Cra UTE | INDEX Pern 1 | Introduction to Indirect Tax 02 3 2 | Various Articles of The Constitution of India 03 5 3 | Introduction to Goods & Services Tax 05 5 4 | Various Taxes Subsumed/ Not subsumed under ov 3 Gst: 5 | Dual GST Model in India: 08 1 Special Category States: 08 1 Common GST Portal / Goods & Service ~ oe 2 Network (GSTN) 8 | Credit system under Oual GST Ht of | 09 2 Credit Utilization av Total no. of Illustrations 22 Cera 1 | ICAI Material a 03.13/04.15/04.16/05.17/06.18/07.20 2 | Examination 1 | Q. 08.21/08.22 02 3_| RTP & MTP 1 | Q. 02.04/02.08 02 4 | Other O1 | Q. 01.01/01.02 /01.03/04.14/07.19 os Total No. of iilust. 22 CAVISHAL BHATTAD (© 09850851 ‘wwww.vsmartacademy.com ‘Smart AcademyDifferentiate between Direct and indirect taxes. Answer _ : Particulars Direct Taxes - Indirect Taxes ] Levied on _ | Itis levied on income earned by activities| It is levied on product or services conducted. Incidence _| itis borne directly by person paying tax | It is shifted to other person as the person of tax _| to Government. paying tax to Government collects the same from ultimate consumer. It is progressive in nature i.e. high rate of It is regressive in nature as all the consumers Nature | taxes for people with higher ability to pay. | equally bear the burden, irrespective of their ability to pay. _ When itis | tis paid after the income reaches in the It is paid before goods/ services reaches the paid? hands of tax payer. tax payer. Collection | Tax collection is difficult and it is on yearly Tax collection is relatively easier and collected basis. at the time of sale /purchase of goods or rendering of services. Examples | Eg. Income tax, wealth tax, etc. Eg.Custom Duty, GST, Excise Duty, Service tax, Sales tax, etc. CREAT) \ ” Explain the salient features of indirect taxes. Answer : . S.No] Feature Explanation 1 An important & major Indirect tax is major source of revenue for all Govts. in the world. ‘source of revenue In India, it contributes more than 50% of the total tax revenues of Central & State Governments. ee 2 |Tax on commodities & It is levied on commodities at the time of supply, manufacture or services purchase or sale or import/export thereof. Hence, it is also known as commodity taxation. It is also levied on provision of services. 3 | Shifting of burden Indirect tax paid by supplier is recovered from buyer by including the tax in the cost of commodity/ service & shifting tax burden in this way. ‘4 No perception of direct | Since, Indirect tax is generally inbuilt in the price of commodity/ ‘pinch service, most of the time tax payer pays the same without actually | knowing that he is paying tax to Government. 5 | Inflationary | Tax imposed causes an all-round price spiral. In short, indirect | taxation directly affects the prices of commodities & services & leads to inflationary trend. 6 | Wider tax base Majority of products or services are subject to indirect taxes with low thresholds. es | CA VISHAL BHATTAD {© 09850850800 www.vsmartacademy.com V’Smart Academy7 | Promotes social welfare | High taxes are imposed on consumption of harmful products/sin goods such as alcoholic products, tobacco products, etc. This not only checks their consumption but also enables the State to collect substantial revenue. 8 [Regressive in nature The rich & poor have to pay the same rate of indirect taxes. This further increases the income disparities between the rich and the poor. Discuss the deficiencies in the existing indirect taxes which led to the need for ushering into GST regime. Answer: Deficiencies in the erstwhile indirect tax regime:~ Feature Explanation 1| Double taxation Earlier some items were treated both as goods & Services that led to double taxation. 2) No set-off CENVAT & State level VAT were value added taxes but cross credit i.e. set-off of those was not possible as CENVAT was central levy & the other one was a State levy. 3 | Cascading of taxes CENVAT did not include value addition chain in distributive trade after the stage of production & in state level VAT also, CENVAT load on goods was not removed leading to cascading oftaxes. 4| Several taxes not For a single transaction, multiple taxes in multiple forms were required subsumed in VAT to be paid like Luxury Tax, Entertainment Tax, etc. which were not subsumed in VAT. 5 | Non-integration of VAT & VAT on goods was not integrated with service tax at the state level. Service Tax So, the cascading effect of service tax was not removed. 6 | Cascading nature of CST | CST was non-vatable (i.e. no credit was allowed) and an origin-based tax which had cascading effect. 7| High Compliance Cost _| Large number of taxes created high compliance cost for the taxpayers in form of more returns, payments, etc. Cae ane Write a short note on various Lists provided under Seventh Schedule to the Constitution of India. [caintermTP-Oct 21] Answer: nan Seventh Schedule to Article 246 of the Constitution contains three lists which enumerate the matters under which the Union & the State Governments have the authority to make laws as follows: List-1 (UNION {It contains the matters in respect of which the Parliament (Central Government) has 'LIST):= the exclusive right to make laws. List-I1 (STATE | It contains the matters in respect of which the State Government has the exclusive LIST):- right to make laws. List-111_ (CON~|It contains the matters in respect of which both the Central & State Governments \CURRENT LIST):-| have power to make laws. CA VISHAL BHATTAD (©) 09850850800 wwwvsmartacademy.com _W'Smart raionee Discuss Article 269A pertaining to levy and collection of GST on inter-State supply. (Study Mat) Answer: > As per Article 269A of the Constitution, GST on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the GST Council, > Here, supply of goods or services or both in the course of import into the territory of India shall be deemed to be supply of goods or services or both in the course of inter-State trade or commerce. > The amount so apportioned to a State shall not form part of the Consolidated Fund of India. Where an amount collected as IGST has been used for payment of SGST or vice versa, such amount shall not form part of the Consolidated Fund of india/ State respectively. This is to facilitate transfer of funds between the Centreand the States. > Parliament is empowered to formulate the principles for determining the place of supply, and when a supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. CCP 01.02.06.00 Why was the need to amend the Constitution of India before introducing the GST? (Study Mat) Answ > Earlier, the fiscal powers between the Centre and the States were clearly demarcated in the Constitution with almost no overlap between the respective domains. > The Centre had the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States had the powers to levy tax on the sale of goods. 