustrations/Questions and Answers given in the Chapter are based on the position of
GST law existing as on 31.10.2020.
LEARNING OUTCOMES
 enlist the various types of statements and returns to be filed by a

registered taxpayer
 identify the persons eligible to file various statements/returns as

also the forms prescribed therefor and explain the periodicity for
filing such statements/returns
 determine the late fee for delayed filing of return
 apply the above concepts in problem solving
 explain the provisions relating to GST practitioner

10.2 INDIRECT TAXES
Furnishing of details of outward supplies

GSTR-3B
Furnishing of returns under section 39 GSTR-4
GSTR-5
RETURNS
First Return
Annual Return
GSTR
GSTR-99
Other returns Final Return
GSTR-10
GSTR-11
Notice to return
defaulters
Default/delay in furnishing return
Levy of late fee
Goods and services tax practitioners
1. INTRODUCTION
The term “return” ordinarily means statement of information (facts) furnished by the
taxpayer, to tax administrators, at regular intervals. The information to be furnished in
the return generally comprises of the details pertaining to the nature of
activities/business operations forming the subject matter of taxation; the measure of
taxation such as sale price, turnover, or value; deductions and exemptions; and
determination and discharge of tax liability for a given period.
In any tax law, “filing of returns” constitutes the most important compliance procedure
which enables the Government/ tax administrator to estimate the tax collection for a
particular period and determine the correctness of the tax compliance of the taxpayers.

RETURNS 10.3
The returns serve the following purposes:

a) Mode for transfer of information to tax
administration;
b) Compliance verification program of tax
administration;
c) Finalization of the tax liabilities of the
taxpayer within stipulated period of
limitation;
d) Providing necessary inputs for taking policy decision;
e) Management of audit and anti-
evasion programs of tax
administration
The taxpayer is generally required to furnish Filing of GST returns helps in
the return in a specific statutory format. determination of tax liability
These formats are, therefore, designed to of the return filer and at the
take care of all the provisions of the law that same time it also has a huge
have a bearing on computation of tax bearing on determination of
liability of a taxpayer. Hence, a study of tax liability of other persons
various fields contained in the form of return with whom the former has
vis-à-vis the relevant corresponding entered into taxable
provisions of the tax law, can facilitate overall activities.
understanding of the tax law in a better
manner.
Under the GST laws, the correct and timely filing of returns is of utmost importance
because of two reasons. Firstly, under GST laws, a taxpayer is required to estimate his
tax liability on “self-assessment” basis and deposit the tax amount along with the filing
of such return. The return, therefore, constitutes a kind of
working sheet/supporting document for the tax authorities
that can be relied upon as the basis on which the tax has been
computed by the taxpayer. Secondly, under the GST regime,
filing of returns not only determines the tax liability of the
person filing the same, but it also has a huge bearing on
determination of tax liability of other persons with whom the
former has entered into taxable activities.

10.4 INDIRECT TAXES
Chapter IX of the CGST Act [Sections 37 to 48] prescribes the provisions relating to
filing of returns as under:
Section 37 Furnishing details of outward supplies
Section 38 Furnishing details of inward supplies
Section 39 Furnishing of returns
Section 40 First return
Section 41 Claim of input tax credit and provisional acceptance thereof
Section 42 Matching, reversal and re-claim of input tax credit
Section 43 Matching, reversal and re-claim of reduction in output tax liability
Section 44 Annual Return
Section 45 Final Return
Section 46 Notice to return defaulters
Section 47 Levy of late fee
Section 48 Goods and services tax practitioners
The provisions relating to forms and manner, in which information is to be

furnished through returns, are given under Chapter VIII of the CGST Rules [Rules
59-84]. State GST laws also prescribe identical provisions in relation to filing of
returns.
Provisions of returns, other than late fee, under CGST Act have also been
made applicable to IGST Act vide section 20 of the IGST Act.

RETURNS 10.5
However, the return filing process is under review and is yet not finalized. A simplified
monthly return in Form GSTR 3B was introduced in July, 2017 to help businesses to
file returns easily in the initial months of GST roll out. This was to be followed with
filing of returns - GSTR - 1, 2 and 3. Further, to ease the compliance requirements
for small taxpayers, the GST Council allowed taxpayers with annual aggregate
turnover up to ` 1.5 Crore to file details of outward supplies in Form GSTR-1 on a
quarterly basis and on monthly basis by taxpayers with annual aggregate turnover
greater than ` 1.5 Crore. The GST Council also recommended to postpone the date
of filing of Forms GSTR-2 (details of inward supplies) and GSTR-3 (monthly return)
for all normal taxpayers, irrespective of turnover, till further announcements were
made in this regard.
The return process has still not been streamlined and the GST Council has extended
GSTR-3B filing requirement till end of March 31, 2021. Therefore, in the subsequent
pages of this Chapter, provisions of only those sections which are practically effective,
have been discussed.
Further, the due dates for filing of various statements/returns discussed under this
Chapter are the due dates which are provided under the provisions of the CGST Act
or the due dates specified by notifications which have been consistent over a period
of time. Practically, the due dates are often extended by the Government on account
of various reasons. Also, the quantum of late fee for delayed filing of
statements/returns discussed under this Chapter is the quantum of late fee as
provided under the provisions of the CGST Act. Here also, the Government often
waives off the late fee either partially or fully. It may be noted that such extended
due dates and late fee waivers are not relevant from examination point of view
The GST Council at its 42nd meeting held on 5th October 2020 has recommended
the following incremental changes in the return filing process:
1. Effective 01.01.2021, taxpayers with turnover below ` 5 crores may file
GSTR-3B and GSTR-1 on quarterly basis. Such taxpayers would, for the
first two months of the quarter, have an option to pay 35% of the net tax
liability of the last quarter, using an auto generated challan.
2. Effective 01.01.2021, due date of furnishing quarterly GSTR-1 by
taxpayers to be revised to 13th of the month succeeding the quarter.
Note – Notification No. 74/2020 CT dated 15.10.2020 has revised the due
date for filing quarterly GSTR-1 by the registered persons having
aggregate turnover up to ` 1.5 crores in the preceding financial year or
current financial year to 13th of the month succeeding the end of quarter.

10.6 INDIRECT TAXES
Such date is applicable for the quarters ending December 2020 and
March 2021.
3. Effective 01.01.2021, for monthly filers, auto-generation of liability from
own GSTR-1 and ITC from suppliers’ GSTR-1s through the newly
developed facility in GSTR-2B. For quarterly filers, this facility would be
effective from 01.04.2021. To ensure such auto generation of ITC and
liability in GSTR 3B, GSTR-1 shall be filed mandatorily before filing
GSTR-3B effective 01.04.2021.
4. GSTR-1 and GSTR-3B return filing system to be extended till 31.03.2021
and the GST laws to be amended to make GSTR-1 and GSTR-3B return
filing system as the default return filing system.
However, as on date 1, some of the aforesaid changes recommended in the return
filing process have not become effective. Further, the exact mechanism of the return
filing process would be available only after the relevant notifications are issued by
the Government. Therefore, in this chapter only those provisions which are currently
effective, have been discussed. The amendments which will be made in the law to
give effect to the new process will be given in the Statutory Update, after the new
process becomes operational.
All the returns under GST laws are to be filed electronically. Taxpayers can file
the statements and returns by various modes. Firstly, they can file their statement
and returns directly on the GST common portal online. However, this may be
tedious and time consuming for taxpayers with large number of invoices. For such
taxpayers, offline utilities have been provided by GSTN that can be used for
preparing the statements offline after downloading the auto populated details and
uploading them on the common portal. GSTN has also developed an ecosystem of
GST Suvidha Providers (GSP) that will integrate with the common portal.
1 Date when the Study Material was released for printing

RETURNS 10.7
The details furnished by the taxpayer in the form of returns shall be consolidated
and stored at the common portal which will be common for both, i.e. Central
Government and State Governments.
• Casual taxable person means a person who occasionally undertakes

transactions involving supply of goods or services or both in the course or
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 [Section
2(20)].
• Common portal means the common goods and services tax electronic portal
referred to in section 146 [Section 2(26)].
• Credit note means a document issued by a registered person under sub-

• Debit note means a document issued by a registered person under sub-

• Electronic cash ledger means the electronic cash ledger referred to in sub-
• Electronic credit ledger means the electronic credit ledger referred to in

• Exempt supply means supply of any goods or services or both which attracts
nil rate of tax or which may be wholly exempt from tax under section 11, or
under section 6 of the Integrated Goods and Services Tax Act, and includes
non-taxable supply [Section 2(47)].
• Goods and services tax practitioner means any person who has been
approved under section 48 to act as such practitioner [Section 2(55)].
• Invoice or tax invoice means the tax invoice referred to in section 31

[Section 66].

