GST

Meaning
Indirect tax is the tax levied on the consumption of goods and services. It is not directly levied on the income of a
person. Instead, he/she has to pay the tax along with the price of goods or services bought by the seller.
Indirect tax is a tax that can be passed on to another individual or entity. Indirect tax is generally imposed on
suppliers or manufacturers who pass it on to the final consumer.
Examples of an Indirect Tax
Excise Duty, Customs Duty, Entertainment Tax, Service Tax, Sales Tax, Gross Receipts Tax  and Value-Added
Tax (VAT) are examples of Indirect taxes.

Different Types of Indirect Taxes

There are different types of indirect tax in India. However, after the implementation of GST, all these indirect
taxes were bundled into one singular tax for the citizens of India. We will have a look at the different types of
indirect tax in India:

1. Service tax: This tax is levied by an entity in return for the service provided by them. The service tax is
collected by the Government of India and deposited with them.
2. Excise duty: When any product or good is manufactured by a company in India, then the tax levied on
those goods is called the Excise Duty. The manufacturing company pays the tax on the goods and in turn
recover the amount from their customers.
3. Value Added Tax: Also known as VAT, this type of tax is levied on any product sold directly to customer
and are movable. VAT consists of Central Sales Tax which is paid to the Government of India State
Central Sales Tax which is paid to the respective State Government.
4. Custom Duty: This a tax levied on the goods imported to India. Sometimes, Custome Duty is also levied
on products which are exported out of India.
5. Stamp Duty: This is a tax levied on the transfer of any immovable property in a state of India. The state
government in whose state the property is located charges this type of tax. Stamp tax is also applicable on
all legal documents too.
6. Entertainment Tax: This tax is charged by the state government and is applicable on any products or
transactions related to entertainment. Purchasing of any video games, movie shows, sports activities,
arcades, amusement parks, etc. are some of the products on which Entertainment Tax is charged.
7. Securities Transaction Tax: This tax is levied during the trading of securities through Indian Stock
Exchange.

Features of Indirect Tax

Here are the key features of indirect taxes:

 Tax liability: The service provider or seller pays indirect taxes to the government, and the liability is
transferred to the consumer.
 Payment of tax: The seller pays indirect taxes to the government and the same is transferred to the
consumer.
 Nature: Indirect taxes were initially regressive in nature, but thanks to the implementation of the Goods
and Services Tax, they are now pretty progressive.
  Saving and investment: Indirect taxes are generally growth-oriented considering the fact that they
encourage consumers to save and invest.
 Evasion: It is difficult to evade indirect taxes because they are now implemented directly through
products and services.

Advantages of Indirect Tax

Here are the main advantages of indirect taxes

 Convenience: Indirect taxes do not burden the taxpayer and are convenient as they are paid only at the
time of making a purchase. Moreover, state authorities find it convenient to levy indirect taxes because
they are collected directly at the stores/factories which helps in saving a lot of time and effort.
 Ease of collection: Indirect taxes are easy to collect in comparison with direct taxes. Since indirect taxes are
only collected at the time of making purchases, the authorities need not worry about their collection.
 Collection from the poor: Those who earn less than Rs.2.5 lakh p.a. are exempt from income tax, which
means that they do not contribute to the government. Since indirect taxes are charged at the point of sale,
all individuals, regardless of the income tax slab under which they fall, contribute towards the growth of
the economy.
 Equitable contributions: Indirect taxes are directly related to the costs of products and services. What this
essentially means that the basic necessities attract lower rates of tax while luxury items are charged at
higher tax rates, thereby ensuring that contributions are equitable.
 Reduce Negative Consumption: The highest indirect taxes are placed on goods that are bad for our health,
like alcohol, tobacco and other similar products. Thus, they are more expensive which helps curb the
spending and consumption of such harmful commodities. 

Disadvantages of Indirect Tax

Some of the disadvantages of Indirect Tax are given below:

 Indirect Tax charged sometimes are cumulative. This means that in a point-based transaction system,
middlemen involved are likely to charge their own service tax which may result in the overall price of the
product increasing.
 Indirect Tax can be regressive in nature. For example, salt tax remains the same for both poor and rich,
However, if a rich person defaults the payment, then the penalties imposed will be higher as well.
 Indirect Tax are not industry friendly. Taxes are levied on raw materials and goods which in turn
increases the cost of production, thus not allowing industries to expand as their competitive capacity is
restricted.
 Indirect Tax is unpredictable: The amount of indirect taxes collected fluctuates. It is based on the buying
of goods and services. As a result, it is impossible for the government to predict how much money will be
raised through indirect taxes
History of GST in India
The history of the Goods and Services Tax (GST) in India dates back to the year 2000 and culminates in 2017 with
four bills relating to it becoming an Act. The GST Act aims to streamline taxes for goods and services across India.

GST History

The implementation of the Goods and Services Tax (GST) in India was a historical move, as it marked a
significant indirect tax reform in the country. The amalgamation of a large number of taxes (levied at a central
and state level) into a single tax is expected to have big advantages.One of the most important benefit of the move
is the mitigation of double taxation or the elimination of the cascading effect of taxation. The initiative is now
paving the way for a common national market. Indian goods are also expected to be more competitive in
international and domestic markets post GST implementation.

From the viewpoint of the consumer, there would be a marked reduction in the overall tax burden that is
currently in the range of 25% to 30%. The GST, due to its self-policing and transparent nature, is also easier to
administer on an overall scale.

When did GST start?

Several countries have already established the Goods and Services Tax. In Australia, the system was introduced
in 2000 to replace the Federal Wholesale Tax. GST was implemented in New Zealand in 1986. A hidden
Manufacturer's Sales Tax was replaced by GST in Canada, in the year 1991. In Singapore, GST was implemented
in 1994. GST is a value-added tax in Malaysia that came into effect in 2015.

History of GST in India

 2000: In India, the idea of adopting GST was first suggested by the Atal Bihari Vajpayee Government in
2000. The state finance ministers formed an Empowered Committee (EC) to create a structure for GST,
based on their experience in designing State VAT. Representatives from the Centre and states were
requested to examine various aspects of the GST proposal and create reports on the thresholds,
exemptions, taxation of inter-state supplies, and taxation of services. The committee was headed by Asim
Dasgupta, the finance minister of West Bengal. Dasgupta chaired the committee till 2011.
 2004: A task force that was headed by Vijay L. Kelkar the advisor to the finance ministry, indicated that
the existing tax structure had many issues that would be mitigated by the GST system.
 February 2005: The finance minister, P. Chidambaram, said that the medium-to-long term goal of the
government was to implement a uniform GST structure across the country, covering the whole
production-distribution chain. This was discussed in the budget session for the financial year 2005-06.
 February 2006: The finance minister set 1 April 2010 as the GST introduction date.
 November 2006: Parthasarthy Shome, the advisor to P. Chidambaram, mentioned that states will have to
prepare and make reforms for the upcoming GST regime.
 February 2007: The 1 April 2010 deadline for GST implementation was retained in the union budget for
2007-08.
 February 2008: At the union budget session for 2008-09, the finance minister confirmed that considerable
progress was being made in the preparation of the roadmap for GST. The targeted timeline for the
implementation was confirmed to be 1 April 2010.
 July 2009: Pranab Mukherjee, the new finance minister of India, announced the basic skeleton of the GST
system. The 1 April 2010 deadline was being followed then as well.
 November 2009: The EC that was headed by Asim Dasgupta put forth the First Discussion Paper (FDP) ,
describing the proposed GST regime. The paper was expected to start a debate that would generate
further inputs from stakeholders.
 February 2010: The government introduced the mission-mode project that laid the foundation for GST.
This project, with a budgetary outlay of Rs.1,133 crore, computerised commercial taxes in states.
Following this, the implementation of GST was pushed by one year.
 March 2011: The government led by the Congress party puts forth the Constitution (115th Amendment)
Bill for the introduction of GST. Following protest by the opposition party, the Bill was sent to a standing
committee for a detailed examination.
 June 2012: The standing committee starts discussion on the Bill. Opposition parties raise concerns over the
279B clause that offers additional powers to the Centre over the GST dispute authority.
 November 2012: P. Chidambaram and the finance ministers of states hold meetings and set the deadline
for resolution of issues as 31 December 2012.
 February 2013: The finance minister, during the budget session, announces that the government will
provide Rs.9,000 crore as compensation to states. He also appeals to the state finance ministers to work in
association with the government for the implementation of the indirect tax reform.
 August 2013: The report created by the standing committee is submitted to the parliament. The panel
approves the regulation with few amendments to the provisions for the tax structure and the mechanism
of resolution.
 October 2013: The state of Gujarat opposes the Bill, as it would have to bear a loss of Rs.14,000 crore per
annum, owing to the destination-based taxation rule.
 May 2014: The Constitution Amendment Bill lapses. This is the same year that Narendra Modi was voted
into power at the Centre.
 December 2014: India's new finance minister, Arun Jaitley, submits the Constitution (122nd Amendment)
Bill, 2014 in the parliament. The opposition demanded that the Bill be sent for discussion to the standing
committee.
 February 2015: Jaitley, in his budget speech, indicated that the government is looking to implement the
GST system by 1 April 2016.
 May 2015: The Lok Sabha passes the Constitution Amendment Bill. Jaitley also announced that petroleum
would be kept out of the ambit of GST for the time being.
 August 2015: The Bill is not passed in the Rajya Sabha. Jaitley mentions that the disruption had no specific
cause.
 March 2016: Jaitley says that he is in agreement with the Congress's demand for the GST rate not to be set
above 18%. But he is not inclined to fix the rate at 18%. In the future if the Government, in an unforeseen
emergency, is required to raise the tax rate, it would have to take the permission of the parliament. So, a
fixed rate of tax is ruled out.
  June 2016: The Ministry of Finance releases the draft model law on GST to the public, expecting
suggestions and views.
 August 2016: The Congress-led opposition finally agrees to the Government's proposal on the four broad
amendments to the Bill. The Bill was passed in the Rajya Sabha.
 September 2016: The Honourable President of India gives his consent for the Constitution Amendment
Bill to become an Act.
 2017: Four Bills related to GST become Act, following approval in the parliament and the President's
assent:
o Central GST Bill
o Integrated GST Bill
o Union Territory GST Bill
o GST (Compensation to States) Bill

