GST

EBOOK
GST is a single tax that has subsumed several indirect taxes that
were previously levied on the sale of goods and services. It is applicable to
the manufacture, sale, and consumption of all goods and services in India.

This section will cover the following topics

 Why do we need GST?

 How can GST change this?
 Previous Tax Structure
 GST
 Components of GST
 GST Tax Structure
 Zero Rate
 Lower Rate
 Standard Rate
 Higher Rate
 Additional Cess

Why do we need GST?

The previous tax system involved multiple taxes, complex compliance

procedures, and intervention by several State and Central tax divisions.
This made it highly difficult to set up and run a business in India.

Under the GST regime, instead of applying taxes on the total value of the
product at each stage, the GST only imposes tax on value addition. Since it
provides credit for the input tax paid at each previous stage of a supply
chain, this method considerably reduces the overall cost of manufacturing
and selling goods.

How can GST change this?

 Instead of applying taxes on the total value of the product at each stage,
the GST only imposes tax on value addition. Because it provides credit for
the input tax paid at each previous stage of a supply chain, this method
considerably reduces the overall manufacturing cost.

Let’s take a closer look at how this works with a simple example.

Comparison of Previous Tax Structure vs. GST

Imagine a manufacturer selling zinc-coated steel buckets to a wholesaler

located in the same state (let’s call it State 1) for Rs. 1,000 each plus tax.

Note: In this example, we are assuming that all taxes associated with the
manufacturing process have been paid and the selling price in the first
stage is the final price set by the manufacturer (excluding VAT).

Previous Tax Structure

 The manufacturer sells the buckets to a wholesaler located in State 1 for
Rs. 1,000 each plus a VAT of 10% (which adds Rs. 100 per bucket).
 The wholesaler in State 1 buys the buckets for Rs. 1,100 per piece and
increases the selling price to Rs. 2,000 per bucket before selling a few of
them to a retailer located in a different state (State 2). Under the pre-GST
regime, this interstate sale will attract a Central Sales Tax (CST) of 12% on
Rs. 2,000 (which adds Rs. 240 CST per bucket).
 The retailer pays Rs. 2,240 per bucket, increases the price by
20%, and offers the buckets to local consumers in State 2 for Rs. 2,688
plus a VAT of 15% (which adds Rs. 403.20 per bucket).
 The end consumer pays a total of Rs. 3,091.20/- per bucket.

Note: Here we have assumed the VAT rate in state 1 to be 10% while the
VAT rate in state is 15%. This is because under the pre-GST system, the
VAT rates are different across different states.
 In the above example, you can see that at every stage of the process,
the application of tax is non-uniform. The tax rate and type are different
each time, and getting ITC is difficult or impossible because the different
taxes are governed by different authorities.

Bottomline - Sellers lose money on taxes at every stage as they don’t get input
tax credit or refund on the tax paid on purchase whenever they make a sale.

GST

Now, let’s take the same example, but instead apply the GST model.

 The manufacturer sells the buckets to a wholesaler located in State 1 for

Rs. 1,000 each plus a GST of 10% (which adds Rs. 100 per bucket).
 The wholesaler in State 1 buys them for Rs. 1,100 per piece and increases
the total selling price to Rs. 2,000 per bucket before selling a few of them to
a retailer located in a different state (State 2). Under the GST regime, this
interstate sale will attract an IGST of 10% on Rs. 2,000 (which adds
Rs. 200 per bucket).
 The retailer pays Rs. 2,200 per bucket, increases the price by
20%, and offers the buckets to local consumers in State 2 for Rs. 2,640
plus a GST of 10% (which adds another Rs. 264 per bucket).
 The end consumer pays a total of Rs.2,904/-.

Note: Here, we have assumed the GST on zinc-coated steel buckets to be

10%. GST for the bucket will stay the same throughout India, irrespective of
whether it is an intra-state sale or inter-state sale.

Bottomline - Looking at both the examples, one can see that there is not
much difference to the buyer/end consumer. The benefit to the end
consumer totally depends on the GST rate associated with a particular item
or service under the GST. If we had assumed a higher GST rate for the
bucket, the end consumer would have actually paid a lot more than earlier.
But then, the real benefit from the GST regime is actually reaped by sellers,
manufacturers and traders because the GST allows an unrestricted flow of
input tax credits and so they get a refund on the input taxes that they have
paid at the time of sale. That said, sellers can pass on this benefit to the
end consumer if they choose to by reducing their final selling prices (as
they do get their tax money back).
 Components of GST

Since July 2017, India has been following the dual-GST model, which is
made up of the following components:

 SGST - A form of GST collected by the state government

 CGST - A form of GST collected by the central government
When the sale of goods and services takes place within the same state,
both taxes will be levied.

If the movement of goods occurs between two different states (i.e., an

interstate transaction), a combined tax called the IGST or the Integrated
GST (SGST + CGST) will be collected by the central government. The IGST
will replace the previously levied Central Sales Tax (CST) of 2%.
The tax amount collected as IGST will later be distributed to respective
state governments.

To understand the dual-GST model better, let’s take a look at the following
scenarios:

Scenario 1: Levy of SGST and CGST

Let us assume that you’re a distributor in Chennai and you buy goods from
a manufacturer in Tirupur, Tamil Nadu. Since the sale and movement of
goods happen within the state, SGST and CGST will be levied on the
sale. You, as the distributor, will get tax credit on the input SGST and
CGST.
Scenario 2: Levy of IGST
Let us assume that you’re a distributor in Belgaum, Karnataka, and you buy
goods from a manufacturer in Tirupur, Tamil Nadu. Here, the sale and
movement of goods happen between two different states, IGST will be
levied on the sale.

GST Tax Structure

The four-tier tax structure of GST has the following slabs: a zero rate, a
lower rate, two standard rates, and a higher rate. Here’s a brief overview of
each GST rate.

Zero rate
The zero rate tax is a nil tax that is applied on goods and services. Zero
rated items include milk, eggs, curd, unpacked foodgrains and health &
educational services.

Lower rate
A lower rate of 5% will be applied on items like sugar, tea, edible oil, coal,
spices, and cotton fabric. This, along with the zero rate, will help prevent
inflation from having much of an impact on the prices of essential items.

Standard rate
There are two standard rates that have been finalized by the GST Council:
12% and 18%.
Processed food, butter, and mobile phones will be taxed at 12%. Capital
goods, industry intermediaries, toiletries, computers and printers will be
taxed the second standard rate of 18%.

Higher rate
A higher rate of 28% will be levied on white goods. This includes items
such as washing machines, high-end motorcycles, air conditioners,
refrigerators, small cars, etc.

Additional cess
The additional cess, which has been a topic of debate since the GST rates
were proposed, is now finalized. It was feared that demerit goods such as
tobacco products and aerated drinks, which were previously taxed at 65%
and 40%, would become cheaper and too easily accessible if the highest
rate of GST was set at 28%. To keep this from happening, the new GST
structure will collect an additional cess on top of the 28% GST. The cess
will only be applied on demerit goods like like coal, paan masala, tobacco,
aerated drinks, and motor vehicles.

E-invoicing
Under the new e-invoicing system, taxpayers will have to generate invoices
following the guidelines set by the GST Council. This guide is your key to
understanding the process of creating a compliant invoice. Here’s what you
need to know.
• What is e-invoicing?

• The current system

• The need for a standard e-invoicing system

• How to generate e-invoice under GST

• How will it curb tax fraud

• Benefits of having an e-invoicing system

What is e-invoicing?
An e-invoice, or electronic invoice, is a digital document that is exchanged
between a supplier and buyer and validated by the government tax portal.
E-invoicing is the proposed system where business-to-business (B2B)
invoices are digitally prepared in an e-invoicing format and authenticated by
the Goods and Services Tax Network (GSTN). This system ensures that a
common format is followed by all businesses before reporting invoices to
the GST portal.

In August 2019, the government shared a draft of an e-invoice for public

view, which was later modified by the GST Council to be compliant
according to their regulations. Not only does the standard format make
compliance easier, but because it’s followed across industries,
interoperability between GST ecosystems is ensured.
 The current system
Today, an invoice generated by the seller needs to be prepared and
reported to two different systems: GST Portal and e-Way Bill.

Businesses generate invoices using different software and

the invoice details are entered using a suitable API by the taxpayer
in a GSTR-1 return. The same information is reflected in a GSTR-2A
and made available to recipients with ‘view only’ permission.
Simultaneously, transporters are required to generate the e-Way Bill, either
directly or by importing the invoices into an excel sheet or JSON manually.

To put an end to this endless trail of paperwork, the GST council introduced
the new return system.

The need for a standard e-invoicing system

Tax departments internationally are eager to make the e-invoicing system a
success for two reasons:

 Following a standard format allows invoices to be shared easily

 Invoices can be read by the central system

With e-invoicing, fields will be pre-populated while filing returns, thus

avoiding discrepancies during data entry and reconciliation.

How to generate e-invoice under GST

The flow of a GST e-invoice system has two parts:
 Communication between the business and the Invoice Registration Portal
(IRP)
 Interaction between the IRP, the GST/ e-Way Bill systems, and the buyer.

Generating an e-invoice

Taxpayers will generate invoices like they normally do, except reporting will
now be done electronically. Taxpayers will have to follow the e-invoice
schema and submit mandatory details accordingly. Here is a list
of mandatory and optional parameters:

 Transaction details like tax scheme, supplier type

 Document details: type, number and date
 Supplier information like legal name, GSTN address, location, PIN code
and state code.
 Buyer information like legal name, GSTN number, address, location, state
code and PIN code
 Dispatch from address details (mandatory if it is different from supplier
details)
 Shipping details (mandatory if it is different from buyer address)
 Item related details like service/ goods, HSN code, total amount, GST rate,
Assessable amount, total item value.
 If the items are being moved in batches, then add batch number.
 Invoice details include assessable values and total invoice value.

Besides the mandatory parameters, the Council also listed optional

parameters, which are subject to change based on the needs of the
business. Once the invoice fields have been finalised, a taxpayer has to
decide if the accounting or billing software is capable of creating a JSON
file, which can then be upload to the IRP.

Creating a unique IRN

The IRP will generate a hash parameter based on the details submitted by
the seller, like GSTIN, document type, document number, and fiscal year.
The IRP will then check if the same invoice exists in the Central
Registry, and after confirming there are no duplicates, the IRP will add its
signature and a QR code in the invoice’s JSON data. The hash generated
by the IRP will be the Invoice Reference Number (IRN) for the e-invoice.

Updating the invoice to the GST and e-way bill systems:

The digitally signed JSON with the IRN is sent to the seller. The uploaded
invoice data is then shared with the GST and e-Way Bill system. The GST
system will update the GSTR-1 for the seller and the GSTR-2A for the
buyer, which will help in determining the liability and ITC. The GST e-
invoice schema will contain details like ‘Transporter ID’ or ‘Vehicle number,’
which will be used to generate an e-Way Bill.

The government’s tax portal is not responsible for generating the e-invoice.
In fact, it will be created with the aid of the seller’s accounting/billing
software and their respective ERP systems. The IRP will just receive,
validate, and digitally sign the invoices uploaded by the seller.

How will it curb tax fraud

With the introduction of e-invoicing, tax authorities will now have access to
a complete trail of B2B invoices from taxpayers since they will be uploaded
in the GST portal. Because invoices are created before any actual
transaction takes place, opportunities to manipulate the
 invoices decrease. The system can identify fake invoices by matching the
input tax credit to output tax on the GSTN portal, preventing tax crimes.

Benefits of having an e-invoicing system

Generating a GST e-invoice is usually the responsibility of a taxpayer who
reports to the IRP in GST. Next, the IRP will generate a unique IRN and a
QR code. The taxpayer will be able to scan this QR code, extract the IRN,
and fetch invoice details.

Here are some benefits of e-invoicing for businesses:

 E-invoicing helps you with data reconciliation and accuracy during manual
data entry.

 It allows interoperability across businesses.

 You can track the e-invoices in real-time.

 The e-invoice details will be auto-populated on tax return forms and e-way
bills, making the tax return process easy.

 All transaction details will be available online at all times. This would
eliminate the need for frequent audits and surveys. Differences in data can
be caught by comparing input credit and output tax.

 This initiative will also build efficiency within the tax administration by
helping to identify fake invoices.
Invoice Furnishing Facility (IFF)
For taxpayers filing GST returns on a quarterly basis under the QRMP
(Quarterly Returns Monthly Payment) scheme, the government has
introduced the Invoice Furnishing Facility (IFF) to make tax compliance
easier. With this facility, you can file and reconcile returns easily, and also
transfer Input Tax Credit (ITC) to your buyers faster. This guide will explain
the basics of what you need to know about IFF, as well as when and how
to use this facility.

• What is the Invoice Furnishing Facility or IFF?

• Criteria for IFF

• Why is Invoice Furnishing Facility important?

• What to submit in the IFF scheme under GST?

• When to submit the IFF GST return?

• How to submit and file IFF in GST portal?

What is the Invoice Furnishing Facility or

IFF?
Effective from January 1, 2021, the Invoice Furnishing Facility is an
optional feature that allows you to upload invoices for the first two months
of a quarter. You can use IFF to add information related to your B2B
invoices and CDNR (Credit/Debit Notes-Registered) during these two
 months. For the last month of the quarter, you must file returns with Form
GSTR-1. For example, for the quarter running from January to March, you
can upload invoices through IFF for January and February. Invoices for
March have to be uploaded in Form GSTR-1 .
Any invoices that you upload in IFF need not be entered again in Form
GSTR-1 that you file in the third month. The invoices that you have filed via
IFF will be reflected in Form GSTR-2A / 2B of your buyer.

