J INTRODUCTION TO INDIRECT TAX CHAPTER OUTLI Introduction of taxes What are taxes ? . Features of Indirect Taxes Merits and Demerits of Indirect Taxes . Types of Indirect Taxes Self Test Exercises 1. INTRODUCTION OF TAXES Constitution of India has the right to collect and levy taxes. In Article 245 of the Constitution, it is stated that only two bodies uphold the power for enacting laws i.e. the Parlian d the Legislature. Article 245 states that : sject to the provisions of this Constitution, Parliament may make laws for the whole or ‘of the territory of India, and the legislature of a State may make laws for the whole tof the state. 4 mi by the Parliament shall be deemed to be invalid on the ground that it would orial operation.Penis INTRODUCTION TO INDIRECT Tax Article 246 gives Union and State Government rights for levying tax. Seventh Schedule to Article 246 states three lists which enumerate the matters under hich the Union and the State Governments have the authority to make laws. w ‘SEVENTH SCHEDULE To’ ARTICLE 246 OF THE INDIAN CONSTITUTION List II State List List: Union List: It contains the matters in respect of which the Parliament (Central Government) has the exclusive rightto make laws. ListI : State List : It contains the matters in respect of which th exclusive right to make laws. ListII : Concurrent List : It contains the matters in res pect of which both the Central and State Government have the exclusive rightto make laws. le State Government has the 2. WHAT ARE TAXES ? Accharge which is mandatory imposed by the Government on income earned by individual or Services or any activity in order to raise re i corporate, ‘es, such as income tax, property tax, capital gain tax, Service tax, value added tax, excise duty tax, GST ete, Taxes are divided into two parts: 21 DirectTax 2.2 Indirect Tax_ TAXES & INDIRECT TAXES a GST 1.3 Direct Taxes Indirect Taxes Ultimate burden of Ultimate burden of Tax Payment : Purchaser Tax: Payment —> | Responsibility to Pay Tax Responsibility to Pay | Tax : Shopkeeper | [Example come Tax] When youbuy stuff, the shopkeeper is responsible for tax payment, but he can collect from you. When you earn income, you are responsible for tax payment, and you also have the burden 21 Direct Tax : Taxes which are paid directly to the government are known as direct tax. It cannot be transferred to another person. Income tax, Corporate Tax, Capital Gain tax, Property tax etc. are considered as direct tax. Direct taxes may be adjusted to the individual characteristics of the taxpayer. Under this system government collects the tax from the person on whom tax it is imposed. Under direct tax system, the taxpayer and tax bearer are the same person. Direct tax is progressive in nature which means that if the income increases, percentage of tax charged will also increase. i.e. tax payers in the higher tax bracket have to pay higher rate of tax. 22 Indirect Tax : A tax whichis collected by the intermediary from the person who bears the burden of tax and then pays the taxes to the government is known is indirect tax. It can be transferred to another person. Sales tax, value added tax (VAT), excise tax, GST are the few types of indirect taxes. Indirect taxes are collected by supplier of goods and services and are paid by the consumer of goods and services. Thus, the burden of tax is shifted to the final consumer. indirect tax is regressive in nature i.e. all the consumers have to bear the burden of tax tive of their capacity to bear tax. Under indirect tax system, tax payer and tax bearer are snt persons. aote ere INTRODUCTION To INDIRECy Ny Wades (3) The incidence of tax is borne the end consumer. it Means th; the person who pays tax to thet government collects it from his Customer, It is regressive in Nature The incidence of tax is borne by the person who pays tax to the Government. It is Progressive in nature, Burden of tax is borne by person Burden of tax is shifted to other himself. person, 3. FEATURES OF INDIRECT TAXES Charged from the final consumer of ‘goods and services, Collected by intermediary and deposited to government, It falls both under central and state government depending upon the specific type of tax. For example, VAT is levied by state government where as CST by central, ‘Sovernment. Now, GST by both State and Central Government. Applied on all the sections of ‘society whether rich or poor. The price of the product on which indirect taxes are imposed increases. Incidence and impact of tax does not fall on same entity. Ad Valorem tax and Specific tax, of which Ad Valorem (VAT, GST) il ional and Specific taxis fixed. vvv wv_- guts AND DEMERITS OF INDIRECT TAXtS ME GST 15 4. MERITS AND s DEMERITS OF * ERITS OF INDIRECT TAXES 4d Merits of Indirect Taxes IRECT TAXES: a Convenient + Indirect Taxes are | * le ; ‘These taxes are imposed on the Rais ‘on production and sale of goods and services. fit thelr burdens of taxes are tr facturers, traders and sellers of goods and services, EGinvenient becariss taxes are eal a to the final consumers. Tax payers feel it erect taxes tre paid in ae at the time of purchase of goods and services. Secondly, greater due to the fact that ms Cae and at intervals, But the convenience Is even Peal enaloe’ pil Wa axis “price coated”, Its wrapped in price. Itis like a sugar Fisica convenient for the State Government also, as taxes can be lump sum and even at the ports or at the factory. Difficult 3 s i i b ee re + Almost, selling price of all the products is inclusive of taxes. , the c omer has no option to evade the indirect taxes. Itcan only be evaded if goods and services are not consumed which is not possible. anne : Indirect taxes have more coverage as compare tO direct taxes. most all the goods and services carry indirect taxes. ‘The taxes are to be paid by the consumers of such goods and services. d. Elastic :Some ofthe indirect taxes are elastic in nature. Government increases the taxes, if perity indirect taxes produce huge it feels that more revenue is required. In times of pros} revenues to the government. e. Universality: Poor people are always exempted from pay as prescribed by law. But Indirect taxes have to be pail ying direct tax due to less income id by both rich and poor class of people. fi Influenceon Pattern of Production : Every product produced or services rendered have a different indirect tax rate. By imposing. different taxes better allocation of resources can be achieved. For example : luxury goods carry the highest rate of taxes, making them expensive. Thus, government can divert resources from these sectors to sector producing necessary goods. May not affect motivation to work and save : The indirect taxes may not affect the most of the indirect taxes are not progressive in motivation to work and to save. Since, them. In other words, indirect taxes are generally individuals ‘would not be demotivated to work and tosave, nature, individuals may not mind to pay regressive in nature. Therefore, which may increase investment. Welfare for the society + The indirect taxes collected by the government are utilized inthe activities such as giving education, medical facilities, transportation, family welfare etc. iets which are harmful for seco impose heavy taxes on the produ as 10 minimize the alcohol etc. It hel to keep a check and t a ect substantial government to colleSy INTRODUCTION To INDiRE GST 1.6 Tax 4.2 Demerits of Indirect Taxe: Although indirect taxes have become quite popular in both develo Ped & under devely counties alike they suffer fom various demerits, of which the following are important: 4. High Cost of Collection : Indirect tax fils to satisty the pr government has to set up elaborate machinery to administer in of tax collection per unit of revenue raised is generall indirect taxes. inciple of economy, The direct taxes, Therefore, coy y higher in the case of most Of the Fate of indirect ta \crease income disparities among the rich and the poor. For example: Salt tax fell more heavil ly on the poor than on the rich, as both have to pay the same price. The tax is ‘Wrapped in the price which is unfair, Affects Consumption : Uncertainty : Indirect taxes are often demand are particularly uncertain, sin up due to the imposition of tax. In fact not bring in more revenue. Possibility of evasion of indirect taxes as some ith the support of sellers. For instance, individuals } and therefore, may not pay Sales tax or VAT (Value Services without abill, and therefore, may evade the service Customers may not pay indirect taxes wi ; = = Ez = 2 the tax is imposed on the consumption of goods, it increases the prices and lowers the standard of lvinginthe country. k. Cause of Unemployment demand, production of goods f the goods are taxed at higher rates, it lowers the effective andemployment,-— ECT TAXES, res oF NOR cst 1.7 5. TYPES OF INDIRECT TAXES 5.1 INDIRECT TAXES BEFORE INTRODUCTION OF GST sur Pur sur Excise Service ur: a ee |enarge |] var [Hf tase taxury YEO | Pare One yy cst Coss Tax fax PPT | Pa coss 5.1 INDIRECT TAXES BEFORE INTRODUCTION OF GST A, CENTRALTAX B, STATETAX A Central Sales Tax (CST) : Central Sales tax is being introduced in the sixth Constitutional Amendment CST is levied on the interstate trade under the purview of the legislative jurisdiction of Parliament. It came into force in 1957, Interstate sale means that the seller is in one state and the buyer is in another state. It is a tax which is levied at the time of the sale of CST goods which are sold through inter-state trade. It is an origin based tax on customers. It is collected by the state where the good is being sold. Itis imposed only on interstate sale whereas sale within the state or import / exportof goods does not fall under this category. CST is payable on inter-State sales is @ 2%. if C formis obtained. Even if CST iscl ‘enue goes to State Government. State from which movement of Union Government, theNS cstis INTRODUCTION TO IIRC} Tax goods commences gets revenue. CST Act is administered by State Government. A trader dealing in goods which involve inter-state trade is expected to pay both the stay sales tax and the central sales tax on such transactions. A2 Central Excise Duty : Central Excise Duty is one of the types of Indirect Tax which is applicable on the goods either manufactured or produced in India and intended to be consumed within India. Excise Duty tax is imposed on the manufacturer or producer of the goods but is always transferred to the end consumer, Excise duty tax is always wrapped up in selling price of the good. Excise Duty tax can be classified into two categories ) Ad valorem : Ad valorem duty tax is charged on particular goods and services, b) Specific: Specific duty tax is charged as fixed Rupees amount on certain purchase Government also charges excise duty on the goods that are harmful for the society, like cigarettes and alcohol. Therefore, these taxes are also called a 20 4 eee | \ Central | excise Duty fixed percentage taxes. New name given to Excise Duty Tax is CENVAT (Central Value Added Tax) A3- Service Tax : Tax which is imposed by the gov. Services to the customers is known as service tax, Servi on all services except the services specified in the Negative List of Services. Apart from this, Service Tax Exemption is allowed to small Scale service providers if the total value of services provided by them during the yearis less than & 10 Lakhs Service taxis levied on the service provider but is actually charged by the customers. Hence, it comes under the category of indirect taxes, It ame into existence under the Finance Act 1994,We have to pay tax on almost on all the services availed by us. For example, service tox is charged on telephone bills, banking services, event management, consultancy service, advertising, beauty parlor, health center, architect, restaurants, short term accommodation by hotels ete. When the service is while if provided to companies then on accru ernment on service providers for giving ce tax is imposed year is more than & 10 lakhs AA Custom duty & Octroi (On Goods) : Custom Duty is levied on all the goods that are imported in India and some ofthe selected a that are exported from India. Duties that are imposed on imported goods are termed as import duty where as duties imposed on exported goods> ERE custom puty & OCTROI (ON Goons) oe GST 1.9 A specific: Specific duties, re imposed aces we ‘ed according to the qua ‘ os 2 10 the quantity or weight of the goods. : wand duty : When custom duty is imposed various other factors, then it isknown as a combination of the value as well as . 