Module-2 Levy and Collection of Tax:

Supply:
Taxable event is very important matter in every tax law. Its determination is most crucial for the proper
implementation of any tax law. Taxable event is that on the happening of which the charge is fixed. It is
that event which on its occurrence creates or attracts the liability to tax.
The taxable event under GST shall be the supply of goods or services or both made for consideration in the
course or furtherance of business. The taxable events under the existing indirect tax laws such as
manufacture, sale, or provision of services shall stand subsumed in the taxable event known as 'supply.'
Scope of Supply:
Provisions under Section 7 of the Central Goods and Services Tax (CGST) Act, 2017 relating to Scope of
Supply", are as under:
For the purposes of this Act, the expression "supply" includes –
a) 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 a consideration by a person in the course or
furtherance of business.
b) Import of services for a consideration whether or not in the course or furtherance of business.
1. Composite Supplies:
As per Section 2(30) of the Central Goods and Services Tax (CGST) Act, 2017, the term "composite
supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies
of goods or services or both or any combination thereof, which are naturally bundled and supplied in
conjunction with each other in the ordinary course of business, one of which is a principal supply.
Illustration – 1
Construction Company entered into contract to sell its building to a customer. The details are as follows:
(1) price of flat: ₹ 100 lakhs, (2) extra charges to select preferred location: ₹ 4 lakhs, (3) parking charges ₹
5 lakhs, (4) club membership fee: ₹ 3 lakhs, (5) Designing and modification charges: ₹ lakhs, (6) Stamp
duty charges: ₹ 4 lakhs, (7) documentation charges: 1 lakh. Compute tax payable, if the tax rate is 12%.
Solution:
• This transaction can be grouped under composite supply, because the construction company
provided many other services like preferred location service, parking service, deigning and
modification service, documentation service, apart from providing main service i.e., construction of
building.
• Club membership fee is not a part of service. It is only a deposit to be handed over to club, when
formed.
• Stamp duty is not a part of service. It is only reimbursement of expenses incurred on behalf of the
customer.
• Therefore, the total taxable value of service will be 112 lakhs (i.e., 100+ 4+ 5+ 2+1), and SGST:
112x6% = 6.72, CGST: 112x6% = 6.72.
Illustration-2
A non AC hotel in Delhi has declared tariff of 2,000 per day. On 27.11.2019, its bills were as follows: (1)
hotel room ₹ 2,000, breakfast ₹ 300, (2) hotel room ₹ 2,200, Extra bed ₹ 400, Laundry charges ₹ 200. (3)
Discounted rate to corporate client ₹ 1,500, (laundry charges ₹ 100, telephone charges ₹ 200. Calculate the
tax liability in each case.
Solution:
Since room tariff is ₹ 2,000, rate of tax will be 12% (6% SGST and 6% CGST). The tax payable in each is
as follows:
• It is composite supply. Hence the tax payable on ₹ 2,000 + 300 will be – SGST (2,300 x 6% = 138)
and CGST (2,300 x 6% = 138)
• It is composite supply. Tax rate depends on room tariff and not on the amount charged. Hence the
tax payable on ₹ 2,200 + 400 + 200 will be – SGST (2,800 x 6% = 168) and CGST (2,800 x 6%
=168)
• It is composite supply. Hence the tax payable on ₹ 1,500 + 100 + 200 will be – SGST (1,800 x 6%
= 108) and CGST (1,800x6% = 108)
2. Mixed Supplies:
As per Section 2(74) of the Central Goods and Services Tax (CGST) Act, 2017, the term "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.
Example-1: A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated
drinks 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 and is not dependent on any other. It shall not be a mixed supply if these items are
supplied separately.
For tax liability purpose, mixed supply consisting of two or more supplies shall be treated as a supply of
that item which has the highest tax rate.
Example-2: Many shops offer combo packs of Tie, watch wallet, pen and they are bundled as a kit and this
kit is supplied for a single price and the supply of one item does not naturally necessitate the supply of other
elements. Hence the supply is a mixed supply. Now let us assume that tax rate for a tie, watch, wallet, pen
are 12%, 18%, 5%, 4% respectively. In this case, watch attracts the highest rate of tax in the mixed supply
i.e., 18%. Hence, the mixed supply will be taxed at 18%.
Example-3: Space Bazaar offers a free bucket with detergent purchased. Is it composite supply or mixed
supply? Assume rate of GST for detergent @28% and bucket @ 18%.
Ans: This is a mixed supply. These items can be sold separately. Product which has the higher rate, will
apply on the whole mixed bundle.
Tax Liability on Mixed Supplies :
• A mixed supply comprising two or more supplies shall be treated as a supply of that particular
supply, which attracts the highest rate of tax.

