Message from the President

Goods and Services Tax (GST) one of the most ambitious tax reforms,

undertaken by the Government, is all set to be implemented from July 1, 2017.

GST will usher India into an era of One Tax, One Market and One Nation,

thereby exerting a positive impact on the GDP and increasing the size of

formal economy in the Country.

GST is certainly going to be a game changer for the Indian economy as it

would facilitate creation of a common market with minimum exemptions and

maximum compliances. Widening tax base as a result of GST implementation

would help in preventing revenue leakages and will achieve the objective of

rationalisation of tax structure. It will provide uniformity of tax structure and

rates across the country and help in avoiding cascading of taxes and reduce

cost of compliance.

India's most progressive tax reform is knocking on our doors, and the

Institute of Company Secretaries of India (ICSI) has taken various initiatives

to facilitate successful implementation of this biggest reform in indirect tax

structure and Indian economy. With a view to provide a basic understanding

of GST to people at large, the Institute of Company Secretaries of India, has

brought out this “Beginners Guide on Goods & Services Tax”

I am sure this beginners guide will prove to be an important facilitator for

public at large to understand the intricacies of GST.

CS (Dr.) Shyam Agrawal

President

The Institute of Company Secretaries of India

1

Index

Sr. No Topic

Page No.

1.

Introduction

3

2.

GST International Scenario

7

3.

GST in India

9

4.

History of GST

11

5.

GST Council

15

6.

Levy under GST

16

7.

Liability under GST

17

8.

Registration

18

9.

Taxable event under GST

21

10.

Time of Supply

23

11.

Nature of Supply

26

12.

Place of Supply

28

13.

Value of Supply

33

14.

Input Tax Credit

35

15.

Tax Invoice, Credit & Debit Notes

37

16.

Returns

42

17.

Payment

45

18.

Accounts & Records

47

19.

Job Work

48

20.

Assessment

50

21.

Audit

51

22.

Benefits of GST

53

23.

Role of Company Secretaries

59

2

1. Introduction

Taxation is one of the vital component of development of any country. The

revenue from taxation is used to finance public goods and services such as

infrastructure, sanitation, transportation and all other amenities which are

provided by the government. From the view of economists, a tax is a non-

penal, yet compulsory transfer of resources from the private to the public

sector levied on a basis of predetermined criteria and without reference to

specific benefit received. Each rupee of tax contributed helps Government to

provide better infrastructure, rural revival and social well-being. Taxation is

also considered as a major tool available to Government for removing poverty

and inequality from the society. On the other hand, tax reform is an essential

component of any comprehensive strategy for structural adjustment & the

resumption of growth. (Chibber & khalilzadeh Shirazi 1988)

Taxes in India are levied by the Central Government, the State Governments

and some local authorities such as the Municipality, which levy minor taxes.

There are two types of taxes which are levied in India and they are; Direct tax,

which is levied directly to an individual's income in the form of Income Tax

and Indirect tax, that is paid indirectly by the final consumer of goods and

services while paying for purchase of goods or for enjoying services. Although

the immediate liability to pay tax falls upon another person such as

manufacturer, provider of services or seller of goods. Indirect taxes in India

have different forms like Central Excise duty, Sales Tax, Services Tax etc.

Constitution of India is the foundation and source of powers to legislate all

laws in India. The authority to levy a tax is derived from the Constitution of

India which allocates the power to levy various taxes between the Central and

the State. Article 246 of the Indian Constitution, distributes legislative powers

including taxation, between the Parliament of India and the State

Legislatures. The Centre has the powers to levy tax on the manufacture of

goods (except alcoholic liquor for human consumption, opium, narcotics

etc.) while the States have the powers to levy tax on the sale of goods. In the

case of inter-State sales, the Centre has the power to levy a tax (the Central

Sales Tax) but, the tax is collected and retained entirely by the States. As for

services, it is the Centre alone that is empowered to levy service tax.

3

Broadly, the existing Indirect Tax regime can be looked at from the point of

view of Central and State laws. For the Central Government, Central Excise,

Customs and Service tax are the three main components of indirect taxes.

While for State Government, Value Added Tax (VAT) and CST are major taxes

along with Octroi, Entertainment Tax etc.

Introduction of the Value Added Tax has been considered to be a major step

and important breakthrough in the sphere of indirect tax reforms in India.

Despite the success of VAT, there are still certain shortcomings in the existing

structure of VAT. This primarily lies in the form of mosaic of taxes being levied

on goods and services, such as luxury tax, entertainment tax, etc., not

subsumed in the VAT thereby marginalizing the benefits of comprehensive

tax credit mechanism.

The present forms of CENVAT and State VAT have remained inefficient in

fully removing the cascading effect of taxes. Besides, there are several other

taxes, which both the Central Government and the State Government levy on

production, manufacture and distributive trade, where no set-off is available

in the form of input tax credit. These taxes add to the cost of goods and

services through "tax on tax" which the final consumer has to bear.

Some of the challenges under the current indirect tax structure could be

attributed to Central Excise wherein currently there are variable rates under

Excise Duty such as 2% without CENVAT 6%, 10%, 18%, 24%, 27%, coupled

with multiple valuation system and various exemptions. Further, under VAT,

different states are charging VAT at different rates, which is resulting in

imbalance of trade between the states. At the same time under VAT there is

lack of uniformity in terms of registration, due date of payment, return filing

assessment procedures, refund mechanism, appellate process etc. thus,

complicating the compliance mechanism. For example: A business

establishment having offices in different states are required to follow the laws

of the respective states.

4

Challenges of Current Tax Structure

1. In respect of taxation of goods, CENVAT is confined to the

manufacturing stage and does not extend to the distribution chain beyond

the factory gate. As such, CENVAT paid on goods cannot be adjusted

against State VAT payable on subsequent sale of goods. This is true both for

CENVAT collected on domestically produced goods as well as that

collected as additional duty of customs on imported goods.

2. CENVAT is itself made up of several components in the nature of cesses

and surcharges such as the National Calamity Contingency Duty (NCCD),

education and secondary and higher education cess, additional duty of

excise on tobacco and tobacco products etc. This multiplicity of duties

complicates the tax structure and often obstructs the smooth flow of tax

credit.

3. While input tax credit of CENVAT or additional duty of customs paid on

goods is available to service providers paying Service Tax, they are unable

to neutralize the State VAT or other State taxes paid on their purchase of

goods.

4. State VAT is payable on the value of goods inclusive of CENVAT paid at the

manufacturing stage and thus the VAT liability of a dealer gets inflated by

this component without compensatory set-off.

5. Inter-State sale of goods attracts the Central Sales Tax (CST) levied by the

Centre and collected by the States. This is an origin-based tax and cannot

be set-off against VAT in many situations.

5

6. State VAT and CST do not directly apply to the import of goods on which

Special Additional Duties (SAD) of customs are levied at a uniform rate of

4% by the Centre. Input tax credit of these duties is available only to those

manufacturing excisable goods. Other importers have to claim refund of

this duty as and when they pay VAT on subsequent sales.

7. VAT dealers are unable to set-off any Service Tax that they may have paid

on their procurement of taxable input services.

8. State Governments also levy and collect a variety of other indirect taxes such

as luxury tax, entertainment tax, entry tax etc. for which no set-off is available.

If VAT is a major improvement over the pre-existing Sales tax at the State level,

then the Goods and Services Tax (GST) will indeed be a further significant

improvement at National as well as State level towards a comprehensive

indirect tax reforms in the country.

GST is one of the biggest taxation reform in India aiming to integrate state

economics and boost over all growth by creating a single, unified Indian

market to make the economy stronger.

6

2. GST International Scenario

Internationally, countries are moving towards simplification of tax structures.

The adoption of Goods and Services Tax has been the most important

development in several countries over the last half-century. Today, it is one of

the widely accepted indirect taxation system prevalent in more than 140

countries across the globe. Globally, GST has been structured as a destination

based comprehensive tax levied at a specified rate on sale and consumption of

goods and services within a country. It facilitates creation of national tax

standards with consumers paying uniform rates of GST, thereby enabling flow

of seamless credit across the supply chain.

GST was first levied by France in 1954. Today, Malaysia is the most recent

country to join the bandwagon.

In countries where GST has been adopted, manufacturers, wholesalers,

retailers and service providers charge GST at the specified rate on price of the

goods and services from consumers and claim input credits for GST paid by

them on procurement of goods and services (raw material).

Globally, the broad principles of GST are as under:

• GST is a broad-based tax

• GST is a destination based tax

• GST is technically paid by suppliers but it is actually funded by consumers

• GST is collected through a staged process i.e. a tax on the value added to

goods or services at every point in the supply chain

• GST is a tax on the consumption of products from business sources, and

not on personal or hobby activities

• Under GST, input tax credit is provided throughout the value chain for

creditable acquisition.

Models of GST

Although most countries have adopted similar principles of GST, there

remain significant differences in the way it is implemented. These differences

result not only from the continued existence of exemptions and special

7

arrangements to meet specific policy objectives, but also from differences of

approaches in the definition of the jurisdiction of consumption and therefore

of taxation. In addition, there are a number of variations in the application of

GST, and other consumption taxes, including different interpretation of the

same or similar concepts; different approaches to time of supply and its

interaction with place of supply; different definitions of services and

intangibles and inconsistent treatment of mixed supplies.