Criteria for IFF

 You have to be a quarterly taxpayer filing GSTR-1 under the QRMP
scheme. This is a scheme that allows taxpayers to file their returns on a
quarterly basis and pay taxes on a monthly basis.

 You can only use IFF for B2B invoices and credit/debit notes with the
following tables:

o 4A, 4B, 4C, 6B, 6C - to add details of B2B invoices

o 9A - to add details of amended B2B invoices (B2BA)
o 9B - to add details of Credit/Debit Notes-Registered (CDNR)
o 9C - to add details of amended Credit/Debit Notes-Registered (CDNRA)

 The total value of invoices for each month cannot exceed 50 lakh INR.

 If invoices are not furnished using IFF, you will have to upload the required
information for all three months at the end of the quarter in Form GSTR-1.

Why is Invoice Furnishing Facility important?

 This facility is beneficial for you and your buyers, as your buyers can claim
Input Tax Credit every month, instead of waiting till the end of each quarter.
 This helps improve your business as well, as more buyers would approach
your business to claim these credits.

 If you have a large number of B2B invoices, this facility to upload invoices
each month will ease your tax burden and will reduce the number of
invoices that you need to upload at the end of the quarter.

What to submit in the IFF scheme under

GST?
While filing your invoices in the first two months, you should submit:

 Details of your B2B invoices

 Details of the credit and debit notes of your B2B invoices issued during that
month

To submit this information, you must fill the following tables that appear in
the Invoice Details page of the GST portal:

 4A, 4B, 4C, 6B, 6C - to add details of B2B invoices

 9A - to add details of amended B2B invoices (B2BA)
9B - to add details of Credit / Debit Notes Registered (CDNR)
 9C - to add details of amended Credit/Debit Notes-Registered (CDNRA)

When to submit the IFF GST return?

You can upload and file invoices for a particular month till the 13th day of
the following month. For example, for the month of July, you can upload
invoices till the 13th of August. After this date, you cannot use this facility
for the previous month’s invoices. In case there are any invoices that you
 had left out previously, you can upload them via the IFF in the following
month or in the quarterly Form GSTR-1.

How to submit and file IFF in GST portal?

To file IFF for the first two months of the quarter:

 Log in to the GST portal.

 Go to Services > Returns > Returns Dashboard.
 In the File Returns page, choose the financial year and the return filing
period (first or second month of the quarter) and click Search.
 Choose the IFF option.
 Choose Prepare online if you want to file via the GST portal, or
choose Prepare offline if you want to use the Returns Offline Tool and
upload the JSON files containing the required details.
 Once you have provided the details, click Generate IFF summary at the
bottom of the page, and then click Submit. Once you have submitted this,
you cannot delete the information you have provided.
 If you wish to file Form GSTR-1, click File Return to enter the details and
choose either file with DSC (Digital Signature Certificate) or file with
EVC (Electronic Verification Code).
For more information, you can visit the GST portal to read the step-to-step
instructions for completing the filing process.

Quarterly Return Filing & Monthly Payment

of Taxes (QRMP) Scheme
To simplify the process of filing returns for small business taxpayers, the
QRMP scheme has been launched by the Indian government. This guide
will explain what the scheme is, the criteria to avail it, and what you’d have
to do once you have been registered under this scheme.
• What is the QRMP scheme?

• Why is the QRMP scheme important?

• Criteria for the QRMP scheme

• How to avail the QRMP scheme

• When to avail the QRMP scheme and submit returns

• Payment of taxes under the QRMP scheme

What is the QRMP scheme?

Brought into effect from 1st January, 2021, the Quarterly Returns Monthly
Payment (QRMP) scheme is one that allows registered taxpayers with an
aggregate turnover of up to INR 5 crores in the previous financial year to
file returns on a quarterly basis and make tax payments on a monthly
basis.

Previously, taxpayers were required to file GSTR-1 and monthly, but with
the QRMP scheme, they can file returns once a quarter. For example, in
the quarter of April-June, you can file returns once and pay taxes for April
by the due date in May. Under this scheme, you need to pay taxes on a
monthly basis (i.e., the first two months of a quarter) using the fixed sum
method (through a pre-filled challan) or self-assessment method (due tax
amount after adjusting ITC). These two methods will be explained in detail
further on in this guide.
Once you opt for this scheme, you will continue to be in this scheme unless
you cross the turnover threshold or opt out of it.
 Why is the QRMP scheme important?
 It is essential that small business taxpayers are aware of this scheme since
it would help reduce the number of returns they have to file in a year.
 With this scheme, eligible taxpayers can also make use of the
optional Invoice Furnishing Facility (IFF). IFF allows you to file four
GSTR-1 returns in a year, and upload invoices for the first two
months of a quarter instead of waiting until the end of the quarter
while filing the return. With IFF, your buyers can also claim Input Tax
Credit (ITC) faster.

Criteria for the QRMP scheme

Who can avail this scheme?

If you’re not a previously registered taxpayer (normal taxpayer/SEZ

developer/SEZ unit), if you have just obtained a new registration, or if
you’re opting out of the Composition Scheme, you can still choose the
QRMP scheme. However, if you are a GST practitioner, you cannot opt
in/out of the QRMP scheme on behalf of a taxpayer.
The choice to avail this scheme is also dependent on the Goods and
Services Taxpayer Identification Number (GSTIN). So, if you have one
Permanent Account Number (PAN) and several GSTINs, you can avail the
QRMP scheme for certain GSTINs, depending on the following criteria.

Criteria
 You can avail this scheme only if you are liable to file Form GSTR-1 and
Form GSTR-3B returns.
 You need to have an aggregate turnover of up to INR 5 crores or less in the
preceding financial year. If your turnover crosses this threshold amount,
you will not be eligible for the scheme from the next quarter.
 You should have filed your last due GSTR-3B return.
 You should not have any data saved in Form GSTR-1 in the portal for the
period in which you’re opting for the scheme. Once you have deleted the
saved information in Form GSTR-1, you can opt for the scheme.

How to avail the QRMP scheme

You can opt in/out of the QRMP scheme by visiting the GST portal:
 Click Login >> Services >> Returns.
 Then, click the Opt-in for quarterly return option.

If you are a previously registered taxpayer:

If you had an annual turnover of up to INR 5 crores for the financial year
2019-20, and if you have filed the GSTR-3B return for October 2020 by
November 30th 2020, you would have automatically been migrated to the
QRMP scheme for the quarter of January-March 2021. If you have been
migrated, you will be assigned a certain return option for this quarter.

In the current financial year, if you have a turnover of up to INR 1.5 crores
and

 filed GSTR-1 on a quarterly basis, you will be assigned the GST quarterly
return option.

 filed GSTR-1 on a monthly basis, you will be assigned the GST monthly
return option.

In the preceding financial year, if you had a turnover between INR 1.5
crores-5 crores, you will be assigned the GST quarterly return option.
If you are a registered taxpayer and have not been migrated, you can opt
for this scheme once you fulfill the criteria.

If you are a newly registered taxpayer:

You can opt for this scheme if you have been given registration during the
first month of a quarter. However, if you have been given registration during
the latter two months of a quarter, you can opt for QRMP only from the next
quarter. For example, for the quarter of April-June, if you have been
registered by April, you can avail the QRMP scheme for that quarter. If you
have been registered only in May or June, then you cannot avail QRMP for
that quarter, and can only avail it for the next. Till then, you will have to file
GSTR-1 and GSTR-3B monthly.

When to avail the QRMP scheme and submit

returns
You can opt in/out of the scheme for a certain quarter between the first day
of the second month of the preceding quarter and the last day of the first
month of the quarter that follows. For example, if you want to opt for this
scheme for the quarter of April-June, you should do so between February
1st to April 30th.

You should submit the GSTR-3B return for each quarter by the 22nd or
24th of the following month, as per the state/union territory where your
principal place of business is registered. Based on the criteria mentioned
previously (that the last GSTR-3B should be filed before opting for QRMP),
if you wish to opt for the QRMP scheme for the quarter of April-June, you
should have submitted your GSTR-3B return for March by the 22nd or 24th
of April. In case you opt out of the scheme, you will have to file GSTR-1
and GSTR-3B on a monthly basis.

Under the QRMP scheme, you can use the Invoice Furnishing Facility (IFF)
to upload invoices for the first two months of a quarter. For each month,
you can submit details of your outward supplies to a registered person till
the 13th of the following month. For the last month, you will have to submit
GSTR-1.

Payment of taxes under the QRMP scheme

For the first two months of a quarter, you will have to pay taxes through
Form PMT-06 and generate a payment challan. The payment for each
month should be made by the 25th of the following month. You can use two
modes of payment:

Fixed sum method

If your last GSTR-3B was filed quarterly, you can get a pre-filled challan for
an amount equal to 35% of tax amount (paid in cash) in the previous
quarter. However, if you are a new taxpayer, have not filed your last GSTR-
3B, or opted out of the Composition scheme, you cannot access the 35%
challan.
If your last GSTR-3B was filed monthly, you can get a pre-filled challan for
an amount equal to the full tax amount (paid in cash) in the last month of
the previous quarter.

Self-assessment method

Here, you can submit the actual tax amount due on inward and outward
supplies, along with the available ITC.

The tax amount you have submitted for the first two months can be used
for adjusting any liability you have in the quarter through form GSTR-3B.

Basics of Form GST PMT-06 Payment

Challan
The PMT-06 challan makes GST payments simpler, and has gained more
prominence due to the QRMP scheme. This guide will explain what PMT-
06 is, along with when and how you would have to make payments through
this form.

• What is Form GST PMT-06?

• When do you have to make the payment?

• Methods of payment under the QRMP scheme

• How to use Form GST PMT-06

• Interest for late payment

 What is Form GST PMT-06?
Form GST PMT-06 is a single challan through which you can pay taxes,
interests, penalties, and fees. You can generate this challan online from the
GST portal, make online payments, and get instant receipts. This is also
the challan you will have to use to deposit your monthly tax if you are
registered under the QRMP scheme.

When do you have to make the payment?

Once you have generated the challan, you will have only 15 days to
complete the pending payment. If you have been registered under the
QRMP scheme, you will have to pay the due tax amount in each of the first
two months. The payment for one month should be made by the 25th of the
following month. For example, payment for the month of April will have to
be done by the 25th of May.

You do not need to make a payment if:

 You have an adequate balance in your electronic cash/credit ledger for the
tax amount you need to pay. In case the balance in the electronic cash
ledger is not adequate to clear the tax amount, you can use PMT 06 to
make your payment.
 You have no liabilities for that month.

Note: If you are a GST practitioner, you can make payments on behalf of
your clients. However, you cannot opt in/out of the QRMP scheme on
behalf of a taxpayer.
 Methods of payment under the QRMP
scheme
You can use either of the following payment methods for any of the months
when making your payment through PMT 06:

 Fixed-sum method
 Self-assessment method

Fixed-sum method

In this method, you can get a pre-filled challan for 35% of the tax amount or
100% of the tax amount, depending on whether you filed quarterly returns
or monthly returns in the previous quarter.

If you had filed quarterly returns, you will get a pre-filled challan for 35% of
the tax amount paid from the Electronic Cash Ledger in the preceding
quarter. If you had filed monthly returns in the preceding quarter, you can
get a pre-filled challan for 100% of the tax amount paid from the Electronic
Cash Ledger in the last month of the previous quarter.

Note: If you are a new taxpayer, if your last GSTR-3B was not filed, or if
you have opted out of the Composition scheme, you cannot access the
35% challan.

Self-assessment method

In this method, you have to assess your tax liability manually and pay the
amount through GST PMT 06 payment challan. You need to consider the
amount you have to pay on inward and outward supplies after adjusting the
 available Input Tax Credit (ITC). You can check your ITC by checking the
auto-drafted ITC statement in Form GSTR-2B, for each month.

How to use Form GST PMT-06

 Go to the GST portal and navigate to Services >> Payments >> Create
challan.
 Select Monthly payment for quarterly return as the reason for generating
the challan if you are in the QRMP scheme. If you are not in the QRMP
scheme, you can select Any other payment to create the challan.
 Select the year and the period for which you are paying taxes.
 Select either of the challan types provided and click Proceed.
 Once you enter the details in the challan, a Challan Portal Identification
Number (CPIN) will be generated on the GST portal. This CPIN is valid
only for 15 days, so you need to make the payment before it expires.
 After you make the payment, you will get a Challan Identification Number
(CIN) which will be shared by the bank as proof of successful payment.
This will need to be entered in GST PMT 06.
 The amount you have paid will be credited to your Electronic Cash Ledger.
If you make online payments with this challan after 8 pm, it will be reflected
in your Electronic Cash Ledger on the same day. You can submit this
challan within 24 hours of making the payment.

For detailed instructions on how to create and submit this challan, you can
visit the GST portal .
If you are in the QRMP scheme, keep in mind that the amount you have
deposited will only be used to make up for any liabilities and cannot be
used for any other purpose until you have filed GSTR-3B for that quarter.
Any remaining amount after filing GSTR-3B can be used in the subsequent
quarters. Refunds can also be claimed only after you have filed GSTR-3B
for that quarter. For example, for the quarter of April-June, if you want a
refund for the amount that you deposited in April, you can only get a refund
once you have filed GSTR-3B for June.
 Interest for late payment
If you don’t make the payment by the due date, interest will accrue from the
due date until the date of payment. A separate interest charge will be made
if Form GSTR-3B is not filed by the due date. In both cases, the interest
rate is 18% (per annum) of the net tax liability.

Exceptions for interest charges:

 If you are paying through the fixed sum method, you will not owe interest if
the due tax amount is paid in the first two months of the quarter by the due
date. If you opt for the self-assessment method, you’ll have to pay interest
for tax or any liability (net of ITC) for late payments. You’ll have to pay this
interest through Form GSTR-3B.

