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UNIT 2 – GST ACT 2017

SYLLABUS

Definitions and Salient features: CGST, SGST/UTGST and IGST. Definition of Goods, Place of
Supply, Principal place of business, agent, principal, Associated Enterprises, Related Persons,
Aggregate Turnover, Services, Taxable Turnover under CGST, SGST and IGST, Capital Goods,
Casual Taxable Person, E-Commerce, Input, Input Tax credit, Job work, Works Contract,
Location of the Supplier, Reverse Charge, Nature of supply – Composite, Mixed, Exempt,
Outward, Inward. Recipient of Goods and Services, Supplier of Goods and Services, E-way
Bill – Rates of GST.

The Central Government passed four sets of GST Acts in the Budget Session in 2017. These
were:
1) Central GST Act, 2017;
2) Integrated GST Act, 2017;
3) Union Territory GST Act, 2017 and
4) GST (Compensation to States) Act, 2017
The Acts were approved by the Parliament after they were introduced as the part of the
Money Bill. The GST Council decided the rate slabs for the Goods and Services to be taxed
under the GST regime.

FEATURES OF GST ACT 2017:

1. GST would be applicable on "supply" of goods or services as against the present concept
of tax on the manufacture of goods or on sale of goods or on provision of services.

2. Destination based Consumption Tax: GST would be based on the principle of destination
based consumption taxation as against the present principle of origin based taxation.

3. PAN based Registration.

4. All transactions and processes only through electronic mode.

5. GST would apply to all goods and services except Alcohol for human consumption.

6. There is no scope for multiple taxation on Goods & Services such as Sales Tax, Entry Tax,
Octroi, Entertainment Tax, Luxury Tax, etc.

7. Exports would be zero-rated.

8. Dual GST with the Centre and the States simultaneously levied on a common base.

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9. It will increase tax collections due to the wide coverage of Goods & Services.

10. Input tax credit available on taxes paid on all procurements.

11. Credit available to recipient only if invoice in matched.

12. Set of auto populated monthly returns and annual returns.

13. Composition taxpayers to file quarterly returns.

14. Separate electronic ledges for cash and credit.

15. Concept of TDS for Govt departments.

16. TCS concept for E-commerce companies.

17. Special procedures for Job Workers.

18. System of GST Compliance Rating

19. GSTN and GST Suvidha providers to provide technology based assistance.

20. Taxes can be deposited by internet banking, NEFT/RTGS, Debit and Credit card and the
counter.

CENTRAL GOODS AND SERVICES TAX (CGST) ACT, 2017

The Central Goods and Services Tax Act 2017 has been enacted to make a provision for levy
and collection of Tax on Inter-state supply of Goods or Services or both by the Central
Government and the matters connected with or incidental thereto.

Features of CGST Act 2017:

1. A state-wise single registration for a taxpayer for filing returns, paying taxes, and to fulf
other compliance requirements.

2. A taxpayer has to file one single return state-wise to report all his supplies, whether
made within or outside the state or exported out of the country and pay the applicable
taxes on them. Such taxes can be Central Goods and Services Tax (CGST), State Goods
and Services Tax (SGST), Union Territory Goods and Services Tax (UTGST) and Integrated
Goods and Services Tax (IGST).

3. A business entity with an annual turnover of up to ₹ 40 lakh or 20 lakh or 10 lakh as the

case may be would not be required to take registration in the GST regime, unless it
voluntarily chooses to do so to be a part of the Input Tax Credit (ITC) chain.
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4. A business entity with turnover up to ₹ 1.5 crore (₹ 50 lakh for service providers) can
avail the benefit of a composition scheme, under which it has to pay a much lower rate
of tax and has to fulfill very minimal compliance requirements The Composition Scheme
is available for all traders, select manufacturing sectors and for restaurants in the service
sectors.

5. In order to prevent cascading of taxes, ITC would be admissible on all goods and services
used in the course or furtherance of business, except on a few items listed in the Law.

6. In order to ensure that ITC can be used seamlessly for payment of taxes under the
Central and the State Law, it has been provided that the ITC entitlement arising out of
taxes paid under the Central Law can be cross-utilised for payment of taxes under the
laws of the States or Union Territories. For example, a taxpayer can use the ITC accruing
to him due to payment of IGST to discharge his tax liability of CGST / SGST / UTGST.
Conversely a taxpayer can use the ITC accruing to him on account of payment of CGST
SGST/LTGST for payment of IGST. Such payments are to be made in a pre-defined order.

7. In the Services sector, the existing mechanism of Input Service Distributor (ISD) under
the Service Tax law has been retained to allow the flow of ITC in respect of input services
within a legal entity.

8. To prevent lock-in of capital of exporters, a provision has been made to refund within
seven days of filing the application for refund by an exporter, 90% of the claimed
amount on a provisional basis.

9. In order to ensure a single administrative interface for taxpayers, a provision has been
made to authorize officers of the tax administrations of the Centre and the States to
exercise the powers conferred under all Acts.

10. An agriculturist to the extent of supply of produce out of cultivation of land, would not
be liable to take registration in the GST regime.

11. To provide certainty in tax matters, a provision has been made for an Advance Ruling
Authority.

12. Exhaustive provisions for Appellate mechanism have been made.

13. Detailed transitional provisions have been provided to ensure migration of existing
taxpayers and seamless transfer unutilized ITC in the GST regime.

14. An anti-profiteering provision has been incorporated to ensure that the reduction of tax
incidence is passed on to the consumers.

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15. In order to mitigate any financial hardship being suffered by a taxpayer, Commissioner
has been empowered to allow payment of taxes instalments.

SGST ACT 2017 (KARNATAKA STATE)

Karnataka GST Act 2017 has been notified by the State Govt. relating to provisions for levy
and collection of tax on Intra-State supply of goods or services or both in the State of
Karnataka, along with provisions on the related matters applicable under the GST Regime.

The Karnataka Legislative Assembly passed the GST Bill on 15th June 2017 and adopted the
state GST bill to pave the way for implementation of the provisions of the Central Act that
will come in to force from 1st July 2017.

The legislation will confer power upon the State Government for levying GST on the supply
of goods and service or both which takes place within the state.

Features of State Goods and Services Tax (SGST) Act 2017 (Karnataka State):
1) This Act may be called the Karnataka Goods and Services Tax Act, 2017.
2) It extends to the whole of Karnataka.
3) Officers under this Act: The Government shall by notification, appoint the following class
of officers for the purposes of this Act, namely:
a) Commissioner of State tax,
b) Additional Commissioners of State tax,
c) Joint Commissioners of State tax,
d) Deputy Commissioners of State tax,
e) Assistant Commissioners of State tax, and
f) any other class of officers as it may deem fit.
Provided that the officers appointed under the Karnataka Value Added Tax Act 2003
(Karnataka Act 32 of 2004) shall be deemed to be the officers appointed under the
provinces of the Act.
4) Levy and collection: There shall be levied a tax called the Karnataka 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 is and at
such rates not exceeding twenty per cent as may be notified by the Government on the
recommendations of the Council.
5) The State 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.
6) 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 a relation to the supply of such goods or services or both.
7) The State tax in respect of the supply of taxable goods or services or both by a supplier
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who is not registered to registered person shall be paid by such person in reverse charge
basis as the recipient.
8) 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.

9) Power to grant exemption from tax: Where the Government is satisfied that it is
necessary in the public interest so to do it may, un 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.

10) Value of taxable supply: 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 supplies and the recipient of the supply are not related
and the price is the sole consideration for the supply.

11) Financial and administrative powers of State President: The State President shall
exercise such financial and administrative powers over the State Blench and Area
Benches of the Appellate Tribunal in a State. Subject to the condition that such
Member officer shall while exercising such delegated powers, continue to act under
the direction control and supervision of the State President.

12) Migration of existing taxpayers: On and from the appointed day, every person
registered under any of the existing laws and having a valid Permanent Account
Number shall be issued a certificate of registration on provisional basis, subject to such
conditions and in such form and as may be prescribed which, unless replaced by a final
certificate of registration.

13) Power to collect statistics: The Commissioner may, if he considers that it is necessary
so to do, by notification, direct that statistics may be collected relating to any matter
dealt with by or in connection with this Act.

14) Bar on disclosure of information: No information of any individual return of part

thereof with respect to any matter shall, without the previous consent in writing of the
concerned his authorized representative, be published and no such information shall
be used for the purpose of any proceedings under this Act.

Except for the purposes of prosecution under this Act or any other Act for the time
being in force.

