UNIT 1 – INTRODUCTION TO GST

Goods and Services Tax (GST) is an indirect tax which was introduced in India on 1 July 2017
and was applicable throughout India which replaced multiple cascading taxes levied by
the central and state governments. It was introduced as The Constitution (One Hundred and First
Amendment) Act 2017 following the passage of Constitution 122nd Amendment Bill. The GST
is governed by a GST Council and its Chairman is the Finance Minister of India.

GST is one indirect tax for the whole nation, which will make India one unified common market.
GST is a single tax on the supply of goods and services, right from the manufacturer to the
consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of
value addition, which makes GST essentially a tax only on value addition at each stage. The final
consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off
benefits at all the previous stages.

Definition of GST

“GST is a tax on goods and services with value addition at each stage having comprehensive and
continuous chain of set of benefits from the producer’s / service provider’s point up to the
retailers’ level where only the final consumer should bear the tax.”

OBJECTIVES/ BASIC SCHEME OF GST:

1. One Country – One Tax

2. Consumption based tax instead of Manufacturing
3. Uniform GST Registration, payment and Input tax Credit
4. To eliminate the cascading effect of Indirect taxes on single transaction
5. Subsume all indirect taxes at Centre and State Level under
6. Reduce tax evasion and corruption
7. Increase productivity
8. Increase Tax to GDP Ratio and revenue surplus
9. Increase Compliance
10. Reducing economic distortions

TAX STRUCTURE IN INDIA

Taxes are classified under two categories namely direct and indirect taxes. The largest difference
between these taxes is their implementation. Direct taxes are paid by the assessee while indirect
taxes are levied on goods and services.

(A) Direct taxes

Direct taxes are levied on individuals and corporate entities and cannot be transferred to others.
These include income tax, wealth tax, and gift tax. As per the Income Tax (IT) Act, 1961 every
assessee whose total income exceeds the maximum exempt limit is liable to pay this tax.
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(B) Indirect taxes

Indirect taxes are not directly paid by the assessee to the government authorities. These are
levied on goods and services and collected by intermediaries (those who sell goods or offer
services).

Central Government levies taxes on the following:

1. Income Tax: Tax on income of a person

2. Customs duties: Duties on import and export of goods
3. Central excise: Taxes on Manufacturing of dutiable goods
4. Service tax: Taxes on provision of services

State Governments can levy the following taxes:

1. Value Added Tax (VAT): This is tax on sale of goods. While intra-state sale of goods are
covered by the VAT Law of that state, inter-state sale of goods is covered by the Central
Sales Tax Act. Even the revenue collected under Central Sales Tax Act is done so by the
State Governments themselves and actually the Central Government has no role to play
so.
2. Stamp duties and Land Revenue: Since land is a matter on which only State Governments
can govern, thus the Stamp duties on transfer of immovable properties are levied by State
Governments.
3. State Excise on Liquor and certain agricultural goods.

Apart from the above, certain powers of taxation have been devolved in the hands of local
bodies. These local governing bodies can levy taxes on water, property, shop and establishment
charges etc.

Simplification of Indirect Taxes under GST Regime: The current indirect tax has one
major problem - the cascading effect.

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GST is set to become one of the biggest fiscal reforms that our country is going to witness. All
businesses, small or large are going to get impacted because of this paradigm shift i.e; removal of
the cascading tax effect in the indirect tax regime. In simple words “cascading tax effect” means
a tax on tax. It is a situation where in a consumer has to bear the load of tax on tax and
inflationary prices as a result of it.

Let’s assume, when Manufacturer “A” sells his goods from Gujarat to Haryana, he is liable to
collect both Excise Duty and Central Sales Tax at the rate of 12.5% and 2% respectively, being
an inter-state sale. Further, Dealer “B” will not get any credit of this Excise Duty and CST.
Dealer “B” in turn sells it to Dealer “C” in Gurgaon and charges VAT on such sale. Dealer “C”
sells it to Dealer “D” in Delhi and collects CST, and finally, Dealer “D” sells these goods to the
end consumer in Delhi, collecting VAT.

TAXES AT THE CENTRE AND STATE LEVEL ARE BEING SUBSUMED

INTO GST:

At the Central level, the following taxes are being subsumed:

a) Central Excise Duty,
b) Additional Excise Duty,
c) Service Tax,
d) Additional Customs Duty commonly known as Countervailing Duty, and
e) Special Additional Duty of Customs.
At the State level, the following taxes are being subsumed:
a) Subsuming of State Value Added Tax/Sales Tax,
b) Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax
(levied by the Centre and collected by the States),
c) Octroi and Entry tax,
d) Purchase Tax,
e) Luxury tax, and
f) Taxes on lottery, betting and gambling.

KEY FEATURES OF GST

The following are the key features of the GST model: -

1. Dual Goods and Service Tax: It would be dual GST to be levied by Centre called
Central GST and that to be levied by States (including Union Territories with legislature)
called as State GST or Union Territory GST.
2. Inter-State Transactions and the IGST Mechanism: The Centre would levy and
collect the Integrated Goods and Services Tax (IGST) on all inter-State supply of goods
and services. The IGST mechanism has been designed to ensure seamless flow of input
tax credit from one State to another.
3. Destination-Based Consumption Tax: GST would be based on the principle of
destination-based consumption taxation as against the present principle of origin based
taxation. It implies that all SGST collected will ordinarily accrue to the State where the
consumer of the goods or services sold resides.

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 4. Computation of GST on the basis of invoice credit method: The liability under the
GST will be invoice credit method i.e. cenvat credit will be allowed on the basis of
invoice issued by the suppliers.
5. Payment of GST: The CGST and SGST are to be paid to the accounts of the central and
states respectively.
6. Goods and Services Tax Network (GSTN): A not-for-profit, Non-Government
Company called Goods and Services Tax Network (GSTN), jointly set up by the Central
and State Governments will provide shared IT infrastructure and services to the Central
and State Governments, tax payers and other stakeholders.
7. Input Tax Credit (ITC) Set Off: Input Tax Credit means reducing the taxes paid on
inputs from taxes to be paid on output. When any supply of services or goods is supplied
to a taxable person, the GST charged is known as Input Tax. ITC for CGST & SGST will
be taken for taxes allowed against central and state respectively.
8. GST on Imports: Centre Govt. would levy IGST on inter-State supply/stock transfer of
goods and services. Import of goods will be subject to basic customs duty and IGST.
9. Exports of goods and Services: It would be Zero rated. All goods or services likely to
be covered under GST except:
a. Alcohol for human consumption – state excise plus VAT
b. Electricity – Electricity duty
c. Real Estate – Stamp duty plus property taxes
d. Tobacco Products – with Central excise duty
e. Petroleum Products (to be brought under GST from date to be notified on
recommendation of GST Council)
10. Maintenance of Records: A taxpayer or exporter would have to maintain separate
details in books of account for availment, utilization or refund of Input Tax Credit of
CGST, SGST and IGST.
11. Administration of GST: Administration of GST will be the responsibility of the GST
Council, which will be the apex policy making body of the GST. Members of GST
Council comprised of the Central and State ministers in charge of the finance portfolio.
12. Goods and Service Tax Council: The GST Council will be a joint forum of the Centre
and the States. The Council will make recommendations to the Union and the States on
important issues like tax rates, exemption list, threshold limits, etc. One-half of the total
number of Members of the Council will constitute the quorum of GST council.

BENEFITS OF GST

The benefits of GST can be summarized as under:

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 Easy compliance Single and
Simple and easy to transparent tax
administer proportionate to the
Uniformity of tax rates For Central and State
For Business & Industry
and structures For the
value of Consumer
goods and
Govt.’s
services
Better controls on
Removal of cascading
leakage
Improved
competitiveness Relief in overall tax
Higher revenue burden
Gain to manufacturers efficiency
& exporters

FOR BUSINESS AND INDUSTRY:

1. Easy compliance: A robust and comprehensive IT system would be the foundation of the
GST regime in India. Therefore, all tax payer services such as registrations, returns,
payments, etc. would be available to the taxpayers online, which would make compliance
easy and transparent.
2. Uniformity of tax rates and structures: GST will ensure that indirect tax rates and
structures are common across the country, thereby increasing certainty and ease of doing
business. In other words, GST would make doing business in the country tax neutral,
irrespective of the choice of place of doing business.
3. Removal of cascading: A system of seamless tax-credits throughout the value-chain, and
across boundaries of States, would ensure that there is minimal cascading of taxes. This
would reduce hidden costs of doing business.
4. Improved competitiveness: Reduction in transaction costs of doing business would
eventually lead to an improved competitiveness for the trade and industry.
5. Gain to manufacturers and exporters: The subsuming of major Central and State taxes
in GST, complete and comprehensive set-off of input goods and services and phasing out
of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and
services. This will increase the competitiveness of Indian goods and services in the
international market and give boost to Indian exports. The uniformity in tax rates and
procedures across the country will also go a long way in reducing the compliance cost.

FOR CENTRAL AND STATE GOVERNMENTS

1. Simple and easy to administer: Multiple indirect taxes at the Central and State levels
are being replaced by GST. Backed with a robust end-to-end IT system, GST would be
simpler and easier to administer than all other indirect taxes of the Centre and State
levied so far.

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 2. Better controls on leakage: GST will result in better tax compliance due to a robust IT
infrastructure. Due to the seamless transfer of input tax credit from one stage to another
in the chain of value addition, there is an inbuilt mechanism in the design of GST that
would incentivize tax compliance by traders.
3. Higher revenue efficiency: GST is expected to decrease the cost of collection of tax
revenues of the Government, and will therefore, lead to higher revenue efficiency.

FOR THE CONSUMER:

1. Single and transparent tax proportionate to the value of goods and services: Due to
multiple indirect taxes being levied by the Centre and State, with incomplete or no input
tax credits available at progressive stages of value addition, the cost of most goods and
services in the country today are laden with many hidden taxes. Under GST, there would
be only one tax from the manufacturer to the consumer, leading to transparency of taxes
paid to the final consumer.
2. Relief in overall tax burden: Because of efficiency gains and prevention of leakages,
the overall tax burden on most commodities will come down, which will benefit
consumers.