The GST Council also finalised on the GST rates and GST rules. The Government declares that the GST Bill will be
applicable from 1 July 2017, following a short delay that is attributed to legal issues.

Tax Structure before GST

 Before the implementation of GST, taxation laws between the Centre and states were clearly demarcated.
There were no overlaps between the fiscal powers, whatsoever. The Centre would levy tax on goods
manufacture, except alcohol for consumption, narcotics, opium, etc.
 The states had the power to charge tax on the sale of goods.
 The Centre would levy the Central Sales Tax that was collected by the originating states.
 The Centre was also levying service tax on all types of services.
 Additionally, the Centre was charging and collecting additional duties of customs on goods that were
imported into or exported from India. This tax was levied in addition to the Basic Customs Duty. This
additional duty of customs is referred to as Countervailing Duty (CVD) and Special Additional Duty
(SAD) and it counter balances excise duties, state VAT, sales tax, and other such taxes.

The introduction of the GST regime made amendments to the Constitution so that the Centre and states are
empowered at the same time to levy and collect GST. This concurrent jurisdiction of the states and Centre also
requires an institutional mechanism that ensures joint decisions are taken about the structure and operation of
GST.

Decisions taken by GST Council

Some of the major decisions taken by the GSTC so far are:

 There would be four tax rates under the GST regime, i.e., 5%, 12%, 18%, and 28%. Some goods and
services were also classified as exempt from tax.
 A cess above the peak rate of 28% would be levied on certain sin and luxury goods.
  The administrative control over 90% of taxpayers with turnover less than Rs.1.5 crore would be with the
State tax administration. 10% of control would be with the Central tax administration.
 Administrative control over taxpayers having turnover above Rs.1.5 crore would be equally divided
between the State and Centre tax administration.

Key features of the GST regime

The GST system is characterized by the following features:

 GST is applicable on the "supply" of services or goods as opposed to the earlier concept of taxation on
goods manufacture, sale of goods, or service provision.
 GST is a destination-based tax structure unlike the origin-based structure that existed previously.
 CGST, IGST, and SGST/UTGST are levied at rates that would be mutually agreed upon by the states and
Centre.
 GST will replace the central taxes mentioned below:
o Duties of Excise (medicinal and toilet needs)
o Central Excise Duty
o Additional Duties of Excise (Goods of Special Importance)
o Additional Duties of Customs (CVD)
o Service Tax
o Special Additional Duty of Customs(SAD)
o Additional Duties of Excise (Textiles and Textile Products)
o Cesses and surcharges
 GST will subsume the following state taxes:
o Central Sales Tax
o Entry Tax
o State VAT
o Luxury Tax
o Purchase Tax
o Entertainment Tax, except that levied by local entities
o Taxes on lotteries and gambling
o Taxes on advertisements
o State cesses and surcharges
 Taxpayers with annual turnover of Rs.20 lakh is exempt from GST. For special category states, this cut-off
is Rs.10 lakh. An option of compounding is available to small-scale taxpayers with annual turnover of
Rs.50 lakh or below. The choice of threshold exemption and the compounding scheme are optional.
 Input credit of CGST shall be used only for paying CGST on the output. Similarly, input credit of
SGST/UTGST will be used only for the payment of SGST/UTGST. Therefore, the two channels of input
tax credit cannot be cross-utilised, except for the payment of IGST for inter-state supplies.

Benefits of GST Implementation

Key benefits of the GST announcement are detailed below:

1. As mentioned above, the GST system will create a common national market that boosts foreign
investment.
2. The cascading effect of taxation will be mitigated.
3. There will be uniformity in laws, rates of tax, and procedures across states.
4. The GST regime is expected to boost manufacturing activities and exports. This would, in turn, generate
more employment and lead to the growth of the economy.
5. Indian products would be more competitive in the international markets.
6. The GST system is likely to improve the overall investment climate in India.
7. Uniformity in the rates of SGST and IGST will reduce tax evasion to a large extent.
8. The average sales burden experienced by companies is expected to come down, thereby increasing
consumption and boosting subsequent production of goods.
9. GST is a simpler system of taxation with smaller number of exemptions.
10. There are automated and simplified methods for processes such as registration, refunds, returns of GST,
tax payments, etc.
11. All interactions will be handled by the common GSTN website.
12. The input tax credit process will be more accurate and transparent, as electronic matching will be
performed.
13. The final price of most goods will be lower when taxation is at the New GST rates. There will also be a
seamless input tax credit flow between the manufacturer, retailer, and supplier of service.
14. A huge segment of small-scale retailers may be either exempt from tax or may benefit from low tax rates
based on the compounding scheme. Consumers will further benefit if purchases are made from these
small retailers.
Subsuming of Taxes
 GST is commonly described as indirect, comprehensive, broad based consumption Tax.
 The Dual GST which would be implemented in India will subsume many consumption taxes.
 The objective is to remove the multiplicity of tax levies thereby reducing the complexity and remove the
effect of Tax Cascading.
 The objective is to subsume all those taxes that are currently levied on the sale of goods or provision of
services by either Central or State Government.
 Subsumation of large number of taxes and other levies will allow free flow of larger pool of tax credits at
both Central  and State level.
1. PRINCIPLES OF TAX SUBSUMATION
 The various Central, State and Local levies were examined to identify their possibility of being
subsumed under GST.
 While identifying, the following principles were kept in mind:
 Taxes or levies to be subsumed should be primarily in the nature of indirect taxes, either on the
supply of goods or on the supply of services.
 Taxes or levies to be subsumed should be part of the transaction chain which commences with
import/ manufacture/ production of goods or provision of services at one end and the
consumption of goods and services at the other.
 The subsumation should result in free flow of tax credit in intra and inter-State levels.
 The taxes, levies and fees that are not specifically related to supply of goods & services should not
be subsumed under GST.
 Revenue fairness for both the Union and the States individually would need to be attempted.

2. CENTRAL TAXES TO BE SUBSUMED IN GST

 On application of the above principles and various papers which have been released in this regard,
it is deduced that the following Central Taxes should be, to begin with, subsumed under the
Goods and Services Tax:
 Central Excise Duty (CENVAT)
 Additional Excise Duties
 The Excise Duty levied under the Medicinal and Toiletries Preparations (Excise Duties) Act 1955
 Service Tax
 Additional Customs Duty, commonly known as Countervailing Duty (CVD)
 Special Additional Duty of Customs – 4% (SAD)
 Surcharges and Cesses levied by Centre are also likely to be subsumed wherever they are in the
nature of  taxes on goods or services.
 This may include cess on rubber, tea, coffee, national calamity contingent duty etc. Central Sales
Tax to be phased out.

3. STATE TAXES TO BE SUBSUMED IN GST

Following State taxes and levies would be, to begin with, subsumed under GST
 VAT / Sales tax
 Entertainment tax (unless it is levied by the local bodies)
 Luxury tax Taxes on lottery, betting and gambling
 State Cesses and Surcharges in so far as they relate to supply of goods and services
  Octroi and Entry Tax Purchase Tax

4. TREATMENT OF SPECIFIC GOODS

 The Central Government tabled the 122nd Constitution Amendment Bill, 2014 (‘Bill’) on the
introduction of Goods and Services Tax (‘GST’) before the lower house of Parliament on December
19, 2014.
 On analysis of the Bill, the Bill contains the following treatment for the following specific goods
4.1     TAX ON SUPPLY OF THE ALCOHOLIC LIQUOR FOR HUMAN CONSUMPTION
4.2     TAX ON TOBACCO PRODUCTS
4.3     TAX ON PETROLEUM CRUDE/ HIGH SPEED DIESEL/ MOTOR SPIRIT/ NATURAL GAS/
AVIATION TURBINE FUEL
4.4     TAX ON NEWSPAPERS AND ADVERTISEMENT THEREIN GST

5. TAXES WHICH ARE NOT TO BE SUBSUMED

 GST may not subsume the following taxes within its ambit
 Basic Customs Duty:
 These are protective duties levied at the time of Import of goods into India.
 Exports Duty:
 This duty is imposed at the time of export of certain goods which are not available in India in
abundance. Road & Passenger Tax:
 These are in the nature of fees and not in the nature of taxes on goods and services.
 Toll Tax: These are in the nature of user fees and not in the nature of taxes on goods and services.
 Property Tax
 Stamp Duty
 Electricity Duty
 GST Council
The Goods and Service Tax Council is a constitutional body that advises the Indian Parliament. It provides
recommendations to the Union and State governments about issues related to Goods and Services Tax. To
provide these recommendations, it collects extensive data from the market on changes in demand for goods
and services.

