GST : Practitioner's Perspective

Committee for Members in Practice (CMP)

GST : Practitioners Perspective

Committee for Members in Practice (CMP)

The Institute of Chartered Accountants of India
(Set up by an Act of Parliament)
New Delhi
Message from President, ICAI

In a major transformational taxation reform, Goods and

Services Tax (GST) which is a comprehensive tax on supply
of goods or services or both has been implemented in India
from 1st July, 2017. The implementation of GST integrates
State economies and boost overall growth with an objective
of unified Indian market on the principle of “One Nation, One
Tax, One Market”.

As per the CGST Act, Practising CAs may render their

services as GST Practitioner, which defines the expression
‘GST Practitioner’ as any person who has been approved under section 48 (1) and
which empowers him to act as such practitioner with respect to furnishing of returns of
the registered taxable person. ICAI plays a crucial role in GST knowledge
dissemination amongst all stakeholders by way of technical publications,
newsletters, webcasts, conferences, etc. In view of the above, the Committee for
Members in Practice (CMP) of ICAI has come up with this e-book on ‘GST:
Practitioner’s Perspective’ which compiles Charge of Tax, Meaning and Scope of
Supply, Meaning of Goods and Services, Exempt Supplies, Payment under Reverse
Charge, Time of Supply, Valuation, Place of Supply, Composition Levy, Electronic
Commerce Operator and Collection of tax at source, Tax deduction at source,
Registration, Tax Invoice, Debit and Credit Notes, GST e-invoicing, Classification of
goods and services, Input Tax Credit, GST returns, Payment of tax and interest,
Refund of taxes, Assessment and Audit, Demand, Recovery and Adjudication,
Accounts and other records, Advance Ruling, Appeals, Offences and Penalties,
Inspection, Search and Seizure, Arrest, Prosecution and Compounding & E-way Bill.
This book is intended to provide knowledge and guidance on GST as a whole to the
CAs in Practice.

I congratulate CA. Satish Kumar Gupta, Chairman, CA. Prasanna Kumar D., Vice
Chairman and all other members of the Committee for Members in Practice of ICAI
for taking this initiative for the benefit of members.

I am sure that the said e-book will be a great aid for Practising Members & CA firms in
their professional pursuits and will help them to discharge professional services to all
stakeholders more efficiently.

CA. Atul Kumar Gupta

President, ICAI
Message from the Chairman, CMP, ICAI

Dear Professional Colleagues,

We are delighted on behalf of the Committee for Members in

Practice (C M P) to present the E-book on ‘‘G S T:
Practitioner’s Perspective’’ on the various aspects GST
Practice for the Members in Practice which will be provided
free of cost to all the Members of ICAI through the Institute’s
website www.icai.org.

Over a period of time, the Indirect Taxes have become a

significant source of revenue for the government. The system relating to indirect
taxation has undergone major transformation since 1991 with the country embracing
liberalisation and globalisation as the themes for growth. This journey continued with
introduction of service tax at central level, value added tax at state level, and is still
continuing by way of various amendments made in the indirect tax laws. GST
practitioners are governed by section 48 of the CGST Act, 2017 and Rules 83 and 84
CGST Rules, 2017 which provide for conduct, procedure, functioning etc of GST
practitioners. Section 48 of CGST Act, 2017 provides for the authorisation of a CA in
Practice person to act as approved GST practitioner. A registered person may
authorise an approved GST practitioner to furnish information, on his behalf, to the
Government. In other words, GST practitioner shall provide services to any
registered person. The aforesaid E-book is a perfect tool which will provide the
practitioners with all requisite information with regard to GST to the Practitioners

I am indebted to the CA. Atul Gupta, President, ICAI & CA. Nihar Niranjan
Jambusaria, Vice President, ICAI for the tremendous support that they have given
since the instigation of the aforesaid book.I also wish to acknowledge the
contributions made by CA. Prasanna Kumar D., Vice Chairman, CMP, ICAI for the
said publication. I deeply appreciate the efforts of CA. Mohd. Salim, contributor and
Yash Dhadda, contributor for reviewing the said book contributed in his best way for
preparing the aforesaid book for Members in Practice & CA Firms. The aforesaid
book has been put together through the selfless efforts of CA. Prasanna Kumar D.,
Vice Chairman, CMP, ICAI, My Council Colleagues, Co-opted Members of the
Committee who have drawn on years of valuable experience to present the same in
best possible way. I also appreciate the efforts put in by Dr. Sambit Kumar Mishra,
Secretary, CMP, ICAI and other officials of the Committee.

CA. Satish Kumar Gupta

Chairman, Committee for Members in Practice, ICAI
 Contents
S.No. Chapter Page No.
1 Introduction 1
2 Charge of Tax 11
3 Meaning and Scope of Supply 22
4 Meaning of Goods and Services 43
5 Exempt Supplies 47
6 Payment under Reverse Charge 55
7 Time of Supply 72
8 Valuation 81
9 Place of Supply 97
10 Composition Levy 110
11 Electronic Commerce Operator and Collection of tax at 118
source
12 Tax deduction at source 130
13 Registration 135
14 Tax Invoice, Debit and credit Notes 146
15 GST e-invoicing 164
16 Classification of Goods and Services 172
17 Input Tax Credit 176
18 GST returns 197
19 Payment of tax and interest 220
20 Refund of taxes 232
21 Assessment and Audit 243
22 Demand, Recovery and Adjudication 262
23 Accounts and other records 285
24 Advance Ruling 288
25 Appeals 295
26 Offences and Penalties 305
27 Inspection, search and seizure 314
28 Arrest, Prosecution and Compounding 320
29 E-way Bill 330
30 Anti-Profiteering in GST 341
31 Job Work 346
 Chapter 1

Introduction
1.1 Background
The earlier system of indirect taxation had multiplicity of taxes levied by the
Centre and the State which had led to a complex and conflicting principles in
indirect tax structure, adding to the multiple compliance and administrative
costs. There was no uniformity in tax rates and structure across States.
There was cascading of taxes due to ‘tax on tax’. There were too many
restrictions on seamless credit availability, i.e., credit of excise duty and
service tax paid at the stage of manufacture was not available to the traders
while paying the State level sales tax or VAT, and vice-versa. Further, no
credit of State taxes paid in one State could be availed in other States. (CST)
Finally, India has moved into Goods and Services Tax (GST) regime from 1-7-
2017. Under GST regime large number of Central and State taxes have been
subsumed into a single tax viz GST, and is meant to mitigate the cascading
effect of taxes, provide near seamless credit and make way for a common
market.

1.2 What is GST (Goods and Service Tax)?

GST is a destination based tax and levied at a single point at the time of
supply of goods or services. GST is based on the principle of value added
tax. GST law emphasizes on voluntary compliance and on accounts based
reporting and monitoring system. It is a comprehensive levy where uniformity
of tax (same Tax rate for a given commodity throughout the Country) is
accomplished.
The Destination based tax implies that tax accrues to the taxing authority
which has jurisdiction over the place of consumption which is termed as
place of supply. Under the GST law the tax is shared between the Central
Government and the State Government or Union territory where the place of
supply of goods or services or both exists. Usually the place of supply is the
place where the goods or services are consumed.
Internationally, GST was first introduced in France and now more than 160
countries have introduced GST. Most of the countries, depending on their
GST : Practitioners Perspective

own socio-economic formation, have introduced National level GST or Dual GST.
Definition of Goods and Services Tax (GST) - The term GST is defined in
Article 366 (12A) of the Constitution to mean “any tax on supply of goods or
services or both except taxes on supply of the alcoholic liquor for human
consumption”.
It may be noted here that the taxable event under GST is ‘supply’ for goods
as well as services. The term ‘supply’ is the wider term than ‘sale’, due to
which stock transfers, branch transfers will come under ambit of GST. For
discussion on what constitutes a supply and what is meaning of ‘goods’ and
‘services’ please refer to Chapter 2.

1.3. Dual GST model

India is a federal country where both the Centre and the States have been
assigned the powers to levy and collect taxes through appropriate legislation.
Both the levels of Government have distinct responsibilities to perform
according to the Division of Powers prescribed in the Constitution for which
they need to raise resources. Accordingly a dual GST model has been
incorporated in the GST law keeping with the Constitutional requirement of
Fiscal Federalism.
It is important to note here that many countries in the world have a single
unified GST system. However in federal countries like Brazil and Canada, a
dual GST system is prevalent whereby GST is levied by both the Federal and
State or Provincial Governments
Under the dual GST model the Centre and States would be simultaneously
levying tax on a common tax base. The GST to be levied by the Central
Government on intra-State (within the State) supply of goods and / or
services would be called the Central Tax (Central goods and services tax)
and that to be levied by the States/ Union territory would be called the State /
Union Territory Tax (State /Union territory goods and services tax). Similarly,
Integrated Tax (Integrated goods and services tax) which will be equivalent
to the State / Union Territory Tax and Central Tax, will be levied and
administered by Centre on every inter-State (outside State) supply of goods
and services.
As per Article 246A(1) of the Constitution of India, the powers to levy GST
have been given to Centre and States concurrently and both are empowered
to levy GST on supply of services in the cases of intra State supplies.

2
 Introduction

Further as per Article 269A(1) of Constitution, GST on supplies in the course

of inter- State Trade or commerce shall be levied and collected by Govt. of
India and apportioned between Union and States in the prescribed manner.

1.4. Concept of inter-State and intra-State supply

Inter-State supply means supply of goods or services or both where the
location of the supplier and the place of supply are in two different States /
Union territories or in a State and a Union territory. It also includes Export
and imports and supply to or by a SEZ Developer or SEZ unit.
Intra-State supply means supply of goods or services or both where the
location of the supplier and the place of supply are in the same State / Union
territory and excludes supply to or by a SEZ Developer or SEZ unit.
The above definitions are given under Section 7 and 8 of the IGST Act, 2017. For
detailed discussion please refer to Chapter 2.

1.5. Applicable taxes under GST law

Under GST law following taxes are charged :
(a) Central Tax: It means Central goods and services tax levied under
Section 9. (Section 2(21) of CGST Act)
This tax is levied on intra-State supply of goods or services or both
and collected by the Central Government under CGST Act.
(b) State Tax: It means the tax levied under any State Goods and
Services Tax Act (Section 2(104) of CGST Act).
This tax is levied under respective SGST Act on intra-State supply of
goods or services or both and collected by State Government/ Union
Territory with legislature.
(c) Integrated Tax: It means the Integrated goods and services tax levied
under the Integrated Goods and Services Tax Act / this Act. (Section
2(58) of CGST Act / Section 2(12) of IGST Act).
Integrated tax is levied on Inter-State supply of goods or services or
both and collected by Central Government under IGST Act. The tax
rate of integrated tax would be equivalent to the total of Central Tax
and State Tax.

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GST : Practitioners Perspective

(d) Union Territory Tax: It means the Union territory goods and services
tax levied under Union Territory Goods and Services Tax Act/ this Act.
(Section 2(115) of CGST Act/ Section 2(9) of UTGST Act).
This tax is levied under UTGST Act on supply of goods or services or both
Intra Union territory which are without Legislature and collected by such
Union Territory. This would be equivalent to State Tax.

1.6. Governing Acts of GST

The levy of GST would currently be governed by thirty four Acts which are as
under:-
(a) Central Goods and Services Tax (CGST) Act, 2017: It contains 21
chapters and 174 sections and the purpose of this Act is to make a
provision for levy and collection of tax on intra-State supply of goods
or services or both by the Central Government and the matters
connected therewith or incidental thereto. This Act is the primary law
for GST and contain the main definitions and provisions relating to
Administration, levy and collection of tax, time and value of tax, input
tax credit, registration, tax invoice, credit and debit notes, accounts
and records, returns, payment of tax, refunds, assessment, audit,
inspection, search, seizure and arrest, demands and recovery, liability
to pay in special cases, advance ruling, appeals and revisions,
offences and penalties, transitional provisions and other miscellaneous
provisions.
For implementation of the provisions of CGST Act, 2017, CGST Rules,
2017 have also been notified which contains 19 Chapters and 162
Rules.
(b) Integrated Goods and Services Tax (IGST) Act, 2017: It consists of
9 chapters and 25 sections and purpose of this Act is to make a
provision for levy and collection of tax on inter-State supply of goods
or services or both by the Central Government and the matters
connected therewith or incidental thereto. This Act contains certain
definitions not mandated in CGST Act and also contains the provisions
related to administration, levy and collection of tax. Further it contains
the provisions which do not exist in CGST Act viz determination of
nature of supply, place of supply of goods or services or both, refund
of integrated tax to international tourist, zero rated supply,

4
 Introduction

apportionment of tax and settlement of funds and other miscellaneous

provisions. Further Section 20 of this Act mandates about application
of provisions of CGST Act in regard to relevant provisions which have
not been incorporated in this Act.
For implementation of the provisions of IGST Act, 2017, IGST Rules,
2017 have also been notified which contains 19 Chapters and 162
Rules.
(c) Union Territory Goods and Services Tax (UTGST) Act, 2017: It
contains 9 chapters and 26 sections and the purpose of this Act is to
make a provision for levy and collection of tax on inter-State supply of
goods or services or both by the Union territories (without Legislature)
and the matters connected therewith or incidental thereto. This Act
contains the definitions and provisions relating to Administration, levy
and collection of tax, payment of tax, inspection, search, seizure and
arrest, demands and recovery, advance ruling, transitional provisions
and other miscellaneous provisions. This Act has been promulgated by
the Central Government for the five Union Territories without
legislature viz Andaman and Nicobar Islands, Lakshwadeep, Dadra
and Nagar Haveli and Daman and Diu, Ladakh and Chandigarh.
Further Section 21 of this Act mandates about application of provisions
of CGST Act in regard to relevant provisions which have not been
incorporated in this Act.
For implementation of the provisions of UTGST Act, 2017, UTGST
Rules, 2017 have also been notified which contains 19 Chapters and
162 Rules.
(d) GST (Compensation to States) Act, 2017: It consists of 14 sections
and a Schedule and the purpose of this Act is to provide for
compensation to the States for the loss of revenue arising on account
of implementation of goods and services tax in pursuance of the
provisions of the Constitution (101st Amendment) Act, 2016. It contains
the definitions and provisions regarding the calculation and release of
compensation, levy and collection of cess, returns, payments and
refunds etc. Further this Act contains a Schedule indicating the
maximum rate at which GST compensation cess may be collected in
respect to supply of goods or services or both.
(e) Thirty State Goods and Services Tax (SGST) Acts (i.e. SGST Act of
each of the 28 States and 3 Union territories with Legislature i.e.
Delhi,
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GST : Practitioners Perspective

Puducherry and Jammu & Kashmir which will be prefixed by the name
of respective State / UT). These SGST Acts are a mirror image of
CGST Act.
For implementation of the provisions of SGST Act(s), 2017, SGST
Rules, 2017 have also been notified by each States which are based
on CGST Rules, 2017 and thus contains 19 Chapters and 162 Rules.

1.7. What are the taxes subsumed and not

subsumed into GST?
State taxes
Subsumed Not subsumed
Value Added Tax Mandi Tax
Purchase Tax Stamp Duty
Entry Tax, Octroi, Local Body Tax Profession Tax
Sales Tax Motor Vehicle Tax
Entertainment Tax (other than the Electricity Duty
taxes levied by Local bodies)
Luxury Tax Sale tax on five petroleum products
namely Petroleum Crude, Motor
Spirit (petrol), High Speed Diesel,
Natural Gas and Aviation Turbine
Fuel for a period of time. GST
Council would decide the date of
including them in GST.
Betting, Gambling and Lottery Tax Road & Passenger Tax
Surcharges and State Cesses Toll Tax

Central taxes
Subsumed Not subsumed
Central Excise Duty (barring five petroleum Customs Duty.
products namely Petroleum Crude, Motor Spirit
(petrol), High Speed Diesel, Natural Gas and
Aviation Turbine Fuel for a period of time)

6
 Introduction

Additional Duties of Excise

Excise on Medicinal and Toiletries Preparation
Act
Additional Customs Duty (CVD) – equal to
central excise on like goods manufactured in
India
Special Additional Duty – Supposed to be
equal to CST which was earlier 4%. Not
changed inspite of drop in CST rate to 2%.
Surcharge and Cesses on aforesaid duties and
taxes
Central Sales Tax
Service Tax

1.8 Input Tax Credit allowed under GST

GST is based on the VAT system and thus it shall be levied at every stage
with applicable set offs in respect of tax remitted at previous stages
GST is basically a tax on final consumption. Accordingly under GST law only
value addition is taxed as credit referred to as "Input Tax Credit" (ITC) is
allowed in respect of taxes paid at previous stages provided the same was
paid for business purposes / for taxable supplies. However there are certain
blocked credits prescribed under Section 17(5) of the CGST Act, 2017
against which credit cannot be availed.
The burden of tax is to be borne by the final consumer. In Central excise/
service tax law there is similar arrangement by name of “CENVAT Credit”.
However no credit of VAT paid by a service provider against the service tax
liability is presently allowed which leads to cascading of taxes. This situation
would be corrected under GST regime.

1.9. Rates of GST

Central Tax and State / Union Territory Tax or Integrated Tax would be levied
at rates to be mutually agreed upon by the Centre and the States under the
aegis of the Goods & Services Tax Council. However the maximum rate of
Central Tax and State / Union Territory Tax as incorporated in the respective

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GST : Practitioners Perspective

Acts is 20%, whereas maximum rate for integrated tax is 40%. The rates of GST
on services have five slabs of rate namely Nil, 5%, 12%, 18% or 28%.
The CGST rates applicable on supply of goods are prescribed in Notification
No.1/2017-Central Tax (Rate) dated 28-6-2017 (as amended).
The CGST rates applicable on supply of services are prescribed in
Notification No.11/2017-Central Tax (Rate) dated 28-6-2017 (as amended).

1.10. Goods and service tax compensation cess

Under GST regime “goods and services tax compensation cess” is levied by
Central Government as per GST (Compensation to States) Act, 2017. This
cess is levied so that Centre can give compensation to the States for the loss
of revenue arising on account of implementation of GST in the initial five
years. The maximum rates of cess that can be levied for various goods or
services have been provided in the Schedule to GST (Compensation to
States) Act, 2017 and it is basically applicable on luxury or sin goods.
The cess rates on supply of goods have been notified vide Notification No.
01/2017-Compensation Cess (Rate), dated. 28-06-2017 as amended from
time to time.
The cess rates on supply of services have been notified vide Notification No.
02/2017-Compensation Cess (Rate), dated. 28-06-2017 as amended from
time to time.

1.11 Goods and Services tax Council

A GST Council has been constituted under Article 279A (1) of the
Constitution, comprising the Union Finance Minister (who will be the
Chairman of the Council), the Minister of State (Revenue) and the State
Finance/Taxation Ministers to make recommendations to the Union and the
States on :-
(i) the taxes, cesses and surcharges levied by the Centre, the States and
the local bodies which may be subsumed under GST;
(ii) the goods and services that may be subjected to or exempted from the
GST;

8
 Introduction

(iii) the date on which the GST shall be levied on petroleum crude, high
speed diesel, motor sprit (commonly known as petrol), natural gas and
aviation turbine fuel;
(iv) model GST laws, principles of levy, apportionment of IGST and the
principles that govern the place of supply;
(v) the threshold limit of turnover below which the goods and services may
be exempted from GST;
(vi) the rates including floor rates with bands of GST;
vii) any special rate or rates for a specified period to raise additional
resources during any natural calamity or disaster;
(viii) special provision with respect to the North- East States, J&K, Himachal
Pradesh and Uttarakhand; and
(ix) any other matter relating to the GST, as the Council may decide.
The mechanism of GST Council would ensure harmonization on different
aspects of GST between the Centre and the States as well as among States.
It has been provided in the Constitution (One Hundred and First Amendment)
Act, 2016 that the GST Council, in its discharge of various functions, shall be
guided by the need for a harmonized structure of GST and for the
development of a harmonized national market for goods and services.
The Constitution (One Hundred and First Amendment) Act, 2016 provides that
every decision of the GST Council shall be taken at a meeting by a majority
of not less than 3/4th of the weighted votes of the Members present and
voting. The vote of the Central Government shall have a weightage of 1/3rd
of the votes cast and the votes of all the State Governments taken together
shall have a weightage of 2/3rd of the total votes cast in that meeting. One
half of the total number of members of the GST Council shall constitute the
quorum at its meetings. Thus practically, any decision in GST Council cannot
be taken without the consent of the Central Government.
As on 31-10-2020, 42 meetings of GST Council have been held.

1.12. GST Portal

www.gst.gov.in is GST portal developed and maintained by Goods &
Services Tax Network (GSTN).

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GST : Practitioners Perspective

This portal facilitates numerous services for taxpayers ranging from obtaining
GST registration, filing of GST returns, refund applications, to the time a
taxpayer applies for the cancellation of the GST registration. The important
aspect of the GST regime is that the tax administration must have a strong
backing of technology. This means that the taxpayers will no longer be
required to visit the tax departments in person for assessments and submit
the applications or returns, although Facilitation Centres are present across
India. The GST portal allows all communications to be done on it, such as
approving, rejecting, or responding to applications. It includes intimation of
notices by the Department and window to respond to the same by taxpayers
Also there is a portal for generation of e-way bill viz https://ewaybill.nic.in/
wherein e-way bills for tracking movement of goods in a motorized conveyance
can be generated. The sender or receiver of goods can generate e-way bill
through given portal.
Apart from GST portal we also have Invoice Registration Portal (IRP)viz
https://einvoice1.gst.gov.in/ wherein the tax payers having aggregate
turnover above Rs 500 cr need to report their B2B invoices to. On reporting,
IRP returns the e-invoice with a unique ‘Invoice Reference Number (IRN)’
after digitally signing the e-invoice and adding a QR Code. Then, the invoice
can be issued to the receiver (along with QR Code). A GST invoice will be
valid only with a valid IRN.

10
 Chapter-2

Charge of Tax
2.1. Introduction
Identification of “charge of tax” is of critical importance in every tax statute as
any tax can be levied on any activity or transaction only when charge of tax
is attracted as per the charging section of such tax statute.
As per the charging section of GST Acts tax is levied on supplies of services.
Thus the taxable event under GST is supply of service instead of provision of
service, which was the taxable event under service tax law.
The provisions regarding charge of tax under GST Law are discussed in the
succeeding paras.

2.2. Contents of the Chapter

a) When charge arises. (See Para 2.3)
b) What is meaning of ‘goods’ and ‘Services’ (See Para 2.4)
c) Who is liable to pay tax. (See Para 2.5)
d) Taxable supply, exempt and non-taxable supply. (See Para 2.6)

2.3. When charge arises

Like any other tax law, the charge of tax under GST law is governed by the
charging section of the respective GST Act(s).
The charging Section of CGST Act / SGST Act(s) / UTGST Act / IGST Act is
discussed in a tabular manner below for ease of understanding of the
readers:
Section 9(1) of Section 5(1) of Remarks
CGST Act / IGST Act
SGST Act and
Section 7(1) of
UTGST Act
Subject to the Subject to the sub-section (2) is in regard to
provisions of sub- provisions of sub- petroleum products, the taxes
GST : Practitioners Perspective

section (2), section (2), on which are not currently

subsumed under GST and the
GST on which shall be levied
on future date as may be
notified by the Government
upon recommendation of GST
Council.
there shall be there shall be levied There are four type of taxes
levied a tax a tax called the under GST laws namely
called the central integrated goods central tax (CGST), state tax
goods and and services tax. (SGST), Union Territory tax
services tax/ (UTGST) and Integrated taxes
state goods and (IGST). We have discussed
services tax / about these taxes in Chapter
Union Territory tax 1.
on all intra-State on all inter-State GST is levied on supply of
supplies of supplies of goods services. Further CGST and
goods or or services or both SGST / UTGST in levied in
services or both cases of intra-State supplies
whereas IGST shall be
charged in cases of inter-State
supplies. The Discussion on
supply, intra-State and inter-
State supplies is made at para
2.4.
except on the except on the Supply of alcoholic liquor for
supply of supply of alcoholic human consumption will not be
alcoholic liquor liquor for human exigible to GST and the taxes
for human consumption being levied in pre GST
consumption regime continue to be levied
on same.
It is a non-GST supply.
on the value on the value The value of a supply is to be
determined under determined under determined under Section 15
section 15 of section 15 of CGST of CGST Act read with GST
CGST Act Act Valuation Rules. The
provisions regarding Valuation
are discussed at Chapter-8.

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 Charge of Tax

and at such and at such rates, In case of intra-State supply

rates, not not exceeding forty CGST and SGST / UTGST will
exceeding twenty per cent, as may be apply the maximum rate of
per cent, as may notified by the which is 20% each. Thus
be notified by the Government on the maximum tax incidence is
Government on recommendations of 40%. Under inter-State supply,
the the Council IGST shall be levied wherein
recommendations the maximum rate of tax is
of the Council also 40%.
There are five slabs of rates of
GST for services namely NIL,
5%, 12%, 18% and 28%.
The CGST rates applicable on
supply of goods are prescribed
in Notification No.1/2017-CT
(Rate) dated 28-6-2017 (as
amended).
The CGST rates applicable on
supply of services are
prescribed in Notification
No.11/2017-CT(Rate) dated
28-6-2017 (as amended).
and collected in and collected in The manner prescribed is
such manner as such manner as detailed in the various Rules
may be may be prescribed which will be discussed in
prescribed relevant Chapters.
and shall be paid and shall be paid by As per the charging section
by the taxable the taxable person. the GST is required to be paid
person. by the Taxable person.
Provisions in this regard are
discussed at para 2.7.
Taxable person here means a
person who is registered or
liable to be registered under
Section 22 or Section 24 i.e.
supplier.

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GST : Practitioners Perspective

In view of above charging section of GST Acts it can be said that the charge
of tax under GST is on the supply of services. Further the tax can only be
levied in cases the services has been supplied in the territory to which the
relevant GST Act extends which is referred to as the taxable territory i.e.
India.
The place where the service has been supplied shall be determined by
applying Section 12 and 13 of IGST Act which governs the determination the
place of supply. The provisions regarding place of supply of services are
discussed in detail in Chapter 9.
Central Tax and State / Union Territory Tax would be levied simultaneously
on every transaction of intra-State supply services. Further both taxes shall
be levied on the same price or value. Integrated Tax would be levied on
every transaction of Inter-State supply services.
The Important terms in regard to charge of tax is discussed in the succeeding
paras:
a) Scope of supply. (See Para 2.3.1)
b) Composite and mixed supplies. (See Para 2.3.2)
c) Meaning of inter-State supply. (See Para 2.3.3)
d) Meaning of intra-State supply. (See Para 2.3.4)
e) Supplies where the location of supplier or place of supply is in
territorial waters (See Para 2.3.5)
2.3.1 Scope of supply
Taxable event under GST is SUPPLY of goods or services or both. For
discussion on meaning and scope of supply please refer to Chapter 3.
2.3.3 Meaning of inter-State Supply
Section 7 of the IGST Act contains provisions regarding when a supply would
be regarded as inter-State supply.
The provisions in regard to services are discussed in subsequent paras.
a) Supplies within India (See Para 2.3.3 a)
b) Import of services (See Para 2.3.3 b)
c) When supplier is located in India and place of supply is outside India

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 Charge of Tax

(See Para 2.3.3 c)

d) Supply of services to or by a SEZ developer or a SEZ unit (See Para
2.3.3 d)
2.3.3 a. Supplies within India
Section 7 (3) of the IGST Act provides that subject to the provisions of
section 12, supply of services, where the location of the supplier and the
place of supply are in––
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
shall be treated as a supply of services in the course of inter-State trade or
commerce.
Example: An architect located in New Delhi provides services in regard to an
immoveable property located in Mumbai. In this case the location of the
supplier is Delhi whereas the place of supply is Mumbai i.e. State of
Maharashtra. Thus it is a case of supply of services where the location of
supplier and the place of supply are in a State and Union territory and it
would be regarded as inter- State supply of services and would be subjected
to Integrated Tax (IGST).
For discussion on the place of supply kindly refer to Chapter 9 .
2.3.3 b. Import of Services
Section 7(4) of IGST Act provides that supply of services imported into the
territory of India shall be treated to be a supply of services in the course of
inter-State trade or commerce. In such cases the location of supplier of
service is located outside India and place of supply is in India. Import of
services would be subjected to IGST which is to be paid by the recipient of
service under reverse charge mechanism.
2.3.3 c. When supplier is located in India and place of
supply is outside India
As per Section 7(5)(a) of the IGST Act supply of services when a supplier is
located in India and place of supply is outside India is treated to be a supply
of services in the course of inter-State trade or commerce and thus would be

15
GST : Practitioners Perspective

subject to payment of IGST. However in cases where such supply satisfies

the conditions stipulated in Section 2(6) of IGST Act it would be regarded as
export of services and will be a zero-rated supply under Section 16(1) of
IGST Act.
In this regard it is important to understand the three terms namely “supplier is
located in India”, “place of supply is outside India” and “India” which are
discussed below:
(i) Supplier is located in India
In light of Section 2(15) of IGST Act the supplier of service shall be regarded
as located in India in the following cases-
a) The place of business for which registration has been obtained and
from where a supply is made is in India.
(b) Where a supply is made from a place other than the place of business
(a fixed establishment elsewhere), and such fixed establishment is
located in India;
(c) Where a supply is made from more than one establishment, whether
the place of business or fixed establishment, and the location of the
establishment most directly concerned with the provision of the supply
is in India.
(d) In absence of such places, the usual place of residence of the supplier
is in India.
For the meaning of terms ‘place of business’, ‘fixed establishment’ and ‘usual
place of residence’ please refer to Chapter 9.
(ii) Place of supply is outside India
The place of supply will be determined as per provisions mandated in
Section 12 and 13 of IGST Act. For detailed discussion on the same kindly
refer to Chapter 9.
(iii) India
The term “India” has been defined in Section 2(56) of CGST Act as follows:
(56) “India” means the territory of India as referred to in Article 1 of the
Constitution, its territorial waters, seabed and sub-soil underlying such
waters, continental shelf, exclusive economic zone or any other
maritime zone as referred to in the Territorial Waters, Continental

16
 Charge of Tax

Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, and
the air space above its territory and territorial waters;
2.3.3 d. Supply of services to or by a Special Economic
Zone developer or a Special Economic Zone
unit.
As per Section 7(5)(b) of the IGST Act supply of services to or by a Special
Economic Zone Developer or a Special Economic Zone Unit is treated to be a
supply of services in the course of inter-State trade or commerce. It may be
noted here that supply of services to / by SEZ Unit / Developer will always be
regarded as inter-State supply irrespective of the location of such SEZ Unit /
Developer and place of supply.
Thus in cases where SEZ Unit / Developer is providing / receiving services
in/ from the same State / Union territory then also it will be regarded as inter-
State supply and in such cases it not required that the location of supplier
and place of supply of service should be in different State / Union territory. In
this regard to reinforce the above, Proviso of Section 8 (2) mandates that
intra- State supplies shall not include supply of services to or by a SEZ
Developer or SEZ Unit.
2.3.4 Meaning of intra-State Supply
Section 8 of the IGST Act contains provisions regarding when a supply would
be regarded as intra-State supply. The provisions in regard to services are
discussed in subsequent paras.
a) Supplies within same State / Union territory (See Para 2.3.4 a)
b) Supply of services to or by a SEZ developer or a SEZ unit (See Para
2.3.4 b)
2.3.4 a Supplies within same State / Union Territory
Section 8 (2) of IGST Act provides that subject to the provisions of section
12, supply of services, where the location of the supplier and the place of
supply are in the same State or same Union Territory shall be treated as intra-
State supply.
Example: A Chartered Accountant located in New Delhi provides audit
services whose place of supply is in New Delhi. In this case as the location of
the supplier and place of supply is in same Union Territory i.e. Delhi.

17
GST : Practitioners Perspective

Accordingly it would be regarded as intra- State supply of services and would

be subjected to Central tax (CGST) and State tax (SGST).
2.3.4 b. Supply of services to or by a Special Economic
Zone Developer or a Special Economic Zone Unit.
As per proviso to section 8(2) of IGST Act the intra- State supplies shall not
include supply of services to or by a SEZ Developer or SEZ Unit. Thus even if
such supplies are made within a State or Union Territory they will be regarded
as inter-State supply. We have already discussed this aspect at para 2.3.2 d.
2.3.5 Supplies where the location of supplier or place of
supply is in territorial waters
Section 9 of IGST Act provides that notwithstanding anything contained in
this Act,––
(a) where the location of the supplier is in the territorial waters, the
location of such supplier; or
(b) where the place of supply is in the territorial waters, the place of
supply,
shall, for the purposes of this Act, be deemed to be in the coastal State or
Union Territory where the nearest point of the appropriate baseline is located.
Thus if any supply of service is made in the territorial water, nearest point of
the appropriate base line will decide the State where the supplier is located
or where there is place of supply of such service.
Example: Service of inspection of any vessel is provided in the sea nearby
Vishakapatnam. In this case the place of supply will be considered as Andhra
Pradesh. In case the location of supplier is also in Andhra Pradesh, it would
be regarded as intra-State supply and Central tax and State tax will be
applicable. If in the instant case the supplier is located outside Andhra
Pradesh it would be regarded as inter-State supply and integrated tax would
be levied on such supply.
2.3.6 Practical example of taxes levied on inter and intra-
State supplies
The practical application of levy of taxes under GST is illustrated as under:-

18
 Charge of Tax

Supply of Location of Place of Type of supply (Tax

Supplier Supply levied)
Goods / Pondicherry Kerala Inter-State (Integrated tax)
Services
Goods / Chandigarh* Chandigarh* Intra-State/UT (Central tax
Services + Union Territory tax)
Goods / Chandigarh* Punjab Inter-State (Integrated tax)
Services
Goods / Punjab Chandigarh* Inter-State (Integrated tax)
Services
Goods / Delhi** Delhi** Intra-State (Central tax +
Services State tax)
Goods / Rajasthan Rajasthan Intra-State (Central tax +
Services State tax)
Goods / Andaman and Chandigarh Inter-State (Integrated tax)
Services Nicobar island
Notes
*Chandigarh is a UT without Legislature: UTGST Act shall prevail in case of intra
State supplies;
**As per Section 2(103) of CGST Act the term “State” includes a Union
Territory (UT) with Legislature (Of the 8 UTs, Delhi, Pondicherry and Ladakh
are the only 3 UTs with Legislature).

2.4 What is meaning of Goods and Services

GST is levied on supply of goods or services. For meaning of ‘goods’ and
‘services’ please refer to Chapter 3.

2.5 Who is liable to pay tax

As per the GST Acts generally the supplier referred to as “taxable person” is
liable to pay tax. However in certain cases the tax is required to be paid by
the recipient under reverse charge mechanism. Further in case of notified
services supplied through electronic commerce operators the person liable to
pay tax would be such electronic commerce operator.

19
GST : Practitioners Perspective

The above provisions are discussed in the succeeding paras:

a) Taxable person is liable to pay tax : Para 2.5.1
b) Recipient is liable to pay tax in certain cases: Para 2.5.2
c) Electronic commerce operator to be person liable to pay tax: Para
2.5.3
2.5.1 Taxable person is liable to pay tax:
As per the charging Sections of GST Acts the applicable tax i.e. CGST,
SGST, UTGST or IGST as the case may be, shall be paid by the taxable
person.
As per Section 2(107) of CGST Act “taxable person” means a person who is
registered or liable to be registered under Section 22 or Section 24;
As per the provisions of Section 22(1) it is stipulated that a person is liable to
take registration if the aggregate turnover exceeds Rs 20 lakhs (Rs 10 Lakhs
in case of special category States) in a financial year. Accordingly any
person whose aggregate turnover is below said threshold exemption limit is
not required to take registration and therefore would not be covered under
the ambit of definition of a ‘taxable person’ and thus would also not be
required to pay tax.
However the persons covered under section 24 viz persons engaged in inter-
State supply, persons required to pay GST under reverse charge etc are
mandatorily required to obtain registration and thus would be regarded as
taxable person and will be liable to pay tax irrespective of their turnover.
For detailed discussion in regard to threshold exemption and aggregate turnover
please refer to Chapter 13.
2.5.2 Recipient is liable to pay tax in certain cases
As per Section 9(3) of the CGST / SGST Acts, Section 5(3) of IGST Act and
Section 7(3) of UTGST Act, tax is required to be paid on reverse charge
basis in respect of goods / services which have been notified by the
Government by the recipient of such goods / services.
Further as per Section 9(4) of the CGST / SGST Acts, Section 5(4) of IGST
Act and Section 7(4) of UTGST Act, tax in respect of supply of specified
categories of goods / services by a unregistered supplier, to specified class
of registered person shall be paid by such person as recipient on reverse
charge basis.

20
 Charge of Tax

For detailed discussion in regard to payment of tax under reverse charge

along with the list of goods and services covered under reverse charge
please refer Chapter- 6.
2.5.3 Electronic commerce operator to be person liable to
pay tax
Section 9(5) of CGST / SGST Act provides that the Government may by
notification specify categories of services the tax on supplies of which shall
be paid by the electronic commerce operator if such services are supplied
through it and it shall be regarded as person liable to pay tax.
In this regard three services have been notified.
Provisions in this regard are discussed in Chapter 11. The same may be
referred to.

21
 Chapter 3

Meaning and Scope of Supply

3.1 Introduction
Goods and services tax is levied on ‘supply’ and therefore the taxable event
under GST is ‘supply’. In case any transaction or activity is not supply, GST
will not be applicable on such a transaction / activity.
The provisions in regard to meaning and scope of supply as mandated under
GST law are discussed in the succeeding paras.

3.2 Meaning of supply

The term supply has been defined under Section 7 of CGST Act/ SGST Acts.
There are three sub-sections in Section 7 and six clauses and three
Schedules to CGST Act / SGST Acts viz Schedule I, II and III, each of which
will be discussed below. It is important to note here that these provisions are
also applicable to IGST Act and UTGST Act.

Sl. Section Description

No
1. 7(1)(a) All forms of supply of goods or services made or agreed
to be made for a consideration by a person in the course
or furtherance of business.
2. 7(1)(b) Import of services for a consideration whether or not in
course or furtherance of business
3. 7(1)(c) The Activities specified in Schedule I, made or agreed to be
made without a consideration.
4. 7(1)(A) Activities which qualify as supply, to be treated as supply of
goods or services as referred to in Schedule -II
5. 7(2)(a) Activities or transactions specified in Schedule III shall
not be treated as supply of services.
6. 7(2)(b) Notified activities / transactions undertaken by
Government / local authority as public authorities shall
not be treated as supply of goods / services.
 Meaning and Scope of Supply

7. 7(3) Government may notify transactions that are treated as

supply of goods/ services and not supply of services /
goods.
The above Sections are discussed in succeeding paras along with the
concept of composite supply and mixed supply.
3.2.1 Scope of supply
Taxable event under GST law is SUPPLY. Meaning and scope of supply
taxable under GST can be understood in terms of following parameters,
which serve as litmus test for any transaction / activity to be regarded as
supply:
 In order to be a supply there should be two persons in transaction viz
supplier and a recipient.
 Supply should be of goods or services.
 Supply should be made for a consideration (4 situations given in
Schedule I is an exception).
 Supply of goods or services or both between related persons or
between distinct persons as specified in section 25 and other activities
/ transactions as listed in Schedule I, will qualify as supply even if
without consideration, provided it is made in the course or furtherance
of business. (This is new law under GST regime as under erstwhile
indirect tax regime, transactions without consideration were not
subject to tax).
 Supply should be made in the course or furtherance of business.
(Import of services is an exception)
 Supply should be made by a taxable person (person who is GST
registered or is liable for GST Registration).
 Supply should be a taxable supply.

23
GST : Practitioners Perspective

Section 7(1)(a) Section 7(1)(b) Section 7(1)(c) Section 7(1)(A)

All forms of Importation of Supplies Where
supply of goods service, specified* certain activities
and / or - for a - To be treated or transactions
services, made consideration as supplies constitute
or agreed to be - whether or not made without a supply, they
made, in the course or consideration shall be treated
- for a furtherance of *Schedule I: as supply of
consideration business 1. Permanent goods or supply
- in the course transfer / of services –
or disposal of Sch II
furtherance of business assets Section 7(2) -
business for which ITC is Activities not be
such as: availed considered as
- sale, 2. Supplies supply:
- transfer, between related
- barter, persons/ Specified in Sch-
- exchange, distinct III
- license, persons in the
course or such activities
- rental,
furtherance of or transactions
- lease or
business (gifts undertaken by
- disposal
of less than Rs. the Central

24
 Meaning and Scope of Supply

50,000 in value Government, a

in a FY by State
employer to Government or
employee not to any local
be treated as authority in
supply) which they are
3. Supply of engaged as
goods by / to public
principal to / by authorities, as
agent may be notified
where agent by the
undertakes to Government on
supply / receive the
such goods on recommendation
behalf of s of the Council,
principal Section 7(3)
4. Importation By Notification
of service from on
a person or recommendation
from any of his of GST Council
other treat activity as
establishments Supply of
outside India, in goods and not
the course or service
furtherance of Supply of
business. service and not
Goods

3.2.1-a. For a supply there should be supply by one

person to another person viz a supplier and a
recipient.
For treating a transaction / activity as supply, there should be at least two
persons viz a supplier and a recipient of such supply. However this is subject
to certain exceptions viz supply between deemed distinct persons which
through part of same organization (same PAN) but treated as distinct entities
under GST law.

25
GST : Practitioners Perspective

(i) Meaning of person

As per Section 2(84) of CGST Act / SGST Acts “person” includes—
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;
(e) a Limited Liability Partnership;
(f) an association of persons or a body of individuals, whether
incorporated or not, in India or outside India;
(g) any corporation established by or under any Central Act, State Act or
Provincial Act or a Government company as defined in clause (45) of
section 2 of the Companies Act, 2013;
(h) any body corporate incorporated by or under the laws of a country
outside India;
(i) a co-operative society registered under any law relating to co-
operative societies;
(j) a local authority;
(k) Central Government or a State Government;
(l) Society as defined under Societies Registration Act, 1860;
(m) trust; and
(n) Every artificial juridical person, not falling within any of the above;
It is important to note here that the term ”Central Government or State
Government” as stated above in Clause (k) will include the Council Ministers
of Central Government and State Governments and also include its
Departments viz Department of Revenue, Department of Economic Affairs,
RTO etc. However it may be noted that the public sector undertakings /
Government companies would not be covered under the term Government.
Further the residual clause is (e) which includes every artificial juridical
person, not falling within any of the above. Example: Liquidator appointed by
Court who is charging fee for the entire process.

26
 Meaning and Scope of Supply

(ii) Meaning of supplier

Section 2(105) of the CGST Act provides that “supplier” in relation to any
goods or services or both, shall mean the person supplying the said goods or
services or both and shall include an agent acting as such on behalf of such
supplier in relation to the goods or services or both supplied.
(iii) Meaning of recipient
Section 2(93) of the CGST Act provides that “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 a 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.
3.2.1-b. Supply should be for a consideration
GST is a advaloram tax and is payable on the value of supply of service
which is referred to as transaction value under GST law. Generally the
consideration received by the supplier would be regarded as the transaction
value. Section 2(31) of the CGST provides that “consideration” in relation to
the supply of goods or services or both includes––
(a) any payment made or to be made, whether in money or otherwise, in
respect of, in response to, or for the inducement of, the supply of goods
or services or both, whether by the recipient or by any other person but
shall not include any subsidy given by the Central Government or a
State Government;
(b) the monetary value of any act or forbearance, in respect of, in response
to, or for the inducement of, the supply of goods or services or both,
whether by the recipient or by any other person but shall not include
any subsidy given by the Central Government or a State Government:
Further the Proviso to Section 2(31) mandates that a deposit given in respect
of the supply of goods or services or both shall not be considered as
payment made for such supply unless the supplier applies such deposit as
consideration for the said supply.

27
GST : Practitioners Perspective

In order to understand the above definition let us break it into the following
components and analyse each of them:
1. Payment made or to be made whether in money or otherwise
2. The Monetary value of any act or forbearance
3. In respect of, in response to, or for the inducement of, the supply of
goods or services or both
4. Whether by the recipient or by any other person.
5. Shall not include any subsidy given by the Central Government or a
State Government;
6. Deposit given in respect of the supply of services shall be included
only if supplier applies such deposit as consideration for the said
supply.
1. Payment made or to be made whether in money or otherwise
This means that the consideration includes any payment made in money i.e.
monetary consideration and otherwise i.e. non- monetary consideration.
Monetary consideration means any consideration received in the form of money.
Non-monetary consideration essentially means compensation in kind such as the
following:
 Supply of goods or services in return for supply of services.
 Doing or agreeing to do an act in return for supply of service.
Example: If A agrees to dry clean B’s clothes and in return B agrees to click
A’s photograph. In such a case non-monetary consideration is flowing and
thus both the services will be regarded as supply.
2. The monetary value of any act or forbearance
The act or forbearance basically refers to the non-monetary consideration
and will be included within the term consideration. Forbear means to abstain
or to desist from. It means foregoing one’s legal right or claim.
Example: If A agrees to design B’s house and in return B agrees not to
object to construction of A’s house in his neighborhood. Here the
forbearance on part of B to not to object construction of A’s house will be a non-
monetary consideration provided by B to A.

28
 Meaning and Scope of Supply

3. In respect of, in response to, or for the inducement of, the supply of
services
This means that any amount payable by the recipient should be in response
to, or for inducement of, the supply of services i.e. the consideration should
have a nexus with the supply of the service. Thus if the recipient of supply
has the obligation to pay an amount to the supplier or to a third person under
the contract of supply, the same will be considered as consideration for the
supply received by him.
Example: Mr X supplies certain services to Mr Y for Rs 25,000/- with a
condition that Mr Y will gift an amount of Rs 10,000/- to wife of Mr X. In this
case the amount of Rs 10,000/- paid by Mr Y to wife of Mr X is y reason of
supply of services. Therefore Rs 35,000/-(Rs 25,000 plus Rs 10,000) will be
considered as consideration for supply of services in hands of Mr X.
4. Whether by the recipient or by any other person
The consideration need not be paid by recipient only and can be also be paid
by any other person.
Example: In case of service of a vehicle during warranty, the service is
provided by the authorized dealer to the owner of the vehicle, but payment is
made to the authorized dealer by the vehicle manufacturer. Such amount
would be regarded as consideration and thus is chargeable to tax.
5. Shall not include any subsidy given by the Central Government or a
State Government.
Any subsidy if any given by the Central Government or State Government will not
be regarded as consideration.
Example: Subsidy received by the fertilizer companies from Government to
sell fertilizers at subsidized rates. In such a case such subsidy will not be
regarded as consideration for supply.
However in case any subsidy is received from any person other Government
then it shall be included in consideration if it is in connection for such supply.
Example: X Limited supplied certain services to B Limited for Rs 1 lakh.
Against such supply B Ltd apart from paying Rs 1 lakh had also paid Rs 2
lakh as subsidy to X Ltd. In this case the amount of Rs 2 lakhs of subsidy will
also be included in consideration and thus the total consideration for the said
supply of services would be Rs 3 lakhs.

29
GST : Practitioners Perspective

6. Deposit given in respect of the supply of services shall be included

only if supplier applies such deposit as consideration for the said
supply
deposit given in respect of the supply of services shall be included only if
supplier applies such deposit as consideration for the said supply i.e. the
amount of deposit is adjusted against supply. The Deposit here also includes
the security deposits as well.
Further here the accounting entries passed in the books would be relevant to
decide whether the amount is adjusted against supply or not. In case the
deposit is shown separately as liability in the books of the supplier it would
not be considered as part of the consideration. However in case such a
deposit is depicted as an income and has the connection / nexus with such
supply, it would be included in the consideration.
3.2.1-c. Supply should be in the course or furtherance of
business
As per Sec 7(1)(a) of the CGST Act only the supplies made in course or
furtherance of business will be regarded as supply.
Section 2(17) of CGST Act / SGST Acts provides that “business” includes––
(a) any trade, commerce, manufacture, profession, vocation, adventure,
wager or any other similar activity, whether or not it is for a pecuniary
benefit;
(b) any activity or transaction in connection with or incidental or ancillary
to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or
not there is volume, frequency, continuity or regularity of such
transaction;
(d) supply or acquisition of goods including capital goods and services in
connection with commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a
subscription or any other consideration) of the facilities or benefits to
its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has

30
 Meaning and Scope of Supply

been accepted by him in the course or furtherance of his trade, profession

or vocation;
(h) services provided by a race club by way of totalisator or a licence to
book maker in such club ; and
(i) any activity or transaction undertaken by the Central Government, a
State Government or any local authority in which they are engaged as
public authorities;
In order to understand what is meant by in the course or furtherance of
business we may refer to the Q No 9 of FAQs on GST as issued by CBEC on
31/03/2017 which is reproduced below:
What do you mean by “supply made in the course or furtherance of
business”?
Ans. “Business” is defined under Section 2(17) include any trade, commerce,
manufacture, profession, vocation etc. whether or not undertaken for a
pecuniary benefit. Business also includes any activity or transaction which is
incidental or ancillary to the aforementioned listed activities. In addition, any
activity undertaken by the Central Govt. or a State Govt. or any local
authority in which they are engaged as public authority shall also be
construed as business. From the above, it may be noted that any activity
undertaken included in the definition for furtherance or promoting of a
business could constitute a supply under GST law.
3.2.1-d Import of services for a consideration whether or
not in course or furtherance of business
As per Section 7(1)(b) of CGST Act / SGST Acts, import of services for a
consideration whether or not in course or furtherance of business is included
within the ambit of supply.
In order to understand the above we need to analyse the following:
(a) Import of services
(b) For a consideration (refer Para 3.2.1-b)
(c) Whether or not in the course of furtherance of business
(a) Import of services
As per Section 2(11) of IGST Act ‘‘import of services” means the supply of
any service, where––

31
GST : Practitioners Perspective

(i) the supplier of service is located outside India;

(ii) the recipient of service is located in India; and
(iii) the place of supply of service is in India
The supplier of service is located outside India
One of the criterion for determining import of service is that the supplier of
service should be located outside India.
In light of Section 2(15) of IGST Act the supplier of service shall be regarded
as located outside India in following cases-
(a) The place of business from where a supply is made is outside India.
(b) Where a supply is made from a place other than the place of business
(a fixed establishment elsewhere), and such fixed establishment is
located outside India;
(c) Where a supply is made from more than one establishment, whether
the place of business or fixed establishment, and the location of the
establishment most directly concerned with the provision of the supply
is outside India.
(d) In absence of such places, the usual place of residence of the supplier
is outside India.
The recipient of service is located in India
In view of provisions mandated in Section 2(14) of IGST Act the recipient of
service shall be regarded as located in India in following cases-
(a) where a supply is received at a place of business in India for which the
registration has been obtained.
(b) where a supply is received at a place other than the place of business
for which registration has been obtained i.e. a fixed establishment
elsewhere located in India.
(c) where a supply is received at more than one establishment, whether
the place of business or fixed establishment, the location of the
establishment most directly concerned with the receipt of the supply is
located in India.
(d) in absence of such places, the usual place of residence of the
recipient is located in India.

32
 Meaning and Scope of Supply

The place of supply of service is in India

The principles for determining the place of supply of services are contained
in Section 12 and 13 of IGST Act. Section 12 is applicable in cases where
the location of supplier and recipient is in India whereas Section 13 will be
operative in situations where the location of supplier or location of recipient is
outside India. Accordingly for determining whether a supply of service is an
import or not we will have to apply Section 13 of IGST Act.
(c) Whether or not in the course or furtherance of business
We have already discussed about what does we mean by “in course or
furtherance of business” at Para 3.2.1-c We had seen that as per Section
7(1)(a) only the supplies, which are made in the course or furtherance of
business are regarded as supply. But in complete contrast under Sec 7(1)(b)
all import of services would be regarded as supplies irrespective of fact that
such import is in course or furtherance of business or not. Thus even
personal import of services would be regarded as supply and in such cases
the recipient will be required to pay tax under reverse charge and to adhere
to other GST compliances.
3.2.1-e Transaction with related persons and deemed
distinct persons treated as supply even if without
consideration:
As per Schedule I supplies between related persons / distinct persons will be
regarded as supply, even if the supply without any consideration. Therefore it
is important to know the meaning of related persons and distinct persons is
under GST law.
(a) Meaning of Related Persons:
Explanation to Section 15 of the CGST Act stipulates that persons (including
legal persons) shall be deemed to be “related persons” if––
 such persons are officers or directors of one another’s businesses;
 such persons are legally recognized partners in business;
 such persons are employer and employee;
 any person directly or indirectly owns, controls or holds twenty-five per
cent. or more of the outstanding voting stock or shares of both of
them;

33
GST : Practitioners Perspective

 one of them directly or indirectly controls the other;

 both of them are directly or indirectly controlled by a third person;
 together they directly or indirectly control a third person; or
 they are members of the same family.
 Sole agent or sole distributor or sole concessionaire.
Gift to employees
Employees being the related person any supply of goods or services or both
to such employee even without consideration if made in furtherance of
business would be regarded as supply. However it has been provided at Sl.
No 2 of Schedule I of CGST Act that gifts (involuntary payments) not
exceeding fifty thousand rupees in value in a financial year by an employer to
an employee shall not be treated as supply of goods or services or both.
The words used here are gifts by an employer to an employee and not
employees and thus it can be said that this limit is a per employee limit and
gifts to an employee in excess of Rs 50,000/- in value in a financial year
would be regarded as supply by employer to employee and tax will be levied
on such supply.
Payments / facilities provided to employees which are part of CTC and as per
employment terms are not gifts and thus not subject to GST.
Supply of service by HO or one branch / division to another is taxable
It has been held by Maharashtra AAR in case of Cummins India Ltd that
supply of service by one branch / division to another will be subject to GST, if
there are distinct GST registration numbers. In such case valuation will be as per
Rule 30 of the CGST Rules i.e. 110% of cost.
Service supplied by establishment of a person in India to own
establishment out of India exempt- Service supplied by establishment of a
person in India to own establishment out of India is exempt, if place of India
is out of India- Sr No. 10E of Notification No. 9/2017-IT(Rate) dated 28-6-
2017 as inserted w.e.f. 27-7-2018.
Free samples – Free samples to unrelated persons will not be subject to
GST but input tax credit will have to be reversed. However, free samples
given to related persons will be subject to GST (and then ITC will be
available)- Para A of CBIC Circular No. 92/11/2019-GST dated 7-3-2019.

34
 Meaning and Scope of Supply

(b) Meaning of distinct persons

Further, Following are deemed distinct persons
(i) Deemed Distinct Persons in Case of Multiple Registrations-
Section 25(4)
A person who has either already obtained or is required to obtain more
than one registration under this Act shall be treated as distinct persons
in respect of each such registration. It is immaterial whether the
aforesaid multiple registrations have been obtained or are required to
be obtained in one State or more than one State.
Example- Mr. Ravi is engaged in supply of professional services as
Chartered Accountant. He has obtained a registration in the State of
West Bengal in respect of his head office. In addition, he has obtained
registration in the State of Delhi in respect of his branch.
In the above case, in respect of each registration at West Bengal and
Delhi, Mr. Ravi shall be treated as distinct person.
(ii) Deemed Establishments of Distinct Persons in case of Multiple
Registration in Different States –Section 25(5)
An establishment of a person who has either obtained or is required to
obtain registration in a State and any of his other establishments in
another State shall be treated as establishment of distinct persons for
the purposes of this Act.
Example -Raj Ltd. is engaged in supply of specified goods. It has obtained
a Registration in the State of Haryana in respect of its head office. In
addition, it has obtained registration in the State of Punjab in respect of its
branch located at Jalandhar.
In the above case, the establishment in Haryana and establishment in
Punjab shall be treated as establishments of distinct persons.

35
GST : Practitioners Perspective

3.2.1-f. Where certain activities or transactions

constitute supply, the following supplies shall be
treated as supply of goods or supply of services:
Schedule II Supply of
Transfer
Transfer of the title in goods Goods
Transfer of right in goods or of undivided share in goods Services
without the transfer of title thereof
Transfer of title in goods under an agreement which Goods
stipulates that property in Goods shall pass at a future date
upon payment of full consideration as agreed
Land and Building
Any lease, tenancy, easement, licence to occupy land Services
Any lease or letting out of the building including a Services
commercial, industrial or residential complex for business or
commerce, either wholly or partly,
Treatment or process
Any treatment or process which is applied to another Services.
person's goods
Transfer of business assets
Goods forming part of business assets are transferred or Goods
disposed of by or under the directions of the person carrying on
the business so as no longer to form part of those assets
Goods held/used for business are put to any private use or Services
are used, or made available to any person for use, for any
purpose other than a purpose of the business, by/under
directions of person carrying on the business
Where any person ceases to be a taxable person, any Goods
goods forming part of the assets of any business carried on
by him shall be deemed to be supplied by him in the course
or furtherance of his business immediately before he ceases
to be a taxable person, unless—
(i) the business is transferred as a going concern to
another person; or

36
 Meaning and Scope of Supply

(ii) the business is carried on by a personal representative

who is deemed to be a taxable person.
Supply of services
Renting of immovable property Services
Construction of a complex, building, civil structure or a part
thereof, including a Complex or building intended for sale to
a buyer, wholly or partly, except where The entire
consideration has been received after issuance of
completion certificate, where required, by the competent
authority or after its first occupation, whichever is earlier.
Temporary transfer or permitting the use or enjoyment of any
intellectual property right
Development, design, programming, customisation,
adaptation, upgradation, enhancement, implementation of
information technology software
Agreeing to the obligation to refrain from an act, or to
tolerate an act or a situation, or to do an act
Transfer of the right to use any goods for any purpose
(whether or not for a specified period) for cash, deferred
payment or other valuable consideration.
Composite supply
Works contract (“works contract” means a contract for Services
building, construction, fabrication, completion, erection,
installation, fitting out, improvement, modification, repair,
maintenance, renovation, alteration or commissioning of any
immovable property wherein transfer of property in goods
(whether as goods or in some other form) is involved in the
execution of such contract)
Supply, by way of or as part of any service or in any other
manner whatsoever, of Goods, being food or any other
article for human consumption or any drink (other than
alcoholic liquor for human consumption), where such supply
or service is for Cash, deferred payment or other valuable
consideration.

37
GST : Practitioners Perspective

Supply of Goods
Supply of goods by any unincorporated association or body Goods
of persons to a member thereof for cash, deferred payment
or other valuable consideration.

It may be noted that above activities are by itself not regarded as supply,
rather they should qualify as supply under Section 7(1) of the CGST Act,
2017 and thereafter only the above Schedule shall come into play. In case
any activity is not a supply as per Section 7(1), this Schedule will not apply.
3.2.1-f Activities or transactions which shall be treated
neither as a supply of goods nor a supply of
services (Schedule-III):
1. Services by an employee to the employer in the course of or in relation
to his Employment.
2. Services by any court (includes District Court, High Court and
Supreme Court) or Tribunal established under any law for the time
being in force.
3. (a) The functions performed by the Members of Parliament,
Members of State Legislature, Members of Panchayats,
Members of Municipalities and Members of other local authorities;
(b) The duties performed by any person who holds any post in
pursuance of the Provisions of the Constitution in that capacity;
or
(c) The duties performed by any person as a Chairperson or a
Member or a Director in a body established by the Central
Government or a State Government or local authority and who is
not deemed as an employee before the commencement of this
clause.
4. Services of funeral, burial, crematorium or mortuary including
transportation of the Deceased.
5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II,
sale of building.
6. Actionable claims, other than lottery, betting and gambling.

38
 Meaning and Scope of Supply

7. Supply of goods from a place in the non-taxable territory to another

place in the non-taxable territory without such goods entering into
India.
8. (a) Supply of warehoused goods* to any person before clearance
for home consumption;
(b) Supply of goods by the consignee to any other person, by
endorsement of documents of title to the goods, after the goods
have been dispatched from the port of origin located outside
India but before clearance for home consumption.
*Warehoused goods shall have the same meaning as assigned to it in the
Customs Act, 1962.

3.3. Composite and Mixed Supplies

As GST is a tax on supply of goods or services or both thus when supply
consists of two or more items (of either goods or services or both), which are
supplied together, concept of Composite and mixed supplies comes into picture.
3.3.1 Meaning of Composite Supply [Sec 2(30)] under
GST
A composite supply would mean a supply made by a taxable person to a
recipient consisting of two or more taxable supplies of goods or services or
both, or any combination thereof, which are naturally bundled and
supplied in conjunction with each other in the ordinary course of
business, one of which is a principal supply:
Illustration: Where goods are packed and transported with insurance, the
supply of goods, packing materials, transport and insurance is a composite
supply and supply of goods is a principal supply.
Principal supply [Sec 2(90) of the CGST Act] means the supply of goods or
services which constitutes the predominant element of a composite supply and
to which any other supply forming part of that composite supply is ancillary.

39
GST : Practitioners Perspective

3.3.1-a How to determine whether a supply is naturally

bundled
As per the definition, any combination supply can be regarded as composite
supply, in cases where the goods or services are naturally bundled. Now the
question arises as to how to determine whether a supply is naturally bundled
or not.
In this regard we can take guidance from Para no 9.2.4 of the Education
Guide (Service Tax) of CBEC which provides that the following factors may
be considered in determining if the services are bundled in the ordinary
course of business i.e. naturally bundled:-
Whether services are bundled in the ordinary course of business would
depend upon the normal or frequent practices followed in the area of
business to which services relate. Such normal and frequent practices
adopted in a business can be ascertained from several indicators some of
which are listed below –
(i) The perception of the consumer or the service receiver. If large
number of service receivers of such bundle of services reasonably
expect such services to be provided as a package then such a
package could be treated as naturally bundled in the ordinary course
of business.
(ii) Majority of service providers in a particular area of business provide
similar bundle of services. For example, bundle of catering on board
and transport by air is a bundle offered by a majority of airlines.
(iii) The nature of the various services in a bundle of services will also help
in determining whether the services are bundled in the ordinary course
of business. If the nature of services is such that one of the services is
the main service and the other services combined with such service
are in the nature of incidental or ancillary services which help in better
enjoyment of a main service. For example service of stay in a hotel is
often combined with a service or laundering of 3-4 items of clothing
free of cost per day. Such service is an ancillary service to the
provision of hotel accommodation and the resultant package would be
treated as services naturally bundled in the ordinary course of
business.

40
 Meaning and Scope of Supply

Other illustrative indicators, not determinative but indicative of bundling of

services in ordinary course of business are :-
There is a single price or the customer pays the same amount, no matter
how much of the package they actually receive or use.
─ The elements are normally advertised as a package.
─ The different elements are not available separately.
─ The different elements are integral to one overall supply – if one or
more is removed, the nature of the supply would be affected.
No straight jacket formula can be laid down to determine whether a service is
naturally bundled in the ordinary course of business. Each case has to be
individually examined in the backdrop of several factors some of which are
outlined above.
3.3.2 Meaning of Mixed Supply [Sec 2(74)] under GST
A mixed supply means two or more individual supplies of goods or services,
or any combination thereof, made in conjunction with each other by a taxable
person for a single price where such supply does not constitute a composite
supply.
Illustration: A supply of a package consisting of canned foods, sweets,
chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for
a single, price is a mixed supply. Each of these items can be supplied
separately and is not dependent on any other. It shall not be a mixed supply
if these items are supplied separately.
3.3.3 Taxation of Composite and Mixed Supply
The tax liability on a composite or a mixed supply shall be determined in
the following manner, namely: —
(a) A composite supply comprising two or more supplies, one of which is a
principal supply, shall be treated as a supply of such principal supply;
and
(b) A mixed supply comprising two or more supplies shall be treated as a
supply of that particular supply which attracts the highest rate of tax.
3.3.3-a Time of supply in case of composite supply
If the composite supply involves supply of services as principal supply, such

41
GST : Practitioners Perspective

composite supply would qualify as supply of services and accordingly the

provisions relating to time of supply of services would be applicable.
Alternatively, if composite supply involves supply of goods as principal
supply, such composite supply would qualify as supply of goods and
accordingly, the provisions relating to time of supply of goods would be
applicable.
3.3.3-b Time of supply in case of mixed supplies
The mixed supply, involving supply of a service liable to tax at higher rates
than any other constituent supplies, would qualify as supply of services and
accordingly the provisions relating to time of supply of services would be
applicable. Alternatively, the mixed supply, involving supply of goods liable to
tax at higher rates than any other constituent supplies, would qualify as
supply of goods and accordingly the provisions relating to time of supply of
services would be applicable.
Note-
As per Section 7(1A) of the CGST Act, 2017 read with Para 6 of the Schedule
II of said Act, two types of composite supplies are be treated as a supply of
services. Thus in such cases we are not required to identify principal supply.
Rather in such cases the legislature has itself treated such composite
supplies as supply of services. These instances are work contract services
and restaurant / outdoor catering.