 In case the amount you paid for each of the first two months is lesser than
the actual amount you owe, you won’t have to pay interest on it as long as
you pay the remaining amount by the end of the quarter, while filing GSTR-
3B.

The process of GST registration involves filling and submitting an online

application in order to obtain an unique GST Identification Number
(GSTIN).

This section will cover the following topics:

 • Eligibility

• Required Documents

• Registration process for existing tax payers

• Registration process for new applicants

• GSTIN (GST Identification Number)

• Checking the status of your Application

Before diving into the process involved in GST registration, let’s take a look
at the eligibility criteria for GST registration.

Eligibility
Businesses with an aggregate turnover exceeding Rs. 20 lakhs must
mandatorily register and pay for GST. Threshold limit is based on the
yearly aggregate turnover of a business.

Aggregate turnover is the sum of all taxable, non-taxable, and exempt

supplies. It also includes export of goods and services (if any).
Apart from the above mentioned criteria, there are a few cases where GST
registration is mandatory. They are:

 Businesses involving inter-state supply of goods and services

 Casual taxable person
 Non-resident taxable person
 People who supply goods and services on behalf of a taxable person
 An online business that offers services under the aggregator model. For
example, businesses supplying online information and database access or
retrieval services from a place outside India to a non-registered person in
India.
 Input service distributors
 Business owners who were registered under the pre-GST law
 Business owners paying tax under the reverse charge mechanism
 E-commerce operators who collect tax at source

Required Documents
While registering for GST, please make sure that you have soft copies of
the documents mentioned below:

Private Limited Company/Public Company

Documents related to the business

 PAN card
 Registration Certificate of the firm
 Memorandum of Association (MOA) /Articles of Association (AOA)
 Copy of Bank Statement
 Declaration to comply with the provisions
 A copy of Board Resolution

Documents related to directors

 PAN and ID proof of directors

Documents related to the office

 Copy of electricity/landline/water bill
 NOC (no objection certificate) issued by the business owner
 Rent agreement (if the business premises are rented)

Limited Liability Partnership

Documents related to the business

 PAN card
 Registration Certificate of the LLP
 LLP Partnership Agreement
 Copy of Bank Statement of the LLP
 Declaration to comply with the provisions
 A copy of Board Resolution

Documents related to the business partners

 PAN and ID proof of the business partners

Documents related to the office

 Copy of electricity bill/landline/water bill
 NOC (no objection certificate) issued by the business owner
 Rent agreement (if the business premises are rented)

Normal Partnerships

Documents related to the business

 PAN card
 Partnership Deed
 Copy of Bank Statement
 Declaration to comply with the provisions

Documents related to the business partners

 PAN and ID proof of partners

Documents related to the office

 Copy of electricity bill/landline/water bill
 NOC (no objection certificate) issued by the business owner
 Rent agreement (if the business premises are rented)

Sole proprietorship/Individual ownership

Documents related to the business

 PAN card and ID proof of the individual
 Copy of Cancelled cheque or bank statement
 Declaration to comply with the provisions
 Documents related to the office
 Copy of electricity/landline/water bill
 NOC (no objection certificate) issued by the business owner
 Rent agreement (if the business premises are rented)

Registration process for existing tax payers

If you’re an existing tax payer, you will receive a provisional username and
password from the tax authority under whom you are registered. You can
also reach out to the tax department to obtain the provisional username
and password.

You will have to use these credentials to log into the GST portal and submit
the necessary forms for obtaining GST registration. To start with the
registration process,

 Log on to www.gst.gov.in
 Click New user login and enter your provisional username and password.

 Click Login
 In the screen that follows, you will be prompted to enter your email address
and mobile number.
 A One Time password (OTP) will be sent to your registered email address
and mobile number. (The one you receive in your email and the one you
receive on your mobile number are different). Enter both the OTPs to
complete the verification.

 Once the process is done, you will be taken to the screen where you will be
asked to select a new username and password for your GST portal.

 Enter the username and password of your choice and click Submit. You will
get a success message informing about the update of your new username
and password. You will then be redirected to the login screen where you
will again have to login using your new username and password.
 The next step is to register for GST and receive a provisional GST number.

 As soon as you log in, you will see the dashboard of the GST portal.
 In the dashboard, click Provisional enrolment option present on the top left
corner.
 Under provisional enrolment, you will have seven sections which you will
have to fill before submitting your application. They are:

o Business details
o Details about proprietor and partner
o Authorized signatory
o Principal place of business
o Additional place of business
o Goods and services
o Bank accounts

 Under each section you will be asked to fill a form and upload the relevant
document(s). For example, while filling the Business Details section, you will
be asked to upload the proof of constitution of business i.e. proof for
registering your business. Similarly, you will be asked for an address proof
for your business while filling the Principal Place of Business section. So,
 keep a digital copy of all your necessary documents ready before filling up
the applications. This will save you a lot of time.
 After filling up all the seven sections, you will have to verify your details
using Digital Signature Certificate (DSC) or E-signature. Enrolment for GST
is not complete without the E-signature.
 Upon digitally signing the application, you will receive an acknowledgement
email in your registered email address.

 If all the submitted documents are correct, the application would be

processed within 3 working days and a provisional registration certificate
will be issued to you. The provisional certificate is valid for 6 months and
can be used until you receive the GSTIN.

Registration process for new applicants

GST registration for new applicants is open from June 25, 2017 and will
stay open for the next three months.

To apply for a new GSTIN, please follow the steps mentioned below:

 Go to www.gst.gov.in
 Click the Services dropdown from the homepage, and navigate
to Registration > New Registration

 Select the New Registration option, in the screen that follows.

 Fill the details of the form and an OTP will be sent to your email address
and mobile number. Please note that OTPs sent to your email address and
mobile number are different.
 Enter the OTPs and click Proceed.
 You will be taken inside the portal where you will be asked to fill other
details such as your company name, authorized signatory, PAN information
etc.
 You will also be asked to upload digital copies of your PAN and company
registration document, etc.
 Once you complete the form, you will be sent a success message and
reference number to your email address and mobile number.
 A provisional GSTIN will be sent to you in a couple of weeks.

GSTIN (GST Identification Number)

GSTIN is a 15-digit identification number issued by the tax department
upon successful processing of your application.

Decoding the GSTIN will give us the following information:

 The first two digits represent the state code.

 The next ten digits represent the PAN number of the business owner.
 The next two digits represent the entity code of the PAN holder in a state.
 The fifteenth digit is the checksum digit.

Checking the status of your Application

You can track the status of your GST application by following the steps
mentioned below:
 Log on to www.gst.gov.in** and scroll down to the bottom of the page.
 Under Important Links, click Check Registration Status

 In the screen that follows, you can check the status of your application by
entering either your registration number, provisional ID, or your PAN
number.

• What is an e-way bill?

• What are the contents of an e-way bill?
• When is an e-way bill generated?
• Who should generate an e-way bill?
• How is an e-way bill generated?
• Validity of an e-way bill
• Documents to be carried by the person in
charge of transportation
• Exemptions
• Verification of documents and supplies
 • What are the penalties associated with the e-
way bill?
What is an e-way bill?
An e-way bill is a permit needed for inter-state and intra-state transportation
of goods worth more than Rs. 50,000. It contains details of the goods, the
consignor, the recipient and the transporter. It can be electronically
generated through the GSTN.

The e-way bill has been made mandatory for inter-state supplies from April
1, 2018 and for intra-state supplies from April 25, 2018 in certain states
(Arunachal Pradesh, Madhya Pradesh, Meghalaya, Sikkim, and
Puducherry).

The following updates have been made for a few states:

Delhi
 As of 16th of June, 2018, e-Way bills are only required for transporting
goods worth more than Rs. 1 lakh, within Delhi, i.e. intra-state movement.

 An e-Way bill isn’t required for movement of goods that involve registered
sellers and unregistered customers, within the state of Delhi.

West Bengal
 As of 6th June, 2018, e-Way bill is required to be generated only when
transporting goods worth more than Rs. 1 lakh, within the state of West
Bengal.

Tamil Nadu
 As of 2nd June, 2018, e-Way bill is required to be generated only when
transporting goods worth more than Rs. 1 lakh, within the state of Tamil
Nadu.

What are the contents of an e-way bill?

An e-way bill has two main components:

 Part A contains the following:

o GSTIN of the recipient

o Place of delivery (PIN Code)
o Invoice/Challan number and the date of issue
o Value of goods
o HSN code
o Transport document number (Goods Receipt Number /Railway Receipt
Number/Airway Bill Number/Bill of Lading Number)
o Reasons for transportation

 Part B contains the details of the transporter (example: their vehicle

number)

When is an e-way bill generated?

An e-way bill must be generated before the goods are shipped and it
should include details of the goods, their consignor, recipient and
transporter.

An e-way bill is generated for:

 Supply of goods
 Non-supply transactions like export/import, return of goods, job work, line
sales, sale on approval basis, semi or completely knocked down supply,
 supply of goods for exhibition or fair, and goods used for personal
consumption.

Who should generate an e-way bill?

 Every registered person who may be a consignor, consignee, recipient or
transporter should generate an e-way bill, if the transportation is being
done through their own or hired means of transport (air/rail/road).

 An unregistered person who is supplying to a registered recipient. Here, the

recipient will need to follow the compliance procedure since the supplier is
not registered.

 The transporter should generate an e-way bill, if both the consignor and the
consignee fail to generate an e-way bill despite having handed over the
goods to the transporter, for conveyance by road.

Note: The consignor can authorize the transporter/courier agency/e-

commerce operator to fill PART-A of the e-way bill on their behalf.
An e-way bill should be generated irrespective of the value of the
consignment (even if the value is lesser than Rs.50,000) in two cases:

 When the goods are supplied by a principal to a job worker in an inter-state

transaction.

 During an inter-state transfer of handicraft goods by a supplier who has

been exempted from GST registration.

How is an e-way bill generated?

The bill can be issued from the GSTN. Learn how to create an e-way bill
through the GSTN. Once it’s generated, the supplier, the recipient, and the
driver involved in transportation of the goods will be provided an e-way bill
number (EBN). Alternatively, the supplier can generate and cancel e-way
bills through SMS, if they do not have access to internet. However, to
initiate this process, the supplier should first log on to the GSTN portal, and
choose the ‘For SMS’ option from the ‘Registration’ tab on the dashboard.
The details of the generated e-way bill will be made available on the
common portal for the recipient. The recipient of the supply should either
accept or reject it on the portal. If the recipient doesn’t take any action
within 72 hours, the e-way bill is considered ‘accepted’.

Form GST EWB-01

 Note: The Part-B details need not be updated if the distance covered by the
vehicle is 50km or lesser. In this case, the e-way bill can be generated with
only the Part-A details.
Validity of an e-way bill
The validity of an e-way bill is based on the distance travelled.

If the distance is less than 200 km then the validity period will be one day
before the relevant date. For every 200 km thereafter, the validity extends
by a day from the relevant date.

Documents to be carried by the person in charge of

transportation of the goods:
 The invoice, bill of supply, or delivery challan.
 For transportation by road, the transporter should carry their transporter
ID.
 For transportation by rail/air/ship, the transporter should carry their
transporter ID, transport document number along with the date of
transportation.
 A copy of the e-way bill or the e-way bill number (EBN). The transporter
can either carry a physical paper copy of the EBN or map it to a Radio
Frequency Identification Device (RFID).

Exemptions:
An e-way bill is not required in the following cases:

 If the value of the consignment is less than Rs. 50,000.

 When the goods being shipped are exempt from GST.

Note: If the consignment contains both - exempt and taxable goods, the
value of exempt goods is excluded from the value of the consignment.
 If goods are transported by non-motorized conveyances (example:
railways). Though an e-way bill is not required, an invoice or a challan
should be carried during the transportation of goods.
 If goods are transported from a port, airport, air cargo complex or land
customs station to an inland container depot or a container freight station
for clearance by the Customs Department.
 Transport of goods as specified in Annexure to Rule 138(14) of the CGST
Rules, 2017.

Verification of documents and supplies

 An authorized officer may halt the vehicle to check the e-way bill or see the
e-way bill number on paper.
 Verification of the e-way bill may be done through a Radio Frequency
Identification Device (RFID), if the e-way bill has been mapped with RFID.

What are the penalties associated with the e-way

bill?
If a consignment is found without an e-way bill, the concerned person
should pay a penalty of Rs. 10,000 or the equivalent amount of tax evaded
(the greater of the two).

If you’re a business owner, transition to GST from the previous tax regime
would bring a lot of questions to your mind. This section talks about a few
important things that you should know while moving to the GST regime.

• What is ITC?

• Transfer of Input Tax Credit.

• Credit for Excise and Additional Custom Duty.

o TRAN-1 Form.

o TRAN-2 Form.
• Transition provisions for Composition Scheme.

o What is composition scheme?

o Transition from normal tax scheme to the Composition scheme in GST

o Transition from composition scheme to normal tax scheme

Transfer of Input Tax Credit

According to the Model GST law, a taxable person can take credit for the
tax amount, which they paid while purchasing capital goods for the
company. Any input tax credit from the previous tax regime could be
passed on as input tax credit in GST while migrating to the GST regime.

Let’s take an example: July 1, 2017 is the appointed day for the GST
rollout. As a business owner, you must make sure that you’ve made a
complete list of all the stock as on June 30, 2017 and claim input tax credit
while filing returns for the period ending June 30, 2017. It will be eligible for
input tax credit under GST only if all such goods and services mentioned in
the return are eligible for such credit under the new GST law.

You should do this within 60 days from the appointed day (in this case, July
1, 2017).

