Chapter II

Levy and Collection of Tax

FAQ’s
Scope of Supply (Section 7)
Section 7 of the Central Goods and Services Tax Act, 2017 (“the CGST Act, 2017” or
“the CGST Act”) made applicable to IGST vide Section 20 of the Integrated Goods and
Services Tax Act, 2017 (“the IGST Act, 2017” or “the IGST Act”) and UTGST vide
Section 21 of the Union Territory Goods and Services Tax Act, 2017 (“the UTGST Act,
2017” or “the UGST Act”)
Q1. What is the scope of the term ‘supply’ as defined in the CGST Act, 2017?
Ans. As per Section 7(1) of the CGST Act, 2017, supply includes:
(a) all forms of supply of goods or services or both such as sale, transfer, barter,
exchange, licence, rental, lease or disposal made or agreed to be made for a
consideration by a person in the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or furtherance
of business [and]1;
(c) the activities specified in Schedule I, made or agreed to be made without a
consideration;2
(d) Deleted3
Clause (d) being part of the section 7(1) defining the term ‘supply’ leads to a
situation where an activity listed in Schedule II would be deemed to be a supply
even if it does not constitute a supply as per clauses (a), (b) and (c) of
section 7(1). Classification of certain specified activities or transactions (which
qualify as a supply under the CGST Act) either as supply of goods or supply of
services is supposed to be done in Schedule II. Hence, clause (d) of section 7(1)
has been deleted and a new sub-section (1A) in section 7 has been inserted]
Further, it may be noted that, subject to the provisions of section 7 (1), (1A) 4 and (2),

1 Effective date yet to be notified.

2 The word “and” after the words “a consideration” has been deleted – Effective date yet to be notified.
3 Effective date yet to be notified. Earlier - (d) the activities to be treated as supply of goods or supply of

services as referred to in Schedule II.

4 Effective date yet to be notified.
Levy and Collection of Tax 19

the Government may, on the recommendations of the Council, specify, by notification,

the transactions that are to be treated as:
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.
Q2. Is it required to distinguish whether a particular supply involves supply of goods or
services or both?
Ans. Yes, the CGST Act, 2017 specifies certain provisions separately for supply of goods
and supply of services viz., Section 12 and Section 13 thereof provides for ascertaining
time of supply of goods and time of supply of services respectively. Similarly, separate
provisions have been specified for ascertaining place of supply of goods and place of
supply of services under the IGST Act, 2017. Further, the rate of tax applicable to
supply of goods and supply of services are different. Accordingly, it is important to
distinguish whether a particular transaction involves supply of goods or supply of
services.
Q3. How to distinguish whether a particular supply involves supply of goods or services or
both?
Ans. The Schedule II appended to the CGST Act, 2017 enlists the activities or transactions 5
which are to be treated as supply of goods or supply of services. One may refer
Schedule II with reference to Section 7 of the CGST Act to classify whether the
transaction involves supply of goods or supply of services. In other words, where
certain activities or transactions constitute a supply as per section 7(1) of the
CGST Act, 2017, they shall be treated either as supply of goods or supply of
services as referred to in Schedule II.
Q4. Whether supply of goods or services without consideration is liable to tax?
Ans. The activities enumerated in Schedule I will qualify as supply even if made without
consideration. Accordingly, such supplies in the absence of consideration are liable to
tax. To illustrate, following are the activities which will qualify as supply in the absence
of consideration and eventually would be liable to tax:
1. Permanent transfer or disposal of business assets where input tax credit has
been availed on such assets.
2. 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:

5 Effective date yet to be notified.

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20 FAQ’s and MCQ’s on GST

Provided that gifts not exceeding ` 50,000/-in value in a financial year by an

employer to an employee shall not be treated as supply of goods or services or
both.
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.
Further the Board vide Circular No. 57/31/2018-GST dated 4.09.2018 has
clarified the Scope of Principal-agent relationship in the context of Schedule I.
4. Import of services by a 6person from a related person or from any of his other
establishments outside India, in the course or furtherance of business.
Hence, import of services by entities which are not registered under GST (say,
they are only making exempted supplies) but are otherwise engaged in business
activities is taxed when received from a related person or from any of their
establishments outside India.
Q5. Whether transfer of goods to another branch located outside the State is taxable?
Ans. In terms of Section 25(4) of the CGST Act, 2017, every person who is required to obtain
separate registration for every branch located in different State or Union territory shall
be treated as distinct persons. Accordingly, the supply of goods (stock transfers) to a
branch located outside the State would qualify as supply, liable to tax in terms of
clause 2 to Schedule I of the CGST Act, 2017. Further, it is important to note that,
supply of goods to a branch/ unit located within the same State having separate
registration would also be liable to tax since both such units (supplying unit and
recipient unit) would qualify as distinct person in terms of Section 25(4).
Q6. Whether gifts given by employer to employee will also qualify as supply?
Ans. In terms of Explanation appended to Section 15, it is clarified that employer and
employee will be deemed to be related persons. Accordingly, in terms clause 2 of
Schedule I, gifts exceeding ` 50,000/- by an employer to employee will be a supply,
when made in the course or furtherance of business and will be liable to tax. As, in
terms of proviso to clause 2 of Schedule I, any gifts for a value not exceeding` 50,000/-
in a financial year will not qualify as supply and as such will not be liable to tax.
Further, as per press release dated 10.07.2017, if services are provided free of charge

6 Effective date yet to be notified. Earlier “taxable person”.

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Levy and Collection of Tax 21

to all the employees by the employer then the same will not be subjected to GST,
provided appropriate GST was paid when procured by the employer. The relevant
extract of aforesaid press release is as under:
“Another issue is the taxation of perquisites. It is pertinent to point out here that the
services by an employee to the employer in the course of or in relation to his
employment is outside the scope of GST (neither supply of goods or supply of
services). It follows therefrom that supply by the employer to the employee in terms
of contractual agreement entered into between the employer and the employee, will
not be subjected to GST. Further, the input tax credit (ITC) scheme under GST does
not allow ITC of membership of a club, health and fitness centre
[Section 17(5)(b)(ii)]. It follows, therefore, that if such services are provided free of
charge to all the employees by the employer then the same will not be subjected to
GST, provided appropriate GST was paid when procured by the employer. The
same would hold true for free housing to the employees, when the same is provided
in terms of the contract between the employer and employee and is part and parcel
of the cost-to-company (C2C).”
Q7. Whether supply of goods by principal to his agent or by agent to his principal is taxable
in the absence of consideration?
Ans. In terms of Section 7 read with Schedule I, following would qualify as supply even if
made without consideration:
1. Supply of goods by a principal to his agent where the agent undertakes to supply
such goods on behalf of the principal; or
2. Supply of goods by an agent to his principal where the agent undertakes to
receive such goods on behalf of the principal.
Q8. Whether import of services will be liable to tax under GST regime?
Ans. The following import of service will qualify as supply under the CGST Act, 2017:
1. As per Section 7, import of service for a consideration whether or not in the
course or furtherance of business is a supply;
2. As per Schedule I, import of service by a taxable person, even if made without
consideration, from a related person or from any of his other establishments
outside India, in the course or furtherance of business.
Q9. Whether superior kerosene oil [SKO] retained for the manufacture of Linear Alkyl
Benzene [LAB] exigible to GST?
Ans. In terms of Circular No. 12/12/2017-GST dated 26.10.2017, the LAB manufacturers
receive superior Kerosene oil (SKO) from, a refinery, say, Indian Oil Corporation (IOC).
They extract n-Paraffin (C9-C13 hydrocarbons) from SKO and return back the