15) Rounding off of tax: The amount of tax, interest, penalty, fine or any other sum
payable and the amount of refund or any other sum die under the provisions of this
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Act shall be rounded off to the rest rupee and for this purpose, where such amount
contains a part of a rupee consisting of pane then if such part is fifty paise or more it
shall be increased to one pee and if such part is less than fifty paise it shall be ignored.

INTEGRATED GOODS AND SERVICES (IGST) ACT 2017

Under GST, IGST a tax levied on all Inter-State supplies of goods and or services and will be
governed by the IGST Act. IGST will be applicable on any supply of goods and / or services
in both cases of export from India.

Note: Under IGST,

 Exports would be zero-rated.
 Tax will be shared between the Central and State Government.

Features of Integrated Goods and Service Tax (GST) Act 2017

1) This Act may be called the Integrated Goods and Services Tax Act, 2017.
2) It shall extend to the whole of India INCLUDING the State of Jammu and Kashmir.
3) The Board may appoint such Central Tax Officers as a thinks fit for exercising the powers
under this Act.
4) Levy and collection: 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 at such rates not exceeding 40 per cent 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.
5) 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
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
6) 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.
7) 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 at 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.
8) Power to grant exemption from tax Where the Government 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 so 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.
9) Refund of Integrated Tax paid on supply of goods to tourist leaving India. The integrated
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tax paid by tourist leaving in any supply of goods taken out of India by him her shall be
refunded in such manner and subject to such conditions and safeguards as may be
prescribed.

Explanation – For the purposes of this section the term our means a person not normally
resident in India, who enters India for a stay of not more than six month for legitimate
non-immigrant purposes.

DEFINITIONS:
GOODS:
The taxable event under GST is supply of ‘Goods’ and Service. Hence, it is important
understand the meaning of both these terms. Before GST, taxes on goods were different
from the taxes on services. The tax on Goods are Excise Duty, VAT, CST and for Services, it
is Service Tax.

Definition of Goods Section 2(52) of GST Act:

Good means every kind of movable property other than money and securities but includes
actionable claims, 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.

Goods include:
a. Every kind of movable property
b. Actionable claims
c. 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.

Goods do not include:

a. Money and
b. Securities

DEFINITION OF SERVICE - Section 2(102) of GST 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 1 – Services include transactions money but does not include money and
securities. Meaning thereby that if transaction is done without any separate charge
/consideration on service.

Explanation 2 – But transaction in money relating to the use of money or its conversion by
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of by any other made from one form, curry or domination, to another form, currency or
denomination for which a separate consideration is charged then it is service.

BUSINESS
As per See 2(17): It includes
(a) Any trade, commerce, manufacture, profession, vocation, adventure, wager or any
other similar activity whether it is for a pecuniary benefit,
(b) Any activity or transaction in connection with or incidental or ancillary 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 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,
(f) Admission for a consideration, of persons to any premises,
(g) Services supplied by a person as the bolder of an office which has been accepted by
him in
(h) the course or furtherance of his trade, profession or vocation,
(i) Services Provided by a race club by way of a license undertaken book-maker in such
club; Any activity or transaction undertaken by the Central Government, State
Government or any activity any local authority in which they are engaged as public
authorities;

PLACE OF BUSINESS
As per Sec 2(85) it includes:
(a) 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 both; or
(b) a place where a taxable person maintains his books of account, or
(c) a place where a taxable person is engaged in business through an agent, called.

Location of Supplier:
It is the registered place of business of supplier.

PLACE OF SUPPLY:
It is the registered place of business of the recipient. 122 nd Constitutional Amendment Bill
The Bill gave way for the introduction of GST. As per Article 286 of Amendment Bill, no law
of a state shall impose a tax on supply of goods or of services or both where such supply
takes place:
 Outside the state, or
 In the course of import of the goods or services or both into, or export of the goods
or services or both out of the territory of India.

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It has also been specified in Article 246A of Amendment Bill that Parliament has exclusive
power to make laws with respect to GST where the supply of goods, or of services, or both
takes place in the course of state trade or commerce.
Principal Place of Business
Principal place business means the place of business specified as the principal place of
business in the Certificate of Registration where the taxable person keeps and maintains
the accounts and records as specified under Section 42.

AGENT
As per Section 2(5) CGST Act 2017, the term agent means a person including a factor,
broker commission agent, decredere agent, an auctioneer or any other agent by whatever
name called, who carries on the business of supply or receipt of goods or services or both
on behalf of other.

PRINCIPAL
As per Section 2(88) at the Central Goods and Services Tax (CGST) Act 2017, unless the
context otherwise requires the term principal means a person on whose behalf an agent
carries on the business of supply or receipt of goods or services or both.

ASSOCIATED ENTERPRISES
As per Section 2(12) of the Central Goods and Services Tax (CGST) Act, 2017, unless the
context otherwise requires the term 'associated enterprises shall have the same meaning
as assigned to it in section 92A of the income-tax Act, 1961.

Section 92 A prescribes 12 Condition if applied to two enterprises and in case any one of
the condition is Satisfied, then both the enterprises will be treated as Associated
Enterprises. The Income Tax Also reserves its right in 13th Condition where it may specify
some additional condition in future.

RELATED PERSONS
Supply of goods/services between related persons or between distinct persons as specified
in Section 25, made for business purposes.

Distinct persons as per Section 25 means that the various branches/business verticals of
person whether they are in the same state or not. But if the branches are registered
separately then they will be treated as distinct persons.

The value of supply in cases between related persons or between distinct persons (with the
same PAN) will be:
1. Open market value
2. Value of supply of like kind and quality
3. Cost based value or Residual valuation

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MEANING AND DEFINITIONS OF AGGREGATE TURNOVER UNDER GST

Turnover, in common parlance is the total volume of a business.
The term "aggregate turnover” has been defined in GST law as under:

According to Section (6) of the 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
inter-state supplies of persons having the same Permanent Account Number, to be
computed on all India basis. But it excludes Central Tax, State Tax, Union Territory Tax,
Integrated Tax and Cess.
Analysis of ATO
The definition of exempt supply, Sec 2(47) supply of a good or services or both which may
which attract nil rate of tax or which may be wholly exemption from tax under section 11
or under section 6 of the integrated Goods and service tax Act, and includes non-taxable
supply.

ATO would, therefore, include the following:

a. All taxable supplies other than reverse charge.
b. All supplies with distinct entities including interstate - Same PAN different GST
registrations (in different States or separate business vertical)
c. Supplies of agents / job worker an behalf of the principal.
d. Goods supplied / received back to / from job worker on principal to principal basis
e. Exempt supply: exempt under notification, non-taxable supplies (Specified
Petroleum Products like Diesel, Petrol, Liquor etc.)
f. Export or zero rated supplies.
g. Taxes other than those under GST.

Examples:
1) Small Bar & Restaurants in a Town in Karnataka: Value of Liquor (excluded from
GST) = ₹ 25 Lakhs, Value of Food & beverages ₹ 19 Lakhs.

Liable for registration when aggregate turnover reaches ₹ 40 lakhs and tax payable
from date of registration on Food & beverages.

2) Petrol pump on Highway in North Karnataka: Sale of petrol and diesel (excluded
from GST) = ₹ 32 lakhs, Sale of lubricants and other minor cleaning services = ₹ 16
lakhs.

Liable for registration when aggregate turnover reaches ₹ 40 lakhs and tax payable
on lubricants.

TAXABLE PERSON:
Means a person who is registered or liable to be registered section 22 or section 24,

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TAXABLE SUPPLY:
Means a supply of goods or services or both which is leviable to tax under this Act;

TAXABLE TURNOVER UNDER CGST, SGST AND IGST:

Taxable turnover is turnover on which a dealer shall be liable to pay tax on supply of and /
or services under GST law.

Turnover liable for tax under CGST and SGST:

Means the turnover of all taxable e supple of goods and or services made within the state
by a dealer who registered under GST includes salue of inward supplies on which tax is
payable by a person on reverse charge basis But exclude exempt supplies, exports of goods
or services or both and inter-state supplies. Also, it does so include Central tax State tax,
Union territory tax, Integrated tax and cess

Turnover liable for tax under IGST:

Means the turnover of all taxable supplies of good and/ or services made outside the state
by a dealer who registered under GST includes import of goods and service and the value
of inward supplies on which tax is payable by a person on reverse charge basis. But
excludes exempt supplies, exports of goods or services include Central tax, State tax, Union
territory tax, Integrated tax and cess.

TURNOVER IN STATE OR TURNOVER IN UNION TERRITORY:

Sec 2(112): It 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 by the said taxable person but excludes central tax, State tax, Union
territory tax, integrated tax and cess.