2 In the case of inter-State sales, the Centre had the power to levy the Central Sales Tax, but the tax was collected and retained entirely by the States. 2 As for services, it was the Centre alone that was empowered to levy service tax. 2 Introduction of the GST necessitated the amendments in the Constit: ‘empower the Centre and the States to levy and collect this tax. > The Constitution of India was amended by the Constitution (1O1st Amendment) Act, 2016 for this purpose. Article 246A of the Constitution introduced thereby empowered the Centre and the States to simultaneously levy and collect the GST. CoS 0 Discuss Article 246A which grants the power to make laws with respect to Goods and Services Tax. (Study Mat) Answer: ‘ion so as to simultaneously DAs per Article 246A of the constitution, Parliament & the Legislature of every State, have power to make laws for GST imposed by the Union or by such State. 2 Parliament has exclusive power to make laws with respect to GST where the supply of goods or services or both takes place in the course of inter-State trade or commerce. > However, in respect to petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel, the aforesaid provisions shall apply from the date to be notified by the Government on the recommendations by the GST Council. Cee VISHAL BHATTAD 09850850800 www.vsmartacademy.com V’Smart AcademyWrite a short note on Goods and Services Tax (GST) Council. [ICAI RTP] 6 te Answer: 2 Article 279A of the Constitution empowers the President to constitute a joint forum of the Centre and States called GST Counci > Constitution of Council: > The Union Finance Minister is the Chairman of this Coun >Mi ers in charge of Finance/ Taxation or any other Minister nominated by each of the States & UTs with Legislatures are members of council. > The Union Minister of Statein charge of Revenue or Financeis also.a member of council. > Function of Council: To make recommendations to the Union and the States on important issues like taxrates, exemptions, threshold limits, dispute resolution, etc. The GST Council has decided the threshold exemption, composition threshold, GST rates, GST legislations including rules and notifications. Explain the concept & principle of GST? .(Study Mat) Answer: The Concept & Principles of GST are 1 Value Added Tax GST is a Broa ices at each stage of supply chain. 2 | Destination based tax [GST is the revenue of that state which has jurisdiction over the place of | | on consumption [consumption of goods &/or services which is also termed as place of supply. ‘Tax on business activity | GST is a tax on the consumption of products/ services from business sources, and not on personal/ hobby activities. inder: on value added to goods &/or 4 | Continuous Chain of It is available from producer's/service provider's point up to the retailer's/ tax Credits [consumelS evel thus taxing only the value added at each stage of supply chain. '5 | Burden borne by final |Only the final consumer bears the GST charged by the last supplier in supply consumer | chain as at all the previous stages- set off benefits are available to the suppliers. 6 | No cascading of taxes As GST is charged only on value added at each stage, there is no cascading |of taxes in this system & it avoids double taxation. List some of the benefits that GST may accrue to the economy. (Study Mat) Answer: GST may accrue following benefits to the economy: a) Creation of unified national market: GST aims to make India a common market with common tax rates and procedures and remove the economic barriers, thereby paving the way for an integrated economy at the national level. b) Boost to ‘Make in India’ initiative: GST may give a major boost to the ‘Make in India’ initiative of the Government of India by making goods and services produced in India competitive in the national as well as international market. This would make India a manufacturing hub. c) Boost to investments, exports and employment: > Under the GST regime, the principle of exporting only the cost of goods or services and not taxes is CA VISHAL BHATTAD 09850850800 www.vsmartacademy.com V'Smart Academy |being followed. 2 This may boost indian exports thereby improving the balance of payments position. Exporters are being facilitated by grant of provisional refund of 90% of their claims within 7 days of issue of acknowledgement of their application, thereby resulting in the easing of position with respect to cash flows. > With a boost in exports and manufacturing activity, more employment would be generated and GDP would increase. GST is a destination-based tax on consumption of goods or services or both. Discuss the validity of the statement. (Study Mat) Answer ‘2 The given statement.is valid. ‘> GSTisadestination-based tax on consumption of goods or services or both. ‘D GST is known as destination based tax since the GST is the revenue of that state which has jurisdiction over the place of consumption of goods &/or services which is also termed as place of supply. Under Goods and Services Tax (GST), only value addition is taxed, and burden of tax is to be borne by the final consumer. Examine the validity of the statement, (Study Mat) Answer :~ a ‘>The statementis correct, VY ‘2 GSTisadestination-based tax on consumption of goods and services. 