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22 FAQ’s and MCQ’s on GST

remaining of SKO to the refinery. In this context, the issue has arisen as to whether in
this transaction GST would be levied on SKO sent by IOC for extracting n -paraffin or
only on the n-paraffin quantity extracted by the LAB manufactures. Further, whether the
return of remaining Kerosene by LAB manufactures would separately attract GST in
such transaction.
In this regard, Department has clarified that GST will be payable by the refinery only on
the net quantity of superior kerosene oil (SKO) retained for the manufacture of Linear
Alkyl Benzene (LAB). Though, refinery would be liable to pay GST on such returned
quantity of SKO, when the same is supplied by it to any other person.
Q10. Whether GST leviable on inter-state transfer of aircraft engines, parts and accessories
for use by their own airlines?
Ans. Yes. In terms of clause 2 of Schedule I of the CGST Act, 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, even if, without c onsideration,
attracts GST. Hence, GST will be levied on inter-State transfer of aircraft engines, parts
and accessories for use by their own airlines.
Further, Circular No. 16/16/2017-GST dated 15.11.2017 also clarifies that credit of GST
paid on aircraft engines, parts & accessories will be available for discharging GST on
inter–State supply of such aircraft engines, parts & accessories by way of inter-State
stock transfers between distinct persons as specified in Section 25 of the CGST Act,
notwithstanding that credit of input tax charged on consumption of such goods is not
allowed for supply of service of transport of passengers by air in economy class at GST
rate of 5%.
Q11. Whether supply of books, pamphlets, brochures, envelopes, annual reports, leaflets ,
cartons, boxes etc., printed with design, logo, name, address or other contents supplied
by the recipient of such supplies, would constitute supply of goods or supply of
services?
Ans. The Government vide Circular No. 11/11/2017-GST dated 20.10.2017 has clarified that
supply of books, pamphlets, brochures, envelopes, annual reports, leaflets, cartons,
boxes etc. printed with logo, design, name, address or other contents supplied by the
recipient of such printed goods, are composite supplies and the quest ion, whether such
supplies constitute supply of goods or services would be determined on the basis of
what constitutes the principal supply.
Printing of books, pamphlets, brochures, annual reports, and the like, where only
content is supplied by the publisher or the person who owns the usage rights to the
intangible inputs while the physical inputs including paper used for printing belong to
the printer, supply of printing [of the content supplied by the recipient of supply] is the

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Levy and Collection of Tax 23

principal supply and therefore such supplies would constitute supply of service falling
under heading 9989 of the scheme of classification of services.
While, supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall
paper etc. falling under Chapter 48 or 49, printed with design, logo etc. supplied by the
recipient of goods but made using physical inputs including paper belonging to the
printer, predominant supply is that of goods and the supply of printing of the content
[supplied by the recipient of supply] is ancillary to the principal supply of goods and
therefore such supplies would constitute supply of goods falling under respective
headings of Chapter 48 or 49 of the Customs Tariff.
Q12. Whether supply by artists through galleries is leviable under GST?
Ans. In terms of Circular No. 22/22/2017-GST dated 21.12.2017, since art works sent to the
gallery for exhibition does not involve consideration, therefore, the same is not a supply.
It is only when the buyer selects a particular art work displayed at the gallery, that the
actual supply takes place and applicable GST would be payable at the time of such
supply.
Q13. Whether GST will apply wherein goods are moved within the State or from the State of
registration to another State for supply on approval basis?
Ans. In terms of Circular No. 10/10/2017-GST dated 18.10.2017, the goods which are taken
for supply on approval basis can be moved from the place of business of the registered
supplier to another place within the same State or to a place outside the State on a
delivery challan along with the e-way bill wherever applicable and the invoice may be
issued at the time of delivery of goods. For this purpose, the person carrying the goods
for such supply can carry the invoice book with him so that he can issue the invoice
once the supply is fructified.
Hence, all such supplies, where the supplier carries goods from one State to another
and supplies them in a different State, will be inter-State supplies and attract IGST in
terms of Section 5 of IGST Act. And those within the State will be exigible to CGST and
SGST in terms of Section 9 of the CGST Act and SGST Act, respectively.
Q67. Enlist the activities or transactions which shall not be considered as ‘ supply’ for GST by
way of Schedule III?
Ans. Following are the activities or transactions which shall not be considered as ‘supply’ for
GST by way of Schedule III:
1. Services by an employee to the employer in the course of or in relation to his
employment.
2. Services by any Court or Tribunal established under any law for the time being in

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24 FAQ’s and MCQ’s on GST

force. Here, the term "Court" includes District Court, High Court and Supreme
Court.
3. (a) the functions performed by the Members of Parliament, Members of State
Legislature, Members of Panchayats, Members of Municipalities and
Members of other local authorities;
(b) the duties performed by any person who holds any post in pursuance of
the provisions of the Constitution in that capacity; or
(c) the duties performed by any person as a Chairperson or a Member or a
Director in a body established by the Central Government or a State
Government or local authority and who is not deemed as an employee
before the commencement of this clause.
4. Services of funeral, burial, crematorium or mortuary including transportati on of
the deceased.
5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of
building.[i.e., excluding sale of under-construction premises where the part or full
consideration is received before issuance of completion certificate or before its
first occupation, whichever is earlier)].
6. Actionable claims, other than lottery, betting and gambling.
77. Supply of goods from a place in the non-taxable territory to another place in the
non-taxable territory without such goods entering into India.
This will exclude from the tax net such transactions which involve movement of
goods, caused by a registered person, from one non-taxable territory to another
non-taxable territory.
88. (a) Supply of warehoused goods to any person before clearance for home
consumption. Where warehoused goods shall have the same meaning as
assigned to it in the Customs Act, 1962.
(b) Supply of goods by the consignee to any other person, by endorsement of
documents of title to the goods, after the goods have been dispatched
from the port of origin located outside India but before clearance for home
consumption.
This is to ensure that there is no double taxation of transactions where supply of goods
occurs in the course of high sea sales and sale of warehoused goods, before clearance
for home consumption. Although the Circular No. 33 /2017-Customs dt 01-08-2017 was
issued to state that IGST would be payable only once at the time of clearance of goods
for home consumption.

7&8 Effective date yet to be notified.

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Levy and Collection of Tax 25

Tax Liability on Composite and Mixed Supplies (Section 8)

Section 8 of the CGST Act, 2017 made applicable to IGST vide Section 20 of the IGST
Act, 2017 and UTGST vide Section 21 of the UTGST Act, 2017
Q14. What is composite supply?
Ans. In terms of Section 2(30) of the CGST Act, 2017, composite supply means a supply
made by a taxable person to a recipient consisting of two or more taxable supplies of
goods or services or both, or any combination thereof, which are naturally bundled and
supplied in conjunction with each other in the ordinary course of business, one of which
is a principal supply. The illustration of composite supply appended to Section 2(30) is
as follows:
Where goods are packed and transported with insurance, the supply of goods, packing
materials, transport and insurance is a composite supply and supply of goods is a
principal supply.
Q15. What is a principal supply?
Ans. In terms of Section 2(90) of the CGST Act, principal supply means the supply of goods
or services which constitutes the predominant element of a composite supply and to
which any other supply forming part of that composite supply is ancillary.
Q16. How would the tax liability be determined in case of composite supply?
Ans. In terms of Section 8 of the CGST Act, 2017, tax liability in case of composite supply
should be determined with reference to the principal supply forming part of such
composite supply.
Q17. What is mixed supply?
Ans. In terms of Section 2(74) of the CGST Act, mixed supply means two or more individual
supplies of goods or services or any combination thereof, made in conjunction with
each other by a taxable person for a single price where such supply does not constitute
a composite supply. The illustration of mixed supply appended to Section 2(74) is as
follows:
A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits,
aerated drink and fruit juices when supplied for a single price is a mi xed supply. Each of
these items can be supplied separately and is not dependent on any other. It shall not
be a mixed supply if these items are supplied separately.
Q18. How would the tax liability be determined in case of Mixed supply?
Ans. In terms of Section 8 of the CGST Act, the tax liability in case of a mixed supply shall
be ascertained with reference to that particular supply which attracts highest rate of tax.

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26 FAQ’s and MCQ’s on GST

Q19. Whether food supplied to the in-patients as advised by the doctor is taxable under
GST?
Ans. In terms of Para 5(3) of Circular No. 32/06/2018-GST dated 12.02.2018, food supplied
to the in-patients as advised by the doctor/nutritionists is a part of composite supply of
healthcare and not separately taxable. Other supplies of food by a hospita l to patients
(not admitted) or their attendants or visitors are taxable.
Q20. Whether retreading of tyres is a supply of goods or services?
Ans. In terms of Circular No. 34/08/2018-GST dated 01.03.2018, in retreading of tyres, which
is a composite supply, the pre-dominant element is the process of retreading which is a
supply of service. Rubber used for retreading is an ancillary supply. Which part of a
composite supply is the principal supply, must be determined keeping in view the nature
of the supply involved. Value may be one of the guiding factors in this determination,
but not the sole factor. The primary question that should be asked is what is the
essential nature of the composite supply and which element of the supply imparts that
essential nature to the composite supply. Supply of retreaded tyres, where the old tyres
belong to the supplier of retreaded tyres, is a supply of goods (retreaded tyres under
heading 4012 of the Customs Tariff attracting GST @ 28%).
Q21. Whether supply of equipment and installation/commissioning of the same would
constitute a composite supply?
Ans. While the recipient actually purchases the equipment, making the equipment the
principal supply, the installation makes the equipment usable by the recipient. Even if ,
there is a separate charge for the installation of the equipment, since the service is
naturally bundled and provided in the ordinary course of business, the supply would be
a composite supply.
Q22. Whether supply of laptop and a carry case would constitute a composite supply?
Ans. In this case, the case only adds value to the supply of laptop and therefore, the case
would be ancillary while the laptop comprises the predominant element of the supply.
Even where the brand of the case is not the same as that of the laptop, and the supplier
establishes that the case is naturally bundled with the laptop in the ordinary course of
his business, the supply can be treated as a composite supply.
Q23. Whether supply of repair services of laptop with parts would constitute a composite
supply?
Ans As such, it is the skill and expertise of the supplier that makes the laptop function as
desired. Whether replacement is necessary or a mere resetting of the existing parts
restores the functionality of the laptop is not known to the customer. Where the object
of the contract is unknown to the customer, that object cannot be the purpose of the

