Framework of GST Laws

Understanding GST:
Concept of GST

1. Framework of GST Laws
by
CA Sri Harsha
CA Manindar
M/s SBS and Company LLP

2. 2
Concept of GST
Understanding GST

3. 3
Itisadestinationbasedtaxonconsumptionofgoodsandservices.Itisproposedtobeleviedatallstages
rightfrommanufactureuptofinalconsumptionwithcreditoftaxespaidatpreviousstagesavailableas
setoff.Inanutshell,onlyvalueadditionwillbetaxedandburdenoftaxistobebornebythefinal
consumer.
Destinationbasedtaxonconsumptionwouldmean,thetaxwouldaccruetothetaxingauthoritywhich
hasjurisdictionovertheplaceofconsumptionwhichisalsotermedasplaceofsupply.
Concept of GST

4. 4
Types of GST
Taxes subsumed
Exclusions from GST
Laws under GST
GST –Modus Operandi

5. 5
Types of GST
GST
Intra State Supplies
CGST
SGST
Inter State SuppliesIGST

6. 6
ItwouldbeadualGSTwiththeCentreandStatessimultaneouslylevyingitonacommontaxbase.The
GSTtobeleviedbytheCentreonintra-Statesupplyofgoodsand/orserviceswouldbecalledthe
CentralGST(CGST)andthattobeleviedbytheStateswouldbecalledtheStateGST(SGST).Similarly
IntegratedGST(IGST)willbeleviedandadministeredbyCentreoneveryinter-statesupplyofgoods
andservices.
IfacharteredaccountanthavingplaceofbusinessinHyderabadprovidesaservicetoaclientlocatedin
Hyderabad,thenhehastochargetwotaxesnamelyCGSTandSGSTonthesamevalue.
IfacharteredaccountanthavingplaceofbusinessinHyderabadprovidesaservicetoaclientlocatedin
Bangalore,thenhehastochargeIGSTinsteadofCGSTandSGSTonthesamevalue.Thecomponentof
SGSTinIGSTshallbesharedbythecentralgovernmenttotherespectivestategovernmentwherethe
supplyisconsumed/deemedtobeconsumed.
Types of GST

7. 7
Taxes subsumed under GST
UnionLevies State Levies
Central Excise Duty VAT/SalesTax
Service Tax Entertainment tax (unless levied by local bodies)
Additional ExciseDuties Luxury Tax
CVD (leviedon imports in lieu of Excise Duty) Taxes on lottery, betting and gambling
SAD (leviedon imports in lieu of VAT) Entry tax not in lieuof Octroi
Exciseduty on Medicinal & Toilet Prep’s Surchargesand Cesses
Surcharges and Cesses
Central Sales Tax

8. 8
Alcoholforhumanconsumption;
PetroleumProducts–PetroleumCrude,MotorSpirit(Petrol),HighSpeedDiesel,NaturalGas,ATF;
Electricity
Theexistingtaxregimeswillcontinueinrespectoftaxationoftheaboveitems.
Exclusions from GST

9. 9
CentralGoodsandServicesTaxAct,2017;
StateGoodsandServicesTaxAct,2017(EachStateshallhaveseparatelaw);
IntegratedGoodsandServicesTaxAct,2017;
UnionTerritoryGoodsandServicesTaxAct,2017;
GoodsandServicesTax(CompensationtoStates)Act,2017
Laws under GST

10. 10
GST Council
Administration
Levy and Collection
Time of Supply
Valuation
Tax Invoices
E-Commerce Operators
Refunds
Anti –Profiteering
Compensation Cess
Various Aspects of GST

11. 11
AGSTCouncilwouldbeconstitutedcomprisingtheUnionFinanceMinister(whowillbetheChairman
oftheCouncil),theMinisterofState(Revenue)andtheStateFinance/TaxationMinisters.
Quorumis50%ofthetotalmembers.Decisionshallbetakenonlyifthereis75%majority.
GSTcouncilisresponsibleforharmonizationondifferentaspectsofGSTbetweentheCentreandthe
StatesaswellasamongStatesandmakerecommendationstotheCentre/Stateon:
❖thetaxes,cessesandsurchargesleviedbytheCentre,theStatesandthelocalbodieswhichmaybesubsumed
underGST;
❖thegoodsandservicesthatmaybesubjectedtoorexemptedfromGST;
❖thedatefromwhichGSTisleviableonexcludeditems;
❖modelGSTlaws,principlesoflevy,apportionmentofIGSTandtheprinciplesthatgoverntheplaceofsupply;
❖thresholdlimitofturnoverbelowwhichGSTshallnotbeapplicable;
❖Others
GST Council

12. 12
OneofthekeydecisionstakenbyGSTcouncilistoprovideasingleinterfacetotheassessees.Hence,all
administrativecontrolisdividedasunder.
IftheturnoverofthetaxpayersislessthanRs1.5Crore:
90%ofthetaxpayers–theStateshallbehavingtheadministrationresponsibility
10%ofthetaxpayers–theCentreshallbehavingtheadministrationresponsibility
IftheturnoverofthetaxpayersismorethanRs1.5Crore:
50%ofthetaxpayers–theStateshallbehavingtheadministrationresponsibility
50%ofthetaxpayers–theCentreshallbehavingtheadministrationresponsibility
ThedivisionoftaxpayersbetweentheCentreandStateshallbedecidedbyGSTNandwillbeknownto
thetaxpayeronhisdashboardattheGSTportal.
Administration