42
 Chapter 4

Meaning of Goods and Services

4.1 Introduction
As discussed in earlier Chapters that GST is levied on supply of goods or
services or both, it is important to know what exactly are goods or services under
GST law. In case a transaction of activity does not involve goods or services, it
cannot be subjected to GST.

4.2 Meaning of Goods

In terms of Section 2 (52) of the CGST Act “Goods” means every kind of
movable property other than money and securities but includes actionable
claims, growing crops, grass and other things attached to or forming part of
land which are agreed to be severed before supply or under a contract of
supply.
The definition of goods has essentially been borrowed from Sale of Goods
Act, 1930 with two major variations i.e. actionable claims are included in the
definition and securities have been excluded.
Although under GST Law tax is levied on goods or services or both but still
the classification of an activity / transaction as good or service is of utmost
importance as there are separate rules for determination of time of supply
and place of supply for goods and services.
4.2.1 What are actionable claims?
As per section 3 of the Transfer of Property Act, 1893 actionable claims
means a claim to any debt, other than a debt secured by mortgage of
immovable property or by hypothecation or pledge of movable property or to
any beneficial interest in movable property not in the possession, either
actual or constructive, of the claimant, which the Civil Courts recognize as
affording grounds for relief, whether such debt or beneficial interest be
existent, accruing, conditional or contingent. Illustrations of actionable claims
are –
 Unsecured debts
 Right to participate in the draw to be held in a lottery.
GST : Practitioners Perspective

4.3 Meaning of Services

In terms of Section 2(102) of the CGST Act “Services” means anything other
than goods, money and securities but includes activity 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.
The words used in the definition are “anything other than goods, money and
securities” and thus it can be said that the term services has been defined in
a residual manner. This definition is too wide and virtually sky is the limit for
the Government to levy tax on services.
It may be noted here that even the immoveable property has not been
excluded from the definition of service which was specifically excluded from
the definition of service as provided in Section 65B(44) of Finance Act, 1994.
However in order to obviate any dispute in this regard the Sale of land and
completed building is not regarded as supply as per Schedule III of CGST
Act.

4.4 Meaning of money

As per Section 2 (75) of CGST Act “money” means the Indian legal tender or
any foreign currency, cheque, promissory note, bill of exchange, letter of
credit, draft, pay order, traveller cheque, money order, postal or electronic
remittance or any other instrument recognised by the Reserve Bank of India
when used as a consideration to settle an obligation or exchange with Indian
legal tender of another denomination but shall not include any currency that
is held for its numismatic value;
As the transaction in money is excluded from the definition of goods as well
as services they will not be exigible to GST.
Examples of transactions in money are:
 The principal amount of deposits in or withdrawals from a bank
account.
 Advancing or repayment of principal sum on loan to someone.
 Conversion of Rs 1,000 currency note into one rupee coins to the
extent amount is received in money form.

44
 Meaning of Goods and Services

4.5 Meaning of securities

Securities have been defined in Section 2(101) of the CGST Act as having
the same meaning assigned to it in clause (h) of section 2 of the Securities
Contract (Regulation) Act, 1956 (42 0f 1956) in terms of which ‘securities’
includes –
 Shares, scrips, stocks, bonds, debentures, debenture stock or other
marketable securities of a like nature in or of any incorporated
company or other body corporate.
 Derivative.
 Security receipt as defined in clause (zg) of section 2 of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002.
 Units or any other such instrument issued to the investors under any
mutual fund scheme.
 Any certificate or instrument (by whichever name called), issued to any
investor by any issuer being a special purpose distinct entity which
possesses any debt or receivable, including mortgage debt, assigned
to such entity, and acknowledging beneficial interest of such investor
in such debt or receivable, including mortgage debt, as the case may
be;
 Government securities;
 Such other instruments as may be declared by the Central
Government to be securities.
 Rights or interest in securities.
As the definition of services as well as goods under GST Law excludes
securities, activities that are in the nature of only transfer of title by way of
sale, redemption, purchase or acquisition of securities on principal-to-
principal basis, excluding services of dealers, brokers or agents in relation to
such transactions, are outside the ambit of ‘services. However activities
which are not in the nature of transfer of title in securities (for example a
person agreeing not to exercise his right in a security for a given period of
time for a consideration) would be regarded as a ‘service.

45
GST : Practitioners Perspective

4.6 Components of goods and services: At a

glance
The components of goods and services as per aforesaid definitions at a
glance is given below:

Particulars Whether Whether

Goods? Services?
Every kind of movable property Yes No
Growing crops, grass and things Yes No
attached to or forming part of the land
which are agreed to be severed before
supply or contract of supply
Anything other than goods No Yes
Money No No
Activity relating to use / conversion of No Yes
money for which a separate
consideration is charged
Actionable Claims* Yes No
Securities No No
*Actionable claims other than lottery, betting and gambling is not treated as
supply as per Para 6 of Schedule –III of the CGST Act, 2017. Thus only
lottery, betting and gambling is subject to GST. Other actionable claims are
not subject to GST. Examples of such actionable claims are insurance policy,
claims for arrear of rent, unsecured loans.

46
 Chapter 5

Exempt Supplies
5.1 Introduction
The Central Government / State Government has the power to grant
exemption from tax under Section 11 of CGST Act /SGST Act, Section 6 of
IGST Act and Section 8 of UTGST Act. Each of the said Sections have three
sub-sections which we shall discuss in this Chapter.

5.2 Meaning of Exempt supply

As per Section 2 (47) of CGST / SGST Act exempt supply means supply of
goods or services or both which attracts nil rate of tax or which may be
wholly exempt from tax under Section 11, or under Section 6 of the IGST Act,
and includes non-taxable supply.
Thus exempt supply is a wide term and includes non-taxable supply.
As per Section 2(78) of CGST / SGST Act “non-taxable supply” means a
supply of goods or services or both which is not leviable to tax under this Act
or under the IGST Act. Examples of non-taxable are the five petroleum
products and alcoholic liquor which are kept outside ambit of GST.
5.3 Exemption in Public Interest by Notification – Section 11(1)
The Central Government may exempt goods and/or services of any specified
description from the tax leviable thereon. However, following cumulative
conditions need to be satisfied:
(a) Exemption is to be granted in public interest only;
(b) Exemption is to be granted on the recommendation of the GST
Council;
(c) Exemption is to be granted by a Notification in the Official Gazette;
(d) Exemption to be granted either absolutely [i.e. without any condition]
or subject to specified conditions;
(e) Exemption can be from the whole or any part of the tax leviable
thereon; and
GST : Practitioners Perspective

(f) The effective date of exemption may either be from the date of issue of
notification or any date subsequent thereto as may be specified in the
relevant Notification.
5.3.1 Absolute i.e. unconditional exemption (wholly or
partly) is compulsory
In terms of Explanation to Section 11(3) of the CGST / SGST Act, 2017,
where an exemption in respect of any goods or services or both from the
whole or part of the tax leviable thereon has been granted absolutely, the
registered person supplying such goods or services or both shall not collect
the tax, in excess of the effective rate, on such supply of goods or services or
both.
There is an identical provision in Explanation to Section 6 of IGST Act.
Thus, in case of unconditional exemption, the supplier cannot pay GST on
such goods or services in excess of effective rate of GST. Thus availing of
absolute exemption is not optional.
5.3.2 Notifications issued for Exemption pursuant to
under Section 11(1)/6(1)
The Notification exempts intra/inter State supplies of goods/services from
whole GST, unconditionally.

Nature of Supply Goods/Service Notification No

Intra-State Goods Notification No. 02/2017-Central Tax
Supplies of (Rate), dt. 28-06-2017 as amended
from time to time (under CGST Act)
and similar Notifications issued
under UTGST Act and SGST Act(s)
of respective States.
Services Notification No. 12/2017-Central Tax
(Rate), dt. 28-06-2017, as amended
from time to time (Under IGST Act)
and similar Notifications issued
under UTGST Act and SGST Act(s)
of respective States.
Inter-State Goods Notification No. 02/2017-Integrated

48
 Exempt Supplies

Supplies of Tax (Rate), dt. 28-06-2017 as

amended from time to time.
Services Notification No. 09/2017-Integrated
Tax (Rate), dt. 28-06-2017 as
amended from time to time.

5.3.3 Brief List of exempt goods

Although The exemption list is long and you need to refer to the exemption
Notification. However just for reference of our readers a list of some of the goods
which have been exempted from levy of GST is given below:

Types of goods Examples

Live animals Asses, cows, sheep, goat, poultry, etc.
Meat Fresh and frozen meat of sheep, cows, goats,
pigs, horses, etc.
Fish Fresh or frozen fish
Natural products Honey, fresh and pasteurized milk, cheese, eggs,
etc.
Live trees and plants Bulbs, roots, flowers, foliage, etc.
Vegetables Tomatoes, potatoes, onions, etc.
Fruits Bananas, grapes, apples, etc.
Dry fruits Cashew nuts, walnuts, etc.
Tea, coffee and Coffee beans, tea leaves, turmeric, ginger, etc.
spices
Grains Wheat, rice, oats, barley, etc.
Products of the Flours of different types
milling industry
Seeds Flower seeds, oilseeds, cereal husks, etc.
Sugar Sugar, jaggery, etc.
Water Mineral water, tender coconut water, etc.
Baked goods Bread, pizza base, puffed rice, etc.
Fossil fuels Electrical energy

49
GST : Practitioners Perspective

Drugs and Human blood, contraceptives, etc.

pharmaceuticals
Fertilizers Goods and organic manure
Beauty products Bindi, kajal, Kumkum, etc.
Waste Sewage sludge, municipal waste, etc.
Ornaments Plastic and glass bangles etc.
Newsprint Judicial stamp paper, envelopes, rupee notes, etc.
Printed items Printed books, newspapers, maps, etc.
Fabrics Raw silk, silkworm cocoon, khadi, etc.
Hand tools Spade, hammer, etc.
Pottery Earthen pots, clay lamps, etc.

5.3.4 Brief List of exempt services

The exemption list for services also is long and you need to refer to the
exemption Notification. However just for reference of our readers a list of
some of the services which have been exempted from levy of GST is given
below:
List of some of the GST exempted services are as follows:

Types of services Examples

Agricultural Cultivation, supplying farm labour, harvesting,
services warehouse related activities, renting or leading
agricultural machinery, services provided by a
commission agent or the Agricultural Produce
Marketing Committee or Board for buying or selling
agriculture produce, etc.
Government Postal service, transportation of people or goods,
services services by a foreign diplomat in India, services offered
by the Reserve Bank of India, services
offered to diplomats, etc.
Financial Services Interest or discount of loan, advances and deposit.
Transportation Transportation of goods by road, rail, water, etc.,
services payment of toll, transportation of passengers by air,

50
 Exempt Supplies

transportation of goods where the cost of transport

is less than prescribed amount.
Legal services Services offered by an arbitral tribunal, a
partnership firm of advocates, individual advocates
to an individual or business entity whose aggregate
turnover is below threshold exemption limit for
purpose of GST registration.
Educational Transportation of faculty or students, mid-day meal
services scheme, examination services, services offered by
IIMs, etc.
Health care Services offered by ambulance, charities, veterinary
services doctors, medical professionals, etc.
Organizational Services offered by exhibition organisers for
services international business exhibitions, tour operators for
foreign tourists, etc.
Other services Services offered by GSTN to the Central or State
Government or Union Territories, admission fee
payable to theatres, circuses, sports events, etc.
which charge a fee up to Rs. 500

For complete list of exemptions the readers are requested to refer to the
exemption Notifications as referred to in Para 3.3.2.
5.3.4 a Services specifically exempted only under IGST
exemption Notification
It may be noted here that the goods / services as exempted by CGST / SGST
Notifications are similar to that exempted under IGST Notifications. However
some services which in all cases be regarded as inter-State supplies have
additionally been exempted under the IGST exemption Notification
considering such supplies are in course of inter-State supplies and thus
cannot be subject to CGST + SGST.
For ready reference of the readers the services which are exempted only
under IGST exemption Notification viz Notification No. 9/2017 IT (R) dated
28.06.2017 are as under:
1) Services received from a provider of service located in a non- taxable
territory by –

51
GST : Practitioners Perspective

(a) the Central Government, State Government, Union territory, a

local authority, a Governmental authority or an individual in
relation to any purpose other than commerce, industry or any
other business or profession;
(b) an entity registered under section 12AA of the Income-tax Act,
1961 for the purposes of providing charitable activities; or
(c) way of supply of online educational journals or periodicals to an
educational institution other than an institution providing
services by way of-
(i) pre-school education and education up to higher
secondary school or equivalent; or
(ii) education as a part of an approved vocational education
course;
(d) a person located in a non-taxable territory.
However, the exemption shall not apply to –
(i) online information and database access or retrieval services
received by persons specified in Entry (a) or Entry (b); or
(ii) services by way of transportation of goods by a vessel from a
place outside India up to the customs station of clearance in
India received by persons specified in the Entry.
2) Supply of services associated with transit cargo to Nepal and Bhutan
(landlocked countries).
3) Services received by the RBI, from outside India in relation to
management of foreign exchange reserves.
4) Services provided by a tour operator to a foreign tourist in relation to a
tour conducted wholly outside India.
5.3.5 Exemption in Public Interest by Special Order
under Circumstances of an Exceptional Nature–
Section 11(2)
The Central Government may exempt from payment of tax any goods and/or
services on which tax is leviable. However, following cumulative conditions need
to be satisfied:

52
 Exempt Supplies

(a) Exemption is to be granted in public interest only;

(b) Exemption is to be granted on the recommendation of the GST
Council;
(c) Exemption is to be granted by a special order in each case; and
(d) Exemption is to be granted under circumstances of an exceptional
nature to be specified in the aforesaid special order.
It may be noted that it is not necessary to publish the order in Official
Gazette.
5.3.5 Insertion of an Explanation in the Notification or
Order – Section 11(3)
The Government may insert an Explanation in the Notification or Order
issued under Section 11(1) or Section 11(2) respectively. However, following
conditions need to be satisfied cumulatively:
(a) Explanation is to be inserted only if the Government considers it
necessary or expedient to do so;
(b) Explanation is to be inserted with a view to clarify the scope or
applicability of any Notification or Order; and
(c) Explanation is to be issued within one year of issue of the Notification
or Order. Further, such Explanation shall have the effect as if it had
always been the part of the original /first relevant Notification or Order.
5.3.6 Difference between exempt supply, Nil rate supply,
zero rated supply and non GST Supply:
Supply Name Description
Zero Rated Zero rated supplies have been defined in Section 16(1)
of the IGST Act and covers the following supplies:
─ Exports
─ Supplies made to SEZ or SEZ Developers.
Such supplies can be made without payment of GST
under LUT / bond or against payment with subsequent
refund of tax paid. Also refund of ITC can be availed.
Nil Rated Supplies that are not covered in exemption notification

53
GST : Practitioners Perspective

but under rate notification with a declared rate of 0% GST.

Example: Agricultural operations…

Exempt Supplies that are covered under exemption Notification

and thus do not attract GST.
Example: Fresh milk, Fresh fruits, Curd, Bread, interest on
loan, health care services etc.
Non-GST These supplies do not come under the purview of GST
law.
Example: Alcohol for human consumption, Petrol etc.

54
 Chapter 6

Payment under Reverse Charge

6.1 Introduction
As per the charging section of GST Acts, the tax is required to be paid by the
taxable person, which is generally the supplier. However in some situations
the tax is to be paid by the recipient of supply. Such provisions have been
incorporated in GST law as Government finds it administratively more
convenient and easy to collect tax from the recipient of service in cases
where the suppliers of service are situated in non-taxable territory or are
illiterate or unorganized or are in large numbers.
As per Section 2(98) of the CGST Act “reverse charge” means the liability to
pay tax by the recipient of supply of services instead of supplier of such
services under sub-section (3) or sub-section (4) or under sub-section (3) or
sub-section (4) of section 5 of IGST Act. The provisions regarding reverse
charge also exist under SGST Act and UTGST Act.
The provisions regarding reverse charge have been inspired from service tax
and under GST law its ambit has been enlarged. The provisions regarding
reverse charge are discussed in succeeding paras.

6.2 Contents of the Chapter

(a) Reverse charge on notified goods (Para 6.3)
(b) Reverse charge on notified services (Para 6.4)
(c) Reverse charge on notified supplies by unregistered person to
registered person (Para 6.5)

6.3 Reverse charge on notified goods

In regard to services, sub-section (3) of Section 9 of CGST /SGST Act(s)
provides that the Government may, on the recommendations of the Council,
by notification, specify categories of supply of goods, the tax on which shall
be paid on reverse charge basis by the recipient of such services and all the
provisions of this Act shall apply to such recipient as if he is the person liable
for paying the tax in relation to the supply of such services.
GST : Practitioners Perspective

Similar provisions also exist under the IGST Act and UTGST Acts.
It may be noted that tax under reverse charge is to be paid in cash and
cannot be adjusted against the input tax credit. However input tax credit of
the amounts paid under reverse charge can be claimed subject to fulfillment
of conditions.
6.3.1 List of goods notified for reverse charge:
The supply of goods which are under ambit of reverse charge mechanism
(RCM) has been notified vide Notification No. 4/2017-Central Tax (Rate)
dated 28-6-2017 (as amended) under Section 9(3) of the CGST Act, 2017.
The list of goods that are under reverse charge from 01.07.2017 (unless
mentioned otherwise) as notified by the Central Government is given below.
These goods are also notified for reverse charge under other GST Acts(s).
S. Tariff item, Description of Supplier of Recipient of
No. sub- supply of Goods goods supply
heading,
heading or
Chapter
(1) (2) (3) (4) (5)
1. 0801 Cashew nuts, not Agriculturist Any registered
shelled or peeled person
2. 1404 90 10 Bidi wrapper Agriculturist Any registered
leaves (tendu) person
3. 2401 Tobacco leaves Agriculturist Any registered
person
4. 5004 to Silk yarn Any person who Any registered
5006- manufactures silk person
yarn from raw silk
or silk worm
cocoons for
supply of silk yarn
4A 5201 Raw Cotton Agriculturist2 Any registered
person
(RCM applicable
from 15.11.2017)

56
 Payment under Reverse Charge

5 - Supply of lottery. State Lottery distributor

Government, or selling agent.
Union Territory or Explanation.- For
any local the purposes of
authority this entry, lottery
distributor or
selling agent has
the same
meaning as
assigned to it in
clause (c) of Rule
2 of the Lotteries
(Regulation)
Rules, 2010,
made under the
provisions of sub
section 1 of
section 11 of the
Lotteries
(Regulations) Act,
1998 (17 of
1998).
6 Any Chapter Used vehicles, Central Any registered
seized and Government, person
confiscated State
goods, old and Government, (RCM applicable
used goods, Union territory or from 13.10.2017)
waste and scrap a local authority1
7 Any Chapter Priority Sector Any registered Any registered
Lending person person
Certificate (RCM applicable
from 28.05.2018)

6.3.1-a Purchase of goods from Agriculturist

Out of eight goods wherein reverse charge is applicable on five goods, if
purchased by registered person from an agriculturist. Thus, it is important to
understand the meaning of the word ‘Agriculturist’.

57
GST : Practitioners Perspective

Meaning of Agriculturist:
As per Section 2(7) of the CGST Act,2017 ‘agriculturist’ means an individual
or a Hindu Undivided Family who undertakes cultivation of land—
(a) by own labour, or
(b) by the labour of family, or
(c) by servants on wages payable in cash or kind or by hired labour under
personal supervision or the personal supervision of any member of the
family.
It may be noted that no definition of term ‘agriculture’ has been given in GST
law and definition of term ‘agriculturist’ is available. Normally, in commercial
parlance, the word ‘agriculture is understood in a very wide manner to
include post-harvesting operations also. Further agriculture should also cover
Floriculture, Horticulture and Sericulture. However it does not include rearing
of animals.
6.3.1-b Supply of lottery tickets
‘Lottery tickets’, is actionable claim and is classified as ‘goods’, under GST.
However, an actionable claims other than lottery, betting and gambling has been
kept outside scope of supply as per Schedule III of the CGST Act.
Hence, the sale of lottery tickets would be considered to be the supply of taxable
goods and will attract GST.
Payment of GST under reverse charge:
In the case of lottery run by State Government, the tickets are sold by the
State Government to lottery distributor /selling agent. The selling agent is
required to pay tax under reverse charge.
Subsequently, when the selling agent supplies such tickets to sub-agent/
customer, no tax is required to be paid. The local sub-agent is also not
required to pay any tax. Thus, a tax is levied at single – point under reverse
charge in case of lottery run by State Government.
However, in the case of lottery authorised by State Government, the tax is to
be paid under the forward charge by the lottery selling agent (i.e. Supplier). A
tax must also be paid at each stage of supply.
Uniform rate of GST of 28% is applicable on all lotteries.

58
 Payment under Reverse Charge

6.3.1-c Priority Sector Lending Certificate (PSLC)

What is the Priority Sector Lending Certificate (PSLC)?
Priority Sector lending certificate (PSLCs) are tradable instruments issued as
certificates against priority sector lending by banks. The certificates help
banks to meet their lending goals specified for the priority sector. Buyers of
PSLC are generally those banks who are not able to meet there required
target of lending priority sector. Thus, banks moving ahead of their targets
issues PSLC to non-achievers to balance the flow of lending and credit.
It may be noted here that these certificates are issued only between banks
and the risk on account of credit made by over-performing banks, does not
transfer with the issue of certificates to other banks.
The Four specified types of PSLC include :
PSLC Agriculture: PSLC issued for agriculture sub lending target.
PSLC Micro Enterprises: PSLC issued for micro-enterprises sub lending
target
PSLC SF/MF: PSLC issued for small and marginal farmers sub lending
target
PSLC General: PSLC issued for correspondingly balancing the overall
lending target.
PSLCs issued by banks does not transfer any risk, loan assets, interest or
any right, hence, PSLC does not fall under the definition of securities. They
have an intrinsic value of their own and are to be taxed at normal rates like
other taxable goods under GST.
Levy of GST on PSLC
As per CBIC Circular No.62/36/2018-GST dated 12.09.2018 clarified that
GST on PSLCs starting from period 1.7.2017 to 27.05.2018 will be paid by
the seller bank on a forward charge basis at the rate of 12%. whereas from
28.05.2018 onwards, the charge would be paid by the buyer bank on reverse
charge mechanism (“RCM”).
The trade of PSLCs among banks will be considered as an Inter-State supply,
accordingly Integrated Tax (“IGST”) is payable on such transactions.

59
GST : Practitioners Perspective

6.4 Reverse Charge Mechanism on supply of

services
In accordance to the powers conferred under Section 9(3) of CGST Act, 2017
and under Section 5(3) of IGST Act, 2017, Notification No. 13/2017-Central
Tax (Rate) dated 28-6-2017 and Notification No. 10/2017-Integrated Tax
(Rate) dated 28-6-2017 (RCM Notifications) have been issued by Govt,
notifying the situations wherein certain supply of services would be under
ambit of reverse charge mechanism.
Following are Supply of services covered under RCM from 01.07.2017
(unless specifically mentioned) as per section 9(3) are:
Sl. Category of Supply of Supplier Recipient of Service
No. Services of service
(1) (2) (3) (4)
1 Supply of Services by Goods (a) Any factory
a goods transport Transport Agency registered under
agency (GTA) who (GTA) who has not or governed by
has not paid central paid central tax at the the Factories Act,
tax at the rate of 6% rate of 6% 1948(63 of 1948);
in respect of or
transportation of (b) any society
goods by road to- registered under
(a) any factory the Societies
registered under Registration Act,
or governed by the 1860 (21 of 1860)
Factories Act, or under any
1948(63 of 1948); other law for the
or time being in
(b) any society force in any part
registered under of India; or
the Societies (c) any co-operative
Registration Act, society
1860 (21 of 1860) established by or
or under any other under any law; or
law for the time (d) any person
being in force in registered under

60
 Payment under Reverse Charge

any part of India; the CGST/IGST/

or SGST/UTGST
(c) any co-operative Act; or
society (e) any body
established by or corporate
under any law; or established, by or
(d) any person under any law; or
registered under (f) any partnership
the Central Goods firm whether
and Services Tax registered or not
Act or the under any law
Integrated Goods including
and Services Tax association of
Act or the State persons; or
Goods and (g) any casual
Services Tax Act taxable person;
or the Union located in the taxable
Territory Goods territory.
and Services Tax (RCM applicable from
Act; or 01.07.2017, however
(e) anybody corporate from 22.08.2017,
established, by or RCM is applicable
under any law; or only where GTA has
(f) any partnership not paid CGST &
firm whether SGST @ 6% each or
registered or not IGST @ 12%).
under any law
including
association of
persons; or
(g) any casual taxable
person.
2 Services supplied by An Any business entity
an individual individual advocate located in the
advocate including a including taxable territory.
senior advocate or a senior advocate
firm of advocates by or firm of advocates.

61
GST : Practitioners Perspective

way of legal services,

directly or indirectly.
Explanation: “legal
service” means any
service provided in
relation to advice,
consultancy or
assistance in any
branch of law, in any
manner and includes
representational
services before any
court, tribunal or
authority.”.
3 Services supplied by An arbitral tribunal Any business entity
an arbitral tribunal to a located in the
business entity. taxable territory.
4 Services provided by Any person Anybody corporate or
way of sponsorship to partnership
anybody corporate or firm located in the
partnership firm. taxable territory.
5 Services supplied by Central Government, Any business entity
the Central State Government, located in the taxable
Government, State Union territory or local territory.
Government, Union authority
territory or local
authority to a business
entity excluding, -
(1) renting of
immovable
property, and
(2) services specified
below-
(i) services by the
Department of
Posts by way of
speed post,

62
 Payment under Reverse Charge

express parcel
post, life
insurance, and
agency services
provided to a
person other than
Central
Government,
State Government
or Union territory
or local authority;
(ii) services in relation
to an aircraft or a
vessel, inside or
outside the
precincts of a port
or an airport;
(iii) transport of goods
or passengers.
5A Services supplied by Central Government, Any person registered
the Central State Government, under the CGST Act,
Government, State Union territory or local 2017.
Government, Union authority (RCM applicable from
territory or local 25.01.2018).
authority by way of
renting of immovable
property to a person
registered under the
Central Goods and
Services Tax Act,
2017 (12 of 2017).
5B Services supplied by Any person Promoter
any person by way of (RCM applicable from
transfer of 01.04.2019)
development rights or
Floor Space Index
(FSI) (including
additional FSI) for

63
GST : Practitioners Perspective

construction of a
project by a promoter.
5C Long term lease of Any person Promoter
land (30 years or (RCM applicable from
more) by any person 01.04.2019)
against consideration
in the form of upfront
amount (called as
premium, salami, cost,
price, development
charges or by any
other name) and/or
periodic rent for
construction of a
project by a promoter.
6 Services supplied by a A director of a The company or a
director of a company company or a body body corporate
or a body corporate to corporate located in the taxable
the said company or territory.
the body corporate.
7 Services supplied by An insurance agent Any person carrying
an insurance agent to on insurance
any person carrying business, located in
on insurance the taxable territory.
business.
8 Services supplied by a A recovery agent A banking company or
recovery agent to a a financial institution
banking company or a or a non-banking
financial institution or financial company,
a non- banking located in the taxable
financial company. territory.
9 Supply of services by Music composer, Music company,
a music composer, photographer, artist, producer or the like,
photographer, artist or or the like located in the taxable
the like by way of territory.
transfer or permitting
the use or enjoyment

64
 Payment under Reverse Charge

of a copyright covered
under section 13(1)(a)
of the Copyright Act,
1957 relating to
original dramatic,
musical or artistic
works to a music
company, producer or
the like.
9A Supply of services by Author Publisher located in
an author by way of the taxable territory.
transfer or permitting RCM will NOT be
the use or enjoyment applicable from
of a copyright covered 01.10.2019 where:-
under section 13(1)(a) (i) the author has
of the Copyright Act, taken registration
1957 relating to under the CGST
original literary works Act, 2017, and
to a publisher. filed a declaration,
in form at
Annexure I of RCM
notification(s),
within the time limit
prescribed therein,
with the
jurisdictional
CGST or SGST
commissioner, that
he exercises the
option to pay
central tax on such
service, in
accordance with
Section 9 (1) of the
CGST Act, 2017
under forward
charge, and to
comply with all the
provisions of

65
GST : Practitioners Perspective

CGST Act, 2017

as they apply to a
person liable for
paying the tax in
relation to the
supply of any
goods or services
or both and that he
shall not withdraw
the said option
within a period of 1
year from the date
of exercising such
option;
(ii) the author makes
a declaration, as
prescribed in
Annexure II of
RCM notification(s)
on the invoice
issued by him in
Form GST Inv-I to
the publisher.
10 Supply of services by Members of Reserve Bank of
the members of Overseeing India.
Overseeing Committee constituted RCM applicable from
Committee to Reserve by the Reserve Bank 13.10.2017
Bank of India of India
11 Services supplied by Individual Direct A banking company or
individual Direct Selling Agents (DSAs) a non-banking
Selling Agents (DSAs) other than a body financial company,
other than a body corporate, partnership located in the taxable
corporate partnership or limited liability territory.
or limited liability partnership firm. RCM applicable from
partnership firm to 27.07.2017
bank or non-banking
financial company
(NBFCs).

66
 Payment under Reverse Charge

12 Services provided by Business facilitator A banking company,

business facilitator (BF) (BF) located in the taxable
to a banking company. territory.
(RCM applicable from
01.01.2019
13 Services provided by An agent of business A business
an agent of business correspondent (BC). correspondent,
correspondent (BC) to located in the taxable
business territory.
correspondent (BC). (RCM applicable from
01.01.2019
14 Security Services Any person other than A registered person,
(services provided by a body corporate. located in the “taxable
way of supply of territory.”
security personnel) RCM shall NOT be
provided to a applicable to,- (i)(a) a
registered person Department or
Establishment of the
Central / State Govt.
or Union territory; or
(b) local authority; or
(c) Government
agencies; which has
taken registration
under the CGST Act,
2017 only for the
purpose of deducting
tax under Sec 51 of
the said Act and not
for making a taxable
supply of goods or
services; or
(ii) a registered person
paying tax under
composition scheme.
(RCM applicable from
01.01.2019

67
GST : Practitioners Perspective

15 Services provided by Any person, other Any body corporate

way of renting of any than a body corporate located in the taxable
motor vehicle who supplies the territory”.
designed to carry service to a body (RCM applicable from
passengers where the corporate and does 01.10.2019)
cost of fuel is included not issue an invoice
in the consideration charging central tax at
charged from the the rate of 6% to the
service recipient, service recipient.
provided to a body
corporate.
16. Services of lending Lender i.e. a person Borrower i.e. a person
securities of Securities who deposits the who borrows the
under Lending securities registered in securities under the
Scheme, 1997 his name or in the Scheme through an
(Scheme). Securities name of any other approved intermediary
and Exchange Board person duly of SEBI).
of India (SEBI), as authorised on his (RCM applicable from
amended. behalf with an 01.10.2019)
approved intermediary
for the purpose of
lending under the
scheme of SEBI.

It may be noted here that the tax is to be paid under reverse charge
mechanism on all the above 20 services in case the supply is made by
specified persons to specified persons as prescribed under RCM
Notifications.
The tax will be paid under CGST Act as well as SGST Act viz CGST + SGST
in case such supplies are intra-State supplies as defined under Section 8 of
the IGST Act,2017. However IGST will be required to paid under reverse
charge where such supplies of services are inter-State as defined under
Section 7 of the IGST Act, 2017.
However in regard to inter-State supplies, apart from above 20 services the
following two additional services has been notified by the Central
Government vide Notification No. 10/2017-Integrated Tax (Rate) dated 28-6-
2017 wherein whole of the tax viz IGST shall be payable by the recipient on
services under Section 5(3) of IGST Act,2017 on Reverse charge basis.

68
 Payment under Reverse Charge

S. Supplier of Category of Supply of Recipient of

No. service Services Service
I Any person Any service supplied by any Any person
located in a person who is located in a located in the
non- non-taxable territory to any taxable territory
taxable person other than non- other than non-
territory taxable online recipient. taxable online
recipient.
ii A person Services supplied by a person Importer, as
located in a located in non- taxable defined in clause
non- territory by way of (26) of section 2
taxable transportation of goods by a of the Customs
territory vessel from a place outside Act, 1962,
India up to the customs located in the
station of clearance in India. taxable territory.

6.5 Reverse charge on notified supplies by

unregistered person to registered person
In terms of Section 9(4)/5(4) of the CGST / IGST Act, 2017, the Government
has powers to specify a class of registered persons who shall, in respect of
supply of specified categories of gods or services or both received from an
unregistered supplier, pay the tax on reverse charge basis as the recipient of
such supply.
In exercise of the powers conferred by Section 9(4) of the CGST Act, 2017,
the Central Government has issued Notification No. 07/2019- Central Tax
(Rate) dated 29-03-2019 wherein GST will be required to be paid w.e.f. 1st
April, 2019, by the promoter (builder) on procurement of goods or services
from unregistered suppliers.
Under the aforesaid Notification, the promoter shall be liable to pay GST
under reverse charge mechanism (RCM) on three kinds of supplies from
unregistered suppliers. The supplies are briefly discussed as under:
6.5.1. RCM on Input and input Service for Construction of Project
If ‘Promoter’ purchases input goods and services used for construction of

69
GST : Practitioners Perspective

project from the unregistered person, then he is liable to pay GST under
reverse charge mechanism (RCM) on such supplies under Section 9(4) of
CGST Act, 2017, if such purchase is less than 80% of total value of inputs
and input services.
Notification No. 07/2019- Central Tax (Rate) dated 29.03.2019 prescribes
that RCM is to be paid on following supplies from unregistered suppliers:
“Supply of such goods and services or both [other than services by
way of grant of development rights, long term lease of land (against
upfront payment in the form of premium, salami, development charges
etc.) or FSI (including additional FSI)] which constitute the shortfall
from the minimum value of goods or services or both required to be
purchased by a promoter for construction of project, in a financial year
(or part of the financial year till the date of issuance of completion
certificate or first occupation, whichever is earlier) as prescribed in
notification No. 11/ 2017- Central Tax (Rate), dated 28th June, 2017,
at items (i), (ia), (ib), (ic) and (id) against serial number 3 in the Table,
published in Gazette of India vide G.S.R. No. 690, dated 28th June,
2017, as amended”
The term used in the notification “shortfall from the minimum value of goods
or services or both required to be purchased by a promoter” means,
minimum 80% of the total value of input and input services or both are
required to be procured by a promoter from a registered person and balance
20% can be procured from an unregistered person. In case this condition is
not fulfilled promoter will have has to be pay RCM on the shortfall from 80%
threshold.
Minimum value for the purpose is prescribed as 80% of the value of input &
input services. However, value of input Services by way of grant of
development rights, long term lease of land (against upfront payment in the
form of premium, salami, development charges etc.) or FSI (including
additional FSI) are excluded for calculating 80% procurement limit.
GST Rate: The GST Rate is 18% even if the actual rate of GST in case of
some of inputs or input services is lower than 18% – (Sr No. 452Q of
Schedule III of Notification No. 08/2019-CT (R) dated 28-6-2017 as inserted
w.e.f. 1-4-2019.)

70
 Payment under Reverse Charge

6.5.2. RCM on Purchase of Cement

Notification No. 07/2019- Central Tax (Rate) dated 29.03.2019 as amended vide
Notification No. 24/2019-Central Tax (Rate) dated 30.09.201 prescribes GST will
be payable under RCM on following supply from an unregistered suppliers
“Cement falling in Chapter Heading 2523 in the First Schedule to the Customs
Tariff Act, 1975 (51 of 1975).
It may be noted here that RCM will be applicable on any amount of purchase
of ‘Cement’ by the “promoter” from an unregistered supplier for the
construction of project during the financial year, irrespective of the condition
of 20%/80%, as in case of input goods and services at point 1 above. Thus
no grace is allowed to promoter and in order to avoid RCM he need to
purchase entire Cement from registered supplier.
On Cement purchases from unregistered supplier, the promoter will be
required to pay GST @ 28% i.e. currently applicable rate on Cement.
6.5.3. RCM on Purchase of Capital goods
Notification No. 07/2019- Central Tax (Rate) dated 29.03.2019 prescribes
RCM will be applicable on following supply from an unregistered supplier:
“Capital goods falling under any Chapter in the First Schedule to the
Customs Tariff Act, 1975 (51 of 1975) supplied to a promoter for
construction of a project on which tax is payable or paid at the rate
prescribed for items (i), (ia), (ib), (ic) and (id) against serial number 3 in
the Table, in notification No. 11/ 2017- Central Tax (Rate), dated 28th
June, 2017, published in Gazette of India vide G.S.R. No. 690, dated
28th June, 2017, as amended.”
Thus as per above Notification a “promoter” is liable to pay GST under RCM
for purchase of any capital goods from any unregistered supplier.

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 Chapter 7

Time of Supply
7.1 Introduction
The determination of time when the incidence of tax arises is of critical
importance under every statute. Such determination is even more important
in regard to taxation of services where it is difficult to identify the time when
they have been rendered as services are intangible in nature.
Time of supply is nothing but a different name for “point of taxation” which was
used under service tax law and denotes the time when the charging event has
occurred. Provisions regarding determination of time of supply are mandated
under Section 12 for Goods and Section 13 for Services. Section 14 of the
CGST Act, 2017 comes into play for determining the time of supply of goods
as well as services in cases of change in rate of tax.
The provisions of Section 12, 13 and 14 of the CGST Act are also applicable
to IGST and UTGST Act. Further SGST Acts of respective States and two
Union Territories also contains the similar provisions they being the mirror
image of CGST Act.

7.2 Importance of time of supply

The importance of time of supply can gauged from the fact that as per
Section 12(1) / 13(1) of CGST Act, 2017 liability to pay tax on goods /
services arises at the time of supply, as determined in accordance with the
provisions of Section 12 and 13. Accordingly any delay in determining of time
of supply would result in delay in payment of tax and consequential levy of
interest which may affect the business margins and cash flows adversely.
Further the time of supply determines the ‘rate of tax’ applicable on any
supply. It also determines the due date of filing of GST returns as well as due
date of payment of tax.
The time of supply also plays key role in determining the rate of exchange
applicable for determination of value of supply in light of Rule 34 of the
CGST Rules, 2017 which is briefed as under:
 For Goods: Applicable rate of exchange as notified by CBIC u/s 14 of
 Time of Supply

the Customs Act, 1962 for the date of time of supply of such goods u/s
12 of the CGST Act. (Rule 34(1) of the CGST Rules).
 For Services: Applicable rate of exchange determined as per generally
accepted accounting principles (GAAP) for the date of time of supply
of such services in terms of Sec 13 of the CGST Act. (Rule 34(2) of
the CGST Rules).

7.3 Statutory provisions relating to Time of

Supply: At a glance
For ready reference the statutory provisions relating to time of supply are
tabulated below:
Sl. Provision of Principles for determination of :
No CGST Act
1. Section 12(2) Time of supply of goods in general (Refer Para 7.4)
2. Section 12(3) Time of supply in respect of payment of tax on
reverse charge basis on goods (Refer Para 7.5)
3. Section 13(2) Time of supply of services in general (Refer Para
7.6)
4. Section 13(3) Time of supply in respect of payment of tax on
reverse charge basis on services (Refer Para 7.7)
8. Section 12(4) / Time of supply is case of supply of vouchers of
13 (4) goods or services. (Refer Para 7.8)
9. Section 12(5) / Time of supply in cases when it is not possible to
13 (5) determine it under provisions of Section 12(2) /
13(2), 12(3) / 13(3) and 12(4) / 13(4)- Residual
Clause. (Refer Para 7.9)
10. Section 12(6) / Time of supply of receipt of interest, late fee,
13 (6) penalty for delayed payment of any consideration.
(Refer Para 7.10)
11. Section 14 Time of supply is case of change in rate of tax in
respect of supply of goods or services.(Refer Para
7.11)

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GST : Practitioners Perspective

7.4 Time of Supply of Goods in normal forward

charge cases
As per Section 12(2) of the CGST Act, 2017, the time of supply of goods
would be earlier of the following dates:
(a) Date of issue of invoice by the supplier or the last date on which he is
required to issue the invoice with respect to the supply u/s 31 [i.e.,
Due date of issue of invoice]; or
(b) the date of receipt of payment by the supplier.
Thus as per above provision GST was payable even in case of receipt of
advance for supply of goods. However relief in this regard has been provided
as discussed in the succeeding para.
7.4.1 No Tax on receipt of payment
The registered person who did not opt for the composition levy under section
10 shall pay the central tax on the outward supply of goods at the time of
supply as specified in section 12(2)(a) i.e. the date of issue of invoice by the
supplier or the last date on which he is required, under section 31(1), to issue
the invoice with respect to the supply. Therefore, no GST is payable on
advances received against supply of goods w.e.f 15.11.2017 (Notification No.
66/2017-Central Tax dated 15.11.2017).
Earlier by Notification No.40/2017- Central Tax dtd.13.10.2017, this benefit
was granted to only small assesses whose turnover in the preceding financial
year or in the year in which he obtained registration does not exceed or is not
likely to exceed Rs 150 Lakhs.

74
 Time of Supply

7.4.2 What is due date of issue of invoice of goods

Normal supply of Goods:
Section 31(1) of CGST Act prescribes due date of issue of invoice i.e. time
limit within which invoice is to be raised in case of supply of goods.
According to the Section the invoice is to be raised before or at the time of,-
(a) removal of goods for supply to the recipient, where the supply involves
movement of goods, or
(b) delivery of goods or making available thereof to the recipient, in any
other case.
Continuous supply of goods:
As per Section 31(4) of the CGST Act, in case of continuous supply of goods,
where successive statements of accounts or successive payments are
involved, the invoice shall be issued before or at the time each such
statement is issued or, as the case may be, each such payment is received.
Sale on approval basis:
Section 31(7) of the CGST Act mandates that where the goods being sent or
taken on approval for sale or return basis are removed before the supply
takes place, the invoice shall be raised before or at the time of supply or six
months from the date of removal, whichever is earlier.
In other words in cases of sale on approval or return basis the invoice should
be issued at time when approval is conveyed by the recipient or six months
from removal of goods, whichever is earlier.
7.4.3 What is date of receipt of payment
Date receipt of payment by the supplier 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.
Though as discussed above GST is now not applicable on advances
received towards supply of goods and thus the computation of date of receipt
of payment has become irrelevant as far as determination of time of supply is
concerned. However it may still be relevant for composition dealers which
are paying tax under Section 10 of the CGST Act, 2017.

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GST : Practitioners Perspective

7.5 Time of supply of goods in reverse charge

cases
As per Section 12(3) of the CGST Act, in case of supplies of goods in respect
of which tax is paid or liable to be paid on reverse charge basis (tax is to be
paid by recipient of the supply), the time of supply shall be the earliest of the
following date, namely: -
(a) the date of receipt of goods, or
(b) 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
(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 (31 st day from date of invoice).
Provided that where it is not possible to determine the time of supply under
clause (a) or clause (b) or clause (c), the time of supply shall be the date of entry
in the books of account of the recipient of supply.
For details regarding the goods which are subject to payment under reverse
charge please refer to Chapter 6 of this book.

7.6 Time of Supply of services in normal forward

charge cases
Time of supply in case of supply of services as per Section 13(2) of the
CGST Act shall be as under: -

Situation Time of Supply

Invoice is issued within prescribed The date of issue of invoice by the
time supplier or date of receipt of payment,
whichever is earlier
Invoice is not issued within The date of provision of service or
prescribed time date of receipt of payment
whichever, is earlier
In cases where time of supply cannot be arrived as above, the time of supply
shall be the date on which the recipient shows the receipt of services in his
books of account.

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 Time of Supply

It may be noted that advances received towards supply of services are

taxable and no relief, as in case of goods has been provided. It is pertinent to
mention here that advances towards services were earlier also subjected to
service tax since 01.07.2011.
As per proviso to section 13(2) where the supplier of taxable goods /Services
receives an amount up to Rs 1000/- in excess of the amount indicated in the
tax invoice, the time of supply to the extent of such excess amount shall, at
the option of the said supplier, be the date of issue of invoice in respect of
such excess amount.
7.6.1 What is prescribed time for issue of invoice for
services
Normal supplies:
Section 31(2) of CGST Act read with Rule 47 of the CGST Rules, provides
that invoice towards supply of service should be issued within 30 days [45
days in case of insurance cos./banking and financial institutions including
NBFCs] from the date of supply of services.
Continuous Supply of Services:
The provisions as contained in Section 31(5) of the CGST Act are tabulated
below:

Situation Description Invoice to be issued

on or before
Payment not linked to Due date of payment is Due date of payment
completion of an event ascertainable from the
contract
Payment not linked to Due date of payment Actual receipt of
completion of an event not ascertainable from payment.
the contract
Payment linked to – Date of completion of
completion of an the event.
event.

7.6.2 What is date of receipt of payment

Date of receipt of payment shall be the date on which the payment is entered

77
GST : Practitioners Perspective

in the books of account of the supplier or the date on which the payment is
credited to his bank account, whichever is earlier.

7.7 Time of Supply of reverse charge on services

As per Section 13(3) of the CGST Act in case of supplies of services in
respect of which tax is paid or liable to be paid on reverse charge basis, the
time of supply shall be the earlier 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 sixty days from the date of issue of
invoice or any other document, by whatever name called, in lieu
thereof by the supplier (61st day from invoice).
Further, where it is not possible to determine the time of supply under clause
(a) or clause (b), the time of supply shall be the date of entry in the books of
account of the recipient of supply.
7.7.1 Special provision for import of services from
associated enterprises
Import of services is subject to payment under reverse charge mechanism. In
case of supply by associated enterprises, where the supplier of service is located
outside India, the time of supply shall be the:
─ Date of entry in the books of account of the recipient of supply or
─ the date of payment,
whichever is earlier.

7.8 Time of Supply of Vouchers of goods /

services (Section 12(4) / 13(4))
In case of supply of vouchers by a supplier of goods or services, the time of
supply shall be—
(a) the date of issue of voucher, if the supply is identifiable at that point;
or
(b) the date of redemption of voucher, in all other cases.

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 Time of Supply

7.8.1 Meaning of Voucher

As per Section 2(118) of the CGST Act ‘voucher’ means an instrument where
there is an obligation to accept it as consideration or part consideration for a
supply of goods or services or both and where the goods or services or both
to be supplied or the 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 instrument.

7.9 Time of Supply of goods / services in residual

cases (Section 12(5) / 13(5))
Where it is not possible to determine the time of supply under the provisions
of sub-section (2), (3) or (4) of Section 12 or 13, the time of supply shall––
(a) in a case where a periodical return has to be filed, be the date on
which such return is to be filed; or
(b) in any other case, be the date on which the tax is paid.
Time of supply under this residuary provision is applicable only when the
other provisions are found to be inapplicable and not merely when there is
some difficulty in determining the facts that are sought for by the relevant
provision.

7.10 Time of Supply for interest, late fee or

penalty for delayed payment of
consideration:
The time of supply 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 for goods or services shall be the date on which the supplier
receives such addition in value.

7.11 Change in rate of tax in respect of supply of

goods or services (Section 14)
The provisions of Section 14 of the CGST Act will be applicable only in cases
where there is change in rate of GST of goods / services and the three
events viz date of supply, date of issue of invoice and date of receipt of
payment are scattered before and after the date of change in rate of tax.

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GST : Practitioners Perspective

It may be noted that in cases all the three events take place before or after
the change in rate of tax, this Section will not apply and time of supply will be
determined as per Section 12 (for goods ) and Section 13 (for services) as
discussed in preceding paras.

Issue of Invoice Receipt of Payment Time of supply

Where Goods or services or both have been supplied before the
change in rate of Tax
After After Date of issue of invoice or date
of receipt of payment,
whichever is earlier
Before After Date of Issue of invoice
After Before Date of receipt of payment
Where Goods or services or both have been supplied after the
change in rate of tax,
Before After Date of receipt of payment
Before Before Date of issue of invoice or date
of receipt of payment,
whichever is earlier
After Before Date of issue of invoice

7.11.1 What is date of receipt of payment

The date of receipt of payment shall be the:
─ date on which the payment is entered in the books of account of the
supplier or
─ the date on which the payment is credited to his bank account,
whichever is earlier.
However the date of receipt of payment shall be the 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 the rate of tax.

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 Chapter 8

Valuation
8.1 Introduction
As per the charging section of GST Acts, GST shall be levied on the value
determined under Section 15 of CGST Act/ SGST Act. Although contained in
the CGST Act/ SGST Acts, the valuation method provided in this section
applies to UTGST and IGST also. Section 15 prescribes the provisions for
arriving at value of taxable supply of service, which generally is the “transaction
value”. However is certain situations the transaction value is not considered
for valuation and such cases the value is determined as per the Valuation
Rules provided in CGST Rules.
The provisions regarding valuation under GST law as given in Section 15 and
Valuation Rules contained in CGST Rules are discussed in the succeeding
paras.

8.2 Statutory provisions regarding Valuation

Sl. Description Provision of CGST / SGST
No Act / CGST / SGST Rules
1. Value to be the transaction value in Section 15(1)
certain cases.
2. Inclusions in the value. Section 15(2)
3. Exclusions from value. Section 15(3)
4. Value of supply of goods / services Section 15(4), Rule 27 to
shall be determined by Rules, 31.
where it cannot be computed under
1 above.
6. Value of supply of services in Rule 32(2)
relation to purchase or sale of
foreign currency, including money
Changing
7. Value of supply of services in Rule 32(3)
relation to booking of air tickets by
an air travel agent.
GST : Practitioners Perspective

8. Value of supply of services in Rule 32(4)

relation to life insurance business.
9. Value of token, or a voucher, or a Rule 32(6)
stamp (other than postage stamp).
10. Value of taxable services provided Rule 32(7)
by notified class of service
providers.
11. Value of supply of goods / services Rule 34
in cases of pure agent
12. Rate of exchange of currency, other Rule 35
than Indian rupees, for
determination of value

8.3 Value of supply of service shall be the

Transaction Value
Section 15(1) of the CGST /SGST Act(s) provides that the value of supply of
services shall be the transaction value, which is the price actually paid or
payable for the said supply of services where the supplier and recipient of
the supply are not related and the price is the sole consideration for the
supply.
In order to understand the above provision we need to learn the following:-
(a) Price actually paid or payable for the said supply of services. (Para
8.3.1)
(b) Supplier and recipient of supply are not a related person. (Para 8.3.2)
(c) Price is the sole consideration of supply. (Para 8.3.3)
8.3.1 Price actually paid or payable for the said supply of
services
The phrase “price actually paid or payable” has been taken from the
definition of transaction value as mandated in Section 4(3)(d) of the Central
Excise Act. The amount actually paid or payable shall be determined based
on the contract entered into between the supplier and recipient of services.
The contract will indicate the amount payable by the recipient for the supply
of services which shall be regarded as price actually paid or payable.

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 Valuation

The CBEC vide the FAQs on GST has clarified as follows with regard to
transaction value.
Q 4. Is contract price not sufficient to determine valuation of supply?
Ans. Contract price is more specifically referred to as ‘transaction value’ and
that is the basis for computing tax. However, when the price is influenced by
factors like relationship of parties or where certain transactions are deemed
to be supply, which do not have a price, the value has to be determined in
accordance with the GST Valuation Rules.
Accordingly the contract price will be regarded as transaction value and GST
shall be levied on such value where the supplier and recipient of the supply
are not related and the price is the sole consideration for the supply.
8.3.2 Supplier and recipient of supply are not a related
person
The Explanation to section 15 of the CGST Act defines the term related
person as under:-
(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 recognised 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; viz Companies,
partnership firms etc.
(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.

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GST : Practitioners Perspective

8.3.2-a Meaning of control

As per the Blacks Law Dictionary, control means:
To exercise restraining or directing influence over; regulate; restrain; domin-
ate; curb; to hold from action; overpower; court, teract; govern. To control a
thing is to have the right to exercise a directing or governing influence over it.
It is the Power or authority to manage, direct, superintend, restrict, regulate,
direct, govern, administer, or oversee.
Control may be affirmative or negative and it is immaterial whether it is exercised
so long as the power to control exists. Generally one person is deemed to control
the other when the former is legally or operationally in a position to exercise
restraint or direction over the latter.
The meaning of control is very important in finding whether the conditions of
related person as provided in clause (v), (vi) and (vii) of the definition of
related person as stated above are fulfilled or not. In case the conditions are
met then supply made to such person would be regarded as supply to a
related person and the transaction value in such cases would be ignored and
valuation shall be made as per CGST Rules, discussed later in the Chapter.
8.3.2-b Meaning of same family
As per Section 2(49) of CGST Act, family means –
(i) the spouse and children of the person, and
(ii) the parents, grand-parents, brothers and sisters of the person if they
are wholly or mainly dependent on the said person.
Thus the spouse and children would always be regarded as member of same
family irrespective of fact whether they are dependent or not. However the
parents, grand-parents, brothers and sisters would be regarded as member
of same family only if they are dependent on said person i.e. the supplier.
It is important to note here that in case supply is made to a member of same
family which is included in the definition of related person under clause (viii),
the transaction value shall be ignored and the valuation will be made as per
CGST Rules, discussed later in the Chapter.
8.3.3 Price is the sole consideration for the supply
This means that the price will be accepted as transaction value only if such

84
 Valuation

price is the sole consideration for the supply. Accordingly if any additional
consideration for the supply is received whether in form of monetary
consideration or non-monetary consideration then such additional
consideration will be regarded as consideration for such supply and thus
would form part of the value of supply.
Generally we would be able to identify from the Contract about the flow of
any additional consideration.
It may be noted here that in case the price is not the sole consideration of
supply the transaction value shall be ignored and the valuation will be made
as per the Valuation Rules. The value of supply of services where
consideration is not wholly in money is determined as per CGST Rules,
discussed later in the Chapter.

8.4 Inclusions in Value

Section 15(2) of CGST mandates about five inclusions to be made in the
value of supply. These are discussed below:
(a) Taxes other than GST (Para 8.4.1)
(b) Amount paid by receipient on behalf of supplier (Para 8.4.2)
(c) Incidental expenses and other charges (Para 8.4.3)
(d) Interest, late fee, penalty (Para 8.4.4)
(e) Subsidy linked to supply (Para 8.4.5)
8.4.1 Taxes other than GST
As per clause (a) of Section 15(2) of CGST Act the value of supply shall
include any taxes, duties, cesses, fees and charges levied under any law for
the time being in force other than this Act, the SGST Act, the UTGST Act and
the GST (Compensation to States) Act, if charged separately by the supplier.
It is interesting to note that IGST has not been mentioned in the above
clause. However it may be noted here that as per section 20(iii) of IGST Act
the provisions of CGST Act relation to value of supply shall mutatis mutandis
apply so far as may be in relation to integrated tax as they apply to Central
tax as if they are enacted under this Act. Thus considering the above
provisions we may say that the amount of IGST shall also be excluded from
the value of supply.

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GST : Practitioners Perspective

Accordingly CGST / SGST / UTGST / IGST shall not be charged upon such
GST amounts. Thus there would be no tax on tax and thus there will be no
cascading of taxes the abolition of which was one of the objectives of
implementation of GST. However in case the supplier charges any tax other
than GST separately, such amount of tax will be included in the value for levy
of GST.
8.4.2 Amount paid by recipient on behalf of supplier
Clause (b) of Section 15(2) provides that the value of supply shall include
any amount that the supplier is liable to pay in relation to such supply but
which has been incurred by the recipient of the supply and not included in
the price actually paid or payable for the goods or services or both.
Example: X Limited awarded a work contract to Y & Co in regard to
construction of a immoveable property. As per the contract the work is to be
executed on turnkey basis with the material as well labour of the supplier.
This work contract being related to immoveable property would be treated as
service. Now if the contract amount is Rs 10 crore. if suppose X Limited
provides cement bags of Rs 50 lakhs to Y & Co and then Y & Co issues the
invoice of Rs 9.50 crore plus GST. In this particular case X Limited was liable
to pay for the cement bags and same has not been included in the invoice of
Rs 9.50 crore issued. Thus in this case the amount of Rs 50 lakhs incurred
by X Ltd on behalf of Y & Co would be included in transaction value, which
will be Rs 10 crore in this case and on which GST shall be levied.
8.4.3 Incidental expenses and other charges
As per clause (c) of Section 15(2) the value of supply shall include incidental
expenses, including commission and packing, charged by the supplier to the
recipient of a supply and any amount charged for anything done by the
supplier in respect of the supply of goods or services or both at the time of,
or before delivery of goods or supply of services.
Normally this clause has greater application on goods however if any
incidental expenses or any amount is charged by the supplier from the
recipient at the time of, or before supply of services same would be included
in the transaction value.
8.4.4 Interest, late fee, penalty
Clause (d) of Section 15(2) provides that the value of supply shall include

86
 Valuation

interest or late fee or penalty for delayed payment of any consideration for
any supply.
This means that if an interest, late fee or penalty is charged by the supplier
of service from the recipient for delayed payment of consideration for any
supply by such recipient then such interest, late fee or penalty will be
included in the value of supply. Thus the value in such a case would be the
value of the supply of service plus the interest, late fee or penalty as charged
from the recipient.
In this regard it is important to note here that tax is required to be on interest,
late fee or penalty only when they are received by the recipient in view of
Rule 13 (6) of CGST Act, which determined the time of supply in such cases.
Example: A Chartered Accountant supplied audit services to a Company for
an agreed audit fee of Rs 1 lakh. Due to delay in payment of audit fee by the
Company the Chartered Accountant levied penal interest of Rs 5000/-. In this
case the value shall include Rs 5000/- also and thus the total value on which
GST shall be levied will be Rs 1,05,000/-. However as discussed above tax
would be paid on Rs 5000/- only when it is received.
8.4.5 Subsidy linked to supply
Clause (e) mandates that subsidies directly linked to the price excluding
subsidies provided by the Central Government and State Governments will
be included in the transaction value.
Further Explanation to Sec 15(2) describes that for the purposes of this sub-
section, the amount of subsidy shall be included in the value of supply of the
supplier who receives the subsidy.
It is important to note here that on similar lines the term ‘consideration’ has
been defined under section 2(31) of CGST Act, which also excludes any
subsidy given, by the Central Government or State Government.
Normally this clause may be mainly applicable in case of goods. However in case
any subsidy linked to supply of services is received other than from the Central
Government / State Government the same shall be included in the value of the
supply of the supplier who receives the subsidy.

8.5 Exclusions from Value

Section 15(3) of CGST Act provides that the value of the supply shall not
include any discount which is given–

87
GST : Practitioners Perspective

(a) before or at the time of the supply if such discount has been duly
recorded in the invoice issued in respect of such supply; and
(b) after the supply has been effected, if—
(i) such discount is established in terms of an agreement entered
into at or before the time of such supply and specifically linked
to relevant invoices; and
(ii) input tax credit as is attributable to the discount on the basis of
document issued by the supplier has been reversed by the
recipient of the supply.
Generally various types of discount are offered to the customer like cash
discount, turnover discount, off-season discount, clearance discount etc. All such
types of discounts would be excluded from the value of taxable supply provided
the conditions stipulated in Section 15(3) are fulfilled.
Further the supplier can take adjustment of the discounts passed on to the
recipient after supply has been affected by means of issue of credit note
provide the relevant input tax credit should also be reversed by the recipient.
In this regard it may be noted that a time period has also been prescribed for
issuance of credit note under GST law.

8.6 Circumstances where transaction value

cannot be computed: Recourse to CGST
Rules
Section 15(4) of CGST Act provides that where the value of the supply of
goods or services or both cannot be determined under sub-section (1), the
same shall be determined in such manner as may be prescribed.
Where the transaction value cannot be determined in terms of Section 15 of
the CGST Act, reference to CGST Rules related to valuation is permitted.
Hence, recourse to the Valuation Rules would be required in the following
circumstances:
 Supplier and recipient of supply are related
 Price is not the sole consideration

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 Valuation

8.6.1 Valuation Rules

Rule No. of Particulars How Value of supply will be
CGST/SGST computed
Rules
27 Value of Supply (a) Open market value of such
when supply;
consideration is (b) If the open market value is not
not solely in available under clause (a), be the
money sum total of consideration in
money and any such further
amount in money as is equivalent
to the consideration not in
money, if such amount is known
at the time of supply;
(c) If the value of supply is not
determinable under clause (a) or
clause (b), be the value of supply
of goods or services or both of
like kind and quality;
(d) If the value is not determinable
under clause (a) or clause (b) or
clause (c), be the sum total of
consideration in money and such
further amount in money that is
equivalent to consideration not in
money as determined by the
application of rule 30 or rule 31 in
that order
28 Value of supply (a) Be the open market value of such
of goods or supply;
services or both (b) If the open market value is not
between distinct available, be the value of supply
or related of goods or services of like kind
persons, other and quality;
than through an
(c) If the value is not determinable
agent
under clause (a) or (b), be the

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GST : Practitioners Perspective

value as determined by the

application of rule 30 or rule 31,
in that order:
Provided that where the goods are
intended for further supply as such by
the recipient, the value shall, at the
option of the supplier, be an amount
equivalent to ninety percent of the
price charged for the supply of goods
of like kind and quality by the recipient
to his customer not being a related
person:
Provided further that where the
recipient is eligible for full input tax
credit, the value declared in the
invoice shall be deemed to be the
open market value of the goods or
services.
In terms of Explanation to section 15
of the CGST Act - 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
recognised partners in business;
iii. such persons are employer and
employee;
iv. any person directly or indirectly
owns, controls or holds twenty-five
per cent. 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

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 Valuation

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;
– Where-“person” also includes
legal persons.
– 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.
29 Value of supply Open market value of the goods being
of goods made or supplied, or at the option of the
received through supplier, 90% of the price charged for
an agent the supply of goods of like kind and
quality by the recipient to his customer
not being a related person, where the
goods are intended for further supply
by the said recipient.
Note-In case, value cannot be
determined under (a) then following
values have to be taken sequentially to
determine the taxable value:
i. Value of supply based on cost i.e.
cost of supply plus 10% mark-up
[Rule 30]
ii. Value of supply determined by
using reasonable means
consistent with principles &
general provisions of GST law.
(Best judgement method) [Rule 31]

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GST : Practitioners Perspective

30 Value of supply 110% of the cost of production or

of goods or manufacture or the cost of acquisition
services or both of such goods or the cost of provision
based on cost of such service
31 Residual method The residual method consists of
for determination determination of value by using
of value of supply reasonable means consistent with the
of goods or principles and general provisions of
services or both section 15 and these rules.
The supplier of goods needs to
sequentially follow rules 27 to 30
before valuing goods as per this
residual rule 31. Service providers,
however, have the option of valuing
services as per rule 30 or rule 31 after
sequentially following rules 27 to 29.
Note-
 Open market value of a 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 the price is the sole consideration, to obtain such
supply at the same time when the supply being valued is made;
 Supply of goods or services or both of like kind and quality means
any other supply of goods or services or both made under similar
circumstances that, in respect of the characteristics, quality, quantity,
functional components, materials, and the reputation of the goods or
services or both first mentioned, is the same as, or closely or
substantially resembles, that supply of goods or services or both.

8.7 Rule 32 : Optional method to determine

taxable value of specified supplies
(A) Value of supply of Option-1
services in Transaction Taxable value shall be equal
relation to the where one to the difference in the buying

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 Valuation

purchase or sale of the rate or the selling rate, as the

of foreign currencies case may be, and RBI
currency, exchanged reference rate for that currency
including money is Indian at the time of exchange
changing Rupees multiplied by total units of
Rule 32(2) of the foreign currency.
CGST Rules If RBI reference rate for a
currency is not available, 1%
of the gross amount of Indian
Rupees provided or received
by the person changing the
money
Transaction 1% of the lesser of the two
where amounts the person changing
neither of the money would have
the received by converting (at RBI
currencies reference rate) any of the two
exchanged currencies into Indian Rupee
is Indian
Rupees
Option-2
Upto Rs. One percent of the gross
1,00,000/- amount of currency exchanged
subject to minimum amount of
Rs. 250/-
Upto Rs. 1000+0.5% of amount
10,00,000/- exchanged exceeding Rs.
1,00,000/-
Amount 5500+0.1% of amount
exceeding exchanged subject to
10,00,000/- maximum of Rs. 60,000/-
(B) Value of service Taxable value is Domestic travel 5% of basic
of booking of fare
tickets for air International Travel - 10% of basic fare
travel by an air Where, Basic fare means that part of the air fare
travel agent on which commission is normally paid to the air

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GST : Practitioners Perspective

Rule 32(3) of the travel agent by the airline.