The Goods and Services Tax Council (GST Council) comprises:

According to the Article 279A of the amended Constitution, the GST Council comprises the following
members:
Chairperson: Finance Minister
Vice Chairperson: He/she is chosen amongst the Ministers of State Government.
Members: The members of the GST Council are MoS (Finance) and all Ministers of Finance/Taxation of every
state.
Voting takes place when at least half of the members are assembled.
The Centre has one-third weightage, whereas the States have two-thirds of the total votes cast at the meeting.
The decision is taken by a 75% majority.
The Council shall make recommendations on anything related to the GST, including rules and rates, etc.
Functions of the Goods and Services Tax Council
The Council is required to make recommendations to the centre and the states on the following matters:

1. The taxes, cesses and surcharges levied by the centre, the states and the local bodies that would be merged
in GST.
2. The goods and services that may be subjected to GST or exempted from GST.
3. Model GST Laws, principles of levy, apportionment of GST levied on supplies in the course of inter-state
trade or commerce and the principles that govern the place of supply.
4. The threshold limit of turnover below which goods and services may be exempted from GST.
5. The rates include floor rates with bands of GST.
6. Any special rate or rates for a specified period to raise additional resources during any natural calamity or
disaster.
7. Special provision with respect to the states of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.
8. Any other matter relating to GST, as the Council may decide.

In addition, the council shall also recommend the date on which the GST may be levied on petroleum crude,
high-speed diesel, petrol, natural gas and aviation turbine fuel.

The Council also has to recommend the compensation to the states for the loss of revenue arising on account of
the introduction of GST for a period of five years. Based on the recommendation, the Parliament determines the
compensation.
Limitation of GST
Increased Costs
GST requires firms to upgrade their current accounting software to ERP or GST-compliant software in
order to keep their operations running. However, firms should keep in mind that purchasing, installing,
and training staff to utilize GST-compliant software can be costly. Furthermore, the expenses of
conducting business have risen significantly for both large and small enterprises, since they must now
hire tax professionals in order to become GST-compliant.
Increased Software Expenses
Prior to the implementation of the GST regime, most Indian businesses relied on basic ERP or
accounting software to manage their day-to-day operations. These software and solutions were
developed in compliance with the tax rules and structures in place at the time. Businesses are now
compelled to switch to more expensive GST-compliant software or specialized GST software as a result
of the implementation of GST. This indicates that operating costs will rise as a result of software
acquisitions and employee training.
Increased Tax Burden on SMEs
One of the most significant downsides of GST is that it has increased tax burdens for small and
medium-sized firms. This is because, under the previous tax structure, enterprises with annual sales of
more than Rs. 1.5 crores were required to pay excise. However, under the new tax structure, any
company with a total yearly turnover of more than Rs. 20 lakh is subject to taxation.
This tax system, however, includes a composition scheme for SMEs with a revenue of less than Rs. 1
crore. SMEs are simply required to pay 1% of their annual revenue under this system. However, if a
company decides to take advantage of this composition benefit, it cannot claim the input tax credit.
Difficult Migration to Online Filing System
Since the implementation of the new tax system, practically every part of the tax has been handled
online, from registration to filing tax returns. With the advancement of modern technology,
organizations are gradually adopting digital solutions. However, such solutions for tiny enterprises
receive little attention. Although the government’s online system is incredibly convenient for business
owners, it still has a steep learning curve that can be difficult for small enterprises.
Compliance Burden
Companies must now register with GST in all states where they operate under the new taxing regime.
Businesses must issue GST-compliant invoices, keep electronic records, and file returns as part of the
registration procedure. The expense of all of these services has significantly raised the strain on the
country’s small and medium-sized businesses. Furthermore, numerous firms are finding it difficult to
adjust to GST because all Indian states’ infrastructure is not ready to embrace e-governance.
Loss in the real estate sector
The advent of the GST has had a significant impact on the real estate industry. It has resulted in an 8%
increase in real estate prices. This has resulted in a 12% drop in property demand. However, it is
possible that this is a short-term trend that may not persist forever.
Standard Tax Rates and Multiple Rates of CESS
Instead of a simpler tax system, India’s GST Council implemented GST with five standard rates. Many
economists believe that this complicates rather than simplifies the structure.
Given India’s many states, each had its own challenges with GST rates. Each wants lower rates to be
implemented for certain items produced. As a result, the GST Council was forced to introduce
numerous tax rates under GST. Furthermore, GST was initially implemented with a tax rate as high as
28%. Despite this, the GST Council has been steadily lowering rates, and most items of daily use now
fall into the 0% to 5% tax category.
 Dual Control 
GST is referred to as a single taxation system, but in reality, it is a dual tax because both the state and
the center will collect separate taxes on a single sale and service transaction.
Hurried Implementation of GST
GST was implemented on July 1, 2017, in the midst of the fiscal year. This made it difficult for firms to
swiftly transition to a new tax framework. Following the prior regime’s tax laws for the first quarter of
2017 and sticking to the newly implemented GST for the remaining quarters posed compliance
challenges.
Income Tax Credit Mismatch
As the tax guard changes, the first few occurrences of application will result in large tax-paying at the
outset. However, when the loop is activated, they will only be allowed to use the tax input in the latter
phases. With such in place, there would be an ITC mismatch during the initial application of GST Tax.

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

government, it should have the following characteristics. 

 Supply should be of goods or services.
 Supply should be taxable. 
 Supply should be made by a taxable person.
 Supply should be made within a taxable territory.
 Supply should be made in exchange for cash or reward (consideration).
 Supply should be made in the course of business or in the interest of growing a business.

Supply of goods or services

When a transaction takes place, if there is a transfer of title of goods, then it is considered as supply of goods. For

example, when you buy a pen from a retailer, the ownership of the pen is transferred from the retailer to you, the

customer. 

When there is a transfer of right in goods without transfer of title, it is considered as supply of service. For

example, if you are availing transportation services, then the right of using the service is transferred to you, while

the ownership still stays with the transportation company.

Supply should be taxable

Supply of goods or services can either be taxable or tax-exempt. Taxable supplies are goods and services that

attract GST. Tax-exempt supplies include supply of goods or services that belong to a specific category mentioned

in the GST Act. 

Supply should be made by a taxable person

A taxable person is defined as a person who is registered under the GST, or is a liable to register, or a person who

has voluntarily registered.

Supply between two non-taxable people will not be considered as supply under GST.  
 If a person supplies goods or services in different states or has multiple business verticals, then they are required

to register separately for each state or vertical. Each of these registered entities will be considered as a taxable

person.    

Supply should be made within a taxable territory

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

Supply should be made in exchange for consideration

Consideration can be defined as a barter of goods or services, or payment made for a supply in money, or in kind.

A prepayment or deposit toward a supply is also as accepted as a consideration by the government.  

According to CGST Act, the following activities that will be treated as supply even if it is made without

consideration.  
 When a business permanently transfers or disposes its assets for which input tax credits have been availed.
 Supply made between two related or separate persons for business purposes.
 Supply of goods by an agent on behalf of the supplier or supply received by an agent on behalf of a customer.
 When a taxable person imports services from a related person, or from his or her own business outside of India
for business purposes.

Supply should be made in the course of business or in the interest of growing a business

GST is applicable only on business transactions. Hence, for a transaction to be a considered as supply under GST,

it has to be made for business purposes.

If supplies are made for personal purposes, it will not be considered as a supply under GST.    

What are the three components of supply under GST?

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

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

Types of Supply under Goods and Services Act (GST)

Classification of Types of Supply under GST

Supply under GST can be classified under the following basis:

1. On the basis of movement /flow

Supply of goods and services involves the presence of two parties which are part of the transaction where one is
the supplier and other is the recipient. When we classify supply on the basis of movement/flow we take into
consideration the point of view of either of the parties, the classification can be as follows:

(A) INWARD SUPPLY

When we talk about a person, 'inward supply' refers to the receipt of goods and services or both, whether by
purchase, acquisition or any other means with or without consideration.

(B) OUTWARD SUPPLY

When we talk about a taxable person, 'outward supply' refers to supply of goods and services or both, whether
by sale, transfer, barter, exchange, license, rental, lease or disposal or any other mode, made or agreed to be made
by such person in the course of furtherance of business.

