GOODS AND SERVICE TAX IN INDIA

UNIT- 1

Introduction to Taxes:

Taxes are mandatory financial charges imposed by governments on individuals,

businesses, or other entities to fund public services and government
expenditures. Taxes play a crucial role in financing government activities,
including infrastructure development, public services, education, healthcare,
defense, and more. There are two main types of taxes: direct taxes and indirect
taxes.

1. Direct Taxes:

Direct taxes are taxes directly imposed on individuals or entities and are based
on their income, wealth, or property. These taxes cannot be shifted to someone
else and are paid by the person or entity on whom the tax liability is imposed.
The amount of direct taxes is typically proportional to the taxpayer's income or
wealth. Some common examples of direct taxes include:

a. Income Tax: A tax levied on an individual's or entity's income, which can be

derived from salaries, business profits, investments, and other sources.

b. Corporate Tax: A tax levied on the profits earned by corporations and

businesses.

c. Wealth Tax: A tax imposed on an individual's net wealth, including assets

like real estate, investments, and other valuable possessions.

d. Property Tax: A tax levied on the value of real estate properties owned by
individuals or businesses.
e. Inheritance Tax: A tax imposed on the value of assets or property inherited
by individuals after the death of the original owner.

2. Indirect Taxes:

Indirect taxes, on the other hand, are imposed on goods and services rather than
on individuals or entities directly. These taxes can be passed on to the end
consumer through the pricing of goods and services. Unlike direct taxes, the
burden of indirect taxes can be shifted from one party to another, such as from a
business to its customers. Some common examples of indirect taxes include:

a. Value Added Tax (VAT): A tax levied at each stage of the production and
distribution process on the value added to a product or service.

b. Goods and Services Tax (GST): Similar to VAT, GST is a comprehensive

indirect tax levied on the supply of goods and services at each stage of the
supply chain.

c. Excise Duty: A tax levied on the production or sale of specific goods, such
as tobacco, alcohol, and petroleum products.

d. Customs Duty: A tax imposed on goods imported into or exported from a

country.

e. Sales Tax: A tax levied on the sale of goods and services at the retail level.
 Indirect taxes are commonly used by governments to generate revenue, and they
can also be used as tools to influence consumption patterns and protect domestic
industries by imposing tariffs on imports.

Comparison of Direct and Indirect Taxe

Both the direct and indirect taxes are significant to the government. They
provide a sizable portion of government revenue. Indirect and direct taxes,
however, have different effects on society. To learn more, keep reading:

Parameter Direct tax Indirect tax

This tax is directly the taxpayer’s This tax on taxpayers for the goods and services availed or
Tax Imposition
income. purchased.

This tax is directly paid to the This tax is indirectly paid to the government through an
Payment course
government. intermediary.

These taxes are paid by individuals

Paying Entity These taxes are paid by end-consumers.
and businesses.

The rate of tax is decided by the

Rate of Payment government based on profit and Tax rates are the same for everyone.
income.

Transferability
This type of tax is non-transferrable. This type of tax is transferable.
of tax

This is a progressive type of tax.

This is a regressive type of tax, which means the tax rate is
Nature of Tax This tax rate increases with an
affected by the individual's income.
individual’s profit and income.

Income tax, wealth tax, corporate

Types of tax Sales tax, service tax, value added tax, etc.
tax, etc.

Tax Collection Collecting this type of tax is difficult. Tax collection is relatively easier.
Benefits of Direct and Indirect Taxes
The key benefits of direct taxes are as follows:

1. Helps in establishing economic and social balance: The direct taxes are charged
according to tax slabs. Individuals earning lower income have to pay less tax and
the individuals earning higher income have to pay more tax. Thus, this category
of tax helps in establishing social and economic balance.
2. Helps in reducing the rate of inflation: The tax rates are increased by the
government when the economy faces inflation. This eventually results in pulling
down demand for goods and services, thus, reducing the rate of inflation.

The key benefits of indirect taxes are as follows:

1. Contribution is equal: Every individual pays some amount of indirect tax to

the state government. Even the lower income groups who are exempted from
direct tax payment, are charged indirect tax on the goods and services they avail
themselves.
2. Unavoidable tax: These taxes are charged on the goods and services
consumed. That is why these taxes are unavoidable.

Disadvantages of Direct and Indirect Taxes

The disadvantages of direct taxes are as follows:

1. Can be avoided: The Government of India has framed stricter rules and policies
in order to curb tax evasion. However, fraudulent practices are still prevailing
and many individuals are paying lower taxes than they should.
2. Investment restraints: A lot of individuals avoid making investment to escape
from the imposition of direct taxes like capital gains tax and securities
transaction tax.
3. Viewed as burden: Direct taxes are often viewed as a burden as they require to
be paid in single lump-sum amount annually.

The disadvantages of indirect taxes are as follows:

1. Unawareness: This type of tax is added to the product price and individuals are
mostly unaware of the amount they are paying.
2. Regressive: This type of tax is considered regressive in nature. Though they
ensure that everyone pays taxes irrespective of their income, they are not equal.
Individuals from all income groups have to pay indirect taxes at the same rate.
3. Increases the price of goods and services: Indirect tax is charged on all the goods
and services availed or consumed in society. Thus, this type of tax increases the
end price of goods and services.

Both direct and indirect taxes are important for the country as they are intricately
linked with the overall economy. As such, collection of these taxes is important for the
government as well as the well-being of the country. Both direct taxes and indirect taxes
are collected by the central and respective state governments according to the type of
tax levied.

Before the 101st Amendment to the Constitution of India, the right to impose
indirect taxes was distributed between the Central Government and the State
Governments based on the provisions of the original Constitution. The primary
authority to levy and collect certain indirect taxes, such as Central Excise Duty,
Customs Duty, and Service Tax, was vested in the Central Government. On the
other hand, State Governments had the authority to impose State-level indirect
taxes, including Value Added Tax (VAT)/Sales Tax, State Excise Duty, and
certain other taxes on goods and services.