STRUCTURE OF GST/ MODEL OF GST (DUAL GST)

Goods & Services Tax (GST) is implemented in about 160 countries in the world under various
models. France was the first to implement GST in 1960. India is opting for Concurrent Dual GST
model (which has been implemented by Brazil & Canada) wherein for levy of tax/ taxes, the
place of supply of goods & services are to be considered. Accordingly, following structure of
GST will be followed in India:

*Additional Tax up to 1% is to be levied in case of inter-state supply of goods.

Revenue will be ultimately received by the State in which goods are finally consumed.

There are three prime models of GST:

1. CGST/GST at Central Level : This tax is levied by the Union Government only
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 2. SGST GST at State Level : This tax is levied by the State Government only
3. Dual GST : Concurrent levying of GST by Centre and State

I. Transaction of goods and services would be taxes under CGST and SGST: The Central
GST and the State GST would be levied simultaneously on every transaction of supply of goods
and services except on exempted goods and services, goods which are outside the purview of
GST and the transactions which are below the prescribed threshold limits. Further, both would be
levied on the same price or value unlike State VAT which is levied on the value of the goods
inclusive of Central Excise.

II. Inter-State Transactions of Goods and Services be taxed under GST: The Integrated
Goods and Services Tax (IGST) on all inter-State supplies of goods and services under Article
269A (1) of the Constitution. The IGST would roughly be equal to CGST plus SGST. The IGST
mechanism has been designed to ensure seamless flow of input tax credit from one State to
another. The inter-State seller would pay IGST on the sale of his goods to the Central
Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order).
The exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The
importing dealer will claim credit of IGST while discharging his output tax liability (both CGST
and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST
used in payment of SGST. Since GST is a destination-based tax, all SGST on the final product
will ordinarily accrue to the consuming State.

Impact of DUAL GST on Prices of Goods and Services:- The GST is expected to foster
increased efficiencies in the economic system thereby lowering the cost of supply of goods and
services. Further, in the Indian context, there is an expectation that the aggregate incidence of the
dual GST will be lower than the present incidence of the multiple indirect taxes in force. The
expectation is that the dealers would start passing on the benefit of the reduced tax incidence to
the customers by way of reduced prices. As regards services, it could be that their short term
prices would go up given the expectation of an increase in the tax rate from the present 10% to
approximately 14% to 16%.

Benefits of Dual GST: – The Dual GST is expected to be a simple and transparent tax with one
or two CGST and SGST rates. The dual GST is expected to result in:-

1. Reduction in the number of taxes at the Central and State level.

2. Removal of the current cascading effect of taxes.
3. Increased tax collections due to wider tax base and better compliance.
4. Reduction in Cost of Payment and Collection of Tax.
5. Clarity and Homogeny in Taxing System.
6. Faster Assessment and Reduced Litigation.
7. Consumption based internationally accepted taxation.
8. Removal of Distortions and Simplification of the tax system.

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Who would be impacted: All businesses, whether engaged in sales / supply of goods or supply
of services, would be impacted by GST. The impact would be on supply chains, ERP, product
pricing, dealer margins etc.
Applicability to service providers :-Unlike the transition from the sales tax regime to the VAT,
where only businesses dealing in goods were affected, in the case of GST, as the name suggests,
both goods and service providers will be impacted. Thus, even pure service providers need to
plan for the transition to the GST.
Taxable event: - The “Taxable event” will be the supply of goods and the supply of services.
Hence, the current taxable events such as ‘manufacture of goods’, ‘sale of goods’ and ‘ rendition
of services’ will not be relevant under the GST regime.

Applicability of both CGST and the SGST on all transactions: - A transaction of ‘supply of
goods’ will attract both the CGST & SGST as applicable on goods. Similarly, a ‘supply of
service’ will attract both the CGST & SGST as applicable on services.

Applicability of other indirect taxes: It is proposed that the taxes to be subsumed under CGST
will include Central Excise Duty (CENVAT), Service Tax and Additional Duties of Customs and
the taxes to be subsumed under the SGST will include Value Added Tax, Central Sales Tax,
Purchase Tax, Entertainment Tax, Luxury Tax, Octroi, Lottery Taxes, Electricity Duty and State
surcharges relating to supply of goods and services.

Carry forward of Input Tax Credits (ITC) and CENVAT Credit (CC) balances:-Going by
the precedence at the time of VAT implementation, it is believed that the accumulated ITC and
CC will both be allowed to be carried forward under the GST regime, although upon fulfillment
of prescribed conditions, if any.

Refund of un-utilized CC on inputs and input services: - Under the proposed Dual GST
model there would be refund of un-utilized accumulated CCs at the end of each fiscal year.

GST COUNCIL
As per Article 279A (1) of the amended Constitution, the GST Council has to be constituted by
the President within 60 days of the commencement of Article 279A. The notification for
bringing into force Article 279A with effect from 12th September, 2016 was issued on 10th
September, 2016.
As per Article 279A (4), the Council will make recommendations to the Union and the States on
important issues related to GST, like the goods and services that may be subjected or exempted
from GST, model GST Laws, principles that govern Place of Supply, threshold limits, GST rates
including the floor rates with bands, special rates for raising additional resources during natural
calamities/disasters, special provisions for certain States, etc.
The Union Cabinet under the Chairmanship of Prime Minister Shri Narendra Modi approved
setting up of GST Council on 12th September, 2016 and also setting up its Secretariat as per the
following details:
a) Creation of the GST Council as per Article 279A of the amended Constitution;

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 b) Creation of the GST Council Secretariat, with its office at New Delhi
c) Appointment of the Secretary (Revenue) as the Ex-officio Secretary to the GST Council;
d) Inclusion of the Chairperson, Central Board of Excise and Customs (CBEC), as a
permanent invitee (non-voting) to all proceedings of the GST Council;
e) Create one post of Additional Secretary to the GST Council in the GST Council
Secretariat (at the level of Additional Secretary to the Government of India), and four
posts of Commissioner in the GST Council Secretariat (at the level of Joint Secretary to
the Government of India).
The Cabinet also decided to provide for adequate funds for meeting the recurring and non-
recurring expenses of the GST Council Secretariat, the entire cost for which shall be borne by
the Central Government. The GST Council Secretariat shall be manned by officers taken on
deputation from both the Central and State Governments.
STRUCTURE/REGULATORY FRAMEWORK OF GST
As per Article 279A of the amended Constitution, the GST Council which will be a joint forum
of the Centre and the States, shall consist of the following members: -
a) Union Finance Minister – Chairperson
b) The Union Minister of State, in-charge of Revenue of finance – Member
c) The Minister In-charge of finance or taxation or any other Minister nominated by each
State Government – Members
All decisions of GST Council will be made by 3/4 majority of the votes cast; the centre shall
have 1/3 and the states together shall have 2/3 of the votes cast.
Threshold limit for exemption to be Rs.20 lakhs for the states and Rs.10 lakhs for special
category states.
The threshold for availing the Composition scheme would be Rs. 75 lakhs. (Enhanced from Rs
50 lakhs to Rs 75 lakhs at the 16th GST Council Meeting held in New Delhi on 11th June 2017).
Service providers and some others would be kept out of the Composition Scheme;
GST COUNCIL MEETINGS
GST Council has met seventeen times since its constitution and some important decisions taken
in the GST Council meeting are:-
1. Rules for conduct of business in GST Council.
2. Timetable for implementation of GST.
3. The threshold limit for exemption from levy of GST would be Rs. 20 lakhs for the States
except for the Special Category States, as enumerated in Article 279A of the
Constitution, for which it will be Rs 10 Lakhs).
4. The threshold for availing the Composition scheme would be Rs. 75 lakhs in States other
than the North East States, Sikkim and Himachal Pradesh. Service providers would be
kept out of the Composition Scheme, except restaurant services.
5. To compensate States for 5 years for loss of revenue due to implementation of GST, the
base year for the revenue of the State would be 2015-16 and a fixed growth rate of 14%
will be applied to it.
6. Approval of the Draft GST Rules on registration, payment, return, refund and invoice,
valuation, input tax credit, composition and transitional provisions.

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 7. All entities exempted from payment of indirect tax under any existing tax incentive
scheme would pay tax in the GST regime and the decision to continue with any incentive
scheme shall be with the concerned State or Central government.
8. Adoption of four slabs tax rate structure of 5%, 12%, 18% and 28%. In addition, there
would be a category of exempt goods and further a cess would be levied on certain goods
such as luxury cars, aerated drinks, pan masala and tobacco products, over and above the
rate of 28% for payment of compensation to the states.
9. GST rates on 1211 items were approved at the 14th GST Council meeting held at
Srinagar on 18th and 19th of May 2017.
10. At the 15th GST Council meeting held at New Delhi on 3rd June 2017, tax rates on the
remaining goods were approved.
11. 28 states, and 2 Union Territories with Legislatures (Delhi and Puducherry) have already
passed their respective State GST Bill in their State Assemblies.
12. Issue of cross empowerment and administrative division of taxpayers between the States
and Centre has been resolved.
The Central Goods and Services Tax bill, Integrated Goods and Services Tax bill, Union
Territories (without legislature) Goods and Services Tax bill and Goods and Services Tax
(Compensation to States) bill have been passed by the Lok Sabha on 29.03.2017 and by the
Rajya Sabha on 06.04.2017.
QUORUM AND DECISION MAKING
1. For a valid meeting of the members of GST Council, at least 50 percent of the total
number of the member should be present at the meeting.
2. Every Decision made during the meeting should be supported by at least 75 percent
majority of the weighted votes of the members who are present and voting at the meeting.
In “article 279A” a principle is there which divides the total weighted vote cast between
Central Government and State Government :-
a. The vote of Central Government shall have the weighted of one-third of the total
votes
b. The votes of State Government shall have the weighted of two third of the total
votes, cast in the meeting
3. Any act, decision or proceedings shall not be declared as invalid on the basis of any
remaining deficiency at the time of establishment of GST Council i.e.
a. if there is any vacancy remained in the Council
b. if there is any defect in the constitution of Council
c. if there is any defect in the appointment of a person as a member of the Council
d. if there is any procedural non compliance.

