€¦ · Sr. No. Direct Taxes Indirect Taxes 1. Imposed on Persons. Imposed on Goods and Services....

I

Goods and Services Tax as amended by GST (Amendment) Acts, 2018 and Notifications & Circulars

issued upto 31.10.2019

Customs and FTP as amended by Finance Act, 2019 and Notifications & circulars issued upto 31.10.2019

Analytical view of topics with interpretations and Solved illustrations to understand the concept and practicality

Volume – 2

Conceptual Learning

on

INDIRECT TAX LAWS

For

CA Final - May, 2020

CS & CMA Final - June, 2020

&

Professionals

CA. Yashvant Mangal FCA, CS, B.Com.

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II

I express my sincere thanks to all our readers, authors and business associates for helping me in my mission of producing quality books for quality education. I wish all our young readers a brilliant success in various examinations and a bright future.

- Author

Conceptual Learning on INDIRECT TAX LAWS

Copyright Author - CA. Yashvant Mangal [All Rights Reserved]

First Edition : November, 2010 Nineteenth Revised Edition : November, 2019

Price : Rs. 580.00 (For 3 Volumes) (No Discount Edition)

Laws stated in this book are as amended by the Finance Act, 2019, CGST (Amendment) Act, 2018, IGST (Amendment) Act, 2018 and incorporates other amendments made by Notifications and Circulars issued upto 31th October, 2019.

Address:

Mangal Classes 201, Second Floor, Above Lotus Showroom, 3D, Bhupalpura, Udaipur (Raj.), PIN – 313001 Phone : 0294-2426400, 8690270442, 7737976730

Contact Yashvant Sir here: [email protected]

Every effort has been made to avoid errors or omissions in this publication. Inspite of this, errors may creep in. Any mistake, error or discrepancy noted might be brought to our notice, which shall be taken care of in the next edition. It is notified that neither the publisher nor the author, or the seller will be responsible for any damage or loss of action to any one, of any kind, in any manner therefrom. It is suggested that to avoid any doubt, the reader should cross check all the facts, common Law and contents of the publication with original Government publications or notifications.

No part of this book may be reproduced or copied in any form or by any means (graphics, electronic or mechanical, including photocopying, recording, taping, or other information storage device, etc.), without written permission of the author. Breach of this condition is liable for legal action.

All disputes are subject to Udaipur jurisdiction only.

mailto:[email protected]

III

Preface to the Nineteenth Edition

Dear Friends,

Indirect Tax Laws is considered to be a theory subject. In my opinion, any taxation subject cannot be a theory subject. Taxation requires thorough understanding of the concepts and practical knowledge.

It is with the great pride and pleasure that I am bringing to you the thoroughly revised and updated 'Nineteenth edition' of my book 'Conceptual Learning on Indirect Tax Laws' that has received overwhelming appreciation of our dear readers and has proved to be a key of success for Indirect Tax Laws paper, which is the ultimate aim of the book. This book is written as per the syllabus prescribed for CA Final, Paper - 8, 'Indirect Tax Laws'.

Goods and Services Tax : The Game Changer Step of the Government

Indirect Tax Laws is one of the most dynamic and practical subjects of the Chartered Accountancy Course. This subject at the Final level is divided into two parts, namely, Part 1 : Goods and Services Tax (GST) for 75 marks and Part 2 : Customs and Foreign Trade Policy (FTP) for 25 marks.

With the introduction of "Goods and Services Tax (GST)" in India with effect from 1-7-2017, the Government aims to unite India with the slogan of "One Nation, One Market, One Tax" by subsuming most of the Central Taxes (Excise duty, Service tax, CST, etc.) and State Taxes (VAT, Entertainment Tax, etc.) into a single tax named "GST". This has given a smooth run to the "Input Tax Credit" chain system in the country.

Understanding the interpretation of GST Laws conceptually and its practical implementation in the country is one of the most challenging tasks for the professionals, which is the most demanding opportunity for the upcoming professionals in this era of GST.

Keeping in mind the need of the students throughout the country, I have came out with the idea of such a book which could help the students to

understand all the concepts through soft language and various analytical notes

understand the interpretation of law with practicality

cover all the topics of the subject in a very smart and easy manner

cover solved analytical illustrations to apply the law in practical situations

cover solved papers of CA Final Exams as per current amended applicable laws

revise all the topics of the subject thoroughly before exams

IV

This book incorporates CA Final syllabus as under :

I. Central Goods and Services Tax Act, 2017, Central Goods and Services Tax Rules, 2017 and Integrated Goods and Services Tax Act, 2017 with CGST (Amendment) Act, 2018, IGST (Amendment) Act, 2018 and notifications & circulars as issued upto 31.10.2019 and relevant illustrations to support the concepts.

II. Customs laws and FTP with all the amendments made by Finance Act, 2019 and all the Notifications and

circulars issued upto 31.10.2019 and relevant case laws and illustrations to support the concepts.

Endeavour has been made to make the edition error-free, yet mistakes might have crept in for which I am apologetic. I look forward to the readers for the suggestions, criticism and feedback to improve the contents of the book. The readers may post their suggestions, grievances, criticism, feedback and queries by e-mail to [email protected].

November 10, 2019 - Author

mailto:[email protected]

V

With Blessings of Lord Hanuman

Dedicated to my parents

Smt. Sushma Mangal & Sh. Ghanshyam Mangal

And

Aunt & Uncle

Smt. Pushpa Mangal & Lt. Sh. Radheshyam Mangal

My Special Thanks to

Ankita Mangal

CA. Rohit Mangal

And

All my Friends

!! Jai Mata Di !!

VI

With Love This Book is dedicated to my Son

“Yedhant Mangal” Who boost my Confidence with his charming eyes & smile

Acknowledgement This book is a result of sincere efforts, dedication and moral support of my wife “Ankita Mangal”, who consistently motivated me to give my best to the students to build their career. I would like to express my sincere thanks to my family members, associates, friends and students for their support in every possible manner. Though words can not express my heartfelt gratitude to them, I hereby acknowledge their co-operation.

CA. Yashvant Mangal

“Talent wins games, but teamwork and intelligence win Championships”

My heartful thanks to my intelligent and dedicated team – Chirag Bansal, CA. Punit Agarwal, CA. Sakshi Mor, Ashutosh Gandhi, Suresh Singh Rathore, Shubham Mehta, Riya Khubchandani, Arshad Shaikh, and Ramesh Kattara

Chapter NameChapter No. Page No.

GST in India : An Introduction 1

Levy of GST 18

Time of Supply 54

Value of Supply 71

Input Tax Credit (ITC) 101

Composition Scheme 184

Reverse Charge Mechanism 197

IGST Act, 2017 210

1

2

3

4

5

6

7

8

SECTION A: GOODS AND SERVICES TAX (GST)

VOLUME - 1


Exemptions Under GST 249

Registration, TDS and TCS 327

Payment of Tax 371

Tax Invoice, Credit and Debit Notes 379

Returns Under GST 402

Refunds Under GST 427

Assessment 444

Audit 453

Accounts and Records 456

Inspection, Search, Seizure and E-Way Bills 463

Demands and Recovery 481

SECTION A: GOODS AND SERVICES TAX (GST)

VOLUME - 2 (This Book)

9

10

11

12

13

14

15

16

17

18

19

VII


Liability to Pay in Certain Cases 499

Advance Ruling 507

Appeals and Revision 514

Offences and Penalties 527

Miscellaneous 542

20

21

22

23

24


Definitions And types of Customs Duties 561

General Provisions Under Customs Act, 1962 581

Importation & Exportation 599

Valuation of Goods 615

Duty Drawback 654

Baggage, Postal Articles and Stores 675

Classification of Goods 686

Exemptions, Refunds, Audit and Verification 695

SECTION B: CUSTOMS LAW

VOLUME - 3

25

26

27

28

29

30

31

32


SECTION C: FOREIGN TRADE POLICY

33

34

35

Foreign Trade Policy - Basics, General Provisions For 709

Imports / Exports, Glossary & Definitions

Exports From India Schemes, Duty Exemption / Remission742

Schemes, EPCG Scheme

EOUs, EHTPs, STPs, BTPs And Deemed Exports 770

VIII

IX

INDIRECT TAX LAWS

Indirect Taxes are imposed on goods and services.

Indirect Taxes are paid to the Government by someone else but burden of the same is borne by someone else (i.e. ultimate consumer).

Sr. No. Direct Taxes Indirect Taxes

1. Imposed on Persons. Imposed on Goods and Services. 2. Directly borne by the taxpayer i.e. no shifting of

tax burden. Tax burden is shifted to the subsequent user.

3. Tax collection is difficult. Tax collection is relatively easier. 4. The amount of tax is determined directly on the

basis of taxable income / wealth of the assessee. The amount of tax is determined indirectly on the basis of value of goods / services.

Section-wise (Topic-wise) Weightage

(Old as well as New Scheme of Education and Training)

Final Course Paper 8 : Indirect Tax Laws (100 Marks)

Part-I : GST (75 Marks)

Sections Content Area Weightage

I 1. Levy and collection of CGST and IGST - Application of CGST/IGST law; Concept of supply including composite and mixed supplies, inter-state supply, intra-state supply, supplies in territorial waters, Charge of tax (including reverse charge), Exemption from tax, Composition levy

45% - 65% (34 to 49 Marks)

[Chp. 2, 3, 4, 5, 6, 7, 8, 9]

2. Place of supply

3. Time and value of supply

4. Input tax credit

5. Computation of GST liability

II 1. Procedures under GST including registration, TDS, TCS, tax invoice, credit and debit notes, electronic way bill, accounts and records, returns, payment of tax, refund, job-work

10% - 30% (8 to 23 Marks)

[Chp. 10, 11, 12, 13 14, 17, 18, 20] 2. Liability to pay in certain cases

III 1. Demand and Recovery 10% - 25% (8 to 19 Marks)

[Chp. 19, 21,

22, 23]

2. Offences and Penalties

3. Advance Ruling

4. Appeals and Revision

X

IV 1. Introduction to GST in India including Constitutional aspects 5% - 10% (4 to 8 Marks)

[Chp. 1, 15, 16

18, 24]

2. Administration of GST, Assessment and Audit

3. Inspection, Search, Seizure and Arrest

4. Other Provisions

Part-II : Customs and FTP (25 Marks)

I 1. Levy of and exemptions from customs duties - All provisions including application of customs law, taxable event, charge of customs duty, exceptions to levy of customs duty, exemption from custom duty

40% - 65% (10 to 16 Marks) [Chp. 25, 26, 28,

31, 32] 2. Types of customs duties

3. Classification of imported and export goods

4. Valuation of imported and export goods

II 1. Import and Export Procedures – including special procedures relating to baggage, goods imported or exported by post, stores 20% - 45%

(5 to 11 Marks) [Chp. 27, 29, 30

32, 34]

2. Drawback

3. Refund

4. Basic concepts relating to export promotion schemes provided under FTP

III 1. Introduction to customs law including Constitutional aspects 10% - 20%

(3 to 5 Marks)

[Chp. 25, 33, 35]

2. Introduction to FTP - Legislation governing FTP, salient features of an FTP, administration of FTP, contents of FTP and other related provisions

3. Basic concepts relating to import and export of goods

Skill-wise Weightage as per ICAI

Comprehension & Knowledge

Analysis & Application

Evaluation & Synthesis

GST (75 Marks) 10% - 30% (8 to 23 Marks)

40% - 70% (30 to 53 Marks)

20% - 30% (15 to 23 Marks)

Customs & FTP (25 Marks) 20% - 40% (5 to 10 Marks)

40% - 70% (10 to 18 Marks)

10% - 20% (3 to 5 Marks)

249

CHAPTER


9.1 Introduction When a supply of goods and/or services falls within the purview of charging section, such supply is

chargeable to GST. However, for determining the liability to pay the tax, one needs to further check whether such supply of goods and/or services are exempt from tax.

Exempt supply has been defined as supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax and includes non-taxable supply. Power to grant exemption from GST has been granted vide section 11 of the CGST Act and vide section 6 of the IGST Act. State GST laws also contain identical provisions granting power to exempt SGST.

Under earlier Indirect Tax regime, a larger number of exemptions were enjoyed by the taxpayers. The idea is to continue the exemption list under GST Regime also. Further, various area based exemptions are not continued under GST.

Essential goods/services, i.e. public consumption products/services, have been exempted. Items such as unpacked food grains, milk, eggs, curd, lassi and fresh vegetables are among the items exempted from GST. Further, essential services like health care services, education services, etc. have also been exempted.

In this chapter, we shall discuss the power to grant exemption from tax under CGST Act/IGST Act and list of services exempt from GST in detail and an overview of the goods exempt from tax.

9.2 Power To Grant Exemption From Tax[Section 11 of The CGST Act / Section 6 of IGST Act]

Statutory Provisions

Sec. 11 Power to grant exemption from tax

Sub-sec. Particulars

(1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.

(2) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by special order in each case, under circumstances of an exceptional nature to be stated in such order, exempt from payment of tax any goods or services or both on which tax is leviable.

(3) The Government may, if it considers necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an

250 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal

explanation in such notification or order, as the case may be, by notification at any time within one year of issue of the notification under subsection (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.

Explanation : For the purposes of this section, where an exemption in respect of any goods or services or both from thewhole or part of the tax leviable thereon has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both.

ANALYTICAL VIEW OF THE TOPIC

1. Exemption from payment of tax: The Government is empowered to grant exemption from tax, if it is necessary in public interest so to do, on recommendation of the GST council, by way of issuance of -

(i) Notification :

The Government may generally exempt supply of goods and/or services of any specified description

On recommendation of the GST council

BY NOTIFICATION

Either absolutely or subject to such conditions as may be specified in the notification

Wholly/partly

With effect from such date as may be specified in such notification.

(ii) Special Order :

The Government may exempt any goods and/or services on which tax is leviable

BY SPECIAL ORDER

On recommendation of the GST Council

Under circumstances of an exceptional nature to be stated in such order in the public interest.

2. No need to pay tax on goods and/or services on which absolute exemption granted: Where an exemption in respect of goods and/or services has been granted absolutely, the registered person supplying such goods and/ or services shall not collect tax on such goods and/or services, in excess of the effective rate.

3. Explanation inserted within 1 year to have retrospective effect: The Government can issue an explanation within 1 year of issue of notification/order of exemption and such explanation shall have effect as if it was a part of the original notification or order, when it was issued, i.e. explanation so inserted would have retrospective effect.

Note : Similar provisions granting power to exempt IGST have been provided under section 6 of the IGST Act.

Illustration 1 :

When exemption from whole of tax collected on goods or services or both has been granted absolutely, can a person pay tax?

Answer :

No, the person supplying exempted goods or services or both shall not collect the tax in excess of the effective rate.


9.3 Goods Exempt From Tax A list of items have been notified under section 11(1) of the CGST Act, 2017/section 6(1) of the IGST Act, 2017. These items have been exempted from whole of the tax. Since GST is a tax for common man, everyday items used by the common man have been included in the list of exempted items.

Items such as unpacked food grains, milk, eggs, curd, lassi and fresh vegetables are among the items exempted from GST.

Goods imported by unit/developer in SEZ exempt from IGST : All goods imported by a unit/developer in the Special Economic Zone (SEZ) for authorised operations are exempt from the whole of the integrated tax leviable thereon under section 3(7) of the Customs Tariff Act, 1975 read with section 5 of the IGST Act, 2017 [Notification No. 64/2017 Cus dated 05.07.2017].

9.4 List of Services Exempt From Tax

I. SPECIFIC SERVICES EXEMPT FROM CGST/IGST

Notification No. 12/2017 CT (R) dated 28.06.2017/ Notification No. 9/2017 IT (R) dated 28.06.2017 unless otherwise specified, has exempted the following services wholly from CGST / IGST respectively:

Sr. No.

Description of Services

Health Care Related Services

1. Services by way of -

(a) health care services by a clinical establishment, an authorised medical practitioner or paramedics;

(b) services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above.

[Entry No. 74 of NN. 12/2017 CT (R)] Notes :

(1) As per clause (zg) under this notification, ‘Health care services’ means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma.

(2) As per clause (s) under this notification, ‘Clinical establishment’ means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases.

(3) As per clause (k) under this notification, ‘Authorised medical practitioner’ means a medical practitioner registered with any of the councils of the recognised system of medicines established or recognised by law in India and includes a medical professional having the requisite qualification to practice in any recognised system of medicines in India as per any law for the time being in force.

(4) Paramedics are trained health care professionals, for example, nursing staff, physiotherapists, technicians, lab assistants, etc.

(5) Recognised system of medicines in India are

(i) Allopathy


(ii) Yoga

(iii) Naturopathy

(iv) Ayurveda

(v) Homeopathy

(vi) Siddha

(vii) Unani

(viii) Any system of medicines that may be recognized by Central Govt.

(6) Rent of rooms provided to in-patients in hospitals is also exempt from GST. [Circular No. 27/01/2018– GST, dated 04.01.2018]

(7) Hospitals hire senior doctors/ consultants/technicians independently, without any contract of such persons with the patient; and pay them consultancy charges, without there being any employer employee relationship. Will such consultancy charges be exempt from GST? Will revenue (department) take a stand that they are providing services to hospitals and not to patients and hence must pay GST?

Answer :

Services provided by senior doctors/consultants/technicians hired by the hospitals, whether employees or not, are healthcare services, which are exempt from GST. [Circular No. 32/06/2018 – GS, dated 12.02.2018]

(8) Retention money: Hospitals charge the patients, say, Rs. 10,000/- and pay to the consultants/ technicians only Rs. 7500/- and keep the balance for providing ancillary services which include nursing care, infrastructure facilities, paramedic care, emergency services, checking of temperature, weight, blood pressure, etc. Will GST be applicable on such money retained by the hospitals?

Answer :

Healthcare services have been defined to mean any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India [para 2(zg) of notification No. 12/2017-CT (Rate)]. Therefore, hospitals also provide healthcare services. The entire amount charged by them from the patients including the retention money and the fee payments made to the doctors, etc., is towards the healthcare services provided by the hospitals to the patients and is exempt. [Circular No. 32/06/2018 – GST, dated 12.02.2018]

(9) Food supplied to the patients: Health care services provided by the clinical establishments will include food supplied to the patients; but such food may be prepared by the canteens run by the hospitals or may be outsourced by the Hospitals from outdoor caterers. When outsourced, there should be no ambiguity that the suppliers shall charge tax as applicable and hospital will get no ITC. If hospitals have their own canteens and prepare their own food; then no ITC will be available on inputs including capital goods and in turn if they supply food to the doctors and their staff; such supplies, even when not charged, may be subjected to GST.

Answer :

Food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable. Other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable. [Circular No. 32/06/2018 – GST, dated 12.02.2018]

2. Services by a veterinary clinic in relation to health care of animals or birds.

[Entry No. 46 of NN. 12/2017 CT (R)]

3. Services by way of artificial insemination of livestock (other than horses). [Entry no. 55A of NN 12/2017 CT(R), inserted by NN 14/2018 CT(R) CT(R) w.e.f. 27.07.2018]


4. Services provided by operators of the common bio-medical waste treatment facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto. [Entry No. 75 of NN. 12/2017 CT (R)]

5. Services provided by the cord blood banks by way of preservation of stem cells or any other service in relation to such preservation. [Entry No. 73 of NN. 12/2017 CT (R)]

6.

Services by an entity registered under section 12AA of the Income-tax Act, 1961 by way of charitable activities. [Entry No. 1 of NN. 12/2017 CT (R)] Notes : As per clause (r) under this notification, ‘Charitable activities’ means activities relating to -

(i) public health by way of,- A. care or counselling of

i. terminally ill persons or persons with severe physical or mental disability; ii. persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or

B. public awareness of preventive health, family planning or prevention of HIV infection;

(ii) advancement of religion, spirituality or yoga; (iii) advancement of educational programmes or skill development relating to,

A. abandoned, orphaned or homeless children; B. physically or mentally abused and traumatized persons;

C. prisoners; or D. persons over the age of 65 years residing in a rural area;

(iv) preservation of environment including watershed, forests and wildlife; Analysis :

In order to claim exemption under this head, following two conditions must be satisfied :

(i) The entity is registered with income tax authorities under section 12AA of the Income tax Act, 1961, and

(ii) Only charitable activities performed by such entity are exempt from GST. Other activities shall not be exempt under this entry.

(iii) It implies that tax is payable on any service other than by way of charitable activities to any person provided by a charitable institution.

(iv) GST on Residential programmes or camps meant for advancement of religion, spirituality or yoga by religious and charitable trusts [Circular No. 66/40/2018-GST dated 26.09.2018]

The services provided by entity registered under Section 12AA of the Income Tax Act, 1961 by way of advancement of religion, spirituality or yoga are exempt. Fee or consideration charged in any other form from the participants for participating in a religious, Yoga or meditation programme or camp meant for advancement of religion, spirituality or yoga shall be exempt. Residential programmes or camps where the fee charged includes cost of lodging and boarding shall also be exempt as long as the primary and predominant activity, objective and purpose of such residential programmes or camps is advancement of religion, spirituality or yoga. However, if charitable or religious trusts merely or primarily provide accommodation or serve food and drinks against consideration in any form including donation, such activities will be taxable. Similarly, activities such as holding of fitness camps or classes such as those in aerobics, dance, music etc. will be taxable.

