IV Unit: GST introduction, background, basic concepts, features, kinds of

GST, Administartion officers, levy collection scope of supply, composite mixed

supplies input tax credit eligibility of input tax credit.

GST introduction, background, basic concepts, features, kinds of GST,

Administration officers:

Dual GST: India has adopted a Dual GST model in view of the federal
structure of the country. Consequently, Centre and States simultaneously levy GST
on taxable supply of goods or services or both which, takes place within a State or
Union Territory. Thus, tax is imposed concurrently by the Centre and States, i.e.
Centre and States simultaneously tax goods and services. Now, the Centre also has
the power to tax intra-State sales & States are also empowered to tax services. GST
extends to whole of India including the State of Jammu and Kashmir

CGST/SGST/UTGST/IGST

GST is a destination-based tax applicable on all transactions involving supply of

goods and services for a consideration subject to exceptions thereof. GST in India
comprises of Central Goods and Services Tax (CGST) – levied and collected by
Central Government, State Goods and Services Tax (SGST) – levied and collected
by State Governments/Union Territories with State Legislatures and Union
Territory Goods and Services Tax (UTGST) – levied and collected by Union
Territories without State Legislatures, on intra-State supplies of taxable goods
and/or services.

 IGST, CGST, and SGST are categories of Goods and Service Tax.
 IGST applies to interstate transactions and CGST and SGST to intrastate transactions.
 IGST is collected together and distributed to the Central and State Governments.
 SGST and CGST are collected directly by the Central and State Governments.

Taxation :

Tax is defined as a Pecuniary burden laid upon individuals or property owners to

suppor the government, payment exacted by the Legislative authority.
Tax is not a voluntary payment or donation, but enforced contribution, exacted
pursuant to legislative authority.
Tax is classified as direct tax and indirect tax.
Direct Tax: the burden to pay the tax cannot be shifted to some one else by the
taxpayer.
Indirect tax: it can be shifted and called regressive in nature because they are not
based on the principle of ability to pay.
Both State and Central Indirect Taxes have been amalgamated into a single tax by
GST and Customs duty will continue in post GST regime

Features of Indirect Tax:

an important source of Revenue.

Tax on commodities and services
Shifting of the burden
Inflationary
Wider tax base
Promote social welfare
Reressive in nature

Concept:

1. Based on Constitutional Provisions

2. Destination tax. They will pay the tax at the destination of the goods.
3. Cgst, sgst, utgist igst: Central state, Union territory and Integrated
4. Cascading effect:
5. Avoid double taxation
6. Value added tax
7. Cross sectional credit and usage: output tax will be used only against cgst
for cgst. Sgst to sgst
8. For IGST – after setting off the IGST Credit, we can adjust the CGST then
SGST Credits

CBIC --: Council members for GST:: CHAIRPERSON –FINANCE MINISTER

VICE-CHAIRPERSON : can be chose from Union members selected from all the
states
Functioning: state and central amounts will be separately allocated
FEATURES:
Major source of revenue
Inflationary: basing on the hike in prices
Shift of Tax burden
Regressive in nature: unlike income tax
Promotion of welfare ---Eg: alcohol- 28% . WWW.GST.GOV.IN
CBIC covid rules: sensed the gravity of the pandemic and its likely impact on the
global supply chain at the very initial stage, and took a number of proactive
measures to ensure smooth operation of all customs locations in India viz. seaports,
airports, land customs stations, foreign post offices and courier terminals, while
following social distancing and other health related guidelines of the Government,
issued from time to time
Example: All major ports have been directed not to levy penalties, demurrage,
charges, fee, rental on any port user (traders, Shipping Lines, concessionaries,
licensees etc.) for any delay in berthing, loading/unloading operations or
evacuation/arrival of cargo caused by reasons attributable to lockdown measures
(Ministry of Shipping letter No. PD-14300/4/2020-PD VII dated 31.03.2020).