4s compound dut In India, Custom Duty is defined under the Cust ; 902 gat falls under the Central Board of Indirect loms Act 1962. All matters related to custom intent of Revere of he Minis pace 'ustom (CBIC), which is adivision of the bern orxyngof lst die i “ pales CBIC formulates policies that concern y custo ; coedecions eltedtcstos Fae a mi Ia ec Almost all the goods which a ee be ee imported in India have to pay the Import Duty ax. Still Cod Ree ving drugs or equipments, fertilizers, food grain etc on which no import duty isimposed. Import duty is further divided in sub categories b Basic sm Duty : Itis imposed on the goods imported u/s 12 of the Custom Act 1962 Seana ety +Itis imposed on the goods imported u/s 3 of Custom Tariff Act, - 'y imposed on the similar goods prod hin Indi a the Additional Custom Duty. goods produced within India is same as Protective duty : Protective duty may be imposed to shield the domestic industry against imports at the rate recommended by the Tariff Commissioner. iv. Anti-dumping duty : Anti-dumping duty may be imposed if the goods being imported is at below fair market price, and is limited to the difference between export and normal price (dumping margin). y. Safeguard Duty : Safeguard duty is levied if the government feels that a sudden increase in import can potentially damage the domestic industry. Octroi: Octroi is tax applicable on goods entering into municipality or any other jurisdiction for use, consumption or sale. In simple terms one can call itas Entry Tax. B, STATETAX BA Entry Tax + Entry tax was introduced on 1" September 2000. It is atax or fee charged by the state government on the movement of goods from one state to another in India. Itis levied by the recipient state to protect its tax base. The tax applies to dealers, industrial, commercial or trading undertakings, central and state government companies firms, societies and clubs which carry on business. This tax has now been subsumed by the GST. B2 Taxes on Lottery : Before te introduction of GST , service tax was charged on thesaleof lottery tickets, Now it has been merged into GST. B3. Value Added Tax / Sales Tax (VAT/ST) : Value Added Tax was introduced in India in 2005. In the beginning years of introduction of VAT few states such as Gujarat, Tamil Nadu, Rajasthan, Madhya Pradesh, /\ Chhattisgarh, Jharkhand, Uttarakhand & Uttar Pradesh did not opted for VAT. but in 2014 almost every state and union territories in India had opted for value added tax system except Andaman, Nicobar islands and Lakshadweep Island. Value Added Tax is imposed on the intrastate sale ie., when state Under such system both the buyer and the seller of the goods belong '0 the same state. As the sale takes place within theGST 1.10 the name suggests itis levied on the product whenever value is added ata stage of Produey ion ag atthe point of retail sale 7 VAT is paid by the producer to the government bat it is setaly Customers or end users who purchase the goods. It is a multistage tax which ig of production of goods and services making the taxation sy’ imposed on domestic as well as imported goods. VAT was introduced to avoid double taxation system. The amount of VAT that the user pays is the cost of the product, less ANY of the ey Collected fy, levied at eve the Stem more transparen, Var? Avis ‘materials used in the product that have already been taxed. VAT= Output tax— Tnput tax, For example : Suppose Mr. X spends T 10,000 o purchases wheat flour to bake bread, Tax levieg isog Mr. X has to pay & 1000s tax. Mr. X spends further € 5,000 to convert wheat flour to bread. Now, the ag Costhim & 15,000. Keeping ® 5,000 as a profit margin, he sol the bread to thecustomer for & 20.000 plus, tay 110%. The customer paid Mr. X the tax of€ 2,000. Thus output taxis 82,000 and ‘nputtaris& 094 So,final VAT payable by Mr. X is € 1,000 % 2,000 1,000) Sales Tax + Sales tax is body om the sale of good! OF we can say that customer Pay sales tax when they purchases Boods and services. Its collected by the retailers, whole gents and passed on to the governing body (government), Sales $ ‘aX is not levied on all the goods and services. There ae certain TAX goods and services which are exempted from it. Sales tax is charged on the movable goods. Union Government has an authority to interstate sale, while state government has an authority to charge sales tax State) sale, Sales can be broadly classified in nthree categories BA Luxury Tax Tax levied on | ot considered essential) is known y Tax. It was introduced in LUXURY 1056. Luxury tox is modeled alter sales tax or VAT. Luxury tax is charged asa percentage onallitems of aparticular clos, Luxurytaxdoes — TAX notaffect the majority of people, it mainly affects the wealthy class ofthe Entiat Its so because wealthy people mostly buy luxury items like expensive cars, jewelery et. Luxury taxis imposed only ifthe amount of Purchase crosses the certain limit. Lux Ury goods have high income clasticity of demand. With the increase in consumption tax paid to the governing Is and services. Itis levied at a point of sale charge sales tax on On intra state (within luxury goods and services (which are e, and also sports by \ sranting (ax exemption. Entertainment means any exhibitor perfor- mance, amusement . €4me, sport oF race, (including horse race) and cinematographic exhibitions. The liability x ‘0 collect entertainment tax “~~ a- “centAINWENT TAX ost 1.11 BS jom the patrons and to deposit the same with the Government lies with the proprietors / manizess of entertainments. Cinemas are the main source of revenue from Entertainment Tax. oft 6 securities Transaction Tax (STT) : Whenever ceourities: afe purchased or sold through Indian Stock securities Transaction ws ange Securities Transaction Tax isimpose, Securities ped hares, debentures, mutual funds ete. Securities = action Tax was introduced in 2004 budget and was applicable from Ist April, 2004. Securities Transaction Tax was introduced with an aim to reduce the short term capital gain tax and to eliminate tax on the long term capital gains. i327 Stamp Duty : Whenever an immovable property located in a state is transferred in another's name then the State Government imposes an indirect tax known as stamp duty. Government also imposes such tax on all legal documents. Every state has an authority to charge different tax rate. p.8 Taxes on Advertisements : In the success of any business. advertisements play a very important role. As per survey, approximately 0.45% of the Indian GDP was spent on advertisement in the year 2018. After the introduction of service tax on all services (other than those covered under negative list), service tax was applicable on all the aspects of advertising services except the sale of space or time for advertisement in some instances. But, now GST is applicable on all modes of advertising including the sale of space in printmedia. 52. INDIRECT TAXES AFTER INTRODUCTION OF GST A. Goods & Service Tax(GST) —_B. Custom Tax AL Goods & Service Tax (GST) : Goods & Service Tax is implemented in India from July 2017. Itis a single indirect tax with an aim to make the nation a unified common market. It is levied by the government on the both goods & services provided by the supplier to the consumer. 4 T has subsumed many indirect taxes which are imposed by both og Central Government and State Government. Indirect taxes such as Central Excise duty, Duties of Excise, ‘Additional Duties of Excise, Additional duties of Customs, Service tax, Central surcharges, Cess, Value Added tax, Entry Tax, Central Sales Tax, Entertainment and Amusement Tax. Luxury Tax and Purchase Tax are subsumed into single tax system GST. The consolidation of several different taxes into one is forecast to help the country move forward by eliminating the cascading of taxes. The reform is also set to pave the way for a common national market, thereby making Indian commodities and services increasingly competitive in both local as well as global markets. GST is a destination based tax. i. CGST: Excise Tax. ADE. Service Tax. Surcharge & Cess T : VAT Purchase, Tax. Luxury Tax, Entry Tax, Surcharge & Cess ST : CVD&SAD,CSTGST 1.12 INTRODUCTION To Wotkicy Ay B. Custom Tax : Already discussed on page No. 8 inthis chapter. 6. SELF TEST EXERCISES, 6.1 Multiple Choice Questions : 1, Which of the following tax will be abolished by the GST ? a) Service Tax b) Income Tax ©) Wealth Tax 4) Corporation Tax 2. Whattype of indirect tax is applicable to music producers/music directors? a) VAT b) Entertainment tax ©) Wealth tax d) Service tax 3. MrAisa transport service provider. He provides his service for delivering goods from one place y another. Heis liable to pay : a) Salestax b) Excise duty ©) Service tax 4) Noneofthe above 4. GST stands or : a) Governmentsales tax b) Goverment service tax ©) Goods & service tax 4) Goods & sales tax 5. Final burden of indirect taxes falls on a) Manufacturer b) Trader c) Retailer d) Consumer fAns.: (a) 2.(d) 3.(c) 4(c) $.(d)] 6.2 Theory Questions : 1. Whatis the difference between direct and indirecttax ? 2, Whattax system does India adopts before implementation of GST? 3. Whenis stamp duty charged by the State Government? 4, Does Luxury tax affect al categories of people? Explain giving the suitable example. 5. Which goverment charges entertainment tax? Whats the main source ofcollectingit? 6. Why was GST introduced in India? 7. Whichall taxesare submerged under GST? 8. Whatdo you understand by service tax? 9, Whatis the difference between VAT and CST? 10. Whatis custom duty and when itis applicable? 11, Whatisthe Securities Transaction Tax? 12, Whatisthe difference between the excise duty and the sales tax? SeWN GST — AN INTRODUCTION CHAPTER OUTLINE |. Introduction to GST - 1A01 2. Features of GST 14.03 GST Council 7 1A.05 Decision making in GST Council 1A.05 1A.06 Importance of GST 1A.06 3. 4. 5. Functions / Role of GST Council 6. 7, . Disadvantages of GST ses 14.07 8. Types of GST os 1A.08 9, Difference Between CGST, SGST, UTGST & IGST 1A.11 10. How will GST work ? _— IAI 11. GST Legislation ses 1A.12 12. Need of GST in India 1A.13 13. Goods not covered under GST = 1A.13 14, Working of GST . 1A.13 15. Goods & Services Tax Network (GSTN) 1A.16 16. Solved Problems wee 1A.17 . Self Test Exercises os 1A.18 ; ag J oS” 1. INTRODUCTION GST is an indirect tax. Ithas been introduced in India on Ist July 2017. Itis a single indirect tax with an aim to make the nation a unified common market. It is levied by the government on the both goods and services provided by the supplier to the consumer. [tis applicable on whole of India. It covers the area of both Indian land and water (up to 200 nautical miles Inside Sea is part of Indian sea water). GST is one indirect tax for the entire country: So, in pre GST era, the pattern of imposing indirect taxes was as followsSt GST 1A2 OST AW Itt, FA Ea ~ | | Imporer of goods : ‘Manufacturer of goods Wholesaler in Delhi sells goog | Import Duty is charged. Central Excise Tax & to retailer in Haryana VATICST is charged. Re Customer in Haryana buys Retailer in Haryana sells goods | VAT is charged. to customer in Haryana, | VAT is charged. After introduction of GST, the pattern of imposing indirect tax isas follows: Importer of goods: Manufacturer of goods ‘Wholesaler in Delhi sells IGST & custom GST is charged. goods to retailer in Haryana, duty is charged. GSTs charged. Ee Et Customer in Haryana buys Retailer in Haryana sells goods GST is charged. to customer in Haryana GsTis charged, In India, it is based on dual GST model. It means that both Central Government as well as State Government will levy tax simultaneously on the common base amount. GST is sub divided into four different types @ SGST - State GST, collected by the State Govt, CGST - Central GST, collected by the Central Govt. ¢ IGST _ - Integrated GST, collected by the Central Govt. on supply of inter- state goods and services. ¢ UTGST - Unionterritory GST, collected by union territory government. Note : India is a Union of States. The territory of India Comprises of the territories ofthe State and the Union Territories. Currently, there are 28 States and 8 Union Territories; of which, three (Dethi, Jammu & Kashmir and Pondicherry) are having legislature.a ypsUMED UNDE GST 1A3 R GST. st Central Government & me. Indirect indirect taxe a nae taxes which are imposed by both any indirect taxes are now under a single taxation regin se duty, Additional Duties of Excise, Additional duties of Customs. ‘ax, Central Sales Tax ST ess as Central xe8 3 herees Gl te ce Ws Central Surcharges, Cess, Value Added tax, Entry T pvertanment Tax, Luxury Tax and Purchase Tax are subsumed into single tax system @ Tax Subsumed under GST CVD & sed on supply of all goods and s e and ends when the supply reaches to the customer ST. At every stage benefit of je value GST is the only tax which is impo: ervices within whole India, GST starts at the manufacturing stag se manufacturer, whole seller, retailer and dealer all charges G input tax credit is provided to the supplier of goods and services, GST is charged on th addition at every stage. GST has helped to mitigate the double taxation, cascading and a multiplicity of taxes. ‘The consolidation of several different taxes forward by eliminating the cascading of taxes. common national market, thereby making Indian commoditi competitive in both local as well as global markets. GST is ade: that the tax is collected by the State where goods are consumed. 