Indirect Taxation This Study Material is for Internal Circulation only 22MBA4F4

RATES OF GST
The GST is levied at variable rates on variable items. The highest rate of tax as
prescribed by the GST law is 40%.
Broadly, six rates of IGST have been notified for goods, viz., 0.25%, 3%,5%, 12%,
18% and 28%. With respect to CGST, broadly six rates have been notified for goods,
viz., 0.125%, 1.5%, 2.5%, 6%, 9%, 14%. SGST/ UTGST at the equivalent rate is also
leviable. For services, broadly four rates of IGST have been notified, viz., 5%, 12%,
18%, 28%. For CGST, broadly four rates of CGST have been notified, viz., 2.5%, 6%,
9%, 14%. Equivalent rate SGST/ UTGST will also leviable.
For certain specified goods and services, nil rate of tax has been notified.

Goods:
Goods means every kind of movable property other than money and securities but
includes actionable claim, growing crops, grass and things attached to or forming
part of the land which are agreed to be severed before supply or under a contract of
supply [Section 2(52)].

GOODS

MEANS

Money &
All kind of movable property EXCLUDES Securities

INCLUDES

Actionable claim, Growing Crops, Grass &

Things forming part of land agreed to be
severed before supply or under a contract of
supply

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Services:
Services means anything other than goods, money and securities but includes
activities relating to the use of money or its conversion by cash or by any other
mode, from one form, currency or denomination, to another form, currency or
denomination for which a separate consideration is charged [Section 2(102)].

SERVICES

MEANS
Activities
relating to use of
money or its
Anything INCLUDING conversion for a
consideration

EXCLUDING Activities facilitating

or
arranging
transactions in
securities

Goods Money Securities

Recipient:

Sec. 2(93), “recipient” of supply of goods or services or both, means—

(a) where a consideration is payable for the supply of goods or services or both, the
person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the person to whom
the goods are delivered or made available, or to whom possession or use of the
goods is given or made available; and
(c) where no consideration is payable for the supply of a service, the person to
whom the service is rendered,
and any reference to a person to whom a supply is made shall be construed as a
reference to the recipient of the supply and shall include an agent acting as such on
behalf of the recipient in relation to the goods or services or both supplied;

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Module 4 – Time, Place and Value of supply

Time of Supply-Key concepts, Determination of time of supply of goods and services

(Simple problems including Change in Rate of Tax in respect of Supply of Goods or
Services).
Place of Supply – importance and types. Simple Problems on identification of Place of
supply
Value of Supply. (Simple problems on treatment of discount in transaction value, Money
exchange services, Air travel agent, based on Cost. Value of supply in case of lottery,
betting, gambling and Horse racing)
Input tax credit-Meaning, Eligibility for availing ITC, Conditions to be satisfied for
availing ITC. Determination of ITC admissible on goods and services (Simple problems)

TIME OF SUPPLY

It means the date on which the charging event has occurred. As a result the rate of
CGST/SGST or IGST or UTGST will be decided in accordance with the time of
supply. Based on time of supply we will also determine the due date of payment of
GST.

Section 12 and 13 of CGST Act, 2017:

Time of Supply of Goods Time of Supply of Services

Section The liability to pay tax on Section The liability to pay tax on
12(1) goods shall arise at the time of 13(1): services shall arise at the time
supply, as determined in of supply, as determined in
accordance with the accordance with the provisions
provisions of this section. of this section.

Section Time of Supply of Goods Section Time of Supply of Services

12(2) under Forward Charge. 13(2) under Forward Charge.
Section Time of Supply of Goods Section Time of Supply of Services
12(3) under Reverse Charge. 13(3) under Reverse Charge.
Section Time of Supply in case of Section Time of Supply in case of
12(4) Supply of Vouchers. 13(4) Supply of Vouchers.
Section Residuary Clause. [where the Section Residuary Clause. [where the
12(5) time of supply cannot be 13(5) time of supply cannot be
determined under sub-section determined under sub-section
(2) to sub-section (4) of (2) to sub-section (4) of section
Section 12] 13]

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Section The time of supply to the Section The time of supply to the extent
12(6) extent it relates to an addition 13(6) it relates to an addition in the
in the value of supply by way value of supply by way of
of interest, late fee or penalty interest, late fee or penalty for
for delayed payment of any delayed payment of any
consideration shall be the date consideration shall be the date
on which the supplier on which the supplier receives
receives such addition in such addition in value.
value.

KEY CONCEPTS FOR UNDERSTANDING TIME OF SUPPLY (TOS):

The time of supply under GST has been linked with events like issue of invoice,
receipt of payment, due date of issue of invoice, etc. The basic philosophy of time of
supply, as appears from the provisions, reflects that the law desires to collect the
tax to the earliest possible time. Before analysing the related statutory provisions
given in sections 12 and 13, there are certain terms and concepts which must be
understood first. These points have been discussed here as to maintain the
significance and depth of the specific provision.

Forward and Reverse Charge

Usually the supplier is liable to pay tax, popularly called as Forward Charge. The
government is empowered under section 9(3) of the CGST Act, to specify the
categories of supply of goods or services. When the liability to pay tax lies with the
recipient, instead of supplier, it is termed as Reverse Charge.

Time Limit for issue of Invoice for supply of Goods

The provisions of time of supply lay down much emphasis on the fact whether or
not the invoice has been issued within the prescribed time limit. The following
rules are:
➢ As per section 31(1), the invoice needs to be issued either before or at the
time of removal (where supply involves movement of goods) of goods/
delivery of goods/ making goods available to recipient.
➢ In case of continuous supply of goods, the invoice should be issued before
or at the time of issuance of periodical statement/ receipt of periodical
payment [section 31(4)].
➢ In case of goods sent or taken on approval for sale or return, invoice should
be issued before or at the time of supply or 6 months from the date of
removal, whichever is earlier [section 31(7)].

Time Limit for issue of Invoice for supply of Services

The miscellaneous provision relating to time limit for issuance of invoice for supply
of services are as follows:
1. As per section 31(2) read with rule 47 of CGST rules, the tax invoice needs to be
issued either before the provision of service or within 30 days from the date of
supply of service. This limit of 30 days is 45 days in case of insurance companies/
banking companies/ financial institutions including NBFCs.

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2. In case of cessation of supply of services before completion of supply, the invoice

(to the extent to the supply made before such cessation) should be issued at the
time when the supply ceases.
3. In case of continuous supply of services, the invoice should be issued either
➢ On/ before the due date of payment or
➢ Before/ at the time when the supplier of services receives the payment
➢ On/ before the date of completion of the milestone event when the payment
is linked to completion of an event.
4. The invoice maybe issued before or at the time of recording of supply in the books
of account or before the expiry of the quarter during which the supply was made,
in case of following:
➢ Insurance companies
➢ Banking companies
➢ Financial institutions including NBFCs
➢ Telecom companies
➢ Notified supplier of services making taxable supplies between distinct
persons (as specified in section 25)

Date of Receipt of Payment

In case of forward charge, where the supplier is liable to pay tax, the date at which
payment has been received by the supplier is very important. As per the
explanation to section 12(2), “the date on which the supplier receives the payment”
shall be the date on which the payment is entered in his books of account or the
date on which the payment is credited to his bank account, whichever is earlier.
In other words, the date of receipt of payment refers to the date on which the
payment is recorded in the books of account of the entity (supplier of goods) that
receives the payment, or the date, on which the payment is credited to the entity’s
bank account, whichever is earlier. Therefore, the date of receipt of payment is
earlier of the following:
➢ The date on which the payment is entered in the books of account of the
supplier
➢ The date on which the payment is credited in his bank account.

Example:
Mr. X, a registered supplier received an advance of Rs.5,00,000 along with the
purchase order on 15-1-2018. This advance payment was entered in the books of
account on 16-1-2018 and credited in his bank account on 18-1-2018. The time of
receipt of payment shall be earliest of entry in the books (16-1-2018) and credit in
bank account (18-1-2018). Therefore, the date of receipt of payment will be taken as
16-1-2018.

Date of payment
In case of reverse charge, the recipient is liable to pay tax. The time of such supply
gives importance to the date at which payment has been made by the recipient. In
this regard, the date of payment Refers to date on which the payment is recorded in
the books of account of the entity that receives the service (recipient of service), or

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the date in which the payment is debited from the entity's bank account, whichever
is earlier. Therefore, the date of payment is earlier of the following:
➢ The date of payment as entered in the books of accounts of the recipient
➢ That date on which the payment is debited in his bank account

Example:
Mr.B, is a registered person, has purchased goods from Mr S. the tax in respect of
these goods is liable to be paid on reverse charge basis. Mr B made payment on 21-
01-2018 and the same was entered by the accountant in the books of Mr B on 22-01-
2018. On 24-01-2018, the payment is debited in the bank account of Mr B. the time
of payment shall be earliest of entry in the books (22-12-2017) and debit in the bank
account (24-01-2018). Therefore, the date of payment will be taken as 22-01-2018.

Vouchers
The statutory Provisions of sections 12(4) and 13(4) uses the words “In case of
supply of Vouchers by supplier….” The “Voucher” here should not be understood
in the common parlance as the accounting voucher or related term used in auditing.
Rather, Under GST laws, the vouchers are instruments that can be exchanged as
payment for goods or services of the designated value.
As per section 2(118), Voucher means instrument where there is an obligation to
accept it as consideration or part consideration for supply of goods or services or
both and where the goods or services or both to be supplied or identities of their
potential suppliers are either indicated on the instrument itself or in related
documentation, including the terms and conditions of use of such instruments. It is
important to note that for TOS, the vouchers may be divided into 2 categories:

a. Where supply is identifiable against voucher:

This category of vouchers includes those vouchers where in the supply against the
vouchers is known at the time of issue of Voucher.
Example 8.3:
Haldiram has opened a new outlet at laxmi nagar, New Delhi. It has issued a
Voucher for deluxe thali worth Rs.450 to first 20 customers. Now, in this case, we
know that the supplier (i.e., Haldiram) will provide the specific supply of deluxe
thali against the voucher. Hence, the supply of this voucher is identifiable.

b. Where supply is NOT identifiable against voucher:

This category covers all those vouchers against which the goods or services to be
provided are not known at the time of issue of voucher. The reason being the
number of goods/services are available, any of which may be to redeem the
voucher.

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Example:
The paschim vihar branch of Easy day a departmental store, has issued vouchers
worth Rs. 2000 which can be redeemed against the purchase of any goods available in
the store. The departmental store has various types of goods with varying rates of
GST. Here, we don’t know the particular goods which the customer will buy to
redeem the voucher. Therefore, for this voucher, the supply is not identifiable.