Legislative Framework: 

There is single legislation – CGST Act, 2017 – for levying CGST. Similarly,
Union Territories without State legislatures [Andaman and Nicobar Islands,
Lakshadweep, Dadra and Nagar Haveli, Daman and Diu and Chandigarh] are
governed by UTGST Act, 2017 for levying UTGST. States and Union territories
with their own legislatures [Delhi and Puducherry] have their own GST legislation
for levying SGST.

Though there are multiple SGST legislations, the basic features of law, such as
chargeability, definition of taxable event and taxable person, classification and
valuation of goods and services, procedure for collection and levy of tax and the
like are uniform in all the SGST legislations, as far as feasible. This is necessary to
preserve the essence of dual GST. 

Further, real estate sector has been kept out of ambit of GST, i.e. GST will not be
levied on sale/purchase of immovable property
Though there are multiple SGST legislations, the basic features of law, such as
chargeability, definition of taxable event and taxable person, classification and
valuation of goods and services, procedure for collection and levy of tax and the
like are uniform in all the SGST legislations, as far as feasible. This is necessary to
preserve the essence of dual GST. 

Input tax credit (ITC)  is the tax paid by the buyer on purchase of goods or
services. Such tax which is paid at the purchase when reduced from liability
payable on outward supplies is known as input tax credit. In other words, input tax
credit is tax reduced from output tax payable on account of sales.

