Chapter 3: Charge Of GST 18
Section 9(1)
Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and
services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic
liquor for human consumption, on the value determined under section 15 and at such rates, not
exceeding twenty per cent., as may be notified by the Government on the recommendations of the
Council and collected in such manner as may be prescribed and shall be paid by the taxable person.
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
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 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 2(98). Reverse charge
Reverse charge means the liability to pay tax by the recipient of supply of goods or services or both
instead of the supplier of such goods or services or both under section 9(3) or 9(4).
Reverse Charge On Services
Service Service Provider Service Recipient
Sponsorship Any Person Any body corporate or partnership firm
Services
Goods Goods Transport (a) any factory;
Transportation Agency (GTA has not taken (b) any society registered under Societies
the Input Tax Credit (ITC) on Registration Act, 1860;
goods and services used in
supplying GTA service) (c) any co-operative society;
(d) any person registered under GST;
Rate Applicable (e) any body corporate; or
@ 5% (2.5% CGST+2.5%
SGST/UTGST or 5% IGST) (f) any partnership firm/AOP/BOI;
(g) any casual taxable person.
However, reverse charge mechanism (RCM) shall not
apply to services provided by a GTA, by way of
transport of goods in a goods carriage by road to-
(a) a Department/ establishment of the Central
Government/ State Government/ Union territory;
or
(b) local authority; or
(c) Governmental agencies, which has taken
registration under the CGST Act only for the 19
purpose of deducting tax under section 51 and not
for making a taxable supply of goods or services
(d) Where GTA opts to avail ITC on goods and
services used in supplying GTA service (Rate
Applicable 12% (6% CGST+6% SGST/UTGST or 12%
IGST))
Note 1: GST shall be paid by the consignor or
consignee whosoever is liable to pay freight charges.
Note 2: If GTA has given services to Unregistered
persons, it will be exempt from GST. (Notification no.
32/2017 CT(R) dated 13-10-2017.)
Legal Services individual advocate or Any business entity located in the taxable territory if
firm of advocates Turnover exceeds threshold limit.
Legal Services Arbitral Tribunal Any business entity located in the taxable territory if
Turnover exceeds threshold limit.
Services by Government or local Any business entity located in the taxable territory if
Government or authority Turnover exceeds threshold limit.
local authority However, No reverse charge is applicable in the
following cases-
(1) Services by the Department of Posts by way of
speed post, express parcel post, life insurance,
and agency services provided to a person
other than Government;
(2) Services in relation to an aircraft or a vessel, inside
or outside the precincts of a port or an airport;
(3) Transport of goods or passengers;
(4) renting of immovable property
Renting of Central Government, Any person registered under the CGST Act, 2017
immovable State Government,
property Union territory or local
authority
Services by Director Company/body corporate
Director Circular No. 140/10/2020 – GST dated 10th June 2020
a. Independent directors or directors who are
not an employee:
Remuneration paid to directors who are not
employees of the company, shall be subject to
levy of GST in the hands of the company under
the reverse charge mechanism.
b. Directors who are also an employee
(Whole Time Director/MD etc.) of the
company: -
• Remuneration on which tax is deducted at
source under section 192 (TDS on salary)
of the Income-tax Act, GST is not leviable
as the said remuneration is paid in the
course of or in relation to an employment
contract.
• Remuneration which is paid over and
above salaries and on which tax is
deducted at source under section 194J
(TDS on fees for professional or technical
services) of the
Income-tax Act, GST is payable on such
remuneration by the company under the
reverse charge mechanism. 20
Insurance Agent an insurance agent Any person carrying on insurance business.
Services
Recovery Agent a recovery agent A banking company or a financial institution or a
Services nonbanking financial company
transfer or music composer, A music company,producer or the like
permitting the use photographer, artist or
or enjoyment of a the like
copyright
transfer or Author Publisher Located in taxable territory.
permitting the use Note: However, an author can choose to pay tax under
or enjoyment of a forward charge if-
copyright relating a) he has taken registration under the CGST Act
to the original and filed a declaration, in the prescribed form,
literary work that he exercises the option to pay CGST on the
said service under forward charge and that he
shall not withdraw the said option within a
period of 1 year from the date of exercising such
option;
b) he makes a declaration on the invoice issued by
him in prescribed form to the publisher
transportation of a person located in non- Importer
goods by a vessel taxable territory
from a place
outside India up to
the customs
station of
clearance in India
Selling of financial Individual Direct Selling bank or non-banking financial company (NBFCs)
products Agents (DSAs) other located in Taxable Territory.