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Levy and Collection of Tax 27

contract. The only object that is known to the customer is the ‘ repair service’ which
makes it the predominant object of supply. This would be the position even if the cost of
the parts replaced is higher than the cost of service. However, this theory can apply
only where such a replacement is done in the ordinary course of the business of
repairing laptops, and such a replacement is naturally bundled with the repair service.
Q24. Which HSN code is to be used in case of composite supplies?
Ans. In case of composite supplies, the HSN code of the principal supply is to be used.
[Reference to Section 8(a) of the CGST Act, 2017].
Q25. Which HSN code is to be used in case of mixed supplies?
Ans. In case of mixed supplies, the HSN of the supply that attracts the highest rate of tax is
to be used. [Reference to Section 8(b) of the CGST Act, 2017].

Levy and Collection (Section 9)

Q26. What are the taxes that are levied on an intra-State supply?
Ans. In terms of Section 9 of the CGST Act, 2017, intra-State supplies are liable to CGST. In
terms of Section 9 of the SGST Act, 2017, intra-State supplies are liable to SGST. In
terms of Section 7 of the UTGST Act, 2017, intra-State supplies effected by a taxable
person located in Union Territory (within the Union Territory) will be liable to UTGST.
Therefore, in case of intra-State supplies in case of State or Union Territory, CGST and
SGST or CGST and UTGST will be applicable respectively.
Q27. How to ascertain the taxable value for levy of CGST & SGST/UTGST?
Ans. Section 15 of the CGST Act, 2017 specifies that the value of supply of goods or
services or both shall be the transaction value, which is the price actually paid or
payable for the said supply of goods or services or both where the supplier and the
recipient of the supply are not related, and the price is the sole consideration for the
supply. Further, Section 15 provides for certain inclusions which will form part of the
value viz., incidental expenses, commission, interest, penalty etc. In cases where the
supplier and recipient are related persons or where the price is not the sole
consideration, the provisions and method for ascertaining the value of taxable supply as
prescribed in the Central Goods and Services Tax Rules (“the CGST Rules” or “the
CGST Rules, 2017”) (Rules 27 – 35) shall apply.
Q28. What is the rate of tax applicable on intra-State supplies?
Ans. The applicable rate of tax on intra-State supply of services has been majorly provided
under Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017 and rate on
intra-State supply of goods has been provided under Notification No. 01/2017-Central

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28 FAQ’s and MCQ’s on GST

Tax (Rate), dated 28.06.2017 [with 3 corrigendum dated 30.06.2017, 12.07.2017 and
27.07.2017] respectively as amended from time to time.
It is pertinent to mention here that:
▪ Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 exempts
intra-State supplies of certain services over certain specified percentage subject
to certain conditions [Though till date, rate specified and condition stipulated in
notification is NIL]
▪ Notification No. 02/2017-Central Tax (Rate) dated 28.06.2017 exempts
intra-State supplies of certain goods from whole of CGST leviable under Section
9 of the CGST Act.
▪ Notification No. 03/2017-Central Tax (Rate) dated 28.06.2017 exempts
intra-State supplies of goods over certain specified percentage subject to certain
conditions.
▪ Notification No. 07/2017-Central Tax (Rate) dated 28.06.2017 exempts supplies
of goods by CSD to Unit Run Canteens; CSD to authorised customers and Unit
Run Canteen to authorised customers, from whole of CGST leviable under
Section 9 of CGST Act.
▪ Notification No. 26/2017-Central Tax (Rate) dated 21.09.2017 exempts
intra-State supply of heavy water and nuclear fuels falling in Chapter 28 of the
First Schedule to the Customs Tariff Act, 1975 by the Department of Atomic
Energy to the Nuclear Power Corporation of India Ltd from the whole of CGST
leviable under Section 9 of the CGST Act.
▪ Notification No. 39/2017- Central Tax (Rate) dated 18.10.2017, subject to
fulfillment of certain condition, notifies the rate of the Central Tax of 2.5% on
intra-State supplies of food preparations put up in unit containers and intended
for free distribution to economically weaker sections of the society under a
programme duly approved by the Central Government or any State Government.
▪ Notification No. 40/2017-Central Tax (Rate) dated 23.10.2017 prescribe Central
Tax rate of 0.05% on intra-State supply of taxable goods by a registered supplier
to a registered recipient for export subject to specified conditions .
▪ Notification No. 45/2017-Central Tax (Rate) dated 14.11.2017, effective from
15.11.2017, provide concessional GST rate of 2.5% on scientific and technical
equipments supplied to public funded research institutions. This notification is
further amended vide Notification No. 9/2018- Central Tax (Rate) dated
25.01.2018.

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Levy and Collection of Tax 29

▪ Notification No. 21/2018-Central Tax (Rate) dated 26.07.2018 exempts the

intra-state supplies of specified handicraft goods over certain specified
percentage.
▪ Notification No. 05/2018-Central Tax (Rate) dated 25.01.2018 exempts Central
Govt.’s share of profit out of services by way of grant of license to explore
petroleum crude etc.
▪ Notification No. 22/2018-Central Tax (Rate) dated 06.08.2018 exempts
intra-State supply of goods or services or both received by a registered person
from any supplier, who is not registered, from the whole of the central tax leviable
thereon under Section 9(4) of the CGST Act, 2017 till 30.09.2019. [i.e. exempt
payment of tax under Section 9(4) of the CGST Act, 2017 till 30.09.2019.]
[NOTE :
➢ Notification No. 11/2017–Central Tax (Rate) dated 28.06.2017 has been
amended vide Notification No. 20/2017–Central Tax (Rate) dated 22.08.2017;
Notification No. 24/2017–Central Tax (Rate) dated 21.09.2017; Notification No.
31/2017–Central Tax (Rate) dated 13.10.2017, Notification No. 46/2017–Central
Tax (Rate) dated 14.11.2017 (w.e.f. 15.11.2017)], Notification No. 01/2018–
Central Tax (Rate) dated 25.01.2018 and Notification No. 13/2018–Central Tax
(Rate) dated 26.07.2018.
➢ Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 has been
amended vide Notification No. 18/2017-Central Tax (Rate) dated 30.06.2017
(w.e.f.-1.07.2017); Notification No. 19/2017-Central Tax (Rate) dated 18.08.2017;
Notification No. 27/2017-Central Tax (Rate) dated 22.09.2017; Notification No.
34/2017-Central Tax (Rate) dated 13.10.2017; Notification No. 41/2017-Central
Tax (Rate) dated 14.11.2017 (w.e.f. 15.11.2017); Notification No. 06/2018–
Central Tax (Rate) dated 25.01.2018; Notification No. 08/2018–Central Tax
(Rate) dated 25.01.2018 and Notification No. 18/2018–Central Tax (Rate) dated
26.07.2018.
➢ Notification No. 02/2017-Central Tax (Rate) dated 28.06.2017 has been
amended vide Notification No. 28/2017-Central Tax (Rate) dated 22.09.2017;
Notification No. 35/2017-Central Tax (Rate) dated 13.10.2017; Notification No.
42/2017-Central Tax (Rate) dated 14.11.2017 (w.e.f. 15.11.2017); Notification
No. 07/2018–Central Tax (Rate) dated 25.01.2018 and Notification No. 19/2018–
Central Tax (Rate) dated 26.07.2018.
➢ Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 has been
amended vide Notification No. 21/2017-Central Tax (Rate) dated 22.08.2017;
Notification No. 25/2017-Central Tax (Rate) dated 21.09.2017; Notification No.