To move your input tax credit into the GST system, you will have to log into
the GST portal and submit either one of the electronic forms; the TRAN-
 1 or the TRAN-2 as applicable, mentioning the amount of tax or duty, you
wish to claim as credit.
The application should also furnish the following information:

 The name of the supplier, serial number and date of issue of the invoice by
the supplier or any document on the basis of which credit of input tax was
admissible under the existing law.
 The description, quantity and value of the goods or services.
 The amount of eligible taxes and duties or, as the case may be, the value
added tax [or entry tax] charged by the supplier in respect of the goods or
services.
 The date on which the receipt of goods or services is entered in the books
of account of the recipient.

The submitted application will be processed by the tax department. Upon

approval, the amount of credit allowed will be credited to the electronic
credit ledger of the applicant under the form GST PMT-2 on the Common
Portal.
The transfer of credit to GST is similar for businesses who were previously
registered under Excise duty, VAT, or Service tax.

TRAN-1 Form
This form has to be filed by every registered taxpayer who wants to claim
ITC on the closing stock that he/she has, as on July 1, 2017. This form will
contain the following details:

 GSTIN of the taxpayer.

 Legal name of the registered person.
 Trade name, if any.
 A declaration on whether all tax returns under existing law are filed on time
(before the appointed date).
 Amount of ITC carried forward according to the returns filed under the pre-
GST regime. This includes CENVAT credits, credits due to statutory forms
(C form, F form, H/I form) and state or UT tax credits.
 Details of capital goods for which ITC has not been availed (both under
central and state laws)
 Details of inputs held in stock. This includes items for which the ITC has
been claimed under the pre-GST regime, with or without invoice details.
 Details of cenvat credits transfered by a person having a centralised
registration under the pre-GST regime.
 Details of goods sent for job work and held by the jobworker on behalf of
the registered taxpayer.
 Details of goods held as an agent on behalf of another taxpayer.
 Details of credits availed under section 142 (11 ©).
 Details of goods sent on approval basis, six months prior to the appointed
day.
 Finally, like all forms, it will contain a declaration of truth that needs to be
duly signed by the registered taxpayer.
TRAN-2 Form
This form is to be filed by every person who had never registered under
any tax authority during the pre-GST regime, be it under Central Excise act,
service tax laws, or the state VAT, but is in possession of stock on 1st July,
2017 for which they may or may not have any track of the taxes paid on
imputs.

Credit for Excise and Additional Custom Duty

As per the previous tax regime, a manufacturing business was charged

excise duty on manufacture of goods. Also, they weren’t given credit for
excise duty and additional custom duty.
Now, with the new tax regime GST is charged on the supply of goods and
not during the manufacture. Now, businesses transitioning from Excise to
GST will be taxed again during the supply of goods, and also won’t be
eligible for credit. This may affect the profit margin of such businesses.

Transitional provisions for such cases is not clearly defined yet.

Transition provisions for Composition Scheme

What is Composition Scheme?
A significant number of small businesses still sell products without invoices.
They don’t keep track of their accounts using a ledger, or have an
accountant to help them manage their accounts. Such businesses can use
the Composition scheme to stay compliant with GST.

In the composition scheme, small businesses who have an aggregate

turnover of less than 75 lakh rupees per annum agree to pay a percentage
of their annual turnover as tax to government instead of accounting for
each and every transaction.

Transition from previous tax regime to Composition

scheme in GST
When a business decides to move from the previous tax regime to
composition scheme in GST, it must pay an amount equal to its available
input credit. The input credit will be calculated based on the amount of input
materials held in stock, as well as semi-finished and finished goods.
Transition from Composition scheme to Normal Tax
Scheme
On the other hand, when a business that has been paying composition tax
wishes to switch to the normal tax scheme, it becomes eligible to take a tax
credit. The credit will be calculated based on input held in stock as well as
semi-finished and finished goods.

• What is supply under GST?

• What are the three components of supply under GST?

• Types of supply under GST

• Supplies where there are more than one goods and/or services involved

What does supply mean under GST?

In the GST system, a taxable event is called a Supply. For an event to be

considered as a supply by the government, it should have the following
characteristics.

• Supply should be of goods or services.

• Supply should be taxable.

• Supply should be made by a taxable person.

• Supply should be made within a taxable territory.

• Supply should be made in exchange for cash or reward

(consideration).
• Supply should be made in the course of business or in the interest of
growing a business.

Let’s look at how each of these characteristics is defined in the GST Act.

Supply of goods or services

When a transaction takes place, if there is a transfer of title of goods, then it
is considered as supply of goods. For example, when you buy a pen from a
retailer, the ownership of the pen is transferred from the retailer to you, the
customer.

When there is a transfer of right in goods without transfer of title, it is

considered as supply of service. For example, if you are availing
transportation services, then the right of using the service is transferred to
you, while the ownership still stays with the transportation company.

Supply should be taxable

Supply of goods or services can either be taxable or tax-exempt. Taxable
supplies are goods and services that attract GST. Tax-exempt supplies
include supply of goods or services that belong to a specific category
mentioned in the GST Act.

Supply should be made by a taxable person

A taxable person is defined as a person who is registered under the GST,
or is a liable to register, or a person who has voluntarily registered.
 Supply between two non-taxable people will not be considered as supply
under GST.

If a person supplies goods or services in different states or has multiple

business verticals, then they are required to register separately for each
state or vertical. Each of these registered entities will be considered as a
taxable person.

Supply should be made within a taxable territory

Taxable territory means any place in India except the State of Jammu and
Kashmir.

Supply should be made in exchange for

consideration
Consideration can be defined as a barter of goods or services, or payment
made for a supply in money, or in kind. A prepayment or deposit toward a
supply is also as accepted as a consideration by the government.

According to CGST Act, the following activities that will be treated as

supply even if it is made without consideration.

 When a business permanently transfers or disposes its assets for which

input tax credits have been availed.
 Supply made between two related or separate persons for business
purposes.
 Supply of goods by an agent on behalf of the supplier or supply received by
an agent on behalf of a customer.
 When a taxable person imports services from a related person, or from his
or her own business outside of India for business purposes.
 Supply should be made in the course of business or
in the interest of growing a business
GST is applicable only on business transactions. Hence, for a transaction
to be a considered as supply under GST, it has to be made for business
purposes.

If supplies are made for personal purposes, it will not be considered as a

supply under GST.

What are the three components of supply under GST?

A supply under GST has three attributes that are used to calculate the tax
owed for that transaction: place, value, and time.

 Place of Supply - This component determines whether a transaction

is an intra-state supply, an inter-state supply, or an external trade,
which determines the type of GST that will be associated with it.
 Value of Supply - This component decides the taxable value of
supply made, and thus the amount of tax that needs to be paid for it.
 Time of Supply - This component determines when the associated
taxes and GST returns are due.

Types of supply under GST

Under the GST, supply of goods and/or services can be classified into two
major categories - Taxable supplies and Non-taxable supplies. These are
further classified into different types based on the nature of supply made.

 Taxable Supplies - These refer to supply of goods and/or services that are
taxable under GST. Registered taxpayers can claim refunds on tax paid
during purchases (in other words, they are eligible for ITC).
o Regular taxable supplies - Whenever you supply an item or service which
attract a GST rate greater than 0% within India, it becomes a
regular taxable supply.
 o Nil-rated supplies - Whenever you supply goods which attract 0% GST by
default, such supplies are known as nil rated supplies.
o Zero-rated supplies - Whenever you make exports, supplies to a SEZ unit
or deemed exports, the GST associated with the items or services
involved becomes 0 even though the same would attract a GST rate
greater than 0% when sold within India. Such supplies are deemed as
zero rated supplies
 Non Taxable Supplies
o Exempt Supplies - The supply of exempt goods or services do not attract
GST even though they are within the purview of GST. That said, the
registered taxpayer cannot claim ITC on inputs used for making such
supplies.
o Non-GST supplies - This refers to supply of items which are outside the
purview of the GST law.
Note: The following transactions must neither be considered as a supply of
goods nor services: Supply of goods from one non-taxable territory to
another without entering India. Supply of warehoused goods to a buyer
before they pass clearance for home consumption. Supply of goods related
to high sea sales.

Supplies where there are more than one goods and/or

services involved

Any supply of goods and/or services made under GST will be classified as
either wholly goods or wholly services depending on the primary item or
service supplied according to Schedule II of the GST law. This also applies
to those cases where the supply made involves both goods and services.

While goods and services can be supplied individually, one can also supply
them as a bundle or a set using one of the following methods of supply:

 If the goods and services supplied together are a natural bundle (wherever
it makes more sense to provide them together than to sell them
individually), then it is known as a composite supply.
 If the goods and services supplied together are not naturally bundled
together (they are not interdependent and can also be sold separately),
then such a supply is known as mixed supply.

GST returns - types and due dates

As a business owner and a taxpayer, you must declare the income that you
receive from carrying out business transactions in your GST return.

Latest updates as per the 42nd GST Council meeting

 Starting 1 January 2021, small taxpayers with aggregate turnover of less

than 5 crores can file quarterly GSTR 1 and GSTR 3B. The due date for
filing the GSTR 1 return will be the 13th of the consecutive month in the
succeeding quarter. However, the taxpayers can continue to submit
invoices every month.

What is GST return?

GST return is a document that will contain all the details of your sales,
purchases, tax collected on sales (output tax), and tax paid on purchases
(input tax). Once you file GST returns, you will need to pay the resulting tax
liability (money that you owe the government).
Who should file GST return?
All business owners and dealers who have registered under the GST
system must file GST returns according to the nature of their business or
transactions.

• Regular Businesses.

• Businesses registered under the Composition Scheme.

• Other types of business owners and dealers.

• Amendments.

• Auto-drafted Returns.

• Tax Notice.

Types of GST returns

Regular Businesses

GST
Purpose
Returns

Tax return for outward supplies made (contains the details of

interstate as well as intrastate B2B and B2C sales including
GSTR1
purchases under reverse charge and inter state stock
transfers made during the tax period).

Monthly return for inward supplies received (contains tax

payer info, period of return and final invoice-level purchase
GSTR2
information related to the tax period, listed separately for
goods and services).
 GST
Purpose
Returns

GSTR 2B is an auto-drafted document that will act as an

Input Tax Credit (ITC) statement for taxpayers. The GST
GSTR2B Council states that GSTR 2B will help in cutting down the
time taken to file returns, minimise errors, ease reconciliation
and simplify compliance.

Consolidated monthly tax return (contains The taxpayer’s

basic information (name, GSTIN, etc), period to which the
return pertains, turnover details, final aggregate-level inward
GSTR3 and outward supply details, tax liability under CGST, SGST,
IGST, and additional tax (+1% tax), details about your ITC,
cash, and liability ledgers, details of other payments such as
interests, penalties, and fees).

Temporary consolidated summary return of inward and

outward supplies that the Government of India has
introduced as a relaxation for businesses that have recently
GSTR3B
transitioned to GST. Hence, in the months of July and August
2017, the tax payments will be based on a simple return
called the GSTR-3B instead.

Annual consolidated tax return (It contains the taxpayer’s

GSTR9 income and expenditure in detail. These are then regrouped
according to the monthly returns filed by the tax payer).

Audit form that needs to be filed by every taxpayer who is

GSTR9C liable to get their annual reports audited when their
aggregate turnover exceeds Rs. 2 crores in a financial year.

Businesses registered under the Composition Scheme

GST
Purpose
Returns

GSTR4 Quarterly return for compounding vendors (It contains the

total value of supply made during the period covered by the
 GST
Purpose
Returns

return, along with the details of the tax paid at the

compounding rate (not more than 1% of aggregate turnover)
for the period along with invoice-wise details for inward
supplies if they are either imports or purchased from normal
taxpayers).

Annual composition return form that has to be filed by every

GSTR9A
taxpayer who is enrolled in the composition scheme.

Other types of business owners and dealers

GST
Purpose
Returns

Variable return for Non-resident foreign taxpayers (It contains

the details of the taxpayer, period of return and invoice details
GSTR5 of all goods and services sold and purchased (this also
includes imports) by the tax payer on Indian soil for the
registered period/month).

Monthly return for ISDs (This return contains the details of the
taxpayer’s basic information (name, GSTIN, etc), period to
which the return pertains, invoice-level supply details from the
GSTR-1 of counter-parties, invoice details, including the
GSTR6
GSTIN of the taxpayer receiving the credit, separate ISD
ledger containing the opening ITC balance for the period,
credit for ITC services received, debit for ITC reversed or
distributed, and closing balance).

Monthly return for TDS transactions (This return contains the

GSTR7 taxpayer’s basic information (name, GSTIN, etc), period to
which the return pertains, supplier’s GSTIN, invoices against
which the tax has been deducted (categorized under the
 GST
Purpose
Returns

major tax heads - SGST, CGST, and IGST), and details of

any other payments such as interests and penalties).

Monthly return for ecommerce operators (It contains the

taxpayer’s basic information (name, GSTIN, etc), the period
to which the return pertains, details of supplies made to
customers through the e-commerce portal by both registered
GSTR8
taxable persons and unregistered persons, customers’ basic
information (whether or not they are registered taxpayers),
the amount of tax collected at source, tax payable, and tax
paid).

Annual return form that has to be filed by ecommerce

GSTR9B
operators who collect tax at the source.

Final GST return before cancelling GST registration (This final

return is to be filed when terminating business activities
GSTR10 permanently/cancelling GST registration. It will contain the
details of all supplies, liabilities, tax collected, tax payable,
etc).

Variable tax return for taxpayers with UIN (It contains the
details of purchases made by foreign embassies and
GSTR11
diplomatic missions for self consumption during a particular
month).

Amendments

GST
Purpose
Return

An amendment form that is used to correct the GSTR-1

document including any mismatches between the GSTR-1 of
GSTR1A
a taxpayer and the GSTR-2 of his/her customers. This can be
filed between 15th and 17th of the following month.
 Auto-drafted Returns

GST
Purpose
Returns

An auto drafted tax return for purchases and inward supplies

made by a taxpayer that is automatically compiled by the
GSTR2A
GSTN based on the information present within the GSTR-1
of his/her suppliers.