7. Services by an old age home run by Central Government, State Government or by an entity registered under section 12AA of the Income-tax Act, 1961 to its residents (aged 60 years or more) against


consideration upto Rs. 25,000/- per month per member, provided that the consideration charged is inclusive of charges for boarding, lodging and maintenance. [Entry No. 9D of NN 12/2017 CT (R), inserted by NN 14/2018 – CT (R), w.e.f. 26.07.2018]

8. Services provided by rehabilitation professionals recognised under the Rehabilitation Council of India Act, 1992 by way of rehabilitation, therapy or counselling and such other activity as covered by the said Act at medical establishments, educational institutions, rehabilitation centers established by Central Government, State Government or Union territory or an entity registered u/s 12AA of the Income tax Act, 1961 [Entry No. 74A of NN 12/2017 CT (R), inserted by NN 28/2018 – CT (R), w.e.f. 01.01.2019]

9 Services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets. [Entry No. 76 of NN. 12/2017 CT (R)]

Illustration 2 :

Mangal Healthcare Hospital provides the following details of amount received from the various services. Calculate value of taxable services and amount of GST liability.

Sr. No. Particulars Amount (Rs.)

1 Amount received towards medical examination and patients admission to critical care units 1,00,50,000

2 Amount received towards doctor’s visit at home of patients 5,00,000

3 Amount received towards nursing care at home of patients 11,20,000

4 Cosmetic surgery services 8,00,000

5 Cosmetic surgery of patients traumatised by accidents to reconstruct anatomy of body 25,00,000

6 Path-laboratory charges for diagnosis 30,00,000

7 Receipt against cord blood bank services by child care unit 10,00,000

8 Charges for providing common Bio-medical waste treatment facility to other clinical establishments 25,00,000

9 Receipts from veterinary services section for animals 5,51,000

10 Ambulance service charges 8,49,000

11 Receipts of physiotherapy section covered under paramedics 2,80,000

12 Receipts from Unani treatments, a recognised system of medicine in terms of Section 2(h) of Clinical Establishment Act, 2010 3,20,000

13 Receipts from Mortuary services 5,00,000

Answer :

Calculation of Service Tax Liability of Mangal Healthcare Hospital


1 Amount received towards medical examination and patients admission to critical care units [Exempt - W.N. (i)] -

2 Amount received towards doctor’s visit at home of patients[Exempt - W.N. (ii)] -


3 Amount received towards nursing care at home of patients[Exempt - W.N. (ii)] -

4 Cosmetic surgery services [Taxable - W.N. (iii)] 8,00,000

5 Cosmetic surgery of patients traumatised by accidents to reconstruct anatomy of body [Exempt - W.N. (iii)] -

6 Path-laboratory charges for diagnosis [Exempt - W.N. (i)] -

7 Receipt against cord blood bank services by child care unit[Exempt - W.N. (iv)] -

8 Charges for providing common Bio-medical waste treatment facility to otherclinical establishments [Exempt - W.N. (v)]

9 Receipts from veterinary services section for animals [Exempt - W.N. (vi)] -

10 Ambulance service charges [Exempt - W.N. (vii)] -

11 Receipts of physiotherapy section covered under paramedics[Exempt - W.N. (i)] -

12 Receipts from Unani treatments, a recognised system of medicine in terms of Section 2(h) of Clinical Establishment Act, 2010 [Exempt - W.N. (i)] -

13 Receipts from Mortuary services [Exempt - W.N. (viii)] -

Total Value of Taxable Services 8,00,000

CGST @ 9% 72,000

SGST @ 9% 72,000

Working Notes :-

(i) Entry No. 74 of Exemption Notification no. 12/2017 CT (R), exempts healthcare services by clinical establishment, an authorised medical practitioner and paramedics. Clause (zg) of said notification covers diagnosis, treatment or care of illness, injury, abnormality, etc. in any recognised system of medicines in India, under health care services. So, the said service is exempt from tax.

(ii) Entry No. 74 of Exemption Notification no. 12/2017 CT (R), exempts health care services provided by medical practitioners and paramedics irrespective of place of provision of these services, whether it is hospital or patient’s home.

(iii) Clause (zg) of Exemption Notification no. 12/2017 CT (R) has specifically excluded hair transplant, cosmetic or plastic surgery from the scope of the term “health care service”. So, the same will be taxable.

However, when such treatments are undertaken to restore anatomy of the body, then, the same will be covered under the definition of health care services and thus, it will be exempt in such case.

(iv) Cord Blood Bank services are covered by Entry No. 73 of Exemption Notification no. 12/2017 CT (R). So, it is exempt.

(v) Common Bio-medical waste treatment facility provided to clinical establishments is covered by Entry No. 75 of Exemption Notification no. 12/2017 CT (R). So, it is exempt.

(vi) Services by veterinary clinic are covered by Entry No. 46 of Exemption Notification no. 12/2017 CT (R). So, it is exempt.

(vii) Ambulance services by way of transportation of patients are specifically covered by Entry No. 74 of Exemption Notification no. 12/2017 CT (R).

(viii) Mortuary or crematorium services are neither treated as supply of goods nor supply of services as per para 4 of Schedule III of the CGST Act, 2017. Hence, not liable to GST.


Services Relating to Agriculture

1. Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce by way of –

(a) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing;

(b) supply of farm labour;

(c) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market;

(d) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;

(e) loading, unloading, packing, storage or warehousing of agricultural produce;

Analysis: Agro warehousing including cold storage of fruits, vegetables, etc. is exempt.

(f) agricultural extension services;

(g) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce.

(h) services by way of fumigation in a warehouse of agricultural produce [item (h) inserted by NN 02/2018 CT (R), dated 25.01.2018].

[Entry No. 54 of NN. 12/2017 CT (R)]

Notes :

(1) As per clause (c) under this notification, ‘Agricultural extension’ means application of scientific research and knowledge to agricultural practices through farmer education or training.

(2) As per clause (d) under this notification, ‘Agricultural produce’ means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market.

(3) As per clause (e) under this notification, ‘Agricultural Produce Marketing Committee or Board’ means any committee or board constituted under a State law for the time being in force for the purpose of regulating the marketing of agricultural produce.

Analysis :

(1) The activities like breeding of fish (pisciculture), rearing of silk worms (sericulture), cultivation of ornamental flowers (floriculture) and horticulture, forestry are included in the definition of agriculture. Plantation crops like rubber, tea or coffee are also covered under agricultural produce.

(2) For example, Sugarcane is agricultural produce, but, Sugar is not agricultural produce, because it is manufactured through processes which alter the essential characteristics of farm produce (sugarcane).

(3) Analysis of the term ‘testing’ used clause (a) of this entry: All testing and ancillary activities relating to testing in relation to agriculture or agricultural produce such as seed certification, technical inspection, technical testing, analysis, tagging of seeds, rendered during testing of seeds, are covered within the meaning of testing as mentioned in clause (a) of this entry. Therefore, such services are not liable to GST.

(4) Charges for process of plucking of flowers (say, Rose) from their plant and make it marketable, for


sale in primary market, at agricultural farm will be exempt from GST.

(5) But, charges for such type of processes carried out at some other place, other than agricultural farm, shall be taxable, although such process does not change essential characteristics of agricultural produce.

(6) Renting of land for “stud farming” is taxable. Because, rearing of horses is not covered under the scope of this entry.

(7) But, renting of land for poultry farming or for rearing of sheep, shall be exempt from GST, as it is covered under the scope of this entry.

(8) Rice is not agricultural produce. Paddy is agricultural produce.

(9) Clarifications regarding applicability of GST on warehousing of agricultural produce [Circular No. 16/ 16/2017-GST, dated 15.11.2017]:

Issue :

Is GST applicable on warehousing of agricultural produce such as tea (i.e. black tea, white tea etc.), processed coffee beans or powder, pulses (de-husked or split), jaggery, processed spices, processed dry fruits, processed cashew nuts etc.?

Clarification :

(i) As per entry no. 54(e) of NN 12/2017-Central Tax (Rate), loading, unloading packing, storage or warehousing of agricultural produce is exempt from GST.

(ii) Agricultural produce in the notification has been defined to mean “any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market”.

(iii) Tea used for making the beverage, such as black tea, green tea, white tea is a processed product made in tea factories after carrying out several processes, such as drying, rolling, shaping, refining, oxidation, packing etc. on green leaf and is the processed output of the same.

(iv) Thus, green tea leaves and not tea, is the “agricultural produce” eligible for exemption available for loading, unloading, packing, storage or warehousing of agricultural produce. Same is the case with coffee obtained after processing of coffee beans.

(v) Similarly, processing of sugarcane into jaggery changes its essential characteristics. Thus, jaggery is also not an agricultural produce.

(vi) Pulses commonly known as dal are obtained after de-husking or splitting or both. The process of de-husking or splitting is usually not carried out by farmers or at farm level but by the pulse millers. Therefore, pulses (de-husked or split) are also not agricultural produce. However, whole pulse grains such as whole gram, rajma etc. are covered in the definition of agricultural produce.

(vii) In view of the above, it is hereby clarified that processed products such as tea (i.e. black tea, white tea, etc.), processed coffee beans or powder, pulses (de-husked or split), jaggery, processed spices, processed dry fruits, processed cashew nuts, etc. fall outside the definition of agriculturalproduce given in notification No. 11/2017-CT (Rate) and 12/2017-CT (Rate) and corresponding notifications issued under IGST and UGST Acts and therefore, the exemption from GST is not available to their loading, packing, warehousing etc. and that any clarification issued in the past to the contrary in the context of Service Tax or VAT/ Sales Tax is no more relevant

Illustration 3 :


Mark Agro Products Ltd., a registered person, furnishes the following details of various services provided by it in the month of December, 2017:


1 Rearing of Silkworm and Horticulture 2,50,000

2 Plantation of Tea and Coffee 2,00,000

3 Renting of Vacant Land for Performing Marriage Ceremony 4,50,000

4 Sale of Wheat on Commission basis 50,000

5 Sale of Rice on Commission basis 2,00,000

Compute the value of taxable services and the GST liability of Mark Agro Products Ltd. for the month of December, 2018. Assume that time of supply in respect of all activities mentioned above falls in the month of December, 2017 itself. GST has been charged separately wherever applicable. Give reasons by way of short notes to your answer.

Answer :

Computation of Value of Taxable Service and GST Liability of Mark Agro Products Ltd. for the month of December, 2017


1 Rearing of Silkworm and Horticulture [Not taxable, as it is covered under entry no. 54 of NN 12/2017 CT (R)] Nil

2 Plantation of Tea and Coffee [Not taxable, as it is covered under entry no. 54 Nil

3 Renting of Vacant Land for performing Marriage Ceremony [Taxable, as it is not covered under any exemption] 4,50,000

4 Sale of Wheat on Commission basis [Not Taxable, as it is covered under entry no. 54 of NN 12/2017 CT (R)] Nil

5 Sale of Rice on Commission basis [Taxable, as rice is not agricultural produce.Therefore, not covered under any exemption.] 2,00,000

Total Taxable Value 6,50,000

CGST @9% 58,500

SGST @9% 58,500

2. Services by way of fumigation in a warehouse of agricultural produce.

[Entry No. 53A of NN 12/2017 CT (R), inserted by NN 02/2018 CT (R), dated 25.01.2018]

3. Services by way of loading, unloading, packing, storage or warehousing of rice. [Entry No. 24 of NN. 12/2017 CT (R)]

Analysis:

(1) Commission agent of rice is taxable.

4. Services by way of warehousing of minor forest produce. [Entry No. 24A of NN 12/2017 C.T. (R.), inserted by NN 14/2018 – CT (R), w.e.f. 26.07.2018]

Examples of minor forest produce: Trees and leaves, flowers and fruits, and all other parts or produce of trees, etc. brought from the forest.


5. Services by way of storage or warehousing of cereals, pulses, fruits, nuts and vegetables, spices, copra, sugarcane, jaggery, raw vegetable fibres such as cotton, flax, jute etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, coffee and tea. [Entry No. 24B of NN 12/2017 CT (R), inserted by NN 21/2019 – CT (R), w.e.f. 01.10.2019]

6. Carrying out an intermediate production process as job work in relation to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce.

[Entry No. 55 of NN. 12/2017 CT (R)]

Clarification on taxability of custom milling of paddy by Rice Millers [Circular No. 19/19/2017-GST, dated 20.11.2017]:

Issue : Whether custom milling of paddy by Rice millers is liable to GST or is exempted under Entry No. 55 of Notification 12/2017 - Central Tax (Rate)

Clarification : Milling of paddy is not an intermediate production process in relation to cultivation of plants. It is a process carried out after the process of cultivation is over and paddy has been harvested.

Further, processing of paddy into rice is not usually carried out by cultivators, rather it done by rice millers.

Milling of paddy into rice also changes its essential characteristics. Therefore, milling of paddy into rice cannot be considered as an intermediate production process in relation to cultivation of plants for food, fibre or other similar products or agricultural produce.

Therefore, in view of the above, it is clarified that milling of paddy into rice is not eligible for exemption under Entry No. 55 of Notification No. 12/2017 - Central Tax (Rate) and corresponding notifications issued under IGST and UTGST Acts.

Further, GST will be liable to be paid only on the processing charges charged by millers for milling of paddy into rice on job work basis (and not on the entire value of rice).

7. Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables.

[Entry No. 57 of NN. 12/2017 CT (R)]

8. Services provided by a goods transport agency [GTA], by way of transport in a goods carriage of Agricultural Produce, milk, salt and foodgrain including flour, pulses and rice. [Entry No. 21(c) and 21(d) of NN. 12/2017 CT (R)]

9. Services by way of transportation by rail or a vessel from one place in India to another of the Agricultural Produce, milk, salt and foodgrain including flour, pulses and rice. [Entry No. 20(e) and 20(f) of NN. 12/2017 CT (R)]

10. Services by way of artificial insemination of livestock (other than horses). [Entry no. 55A of NN 12/2017 CT(R), inserted by NN 14/2018 CT(R) CT(R) w.e.f. 27.07.2018]

11. Services by way of slaughtering of animals. [Entry No. 56 of NN. 12/2017 CT (R)]

12. Services provided by the Central Government, State Government, Union territory or local authority by way of assignment of right to use natural resources to an individual farmer for cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products. [Entry No. 63 of NN. 12/2017 CT (R)]


13. Services supplied by electricity distribution utilities by way of construction, erection, commissioning, or installation of infrastructure for extending electricity distribution network upto the tube well of the farmer or agriculturalist for agricultural use. [Entry No. 10A of NN 12/2017 CT (R), inserted by NN 14/2018 – CT (R), w.e.f. 26.07.2018]

14. Services provided by the National Centre for Cold Chain Development under the Ministry of Agriculture, Co-operation and Farmer’s Welfare by way of cold chain knowledge dissemination. [Entry No. 58 of NN. 12/2017 CT (R)]

Illustration 4 :

Mangal Agro Ltd. registered under GST furnishes the following details with respect to the activities undertaken by them in the month of March, 2018 :

Sl.No. Particulars Amount (Rs.)

1) Charges for soil testing of farm land 65,000

2) Charges for training of farmers on use of new pesticides and fertilizers developed through scientific research 75,000

3) Receipts from Supply of farm labour 83,000

4) Charges for warehousing of potato chips 60,000

5) Charges for warehousing of rice 45,000

6) Charges for seed testing 15,000

7) Renting of vacant land to a stud farm 1,15,000

8) Retail packing and labelling of fruits and vegetables 77,000

9) Commission received on sale of wheat 5,50,000

10) Charges for warehousing of cotton fabrics 1,00,000

11) Leasing of vacant land to a cattle farm 1,50,000

Compute the value of taxable supply of Mangal Agro Ltd. for the month of March, 2018 if all the above amounts are exclusive of GST.

Answer :

Computation of Value of taxable supply


1) Charges for soil testing of farm land [Exempt as per Entry No. 54 of NN. 12/2017-CT (R)] Nil

2) Charges for training of farmers on use of new pesticides and fertilizers developed through scientific research [Exempt as per Entry No. 54 of NN. 12/2017-CT (R)] Nil

3) Receipts from Supply of farm labour [Exempt as per Entry No. 54 of NN. 12/2017-CT (R)] Nil

4) Charges for warehousing of potato chips [Potato chips is not an agricultural produce,warehousing of the same shall be taxable] 60,000

5) Charges for warehousing of rice [Exempt as per Entry No. 24 of NN. 12/2017-CT (R)] Nil

6) Charges for seed testing [Exempt as per Entry No. 54 of NN. 12/2017-CT (R)] Nil


7) Renting of vacant land to a stud farm [The same will be liable for GST, as rearing of horses has been specifically excluded from Exemption] 1,15,000

8) Retail packing and labelling of fruits and vegetables[Exempt as per Entry No. 57 of NN. 12/2017-CT (R)] Nil

9) Commission received on sale of wheat [Exempt as per Entry No. 54 of NN. 12/2017-CT (R)] Nil

10) Charges for warehousing of cotton fabrics [Liable to GST] 1,00,000

11) Leasing of vacant land to a cattle farm [Exempt as per Entry No. 54 of NN. 12/2017-CT (R)] Nil

Value of Taxable Supply 2,75,000

Education Related Services

1

Services provided -

(a) by an educational institution to its students, faculty and staff;

(aa) by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee [item (aa) inserted by NN 02/2018 CT (R), dated 25.01.2018];

(b) to an educational institution, by way of, -

(i) transportation of students, faculty and staff;

(ii) catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory;

(iii) security or cleaning or house- keeping services performed in such educational institution;

(iv) services relating to admission to, or conduct of examination by, such institution;

(v) supply of online educational journals or periodicals [sub-item (v) inserted by NN 02/2018 CT (R), dated 25.01.2018]

However, nothing contained in sub-items (i), (ii) and (iii) of item (b) shall apply to an educational institution other than an institution providing services by way of preschool education and education up to higher secondary school or equivalent. [as amended by NN 02/2018 CT (R), dated 25.01.2018] [Entry No. 66 of NN. 12/2017 CT (R)] Provided further that nothing contained in sub-item (v) of item (b) shall apply to an institution providing services by way of, -

(i) pre-school education and education up to higher secondary school or equivalent; or

(ii) education as a part of an approved vocational education course.

[Second Proviso inserted by NN 02/2018 CT (R), dated 25.01.2018] Notes : (1) As per clause (y) under this notification, ‘Educational institution’ means an institution providing

services by way of, -

pre-school education and education up to higher secondary school or equivalent;

education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;

education as a part of an approved vocational education course.

(2) As per clause (h) under this notification, ‘Approved vocational education course’ means, - a course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or State Council for Vocational Training offering courses in designated trades


notified under the Apprentices Act, 1961 or a Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship;

(3) For removal of doubts, it is clarified that the Central and State Educational Boards shall be treated as Educational Institution for the limited purpose of providing services by way of conduct of examination to the students. [Inserted by NN 14/2018 CT(R) w.e.f. 27.07.2018]

Analysis:

(1) Services provided by school, colleges, etc. to its students, faculty & staff are exempt from GST, which is further analysed in detail hereunder.

(2) Services by way of conduct of degree courses by colleges, universities or institutions which lead to grant of qualifications recognized by law for the time being in force would be covered under exemption.

(3) But, training given by private coaching institutes would not be covered as such training does not lead to grant of a recognized qualification.

(4) Further, services relating to any qualification recognised by a law of foreign country are not covered in exemption, hence, taxable.

(5) The services provided by international schools giving international certifications likes international business schools are services by way of education upto higher secondary schools or equivalent and therefore, covered under this exemption.

(6) Boarding schools provide service of education coupled with other services like providing dwelling units for residence and food. In this case, since, the service of providing residential dwelling for use as residence is also covered under entry no. 12 of this exemption list, therefore, the question of taxability does not arise in such a case. Further, it is exempt also because any service by an education institution to its students, faculty and staff are exempt from GST (not necessarily relating to education only).

(7) Further, any service by an educational institution to its students, faculty and staff are exempt from GST (not necessarily relating to education only). For e.g.:

(i) Service by an education institution to its students, faculty and staff by way of transportation by bus, etc. are exempt under this entry.

(ii) If any charges are collected from the students by any educational institution in respect of participation in any campus placement programme, etc., then GST is exempt on such charges.

(8) GST is liable on services provided by educational institutes such as ICAI, IITs, IIMs, etc. charging fees from prospective employers like corporate house/MNCs, who come to the institutes for recruiting candidates through Campus interviews, as such services are not covered in the exemption (because these services are provided by educational institutions to person other than students, faculty & staff).

(9) A course in a college which leads to dual qualification out of which if only one is recognized by law, would be a case of Bundled service, which is mixed supply as per section 2(74) of the CGST Act. And GST will be levied after considering the provisions of section 8(b) of the CGST Act.

(10) Any service provided to educational institutions is exempt from GST only if it is covered under item (b) of this entry.

(11) Further, sub-items (i), (ii) and (iii) of item (b) of this entry (i.e. transportation, catering, security, cleaning and house-keeping services) is applicable only to educational institution providing services by way of pre-school education and education up to higher secondary school or equivalent. Therefore, if services covered under sub-items (i), (ii) and (iii) of item (b) of this entry (i.e. transportation, catering, security, cleaning and house-keeping services) are provided to other educational institutions (i.e. colleges, vocational educational institutions, etc.), then, it will be chargeable to GST. [as per first proviso to this entry]


(12) Further, sub-item (v) of item (b) of this entry (i.e. supply of online educational journals or periodicals) is applicable only to educational institutions providing services by way of education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force (i.e. college, etc.). Therefore, if online educational journals or periodicals is supplied to other educational institutions (i.e. schools, vocational educational institutions, etc.), then, it will be chargeable to GST.[as per second proviso to this entry]

(13) But, sub-item (iv) of item (b) of this entry (i.e. services relating to admission to, or conduct of examination by, such institution) is applicable to all educational institutions. Therefore, if services covered under sub-item (iv) of item (b) of this entry (i.e. services relating to admission to, or conduct of examination by, such institution) are provided to any educational institution, then, it will be exemptfrom GST. [For example, services provided to ICAI, ICSI, etc. for conduct of examination by any College, school, etc. are exempt from GST].