Different countries follow different model of GST based upon their own

legislative and administrative structure and their requirements. Some of these

models are

• Australian Model wherein, tax is collected by the Centre and distributed to

the States

• Canadian Model wherein there are three variants of taxes

• Kelkar-Shah Model based on Canada Model wherein taxes are collected by

the Centre however, two different rates of tax are to be levied by the Centre

and the States and

• Bagchi-Poddar Model which envisages a combination of Central Excise,

Service Tax and VAT to make it a common base of GST to be levied both by

the Centre and the States separately.

Most countries follow a unified GST regime. However, considering the

Federal nature of Indian Constitution, dual model of GST is proposed, where

the power to levy taxes would be subjectively distributed between Centre and

States thus, GST will be levied by both, the Centre as well as the States and

there will be separate levies in the form of Central Goods and Services Tax

(CGST), State Goods and Services Tax (SGST) and Integrated Goods and

Services Tax (IGST) enabling the tax credit across these three variants of

taxes. Currently, Brazil and Canada also follow dual GST model.

8

3. GST in India

GST is one of the biggest taxation reforms in India aiming to integrate State

economies and boost overall growth by creating a single, unified Indian

market to make the economy stronger. GST is proposed to be a

comprehensive destination based indirect tax levy of goods as well as services

at the national level. Its main objective is to consolidate multiple indirect tax

levies into a single tax thus subsuming an array of tax levies, overcoming the

limitations of existing indirect tax structure, and creating efficiencies in tax

administration.

GST is a consumption or destination based tax levied on the basis of the

“Destination principle.” It is a comprehensive tax regime covering both goods

and services, and be collected on value-added at each stage of the supply

chain. Further, GST paid on the procurement of goods and services can be set

off against that payable on the supply of goods or services. Simply put, Goods

and Services Tax is a tax levied on goods and services imposed at each point of

supply. Such GST will be on entire goods and services or except some

exempted class of goods or services or a negative list of goods and services on

which GST will not be levied. GST is a national level tax based on value added

principle just like State level VAT which is levied as tax on sale of inter-state

goods.

The essence of GST is in removing the cascading effects of both Central and

State taxes by allowing setting-off of taxes throughout the value chain, right

from the original producer and service provider's point up to the retailer's

level. GST is thus not simply VAT plus service tax, but a major improvement

over existing system of VAT and disjointed Service Tax ushering in the

possibility of a collective gain for industry, trade and common consumers as

well as for the Central Government and the State Governments.

GST, as a well-designed value added tax on all goods and services, is the most

elegant method to eliminate distortions and to tax consumption. Taxes

proposed to be subsumed under GST are as follows:

9

Central taxes State taxes

State VAT

Central Excise Duty

Central Sales Tax

Duties of Excise (Medicinal and

Toilet Preparations)

Purchase Tax

Additional Duties of Excise

Luxury Tax

(Goods of Special Importance)

Additional Duties of Excise

Entry Tax (All forms

(Textiles and Textile Products)

Additional Duties of Customs

Entertainment Tax (except those

(commonly known as CVD)

levied by the local bodies)

Special Additional Duty of

Taxes on advertisements

Customs (SAD)

Service Tax

Taxes on lotteries, betting and

gambling

Cesses and surcharges insofar as

State cesses and surcharges insofar

they relate to supply of goods or

as they relate to supply of goods or

services

services

10

4. History of GST

The origin of Goods and Services Tax could be traced back to July 17, 2000,

when the Government of India set up the Empowered Committee of State

Finance Ministers with the Hon'ble State Finance Ministers of West Bengal,

Karnataka, Madhya Pradesh, Maharashtra, Punjab, Uttar Pradesh, Gujarat,

Delhi and Meghalaya as members with the following objectives:

• to monitor the implementation of uniform floor rates of sales tax by States

and Union Territories;

• to monitor the phasing out of the sales-tax based incentive schemes;

• to decide milestones and methods of States to switch over to VAT; and

• to monitor reforms in the Central Sales Tax system existing in the country.

Subsequently, Hon'ble State Finance Ministers of Assam, Tamil Nadu, Jammu

& Kashmir, Jharkhand and Rajasthan were also notified as the members of the

Empowered Committee.

On August 12, 2004, the Government of India decided to reconstitute the

Empowered Committee with all the Hon'ble State Finance/Taxation

Ministers as its members. Later on, it was decided to register the body as a

Society under the Societies Registration Act, 1860. GST has been in the

pipeline for a long time, for its passage and implementation.

Here is a brief flash back mentioning the key milestones of the journey of GST

in India :

2003: The Kelkar Task Force on Indirect Tax had suggested a comprehensive

Goods and Services Tax (GST) based on VAT principle.

February, 2007: An announcement was made by the then Hon'ble Union

Finance Minister in the Central Budget (2007- 08) to the effect that GST

would be introduced with effect from April 01, 2010.

September, 2009: The Empowered Committee (EC) decided to constitute a

Working Group consisting of Principal Secretaries / Secretaries (Finance /

Taxation) and Commissioners of Trade Taxes of all States/UTs to give their

recommendations on :

11

• the commodities and services that should be kept in the exempted list;

• the rules and principles of taxing the transactions of services including the

transactions in inter-State services; and

• finalization of the model suggested for inter-state transaction/movement

of goods including stock transfers in consultation with the State Bank of

India and some other nationalized banks.

November, 2009: Based on inputs from Government(s) of Centre and States,

Empowered Committee released its First Discussion Paper on GST.

March, 2011: The Constitution (One Hundred and Fifteenth Amendment)

Bill, 2011 to give concurrent taxing powers to the Union and States was

introduced in Lok Sabha. The Bill suggested the creation of Goods and

Services Tax Council and a Goods and Services Tax Dispute Settlement

Authority. The Bill was lapsed in 2014 and was replaced with the Constitution

nd

(122 Amendment) Bill, 2014.

November, 2012: A “Committee on GST Design”, consisting of the officials of

the Government of India, State Governments and Empowered Committee

(EC) was constituted.

January, 2013: The Empowered Committee deliberated on the proposed

th

design including the Constitution (115 ) Amendment Bill and submitted the

report. Based on this Report, the EC recommended certain changes in the

Constitution Amendment Bill and decided to constitute three below

mentioned Committees of Officers to discuss and Report on various aspects of

GST :

• Committee on Place of Supply Rules and Revenue Neutral Rates;

• Committee on dual control, threshold and exemptions;

• Committee on IGST and GST on imports.

March, 2013: A not for profit, non-Government, private limited company was

incorporated in the name of Goods and Services Tax Network (GSTN) as

special purpose vehicle setup by the Government primarily to provide IT

infrastructure and services to the Central and State Government(s), tax payers

and other stakeholders for implementation of the Goods and Services Tax

(GST).

12

August, 2013: The Parliamentary Standing Committee submitted its Report to the Lok Sabha. The recommendations of the Empowered Committee (EC)

and the recommendations of the Parliamentary Standing Committee were

examined by the Ministry in consultation with the Legislative Department.

Most of the recommendations made by the Empowered Committee and the

Parliamentary Standing Committee were accepted and the Draft Amendment

Bill was suitably revised.

September, 2013: The final draft Constitutional Amendment Bill

incorporating the above stated changes was sent to the Empowered

Committee for consideration.

November, 2013: The EC once again made certain recommendations on the

Bill after its meeting in Shillong. Certain recommendations of which were

th

incorporated in the draft Constitution (115 Amendment) Bill and the

revised draft was again sent to EC for its consideration.

June, 2014: The draft Constitution Amendment Bill in March, 2014 was sent to

the Empowered Committee after approval of the new Government.

December, 2014: The Constitution (One Hundred and Twenty-Second

Amendment) Bill, 2014 seeking to amend the Constitution to introduce the

Goods and Services Tax (GST) and subsume state Value Added Tax, octroi

and entry tax, luxury tax, etc. was introduced in the Lok Sabha on December

19, 2014 by the Hon'ble Minister of Finance, Mr. Arun Jaitley.

nd

May, 2015: Constitution Amendment (122 ) Bill was passed by Lok Sabha on

May 06, 2015.

May, 2015: In Rajya Sabha, Bill was referred to a 21-member Select Committee

of Rajya Sabha.

July, 2015: Select Committee submitted its report to Rajya Sabha on July 22,

2015.

June, 2016: On June 14, 2016, the Ministry of Finance released draft model law

on GST in public domain for views and suggestion.

nd

August, 2016: On August 03, 2016, the Constitution (122 Amendment) Bill,

2014 was passed by Rajya Sabha with certain amendments.

August, 2016: The changes made by Rajya Sabha were unanimously passed by

Lok Sabha, on August 08, 2016.