Quarterly purchase-related tax return for composition

dealers. It’s automatically generated by the GSTN portal
GSTR4A
based on the information furnished in the GSTR-1, GSTR-5,
and GSTR-7 of your suppliers.

Tax Notice

GST
Purpose
Return

Tax notice issued by the tax authority to a defaulter who has

GSTR3A
failed to file monthly GST returns on time.

Latest Updates as per the 31st GST meeting

 During the 31st GST meeting, the GST Council decided to institute a new
return filing system to help ease the burden of filing returns for taxpayers.
In an attempt to help taxpayers switch to this new filing system, the GST
Council has initiated a transition plan.

 As of May 2019, a prototype of the offline tool used to file returns was
shared on the online portal. The offline tool shares the same look and feel
as the online portal.
 The new returns have 5 main components: one main return and four
annexures (Form GST ANX-1, Form GST ANX-2, Form GST ANX-1A, and
PMT-08).

 From July 2019, taxpayers will be allowed to upload their invoices using the
offline tool for Form GST ANX-1 on a trial basis. They will also be able to
view and download their invoices for inward supplies using the Form GST
ANX-2 offline tool on a trial basis. From August 2019, taxpayers can import
their purchase register using the offline tool and match it with their
downloaded inward supply invoices to find mismatches.

 The new annexures ANX-1 and ANX-2, will be made available for trial
between the months of July and September, 2019. During this time,
taxpayers must continue to file their outward supply details in Form GSTR-
1 and their returns in Form GSTR-3B.

 From October of 2019, Form GSTR-1 will be replaced with Form GST
ANX-1. This will be made compulsory for large taxpayers (those with an
aggregate annual turnover in the previous financial year of more than Rs. 5
crore) in October 2019, and for small taxpayers (those with an aggregate
annual turnover in the previous financial year of up to Rs. 5 crore) in
January 2020. Both large and small taxpayers may begin uploading
invoices and other documents in Form GST ANX-1 on a continuous basis
from October 2019. This is not the case for Form GST ANX-2, however, as
this form can only be viewed during this period.

 For the months of October and November 2019, large taxpayers are to
continue filing Form GSTR-3B on a monthly basis. They must file their first
Form GSTR-1 for the month of December 2019, by the 20th of January,
 2020. Small taxpayers, on the other hand, must stop filing Form GSTR-3B
and start filing Form GST PMT-08 in October 2019. They can start filing
their first Form GSTR-1 for the quarter of October to December 2019, from
the 20th of January, 2020.

 Starting from January 2020, all taxpayers must begin filing Form GST RET-
01. Form GSTR-3B must be completely phased out.

New GST returns

In an effort to simplify the filing process and increase tax compliance, the
GST Council has approved a new return filing process. This filing process
is expected to come into effect in six months. Here’s what you need to
know about the new GST returns.

• New Returns For Registered Taxpayers

• New Returns For Composition Dealers

• New Returns For Small Taxpayers

• Uploading Invoices

• Invoicing for B2B Dealers

• Process of Tax Recovery

• Information in the Return

• How will the transition to the new filing work?

 • Sahaj return

• Sugam return

• Normal return

New Returns For Registered Taxpayers

 All GST registered taxpayers except ISD providers, small taxpayers,
composition dealers are expected to file one monthly returns.

 The return will have two tables; one for reporting outward supplies and the
other for availing input tax credit based on the invoices that the supplier
uploads.

 The taxpayer can create a profile according to the nature of supplies made
and received. The fields that the taxpayer would need to fill in would be
displayed according to the nature of his profile.

 The date of filing will depend on the business’ turnover, in order to ease the
load on the IT system.

 Nil return filers or taxpayers who have made no purchase or sale will be
able to file returns by sending an SMS.
 New Returns For Composition Dealers
 Composition dealers and dealers who have zero transactions can file
quarterly returns.

New Returns For Small Taxpayers

 Small taxpayers who have an annual turnover less than Rs.5 Crores have
the option to do quarterly filing. This option will be available to small traders
who make B2C or B2B and B2C supplies. The quarterly return will be
similar to the main return with monthly payment facility.

 The new returns for small taxpayers is called Sahaj and Sugam. This return
will require fewer details than the regular return.

 The GST Council has introduced 3 new returns, Sahaj, Sugam, and the
Normal return in an attempt to simplify the process of filing returns.

Uploading Invoices
 The seller can upload invoices at any time of the month in order to allow
the buyer to avail input tax credit.

 The buyer can view and lock the invoices as and when the seller uploads
them.

 The buyer is not required to upload their purchase invoice.

 Sellers who have defaulted on tax payments above a certain amount will be
prevented from uploading invoices to avail input tax credit.

Invoicing for B2B Dealers

 If you are a B2B dealer, you are required to fill out invoice-wise details of
your supply while filing. Based on these and the invoices uploaded by your
seller, the system will calculated your tax liability automatically.

 Invoices related to B2B transactions need to have a 4-digit or higher HSN

number.

Process of Tax Recovery

 In cases where the seller has not paid their tax due, the buyer’s input tax
credit will not be reversed automatically.

 In exceptional cases like a missing dealer, closure of a supplier’s business,

or suppliers having inadequate assets, the revenue tax authority will decide
whether to reverse the buyer’s credits or not.

Information in the Return

 The recovery or reversal of input tax credit will be done after the tax
authority issues a notice and order. The entire process will be automated
and handled online.
How will the transition to the new filing work?
The transition will be done in three stages:

Stage I
In this stage, there will be no change in the current filing system. The filing
of GSTR3B and GSTR1 will continue. GSTR2 and GSTR3 will remain
suspended. This stage will last until the new filing software is ready to use,
which is expected to occur in six months.

Stage II
When the new filing system is ready, it will allow you to upload invoice-wise
data and also claim input tax credit on a self-declaration basis similar to
the current GSTR3B filing process. During this stage, you will be able to
see the credits available to you based on the invoices that your sellers
have uploaded and the provisional credits that you can claim. This stage
will last for six months to allow everyone to adjust to the new system.

Stage III
Six months after Stage II begins, provisional credit will end. The input tax
credit that you can avail will then be limited to the invoices uploaded by
your sellers.

With the rollout of GST in July, one of the most important concepts that
every tax payer needs to understand is input tax credit(ITC). Before diving
into details, let’s have a thorough understanding of input tax credit.
 What is Input Tax Credit?
GST taxation structure allows businesses across India to claim input credit
for the tax they paid while purchasing capital goods for their company.

Latest updates
 Starting January 2021, the provisional credit is restricted to 5 per cent.

 According to Rule 86B under GST, if the value of taxable supply exceeds
50 lakhs in a month, then the registered taxpayer cannot use the available
credit amount to discharge his output tax if it exceeds 99% of tax liability.

 ITC will be auto populated from GSTR 1 through GSTR 2B. This will be
effective for monthly filers from 1 January, 2020 and for quarterly filers from
1 April, 2020.

 In order to enable auto population of tax liability and ITC, Form GSTR 1
has to be mandatorily filed before GSTR 3B.

How does it work?

At each stage of the supply chain, the buyer gets credit for the input tax
paid, and they can use it to offset the GST that needs to be paid to the
Centre and State governments. To understand this concept better, let’s
take the example of a company called MK Kitchen Knives which sells
custom-made kitchen knives.

 They purchase steel and plastic worth Rs.2000 from a vendor at a GST
rate of 12.5%. Thus, the input tax they pay is Rs.250.
 The company now sells the manufactured knives for Rs.4000, plus an
output tax of 12.5%, making the total selling price Rs.4500 (Rs.4000 +
Rs.500).
 Thus, the tax that MK Kitchen Knives owes to the Government = Output tax -
Input tax credit = Rs.500 - Rs.250 = Rs.250
Eligibility criteria
Businesses need to adhere to the following rules to claim input tax credit.

 The buyer must possess a valid tax invoice, debit note, or other prescribed
document issued by a registered dealer.
 The buyer must have received the good or service. If the product is being
received in instalments, then the credit can be claimed against the tax
invoice for the last instalment.
 The supplier must have paid the tax due on the buyer’s purchases to the
government either in cash or by claiming input tax credit.
 Finally, the supplier must have filed GST returns. The most unique and
unprecedented change GST brings to this entire tax setup is that you are
allowed to claim input tax credit on your purchases only if your supplier is
GST compliant and has paid the tax they had collected from you.
 To claim ITC, the buyer should pay the supplier for the supplies received
(inclusive of tax) within 180 days from the date of issuing the invoice. If the
buyer fails to do so, the amount of credit they would have availed, will be
added to their output tax liability. Once the buyer pays the amount due to
the supplier by the taxpayer, they will be able to avail ITC. In case of partial
payment, credits proportionate to the payment can be availed.
 Motor vehicles used to transport people (seating capacity of more than
thirteen including driver), vessels and aircrafts, and money for or by a
banking company or financial institution.
 General insurance, repair and maintenance with respect to motor vehicles,
vessels and aircrafts.
 Goods or services that are mandatory for an employer to provide to their
employees, under any law.

Ineligible to claim ITC

ITC cannot be claimed in the following cases:

 Purchase of capital goods used for non-business purposes.

 Composition dealers
 Purchase of capital goods used for manufacturing exempted goods
 Blocked credits [Section17 (5)]

Documents required
The documents required to avail ITC are:

 Invoice issued by the supplier

 Invoice issued similar to Bill of Supply, in cases where the total amount is
less than Rs. 200 or reverse charge mechanism is applicable
Debit note issued by the supplier (if any)
Bill of Entry or similar documents issued by the Customs Department
 Bill of Supply issued by the supplier
 Document issued by ISD, could be an invoice or credit note

Time limits for claiming Input Tax Credit

ITC can only be claimed for tax invoices and debit notes which are less
than a year old. In any other case, the last date to claim ITC is the earlier of
the following:

 Before filing valid GST returns for month of September following the end of
the financial year applicable to that invoice. For example, for an invoice
issued on June 26, 2018, ITC should be claimed by September 2018.
 Before filing a relevant annual return

Claiming and reconciling ITC

The GST comprises of 3 types of taxes: CGST, SGST and IGST.

CGST (Central GST) - Collected by the Central Government for

transactions within one state.
SGST (State GST) - Collected by the State Governments for transactions
within one state.
 IGST (Integrated GST) - Single levy collected by the Central Government
for transactions between states.
The three tax credits can be used to offset one another.
 CGST credit can be used to offset CGST liability; if there is credit left over,
it can be applied toward IGST liability next.
 SGST credit can be used to offset SGST liability; if there is credit left over,
it can be applied toward IGST liability next.
 IGST credit can be used to offset IGST liability; if there is credit left over, it
can be applied toward CGST liability first and then toward SGST liability.

Reconciliation of these credits is done by matching your transactions with

those of your customers or vendors. This will help the Tax Department
verify the transactions from both ends. The GST Identification Number
(GSTIN) is used to match transactions together.

Let us now use an example to understand how this reconciliation process

works:

Suppose MK Kitchen Knives (recipient) purchased 10 tons of steel from GH

Steelware Inc. (supplier) which is also registered for GST. The two
companies will reconcile their transactions, and the recipient will claim the
input tax credit, as follows:

 GH Steelware Inc. will file the GSTR-1 report (Details of outward

supply).
 The details furnished in the GSTR-1 will be automatically fetched in
the GSTR-2A (Details of inward supply) for MK Kitchen Knives,
where they will be able to see the transaction details.
  MK Kitchen Knives will then check the records and make any
necessary modifications/additions. Once the changes are made, this
information will be automatically pulled when they will file the GSTR-
2. The correct input credits will then be credited to their electronic
credit ledger.
 GH Steelware Inc can then use the GSTR-1A form to view and
accept the changes that MK Kitchen Knives made in the GSTR-2.
 Finally, once GH Steelware Inc. has filed the monthly returns (GSTR-3),
MK Kitchen Knives will be able to avail the input tax credit and apply it to
future output tax liabilities.

In cases where the tax on purchases is higher than the tax on sales, the
extra input credit can be carried forward or claim a refund.
Existing CENVAT) credits can be converted to GST input tax credits as
well.
Adjusting ITC for inter-state and intra-state
transactions
Let’s now look at how Input Tax Credit can be used to offset output tax
liabilities for both inter-state and intra-state transactions.

Let’s say MK Kitchen Knives is based in Tamil Nadu. The details of their
last four intra-state transactions are tabulated below, including the tax
liability.
 In the above example, MK Kitchen Knives has a total input tax credit
of Rs.80,000 (Rs.50,000 + Rs.30,000) from both CGST and SGST.
 Based on the tax offsetting rules under GST, they use the CGST input tax
credit worth Rs.80,000 to offset the CGST liability of Rs.87,000 (Rs.47,000 +
Rs.40,000). Once this adjustment is completed, the remaining CGST
liability is Rs.7,000 (Rs.87,000 - Rs.80,000).
 Similarly, they use the SGST input tax credit worth Rs.80,000 to offset the
SGST liability of Rs.87,000 (Rs.47,000 + Rs.40,000). Upon completion, the
SGST liability amounts to Rs.7,000 (Rs.87,000 - Rs.80,000).
 The total tax liability is thus Rs. 14,000 (Rs.7,000 + Rs.7,000).
If there is any CGST credit left over after setting off the CGST tax liability, it
cannot be used to offset SGST. Thus, the balance of the CGST credit will
be carried over to the next tax period. The same applies to unused SGST
credit; it can only be carried forward, not applied to CGST liability.

