Goods and Services Tax.cdr
Author: Dev
Date: 2017-06-21T12:55:16+00:00

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 :

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• 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.

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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.

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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.

50

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.

51

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