2. On the basis of continuity

When we classify supply on the basis of repetition of transactions between the two parties, the classification can
be as follows:

(A) ONE TIME SUPPLY

Here, the transaction involving supply of goods and services between the parties occurs only once.

(B) CONTINUOUS SUPPLY

(i) CONTINUOUS SUPPLY FOR GOODS

According to Section 2(32) of CGST Act, 2017 'continuous supply of goods' means a supply of goods which is
provided, or agreed to be provided, continuously or on recurrent basis, under a contract, whether or not by
means of wire, cable, pipeline or other conduit, and for which the supplier invoices the recipient on a regular or
periodic basis.

(ii) CONTINUOUS SUPPLY FOR SERVICES

According to Section 2(33) of CGST Act, 2017 'continuous supply of services' means a supply of services which is
provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding
three months with periodic payment obligations.

3. On the basis of taxability

A transaction which qualifies to be a supply under GST need not qualify to be a taxable supply.

(A) TAXABLE SUPPLY

"Taxable supply refers to a supply of goods and services or both which is not leviable to tax under CGST Act." -
Section 2(108) of CGST Act, 2017.

(B) NON-TAXABLE SUPPLY

"Non - taxable supply means a supply of goods or services or both which is not leviable to tax under CGST Act or
under the IGST Act." - Section 2(78) of CGST Act, 2017.
(C) EXEMPT SUPPLY
"Exempt supply means a supply of any goods or services or both which attracts nil rate of tax or which may be
wholly exempt from tax under Section 11, or under section 6 of IGST Act, and includes non-taxable supply." -
Section 2(47) of CGST Act, 2017.

(D) ZERO RATED SUPPLIES

Supply of goods and services on which no tax is payable but Input Tax Credit pertaining to that supply is
admissible.

According to Section 16(1) of IGST Act, 2017, 'Zero rated supplies' means any of the following goods or services
or both :

(i) Export of goods of services or both.

(ii) Supply of goods or services to a Special Economic Zone developer or Special Economic Zone unit.

4. On the basis of geographical location

This classification considers movement of supply geographically which can be classified and explained as follows
:

(A) INTER-STATE SUPPLY

According to Section 7(1) of IGST Act, subject to the provisions Section 10 , supply of goods, where the location of
the supplier and the place of supply are in -

(i) Two different states;

(ii) Two different Union territories; OR

(iii) A state and a Union territory

shall be treated as supply of goods in this course.

Similarly in Section 7(3), subject to the provisions of Section 12, supply of services, where the location of the
supplier and the place of supply are in -

(i) Two different states;

(ii) Two different Union territories; OR

(iii) A state and a Union territory

shall be treated as supply of service in this course.

(B) INTRA-STATE SUPPLY

As per Section 8(1) of IGST Act, subject to the provisions of Section 10, supply of goods where the location of the
supplier and the place of supply of goods are in the same state or same Union territory shall be treated as intra-
state supply with respect to the fact that the following goods shall NOT be treated as intra- state supply which are
-

(i) Supply of goods to or by a Special Economic Zone developer or a Special Economic Zone unit;
(ii) Goods imported into the territory of India till they cross the customs frontiers of India; or

(iii) Supplies made to a tourist referred to in section 15.

(C) SUPPLIES IN THE TERRITORIAL WATERS

As per Section 9 of IGST Act, notwithstanding anything contained in this act, -

(a) Where the location of the supplier is in the territorial waters, the location of such supplier; or

(b) Where the place of supply is in the territorial waters, the place if supply, shall, for the purpose of this Act, be
deemed to be in the coastal state or Union territory where the nearest point of the appropriate baseline is located.

5. On the basis of goods supplied in conjunction

When two or more goods or services or both are supplied together a question arises on the tax payable as both
these goods or services or both may have different GST rates when sold separately. These goods supplied
together are called combination supplies which CGST Act classifies into the following:

(A) Composite Supply

According to Section 2(30) of CGST Act 2017, 'composite supplies' 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 bundles and supplied in conjunction with each other in the ordinary course of business, one
of which is principal supply.

(B) Mixed Supply

According to Section 2(74) of CGST Act 2017, '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 fir a single price
where supply does not constitute a composite supply.

Exempted supply
Exempted supply is defined in section 2(47) of GST Act. (47) “Exempt supply” means supply of any goods or
services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or
under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply.

It is the supply of goods and services that does not attract GST and allows no claim on ITC. Example: Bread,
fresh fruits, fresh milk and curd etc. Exempt supply is defined in section 2(47) of GST Act.

Aggregate Turnover under GST- Meaning, Inclusion and Exclusions

The term ‘aggregate turnover’ plays an important role in GST.
It decides: 1. Whether a person is liable for registration under GST
 Whether a person is eligible for opting Composition Scheme
 The term ‘aggregate turnover’ has been defined in GST law as under: “Aggregate Turnover”
means value of all taxable supply (excluding the value of inward supply on which tax is payable
by a person on reverse charge basis), exempt supply, export of goods or services or both and
 interstate supply of persons having the same permanent account number, to be computed on all
India basis but excludes central tax, state tax, union territory tax, integrated tax & cess.
 Aggregate turnover does not Include:- 1. Inward supply on which recipient is liable to pay tax
under reverse charge mechanism. The value of such supply would not form part of the ‘aggregate
turnover’ of the recipient of such supply. However, the value of such supplies would continue to
be part of the ‘aggregate turnover’ of the supplier of such services. 2. Central tax, state tax, union
territory tax, integrated tax & compensation cess.
 Aggregate turnover includes the following supplies:- 1. Taxable supplies; 2. Exempt supply: •
Supply that have NIL rate of tax; • Supply that are wholly exempt from tax under section 11, or
under section 6 of IGST Act. • Non-taxable supply 3. Export of goods or services or both; 4.
Interstate supply between units of a person having same PAN.
 The following aspects also need to be noted: 1. For an agent, the supplies made by him on behalf of
all his principals would be included while calculating aggregate turnover.
 For a job worker, the following supplies would not be included in his aggregate turnover:
 Goods returned to the principal √ Goods sent to another job worker on the instructor of the
principal
 Goods directly supplied from the premises of the job worker by the principal. >
 Aggregate turnover is to be calculated on all- India basis

What is the Time of Supply of Services under GST?

For any taxation system, time of taxation or point of taxation is of crucial importance. Point of taxation (POT)
refers to the point in time when tax is required to be paid for a taxable event. This is a mechanism which is used
to determine the point in time when the tax liability will arise.

One of the major changes which has occurred between the previous indirect taxation regime and currently in GST
is, the definition of taxable event. While earlier, the taxable event was sale / removal, currently it is supply.
Accordingly we need to revisit the time of taxation, and understand how the time of taxation under GST pans
out.

Time of taxation in previous regime

Under the previous indirect tax regime, the point of taxation was different for each type of tax:

 Manufacturing of goods (Central Excise): Removal of the excisable goods from the excise unit
 Rendering of services (Service tax): Earliest of date of receipt of payment or date of issue of invoice
 Sale of goods (VAT / CST): Actual sales of goods

Time of supply in GST

The time of taxation in GST is referred to as time of supply. Under GST, the taxable event is supply of goods and
services. The time - point of taxation of GST, when goods or services are supplied will be determined in terms of
the ‘time of supply’ provisions, laid down by the GST Council.

The time of supply provisions, which determine the point of taxation of goods and services, can be split into 2
parts:

 For goods & services on forward Charge

 For goods & services on reverse Charge

Time of supply of goods & services under forward charge

Forward charge is a mechanism in which the supplier has to levy tax and remit the same to the credit of the
central or state Government. Under the current tax regime, tax is levied and collected on most transactions using
the forward charge mechanism (also called Direct Charge).

Time of supply of goods under forward Charge

The liability of GST (CGST and SGST/UTGST or IGST, as applicable) will arise at the earliest of the following:

 Date of invoice: The date on which the supplier issues the invoice

 Due Date to issue invoice: The last date on which the supplier is required to issue the invoice with
respect to the supply of goods. In case of supply of goods involving the movement goods, the invoice
needs to be issued at the time of removal. In other cases, at the time of delivery of goods to the recipient.
 Receipt of payment: The date on which payment is received. The point of taxation in this case will be the
earliest of the date on which payment is accounted in the books of accounts of the recipient or the date on
which payment is credited to his bank account.

Time of supply of services under forward charge

The liability of GST (CGST and SGST/UTGST or IGST, as applicable) will arise at the earliest of the following

 Date of invoice: The date on which the supplier issues the invoice

 Due date to issue invoice: The last date on which the supplier is required to issue the invoice is 30 days
from the date of supply of services. In case of a banking company, the invoice has to be issued within 45
days from the date of supply of services.
 Receipt of payment: The date on which payment is received. The earliest of the date on which the
payment is accounted in the books of accounts or the date on which the payment is credited to his bank
account.
Time of supply of goods & services under reverse charge

Under the reverse charge mechanism, the recipient or buyer of goods or services has to pay tax to the credit of the
government unlike forwarding charge, where the supplier has to pay the tax. This mechanism has primarily been
introduced to ensure that the tax is collected on the sale of goods or services from various unorganised sectors.
This has helped the government to track and tax those taxable goods and services which were so far not traceable.