Consider another set of transactions for MK Kitchen Knives. This time, it’s a
mix of inter-state and intra-state transactions.
 As illustrated above, MK Kitchen Knives has an IGST credit
of Rs.40,000 (Rs.10,000 + Rs.10,000 + Rs. 20,000), and tax liabilities
of IGST 20,000, CGST 10,000 and SGST 15,000.
 According to the tax offsetting rules under GST, IGST credit needs to be
used first to offset IGST tax liability. Whatever IGST credit is left can be
used against CGST liability, then against SGST liability (in that order).
 MK Kitchen Knives first uses their IGST credit to offset their IGST liability
of Rs.20,000.
 The remaining credit of Rs.20,000 (Rs. 40,000 - Rs.20,000) is used to offset
the CGST liability of Rs.10,000.
 After this adjustment, the remaining IGST credit of Rs.10,000 can be used to
offset part of the SGST liability worth Rs.15,000.
 Once the entire IGST credit has been utilized, we’re left with a SGST
liability of Rs.5,000 (Rs.15,000 - Rs.10,000).
Availing ITC
Here are a few specific cases in which ITC can be availed:

 When goods/services are used partly for business purposes and partly for
other purposes, then ITC can be availed only on the inputs used for
business purposes.
 When goods/services are used partly for furtherance of taxable supplies
and partly for exempt supplies, ITC can be availed only on the inputs used
for making taxable, and zero rated supplies.
 A taxpayer switching from composition scheme to the normal scheme, can
avail ITC on the following:
 o Purchases held as stocks (this could include semi-finished/finished
goods)
o Capital goods held till their last day as a composition dealer
 When an exempt supply of goods and/or services become taxable, the
supplier can claim ITC for the goods held as stock (this could include semi-
finished/finished goods) relatable to exempt supplies. The supplier will also
be liable to claim credit on capital goods used exclusively for the exempt
supply.
 When vehicles that have a seating capacity of more than thirteen (including
the driver), used to transport people.
 When vehicles are used to transport vessels and aircrafts.
 When vehicles are used to transport money for a financial institution.
 When certain services such as, insurance, repair or maintenance of
vehicles, vessels and aircrafts for which credit is applicable.
 For goods or services that an employer must provide their employees,
under any law.

NOTE: In the last two cases, ITC should be availed within 1 year from the
date of issue of invoice by the supplier.
ITC Utilization
As per Rule 88A from a notification released by the CBIC (Central Board of
Indirect Taxes and Customs), taxpayers must first use the ITC available
from integrated tax to pay off all of their applicable integrated tax. Any ITC
remaining after this, can then be used towards paying CGST, SGST, and
UGST. This rule is only applicable if the ITC availed from integrated tax is
used completely, before the ITC availed from CGST, SGST, and UGST are
used.

Here is how ITC was utilized before Rule 88A was implemented.
Here is how ITC is utilized after the implementation of Rule 88A.
 As India is gearing up to make the switch to GST, there are lots of new
rules and regulations to follow when it comes to invoicing. The Government
has specified the tax elements that are mandatory to each invoice, and it is
absolutely essential that business owners across India update their
invoicing processes accordingly.

Types of invoices
There are two types of invoice in the GST regime:

 A tax invoice is issued when a registered dealer supplies taxable goods or

services. It is mandatory for claiming input tax credit.
 A bill of supply is issued when a registered dealer supplies GST-exempt
goods or services, or for any sale where the supplier is registered under the
composition scheme.
GST-specific elements that must be added to a tax
invoice
Based on the rules prescribed by the Government, here is what a sample
tax invoice will look like in the GST
 regime:

Let’s now look at all these details individually and see what they mean:

 The type of invoice - It needs to show whether the issued document is a tax
invoice, a debit note or a credit note.
 Name, address and GSTIN of the supplier - These details are crucial for
matching your outward supplies with your customers’ inward supplies in the
GSTN portal.
 Invoice serial number - The invoice serial number must be part of a
consecutive series containing only alphabets and/or numerals. It must also
be unique for a financial year.
 Name, address and GSTIN of the recipient - Just like the supplier details, the
recipient details will be used for matching and reconciling the transactions.
 UIN - This ID is assigned to agencies of the United Nations, consulates or
embassies of foreign countries, and certain other persons. Not all invoices
will include a UIN.
 Destination state name - Invoices for inter-state transactions must specify
the destination state.
 HSN or SAC code - If you’re supplying goods, you must include the HSN
code (unless your annual turnover is less than Rs. 1.5 crores). If you’re
supplying services, you must include the SAC code.
 Tax amount charged - The CGST, SGST, and IGST tax rates, along with
the corresponding tax amounts, must be shown in separate columns.
 Reverse charge statement - The invoice must state whether reverse charge
is applicable to the transaction or not.
 Signature - The supplier or other authorized person must sign either in
physical form or digitally.
Note: If the recipient is not registered under the GST regime, and the value
of supply is more than Rs.50,000, the invoice should contain the following
details:
 Name and address of the recipient
 Shipping address
 State name and State code

Time limits for issuing tax invoices

Supply of goods

If the supply involves the transfer of finished goods from one place to
another, then the invoice must be issued at or before the time
of transfer. So if a dealer is purchasing pens from a supplier, the supplier
needs to issue an invoice at or before the time the pens leave the
warehouse. If the supply does not involve the transfer of finished
goods, the supplier can issue the invoice when the goods are delivered to
the recipient. If a dealer is purchasing a custom partition wall for his/her
office that will be completely assembled on-site, the invoice must be issued
at the time the completed wall is made available at the recipient’s office.
 Supply of services

In most cases, the tax invoice must be issued within 30 days from the date
of supply. If the supplier is a bank or an insurer, then the invoice must be
issued within 45 days from the date of supply.

Number of tax invoice copies that are to be issued

For the supply of goods, the following copies are required:

 The original invoice is issued to the recipient, and is marked as ‘Original for
recipient’.
 A duplicate copy is issued to the transporter of goods, and is marked as
‘Duplicate for transporter’. This duplicate needs to be shown by the
transporters whenever they’re asked for evidence, unless the supplier has
obtained an invoice reference number. (The supplier can obtain an invoice
reference number by uploading their tax invoice in the GST portal. It is valid
for 30 days from the date of upload.)
 A triplicate copy is retained by the supplier for their own use, and is
marked as ‘Triplicate for supplier’.
For the supply of services, the following copies are required:

 The original invoice is issued to the recipient, and is marked as ‘Original for
recipient’.
 A duplicate copy is retained by the supplier for their own use, and is
marked as ‘Duplicate for supplier’.
Revising an already-issued tax invoice
When an invoice is already issued, but there are changes to be made in the
taxable value of the product or the tax amount, one of the following needs
to be issued:

 Supplementary invoice/Debit note - If there is an increase in the price of an

already supplied item, then the supplier needs to issue a debit note to the
recipient. The debit note needs to be issued within 30 days of making such
a price revision.
 Credit note - Similarly, if there is a decrease in the price, the supplier must
issue a credit note needs to the recipient. The credit note must be issued
on or before 30th September of the next financial year, or before the filing
of the annual GST return, whichever is earlier.
The format of these documents is exactly the same as that of a tax invoice.
The only difference is that it needs to be explicitly specified at the top
whether the document is an invoice, a debit note, or a credit note.

Latest Updates
 As per the amended CGST rule, all taxpayers will continue to pay monthly
dues through a simple challan. As per new provisions, a nil FORM CMP-08
can be filed via SMS.

 What is the composition scheme?

 Features of composition scheme
 Who can opt for composition scheme?
 How do I sign up for the composition scheme?
 Documents required in Composition Scheme
 Converting a Normal Dealer to a Composition Dealer
 What are the returns associated with Composition Scheme?
 Advantages of the composition scheme
 What are the downsides of this scheme?
 What happens when a business opts out of the composition scheme?
 Disqualification and Penalty

What is the composition scheme?

 It is a scheme under GST for small businesses belonging to the
unorganized sector with aggregate turnover less than Rs. 1.5 crore (less
than 75 lakhs for North Eastern states). The business owners registered
under this scheme are called compounding vendors/dealers, and these
vendors pay tax at a lesser rate. Also, they have fewer returns to file
compared to normal taxpayers.

As per the 32nd GST Council Meeting, a new composition scheme is being
put together. This is meant for those suppliers who are either providing
independent services or a combination of both goods and services, and
have a turnover of up to Rs 50 lakhs in the preceding financial year. The
tax rate for this scheme is at 6% (3% CGST + 3% SGST).
Features of Composition Scheme:
Here are some important features of composition scheme:

 Manufacturers of goods, dealers, and restaurant owners (applicable only to

restaurants that do not serve alcohol) can opt for composition scheme.

 A compounding dealer cannot collect tax or claim input tax credit for the
supplies delivered to their clients. Due to this reason, bills of supply are
issued for sales transactions, instead of tax invoices.

 Business owners registered under this scheme pay tax at a much lesser
rate compared to normal business owners. The tax paid by the
compounding vendors will be equal to at least 1% of the business’s annual
turnover.
 The composition rates are different based on the type of business.

o For traders and manufacturers it’s 1%.

o For restaurant sector it’s 5%.

 The registered business owner under Composition Scheme will have to file
one return each quarter by 18th of the month following that quarter.

 If a business owner has 5 different businesses under the same PAN, he

must register all the businesses under Composition Scheme or opt out of
the scheme.

 For transactions under the reverse charge mechanism, the compounding

dealers will be taxed at the normal GST rate.

 A compounding dealer is permitted to supply services, excluding restaurant

services, that are worth under 10% of the turnover for the preceding
financial year or Rs. 5 lakhs, whichever is higher.

Eligibility criteria
As of the 1st of April, 2019, the limit to be eligible for the composition
scheme has been increased to Rs 1.5 crore (less than 75 lakhs for North
Eastern states) and the business is required to sell goods only within their
own state.

The following individuals cannot opt for Composition Scheme:

 Suppliers who provide services
 Supplier who supply exempt goods

 Suppliers involved in inter-state transactions

 E-commerce operators/aggregators

 Casual taxable person or a non-resident taxable person

 Manufacturers of ice-cream, pan masala and tobacco & tobacco substitute

How do I sign up for the Composition Scheme?

When a business owner wishes to apply for composition scheme, they
should file the application with the tax department at the beginning of the
financial year (1st April). The sign-up process is PAN-based, so business
owners are advised to keep their PAN cards ready. The registration
process is divided into 3 categories:

For businesses registered under pre-GST regime:

 If the business is already registered under the previous tax regime, the
business owner will be provided with a provisional certificate during their
GST registration.

 They should file FORM GST CMP-01 through the GSTN portal on or before
30 days from July 1, 2017. If the filing is delayed, the business owner will
not be allowed to collect tax or issue bills of supply.

 Once this is done, the business owner should furnish details regarding the
stock held by them before they opted for composition scheme in FORM
GST CMP-03 within 60 days. Details regarding purchases made from
unregistered vendors should also be included in this form. After
filing FORM GST CMP-03, the business owner should not collect any tax
from the appointed day but, they can issue bill of supply for supplies made
after that day.

For businesses that are registering for the first time

In this case, the business owner should file FORM GST REG-01. In Part B
of the form, under Section 10, select “Registration as composite business
owner” option .

For businesses registered under GST

When a business transitions from the normal tax scheme to the
composition scheme, it must pay an amount equal to its available input tax
credit. The input tax credit will be calculated based on the amount of input
materials, semi-finished and finished goods held in stock.

To register for composition scheme, the business owner should file FORM
GST CMP-02, and furnish details of ITC related to inputs, semi-
finished/finished goods (within 60 days from the beginning of the financial
year) held in stock, in FORM GST ITC-3.

Documents required in Composition Scheme

Bill of supply: Composition vendors cannot collect tax, therefore cannot
claim ITC on the supplies made by them. That’s why a bill of supply
is issued instead of a tax invoice.
What are the returns associated with Composition
Scheme?
 Businesses that have registered for the composition scheme will
need to file GSTR-4, an annual return specifically designed for them.
 The return for a particular quarter should be filed on or before the
18th of the month following that quarter. Example, if you are filing the
GSTR-4 for the July-September quarter, you have to file it before the
18th of October.
 Besides GSTR-4, businesses should also furnish GSTR-9A (consolidated
annual return for compounding vendors) as part of the compliance process.

 Additionally, taxpayers that are listed under the Composition Scheme also
need to file a new form, GST CMP-8, a simplified statement for payment of
self-assessed tax, by the 18th of the month after the end of a quarter. This
means that business would have to file the returns for the April-June
quarter in July. Taxpayers can fill in details of their inward and outward
supplies applicable to reverse-charge, tax and interest payable, and tax
and interest paid. The due date for the period of April-June 2019 has been
extended to the 31st July 2019.

What happens when a business opts out of the

composition scheme?
A business owner availing composition scheme can opt out of the scheme,
and instead choose the normal tax scheme with benefit of ITC. The credit
will be calculated based on input, semi-finished and finished goods held in
stock.

Note: You can switch between a normal vendor or compounding vendor

only once during a particular financial year.
Disqualification and Penalty
If tax authorities believe that a business is wrongfully enrolled or not
eligible, they may disqualify the business from the composition scheme or
demand a penalty equal to the tax amount owed. In case of late filing of
GSTR-4, the business owner will be fined Rs. 100 per day to a maximum
amount of Rs. 5,000/-. Also, not furnishing returns for 3 consecutive tax
periods may result in cancellation of registration by the tax authorities.

• What is reverse charge?

• When is reverse charge applicable?
• Requirements under the reverse charge mechanism
• Time of supply for goods and services under reverse charge
• ITC on reverse charge
• Self-invoicing
• Exemptions under reverse charge

What is reverse charge?

Typically, taxes are collected by business owners on behalf of the
customers, which is then paid to the government. Reverse charge is when
the buyer pays the tax directly to the government.