Levy and Collection of GST:

Levy and Collection of Tax under CGST Act 2017:
All forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental,
lease or disposal made or agreed to be made i.e. for future transaction for a consideration by a person in the
course or furtherance of business.
Levy of Tax:
Levy of tax means the imposition of taxes as well as assessment of tax but does not include collection of
tax. The term levy appears to be wider than the term of assessment. When the payment of tax is enforced
there is a levy. Therefore, the provision related with levy can be divided into two parts I.e. imposition of
tax and assessment of tax.
1. Imposition of Tax: This type’s tax is done by Government and tax is imposed as soon as take place.
2. Assessment of Tax: This type’s tax is done by Executive Government and assessment means
calculation of tax.
Collection of Tax:
Collection of tax means the point of time for payment of tax. Hence, as soon as tax is levied right to collect
tax arises in the department. Sometimes administrative convenience it may be delayed such as for a month
or a quarter. So that assesses need not to file return and pay tax every time as and when taxable event takes
place.
Levy and Collection of GST Under CGST Act. (Section 9)
1. Levy of central goods and service tax [Section 9(1)]
Under CGST Act, central tax called as the central goods and services tax (CGST) shall be levied on all
intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human
consumption
It shall be levied on the value determined under section 15 and at such rates, not exceeding 20%, As
may be notified by the Government on the recommendations of the Council and collected in such
manner as may be prescribed and shall be paid by the taxable person.
2. Central tax on petroleum products to be levied from the date to be notified [Section 9(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. Tax payable on reverse charge basis [Section 9(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. Further, 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.
4. Tax payable on reverse charge if the supplies are made to a registered person by unregistered
person [Section 9(4)]
The central tax in respect of the supply of taxable goods or services or both by a supplier, who is Not
registered, to a registered person shall be paid by such person on reverse charge basis as the Recipient 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. [Section 9(4) has Been deferred till 30.6.2018]
5. Tax payable on intra-State supplies by the electronic commerce operator on notified Services
[Section 9(5)]
As per section 2(45) of the CGST Act, 2017, “electronic commerce operator” means any person who owns,
operates or manages digital or electronic facility or platform for electronic commerce.

Levy and Collection of GST Under IGST Act. (Section 5)

The provisions under section 5 of the IGST Act are similar to section 9 of CGST Act except
1. The word CGST has been substituted by IGST under IGST Act
 2. Under IGST Act, tax called integrated tax is to be levied on all interstate supplies and on goods
Imported into India.
3. Maximum rate under section 5(1) of the IGST Act is 40% (i.e. 20% CGST +20% UTGST).
Levy and Collection of GST Under UTGST Act. (Section 7)
The provisions under section 7 of the UTGST Act are similar to section 9 of CGST Act except
1. word CGST has been substituted by the word UTGST under the UTGST Act.
2. Under UTGST Act, tax called UT tax is be levied on all intra-State supplies,
3. Maximum rate 7(1) of UTGST Act is 20%.

Procedure Relating to Levy (CGST & SGST)

Provisions under Section 9 of the Central Goods and Services Tax (CGST) Act, 2017 relating to "Levy and
Collection", are as under:
(1) Tax shall be levied 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 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.
(4) The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not
registered, to a registered person shall be paid by such person on reverse charge basis as the recipient 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.
(5) The Government may, on the recommendations of the 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 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.
Procedure Relating to Levy (IGST)
Provisions under Section 5 of the Integrated Goods and Services Tax (IGST) Act, 2017 relating to "Levy
and Collection of Tax", are as under:
(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and
services tax on all inter-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 of the Central Goods and Services Tax
Act and collected in such manner as may be prescribed and shall be paid by the taxable person:
Provided that the integrated tax on goods imported into India shall be levied and collected in accordance
with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said
Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act,
1962.
(2) The integrated 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, 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.
(4) The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not
registered, to a registered person shall be paid by such person on reverse charge basis as the recipient 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.
(5) The Government, on the recommendations of the Council, by notification, specify categories of services,
the tax on inter-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 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 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.