CGST Rules
(C) Value of service (a) the gross premium charged from a policy
in relation to life holder reduced by the amount allocated for
insurance investment, or savings on behalf of the policy
business (Not holder, if such an amount is intimated to the
applicable where policy holder at the time of supply of service;
entire premium (b) in case of single premium annuity policies
paid by the policy other than (a), 10% of single premium charged
holder is only from the policy holder; or
towards the risk (c) in all other cases, 25 % of the premium
cover in life charged from the policy holder in the first year
insurance) and twelve and a half per cent. of the premium
Rule 32(4) of the charged from the policy holder in subsequent
CGST Rules years:
(D) Value of buying Difference between the selling price and the
and selling of purchase price and where the value of such
second hand supply is negative, it shall be ignored.
goods where no Provided that the purchase value of goods
ITC has been repossessed from a defaulting borrower, who is not
availed registered, for the purpose of recovery of a loan or
Rule 32(5) of the debt shall be deemed to be the purchase price of
CGST Rules such goods by the defaulting borrower reduced by
5% points for every quarter or part thereof,
between the date of purchase and the date of
disposal by the person making such
Repossession
(E) Value of a token, Money value of the goods or services or both
or a voucher, or a redeemable against such token, voucher,
coupon, or a coupon, or stamp
stamp (other than
postage stamp)
which is
redeemable
against a supply
of goods or

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 Valuation

services or both
Rule 32(6) of the
CGST Rules
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 said Act
between distinct persons as referred to in Section 25, where input tax
credit is available, shall be deemed to be NIL.
Rule 32(7) of CGST Rules. It may be noted here that no class of
service providers has yet been notified under said Rule.

8.8 Value of supply of services in case of pure

agent (Rule 33)
Notwithstanding anything contained in the provisions of this Chapter, the
expenditure or costs incurred by a supplier as a pure agent of the recipient of
supply shall be excluded from the value of supply, if all the following
conditions are satisfied, namely,-
(i) the supplier acts as a pure agent of the recipient of the supply, when
he makes the payment to the third party on authorisation by such
recipient;
(ii) the payment made by the pure agent on behalf of the recipient of
supply has been separately indicated in the invoice issued by the pure
agent to the recipient of service; and
(iii) the supplies procured by the pure agent from the third party as a pure
agent of the recipient of supply are in addition to the services he
supplies on his own account.
Where - “pure agent” means a person who-
(a) enters into a contractual agreement with the recipient of supply to act
as his pure agent to 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 so procured or supplied as pure agent of the recipient of supply;
(c) does not use for his own interest such goods or services so procured;
and

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GST : Practitioners Perspective

(d) receives only the actual amount incurred to procure such goods or
services in addition to the amount received for supply he provides on
his own account.
Illustration. Corporate services firm A is engaged to handle the legal work
pertaining to the incorporation of Company B. Other than its service fees, A
also recovers from B, registration fee and approval fee for the name of the
company paid to Registrar of the Companies. The fees charged by the
Registrar of the companies registration and approval of the name are
compulsorily levied on B. A is merely acting as a pure agent in the payment
of those fees. Therefore, A’s recovery of such expenses is a disbursement
and not part of the value of supply made by A to B.
8.9 Rate of exchange for determining value of
taxable supply
As per Rule 34(1) of the CGST Rules the rate of exchange for determination
of value of taxable goods shall be the applicable rate of exchange as notified
by the Board under section 14 of the Customs Act, 1962 for the date of time
of supply of such goods in terms of section 12 of the Act.
Further as per Rule 34(2), the rate of exchange for determination of value of
taxable services shall be the applicable rate of exchange determined as per
the generally accepted accounting principles for the date of time of supply of
such services in terms of section 13 of the Act.
8.10 Valuation of supply inclusive of GST
As per Rule 35 of the CGST Rules where value of supply is inclusive of
IGST/ CGST/ SGST/ UTGST the tax amount will be determined as under:
Tax amount = (Value inclusive of taxes x GST tax rate in %) / (100 + sum of GST
tax rates in %).
Example: A supplier of services supplied services to another State and
charged Rs 1000 including IGST. The rate of IGST is 18%. In this case the
tax (IGST) amount would be worked out by applying Rule 35 as under:
First we work out the value of taxable supply as under:
1000 X 100/ 118 = Rs 847.45
Tax amount = 847.45 X 18% = 152.55
In above case if we add the value + tax i.e Rs 847.45 + Rs 152.55 the total
amount comes to Rs 1000/- which has been charged in this case.

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 Chapter 9

Place of Supply
9.1 Introduction
Determination of place of supply of service is of critical importance under
GST law as the place of supply of goods / services together with the location
of supplier determines whether the supply is inter-State in which case IGST
would be levied or intra State in which case CGST and SGST both will be
applicable.
Location of Supplier

IGIG
STST
Different State
Place of Supply

Location of Supplier

CGST+SGST
Place of Supply Same
State

Further the location of supplier and place of supply would also determine
whether tax is required to be paid on supply of good / service or not as in
case the place of supply of such goods / services is outside India it would be
regarded as export of goods / services subject to fulfilment of certain
conditions. Export of goods / services under GST law is a zero rated supply
under GST Law.
GST is a destination based tax and share of tax accruing to the State where
consumption of service took place. Accordingly each State Officer will verify
properly to ascertain that the place of supply has been properly determined
by the taxable person so that respective State gets their SGST or the share
out of IGST.
As per Section 2(86) of CGST / SGST Acts “place of supply” means the
place of supply as referred to in Chapter V of the IGST Act.
GST : Practitioners Perspective

9.2 Contents of the Chapter

a) Meaning of location of supplier of services (Para 9.4)
b) Meaning of location of recipient of services (Para 9.5)
c) Place of supply of goods (other than import and exports) (Para 9.6)
d) Place of supply of import and export of goods (Para 9.7)
e) Place of supply of services where location of supplier and location of
recipient is in India (Para 9.8)
f) Place of supply of services where location of supplier or location of
recipient is outside India (Para 9.9)

9.4 Location of the Supplier of Services

As discussed supra location of supplier and place of supply will determine
the nature of supply viz intra-State or inter-State. Thus determining of same
is of critical importance.
In terms of Section 2(15) of the IGST Act, 2017 “location of the supplier of
services” means:
(a) where a supply is made from a place of business for which the
registration has been obtained, the location of such place of business;
(b) where a supply is made from a place other than the place of business for
which registration has been obtained (a fixed establishment elsewhere),
the location of such fixed establishment;
(c) where a supply is made from more than one establishment, whether the
place of business or fixed establishment, the location of the
establishment most directly concerned with the provision of the supply;
and
(d) in absence of such places, the location of the usual place of residence
of the supplier
9.4.1 Meaning of supplier
As per Section 2(105) of CGST Act “supplier” in relation to any goods or
services or both, shall mean the ‘person’ supplying the said goods or
services or both and shall include an agent acting as such on behalf of such
supplier in relation to the goods or services or both supplied;

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 Place of Supply

9.4.2 Meaning of ‘supply is made’

The clauses of above definition uses the phrase “supply is made” and thus
identification of the place from where supply is made is of critical importance.
Normally the place where supply is made can be identified from the contract
entered between supplier and the recipient. The purchase order mentions the
address of the supplier along with other details viz address of recipient,
nature of service, consideration etc .Thus is normal situations we can say
that the address of supplier of service mentioned in the contract shall be
considered as place from which supply is made.
9.4.3 Meaning of place of business
As per clause (a) of Section 2(15) where a supply is made from a place of
business for which the registration has been obtained, the location of such place
of business would be regarded as location of supplier of service.
As per 2(85) of the CGST Act “place of business” includes––
(a) a place from where the business is ordinarily carried on, and includes
a warehouse, a godown or any other place where a taxable person
stores his goods, supplies or receives goods or services or both; or
(b) a place where a taxable person maintains his books of account; or
(c) a place where a taxable person is engaged in business through an
agent, by whatever name called;
The above definition starts with phrase “includes’ and thus the places or
locations listed in the definition are illustrative and not exhaustive. Further
each of the three clauses makes a reference to ‘taxable person’ which means
that place of business is relevant only in regard to a taxable person i.e a
person who is already registered or is liable to take registration.
9.4.4 Meaning of fixed establishment
As per clause (b) of Section 2(15) where a supply is made from a place other
than the place of business for which registration has been obtained (a fixed
establishment elsewhere), the location of such fixed establishment would be
regarded as location of supplier of service.
Section 2(50) of CGST Act describes that “fixed establishment” means a
place (other than the registered place of business) which is characterised by
a sufficient degree of permanence and suitable structure in terms of human

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GST : Practitioners Perspective

and technical resources to supply services, or to receive and use services for
its own needs.’
The following three elements are critical to determine whether a place is a
‘fixed establishment’:
(a) Having a sufficient degree of permanence;
(b) Having a structure of human and technical resources; and
(c) Other than a registered place of business.
The following points need to be noted:
 A fixed establishment refers to a place of business which is not
registered;
 The person should undertake supply of services or should receive and
use services for own needs in such place;
 Not every temporary or interim location of a project site or transit-
warehouse will become a fixed establishment of the taxable person.
In regard to the meaning of ‘fixed establishment’ we may seek guidance from
the Para 5.2.6 of the Education Guide published by CBEC in regard to
service tax. The said para is reproduced as under:-
5.2.6 What is the meaning of a “fixed establishment”?
A “fixed establishment” is a place (other than the business establishment)
which is characterized by a sufficient degree of permanence and suitable
structure in terms of human and technical resources to provide the services
that are to be supplied by it, or to enable it to receive and use the services
supplied to it for its own needs.
Temporary presence of staff by way of a short visit at a place cannot be
called a fixed establishment. Also, the number of staff at a location is not
important. What is relevant is the adequacy of the arrangement (of human
and technical resources), to carry out an activity for a consideration, or to
receive and use a service supplied. Similarly, it will be important to evaluate
the permanence of the arrangement i.e. whether it is capable of executing
the task.
9.4.5 Meaning of usual place of residence
As per clause (d) of Section 2(15) in absence of places as stated in clause

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(a), (b) and (c), the location of the usual place of residence of the supplier
would be regarded as location of supplier of service.
Section 2(113) of CGST Act describes that usual place of residence means–
(a) in case of an individual, the place where he ordinarily resides i.e.
residential address.
(b) in other cases, the place where the person is incorporated or
otherwise legally constituted;
The Clause (b) of Section 2(113) provides that usual place of residence in
case a person other than individual shall be the place where the person is
incorporated or otherwise constituted.
The CBEC in regard to identification of usual place of business at Para 5.2.8
of the Education Guide in regard to service tax has clarified as under:-
5.2.8 What does “usual place of residence” mean?
The usual place of residence, in case of a body corporate, has been
specified as the place where it is incorporated or otherwise legally
constituted.
The usual place of residence of an individual is the place (country, state etc)
where the individual spends most of his time for the period in question. It is
likely to be the place where the individual has set up his home, or where he
lives with his family or is in full time employment. Individuals are not treated
as belonging in a country if they are short term, transitory visitors (for
example if they are visiting as tourists, or to receive medical treatment or for
a short term educational course). An individual cannot have more than one
usual place of residence.
In addition, in the case of telecommunication services, it has been prescribed
that the usual place of residence of the receiver shall be the billing address.
This in effect means the address that is available in the records of the
service provider for billing the receiver of the telecommunication service. This
provision will be applicable to individual customers (generally referred to as
subscribers) of a telecommunication service, who are provided a subscriber
identification module (commonly referred to as SIM card, which may be post-
paid or pre- paid) and a unique identification number (10-digit or 8-digit, as
the case may be) by the service provider.

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9.5 Location of the Recipient of Services

While determining the place of supply in many situations, the location of
recipient of services is regarded as place of supply and thus it is important to
go through its definition.
In terms of Section 2(14) of the IGST Act, 2017 “location of the recipient of
services” means-
(a) where a supply is received at a place of business for which the
registration has been obtained, the location of such place of business;
(b) where a supply is received at a place other than the place of business
for which registration has been obtained (a fixed establishment
elsewhere), the location of such fixed establishment;
(c) where a supply is received at more than one establishment, whether
the place of business or fixed establishment, the location of the
establishment most directly concerned with the receipt of the supply;
and
(d) in absence of such places, the location of the usual place of residence
of the recipient
9.5.1 Meaning of Recipient
Section 2(93) inter alia provides that “recipient” of supply of services
means—
(a) where a consideration is payable for the supply of services, the person
who is liable to pay that consideration;
(b) where no consideration is payable for the supply of a service, the
person to whom the service is rendered,
In view of the above definition, the person liable to pay the consideration for
the supply would be regarded as recipient of supply irrespective of fact
whether the service was rendered to such person or not. However where no
consideration is payable, the recipient will be the person to whom the service
is rendered. It is pertinent to mention here Schedule I of CGST Act provides
that certain activities would be treated as supply even if made without
consideration.
We have already discussed the meaning of terms place of business, fixed
establishment, usual place of business in the preceding para.

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 Place of Supply

9.6 Place of Supply of Goods (Other than import

and export) (Section 10 of IGST Act)
Section Particulars Place of Supply
10(1)(a) Where the supply Place of supply where movement of
involves the movement goods terminates for delivery to the
of goods, whether by recipient
the supplier or the
recipient or by any
other person
10(1)(b) Supply on direction of Place of supply of goods shall be the
a third person (acting principal place of business of such
as an agent or third person.
otherwise) This clause basically covers the ‘Bill
to Ship to’ transactions and would
also cover sale in transit by transfer of
documents of title and where goods
are sent to job worker on the
instructions of principal.
10(1)(c) Supply does not Place of supply shall be the location
involve movement of of such goods at the time of the
goods delivery to the recipient

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GST : Practitioners Perspective

10(1)(d) Goods are assembled, Place of supply shall be the place of

or installed at site such installation or assembly
10(1)(e) Goods are supplied on Place of supply shall be the location
board a conveyance, at which such goods are taken on
including a vessel, an board
Aircraft, a train or a
motor vehicle
10(2) Where the place of It shall be determined in such manner
supply of goods cannot as may be prescribed. This is the
be determined in terms residual provision.
of the above provisions

9.7 Place of supply of Goods imported into, or

exported from India (Section 11 of IGST Act)
Particulars Place of Supply
Imported into India Location of the importer
Exported from India Location outside India

9.8 Place of Supply (POS) of Services where

location of supplier and recipient is in India
(Section 12 of IGST Act)
Section Particulars Place of Supply
12(2) General Provisions Supply made to a
Registered person- POS is Location of
recipient
Unregistered person- Location of
recipient if address on record exists
 Location of supplier if address not
available
12(3) Immovable property POS is the location at which the
related-services immovable property or boat or vessel, is
including located or intended to be located
accommodation in

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 Place of Supply

hotel/boat/ vessel  If located outside India:

location of the recipient
12(4) a) Restaurant and Location where the services are actually
catering performed
b) Personal
grooming
c) Fitness
d) Beauty
treatment
e) Health service
including
cosmetic and
plastic surgery
12(5) Training and Registered person- POS is location of
performance recipient
appraisal Unregistered person- Location where
services are actually performed
12(6) Supply of services Place where the event is actually held or
for admission to: where the park or such other place is
 Cultural located.
 Artistic
 Sporting
 Scientific
 Educational
 Entertainment
event
 Amusement Park
 Any other place
and services
ancillary to above
12(7) Supply of: Registered recipient: Location of
a) Organising recipient
cultural, arts, Unregistered recipient: Location where the
sports, event is actually held

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GST : Practitioners Perspective

educational, If the event is held outside India:

scientific, Location of the recipient
entertainment,
conference, fair
exhibition or
similar events
b) Services
ancillary to
above
12(8) Services by way of Registered Recipient: Location of
transportation of recipient
goods, including by Unregistered Recipient: Location
mail or courier where goods handed over for
transportation
12(9) Passenger Registered recipient: Place of registered
transportation recipient
service (Return Unregistered recipient: Place where
journey treated as passenger embarks on the conveyance for
separate journey) a continuous journey
12(10) On board a First scheduled point of departure of that
conveyance, conveyance for that journey
including a vessel,
an aircraft, a train
or a motor vehicle,
12(11) Supply of Services involving fixed line, circuits,
telecommunication dish antenna etc: Location of such fixed
services including equipment
data transfer,  Post-paid mobile/ internet services:
broadcasting, DTH, Location of billing address of the
cable etc. recipient
 Sale of pre-paid voucher: Place of
sale of such vouchers
In case payment is made through
internet banking: Location of recipient as
per the record of the supplier

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 Place of Supply

 Other cases: Address of the

recipient in records
If such address is not available: Location
of supplier
12(12) Supply of banking  Location of recipient in supplier’s
and other financial records
services, including  If not available, then location of
stock broking supplier
Services
12(13) Supply of insurance Registered recipient: Location of
services recipient
Unregistered recipient: Location of
recipient in supplier’s records
12(14) Advertisement  Each of States/Union Territory
Services to where the advertisement is
Government, etc. broadcasted/displayed/run
 Proportionate value in case of
multiple States (Rule 3 of the IGST
Rules).

9.9 Place of Supply (POS) of Services in cases of

Location of supplier or recipient is outside
India (Section 13 of IGST Act)

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GST : Practitioners Perspective

108
 Place of Supply

*Notes:
1. The provisions of place of supply in respect of service at Sl. No 1
and 3 above are not applicable in case of goods that are temporarily
imported into India for repairs and exported after repairs.
2. Where these services at Sl. No 1,2,3,4 and 5 above are supplied at:
a) more than one location, including a location in the taxable
territory, then place of supply shall be the location in the taxable
territory (Section 13(6))
b) more than one State or Union territory, then the place of supply
shall be each such State or Union territory in proportion to the
value of services separately collected or determined in terms of
the contract or agreement entered into in this regard or, in the
absence of such contract or agreement, on such other basis as
may be prescribed. (Section 13(7))

109
 Chapter 10

Composition Levy
10.1 Introduction
Small taxpayers do not possess sufficient knowledge, expertise and
manpower to comply with the GST compliances including the detailed
accounting and paper work involved. Accordingly, for such tax payers, an
optional simplified composition scheme has been prescribed, vide Section 10
of the CGST Act, 2017.
The provisions regarding the composition levy are contained in Section 10 of
CGST Act and Composition Rules. It is important to note here that Section
10 starts with a non obstante clause and is having an overriding effect over
the charging Section 9(1) of the CGST Act / SGST Act which provides that
CGST / SGST shall be levied at such rate as may be notified by the Central /
State Government on the value determined under Section 15.

10.2 Who is eligible for Composition Scheme

As per Notification No. 14/2019 - Central Tax, dated 7th March 2019
taxpayers having aggregate turnover of upto Rs 150 lakhs (limit of Rs 100
lakhs upto 31-3-2019) in the preceding financial year are eligible to avail
composition scheme, if they are located in India except States of (i)
Arunachal Pradesh, (ii) Manipur, (iii) Meghalaya, (iv) Mizoram, (v) Nagaland,
(vi) Sikkim, (vii) Tripura and viii) Uttrakhand.
However in case of tax payers located in the States of (i) Arunachal Pradesh,
(ii) Manipur, (iii) Meghalaya, (iv) Mizoram, (v) Nagaland, (vi) Sikkim, (vii)
Tripura and viii) Uttrakhand, their aggregate turnover of preceding financial
year should not exceed Rs 75 lakhs, otherwise they will become ineligible to
avail the Composition Scheme. (Proviso to Notification No. 14/2019 - Central
Tax, dated 7-3-2019 effective from 1-4-2019)
These limits were applicable with effect from 1st April 2019.
In terms of Section 10(3), the Composition Levy Scheme shall stand
withdrawn from the day when the aggregate turnover of the registered
taxable person during a financial year exceeds threshold limit of composition
levy i.e., 1.50 crore (75 lakh in case of certain States as discussed above.)
 Composition Levy

Hence, Composition Scheme once granted, the eligibility would be valid

unless the permission is cancelled or is withdrawn or the person becomes
ineligible for the Scheme.
If the aggregate turnover in financial year exceeds Rs 100 lakhs / Rs 75
lakhs, as the case may be, the Composition Scheme will not be available in
next financial year.
10.2.1 Meaning of aggregate turnover
As per Section 2(6) of the CGST Act,2017, “aggregate turnover” means the
aggregate value of all taxable supplies (excluding the value of inward
supplies on which tax is payable by a person on reverse charge basis),
exempt supplies, exports of goods or services or both and inter-State
supplies of persons having the same Permanent Account Number, to be
computed on all India basis but excludes taxes (CGST, SGST, UTGST and
IGST).
Aggregate turnover will not include the value of value of exempt supply of
services provided by way of extending deposits, loans or advances in so far
as the consideration is represented by way of interest or discount
(Explanation 1 to Section 10 of the CGST Act effective from 1-1-2020).

10.3 Who are not eligible to avail the Composition

Scheme
The composition levy cannot be opted for by a taxable person-
 who is engaged in the supply of services other than supplies referred
to in clause (b) of paragraph 6 of Schedule II (service of supply of food
for human consumption). However, supplier of goods can supply
services upto 10% of turnover of previous financial year or Rs 5 lakhs,
whichever is higher
 who makes any supply of goods or services which are not leviable to
tax under the CGST Act/ SGST Act/ UTGST Act like petrol, diesel,
alcohol liquor for human consumption, etc.
 who is engaged in making any inter-State outward supplies of goods or
services ; or
 who is engaged in making any supply of goods or services through an
electronic commerce operator who is required to collect tax at source
under section 52; or

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GST : Practitioners Perspective

 who is a manufacturer of such goods as may be notified on the

recommendation of the Council. In this regard, following goods have
been notified:
o Ice cream and other edible ice, whether containing cocoa
o Pan masala
o All goods, i.e. tobacco and manufactured tobacco substitutes
 Who is a casual taxable person or a non-resident taxable person.
Where more than one registered persons are having the same PAN, the
registered person shall not be eligible to opt for Composition Scheme unless
all such registered persons opt to pay tax under Composition Scheme.
(Proviso to Section 10(2) of the CGST Act, 2017).
Hence, registered taxable person, having the same PAN has obtained more than
one Registration, whether in the same State or in two different States as Head
Office and Branch, then the Head Office and Branch cannot opt for composition
levy Scheme in isolation. Both will have to opt for composition levy.

10.4 Rates under Composition Scheme

Concessional tax rates have been prescribed for composition tax payers
which are given as under:
1. Tax payable by manufacturer - (a) 0.5% CGST plus 0.5% SGST/UTGST
(total 1%) of turnover in State or Union territory in case of a manufacturer
[The rate was 1% plus 1% upto 31-12-2017. It is 0.5% plus 0.5% w.e.f. 1-1-
2018].
2. Tax on food in restaurant - 2.5% CGST plus 2.5% of SGST/UTGST (total
5%) of turnover in State or Union territory in case of persons engaged in
making supplies referred to in Para 6(b) of Schedule II of CGST Act [service
of supply of food for human consumption].
The suppliers of food will be eligible for Composition Scheme even if they
supply exempted services including service of extending deposits or loans
and receiving interest - Removal of Difficulties Order No. 1/2017-CT, dated 13-
10-2017.
Thus, the Composition Scheme is available even if the taxable person
receives interest, which is an exempted service.

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3. Tax payable by traders supplying services upto 10% of turnover -

0.5% CGST plus 0.5% SGST/UTGST (total 1%) of turnover of taxable
supplies in State or Union Territory in case of other suppliers [i.e. traders]
[The words 'and services’ has been added w.e.f. 1-2-2019]. The traders can
supply services upto 10% of turnover or Rs 5 lakhs in a year whichever is
higher and still will be eligible for Composition Scheme w.e.f 1-2-2019.
10.4.1 Meaning of ‘turnover in a State or Union Territory’
Tax is payable by manufacturer / supplier of food viz restaurant / outdoor caterer
on the amount of turnover in State or Union territory.
As per Section 2(112) of the CGST Act, ‘turnover in State’ or ‘turnover in Union
territory’ means the aggregate value of all taxable supplies (excluding the value
of inward supplies on which tax is payable by a person on reverse charge
basis) and exempt supplies made within a State or Union territory by a
taxable person, exports of goods or services or both and inter-State supplies
of goods or services or both made from the State or Union territory by the
said taxable person but excludes central tax, State tax, Union territory tax,
integrated tax and cess.
Thus tax at fixed rate is payable on ‘exempt supplies also’. However the
traders are required to pay tax on taxable supplies only w.e.f. 1-1-2018 [Till 31-
12-2017, the traders were liable to pay tax on ‘turnover in State’ which include
exempt supplies also].
Note: For the purposes of determining the tax payable under Composition
Scheme, turnover in State or turnover in Union territory shall not include the
value of following supplies, namely:––
(i) supplies from the first day of April of a financial year up to the date
when such person becomes liable for registration under this Act; and
(ii) exempt supply of services provided by way of extending deposits,
loans or advances in so far as the consideration is represented by way
of interest or discount. (Explanation 2 to Section 10 of the CGST Act).

10.5 Other Conditions / restrictions

The registered person may opt to pay tax under Composition Levy Scheme
subject to satisfaction of the following conditions and restrictions:
 he is not entitled to input tax credit

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 he is neither a casual taxable person or a non-resident taxable person.

 he shall pay tax under Section 9(3) or 9 (4) of the CGST Act (reverse
charge) on inward supply of goods or services or both (tax to be paid
at normal rates and not concessional rates).
 he shall mention the words “composition taxable person, not eligible to
collect tax on supplies” at the top of the bill of supply issued by him;
and
 he shall mention the words “composition taxable person” on every
notice or signboard displayed at a prominent place at his principal
place of business and at every additional place or places of business.
The registered person paying tax under Section 10 may not file fresh
intimation every year. He may continue to pay tax under said section subject
to the provisions of the Act and these Rules (Rule 5(2) of the CGST Rules,
2017).
In terms of Section 10(4) of the CGST Act, a taxable person who pays tax
under Composition Levy shall not collect any tax from the recipient on
supplies made by him nor shall he be entitled to any credit of input tax.
It is also worth noting here that in terms of Section 10(5) if the proper officer
has reasons to believe that a taxable person was not eligible to pay tax
under Composition Levy Scheme, the concerned taxable person shall be
liable to pay the following:
(a) Any tax which may be payable by him under other provisions of the
Act; and
(b) Penalty;
(c) Provision of Section 73 and 74 for shall apply for determination of tax and
penalty

10.6 Composition scheme not applicable for tax

payable under RCM
It is important to note that, a taxable person opting for Composition Scheme
will be required to pay tax on supplies taxable under RCM at regular rates
and not the composition rate. Further, such person shall not be eligible to
claim Input tax credit of tax so paid under reverse charge mechanism.

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10.7 Application or exercising option to pay tax

under composition
Taxable person should make an application exercising his option to pay tax
under Composition scheme. There are three possibilities in which such
option can be exercised:
 Taxable Person migrating from old registration to GST registration
 Taxable Person obtaining new registration under GST laws
 Taxable Person paying tax under normal levy in one financial year and
wants to opt for Composition Scheme in next financial year, under the
GST regime

10.8 Switching from Composition Scheme to

normal scheme of payment of tax
Section 18(1)(c) of CGST Act states that if taxable person switches over from
Composition Scheme to normal scheme, he is entitled to take credit of input
tax in respect of inputs held in stock, inputs contained in semi-finished or
finished goods held in stock and on capital goods on the day immediately
preceding the date from which he becomes liable to pay tax under section 9
of CGST Act.
Following persons will shift from Composition Scheme to normal scheme - (a)
who has furnished an intimation under rule 6(2) or (b) filed an application for
withdrawal under rule 6(3) or (c) a person in respect of whom an order of
withdrawal of option has been passed in Form GST CMP-07 under rule 6(5)
rule of CGST Rules, 2017.
A person switching to normal scheme will have to file a statement in form
GST ITC-01, containing details of the stock of inputs and inputs contained in
semi-finished or finished goods held in stock by him on the date on which the
option is withdrawn or denied. The statement should be filed within 30 days
from the date from which the option is withdrawn or from the date of order
passed in form GST CMP-07, as applicable - Rule 6(6) of CGST Rules, 2017.

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10.9 Switching from normal scheme to

Composition Scheme of payment of tax
If taxable person who has avaíled ITC intends to switch over to the
Composition Scheme, he is required to reverse ITC in respect of inputs held
in stock, inputs contained in semi-finished goods held in stock and on capital
goods, as if supply is made attracts provisions of section 18(4) of CGST Act
and Rules made thereunder. Thus, person who intends to shift to the
Composition Scheme suppose w.e.f. 1-4-2020 is required to pay an amount
equal to ITC on stocks of inputs, WIP and capital goods in stock as on 31-3-
2020. After payment of such amount, if there is balance of ITC in electronic
credit ledger, it will lapse.

10.10 Composition Scheme for small service

providers having turnover upto Rs 50 lakhs
A simplified scheme was introduced vide Notification No. 2/2019-CT (rate) dated
7-3-2019 w.e.f 1-4-2019 for small service providers (and those who are supplier
of goods as well as services exceeding 10% of turnover within State
/ UT) whose aggregate turnover during the previous year did not exceed Rs
50 lakhs.
In line with above, Section 10(2A) of the CGST Act, 2017 has been
introduced vide Finance (No.2) Act,2019 with effect from 1-1-2020.
The taxable person opting for this scheme is required to pay CGST @ 3%
plus SGST / UTGST @ 3% on first supplies of goods or services upto Rs 50
lakhs, made on or after 1-4-2019.
Conditions:
 The aggregate turnover in previous financial year should not exceed
Rs 50 lakhs (all taxable persons having same Income Tax PAN).
 The registered person should not be eligible for the Composition
Scheme under section 10(1) of CGST Act.
 He should not be engaged in making any supply which is not leviable
to tax under CGST Act (petroleum products).
 He should not be engaged in making inter-state supplies.

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 He is neither a casual taxable person nor a non-resident taxable

person.
 He should not be making supplies through e-commerce operator who
is required to collect tax at source under section 52 of CGST Act.
 He should not be engaged in supply of ice cream, pan masala and
tobacco products.
 He should not collect GST from customers. He shall pay 6% tax (3%
CGST + 3% SGST) from his pocket.
 He shall issue bill of supply (and not tax invoice), as per provision of
section 31(3) (c) of CGST Act.
 In case of inward supplies where reverse charge is applicable under
section 9(3) or 9(4) of CGST Act, he should pay the normal tax
applicable on such supplies.
 CGST Rules, as applicable to person paying tax under section 10 of
CGST Act (Composition Scheme) shall apply to pay person paying tax
under this simplified scheme.

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 Chapter 11

Electronic Commerce Operator and

Collection of Tax at Source
11.1 Introduction
In the last decade a major revolution that has taken place is in regard to the
supply of goods and services through electronic commerce operators. Nowadays
numerous buyers and sellers buy / sell goods or services from the electronic
commerce operator platform and the business through electronic commerce
operators has grown manifold in last few years.
Specific provisions in regard to definition of electronic commerce operator,
liability of electronic commerce operator to pay tax in case of notified
services provided through them and collection of tax at source have been
incorporated under GST Law which are discussed in the succeeding paras.

11.2. Contents of the Chapter

The contents of this Chapter are as under:-
(a) Meaning of electronic commerce operator (Para 11.3)
(b) Payment of taxes (Para 11.4)
(c) Payment of taxes by electronic commerce operator (Para 11.5)
(d) Collection of Tax at source (Para 11.6)
(e) Registration (Para 11.7)

11.3. Meaning of Electronic Commerce Operator

Specific definitions of ‘electronic commerce’ and ‘electronic commerce
operators’ and has been provided in section 2(44) and 2(45) of the CGST
Act.
As per Section 2(44) “electronic commerce” means the supply of goods or
services or both, including digital products over digital or electronic network;
Further as per Section 2(45) “electronic commerce operator” means any
person who owns, operates or manages digital or electronic facility or
platform for electronic commerce;
 Electronic Commerce Operator and Collection of Tax at Source

If we analyse the definitions of the electronic commerce and electronic

commerce operator the following essential ingredients of electronic
commerce operator appears:
(a) Supply over digital or electronic network. In cases of electronic
commerce physical presence of buyer and seller is not required at a
single place and the deal is struck over the digital or electronic
network through website or mobile applications.
(b) The person should own, operate or manage the platform. The electronic
commerce operator should own, operate or manage the digital or
electronic facility of platform.
(c) It should be used for electronic commerce which is defined is Section
2(45) to mean the supply of goods or services or both, including digital
products over digital or electronic network.
As per Wikipedia, e-commerce is a transaction of buying or selling online.
Electronic commerce draws on technologies such as mobile commerce,
electronic funds transfer, supply chain management, Internet marketing,
online transaction processing, electronic data interchange (EDI), inventory
management systems, and automated data collection systems. Modern
electronic commerce typically uses the World Wide Web for at least one part
of the transaction's life cycle although it may also use other technologies
such as e-mail. E-commerce businesses may employ some or all of the
following:
 Online shopping web sites for retail sales direct to consumers
 Providing or participating in online marketplaces, which process third-
party business-to-consumer or consumer-to-consumer sales
 Business-to-business buying and selling
 Gathering and using demographic data through web contacts and
social media
 Business-to-business (B2B) electronic data interchange
 Marketing to prospective and established customers by e-mail or fax
(for example, with newsletters)
 Engaging in pretail for launching new products and services
 Online financial exch anges for currency exchanges or trading purposes

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11.4 Payment of Taxes

Normally in cases where the services are supplied by a supplier through
electronic commerce operator the tax will be required to be paid by such
supplier in view of Section 9(1) of CGST Act and other charging sections of
GST Acts according to which the tax is to be paid by a taxable person.
However in regard to services it is important to note that under Section 9(5)
of the CGST Act the Government is empowered to notify certain services
which if supplied through Electronic Commerce Operator the tax on which
will be paid by the electronic commerce operator and not by the supplier of
such service.

11.5 Payment of taxes by electronic commerce

operator
Section 9(5) of CGST / SGST Act(s) and Section 5(5) of IGST Act provides
that the Government may, on the recommendations of the Council, by
notification, specify categories of services the tax on intra-State / inter-State
supplies of which shall be paid by the electronic commerce operator if such
services are supplied through it, and all the provisions of this Act shall apply
to such electronic commerce operator as if he is the supplier liable for paying
the tax in relation to the supply of such services:
Provided that where an electronic commerce operator does not have a physical
presence in the taxable territory, any person representing such electronic
commerce operator for any purpose in the taxable territory shall be liable to pay
tax:
Provided further that where an electronic commerce operator does not have
a physical presence in the taxable territory and also he does not have a
representative in the said territory, such electronic commerce operator shall
appoint a person in the taxable territory for the purpose of paying tax and
such person shall be liable to pay tax.
It is thus evident that GST is payable by electronic commerce operator if
such operator has office in taxable territory. In case he does not have office
in taxable territory the tax will be paid by any person having office in taxable
territory representing such operator for any purpose. Otherwise the electronic
commerce operator shall appoint a person in taxable territory for the purpose
of paying GST and such person shall be liable for payment of tax.

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In terms of Section 9(5), the Central Government may specify categories of

services the tax on which shall be paid by the electronic commerce operator if
such services are supplied through it.
The actual supplier of services is a third party who provides such supplies to
the customer through e-commerce operator. Instead of levying tax on such
actual supplier, the law has imposed levy on e-commerce operator.
Consequently, all the provisions of the CGST Act shall apply to such
electronic commerce operator as if he is the person liable for paying the tax in
relation to supply of such services.
11.5.1 Payment of taxes by the electronic commerce
operator is not under reverse charge
Under GST law as per definition of reverse charge as given in Section 2(98)
of CGST Act it covers situations where the recipient is liable to pay tax and
as the electronic commerce operator is not a recipient and thus the payment
of tax by such operator under Section 9(5) of CGST Act will not be regarded
as payment under reverse charge.
11.5.2. Notified services
As per Section 9(5) the liability to pay tax dwelves upon electronic commerce
operator only in cases of notified services. In this regard government has
notified following services as per Notification No. 17/2017- Central Tax
(Rate) dated 28-6-2017 (as amended). Similar Notifications have also been
issued under other GST Acts also:
(1) services by way of transportation of passengers by a radio-taxi, motor
cab, maxicab and motor cycle;
(2) services by way of providing accommodation in hotels, inns, guest
houses, clubs, campsites or other commercial places meant for
residential or lodging purposes, except where the person supplying
such service through electronic commerce operator is liable for
registration under read with section 22(1) of the CGST Act.
(3) services by way of house-keeping, such as plumbing, carpentering
etc., except where the person supplying such service through
electronic commerce operator is liable for registration under section
22(1) of the CGST Act.

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11.6 Collection of Tax at source

TCS refers to the tax which is collected by the electronic commerce operator
when a supplier supplies taxable goods or services through its portal and the
payment for that supply is collected by the electronic commerce operator.
Example of e-commerce operators in India are Amazon, Flipkart, Jabong,
etc. These operators display on their portal goods as well as services which
are actually supplied by some other person to the consumer.
The goods or services belonging to other suppliers are displayed on the
portals of the operators and consumers buy such goods/services through
these portals. On placing the order for a particular good/service, the actual
supplier supplies the selected good/ service to the consumer but the
price/consideration for the good/service is collected by the operator from the
consumer and passed on to the actual supplier after the deduction of
commission by the Operator.
Now through the TCS provisions as mandated under Section 52 of the CGST
Act, which are effective from 01-10-2018, the Government has placed the
responsibility on the operator to collect the ‘tax’ at a rate of 1% from the
supplier. This shall be done by the operator by paying the supplier, the price
of the product/ services, less the tax, calculated at the rate of 1%. The said
amount will be calculated on the net value of the goods/services supplied
through the portal of the operator.
It may be noted that the collection of tax at source as given under Section
52(1) is different from the provisions in regard to payment of tax by electronic
commerce operator under Section 9(5) as in later the operator becomes the
person liable to pay tax and is required pay full GST on supply whereas in
case of collection of tax at source such operator is not regarded as person
liable to pay tax as it only required to collect 1% tax and deposit the same.
Further collection of tax at source is required in case of all supplies (except
those notified under section 9(5)) whereas the payment of tax under Section
9(5) is required only in cases of notified supplies.
11.6.1 Meaning of net value of taxable supplies
As per Section 52(1) collection of tax source is required at the rate not
exceeding 1% as may be notified of the net value of taxable supplies made
through it by other suppliers where consideration with respect to such
supplies is to be collected by the operator.

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Thus it is important to understand the meaning of ‘net value of taxable

supplies’.
As per Explanation to Section 52(1) the expression “net value of taxable
supplies” shall mean the aggregate value of taxable supplies of goods or
services or both, other than services notified under sub-section (5) of Section
9, made during any month by all registered persons through the operator
reduced by the aggregate value of taxable supplies returned to the suppliers
during the said month.
Thus the net value of taxable supplies in case of services would mean the
aggregate value of taxable supplies of services as reduced by the services
notified under Section 9(5) (refer para 9.5.2). It may be noted here that as
Explanation the value of taxable supplies returned to the suppliers is also to
be excluded from net value of taxable supplies, however this exclusion is
applicable only to goods and may not apply to services.
11.6.2 When tax is to be collected
Section 52(1) mandates that electronic commerce operator shall collect tax
at source of the net value of taxable supplies made through it by other
suppliers where the consideration with respect to such supplies is to be
collected by the operator.
It may be noted here that the said section does not provide that tax shall be
collected at the time of credit of the amount in the account of operator or the
account of supplier. Rather it states that tax is to be collected in respect of
consideration to be collected by the operator. This means that net value of
taxable supply is to be computed in the manner prescribed as discussed in
preceding para on monthly basis and any supply made in respect of which
consideration has not been received would also be included in such value.
11.6.3 Which tax is to be collected
Under GST Law, CGST and SGST / UTGST is levied on intra-State supply of
services whereas IGST is applicable in case of inter-State supplies. Now the
question arises that under which tax head would the tax collected at source
be deposited by electronic commerce operator. In this regard it may be noted
that the tax head under which collection of tax is to be made will be the tax
charged by the supplier in its invoice. In case supplier has charged IGST, the
entire amount of TCS shall be deposited in IGST and if the supplier has
charged CGST and SGST, the deposition of tax collected at source will also
be bifurcated in the ratio of CGST and SGST.

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11.6.4 When the tax collected is required to be deposited

As per Section 52(3) of CGST Act the amount collected under sub-section (1)
shall be paid to the Government by the operator within ten days after the end
of the month in which such collection is made, in such manner as may be
prescribed.
11.6.5 Filing of Statement
Section 52 (4) of CGST Act provides that every operator who collects the
amount specified in sub-section (1) shall furnish a statement, electronically,
containing the details of outward supplies of goods or services or both
effected through it, including the supplies of goods or services or both
returned through it, and the amount collected under sub-section (1) during a
month, in such form and manner as may be prescribed, within ten days after
the end of such month.
11.6.6 Form and manner of submission of statement of
supplies by an e-commerce operator
As per Rule 67 (1) of the CGST Rules every electronic commerce operator
required to collect tax at source under section 52 shall furnish a statement in
Form GSTR-8 electronically through the Common Portal, either directly or from a
Facilitation Centre notified by the Commissioner, containing details of supplies
effected through such operator and the amount of tax collected as required under
sub-section (1) of section 52.
Further as per Rule 67(2) the details furnished by the operator under sub-rule
(1) shall be made available electronically to each of the suppliers in Part D of
Form GSTR-2A on the Common Portal after the due date of filing of Form GSTR-
8.
Further Rule 60(7) of CGST Rules also provides that the details of tax
collected at source furnished by an e-commerce operator under section 52 in
Form GSTR-8 shall be made available to the concerned person in Part D of
Form GSTR - 2A electronically through the Common Portal and such taxable
person may include the same in Form GSTR-2.
11.6.7 Rectification of omission or inaccurate particulars
in the Statement
As per Section 52 (6) of CGST Act if any operator after furnishing a

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statement under sub-section (4) discovers any omission or incorrect

particulars therein, other than as a result of scrutiny, audit, inspection or
enforcement activity by the tax authorities, he shall rectify such omission or
incorrect particulars in the statement to be furnished for the month during
which such omission or incorrect particulars are noticed, subject to payment
of interest, as specified in sub-section (1) of section 50:
Provided that no such rectification of any omission or incorrect particulars shall
be allowed after the due date for furnishing of statement for the month of
September following the end of the financial year or the actual date of
furnishing of the relevant annual statement, whichever is earlier.
11.6.8 Matching of details
As per Section 52(8) of CGST Act the details of supplies furnished by every
operator under sub-section (4) shall be matched with the corresponding
details of outward supplies furnished by the concerned supplier registered
under this Act in such manner and within such time as may be prescribed.
In this regard Rule 78 of the CGST Rules is relevant which provides that the
following details relating to the supplies made through an e-commerce operator,
as declared in Form GSTR-8, shall be matched with the corresponding details
declared by the supplier in Form GSTR-1-
(a) GSTIN of the supplier;
(b) GSTIN or UIN of the recipient, if the recipient is a registered person;
(c) State of place of supply;
(d) Invoice number of the supplier;
(e) Date of invoice of the supplier;
(f) Taxable value; and
(g) Tax amount:
Provided that for all supplies where the supplier is not required to furnish the
details separately for each supply, the following details relating to such
supplies made through an e-Commerce operator, as declared in Form GSTR-8,
shall be matched with the corresponding details declared by the supplier in
Form GSTR-1-
(a) GSTIN of the supplier;

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(b) State of place of supply;

(c) Total taxable value of all supplies made in the State through e-
commerce portal; and
(d) Tax amount on all supplies made in the State:
Provided further that where the time limit for furnishing Form GSTR-1 under
section 37 has been extended, the date of matching of the above mentioned
details shall be extended accordingly.
11.6.9 Communication and rectification of discrepancy in
details furnished by the e-commerce operator and
the supplier
As per Section 52 (9) of CGST Act where the details of outward supplies
furnished by the operator under sub-section (4) do not match with the
corresponding details furnished by the supplier under section 37, the
discrepancy shall be communicated to both persons in such manner and
within such time as may be prescribed.
As per Rule 79 (1) any discrepancy in the details furnished by the operator
and those declared by the supplier shall be made available to the supplier
electronically in Form GST MIS-5 and to the e-commerce portal electronically
in Form GST MIS–6 through the Common Portal on or before the last date of
the month in which the matching has been carried out.
Rule 79 (2) of CGST Rules provide that a supplier to whom any discrepancy
is made available under sub-rule (1) may make suitable rectifications in the
statement of outward supplies to be furnished for the month in which the
discrepancy is made available.
Further as per Rule 79(3) an operator to whom any discrepancy is made
available under sub-rule (1) may make suitable rectifications in the statement
to be furnished for the month in which the discrepancy is made available.
11.6.10 Implication of non-rectification
As per Section 52 (10) the amount in respect of which any discrepancy is
communicated under sub-section (9) and which is not rectified by the
supplier in his valid return or the operator in his statement for the month in
which discrepancy is communicated, shall be added to the output tax liability
of the said supplier, where the value of outward supplies furnished by the

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operator is more than the value of outward supplies furnished by the

supplier, in his return for the month succeeding the month in which the
discrepancy is communicated in such manner as may be prescribed.
Further Section 52 (11) provides that the concerned supplier, in whose
output tax liability any amount has been added under sub-section (10), shall
pay the tax payable in respect of such supply along with interest, at the rate
specified under sub-section (1) of section 50 on the amount so added from
the date such tax was due till the date of its payment.
In this regard Rule 79 (4) of the CGST Rules provides that where the
discrepancy is not rectified under sub-rule (2) or sub-rule (3), an amount to
the extent of discrepancy shall be added to the output tax liability of the
supplier in his return in Form GSTR-3 for the month succeeding the month in
which the details of discrepancy are made available and such addition to the
output tax liability and interest payable thereon shall be made available to the
supplier electronically on the Common Portal in Form GST MIS –5.
11.6.11 Annual Statement
Section 52(5) of CGST Act provides that every operator who collects the
amount specified in sub-section (1) shall furnish an annual statement,
electronically, containing the details of outward supplies of goods or services
or both effected through it, including the supplies of goods or services or both
returned through it, and the amount collected under the said sub-section
during the financial year, in such form and manner as may be prescribed,
before the thirty first day of December following the end of such financial
year.
11.6.12 Claim of Credit by the supplier
As per Section 52 (7) of CGST Act the supplier who has supplied the goods
or services or both through the operator shall claim credit, in his electronic
cash ledger, of the amount collected and reflected in the statement of the
operator furnished under sub-section (4), in such manner as may be
prescribed.
As per Rule 67(2) the details furnished by the operator under Rule 67(1) shall
be made available electronically to each of the suppliers in Part D of Form
GSTR-2A on the Common Portal after the due date of filing of Form GSTR- 8
and accordingly tax collected at source by electronic commerce operator shall
be auto populated in GSTR 2A and credit of same can be taken by the supplier.

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11.6.13 Notice to electronic commerce operator

In respect to services, section 52(12) of CGST Act provides that any
authority not below the rank of Deputy Commissioner may serve a notice,
either before or during the course of any proceedings under this Act,
requiring the operator to furnish such details relating to supplies of services
effected through such operator during any period as may be specified in the
notice.
Further as per sub-section (13) every operator on whom a such a notice has
been served shall furnish the required information within fifteen working days
of the date of service of such notice.
Section 52 (14) mandates that in case any person who fails to furnish the
information required by the notice served under sub-section (12) shall,
without prejudice to any action that may be taken under section 122, be
liable to a penalty which may extend to twenty-five thousand rupees.
Explanation.—For the purposes of this section, the expression “concerned
supplier” shall mean the supplier of services making supplies through the
operator.

11.7 Registration
As per Section 24(x) of CGST Act, it is mandatory for the electronic
commerce operator (who is required to collect tax at source under section
52) to obtain registration irrespective of its aggregate turnover.
Accordingly any person who is selling his own goods / himself providing
services from its website, will be eligible to get threshold exemption limit of
aggregate turnover for the purpose of GST registration.
In this regard as per Rule 12 of the CGST Rules is relevant which inter alia
states that any person required collect tax at source in accordance with the
provisions of section 52 shall electronically submit an application, duly signed
or verified through EVC, in Form GST REG-07 for grant of registration through
the Common Portal, either directly or from a Facilitation Centre notified by the
Commissioner. The proper officer may grant registration after due verification
and issue a certificate of registration in Form GST REG-06 within three
working days from the date of submission of application.

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 Electronic Commerce Operator and Collection of Tax at Source

11.8 Consequences of not complying with TCS

provisions
Sl. No Default made Consequence of default
1. TCS not collected or Interest to be paid along with
inaccurate particulars given. the TCS amount; else the
amount shall be determined and
recovered as per the law.
2. TCS collected but not paid to Interest to be paid along with
the Government or paid later the TCS amount; else the
than 10th of the succeeding amount shall be determined and
month recovered as per the law.
3. TCS default Penalty of Rs 10,000/- or an
amount equivalent to the tax not
collected under section 51 or
short collected or collected but
not paid to the Government,
whichever is higher. (Section
122(1)(v))
4. Not furnishing the details Any person who fails to furnish
called for by Department. the information required by the
notice served under section
52(12) shall, without prejudice
to any action that may be taken
under section 122 be liable to a
penalty which may extend to Rs
25,000/-.
(Section 52(14))

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 Chapter 12

Tax Deducted at Source

12.1 Introduction
The provisions regarding tax deduction at source are mandated in Section 51
of the CGST / SGST Act(s). Further this section also has applicability to
IGST and UTGST Acts also. The provisions in regard to tax deduction at
source are discussed in the succeeding paras.

12.2. Effective date of applicability of TDS

provisions
As per Notification No. 50/2018 Central Tax dated 13-09-2018 the effective
date of applicability of TDS provisions is 01-10-2018. Accordingly, tax will be
required to be deducted by specified persons on payments made or credited
to suppliers on or after 01-10-2018.

12.3 TDS provisions under GST Law – At a Glance

The provisions in respect to deduction of tax source are contained in the
Section 51 of the CGST Act, 2017. Similar provisions exist in SGST Acts of
respective State Governments. Further such provisions are also applicable to
IGST Act, 2017 in terms of Section 20(x) of IGST Act,2017 and to UTGST
Act, 2017 as per Section 21(xi) of the UTGST Act, 2017. Further apart from
Section 51 of the CGST / SGST Acts certain other provisions of such Acts
will also be applicable in regard to TDS. In addition to above the machinery
provisions in regard to compliance to TDS provisions are contained in CGST
/ SGST Rules, 2017.
For ready reference, the matrix of provisions of GST Law relevant in regard
to deduction of tax at source is tabulated below:
 Tax Deducted at Source

Sl. Description Section of Rule of GST

No CGST Act/ CGST Rules/ Forms
SGST Act SGST Rules
1. Transitional provisions 142(13)
2. Persons liable to Section 51(1)
deduct, conditions, time
and rate of
deduction.
3. Compulsory Section 24 (vi)
requirement for
registration as tax
deductor
4. Application for Section 25 Rule 12(1) GST
registration REG-07
5. Grant of Registration Rule 12(2) GST
Certificate REG-06
6. Cancellation of Rule 12(3) GST
Registration Certificate read with REG-08
Rule 22
7. Payment of Tax Section 51(2) Rule 85(4) GST
deducted at source read with PMT-05
Section 39(7)
8. Payment of interest on Section 51(6)
delayed payment. read with
Section 50(1)
9. Filing of TDS Return Section 51(5) Rule 66(1) GSTR-7
read with
Section 39(3)
10. Late fee for delay in Section 47(1)
filing of TDS return
11. Issue of TDS Section 51(3) Rule 66(3) GSTR-7A
Certificate
12. Late fee for late Section 51(4)
furnishing of TDS
certificate

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GST : Practitioners Perspective

13. Claim of credit of tax Section 51(5) Rule 66(2)

deducted by deductee read with
Rule 87(9)
14. Penalty on TDS default Section
122(1)(v)
15. Demand of TDS Section 51(7)
read with
Section 73 or
74
16. Refund of TDS Section 51(8)
read with
Section 54

12.4 Overview of TDS under GST law

For benefit of readers, a brief overview on important provisions relating to
TDS under GST Law are given below.
12.4.1 Persons required to deduct tax
As per Section 51(1) of the CGST Act, 2017 read with Notification No.
50/2018 – Central Tax dated 13-09-2018 following persons (deductors) need
to deduct tax at source.
(a) a department or establishment of the Central Government or State
Government; or
(b) local authority; or
(c) Governmental agencies; or
(d) an authority or a board or any other body, -
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government,
with 51% or more participation by way of equity or control, to carry out any
function;
(e) Society established by the Central Government or the State
Government or a Local Authority under the Societies Registration Act,
1860;
(f) public sector undertakings.

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 Tax Deducted at Source

12.4.2 Quantum and rate of tax deduction

The tax would be deducted @1% (CGST and SGST each for intra-State
supply) and @ 2% (IGST for inter-State supply) of the payment made to the
supplier (the deductee) of taxable goods or services or both, where the total
value of such supply, under a contract, exceeds Rs 2,50,000/- (excluding the
amount of Central tax, State tax, Union territory tax, integrated tax and cess
indicated in the invoice).
12.4.3 no tax deduction required in some cases
No deduction shall be made if the location of the supplier and the place of
supply is in a State or Union territory which is different from the State, or as
the case may be, Union territory of registration of the recipient. Further tax is
also not required to be deducted in case the preconditions of tax deduction
as laid down under Section 51(1) are not fulfilled. Example: Payment of
exempt supplies, taxable supplies where contract value does not exceed Rs
2.50 lakh etc.
12.4.4 Registration of TDS deductors
A TDS deductor has to compulsorily register without any threshold limit. The
deductor has a privilege of obtaining registration under GST without having
required to obtain PAN. He can obtain registration using his Tax Deduction
Account Number (TAN) issued under the Income tax Act, 1961.
12.4.5 Payment of TDS
The amount of tax deducted at source should be deposited to the
Government account by the deductor by 10th of the succeeding month. The
deductor would be liable to pay interest if the tax deducted is not deposited
within the prescribed time limit.
12.4.6 Filing of TDS Return
The deductor is also required to file a return in Form GSTR-7 within 10 days
from the end of the month. The details of tax deducted at source furnished by
the deductor in Form GSTR-7 shall be made available to each of the suppliers
in Part C of Form GSTR-2A electronically through the Common Portal and the
said supplier may include the same in Form GSTR-2. The amounts deducted
by the deductor get reflected in the GSTR-2 of the supplier (deductee). The
supplier can take this amount as credit in his electronic cash register and use
the same for payment of tax or any other liability.

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GST : Practitioners Perspective

12.4.7 TDS Certificate

A TDS certificate is required to be issued by deductor (the person who is
deducting tax) in Form GSTR-7A to the deductee (the supplier from whose
payment TDS is deducted), within 5 days of crediting the amount to the
Government, failing which the deductor would be liable to pay a late fee of
Rs. 100/- per day from the expiry of the 5th day till the certificate is issued.
This late fee would not be more than Rs. 5000/-
It may be noted that Section 51(4) which prescribed for levy of late fee as
above has been omitted w.e.f 1.1.2021 and accordingly late fee would not be
levied for delay in issuance of TDS certificate.
12.4.8 Availment of credit by supplier
The TDS deducted and deposited by deductor in the Government account
shall be reflected in the electronic cash ledger of the supplier (i.e. deductee)
who would be able to use the same for payment of tax or any other amount.
12.4.9 Consequences of not complying with TDS
provisions:
Sl.No Default made Consequence of default
1. TDS not deducted Interest to be paid along with
the TDS amount; else the
amount shall be determined
and recovered as per the law.
2. TDS certificate not issued or
delayed beyond the
prescribed period of five days
3. TDS deducted but not paid to Interest to be paid along with
the government or paid later the TDS amount; else the
than 10th of the succeeding amount shall be determined
month and recovered as per the law.
4. Late filing of TDS returns Late fee of Rs. 100/- for every
day during which such failure
continues subject to a
maximum amount of five
thousand rupees.
Further in case of TDS default, penalty of Rs 10,000/- or an amount
equivalent to the tax not deducted under section 51 or short deducted or
deducted but not paid to the Government, whichever is higher.

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 Chapter 13

Registration
13.1 Introduction
As per the charging sections of GST Acts, the applicable tax is paid by the
taxable person.
In terms of Section 2(107) ‘taxable person’ means a person who is registered
or required to be registered under Section 22 or 24 of the CGST Act.
Thus both the terms i.e taxable person and registration are connected and are
of critical importance.
One who is required to obtain multiple registrations in different States or
within one State would be considered as distinct person in each State.

13.2 Registration to be obtained if turnover

exceeds prescribed limit
Section 22(1) of the CGST Act,2017 provides that every supplier shall be
liable to be registered under this Act in the State or Union territory from
where he makes a taxable supply of goods or services or both if his
aggregate turnover in a financial year breaches a prescribed threshold.
Various thresholds have been prescribed depending upon State from which
supply is being made / goods or services being supplied.
For ready reference the threshold limit of aggregate turnover applicable in
various situations along with legal references is tabulated below:
Sl. Supplier of: State / UT from Threshold Legal reference
No which supply is exemption
made limit of
aggregate
turnover
1. Goods or Entire India, Rs 20 lakh i) Section 22(1)
services or both except ii) Second
Nagaland, proviso to Sec
GST : Practitioners Perspective

Tripura, Manipur 22(1).

and Mizoram.
2. Goods or States of Rs 10 lakh i) Section 22(1)
services or both Nagaland, ii) First proviso
Tripura, Manipur to Sec 22(1).
and Mizoram.
3. Only supply of Entire India, Rs 40 lakh i) Section 22(1)
goods, except Ice except in the (to be ii) Third Proviso
Cream and other States of computed to Section 22(1)
edible ice, Arunachal excluding (inserted by
whether or not Pradesh, interest on Finance Act,
containing cocoa Manipur, deposits, 2019, w.e.f. 1-1-
pan masala All Meghalaya, loans and 2020 vide
goods i.e. Mizoram, advances*). Notification No.
Tobacco and Nagaland, 10/2019-Central
manufactured Puducherry, Tax, dated
tobacco Sikkim, 07.03.2019.
substitutes Telangana, iii)Explanation to
Tripura, Sec 22(1)
Uttarakhand
* No such reduction to be made while computing aggregate turnover of Rs 20
lakh / 10 Lakh.
For ease of understanding the State / UT wise threshold limit for GST registration
is tabulated below:
Name of State / UT Person Person engaged
engaged exclusively in
exclusively in supply of services
supply of or supply of
goods goods and
services both
Entire India (except the Rs 40 lakh Rs 20 lakh
States/UTs of Arunachal
Pradesh, Manipur, Meghalaya,
Mizoram, Nagaland,
Puducherry, Sikkim, Telangana,
Tripura, Uttarakhand)

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 Registration

Puducherry, Telangana, Rs 20 lakh Rs 20 lakh

Arunachal Pradesh,
Meghalaya, Sikkim,
Uttarakhand
Manipur, Mizoram, Nagaland, Rs 10 lakh Rs 10 lakh
Tripura

13.2.1 Meaning of Aggregate turnover

The term aggregate turnover is defined under Section 2(6) of CGST Act as
follows:-
(6) “aggregate turnover” means the aggregate value of all taxable
supplies (excluding the value of inward supplies on which tax is
payable by a person on reverse charge basis), exempt supplies,
exports of goods or services or both and inter-State supplies of
persons having the same Permanent Account Number, to be
computed on all India basis but excludes central tax, State tax, Union
territory tax, integrated tax and cess;
Aggregate turnover’ means value of all outward supplies (taxable supplies +
exempt supplies + exports + inter-State supplies) of a person having the
same PAN and computed on all India basis minus Central tax (CGST), State
tax (SGST), Union territory tax (UTGST), integrated tax (IGST) and
compensation cess.
Non-taxable supply viz supply of alcoholic liquor and the 5 petroleum
products currently outside GST, will be included in aggregate turnover as
same are covered under the definition of exempt supply.
Also, the value of inward supplies on which tax is payable under reverse
charge is not taken into account for calculation of ‘aggregate turnover’.
Further activities / transactions included in Schedule III of CGST Act, 2017
will also not be included in aggregate turnover.
It shall include supply made by an agent on behalf of its principal in cases
where invoice is issued by him in his name. Further in case a person is
engaged solely in supply of goods (barring few goods), the aggregate
turnover shall not include interest on deposits, loans and advances.

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GST : Practitioners Perspective

13.3 Persons not be liable to register even if

aggregate turnover exceeds prescribed limit
As per Section 23 of the CGST Act, 2017, following persons need not obtain
GST registration even if their aggregate turnover exceeds the prescribed
limit.
(a) An agriculturist, to the extent of supply of produce out of cultivation of
land.
(b) Any person engaged exclusively in the business of supplying goods
and/ services that are not liable to tax or wholly exempt from tax under
the CGST Act or under IGST Act
(c) The Government may, on the recommendations of the Council, by
notification, specify the category of persons who may be exempted
from obtaining registration under this Act.
The Government has specifically granted exemption from registration, to the
following persons:
(a) Persons engaged in rendering taxable services which are liable to
GST under reverse charges are not required to take registration -
(Notification No. 5/2017–Central Tax, dated 19.06.2017)
(b) Job-workers engaged in making inter-State supply of services to a
registered person except those who are liable to be registered under
section 22(1) of the CGST Act, 2017 or persons opting for voluntary
registration or persons engaged in making supply of services in
relation to jewellery, goldsmiths’ and silversmiths’ wares and other
articles (w.e.f. 14.09.2017) - Notification No. 7/2017–Integrated Tax,
dated 14.09.2017 as amended vide Notification No. 2/2019-Integrated
Tax, dated 29-Jan-2019, w.e.f. 1-Feb2019.
(c) Persons effecting inter-State supplies of taxable services – where the
aggregate value of supplies on PAN-India basis does not exceed
Rs 20 Lakhs in a year (Rs 10 Lakhs for special category States-
Manipur, Mizoram, Nagaland and Tripura) (w.e.f. 13.10.2017) -
Notification No. 10/2017–Integrated Tax, dated 13.10.2017 as
amended vide Notification No. 3/2019-Integrated Tax, dated 29-Jan-
2019, w.e.f. 1-Feb-2019.

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 Registration

(d) Categories of persons effecting inter-State taxable supplies of

handicraft goods – where the aggregate value of supplies on PAN-
India basis does not exceed Rs 20 Lakhs in a year (Rs 10 Lakhs for
special category States- Manipur, Mizoram, Nagaland and Tripura) -
(w.e.f. 22.10.2018) - Notification No. 3/2018–Integrated Tax dated
22.10.2018. This notification has superseded Notification No. 8/ 2017-
Integrated Tax, dated 14.09.2017
(e) Persons providing services through an e-commerce who is required to
collect tax at source, provided their aggregate turnover does not
exceed Rs 20 lakh (Rs 10 lakh in special category States-Manipur,
Mizoram, Nagaland and Tripura) (w.e.f. 15.11.2017). - Notification No.
65/2017–Central Tax, dated 15.11.2017 as amended vide Notification
No. 6/2019-Central Tax, dated 29-Jan-2019, w.e.f. 1-Feb-2019
(f) Categories of casual taxable persons making taxable supplies of
handicraft goods where the aggregate value of supplies on PAN-India
basis does not exceed Rs 20 Lakhs in a year (Rs 10 Lakhs for special
category States-Manipur, Mizoram, Nagaland and Tripura) - (w.e.f.
23.10.2018) – Notification No. 56/2018-Central Tax, dated 23.10.2018.
This notification has superseded Notification No. 32/ 2017-Central
Tax, dated 15.09.2017.

13.4 Compulsory Registration irrespective of

quantum of aggregate turnover
In terms of Section 24, following persons are required to be compulsorily
registered under CGST Act even if their aggregate turnover is below the
specified exemption limit and are exempt from registration under section
22(1)
(a) Person making any inter-state taxable supply (Subject to two
exemptions i) Inter State supplies of taxable services (Notification No.
10/2017–Integrated Tax, dated 13.10.2017 amended vide Notification
No. 3/2019-Integrated Tax, dated 29.01.2019, w.e.f. 1-Feb-2019) and
ii) handicraft goods except when their turnover exceeds threshold limit
(Notification No.3/2018– Integrated Tax, dated 22.10.2018 which
superseded Notification No. 8/ 2017- Integrated Tax, dated
14.9.2017))

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GST : Practitioners Perspective

(b) Casual Taxable Persons making taxable supply (subject to exemption

of Casual taxable persons making taxable supplies of handicraft goods
if the aggregate turnover does not exceed Rs 20 lakhs (Notification
No. 56/2018-Central Tax, dated 23.10.2018 which superseded
Notification No. 32/ 2017–Central Tax, dated 15.9.2017)).
(c) Persons liable to pay GST under reverse charge.
(d) Electronic commerce operator in respect of specified categories of
services if such services are supplied through it [where the provision of
Section 9(5) of CGST Act apply].
(e) Non-resident taxable persons making taxable supply.
(f) Persons who are required to deduct tax at source, whether or not
separately registered under GST Act(s) [Separate registration required
for TDS purposes by Govt Deptt / PSUs]
(g) Every electronic commerce operators who is required to collect tax at
source under section 52.
(h) Persons who supply goods and/or services on behalf of other taxable
persons whether as an agent or otherwise. (Though not expressly
mentioned, ‘agents’ will become liable to compulsory registration only
if their transactions fall in Schedule I).
(i) Input Service Distributor, whether or not separately registered under
GST Act(s) [Separate registration required for ISD purposes]
(j) Persons who supply goods or services or both (other than supplies
specified under section 9(5)) through such electronic commerce
operator who is required to collect tax at source under section 52.
However, persons who are suppliers of service and supplying services
through e-commerce operator are not required to register under GST
under GST if their aggregate turnover is less than Rs 20 lakhs per
annum ( Rs 10 lakhs in case of specified States)- Notification No.
65/2017 – Central Tax dated 15.11.2017. This exemption is not
available to supplier of goods.
(k) Every person supplying Online Information and Database Access or
Retrieval Services (OIDAR Services) from a place outside India to a
person in India, other than a registered taxable person.