13

September, 2016: The Bill was adopted by majority of State Legislatures wherein approval of at least 50%of the State Assemblies was required

September, 2016: Final assent of Hon'ble President of India was given on 8th

September,2016

April, 2017: Parliament passed the following four bills

• Central Goods & Services tax (CGST) Bill

• Integrated Goods & Services Tax (IGST) Bill

• Union Territory Goods & Services tax (UTGST) Bill

• Goods & Services Tax (Compensation to States) Bill

April, 2017: President's assent was given to the above four key legislation on

Goods & Services Tax

(state are in process of passing separate and dedicated legislation i.e. SGST

Bill in their respective legislatures)

14

5. GST Council

GST Council is the main decision-making body that has been formed to

finalize the design of GST. This governing body of GST comprises of Union

Finance Minister – Arun Jaitley, who is the Chairman of the council, the

Minister of State (Revenue) and the State Finance/ Taxation Ministers. The

duty of the Council is to make recommendations to the Union and the States.

It has been provided in the Constitution (one hundred and first amendment)

Act, 2016 that the GST Council, in its discharge of various functions, shall be

guided by the need for a harmonized structure of GST and for the

development of a harmonized national market for goods and services.

In the GST Council a decision is taken by a three-fourth majority with the

Centre having a one-third vote and the states the remaining two-third.

Functions of the GST Council seeked to include making recommendations

on:

• taxes, cesses, and surcharges levied by the Centre, States and local bodies

which may be subsumed in the GST;

• goods and services which may be subjected to or exempted from GST;

• Model GST laws, principles of levy, apportionment of IGST and principles

that govern the place of supply;

• threshold limit of turnover below which goods and services may be

exempted from GST;

• rates including floor rates with bands of GST;

• special rates to raise additional resources during any natural calamity;

• special provision with respect to Arunachal Pradesh, Jammu and Kashmir,

Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal

Pradesh and Uttarakhand; and

• any other matters

15

6. Levy under GST Regime

GST will be levied on supply of all goods or services or both except supply of

alcoholic liquor for human consumption. Five petroleum products viz.

petroleum crude, motor spirit (petrol), high speed diesel, natural gas and

aviation turbine fuel have temporarily been kept out and GST Council shall

decide the date from which they shall be included in GST. Electricity has also

been kept out of GST.

The structure provided under GST is dual in nature and under this , the

Centre and the States will simultaneously levy tax on a common base. The GST

levied by the Centre on intra-State supply of goods and / or services would be

called the Central GST (CGST) and that levied by the States / Union territory

would be called the State GST (SGST)/ UTGST. Similarly, Integrated GST

(IGST) will be levied and administered by Centre on every inter-state supply of

goods and services.

CGST

Intra state

SGST

GST

Inter state

IGST

16

7. Liability under GST

Under the GST regime, liability to pay tax arises when the taxable person

crosses the turnover threshold of Rs.20 lakhs (Rs. 10 lakhs for North Eastern &

Special Category States) except in certain specified cases where the taxable

person is liable to pay GST even though he has not crossed the threshold limit.

The CGST / SGST is payable on all intra-State supply of goods and/or services

and IGST is payable on all inter- State supply of goods and/or services.

A Composition Scheme, which is mainly devised for small taxpayers, provides

concessional rate of tax and filing of quarterly returns instead of monthly

return. To be eligible for registration under Composition scheme it is

required that the aggregate turnover of a registered tax payer should not

exceed Rs 75,00,000/- in the preceding financial year.

taxable supplies (excluding the

value of inward supplies on

excludes

which tax is payable by a person

central tax,

on reverse charge basis),

State tax,

Union

territory

tax,

integrated

Exempt Supplies

tax and cess

Aggregate Turnover

exports of goods or services

or both

inter-State supplies of persons

having the same Permanent

Account Number

17

8. Registration

In any tax system, registration is the most fundamental requirement for

identification of tax payers ensuring tax compliance in the economy.

Registration of any business entity under the GST Law implies obtaining a

unique number from the concerned tax authorities for the purpose of

collecting tax on behalf of the government and to avail Input Tax Credit for

the taxes on his inward supplies. Without registration, a person can neither

collect tax from his customers nor claim any input Tax Credit of tax paid by him

Persons Liable to register

Section 22 of the CGST Act, 2017 specifies the list of persons liable for

registration and section 24 of the CGST Act, 2017 lists categories of persons

who are required specifically to take registration even if they are not covered

under section 22 of the Act. Following is a summarised list:

• Supplier: Supplier of taxable goods or services or both exceeding the

specified threshold limit of Rs. 10 lakhs (for special category States) and

Rs. 20 lakhs for other states and Union territories

• Licensee: Every person who is a registered licensee or holds a license

under an existing law, on the day immediately preceding the appointed

day

• Transferee: Where a business, which is carried by a taxable person is

transferred as a going concern shall be liable to be registered with effect

from the date of such transfer or succession

• Transferee under a scheme: Transfer pursuant to sanction of a scheme or

an arrangement for amalgamation or, as the case may be, demerger of two

or more companies pursuant to an order of a High Court, Tribunal or

otherwise, the transferee shall be liable to be registered, with effect from

the date on which the Registrar of Companies issues a certificate of

incorporation giving effect to such order of the High Court or Tribunal

• Interstate supplier: An interstate supplier is compulsorily required to get

registered under GST

• Casual Taxable person: A person who occasionally undertakes

transactions involving supply of goods or services or both in the course or

furtherance of business, whether as principal, agent or in any other

capacity, in a State or a Union territory where he has no fixed place of

business is termed as a casual taxable person.

18

Such persons if making taxable supply of goods or services or both comes

under the ambit of taxable persons

• Payer of Reverse charge: Persons who are required to pay tax under

reverse charge shall get registered under GST

• Person under Section 9(5) of CGST Act, 2017: As stated in section 9(5) of

CGST Act, 2017, the Government may, on the recommendations of the

Council, by notification, specify categories of services, the tax on intra-

State supplies of which shall be paid by the electronic commerce operator

if such services are supplied through it, and all the provisions of this Act

shall apply to such electronic commerce operator as if he is the supplier

liable for paying the tax in relation to the supply of such services

• Non-resident: A non-resident taxable person making taxable supply

• Deductor of tax at source: Persons who are required to deduct tax under

section 51, whether or not separately registered under this Act

• Supplier on behalf of another person: Persons who make taxable supply of

goods or services or both on behalf of other taxable persons whether as an

agent or otherwise

• Input Service Distributor: Whether or not separately registered under this

Act

• Supplier through Electronic Commerce Operator: Persons who supply

goods or services or both (other than supplies specified under sub-section

(5) of section 9), through such electronic commerce operator who is

required to collect tax at source under section 52

• Electronic Commerce Operator: Every Electronic Commerce Operator

• Supplier of online information: Every person supplying online

information and database access or retrieval services from a place outside

India to a person in India, other than a registered person

• Any other person: Any other person or class of persons as notified by the

Government on recommendations of the Council

Persons not liable for registration

The following persons have been specifically kept out of the purview of

registration under GST:

• Person supplying exempted goods or services or goods or services which

are not liable for tax under GST.

• An agriculturist, to the extent of supply of produce out of cultivation of

land.

19

The government may, on the recommendations of the Council, by

notification, specify the category of persons who may be execpted from

obtaining registration under CGST Act

GSTIN

GST Registration Number will be 15 digits- PAN based number- called GSTIN,

as under-

State

Entity

Check

PAN

Blank

Code

Code

Digit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

• The first two digits of this number will represent the state code

• The next ten digits will be the PAN number of the taxpayer

• The thirteenth digit will be assigned based on the number of registrations

within a state

• The fourteenth digit will be Z by default

• The last digit will be for check code

Registration under GST is not tax specific, which means that there is single

registration for all the taxes i.e. CGST, SGST/UTGST, IGST and cesses. A

given PAN based legal entity would have one GSTIN per State, that means a

business entity having its branches in multiple States will have to take separate

State wise registration for the branches in different States. But within a State,

an entity with different branches would have single registration wherein it can

declare one place as principal place of business and other branches as

additional place of business. However, a business entity having separate

business verticals (as defined in section 2 (18) of the CGST Act, 2017) in a state

may obtain separate registration for each of its business verticals.

An application has to be submitted online through the common portal

(GSTN) within thirty days from the date when liability to register arise. The

Casual and Non-Resident taxable persons need to apply at least five days prior

to the commencement of the business. For transferee of a business as going

concern, the liability to register arises on the date of transfer.

20

9. Taxable event under GST

Under the exiting regime taxable event for various taxes are different. For

example, for excise duty the taxable event is manufacture or production of

goods in India. Similarly, for services the taxable event was when a service was

provided or agreed to be provided. Under CST and VAT it is sale of goods.

Thus, all this led to lot of confusion in determining taxable event under

different taxes. To replace such multiple taxable events, GST has brought a

single and uniform taxable event, which is, supply and tax will accrue to the

taxing authority which has jurisdiction over the place of consumption will be

the place of supply is most cases.

Supply has been very subjectively and inclusively defined in the Act. The types

of supply identified under the Act are:

Schedule I activities (whether

Supply which are made or

or not for consideration) like

agreed to be made for a

t r a n s f e r o f g o o d s f r o m

consideration by a person in

principle-agent transaction

the course or furtherance of

etc.

business

Supply

S c h e d u l e I I a c t i v i t i e s

Import of services which are

(activities to be treated as

for consideration (whether

supply of goods or supply of

or not in the course or

services)

furtherance of business).