Composition levy:
Composition Scheme is a simple and easy scheme under GST for taxpayers. Small taxpayers can get rid of
tedious GST formalities and pay GST at a fixed rate of turnover. This scheme can be opted by any taxpayer
whose turnover is less than Rs.1.5 crore*.
Who can opt for Composition Scheme
A taxpayer whose turnover is below Rs.1.5 crore* can opt for Composition Scheme. In case of North-
Eastern states and Himachal Pradesh, the limit is now Rs.75* lakh. As per the CGST (Amendment) Act,
2018, a composition dealer can also supply services to an extent of ten percent of turnover, or Rs.5 lakhs,
whichever is higher. This amendment will be applicable from the 1st of Feb, 2019. Further, GST Council
in its 32nd meeting proposed an increase to this limit for service providers on 10th Jan 2019*. Turnover of
all businesses registered with the same PAN should be taken into consideration to calculate turnover.
Who cannot opt for Composition Scheme
The following people cannot opt for the scheme-
• Manufacturer of ice cream, pan masala, or tobacco.
• A person making inter-state supplies.
 • A casual taxable person or a non-resident taxable person.
• Businesses which supply goods through an e-commerce operator.

What are the conditions for availing Composition Scheme?

The following conditions must be satisfied in order to opt for composition scheme:
• No Input Tax Credit can be claimed by a dealer opting for composition scheme
• The dealer cannot supply goods not taxable under GST such as alcohol.
• The taxpayer has to pay tax at normal rates for transactions under the Reverse Charge Mechanism
• If a taxable person has different segments of businesses (such as textile, electronic accessories,
groceries, etc.) under the same PAN, they must register all such businesses under the scheme
collectively or opt out of the scheme.
• The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard
displayed prominently at their place of business.
• The taxpayer has to mention the words ‘composition taxable person’ on every bill of supply issued
by him.
• As per the CGST (Amendment) Act, 2018, a manufacturer or trader can now also supply services
to an extent of ten percent of turnover, or Rs.5 lakhs, whichever is higher. This amendment will be
applicable from the 1st of Feb, 2019.
How can a taxpayer opt for composition scheme?
To opt for composition scheme a taxpayer has to file GST CMP-02 with the government. This can be done
online by logging into the GST Portal. This intimation should be given at the beginning of every Financial
Year by a dealer wanting to opt for Composition Scheme. Here is a step by step Guide to File CMP-02 on
GST Portal.
How Should a Composition Dealer raise bill?
A composition dealer cannot issue a tax invoice. This is because a composition dealer cannot charge tax
from their customers. They need to pay tax out of their own pocket. Hence, the dealer has to issue a Bill of
Supply. The dealer should also mention “composition taxable person, not eligible to collect tax on supplies”
at the top of the Bill of Supply.
What are the GST rates for a composition dealer?
Following chart explains the rate of tax on turnover applicable for composition dealers :

How should GST payment be made by a composition dealer?

GST Payment has to be made out of pocket for the supplies made. The GST payment to be made by a
composition dealer comprises of the following:
• GST on supplies made.
• Tax on reverse charge.
 • Tax on purchase from an unregistered dealer.
What are the returns to be filed by a composition dealer?
A dealer is required to pay tax in a quarterly statement CMP-08 by 18th of the month after the end of the
quarter. Also, a return in form GSTR-4 has to be filed annually by 30th April of next financial year from
FY 2019-20 onwards. GSTR-9A is an annual return to be filed by 31st December of the next financial year.
It was waived off for FY 2017-18 and FY 2019-20. Also, note that a dealer registered under composition
scheme is not required to maintain detailed records.
What are the advantages of Composition Scheme?
The following are the advantages of registering under composition scheme:
• Lesser compliance (returns, maintaining books of record, issuance of invoices)
• Limited tax liability
• High liquidity as taxes are at a lower rate
What are the disadvantages of Composition Scheme?
Let us now see the disadvantages of registering under GST composition scheme:
• A limited territory of business. The dealer is barred from carrying out inter-state transactions
• No Input Tax Credit available to composition dealers
• The taxpayer will not be eligible to supply non-taxable goods under GST such as alcohol and goods
through an e-commerce portal.

Exemptions from GST:

Tax exemptions come in many forms but one thing they all have in common is they either reduce rentirely
eliminate your obligation to pay tax. Most taxpayers are entitled to an exemption on their tax retorn that
reduces your tax bill in the same way a deduction does. Federal and state governments requently exempt
organizations from income tax entirely when it serves the public, such as with charities and religious
organizations.

Meaning of Exemption
An exemption is a deduction allowed by law to reduce the amount of income that would otherwise be taxed.
The Internal Revenue Service (IRS) offers two types of exemptions: personal and dependent emptions. An
example of an exemption is the reduction in taxes granted for dependent children under the age of 18) living
with the tax filer.