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 Registration

13.5 Other GST Registration provisions:

 A person, though not liable to be registered under section 22 or
section 24 may get himself registered voluntarily, and all provisions of
this Act, as are applicable to a registered person, shall apply to such
person.
 One person who supplies goods or services from different States or
different Union territories is required to get registered in each of such
State or from different Union Territories.
 In case of registrations other than casual taxable person or non-
resident taxable person every person shall apply within 30 days from
the date on which he becomes liable to registration.
 However, casual taxable person and non-resident taxable person are
required to get registration at least five days prior to the
commencement of business. Certificate of registration issued to them
will be valid for a period of 90 days and the designated officer can
further extend this period by 90 days, provided a reasonable cause is
provided by the taxable person. A casual taxable person is required to
make an advance deposit of tax in an amount equivalent to the
estimated tax liability for the period for which registration is sought.
 A non-resident taxable person needs to electronically submit a duly
signed application, along with a self-attested copy of his valid
passport, for registration, using the FORM GST REG-09, at least five
days prior to the commencement of business on the Common Portal.
He will be given a temporary reference number electronically by the
Common Portal for making an advance deposit of tax in his electronic
cash ledger and an acknowledgment will be issued thereafter.
 If case, all the information in the application is submitted properly
along with necessary documents then, registration shall be granted
from seven days from submitting the documents and the clarification, if
any.
 Registration shall be granted from the date of application if the same is
made within thirty days of becoming liable to registration. Otherwise, if
application is made beyond 30 days of becoming eligible, then from
the date of grant of registration.
 Once registration is done, Goods and Services Tax Identification

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GST : Practitioners Perspective

Number (GSTIN) will be allotted in the following format.

(a) Two characters for the State code;
(b) Ten characters for the PAN or the Tax Deduction and Collection
Account Number;
(c) Two characters for the entity code; out of this the first code is
no. of registration within same State and second is “z”, kept
reserve for future use.
(d) One checksum character.
 Every registered person shall display his GSTIN on the name board
exhibited at the entry of his principal place of business and at every
additional place or places of business.

13.6 GST Registration Procedure

Section 25 of the CGST Act,2017 read with Rule 8 to 26 of the CGST Rules,
2017 related to registration provides a detailed road map on the procedural
aspects of the registration. Every person before applying for registration,
declare his Permanent Account Number, mobile number, e-mail address,
State or Union Territory in Part A of FORM GST REG-01. The Permanent
Account Number shall be validated online by the common portal from the
database maintained by the CBDT. The mobile number and e-mail id shall be
verified through a one-time password sent to the said Mobile number and e-
mail id.

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 Registration

13.7 Aadhaar authentication for new GST

registrations
For the new Goods and Services Tax (GST) registration, authentication by
Aadhaar has been enabled from 21-8-2020. This mode of authentication
removes the need for physical verification and the new GST registration will
be issued within 3 working days of verification. This aims to streamline and
expedite the process.
However, those who still opt for other modes of verification will get the GST
registration only after 21 days as physical verification of the business
premises or verification of document has to be completed first. It will also
increase genuine taxpayers while eliminating any fraudulent or fake entities.
For physical verification of business premises, additional documents, instead
of the pre-registration, may be sought by the officer in view of the Covid-19
pandemic. This feature can be availed by all Indian citizens.

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GST : Practitioners Perspective

The entities who are not required to do this are the following: non-resident
taxpayers, taxpayers who have a Unique Identification Number (UIN), tax
collectors, tax deductors, etc. It is also not required for Online Information
Database Access and Retrieval services (OIDARs).
However, in both cases, the concerned officer has to complete the process within
the specified timeframe of 3 working days for Aadhaar authentication cases and
21 days for non-Aadhaar authentication cases.

13.8 Effective date of Registration

Where an applicant submits Effective date of registration is
application for registration
Within 30 days from the date he the Date on which he becomes liable
becomes liable to registration to registration
After 30 days from the date he Date of grant of registration
becomes liable to registration

13.9 Aadhaar Authentication for existing

Taxpayers
Functionality for Aadhaar authentication and e-KYC where Aadhaar is not
available, has been deployed on GST Common Portal w.e.f. 6th January,
2021, for existing taxpayers.
All taxpayers registered as regular taxpayers (including casual taxable person,
SEZ Units/Developers), ISD and composition taxpayers can do their Aadhaar
authentication or e-KYC on GST Portal. This is not applicable for Government
Departments, public sector undertakings, Local Authorities and Statutory Bodies.
13.9.1 What is Aadhaar Authentication or e-KYC
a) If Aadhaar is available, the primary authorized signatory and 1 person
who is Proprietor/Partner/Director /Managing Partner/ Karta of the
entity registered can go for the Aadhaar authentication.
b) In absence of Aadhaar, they can upload any of the following
documents to undergo e-KYC:
Aadhaar Enrolment Number

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 Registration

Passport
EPIC (Voter ID Card)
KYC Form
Certificate issued by Competent Authority
Others
13.9.2 How to do Aadhar Authentication/ e-KYC on Portal
a) When an existing registered taxpayer would login, a pop-up with
Question will be shown “Would you like to authenticate Aadhaar of the
Partner/Promotor and Primary Authorized Signatory “ with the two
options “Yes, navigate to My Profile” and “Remind me later”.
b) If taxpayer clicks on “Remind me later” pop up will be closed and user
can navigate anywhere on the GST portal.
c) If taxpayer clicks on “Yes, Navigate to My Profile”, system will navigate
to My Profile. In MY PROFILE, a new tab “Aadhaar Authentication
status” has been shown from where link for Aadhaar Authentication to
the Primary Authorized Signatory and one of promoters/partners as
selected by him will be sent.
Note: If same person is Primary Authorized Signatory and
Partner/Promoter, Aadhaar authentication is only required to be done
for that person.
d) On the My profile page, in addition to SEND AADHAAR
AUTHENTICATION LINK, UPLOAD E-KYC DOCUMENTS option
would also be displayed to taxpayer from where they can upload the e-
KYC documents on Portal. In this case, the process of e-KYC
authentication would be subject to approval of uploaded e-KYC
documents by Tax Official.

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 Chapter 14

Tax Invoice and Debit / Credit Note

14.1 Introduction
Every taxable person is required to issue a tax invoice for every supply of
goods or services made by him. Further for making adjustment in value as
shown in the tax invoice issued a debit or credit note is required to be issued.
The provisions in regard to tax invoice, credit and debit notes are contained
in Chapter VII, Sections 31 to 34 of CGST Act and such provisions are
applicable in other GST Acts also. Further the procedural aspects in this regard
are mandated in Rule 46 to 55A of the CGST Rules.

14.2 Contents of the Chapter

(a) Meaning of invoice (refer Para 14.3)
(b) Issue of invoice and other documents (refer Para 14.4)
(c) Issue of credit note and debit notes (refer Para 14.5)

14.3 Meaning of Invoice

As per Section 2(66) of CGST Act “invoice” or “tax invoice” means the tax invoice
referred to in Section 31.
Generally invoice is issued by the seller or provider of a service and indicates
the items / services supplied and the amount receivable by the supplier from
the recipient. An invoice is usually issued on or after the completion of supply
of goods or services.
Invoice includes revised invoice
Explanation to Section 31 provides that for the purposes of this section, the
expression “tax invoice” shall include any revised invoice issued by the
supplier in respect of a supply made earlier.

14.4 Tax Invoices and other documents

The provisions regarding issuance of tax invoices / invoices and other
documents are contained in Section 31 to 33 of the CGST Act. Further the
 Tax Invoice and Debit / Credit Note

aspects regarding contents, time limits of issuance etc are mandated in Rule
46 to 55A CGST Rules.
It may be noted that under GST Law apart from issue of tax invoice several
other documents are required to be issued viz. bill of supply, receipt voucher,
refund voucher are required to made by supplier which were not required
under service tax law. Further the recipient of supply in case reverse charge
is applicable need to issue invoice in respect of goods / service received
(from unregistered supplier) and payment voucher in case advance payment
is made by him.
14.4.1 Issue of invoice of supply
Goods: As per Section 31(1) of the CGST Act a registered person supplying
taxable goods shall, before or at time of:
(a) Removal of goods for supply to the recipient, where supply involves
movement of goods; or
(b) Delivery of goods or making available thereof to the recipient, in any
other case.
Services: Section 31(2) of CGST Act provides that a registered person
supplying taxable services shall, before or after the provision of service but
within a prescribed period, issue a tax invoice, showing the description,
value, tax charged thereon and such other particulars as may be prescribed.
It may be noted that tax invoice is required to be issued in regard to supply of
taxable goods / services on which tax is levied. Thus in case the services
supplied are exempt supplies / non-taxable supplies, tax invoice is not
required to be issued. However in cases of exempt supply, bill of supply will
be issued provisions in regard to which we will be discussing later in this
Chapter.
14.4.1-a Time limit of issue of tax invoice of services
As Rule 47 of the CGST Rules the tax invoice in case of taxable supply of
services shall be issued within a period of 30 days from the date of supply of
service.
However as per Proviso to Rule 47 where the supplier of services is an
insurer or a banking company or a financial institution, including a non-
banking financial company, the period within which the invoice or any

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document in lieu thereof is to be issued shall be 45 days from the date of

supply of service.
14.4.1-b Supplies to distinct persons
Second Proviso to Rule 47 provides that an insurer or a banking company or
a financial institution, including a NBFC, or a telecom operator, or any other
class of supplier of services as may be notified by the Government on the
recommendations of the Council, making taxable supplies of services
between distinct persons as specified in section 25, may issue the invoice
before or at the time such supplier records the same in his books of account
or before the expiry of the quarter during which the supply was made.
14.4.1-c Contents of invoice
Rule 46 of the CGST Rules provides that the tax invoice issued under
Section 31 by a registered person in respect to supply of goods / services
shall contain the following particulars:
(a) name, address and GSTIN of the supplier;
(b) a consecutive serial number not exceeding sixteen characters, in one
or multiple series, containing alphabets or numerals or special
characters hyphen or dash and slash symbolised as “-” and “/”
respectively, and any combination thereof, unique for a financial year;
(c) date of its issue;
(d) name, address and GSTIN or UIN, if registered, of the recipient;
(e) name and address of the recipient and the address of delivery, along
with the name of State and its code, if such recipient is un-registered
and where the value of taxable supply is Rs 50,000/- or more;
(f) name and address of the recipient and the address of delivery, along
with the name of State and its code, if such recipient is un-registered
and where the value of taxable supply is less than fifty thousand
rupees or more and the recipient requests that such details be
recorded in the tax invoice.
(g) HSN Code for goods or services;
(h) description of goods or services or both;
(i) quantity in case of goods and unit or Unique Quantity Code thereof;

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(j) total value of supply of goods or services or both;

(k) taxable value of supply of goods or services or both taking into
account discount or abatement, if any;
(l) rate of tax (Central tax, State tax, Integrated tax, Union territory tax or
cess);
(m) amount of tax charged in respect of taxable goods or services (Central
tax, State tax, Integrated tax, Union territory tax or cess);
(n) place of supply along with the name of State, in case of a supply in the
course of inter-State trade or commerce;
(o) address of delivery where the same is different from the place of
supply;
(p) whether the tax is payable on reverse charge basis; and
(q) signature or digital signature of the supplier or his authorized
representative:
In case of export of goods or services, the invoice shall carry an
endorsement “SUPPLY MEANT FOR EXPORT ON PAYMENT OF
INTEGRATED TAX” or “SUPPLY MEANT FOR EXPORT UNDER BOND OR
LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX”,
as the case may be, and shall, in lieu of the details specified in clause (e),
contain the following details:
(i) name and address of the recipient; (ii) address of delivery; and (iii) name
of the country of destination:
14.4.2 Tax invoice in special cases
Rule 54 of the CGST Rule mandates provisions in regard to issue of tax
invoice in special cases which are discussed below:
14.4.2-a Input service distributor (ISD)
As per sub-rule (1) to Rule 54 an ISD invoice or, as the case may be, an ISD
credit note issued by an Input Service Distributor shall contain the following
details:-
(a) name, address and GSTIN of the Input Service Distributor;
(b) a consecutive serial number not exceeding sixteen characters, in one

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or multiple series, containing alphabets or numerals or special

characters hyphen or dash and slash symbolised as, “-”, “/”,
respectively, and any combination thereof, unique for a financial year;
(c) date of its issue;
(d) name, address and GSTIN of the recipient to whom the credit is
distributed;
(e) amount of the credit distributed; and
(f) signature or digital signature of the Input Service Distributor or his
authorized representative:
Further where the Input Service Distributor is an office of a banking company
or a financial institution, including a non-banking financial company, a tax
invoice shall include any document in lieu thereof, by whatever name called,
whether or not serially numbered but containing the information as
prescribed above.
14.4.2-b Insurer or a banking company or a FI including NBFC
As per sub-rule (2) to Rule 54 where the supplier of taxable service is an
insurer or a banking company or a financial institution, including a non-
banking financial company, the said supplier shall issue a tax invoice or any
other document in lieu thereof, by whatever name called, whether issued or
made available, physically or electronically whether or not serially numbered,
and whether or not containing the address of the recipient of taxable service
but containing other information as prescribed under rule 46.
As per sub-section (5) the above provision shall also applicable on issue of
bill of supply, receipt voucher, refund voucher, payment voucher and revised
tax invoice and credit or debit notes. The provisions in regard to these
documents are discussed later in this Chapter.
14.4.2-c Goods Transport Agency
As per sub-rule (3) to Rule 54 where the supplier of taxable service is a
goods transport agency supplying services in relation to transportation of
goods by road in a goods carriage, the said supplier shall issue a tax invoice
or any other document in lieu thereof, by whatever name called, containing
the gross weight of the consignment, name of the consignor and the

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consignee, registration number of goods carriage in which the goods are

transported, details of goods transported, details of place of origin and
destination, GSTIN of the person liable for paying tax whether as consignor,
consignee or goods transport agency, and also containing other information
as prescribed under rule 46.
14.4.2-d Passenger transport service
Sub-rule (4) to Rule 54 mandates that where the supplier of taxable service
is supplying passenger transportation service, a tax invoice shall include
ticket in any form, by whatever name called, whether or not serially
numbered, and whether or not containing the address of the recipient of
service but containing other information as prescribed under rule 46.
As per sub-section (5) the above provision shall also applicable on issue of
bill of supply, receipt voucher, refund voucher, payment voucher and revised
tax invoice and credit or debit notes. The provisions in regard to these
documents are discussed later in this Chapter.
14.4.3 Manner of issuing invoice
As per Rule 48(1) of the CGST Rules the invoice shall be prepared in
triplicate, in case of supply of goods, in the following manner:–
(a) the original copy being marked as ORIGINAL FOR RECIPIENT; and
(b) the duplicate copy being marked as DUPLICATE FOR
TRANSPORTER.
(c) the triplicate copy being marked as TRIPLICATE FOR SUPPLIER.
As per Rule 48(2) of the CGST Rules the invoice shall be prepared in
duplicate, in case of supply of services, in the following manner:–
(a) the original copy being marked as ORIGINAL FOR RECIPIENT; and
(b) the duplicate copy being marked as DUPLICATE FOR SUPPLIER.
Further as per sub-section (3) the serial number of invoices issued during a
tax period shall be furnished electronically through the Common Portal in
FORM GSTR-1.(Table -14). While perusing this table it is evident that a
taxable person can have many series of invoices without obtaining any
permission from the Department.

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14.4.4 Issue of invoices in cases of continuous supply

Continuous supply of Goods:
As per Section 2(30) of the CGST Act “continuous supply of goods” means a
supply of goods which is provided, continuously or on recurrent basis, under
a contract, whether or not by means of wire, cable, pipeline or other conduit,
and for which the supplier invoices the recipient on a regular or periodic
basis and includes supply of such goods as the Government may, subject to
such conditions, as it may, by notification, specify.
Time limit of issue of invoice:
As per Sec 31(4) of the CGST Act, 2017, in case of continuous supply of goods,
where successive statement of accounts or successive payments are involved,
the invoice is required to be issued before or at the time:
 each such statement is issued or,
 as the case may be each such payment is received.
Thus the due date of issue of invoice boils down to the contract entered in
regard to the continuous supply of goods. In case the contract provides that
a statement on account shall be prepared by the supplier on monthly /
quarterly basis, the invoice is required to be issued along with issuance of
such a statement of account.
Continuous supply of Services:
As per Section 2(31) of the CGST Act “continuous supply of services” means
a supply of services which is provided, or agreed to be provided,
continuously or on recurrent basis, under a contract, for a period exceeding
three months with periodic payment obligations and includes supply of such
services as the Government may, subject to such conditions, as it may, by
notification, specify.
Time limit of issue of invoice:
Sub-section (5) of Section 31 mandates that subject to the provisions of
clause (d) of sub-section (3), in case of continuous supply of services,––
(a) where the due date of payment is ascertainable from the contract, the
invoice shall be issued on or before the due date of payment;

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(b) where the due date of payment is not ascertainable from the contract,
the invoice shall be issued before or at the time when the supplier of
service receives the payment;
(c) where the payment is linked to the completion of an event, the invoice
shall be issued on or before the date of completion of that event.
The said sub-section starts with the words “subject to provisions of clause (d)
of sub-section (3)” which means that in case any advance amount is received
against the supply of continuous supply of services the receipt voucher as
provided in said clause is required to be issued.
It may be noted here that the 30 days / 45 days period for issuance of invoice
as laid down in Rule 47 of the CGST Rules, 2017 is applicable for normal
supplies and is not applicable in case of continuous supply of services.
14.4.5 Special provisions for notified category of
services
As per First Proviso to Section 31(2) of CGST Act the Government may, on
the recommendations of the Council, by notification and subject to such
conditions as may be mentioned therein, specify the categories of services in
respect of which ––
(a) any other document issued in relation to the supply shall be deemed to be
a tax invoice; or
(b) tax invoice may not be issued.
No notification in this regard has been issued till date.
14.4.6 Issue of invoice in respect of period prior to
registration
As per clause (a) of Section 31(3) a registered person may, within one month
from the date of issuance of certificate of registration and in such manner as
may be prescribed, issue a revised invoice against the invoice already issued
during the period beginning with the effective date of registration till the date
of issuance of certificate of registration to him.
In regard to above as per Rule 53(2) of CGST Rules, every registered person
who has been granted registration with effect from a date earlier than the
date of issuance of certificate of registration to him, may issue revised tax
invoices in respect of taxable supplies effected during the period starting

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from the effective date of registration till the date of issuance of certificate of
registration:
However the registered person may issue a consolidated revised tax invoice
in respect of all taxable supplies made to a recipient who is not registered
under the Act during such period:
Further in case of inter-State supplies, where the value of a supply does not
exceed two lakh and fifty thousand rupees, a consolidated revised invoice
may be issued separately in respect of all recipients located in a State, who
are not registered under the Act.
14.4.7 Non-issuance of invoice of less than Rs 200/-
As per Clause (b) of Section 31(3) of CGST Act a registered person may not
issue a tax invoice if the value of the goods or services or both supplied is
less than Rs 200/- subject to such conditions and in such manner as may be
prescribed.
In this regard as per Fourth Proviso to Rule 46 provides that a registered
person may not issue a tax invoice in accordance with the provisions of
clause(b) of sub-section (3) of Section 31 subject to the following conditions,
namely:-
(a) the recipient is not a registered person; and
(b) the recipient does not require such invoice, and shall issue a
consolidated tax invoice for such supplies at the close of each day in
respect of all such supplies.
14.4.8 Issue of bill of supply
As per Clause (c) of Section 31(3) of CGST Act a registered person
supplying exempted goods or services or both or paying tax under the
provisions of section 10 (i.e. Composition Scheme) shall issue, instead of a
tax invoice, a bill of supply containing such particulars and in such manner as
may be prescribed.
14.4.8-a Contents of Bill of supply
Rule 49 of CGST Rules provides that a bill of supply referred to in section
31(3)(c) shall be issued by the supplier containing the following details:-
(a) name, address and GSTIN of the supplier;

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(b) a consecutive serial number not exceeding sixteen characters, in one

or more multiple series, containing alphabets or numerals or special
characters -hyphen or dash and slash symbolised as “-” and
“/”respectively, and any combination thereof, unique for a financial
year;
(c) date of its issue;
(d) name, address and GSTIN or UIN, if registered, of the recipient;
(e) HSN Code for goods or services;
(f) description of goods or services or both;
(g) value of supply of goods or services or both taking into account
discount or abatement, if any; and
(h) signature or digital signature of the supplier or his authorized
representative:
The Provisos to Rule 46 shall, mutatis mutandis, apply to the bill of
supply issued under this rule.
It may be noted that any tax invoice or any other similar document issued
under any other Act for the time being in force in respect of any non-taxable
supply shall be treated as bill of supply for the purposes of the Act.
14.4.8-b Non-issuance of bill of supply of less than Rs 200/-
As per Proviso to clause(c) of Section 31(3) of CGST Act the registered
person may not issue a bill of supply if the value of the goods or services or
both supplied is less than Rs 200/- subject to such conditions and in such
manner as may be prescribed. This provision is identical to that contained in
Section 31(3)(b) as mandated in regard to issue of invoice.
14.4.9 Issue of receipt voucher
Clause (d) of Section 31(3) of CGST Act mandates that a registered person shall,
on receipt of advance payment with respect to any supply of goods or services or
both, issue a receipt voucher or any other document, containing such particulars
as may be prescribed, evidencing receipt of such payment.
It may be noted here that as per the provisions of time of supply in case any
advance towards supply of service has been received but service has not yet

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been supplied, time of supply will be attracted and tax would be required to
charged and deposited on such advance amount received.
14.4.9-a Contents of receipt voucher
As per Rule 50 of the CGST Rules a receipt voucher referred to in section
31(3)(d) shall contain the following particulars:
(a) name, address and GSTIN of the supplier;
(b) a consecutive serial number not exceeding sixteen characters, in one
or multiple series, containing alphabets or numerals or special
characters -hyphen or dash and slash symbolised as “-” and
“/”respectively, and any combination thereof, unique for a financial
year
(c) date of its issue;
(d) name, address and GSTIN or UIN, if registered, of the recipient;
(e) description of goods or services;
(f) amount of advance taken;
(g) rate of tax (Central tax, State tax, Integrated tax, Union territory tax or
cess);
(h) amount of tax charged in respect of taxable services (Central tax, State
tax, Integrated tax, Union territory tax or cess);
(i) place of supply along with the name of State and its code, in case of a
supply in the course of inter-State trade or commerce;
(j) whether the tax is payable on reverse charge basis; and
(k) signature or digital signature of the supplier or his authorized
representative:
PROVIDED that where at the time of receipt of advance,
(i) the rate of tax is not determinable, the tax shall be paid at the rate of
eighteen per cent.;
(ii) the nature of supply is not determinable, the same shall be treated as
inter-State supply.

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14.4.10 Issue of refund voucher

Section 31(3)(e) of CGST Act mandates that a where, on receipt of advance
payment with respect to any supply of goods or services or both the
registered person issues a receipt voucher, but subsequently no supply is
made and no tax invoice is issued in pursuance thereof, the said registered
person may issue to the person who had made the payment, a refund
voucher against such payment.
14.4.10-a Contents of refund voucher
As per Rule 51 of CGST Rules a refund voucher referred to in clause (e) of sub-
section (3) of section 31 shall contain the following particulars:
(a) name, address and GSTIN of the supplier;
(b) a consecutive serial number not exceeding sixteen characters, in one
or multiple series, containing alphabets or numerals or special
characters -hyphen or dash and slash symbolised as “-” and
“/”respectively, and any combination thereof, unique for a financial
year
(c) date of its issue;
(d) name, address and GSTIN or UIN, if registered, of the recipient;
(e) number and date of receipt voucher issued in accordance with
provisions of rule 50;
(f) description of goods or services in respect of which refund is made;
(g) amount of refund made;
(h) rate of tax (Central tax, State tax, Integrated tax, Union territory tax or
cess);
(i) amount of tax paid in respect of such services (Central tax, State tax,
Integrated tax, Union territory tax or cess);
(j) whether the tax is payable on reverse charge basis; and
(k) signature or digital signature of the supplier or his authorized
representative.

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14.4.11 Issue of self-invoice by recipient under reverse

charge
As per Clause (f) of Section 31(3) of CGST Act a registered person who is
liable to pay tax under sub-section (3) or sub-section (4) of Section 9 shall
issue an invoice in respect of goods or services or both received by him from
the supplier who is not registered on the date of receipt of goods or services
or both.
It may be noted that such self-invoice is only to be raised where any supply
which is subject to reverse charge is received from an unregistered supplier.
The provisions regarding reverse charge and the services on which tax is
required to paid by the recipient of service under reverse charge mechanism
is discussed at Chapter 6.
Further the contents of the invoice to be issued by the recipient would be as
per Rule 46 which we had discussed at Para 14.4.2.
14.4.12 Issue of payment voucher by recipient
Clause (g) of Section 31(3) of CGST Act mandates that a registered person
who is liable to pay tax under sub-section (3) or sub-section (4) of section 9
shall issue a payment voucher at the time of making payment to the supplier.
The payment voucher will be issued in cases where advance payment is
made by the recipient to supplier towards supply of service in cases where
reverse charge provisions are attracted. In such cases the tax is required to
be paid on such advance payment as time of supply is triggered as per the
provisions of Section 13 of CGST Act.
14.4.12-a Contents of payment voucher
As per Rule 52 of the CGST Rules, a payment voucher referred to in clause
(g) of sub-section (3) of section 31 shall contain the following particulars:
(a) name, address and GSTIN of the supplier if registered;
(b) a consecutive serial number not exceeding sixteen characters, in one
or multiple series, containing alphabets or numerals or special
characters -hyphen or dash and slash symbolised as “-” and
“/”respectively, and any combination thereof, unique for a financial
year

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(c) date of its issue;

(d) name, address and GSTIN of the recipient;
(e) description of goods or services;
(f) amount paid;
(g) rate of tax (Central tax, State tax, Integrated tax, Union territory tax or
cess);
(h) amount of tax payable in respect of taxable goods or services (Central
tax, State tax, Integrated tax, Union territory tax or cess);
(i) place of supply along with the name of State and its code, in case of a
supply in the course of inter-State trade or commerce; and
(j) signature or digital signature of the supplier or his authorized
representative.
14.4.13 Ceasing of contract
Sub-section (6) of section 31 mandates that in a case where the supply of
services ceases under a contract before the completion of the supply, the invoice
shall be issued at the time when the supply ceases and such invoice shall be
issued to the extent of the supply made before such cessation.
14.4.14 Sale on return or approval basis
As per Section 31(7) of the CGST Act where the goods being sent or taken
on approval for sale or return are removed before the supply takes place, the
invoice shall be issued before or at the time of supply or six months from the
date of removal, whichever is earlier.
In other words, in such cases the invoice shall be issued when the customer
communicates its acceptance of the goods or six months from date of
removal, whichever is earlier.
14.4.15 Prohibition of unauthorized collection of tax
As per Section 32 (1) a person who is not a registered person shall not
collect in respect of any supply of goods or services or both any amount by
way of tax under this Act.
Further sub-section (2) provides that no registered person shall collect tax except
in accordance with the provisions of this Act or the rules made thereunder.

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14.4.16 Amount of tax should be shown

As per Section 33 of CGST Act notwithstanding anything contained in this
Act or any other law for the time being in force, where any supply is made for
a consideration, every person who is liable to pay tax for such supply shall
prominently indicate in all documents relating to assessment, tax invoice and
other like documents, the amount of tax which shall form part of the price at
which such supply is made.
Accordingly the amount of tax charged viz CGST and SGST / UTGST or
IGST as the case may be should be separately indicated on the invoice. In
case the consideration is inclusive of tax the amount of value and tax may be
computed by reverse working.

14.5 Issue of Credit / Debit note

Section 34 of the CGST Act mandates the provisions regarding issue of
credit and debit notes. It may be noted here that the details of the credit /
debit notes need to be uploaded on to the common portal in the specified
table given in Form GSTR-1. Upon issuance of credit / debit note the tax
liability of the taxable person will be increased or decreased based on the
information contained and amount involved in the credit and debit notes
uploaded onto the common portal.
14.5.1 Issue of Credit Note
As per Section 34 (1) of the CGST Act, where one or more tax invoices have
been issued for supply of any goods or services, one or more credit notes
can be issued by the supplier who is a registered person, in the following
cases:-
(a) the taxable value or tax charged in that tax invoice is found to exceed
the taxable value or tax payable in respect of such supply, or
(b) goods supplied are returned by the recipient
(c) where services supplied are found to be deficient, the registered
person, who has supplied such goods or services or both.
14.5.1-a Limitation period for issue of credit note
As per sub-section (2) to Section 34 any registered person who issues a
credit note in relation to a supply of goods or services or both shall declare

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the details of such credit note in the return for the month during which such credit
note has been issued but not later than September following the end of the
financial year in which such supply was made, or the date of furnishing of the
relevant annual return, whichever is earlier, and the tax liability shall be adjusted
in such manner as may be prescribed.
14.5.1-b Incidence of tax should not be passed
As per Proviso to Section 34(2) no reduction in output tax liability of the
supplier shall be permitted, if the incidence of tax and interest on such supply
has been passed on to any other person. Therefore before issuing the credit
note, the taxable person must satisfy / ensure that he has borne the
incidence of tax and has not passed on the same onto the recipient. This
condition is based on the principle of unjust enrichment.
14.5.2 Issue of Debit Note
As per Section 34(3) of CGST Act where a tax invoice has been issued for
supply of any goods or services or both and the taxable value or tax charged
in that tax invoice is found to be less than the taxable value or tax payable in
respect of such supply, the registered person, who has supplied such goods
or services or both, shall issue to the recipient a debit note containing such
particulars as may be prescribed. As per Explanation to Section 34 the
expression “debit note” shall include a supplementary invoice.
It may be noted here that no limitation period for issue of debit note has been
prescribed.
Further as per sub-section (4) any registered person who issues a debit note
in relation to a supply of goods or services or both shall declare the details of
such debit note in the return for the month during which such debit note has
been issued and the tax liability shall be adjusted in such manner as may be
prescribed.
14.5.3 Link with the original invoice not required
When GST regime was introduced the debit / credit note must contain the
invoice number vide which the original supply of services was made. The
details of debit / credit note need to be declared in return FORM GSTR-1. If we
see the return form the format of the table given therein clearly indicates the
declaration of the invoice number against each debit / credit note. Therefore
it was required to be ensured that each debit / credit note must be linked to
the invoice and the invoice number must appear in the debit / credit note.

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However now delinking has been made between original invoice and debit /
credit note and now in GSTR-1 the original invoice reference is no longer
required to be give,
14.5.4 Contents of revised tax invoice
As per Rule 53(1) of the CGST Rules a revised tax invoice referred to in
Section 31 shall contain the following particulars -
(a) the word “Revised Invoice”, wherever applicable, indicated
prominently;
(b) name, address and GSTIN of the supplier;
(c) (omitted)
(d) a consecutive serial number not exceeding sixteen characters, in one
or multiple series, containing alphabets or numerals or special
characters -hyphen or dash and slash symbolised as “-” and
“/”respectively,, and any combination thereof, unique for a financial
year;
(e) date of issue of the document;
(f) name, address and GSTIN or UIN, if registered, of the recipient;
(g) name and address of the recipient and the address of delivery, along
with the name of State and its code, if such recipient is un-registered;
(h) serial number and date of the corresponding tax invoice or, as the
case may be, bill of supply;
(i) (Omitted) ; and
(j) signature or digital signature of the supplier or his authorized
representative:
14.5.5 Contents of debit note / credit note
As per Rule 53(1A) of the CGST Rules a credit note / debit note as referred
to in section 34 shall contain the following particulars -
(a) name, address and GSTIN of the supplier;
(b) nature of the document;
(c) a consecutive serial number not exceeding sixteen characters, in

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one or multiple series, containing alphabets or numerals or special

characters -hyphen or dash and slash symbolised as “-” and
“/”respectively,, and any combination thereof, unique for a financial
year;
(d) date of issue of the document;
(e) name, address and GSTIN or UIN, if registered, of the recipient;
(f) name and address of the recipient and the address of delivery, along
with the name of State and its code, if such recipient is un-
registered;
(g) serial number and date of the corresponding tax invoice or, as the
case may be, bill of supply;
(h) value of taxable supply of goods or services, rate of tax and the
amount of the tax credited or, as the case may be, debited to the
recipient; and
(i) signature or digital signature of the supplier or his authorized
representative:
14.5.6 Adjustment in tax liability
The issue of credit note will reduce the tax liability of the taxable person as
the value of supply is reduced to the extent of the value of credit note. Every
taxable person is required to declare the details of outward supply made by
him in Form GSTR-1. The tax amount payable for each supply is also
required to be declared in the return. The credit of tax paid is auto-populated
to the account of the recipient. Therefore, it is essential that the recipient
reduces the credit.
As provided in Proviso to Section 34(2) that no reduction in output tax liability
due to issuance of credit note will be allowed if the incidence of tax on such
supply has been passed on to any other person. Accordingly tax liability of
the supplier will be reduced only when the recipient has reduced input tax
credit availed by the recipient.
As regards the debit note is concerned it increases the tax liability of the
person. The Section 34(3) of the GST Act does not provide any time limit for
issuance of debit note. The differential tax on increase in value of supply is
payable whenever the amount is increased and details of debit notes needs
to be given separately in Form GSTR-1.

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 Chapter 15

GST e-invoicing
15.1 Introduction
The GST Council, in its 37th meeting on 20th September 2019, had
recommended introduction of electronic invoice (‘e-invoice’) in GST in a
phased manner.
GST e-invoice system is a path-breaking initiative which is going to
revolutionize the way businesses interact with each other. It will be yet
another milestone in India’s journey in enhancing ease of doing business.
‘e-invoicing’ essentially involves reporting details of specified GST
documents to a Government-notified portal and obtaining a reference
number.
e-invoicing has many advantages for businesses such as standardisation, inter-
operability, auto-population of invoice details into GST return and other forms
(like e-way bill), reduction in processing costs, reduction in disputes,
improvement in payment cycles and thereby improving overall business
efficiency.
Huge advancements in technology sophistication, increased penetration of
internet along with availability of computer systems at reasonable cost has made
‘e-invoice’, a popular choice worldwide.

15.2 What is ‘e-invoicing’?

As per Rule 48(4) of CGST Rules, notified class of registered persons have
to prepare invoice by uploading specified particulars of invoice (in FORM
GST INV-01) on Invoice Registration Portal (IRP) and obtain an Invoice
Reference Number (IRN). After following above ‘e-invoicing’ process, the
invoice copy containing inter alia, the IRN (with QR Code) issued by the
notified supplier to buyer is commonly referred to as ‘e-invoice’ in GST.
Because of the standard e-invoice schema (INV-01), ‘e-invoicing’ facilitates
exchange of the invoice document (structured invoice data) between a
supplier and a buyer in an integrated electronic format. Please note that ‘e-
invoice’ in ‘e-invoicing’ doesn’t mean generation of invoice by a Government
portal.
 GST E-invoicing

Registered persons will continue to create their GST invoices on their own
Accounting/Billing/ERP Systems. Necessary changes on account of e- invoicing
requirement (i.e. to enable reporting of invoices to IRP and obtain IRN), will be
made by ERP/Accounting and Billing Software providers in their respective
software. They need to get the updated version having this facility.
The invoices will now be reported to ‘Invoice Registration Portal (IRP)’. On
reporting, IRP returns the e-invoice with a unique ‘Invoice Reference Number
(IRN)’ after digitally signing the e-invoice and adding a QR Code. Then, the
invoice can be issued to the receiver (along with QR Code). A GST invoice
will be valid only with a valid IRN.
It may be noted that besides tax invoices, credit notes and debit notes as issued
under Section 34 of the CGST Act are also covered under GST e- invoicing.
However bill of supply is not covered as it is issued for exempt supplies on which
no GST is charged.

15.3 Businesses for which, e-invoicing is

mandatory
For Registered persons whose aggregate turnover (based on PAN) in any
preceding financial year from 2017-18 onwards, is more than prescribed limit
i.e. Rs 500 crore, e-invoicing is mandatory. Further this turnover limit is
reduced to Rs 100 Cr for e-invoicing compliance from 1st January,2021.
Thus tax payers having turnover exceeding Rs 100 Cr would be required to
do GST e-invoicing from 01-01-2021.
However it may be noted that following entities are not required to do GST e-
invoicing:
a. Special Economic Zone Units
b. insurer or a banking company or a financial institution, including a non-
banking financial company
c. goods transport agency supplying services in relation to transportation
of goods by road in a goods carriage
d. Suppliers of passenger transportation service
e. Suppliers of services by way of admission to exhibition of
cinematograph films in multiplex screens

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15.4 Supplies presently covered under e-invoicing

Supplies to registered persons (B2B), supplies to SEZs (with/without
payment), Exports (with/without payment), deemed exports, by notified class of
taxpayers are currently covered under e-invoicing. It may be noted that
reporting B2C invoices by notified persons is not applicable/allowed
currently.
e-invoicing is not applicable for import bills of entry.

15.5 Applicability of GST e-invoicing on reverse

charge
If the invoice issued by notified person is in respect of supplies made by him
but attracting reverse charge under Section 9(3), e-invoicing is applicable.
For example, a taxpayer (say, a firm of advocates having aggregate turnover
in a FY is more than Rs. 100 Cr.) is supplying services to a company (who
will be discharging tax liability as recipient under RCM), such invoices have to
be reported by the notified person to IRP.
On the other hand, where supplies are received by notified person from (i) an
unregistered person (attracting reverse charge under Section 9(4)) or (ii) through
import of services, e-invoicing doesn’t arise / not applicable.

15.6 Invoice Registration Portal

Invoice Registration Portal (IRP) is the website for uploading/reporting of
invoices by the notified persons. Vide notification no. 69/2019-Central Tax
dated 13.12.2019, ten portals were notified for the purpose of preparation of
the invoice in terms of Rule 48(4).
The first Invoice Registration Portal (IRP) is active and can be accessed at:
https://einvoice1.gst.gov.in/ Other portals will be made available in due
course.

15.7 Generation of e-invoice

A system/utility to report e-invoice details in JSON format to IRP and to
receive signed e-invoice in JSON format from the Portal.
For Entities not having their own ERP/Software solutions, they can use the
free offline utility (‘bulk generation tool’) downloadable from the e-invoice

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 GST E-invoicing

portal. Through this, invoice data can be easily reported to IRP and obtain
IRN/signed e-invoice.

15.8 Modes for generation of e –invoice

Multiple modes are available so that taxpayer can use the best mode based
on his/her need
a. API based (integration with taxpayer’s system directly)
b. API based (integration with taxpayer’s system through GSP/ASP)
c. Free Offline Utility (‘Bulk Generation Tool’, downloadable from IRP)
Web-based / mobile app-based modes will also be provided in future.
15.9 E-invoice - Schema / Contents
‘Schema’ simply means a structured template or format. ‘E-invoice’ schema
is the standard format for electronic invoice. It is notified as ‘Form GST INV-
1’.
Presently, businesses are preparing/generating invoices in their respective
ERPs/Accounting/Billing Software. All these software have their own format
of storing the data of invoice. Thus, the e-invoice generated by one system is
not understood by the other, thereby necessitating data entry efforts and
consequent errors and reconciliation problems.
‘Schema’ acts as uniform standard for ERP/ Billing/Accounting software
providers to build utility in their solution/package to prepare e-invoice in
notified standard thereby ensuring e-invoice generated by any
ERP/Accounting and Billing Software is correctly understood by another
ERP/Accounting software. This is also required for ensuring uniformity in
reporting to IRP.
Further Schema ensures e-invoice is ‘machine-readable’ and ‘inter-operable’,
i.e. the invoice/format can be readily ‘picked up’, ‘read’, ‘understood’ and
further processed by different systems like Oracle, Tally, SAP etc.
E-invoice Schema is based on PEPPOL/Universal Business Language (UBL)
with certain customizations to cater to Indian business practices and legal
requirements.
Invoice details in prescribed Schema (INV-01) have to be reported to IRP in
JSON format. ‘JSON’ stands for JavaScript Object Notation. It can be

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GST : Practitioners Perspective

thought of as a common language for systems/machines to communicate

between each other and exchange data. As the ERP or Accounting software
will generate it, taxpayer need not worry about it. This format is also used in
GST system for reporting all data to GST System.
15.9.1 Fields in e-invoice Schema?
Various types of fields in e-invoice schema are :
a. Data for fields marked as ‘Mandatory’ have to be provided
compulsorily.
b. A mandatory field not having any value can be reported as NIL.
c. Fields marked as ‘Optional’ may or may not be filled up. Many of these
are relevant for specific businesses (e.g. Batch No., Attributes etc.)
and to cater to specific scenarios (e.g. export, e-way bill etc.).
d. Some sections in the Schema are marked as ‘Optional’. But, if this
section is selected, some of the fields may be mandatory. For
example, the section ‘e-way Bill Details’ is marked as optional. But, if
this section is chosen, the field, ‘Mode of Transportation’ is mandatory.

15.10 Generation of IRN

Invoice Reference Number (IRN) is not same as Invoice number. Invoice no.
(e.g. ABC/1/2019-20) is assigned by supplier and is internal to business. Its
format can differ from business to business and also governed by relevant
GST rules. IRN, on other hand, is a unique reference number (hash)
generated and returned by IRP, on successful registration of e-invoice.
IRN is a unique 64-character hash, e.g. 35054cc24d97033afc24f49ec4444
dbab81f542c555f9d30359dc75794e06bbe.
15.10.1 Rejection of Invoice by IRP
It may be noted here that IRP can reject an invoice. IRP will check whether
the invoice was already reported and existing in the GST System. (This
validation is based on the combination of Supplier’s GSTIN-Invoice Number
Type of Document-Fin. Year, which is also used for generation of IRN). In
case the same invoice (document) has already been reported earlier, it will
be rejected by IRP. Certain other key validations will also be performed on
portal. In case of failure, registration of invoice won’t be successful, IRN
won’t be generated and invoice will be rejected along with relevant error

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codes (which give idea about reasons for rejection.)

15.10.2 Signed JSON provided by IRP in case of
successful registration of invoice
IRP will return only the signed JSON. No PDF will be returned. On receipt of
signed JSON, it is for the respective ERP or Accounting & Billing software
system to generate PDF, if needed. Upon successful registration of invoice
on IRP, it will return a signed e-invoice JSON to the supplier with IRN and
QR Code.

15.11 Printing of Invoice / IRN / QR Code.

Once the IRP returns the signed JSON, your ERP/Accounting/Billing System
it into PDF and printed, if required. Businesses who don’t have their own
ERP/Accounting Software, will be downloading and using the free offline
utility (‘bulk generation tool’) to upload invoice data on einvoice portal and
obtain signed invoice (in JSON). In this scenario also, there is a facility on e-
invoice portal to generate ‘human-readable’ PDF copy of invoice (for
save/print/e - mail etc.).
Printing IRN on the invoice is optional. IRN is anyway embedded in the QR
Code which is one of the mandatory particulars on invoice as per Rule 46 of
the CGST Rules, 2017.
Further the QR code is part of signed JSON, returned by the IRP. It is a
string (not image), which the ERP/accounting/billing software shall read and
convert into QR Code image for placing on the invoice copy.
The QR code (containing, inter alia, the IRN) which comes as part of signed
JSON from IRP, shall be extracted and printed on the invoice. This is one of
the mandatory particulars of invoice under Rule 46 of CGST Rules. However,
printing of QR code on separate paper is not allowed.
While the printed QR code shall be clear enough to be readable by a QR
Code reader, the size and its placing on invoice is upto the preference of the
businesses.
15.11.1 Issue of invoice in triplicate / duplicate
Where e-invoicing is applicable, there is no need of issuing invoice copies in
triplicate/duplicate. This is clearly specified in Rule 48(6).

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15.11.2 Period of retention/storage/archival, in case of e

–invoicing
As per Rule 56(16) of CGST Rules, “Accounts maintained by the registered
person together with all the invoices, bills of supply, credit and debit notes,
and delivery challans relating to stocks, deliveries, inward supply and
outward supply shall be preserved for the period as provided in Section 36…”
The same applies to e-invoicing also.
15.11.3 Penal provisions
The penal provisions for not issuing invoice in accordance with GST law/rules
are provided in Section 122 of CGST/SGST Act read with CGST Rules.

15.12 e-invoice - Sending to Receiver

Upon receiving signed JSON from the IRP, it is for the supplier to share the e-
invoice (along with QR Code etc.) in agreed format to the receiver. A
suggested mechanism may be to exchange the PDF of the JSON received
from IRP, (including QR code) as the best authenticated version of the e-
invoice for business transactions. However, a mechanism to enable system- to-
system exchange of e-invoices through ecosystem partners will be made
available in due course.
As per Rule 138A(2) of CGST Rules, where e-invoicing is applicable, “the
Quick Reference (QR) code having an embedded Invoice Reference Number
(IRN) in it, may be produced electronically, for verification by the proper
officer, in lieu of the physical copy of such tax invoice.” Thus carrying of
physical / hard copy is not required.

15.13 e-invoice - Amendment / Cancellation

Amendments of details of a reported invoice for which IRN has already been
generated are not possible on IRP. Any changes in the invoice details
reported to IRP can be carried out on GST portal (while filing GSTR-1). In
case GSTR-1 has already been filed, then using the mechanism of
amendment as provided under GST. However, these changes will be flagged
to proper officer for information.

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15.13.1 Cancellation of IRN / Invoice reported to IRP

The cancellation request an IRN/invoice reported to IRP can be triggered
through ‘Cancel API’ within 24 hours from the time of reporting invoice to
IRP. However, if the connected e-way bill is active or verified by officer
during transit, cancellation of IRN will not be permitted. In case of
cancellation of IRN, GSTR-1 also will be updated with such ‘cancelled’
status.
It may be noted that once an IRN is cancelled, the concerned invoice number
cannot be used again to generate another e-invoice/IRN (even within the
permitted cancellation window). If it is used again, then the same will be
rejected when it is uploaded on IRP. This is because IRN is a unique string
based on supplier’s GSTIN, document number, type of document & financial
year.
Further no partial cancellation of reported e-invoice allowed. Cancellation of
invoices is governed by Accounting Standards and other applicable
rules/regulations.

15.14 E-invoice – Linkage with e-way bill / GST

Return
With the introduction of e-invoicing, while transporting goods, wherever the e-
way bill is needed, the requirement continues to be mandatory.
15.14.1 Auto generation of e-way bill
In case both Part-A and Part-B of e-way bill are provided while reporting
invoice details to IRP, they will be used to generate e-way bill. In case Part-B
details are not provided at the time of reporting invoice to IRP, the same will
have to be provided by the user through ‘e-way bill’ tab in IRP log in or e- way
bill Portal, so as to generate e-way bill.
15.14.2 Auto generation of GSTR-1 / GSTR-2B
On successful reporting of invoice details to IRP, the invoice data (payload)
including IRN, will be saved in GST System. The GST system will auto-
populate them into GSTR-1 of the supplier and GSTR-2A / GSTR-2B of
respective receivers. With source marked as ‘e-invoice’, IRN and IRN date
will also be shown in GSTR-1 and GSTR-2A.
For further details on GST e-invoicing the e-invoice portal i.e.
https://einvoice1.gst.gov.in may be referred to.

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 Chapter 16

Classification of Goods / Services

16.1 Introduction
GST law does not contain a commodity classification tariff but a look at the
notifications issued reveals the classification of goods and services are
contained within the notification which prescribes the rate of tax.
Classification in terms of HSN in case of goods and SAC in case of services
is to be made by the assesse so as to arrive at the rate of tax at which tax is
to be paid.
The Harmonized System of Nomenclature (HSN), issued by the World
Customs Organization, Brussels, could be adopted for classification of
goods. This would integrate Indian trade and industry with global trade even
at each State level. Further it would ensure that there is uniformity amongst
Union and the States in the matter of classification of goods. It is a
combination of different sections, further drilled down to Chapters, which are
further classified into Headings and Sub-headings. The HSN structure
contains 21 Sections, with 99 Chapters, about 1,244 Headings, and 5,224 Sub-
headings. It is a six-digit uniform code that classifies more than 5,000 products
and is accepted worldwide.
Similar to the International HSN Codes, India has adopted a Service
Accounting Code (SAC) for all its services. GST will subsume the service tax,
which covers all kinds of services. Since GST is a combination of goods or
services or both, an equable classification for services is also required. SAC
will remain the same under the GST regime.
It may be noted that Classification is not only required to determine the rate
of tax applicable but also examine the availability of exemptions.
The classification at higher rates than the correct rate may lead to assessee
being uncompetitive.
The Classification at lower rate can severely damage the business when the
demand for several years with interest and penalty is raised.
Therefore, it is important that classification is not done in a hurry and done
accurately and in case of doubt reference to the entry, HSN, case laws be
 Classification of Goods / Services

examined in an independent manner. It may be noted that the Apex court has
held that exemptions are to be construed strictly.

16.2 Digits of HSN Code required to be mentioned

on tax invoice
Central Government vide Notification No. 12/2017-Central Tax dated 28-06-
2017 has w.e.f 1st July 2017 notified the following number of digits of
Harmonized System of Nomenclature (HSN) Codes which are required to be
mentioned in a tax invoice issued by a registered person having prescribed
annual turnover:
S. Annual Turnover in the preceding Financial Number of Digits
No. Year of HSN Code
1 Upto Rs. 1.5 crore Nil
2 More than Rs. 1.5 crore and upto Rs. 5 crores 2
3 More than Rs. 5 crores 4
Similar requirement for mentioning HSN Codes in tax invoice has been
prescribed under IGST Act, 2017 vide Notification No. 05/2017-Integrated
Tax, dt.28-06-2017.
16.2.1 Amendment effective from 01.04.2021
Notification No. 78/2020- Central Tax dated 15-10-2020 has been issued by
the Central Government wherein changes have been made in the Notification
No 12/2017- Central tax dated 28-6-2017 with effect from 1st April, 2021.
For ready reference of our readers the comparative position of use of HSN / SAC
is tabulated below:

Sl. Annual Turnover in the No. of No. of digits of

No preceding year digits of HSN Code
HSN Code (To be effective
(Existing) from 1st
April,2021)
1. Upto Rs 1.50 Crores Nil 4*
2. More than Rs 1.50 Crore and upto 2 4*
Rs 5 crore.
3. More than Rs 5 crores 4 6

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GST : Practitioners Perspective

* As per Proviso given in Notification No. 78/2020- Central Tax dated 15-10-
2020 a registered person having aggregate turnover up to Rs 5 Cr in the
previous FY may not mention the number of digits of HSN Code in a tax invoice
issued by him under the said rules in respect of supplies made to unregistered
persons. i.e. B2C supplies. Currently no distinction between B2B and B2C
supplies exists for purpose of disclosure of HSN/ SAC Codes.
Apart from above it may be noted that the Government has the power to
notify 8 digit HSN on the notified class of supplies by all taxpayers. Further
reference of only HSN is here and thus 8 digit HSN disclosure will be
required only for supply of goods and not for services, which is in line with
current position where HSN codes of 8 digits are mandatory only in case of
export and imports of goods.

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 Chapter 17

Input Tax Credit

17.1 Introduction
Input tax credit is based on the concept of value added tax (VAT). The
concept of VAT provides that the indirect taxes paid in the earlier point of
time are allowed to be set off against the tax payable at later point of time.
This means that only value addition is taxed as credit is allowed in respect of
taxes paid at previous stages. The burden of tax is eventually to be borne by
the final consumer.
The concept of VAT was introduced in order to avoid cascading effect of
taxes and is worldwide found to be an excellent and transparent indirect tax
collection system, which reduced tax evasion, ensures better tax compliance
and increases tax revenue of the Government.
The set off scheme talked about above is presently governed by the
CENVAT Credit Rules, 2004, which is common to both the assessees under
the Central Excise as well as Service Tax. These Rules are in force from 10- 9-
2004 and were historic in a way as the credit of service tax as well as excise
duty was extended across goods and services which resulted in integration of
goods and service tax.

As per Section 16 (1) of the CGST Act every registered person shall, subject
to such conditions and restrictions as may be prescribed and in the manner
GST : Practitioners Perspective

specified in section 49, be entitled to take credit of input tax charged on any
supply of goods or services or both to him which are used or intended to be
used in the course or furtherance of his business and the said amount shall
be credited to the electronic credit ledger of such person.

17.2 Contents of the Chapter

(a) Meaning of input tax and input tax credit (refer Para 17.3)
(b) Input tax credit- Important provisions (refer Para 17.4)
(c) ITC restriction under Rule 36(4) of the CGST Rules (refer Para 17.5)
(d) Blocked input tax credit (refer Para 17.6)
(e) Order of utilization of input tax credit (refer Para 17.7)

17.3 Meaning of input tax and input tax credit

The CGST Act provides the definition of input tax and input tax credit which
are given below:
17.3.1 Input Tax
As per Section 2(62) “input tax” in relation to a registered person, means the
Central tax, State tax, Integrated tax or Union territory tax charged on any
supply of goods or services or both made to him and includes—
(a) the integrated goods and services tax charged on import of goods;
(b) the tax payable under the provisions of sub-sections (3) and (4) of
Section 9;
(c) the tax payable under the provisions of sub-sections (3) and (4) of
Section 5 of the Integrated Goods and Services Tax Act;
(d) the tax payable under the provisions of sub-sections (3) and (4) of
Section 9 of the respective State Goods and Services Tax Act; or
(e) the tax payable under the provisions of sub-sections (3) and (4) of
Section 7 of the Union Territory Goods and Services Tax Act,
but does not include the tax paid under the composition levy;
Thus as per said definition input tax basically means GST charged by the
supplier on supply of goods or services or both from a registered person who
is the recipient of such supply. It also includes the tax paid under reverse

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charge mechanism on the notified services as well as supplies received from

unregistered person. It further includes the IGST charged on import of goods.
However, it does not include tax paid under composition levy.
17.3.2 Input tax credit
As per Section 2(63) “input tax credit” means the credit of input tax.
The Input tax has been defined under Section 2(62), which we have already
discussed in the preceding para.
17.3.3 Type of taxes under GST for which credit is
allowed
As provided in Section 2(62) input tax means the Central tax, State tax,
Integrated tax or Union Territory tax charged from the recipient of supply of
goods or services or both. Thus it is important to understand about levy of
such taxes. The discussion in this regard is as under:-
Under GST law following taxes would be charged:-
(a) Central Tax: It means Central Goods and Services Tax levied under
Section 9. (Section 2(21) of CGST Act)
This tax is levied on intra-State supply of goods or services or both
and collected by the Central Government under CGST Act.
(b) State Tax: It means the tax levied under any State Goods and
Services Tax Act (Section 2(104) of CGST Act).
This tax is levied under respective SGST Act on intra-State supply of
goods or services or both and collected by State Government/ Union
Territory with Legislature.
(c) Integrated Tax: It means the Integrated goods and services tax levied
under the Integrated Goods and Services Tax Act / this Act. (Section
2(58) of CGST Act / Section 2(12) of IGST Act).
Integrated tax is levied on Inter-State supply of goods or services or
both and collected by Central Government under IGST Act. The tax
rate of integrated tax would be equivalent to the total of Central Tax
and State Tax.
(d) Union Territory Tax: It means the Union Territory goods and services
tax levied under Union Territory Goods and Services Tax Act/ this Act.
(Section 2(115) of CGST Act/ Section 2(9) of UTGST Act).

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This tax is levied under UTGST Act on supply of goods or services or both
Intra Union territory which are without legislature and collected by such
Union Territory. This would be equivalent to State Tax.
Burden of proof on taxable person availing input tax credit:
Where any person claims that he is eligible for input tax credit under this Act, the
burden of proving such claim shall lie on such person (Section 155 of the CGST
Act).

17.4 Input Tax Credit- Important provisions at a

glance
Pre-requisites for  The person claiming must be a person
availment of input registered under GST. (Unregistered person
tax credit by cannot avail input tax credit).
registered person  Goods or services or both are used or intended
(Section 16(1) / (2)) to be used in the course or in the furtherance of
business.
 Possession of tax invoice/ debit note / tax-
paying document issued by a registered
supplier.
 Received the goods or services or both
(includes deemed receipt of goods / services in
cases where the goods are delivered by
supplier to other person on direction of the
registered person and where the services are
provided by the supplier to any person on the
direction of and on account of such registered
person).
 If the inputs are received in lots, he will be
eligible to avail the credit only when the last lot
of the inputs is received.
 No ITC on GST paid with advances for supply of
services. (No GST applicable on advances for
goods).
 Subject to section 41 (claim of ITC and
provisional acceptance thereof), the supplier
has paid the said amount of tax (as charged in

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 Input Tax Credit

the invoice) to appropriate Government in cash

or by way of utilization of input tax credit, as
admissible.
 The registered person has furnished its return
under Section 39 (GSTR-3B) for availing the
credit (by this the ITC amount is credited to the
electronic credit ledger and can be utilized
against payment of outward tax liability)
 Reversal of ITC on non-payment of
consideration:
 Where recipient of goods or service or both has
not paid the supplier within 180 days from date
of invoice, the amount of input tax credit
availed of proportionate to such amount not
paid to supplier along with the interest will be
added to output liability of the recipient. Such
non-payment of the value of invoice must be
admitted in the GSTR-3B for the month
immediately following the period of 180 days
from the date of issue of invoice. In case part
payment has been made, proportionate credit
would have to be reversed. However, this
condition does not apply for supplies which are
payable under reverse charge basis.
(Second Proviso to Section 16(2) of the CGST
Act).
 The said input tax credit can be re-availed on
payment of value of supply and tax payable
thereon.
(Third Proviso to Section 16(2) of the CGST
Act).
Time limit of  A registered person cannot take ITC in respect
availing of ITC: of any invoice or debit note for supply of goods
(Section 16(4) of the or services after the due date for furnishing the
CGST Act) return under Section 39 (GSTR-3B) for the
month of September following the end of
financial year to which such invoice/invoice

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relating to debit note pertains or furnishing of

the relevant annual return, whichever is earlier.
 So, The upper time limit for taking ITC was
20th/22nd/24th October, 2020 (i.e. due date of
furnishing GSTR-3B for September,2020) in
regard to availing of ITC pertaining to any
invoice of FY 2019-20, considering that annual
return filing for said year is not in question as of
now.
As stated above the time limit for availing Input Tax
Credit against a debit note was linked with the date
of invoice against which such debit note was
issued.
However now amendment in Section 16(4) has been
made effective from 1.1.2021 and now the time limit
for availing of ITC in respect of a debit note has
been delinked from the date of invoice and time limit
for availing of ITC shall be determined considering
the date of the debit note. Thus, ITC on debit notes
issued after 6 months from the end of the financial
year to which invoice pertains can be availed post
amendment.
ITC on Capital ITC is available for capital goods under GST.
Goods However, ITC is not available for-
i. Capital goods used exclusively for making
exempted goods
ii. Capital goods used exclusively for non-
business (personal) purposes
(Section 16(1) and 17(2) of the CGST Act).
No ITC will be allowed if depreciation has been
claimed on tax component of capital goods. (Section
16(3) of the CGST Act).
ITC on goods sent  ITC will be allowed when inputs / capital goods
for job work Job are sent to job worker in both the cases i.e when
Work these are sent from principal’s place of business
(Section 19 of the or when such inputs / capital goods are directly
CGST Act) sent to a job worker for job work without being

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 Input Tax Credit

first brought to his place of business.

 However, in case the goods sent are not
received back by the principal within 1 year (3
years for capital goods) it shall be deemed that
inputs / capital goods had been supplied by the
principal to the job worker on the day the said
inputs / capital goods were sent out. This will
not apply to moulds and dies, jigs and fixtures or
tools sent out to a job worker for job work.
Manner of  An input service distributor (ISD) can be the
distribution of credit head office (mostly) or a branch office or
by Input Service registered office of the registered person under
Distributor (ISD) GST. ISD collects the input tax credit on all the
(Section 20 / 21 of the purchases made and distribute it by issue of an
CGST Act). ISD invoice, to the concerned recipients
(branches) under different heads like
CGST,SGST/UTGST, IGST or cess.
 Credit to be distributed pro rata of basis of
turnover in a State / UT, during the relevant
period, to the aggregate of the turnover of all
such recipients to whom such ITC is
attributable.
 The amount of credit distributed cannot exceed
the amount of credit available for distribution.
 Excess ITC distributed can be recovered from
all recipients along with interest, as per
provisions of Section 73 and 74.
Transfer of ITC on This applies in cases of amalgamations/mergers/
sale, merger, transfer of business. The transferor will have
amalgamation, lease available ITC which will be passed to the transferee
or transfer of a at the time of transfer of business. Transferor to file
business FORM GST ITC-02 (Rule 41 of the CGST Rules).
(Section 18(3) of the
CGST Act).
Reversal of Input ITC can be availed only on goods and services for
Tax Credit business purposes. If they are used for non-
business (personal) purposes, or for making exempt

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supplies ITC cannot be claimed. Apart from these,

there are certain other situations where ITC will be
reversed.
ITC will be reversed in the following cases-
1) Non-payment of invoices in 180 days– ITC
will be reversed for invoices which were not paid
within 180 days of issue.
2) Credit note issued to ISD by seller– This is for
ISD. If a credit note was issued by the seller to
the HO then the ITC subsequently reduced will
be reversed.
3) Input / input services partly for business
purpose and partly for exempted supplies or
for personal use – This is for businesses which
use input / input services for both business and
non-business (personal) purpose. ITC used in
the portion of input goods/services used for the
personal purpose must be reversed
proportionately. (Pro rata reversal to be made
as per Section 17(1) / (2) read with Rule 42 of
the CGST Rules)
4) Capital goods partly for business and partly
for exempted supplies or for personal use.
Prorata reversal to be made as per Section
17(1) / (2) read with Rule 43 of the CGST Rules.
ITC in respect of  A banking company or a financial institution
banking companies including a non-banking financial company
(Section 17(4) of the engaged in supply of services by way of
CGST Act read with accepting deposits or extending loans or
Rule 38 of the CGST advances (making partly exempt supplies and
Rules). party taxable supplies) would either avail
proportionate credit (Rule 42 / Rule 43 of CGST
Rules) or avail 50% of the eligible input tax credit
and rest shall lapse.
 Option once exercised shall not be withdrawn
during the remaining part of the financial year.
 However, input tax will not be restricted to 50%

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 Input Tax Credit

in respect of supply made by one registered

person to another registered person having the
same Permanent Account Number viz deemed
distinct persons.
Reconciliation of ITC claimed by the person has to match with the
ITC details specified by his supplier in his GST return. It
may be noted that on basis of GSTR-1 filed by
supplier the ITC details will be reflected in GSTR-2A
of the recipient. As per Rule 36(4) of the CGST
Rules, a registered person can avail ITC in a month
to the extent of only 110% of the eligible tax credits
reflected in GSTR-2A.
Thus reconciliation is must in order to locate
invoices whose credit is not reflected in GSTR-2A
so that follow up can be made with the supplier to
file its GSTR-1 and pay tax.
In case the invoices not reflected in GSTR-2A
exceeds 10% of eligible ITC as per GSTR-2A, the
person will not be able to avail credit beyond 10%
and will have to review position while filing GSTR-
3B of next month and if fresh credits are reflected,
credit thereof can be availed.
The grace limit of 10% has been reduced to 5% with
effect from 1.1.2021. Further this limit is to be seen
with reference to the new auto drafted ITC
statement GSTR-2B which is to be downloaded
from GST portal on 12th of next month. i.e. GSTR-
2B for January, 2021 can be downloaded by
taxpayer on 12th February, 2021, which can then be
used to reconcile ITC and at maximum 105% of
eligible credit as GSTR-2B can be availed by
taxpayer subject to maximum of eligible ITC as per
books.
For detailed discussion along with illustration on
practical application of Rule 36(4), please refer to
para 17.5.