TIME OF SUPPLY OF GOODS [SECTION 12]

The liability to pay tax on goods shall arise at the time of supply (TOS) as
determined in accordance with the provision of section 12 of CGST Act, 2017. This
section covers the determination of time of supply in the following situations:
(a) Supply of goods where under Forward Charge [Section 12(2)]
(b) Receipt of goods that are taxable under Revenue Charge [Section 12(3)]
(c) Supply of Vouchers [Section 12(4)]
(d) Residual Cases [Section 12(5)]
(e) Addition to the value of Supply [Section 12(6)]

TOS for Supply of Goods (Forward Charge) [Section 12(2)]

As per section 12(2) of CSGT Act, 2017, where the supplier is liable to pay tax under
forward charge, the time of supply of goods shall be the earlier of the following
dates, namely,
(a) The date of issue of invoice by the supplier or the last date on which he is
required, under section 31, to issue the invoice with respect to the supply;
OR
(b) The date on which the supplier receives the payment with respect to the
supply.

Example: [Invoice issued within Time Limit]

Kamal has supplied goods to Mr. X on 24-12-2017. The invoice had already been
raised on 22-12-2017. Mr. X has paid the due amount on 29-12-2017. The receipt was
entered in the books of account by Kamal on 30-12-2017. But, the same was credited
in his bank account on 2-1-2018. In this case, the time of supply shall be the earliest
of the following:

(a) Date of issue of actual invoice (Since issued within time limit) 22-12-2017
(b) Date of Payment entered in the books of account 30-12-2017
(c) Date on which amount credited in bank account 2-1-2018
Time of Supply (Earliest) 22-12-2017

Example 2: [Invoice issued AFTER expiry of Time Limit]

In the above example, if the invoice was raised on 27-12-2017, then this date of issue
of actual invoice shall not be used. Rather, the last date on which the invoice was
required to be issued as per section 3(1) i.e. 24-12-2017 would be considered as
follows:

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(a) Last Date for issue of invoice as per section 31(1) (Since issued 24-12-2017
was not issued within time limit)
(b) Date of payment entered in the books of account 30-12-2017
(c) Date on which amount credited in bank account 2-1-2018
Time of Supply (Earliest) 24-12-2017

When Advance is received in respect of supply of goods covered under forward charge
In normal circumstances, if advance is received by the supplier from recipients of goods,
then date of payment will be before the date of invoice. Accordingly, the date of receipt of
advance will be the time of supply to the extent of such advance.
It means, as per section 12(2), the Time of Supply (TOS) of goods under forward charge is
generally determined on the basis of date of invoice or the date of payment, whichever is
earlier. However, the government has given relaxation to the eligible tax payers through
the two notifications:
TOS for receipt of goods that is taxable under Reverse Charge [section 12(3)]
In case of supplies in respect of which tax is paid or liable to be paid on reverse
charge basis, the time of supply shall be the earliest of the following dates, namely:
a) The date of the receipt of the goods, or
b) The date of payment as entered in the books of accounts of the recipient or
the date on which the payment is debited in his bank account, whichever is
earlier or
c) The date immediately following 30 days from the date of issue of invoice or
any other document, by whatever name called, in lieu thereof by the
supplier.
In case of (c) above, it means that the 31st day from the date of issuance of invoice
by the supplier shall be taken. For example: If the date of issue of invoice by
supplier is 20-11-2017, then date for third condition will be 20th November + 30
days + following day i.e 21-12-2017. Therefore effectively, the 31st day is to be taken.
If the above does not work
As per provision to section 12(3), where it is not possible to determine the time of
supply as per above mentioned manner, the time of supply shall be the date of
entry in the books of account of the recipient of supply.

Example:
Ritu traders supplied to Mr. B certain goods, which are liable to be paid on reverse
charge basis. The following details are available:
Transaction/ event Date
1) Date of receipt of goods by Mr. B 12-1-2018
2) Date on which the payment is made by Mr. B 18-2-2018
3) Date on which above payment is entered in books by Mr. B 20-2-2018
4) Date on which above payment is debited in bank account of Mr. B 21-2-2018
5) Date of issue of invoice by supplier (Ritu traders) 10-1-2018
Now there are three relevant dates, the earliest of which shall be the point of
supply.

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Event Date
Date of receipt of goods by Mr. B 12-1-2018
The date of payment as entered in the books of recipient 20-2-2018
The date on which the payment is debited in his bank a/c of 21-2-2018
recipient
The date immediately following 30 days from the date of 10-2-2018
issue of invoice (i.e the 31st day from the date of issuance of
invoice by supplier)
Point of supply (earliest) 12-1-2018

Example:
In the above example, if goods are received by Mr. B on 22-2-2018, then the point of
supply will be determined as follows:
Again, let us find out the relevant dates, the earliest of which shall be the point of
supply.
Event Date
Date of receipt of goods by Mr. B 22-2-2018
The date of payment as entered in the books of recipient 20-2-2018
The date on which the payment is debited in his bank a/c of 21-2-2018
recipient
The date immediately following 30 days from the date of issue 10-2-2018
of invoice (i.e the 31st day from the date of issuance of invoice
by supplier)
Point of supply (earliest) 10-2-2018

TOS for supply of vouchers [Section 12(4)]

As regards the time of supply (TOS) in case of supply of vouchers by a supplier,

following are the rules:
Clause Case Time of supply
(a) If the supply is identifiable at the point at which The date of issuance of
voucher is issued voucher
(b) If the supply is not identifiable at the point at which The date of redemption
voucher is issued of voucher

Example:
On account of increasing competition, the Dominos has launched a scheme under
which with each purchase of a large pizza, during the Diwali season, one can buy
a voucher for Rs.50 which will be redeemable till 24th Nov for a small pizza. Now,
as the supply against which the voucher will be redeemed is known on the date of
the sale, the TOS is the date of issue of the voucher.

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TOS for Residual cases [section 12(5)]

Where it is not possible to determine the TOS as per sec 12(2) or 12(3) or 12(4), the
TOS shall be as under:
Clause Case Time of supply
(a) Where a periodical return has to be The date on which such return is to
filed be filed.
(b) In any other case The date on which the tax (i.e., GST
is paid)
It is important to note that this residuary provision is applicable only when the
other provisions are found to be in applicable and not merely when there is some
difficulty in determining the facts that are sought for by the relevant provision.

TOS in relation to value of supply by way of interest, etc. [section 12(6)]

Usually the contracts of supplies contain the provision of payment of interest or late
fee or penalty, in the event of payment of consideration, by the recipient beyond the
agreed time period. As per sec 15(2) (d) of the CGST act, this additional payment is
includable in the value of supply (please refer 9.3.1 for detailed discussion) it means
the liability to pay GST arises on such addition in value also. Section 12(6)
prescribes that the TOS to the extent it relates to an addition in the value of supply
by way of interest, late fee or penalty for delayed payment of any consideration
shall be the date on which the supplier receives such addition in value.

In other words, the special charges imposed for delay in payment of consideration
will enjoy the facility of TOS being date of receipt of the charges imposed, i.e., cash
basis payment of GST.
Example:
Smart limited supplied goods to Dinanath for Rs.1,50,000 on 15-10-2017. The
payment for the same can be made up to 28-10-2017. If the buyer fails to make the
payment, then interest shall be charged at RS.100 per day to be calculated from 16-
10-2017. Dinanath paid the due amount Rs.1,50,000 on 18-11-2017. As regards
Interest, the supplier agreed to waive a portion of interest against payment of RS.
1,800 immediately. Dinanath makes the payment of Rs.1,800 on the same date i.e. ,
18-11-2017

In this example, the TOS of goods shall be 15-10-2017, when the invoice was raised
which is earlier than the date of payment (18-11-2017). As per the section 12(6), the
time of supply in relation to value of supply by way of interest shall be 18-11-2017
i.e., the date of receipt of the interest amounting to rs. 1,800.

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TIME OF SUPPLY OF SERVICE [SECTION 13]

The liability to pay tax on services shall arise at the TOS as determined in
accordance with the provisions of section 13 of CGST act, 2017. This section covers
the determination of TOS in the following situations
(a) Supply of services where the supplier is liable to pay tax (forward charge)
[section 13 (2)]
(b) Receipt of services that are taxable under reverse charge [section 13 (3)]
(c) Supply of vouchers [section 13 (4)]
(d) Residual cases [section 13 (5)]
(e) Addition to the value of supply [section 13 (6)]

TOS for supply of services (Forward charge) [section 13(2)]

As per the section 13(2) of CGST act, 2017, the time of supply of services shall be the
earliest of the following dates, namely:

Clause Case Time of supply

(a) If the invoice is issued within the The date of issuance of invoice by the
period prescribed under section 31 supplier
OR
The date of receipt of payment
whichever is EARLIER.
(b) If the invoice is not issued within The date of provision of service
the period prescribed under section OR
31 The date of receipt of payment
whichever is EARLIER.
(c) If above two clauses (a) and (b) do The date on which the recipient shows
not apply the receipt of services in his books of
account.

Example:
The Rama consultancy services are engaged in providing taxable services. It has
provided a service to M/s Ruhani Enterprises 19-01-2018, the invoice in respect of
which was issued on 20-01-2018. The payment in this respect was received on 22-
01-2018 which was entered in the books same date. The same was credited in the
bank account of “The Rama consultancy Services” after two days on 24-01-2018.
Now, in this case the TOS shall be the earlier of the following dates:

(a) Date of issue of invoice as per section 31(1) 20-1-2018

(Since issued it has been issued within 30 days)
(b) Date of entry for receipt of payment 22-1-2018
(c) Date of payment credited in bank account 24-1-2018

Being the earliest of the three dates, The TOS shall be 20-01-2018

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If in the example, the invoice was raised on 25-2-2018, then the position will be
different. In this case, the date of completion of service will be taken into account.
The reason being the invoice has been issued after prescribed period of 30 days. The
TOS shall be the earliest of the following dates:

(a) Date of issue of invoice as per section 31(1) 19-1-2018

(Since issued it has been issued after prescribed limit
of 30 days)
(b) Date of entry for receipt of payment 22-1-2018
(c) Date of payment credited in bank account 24-1-2018

Then the TOS earliest of all the above dates, 19-01-2018

Example: [Service provided by bank]

Oriental bank of commerce has supplied services on 14-11-2017. The payment for
the same has been received on 16-11-2017. The invoice was issued after 34 days on
18-12-2017. While determining the fact whether the invoice has been issued within
prescribed time limit, a period of 45 days will be taken in place of 30 days, as it is
the case of the bank.
Since the invoice has been issued in 34 days, the date of issue of invoice shall be
taken and not the date of providing the service. The TOS shall be the earliest of the
following dates:

(a) Date of issue of invoice as per section 31(1) 18-12-2017

(Since issued it has been issued within limit of 45
days)
(b) Date of entry for receipt of payment 16-11-2017
Time of supply (Earliest of two dates) 16-11-2017

In the same example, if the invoice has been issued after 45 days, then date of
service shall be taken into account. In that case TOS would be 14-11-2017 as
payment was received after this date.