2 It is levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. ‘> Thus, only value addition is taxed, and burden of taxis to be borne by the final consumer Explain with the help of examples how a particular transaction of goods and services is taxed simultaneously under Central GST (CGST) and State GST (SGST)? (Study Mat) Answer :~ ‘> The CGST and the SGST is levied simultaneously on every intra-State supply of goods/ services or both made by registered persons except the exempted goods & services as well as goods & services which are outside the purview of GST. ‘> Further, both are levied on the same price or transaction value. ‘> Example: Suppose that the rate of CGST & SGST is 10%. When a wholesaler of steel in Uttar Pradesh supplies steel bars and rods to a construction company whichis also located within the same State for ® 100, the dealer would charge CGST of 210 and SGST of 210 in addition to the basic price of the goods. The CGST component will go into a Central Government account while the SGST portion into the account of the concerned State Government (ie U.P.). He might not actually pay 220 (710 + @10) in cash as he would be entitled to set-off this liability against the CGST or SGST paid on his eligible purchases (inputs, input services and capital goods) assuming that all his purchases are intra-State. However, for paying CGST, he would be allowed to use only the o| CAVISHAL BHATTAD (© 09850850800 www.vsmartacademy.com V’Smart Academycredit of CGST paid on his purchases while for SGST he can utilize the credit of SGST alone. CGST credit cannot be used for payment of SGST and vice versa. a eke List the taxes which are subsumed in GST? What are the taxes that will continue post GST? Answer :- Central levies subsumed State levies subsumed Central Excise Duty & Additional Excise Duties Vat/ Sales Tax Excise Duty levied under Medicinal & Toilet Preparation Act Entertainment Tax (except those levied by local bodies) Service Tax Taxes on lottery, betting & gambling ACD (Additional custom duty) Entry Tax (All forms) & Purchase Tax Central Sales Tax Luxury Tax & Taxes on advertisements Central Surcharges & Cesses related to supply of goods & services State surcharges & Cesses related to supply of goods & services The taxes that will continue after GST are:~ a.Basic Customs Duty b.Export Duty ¢.Stamp Duties & Property Tax Electricity Duties e.Entertainment tax levied by local bodies f. Excise duty/ VAT/ CST on Alcohol for human consumption & Petroleum products. o Which are the commodities whieh have Geen kat tide the purview of GSTT Examine the status of taxation of such commodities after introduction of GST. (Study Mat) Answer :~ . ‘> Supplies of all goods &/or services are taxable under GST except alcoholic liquor for human consumption. > Supply of following would be taxable with effect from the date notified by Government on recommendations of the GST Council:~ a) petroleum crude, b) high speed diesel, c) motor spirit (petrol), d) natural gas & e) aviation turbine fuel. ‘> The taxation system (CST/VAT & central excise) still continues for said commodities. G Discuss the leviability of GST or otherwise on the following: 1) Alcoholic tiquor for human consumption 2) Petroleum crude, diesel, petrol, Aviation Turbine Fuel (ATF) and natural gas, 3) Tobacco 4) Opium, Indian hemp and other narcotic drugs and narcotics Answer :~ 1) Alcoholic liquor for human consumption: It is outside the realm of GST. The manufacture/ production of alcoholic liquor continues to be subjected to State excise duty and inter-State/intra-State sale of the CAVISHAL BHATTAD (© 09850850800 V'Smart Academy (Study Mat) www.vsmartacademy.comsameis subject to CST/VAT respectively. 2) Petroleum crude, diesel, petrol, Aviation Turbine Fuel (ATF) and natural gas: > At present, Petroleum crude, diesel, petrol, ATF and natural gas are not leviableto GST. > GST will be levied on these products from a date to be notified on the recommendations of the GST Council. > But, thereis a levy of:- a) Central excise duty on manufacture/ production of petroleum crude, diesel, petrol, ATF and natural gas & b) CST/ VAT on inter-State/intra-State sale of the same respectively. 3) Tobacco: Tobacco is subject to GST as well as central excise duty as it is within the purview of GST i.e. GSTis leviable on its’ supply & Union Government has also retained the power to levy excise duties on tobacco and tobacco products manufactured in India. 4) Opium, indian hemp and other narcotic drugs and narcotics: > Opium, Indian hemp and other narcotic drugs and narcotics are within the purview of GST, i.e. GST is leviable on them. ‘> However, State Governments have also retained the power to levy excise duties on such products ‘manufactured in india. > Resultantly Opium, Indian hemp and other narcotic drugs and narcotics are subject to GST as well as, State exciseduties. Adual GST has been implemented in India. Elaborate, (Study Mat) Answer :- Wi India adopted a Dual GST model in view of the federal structure of the country where GST is imposed concurrently by the Centre & States, i.e. they both simultaneously tax goods & services as under:~ > Centre has power to levy |GST on inter-: supplies of goods &/or services. > Central & States/UTs with state legislature simultaneously have power to levy CGST & SGST on Intra State supplies of goods &/or services. ‘> UTs without legislature have power to levy UTGST on Intra state supplies of goods &/or services. List the special category States as prescribed in Article 279A of the Constitution of India? Answer: There are 11 Special Category States for which special provisions are made under GST, namely, States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh & Uttarakhand. Whatis GSTN? Answer: > GSTN stands for Goods and Services Tax Network (GSTN). 2 It is a Special Purpose Vehicle that provide a shared IT infrastructure and services to Central and State CAVISHAL BHATTAD (© 09850850800 www.vsmartacademy.comGovernments, tax payers and other stakeholders for implementation of GST. tis anon-Government, private limited company formed u/s 8 of the Companies Act, 2013 (not for profit companies). Discuss the functions of Common GST portal/ GSTN? [study Mat] Answer:~ Common GST portal is a robust settlement mechanism amongst the States & the Centre as GST is a destination-based tax. It is a clearing house & it verifies the claims and inform the respective Governments totransferthe funds. Thus, Common GST Electronic Portal — www.gst.gov.in — is a website managed by Goods & Services Network (GSTN). It establishes a uniform interface for tax payer and a common and shared IT infrastructure between the Centre and States. The functions of Common GST portal/ GSTN include:~ 2 Facilitating registration > Forwarding the returns to Central & State authorities ‘2 Computation & settlement of GST ‘2 Matching of tax payment details with banking network 2 Providing various MIS reports to the Central & the State Governments based on the taxpayer return information oO ‘> Providing analysis of taxpayers’ profile ‘> Running the matching engine for matching, reversal & reclaim of input tax credit ‘> For furnishing E-Way Bill r ‘2 For generation of E-Invoice ee neal iran Bring out the salient features of cross utilization of Input Tax Credit (ITC) under GST law? [cA final Novi7] Answer Input Tax Credit (ITC) of GST, CGST and SGST/UTGSTis available throughout the supply chain but, 1. First use IGST credit to pay |GST. ‘2 remaining amount can be used to pay CGST & SGST/UTGST in any order and in any proportion. 