13. 13
ThechargingsectionunderCGSTisSection9,whichstatesthatthereshallbeataxcalledthecentral
goodsandservicetaxonallintra-statesuppliesofgoodsorservicesorbothonthevaluedetermined
underSection15andatsuchrates,notexceeding20%asmaybenotified.Similarsectionshallbethere
inSGST.Forallinter-statesupplies,IGSTAct,2017shallbethegoverningact.
Thechargingsectionmakesitabundantlyclearthatthetax(whetherCGST/SGST/IGST/UTGST)ison
supplies.Andasseenfromearlierslides,thetaxableeventunderGSTlawsis‘Supply’.Hence,itisvery
importanttounderstandthescopeofsupplyinordertoappreciatetheGSTlaws.
Thescopeof‘Supply’islaidunderSection7oftheCGST&SGSTAct.Section20ofIGSTActleadsus
backtoSection7ofCGSTActtounderstandtheambitof‘Supply’.Now,letusproceedtounderstand
theterm‘Supply’.
Levy & Collection

14. Section7–ForthepurposesofthisAct,theexpression‘Supply’includes-
14
Understanding Supply:
14
Supply
includes
Allformsofsupplyofgoodsorservicesfora
considerationincourseorfurtheranceofbusiness
Import of services for a consideration
Schedule I
Schedule II
does not include
Schedule III
Notified activities undertaken by CG/SG/LA as Public
Authorities

15. SupplyIncludes:
a)Allformsofsupplyofgoods/servicessuchassale,transfer,barter,exchange,license,rental,leaseordisposalmade
oragreedtobemadeforaconsiderationbyapersoninthecourseorfurtherofbusiness;
b)Importationofaservice,whetherornotforaconsiderationandwhetherornotinthecourseorfurtheranceof
businessand
c)TheactivitiesspecifiedinScheduleI,madeoragreedtomadewithoutaconsideration;
d)TheactivitiestreatedassupplyofgoodsorservicesasreferredtoinScheduleII
15
Understanding Supply –‘Includes’:
15
‘consideration’inrelationtosupplyofgoodsorservicesorbothincludes–
a.anypaymentmadeortobemade,whetherinmoneyorotherwise,inrespectof,inresponseto,orforthe
inducementof,thesupplyofgoodsorservicesorbothwhetherbyrecipientorbyanyotherpersonbutshallnot
includeanysubsidygivenbyCG/SG
b.themonetaryvalueofanyactorforbearance,inrespectof,inresponseto,orfortheinducementof,thesupplyof
goodsorservicesorboth,whetherbyrecipientorbyanyotherpersonbutshallnotincludeanysubsidygivenby
CG/SG
Providedthatadepositgiveninrespectofsupplyofgoodsorservicesorbothshallnotbeconsideredaspayment
madeforsuchsupplyunlessthesupplierappliessuchdepositasaconsiderationforthesaidsupply
‘Business’includes:
a.Anytrade,commerce,manufacture,profession,vocation,adventure,wageroranyothersimilaractivity,whetheror
notforpecuniarybenefit;
b.Anyactivityortransactioninconnectionwithorincidentalorancillarytosub-clause(a);
c.Anyactivityortransactioninnatureof(a),whetherornotthereisavolume,frequency,continuityorregularityof
suchtransaction;
d.Supplyoracquisitionofgoodsincludingcapitalgoodsandservicesinconnectionwithcommencementorclosureof
business;
e.Provisionbyclub,association,society,oranysuchbody(forasubscriptionoranyotherconsideration)ofthefacilities
orbenefitstoitsmembers;
f.Admission,foraconsideration,ofpersonstoanypremises;
g.Servicessuppliedbyapersonastheholderofofficewhichhasbeenacceptedbyhiminthecourseorfurtheranceof
histrade,professionorvocation;
h.Servicesprovidedbyaraceclubbywayoftotalizatororalicencetobookmakerinsuchclub;
i.AnyactivityortransactionundertakenbyCG/SG/LAinwhichtheyareengagedaspublicauthorities

16. Importationofservices:
❖Importationofservicesisincludedintheexpressionof‘supply’;
❖Onimportationofservices,IGSThastobepaid;
❖Ifimportationofservicesisforconsideration,thensituationwillbecoveredunderSection7(1)(b);
❖Ifimportationofservicesisnotforconsiderationandfromrelatedpersonsorfromanyother
establishmentoutsideIndia,thensituationwillbecoveredunderEntry(d)ofSchI;
❖Importationofservicesshallbeconsideredassupplywhethersuchimportationhappenswhetherornot
inthecourseorfurtheranceofbusiness
16
Understanding Supply –Importation of Services:
16
2(11) of IGST Act
import of services –means the supply of any service, where –
supplier of service is located outside India;
Recipient of service is located in India;
place of supply of service is in India