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GST : Practitioners Perspective

17.5 ITC restriction under Rule 36(4) of the CGST

Rules
As per Rule 36(4) of the CGST Rules inserted from 09.10.2020 vide
Notification No. 49/2019 Central Tax, dated 09-10-2019, restriction has been
introduced in regard to invoices not uploaded by suppliers in their GSTR-1
and thus not reflected in recipients GSTR-2A.
For ready reference the sub-rule in CGST Rules, 2017, is reproduced as below:-
“(4) Input tax credit to be availed by a registered person in respect of
invoices or debit notes, the details of which have not been uploaded
by the suppliers under sub-section (1) of section 37, shall not exceed
20 per cent. of the eligible credit available in respect of invoices or
debit notes the details of which have been uploaded by the suppliers
under sub-section (1) of section 37.”.
Vide Notification No. 75/2019 – Central Tax 26-12-2019 amendment was
carried out in the Rule 36(4) (w.e.f. 01.01.2020) whereby for the figures and
words “20 per cent.”, the figures and words “10 per cent.” were substituted.
This meant that the ITC cushion available towards availing of credit in
respect of invoices not reflected in GSTR 2A was reduced from 20% to 10%.
In simple words, the input tax credit availed by a registered person (w.e.f
09.10.2020) in its GSTR-3B shall comprise of eligible credit as uploaded by
supplier in its GSTR 1 (statement of outward supply) which is then auto
populated in the GSTR 2A of the recipient.
Further in regard to invoices not uploaded by suppliers and thus not reflected
in GSTR 2A of the recipient, such recipient can at maximum avail input tax
credit upto 20% of eligible credit (10% from 01.01.2020) as uploaded by
supplier and reflected in its GSTR 2A. Needless to mention here that we are
discussing about invoices of B2B supplies here, as anyways B2C supplies
are made to ultimate consumers which being not GST registered are not
eligible to take input tax credit.
Later on considering Corona outbreak, relief was accorded whereby it was
prescribed that Rule 36(4) will not apply while filing of returns (GSTR-3B) for
the period February to August, 2020 and will be applicable on cumulative
basis for these months, while filing of return for September, 2020.

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The Rule 36(4) of the CGST Rules, 2017 has recently been amended vide
Notification No. 94/2020-Central Tax dated 22-12-2020 whereby the percentage
of provisional credit to the eligible credit that can be availed has further been
reduced from 10% to 5% w.e.f. 1st January, 2020.
Further new auto drafted ITC Statement in Form GSTR-2B is being made
available to the taxpayer on 12th of succeeding month. The computation of
Rule 36(4) should accordingly now be based on Form GSTR-2B.
17.5.1 How to compute ITC to be availed after applying
Rule 36(4)
Let’s understand computing the ITC to be availed after applying Rule 36(4)
with help of an example of availing of ITC in GSTR-3B in the month of
January, 2021. The impact of Rule 36(4) can also be gauged by the example:
(Amount in Rs)
Sl No Particulars In case Rule After applying
36(4) was Rule 36(4)
not enacted
A Eligible ITC* available as 1,00,000 1,00,000
per Books of Accounts for
January, 2021
B Eligible ITC** available in 70,000 70,000
the GSTR-2B of January,
2021
C ITC that can be claimed 30,000 3,500
on provisional basis (70,000*5%)
D=B+C Total ITC that can be 1,00,000 73,500
claimed in the GSTR-3B
E=A-D ITC not allowed in the Nil 26,500
GSTR-3B of January 2021
(Impact of Rule 36(4))
*Eligible ITC as per books refers to the credit of invoices which have been
recorded in the books, which can be availed as per GST law i.e. such credit
is related to any expense incurred for business purposes or for taxable
supply of goods or services or both. It would also exclude the blocked credits
covered under Section 17(5) of the CGST Act.

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GST : Practitioners Perspective

** The GSTR-2B would bifurcate credit into eligible and ineligible. However
Still GSTR-2B could contain ineligible ITC reflecting that relates to expenses
such as food, club memberships, personal expenditure, etc or even ITC
mistakenly reflecting due to the wrong GSTIN entered by a supplier. Hence,
only eligible ITC should be considered by tax payer while calculating the limit
for 5% provisional credit.
Lets understand how eligible credit is computed with help of an example:
Table 1: Computation of Eligible ITC as per Books of Accounts
(Amount in Rs)

A Total ITC appearing in the books for Jan 2021 1,20,000

B ITC relating to non-business / private 10,000
purposes (Ineligible)
C Blocked credit under Section 17(5) (Ineligible) 10,000
D=A-B-C ITC relating to business purposes for Jan 1,00,000
2021 (eligible ITC that can be availed as per
books for Jan, 2021

Table 2: Computation of Eligible ITC to be availed in GSTR-3B as per

Rule 36(4) after considering GSTR-2B

A ITC appearing in the GSTR-2B for Jan 2021 80,000

B ITC relating to non-business / private 8,000
purposes (Ineligible)
B= A-B ITC relating to business purposes* for Jan 72,000
2021 (eligible ITC that can be claimed in
GSTR-3B for January, 2021
A (Table Total ITC difference (between the books and 40,000
1) – A the GSTR-2B) not reflecting in the GSTR-2B (1,20,000-
(Table 2) for Jan 2021 80,000)
D (Table Eligible ITC difference (between the books 28,000
1) – D and the GSTR-2B) not reflecting in the GSTR- (Rs.1,00,000-
(Table 2) 2B for Jan 2021 Rs.72,000)
*Each and every invoice to be checked and to be seen that credit of same is
eligible. It is not to be taken as balancing figure.

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 Input Tax Credit

In absence of Rule 36(4) of the CGST Rules, the taxpayer could have
claimed the entire Rs.28,000 (Rs.1,00,000 – Rs.72,000) as provisional credit.
However upon notification of Rule 36(4) and reduction of provisional credit
limit to 5% of eligible credit, such taxpayer can avail ITC of only Rs.3,600
(Rs.72,000*5%) in his GSTR-3B of January 2021 thus impacting taxpayer by
Rs 24,400 ( Rs 28,000 – Rs 3600) .
17.5.2 When can the balance ITC be claimed?
The balance ITC that has not been claimed as provisional ITC due to
restriction laid down by Rule 36(4) can be claimed in the succeeding months
once details have been actually uploaded by the suppliers and amount is
reflected in GSTR-2B of the subsequent months . If a supplier has only
uploaded part of the pending invoices in a later period, the taxpayer will be
able to claim ITC only proportional up to 5% of these pending invoices
uploaded.
Let us understand how provisional ITC is calculated in a later tax period with help
of following Example:
(Amount in Rs)
Computation of Provisional ITC on Pending Invoices of January 2021
uploaded in February, 2021
Sl. No. Particulars Case I Case II
A Provisional ITC claimed in Jan, 2021 3,500 3,500
(as per example given above)
B Provisional ITC of Jan, 2021 26,500 26,500
remaining to be claimed (as per the
example above)
C Eligible ITC uploaded by suppliers 20,000 26,500
(for month of Jan, 2021) in the month
of Feb 2021
D=C*5% Provisional ITC which can be claimed 1,000 NIL*
for the month of Feb 2021 (20,000*5%)
E=C+D Total ITC that can be claimed in 21,000 26,500*
Feb 2021 (ITC reported by
suppliers + provisional ITC)
F=B-E Balance eligible ITC of Jan, 2021 still 5,500 Nil
not allowed in Feb 2021

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GST : Practitioners Perspective

*Provisional ITC cannot exceed the total eligible ITC available. As the total
eligible ITC available is Rs.1,00,000 and Rs.73,500 had already been
claimed in the month of Jan 2021, accordingly only the balance Rs.26,500
can be claimed in GSTR-3B of February, 2021.

17.6 Blocked Input Tax Credit

Though the one of the pillars of GST is free flow of credits in order to
eliminate cascading of taxes, input tax credit is not available in respect of
certain inward supply of goods or services as per Section 17(5) of the CGST
Act, 2017. It is important to note here that clause (a) and (b) of Section 17(5)
were substituted for clauses (a), (aa), (ab) and (b) by CGST (Amendment)
Act, 2018 which has been made effective from 01-02-2019. The updated
provisions of Section 17(5) of the CGST Act, 2017 is tabulated below:
Clause of Blocked Credit When ITC is Remarks
Section available and not
17(5) blocked
(a), b(i)) & Motor vehicles for When such motor Earlier ITC was
(ab) transportation of vehicles are used prohibited for all
persons having for motor vehicles and
approved seating i) further supply now seating
capacity of not of such vehicles capacity criteria
more than 13 or has been inserted
persons (including ii) transportation of in new clause.
the driver) passengers or Further specific
including leasing, iii) imparting prohibition for ITC
renting or hiring training on on services of
thereof. driving of such general insurance,
Services of general motor vehicles. servicing, repair
insurance, ITC would further and maintenance
servicing, repair be admissible for of motor vehicles
and maintenance leasing, renting or was not there in old
of aforesaid motor hiring of motor clause and in new
vehicles vehicles when such clause it has
motor vehicles are specifically been
used for above prohibited to avoid
said purposes or disputes in this
where the recipient regard. Although
is engaged in the Normally tax payers

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 Input Tax Credit

manufacture of were not availing

such motor ITC on such
vehicles or in the services.
supply of general
insurance services
in respect of such
motor vehicles
insured by him.
(aa), b(i)) Vessels and When such Vessels Specific prohibition
& (ab) Aircraft including and Aircraft are for ITC on services
leasing, renting or used for of general
hiring thereof. i) further supply insurance,
Services of general of such Vessels servicing, repair
insurance, and Aircraft or and maintenance
servicing, repair ii) transportation of vessels and
and maintenance of passengers aircraft was not
of aforesaid or there in old clause
vessels and iii) imparting and in new clause
aircrafts. training on it has specifically
navigating / been prohibited to
flying such avoid disputes in
vessels / this regard.
aircraft. Although normally
iv) transportation tax payers were
of goods. not availing ITC on
ITC would be such services.
admissible for
leasing, renting or
hiring of vessels or
aircraft when such
vessels or aircraft
are used for above
said purposes or
where the recipient
is engaged in the
manufacture of
such vessels or
aircraft or in the
supply of general

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GST : Practitioners Perspective

insurance services
in respect of such
vessels or aircraft
insured by him.
b(i) Supply of food and ITC would be ITC would be
beverages, outdoor available when admissible where it
catering, beauty inward supply of is obligatory for an
treatment, health goods or services employer to
services, cosmetic or both of a provide such
and plastic surgery, particular category supplies to its
life insurance and is used by a employees under
health insurance registered person any law for the time
for making an being in force.
outward taxable
supply of the same
category of goods
or services or both
or as an element of
a taxable
composite or mixed
supply;
b(ii) Membership of a -
club, health and
fitness centre;
b(iii) Travel benefits -
extended to
employees on
vacation such as
leave or home
travel concession;
(c) Works contract - The term
services when “construction”
supplied for includes re-
construction of an construction,
immovable renovation,
property (other additions or
than plant and alterations or
machinery) except repairs, to the
where it is an input extent of

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 Input Tax Credit

service for further capitalisation, to

supply of works the said immovable
contract service; property;
Further the
(d) Goods or services - expression “plant
or both received by and machinery”
a taxable person means apparatus,
for construction of equipment, and
an immovable machinery fixed to
property (other earth by foundation
than plant or or structural
machinery) on his support that are
own account used for making
including when outward supply of
such goods or goods or services
services or both or both and
are used in the includes such
course or foundation and
furtherance of structural supports
business. but excludes—
(i) land, building or
any other civil
structures;
(ii) tele-
communication
towers; and
(iii) pipelines laid
outside the
factory
premises
(e) Goods or services - It may noted here
or both on which that under
tax has been paid Composition
under section 10 Scheme the tax
i.e. Composition cannot be charged
Scheme by supplier from
the recipient and
accordingly
question ITC

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GST : Practitioners Perspective

availment by
recipient does not
arise.
(f) Goods or services - -
or both received by
a non-resident
taxable person
except on goods
imported by him;
(g) Goods or services - ITC is admissible
or both used for only in respect of
personal supplies taken for
consumption; business purposes.
Thus supplies
received for
personal purposes
are blocked.
(h) Goods lost, stolen, - Such goods being
destroyed, written not used for
off or disposed of providing taxable
by way of gift or supplies, the ITC
free samples; thereon is blocked
u/s 17(5).
(i) Any tax paid in - As in such cases
accordance with tax was not paid
the provisions of with intention to
sections 74 (Tax evade tax the ITC
not / short paid thereon has been
due to fraud etc), prohibited in order
129 (Detention, to penalize such
seizure and assessees.
release of goods
and conveyance in
transit) and 130
(confiscation of
goods or
conveyance and
levy of penalty).

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17.7 Order of utilization of Input Tax Credit (Rule

88A)
As per the Circular No: 98/17/2019 dated 23 April 2019, it has been clarified that-
As per the provisions of Section 49 of the CGST Act, credit of integrated tax
has to be utilised first for payment of integrated tax, then Central tax and
then State tax, in that order mandatorily. This led to a situation, in certain
cases, where a taxpayer has to discharge his tax liability on account of one
type of tax (say State tax) through electronic cash ledger, while the input tax
credit on account of other types of tax (say Central tax) remains unutilised in
electronic credit ledger.
The Rule 88A as inserted in the CGST Rules allows utilisation of input tax
credit of integrated tax towards the payment of Central tax and State tax, or
as the case may be, Union Territory tax, in any order subject to the condition
that the entire input tax credit on account of integrated tax is completely
exhausted first before the input tax credit on account of Central tax or
State/Union Territory tax can be utilised.
It is clarified that after the insertion of the said rule, the order of utilisation of input
tax credit will be as per the order (of numerals) given below:

Input tax Output Output liability on account Output liability on

credit on liability on of Central tax account of State
account account of tax
of Integrated
tax
Integrated (I) (II) – In any order in any proportion
tax
(III) Input tax credit on account of Integrated tax to be completely
exhausted mandatorily
Central (V) (IV) Not permitted
tax
State (VII) Not permitted (VI)
tax/Union
Territory
tax

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GST : Practitioners Perspective

With the new rules in place, it is mandatory to utilise the entire IGST
available in electronic credit ledger before utilising ITC on CGST or SGST.
The order of setting off ITC of IGST can be done in any proportion and any
order towards setting off the CGST or SGST output after utilising the same
for IGST output.

17.8 Restricting use of ITC amount for

discharging output tax liability in GST
The latest amendment has been made in the CGST Rules, 2017 vide
notification no. 94/2020-Central Tax Dated 22-12-2020 (CGST (Fourteenth
Amendment) Rules, 2020.) Amongst the various changes made vide above
Notification is insertion of new Rule 86B (Restriction on use of input tax credit
for discharging the output liability). It may be noted that as per Notification said
Rule will be effective from 1st January 2021.
Highlights of New Rule 86B:
For ready reference the Highlights of the new Rule is being discussed as
under:
(a) Rule 86B has an overriding effect over other rules: This rule starts
with the non-obstante clause and has an overriding impact on any other
provision of the Rules. Accordingly restriction in use of ITC will be applicable
even if such ITC otherwise can be freely used as per other Rules.
(b) Rule lays down restriction on use of ITC while discharging output
tax liability-The New rule 86B lays down restriction on registered person that
he shall not use the amount available in electronic credit ledger to discharge
his liability towards output tax in excess of limit prescribed.
(c) Output tax liability cannot be discharged in excess of 99% by
utilising input tax credit. The main highlight of the new Rule 86B is laying
down limit of 99% of output tax liability for using the ITC. This means that
suppose if the output tax liability is Rs 100/- and ITC available is Rs 150/-
such person can use ITC upto maximum of Rs 99/- (99%) and will have to
pay tax of Rs 1 /- in cash.
(d) New Rule is applicable for specified registered persons: It is
important to note that new rule is not applicable across the board but is
applicable on the registered person whose value of taxable supply other
than exempt supply and zero-rated supply, in a month exceeds fifty lakh
rupees.

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 Input Tax Credit

It is important to note here that the expression ‘in a month’ has been used in
the Rule which means this limit of Rs 50 lakh is not be seen with respect to
preceding financial year but same is to be checked for each month for which
GSTR-3B is being filed.
Accordingly, in cases where turnover of taxable supply is less than 50 Lakh
in a month the restriction of Rule 86B would not apply. However such
checking with turnover of taxable supply needs to be carried out each month
to determine as to whether the ITC restriction would apply or not and
whenever this threshold is transgressed the ITC restriction for that month
shall be applicable.
(e) Situations where new Rule 86B shall not be applicable: Proviso to
Rule 86B mandates situations where the ITC restriction shall not be
applicable. These situations are discussed below:
1. Payment of Income Tax of more than Rs 1 lakh- Rule 86B would not
be applicable in cases wherein the persons mentioned herein below
have deposited amount of more than one lakh rupees as income
tax under the Income-tax Act, 1961–
 the said registered person or
 the proprietor or karta or the managing director of the registered
person or
 any of the two partners, whole-time directors, members of
Managing Committee of Associations or Board of Trustees of
the registered person, as the case may be,
The above payment of income tax needs to be checked in each of the last
two financial years for which the time limit to file return of income under
section 139(1) of the said Act has expired.
2. Refund of ITC towards Zero Rated Supplies of Goods or services
or both- Rule 86B would not be applicable in cases wherein registered
person has received a refund amount of more than Rs 1 lakh in the
preceding financial year on account of unutilised input tax credit
under clause (i) of First Proviso of Section 54(3) i.e. zero rated
supplies made without payment of tax.
3. Refund of Input Tax Credit due to Inverted Duty Structure- The ITC
restriction shall not be applicable in case the registered person has

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GST : Practitioners Perspective

received a refund amount of more than Rs 1 lakh in the preceding

financial year on account of unutilised input tax credit under clause
(ii) of First Proviso of Section 54(3) i.e. inverted duty structure.
4. Cumulative discharge of tax liability of more than 1% during the
financial year- restriction in Rule 86B is not applicable wherein
cumulatively upto the said month in the current financial year
registered person has discharged his liability towards output tax
through the electronic cash ledger for an amount which is in excess of
1% of the total output tax liability. Therefore, while filing return for each
month, taxpayer need to check whether his cumulative discharge of
tax liability of output tax through electronic cash ledger is more than
1% upto the month of filing of return.
5. Specified Registered persons-Restriction under Rule 86B is not
applicable in cases wherein the registered person is
i) Government Department; or
ii) a public sector undertaking; or
iii) a local authority;or
iv) a statutory body.
It appears that as these bodies will not resort to tax evasion and thus have
been kept out of the new Rule.
6. Commissioner or an office authorised by him empowered to
remove the restriction-The rule empowers the Commissioner or an
officer authorised by him in this behalf to remove the said restriction
after such verifications and such safeguards as he may deem fit.

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 Chapter 18

GST Returns
18.1 Introduction
A registered person will have to file returns either monthly (normal supplier)
or quarterly basis (Supplier opting for Composition Scheme). An ISD will have
to file monthly returns showing details of credit distributed during the
particular month. A Person required to deduct tax (TDS) and persons
required to collect tax (TCS) will also have to file monthly returns showing the
amount deducted/collected and other specified details. A non-resident
taxable person will also have to file returns for the period of activity
undertaken.
Every registered person, other than an Input Service Distributor, a non-
resident taxable person and a person paying tax under the provisions of
Section 10 or Section 51 or Section 52 (i.e. normal registered taxpayer)
having aggregate turnover in the preceding or current financial year more
than Rs.1.5 Crore has to file the monthly return [GSTR-1] of outward supplies
specifying details like outward supplies to registered persons, outward
supplies to unregistered persons (consumers), details of credit/debit notes,
zero rated, exempted and non-GST supplies, exports, and advances
received in relation to future supply. And Other suppliers whose annual
turnover is upto Rs. 1.5 Crore, are required to file quarterly return of outward
supplies.

18.2 Statement of Outward Supply (GSTR-1)

Outward supply means the supply of services made by made by a supplier to
another person i.e. recipient.
The term outward supply has also been defined under Section 2(83) of CGST
Act as follows:
(83) “outward supply” in relation to a taxable person, means supply of
goods or services or both, whether by sale, transfer, barter, exchange,
licence, rental, lease or disposal or any other mode, made or agreed
to be made by such person in the course or furtherance of business;
As per Section 37 (1) of CGST Act every registered person, other than an
Input Service Distributor, a non-resident taxable person and a person paying
GST : Practitioners Perspective

tax under the provisions of Section 10 (composition levy) or Section 51

(TDS) or Section 52 (TCS), shall furnish, electronically, in such form and
manner as may be prescribed, the details of outward supplies of goods or
services or both effected during a tax period on or before the tenth day of
the month succeeding the said tax period and such details shall be
communicated to the recipient of the said supplies within such time and in
such manner as may be prescribed.
It may be noted that no rectification of error or omission in respect of the
details furnished in GSTR-1 shall be allowed after furnishing of GSTR-3B for
the month of September following the end of the financial year to which such
details pertain, or furnishing of the relevant annual return, whichever is
earlier.
For example the return for the month of say October, 2018 could have been
rectified upto furnishing of return for the month of September, 2019 i.e. 20th
October,2019 (or furnishing of annual return for FY 2018-19 (extended due
date is 31/12/2020), whichever is earlier.
Explanation below Section 37 mandates that for the purposes of this
Chapter, the expression “details of outward supplies” shall include details of
invoices, debit notes, credit notes and revised invoices issued in relation to
outward supplies made during any tax period. For details regarding these
documents please refer to Chapter 12.
18.2.1 Form and manner of furnishing details of outward
supplies
As per Rule 59 (1) of the CGST Rules every registered person (other than a
person referred to in Section 14 of the IGST Act, 2017 i.e. supplier of online
information and data base access or retrieval services) required to furnish
the details of outward supplies of goods or services or both under Section 37,
shall furnish such details in Form GSTR-1 electronically through the Common
Portal, either directly or through a Facilitation Centre notified by the
Commissioner.
Sub-rule (2) mandates that the details of outward supplies of goods or
services or both furnished in Form GSTR- 1 shall include, inter alia, –
(a) invoice wise details of all -
(i) inter-State and intra-State supplies made to registered persons;
and

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(ii) inter-State supplies with invoice value more than two and a half
lakh rupees made to unregistered persons;
(b) consolidated details of all -
(i) intra-State supplies made to unregistered persons for each rate
of tax; and
(ii) State wise inter-State supplies with invoice value upto two and a
half lakh rupees made to unregistered persons for each rate of
tax;
(c) debit and credit notes, if any, issued during the month for invoices
issued previously.
Sub-rule (3) provides that the details of outward supplies furnished by the
supplier shall be made available electronically to the concerned registered
persons (recipients) in Part A of Form GSTR-2A, in Form GSTR-4A and in Form
GSTR-6A through the Common Portal after the due date of filing of Form GSTR-
1.

18.3 GSTR-3B
As per Rule 61(5) of the CGST Rules, where time limit for furnishing of GSTR-
1 / GSTR-2 has been extended, instead of filing of GSTR-3 return under
Section 39(1) of the CGST Act, the Commissioner may by notification, specify
GSTR-3B may be filed under Section 39(1) of the CGST.
It may be noted that GSTR-2 and GSTR-3 didn’t see the light of day since
inception of GST regime and thus not being discussed. Further now GSTR-3 has
been postponed and its intermediate replacement is GSTR-3B. Let’s discuss
GSTR-3B
GSTR-3B is a monthly self-declaration to be filed by a registered GST dealer
with payment of GST. It is a simplified return to declare the output tax liability
and availing / utilizing the input tax credit which is filed every month along
with payment of net tax liability in cash after utilizing eligible inout tax credit.
It may be noted here that you have to file GSTR-3B even when there has
been no business activity (nil return). You cannot revise/amend GSTR-3B
and you have to file a separate GSTR 3B for every GSTIN you have.
All taxpayers, including those with nil returns are required to file this GST
return form on a monthly basis. However NIL return filers can file GSTR-3B by
SMS.

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However, there are a few exceptions:

 Input Service Distributors & Composition Dealers
 Suppliers of OIDAR (Online Information Database Access and
Retrieval Services)
 Non-resident taxable person
The above are exempted from filing return in using the 3B form under
existing rules.
18.3.1 Quarterly filing of GSTR-3B and monthly payment
– New QRMP Scheme
As a trade facilitation measure and in order to further ease the process of
doing business, the GST Council in its 42nd meeting held on 05.10.2020,
had recommended that registered person having aggregate turnover up to
Rs 5 crore may be allowed to furnish return (GSTR-3B) on quarterly basis
along with monthly payment of tax, with effect from 01.01.2021.
In line with the Government has issued notifications to implement the
Scheme of quarterly return filing along scheme with monthly payment of
taxes (referred to as “QRMP Scheme”).
The governing provisions of QRMP are as under:

Sl. Section / Rule / Remarks

No. Notification
1. Proviso to Section Notified vide Notification No. 81/2020-Central
39(1) of the CGST tax, dated 10.11.2020 w.e.f 10th November,
Act,2017 2020.
Proviso provides power to Central Govt. to
notify certain class of persons for QRMP
scheme.
2. First Proviso to Notified vide Notification No. 81/2020-Central
Section 39(7) of tax, dated 10.11.2020 w.e.f 10th November,
the CGST Act, 2020
2017 Proviso is regarding payment of tax due under
QRMP scheme.
3. Rule 67A of the Inserted vide Notification No. 82/2020-Central

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CGST Rules, tax, dated 10.11.2020 w.e.f 10th November,

2017 2020 for prescribing manner of opting for
furnishing quarterly return.
4. Notification No. Notifies class of persons eligible for QRMP
84/2020- Central scheme under Proviso to Section 39(1) of the
Tax dated CGST Act for furnishing of GSTR-3B starting
10.11.2020 from quarter starting from 1st January,2021.
5. Notification No. Contains special procedure for making payment of
85/2020- Central tax liability in the first two months of the quarter.
Tax dated Effective from 1st January,2021.
10.11.2020

FAQs on QRMP Scheme

Q.1 What is QRMP Scheme?
Ans: Currently the periodicity of filing GSTR-3B return along with payment of
GST is monthly. Under QRMP Scheme, in order to facilitate small tax payers
they will be allowed to file GSTR-3B return on quarterly basis, however
payment of GST will be required to be made on monthly basis.
This new Scheme will be effective from 01.01.2021 and it is an optional scheme.
The eligible tax payers can opt for the scheme or may also not opt it and
continue with the normal monthly filing of GSTR-3B.
Q.2 Who are eligible for QRMP Scheme?
Ans: In terms of notification No. 84/2020- Central Tax, dated 10.11.2020, a
registered person who is required to furnish a return in Form GSTR-3B, and
who has an aggregate turnover of up to 5 crore rupees in the preceding
financial year, is eligible for the QRMP Scheme.
The aggregate annual turnover for the preceding financial year shall be
calculated in the Common Portal taking into account the details furnished in
the returns by the taxpayer for the tax periods in the preceding financial year.
In case the aggregate turnover exceeds 5 crore rupees during any quarter in the
current financial year, the registered person shall not be eligible for the Scheme
from the next quarter.
Q.3 When I can opt for QRMP Scheme?

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facility to avail the Scheme on the Common Portal would be available

throughout the year. In terms of rule 61A of the CGST Rules, 2017, a
registered person can opt in for any quarter from first day of second month of
preceding quarter to the last day of the first month of the quarter.
In order to exercise this option, the registered person must have furnished
the last return, as due on the date of exercising such option.
Example: A registered person intending to avail of the Scheme for the
quarter ‘July to September’ can exercise his option during 1st of May to 31st
of July. If he is exercising his option on 27th July for the quarter (July to
September), in such case, he must have furnished the return for the month of
June which was due on 22/24th July.
Q.4 Do I need to exercise option every quarter?
Ans: Registered persons are not required to exercise the option every
quarter. Where such option has been exercised once, they shall continue to
furnish the return as per the selected option for future tax periods, unless
they revise the said option.
Q.5 Does I also require to opt for the QRMP Scheme for the first quarter
of its implementation i.e. January, 2021 to March, 2021
Ans: For the first quarter of the Scheme i.e. for the quarter January, 2021 to
March, 2021, in order to facilitate the taxpayers, all the registered persons,
whose aggregate turnover for the FY 2019-20 is up to Rs 5 crore and who
have furnished the return in Form GSTR-3B for the month of October, 2020 by
30th November, 2020, shall be migrated on the Common Portal as below:
Sl. Class of registered person Default Option*
No.
1 Registered persons having aggregate turnover Quarterly return
of up to Rs 1.5 crore who have furnished
GSTR-1 on quarterly basis in the
current financial year
2 Registered persons having aggregate turnover Monthly Return
of up to Rs 1.5 crore who have furnished
GSTR-1 on monthly basis in the current
financial year
3 Registered persons having aggregate Quarterly return

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turnover more than Rs 1.5 crore and up to

Rs 5 crore in the preceding financial year
*Registered persons are free to change the default option as above, if they
so desire, from 05.12.2020 to 31.01.2021.
If you want default migration as above you should ensure that you furnish GSTR-
3B of October, 2020 positively by 30.11.2020, else you will not be migrated to the
Scheme and you will be able to opt for the Scheme once the Form GSTR-3B as
due on the date of exercising option has been filed.
Q.6 Whether after opting for QRMP Scheme, can I later opt out?
Ans: The facility for opting out of the Scheme for a quarter will be available
from first day of second month of preceding quarter to the last day of the first
month of the quarter.
Example: A registered person intending to opt out of the Scheme for the
quarter ‘April to June’ can exercise opting out during period 1st of February
to 30th of April.
Q.7 What will happen if my turnover exceeds Rs 5 crore?
Ans: Any registered person, whose aggregate turnover crosses Rs 5 crore
during a quarter in current financial year, shall opt for furnishing of return on
a monthly basis, electronically, on the Common Portal, from the succeeding
quarter. In other words, in case the aggregate turnover exceeds Rs 5 crore
during any quarter in the current financial year, the registered person shall
not be eligible for the QRMP Scheme from the next quarter.
Q.8 Can I opt QRMP for some GSTIN and normal scheme for other
GSTINs under the same PAN?
The option to avail the QRMP Scheme is GSTIN wise and therefore, distinct
persons as defined in Section 25 of the CGST Act (different GSTINs on same
PAN) have the option to avail the QRMP Scheme for one or more GSTINs. In
other words, some GSTINs for that PAN can opt for the QRMP Scheme and
remaining GSTINs may not opt for the Scheme.
Q.9 I have opted for QRMP Scheme, Should I continue to file GSTR-1 on
quarterly basis?
Ans: Yes, the registered persons opting for the Scheme would be required to
furnish the details of outward supply in Form GSTR-1 quarterly as per the Rule
59 of the CGST Rules.

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Q.10 What is IFF facility under QRMP scheme?

For each of the first and second months of a quarter, the registered person
who has opted for QRMP scheme will have the facility (Invoice Furnishing
Facility- IFF) to furnish the details of such outward supplies to a registered
person, as he may consider necessary, between the 1st day of the
succeeding month till the 13th day of the succeeding month.
The said details of outward supplies shall, however, not exceed the value of
Rs 50 lakhs in each month. It may be noted that after 13th of the month, this
facility for furnishing IFF for previous month would not be available. As a
facilitation measure, continuous upload of invoices would also be provided
for the registered persons wherein they can save the invoices in IFF from the
1st day of the month till 13th day of the succeeding month.
The facility of furnishing details of invoices in IFF has been provided so as to
allow details of such supplies to be duly reflected in the Form GSTR-2A and
Form GSTR-2B of the concerned recipient.
For example, a registered person who has availed the Scheme wants to
declare two invoices out of the total ten invoices issued in the first month of
quarter since the recipient of supplies covered by those two invoices desires
to avail ITC in that month itself. Details of these two invoices may be
furnished using IFF. The details of the remaining 8 invoices shall be
furnished in Form GSTR-1 of the said quarter.
The two invoices furnished in IFF shall be reflected in Form GSTR-2B of the
concerned recipient of the first month of the quarter and remaining eight
invoices furnished in Form GSTR-1 shall be reflected in Form GSTR-2B of the
concerned recipient of the last month of the quarter. The said facility would
however be available, say for the month of July, from 1st August till 13th
August. Similarly, for the month of August, the said facility will be available
from 1st September till 13th September.
The details of invoices furnished using the said facility in the first two months
are not required to be furnished again in Form GSTR-1. Accordingly, the details
of outward supplies made by such a registered person during a quarter shall
consist of details of invoices furnished using IFF for each of the first two
months and the details of invoices furnished in Form GSTR-1 for the quarter.
At his option, a registered person may choose to furnish the details of outward
supplies made during a quarter in Form GSTR-1 only, without using the IFF.

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Q.11 How do I require to make payment of GST under QRMP scheme?

The registered person under the QRMP Scheme would be required to pay
the tax due in each of the first two months of the quarter by depositing the
due amount in Form GST PMT-06, by 25th of the succeeding month.
While generating the challan, taxpayers should select “Monthly payment for
quarterly taxpayer” as reason for generating the challan.
There are two options viz fixed sum method and self-assessment method, for
monthly payment of tax during the first two months of a quarter.
Q.12 What are the options for making payment of tax under QRMP
Scheme?
There are two options for monthly payment of tax during the first two months
which are discussed below:
(a) Fixed Sum Method: A facility is being made available on the portal for
generating a pre-filled challan in Form GST PMT-06. The challan will be
generated for following amount:

Situation Tax required to be paid in first

two months of the quarter
I. Where tax payer had filed GSTR- 35% of tax paid (CGST / SGST/
3B of previous quarter on quarterly IGST/ UTGST/ Cess) in cash.
basis.
II. Where tax payer had filed GSTR- equal to the tax paid in cash in the
3B of previous quarter on monthly last month of the immediately
basis. preceding quarter

It may be noted here that the quarter Jan – March, 2021 will be first quarter
of the Scheme and as GSTR-3B for the period till December,2020 will have
been filed on monthly basis, thus the taxpayer opting for fixed sum method
will be governed under Situation II above and he will have to pay the amount
of tax equal to tax paid in December,2020.
It may be noted that monthly tax payment through this method would not be
available to those registered persons who have not furnished the return for a
complete tax period preceding such month. A complete tax period means a
tax period in which the person is registered from the first day of the tax
period till the last day of the tax period.

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(b) Self-Assessment Method: The Persons can also pay the tax due by
considering the tax liability on inward and outward supplies and the input tax
credit available, in Form GST PMT-06.
In order to facilitate ascertainment of the ITC available for the month, an auto-
drafted input tax credit statement has been made available in Form GSTR2B, for
every month.
The registered person is free to avail either of the two tax payment methods
in any of the two months of the quarter.
Q.13 Do I need to deposit GST under QRMP scheme even if balance in
my electronic cash / credit ledger is adequate?
Ans: No, In case the balance in the electronic cash ledger and/or electronic
credit ledger is adequate for the tax due for the first month of the quarter or
where there is nil tax liability, the registered person may not deposit any
amount for the said month. Similarly, for the second month of the quarter, in
case the balance in the electronic cash ledger and/or electronic credit ledger
is adequate for the cumulative tax due for the first and the second month of
the quarter or where there is nil tax liability, the registered person may not
deposit any amount.
Q.14 I have deposited excess tax in first two months of the quarter. Can
I claim refund?
Ans: Any claim of refund in respect of the amount deposited for the first two
months of a quarter for payment of tax shall be permitted only after the return
in FORM GSTR-3B for the said quarter has been furnished. Further, this
deposit cannot be used by the taxpayer for any other purpose till the filing of
return for the quarter.
Q.15 How and when I need to file my GSTR-3B returns?
The Registered persons opting for QRMP scheme would be required to
furnish Form GSTR-3B, for each quarter, on or before 22nd / 24th day of the
month succeeding such quarter (based on State / UT where its place of
business is located).
In Form GSTR-3B, they shall declare the supplies made during the quarter, ITC
availed during the quarter and all other details required to be furnished therein.
The amount deposited by the registered person in the first two months shall
be debited solely for the purposes of offsetting the liability

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furnished in that quarter’s FORM GSTR-3B. However, any amount left after
filing of that quarter’s FORM GSTR-3B may either be claimed as refund or
may be used for any other purpose in subsequent quarters.
Q.16 I have cancelled my GST registration in mid of quarter. Do I need
to file GSTR-3B after end of quarter?
In case of cancellation of registration of a person who had opted for QRMP
scheme, during any of the first two months of the quarter, he is still required
to furnish return in Form GSTR-3B for the relevant tax period.
Q.17 I have opted for fixed sum method for payment of GST. There was
shortfall in payment of GST in first two months of the quarter. Do I need
to pay interest for the shortfall?
Ans: No interest would be payable in case the tax due is paid in the first two
months of the quarter by way of depositing auto-calculated fixed sum amount
by the due date. In other words, if while furnishing return in Form GSTR-3B, it
is found that in any or both of the first two months of the quarter, the tax liability
net of available credit on the supplies made /received was higher than the
amount paid in challan, then, no interest would be charged provided they
deposit system calculated amount for each of the first two months and
discharge their entire liability for the quarter in the Form GSTR-3B of the
quarter by the due date.
As discussed earlier the due date of payment of challan in first two months is
25th of next month and that of GSTR-3B for the quarter is 22 nd / 24th of the
next month. Thus if payment of taxes is made by above dates, no interest will
be payable.
If system generated challans not paid by due date
In case such payment of tax by depositing the system calculated amount in
Form GST PMT-06 is not done by due date, interest would be payable at the
applicable rate, from the due date of furnishing Form GST PMT-06 till the
date of making such payment.
If GSTR-3B for the quarter is filed after due date
In case Form GSTR-3B for the quarter is furnished beyond the due date,
interest would be payable as per the provisions of Section 50 of the CGST
Act for the tax liability net of ITC.

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Illustration:
A registered person, who has opted for the Scheme, had paid a total amount
of Rs. 100/- in cash as tax liability in the previous quarter of October to
December.
Description Amount Amount paid Actual tax Actual tax
of Tax paid in (35%) in first 2 liability liability
quarter Oct quarters of after ITC after ITC
to Dec,2020 Jan-March, for Jan for Feb
2021 (fixed
sum)
CGST 100 35 45 40
(shortfall (shortfall
Rs 10) Rs 5)
SGST 100 35 45 40
(shortfall (shortfall
Rs 10) Rs 5)
IGST 160 56 60 62
(shortfall (shortfall
Rs 4) Rs 6)
Situation I: Monthly payment of tax and GSTR-3B is filed by due dates
In above case if the person has deposited challan for fixed sum for first two
months by 25th February and 25th March and also discharged entire tax
liability for the quarter in GSTR-3B by due date i.e. 22nd / 24th April,2020, no
interest will be applicable on amount of shortfall is payment of tax in the first
two months.
Situation II: If GSTR-3B is filed late
In his GSTR-3B for the quarter, it is found that total liability for the quarter net
of available credit was Rs 120/- for CGST and SGST each and Rs 200 for
IGST. Suppose he filed its GSTR-3B on 30th April instead of due date of 24th
April.
In such a case interest would be payable @ 18% p.a. on Rs. 50 for CGST
and SGST each [Rs. 120 – Rs. 70 (deposit made in cash ledger in first two
months)] and Rs 88 for IGST [Rs. 200 – Rs. 112 (deposit made in cash
ledger in first two months)] for the period of 6 days i.e. form 24th April to 30th
April.

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Situation III: Monthly payment of tax is not on time

In this case interest would be payable @ 18% p.a., from the due date of
furnishing Form GST PMT-06 till the date of making such payment.
Thus, if payment for the month of January is made on 28th February, interest
need to be paid on Rs 35/- for CGST and SGST and Rs 56 for IGST for a
period of 3 days [due date of payment i.e. 25th Feb to date of payment i.e.
28th February].
Q.18 I have opted for self-assessment method for payment of GST.
There was shortfall in payment of GST in first two months of the
quarter. Do I need to pay interest for the shortfall?
For registered person making payment of tax by opting self-assessment
method interest amount would be payable as per the provision of Section 50
of the CGST Act for tax or any part thereof (net of ITC) which remains unpaid
/ paid beyond the due date for the first two months of the quarter.
Thus, in self-assessment case the person will be required to pay interest in
case any shortfall arises in payment of tax in the first two months of the
quarter.
Q.19 How interest will be required to be paid?
Ans: Interest payable, if any, shall be paid through Form GSTR-3B.
Q.20 In case there is delay in payment of tax in first two months of a
quarter. do I need to pay late fee?
Late fee is applicable for delay in furnishing of return / details of outward
supply as per the provision of Section 47 of the CGST Act. As per the scheme,
the requirement to furnish the return under the Proviso to sub- section (1) of
Section 39 of the CGST Act is quarterly. Accordingly, late fee would be the
applicable for delay in furnishing of the said quarterly return / details of outward
supply.
Accordingly, no late fee is applicable for delay in payment of tax in first two
months of the quarter. However late fee of Rs 200/- per day (CGST + SGST)
subject to maximum of Rs 10,000/- (CGST + SGST) will be applicable in
case the quarterly GSTR-3B is not filed by due date i.e. 22nd / 24th of month
succeeding the quarter.

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18.4 Return to be filed by person under

Composition Scheme
Sub-section (2) provides that a registered person paying tax under the
provisions of section 10 (composition levy) shall, for each quarter or part
thereof, furnish, in such form and manner as may be prescribed, a return,
electronically, of turnover in the State or Union territory, inward supplies of
goods or services or both, tax payable and tax paid within eighteen days
after the end of such quarter.
18.4.1 Form and manner of submission of quarterly
return by the composition supplier
As per Rule 62 (1) of the CGST Rules every registered person paying tax
under section 10 shall, on the basis of details contained in Form GSTR-4A, and
where required, after adding, correcting or deleting the details, furnish the
quarterly return in Form GSTR-4 electronically through the Common Portal,
either directly or through a Facilitation Centre notified by the Commissioner.
Sub-rule (2) provides that every registered person furnishing the return under
sub-rule (1) shall discharge his liability towards tax, interest, penalty, fees or
any other amount payable under the Act or these rules by debiting the
electronic cash ledger.
As per Rule 62(3) the return furnished under sub-rule (1) shall include, inter alia,-
(a) invoice wise inter-State and intra-State inward supplies received from
registered and un-registered persons; and
(b) consolidated details of outward supplies made.
Further sub-rule (4) mandates that a registered person who has opted to pay
tax under section 10 from the beginning of a financial year shall, where
required, furnish the details of outward and inward supplies and return under
rule 59, rule 60 and rule 61 relating to the period during which the person
was liable to furnish such details and returns till the due date of furnishing
the return for the month of September of the succeeding financial year or
furnishing of annual return of the preceding financial year, whichever is
earlier.

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Explanation. – The person shall not be eligible to avail of input tax credit on
receipt of invoices or debit notes from the supplier for the period prior to his
opting for the Composition Scheme.
Also sub-rule (5) states that a registered person opting to withdraw from the
Composition Scheme at his own motion or where option is withdrawn at the
instance of the proper officer shall, where required, furnish the details
relating to the period prior to his opting for payment of tax under Section 9 in
Form GSTR-4 till the due date of furnishing the return for the quarter ending
September of the succeeding financial year or furnishing of annual return of
the preceding financial year, whichever is earlier.

18.5 Return to be filed by person deducting tax at

source
As per Section 39 (3) of CGST Act every registered person required to
deduct tax at source under the provisions of section 51 shall furnish, in such
form and manner as may be prescribed, a return, electronically, for the
month in which such deductions have been made within ten days after the
end of such month.
18.5.1 Form and manner of submission of return by a
person required to deduct tax at source
As per Rule 66 (1) of the CGST Rules every registered person required to deduct
tax at source under section 51 shall furnish a return in Form GSTR-7
electronically through the Common Portal either directly or from a Facilitation
Centre notified by the Commissioner.
Sub-rule (2) states that the details furnished by the deductor under sub-rule
(1) shall be made available electronically to each of the deductees on the
Common Portal after the due date of filing of Form GSTR-7 for claiming the
amount of tax deducted in his electronic cash ledger after validation.
Further as per sub-rule (3) the certificate referred to in sub-section (3) of
Section 51 shall be made available electronically to the deductee on the
Common Portal in Form GSTR-7A on the basis of the return furnished under
sub-rule (1).

18.6 Return to be filed by Input Service Distributor

As per Section 39 (4) every taxable person registered as an Input Service

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Distributor shall, for every calendar month or part thereof, furnish, in such
form and manner as may be prescribed, a return, electronically, within
thirteen days after the end of such month.
18.6.1 Form and manner of submission of return by an
Input Service Distributor
As per Rule 65 of the CGST Rules every Input Service Distributor shall, on
the basis of details contained in Form GSTR-6A, and where required, after
adding, correcting or deleting the details, furnish electronically the return in
Form GSTR-6, containing the details of tax invoices on which credit has been
received and those issued under section 20, through the Common Portal
either directly or from a Facilitation Centre notified by the Commissioner.

18.7 Return to be filed by non-resident taxable

person
As per Section 39 (5) of CGST Act every registered non-resident taxable
person shall, for every calendar month or part thereof, furnish, in such form
and manner as may be prescribed, a return, electronically, within twenty days
after the end of a calendar month or within seven days after the last day of
the period of registration specified under sub-section (1) of section 27,
whichever is earlier.
18.7.1 Form and manner of submission of return by non-
resident taxable person
As per Rule 63 of the CGST Rules, every registered non-resident taxable person
shall furnish a return in Form GSTR-5 electronically through the Common Portal,
either directly or through a Facilitation Centre notified by the Commissioner,
including therein the details of outward supplies and inward supplies and shall
pay the tax, interest, penalty, fees or any other amount payable under the Act or
these Rules within twenty days after the end of a tax period or within seven days
after the last day of the validity period of registration, whichever is earlier.

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18.8 Return of tax collection at source by e-

commerce operator
The statement is required to be furnished by e-commerce operator on Form
GSTR-8. The details are discussed at Chapter 11.

18.9 Extension of time limit

Sub-section (6) provides that the Commissioner may, for reasons to be
recorded in writing, by notification, extend the time limit for furnishing the
returns under this section for such class of registered persons as may be
specified therein. However, any extension of time limit notified by the
Commissioner of State tax or Union territory tax shall be deemed to be
notified by the Commissioner and vice-versa.

18.10 NIL return to be filed

As per Section 39 (8) every registered person who is required to furnish a
return under sub-section (1) or sub-section (2) shall furnish a return for every
tax period whether or not any supplies of goods or services or both have
been made during such tax period. Accordingly the non-resident persons and
persons required to deduct tax at source are not required to file returns in
case of NIL information.
It may be noted that now Nil GSTR-1 / GSTR-3B can be filed through SMS
from Mobile.

18.11 Rectification of error or omission

Sub-Section (9) provides that subject to the provisions of sections 37 and 38,
if any registered person after furnishing a return under sub-section (1) or sub-
section (2) or sub-section (3) or sub-section (4) or sub-section (5) discovers
any omission or incorrect particulars therein, other than as a result of scrutiny,
audit, inspection or enforcement activity by the tax authorities, he shall rectify
such omission or incorrect particulars in the return to be furnished for the
month or quarter during which such omission or incorrect particulars are
noticed, subject to payment of interest under this Act.
However no such rectification of any omission or incorrect particulars shall
be allowed after the due date for furnishing of return for the month of
September or second quarter following the end of the financial year, or the
actual date of furnishing of relevant annual return, whichever is earlier.

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18.12 Return cannot be filed if previous returns

not filed
As per sub-section (10) a registered person shall not be allowed to furnish a
return for a tax period if the return for any of the previous tax periods has not
been furnished by him.

18.13 First Return

As per Section 40 of CGST Act every registered person who has made
outward supplies in the period between the date on which he became liable
to registration till the date on which registration has been granted shall
declare the same in the first return furnished by him after grant of
registration.
It may be noted here that no separate format for filing of the first return has been
provided in the CGST Rules.

18.14 Annual Return

As per Section 44 (1) of CGST Act every registered person, other than an
Input Service Distributor, a person paying tax under Section 51 or Section 52,
a casual taxable person and a non-resident taxable person, shall furnish an
annual return for every financial year electronically in such form and manner
as may be prescribed on or before the thirty-first day of December following
the end of such financial year.
Further as per sub-section (2) every registered person who is required to get
his accounts audited in accordance with the provisions of Section 35(5) shall
furnish, electronically, the annual return under sub-section (1) along with a
copy of the audited annual accounts and a reconciliation statement,
reconciling the value of supplies declared in the return furnished for the
financial year with the audited annual financial statement, and such other
particulars as may be prescribed.
18.14.1 Annual return
As per Rule 80(1) of the CGST Rules every registered person, other than an
Input Service Distributor, a person paying tax under section 51 or section 52,
a casual taxable person and a non-resident taxable person, shall furnish an
annual return as specified under section 44(1) electronically in Form GSTR- 9
through the Common Portal.

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It may be noted here that a person paying tax under section 10 (Composition tax
payers) shall furnish the annual return in Form GSTR-9A.
Sub rule (2) provides that every electronic commerce operator required to
collect tax at source under section 52 shall furnish annual statement referred
to in sub-section (5) of the said section in Form GSTR -9B.
Sub rule (3) mandates that every registered person whose aggregate
turnover during a financial year exceeds two crore rupees shall get his
accounts audited as specified under section 35(5) and he shall furnish a copy
of audited annual accounts and a reconciliation statement, duly certified, in
Form GSTR-9C, electronically through the Common Portal.
Note: It may be noted here that for FY 2017-18 and 2018-19 furnishing of
GSTR-9 has been made optional for tax payers whose aggregate turnover
does not exceed Rs 2 Crore. Further GSTR-9C is also made optional for FY
2018-19 and 2019-20 for taxpayers having aggregate turnover of upto Rs 5
Crore.

18.15 Final Return

As per Section 45 of CGST Act every registered person who is required to
furnish a return under sub-section (1) of Section 39 and whose registration
has been cancelled shall furnish a final return within three months of the date
of cancellation or date of order of cancellation, whichever is later, in such
form and manner as may be prescribed.
18.15.1 Procedure as per Rules
As per Rule 81 of the CGST Rules every registered person required to
furnish a final return under Section 45, shall furnish such return electronically
in Form GSTR-10 through the Common Portal either directly or through a
Facilitation Centre notified by the Commissioner.

18.16 Levy of late fee

As per Section 47 (1) of CGST Act any registered person who fails to furnish
the details of outward or inward supplies required under Section 37 or Section
38 or returns required under Section 39 or Section 45 by the due date shall
pay a late fee of Rs 100/- (plus Rs 100/- for SGST i.e. total Rs 200/-) for
every day during which such failure continues subject to a maximum amount
of Rs 5000/-(plus Rs 5000/- for SGST i.e. total Rs 10,000/-)

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Further sub-section (2) provides that any registered person who fails to
furnish the return required under section 44 by the due date shall be liable to
pay a late fee of Rs 100/- ( plus Rs 100/- for SGST i.e. total Rs 200/-) for
every day during which such failure continues subject to a maximum of an
amount calculated at a 0.25% (plus 0.25% for SGST i.e. total 0.50%) of his
turnover in the State or Union territory.

18.17 GST Return Due Dates : At a Glance

Latest GST return filing due dates as per recent Notifications / provisions of GST
law are as under:
Assessee Form No Due Date
Details of outward supplies GSTR-1 13th of Month
of taxable goods or (quarterly) succeeding the end of
services or both by quarter.
registered persons having
aggregate turnover of up
to Rs 1.5 crore in the
preceding FY or the
current FY
Details of outward supplies GSTR-1 11th of next month.
of taxable goods or (quarterly)
services or both by
Registered persons having
aggregate turnover of
more than Rs 1.5 crore in
the preceding FY or the
current FY
Payment of tax / availing GSTR-3B 20th of next month
ITC and filing of Return for
taxpayers having an
aggregate turnover > Rs 5
Cr in the preceding FY.
Payment of tax / availing GSTR-3B 22nd of next month
ITC and filing of Return for
taxpayers in Group-A*
States having an

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aggregate turnover upto

Rs 5 Cr in the preceding
FY.
Payment of tax / availing GSTR-3B 24th of next month
ITC and filing of Return for
taxpayers in Group B*
States having an
aggregate turnover upto
Rs 5 Cr in the preceding
FY.
For registered persons GSTR-4 (Quarterly 18th of the month
opting for composition levy Return) succeeding the quarter
For non-resident taxable GSTR-5 20th of the next month
person or within 7 days after
expiry of registration,
whichever is earlier
Input Service Distributor GSTR 6 (Monthly 13th of the next month
(ISD) Return)
Monthly Return for TDS GSTR 7 (Monthly 10th of the next month
Return)
E-commerce operator GSTR-8 (Monthly 10th of Next Month
Return)
Annual Return by Normal GSTR 9 (Annual 31st December of next
tax payer Return) FY
(Due date extended till
28.02.2021 for FY
2019-20, Due date for
FY 2018-19 was
31.12.2020)
Note: Filing made
optional for FY 2018-19
and 2019-20 for tax
payers having
aggregate turnover
upto Rs 2 Cr.

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Annual return by GSTR-9A 31st December next

composition supplier FY
(Due date extended till
28.02.2021 for FY
2019-20, Due date for
FY 2018-19 was
31.12.2020)

Annual Return by e- GSTR-9B 31st December next

commerce operator FY
Audit certificate and GSTR-9C 31st December next
reconciliation statement by FY
Normal tax payer having (Due date extended till
aggregate turnover of 28.02.2021 for FY
more than Rs. 2 crores 2019-20, Due date for
FY 2018-19 was
31.12.2020)
Note: Filing made
optional for FY 2018-19
and 2019-20 for tax
payers having
aggregate turnover
upto Rs 5 Cr.
Taxable Person whose GSTR-10 (Final Within three months of
registration has been Return) the date of cancellation
surrendered or cancelled or date of order of
cancellation, whichever
is later.
Return to be filed by GSTR-11 To be submitted along
persons having Unique with refund application
Identity Number and
claiming refund on inward
supplies
*Group A: Chhattisgarh, Madhya Pradesh, Gujarat, Daman and Diu Dadra
and Nagar Haveli, Maharashtra, Karnataka, Goa ,Lakshadweep, Kerala

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 GST Returns

,Tamil Nadu, Puducherry, Andaman & Nicobar island, Telangana Andhra

Pradesh.
*Group B: Jammu and Kashmir, Ladakh, Himachal Pradesh, Punjab,
Chandigarh, Haryana, Delhi Rajasthan, Uttar Pradesh, Bihar, Sikkim,
Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura Meghalaya,
Assam, West Bengal, Jharkhand, Odisha, Uttarakhand.
Note: In case QRMP Scheme is adopted (refer para 18.3.1) GSTR-3B will be
required to be filed on quarterly basis by 22nd / 24th of month succeeding
the quarter.

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 Chapter 19

Payment of Tax and Interest

19.1 Introduction
Though as per GST law it was mandated that a taxpayer would be required
to file GSTR-1 and GSTR-2 and on basis of which GSTR-3 will be auto
populated and necessary payment of tax will be made while filing GSTR-3.
However due to system issues GSTR-2 and GSTR-3 along with the matching
mechanism of credit couldn’t see the light of the day and since inception the
taxpayers are required to file GSTR-3B instead of GSTR-3 and payment of
tax is also required to be made while filing of GSTR-3B.
It may be noted that Section 49 of CGST Act makes provision for interest,
penalty and other amounts. Section 50 provides for payment of interest on
delayed payment of taxes. The provision relating payment of tax and interest are
discussed in the succeeding paras.

19.2 Due dates for payment of tax

Under GST law there is no separate provisions regarding the due date of
payment of tax. However as per Section 39(7) of the CGST Act every taxable
person who is required to furnish a return shall pay the amount not later than
the last date on which he is required to file the return.
The due dates for filing the return are specified in sub-sections (1), (2), (3) &
(5) of Section 39 of CGST Act which provides for various due dates for filing
of different returns and accordingly the due date of payment of tax in such
cases will also hinge of such dates.
For due dates of filing of various GST returns which are also the due dates of
making of payment of GST, please refer to para 18.17.

19.3 Electronic tax liability register

As per Section 49(7) of the CGST Act all liabilities of a taxable person under
this Act shall be recorded and maintained in an electronic liability register in
such manner as may be prescribed.
 Payment of Tax and Interest

As per Rule 85(1) of the CGST Rules the electronic liability register specified
under section 49(7) shall be maintained in Form GST PMT-01 for each person
liable to pay tax, interest, penalty, late fee or any other amount on the Common
Portal and all amounts payable by him shall be debited to the said register.
Form GST PMT-01 has two parts, Part I is regarding the return related
liabilities and Part II, which is for other than return related liabilities.
In Part I of GST PMT-01 we need to provide the details of return related
liabilities like date, reference number, ledger used for discharging liability,
description, type of transaction [(Debit(DR) (Payable) / (Credit (CR) (Paid)],
Amount debited / credited of various taxes / cess with separate columns for
tax, interest, penalty, fee and other payments. Further the last columns are in
regard to the Balance (payable) towards such sums.
Further Part II of GST PMT-01 is regarding other than return related liabilities
wherein we need to provide the details like date, reference number, tac
period, ledger used for discharging liability, description, type of transaction
[(Debit(DR) (Payable) / (Credit (CR) (Paid), Reduction (RD/ Refund(RF)],
Amount debited / credited of various taxes / cess with separate columns for
tax, interest, penalty, fee and other payments. Further the last columns are in
regard to the balance (payable) towards such sums. Part II would cover the
reduction or enhancement in the amount payable due to decision of appeal,
rectification, revision, review etc. Further payment against shown cause
notice or any other payment made voluntarily shall be shown in the register
at the time of making payment through credit or cash ledger. Thus debit and
credit entry in Part II of GST PMO-01 will be created simultaneously.
19.3.1 Amount Debited
In Column 6 of Part I of Form GST PMT-01 the Debit (DR) amount means the
amount payable by the taxable person on the onward supplies including
exports and tax payable under reverse charge. As per clause (a) of Rule
85(2) of the CGST Rules the electronic liability register of the person shall be
debited by the amount payable towards tax, interest, late fee or any other
amount payable as per the return furnished by the said person. Further
amount payable other than the return related liabilities like enhancement in
the amount payable due to decision of appeal, rectification, revision, review
etc would be shown as debit in Column 7 of Part II.

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19.4 Payment of Amount

The taxable person can pay the tax by utilizing the credit or depositing the
amount in electronic cash ledger. The payment made by utilizing the credit or
electronic cash ledger will also be reflected in GST PMT-1. The Column 6
(Part I) or column 7 (Part II) in case payment of dues made will indicate
"CR". It is further provided in CGST Rules that identification number will be
generated by common portal for each of the entries made in electronic
register.
It is important to note here that as per Section 49(4) of the GST Act, the
amount available in electronic credit ledger shall be used for making any
payment towards output tax payable under the provisions of the Act.
As per Section 2(82) of CGST Act and 2(8) of the IGST Act output tax in
relation to a taxable person, means the tax / integrated tax chargeable under
this Act on taxable supply of goods or services or both made by him or by his
agent but excludes tax payable by him on reverse charge basis.
Thus output tax is a tax payable for taxable supplies of goods or services. It
is clearly provided that it excludes the tax payable by him on reverse charge
basis. Therefore, the tax payable under reverse charge will not be regarded
as output tax payable. Therefore the balance in the credit ledger cannot be
utilized for the purpose of payment of GST on reverse charge.

19.5 Electronic Credit Ledger

The Electronic credit ledger is defined in section 2(46) of the CGST Act very
briefly as follows:-
(46) electronic credit ledger means the electronic credit ledger referred
to in sub section (2) of section 49.
As per Section 49 (2) of CGST Act the input tax credit as self-assessed in the
return viz Form GSTR -2 of a registered person shall be credited to his
electronic credit ledger, in accordance with Section 41 which provides that
every registered person can take the credit of eligible input tax, as self-
assessed, in his return and such amount shall be credited on a provisional
basis to his electronic credit ledger. Further such credit can be utilised only
for payment of self-assessed output tax as per the return in Form GSTR-2.
The Form GST PMT-02 shall be maintained at the common portal and shall
contain the details like date, reference number, tax period, description

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 Payment of Tax and Interest

(Source of credit & purpose of utilization), transaction type (Debit(DR) /

Credit(CR)) and Credit / Debit amounts relating to input tax credits of Central
tax, State tax, UT tax, Integrated tax and cess in each column separately along
with balance of provisional credit under each of these heads. Further the
entries in Form GSTR-2 shall be matched with the details of input credits as
auto populated from the details of supplies as disclosed in the outward supply
returns filed by the suppliers and in case any mismatch is there the amounts
thereof along with tax period will be shown separately in Form GST PMT-02.
The Column 5 of GST PMT-04 relating to description will include sources of
credit and utilization thereof towards liability related to return or demand etc.
19.5.1 Amount Credited to electronic credit ledger
As per Rule 86(1) of the CGST Rules every claim of input tax credit under
the Act shall be credited to the electronic credit ledger. Further all type of
credits as per return, credit on account of merger, credit due on account of pre-
registration inputs etc credit due to opting out from Composition Scheme,
transition etc will be recorded in the credit ledger.
19.5.2 Amounts Debited to electronic credit ledger
As per Rule 86(2) the electronic credit ledger shall be debited to the extent of
discharge of any liability in accordance with Section 49 i.e. for payment of
tax. As discussed earlier that balance in electronic credit ledger can only be
used for making payment towards output tax only and thus cannot be used
for making payment of tax liability under reverse charge.
19.5.3 Refund of any unutilized amount of credit
As per Rule 86(3) of the CGST Rules where a registered person has claimed
refund of any unutilized amount from the electronic credit ledger in
accordance with the provisions of section 54, the amount to the extent of the
claim shall be debited in the said ledger.
However if the refund so filed is rejected, either fully or partly, the amount
debited under sub- rule (3), to the extent of rejection, shall be re-credited to
the electronic credit ledger by the proper officer by an order made in Form GST
PMT-03.
Explanation to Rule 86 provides that for the purpose of this rule, a refund
shall be deemed to be rejected, if the appeal is finally rejected or if the

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claimant gives an undertaking to the proper officer that he shall not file an
appeal.
19.5.4 No other Entry
As per Rule 86(5) of the CGST Rules unless specified in these rules, no
entry shall be made directly in the electronic credit ledger under any
circumstance. Accordingly in case any correction is required to be made, the
registered person shall apply to jurisdictional officer in Form GST-PMT-04.
19.5.5 Correction in Electronic Credit Ledger
As per Rule 86(5) of the CGST Rules a registered person shall, upon
noticing any discrepancy in his electronic credit ledger, communicate the
same to the officer exercising jurisdiction in the matter, through the Common
Portal in Form GST PMT-04.

19.6 Electronic Cash Ledger

The Electronic cash ledger is defined in Section 2(43) of the GST Act as follows:-
"(43) electronic cash ledger" means the electronic cash ledger referred
to in sub-section (1) of section 49.
Sub-section (1) of Section 49 mandates that every deposit made towards tax,
interest, penalty, fee or any other amount by a person by internet banking or
by using credit or debit cards or National Electronic Fund Transfer or Real
Time Gross Settlement or by such other mode and subject to such conditions
and restrictions as may be prescribed, shall be credited to the electronic
cash ledger of such person to be maintained in such manner as may be
prescribed.
As per the Rule 87 of the CGST Rules, the electronic cash ledger mentioned
under section 49(1) shall be maintained in common portal in Form GST PMT-
5.
The Form GST PMT-05 shall contain details of date and time of deposit,
Reporting date (by bank), Reference No, tax period, description, type of
transaction [(Debit (DR) / Credit (Cr)], Amount debited / credited and balance
(Central tax, State tax/ UT Tax/Integrated tax/cess / Total) under the heads
of Tax, Interest, Penalty, Fee, Others and Total.

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 Payment of Tax and Interest

The heading column-8 of GST PMT-05 is "Type Transaction [Debit

(DR)/Credit (CR) The mention of CR in column means that the amount has
been deposited by the taxable person. The mention of DR in column 8,
means the amount has been utilised for payment of dues.
19.6.1 Deposit of amount
As per Rule 87(2) of the CGST Rules any person, or a person on his behalf, shall
generate a challan in Form GST PMT- 06 on the Common Portal and enter the
details of the amount to be deposited by him towards tax, interest, penalty, fees
or any other amount.
Further as per sub-rule (3) the amount can be deposited through any of the
following modes:
(i) Internet banking through authorized banks;
(ii) Credit card or Debit card through the authorised bank;
(iii) National Electronic Fund Transfer (NEFT) or Real Time Gross
Settlement (RTGS) from any bank;
(iv) Over the Counter payment (OTC) through authorized banks for
deposits up to ten thousand rupees per challan per tax period, by
cash, cheque or demand draft:
Provided that the restriction for deposit up to ten thousand rupees per
challan in case of an Over the Counter (OTC) payment shall not apply to
deposit to be made by –
(a) Government Departments or any other deposit to be made by persons
as may be notified by the Commissioner in this behalf;
(b) Proper officer or any other officer authorised to recover outstanding
dues from any person, whether registered or not, including recovery
made through attachment or sale of movable or immovable properties;
(c) Proper officer or any other officer authorized for the amounts collected
by way of cash, cheque or demand draft during any investigation or
enforcement activity or any ad hoc deposit:
Provided further that the challan in Form GST PMT-06 generated at the
Common Portal shall be valid for a period of fifteen days.