CAPITAL GOODS:
The definition of capital goods under revised GST Law is given under section 2(19) which
states that capital goods means goods, the value of which is capitalised in the books of
accounts of person claiming the credit and which are used or intended to be used in the
course or furtherance business

Capital goods are assets such as buildings, machinery, equipment, vehicles and tools that
an organization uses to produce goods or services. For example, a blast furnace used in
iron and steel industry is a capital asset for the steel manufacturer.

Capital goods are not consumed when the final product is made. They are not consumed in
single year of production. Therefore, they cannot be entirely deducted as business
expenses in the year of the purchase. Instead, they are depreciated over the course of their

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useful lives. The business recognises part of the cost each year through accounting
techniques as depreciation amortization and depletion.

CASUAL TAXABLE PERSON:

As per section 2(20) of CGST Act 2017 ‘Casual Taxable Person’ is 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 on any other capacity, in a State or
Union territory where he has no fixed place of business.

Provisions:
1) There is no special forms to register as a casual taxable person. The normal form
GST REG-01 which is used by other taxable persons can be used for registration by
casual taxable person.
2) Certificate of Registration a casual taxable person will be valid for a period of 90
days and the designated officer can further extend this period by 90 days, provided
a reasonable cause is provided by the taxable person
3) A casual person can make taxable supply only after obtaining the Certificate of
Registration.
4) The casual taxable person is required to make an advance deposit of tax in an
amount equivalent to the estimated tax liability for the period for which registration
is sought.
5) The amount deposited by a casual taxable person will be credited into the
electronic cash ledger of the person and will subsequently be adjusted against the
tax liability.

INPUT
As per Section 2(59) of the Central Goods and Services Tax (CGST) Act, 2017, unless the
context otherwise requires, the term input means any goods other than capital goods used
or intended to be used by a supplier in the course or furtherance of business.

INPUT TAX
As per Sec. 2(62) ‘Input Tax' in relation to Registered person, means the Central Tax, Tas,
Integrated Tax or Union Territory Tax charged on any supply of goods and services or made
to him and includes;
 Integrated Goods and Service Tax on import of goods;
 Tax payable under the provision of sub section (3) & (4) of Section 9.
 Tax payable under the provision of sub section (3) & (4) of Section 5 of Integrated
Good and Service Tax Act.
 Tax payable under the provision of sub section (3) & (4) of Section 9 of respective
State Goods and Service Tax Act, or

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 Tax payable under the provision of sub section (3) & (4) of Section 7 of the Union
Territory Goods and Service Tax Act.
But does not include tax paid under the composition levy.

INPUT TAX CREDIT

As per Section 2(63) of the Central Goods and Services Tax (CGST) Act, 2017, unless the
context otherwise requires, the term input tax credit means the credit of input tux paid on
inward supply.

JOB-WORK
 ‘Job-work' means undertaking any treatment or process by a person on goods
belonging to another registered taxable person
 The expression job-worker shall be construed accordingly means the person doing job
work.
 The definition of job work reflects the change in basic scheme of taxation relating to job
-work in the proposed GST regime.

Supply of goods to a Job Worker

 The goods sent by a taxable person to a job-worker will not be treated as supply and
liable to GST.
 The supply of goods by a registered taxable person (principal) to a job worker shall not
be regarded as supply of goods.
 Therefore, it can be inferred that no GST shall be applicable on the ds supplied by the
registered principal to a job-worker
 The registered taxable person (principal) can send the taxable goods to a job-worker for
job work without payment of tax.
 He can further send the goods from one job-worker to another job-worker and so on
subject to certain conditions.

Goods not received back within prescribed period

 Further an amount equivalent to the input tax credit availed on such inputs has to be
paid along with interest, in case the inputs are not received back within the specified
time.
 The credit can be reclaimed when the inputs are actually received back.

Supply of goods from Job Worker's premises

 The principal can supply the goods directly from the premises of the job-worker
without bringing it back to his own premises.
 He does not need to bring back to his own premises.

Conditions
Any of these conditions should be satisfied for supplying the goods from the Job Worker's
premises directly:

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 The principal should have declared the premises of such job-worker as his
additional place of business or
 Job-worker is a registered person or
 Goods have been notified as per GST Law.

Aggregate Turnover of Job Worker

 Where the goods of principal directly supplied from the job-worker's premises, it will
not be included in the aggregate turnover of the job worker.
 It will be included in the aggregate turnover of the principal.

Registration by Job Worker

A Job-worker would be a supplier of services. He will be required to obtain registration if
his/ her aggregate turnover exceeds the prescribed threshold as specified in GST Law

Exemptions
The provisions relating to job-work are applicable only when registered taxable person
intends to send taxable goods.

In other words, these provisions are not applicable to –

 Exempted or Non-taxable goods or
 When the sender is a person other than registered taxable person

WORKS CONTRACT
Works contract has been defined in clause 119 of section 2 of CGST ACT, 2017 which says
that works contract is a contract for building, construction, fabrication, completion,
erection, installation, improvement, repair, maintenance, and renovation etc. of any
immovable property where transfer of property in goods is involved in execution of
contract. That means any work should be on immovable property and transfer in goods
must take place.

1. Work Contract and Input Tax Credit.

GST Law mentions that input tax credit is not available for:
a. works contracts services when supplied for construction of immovable property, other
than plant and machinery, except where it is an input service for further supply of works
contract service.

b. goods or services received by a taxable person for construction of an immovable

property on his own account other than plant and machinery, even when used in course
or furtherance of business.

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c. Input Tax Credit is available to both a builder and a taxable person while constructing
plant and machinery. But Input Tax Credit is not available to any taxable person who
constructs on his own account even if it is for business use.

2. Work Contract and Abatement

a. No abatement has been prescribed for works contract service so far. Currently VAT i
payable on the works contract Service tax is paid 15% on either 40% (on new work) or
70% (on repair maintenance work).

b. In case no abatement composition is provided it may lead to significant increase m tax

burden especially if such works contract is taxed at Standard GST rate which is 18% and
even if subjected to lower tax rate is 12%.

3. Work Contract and Composition Scheme

a. Composition scheme is not available to works contractors as it is treated as service under
GST.

b. Composition scheme is only available to suppliers of goods. This will be a big blow to the
small sub-contractors who cannot opt for composition scheme. They will be forced
to register for normal taxation scheme increasing their compliances and costs.

4. Work Contract TDS provisions

TDS provisions which are provided in section 52 of CGST Act 2017 will be applicable to
works contract provided amount is more than ₹ 2,50,000 and it is not inter-state supply.

LOCATION OF THE SUPPLIER AND RECIPIENT:

Supplier:
 Under GST a supplier in someone who supplies any goods or services.
 A supplier also includes an agent acting on behalf of a supplier for supply of goods
or services.

Location of Supplier:
 Is usually where a supply is made from, a place mentioned as principal place of
business on the GST registration certificate.
 In case the supply was undertaken from place other than place mentioned on the
GST Registration Certificate the location of place mentioned on the GST Registration
Certificate can be used.
 If supply made from more than one location, then the location which was most
directly
 concerned with the supply can be treated as the location of the supplier.
 If the location of supplier cannot be determined in any of the above manners, the
usual place of residence of the supplier would be the location of the supplier on the
GST invoice.

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Recipient of supply of goods or services:

 Is someone who is able for payment of consideration for the supply of goods or
services.
 If no consideration is payable, the person to whom the goods are delivered or made
available, or uses the goods or services would be the recipient.
 The word recipient could also be used to refer an agent acting on behalf of a
recipient.

Location of Recipient:
 The location of recipient in relation to the location of supplier would determine the
type of GST to be applied on the transaction.
 The location of recipient is usually a place of business for which GST registration has
been obtained (in the case of B2B supply) where the supply is received.
 If the supply is received at a place which is not mentioned on the GST Registration
Certificate then the location of that place can be used as location of recipient.
 If a supply is received at more than one place, then the location most directly
concerned with the receipt of supply can be used as the location of recipient.
 In the absence of any of the above, the location of the usual place of residence of
the recipient can be used as location of recipient.

E-Ledgers under GST:

 One of the benefits under GST regime is that the payment of taxes is done online.
 E-Ledger is an electronic form of passbook for GST.
 These e-ledgers are available to all GST registrants on the GST Portal.