POWERS AND FUNCTIONS OF THE GST COUNCIL

The GST council will be supposed to make recommendation to the Union and State on the
following matters:-

1. On subsuming of various taxes, cess, and surcharge in GST.

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2. Details of services and goods that will be subjected to GST or which will be exempted
from GST.
3. On Threshold limit below which services and goods will be exempted from GST.
4. On GST rates including floor rate with bands of GST and any special rate for time being
to arrange resources to face any natural calamity.
5. Making special provisions for the following states: Arunachal Pradesh, Assam, Jammu
and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal
Pradesh and Uttarakhand.
6. Principles related to the place of supply.
7. On model law on GST, Principal of levy of GST and the principals which will govern the
place of Supply.
8. Other related matters.

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 MEANINGS & DEFINITIONS

1. AGGREGATE TURNOVER:
The aggregate turnover has been defined in section 2(6) of the Act as follows:
“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. The analysis of definition for computing
aggregate turnover is discussed below:
a) Turnover of all products: The tturnover of all the supplies whether taxable supplies,
exempt supplies and exports should be aggregated to compute the limit of Rs.40 Lakhs or
Rs.10 lakhs.
b) Turnover on the basis of PAN will be computed: The aggregate turnover of person
having Permanent Account Number (PAN) will be computed on all India basis. Thus say,
if the person has branch in 3 different states then turnover of all the branches will be
considered to compute the aggregate turnover.
c) Value of turnover will not include the CGST, SGST and IGST charged on such
supply: It will not include the CGST, SGST and IGST charged on such supply. Thus
only transaction value computed as per section 15 of the GST Act will be aggregated to
compute the limit.
d) Reverse charge and Inward Supplies: It is mentioned in the definition that aggregate
turnover will not include the value of supply on which tax is paid on reverse charge basis
and the value of inward supplies.

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 e) Supply on own account and on behalf of principal will be include: GST Act provides
that in computing the aggregate turnover of supplies made by taxable person, whether on
his own account or on behalf of principal needs to be computed. A person can make
supply of goods on his own account and as an agent of principal also.
f) Supply of Goods by Principal after completion of Job Work: GST Act further
provides that in computing the aggregate turnover, the supply of goods by registered job-
worker after completion of shall be treated as supply of goods by principal and such
turnover shall not be included in aggregate turnover of registered job-worker.

2. BUSINESS
Section 2 (7) explains "Business which includes –
1. Any trade, commerce, manufacture, profession, vocation or any other similar activity,
whether or not it is for a pecuniary benefit;
2. Any activity or transaction in connection with or incidental or ancillary;
3. Any activity or transaction in the nature, whether or not there is volume, frequency,
continuity or regularity of such transaction;
4. Supply or acquisition of goods including capital assets and services in connection with
commencement or closure of business;
5. 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, as the case may be;
6. Admission, for a consideration, of persons to any premises; and
7. Services supplied by a person as the holder of an office which has been accepted by him
in the course or furtherance of his trade, profession or vocation;

3. GOODS
As per section 2 (52) “Goods means every kind of movable property other than money
and securities but includes actionable claims ,growing crops, grass and things attached to or
forming part of the land which are agreed to be severed before supply or under a contract of
supply.”
Goods include:
a) Every kind of movable property not immovable.
b) Actionable claims
c) Growing crops, grass and things attached to or forming part of the land which are
agreed to be severed before supply or under a contract of supply.
Goods do not include: Money and Securities.

4. PLACE OF BUSINESS
As per Section 2 (85) the term “Place of business” includes: -
1. A place from where the business is ordinarily carried on, and includes a warehouse, a go-
down or any other place where a taxable person stores his goods, provides or receives
goods and/or services; or
2. A place where a taxable person maintains his books of account; or
3. A place where a taxable person is engaged in business through an agent, by whatever
name called.

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A place where agent is deputed on behalf of principal shall be treated as place of business. It may
be treated as branch /agency/ additional place of business.

5. CAPITAL GOODS
As per the Section 2 (19) “Capital Goods” means goods, the value of which is
capitalized in the books of accounts of the person claiming the credit and which are used or
intended to be used in the course or furtherance of business.”
It includes:
a) Capital goods mean goods which are capitalized in books of accounts.
b) Capitalization means a situation “when the costs to acquire an asset are expensed over the
life of that asset rather than in period it as incurred.”
c) Further, such capital goods should be used in course of business. It means goods should
not be used for personal purpose.

6. CASUAL TAXABLE PERSON

As per Section 2 (20) of the law, “Casual Taxable Person” is a person who occasionally
undertakes transactions involving supply of goods or services, or both, in the course or
furtherance of business, whether as principal, agent or in any other capacity, in a State or a Union
territory where he has no fixed place of business. The Legal Provisions under GST Act:
a) Casual Taxable person shall apply for registration at least 5 days prior to commencement
of business.
b) Any business which is required to supply goods or service or both in a particular state
(which is not its principal place of business) and which is not registered in that state, can
opt to register as a ‘Casual Taxable Person’. For example, A Jeweller who has a
showroom in Bangalore but participates in exhibition cum sale in another city .
c) The certificate of registration issued to a casual taxable person shall be valid for the
period of 90 days but the Proper officer may extend the said period.
d) A Casual Taxable person shall be required to make an advance deposit of tax in an
amount equivalent to the estimated tax liability of such person for the period for which
registration is sought.
e) The amount deposited shall be credited the electronic cash ledger of such person & will
subsequently be adjusted against the tax liability.

7. COMPOSITE SUPPLY
Under Section 2 (30) of GST Law states that, “Composite Supply” means a supply made by
a taxable person to a recipient comprising two or more supplies of goods or services, 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.
Following conditions are necessary for composite supply:
a) Supply of two or more goods or services together, AND
b) It should be a natural bundle and they cannot be separated
For Example: A Five-star hotel provides four days and three-night package, with breakfast. This
is a composite supply as the package of accommodation facilities and breakfast is a natural
combination in the ordinary course of business for a hotel.

8. MIXED SUPPLY

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 As per Section 2 (74) explains, “Mixed Supply” means two or more individual supplies
of goods or services, or any combination thereof, made in conjunction with each other by a
taxable person for a single price where such supply does not constitute a composite supply.
In other words, the combination of goods or services is not bundled due to natural
necessities, and they can be supplied individually in the ordinary course of business. For tax
liability purpose, mixed supply consisting of two or more supplies shall be treated as a supply of
that item which has the highest tax rate.
For Example: Many shops offer combo packs of canned foods, chocolates, cakes and fruit
juices and they are bundled as a kit and this kit is supplied for a single price and the supply of
one item does not naturally necessitate the supply of other elements. Hence the supply is a mixed
supply.

9. EXEMPT SUPPLY
It is defined in Section 2 (47) of GST Act, “Exempt supply" means supply of any goods or
services or both which attracts nil rate of tax or which may be wholly exempt from tax and
includes non-taxable supply. It includes the supply of following type of goods and services:
a) Supply attracting ‘Nil’ rate of tax i.e; goods or services are taxable but at Nil Rate.
b) Supplies which are wholly or partially exempted from CGST or IGST by the way of
notification,
c) Non taxable supplies that are not taxable under the Act (viz. Alcoholic liquor for human
consumption)
Zero rated supplies (It means export or supply of goods or services to a Special Economic
Zone developer or a Special Economic Zone unit) such as exports would not be treated as
supplies taxable at ‘nil 'rate of tax.

10. OUTWARD SUPPLY

Section 2(83) explains the new definition as: “Outward Supply” in relation to a person, shall
mean supply of goods or services, whether by sale, transfer, barter, exchange, licence, rental,
lease or disposal or any other means made or agreed to be made by such person in the course or
furtherance of business;” The following aspects need to noted:
a) Supplies not qualifying as outward supplies would also be included for computing the
aggregate turnover.
b) In case of composition supplier, where he engages with a recipient outside the state, and
if the transaction doesn’t result in a ‘outward supply’, the conditions imposed on him as a
composition supplier would not be violated.
c) Supplies would have to be declared in the return GSTR-I.

11. PRINCIPAL SUPPLY

As per Section 2(90) of the Central Goods and Services Tax (CGST) Act, 2017, The
term “Principal Supply” 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.
It emerges only for determining whether a supply is a composite supply or not and the
rate of tax applicable on composite supply.

15
 In this case, the predominant supply is accommodation services and WiFi services are
provided only for better enjoyment of the principal supply of service. This is same concept of
bundled service which is applicable in current service tax regime.

12. PLACE OF SUPPLY

As per Section 2 (86) ‘Place of Supply’ under GST is an important factor as it defines
whether the transaction will be counted as intra-state or inter-state and accordingly the
changeability of tax, i.e levy of SGST, CGST & IGST will be determined. While determining the
levy of taxes based on Place of Supply, two things are considered namely:
a) Location of Supplier: It is the registered place of business of the supplier
b) Place Of Supply: It is the registered place of business of the recipient

13. SUPPLIER
As per Section 2 (105)of CGST Act, 2017, “Supplier” in relation to any goods or
services or both, shall mean the person supplying the said goods or services and shall include an
agent acting as such on behalf of such supplier in relation to the goods or services or both
supplied.
The term supplier is fitted to a Person as against Taxable Person or Registered Person.
Types of suppliers are as follows:
a) Manufacturers and Vendors: These are the companies that research, develop and
actually produce the finished product. Manufacturers & vendors are the source of the
supply chain.
b) Wholesalers and Distributors: these suppliers are companies that buy in bulk from
several manufacturers & vendors. Distributors & wholesalers may also supply larger
quantities to organizations or government departments directly.
c) Affiliate Merchants: An affiliate merchants is a supplier that wishes to drive traffic to
their website or sales of their products through banner ads & links placed throughout
networks of affiliates’.
d) Franchisors: A franchisor is a business owner and will grant a license to an individual,
which allows them to develop their own business using the trademark, name, know-how
and business systems.
e) Importers and Exporters: These suppliers will purchase products manufacturers in one
country and either export them to distributor in a different country or import them from
an exporter in their country.
f) Independent Crafts People: these manufacturers have designed on smaller unique
scales of economy and will usually sell direct to retailers or consumers.
g) Drop Shippers: These are suppliers of products from single or multiple companies that
will deliver direct to the buyer once they have made the purchase from your business.