(14) Further, any service, which is not covered under item (b) of this entry, provided to any educational institution shall be chargeable to GST. (For example, advertisement services, telecom services, etc. provided to any educational institution are taxable.)

(15) Clarifications regarding GST on College Hostel Mess Fees [Circular No. 28/02/2018 – GST, dated 08.01.2018]

The educational institutions have mess facility for providing food to their students and staff. Such facility is either run by the institution/ students themselves or is outsourced to a third person. Supply of food or drink provided by a mess or canteen is taxable under GST.

Case I : If the catering service is one of the services provided by an educational institution to its students, faculty and staff and the said educational institution is covered by the definition clause (y) of NN 12 2017-Central Tax (Rate), then, the same is exempt.

Case II : If the catering services, i.e., supply of food or drink in a mess or canteen, is provided by anyone other than the educational institution, then, it is a supply of service to the concerned educational institution and attracts GST.

(16) Clarification on GST rate applicable on supply of food and beverage services by educational institution [Circular No. 85/04/2019- GST, dated 01-01-2019)

Supply of all services by an educational institution to its students, faculty and staff is exempt under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, Sl. No. 66. Such services include supply of food and beverages by an educational institution to its students, faculty and staff. A supply is eligible for exemption under an entry of the said notification where the description of the service leaves no room for any doubt. Accordingly, it is clarified that supply of food and beverages by an educational institution to its students, faculty and staff, where such supply is made by the educational institution itself, is exempt under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, vide Sl. No. 66 w.e.f. 01-07-2017 itself. However, such supply of food and beverages by any person other than the educational institutions based on a contractual arrangement with such institution is leviable to GST @ 5%.

(17) Services provided by any person to any educational institution in respect of imparting any skill, knowledge, education or development of course content or any other knowledge - enhancement activity, whether for the students or the faculty, are taxable.

(18) Building let out to any educational institution is taxable.

(19) Placement services provided to any educational institutions for securing job placements for the students are not covered in exemption. Hence, taxable.

2

Services by way of giving on hire motor vehicle for transport of students, faculty and staff, to a person providing services of transportation of students, faculty and staff to an educational institution providing services by way of pre-school education and education upto higher secondary school or equivalent.


[Entry No. 22(c) of NN 12/2017 CT (R), inserted by NN 02/2018 – CT (R), dated 25.01.2018]

3

Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme :

(a) 2 year full time Post Graduate Programmes in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT) conducted by the Indian Institute of Management;

(b) fellow programme in Management;

(c) 5 year integrated programme in Management.

[Entry No. 67 of NN. 12/2017 CT (R)] [omitted by NN 28/2018 – CT (R), dated 31.12.2018]

Applicability of GST on various programmes conducted by the Indian Institutes of Management (IIMs) [Circular No. 82/01/2019- GST, dated 01.01.2019]

(1) The Indian Institutes of Management Act, 2018 came into force on 31st January, 2018. According to provisions of the IIM Act, all the IIMs listed in the schedule to the IIM Act are “institutions of national importance”. They are empowered to (i) grant degrees, diplomas, and other academic distinctions or titles, (ii) specify the criteria and process for admission to courses or programmes of study, and (iii) specify the academic content of programmes. Therefore, with effect from 31st January, 2018, all the IIMs are “educational institutions” as defined under notification No. 12/ 2017- Central Tax (Rate) dated 28.06.2017 as they provide education as a part of a curriculum for obtaining a qualification recognised by law for the time being in force.

(2) At present, Indian Institutes of Managements are providing various long duration programs (one year or more) for which they award diploma/ degree certificate duly recommended by Board of Governors as per the power vested in them under the IIM Act, 2017. Therefore, it is clarified that services provided by Indian Institutes of Managements to their students- in all such long duration programs (one year or more) are exempt from levy of GST. As per information received from IIM Ahmedabad, annexure 1 to this circular provides a sample list of programmes which are of long duration (one year or more), recognized by law and are exempt from GST.

(3) For the period from 1st July, 2017 to 30th January, 2018, IIMs were not covered by the definition of educational institutions as given in notification No. 12/ 2017 Central Tax (Rate) dated 28.06.2017. Thus, they were not entitled to exemption under Sl. No. 66 of the said notification. However, there was specific exemption to three programs of IIMs under Sl. No. 67 of notification No. 12/2017- Central Tax (Rate). Therefore, for the period from 1st July, 2017 to 30th January, 2018, GST exemption was available only to three long duration programs specified in serial no. 67.

(4) It is further, clarified that with effect from 31st January, 2018, all IIMs have become eligible for exemption benefit under Sl. No. 66 of notification No. 12/ 2017- Central Tax (Rate) dated 28.06.2017. As such, specific exemption granted to IIMs vide Sl. No. 67 has become redundant. The same has been deleted vide notification No. 28/2018- Central Tax (Rate) dated, 31st December, 2018 w.e.f. 1st January 2019.

(5) Indian Institutes of Managements also provide various short duration/ short term programs for which they award participation certificate to the executives/ professionals as they are considered as “participants” of the said programmes. These participation certificates are not any qualification recognized by law. Such participants are also not considered as students of Indian Institutes of Management. Services provided by IIMs as an educational institution to such participants is not exempt from GST. Such short duration executive programs attract standard rate of GST @ 18% (CGST 9% + SGST 9%). As per information received from IIM Ahmedabad, annexure 2 to this circular provides a sample list of programmes which are short duration executive development programs, available for participants other than students and are not exempt from GST.

(6) In nut shell, w.e.f. 31.01.2018 all long duration programs (one year or more) conferring degree/ diploma as recommended by Board of Governors as per the power vested in them under the IIM Act, 2017 including one- year Post Graduate Programs for Executives are exempt from GST. And, all short


duration executive development programs or need based specially designed programs (less than one year) which are not a qualification recognized by law are not exempt from GST.

(7) List of examples of long duration programs recognised under IIM Act, 2017 offered by IIM Ahmedabad [which are exempt from GST]:

(i) Post-Graduate Programme (PGP) – 2-year program

(ii) Post-Graduate Programme in Food and Agri-Business Management (PGP-FABM) – 2-year program

(iii) Fellow Programme in Management (FPM) – 4 to 5-year program

(iv) Post-Graduate Programme in Management for Executives (PGPX) – 12 months (1 year) full time program

(v) ePost-Graduate Programme (ePGP) – 2-year online program.

(8) List of examples of short duration executive development programs offered by IIM Ahmedabad which are available to participants [which are not exempt from GST]:

(i) Armed Forces Programme

(ii) Faculty Development Programme

(iii) Executive Education

a. Customized Executive Programmes

b. Open Enrolment Programme.

Clarification on applicability of GST exemption to the DG Shipping approved maritime courses conducted by Maritime Training Institutes of India – [Circular No. 117/36/2019 – GST, dated 11.10.2019]

Issue : Applicability of GST exemption to the Directorate General of Shipping approved maritime courses conducted by the Maritime Training Institutes of India.

1. Under GST Law, vide Sl. No. 66 of the notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, services provided by educational institutions to its students, faculty and staff are exempt from levy of GST. In the above notification, “educational institution” has been defined to mean an institution providing services by way of education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force.

2. GST exemption on services supplied by an educational institution would be available, if it fulfils the criteria that the education is provided as part of a curriculum for obtaining a qualification/ degree recognized by law.

3. The Maritime Training Institutes and their training courses are approved by the Director General of Shipping which are duly recognised under the provisions of the Merchant Shipping Act, 1958 read with the Merchant Shipping (standards of training, certification and watch-keeping for Seafarers) Rules, 2014. Therefore, the Maritime Institutes are educational institutions under GST Law and the courses conducted by them are exempt from levy of GST. The exemption is subject to meeting the conditions specified at Sl. No. 66 of the notification No. 12/ 2017- Central Tax (Rate) dated 28.06.2017.


4

Any services provided by, -

(a) the National Skill Development Corporation set up by the Government of India;

(b) a Sector Skill Council approved by the National Skill Development Corporation;

(c) an assessment agency approved by the Sector Skill Council or the National Skill Development Corporation;

(d) a training partner approved by the National Skill Development Corporation or the Sector Skill Council, in relation to –

(i) the National Skill Development Programme implemented by the National Skill Development Corporation; or

(ii) a vocational skill development course under the National Skill Certification and Monetary Reward Scheme; or

(iii) any other Scheme implemented by the National Skill Development Corporation. [Entry No. 69 of NN. 12/2017 CT (R)]

5

Services provided by training providers (Project implementation agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDUGKY) implemented by the Ministry of Rural Development, Government of India by way of offering skill or vocational training courses certified by the National Council for Vocational Training.

[Entry No. 71 of NN. 12/2017 CT (R)]

6

Services of assessing bodies empanelled centrally by the Directorate General of Training, Ministry of Skill Development and Entrepreneurship by way of assessments under the Skill Development Initiative Scheme.

[Entry No. 70 of NN. 12/2017 CT (R)]

7

Services provided to the Central Government, State Government, Union territory administration under any training programme for which total expenditure is borne by the Central Government, State Government, Union territory administration.

[Entry No. 72 of NN. 12/2017 CT (R)]

8

Services by way of training or coaching in recreational activities relating to -

(i) arts or culture, or (ii) sports by charitable entities registered under section 12AA of the Income-tax Act.

[Entry No. 80 of NN. 12/2017 CT (R)] Analysis:

1. The exemption benefit is available to coaching or training relating to all forms of dance, music, painting, sculpture making and theatre.

2. But, the exemption benefit in relation to coaching or training relating to sports is available only if such training or coaching is provided by a charitable entity registered under section 12AA of the Income-tax Act.

Illustration 5 :

Mangal Education Pvt. Ltd. owning various educational institutions provides the details about various receipts :

(A) Receipts of Mangal Public School

(i) Tution fee from students - Rs. 10,00,000

(ii) Hostel fee from students - Rs. 5,50,000

(iii) Staff quarter rent received from faculties - Rs. 1,20,000


(iv) Receipts from pre-nursery section - Rs. 1,00,000

(v) Mess charges from students - Rs. 1,60,000

(vi) Bus fee from students - Rs. 1,80,000

(vii) “Mind Parichay” career counselling fees from students - Rs. 25,000

(viii) Sale of admission forms of school - Rs. 40,000

(ix) Fee for participation of educational seminar from students - Rs. 20,000

(B) Receipts of Mangal International School affiliated to University of Australia

(i) Tution fee for high school diploma recognised by Indian government - Rs. 5,00,000

(ii) Tution fee for High School Diploma recognised by Government of Australia, equivalent to higher secondary education in India - Rs. 7,00,000

(C) Receipts from Mangal Technological College affiliated to University of U.K.

(i) Course fee for ‘Masters in Technology’ recognised degree course approved by Ministry of H.R.D., India - Rs. 20,00,000

(ii) Course fee for ‘Masters in Technology’ recognised degree course of U.K. - Rs. 45,00,000

(iii) Campus Placement Participation fee from students covered

(a) in course of point (i) - Rs. 1,00,000

(b) in course of point (ii) - Rs. 60,000

(iv) Campus Placement Participation fee from prospective employer companies

(a) For students of course of point (i) - Rs. 3,00,000

(b) For students of course of point (ii) - Rs. 4,00,000

(v) Fee for I.T. training, which is a part of a curriculum for obtaining degree

(a) Under course of point (i) - Rs. 3,00,000

(b) Under course of point (ii) - Rs. 4,00,000

(vi) Donation received from various persons - Rs. 20,00,000

(D) Receipts from Mangal Training Centre for football registered under section 12AA of the Income-tax Act

(i) Training fee - Rs. 3,80,000

(ii) Transportation fee from students - Rs. 60,000

(iii) Hostel fee from students - Rs. 10,000

(iv) Staff quarter rent from faculties - Rs. 1,00,000

(E) Receipts from Mangal Coaching Classes for CA, CS and CMA students

(i) Coaching fee - Rs. 10,00,000

(ii) Sale of admission forms - Rs. 50,000

(F) Receipts from Mangal Industrial Training Center (ITC) affiliated to the National Council for Vocational Training offering approved course

(i) Training fee from students - Rs. 2,50,000

(ii) Bus fee from students and faculty - Rs. 30,000

Calculate the value of taxable services and amount of GST liability for Mangal Education Pvt. Ltd.

Answer : Computation of GST Liability of M/s Mangal Education Pvt. Ltd.


Particulars Amount (Rs.) (A) Receipts of Mangal Public School

(i) Tution fee from students [Exempt, as it is covered under entry no. 66 of the Exemption Notification No. 12/2017 CT (R)] Nil

(ii) Hostel fee from students [Exempt, as it is covered under entry no. 12 and entry no. 66 of the Exemption Notification No. 12/2017 CT (R)] Nil

(iii) Staff quarter rent received from faculties [Exempt - Same as (ii) above] Nil

(iv) Receipts from pre-nursery section [Exempt - Entry 66, NN 12/2017 CT (R)] Nil (v) Mess charges from students [Exempt - Entry 66, NN 12/2017 CT (R)] Nil

(vi) Bus fee from students [Exempt - Entry 66, NN 12/2017 CT (R)] Nil

(vii) “Mind Parichay” career counselling fees from students [Exempt - Entry 66, NN 12/2017 CT (R)] Nil

(viii) Sale of admission forms of school [Exempt - Entry 66, NN 12/2017 CT(R)] Nil (ix) Fee for participation of educational seminar from students[Exempt - Entry

66, NN 12/2017 CT (R)] Nil (B) Receipts of Mangal International School affiliated to University of Australia

(i) Tution fee for high school diploma recognised by Indian government [Exempt - Entry 66, NN 12/2017 CT (R)] Nil

(ii) Tution fee for High School Diploma recognised by Government of Australia, equivalent to higher secondary education in India [Exempt - Entry 66, NN 12/2017 CT (R)] Nil

(C) Receipts from Mangal Technological College affiliated to University of U.K.

(i) Course fee for ‘Masters in Technology’ recognised degree course approved by Ministry of H.R.D., India [Exempt - Entry 66, NN 12/2017 CT (R)] Nil

(ii) Course fee for ‘Masters in Technology’ recognised degree course of U.K.[Taxable, since it is not a recognised course as per Entry 66, NN 12/2017CT (R), so, it is not covered under exemption list and further it is not covered by any other exemption notification also] 45,00,000

(iii) Campus Placement Participation fee from students covered (a) in course of point (i) [Exempt - Entry 66, NN 12/2017 CT (R)] Nil

(b) in course of point (ii) [Taxable, since it is not provided by “educational institution” as defined in clause (y) of NN 12/2017 CT (R)] 60,000

(iv) Campus Placement Participation fee from prospective employer companies

(a) For students of course of point (i) [Taxable, since the services are not provided to students, faculties or staff, so not covered under Entry 66, NN 12/2017 CT (R)] 3,00,000

(b) For students of course of point (ii) [Taxable - Refer (iii) (b) and (iv) (a) above] 4,00,000

(v) Fee for I.T. training, which is a part of a curriculum for obtaining degree

(a) Under course of point (i) [Exempt - Entry 66, NN 12/2017 CT (R)] Nil (b) Under course of point (ii) [Taxable - Refer point (iii)(b) above] 4,00,000

(vi) Donation received from various persons [It is not a consideration for any service, so not taxable] Nil

(D) Receipts from Mangal Training Centre for Football registered under Section 12AA of the Income-tax Act


(i) Training fee [Exempt - Entry 80, NN 12/2017 CT (R)] Nil (ii) Transportation fee from students [Taxable - Not covered by exemption

notification, since it is not a education institution as defined in clause (y) of NN 12/2017 CT (R), and only services by way of training or coaching is covered in entry 80, NN 12/2017 CT (R)] 60,000

(iii) Hostel fee from students [Exempt, as it is covered under entry no. 14 of the Exemption Notification No. 12/2017 CT (R) (assuming it is less than Rs. 1,000 per day)] Nil

(iv) Staff quarter rent from faculties [Exempt, as it is covered under entry no. 12 of the Exemption Notification No. 12/2017 CT (R)] Nil

(E) Receipts from Mangal Coaching Classes for CA, CS and CMA students (i) Coaching fee [Taxable, since Mangal Coaching Classes is not “educational

institution” as defined in clause (y) of NN 12/2017 CT (R)] 10,00,000

(ii) Sale of admission forms [Taxable, since Mangal Coaching Classes is not “educational institution” as defined in clause (y) of NN 12/2017 CT (R)] 50,000

(F) Receipts from Mangal Industrial Training Center (ITC) affiliated to the National Council for Vocational Training offering approved course (i) Training fee from students [Exempt - Entry 66, NN 12/2017 CT (R)] Nil

(ii) Bus fee from students and faculty [Exempt] Nil Total Value of Taxable Services 67,70,000 CGST @ 9% 6,09,300 SGST @ 9% 6,09,300

Illustration 6 : Mind Parichay Education Services Ltd. is engaged in Providing Various Services to educational institutions furnishes following information :


(i) Services by way of Transportation of students faculty and staff to Mangal Public School 2,00,000

(ii) House keeping services to Mangal Coaching Center 2,00,000

(iii) House keeping service to Mangal College of Commerce 3,00,000

(iv) Transportation Service to Mangal Training Center of Arts 50,000

(v) Catering Services to Mangal International School of Business providing recognized degree course 1,00,000

(vi) Conduct of Examination for Coaching Center 20,000

(vii) Conduct of Examination for ICAI 1,00,000

(viii) Security services to Mangal International College providing diploma recognized by U.K. Government 80,000

(ix) Renting of Property to Mangal Pre-nursery school 1,20,000

(x) Renting of Property to Mangal Classes 1,80,000

(xi) Conducting counselling sessions for students of Mangal Public School 1,60,000

(xii) Conducting placement services for ICAI 65,000


(xiii) Catering service to pre-primary school under Mid-day Meal Scheme 30,000

(xiv) Admission consultancy to Mangal Public School 80,000

(xv) Admission consultancy fee from students directly, for admission to Mangal Public School 1,20,000

Calculate the value of taxable services and amount of tax liability for Mind Parichay Education Services Ltd. Solution:


(i) Services by way of Transportation of students faculty and staff to Mangal Public School [Exempt – WN (1)] Nil

(ii) House keeping services to Mangal Coaching Center [Taxable – WN(2)] 2,00,000

(iii) House keeping service to Mangal College of Commerce [Taxable – WN(3)] 3,00,000

(iv) Transportation Service to Mangal Training Center of Arts [Taxable – WN(4)] 50,000

(v) Catering Services to Mangal International School of Business providing recognized degree course [Taxable – WN(3)] 1,00,000

(vi) Conduct of Examination for Coaching Center [Taxable – WN(2)] 20,000

(vii) Conduct of Examination for ICAI [Taxable – WN(5)] NIL

(viii) Security services to Mangal International College providing diploma recognized by U.K. Government [Taxable – WN(2)] 80,000

(ix) Renting of Property to Mangal Pre-nursery school [Taxable – WN(6)] 1,20,000

(x) Renting of Property to Mangal Classes [Taxable – WN(6)] 1,80,000

(xi) Conducting counselling sessions for students of Mangal Public School [Taxable – WN(6)] 1,60,000

(xii) Conducting placement services for ICAI [Taxable – WN(6)] 65,000

(xiii) Catering service to pre-primary school under Mid-day Meal Scheme [Exempt – WN(1)] NIL

(xiv) Admission consultancy to Mangal Public School [Exempt – WN(1)] NIL

(xv) Admission consultancy fee from students directly, for admission to Mangal Public School [Taxable – WN(7)] 1,20,000

Value of Taxable Services 13,95,000

CGST @ 9% 1,25,550

SGST @9% 1,25,550

Working Notes :

1. Entry no. 66 of NN 12/2017 CT (R) (Mega Exemption Notification) exempts certain services provided to educational institutions [defined in clause (y) of said notification]. Since, the service is covered by this entry no. 66 and the institution is also covered under the definition of educational institution, therefore, the service is exempt from GST.

2. Institution is not covered under definition of educational institution of clause (y) of NN 12/2017, so, it is taxable.


Entertainment and Sports Related Services

1. Services by way of admission to a museum, national park, wildlife sanctuary, tiger reserve or zoo. [Entry No. 79 of NN. 12/2017 CT (R)] Note: Under this notification, ‘museum, national park, wildlife sanctuary, tiger reserve and zoo’ shall have the same meaning as assigned to it in the Wild Life (Protection) Act, 1972.

2. Services by way of admission to a protected monument so declared under the Ancient Monuments and Archaeological Sites and Remains Act 1958 or any of the State Acts, for the time being in force. [Entry No. 79A of NN 12/2017 CT (R), inserted by NN 47/2017 – CT (R), w.e.f. 15.11.2017] Analysis : (i) An ancient monument which is declared to be of national importance by or under Ancient and

Historical Monuments and Archaeological Sites and Remains (Declaration of National Importance) Act, 1951, or by section 126 of the States Re-organisation Act, 1956 is called a protected monument.

3. The service is not covered by entry 66 of NN 12/2017 and also any other exemption notification, so taxable. This service is exempt only if it is provided to an educational institution providing services

4. Institution is not covered by definition of educational institution given in clause (y) of NN 12/2017. So, it is taxable. (Further, entry 80 of NN 12/2017 covers only training or coaching services by such institutes.)

5. If services covered under sub-item (iv) of item (b) of entry no. 66 of NN 12/2017 CT (R) (i.e. services relating to admission to, or conduct of examination by, such institution) are provided to any educational institution, then, it is exempt from GST.

6. The service is not covered by entry 66 of NN 12/2017 and also any other exemption notification, so taxable.

7. As per entry 66(b) of NN 12/2017, certain services provided to educational institution are exempt. Though the service is covered under the entry and the institution is also covered under the definition, but, since the services are provided to students directly, so it is taxable.