To make GST payment process convenient, each registered taxpayer gets three types of
electronic ledgers that you can access. These include,
(1) Electronic Cash Ledger &
(2) Electronic Credit Ledger
(3) Electronic Liability Ledger

1. Electronic Cash Ledger:

This is like an e-wallet. Any GST payment made in cash or through bank reflects in
Electronic Cash Ledger Electronic Cash Ledger provides a summary of all your GST
payments. It reflects the cash available to pay off your GST tax liability. Thus, any deposit
made on the GST portal is credited to your Electronic Cash Ledger. This means that the
amount available in the Electronic Cash Ledger is used for making payments. These
payments are towards tax, interest, GST penalty fees and any other amount payable. After
deduction of Input Tax Credit (ITC) any balance tax liability has to be paid using balance in
Electronic Cash Ledger. Balance in Electronic Cash Ledger is utilized for payment of GST
liability.

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2. Electronic Credit Ledger:

All eligible Input Tax Credit that is claimed by a registered dealer in the GST returns (GSTR -2
or GSTR-3B) reflects in Electronic Cash Ledger. Thus, every claim of input tax credit of the
registered taxpayer eligible for claiming such a credit is credited to this ledger. Credit in
Electronic Cash Ledger can be used only for payment of tax. This means that balance of
Electronic Credit Lodger cannot be utilised for payment of interest, penalty or late fees.
Interest and Penalty can be paid only through actual cash payment

3. Electronic Liability Ledger:

All the liabilities of a taxable person under GST are maintained in electronic liability
register. This register showcases the amount of tax due, interest, penalty, late fee or any
other amount on the common portal. Hence, the electronic liability register debuted with
all the amounts payable by registered taxable person.

Reverse Charge Mechanism (RCM)

 Reverse charge is a mechanism under which the recipient of the goods or services is
liable to pay the tax instead of the provider of the goods and services.
 Under the normal taxation regime, the supplier collects the tax from the buyer and
deposits the same after adjusting the output tax ability with the put tax credit available.
But under reverse charge mechanism (RCM), liability to pay tax shifts from supplier to
recipient
 For example: Mr.A purchase goods from Mr.B for 10,000. Mr. A is registered under GST
whereas Mr B is an unregistered person under GST. Had Mr. B been a registered
supplier, such supplies would have been taxable at the rate of 18% and Mr. B would
have collected tax of ₹ 1800 on such supplies. As in the given case. Mr.B is an
unregistered supplier and cannot collect any tax, Mr. A would be required to pay taxes
to the Government of ₹ 1800 & claim credit of the same against his output liability.
 The Government has imposed the reverse charge mechanism starting from 1st
February 2019 as per the GST acts and amendments. Also to note that the up to ₹ 5000
exemptions will be removed effectively.
 As per section 2(98) of CGST Act 2017, "reverse charge" means the liability to pay tax by
the recipient of the supply of goods or services or both instead of the supplier of such
goods or services or both under section 9(3) & 9(4) of CGST/SGST Act and section 5(3) &
5(4) of the Integrated Goods and Services Tax Act.

There are two type of reverse charge liability, namely:

1. Supply of goods or services or both notified by the Government u/s 9(3) of CGST Act
2017 or u/s 5(3) of IGST Act 2017 on the recommendations of the GST Council.
2. Supply of taxable goods or services or both by an unregistered supplier to a registered
person u/s 9(4) of CGST Act, 2017 or u/s (4) of IGST Ac 2017

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Applicability of Reverse Charge

1. Supply of goods by unregistered dealer to registered dealer:
In case an unregistered person is selling goods or providing any services to the
registered person, then the liability to pay tax shifts on the registered person i.e the
recipient of goods/ services, where such supply of usable supplies. No reverse charge
mechanism in case of exempted supplies.
The tax will be paid by the registered dealer and all the provisions of the act will be
applicable to him as if he is the supplier of the goods or services. Input credit will be
allowed to the registered dealer of the tax paid by him under the reverse charge
mechanism.

2. For Services Provided by E-commerce Operator:

In case of services provided by e-commerce operators, liability to pay tax lies on the
recipient of services. If the assessee has no physical presence in the taxable area, then
the representative of such e-commerce operator will be liable to pay tax. If there is no
representative, then the assessee has to appoint one who will be liable to pay GST. For
example Urban Clap provides services of plumbers, electricians teachers, beauticians etc
Urban Clap is able to pay GST and collects it from the customers instead of the registered
service providers. If the e-commerce operator does not have a physical presence in the
taxable territory, then a person representing such electronic commerce operator for any
purpose will be liable to pay tax. If there is no representative, the operator will appoint a
representative who will be held liable to pay GST.

3. Supply of certain goods and services specified by CBIC:

CBIC has issued a list of goods and a list of services on which reverse charge is applicable.

Important Points to be Taken Care Under RCM:

1. Goods and services notified under section 9(3) & 9(4) of CGST/SGST Act and section 5(3)
& 5(4) of the Integrated Goods and Services Tax Act must have person registered under
GST.

2. As per Section 24 of CGST Act 2017, A person paying tax under the reverse charge
mechanism has to compulsorily get registered even if the turnover is below the
threshold limit.

3. Under the reverse charge mechanism, the GST applicable must be submitted to the
Government on every 20th of next month.

4. The input tax credit will be available for all the RCM goods and services used for the
furtherance of business according to the GST paid. And the service acquiring individual,
who is also paying reverse charge can take the benefits of an input tax credit.

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5. There will be no auto-population of details of the GST paid under the RCM in GSTR 2, but
will be subjected to the manual furnishing of details.

6. Wherever the RCM is applicable the invoice the invoices along with the consolidated
purchases should be issued on a daily basis. on all GST applicable who are under section
31(3).

7. Payment voucher must be issued by the recipient at that at the time period of supplier’s
Payment.

8. The ITC is availed by recipient which is in Electronic Credit Ledger cannot be used
towards payment of output tax on goods or services, the payment of tax under reverse
charge only on cash i.e through Electronic Cash Ledger

9. The composition scheme registered individuals also come under the reverse charge,
where there will be no credit of RCM be availed

10. The reverse charge mechanisms is applicable to payments made in advance also.

11. If in case, a dealer is unregistered under GST, then he is not allowed to deal in any
interstate transactions. For any reverse charge mechanism to be applicable, there must
be only intra-state transactions

12. GST Compensation Cess will be applicable on tax paid under reverse charge mechanism
also. The purpose is to compensate States for loss of revenue on the implementation of
GST. This will be applicable for 5 years from the date GST gets implemented.

NATURE OF SUPPLY
In the GST system, a taxable event is called a Supply.
For an event to be considered supply by the Government, it should have the following
characteristics:
1. Supply of goods or services:
When a transaction takes place, if there is a transfer of goods, then it is considered as
supply of good. For example, when you buy a pen from a retailer, the ownership of the
pen is transferred from the retailer to you, the customer. When there is a transfer of
right in goods without transfer of title, it is considered as supply of service. For example,
if you are availing transportation services, then the right of using the service transferred
to you, while the ownership still stays with the transportation company.

2. Supply should be taxable:

Supply of goods or services can either be taxable or tax-exempt. Taxable supplies are
goods and services that attract GST. Tax-exempt supplies include supply of goods or
services that belong to a specific category mentioned in the GST Act.

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3. Supply should be made by a taxable person:

A taxable person is defined as a person who registered under the GST, or is a liable to
register, or a person who has voluntarily registered. Supply between two non-taxable
people will not be considered as supply under GST.
If a person supplies goods or services different states or has multiple business verticals,
then they are required to register separately for each state or vertical. Each of these
registered entities will be considered as a taxable person.

4. Supply should be made within a taxable territory:

Taxable territory means any place in India except the State of Jammu and Kashmir.

5. Supply should be made in exchange for consideration:

Consideration can be defined as a barter of goods or services, or payment made for a
supply in money, or in kind. A prepayment or deposit toward a supply is also as accepted
as a consideration by the government.
For Example: Mrs. B provides free coaching to neighbouring students as a hobby. This is
not considered as supply as this act is not performed for a consideration.

However, as specified in Schedule I of GST Act, certain activities are considered as supply
even if it is made without consideration.

According to CGST Act, the following activities that will be treated as supply even if it is
made without consideration:
i. When a business permanently transfers or disposes its assets for which input tax
credits have been availed
ii. Supply made between two related or separate persons for business purposes.
iii. Supply of goods by an agent on behalf of the supplier or supply received by an agent
on behalf of a customer.
iv. When a taxable person imports service from a related person, or from his or her own
business outside of India for business purposes.

6. Supply should be made in the course of business or in the interest of growing business:
GST is applicable only on business transactions. Hence, for a transaction to be a
considered as supply under GST, it has to be made for business purposes. If supplies are
made for personal purposes, it will not be considered as a supply under GST.