Example: Mr.
A purchased goods worth Rs. 18,000 on which GST @ 18% = Rs. 3240.
He sold goods worth Rs. 22,000. GST payable @ 18% is Rs. 3960.
Thus, net GST payable through cash     Rs. 720.
Manner of utilization of ITC:
Input Tax Credit (ITC) of CGST and SGST/UTGST is available throughout the
supply chain, but cross utilization of credit of CGST and SGST/UTGST is not
possible, i.e. CGST credit cannot be utilized for payment of SGST/UTGST and
SGST/UTGST credit cannot be utilized for payment of CGST.
However, cross utilization is allowed between CGST/SGST/UTGST and IGST, i.e.
credit of IGST can be utilized for the payment of CGST/SGST/UTGST and vice
versa.
Seamless flow of credit:
Since GST is a destination-based consumption tax, revenue of SGST ordinarily
accrues to the consuming States. The inter- State supplier in the exporting State is
allowed to set off the available credit of IGST, CGST and SGST/UTGST (in that
order) against the IGST payable on inter-State supply made by him.
The buyer in the importing State is allowed to avail the credit of IGST paid on
inter-State purchase made by him. Thus, unlike the earlier scenario where the
credit chain used to break in case of inter-State sales on account of non-VAT able
CST, under GST regime there is a seamless credit flow in case of inter-State
supplies too.
The revenue of inter-State sale does not accrue to the exporting State and the
exporting State transfers to the Centre the credit of SGST/UTGST used in payment
of IGST.
The Centre transfers to the importing State the credit of IGST used in payment of
SGST/UTGST. Thus, the inter- State trade of goods and services (IGST) needed a
robust settlement mechanism amongst the States and the Centre.
A Common Portal was needed which could act as a clearing house and verify the
claims and inform the respective Governments to transfer the funds. This was
possible only with the help of a strong IT Infrastructure.
GST Common Portal:
Resultantly, Common GST Electronic Portal – www.gst.gov.in – a website
managed by Goods and Services Network (GSTN) [a company incorporated under
the provisions of section 8 of the Companies Act, 2013] has been set by the
Government to establish a uniform interface for the tax payer and a common and
shared IT infrastructure between the Centre and States.
The GST portal is accessible over Internet (by taxpayers and their CAs/Tax
Advocates etc.) and Intranet by Tax Officials etc. The portal is one single common
portal for all GST related services.
A common GST system provides linkage to all State/ UT Commercial Tax
Departments, Central Tax authorities, Taxpayers, Banks and other stakeholders.
The eco-system consists of all stakeholders starting from taxpayer to tax
professional to tax officials to GST portal to Banks to accounting authorities.
Primarily, GSTN provides three front end services to the taxpayers namely
registration, payment and return through GST Common Portal.
The functions of the GSTN include facilitating registration; forwarding the returns
to Central and State authorities; computation and settlement of IGST; matching of
tax payment details with banking network; providing various MIS reports to the
Central and the State Governments based on the taxpayer return information;
providing analysis of taxpayers’ profile; and running the matching engine for
matching, reversal and reclaim of input tax credit.
However, it is important to note that the Common GST Electronic Portal for
furnishing electronic way bill is www.ewaybillgst.gov.in
[managed by the National Informatics Centre, Ministry of Electronics &
Information Technology, Government of India]. E-way bill is an electronic
document generated on the GST portal evidencing movement of goods.
GSPs/ASPs:
GSTN has selected certain IT, ITeS and financial technology companies, to be
called GST Suvidha Providers (GSPs). GSPs develop applications to be used by
taxpayers for interacting with the GSTN.
They facilitate the tax payers in uploading invoices as well as filing of returns and
act as a single stop shops for GST related services.
They customize products that address the needs of different segment of users.
GSPs may take the help of Application Service Providers (ASPs) who act as a link
between taxpayers and GSPs.
Compensation Cess:
A GST Compensation Cess at specified rate has been imposed under the Goods
and Services Tax (Compensation to States) Cess Act, 2017 on the specified luxury
items or demerit goods, like pan masala, tobacco, aerated waters, motor cars etc.,
computed on value of taxable supply. Compensation cess is leviable on intra-State
supplies and inter-State supplies with a view to provide for compensation to the
States for the loss of revenue arising on account of implementation of the GST.
GST – A tax on goods and services:
GST is levied on all goods and services, except alcoholic liquor for human
consumption and petroleum crude, diesel, petrol, ATF and natural gas.
Alcoholic liquor for human consumption: is outside the realm of GST. The
manufacture/production of alcoholic liquor continues to be subjected to State
excise duty and inter-State/intra-State sale of the same is subject to CST/
VAT respectively.
Petroleum crude, diesel, petrol, ATF and natural gas: As regards petroleum
crude, diesel, petrol, ATF and natural gas are concerned, they are not presently
leviable to GST. GST will be levied on these products from a date to be notified on
the recommendations of the GST Council. Till such date, central excise
duty continues to be levied on manufacture/production of petroleum crude, diesel,
petrol, ATF and natural gas and inter-State/intra-State sale of the same is subject
to CST/VAT respectively.
Tobacco: Tobacco is within the purview of GST, i.e. GST is leviable on tobacco.
However, Union Government has also retained the power to levy excise duties on
tobacco and tobacco products manufactured in India. Resultantly, tobacco is
subject to GST as well as central excise duty.
 There is single legislation – CGST Act, 2017 – for levying CGST. Similarly,
Union Territories without State legislatures [Andaman and Nicobar Islands,
Lakshadweep, Dadra and Nagar Haveli, Daman and Diu and Chandigarh] are
governed by UTGST Act, 2017 for levying UTGST. States and Union territories
with their own legislatures [Delhi and Puducherry] have their own GST legislation
for levying SGST.

ADVANTAGES OF GST:

Citizens: (i) Simpler tax system (ii) Reduction in prices of goods and services due
to elimination of cascading (iii) Uniform prices throughout the country (iv)
Transparency in taxation system (v) Increase in employment opportunities
Trade/Industry: (i) Reduction in multiplicity of taxes (ii) Mitigation of
cascading/double taxation (iii) More efficient neutralization of taxes especially for
exports (iv) Development of common national market (v) Simpler tax regime-
fewer rates and exemptions.
Central/State Governments: (i) A unified common national market to boost
Foreign Investment and “Make in India” campaign (ii) Boost to
export/manufacturing activity, generation of more employment, leading to reduced
poverty and increased GDP growth (iii) Improving the overall investment climate
in the country which will benefit the development of states (iv) Uniform SGST and
IGST rates to reduce the incentive for tax evasion (v) Reduction in compliance
costs as no requirement of multiple record keepi t

SUPPLY:
Supply includes sale, transfer, exchange, barter, license, rental, lease and disposal.
If a person undertakes either of these transactions during the course or furtherance
of business for consideration, it will be covered under
the meaning of Supply under GST.