10.8 INDIRECT TAXES
• Inward supply in relation to a person, shall mean receipt of goods or services

or both whether by purchase, acquisition or any other means with or without
consideration [Section 2(67)].
• Non-resident taxable person means any person who occasionally

undertakes transactions involving supply of goods or services or both,
whether as principal or agent or in any other capacity, but who has no fixed
place of business or residence in India [Section 2(77)].
• Outward supply in relation to a taxable person, means supply of goods or

services or both, whether by sale, transfer, barter, exchange, licence, rental,
lease or disposal or any other mode, made or agreed to be made by such
person in the course or furtherance of business [Section 2(83)].
• Prescribed means prescribed by rules made under this Act on the

recommendations of the Council [section 2(87)].
• Proper officer in relation to any function to be performed under this Act,

means the Commissioner or the officer of the central tax who is assigned that
function by the Commissioner in the Board [Section 2(91)].
• Quarter shall mean a period comprising three consecutive calendar months,

ending on the last day of March, June, September and December of a
calendar year [Section 2(92)].
• Recipient of supply of goods or services or both, means—
♦ where a consideration is payable for the supply of goods or services or

♦ where no consideration is payable for the supply of goods, the person

♦ where no consideration is payable for the supply of a service, the person

and any reference to a person to whom a supply is made shall be construed
as a reference to the recipient of the supply and shall include an agent acting
as such on behalf of the recipient in relation to the goods or services or both

RETURNS 10.9
• Registered person means a person who is registered under section 25 but

does not include a person having a Unique Identity Number [Section 2(94)].
• Return means any return prescribed or otherwise required to be furnished by

or under this Act or the rules made thereunder [Section 2(97)].
• Reverse charge means the liability to pay tax by the recipient of supply of
goods or services or both instead of the supplier of such goods or services or
both under sub-section (3) or sub-section (4) of section 9, or under sub-
section (3) or sub- section (4) of section 5 of the Integrated Goods and
Services Tax Act [Section 2(98)].
• Supplier in relation to any goods or services or both, shall mean the person
• Tax period means the period for which the return is required to be furnished
[Section 106].
• Taxable person means a person who is registered or liable to be registered

under section 22 or section 24 [Section 2(107)].
• Taxable supply means a supply of goods or services or both which is leviable

to tax under this Act [Section 2(108)].
• Valid return means a return furnished under sub-section (1) of section 39 on

which self-assessed tax has been paid in full [Section 2(117)].
3. FURNISHING DETAILS OF OUTWARD SUPPLIES

[SECTION 37 READ WITH RULE 59 OF THE CGST
RULES]
(i) Who is required to furnish the details of outward supplies?
The details of outward supplies (see definition) of both goods and services
are required to be furnished by every registered person including casual
registered person except the following:
 input service distributor (ISD)*
 non-resident taxable person

 person paying tax under composition scheme

 person deducting tax at source*
 person collecting tax at source i.e., e-commerce operator (ECO), not
being an agent*
 supplier of online information and database access or retrieval services
(OIDAR)* located in non-taxable territory and providing such services
to non-taxable online recipient
* Note: Provisions for filing of returns by an input service distributor, a person
deducting tax at source, a person collecting tax at source and a supplier of online
information and database access or retrieval services (OIDAR) will be discussed
at the Final level.
♦ ISD
All ♦ Non-resident taxable person
Persons registered ♦ Composition taxpayer

persons ♦ Person deducting tax at source
required
including ♦ Person collecting tax at source
to file casual
GSTR-1 registered ♦ Supplier of OIDAR service
person located in non-taxable
territory providing services to
non-taxable online recipient
(ii) What is the form for submission of details of outward supplies?

The details of outward supplies are required to be
furnished, electronically, in Form GSTR-1. Such
details can be furnished through the common
portal, either directly or from a Facilitation Centre
notified by the Commissioner.
Further, a Nil GSTR-1 can be filed through an
SMS using the registered mobile number of the taxpayer.
(iii) What is the due date of submission of GSTR-1?
GSTR-1 for a particular month is filed on or before the 10th day of the
immediately succeeding month. In other words, GSTR-1 of a month can be
filed any time between 1st and 10th day of the succeeding month. It may be
noted that GSTR-1 cannot be filed during the period from 11th day to 15th day
of month succeeding the tax period.

RETURNS 10.11
(1) The details of outward supplies pertaining to the month of

October will be required to be furnished on or before 10th
November and GSTR-1 for October cannot be filed between 11th
November to 15th November.
The due date of filing GSTR-1 may be extended by the
Commissioner/Commissioner of State GST/Commissioner of UTGST for a
class of taxable persons by way of a notification. The due date for monthly
filing of GSTR-1 is being extended from 10 th day to 11th day of the succeeding
month from some time.
Quarterly filing of GSTR-1: As a measure of easing the compliance
requirement for small taxpayers, GSTR-1 has been allowed to be filed
quarterly by small taxpayers with aggregate annual turnover up to ` 1.5 crore
in the preceding financial year or the current financial year. As of now this
facility has been given till the quarter January-March 2021. Taxpayers with
annual aggregate turnover above ` 1.5 crore, however, continue to file
GSTR- 1 on monthly basis.
The due date for filing of GSTR-1 for a quarter is specified by way of
notifications. Presently, the due date for filing GSTR-1 for a quarter is
being notified as 13th of the month succeeding the end of
quarter. Earlier, the due date was being notified as the last day of the
month succeeding the quarter.
A taxpayer cannot file GSTR-1 before the end of the current tax
period.
However, following are the exceptions to this rule:
a. Casual taxpayers, after the closure of their business
b. Cancellation of GSTIN of a normal taxpayer
A taxpayer who has applied for cancellation of registration will be
allowed to file GSTR-1 after confirming receipt of the application.

(iv) What are the contents of GSTR-1?
CONTENTS OF GSTR- 1
Basic & Other Details Details of Outward Supplies

• GSTIN • B2B including UIN holders
• Legal name • B2C inter-State supplies where
• Trade name, if any invoice value > ` 2.5 lakh
• Aggregate turnover in • Consolidated details of other
previous year B2C supplies
• Year and Month • Zero rated and Deemed
• HSN-wise summary of exports
outward supplies • Debit/ Credit notes issued
• Details of documents issued • Nil rated/ Exempted/ Non-
GST
• Amendments for prior period
• Advances received/advances
adjusted
GST is a destination-based consumption tax. Hence, the tax revenue

is transferred to the State which is the place of supply 2 of the particular
transaction. Since, the place of supply is crucial for determining the
share of every State in the tax revenue, GSTR-1 also captures information
relating to place of supply.
(v) What kind of details of outward supplies are required to be

furnished in GSTR-1?
The registered person is required to furnish details of invoices and revised
invoices issued in relation to supplies made by him to registered and
unregistered persons during a month and debit notes and credit notes in
GSTR-1 in the following manner:
2 Principles determining the place of supply are contained in sections 10 to 13 of the IGST Act. These
will be discussed at the Final Level.

RETURNS 10.13
Sl. Invoice-wise* Consolidated Debit and credit

No. details of ALL details of ALL notes
(i) Inter-State and Intra-State supplies Issued during the

Intra-State supplies made to month for invoices
made to registered unregistered persons issued previously
persons for each rate of tax
(ii) Inter-State supplies Inter-State supplies

made to made to
unregistered unregistered persons
persons with invoice with invoice value
value exceeding upto ` 2,50,000 for
` 2,50,000 each rate of tax
separately for each
State
It can be seen from the above table that uploading of invoices depends on
whether the supply is B2B or B2C plus whether the supply is intra-State or
inter-State.
B2C means business to

B2B means business to consumer transaction. In
business transaction. In such such type of transactions,
type of transactions, the the recipient is consumer or
recipient is also a registered unregistered and hence, will
supplier and hence, takes ITC. not take or
For B2B supplies, all invoices need to be uploaded cannot take
irrespective ofITC.
whether
they are intra-State or inter- State supplies. This is so because the recipient
will take ITC basis such invoices.
For B2C supplies, uploading in general is not required as the buyer will not
be taking ITC. However, still in order to implement the destination-based
principle, invoices of value more than ` 2.5 lakh in inter-State B2C supplies
need to be uploaded. For inter-State invoices below ` 2.5 lakh, State wise
summary is sufficient and for all intra-State invoices, only consolidated details
need to be given.