The 101st Amendment to the Constitution of India, passed in 2016, brought

significant changes to the taxation system by introducing the Goods and
Services Tax (GST). The GST is a comprehensive indirect tax levied on the
supply of goods and services across India, replacing a range of previous indirect
taxes at both the Central and State levels.

After the 101st Amendment, the authority to impose indirect taxes on goods and
services was conferred to both the Central and State Governments concurrently.
However, this authority was limited to specific elements of the GST. The
following are the types of GST imposed by the Central and State Governments
after the 101st Amendment:

1. Central Goods and Services Tax (CGST):

The Central Government has the authority to levy and collect CGST on intra-
state supplies of goods and services. CGST is applicable when the supply of
goods or services takes place within the boundaries of a single state.
2. State Goods and Services Tax (SGST):

State Governments have the authority to levy and collect SGST on intra-state
supplies of goods and services. SGST is similar to CGST but applies to
transactions that occur within a specific state.

3. Integrated Goods and Services Tax (IGST):

The Central Government has the authority to levy and collect IGST on inter-
state supplies of goods and services. IGST is applicable when the supply of
goods or services takes place between two different states.

The GST system is designed to create a harmonized and unified tax structure
across the country, eliminating the cascading effect of multiple taxes and
simplifying the tax compliance process for businesses. It has facilitated the
seamless movement of goods and services throughout India and significantly
impacted the indirect tax landscape in the country. The Goods and Services Tax
(GST) was introduced in India on July 1, 2017, after the passage of the 101st
Amendment to the Constitution of India in 2016. The GST is a comprehensive
indirect tax that replaced a complex web of multiple indirect taxes levied by the
Central and State Governments. It was implemented to create a unified and
simplified tax structure across the country.

Before the introduction of GST, India had a fragmented tax system with various
taxes imposed at different stages of the supply chain. This included Central
Excise Duty, Service Tax, Value Added Tax (VAT), Central Sales Tax, and
various other cesses and surcharges. The multiplicity of taxes led to a cascading
effect, resulting in the taxation of taxes and an inefficient tax system.

The introduction of GST aimed to address these issues and bring about the
following benefits:
1. One Nation, One Tax: GST created a common tax base and tax rates
throughout India, unifying the entire country into a single economic market. It
replaced multiple indirect taxes with a single tax, making it easier for businesses
to operate across state boundaries.

2. Elimination of Cascading Effect: With GST, the cascading effect of

multiple taxes was eliminated. GST is levied at each stage of the supply chain,
but businesses can claim input tax credits for the taxes paid on their purchases.
This ensures that taxes are only levied on the value added at each stage, leading
to a more efficient and transparent tax system.

3. Simpler Tax Compliance: GST replaced various tax filings with a single
GST return, reducing the compliance burden for taxpayers. The GST Network
(GSTN) was established as a digital platform to facilitate the seamless filing of
returns and processing of tax payments.

4. Boost to Economic Growth: By streamlining the tax system and reducing

the cost of compliance, GST aimed to boost economic growth and make India a
more attractive destination for investments.

GST is a destination-based tax, meaning the tax revenue is collected in the state
where the final consumption of goods or services occurs. It is categorized into
Central Goods and Services Tax (CGST), State Goods and Services Tax
(SGST), and Integrated Goods and Services Tax (IGST), depending on the type
of supply.

While the introduction of GST was a significant reform and has brought about
positive changes in the Indian tax system, it also faced challenges during its
implementation, such as initial technological glitches and adaptation issues for
businesses. Over time, the GST structure has been subject to revisions and
amendments to address concerns and improve its effectiveness.

1. Goods and Services Tax (GST):

GST stands for Goods and Services Tax. It is a comprehensive indirect tax
levied on the supply of goods and services throughout India. GST is designed to
replace multiple indirect taxes at both the Central and State levels and create a
unified tax system. Under GST, taxes are levied at each stage of the supply
chain, but businesses can claim input tax credits for taxes paid on their
purchases, leading to the elimination of the cascading effect.

2. Supply:

In the context of GST, "supply" refers to the transfer of goods or services (or
both) for consideration, either in the course of business or otherwise. It includes
all forms of supply, such as sale, transfer, exchange, barter, lease, rental, and
even the supply of goods or services for free or as gifts.

3. Aggregate Turnover:

"Aggregate turnover" refers to the total value of all taxable supplies (goods and
services) made by a taxpayer within a financial year. It includes the value of
supplies made within a state (intra-state supplies) and supplies made between
different states (inter-state supplies). Aggregate turnover is a crucial
determinant for various GST compliance requirements, such as registration, tax
liability, and composition scheme eligibility.

4. Person:

In the context of GST, the term "person" has a wide definition and includes any
individual, Hindu Undivided Family (HUF), company, partnership firm,
association of persons (AOP), body of individuals (BOI), or any other legal
entity, whether incorporated or unincorporated. It encompasses both natural and
juridical persons, liable to pay GST or eligible to claim input tax credits,
depending on their role in the supply chain.

5. Business:

"Business" under GST refers to any activity or transaction involving the supply
of goods or services with the intention of earning profit. It includes any trade,
commerce, manufacture, profession, vocation, adventure, or any systematic
activity carried out in the form of a business organization. Even activities
undertaken by charitable organizations or entities involved in activities for
consideration, whether or not for profit, are considered business under GST if
they meet the defined criteria.

These definitions and concepts are fundamental to understanding the

applicability and compliance requirements of the Goods and Services Tax in
India. It's essential for taxpayers and businesses to have a clear understanding of
these terms to ensure proper adherence to GST regulations and avoid any non-
compliance issues.