Illustration 7 :

Determine the taxability under various independent cases :

1. Services provided by Mr. Rohit to Mangal Public School to teach accounts to commerce students. Mr. Rohit is not an employee of the school for Rs. 5,00,000.

2. Development of course content for Mangal college of technology by Dr. Abhishek Goyal for Rs. 8,00,000.

3. Training of staff of Mangal Industrial Training Institute (Approved ITI for vocational training by CA. Vimal Surana) - Rs. 10,00,000.

Answer :

Sr. No. Particulars 1 Services to school for teaching accounts (WN) Taxable 2 Development of course content of college (WN) Taxable

3 Training of staff of approved ITI (WN) Taxable

Working Note :

Entry no. 66 of NN. 12/2017 CT (R) provides exemption for services provided to educational institution for various services. Since, none of the services specified in notification includes the given service. So, it is taxable.


More than 3,600 historical monuments and archaeological sites have been declared as protected monuments in India. [E.g.. – Taj Mahal in Agra, Jantar Mantar in Delhi, etc.]

(ii) No GST will be levied on the price charged for Entry ticket of these protected monuments as per this entry no. 79A of NN 12/2017 CT (R).

3. Services by way of right to admission to - (a) circus, dance, or theatrical performance including drama or ballet; (b) award function, concert, pageant, musical performance or any sporting event other than a recognised

sporting event; (c) recognised sporting event; (d) planetarium [item (d) inserted by NN 02/2018 CT (R), dated 25.01.2018],

where the consideration for right to admission to the events or places as referred to in items (a), (b), (c) or (d) above is not more than Rs. 250 Rs. 500 per person [Rs. 250/- substituted by Rs. 500/- by NN 02/2018 CT (R), dated 25.01.2018]. [Entry No. 81 of NN. 12/2017 CT (R)]

Note : As per clause (zv) under this notification, ‘Recognised sporting event’ means any sporting event,- (i) organised by a recognised sports body where the participating team or individual represent any

district, State, zone or country; (ii) organised –

(A) by a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, state or zone;

(B) by Association of Indian Universities, Inter-University Sports Board, School Games Federation of India, All India Sports Council for the Deaf, Paralympic Committee of India or Special Olympics Bharat;

(C) by Central Civil Services Cultural and Sports Board; (D) as part of national games, by Indian Olympic Association; or (E) under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme;

4. Services by an artist by way of a performance in folk or classical art forms of - (a) music, or (b) dance, or (c) theatre, if the consideration charged for such performance is not more than Rs. 1,50,000/-. However, the exemption shall not apply to service provided by such artist as a brand ambassador. [Entry No. 78 of NN. 12/2017 CT (R)]

Note : As per clause (m) under this notification, ‘Brand ambassador’ means a person engaged for promotion or marketing of a brand of goods, service, property or actionable claim, event or endorsement of name, including a trade name, logo or house mark of any person. Analysis: (i) All other activities by an artist in other art forms e.g. western music or dance, modern theatres,

performance of actors in films or television serials would be taxable. (ii) Similarly, activities of artists in still art forms e.g. painting, sculpture making, etc. are taxable. (iii) Services provided by such an artist as brand ambassador is also taxable. (iv) Services by an artist by way of a performance in folk or classical art form of (a) music, or (b) dance, or

(c) theatre, are exempt only if the consideration charged for such performance is upto Rs. 1,50,000/ - per performance.

(v) In case, where consideration charged for such service is Rs. 1,51,000/-, then, GST would be chargeable and it will be charged on entire Rs. 1,51,000/-.

Illustration 8 :


Mr. Nawab, a performing artist, provides the following information relating to December, 2017 receipts from :

Particulars Amount (Rs.)

Performing classical dance 98,000

Performing in television serial 2,80,000

Services as brand ambassador 12,00,000

Coaching in recreational activities relating to arts 2,10,000

Activities in sculpture making 3,10,000

Performing western dance 90,000

Determine the value of taxable services and GST payable by Mr. Navab for December, 2017. GST has been charged separately, wherever applicable. Mr. Navab is registered in GST. Answer :

Computation of Value of Taxable Services and GST Payable by Mr. Nawab for December, 2017

Sr.No. Particulars Amount (Rs.)

1 Performing classical dance [Exempted vide Entry No. 78 of NN. 12/2017 CT (R)] Exempt

2 Performing in television serial [Taxable] 2,80,000

3 Services as Brand ambassador [Taxable, as it is excluded from Entry No. 78 of NN. 12/2017 CT (R)] 12,00,000

4 Coaching in recreational activities relating to arts [Exempted vide Entry No. 80 of NN. 12/2017 CT (R)] Exempt

5 Activities in sculpture making [Taxable, as it is a receipt from performing activities in sculpture making, not from training or coaching in sculpture making] 3,10,000

6 Performing Western dance [Taxable] 90,000


CGST @ 9% 1,69,200

SGST @ 9% 1,69,200

Illustration 9 :

Mangal Pvt. Ltd. manufactures mobile with the brand name ‘Mangal’s’. Mangal Pvt. Ltd. has organized a concert to promote its brand. Ms. Juli, its brand ambassador, who is a leading film actress, has given a classical dance performance in the said concert. The proceeds of the concert worth Rs. 1,20,000 will be donated to a charitable organization. Whether Ms. Juli will be required to pay any GST?

Answer :

Services by an artist by way of a performance in folk or classical art forms of

(a) music, or

(b) dance, or

(c) theatre

are exempt from GST, if the consideration charged for such performance is not more than Rs. 1,50,000. However, such exemption is not available in respect of service provided by such artist as a brand ambassador as per entry no. 78 of NN 12/2017 CT (R).

274 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Since Ms. Juli is the brand ambassador of ‘Mangal’s’ mobile manufactured by Mangal Pvt. Ltd., the services rendered by her by way of a classical dance performance in the concert organized by Mangal Pvt. Ltd. to promote its brand will not be eligible for the above mentioned exemption and thus, be liable to GST. The fact that the proceeds of the concert will be donated to a charitable organization will not have any bearing on the eligibility or otherwise to the above mentioned exemption.

Illustration 10 :

Compute the taxable value of supply of service of Basanti Ltd. For the month of July 2018 from the following information.

S.No. Particulars Amount (Rs.)

(1) Entry fees received for cultural programme organised in open Theatre assuming each tickets are Rs. 500 1,00,000

(2) Receipts on account of stand alone ride in a mall 3,00,000

(3) Receipts of video parlours exhibiting movies 2,00,000

(4) Auxiliary services provided in capacity of an event manager for organising an event 12,00,000

(5) Receipts from running Circus assuming each tickets are Rs. 400 16,00,000

(6) Receipts on account of admission to award function where the consideration for admission is Rs. 600 per person 12,00,000

(7) Receipts on account of admission to musical performance where the consideration for admission is Rs. 1,000 per person 10,00,000

(8) Receipts on account of admission to recognised sporting event where the consideration for admission is Rs. 1,000 per person 6,00,000

(9) Receipts on account of admission to non recognised sporting event where the consideration for admission is Rs. 1,000 per person 35,00,000

(10) Receipts of amusement park 10,00,000

Answer :

Computation of value of taxable supply

S. No. Particulars Amount (Rs.)

(1) Entry fees received for cultural programme organised in open theatre (Note-1) Exempt

(2) Receipts on account of stand alone ride in a mall 3,00,000

(3) Receipts of video parlours exhibiting movies 2,00,000

(4) Auxiliary services provided in capacity of an event manager for organising an event 12,00,000

(5) Receipts from running Circus (Note-1) Exempt

(6) Receipts on account of admission to award function where the consideration for admission is Rs. 600 per Person 12,00,000

(7) Receipts on account of admission to musical performance where the consideration for admission is Rs. 1,000 per person 10,00,000

(8) Receipts on account of admission to recognised sporting event where the consideration for admission is Rs. 1,000 per Person 6,00,000

(9) Receipts on account of admission to non recognised sporting event where the consideration for admission is Rs. 1,000 per Person 35,00,000


(10) Receipts of amusement park 10,00,000

(11) Taxable Value of supply 90,00,000

Notes :

(1) Services by way of right to admission to-

(a) circus, dance, or theatrical performance including drama or ballet;

(b) award function, concert, pageant, musical performance or any sporting event other than a recognised sporting event;

(c) recognised sporting event,

(d) Planetarium

where the consideration for right to admission to the events or places as referred to in (a), (b), (c) or (d) above is not more than Rs. 500 as per entry no. 81 of NN 12/2017 CT (R).

5. Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India. [Entry No. 54 of NN. 09/2017 IT (R)]

Note : As per clause (zzl) under this notification, ‘Tour operator’ means any person engaged in the business of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours.

6. Services provided to a recognised sports body by -

(a) an individual as a player, referee, umpire, coach or team manager for participation in a sporting event organised by a recognized sports body;

(b) another recognised sports body.

[Entry No. 68 of NN. 12/2017 CT (R)]

Note : As per clause (zw) under this notification, ‘Recognised sports body’ means –

(i) Indian Olympic Association;

(ii) Sports Authority of India;

(iii) A national sports federation recognised by the Ministry of Sports and Youth Affairs of the Central Government, and its affiliate federations;

(iv) National sports promotion organisations recognised by the Ministry of Sports and Youth Affairs of the Central Government;

(v) The International Olympic Association or a federation recognised by the International Olympic Association; or

(vi) A federation or a body which regulates a sport at international level and its affiliated federations or bodies regulating a sport in India.

Analysis :

(i) Services provided by individuals such as selectors, commentators, curators, technical experts, cheerleaders, etc. are not exempted, hence, taxable.

(ii) The service of a player to a franchisee which is not a recognized sports body is not exempted, hence, taxable.

Illustration 11 :

276 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Mr. Agrawal acts as a referee in a Tennis match organized by Sports Authority of India. He has also acted as a referee in another charity tennis match organized by a local sports club. Discuss whether he is required to pay any GST?

Answer :

Services provided to a recognized sports body by an individual as a referee in a sporting event organized by a recognized sports body is exempt from GST as per entry no. 68(a) of NN 12/2017 CT (R).

Since in the first case, the Tennis match is organized by Sports Authority of India, which is a recognized sports body, services provided by the individual as a referee in such tennis match will be exempt.

However, when he acts as a referee in a charity tennis match organized by a local sports club, he would not be entitled to aforementioned exemption as a local sports club is not a recognized sports body and thus, GST will be payable in this case.

Illustration 12 :

Mr. AB a famous cricketer furnishes you with the following information of the various receipts for the month ended 30-11-2018. You are required to determine his GST liability, if all the amounts are exclusive of GST. Rate of GST -18%


(1) Receipts of sports training academy registered u/s 12AA of Income Tax Act, 1961 to coach young players 20 lakh

(2) Receipts from acting as brand ambassador for corporate Client 35 lakh

(3) Receipts from franchisee of Indian Premier league (not a recognised sports body) 135 lakh

(4) Receipts from Sports Authority of India for participation in recognised sport 100 lakh Answer :

Computation of Value of taxable supply and GST liability


(1) Receipts of sports training academy registered u/s 12AA of Income Tax Act, 1961 to coach young players [Exempt from GST as per Entry No. 80 of NN. 12/2017-CT (R)] Exempt

(2) Receipts from acting as brand ambassador for corporate client [Liable for GST] 35 lakh

(3) Receipts from franchisee of Indian Premier league (not a recognised sports body) [Liable for GST] 135 lakh

(4) Receipts from Sports Authority of India for participation in recognised sport[Exempt from GST as per Entry No. 68 of NN. 12/2017-CT (R)] Exempt

Total Value of Taxable Services 170 Lakh

GST @18% 30.6 Lakh

7. Services by way of sponsorship of sporting events organised -

(a) by a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, State, zone or Country;

(b) by Association of Indian Universities, Inter-University Sports Board, School Games Federation of


India, All India Sports Council for the Deaf, Paralympic Committee of India or Special Olympics Bharat;

(c) by the Central Civil Services Cultural and Sports Board;

(d) as part of national games, by the Indian Olympic Association; or

(e) under the Panchayat Yuva Kreeda Aur Khel Abhiyaan Scheme.

[Entry No. 53 of NN. 12/2017 CT (R)]

8. Services provided by and to Fédération Internationale de Football Association (FIFA) and its subsidiaries directly or indirectly related to any of the events under FIFA U-17 Women's World Cup 2020 to be hosted in India. But, this exemption shall be allowed only if Director (Sports), Ministry of Youth Affairs and Sports certifies that the services are directly or indirectly related to any of the events under FIFA U-17 Women's World Cup 2020. [Entry No. 9AA of NN 12/2017 CT (R), inserted by NN 21/2019 – CT (R), w.e.f. 01.10.2019]

9. Services by way of right to admission to the events organised under FIFA U-17 Women's World Cup 2020. [Entry No. 82A of NN 12/2017 CT (R), inserted by NN 21/2019 – CT (R), w.e.f. 01.10.2019] Analysis: This service is exempt without any monetary limit.

10. Services provided by and to Federation Internationale de Football Association (FIFA) and its subsidiaries directly or indirectly related to any of the events under FIFA U-17 World Cup 2017 to be hosted in India.

But, this exemption shall be allowed only if Director (Sports), Ministry of Youth Affairs and Sports certifies that the services are directly or indirectly related to any of the events under FIFA U- 17 World Cup 2017.

[Entry No. 9A of NN. 12/2017 CT (R), inserted by NN 21/2017 CT (R), dated 22.08.2017]

11. Services by way of right to admission to the events organized under FIFA U-17 World Cup 2017.

[Entry No. 82 of NN. 12/2017 CT (R), inserted by NN 25/2017 CT (R), dated 21.09.2017]

Analysis : This service was exempt without any monetary limit.

Transportation Related Services

1. Service of transportation of passengers, with or without accompanied belongings, by -

(a) railways in a class other than -

(i) first class; or

(ii) an air-conditioned coach;

(b) metro, monorail or tramway;

(c) inland waterways;

(d) public transport, other than predominantly for tourism purpose, in a vessel between places located in India; and

(e) metered cabs or auto rickshaws (including e-rickshaws).

[Entry No. 17 of NN. 12/2017 CT (R)]

Notes :


(1) As per clause (za) under this notification, ‘E-rickshaw’ means a special purpose battery powered vehicle of power not exceeding 4000 watts, having three wheels for carrying goods or passengers, as the case may be, for hire or reward, manufactured, constructed or adapted, equipped and maintained in accordance with such specifications, as may be prescribed in this behalf.

(2) As per clause (zi) under this notification, ‘Inland waterway’ means national waterways as defined in clause (h) of section 2 of the Inland Waterways Authority of India Act, 1985 or other waterway on any inland water, as defined in clause (b) of section 2 of the Inland Vessels Act, 1917.

(3) As per clause (zo) under this notification, ‘Metered cab’ means any contract carriage on which an automatic device, of the type and make approved under the relevant rules by the State Transport Authority, is fitted which indicates reading of the fare chargeable at any moment and that is charged accordingly under the conditions of its permit issued under the Motor Vehicles Act, 1988 and the rules made thereunder (but does not include radio taxi).

Analysis:

(1) If any separate amount is charged for transportation of accompanied belongings also, then, applicability of provisions of GST on such charges will be the same which are applicable for the charges for the transportation of passenger who is carrying accompanied belongings. [i.e. if GST is exempt on transportation of passenger, then, GST would be exempt on transportation of accompanied belongings also and vice versa.]

(2) GST will not be leviable on transportation of passengers in Second or lower class or sleeper class or non AC coaches in trains as per the negative list.

(3) Service provided by leisure or charter vessels or a cruise ship, predominant purpose of which is tourism, would not be exempt from GST and hence, taxable.

(4) Transport of passengers by Air is not covered in the above entry of exemption list, hence, taxable.

2. Transport of passengers, with or without accompanied belongings, by –

(a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal;

(b) non-air conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or

(c) stage carriage other than air- conditioned stage carriage.

[Entry No. 15 of NN. 12/2017 CT (R)] Notes :

(1) As per clause (zzh) under this notification, ‘Stage carriage’ shall have the same meaning as assigned to it in clause (40) of section 2 of the Motor Vehicles Act, 1988.

(2) As per Sec. 2(40) of the Motor Vehicle Act, 1988, “Stage carriage” means a motor vehicle constructed or adapted to carry more than 6 passengers excluding the driver on hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stages of the journey.

(3) As per clause (t) under this notification, ‘Contract carriage’ has the same meaning as assigned to it in clause (7) of section 2 of the Motor Vehicles Act, 1988.

(4) As per clause (zu) under this notification, ‘Radio taxi’ means a taxi including a radio cab, by whatever name called, which is in two-way radio communication with a central control office and is enabled for tracking using the Global Positioning System or General Packet Radio Service;

Analysis :

(1) No GST is payable for the service rendered by a non A.C. bus with a contract carriage permit. However, transport of passengers in any contract carriage whether A.C. or non A.C. for the


transportation for tourism, conducted tour, charter or hire is taxable.

(2) However, transport of passengers by a radio taxi is not exempted, whether A.C. or non A.C., hence, taxable.

(3) Transport of passengers by A.C. contract carriage is also not exempted, hence, taxable.

(4) Transport of passengers in Non-A/C stage carriage is exempted under this entry.

(5) But, Transport of passengers by A.C. stage carriage is not exempted, hence, taxable.

(6) Transport of passengers by ropeway, cable car or aerial tramway is not exempted under any exemption entry, hence, it is taxable.

Illustration 13 :

Blue Bus Ltd. is engaged in providing service of transportation of passengers by following modes in the month of June 2018.


1) Service of transportation of passenger by non air conditioned Stage carriage 50,00,000

2) Service of transportation of passengers in air conditioned contract carriages 45,00,000

3) Service of transportation of passengers by vessels in National Waterways 15,00,000

4) Service of transportation of passengers in Radio Taxis 30,00,000

5) Service of transportation of passengers in Non air conditioned contract carriages 5,00,000

6) Service of transportation of passenger in Metered Cab 30,00,000

7) Service of transportation of passengers by contract carriage for Tourism 25,00,000

8) Service of transportation of passenger for Mumbai to Chennai port in a vessel and such service is not for tourism purpose 25,00,000

9) Service of transportation of passenger by Air conditioned Stage Carriage 5,00,000 Compute the value of taxable supply if all charges are exclusive of GST.

Answer :


Sr.No. Particulars Amount (Rs.)

1) Transportation of passenger by non air conditioned Stage carriage[Exempt from GST as per Entry No. 15 of NN. 12/2017-CT (R)] Nil

2) Service of transportation of passengers in air-conditioned contract carriages [Liable to GST] 45,00,000

3) Transportation of passengers by National Waterways[Since National Waterways are covered in definition of inland Waterways -

Exempt from GST as per Entry No. 17 of NN. 12/2017-CT (R)] Nil

4) Service of transportation of passengers in Radio Taxis [Liable to GST] 30,00,000

5) Service of transportation of passengers in non air-conditioned contract carriages[Exempt from GST as per Entry No. 15 of NN. 12/2017-CT (R)] Nil

6) Transportation of passenger in Metered Cab [ Exempt from GST as per Entry No. 17 of NN. 12/2017-CT (R)] Nil

7) Transportation of passengers by contract carriage for tourism [Liable to GST] 25,00,000


8) Transportation of passenger from Mumbai to Chennai port in a vessel [Being a public transport in a vessel sailing in India and not for tourism Exempt from GST as per Entry No. 17 of NN. 12/2017-CT (R)] Nil

9) Transportation of passenger by Air conditioned Stage Carriage [Liable to GST] 5,00,000

Value of Taxable Supply 1,05,00,000

3. Services provided to the Central Government, by way of transport of passengers with or without accompanied belongings, by air, embarking from or terminating at a Regional Connectivity Scheme airport, against consideration in the form of viability gap funding:

Provided that nothing contained in this entry shall apply on or after the expiry of a period of 1 year 3 years from the date of commencement of operations of the regional connectivity scheme airport as notified by the Ministry of Civil Aviation.

[Entry No. 16 of NN. 12/2017 CT (R)] [1 year is substituted by 3 years, by NN 02/2018 CT (R), dated 25.01.2018]

4. Services by way of transportation of goods-

(a) by road except the services of –

(i) a goods transportation agency (GTA);

(ii) a courier agency;

(b) by inland waterways. [Entry No. 18 of NN. 12/2017 CT (R)] Notes :

(1) As per clause (ze) under this notification, ‘Goods transport agency’ means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.

(2) As per clause (u) under this notification, ‘Courier agency’ means any person engaged in the door-to-door transportation of time-sensitive documents, goods or articles utilising the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles;

Analysis

(1) All the services provided by GTA issuing consignment note are excluded from the exemption list and hence, taxable.

(2) All the services provided by courier agency are excluded from the exemption list and hence, taxable. The nature of service provided by ‘Express Cargo Service’ falls within the scope and definition of the courier agency. Similarly, ‘Angadia’ who undertakes delivery of documents, goods or articles received from a customer to another person for a consideration is also covered within the scope and definition of the courier agency and hence, liable to GST.

(3) The services of transportation of goods by railways and by air within the country or abroad are not covered in the exemption list and hence, taxable.

(4) The services of transportation of goods by a vessel other than in inland waters or national waterways i.e. in the coastal waters of India, are not covered in the exemption list and hence, taxable.

(5) The services provided as agents for inland waterways are not covered by exemption list and hence, taxable.

5. Services by way of transportation of goods by an aircraft from a place outside India upto the customs station of clearance in India.

[Entry No. 19 of NN. 12/2017 CT (R)]


Analysis:

(1) Transportation of goods by an aircraft from a place outside India upto the customs station of clearance in India is exempt from GST and not only upto first customs station in India. For example, if any aircraft carrying goods from Singapore has arrived at Delhi Customs station, and unloaded certain goods, which are to be transshipped to Mumbai Customs station through another aircraft. Then, in such case, transportation upto Mumbai Customs station shall be exempt from GST, because, Mumbai customs station is the Customs station of clearance in India.