TYPES OF 'SUPPLY' UNDER 'GST' REGIME

 Supply. Section 7 of the Act defines the term 'supply' including-
 Composite Supply. ...
 Continuous supply. ...
 Inward supply. ...
 Outward supply. ...
 Mixed supply. ...
 Taxable supply. ...
 Non taxable supply.

Composite Supply under GST

‘composite supply’ under sec.2(30). means a supply made by a

taxable person to a recipient consisting of two or more taxable
supplies of goods or services or both, or any combination thereof,
which are naturally bundled and supplied in conjunction with each
other in the ordinary course of business, one of which is a principal
supply. 
This definition implies that when supply is made which consists of
different forms of supply including goods or services but which are
necessarily, naturally and integrally connected to the main supply,
then the entire supply should be taken as a single supply which has
got essential character of principal supply.
Inter-State supplies of taxable goods and/or services are subject to Integrated
Goods and Services Tax (IGST). IGST is approximately the sum total of CGST
and SGST/UTGST and is levied by Centre on all inter-State supplies

Transactions Treated as Supply under GST Even If Made Without Consideration

Note: Section 7 of the CGST Act was amended to include a new clause under the
definition of supply. Activities or transactions involving the supply of goods or
services by any person, other than an individual, to its members or constituents or
vice-versa, for cash, deferred payment or other valuable consideration. Earlier, this
supply would have been considered as only supply of goods under schedule II. So,
the scope is expanded now for levy

Transactions between related persons and other activities of GST Schedule I

will be treated as supply even if made without any consideration These
transactions are mostly between parties which are related or between an agent and
a principal. The parties pay GST and can later claim it as input tax credit

Transactions between related parties are of special importance under any law as the
pricing methodologies and arriving at them are challenging. When parties are
related, the prices are controlled and they would not sometimes be the prices that
would have otherwise been charged, had the transaction taken place between
unrelated parties.
Related persons are defined u/s 2(84) of the GST Act. Persons shall be deemed to
be related if they fall under any of the categories below
1. Officer or director of one business is the officer/director of the other
business
2. Officer or director of one business is the officer/ director of another business
3. Businesses legally recognised as partners
4. An employer and an employee.
5. Businesses legally recognised as partners
6. One of them controls the other directly or indirectly
7. They are under common control or management.
8. The entities together control another entity.
9. The promoters or managerial persons are members of the same family,

Who is a Person?
Persons include a legal person who can be individuals, HUF, company, firm, LLP,
co-operative society, a body of individuals, local authority, government, or an
artificial juridical person. It also includes entities incorporated outside India.
Persons who are associated with one another’s business or is a sole agent or sole
distributor or sole concessionaire shall be deemed to be related.

Tax liability of supply made between related persons:

Supplies between the related persons with consideration in arm’s length shall
constitute as ‘Supply’ like any other transaction. Whereas, the supply made
between related persons for inadequate or no consideration is covered under
Schedule I of the GST Act. Such transactions shall be treated as ‘Supply’ only if it
happens in the course or furtherance of business.
Further, when an entity makes an import of service from a related person or
establishment outside India (without consideration) but for doing business, it shall
be considered as a supply. 
Example, A Ltd. sells goods to B Ltd. (related entity) at Rs. 1,000 and to C Ltd.
(unrelated entity) at Rs. 1,500. In this case, we can say that the relationship has
influenced the pricing of A Ltd. Hence, for the purpose of valuation, Rs. 1,500 will
be considered.

Even if there is no consideration it is a supply

1. Permanent transfer of the business asset: if you are not availing the input tax
credit
Permanent transfer or sale of business assets on which input tax credit has been
availed will also be treated as supply even if there is no consideration received.
GST is applicable to the sale of business assets only. It does not apply to the
sale of personal land or building and other personal assets. “Permanent transfer”
means transfer without any intention of receiving the goods back. 