SCOPE OF SUPPLY
Besides the above definition, there are three schedules that mention the activities that are
considered as Supply under GST:

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 Schedule I mentions the transactions that are considered supply even if there is no
consideration involved.
 Activities are treated as supply of goods and supply of services are mentioned
under GST Schedule II.
 Schedule III lists the activities that are treated as neither supply of goods nor supply
of services under GST.

Schedule I – Treated as Supply of Goods even if there is no consideration involved

There are certain activities that are construed as supply even if there is no consideration
involved. Such supplies are referred to as "Demand Supplies" under GST Following are the
list of all such activities:
1. Permanent or disposal of business assets. Provided Input Tax Credit has been availed on
such assets.
2. Supply of goods or services between related persons or distinct persons as mention
under section 25. Provided such a supply is made in the ordinary course of business or
for furtherance of business.
3. Principal supplying goods to his agent Provided the agent undertakes to supply such
goods on behalf of the principal.
4. Agent supplying goods to his Principal. Provided the agent undertakes to receive such
goods on behalf of the principal
5. Taxable person importing services from either a related person or any of his
establishments outside India.

Schedule II – Activities Treated as Supply of Goods

Following are the activities that form "Supply of Goods” under GST:
1. Any transfer of title in Goods.
2. Transfer of title in goods under an agreement stipulating that the property in goods shall
pass at a future date upon payment of full consideration as agreed.
3. Goods forming part of the assets of a business transferred or disposed of by or under the
direction of the person carrying on the business. Provided such goods are translated so
that they no longer form part of those assets. Moreover, such a transfer takes place
whether or not for a consideration.
4. There are cases where a person ceases it be a taxable person. In such a case goods
forming part of the assets of any business carried on by the said person shall be deemed
to be supplied by him in the course or furtherance of his business. Provided such goods
are supplied immediately before the person cesses to be a taxable person, unless:
a. The business is transferred as a going concern to another person
b. Business is carried on by a personal representative who is deemed to be taxable.
5. Supply of goods by any unincorporated association to a member for cash, deferred
payment or other valuable consideration.

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Activities Treated as Supply of Services

Following are the activities that form "Supply of Services” under GST:
1. Transfer of right in goods or of undivided share in goods without the transfer of title.
2. Any lease, tenancy, encashment, licence to occupy land.
3. Lease or letting out of the building including a commercial industrial or residential
complex for business or commerce, either wholly or partly.
4. Any treatment of process which is applied to another person's goods.
5. Transfer of business assets
i) By or under the direction of a person carrying on a business
ii) Goods held assets or used for the purposes of the business are put to any private use
iii) Are used, or made available to any person for use, for any purpose other than the
purpose of the business, whether or not for a consideration
6. Renting of immovable property
7. 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. This is except the cases where:
i) the entire consideration has been received after issuance of completion certificate
where required by the competent authority or
ii) after its first occupation, whichever is earlier
8. Temporary transfer or permitting the use of any intellectual property right.
9. Development, design, programming, customization, adaptation, up-gradation,
enhancement, implementation of information technology software.
10. Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or
to
11. Transfer of the right to use any goods for any purpose (better or not for a specified
period) for cash, deferred payment or other valuable consideration.
12. Composite supply of works contract as defined in clause (119) of section 2.
13. Composite supply:
i. by way of or as part of any service or
ii. in any other manner whatsoever, of goods, being food or any other article
consumption or any drink. (other than alcoholic liquor for human consumption).
Provided such supply or service is for cash, deferred payment or other valuable
Consideration.

Schedule III – Activities that are neither treated as supply of goods or supply of services
There are certain activities that are not to be treated as Supply under GST. Hence,
following activities are neither treated as supply of goods not supply of services:
Following are the transactions covered under negative list:
1. Services provided by an employee to the employer.
2. Gifts up to ₹ 50,000/- in value in a Financial Year, by an employer to an employee.
3. Services of the funeral, burial, crematorium or mortuary including transportation of the
deceased.
4. Services by any court or Tribunal.

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5. Duties performed by the MP/MLA/MLC/ Members of Local Bodies.

6. 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.
7. Duties performed by any person who holds any post in pursuance of the provisions of
the Constitution in that capacity.
8. Sale of Land.
9. Sale of Building (However, if construction of a complex /building intended for sale to a
buyer and part of the consideration is received before completion, then it will be treated
as Supply of Services).
10. Actionable claims, other than lottery, betting and gambling.

Components of supply under GST

A supply under GST has three attributes that are used to calculate the tax owned for that
transaction: place, value and time.

Place of Supply – This component determines whether a transaction is an intra-state

supply, an inter-state supply, or an external trade, which determines the type of GST that
will be associated with it.

Value of Supply – This component decides the taxable value of supply made, and thus the
amount of tax that needs to be paid for it.

Time of Supply – This component determines when the associated taxes and GST returns
are due.

Different Kinds of Supply under GST

Supply can classified in to different types on the following basis:
1. Based on location
Based on location, supply can be classified in to three categories as under:

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Intra-State supply
Intra-State is a type of supply of goods or services where the location of the supplier and
the place of supply of goods are in the same State or same Union Territory.

Exceptions:
 Supply of goods to or by a Special Economic Zone developer or a SEZ unit; or
 Goods imported into the territory of India, or
 Supplies made to a tourist (section 15)

Territorial waters
 Where the location of the supplier is in the territorial waters or
 Where the place of supply is in the territorial waters,

The place of supply will be in the nearest Coastal State or Union Territory.

Inter-State supply
It is a supply of goods or services, where the location of the supplier and place of supply
are in –
 Two different States
 Two different Union territories; or
 A State and a Union territory
It also includes import of goods or services into the territory of India.

Further, the following shall be treated as an inter-state supply of goods or services:

 When the supplier is located in India and the place of supply is outside India,
 To or by a Special Economic Zone (SEZ) developer or a SEZ unit; or
 In the taxable territory, not being an intra-state supply and not covered elsewhere.

2. Based on Combination
Based on combination, supply can be classified in to three categories as under:

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Composite Supply
As per sections 2(30) of CGST Act 2017, a composite supply would mean a supply made by
a able person to a recipient consisting of two or more taxable supplies of goods or services
or both, 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.
Where goods are packed and ported with insurance, the supply of goods, packing
materials, transport and insurance is a composite supply and supply of goods is a principal
supply.
In other words, Composite supply means a supply is comprising of two or more goods
services, which are naturally bundled and supplied in with each other in the ordinary of
business, one of which is a principal supply.
The items cannot be supplied separately.

A works contracts and restaurant services are classic examples of composite supplies,
however the GST Act identifies both as supply of services and chargeable to specific rate of
tax mentioned against such services (works contract and restaurants).

In composite supply rate of tax shall be the rate of principal supply.

A supply of goods and services will be treated as composite supply if it fulfills the following
criteria:
1. Supply of two or more goods or services together.
2. It is a natural bundle i.e, goods or services are usually provided together course of
business.
3. They cannot be separated.

Example:
Goods are packed and transported with insurance. The supply of goods, packing materials,
transport and insurance is a composite supply. Insurance, transport cannot be done
separately if there are no goods to supply. Thus the supply of goods is the principal supply.
Tax liability will be the tax on the principal supply i.e. GST rate on the goods.
Note: If the second condition is not fulfilled it becomes a mixed supply.

Mixed Supply
It means two or more individual supplies of goods or services, made in conjunction with
each other by a taxable person for a single price where such supply does not constitute a
composite supply.
As per section 2(74) of the CGST Act 2017 a 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. In other words, mixed supply under GST means a combination of two or

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more goods or services made together for a single price. Each of these items can be
supplied separately and is not dependent on any other.
Eg. A Diwali gift box consisting of canned foods, sweets, chocolates, cakes, dry fruits,
aerated drink and fruit juices supplied for a single price is a mixed supply. All are also sold
separately. Since aerated drinks have the highest GST rate of 28%, aerated drinks will be
treated as principal supply and 28% will apply on the entire gift box.
Note: Under GST, a mixed supply will have the tax rate of the item which has the highest
rate of tax. If the items can be sold separately, then it would be a mixed supply.
For example, if a person buys canned foods, sweets, chocolates, cakes, dry fruits, aerated
drink and fruit juices separately and not as a Diwali gift box, then it is not considered a
mixed supply. All items will be taxed separately.

Illustrations
1. Classify the following supplies into Composite Supply and Mixed Supply:
a) Supply of cable and setting the connection.
b) Supply of parcel consisting of wheat powder, masala powder, sugar and rice.
c) Supply of juice in bottle.
d) Supply of ceiling fan and regulator.
e) Supply of cement and paint.
f) Supply of furniture and mat.
g) Supply and fixing of the vehicle battery.
h) Supply of combo packs of tie, watch, wallet, pen, writing pad bundled together as kit.