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30 FAQ’s and MCQ’s on GST

30/2017-Central Tax (Rate) dated 29.09.2017; Notification No. 32/2017-Central

Tax (Rate) dated 13.10.2017; Notification No. 47/2017-Central Tax (Rate) dated
14.11.2017 (w.e.f. 15.11.2017); Notification No. 02/2018–Central Tax (Rate)
dated 25.01.2018 and Notification No. 14/2018–Central Tax (Rate) dated
26.07.2018.
Q29. Who is responsible to pay taxes?
Ans. Generally, the person effecting taxable supplies is liable to pay taxes. However,
following are certain exceptions:
(a) Reverse charge: Section 9(3) of the CGST Act, 2017 inter alia provides that, the
Government may, on the recommendations of the Council, by notification, specify
categories of supply of goods or services or both, the tax on which shall be paid
on reverse charge basis by the recipient of such goods or services or both.
In this regard, the Central Government vide Notification No. 04/2017-Central Tax
(Rate) dated 28.06.2017 read with Notification No. 36/2017-Central Tax (Rate)
dated 13.10.2017, Notification No. 43/2017-Central Tax (Rate) dated 14.11.2017
and Notification No. 11/2018–Central Tax (Rate) dated 28.05.2018 specifies the
supply of goods which are liable to CGST under Reverse Charge Mechanism
(“RCM”).
Further, Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017 read with
Notification No. 22/2017-Central Tax (Rate) dated 22.08.2017, Notification No.
33/2017-Central Tax (Rate) dated 13.10.2017, Notification No. 03/2018–Central
Tax (Rate) dated 25.01.2018 and Notification No. 15/2018–Central Tax (Rate)
dated 26.07.2018 specifies the supply of services which are liable to CGST under
RCM.
Further, 9Section 9(4) of the CGST Act inter alia provides that, the Government
may, on the recommendations of the Council, by notification, specify a class of
registered persons who shall, in respect of supply of specified categories of
goods or services or both received from an unregistered supplier, pay the tax on
reverse charge basis as the recipient of such supply of goods or services or both.
However, Notification No. 22/2018-Central Tax (Rate) dated 06.08.2018 exempts
intra-State supply of goods or services or both, received by registered person
from an un-registered dealer from whole of the integrated tax under section 9(4)
till 30th September 2019.
Furthermore, Import of service will be taxable in the hands of the recipient i.e.,
importer.

9 Effective date yet to be notified.

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Levy and Collection of Tax 31

(b) E-Commerce: Categories of services as specified under Notification 17/2017-

Central Tax (Rate), dated 28.06.2017 read with Notification No. 23/2017- Central
Tax (Rate) dated 22.08.2017 or such other services as may be notified by the
Government on the recommendations of the Council the tax shall be paid by the
electronic commerce operator if such services are supplied through it. The
services notified till date are as under:
(1) services by way of transportation of passengers by a radio-taxi, motor cab,
maxicab and motor cycle;
(2) services by way of providing accommodation in hotels, inns, guest houses,
clubs, campsites or other commercial places meant for residential or
lodging purposes, except where the person supplying such service through
electronic commerce operator is liable for registration under Section 22(1)
of the CGST Act.
(3) services by way of house-keeping, such as plumbing, carpentering etc.,
except where the person supplying such service through electronic
commerce operator is liable for registration under Section 22(1).
Q30. Whether the tax on intra-State supplies is applicable to every supply?
Ans. No, Section 9(1) of the CGST Act, which is the charging provision for levy and collection
of tax on intra-State supplies, excludes supply of alcoholic liquor for human
consumption. Further, in terms of Section 9(2), tax on supply of petroleum crude, high
speed diesel, motor spirit, natural gas and aviation turbine fuel shall be levied with
effect from such date as may be notified by the Government on the recommendations of
the Council. Accordingly, supply of alcoholic liquor for human consumption is not liable
to tax under the CGST Act, 2017.
Q31. Whether CGST and SGST/ UTGST is applicable on import of goods or services or
both?
Ans. In terms of Section 7 of the IGST Act, 2017, import of goods or services or both shall be
treated to be a supply in the course of inter-State trade or commerce. Accordingly, tax
under the provisions of IGST Act shall apply on import of services. Further, proviso to
Section 5(1) of the IGST Act states that IGST on goods imported into India shall be
levied and collected in accordance with the provisions of Section 3 of the Customs
Tariff Act, 1975 on the value as determined under the said Act.

Reverse Charge
Q32. What does the payment of tax under reverse charge mean?
Ans. In terms of Section 2(98) of the CGST Act, the term reverse charge means the liability

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32 FAQ’s and MCQ’s on GST

to pay tax by the recipient of supply of goods or services or both instead of the supplier
of such goods or services or both under Section 9(3) or 9(4) of the CGST Act, 2017 or
under Section 5(3) or 5(4) of the IGST Act, 2017.
Q33. What are the different types of supplies which are liable to tax under RCM?
Ans. As per Section 9 of the CGST Act, 2017, there are two types of supplies which are
liable to tax under RCM: -
1. As per section 9(3), specified categories of supply of goods or services or both
as notified by Government on recommendations of the Council are liable to tax
under reverse charge mechanism. The Government has notified category of
goods that attracts reverse charge liability vide Notification No. 04/2017-Central
Tax (Rate) dated 28.06.2017 amended vide Notification No. 36/2017-Central Tax
(Rate) dated 13.10.2017, Notification No. 43/2017-Central Tax (Rate) dated
14.11.2017 and Notification No. 11/2018-Central Tax (Rate) dated 28.05.2018.
Category of services that attracts reverse charge liability are notified vide
Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017 amended vide
Corrigendum dated 25.09.2017, Notification No. 22/2017-Central Tax (Rate)
dated 22.08.2017, Notification No. 33/2017-Central Tax (Rate) dated 13.10.2017,
Notification No. 03/2018-Central Tax (Rate) dated 25.01.2018 and Notification
No. 15/2018-Central Tax (Rate) dated 26.07.2018.
As per 10section 9(4) of the CGST Act provides that, the Government may, on the
recommendations of the Council, by notification, specify a class of registered
persons who shall, in respect of supply of specified categories of goods or
services or both received from an unregistered supplier, pay the tax on reverse
charge basis as the recipient of such supply of goods or services or both, and all
the provisions of the CGST Act shall apply to such recipient as if he is the person
liable for paying the tax in relation to such supply of goods or services or both.
However, before this amendment, as per Section 9(4) supply of taxable goods or
services or both by an unregistered supplier to a registered person are liable to
tax under RCM. Further, vide Notification No. 08/2017-Central Tax (Rate) dated
28.06.2017 with effect from 01.07.2017 the supplies made by unregistered
suppliers to a registered person were exempted, if the aggregate value of such
supplies does not exceed ` 5,000/- in a day. Thereafter, vide Notification No.
38/2017-Central Tax (Rate), dated 13.10.2017, RCM was deferred till
31st March,2018 without any threshold limit and then subsequently it was further
extended till 30th June,2018 vide Notification No. 12/2018-Central Tax (Rate), dt.
29-06-2018 and thereafter again extended till 30th September,2019 vide
Notification No. 22/2018-Central Tax (Rate) dated 06.08.2018.

10 Effective date yet to be notified.

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Levy and Collection of Tax 33

2. Exemption to recipients from application of Section 9(4) who are not liable to be
registered otherwise than Section 24(vi) (as a tax deductor) is provided vide
Notification No. 09/2017-Central Tax (Rate) dated 28.06.2017.
3. Exemption to registered taxpayers is provided from application of Section 9(4)
who are engaged in outward supply of second hand goods in terms of Rule 32(5)
vide Notification No. 10/2017-Central Tax (Rate) dated 28.06.2017.
Q34. Is it lawful to collect tax from recipient of supply on reverse charge basis?
Ans. Yes, as long as the tax is on the subject of levy, the Government is free to collect this
tax from any person – either the supplier or the recipient or anyone else. Even a third
party can be called upon to deposit the tax provided there is some nexus such as
collection of payment for the supply between two other persons.
Q35. Should tax payable on reverse charge basis be reduced from the value of the supply?
Ans. Contractually if tax is not included in the price payable towards the supply, then tax
payable on reverse charge basis cannot be reduced from the value of supply that is
paid to the supplier. And if included, then due effect to this understanding must flow by
making the deduction from the payment.
Q36. What is the effect of reverse charge on input tax credit?
Ans. As regards the recipient who pays tax on reverse charge basis, tax so paid would be
available as credit subject to Section 17 of the CGST Act, 2017. As regards the supplier
whose tax is paid by the recipient, value of such supply will be treated as ‘ exempt
supply’ while applying Section 17(2) of the CGST Act, 2017 on all the credits availed.
Q37. What is the difference between reverse charge under Section 9(3) and under
Section 9(4) of the CGST Act, 2017?
Ans. The Government has notified a list of goods and services along with the type of
recipient who is liable to pay tax on those supplies covered under reverse charge as
per Section 9(3). If the goods or the services are not listed or the recipient is not
notified, then reverse charge does not apply. For example, tax in respect of services of
advocate availed by a business entity is payable on reverse charge basis. If the
recipient is a religious trust which means it is not a business entity, reverse charge is
not applicable.
Whereas, as per 11section 9(4) of the CGST Act, the Government may notify a class of
registered persons who shall be liable to payment of tax on reverse charge basis, in
respect of supply of specified categories of goods or services or both rec eived from an
unregistered supplier,