In the previous regime, the relevant taxes were applicable on goods and services under Reverse Charge. On
purchases of goods made from unregistered dealers, the recipient (registered dealer) of goods had to pay
purchase tax on a reverse charge basis. Similarly, on certain notified categories of services, the recipient had to
pay service tax on a reverse charge basis. The burden of tax liability under reverse charge, was applicable
completely on the recipient of service or partially on the service provider and the recipient of service, depending
on the nature of the service.

Time of supply of goods under reverse Charge

The liability of GST (CGST and SGST/UTGST or IGST as applicable) will arise at the earliest of the following:

 Date of receipt of goods: The date on which the goods are received by the recipient
 Date of payment: The date on which payment is made. The earliest of the date on which the payment is
accounted for in the books of accounts of the recipient or the date on which the payment is credited to his
bank account
 30 days from date of invoice: The date immediately following 30 days from the date of issue of invoice by
the supplier

Note: If for any reason, the above dates cannot be determined, then the time of supply will be the date of
recording the supply in the books of the recipient.

Time of supply of services under reverse Charge

The liability of GST (CGST and SGST/UTGST or IGST as applicable) will arise at the earliest of the following

 Date of payment : Earliest of date of payment entered in books of accounts or the date on which payment
is credited to the bank accounts
 60 days from the date of invoice: In case payment is not made by recipient to service provider within 60
days, the time of supply will the date immediately following the expiry of 60 days

ST rolled out on July 1 and yet there is still some ambiguity among the exporters on the possible impact of the new
regime on this industry.
The most significant change brought by the GST is taxable event is supply of goods/services or both unlike
removal of manufactured goods under the Excise regime.
GST on Exports – Levy
 The export of goods or services is considered as a zero-rated supply
 Also Supply of goods to Special Economic Zone is considered as a zero-rated supply
GST will not be levied on export of any kind of goods or services.
Exports of Goods
Types of Business we here consider important to discuss:
1. Manufacturer Exporter
2. Merchant Exporter
1."Manufacturer Exporter" means a person who manufactures goods and exports or intends to export such
goods. Here, the manufacturer exporter procures the export order and exports in their own name.
2. “Merchant Exporter" means a person engaged in trading activity and exporting or intending to export goods.
Merchant exporter procures the material from a manufacturer and exports in his firm’s name. Here merchant
exporter procures the order from international market. Merchant exporter does not have own manufacturing unit or
processing factory.
 
What is Export of Goods under GST? As per IGST Act Section 2(5) Export of goods with its grammatical variations and
cognate expressions, means taking goods out of India to a place outside India. Export means trading or supplying of
goods and services outside the domestic territory of a country.

 Export of Goods and Services

 Export of goods means taking goods out of India to a place outside India.
 Export of Services means when the supplier of service is located in India and the place of supply of
service is outside India.

2. Treatment of Exports under GST

1. Export of goods or services are treated as Zero rated supply i.e., the goods or services exported
shall be relieved upon them either at the input stage or at the final product stage.
2. Export of goods or services are treated as inter state supply in course of business.

3. Features of Export under GST scheme

1. The goods and services can be exported either on payment of IGST which can be claimed as
refund after the goods have been exported or under Letter of Undertaking (LUT) without payment of
IGST.
2. In case of goods and services exported under LUT, the exporter can claim refund of accumulated
ITC on account of export
3. The shipping bill filed with the customs is treated as an application for refund of IGST and shall be
deemed to have been filed after submission of export general manifest and furnishing of a valid
return in Form GSTR-3 by the applicant.

4. Place of Supply in case of Export of Goods

The Place of supply in case of Export of goods is the place where the goods have been exported to.
i.e., destination outside India

The Place of supply of Services shall be the location of recipient of the services. Unless the location of
the recipient of services is not available then the place of supply shall be the location of the supplier of
services.

5. Deemed Exports
Deemed Exports refers to those transactions in which goods supplied do not leave the country and the
payment for such supplies is received whether in Indian Currency or in Free foreign exchange.
 Registration under GST
Registration of an assessee or a ‘taxable person’ is the starting point in any tax law. It is the most
fundamental requirement of identification of the business for tax purposes and monitoring
compliance requirements.

CGST Act provides for registration of every supplier effecting the taxable supplies. Every supplier
having aggregate turnover exceeding ₹ 20 lakh in the financial year is required to be registered.
This threshold limit of ₹ 20 lakh is reduced to ₹ 10 lakh in cases of supplies effected in the States
of Himachal Pradesh, Uttarakhand, Manipur, Arunachal Pradesh, Assam, Jammu & Kashmir,
Meghalaya, Mizoram, Nagaland, Sikkim, and Tripura. For calculating the threshold limit, supply of
goods by a registered Job-worker after completing job-work, shall be treated as the supply of
goods by the "principal" and shall not be included in the aggregate turnover of the registered job-
worker.

Registration, under GST, is a State-wise requirement which means a person making supplies in
every State is required to be separately registered in that State once the threshold limit is crossed
taking to account supplies from all States. Such a person making taxable supplies from different
places in the State will be required to take one registration in the State, except in case of business
verticals in which case multiple registrations are permitted within a State. If a taxpayer supplies
from different places in the State, he has to opt for one place as “principal place of business” and
mention all other places in the State as “additional place of business” at the time of obtaining
registration. The application for registration will have to be made within 30 days from the date the
liability of registration arises.

A business vertical means a distinguishable component of an enterprise that is engaged in the

supply of individual goods or services or a group of related goods or services which is subject to
risks and returns that are different from those of the other business verticals and for this purpose
the following factors shall be considered:
  The nature of the goods or services;
 The nature of the production processes;
 The type or class of customers for the goods or services;
 The methods used for distribution of goods or supply of services; and
 The nature of regulatory environment (wherever applicable), including banking, insurance,
or public utilities.

All the existing taxpayers (under Excise, VAT or Service Tax) are not eligible for threshold limit
exemptions. They have to compulsorily migrate and obtain provisional registration from GSTN
before the appointed day, irrespective of the fact that their turnover is less than threshold limit
specified in the GST Law. However, such taxpayers can opt out from the provisional registration if
their supplies are not covered under GST or they are within the threshold limit.

Aggregate turnover is defined to mean the aggregate value of all taxable supplies, exempt
supplies, export of goods or services or both and inter-State supplies made by the person having
same Permanent Account Number to be computed on the all India basis. However, Central Tax
(CGST), State Tax (SGST), Union Territory Tax (UTGST), Integrated Tax (IGST) and Cess are not
to be included in such supplies. Further, value of inward supplies on which tax is payable on
reverse charge basis is also to be excluded.

A Special Economic Zone unit or developer shall make a separate application for registration as a
business vertical distinct from its other units located outside the Special Economic Zone.
A casual taxable person or a non-resident taxable person shall have to apply for the registration at
least 5 days prior to the commencement of business. A casual taxable person is one who
occasionally undertakes transaction involving supply of goods for services or both in the course or
furtherance of business in a State or Union Territory where he does not have fixed place of
business. A non-resident taxable person is one who occasionally undertakes transaction involving
supply of goods for services or both in the course or furtherance of business but not having fixed
place of business or residence in India.
PERSONS NOT LIABLE FOR REGISTRATION IN GST

CATEGORIES OF PERSONS WHO ARE REQUIRED TO BE REGISTERED

IRRESPECTIVE OF THE THRESHOLD

 Person making any inter-State taxable supply;

 Casual taxable person making taxable supply;
 Persons who are required to pay tax under reverse charge;
  Electronic commerce operator undertaking supplies on behalf of other suppliers (liable to
discharge tax liability for supply of services as may be notified)
 Non-resident taxable person making taxable supply;
 Persons who are required to deduct tax at Source under GST;
 Persons who supply goods or services or both on behalf of other registered taxable person
whether as an agent or otherwise;
 Input service distributor;
 Every electronic commerce operator;
 Every person supplying online information and database access or retrieval services from a
place outside India to a person in India, other than a registered taxable person;
 Such other person or class of persons as may be notified by the Central Government or a
State Government on the recommendations of the Council.

FOLLOWING PERSONS ARE NOT LIABLE FOR REGISTRATION

 Any person engaged exclusively in the business of supplying goods or services or both that
are not liable to tax or wholly exempt from tax under CGST or under the Integrated Goods
and Services Tax Act
 An agriculturist, to the extent of supply of produce out of cultivation of land
 Government may, on the recommendations of the Council, by notification, specify the
category of persons who may be exempted from obtaining registration under this Act.

Types of GST registration

1.
1. Normal taxpayers
Most businesses in India fall under this category.
Businesses whose turnover exceeds Rs 40 lakh in a financial year are required to register as normal taxable
people. However, the threshold limit is Rs 10 lakh if you have a business in the north-eastern states, J&K,
Himachal Pradesh, and Uttarakhand.
1.
1. Casual taxable individual
Occasional or seasonal businesses need to register their businesses under GST for this category. Businesses need
to make a deposit equal to the GST liability from the occasional operations.
The tenure for registration is 3 months. However, businesses can apply for renewal and extensions.