14. PERSON
As per Section 2 (84) “person” includes:
a) an individual;
b) a Hindu undivided family;
c) a company;
d) a firm;
e) a Limited Liability Partnership;

16
 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, State or Provincial Act or a
Government company as defined in section 2(45) of the Companies Act, 2013 (18 of
2013);
h) anybody corporate incorporated by or under the laws of a country outside India;
i) A Co-operative society registered under any law relating to cooperative societies;
j) a local authority;
k) Central or a State government;
l) Society as defined under the Societies Registration Act, 1860
m) Trust; and
n) Every artificial juridical person, not falling within any of the preceding sub-clauses;

15. INPUT SERVICE DISTRIBUTOR

As per Section 2(61) of CGST Act, 2017, "Input Service Distributor" means an office of the
supplier of goods or services or both which receives tax invoices issued under section 31 towards
the receipt of input services and issues a prescribed document for the purposes of distributing the
credit of central tax, State tax, integrated tax or Union territory tax paid on the said services to a
supplier of taxable goods or services or both having the same Permanent Account Number as
that of the said office.
Registration under GST
a) An ISD is required to obtain a separate registration.
b) The registration is mandatory and there is no threshold limit for registration.
c) Businesses who are already registered as an ISD under the existing regime (i.e. under
Service Tax), will be required obtain a new ISD registration under GST.
Manner of Distribution - ISD
1. Under GST, on an intrastate transaction, CGST and SGST will be applicable. In case of
transaction within a union territory, CGST and UTGST will be applicable. IGST will be
applicable in case of interstate transactions and imports. The following are the scenarios
of distribution of credit by an ISD:
a. ISD and the recipient of credit are located in the same state
b. ISD and the recipient of credit are located in different states
2. The unit to which the input tax credit is distributed is referred to as the ‘recipient of
credit’.

REGISTRATION UNDER GST

1. Introduction
The GST Act provides that every supplier of goods or services or both who has an aggregate
turnover of more than Rs. 40 lakhs in a year (Rs.20 lakhs in Special Category States) have to
obtain GST registration. If the supplier is only supplying services, then threshold limit is Rs. 20
lakhs in a year (Rs.10 lakhs in Special Category States) subject to the condition that State has
opted for this higher threshold limit. However, there are certain categories of suppliers who are
required to obtain mandatory registration irrespective of their turnover limit.

17
2. Who is required to take mandatory GST Registration
The following categories of suppliers are required to obtain mandatory registration irrespective
of any turnover limit:
1. Persons making any inter-state taxable supply of goods (services have been exempted from
this condition)
2. Casual taxable persons making taxable supply (However casual taxable persons making
supplies of specified handicraft goods need not take compulsory registration and are entitled to
the threshold exemption of Rs. 40 Lakh.)
3. Persons required to pay tax under reverse charge
4. Non-resident persons making taxable supply
5. Persons required to deduct tax under section 51
6. Persons required to collect tax under section 52
7. Persons who make taxable supply on behalf of other taxable persons whether as an agent or
otherwise
8. Input Service Distributor
9. Person selling goods or services through e-commerce operator
10. Every E-Commerce operator who is required to collect tax at source
11. Person supplying online information, data base access or retrieval services (OIDAR) from a
place outside India to an unregistered person in India
Exemption from Registration
The following persons are not required to take GST Registration:
1. A person supplying only exempt goods or services, would not be required to obtain
registration even if his aggregate turnover during the year exceeds Rs. 40/20 lakhs.
2. An agriculturist is not required to obtain registration to the extent of supply of produce out of
cultivation land
Types of GST Registration
The person shall be allowed to opt for the following two schemes while taking registration:
4.1 Composition Scheme
The Composition levy scheme is a very simple, hassle-free compliance. It is a voluntary and
optional scheme. This scheme is for small taxpayers whose turnover is less than 1.5 crore in case
of supplier of goods (75 lakhs in case of North Eastern States) and 50 lakhs in case of supplier of
services. The following persons shall not be eligible to take composition scheme:
a) Manufacturer of ice cream, pan masala, or tobacco
b) Person making inter-state supplies
c) Casual taxable person or non-resident taxable person
d) Supplier supplying goods through an e-commerce operator
18
4.2 Regular Scheme
If a person who is not eligible or not willing to opt for composition scheme has to opt for regular
scheme.
Calculation of Aggregate Turnover
For the purpose of registration, where turnover limit applies, one has to calculate the aggregate
turnover during the year. The Aggregate Turnover of the year shall be sum of following:
1. Value of all taxable supplies
2. Value of all exempt supplies
3. Value of export supplies
4. Value of inter-state supplies
5. Turnover of all entities of a person under same PAN (aggregated on an All India Basis).
Aggregate Turnover shall not include value of any inward supply on which tax is liable to be
paid by a person on reverse charge basis. Turnover shall also not include GST paid on any
supply.
Voluntary Registration
If a person whose annual turnover is below the threshold limit or not liable to take mandatory
registration may apply for GST registration voluntarily.
Benefits of registering under GST

A. For normal registered businesses:

 Take input tax credit

 Conduct interstate business without restrictions

B. For Composition dealers:

 Limited compliance
 Lesser tax liability
 Less impact on working capital

C. For businesses that voluntarily opt-in for GST registration (Below Rs.40 lakhs*)

 Avail input tax credit

 Conduct interstate business without restrictions
 Easily register on online & e-commerce websites
 Get a competitive advantage compared to other businesses.

What is a GST identification number or GSTIN?

19
Each taxpayer is allotted a PAN-based 15-digit Goods and Services Taxpayer Identification
Number (GSTIN) in every state that they operate. It is obtained as a part of the GST registration
process. Once the GST registration application is verified and passed by the GST officer, a
unique GSTIN is assigned to the business.

Documents required for GST Registration

Here are the documents required to complete GST Registration:
1. PAN card
2. Aadhaar card
3. Business address proof
4. Bank account statement and cancelled cheque
5. Incorporation Certificate or the business registration proof
6. Digital Signature
7. Director’s or Promoter’s ID proof, address proof, and photograph
8. Letter of Authorization or Board Resolution from Authorized Signatory

PROCEDURE FOR REGISTRATION

Every person who is liable to be registered under section 22 or section 24 shall apply for
registration in every such State or Union territory in which he is so liable within thirty days from
the date on which he becomes liable to registration.
1. A person seeking registration under this Act shall be granted a single registration in a
State or Union territory: Provided that a person having multiple business verticals in a
State or Union territory may be granted a separate registration for each business vertical,
subject to such conditions as may be prescribed.
2. A person, though not liable to be registered under 22 or section 24 may get himself
registered voluntarily.
3. A person who has obtained or is required to obtain more than one registration, whether in
one State or Union territory or more than one State or Union territory will be treated as
distinct persons for the purposes of this Act.
4. Every person shall have a Permanent Account Number issued under the Income tax Act,
1961 in order to be eligible for grant of registration.
5. A non-resident taxable person may be granted registration on the basis of such other
documents as may be prescribed.
6. Where a person who is liable to be registered under this Act fails to obtain registration,
the proper officer may, without prejudice to any action which may be taken under this
Act or under any other law for the time being in force, proceed to register such person in
such manner as may be prescribed.
7. The registration or the Unique Identity Number shall be granted or rejected after due
verification within prescribed such period.
8. A certificate of registration shall be issued in such form and with effect from such date as
may be prescribed.
9. A registration or a Unique Identity Number shall be deemed to have been granted after
the expiry of the period prescribed, if no deficiency has been communicated to the
applicant within that period.

20
Penalty for not obtaining GST registration
An offender not paying tax or making short payments (genuine errors) has to pay a penalty of
10% of the tax amount due subject to a minimum of Rs.10,000.
The penalty will at 100% of the tax amount due when the offender has deliberately evaded
paying taxes.
SPECIAL PROVISIONS RELATING TO REGISTRATION OF “CASUAL TAXABLE
PERSON AND NON-RESIDENT TAXABLE PERSON”:

The Provisions under Section 27 of the Central Goods and Services Tax (CGST) Act, 2017:
1. The certificate of registration issued to a casual taxable person or a nonresident taxable
person shall be valid for the period specified in the application for registration or ninety
days from the effective date of registration, whichever is earlier and such person shall
make taxable supplies only after the issuance of the certificate of registration;
2. A casual taxable person or a non-resident taxable person shall, at the time of submission
of application for registration, make an advance deposit of tax in an amount equivalent to
the estimated tax liability of such person for the period for which the registration is
sought;
3. The amount deposited shall be credited to the electronic cash ledger of such person and
shall be utilized in the manner provided under section 49.

INPUT TAX CREDIT

Input tax is a tax imposed on the person when he receives supply of goods & services which are
used for his business. Fulfilment of Input Tax Credit under GST – Conditions to Claim is one of
the most critical activities for every business to settle its tax liability. ITC being the backbone of
GST and a major concern for all the registered persons under GST regime.

21
Items on which credit -ITC is not allowed

1. Motor vehicles or conveyance only, expenses related to the normal use of motor vehicles
for office purposes cannot be claimed as an ITC.
2. Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and
plastic surgery.
3. Travel benefits extended to employees on vacation such as leave or home travel
concession.
22
 4. Expenses relating to rent-a-cab facilities, life or health insurance except the Government
notifies it as services which are obligatory for an employer to provide to its employees
under law.