2. Entire ITC of IGSTis to be fully utilised first before the ITC of CGST or SGST/UTGST can beutilized. 3. CGST Credit shall first be utilized for payment of CGST. 2 Remaining amount will be utilized for payment of |GST. 4. SGST /UTGST credit shall first be utilized for payment of SGST/UTGST. > Remaining amount will be utilized for payment of IGST, that too only when credit of CGST is not available for payment of GST. 5. CGST credit shall not be utilised to pay SGST/ UTGST. 6. SGST/ UTGST credit shall not be utilised to pay CGST. CAVISHAL BHATTAD (© 09850850800 www.vsmartacademy.com V'Smart Academy riCoAT EAT) Mr. Ajay, a registered supplier of goods, pays GST under regular scheme and provides the following information for the month of August 20XX: Particulars e | Inter-State taxable supply of goods 70,00,000 Video | Intra-State taxable supply of goods | 2,00,000 Intra-State purchase of taxable goods 5,00,000 He has the following Input tax credit at the beginning of August 20XX: | Nature cast T (ist _ Rate of CGST, SGST and IGST are 9%, 9% and 18% respectively. Both Inward and outward supplies are exclusive of taxes wherever applicable. All the conditions necessary for availing the ITC have been fulfilled. Compute the net GST payable by Mr. Ajay for the month of August 20XX. [cainter May18] Answer: Note 1: - Computation of total ITC Particulars IGST@ 18% |CGST@9% (SGST@9% Opening ITC 25,000 20,000 30,000 | Add: ITC on Intra-State purchases 7 45,000 45,000 of taxable goods valuing & 5,00,000 Wi Total ITC ‘| 25,000 65,000 75,000 Computation of Net GST payable by Mr. Ajay for the month of August, 20XX [S.No] Particulars -—«'| ‘Taxable | IGST@ | CGst@ | SGST@ Value @ | 18% % 9% F IE 1 | Intra-State taxable supply | 2,00,000 - 18,000 | 18,000 of goods 2 | Inter-State taxable supply | 10,00,000 | 1,80,000 - - of goods Total GST Payable 1,80,000 | 18,000 | 18,000 3 | Less: ITC (Note) IGST - 25,000 (25,000) 7 : 4 | CGST- 65,000 (47,000) | (18,000) |x 5 | SGST- 75,000 — (67,000) | __x (18,000) Net GST payable 51,000 | Nil Nit Note:~ 1.IGST credit is used to pay IGST Ist, once IGST credit is fully utilised then CGST/SGST credits are used first to pay tax under same head f balance credit is used to pay IGST. 2. Also, SGST credit can be utilised to pay IGST only when credit of CGSTis not available to pay IGST. Acat 10 | CA VISHAL BHATTAD (© 09850850800Cd BTL INDEX Serra aC ete 1 | Important Definitions 2 1 2 | Sec7: Supply 4 1 3 | Sec7(1)(a): Supply for consideration in the course 14 4 or furtherance of business 4 | Sec7(1)(aa): Supply by person other than individual | 16 1 to its members 5 | Sec7(1)(c) read with Schedule |: Activities to be 16 10 treated as supply even if made without consideration © | Sec7(1)(b): Import of service for consideration read | 22 3 with para 4 of Schedule | 7 | Section 7(2) read with Schedule Ill:~ Activities treated | 24 4 neither as supply of goods nor supply of services 8 | Section 7(1A) & 7(3) read with Schedule II:~ 26 4 Activities to be treated as supply of goods or supply of services (Classification as ‘supply of goods’ or ' supply of services’) 9 | Section 8: Composite Supply & Mixed Supply 28 5 Total no. of Illustrations ICAI Material 2 | Examination 02 | Q. 03.06/05.07/05.10/07.22/08.28/09.33/ 06 3 | RTP& MTP 02 | Q. 02.02/03.05/09.18/05.16/07.23/08.27/ 06 4) Other 02 Q. 01.01/03.04 /04.07/05.09/08.13/05.15/07.22/| 08 09.29/ Total No. of Illust. 33 mm ——-W’Smart AcadGA ns Define the following terms as per GST Act: 1) _ Taxableterritory & Non-taxable territory 2) Goods 3) — Services 4) Recipient of Supply of goods and/or services (CA Inter MTP Oct 2020) 8) Deemed Distinct Person 6) _ Intrastate Supply & Inter State Supply 7) Consideration Answer: 1) |Taxableterritory: DAs per Section 2(109), “Taxable territory” means the territory to which the provisions of the GST Act apply (i.e. whole of territory of India). Non-taxable territory: > As per Section 2(79), “Non-taxable territory” means the territory which is outside the taxable territory. Authors Comment (Just for reference): Sec _|Indiameans 2(56) |) Territory of india as referred to in article 1 of Constitution (The territory of the Union of India viz., state and the union territories). b) Its Territorial Water, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as defined in the Territorial Waters, | Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976. c) Theair space aboveits territory and territorial waters. Note: INM=1.85KM, On Territorial waters = upto 12NM from baseline, Contiguous zone = upto 24NM & EEZ = 200NM 2) | Goods: As per section 2(52) of CGST Act, 2017, “Goods” ‘means every kind of movable property Dotherthan money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply. 3) | Services: ‘As per section 2(102) of CGST Act, 2017, “Services” 2 means anything ‘> other than goods, money and securities but Dincludes activities relating to:- > the use of money or > its conversion by cash or by any other mode, from one form, currency or denomination to another form, currency or denomination for which a separate consideration is charged. Explanation:-“Services” includes facilitating or arranging transactions in securities. [ CA VISHAL BHATTAD © 09850850800 www.vsmartacademy.com V'Smart Academy4) [Recipient: ‘DAs per section 2(93) of CGST Act, “Recipient” of supply of goods &/or services means:~ a) where a consideration is payable for supply of goods &/or services, > the person who is liable to pay that consideration, b) where no consideration is payable for the supply of goods, > the person to whom the goods are delivered or made available, or > towhom possession or use of the goods is given or made available, and c) whereno consideration is payable for the supply ofa service, > the person to whom the serviceis rendered, and Dany reference toa person to whom a supply is made shall be construed as a referenceto the recipient ofthe supply and 2 shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied. 5) Deemed Distinct Person: ‘> As per section 25(4) of CGST Act, If more than one registration is obtained or is required to be obtained by a person in one or more State or Union territory, then for each of such registration, he shall be treated as distinct persons. DAs per section 25(5) of CGST Act, If registration is obtained or is required to be obtained by a person for one establishment in a State or Union territory & has an establishment in another State or Union territory, then such establishments shall be treated as establishments of distinct persons. 