Solution:
Composite Supply Mixed Supply

a) Supply of cable and setting the b) Supply of parcel consisting of wheat

connection powder, masala powder, sugar and rice
c) Supply of juice in bottle e) Supply of cement and paint

d) Supply of ceiling fan and regulator f) Supply of furniture and mat

g) Supply and fixing of the vehicle battery h) Supply of combo packs of tie, watch
wallet, pen, writing pad bundled
together as a kit

2. Classify the following supplies into Composite Supply and Mixed Supply:
a) Restaurant with lodging
b) Supply of coconut od with cans
c) Supply of car and vehicle insurance
d) Supply of laptop with Bag
e) Air transport and food on board

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f) Combination of hotel accommodation, auditorium and food

g) Five star hotels often provide free laundry services on staying at the hotel
h) Booking Rajdhani train ticket which includes meal
i) Supply of bricks, cement, sand along with services of labourers, engineers, architects
to construct a building
j) Buy detergent get bucket free

Composite Supply Mixed Supply

a) Restaurant with lodging c) Supply of car and vehicle insurance

b) Supply of coconut oil with cans j) Buy detergent get bucket free

d) Supply of laptop with Bag

e) Air transport and food on board

f) Combination of hotel accommodation,

auditorium and food
g) Five star hotels often provide free
laundry services on staying at the hotel
h) Booking Rajdhani train ticket which includes
meal

i) Supply of bricks, cement, sand along with

services of labourers, engineers, architects
to construct a building

Continuous Supply
Continuous supply is of two types viz,:
a) continuous supply of goods and
b) continuous supply of services.

Continuous supply of goods means 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 a supply of services which is provided, or agreed to be

provided, continuously or on recurrent basis, under a contract, for a period exceeding
three month with periodic payment obligations and includes supply of such services as the
Government subject to such conditions, as it may, by notification.

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3. Based on Recipient
Based on recipient, supply can be classified in to three categories as under:

Inward Supply
It means receipt of goods or services or both whether by purchase, acquisition or any other
means with or without consideration.
As per Section 2(67) of the Central Gods and Services Tax (CGST) A 2017, the term “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.

Outward Supply
As per Section 2(83) of the Central Goods and Services Tax (CGST) Act, 2017, the term
“Outward Supply” in relation to a taxable person, means supply of goods or services or
both, whether by sale, transfer, barter, exchange, license, rental, lease or disposal or any
other mode, made or agreed to be made by such person in the course or furtherance of
business.

4. Based on Tax Treatment

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Exempt Supply
As per section 2(47) of GST 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.
Exempt supply includes:
(a) Non-taxable supply.
(b) Supply attracting nil rate of tax,
(c) Supplies exempt under Sec 11 of GST Act excluding IGST and under Section 6 of IGST
Act:
Note:
a. Zero rated supplies such as exports would not be treated as supplies taxable as nil
rate tax.
b. Input tax credit attributable to exempt supplies will not be available for utilization or
setoff.

Zero-Rated Supply
It means export or supply of goods services to a Special Economic Zone developer or a
Special Economic Zone unit. GST is not applicable in India for exports. Hence, all export
supplies of a taxpayer registered under GST would be classified as zero rated supply. Zero
rated supply for GST is eligible for refund. Taxpayers are required to furnish details of all
zero rated supply in GSTR 3B Return and GSTR 1 Return. According to Section 16 of the
IGST Act, zero rated supply mans any of the following supplies of goods or services:
 Export of goods or services or both or
 Supply of goods or services or both to a Special Economic Zone developer,
 Supply of goods or services or both to a Special Economic Zone unit

Non-Taxable Supply
Non-taxable supply is the sale of any good or service which attracts nil rate of tax and is
similar to exempt supply. There are three types of exemption from charging GST. These are
supplies outside the GST system, GST-free supplies, and input taxed supplies.

GST-free supplies

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If a supply is GST-free, this means that no GST is payable on it, but that the supplier is
entitled to claim credits for the GST payable on its business inputs that relate to that supply
(Sec 9-5;11-15). For this reason,it is quite different from a supply which is outside the GST
system altogether.
Example: A registered greengrocers' business consists wholly of selling fresh food. The sale
of that food is GST-free. The greengrocer therefore will not charge GST on the food it sells,
and claim input tax credits for the GST it pays on goods and services it acquires in carrying
on its business, e.g. rent and equipment.
Note: If the greengrocer used some of those goods for private, non-business purposes, only
proportion of the input tax credit for GST on those goods would be allowed

Input taxed supplies

If a supply is "input taxed” no GST is payable on it, but the supplier normally cannot claim
input credits for the GST payable on its business inputs that relate to that supply (Sec 9-5;
11-15)
Example: A registered landlord's business consists wholly of letting private residential
premises. These are input taxed supplies. The landlord therefore will not charge GST on the
rent, and cannot claim input tax credits for the GST it pays on the goods and services it
acquires to run the business.
Note: If the landlord also used some of the goods and services in other business activities
that were taxable (or GST-free), it could claim a proportion of the GST as an Input Tax
Credit.

Taxable Supply
Supply on which tax shall be paid under GST:
Section 2(108) of CGST ACT defines taxable supply to mean a supply of goods or services or
both which is leviable to tax under this Act. Accordingly, all supply of goods and services
except the following shall be taxable supply:
 Supply of Alcohol for human consumption
 Non-taxable supplies which shall include supplies whose place of supply is in non-
taxable territories
It is pertinent to mention that Exempt supplies/ Nil rated supplies shall be taxable since
they are leviable to tax but have been exempted or their rate is zero.

RECIPIENT OF SUPPLY OF GOODS/ SERVICES

As per Section 2(93) of the Central Goods and Services Tax (CGST) Act, 2017, the term
‘recipient’ of supply of goods or services or both, means –
(a) where a consideration is payable for the supply of goods 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

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(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.

Supplier of Goods and Services

As per Section 2(105) of the Central Goods and Services Tax (CGST) Act, 2017, the term
“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.

RATES OF GST
The GST is governed by a GST Council and as Chairman is the Finance Minister of India.
Under GST, goods and services are taxed at the following rates, 0% 5% 12% 18% and 28%.
The lowest rate of 5% shall be leviable on common items and highest rate of 28% on luxury
items.
(as per 37th GST Council Meeting), generally there are 5 slabs under GST namely 0% 5%
12% 18% and 28%.
Category of Goods & Services in different slabs in numbers (as on 29 th GST Council
Meeting).

S.No. Slabs No. of Items

(Approx)
01 0.25% 03
02 3% 18
03 5% 308
04 12% 246
05 18% 194
06 28% 23
07 Nil Rate or 0% 163

EXEMPTIONS UNDER GST

The government has classified certain goods and services as exempt from GST. Unlike with
zero-rated goods and services, business owners cannot claim ITC for the sale of exempted
goods and services. Here's a list of all the exemptions:

Exempted Goods
Live Animals, Meat, Fish, Prawn, Eggs, Honey and Milk Products, Non-Edible Animal
Products, Live Trees and Plants, Vegetables, Fruits and Dry Fruits, Tea, Coffee and Spices (all
types of seeds without any processing), Edible Grains, Oil Seeds, Fruit and Part of Plants,
Gums, Resins, Vegetable Materials and Products, Sugar, Jaggery & bubble Gums, Pizza, Cake,
Bread, Pasta & Waffles, Prasadam supplied by religious places like temples, mosques,

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churches, gurudwaras, dargahs, etc., Water (other than aerated, mineral, purified, distilled,
medicinal, ionic battery, de-mineralized and water sold in scaled container) Non-alcoholic
Toddy, Neera including date and palm neera, Tender coconut, Flours, Meals & Pellets, Salts
& Sands, Fossil Fuels – Coal and Petroleum, Gases and Nonmetals, Human Blood and its
components, All types of contraceptives, Fertilizers, Kajal (other than kajal pencil sticks),
Kumkum, Bindi, Sindur, Sanitary napkins, Alta, Municipal waste, sewage sludge, clinical
waste, Plastic bangles, Condoms and contraceptives, Firewood or fuel wood, Wood
charcoal, Judicial, Non-judicial stamp papers, Court fee stamps, Postal items, Rupee notes
when sold to the Reserve Bank of India, Printed Books, Brochures, Newspapers, Silkworm
laying, cocoon, Raw silk, Silk waste, Khadi fabric, Wool, Gandhi Topi, Khadi Yarn, Jute fibers,
raw, Coconut, coir fiber, Indian National Flag, Human hair, Idols made of clay, Earthen pot
and clay lamps, Glass bangles (except those made from precious metals), Agricultural
implements manually operated or animal driven, Handloom (weaving machinery), Amber
charkha, Spacecraft (including satellites) and suborbital and spacecraft launch vehicles,
Hearing aids, Muddhas made of sarkanda and phoolbaharijhadoo, Slate pencils and chalk
sticks, Slates. Indigenous handmade musical instruments, Passenger baggage. Exemption
from GST / iGST is being given on import of specified defence goods not being manufactured
indigenously, it's being extended only up to 2024. Pooja Samaagri.