2. FEATURES OF GST Canadian value added tax system is the main source of direction many taxes just to avoid complexities. Under this system all the goods auniform rate. Features of GST are broadly classified as under : 2.1 Dual tax system : GST is having two components - one nal be levied by the Central Government, and other as State G: concerned State. Hence, GST will be charged only as CGST into one is forecasted to help the country move The reform is also set to pave the way for a gly of GST. Itisa blanket over ‘and services are charged at med as Central GST which will ST which will be levied by the and SGST/UTGST.GST 1A.4 GST - AN INTRopy tp N 2.2. Applicability of GST : Goods & Service tax (Central GST & State GST) would be a len ” eg 23 onal dealings of goods and services in the country except those which are exempted op outside the purview of GST or dealings are below the threshold limit as prescribed by tay. Destination based tax system : GST is based on the destination of consumption at a time sale and supply of goods & services to final consumer. and not at various points, It implieg that SGST is applicable on the state in which the final consumer of goods and servicey lives 2.4 Common indirect tax : With the introduction of GST all the indirect taxes such as Var 2: 2 2 2, CST, service tax, excise tax etc. are replaced by only one tax i.e. GST. No hidden rate : GST is based on the direct rate system. No additional taxes Such as cess etc. would be applicable. Only one rate would be there. Central GST and State GST rates ae prescribed appropriately Collection of GST : GST would be collected by two governments i.e. State Sovernment and Central government. It means that 50% of the Prescribed rate will be paid to the central government and remaining 50% to the state government. Responsibility of collection of GST : Since the responsibility is being divided between both state & central government, so there would be no dispute among both the government, 8 Goods and Service Tax Network (GSTN) : Central and State government has jointly set, not for profit Non Government company named as Goods and Services Tax Network (GSTN) whose job is to share IT infrastructure and services among the Central and State Government, stakeholders and lastly the tax payers an a g 2.9 Reduce Complexity : GST will be the uniform indirect tax levied throughout the country. 2. Due to this single indirect tax, there will be less complexity and people can adopt it very easily. 10 Computation on the basis of invoice credit method : The liability under GST will be on the basis of invoice credit method (CENVAT) which means that credit will be allowed on the basis of invoice issued by the suppliers. 2.11 Input tax credit set off Since, both Central GST & State GST are treated separately, credit L Of CGST willbe used against the tax amount payable of CGST only and creditof SGST will beused against the tax amount payable of SGST only. No internal credit will beallowed to set off between Central GST and State GST except in case of interstate supply of goods and services under which IGST model will be applicable, Separate details are to be maintamned inthe books regarding the input tax credit utilization or refund) by taxpayer or exporter. 2 Administration of GST : The introduction of GST has bought more ansparent and Corruption free tax administration system. Due to the dual GST system, Centre and States would have parallel jurisdiction. Keeping in mind the need of tax payer's convenience, functions such as assessment, enforcement, scrutiny and audit would be undertaken by the authority which iscollecting the tax, with information sharing between the Centre and States. 3 Goods & Service Tax Council : Both Central and State government will have a joint forum named as GST council, Recommendations on important issues like tax rates, tax exemption list, threshold limits ete will be issued by the council (by virtue of proposed Article 246A of the constitution) to Union and States government. One-half of the total number of Members of the Council will constitute the quorum of GST council._ al cess : GST IAS reshold Exemption : Suppliers : uv faulted onall India bane aa 8 whose annual turnover is fess than ® 20 lakh Se Tpara WoUTd be exempted ye RPS he tte Manipur. Meru, Nagaland ST. Suppliers of goods whose annual turnover is lates es au India basis) and % 20 Lakhs in the States of > Meghala S Tripura and Uttarakhand woul Cjuzonm, Nagaland, Puduchery, Sikkim, be exempted from GST jess than € 40 Lakhs (calcul Arunachal Pradesh, Manipur Tela ; The uniform proc jysUniform TM procedure will be followe: e al, re reironottthCenalGSTanSuteGst ame cen i fo of GST : Periodic nyer 46 Return eriodical Teturns are to be submitted by the taxpayers as per the forms prescribed by the GST Authorities, ; 3. GST COUNCIL Aspetarticle 279 A of the amended Constitution, a joint forum of the Centre and the States is made. This joint forum GST COUNCIL isknown as Goods & Service Tax Council (GST Council), tis are an apex constitutional body. It was constituted by the President within 60 days of the commencement of Article279A. GST Council is the main decision-making body that has teen formed to finalize the design of GST. 31 Formation of GST Council : The provisions relating to GST Council came into force on 12th September, 2016 and were issued on 10th September, 2016. President constituted the GST Council on 15th September, 2016. Members of GST Council : The governing body of GST Council consists of the following member, namely : a, theunion Finance Ministeris the Chairperson; b. the Union Minister of State in charge of Revenue or Finances the Member; c. the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government are the Members. Note: . The Secretary of Revenue Department will be appointed as Ex-Officio Secretary tothe GST Council ‘The Chairperson of Central Board of Indirect tax and Customs(CBIC) will be the permanent invitee inal the proceedings ofthe GST Council who will not have the voting rights. ‘One post of Additional Secretary to the GST Council in the GST Council Secretariat (at the level of Additional Secretary to the Government of India) will be created. Four posts of Commissioner in the GST Council Secretariat (at the level of Joint Secretary to the Government of India) will also be created. ey Pro se si) pores eee Thecome was Sechar andi gid the stes andor nies arate eemption i 4, DECISION MAKING IN GST COUNCIL Tomake any GST Council meeting valid, minimum of 50 percent of the total number of the "embers should be present atthe meeting.GST 1A6 Every decision of the GST Council shall be taken at a meeting, by three-fourth of the weighted votes of the members present and voting, following principles, namely majority of ni IM accordance vin a, the vote of the Central Government shall have a weightage of one. third of the, Votes cast, and Me the votes of all the State Governments taken together shall have a w thirds of the total votes cast, in that meeting, Each state has one vote, ittespectiyg af size or population, b. Cightage of, Any act, decision or proceedings shall not be declared as inv lid on the basis Of a, remaining deficiency atthe time of establishment of GST Council i.e, ) © if'there isany vacancy remained in the Council ¢ ifthereis any defect in the constitution of Council © ifthereisany defectin the appointment ofa person as a member of the Councij . ifthere is any procedural non-compliance, 5. FUNCTIONS / ROLE OF GST COUNCIL As per Article 279 A(4), the GST Council shall make Fecommendations to the Union ag States on importantissues related to GST, such as- a. taxes, cesses, and surcharges levied by the Centre, States & local bodies Which may bg subsumed in the GST; s + goods and services which may be subjectedto, orexempted from GST; model GST laws, principles of levy, Apportionment of IGST and Principles that gover the place of supply; 2 } threshold limitoftumover below which goods Fates including floor rates with bands of GST: SPechal aes to raise additonal resources during any natural calamity: special provision with respect to Arunachal Pradesh, Jammu & Kashmir, Meghalaya, Mizoram, Nag; Manipur, land, Sikkim, Tripura, Himachal Pradesh & Uttarakhand: . ‘anyother mates related to Goods & Service Tax as council may decide. 6. IMPORTANCE OF GST The entire country isin the win situation withthe inttoduetion of GST. Everyone like Consumer, Government and the stakeholders of industry is being benefited with, GST. Cost of 800ds and services will be lower, goods and services will become Competitive around the globe and it will also boost the Indian Economy, Some of the advantages of GST are mentioned below a. Easy Compliance: GST regime in India is based ona robust and comprehensive IT system. Therefore, it has made easy forthe ta online. Now, the taxpayers can do the following services online: registrations, filing of returns, making tax payments etc This would make compliance easy and transparent Similarly, with the help of GST ith s become simpler and easier to administer thanall other indirect taxes ofthe Centre and State levied so far Creation of integrated national market : The main of GST is to make complete Indias and services may be exempted from GST. eree re- ayantaces or GST . GST 1A7 common market having only one c ‘omMmon tax rate and removing all the economic barriers thus paving the way for an unifi ed national market. In other words, an assessee can do the pusiness in any part of the country, a . " ¥. a8 taxes will be 5 , gee of doing busines. Xes Will be neutral, irrespective of the choice of D E Mitigation of ill effects of cascading : B) subsuming most of the Central and State tax : into a single tax and by allowing a set off of es a prior stage taxes for the transactions across the nocaxaan] Pre value chain, it would mitigate the ill te effects of cascading, improve competitiveness and improve liquidity ofthe businesses. [ Goods & Sones] a Elimination of multiple taxes and double — taxation : Almost all the existing indirect Transparency in taxes such as VAT, CST, excise tax, enter- ne Seen tainment tax, luxury taxes etc of both Central and State Government will be subsume into single tax i.e GST. This tax will be uniformly applicable on all goods and services throughout India. GST will also remove the double taxation from the system helping the consumers in paying less tax than before. e, Boost to ‘Make in India’ initiative : Initiative of GST will help in reducing the cost of roduction in the domestic market, which will result in making the product price competitive around the globe. With the help of GST India's ranking in "Ease of Doing. Business" will also improve. It will create more market for the product in the intemational market which will increase the exports and focusing tow ‘ards the growth of an economy. f, Buoyancy to the Government Revenue : GST is expected to bring buoyancy to the Government Revenue by widening the tax base and improving the taxpayer compliance. here will be more transparency in the system which ‘Transparent system : With the single tx -onomy towards a better corruption free country. illdecrease the corruption and stepsan ec Generation of employment : GST will help in