In the context of Goods and Services Tax (GST) in India, there are specific
terms related to the nature of supplies and identification of taxpayers. Let's
understand these terms:

1. Mixed Supply:

Mixed supply refers to a situation where two or more individual goods or

services are supplied together in a single transaction, but they are not naturally
bundled. In a mixed supply, each component can be supplied separately and is
not dependent on the other components. The tax rate applicable to a mixed
supply is determined based on the item attracting the highest rate of tax among
the individual supplies involved in the transaction.
For example, if a fast food restaurant offers a meal combo that includes a
burger, fries, and a soft drink, it would be considered a mixed supply. While
these items are supplied together, they can also be purchased individually, and
the tax rate for the combo would be based on the item attracting the highest
GST rate.

2. Composite Supply:

Composite supply refers to a situation where two or more individual goods or

services are supplied together in a single transaction, and they are naturally
bundled in the ordinary course of business. In a composite supply, one
component is the principal supply, and the other components are ancillary to it.
The tax rate applicable to a composite supply is determined based on the
principal supply.

For example, if a mobile phone is sold along with a warranty, the supply of the
mobile phone and the warranty is a composite supply. The mobile phone is the
principal supply, and the warranty is ancillary to it. The tax rate for the
composite supply would be based on the applicable rate for mobile phones.

GSTN( Goods and Services Tax Network)

GSTN stands for Goods and Services Tax Network. It is a technology-driven
platform that plays a crucial role in the implementation and administration of
the Goods and Services Tax (GST) in India. GSTN serves as the IT backbone
for the entire GST ecosystem, facilitating the seamless flow of information,
data, and funds between various stakeholders, including taxpayers, government
authorities, and other related parties.

Meaning of GSTN:

The Goods and Services Tax Network (GSTN) is a non-profit, non-

governmental organization that operates as the technology infrastructure for the
implementation of GST in India. It provides the necessary technological
infrastructure to manage and monitor the entire GST process, right from
registration and filing returns to processing payments and refunds.

Functions of GSTN:

1. Registration: GSTN is responsible for the registration of taxpayers under

the GST regime. It maintains a comprehensive database of all registered
taxpayers, enabling seamless communication between taxpayers and tax
authorities.

2. Filing of Returns: GSTN facilitates the electronic filing of GST returns.

Registered taxpayers can file their returns through the GSTN portal, ensuring
accuracy and efficiency in the reporting of transactions and tax liability.

3. Tax Payment: GSTN handles the process of tax payment by providing a

secure and reliable platform for taxpayers to remit their GST liabilities. This
ensures timely and accurate tax collections by the government.

4. Invoice Matching: GSTN plays a critical role in the matching of invoices

between suppliers and recipients. This helps in preventing tax evasion and
ensures that input tax credits are correctly claimed.

5. Generating e-Way Bills: In cases of movement of goods, GSTN generates

e-Way Bills, which are electronic documents required for the transportation of
goods exceeding a certain value. These bills are crucial for tracking the
movement of goods and ensuring compliance with GST rules.

6. Data Analytics and Risk Assessment: GSTN collects and stores a vast
amount of transactional data. This data is used for data analytics, which aids tax
authorities in identifying patterns of non-compliance, potential tax evasion, and
other irregularities.

7. Refund Processing: For eligible taxpayers, GSTN assists in the processing

of refund claims. The platform ensures that valid refund claims are processed
efficiently and accurately.

8. Communication Platform: GSTN serves as a communication channel

between taxpayers and tax authorities. It enables taxpayers to receive
notifications, updates, and clarifications from the tax authorities.

9. GSTN Portal: The GSTN portal is the primary interface through which
taxpayers interact with the GST system. It provides various services, including
registration, return filing, payment, and access to relevant forms and documents.

GSTIN (Goods and Services Tax Identification Number)

GSTIN is a unique identification number assigned to every registered taxpayer

under GST. It is a 15-digit alphanumeric code that is based on the state code,
taxpayer's PAN (Permanent Account Number), entity code, and a checksum
digit. GSTIN is used for identification and communication with the tax
authorities and is required for all GST-related transactions.

Understanding these terms is essential for businesses and taxpayers to comply

with GST regulations accurately and efficiently. It ensures proper classification
of supplies and helps in determining the correct tax rates and compliance
requirements. Input Tax Credit (ITC) is a crucial concept under the Goods and
Services Tax (GST) regime that allows businesses to claim a credit for the GST
paid on their purchases and use it to offset their GST liability on sales. E-
commerce operators and businesses involved in e-commerce transactions are
also eligible to claim input tax credit under certain conditions. Let's explore the
key points related to ITC for e-commerce businesses:

INPUT TAX CREDIT

Input Tax Credit (ITC) is a fundamental concept in the Goods and Services Tax
(GST) system. It allows a registered taxpayer to offset the tax paid on input
goods and services against the tax liability on output supplies. In simpler terms,
ITC enables a taxpayer to reduce the amount of GST they need to pay on their
outward supplies (sales) by deducting the GST they've already paid on their
inward supplies (purchases).

Here's a breakdown of the meaning and significance of Input Tax Credit:

Meaning:

When a business purchases goods or services for its operations, it pays GST on
those purchases. This GST paid on purchases is referred to as input tax. This
input tax can be claimed as a credit against the GST that the business collects
from its customers on the sales of goods or services, which is known as output
tax.

Example:

Let's say Company A is a manufacturer that buys raw materials worth ₹1,00,000
from various suppliers. The GST rate on these raw materials is 18%, resulting in
a total GST of ₹18,000. Company A then processes these raw materials and
produces finished products, which it sells for ₹2,00,000. The GST rate on the
finished products is also 18%, resulting in an output tax liability of ₹36,000.
In this scenario, Company A can claim an Input Tax Credit of ₹18,000 (the GST
paid on raw material purchases) against its output tax liability of ₹36,000. This
means Company A will only need to remit ₹18,000 as GST to the government,
effectively offsetting the input tax against the output tax.

Significance:

Input Tax Credit serves several important purposes:

1. Avoidance of Tax on Tax: ITC helps prevent the cascading effect of taxes,
also known as "tax on tax." Without ITC, businesses would end up paying taxes
on the taxes already paid by their suppliers, leading to higher costs.