5. Sale of membership in a club, health, fitness centre.

6. Works contract service for construction of an immovable property (except plant &
machinery.
7. Goods and/or services for construction of an immovable property whether to be used for
personal or business use.
8. Goods and/or services where tax have been paid under composition scheme.
9. Goods and/or services used for personal use.
10. Goods or services or both received by a non-resident taxable person except for any of the
goods imported by him.
11. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
12. ITC will not be available in the case of any tax paid due to non-payment or short tax
payment, excessive refund or ITC utilized or availed by the reason of fraud or willful
misstatements or suppression of facts or confiscation and seizure of goods.

DISTRIBUTION OF CREDIT BY ISD (Input Service Distributor)

The concept of Input Service Distributor under GST and related laws has been kept
aligned to continue the existing position.

23
Under current tax regime the definition of Input Service Distributor includes
 an office of the manufacturer or producer of final products or provider of output service
 which receives invoices issued under rule 4A of Service Tax Rules, 1994 towards
purchase of input services
 issue invoice, bill or challan for the purposes of distributing the credit of service tax paid
on the said services to such manufacturer or producer or provider.
Hence, the available ITC to ISD is distributed by it to its units and outsourced manufacturers.
Input Service Distributor under GST Model includes:
 an office of the supplier of goods and / or services which
 receives tax invoices issued by supplier towards receipt of input services and/or goods
and
 issues a prescribed document for the purposes of distributing the credit of CGST (SGST
in State Acts) and / or IGST paid on the said services to a supplier of taxable goods and /
or services having same PAN as that of the office referred to above

RATES OF GST IN INDIA

24
 PRACTICAL PROBLEMS

Illustration 1: M/s Roy Ltd. Of Davanagere supplies goods worth Rs. 5,00,000 to M/s Shaha ltd.
of Mangalore. Tax rate is 18%. Compute the taxability and accounting treatment.

Solution: Location of supply - Davanagere (Karnataka)

Place of supply - Mangalore (Karnataka)

INTRA STATE TRANSACTION: -

Taxes to be levied/charged: -

CGST = 5,00,000*9% = 45000

SGST = 5,00,000*9% = 45000

25
 JOURNAL ENTRIES

In the books of M/S Roy Ltd

Date Particulars L.F Debit Credit

MS Shaha ltd 5,90,000
To Sales 5,00,000
To CGST payable 45,000
To SGST payable 45,000

In the books of MS Shukla Ltd

Date Particulars L.F Debit Credit

Purchases a/c 5,00,000
CGST payable 45,000
SGST payable 45,000
To MS Roy a/c 5,90,000

Illustration 2: M/s Shukla Ltd. of Mumbai supplies goods worth Rs. 4,00,000 to M/s Das
Limited of Durgapur. Tax rate is 18%. Compute the taxability and accounting treatment.

Solution: Location of supply - Mumbai (Maharashtra)

Place of supply - Durgapur (West Bengal)

INTER STATE TRANSACTION: -

Taxes to be levied/charged: -

IGST = 4,00,000*18% = 72000

JOURNAL ENTRIES

In the books of M/S Shukla Ltd

Date Particulars LF Debit Credit

MS Das a/c 4,72,000
To sales 4,00,000
To IGST payable 72,000

In the books of M/S Das Ltd

Date Particulars LF Debit Credit

Purchases a/c 4,00,000

26
 IGST payable 72,000
To MS Shukla 4,72,000

Illustration 3: Star Paper private ltd. has the following details for the year 2020 -2021. Compute
the aggregate turnover.
1. Intra - State supplies Rs. 4,00,000
2. Inter – State supplies 5,00,000
3. Non – taxable supplies 20,000
(included in exempt supplies)
4. Value of exports 70,000
5. Exempt supplies 60,000
6. IGST paid 20,000

Solution: Computation of Aggregate Turnover

Particulars Total Amount

(Rs.)
1. Intra-state Supplies 4,00,000
2. Inter-state Supplies 5,00,000
3. Value of Exports 70,000
4. Exempt Supplies 60,000

Aggregate Turnover 10,30,000

Working Note:
 As per GST law, IGST paid shall not be considered while calculating aggregate turnover
as it is not provided in the concept definition.
 Non-taxable supplies have already been included in the exempt supplies

Illustration 4: Mr. Suman purchased goods and made payment of Rs. 5,00,000 (inclusive of
GST) to Mr. Amit. The rate of SGST @ 6%, CGST @ 6%, then what will be assessable value.

Solution: Let, the Assessable Value exclusive of GST = 100

(+) CGST @ 6% = 6

(+) SGST @ 6% = 6

Assessable Value including GST = 112

If A.V. is Rs.112, then the payable = 5,00,000

If A.V. is Rs.100, then the payment = 5,00,000*100/112

= Rs. 446428.57

27
Illustration 5: Mistake Company manufacturers 10,000 units of products and sold to a whole
seller at Rs. 50 per unit. 20% trade discount is allowed to the whole seller as per the normal
practice. What is the amount of GST payable if rate of GST is 18%? (Assume exclusive of GST)

Solution: Computation of Transaction Value and GST Payable

Particulars Total Amount (Rs.)

Selling Price (10,000*50) 5,00,000
Less: Trade Discount (20% * 5,00,000) 1,00,000
Transaction Value 4,00,000

CGST Payable (9% of 4,00,000) 36,000

SGST Payable (9% of 4,00,000) 36,000
GST Payable 72,000

Illustration 6: A dealer in Kolkata entered a contract with a supplier in Odisha to deliver

Machinery along with essential accessories. From the information determine the total amount of
GST payable U/s 15 of the CGST Act 2017.
Particulars Rs.
Machinery cost (excluding taxes) 4,00,000
Installation expenses charged separately 30,000
Packing charges (secondary) 80,000
Design charges paid by the buyer 10,000
Cost of material supplied by buyer free of charge 5,000
Pre delivery inspection charges 2,000
Loading and handling charges within the factory 5,000
Other information:
1. Cash Discount 5% on price of machinery.
2. Bought out accessories supplied along with machinery valued at Rs. 10,000 which was
necessary for the working of the machinery. These bought out goods are charged for tax
at the rate of 5%.
3. GST rate is 18%. Make suitable assumptions as are required and provide brief reasons.
Solution: Computation of Transaction Value and GST Payable

Particulars Amount Amount

(Rs.) (Rs.)
Machinery Cost (exclusive of GST) 4,00,000
Add:
Installation expenses 30,000
Packing charges 80,000
Design charges 10,000
Cost of Materials 5,000
Pre delivery inspection charges 2,000
Loading and handling charges 5,000
Bought – out accessories 10,000 1,42,000

28
 5,42,000
Less: Cash Discount (5% of 4,00,000) 20,000
Transaction Value 5,22,000
Calculation of GST Payable:
IGST Payable i.e; Rs. 5,22,000 * 18% 93,960
Total GST Payable 93,960

Working Note: This is case of Composite Supply as Bought – out accessories are essential for
the working of the machinery. So, in this case GST rate of Principal Supply i.e; 18% should be
considered.

Illustration 7: Mr. B.K.Bhatt (dealer in Delhi) entered into contract with a supplier in Mysore to
deliver Machinery along with essential accessories. From the following information determine
the total amount of GST payable u/s 15 of the CGST Act, 2017:
Rs.
Price of Machinery (exclusive of GST) 12,00,000
Installation and erection expenses charged separately in invoice 86,000
Packing charges charged separately in invoice 8,000
Design and engineering charges charged separately in invoice 66,000
Pre delivery inspection charges 12,000
Rate of GST on Machinery 18%

Other information:

a) Cash Discount of Rs. 65,000 was allowed as per terms of contracts. Since full
payment was received before dispatch of machinery.
b) The machine is supplied along with accessories (optional) at Rs. 20,000 and the rate
of duty applicable to these accessories is 28%.
c) Find the GST payable, if the rate of GST on Principal Supply is 18%.

Solution: Computation of Transaction Value and GST Payable

Particulars Amount Amount

(Rs.) (Rs.)
Price of Machinery (exclusive of GST) 12,00,000
Add:
Installation and erection expenses 86,000
Packing charges 8,000
Design and engineering charges 66,000
Pre delivery inspection charges 12,000
Bought – out accessories 20,000 1,92,000
13,92,000
Less: Cash Discount 65,000
Transaction Value 13,27,000
Calculation of GST Payable:
IGST Payable i.e; Rs. 13,27,000 * 28%) 3,71,560

29
 Total GST Payable 3,71,560

Working Note: This is case of Mixed Supply as Bought – out accessories are optional. So, in
this case accessories have highest rate that is 28% than the principal supply i.e; 18%. Therefore,
Accessories GST rate should be considered.

Illustration 8: Mr. Harish is a registered dealer in Jaipur. From the following, find out taxable
turnover and IGST payable under the GST Act:
a) Chocolates not cointaining Cocoa worth Rs.2,04,000 sold to a registered dealer of Punjab
(IGST rate is 28%)
b) Mineral water worth Rs. 2,20,000 were transferred to their branch at Kolkata (IGST rate
is 18%)
c) Ayurvedic medicines worth Rs. 1,64,800 are sold to the registered dealer of MP (IGST
rate is 12%)
d) Skimmed milk powder worth Rs. 54,000 are sold to the registered dealer of UP (IGST
rate is 5%)
e) Goods amounting to Rs. 3,10,000 were sold to firm of London in the course of export
outside India.
f) Silver worth Rs. 5,40,000 are sold to a registered dealer of UP (IGST rate is 5%)
g) Coffee beans worth Rs. 2,20,000 were transferred to their branch at Kolkata.
h) Sale of petroleum products to a register dealer in UP for Rs. 2,50,000.
i) Sale of alcoholic liquor for human consumption to a register dealer in MP for
Rs.4,50,000.