17. ScheduleI:ActivitiestobetreatedasSupplyevenifmadewithoutConsideration:
1.PermanentTransfer/DisposalofBusinessAssetswhereITChasbeenavailedonsuchassets;
2.Supplyofgoodsorservicesbetweenrelatedpersons,orbetweendistinctpersonsasspecifiedin
Section25,whenmadeinfurtheranceofcommerceorbusiness;
3.Supplyofgoods:
a.Byaprincipaltohisagentwheretheagentundertakestosupplysuchgoodsonbehalfofprincipal;
b.Byanagenttohisprincipalwheretheagentundertakestoreceivesuchgoodsonbehalfofprincipal
4.Importofservicesbyataxablepersonfromarelatedpersonorfromanyofhisotherestablishments
outsideIndia,inthecourseorfurtheranceofbusiness.
17
Understanding Supply –Schedule I:
17
Rule6(7)ofDeterminationofValueofSupplyRulesprovidethevalueoftaxableservicesprovidedbysuchclass
ofserviceprovidersasmaybenotifiedbytheGovtasreferredtoEntry2inScheduleIbetweendistinctpersons
asreferredtoinSection25,otherthanthosewhereITCisnotavailableunderSection17(5)shallbedeemed
tobeNil
Further,giftsnotexceedingRs50,000/-invalueinafinancialyearbyanemployertoanemployeeshallnotbe
treatedassupplyofgoodsorservicesorboth

18. ❖Asdiscussedinthepreviousslides,whenthereisadualtaxmodeloneachtransaction,thatistosaywhen
CGSTandSGSThastobechargedoneachtransaction,whyistherestillnecessitytomakeadistinction
betweenGoodsandServices?
❖UndertheGSTlaws,therearecertainsectionswhichwillbeapplicableforgoodsandcertainother
sectionswhichwillbeapplicabletoservices.Forexample,thetimeofsupplyforgoodsisdealtbySection
12ofCGSTAct,whereasforservicesthetimeofsupplyisdealtbySection13ofCGSTAct.Further,the
placeofsupplyforgoodsisdealtbySection10ofIGSTAct,whereasforservicestheplaceofsupplyis
dealtbySection12andSection13ofIGSTAct.Hence,thererequiresadistinctionbetweenthegoodsand
servicesevenundertheGSTframework.
❖Further,therateoftaxesforgoodsandservicesaredifferent.Hence,therehastobeastatutewhich
clearlylaysastowhatarethetransactionsthataretobetreatedasgoodsandservices.
18
Understanding Supply –Goods vs Services:
18
Goods–meanseverykindofmoveablepropertyotherthanmoneyandsecuritiesbutincludesactionableclaim,
growingcrops,grassandthingsattachedtoorformingpartofthelandwhichareagreedtobeseveredbefore
supplyorcontractofsupply–2(52)
Services–meansanythingotherthangoods,moneyandsecuritiesbutincludesactivitiesrelatingtouseofmoney
oritsconversionbycashorbyanyothermode,fromoneform,currencyordenomination,toanotherform,
currencyordenominationforwhichaseparateconsiderationischarged–2(102)

19. ScheduleII:ActivitiesbetreatedasSupplyofGoodsorServices:
19
Understanding Supply –Schedule II:
19
Schedule II
Supply of Goods
Transfer of Goods with Title
Transfer of BAs for the purposes of business
Supply of Services
Transfer of Goods without Title
Transfer of BAs for the purposes other than business
Treatment or Process
Land & Building
Declared Services

20. ScheduleII:ActivitiesbetreatedasSupplyofGoods:
20
Understanding Supply –Schedule II:
20
Supply of Goods
Any transfer of title in goods –1(a)
Anytransferoftitleingoodsunderanagreementwhich
stipulatesthatpropertyingoodsshallpassatafuturedate
uponapaymentoffullconsiderationasagreed
Wheregoodsformingpartofassetsofabusinessaretransferred
ordisposedofbyorunderthedirectionsofpersoncarryingon
businesssoasnolongertoformpartofthoseassets,whetheror
notforconsideration,suchtransferordisposal–4(a)
Supplyofgoodsbyunincorporatedassociationorbodyof
personstoamemberthereofforcash,deferredpaymentor
othervaluableconsideration

21. ScheduleII:ActivitiesbetreatedasSupplyofServices:
21
Understanding Supply –Schedule II:
21
Supply of
Services
Anytransferofrightingoodsorofundividedshareingoods
withouttransferoftitlethereof
Anylease,tenancy,easement,licensetooccupyland
Anyleaseorlettingoutbuildingincludingcommercial,
industrialorresidentialcomplexforbusinessorcommerce,
eitherwhollyorpartly
Anytreatmentorprocesswhichisappliedtoanother
person’sgoods

22. ScheduleII:ActivitiesbetreatedasSupplyofServices:
22
Understanding Supply –Schedule II:
22
Supply of
Services
Where,byorunderthedirectionofapersoncarryingona
business,goodsheldorusedforthepurposeofbusiness
areputtoanyprivateuseorareused,ormadeavailableto
anypersonforuse,foranypurposeotherthanapurposeof
business,whetherornotforaconsideration,theusageor
makingavailableofsuchgoods
RentingofImmovableProperty
Constructionofcomplex,building,civilstructureorapart
thereof,includingacomplexorbuildingintendedforsaleto
abuyer,whollyorpartly,exceptwhereentireconsideration
hasbeenreceivedafterissuanceofCCorafteritsfirst
occupationwhicheverisearlier