21

There are few activities which are specifically not to be considered as SUPPLY

and these are:

1. Schedule III activities which includes

• Services from an employee to employer

• Services by any court or Tribunal

• (a) functions performed by members of Parliament, member of State

Legislature, member of Parchayats, member of Municipalities and

members of other local authorities

(b) the duties performed by any person who holds any post is

pursuance of the provision of the Constitution is that capacity or

(c) the duties performed by any person as a Chairperson or a Member

or a director in a body established by Central Government or a State

Government or local authority & who is not deened as an employee

before the commencement of this clause

• Services of funeral, burial, crematorium or mortuary

• Sale of land subject to Schedule II(5)(b), sale of building

• Actionable claims, other than lottery, betting and gambling

2. activities or transactions undertaken by the Central Government, a State

Government or any local authority in which they are engaged as public

authorities, as may be notified by the Government on the recommendations

of the Council.

22

10. Time of Supply

Point of taxation means the point in time when goods have been deemed to be

supplied or services have been deemed to be provided. The point of taxation

enables us to determine the rate of tax, value, and due dates for payment of

taxes. Under GST the point of taxation , i.e., the liability to pay CGST / SGST,

will arise at the time of supply as determined for goods and services. CGST

Act,2017 states provisions to determine time of supply of goods under section

12 and time of supply of services under section 13 of the Act.

Time of Supply of Goods

Type

Goods (Sec 12)

General provision

(Earliest of the three)

(sub section 2)

• date of issue of invoice

• last date when invoice is required to be

issued (sec 31(1)

• receipt of payment

Excess amount amount

(at the option of supplier) date of issue of

received is up to Rs. 1000 invoice (with respect to such excess amount)

in excess to the amount

indicated in tax invoice

Here “supply” shall be deemed to have been made to the extent it is covered

by the invoice or, as the case may be, the payment and “the date of receipt of

payment” shall be the earliest of the following:

date on which the payment is entered in the books of account of the supplier

or the date on which the payment is credited to his bank account

Reverse Charge Basis

(Earliest of the three)

(sub section 3)

• the date of the receipt of goods

• the date of payment as entered in the books

of account or payment is debited in his bank

account whichever is earlies

• the date immediately following thirty days

from the date of issue of invoice or any other

document

23

where it is not possible to determine the time of supply the date of entry in

the books of account of the recipient of supply

Vouchers (sub section 4)

• the date of issue of voucher, if the supply is

identifiable at that point or

• the date of redemption of voucher, in all

other cases

Where it is not possible to determine the time of supply under the

provisions of sub-section (2) or sub-section (3) or sub-section (4), the time

of supply shall––

in a case where a periodical return has to be filed, be the date on which

such return is to be filed; or in any other case, be the date on which the tax

is paid.

The time of supply to the extent it relates to an addition in the value of supply

by way of interest, late fee or penalty for delayed payment of any

consideration shall be the date on which the supplier receives such addition

in value.

Time of Supply of Services.

Type

Services (Sec 13)

General provision

(Earliest of)

(sub section 2)

• date of issue of invoice if issued within

time prescribed under (sec 31(2)) or

date of receipt of payment whichever

is earlier or

• date of provision of service if invoice

not issued within time prescribed

under section 31(2) or the date of

receipt of payment, whichever is

earlier or

• date of receipt as entered in the

books of account, in other cases

Excess amount

amount received is up to (at the option of supplier)

Rs. 1000 in excess to the amount date of issue of invoice (with respect to

indicated in tax invoice

such excess amount)

24

Here “supply” shall be deemed to have been made to the extent it is

covered by the invoice or, as the case may be, the payment and “the date of

receipt of payment” shall be the earliest of the following:

• date on which the payment is entered in the books of account of the

supplier or

• the date on which the payment is credited to his bank account

Reverse Charge Basis

(Earliest of the following)

(sub section 3)

• the date of payment as entered in the books of

account or payment is debited in his bank

account, whichever earlier

• the date immediately following sixty days from

the date of issue of invoice or any other

document

Services by associated in the enterprises:

Where the supplier of service is located outside India,(earlier of the two)

• the date of entry in the books of account of the recipient

• the date of payment

Vouchers

• the date of issue of voucher, if the supply is

(sub section 4)

identifiable at that point or

• the date of redemption of voucher, in all other

cases

Where it is not possible to determine the time of supply under the provisions

of sub-section (2) or sub-section (3) or sub-section (4), the time of supply

shall––

• in a case where a periodical return has to be filed, be the date on which

such return is to be filed; or

• in any other case, be the date on which the tax is paid.

The time of supply to the extent it relates to an addition in the value of supply

by way of interest, late fee or penalty for delayed payment of any

consideration shall be the date on which the supplier receives such addition

in value.

25

11. Nature of Supply

GST is a destination based tax i.e consumption tax, which means tax will be

levied where goods and services are consumed and will accrue to that state

thus, it is of immense importance that the place of supply of any transaction is

determined correctly. To determine the correct place of supply, it is important

that the nature of supply be understood first. Following table list provisions as

contained in IGST Act, 2017, to know whether a supply will be treated as Inter

State or Intra State supply.

The following services shall be treated as inter state supply:

Inter State Supply (Sec 7)

Supply of

Goods

Services

L o c a t i o n o f t h e t w o d i f f e r e n t

two different States;

supplier and the States;

t w o d i f f e r e n t U n i o n

place of supply are in

t w o d i f f e r e n t

territories; or

Union territories;

a S t a t e a n d a U n i o n

or a State and a

territory,

Union territory

Import

till they cross the No specific requirement (all

customs frontiers of services imported will be

India

treated as inter state supply)

supplier located in India and the place of supply is outside India

to or by a Special Economic Zone developer or a Special Economic Zone unit

in the taxable territory, not being an intra-State supply and not covered

elsewhere in this section

26

The following supplies shall be treated as intra state supply:

Intra State Supply

Supply of

Goods

Services

L o c a t i o n o f t h e same State or same

same State or same

supplier and the Union territory

Union territory

place of supply are in

Following will not be considered as Intra State Supply

• supply of goods to or by a

Special Economic Zone

developer or a Special

Economic Zone unit

• goods imported into the

territory of India till they

cross the customs frontiers

of India

• supplies of goods made to a

tourist as referred to in

Section 15

Following will be treated as establishments of distinct persons:

• an establishment in India and any other establishment outside India;

• an establishment in a State or Union territory and any other establishment

outside that State or Union territory; or

• an establishment in a State or Union territory and any other establishment

being a business vertical registered within that State or Union territory

A person carrying on a business through a branch or an agency or a

representational office in any territory shall be treated as having an

establishment in that territory.

27

12. Place of Supply

Place of supply is important to determine the nature of sale (inter-state, intra-

state, import or export) and the State where State component of GST will

accrue.

Place of Supply of Goods

Section 10 of the IGST Act, 2017, specifies place of supply of goods, other than

supply of goods imported into, or exported from India.

S u p p l y i n v o l v i n g

m o v e m e n t o f g o o d s

location of the goods at the time at which

(whether by the supplier

the movement of goods terminates for

or the recipient or by any

delivery to the recipient

other person)

Delivery of goods (by the

supplier to a recipient or

any other person on the

direction of a third person)

principal place of business of such

either by way of transfer of

person

documents of title to the

goods or otherwise

S u p p l y n o t i n v o l v i n g

m o v e m e n t o f g o o d s

location of such goods at the time of

(whether by the supplier

the delivery to the recipient

or the recipient)

Installation/Assembelling

place of such installation or assembly

of goods

Goods supplied on board

location at which such goods are

a conveyance

taken on board

28

Place of Supply of Services

Section 12 of the Integrated GST Act, 2017 lists place of supply of services,

where location of supplier and recipient is in India.

(Sub Section)

Type

Place of Supply

Applicability

of Service

(2) General

Made to a registered person location of such person

Provision

Made to unregistered person - location of recipient where

address on records exist

- location of the supplier

of services in other cases

(3) Immovable s e r v i c e s p r o v i d e d b y l o c a t i o n a t w h i c h

property, boat

a r c h i t e c t s , i n t e r i o r immovable property or boat

or vessel

decorators or any service

provided by way of grant of or vessel is located or

rights to use immovable intended to be located

property or for carrying

out or co-ordination of

construction work

B y w a y o f l o d g i n g

accommodation, including

a houseboat or vessel

A c c o m m o d a t i o n f o r

organising marriage or

matters related thereto,

official, social, cultural,

r e l i g i o u s o r b u s i n e s s

function including services

provided in relation to

such function at such

property; etc

Any ancillary services to the

above services

if immovable property or the place of supply shall be

boat or vessel is located or the location of the recipient

intended to be located

outside India

29

Immovable

located in more than

proportionate allocation

Property/boat

one State

amongst states as per the

/vessel

value of service received or

as per the contract or as may

be prescribed

(4) Specific

S e r v i c e s l i k e b e a u t y

location where the services

services

p a r l o u r , fi t n e s s ,

are actually performed

restaurant and catering

services etc.