Solution: Calculation of taxable turnover and IGST

Sr.No Particulars Taxable Rate of GST
turnover GST
1. Chocolates not containing cocoa sold to 2,04,000 28% 57,120
dealer in Punjab
2. Mineral water was transferred to a 2,20,000 18% 39,600
branch in Kolkata
3. Ayurvedic medicines sold to dealer in 1,64,800 12% 19,776
Kolkata
4. Skimmed powder sold to dealer in MP 54,000 5% 2,700
5. Goods sold to firm of London for - - -
export
NOTE:- exports are free from GST
6. Silver sold to dealer of UP 5,40,000 5% 27,000
7. Coffee beans - - -
NOTE:- coffee beans are free from
GST
8. Sale of petroleum products - - -
NOTE:- Petroleum are free from GST
9. Sale of alcoholic liquor - - -
NOTE:- alcohol is free from GST law

30
 Total 11,82,800 1,46,176

Illustration 9: Mr. Manoj Verma, a practicing Charted Accountant in Bangalore received money
from various clients for the services rendered in the month of November, 2017:
a) Accounting and auditing services of Rs. 1,25,000.
b) Representation before various statutory authorities Rs. 1,00,000.
c) Cost accounting and Cost auditing of Rs. 50,000.
d) Secretarial auditing Rs. 35,000.
e) Verification of declarations in prescribed forms of compliance for obtaining a certificate
of commencement of business Rs. 40,000.
f) Certification of documents to be filed from registrar of companies Rs. 25,000.
g) Ledger maintenance, non-professional services and preparation of coaching material Rs.
20,000.
h) Fee for routine visits to income tax offices Rs. 55,000.
i) Remuneration for teaching CA and ICWA students Rs. 30,000.
j) Fee for outsourcing work of a client such as billing and ledger posting Rs. 75,000.
k) Services rendered in Delhi Rs. 70,000.
You are required to calculate GST payable, IGST rate is 18%, CGST is 9% and SGST is 9%.

Solution: Computation of taxable turnover SGST, CGST & IGST

Sr. Particulars Taxable Rate of IGST CGST SGST
No turnover GST
1. Accounting and 125000 18% - 11250 11250
auditing
2. Representation 100000 18% - 9000 9000
3. Cost accounting and 50000 18% - 4500 4500
cost audit
4. Secretarial auditing 35000 18% - 3150 3150
5. Certificate of 40000 18% - 3600 3600
commencement
6. Certification of 25000 18% - 2250 2250
business
7. Ledger maintenance - - - - -
NOTE:- it is free from
GST law
8. Fee for routine visits 55000 18% - 4950 4950
9. Remuneration for - - - - -
teaching
NOTE:- it is free from
GST law
10. Fee for out sourcing - - - - -
work
NOTE:- it is free from
GST law

31
 11. Services rendered in 70000 18% 12600 - -
Delhi
Total 500000 12600 38700 38700

Illustration 10: From the following details, compute the value of GST payable for the
Assessment year 2017-2018. If the rate of CGST and SG ST in at 9% each.
Particulars Amount (Rs.)
Services provided by foreign diplomatic mission 5,00,000
Aerial advertising 1,00,000
Service by the way of private tuitions 30,000
Speed post services 50,000
House given on rent for residential purpose 3,00,000
Value of free services rendered to friends 50,000
Services rendered to UNO 2,00,000
Certification for exchange control purpose 50,000
Secretarial auditing 20,000
Fees to act as a liquidator 1,00,000
Vacant land used for horticulture 10,00,000
Sale of time slot by broadcasting organization 1,00,000
Services rendered within Indian territorial water 10,00,000
Services relating to supply of farm labour 2,00,000

Solution: Computation of GST payable and taxable turnover

Sr. Particulars Taxable Rate of CGST SGST
No. turnover GST
1. Services provided by foreign - - - -
diplomatic mission
NOTE:-services provided are
free from GST
2. Aerial advertising 100000 18% 9000 9000
3. Service by the way of private 30000 18% 2700 2700
tuitions
4. Speed post services 50000 18% 4500 4500
5. House given on rent for 300000 18% 27000 27000
residential purpose
6. Value of free services rendered 50000 18% 4500 4500
to friends
7. Services rendered to UNO - - - -
8. Certification for exchange 50000 18% 4500 4500
control purpose
9. Secretarial auditing 20000 18% 1800 1800
10. Fees to act as a liquidator 100000 18% 9000 9000
11. Vacant land used for horticulture - - - -
12. Sale of time slot by broadcasting 100000 18% 9000 9000
organization

32
 13. Services rendered within Indian 1000000 18% 90000 90000
territorial water
14. Services relating to supply of - - -
farm labour
Total 1800000 162000 162000

Illustration 11: Compute the amount of output tax to be uploaded by the dealer for the month of
July and state which is the last date to upload it in credit ledger:
1. Product A sold to dealer in Bangalore rate of GST notified to this product is 12% -
Rs.,1,00,000
2. Product B sold to dealer in Mysore rate of GST @ 5% - Rs. 50,000
3. Product C @ Nil rate GST sold to a dealer in Pondicherry – Rs. 1,20,000
4. Product D @ 18% GST sold to a dealer in Jammu & Kashmir – Rs. 2,00,000
5. Product E @ 28% GST sold to a unregistered dealer within the state – Rs. 3,20,000
6. Product F rate of GST notified is 18% sold to a SEZ developer in Bangalore – Rs.
5,00,000
7. Product G sold to a dealer in Union Territory rate of GST notified is 12% - Rs.4,00,000
8. Product H which is exempted from GST is sold to a registered dealer of Pune – Rs.
6,00,000
9. Product I exported to China the GST rate notified by GST Council for this product is
12% if it is sold in India – Rs. 4,50,000
10. Product J sold to a unit of SEZ in Mysore the rate of GST notified to this product is 5% -
Rs. 3,00,000
11. Product K sold to a registered dealer within the state the rate of GST notified is 18% –
Rs. 2,50,000
12. Product L sold to a dealer in Belagavi who has registered under composition scheme @
28% GST – Rs. 2,00,000

Solution: Computation of GST Payable

Sr. Particulars Taxable GST CGST SGST IGST

No. Income Rates (Rs.) (Rs.) (Rs.)
1. Product A sold to dealer in Bangalore 1,00,000 6% 6,000 6,000 -
rate each
2. Product B sold to dealer in Mysore 50,000 2.5% 1,250 1,250
each
3. Product C sold to a dealer in - - - - -
Pondicherry (Note: 0% rate of tax
means exempted from GST)
4. Product D sold to a dealer in Jammu 2,00,000 18% - - 36,000
& Kashmir
5. Product E sold to a unregistered 3,20,000 18% 44,800 44,800 -
dealer within the state
each
6. Product F sold to a SEZ developer in - - - - -
33
 Bangalore
(Note: Supplies to SEZ’s are taxable
at 0% rate)
7. Product G sold to a dealer in Union 4,00,000 12% - - 48,000
Territory

8. Product H sold to a registered dealer - - - - -

of Pune
(Note: exempted as per notification)
9. Product I exported to China the GST - - - - -
rate notified by GST Council
(Note: Exports are free from GST)
10. Product J sold to a unit of SEZ in - - - - -
Mysore
(Note: Supplies to SEZ’s are taxable
at 0% rate)
11. Product K sold to a registered dealer 2,50,000 9% 22,500 22,500 -
within the state
each
12. Product L sold to a dealer in Belagavi 2,00,000 18% 28,000 28,000
who has registered under composition
each
scheme

Total Output Tax Payable 1,02,55 1,02,550 84,000

0

Illustration 12: From the following details. Compute the input tax credit eligible on inputs:
a) Raw material R purchased within the state (GST @ 5%) Rs. 4,00,000
b) Raw material A purchased from local market (GST @ 12%) 3,00,000
c) Raw material M purchased from registered dealer (GST @ 5%) 80,000
d) Raw material A purchased within the state from unregistered dealer
(18% @ GST) 4,00,000
e) Raw material R purchased within the state from a dealer, who opted
For composition scheme (12% @ GST) 4,00,000
f) Raw Material H imported from UK excluding IGST @ 28% 80,000
g) Raw material A purchased from other state (exclusive of IGST @ 5%) 40,000
h) Raw Material N imported from USA
(including BCD and excluding IGST @ 12%) 5,50,000
i) Raw Material D imported from Pakistan
(including BCD and GST @ 18%) 1,18,000
j) Raw Material R purchased at 0% rate 20,00,000
k) Raw Material A purchased was exempt from GST at the time
of purchase 5,00,000

34
Solution: Computation of INPUT TAX CREDIT

Sr. Particulars Taxable GST CGST SGST (Rs.) IGST

No. Income Rates (Rs.) (Rs.)
1. Raw material R purchased 4,00,000 5% 10,000 10,000 -
within the state
2. Raw material A purchased 3,00,000 12 % 18,000 18,000 -
from local market
3. Raw material M purchased 80,000 5% 2,000 2,000 -
from registered dealer
4. Raw material A purchased - - - - -
within the state from
unregistered dealer
(Note: Unregistered dealer is
not eligible for ITC)
5. Raw material R purchased - - - - -
within the state from a
dealer, who opted for
composition scheme
(Note: composition scheme
is not eligible for ITC)
6. Raw Material H imported 80,000 28% - - 22,400
from UK excluding IGST
7. Raw material A purchased 4,00,000 5% - - 2,000
from other state
8. Raw Material N imported 5,50,000 12% - - 66,000
from USA
9. Raw Material D imported 1,00,000 18% - - 18,000
from Pakistan (1,18,000 *
100/118)
10. Raw Material R purchased at 0% rate - - - -
(Note: Exempted as per notification)
11. Raw Material A purchased - - - - -
was exempt from GST at the
time of purchase
(Note: Exempted as per
notification)
Total 15,50,00 30,000 30,000 1,08,400
0

Illustration 13: Mr. Gopal Krishna submits the following information, calculate the Transaction
Value:
Particulars Rs.
Goods U purchased within the state (inclusive of GST @ 5%) 6,15,000
Goods S purchased within (inclusive of GST @ 12%) 6,12,000
35
Goods H purchased from registered dealer at 12% GST 60,000
Goods A purchased in local market from unregistered dealer at 12% GST 6,08,000
Goods D purchased within the state from composite dealer at 5% GST 6,68,050
Goods E imported from HP excluding IGST @18% 60,000
Goods V purchased from AP inclusive of IGST @ 5% 63,000
Goods I imported from Srilanka including BCD and excluding IGST @ 18%) 6,50,000
Goods N imported from Thailand (including BCD and GST @ 18%) 6,18,000
Labour Charges 63,950
Mr. Gopal Krishna sold entire stock to Mr. Prashad at a profit of 16% on the cost of
production.