Exempted Services
1. Agricultural services:
This includes all services related to agriculture except the rearing of horses. Exempt
services include cultivation, harvesting, supply of farm labour,fumigation, packaging,
renting or leasing of machinery for agricultural purposes, warehouse activities, and
services by an Agricultural Produce Marketing Committee or Board that is provided by n
agent for the sale or purchase of agricultural produce.

2. Transportation services:
 Transportation service by road or bridge on payment of toll, transportation of goods
by road (except when carried out by transportation agency or courier agency).
 Transportation of goods by inland waterways
 Transportation of passengers by air (in the states of Manipur, Meghalaya, Assam,
Arunachal Pradesh, Nagaland, Sikkim, Tripura, and Bagdogra)
 Transportation by non-AC horse or contract carriages, tranportation of agricultural
produce mak, salt, newspapers, or woodgrains.
 Transportation of goods where the gross amount charged is less than ₹ 1500.
 Hiring services provided to any state transport undertaking, including motor vehicles
with a capacity to carry more than 12 passengers, services provided to goods
transport agencies.

3. Services provided by the Government and diplomatic missionaries:

 Services by any foreign diplomatic mission located in India.
 Services provided by the Reserve Bank of India.

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• Services by the Government or any local authority except the following services –
a. Services by the Department of Posts via speed post, express parcel post, life
insurance, and agency services provided to any individual other than the
Government.
b. Services related to an aircraft/vessel within or beyond the boundaries of a port of
airport.
c. Transportation of goods or passengers.
d. Any other service, except those that come under (a) and (b), that is provided to
business entities.

 Services provided to diplomats, including the United Nations.

 Life insurance services provided under the National Pension System, life insurance
provided by the Army, Naval and Air Force Groups.
4. Judicial services
 Services provided by an arbitral tribunal (i.e., services provided by the court or a
judge) to any individual other than a business entity or to a business entity with a
turnover up to ₹ 20 lakhs (₹ 10 lakhs for special category states) in the preceding
financial year.
 Services provided by a partnership firm of advocate(s) to an advocate or partnership
firm of advocates, any individual that is not a business entity, or a business entity
with a turnover up to ₹ 20 lakhs (₹ 10 lakhs for special category states) in the
preceding financial year.
 Services provided by a senior advocate (legal services) to any individual other than a
business entity or to a business entity with a turnover up to ₹ 20 lakhs (₹ 10 lakhs for
special category states) in the preceding financial year.

5. Educational services
 Transportation of students and faculty, mid-day meal catering services, admission,
examination services, and security and housekeeping services.
 Services provided by Indian Institutes of Management (except the Executive
Development Programme).

6. Medical services
 Services provided by a veterinary clinic; health-care services provided by clinics or
paramedics.
 Services provided by ambulances, charities, and organizations facilitating religious
pilgrimage.

7. Services provided by organizers

 Services provided by organizers for business exhibitions held outside India.
 Services provided by tour operators to foreign tourists (this includes tours that are
conducted completely outside India).

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8. Miscellaneous services
 Transmission or distribution of electricity by authorized personnel.
 Services provided by recognized sports bodies.
 Services provided by journalists, Press Trust of India, or United News of India. This
includes the collection and provision of news.
 Services provided by slaughterhouses.
 Services provided by libraries.
 Services provided for public conveniences, such as washrooms, lavatories, urinals,
and toilets.
 Services provided for conducting religious ceremonies, including renting the
premises of any religious place.

9. New exemptions that have been added:

 Services provided by the GSTN to the Central government. State government, and
Union Territories.
 Services related to renting property for residential purposes and renting rooms with
charges less than ₹ 1000 per day
 Admission to circuses, theatrical performances, award ceremonies sport events
(other than recognized sport events), and admission to recognized sport events
which charge less than ₹ 250/- per person for registration. This also includes
admission services for museum, national parks, wildlife sanctuaries, zoos, etc.
 Services supplied by banks to Basic Saving Bank Deposit (BSBD) account holders
under Pradhan Mantri Jan Dhan Yojana (PMJDY).
 Services supplied by rehabilitation professionals recognised under Rehabilitation
Council of India Act, 1992 at hospitals, schools or rehabilitation centres established
by Government or charitable institute registered under Section 12AA of The Income
tax Act, 1961.
 Loan guarantee services provided by Government to its undertakings and PSUs for
bank loans.

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Illustrations on Computation of Aggregate Turnover

Format for Calculation of Aggregate Turnover for GST Registration

Transactions Consideration
for GST
1 Taxable, nil rated and exempt supplies of goods and services Yes
2 Inter-State Supplies Yes
3 Exempt supplies of goods and services Yes
4 Export of goods or services or both Yes
5 Any kind of central tax, state tax, union territory, integrated tax and
compensation cess No
6 Inward supplies of goods and services. No
7 Inward supplies on which the recipient needs to pay tax under the RCM No

8 The supply of goods after completion of job work No

9 Supply of goods for Job work No
10 Supply of goods and services to SEZ developer Yes
1. Vivek Private Ltd is having its manufacturing units at Mangalore and Chennai. It also has
service unit at Mysore. From following information calculate aggregate turnover of Vivek
Private Ltd for the year 2016-17:

a. Sold goods from Mangalore unit to a dealer at Delhi for. Rs 25,00,000.

b. Sold goods from Mangalore unit to a dealer at Mysore for Rs. 5,00,000.

c. Supplied goods from Chennai unit to UK for Rs 20,00,000.

d. Rendered service from Mysore unit to a person located in Hubli for Rs. 1,00,000.

e. Mangalore unit supplies non-taxable goods to Mr. Narayan at Bangalore for Rs 2,50,000.

f. Supplied goods from Mangalore unit to SEZ located in Delhi for Rs 5,00,000.

g. Total IGST and CGST& SGST paid by Vivek Private Ltd for the year Rs 3,00,000.

h. Supplied goods which are exempt from tax from Chennai unit to a dealer at Dharwad for
Rs 20,000.

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2. Compute the aggregate turnover of Mr. Harshavardhan from the following

1. Supplied goods to unregistered dealer at Hyderabad for Rs 2,00,000.

2. Sold goods to UK for UNO purpose Rs 3,00,000.

3. Sale of goods to Arun at Chamarajanagar. Rs 500000

4. Sale of goods to Mr. Nagesh at Bidar for . Rs 200000

5. Goods supplied to a job worker in Mangalore for Rs 1500000.

6. Job worker send back the goods after processing for. Rs 800000 and other Rs 900000
goods supplied to SEZ developer at Bangalore.

7. Harshavardhan purchased a truck for Rs 800000 and paid. Rs 200000 as GST.

8. Received goods from registered dealer for. Rs 100000.

9. Harshavardhan renders services to a company which is established in London for Rs

200000.

10. Harshavardhan paid Rs 300000 as GST to Government and. Rs 50000 as job charges to
Job worker.

3. Compute the aggregate turnover from the following:

Mr. Narendra of Mysore gives you the following details of transactions

1. Sale of goods by Mr. Narendra to Mr. X in Chamarajanagar . Rs 500000

2. Sale of goods by Mr. Narendra to Mr. Y in Mumbai. Rs 200000

3. Sale of Goods by Mr. Narendra to XYZ Company in Bangalore Rs 150000

4. The goods received by Mr. Narendra from unregistered dealer. Rs 10000

5. Goods supplied by Narendra to a job worker in Mysore 1 Rs 50000 and returned after
completion

6. Supply of services to Mr. B and it is chargeable to tax Rs 400000 at zero rates

7. The sale of goods to a merchant in USA Rs 500000

8. Transfer of goods from branch in Mandya to a branch in Bangalore Rs 500000

9. The amount of CGST and SGST paid by Narendra Rs 50000

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Illustrations on Computation of Taxable Turnover under IGST, CGST and SGST