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19.6.1-a Commission to be borne by payer

Explanation to Rule 87(3) provides that for making payment of any amount
indicated in the challan, the commission, if any, payable in respect of such
payment shall be borne by the person making such payment.
19.6.1-b Meaning of Authorized Bank
As per sub-rule (3) payment can be made by internet banking / credit or debit
card through authorized banks.
The term “authorized Bank” has been defined in Section 2(14) as follows;
“(14) authorised bank” shall mean a bank or a branch of a bank authorised
by the Government to collect the tax or any other amount payable under
this Act;
19.6.2 Payment by un-registered person
As per sub rule (4) any payment required to be made by a person who is not
registered under the Act, shall be made on the basis of a temporary
identification number generated through the Common Portal.
19.6.3 Payment through NEFT or RTGS
Sub-rule (5) provides that where the payment is made by way of NEFT or
RTGS mode from any bank, the mandate form shall be generated along with
the challan on the Common Portal and the same shall be submitted to the
bank from where the payment is to be made:
Provided that the mandate form shall be valid for a period of fifteen days
from the date of generation of challan.
It may be noted here that the payment through NEFT / RTGS can be made
through any bank and necessarily from an authorized bank.
19.6.4 Challan Identification Number (CIN)
As per Rule 87(6) of the CGST Rules on successful credit of the amount to
the concerned government account maintained in the authorised bank, a
Challan Identification Number (CIN) will be generated by the collecting bank
and the same shall be indicated in the challan.
As per sub Rule (7) on receipt of CIN from the collecting bank, the said
amount shall be credited to the electronic cash ledger of the person on

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 Payment of Tax and Interest

whose behalf the deposit has been made and the Common Portal shall make
available a receipt to this effect.
Sub-rule (8) provides that where the bank account of the person concerned,
or the person making the deposit on his behalf, is debited but no Challan
Identification Number (CIN) is generated or generated but not communicated
to the Common Portal, the said person may represent electronically in Form
GST PMT-07 through the Common Portal to the bank or electronic gateway
through which the deposit was initiated.
19.6.5 Refund
As Section 49(6) of CGST Act the balance in the electronic cash ledger or
electronic credit ledger after payment of tax, interest, penalty, fee or any
other amount payable under this Act or the Rules made thereunder may be
refunded in accordance with the provisions of Section 54.
As per Rule 87(10) of the CGST Rules where a person has claimed refund of
any amount from the electronic cash ledger, the said amount shall be debited
to the electronic cash ledger. However as per sub-rule (11) in case the
refund so claimed is rejected, either fully or partly, the amount debited to the
extent of rejection, shall be credited to the electronic cash ledger by the
proper officer by an order made in Form GST PMT-03.
19.6.6 Utilisation
As per Section 49(3) of CGST Act the amount available in the electronic cash
ledger may be used for making any payment towards tax, interest, penalty,
fees or any other amount payable under the provisions of this Act or the rules
made thereunder in such manner and subject to such conditions and within
such time as may be prescribed.
Rule 87(1) of the CGST Rules also provides that payments towards tax, interest,
penalty, fee or any other amount shall be debited from the electronic cash ledger.

19.7 Mode of payment

Rule 85(3) of the CGST Rules provides that subject to the provisions of
Section 49, payment of every liability by a registered person as per his return
shall be made by debiting the electronic credit ledger maintained as per Rule
86 or the electronic cash ledger maintained as per Rule 87 and the electronic
liability register shall be credited accordingly.

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GST : Practitioners Perspective

19.7.1 Sequence of adjustment of payment

As per Section 49(8) of CGST Act every taxable person shall discharge his
tax and other dues under this Act or the Rules made thereunder in the
following order, namely:––
(a) self-assessed tax, and other dues related to returns of previous tax
periods;
(b) self-assessed tax, and other dues related to the return of the current
tax period;
(c) any other amount payable under this Act or the Rules made thereunder
including the demand determined under Section 73 or Section 74.
The above provisions specifies the manner in which the amount paid by a
taxable person will be adjusted in case the amount paid in less than the total
demand / tax payable. In such cases against the amount paid the tax dues
relating to previous periods will be adjusted and in case after that some
balance is left it would be used for payment of the current dues and any
balance amount thereafter shall be used for payment of demands confirmed
by the Department under Section 73 and 74 of the CGST Act. It may be
noted here that irrespective of the details mentioned in the challan,
adjustment will always be made as per the provisions mandated in Section
49(8) of CGST Act.
19.7.1-a Meaning of tax and other dues.
As per Explanation (b) to Section 49 of CGST Act the expression,—
(i) “tax dues” means the tax payable under this Act and does not include
interest, fee and penalty; and
(ii) “other dues” means interest, penalty, fee or any other amount payable
under this Act or the rules made thereunder.

19.8 Utilization of Credit

The provisions regarding utilization of credit are contained under sub-section
(4) and (5) of Section 49 of CGST Act.
For further details refer to para 17.7.

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 Payment of Tax and Interest

19.9 Interest on delayed payment

Sub-section (1) of Section 50 provides that every person who is liable to pay
tax in accordance with the provisions of this Act or the Rules made
thereunder, but fails to pay the tax or any part thereof to the Government
within the period prescribed, shall for the period for which the tax or any part
thereof remains unpaid, pay, on his own, interest at such rate, not exceeding
18%., as may be notified by the Government on the recommendations of the
Council. Thus, both Central Government as well as State Government will
issue the notification specifying the rate interest leviable for delay in making
payment which shall not exceed 18%.
Further it has been provided in sub-section (2) that interest under sub-
section (1) shall be calculated, in such manner as may be prescribed, from
the day succeeding the day on which such tax was due to be paid i.e. the
due date.
Thus, interest shall be levied from the day succeeding the due date of
payment of tax.
19.9.1 Undue / excess claim of Credit / reduction in liability
Sub-section (3) of Section 50 provides that a taxable person who makes an
undue or excess claim of input tax credit under Section 42(10) or undue or
excess reduction in output tax liability under Section 43(10), shall pay interest on
such undue or excess claim or on such undue or excess reduction, as the case
may be, at such rate not exceeding 24% per cent, as may be notified by the
Government on the recommendations of the Council.
Section 42(10) is in regard to claim of input tax credit which does not match
the corresponding details of outward supply furnished by the supplier,
whereas Section 43(10) is in regard to reduction in output liability due to
issuance of credit note which does not match with the corresponding
reduction in the claim for input tax credit by the recipient. In such cases of mis-
match the said amount is added to the output tax liability of the recipient and in
such cases maximum interest upto 24% p.a shall be levied.

19.10 Passing of incidence

Sub-section (9) of Section 49 provides that every person who has paid the
tax on goods or services shall be deemed to have passed on the full

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incidence of tax to the recipient of goods or services. Thus deeming

provision has been made in this section that the incidence of tax paid on any
supply has been recovered from the recipient. Therefore, the onus of proof is
on the supplier of goods to substantiate by evidence that the incidence of tax
has not been passed to the customer. Otherwise in case any refund is due
such taxable person the refund amount will be credited to consumer welfare
fund. This is based on the doctrine of unjust enrichment.

19.11 Identification number for each transaction

It will be observed from above that the electronic tax liability register,
electronic credit ledger and electronic cash ledger will have various entries.
These entries are made for various purposes. All the three registers have
column for types of transactions which can be Debit (DR) or Credit (CR). The
Rule 88 of the CGST Rules provides that the unique identification number
shall be generated at the common portal for debit or credit in each of the
register. Thus, the entries will be recognized by unique identification number.

19.12 Inter Branch transfer not possible

As it is evident from the discussion made in preceding paras that the
adjustment of the tax paid in GST PMT-01 will be made electronically.
Therefore, the taxable person while making payment should enter the correct
registration number on challan as it may happen that such taxable person
may have multiple registration and the payment of tax may be made centrally
by head office. In such a case if the registration number is wrongly
mentioned while making payment, the amount may get credited to other
branch. There are no provisions in the GST Acts for transfer of such amount
from one branch to another. This problem may specifically arise from service
providers who are not accustomed to multiple registrations, as under current
service tax regime centralized registration was available.

19.13 Transfer from one head to another possible

GST Network (GSTN) has recently developed a new functionality on the
portal through which taxpayers can now transfer amount available under one
head to another in the electronic cash ledger. Form GST PMT-09 provides
flexibility to taxpayers to make multiple transfers from more than one head
(major or minor) to another head (major or minor) and helps with the intra-
head or inter-head transfer of amount available in electronic cash ledger.

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 Payment of Tax and Interest

The 'major' heads are Central GST, State or Union Territory GST, Integrated
GST and cess, whereas the 'minor' heads defined in the law are Tax, Interest,
Late Fee, Penalty and Others.

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 Chapter 20

Refund of Taxes
20.1 Introduction
Sections 54 to 58 of the CGST Act makes the provisions for granting of
refund of Tax, interest on delayed refunds, crediting of refund to Consumer
Welfare Fund and utilisation of such Fund. Further the procedural aspects of
refund are contained in the CGST Rules. As per the provisions of GST law
the refund of taxes can be claimed in different circumstances. The provisions
contained in these sections briefly are discussed below.

20.2 Refund of tax and interest

Normally, refund provisions apply in case of (a) tax paid / unutilized input tax
credit (ITC) on zero rated supplies (exports and supplies to SEZ) and b) Inverted
duty structure i.e. input tax credit more than tax payable on output supply (but not
in case of exempted supply or supply with Nil rate of tax). (Section 54(3) of the
CGST Act).
However, refund of unutilized ITC shall not be allowed if:
─ the goods exported out of India are subjected to export duty;
─ the supplier of goods or services or both avails of drawback in respect
of CGST or claims refund of the IGST paid on such supplies.
In such cases, upon refund, the amount refunded shall be debited to
electronic credit ledger.
Refund can also be claimed by a registered person, if he has paid excess tax
by mistake.
Any person claiming refund of any tax and interest, if any, paid on such tax
or any other amount paid by him, may make an application in that regard to
the proper officer before the expiry of two years from the relevant date in the
prescribed form and manner (Section 54(1) of the CGST Act).

20.3 Refund of balance in Electronic cash ledger

Refund from the balance in the electronic cash ledger can be made without
 Refund of Taxes

any time limit as money is lying in your ledger only in nature of deposit.
Further as you have not collected this amount from anyone the principle of
unjust enrichment does not apply.
Upon refund, the amount refunded shall be debited to the electronic cash ledger.

20.4 Application and procedure of refund

The application of refund shall be accompanied by:
(a) Such documentary evidence as may be prescribed to establish that a
refund is due to the applicant.
(b) Evidence that the incidence of tax has not been passed on by him to
any other person (CA certificate). However, where the amount claimed
as refund is less than Rs 2 lakhs, self-declaration based on documents
available with him is sufficient. (Section 54(4) of the CGST Act).
Rule 89(2) of the CGST Rules, 2017 provides the documents to be filed with
refund claim.

20.5 Scrutiny of refund claim and passing of order

If, on receipt of any such application, the proper officer is satisfied that whole
or part of amount claimed as refund is refundable, he may make an order
accordingly and the amount so determined shall be credited to “Consumer
Welfare Fund’ except where taxable person proves that he has not passed
on burden of tax to another person. (Section 54(5)
The proper officer may, in the case of any claim for refund on account of zero-
rated supply of goods or services or both made by registered persons
(excluding some notified categories), refund on a provisional basis, 90% of
the total amount so claimed, excluding the amount of ITC provisionally
accepted, and thereafter make an order under sub-section (5) for final
settlement of the refund claim after due verification of documents furnished
by the applicant. (Section 54(6) of the CGST Act).
20.5.1 Time limit for deciding refund cases
The proper officer shall issue the order refusing or accepting refund claim
within 60 days from the date of receipt of application complete in all respects
(Section 54(7) of the CGST Act).

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20.5.2 No refund if amount is less than Rs 1000/-

No refund shall be paid, if the amount is less than Rs 1000/- (Section 54(14)
of the CGST Act,2017)

20.6 Application for refund of tax, interest,

penalty, fees or any other amount
Any person, except the persons covered under notification issued under
Section 55 (UN agencies, Embassies), claiming refund of any tax, interest,
penalty, fees or any other amount paid by him, other than refund of
integrated tax paid on goods exported out of India, may file an application
electronically in Form GST RFD-01 (Rule 89(1) of CGST Rules).

20.7 Refund in electronic cash ledger

Any claim for refund relating to balance in the electronic cash ledger in
accordance with the provisions of Section 49(6) may be made through the
return furnished for the relevant tax period in Form GSTR-3 or Form GSTR-4
or Form GSTR-7, as the case may be. (First Proviso to Rule 89(1) of CGST
Rules).

20.8 Refund application in case of supply of

goods to SEZ
In respect of supplies to a Special Economic Zone unit or a Special
Economic Zone developer, the application for refund shall be filed by the
supplier of goods after such goods have been admitted in full in the Special
Economic Zone for authorised operations, as endorsed by the specified
officer of the Zone. (Second Proviso (a) to Rule 89(1) of CGST Rules).

20.9 Refund application in case of supply of

goods to SEZ
In respect of supplies to a Special Economic Zone unit or a Special
Economic Zone developer, the application for refund shall be filed by the
supplier of services along with such evidence regarding receipt of services
for authorised operations as endorsed by the specified officer of the Zone.
(Second Proviso (b) to Rule 89(1) of CGST Rules).

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 Refund of Taxes

20.10 Refund claim in case of deemed export

In respect of supplies regarded as deemed exports, the application may be
filed by, - (a) the recipient of deemed export supplies; or (b) the supplier of
deemed export supplies in cases where the recipient does not avail of input
tax credit on such supplies and furnishes an undertaking to the effect that the
supplier may claim the refund. (Third Proviso to Rule 89(1) of CGST Rules).

20.11 Refund of advance tax by casual or non-

resident taxable person
Refund of any amount, after adjusting the tax payable by the applicant out of the
advance tax deposited by him under Section 27 at the time of registration, shall
be claimed in the last return required to be furnished by him. (Fourth Proviso to
Rule 89(1) of CGST Rules).20.12 Procedure after submitting refund
application:
If the application relates to a claim for refund from the electronic cash ledger,
an acknowledgement in Form GST RFD-02 shall be made available to the
applicant through the common portal electronically, clearly indicating the date
of filing of the claim for refund and the time period specified in Section 54(7)
shall be counted from such date of filing. (Rule 90(1) of CGST Rules)
The application for refund, other than claim for refund from electronic cash
ledger, shall be forwarded to the proper officer who shall, within a period of
15 days of filing of the said application, scrutinize the application for its
completeness and where the application is found to be complete in terms of
sub-rule (2), (3) and (4)of Rule 89, an acknowledgement in Form GST RFD- 02
shall be made available to the applicant through the common portal
electronically, clearly indicating the date of filing of the claim for refund and
the time period specified in Section 54(7) shall be counted from such date of
filing. (Rule 90(2) of CGST Rules)
If any deficiencies are noticed, the proper officer shall communicate the
deficiencies to the applicant in Form GST RFD-03 through the common portal
electronically, requiring him to file a fresh refund application after rectification
of such deficiencies. (Rule 90(3) of CGST Rules).

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20.12.1 Intimation under SGST also means intimation

under CGST and vice versa
Where deficiencies have been communicated in Form GST RFD-03 under the
SGST,2017, the same shall also deemed to have been communicated under
this rule along with the deficiencies communicated under Rule 90(3). (Rule
90(4) of CGST Rules).

20.13 Order sanctioning refund

If upon examination of the application, the proper officer is satisfied that a
refund under Section 54(5) is due and payable to the applicant, he shall make
an order in Form GST RFD-06 sanctioning the amount of refund to which the
applicant is entitled, mentioning therein the amount, if any, refunded to him on
a provisional basis under Section 54(6), amount adjusted against any
outstanding demand under the Act or under any existing law ( excise, VAT,
service tax) and the balance amount refundable. (Rule 92(1) of the CGST
Rules).
In cases where the amount of refund is completely adjusted against any
outstanding demand under the Act or under any existing law, an order giving
details of the adjustment shall be issued in Part A of Form GST RFD-07. (Proviso
to Rule 92(1) of the CGST Rules).
Refund order will be passed in Form RFD-04/06/07 as applicable.

20.14 Show cause Notice of whole or part of

refund is not admissible
If the proper officer is satisfied, for reasons to be recorded in writing, that the
whole or any part of the amount claimed as refund is not admissible or is not
payable to the applicant, he shall issue a notice in Form GST RFD-08 to the
applicant, requiring him to furnish a reply in Form GST RFD-09 within a period
of 15 days of the receipt of such notice and after considering the reply, make
an order in Form GST RFD-06 sanctioning the amount of refund in whole or
part, or rejecting the said refund claim and the said order shall be made
available to the applicant electronically and the provisions of Rule 92(1) shall,
mutatis mutandis, apply to the extent refund is allowed. (Rule 92(3) of the
CGST Rules).
No application for refund shall be rejected without giving the applicant an
opportunity of being heard (Proviso to Rule 92(3) of the CGST Rules).

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 Refund of Taxes

20.15 Refund order or adjudication order after

SCN and hearing
If the proper officer is satisfied that the amount refundable under Rule 92(1)
or Rule 92(1A) Or Rule 92(2) is payable to the applicant under Section 54(8),
he shall make an order in Form GST RFD-06 and issue a payment order in
Form GST RFD-05 for the amount of refund and the same shall be
electronically credited to any of the bank accounts of the applicant mentioned
in his registration particulars and as specified in the application for refund on
the basis of a consolidated payment advice. (Rule 92(4) of the CGST Rules).
The order issued in Form GST RFD-06 shall not be required to be revalidated
by the proper officer (First Proviso to Rule 92(4) of the CGST Rules).
The payment order in Form GST RFD-05 shall be required to be revalidated
where the refund has not been disbursed within the same financial year in
which the said payment order was issued. (Second Proviso to Rule 92(4) of
the CGST Rules).
The Central Government shall disburse the refund based on the consolidated
payment advice issued under Rule 92(4). (Third Proviso to Rule 92(4) of the
CGST Rules).
If the proper officer is satisfied that the amount refundable under Rule 92(1)
or Rule 92 (1A)] or Rule 92 (2) is not payable to the applicant under Section
54(8), he shall make an order in Form GST RFD-06 and issue a payment order
in Form GST RFD-05, for the amount of refund to be credited to the Consumer
Welfare Fund. (Rule 92(5) of the CGST Rules).

20.16 Credit of the amount of rejected refund

claim
Where any deficiencies have been communicated under Rule 90(3), the
amount debited under Rule 89(3) shall be re-credited to the electronic credit
ledger. (Rule 93(1) of the CGST Rules).
Where any amount claimed as refund is rejected under Rule 92, either fully or
partly, the amount debited, to the extent of rejection, shall be re-credited to
the electronic credit ledger by an order made in Form GST PMT-03. (Rule
93(2) of the CGST Rules).

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GST : Practitioners Perspective

For the purposes of this rule, a refund shall be deemed to be rejected, if the
appeal is finally rejected or if the claimant gives an undertaking in writing to
the proper officer that he shall not file an appeal. (Explanation to Rule 93 of
the CGST Rules).

20.17 Order sanctioning interest on delayed

refunds
Where any interest is due and payable to the applicant under Section 56, the
proper officer shall make an order along with a payment order in Form GST
RFD-05, specifying therein the amount of refund which is delayed, the period
of delay for which interest is payable and the amount of interest payable, and
such amount of interest shall be electronically credited to any of the bank
accounts of the applicant mentioned in his registration particulars and as
specified in the application for refund. (Rule 94 of the CGST Rules).

20.18 Withholding of refund or deduction from

refund in certain cases
Where any refund is due under Section 54(3) of CGST Act to a registered
person who has defaulted in furnishing any return or who is required to pay
any tax, interest or penalty, which has not been stayed by any court, Tribunal
or Appellate Authority by the specified date, the proper officer may:
(a) withhold payment of refund due until the said person has furnished the
return or paid the tax, interest or penalty, as the case may be;
(b) deduct from the refund due, any tax, interest, penalty, fee or any other
amount which the taxable person is liable to pay but which remains
unpaid under this Act or under the existing law. (Section 54(10) of
CGST Act).
The expression ‘specified date’ shall mean the last date for filing an appeal under
this Act.

20.19 Withholding refund by order by

Commissioner, if matter is in appeal
If an order giving rise to a refund is the subject matter of an appeal or further
proceedings or where any other proceedings under this Act is pending and
the Commissioner is of the opinion that grant of such refund is likely to

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 Refund of Taxes

adversely affect the revenue in the said appeal or other proceedings on

account of malfeasance or fraud committed, he may, after giving the taxable
person an opportunity of being heard, withhold the refund till such time as he
may determine. (Section 54(11) of CGST Act).
Where a refund is withheld under Section 54(11), the taxable person shall,
notwithstanding anything contained in Section 56, be entitled to interest at
such rate not exceeding 6% as may be notified on the recommendations of
the Council, if as a result of the appeal or further proceedings he becomes
entitled to refund. (Section 54(12) of CGST Act).
Rate of interest notified from 1-7-2017 is 6%.

20.20 Time limit for filing refund claim

Any person claiming refund of any tax, interest, if any, paid on such tax or
any other amount paid by him, may make an application before the expiry of
2 years from the ‘relevant date’ in such form and manner as may be prescribed.
A registered person may claim refund of any unutilised ITC in case of zero
rated supplies or accumulated ITC on account of inverted duty structure can
be claimed at the end of any tax period.
The relevant date is different in every case. Here are the relevant dates for
various refund cases as mandated under Explanation 2 to Section 54 of the
CGST Act.
Situation for claiming GST Refund Relevant date
Refund is in respect of goods
exported outside India (or on inputs/
input services used in such goods)
(i) By sea Date on which the ship or the aircraft
(ii) By Air in which such goods are loaded,
leaves India
(iii) By land Date on which such goods pass the
frontier
(iv) By post Date of dispatch of goods by the
concerned Post Office to a place
outside India

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GST : Practitioners Perspective

Refund in respect of deemed Date on which the return relating to

exports such deemed exports is filed
Refund is in respect of services Where supply of Date of receipt of
exported (or on inputs/ input service payment in
services used in such services) completed prior convertible
to receipt of foreign exchange
payment
Where payment Date of issue of
for service invoice
received in
advance
Tax becomes refundable as a Date of communication of such
consequence of: judgment, decree, order or direction
(i) Judgment
(ii) Decree
(iii) Order
(iv) Direction
of Appellate Authority, Appellate
Tribunal or any Court
Refund of unutilized input tax credit End of the financial year in which
such claim for refund arises
Tax is paid provisionally under this Date of adjustment of tax after the final
Act or the rules made thereunder assessment thereof.
In case of a person other than the Date of receipt of goods or services
supplier by such person
In any other case Date of payment of tax

20.21 Interest on Delayed Refund

If any tax ordered to be refunded under Section 54(5) to any applicant is not
refunded within 60 days from the date of receipt of application under section
54(1), interest @ 6% p.a. shall be payable in respect of such refund from the
date immediately after the expiry of 60 days from the date of receipt of
application under the said sub-section till the date of refund of such tax. (Section
56 of the CGST Act).

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 Refund of Taxes

Where any claim of refund arises from an order passed by an adjudicating

authority or Appellate Authority or Appellate Tribunal or court which has
attained finality and the same is not refunded within 60 days from the date of
receipt of application filed consequent to such order, interest @9% shall be
payable in respect of such refund from the date immediately after the expiry
of 60 days from the date of receipt of application till the date of refund.
(proviso to Section 56 of the CGST Act).
Where any order of refund is made by an Appellate Authority, Appellate Tribunal
or any court against an order of the proper officer under sub-section
(5) of Section 54(5), the order passed by the Appellate Authority, Appellate
Tribunal or by the court shall be deemed to be an order passed under the
Section 54(5). (Explanation to Section 56 of the CGST Act).

20.22 Refund to taxable person instead of

depositing in consumer welfare fund
Refund once sanctioned, should be deposited with Consumer Welfare Fund.
However in following cases, the refundable amount, shall, instead of being
credited to the Fund, be paid to the applicant (Section 54(8) of CGST Act) :
(a) refund of tax paid on export of goods or services or both or on inputs
or input services used in making such exports;
(b) refund of unutilised input tax credit under Section 54(3);
(c) refund of tax paid on a supply which is not provided, either wholly or
partially, and for which invoice has not been issued, or where a refund
voucher has been issued;
(d) refund of tax in pursuance of Section 77 (IGST paid instead of CGST /
SGST or vice versa);
(e) the tax and interest, if any, or any other amount paid by the applicant,
if he had not passed on the incidence of such tax and interest to any
other person; or
(f) the tax or interest borne by such other class of applicants as the
Government may, on the recommendations of the Council, by
notification, specify.

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20.23 No refund except in aforesaid cases

Notwithstanding anything to the contrary contained in any judgment, decree,
order or direction of the Appellate Tribunal or any court or in any other provisions
of this Act or the rules made thereunder or in any other law for the time being in
force, no refund shall be made except in accordance with the provisions of
section 54(8) (Section 54(9) of the CGST Act).

20.24 Refund to casual taxable person or non-

resident taxable person only after he files all
returns
Notwithstanding anything to the contrary contained in this section, the
amount of advance tax deposited by a casual taxable person or a non-
resident taxable person under Section 27(2), shall not be refunded unless
such person has, in respect of the entire period for which the certificate of
registration granted to him had remained in force, furnished all the returns
required under Section 39. (Section 54(13) of the CGST Act).

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 Chapter 21

Assessment and Audit

21.1 Introduction
The Assessment of taxes payable in one of the most critical and important
aspect in levy and collection of taxes. It is the process by which proper
officer confirms the correctness of payment of taxes. The provisions relating
to self-assessment, provisional assessment, scrutiny of returns and other
related provisions in regard to assessment are contained in Section 59 to 64
of the CGST Act. Further Sections 65 and 66 of the CGST Act makes
provisions relating to audit of records of the registered person at premises of
such person.
The above provisions in regard to assessment and audit are discussed in this
Chapter.

21.2 Meaning of Assessment

Assessment means determining the tax liability. The word 'assessment' can
comprehend the whole procedure for ascertaining and imposing liability upon the
tax payer Kalavati Devi v, CIT AIR 1968 SC 162 66 ITR 680 (SC).
As per Section 2(11) of CGST Act “assessment” means determination of tax
liability under this Act and includes self-assessment, re-assessment,
provisional assessment, summary assessment and best judgment
assessment;

21.3 Self Assessment

As per Section 59 of CGST Act every registered person shall self-assess the
taxes payable under this Act and furnish a return for each tax period as specified
under Section 39. A registered person is a person who has obtained registration
under GST laws are per requirement of Section 22 or 24 of the CGST Act.
It is important to note here that the registered person or an authorized person
on its behalf certifies the assessment of tax made by him in the return Form
GSTR-3B and payment of tax by utilizing the balance in electronic cash
ledger or electronic credit ledger is true and correct. Thus it is evident that
GST : Practitioners Perspective

such person makes a self-assessment of tax liability and details of payment

made by him. Such type of declarations are required under other return
forms also and thus it can be said that all the returns under the GST law are
self-assessed.

21.4 Provisional Assessment

As per Section 60(1) of CGST Act where the taxable person is unable to
determine the value of services or determine the rate applicable thereto, he
may request the proper officer in writing giving reasons for payment tax on
provisional basis and the proper officer shall pass an order allowing payment
of tax on provisional basis at such rate or on such value as may be specified
by him.
21.4.1 Bond with security
Sub-section (2) of Section 60 mandates that the payment of tax on
provisional basis may be allowed, if the taxable person executes a bond in
such form as may be prescribed, and with such surety or security as the
proper officer may deem fit, binding the taxable person for payment of
difference between the amount of tax as may be finally assessed and the
amount of tax provisionally assessed.
21.4.2 Final assessment within six months
Sub-Section (3) mandates that the proper officer shall, within a period not
exceeding six months from the date of the communication the order issued under
sub-section (1), pass the final assessment order after taking in account such
information as may be required for finalizing the assessment.
However as per Proviso to said sub-section the above period may, on
sufficient cause the shown and for reasons to be recorded in writing, be
extended by Joint/Additional Commissioner for a further period not exceeding
six months and by the Commissioner for such further period not exceeding
four years.
21.4.3 Interest payable if tax payable after final
assessment is more than tax paid
As per sub-Section (4) the registered person shall be liable to pay interest on any
tax payable on the supply of goods or services or both under provisional
assessment but not paid on the due date specified under sub-section (7) of

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 Assessment and Audit

section 39 or the rules made thereunder, at the rate specified under sub-
section (1) of Section 50, from the first day after the due date of payment of
tax in respect of the said supply of goods or services or both till the date of
actual payment, whether such amount is paid before or after the issuance of
order for final assessment.
21.4.4 Refund if tax payable was less
Sub-Section (5) provides that where the registered person is entitled to a
refund consequent to the order of final assessment under sub-Section (3),
subject to the provisions of sub-section (8) of Section 54, interest shall be
paid on such refund as provided in Section 56.
21.4.5 Procedure mandated in Rules
Rule 98 of the CGST Rules prescribes the detailed procedure in regard to
the provisional assessment.
As per Rule 98(1) every registered person requesting for payment of tax on a
provisional basis in accordance with the provisions of Section 60(1) shall
furnish an application in Form GST ASMT-01, along with the documents in
support of his request, electronically through the Common Portal.
(2) The proper officer may, on receipt of the application under sub-rule
(1), issue a notice in Form GST ASMT-02 requiring the registered person to
appear in person or furnish additional information or documents in support of
his request and the applicant shall file a reply to the notice in Form GST ASMT–
03.
(3) The proper officer shall issue an order in Form GST ASMT-04, either
rejecting the application, stating the grounds for such rejection or allowing
payment of tax on provisional basis indicating the value or the rate or both on
the basis of which the provisional assessment is to be made and the amount
for which the bond is to be executed and security to be furnished not
exceeding 25% of the amount covered under the bond.
(4) The registered person shall execute a bond in accordance with the
provisions of Section 60(2) in Form GST ASMT-05 along with a security in the
form of a bank guarantee for an amount as determined under sub rule (3):
Provided that a bond furnished to the proper officer under the CGST / SGST
Act or IGST Act shall be deemed to be a bond furnished under the provisions
of this Act and the Rules made thereunder.

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GST : Practitioners Perspective

Explanation.- For the purposes of this rule, the term “amount” shall include
the amount of integrated tax, Central tax, State tax or Union territory tax and
cess payable in respect of such transaction.
(5) The proper officer shall issue a notice in Form GST ASMT-06, calling for
information and records required for finalization of assessment under section
60(3) and shall issue a final assessment order, specifying the amount payable
by the registered person or the amount refundable, if any, in Form GST ASMT-
07.
(6) The applicant may file an application in Form GST ASMT- 08 for release
of security furnished under sub-rule (4) after issue of order under sub-rule (5).
(7) The proper officer shall release the security furnished under sub-rule
(4), after ensuring that the applicant has paid the amount specified in sub-
rule (5) and issue an order in Form GST ASMT–09 within a period of seven
working days from the date of receipt of the application under sub-rule (6).

21.5 Scrutiny of returns

As per Section 61 (1) the proper officer may scrutinize the return and related
particulars furnished by the registered person to verify the correctness of the
return and inform him of the discrepancies noticed, if any, in such manner as
may be prescribed and seek his explanation thereto. Further as per sub-
section (2) in case the explanation is found acceptable, the registered person
shall be informed accordingly and no further action shall be taken in this
regard.
21.5.1 Action if no satisfactory explanation
As per sub-Section (3) in case no satisfactory explanation is furnished within
a period of thirty days of being informed by the proper officer or such further
period as may be permitted by him or where the registered person, after
accepting the discrepancies, fails to take the corrective measure in his return
for the month in which the discrepancy is accepted, the proper officer may
initiate appropriate action including those under Section 65 or Section 66 or
Section 67, or proceed to determine the tax and other dues under Section 73
or Section 74.
21.5.2 Procedure mandated in Rules
The procedure regarding scrutiny of returns is contained under Rule 99 of the
CGST Rules. The said Rule is given below:

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As per Rule 99(1) Where any return furnished by a registered person is

selected for scrutiny, the proper officer shall scrutinize the same in
accordance with the provisions of Section 61 with reference to the information
available with him, and in case of any discrepancy, he shall issue a notice to
the said person in Form GST ASMT-10, informing him of such discrepancy and
seeking his explanation thereto within such time, not exceeding fifteen days
from the date of service of the notice, as may be specified in the notice and
also quantifying the amount of tax, interest and any other amount payable in
relation to such discrepancy.
Sub-rule (2) provides that the registered person may accept the discrepancy
mentioned in the notice issued under sub-rule (1), and pay the tax, interest
and any other amount arising from such discrepancy and inform the same or
furnish an explanation for the discrepancy in Form GST ASMT-11 to the proper
officer.
As per sub-rule (3) where the explanation furnished by the taxable person or the
information submitted under sub-rule (2) is found to be acceptable, the proper
officer shall inform the registered person accordingly in Form GST ASMT-12.

21.6 Best Judgment Assessment of non-filers of

returns
As per Section 62 (1) notwithstanding anything to the contrary contained in
Section 73 or Section 74, where a registered person fails to furnish the return
under Section 39 or Section 45, even after the service of a notice under
Section 46, the proper officer may proceed to assess the tax liability of the
said person to the best of his judgement taking into account all the relevant
material which is available or which he has gathered and issue an
assessment order within a period of five years from the date specified under
Section 44 for furnishing of the annual return for the financial year to which
the tax not paid relates.
Further as per sub-section (2) where the registered person furnishes a valid
return within thirty days of the service of the assessment order under sub-
section (1), the said assessment order shall be deemed to have been
withdrawn but the liability for payment of interest under sub-section (1) of
Section 50 or for payment of late fee under Section 47 shall continue.

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21.6.1 Procedure mandated in Rules

Rule 100(1) of the CGST Rules inter-alia provides that the order of
assessment made under sub-section (1) of Section 62 shall be issued in Form
GST ASMT-13 and summary thereof shall be uploaded electronically in Form
GSTR DRC-07.

21.7 Best Judgment Assessment of unregistered

persons
As per Section 63(1) of CGST Act notwithstanding anything to the contrary
contained in Section 73 or Section 74, where a taxable person fails to obtain
registration even though liable to do so or whose registration has been
cancelled under sub-section (2) of Section 29 but who was liable to pay tax,
the proper officer may proceed to assess the tax liability of such taxable
person to the best of his judgment for the relevant tax periods and issue an
assessment order within a period of five years from the date specified under
Section 44 for furnishing of the annual return for the financial year to which
the tax not paid relates:
Provided that no such assessment order shall be passed without giving the
person an opportunity of being heard.
21.7.1 Procedure mandated as per Rules
As per sub-rule (2) to Rule 100 of the CGST Rules the proper officer shall
issue a notice to an unregistered taxable person in accordance with the
provisions of Section 63 in Form GST ASMT-14 containing the grounds on
which the assessment is proposed to be made on best judgment basis and
after allowing a time of fifteen days to such person to furnish his reply, if any,
pass an order in Form GST ASMT- 15.
21.7.2 Principles behind best judgment assessment
Best judgment assessment is normally used as one of the tools to harass taxable
persons. However, best judgment assessment cannot be on basis of whims and
fancies. The few landmark judicial pronouncements in this regard are cited
below.
It has been held that though best judgment is an estimate and involves guess
assessment or material work, the estimate must relate to some and it
Raghubar must be something more than mere suspicion – Raghubar Mandal
v. State of Bihar (1957) 8 STC 770 (SC) AIR 810 = AIR 1957 SC 810.

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Even a best judgment assessment must be made reasonably and not

surmises- Kathyaini Hotels v. ACCT (2004) 135 STC 77 (SC).
In State of Kerela v. C. Velukutty – (1966) 17 STC 465= 60 ITR 239 (SC), it
was held that best of judgment' means it does not depend on arbitrary
caprice. Though there is element of guesswork, it shall have reasonable
nexus to the available material and circumstances of the case.
There is no doubt that authorities should try to make an honest and fair
estimate of the income even in best judgment assessment and should not act
arbitrarily, there is always a certain degree of guess work in best judgment
assessment. If assessee did not maintain proper books of account, he
himself has to be blamed for such assessment - Kachwala Germs v.
JCIT(2007) 158 Taxman 71 (SC).
In Dhakeswari Cotton Mills v. CIT AIR 1955 SC 65 = (1954) 26 ITR 775 (SC
5 member), it was held that technical rules of evidence and pleadings are not
applicable in best judgment assessment', but it cannot be pure guess. There
must be something more than mere suspicion to support assessment.
The best judgment assessment should be based on some material and basis
must be disclosed to dealer. Dealer's explanation has to be considered.
S Mohammed v. CCT (1999) 116 STC 28 (Karn. HC DB) Dwijendra Kumar v.
Suptd. of Taxes (990) 78 STC 393 (Gau HC) Sankar Trading v. State of
Tripura (1991) 92 STC 22 (Gau HC DB)
In New Vishwakarma Engg. Works v. STC (Allahabad HC) it was held that
even in case of best judgment assessment principles of natural justice
required to be followed. dealer should informed of the material on which charge
was going to be imposed and dealer must be given opportunity to rebut the
effect of material, if he can.
Estimate of turnover on the basis of particulars available in dealer's books is
not a best judgment assessment - Arul Constructions v. State of Tamil Nadu
(2011) 43 VST 157 (Mad HC DB)

21.8 Summary assessment in certain special

cases
The proper officer may, on any evidence showing a tax liability of a person
coming to his notice, the permission of Additional Joint Commissioner,
proceed to assess the tax liability of such person to protect the interest of
Revenue and issue an assessment order. (Section 64(1) of CGST Act).

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Such summary assessment order can be passed if proper officer has

sufficient grounds to believe that any delay in doing so will adversely affect
the interest of Revenue.
21.8.1 Withdrawal of order
As per sub-Section (2) on an application made by the taxable person within
thirty days from the date of receipt of order passed under sub-section (1) or
on his own motion, if the Additional Commissioner or Joint Commissioner
considers that such order is erroneous, he may withdraw such order and
follow the procedure laid down in Section 73 or Section 74.
21.8.2 Procedure mandated as per Rules
As per Rule 100 (3) of the Assessment and Audit Rules the order of
summary assessment under sub-section (1) of Section 64 shall be issued in
Form GST ASMT-16 and summary of the order shall be uploaded electronically
in Form GST DRC-07.
Sub-rule (4) provides that the person referred to in sub-section (2) of Section
64 may file an application for withdrawal of the summary assessment order in
Form GST ASMT–17.
Further as per sub-rule (5) the order of withdrawal or, as the case may be,
rejection of the application under sub- section (2) of Section 64 shall be
issued in Form GST ASMT-18.

21.9 Meaning of Audit

As per section 2(13) of CGST Act “audit” means the examination of records,
returns and other documents maintained or furnished by the registered
person under this Act or the Rules made thereunder or under any other law
for the time being in force to verify the correctness of turnover declared,
taxes paid, refund claimed and input tax credit availed, and to assess his
compliance with the provisions of this Act or the Rules made thereunder.
The provisions of audit are contained under Section 65 and 66 of the CGST
Act which are discussed in succeeding paras.

21.10 Audit by Tax Authorities

As per Section 65 (1) the Commissioner or any officer authorised by him, by way
of a general or a specific order, may undertake audit of any registered

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person for such period, at such frequency and in such manner as may be
prescribed.
Thus audit under said section can be made of any registered person i.e. a
person who has obtained registration as required under Section 22 or 24 of
CGST Act.
Further sub-section (2) mandates that the officers referred to in sub-section
(1) may conduct audit at the place of business of the registered person or in their
office.
The place of business is defined under Section 2(85) of CGST Act. Further
Section 35 of CGST Act mandates that every registered person shall keep
and maintain at principal place of business as mentioned in the certificate of
registration, true and correct account of outward supply of services, input
credit availed, output tax payable etc. Thus normally the audit will be
conducted at the principal place of business of the registered person.
21.10.1 Period of Audit as per Rule
As per Rule 101 (1) the period of audit to be conducted under section 65(1) shall
be a financial year or multiples thereof.
21.10.2 Notice of audit
As per Section 65(3) of CGST Act the registered person shall be informed by
way of a notice not less than fifteen working days prior to the conduct of audit
in such manner as may be prescribed.
21.10.2-a Procedure mandated in Rules
As per Rule 101(2) of the CGST Rules where it is decided to undertake the
audit of a registered person in accordance with the provisions of Section 65,
the proper officer shall issue a notice in Form GST ADT-01 within the time
specified in sub-section (3) of the said section.
21.10.3 Time limit for Audit
Section 65 (4) mandates that the audit under sub-section (1) shall be
completed within a period of three months from the date of commencement
of the audit:
However where the Commissioner is satisfied that audit in respect of such
registered person cannot be completed within three months, he may, for the

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reasons to be recorded in writing, extend the period by a further period not

exceeding six months.
Further the Explanation to said section states that the expression
“commencement of audit” shall mean the date on which the records and
other documents, called for by the tax authorities, are made available by the
registered person or the actual institution of audit at the place of business,
whichever is later.
21.10.4 Afford / furnish necessary facility / information.
As per Section 65 (5) during the course of audit, the authorised officer may
require the registered person,—
(i) to afford him the necessary facility to verify the books of account or
other documents as he may require;
(ii) to furnish such information as he may require and render assistance
for timely completion of the audit.
21.10.4-a Procedure mandated in Rules
As per Rule 101(3) of the CGST Rules the proper officer authorised to
conduct audit of the records and books of account of the registered person
shall, with the assistance of the team of officers and officials accompanying
him, verify the documents on the basis of which the books of account are
maintained and the returns and statements furnished under the Act and the
rules made thereunder, the correctness of the turnover, exemptions and
deductions claimed, the rate of tax applied in respect of supply of goods or
services or both, the input tax credit availed and utilized, refund claimed, and
other relevant issues and record the observations in his audit notes.
Further as per sub-Rule (4) the proper officer may inform the registered
person of the discrepancies, if any, noticed as observations of the audit and
the said person may file his reply and the proper officer shall finalise the
findings of the audit after due consideration of the reply furnished.
21.10.5 Conclusion of Audit
As per Section 65 (6) of CGST Act on conclusion of audit, the proper officer
shall, within thirty days, inform the registered person, whose records are
audited, about the findings, his rights and obligations and the reasons for
such findings.

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21.10.5-a Procedure mandated in Rules

As per sub-rule (5) of Rule 101 of CGST Rules on conclusion of the audit,
the proper officer shall inform the findings of audit to the registered person in
accordance with the provisions of Section 65(6) in Form GST ADT-02.
21.10.6 Demand for differential tax
As per Section 65 (7) of CGST Act where the audit conducted under sub- section
(1) results in detection of
a) tax not paid or
b) short paid or
c) erroneously refunded, or
d) input tax credit wrongly availed or utilised,
the proper officer may initiate action under Section 73 or Section 74.

21.11 Special Audit

As per Section 66 (1) of CGST Act if at any stage of scrutiny, inquiry,
investigation or any other proceedings before him, any officer not below the
rank of Assistant Commissioner, having regard to the nature and complexity
of the case and the interest of revenue, is of the opinion that the value has
not been correctly declared or the credit availed is not within the normal
limits, he may, with the prior approval of the Commissioner, direct such
registered person by a communication in writing to get his records including
books of account examined and audited by a Chartered Accountant or a Cost
Accountant as may be nominated by the Commissioner.
Further as per Rule 102(1) of CGST Rules where special audit is required to
be conducted under Section 66, the officer referred to in the said section shall
issue a direction in Form GST ADT-03 to the registered person to get his
records audited by the Chartered Accountant or Cost Accountant specified in
the said direction.
21.11.1 Meaning of Chartered Accountant
As per Section 2(23) of CGST Act “Chartered Accountant” means a Chartered
Accountant as defined in clause (b) of sub-section (1) of section 2 of the
Chartered Accountants Act, 1949.

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As per above referred clause of Chartered Accountants Act ‘Chartered

Accountant’ means a person who is the Member of the Institute. A person
shall be regarded as Member if his name appears in the register of members
prepared by the Institute of Chartered Accountants of India.
21.11.2 Meaning of Cost Accountant
As per Section 2(35) “Cost Accountant” means a Cost Accountant as defined
in clause (c) of sub-section (1) of section 2 of the Cost and Works
Accountants Act, 1959;
As per above referred clause of Cost and Works Accountants Act ‘Cost
Accountant’ means a person who is the Member of the Institute.
21.11.3 Audit report within 90 days with further extension
of 90 days
As per Section 66 (2) of CGST Act the Chartered Accountant or Cost
Accountant so nominated shall, within the period of ninety days, submit a
report of such audit duly signed and certified by him to the said Assistant
Commissioner mentioning therein such other particulars as may be specified:
However, the Assistant Commissioner may, on an application made To Him In
This Behalf By The Registered Person Or The Chartered Accountant Or Cost
Accountant or for any material and sufficient reason, extend the said period
by a further period of ninety days.
21.11.4 Special audit in addition to any other audit
Section 66(3) provides that the provisions of sub-section (1) shall have effect
notwithstanding that the accounts of the registered person have been audited
under any other provisions of this Act or any other law for the time being in force.
From plain reading of above provision it appears that even if the audit has
been conducted by the Department under Section 65 for a period, Special
audit can still be conducted for the same period.
21.11.5 Opportunity of hearing to taxable person
Section 66(4) of CGST Act provides that the registered person shall be given
an opportunity of being heard in respect of any material gathered on the
basis of special audit under sub-section (1) which is proposed to be used in
any proceedings against him under this Act or the Rules made thereunder.

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Therefore the registered person can refute any objection raised by a

Chartered Accountant / Cost Accountant in its report.
Further as per Rule 102(2) of CGST Rules on conclusion of special audit, the
registered person shall be informed of the findings of special audit in Form GST
ADT-04.
21.11.6 Expenses of special audit
As per Section 66(5) the expenses of the examination and audit of records
under sub-section (1), including the remuneration of such Chartered
Accountant or Cost Accountant, shall be determined and paid by the
Commissioner and such determination shall be final.
Therefore the expenses on special audit are not required to be paid by the
registered person of whose special audit is being conducted.
21.12.7 Demand notice on basis of special audit report
As per Section 66 (6) of CGST Act where the special audit conducted under
sub-section (1) results in detection of tax not paid or short paid or
erroneously refunded, or input tax credit wrongly availed or utilised, the
proper officer may initiate action under Section 73 or Section 74.

21.13 Audit of Accounts from a Chartered

Accountant
Every registered person whose turnover during a financial year exceeds the
prescribed limit (2 crore) will get his accounts audited by a Chartered
Accountant or a Cost Accountant and shall submit a copy of the audited
annual accounts, the reconciliation statement under section 44(2) and such
other documents in such form and manner as prescribed under Rule 80 of
the CGST Rules. (Section 35(5) of the CGST Act).
In terms of Rule 80(3) of the CGST Rules “every registered person whose
aggregate turnover during a financial year exceeds two crore rupees shall
get his accounts audited as specified under sub-section (5) of Section 35 and
he shall furnish a copy of the audited annual accounts and a reconciliation
statement, duly certified, in GSTR 9C, electronically through the common
portal either directly or through a Facilitation Centre notified by the
Commissioner”.
It may be noted here that for FY 2018-19 and 2019-20 the audit of accounts

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as above is optional for tax payers having aggregate turnover upto Rs 5

Crore (instead of Rs 2 Crore).
combined reading of the Section 35(5), 44(2) along with the notified forms,
give rise to two situations, namely,
(a) entities not required to be audited under any other statute in which
case audit has to be carried out in terms of Section 35(5) and
reconciliation statement to be drawn under Section 44(2) duly certified
and
(b) entities that are required to be audited under any other statutes like
the Companies Act, Income-tax Act, Co-operative Societies Act, etc.,
When the records of the entity are audited under any other statute,
reconciliation statement can be drawn up by the same auditor, who will also
certify the same or different auditor. Where the financials are audited (under
any other law), then there is no requirement to conduct yet another audit of
the same financials for GST purposes. GST audit exercise can proceed with
the remainder of the exercise to prepare the reconciliation statement as
required in Part A and certify as required in Part B.
Where the financials are (somehow) not audited under any law, then these
financials need to be audited for GST purposes apart from the exercise in
Part A and Part B of GSTR 9C. Please note that there no guidance as to the
‘terms of reference’ for such a case. Given that this is a case that has come
before a Chartered Accountant, his expertise will come to bear in providing a
suitably audited financial statement to proceed with the Part A and Part B
exercise in GSTR 9C.
21.13.1 Documents to be furnished upon completion of
Audit
It can be seen that Section 35(5) read with Section 44(2) of the CGST Act
provides that the following documents shall be furnished electronically by the
assessee upon conclusion of the audit:
(a) Annual Return;
(b) Copy of the audited annual accounts;
(c) Reconciliation statement, reconciling the value of supplies declared in
the return furnished for the financial year with the audited annual
financial statement in Form GSTR 9C, duly certified;

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(d) Such other particulars, as may be prescribed Vide Rule 80(3) the
reconciliation statement shall be furnished in the GSTR 9C.
The provisions of Section 44(2) require reconciliation of the figures declared
in ‘return furnished for the financial year’ with the ‘audited financial
statement’. It appears that the return furnished for the financial year refers to
the annual return furnished in Form GSTR 9.
21.13.2 Audit not required of Govt. Department
Any Department of the Central Government or a State Government or a local
authority, whose books of account are subject to audit by the C&AG or an
auditor appointed for auditing the accounts of local authorities under any law
for the time being in force, is not required get the audit of accounts done
under GST law.
21.13.3 Important points to be seen while conducting GST
Audit under Section 35(5)
1. Reconciliation of Income & Receipts as per P & L account and as per
GST Returns.
This one is the basic exercise wherein the incomes as per P&L Account for
the FY 2018-19 should be reconciled with the income streams on which GST
has been paid under GSTR-3B / GSTR-9 or not paid being exempt / non-
GST supplies.
Reasons for differences between the turnover could be due to unbilled
revenue in books, which though booked as income is not subject to GST as
time of supply has not been triggered. Another reason for difference could be
unadjusted advances of services as year end which though are subject to
payment of GST, but same are not booked as income in P&L Account.
Further there could be foreign exchange fluctuations which may be adjusted
in P&L Account but same are not subject to GST.
It is recommended that every transaction reflected in ‘Other Income’ ledger is
checked to confirm as to whether GST is applicable on any such transaction
for which tax invoice is not prepared. For example, late payment interest
received etc. Further credit in expenditure accounts should also be checked
to catch the reimbursement of expenses and whether GST is paid thereon in
cases where such reimbursement is not as pure agent.
The reconciliation of the turnover declared in the audited financial statement with
turnover declared in GSTR9 is to be mentioned in Part II of GSTR-9C.

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2. Supply of services free of cost to branches located to other States

As per Section 25 of the CGST Act, 2017 read with para 2 of Schedule – I to
the CGST Act, 2017, any transfer of goods / support services given by head
office / branch to other branches / factory is to be treated as ‘outward supply’
even if it is without consideration and accordingly, IGST will be applicable.
Thus such cases should be checked, to ensure payment of due GST on the
value determined as per CGST Rules, 2017.
3. Verification of ’place of supply’ to check whether correct GST is
charged
It should be checked that place of supply has correctly been determined and
indicated in the tax invoice raised. Such compliance should specifically be
checked in “bill to – ship to” cases where the place of supply of goods is not
the place where goods are sent but the place where the person on whose
direction the goods are sent, is located (registered).
Any wrong determination of place of supply may result in wrong payment of
tax i.e. CGST + SGST instead of IGST and vice versa.
4. Rate of outward supply to be checked based on HSN/SAC
The rate of GST applicable on outward supplies as charged and paid by
auditee should be checked based upon HSN / SAC Code in order to ensure
the correctness of rate applied. It may be noted here that in Part III of GSTR-
9C we need to give the reconciliation of tax paid wherein the bifurcation of
tax value is to be given GST rate wise viz 5%, 12%,18% or 28%.
5. Outward supplies claimed as exports to be checked
Outward supplies claimed as exports to be checked on the basis of
provisions of Sec. 2(5) & 2(6) of IGST Act, 2017. Whether such supplies
satisfy all conditions or not.
Like as per Section 2(6) a supply will be regarded as export of service inter-
alia only if the payment of such service has been received by the supplier of
service in convertible foreign exchange. Thus, even if recipient is located
abroad and place of supply is also abroad, such supply of service would not
be regarded as export if payment is received in Indian Rupees.
Also, it should be checked that if exports are made without payment of GST, LUT
has duly been submitted.

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6. Checking valuation of supply is as per GST law:

It should be ensured that all expenses recovered by the supplier incurred on
behalf of recipient like transit insurance, freight etc. are included in taxable value
and GST is paid thereon.
Further adjustment of any discounts given is strictly as per the provisions of
Sec. 15(3) of CGST Act, 2017 wherein only the discounts recorded on invoice
or allowed subsequently as per agreement (by issue of credit note) are
allowed. For rest of discounts no adjustment of GST is allowed, however a
financial credit note of basic value can be issued without any GST
implications.
8. Expenses liable to RCM including the foreign payments.
As a GST Auditor another important area to check is whether compliance of
reverse charge provisions has been made by auditee or not. Here also the
auditor can check the ledger accounts of expense heads like renting of motor
vehicles, legal services, sponsorship expenses, freight payments to GTA,
security expenses etc and a reconciliation may be obtained thereof with amounts
on which GST has been paid under reverse charge mechanism.
The Foreign payments towards import of services are also subject to RCM,
the amounts thereof can be checked from 15CA / 15CB / notes to accounts
in case of Companies and payment of GST be ensured.
9. Reconciliation of ITC declared in Annual Return with ITC availed on
expenses as per P&L A/c
The Auditor should check the expense heads in ledger accounts on which
ITC is being availed. This will ensure accuracy of ITC availed. Such
reconciliation is to be given at Table 14 of GSTR-9C, However same has been
made optional for the FY 2018-19. However, It is suggested that such
statement should be kept as part of working papers of the audit.
Further it should be checked that the documentary evidences as laid down
under Rule 36 of the CGST Rules, 2017 is available and condition for
availing of ITC as per Section 16 of the CGST Act are fulfilled.
Also, by logic, the ITC closing balance as on March 31, 2019 should match
with ITC balance reflected on the GST portal under the input tax credit
ledger.

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10. Ensure blocked ITC covered in Sec. 17(5) has not been availed
While checking the ITC availed by the auditee, it should be checked that ITC
which is blocked under Section 17(5) of the CGST Act, 2017 has not been
availed.
Examples of blocked credits are GST paid on passenger transportation
vehicles or renting thereof including insurance, R&M etc (subject to some
exceptions), work contract services for construction of immoveable property,
goods / services received for construction of immoveable property (other
than P&M) on his own account etc.
11. Checking that payment to creditors is made within 180 days, else
ITC to be reversed
As per Second Proviso to Section 16(2) of the CGST Act,2017 where a
recipient fails to pay to the supplier (other than in RCM cases) the value of
supply along with tax payable thereon within a period of 180 days from the
invoice date, the corresponding ITC will be added in output tax liability. In
case partial payment is made, partial ITC will be added.
Here it is important to note that words used are “fails to pay” and thus in our view
the cases where retention money is deducted from bill, as per contract terms,
reversal of ITC as above is not required. For further details Click Here.
12. Reversal of ITC on any value of goods written off in the books
As per Section 17(5)(h) of the CGST Act, 2017 in case any goods (raw
material, WEIP or finished goods) are written off in the books, the respective
ITC thereon should be reversed. Compliance of this may be checked.
13. Reversal of ITC in case of exempted / non-GST supply;
In accordance to Section 17(1) and 17(2) of the CGST Act, 2017 read with
Rule 42 of the CGSt Rules, 2017 taxpayers are required to reverse input tax
credit in respect of common goods / services used in providing taxable as
well as exempt supplies. It should be checked that such reversal is made as
per formula given in Rule 42 of the CGST Rules, 2017 which speaks of pro
rata reversal.
Further the exempt supply for purpose of above ITC reversal is to be
computed after certain adjustment. For further details Click here.

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14. Ensure Tax invoices/ debit or credit notes/ self invoices/ payment
voucher/ refund voucher are issued
It should be checked that the supplier has issued tax invoice as per provisions
of Section 31 of the CGST Act, 2017 containing all the required particulars as
mandated under Rule 46 of the CGST Rules, 2017. Further debit / credit
notes are issued in compliance to Section 34 and Rule 53.
Further issuance of self invoice is to be made as per Section 31(3)(f) of the
CGST Act,2017 in cases where supplies are received from unregistered
suppliers. This invoice is most important in availing of ITC of tax paid under RCM
in view of fact that as per Rule 36 the documentary requirement for availing of
ITC in such cases is this self invoice.
A receipt voucher is to be issued upon receipt of advance as per Section
31(3)(e) and payment voucher as per Section 31(3)(g) is to be issued at time
of making payment to the supplier in cases where payment is required to be
made under RCM.
15. To check compliances in regard to Goods Sent to Job Work
It should be checked whether the conditions are fulfilled for claiming input tax
credit on goods (including capital goods) sent for job work. Also whether the
Principal has sent goods to the job worker under the cover of delivery
challans. Further it should be checked whether the registered person has
furnished Form ITC 04 for the quarters in which goods were sent out for job
work.
It should also be ensured that in case the registered person has supplied
goods directly from the place of business of job worker, whether he has
satisfied the conditions laid down in Proviso to Section 143 (1) of GST Act.
Further in case the job worker is unregistered, and such job worker has
supplied any waste/ scrap generated during the job work from his place of
business directly, it should be checked whether the registered person has
paid tax on such supply.
It should also be checked that any goods sent for job work are returned
within specified time viz one year for inputs and three years for capital goods.
Else the sending of such goods would be treated as supply on the day such
goods were sent and thus GST would become payable with interest.

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 Chapter 22

Demand, Recovery and Adjudication

22.1 Introduction
The verification of records during the assessment and audit may result in
identification by the Department of any case of non-payment, short payment,
wrong availment or utilization of input tax credit or erroneous refund of taxes
by or to a taxable person. Accordingly, in such cases the above amounts
need to be recovered by the Department from such person. The provisions in
regard to recovery of taxes are contained in Section 73 to 84 of CGST Act.
Identical provisions are there in SGST Acts and further these provisions are
also applicable to IGST Act and UTGST Act also in view of specific
mandation in this regard in such Acts.

22.2 Contents of the Chapter

(a) Demands for tax short paid or not paid or erroneously refunded (Refer
Para 22.3)
(b) Demand when no charge of fraud, wilful mis-statement or suppression
of facts (Refer Para 22.4)
(c) Demand when fraud, wilful mis-statement is or suppression of facts is
alleged by Department (Refer Para 22.5)
(d) Meaning of fraud or any wilful-misstatement or suppression of facts to
evade tax (Refer Para 22.6)
(e) Tax collected but not paid to Government (Refer para 22.7)
(f) Central tax / State tax or Union territory tax paid when Integrated tax
payable and vice versa (Refer para 22.8)
(g) Recovery of tax (Refer Para 22.9)
(h) Payment of tax and other amount in instalments. (Refer Para 22.10)
(i) Transfer of property to be void in certain cases. (Refer Para 22.11)
(j) Tax to be first charge on property. (Refer Para 22.12)
(k) Provisional attachment to protect revenue in certain cases (Refer Para
22.13)
 Demand, Recovery and Adjudication

(l) Continuation and validation of certain recovery proceedings (Refer

Para 22.14)

22.3 Demands for tax short paid or not paid or

erroneously refunded
Since taxes under the GST Acts is payable on self-assessment basis, it is
possible that the taxable person may not have correctly paid the tax or may
not have paid the tax at all. It is also possible that the taxable person might
have claimed refund and got refund of tax or input tax credit which is
wrongful. In such cases, as per the provision of GST Acts the department
can issue show cause notice and adjudicate the demand. In normal cases,
such order is required to be passed within three years from the relevant date
(refer Para 22.4.7). However, if the non-payment was on account of fraud,
wilful mis-statement or suppression of facts to evade tax, the order can be
passed within five years from relevant date (refer Para 22.5.7). These
provisions apply to recovery of interest as well.

22.4 Demand when no charge of fraud, wilful mis-

statement or suppression of facts
As per Section 73(1) where any tax has not been paid or short paid or
erroneously refunded, or where input tax credit has been wrongly availed or
utilized for any reason, other than the reason of fraud or any wilful
misstatement or suppression of facts to evade tax the proper officer shall
serve notice on the person chargeable with tax which has not been so paid
or which has been so short paid or to whom the refund has erroneously been
made, who has wrongly availed or utilized input tax credit. The notice should
require him to show cause why he should not pay the amount specified in the
notice along with interest payable thereon under Section 50 and penalty
leviable under the provisions this Act or the Rules made thereunder.
The provisions apply to recovery of interest also.
22.4.1 Time limit for issue of SCN
As per Section 73(2) of CGST Act the proper officer shall issue the notice
under sub-section (1) at least three months prior to the time limit specified
under sub-section (10) for issuance of order. The time limit of issuance of
order is discussed at Para 18.4.7.

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22.4.2 Statement if SCN on same issue was issued for

earlier period
Once a show cause notice (SCN) has been issued, repeat notices / statements
are required till matter is finally adjudicated. As per Section 73(3) of CGST Act
where a notice has been issued for any earlier period under Section 73(1), the
proper officer may serve a statement, containing the details of tax not paid or
short paid or erroneously refunded or input tax credit wrongly availed or
utilized for such periods other than those covered under earlier SCN, on the
person chargeable with tax. Thus such Statements would be issued on the
same issues but for subsequent period i.e. periods not covered by SCN.
Further In this regard Section 73(4) of CGST Act provides that the service of
such statement shall be deemed to be service of notice on such person, if
the grounds relied upon for such tax periods are the same as are mentioned
in the earlier notice.
The above provision has been incorporated in order to save paper work at
Department, where show cause notice on same grounds was issued for
earlier period.
22.4.3 Taxable Person can pay tax on own before issue
of SCN
As per Section 73(5) of CGST Act the person chargeable with tax may,
before service of notice or statement pay the amount of tax along with
interest payable thereon under Section 50 on the basis of his own
ascertainment of such tax or the tax as ascertained by the proper officer and
inform the proper officer in writing of such payment.
Section 73(6) stipulates that the proper officer, on receipt of such
information, shall not serve any show cause notice or the Statement in
respect of the tax so paid or any penalty leviable under the provisions of this
Act or the Rules made thereunder.
The above provision is to promote voluntary compliance and reduce
litigation.
Further it may be noted that “Shall” not serve show cause notice or the
Statement means it is a mandatory provision. The issue has to be closed any
notice even for penalty or late fee etc cannot be issued.

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22.4.4 Show cause notice if amount short paid.

As per Section 73(7) where the proper officer is of the opinion that the
amount paid under Section 73(5) falls short of the amount actually payable,
he shall proceed to issue the show cause notice under Section 73(1) in
respect of such amount which falls short of the amount actually payable.
22.4.5 No penalty if tax with interest paid within 30 days
from issue of SCN
As per section 73(8) where any person chargeable with tax under the SCN
(73(1)) or statement (73(8)) pays the said tax along with with interest
payable under Section 50 within thirty days of issue of show cause notice, no
penalty shall be payable and all proceedings in respect of the said tax shall
be deemed to be concluded.
It is important to note here that the period of thirty days is counted from date
of ‘issue’ of SCN and not date of receipt of SCN. Further all proceeding in
respect of the said tax shall be deemed to be concluded means any further
notice even to co-noticee for penalty, late fee etc cannot be issued.
22.4.6 Demand with maximum 10% penalty
In case a taxable person does not voluntarily pay the tax and interest, the
proper officer shall, after considering the representation, if any, made by
person chargeable with tax, determine the amount of tax, interest and a
penalty not exceeding ten per cent of tax or ten thousand rupees, whichever
is higher, due from such person and issue an order. (Section 73(9) of CGST
Act)
The words used in above sub-section are ‘penalty not exceeding 10%’ which
means lower penalty can be imposed.
22.4.7 Time limit for issue of order
As per Section 73(10) the proper officer shall issue the order under section
73(9) within three years from the due date for furnishing of annual return for
the financial year to which the tax not paid or short paid or input tax credit
wrongly availed or utilised relates to or within three years from the date of
erroneous refund.
It is important to note here that the above time limit is for issue of demand
order and not for issuing show cause notice. However, if the SCN was kept

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pending and transferred to call book as Department had filed appeal against
an order adverse to Revenue in some other proceedings on same issue, that
period shall be excluded under Section 75 (11) of CGST Act.
Further as discussed at Para 22.4.1 that SCN is required to be issued at
least three months prior to time limit specified in sub-section (10) for
issuance of order.