(2) Prior to 01.06.2016, this exemption was available to such transport by aircraft as well as vessel. But, now, this exemption is available only in case of transport by aircraft. W.e.f. 01.06.2016, such transport by vessels is made taxable.

6. Services by way of transportation of goods by an aircraft from customs station of clearance in India to a place outside India. Nothing contained in this entry shall apply after the 30.09.2018 30.09.2019 30.09.2020 [Exemption extended till 30.09.2020 by NN 21/2019 CT(R) w.e.f. 01.10.2019]. [Entry No. 19A of NN 12/2017 CT (R), inserted by NN 02/2018 – CT (R), dated 25.01.2018]

7. Services by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India.

Nothing contained in this entry shall apply after the 30.09.2018 30.09.2019 30.09.2020 [Exemption extended till 30.09.2020 by NN 21/2019 CT(R) w.e.f. 01.10.2019].

[Entry No. 19B of NN 12/2017 CT (R), inserted by NN 02/2018 – CT (R), dated 25.01.2018]

8. Services by way of transportation by rail or a vessel from one place in India to another of the following goods –

(a) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap;

(b) defence or military equipments; (c) newspaper or magazines registered with the Registrar of Newspapers; (d) railway equipments or materials; (e) agricultural produce; (f) milk, salt and food grain including flours, pulses and rice; and (g) organic manure.

[Entry No. 20 of NN. 12/2017 CT (R)]

9. Services provided by a goods transport agency, by way of transport in a goods carriage of –

(a) agricultural produce;

(b) goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage does not exceed Rs. 1,500;

(c) goods, where consideration charged for transportation of all such goods for a single consignee does not exceed Rs. 750;

(d) milk, salt and food grain including flour, pulses and rice;

(e) organic manure;

(f) newspaper or magazines registered with the Registrar of Newspapers;

(g) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or

(h) defence or military equipments.


[Entry No. 21 of NN. 12/2017 CT (R)]

Illustration 14 : (GTA Service)

Consignee Total Freight for All Consignments of a Consignee (irrespective of no. of Consignments/Consignors) (Rs.)

A 200

B 800

C 100

D 150

E 250

Total 1500*

*Since, the gross amount charged for all the consignments does not exceed Rs. 1,500/-, therefore, the service is fully exempt.


Consignee Total Freight for All Consignments

of a Consignee (irrespective of no. of Consignments/Consignors) (Rs.)

Taxability

A 700 Exempt [individual consignee upto Rs. 750]

B 450 Exempt [individual consignee upto Rs. 750]

C 500 Exempt [individual consignee upto Rs. 750]

D 750 Exempt [individual consignee upto Rs. 750]

E 1000 Taxable***

Total 3400**

** Since, the gross amount charged for all the consignments exceeds Rs. 1,500/-, therefore, the entire service is not exempt. However, exemption in respect of consignments for an individual consignee may be claimed if the freight for consignments for an individual consignee does not exceed Rs. 750/-.

***GST Payable (assuming option of GST @ 12% is opted by GTA)

CGST Payable : 1000 x 6% = 60/-

SGST Payable : 1000 x 6% = 60/-


Calculate the value of taxable service of ‘X’ Transport Company engaged in the business of transport of goods by road. Give reasons for taxability or exemption of each item. Freight is received from persons registered in GST. Suitable assumptions may be made wherever required. Rate of GST = 12%.

S. No. Particulars Amount (Rs.)

1 Total freight charges received by ‘X’ during the year 13,50,000

2 Freight charges received for transporting fruits 1,25,000

3 Freight collected for transporting small consignment for persons who paid less than Rs. 750/- for all consignments 75,000

4 Freight collected for transporting goods in small vehicles for persons who paid less than Rs. 1,500/- per trip per vehicle 1,50,000


Answer: Computation of Value of Taxable Service and GST thereon


Total freight received 13,50,000

Less : Freight charges received for transporting fruits [Exempted vide Entry No. 21 of NN. 12/2017 CT (R)] 1,25,000

Less : Freight collected less than Rs. 750 from each consignee (Exempt, since the freight charged to a single consignee does not exceed Rs. 750) [Exempted vide Entry No. 21 of NN. 12/2017 CT (R)] 75000.00

Less : Freight collected for transporting goods in small vehicles for persons who paid less than Rs. 1,500/- per trip per vehicle (Exempt, since the freight on all consignments transported into a goods carriage doesn’t exceed Rs. 1,500) [Exempted vide Entry No. 21 of NN. 12/2017 CT (R)]

1,50,000

Total Value of Taxable Service 10,00,000

CGST @ 6% 60000.00

SGST @ 6% 60000.00


Discuss whether GST is chargeable in respect of goods transport agency service in each of the following independent cases :

(i) Transportation of organic manures Rs. 50,000.

(ii) Transportation of goods by a single goods carriage Rs. 1,800.

(iii) Transportation of military equipments Rs. 25,000.

(iv) Transportation of polyester fibre Rs. 15,000

Necessary explanation is also to be given.

Answer :

Entry No. 21 of Mega exemption notification no. 12/2017 CT (R) exempts goods transport agency service in respect of certain goods.

Sr. No. Particulars Taxability

(i) Transportation of organic manures Rs. 50,000 [Entry 21(e)] Exempt

(ii) Transportation of goods by a single goods carriage Rs. 1,800[Entry 21 (b) : Freight exceeding Rs. 1,500 is taxable] Taxable

(iii) Transportation of military equipments Rs. 25,000 [Entry 21(h)] Exempt

(iv) Transportation of polyester fibre Rs. 15,000 Taxable

10. Services provided by a Goods Transport Agency (GTA), to an unregistered person, including an unregistered casual taxable person, other than the following recipients, namely :

(a) any factory registered under or governed by the Factories Act, 1948; or

(b) any society registered under the Societies Registration Act, 1860 or under any other law for the


time being in force in any part of India; or

(c) any co-operative society established by or under any law for the time being in force; or

(d) any body corporate established, by or under any law for the time being in force; or

(e) any partnership firm whether registered or not under any law including association of persons; and

(f) any casual taxable person registered under the CGST Act or the IGST Act or the SGST Act or the UTGST Act.

[Entry No. 21A of NN. 12/2017 CT (R), inserted by NN. 32/2017 CT (R), dated 13.10.2017]

Analysis :

(1) Any service provided by GTA to persons covered under aforesaid clauses (a) to (f) and to any registered person in GST, are chargeable to GST. Otherwise, it is exempt from GST.

(2) Further, if services are provided by GTA to persons covered under aforesaid clauses (a) to (f) and to any registered person in GST, then, it is chargeable to GST under Reverse charge mechanism (RCM), if GTA has opted to pay GST @ 5% (i.e. who has not paid GST at the rate of 12%).

(3) It means GST would be payable by GTA only if GTA has opted to pay GST at the rate of 12% and hasprovided services to persons covered under aforesaid clauses (a) to (f) and to any registered person in GST.

(4) Hence, if GTA has opted to pay GST @ 5% on all the services provided by it (if chargeable to GST), then, GTA would not be liable to get itself registered under GST at all. Because, if option to pay GST@ 5% is opted, then, either services are chargeable under RCM (if service is chargeable to GST) or it is exempt from GST.

11. Services provided by a goods transport agency, by way of transport of goods in a goods carriage, to, -

(a) a Department or Establishment of the Central Government or State Government or Union territory; or

(b) local authority; or

(c) Governmental agencies,

which has taken registration under the CGST Act, 2017 only for the purpose of deducting tax u/s 51 and not for making a taxable supply of goods or services. [Entry No. 21B of NN. 12/2017 CT (R), inserted by NN 28/2018 – CT (R), w.e.f. 01.01.2019]

12. Supply of services associated with transit cargo to Nepal & Bhutan (landlocked countries). [Entry No. 9B of NN. 12/2017 CT (R), inserted by NN 30/2017 CT (R), dated 29.09.2017]

13. Services by way of giving on hire – (a) to a state transport undertaking, a motor vehicle meant to carry more than 12 passengers; or

(aa) to a local authority, an Electrically operated vehicle meant to carry more than 12 passengers [Explanation.- For the purposes of this entry, “Electrically operated vehicle” means vehicle falling under Chapter 87 in the First Schedule to the Customs Tariff Act, 1975 which is run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicle.]; or

(b) to a goods transport agency, a means of transportation of goods; or

(c) motor vehicle for transport of students, faculty and staff, to a person providing services of transportation of students, faculty and staff to an educational institution providing services by way of pre-school education and education upto higher secondary school or equivalent.


[Entry No. 22 of NN. 12/2017 CT (R)] [item (c) inserted by NN 02/2018 - CT (R), dated 25.01.2018], [item (aa) inserted by NN 13/2019 – CT (R), w.e.f. 01.08.2019]

Analysis :

(i) For e.g., if a bus is given on hire to a state transport undertaking, then, GST is exempted on the hire charges.

(ii) Similarly, if a truck is given on hire to a GTA, then, GST is exempted on the hire charges.

14. Service by way of access to a road or a bridge on payment of toll charges. [Entry No. 23 of NN. 12/2017 CT (R)]

15. Service by way of access to a road or a bridge on payment of annuity. [Entry No. 23A of NN. 12/2017 CT (R), inserted by NN. 32/2017 CT (R), dated 13.10.2017]

Construction Related Services

1. Services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex.

[Entry No. 11 of NN. 12/2017 CT (R)]

Notes :

(1) As per clause (zza) under this notification, ‘Residential complex’ means any complex comprising of a building or buildings, having more than one single residential unit;

(2) As per clause (zzd) under this notification, ‘Single residential unit’ means a self-contained residential unit which is designed for use, wholly or principally, for residential purposes for one family.

(3) As per clause (zr) under this notification, ‘Original works’ means -

all new constructions;

all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;

erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise.

2. Services provided by way of pure labour contracts of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works pertaining to the beneficiary led individual house construction or enhancement under the Housing for All (Urban) Mission or Pradhan Mantri Awas Yojana. [Entry No. 10 of NN. 12/2017 CT (R)]

3. Service by way of transfer of development rights (herein refer TDR) or Floor Space Index (FSI) (including additional FSI) on or after 1st April, 2019 for construction of residential apartments by a promoter in a project, intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

The amount of GST exemption available for construction of residential apartments in the project under this notification shall be calculated as under:

[GST payable on TDR or FSI (including additional FSI) or both for construction of the project] x (carpet area of the residential apartments in the project) ÷ (Total carpet area of the residential and commercial


apartments in the project ).

Conditions:

(i) Provided that the promoter shall be liable to pay tax at the applicable rate, on reverse charge basis, on such proportion of value of development rights, or FSI (including additional FSI), or both, as is attributable to the residential apartments, which remain un-booked on the date of issuance of completion certificate, or first occupation of the project, as the case may be, in the following manner –

[GST payable on TDR or FSI (including additional FSI) or both for construction of the residential apartments in the project but for the exemption contained herein] x (carpet area of the residential apartments in the project which remain un- booked on the date of issuance of completion certificate or first occupation) ÷ (Total carpet area of the residential apartments in the project)

(ii) The tax payable in terms of the first proviso hereinabove shall not exceed 1% [0.5% CGST + 0.5% SGST] of the value in case of affordable residential apartments and 5% [2.5% CGST + 2.5% SGST] of the value in case of residential apartments other than affordable residential apartments remaining un- booked on the date of issuance of completion certificate or first occupation.

(iii) The liability to pay central tax on the said portion of the development rights or FSI, or both, calculated as above, shall arise on the date of completion or first occupation of the project, as the case may be, whichever is earlier.

[Entry No. 41A of NN. 12/2017 CT (R), inserted by NN 04/2019 – CT (R), w.e.f. 01.04.2019]

4. Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more, on or after 01.04.2019, for construction of residential apartments by a promoter in a project, intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

The amount of GST exemption available for construction of residential apartments in the project under this notification shall be calculated as under:

[GST payable on upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable for long term lease of land for construction of the project] x (carpet area of the residential apartments in the project) ÷ (Total carpet area of the residential and commercial apartments in the project).

Conditions:

(i) The promoter shall be liable to pay tax at the applicable rate, on reverse charge basis, on such proportion of upfront amount (called as premium, salami, cost, price, development charges or by any other name) paid for long term lease of land, as is attributable to the residential apartments, which remain un- booked on the date of issuance of completion certificate, or first occupation of the project, as the case may be, in the following manner –

[GST payable on upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable for long term lease of land for construction of the residential apartments in the project but for the exemption contained herein] x (carpet area of the residential apartments in the project which remain un- booked on the date of issuance of completion certificate or first occupation) ÷ (Total carpet area of the residential apartments in the project)

(ii) The tax payable in terms of the first proviso shall not exceed 1% [0.5% CGST + 0.5% SGST] of the value in case of affordable residential apartments and 5% [2.5% CGST + 2.5% SGST] of the value in case of residential apartments other than affordable residential apartments remaining un- booked on the date of issuance of completion certificate or first occupation.

(iii) The liability to pay central tax on the said proportion of upfront amount (called as premium,


salami, cost, price, development charges or by any other name) paid for long term lease of land, calculated as above, shall arise on the date of issue of completion certificate or first occupation of the project, as the case may be.

[Entry No. 41B of NN. 12/2017 CT (R), inserted by NN 04/2019 – CT (R), w.e.f. 01.04.2019]

Notes [Common for Entry 41A and 41B] [inserted by NN 04/2019 – CT (R), w.e.f. 01.04.2019]:

(a) Value of supply of service by way of transfer of development rights or FSI by a person to the promoter against consideration in the form of residential or commercial apartments shall be deemed to be equal to the value of similar apartments charged by the promoter from the independent buyers nearest to the date on which such development rights or FSI is transferred to the promoter.

(b) Value of portion of residential or commercial apartments remaining un-booked on the date of issuance of completion certificate or first occupation, as the case may be, shall be deemed to be equal to the value of similar apartments charged by the promoter nearest to the date of issuance of completion certificate or first occupation, as the case may be.

(c) The term “apartment” shall have the same meaning as assigned to it in clause (e) under section 2 of the Real Estate (Regulation and Development) Act, 2016.

(d) The term “affordable residential apartment” shall have the same meaning as assigned to it in the notification No. 11/2017-Central Tax (Rate), dated 28th June, as amended.

(e) The term “promoter” shall have the same meaning as assigned to it in clause (zk) under section 2 of the Real Estate (Regulation and Development) Act, 2016.

(f) The term “project” shall mean a Real Estate Project or a Residential Real Estate Project.

(g) the term “Real Estate Project (REP)” shall have the same meaning as assigned to it in clause (zn) under section 2 of the Real Estate (Regulation and Development) Act, 2016.

(h) The term “Residential Real Estate Project (RREP)” shall mean a REP in which the carpet area of the commercial apartments is not more than 15% of the total carpet area of all the apartments in the REP;

(i) The term “carpet area” shall have the same meaning as assigned to it clause (k) under section 2 of the Real Estate (Regulation and Development) Act, 2016.

(j) “an apartment booked on or before the date of issuance of completion certificate or first occupation of the project” shall mean an apartment which meets all the following three conditions, namely-

(i) part of supply of construction of the apartment service has time of supply on or before the said date; and

(ii) consideration equal to at least one installment has been credited to the bank account of the registered person on or before the said date; and

(iii) an allotment letter or sale agreement or any other similar document evidencing booking of the apartment has been issued on or before the said date.

(k) “floor space index (FSI)” shall mean the ratio of a building’s total floor area (gross floor area) to the size of the piece of land upon which it is built.

Renting of Immovable Property Related Services

1. Services by way of renting of residential dwelling for use as residence. [Entry No. 12 of NN. 12/2017 CT (R)] Analysis :

(1) A residential house/flat taken on rent which is used only for residential purpose is covered in this entry and hence, exempt.


(2) A residential house taken on rent which is used predominantly for commercial or non-residential use would not be covered in this entry and hence, would be taxable.

(3) Renting of a residential dwelling which is used partly for residence and partly for non-residential purpose like an office of a lawyer or a clinic of a doctor would be a case of bundled services as renting service is being provided both for residential use and for non-residential use. Taxability of such bundled services has to be determined in terms of the principles laid down in Sec. 8 of the Act. And, since, this is not naturally bundled service, therefore, it is a case of mixed supply and hence, entire rent would be chargeable to GST.

(4) If a house is given on rent and the same is used as a hotel or a lodge, such renting transaction is not covered in this exemption entry because the person taking it on rent is using it for commercial purpose. Renting of rooms in a hotel or a lodge let out whether or not for temporary stay would not be covered in this exemption entry because a hotel or a lodge is not a residential dwelling, hence, it is chargeable to GST.

(5) Govt. department allotting houses to its employees for residential purpose and charging a license fee for such service would also be covered under this exemption entry and hence, not taxable.

(6) Furnished flats (service apartments) given on rent for temporary stay are in the nature of lodges or guest houses and hence, not treatable as a residential dwelling, therefore, it will be taxable.

(7) The phrase ‘residential dwelling’ has not been defined in the GST Acts, 2017. It has therefore to be interpreted in terms of the normal trade parlance as per which it is any residential accommodation, but does not include hotel, motel, inn, guest house, campsite, lodge, house boat, or like places meant for temporary stay. However, vide entry No. 14 of NN. 12/2017 CT (R), services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below or equal to Rs. 1,000/- per day or equivalent have been exempted from GST (which is discussed in next entry).

2. Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff Value of supply of a unit of accommodation below or equal to Rs. 1,000 per day or equivalent. [“or equal to” words inserted by NN 21/2019 – CT (R), w.e.f. 01.10.2019] [Entry No. 14 of NN. 12/2017 CT (R)]

Note : As per clause (w) under this notification, ‘Declared tariff’ includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air-conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit.

Analysis :

(1) Analysis of amendment of “or equal to” words: If the value of supply is Rs. 1,000/-, then, it is exempt from GST w.e.f. 01.10.2019. Before amendment, it was taxable.

(2) If the Value of supply is more than Rs. 1,000 per day, then GST shall be charged on the value of supply.

(3) If these services are provided even by a non-commercial entity (i.e. Dharmshala, Ashram, etc.), then also GST is applicable, if value of supply is more than Rs. 1,000.

(4) Analysis of amendment: The concept of ‘Declared Tariff’ is deleted by NN 14/2018 – CT (R), w.e.f. 26.07.2018. Now, actual value of supply (after considering other charges, discounts, etc.) is relevant to determine taxability.

(5) Is hostel accommodation provided by Trusts to students covered within the definition of Charitable Activities and thus, exempt under Sl. No. 1 of notification No. 12/2017-CT (Rate).

Ans. Hostel accommodation services do not fall within the ambit of charitable activities as defined in pa 2(r) of notification No. 11/2017-CT (Rate) However, services by a hotel, inn, guest house, club or c by whatever name called, for residential or lodging purposes, having value of supply of a unit of accommodation upto one thousand rupees per day or equivalent are exempt. Thus,


accommodation service in hostels including by Trusts having value of supply upto one thousand rupees per day is exempt. [Circular No. 32/2018 – GST, dated 12.02.2018]

3. Services by a person by way of -

(a) conduct of any religious ceremony;

(b) renting of precincts of a religious place meant for general public, owned or managed by an entity registered as a charitable or religious trust under section 12AA of the Income-tax Act, 1961 or a trust or an institution registered under section 10(23C)(v) of the Income-tax Act or a body or an authority covered under section 10(23BBA) of the said Income-tax Act.

Provided that nothing contained in entry (b) of this exemption shall apply to -

(i) renting of rooms where charges are Rs. 1,000 or more per day;

(ii) renting of premises, community halls, kalyan mandapam or open area, and the like where charges are Rs. 10,000 or more per day;

(iii) renting of shops or other spaces for business or commerce where charges are Rs. 10,000 or more per month.

[Entry No. 13 of NN. 12/2017 CT (R)]

Notes :

(1) As per clause (zx) under this notification, ‘Religious place’ means a place which is primarily meant for conduct of prayers or worship pertaining to a religion, meditation, or spirituality;

(2) As per clause (zc) under this notification, ‘General public’ means the body of people at large sufficiently defined by some common quality of public or impersonal nature;

Analysis:

(1) The exemption of renting of precincts of a religious place is available only if the place is meant for general public and is owned and managed by trusts, etc. covered under income tax act, as aforesaid.

(2) Religious ceremonies are life cycle rituals including special religious poojas conducted in terms of religious texts by a person so authorized by such religious texts. Occasions like birth, marriage and death involve elaborate religious ceremonies.

(3) The CBIC has clarified that the word ‘precincts’ should be considered as all immovable property of the religious place located within the outer boundary wall of the complex (of buildings and facilities) in which the religious place is located, as being located in the precincts of the religious place. The immovable property located in the immediate vicinity and surrounding of the religious place and owned by the religious place or under the same management as the religious place, may be considered as being located in the precincts of the religious place and the benefit of exemption under Entry No.13 of NN. 12/2017 CT (R) should be extended. [Circular no. 200/10/2016-S.T., dated 06.09.16]

Illustration 18 :

Mr. Mangal, a priest, charged Rs. 51,000 for services provided to Mr. Rohit D’Souza for conducting his marriage ceremony at Church. Whether such services are liable to GST?

Answer :

Under Entry No. 13 of Exemption Notification No. 12/2017 CT (R), services by a person by way of conduct of any religious ceremony is exempt from GST. In the given case, Mr. Mangal provided services to Mr. Rohit D’ Souza to conduct religious ceremony and hence, it is exempted from GST.

Illustration 19 :

Mangal International Public School, rented its premises (ground) for marriage rituals and charged Rs.


1,50,000 for the same. Comment, whether the services provided are liable to GST or not.