2. Efficiency and Competitiveness: ITC promotes economic efficiency and

improves the competitiveness of businesses. It reduces the overall tax burden
and encourages proper documentation and compliance within the supply chain.

3. Encouraging Formalization: To claim ITC, businesses need to be

registered under GST and engage in proper invoicing and documentation. This
encourages informal sectors to formalize their operations.

4. Transparency and Compliance: The ITC mechanism necessitates accurate

reporting and matching of invoices, contributing to better tax compliance and
minimizing fraudulent practices.

5. Cash Flow Improvement: By reducing the tax liability, ITC can enhance the
cash flow of businesses, allowing them to allocate resources more effectively.
It's important to note that certain conditions and rules govern the claiming of
Input Tax Credit. These include valid GST invoices, proper matching of
invoices, timely filing of returns, and adherence to specific eligibility criteria.
Businesses need to comply with these requirements to avail the benefits of Input
Tax Credit under the GST regime.It's important to note that certain conditions
and rules govern the claiming of Input Tax Credit. These include valid GST
invoices, proper matching of invoices, timely filing of returns, and adherence to
specific eligibility criteria. Businesses need to comply with these requirements
to avail the benefits of Input Tax Credit under the GST regime.

Eligibility for ITC

To be eligible for input tax credit, e-commerce businesses must fulfill the
following criteria:

a. The e-commerce operator or business must be a registered taxpayer under

GST.

b. The goods or services for which ITC is claimed must have been used for the
furtherance of business activities. ITC cannot be claimed on personal or non-
business expenses.

ITC on Input Goods and Services:

E-commerce businesses can claim input tax credit on the GST paid for goods
and services used in their business operations. This includes raw materials,
products for resale, packing materials, services like logistics, marketing, etc.
However, ITC cannot be claimed on goods and services used for exempt
supplies or non-business purposes.

ITC on Reverse Charge:

Under certain scenarios, the liability to pay GST is shifted from the supplier to
the recipient (e-commerce operator or business). This is known as the reverse
charge mechanism. In such cases, the e-commerce business is eligible to claim
ITC on the GST paid through reverse charge for input goods and services used
for their business.

ITC on Input Services for E-commerce Operators:

E-commerce operators, which provide a platform for other sellers to sell their
products, can claim ITC on the GST paid for services like website development,
platform maintenance, payment gateway services, etc., which are used for
facilitating e-commerce operations.

Restrictions and Conditions:

While ITC is beneficial for businesses, there are certain restrictions and
conditions to be aware of:

a. ITC cannot be claimed on certain goods and services for which ITC is
specifically blocked by the GST law.

b. Proper documentation and tax invoices are necessary to claim ITC. The tax
invoices should be in the name of the registered e-commerce business claiming
the credit.

c. Businesses must comply with the filing of timely GST returns and fulfill
other compliance requirements to claim and retain ITC.

It is essential for e-commerce operators and businesses to maintain proper

records of their purchases, expenses, and sales to ensure accurate and legitimate
claims of Input Tax Credit. Any errors or non-compliance in ITC claims could
lead to penalties and legal repercussions. Therefore, it is advisable for e-
commerce businesses to seek professional advice and ensure compliance with
GST regulations.

India's Goods and Services Tax (GST) is implemented as a dual GST model,
and within the dual model, there are two components: Central Goods and
Services Tax (CGST) and State Goods and Services Tax (SGST). However,
before understanding the dual GST model, let's briefly explore the various GST
models:

Single GST Model

Under the single GST model, there is only one GST that is applicable at the
national level for all transactions, including both intra-state (within the same
state) and inter-state (between different states) supplies. This means there is a
single tax rate that applies uniformly throughout the country, regardless of the
location of the supplier or the consumer.

Dual GST Model

The dual GST model is the one adopted by India. It involves the simultaneous
imposition of two GSTs by the Central and State Governments, respectively.
The Central Government levies and collects the Central Goods and Services
Tax (CGST), while the State Governments levy and collect the State Goods and
Services Tax (SGST).

Dual GST Model in India:

India's GST is a dual GST model, as mentioned earlier. Here's how it works:

a. Intra-State Transactions: When goods or services are supplied within the

boundaries of a single state, both the Central and State Governments impose
taxes on the transaction. The tax rates comprise CGST (collected by the Central
Government) and SGST (collected by the State Government). The combined
rate of CGST and SGST is usually equal to the applicable GST rate.

b. Inter-State Transactions: When goods or services are supplied from one

state to another, the Central Government imposes the Integrated Goods and
Services Tax (IGST). The IGST is a combination of CGST and SGST, but the
entire amount is collected by the Central Government. The IGST is then
distributed to the respective State Governments based on the destination
principle.

The dual GST model ensures that both the Central and State Governments have
a role in the taxation of goods and services. It allows for a division of tax
revenue between the Central and State Governments, enabling them to maintain
their fiscal autonomy while also fostering a harmonized and unified tax
structure across the country.

India's GST regime was introduced on July 1, 2017, with the goal of
streamlining the taxation system, reducing tax cascading, and promoting ease of
doing business. The implementation of GST has been one of the most
significant tax reforms in the country's history.

As of my last update in September 2021, the Goods and Services Tax (GST)
system in India consists of four main types of GST:

1. Central Goods and Services Tax (CGST): CGST is a component of GST

levied by the Central Government of India on intra-state supplies of goods and
services. The revenue collected under CGST goes to the Central Government.

2. State Goods and Services Tax (SGST): SGST is another component of

GST imposed by the State Governments on intra-state supplies of goods and
services. The revenue collected under SGST goes to the respective State
Government.

3. Integrated Goods and Services Tax (IGST): IGST is applicable to inter-

state supplies of goods and services. It is levied by the Central Government, and
the revenue is shared between the Central and State Governments. The major
difference between IGST and CGST/SGST is that IGST is applied when goods
or services move from one state to another.