When advance is received or invoice is issued for part payment:

As per the clause (i) to explanation to section 13(2), the supply shall be deemed to
have been made to the extent it is covered by the invoice or, as the case may be , the
payment.

Therefore, where a part of the consideration is paid in advance or invoice is issued

for payment, the TOS will not cover the whole supply. The above explanation
clearly provides that, the supply shall be deemed to have been made to the extent it
is covered by the invoice or the part advance payment.

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Example:
On 12th Jan 2018, B.R. Ambedkar college (of Delhi university) has booked ‘shah
auditorium’ for their annual day function. The function is to be held on the
foundation day of the college i.e, on 8th Feb. The college has paid the booking
amount of Rs.20,000 on the date of booking. The function was successfully held.
The invoice was raised by the manager of the auditorium on 10th Feb for Rs.50,000 ,
indicating balance of Rs.30,000 payable. This balance amount was paid by college
on 16th Feb 2018.
Let us determine the TOS. Now, the TOS of service to the extent of Rs. 20,000 is 12 th
Jan 2018 as the date of payment is earlier than the date of service. But the TOS of
service to the extent of balance Rs. 30,000 is 10th Feb which comes before the date of
payment (i.e, 16-02-2018). It may be noted that the date of provision of services has
not been taken since the invoice was issued within the prescribed limit.

Time of supply of services in case of excess payment

As per provision to section 13(2), where the supplier of taxable service receives an
amount up to one thousand rupees in excess of the amount indicated in the tax
invoice, the TOS to the extent of such excess amount shall, at the option of said
Supplier, be the date of issue of invoice relating to such excess amount.

Example:
MTNL, a telephone company receives Rs.2,000 against the invoice of Rs.1,560. The
excess amount of Rs.440 can be adjusted against the next invoice. The company has
the option to take the date of the next invoice as the TOS of service in relation to the
amount of Rs. 440 received in excess against the earlier invoice.

TOS for receipt of services that is taxable under reverse charge [Section 13(3)]
In case of supplies in respect of which tax is paid or liable to be paid on reverse
charge basis, the TOS shall be the earliest of the following dates, namely:
(a) The date of payment as entered in the books of account of the recipient or the
date on which the payment is debited in his bank account , whichever is
earlier
Or
(b) The date immediately following 60 days from the date of issue of invoice or
any other document, by whatever name called, in lieu thereof by the supplier.

In case of (b) above, it means that 61st day from the date of issuance of invoice
by the supplier of services shall be taken.

Example:
If the date of issue of invoice by suppliers is 20-11-2017, then date for third
condition will be 20th Nov +60 days + following day i.e., 20-01-2018. Therefore
effectively, the 61st day is to be taken.

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If the above doesn’t work:

As per the first provision to section 13(3), where it is not possible to determine the
TOS as per above mentioned manner, the TOS shall be the date of entry in the
books of accounts of the recipient of supply.

Associated Enterprises:
As per the second provision to section 13(3), in case of supply by “associated
enterprises”, where the supplier of service is located outside India, The TOS shall
be the date of entry in the books of accounts of the recipient of supply or date of
payment, whichever is earlier.

Example:
Bharat, a registered person, has received the supply of services from the non-
taxable territory. Accordingly the tax is liable to be paid by the recipient on reverse
charge basis. Bharat provides following information in respect of such service
received by him.
(a) Date of payment as entered in the books by the service 2-12-2017
receiver (Bharat)
(b) The Date on which the above payment is debited in bank 5-12-2017
account of Bharat
(c) Date of issue of invoice by the supplier of service 24-11-2017

First of all, there is a need to determine the date immediately following the 60 days
from the date of issue of invoice. It means the 61st day from the date of issuance of
invoice by the supplier of service shall be taken i.e., 24-11-2017 +60 days. It comes
on 24-01-2018. The point of supply shall be earliest of the following dates:

(a) Date of payment as entered in the books by the service 2-12-2017

receiver (Bharat)
(b) The Date on which the above payment is debited in bank 5-12-2017
account of Bharat
(c) The date immediately following the 60 days from the date of 24-1-2018
issue of invoice
Point of supply(Earliest) 2-12-2017

TOS for Supply of vouchers [section 13(4)]

The Meaning of voucher has already been given in detail in Para 8.3.6. As regards
the time of supply (TOS) in case of supply of vouchers by a supplier, following are
the rules:
Clause Case Time of supply
(a) If the supply is identifiable at the point at which The date of issuance of
voucher is issued voucher
(b) If the supply is not identifiable at the point at The date of redemption
which voucher is issued of voucher

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Example:
On 1st Jan 2018, wardrobe dry cleaners, Vivek Vihar, have issued vouchers of
Rs.4000 to ‘KRVV Limited’. The company ‘KRVV Limited’ distributed these
vouchers amongst its employees. The vouchers may be redeemed by the employees
latest by 28th Feb by taking dry cleaning services from wardrobe dry cleaners, Vivek
Vihar. In this example, the vouchers are identifiable with a particular supply of dry
cleaning service. Therefore, the date of issue of vouchers i.e., 1st Jan 2018, shall be
the TOS.

TOS for Residual Cases [Section 13(5)]

Where it is not possible to determine the time of supply as per Section 13(2) or 13(3)
or 13(4), the time of supply shall be as under

Clause Case Time of supply

(a) Where a periodical return has to be filed The date on which such
return is to be filed
(b) In any other case The date on which the tax
(i.e. GST) is paid

It is important to note that this residency provision is applicable only when the
other provisions are found to be inapplicable & not merely when there is some
difficulty in determining the facts that are sought for by the relevant provision.

TOS in relation to value of supply by way of interest, etc. [Section 13(6)]

The provision for TOS in case of addition in value by way of interest or late fee or
penalties for delayed payment of consideration are same for goods and services.
Section 13(6) prescribes that TOS in case of addition in value by way of interest, late
fee, penalty for delayed payment of consideration for a service is the date on which
the supplier receives such addition in value.

Example: [Late fee charged by mobile service providers]

Mr. Harish could not pay his mobile bill in time. The service provider, Bharathi
Airtel has charged Rs.150 as late fee on account of non-payment of bill on due date
for the month of Jan 2018. The TOS of such late fees will be late fees will be the date
on which the Bharathi Airtel receives the amount of late fee from their customer.

TIME OF SUPPLY WHERE THERE IS CHANGE IN RATE OF TAX IN RESPECT

OF SUPPLY OF GOODS OR SERVICES [SECTION 14]

Notwithstanding anything contained in section 12 or section 13, the TOS, where

there is change in rate of tax in respect of goods or services or both, shall be
determined in the following manner, namely:

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CASE 1: Where the goods or services or both have been supplied BEFORE the
change in rate of tax:
i. Where the invoice for the same has been issued and the payment is also
received after the change in rate of tax, the TOS shall be the date of receipt of
payment or the date of issue of invoice, whichever is earlier,
Or
ii. Where the invoice has been issued prior to the change in rate of tax but
payment is received after the change in rate of tax, the TOS shall be the date
of issue of invoice,
Or
iii. Where the payment has been received before the change in rate of tax, but
the invoice for the same is issued after the change in rate of tax, TOS shall be
the date of receipt of payment.

CASE 2: Where the goods or services or both have been supplied AFTER the
change in rate of tax:
i. Where the payment is received after the change in rate of tax, but the invoice
has been issued prior to the change in rate of tax, TOS shall be the date of
receipt of payment.
Or
ii. Where the invoice has been issued and the payment is received before the
change in rate of tax, the TOS shall be the date of receipt of payment or date
of issue of invoice, whichever is earlier;
Or
iii. Where the invoice has been issued after the change in rate of tax, but the
payment is received before the change in rate of tax, TOS shall be the date of
issue of invoice.

Meaning of date of receipt of payment:

As per the explanation to section 14, “the date or receipt of payment’ shall be date
on which the payment is entered in the books of account of supplier or the date on
which the payment is credited to his bank account, whichever is earlier. As per
Provisions to section 14, the date of receipt of payment shall be date of credit in the
bank account if such credit in the bank account is after four working days from the
date of change in rate of tax.

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Analysis of above Provisions:

For easy understanding, the above Provisions may be summarized in following
tabular form:
Taxable Issue of Receipt of Time of Supply Rate
Supply has Invoice (as payment (as of
been provided regards regards GST
change in change in
effective effective
rate of tax) rate of tax)
BEFORE AFTER AFTER 1.Date of payment NEW
change in 2.Date of issue of invoice
effective rate Whichever is earlier
of tax
PRIOR AFTER Date of issue of invoice OLD

AFTER PRIOR Date of receipt of payment OLD

It means the new rate is applicable only when both events (invoice & Payment)
are before change

AFTER PRIOR AFTER Date of payment NEW

change in
effective rate PRIOR PRIOR 1.Date of payment OLD
of tax 2.Date of issue of invoice
Whichever is earlier

AFTER PRIOR Date of issue of payment NEW

It means old rate is applicable only when both events (invoice & Payment) are
before change

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Self-Evaluation Questions.

1. What do you mean by time of supply? Explain its significance.

2. What shall be the time of supply of goods when

(a) Supplier is liable to pay tax under forward charge
(b) Tax is levied on Reverse Charge Basis

3. What is the difference between vouchers where supply is identifiable at the time of
issue of voucher and where it is not identifiable? Is there any difference between the
provisions regarding time of supply regarding the two?

4. Explain how the time of supply of services shall be determined under forward charge
approach. What will be the treatment when part payment is received in advance?

5. “In case of supply of services at which reverse charge is applicable, the date of issue
of invoice by supplier is very important.” Explain.

6. Briefly explain the provision of section 14 of CGST Act, 2017 regarding the
determination of point of supply in case of change in rate of tax.