reducing the poverty in an economy by generating more: employment i. Better controls on leakage : GST will infrastructure, Due to the seamless transfer of input tax credit thechain of value addition there isan in-built mechanism in the encourage tax compliance by traders 7. DISADV ‘ANTAGES OF GST a. Impact on Real Estate + GST will create the negative points towar ncvease the eostof new homes resulting inthe decrease in the demand also reduce the development of the country b. Old wine in a New Bottle : According to some experts CGST is the new mi CST, SGST to VAT and IGST to Excise tax result in better tax compliance due to a robust IT ‘om one stage to another in design of GST that would rds the real estate. Itwill of new homes. Itwill ame given to Inflation rate : Introduction of GS T has increased the inflation rate almost by 2% affecting tion of the country7 GSTIAS GST - AN INTRODUCTION 4. Costlier Services : Service industry such as telecom, education, airline and banking are affected badly. These services have become costlier due to the increase in the tax rate from 15% to 18%. €. Requirement of registration in many states : As per GST, seller of goods and services jy obliged to register in all the states in which the seller is doing business. Due to this complexity on the part of seller will increase. £ Change in Business Software : Accounting software is being used by almost all businesses for filling tax returns. With the introduction of GST all the existing software's are to be replaced. This will inerease the cost and also the training of employees will be required 8. TYPES OF GST In India, our government is divided into two parts- Central Government and State Government. Both the government needs revenue. The government earns revenue through indirect taxes. In the pre GST era Central Government ears revenue by levying excise duty, service tax , custom duty, additional Excise Duty, additional customs duty, special additional duty of custom etc where as State Government earns revenue by levying VAT, luxury tax, entertainment tax, tax on Lottery/betting/gambling, octroi, purchase tax etc. In post GST era indirect taxes levied by both the government are subsumed in GST. Now, both the government has to depend on GST for earning revenue through indirect taxes. Due to this reason GST is known as dual taxation system, During intrastate sales (within same state) transaction, two taxes will be levied. One will be CGST and other will be SGST (in case of state) or UTGST (in case of union territory). CGST will be collected by the central government and SGST / UTGST will be collected by the respective State or Union Territory in which the consumer belongs. In case of interstate (within two states) sale CGST and SGST/ UTGST will be replaces with IGST. Hence, we can say that GST is divided into fourtypes: » Central Goods & Service Tax (CGST) > State Goods & Service Tax (SGST) » Union Territory Goods & Service Tax (UTGST) > Integrated Goods & Service Tax (IGST) SALE OF GOODS OR SERVICES (LOCATION OF SUPPLIER AND PLACE OF SUPPLY) WITHIN SAME STATE (INTRA STATE SALE) WITHIN DIFFERENT STATE / UNION TERRITORY (INTER STATE SALE) Ist 8.1 INTRA STATE SALE a. Central Goods & Service Tax (CGST) : CGST refers to the GST tax which is imposed by the Central Government of India. Itis governed by CGST Act. Itis imposed on any transaction of sale of goods and services within a state. In other words, it can also be said that whenever intraox STATE SNE GST 1A9 a goods and services takes place CGST is ley sale means ‘ " both c + ; " is levied, Intra sale means tha ee vied by CGSThi owralg cen fas nobaumed many indies taxes which we me “CST. Custom Duty, Special Addi 1as replaced taxes such as Service Tax, Central Excise “GST is same as that of SGST / ae Duty (SAD) ete, As per law the rate of tax charged 1 price of oodsand serves ST. Both CGST & SGST/UTGST are charged on the otf tere isan ax ability under CG ty under CGST, itcan only beset off against CGST or IGST input tax credit only suf government before State Goods & Service Tax (SGST) : sate Government of India, Itis govern Aa SGST refers to the GST tax which is imposed by the asad services within a state. I ied by SGST Act. It is imposed on any transaction ofsale of se ae services takes place S pa words, it ean also be said that whenever intra sale of eons 10 the same state, SGST hi is levied. Intra sale means that both consumer and supplier rrment before GST ea It ee a many indirect taxes which were levied by State I. laced taxes such as VAT, Stat Te Jax, Luxury Tax, Entry Tax, State Cesses and Surcharges ete. Site Sales Ta, Entenainnet there is any tax liability under SGST, itcan only be set off against SGST or IGST input Union Territory Goods and Service Tax (UTGST): UTGST refers to the GST tax which sed by the Union Territories: of India. Itis imposed on any: transaction of sale of goods and in a Union Territory. In other words, it can also be said that whenever intra sale of UTGST is levied. Intra sale means that both ie on sale of goods and Note: I tax credit only. jsimpo: services witht goods and services takes place in Union Territory, consumer and supplier belong to the same Union Territory. It is applicabl services in any of the five Union Territories of India including: ‘Andaman and Nicobar Islands, Dadra & Nagar Haveli and Daman & Diu, Chandigarh, iv. Lakshadweep, and vy. Ladhak +1 SGST is charged by State Government and UTGST is levied in replacement of SGS rGSTis charged by Union Territory Government Thus, any sale Union Territory: CGST + UTGST will be levied. Since, Union Territory does not have legislation therefore common State GST (SGST) cannot be applied. of goods and services within UTGST or GST inputtaxcredit oly itcanonly besetoff against inion under UTGST, it Delhi, Jammu and Kashmir and Puducherry UTs as these three U Jation, so SGST isapplicable to them. Note 1. Ifthere isany tax liability 2, UTGST is not applicable in Territories have their own legis! Illustration 1: Rajesh of Bengaluru sells and delivers cloth '0 Dharmesh of Mysore having taxable value oF 2,00, 000 Thisisanintra state sale as both sellerand purchaser are from the samestate. If GST is charged @ 5%, totalamount of GST charged will be 10,000. Out of this '50% ie. € 5,000 will be deposited to the Central Government as CGST and remaining 50%i-. “psi toKamataka Goveramentas SST ‘Total amount charged fomDharmesh willbe € 210,000. dat acces STIBET=SN /UTGST on intra state Note : As per GST Act, the rates of fax imposed by CGST and SGST’ supply of goods or: yuld not be more than 14%each. services should be equal and shorGST 1A.10 Solution: | Amountofsale Add; GST -- [email protected]% 5000 SGSTW2.5% 5,000 Netamount payable 72,10,000 J : i = Kamataka (Buyer) Not nti case, bah buyer and see belong othe same state Ths ina Sale. State GST will therefore be deposited with Kamataka Government 8.2 INTER STATE SALE: ©2,00,000 Karnataka (Seller) SY ‘union territory. Whenever sale of go Movement of goods or services should also be there. Mlustration 2: Taxable value of Supply (&2, 00,000 50,000) (itshould benoted the GST paidby Dharmesh willnot | beincluded while calculatingtaxable valueofsupply) Add: GST-IGST @ 5% of €2, 50,000 | Total amount charged by Samarth 2 | | a. | Karnataka (Seller) Kerala (Buyer) | this case both buyer and seller belong to different states. This is inter-state | sale. Therefore, Dharmesh (seller) will deposit the amount of IGST to Central Govt. Central Govt. will deposit the amount of SGST to Kerala Govt. (state where the buyer | belongs to) as GST is a destination based tax. )- HNC BEINN COT SGST.IGST, UGST & UTGST 9. DIFFERENCE BETW CGST SG ST IGsT | uGsTuTGst Intrastate(Within | Intasawavanetinnconns Intra tate (Within | Inter-state (hetween | Within one Union ‘one state) one state) twostatesorone | Territory (UT) stateandone UT) | & imports -ajlectedby | Central Govt collectee™? State Govt Central Govt UTGovt penefitting Cenral Got State Govt Central Govt. UTGovt jOVt. | : authority &StateGovt. | | axcredit | CGST.IGST SGST,IGST IGST,CGST UTGST, IGST Use Priority SGST peplacement | Servicetax,excise | VAT,salestax, | Centralsalestax | VAT. sales ta afiaxes | duty.countervailing luxury tax,entry tax | (CST) luxury tax, entry tax, | duty (CVD), special | entertainmenttax, entertainment tax, additional duty —_| purchase tax, Octroi, purchase tax, octroi, (SAD), Additional | taxes on lottery. taxes on lottery Duties of Excise ; (ADE), & any other indirect central levy. Exemption | €20/40lakhs annual 20/40 lakhs annual | € 20/40 lakhs annual | Exemption limit Limit tumover tumover turnover notdefined Composition | Thedealer may use| Thedealermay use | Thedealermay use ‘Composition Sch- Scheme | thebenefitofturm- | thebenefitoftum- | thebenefitoftum- | és isnotavai- overof® LSet, | overof® scr. | overof€1.Ser. | lableinthisregard Free Supplies] CGSTiisapplicable | SGSTisapplicable IGSTisapplicable | UTGSTisapplicable onfieesupplies | onficesupplies | onfreesupplies | onfteest plies pp Pi Registration | Notapplicabletil | Notapplicable ill Notapplicabletill | Registrationisnece thetummoverexceeds| the tumoverexceeds | theturmoverexceeds | ssrily mandatory 20/40 lakhs % 20/40 lakhs %20/40 lakhs if supply is made outside the states. As other typeof taxes provides the facility of input tax credit, GST t00 has the provision of providing the benefit of input tax credit. Such benefit can be availed by the registered dealer to the subsequent taxes on te same product and services. All three IGST, ‘SGST and CGST credits are usable against each other. Any IGST credit willbe fist sed to deal with [GST tax, then CGST, and then to set off SGST. You must also by now have understood the need for 3 different taxes: IGST is to ensure & smooth flow of tax credit between states; Dual taxes (C' GST & SGST) are there to ensure that both Centre and states get their deserving revenue. 10. HOW WILL GST WORK ? The supply of goods and services has to go through different stages bel consumer, fore it reaches the endi. GST - AN HaroDUC A On = Em) Inpre GST era several taxes such as excise duty on goods manufactured, VAT on goods so f within same state and CST if goods are supplied between two different states were applicable throughout this process. However, this situation is changed in post GST era. Now, al the taxes aretaken over by GST. Here's an example to understand the working in post GST era Stage 1: Manufacturer— Take an example of garment manufacturing as an example and GST rate applicable is 5%, The garment manufacturer purchases raw material for € 1,000. GST paid @ 5% % 59 Hence, total amount paid by the manufacturer’ to purchase raw material for € 1,050. He now adds his own value (such as labour, overhead expenses and profit) of € 200 to the ‘materials during the manufacturing process, This brings the manufacturing cost to € 1,200(GST Paid of & 50 will not be added while calculating the cost ‘of manufacturing). Now, the total tax amount on the Output of the garments manufactured comes to % 60 (5% of 1,200) in the GST tax system, the manufacturer would be required to pay a tax of € 60; however under GST he will get the input tx credit of € 50 as he has already paid it while purchasing the Taw materials. Thus, the final GST that the manufacture will incur will be of € 10 (total tax on & 1.200 -tax paid on € 1,000)i.