Answer :

Yes; Since, premises (ground) of Mangal International School are not precincts of religious place, therefore, these services are not covered under entry No. 13 of Exemption Notification No. 12/2017 CT (R). Hence, such services are liable to GST.

Illustration 20 :

Mangal Classes took a hall on rent for its last day revision batch in the precincts of a temple. for Rs. 9,000 per day Comment whether the said services are liable to GST.

Answer :

Under Entry No. 13 of Exemption Notification No. 12/2017 CT (R), it is not specified that renting of precincts of a religious place should be for any particular purpose. Hence, the services received by Mangal Classes are exempt from GST as the rent per day is below Rs. 10,000 per day.

Illustration 21 :

Renting of precincts of a religious place - Tirumala Tirupati Devasthanams, an entity registered as religious trust u/ s 12AA of the Income-tax Act, 1961, has furnished you the following details with respect to the activities undertaken by it. You are required to compute its value of taxable supply from the information given below.


Renting of room where charges are Rs. 750 per day 7,50,000

Renting of room where charges are Rs. 1,200 per day 12,00,000

Renting of community halls where charges are Rs. 12,500 per day 25,00,000

Renting of Kalyan mandapam where charges are Rs. 8,500 per day 8,50,000

Renting of shops for business where charges are Rs. 15,000 per month 9,45,000


Answer :

Computation of GST


Renting of room where charges are Rs. 750 per day Nil

Renting of room where charges are Rs. 1,200 per day 12,00,000

Renting of community halls where charges are Rs. 12,500 per day 25,00,000

Renting of Kalyan mandapam where charges are Rs. 8,500 per day Nil


Renting of shops for business where charges are Rs. 7,000 per month Nil

Value of Taxable supply 46,45,000 Note : As per Entry No. 13(b) of NN.12/2017 CT (R) Services by a person by way of renting of precincts of a religious place meant for general public, owned or managed by an entity registered as a charitable or religious trust under section 12AA of the Income-tax Act, 1961 are exempt. Provided that nothing contained in entry (b) of this exemption shall apply to,-


i. renting of rooms where charges are Rs. 1,000 or more per day;

ii. renting of premises, community halls, kalyan mandapam or open area, and the like where charges are Rs.10,000 or more per day;

iii. renting of shops or other spaces for business or commerce where charges are Rs. 10,000 or more per month.

4. Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting long term lease of 30 years, or more of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 50% or more ownership of Central Government, State Government, Union territory directly or through an entity which is wholly owned by the Central government, State Government or Union territory to the industrial units or the developers in any industrial or financial business area. [as amended by NN 23/ 2018 CT(R) w.e.f. 20.09.2018] [Entry No. 41 of NN. 12/2017 CT (R), as amended by NN. 32/2017 CT (R), w.e.f. 13.10.2017] Analysis: This exemption is admissible irrespective of whether such upfront amount is payable or paid in one or more instalments, provided the amount is determined upfront. [Circular No. 101/20/2019 – GST, dated 30.04.2019]

5. Renting of vacant land with or without a structure incidental to its use for the purpose of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce. [Entry no. 54(d) of NN. 12/2017 CT (R)]


7. Services by way of renting or leasing of agro machinery or vacant land with or without a structure incidental to its use; [Entry No. 54(e) of NN 12/2017 CT(R)]

8. Services by way of loading, unloading, packing, storage or warehousing of rice. [Entry No. 24 of NN. 12/2017 CT (R)]

Analysis:

(1) Commission agent of rice is taxable.

9. Services by way of warehousing of minor forest produce. [Entry No. 24A of NN 12/2017 C.T. (R.), inserted by NN 14/2018 – CT (R), w.e.f. 26.07.2018]

Examples of minor forest produce: Trees and leaves, flowers and fruits, and all other parts or produce of trees, etc. brought from the forest.

10. Services by way of storage or warehousing of cereals, pulses, fruits, nuts and vegetables, spices, copra, sugarcane, jaggery, raw vegetable fibres such as cotton, flax, jute etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, coffee and tea. [Entry No. 24B of NN 12/2017 CT (R), inserted by NN 21/2019 – CT (R), w.e.f. 01.10.2019]

Illustration 22 :

292 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal M/s. Maheshwari Properties registered under GST as taxable person is engaged in the business of renting various immovable properties owned by it. During the month ending 31-08-2018, it collected a rent of Rs. 9,00,000. The said sum includes rent from-

S.N. Particulars Amount (Rs.)

(1) Vacant land used for agriculture 1,00,000

(2) Land used for Circus 50,000

(3) Houses let out to individuals for residential purposes 1,00,000

(4) Building let out to Hotel Vrindavan 1,20,000

(5) Vacant land given on lease to ABC Pvt. Ltd. for construction of building at a later stage to be used for furtherance of business or commerce 1,80,000

(6) Premises let out to a religious trust 90,000

(7) Premises let out to a Agrawal coaching classes 1,40,000

(8) Building let out to a theatre 1,20,000

Compute the amount of GST payable by the firm, assuming that the rent is exclusive of GST. Rate of GST -18%. Make suitable assumptions.

Answer :

Computation of GST payable

Sl. No. Particulars Amount (Rs.)

1 Total Rent 9,00,000

2 Rent from vacant land used for agriculture [Exempt as per Entry No. 54of Exemption NN. 12/2017-CT (R) (1,00,000)

3 Rent from land used for Circus [Liable to GST] Taxable

4 Houses let out to individuals for residential purposes[Exempt as per Entry No. 12 of Exemption NN. 12/2017-CT (R)] (1,00,000)

5 Building let out to hotel Vrindavan [Liable to GST] Taxable

6 Vacant land given on lease to ABC Pvt. Ltd. for construction of building ata later stage to be used for furtherance of business or commerce [Liable to GST] Taxable

7 Premises let out to a religious trust [Liable to GST] Taxable

8 Premises let out to a Agrawal coaching classes [Liable to GST] Taxable

9 Building let out to a theatre [Liable to GST] Taxable

Total Taxable Value of Supply 7,00,000

GST payable @ 18% 1,26,000

Illustration 23 :

Determine the value of supply and the GST liability, to be collected and paid by the owner, with the following particulars:

Particulars Rs.

Rent of the commercial building 18,00,000


Maintenance charges collected by local society from the owner and reimbursed by the tenant 2,50,000

Owner intends to charge GST on refundable advance, as GST is applicable on advance 6,00,000

Municipal taxes paid by the owner 3,00,000

Rent and maintenance charges are exclusive of GST.

GST rates applicable on renting of business premises is as follows:

CGST 9%

SGST 9%

Provide suitable explanations where required.

Solution :


Rent of the commercial buiding 18,00,000

Maintenance charges collected by the local society from the owner and reimbursed by the tenant [ Note-1] 2,50,000

Refundable advance [Note-2] Nil

Municipal taxes paid by the owner [Note-3] Nil

Value of supply 20,50,000

CGST @ 9% 1,84,500

SGST @ 9% 1,84,500

Notes:-

1. Being reimbursed by the tenant, such charges ultimately form part of the rent paid by the tenant to the owner and thus, will form part of the value.

2. Being refundable, the advance is in the nature of security deposit which does not constitute consideration in terms of section 2(31) of the CGST Act, 2017 and thus, is not includible in the value.

3. Being an expenditure incurred by the supplier, the same is not includible in the value, assuming that such taxes are not charged to the recipient.

Government Related Services

1. Services by Government : Services by the Central Government, State Government, Union territory or local authority excluding the following services –

(a) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory;

(b) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;

(c) transport of goods or passengers; or

(d) any service, other than services covered under entries (a) to (c) above, provided to business entities.

[Entry No. 6 of NN. 12/2017 CT (R)]

Analysis :

(1) Any service provided by the Government or local authority will not be chargeable to GST except


aforesaid 4 categories of services [covered under (a) to (d) above] i.e. in case of these 4 categories of services, GST will be leviable.

(2) The basic idea behind taxing certain activities of the Government or local authorities is to provide equal competition to private entities in these areas and to avoid break in Input Tax Credit chain as the taxable services provided by the Government are normally in the nature of intermediary services.

(3) As per clause (a) of this entry, only services by way of speed post, express parcel post, life insurance, and the agency services (i.e. intermediary services on commission basis, e.g. distribution of bonds, passport applications, collection of telephone and electricity bills, etc.) provided by the Department of Posts to non-government entities are taxable.

(4) However, the following services provided by the Department of Posts, other than specified above, are not liable to GST (as these are not excluded from exemption list) :

Basic mail services known as postal services such as post card, inland letter, book post, registered post provided exclusively by the Department of Posts to meet the universal postal obligations.

Transfer of money through money orders, operation of savings accounts, issue of postal orders, pension payments and other such services.

(5) As per clause (d) of this entry, any service, (other than services covered under clauses (a) to (c) above), provided to business entities by govt. or local authority are taxable as these are excluded from the exemption list. But, in this case, if the service recipient is other than business entity, then, GST shall not be payable as it is not excluded from the exemption list.

(6) As per clause (n) under this notification, ‘Business entity’ means any person carrying out business.

(7) Further, various other services of government and local authority are also exempted from GST by adding various other entries in this Exemption List, which is discussed in following paras of this chapter.

(8) Furthermore, some services provided to Government, etc. are also exempt from GST by adding various other entries in this Exemption List, which is also discussed in following paras of this chapter.

(9) As per the settled position of law, the term ‘Government’ include various departments of the Government (e.g. Income tax department, Police Department, etc.), but, various government companies registered under the Companies Act, 2013, corporations formed under Central Acts or State Acts or autonomous institutions set up by a special Act are not included in the term ‘Government’. Therefore, services provided by/to such entities are not entitled for exemptions given in various exemption entries relating to the ‘Government’. It would also not include regulatory bodies.

(10) For the services provided by the Government to business entities [covered under clause (d) above, except Renting of Immovable Property to unregistered person], the government departments will not have to get themselves registered under GST for paying GST, because, in these services GST will be payable by the service recipient (i.e. the business entities receiving the service) under reverse charge mechanism. However, for the services covered under clauses (a), (b) & (c) above provided by the Government, etc. to any person and Renting of Immovable Property provided by the Government, etc. to business entities not registered in GST, the GST will be payable by the concerned department itself (i.e. by the service provider, as here reverse charge mechanism does not apply).

(11) As per Section 2(114) of the CGST Act, Union territory: means the territory of -

(a) the Andaman and Nicobar Islands;

(b) Lakshadweep;

(c) Dadra and Nagar Haveli;

(d) Daman and Diu;


(e) Chandigarh; and

(f) Other territory.

Explanation : For the purposes of this Act, each of the territories specified in sub-clauses (a) to (f) shall be considered to be a separate Union territory.

(12) As per Section 2(69) of the CGST Act, “local authority” means -

(a) a “Panchayat” as defined in clause (d) of article 243 of the Constitution;

(b) a “Municipality” as defined in clause (e) of article 243P of the Constitution;

(c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund;

(d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006;

(e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution;

(f) a Development Board constituted under article 371 of the Constitution; or

(g) a Regional Council constituted under article 371A of the Constitution;

Illustration 24 :

Indian Post Office department provides you the following information for the month of February, 2017 :

1. Amount received towards speed post services to general public = Rs. 80,00,000

2. Amount received towards ordinary post services = Rs. 50,00,000

3. Amount received towards post office life insurance services = Rs. 20,00,000

4. Amount received towards speed post services provided to BSNL for mailing telephone bills to various corporate clients = Rs. 10,00,000 [not included in (1) above]

5. Amount received towards speed post services provided to CBEC department for mailing various notices to various assesses = Rs. 2,50,000 [not included in (1) above]

6. Commission received from Reliance communication towards accepting payments of various mobile bills of their clients in rural area = Rs. 5,00,000

7. Commission received from state government for performing various agency services = Rs. 15,00,000

Compute the amount of Goods and Services Tax liability on above assuming all figures are without taxes.

Answer :

Computation of Amount of Goods and Services Tax Liability


1 Amount received towards speed post services to general public - [Taxable] 80,00,000

2 Amount received towards ordinary post services - [Exempt] Nil

3 Amount received towards post office life insurance services - [Taxable] 20,00,000

4 Amount received towards speed post services provided to BSNL for mailing telephone bills to various corporate clients [not included in (1) above] - [Taxable, because, BSNL is not Government. It is Government Company] 10,00,000

5 Amount received towards speed post services provided to CBEC Exempt


department for mailing various notices to various assesses [not included in (1) above] -[Exempt, because, services provided by Post Office department to Government, is covered in exemption list and hence, exempt]

6 Commission received from Reliance communication towards accepting payments of various mobile bills of their clients in rural area - [Taxable, agency services by Post office is taxable] 5,00,000

7 Commission received from state government for performing various agency services - [Exempt, because, services by post office to government is covered in exemption list and hence, exempt] Exempt

Total Value of Taxable Services 1,15,00,000

CGST Liability (@ 9%) 10,35,000

SGST Liability (@ 9%) 10,35,000

Illustration 25 :

Mumbai Post Office provided the following services to persons other than Government during the month ending 31-08-2018, all charges are exclusive of GST -

Sl.No. Services rendered Amount (Rs.)

1) Operation of saving accounts 2,00,000

2) Transfer of money through money orders 3,00,000

3) Basic mail services 2,50,000

4) Rural postal life insurance services 1,00,000

5) Distribution of mutual funds, bonds and passport applications 6,00,000

6) Pension payment services 4,00,000

7) Collection of telephone and electricity bills 1,50,000

8) Issuance of postal orders 80,000

9) Express parcel post services 5,20,000

10) Speed post services 1,00,000

Compute the value of taxable supply of the month ending 31-08-2018.

Answer :



1) Operation of saving accounts [Exempt as per Entry 6 of NN. 12/2017-CT(R)] Nil

2) Transfer of money through money orders [Exempt as per Entry 6of NN. 12/2017-CT(R)] Nil

3) Basic mail services [Exempt as per Entry 6of NN. 12/2017-CT(R)] Nil

4) Rural postal life insurance services (Liable to GST) 1,00,000

5) Distribution of mutual funds, bonds and passport applications (Liable to GST) 6,00,000

6) Pension payment services [Exempt since covered in Entry 6 of Exemption] Nil

7) Collection of telephone and electricity bills (Liable to GST) 1,50,000

8) Issuance of postal orders [Exempt as per Entry 6 of NN. 12/2017-CT(R)] Nil


9) Express parcel post services (Liable to GST) 5,20,000

10) Speed post services (Liable to GST) 1,00,000

Value of taxable supply 14,70,000

2. Services provided by the Central Government, State Government, Union territory or local authority to a business entity with an aggregate turnover of up to Rs. 20 lakhs (Rs. 10 lakhs, in case of a Special Category States) in the preceding Financial Year such amount in the preceding financial year as makes it eligible for exemption from registration under the CGST Act, 2017 [as amended by NN 21/2019 – CT (R), w.e.f. 01.10.2019]. Explanation : For the purposes of this entry, it is hereby clarified that the provisions of this entry shall not be applicable to following services : (i) Clauses (a), (b) and (c) of Entry 6 above. (ii) Services by way of renting of immovable property. [Entry No. 7 of NN. 12/2017 CT (R)] Analysis : (1) Since, all the services by government or local authority to a business entity are taxable (further,

these are chargeable under Reverse Charge Mechanism), therefore, by making this entry in exemption list, Government has excluded small business from the purview of GST.

(2) As per clause (zy) under this notification, ‘Renting in relation to immovable property’ means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property;

3. Services provided by Central Government, State Government, Union territory or a local authority where the consideration for such services does not exceed Rs. 5,000. However, nothing contained in this entry shall apply to services referred in Clause (a), (b) and (c) of Entry 6 above. Further, in case where continuous supply of service* is provided by the Central Government, State Government, Union territory or a local authority, the exemption shall apply only where the consideration charged for such service does not exceed Rs. 5,000 in a F.Y. [Entry No. 9 of NN. 12/2017 CT (R)] Analysis : *As per Sec. 2(33) of the CGST Act, 2017, “continuous supply of services” means a supply of services which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding three months with periodic payment obligations and includes supply of such services as the Government may, subject to such conditions, as it may, by notification, specify.

4. Services provided by the Central Government, State Government, Union territory or local authority to another Central Government, State Government, Union territory or local authority. However, nothing contained in this entry shall apply to services referred in clauses (a), (b) and (c) of Entry 6 above. [Entry No. 8 of NN. 12/2017 CT (R)]

5. Services provided by the Central Government, State Government, Union territory or local authority by way of issuance of passport, visa, driving licence, birth certificate or death certificate. [Entry No. 61 of NN. 12/2017 CT (R)]


6. Services provided by the Central Government, State Government, Union territory or local authority by way of - (a) registration required under any law for the time being in force; (b) testing, calibration, safety check or certification relating to protection or safety of workers,

consumers or public at large, including fire license, required under any law for the time being in force.

[Entry No. 47 of NN. 12/2017 CT (R)] GST applicability on Seed Certification Tags [Circular No. 100/19/2019-GST, dated 30.04.2019] Seed testing and certification is a multi-stage process, the charges for which are collected from the seed producers at different stages. Supply of seed tags to the seed producer is nothing but an element of the one integrated supply of seed testing and certification. All the charges, including those for issue of seed certificates/tags by the Seed Certification Agency of Tamil Nadu, Uttarakhand or any other state to the seed producing organization / companies are collected for the composite supply of seed testing and certification, which is exempt under NN 12/2017 - CT (R) - Entry No. 47. Author’s Note: This activity is also covered under NN 12/2017 – CT (R) - Entry No. 54(a) [Agriculture Related Exemption], which is also exempt from GST.

7. Services by way of licensing, registration and analysis or testing of food samples supplied by the Food Safety and Standards Authority of India (FSSAI) to Food Business Operators. [Entry no. 47A of NN 12/2017 CT(R), inserted by NN 14/2018 CT(R) w.e.f. 27.07.2018]

8.

Services by the Employees’ State Insurance Corporation [ESIC] to persons governed under the Employees’ State Insurance Act, 1948. [Entry No. 30 of NN. 12/2017 CT (R)]

9. Services provided by the Employees Provident Fund Organisation [PF] to the persons governed under the Employees Provident Funds and the Miscellaneous Provisions Act, 1952. [Entry No. 31 of NN. 12/2017 CT (R)]

10. Services by Coal Mines Provident Fund Organisation to persons governed by the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948). [Entry No. 31A of the NN 12/2017, inserted by NN 14/2018, w.e.f. 26.07.2018]

11. Services by National Pension System (NPS) Trust to its members against consideration in the form of administrative fee. [Entry No. 31A of the NN 12/2017, inserted by NN 14/2018, w.e.f. 26.07.2018]

12. Services provided by the Insurance Regulatory and Development Authority [IRDA] of India to insurers under the Insurance Regulatory and Development Authority of India Act, 1999. [Entry No. 32 of NN. 12/2017 CT (R)]

13. Services provided by the Securities and Exchange Board of India [SEBI] set up under the Securities and Exchange Board of India Act, 1992 by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market. [Entry No. 33 of NN. 12/2017 CT (R)]

14. Services provided by the National Centre for Cold Chain Development under the Ministry of Agriculture, Co-operation and Farmer’s Welfare by way of cold chain knowledge dissemination. [Entry No. 58 of NN. 12/2017 CT (R)]

15. Services by way of providing information under the Right to Information Act, 2005 (RTI). [Entry No. 65A of NN 12/2017 CT (R), inserted by NN 02/2018 CT (R), dated 25.01.2018]

16. Services by Central Government, State Government, Union territory, local authority or governmental


authority by way of any activity in relation to any function entrusted to a municipality under article 243W of the Constitution are exempt. [Omitted words, omitted by NN 14/2018- C.T. (Rate), w.e.f. 27.07.2018]

[Entry No. 4 of NN. 12/2017 CT (R)]

Note : As per clause (zf) under this notification, “Governmental Authority” means an authority or a board or any other body -

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution or to a Panchayat under article 243G of the Constitution.

Analysis of Amendment:

Services by Central Government, State Government, Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution are treated as neither supply of goods nor supply of services as per Section 7(2) of the CGST Act, 2017 as notified by NN 14/ 2017 – CT (R), as amended by NN 16/2018 – CT (R), w.e.f. 27.07.2018. Therefore, words “Central Government, State Government, Union territory or local authority” are omitted from this entry to avoid duplicacy.

17. Services by a Central Government, State Government, Union territory, local authorityor Governmental Authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution. [Omitted words, omitted by NN 14/2018- C.T. (Rate), w.e.f. 27.07.2018] [Entry No. 5 of NN. 12/2017 CT (R)] Analysis of Amendment: Services by Central Government, State Government, Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution are treated as neither supply of goods nor supply of services as per Section 7(2) of the CGST Act, 2017 as notified by NN 14/ 2017 – CT (R), as amended by NN 16/2018 – CT (R), w.e.f. 27.07.2018. Therefore, words “Central Government, State Government, Union territory or local authority” are omitted from this entry to avoid duplicacy.

18. Supply of service by a Government Entity to Central Government, State Government, Union territory, local authority or any person specified by Central Government, State Government, Union territory or local authority against consideration received from Central Government, State Government, Union territory or local authority, in the form of grants. [Entry No. 9C of NN. 12/2017 CT (R), inserted by NN. 32/2017 CT (R), dated 13.10.2017] Note : As per clause (zfa) under this notification, “Government Entity” means an authority or a board or any other body including a society, trust, corporation, (i) set up by an Act of Parliament or State Legislature; or (ii) established by any Government, with 90% or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority.” [Clause (zfa) inserted by NN. 32/2017 CT (R), dated 13.10.2017]

19. Services provided by the Central Government, State Government, Union territory by way of deputing officers after office hours or on holidays for inspection or container stuffing or such other duties in relation to import export cargo on payment of Merchant Overtime charges. [Entry No. 65 of NN. 12/2017 CT (R)]


20. Services provided by the Central Government, State Government, Union territory or local authority by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Central Government, State Government, Union territory or local authority under such contract. [Entry No. 62 of NN. 12/2017 CT (R)]

21. Services supplied by Central Government, State Government, Union territory to their undertakings or Public Sector Undertakings (PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs from the banking companies and financial institutions. [words “banking companies and” inserted by NN 28/2018 – CT (R), w.e.f. 01.01.2019] [Entry no. 34A of NN 12/2017 CT (R), inserted by NN 14/2018 CT (R), w.e.f. 26.07.2018].