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PLACE OF SUPPLY

Introduction:
GST is destination based tax wherein the tax is payable in the state where goods
and services are finally consumed. The taxes under GST may be CGST, SGST,
UTGST and IGST, in order to determine the type of GST, the nature of supply is to
be ascertained. This nature may be either Inter-state or Intra-state. The supply of
goods imported into, or exported from India is treated as Intra-state supply.

Place of supply and location of supplier are the two major determinants, while
deciding the nature of supply. The supply may be domestic or cross-border. The
domestic supply may further be within or outside the state. This bifurcation is
applicable not only for the goods but also for services.
The ‘place of supply’ denotes the place where the supply is consumed. Thus, place
of supply determines the jurisdiction where the tax revenue should reach.

NEED & IMPORTANCE DETERMINATION OF PLACE OF SUPPLY

GST is destination based tax i.e., consumption tax, which means tax will be levied
where goods and services are consumed and will accrue to that state. So, the state
where they are consumed will have the right to collect GST.
This, in turn, makes the concept of place of supply crucial under GST as all the
provisions of GST revolves around it.

IMPORTANCE
The reasons why an accurate determination of place of Supply is important for
business are listed below:
1. Wrong classification of supply between interstate or intra-state and vice-versa may
lead to hardship to the taxpayer as per section 19 of IGST Act and section 70 of
CGST Act.
2. Where wrong taxes have been paid on the basis of the wrong classification, refund
will have to be claimed by the taxpayer
3. The taxpayer will have to pay the correct tax along with interest for delay on the
basis of revised/correct classification
4. Also, correct determination of place of supply will help us in knowing the incidence
of tax. As if place of supply is determined as a place outside India, then tax will not
have to be paid on that transaction

Place of Supply in GST:

While determining the levy of taxes based on Place of Supply, two things are
considered namely:
1. Location of Supplier: It is the registered place of business of the supplier.
2. Place of Supply: It is the registered place of business of the recipient

Legal Framework:
The provisions regarding place of supply of goods or services are provided in
chapter 5 of IGST Act, vide sections 10-14.

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Section 10: Place of supply of goods other than supply of goods imported into, or
exported from India.
Section 11: Place of supply of goods imported into or exported from India.
Section 12: Place of supply of services where location of supplier and recipient is in
India.
Section 13: Place of supply of services where location of supplier or location of
recipient is outside India.
Section 13(12): Special provision for payment of tax by a supplier of online
information and data base access or retrieval services.

Importance of Place of Supply

Place of supply is important to determine the kind of tax that is to be levied. The
IGST is levied in case of Inter-state supply whereas CGST and SGST become
applicable in case of Intra-state supply. Whether the supply is Inter-state or Intra-
state, it depends upon the location of supplier and the place of supply.
When the location of supplier and place of supply are in two different states, it will
be an Inter-state supply and IGST will be applicable but when the two are in the
same state, then it will be an intra-state supply and CGST and SGST/UTGST is
applicable.

Whether location
Location of Place of of supply and Whether inter-state/
Case
supplier supply place of supply intra-state
are in same state
1 Kerala Bihar NO Inter-state (IGST)
2 Puducherry Puducherry YES Intra-state (CGST &
Puducherry GST)
3 Chandigarh Chandigarh YES Intra-state
(CGST+UTGST)
4 Chandigarh Punjab NO Inter-state(IGST)
5 Chandigarh Daman & Diu NO Inter-state (IGST)
6 Goa Goa YES Intra-state (CGST +
Goa GST)
7 Karnataka Karnataka Special Case Inter-state
(SEZ) (non-SEZ)

Thus, it is very important to understand the two phases and the manner of
determination of the two.

Location of Supplier of Goods:

“Location of supplier” of goods- the word location refers to the site or premises i.e,
the geographical point where the supplier is situated together with goods under his
control, redy to be supplied. Location of supplier of goods is the site / premises of
supplier whether the supplier is situated together with the goods under his control,
ready to be supplied. Thus it is usually the place from where a supply is made. In

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GST registration certificate, a place is mentioned as a principal place of business

and it may be taken as location of supplier.

Location of Supplier of Services:

“Location of supplier” of service- Sec 2(15) of IGST Act, 2017 defines “location of
supply of services” as:

Situation Location of supplier of services

1 Where the supply is made from place It is the location of such place of
of business for which registration has business.
been obtained
2 Where the supply is made from place It is the location of such fixed
other than place of business for which establishment.
registration has been obtained (office
establishment elsewhere),
3 Where the supply is made from more It is the location of the establishment
than one establishment, whether the most directly concerned with the
place of business or fixed establishment provision of the supply.
4 In absence of such places, It is the location of the usual place of
residence of supplier.

Location of Recipient of Services

The definition of ‘Recipient of services’ is summarized in the table given below:
Situation Location of Recipient of services
1 Where the supply is received at a place It is the location of such place of
of business for which registration has business.
been obtained
2 Where the supply is received at a place the location of such fixed
other than place of business for which establishment.
registration has been obtained (office
establishment elsewhere),
3 Where the supply is made from more the location of the establishment
than one establishment, whether the most directly concerned with the
place of business or fixed establishment provision of the supply.
4 In absence of such places, the location of the usual place of
residence of recipient.

The term “place of supply” and its legal term, its meaning should be understood
with the legal intent and not in common parlance.
GST is the destination based consumption tax but no provision of law clarifies this
concept. The provisions of ‘place of supply’ fully bridge this missing link. In each
case of supply, the law makers have declared the place of supply. It is the place of
supply that will have right of accrual of revenue.

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Types of Supply
The GST laws have integrated the goods and services and are the common name
“supply” considering the supplies may be divided on two bases, namely-
1. Geographical basis and
2. Purpose of recipient.

1. Geographical Basis
The geographical boundaries of a country are very important in determination of
any type of tax liability. Under GST also, the place of recipient and the place of
supplier play significant role in deciding the type of supply. On such basis, there
can be following two types of supplies:
(a) Domestic Supply
(b) Cross border supply

(a) Domestic Supply: It refers to those supply or transactions, where the supplier
and recipient of Supply, both are located in India. The supply of goods or services
is within India.

(b) Cross border supply: It is basically supply of goods or provisioning of services

exported out of India or imported into India. Section 11 deals with statutory
provision for determination of place of supply of ‘GOODS' imported into, or
exported from India. Similarly, section 13 deals with statutory provisions for
determination of place of supply of ‘SERVICES' where location of supplier or
location of recipient is outside India.

2. Purpose of Recipient
When supply is made in terms of goods or services, the recipient may be the end
consumer or another business entity, for which it is inward supply. On such basis,
the supply maybe classified as:
(a) Business to Business Supply (B2B Supply)
(b) Business to Consumer Supply (B2C Supply)
(a) Business to Business Supply: It is commonly abbreviated as B2B. Under this
type of supply, both the supplier and the recipient are businesses. It means the
supplies are used by the recipient in the course of furtherance of the business. The
tax paid by the recipient shall be available as input tax credit. For Example: If an
event Management Company hires the services of a caterer, in the course of or in
furtherance of their business, then it is a B2B supply.

(b) Business to Consumer Supply: It is commonly abbreviated as B2C. Under this

type of supply, the recipient is the final consumer. In other words, it is a transaction
between a business and a consumer. Accordingly, no credit of Input tax is allowed
to the consumer. Suppose, Mr. Sharma hires the services of a caterer on the occasion
of marriage of his daughter. In this case, the recipient is end user. No question
arises about availability of ITC to Mr. Sharma. This type of supply is a B2C supply.

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Difference between B2B and B2C Supply

B2B Supply B2C Supply
1 It refers to business to business supply It refers to business to consumer supply
The two parties are ‘business’ and The two parties are ‘business’ and
2
‘business’ ‘consumer’
The recipient is acting in the course of
3 The recipient is the end user.
or in furtherance of his business.
No question arises about availability of
4 The recipient can claim ITC.
ITC.

PLACE OF SUPPLY IN CASE OF GOODS

Place of supply of Goods:
Place of supply of goods under GST defines whether the transaction will be
counted as intra-state or inter-state, and accordingly levy of SGST, CGST & IGST
will be determined.
Following topics under it are as follows:
1. Supply involving Movement of Goods
2. Goods delivered on the direction of 3rd party (Bill to Ship model)
3. Supply not involving movement of Goods
4. Goods are assembled or installed at Site
5. Goods supplied on a board /vessel/ conveyance
6. Imports and exports

Place of Supply of Domestic Transactions involving Goods:

As per section 10 of the CGST Act, 2017 Place of Supply of goods other than supply
of goods imported into, or exported from India, shall be as under:

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1. Supply involves movement of goods [Section 10(1)(a) of the IGST Act, 2017]:

Nature of supply Place of supply of goods

Supply involves movement of goods Location of the goods at the time at which
whether by supplier or recipient or by any the movement of goods terminates for
other person. delivery to the recipient.

Analysis:
In the case of supply, involving movement of goods, the place of supply is the
location of the goods at the time when the movement of goods terminates (ends) for
delivery to the recipient. The movement can be undertaken by the supplier or the
recipient. It may even be taken by any other person after the supplier or the
recipient discloses the destination to the person.
Example :
Mr. C of Chennai received purchase order from Mr. H of Hyderabad for want of commercial
goods. Now supply involves movement of goods by supplier from Chennai to Hyderabad in
a truck by road.
Place of supply of goods = Hyderabad.
IGST will be levied.
Example:
X of Delhi and Y of Bengaluru entered into an agreement to supply the goods to Y at
Bengaluru. The goods are in Delhi, from they will move to the Bengaluru. Here, the place of
supply is Bengaluru.
Example Answer:
X Ltd., located in Mumbai, Maharashtra 1. Location of Supplier: Mumbai
receives order from M/s Y Ltd. located in (Maharashtra).
Ahmedabad, Gujarat for supply of one 2. Place of Supply: Ahmedabad (Gujarat)
machine. Find the place of supply and Since, the movement of goods terminates at
applicable GST? Ahmedabad.
Applicable GST = IGST (Inter-state supply)

Place where
Location of movement of Place of Whether inter-state
Case
Supplier goods supply or intra-state
terminates
1 Supplier moved the Himachal Himachal Himachal Intra-state (CGST &
goods from place of Pradesh Pradesh Pradesh SGST at Himachal
manufacture to Pradesh)
2 desired place of Himachal Haryana Haryana Inter-state (IGST)
destination as Pradesh payable at
conveyed by the Himachal Pradesh
buyer.
3 Recipient took the Chandigarh Chandigarh Chandigarh Intra-state (CGST +
goods ex-factory UTGST at
from the premises of Chandigarh)
4 supplier and moved Chandigarh Uttar Uttar Inter-state (IGST)
them to the desired Pradesh Pradesh payable at
place. Chandigarh

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2. The supplier delivers goods to a recipient or any other person on the direction of
a third person by way of transfer of documents of title to the goods or otherwise
[Section 10(1)(b) of the IGST Act 2017] Or Goods delivered on “Bill to ship to”
Model:
Nature of supply Place of supply of goods
Goods are delivered by the supplier to a It shall be deemed that the said third person
recipient or any other person on the has received the goods and the Place of
direction of a third person, whether acting Supply of such goods shall be the principal
as an agent or otherwise, before or during place of business of such person.
movement of goods by way of transfer of
documents of title to the goods or
otherwise.
As per section 10(1)(b) where the goods are delivered by the supplier to a recipient
or any other person on the direction of a third person, whether acting as an agent or
otherwise, before or during movement of goods, either by way of transfer of
documents of title to the goods or otherwise, it shall be deemed that the said third
person has received the goods and the place of supply as such in this situation,
there are three parties involved:
a) The Supplier
b) The Recipient
c) The third party on whose instructions the goods are delivered.
The first party is the supplier of goods who delivers the same to the second party,
the recipient. This delivery is however, on the instructions of a third party I. e., the
buyer who may be acting as an agent or on his own account. It is deemed that the\
third person has received goods and the place of supply is the principal place of
business of third person.