6) | Inter State Supply & Intra state supply: 2 Ifthe location of supplier and the place of supply are in the same State/ Union territory, it shall be treated as an ‘Intra State supply’. ‘2 Ifthe location of supplier and the place of supply are in:~ > two different States or > two different Union territories or » a State & a Union Territory it shall be treated as an ‘Inter State supply’. Import or export of goods &/ or services are also treated as interstate supply > As per the definition of ‘consideration’ provided under the CGST Act, “Consideration” in relation to supply of goods &/or services include: a) Any payment in money or otherwii supply of goods &/or services. b) The monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, Ditexclud a) Any subsidy given by the Central Government or a State Government. b) Deposit given for the supply shall not be considered as payment made unless the supplier applies itas consideration forthe said supply. 2 The consideration can be provided by the recipient or by any other person 2 The term money under GST law not only includes cash (Indian as well as foreign currency) but also cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller's cheque, money , in respect of, in response to, or for the inducement of, the CAVISHAL BHATTAD (© 09850850800 www.vsmartacademy.com V'Smart Academy Tr}‘order, postal/electronic remittance or any such similar instrument recognized by RBI. ‘> Non-monetary consideration essentially means consideration in kind. ‘Exchange is a form of supply of goods or services or both, made or agreed to be made for a consideration by a person in the course or furtherance of business". Explain it with help of example. [icairtPJun2018] Oz Answer:- Video ‘> When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing nor both things being money only, thetransactionis called an exchange. > Exchange offers on products like televisions, mobile phones, refrigerators, etc. are levial to GST. > Example:- Mr. X is a dealer of new cars. He sells new cars for ® 8,25,000 & agrees to reduce ® 1,25,000 on surrendering of old car. Mr. Y who intends to buy new car worth ® 8,25,000 agreed to exchange his old car with new car. Under GST law, it will be treated as Mr. Y has made supply of old car to dealer Mr. X and Mr. X has made supply of new car to Mr. Y. if Mr. Y is registered person, he will be liable to pay GST on 21,25,000. ‘Whereas, Mr. X will be liable to pay GST on 2 8,25,000 irrespective of fact that whether Mr. Y is a registered personor not. Maurruteaetu 00 - Meghraj & Co. wishes to commence the business of supplying ready-made garments within Punjaband in the neighbouring States of Delhi and Haryana. Kindly state as to what is the taxable event under GST and leviability of CGST, SGST/UTGST: onthe same? (Study Mat) Answer :~ > Taxable event under GST is the supply of goods or services or both made for consideration in the course or furtherance of business. 2 CGST and SGST will be levied on intra-State supplies. 21GST will be levied on inter-State supplies. Oz Determine whether there is consideration in following cases & also state whether GST is chargeable: 1) | Reliance JIO offers free mobile handset on payment of security deposit worth €1500/- which is fully refundable. ii) Isha, a customer purchases a gold necklace weighing 275 gms from PN Gadgil Jewel showroom. In exchange, she sells her old gold articles weighing 200 gms & pays differential amount in cash. RC cricket association Chennai, gifts a motor bike to Rahul as inducement to join their cricket club. XYZ itd. is manufacturing fertilizers used for agriculture purpose. State govt. has given 30% subsidy on sale of such fertilizer. v) | ABC and Co., a trading concern, has supplied the product X to Mr. Y at subsidized rate of @ 30,000 (Open market value of such goods is € 45,000). The supplier of ABC and Co. has given the subsidy to it to compensate for the price difference. ra CAVISHAL BHATTAD (© 09850850800 www.vsmartacademy.com V'Smart AcademyAnswer:~ i) | No, as security deposit given in this case is not applied by the supplier towards the mobile handset Provided by it. Hence, GST will not be charged as there is no supply in absence of consideration. ii) | In this case, there are two supplies as follows:- - - a) Sale of gold necklace by Jeweller to the customer: 2 It falls under the ambit of ‘supply’ as the sale of Jewellery by the Jeweller is in the course of his business. > Consideration paid by customer is partly in kind for 200 gms & partly in money for 75 gms. ‘> GST shall be charged on value determined as per open market value for 275 gms of gold necklace. b) Sale of old gold articles by customer to Jeweller:~ tis out of the purview of ‘supply’ as the sale by customer is not in the course of business. Hence, GST will not be charged. iii) | ¥e8, a8 supply of motor bike is in response to an offer to join (i.e. inducement to join) the cricket club & thus, GST shall be charged. iv) |No, Section 2(31) of C@ST Act clearly states that “consideration” excludes the value of subsidy given by State Government. Thus, in the given case, GST will be charged on value excluding subsidy. v) | Yes, Section 2(31) of CGST Act clearly states that “consideration” excludes the value of subsidy given by Central Government or State Government. But, in given case, subsidy is given by the supplier and not by Government. Hence, subsidy is treated as consideration & GST will be charged on value including such subsidy. z The temple of ancestral deity of Mr. Aman Goel and his family is located at Beri, Haryana. The temple is run by a charitable organisation registered under section 12AA of the Income Tax Act, 1961. The family has got unshakeable faith in their ancestral deity. Mr. Aman is a big entrepreneur having flourishing business of tiles in Gurugram. Upon the birth of their first child, he donated 10 lakh to the said temple for construction of a sitting hall in the temple. On the main door of the sitting hall, a name plate was placed stating "Donated by Mr. Aman Goel upon birth of his first child". You are required to examine the leviability of GST on the donation received from Mr. Aman Goel? [CA Inter RTP May 2020]. Answer:~ Legal Provision:~ 2 As per CBIC clarification, if aname plate or similar acknowledgement is placed in the premises of religious institution displaying donor's name just as an expression of gratitude and public recognition of donor's act of philanthropy, then there is no supply of service for a consideration (in the form of donation) & there is no GST liability on such consideration. > But the conditions that the displaying of name is not aimed at giving publicity to the donor to advertise or promote his business. 