23. Services by an old age home run by Central Government, State Government or by an entity registered under section 12AA of the Income-tax Act, 1961 to its residents (aged 60 years or more) against consideration upto Rs. 25,000/- per month per member, provided that the consideration charged is inclusive of charges for boarding, lodging and maintenance. [Entry No. 9D of NN 12/2017 CT (R), inserted by NN 14/2018 – CT (R), w.e.f. 26.07.2018]

24. Services provided by the Central Government, State Government, Union territory or local authority by way of assignment of right to use any natural resource where such right to use was assigned by the Central Government, State Government, Union territory or local authority before the 1st April, 2016. However, the exemption shall apply only to tax payable on one time charge payable, in full upfront or in installments, for assignment of right to use such natural resource. [Entry No. 64 of NN. 12/2017 CT (R)]

25. Services provided by the Central Government, State Government, Union territory or local authority by way of allowing a business entity to operate as a telecom service provider or use radio frequency spectrum during the period prior to 01.04.2016, on payment of licence fee or spectrum user charges, as the case may be. [Entry No. 42 of NN. 12/2017 CT (R)]

26. Services supplied by a State Government to Excess Royalty Collection Contractor (ERCC) by way of assigning the right to collect royalty on behalf of the State Government on the mineral dispatched by the mining lease holders. Provided that at the end of the contract period, ERCC shall submit an account to the State Government and certify that the amount of goods and services tax deposited by mining lease holders on royalty is more than the goods and services tax exempted on the service provided by State Government to the ERCC of assignment of right to collect royalty and where such amount of goods and services tax paid by mining lease holders is less than the amount of goods and services tax exempted, the exemption shall be restricted to such amount as is equal to the amount of goods and services tax paid by the mining lease holders and the ERCC shall pay the difference between goods and services tax exempted on the service provided by State Government to the ERCC of assignment of right to collect royalty and goods and services tax paid by the mining lease holders on royalty. Explanation.- “mining lease holder” means a person who has been granted mining lease, quarry lease or license or other mineral concession under the Mines and Minerals (Development and Regulation) Act, 1957 (67 of 1957), the rules made thereunder or the rules made by a State Government under sub-section (1) of section 15 of the Mines and Minerals (Development and Regulation) Act, 1957. [Entry no. 65B of NN 12/2017 CT(R), inserted by NN 14/2018 CT(R) w.e.f. 27.07.2018] Note :-


1. As per Rajasthan Minor Mineral Concession Rules -2017, “Excess Royalty Collection Contract” means a contract to collect royalty in excess of annual dead rent and any other charges as may be specified in the contract, on behalf of the Government for specified mineral dispatched by the mining lessee, from the area specified in the contract;

27. Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting long term lease of 30 years, or more of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 50% or more ownership of Central Government, State Government, Union territory directly or through an entity which is wholly owned by the Central government, State Government or Union territory to the industrial units or the developers in any industrial or financial business area. [as amended by NN 23/2018 CT(R) w.e.f. 20.09.2018] [Entry No. 41 of NN. 12/2017 CT (R), as amended by NN. 32/2017 CT (R), w.e.f. 13.10.2017] Analysis: This exemption is admissible irrespective of whether such upfront amount is payable or paid in one or more instalments, provided the amount is determined upfront. [Circular No. 101/20/2019 – GST, dated 30.04.2019]

28. Transmission or distribution of electricity by an electricity transmission or distribution utility. [Entry No. 25 of NN. 12/2017 CT (R)] Notes : 1. As per clause (z) under this notification, ‘Electricity transmission or distribution utility’ means

the Central Electricity Authority; a State Electricity Board; the Central Transmission Utility or a State Transmission Utility notified under the Electricity Act, 2003 or a distribution or transmission licensee under the said Act, or any other entity entrusted with such function by the Central Government or, as the case may be, the State Government.

2. As per clause (p) under this notification, ‘Central Electricity Authority’ means the authority constituted under section 3 of the Electricity (Supply) Act, 1948.

3. As per clause (q) under this notification, ‘Central Transmission Utility’ shall have the same meaning as assigned to it in clause (10) of section 2 of the Electricity Act, 2003.

Analysis : Any person would be covered under this exemption entry, only if it is covered under the definition of “electricity transmission or distribution utility”.

29. Services supplied by electricity distribution utilities by way of construction, erection, commissioning, or installation of infrastructure for extending electricity distribution network upto the tube well of the farmer or agriculturalist for agricultural use. [Entry No. 10A of NN 12/2017 CT (R), inserted by NN 14/2018 – CT (R), w.e.f. 26.07.2018]

Illustration 26 :

Whether the activities carried by electricity distribution companies of India (DISCOMs) against recovery of charges from consumers under State Electricity Act are exempt from GST?

Answer :

Service by way of transmission or distribution of electricity by an electricity transmission or distribution utility is exempt from GST under notification No. 12/2017- CT (R), Sl. No. 25.

However, the other services such as, -

i. Application fee for releasing connection of electricity;

ii. Rental Charges against metering equipment;

iii. Testing fee for meters/ transformers, capacitors etc.;

iv. Labour charges from customers for shifting of meters or shifting of service lines


v. Charges for duplicate bill;

provided by DISCOMS to consumer are taxable, as these are not covered under the exemption entry. [Circular No. 34/ 8/2018 – GST, dated 01.03.2018]

30. Services by a foreign diplomatic mission located in India. [Entry No. 59 of NN. 12/2017 CT (R)]

31. Services by a specified organisation in respect of a religious pilgrimage facilitated by the Ministry of External Affairs, (words, omitted by NN 02/2018 - CT (R), dated 25.01.2018), the Government of India, under bilateral arrangement. [Entry No. 60 of NN. 12/2017 CT (R)] Note : As per clause (zzf) under this notification, ‘Specified organisation’ shall mean, - Kumaon Mandal Vikas Nigam Limited, a Government of Uttarakhand Undertaking; or ‘Committee’ or ‘State Committee’ as defined in section 2 of the Haj Committee Act, 2002.

32. Pure services provided to Government: Pure services (excluding works contract service or other composite supplies involving supply of

any goods) provided to the Central Government, State Government or Union territory or local authority or a

Governmental authority or a Government Entity by way of any activity:

– in relation to any function entrusted to a Panchayat under article 243G of the Constitution or – in relation to any function entrusted to a Municipality under article 243W of the Constitution

[Entry No. 3 of NN. 12/2017 CT (R)] ["Government Entity" inserted by NN 02/2018 - CT (R), dated 25.01.2018]

33. Composite supply provided to Government:

Composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply

provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity

by way of any activity:

in relation to any function entrusted to a Panchayat under article 243G of the Constitution or

in relation to any function entrusted to a Municipality under article 243W of the Constitution.

[Entry No. 3A of NN 12/2017 CT (R), inserted by NN 02/2018 – CT (R), dated 25.01.2018]

Note : Applicability of GST on ambulance services provided to Government by private service providers under the National Health Mission (NHM) [Circular No. 51/25/2018 GST, dated 31.07.2018]

1. The service of transportation in ambulance provided by State Governments and private service providers (PSPs) to patients are exempt under notification No. 12/2017 CT (R) – Entry no. 74(b).

2. Clarification is required regarding taxability of ambulance service provided by PSPs to State Governments under National Health Mission, which is discussed in subsequent paras.

3. Functions of ‘Health and sanitation’ are entrusted to Panchayats under Article 243G of the Constitution of India read with Eleventh Schedule. Function of ‘Public health’ is entrusted to Municipalities under Article 243W of the Constitution read with Twelfth schedule to the Constitution. Thus ambulance services are an activity in relation to the functions entrusted to Panchayats and Municipalities under Articles 243G and 243 W of the Constitution.

4. In view of the above, it is clarified that the service provided by PSPs to the State Governments by


way of transportation of patients on behalf of the State Governments against consideration in the form of fee or otherwise charged from the State Government, it is clarified that the same would be exempt under-

a. Sl. No. 3 of notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 if it is a pure service and not a composite supply involving supply of any goods, and

b. Sl. No. 3A of notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 if it is a composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent of the value of the said composite supply.

34. Services of leasing of assets (rolling stock assets including wagons, coaches, locos) by the Indian Railways Finance Corporation to Indian Railways. [Entry No. 43 of NN. 12/2017 CT (R)]

35. Services provided by the Goods and Services Tax Network [GSTN] to the Central Government or State Governments or Union territories for implementation of Goods and Services Tax. [Entry No. 51 of NN. 12/2017 CT (R)]

36. Services provided to the Central Government, State Government, Union territory under any insurance scheme for which total premium is paid by the Central Government, State Government, Union territory.

[Entry No. 40 of NN. 12/2017 CT (R)]

Clarifications regarding applicability of GST [Circular No. 16/16/2017-GST, dated 15.11.2017]:

Issue : Is GST leviable on General Insurance policies provided by a State Government to employees of the State government/Police personnel, employees of Electricity Department or students of colleges/ private schools, etc.

(a) where premium is paid by State Government and

(b) where premium is paid by employees, students, etc.?

Clarification:

(a) It is hereby clarified that services provided to the Central Government, State Government, Union territory under any insurance scheme for which total premium is paid by the Central Government, State Government, Union territory are exempt from GST under entry no. 40 of notification No. 12/2017 Central Tax (Rate).

(b) Further, services provided by State Government by way of general insurance (managed by government) to employees of the State government / Police personnel, employees of Electricity Department or students are also exempt vide entry no. 6 of notification No. 12/2017- CT(R) which exempts Services by Central Government, State Government, Union territory or local authority to individuals.

37. Services provided to the Central Government, State Government, Union territory administration under any training programme for which total expenditure is borne by the Central Government, State Government, Union territory administration. [Entry No. 72 of NN. 12/2017 CT (R)]

38. Services provided to the Central Government, by way of transport of passengers with or without accompanied belongings, by air, embarking from or terminating at a Regional Connectivity Scheme airport, against consideration in the form of viability gap funding: Provided that nothing contained in this entry shall apply on or after the expiry of a period of 1 year 3 years from the date of commencement of operations of the regional connectivity scheme airport as notified by the Ministry of Civil Aviation.


[Entry No. 16 of NN. 12/2017 CT (R)] [1 year is substituted by 3 years, by NN 02/2018 CT (R), dated 25.01.2018]

39. Service provided by Fair Price Shops to Central Government, State Government or Union Territory by way of sale of food grains, kerosene, sugar, edible oil, etc. under Public Distribution System (PDS) against consideration in the form of commission or margin. [Entry No. 11A and 11B of NN 12/2017 CT (R), are merged by NN 47/2017 - CT(R), w.e.f. 15.11.2017]

40. Service provided by Fair Price Shops to State Governments or Union territories by way of sale of kerosene, sugar, edible oil, etc. under Public Distribution System (PDS) against consideration in the form of commission or margin. [Entry No. 11B of NN. 12/2017 CT (R), omitted by NN 47/2017 CT (R), w.e.f. 15.11.2017]

41. Taxable services, provided or to be provided, by a Technology Business Incubator (TBI) or a Science and Technology Entrepreneurship Park (STEP) recognised by the National Science and Technology Entrepreneurship Development Board of the Department of Science and Technology, Government of India or bio-incubators recognised by the Biotechnology Industry Research Assistance Council, under the Department of Biotechnology, Government of India.

[Entry No. 48 of NN. 12/2017 CT (R)]

Note : Also refer next point (entry no. 44)

42. Services provided by an incubatee up to a total turnover of Rs. 50 lakh in a financial year subject to the following conditions, namely :

(a) the total turnover had not exceeded Rs. 50 lakh during the preceding financial year; and

(b) a period of three years has not elapsed from the date of entering into an agreement as an incubatee.

[Entry No. 44 of NN. 12/2017 CT (R)]

Notes :

(1) As per clause (zh) under this notification, ‘Incubatee’ means an entrepreneur located within the premises of a Technology Business Incubator or Science and Technology Entrepreneurship Park recognized by the National Science and Technology Entrepreneurship Development Board (NSTEDB) of the Department of Science and Technology, Government of India and who has entered into an agreement with the Technology Business Incubator or the Science and Technology Entrepreneurship Park to enable himself to develop and produce hi-tech and innovative products.

(2) Example :

Year Total Turnover Exempted Turnover Taxable Turnover

1 60 Lacs 50 Lacs 10 Lacs

2 50 Lacs - 50 Lacs

3 45 Lacs 45 Lacs -

4 50 Lacs - 50 Lacs

5 20 Lacs - 20 Lacs

43. Services by way of giving on hire –

(a) to a state transport undertaking, a motor vehicle meant to carry more than 12 passengers; or

(aa) to a local authority, an Electrically operated vehicle meant to carry more than twelve passengers [Explanation.- For the purposes of this entry, “Electrically operated vehicle” means vehicle falling under Chapter 87 in the First Schedule to the Customs Tariff Act, 1975 which is run solely on electrical energy derived from an external source or from one or more electrical batteries fitted


to such road vehicle.]; or

(b) to a goods transport agency, a means of transportation of goods; or

(c) motor vehicle for transport of students, faculty and staff, to a person providing services of transportation of students, faculty and staff to an educational institution providing services by way of pre-school education and education upto higher secondary school or equivalent.

[Entry No. 22 of NN. 12/2017 CT (R)] [item (c) inserted by NN 02/2018 - CT (R), dated 25.01.2018], [item (aa) inserted by NN 13/2019 – CT (R), w.e.f. 01.08.2019] Analysis :

(i) For e.g., if a bus is given on hire to a state transport undertaking, then, GST is exempted on the hire charges.

(ii) Similarly, if a truck is given on hire to a GTA, then, GST is exempted on the hire charges.

Analytical Note : Services provided by Police/security agencies of Government to PSUs/corporate entities/sports events held by private entities

Services provided by Police or security agencies of Government to PSU/private business entities are not exempt from GST.

Such services are taxable supplies and the recipients are required to pay the tax under reverse charge mechanism on the amount of consideration paid to Government for such supply of services [See the reverse charge provisions as discussed in Chapter – 7].

Example 1:

The Karnataka Cricket Association, Bangalore requests the Commissioner of Police, Bangalore to provide security in and around the Cricket Stadium for the purpose of conducting thecricket match. The Commissioner of Police arranges the required security for an agreed consideration. In this case, services of providing security by thepolice personnel are not exempt. As the services are provided by Government, Karnataka Cricket Association is liable to pay the tax on the consideration paid, albeit under reverse charge mechanism.

Illustration 27 :

Whether the guarantee provided by State Government to state owned companies against guarantee commission, is taxable under GST?

Answer :

Services supplied by Central Government, State Government, Union territory to their undertakings or Public Sector Undertakings (PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs from the banking companies and financial institutions are exempt from GST as per entry no. 34A of NN 12/2017 [inserted by NN 14/2018, w.e.f. 26.07.2018].

Banking Related Services

1. Services by the Reserve Bank of India. [Entry No. 26 of NN. 12/2017 CT (R)]

2. Services received by the RBI, from outside India in relation to management of foreign exchange reserves. [Entry No. 42 of NN. 09/2017 IT (R)] Analysis : Any service, other than covered in this entry, provided to RBI is not exempt from GST. Hence, chargeable to GST.

3. Services by way of -

(a) extending deposits, loans or advances in so far as the consideration is represented by way of interest


or discount (other than interest involved in credit card services);

(b) inter se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst banks and such dealers.

[Entry No. 27 of NN. 12/2017 CT (R)]

Note : As per clause (zj) under this notification, ‘Interest’ means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) but does not include any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized.

Analysis : (1) If any service charges or processing fees or documentation charges or inspection charges, etc. are

recovered in addition to interest on loan, advance or a deposit, then, such charges would be taxable under GST.

(2) Discounting of Bills of Exchange is covered in this exemption entry only to the extent of its consideration as represented by way of discount, i.e. charges other than discounting charges are taxable.

(3) The services in the case of the Credit Card are by way of levy of issuing charges or the commission charged from merchants, etc. The interest charged for failure to pay due amount at the due date have been specifically excluded from this exemption entry. Therefore, these are taxable.

(4) Penal interest charged for delay in repayment is considered as interest as per loan agreements. Therefore, not taxable under GST.

(5) Services provided by banks or authorized dealers of foreign exchange by way of sale of foreign exchange to general public against commission are taxable under GST. But, Services provided by banks or authorized dealers of foreign exchange by way of sale of foreign exchange to another bank or authorized dealer of foreign exchange against commission are covered under this entry and hence, exempt from GST.

(6) Any service charge other than those covered under this exemption entry would be chargeable to GST. For e.g. ATM card maintenance charge, transaction charges, merchant banking charges, locker rent, banker to an issue (IPO) charges, etc. are not exempt from GST and hence, taxable under GST.

(7) As per sec. 2(52) of the CGST Act, 2017, “goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;

(8) As per sec. 2(102) of the CGST Act, 2017, “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;

(9) Mere transactions in money would be outside the ambit of definition of ‘goods’ as well as ‘service’ (e.g. mere transactions in Commercial Paper (CP) or Certificates of Deposit (CD) are mere transactions in money, as these are in the nature of promissory note, etc.).

(10) The terms ‘Goods’ and ‘Service’ exclude ‘securities’ and the definition of ‘securities’ include ‘derivatives’. Therefore, transactions in instruments like interest rate swaps and foreign exchange swaps would be excluded from the definition of ‘goods’ and ‘service’ as such instruments are derivatives, hence, not chargeable to GST.

(11) Forward contracts in commodities or currencies would not fall in the ambit of definition of ‘goods’ or ‘service’. Therefore, not chargeable to GST. Future contracts are similar to forward contracts, hence, not chargeable to GST.

(12) However, if any separate consideration (commission, etc.) is charged for the activity relating to transactions in money or transfer of title in goods, then, such consideration (commission, etc.) would be chargeable to GST. Therefore, GST would be levied on service charges or documentation fees or


service fees or broking charges, normally charged for various transactions in money or for transfer of title in goods including charges for making drafts, letter of credit issuance charges, service charges relating to issuance of Commercial Paper (CP) or Certificates of Deposit (CD) or transactions in securities or forward contract or future contracts, etc.

(13) Repos and reverse repos transactions entered into by bank are having the characteristics of loans and deposits for interest, therefore, they are covered under this entry and hence, exempt from GST.

(14) As per clause (zaa) under this notification, “financial institution” has the same meaning as assigned to it in clause (c) of section 45-I of the Reserve Bank of India Act, 1934. [clause (zaa) inserted by NN 28/2018 – CT (R), w.e.f. 01.01.2019]

(15) Clarification regarding applicability of GST on additional / penal interest – [Circular No. 102/21/2019, dated 28.06.2019]

1. Various representations have been received from the trade and industry regarding applicability of GST on delayed payment charges in case of late payment of Equated Monthly Instalments (EMI). An EMI is a fixed amount paid by a borrower to a lender at a specified date every calendar month. EMIs are used to pay off both interest and principal every month, so that over a specified period, the loan is fully paid off along with interest. In cases where the EMI is not paid at the scheduled time, there is a levy of additional / penal interest on account of delay in payment of EMI.

2. Doubts have been raised regarding the applicability of GST on additional / penal interest on the overdue loan i.e. whether it would be exempt from GST in terms of Sl. No. 27 of notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 or such penal interest would be treated as consideration for liquidated damages [amounting to a separate taxable supply of services under GST covered under entry 5(e) of Schedule II of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act) i.e. “agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act”]. In order to ensure uniformity in the implementation of the provisions of the law, the Board, in exercise of its powers conferred by section 168 (1) of the CGST Act, hereby issues the following clarification.

3. Generally, following two transaction options involving EMI are prevalent in the trade:-

Case – 1: X sells a mobile phone to Y. The cost of mobile phone is Rs 40,000/-. However, X gives Y an option to pay in installments, Rs 11,000/- every month before 10th day of the following month, over next four months (Rs 11,000/- *4 = Rs. 44,000/-). Further, as per the contract, if there is any delay in payment by Y beyond the scheduled date, Y would be liable to pay additional/penal interest amounting to Rs. 500/- per month for the delay. In some instances, X is charging Y Rs. 40,000/- for the mobile and is separately issuing another invoice for providing the services of extending loans to Y, the consideration for which is the interest of 2.5% per month and an additional / penal interest amounting to Rs. 500/- per month for each delay in payment.

Case – 2: X sells a mobile phone to Y. The cost of mobile phone is Rs 40,000/-. Y has the option to avail a loan at interest of 2.5% per month for purchasing the mobile from M/s ABC Ltd. The terms of the loan from M/s ABC Ltd. allows Y a period of four months to repay the loan and an additional / penal interest @ 1.25% per month for any delay in payment.

4. As per the provisions of sub-clause (d) of sub-section (2) of section 15 of the CGST Act, the value of supply shall include “interest or late fee or penalty for delayed payment of any consideration for any supply”. Further in terms of Sl. No. 27 of notification No. 12/2017- Central Tax (Rate) dated the 28.06.2017 “services by way of (a) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services)”is exempted. Further, as per clause 2 (zk) of the notification No. 12/2017-Central Tax (Rate) dated the 28th June, 2017, “‘interest’ means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) but does not include any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised;”.