Example:
Mr. C of Chennai received purchase order from Mr. H of Hyderabad for want of commercial
goods. Now supply involves movement of goods by supplier from Chennai to Hyderabad by
road in a truck. Upon the direction of Mr. H of Hyderabad these goods are redirect to
Branch office of Mr. H located in Vijayawada by way of transfer of documents of title to the
goods (i.e. Lorry Receipt or LR copy).

Place of supply goods = Hyderabad.

IGST will be levied.
It shall be deemed that the said third person has received the goods and the Place of Supply
of such goods shall be the principal place of business of such person.

Example:
A of ‘Maharashtra’ supplied goods to B of ‘Delhi’. When goods start moving B instructs the
supplier i.e, Mr. A to deliver goods to Cat Ahmadabad on his behalf.

Now, in this example, the place of supply will be Delhi as per section 10(1)(b) of IGST Act,
2017.

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Place of business of
Place where
the third person on
Location of goods are Place of Whether Inter-state or
Case whose instruction
supplier received by supply Intra-state
goods are supplied
the recipient
to the recipient
1 Delhi Himachal Himachal Pradesh Himachal Inter-state (IGST)
Pradesh Pradesh payable at Delhi
2 Himachal Haryana Himachal Pradesh Himachal Intra-state (CGST &
Pradesh Pradesh SGST at Himachal
Pradesh)
3 Punjab Punjab Punjab Punjab Intra-state (CGST
+SGST at Punjab)
4 Lucknow Chandigarh Delhi Delhi Inter-state (IGST) at
Uttar Pradesh
5 Jaipur Jaipur Uttar Pradesh Uttar Inter-state (IGST)
Pradesh payable at Jaipur
6 Chandigarh Himachal Himachal Pradesh Himachal Inter-state (IGST)
Pradesh Pradesh payable at Chandigarh
7 Varanasi Maharastra Shimla Shimla Inter-state (IGST)
payable at Varanasi

3. Supply does not involve movement of goods [Section 10(1)(c) of the IGST Act,
2017]:

Nature of supply Place of supply of goods

Where the supply does not involve Location of such goods at the time of the
movement of goods, whether by the delivery to the recipient
supplier or the recipient. (This place of supply is irrespective of the
location of the buyer and seller)
As per section 10(1)(c) “where the supply does not involve movement of goods,
(whether by the supplier or the recipient), the place of supply shall be the location
of such goods at the time of the delivery to the recipient”. Here, it is not intended to
cover cases where it is difficult to move, but to cover those cases where the supply
demands that good ought not to move.
If the supply does not involve movement of goods, the place of supply is the
location of goods at the time of delivery to the recipient.

Example: 1
X took a building on rent from Mr.Y. He bolted a machinery on the floor of the
building. After three years he vacated the building but agreed with the landlord to
leave behind the machinery for the landlord without dismantling it.
The supply of machinery by the tenant to the landlord does not involve
movement of goods and place of supply shall be where the machine is fixed.

Example: 2
A and B both located in Kerala. B comes to shop of A. A delivered goods to B. What
is the place of supply of goods. Which levy will attract?

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Answer:
Place of supply goods = Kerala.
CGST & SGST will be levied
Location of such goods at the time of the delivery to the recipient.
This is irrespective of the location of the buyer and seller.

Example: 3
M/s Karina Ltd. incorporated in Mumbai and own a godown in Chennai. Mr. M of
Mumbai approached M/s Karina Ltd. of Mumbai for purchase of goods lying in
godown at Chennai. Mr M further informs that he does not want delivery of goods
in Mumbai. M/s Karina Ltd. issues invoice for sale of goods in Mumbai.
Find the place of supply of goods and levy of tax?
Place of supply goods = Chennai

Answer:
IGST will be levied
Location of such goods at the time of the delivery to the recipient where Supply
does not involve movement of goods.
This place of supply is irrespective of the location of the buyer and seller.

Example: 4
M/s X Ltd has place of business in Chennai, being an NBFC given an asset under
financial lease to M/s ABC Ltd. of Chennai. The said asset so far used by M/s ABC
Ltd in their factory located at Hyderabad. At the end of lease period the said asset
acquired by M/s ABC Ltd. at a nominal amount. Find the place of supply of goods
and levy of GST.

Answer:
Place of supply of goods = Hyderabad.
IGST will be levied. Since, there is no movement of goods from one place to
another, provisions of Sec. 10(1)(c) of IGST applicable.

4. Goods are assembled or installed at Site [Sec 10(1)(d) of IGST, 2017]:

Nature of supply Place of supply of goods

Where the goods are assembled or installed Place of such installation or assembly
at site.

As per section 10(1) (d), ‘where the goods are assembled or installed at site, the
place of Supply shall be the place of such installation or assembly”. It is important
to distinguish this installation or assembly from “works contract”. Work contract
under GST is treated as supply of services and the provisions of this section are
therefore not applicable. Thus, if the supply involves goods which are to be
installed or assembled at site, the place of supply is the place of supply is the place
of such installation or assembly.

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Place where Place of

Location of Place of Whether inter-
Case goods are business of the
supplier supply state/ intra-state
installed recipient
Inter-state
Himachal Himachal Himachal
1 Delhi (IGST)payable at
Pradesh Pradesh Pradesh
Delhi
Inter-state
Himachal Himachal
2 Haryana Haryana (IGST)payable at
Pradesh Pradesh
Himachal Pradesh
Inter-state
3 Nagpur Punjab Goa Punjab (IGST)payable at
Nagpur
Inter-state
4 Lucknow Chandigarh Delhi Chandigarh (IGST)payable at
Uttar Pradesh
Inter-state
Uttar Uttar
5 Jaipur Shimla (IGST)payable at
Pradesh Pradesh
Jaipur
Inter-state
Himachal Himachal Himachal
6 Chandigarh (IGST)payable at
Pradesh Pradesh Pradesh
Chandigarh
Intra-state (CGST
7 Varanasi Varanasi Maharashtra Varanasi and SGST)payable
at Varanasi
Example: 1
Mr. D located in New Delhi, place order on Mr. Delhi of New Delhi for installation of Air-
condition machine in his factory located in Chennai. Mr. D procures the Indoor and out-
door units, set of plugs, electrical cables, distribution boards and other items from different
States in India and arranges for delivery in Chennai. The said machine assembled by Mr.
Dehli in Chennai. Find the Place of supply of goods and levy tax?
Answer:
Place of supply of goods = Chennai
Mr. Delhi is liable to pay IGST.

Example: 2
A purchases a machine from B, where both A and B are in Delhi. The machine, however,
needs to be installed in Faridabad (Haryana) as the machine is installed in Faridabad.
Location of supplier Delhi, place of supply Haryana: IGST will be applicable.

5. Goods supplied on a vessel/conveyance [Section 10(1)(e) of IGST Act, 2017]:

Nature of supply Place of supply of goods
Where the goods are supplied on board a Location at which such goods are taken on
conveyance including a vessel, an aircraft, a board.
train or a motor vehicle.

As per section 10(1)(e), “where the goods are supplied on board a conveyance,
including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be
the location at which such goods are taken on board. The supplier may himself

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supply the goods to passengers, like salesman of a particular company selling pack
eatables which they carry along specifically for the purpose of sale or the goods
sold to the operator of the conveyance and the operator selling to the travelling
passengers. In the second case, there are two supplies, the first is the supply with
the operator of the conveyance and second is the supply by the operator of
conveyance to the passengers on board during the journey.

The place of supply of goods supplied on board a conveyance like aircraft, train,
vessel, motor vehicle, etc. is the location where such goods have been taken on
board. These goods are sold during the journey on board a conveyance.
Example: 1
Chennai express train going form Chennai to Cochin, M/s X Ltd. located in Cochin has
supplied the food which are given to passengers during night time. The food packets are
loaded at Chennai Central Station, Chennai.
Find the place of supply of goods and levy of GST?
Answer:
Place of supply of goods = Chennai
M/s X Ltd. is liable to pay IGST.

Example: 2
Mr. C of Chennai supplied goods to M/s Spice Jet Airlines of Chennai flying between Delhi-
Mumbai. The goods are loaded in the aircraft in Delhi. Find the place of supply of goods and
levy of tax?
Answer:
Place of supply of goods = Delhi
Mr. C of Chennai is liable to pay IGST.

Example: 3
Mr Z boarded the train at New Delhi for its destination Mumbai. He carried some goods
with him for the purpose of sale during the journey. Then the train reaches Surat, he sells
certain goods. Now, in this case place of supply of such goods will be New Delhi i.e, the
location at which the goods are take on board.