The responsibility of reverse charge can either rest completely on the buyer
or in certain special cases, it can be partially/jointly borne both by the buyer
and the seller.
 Note: Reverse charge applicable on supplies made by unregistered
vendors to their registered customers has been suspended till June 30,
2018.
When is reverse charge applicable?
Reverse charge is applicable on both, goods and services. The following
are the situations in which reverse charge will be applicable:

 A registered business owner receiving goods or services from an

unregistered vendor. Example: A registered wholesaler or a retailer buying
farm produce (for the purpose of selling it to other vendors/consumers)
from unregistered vendors, has to pay the GST associated with the
purchase to the government.
 Services offered by an aggregator or e-commerce operator.
 The following list of goods and services specified by Central Board of
Excise and Customs (CBEC).

Recipient of
Tariff item,
supply (the
sub- Description
person who
S.No heading, of supply of Supplier of goods
pays tax
heading or Goods
on reverse
chapter
charge)

Cashew
nuts, not Registered
1. 0801 Agriculturist
shelled or taxable person.
peeled

Bidi wrapper
Registered
2. 1404 90 10 leaves Agriculturist
taxable person.
(tendu)

Tobacco Registered
3. 2401 Agriculturist
leaves taxable person.

Any person who

5004 to Registered
4. Silk yarn manufactures silk
5006 taxable person.
yarn from raw silk
 Recipient of
Tariff item,
supply (the
sub- Description
person who
S.No heading, of supply of Supplier of goods
pays tax
heading or Goods
on reverse
chapter
charge)

or silk worm
cocoons.

State Government, Lottery

Supply of
5. — Union Territory or distributor or
lottery
any local authority. selling agent.
 List of services applicable to be taxable under reverse charge from the 14th
GST council meet. Here the receiver of such services is liable to pay GST
on reverse charge.

Recipient of supply
(the person who
S.No Service Service provider
pays GST on
reverse charge)

Services provided by a
Supplier in non- Registered
1. person in a non-taxable
taxable territory taxpayer
territory

Transport of goods by Goods Transport Registered

2.
road Agency taxpayer

Legal firm or Registered

3. Legal services
advocate taxpayer

Services provided by Registered

4. Arbitral Tribunal
an arbitral tribunal taxpayer

Individual or Corporate or
5. Sponsorship services
business partnership firms

Services provided by
government or local
authority
Government/Local Registered
6. (excludes renting of
authority taxpayer
immovable property,
postal services,
insurance and agency
 Recipient of supply
(the person who
S.No Service Service provider
pays GST on
reverse charge)

services, services
provided to an aircraft
or ship in an Indian air
port or port and
transport of
goods/passengers)

Services offered by a
The company to
director or corporate Director or
7. which they offer
body to their own corporate body
their services
company

Services of an
8. Insurance agent Insurance company
insurance agent

Banking
Recovery agent
9. Recovery agent company/Financial
services
firm

Transport of goods by a
vessel from overseas to Transporting
10. Importer of goods
a customs office in agency
India

Transfer/Giving
permission to
Artist, musician or
copyrighted content (as Publishing
11. any creative
according to section company
person
13(1) of copyright act
1957)

Taxi services through

E-commerce
12. an e-commerce Taxi driver
operator
operator

Requirements under the reverse charge mechanism

 The recipient of goods/services must be registered under GST.
 Every registered business owner should maintain accurate records of
supplies that would incur reverse charge.
 Wherever reverse charge applies, the supplier must clearly mention on the
invoice that the tax payable for that specific transaction is through reverse
charge. Similarly, the same should be mentioned on receipt vouchers and
refunds vouchers.
 Advance paid on supplies that incur reverse charge is taxable under GST.
The taxpayer making advance payment should pay tax on reverse charge
basis.

Time of supply for goods and services under

reverse charge
for a transaction is the date on which taxes are levied upon the
supplies. The time of supply under reverse charge will be the earliest of the
following dates:
 date of receipt of goods or
 date of payment or
 the date immediately after 30 days from the invoice date for goods and 60
days from the invoice date for services.

Note: If none of the above applies, then it can also be the date of entry in
the books of the receiver.
Examples for determining time of supply for goods and services:
Goods:
Let’s say, you purchase goods from an unregistered vendor on October 28,
2017. The goods are delivered to your workplace on October 29, 2017.
Now, you complete your payment on November 1, 2017. So, you have to
pay GST under reverse charge, as the supplier is unregistered.

In this case, time of supply would be 29 October 2017 (Date of receipt of

goods).

Services:
For example, if you are the owner of a goods transport agency, and you
provide transportation services to a client. Since reverse charge is
applicable on goods transportation service, the client (recipient) has to pay
reverse charge. Now, you’ve provided the services on 28 October 2017,
and issued an invoice the very same day, and the client pays you on 5
November 2017.

In this case, the time of supply would be 5 November 2017.

If the client fails to make the reverse charge payment to you within 60 days,
the time of supply will be 60 days from the date of invoice, that is the 28th
of December.

ITC on reverse charge

Input tax credit can be claimed by the buyer as long as they use the goods
and services they bought on reverse charge basis for business
purposes only.

Also, a supplier cannot claim ITC on the tax paid on goods/services that
were used to make supplies that incur reverse charge.

Self-invoicing
Under reverse charge mechanism, self-invoicing is done when a business
owner purchases supply from an unregistered supplier. This is done, as the
unregistered supplier cannot issue an invoice.

Exemptions under reverse charge

 A registered business owner is exempted from paying GST through reverse
charge on intra-state purchases from unregistered sellers, as long as the
total value of the supply received per day is less than or equal to Rs.5,000/-

Under the GST regime, multiple tax levies have been replaced by a single
GST tax. This has led to major changes in the accounts the business
owners must maintain. Previously, you would have maintained individual
accounts for VAT, excise, CST and other service taxes with separate input,
output, and credit entries for each. Now, the new tax regime means a
completely new list of accounts, featuring the components of GST.

Prerequisites for maintaining records and accounts

 The maintenance of records and accounts is handled by:
o The business owner or the operator of the premises used for storage of
goods: They should maintain accounts regarding the time period for which
the goods were in the storage location (example: warehouse). This
includes details regarding dispatch, movement, receipt, and disposal of
goods.
o The transporter of goods and services: They should maintain records of the
goods transported, delivered, and the goods stored in transit by them.
 Under the GST regime, all the records and accounts should be maintained
at the principal place of business, i.e, the primary place where the business
takes place.
 If more than one place of business is mentioned in the registration
certificate, records and accounts related to each place of business should
be kept at the respective workplaces.
 If a business owner chooses to maintain the records/accounts in electronic
format, they should make sure they have a proper back-up of the
records/accounts. Also, they should be feasible to produce the
records/accounts when demanded.

 When the turnover of a business exceeds the prescribed financial limit, the
business is liable for an audit.
 Records and accounts to be maintained under the
GST regime
Every business owner registered under GST must maintain the following
records:

 Production or manufacture of goods - Details of all the goods manufactured

or produced by the taxpayer.
 Details of purchases - Details of all the inward supplies purchased by the
taxpayer, including the name and address of the supplier.
 Details of sales - Details of all the outward supplies sold by the taxpayer,
including the name and address of the buyer.
 Stock of goods - The current amount of goods available in
the taxpayer’s inventory.
 Input Tax Credit availed - The value of Input Tax Credit availed during the
purchase of raw materials or other capital goods.
 Output tax payable - The output tax payable on the sale of finished goods
or services.
 Output tax paid - The GST paid either by availing of input tax credit or in
cash.
 Any other records if required - Any additional record required by the
Government for a particular business type, such as:
o Goods or services imported or exported during a tax period.

o Inward and outward supplies that attract the payment of tax on reverse
charge, along with relevant documents such as invoices, bills of supply,
delivery challans, credit notes, debit notes, receipt vouchers, payment
vouchers, refund vouchers and e-way bills.

Accounts to be maintained under the GST regime

 Every business owner should maintain the following accounts:

 Account of stock with respect to the goods purchased and sold. This
account should contain all the related details like opening balance, amount
of goods received and supplied, goods lost/stolen/destroyed/written off as
gift or free samples, balance stock of raw materials, finished goods, scrap,
and wastage.
 Account of advances received and paid, along with adjustments if any.
 Account of tax amounts, which contains details of tax payable, tax collected
and paid, input tax, input tax credit claimed (along with tax invoice as
proof), credit note, debit note, and delivery challan (issued or received
during a particular tax period).
 Supplier details containing the name and address of the supplier from
whom taxable goods/services, have been received.
 Recipient details containing the name and address of the buyer to whom
goods/services were supplied.
 Address of the warehouse/garage or any other premises where the goods
are stored. This includes goods stored during transit, along with the details
of the stock stored at that instance.
 Monthly production accounts, where the quantitative details of the following
are furnished:
o raw materials used for manufacture
o goods manufactured
o waste and by-products produced in the process
 Accounts containing the quantitative details of goods used in the provision
of services, details of input services utilised and the services supplied

Note: In addition to this, the Commissioner of GST has the authority to

apprise business owners to maintain additional accounts/documents for a
specific reason or to maintain the accounts in a prescribed manner.
Input and Output in GST
The biggest change GST brings to the table is the concept of Input Tax
Credit. The tax you pay on purchasing your inputs (goods or services used
for furthering your business) can be used to offset the tax you will pay on
 your outputs (finished products or services). Another change is
GST’s dual-component structure. The tax for intrastate transactions is
divided into CGST (Central GST) that must be paid to the Center and
SGST (State GST) that must be paid to the State. If it’s an interstate
transaction, a single integrated tax called IGST (Integrated GST) has to be
paid to the Center. Because of these regulations, the following accounts
must be maintained by a registered business owner:
 Input CGST A/c
 Output CGST A/c
 Input SGST A/c
 Output SGST A/c
 Input IGST A/c
 Output IGST A/c

Electronic cash ledger

GST also introduces a concept called the electronic ledgers. Once you
register for GST in the Government portal, you will get access to 3 types of
electronic ledgers:

 The E-cash ledger serves as an e-wallet and can be used by the taxpayer to
make any payments, such as tax, interest, and penalties. If the taxpayer
does not have enough money in this ledger for a particular payment, they
can simply recharge it online.
 The E-credit ledger will contain the input tax credit fetched from
the taxpayer’s monthly returns. The credit will be of three types: CGST,
SGST and IGST. This amount can only be used to pay tax and cannot be
used for any other purpose.
 The E-liability ledger will contain the taxpayer’s total tax liability for a
particular month. By default, this will be shown on the taxpayer’s GST
dashboard.
How to pass your accounting entries
Let’s now consider a sample transaction and observe how the entries need
to be made in the taxpayer’s different accounts.

Intrastate transaction

Let’s say Raj purchased pens worth Rs. 50,000 from a GST-registered
dealer within his state. The tax applicable to his purchase is 18%, which is
broken down into CGST (9%) and SGST (9%). Thus, he pays a total tax of
Rs. 9,000 (18% of Rs. 50,000) which is split equally between CGST
(Rs. 4,500) and SGST (Rs. 4,500). He can later claim this amount as input
tax credit when he has to offset his output tax liabilities.

He now sells the pens to another GST-registered dealer for Rs. 80,000. His
output tax liability will be 18% of Rs. 80,000, for a total of Rs. 14,400 that is
split up equally between output CGST and output SGST.
Let’s assume he paid a legal consultation fee of Rs. 2,500 to his CA by
cheque. The tax he pays on this will include CGST of Rs. 225 (9% of
2,500) and SGST of Rs. 225 (9% of 2,500).

He also paid Rs. 5,000 to purchase the boxes and other materials used for
storing the pens. The same tax rates apply here, so he pays CGST of Rs.
450 (9% of 5,000) and SGST of Rs. 450 (9% of 5,000).
 Raj’s total tax liability
Let’s now observe how Raj’s total tax payable is calculated.

 Total input CGST = 4,500 + 225 + 450 = 5,175

 Total input SGST = 4,500 + 225 + 450 = 5,175
 Total output CGST = 7,200
 Total output SGST = 7,200
 Net CGST payable = Output CGST - Input CGST = 7,200 - 5,175 = 2,025
 Net SGST payable = Output SGST - Input SGST = 7,200 - 5,175 = 2,025

Total tax payable = 2,025 + 2,025 = 4,050

If Raj has any ITC left after paying his tax obligations, it will be carried over
to the next year.

Interstate transaction

Let’s say Raj purchased pens worth Rs. 15,000 from a GST-registered
dealer from outside his state. The tax rate on his purchase is 18%. Thus,
he pays an IGST of Rs. 2,700 (18% of 15,000), which he can later avail as
input credit.
He now sells some of his pens locally for Rs. 8,000. His output tax liability
will be 18% of Rs. 8,000, for a total of Rs.1,440 that is split up equally
between output CGST and output SGST.

He sells his remaining pens outside his state for Rs.10,000. The output tax
liability for these will be an IGST of 18% of Rs. 10,000, which equals Rs.
1,800.
 Let’s assume he paid a legal consultation fee of Rs. 2,000 locally to his CA
by cheque. The tax he pays on this will include CGST of Rs. 180 (9% of
2,000) and SGST of Rs. 180 (9% of 2,000).

Raj’s total tax liability

 Total input SGST = 180
 Total input IGST = 2,700
 Total output CGST = 720
 Total output SGST = 720
 Total output IGST = 1,800
 Net CGST payable = Output CGST - Input CGST = 720-180 = 540
 Net SGST payable = Output SGST - Input SGST = 720-180 = 540
 The IGST credit of Rs. 2,700 can be used to offset the IGST liability of
1,800, leaving Rs. 900 in credit.
 The remaining Rs. 900 will first be applied to the net CGST liability of 540,
leaving Rs. 360 in credit.
 The leftover Rs. 360 can be applied to the net SGST liability.
 After all of the credits have been used, the remaining output tax payable
equals the SGST liability minus the remaining IGST credit.