22.5 Demand when fraud, wilful mis-statement is

or suppression of facts is alleged by
Department
As per Section 74(1) of CGST Act where it appears to the proper officer that
any tax has not been paid or short paid or erroneously refunded or where
input tax credit has been wrongly availed or utilised by reason of fraud, or
any wilful-misstatement or suppression of facts to evade tax, he shall serve
notice on the person chargeable with tax which has not been so paid or
which has been so short paid or to whom the refund has erroneously been
made, or who has wrongly availed or utilised input tax credit, requiring him to
show cause as to why he should not pay the amount specified in the notice
along with interest payable thereon under Section 50 and a penalty
equivalent to the tax specified in the notice.
22.5.1 Time limit for issue of SCN
As per Section 74(2) of CGST Act the proper officer shall issue the notice
under sub-section (1) at least six months prior to the time limit specified
under sub-section (10) for issuance of order. The time limit of issuance of
order is discussed at Para 18.5.7.
22.5.2 Statement if SCN on same issue was issued for
earlier period
Once a show cause notice (SCN) has been issued, repeat notices / statements
are required till matter is finally adjudicated. As per Section 74(3) of CGST Act
where a notice has been issued for any earlier period under Section 74(1), the
proper officer may serve a statement, containing the details of tax not paid or
short paid or erroneously refunded or input tax credit wrongly availed or
utilized for such periods other than those covered under earlier SCN, on the
person chargeable with tax. Thus such statements

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would be issued on the same issues but for subsequent period i.e. periods
not covered by SCN.
Further in this regard Section 74(4) of CGST Act provides that the service of
such statement shall be deemed to be service of notice on such person, if
the grounds relied upon for such tax periods are the same as are mentioned
in the earlier notice.
22.5.3 Taxable Person can pay tax with 15% of tax as
penalty on own before issue of SCN
As per Section 74(5) of CGST Act the person chargeable with tax may,
before service of notice or statement pay the amount of tax along with
interest payable thereon under Section 50 and a penalty equivalent to fifteen
percent of such tax on the basis of his own ascertainment of such tax or the
tax as ascertained by the proper officer and inform the proper officer in
writing of such payment.
Section 74(6) stipulates that the proper officer, on receipt of such
information, shall not serve any show cause notice or the statement in respect
of the tax so paid or any penalty leviable under the provisions of this Act or the
Rules made thereunder.
The above provision is to promote voluntary compliance and reduce
litigation.
Further it may be noted that “Shall” not serve show cause notice or the
Statement means it is a mandatory provision. The issue has to be closed any
notice even for penalty or late fee etc cannot be issued.
22.5.4 Show cause notice if amount short paid.
As per Section 74(7) where the proper officer is of the opinion that the
amount paid under Section 74(5) falls short of the amount actually payable,
he shall proceed to issue the show cause notice under Section 74(1) in
respect of such amount which falls short of the amount actually payable.
22.5.5 25% Penalty if tax with interest paid within 30 days
from issue of SCN
As per section 74(8) where any person chargeable with tax under the SCN
(74(1)) or statement (74(8)) pays the said tax along with interest payable under
Section 50 and a penalty equivalent to twenty-five percent of such tax

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within thirty days of issue of show cause notice, all proceedings in respect of the
said tax shall be deemed to be concluded.
It is important to note here that the period of thirty days is counted from date
of ‘issue’ of SCN and not date of receipt of SCN. Further all proceeding in
respect of the said tax shall be deemed to be concluded means any further
notice even to co-noticee for penalty, late fee etc cannot be issued.
22.5.6 Demand with penalty equal to tax, in case of
willful- misstatement or suppression of facts etc.
In case a taxable person does not voluntarily pay the tax and interest, the
proper officer shall, after considering the representation, if any, made by
person chargeable with tax, determine the amount of tax, interest and a
penalty due from such person and issue an order. (Section 74(9) of CGST
Act)
There is no discretion with the officer to reduce penalty in case of fraud,
suppression of facts or willful mis-statement. However as per Section 74(11)
if the taxable person pays tax, interest and penalty equivalent to 50% of such
tax within thirty days of communication of order, all proceedings in respect of
said notice shall be deemed to be concluded i.e. balance 50% penalty will
stand waived.
22.5.7 Time limit for issue of order
As per Section 74(10) the proper officer shall issue the order under section
74(9) within a period of five years from the due date for furnishing of annual
return for the financial year to which the tax not paid or short paid or input tax
credit wrongly availed or utilised relates to or within five years from the date
of erroneous refund.
It is important to note here that the above time limit is for issue of demand
order and not for issuing show cause notice. However, if the SCN was kept
pending and transferred to call book as Department had filed appeal against
an order adverse to Revenue in some other proceedings on same issue, that
period shall be excluded under Section 75 (11) of CGST Act.
Further as discussed at Para 18.5.1 that SCN is required to be issued at
least six months prior to time limit specified in sub-section (10) for issuance
of order.

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22.5.8 Meaning of fraud or any wilful-misstatement or

suppression of facts to evade tax
Time limit for raising demand and penalty amount increases if there is charge
of fraud or any wilful misstatement or suppression of facts to evade tax.
Hence, this issue becomes litigation prone
However, Explanation 2 below Section 74 of CGST Act states that for the
purposes of this Act, the expression “suppression” shall mean non-
declaration of facts or information which a taxable person is required to
declare in the return, statement, report or any other document furnished
under this Act or the Rules made thereunder, or failure to furnish any
information on being asked for, in writing, by the proper officer.
For ready reference the summary of important judicial pronouncements is
given below:
22.5.8-a Suppression should be wilful
Supreme Court in Rainbow Industries v. CCE- 1994 (74) ELT 3 (SC) 1994 (6)
SCC 563 AIR 1994 SC 2783 = 1994 AIR SCW 4465 have held that in order
for the extended period to apply, two ingredients must be present wilful
suppression, mis declaration etc., and the intention to evade duty. The
dictum laid in above judgment has been followed in ONGC v. CCE-1995 (79)
ELT 117 (CEGAT). Same view in Tamil Nadu Housing Board v. CCE-1995
Suppl (1) SCC 50 = 74 ELT 9 (SC). In this case, it was held that the powers
to extend period from one year to 5 years are exceptional powers and hence
have to be construed strictly.
Intention to evade payment of duty is not mere failure to pay duty. It must be
something more, i e. that assessee must be aware that duty was leviable and
he must deliberately avoid payment of duty. ‘Evade’ means defeating the
provision of law of paying duty. It is made more stringent by the use of word
‘intent'. In other words, the assessee must deliberately avoid payment of duty
payable under the law. Where there was scope of doubt whether duty was
payable or not, is not intention to evade duty. Tamilnadu Housing Board v.
CCE 1995 Supp (1) SCC 50=1994(74) ELT 9(SC)=55 ECR 7. In this case it
was held that the powers to extend period from one year to 5 years are
exceptional powers and hence have to be construed strictly.

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22.5.8-b No suppression if all facts were disclosed

If all facts have been disclosed to Department, extended period is not
applicable - Nestler Boilers (P) Ltd. v. Collector 1990 (50) ELT 613 (CEGAT),
National Rifles v. CCE 1999 (112) ELT 483 (CEGAT), P R Rolling v. CCE
(2010) 249 ELT 232 (CESTAT), Alumeco India Extrusion v. CCE (2010) 249
ELT 577 (CESTAT), Delhi Public School Society v. CST (2014) 43 GST
421=41 taxmann.com 377=75 VST 350(CESTAT), CC v. A S Moloobhoy and
Sons (2015) 51 GST 110= 57 taxmann.com 297 (SC)
22.5.8-c Mere inaction or mere non-disclosure is not suppression of Facts
Suppression means not providing information which the person is legally
required to state, but is intentionally or deliberately not stated.
Hon. Supreme Court, in Collector v. Chemphar Drugs 40 ELT 276 = 1989 (2)
SCC 127 = AIR 1989 SC 832, has held that mere inaction or failure on part of
manufacturer will not amount to suppression of facts. Conscious or deliberate
withholding of information when the manufacturer knew otherwise, is
required to be established, before saddling the manufacturer with liability for
extended period (3) [reiterated in Lubri-Chem Industries Ltd v. Collector 1994
(73) ELT 257 SC = 1994 (2) Supp. SCC III 258= 1994 AIR SCW 3672 = AIR
1994 SC 2604 = 1994 (4) RLT 239 (SC)].- Same view in M K Kotechav CCE
AIR 2005 SC 1147=179 ELT 261(SC 3 Member Bench), Nestle India v. CCE
(2009) 235 ELT 577 (SC).
In the case of Padmini Products v. CCE - 1989 (43) ELT 195 (SC)= (1989) 4
SCC 275 = AIR 1989 SC 2278 = 25 ECR 289 = (1990) 76 STC 411 (SC), it
has been held by Apex Court that mere non-declaration is not sufficient to
invoke larger period but some more positive act is required. It was held that
mere failure or negligence on part of manufacturer to take license or pay duty
in case where there was scope for doubt as to whether goods were dutiable
or not, could not attract the extended limitation. In this case the assessee did
not obtain excise license under belief that the goods are exempt from duty.
There was a scope of doubt regarding liability of duty. Hence, demand for
period beyond period of one year (that time six months) was set aside -
followed in Jaiprakash Industries v. CCE 2002 AIR SCW 4840 = (2003) 1
SCC 67 = 146 ELT 481 (SC 3 Member Bench). Cadila Laboratories v. CCE
2003 AIR SCW 1115 = 152 ELT 262 (SC) CCE 2005 (188) ELT 251 (SC 3

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Member Bench), Gopal Zarda udyog v. CCE 2005 (188) ELT 251 (SC 3
Member Bench), Uniworth Textiles v CCE (2013) 9 SCC 753=39 STT58 = 31
taxmann.com 67=288 ELT 161(SC), Escorts Limited v CCE (2015) 9 SCC
109= 319 ELT 406 (SC).
Mere omission to give correct information did not constitute suppression
unless that omission was made wilfully in order to evade duty. Suppression
would mean failure to disclose full and true information with the intent to
evade payment of duty - CCE v Ballarpur Industries Ltd. (2007) 11 STT 6
(SC) - Same view in Continental Foundation Jt Venture v. CCE (2007) 10
SCC 337 = 216 ELT 177 (SC), Anand Nishikawa Co. Ltd. v. CCE 2005 (188)
ELT 149 = 2 STT 226 =(2005) 7 SCC 749 (SC) - quoted with approval in
CCE v Damnet Chemicals (2007) 216 ELT 3 (SC) UOl v. Rajasthan Spinning
& Weaving Mills (2009) 20 STT 481 180 Taxman 609 = 238 ELT 3 (SC) -
Escorts Ltd. v. CCE (2015) 9 SCC 109 = 319 ELT 406 (SC).
A mere omission or negligence would not constitute a deliberate act of
suppressioveri or suggestiofalsi - Dilip N Shroff v. Jt CIT (2007) 161 Taxman
218 = 291 ITR 519 (SC) - quoted in CWT v. Smt Shakuntala Devi Dalmia
(2008) 172 Taxman 162 (All HC DB) - CIT v Cafco Syndicate Shipping Co
(2008) 174 Taxman 406 (Mad HC DB)
22.5.8-d No suppression if facts not required to be disclosed are not disclosed
There can be no suppression of facts if facts which are not required to be
disclosed are not disclosed - Smt. Shirisht Dhawan v. Shaw Brothers -1992
(1) SCC 534 = 1992 AIR SCW 1549 =AIR 1992 SC 1555' CCE v. Ranka
Wires (2015) 322 ELT 410 (SC)
22.5.8-e No suppression of facts if assessee had a bona fide belief
If a party bona fide believes in a legal position (e.g. that no duty is payable or
no licence is required in his case) and if there is scope for such belief and
doubt, penal provisions of section 11A will not apply. - Padmini Products v.
CCE – 1989 (43) ELT 195 (SC) =1989 (4) SCC 275 = 1989 (25) ECR 289
(SC) = AIR 1989 SC 2278 - CCE v. Surat Textile Mills 2004 (167) ELT 379
(SC 3 Member Bench) Gopal Zarda udyog v. CCE 2005 (188) ELT 251 (SC 3
Member Bench) - CCE v. ITC Ltd. (2010) 257 ELT 514 (Kar HC DB)

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22.5.8-f No suppression if Department aware of facts

extended period of five years is not applicable for any omission on part of
assessee, unless it is a deliberate attempt to escape from payment of duty.
When facts were known to the Department, extended period of five years is
not applicable- Pushpam Pharmaceuticals Co v. CCE 1995 Supp 3 SCC 462
=78 ELT 401(SC) - quoted with approval in Sarabhai M Chemicals v. CCE
AIR 2005 SC 1126 = (2005) 2 SCC 168=179 ELT 3 (SC 3 Member Bench). -
Anand Nishikawa Co Ltd v CCE 2005 (188) ELT 149 = 2 STT 226 = (2005) 7
SCC 749 (SC).
22.5.8-g Wilful Misstatement
False statement becomes ‘wilfull’ if it is deliberate or intentional. It is not
wilfull if statement is accidental or inadvertent. A statement will not be
misstatement only because full facts were not disclosed. "Wilful" means ‘with
intent to evade duty'.- Cosmic Dye Chemical v. CCE 95 STC 604 = 75 ELT
721 = (1995) 6 SCC 117 (SC 3 Member Bench)- quoted with approval in Uol
v. Rajasthan Spinning & Weaving Mills (2009) 238 ELT 3 (SC).
Misstatement must be wilful to invoke extended period of limitation-
Continental Foundation Jt Venture v. CCE (2007) 10 SCC 337 = 216 ELT
177 (SC) - quoted with approval in UOI v. Rajasthan Spinning Weaving Mills
(2009) 20 STT 481=180 Taxman 609 = 238 ELT 3 (SC).
22.5.8-h Fraud
basic element of fraud is deceit. Section 17 of Contract Act states that fraud
means making a suggestion, as a fact, which the person does not believe it
be true. Fraud also means active concealment of fact. Generally, ‘fraud'
means deceit, trickery or misrepresentation. Intention to evade duty is built
into the words ‘fraud' and ‘collusion’ - Cosmic Dye Chemical v. CCE 95 STC
604 = (1995) 6 SCC 117 = 75 ELT 721 (SC 3 Member Bench). In Dr. Vimla v.
Delhi Administration AIR 1963 SC 1572 = 1963 Supp 2 SCR 585, it as
observed that “defraud" includes an element of deceit.
In UOI v. Jain Shudh Vanaspati 1996 (86) ELT 460 (SC), it was observed
‘fraud’, if established, unravels all.
No Court in this land will allow a person to keep an advantage which he has
obtained by fraud. No judgment of a Court, no order of a Minister, can be allowed
to stand if it has been obtained by fraud. Fraud unravels everything.

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The Court is careful not to find fraud unless it is distinctly pleaded and
proved ; but once it is provide, it vitiates judgements, contracts and all
transactions whatsoever - Lazarus Estate v. Berly (1956) 1 All ER 341 (CA)
quoted with approval in Ram Preeti Yadav v. U P Board of High School and
Intermediate Education 2003 AIR SCW 4912 = (2003) 8 SCC 311= AIR 2003
SC 4268, where it was observed, 'In SP Chengalvaraya Naidu v. Jagannath
AIR 1994 SC 853 = (1994) 1 SCC 1 = 1994 AIR SCW 243, this Court stated
that fraud avoids all judicial acts, ecclesiastical or temporal’- Same view in
CC v. Aafloat Textiles (2009) 235 ELT 587 (SC) - State of Uttar Pradesh v.
Ravindra Kumar Sharma (2016) 4 SCC 791.
Fraud is proved when it is shown that a false representation has been made
(i) knowingly or (ii) without belief in its truth or (iii) recklessly, careless
whether it be true or false. Suppression of a material document would also
amount to a fraud on the Court - Ashok Leyland Ltd v. State of Tamil Nadu
2004 AIR SCW 1001 = 2004 (3) SCC 1 (SC 3 Member Bench) -Same view in
Derry v Peek (1886-90) All ER 1 = (1889) 14 AC 337 (HL) State of AP v. T
Suryachandra Rao (2005) 6 SCC 149 = AIR 2005 SC 3110- State of Orissa
v. Harapriya Bisoi AIR 2009 SC 2991.
Suppression of a material document would also amount to fraud on Court -
Gowrishankar v. Joshi Amba Shankar Family Trust 1996 (3) SCC 310 = 1996
AIR SCW 2684 = AIR 1996 SC 2202
Concealment of relevant and material facts, which should have been
declared before Arbitrator, is an act of fraud and is against public policy of
India - Fraud being of 'infinite variety' may take many forms -- Fraud - in the
contemplation of a civil court of justice, may be said to include properly all
acts, omissions, and concealments which involve a breach of legal or
equitable duty, trust or confidence, justly reposed, and are injurious to
another, or by which an undue or unconscientious advantage is taken of
another- Venture Global Engineering v. Satyam Computer Services (2010) 8
SCC 660.
Fraud is an act of deliberate deception with the design of securing something
by taking unfair advantage of another. It is a deception in order to gain by
another's loss. It is cheating intended to get an advantage - S P
Chengalvaraya Naidu v. Jagannath AIR 1994 SC 853 = (1994) 1 SCC 1
=1994 AIR SCW 243.
In CC v. Essar Oil Ltd (2004)172 ELT 433 (SC), all important case law on
‘fraud' was discussed, and it was observed, “By ‘fraud’ is meant an intention

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to deceive; whether it is from any expectation of advantage to party itself or

from the ill will towards other is immaterial. ‘Fraud’ involves two elements,
deceit and injury to the person deceived. Injury will include any harm
whatever caused to any person in body, mind, reputation or such others [see
Dr. Vimla v. Delhi Administration AIR 1963 SC 1572 = 1963 Supp 2 SCR 585
and Indian Bank Association v. Satyam Fibres 1996 (5) SCC 550 = 1996 AIR
SCW 3228 = AIR 1996 SC 2592].
Misrepresentation itself amounts to fraud - Devendra Kumar v. State of
Uttaranchal (2009) 9 SCC 363.
Frauset jus nunquam cohabitant - Fraud and justice never dwell together -
Meghmala v. G Narasimha Reddy (2010) 8 SCC 383.
However, mere silence is not fraud, unless it is the duty of the person to
speak or silence itself is equivalent to speech.

22.6 General provisions relating to demand of tax

The following provisions apply to both types of demands i.e. the demands
under Section 74 wherein the charge of fraud, wilful mis-statement or
suppression of facts to evade tax has been invoked and demand under
Section 73 without such charge.
22.6.1 Period of stay to be excluded for computing
period of three/five years
As per Section 75(1) of CGST Act where the service of notice or issuance of
order is stayed by an order of a court or Tribunal, the period of such stay
shall be excluded in computing the period of three years or five years.
22.6.2 If charge of suppression, fraud not established
Section 75(2) of CGST Act provides that if Appellate Authority or Tribunal or
Court concludes that the notice issued under Section 74(1) is not sustainable
for the reason that the charge of fraud or any wilful mis-statement or
suppression of facts to evade tax has not been established against the
person to whom the notice was issued, the proper officer shall determine the
tax payable by such person, deeming as if notice was issued under Section
73(1) i.e. period of limitation for issue of order within three years shall apply
in such cases instead of five years. Further the date upto which SCN can be
issued will be computed accordingly. (refer Para 22.4.7).

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22.6.3 Time limit of issue of order in pursuance to

direction of Appellate Authority etc.
As per Section 75(3) of CGST Act where any order is required to be issued in
pursuance of the direction of the Appellate Authority or Applellate Tribunal or
a Court, such order shall be issued within two years from the date of
communication of the said direction.
22.6.4 Opportunity of personal hearing
Section 75(4) mandates that an opportunity of personal hearing shall be
granted where a request is received in writing from the person chargeable
with tax or penalty, or where any adverse decision is contemplated against
such person.
22.6.5 Maximum of three Adjournments from hearing can
be given
As per Section 75(5) of CGST Act the proper shall, if sufficient cause is
shown by the person chargeable with tax, grant time to such person and
adjourn the hearing for reasons to be recorded in writing. However no
adjournment shall be granted for more than three times to a person during
the proceedings.
Thus under GST law maximum three adjournments can be given. This
provision has been incorporated in order to speed up the disposal of notices.
22.6.6 Issue of order with reasons
Section 75(6) states that the proper officer in his order, shall set out the
relevant facts and the basis of his decision. Thus the order issued by the
proper officer should be a speaking order.
22.6.7 Demand cannot be more than specified in notice
and cannot be confirmed on other ground
As per Section 75(7) the amount of tax, interest and penalty demanded the
order shall not be in excess of the amount specified in the notice and no
demand shall be confirmed on grounds other than the grounds specified in
the notice.
22.6.8 Interest penalty gets automatically modified
Section 75(9) provides that where the Appellate Authority or Appellate

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Tribunal or Court modifies the amount of tax determined by the proper

officer, the amount of interest and penalty shall stand modified accordingly,
taking into account the amount of tax so modified.
This is due to fact that computation of interest and penalty hinges upon the
amount of tax and in cases where the tax amount has been modified
pursuant to an order of Authority/ Tribunal / Court the corresponding amount
related to interest and penalty shall also be recomputed based upon the
revised tax demand.
22.6.9 Interest mandatory even if not specified in order
Section 75(10) provides that interest on the tax short paid or not paid shall be
payable whether or not specified in the order determining the tax liability.
Thus, Interest is mandatory and would be levied as per Section 50 of CGST
Act.
22.6.10 Adjudication concludes if order not issued
within three/five years
As per Section 75(11) the adjudication proceedings shall be deemed to be
concluded if the order is not issued within three/five years i.e. the time limit of
issuance of order under section 73(10) or 74(10) of CGST Act.
The adjudication in such cases would be deemed to be concluded as
issuance of order in such cases would become time barred as the limitation
period of three / five years has expired.
Exclusion of Time: As per Section 75(11) if on any issue either Appellate
Authority or Appellate Tribunal or High Court has given decision prejudicial to
the interest of Revenue, and the Revenue has filed appeal to next higher
appellate authorities viz Appellate Tribunal or High Court or Supreme Court,
the time taken for decision rendered by such appellate authorities will be
excluded in computing the period of three or five years in cases the
proceedings are initiated by way of issue of SCN.
22.6.11 If Penalty imposed u/s 73 or 74, penalty cannot
be imposed under other provisions
As per Section 75(13) where any penalty is imposed under Section 73 or 74,
no penalty for the same act or omission shall be imposed on the same
person under any other provision of the GST Act(s).

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22.7 Tax collected but not paid to Government

Section 76(1) mandates that every person who has collected from any other
person any amount as representing the tax under this Act, and has not paid
the said amount to the Government, shall forthwith pay the said amount to
the Government, irrespective of whether the supplies in respect of which
such amount was collected are taxable or not.
In such cases as per sub-section (2), (3) and (5) of Section 76 the proper
officer can issue show cause notice to him and confirm demand through an
order after considering the representation of such person and giving him
personal hearing in case request is received in writing from the person to
whom SCN has been issued.
As per sub-section (8) the order issued by proper officer shall be a speaking
order i.e. it shall set out in his order the relevant facts and the basis of his
decision. Further the order shall not travel beyond the SCN for the purpose of
confirming the liability.
Further as per sub-section (4) such person shall be liable to pay interest at
the rates specified in Section 50 from the date such amount was collected by
him to the date such amount is paid by him to the Government.
It is important to note here that sub-section (1) states that SCN in cases of
tax collected but not paid to Government can be issued in regard to payment
of tax, interest and penalty. However specific provision of levy of interest only
in such cases has been provided in sub-section (4) and no provision in
regard to levy and quantum of penalty exists in Section 76 of CGST Act.
22.7.1 Time limit of issue of order
As per Section 76(6) the proper officer shall issue an order within one year
from the date of issue of notice. The period of stay in regard to issue of order
by an order of court of Appellate Tribunal shall be excluded in computing the
said period of one year.
It may noted here that no limit for issuance of notice under Section 76(1) has
been laid down and it can be issued by the proper officer at any time for any
period. However once such SCN has been issued then provision has been
mandated in law for completion of the adjudication and issue order within one
year from date of issue of such notice.

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22.7.2 Surplus credited to Fund or refunded

As per sub-section (9) and (10) of Section 76 the amount paid under sub-
section (1) or (3) shall be adjusted against the tax payable, if any, by the
person in relation to supplies referred to in sub-section (1) i.e. for which tax
was collected. Where any surplus is left after such adjustment the amount of
such surplus shall either be credited to the Fund or refunded to the person
who borne the incidence of such amount.
Further as per Section 73(11) the person who has borne the incidence of the
amount may apply for the refund of the same and for such refund provisions
of unjust enrichment will apply. Accordingly refund cannot be claimed by a
person who has passed on the incidence of the tax onto the other person.

22.8 Central tax / State tax or Union territory tax

paid when Integrated tax payable and vice
versa
Section 77 of CGST Act / SGST Act, Section 19 of IGST Act and Section 12
of UTGST Act lays down the provisions in regard to cases where the tax is
wrongfully collected and paid to Central Government or State Government.
For ready reference the above provisions are given below in a tabular
presentation.
Section 77 of CGST / Section 19 of IGST Section 12 of UTGST
SGST Acts Act Act
77. (1) A registered 19. (1) A registered 12. (1) A registered
person who has paid person who has paid person who has paid
the Central tax and integrated tax on a the Central tax and the
State tax or, as the supply considered by Union territory tax on a
case may be, the him to be an inter- transaction considered
Central tax and the State supply, but by him to be an intra-
Union territory tax on a which is subsequently State supply, but
transaction considered held to be an intra- which is subsequently
by him to be an intra- State supply, shall be held to be an inter-
State supply, but granted refund of the State supply, shall be
which is subsequently amount of integrated refunded the amount
held to be an inter- tax so paid in such of taxes so paid in
State supply, shall be manner and subject to such manner and

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refunded the amount such conditions as subject to such

of taxes so paid in may be prescribed. conditions as may be
such manner and prescribed.
subject to such
conditions as may be
prescribed.
(2) A registered person (2) A registered person (2) A registered person
who has paid who has paid Central who has paid
integrated tax on a tax and State tax or integrated tax on a
transaction considered Union territory tax, as transaction considered
by him to be an inter- the case may be, on a by him to be an inter-
State supply, but transaction considered State supply, but
which is subsequently by him to be an intra- which is subsequently
held to be an intra- State supply, but held to be an intra-
State supply, shall not which is subsequently State supply, shall not
be required to pay any held to be an inter- be required to pay any
interest on the amount State supply, shall not interest on the amount
of central tax and be required to pay any of the central tax and
State tax or, as the interest on the amount the Union territory tax
case may be, the of integrated tax payable.
Central tax and the payable.
Union territory tax /
State tax payable.

22.9 Recovery of tax

As per Section 78 if the demand raised in any order passed under GST Acts
is not paid within a period of three months from the date of service of such
order, Department can start recovery proceedings.
Further the above period of three months can be reduced by proper officer if
considered expedient in the interest of the Revenue for reasons to be
recorded in writing.
Section 79 lays down the provisions in regard to recovery of tax and such
provisions as relevant to suppliers of services are given below:-
79. (1) Where any amount payable by a person to the Government under
any of the provisions of this Act or the rules made thereunder is not paid, the

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proper officer shall proceed to recover the amount by one or more of the
following modes, namely:––
(a) the proper officer may deduct or may require any other specified
officer to deduct the amount so payable from any money owing to such
person which may be under the control of the proper officer or such
other specified officer;
(b) the proper officer may recover or may require any other specified
officer to recover the amount so payable by detaining and selling any
goods belonging to such person which are under the control of the
proper officer or such other specified officer;
(c) (i) the proper officer may, by a notice in writing, require any other person
from whom money is due or may become due to such person or who
holds or may subsequently hold money for or on account of such
person, to pay to the Government either forthwith upon the money
becoming due or being held, or within the time specified in the notice
not being before the money becomes due or is held, so much of the
money as is sufficient to pay the amount due from such person or the
whole of the money when it is equal to or less than that amount;
(ii) every person to whom the notice is issued under sub-clause (i) shall
be bound to comply with such notice, and in particular, where any such
notice is issued to a post office, banking company or an insurer, it
shall not be necessary to produce any pass book, deposit receipt,
policy or any other document for the purpose of any entry,
endorsement or the like being made before payment is made,
notwithstanding any rule, practice or requirement to the contrary;
(iii) in case the person to whom a notice under sub-clause (i) has been
issued, fails to make the payment in pursuance thereof to the
Government, he shall be deemed to be a defaulter in respect of the
amount specified in the notice and all the consequences of this Act or
the rules made thereunder shall follow;
(iv) the officer issuing a notice under sub-clause (i) may, at any time,
amend or revoke such notice or extend the time for making any
payment in pursuance of the notice;
(v) any person making any payment in compliance with a notice issued
under sub-clause (i) shall be deemed to have made the payment

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under the authority of the person in default and such payment being
credited to the Government shall be deemed to constitute a good and
sufficient discharge of the liability of such person to the person in
default to the extent of the amount specified in the receipt;
(vi) any person discharging any liability to the person in default after
service on him of the notice issued under sub-clause (i) shall be
personally liable to the Government to the extent of the liability
discharged or to the extent of the liability of the person in default for
tax, interest and penalty, whichever is less;
(vii) where a person on whom a notice is served under sub-clause (i)
proves to the satisfaction of the officer issuing the notice that the
money demanded or any part thereof was not due to the person in
default or that he did not hold any money for or on account of the
person in default, at the time the notice was served on him, nor is the
money demanded or any part thereof, likely to become due to the said
person or be held for or on account of such person, nothing contained
in this section shall be deemed to require the person on whom the
notice has been served to pay to the Government any such money or
part thereof;
(d) the proper officer may, in accordance with the rules to be made in this
behalf, distrain any movable or immovable property belonging to or
under the control of such person, and detain the same until the
amount payable is paid; and in case, any part of the said amount
payable or of the cost of the distress or keeping of the property,
remains unpaid for a period of thirty days next after any such distress,
may cause the said property to be sold and with the proceeds of such
sale, may satisfy the amount payable and the costs including cost of
sale remaining unpaid and shall render the surplus amount, if any, to
such person;
(e) the proper officer may prepare a certificate signed by him specifying
the amount due from such person and send it to the Collector of the
district in which such person owns any property or resides or carries
on his business or to any officer authorised by the Government and
the said Collector or the said officer, on receipt of such certificate,
shall proceed to recover from such person the amount specified
thereunder as if it were an arrear of land revenue;

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(f) Notwithstanding anything contained in the Code of Criminal

Procedure, 1973, the proper officer may file an application to the
appropriate Magistrate and such Magistrate shall proceed to recover
from such person the amount specified thereunder as if it were a fine
imposed by him.
(2) Where the terms of any bond or other instrument executed under this
Act or any rules or regulations made thereunder provide that any amount due
under such instrument may be recovered in the manner laid down in sub-
section (1), the amount may, without prejudice to any other mode of
recovery, be recovered in accordance with the provisions of that sub-section.
(3) Where any amount of tax, interest or penalty is payable by a person to
the Government under any of the provisions of this Act or the rules made
thereunder and which remains unpaid, the proper officer of State tax or
Union territory tax, during the course of recovery of said tax arrears, may
recover the amount from the said person as if it were an arrear of State tax
or Union territory tax and credit the amount so recovered to the account of
the Government.
(4) Where the amount recovered under sub-section (3) is less than the
amount due to the Central Government and State Government, the amount
to be credited to the account of the respective Governments shall be in
proportion to the amount due to each such Government.

22.10 Payment of tax and other amount in

installments
As per Section 80 on an application filed by a taxable person, the
Commissioner may, for reasons to be recorded in writing, extend the time for
payment or allow payment of any amount due under this Act, other than the
amount due as per the liability self-assessed in any return, by such person in
monthly instalments not exceeding twenty four, subject to payment of interest
under Section 50 and subject to such conditions and limitations as may be
prescribed:
Further as per Proviso to Section 80 where there is default in payment of any
one instalment on its due date, the whole outstanding balance payable on
such date shall become due and payable forthwith and shall, without any
further notice being served on the person, be liable for recovery.

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22.11 Transfer of property to be void in certain

cases
As per Section 81 of CGST Act where a person, after any amount has
become due from him, creates a charge on or parts with the property
belonging to him or in his possession by way of sale, mortgage, exchange, or
any other mode of transfer whatsoever of any of his properties in favour of
any other person with the intention of defrauding the Government revenue,
such charge or transfer shall be void as against any claim in respect of any
tax or any other sum payable by the said person:
Further as per Proviso to said Section, such charge or transfer shall not be
void if it is made for adequate consideration, in good faith and without notice
of the pendency of such proceedings under this Act or without notice of such
tax or other sum payable by the said person, or with the previous permission
of the proper officer.

22.12 Tax to be first charge on property.

Section 82 of CGST Act mandates that notwithstanding anything to the
contrary contained in any law for the time being in force, save as otherwise
provided in the Insolvency and Bankruptcy Code, 2016, any amount payable
by a taxable person or any other person on account of tax, interest or penalty
which he is liable to pay to the Government shall be a first charge on the
property of such taxable person or such person.

22.13 Provisional attachment to protect Revenue

in certain cases
As per Section 83 (1) of CGST Act where during the pendency of any
proceedings under Section 62 or Section 63 or Section 54 or Section 67 or
Section 73 or Section 74, the Commissioner is of the opinion that for the
purpose of protecting the interest of the Government revenue, it is necessary
so to do, he may, by order in writing attach provisionally any property,
including bank account, belonging to the taxable person in such manner as
may be prescribed.
However it has been provided in sub-section (2) that every such provisional
attachment shall cease to have effect after the expiry of a period of one year
from the date of the order made under sub-section (1).

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22.14 Continuation and validation of certain

recovery proceedings
Section 84 of CGST Act provides that where any notice of demand in respect
of any tax, penalty, interest or any other amount payable under this Act,
(hereafter in this section referred to as “Government dues”), is served upon
any taxable person or any other person and any appeal or revision
application is filed or any other proceedings is initiated in respect of such
Government dues, then––
(a) where such Government dues are enhanced in such appeal, revision
or other proceedings, the Commissioner shall serve upon the taxable
person or any other person another notice of demand in respect of the
amount by which such Government dues are enhanced and any
recovery proceedings in relation to such Government dues as are
covered by the notice of demand served upon him before the disposal
of such appeal, revision or other proceedings may, without the service
of any fresh notice of demand, be continued from the stage at which
such proceedings stood immediately before such disposal;
(b) where such Government dues are reduced in such appeal, revision or
in other proceedings––
(i) it shall not be necessary for the Commissioner to serve upon
the taxable person a fresh notice of demand;
(ii) the Commissioner shall give intimation of such reduction to him
and to the appropriate authority with whom recovery
proceedings is pending;
(iii) any recovery proceedings initiated on the basis of the demand
served upon him prior to the disposal of such appeal, revision or
other proceedings may be continued in relation to the amount so
reduced from the stage at which such proceedings stood
immediately before such disposal.

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 Chapter 23

Accounts and Other Records

23.1 Introduction
Assessment in GST is mainly focused on self-assessment by the taxpayers
themselves. Every taxpayer is required to self-assess the taxes payable and
furnish a return for specified tax periods i.e. the period for which return is
required to be filed. The compliance verification is done by the Department
through scrutiny of returns, audit and/or investigation. Thus, the compliance
verification is to be done through documentary checks rather than physical
controls. This requires certain obligations to be cast on the taxpayer for
keeping and maintaining accounts and records.

23.2 Registered required to keep and maintain

certain accounts / records
As per Section 35(1) of the CGST Act every registered person shall keep and
maintain, at his principal place of business, as mentioned in the certificate of
registration, a true and correct account of—
(a) production or manufacture of goods;
(b) inward and outward supply of goods or services or both;
(c) stock of goods;
(d) input tax credit availed;
(e) output tax payable and paid; and
(f) such other particulars as may be prescribed.
Where more than one place of business is specified in the certificate of
registration, the accounts relating to each place of business shall be kept at such
places of business. (First Proviso to Section 35(1) of the CGST Act).
The registered person may keep and maintain such accounts and other
particulars in electronic form in such manner as prescribed in Rule 57 of the
CGST Rules. (Second Proviso to Section 35(1) of the CGST Act).
GST : Practitioners Perspective

23.3 Maintenance of accounts by transporter and

owner / operator of godown:
Section 35(2) of the CGST Act mandates that it is the responsibility of the
following persons to maintain records of the consignor, consignee and other
relevant details of the goods as prescribed in Rule 58 of the CGST Rules,
2017.
─ The owner or Operator of warehouse or godown or any other place
used for storage of goods
─ Every transporter

23.4 Power of Commissioner in regard to

maintenance of accounts
The Commissioner may notify a class of taxable persons to maintain
additional accounts or documents for such purpose as may be specified
therein. (Section 35(3) of the CGST Act).
Where the Commissioner considers that any class of taxable person is not in
a position to keep and maintain accounts in accordance with the provisions
of this section, he may, for reasons to be recorded in writing, permit such
class of taxable persons to maintain accounts in such manner as may be
prescribed. (Section 35(4) of the CGST Act).

23.5 Failure to account for goods / services

Subject to the provisions of Section 17(5)(h)(i.e. goods lost, stolen,
destroyed, written off etc), where the registered person fails to account for
the goods or services or both in accordance with the provisions of Section
35(1), the proper officer shall determine the amount of tax payable on the
goods or services or both that are not accounted for, as if such goods or
services or both had been supplied by such person and the provisions of
Section 73 or Section 74, as the case may be, shall, mutatis mutandis, apply
for determination of such tax.(Section 35(6) of the CGST Act).

23.6 Period of retention of accounts

Every registered person required to keep and maintain books of account or other
records in accordance with the provisions of section 35(1) shall retain

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them until the expiry of 72 months (6 years) from the due date of furnishing
of annual return for the year pertaining to such accounts and records.
(Section 36 of the CGST Act)
If a registered person, who is a party to an appeal or revision or any other
proceedings before any Appellate Authority or Revisional Authority or
Appellate Tribunal or court, whether filed by him or by the Commissioner, or
is under investigation for an offence under Chapter XIX, shall retain the
books of account and other records pertaining to the subject matter of such
appeal or revision or proceedings or investigation for a period of one year
after final disposal of such appeal or revision or proceedings or investigation,
or for the period specified above, whichever is later.(Proviso to Section 36 of
the CGST Act).

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 Chapter 24

Advance Ruling
24.1 Introduction
The broad objective for incorporating the provisions of advance ruling under
the GST law were to setting up such an authority were to provide certainty in
tax liability in advance in relation to an activity proposed to be undertaken by
the applicant, attract foreign direct investment (FDI), reduce litigation,
pronounce ruling expeditiously in transparent and inexpensive manner. The
provisions of advance ruling were made long ago in 1993 in Income Tax Act
vide sections 245N to 245R.
Section 95 to Section 106 of the CGST Act makes provisions relating to
advance ruling. The provisions contained in these sections are quite different
from the provisions contained in other fiscal statutes, in as much as it
provides for advance ruling, appellate authority and also permits the advance
ruling in respect of the activities which are being undertaken by the applicant.
Similar provisions in regard to advance ruling exist under the service tax law.
The provisions contained in the above sections of CGST Act which are also
part of SGST Act and applicable to IGST Act and UTGST Act also are
discussed in this Chapter.

24.2 Meaning of Advance Ruling

As per clause (a) of section 95 of CGST /SGST Act and section 12 of UTGST
Act, ‘advance ruling’ means a decision provided by the authority or the Appellate
Authority to an applicant on matters or on questions specified in section 97(2) or
100(1) of CGST/SGST Act as the case may be, in relation to the supply of goods
or services or both proposed to be undertaken or being undertaken by the
applicant.
It is evident from the above that Advance Ruling means a decision provided
by either Original Authority or Appellate Authority on the issues specified in
Section 97(2) or Section 100(1). Thus before proceeding head it is important
to go through the issues on which advance ruling can be sought.
As per Section 97(2) of CGST Act Advance Ruling can be sought for the
following questions:
 Advance Ruling

(a) classification of any goods or services or both;

(b) applicability of a notification issued under provisions of the GST Act(s);
(c) determination of time and value of supply of goods or services or both;
(d) admissibility of input tax credit of tax paid or deemed to have been
paid;
(e) determination of the liability to pay tax on any goods or services under
the Act;
(f) whether applicant is required to be registered under the Act;
(g) whether any particular thing done by the applicant with respect to any
goods or services amounts to or results in a supply of goods or
services, within the meaning of that term.
From above it is evident that Advance Ruling can only be in respect of these
issues mentioned in Section 97(2) of CGST Act. Further the definition of
advance ruling as discussed supra mentions of Section 100(1) also. In this
regard it may be noted that Section 100(1) provides for filing appeal against
the Order passed under section 98 of the Act. Therefore the appeal under
section 100 of the Act will also be in respect of issues stipulated in Section
97(2) of the Act.
It may be seen that the issues specified in Section 97 (2) may be in relation
to supply of goods or services proposed to be undertaken or being
undertaken by the applicant.

24.4 Constitution of original Authority and

Appellate Authority and the powers thereof
Section 96 and 99 of CGST Act provides for constitution of original Authority
for Advance Ruling and for Advance Ruling respectively and also powers of
Authority. These discussed below:
24.4-1 Original Authority
Section 96 of the CGST Act provides that the Authority for Advance Ruling
constituted under the provisions of SGST Act or UT-GST Act, shall be
deemed to be the Authority for Advance Ruling in respect of that State or
Union Territory under this Act also. The State Government or the
Government in Union Territory will constitute the advance ruling authority.

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The State authority will also decide the advance ruling in respect of CGST
Act and IGST Act
24.4-2 Appellate Authority
Section 99 of the CGST Act provides that the Appellate Authority
constituted under the SGST Act or UTGST Act shall be deemed to be the
Appellate Authority in respect of that State or Union Territory under this Act
also. Thus, as mentioned above, the State Government or Government in the
Union Territory will constitute the Appellate Authority for that State. The
same authority will also be considered as Appellate Authority for CGST Act
and IGST Act.
24.4-3 Powers of Authority and Appellate Authority
Section 105 of the CGST Act provides that the Authority or the Appellate
Authority shall have the powers of civil court under the Code of Civil
Procedure, 1908 for the purpose of exercising its powers regarding:
(a) Discovery and inspection;
(b) Enforcing the attendance of any person and examining him on oath
(c) Issuing commissions and compelling production account other records.
It may be noted that the Authority can issue summons to any person for this
purpose.
Section 105(2) of the CGST Act provides that the Authority or the Appellate
Authority shall be considered as a civil court for the purposes of Section 195
and every proceeding before the Authority shall be deemed to be a judicial
proceeding within the meaning of Sections 193 and 228, and for the purpose
of Section 196, of the Indian Penal Code.

24.5 Application for Advance Ruling

As per Section 97(1) of the CGST Act, the applicant shall make an
application in such form and manner and accompanied by such fees as may
be prescribed.
The term 'applicant’ has been defined in Section 95(b) of he Act to mean any
person registered or desirous of obtaining registration under Act. Accordingly any
person who is registered or desirous to obtain the same i.e who is not registered
presently can make an application for obtaining Advance Ruling.

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24.6 Procedure on receipt of Application

Section 98 of the CGST Act specifies the procedure to be followed by
Authority after the receipt of application. The following steps are specified in
said section.
24.6.1 Forward copy to officers
As per Section 98(1), the authority shall forward a copy of the application
received along with all the enclosures to concerned officers. The authority
can also request to furnish the relevant records. The records shall be
returned as early as possible.
24.6.2 Accepting or rejecting of Application
The authority after examining the application, records and after hearing the
applicant or authorized representative by order shall admit or reject the
application. The Proviso further provides that the application shall not be
admitted where the questions raised in the application already pending in any
proceeding or decided in any proceeding under any provisions of this Act in case
of an applicant.
The Second Proviso provides that the application should not be rejected
without providing an opportunity of personal hearing.
In case of rejection of the application the Order shall give the reasons for
such rejection.
As per sub section (3), the copy of the admission order and the rejection
order shall be forwarded to the applicant and prescribed officers.
24.6-3 Procedures after admission
The authority shall examine the material as may be placed before him or
obtained by the authority. The authority shall provide an opportunity of
hearing to the applicant the authorized representative the appellant as well
as to concerned officer or his authorized representative. Thereafter the
Authority shall pronounce its advance ruling on the specified issues.
24.6-4 Difference of Opinion
Where the Members of the Authority shall differ on any question on which the
Advance Ruling is sought, they shall state the point on which they differ and
make reference to Appellate Authority for its decision. If the Members of the

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Appellate Authority also differ on any point, it shall be deemed that no

Advance Ruling can be issued in respect of questions covered by reference
application.
24.6-5 Time Limit
Section 117(6) of CGST Act provides that the Authority or, as the case may
be the Appellate Authority shall pronounce its Advance Ruling in writing within
90 of the receipt of application.
24.6-5 Copy of Order
A copy of Advance Ruling pronounced by Authority duly signed by members
and certified in such manner shall be sent to the applicant and jurisdictional
Officer as soon as possible, after the pronouncement.

24.7 Appeal to the Appellate Authority and orders

Section 100 and 101 of the CGST Act provides for filing of appeal against the
Order pronounced by authority under sub-section (4) of Section 98. The
order by authority under Section 98(4) is made after the application is
admitted. If the application is not admitted, but rejected for admission then no
appeal can be filed against the order of rejection. The following steps in this
regard are discussed below:
24.7-1 Time Limit
As per Section 100 (2) of the CGST Act, the appeal shall be filed within a
period of 30 days from the date on which the Advance Ruling sought to
appealed against, is communicated to the applicant or jurisdictional officer.
24.7-2 Form and the Manner of filing Appeal
The form and the manner of filing the appeal will be specified in the rule as
an when notified.
24.7-3 Order of the Appellate Authority
The Appellate Authority after hearing shall pass such order as it thinks fit,
confirming or modifying the ruling appealed against. The said order shall be
passed within 90 days from the date of filing the appeal under section 100 or
98(5). If the Members of the Appellate Authority differ on any points referred
to in appeal or reference, it shall be deemed that no Advance Ruling can be
issued under appeal or reference. The copy of the Advance Ruling Order
duly
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signed by the Members and certified in such manner shall be sent to the
applicant or the jurisdictional Officer after its pronouncement.
24.7-4 Writ Petition
There is no provision of appeal against decision of Appellate Authority
However, writ petition is maintainable. Similar provisions regarding Advance
Ruling is made under the Central Excise Act, 1944 and the Income tax Act,
1961. No appeal is provided against the order of Advance Ruling Authority. It
has been held when there is no appeal, writ petition can be filed. The ratio
the following judgment should apply in GST Act also.
In Columbia Sportswear v 25 taxmann.com 470-210Taxman ELT 321 (SC) it was
held that Authority for Advance Ruling (AAR) is a Tribunal. writ petition against
the decision of AAR can be filed before High Court.
In this regard the FAQs on GST issued by CBEC on 31/03/2017 is important,
Q.19 (Chapter 17) of which is reproduced below:
Q 19. Whether Appeal can be filed before High Court or Supreme Court
against the ruling of Appellate Authority for Advance Rulings?
Ans. The CGST /SGST Act do not provide for any appeal against the ruling
of Appellate Authority for Advance Rulings. Thus no further appeals lie and
the ruling shall be binding on the applicant as well as the jurisdictional officer
in respect of applicant.
However, writ jurisdiction may lie before Hon’ble High Court or the Supreme
Court.

24.8 Rectification of Advance Ruling

Section 102 of the CGST Act provides that the Order passed by Authority or
Appellate Authority may be amended to rectify any error apparent on the face
of the record. If such error is noticed by the Appellate or by Authority on its
own accord, or is brought to notice by jurisdiction officer or applicant within a
period of six months from the date of order, then such orders can be
rectified. The Proviso further provides that no rectification which has the
effect of enhancing the tax or reducing the amount of admissible amount of
credit shall be made, unless notice is given to the applicant and such
applicant is provided with reasonable opportunity of hearing.

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24.9 Binding Nature

As per section 103(2), the Advance Ruling is binding on the applicant and also
binding on concerned officer or jurisdictional officer in respect of the
applicant (i.e., not in respect of others). The Advance Ruling will continue to
be binding unless there is change in law or facts the basis on which Advance
Ruling was given.
In this regard to the question whether the Advance Ruling is applicable on
persons other than applicant the FAQs on GST issued by CBEC on
31/03/2017 is important, Q.11 (Chapter 17) of which is reproduced below:-
Q11.Whether the Advance Ruling have precedent value of a judgment of the
High Court or the Supreme Court?
Ans. No, the Advance Ruling is binding only in respect of the matter referred.
It has no precedent value. However, even for persons other than applicant, it
does have persuasive value.

24.10 Order void in certain circumstances

As per Section 104 of the CGST Act where an Advance Ruling pronounced by
the Authority has been obtained by the applicant by fraud or suppression of
material facts or misrepresentation of facts, the authority can declare the
ruling to be void ab initio. Thereupon, all the provisions of the Act shall apply
to the applicant as if such ruling had never been made. Copy of such order
declaring the ruling void ab initio shall be sent to concerned officer or
jurisdictional officer.
If Authority for Advance Rulings find that the Advance Ruling was obtained by
fraud or misrepresentation of facts, the Authority can de ruling as void ab
initio.
The Proviso further provides that no order shall be issued unless the
opportunity has been given to the applicant of hearing.

24.11 Procedure of original Authority and

Appellant Authority
Section 106 of CGST Act provides that original Authority and Appellate
Authority have power to regulate its own procedure in all matters under the
Act. Thus, the Original Authority and Appellate Authority will issue public
notice or circular for the purpose of laying down the procedure on various
issues including manner of granting personal hearing etc.

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 Chapter 25

Appeals
25.1 Introduction
Someone has rightly said that ‘Powers corrupts and absolute power corrupts
absolutely’. Uncontrolled power is much more likely to be misused than
controlled power. Hence all Statutes generally provide for right of appeal
against an adverse decision. Accordingly provisions regarding appeals and
revision are provided under GST Law and are contained under Section 107
to 121 of CGST Act. Further these provisions are mirrored under the SGST
Acts of the respective State Govt / Union territory with Legislature. Thus we
can say that there are identical provisions regarding appeals and revision
under CGST and SGST Acts. These provisions are also applicable to IGST
Act / UTGST Act. The provisions contained in Section 107 to 121 of CGST /
SGST Act(s) are discussed in the succeeding paras.

25.2 Appeals under GST Law : At a glance

For ready reference of the readers the appeal provisions are tabulated as under:
 APPEALS UNDER GST
S. Types of When to file a Appeal Time Limit for filing Procedure for filing Appeal
No. Appeals appeal
1. Appeals to Any person aggrieved by aggrieved assessee 1. aggrieved assessee may prefer an appeal in
Appellate any decision or order may prefer an appeal prescribed Form-GST APL-01 (The grounds of
Authority passed under CGST within 3 months from the appeal and form of verification must be duly
/SGST/UTGST Act by an date on which the said signed) / Department may file application for
Adjudicating Authority decision or order is appeal in Form GST APL-03 along with the
Dept.- The Commissioner communicated to such other documents either electronically or
may, on his own motion, or person. otherwise as may be notified by the
Commissioner against a provisional
296

upon request from the For the department

Commissioner of State tax (Revenue), the time limit acknowledgement.
or the Commissioner of is 6 months 2. Thereafter a certified copy of the decision or
Union Territory tax, call for Appellate Authority is order appealed against shall be submitted
and examine the record of empowered to condone within 7 days of filing the appeal.
any proceeding in which an the delay in filing appeal 3. In case the appeal is filed by assessee, a final
adjudicating authority has upto 1 month. acknowledgement indicating the appeal
passed any decision or number shall be issued in Form GST APL-02
order under CGST by the said authority.
/SGST/UTGST Act, for the

Appeals
4.
purpose of satisfying
himself as to the legality or If Certified Date of filling appeal shall be
 propriety of the said decision copy is filed
or order and may, by order, Date on which the provisional
Within 7 days
direct any Officer acknowledgement stands issued
subordinate to him to apply
to the Appellate Authority After 7 days Date of submission of Certified
copy
The appeal shall be treated to be filed only
when the final acknowledgement, indicating
the appeal number is issued.
5. No appeal can be filed by appellant unless the
following is paid:
297

- Amount of tax, interest, fine, fee & penalty,

as is admitted, in full; and
- Pre-deposit of sum equal to 10% of
remaining amount of tax in dispute.
6. On payment of above amount, the recovery
proceedings for balance amount are deemed
to be stayed
7. Appellate authority need to hear and decide
the appeal, wherever possible, within a period

Appeals
of 1 year from the date of filing. Such Order
with a summary in Form GST APL-04, clearly
 GST : Practitioners Perspective
indicating the final amount of demand
confirmed needs to be sent to the appellant,
the respondent, the adjudicating authority,
jurisdictional Commissioner of CGST, SGST
and UTGST
2. Appeals to Any person aggrieved by aggrieved assessee 1. Appeal shall be preferred in prescribed Form
Appellate any decision or order may prefer an appeal GST APL-05 along with the other documents
Tribunal passed under Section 107 within three months from either electronically or otherwise as may be
or 108 of CGST Act or the the date on which the notified by the Registrar against a provisional
SGST or the UTGST Act order sought to be acknowledgement.
Dept.- Commissioner may, appealed against is 2. Memorandum of cross-objections to the
298

on his own motion or upon communicated. Appellate Tribunal shall be filed in Form GST
request from the For the APL-06.
Commissioner of State Tax Department 3. A cross appeal or appeal by Revenue to the
or Union Territory Tax, call (Revenue), the time limit Appellate Tribunal shall be made
for and examine the record is 6 months electronically, in Form GST APL-07.
of any order passed by the Memorandum of Cross 4. A certified copy of the decision or order
Appellate Authority or the objection is to be filed appealed against along with specified fees
Revisional Authority under by the assessee within shall be submitted within 7 days of filing of the
CGST /SGST/UTGST Act 45 days from the receipt appeal & a final acknowledgement indicating
for the purpose of of notice of appeal filed the appeal no. shall be issued in Form GST
satisfying himself as to the by the Department. APL-02.
Appellate Tribunal is
 legality or the propriety of empowered to condone 5.
the said order and may, by the delay in filing appeal If Certified Date of filling appeal shall be
order, direct any officer by assessee for a copy is filed
subordinate to him to apply further period of 3
Within 7 days Date on which the provisional
to the Appellate Tribunal months or memorandum
acknowledgement stands
of cross objection for a
issued
further period of 45
After 7 days Date of submission of Certified
days.
copy
An appeal shall be deemed to be filed only on
generation of the final acknowledgement
number.
299

6. Appeal to be filed in prescribed form duly

verified in prescribed manner along with
prescribed fees and
7. Amount of tax, interest, fine, fee &penalty, as
is admitted, in full; and pre-deposit of sum
equal to 20% of remaining amount of tax in
dispute in addition to amount deposited during
filling appeal before Appellate Authority
8. On payment of above amount, the recovery

Appeals
proceedings for balance amount are stayed till
the disposal of appeal.
 GST : Practitioners Perspective
9. The fees for filing and restoration of appeal
shall be Rs. 1,000/- for every Rs. 1 lakh of tax
or input tax credit involved or the difference in
tax or input tax credit involved or the amount of
fine, fee or penalty determined in the order
appealed against, subject to maximum of Rs.
25,000/-.
10. Appellate Tribunal to pass the order
confirming, modifying or annulling the decision
or order appealed against or remand the case
back to the appellate authority or the
300

Revisional authority or the original adjudicating

authority.
11. The Appellate Tribunal is empowered to
amend its order to rectify any mistake apparent
from record.
12. The Appellate Tribunal to hear and decide the
appeal, as far as possible, within a period of 1
year from the date of filing and send the copy
of order to appellate authority / Revisional
authority / original adjudicating authority, the
appellant, the jurisdictional Commissioner,
 Commissioner of State Tax or Union Territory
Tax.
13. The jurisdictional officer shall issue a
statement in Form GST APL-04 clearly
indicating the final amount of demand
confirmed by the Appellate Tribunal.
3. Appeals to Any person aggrieved by Appeal shall be filed 1. Appeal to be preferred in Form GST APL 08,
High Court any order passed by the within 180 days from the precisely stating the substantial question of law
(HC) State Bench or Area date on which the order involved, along with the prescribed fee.
Benches of the appealed against is 2. On being satisfied that substantial question of
Appellate Tribunal received by the law is involved in the case, HC shall formulate
301

aggrieved person a substantial question of law.

HC is empowered to 3. Appeal to be heard only on the question so
condone the delay in filing formulated and the respondent shall be
appeal. allowed to argue that the case does not involve
such question.
4. The HC may hear the appeal on any other
substantial question of law not formulated by it
after satisfying, for reasons to be recorded, of
involvement of such question in the case.

Appeals
5. The HC may determine any issue which has
not been determined or has been wrongly
 GST : Practitioners Perspective
determined by the State Bench or Area Benches.
6. Appeal to be heard by a Bench of not less than
2 Judges of HC and shall be decided in
accordance with the majority of opinion of such
Judges.
7. Difference of opinion on any point shall be
referred to one or more of the other Judges of
HC and such point shall be decided according
to the opinion of majority of Judges who have
heard the case including those who first heard
it.
302

8. The effect of judgment of HC shall be given on

the basis of a certified copy of the judgment.
9. The jurisdictional officer shall issue a
statement in Form GST APL-04 clearly
indicating the final amount of demand
confirmed by the HC

4. Appeals to Appeal shall lie to the SC- Immediately after The jurisdictional officer shall issue a statement in
Supreme From any order passed by passing of the judgment Form GST APL-04 clearly indicating the final amount
Court (SC) the National Bench or the or order, the HC certifies of demand confirmed by the SC
Regional Benches of the to be a fit one for appeal
 Appellate Tribunal; to the SC. SC is empowered to frame any substantial question of
Or law not formulated by any lower authority if it is
From any judgment or satisfied that the case before it involves such question
order passed by HC in an of law
appeal made under section
117,
in any case which, on its
own motion or on an oral
application made by or on
behalf of the party
aggrieved
303

Appeals
 Accounts and Other Records

25.3 Appeal before Appellate Authority-

109A. (1) Any person aggrieved by any decision or order passed under this
Act or the State Goods and Services Tax Act or the Union Territory Goods
and Services Tax Act may appeal to –
(a) the Commissioner (Appeals) where such decision or order is passed
by the Additional or Joint Commissioner;
(b) the Additional Commissioner (Appeals) where such decision or order
is passed by the Deputy or Assistant Commissioner or
Superintendent,
within three months from the date on which the said decision or order is
communicated to such person. (Rule 109A(1) of the CGST Rules).
An officer directed under sub-section (2) of Section 107 to appeal against any
decision or order passed under this Act or the State Goods and Services Tax Act
or the Union Territory Goods and Services Tax Act may appeal to –
(a) the Commissioner (Appeals) where such decision or order is passed
by the Additional or Joint Commissioner;
(b) the Additional Commissioner (Appeals) where such decision or order
is passed by the Deputy or Assistant Commissioner or the
Superintendent,
within six months from the date of communication of the said decision or
order.
(Rule 109A(2) of the CGST Rules).

25.4 Notice to person and order of revisional

authority in case of revision.
Where the revisional authority decides to pass an order in revision under
Section 108 which is likely to affect the person adversely, the revisional
authority shall serve on him a notice in Form GST RVN-01 and shall give him
a reasonable opportunity of being heard. (Rule 109B(1) of the CGST Rules).
The revisional authority shall, along with its order under sub-section (1) of
Section 108, issue a summary of the order in Form GST APL-04clearly
indicating the final amount of demand confirmed. (Rule 109B(2) of the CGST
Rules).

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 Chapter 26

Offences and Penalties

26.1 Introduction
Compliance of any law is of utmost importance. In order to reinforce the
compliance of the various provisions in any law the offences as well as
consequential penalties that can be levied on the persons contravening the
provisions of such Act, are contained in the relevant statute itself.
The provisions regarding offences and penalties are contained in Section
122 to 131 of the CGST Act, which will be discussed in this Chapter.

26.2 Offences and Penalties in GST : At a glance

S. Nature of Default Amount of Penalty
No.
1. Penalty for certain offences: Shall be liable to pay
Where a taxable person who- Penalty equivalent to higher
(i) supplies any goods or of Rupees 10,000/- or tax
services or both without issue evaded/ tax not deducted/
of any invoice or issues an collected or short
incorrect or false invoice with deducted/collected or tax
regard to any such supply; deducted/collected but not
(ii) issues any invoice or bill paid or ITC availed of or
without supply of goods or passed on or distributed
services or both in violation of irregularly or refund claimed
the provisions of this Act, or fraudulently, whichever is
the rules made thereunder; higher
(iii) Collects any amount as tax/
any tax in contravention of
the provisions of the CGST
Act but fails to pay the same
to the Government beyond a
period of 3 months from the
date on which such payment
becomes due
GST : Practitioners Perspective

(iv) fails to deduct/ collect tax u/s

52/51 or deducted/collected
an amount which is less than
the amount required to be
deducted/collected or fails to
pay to the Government the
amount deducted /collected
(v) takes or utilizes input tax
credit without actual receipt
of goods/services or both
either
(vi) fully or partially, in
contravention of the
provisions of this Act or takes
or distributes ITC in
contravention of section 20,
or the rules made thereunder;
(vii) Fraudulently obtains refund
of tax
(viii) Takes or distributes inout tax
credit in contravention of
section 20, or rules made
thereunder
(ix) falsifies or substitutes
financial records or produces
fake accounts or documents
or furnishes any false
information or return with an
intention to evade payment of
tax due under this Act;
(x) Fails to obtain registration (if
liable to be registered under
GST) or furnishes any false
information regard to
registration particulars, either
at the time of applying for
registration, or subsequently;
(xi) obstructs or prevents any

306
 Offences and Penalties

officer in discharge of his

duties
(xii) transports any taxable goods
without the cover of specified
documents
(xiii) suppresses turnover leading
to evasion of tax
(xiv) fails to keep, maintain or
retain books of account and
other documents;
(xv) fails to furnish information or
documents called for by an
officer or furnishes false
information or documents
during any proceedings
(xvi) supplies, transports or stores
any goods which has reason
to believe are liable to
confiscation
(xvii) issues any invoice or
document by using the
registration number of
another registered person;
(xiv) tampers with, or destroys any
material evidence or
document;
(xv) disposes off or tampers with
any goods that have been
detained, seized, or attached
under this Act;
Section 122(1) of the CGST Act
1A. Penalty on ultimate beneficiary Shall be liable to a penalty of
of the fraud transactions and the an amount equivalent to the
person at whose direction the tax evaded or input tax
fraud transaction has been credit availed of or passed
conducted. on.
“(1A) Any person who retains the

307
GST : Practitioners Perspective

benefit of a transaction covered

under clauses (i), (ii), (vii) or
clause (ix) of sub-section (1) and at
whose instance such transaction is
conducted,
2. Penalty where tax has not been Shall be liable to a penalty
paid / short paid / erroneously of Rs. 10,000/- or 10% of the
refunded tax due, whichever is higher.
Any registered taxable person who
supplies any goods or services or
both by whom any tax has not
been paid or short-paid or
erroneously refunded, or where the
input tax credit has been wrongly
availed or utilized for any reason,
other than the reason of fraud or
any willful misstatement or
suppression of facts to evade tax.
(Section 122(2)(a) of the CGST
Act)
3. Penalty where tax has not been Shall be liable to a Penalty
paid / short paid / erroneously equal to Rs 10,000/- or the
refunded tax due from such person,
Any registered taxable person who whichever is higher shall be
supplies any goods or services or imposed
both by whom any tax has not
been paid or short-paid or
erroneously refunded, or where the
input tax credit has been wrongly
availed or utilized for any reason,
for reason of fraud or any willful
misstatement or suppression of
facts to evade tax. (Section
122(2)(b) of the CGST Act)
4. Penalty for certain offences: Shall be liable to a Penalty
Any person who: which may extent to Rs.
1. aids or abets any of the 25000/-

308
 Offences and Penalties

offences specified in Section

122 (1)
2. acquires possession of, or in
any way concerns himself in
transporting, removing,
depositing, keeping,
concealing, supplying, or
purchasing or in any other
manner deals with any goods
which he knows or has reason
to believe are liable to
confiscation;
3. receives or is in any way
concerned with the supply of,
or in any other manner deals
with any supply of services
which he knows or has reason
to believe are in contravention
of any provisions of this Act or
the Rules made thereunder;
4. fails to appear before the
officer of Central tax, when
issued with a summon for
appearance to give evidence
or produce a document in an
enquiry
5. fails to issue invoice in
accordance with the provisions
of this Act or rules made
thereunder, or fails to account
for an invoice in his books of
account.
Section 122(3) of the CGST Act
4. Penalty for failure to furnish Shall be liable to pay penalty
information return of Rs. 100/- for each day for
If the person who is required to file which the failure continues but
an ‘information return’ as not exceeding Rs. 5000/-

309
GST : Practitioners Perspective

prescribed under Section 150 has

not filed the return within the
stipulated period of 90 days from
the date of issue of show cause
notice. (Section 123 of the CGST
Act)
5. Fine for failure to furnish Shall be punishable with a
statistics: fine which may extend to Rs.
If any person required to furnish 10,000/- and in case of a
any information or return under continuing offence to a
section 151,— further fine which may
(a) without reasonable cause fails extend to Rs. 100/- for each
to furnish such information or day after the first day during
return as may be required which the offence continues
under that section, or subject to a maximum limit
(b) willfully furnishes or causes to of Rs. 25,000/-.
furnish any information or
return which he knows to be
false.
(Section 124 of the CGST Act)

26.3 General i.e. residual penalty

As per Section 125 of CGST Act any person, who contravenes any of the
provisions of this Act or any Rules made thereunder for which no penalty is
separately provided for in this Act, shall be liable to a penalty, which may
extend to twenty-five thousand rupees.