Place where
Place where the goods
goods are are supplied Whether Intra-
Location of Place of
Case taken on to the state or inter-
supplier supply
board a passenger state
conveyance during
journey
1 Delhi Delhi Delhi Delhi Intra-state
Inter-state (IGST)
Himachal Himachal payable at
2 Punjab Punjab
Pradesh Pradesh Himachal
Pradesh
3 Nagpur Rajasthan Nagpur Rajasthan Inter-state (IGST)

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payable at
Nagpur
Inter-state (IGST)
4 Lucknow Delhi Delhi Delhi payable at
Lucknow
Intra-state CGST
5 Chennai Chennai Surat Chennai & SGST payable
at Chennai
Inter-state (IGST)
Himachal
6 Chandigarh Haryana Haryana payable at
Pradesh
Chandigarh

6. Place of Supply of goods cannot be determined [Section 10(2) of the IGST Act,
2017]:
Nature of supply Place of supply of goods
Anything not covered under sub-section (a) Determined in such manner as may be
to (e) of Section 10(1) of the IGST Act, 2017 prescribed (i.e. as recommended by GST
Council)
Where the place of supply of goods cannot be determined, the place of supply shall
be determined in such manner as may be prescribed. Where none of the above
provisions are applicable to determine the place of supply of goods, the Central
Government will prescribe rules on the recommendations of the GST Council
regarding the manner of its determination. However, it must be ensured before
taking recourse to residual provisions that the Supply is one which is not already
covered by any of the earlier sub-sections.

Place of supply of goods imported into or exported from India [Sec. 11 of the
IGST Act, 2017]:
Place of supply of goods where the goods are imported into or exported from India
will be determined in accordance with section 11 of the IGST Act. Import of goods
is defined in section 2 (5) of the IGST Act and export of goods is defined in section
2(10) of the IGST Act. It must be noted that the payment in convertible foreign
exchange is not a criterion for determining import and export of goods but it is
relevant in case of services and transaction involving goods treated as services.
Another aspect worth noting is, if the goods move from one foreign country to
another foreign country without entering into India it will not be a supply in
taxable territory even if the supplier is in India.
The place of supply in cases involving import and export of goods is determined as
per the provisions of section 11 of the IGST Act, 2017.
Nature of supply Place of supply of goods
Import into India Location of the importer
Export from India Location of outside India

Conclusion: IGST – Levy

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Export of Goods
When goods are exported from India, then the place of supply of such goods shall
be the location outside India i.e. the place where the goods have been exported.
“Export means taking goods out of India to a place outside India". Such export of
goods have been treated as inter-state supply but no GST is payable as it has been
declared as Zero rated supplies.

Import of Goods
If the goods have been imported into India, the place of supply of goods is the place
where the importer is located. In this regard, import has been defined as bringing
into India from a place outside India. It is treated as inter-state supplies and it
attracts IGST along with Customs Duties. In the case of some products like pan
Masala, GST compensation cess is also levied.

Import of Goods
Case Location Place where Place where Location Place of
of goods are located the goods are of supply
supplier before supply supplied Importer
1 England England Delhi Delhi Delhi
Not an
2 Haryana USA Denmark Punjab
import
3 USA USA Nagpur Delhi Delhi

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PLACE OF SUPPLY IN CASE OF SERVICES:

As per sec 12 of IGST Act, 2017, when the location of supplier of service and the
location of recipient of service is in India, the place of supply of services is
governed by

(a) General Provisions

(b) Specific Provisions

General Provisions [Sec 12 (2)] : These provisions are applicable only if the supply
does not fall in any of the specific cases.

SL Supply of services made to Place of supply of

service
a Registered Person (Recipient) location of Recipient
b Unregistered Person (Recipient) and location of location of Recipient
Recipient is available
c Unregistered Person (Recipient) and location of location of Supplier
Recipient is NOT available

Specific Provisions
SL Nature of transaction Place of supply of service
a (i) In relation to immovable property such as Location of immovable
interior decorator, Architects, Surveyors, property/boat/vessel (in
Engineers, Export/import agents, Co-ordination India)
of construction work etc.,
(ii) Grant of right to use immovable property Location of recipient (in
(iii) By way of lodging accommodation case of outside India)
(iv) By organizing marriages/reception etc.,
b Restaurant services/Fitness/Beauty and health Location of services
services
c Training and performance appraisal services B2B-Location of
Registered Recipient
B2C-Location of services
d Admission to events/amusement park/other Location of event
places
e Organization of events Reg Recipient-Location of
Recipient
Unregistered Recipient-
Location of event (in
India) & Location of
Recipient (outside India)
f Transportation of goods including mails Reg Recipient-Location of
Recipient
Unregistered Recipient-
Location of goods handed

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over.
g Passenger Transportation services Reg Recipient-Location of
Recipient
Unregistered Recipient-
Location of beginning of
journey.
h Service supplied on board a conveyance Location of the first board
point of departure
i Telecommunication services Place where device
installed
j Post paid Mobile services Billing address
k Pre paid /DTH services Address of the selling
agent
l Other cases Address of the recipient
m Banking, financial and stock broking services Location of recipient. If
address not available,
then location of supplier
n Insurance services Location of recipient
o Advertisement service to Govt. Respective State /Union
Territory where the
Advertisement is
broadcasted

Self-Evaluation Questions.

3. Why is the determination of place of supply important under the GST Laws?
4. How is the location of supplier of services determined?
5. Discuss the provisions for determination of place of supply of goods in the
domestic transactions under provisions.
6. List down the transactions when place of supply in domestic transactions is
determined under specific provisions.
7. How the location of recipient & supplier of services is defined for the purchase of
determining place of supply in case of domestic transactions? Also state the general
provisions for place of supply of services:
a. When the recipient is registered person
b. When the recipient is unregistered person
8. Determine the place of supply in the following cases:
a. Organisation of an event
b. Transportation of goods, including mails
c. Advertisement services to Government
d. Mobile connection

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VALUE OF SUPPLY

VALUE OF SUPPLY
Value of Supply in common terms is nothing but the amount paid by the recipient
of supply to the supplier as consideration for supply (also known as transaction
value). It means Value of supply is the figure upon which tax is levied and
collected.
It is important to know to ascertain correct value of supply for correct levy of GST.
Valuation rules determine value of goods or services or both on which tax under
GST has to be charged. Valuation rules have been prescribed under CGST Rules,
2017 for the purpose of determination of fair market value of goods or services or
both supplied by the registered person. It means valuation rules are helpful to
determine the value of supply where value not determined under Sec. 15(1) as
mentioned under Sec. 15(4) of CGST Act, 2017.

Methods of calculation of Value of Taxable Supply-An Over view

Section 15 (1) Transaction value is the value of supply
Section 15 (2) Inclusions in the value of suppky
Section 15 (3) Discount not to be included
Section 15 (4) When Sec 15 (1) is not applicable (Rule27 to 31)
Section 15 (5) About notified Goods/services (Rule 32)

In most of the cases of regular normal trade, the invoice value (i.e. transaction
value) is the taxable value, which is specified under section 15(1). However, when
value cannot be determined under section 15(1); and for certain specific
transactions, the value is determined using Chapter IV: Determination of Value of
Supply of CGST Rules.

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VALUE OF TAXABLE SUPPLY [SECTION 15(1),15(2) & 15(3)]

Section 15(1): the price is sole consideration for sale:
Under GST, the valuation is done based on the transaction value only if price is a
sole consideration where supplier and the recipient are not related.
Sole consideration means by paying GST on such consideration there is no revenue
loss to the department.

Value of a supply of goods and/or services shall be:

a)There are two basic conditions for application of Sec 15 (1)
i. Supplier and recipient are not related
ii. The price is the sole consideration for the supply
b) If these two conditions are met, then
Value of supply = Transaction value (Price paid or payable) + Certain elements
(Given in Sec 15(2)

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Explanation: For the purpose of the CGST Act, 2017:

Related Persons means (Sec 15):
(a) persons shall be deemed to be “related persons” if––
(i) such persons are officers or directors of one another’s businesses;
(ii) such persons are legally recognized partners in business;
(iii) such persons are employer and employee;
(iv) any person directly or indirectly owns, controls or holds 25% or more of
the outstanding voting stock or shares of both of them; (v) one of them
directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third person;
(vii) together they directly or indirectly control a third person; or
(viii) they are members of the same family;

(b) the term “person” also includes legal persons;

(c) persons who are associated in the business of one another in that one is the sole
agent or sole distributor or sole concessionaire, howsoever described, of the other,
shall be deemed to be related.

Section 15(1): the price is sole consideration for sale:

Under GST, the valuation is done based on the transaction value only if price is a
sole consideration where supplier and the recipient are not related.
Sole consideration means by paying GST on such consideration there is no revenue
loss to the department.

Value of a supply of goods and/or services shall be:

“Transaction Value (TV), that is the price actually paid or payable for the said
supply of goods and/or services” Where:
● The supplier and the recipient of the supply are not related and
● The price is the sole consideration for the supply.

Payment of taxes, duties, cesses, fees and charges [Sec. 15(2)(a) of CGST Act,
2017]:
Any taxes, duties cesses, fees and charges levied under any law for the time bring
in force other than CGST/ SGST/ UTGST/ IGST/ Compensation Cess shall be
added to the value of supply.

Supplies made by recipient on behalf of supplier [Sec. 15(2)(b) of CGST Act,

2017]:
The transaction value will include the amount which the supplier is so liable to pay
but it has been paid by the recipient of supply.

Commission and packing charges [Sec. 15(2)(c) of CGST Act]:

The transaction value will include commission and packing charges charged by the
supplier to the recipient of supply and transaction value to include any amount

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charged by the supplier for anything done in respect of supply either at the time or
before delivery of goods or services.

Example:
Mr. A is a seller of furniture. He supplied the furniture for Rs.5,75,000 to Mr. B with
the condition that to remove old furniture from the premises of Mr.B by charging
Rs.5,000. Find the value of taxable supply of goods in the hands of Mr. A.
Answer:
The value of taxable supply of goods is Rs.5,80,000.

Interest or late fee or penalty for delayed payment [Sec. 15(2)(d) of the CGST Act,
2017]:
It is specifically provided that interest or late fee or penalty for delay in payment of
any consideration for supply will form part of the value of supply.

Subsidy directly linked to the price (other than Govt. Subsidies) [Sec. 15(2)(e) of
CGST Act, 2017]:
Subsidy provided in any form or manner linked to the supply will also be included
in the transaction value.

Example:
Bharat Gas sells cooking gas cylinders. Subsidy directly transferred to the account
of the customer. Selling price per cylinder is Rs.800. Customer received subsidy
Rs.200 directly from Government to his bank account. Net outflow of the buyer is
Rs.600. Find the value of supply of goods (per cylinder) in the hands of Bharat Gas.