¢. € 10(60-50) Stage 2: Wholesaler— Here, the garment is supplied from manufacturer to whole seller for ® 1,200 plus GST of & 60. The whole seller then adds his value (his profit margin) of € 200 making the total of € 1,400 (1,200+200) Now, the total tax amount of the output of whole seller comes to © 70 (5% of 1,400). The \whole seller would be required to pay a tax of € 70; however under GST he will get the input tax credit of € 60 as he has already paid it while purchasing garments. Thus, the final GST that the manufacture will incur willbe of € 10 total tax on€ 1,400—tax paid on ® 1,200) i.e. € 10(70-60). Stage 3: Retailer— In this step, retailer will purchase garment from the whole sellerat the 703s value of € 1,400 * GST of € 70, He then adds his value (profit margin) of R 200 making the total cost of the Sarment to & 1,600. GST applicable here is € 80 (5% of 1,600), but since the retailer has already Paid a tax while purchasing the goods, he can get the input tax credit facility. Therefore, the final GST o be paid by the retailer would be 10 (80-70) Altthe end the GST paid by the customer will be € 80 on the Purchase price of € 1,600. This amount would have been much higherin pre GST era, Therefore, GST is considered as the win-win scenario that will benefit the entire value chain and make is easier for both businesses and consumers, GST 1A.12 Manufacturerfiesseq Whole seller 11. GST LEGISLATION There are following legislation in the GST era: i, Central Governmentis governed by CGSTAct, 2017. ii, Union Territories which are not covered under State Legislatures such as Laddakh, Andaman & Nicobar Islands, Lakshyadweep Islands, Dadra & Nagar Haveli, Daman & Diu, Ladhak and Chandigarh are governedby UTGST Act. 2017- ont GsTNINDIS GsT 1.13 ___ajpStatesand Union Territories with their own legislation [Delhi Jammuand Kashmirand i teaver ownGST legislation frlenyng SOS, i Jam 12. NEED of GST IN INDIA Shortcomings in existing tax system, { Has given birth to (ost ) Medicine for poor health of \ existing indirect tax regime. NN — /¢ Multiple taxes at different levels, ‘¢ Double taxation ofa transaction as both ods & services. « NoCENVAT after manufacturing stage «# Cascading of taxes. Single tax at all levels. A comprehensive tax structure covering both goods and services. © Input tax credit facility at allstages. 13. GOODS NOT COVERED UNDER GST GSTisapplicable on all goods and services, except on the following, ‘asmentioned below : Alcohol for human consumption : It is outside the domain of GST. State excise duty is applicable on the manufacturers and producers. If interstate or intrastate sale is there then C$Tand VAT is applicable as the case may be. jj, Petroleum crude, diesel, petrol, ATF and natural gas : In today's date all these are not presenly leviable to GST. Once, the GST Council gives its recommendation, GST will be levied on these products from a date to be notified. Till date all these products are not covered under GST act. Still, Central Excise Duty is levied on production of petroleum crude, diesel, petrol, ATE and natural gas. In case of interstate and intra state sale or transfer of goods CST and VAT will be levied. si, Tobacco : GST is applicable on tobacco and tobacco products but Union Government has algo retained the power to levy excise duty on it, Hence, both excise duty and GST are applicable on Tobacco and its products. Real Estate Sector : No GST is levied on the sale and purchase of immovable property such asrealestate. 14. WORKING OF GST 14.1 Incase of Intra State Supply : Mlustration 3: Mr. Asupply goods worth € 10,000 to Mr B . Mr. B does the value addition of 30% and sells ito Mr. C.GSTis charged (@ 8%. Show the working ifal the three persons lives in the same state. Solution: WHEN MR. A SUPPLY GOODS TO MR. B Particulars | Amount (%) ‘Value charged for supply of goods | 10,000 | 400 | {dd: SGST a 4% Total price payable by Mr. B be levied in equal proportion. MrA will now remit is ipply CGST & SGST wGST 1A.14 CGST to Central Government and SGST to the State Government AsMr Aisa first stage supplier of goods he will not get the benefit of input tax and SGST Tein. Coy WHEN MR. B supPLy GooDs TO MR. C Particulars, | Amount 2) | Value charged for supply of goods (% 10,000+30% of 10,000) | 13,000 {dd:CGST@4% _ | 520 Add: SGST @4% _520 Total price payable by Mr: to Mr, B = | 14,040 $f COMPUTATION OF CGST, SGST PAYABLE BY MR, BT0 GOVERNMENT Particulars [ Amount() CGST payable _ 320 Less: Input tax creditof CGST 40 CGST payable to Central Government | 120 SGST payable 520 Less: Input tax creditof SGST 400 SGST payable to State Government | 10 STATEMENT OF REVENUE EARNED BY CENTRAL AND STATE GOVERNMENT Particulars RevenuetoCentral | Revenue to State Government (®) | Government(%) Supply of goodsby Mr. AtoMr. B 400 400 Supply of goods by Mr. Bto Mr. C 120 120 Total 520 520 14.2 Incase ofinterstate supply: Iustration 4: Mr.A of Rajasthan supply goods to Mr. B of Rajasthan worth & 10,000. Ths is stage Now, Mr. Bof Rajasthan sells the goods to Mr. Cof Kerala after doing value addition of 30%, Thisis stage II, Now, Mr.C of Kerala sells goods to Mr, D of Kamataka after doing value addition of 20%. This is stage IIL Now, Mr.D of Karnataka sells goods to Mr Eof Kamataka after doing value addition of 20%, Show the working under GST regime if GST is charged @ 8%. Solution : WHEN MR. A SUPPLY GOODS TO MR. B Particulars ‘Amount(®) Value charged forsupply of goods = 10,000 Add: CGST@4% = 400 Add: SGST @4% 400 Since, it is intra state supply CGST & SGST will be levied in equal proportion. Mr will now remit CGST to Central Government and SGST tothe State Government. AsMr Ais the first stage supplier of goods he will not get the benefit of input tax credit of COST and SGST.> TRATION oe ___ WHEN MR. B suppLy Goons 10 MR. © Particulars 7 : | -avarned forsunplyotacgdalie) Value charged for supply of goods %10,000 + 30% oF 10,000) Add: IGST@8% ,000 + 30% of 10,000) ‘Total price payable by Mr. CtoMr.B - fotal price payable by Mr. Cto COMPUTATION OF Icst PAYABLE TO GOVERNMENT [Particulars SSS IGST payable _ Less : Input tax credit of CGST Less : Input tax credit of SGST |_IGsT payable o Central Government = approP’ : $00 utilized in payment of GST to the Central Government ‘WHEN MR. C SUPPLY GOODS TO MR. D. Particulars Amount (%) GST 1A15 Amount(®) } 13,000 1,040 | 14,040 The IGST chorzed @ Mr. C of Kerala for supply of goods will be remitted by B of Rajasthan to the riate account of the Central Government. Rajasthan State Government will transfer SGST credit of ‘Value charged for supply of goods (€ 13,000 + 20% of 13,000) Add :IGST @ 8% Total price payable by Mr. D to Mr.C COMPUTATION OF IGST PAYABLE TO GOVERNMENT 15,600 16,848 1,248 IGST payable to CentralGovernment —— Particulars “Amount ®) IGST payable = 1.248 Less : Input tax credit of GST — 1,040 208 WHEN MR. D SUPPLY Goos TO MR. E Mr D will aval input tax credit of IGST paid by him onthe purchase of goods and will uiliz such credit forbeingsetofTagainst he CGST and SGST payableon the intrastate supply of goods made Py himtoMr. E Total price payable by Mr. E to Mr. D Particulars | Amount (®) | ‘Value charged for supply of goods ( €15,600+20% of | 5,600) 18,720 Add:CGST @4% 749 Add: SGST @4% 749 20,218 COMPUTATION OF CGST, SGST PAYABLE TO GOVERNMENT Particulars Amount (®) CGST payable | 749 Less : Credit of GST | CGST payable to Central Government SGST payable 749 ess: Credit of GST ( € 1,248-% 749) 499 250GST 1A.16 GST - Ay 5 NTRopy TS Note : Rates of CGST, SGST and IGST have been assumed to be 4%, 4% and 8% especie y. STATEMENT OF REVENUE EARNED BY CENTRAL AND STATE GOVERNME Particulars Revenue to | Revenueto | Revenueto | Reven CentralGovt. | Rajasthan _ KeralaGovt. Kama” —_______| © | Gort) | conte Supply of goods by Mr. A to Mr. B 400 400 Supply of goodsbyMr.BtoMr.C 240 | Transfer by Rajasthan State to Central Government 400 | (400) Supply of goods by Mr. CtoMr.D 208 | | Supply of goods by Mr. Dto Mr. E | 250 | Transfer by Central Govt. to | I | Kamataka Government (499) 499 Total 19 | 9 | 15. GOODS AND SERVICES TAX NETWORK (GSTN) Goods and Service Tax Network (GSTN) is a Non- Government, private limited company. It is considered as the technology backbone for GST in India. As discussed GST is a IN destination based tax system in which the tax is collected with the state in which goods or services are consumed. Thus, robust settlement mechanism amongst the State and the Centre is required in case of inter-state supply of goods and services. GSTN is created for providing the front end and back end IT and infrastructural support to the Central and State Governments, taxpayers and other stakeholders, for the implementation of GST. «<>» {6000S #:" SERVICES TAX WINE" Gsp-cst — Ohum< > + Reourrearion + Chatian Genenarion + twvoter Urcoaome a + Reruan Pitswe + Lepoen Tax PAYER csp ecosystem 18.1 Functions of GSTN : Following are the main functions of GSTN Facilitating registration; filing and forwarding the returns to Central and State tax computation and settlement of IGST; matching of tax payment details with banking network: providing various Management Information System reports to Governments authorities:> sox? PROBLEMS Ost 1A.17 vie analysis of tax payers’ profile; and ii running the matching engine for input tax credit T SUVIDHA PROVIDERS OR GSP + GSP or GST Suvidha Providers are third party IT 5.2 : * % L hho develop the web or mobile base interfaces for taxpayers to interact with the GST sw vendo work. ; SES Needed ? Under GST, The process such as filing GST Return: oF cgnehroniZing 17 ae sis very time-consuming for the taxpayer as the taxpayer has to fill voximately : oe year. This is where the GSP caters the need of taxpayer as it fies and saves time that is needed for the GST compliance whether it is GST Return filing simplifies oe ation of invoi : of synchronization Xe ee GST Suvidha Provider (GSP) will provide APIs to carry out the procedure suc as Registration, GST Return filing, tax payment or invoice uploading an¢ Mi alsobe in direct contact with the GSTN. 16. SOLVED PROBLEMS roblem 1: Prov it X of Chennai purchased goods from other states and from within state. He paid SGST € 12,000, .sT € 12,000 and IGST % 24,000. Mr. X sold his goods to Mr. K of Karnataka(Trader) for € 4.90,000 {1GsT @ 18%) Thereafter Mr. K of Kamataka sold these ‘g00ds to Mr. B of Bengaluru (Consumer) for & 6,00,000(CGST& SGST @ 18%). Find the Net GST liability of Mr. X and Mr. K. Also find net rey, nue 10 the tate and Central Government, Solution : Goods sold = % 4,00,000 GST 18% = % 72,000 Mr. X of Chennai Mr. B Bengaluru / input tax credit (ITC) K Mr. re { arnataka | ( SGST = € 12,000 ate) CGST =F 12,000 (Trader) IGST = % 24,000 Goods Sold = & 6,00,000 CGST9% =% 54,000 : QS l Valuein(®) mealonet Particulars of Mr. X Output tax IGST 72,000 Less : Input Tax Credit (ITC) T (24,000) Is: IGST | 2nd CGST | 3rd SGST Mr.X paid to Central Governmentos GST 1A.18 GST- AN ITRODUCT, Since, dealer has used SGST of Tamil Nadu to the extent of © 12,000 in payment of IGst, Tam, Nadu State (i.e. exporting State) has to transfer € 12,000 o the credit of the Centre, IGST of € 72,000 is availed as credit by Karnataka buyer Mr. K Particulars of Mr. K of Karnataka CGST(®) SGST(®) | ITCAtloweg Outputtax 54,000 54,000 — Less: Input Tax Credit (ITC) IGST (54,000) (18,000) ricst 2CGsT 3°sGsT Net tax pad to State Government by Mr. K Nil 36,000 Since, dealer has used IGST of & 18,000 to pay the SGST of Kamataka State, the Centre has ty transfer € 18,000 to the Karnataka State (ie. importing state) Revenue to the Centre = € 72,000-€ 18,000 = € 54,000 (i.e.9%) Revenuetothe State =%36,000+ € 18,000= % 54,0009 (i.e.9%) Total Revenue to the Government = 18% ( One Nation - One Tax) Problem 2: Mr. D of Delhi purchased goods from Mr. R of Rajasthan for ¥ 45,000. SGST and CGST rate on supply of goods and services is 6% each .IGST rate is 12%. Compute: a) Total price charged by Mr. R b) Whois iableto payGST? Solution : Particulars | Value in (%) ‘Supply of goods 45,000 Add :IGST @ 12% 5,400 a) Total price charged by Mr. R from Mr. D (interstate supply of goods) b) Mr RisliabletopayGST 50,400 Note: 1. IGSTis applicable as supply of goods between two different states took place. 2. Mr.R will submitthe amount of GST charged from Mr. Dto the Central Govt. 17. SELF TEST EXERCISES 17.1 Multiple Choice Questions : 1. Which of the following taxes leviable on an inter-State transaction? a) CGST b) SGST ©) Bothofabove —d) IGST 2. The headquarters of GST council is located at. a) NewDelhi b) Lucknow ©) Ahmadabad @) Mumbai 3. Which state became the first state of lidia to ratify GST bill? a) Bihar b) Telangana ©) Assam d) Andhra Pradesh 4. InIndia GST became effective from a) IstApril,2017 —b) IstJanuary, 2017) IstJuly,2017—d)_Ist March, 2017 §. InIndia GST came effective from July Ist,2017 India has chosen___ model of dual 4€" GST. a) USA b) UK ©) Canadian @) China 6. Indian GST model has_rate structure. a) 3 b)4 05 d 6> 7. pst EXERCTS got PF stands for in IGS? what does! 1.4) International b) Internat + hie tone : ow many types taxes willbe in Kian GST 7 rig fr a2 3 o4 4a) 5 * rarstannouncementtointroduce GST by 2010, is made in Yeu a) 2000 ©) 2004 9 ih 4) ih 7 which ofthe following tax isnot subsumed in GST a) VAT b) Stamp Duty ©) Entry Tax 4) Entertainenecst Vax i. ‘What are the taxes levied on an Intra-State Supply? a) cGsT b) SGST ©) CGSTUSGST = dy IGST 42. What js the maximum rate prescribed under CGST? 4) 12% b) 20% © Wh dy 1% a which of the following taxes will be levied on Imports of goods and vervices? a) CGST b) SGST 9) IGST dy Exempt 14, Maximumrate prescribed under UTGST/SGST? ) 4% b) 20% o) We 4) 15. Supply includes which of the following? a) Goods _ by Services ©) GoodsorServices d) Goods& Services @) Goods and for Services 16, {sthere any ceiling limit prescribed on therateunder IGST? a) 12% b) 18% o) B% d) 0% 17, Whatisthe threshold limit of tumover fr opting composition scheme under GST? a) %20lacs b) €10lacs TOlacs d) Noneoftheabove 18, GSTStands for a) Goods & Supply Tax b) Government Sales Tax c) Goods & Services Tax d) General Sales Tax 19. Which ofthe followings an intrastate supply? a) Supplier of goods located in Nagpur and place of supply of goods SEZ locatedin Mumbei. b) Supplier of goods located in Kolkata and place of supply of goods in Bangsox ©) Supplier of goods located in Goa and place of supply ‘of goods in Goa. d) Alltheabove Ans. :1.