than a body corporate,
partnership or limited
liability partnership firm
supply of services Members of overseeing RBI
to RBI committee
Security services Any person other than a A registered person, located in the taxable territory.
body corporate Except:
a) a Department or Establishment of the Central
Government or State Government or Union
territory; or
b) local authority
c) Person deducting tax under section 51 of CGST
Act
d) A registered person paying tax under section 10
of the said Act.
Services provided Services provided by an A business correspondent, located in the taxable
by an agent of agent of business territory.
business correspondent to
correspondent to business correspondent
business
correspondent
Services provided Business facilitator A banking company, located in the taxable territory.
by business
facilitator to a 21
banking company
Service by way of Any person other than a Any body corporate located in the taxable territory
renting of any body corporate (taken
motor vehicle only the limited ITC (of input However No RCM shall be applicable if:
designed to carry services in the same line of Supplier of services opts to pay GST at 12%. In this
business))
passengers where Rate Applicable: case, there is no restriction on availing ITC on goods
the cost of fuel is 5% (2.5% CGST+2.5% and services used in supplying renting of motor
included in the SGST/UTGST or 5% IGST) vehicles service by the supplier of service.
consideration
charged from the
service recipient
Services of Lender i.e., a person Borrower i.e., a person who borrows the securities
lending of who deposits the under the Scheme through an approved intermediary of
securities under securities registered in SEBI
Securities his name or in the name
Lending Scheme, of any other person duly
1997 (“Scheme”) authorised on his behalf
of Securities and with an approved
Exchange Board intermediary for the
of India, as purpose of lending
amended under the Scheme of
SEBI
Services from any person who is any person located in the taxable territory.
non-taxable located in a non-taxable Except: No such reverse charge shall be applicable in
territory to taxable territory case of OIDAR services received by an unregistered
territory person.
REVERSE CHARGE ON GOODS
Description of supply of Goods Supplier of Goods Recipient of supply
Cashew nuts, not shelled or Agriculturist Any registered person
peeled
Bidi wrapper leaves (tendu) Agriculturist Any registered person
Tobacco leaves Agriculturist Any registered person
Silk yarn Any person who manufactures Any registered person
silk yarn from raw silk or silk
worm cocoons for supply of silk
yarn
Raw Cotton Agriculturist Any registered person
Supply of lottery. State Government, Union Lottery distributor or selling
Territory or any local authority agent
Used vehicles, seized and Central Govt, State Govt, Union Any registered person
confiscated goods, old and used Territory or a local authority
goods, waste and scrap
GST rates in real estate sector
The effective rate of GST on real estate sector for the new projects by promoters are as follows:
1. 1% without ITC on construction of affordable houses (area 60 sqm in metros/ 90 sqm in 22
non- metros and value upto ` 45 lakh).
2. 5% without ITC is applicable on construction of:
(a) all houses other than affordable houses, and
(b) commercial apartments such as shops, offices etc. in a residential real estate project
(RREP) in which the carpet area of commercial apartments is not more than 15% of
total carpet area of all apartments.
Conditions:
Above tax rates shall be available subject to following conditions:
(a) ITC shall not be available.
(b) 80% of inputs and input services used in supplying the service shall be purchased
from registered persons.
Except (i.e Can be procured from Unregistered Person)
• services by way of grant of development rights, long term lease of land or Floor Space
Idex(FSI) (including additional FSI)
• electricity, high speed diesel, motor spirit, natural gas.
However, if value of inputs and input services purchased from registered supplier is less than 80%
then,
• promoter has to pay GST on reverse charge basis, under section 9(4) of the CGST Act, at the
rate of 18% on all such inward supplies (to the extent short of 80% of the inward supplies
from registered supplier).
• where cement is received from an unregistered person, the promoter shall pay tax on supply of
such cement on reverse charge basis, under section 9(4), at the rate of 28% (CGST 14% +
SGST 14%).
GST on capital goods shall be paid by the promoter on reverse charge basis, under section 9(4) of the
CGST Act at the applicable rates.