4. Union Territory Goods and Services Tax (UTGST): UTGST is similar to

SGST, but it is applicable to the supply of goods and services within the Union
Territories of India. The revenue collected under UTGST goes to the Union
Territory's administration.

These types of GST were introduced in India as part of the Goods and Services
Tax Act, which came into effect on July 1, 2017, replacing the previous
complex tax system with a unified, simplified, and more efficient tax structure.
However, please be aware that there might have been updates or changes to
GST system after my last update, so it is advisable to refer to the latest official
sources for the most up-to-date information.

Levy and Collection of GST under CGST Act, IGST Act and UTGST Act

Section 9 of CGST Act/SGST Act and Section 5 of IGST Act are the Charging
Sections for the purposes of levy of GST.

CGST and SGST shall be levied on all intra-state supplies of goods and/or
services and IGST shall be levied on all inter-state supplies of goods and/or
services respectively.

A. Levy and Collection of GST Under CGST Act. (Section 9)

1. Levy of central goods and service tax [Section 9(1)]:

Under CGST Act, central tax called as the central goods and services
tax (CGST) shall be levied on all intra-State supplies of goods or services or
both, except on the supply of alcoholic liquor for human consumption.
It shall be levied on the value determined under section 15 and at such rates,
not exceeding 20%, as may be notified by the Government on the
recommendations of the Council and collected in such manner as may be
prescribed and shall be paid by the taxable person. [Similar rates have been
prescribed under SGST/UTGST]

2. Central tax on petroleum products to be levied from the date to be notified

[Section 9(2)]:

The central tax on the supply of petroleum crude, high speed diesel, motor
spirit (commonly known as petrol), natural gas and aviation turbine fuel shall
be levied with effect from such date as may be notified by the Government
on the recommendations of the Council.

3. Tax payable on reverse charge basis [Section 9(3)]:

The Government may, on the recommendations of the Council,

by notification, specify categories of supply of goods or services or both, the
tax on which shall be paid on reverse charge basis by the recipient of such
goods or services or both.

Further, all the provisions of this Act shall apply to such recipient as if he is
the person liable for paying the tax in relation to the supply of such goods or
services or both.

4. Tax payable on reverse charge if the supplies are made to a registered

person by unregistered person [Section 9(4)]:

The central tax in respect of the supply of taxable goods or services or both
by a supplier, who is not registered, to a registered person shall be paid by
such person on reverse charge basis as the recipient and all the provisions of
this Act shall apply to such recipient as if he is the person liable for paying the
tax in relation to the supply of such goods or services or both. [Section 9(4)
has been deferred till 30.6.2018]

5. Tax payable on intra-State supplies by the electronic commerce operator on

notified services [Section 9(5)]
As per section 2(45) of the CGST Act, 2017, “electronic commerce operator”
means any person who owns, operates or manages digital or electronic
facility or platform for electronic commerce.

Further, “electronic commerce” means the supply of goods or services or

both, including digital products over digital or electronic network.

Thus, Electronic Commerce Operators (ECO), like flipkart, uber, makemy-trip,

display products as well as services which are actually supplied by some other
person to the consumer, on their electronic portal. The consumers buy such
goods/services through these portals. On placing the order for a particular
product/service, the actual supplier supplies the selected product/service to
the consumer. The price/consideration for the product/service is collected by
the ECO from the consumer and passed on to the actual supplier after
the deduction of commission by the ECO.

The Government may, on the recommendations of the Council, by

notification, specify categories of services the tax on intra-State supplies of
which shall be paid by the electronic commerce operator (ECO), if such
services are supplied through it.

Further, all the provisions of this Act shall apply to such electronic commerce
operator (ECO) as if he is the supplier liable for paying the tax in relation to
the supply of such services.

However, where an electronic commerce operator (ECO) does not have a

physical presence in the taxable territory, any person representing such
electronic commerce operator (ECO) for any purpose in the taxable territory
shall be liable to pay tax.

Where an electronic commerce operator (ECO) does not have a physical

presence in the taxable territory and also he does not have a representative
in the said territory, such electronic commerce operator shall appoint
a person in the taxable territory for the purpose of paying tax and such
person shall be liable to pay tax.
The Government vide Notification No. 17/2017 CT (R) dated 28.06.2017 has
notified the following categories of services supplied through ECO for this
purpose—

services by way of transportation of passengers by a radio-taxi, motorcab,

maxicab and motor cycle;

services by way of providing accommodation in hotels, inns, guest houses,

clubs, campsites or other commercial places meant for residential or lodging
purposes, except where the person supplying such service through electronic
commerce operator is liable for registration under section 22(1) of the
CGST Act.

B. Levy and Collection of GST Under IGST Act. (Section 5)

The provisions under section 5 of the IGST Act are similar to section 9
of CGST Act except—

the word CGST has been substituted by IGST under IGST Act

under IGST Act, tax called integrated tax is to be levied on all

interState supplies and on goods imported into India.

maximum rate under section 5(1) of the IGST Act is 40% (i.e. 20% CGST +
20% UTGST).

C. Levy and Collection of GST Under UTGST Act. (Section 7)

The provisions under section 7 of the UTGST Act are similar to section 9 of
CGST Act except—

the word CGST has been substituted by the word UTGST under the
UTGST Act.

under UTGST Act, tax called UT tax is be levied on all intra-State supplies,

maximum rate 7(1) of UTGST Act is 20%.

Taxability of ECO for specified services
 UNIT-II

Registration under the Goods and Services Tax (GST) system is a crucial step for businesses
that are required to comply with GST regulations. GST registration allows a business to
legally collect and remit GST to the government on its taxable supplies. Here's an overview
of the registration process:

1. Threshold for Registration

Businesses need to register for GST when their aggregate turnover crosses a prescribed
threshold limit. This threshold limit can vary from country to country. Aggregate turnover
includes the total value of all taxable supplies, exempt supplies, exports of goods/services,
and inter-state supplies.