Remaining tax payable = 540 - 360 = 180

Retention period
The GST law dictates that every registered taxable person must maintain
their book of accounts for a period of at least 6 years from the last date of
filing of the relevant annual return. These records and documents should
be maintained at all the related business locations as mentioned in the
registration certificate.

Latest Update from CBIC as on December 2020

 Starting January 1, 2021, businesses having an aggregate turnover of
more than 50 lakhs will have to pay at least 1% GST liability in cash.

Every registered taxpayer should pay their taxes by 20th of a month. Let’s
take an example where a business is filing GST returns for May during the
month of June. In that case, it should file all the returns and make tax
payments by 20th of June.

If the taxpayer did not pay the tax due by 20th, an interest on the tax due
will be applied. Also, they cannot file the tax returns for the next reporting
period.
Managing ITC and GST payable
The GST portal has provided the following ledgers to facilitate and manage
GST payments.

Cash Ledger
All payments made by the taxpayer will be recorded under the cash ledger.
This includes tax payments, penalty, interest amount, etc.

ITC Ledger
This ledger holds a record of Input tax credit given to a taxpayer. The ITC is
credited after the validation of submitted transactions in the GSTR-2. The
ITC credited can only be adjusted with the GST payable and not with late
fee or penalty.

Tax Liability Ledger

The taxpayer would get all the information regarding GST payable, penalty,
late fee, etc.

Payment Options
GST portal has multiple options through which you can make tax
payments:

Over the Counter Payments

Over the counter (OTC) payments can be made if the GST payable is less
than Rs. 10,000. The amount can be paid by cash, cheque, or Demand
 Draft (DD). Amounts exceeding Rs.10,000 should be paid using one of the
below options.

Generating Challan
One way of paying taxes is by generating an electronic challan from the
GST portal. In order to do that, the taxpayer should deposit the amount in
the cash ledger of the GST portal. After adding money, they will have to
generate the challan by filling the form GST PMT-06. The challan
generated will be valid for a period of 15 days.

Making payment through cards/NEFT

Another mode is payment include performing online payment using:

 Credit and Debit Cards

 NEFT transfer
 RTGS

A Challan identification Number or CIN will be issued upon making the tax
payment. This will act as a reference number for the payment.
Offsetting ITC with GST Payable
If you’ve received input tax credit, you can offset it with the GST payable
and pay the balance amount to the tax department.

Refund under GST

Refund under GST can be claimed under following cases:

 Export of goods and services

 When you have unused input tax credit
 Excess payment made by mistake
 Refund of tax payments made by UN bodies, embassies, para-military
force canteens, etc.
 Credit accumulation due to output being tax exempt or nil-rated.

Refunds filed under any of the above cases will be calculated by the GST
portal for each type of tax: SGST, CGST, and IGST. If you’ve paid an
excess amount for GST, or wish to claim refund, you will have to fill out an
electronic form from the GST portal. The portal would verify the claim and
refund the excess amount. The processing time for the refund application
could range from two weeks to as long as sixty days.

Penalty
Tax defaulters will be subjected to warning, followed by a penalty. Penalties
under GST can be classified under two categories:

1. If a taxpayer has not paid GST or makes short payments, they will be
charged a penalty of 10% of the tax amount or a minimum of Rs. 10,000.

2. If a taxpayer is found of committing fraud or is evading taxation, they will be

charged a penalty amount of tax evaded/short deducted etc., i.e., 100%
penalty, or a minimum of Rs. 10,000.

Penalties in GST

The introduction of the GST regime has brought India simplified tax filing,
greater transparency, and less potential for tax evasion. Since the tax
return filing process has been moved online, business owners now have to
 upload invoices and other documents as proof of transactions. To ensure
that business owners are complying with the rules and regulations, the
Government has created a list of non-compliant activities that are likely to
invoke penalties. Let’s look at the various offenses and their
consequences:

1. Carrying out fraudulent activities

 Not obtaining necessary GST registration for the business.
 Providing false information during registration.
 Providing false information or documents to the CGST/SGST tax officials.
 Obtaining tax refunds of CGST/SGST through fraudulent means.

Consequence:

The offender will be fined Rs. 10,000 or the equivalent tax amount evaded.
Furnishing false information will lead to a fine of Rs. 10,000 for the first
offense, and continued offense will lead to fines of Rs. 100 per day, up to a
maximum of Rs. 25,000. Any person who helps the offender will be fined
Rs. 25,000.

2. Delayed filing of returns

 Failing to furnish GSTR1 monthly returns for outward supplies (sales),
which must be filed by registered suppliers before the 10th of the following
month.
 Failing to furnish GSTR2 monthly returns for inward supplies (purchases),
which must be filed by registered suppliers before the 15th of the following
month.
 Failing to furnish GSTR9 annual returns, which must be filed by every
registered person before 31st December of the following year.

Consequence:
 The offender will be fined Rs.100 per day per Act (Rs.100 for CGST and
Rs.100 for SGST), up to a maximum of Rs. 5,000. If the taxpayer fails to
furnish GSTR9, they will be fined Rs. 100 per day, up to a quarter of their
turnover within the state in question.

3. Not issuing accurate invoices

 Issuing incorrect or fraudulent invoices for the sale of goods or services.
 Supplying goods or services without issuing appropriate invoices.
 Misusing another taxable person’s ID number for the supply of goods or
services.
 Issuing an invoice without supplying goods or services.

Consequence:

The offender will be fined of Rs. 10,000 or the equivalent tax amount
evaded.

4. Supplying goods and services in contravention to

GST laws
 Transporting taxable goods without appropriate documents.
 Transporting taxable goods without GST registration, despite being eligible
for registration.
 Supplying or storing goods that are liable to confiscation, such as goods
that would breach taxation rules or result in tax evasion.

Consequence:

If the offender chooses to come forward voluntarily, they will be fined an

amount equivalent to the tax evaded. Otherwise, they will be fined 50% of
the value of the supply.
 5. Evading taxes on purpose
 Failing to remit collected taxes to the Government within 3 months of the
due date.
 Failing to deduct tax or deposit tax with the Government.
 Suppressing the turnover of goods/services to evade tax.
 Availing or utilizing full or partial ITC without proper sales receipt.

Consequence: The offender will pay a fine of Rs. 10,000 or the equivalent
tax amount evaded.

6. Participating in activities that involve

tampering/obstruction
 Tampering with or destroying legal documents or material evidence.
 Obstructing or preventing any tax official from discharging their duty.
 Tampering with goods after they have been confiscated or barred from
supply/transport.

Consequence:

These activities are judged very seriously. Offenders will be subjected to 6

months of imprisonment, plus a fine of an undisclosed amount.

7. Repeatedly making short payments

When the payment made is lesser than the legal requirement, it’s called
short payment. A taxpayer is said to have made ‘repeated short payments’
if they were involved in 3 short payments in 3 returns during 6 consecutive
tax periods.

Consequence:
 If a taxpayer is involved in this offense, they will be fined an amount of Rs.
10,000 or 10% of the short tax paid (whichever amount is higher).

Any other breach of law:

 Failing to maintain necessary books or documents.
 Failing to deduct TDS (Tax Deducted at Source) where applicable, or
deducting an amount less than the required amount.
 Failing to collect TCS (Tax Collected at Source) where applicable, or
collecting an amount less than the required amount.

Common penalty:
Any offense under GST for which a penalty is not specified will be fined an
amount up to Rs. 25,000. In case, the taxpayer is convicted for fraudulent
activities, then apart from the above penalties, the following will apply:

 When the tax amount involved is up to 50 lakhs, the person will have to
serve a jail term of 1 year and will be fined an amount equivalent to the tax
evaded.
 When the tax amount ranges between 50 lakhs to 100 lakhs, then the
person will have to serve a jail term of three years and pay the penalty.
 When the tax amount exceeds 100 lakhs, then jail term will be extended 5
years, along with the penalty.

What happens after a penalty is imposed on the

taxpayer?
 When a penalty is imposed, the offender will be sent a notice and given a
fair opportunity to be heard by the tax officials.
 The tax authorities will give the offender a summary of the reasons for the
penalty, and the legal provisions under which the penalty has been
imposed.
 If the offender chooses to voluntarily disclose infringement of law, the tax
authorities may use the disclosure as leverage to reduce the penalty.
 In the GST regime, taxpayers will not be penalized
for minor offenses, if:
 The amount involved in the offense is less than Rs. 5000.
 The offense was committed unknowingly and is not backed up with any sort
of malicious intent to evade taxes.
 The offense was committed due to lack of proper understanding of GST
laws.
 The offense is easily rectifiable, like an omission or an erroneous record in
a document.

Procedures in GST

While we’ve been bombarded with GST-related information in the last few
months, there hasn’t been much discussion regarding the audit and
assessment processes. These procedures are carried out when there’s a
mismatch between the tax owed by a taxpayer and the actual tax amount
they have paid. A lot goes into these procedures to maintain the
transparency of the tax system.

Audits

What is an audit?
An audit is a verification process used to validate a taxpayer’s financial
records and legal documents. Usually, audits are carried out to check the
accuracy of GST turnover declarations, tax payments, and refunds claimed.
They’re also used to check the returns filed by the taxpayer. Audits help
validate compliance ratings of businesses by assessing the degree of
compliance of their activities.

Threshold for an audit under GST

If a business’ turnover exceeds 1 crore in a fiscal year, the business owner
will be liable for an audit session conducted by a Chartered Accountant.

Requirements
Once the audit notice is sent, the taxpayer has to file GSTR-9B and upload
a few documents, including a reconciliation statement, an audited copy of
the annual accounts, and any other legal document requested in the audit
notice.

Auditing process
When the conditions for an audit are met, the Commissioner of
CGST/SGST will authorize a tax official to conduct the audit. The tax official
will send the taxpayer a notice 15 days before the start of the audit. The
audit itself takes place at the taxpayer’s place of business and will be
completed within three months of the date of the notice.

Special audit

When is a special audit needed?

The Assistant Commissioner can call for a special audit if the regular audit
reveals disparities in the taxpayer’s records. These disparities could include
 inaccurate tax declarations or incorrect credits availed. The special audit
process is carried out by a Chartered Accountant or Cost Accountant
nominated by the Commissioner.

Results of the auditing process

At the end of the prescribed audit period, the findings will be declared, and
the audit report will be submitted to the Assistant Commissioner. Findings
include any discrepancies in tax refunds, tax payments, or input tax credit
between the audited financial statement and the information furnished by
the taxpayer. After the findings are declared, the taxpayer will be given a
chance to be heard by the tax officials.

Provisions relevant to special audit:

The concerned taxpayer will be convicted under Section 73 (non-fraud
case) or Section 74 (fraud case), if they are found guilty of the following:

 Tax not paid

 Short payment of tax
 Incorrect tax refunds
 Improper availing or utilizing of ITC

Demand and recovery

The Income Tax Department uses these procedures when there’s a
mismatch between the tax owed by a taxpayer and the actual tax amount
they have paid. These actions start with a tax official sending a notice to
the taxpayer demanding payment of the taxes owed. This can happen in
the following cases:
 Unpaid or short paid tax or incorrect refund, where no fraudulent activities
are involved.
 Unpaid or short paid tax or incorrect refund that involves fraudulent
activities.
 Failure to deposit tax with the government, despite collecting the
appropriate amount.
 Making payments for SGST transactions where IGST had to be paid or vice
versa.

Note: If the amount demanded is not paid, the Income Tax department will
begin its recovery procedure.

Assessment

An assessment is a process used to calculate a taxpayer’s tax liability —

in other words, how much tax they should pay. Under GST, there are five
types of assessments:

1. Self assessment
Under GST, every registered taxpayer will assess the tax amount they
must pay and file their periodic returns on time.

2. Summary assessment
Summary assessment is carried out by a tax official, if they have a valid
reason to believe that the delay in assessment would adversely affect the
overall revenue, and they also possess evidence of the concerned
taxpayer’s tax liability.

If the order is found to be erroneous (within 30 days of receipt) by the Joint

Commissioner or the Assistant Commissioner, it can be withdrawn by
them.
 3. Provisional assessment
When the taxpayer is unable to accurately calculate their own tax rate, they
can opt for provisional assessment, where the tax official will calculate the
tax rate and notify the taxpayer of the result. The taxpayer can then pay
their taxes at the rate set by the tax official.
4. Scrutiny assessment
The tax officer can scrutinize a taxpayer’s returns and related information,
and seek explanation regarding any discrepancies. If the explanation is not
satisfactory, corrective measures such as an audit or a special audit will be
initiated.

5. Best judgement assessment

If scrutiny assessment fails, a tax official will assess the taxpayer’s records
using the available evidence. This is likely to happen when:

 The necessary documents, financial records, or returns are not furnished.

 The furnished documents or records are rejected by the tax official due to
inaccuracy.
 Any taxable person fails to pay taxes despite being eligible to pay taxes
under GST.

Advance ruling

What is advance ruling, under the GST regime?

 Under the GST regime, advance rules are clearly-written decisions
provided by the tax officials to clear up questions that taxpayers are likely
to have regarding the supply of goods and services.

Advance ruling can be sought in the following

cases:
 Classifying goods and/or services
 Applicability of a notification issued under GST
 Determining the time and value of a supply of goods and/or services
 Determining whether input tax credit is permissible
 Determining the liability to pay tax on any goods or services
 Possibility of the applicant being registered under GST
 Determining whether a particular activity will result in a supply of goods or
services

Process
The taxpayer should furnish an application form, along with the necessary
financial records, to the tax official. The tax official may accept or reject the
application, and their decision will be communicated to the registered
taxpayer within 90 days from the date of receipt of the application.