2 Here, Recipient of donation/ gift has no obligation (quid pro quo) to do anything i.e. supply a service. Discussion & Conclusion:~ In the given case, ‘> The payment madetoa charitable organization has the character of gift or donation. > As there is no reference or mention of any business activity of the donor so as to advertise it, the purposes also philanthropic (i.e., it leads to no commercial gain) &thus, not leviableto GST. CAVISHAL BHATTAD (© 09850850800 www.vsmartacademy.com V'Smart AcademyPERT Glory Ltd. is engaged in manufacturing and selling of cosmetic products. Seva Trust, a charitable organisation, approached Glory Ltd. to provide financial assistance for its charitable activities. Glory Ltd. donated a sum of 2 lakh to Seva Trust with a condition that Seva Trust will place a hoarding at the entrance of the trust premises displaying picture of products sold by Glory Ltd. Examine whether this activity would amount to “supply” under GST law? [CA Inter May 22 Exam), — Legal Provision:- > An activity qualifies as supply under GST only if itis for a consideration and is in course/ furtherance of business. 2 Donations received by the charitable organizations are treated as consideration only when there's an obligation on part of the recipient of the donation to do anything. Discussion & Conclusion:~ 2 Since in the given case, the display of products sold by the donor ~ Glory Ltd. - in charitable organization's premises aims at advertising/promotion of its business, it is supply for consideration in course/ furtherance of business and thus, qualifies as supply under GST law. ek anes A Resident Welfare Association provides the service of depositing the electricity bills of the residents in lieu of some nominal charges. Whether this activity is treated as supply under the GST Act? Answer:- 2 Legal Provision:~ 2 As per section 2(17) of CGST Act, 2017, Giese includes provision of service by club or association or society to its members for a subscription or any other consideration. > As per Section 7(1)(aa) of the said act, supply includes activity/ transaction supplied bya person other than an individual for its members for consideration. Explanation to this section states that such person and its members are deemed to be two separate persons & supply between them deemed to take place from one personto another. Discussion & Conclusion:~ 2 In this case, Resident Welfare Association is a person other than an individual and it is providing service to its members by way of depositing the electricity bills of the residents in lieu of some nominal charges. ‘2 Hence, this transaction is treated as supply u/s 7(1)(aa). 05. Sec 7(1)(c) read with Schedule I: Activities to be treated as supply even if made without consideration Prithvi Associates is engaged in supply of taxable goods. It enquires from its tax advisor as to whether any activity can be treated as supply even if made without consideration in accordance with the provisions of the GST law. You are required to enumerate such activities, if any (Study Mat) Answer :~ Section 7(1)(a) of CGST Act stipulates that the supply of goods &/or services should be for a consideration and should be in the course or furtherance of business. But, Section 7(1)(c) states the Activities to be CA VISHAL BHATTAD www.vsmartacademy.com V'Smart Academytreated as supply even if made without consideration which are given under Schedule las follows:~ Para Activity/ Transactions 1 | Permanent transfer or disposal of business assets where input tax credit has been availed on such assets 2 | Supply of goods &//or services between:~ related persons or ‘D distinct persons as specified in section 25, | when made in the course or furtherance of business. However, gifts not exceeding Rs. 50000 in value in a financial year by an employer to an employee ‘shall not be treated as supply of goods &/or services 3 Supply of goods: a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal or b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal However, this para 3is applicable only when agent issues invoice to customer in his ownname. 4 | Import of services by a person:- 2 fromarelated person or > from any of his other establishments outside India, inthe course or furtherance of business Whether the following transactions are treated as supply? (a) Aretailer of clothes gives clothes from his business stock (on which ITC is taken) to his friend free of cost permanently. (b) A dealer of air conditioners (on which ITC is not taken) permanently transfers an air conditioner from his stock in trade, for personal use at his residence. > As per Section 7(1)(c) read with para 1 of schedule | of CGST Act, permanent transfer or disposal of business assets where ITC has been availed on such assets shall be treated as supply under GST even when thereis no consideration is involved. ‘2 So, if no ITC is availed on such business asset, then it will not be treated as supply under this para. Discussion and Conclusion: (a) Business assets also includes stock in trade. Hence, in this case, permanent transfer of business stock free of cost shall be treated as supply under para 1 of schedule | as the retailer claimed input tax credit on his purchase of that business stock. (b) The transaction will not constitute a supply even though there is permanent transfer of stock in trade (business asset) as in this case, no input tax credit is taken on such stock in trade. CAVISHAL BHATTAD © 09850850800 www.vsmartacademy.com V'Smart AcademyCoAT AA) Sahab Sales, an air-conditioner dealer in Janakpuri, Delhi, needs 4 air conditioners for his newly constructed house in Safdarjung Enclave. Therefore, he transfers 4 air- conditioners [on which ITC has already been availed by it] from its stock, for the said purpose. Examine whether the said activity amounts to supply u/s7 of the CGST Act, 2017. Further, a Janakpuri resident, Aakash, approached Sahab Sales. He sold an air conditioner to Sahab Sales for ¥ 5,000. Aakash had bought the said air conditioner six months before, for his residence. Does sale of the air conditioner by Aakash to Sahab Sales amount to supply u/s 7 of the Cq@stAct,2017? [RTP2018] * Legal Provisio ‘2 Section 7(1)(a) of CGST Act states that the supply of goods and/or services should be for a consideration and should bein the course or furtherance of business. ‘2 