2. Voluntary Registration:

Even if a business's turnover does not exceed the threshold, it can choose to register for
GST voluntarily. This can be beneficial if the business wants to avail of input tax credit
benefits or participate in inter-state trade.

3. Mandatory Registration:

In some cases, registration might be mandatory even if the turnover is below the threshold.
For example, businesses engaged in inter-state supply of goods/services, e-commerce
operators, and businesses liable to pay tax under the reverse charge mechanism may need to
register regardless of turnover.

4. Application for Registration:

To apply for GST registration, a business needs to submit an online application through the
designated GST portal. The required documents and information typically include the
business's legal name, address, PAN (Permanent Account Number), bank account details,
proof of business constitution, and other relevant documents.

5. GSTIN:
 Once the application is processed and approved, the business is assigned a unique Goods
and Services Tax Identification Number (GSTIN). This GSTIN must be mentioned on all
invoices and correspondence related to GST.

6. Types of Registration:

Depending on the nature of the business and its operations, there are different types of
registrations, such as regular taxpayer registration, composition scheme registration (for small
taxpayers), non-resident taxpayer registration, and more.

7. Input Tax Credit (ITC):

Registered businesses are eligible to claim input tax credit on the GST paid on their
purchases. However, this is subject to compliance with GST rules and conditions.

8. Filing of GST Returns:

Registered businesses are required to file regular GST returns, which provide details of
their sales, purchases, input tax credit claims, and GST liability. The frequency and type of
return to be filed depend on the business's turnover and other factors.

9. Amendment of Registration Details:

If there are any changes in the business's details, such as address, contact information, or
business partners, the business must update its GST registration accordingly.

10. Cancellation of Registration:

Businesses can apply for cancellation of GST registration if they cease operations or no
longer meet the registration requirements.

It's important for businesses to understand their obligations and responsibilities under the
GST regime and ensure proper compliance with the registration process and subsequent
requirements. Regulations and procedures can vary based on the country's specific GST
framework. Therefore, businesses should consult official guidelines and seek professional
advice if needed.
 Compulsory registration under the Goods and Services Tax (GST) system means that certain
businesses are required to register for GST regardless of their turnover. This is typically
mandated to ensure proper tax compliance, prevent tax evasion, and regulate specific types of
businesses. The criteria for compulsory registration can vary between countries implementing
the GST framework. Here are some common scenarios where businesses might be required to
register for GST:

1. Inter-State Supply:

Businesses that engage in the supply of goods or services between different states or union
territories are often required to register for GST, irrespective of their turnover. Inter-state
supply refers to transactions where the place of supply is in a different state than the location
of the supplier.

2. E-Commerce Operators:

E-commerce platforms or operators that facilitate the supply of goods or services through
their platforms are usually required to register for GST, regardless of their turnover. This
helps ensure proper tax collection on supplies made through online platforms.

3. Casual Taxable Persons:

Individuals or businesses that supply goods or services on an occasional or infrequent basis,

such as during exhibitions or trade shows, may be required to register for GST, even if their
turnover is below the threshold.

4. Non-Resident Taxable Persons:

Non-resident individuals or businesses making taxable supplies in a country where they do

not have a fixed place of business are often required to register for GST.

5. Reverse Charge Mechanism:

In cases where the recipient of goods or services is liable to pay GST under the reverse
charge mechanism, the recipient might be required to register for GST, irrespective of their
turnover.
6. Input Service Distributor (ISD):

Businesses functioning as ISDs, which distribute input tax credit to their branches or units,
are required to register for GST.

7. Special Cases:

Depending on the country's specific regulations, certain special cases or industries might
have compulsory registration requirements. For example, certain industries with high revenue
potential or risk of tax evasion might be subject to compulsory registration.

It's important to note that the criteria for compulsory registration can vary from country to
country, and there might be additional specific scenarios where registration is mandated.
Businesses should refer to the official GST guidelines and regulations in their respective
countries to understand the exact requirements for compulsory registration and ensure
compliance with the law.

The procedure for registration under the Goods and Services Tax (GST) system can vary
from country to country, but the general steps are relatively similar. Here's a broad outline of
the typical procedure for GST registration:

1. Check Eligibility:

Determine whether your business is eligible for GST registration based on factors such as
turnover, nature of supply, and location of operations. Some businesses might be required to
register compulsorily, while others can opt for voluntary registration.

2. Gather Required Documents:

Prepare the necessary documents and information for the registration application.
Commonly required documents include PAN (Permanent Account Number) of the business,
proof of constitution (such as partnership deed, memorandum of association, articles of
association), address proof of the place of business, bank account details, and authorized
signatory details.

3. Access GST Portal:

Log in to the official GST portal of your country. This is the government's online platform
for all GST-related activities.
4. Initiate Registration Application:

Start the registration process by selecting the option for "New Registration" or a similar
term on the portal.

5. Fill in Application Form:

Complete the GST registration application form. The form might require details about the
business, owners/partners, nature of business, place of business, bank account details, and
more. Make sure to enter accurate and up-to-date information.

6. Upload Documents:

Upload the scanned copies of the required documents. Ensure that the documents are
legible and meet the specified file size and format requirements.

7. Verification through OTP and Email:

The portal might send an OTP (One-Time Password) to the registered mobile number and
email address for verification. Enter the OTP and complete the verification process.

8. Business Verification:

The tax authorities might conduct physical or telephonic verification of the business
premises to ensure the accuracy of the provided information.

9. Application Review:

The tax department will review the application and documents. If any discrepancies or
missing information are identified, you might be asked to provide clarifications or
corrections.

10. GSTIN Allocation:

Upon successful verification and approval, the tax department will allocate a unique Goods
and Services Tax Identification Number (GSTIN) to your business.
11. Receipt of Certificate:

You will receive a GST registration certificate in electronic form (PDF) via email. This
certificate contains your GSTIN and other registration details.