The taxpayers who are exempted from GST Registration are:

a) Agriculturists.
b) Persons falling in Threshold Exemption Limit.
c) Persons making Nil-Rated/ Exempt supplies of goods and services.
d) Persons making Non-Taxable/ Non-GST supplies of goods and services.
e) Activities that are neither Supply of Goods nor Services. Persons making only supplies covered
under reverse charge.
Now lets us study the details of each and every person who has been exempted:
1. Agriculturists
An agriculturist is a person who supplies the products out of his cultivation land. They will be given
exemptions from GST Registration. Agro-inputs like fertilizers, seeds, irrigation (electricity is required),
machinery and all other agricultural services are also exempted under GST regime.
2. Persons falling in threshold exemptions limit
A business entity with an annual turnover less than 20 lakh is given exemptions from GST gistration. But
there are some special category states (Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand) where this threshold
limit is 10 lakh.
Supplier → Aggregate turnover in a financial year → Less than Rs. 20 Lakh
Special Category State Supplier → Aggregate turnover in a financial year → Less than Rs10 Lakh
3. Persons making Nil-Rated/Exempt supplies
These are the persons who are engaged in the business of supplying common items which are in the
exemptions list of GST. Some of them are mentioned below:
a) All unprocessed food like rice, wheat, bread, milk, vegetables, cereals, eggs, meat, fish, salt etc.
b) Train travel by local and sleeper classes.
c) Education.
d) Healthcare (but not medicines).
e) lodges with room rent less than 1,000
f) Kid's colouring/drawing books.
g) Bindis, sindoor, bangles, etc.
4. Persons making Non-Taxable/ Non-GST supplies
Such items do not come under the purview of GST:
Petroleum crude & petrol → High speed diesel → Natural gas
Electricity → Alcohol for Human Consumption → Aviation Turbine Fuel
5. Activities that are neither Supply of Goods nor Services
These include:
a) Services by an employee.
b) Services by any Court or Tribunal.
c) Functions and duties of
(i) MPS, MLAS, Members of Panchayats, Municipalities and other local authorities;
(ii) Person holding any Constitutional Post;
(iii) Person as a Chairperson or a Member or a Director in a body.
d) Funeral Services.
e) Sale of land and building.
f) Actionable claims (other than lottery, betting and gambling).
Exemptions from Tax:
(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.
Schedule I [Section 7]
1. Activities to be treated as supply even if made without Consideration 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.
4. Import of services by a taxable person from a related person or from any of his other establishments
outside India, in the course or furtherance of business.
Schedule II [Section 7]
Activities to be treated as Supply of Goods or Supply of Services
1. Transfer
(a) any transfer of the title in goods is a supply of goods;
(b) any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a
supply of services;
(c) any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a
future date upon payment of full consideration as agreed, is a supply of goods.
2. Land and Building
(a) any lease, tenancy, easement, licence to occupy land is a supply of services;
(b) any lease or letting out of the building including a commercial, industrial or residential complex for
business or commerce, either wholly or partly, is a supply of services.
3. Treatment or process
Any treatment or process which is applied to another person's goods is a supply of services.
4. Transfer of business assets
(a) where goods forming part of the assets of a business are transferred or disposed of by or under the
directions of the person carrying on the business so as no longer to form part of those assets, whether or not
for a consideration, such transfer or disposal is a supply of goods by the person;
(b) where, by or under the direction of a person carrying on a business, goods held or used for the purposes
of the business are put to any private use or are used, or made available to any person for use, for any
purpose other than a purpose of the business, whether or not for a consideration, the usage or making
available of such goods is a supply of services;
(c) where any person ceases to be a taxable person, any goods forming part of the assets of any business
carried on by him 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, unless ---
(i)the business is transferred as a going concern to another person; or
(ii) the business is carried on by a personal representative who is deemed to be a taxable person.
5. Supply of services
The following shall be treated as supply of services, namely:
(a) Renting of immovable property;
(b) 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.
Explanation: For the purposes of this clause
(1) 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 Architecture constituted under the Architects Act, 1972;
or
ii. A chartered engineer registered with the Institution of Engineers (India); or
iii. (ill) A licensed surveyor of the respective local body of the city or town or village or development
or planning authority;
(2) The expression construction includes additions, alterations, replacements or remodelling of any existing
civil structure;
(c) Temporary transfer or permitting the use or enjoyment of any intellectual property right;
(d) Development, design, programming, customisation, adaptation, upgradation, enhancement,
implementation of information technology software;
(e) Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and
(f) Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash,
deferred payment or other valuable consideration.
6. Composite supply
The following composite supplies shall be treated as a supply of services, namely:
(a) Works contract as defined in clause (119) of section 2; and
(b) Supply, by way of or as part of any service or in any other manner what so ever, of goods, being food
or any other article for human consumption or any drink (other than alcoholic liquor for human
consumption), where such supply or service is for cash, deferred payment or other valuable consideration.
7. Supply of Goods
The following shall be treated as supply of goods, namely: Supply of goods by any unincorporated
association or body of persons to a member thereof for cash, deferred payment or other valuable
consideration.
Schedule III [Section 7]
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) the functions performed by the Members of Parliament, Members of State Legislature, Members
of Panchayats, Members of Municipalities and Members of other local authorities;
(b) the duties performed by any person who holds any post in pursuance of the provisions of
the Constitution in that capacity; or
(c) the 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 clause (b) of paragraph 5 of Schedule II, sale of building.
6. claims, other than lottery, betting and gambling. Explanation: For the purposes of paragraph 2, the term
"court" includes District Court, High Court and Supreme Court.