Solution: Calculation of Transaction Value

Particulars Total Amount (Rs.)

Goods U purchased within the state 5,85,714
(615000*100/105)
Goods S purchased within 5,26,429
(612000*100/112)
Goods H purchased from registered dealer 60,000
Goods A purchased in local market from unregistered dealer 6,08,000
Goods D purchased within the state from composite dealer 6,68,050
Goods E imported from HP excluding IGST 60,000
Goods V purchased from AP inclusive of IGST 60,000
(63000*100/118)
Goods I imported from Srilanka including BCD and excluding IGST 6,50,000
Goods N imported from Thailand 5,23,729
(618000*100/118)
Add:- labour charges 63,950
Total cost 38,25,872
Add:- Profit (3825872*16%) 6,12,140
Transaction value 44,38,011

36
 ASSESSMENT AND RETURNS
Introduction

Assessment is the process of determination of the tax liability of a taxpayer. There are different
ways to determine tax liability under the GST law. GST Assessment is required to be done to
establish the tax liability of an assessee. Taxation Laws lay down a process of assessment, i.e. a
way to figure out exactly how much tax should be paid.

Definition of the term “Assessment”

As per Section 2(11) of the Central Goods and Services Tax (CGST) Act, 2017, unless the
context otherwise requires, the term “assessment” means determination of tax liability under this
Act and includes self-assessment, re-assessment, provisional assessment, summary assessment
and best judgment assessment.

TYPES OF ASSESSMENT

Only self-assessment is done by the taxpayer himself. All the other assessments are by tax
authorities.

I. Self-Assessment – Section 59

37
“Every registered person shall self-assess the taxes payable under this Act and furnish a return for
each tax period as specified under section 59”.

Self-Assessment is the first stage for all the assessments now. The registered person is required to
compute his output, take the available input credit and pay the balance amount and file the returns
in the prescribed forms. This means GST continues to promote self-assessment just like the Excise,
VAT and Service Tax under current tax regime.

II. Provisional Assessment – Section 60

An assessee can request the officer for provisional assessment if he is unable to determine value or
rate.

Unable to determine value due to difficulty in –

a) Calculating the transaction value

b) Understanding whether certain receipts should be included or not

Unable to determine rate of tax due to difficulty in –

a) Classifying the goods/services

b) Identifying whether any notification is applicable or not

Provisions of Provisional Assessment under Section 60 of the CGST ACT, 2017

1. Requests for provisional assessments will be given in writing

2. The proper officer can allow paying tax on provisional basis at a rate or on a value
specified by him.
3. Order will be passed within 90 days from date of request.
4. The taxable person has to issue a bond with a security promising to pay the difference
between provisionally assessed tax and final assessed tax.
5. Provisional assessments will be followed by final assessments. The proper officer can ask
for information before final assessment.

Time Limit for Final Assessments

The final assessment will be done within 6 months of the provisional assessment. This can be
extended for 6 months by the Joint/Additional Commissioner. However, the Commissioner can
extend it for further 4 years as he seems fit.

Interest on Additional Tax Payable and Refunds

The tax payer will have to pay interest on any tax payable under provisional assessment which
was not paid within the due date. Interest period will be calculated from the day when tax was
first due on the goods/services (and not the date of provisional assessment) till the actual

38
 payment date, irrespective of payment being before or after final assessment. Rate of interest will
be maximum 18%.

If the tax as per final assessment is less than provisional assessment then the taxable person will
get a refund. He will also get interest on refund.

III.Scrutiny Assessment

Under Scrutiny assessment, an officer can examine the return and other information furnished by
a person, to verify the correctness of the return.

Provisions of Scrutiny of Returns under Section 61 of the CGST ACT, 2017

1. The proper officer can scrutinize the return to verify its correctness. It is a non-
compulsory pre-adjudication process. In simple words, it is not mandatory for the officer
to scrutinize return. Scrutiny of returns is not a legal or judicial proceeding,i.e., no order
can be passed. The officer will ask for explanations on discrepancies noticed.
2. When Explanation is Satisfactory
a. If the officer finds the explanation satisfactory then the taxable person will be
informed and no further action will be taken.
3. When Explanation is not Satisfactory
a. The proper officer will take action-
b. If the taxable person does not give a satisfactory explanation within 30 days Or
c. He does not rectify the discrepancies within a reasonable time (not yet prescribed)
4. The officer may-
a. Conduct audit of the tax payer u/s 65
b. Start Special Audit procedure u/s 66
c. Inspect and search the places of business of the tax payer
d. Start Demand and Recovery provisions

Similar provisions regarding scrutiny are existing in current excise, VAT and service tax laws.

IV. Best Judgement Assessment

In the best Judgement Assessment, an assessing officer assesses based on his reasoning and
using the readily available information. The assessment will be made without any having
biasness. There are 2 parts/circumstances to best judgement assessment which are as follows:

1. Assessment of Non-filers of Returns:

As per Section 62 of the CGST Act, 2017- If a registered taxable person fails to file then, then
the proper officer can proceed to assess such person to his best judgment after a period of 15
days after the date of the service of notice. Such assessment order can be passed within: -

39
 a. A period of 5 years from the due date of the annual return for that particular year or the
actual date of filing of the annual return of that year, whichever is earlier.

b. A period of 3 years from the due date of the annual return for the relevant year or the
actual date of filing of the annual return for that year, whichever is earlier, in any other
case.

2. Assessment of Unregistered Persons:

As per Section 63 of the CGST Act, 2017 - If any taxable person has failed to apply and was
liable to get registered, the proper officer shall assess the tax payable by such person during the
period he/she remains unregistered. Such order shall be passed:

a. After serving a notice on and giving an opportunity of being heard to the assessed.
b. According to the best judgment of the Assessing officer.
c. Within 5 years from the due date for filing of the annual return of the relevant year.

V. Summary Assessment in special cases

As per Section 64 of the CGST Act, 2017 - This is done when the Proper Officer believes
some suspicious grounds for delay in filing returns which may impact the revenue. Proper
Officer passes the summary assessment with prior permission of Additional/Joint
Commissioner.

40
41
PRACTICAL PROBLEMS

42
Illustration 1: M/s Usha Limited of Bengaluru having registered business premises makes the
supplies goods worth Rs. 15,00,000 to M/s Saha Limited who has also registered business in
Mysuru. Further M/s Saha sells the goods to its customer in Mangalore for Rs. 18,00,000.
Compute the taxability under GST if GST rate is 18%.

Solution: Calculation of Net GST Payable

Particulars M/s Usha Ltd. M/s Saha Ltd.

Transaction value of supply 15,00,000 18,00,000
Output Tax liability
CGST @ 9% 1,35,000 1,62,000
SGST @ 9% 1,35,000 1,62,000
Less: Input Tax Credit
CGST @ 9% Nil 1,35,000
SGST @ 9% Nil 1,35,000
Balance Payable
CGST 1,35,000 27,000
SGST 1,35,000 27,000

Illustration 2: Mr. John supplies goods within the state and its value is Rs. 12,00,000. The value
of goods exported Rs. 20,00,000. The value of receipt of goods from other state is Rs. 20,00,000.
If IGST rate is 18%, SGST & CGST rate is 9% each, calculate net GST payable.

Solution: Calculation of Net GST Payable

Particulars CGST SGST IGST Total

(Rs.) (Rs.) (Rs.) (Rs.)

Output Tax Liability 1,08,000 1,08,000 ---- 2,16,000

CGST (12,00,000 * 9%)
SGST (12,00,000 * 9%)
Less: Input Tax Credit
CGST 1,08,000 ---- ---- ----
SGST ---- 1,08,000 ---- ----
IGST (20,00,000 * 18%) ---- ---- ---- 3,60,000

Balance Payable Nil Nil Nil (1,44,000)

(EXCESS CREDIT)
Working Note:

 GST is not payable on exports.

 Excess credit of IGST of Rs. 1,44,000 can be claimed as refund or carried forward in
electronic credit ledger used in the subsequent period.

43
Illustration 3: Mr. Suplab (registered dealer) purchased goods for Rs. 60,50,000 from a
registered dealer outside the atate. He sold goods locally for Rs. Rs. 40,50,000. Again he sold
goods outside the state for Rs. 90,00,000. If CGST is 9%, SGST is 9% and IGST is 18%,
Calculate net GST payable.

Solution: Calculation of Net GST Payable

Particulars CGST SGST IGST Total

(Rs.) (Rs.) (Rs.) (Rs.)

Output Tax Liability 3,64,500 3,64,500 16,20,000 23,49,000

CGST (40,50,000 * 9%)
SGST (40,50,000 * 9%)
IGST (90,00,000 * 18%)
Less: Input Tax Credit ----- ----- 10,89,000 10,89,000
IGST (60,50,000 * 18%)

Tax Payable Amount 3,64,500 3,64,500 5,31,000 12,60,000

Working Note: Input Tax Credit of Rs. 10,89,000 is available under IGST. This input tax credit
(ITC) should be fully utilized for the payment of IGST tax liability.

Illustration 4: Mrs. Sowmya (registered dealer) purchased goods Rs. 80,000 from a local
registered dealer. She paid legal fees of Rs. 5,000, purchased plastic packaging materials Rs.
5,000, transportation cost Rs. 5,000, wages Rs. 5,000 and other manufacturing expenses Rs.
5,000, and Consultation fees Rs. 12,000. If CGST is 9% & SGST is 9%. Calculate the net GST
payable. She sold goods within the state at a profit of Rs. 20,33,000.