Made to a registered

(5) Training

location of such person

person

and

performance Made to unregistered location where the services

appraisal

person

are actually performed

admission to a cultural,

where the event is actually

(6) Services

a r t i s t i c , s p o r t i n g ,

held

by way of

scientific, educational,

or where the park or such

entertainment event or

other place is located.

amusement park or any

other place and services

ancillary there to

(7) Organisation Made to a registered

location of such person

of a cultural,

person

artistic, sporting Made to unregistered the place where the event is

event etc., and

person

actually held

services ancillary event held outside India

location of the recipient

to organisation

of any of the

Held in more than one

proportionate allocation

events or

State

amongst states as per the

assigning of

value of service received or

sponsorship of

as per the contract or as may

such events

be prescribed

(8)Transportati

registered person

location of such person

on of goods,

including by

unregistered person

location at which such

mail or courier

goods are handed over for

their transportation

30

(9) Passenger

registered person

location of such person

transportation

unregistered person

place where the passenger

service

embarks on the conveyance

for a continuous journey

Right to passage Made to a registered person Location of such person

is given for

future use and

Made to unregistered person M a d e t o u n r e g i s t e r e d

the point of

p e r s o n - l o c a t i o n o f

embarkation is

recipient where address on

not known at

records exist

the time of

- location of the supplier of

issue of right to

ser vices in other cases

passage

*The return journey shall be treated as a separate journey, even if the

right to passage for onward and return journey is issued at the same time

(10) On board

including a vessel, an

l o c a t i o n o f t h e fi r s t

a conveyance

aircraft, a train or a

s c h e d u l e d p o i n t o f

motor vehicle

d e p a r t u r e o f t h a t

conveyance for the journey

(12) Banking

i n c l u d i n g s t o c k

- location of the recipient of

and other

broking services to

s e r v i c e o n r e c o r d s o f

any person

financial

supplier or

services

- if location of recipient is

not available, location of the

supplier of services

(13) Insurance

Made to a registered location of such person

services

person

Made to unregistered location of the recipient of

person

Services on the records of

the supplier of services.

31

Place of supply of Telecommunication services

Section 12(11) of the Integrated GST Act, 2017 states the provisions for

determining the place of supply of telecommunication services including data

transfer, broadcasting, cable and direct to home television services to any

person

• In any other cases, be the address of the recipient as per the records of the

supplier of services and where such address is not available, the place of

supply shall be location of the supplier of services

• If pre-paid service is availed or the recharge is made through internet

banking or other electronic mode of payment, the location of the

recipient of services on the record of the supplier of services shall be the

place of supply of such services.

Where the leased circuit is installed in more than one State or Union territory

and a consolidated amount is charged for supply of services relating to such

circuit, the place of supply of service shall be proportionately allocated

amongst states/Union Territories as per the value of service received or as per

the contract or as may be prescribed

32

13. Value of Supply

Value of taxable supply under GST is the transaction value. Transaction value

means the price actually paid or payable for the said supply of goods or

services or both where the supplier and the recipient of the supply are not

related and the price is the sole consideration for the supply.

directly or indirectly owns,

directly or indirectly

controls or holds twenty-five

controlled by a third

per cent. or more of the

person

outstanding voting stock or

shares of both of them

directly or indirectly

legally recognised

controls the other

partners in business

employer and

directly or indirectly

Related

employee

Persons

control a third person

officers or directors of one

members of the same

another’s businesses

family

33

Value of Supply

Includes

Excludes Discount

any taxes, duties, cesses, fees Before or at the time of After the supply:

and charges levied under supply:

established in

any law for the time being in if discount has been t e r m s o f a n

force other than GST Act

d u l y r e c o r d e d i n agreement and

invoice

s p e c i fi c a l l y

a n y a m o u n t t h a t t h e

l i n k e d t o

supplier is liable to pay in

relevant invoices

relation to such supply but

input tax credit,

which has been incurred by

attributable to

the recipient of the supply

discount have

and not included in the

been reversed by

p r i c e a c t u a l l y p a i d o r

recepient

payable for the goods or

services or both;

incidental expenses

interest or late fee or

penalty for delayed payment

of any consideration for any

supply

subsidies directly linked to

t h e p r i c e e x c l u d i n g

subsidies provided by the

34

14. Input Tax Credit

Input tax credit is a provision of reducing the tax already paid on inputs. This

can be understood with the help of the following diagram:

B

(input tax

paid = Rs. 20)

C

A

(input tax paid

(input tax paid

= Rs. 80)

= Rs. 50)

Final

product

Tax=Rs. 300

Total input tax paid

= Rs.(50 + 20 + 80);

Output tax = Rs. 300;

Tax to be paid by manufacturer

(Rs.300 – Rs.150) = Rs.150

(Input tax credit availed = Rs.150)

Input Tax Credit (ITC) is considered as a cornerstone of GST. In the current

tax regime, there is a non-availability of credit at various points of supply

chain, which leads to a cascading effect of tax and increases the cost of goods

and services. This flaw has been removed under GST and a seamless flow of

credit throughout the value chain will be provided which will help in reducing

the cascading effect of tax.

Under GST, Input tax, means the central tax (CGST), State tax (SGST),

integrated tax (IGST) or Union territory tax (UTGST) charged on supply of

goods or services or both made to a registered person and includes taxes paid

on input goods, input services or both. To avail the benefit of ITC it is required

that the person availing such benefit is registered under GST. An unregistered

person is not eligible to take the benefit of ITC.

Section 16 of the CGST Act ,2017, states the condition and eligibility to obtain

ITC . Following four conditions are required to be fulfilled by a registered

taxable person:

35

• he should be in possession of tax invoice or debit note or such other tax

paying documents as may be prescribed;

• he should have received the goods or services or both;

• the supplier should have actually paid the tax charged in respect of the

supply to the government; and

• he should have furnished the return under section 39.

(where the goods against an invoice are received in lots or instalments, the

registered person shall be entitled to take credit upon receipt of the last lot or

instalment)

Availability of ITC to recipient has been made dependent on payment of tax

by supplier. Thus, even if the receiver has paid the amount of tax to the

supplier and the goods and/or services so procured are eligible for ITC, no

credit would be available, till the time tax so collected by the supplier is

deposited to the Government. Also if a recipient fails to pay the amount of

supply along with tax payable thereon within 3 months from the date of issue

of invoice, the recipient will be liable to pay along with the output tax liability

an amount equal to the input tax credit availed by the recipient along with

interest thereon

Utilisation of ITC

ITC

Intra State

Inter State

CGST

SGST

IGST

Credit to be

Credit to be tilised

Credit to be

utilised

sequentially

utilised

sequentially

IGST

sequentially

SGST

CGST

CGST IGST

IGST

SGST

Cross utilisation of CGST and SGST is not available

36

15. Tax invoice, Credit and Debit notes

Whenever a transaction takes place, different kinds of documents are issued

under different circumstances, like invoice, credit note, debit note and bill

of supply.

Invoice

An invoice indicates what must be paid by the buyer to the seller. On every

sale/purchase an invoice is issued by the supplier i.e person making the

sale. An invoice provides a detailed account of the products or service along

with details of supplier, purchaser, tax charged and other particulars such

as discounts, terms of sale etc.

Invoice for goods is required to be raised before or at the time of –

• removal of goods for supply to the recipient, where the supply involves

movement of goods; or

• delivery of goods or making available thereof to the recipient, in any other

case

A registered taxable supplier of services, is required to raise invoice at the

following timeline:

General provision

In case of taxable supply of services,

invoice shall be issued within a period of

thirty days from the date of supply of

service

(In case the supplier of services is an

insurer or a banking company or a

financial institution, including a non-

banking financial company, the invoice

shall be issued within 45 days of supply of

service)

Continuous Supply of service

before or at the time each such

statement is issued or, as the case may be,

each such payment is received

37

Continuous supply having

on or before the due date of payment

ascertainable due date

Continuous supply having

before or at the time when the supplier

unascertainable due date

of service receives the payment

Continuous supply where the

on or before the date of completion of

p a y m e n t i s l i n k e d t o t h e

that event

completion of an event

When contract ceases before

at the time when the supply ceases and

completion of supply

such invoice shall be issued to the extent

of the supply made before such cessation

Where the goods being sent or taken on approval for sale or return are

removed before the supply takes place, the invoice shall be issued before or at

the time of supply or six months from the date of removal, whichever is earlier.

Here, “tax invoice” shall include any revised invoice issued by the supplier in

respect of a supply made earlier. The Government may, on the

recommendations of the Council, by notification, specify the categories of

goods or services in respect of which a tax invoice shall be issued or any other

document issued in relation to the supply shall be deemed to be a tax invoice.

A revised invoice can be issued by a registered person, within one month from

the date of issuance of certificate of registration.

Original for

recepient

Goods

Duplicate for

Transporter

Invoice

Triplicate for

Supplier

Original for

recepient

Services

Duplicate for

supplier

38

Although all GST taxpayers are free to design their own invoice format., it is

required that certain fields as mentioned in the invoice rule be incorporated

in all invoices. A draft template of invoice (GST INV-1) under GST is given

below :

39

Bill of Supply

Where a supplier is not required to charge any tax, he shall to raise a bill of

supply instead of invoice. Bill of supply will be raised by

• a registered person supplying exempted goods or services or both or

• a registered person paying tax under the provisions of Section 10

Receipt voucher

When an advance payment is received with respect to any supply of goods or

services or both, a receipt voucher is required to be issued by the registered

person. Further, if no supply is made and no tax invoice is issued after the issue

of receipt voucher, the said registered person may issue to the person who had

made the payment, a refund voucher against such payment.