(c), 2(a), 3.(ch 4.(c), 5-(ch 6.(B) 7-(c). 81D) 9-(ch 10.(bj, M.(ch 12.04 13 (c), 14.(a), 15.(d), 16.(d), 17.(ch 18.(c) 19-40) 172Theoretical Questions : “Are The Benefits of Goods and Services Tax (GST)? ‘What is Goods and Services Tax (GST)? How does it work? Discuss the dual GST model introduced India FS20 . ' GST 1A GST - Ay Ioan 17.3 Practical Questions : 1. Mr.Xof Chennai supplied gps for &20,000o Mr. of Madura. SGST and COST rat goods and services is 9%.IGST rates 18%. Findthe following: OM Suppo a) Total price charged by Mr. X b) — Whoisliableto pay GST? [Ans. : (a) 23,600 (b) Mr. X ] 2. -Mr.Zof Madura supplied goods for ® 24000 to Mr. Sof Slam, Mr-7 . Mr. Z purchased goods (nclusiveof CGST & SGST @9%eac) from Me Xof Chennai Findihc ho R23 a) Totalprice charged by Mr.Z fr supply of goods ana b) — Whoisliabletopay GST ©) Netliability of GST. [Ans, :(a) 828,320 (b)Mr.Z (c) SGST % 360and CST 360) 609 lowing Hint: Particulars CGST(%) | SGT ie Ouiputtax | 2760 2160 Less: Input tax credit | 1,800) 1,800) Net tax liability ofMr.Z 360 360 | 360 | goods and revenue to the government. [Ans. : Net tax liability of Mr.A = %900(SGST),% 900( CGST) and Nil IGST) Mr.C = Nil(SGST), Nil(CGST) and 1,350(IGST) Mr.H_ = %2,250(SGST), Nil(CGST) and Nil IGST) Total revenue to government = © 5,400] 4. Mr. M of Maharashtra supplied goods/services for € 35,000 to Mr. P of Pune Mr. M purchased Boods/services for € 23,600 (inclusive of IGST 18%) from Mr. C of Tamil Nadu. SGST and GST rate on supply of goods and services is 9% each. Find the following: a) Total price charged by Mr. M for supply of goods/services and b) Whois liable to pay GST. [Ans, :© 41,300 ; Mr. M] _—_—_—____2 LEVY OF GST CHAPTER OUTLINE 1. Introduction 2.01 2. Levy of GST in case on intra-state supply 2.02 3. Levy of GSTin case of inter-state supply 2.05 4, Solved Problems 2.07 5. Self Test Exercises 2.07 1. INTRODUCTION The word levy means an amount (such as tax) which is to be collected by legal authority (government). Now, the problem arises what is the taxable event and at what time the tax is to be collected by the government. These two aspects are totally different from each other. In this chapter we are going to discuss about the taxable event for the collection of GST by the government. As per law GST is collected by Central Government and State Government/ Union Territory Government. Sections under which GST will be charges are as follows : > Section 9 of Central Goods & Service Tax Act (CGST Act) / State Goods and Service Tax Act (SGST Act) and section 7 of Union Territory Goods and Service Tax Act (UTGST Act) > Section 5 of Integrated Goods and Service Tax Act (IGST Act). As discussed in previous chapter CGST and SGST /UTGST is charged when the supply of goods is within one state or one Union territory. i.e in case of intra state supply of goods and IGSTis charged when the supply of goods is between two different states or Union territory. Example 2.1 Supply of goods from Haryana to Maharashtra. It will be considered as inter-state sale and IGST will be charged. b. Supply of goods from Jaipur to Jodhpur, CGST and SGST will be charged. It will be considered as intra state sale.Jay ofthe supplier of goods y ngs) to the BOVEMMENt by iy woods and services, 6s the reipientof own asfrvantchgetornal hans, srernmentits own as ever hig, anism of Levy of GST STATE SUPPLY 7 LEVY OF GSTIN CASE OF INTRA S vices or both within one state or sa Suse Supply cnt defined as suply of oad or = cneunionteitor ofthe county. User Ina iat supply dual GSTis vie. ‘Ae discusedearir on all intra state supe ‘ceca ef CGST Act and Stat Gods & Service Tet Tero Goods & Service lies : Central Goods & Service Tax (CGST) SSGST) (section 9of CGST Act)/Uiion 1ST Act willbelevied. "Tax (UTGST) section 7 of TO transactions and importation of te evade on nr tat ection 92) Cental ax onthe upp roleum rude, wp of righ sped dese toto prt (Commonly known a stralgasand Per, tion turbine fol . 4 ae levied wih tes fom a elec date maybe nt by the Goverment om the isp secon 92): Te goverment may on te emma enter sol ager oy of od sre enacnemueanie oceaeteatay Semetaarccweatt Fe ce an co siete ena rpyne et 8 per section 4) : Ia unepseed mae, perion supplies goats or services oF bath 0 8 nt nthe hal ly eg ened vison of his Act shalappy Sirsa tinny ere Bes" pay cst cs é ee on Recipient wil Unregistered, pay GST" Desir ew allregitered person & Goods and series which orate profi fhe Govermenteion 9st app ood ad vies. ‘ris applicable oly to selced categories of registered prions. csr AS ae suppy of aero ated goods under the cam of retin. . sep ied by he overex, Sun the same being ote the provson vtec 0) COST wt vio ail ina-State supplies of goods or services or ein Sec eames et en sets “a Sonrpeseat 5()wllnagetftvefrm st Febroay 201 a suppl of soba gurfor human consumption, on ihe value determined ws 1S $_istobe noted thatthispovsion suspended i 30.09.2019 T.shoudibe ote rat he OGST ales charged should not exceed wen - eed twenty percont [., Tice Reverse charge provisos wonkt note applicable if he BES ales of sch supplies of “pom any oll he supplies, wh are 0b | | "40% (.8. COST 20% and SGST 20%) on all ‘maximum GST rate charged wi ot exceed may be notified by the Government onthe intestate suppsies of goods or services), 2 Fecommendation ofthe Councl and should be colected csocendarn of oul be in such a manner as may be cod an ul apy wraps, SST a wel as UTGST has ao ty a taxable person 1 Noten No. 8201728062017. Section 2148) ofthe COST Act, 201710 tronic faciy or platform fonds or erices or bah ied ered doesnot excends 5,0 nay Vie lesronie Commerce Operatorhasbeen defined in cay person who owns, operas of manages dig F< ——————tonic commerce, For ¢ person displays ple, Am " ; !z0N, Snap deal Product as well as servic " i 6ST INCASE OF 8 Sia omy osr2s 0, tpg cr Poteet mane, breterrencn tote conser. Teche Commerc pean reg Sori Or STON CASE oF neren stare SUPPLY eit matinee ea =) nd up | iferentsatesoruionteion of heer Under neste supply single GS service Tax IGST) (section oft a, neste suplycanfurtert dvddimotwanens E Condited 7 TL Seviog ge Both goods and services Re LgtNCASEOF SUM oF Coons: neece 200ds interstate supply wll IY Of goods or services or bath between two soit taline state supply Integrated Goods and ct wllbelevied beteatedinthefollowingtwocaser A. As per section 7 soppy of goa wil evita nd goods andthe place ofrecipien an i easen = vaste men gama <. Deutaaions soya pouece ses he ct as ga, Seti] ® Memmi Gy Steet tery ero ‘Presence le territory = eee not have a representative ‘in the said terry inter-state trade or commerce, Seis commerce Operator Dein a person inthe taxable en forthe pu canbe futher explained withthe help of figure given below ‘2x and such person: shall be liable to pay tax, ie ea ‘ “ Ce baitaalheahacg td teenies Between two | [Betweon one Diterent State and o State, Union Terry this representative is physically present then he has to pay tax his epesarate wanoay Prose hen Eocene ceo coer rpesenan : “anes InmmststesALE castor sees: ea Leeman ttnagces: SS A. Aspr set) ply of ei wilt win ae de anf py " ‘of service and the place of recipient of service are situated in © TwoSatd 1 OneStat Too Uaioe section service imported into the terior ofa shale tated. ‘As persection7 (4 supply f service imported int the iri ‘obeasupply of servieinthe couse ofinersate trade or| Py Lavy gy ost 26 ‘ preted alia) ‘SUPPLY OF SERVICES IMPORTED wing {WE TERRITORY OF NDA [7()} SUPPLY OF SERNCES vr nO (8 - i Tilthe goods) Bewweentno|[ Between one Sate | Between two oiferent| | roses the custom patent Sates. || gone Une Teor |[ Union Temiory. |] “fenters of ine 1, tnterstate sale in cas of Supply of both Goods and Services : In the following cas, suppl of Bh Goo and Services shal he eae as an inter-state supply of goods 14 When be supplies locate in Indiana the place of supply isouside India 1 Supply of gos and services or bath 1 (ar by} a Special Economic Zone (SEZ) {Supply o goods or serves or oth in the taxable terior, not being an intra state suppl and covered elsewhere inthisscton INTERSTATE SALE IN CASE OF SUPPLY Ciera The suppiern cates ‘Supply of goods and | ‘Suppiy of goods or series or ‘ind and he services or bth oth nthe taxable tertory, place of Suro s toerby)aSEZ not being an intrastate ouse nda developer or SEZ Unt supply and not covered ‘elsewhere inthe section, Zero rated supply 16): As perseti 004s or teres orbeth 4 Exportof gods orservicesorboth or 5 Sern f gots or sevice orth a Special Ezonomic Zane develope ra Special Economic Zone unit. However. supply of reac tee si fnenakshole beget SEZ un al ion 161) of IGS Act zero rated supply mean the supiyof Note: TeensorslsltelSAc aslo scene CBSTAd (aisedabor) eas 7 water ee | sn POM 4. SOLVED PROBLEMS il je ret yc Li, Aurangabad wholesale dealer in god rings. (ST rte fora wopy ee econ forthe month ane 2019 fl raicat | Recnlentof | Place supply fue (309 Kolkata ee | ytd | he ut eo ay sppy be an ese ot made daring une. 2019 Cael GST bibl for Sune, 2019. ssumnginpusta credit tobe NIL ston COMPUTATION OF GST OF ABC LD. row Jue, 2019 ost Cast Sos Gaines [Nature | Tisablevave atterdiscount(®) @ 18% (%) 9) Turse | $8000) 00 Inerste | 7.50750 | 135,135 — Tourastae | 329.40 2968 294352 Inrasie | 502.200 5.1980 Rs SND ‘roblem22 ‘Ble dat Deh couriers packages within he ate and to other sates. On Dec. 9, 2018 Ble dar courier sold 2,000 packages to XL within Delhi atthe cost of € 100 per package an | 80 packages'o Le cuts Dehitthecos of € 200 per package, GST rteaple is 18% Calle amount of GST (Ratesaeincusiv oats), soto: Recipieatot | Nature s seste Supply 9) XLu. | datasate | 1,69491.00 was | Yud. | Interstate | 30808474 Total as 5, SELF TEST EXERCISES Mutrirue Cuotce QuesTi0%s: 1. Whatare the atesevedon ania Sate Soply? a) cost by sost ©) Costascst a) lost 2. Whatisthe maximum ate resid under COST? a) 28 by 28% ©) 20% a ise 2. Who ino therateota to beleviedunder CGST? 8) CentalGovernnentsuomoo 1) StteGovernmentsuomo1oGST 2.8 Levy , en ite GST Council suo moto; 4) Central Governmentas perthe recommendations of the GST Council, 4. Whatarethe supplies on which reverse charge mechanism would apply? a) Notified categories of goods or services or both; )__ Inward supply of goods or services or both from an unregistered dealer; ©) Bothoftheabove; 4) Noneof the above. $. Which of the following taxes will be levied on Imports? a) CGST b) GST ©) IGsT 4) Exemp, § Which of the following axes wouldbe levied onan ntra-State supply of goods orservices orb, a) CGST b) Unionterritory tax ¢) Bothoftheabove — d) IGsT 7. _Isthere any maximum rate prescribed under UTGST? a) 14% ‘b) 28% ©) 20% d) 30% {Ans.: 1(c) 2.(c) 3.(d) 4(c) 5.(c) 6(c) Z(c)] 5.2 THEORITICAL QUESTIONS : 1. Whatare the taxes that are levied on an intra state supply? 2. How taxable value for levy of CGST & SGST/UTGST is ascertained? 3. Whatis the maximum rate of tax which levied on intrastate supplies? 4. Whoisresponsible to pay taxes? 5. What does the payment of ax under reverse charge mean? & What are the different types of supplies which re liable to tax under reverse charge mechanism? 7. Whether the tax on intra state supplies is applicable toevery supplies? 