(2) Mr. XY makes intra-State taxable supplies for ` 10,000 and

` 50,000 to Mr. AB, a registered person and ` 1,00,000 to Mr. DE,
an unregistered person. He also makes inter-State taxable
supplies for ` 2,60,000 and ` 45,000 to Mr. RS, a registered person
and ` 1,50,000 to Mr. OP, an unregistered person. Mr. XY will report invoice-
wise details of intra-State supplies made to Mr. AB and inter-State supplies
made to Mr. RS, in GSTR-1 to be filed by him.
The provisions relating to uploading of invoices have been explained by way

of a diagram given at next page.
Invoices can be uploaded any time during the tax period and not just at
the time of filing of GSTR-1.
(3) For the month of October, the taxpayer can upload invoices
from 1st October to 10th November. In case of late filing of GSTR-
1, invoices can be uploaded after 15th November.
Invoices can be modified/deleted any number of times till the submission of

GSTR-1 of a tax period. The uploaded invoice details are in a draft version till
the GSTR-1 is submitted and can be changed irrespective of due date.
Scanned copies of invoices are not required to be uploaded. Only

certain prescribed fields of information from invoices need to be
uploaded e.g., invoice no., date, value, taxable value, rate of tax, amount
of tax etc. In case there is no consideration, but the activity is a supply by
virtue of Schedule 1 of CGST Act, the taxable value will have to be worked
out as prescribed and uploaded.
Description of each item in the invoice need not be uploaded. Only

HSN (Harmonized System of Nomenclature) code in respect of supply of
goods and accounting code in respect of supply of services need to be fed.

RETURNS 10.15
Outward Taxable Supplies
B2B supplies B2C supplies
Inter-state Intra-state
Inter-state Intra-state
supplies supplies
supplies supplies
Consolidated
Invoices > Invoices ≤ details of all
Invoice-wise details ` 2,50,000 ` 2,50,000 supplies to be
of all supplies to be uploaded
uploaded
Invoice-wise details State-wise consolidated

to be uploaded details to be uploaded
Indication of HSN details

The minimum number of digits of HSN code that a filer has to upload depend
on his turnover in the last year. Notification No. 12/2017 CT 28.06.2017, which
has been issued in this regard, provides as under:
Position till 31.03.2021
Annual turnover in the preceding Number of Digits of HSN

financial year Code
Upto ` 1.5 core Nil
More than ` 1.5 crore and upto ` 5 crore 2
More than ` 5 crore 4

(4) The turnovers of Yellow Lemon Pvt. Ltd., Red Pepper Pvt. Ltd.
and Blue Berry Pvt. Ltd. in the previous financial year are ` 1.5 crore,
` 4.8 crore and ` 5 crore respectively. While Yellow Lemon Pvt. Ltd.
is not required to upload HSN code of the goods sold, Red Pepper
Pvt. Ltd. and Blue Berry Pvt. Ltd. have to upload 2 digits of HSN code of goods
sold by them. This will be the position till 31.03.2021.
HSN or HS (Harmonized Commodity Description and

Coding System) is a standardized system of nomenclature
of different goods developed by World Customs
Organization, which is accepted globally. HSN uses 6-digits uniform
codes to classify different goods. India uses eight-digits codes for
more specific and precise classification.
Position from 01.04.2021

It may be noted that Notification No. 12/2017 CT 28.06.2017 has been
amended to provide that effective 01.04.2021, the HSN would be
disclosed as under 3:
Annual turnover in the Number of Digits of HSN Code

preceding financial year
Upto ` 5 core For B2B supply - 4
For B2C supply – 4 (optional)
More than ` 5 crore 6
(5) The turnovers of Yellow Lemon Pvt. Ltd., Red Pepper Pvt. Ltd. and
Blue Berry Pvt. Ltd. in the previous financial year are ` 1.5 crore, ` 4.8
crore and ` 6 crore respectively. While Yellow Lemon Pvt. Ltd. and
Red Pepper Pvt. Ltd. will be required to upload 4 digits of HSN code of the
goods sold to registered persons, uploading of 4 digits HSN code will be
optional for the two companies when the goods are sold to unregistered
persons. Blue Berry Pvt. Ltd. will have to upload 6 digits of HSN code of goods
sold by it. This will be the position from 01.04.2021.
3
Since this amendment will be effective from 01.04.2021, the same will be applicable for
November 2021 examinations. For May 2021 examinations, the position effective till 31.03.2021
as given in preceding table is applicable.

RETURNS 10.17
(vi) Communication of details of GSTR-1 to the recipient of supply

The details of outward supplies for a month furnished by the supplier are
communicated and made available electronically (auto populated) to the
respective recipient(s) in Part A of Form GSTR- 2A/ Form GSTR-4A (in case of
registered person opting for composition levy through the common portal
after the 10th day of the succeeding month (due date of filing of GSTR-1).
(vii) How are the details of outward supply furnished in prior
periods amended? [Section 37(3)]
(a) Scope of amendment/ correction entries
Tables 9, 10 and 11(II) of GSTR-1 provide for amendments in details of
taxable outward supplies furnished in earlier periods (hereinafter referred
to as “Amendment Table”). The details of original debit notes/ credit notes
/ refund vouchers issued by the tax-payer in the current tax period as also
the revision in the debit notes/ credit notes / refund vouchers issued in the
earlier tax periods are required to be shown in Table 9 of the GSTR-1.
Ordinarily, in Amendment Table, the suppler is required to give details of
original invoice (No and Date), the particulars of which have been wrongly
entered in GSTR-1 of the earlier months and are now sought to be
amended. However, it may happen that, a supplier altogether forgets to
include the entire original invoice while furnishing the GSTR-1 for a
particular month.
In such cases also, he would be required to show the details of the said
missing invoice which was issued in earlier month in the Amendment Table
only, as such type of errors would also be regarded as data entry error.
by way of
can be amended
Particulars
furnished Amendment
in GSTR-1 Tables given
of prior in GSTR-1 of
periods subsequent
periods

(b) Rectification of errors

If the supplier discovers any error or omission, he shall rectify the same
in the tax period during which such error or omission is noticed, and
pay the tax and interest, if any, in case there is short payment, in the
return to be furnished for such tax period.
(6) A supplier discovers a mistake in details of the invoice
furnished in GSTR-1 for the month of August, in October. He
can rectify the said mistake in the GSTR-1 for the month of
October.
(c) Time limit for rectification
Suppose for some reason, supplier could not make correction at the
time of filing of GSTR-1 for the month of October then he can make
such amendments in the subsequent periods.
However, the maximum time limit within which such amendments are
permissible is earlier of the following dates:
• Date of filing of monthly return u/s 39 for the month of September

following the end of the financial year to which such details
pertain or
• Date of filing of the relevant annual return

(7) An entity has furnished the annual return for the previous
financial year on 15th August in the current financial year. An
error is discovered in respect of a transaction pertaining to
the month of November of the previous financial year. The entity has
filed the returns for the month of September of the current financial
year on 20th October. In this case, the rectification of the error
pertaining to the transaction in the month of November of the previous
financial year cannot be rectified beyond 15th August in the current
financial year.
It may be noted that, the expression ‘due date’ is missing in time

limits prescribed for making amendments u/s 37(3) [GSTR-1]. Therefore,
such date apparently means actual date of filing and not the due date.

RETURNS 10.19
(viii) Nil GSTR-1

Filing of GSTR-1 is mandatory for all normal and casual taxpayers, even if
there is no business activity in any particular tax period. For such tax
period(s), a Nil GSTR-1 is required to be filed.
A Nil GSTR-1 does not have any entry. For example, a Nil GSTR-1 for a tax
period cannot be filed, if the taxpayer has made any outward supply
(including exempt, nil rated or non-GST supplies), or it has received supplies
on which tax is payable under reverse charge or an amendment needs to be
made to any of the supplies declared in an earlier return or any credit or debit
notes is to be declared / amended etc.
A Nil GSTR-1 can be filed through an SMS using the registered mobile
number of the taxpayer. GSTR-1 submitted through SMS is verified by
registered mobile number-based OTP facility.
A taxpayer can file Nil GSTR-1, anytime from 1st of the month subsequent of
the tax period onwards. For example, GSTR-1 for the calendar month of April,
can be filed from 1st May onwards. GSTR-1 for the quarter of April to June
can be filed from 1st July onwards.
✪ Taxpayer opting for voluntary cancellation of GSTIN has to

file GSTR-1 for active period.
✪ In cases where a taxpayer has been converted from a
normal taxpayer to composition taxpayer, GSTR-1 will be available for
filing only for the period during which the taxpayer was registered as
normal taxpayer. The GSTR-1 for the said period, even if filed with delay
would accept invoices for the period prior to conversion.
What are the precautions that a taxpayer is required to take for a hassle-free
compliance under GST?
One of the most important things under GST is the timely
uploading of the details of outward supplies in GSTR-1.
Timely uploading
How best this can be ensured will depend on the number of
B2B invoices that the taxpayer issues. If the number is of the details of
small, the taxpayer can upload all the information in one outward supplies in
go. However, if the number of invoices is large, the invoices Form GSTR-1
(or debit/ credit notes) should be uploaded on a regular
basis.