23. ScheduleII:ActivitiesbetreatedasSupplyofServices:
23
Understanding Supply –Schedule II:
23
Supply of
Services
Temporarytransferorpermittingtheuseorenjoymentof
anyIPR
development,design,programming,customization,
adaption,upgradation,enhancement,implementationof
informationtechnologysoftware
Agreeingtotheobligationtorefrainfromanact,orto
tolerateanactorsituationortodoanact
Transferofrighttouseanygoodsforanypurpose(whether
ornotforspecifiedperiod)forcash,deferredpaymentor
othervaluableconsideration

24. ScheduleII:ActivitiesbetreatedasSupplyofServices:
24
Understanding Supply –Schedule II:
24
Supply of
Services
Composite
Supplies
workscontractasdefinedin2(119)–meansa
contractforbuilding,construction,fabrication,
completion,erection,installation,fittingout,
improvement,modification,repair,maintenance,
renovation,alterationorcommissioningofany
immovablepropertywhereintransferofpropertyin
goods(whetherasgoodsorinsomeotherform)is
involvedinexecutionofsuchcontract
Supply,bywayoforaspartofanyserviceorinany
othermannerwhatsoever,ofgoodsbeingfoodorany
otherarticleforhumanconsumptionoranydrink
(otherthanliquorforhumanconsumption),where
suchsupplyorserviceisforcash,deferredpaymentor
othervaluableconsideration

25. Notwithstandingtoanythingcontainedinsub-section(1)–
a.ActivitiesorTransactionsspecifiedinScheduleIII;or
b.SuchactivitiesortransactionsundertakenbyCG/SG/LAinwhichtheyareengagedaspublicauthorities,
asmaybenotifiedbyGovernment
shall be treated as neither a supply of goods nor a supply of services
25
Understanding Supply –Does Not Includes:
25

26. ScheduleIII:ActivitiesorTransactionswhichshallbetreatedasneithersupplyofgoods/services:
26
Understanding Supply –Schedule III:
26
ScheduleIII
Servicesbyanemployeetoemployerincourseoforinrelationtohis
employment
ServicesbyanycourtorTribunalestablishedunderanylawfortimebeingin
force
Functionsperformed by Members of Parliament/State
Legislature/Panchayats/Municipalities/LocalAuthorities
Dutiesperformedbyanypersonwhoholdsanypostinpursuanceofprovisions
ofconstitutioninthatcapacity

27. ScheduleIII:ActivitiesorTransactionswhichshallbetreatedasneithersupplyofgoods/services:
27
Understanding Supply –Schedule III:
27
ScheduleIII
DutiesperformedbyanypersonasChairperson/Member/Directorinabody
establishedbyCG/SG/LAandwhoisnotdeemedasanemployeebefore
commencement
Servicesoffuneral,burial,crematoriumormortuaryincludingtransportation
ofdeceased
Saleoflandand,subjecttoclause(b)ofParagraph5ofScheduleII,saleof
building
ActionableClaims,otherthanlottery,bettingandgambling

28. ActivitiesorTransactionsundertakenbyCG/SG/LA:
❖Theterm‘business’coversthesuppliesmadebyCG/SG/LAinwhichtheyareengagedinpublicauthorities;
❖Hence,byvirtueofSection7(1)(a),suppliesmadebyCG/SG/LAinthecapacityofpublicauthoritieswillbesubjectedto
GST.
❖However,inlightofSection7(2)(b),theGovernmentonrecommendationsofcouncilmightnotifycertainsupplies
neithertobesupplyofgoodsnorservices.
28
Understanding Supply –Activities by
CG/SG/LA:
28

29. Powertonotifytreatmentoftransactions:
SubjecttoprovisionsofSection7(1)and7(2),theGovernmentonrecommendationofGSTCouncil,specifyby
notification,thetransactionsthataretobetreatedas:
SupplyofGoodsnotasaSupplyofServices;
SupplyofServicesandnotasaSupplyofGoods;
29
Understanding Supply –7(3):
29

30. ❖Letustakeanexample,wheregoodsarepackedandtransportedwithinsurance.Heretherearetwo
suppliesnamelysupplyofgoodsandsupplyofservicesthatisinsurance.Thequestionbeforeuswhether
thesupplyhastobetreatedassupplyofgoodsorsupplyofservices?
❖Inordertosolvesuchinstances,theconceptof‘compositesupply’hasbeenintroduced.AsperSection
2(30)ofCGSTAct,‘compositesupply’meansasupplymadebyataxablepersontoarecipientconsisting
oftwoormoretaxablesuppliesofgoodsorservicesorboth,oranycombinationthereof,whichare
naturallybundledandsuppliedinconjunctionwitheachotherintheordinarycourseofbusiness,oneof
whichisaprincipalsupply.
❖2(90)dealswiththedefinitionof‘principalsupply’whichmeansthesupplyofgoodsorserviceswhich
constitutesthepredominantelementofacompositesupplyandtowhichanyothersupplyformingpart
ofthatcompositesupplyisancillary
❖Section8dealswithtaxationofcompositesupplywhichstatesthatacompositesupplycomprisingoftwo
ormoresupplies,oneofwhichisaprincipalsupply,shallbetreatedassupplyofsuchprincipalsupply.
Hence,intheaboveexample,sincesupplyofgoodsisprincipalsupply,thetransactionshallbetreatedas
supplyofgoods.
30
Taxability of Composite & Mixed Supply –Section 8:
30