Exempt goods and Supplies

1. Section 2(42): Exempt Supplies
This has been defined to mean supply of any goods and/or services which are not taxable under this Act
and includes such supply of goods and/or services which attract nil rate of tax or which may be exempt
from tax under section 11.
When we compare this definition with definition in Model GST law, it can be noticed that NIL rate of tax
will be classified as exempt supplies for the purpose of this act. The definition of exempt supply is also
important for the purpose of allowing input tax credit. When the input tax credit is partly used for taxable
supply and party for exempt supply then the credit will be restricted to so much credit as is attributable to
taxable supply as per provision of Section 17(2) of Revised GST law. But inclusion of NIL rate of tax into
exempt supply would mean that earlier there was an interpretation that cenvat could be allowed on such
supplies but after the amendment, it is clear that nil rated supplies will be exempt supplies and as a result,
so much cenvat as is attributable to such supplies shall not be allowed.
The definition of "exempt supply" also include those supply which are exempted under Section 11. We see
that there is no change in this regard on comparing with old GST law except earlier the Section giving
exemption was Section 10 only. Even there is no major difference in wording of new and old section.
However, certain points are relevant for Section 11 which are as under:
a. The Central or State Government can issue notification to give exemption from payment of GST
but it will be done on recommendation of GST council only.
 b. The Central or State Government can also issue special order to give exemption from payment of
GST in exceptional circumstances but it will also be issued on recommendation of GST council.
c. There is a power in Central and State Government to issue an explanation to add in this notification
or order within one year to explain the scope of notification or order and this will have effect that
this explanation will be part of statue from the date of notification. This can be welcome step to
clarify doubts but at the same time, it can dangerous as it may create liability retrospectively.
d. The interpretation taken by assessee on language of notification can be undone by issue of an
explanation. There is no need to issue notification in public gazette only but it can be effective on
publication on website of the Government. This is also major change from the existing position.
Even the Apex Court has held that the notification will effective from the date of issue of notification
in official gazette.

2. Section 2(48): Goods

There has been substantial change in the of goods. The new definition reads as follows:
"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;"
The old definition read as follows:
"Goods" means every kind of movable property other than actionable claim and money but includes
securities, growing crops, grass and things attached to or forming part of the land which are agreed to be
severed before supply or under the contract of supply;
Explanation: For the purpose of this clause, the term 'moveable property' shall not include any intangible
property.
When both the definitions are compared, it can be noted that goods will now include actionable claim,
intangible property and exclude securities. In other words Shares/debenture/Mutual Funds etc have been
excluded from GST and transaction in these will not be subjected to GST. There was dispute and share
market was demanding to exclude the securities from GST and it is welcome step on part of Government.
Similarly actionable claim will be included in Goods instead of services. Also the explanation has been
deleted under new definition giving effect that intangible property will be covered under goods now instead
of services. This is done with the intention to end the ongoing dispute over the software service
classification.
3. Section 2(54): Input
The new definition read as follows:
"Input means any goods other than capital goods used or intended to be used by a supplier in the course or
furtherance of business;"
The old definition read as follows:
"Input" means any goods other than capital goods, subject to exceptions as may be provided under this Act
or the rules made there under, used or intended to be used by a supplier for making an outward supply in
the course or furtherance of business;
The intention behind the amendment has largely been to simplify it to avoid any litigation. It can be noted
that in the old law, the definition was oriented towards mandating the use of the goods for making the
outward supply. In the new definition, this condition has been done away with and the only condition
retained is that the inputs should be used in the furtherance of business. This will avoid litigation to a large
extent where there is dispute over the use of inputs. The only fact that it has been used for the purpose of
business itself will be sufficient to render it eligible for the purpose of availing cenvat.
Exempt supply is defined in section 2(47) of GST Act. (47) "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.
It thus includes the supply of following type of goods and services:
(a) Non-taxable supply;
(b) Supply attracting nil rate of tax;
(c) Supplies exempt under Section 11 of the GST Act excluding IGST and under Section 6 of the IGST
Act;