GST common portal allows regular uploading of invoices.

Regular Till the statement is actually submitted, the system also
allows the taxpayer to modify the uploaded invoices.
uploading of
Therefore, it would always be beneficial for the taxpayers to
invoices regularly upload the invoices. Last minute rush makes
uploading difficult and comes with higher risk of possible failure and default.
The second thing would be to ensure that taxpayers

follow up on uploading the invoices of their inward
Follow up with suppliers
supplies by their suppliers. This would be helpful in
to upload the invoices of
ensuring that the ITC is available without any hassle inward supplies
and delay. Recipients can also encourage their
suppliers to upload their invoices on a regular basis
instead of doing it on or close to the due date. The system would allow recipients to
see if their suppliers have uploaded invoices pertaining to them.
4. FURNISHING OF RETURNS UNDER SECTION 39

(i) GSTR-3B [Rule 61(5) of the CGST Rules]
Section 39(1) prescribes a monthly return for every registered person, other
than an input service distributor or a non-resident taxable person or a
composition taxpayer, a person deducting tax at source, a person collecting
tax at source, i.e. an electronic commerce operator and supplier of OIDAR
services located in non-taxable territory providing such services to non-
taxable online recipient.
Initially, return in Form GSTR-3 was notified as
the return under section 39(1) which was to be
filed by 20th day of the month succeeding the
relevant calendar month or part thereof.
However, GSTR-3 never became practically GSTR-3B
applicable as the filing thereof has been
deferred by the GST Council since the
introduction of GST law. Therefore, in lieu of
return in Form GSTR-3, return in Form GSTR-3B has been notified as the
monthly return under section 39(1). Presently, the due date of submission

RETURNS 10.21
for GSTR-3B is being notified as 20th day of the month succeeding the
relevant month.
Considering the difficulties faced by trade and industry in filing of returns, the
Government has introduced staggered filing of GSTR-3B returns as a
temporary measure to de-stress the GST return filing system. The last date for
filing of GSTR-3B for the taxpayers having annual turnover of ` 5 crore and
above in the previous financial year would be 20th of the month. For the
taxpayers having annual turnover below ` 5 crore in previous financial year, the
due date for filing of GSTR-3B would be 22nd or 24th of the month depending
upon the State or Union Territory in which they are registered. Presently, the
staggered filing has been provided for tax periods till March 2021.
GSTR-3B can be submitted electronically through the common portal, either
directly or through a Facilitation Centre notified by the Commissioner.
Further, a Nil GSTR-3B can be filed through an SMS using the registered
mobile number of the taxpayer.
GSTR-3B is a simple return containing summary of outward supplies, inward
supplies liable to reverse charge, eligible ITC, payment of tax etc. Thus, GSTR-
3B does not require invoice-wise data of outward supplies.
The broad content of GSTR-3B are given at next page:
Nil GSTR-3B
Filing of GSTR-3B is mandatory for all normal and casual taxpayers, even if there
is no business activity in any particular tax period. For such tax period(s), a Nil
GSTR-3B is required to be filed.
A Nil GSTR-3B does not have any entry in any of its tables. For example, a
Nil GSTR-3B for a tax period cannot be filed, if the taxpayer has made any
outward supply (including nil-rated, exempt or non-GST supplies) or has
received any supplies which are taxable under reverse charge or it intends to
take ITC etc.
A Nil GSTR-3B can be filed through an SMS using the registered mobile
number of the taxpayer. GSTR-3B submitted through SMS is verified by
registered mobile number-based OTP facility.
A taxpayer may file Nil Form GSTR-3B, anytime on or after the 1st of the
subsequent month for which the return is being filed for.

CONTENTS OF GSTR- 3B
Basic Details Other details relating to supplies
• GSTIN • Summarised details of outward

• Legal name of the supplies and inward supplies liable
registered person to reverse charge
• Year and Month • Summarised details of inter-State
supplies made to unregistered
persons, composition taxable
persons and UIN holders
• Eligible and ineligible ITC
• Values of exempt, nil-rated and
non-GST inward supplies
• Payment of tax
• TDS/TCS credit
(ii) GSTR-4 – Return for composition supplier [Section 39(2) read

with rule 62 of the CGST Rules] 4
(a) Person eligible to file return, periodicity and form of return
Every registered person paying tax under
section 10, i.e. a composition supplier is
required to file an annual return in Form
GSTR-4.
GSTR-4 for a financial year or part of a
financial year should be filed
electronically through the common portal either directly or through a
Facilitation Centre notified by the Commissioner.
4
A person paying concessional tax @ 6% under Notification No. 2/2019 CT (R) dated 07.03.2019 is also required
to file GSTR-4. Therefore, all the provisions discussed under this heading are also applicable for persons paying
tax under the said notification. It may be noted that the provisions of the composition scheme available under the
said notification have been incorporated under section 10 vide the Finance (No. 2) Act, 2019.

RETURNS 10.23
Quarterly statement for payment of self-assessed tax

The persons required to file GSTR-4 are also required to furnish a
statement in the Form GST CMP-08 containing details of payment of
self-assessed tax, for every quarter (or part of the quarter), by 18th day
of the month succeeding such quarter.
While a composition supplier is required to file the

return GSTR-4 annually, he is required to pay the tax
quarterly.
(b) Due date for filing GSTR-4 and Statement for payment of self-
assessed tax
GSTR-4 for a financial year should be furnished by 30th April of the
succeeding financial year.
By 30th day of the

Due date of filing
month of April
GSTR-4 for a financial
following the end of
year
such financial year
GST CMP-08 (quarterly statement for payment of self-assessed tax)

should be furnished by 18th day of the month succeeding such quarter.
By 18th day of the

Due date of filing GST
month succeeding
CMP-08 for a quarter
such quarter
(c) Auto-population of inward supplies

The inward supplies of a composition supplier received from registered
persons filing GSTR-1 will be auto populated in FORM GSTR-4A for
viewing.
(d) Contents of GSTR-4
The broad contents of GSTR-4 are given at next page.

CONTENTS OF GSTR- 4
Details regarding Inward and

Basic & Other Details
Outward Supplies
• GSTIN • Invoice-wise details of all inward

supplies (i.e., intra and inter-
• Legal name and Trade
State supplies and from
name
registered and unregistered
• TDS/TCS credit received persons) including reverse
[Table 7] charge supplies and import of
• Tax, interest, late fee services [Table 4]
payable and paid [Table 8] • Summary of self-assessed
• Refund claimed from liability as per GST CMP-08 (Net
Electronic cash ledger of advances, credit & debit notes
[Table 9] and any other adjustments due
to amendments etc.) [Table 5]
• Tax rate wise details of outward
supplies/inward supplies
attracting reverse charge (Net of
advances, credit & debit notes
and any other adjustments due
to amendments etc.) -
Consolidated details of outward
supplies [Table 6]
◪ Consolidated details of outward supplies

Composition taxpayers are neither entitled for any ITC nor entitled
to pass on any ITC to its customers. Therefore, composition
taxpayers are required to provide consolidated details of outward
supplies in GSTR-4 (Table 6) and not invoice-wise details.
However, details of inter-State and intra-State inward supplies
received from registered and un-registered persons are to be
provided invoice-wise (Table 4).

RETURNS 10.25
◪ Tax liability
Since composition suppliers are not eligible to take ITC, they
discharge their tax liability only by debiting electronic cash ledger.
(e) Nil return
Filing of GST CMP-08 is mandatory for all taxpayers who have opted to
pay tax under composition scheme, even if there is no business activity in
any particular tax period. For such tax period(s), a Nil GST CMP-08 is
required to be filed.
A Nil GST CMP-08 does not have any entry in any of its tables. For
example, a Nil GST CMP-08 for a tax period cannot be filed, if the
taxpayer has made any outward supplies or has received any supplies
which are taxable under reverse charge.
A Nil GST CMP-08 can be filed through an SMS using the registered
mobile number of the taxpayer. A Nil GST CMP-08 submitted
through SMS is verified by registered mobile number-based OTP
facility.
(f) Statements/return for the period prior to opting for
composition scheme
If a registered person opts to pay tax under composition scheme

from the beginning of a financial year, he will, where required, furnish
statements/return relating to the period prior to paying tax under
composition scheme till the
• due date of furnishing the return for the month of September

of the succeeding financial year, or
• furnishing of annual return of the preceding financial year,

The composition supplier will not be eligible to avail ITC on receipt
of invoices or debit notes from the supplier for the period prior to
their opting to pay tax under composition scheme.