31. ❖Letustakeananotherexample,wheresupplyofpackageconsistingofcannedfoods,sweets,chocolates,
cakes,dryfruits,aerateddrinksandfruitforasingleprice.Thequestionforconsiderationiswhatrateof
taxshouldbeapplied?
❖Inordertosolvesuchinstances,theconceptof‘mixedsupply’hasbeenintroduced.AsperSection2(74)of
CGSTAct,‘mixedsupply’meanstwoormoreindividualsuppliesofgoodsorservicesoranycombination
thereof,madeinconjunctionwitheachotherbyataxablepersonforasinglepricewheresuchsupply
doesnotconstituteacompositesupply.
❖Section8(b)dealswithtaxationofmixedsupplywhichstatesthatamixedsupplycomprisingtwoormore
suppliesshallbetreatedassupplyofthatparticularsupplywhichattractsthehighestrateoftax.Hence,in
theaboveexample,thepackageattractstherateoftaxwhichishighestamongthesuppliesmade.
31
Taxability of Composite & Mixed Supply –
Section 8:
31

32. 32
ThechargingsectionunderCGSTisSection9,whichstatesthatthereshallbeataxcalledthecentral
goodsandservicetaxonallintra-statesuppliesofgoodsorservicesorbothonthevaluedetermined
underSection15andatsuchrates,notexceeding20%asmaybenotified.Similarsectionshallbethere
inSGST.Forallinter-statesupplies,IGSTAct,2017shallbethegoverningact.
ValuationisdealtbySection15.Thevalueofasupplyofgoodsorservicesorbothshallbethe
transactionvalue,whichisthepricepaidorpayableforsaidsupplyofgoodsorservicesorbothwhere
thesupplierandrecipientofthesupplyarenotrelatedandthepriceisthesoleconsiderationofthe
supply.
Ifthesupplierandrecipientofthesupplyarerelatedpersonsorifthepriceisnotthesole
considerationofthesupply,thenvaluationhastobedecidedbasedonthevaluationrulescalled
DeterminationofValueofSupply(draftrulesnotified).
Valuation –Section 15:

33. 33
Wehaveunderstoodthatvalueofsupply=transactionvalue*NotifiedRate.Now,itisimportantto
understandwhensuchCGST/SGST/IGSThastobepaid.Thepointoftaxationthatistosaywhentaxhas
tobepaidhasbeendealtbySection12and13.
Section12dealswiththetimeofsupplyofgoodsandwhereasSection13dealswithtimeofsupplyof
services.Thereareseparateprovisionsfordeterminingtimeofsupplyundernormalcircumstancesand
instanceswheretaxhastobepaidunderreversechargemechanism.
Thetimeofsupplyofgoodsthatistheliabilitytopaytaxongoodsshallariseattheearliestofthe
following:
dateofissueofinvoicebythesupplierorthelastdayonwhichheisrequiredtoissueaninvoicefor
suchsupplyor
dateonwhichsupplierreceivesthepaymentwithrespecttothesupply
Time of Supply –Section 12 & 13:

34. 34
Thetimeofsupplyofservicesthatistheliabilitytopaytaxonservicesshallariseattheearliestofthe
following:
dateofissueofinvoice(ifinvoiceisissuedwithintheprescribedtime)bythesupplierorthedateof
receiptofpaymentbysupplier;
dateofprovisionofservice(ifinvoiceisnotissuedwithintheprescribedtime)orthedateofreceiptof
paymentbysupplier;
dateonwhichtherecipientshowsthereceiptofservicesinhisbooksofaccount,incasetheabove
provisionsdoenotapply.
Time of Supply –Section 12 & 13:

35. 35
Tax Invoice –Section 31:
❖Every registered person supplying taxable goods shall issue an invoice containing particulars (as per Rule
1 of Invoice Rules) before or at the time of:
removal of goods for supply to the recipient, where supply involves movement of goods;
delivery of goods or making available thereof to the recipient, in any other case.
❖In case of continuous supply of goods, where successive statement 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 many be, each such payment is received.
❖Every registered person supplying taxable services shall issue an invoice, before or after the provision of
service but within an prescribed period (30 days –as per Rule 2 of Invoice Rules).
❖Incaseofcontinuoussupplyofservices,whereduedateofpaymentisascertainablefromcontract,the
invoiceshallbeissuedonorbeforetheduedateofpayment.Wheretheduedateofpaymentisnot
ascertainablefromthecontract,theinvoiceshallbeissuedbeforeoratthetimewhensupplierreceives
payment.Wherepaymentislinkedtocompletionofanevent,invoiceshallbeissuedonorbeforedate
ofcompletionofthatevent.