Credit note and debit note

A registered person is required to issue credit note or debit note under certain

circumstances. Following table summarizes such situations:

Credit note

Debit note

when taxable value or tax

charged in a tax invoice is

f o u n d t o e x c e e d t h e

where taxable value or tax

taxable value or tax payable

charged in that tax invoice

in respect of supply

is found to be less than the

taxable value or tax payable

where the goods supplied

in respect of such supply

a r e r e t u r n e d b y t h e

recipient

where goods or services or

both supplied are found to

be deficient

40

Delivery Challan

Invoice Rules list few situations where a delivery challan, serially numbered,

will be issued instead of invoice. Such situations are as follows:

• supply of liquid gas where the quantity at the time of removal from the

place of business of the supplier is not known

• transportation of goods for job work

• transportation of goods for reasons other than by way of supply, or

• such other supplies as may be notified by the Board

Original for consignee

Duplicate for Transporter

Delivery Challan

Goods

Triplicate for consigner

The supplier is required to issue a tax invoice after delivery of goods where tax

invoice could not be issued at the time of removal of goods for the purpose of

supply.

Where the goods are being transported in a semi knocked down or completely

knocked down condition:

• the supplier shall issue the complete invoice before dispatch of the first

consignment;

• the supplier shall issue a delivery challan for each of the subsequent

consignments, giving reference of the invoice;

• each consignment shall be accompanied by copies of the corresponding

delivery challan along with a duly certified copy of the invoice; and

• the original copy of the invoice shall be sent along with the last

consignment.

41

16. Returns

As per law, a taxpayer is required to file a document with the administrative

authority which is commonly known as a “return”. There are various types of

returns under GST like the First return, Monthly return, Return for

Composition Scheme, TDS return, Return for Input Service Distributor

Annual return and final return. Under GST , everything will be online and will

be updated regularly. Few businesses will be required to file 37 returns in a

year (three returns per month and one annual return) per state. If a business

is done from offices in multiple states, the number of returns will go up

accordingly. The entire procedure of filling returns can be divided into 5 parts

as follows.

Submis

Matching

Final

Rectification

Matching of

sion of

claim in reduction

of ITC

acceptance

of

return

of ITC

discrepancies

in output

in ITC

tax liability

The concept of revised returns is not provided in the GST return rules and

accordingly, the businesses would have to avail and re-avail, the mismatched

credit by way of credit notes, debit notes, and supplementary invoices. The

return rules have prescribed different forms to be filled by a registered person.

A summarised list has been given below:

Forms

Applicability

Type

Timeline

Outward

th

GSTR-1

On or before 10

Supplies

of next month

GSTR-2

Every registered person

Inward

after the 10th day

( o t h e r t h a n a n I S D , Supplies

but on or before

a non-resident taxable

the 15th day of the

person and a person paying

m

o

n

t

h

tax under the provisions

succeeding the

of section 10/51/52)

tax period

42

GSTR-3

Monthly return

On or before 20th of

next month

GSTR-4 R e g i s t e r e d Quarterly Return

within 18 days after the

C o m p o s i t i o n

end of each quarter

Supplier

GSTR-5 Every Registered I n w a r d a n d (whichever is earlier)

n o n - r e s i d e n t Outward Supplies

within 20 days after the

Taxable Person

e n d o f a c a l e n d a r

month or within 7 days

after the last day of the

period of registration

(section 27(1))

GSTR-6 Every Input Service D e t a i l s o f Ta x Before 13th of next

Distributor (ISD)

invoices

month

GSTR-7

Details of TDS

Every Registered

within 10 days after the

Person deducting

end of the month in

t a x a t s o u r c e

which deductions is

(section 51)

made

GSTR-8

Details of TCS

Every E-commerce

within ten days after

operator required

the end of the month

t o c o l l e c t t a x

in which collection is

(section 52)

made

GSTR-9

Annual Return

Ever y Registered

31st Dec of next

Person (except ISD,

financial year

N o n r e s i d e n t

t a x a b l e , S e c t i o n

10,51,52 and Casual

Taxable Person

GSTR-10 Taxable Person

Final Return

Within three months

whose registration

o f t h e d a t e o f

has been cancelled

cancellation or date of

or surrendered

order of cancellation,

whichever is later,

43

Goods under GST regime, will be classified under, Harmonised System of

Nomenclature (HSN) code whereas services will be classified as per the

Services Accounting code (SAC). HSN is an internationally standardized

system of names and numbers to classify traded products. At present, HSN

code is used to classify goods under Value added tax. The return rules

prescribe that the Harmonized System of Nomenclature code pertaining to

every invoice would not be required to be submitted. The disclosure of the

HSN code would depend on the annual turnover of the taxpayer.

Requirement of HSN code

Annual Turnover

Requirement

Up to Rs. 1.5 crores

Description of goods

Rs. 1.5 crores to 5 crores

Disclosure of 2 digit level of HSN code

More than 5 crores

Disclosure of 4 digit level of HSN code

44

17. Payment

As India is moving towards digitisation, GST have provided an easy and simple

way of payment of taxes. Under GST regime, all the taxpayers will get three

electronic ledgers namely E-cash Ledger, E-credit Ledger & E-liability Ledger

through their GST profile.

E-cash ledger: The electronic cash ledger under sub-section (1) of section 49

shall be maintained in FORM GST PMT-05 for each person, liable to pay tax,

interest, penalty, late fee or any other amount, on the Common Portal for

crediting the amount deposited and debiting the payment therefrom towards

tax, interest, penalty, fee or any other amount. Thus, Payment can be made in

cash by debiting the e-cash leger maintained on the common portal. Money

can be deposited in the Cash Ledger by different modes, namely, E-Payment

(Internet Banking, Credit Card, Debit Card); Real Time Gross Settlement

(RTGS)/ National Electronic Fund Transfer (NEFT); Over the Counter

Payment in branches of Banks Authorized (for deposits upto ten thousand

rupees per challan per tax period, by cash, cheque or demand draft) to accept

deposit of GST. A challan in FORM GST PMT-06 is required to be generated and

the details of the amount to be deposited towards tax, interest, penalty, fees or

any other amount will be entered in the challan. Challan in FORM GST PMT-06

generated at the Common Portal shall be valid for a period of fifteen days

E- debit or credit ledger: Every registered taxable person is required to record

and maintain an electronic liability ledger in Form GST PMT- 01 and all

amounts payable will be debited in the said register. The electronic credit

ledger shall be maintained in Form GST PMT-02 for each registered person

eligible for input tax credit under the Act on the common portal & every claim

of input tax credit under the Act shall be credited to the said ledger..

Payment of every liability by a registered taxable person can be made by

debiting the e liability ledger or e- cash ledger

Any amount of demand debited or amount of penalty imposed or liable to be

imposed in the electronic tax liability register shall stand reduced to the

extent of relief given by the appellate authority or Appellate Tribunal or court

or if the taxable person makes the payment of tax, interest and penalty

specified in the show cause notice or demand order, the electronic tax liability

register shall be credited accordingly.

45

Any payment required to be made by a person who is not registered under the

Act, shall be made on the basis of a temporary identification number

generated through the Common Portal.

The payment processes under GST Act(s) have the following features:

• Electronically generated challan from GSTN Common Portal in all modes

of payment and no use of manually prepared challan

• Facilitation for the tax payer by providing hassle free, anytime, anywhere

mode of payment of tax

• Convenience of making payment online

• Logical tax collection data in electronic format

• Faster remittance of tax revenue to the Government Account

• Paperless transactions

• Speedy Accounting and reporting

• Electronic reconciliation of all receipts

• Simplified procedure for banks

46

18. Accounts and Records

A registered person is required to maintain proper accounts and records and

keep it at his registered principal place of business. If there is more than one

place of business specified in the certificate of registration, the accounts

relating to each place of business shall be kept at such places of business. To

facilitate digitisation, there is a facility to maintain accounts and other records

in electronic form under GST. List of account to be maintained is as follows:

• production or manufacture of goods;

• inward and outward supply of goods or services or both;

• stock of goods;

• input tax credit availed;

• output tax payable and paid; and

• such other particulars as may be prescribed

Owner or operator of warehouse or godown or any other place used for

storage of goods and every transporter, irrespective of whether he is a

registered person or not, shall maintain records of the consigner, consignee

and other relevant details of the goods in such manner as may be prescribed.

The time duration for retention of accounts and records under GST is seventy-

two months from the due date of furnishing of annual return for the year

pertaining to such accounts and records. A registered person, who is a party to

an appeal or revision or any other proceedings before any Appellate Authority

or Revisional Authority or Appellate Tribunal or court, whether filed by him

or by the Commissioner, or is under investigation for an offence under

Chapter XIX, shall retain the books of account and other records pertaining

to the subject matter of such appeal or revision or proceedings or

investigation for a period of one year after final disposal of such appeal or

revision or proceedings or investigation, or for the period specified above,

whichever is later.