(f) GSTR-4 for the period prior to exiting from composition scheme
A registered person opting to withdraw from the composition
scheme at his own motion or where option is withdrawn at the
instance of the proper officer will, where required, furnish-
(1) GST CMP-08 (2) GSTR-4
relating to the period prior to his exiting from

composition scheme
TILL
18th of the month 30th April following the

succeeding the quarter in end of the financial year
which the date of during which such
withdrawal falls withdrawal falls
The provisions explained in points (e) and (f) above have been
explained by way of a diagram given at the next page.
As per section 29(2), a proper officer is empowered to cancel the

registration of a taxable person if, inter alia,:
(a) a person paying tax under composition scheme has not furnished his
GSTR-4 for 3 consecutive tax periods
(b) any other taxable person has not furnished returns for consecutive
period of 6 months.

RETURNS 10.27
Regular Composition taxpayer Regular

taxpayer taxpayer
Opting for composition scheme Exit from composition scheme
Statements/Return relating
to period prior to opting for GST CMP-08 for GSTR 4 for period
composition scheme to be period prior to prior to exit from
filed exit from composition
composition scheme to be
scheme to be filed by
till filed by
♦ due date of furnishing

the return for the 30th April
18th day of the
month of September of following the
month
the succeeding end of the
succeeding the
financial year financial year
quarter in which
OR during which
the date of
♦ furnishing of annual such withdrawal
withdrawal falls
return of the preceding falls
financial year
WHICHEVER IS EARLIER
(iii) GSTR-5 - Return for Non-Resident Taxable Persons [Section

39(5) read with rule 63 of the CGST Rules]
Non-Resident Taxable Persons (NRTPs) are those suppliers who do not have
a business establishment in India and have come for a short period to make
supplies in India. They would normally import their products into India and
make local supplies. The concept of Non-Resident Taxable Person has been
discussed in detail in Chapter 7 – Registration.

(a) Monthly return

A registered NRTP is not required to file
separately the Statement of Outward Supplies
and applicable return for a normal taxpayer.
In place of the same, a simplified monthly tax
return has been prescribed in Form GSTR-5 for
a NRTP for every calendar month or part thereof. The details of outward
supplies and inward supplies of a NRTP are incorporated in GSTR-5.
(b) Last date of filing return
GSTR-5 should be furnished within 20 days after the end of the
calendar month or within 7 days after the last day of validity period
of the registration, whichever is earlier.
(c) Payment of interest, penalty, fees or any other amount payable
A NRTP should pay the tax, interest, penalty, fees or any other amount
payable under the CGST Act or the provisions of the Returns chapter
under the CGST Rules, till the last date of filing GSTR-5.
A NRTP is not
required to file
an annual return.
(iv) Due date for payment of tax

Due dates for payment of tax in respect of the persons required to file
GSTR-3B and GSTR-5 are linked with the due dates for filing of such returns,
i.e. the last dates (due dates) of filing such returns are also the due dates for
payment of tax in respect of persons required to file such returns.
However, in case of registered persons paying tax under composition scheme,
the due date for payment of tax and filing of GSTR-4 is delinked. While
GSTR-4 for a financial year is required to be filed by 30th April of the following
year, tax for a quarter is to be paid by 18th of the month succeeding such
quarter.
Also, NRTPs or casual taxable persons are required to make advance deposit
of an amount equivalent to their estimated tax liability for the period for

RETURNS 10.29
which registration is sought or extension of registration is sought in terms of

section 27(2).
ILLUSTRATION 1
Mr. Akash obtains registration under regular scheme (Section 9). He asks Mr.
Mohan, his tax manager, to pay GST on quarterly basis. However, Mr. Mohan
advises Mr. Akash to pay GST on monthly basis.
You are required to examine the validity of the advice given by Mr. Mohan.
ANSWER
The advice given by Mr. Mohan is valid.
A person registered under regular scheme (Section 9) is required to file a
monthly return in form GSTR-3B. Due date for payment of tax in respect of
the persons required to file GSTR-3B is linked with the due date for filing of
such return. Therefore, a person registered under regular scheme is required
to pay GST on monthly basis by the 20th of the succeeding month, which is
the due date for filing of GSTR-3B.
Quarterly payment of taxes can be made by persons registered under
composition scheme.
(v) Rectification of errors/omissions [Section 39(9)]
If a return has been filed, how can it

be revised if some changes are
required to be made?
In GST since the returns are built from details of

individual transactions, there is no requirement for
having a revised return. Any need to revise a return
may arise due to the need to change a set of invoices or debit/ credit
notes. Instead of revising the return already submitted, the system
allows changing the details of those transactions (invoices or
debit/credit notes) that are required to be amended. They can be
amended in any of the future GSTR- 1 in the tables specifically
provided therein for the purposes of amending previously declared
details.

Omission or incorrect particulars discovered in the returns filed u/s 39 can be

rectified in the return to be filed for the tax period during which such omission
or incorrect particulars are noticed. Any tax payable as a result of such error
or omission will be required to be paid along with interest.
Exception
It is important to note that section 39(9) does not permit rectification of error
or omission discovered on account of scrutiny, audit, inspection, or
enforcement activities by tax authorities.
Hence, assessee may not be able to pass on the ITC to the receiver in respect
of tax payments made by him in pursuance of any of the afore-mentioned
situations.
ILLUSTRATION 2
Ms. Pragya, a taxpayer registered under regular scheme (Section 9), files
GSTR-3B for the month of October on 20th November. After filing the return,
she discovers that the value of a taxable supply has been under-reported
therein.
Ms. Pragya now wants to file a revised GSTR-3B. Examine the scenario and
give your comments.
ANSWER
Under GST law, a return once filed cannot be revised. However, the details of
those transactions that are required to be amended can be changed in any of
the future GSTR- 1s. For this purpose, specific tables are provided in GSTR-1
to amend previously declared details.
Thus, Ms. Pragya cannot revise GSTR-3B filed by her for the month of October.
However, she can amend the details of the taxable supply, which was under-
reported, in GSTR-1 for the month of November. The tax payable on account
of such error will be paid along with interest in GSTR-3B for the month of
November.
Time limit for making rectification
The maximum time limit within which the rectification of errors/omissions is
permissible is earlier of the following dates:
• Due date of filing of return for the month of September following the
end of the financial year [i.e., 20th October of next financial year] or
• Actual date of filing of the relevant annual return

RETURNS 10.31
The last date of filing of annual return for a financial year is 31st December of
next financial year. Hence, if annual return for a financial year is filed before
20th October (next financial year), then no rectification of errors/omissions in
returns pertaining to the said financial year would be permitted thereafter.
Revision of
return
Rectification on
account of
Rectification scrutiny, audit,
in subsequent inspection or
return enforcement
activities
Maximum time limit for rectification

DUE date for filing return for September of next FY
OR
Actual date of filing annual return
✪ A return furnished under section 39(1) on which self-

assessed tax has been paid in full is considered as a valid
return.
✪ Filing of returns for current month is possible only when
returns of the previous month have been filed.
✪ A taxpayer needs to electronically sign the submitted returns
otherwise it will be considered not-filed.
✪ Taxpayers can electronically sign their returns using a DSC
(mandatory for all types of companies and LLPs), E-sign (Aadhaar-based
OTP verification), or EVC (Electronic Verification Code sent to the
registered mobile number of the authorized signatory).