Answer:
Since, the amount of subsidy is directly credited to the account holder and not
received by the Bharat Gas making the supply. Therefore, such subsidy will not be
considered as part of transaction value as it is not received by the Bharat Gas
making the supply.
Hence, transaction value is Rs.800 per cylinder.

Example:
The Government provides subsidy, for the benefit of farmers but it is given to the
manufacturer of fertilizers. Such subsidy will form part of value of supply?
Answer:
The buyer of goods does not provide subsidy, but the Government as per the
scheme provides it.
Therefore, this will not form part of value of supply as it is specifically specified
that such subsidy provided by the Government will not form part of the value of
supply.

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Discount under GST [Sec. 15(3) of the CGST Act, 2017]:

Transaction value not available [Sec. 15(4) read with CGST Rules, 2017 (i.e.
Determination of value of supply)]:
Rule 27: Value of supply of goods or services where the consideration is not wholly
in money
(a) Open market value of such supply
(b) Sum total of consideration equal to money, if such amount is known at the time
of supply provided (a) not applicable.
(c) The value of supply of like kind and quality if (a) and (b) not applicable.
(d) Based on cost as per rule 30, if not as per residual method rule 31in that order,
provided (a) to (c) not applicable.

Rule 28: value of supply or goods or services or both between distinct or related
persons, other than through an agent
Rule 29: value of supply of goods made or received through an agent
Rule 30: value of supply of goods or services or both based on Cost.
Rule 31: Residual method for determination of value of supply of goods or services
or both

Rule 27: value of supply of goods or services where the consideration is not
wholly in money:
Valuation based on based on open market value of such supply.
(a) “Open market value” of supply of goods or services or both means the full value
in money, excluding the integrated tax, central tax, State tax, Union territory tax
and the cess payable by a person in a transaction, where the supplier and the
recipient of the supply are not related and price is the sole consideration, to obtain
such supply at the same time when the supply being valued is made.

Example:
Where a new phone is supplied for Rs.20,000/- along with the exchange of an old
phone and if the price of the new phone without exchange is Rs.24,000/-, the open
market value of the new phone is Rs.24000/-.

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Example:
Mr. A being a registered person sells TVs to all customers at Rs.45,000. He supplied
new TV for Rs.42,000 along with the exchange of an old TV. Find the open market
value of TV.
Answer:
Open market value is Rs.45,000.

Example:
M/s X Ltd is a manufacturer of car and sells the car in the open market at a price of
Rs.11,00,000. M/s X Ltd provided the car to his company auditor is only for
Rs.9,00,000. In return auditor provide auditing services to M/s X Ltd and charged
Rs. 5,000 with the condition that company will be provided the car at the price of
Rs.9,00,000. Find the value as per Rule 27(a), Determination of value of supply.
Answer:
Open market value of the car is Rs.11,00,000.
Therefore, M/s X Ltd transaction value should be Rs.11,00,000 on which GST will
be levied.

(b) Sum total of consideration equal to money, if such amount is known at the time
of supply provided open market value is not available.
The value of consideration which is non-monetary terms shall be determined in
monetary terms. The said value shall be added to the value in monetary terms in
determination of value of supply.

Example:
M/s X Ltd. is supplier of security services provided such services to M/s Y Ltd. As
per the contract M/s Y Ltd is to pay monthly Rs.1,00,000. In the month of
November M/s Y Ltd. supplied uniforms to all employees of M/s X Ltd. by
spending Rs.20,000. As a result M/s X Ltd. raised the bill for Rs. 80,000 in the
month of November. In the given case M/s X Ltd. received consideration for
security service is partially in terms of money Rs.80,000 and partially in kind (i.e
uniforms). Find the taxable value of service on which GST will be levied.

Answer:
GST will be levied on the value of Rs.1,00,000 (Rs.80,000 + uniforms equal to
monetary value of Rs. 20,000) in the hands of M/s X Ltd.

(c) The value of supply of like kind and quality if (a) and (b) not applicable:
If the value of supply is not determinable as per open market value and monetary
value of non-monetary values, the values of supply shall be of like kind and
quality.
Factors facilitates to determine value of supply:
• Goods or services of same kind and quality
• Identical or Similar nature
• Similar circumstances
• Comparison of various factors and so on…

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Example:
Guidelines Academy teaching or coaching budding CMA’s Tuition fee of
Guidelines Academy can be compared with another academy of same kind and
nature. It means we should not compare with home tuition of a faculty to 4th
Standard students.

Example:
Feather light chairs price compare with identical or similar nature product. It means
feather light product compare with Godrej chair products.

Example :
Canon heavy duty machines can not be compared with ordinary laser Jet printer.
Like wise interior decorator completed interior decoration of a residential house
measuring 1000 sq. ft cannot be considered as similar service for doing interior
decoration of 1000 sq. ft. of office area.

(d) Based on cost as per rule 30 or based on residual method as per rule 31 in that
order, provided (a) to (c) not applicable.
As per rule 30 of the CGST Rules, 2017 value of supply of goods or services or both
on cost. The value shall be 110% of the cost of production or manufacture or the
cost of acquisition of such goods or the cost of provision of such services.

As per Rule 31 of the CGST Rules, 2017 Residual method for determination of
value of supply of goods or services or both
It is provided that where the value of supply of goods or services or both cannot be
determined under rule 27 to rule 30 of the CGST Rules, 2017, value shall be
determined by using reasonable means consistent with the principles and the
general provisions of Sec. 15 and the provisions of this Chapter IV of the CGST
Rules, 2017.
It means to say that efforts should be made by proper officer to determine the by
using his best judgment assessment.

Determination of value in respect of certain supplies (Rule 32 of Chapter IV of

the CGST Rules, 2017):
Rule 32(1): Notwithstanding anything contained in the provisions of this Chapter,
the value in respect of supplies specified below shall, at the OPTION of the
supplier, be determined in the manner provided hereinafter.
Rule 32(2): Money changing services
Rule 32(3): Air travel agent of passenger transport
Rule 32(4): Life insurance business
Rule 32(5): Buying and Selling of second hand goods:
Redeemable voucher/coupons/stamp (other than postage stamp) [Rule 32(6) of the
CGST Rules, 2017]:
There are many companies who issues vouchers, coupons, stamp and so on the
basis of which goods or services can be procured by the holder of such
vouchers/coupons/stamps etc.

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Valuation:
The value of a token, or a voucher, or a coupon, or a stamp (other than postage
stamp) which is redeemable against a supply of goods or services or both shall be
equal to the money value of the goods or services or both redeemable against such
token, voucher, coupon, or stamp.

Value of service provided by one distinct person to another distinct person [Rule
32(7) of the CGST Rules, 2017]:
The value of taxable services provided by such class of service providers as may be
notified by the Government, on the recommendations of the Council, as referred to
in paragraph 2 of Schedule I of the CGST Act, 2017 between distinct persons as
referred to in section 25, where input tax credit is available, shall be deemed to be
NIL.

Value of supply of services in case of pure agent [Rule 33 of the CGST Rules,
2017]:
Pure Agent means a person who:
(a) Enters into a contractual agreement with the recipient of supply to act on their
behalf and incur expenditure or costs in the course of supply of goods or
services or both;
(b) Neither intends to hold nor holds any title to the goods or services (or both)
procured on behalf of or provided to the recipient of supply;
(c) Does not use the goods or services so procured for his own interest; and
(d) Receives only the actual amount incurred to procure such goods or services.

Rate of exchange of currency for determination of value [Rule 34 of the CGST

Rules, 2017]:
The rate of exchange for the determination of the value of taxable goods or services
or both shall be the applicable reference rate for that currency as determined by the
Reserve Bank of India (RBI) on the date of time of supply in respect of such supply
in terms of section 12 or as the case may be, section 13 of the Act.

Value of supply inclusive of integrated tax, State tax, Union territory tax [Rule 35
of the CGST Rules, 2017]:
Where the value of supply is inclusive of integrated tax or, as the case may be,
central tax, State tax, Union territory tax, the tax amount shall be determined in the
following manner, namely:-

This formula is very useful in case where supplier may treat the particular supply
as exempted from GST and therefore will not indicate the tax amount separately in
the bill of supply prepared by him. In fact it is taxable supply with GST. In such
case transaction value will be determined with help of rule 35.

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Self-Evaluation Questions.

1. What are the basic conditions for valuation of taxable supply under section 15(1) of
CGST Act, 2017?
2. What do you mean by “Related Parties” for the purpose of determination of value
of supply?
3. What is the meaning of Transaction value under GST? What elements included in
the transaction value?
4. State the provisions related to treatment of discount for the purpose of calculating
the transaction value.
5. Explain the valuation Principles in CGST Rules, 2017 in the following cases:
a. Consideration is not wholly in money
b. Supply between distinct or related persons
c. Supply through an agent
d. Value based on cost
e. Residual Method

**********

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Input Tax Credit:

INTRODUCTION:
When a registered, person purchases goods or avails services, GST is paid on such
inward supplies. These supplies are used for furtherance of business and the
outward supplies are made. On such outward taxable supplies, GST is collected
from the recipient. The total GST collected on outward supplies will not be payable
to the government in entirely, but it will get reduced on account of adjustment of
tax paid on inward supplies, subject to certain conditions. This mechanism in which
tax paid on inward supply is adjusted towards tax paid on outward supply is
known as Input Tax Credit (ITC). The GST laws provide the benefit of ITC not only
on input goods/ services but also on capital goods. This ITC available reflects in the
electronic credit ledger of the tax-payer maintained at the GST common portal. In
this chapter, we will discuss the various aspects of ITC like conditions,
circumstances, manner of computation, reversal etc.
MEANING OF INPUT TAX CREDIT:
As per section 2(63) of the CGST act, 2017 “input tax credit” means the credit to
input tax. Input tax is defined under section 2(62) of the CGST act as follows:

It means the central tax, state tax, integrated tax or union territory tax charged on
any supply of goods or services or both made to a registered person but does not
include the tax paid under the composition levy.