As per Section 7(1)(c) sread with Para 1 of Schedule | of CGST Act, 2017, Permanent transfer or disposal of business assets where input tax credit has been availed on such assets shall be treated as supply even when itis made without consideration. Discussion & Conclusion:~ ‘2 Inthe given case, permanent transfer of air conditioners by Sahab Sales from its stock for personal use at its residence would amount to supply even though it is made without consideration as per para 1 discussed above. oO ‘2 But, sale of air conditioner by Aakash to Sahab Sales will not qualify as supply under section 7. Although it ismade fora consideration, but it is notin the course or furtherance of business. Damodar Private Ltd., registered in Delhi, is planning to transfer some goods to its branch, registered in West Bengal, without any consideration, so that the goods can be sold from the branch. The company believes that the transaction that will be undertaken by it would not qualify as supply as no consideration is involved. Ascertain whether the transfer of goods by Damodar Private Ltd. to its branch office would qualify as supply. (Study Mat) Answer :~ Legal Provision: ‘> As per Schedule | read with section 7(1)(c), supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business, is deemed as supply even if made without consideration Discussion & Conclusion: In the given case, since the Damodar Private Ltd. and its branch located in another State are distinct persons. ‘> Thus, supply of goods between them would qualify as supply. Raghubir transfers 1000 shirts from his factory located in Lucknow to his retail showroom in Delhi so that the same can be sold from there. The factory and retail showroom of Raghubir Fabrics are registered in the States where they are located. Although no consideration is charged, supply of goods m factory to retail showroom constitutes supply. Justi [study Mat (Example)] CAVISHAL BHATTAD (©) 09850850800 www.vsmartacademy.com ‘Smart AcademyAnswer:- Pay Legal provision:~ deo, 2 As per section 7(1)© read with para 2 of schedule | of CGST Act, 2017, Supply of goods &/or services between distinct person u/s 25 in the course or furtherance of business shall be treated as supply even when itis made without consideration. 2 Section 25(4) of CGST Act, 2017 states that if more than one registration is obtained or is required to be obtained by a person in one or more State, then for each of such registration, he shall be treated as distinct persons. Discussion & Conclusion:- > In given case, factory & retail showroom of Raghubir Fabrics are registered in the States where they are located. So, both are treated as establishments of distinct person u/s25(4). 2 Although, no consideration is charged, supply of goods from factory to retail showroom constitutes supply as per para2 of schedule | stated aboveas it is in course or furtherance of business. On occasion of Diwali, Daksh gold pvt. Itd. distributes gift hamper to its employee worth €3,00,000. Does it qualify as supply? Would your answer be different, if gifts of € 42,000 have been given to a employee? Answer: Legal Provision:~ 2 As per section 7(1)(c) read with Para 2 of Schedule | of CGST Act, 2017, Supply of goods &/or services between related persons is treated as supply even ifitis without consideration. 2 Proviso to para 2 of schedule | states that if gifts given by employer to an employee are not exceeding @ 50,000 in value ina financial year, then it shall not be treated as supply of goods &/or services. 2 As per explanation to section 15, employer and employee are deemed to be related persons. Discussion & Conclusion:- 1) Diwali gift to employee worth ¥3,00,000 will qualify as supply and such supply would be leviable to GST as the employer & employee are related and value of gift exceeds Rs 50000 ina financial year. 2) If gift of € 42,000 is given instead of ® 3,00,000, the same will not qualify as supply. This is because, the value of gift is not exceeding 50,000 ina financial year. Gagan Engineering Pvt. Ltd., registered in Haryana, is engaged in providing maintenance and repair services for heavy steel machinery. For carrying out the repair work, Gagan Engineering Pvt. Ltd. sends its container trucks equipped with items like repair equipments, consumables, tools, parts etc. from Haryana workshop to its own repairing centres (registered under GST law) located in other ‘States across India where the clients’ machinery are being brought and are being repaired. Discuss the leviability of GST on the inter-State movement of trucks from the workshop of Gagan Engineering Pvt. Ltd. in Haryana to its own repairing centres located in other States across India. [study Mat][CA inter MTP Oct 23] Oz Answer:~ Video Legal Provision:~ > Section 25(4) of CGST Act, 2017 states that if more than one registration is obtained or is required to be obtained by a personin one or more State, then for each of such registration, he shall be treated CAVISHAL BHATTAD (© 09850850800 www.vsmartacademy.com V'Smart Academyas distinct persons. 2 Section 7(1)@ read with Para 2 of schedule | of CGST Act, 2017 states that supply of goods and/or services between ‘distinct persons’ as specified in section 25, when made in the course or furtherance of business shall be treated as supply even if made without consideration. > Asper CBIC circular, » The inter-State movement of various modes of conveyance including trucks, carrying goods &/or passengers or for repairs and maintenance, between ‘distinct persons’ as specified in section 25(4), not involving further supply of such conveyance, may be treated ‘neither as a supply of goods nor supply of service’ and therefore, will not be leviable to IGST. » But, the applicable CGST/SGST/IGST shall be leviable on repairs & maintenance done for such conveyance. Discussion & conclusion: 2 In the given case, inter-State movement of trucks from the workshop of Gagan Engineering Pvt. Ltd. located in Haryana to its repair centres located in other States is ‘neither a supply of goods nor supply of services’. Mr. Veer isa supplier of goods located in Mumbai has appointed Mr. Rudra to procure goods based on a specification given by him. As the same kind of goods are not available in the area of Mr. Veer, Mr. Rudra buys the specified goods on his behalf from M/s XYZ Ltd. For this activity, invoice is issued in the name of principal. i) Whether itis to be treated as a supply under GST? fi) Would your answer differ if invoice is issued in name of an agent Mr. Rudra? Answer:~ Legal Provision: 2 Section 7(1)(c) read with Para 3 of Schedule | of CGST Act, 2017 states that supply of goods by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal, shall betreated as supply even if made without consideration. As per CBIC clarification, if invoice for further supply is being issued by agent in his own name, then this activity is treated as supply under para 3 Schedule, otherwise not. Discussion:~ > Inthe given case, Mr. Rudra (Agent) is appointed just to procure the goods on behalf of Mr. Veer (Principal) and heis issuing invoice also in name of Mr. Veer (Principal). 