5. OTHER RETURNS
(i) First Return [Section 40]

When a person becomes liable to registration after his turnover crosses the
threshold limit, he may apply for registration within 30 days of so becoming
liable. Thus, there might be a time lag between a person becoming liable to
registration and grant of registration certificate.
During the intervening period, such person might have made the outward
supplies, i.e. after becoming liable to registration but before grant of the
certificate of registration.
Now, in order to enable such registered person to declare the taxable supplies
made by him for the period between the date on which he became liable to
registration till the date on which registration has been granted so that ITC
can be availed by the recipient on such supplies, firstly, the registered person
may issue revised tax invoices against the invoices already issued during said
period within 1 month from the date of issuance of certificate of registration
[Section 31(3)(a) read with rule 53 of CGST Rules – Discussed in detail in
Chapter-8: Tax Invoice, Credit and Debit Notes; E-Way Bill]. Further, section
40 provides that registered person shall declare his outward supplies made
during said period in the first return furnished by him after grant of
registration. The format for this return is the same as that for regular return.
Details of outward
Details of outward
supplies, after
supplies made in
becoming liable to
first tax period
registration but
after grant of the
before grant of the
certificate of
certificate of
registration
registration First Return

RETURNS 10.33
(ii) Annual Return [Section 44 read with rule 80 of the CGST Rules]
(a) Who is required to furnish annual return and what is the due
date for the same?
All registered persons are required to file an annual return 5. However,
following persons are not required to file the annual return:
(i) Casual taxable persons.
(ii) Non- resident taxable person
(iii) Input service distributors 6
(iv) Persons authorized to deduct/collect tax at source under section
51/52 7 and
(v) Person supplying OIDAR services from outside India to
unregistered persons in India
The annual return for a financial year needs to be filed by 31 st
December of the next financial year.
The due date of filing annual return may be extended by the
Commissioner/Commissioner of State GST/Commissioner of UTGST
for a class of taxable persons by way of a notification.
Every registered person who is required to get his accounts audited
under section 35(5) 8 shall also furnish electronically a copy of audited
annual accounts and a certified reconciliation statement in the
prescribed form along with the annual return. Reconciliation
Statement reconciles the value of supplies declared in the return
furnished for the financial year with the audited annual financial
statement and such other particulars, as may be prescribed.
5
Filing of annual return in respect of financial years 2017-18, 2018-19 and 2019-20 has been made
voluntary for the registered persons whose turnover is less than ` 2 crore and who have not furnished the
said annual return before the due date. This information is given solely for knowledge purpose.
6 The concept of Input Service Distributor will be discussed at the Final Level.
7 The concept of person deducting/collecting tax at source will be discussed at the Final Level.
8 Section 35 contains the provisions relating to accounts and records. Such provisions will be discussed at
the Final Level.

(b) What is the prescribed form for annual return?

The annual return is to be filed electronically in
Form GSTR-9 through the common portal. GSTR-9
Composition scheme supplier: A person paying
tax under composition scheme is required to file
the annual return in Form GSTR-9A.
(iii) Final Return [Section 45 read with rule 81 of the CGST Rules]
(a) Who is required to furnish final return?
Every registered person who is required to
furnish return u/s 39(1) and whose
registration has been surrendered or
cancelled is required to file a final return
GSTR-10
electronically in Form GSTR-10 through the
common portal.
(b) What is the time-limit for furnishing final return?
The final return has to be filed within 3 months of the:
(i) date of cancellation
or
(ii) date of order of cancellation
whichever is later.
(iv) Details of inward supplies of persons having UIN [Rule 82 of the
CGST Rules]
(a) When UIN is issued for claiming refund of taxes paid on inward
supplies
Such person shall furnish the details of
the inward supplies of taxable goods
and/or services on which refund of
taxes has been claimed, in Form GSTR-
11, along with application for such
refund claim.

RETURNS 10.35
(b) When UIN is issued for purposes other than refund of taxes paid
Such person shall furnish the details of inward supplies of taxable goods
and/or services as may be required by the proper officer in Form
GSTR-11.
6. DEFAULT/DELAY IN FURNISHING RETURN

[SECTIONS 46 & 47]
(i) Notice to return defaulters [Section 46 read with rule 68 of the
CGST Rules]
A notice in prescribed form is issued, electronically, to a
registered person who fails to furnish return under section 39
[Normal Return] or section 44 [Annual Return] or section 45
[Final Return] or section 52 [TCS Statement]. The notice
requires the registered person to furnish the return within 15 days.
(ii) Late fees levied for delay in filing return [Section 47]
Delay in filing any of the following by their respective due dates, attracts late
fee:
(A) Statement of Outward Supplies [Section 37]
(B) Returns [Section 39]
(C) Final Return [Section 45]
`100 for every day during

which such failure continues
Quantum of
late fee
`5,000

Late fees levied for delay in filing annual return under section 44
A registered person who fails to furnish the annual return under section 44
by the due date is required to pay a late fee as under:
`100 for every day during

which such failure continues
Quantum of
late fee 0.25% of the turnover of
the registered person in the
State/Union Territory
It may be noted that the late fee payable by a registered

person for delayed filing of a return and/or annual return, as
mentioned above, is with reference to only the CGST Act. An
equal amount of late fee would be payable by such person
under the respective SGST/UTGST Act as well.
7. GOODS AND SERVICES TAX PRACTITIONERS

[SECTION 48]
Section 48 provides for the authorisation of an eligible person to act as approved
Goods and Services Tax Practitioner (GSTP). A registered person may authorise
an approved GSTP to furnish information, on his behalf, to the Government. The
manner of approval of GSTPs, their eligibility conditions, duties and obligations,
manner of removal and other conditions relevant for their functioning have been
prescribed in the rules 83, 83A and 84 of the CGST Rules.
GSTN provides separate user ID and Password to
GSTP to enable him to work on behalf of his
clients without asking for their user ID and
passwords. They can do all the work on behalf of
taxpayers as allowed under GST Law. A taxpayer
may choose a different GSTP by simply
unselecting the previous one and then choosing
a new GSTP on the GST portal.
Standardized formats have been prescribed for making application for enrolment
as GSTP, certificate of enrolment, show cause notice for disqualification, order of

RETURNS 10.37
rejection of application of enrolment, list of approved GSTPs, authorisation letter

and withdrawal of authorisation. A GSTP enrolled in any State or Union Territory
shall be treated as enrolled in the other States/Union territories.
(i) What is the eligibility criteria for GSTP?
The eligibility criteria for GSTP has been explained by way of a diagrams
given below and at next page.
Indian citizen
Person of sound
mind
A
person
Not adjudicated as
who is insolvent
Not been convicted

by a competent
court
Retired officer of Commercial Tax Department of any State

Govt./CBIC who, during service under Government had worked in a
satisfies any of the
post not lower than the rank of a Group-B gazetted officer for a
period ≥ 2 years
conditions
Enrolled as a Sales Tax Practitioner or Tax Return Preparer under the

earlier indirect tax laws for a period of not less than 5 years
Has aquired any of the prescribed qualifications (mentioned below)

(i) Graduate or postgraduate degree or its equivalent examination having a degree

in Commerce, Law, Banking including Higher Auditing, or Business Administration
or Business Management from any Indian University established by any law for the
time being in force
Qualifications
(ii) Degree examination of any Foreign University recognised by any Indian

Prescribed
University as equivalent to the degree examination mentioned in sub-clause (i)
(iii) Any other examination notified by the Government, on the recommendation

of the Council, for this purpose
(iv) Any degree examination of an Indian University or of any Foreign University

recognized by any Indian University as equivalent of the degree examination
(v) Has passed final examination of ICAI/ ICSI/ Institute of Cost Accountants of
India.
(ii) What are the activities which can be undertaken by a GSTP?

A GSTP can undertake any/all of the following activities on behalf of a
registered person, if so authorised by him:
Furnish Make deposit Furnish Furnish details

Furnish details
monthly, for credit into information for of challan in
of outward and
annual or final electronic cash generation of the prescribed
inward supplies
return ledger e-way bill form
File an File an intimation

File an
application for to pay tax under
application for
amendment or the composition File a claim for
registration
cancellation of scheme or refund
amendment/
enrolment withdraw from the
cancellation
under rule 58 said scheme
Also allowed to appear as authorised

representative before any officer of
Department, Appellate Authority or Appellate Confirmation from the registered
Tribunal, on behalf of such a registered person person shall be sought
provided he is enrolled as GSTP under rule 83.

RETURNS 10.39
Furnishing returns through GSTP: When a registered person opts to furnish

his return through GSTP, such registered person:
Before confirming submission

Gives his consent in of any statement prepared by
prescribed form to any GSTP, ensures that the facts
GSTP to prepare and mentioned in the return are
furnish his return true and correct.
Thus, the responsibility for correctness of any particulars furnished in the

return or other details filed by the GSTP continues to rest with the registered
person on whose behalf such return and details are furnished.
The registered person before confirming, should ensure that the facts
mentioned in the return are true and correct before signature. However,
failure to respond to request for confirmation is treated as deemed
confirmation.
(iii) Other points
 A registered person gives his consent and authorises a GSTP in the

prescribed form by listing the authorised activities in which he intends
to authorise the GSTP. The GSTP accepts the authorisation in Part B of
the same form.
 The GSTP can undertake only such tasks as indicated in the prescribed
form. The registered person may, at any time, withdraw such
authorization.
 Any statement furnished by the GSTP is made available to the registered
person on the common portal. For every statement furnished by the
GSTP, a confirmation is sought from the registered person over email
or SMS.
 The GSTP should prepare all statements with due diligence and affix his
digital signature on the statements prepared by him or electronically
verify using his credentials.
 If the GSTP is found guilty of misconduct, his enrolment will be liable to
be cancelled and a show cause notice would be issued to him.