It shall also include:

a) The integrated goods and services tax which is charged on import of goods

b) The tax payable as per section 9(3) and (4) of the CGST act

c) The tax payable as per section 5(3) and (4) of the IGST act

d) The tax payable as per section 9(3) and (4) of the respective SGST act

e) The tax payable as per section 7(3) and (4) of the UTGST act.
Example
Suppose Mr. A is a registered wholesaler in Mumbai. He purchased goods worth
Rs.5,00,000 from Mumbai and paid GST @12%. After value addition and profit
margin, Mr. A sold these goods to Mr. B (a registered dealer in Maharashtra state)
for Rs.9,00,000 and charged GST @12% on it. Now,

GST paid on inward supply GST collected on outward supply

CGST 6% of Rs.5,00,000 = Rs.30,000 6% of Rs.9,00,000 = Rs.54,000

SGST 6% of Rs.5,00,000 = Rs.30,000 6% of Rs.9,00,000 = Rs.54,000

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It is clear that Mr. A has input tax credit of CGST and SGST for Rs.30,000 each.
Now, Mr. A will pay Rs.24,000 each as net GST. This amount has been arrived at
after deducting Rs.30,000 already paid at the time of purchase of goods. This benefit
or system of adjustment of “GST paid on inward supplies” towards “GST on
outward supplies” is called as Input Tax Credit.

RATIONALE BEHIND ITC UNDER GST

The credit mechanism under the indirect tax aims to mitigate the cascading effect of
duty on duties. It provides for credit of duties paid on goods or services which are
used as inputs in production of output goods or provision of output services. This
aim was not achieved to the fullest as various duties, taxes and cess were levied at
the central and state levels and all were not adjusted against each other. With the
introduction of GST, credit on goods and services is available across the entire
supply chain barring a few exceptions. It may be noted that it is an auto populated
feature.

LEGAL FRAMEWORK OF ITC

The various provisions related to INPUT TAX CREDIT (ITC) are given under
Chapter 5 (section 16-21) of the CGST act and CGST rules. These provisions of ITC
under CGST are also applicable to the IGST act. Section 20 of the IGST act has made
the provisions applicable. The aspects covered under various sections are:

Section 16: Eligibility and conditions for input tax credit.

Section 17: Apportionment of credit and blocked credits

Section 18: Availability of credits in special circumstances

Section 19: Taking input tax credit in respect of inputs and capital goods sent for
job work.

Section 41: Utilization of ITC

Section 42: Matching, Reversal and Reclaim of ITC.

ELIGIBILITY FOR AVAILING ITC [SECTION 16(1)]

As per section 16(1), “Every registered person shall, subject to such conditions and
restrictions as may be prescribed and in the manner specified in section 49, be
entitled to take credit of input tax charged on any supply of goods and services or
both to him which are used or intended to be used in the course or furtherance of
business and the said amount shall be credited to the electronic credit ledger of
such person.”
The analysis of the above statutory provision reveals the following:

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1. Registered Person: As per section 16(1), input tax credit is available only to a
registered person. When a registered person is supplied with goods or services or
both, on which tax has been charged, he is allowed to take credit of the input tax
paid. This means, if a person is unregistered, he will not be eligible to claim Input
Tax Credit.

Exception: There is one exception wherein ITC is not available although the person
is registered. This exception applies to a person who pays tax under section 10 of
the CGST Act, under the compounded levy scheme. Such person cannot claim ITC
in respect of inward supplies made by him. In-fact, the tax paid under composition
levy does not fall within the definition of input tax.

2. In the course or furtherance of business: The goods or services must be used or

intended to be used in the course or in furtherance of his business. However, no
such credit is available in respect of inputs used for outward supply of exempted
goods or services.
3. Credit Ledger: The amount of ITC shall be credited to the Electronic Credit Ledger
of the person entitled.

4. Manner of Utilisation: The ITC shall be utilized in the manner specified in section
49. (Please refer Para 11.11 for detail)

5. Rules under CGST Rules, 2017: The conditions and restrictions have been
specified in Chapter V of CGST Rules, 2017 (Rule 36 to Rule 45).

CONDITIONS FOR AVAILING ITC [SECTION 16(2)]

The registered person is entitled to the credit of any input tax credit on fulfilment of
following conditions:

(a) Possession of Tax Invoice or Debit Note

(b) Receipt of Goods and Services

(c) Payment of tax to the Government

(d) Filing of Valid Return

NOTE: The above conditions are given in section 16(2), which starts with
“Notwithstanding anything contained in this section….”. It means that it is over-
riding section. Moreover, these conditions are cumulative; therefore, they all must
be satisfied in order to be eligible for availing tax credit.

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1. Tax Invoice or Debit Note [Section 16(2)(a) of the CGST Act, 2017]:
As per section 16(2)(a), no registered person shall be entitled to the credit of any
input tax in respect of any supply of goods or services or both to him unless, he is
in possession of tax invoice of debit note issued by a supplier registered under this
Act. As per Rules 36(1), any of the following documents suffice the condition of
possession of Invoice –

(a) an invoice issued by the supplier of goods or services or both

(b) an invoice raised by the recipient in case of inward supplies from

unregistered person.

(c) a debit note issued by supplier of goods or services or both

(d) a bill of entry or any similar document prescribed under Customs Act, 1962

(e) an Input Service Distributor invoice or Input Service Distributor credit note
or any other document issued by the input service distributor for
distribution of credit.

These documents must have all the particulars as specified in the provisions of
Chapter VI and all relevant particulars prescribed in Rule 46 of the CGST Rules
such as the name address, GST Number, HSN code of goods and services,
description of goods and services etc.

The section does not specify which copy of the invoice will be the basis of taking
ITC. However, Rule 48 does not clarify that original copy should be kept by the
recipient for the purposes of record.
Exception:
No input tax credit shall be availed by a registered person in respect of any tax has
been paid in pursuance of any order, where any demand has been confirmed on
account of any fraud, willful misstatement or suppression of facts.
2. Receipt of Goods or Services or both [Section 16(2)(b) of the CGST Act, 2017]:
As per section 16(2)(b), the registered person should have received the goods or
services or both. This means the ITC will not be availed unless the goods are
received by the registered person.

Example:

ABC Limited has purchased goods from XYZ Limited and PQR Limited For ₹
90,000 and ₹ 2,00,000 respectively. In respect of both the supplies, the invoice has
been received. The goods were received in April 2018 (from XYZ Limited) and in
May (from PQR Limited). Now in this example, the ITC is admissible on ₹ 90,000
only for the month of April 2018. The ITC as regards supplies from PQR for ₹

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2,00,000 shall not be available in April. Since the goods are received in the month of
May, the ITC shall be available in May, 2018.
When goods are deemed to have been received:
Statutory Provision:
As amended by the central GST (Amendment) Act, 2018 the Explanation to section
16(2) clarifies, “for the purpose of this clause, it shall be deemed that the registered
person has received the goods or, as the case, may be services-

i. Where the goods are delivered by the supplier to a recipient or any

other person on the direction of such registered person, whether
acting as an agent or otherwise, before or during movement of goods,
either by the way of transfer of documents of title to good or
otherwise.

ii. Where the services are provided by the supplier to any person on the
direction of an account of such registered person”.

Analysis of the Provisions:

➢ It is not necessary that the goods are delivered to the buyer only. Where the
goods are delivered by the suppliers to a recipient or any other person on the
direction of such registered person, whether acting as an agent or otherwise,
it shall be deemed that the registered person has received the goods.

➢ In the principle the person who wants to avail ITC must have received the
goods or services but he may even direct that goods or services may be
delivered to another person i.e., a third party through transfer of documents
of title of goods or otherwise. He may do so either before or during the
movement of goods. This exceptional transfer is known as “Bill to ship to
Model” Thus, even if the goods and/or services are directed to be delivered
to a third person, the person who is directing is the deemed recipient of
goods and/ services under the act.

Example:

X of Delhi agreed to supply goods to Mr. Y of Bombay. As a part of agreement,

these goods are to be delivered to Z at Ahmedabad. This is “Bill to ship to Model”
and Y shall be treated as deemed recipient and shall be eligible for the ITC. In other
words, Mr. Z who is actually receiving the goods will not be eligible for ITC on
such transactions.

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3. Payment of Tax to the Government Sec 16(2)(c) of the CGST Act, 2017:
As per section 16(2)(c), the third essential condition is that the tax should have
actually been paid to government on the goods or services for which ITC is being
taken. This payment can be done by the supplier either:-

(a) Making the payment through cash or

(b) Through utilization of ITC

However when the recipient claims ITC, is provisionally allowed to be utilized for
making the payment of self-assessed tax on outward supply, before matching in
common portal. It is later on verified after filing of GSTR 3.
4. Filing of Valid Return Sec. 16(2)(d) of the CGST Act, 2017:
As per section 16(2(d), the fourth essential condition is that the registered person
should have furnished the return under section 39.

The return has to be filed before 20th of the month succeeding the month in which
the supplies were received. This return must be furnished in form GSTR-3 and
must contain all the details of inward supplies.

NO ITC IF DEPRECIATION IS CLAIMED ON TAX COMPONENT [SECTION

16(3)]:
Where the registered person has claimed depreciation on the tax component of the
cost of capital goods and plant and machinery under the provisions of the Income
tax act, 1961.
The input tax credit on the said tax component shall not be allowed. It is clear that
in respect of tax paid on such items, double benefit cannot be claimed under GST
laws and Income tax act, 1961 simultaneously. Therefore, the assesse has the option
to either claim deprecation on tax component of capital goods by capitalizing the
capital goods inclusive of tax in the books of account or to claim ITC. A person is
not allowed to take the dual benefit under two different laws simultaneously.

Example:

Z limited purchased a machine for Rs.15,00,000 plus GST @ 18%. The machine has
been capitalized in the books at Rs.17,70,000 (i.e., inclusive of GST paid).
Accordingly, the depreciation was claimed for Rs.2,65,500 (i.e., 15% of Rs.17,70,000)
under the Income Tax act. Since depreciation is claimed on tax (GST) component of
cost of machinery, the ITC shall not be allowed.

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TIME LIMIT FOR AVAILING THE ITC [SECTION 16(4)]:

A registered person shall not be entitled to take input tax credit in respect of any
invoice or debit note for supply of goods or services or both after:

• The due date of furnishing of the return under section 39 for the month of
September following the end of financial year to which such invoice relating to
such debit note pertains.,

OR

• Furnishing of the relevant annual return.

Whichever is earlier.
In other words, the ITC on invoices or on debit notes relating to invoices which
pertain to a particular financial year must be availed before the earlier of the
following:

Earlier of

The due date of filing of return Date of filing the annual return
for the month of September of the relevant financial year,
immediately following the end the due date for which is 31st
of financial year i.e., 20th OR December of succeeding
October financial year.

As per section 39(1), due date of As per section 44(1), annual

filing of return for every return for every financial year
calendar month is 20 days from is to be furnished on or before
the end of the calendar month. the 31st December following the
It means the return for the end of such financial year.
month of September is to be
furnished by 20th October.

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