1. Non-resident taxable individual

Individuals who reside outside India but occasionally supply goods or services as agents, principals, or in other
capacities to Indian residents are liable to file for registration under this category.
The business owner must pay a deposit equal to the expected GST liability during the GST active tenure. The
normal tenure is 3 months. However, individuals can extend or renew the registration if required.

1. Composition registration
Businesses with an annual turnover of up to Rs 1 crore are eligible for registration under composition scheme.
Under this scheme, businesses have to pay a fixed amount of GST irrespective of their actual turnover.
Important facts about GST registration
 Any business that has a turnover of over 20 lakh INR is required to register for GST.
 If you are a supplier of goods to more than one state, you are required to register for GST in all the states
you supply goods.
 There is no registration fee for GST.
 Failing to file for GST will result in a fine of 10,00 INR or 10% of the due amount.
Procedure for GST registration
 The procedure to obtain a GST registration is easy and free. A taxpayer seeking a normal registration can visit the
GST portal and fill the registration Form GST REG-01.

o Visit GST portal
o Click on “Registration” under the “Services” tab and then click on “New registration”.
The application form is divided into 2 parts – Part A and Part B.

o Select the ‘Taxpayer’ as the type of taxpayer from the ‘I am a’ drop-down list.
o From the State/UT and District drop-down list, select the state and district for which registration is
required.
o In the Legal Name of the Business field, enter the legal name of the business/ entity as mentioned in the
PAN database.
o In the Permanent Account Number (PAN) field, enter PAN of the business or PAN of the Proprietor.
 In the email address field, enter the email address of the primary authorised signatory.
 In the mobile number field, enter the valid mobile number of the primary authorised signatory.
 Enter the captcha and click the ‘Proceed’ button.
 After completing the process, move to Part B. After verification, you will receive a Temporary Reference
Number (TRN). The TRN will be sent to the registered email address and mobile number.

Part B
 Click on ‘Services’ > ‘Registration’ > ‘New Registration’ option and select the Temporary Reference Number
(TRN) button to log in using the TRN.
 In the TRN field, enter the TRN generated and the captcha text shown on the screen. Then, click on ‘
Proceed.
Enter OTP sent on mobile or email in the verify OTP page. And, click on the ‘Proceed’ button.
The My Saved Application page is displayed. Under the Action column, click the Edit icon.
On the top of the page,registration application form with 10 tabs open. Click on each tab to enter the details like
business details, promoter/partner details, authorised signatory, principal & additional place of business, goods
& services detail, state information, aadhaar authentication and verification.
 Now click on ‘Save and continue’. Once the application is submitted, sign it digitally using DSC and click on
‘Proceed’
 After submission, you will receive an Application Reference Number (ARN) via email or SMS to confirm
your registration.

Documents required for GST Registration

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

The value of supply for a transaction is the price or consideration paid by the customer to the supplier. It includes

extra charges like shipping and handling, but it does not include GST.

Some actions that aren’t sales, such as stock transfers between two states, are still considered taxable transactions.

In these cases, the value of supply is the open market value, or the amount the goods are expected to sell for.

How is the value of supply determined?

As a general rule, the value of supply is the amount that was paid for the goods or services, minus GST. Because

some transactions are paid in cash while others are in trade or barter, there are two sets of rules for calculating the

value of supply.
 The General Valuation Rules apply to transactions where the buyer pays the whole price of the products or
services in cash.
o In this case, the value of supply is the total price or consideration paid, minus the GST on that amount.
o Value of Supply = Consideration - GST on Consideration
 The Special Valuation Rules apply to transactions where some or all of the payment is in trade instead of cash.
o Completely non-cash payment 
o If the buyer pays entirely in trade and no cash, the value of supply is the open market value of the products
or services, minus the GST on that amount.
o Value of Supply = OMV - GST on OMV
Partially non-cash payment
o If the buyer pays partially in cash and partially in trade, the value of supply is the cash price paid plus the
open market value of the traded products or services, minus the GST on that total amount.
o Value of Supply = (Monetary Consideration + In-kind Consideration) - GST on Total Consideration   
Note: The value of supply includes cess, billable expenses, subsidies, penalties, and all taxes except GST (and
any other charges that may or may not be included in the price of the goods and services supplied). 
Inclusions in the Value of supply
There are certain elements which is required to be included in the value of taxable supply. We will understand all
the elements step by step as under-
 Taxes, duties, cesses, fees and Charges
 Amount incurred by recipient on behalf of supplier
 Incidental expenses and amount charged for activities done before delivery
 Delayed payment charges
 Subsidies

Exclusions in the Value of supply

There are two types of discount which is required to be excluded from the value of supply.

Discount given on or before supply

Discount given after the supply
Transaction value is the price actually paid(or payable) for the supply of goods/services
between un-related parties (i.e., price is the sole consideration) The value of supply under
GST shall include:

 Any taxes, duties, cess, fees, and charges levied under any act, except GST. GST
Compensation Cess will be excluded if charged separately by the supplier.

 Any amount that the supplier is liable to pay which has been incurred by the recipient
and is not included in the price.

 The value will include all incidental expenses in relation to sale such as packing,
commission etc.

 Subsidies linked to supply, except Government subsidies will be included.

 Interest/late fee/penalty for delayed payment of consideration will be included.

What is a Tax Invoice?

Section 31 of the CGST Act has made it mandatory for every registered supplier to issue a tax invoice for every

supply of goods or services. If the supplier is unregistered, the buyer needs to issue a payment voucher and a tax

invoice.

Meaning of a tax invoice

All registered taxpayers are required to issue a tax invoice to their customers. A tax invoice primarily contains

details of goods sold, quantity, taxes charged, and taxable value. It is primary evidence based on which a

customer can claim an input tax credit. 

Contents and format of a tax invoice

A tax invoice should ideally contain the below details:

 1 Supplier name and contact  1 Customer name and contact 2 Tax invoice number

 4 PAN and GSTIN of the supplier and customer 5 Date of issue of invoice 6 Place of supply of goods

 7. Tax rate, HSN code and tax amount 8. Description of goods sold

 9. The taxable amount, along with the gross value of goods sold 10 Discount given Applicability of RCM

 Signature of supplier or his authorised representative

There are various templates available in the market for issuing a tax invoice. A taxpayer can use these templates

and customise the same based on its business and industry needs. This will help to build brand image. An

invoicing generating tool can also be used to create invoices. This reduces manual entry and, in turn, improves

efficiency. Refer to this page for detailed formats of a tax invoice.

Why is it necessary to use a tax invoice?

Issuance of tax invoices is essential to evidence the supply of goods or services. A tax invoice should be issued at

the time of supply by all registered GST taxpayers. From a buyer’s point of view, receipt of tax invoice for goods

purchased or services availed is essential to claim the input tax credit. Further, a tax invoice is also essential for

various financial reporting purposes.

Also, under GST, tax is charged at the time of supply. Thus, the date of issue of the invoice is an important

indicator of the time of supply. Time of supply of goods is the date of invoice or receipt of payment, whichever is

earlier.

What is considered a tax invoice in India?

A tax invoice is considered a legal document in India that the supplier should issue to the customer on the sale of

goods. Here, the buyer is not the consumer. Hence, a tax invoice is issued and not a retail invoice. It should

contain all the details as mentioned in the above section. 

Comparison between tax invoice and receipts

The supplier issues both tax invoices and receipts to the customer. An invoice is sent to demand payment for

goods sold or services rendered. In contrast, a receipt is issued as evidence of payment made. Both invoice and a

receipt usually contain the same data.

Time limit to issue a tax invoice

The time limit for issuing an invoice depends upon the type of supply that is whether it is a supply of goods or

supply of services:

For supply of goods

For the supply of goods from one place to another, a tax invoice shall be issued on or before the time of transfer.

If it does not involve a transfer of goods from one place to another, the supplier can issue a tax invoice when the

goods are delivered to the recipient.

For supply of services

A tax invoice shall be issued within 30 days from the date of supply. If the supplier is a bank or an insurance

company, then the invoice must be issued within 45 days from the date of supply.

How many copies of the tax invoice are to be issued?

For supply of goods

 Original invoice- It is sent to the customer and is marked as “original for the recipient.”

 Duplicate copy- This is sent to the transporter and is marked as “duplicate for transporter”. A transporter is

required to show this invoice as evidence during the transport of goods.

 Triplicate copy- The supplier keeps this copy for its use and is marked as “triplicate for supplier”.

For supply of services

 Original invoice- It is sent to the customer and is marked as “original for the recipient.” 

 Duplicate copy- The supplier keeps this copy for its use and is marked as “duplicate for supplier”.

What is a GST Return?

A GST return is a document containing details of all income/sales and/or
expenses/purchases that a GST-registered taxpayer (every GSTIN) is required to file with
the tax administrative authorities. This is used by tax authorities to calculate net tax liability.
Under GST, a registered dealer has to file GST returns that broadly include:

 Purchases
 Sales
 Output GST (On sales)
 Input tax credit (GST paid on purchases)

To file GST returns or for GST filings, check out the Clear GST software that allows the
import of data from various ERP systems such as Tally, Busy, custom Excel, to name a few.
There is also the option to use the desktop app for Tally users to directly upload data and
file.