(iv) What is the procedure for enrolment as GSTP?
The procedure for enrolment of GSTP has been depicted in the following
diagram:
An application in The Application
prescribed form will be In case, the
The enrolment
may be made scrutinised and application is
once done
electronically GSTP certificate rejected,
remains valid
through the will be granted proper
till it is
common portal in the reasons need
cancelled.
for enrolment as prescribed to be given.
GSTP. form.
Any person who has been enrolled

as GSTP by virtue of him being No person enrolled
enrolled as a Sales Tax Practitioner as a GSTP is eligible
or Tax Return Preparer under the to remain enrolled
earlier indirect tax laws can remain unless he passes
enrolled only for a period of 30 such examination
months from the appointed date conducted at such
unless he passes the said periods by NACIN
examination within the said period
of 30 months.
The provisions relating to returns have been summarised by way of tables and
diagrams to help students remember and retain the provisions in a better and
effective manner:
(i) Modes of filing returns

All the returns are to be filed online.
GSTN portal (www.gst.gov.in)

Modes of filing
return
Offline utilities provided by GSTN
GST Suvidha Providers (GSPs)

RETURNS 10.41
(ii) List of Returns/Statements under GST

Return / Periodicity/ Who Files? Date for filing
Statement Description
GSTR-1 Monthly Person registered Due date prescribed in
statement of under regular scheme the Act is 10th day of the
outward with annual next month. However,
supplies of aggregate turnover presently, the same is
goods and/or greater than ` 1.5 being extended to 11th
services crore (including a day of the next month.
casual taxable
person)
Quarterly Person registered 13th day of the month
statement of under regular scheme succeeding the quarter
outward with annual has been notified as the
supplies of aggregate turnover due date for the recent
goods and/or up to ` 1.5 crore quarters
services (including a casual
taxable person)
GSTR-3B Monthly Person registered Annual turnover ≥ ` 5
return under regular crore in previous
scheme including financial year - 20th of
casual taxable the month.
person Annual turnover < ` 5
crore in previous
financial year - 22nd or
24th of the month
depending upon the
State or Union Territory
in which they are
registered.
Presently, the staggered
filing has been provided
for tax periods till March
2021.

GSTR-4 Return for a Registered person 30th April of the next

financial year paying tax under financial year
composition scheme
GSTR-5 Monthly Registered non- 20th day of the next
return resident taxpayer month or within 7 days
after expiry of
registration, whichever
is earlier
GSTR-9 Annual return Registered person 31st December of the
other than an ISD, next financial year
tax deductor/tax
collector, casual
taxable person and
a non-resident
taxpayer
GSTR-10 Final return Taxable person Within three months of
whose registration the date of cancellation
has been or date of order of
surrendered or cancellation, whichever
cancelled is later.
GSTR-11 Details of Persons who have -

inward been issued a
supplies Unique Identity
Number (UIN)
(iii) Due date of payment of tax
Due date •Payment should be made on or before 20th of every

of month
payment •For registered persons paying tax under composition
of tax scheme, payment for a quarter should be made on or
scheme
before 18th of the month succeeding the quarter

RETURNS 10.43
(iv) Annual return
Annual Return
The annual return for a financial year needs to be filed

by 31st December of the next financial year.
In this return, the taxpayer needs to furnish

details of expenditure and income for the entire
financial year.
(v) Revision of returns
There is no mechanism of filing revised returns for any

correction of errors/omissions.
The rectification of errors/omissions is allowed in

the subsequent returns.
However, no rectification is allowed after the due date

for furnishing the return for the month of September
following the end of the financial year to which
such details pertain or furnishing of the relevant
(vi) Late fee for delay in filing of returns
Any registered person who subject to a

is liable to pay a
fails to furnish statements, maximum of
late fee of
returns u/s 39 and final ` 5,000, under
` 100 per day,
return by the due dates the CGST Act
shall be subject to a
Any registered person who liable to pay maximum of 0.25% of
fails to furnish the annual a late fee of his turnover in the
retun by the due date ` 100 per State/Union Territory,
day, under the CGST Act


1. Mr. X, a regular taxpayer, did not make any taxable supply during the month
of July.
Is he required to file a GSTR-3B?
2. If a return has been filed, how can it be revised if some changes are required to
be made?
3. M/s Cavenon Enterprises, a registered supplier of designer wedding dresses
under regular scheme, has aggregate annual turnover of ` 30 lakh in the
preceding financial year. It is of the view that in the current financial year, it
is permitted to file its statement of outward supplies (GSTR-1) on a quarterly
basis while its accountant advises it to file the same on a monthly basis.
You are required to advise M/s Cavenon Enterprises on the same.
4. Mr. Kohli is a registered supplier in the State of Gujarat. He is filing
GSTR-1 every month. During the month of February, he went out of India and
thus, could not do any business transaction during that month. He believes
that as there is no transaction, there is no need to file GSTR-1 for the month of
February.
Is he correct? Explain.
5. Mr. Kalpesh is a registered dealer in Kerala paying tax under composition levy
from 1st April. However, he opts to pay tax under regular scheme from 1 st
December.
Is he liable to file GSTR-4 for the month of November? Discuss.
6. Mrs. Zarina, a registered dealer in Rajasthan, did not file GSTR-3B for the month
of June but she wants to file GSTR-3B for the month of July.
Is it possible? Answer with reference to section 39 of the CGST Act.
7. X has not made any outward supply during the month of September. However, X
has procured certain input services during the month. X is of the opinion that he
can file Nil GSTR-3B for the month of September through SMS.
Whether the understanding of X is correct? Explain.
8. A is a chartered accountant in practice and is registered under GST. On a query
regarding return filing process by a potential client, A has represented him as a
GST practitioner. A is of the view that since he is a qualified chartered accountant

RETURNS 10.45
with a GST registration in the name of his proprietorship firm, he also qualifies as
GST practitioner.
Is the understanding of A correct? Discuss.
9. Quicktax, a GST return filing service provider, has asked its clients to provide the
scanned copies of the tax invoices issued to B2B customers for uploading on the
GST portal and filing the return.
Whether the process followed by Quicktax is correct?
10. X Ltd. is winding up its business in Rajasthan. The Tax Consultant of X Ltd. has
suggested that X Ltd. will have to file either the annual return or the final return
at the time of voluntary cancellation of registration in the state of Rajasthan.
Do you agree with the stand taken by Tax Consultant of X Ltd.? Offer your
comments.
10. ANSWERS/HINTS
1. A regular taxpayer is required to furnish a return u/s 39 for every month even if
no supplies have been effected during such period. In other words, filing of Nil
GSTR-3B is also mandatory.
Therefore, Mr. X is required to file GSTR-3B even if he did not make any taxable
supply during the month of July.
2. In GST since the returns are built from details of individual transactions, there is
no requirement for having a revised return. Any need to revise a return may
arise due to the need to change a set of invoices or debit/ credit notes. Instead
of revising the return already submitted, the system allows changing the details
of those transactions (invoices or debit/credit notes) that are required to be
amended. They can be amended in any of the future GSTR- 1 in the tables
specifically provided for the purposes of amending previously declared details.
As per section 39(9), omission or incorrect particulars discovered in the returns
filed u/s 39 can be rectified in the return to be filed for the month during which
such omission or incorrect particulars are noticed. Any tax payable as a result of
such error or omission will be required to be paid along with interest. The
rectification of errors/omissions is carried out by entering appropriate particulars
in “Amendment Tables” contained in GSTR-1.