Solution: Calculation of transaction value

Particulars Amount (Rs.) Amount (Rs.)

Purchase of raw materials 80000
Add:
Legal fees 5000
Packaging 5000
Transportation cost 5000
Wages 5000
Manufacturing expenses 5000
Consultation fees 12000 37000
Total cost 117000
(+) Profit margin 2033000
Transaction value 2150000

44
Output ----- 2150000 (C/S)

Input ------- 80000 (C/S)

Calculation of net GST payable

Particulars CGST SGST Total

Output tax liability 193500 193500 387000
CGST (2150000*9%)
SGST (2150000*9%)
Less: Input tax Credit
CGST (80000*9%) 7200 - 7200
SGST (80000*9%) - 7200 7200
Balance payable 186300 186300 372600

Illustration 5: Geetha, a registered dealer, based in Kerala submits the following information.
Compute net IGST payable.
Import of raw material Rs. 2,10,000
Raw material purchased from Kerala Rs. 2,24,000
Raw material purchased from Karnataka Rs. 95,000
Transportation & manufacturing Rs. 67,000

Geetha sold entire stock to Divya based in Karnataka at a profit of 10% on the cost of
production. IGST rate on such sale is 18%.

Solution: Calculation of Transaction Value

Particulars Amount (Rs.)

Import of raw materials 210000
Raw materials from Kerala 224000
Raw materials from Karnataka 95000
529000
(+) Transport and manufacture 67000
Total cost 596000
Profit (10%) 59600
Transaction value 655600

Output ----- 655600 (IGST)

Input ----- 210000 (IGST)

Input ----- 224000 (C/S)

Input ----- 95000 (IGST)

Calculation of Net GST payable

45
Particulars CGST SGST IGST Total
Output tax liability - - 118008 118008
IGST (655600*18%)
Less: Input tax Credit
CGST (224000*9%) - - 20160 20160
SGST (224000*9%) - - 20160 20160
IGST (305000*18%) - - 54900 54900
Balance payable - - 22788 22788

Illustration 6: From the following particulars; compute the net GST payable by Wipro
Company for the period ending 31/08/2021.

Particulars Amount (Rs.)

Inputs procured:
Raw material at nil rate 20,00,000
Raw material purchase within the state at 5% GST 30,00,000
Raw material A purchased at 5% GST 1,74,80,000
Output:
Intra state sale of finished goods at 18% GST (these goods were produced
entirely from raw material at nil rate GST procured as input) 28,00,000
Exempted sales (these goods were produced from raw material procured at 5%
GST to the extent of 60%) 25,00,000
Sale of finished goods at 18% (these goods were procured from intra-state
purchases at 5% GST to the extent of 40%) 10,00,000
Intra-state sale of finished goods at 5% (these goods were produced from raw
material A) 50,00,000

Solution: Calculation of Net GST payable

Particulars CGST SGST IGST
Output tax liability
Intra state (280000*9%) 252000 252000 -
Exempted sales - - -
Sale of finished goods (1000000*9%) 90000 90000 -
Inter state (5000000*5%) - - 250000
Total A 342000 342000 250000
Less:- Input tax credit
Raw material at nil rate - - -
Raw material purchase within the state 30000 30000 -
(3000000*40% = 1200000*2.5% each )
Raw material A purchased (17480000*2.5%) 437000 437000 -
Total B 467000 467000 -
Balance payable (125000) (125000) 250000
Less:- inter state set off IGST towards - - 125000
CGST/SGST 125000

46
GST payable - - -

WHAT IS GST NETWORK?

The Goods and Service Tax Network (or GSTN) is a non-profit, non-government organization. It
will manage the entire IT system of the GST portal, which is the mother database for everything
GST. This portal will be used by the government to track every financial transaction, and will
provide taxpayers with all services – from registration to filing taxes and maintaining all tax
details.

It is established primarily to assist the rollout and implementation of GST and to act as the nodal
agency to provide assistance in terms of IT infrastructure and services to the Central, State
Governments, tax payers and general public. In essence, it will act as a common interface
between the government, tax payers, accounting authorities and banks & RBI. The portal
envisions becoming a trusted National Information Utility (NIU) which provides reliable,
efficient and robust IT Backbone for the smooth functioning of the Goods & Services Tax
regimen enabling economic agents to leverage the entire nation as One Market with minimal
Indirect Tax compliance cost.

Salient Features of the GSTN

The GSTN is a complex IT initiative. It will establish a uniform interface for the taxpayer and
also create a common and shared IT infrastructure between the Centre and States.

1. Trusted National Information Utility - The GSTN is a trusted National Information

Utility (NIU) providing reliable, efficient and robust IT backbone for the smooth
functioning of GST in India.

47
 2. Handles Complex Transactions - GST is a destination based tax. The adjustment of
IGST (for inter-state trade) at the government level (Centre & various states) will be
extremely complex, considering the sheer volume of transactions all over India. A rapid
settlement mechanism amongst the States and the Centre will be possible only when there
is a strong IT infrastructure and service backbone which captures, processes and
exchanges information.
3. All Information Will Be Secure - The government will have strategic control over the
GSTN, as it is necessary to keep the information of all taxpayers confidential and secure.
The Central Government will have control over the composition of the Board,
mechanisms of Special Resolution and Shareholders Agreement, and agreements between
the GSTN and other state governments.
4. Expenses Will Be Shared - The user charges will be paid entirely by the Central
Government & State Governments in equal proportion (i.e. 50:50) on behalf of all users.
The state share will be then apportioned to individual states, in proportion to the number
of taxpayers in the state.

POWERS AND FUNCTIONS OF GSTN

Some of the Functions of the GSTN are as follows:

1. Facilitate registration,
2. Computation of IGST and its settlement,
3. File tax returns and submit to central and state authorities,
4. Integrate banking network with tax payment details,
5. Analyze tax payer’s profile,
6. Manage computation engine of input tax credit,
7. Submit MIS reports to governments based on tax payer return information,
8. Running the matching engine for matching, reversal and reclaim of ITC,
9. Maintenance of ledger accounts,
10. Processing & reconciliation of information,
11. Provide training, analytics and business intelligence to all the stakeholders, and
12. Carry out research and study best practices on GST.

Some of the Powers of GSTN:

1. Creating an Efficient IT Infrastructure: The primary priority of GSTN is to develop a

robust and common IT infrastructure so that taxpayers can use it for registration
purposes, filling of returns, tax payments and generation of business intelligence. The tax
authorities will have control over the approval of registrations, assessment and audit etc.
2. Processing Registration Applications: In GST regime, the registration will be done on
the common GST portal. Proper scrutiny & validation of the application and its details,
once the validation process has been carried out, the registration application will be
shared with Central and State tax authorities.
3. Payment of GST by taxpayers: GST invoices will be prepared by the taxpayers on the
GST portal only. There will be two options available to the tax payer to pay the tax:

48
 a. Online - The taxpayer can pick any bank that have the authority to collect GST as
directed by RBI. After submitting the user ID & password of the bank, the
taxpayer can make the necessary payment and download the paid challan from the
GST portal, once the payment has been confirmed by the bank.
b. Offline – The taxpayer has the option of an offline tax payment. He can print the
challan & present it in the corresponding bank for an Over the counter ‘OTC’
payment.
4. Filling of Returns: Availability of Input tax credit (ITC) at various levels is one the most
important features of GST. For claiming of ITC, billions of buyers & sellers invoices will
have to be uploaded and matched every month. The claim and utilization of credit will be
done on the basis of the returns filed on the GST portal.

WHAT IS THE GSTIN?

GOODS & SERVICES TAX IDENTIFICATION NUMBER

All the business entities registering under GST will be provided a unique identification number
known as GSTIN or GST Identification Number. Currently any dealer registered under state VAT
law has a unique TIN number assigned to him by state tax authorities. Similarly, service tax
registration number is assigned to a service provider by Central Board of Excise and Customs
(CBEC).

Under GST regime, all these parties will come under one single authority and the different
identification numbers will be replaced by a single type of registration number for everyone
(GSTIN). This will ensure better administration by the authority and greater compliance by
taxpayers and hopefully improve tax collection.

Structure of GSTIN:

1. Each taxpayer is assigned a state-wise 15-digit GSTIN.

2. It will be on PAN based.
3. The first two digits represent the state code as per Indian Census 2011. Every state has a
unique code. For instance, State code of Karnataka is 29.
4. The next ten digits will be the PAN number of the taxpayer.
5. The thirteenth digit will be assigned based on the number of registration within a state.
6. The fourteenth digit will be Z by default.
7. The last digit will be for check code. It may be an alphabet or a number.

49
 GSP ECO SYSTEM
A common GST system will provide linkage to all State/UT Commercial Tax departments,
Central tax authorities, taxpayers, banks, and other stakeholders. The eco-system consists some
of the features which are as follows:

1. GSPs shall provide the tax payers with all the services addition to maintaining their
individual business ledgers (sales ledger and purchase ledger) and other value added
services.
2. Another important service expected from GSPs is the automatic reconciliation of
purchase made and entered in the purchase register and data downloaded in the form of
GSTR-2 from the GST portal. In additional there will be sector-specific or trade specific
needs which the GSPs are expected to fulfill.
3. The GST System will have a G2B portal for taxpayers to access the GST System there
will be a wide variety of tax payers (SME, Large Enterprise, Small retail vendor etc.)
who will require different kind of facilities like converting their purchase/sales register
data in GST compliant format, integration of their Accounting Packages/ERP with GST
System.
4. The specific needs of an industry or trade could be met by GSP. In short, the GSP can
help the taxpayers in GST compliance through their innovative and convenient solutions.

The conceptual diagram depicting the same is as given below.

50
Few Important Concepts under GST:

1. Compensation cess:

The Compensation Cess is a Cess that will be collected on the supply of select goods and or
services or both till 1st July 2022. The Cess will compensate the states for any revenue loss on
account of implementation of GST.

2. Items exempted under GST

51
Note: For computation of GST, calculation of transaction value is very important.

Note: For more questions please check the GST advanced problem (PPT)

52