2 Hehas not involved himselfin the supply or receipt of goods in any way. 2 Hence, Mr. Rudrais not an agent of Mr. Veer for the purpose of para 3 of schedule! Conelusion:~ i) No, its not to be treated as a supply as per para 3 of Schedule |. This is because Mr. Rudra (Agent) is invoicein name of the Mr. Veer (Principal). ii) Yes, ifinvoiceis in thename Mr. Rudra (Agent), then this transaction will be treated as supply as per para 3of Schedule. CAVISHAL BHATTAD (© 09850850800 www.vsmartacademy.com V'Smart AcademyM/s M Ltd. being a garment manufacturer, appoints Mr. Ram as an agent, who stores garments manufactured by M Ltd. and sends to dealers whenever M Ltd. asks Mr. Ram to do so. Mr. Ram issues his own invoice. Isita supply? Justify. [ICAI RTP Jun 2018] = Legal Provision:~ > Section 7(1)(c) read with Para 3 of Schedule I of CGST Act, 2017 states that supply of goods by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal shall be treated as supply even if made without consideration. 2 As per CBIC clarification, ifinvoice for further supply is being issued by agent in his own name, then this activity would be treated as supply under para 3 Schedule1, otherwise not. Discussion & Conclusion:~ > Yes. Transfer of garments from M Ltd. to Mr. Ramis taxable supply under GST & GST will be levied. 2 This is because, Mr. Ram (Agent) is issuing invoice in his own name for further supply of goods on behalf of M/sMtd. > Thus, this transaction is getting covered under para 3 of schedulellas discussed above. ry} Charm Limited, registered under GST in the State of Jharkha anufactures cosmetic products and appointed Mr. Handsome of Mumbai, who is registered under GST in the State of Maharashtra, as their Del-credere agent (DCA) to sell their products. Being @ DCA, he agrees to raise invoices in his own name and also guarantees for the realization of payments from customers to Charm Limited. In order to realize the payments from customers.on time, he extends short term transaction based loans tothem and charges interest for the. . Mr. Handsome provides you the following detait of transactions carried out during month of March ee C = ——— Goods/services supplied ) ate) Amount (#) [Outward Supply _ _ (i)_| Goods sold by Mr. Handsome in his DCA capaci (intra - State transaction) | 2\80,000 (ii) [Interest earned from the above customers for short term credit facility provided for timely payment of dues. (intra-State transaction) (iii) | Commission bill raised on Charm Limited ({nter-State transaction) in respect of | 30,000 DCA services provided Inward Supply 7 (iv) | Inter-State supply of goods received from Charm Limited. Being a DCA, no Nil consideration was paid. Value under section 15 - ¥ 2,00,000 (v) | Received training in marketing and distribution from Charm Limited as perDCA | Nl agreement, free of cost. Company charges 275,000 for such training when it provides the same to others. Applicable rate of tax on both inward and outward supplies is 9% each for CGST and SGST and 18% for IGST. Amounts given above are exclusive of taxes wherever applicable. Subject to the information given above, necessary conditions are complied with for availment of input tax credit. ‘You are required to calculate the gross GST liability and eligible input tax credit for the month of March 20XX of Mr. Handsome. CAVISHAL BHATTAD © 09850850800 ‘www.vsmartacademy.com V’Smart Academy riBrief notes should form part of your answer for treatment of items in SI. No. (i) to (v). [cA inter Nov 22 Exam] Answer:~ 1) Computation of Gross GST liability of Mr. Handsome for the month of March 20XX: Particulars 1gst (2)|cast(z) s@st (2) Goods sold by Mr. Handsomein his DCA capacity 2,80,000] - | 27,000 | 27,000 Add: Interest earned for short term credit facility provided to | 20,000 |[3,00,000 [3,00,000 above customers 3,00,000 | *9%]) *9%]) [interest included in value of supply of goods sold since where DCA is an agent under Schedule - | of CGST Act, short term credit facility provided by DCA to buyer is subsumed in the supply of goods by DCA to buyer.] Commission charged for DCA services 5400 | ~ = [Being taxable supply of services. ] [30,000*) 18%] Gross GST Liability 3,400 | 27,000 | 27,000 Note: Since the invoice for goods sold is issued by the DCA — Mr. Handsome in his own name, he would fall under the ambit of an agent under Schedule- | of the CGST Act. 2) Computation of eligible ITC for the month of March 20XX:~ Particulars Ist (z) [c@st(z) |Sast (2) Inward supply of goods from Charm Limited free of cost | 36,000 | - - [Supply of goods by principal~ Charm Limited to agent ~ Mr. Handsome [2,00,000) qualifies as supply even though it is made without consideration. ] | 18%] Training in marketing and distribution received from Charm Limited free) — - - of cost [Since no consideration is charged for the services provided, said services do not qualify as supply. As no GST i onthe same, ITC is not available] Total ITC Availlable 36,000 With reference to provisions of the CGST Act, 2017, discuss in brief, when "Importation of services "is to be considered as supply and when itis not to be considered as supply. [CA Inter Nov20 Exams] OR Discuss the taxability of import of services under GST. [1CAI- RTP] Answer:~ ‘2 As per section 7(1)(b) of CGST Act, 2017, Importation of services for a consideration whether or not in the course or furtherance of business is to be considered as supply. Thus, if services are imported for a consideration, then they are taxable in both situations i.e. when importation is in the course or furtherance of business & even when itis not. > Para 4 of Schedule | of CGST Act states that Importation of services by a person without consideration is deemed as supply provided the following two conditions are satisfied:~ (a) Such import is from related person or from his establishments located outside India & (b) Such importis in the course or furtherance of business. * 3 Ca CA VISHAL BHATTAD (© 09850850800 www.vsmartacademy.com V'Smart Academy