Format of determination of TTO under IGST, CGST, SGST and UTGST

Particulars IGST CGST SGST UTGST

1. Supply of Goods & Services between two Yes No No No

states
2. Branch transfer of goods & Services between Yes No No No
two states
3. Supply of Goods & Services between two Yes No No No
Union territories
4. Branch transfer of Goods & Services Yes No No No
between two Union territories
5. Supply of Goods & Services within the same No Yes Yes No
State
6. Supply of Goods & Services within the same No Yes No Yes
Union Territory
7. Purchase of Goods & Services from No Yes Yes No
Unregistered dealer with in the state
8. Purchase of Goods & Services from a dealer Yes No No No
from outside the country
9. Supply of Goods & Services outside the Zero No No No
country Rate
10. Supply of Goods & Services to EOU, SEZ, FTZ, Zero No No No
EHTP, STP, etc. Rate
11. Purchase of goods and services from an unit Yes No No No
of SEZ or SEZ developer
12. Supply of goods to job worker No No No No

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4. From the following transactions state the type of tax payable under GST law by registered
person:
1. Sale of goods from Bombay to Delhi
2. Goods sold within Bombay
3. Goods sold from Bombay to Pune
4. Sale of goods from Karnataka to Maharashtra
5. Sale of goods from Mysore to Dharwadi
6. Sale of goods from Bangalore to Shimla
7. Export of goods from Bangalore to New york, USA.
8. Provision of services by an Indian company to its wholly owned subsidiary in Australia
9. Royalty paid to a company outside India for using its brand name in India.
10. Mr Bharat purchases machinery from china.
11. Supplied goods to SEZ developer
12. Purchased goods from EOU.

5. Mr Nagraj is from Haryana. State the type of tax payable under GST law:
1. Supplied goods to Kolkata
2. Purchased goods from an unregistered dealer within the state of Haryana.
3. Sold goods to Infosys ltd., Bangalore.
4. Supplied goods to NGO at Noida.
5. Supplied goods for job work at Delhi
6. Transfer goods to his branch at Pune
7. Supplied goods to EHTP.
8. Rendered services to Xylu Ltd., at Japan.
9. Obtained services from an unregistered dealer of Haryana.
10. Sold goods to Andaman.
11. Supplied services to Lakshadweep.
12. Purchased goods from a person who is registered under GST from within the State.
13. Supplied goods to a dealer who is registered under composition scheme in Haryana.
14. Received goods from Lakshadweep.

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6. Mr. Vinod is a registered dealer in Bhopal. From the following particulars, compute
turnover which is taxable under IGST and IGST payable.

1. Product C worth Rs 2,04,000 sold to a registered dealer of Punjab @ 28%

2 Product M amounting to Rs 2,00,000 supplied to dealer of Srinagar @ 12%.

3. Product B worth , Rs 2,20,000 were transferred to their branch at Kolkata IGST @18%

4. Commodity Z worth Rs 3,00,000 supplied to Job worker of Bangalore @ 12%.

5. Ayurvedic medicines worth Rs 1,64,800 are sold to the registered dealer of Maharashtra
@12%

6. Product S worth Rs 54,000 are sold to the registered dealer of Uttar Pradesh @ 5%.

7. Product G rated @ 5% amounting to Rs 3,10,000 were sold to firm of London in the

course of export outside India.

8. Product S amounting to Rs 5,40,000 are sold to a registered dealer of UP @ 5%

9. Commodity X imported from UK for Rs 8,00,000 (IGST @ 12%),

10. Received Goods from a registered dealer of Haryana for Rs. 5,00,000 @ 12%.

11. Sale of Petroleum products to a registered dealer in UP for Rs 2,50,000 @ 12%.

12. Sale of alcoholic liquor for human consumption to a registered dealer in Bihar for
Rs.3,00,000.

13. Supplied product L worth Rs 8,00,000 to dealer in Bhopal @ 5%.

14. Product R amounting to Rs 3,45,000 sold to an unregistered dealer of Bhuvaneshwar

@12%.

15. Rendering a services worth Rs 3,00,000 to a person of New Delhi @ 18%.

16. Product S sold to a dealer of Arunachal Pradesh for Rs 3,55,000 @ 5%

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7. Ms Madhav and Co a registered dealer in Maharashtra furnishes the following

information for the month of November 2017. Compute the turnover which is taxable under
SGST/CGST and IGST

1. Goods of Rs 8,00,000 sold to a dealer at Patna.

2. Commodity worth Rs 3,50, 000 sold to an unregistered dealer of Assam

3. Goods of Rs 2,20,000 supplied within the state.

4. Product X supplied to a dealer at Pune for Rs 5,45,000.

5. Product S worth Rs 3,00,000 send to job worker at Mumbai.

6. Goods worth Rs 5,00,000 supplied to a unit of EOU at New Delhi.

7. Goods amounting to Rs 3,00,000 supplied to Andaman.

8. Goods worth Rs 3,75,000 received from an unregistered dealer at Nagpur

9. Commodity Z. supplied to a dealer at London for Rs 7,65,000.

10. Supplied goods of Rs 85,000 to Jammu and Kashmir.

11. Goods of Rs 2,50,000 supplied from job worker place directly to dealer of Pune

12. Commodity Z worth Rs 6,10,000 transferred to their branches in Karnataka.

13. Goods purchased from an unregistered dealer of Mumbai for Rs.10,00,000.

14. Goods worth Rs 3,25,000 supplied to a registered dealer at Lakshawdweep.

15. Goods worth Rs 2,00,000 received from job worker.

16. Goods worth Rs 8,00,000 send to job worker at Nagpur. He supplied goods directly after
processing to a dealer at Bangalore for Rs 5,00,000 and a registered dealer at Pune for Rs
4,00,000

17. Goods sold to a dealer of Mysore who has registered under composition scheme for Rs
3,00,000.

18. Goods purchased from a registered dealer at Pune for Rs 3,00,000.

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8. Surabhi is a registered dealer in Mandya. From the following particulars, find out taxable
turnover and CGST and SGST payable under the GST Act:
a. Chocolate not containing Cocoa worth Rs 2,04,000 sold to a registered dealer of Punjab
(IGST @ 18%).
b. Mineral waters worth Rs 2,20,000 were transferred to their branch at Kolkata (IGST
@18%).
c. Ayurvedic medicines worth Rs 1,64,800 are sold to the registered dealer of MP (IGST @
5%).
d. Skimmed milk powder worth Rs 54,000 is sold to a registered dealer of UP (IGST @ 5%).
e. Goods amounting to Rs 3,10,000 were sold to firm of London (IGST @ 18%).
f. Silver worth Rs 5,40,000 are sold to a registered dealer of TN (IGST @ 3%).
g Coffee beans worth Rs 2,20,000 were transferred to their branch at Kolkata.
h. Sale of Petroleum products to a registered dealer in AP for Rs 2,50,000.
i Sale of Alcoholic liquor for human consumption to a registered dealer in Mumbai for Rs
4,50,000.
j. Sale of Tea powder for an unregistered dealer in Kerala for Rs 1,50,000 (IGST @ 5%).
k. Sale of aerated drinks worth Rs 3,50,000 to a Foreign diplomatic mission at Chennai (IGST
@28%).
l. Rendered a service worth Rs 5,00,000 to an unit of Reserve Bank of India at Kolkata (IGST
@18%).

9. Mr Anil made an aggregate turnover of Rs 90,00,000 for the month of February 2019.
Compute taxable turnover if following supplies are included in the aggregate turnover:
a. Inter -state supply Rs 40,00,000.
b. Supply to SEZ developer Rs 10,00,000.
c. Export to China Rs 5,00,000.
d. Supply within the state Rs 25,00,000.
e. Exempt supplies Rs 8,00,000.
f. CGST, SGST and IGST collected Rs 2,00,000

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QUESTIONS

6 Marks Questions

1. Write a note on: a) Goods b) Place of supply c) Principal place of business.

2. Write a note on: a) Agent b) Principal c) Associated enterprises.

3. Write a note on: a) Related persons b) Casual taxable person c) Services.

4. Briefly explain the aggregate turnover under GST Act 2017.

5. Explain the following: a) Mixed supply b) Composite supply.

6. Explain the following: a) Exempt supply and Zero rated supply.

7. Simple problems on calculation of aggregate turnover.

12 Marks Questions

1. Discuss salient features of GST Act 2017.

2. Discuss salient features of CGST Act 2017.

3. Briefly explain job work and works contract under GST Act 2017.

4. What is Reverse charge? Explain the applicability of reverse charge.

5. Explain the following: a) Mixed supply b) Composite supply c) Outward supply.

6. Problems on determination of turnover liable for tax under SGST/UTGST, CGST and IGST.

24 Marks Questions

1. Explain the classification of supply under GST.

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GST & Customs Duty Unit 2: GST Act 2017