3. Section 37 stipulates that GSTR-1 for a particular month is required to be filed

on or before the 10th day of the immediately succeeding month, i.e. on a monthly
basis.
However, presently, as a measure of easing the compliance requirement for small
taxpayers, GSTR-1 has been allowed to be filed quarterly by small taxpayers with
aggregate annual turnover up to ` 1.5 crore in the preceding financial year or
the current financial year. Taxpayers with annual aggregate turnover above
` 1.5 crore will however continue to file GSTR- 1 on a monthly basis.
In view of the same, M/s Cavenon Enterprises can file its GSTR-1 on quarterly
basis as its aggregate turnover does not exceed ` 1.5 crore in the preceding
financial year.
4. No, Mr. Kohli is not correct. GSTR-1 needs to be filed even if there is no
business activity in the tax period. Therefore, in the given case, even though
Mr. Kohli was out of India and thus, could not do any business transaction
during the month of February, he is still required to file GSTR-1 for that
month.
5. Where a taxpayer opts to withdraw from the composition scheme, he has to
file GSTR-4 for the period prior to his opting for payment of tax under regular
scheme. Therefore, in the given case, Mr. Kalpesh is liable to file GSTR-4 for
the month of October since he was paying tax under composition scheme
during the month of October.
6. As per section 39(10), a registered person is not allowed to furnish a return
for a tax period if the return for any of the previous tax periods has not been
furnished by him
Therefore, in the given case, Mrs. Zarina cannot file GSTR-3B for July if she
has not filed GSTR-3B for the preceding month, i.e., June.
7. Nil GSTR-3B means that the return has nil or no entry in all its Tables. Since in
the present case X has received certain input services, he cannot file Nil GSTR-
3B through SMS as the said input services will need to be disclosed in the Table
for Eligible ITC in GSTR-3B.
8. The understanding of A is not correct.
A chartered accountant can become a GST practitioner (GSTP). However, holding
a certificate of practice as a chartered accountant and having GST registration
does not imply that such chartered accountant is a GST practitioner as well. For
becoming a GSTP, even a chartered accountant in practice has to follow the

RETURNS 10.47
enrolment process of GSTP as provided under the GST law and only upon
approval of such enrolment can a chartered accountant represent himself as a
GSTP.
9. No, the process followed by Quicktax is not correct.
The registered persons supplying goods or services to B2B customers are
required to upload the invoice wise details of supplies made during the tax
period. However, there is no requirement to upload the scanned copies of the
invoices issued to the customers on the GST portal at the time of filing returns.
Only information required as per GST returns is to be captured in the return filing
utility and the same is to be uploaded on the GST portal and not the scanned
copies of the actual invoices.
10. No, the stand taken by Tax Consultant of X Ltd. is not correct.
Annual return is required to be filed by every registered person paying tax as
a normal taxpayer. Final return is filed by the registered persons who have
applied for cancellation of registration within three months of the date of
cancellation or the date of cancellation order.
In the given case, X Ltd., a registered person, is winding up its business and
has thus, applied for cancellation of registration. Therefore, it is required to
file both annual return and final return.

AMENDMENTS MADE VIDE THE FINANCE (NO. 2) ACT, 2019

The Finance (No. 2) Act, 2019 has come into force from 01.08.2019. However, the
amendments made in section 39 of the CGST Act vide the Finance (No. 2) Act, 2019
would become effective only from a date to be notified by the Central Government in
the Official Gazette. Such a notification has not been issued till the time this Study
Material is being released for printing. Therefore, the applicability or otherwise of such
amendment for May 2021 and/or November 2021 examinations shall be announced y
the ICAI only after such notification is issued by the Central Government.
In the table given below, the existing provisions 9 of section 39 are compared with the
provisions as amended by the Finance (No. 2) Act, 2019.
Once the announcement for applicability of such amendments for examination(s) is
made by the ICAI, students should read the amended provisions given hereunder in
place of the related provisions discussed in the Chapter.
Section Existing provisions Provisions as Remarks

No. amended by the
Finance (No. 2) Act,
2019
39 Sub-section (1) Sub-section (1) Under the existing

Every registered Every registered person, provisions,
person, other than an other than an Input composition
Input Service Service Distributor or a taxpayers as well as
Distributor or a non- non-resident taxable registered persons
resident taxable person person or a person paying tax under
or a person paying tax paying tax under the Notification No.
under the provisions of provisions of section 10 2/2019 CT (R) dated
section 10 or section 51 or section 51 or section 07.03.2019 are
or section 52 shall, for 52 shall, for every required to file
every calendar month calendar month or part annual return and
or part thereof, furnish, thereof, furnish, a make quarterly
in such form and return, electronically, of payment of taxes in
manner as may be inward and outward terms of Notification
prescribed, a return, supplies of goods or No. 21/2019 CT
9

RETURNS 10.49
electronically, of inward services or both, input dated 23.04.2019

and outward supplies tax credit availed, tax issued under section
of goods or services or payable, tax paid and 148 read with rule 62
both, input tax credit such other particulars, of CGST Rules.
availed, tax payable, tax in such form and Such provisions are
paid and such other manner, and within now being
particulars as may be such time, as may be incorporated in the
prescribed, on or prescribed: CGST Act vide the
before the twentieth Provided that the amendment being
day of the month Government may, on proposed by the
succeeding such the recommendations Finance (No. 2) Act,
calendar month or part of the Council, notify 2019 in section 39.
thereof. certain class of Section 39 of the
registered persons CGST Act is being
who shall furnish a amended so as to
return for every allow the
quarter or part composition
thereof, subject to taxpayers (which
such conditions and includes taxpayers
restrictions as may be paying tax under
specified therein. Notification No.
Sub-section (2) Sub-section (2) 2/2019 CT (R) dated
07.03.2019 by virtue
A registered person A registered person of amendment
paying tax under the paying tax under the being made in
provisions of section 10 provisions of section 10, section 10 of the
shall, for each quarter shall, for each financial CGST Act vide the
or part thereof, furnish, year or part thereof, Finance (No. 2) Act,
in such form and furnish a return, 2019) to furnish
manner as may be electronically, of annual return along
prescribed, a return, turnover in the State or with quarterly
electronically, of Union territory, inward payment of taxes.
turnover in the State or supplies of goods or
Further, other
Union territory, inward services or both, tax
specified taxpayers
supplies of goods or payable, tax paid and
may be given the
services or both, tax such other particulars
option for quarterly
payable and tax paid in such form and
or monthly
within eighteen days manner, and within

after the end of such such time, as may be furnishing of returns

quarter. prescribed. and payment of
taxes under the
Sub-section (7) Sub-section (7) proposed new
Every registered Every registered person return system.
person, who is required who is required to
to furnish a return furnish a return under
under sub-section (1) sub-section (1), other
or sub-section (2) or than the person
sub-section (3) or sub- referred to in the
section (5), shall pay to proviso thereto, or
the Government the tax sub-section (3) or sub-
due as per such return section (5), shall pay to
not later than the last the Government the tax
date on which he is due as per such return
required to furnish such not later than the last
return: date on which he is
required to furnish such
return:
Provided that every
registered person
furnishing return
under the proviso to
sub-section (1) shall
pay to the
Government, the tax
due taking into
account inward and
outward supplies of
goods or services or
both, input tax credit
availed, tax payable
and such other
particulars during a
month, in such form
and manner, and

RETURNS 10.51
within such time, as

may be prescribed:
Provided further that
every registered
person furnishing
return under sub-
section (2) shall pay to
the Government the
tax due taking into
account turnover in
the State or Union
territory, inward
supplies of goods or
services or both, tax
payable, and such
other particulars
during a quarter, in
such form and
manner, and within
such time, as may be
prescribed.

Note
The Study Material follows a systematic approach of
explaining the GST law by first extracting the statutory
provisions followed by their analysis. Students may note that
the provisions which do not form part of the syllabus are not
included in such statutory provisions. Such excluded
provisions can either be complete sections or rules or sub-
sections/sub-rules of sections/rules.
However, where a section/rule is included in the syllabus, but
contains reference to inter alia another section/rule which is
excluded from the syllabus, the entire section has been given
in the statutory provisions i.e., the reference to the excluded
section has not been removed while reproducing the statutory
provisions. While analysing the section, however, only the
relevant portion has been dealt with in detail.
The discussion on the GST law in this Study Material
incorporates the content and images made available by the
CBIC on its website www.cbic.gov.in namely, FAQs on GST, e-
flyers issued on various aspects of GST, sectoral FAQs as also
the user manuals and FAQs available on the GST common
portal www.gst.gov.in, to the extent relevant to such
discussion.

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Intermediate Course

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Edition : October 2020

Committee/ : Board of Studies

Price (All Modules) : `

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

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The traditional role of a chartered accountant restricted to accounting and

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© The Institute of Chartered Accountants of India

Components About the component

1. Learning Learning outcomes which you need to demonstrate after

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

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

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

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

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

Happy Reading and Best Wishes!

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

SECTION A: INCOME TAX LAW (60 MARKS)

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(iii) Profits and gains of business or profession

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

SECTION B – INDIRECT TAXES (40 MARKS)

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a) Application of CGST/IGST law

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CHAPTER-1: GST IN INDIA–AN INTRODUCTION

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CHAPTER-3: CHARGE OF GST

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

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

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CHAPTER-5 TIME AND VALUE OF SUPPLY

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© The Institute of Chartered Accountants of India

Direct and Indirect Taxes

Features of indirect taxes

Genesis of GST in india

Need for GST in India

Framework of GST as introduced in India

What is a tax? A tax may be defined as a "pecuniary burden laid upon

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2. DIRECT AND INDIRECT TAXES

At Intermediate level, we will study the basic concept of Goods and

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Burden of tax borne Burden of tax shifted

Direct Tax Indirect Tax

Direct taxes Income tax

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3. FEATURES OF INDIRECT TAXES

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4. GENESIS OF GST IN INDIA

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