47

19. Job work

A large number of industries depend upon outside support for completing

manufacturing activity. Job work means undertaking any treatment or process

by a person on goods belonging to another registered taxable person. The

person who is treating or processing the goods belonging to other person is

called 'job worker' and the person to whom the goods belongs is called

'principal'.

Under section 143(1) of CGST Act, 2017 a Principal under intimation and

subject to such conditions as may be prescribed can send inputs or capital

goods to a job worker without payment of tax for further processing or

treatment and from there subsequently to another job worker(s) and shall

either bring back such inputs/capital goods after completion of job work or

otherwise within 1 year/3years of their being sent out or supply such

inputs/capital goods after completion of job work or otherwise within 1 year /

3 years of their being sent out, from the place of business of a job worker on

payment of tax within India or with or without payment of tax for export.

Capital Goods excludes moulds and dies, jigs and fixtures, or tools.

Within

Principal

Within

Principal (send

1 year

(send inputs)

3 years

capital goods)

INPUTS

CAPITAL

GOODS

Job worker I

Job worker I

Job worker

(Processes )

(Processes)

II

Job worker II

(Processes)

(Processes)

Send inputs without payment of tax

48

Under GST regime, when goods are sent from a taxable person to a Job worker, it shall be treated as supply and will be liable to GST if the goods so

sent are not received back within 1 year or 3 years in case of inputs or capital

goods, as the case may be.

Further, a principal can supply goods from the place of business of job worker

if the principal declares the place of business of the job worker as his

additional place of business, except in following two conditions:

• where the job worker is registered under section 25; or

• where the principal is engaged in the supply of such goods as may be

notified by the Commissioner.

Input Credit in case of Job Work

A principal is eligible to take input tax credit for the inputs sent to a job worker.

Although section 16 of the CGST Act, 2017 specifically states that ITC will be

provided only when goods are actually received, but under Job work this

condition is exempted and ITC can be availed even if inputs or capital goods

are directly sent to the Job Worker without being first brought to the place of

business of Principal.

49

20. Assessment

Assessment means determining tax liability under this CGST Act, 2017 &

includes the following types of assessment:

Self assessment

Provisional

Summary

assessment

assessment

Assessment

Assessment of

Scrutiny of

unregistered

returns

persons

Assessment of

non filers

Every registered person is required to self-assess the taxes payable under this

Act and furnish a return for each tax period.

A provisional assessment is done when the taxable person is unable to

determine the value of goods or services or both or determine the rate of tax

applicable thereto, and request the proper officer in writing giving reasons for

payment of tax on a provisional basis and the proper officer shall pass an

order, within a period not later than 90 days from the date of receipt of such

request, allowing payment of tax on provisional basis at such rate or on such

value as may be specified by him.

Summary Assessment is done if an officer believes that any delay in assessment

can adversely affect the interest of the revenue.

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21. Audit

Audit under GST can be of following two types:

AUDIT

General Audit

Special Audit

Commissioner

officer not

or officer

below the rank

authorised by

of Assistant

commissioner

Commissioner

regard to nature or

by way of

complexity of the

general or

case and the

special order

interest of revenue

General Audit: A prior notice of not less than fifteen working days will be sent

to the registered person before the audit is conducted. The audit need to be

completed within a period of three months from the date of commencement

of the audit, but a further extension for a period of six months may be

provided by the Commissioner for the reasons recorded in writing. On

conclusion of audit, the proper officer shall, within thirty days, inform the

registered person, whose records are audited, about the findings, his rights

and obligations and the reasons for such findings.

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Special Audit: If at any stage of scrutiny, inquiry, investigation or any other proceeding before him, any officer not below the rank of Assistant

Commissioner, having regard to the nature and complexity of the case and the

interest of revenue, is of the opinion that the value has not been correctly

declared or the credit avalied is not within the normal limits he may, with the

prior approval of the Commissioner, direct such registered person by a

communication in writing to get his records including books of accounts

examined & audited. A report of audit signed and certified by the appointed

Chartered Accountant or Cost Accountant is required to be submitted within

90 days although this period can be further extended to 90 days. The

registered person shall be given an opportunity of being heard in respect of

any material gathered on the basis of special audit under sub-section (1)

which is proposed to be used in any proceedings against him under this Act or

the rules made thereunder. Where the special audit conducted results in

detection of tax not paid or short paid or erroneously refunded, or input tax

credit wrongly availed or utilised, the proper officer may initiate required

action.

502

22. Benefits of GST

GST will bring numerous benefits to all stakeholders viz industries,

government and citizens. Some of these benefits are listed below:

Seamless Flow of Credit: GST will facilitate seamless credit across the entire

supply chain and across all States under a common tax base.

Elimination of Cascading effect: Goods & Service Tax would eliminate the

cascading effects of taxes on production and distribution cost of goods and

services. The exclusion of cascading effects i.e. tax on tax will significantly

improve the competitiveness of original goods and services in market will lead

to beneficial impact to the GDP growth of the country. It is felt that GST would

serve a superior reason to achieve the objective of streamlining indirect tax

regime in India which can remove cascading effects in supply chain till the

level of final consumers.

Revenue Gain: Revenue will increase under GST regime because of widening

of the dealer base by capturing value addition in the distributive trade and

increased compliance.

Enhanced Transparency: GST regime shall enhance transparency in the

indirect tax framework and is expected to bring down the rate of inflation.

Zero rated Exports: Under the GST regime, exports will be zero rated in

entirety unlike the present system where refund of some taxes is not allowed

due to fragmented nature of indirect taxes between the Centre and the States.

All taxes paid on the goods or services exported or on the inputs or input

services used in the supply of such export goods or services shall be refunded.

GST will boost Indian exports, thereby improving the balance of payments

position. Exporters will be facilitated by grant of provisional refund of 90% of

their claims within seven days of issue of acknowledgement of their

application, thereby resulting in the easing of position with respect to cash

flows.

Increased Uniformity: Uniform GST rates will reduce the incentive for

evasion by eliminating rate arbitrage between neighbouring States and that

between intra and inter-State sales. Harmonization of laws, procedures and

rates of tax will make compliance easier and simple.

53

There would be common definitions, common forms/formats, common

interface through GST portal, resulting in efficiencies and synergies across

the board. This will also remove multiple taxation of same transactions and

inter-State disputes like the ones on entry tax and e-commerce taxation

existing today.

Increased Certainty: Common procedures for registration of taxpayers,

refund of taxes, uniform formats of tax return, common tax base, common

system of classification of goods or services along with timelines for every

activity will lend greater certainty to taxation system.

Increased Digitalisation: GST is largely technology driven. The interface of

the taxpayer with the tax authorities will be through the common portal

(GSTN). There will be simplified and automated procedures for various

processes such as registration, returns, refunds, tax payments, etc. All

processes, be it applying for registration, filing of returns, payment of taxes,

filing of refund claims etc., would be done online through GSTN. The input

tax credit will be verified online. Electronic matching of input tax credit across

India will make the process more transparent and accountable. This will

encourage a culture of compliance. This will also greatly reduce the human

interface between the taxpayer and the tax administration, leading to speedy

decisions.

A list of goods, where the incidence of tax under GST is lower than the present

tax incidence, as released by CBEC is as under:

S. No.

Description of goods

Food & Beverage

1.

Milk powder

2.

Curd, Lassi, Butter milk put up in unit container

3.

Unbranded Natural Honey

4.

Ultra High Temperature (UHT) Milk

5.

Dairy spreads

6.

Cheese

54

7.

Cashew nut

8.

Raisin

9.

Spices

10.

Tea

11.

Wheat

12.

Rice

13.

Flour

14.

Soyabean oil

15.

Groundnut oil

16.

Palm oil

17.

Sunflower oil

18.

Coconut oil

19.

Mustard Oil

20.

Sunflower oil

21.

Other vegetable edible oils

22.

Sugar

23.

Palmyra jaggery

24.

Sugar confectionery

25.

Pasta, spaghetti, macaroni, noodles

26.

Fruit and vegetable items and other food products

27.

Pickle, Murabba, Chutney

28.

Sweetmeats

29.

Ketchup & Sauces

30.

Mustard Sauce

31.

Toppings, spreads and sauces

55

32.

Instant Food Mixes

33.

Other pulses bari (mungodi)

34.

Mineral water

35.

Ice and snow

Infrastructure / fuel

36.

Cement

37.

Coal

38.

Kerosene PDS

39.

LPG Domestic

40.

Fly ash bricks and fly ash blocks

Medical and health

41.

Insulin

42.

X ray films for medical use

43.

Diagnostic kits and reagents

44.

Glasses for corrective spectacles and flint buttons

45.

Spectacles Lenses

46.

Intraocular lens

47.

Spectacles, corrective

48.

Medical furniture

Household goods of daily use

49.

Agarbatti

50.

Tooth powder

51.

Hair oil

52.

Toothpaste

53.

Kajal [other than kajal pencil sticks]

56

54.

Soap

55.

LPG Stove

56.

Aluminium foils

57.

Spoons, forks, ladles, skimmers, cake servers, fish knives, tongs

58.

Sewing Machine

59.

Kerosene pressure lantern

60.

LED

61.

Sports goods other than articles and equipments for general

physical exercise

62.

Phul-jahroo

63.

Bamboo furniture

Educational

64.