Types of GST Returns and Due dates

GSTR-1

GSTR-1 is the return to be furnished for reporting details of all outward supplies of goods and services made. In

other words, it contains the invoices and debit-credit notes raised on the sales transactions for a tax period. GSTR-

1 is to be filed by all normal taxpayers who are registered under GST, including casual taxable persons. 

Any amendments to sales invoices made, even pertaining to previous tax periods, must be reported in the GSTR-

1 return by all the suppliers or sellers registered under GST. 

The filing frequency of GSTR-1 is currently as follows:

(a) Monthly, by 11th* of every month- If the business either has an annual aggregate turnover of more than Rs.5

crore or has not opted into the QRMP scheme.

(b) Quarterly, by 13th** of the month following every quarter- If the business has opted into the QRMP scheme.

*Till September 2018, the due date was the 10th of every month. 

**Till December 2020, was the end of the month succeeding the quarter.

GSTR-2A

GSTR-2A is a view-only dynamic GST return relevant for the recipient or buyer of goods and services. It contains

the details of all inward supplies of goods and services i.e., purchases made from GST registered suppliers during

a tax period. 

The data is auto-populated based on data filed by the corresponding suppliers in their GSTR-1 returns. Further,

data filed in the Invoice Furnishing Facility (IFF) by the QRMP taxpayer, also get auto-filled. 

Since GSTR-2A is a read-only return, no action can be taken in it. However, it is referred by the buyers to claim an

accurate Input Tax Credit (ITC) for every financial year, across multiple tax periods. In case any invoice is

missing, the buyer can communicate with the seller to upload it in their GSTR-1 on a timely basis.

It was used frequently for claiming ITC for every tax period until August 2020. Thereafter, the buyers are

required to refer to the GSTR-2B, a static return, to claim the input tax credit for every tax period. However, some

taxpayers still find referring to the GSTR-2A beneficial at the time of filing the annual GST return.
GSTR-2B

The GSTR-2B is again a view-only static GST return important for the recipient or buyer of goods and services. It

is available every month, starting in August 2020 and contains constant ITC data for a period whenever checked

back. 

ITC details will be covered from the date of filing GSTR-1 for the preceding month (M-1) up to the date of filing

GSTR-1 for the current month (M). The return is made available on the 12th of every month, giving sufficient time

before filing GSTR-3B, where the ITC is declared.

The GSTR-2B provides the action to be taken against every invoice reported, such as to be reversed, ineligible,

subject to reverse charge, references to the table numbers in GSTR-3B.

GSTR-2

GSTR-2 is currently a suspended GST return, that applied to registered buyers to report the inward supplies of

goods and services, i.e. the purchases made during a tax period. 

The details in the GSTR-2 return had to be auto-populated from the GSTR-2A. Unlike GSTR-2A, the GSTR-2

return can be edited. GSTR-2 is to be filed by all normal taxpayers registered under GST. However, the filing of

the same has been suspended ever since September 2017.

GSTR-3

GSTR-3 is again currently a suspended GST return. It was a monthly summary return for furnishing summarized

details of all outward supplies made, inward supplies received and input tax credit claimed, along with details of

the tax liability and taxes paid. 

This return would have got auto-generated on the basis of the GSTR-1 and GSTR-2 returns filed. GSTR-3 is to be

filed by all normal taxpayers registered under GST, however, the filing of the same has been suspended since

September 2017.

GSTR-3B

GSTR-3B is a monthly self-declaration to be filed, for furnishing summarised details of all outward supplies

made, input tax credit claimed, tax liability ascertained and taxes paid. 

GSTR-3B is to be filed by all normal taxpayers registered under GST. The sales and input tax credit details must
be reconciled with GSTR-1 and GSTR-2B every tax period before filing GSTR-3B. GST reconciliation is crucial to

identify mismatches in data, that may lead to GST notices in future or suspension of GST registration as well. 

The filing frequency of GSTR-3B is currently as follows:

(a) Monthly, 20th* of the succeeding month- For taxpayers with an aggregate turnover in the previous financial

year of more than Rs.5 crore or have been otherwise eligible but still opted out of the QRMP scheme.

(b) Quarterly, 22nd of the month following the quarter for ‘X’** category of States and 24th of the month

following the quarter for ‘Y’** category of States- For the taxpayers with aggregate turnover equal to or below

Rs.5 crore, eligible and remain opted into the QRMP scheme.

* Effective from January 2021 tax period onwards.

** ‘X’ category States/UT – Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu,

Telangana or Andhra Pradesh or the Union territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry,

Andaman and Nicobar Islands and Lakshadweep.

‘Y’ category States/UT- Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim,

Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand or Odisha or the

Union Territories of Jammu and Kashmir, Ladakh, Chandigarh and New Delhi.

GSTR-4

GSTR-4 is the annual return that was to be filed by the composition taxable persons under GST, by 30th April of

the year following the relevant financial year. It has replaced the erstwhile GSTR-9A (annual return) from FY

2019-20 onwards.

Prior to FY 2019-20, this return had to be filed on a quarterly basis. Thereafter, a simple challan in form CMP-

08 filed by 18th of the month succeeding every quarter replaced it. 

The composition scheme is a system in which taxpayers dealing with goods and having a turnover up to Rs.1.5

crores can opt into and pay taxes at a fixed rate on the turnover declared. Further, the service providers can avail

a similar scheme as per CGST (Rate) Notification 2/2019 dated 7th March 2019 if their turnover is up to Rs.50

lakh.
GSTR-5

GSTR-5 is the return to be filed by non-resident foreign taxpayers, who are registered under GST and carry out

business transactions in India. The return contains details of all outward supplies made, inward supplies

received, credit/debit notes, tax liability and taxes paid. 

The GSTR-5 return is to be filed monthly by the 20th of each month under GSTIN that the taxpayer is registered

in India.

GSTR-5A

GSTR-5A refers to a summary return for reporting the outward taxable supplies and tax payable by Online

Information and Database Access or Retrieval Services (OIDAR) provider under GST.

The due date to file GSTR-5A is the 20th of every month.

GSTR-6

GSTR-6 is a monthly return to be filed by an Input Service Distributor (ISD). It contains details of input tax credit

received and distributed by the ISD. It will further contain details of all documents issued for the distribution of

input credit and the manner of distribution.

The due date to file GSTR-6 is the 13th of every month.

GSTR-7

GSTR-7 is a monthly return to be filed by persons required to deduct TDS (Tax deducted at source) under GST.

This return will contain details of TDS deducted, the TDS liability payable and paid and TDS refund claimed if

any. 

The due date to file GSTR-7 is the 10th of every month.

GSTR-8

GSTR-8 is a monthly return to be filed by e-commerce operators registered under the GST who are required to

collect tax at source (TCS). It contains details of all supplies made through the e-commerce platform, and the TCS

collected on the same. 

The GSTR-8 return is to be filed on a monthly basis by the 10th of every month.
GSTR-9

GSTR-9 is the annual return to be filed by taxpayers registered under GST. It is due by 31st December of the year

following the relevant financial year, as per the GST law. It contains the details of all outward supplies made,

inward supplies received during the relevant financial year under different tax heads i.e. CGST, SGST & IGST

and a summary value of supplies reported under every HSN code, along with details of taxes payable and paid. 

It is a consolidation of all the monthly or quarterly returns (GSTR-1, GSTR-2A, GSTR-3B) filed during that

financial year. GSTR-9 is required to be filed by all taxpayers registered under GST. 

However, there are few exceptions such as taxpayers who have opted for the composition scheme, casual taxable

persons, input service distributors, non-resident taxable persons and persons paying TDS under section 51 of the

CGST Act. 

Note: As per the CGST notification no. 47/2019, later amended, the annual return under GST for taxpayers

having an aggregate turnover that does not exceed Rs.2 crore has been made optional for FY 2017-18, FY 2018-19

and FY 2019-20.

GSTR-9A

GSTR-9A is currently a suspended annual return earlier required to be filed by composition taxpayers. It had a

consolidation of all the quarterly returns filed during that financial year. 

Ever since GSTR-4 (annual return) was introduced from FY 2019-20, this return stands scrapped. Prior to that,

GSTR-9A filing for composition taxpayers had been waived off for FY 2017-18 and FY 2018-19.

GSTR-9C

GSTR-9C is a self-certified reconciliation statement between the books of accounts and the GSTR-9 that is to be

filed by every registered person under GST whose turnover during a financial year exceeds the prescribed limit

of Rs.5 crore. The deadline to file this statement is the same as the due date prescribed for GSTR-9, i.e., 31st

December of the year following the relevant financial year.

GSTR-9C is to be filed for every GSTIN, hence, one PAN can have multiple GSTR-9C forms being filed. 
GSTR-10

GSTR-10 is to be filed by a taxable person whose registration has been cancelled or surrendered. This return is

also called a final return and has to be filed within three months from the date of cancellation or cancellation

order, whichever is earlier.