36. 36
Tax Invoice –Section 31:
❖A registered person supplying exempted goods or services or both or paying tax under Section 10 shall
issue, instead of tax invoice, a bill of supply (as per Rule 4 of Invoice Rules). A registered person may not
issue a tax invoice if the value of goods/services/both supplied is less than Rs 200/-.
❖Aregisteredpersonshall,onreceiptofadvancepaymentwithrespecttoanysupplyof
goods/services/both,issueareceiptvoucheroranyotherdocumentevidencingreceiptofsuch
payment(asperRule5ofInvoiceRules)andconsequentlyifnosupplyisbeingdone,thesuppliershall
issueasrefundvoucher.
❖AregisteredpersonwhoisliabletopaytaxunderSection9(3)/9(4)shallissueaninvoiceinrespectof
goods/services/bothreceivedbyhimfromthesupplierwhoisnotregisteredasonthedateofreceipt
ofgoods/services/both.Further,therecipienthastoissueapaymentvoucheratthetimeofmaking
paymenttosupplier.

37. 37
Tax Invoice –Section 31:
❖Incasewheresupplyofservicesceasesunderacontractbeforethecompletionofsupply,theinvoice
shallbeissuedatthetimewhenthesupplyceasesandsuchinvoiceshallbeissuedtotheextentof
supplymadebeforesuchcessation.
❖Notwithstandinganythingcontained,wheregoodsbeingsentortakenonapprovalforsaleorreturn
areremovedbeforesupplytakesplace,theinvoiceshallbeissuedbeforeorattimeofsupplyorsix
monthsfromthedateofremoval,whicheverisearlier.

38. 38
E-Commerce Operators:
❖ThephraseelectroniccommercehasbeendefinedvideSection2(44)ofCGSTActwhichmeansthe
supplyofgoodsorservicesorbothincludingdigitalproductsoverdigitalorelectronicnetwork.
❖ThephraseelectroniccommerceoperatorhasbeendefinedvideSection2(45)ofCGSTActwhich
meansanypersonwhoowns,operatesormanagesdigitalorelectronicfacilityorplatformfor
electroniccommerce.
❖Thegovernmentshallnotifycertaincategoriesofe-commerceoperatorswhoareengagedinsupplyof
servicestopaytaxonservicesprovidedvidesuchplatform.Ifthee-commerceoperatordoesnothave
physicalpresenceinIndia,anypersonrepresentingsuchoperatorshallberequiredtopaytax.
❖E-commerceoperatoreitheringoodsorservicesshallnotbeeligibleforthebenefitofcomposition
schemeunderSection10.

39. 39
E-Commerce Operators:
❖Everye-commerceoperatorshallbeliableforobtainingregistrationandheisnoteligibleforthebasic
exemptionlimitunderSection22.
❖Everye-commerceoperatorshallcollectanamountatsuchratenotexceeding1%,ofthenetvalueof
taxablesuppliesmadethroughitbyothersupplierswheretheconsiderationwithrespecttosuch
suppliesistobecollectedbyoperator.
❖Netvalueoftaxablesuppliesshallmeantheaggregatevalueoftaxablesuppliesofgoodsorservicesor
bothotherthantheservicesnotifiedunderSection9(5),madeduringanymonthbyallregistered
personsthroughtheoperatorreducedbyaggregatevalueoftaxablesuppliesreturnedtothesuppliers
duringthemonth.

40. 40
Refunds:
❖Theclaimofrefundoftaxorinterestoranyotheramountpaidbyhimhastobemadebywayofan
applicationbeforetheexpiryof2yearsfromtherelevantdate.However,forclassofpersonsnotified
underSection55,therefundapplicationshallbemadebeforeexpiryof6monthsformthelastdayof
quarterinwhichsupplywasreceived.
❖Taxablepersonwhoareengagedinzeroratedsupplieswithoutpaymentoftaxorwherecredithas
beenaccumulatedonaccountofrateoftaxoninputsishigherthanrateoftaxonoutputscanclaim
therefundofunutilizedITCattheendofanytaxperiod.However,norefundshallbegivenifsupplier
availsdrawbackbenefits.
❖Applicationshallbeaccompaniedanydocumentaryevidencetoestablishthatrefundisdueand
documentaryorotherevidencethatincidenceoftaxhasnotbeenpassedon.Iftherefund<2lakhs,a
declarationcertifyingincidenceoftaxhasnotbeenpassedwouldsuffice.
❖Onreceiptofapplication,ifproperofficerissatisfied,hecanrefundwhole/partoftheamountclaimed
andmakeanordergranttherefundwithin60daysfromthedateofapplication.
specializedagencyofUNOoranyMFIOnotifiedunderUnitedNations(PrivilegesandImmunities)Act,1947,
Consulateorembassyofforeigncountriesoranyotherclassofpersons
ZeroratedsupplyisdefinedvideSection16ofIGSTAct.Itmeansexportofgoodsorservicesorbothorsupply
ofgoodsorservicesorbothtoaSEZdeveloperorunit
Apersonclaimingrefundofcreditattheendoftaxperiodmayclaimsuchrefundinreturnfurnishedunder
Section39.