Chapter 4: Composition Scheme 23
Composition Scheme Section 10
The composition levy is an alternative method of levy of tax designed for small taxpayers
whose turnover is up to prescribed limit.
Small taxpayers with an aggregate turnover in a preceding financial year up to Rs. 1.5 crore
shall be eligible for composition levy. However, Threshold limit is Rs. 75 lakh in respect of 8
of the Special Category States namely:
Nagaland Uttarakhand Sikkim Tripura
Arunachal Pradesh Mizoram Manipur Meghalaya
The objective of composition scheme is to bring simplicity and to reduce the compliance
cost for the small taxpayers.
The composition scheme is available to the suppliers of goods and restaurant service.
However as per second proviso to section 10(1), composition suppliers are permitted to
supply other services upto :
a) 10% of turnover in the state or union territory in the preceding financial year or
b) Rs.5,00,000
whichever is higher.
Eg. Ramsewak is engaged in supply of goods. His aggregate turnover in preceding FY is Rs. 60
lakh. Since his aggregate turnover in the preceding FY does not exceed Rs. 1.5 crore, he is
eligible for composition scheme in current FY.
The value of supply of exempt services by way of extending deposits, loans or advances in so
far as the consideration is represented by way of interest or discount, shall not be taken into
account –
i. for determining the eligibility for composition scheme under second proviso to section
10(1). Thus while computing value of services [other than restaurant services] as
referred in second proviso to section 10(1), interest on loans/deposit/advances will not
be taken into account.
ii. In computing aggregate turnover in order to determine eligibility for composition
scheme.
An eligible person opting to pay tax under the composition scheme shall, instead of paying
tax on every invoice at the specified rate, pay tax at a prescribed percentage of his turnover
every quarter. At the end of a quarter, he would pay the tax, without availing the benefit of
input tax credit. Return is to be filed annually by a composition supplier.
While computing the threshold limit of Rs. 1.5 crore, inclusions in and exclusions
from ‘aggregate turnover’ are as follows:
Inclusions
Exclusions 24
Value of all outward supplies Value of inward supplies on which tax is
1. Taxable supplies payable under reverse charge
2. Exempt supplies
Taxes Under GST
3. Exports
(i.e.CGST/SGST/UTGST/IGST/Compensation
4. Inter-State supplies
Cess)
of persons having the same PAN be
computed on all India basis
The rate shall be as given under Rule 7
S. no Category Of Registered Person Rate Of Tax
1 Manufacturer, other than 0.5% CGST + 0.5% SGST of Turnover in the
manufacturer of Ice cream, Pan State/Turnover in the Union Territory
masala & Tobacco
2 Person engaged in restaurant 2.5% CGST & 2.5% SGST of Turnover in the
services State/Turnover in the Union Territory
3 Any other Supplier of goods 0.5% CGST + 0.5% SGST of Taxable Supplies
in the State/Turnover in the Union Territory
A) Conditions for opting to pay tax under composition scheme:
(i) Restricted from making supply of goods which are not liable to GST: Certain goods are not
liable to GST, e.g. petroleum, alcohol for human consumption, etc. – a person opting for
composition scheme shall not be entitled to make any supply of non-GST goods.
(ii) Restricted from effecting inter-State outward supplies: The taxable person should not affect
any inter-State outward supplies. This means that even stock transfers to branches outside
the State would not be permitted. However, in so far as it relates to inter-State inward
procurements / receipts, there is no restriction.
(iii) Restricted from making supplies through an e-commerce operator: A person opting for
composition scheme is not allowed to affect any supply of goods through an
ecommerce portal, unless such portal is owned by the same person.
(iv) Restriction on manufacture of notified goods: The person opting for the scheme should not
be a manufacturer of certain goods as are notified in this regard. However, there is no
restriction in case the person is engaged in trading of such goods.
Notified Goods:
(i) Ice cream and other edible ice, whether or not containing cocoa
(ii) Pan masala
(iii) Tobacco and manufactured tobacco substitutes
(iv) Manufacture of Aerated Water
(v) Would be applicable for all transactions under the same PAN: Composition scheme would
become applicable for all the business verticals having separate registrations within the
State and all other registrations outside the State which are held by the person with same
PAN.
(vi) Shall not collect tax: Taxable person opting to pay tax under the composition scheme is
prohibited from collecting tax on the outward supplies.