8. Whether CGST & SGST/UTGSTis applicable on import of goods or service or both? 5.3 PRACTICAL QUESTIONS: 1. PQR Lid,, Ajmer is a wholesale dealer in carpets. GST rate for its supply is 12%. The data noted May 2019 are Dateof | Recipient ] Place | Quantity Rate | Discount supply | | | | npr unit | Mayos | A | Dehradun 4 5,600 4% May09 B Delhi 21 10,900 1% May 12 | c | Bikaner | 19 | 7,000 3% May}9 [Do | spur | » 8.900 5% May 25 E | Mumbai 15 | 12,900 1% Mays! | oF | Nasik | a7 6.900 9% No other supply was made during May 2019. Calculate GST. liability assuming input tax credit 0% zero. (Rates are exclusive of taxes) (Ans. IGST © 69,530.24; CGST %22,452.3; SGST %22,452.3] 2. Mr. A, an accountant from Varanasi provides services both within the state and outside UP. I? f f Particular month he checks accounts for 25 people within UP at cost of ® 1,500 per persona! People outside UP atthe cost of € 2,000 per person. Calculate the amount of GSTTifrate is incste™ taxes and GST @ 18%. [Ans. :IGST @ 18% 4,576; CGST @ 9% % 2,860; SGST @ 9% 82,860) —3 CONCEPT OF SUPPLY CHAPTER OUTLINE Taxable event Meaning of the word supply’ Types of supply Activities which shall be treated neither as a supply of goods nora supply of services Solved Problems Self Test Exercises % ax Tao 1. TAXABLE EVENT Taxable event under GST law is supply of goods or services or both. It means no supply no GST. The term, "supply" has been inclusively defined in the Act. The meaning and scope of supply under GST can be understood in terms of following six parameters, which can be adopted ‘ocharacterize a transaction as supply : i. Supply of goods or services. Supply of anything other than goods or services does not attract GST. ii, ii, iv. .. y Supply should be made fora consideration. Supply should be made in the course or furtherance of business Supply should be made by a taxable person. Supply should be a taxable supply. Supply should be made within the taxable territory———t 1 Concer oF Stam cmraa of EL Or . to ila cn ‘is deemed to be a supply thay ‘acontract of supply. tang few exceptions heaherornotinthecouneorfutherancey 4,2 MeaningotServies: As per section? (102) the expression “services canbe defined a _ MEANING OFTHE NORD 3 Hpbi a nec sec de et caall | os 3 21 Aspersetion7(1) thee rv poh suc as sale, transfer, barter, exchar samples of soppy of goods oF $8 fefora consideration by aperson| |. Me. X deposit € 1,000 in his saving bank account of HDIFC bank. twill nether be weated 2 ot etek eee anarrfaherance of Asis: or furtherance i, Mr.Xtookaloan of © 50.000 from Mr. Y. Mr. X turned he peinciple amount of € 50,500 to Mi a in win mt fice Freee HM oN Se Ne eas lag sideraigg, Me MeXeamered€ OD imoSOsaero®Deach fam MY. Killeciberbe wea serie sie specifi in Schedule made agreed to be made without a considerations nor god. Hence GST will at bechaged a jv, Mr. Xisa foreign exchange dealer. He converted % 500 of Mr. Y into US dollars and charge fees = ied wppl of goods or supply of services as refered toin Schedul of €25 for exchanging rupees into dolls. Hence, willbe considered ata relaed activity ands Ten ican Cal eins Perea set a , nae ee Se ead TFs ef sub-section (they sal be treated either as supply of goods or supply of Seviesaseferedtoin Schedule) 22 Aspersecton72)the expression “ply excludes ‘Actives orcansctons specified in Schedule; or 1b Sochactvites or tansactions underaken bythe Central Government, a State Government Note: Secure are neither god nor sendzes, Consideration caved for tans of secu isnot subject io GST Hence sti eae only tanto ile by way of Stl prcase redemptions ottrestedas service, GST snotapplicable But, Fes charged byte dealeagent fr sch services willbe consiered as service. | Hence, GSTisappliableonit {rupley ch hey engagd slices 2578) Pe noid) a3 Meaning of cure of business The em coun of bxines canbe Gos san ay ‘2 nent terreno Cae sci cried ony apersonseglay for runing vate orcommerce, Note: Activites specified in Schedule II (Le. Negative ist): froie has 1. Senexsbyealoetocrploeriathecoune ol rinscaontahisemployment, 2% Sees ct Tribal 1. Seviesbj member Patamentandother 4 Seviesby inal bile 5 Saloon Bulng Accor caimatertunonery, being nd pambling “Me. Xisa lanyer ears out the activity of advising clients concering business wansactions lim {sbi avisabity of prosecuting or defending Imrie or legal rights and obligations erp ‘ws ruling and egslatons for individuals and businesses. All these activities canbe considered as perfrmedinthe course of busines ‘At Furtherance of Business : In the course or furtherance’ is not defined, but is broad {enough fo cover any supplies mad in connection withthe business or new activities to expandbusness ‘A Autromsor stim. or ooos on services on nor one = ]ORROTHORA CONSIDERATION INTHE | __-Mr Xisinthe busines of manufctrng ements He want expand his hanes and want asl a naoarimssxor sss Mvaet COSTA 2017] the pacts in uj SoM apn Mya acostan er reoy else eer a lsug te laces or pronetv tgs Hence MY cuit vars macs nfahrance, #7 Brey inveterate 202) eso” goods canbedfinedas business an i © Oterthntnone nd sear But incldesacionble cli z ‘As mentioned above in se. 71) the meaning ofall eight terms (sal, wane, hater. exchange, ors notincue money and securities) Wh of al cight terms sale, waster, hater. exchange, ee 0 cence rentl or diosa) have not been defined by CGST Act, 2017 or SGST Act 2017 or GST (ony lotr, being and gambling chall be treated a ‘As. 2017. Theseermsarepecfiedasan examples. Te meaning ofthe lr are mension lowST ors ue | Teter ells Concern oy 34 sale goskortansfersngthe ownership fe Foreah:ot 1 Defered pape nee cation, charge on + err amntge ec cE che same gus MEY 7 sransfered from Mr Xo Mr. ¥ i Mea tevedd ula GST wile apple a pen le Si. sling Nao di probed | © MeN tt conereas ils and MX isponishble under he pledge. Hence, GST}, sosed an invoice, Since the ownership jy 1 tl be weated a sale and GST will be | rer tenon aegingmestanene Eample35 | Me Roca aping mai. 5 gen on wat Mr Y for 2 anh fora NQolamaal ton insta cueooneship nt trafered athe iho | Seem sransfere Hee supply series ibe toGST, Imes exchange of gods series for oer goods or sevice witout any edmofechangeaehasnoe) | Barer Fuample¢: i MEX ayer provides ses oY. cape. feu MY oi theo of ir X Tn sah fated ae proving able services. Hine STi pole fh MEX wl py OST ol seis areptered een) 4k Wie pops uplift tasand oes alone with he bate ofa poe urs mantauredby te pentane alo he itr own at Stns of supply ur haan peste open make va of the lgepisou oom. he ao he plo te pp a four usa tes He econ Sip pops alto > ST ona four dos pers Soper pe sale Ciardnomt np daewepecdpeman nT NO OST change len sat ging one hi | tinhinnanne 1 giving one thing and receiving another (especially of the same | Exam: | Me X's Hesldanew cra Me nh | exchange of an old car whose value Oe a sO song than | Gaeteaedlrahoe e100 ee MY pate X E4000 nachauna ie | face Vian eedastdn Me XhlatleopyGSTont Nat: MeY willy GST tes argseedpeon. Himeans, | Himes. permission fom an uta | ing. orcamyonatade Licence ownorase something. doa paicular ost 35 Thelen cane preninne he ww prmanetyenpranly IMB | | tetpay CS ate chp ee peng ee Geren charges es vig nee oe NST pope cnscce viel Geren re ney Hee ea (VST ae on eres piey Cement oral ae | hatvnghene perp —— canal | financial lease made by the customer to the bank ® 40,000 which includes € Lease 30,00 as principal amount. Financial leases shal be taxed as supply of senses | hence, ABCBank Lid.isiabltopay GST. | Disposal normally considered as selling of ase when the organizations about to close down and varios ases are required to be disposed of or geting nid or ‘something by throwing avay suchas scrap, wastes et. Such transactions will also beconsideredas supply oflabletotax under GST Law. Example3A1: YZ Lis losing his busines and goes all ts furiure for € 20000, twill be ‘considered sup. Hence XYZ Lisle pay GST. Disposal | [AS Consideration : As per section 231) of CGST Act 2017 “consideration” i relation tthe supply of goods or services or bth includes- ‘Any payment made or to be made, whether in money or otherwise. in respect of, in response to, or forthe ndacement ofthe supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the ‘Central GovernmentoraState Government: The monetary value of any actor forbearance. in respect of. in response to, or forthe inducement of, the supply of goods or services or both, whether by the recipient or by any other person bt shall ot include any subsidy given bythe Central Government ora StateGovernment Provided that «deposit given in respect ofthe supply of goods or services or both shall notbe considered as payment made forsuch supply unless the supplier applies such ‘epost as consideration forthe suid supplyCNC OF Sq, jonare a8 fOH1O%S: paideration which can be, seinen eng cy west) Malorelectronic transfer : terms stich as ru 1 alent feataresofeON Ponty conser cn Men a RT viet. n° cri. “ syne ean rf eK oa service: arn for posts mo service . Now wen Son any 008° bt ox asitia 5 Sateen iy The consideration fy cera ment» \¢ Cental Gvernment or Stat ea tana et va Doar Any depot / vance gen gd or service on returnable asis 8 a 0 > depos / advance 8 * cn se act GST. Ite amount deposited oF advan Paredes comnertion a eS tion and wil be ah onl be considered as considera ‘raed is otreturned back hen Government givesany subsidy somethi, _ a Sets erp Ea Sisal Sl ety ent Te Scam” + oie cryin eats ceeane ee coewant ana nt sete ase oF 008 Cone andvasinpoeine 100. The mont recived yt Ace cay sn nae con ihedocncsis ate ee dn se eg 7 tty pl yo: te pet romuped a ec Ba Sie ap was with in warranty pend XYZ. Lid replaced ‘henge pt fe of tnt Hees tl tb come omedeation ad 0 GST wb toledo Me Yeon owes sano ays etme XYZ ceting auniay tke eerie of be dancer te yy consieraton fa renee ene (20 lakhs ming srgm wl bcondered as consieratin be has, Hence it will the considere SaaAIEE IEE SSS LESESLESESESSISESEIEEEE ext ost37 coe fechared ico s omaderst sa ST Tote Following ot considera conser © Grant pocket rey Giver eed Gach has been pen © Arnunt pid on srry 1B, IMPORTOFSERVICEFOR A CONSIDERNTION WHETHER OR SOT IVCOLRSE OR FURTHER: [ANCE OF BUSINESS 7(1)(b)of COST Act-2017], The salient features areas follows ‘a. Itisnotapplicableon goods. is applicable only on services bb. Itshouldbeimpon of service where f= Therecipientof service shouldbe in India ‘= The supplier of service shouldbe located outside India f@ The place of supply of service shoul bein India There should be some consideration forthe supply of service 4, Services may beinthe course or funheranceof business or not penn ada ‘whee fr bsines or pera se, al be ajo thepenon avaingtheservces unt tevere hate ns amples 3.135 1L-Mr.X downloaded the information fre of cos from Gootle ested adi. without any coms eration. Hen, it wil not considered as imported services as consideration 2 they td lablitytopay GST willbe levi. A Mr.X isa businessman in New Delhi. He ook constancy service from Mr Y in USA for € 10.000 for expansion of his business. Thus, will coniered athe supply of service a such serie for consideration and fo furtherance of busines, Therefor. shale lsble to IGST {HL Me. Xisa business mann New Delhi He took consultancy service fom Mr ¥ 0 USA for ® 1.000 for his personal use. Thus twill comer asthe spply of service at sch acre i for ‘consideration, Whether he service is for fuheraceof busines for personal ue Joes ot make ny difference. Therefore tsallbehablets IGS Jn, Mr.XCva busines man in New Delhi He wok consulta service fom Me Ysa USA witout any ‘consideration for expansion of his business Ths till ot be conde the supply of service ‘no consideration is pad such sorvics though sich service for fureranc of Pines. Therefore, shal mtbelabetsIGST Mr. impor (downloud) song for 2.00 for persona use Hence twill considered as supply as amount spud or tii the serces Whether the services fo urheance of Business Fa ‘eronal use does a make any difference Mheefone it shullbe habe GST Yk Mr. X tok an online couse on EDX (studi USA on digital marketing ors wm in India He Paid $ 30.050 forthe omline course Hence, ml he oncidered as soppy. vei recep of hs Service sm or sins. foterane busines Me X nat abl pay GST under revere charge mechanismasitisexemps fm GST. Since ItinntOIDAR sere "L_por of wme services by a Indian ranch from hes parent company, inthe core furheranceSONEEET ON Si and ence 1GST wi prt as s009 se tape oF ON a) 2 Iyect to GST even if made ith Tae of SGREED TO BE MADE ETH, rAd 017] 1 miontCOST At sr he EAI apy eo a yc course of basis? i be scone erit th Tay nalts cn atiperonsorteven din ance bere TES elena SCE rence ons when mE ar gifts not exceeding fifty