41. 41
Refunds:
❖Incaseofanyclaimforrefundonaccountofzeroratedsupplyofgoodsorservicesorotherthansuch
categoryofregisteredpersons(tobenotified),refundof90%ofITC[excludingprovisionallyaccepted
ITC]shallbegrantedonsubmittingtheapplication.Thebalancecanbegrantedafterverificationof
documents.
❖Therefundshallbegrantedinthefollowingsituations:
▪refundoftaxpaidonzeroratedsuppliesorinputsorinputservicesusedinmakingzeroratedsupplies;
▪refundofunutilizedinputtaxcreditasperSection54(3);
▪refundoftaxpaidonsupplywhichisnotprovidedeitherwhollyorpartiallyandforwhichinvoicehasnot
beenissuedorrefundvoucherhasbeenissued;
▪refundoftaxpaidinpursuanceofSection77[TaxwrongfullycollectedandpaidtoCG/SG];
▪tax/interest/anyotheramountpaidbyapplicantwhereincidenceisnotpassed;
▪tax/interestbornebysuchclassofapplicantnotifiedbyCG/SGonrecommendationofGSTCouncil.

42. 42
Anti-Profiteering:
❖Letusunderstandtheconceptofanti-profiteeringbytakinganexample.Abuilderengagedin
constructionofresidentialcomplexesissellingaflatatRs1Croreason30.06.17.Thecurrentrateof
VATforconstructionofresidentialcomplexesis1.25%andservicetaxis4.5%leadingtoatotalof
5.75%.Thebuilderiseligibleforcreditonlyonservicetaxpaidoninputservicesandexcisedutypaidon
capitalgoods.HeisbarredfromtakingcrediteitherofVATpaidorexcisedutypaidoninputslike
cement,steelandothers.
❖Assumingtheappointeddaybeing01.07.17andalsoassumingtheproposedrateofGSTforbuildersis
finalizedat12%withfulleligibleinputtaxcredit.Thatistosaytherateoftaxhasincreasedbyalmost
100%fromtherateoftaxintheexistingregime(thatis5.75%to12%).Thequestionbeforeusnowis,
howtheendconsumerbenefitsoutofGST?

43. 43
Anti-Profiteering:
❖WehavetounderstandthatthebuilderisnoweligibletotakecreditofexcisedutyandVATpaidon
inputswhicharelyingintheopeningstock,workinprogressandfinishedgoodsaccordingtothe
transitionalprovisions.Assuming10%isthevalueofland,30%isthevalueofservicesinRs1Crore,
thenRs60lakhsrepresentsthevalueofmaterials.
❖Takingtheaveragerateofdutyoninputsat20%(14.5–VAT+12.5–ED),thevalueofcreditsinvolved
inRs60lakhsmaterials,wouldbeRs12lakhs(60lakhs*20%).ThatistosaytheamountofRs12lakhs
whichwasnoteligibleascredithitherto,nowbecomeseligibleunderGST.
❖ThereforetherevisedpriceoftheflatshallbeRs88lakhsinsteadofRs1Crore.Hencethenewrateof
taxshallbeappliedonRs88lakhsinsteadofRs1Crore.Therewouldbeminordifferenceinthetax
payablebeforeGSTandpostGST.

44. 44
Anti-Profiteering:
❖Now,ifsuchbenefitisnotpassedontotheconsumers,thentheanti-profiteeringmeasurewouldbe
madeapplicable.
❖AsperSection171,anyreductioninrateoftaxonanysupplyofgoodsorservicesorbenefitofinputtax
creditshallbepassedontherecipientbywayofcommensuratereductioninprices.TheCG,by
notificationconstituteanauthorityorempoweranexistingauthoritytoexaminewhethertheinputtax
creditsavailedbyaregisteredpersonorreductionintaxratehaveactuallyresultedincommensurate
reductioninprices.
❖Hence,itisnecessarytoquantifysuchcreditswhichareeligiblenowandaccordinglythebenefithasto
bepassedtotheultimateconsumers.

45. 45
Compensation Cess:
❖OneofthekeyreasonsthatthestateshasagreedtopartnerwiththecenterforGSTisthe
compensationagreedtobepaidbythecenterincaseifthestatesfallshortoftheirrevenuefromtaxes
whicharesubsumedintoGST.Thestateshavemadesurethatthecompensationpayablebycenteris
constitutionallysafeguardedbyplacingtheprovisionsintheGSTlaws.
❖Asaresultofsuchdeliberation,TheGoodsandServicesTax(CompensationtoStates)Act,2017has
takenbirth.Thehighlightsofsuchactaredealthereunder.
❖Eachstateshallbeeligibleforacompensationasdeterminedinlightoftheprovisionsoftheaboveact
foraperiodof5years.
❖ThecompensationshallbepayableiftherevenuefromexistingtaxeswhicharesubsumedintoGSTis
lessthantaxescollectedbystateunderGSTlaws.Revenuefromexistingtaxesshallbetakenfroma
baseyearthatis2015-16.