(vii) Not entitled to input tax credit: Taxable person opting to pay tax under the composition
scheme will not be eligible to claim any input tax credits.
(viii) Such supplier shall mention the words “composition taxable person not eligible to
collect tax on supplies” at the top of the bill of supply. (not allowed to issue tax invoice)
25
As per Rule 3,
A person applying for registration may give option for composition scheme in part B of REG-01.
Such intimation shall be considered only after the grant of registration to the applicant and his
option to pay tax under composition levy shall be effective from the date from which registration is
effective.
As per Rule 4,
A registered person who opts to pay tax under composition levy scheme shall electronically file an
intimation in prescribed form on the GST Common Portal , prior to the commencement of the FY for
which said option is exercised. Option to pay tax under section 10 shall be effective from the
beginning of the next financial year but such person shall also furnish statement in ITC-03 for
reversal of tax credit within a period of 90 days from the date of commencement of composition
scheme.
As per Rule 5,
Such person should be neither casual taxable person nor non - resident taxable person.
As per Rule 6,
If turnover exceeds Rs.1,50,00,000 he will be shifted to normal scheme with immediate effect and
he will give an intimation in CMP-04 within 7 days of exceeding the limit.
Any person who is in the composition scheme may opt out of the scheme at any time and shall
file an application in CMP-04 and he will get shifted to normal scheme with immediate effect. He
shall be required to submit ITC-01 for availing ITC within 30 days from the date of withdrawal.
Such withdrawal shall be applicable to all the places in all the states/UTs.
CLARIFICATION
Person providing exempted service is eligible for composition scheme
A person supplies restaurant service and also supplies any exempt services including services by
way of extending deposits, loans or advances in so far as the consideration is represented by way of
interest or discount, the said person shall not be ineligible for the composition scheme Further, while
computing aggregate turnover of such person in order to determine his eligibility for composition
scheme, value of supply of any exempt services including services by way of extending deposits,
loans or advances in so far as the consideration is represented by way of interest or discount, shall
not be taken into account [Order No.01/2017 CT dated 13.10.2017].
Section 10(2A) Presumptive Scheme For Service Provider
This Section provides an option to a registered person whose aggregate turnover in the preceding
financial year is upto Rs. 50 lakh and who is not eligible to pay tax under sub section (1), to pay tax @
3% [Effective rate 6% (CGST+ SGST/ UTGST)] on first supplies of goods and/or services upto an
aggregate turnover of Rs. 50 lakh made on/after 1st April in any financial year, subject to specified
conditions.
Conditions to be fulfilled:
1. registered person is not engaged in making any supply which is not leviable to tax under the
said Act. Under composition scheme, restriction is only on supply of goods not leviable to
tax
2. not engaged in making any inter-State outward supply – neither of goods nor of services.
3. neither a casual taxable person nor a non-resident taxable person
4. not engaged in making any supply through an electronic commerce operator who is required
to collect tax at source under section 52.
5. not engaged in making supplies of notified goods, namely, ice cream and other edible ice, 26
whether or not containing cocoa , Pan masala, manufacturer of aerated water and all goods
of Chapter 24, i.e. Tobacco and manufactured tobacco substitutes.
6. The registered person shall not collect any tax from the recipient on supplies made by him
nor shall he be entitled to any credit of input tax
7. The registered person shall issue a bill of supply** instead of tax invoice. Such bill of supply
will have the following words at its top - ‘taxable person paying tax in terms of Notification No.
2/2019 CT (R) dated 07.03.2019, not eligible to collect tax on supplies’.
Other significant points
1. Where more than one registered persons are having the same PAN, tax on supplies by all
such registered persons is paid at concessional rate under this notification.
2. Where any registered person who has availed of ITC opts to pay tax under this notification, he
shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger.
Said amount shall be equivalent to the ITC in respect of inputs held in stock and inputs
contained in semi-finished or finished goods held in stock and on capital goods as if the
supply made under this notification attracts the provisions of section 18(4) of the CGST Act
and the rules made thereunder.
3. In computing aggregate turnover in order for determining eligibility for this scheme, interest
on loans/deposit/advances will not be taken into account.
4. Tax on inward supplies on which he is liable to pay tax under section 9(3)/9(4) (reverse
charge) at the Normal applicable rates.