26.4 General disciplines related to penalty

The general principles of imposing penalty are given in Section 126 of the CGST
Act, which are discussed in the succeeding paras.
26.4.1 No penalty for minor breaches
As per sub-Section (1) no officer under this Act shall impose any penalty for
‘minor breaches’ of tax regulations or procedural requirements and in
particular, any omission or mistake in documentation which is easily
rectifiable and made without fraudulent intent or gross negligence.

310
 Offences and Penalties

A breach shall be considered a ‘minor breach’ if the amount of tax involved is

less than five thousand rupees. Further an omission or mistake in documentation
shall be considered to be ‘easily rectifiable’ if the same is an error apparent on
the face of record.
26.4.2 Penalty to be commensurate with severity of
breach
Section 126 (2) mandates that the penalty imposed under this Act shall
depend on the facts and circumstances of each case and shall be
commensurate with the degree and severity of the breach.
26.4.3 No penalty without hearing
Sub-section (3) provides that no penalty shall be imposed on any person
without giving him an opportunity of being heard. This is based on the
principle of natural justice.
26.4.4 Reason to be given for imposing penalty
As per Section 126 (4) of CGST Act the officer under this Act shall while
imposing penalty in an order for a breach of any law, regulation or procedural
requirement, specify the nature of the breach and the applicable law,
regulation or procedure under which the amount of penalty for the breach
has been specified. Thus the order levying penalty should be a speaking
order.
26.4.4 Lower penalty if breach voluntarily disclosed
Sub-Section (5) provides that when a person voluntarily discloses to an
officer under this Act the circumstances of a breach of the tax law, regulation
or procedural requirement prior to the discovery of the breach by the officer
under this Act, the proper officer may consider this fact as a mitigating factor
when quantifying a penalty for that person.
26.4.5 Provisions not apply when law specifies fixed
penalty
Sub-Section (6) mandates that the provisions of this section shall not apply in
such cases where the penalty specified under this Act is either a fixed sum or
expressed as a fixed percentage.

311
GST : Practitioners Perspective

26.4.6 Penalty may not be levied in case of bona fide

belief or technical lapses
important judicial pronouncements in regard to existing statutes which would also
be relevant under GST regime also are stated below for the judicial approach /
inclination in cases of levy of penalty
The Hon’ble Supreme Court in Hindustan Steel Ltd v State of Orissa AIR
1970 SC 253 = 25 STC 211 = 83 ITR 26 = (1969) 2 SCC 627 = 2 ELT (J159)
(SC) observed as follows:
The discretion to exercised impose penalty must be exercised judicially. A
penalty will be imposed in case where party acts deliberately in defiance of
law, but not in cases where there is a technical or venial breach of the
provisions of the Act or where the breach flows from a bona fide belief that
the offender not liable under the Act….An order imposing penalty for failure
to carry out a statutory obligation is the result of quasi-judicial proceeding.
Penalty will not be ordinarily imposed unless the party obliged either acted
deliberately in defiance of law or was guilty of conduct contumacious or
dishonest or acted in conscious disregard of its obligation. Penalty will not be
imposed merely because it is lawful to do so. Even if a minimum penalty is
prescribed, the authority will be justified in refusing to impose penalty, when
there is a technical or venial breach of the Act or where breach flows from a
bona fide belief that the offender is not liable to act in the manner prescribed
by the statute--- Quoted with approval in Shiv DuttFateh Chand v. UOI (1983)
53 STC 289 (SC) = AIR 1984 SC 1194=148 ITR 564 (SC).
In Bharjativa Steel Industries v. CST (2008) 11 SCC 617 = 13 VST 514 (SC),
it was held that when assessing authority has been conferred with a
discretionary jurisdiction to levy penalty, by necessary implication, the
authority may not levy penalty. If it has discretion not to levy penalty,
existence of mens rea is a relevant factor. In Cement Marketing Co of India
v. Asstt. Commissioner of Sales Tax (1980) 1 SCC 71 = (6) ELT 295 (SC) =
124 ITR 15 = 4 Taxman 44 = (1980) 45 STC 197 (SC) = AIR 1980 SC 346
also, it was held that even if a minimum penalty is prescribed, the authority
will be justified in refusing to impose a penalty when there is a technical or
venial breach of the provisions of the Act or where the breach flows from a
bona fide belief that the offender is not liable to act in the manner prescribed
in the statute. In this case, it was held that ‘falsely represents’ postulates
mens rea in that the representation should be something which in fact and to

312
 Offences and Penalties

his knowledge is false, and this element would be excluded if the person
acted in bona fide belief that his representation is true.
In D Navinchandra v. UOI -1987 (29) ELT 492 (SC) = 1987 (3) SCC 56 and
B. Vijay Kumar v. UOI –AIR 1987 SC 1794 also, it has been held that bona
fides must be considered while imposing penalty.
No penalty if party has bona fide belief – EID Parry v. ACCT 2000 AIR SCW
86=117 STC 457=AIR 2000 SC 551.

26.5 Power to impose penalty in certain cases

As per Section 127 where the proper officer is of the view that a person is
liable to a penalty and the same is not covered under any proceedings under
Section 62 or Section 63 or Section 64 or Section 73 or Section 74 or Section
129 or Section 130, he may issue an order levying such penalty after giving a
reasonable opportunity of being heard to such person.
For ready reference the proceedings under these sections are as follows;-
Section of Nature of proceedings
CGST Act
62 Assessment of non-filers of return
63 Assessment of un-registered person
64 Summary assessment in certain special cases
73 Show cause Notice for recovery of tax etc
74 Show cause Notice for recovery of tax etc on account of
suppression, or willful mis-statement.
129 Detention, seizure and release of goods and
conveyance in transit
130 Confiscation of goods or conveyances or levy of penalty

26.6 Powers to reduce or waive penalty with the

Government
As per Section 128 of CGST Act the Government may, by notification, waive
in part or full, any penalty referred to in Section 122 or Section 123 or Section
125 or any late fee referred to in Section 47 (on late filing of return) for such
class of taxpayers and under such mitigating circumstances as may be
specified therein on the recommendations of the Council.

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 Chapter 27

Inspection Search and Seizure

27.1 Introduction
GST Acts(s) provides power to the officers for inspection of the records to
ascertain the proper payment of tax. Such provisions are mandated to
prevent evasion of tax. Such provisions are contained in all the fiscal statutes
like Income Tax Act, Central Excise Act, Customs Act etc. The provisions
regarding inspection, search and seizure are contained in Section 67 to 72 of
CGST Act. The above provisions are mirrored in SGST Acts of the respective
State Governments / Union territory with Legislature. Further these provisions
laid down in said Sections are also applicable to IGST and UTGST Act also.
The provisions of the above sections as relevant to suppliers of services are
discussed in this Chapter.

27.2 Access to place of business

Section 71 (1) provides that any officer under this Act, authorised by the
proper officer not below the rank of Joint Commissioner, shall have access to
any place of business of a registered person to inspect books of account,
documents, computers, computer programs, computer software whether
installed in a computer or otherwise and such other things as he may require
and which may be available at such place, for the purposes of carrying out
any audit, scrutiny, verification and checks as may be necessary to
safeguard the interest of Revenue.
Sub-section (2) of said section provides that every person in charge of place
referred to in sub-section (1) shall, on demand, make available to the officer
authorised under sub-section (1) or the audit party deputed by the proper
officer or a cost accountant or chartered accountant nominated under section
66—
(i) such records as prepared or maintained by the registered person and
declared to the proper officer in such manner as may be prescribed;
(ii) trial balance or its equivalent;
(iii) statements of annual financial accounts, duly audited, wherever
required;
 Inspection Search and Seizure

(iv) cost audit report, if any, under section 148 of the Companies Act,
2013;
(v) the income-tax audit report, if any, under section 44AB of the Income-
tax Act,1961;and
(vi) any other relevant record,
for the scrutiny by the officer or audit party or the Chartered Accountant or
Cost Accountant within a period not exceeding fifteen working days from the
day when such demand is made, or such further period as may be allowed by
the said officer or the audit party or the chartered accountant or cost
accountant.

27.3 Power to Inspection, Search and Seizure

The power of the authorized person to inspect, search and seizure are
provided in Section 67 of the CGST Act. These are discussed in the
succeeding paras.
27.3.1 Power to inspection
Section 67(1) of CGST Act provides that where the proper officer, not below
the rank of Joint Commissioner, has reasons to believe that––
(a) a taxable person has suppressed any transaction relating to supply of
goods or services or both or the stock of goods in hand, or has
claimed input tax credit in excess of his entitlement under this Act or
has indulged in contravention of any of the provisions of this Act or the
rules made thereunder to evade tax under this Act; or
(b) any person engaged in the business of transporting goods or an owner
or operator of a warehouse or a godown or any other place is keeping
goods which have escaped payment of tax or has kept his accounts or
goods in such a manner as is likely to cause evasion of tax payable
under this Act,
he may authorise in writing any other officer of Central tax to inspect any
places of business of the taxable person or the persons engaged in the
business of transporting goods or the owner or the operator of warehouse or
godown or any other place.
Thus an officer can inspect where he has reason to believe about
suppression of information leading to suppression of tax amount.

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GST : Practitioners Perspective

27.3.1-a Meaning of reason to believe

This word is used in other Acts also like Income Tax Act and judicial
pronouncements in regard to said Act can be helpful for us in understanding
the term reason to believe.
Under ITO v. Lakhmani Mewal Das (1976) 103 ITR 437 (SC) it was held that
the words “has reason to believe” in Section 132(1) of Income Tax Act, 1961
postulate belief and existence of reason for that belief. The belief must be
held in good faith; it cannot be merely a pretence. It does not mean a purely
subjective satisfaction of the officer.
It is settled principle of law that ‘reason to believe’ is not synonymous to
‘reason to suspect’ (See Dr Pratap Singh and another v. Director of
Enforcement, FERA and others AIR 1985 SC 989 para 10)
27.3.2 Search and Seizure
Section 67(2) of the CGST Act provides that where the proper officer, not
below the rank of Joint Commissioner, either pursuant to an inspection
carried out under sub-section (1) or otherwise, has reasons to believe that
any goods liable to confiscation or any documents or books or things, which
in his opinion shall be useful for or relevant to any proceedings under this
Act, are secreted in any place, he may authorise in writing any other officer
of Central tax to search and seize or may himself search and seize such
goods, documents or books or things.
Where it is not practicable to seize any such goods, the proper officer, or any
officer authorised by him, may serve on the owner or the custodian of the
goods an order that he shall not remove, part with, or otherwise deal with the
goods except with the previous permission of such officer. (First proviso to
Section 67(2) of the CGST Act).
It has further been provided that the documents or books or things so seized
shall be retained by such officer only for so long as may be necessary for
their examination and for any inquiry or proceedings under this Act. (Second
proviso to Section 67(2) of the CGST Act).
Sub-section (4) mandates that the authorized officer shall have the power to
seal or break open the door of any premises or to break open any almirah,
electronic devices, box, receptacle in which any accounts, registers or
documents of the person are suspected to be concealed, where access to
such premises, almirah, electronic devices, box or receptacle is denied.

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Further as per sub-section (5) the person from whose custody any
documents are seized shall be entitled to make copies thereof or take
extracts therefrom in the presence of an authorised officer at such place and
time as such officer may indicate in this behalf except where making such
copies or taking such extracts may, in the opinion of the proper officer,
prejudicially affect the investigation.
As per sub-section (6) the goods so seized under sub-section (2) shall be
released, on a provisional basis, upon execution of a bond and furnishing of
a security, in such manner and of such quantum, respectively, as may be
prescribed or on payment of applicable tax, interest and penalty payable, as
the case may be.
Further as per sub-section (7) where any goods are seized under sub-section
(2) and no notice in respect thereof is given within six months of the seizure
of the goods, the goods shall be returned to the person from whose
possession they were seized:
Provided that the period of six months may, on sufficient cause being
shown, be extended by the proper officer for a further period not exceeding
six months.
27.3.2-a Special provisions for perishable goods
As per Section 67(8) of the CGST Act, the Government may, having regard
to the perishable or hazardous nature of any goods, depreciation in the value
of the goods with the passage of time, constraints of storage space for the
goods or any other relevant considerations, by notification, specify the goods
or class of goods which shall, as soon as may be after its seizure under sub -
section ( 2 ), be disposed of by the proper officer in such manner as may be.
Further as per sub-section (9), where any goods, being goods specified
under sub - section (8), have been seized by a proper officer, or any officer
authorised by him under sub section ( 2), he shall prepare an inventory of
such goods in such manner as may be prescribed.
It may be noted that no perishable / hazardous goods have been notified by
the Government under the above provisions.
27.3.2-b Return of documents, books etc.
As per sub-section (3) the documents, books or things referred to in sub- section
(2) or any other documents, books or things produced by a taxable

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person or any other person, which have not been relied upon for the issue of
notice under this Act or the Rules made thereunder, shall be returned to such
person within a period not exceeding thirty days of the issue of the said
notice.
It may be noted here the notices which are being referred to in this sub-
section are the show cause notices issued under Section 73 and 74.
However it has been provided in sub-section (11) that where the proper
officer has reasons to believe that any person has evaded or is attempting to
evade the payment of any tax, he may, for reasons to be recorded in writing,
seize the accounts, registers or documents of such person produced before
him and shall grant a receipt for the same, and shall retain the same for so
long as may be necessary in connection with any proceedings under this Act
or the rules made thereunder for prosecution. Thus in such cases there is no
time limit for refund of the accounts, register or documents.
27.3.2-c Applicability of Code of Criminal Procedure
As per Section 67(10) the provisions of the Code of Criminal Procedure,
1973, relating to search and seizure, shall, so far as may be, apply to search
and seizure under this section subject to the modification that sub-section (5)
of Section 165 of the said Code shall have effect as if for the word
“Magistrate”, wherever it occurs, the word “Commissioner” were substituted.

27.4 Power to summons to give evidence

As per Section 60 (1) of CGST Act the proper officer under this Act shall have
power to summon any person whose attendance he considers necessary
either to give evidence or to produce a document or any other thing in any
inquiry in the same manner, as provided in the case of a civil court under the
provisions of the Code of Civil Procedure, 1908.
Further as per sub-Section (2) of CGST Act every such inquiry referred to in sub-
section (1) shall be deemed to be a “judicial proceedings” within the meaning of
section 193 and section 228 of the Indian Penal Code.

27.5 Power to arrest

Section 69 of CGST Act provides that the Commissioner can arrest the
person, if he has reason to believe that the person has committed an offence
punishable under clause (i) or (ii) of Section 132(1) or Section 132(2).

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27.6 Others officers to assist

As per Section 72 (1) all officers of Police, Railways, Customs, and those officers
engaged in the collection of land revenue, including village officers, officers of
State tax and officers of Union territory tax shall assist the proper officers in the
implementation of this Act.
As per sub-section (2) the Government may, by notification, empower and
require any other class of officers to assist the proper officers in the
implementation of this Act when called upon to do so by the Commissioner.

27.7 Inspection of Goods in Movement

As per Section 68 of the CGST Act, the person in charge of a vehicle
carrying goods exceeding Rs. 50,000 is required to carry the following
documents:
 Invoice or bill of supply or delivery challan
 Copy of e-way bill (hard copy or via RFID)
The proper officer has the power to intercept goods in transit and inspect the
goods and the documents.
If the goods are in contravention to the GST Act then the goods, related
documents, and the vehicle carrying them will be seized. The goods will be
released only on payment of tax and penalty.
Before confiscating the goods, the tax officer shall give an option of paying a fine
instead of confiscation.

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 Chapter 28

Arrest, Prosecution and Compounding

28.1 Introduction
Law without stringent provisions for punishment is like lion without teeth.
Accordingly, in order to ensure compliance, GST law provides for penalties,
arrest and prosecution for violation of law. Section 132 to 138 of CGST Act
contains the provision regarding prosecution. Further Section 138 makes
provisions for compounding of offences. Further the procedure for arrest in
respect of certain offences are mandated in Section 69 of CGST Act. The
above provisions are mirrored in SGST Acts of the respective State
Governments / Union territory with Legislature. Further these provisions laid
down in said Sections are also applicable to IGST and UTGST Act also.
The provisions of the above sections are discussed in this Chapter.

28.2 Punishment for certain offences

As per Section 132 (1) whoever commits, or causes to commit and retain the
benefits arising out of, any of the following offences* , namely:—
(a) supplies any goods or services or both without issue of any invoice, in
violation of the provisions of this Act or the Rules made thereunder,
with the intention to evade tax;
(b) issues any invoice or bill without supply of goods or services or both in
violation of the provisions of this Act, or the rules made thereunder
leading to wrongful availment or utilisation of input tax credit or refund
of tax;
(c) avails input tax credit using the invoice or bill referred to in clause (b)
or fraudulently avails input tax credit without any invoice or bill*
(d) collects any amount as tax but fails to pay the same to the
Government beyond a period of three months from the date on which
such payment becomes due.
(e) evades tax or fraudulently obtains refund and where such offence is
not covered under clauses (a) to (d)*;
(f) falsifies or substitutes financial records or produces fake accounts or
 Arrest, Prosecution and Compounding

documents or furnishes any false information with an intention to

evade payment of tax due under this Act;
(g) obstructs or prevents any officer in the discharge of his duties under
this Act;
(h) acquires possession of, or in any way concerns himself in transporting,
removing, depositing, keeping, concealing, supplying, or purchasing or
in any other manner deals with, any goods which he knows or has
reasons to believe are liable to confiscation under this Act or the rules
made thereunder;
(i) receives or is in any way concerned with the supply of, or in any other
manner deals with any supply of services which he knows or has
reasons to believe are in contravention of any provisions of this Act or
the rules made thereunder;
(j) tampers with or destroys any material evidence or documents;
(k) fails to supply any information which he is required to supply under this
Act or the rules made thereunder or (unless with a reasonable belief,
the burden of proving which shall be upon him, that the information
supplied by him is true) supplies false information; or
(l) attempts to commit, or abets the commission of any of the offences
mentioned in clauses (a) to (k) of this section,
shall be punishable as under:

Amount of tax evaded or ITC Above Above Above

wrongly availed or utilised or 100-200 200-500 500
refund wrongly taken lakhs lakhs lakhs
Imprisonment Upto 1 Upto 3 Upto 5
year years year
Fine In all three cases
In cases where tax payer commits or abets the commission of an offence
specified in clause (f) or clause (g) or clause (j), he shall be punishable with
imprisonment for a term which may extend to six months or with fine or with
both.
*As amended w.e.f. 1.1.2021.

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28.2.1 Repeat Conviction

Sub-section (2) of Section 132 mandated that where any person convicted of
an offence under this section is again convicted of an offence under this
section, then, he shall be punishable for the second and for every
subsequent offence with imprisonment for a term which may extend to five
years and with fine.
28.2.2 Minimum punishment
Sub-section (3) provides that the imprisonment referred to in clauses (i), (ii)
and (iii) of sub-section (1) and sub-section (2) shall, in the absence of special
and adequate reasons to the contrary to be recorded in the judgment of the
Court, be for a term not less than six months.
28.2.3 Offence cognizable and non bailable only in
specified cases
Sub-Section (4) provides that notwithstanding anything contained in the Code
of Criminal Procedure, 1973, all offences under this Act, except the offences
referred to in sub-section (5) shall be non- cognizable and bailable.
Sub-section (5) prescribes that the offences specified in clause (a) or clause
(b) or clause (c) or clause (d) of sub-section (1) and punishable under clause
(i) of that sub-section shall be cognizable and non-bailable.
Thus if in case of following offences the amount of tax evaded or the amount
of input tax credit wrongly availed or utilised or the amount of refund wrongly
taken exceeds five hundred lakh rupees such offences shall be cognizable or
non-bailable.
(a) supplies any goods or services or both without issue of any invoice, in
violation of the provisions of this Act or the rules made thereunder,
with the intention to evade tax;
(b) issues any invoice or bill without supply of goods or services or both in
violation of the provisions of this Act, or the rules made thereunder
leading to wrongful availment or utilisation of input tax credit or refund
of tax;
(c) avails input tax credit using such invoice or bill referred to in clause
(b);
(d) collects any amount as tax but fails to pay the same to the

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Government beyond a period of three months from the date on which

such payment becomes due;
(e) collects any amount as tax but fails to pay the same to the
Government beyond a period of three months from the date on which
such payment becomes due.
It may be noted that in cases of all the other offences or the above offences
where the tax evaded amount is upto Rs 500 lakhs will be non-cognizable
and bailable.
28.2.4 Meaning of tax
As per Explanation to Section 132 for the purposes of this section, the term
“tax” shall include the amount of tax evaded or the amount of input tax credit
wrongly availed or utilised or refund wrongly taken under the provisions of
this Act, the State Goods and Services Tax Act, the Integrated Goods and
Services Tax Act or the Union Territory Goods and Services Tax Act and
cess levied under the Goods and Services Tax (Compensation to States)
Act.
28.2.5 Prosecution with permission of Commisoner
As per sub-Section (6) a person shall not be prosecuted for any offence
under this section except with the previous sanction of the Commissioner.

28.3 Cognizance of offences

As per Section 134 no court shall take cognizance of any offence punishable
under this Act or the rules made thereunder except with the previous
sanction of the Commissioner, and no court inferior to that of a Magistrate of
the First Class, shall try any such offence.

28.4 Power to arrest and grant of bail

As per Section 69 (1) of CGST Act where the Commissioner has reasons to
believe that a person has committed any offence specified in clause (a) or
clause (b) or clause (c) or clause (d) of sub-section (1) of Section 132 which
is punishable under clause (i) or (ii) of sub-section (1), or sub-section (2) of
the said section, he may, by order, authorise any officer of Central Tax to
arrest such person.
We have already discussed about the above offences in the preceding para.

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28.4.1 Production before a magistrate within 24 hours

Sub-section (2) provides that where a person is arrested under sub-section
(1) for an offence specified under sub- section (5) of section 132, the officer
authorised to arrest the person shall inform such person of the grounds of
arrest and produce him before a Magistrate within twenty-four hours.
28.4.2 Procedure regarding Bail
As per Section 69 (3) subject to the provisions of the Code of Criminal
Procedure, 1973,––
(a) where a person is arrested under sub-section (1) for any offence
specified under sub-section (4) of Section 132, he shall be admitted to
bail or in default of bail, forwarded to the custody of the Magistrate;
(b) in the case of a non-cognizable and bailable offence, the Deputy
Commissioner or the Assistant Commissioner shall, for the purpose of
releasing an arrested person on bail or otherwise, have the same
powers and be subject to the same provisions as an officer-in-charge
of a police station.

28.5 Presumption of culpable mental State

As per Section 135 of CGST Act in any prosecution for an offence under this
Act which requires a culpable mental state on the part of the accused, the
court shall presume the existence of such mental state but it shall be a
defence for the accused to prove the fact that he had no such mental state
with respect to the act charged as an offence in that prosecution.
Further Explanation to said section states that for the purposes of this section,––
(i) the expression “culpable mental state” includes intention, motive,
knowledge of a fact, and belief in, or reason to believe, a fact;
(ii) a fact is said to be proved only when the court believes it to exist
beyond reasonable doubt and not merely when its existence is
established by a preponderance of probability.

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28.6 Relevancy of statements under certain

circumstances
As per Section 136 of CGST Act a statement made and signed by a person
on appearance in response to any summons issued under Section 70 during
the course of any inquiry or proceedings under this Act shall be relevant, for
the purpose of proving, in any prosecution for an offence under this Act, the
truth of the facts which it contains,––
(a) when the person who made the statement is dead or cannot be found,
or is incapable of giving evidence, or is kept out of the way by the
adverse party, or whose presence cannot be obtained without an
amount of delay or expense which, under the circumstances of the
case, the court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in
the case before the court and the court is of the opinion that, having
regard to the circumstances of the case, the statement should be
admitted in evidence in the interest of justice.

28.7 Offences by Companies and certain other

persons
Section 137 (1) of CGST Act provides that where an offence committed by a
person under this Act is a company, every person who, at the time the
offence was committed was in charge of, and was responsible to, the
company for the conduct of business of the company, as well as the
company, shall be deemed to be guilty of the offence and shall be liable to
be proceeded against and punished accordingly.
Sub-section (2) mandates that where an offence under this Act has been
committed by a company and it is proved that the offence has been
committed with the consent or connivance of, or is attributable to any
negligence on the part of, any director, manager, secretary or other officer of
the company, such director, manager, secretary or other officer shall also be
deemed to be guilty of that offence and shall be liable to be proceeded
against and punished accordingly.
28.7-1 Offence committed by certain other persons
Sub-section (3) provides that where an offence under this Act has been

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committed by a taxable person being a partnership firm or a Limited Liability

Partnership or a Hindu Undivided Family or a trust, the partner or karta or
managing trustee shall be deemed to be guilty of that offence and shall be
liable to be proceeded against and punished accordingly and the provisions
of sub-section (2) shall, mutatis mutandis, apply to such persons.
28.7-2 No offence if no knowledge and due diligence
exercised
As per section 137 (4) nothing contained in this section shall render any such
person liable to any punishment provided in this Act, if he proves that the
offence was committed without his knowledge or that he had exercised all
due diligence to prevent the commission of such offence.
28.7-3 Meaning of company and director
As per Explanation below Section 137 for the purposes of this section,––

(i) “company” means a body corporate and includes a firm or other
association of individuals; and
(ii) “director”, in relation to a firm, means a partner in the firm.

28.8 Compounding of offences

As per Section 138(1) of CGST Act any offence under this Act may, either
before or after the institution of prosecution, be compounded by the
Commissioner on payment, by the person accused of the offence, to the
Central Government or the State Government, as the case be, of such
compounding amount in such manner as may be prescribed:
28.8-1 Offences which cannot be compounded
As per First Proviso to Section 138(1) nothing contained in this section shall
apply to—
(a) a person who has been allowed to compound once in respect of any of
the offences specified in clauses (a) to (f) of sub-section (1) of Section
132 and the offences specified in clause (l) which are relatable to
offences specified in clauses (a) to (f) of the said sub-section;
(b) a person who has been allowed to compound once in respect of any
offence, other than those in clause (a), under this Act or under the
provisions of any SGST Act or the UTGST Act or the IGST Act in
respect of supplies of value exceeding one crore rupees;

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(c) a person who has been accused of committing an offence under this
Act which is also an offence under any other law for the time being in
force;
(d) a person who has been convicted for an offence under this Act by a
court;
(e) a person who has been accused of committing an offence specified in
clause (g) or clause (j) or clause (k) of sub-section (1) of section 132;
and
(f) any other class of persons or offences as may be prescribed.
28.8-2 Compounding does not affect proceedings under
other law
As per Second Proviso to Section 138(1) any compounding allowed under the
provisions of this section shall not affect the proceedings, if any, instituted under
any other law.
28.8-3 Meaning of Compounding
Fine and imprisonment can be imposed only by competent criminal Court.
However, instead of going to Court, the offender may agree to pay
composition amount. Order for paying composition money can be made by
quasi-judicial authorities. This is called "compounding of offences’.
'Compounding' is essentially a compromise arrangement between
administrator of the enactment and person committing an offence.
Compounding crime consists of receipt of some consideration (termed as
compounding fees) in return for an agreement not to prosecute one who has
committed an offence - Reliance Industries, in re- (1997) 24 CLA 214 (CLB).
‘Compounding’ means that the accused and the complainant have come to
terms and the dispute between the parties has been settled amicably or
adjusted by agreement and the complainant agrees not to prosecute the
accused. If the case is pending, the accused and the complainant then make
a joint application to the Court that the parties have come to terms and the
case may not be proceeded with.
Thus, in compounding, there is a compromise or agreement, while in case of
imposition of fine under provisions of an Act, there is no agreement as such.
Section 320 of Criminal Procedure Code permits compounding of various
offences under Indian Penal Code.

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Such compounding can be done either before or after institution of

prosecution. After payment of such composition amount, prosecution will not
be launched, or if it was launched, it will be withdrawn.
28.8.3-a Full and bona fide disclosure required for
compounding of offense
In UOI v. Anil Chanana (2008) 4 SCC 175 = 222 ELT 481 (SC), it was held
that compounding of offences is based on the principle of disclosure. If there
are demonstratable contradictions or inconsistencies or incompleteness,
application for compounding cannot be entertained. Applicant cannot
hoodwink the authority. Applicant has to be a one-time evader. He has to
make a clean breast of his affairs. Otherwise, offense should not be
compounded. Compounding should be allowed only in case of doubtful
benefit to the Revenue and to prevent needlessly proliferating litigation and
holding up of collection.
28.8.3.-b Compounding means acquittal
As per section 320 of Cr PC, composition will have the effect of acquittal of
accused. It is not mere discharge. Thus, if offence is compounded, the
person is to deemed to be acquitted, and hence does not become ineligible
to be appointed as a Director. [confirmed in Circular No. 5/23 dated 28-4-
1993 of Department of Company Affairs].
In Maharashtra Power Development Corpn Ltd. v. Dabhol Power Company
(2004) 52 SCL 224 (Bom HC DB), it was held that if offence is compounded,
it is as if no offence had even been committed in the first place.
28.8-4 Compounding only after tax, interest and penalty
paid
Third Proviso to Section 138(1) mandates that compounding shall be allowed
only after making payment of tax, interest and penalty involved in such offences.
28.8-5 Amount for compounding of offences
Sub-section (2) provides that the amount for compounding of offences under
this section shall be such as may be prescribed, subject to the minimum
amount not being less than ten thousand rupees or 50% of the tax involved,
whichever is higher, and the maximum amount not being less than Rs
30,000/- or 150% of the tax, whichever is higher.

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28.8-6 Discharge after paying compounding fee

Section 138(3) of CGST Act provides that on payment of such compounding
amount as may be determined by the Commissioner, no further proceedings
shall be initiated under this Act against the accused person in respect of the
same offence and any criminal proceedings, if already initiated in respect of
the said offence, shall stand abated.
procedure for compounding of offences is contained in Rule 162 of the
CGST Rules.

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 Chapter 29

E-Way Bill
29.1 Introduction
As mandated by the Government in terms of Section 68 of the CGST Act read
with Rule 138 of the CGST Rules, e-way bill is a document that is required to
be carried by custodian of the goods while the goods are in transit. It can be
generated from the Common Portal www.ewaybillgst.gov.in before
commencement of movement of goods.
E-way bill is required for movement of goods from one State to another from 1-4-
2018 all over India. For intra-State movement of goods, the provision is
applicable from 3-6-2018, in all States.

29.2 General Rule for E-way Bill

The basic rule in regard to e-way bill is Rule 138(1) of the CGST Rules, 2017
which reads as under:
“Every registered person who causes movement of goods of consignment
value exceeding fifty thousand rupees—
(i) in relation to a supply; or
(ii) for reasons other than supply; or
(iii) due to inward supply from an unregistered person,
shall, before commencement of such movement, furnish information relating
to the said goods in Part A of Form GST EWB-01, electronically, on the
common portal along with such other information as may be required at the
common portal and a unique number will be generated on the said portal.”

29.3 E-way bill cannot be generated, if supplier or

recipient has not filed two consecutive
returns
As per Rule 138E of the CGST Rules, effective from 21-11-2019 (refer
Notification No. 22/2019-CT dated 23-4-2019, as amended on 20-8-2019), if
the supplier or recipient or transporter or e-commerce operator or courier has
 E-Way Bill

not filed returns for consecutive months (normal taxable person) or two
consecutive periods (composition supplier), Part A of e-way bill cannot be
generated by supplier, recipient, transporter, e-commerce operator or a
courier agency.
Further, the registered person, other than a person paying tax under Section
10 (composition supplier), who has not furnished the Form GSTR-1 for any
two months, or quarters shall not be allowed to generate e-way bill ( Rule
138E(c) of the CGST Rules, inserted w.e.f. 11-1-2020.
Jurisdictional Commissioner of GST (of taxable person who has not filed the
returns) can grant special persmission to file e-way bill in such cases, for
which application has to be made in form GST EWB-05. The Commissioner
can refuse permission or grant permission with conditions after giving
personal hearing, by issuing order in form GST EWB-06.

29.4 E-way Bill provisions at a glance

E Way Bill General Registered person causes movement of goods
Rule value > Rs. 50,000, or inward supply from
unregistered person:
– Before movement of goods
– Furnish information in Part A of GST EWB-01 on
common portal
Special Cases Any interstate movement irrespective of value:
– Any goods, from Principal to Job Worker
– Handicraft goods from person exempted from
registration
Who is liable to Registered person, transporter, principal /
generate registered job worker or person exempted from
registration on case to case basis
Furnishing Part A of GST EWB-01 can be filled, on an
information on authorisation:
behalf of registered – From: Registered Person, By: Transporter
person / consignor – From: Consignor, By: E Commerce operator
For whom it is Unregistered person until they are covered under
optional special cases

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From where to www.ewaybillgst.gov.in, Android App, SMS, ASP

generate Integration with web portal, using GST Suvidha
Provider
Which form EWB 01, which contains two parts:
Part A – Details of goods moved
Part B – Detail of vehicle
– After filling Part A unique number gets
generated.
– Only after filling Part A and Part B both, E Way
Bill no. (EBN) can be generated
Validity of e way bill Normal Cargo : 1 Day for first 100 Km thereafter for
every 100 Km or part thereof additional 1 day
Odd Dimension Cargo : 1 Day for first 20 Km
thereafter for every 20 Km or part thereof additional
1 day
Each day shall be counted as the period expiring at
midnight of the day immediately following the date
of generation of e-way bill
Rule 138 has been amended and w.e.f. 1.1.2021, e-
way bill will be valid for 1 day for every 200 km of
travel, as against 100 km earlier, in cases other
than over dimensional cargo or multimodal shipment
in which at least one leg involves transport by ship.
For every 200 km. or part thereof thereafter, one
additional day will be allowed.

Documents required – Invoice / bill of supply / delivery challan for

to consignment of goods
generate e way bill – Transport by road through transporter :
Transporter ID or Vehicle number
– Transport by road through owned / hired
vehicle: Vehicle number
– Transport by Rail / Air / Vessel : Transport
document number, date of document
Documents / – the Invoice or bill of supply or delivery challan,
Devices required to as the case may be

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carry during Transit – a copy of the e-way bill or the EBN, either
physically or
– where notified by the Commissioner, EBN
mapped to a Radio Frequency Identification
Device (RFID) embedded on to the conveyance
Exemption from e – Goods specified in Annexure to E Way rules
way bill – Goods transport form non motorised vehicle
– Goods transport from port, airport, aircargo
complex and land customs station to Inland
container depot or Container Freight Station for
Custom clearance
– Transport in notified areas (till date no
notification)
– All goods other than de-oiled cake as specified
in the Schedule appended to notification No.
2/2017- Central tax (Rate) dated the 28th
June, 2017 as amended from time to time
– Alcoholic liquor for human consumption,
petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas or
aviation turbine fuel
– Goods being transported are treated as no
supply under Schedule III of the Act
– Goods transported under Customs Bond from
– Inland Container Depot or a Container Freight
Station TO – Customs Port, Airport, Aircargo
complex and Land Customs Station
or Under – Customs Bond, FROM – One Customs
Station or Port, TO – Another Customs Station or
Port
or Under – Customs supervision or seal
– Goods being transported are transit cargo from
or to Nepal or Bhutan
– Goods being transported are exempt from tax
under:
Notification No. 7/2017-Central Tax (Rate)–
Supplies by CSD to Unit Run Canteens and

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GST : Practitioners Perspective

supplies by CSD / Unit Run Canteens to

authorised customers notified under section 11
(1) and section 55 CSD, and
Notification No. 26/2017 – Central Tax (Rate)–
Exempt certain supplies to NPCIL
– Movement of goods caused by defence
formation under Ministry of Defence as a
consignor or consignee
– Consignor of goods is the Central Government,
Government of any State or a local authority for
transport of goods by rail
– Empty cargo containers are being transported
– Goods are being transported upto a distance of
twenty kilometres: from- place of the business of
the consignor, to- weighbridge for weighment
OR from- weighbridge, to- place of the business
of the said consignor subject to that movement of
goods is accompanied by a delivery challan
issued in accordance with rule
55 CGST Rules

What are other EWB-02 : Consolidated e way bill (for transporter,

forms multiple consignment in single vehicle)
EWB-03 : Summary report of Inspection by
department of goods in transit
EWB-04: Intimation by transporter if vehicle is
detained for more than 30 minutes
GST INV- 1 : For generating Invoice Reference
Number (IRN)

29.5 Salient features of E-way bill

 Central Government has notified www.ewaybillgst.gov.in [EWB system
for short] as common portal for furnishing e-way bill - Notification No.
9/2018-CT dated 23-1-2018.
 Generation of e-way bill is three step process - (a) Part A of GST EWB-
01 electronically by supplier/recipient (or transporter) and

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 E-Way Bill

generation of unique number by system (b) Part B by

transporter/supplier/recipient (c) Generation of e-way bill by GSTN
with e-way bill number and date and its validity period.

 The provisions apply when value of a consignment exceeds Rs

50,000. Generation of e-way bill for value less than Rs 50,000 is
optional.

 The movement may be in relation to a supply or for reasons other than

supply [like (a) Sending cranes, bulldozers, cement mixers to site (b)
Sending construction material to and from site (c) Own use by taxable
person elsewhere (d) Exhibition and fair].

 In following cases, e-way bill should be generated for inter-State

movement, even if value of consignment is below Rs 50,000 –

(a) Sending material by Principal inter-State for job work

(b) Handicraft goods transported inter-State under exemption if

turnover of person below 20/10 lakhs.

 In case of inter-State movement of goods, e-way bill is required if

consolidated value of all consignments in conveyance exceed Rs
50,000, even if value of individual consignment is less than Rs 50,000
- Rule 138(7) of CGST Rules.

 Consignor, consignee or transporter, as the case may be, is required to

get registered on the EWB system even if he has GSTIN. After filling
the GSTIN, he will get OTP and then can generate username and
password. It is advisable to have same username and password as
used for GSTN.

 Transporters or suppliers can create multiple sub-users and allocate

roles to them. The Large transporters can declared their various offices
or business places as sub-users. Three sub-users can be generated
for each registered place of business - CBI&C Press Release dated 1- 4-
2018.

 EWB system allows creation of Masters - client master, Transporter

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GST : Practitioners Perspective

Master, master and Product Master with HSN code. This will make
data entry easy and quick. The Masters can be uploaded on system.

 A transporter not having GSTIN is required to enrol on the EWB

system. Both Income Tax PAN and Aadhaar of any person in
organisation is essential. If PAN and Aadhaar details do not match, the
transporter is 'Niradhar'.
 consignor who is registered is required to upload information in Part A of
form GST EWB-01, electronically, before movement of goods
commences. At that time, a Unique Number is generated by GSTN
network which is valid only for 15 days for updation of part B in GST
EWB-01.- Second Proviso to Rule 138(9) of CGST Rules [This is not an
e-way bill number].
 The e-way bill can be generated through various modes like Web
(online), Android App, SMS, using bulk upload tool and API bases site
to site integration – CBI&C press release dated 1-4-2018.
 In case of 'bill to ship to' or 'Bill from dispatch from' transactions, there
should be one e-way bill but details are required to be filled in the
appropriate columns of part A of e-way bill.
 If the consignee or recipient refuses to take delivery, transporter can
get one more e-way bill generated with the help of supplier or recipient
showing its as ‘sale return’ and return to supplier.
 The value to be indicated is total value as per section 15 of CGST Act
and should be inclusive of GST.
 If consignor is not registered but consignee is registered, the
consignee is required to upload the details of Part A electronically on
EWB system [Rule 138(1)(iii) of CGST Rules].
 Uploading information by SMS through registered mobile is
permissible for which App is required. The procedure is given in 'User
Manual for SMS Operations' which is available on EWB system.
 Bulk generation of Part A of e-way bill is possible. JSON file can be
generated offline and uploaded for generation of e-way bills. Each
JSON file should not contain more than 500 requests. The procedure
is given in 'User Manual - Offline Tool' which is available on EWB
system.

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 E-Way Bill

 Taxable persons generating more than 1,000 e-way bills in a day or

update 1,000 vehicle numbers in a day can have API interface with
EWB system to generate e-way bill online from system to system. The
procedure is given in 'User Manual for API Interface' which is available
on EWB system.
 If goods are transported in own conveyance, the consignor/consignee
is also required to generate e-way bill in form GST EWB-01
electronically on the common portal after furnishing information in Part
B of form GST EWB-01 - rule 138(2) of CGST Rules.
 If goods are transported by railway, air or vessel, the e-way bill will
indicate serial number and date of railway receipt, Air Consignment
Note of Bill of Lading, as the case may be [Proviso to Rule 138(2) of
CGST Rules]. This should be added after goods are booked with
railway, air or vessel. If goods are transported by rail, delivery of
goods will be given only on production of e-way bill.
 However, in case of booking of parcels through registered
leaseholders, Part B of e-way Bill will be prepared by registered
leaseholder and not by supplier who is preparing e-way bill.
 The transporter will upload the information after filling part B of Form
GST EWB-01. [Rule 138(3) of CGST Rules].
 The vehicle number should be entered without space in between. The
last number is required to be of four digits. Any middle number is
required to be of two digits. For example, UP 1 345 should be entered
as UP010345. AP 5 P 23 should be entered as AP05P0023. TN 10 DE
45 should be entered as TN10DE0045. Defence vehicle number
should start with DF. Temporary RC vehicle should start with TR.
Bhutan vehicle should start with 'BP'. Nepal vehicle should start with
BP [seems to be mistake in FAQ]. It seems it should be 'NP'.
 On submission of information in Parts A and B, a unique e-way bill
number (EBN) will be generated by system. This will be available to
supplier, recipient and transporter on common portal [Rule 138(4) of
CGST Rules].
 E-way bill is valid only when both Parts A and B are filled in -
Explanation 2 to Rule 138(3) of CGST Rules.
 If single consignment is transported in more than one vehicles, copy of
invoice should be with one vehicle and delivery challan with other

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GST : Practitioners Perspective

vehicles with copy of invoice. Each vehicle should have separate e-

way bill. Original invoice will be with last consignment.
 One e-way bill is required for each consignment i.e. each invoice or
delivery challan or bill of supply. If there are more than one
consignments in a vehicle, separate e-way bill is required for each
consignment.
 E-way Bill once generated cannot be changed. Only transport details
can be changed. If there is mistake, only option is to cancel the e-way
bill within 24 hours and generate fresh one.
 If the transport is less than 50 Kms from place of supplier to place of
transporter, details of conveyance may not be furnished by transporter
[Third Proviso to Rule 138(3) of CGST Rules]. If distance is more than
50 Kms, e-way bill is required to e-generated.
 Similarly, when transporter delivers goods to ultimate consignee at
destination within State where distance is less than 50 Kms, details of
conveyance may not be furnished in GST EWB-01 [Proviso to rule
138(5) of CGST Rules].
 If goods are transshipped from one conveyance to other, details have
to be submitted in Form GST EWB-01 [rule 138(5) of CGST Rules]
 The e-way bill can be assigned to another transporter for filling Part B.
However, once Part B is filled in, the e-way bill cannot be assigned -
Rule 138(5A) of CGST Rules.
 If consignments are consolidated in one conveyance by transporter,
consolidated e-way bill in Form GST EWB-02 should be generated [Rule
138(6) of CGST Rules]
 The e-way bill generated is valid for one day if transport of goods is
less than 100 Km. Further, one additional day is allowed for every 100
Kms after first 100 Km. If goods could not be transported within that
period, fresh e-way bill should be generated. For oversized cargo, the
validity is 20 Kms per day [Rule 138(10) of CGST Rules]
 Rule 138 has been amended and w.e.f. 1.1.2021, E-way bill will be
valid for 1 day for every 200 km of travel, as against 100 km earlier, in
cases other than over dimensional cargo or multimodal shipment in
which at least one leg involves transport by ship.

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 E-Way Bill

 For every 200 km. or part thereof thereafter, one additional day will be
allowed.
 One day means upto midnight of following day - Explanation 1 to rule
138(10) of CGST Rules.
 Under circumstances of an exceptional nature, if the goods cannot be
transported within the validity period of the e-way bill, the transporter
may generate another e-way bill after updating the details in Part B of
form GST EWB-01 [Second Proviso to Rule 138(10) of CGST Rules]. It
is not clear who is to determine that the circumstances are of an
exceptional nature.
 E-way bill generated in one State is valid in all other States [Rule
138(13) of CGST Rules].
 Details of e-way bill are supplied to recipient when information is
uploaded by supplier or transporter. Similarly, details of e-way bill are
supplied to supplier when information is uploaded by recipient or
transporter [Rule 138(11) of CGST Rules].
 If the supplier/recipient does not communicate his rejection within 72
hours, or the time of delivery of goods, whichever is earlier, the details
are deemed to have been accepted by him [Rule 138(12) of CGST
Rules].
 Exemptions have been provided from provisions of e-way bill in
specified cases [Rule 138(14) of CGST Rules].
 Invoice Reference Number can be generated by uploading invoice and
then physical copy of invoice may not be carried. This number will be
valid for 30 days [Rule 138A(2) of CGST Rules]. If such invoice number
is generated, carrying physical invoice is not required. At present, this
is optional.
 Transporters may be asked to obtain unique Radio Frequency
Identification Device (RFID) [Rule 138A(4) of CGST Rules]
 Road checks may be made and reporting of road checks has been
provided [Rule 138C of CGST Rules].
 If a vehicle is intercepted and detained for more than 30 minutes, the
transporter may upload the said information in form GST EWB-04 on
the common portal [Rule 138D of CGST Rules]. This will be treated as
grievance on the detention.

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GST : Practitioners Perspective

 If goods are transported without valid documents, these can be

detained. These can be seized. The goods and conveyance can be
released on provisional basis on bond and security - Section 129 of
CGST Act.
 The offending goods and conveyance can be confiscated. These can
be released on payment of redemption fine - Section 130 of CGST Act.
Few suggested inclusions
─ Anti Profiteering
─ Job Work

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 Chapter 30

Anti-Profiteering in GST
30.1 Introduction
Any reduction in rate of tax on any supply of goods or services or the benefit
of input tax credit should have been passed on to the recipient by way of
commensurate reduction in prices. However it has been the experience of
many countries that when GST was introduced there has been a marked
increase in inflation and the prices of the commodities. This happened in
spite of the availability of the tax credit right from the production stage to the
final consumption stage which should have actually reduced the final prices.
This was obviously happening because the supplier was not passing on the
benefit to the consumer and thereby indulging in illegal profiteering.
National Anti-profiteering Authority has therefore been constituted by the
central Government to examine whether input tax credits availed by any
registered person or the reduction in the tax rate have actually resulted in a
commensurate reduction in the price of the goods or services or both
supplied by him, this is to ensure that the consumer is protected from
arbitrary price increase in the name of GST.
The provisions of anti-profiteering are given under Section 171 of the CGST Act,
2017 and Chapter XV (Rule 122 to 137) of the CGST Rules, 2017.
As per Section 171(1) any reduction in rate of tax on any supply of goods or
services or the benefit of input tax credit shall be passed on to the recipient
by way of commensurate reduction in prices.

30.2 Constitution and Power to determine

methodology of National Anti-profiteering
Authority
The National Anti-Profiteering Authority shall be a five Member Committee
consisting of a Chairman who holds or has held a post equivalent in rank to a
Secretary to the Government of India;and four Technical Members who are
or have been Commissioners of State tax or Central tax for at least one year
or have held an equivalent post under existing laws. An officer not below the
GST : Practitioners Perspective

rank of Additional Commissioner (working in the Directorate General of Anti -

profiteering) shall be the Secretary to the Authority.
The Authority may determine the methodology and procedure for
determination as to whether the reduction in the rate of tax on the supply of
goods or services or the benefit of input tax credit has been passed on by the
registered person to the recipient by way of commensurate reduction in
prices.

30.3 Duties of the Authority:

The Authority would have the following duties:
(i) to determine whether any reduction in the rate of tax on any supply of
goods or services or the benefit of input tax credit has been passed on
to the recipient by way of commensurate reduction in prices;
(ii) to identify the registered person who has not passed on the benefit of
reduction in the rate of tax on supply of goods or services or the
benefit of input tax credit to the recipient by way of commensurate
reduction in prices;
(iii) to order,
(a) reduction in prices;
(b) return to the recipient, an amount equivalent to the amount not
passed on by way of commensurate reduction in prices along
with interest at the rate of eighteen per cent from the date of
collection of the higher amount till the date of the return of such
amount or recovery of the amount not returned, as the case
may be,in case the eligible person does not claim return of the
amount or is not identifiable, and depositing the same in the
Consumer Welfare Fund;
(c) imposition of penalty;and
(d) cancellation of registration.
(iv) to furnish a performance report to the Council by the tenth day of the
close of each quarter.

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 Anti Profiteering in GST

30.4 Application to the Authority

All applications from interested parties on issues of local nature shall first be
examined by the State level Screening Committee constituted in each State
by the State Governments consisting of an officer of the State Government,
to be nominated by the Commissioner, and an officer of the Central
Government, to be nominated by the Chief Commissioner.
The Screening Committee on being satisfied that the supplier has not passed
on the benefit of reduction in rate of tax on any supply of goods or services
or the benefit of input tax credit on to the recipient by way of commensurate
reduction in prices, will forward the application with its recommendations to
the Standing Committee on Anti profiteering, which shall consist of such
officers of the State Government and Central Government as may be
nominated by the GST council, for further action. If the Standing Committee
is satisfied that there is a prima facie evidence to show that the supplier has
not passed on the benefit of reduction in the rate of tax on the supply of
goods or services or the benefit of input tax credit to the recipient by way of
commensurate reduction in prices, it shall refer the matter to the Director
General of Anti-profiteering for a detailed investigation.

30.5 Investigation
The Director General of Anti-profiteering shall conduct investigation and
collect evidence necessary to determine undue profiteering and before
initiation of the investigation, issue a notice to the interested parties (and to
such other persons as deemed fit for a fair enquiry into the matter)
containing, inter alia, information on the following, namely: -
(a) the description of the goods or services in respect of which the
proceedings have been initiated;
(b) summary of the statement of facts on which the allegations are based;
and
(c) the time limit allowed to the interested parties and other persons who
may have information related to the proceedings for furnishing their
reply.
The evidence or information presented to the Director General of Anti-
profiteering by one interested party can be made available to the other interested
parties, participating in the proceedings. The evidence provided

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GST : Practitioners Perspective

will be kept confidential and the provisions of section 11 of the Right to

Information Act, 2005 (22 of 2005), shall apply mutatis mutandis to the
disclosure of any information which is provided on a confidential basis.
The Director General of Anti-profiteering can seek opinion of any other
agency or statutory authorities in the discharge of his duties. The Director
General of Anti-profiteering, or an officer authorised by him will have the
power to summon any person necessary either to give evidence or to
produce a document or any other thing. He will also have same powers as
that of a civil court and every such inquiry shall be deemed to be a judicial
proceeding.
The Director General of Anti-profiteering will complete the investigation within
a period of three months or within such extended period not exceeding a
further period of three months for reasons to be recorded in writing as
allowed by the Authority and, upon completion of the investigation, furnish to
the Authority, a report of its findings along with the relevant records.

30.6 Order of the Authority

The Authority shall (after granting an opportunity of hearing to the interested
parties if so requested) within a period of three months from the date of the
receipt of the report from the Director General of Anti-profiteering determine
whether a registered person has passed on the benefit of the reduction in the
rate of tax on the supply of goods or services or the benefit of input tax credit
to the recipient by way of commensurate reduction in prices.
If the Members of the Authority differ in opinion on any point, the point shall
be decided according to the opinion of the majority.
Where the Authority determines that a registered person has not passed on
the benefit of the reduction in the rate of tax on the supply of goods or
services or the benefit of input tax credit to the recipient by way of
commensurate reduction in prices, the Authority may order-
(a) reduction in prices;
(b) return to the recipient, an amount equivalent to the amount not passed
on by way of commensurate reduction in prices along with interest at
the rate of eighteen per cent. from the date of collection of the higher
amount till the date of the return of such amount or recovery of the
amount including interest not returned, as the case may be;

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 Anti Profiteering in GST

(c) the deposit of an amount equivalent to fifty per cent of the amount
determined under the above clause in the Consumer Welfare Fund
and the remaining fifty per cent of the amount in the Consumer
Welfare Fund of the concerned State, where the eligible person does
not claim return of the amount or is not identifiable;
(d) imposition of penalty ( As per Section 171(3A) penalty @ 10% of the
profiteered amount can be levied, however no penalty will be levied if
profiteered amount is deposited within 30 days of passing order by
Authority) ; and
(e) cancellation of registration
Any order passed by the Authority shall be immediately complied with by the
registered person failing which action shall be initiated to recover the amount
in accordance with the provisions of the IGST Act or the CGST Act or the
UTGST Act or the SGST Act of the respective States, as the case may be.
The Authority may require any authority of Central tax, State tax or Union
territory tax to monitor the implementation of the order passed by it.

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 Chapter 31

Job Work
31.1 Introduction
Job work sector constitutes a significant industry in Indian economy. It
includes outsourced activities that may or may not culminate into
manufacture. The term Job-work itself explains the meaning. It is processing
of goods supplied by the principal. The concept of job work already exists in
Central Excise, wherein a principal manufacturer can send inputs or semi-
finished goods to a job worker for further processing. Many facilities,
procedural concessions have been given to the job workers as well as the
principal supplier who sends goods for job work.
The whole idea is to make principal responsible for meeting compliances on
behalf of the job worker on the goods processed by him (job worker),
considering the fact that typically the job- workers are small persons who are
unable to comply with the discrete provisions of the law. The GST Act makes
special provisions with regard to removal of goods for job-work and receiving
back the goods after processing from the job worker without payment of
GST. The benefit of these provisions shall be available both to the principal
and the job worker. \
The provisions in regard to job work are contained under Section 143 of the
CGST Act, 2017 and Rule 45 of the CGST Rules, 2017.

31.2 Meaning of Job work

Section 2(68) of the CGST Act, 2017 defines job work as ‘any treatment or
process undertaken by a person on goods belonging to another registered
person’. The one who does the said job would be termed as ‘job worker’. The
ownership of the goods does not transfer to the job worker but it rests with
the principal. The job worker is required to carry out the process specified by
the principal, on the goods.

31.3 Procedural aspects related to job work

Certain facilities with certain conditions are offered in relation to job work,
some of which are as under:
 Job Work

a) A registered person (principal) can send inputs/ capital goods under

intimation and subject to certain conditions without payment of tax to a
job worker and from there to another job worker and after completion
of job work bring back such goods without payment of tax. The
principal is not required to reverse the ITC availed on inputs or capital
goods dispatched to job worker.
b) principal can send inputs or capital goods directly to the job worker
without bringing them to his premises, still the principal can avail the
credit of tax paid on such inputs or capital goods.
c) However, inputs and/or capital goods sent to a job worker are required
to be returned to the principal within 1 year and 3 years, respectively,
from the date of sending such goods to the job worker.
d) After processing of goods, the job worker may clear the goods to-
(i) Another job worker for further processing;
(ii) Dispatch the goods to any of the place of business of the
principal without payment of tax;
(iii) Remove the goods on payment of tax within India or without
payment of tax for export outside India on fulfilment of
conditions.
The facility of supply of goods by principal to the third party directly from the
premises of the job worker on payment of tax in India likewise with or without
payment of tax for export may be availed by the principal on declaring
premise of the job worker as his additional place of business in registration.
In case the job worker is a registered person under GST, even declaring the
premises of the job worker as additional place of business is not required.
Before supply of goods to job worker, principal would be required to intimate
the Jurisdictional Officer containing the details of description of inputs
intended to be sent by the principal and the nature of processing to be
carried out by the job worker. The said intimation shall also contain the
details of another job worker, if any.
The inputs or capital goods shall be sent to the job worker under the cover of
a challan issued by the principal. The challan shall be issued even for the
inputs or capital goods sent directly to the job worker. The challan shall
contain the details specified in rule 10of the Invoice Rules.

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GST : Practitioners Perspective

The responsibility for keeping proper accounts for the inputs or capital goods
shall lie with the principal.

31.4 Input Tax credit on goods supplied to job

worker
Section 19 of the CGST Act, 2017 provides that the principal (a person
supplying taxable goods to the job worker) shall be entitled to take the credit
of input tax paid on inputs sent to the job- worker for the job work. Further,
the Proviso also provides that the principal can take the credit even when the
goods have been directly supplied to the job worker without bringing into the
premise of the principal. The principal need not wait till the inputs are first
brought to his place of business.

31.5 Time Limits for return of processed goods

As per Section 19 of the CGST Act, 2017, inputs and capital goods after
processing shall be returned back to principal within one year or three years
respectively of their being sent out. Further, the provision of return of goods
is not applicable in case of moulds and dies, jigs and fixtures or tools
supplied by the principal to job worker.

31.6 Extended meaning of input

As per the explanation provided in Section 143 of the CGST Act, 2017, where
certain process is carried out on the input before removal of the same to the
job worker, such product after carrying out the process to be referred as the
intermediate product. Such intermediate product can also be removed
without the payment of tax. Therefore, both input and intermediate product
can be cleared without payment of duty to job worker.

31.7 Waste clearing provisions

Pursuant to section 143 (5) of the CGST Act, 2017, waste generated at the
premises of the job worker may be supplied directly by the registered job worker
from his place of business on payment of tax or s such waste may be cleared by
the principal, in case the job worker is not registered.

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 Job Work

31.8 Relevant Circulars in regard to Job work

Movement of goods from the principal to the job worker and the documents
and intimation required therefor:
(i) Where goods are sent by principal to only one job worker - The
principal shall prepare in triplicate, the challan in terms of Rules 45 and
55 of the CGST Rules, for sending the goods to a job worker. Two
copies of the challan may be sent to the job worker along with the
goods. The job worker should send one copy of the said challan along
with the goods, while returning them to the principal. The Form GST ITC-
04 will serve as the intimation as envisaged under section 143 of the
CGST Act, 2017.
(ii) Where goods are sent from one job worker to another job worker -
In such cases, the goods may move under the cover of a challan
issued either by the principal or the job worker. In the alternative, the
challan issued by the principal may be endorsed by the job worker
sending the goods to another job worker, indicating therein the
quantity and description of goods being sent. The same process may
be repeated for subsequent movement of the goods to other job
workers.
(iii) Where the goods are returned to the principal by the job worker -
The job worker should send one copy of the challan received by him
from the principal while returning the goods to the principal after
carrying out the job work.
(iv) Where the goods are sent directly by the supplier to the job
worker - In this case, the goods may move from the place of business
of the supplier to the place of business/premises of the job worker with
a copy of the invoice issued by the supplier in the name of the buyer
(i.e. the principal) wherein the job worker’s name and address should
also be mentioned as the consignee, in terms of Rule 46(o) of the
CGST Rules. The buyer (i.e., the principal) shall issue the challan
under Rule 45 of the CGST Rules and send the same to the job worker
directly in terms of para (i) above. In case of import of goods by the
principal which are then supplied directly from the customs station of
import, the goods may move from the customs station of import to the
place of business/premises of the job worker with a copy of the Bill of

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GST : Practitioners Perspective

Entry and the principal shall issue the challan under Rule 45 of the
CGST Rules and send the same to the job worker directly.
(v) Where goods are returned in piecemeal by the job worker - In case
the goods after carrying out the job work, are sent in piecemeal
quantities by a job worker to another job worker or to the principal, the
challan issued originally by the principal cannot be endorsed and a
fresh challan is required to be issued by the job worker.
(vi) Submission of intimation - It is the responsibility of the principal to
include the details of all the challans relating to goods sent by him to
one or more job worker or from one job worker to another and its
return therefrom. The Form GST ITC-04 will serve as the intimation as
envisaged under section 143 of the CGST Act.—Circular No.
38/12/2018, dated 26-3-2018, as amended by, Circular No. 88/7/2019,
dated 1-2-2019.
Supply of goods by the principal from job worker’s place of business/
premises - The supply of goods by the principal from the place of
business/premises of the job worker will be regarded as supply by the
principal and not by the job worker as specified in section 143(1)(a) of the
CGST Act.—Circular No. 38/12/2018, dated 26- 3-2018, as amended by,
Circular No. 88/7/2019, dated 1-2-2019.
Violation of conditions laid down in section 143 - As per the provisions
contained in Section 143 of the CGST Act, if the inputs or capital goods
(other than moulds and dies, jigs and fixtures or tools) are neither received
back by the principal nor supplied from the job worker’s place of business
within the specified time period, the inputs or capital goods (other than
moulds and dies, jigs and fixtures or tools) would be deemed to have been
supplied by the principal to the job worker on the day when such inputs or
capital goods were sent out to the first job worker. If such goods are returned
by the job worker after the stipulated time period, the same would be treated
as a supply by the job worker to the principal and the job worker would be
liable to pay GST if he is liable for registration in accordance with the
provisions contained in the CGST Act read with the Rules made thereunder.
Further, there is no requirement of either returning back or supplying the
goods from the job worker’s place of business/premises as far as moulds and
dies, jigs and fixtures, or tools are concerned.— Circular No. 38/12/2018,
dated 26-3-2018, as amended by, Circular No. 88/7/2019, dated 1-2-2019.

350
 Job Work

Job work provisions applicable to a registered person - The provisions of

Section 143 of the CGST Act are applicable to a registered person. Thus, it is
only a registered person who can send the goods for job work under the said
provisions. It may also be noted that the registered person (principal) is not
obligated to follow the said provisions. It is his choice whether or not to avail
or not to avail of the benefit of these special provisions.— Circular No.
38/12/2018, dated 26-3-2018, as amended by, Circular No. 88/7/2019, dated
1-2-2019.

351
 CA. Satish K. Gupta CA. Prasanna Kumar D.
Central Council Member and Chairman Central Council Member and Vice-Chairman
CMP, ICAI CMP, ICAI

COMMITTEE FOR MEMBERS IN PRACTICE (CMP) FOR

THE COUNCIL YEAR 2020-21
Members of Committee
CA. Satish K. Gupta Chairman, CMP, ICAI CA. Sushil Kumar Goyal Member, CMP, ICAI
CA. Prasanna Kumar D Vice-Chairman, CMP, ICAI CA. (Dr.) Debashis Mitra Member, CMP, ICAI
CA. Anil Satyanarayan Bhandari Member, CMP, ICAI CA. Pramod Kumar Boob Member, CMP, ICAI
CA. Prafulla Premsukh Chhajed Member, CMP, ICAI CA. Manu Agrawal Member, CMP, ICAI
CA. Dheeraj Kumar Khandelwal Member, CMP, ICAI CA. Anuj Goyal Member, CMP, ICAI
CA. Shriniwas Yeshwant Joshi Member, CMP, ICAI CA. Prakash Sharma Member, CMP, ICAI
CA. Durgesh Kumar Kabra Member, CMP, ICAI CA. (Ms.) Kemisha Soni Member, CMP, ICAI
CA. Aniket Sunil Talati Member, CMP, ICAI CA. Hans Raj Chugh Member, CMP, ICAI
CA. Dayaniwas Sharma Member, CMP, ICAI CA. Pramod Jain Member, CMP, ICAI
CA. Rajendra Kumar P Member, CMP, ICAI CA. Rajesh Sharma Member, CMP, ICAI
CA. M. P. Vijay Kumar Member, CMP, ICAI Shri Gyaneshwar Kumar Singh Member, CMP, ICAI

Co-Opted Members
CA.Aatman Shah
CA. Sunil Kumar Mor
CA. Rajasekhara Reddy Eada
CA.Vijay Garg
CA.Mukesh Chaudhary
CA.Mastan Singh
CA.Sripria Kumar

Dr. Sambit Kumar Mishra, Secretary, Committee for for Members in Practice (CMP), ICAI
ICAI Bhawan, A-29, First Floor, Administrative Building, Sector-62, Noida-201309, UP India
Ph.: 0120-3045994; E-mail : sambit.mishra@icai.in