46. 46
Compensation Cess:
❖Theprojectednominalgrowthrateofrevenuesubsumedforthe5yearperiodshallbe14%.Thatisto
sayiftherevenuefromsubsumedtaxesisRs100forthe15-16,thenthequantumofsubsumedtaxes
foryear18-19shallbeRs148.15[100(1+14%)^3].TheactualrevenuecollectedbystateunderGSTlaws
shallbetaken.Ifthereisashortfallthecompensationbecomespayable,otherwisenopaymentistobe
madetosuchstate.
❖Thecompensationpayabletoeachstateshallbecalculatedprovisionallyattheendoftwomonth
period.Theprovisionalcompensationshallbethedifferencebetweentheprojectednominalgrowth
raterevenueshallbetakenprovisionallyatapro-ratabasistheactualcollectionsfurtherreducedby
anycompensationpaidtothestatefortheprecedingtwomonthperiod.
❖Thefinalcompensationshallbepaid/adjustedwhenthefinaltaxfiguresonacompleteyearbasisas
certifiedbyCAGarrives.Ifastatehasgotadditionalcompensation,thesameshallbeadjustedagainst
futurepayments.

47. 47
Compensation Cess:
❖Theprojectednominalgrowthrateofrevenuesubsumedforthe5yearperiodshallbe14%.Thatisto
sayiftherevenuefromsubsumedtaxesisRs100forthe15-16,thenthequantumofsubsumedtaxes
foryear18-19shallbeRs148.15[100(1+14%)^3].TheactualrevenuecollectedbystateunderGSTlaws
shallbetaken.Ifthereisashortfallthecompensationbecomespayable,otherwisenopaymentistobe
madetosuchstate.
❖Thecompensationpayabletoeachstateshallbecalculatedprovisionallyattheendoftwomonth
period.Theprovisionalcompensationshallbethedifferencebetweentheprojectednominalgrowth
raterevenueshallbetakenprovisionallyatapro-ratabasistheactualcollectionsfurtherreducedby
anycompensationpaidtothestatefortheprecedingtwomonthperiod.
❖Thefinalcompensationshallbepaid/adjustedwhenthefinaltaxfiguresonacompleteyearbasisas
certifiedbyCAGarrives.Ifastatehasgotadditionalcompensation,thesameshallbeadjustedagainst
futurepayments.

48. 48
Compensation Cess:
❖Wherenocompensationisduetobereleasedinafinancialyear,andincaseanyexcessamounthas
beenreleasedtoastateinpreviousyear,thisamountshallberefundedbyStatetoCentralGovernment
andsuchamountshallbecreditedtoafundnamed‘Goods&ServicesTaxCompensationFund’.
❖Thereshallbeleviedagoodsandservicestaxcompensationcessonallintraandinterstatesuppliesfor
thepurposeofprovidingcompensationtothestatesforlossofrevenuearisingonaccountof
implementationofgoodsandservicestaxact.Thesaidcessshallbeinforceforaperiodof5yearsor
forsuchperiodasmaybeprescribedbythecouncil.
❖Thesaidcessshallnotbeapplicableonsuppliesmadebyataxablepersonwhohasdecidedtooptfor
compositionscheme.
❖TheratesofcessarespecifiedinScheduletotheAct.Thecesscannotbeleviedinexcesstosuchrates
specifiedintheSchedule.

49. 49
Compensation Cess:
❖Thecessshallbeonthebasisofvalue,quantityorsuchbasisasspecifiedintheschedule.Ifthecessis
leviedonthebasisofvaluethenthevaluehastobereckonedasperSection15ofCGSTAct.Incaseof
importedgoodsthecesshastobeleviedonthesaidgoodsatthepointoftimetheyareimported
underSection12ofCustomsActandvaluedeterminedundertheCustomsTariffAct.
❖Everytaxablepersonmakingataxablesupplyhastopaysuchcess,filesuchreturnsinsuchformsalong
withotherreturnsandapplyforrefundofcessinsuchformasmaybeprescribed.
❖Thecesspaidoninwardsuppliesongoodsorservicesorbothandcesschargedonimportofgoods
andcesspayableonreversechargebasisshallbeutilizedonlytowardspaymentofsaidcessonsupply
ofgoodsandservicesleviableunderthisact.

50. 50
Compensation Cess:
S.No Description of Goods/Services Tariff Heading
& Others
Maximum Rate
1 Pan Masala 21 135% ad valorem
2 Tobacco & manufactured Tobacco Substitutes, including
tobacco products
24 4,170per1000sticksor290%advaloremor
acombinationnotexceedingsumofthe
above
3 Coal,briquettes,ovoidsandsimilarsolidfuels
manufacturedfromcoal,lignite,whetherornot
agglomerated,excludingjet,peat(includingpeatlitter),
whetherornotagglomerated.
27 01/02/034,000pertonne
4 AeratedWaters 22 15%advalorem
5 MotorCarsandothermotorvehiclesprincipally
designedforthetransportofpersons(otherthanmotor
vehiclesforthetransportoftenormorepersons,
includingthedriver),includingstationwagonsand
racingcar
8703 15%advalorem
6 Anyothersupplies 15%advalorem

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