urousands Pupes B se eds spi of gods" fi, Supply mad iii. Supply of soods: ‘a. by aincipal to his agen [arene et oie ie COST (Anendme) Ac 2018 ei A ee os ober einen oni ni i th cous oe furtherance of busine nes gps aes whe inp eit ha bog esses gas arises permanent ithe aetna amount incuency) andithasalready took the benefit input credithen itwillbe considered as supply and GST will be applicable. Tecrapoticanastris bse seston Miigeshaieyecere 2 Sie onuepemrny {Bispace sofa een, panemployee + where the agen undertakes fo supply such 200d a ertakes to reeive such g00d a aren nace coll eyed fre and eee Nat input ax oie assed en ale shllalkobeconsderedas supply ands ible for GST. Example: 1 Mi Xana pcsa cin hi 2 cone ripen ue. osing them forte beteetentoadgene Intec to etaowigreons (© MX snot busines compas so he snot regi ied ee gem et repstee adr GST Act hence he is at (© Me Xhasnt doatedaircondine fr fuhranceof busines, ACL. dein prse nsf «availed the benefit of yo pawn ost 39 ‘Sonence for personal se means ABC Late trie weaedas supply of Boa and ABC ae 4. ABC PW La tengvaieto mena owt have beadfice m Del, Head aledy AO Lb ane ai omitoners 1 is ery vane is bane set Hence, ray OST rently vane of ts ck the sity the stock tansfered In such a tation thought disable wo pay GST at has not aval pat pine toa mb ot eof {ido forbes ine Me Xisabontllmednavl on et partarcne Sotelo onsidered a supply transaction ” 4 ABCisasole pot fim dangling ofr Hoke thea peel ‘will not be considered as supply if ABC has not availed input tax credit - +1. VNLid.isinthe usinssof Hotel He purchase AC for busines purpose and after 2 years eraser the AC to director witout consideration. ITC hasbeen availed on ir conditioners. Hence ax pet schedule itwillbe consideredas deemed supply ‘SUPPLY OF GOODS OR SERVICES OR BOTH BETWEEN RELATED PERSONS OR BETWEEN DISTINCT PERSONS: ‘Meaning of related person - ‘a. Personsshall bedeemedto be “related person Such personsare officers or directors ‘fone another’ businesses; For Example, Mr. Ais officer of company A. ‘and director of company 1B. Mr Bisan officer in company B & director inCompany A. Itmeans that Me. A & Mr. Bare related to eachother & Company A & Company Bare also related to each other. Therefore, ny supply between them, wil be teated as supply betwcenrelted persons Such persons ae legally recognised partners in business. For Example, Mr, Ganesh and Mr. Rakesh are partners in Ganesh Trading Lid. Any supply between Mr, Ganesh and Mr- Rakesh will be treated as supply betweencelated persons.CONCEPT Op gr a 10 ; en aN ems ee estat aden pone nce Corot. Bb Suchpeesa Emplyeetticemoe nv IN ‘cuunep anb EXCLUDED 51% Eauty Ganesh Tsing Ls soy ean Pee) As ilsated above, Ganesh rating i. hls nuit in Rakesh Trang La [i sa ee eke pec es oe Ne)__[Emoloved by Ganesh Trading Ltd iretiy controls Rakesh Trading Ltd's busines. een a Ipomnrct Conrrot. Me Rakesh is an employee of ————— auc rng ay pp 00) en pean Ganesh Trading Lid to Mr, Rakesh rae Ganesh Tadeo Ls SS EOY _. pate ang ut considered 05 supply between related ns am Te at: Sty pid pres in pares t fn bot aed pp Hee, 4 sa Ene Fae pay GST. is ust appropri of | ane (Retetes Person) rel ———— As illustrated above, Ganesh Trading Lid. holds equity in Rakesh Trading Lad Rakesh Trading Ltd. holds equity in Max Trading Ltd. Any supply between Ganesh ‘Trading Lud, and Max Trading Lu, are related. This is because Ganesh Trading Ltd Tower Gift no exceeding € 0,00 valve in financlal yearby an _mplyeto employe shal nat consti supply of ods eviceso bh, indirectly controls Max Trading’s Ltd, business by way of ‘Rakesh Trading's business imerestin Max Trading Ltd, ‘vs Both of them are direct or indirectly controlled by athitd person. Ifin any supply. the I ay or ae inl evn cons rs 256 o moe eo ig voting stock or shares ofboth ofthe. ample supplier and the recipient are directly or indirectly controlled by athird person. Mi Xols.00 sre oF XYZLed whose Example 316: ht a comps F100 she of Inthe illustration above, Ganesh Teading Lid ols equity in Rakesh Trading Li. and Frm ae AB Lal heal umes of 1500 sare Max Trading. The supply between Rakesh Trading Lud and Max Trading Lar relatedsince XiniANCLiceactlasitaeenn Sactehe ts AM booth are dl controled by Ganesh Trading Lid eel iil Mr XandX¥2 Lu canals {iter Tbe he ge ema, Topher yy ini cn tigen any whe eat oa recipient together det oid control third person po compton eee copies namely A Lid, BLA, C Example 3.17; ‘pret cmpay. Poe -BLid, CLid, Did andZ Lit Sean a ee RPAY Hl sin ch he fay (Rakesh Trading Ld holds B® equity in Max Trading Lid. & 30%in Ganesh Teating 1d Beis wilbe tested as elated persons, 4 Max Trading Lid, hold 70 euity in Ganesh Trading Lid. Now, together, Rakesh eae Lid has contol over Ganesh Trading Ld athe supply etween them wile consid ret nce ton te ae: inany soppy berseen elated pena SONI the ote, then it an sepplierorte as supply between ested persons. ‘8 considered as supp) yi, Theyre members of te same family. supply made betwen he nmr ofthe sae family isconsieredssuply bweercated persons; crews aac ate u steams? ag a erin tat ne the sole ola ene fe ANT a » hae sn poms ese ‘of the ote. sal Be der emer qa: operestnh.apenanaa aged aren DNC ein ne Sat oF Union eto FO thy, et oe tah rgisaton, be Geated 38 distin Soahene Bo Spree Pen Sa pects A ee sn exablishment wil be treated as Distinct Person, ang, hei: eisai a cag ewccnben sitetanatle — ABC Lal henna isbrchoferi Pue ay sa sen aca tr Ty Fame en nce een ene Contd needed aa Ty tate Ds unmatetattge Cried Das wafer as Se ST Seite eanee eee rite amir errige metre temas ii rT 7 ere eed naeer pees pata Yu pst transaction between Xd Y wll be {agosto ese Xd Y wile weed spy ad ale pay YOST owe 1, A Ld, ash manaacere a Alas in Mr; Xs an agent, who oes shoes manuel dts dele leo whesrer LL asks MX todos wll betel CONCEPT mS, pwr! he spy between AEA and Me Kanale ns 44 Importation of services: Salient Features of import of services hy «tale penn subich shall be treated a supply are fe Iishoulde fromarelated person {¢ _Itshould be fromhisestablishments located outside Inia {2 Itshouldbe inthe course furtherance of business example 320; UA USA seg cy Li Ind at. na ns en servic rm AL leet uppy nL habe pe OST onder ST fc whcterconidrtenecvedor ~ ‘Avan indivia who som on Bada, Bi carpng on buena. 8 gt inca service from Ate curso frteranzof sine Soham ibe tented spl (une elated pon ad sible py OST ander OST AS cin corn eetedern 1 ACTIVITIES ORTRANSACTIONS WHICH ARE TOME TREATED ASSUPFLY OF GOODS pe SUPPLY OF SERVICES AS REFERRED TOIN SCHEDULE IA}: ‘Schedule- IL to CGST Act, 2017 provides a list of activities and transactions 1 determine whetherit isa supply of Gods ora supply of Services. ‘Such determination is very much important to select appropriat: catego) ile applying fr reistation, selection of HSN Codes, selection frat of tax determination of place Aspe? a of Supply determination of ime of Supply. invoicing, returns, tax payments. Schedule II, the activities or transactions which will be treated as suppl of goods 0” ‘apply ofservicesarementoned below aa. Any transferofthetilein goodsisasupply of goods For Example, Mr Xisa dealer fa condones. He sold i conitoners to Mr. for 000. S, nts case transfer oft isconsidered = supply of E008 ‘Any transferof right in goods or of undivided share in goods without the transfer of title thereof, isa supply of services For Example, Me X isa dae of i conditioners Heals give ai Socios onsen He lows ir Y tows hiaircondtioners for months a an grec sonst, The {hetero aircondione shall betreatdas supply of er== ce Any transfer oft in goods under an agreement which stipulates that propery ia ood shall pass ata future da upon payment of fl sosideration a agreed. is supply of goods. Example 321 rare cok laptop on lon with monthly EMIS of © $000 fo 10 mans rm ABC ree de ura sitaton Mca ase te lpr but oss asfere retin pnient ffl enseation of € 50.000. Te aforesaid wansaton wil treated assupply of 300s Me X apecs 1 sold gods 10 Mr ¥ for © 10.00. Mr Meth in pods will be tafe Y atthe nseatonafter tons Thsissupply of wots ¥ will make payment es? ime of pment of fulla—_ CONCERT OF St, eee oaeeeeea Ue ee : supply of services; asta cen ocupy ais 7150 2 a 4 his land to Mr of services. Aa se ME ands ene i re cither wholly Of parts i8 Sup, ber weslealet for business or reestal Claes ne is ose 10 Mr Yon ese fF oe EMF A 9a ieee ice 7 oo any eaten or process whichis applied to ane ers, seodssasoplyf series. For Example Mé Xanuficus ‘pero te pking done Ni Transfer ofbasnesassels: 5 Fas rng ofthese of business rarsfered or Ped ree ithe tn ofthe person carryingon te business sm ong ates sets wheter o ot or eonsierain, such taser @ Gispoasasppiyo goods the perso: Bxampe32: cana iva manufactur of grmens. Wile manfactsing here was deft arse Nir A decided osc itt Me Bat TO douse Mr. B parted sean Inhscaseitwilbecoieedasth spy ofg00d8 i. Mena manfauer of gamens. While mnufcring hee was a defect in fe eee Mr se doa the dfs game which TC es ex ert rluap nan case twilb considered sth spy of os by Me Tipu comideraon is hee. Valation of defective garments for GST ata edn on far mrt ae ais in acrdance with COST Ral SoM comenedviherminatonf ale 1 Wer, by or under he direction of person caring ona busines, goods held tse orth prposesfthe business te po ay private seo re used or mae avalaletoany penn frase fran purposether than purpose ofthe busines tert racine sp arming ail fh gos supply ofsrvices: the goods and sent hem tot Bor posking purpose ‘Beale teaedas supply ofservces andliable forty xamples. 2M. Aba atin Dei. He yrcases the 5 washing machine otha hese cane satin orwaingcuis belsetct Hetok one waning mit sho 1 days ass ern washing michine needs repr. Te eres ranean Mr Asal ea py ees Mr As ladys. Hees wating stn onet tase Be ashing machine o his fends house fr one month wih omsideration. The afresidpva ‘ere ale pie we af waking machin y M.'s ed ml Where any person ceases tobe a taxa ‘be a taxable person, sny goods forming part of be ost 3.15 asses of any business cared on by h cual my }onby him shall be deemed 1 be supplied by him inthe course fren of hs bes mmeisely before he ceases to ea ale ‘The ousinessis transfered as. going concer ther pervon:or fi, The business is cartied on by personal representative who is deemed to be @ taxable person xample324: 1PM X wan to cose downns ses eau s elesting wo USA. He as cei ‘capital goods and inputs forming part ofthe assets of the business carried on by hin. i this Casecaptal goods nd inputs wil beted supply of pods inthe course ot fuberace ofhisbusinessimmedntly before eeasesto beatae ern. Ab Ontheoter ind if Me XtranerhisbusinestoMe.YandMe Y ages comin be ‘sins ORME Xs busines scared ony peronareresatve whois deemed ioe 2 sable pen. thenremining capital pods nd inp sl et be eat a sep of goods adsl note able forGST ‘Supply of Services :Thefollowingshllbe weatedassuply of services. amely 1. Renting of immovable proper ote Reig of movable propery meas giving ous cea eer for commercial useorresideatalue ‘Note: The Genial Goverment has exemple supply of services by way ofretn, ofresidentaldveling farus as residence fom whole ofthe ax viable there om b. Construction of a complex, building, civil structure ora part thereof, including @ complex or building intended fo sale oa buyer wholly o arly, xcept where the tire consideration hasbeen received afer issuance of completioncetficate, where required, by the competent authority oraferisfrstoscupation, whicheverisearie. ce Temporary transferor permiting the use or enjoyment of any intellectual property right 1 Development, design, programming, cusiomization, adaptation, up gradation, ceshancement, implementation of information technology software; ‘Agreeing tthe obligation o refrain fom an ato tleratean acto station, ortodoanactsand For Example, Fes collect by ban for bounce of customer’ cheque. willbe eae ss ‘supply of sevice anal for ST. transfer ofthe right wuse any good for any purpose (whether or not foraspecified period) forcash, dfered payment or ther valuable consideration. Composite supply : Te following compost sppis shal be teat sas) of services, namely’ fa Works contractas defined inclause119of ection; and te Soply,by wa fora part ofan servic or inany ther mane whee sou beng od or any the arse forhuan cosurpion any i aoe cnbi liquor or human consumption) wheresuchspplyorsrvice or ‘ash, deferred paymentor othe valuable consideration.