12. Start Collecting and Remitting GST:

Once registered, you are required to collect GST on your taxable supplies and remit the
collected GST to the government within the specified timeframe.

13. Filing Returns:

Registered businesses need to file regular GST returns, providing details of their sales,
purchases, and input tax credit. The frequency and type of returns depend on your turnover
and other factors.

It's important to note that the above steps are a general guideline and may vary based on the
specific rules and regulations of your country's GST system. Always refer to the official GST
portal and guidelines provided by your country's tax authorities for the most accurate and up-
to-date information on the registration process. If you're uncertain about any aspect of the
process, consider seeking assistance from tax professionals or consultants familiar with your
country's GST laws.

The specific documents required for registration under the Goods and Services Tax (GST)
system can vary depending on the country and its regulations. However, I can provide you
with a general list of common documents that are typically needed for GST registration. Keep
in mind that this list might not cover every possible scenario, so it's essential to refer to the
official GST guidelines of your country for accurate and up-to-date information. Here's a
general overview of the types of documents that might be required:

1. Business Documents:

- PAN (Permanent Account Number) of the business entity

- Proof of constitution, depending on the type of entity (e.g., partnership deed, certificate of
incorporation, articles of association)

- Memorandum of Association (MOA) and Articles of Association (AOA) for companies

 - LLP (Limited Liability Partnership) Agreement for LLPs

2. Business Address Proof:

- Address proof of the principal place of business (e.g., rental agreement, ownership deed,
lease agreement)

- Additional address proof documents if the business operates from multiple locations

3. Authorized Signatory Details:

- Photographs of authorized signatories

- Proof of appointment of authorized signatories

4. Bank Account Details:

- Bank account statement or canceled cheque showing the name of the account holder,
account number, and IFSC code

5. Additional Documents:

- For proprietorships: Identity and address proof of the proprietor

- For partnerships: Identity and address proof of partners

- For companies: List of directors and their identity and address proof

- For LLPs: List of partners and their identity and address proof

- For non-resident taxable persons: Proof of appointment of an authorized person in India

- For e-commerce operators: Authorization or agreement with suppliers

6. Optional Documents:

- If applicable, any business-related licenses or registrations (such as excise registration,

service tax registration, etc.)

- Any other documents that might be specified by the tax authorities for specific categories
of businesses
Remember that the document requirements can vary based on the type of business entity, the
country's GST regulations, and whether you are applying for compulsory or voluntary
registration. Always refer to the official GST portal and guidelines provided by your
country's tax authorities to ensure that you have the correct and complete set of documents
for your GST registration application. If you're unsure about any aspect, consider seeking
guidance from tax professionals or consultants who are familiar with your country's GST
laws.

Reverse charge is a mechanism in the Goods and Services Tax (GST) system where the
liability to pay tax is shifted from the supplier of goods or services to the recipient of those
goods or services. In other words, under reverse charge, the recipient becomes responsible for
paying the applicable GST on certain transactions instead of the supplier. This mechanism is
used to ensure proper tax collection and compliance, particularly in cases where the supplier
might not be easily reachable by the tax authorities.

Here are some key points to understand about the reverse charge mechanism:

1. Normal Scenario (Forward Charge):

In the regular or forward charge mechanism, the supplier of goods or services collects GST
from the recipient and remits it to the government.

2. Reverse Charge Scenario:

In certain scenarios, the responsibility for paying GST shifts from the supplier to the
recipient. The recipient is required to calculate, pay, and report the GST directly to the tax
authorities.

3. Applicability:

Reverse charge is usually applicable in specific cases determined by the tax authorities,
such as:

- Supplies from unregistered dealers to registered dealers.

- Specified goods or services as listed in GST regulations.

- Import of goods or services.

- Certain goods or services supplied by certain notified categories of suppliers.

4. Reporting and Payment:

The recipient is required to report the reverse charge transactions in their GST return and
pay the applicable GST amount directly to the government. This amount can then be claimed
as input tax credit, subject to compliance with GST rules.

5. Input Tax Credit (ITC):

Recipients paying GST under the reverse charge mechanism can claim input tax credit on
the GST paid, just like in the regular forward charge scenario. This helps avoid double
taxation.

6. Compliance:

Businesses that are required to pay GST under reverse charge must ensure proper
compliance with filing returns and payment of taxes within the specified timeframes.

7. Documentation:

It's important to maintain proper documentation of reverse charge transactions, including

invoices or other relevant documents, for audit and compliance purposes.

8. Changes in GST Rates:

If there are any changes in GST rates, both the supplier and recipient need to be aware of
how it affects the reverse charge mechanism.

It's important to note that the specific scenarios and rules for reverse charge can vary from
country to country, as each jurisdiction might implement its own rules based on the GST
framework. Therefore, businesses should always refer to the official GST guidelines and
regulations of their respective countries to understand how the reverse charge mechanism
applies to them.

The Composition Scheme under the Goods and Services Tax (GST) system is a special
scheme designed to simplify the compliance process for small businesses and reduce their tax
burden. It allows eligible businesses to pay a fixed percentage of their turnover as tax and
provides certain relaxations in terms of compliance requirements. This scheme is particularly
beneficial for small taxpayers who might find it challenging to meet the regular GST
compliance obligations.

Here are the key features of the Composition Scheme:

1. Eligibility:

Small businesses with a turnover below a specified threshold (which varies by country) are
eligible to opt for the Composition Scheme.

2. Turnover Limit:

The turnover threshold to be eligible for the Composition Scheme is generally lower than
the threshold for regular GST registration. It's important to check the specific turnover limit
set by your country's GST regulations.

3. Tax Payment:

Businesses under the Composition Scheme pay GST at a fixed rate (usually lower than the
regular GST rates) on their total turnover. This rate can vary depending on the nature of the
business, such as manufacturers, traders, or service providers.