11 Effective date yet to be notified.

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34 FAQ’s and MCQ’s on GST

However, the supplies made by unregistered suppliers to a registered person are

exempted without any threshold limit till 30.09.2019 vide Notification No. 22/2018-
Central Tax (Rate) dated 06.08.2018.
Q38. Is reverse charge applicable after supply or on payment of advance?
Ans. Reverse charge is applicable when there is a supply and the time of supply is
determined by Section 12 or Section 13 of the CGST Act. Reverse charge is applicable
at the time of advance even though actual supply is yet to take place. Section 31(3)(g)
read with Rule 52 of the CGST Rules provides for the issuance of a Payment Voucher
at the time of making payment to the supplier in cases where registered person is liable
to pay tax on reverse charge basis.
Q39. What are the implications if, supplier charges GST on the invoice though reverse
charge is applicable?
Ans. Recipient is free to reduce the GST charged from the value of invoice and pay only the
net amount but liable to discharge the reverse charge obligation separately.
Q40. What are implications to supplier if recipient refuses to pay tax on reverse charge?
Ans. There is no recourse back to the supplier in case of default by recipient to discharge
reverse charge liability.
Q41. In case supplier has paid GST which was payable by recipient on reverse charge, is
recipient discharged from the liability to pay tax on reverse charge?
Ans. No, even if supplier has somehow paid tax, reverse charge liability must be discharged
by the recipient.
Q42. Is GST wrongly paid by supplier available as input tax credit (ITC) to recipient? [In case
of Reverse Charge]
Ans. No, GST wrongly paid by supplier cannot be claimed as input tax credit (ITC) by
recipient in case of supply reported in FORM GSTR-1 as "Supplies attracting tax on
reverse charge basis". However, the supplier can claim for refund of tax wrongly paid.
Q43. Is condition to pay supplier within 180 days applicable to supplies covered by reverse
charge?
Ans. No, second proviso to Section 16(2) of the CGST Act requiring the recipient to make
payment towards the value of supply along with tax payable thereon wit hin a period of
180 days does not apply to supplies on which tax is payable on reverse charge basis.
Q44. Is reverse charge applicable on supply of goods also or is it only on supply of services?
Ans. Payment of tax on reverse charge is applicable on goods also. Notification No. 04/2017-
Central Tax (Rate), Notification No. 04/2017-Integrated Tax (Rate) and Notification No.

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Levy and Collection of Tax 35

04/2017-Union Territory Tax (Rate), all dated 28.06.2017 as amended from time to time
may be referred.
Q45. Explain effect of Section 23 of the CGST Act in relation to reverse charge?
Ans. Persons specified in Section 23 are excluded from registration. If such persons are
receiving inward supplies liable to tax on reverse charge basis under Section 9(3), they
will be liable to get registered in terms of Section 24 and comply with other
requirements of law. But, if such persons do not attract Section 9(3), then they can
remain unregistered and therefore not attract Section 9(4) too.
Q46. In case supplier eligible to threshold exemption, is reverse charge applicable?
Ans. Supplier may not have paid tax due to threshold benefit but this does not excuse
registered recipient from liability under Section 9(4) which is attracted if ‘supplier is not
registered’ without inquiring into the reasons for such non-registration.
Q47. In case supplier is under composition and no tax appears on invoice, is reverse charge
attracted under Section 9(4) of the CGST Act?
Ans. Though no tax appears on the invoice, the supplier is nevertheless registered. Hence,
Section 9(4) is not attracted.
Q48. If all the supplies of a person are under reverse charge mechanism, can such person
not register under the Act although the aggregate turnover is exceeding the prescribed
limit?
Ans. It is not necessary for the supplier to take registration since the Notification
No. 05/2017-Central Tax dated 19.06.2017 exempts persons subject to reverse charge
under Section 9(3) from registration if they are engaged only in making taxable supplies
on which tax is payable by the recipient. For Example: - In case of an independent
director providing services, and his only income is from independent directorship (or
such other services covered under RCM) to the company, in this case the director won’t
be required to take registration.
Q49. M/s XYZ Pvt. Ltd. imported some goods on which it was liable to pay GST under
reverse charge. While the goods were lying at port, goods were lost or destroyed due to
some natural disaster. In this case will it be liable to GST?
Ans. In case of natural disaster or loss, no import duty is levied, therefore no GST will be
applicable.
Q50. M/s XY Ltd. is not registered under GST. The company avails the rent-a-cab service for
its employees. Whether M/s XY Ltd. will be considered as taxable person under GST?
Ans. No

Indirect Taxes Committee

36 FAQ’s and MCQ’s on GST

Composition Levy (Section 10)

Q51. What is the threshold limit for opting composition scheme?
Ans Notwithstanding anything to the contrary contained in the CGST Act but subject to the
provisions of Sections 9(3) and 9(4), a registered person, whose aggregate turnover in
the preceding financial year did not exceed one crore rupees, may opt to pay, in lieu
of the tax payable by him under section 9(1) an amount of tax calculated at such rate 12
as may be prescribed.
In other words, composition tax payers shall, in lieu of the tax payable on the invoice
value of the transactions under section 9(1) (applicable to regular taxpayers), pay tax
as a percentage of their turnover.
Further, this limit, is rupees seventy-five lakhs in the case of an eligible registered
person, registered under section 25 of the CGST Act, in any following States, namely: -
(i) Arunachal Pradesh,
(ii) Assam,
(iii) Manipur,
(iv) Meghalaya,
(v) Mizoram,
(vi) Nagaland,
(vii) Sikkim,
(viii) Tripura,
(ix) Himachal Pradesh
It may be noted that aforesaid limit of ` 1 crore/ 75 lakh is notified vide Notification
No. 46/2017-Central Tax dated 13.10.2017. Prior to such change the threshold limit
was `75 and 50 lakh respectively as stated in Notification No. 8/2017-Central Tax dated
27.06.2017.
13Moreover, on recommendation of the Council, the Government may, by notification,
increase the aforesaid limit of ` 1 crore upto ` 1.5 crore14. The limit is being raised from
` 1 crore to ` 1.5 crore as a measure of facilitate trade.
Q52. What is the rate of tax applicable to a taxable person opting to pay tax under
composition scheme?
Ans. As per Section 10(1) of the CGST Act, 2017 read with Notification No. 1/2018 -Central
Tax dated 1.1.2018 and subject to such conditions and restrictions as may be
prescribed, with effect from 1.1.2018, the rate of tax, shall be:

12, 13 & 14 Effective date yet to be notified.