School Bag

65.

Exercise books and note books

66.

Childrens' picture, drawing or colouring books

67.

Staplers

68.

Printers [other than multifunction printers]

Clothing and Footwear

69.

Silk fabrics

70.

Woollen fabrics

71.

Cotton fabrics not containing any other textile material

72.

Other Vegetable yarn fabrics

73.

Manmade filament/fibre fabrics

57

74.

Readymade garments and made up articles of textiles of sale value

not exceeding Rs.1000 per piece

75.

Readymade garments and made up articles of textiles of sale value

exceeding Rs.1000 per piece

76.

Footwear of RSP upto Rs.500 per pair

77.

Other footwear

Safety / security gadgets

78.

Helmet

79.

Headgear and parts thereof

80.

Recorder

81.

CCTV

Agricultural equipment

82.

Fixed Speed Diesel Engines of power not exceeding 15HP

83.

Tractor rear tyres and tractor rear tyre tubes

84.

Weighing Machinery [other than electric and electronic]

Assistive devices for the differently abled

85.

Car for Physically handicapped person

86.

Braille Watches

Miscellaneous

87.

Kites

88.

Plastic Tarpaulin

89.

Baby carriages

Source: http://www.cbec.gov.in/resources//htdocs-cbes/pressrelease/press-release-regarding-tax-incidence-16-06-2017.pdf

58

23. Role of Company Secretary

Company Secretaries are independent professionals governed by the Code of

Conduct provided in the Company Secretaries Act, 1980. Company

Secretaries come in existence after extensive exposure provided by the

Institute through compulsory coaching, examinations, rigorous training and

continuing education programmes. The curriculum of Company

Secretaryship Course includes, inter-alia detailed study of Direct Taxes,

Indirect Taxes including VAT, Central Excise, Service Tax, Central Sales Tax,

Accountancy, Corporate Laws, Financial Treasury and Forex Management,

etc.

The Company Secretaries are rendering value added services to the trade and

industry and acting as extended arms of the regulatory mechanism. In a

country like India where the tax regime is complicated and multi-faceted,

there is no dearth of opportunities for professionals like Company Secretaries

to work towards the massive tax network's compliance, regulations etc. since

they are capable of understanding the dynamic nuances of law and taxation

system.

A Company Secretary is well versed in laws subject. There is not even an iota of

doubt on their academic knowledge and practical training. Company

Secretaries particularly master their understanding in the law subjects.

Whether it is in indirect tax laws or the GST law, it will be a smooth ride for a

Company Secretary owing to their understanding and expertise in the subject

of various laws. The Company Secretaries have already been recognized under

the existing tax laws and in VAT profiles by various State Governments.

Company Secretaries are recognized as one of the Key Managerial Personnel

(KMP) of a company under the Companies Act, 2013. The functions of the

Company Secretary as a KMP include reporting and advising the Board about

compliance with the provisions of the Companies Act, the rules made there

under and other laws applicable to the company which inter-alia include the

laws relating to Central Excise, Service Tax and Value Added Tax which are

now subsuming under the proposed Goods and Services Tax (GST) Law.

59

Company Secretaries have been recognized in the following areas of taxation:

Income Tax

Goods and

Services Tax

Value Added

Taxation Laws

(GST)

Tax (VAT)

Service Tax

Recognition under Income-tax Act, 1961 and Income-tax Rules, 1962

Authority to represent before the Income-Tax authorities

•

Company Secretaries in Practice have been authorized to appear as

Authorized Representative before the Income-Tax authorities.

[Section 288(2) under Income-tax Act, 1961 and Rule 50(2A)]

Recognition under existing VAT regime

Authority to

Recognition

represent

to Company

VAT Audit

before VAT

Secretaries in

authorities

Practice under

VAT

VAT Audit

• Company Secretary in Practice as a Tax Practitioner may conduct VAT

Audit under Karnataka VAT Rules, 2005. [Rule 34(1) read with Rule

168(2)(b)]

• Company Secretary in Practice as a Tax Practitioner may conduct VAT

Audit under Jharkhand VAT Act, 2005. [Section 2(I)]

60

Authority to represent before VAT authorities

• The Company Secretaries in Practice have been recognized to act as

Authorized Representative before the VAT authorities under -

v West Bengal Value Added Tax Rules, 2005 – [Rule 2(1)(a)(iv)]

v Bihar VAT Act, 2005 – [Section 87(d)]

v Goa VAT Act, 2005 – [Section 82(1)(b]

v Karnataka VAT Rules, 2005 – [Rule 168(1)]

v Kerala VAT Act, 2003 – [Section 86(e)]

v Daman & Diu VAT Regulation, 2005 – [Regulation 82(1)(b)]

v Jharkhand VAT Rules, 2006- [Rule 51 (1)]

v Delhi Value Added Tax Act, 2004- [Section 82(1)(b)]

v Uttar Pradesh VAT Rules, 2008- [Rule 2 (e) read with Rule 73]

v Maharashtra VAT Act, 2002- [Section 82(1) (b)]

v Arunachal Pradesh Goods Tax Act, 2005- Section 83(1) read with Rule

78(1)(a) of Arunachal Pradesh Goods Tax Rules, 2005

v Haryana VAT Act, 2003- Section 52(2) (iii) read with Section 288(2)(v) of

Income-Tax Act, 1961 and Rule 50 (2A) of the Income Tax Rules, 1962

v Meghalaya VAT Rules, 2005- Rule (1)(f) (iv)

v Rajasthan VAT Rules, 2006- Rule 62(b) read with Rule 50(2A) of the

Income Tax Rules, 1962.

61

Recognition under Service Tax

Authorised

Company Secretaries in Practice have been authorized

to represent

to appear as Authorized Representative before advance

before

ruling authority under Service Tax. [Section 96D of

advance

Finance Act, 1994 read with sub-section (2) of section

ruling

35Q of the Central Excise Act, 1944].

authority

Company Secretaries in Practice are authorised to set

Certified

up Certified Facilitation Centre's under the

Facilitation

Automation of Central Excise and Services Tax

Centre's

(“ACES”) Project of CBEC vide MoU between CBEC

and ICSI

Recognition under Goods and Service Tax (GST)

Company

Secretary to act

as GST

Practitioner

Authoriy to

represent

before the

Appellate

Authority

62

Company Secretary to act as GST Practitioner

• Pursuant to Section 48 of CGST Act, 2017 read with Rule 24 of the Return

Rules, any person who has passed the final examination of the Institute of

Company Secretaries of India (ICSI) is eligible for enrolment as a Goods

and Service Tax Practitioner.

Authority to represent before the Appellate Authority

• Under Section 116 of Central GST Act, 2017 a Company Secretary is

entitled or required to appear before an officer appointed under this Act,

or the Appellate Authority or the Appellate Tribunal in connection with

any proceedings under this Act.

The spectrum of GST is wide and most of the industrial and corporate

entities are exposed to GST as a service provider, service / goods receiver,

importer, exporter of service / goods or otherwise. Since these assessees come

from a heterogeneous background (rural, urban, literate, illiterate,

corporates, individuals, etc.), importing legal opinions on ticklish issues of

tax, interpretation of judicial pronouncements and suggesting the course of

action are some of the advisory and consulting services that professional like

Company Secretaries could offer for better compliance.

Company Secretaries can play an important role in being an advisor and

facilitator for due compliances of laws relating to GST and be an asset to the

general business community and corporate world. The Company Secretary

can perform the following types of services to clients:-

i) Advisory services or strategic advisor

A Company Secretary can comprehensively interpret the law and provide

complete guidance and advisory to the business entities. Company

Secretaries are more suited for their services because of their knowledge of

laws and good communication skills.

ii) Tax Planning

Company Secretaries are competent to understand the impact of laws and

its various alternatives and can be helpful in proper tax planning of GST.

63

iii) Procedural Compliances

Procedural Compliance includes registration, filing of returns, payments

of taxes, assessment etc. Since a Company Secretary is already playing the

role of a Compliance Officer under various other laws, he can assist in the

same under GST also.

iv) Book/Record Keeping

Like any other tax laws, GST would also require proper record keeping

and maintaining systematic records of credit of input/input service and its

proper utilisation etc. Company Secretaries have competent skills to

perform these tasks.

v) Appeals and Representation

A Company Secretary can provide the service of representation with

confidence because of practical exposure of appearing before various

competent authorities. Because of their legal bent of mind, a Company

Secretary can provide better services in the field of appellate work.

vi) Vetting

Vetting of legal documents and drafting agreements, etc. also requires

professional skills. Company Secretary possess acumen in this area and

could assist in drafting legal documents like replies to show cause notice,

representations at appellate forums, representations before adjudicating

authority, opinions and clarifications.

For better administration of new tax regime in the country, it is pertinent

to have more and more competent and equipped professionals to facilitate

regulators to ensure compliance of various statutes and thus help in achieving

this ambitious task. The Company Secretaries, who practice in almost all the

branches of law and have a strong accounting background, are competent

professionals to handle the regulatory compliance under the GST laws. They

are skilled professionals who understand legal, financial and compliance

dimensions of business entity comprehensively and will assist in making GST

as “Good and Simplified Tax” regime further fuelling the growth of India Inc.

64