4. Input Tax Credit (ITC):

Businesses under the Composition Scheme are not eligible to claim input tax credit (ITC)
for GST paid on their purchases. This means they cannot offset the GST they paid on inputs
against the GST they collected on sales.

5. Simplified Returns:

Businesses under the Composition Scheme are required to file simplified quarterly returns
instead of the regular monthly or quarterly returns required for other taxpayers. These returns
contain summarized details of turnover and tax paid.

6. Invoice Requirements:
 Businesses under the Composition Scheme are not required to issue detailed GST invoices.
They can issue simplified invoices with limited details.

7. Inter-State Supply Limitation:

Businesses under the Composition Scheme cannot engage in inter-state supply of

goods/services. They can only supply goods/services within the same state or union territory
where they are registered.

8. Non-Applicability to Specific Goods/Services:

Some goods or services, such as alcoholic beverages and ice cream, are not covered under
the Composition Scheme. Businesses dealing with such items cannot opt for this scheme.

9. Quarterly Payment:

Under the Composition Scheme, businesses need to make quarterly GST payments based
on their turnover. The payment due date is typically the 18th of the month following the end
of the quarter.

10. Annual Return:

In addition to the quarterly returns, businesses under the Composition Scheme are required
to file an annual return by a specified due date.

It's important to carefully assess the eligibility criteria and understand the implications of
opting for the Composition Scheme. While it simplifies compliance and reduces tax rates, it
also comes with limitations, such as the inability to claim input tax credit. Businesses should
consider their turnover, nature of operations, and future growth prospects before deciding
whether to opt for the Composition Scheme. As regulations can vary by country, it's
advisable to refer to the official GST guidelines and regulations of your country for accurate
and up-to-date information.

Zero-rated supply is a concept in the Goods and Services Tax (GST) system where the supply
of goods or services is subject to a GST rate of 0%. This means that while GST is applicable
to the supply, the tax rate is set at 0%, resulting in no actual tax liability for the supplier.
However, businesses making zero-rated supplies are usually entitled to claim input tax credits
(ITC) for the GST paid on their purchases.
Zero-rated supplies are often used to promote certain industries, encourage exports, and
ensure that essential goods and services are available at a lower cost. Here are some key
points to understand about zero-rated supply:

1. No Tax Liability, but ITC Available:

Suppliers making zero-rated supplies do not charge GST on their invoices, but they can
claim input tax credits on the GST paid on their purchases. This helps avoid the cascading
effect of taxes and reduces the final cost of goods or services.

2. Export of Goods/Services:

Zero-rated supply is commonly associated with export of goods and services. When goods
or services are exported, the supplier charges 0% GST, ensuring that the export items remain
competitive in international markets.

3. Essential Goods and Services:

Certain countries may designate essential goods and services, such as basic food items and
healthcare services, as zero-rated supplies. This makes these items more affordable for
consumers.

4. International Trade:

Zero-rated supply is especially relevant for international trade. By applying a 0% GST rate
on exports, countries can encourage their businesses to participate in global markets.

5. Compliance Requirements:

Businesses engaged in zero-rated supplies are still required to maintain proper records, file
GST returns, and adhere to other compliance requirements, even though they don't collect
GST on their supplies.

6. Refunds for Accumulated Credits:

 In some cases, businesses making zero-rated supplies may accumulate excess input tax
credits due to the zero-rated nature of their sales. Countries often have provisions for
refunding these accumulated credits to ensure smooth cash flow for exporters.

7. Verification of Exports:

Tax authorities often require exporters to provide supporting documentation to verify that
the goods or services have been exported as claimed.

8. Applicable Sectors:

The types of goods and services that can be classified as zero-rated supplies can vary by
country and are usually determined by the country's GST regulations.

It's important to note that the specific rules and regulations regarding zero-rated supplies can
vary from country to country. Businesses should always refer to the official GST guidelines
and regulations of their respective countries to understand the conditions and procedures for
zero-rated supplies.

Exemption from Goods and Services Tax (GST) means that certain goods or services are
excluded from the GST tax base and are not subject to GST. This exemption can be granted
by the government to achieve various objectives, such as supporting specific industries,
promoting social welfare, or reducing the tax burden on essential items. Here are some key
points to understand about GST exemption:

1. Types of Exemptions:

GST exemptions can apply to specific goods, services, or categories of transactions. These
exemptions can be complete, where no GST is levied at all, or partial, where a reduced rate of
GST is applied.

2. Essential Goods and Services:

Many countries exempt essential goods and services from GST to ensure affordability and
accessibility. This might include items like basic food items, healthcare services, educational
services, and certain agricultural products.
3. Social Welfare and Necessities:

Certain goods and services that contribute to social welfare, such as charitable activities,
medical supplies, and education services, are often exempt to support these vital sectors.

4. Small and Marginal Businesses:

Some countries provide exemptions to small businesses with turnover below a specified
threshold to alleviate compliance burdens.

5. Export of Services:

Exemptions might also apply to certain export services, ensuring that services destined for
foreign customers are not subject to domestic GST.

6. Cultural and Artistic Activities:

Cultural and artistic activities, such as performances, exhibitions, and public art, might be
granted exemptions to encourage cultural development.

7. Niche and Local Industries:

GST exemptions might be applied to niche or locally important industries to stimulate

growth and sustainability.

8. Special Provisions

Exemptions can also be granted based on special provisions in the GST law, often tailored
to specific circumstances.

9. Documentation and Compliance:

While exempt supplies are not subject to GST, businesses making such supplies may still
need to maintain proper records and file relevant returns.

It's important to note that the specific goods, services, or categories that are exempt from
GST can vary widely from country to country. Each jurisdiction's tax laws determine which
items are exempt and the conditions for claiming exemptions. Businesses and individuals
should refer to the official GST guidelines and regulations of their respective countries to
understand the exact scope of GST exemptions and their implications.