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Levy and Collection of Tax 37

1. Half per cent of the turnover in State or turnover in Union territory in case of a
manufacturer;
2. two and a half per cent, of the turnover in State or turnover in Union territory in
case of persons engaged in making supplies referred to in clause (b) of
paragraph 6 of Schedule II; and
3. half per cent, of the turnover of taxable supplies of goods in State or turnover in
Union territory in case of other suppliers.
It may be noted that prior to 1.1.2018, the rates as per Notification No. 8/2017-Central
Tax dated 27.06.2017 were:
1. one per cent of the turnover in State or turnover in Union territory in case of a
manufacturer;
2. two and a half per cent, of the turnover in State or turnover in Union territory in
case of persons engaged in making supplies referred to in clause (b) of
paragraph 6 of Schedule II; and
3. half per cent, of the turnover in State or turnover in Union territory in cas e of
other suppliers.
Q53. Can every taxable person opt to pay tax under composition scheme?
Ans. Registered person whose aggregate turnover in the preceding financial year does not
exceed one crore rupees or seventy-five lakhs rupees in case of specified States as
prescribed under Notification 46/2017-Central Tax, dated 13.10.2017), may opt to pay
tax under composition scheme, subject to satisfaction of the following conditions and
restrictions:
1. 15Save as provided in Section 10(1), he is not engaged in the supply of services -
This is a consequential amendment, as a new proviso is being added to
section 10(1) to provide that a person who opts to pay tax under composition
scheme may supply services (other than restaurant services), of value not
exceeding 10%. of turnover in a State or Union territory in the preceding financial
year or Rs. 5 lakh, whichever is higher.
2. he is not supplying goods which are not leviable to tax e.g. petrol ;
3. he is not engaged in making any inter-State outward supplies of goods;
4. he is not supplying goods through an electronic commerce operator who is
required to collect tax at source under Section 52; and

15Effective date yet to be notified. Earlier it was - he is not engaged in the supply of services other than
supplies referred to in clause (b) of paragraph 6 of Schedule II;

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38 FAQ’s and MCQ’s on GST

5. he is not a manufacturer of such goods as may be notified by the Government on

the recommendations of the Council. In this regard, following goods have been
notified vide Notification No. 8/2017-Central Tax dated 27.06.2017.
i) Ice cream and other edible ice, whether containing cocoa
ii) Pan masala
All goods, i.e. Tobacco and manufactured tobacco substitutes (It may be noted,
there is no restriction in case the person is engaged in trading of such goods.)
6. he is not entitled to input tax credit
7. he is neither casual taxable persons nor non-resident taxable persons.
8. composition scheme would become applicable for all the business verticals
having separate registrations within the State and all other registrations outside
the State which are held by the person with same PAN. (Would be applicable for
all transactions under the same PAN)
To clarify further, if a taxable person has multiple business verticals and if he has
opted for separate registrations for each such vertical, composition scheme
would become applicable for all the business verticals and it cannot be applied
for selected verticals only.
e.g.: If a taxable person has the following businesses separately registered: Sale
of footwear (Registered in Karnataka), Sale of mobiles (Registered in Karnataka),
Franchisee of McDonalds (Registered in Kerala). In the above scenario, the
composition scheme would be applicable for all the 3 units. Taxable person will
not be eligible to opt for composition scheme say for sale of footwear and sale of
mobiles and opt to pay taxes under the regular scheme for franchisee of
McDonalds.
9. the goods held in stock by him on the appointed day have not been purchased in
the course of inter-State trade or commerce or imported from a place outside
India or received from his branch situated outside the State or from his agent or
principal outside the State, where the option is exercised under Rule 3(1) of the
CGST Rules;
10. the goods held in stock by him have not been purchased from an unregistered
supplier and where purchased, he pays the tax under Section 9(4);
11. he shall pay tax under Section 9(3) or 9(4) of the CGST Act on inward supply of
goods or services or both. However, for the time being, provisions of Section 9(4)
have been suspended till 30.09.2019 vide Notification No. 22/2018-Central Tax
(Rate) dated 06.08.2018;

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Levy and Collection of Tax 39

12. he shall mention the words “composition taxable person, not eligible to collect tax
on supplies” at the top of the bill of supply issued by him; and shall mention the
words “composition taxable person” on every notice or signboard displayed at a
prominent place at his principal place of business and at every additional place or
places of business.
Q54. Whether an application/ intimation needs to be made by supplier opting for composition
scheme?
Ans Yes, the taxable person should make an application exercising his option to pay ta x
under composition scheme. There are three possibilities in which such option can be
exercised:
(a) Taxable Person migrating from old registration to GST registration : As per
Rule 3(1) of the CGST Rules, in cases involving migration, there is need to
exercise option of composition in FORM GST CMP 01 prior to appointed date or
within 30 days after the appointed date. In this case, the option to pay tax under
composition scheme shall be effective from the appointed date. This date has
further been extended to 16th August 2017. Such person would be required to
file stock statement under Rule 3(4) in FORM GST CMP-03 within a period of 90
days (extended from 60 days to 90 days by Notification No. 22/2017–Central Tax
w.e.f.17.08.2017) from the date on which the option for composition levy is
exercised or within such further period as may be extended by the Commissioner
in this behalf.
(b) Taxable Person obtaining new registration under GST laws : Such option can
be exercised at the time of obtaining registration under Section 22 in Part B of
FORM GST REG-1. In this case, the option to pay tax under composition scheme
shall be effective from the effective date of registration. [Refer Rule 3(2) of CGST
Rules]
(c) Taxable Person paying tax under normal levy in one financial year and
wants to opt for composition scheme in next financial year, under the GST
regime : Such option can be exercised by filing intimation in FORM GST CMP 02
prior to commencement of the year for which the option to pay tax under
composition scheme is exercised. In this case, the option to pay tax under
composition scheme shall be effective from the beginning of the financial year.
Moreover, provisions of Section 18(4) shall become applicable and person shall
be required to file statement containing details of stock and inward supply of
goods received from un-registered persons, held in stock, on the date
immediately preceding the date from which he opts for composition levy, in
FORM GST ITC 03 within 60 days from the commencement of the relevant
financial year. [Refer Rule 3(3) of CGST Rules].The option exercised by a

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40 FAQ’s and MCQ’s on GST

registered person to pay tax under composition scheme is valid as long as the
conditions stipulated in GST law to avail such scheme are complied with or
option withdrawn by the assessee or proper officer has reasons to believe that
the registered person was not eligible to pay tax under section 10 or has
contravened the provisions of the Act or Chapter on Composition scheme in the
CGST Rules.
(d) A new sub-rule (3A) was inserted vide Notification No. 34/2017-Central Tax
dated 15.09.2017 which had an overriding effect on provisions of sub-rule (1), (2)
and (3). As per the said rule, it was provided that, in all cases involving (a), (b)
and (c) above, the option of composition scheme can be obtained only from
01.10.2017 by filing application in FORM CMP-02 and furnishing stock
statements in FORM GST ITC-03, within 90 days from 01.10.2017.
Since, this was not the intended interpretation of the said amendment, sub-rule 3A was
once again amended vide Notification No. 45/2017–Central Tax dated 13.10.2017. By
making the said amendment, the government clarified that, sub-rule 3A was intended to
cover those cases, where either at the time of migration or by taking registration under
GST if any person who has availed normal scheme wishes to opt for composition
scheme, then such person may opt for composition scheme under Section 10 with
effect from the first day of the month immediately succeeding the month in which he
files an intimation in Form GST CMP-02 on or before 31.03.2018. In this case, such
person would be required to furnish stock statements in FORM GST ITC-03 within 180
days from the day on which such person commences to pay tax under Section 10. It
may be noted that, the purpose of rule (3A) is only to enable the persons to opt for
composition scheme in the first year of GST implementation, without making them to
wait up to the next financial year. This is on account of the fact that, the threshold limit
for the purposes of composition scheme under Section 10 was enhanced twice i.e. once
on 27.06.2017 and then again on 13.10.2017. Hence, Rule 3(3A) would only cover
cases, where the application is made prior to 31.03.2018. For all applications made
after 31.03.2018, the matter would be governed by Rule 3(3) above.
Summary
Taxable Person Form to be filed
Migrating from old registration to GST registration Form GST CMP-01
Obtaining new registration under GST laws Part B of Form GST REG-1.
Paying tax under normal levy in one financial year and Form GST CMP-02
wants to opt for composition scheme in next financial
year, under the GST regime
Q55. Whether a supplier of services is eligible to pay tax under composition scheme?