Out-of-scope Supplies
Out-of-scope Supplies refer to supplies which fall outside the scope of the GST Act.
GST does not need to be charged on out-of-scope supplies and such supplies need not be reported in the
GST return.
Out-of-scope supplies include third country sales, sales of overseas goods made within the Free Trade Zone
and Zero GST Warehouses and private transactions.

Third Country Sales

Third country sales refer to sales of goods that are delivered from a place outside Singapore to another place
outside Singapore. Such supplies are considered to be out-of-scope supplies; they are not subject to GST
and need not be reported in the GST return.
The scope of each of the term is discussed below:
(a) Non-taxable supply
The Schedule III & activities or transaction notified by Government under section 7(2)(b) of the CGST Act
defines the transactions which are neither considered as supply of goods nor supply of service. The activities
described therein will not be chargeable to GST. Hence, they will be considered as a non-taxable supply.
(b) Supply attracting nil rate of tax
NIL rates means that the goods or services are taxable but at Nil Rate.
(c) Supplies exempt under Section 11 of the GST Act excluding IGST and under Section 6 of the
IGST Act
It includes non-taxable supply and supply which have been exempt under section 11. As discussed above,
non-taxable supply are goods on which no tax is leviable under section 9 of GST Act. The Government has
power under section 11 to specify by notification products which are exempt either absolutely or subject to
conditions the goods or services from the whole or part of tax leviable thereon. The section further provides
that such goods or services will be exempted on the recommendation of GST Council. It, therefore, appears
that identical goods or services will be exempt In all the States. Once GST Council recommends exemption
from payment of tax on any goods or services, the same will be applicable to all the States and Union
Territory of the country. However, each State will have to issue notification for the purpose of exempting
goods or services from payment of GST under the respective SGST Act.
Composition Scheme GST Rate:
 -
1% for traders and other suppliers
-
2% to manufacturers
-
5% to restaurant services
-
6% to for businesses providing services I e mixed services (other than restaurant
service.
Example 1
M/ s X Ltd. being a manufacturer of laptops has four factories in Chennai, Salem, Coimbatore and
Madurai.
Place P.Y. Turnover ` in lakhs (Including Taxes @ 18%)
Chennai 57.91
Salem 12.00
Coimbatore 8.00
Madurai 10.00
Chennai –II 23.60
Total 111.51
Is M/ s X Ltd eligible for composition levy in the current year?

Answer:
Aggregate turnover = 111.51 x 100/118 = ` 94.50 lakh
Note: Since, aggregate turnover in the preceding financial year does not exceed ` 1 crore, M/s X Ltd. is
eligible for composition Scheme.

Example : 2
M/ s Paul Ltd. being a trader of laptops has two units in Chennai and in Mumbai.

Place P.Y. Turnover ` in lakhs (Excluding taxes)

Chennai 52.00
Mumbai 12.00
You are required to answer the following:
(a) Is M/ s Paul Ltd eligible for composition levy in the current year?
(b) If so, can M/ s Paul Ltd. opt composition scheme for Chennai location and normal scheme for
Mumbai?
(c) Need to give separate intimations for opting composition scheme in each State.

Answer
(a) Yes. M/s Paul Ltd. is eligible to avail the composition scheme in both the states namely Tamil
Nadu and Maharashtra.
Since, M/s Paul Ltd. has same PAN, and his aggregate turnover does not exceeds rupees one
crore, it is eligible for composition levy, even though the company has multiple registrations under
GST.
(b) No. M/s Paul Ltd. cannot opt composition scheme for one location and normal scheme for
another location. 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) Of Section 10 of CGST Act, 2017 unless all such registered persons opt to pay tax under that
sub-section.
Intimation to opt composition scheme in respect of any place of business in any State or Union
Territory shall be deemed to be intimation in respect of all other places of business registered
on the same Permanent Account Number (PAN)