GSTR-11

GSTR-11 is the return to be filed by persons who have been issued a Unique Identity Number (UIN) in order to

get a refund under GST for the goods and services purchased by them in India. UIN is a classification made for

foreign diplomatic missions and embassies not liable to tax in India, for the purpose of getting a refund of taxes.

GSTR-11 will contain details of inward supplies received and refund claimed.  

Late filing of GST Returns

Return filing is mandatory under GST. Even if there is no transaction, you must file a Nil return.

There are few points to note:

 You cannot file a return if you do not file the previous month/quarter’s return.

 Hence, late filing of GST return will have a cascading effect leading to heavy fines and penalty.

 The late filing fee of the GSTR-1 is populated in the liability ledger of GSTR-3B filed immediately after such

delay.

Interest and Late fee to be paid

 Interest is 18% per annum. It has to be calculated by the taxpayer on the amount of outstanding tax to be

paid. It shall be calculated on the net tax liability identified in the ledger at the time of payment. The time

period will be from the next day of filing due date till the actual date of payment.

 As per the CGST Act, the late fee is Rs.100 per day per Act. So it is Rs.100 under CGST & Rs.100 under

SGST. The total shall be Rs.200/day. However, there is a maximum levy of Rs.5,000 per Act. There is no

late fee separately prescribed under the IGST Act. For GSTR-9/9C, the maximum late fee per Act is capped

at 0.25% of turnover in the state or Union Territory. Please note that the amount of late fees can be reduced

due to relief schemes provided by the government. Please check the individual return pages to stay up to

date on the latest late fees.

 To learn more about late fees charged across the GST Return periods, read our article on late fees under

GST.
Section 37 – Furnishing details of outward supplies

Every registered person, other than an Input Service Distributor, a non-resident taxable person and a person
paying tax under the provisions of section 10 or section 51 or section 52, shall furnish, electronically, 1[subject to

such conditions and restrictions and] in such form and manner as may be prescribed, the details of outward
supplies of goods or services or both effected during a tax period on or before the tenth day of the month

succeeding the said tax period and such details 2[shall, subject to such conditions and restrictions, within such
time and in such manner as may be prescribed, be communicated to the recipient of the said supplies]

the Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit for
furnishing such details for such class of taxable persons as may be specified therein:

further that any extension of time limit notified by the Commissioner of State tax or Commissioner of
Union territory tax shall be deemed to be notified by the Commissioner.

Every registered person who has been communicated the details under sub-section (3) of section 38 or
the details pertaining to inward supplies of Input Service Distributor under sub-section (4) of section
38, shall either accept or reject the details so communicated, on or before the seventeenth day, but not
before the fifteenth day, of the month succeeding the tax period and the details furnished by him under
sub-section (1) shall stand amended accordingly.
(3) Any registered person, who has furnished the details under sub-section (1) for any tax period and
which have remained unmatched under section 42 or section 43, shall, upon discovery of any error or
omission therein, rectify such error or omission in such manner as may be prescribed, and shall pay the
tax and interest, if any, in case there is a short payment of tax on account of such error or omission, in
the return to be furnished for such tax period:

Section 38 – Furnishing details of

inward supplies
CGST ACT 2017

(1)  The details of outward supplies furnished by the registered persons under sub-section (1) of section
37 and of such other supplies as may be prescribed, and an auto-generated statement containing the
details of input tax credit shall be made available electronically to the recipients of such supplies in such
form and manner, within such time, and subject to such conditions and restrictions as may be
prescribed.

(2) The auto-generated statement under sub-section (1) shall consist of––

(a) details of inward supplies in respect of which credit of input tax may be available to the recipient; and

(b) details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by the
recipient, on account of the details of the said supplies being furnished under sub-section (1) of section
37,––

(i) by any registered person within such period of taking registration as may be prescribed; or

(ii) by any registered person, who has defaulted in payment of tax and where such default has continued
for such period as may be prescribed; or

(iii) by any registered person, the output tax payable by whom in accordance with the statement of
outward supplies furnished by him under the said sub-section during such period, as may be prescribed,
exceeds the output tax paid by him during the said period by such limit as may be prescribed; or

(iv) by any registered person who, during such period as may be prescribed, has availed credit of input
tax of an amount that exceeds the credit that can be availed by him in accordance with clause (a), by
such limit as may be prescribed; or

(v) by any registered person, who has defaulted in discharging his tax liability in accordance with the
provisions of sub-section (12) of section 49 subject to such conditions and restrictions as may be
prescribed; or
(vi) by such other class of persons as may be prescribed.]

Section 39 – Furnishing of returns.

CGST ACT 2017

(1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a
person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar
month or part thereof, furnish, a return, electronically, of inward and outward supplies of goods or
services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form
and manner, and within such time, as may be prescribed:

2
 “Provided that the Government may, on the recommendations of the Council, notify certain class of
registered persons who shall furnish a return for every quarter or part thereof, subject to such conditions
and restrictions as may be specified therein.”

(2) A registered person paying tax under the provisions of section 10, shall, for each financial year or part
thereof, furnish a return, electronically, of turnover in the State or Union territory, inward supplies of
goods or services or both, tax payable, tax paid and such other particulars in such form and manner, and
within such time, as may be prescribed.

(3) Every registered person required to deduct tax at source under the provisions of  section 51 shall
furnish, in such form and manner as may be prescribed, a return, electronically, for the month in which
such deductions have been made within ten days after the end of such month.

(4) Every taxable person registered as an Input Service Distributor shall, for every calendar month or part
thereof, furnish, in such form and manner as may be prescribed, a return, electronically, within thirteen
days after the end of such month.

(5) Every registered non-resident taxable person shall, for every calendar month or part thereof, furnish,
in such form and manner as may be prescribed, a return, electronically, within  2[thirteen]  days after the
end of a calendar month or within seven days after the last day of the period of registration specified
under sub-section (1) of section 27, whichever is earlier.

(6) The Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit
for furnishing the returns under this section for such class of registered persons as may be specified
therein:

Provided that any extension of time limit notified by the Commissioner of State tax or Union territory tax
shall be deemed to be notified by the Commissioner.

GST Penalty For Failure To Furnish Information In

GST Return under GST Law
Section 150 of CGST Act require some person to file an information return in specified cases. Section 123 of the
CGST Act provides that if a person who is required to furnish an information return fails to do so within the period
specified in the notice thereof, the proper officer may direct that such person shall be liable to pay a penalty of
one hundred rupees for each day of the period during which the failure to furnish such return continues:

Provided that the penalty imposed under this section shall not exceed five thousand rupees.

Section 151 gives a power to Commissioner to ask any person to provide information required by him for
collection of statistics. Section 124 of the CGST Act provides that if any person required to furnish any information
or return under section 151,—

(a)        without reasonable cause fails to furnish such information or return as may be required under that section,
or

(b)       wilfully furnishes or causes to furnish any information or return which he knows to be false.

A fine which may extend upto Rs. 10000 and a further fine which may extend to Rs. 100/ day of default subject to
maximum of Rs. 25000 may be imposed on such person.

What are the offences under GST?

When has anyone committed an offence under GST?

There are 21 offences under GST. For easy understanding, these have been grouped into
heads as given below:

Fake or wrong invoices:

 A taxable person supplies any goods/services without any invoice or issues a false
invoice.

 He issues any invoice or bill without supply of goods/services in violation of the

provisions of GST

 He issues invoices using the identification number of another bonafide taxable person

Fraud:
 He fails to supply information that is required to be supplied under the Act or submits
false information* 

 He submits fake financial records/documents or files fake returns to evade tax

 Does not provide information/gives false information during proceedings

Tax evasion:

 He collects any GST but does not submit it to the government within 3 months

 Even if he collects any GST in contravention of provisions, he still has to deposit it to

the government within 3 months. Failure to do so will be an offence under GST.

 He obtains a refund of any CGST/SGST by fraud.

 He takes and/or utilizes input tax credit without actual receipt of goods and/or services

 He deliberately suppresses his sales to evade tax

Supply/transport of goods:

 He transports goods without proper documents

 Supplies/transports goods that he knows will be confiscated

 Destroys/tampers goods that have been seized

Others:

 He has not registered under GST although he is required to by law

 He does not deduct TDS or deducts less amount where applicable.

 He does not collect TCS or collects less amount where applicable.

 Being an Input Service Distributor, he takes or distributes input tax credit in violation of
the rules
 He obstructs the proper officer during his duty (for example, he hinders the officer
during the audit by tax authorities)*

 He does not maintain all the books that he required to maintain by law

 He tampers with or destroys any material evidence*

*In Budget 2023, it was proposed that these offences be removed/decriminalised from the
CGST Act. The same will come into force once notified by the CBIC.

For the 21 offences above, for fraud cases, penalty will be 100% (minimum Rs. 10,000)

For cases mentioned in 1, 2 under fake invoicing and 4th under both tax evasion and others
heads, the penalty is equal to the tax evaded or ITC availed or passed on.