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Levy and Collection of Tax 41

Ans. No, a supplier of services is not eligible to opt for composition scheme. However, a
supplier supplying composite supply involving supply of service or goods being food or
any other article for human consumption or any drink (other than alcoholic liquor for
human consumption) is eligible to opt for payment of taxes under composition scheme.
However, CGST (Amendment) Act 2018 dated 29.08.2018 vide 16inserting a proviso to
Section 10 to provide that a person who opts to pay tax under composition scheme may
supply services (other than restaurant services), of value not exceeding 10%. of
turnover in a State or Union territory in the preceding financial year or Rs. 5 lakh,
whichever is higher.
Q56. Whether a taxable person having same PAN can opt to pay tax under composition
scheme by seeking separate registration for branches?
Ans. No, a registered person shall not be eligible to opt for the composition scheme unless
all such registered persons (branches having separate registration under a single PAN)
opt to pay tax under composition scheme.
Q57. Whether a taxable person under composition scheme eligible to claim input tax credit?
Ans. No, a taxable person under composition scheme is not eligible to claim input tax credit.
However, if the taxable person becomes ineligible to remain under composition
scheme, the taxable person will become entitled to take input tax in respect of inputs
held in stock (as inputs, contained in semi-finished or finished goods) on the day
immediately preceding the date from which he becomes liable to pay tax under
Section 9. (Refer Section 18(1)(c) read with Rule 40 of the CGST Rules). A statement
of stock shall be filed in Form GST ITC-01 within 30 days from the date from which the
option is withdrawn or the order cancelling the composition option is passed.
Q58. Can a customer who buys from a taxable person who is under composition scheme
claim composition tax as input credit?
Ans. No, the recipient is not eligible to take input tax credit of composition tax paid.
Moreover, a taxable person paying taxes under composition scheme is not entitled to
collect taxes from the recipient in terms of Section 10(4) of the CGST Act, 2017.
Accordingly, there does not arise a question for the recipient to claim input tax credit.
Q59. What is aggregate turnover?
Ans. In terms of Section 2(6) of the CGST Act, 2017, "aggregate turnover" means the
aggregate value of all taxable supplies (excluding the value of inward supplies on which
tax is payable by a person on reverse charge basis), exempt supplies, exports of goods
or services or both and inter-State supplies of persons having the same Permanent

16 Effective date yet to be notified.

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42 FAQ’s and MCQ’s on GST

Account Number, to be computed on all India basis but excludes Central tax, State tax,
Union territory tax, integrated tax and cess.
Q60. Whether a taxable person can still pay tax under composition scheme even after the
turnover in the current financial year exceeds threshold limit?
Ans. In terms of Section 10(3), the option availed for paying tax under composition scheme
shall lapse with effect from the day on which his aggregate turnover during a financial
year exceeds the threshold limit of composition scheme.
Q61. What are the consequences, if a taxable person violates the conditions prescribed for
composition scheme?
Ans. Following are the consequence for non-compliance with the conditions specified for
composition scheme:
1. shall be liable to pay additional taxes at the rates applicable to regular taxable
person;
2. shall be liable to penalty; and
3. the amount of tax and penalty shall be recovered in terms of Section 73 or 74
of the CGST Act, 2017.
Q62. Is there any option for registered taxable person to withdraw from the composition
scheme?
Ans. The registered taxable person who intends to withdraw from the composition scheme
shall, before the date of such withdrawal, file an application in FORM GST CMP-04.
Where the option of composition scheme is lapsed due to non-compliance of any of the
eligibility conditions under Section 10 or rules made thereunder, then taxable person
shall file an intimation of withdrawal in the same FORM GST CMP-04 within 7 days of
the occurrence of event leading to disability under the scheme. An intimation for
withdrawal or cancellation of permission in respect of any place of business in a State
or UT shall be deemed to be an intimation in respect of all other places of business
registered on the same PAN.
Q63. Can the proper officer cancel the registration of supplier who has opted composition
scheme?
Ans. Yes. Where the proper officer has reasons to believe that the taxable person was not
eligible to the composition scheme, the proper officer may cancel the permission and
demand the following:
• Differential tax and interest – viz., tax payable under the other provisions of the
Act after deducting the tax paid under composition scheme.
• Penalty determined based on the demand provisions under Section 73 or 74.

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Levy and Collection of Tax 43

However, it is essential to issue show cause notice in FORM GST CMP 05 and provide
an opportunity of being heard to the taxable person before proceeding with the demand.
The proper officer shall within 30 days of receipt of reply, either accept the reply
(in FORM GST CMP 06) to SCN or deny the option to pay tax under section 10 from the
date of option or from the date of event occurring the contravention of section 10 or
rules thereunder, by passing an order in Form GST CMP 07.
Q64. State the clarifications made vide CGST (Removal of Difficulties Order), 2017 Order
No. 1/2017-Central Tax dated 13.10.2017-, in respect of composition scheme?
Ans. CGST (Removal of Difficulties Order), 2017 Order No. 1/2017– Central Tax dated
13.10.2017 has provided the following two clarifications in respect of composition
scheme:
• if a person supplies goods and/or services referred to in clause (b) of paragraph
6 of Schedule II of the said Act and also supplies any exempt services including
services by way of extending deposits, loans or advances in so far as the
consideration is represented by way of interest or discount, the said person shall
not be ineligible for the composition scheme under Section 10 subject to the
fulfillment of all other conditions specified therein.
• In computing his aggregate turnover in order to determine his eligibility for
composition scheme, value of supply of any exempt services including services
by way of extending deposits, loans or advances in so far as the consideration is
represented by way of interest or discount, shall not be taken into account.
Q65. What will be the rate of tax for bakery items supplied where eating place is attached -
manufacturer for the purpose of composition levy?
Ans. The Government vide Circular No. 27/01/2018 dated 4.01.2018 has clarified that any
service by way of serving of food or drinks including by a bakery qualifies under section
10(1)(b) of the CGST Act and hence GST rate of composition levy for the same would
be 5%.
Q66. Whether a restaurant serving alcohol along with other foods etc. to its customers can
opt for composition scheme under Section 10?
Ans. In terms of Section 10(2) (a) read with clause (b) of Entry No. 6 of Schedule II of CGST
Act, 2017, such restaurant cannot opt for composition scheme.

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44 FAQ’s and MCQ’s on GST

MCQ’s
Scope of supply (Section 7)
Q1. What are different types of supplies covered under the scope of supply?
(a) Supplies made with consideration
(b) Supplies made without consideration
(c) Both of the above
(d) None of the above
Ans. (c) Both of the above

Tax Liability on Composite and Mixed Supplies (Section 8)

Q2. What are the factors differentiating composite supply & mixed supply?
(a) Nature of bundling i.e. artificial or natural
(b) Existence of principal supply
(c) Both of the above
(d) None of the above
Ans. (c) Both of the above
Q3. What would be the tax rate applicable in case of composite supply?
(a) Tax rate as applicable on principal supply
(b) Tax rate as applicable on ancillary supply
(c) Tax rate as applicable on respective supply
(d) None of the above
Ans. (a) Tax rate as applicable on principal supply
Q4. What would be the tax rate applicable in case of mixed supply?
(a) Tax rate as applicable on supply attracting the lowest rate of tax
(b) Tax rate as applicable on supply attracting the highest rate of tax
(c) Tax @ 28%
(d) None of the above
Ans. (b) Tax rate as applicable on supply attracting the highest rate of tax

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Levy and Collection of Tax 45

Levy and Collection (Section 9)

Q5. ………….of the Constitution provides that no tax shall be levied or collected except by
authority of law?
(a) Article 254
(b) Article 245
(c) Article 265
(d) Article 256
Ans. (c) Article 265
Q6. What are the taxes levied on an intra-State supply?
(a) CGST
(b) SGST
(c) CGST and SGST
(d) IGST
Ans. (c) CGST and SGST
Q7. What is the maximum rate prescribed under CGST Act?
(a) 12%
(b) 28%
(c) 20%
(d) 18%
Ans. (c) 20%
Q8. Who will notify the rate of tax to be levied under CGST Act?
(a) Central Government suo moto
(b) State Government suo moto
(c) GST Council suo moto
(d) Central Government as per the recommendations of the GST Council
Ans. (d) Central Government as per the recommendations of the GST Council
Q9. Which of the following taxes will be levied on imports?
(a) CGST
(b) SGST
(c) IGST

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46 FAQ’s and MCQ’s on GST

(d) CGST and SGST

Ans. (c) IGST
Q10. What is the maximum rate prescribed under UTGST Act?
(a) 14%
(b) 28%
(c) 20%
(d) 30%
Ans. (c) 20%

Reverse Charge
Q11. What are the supplies on which reverse charge mechanism would apply?
(a) Notified categories of goods or services or both under section 9(3)
(b) Inward supply of goods or services or both from an unregistered dealer under
section 9(4)
(c) Both the above
(d) None of the above
Ans. (a) Notified categories of goods or services or both under section 9(3) as section
9(4) has been deferred presently.
Q12. Which of the following services are covered under Reverse Charge Mechanism of
CGST Act, 2017?
i. Legal Consultancy
ii. Goods Transport Agency
iii. Manpower Supply
iv. Rent-a-Cab
(a) i & iii
(b) i & iv
(c) i & ii
(d) All the above
Ans. (c) i and ii
Q13. In case of GTA services provided to an Individual not registered under GST and not a
business entity, liability to pay GST is on

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Levy and Collection of Tax 47