2. Between employer and employee – if a gift of more than 50k then it is taxable.
3. Related persons : officers, directors, employer and employee if one person
controls the other then they also related, if third person controls then also they
are related, members of same family also related.
Import of services by a taxable person from a related person or from any of his
other establishments outside India, for business purposes, will be treated as
supply. For example, ABC Inc. is incorporated in the US by A Ltd. along with
B Ltd. both from India. Services are imported by B Ltd from ABC Inc. without
any consideration, the import will be deemed to be a supply. GST will be paid
by B Ltd. on a reverse charge basis

4. Distinct persons: branch to branch transaction also it s supply if they are in

different states
5. Principal agent. : Both agent and principal will be liable to pay GST jointly &
severally. The person paying GST can later claim the input tax credit
 1. By a principal to his agent and the agent will supply them on behalf of the
principal. For example, a company based in Mumbai employs an agent in
Pune (Maharashtra) and sends goods to him. GST is applicable
2. By an agent to his principal when the agent receives these goods on behalf
of the principal
Example: a company in the suburbs employs an agent in the city. The agent
buys goods from the city and sends them to the principal to sell in the suburbs.
Any supplies between agent and principal will be liable to GST.

6. Importation of services: even if there is no consideration it is a supply

In course of business and in furtherance of the business for a specific set of
goods only
7. Importation of Services must be a supply when there is consideration it is a
supply whether or not i course of business and in furtherance of the business ( 6
& 7 contradiction)

List of items to be treated as supply list: schedule II

Schedule III – negative list (not treated as Supply)
Works contract services,

.
Chapert V: Registration : returns, payment of tax, penalties tds tcs demand
and recovery advance ruling, appeals and revisions appellate tribunals
offences and penalties.

GST Registration Process

 GST registration is mandatory for certain businesses with annual turnover

above Rs. 40 Lakhs.
 GST registration can be done online at Nil charges.
 There is a 10% penalty on tax due if you don’t register for GST.
 Small businessmen can enjoy benefits by voluntary GST registration.
 GSTIN is a unique GST Identification Number assigned to the businesses
registered under GST.

GST Registration PROCESS:

Classification of goods and services:
HSN (Harmonised System of Nomenclature) code is used for classifying the goods
under the GST.
A new Scheme of Classification of Services has been devised wherein the
services of various descriptions have been classified under various sections,
headings and groups. Each group consists of various Service Codes (Tariff).
Chapters referred are the Chapters of the First Schedule to the Customs Tariff Act,
1975.
Registration:
Every supplier of goods and/ or service is required to obtain registration in the
State/UT from where he makes the taxable supply if his aggregate turnover
exceeds ` 20 lakhs during a FY.
However, the limit of 20 lakh will be reduced to 10 lakh if the person is carrying
out business in the Special Category States1 except Jammu and Kashmir.
Composition Scheme:
In GST regime, tax (i.e. CGST and SGST/UTGST for intra-State supplies and
IGST for inter-State supplies) is payable by every taxable person and in this
regard, provisions have been prescribed in the law.
However, for providing relief to small businesses making intra-State supplies, a
simpler method of paying taxes and accounting thereof is also prescribed, known
as Composition Levy.
Exemptions:
Apart from providing relief to small-scale business, the law also contains
provisions for granting exemption from payment of tax on essential goods and/or
services.
www.gst.gov.in - Know all about the Government GST Portal Login.
GST Registration:

GST Number Search: 15 Digits Every Business Needs

SUPPLY:
It must be made in the course of furtherance of business. It must be a taxable
supply
 GST Slab Rates in India
GST Rates

Last Updated 21st Apr 2021

Slab Popular Goods Popular Services

Rates
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Plastic waste

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Handbags for sale

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28% Sunscreen, Motorcycles, Pan Masala Cinema, Food/Drinks/Stay at AC Five Star

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