(a) Supplier
(b) Recipient
(c) Both
(d) Exempt
Ans. (d) Exempt vide Sl. No. 21A of Notification No. 12/2017-Central Tax (Rate), dated
28-Jun-2017
Q14. In case of sponsorship services provided by Mr. A to M/s AB Ltd., liability to pay GST is
on:
(a) Mr. A
(b) M/s AB Ltd.
(c) Both
(d) None of the above
Ans. (b) M/s AB Ltd.
Q15. In case of renting of land, inside an Industrial estate, by State Government to a
registered manufacturing company, GST is:
(a) Exempted
(b) Applicable under Normal Charge
(c) Applicable under Reverse Charge
(d) None of the above
Ans. (c) Applicable under Reverse Charge
Q16. In case of services by an insurance agent to Ms. ABC Insurance Co. Ltd., GST is to be
paid by:
(a) Insurance Agent
(b) ABC Insurance Co. Ltd.
(c) Both
(d) None of the above
Ans. (b) ABC Insurance Co. Ltd.
Q17. Sitting fees received by director of XYZ Ltd., is liable for GST in the hands of the………
(a) Director
(b) XYZ Ltd

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48 FAQ’s and MCQ’s on GST

(c) Both of above

(d) None of the above
Ans. (b) XYZ Ltd.
Q18. Services by a recovery agent to M/s ZZZ Bank Ltd., are liable for GST in the hands of:
(a) M/s ZZZ Bank Ltd.
(b) Recovery agent
(c) Both the above
(d) None of the above
Ans. (a) M/s ZZZ Bank Ltd.
Q19. In case of lottery procured from State Government by a lottery distributor, GST is
payable by:
(a) Lottery distributor
(b) State Government
(c) Both the above
(d) None of the above
Ans. (a) Lottery distributor
Q20. Reverse charge under section 9(3) of the CGST Act is applicable on:-
(a) Only on notified services
(b) Only on notified goods
(c) Notified goods & services
(d) None of the above
Ans. (c) Notified goods & services
Q21. If Tobacco leaves procured from an Agriculturist by a registered person, then: -
(a) Reverse charge is applicable
(b) Normal charge is applicable
(c) Joint charge is applicable
(d) None of the above
Ans. (a) Reverse charge is applicable
Q22. In case M/s. PQR Ltd., a registered person, has availed rent-a-cab service from M/s
ABC Travels (Proprietor) service then which one of the following is true:-

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Levy and Collection of Tax 49

(a) Reverse charge is applicable as this is a notified service.

(b) Reverse charge is applicable if ABC Travels is not registered.
(c) Joint charge is applicable
(d) None of the above
Ans. (b) Reverse charge is applicable if ABC Travels is not registered.
Q23. Reverse charge is applicable:
(a) Only on intra-State supplies
(b) Only on inter-State supplies
(c) Both intra-State and inter-State supplies
(d) None of the above
Ans. (c) Both intra-State and inter-State supplies
Q24. Banking services provided by Department of post :
(a) Taxable & Reverse Charge Mechanism is applicable
(b) Taxable & Normal Charge is applicable
(c) Exempt from GST
(d) Nil rated
Ans. (c) Exempt from GST
Q25. If a supplier is under the composition scheme, does RCM still apply to the recipient
(a) Yes
(b) No
Ans. (b) No
Q26. If all supplies made by a supplier are covered under RCM, should they still register
under the CGST Act if the threshold exceeds the prescribed limit
(a) Yes
(b) No - Notification No. 05/2017-Central Tax dated 19.06.2017
Ans. (b) No - Notification No. 05/2017- Central Tax dated 19.06.2017.
Q27. When can credit for tax paid under reverse charge be taken?
(a) Same month
(b) Next month

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50 FAQ’s and MCQ’s on GST

(c) Any of the two months

Ans. (a) Same month
Q28. If a supplier is under the composition scheme, then whether tax will be paid under
reverse charge by the composition supplier:
(a) Yes
(b) No
Ans. (a) Yes
Q29. Whether services supplied by individual Direct Selling Agents (DSAs) to banks/ non-
banking financial company (NBFCs) will be covered under Reverse Charge Mechanism:
(a) Yes
(b) No
Ans. (a) Yes

Composition levy (Sections 10)

Q30. Which of the following persons can opt for composition scheme?
(a) Person making any supply of goods which are not leviable to tax under this Act;
(b) Person making any inter-State outward supplies of goods and services(except
restaurant services);
(c) Person effecting supply of goods through an e-commerce operator liable to
collect tax at source
(d) Person providing restaurant services
Ans. (d) Presently ,Person providing restaurant services. (It may be noted that CGST Act
Amendment has provided an option to take composition scheme 10% or Rs. 5 Lacs
as discussed earlier)17
Q31. What is the threshold limit of turnover in the preceding financial year for opting to pay
tax under composition scheme for States other than special category States ?
(a) ` 20 lacs
(b) ` 10 lacs
(c) ` 50 lacs
(d) ` 1 crore

17 Effective date yet to be notified.

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Levy and Collection of Tax 51

Ans. (d) ` 1 crore [Notification No. 46/2017-Central Tax dated 13.10.2017 read with
Notification No. 08/2017-Central Tax dated 27.06.2017]
Q32. What is the threshold limit of turnover in the preceding financial year for opting to pay
tax under composition scheme for special category states?
(a) ` 25 lacs
(b) ` 50 lacs
(c) ` 75 lacs
(d) ` 1 crore
Ans. (c) ` 75 lacs [Notification No. 46/2017-Central Tax dated 13.10.2017 read with
Notification No. 08/2017-Central Tax dated 27.06.2017]
Q33. What is the rate applicable under CGST to a registered person being a manufacturer
opting to pay taxes under composition scheme?
(a) 2.5%
(b) 1%
(c) 0.5%
(d) No composition for manufacturer
Ans. (c) 0.5% [Notification No. 01/2018-Central Tax dated 01.01.2018]
Q34. What is the rate applicable under CGST to a registered person being a hotelier
(providing restaurant and accommodation services ) opting to pay taxes under
composition scheme?
(a) 1%
(b) 0.5%
(c) 2.5%
(d) Not eligible for composition scheme thus liable to pay normal tax
Ans. (d) Not eligible for composition scheme thus liable to pay normal tax [Composition
scheme is available to restaurant only. Even composition scheme is not extended
to any other service provider]
Q35. Mr. Richard, a trader in Delhi has opted for composition scheme of taxation under GST.
Determine the rate of total GST payable by him under composition scheme:
(a) 0.5% CGST & 0.5% SGST
(b) 2.5% CGST & 2.5% UTGST
(c) 5% IGST

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52 FAQ’s and MCQ’s on GST

(d) 5% UTGST
Ans. (a) 0.5% CGST & 0.5% SGST
Q36. Can a registered person opt for composition scheme only for one out of his 3 business
verticals having same Permanent Account Number?
(a) Yes
(b) No
(c) Yes, subject to prior approval of the Central Government
(d) Yes, subject to prior approval of the concerned State Government
Ans. (b) No
Q37. Can composition scheme be availed if the registered person effects inter-State
supplies?
(a) Yes
(b) No
(c) Yes, subject to prior approval of the Central Government
(d) Yes, subject to prior approval of the concerned State Government
Ans. (b) No
Q38. Can a registered person under composition scheme claim input tax credit?
(a) Yes
(b) No
(c) Input tax credit on inward supply of goods only can be claimed
(d) Input tax credit on inward supply of services only can be claimed
Ans. (b) No
Q39. Can a registered person opting for composition scheme collect tax on his outward
supplies?
(a) Yes
(b) No
(c) Yes, if the amount of tax is prominently indicated in the invoice issued by him
(d) Yes, only on such goods as may be notified by the Central Government
Ans. (b) No
Q40. Which of the following will be excluded from the computation of ‘aggregate turnover’?
(a) Value of taxable supplies

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Levy and Collection of Tax 53

(b) Value of exempt Supplies

(c) Non-taxable supplies
(d) Value of inward supplies on which tax is paid on reverse charge basis
Ans. (d) Value of inward supplies on which tax is paid on reverse charge basis
Q41. What will happen if the turnover of a registered person opting to pay taxes under
composition scheme during the year 2017-18 crosses threshold limit?
(a) He can continue under composition scheme till the end of the financial year
(b) He will be liable to pay tax at normal rates of GST on the entire turnover for the
financial year 2017-18
(c) He will cease to remain under the composition scheme with immediate effect
(d) He will cease to remain under the composition scheme from the quarter following
the quarter in which the aggregate turnover exceeds threshold limit
Ans. (c) He will cease to remain under the composition scheme with immediate effect.

Indirect Taxes Committee