5. Accordingly, based on the above provisions, the applicability of GST in both cases listed in para


3 above would be as follows:

Case 1: As per the provisions of sub-clause (d) of sub-section (2) of section 15 of the CGST Act, the amount of penal interest is to be included in the value of supply. Thetransaction between X and Y is for supply of taxable goods i.e. mobile phone. Accordingly, the penal interest would be taxable as it would be included in the value of the mobile, irrespective of the manner of invoicing.

Case 2: The additional / penal interest is charged for a transaction between Y and M/s ABC Ltd., and the same is getting covered under Sl. No. 27 of notification No. 12/2017- Central Tax (Rate) dated 28.06.2017. Accordingly, in this case the 'penal interest' charged thereon on a transaction between Y and M/s ABC Ltd. would not be subject to GST, as the same would not be covered under notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The value of supply of mobile by X to Y would be Rs. 40,000/- for the purpose of levy of GST.

6. It is further clarified that the transaction of levy of additional / penal interest does not fall within the ambit of entry 5(e) of Schedule II of the CGST Act i.e. “agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act”, as this levy of additional / penal interest satisfies the definition of “interest” as contained in notification No. 12/2017- Central Tax (Rate) dated 28.06.2017. It is further clarified that any service fee/charge or any other charges that are levied by M/s ABC Ltd. in respect of the transaction related to extending deposits, loans or advances does not qualify to be interest as defined in notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, and accordingly will not be exempt.

4. Services provided by a banking company to Basic Saving Bank Deposit (BSBD) account holders under Pradhan Mantri Jan Dhan Yojana (PMJDY). [Entry No. 27A of NN. 12/2017 CT (R), inserted by NN 28/2018 – CT (R), w.e.f. 01.01.2019]

Illustration 28 : (Banking Service)

X Bank Ltd., furnishes the following information relating to services provided and the gross amount received:

Particulars Rs. in lakhs

Merchant Banking Services 8

Asset Management (including portfolio management) 3

Service charges for services to the Government of India 1.5

Interest on Overdraft and Cash credits 2

Banker to the issue 5

Locker rent 2

Compute the value of taxable service and the GST liability of X Bank Ltd., assuming all figures are exclusive of GST.

Answer :

Calculation of Value of Taxable Services of X Bank Ltd.

Particulars Rs. in lakhs

Merchant Banking Services - Taxable 8

Asset Management (including portfolio management) - Taxable 3

Service charges for services to the Government of India - Taxable 1.5

Interest on Overdraft and Cash Credits - Not Taxable [Since, it is specifically covered


under exemption list Entry No. 27 of NN. 12/2017 CT (R)] -

Banker to the issue - Taxable 5

Locker rent – Taxable 2

Total Value of Taxable Services 19.5

CGST @ 9% 1.755

SGST @ 9% 1.755


Robinson Bank Ltd. furnishes the following information relating to services provided and the gross amount received during the month of December, 2017. Compute the value of taxable service and GST payable.

Sr. No. Particulars Rs. in lakhs

(i) Amount of commission received for debt collection service 10

(ii) Discount earned on bills discounted 4.5

(iii) Dealing in sale and purchase of forward contract 5.7

(iv) Charges received on credit card and debit card facilities extended 3.8

(v) Penal interest recovered from the customers for the delay in repayment of loan 2.6

(vi) Commission received for service rendered to Government for tax collection 6.0

(vii) Interest earned on reverse repo transaction 25.0

Show the workings with explanation wherever required, assuming all figures are exclusive of GST. Answer :

Computation of the Value of Taxable Services and GST

Sr. No. Particulars Amount in Rs.

(i) Commission received on debt collection service – Taxable 10,00,000

(ii) Discount earned on bills discounted - Not Taxable [Since, it is specifically covered under exemption list Entry No. 27 of NN. 12/2017 CT (R)] -

(iii) Dealing in sale and purchase of forward contract - Not Taxable [Since, it is trading of securities which is specifically excluded from the definition of goods as well as services] -

(iv) Charges received on credit card and debit card facilities extended – Taxable 3,80,000

(v) Penal interest charged for the delay in repayment – Not Taxable [It is considered as interest as per loan agreements. And interest is specifically covered under exemption list Entry No. 27 of NN. 12/2017 CT (R). Therefore, not taxable under GST] -

(vi) Commission received for services rendered to Government for collection oftaxes – Taxable 6,00,000


(vii) Interest earned on Reverse repo transactions – Not Taxable [Not taxable, as it is in the nature of interest. And interest is specifically covered under exemption list Entry No. 27 of NN. 12/2017 CT (R). Therefore, not taxable under GST] -

Total Amount received 19,80,000

SGST @ 9% 1,78,200

CGST@ 9% 1,78,200


Pankaj Bank Ltd., a registered person in GST, furnishes the following information relating to services provided and the Gross amount received :

(i) Locker rent - Rs. 12 lakhs (ii) Banker for the issue - Rs. 15 lakhs (iii) Asset Management (including portfolio management) - Rs. 8 lakhs (iv) Interest earned on OD and CC facilities - Rs. 80 lakhs (v) Penal interest charged for delay in repayment - Rs. 10 lakhs (vi) Processing fees charged for granting loan - Rs. 13 lakhs (vii) Processing fees charged from Gaurav Bank Ltd. for inter-bank loan granted to them [not included in (vi) above] - Rs. 2 lakhs (viii) Merchant Banking Services - Rs. 4 lakhs (ix) Debit cards and Credit cards issuing charges - Rs. 1 lakh

(x) Commission charged from merchants for payments made through credit cards and debit cards - Rs. 2 lakhs

(xi) Interest charged from credit card holders @ 3% per month for delay in repayment of amount used by payment through credit cards - Rs. 3 lakhs

(xii) Interest earned on repos and reverse repos transactions entered into by bank - Rs. 10 lakhs.

Compute the value of Taxable services under “Banking and Other Financial Service” and GST payable thereon, assuming all figures given above are exclusive of GST.

Answer :

Sr. No. Particulars Rs. in lakhs

(i) Locker rent – Taxable 12

(ii) Banker for the issue – Taxable 15

(iii) Asset Management (including portfolio management) – Taxable 8

(iv)

Interest earned on OD and CC facilities – Not Taxable [Interest is specifically covered under exemption list Entry No. 27 of NN. 12/2017 CT (R). Therefore, not taxable under GST]

-

(v) Penal interest charged for delay in repayment [It is considered as interest as per loan agreements. And interest is specifically covered under exemption list Entry No. 27 of NN. 12/2017 CT (R). Therefore, not taxable under GST]

-

(vi) Processing fees charged for granting loan – Taxable 13


(vii)

Processing fees charged from Gaurav Bank Ltd. for inter-bank loan granted to them [not included in (vi) above] – Taxable [It is taxable, because, only inter-bank foreign exchange transactions are covered under Entry No. 27 of exemption list and not any other inter-bank transactions.] 2

(viii) Merchant Banking Services – Taxable 4

(ix) Debit cards and Credit cards issuing charges – Taxable 1

(x) Commission charged from merchants for payments made through credit cards and debit cards – Taxable 2

(xi) Interest charged from credit card holders @ 3% per month for delay in repayment of amount used by payment through credit cards – Taxable [The interest charged for failure to pay due amount at the due date have been specifically excluded from this exemption entry. Therefore, these are taxable.] 3

(xii) Interest earned on repos and reverse repos transactions entered into by bank – Not Taxable [Interest is specifically covered under exemption list Entry No. 27 of NN. 12/2017 CT (R). Therefore, not taxable under GST] -

Total Value of Taxable Services 60.00

CGST @ 9% 5.40

SGST @ 9% 5.40

5. Services by an acquiring bank, to any person in relation to settlement of an amount upto Rs. 2,000/- in a single transaction transacted through credit card, debit card, charge card or other payment card service. Explanation : For the purposes of this entry, “acquiring bank” means any banking company, financial institution including non-banking financial company or any other person, who makes the payment to any person who accepts such card.

[Entry No. 34 of NN. 12/2017 CT (R)]

6. Services by the following persons in respective capacities –

(a) business facilitator or a business correspondent to a banking company with respect to accounts in its rural area branch;

(b) any person as an intermediary to a business facilitator or a business correspondent with respect to services mentioned in entry (a); or

(c) business facilitator or a business correspondent to an insurance company in a rural area.

[Entry No. 39 of NN. 12/2017 CT (R)]

Note :

(1) As per clause (o) under this notification, ‘Business facilitator or business correspondent’ means an intermediary appointed under the business facilitator model or the business correspondent model by a banking company or an insurance company under the guidelines issued by the Reserve Bank of India.

(2) As per clause (zi) under this notification, ‘Insurance company’ means a company carrying on lifem insurance business or general insurance business.

(3) As per clause (zk) under this notification, ‘Intermediary’ has the same meaning as assigned to it in sub-section (13) of section 2 of the Integrated Goods and Services Tax Act, 2017.

(4) As per Sec. 2(13) of the IGST Act, 2017, Intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or


securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.

(5) As per clause (zzb) under this notification, ‘Rural area’ means the area comprised in a village as defined in land revenue records, excluding the area under any municipal committee, municipal corporation, town area committee, cantonment board or notified area committee; or any area that may be notified as an urban area by the Central Government or a State Government;

(6) GST on Services of Business Facilitator (BF) or a Business Correspondent (BC) to Banking Company [Circular No. 86/05/2019- GST, dated 01.01.2019]

Representations have been received seeking clarification on following two issues:

Issue 1: What is the value to be adopted for the purpose of computing GST on services provided by BF/BC to a banking company?

Clarification: As per RBI’s Circular No. DBOD.No.BL.BC. 58/22.01.001/2005-2006 dated 25.01.2006 and subsequent instructions on the issue (referred to as ‘guidelines’ hereinafter), banks may pay reasonable commission/fee to the BC, the rate and quantum of which may be reviewed periodically. The agreement of banks with the BC specifically prohibits them from directly charging any fee to the customers for services rendered by them on behalf of the bank. On the other hand, banks (and not BCs) are permitted to collect reasonable service charges from the customers for such service in a transparent manner. The arrangements of banks with the Business Correspondents specify the requirement that the transactions are accounted for and reflected in the bank's books by end of the day or the next working day, and all agreements/ contracts with the customer shall clearly specify that the bank is responsible to the customer for acts of omission and commission of the Business Facilitator/Correspondent. Hence, banking company is the service provider in the business facilitator model or the business correspondent model operated by a banking company as per RBI guidelines. The banking company is liable to pay GST on the entire value of service charge or fee charged to customers whether or not received via business facilitator or the business correspondent.

Issue 2: What is the scope of services provided by BF/BC to a banking company with respect to accounts in its rural area branch that are eligible for existing GST exemption?

Clarification:

The procedure for classification of branch of a bank as located in rural area and the services which can be provided by BF/BC, is governed by the RBI guidelines. Therefore, classification adopted by the bank in terms of RBI guidelines in this regard should be accepted.

Insurance Related Services

1. Services of general insurance business provided under following schemes –

(a) Hut Insurance Scheme; (b) Cattle Insurance under Swarnajayanti Gram Swarozgar Yojna (earlier known as Integrated Rural

Development Programme); (c) Scheme for Insurance of Tribals; (d) Janata Personal Accident Policy and Gramin Accident Policy; (e) Group Personal Accident Policy for Self-Employed Women; (f) Agricultural Pumpset and Failed Well Insurance; (g) Premia collected on export credit insurance; (h) Restructured Weather Based Crop Insurance Scheme (RWCIS), approved by the Government of

India and implemented by the Ministry of Agriculture [earlier, it was “Weather Based Crop Insurance Scheme or the Modified National Agricultural Insurance Scheme”, which is replaced by


Bold words by NN 21/2017 – CT (R), dated 22.08.2017]; (i) Jan Arogya Bima Policy; (j) Pradhan Mantri Fasal Bima Yojana (PMFBY); [earlier, it was “National Agricultural Insurance

Scheme (Rashtriya Krishi Bima Yojana)”, which is replaced by Bold words by NN 21/2017 – CT (R), dated 22.08.2017];

(k) Pilot Scheme on Seed Crop Insurance; (l) Central Sector Scheme on Cattle Insurance; (m) Universal Health Insurance Scheme; (n) Rashtriya Swasthya Bima Yojana; (o) Coconut Palm Insurance Scheme; (p) Pradhan Mantri Suraksha Bima Yojna; (q) Niramaya Health Insurance Scheme implemented by the Trust constituted under the provisions of

the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999.

(r) Bangla Shasya Bima [item (r) inserted by NN 21/2019 – CT (R), w.e.f. 01.10.2019] [Under this scheme, the West Bengal Government will provide crop insurance coverage to farmers, especially for the Kharif season crops]

[Entry No. 35 of NN. 12/2017 CT (R)]

2. Services of life insurance business provided under following schemes - (a) Janashree Bima Yojana; (b) Aam Aadmi Bima Yojana; (c) Life micro-insurance product as approved by the Insurance Regulatory and Development Authority,

having maximum amount of cover of Rs. 50,000/- Rs. 2,00,000/- [Rs. 50,000/- is substituted by Rs. 2,00,000/- by NN 02/2018 - CT(R), dated 25.01.2018]

(d) Varishtha Pension Bima Yojana; (e) Pradhan Mantri Jeevan Jyoti Bima Yojana; (f) Pradhan Mantri Jan Dhan Yojana; (g) Pradhan Mantri Vaya Vandan Yojana. [Entry No. 36 of NN. 12/2017 CT (R)]

3. Services provided to the Central Government, State Government, Union territory under any insurance scheme for which total premium is paid by the Central Government, State Government, Union territory. [Entry No. 40 of NN. 12/2017 CT (R)]

4. Services by way of reinsurance of the insurance schemes specified in entries 35 or 36 or 40. [Entry No. 36A of NN 12/2017 CT (R), inserted by NN 02/2018 – CT (R), dated 25.01.2018], [as amended by NN 14/2018 CT(R), w.e.f. 27.07.2018]

5. Services by way of collection of contribution under the Atal Pension Yojana. [Entry No. 37 of NN. 12/2017 CT (R)]

6. Services by way of collection of contribution under any pension scheme of the State Governments. [Entry No. 38 of NN. 12/2017 CT (R)]

7. Services of life insurance business provided by way of annuity under the National Pension System regulated by the Pension Fund Regulatory and Development Authority of India under the Pension Fund Regulatory and Development Authority Act, 2013. [Entry No. 28 of NN. 12/2017 CT (R)]

8. Services of life insurance business provided or agreed to be provided by the Army, Naval and Air Force


Group Insurance Funds to members of the Army, Navy and Air Force, respectively, under the Group Insurance Schemes of the Central Government. [Entry No. 29 of NN. 12/2017 CT (R)]

9. Services of life insurance provided or agreed to be provided by the Naval Group Insurance Fund to the personnel of Coast Guard under the Group Insurance Schemes of the Central Government. [Entry No. 29A of NN 12/2017 CT (R), inserted by NN 02/2018 – CT (R), dated 25.01.2018]

10. Services of life insurance provided or agreed to be provided by the Central Armed Police Forces (under Ministry of Home Affairs) Group Insurance Funds to their members under the Group Insurance Schemes of the concerned Central Armed Police Force. [Entry No. 29B of NN 12/2017 CT (R), inserted by NN 21/2019 – CT (R), w.e.f. 01.10.2019]

11. Services by the Employees’ State Insurance Corporation [ESIC] to persons governed under the Employees’ State Insurance Act, 1948. [Entry No. 30 of NN. 12/2017 CT (R)]

12. Services provided by the Insurance Regulatory and Development Authority [IRDA] of India to insurers under the Insurance Regulatory and Development Authority of India Act, 1999. [Entry No. 32 of NN. 12/2017 CT (R)]

13. Services by the business facilitator or a business correspondent to an insurance company in a rural area. [Entry No. 39(c) of NN. 12/2017 CT (R)]

Miscellaneous Services

1. Services by way of transfer of a going concern, as a whole or an independent part thereof. [Entry No. 2 of NN. 12/2017 CT (R)] Analysis : (i) Transfer of a going concern means transfer of a running business which is capable of being carried on

by the purchaser as an independent business. Such sale of business as a whole is not only a transfer of goods or immovable property, but it comprises a comprehensive sale of immovable property, goods, transfer of unexecuted orders, employees, goodwill, etc.

(ii) Since, the transfer of a going concern is not merely a transfer of title in either the immovable property or goods, therefore, it may amount to service. Hence, to provide exemption to such transactions, this exemption is provided for.

2. Services provided by- (a) an arbitral tribunal to –

(i) any person other than a business entity; or (ii) a business entity with an aggregate turnover up to Rs. 20 lakh (Rs. 10 lakh in the case of Special

Category States) in the preceding financial year such amount in the preceding financial year as makes it eligible for exemption from registration under the CGST Act, 2017 [as amended by NN 21/2019 – CT (R), w.e.f. 01.10.2019].; or

(iii) the Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity;

(b) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to - (i) an advocate or partnership firm of advocates providing legal services; (ii) any person other than a business entity; or (iii) a business entity with an aggregate turnover up to Rs. 20 lakh (Rs. 10 lakh in the case of Special

Category States) in the preceding financial year such amount in the preceding financial year as makes it eligible for exemption from registration under the CGST Act, 2017 [as amended by NN


21/2019 – CT (R), w.e.f. 01.10.2019].; or (iv) the Central Government, State Government, Union territory, local authority, Governmental

Authority or Government Entity; (c) a senior advocate by way of legal services to –

(i) any person other than a business entity; or (ii) a business entity with an aggregate turnover up to Rs. 20 lakh (Rs. 10 lakh in the case of Special

Category States) in the preceding financial year such amount in the preceding financial year as makes it eligible for exemption from registration under the CGST Act, 2017 [as amended by NN 21/2019 – CT (R), w.e.f. 01.10.2019].; or

(iii) the Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity.

[Entry No. 45 of NN. 12/2017 CT (R)] [sub-item (iii) of item (a), sub-item (iv) of item (b) and sub-item (iii) of item (c), inserted by NN 02/2018 - CT (R), dated 25.01.2018] Analysis : (1) As per clause (b) under this notification, ‘Advocate’ has the same meaning as assigned to it in

clause(a) of subsection (1) of section 2 of the Advocates Act, 1961. (2) As per Sec. 2(1)(a) of the Advocates Act, 1961, Advocate means an advocate entered in any roll under

the provisions of the Advocates Act, 1961. (3) As per clause (i) under this notification, ‘Arbitral tribunal’ has the same meaning as assigned to it in

clause (d) of section 2 of the Arbitration and Conciliation Act, 1996. (4) As per Sec. 2(d) of the Arbitration and Conciliation Act, 1996, Arbitral tribunal means a sole

arbitrator or a panel of arbitrators. (5) As per clause (zzc) under this notification, ‘Senior advocate’ has the same meaning as assigned to it

in section 16 of the Advocates Act, 1961. (6) As per sec. 16 of the Advocates Act, 1961, an advocate may, with his consent, be designated as senior

advocate if the Supreme Court or a High Court is of opinion that by virtue of his ability standing at the Baror special knowledge or experience in law he is deserving of such distinction. Senior advocates shall, in the matter of their practice, be subject to such restrictions as the Bar Council of India may, in the interest of the legal profession, prescribe.

(7) As per clause (zl) under this notification, ‘Legal service’ means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.

(8) Services provided by an arbitral tribunal and legal services provided by partnership firms of advocates or an individual as an advocate are taxable only if such services are provided to business entities with an aggregate turnover exceeding such amount in the preceding financial year as makes it eligible for exemption from registration under the CGST Act, 2017. However, in respect of these services provided by such service providers to such business entities, GST is required to be paid on reverse charge basis by such business entities. Therefore, in any case, arbitral tribunal or partnership firm of advocates or an individual as an advocate is not required to get itself registered under GST.

(9) Further, legal services provided by partnership firms of advocates or an individual as an advocate (except senior advocate) to another advocate or partnership firm of advocates providing legal services are exempt from GST irrespective of the aggregate turnover of the recipient advocate or partnership firm of advocates during preceding financial year.

(10) But, legal services provided by senior advocate to another advocate or partnership firm of advocates providing legal services are not separately exempt from GST. Therefore, legal services provided by senior advocate to another advocate or partnership firm of advocates providing legal services with an aggregate turnover exceeding such amount in the preceding financial year as makes it eligible for exemption from registration under the CGST Act, 2017 are taxable under GST.

(11) Further, any service provided by an arbitral tribunal, or any legal service provided by any individual


advocate including senior advocate or a partnership firm of advocates to the Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity shall be exempt from GST irrespective of the aggregate turnover of the Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity in the preceding financial year (as per amendment made by NN 02/2018 CT (R), dated 25.01.2018).

Illustration 31 : Mr. Mangal, an advocate, has rendered the following services in the month of April, 2018 : (a) Representing Mrs. Jain in her divorce case before High Court. (b) Representing Mr. Surana, an engineer by profession, in relation to his GST liability [Turnover of Mr.

Surana in the financial year 2017-18 was Rs. 21 lakh] (c) Legal consultancy given to Bansal Associates, a partnership firm of advocates [Turnover of services of

Bansal Associates in the financial year 2017-18 was Rs. 25 lakh] Examine whether GST is payable on each of the above services assuming Mr. Mangal to be - (a) an advocate other than a senior advocate. (b) a senior advocate in terms of section 16 of the Advocates Act, 1961? Answer : In background of Entry No. 45 (b) and (c) of NN. 12/2017-CT (R), GST liability of each of the services rendered by Mangal, are examined hereunder :

Sl.No. When Mr. Mangal is an advocate other than senior advocate

When Mr. Mangal is a senior advocate

(a) Service of representing Mrs. Jain in her divorce case will be exempt as Mrs. Jain is not a business entity.

Such service will be exempt even if the same are rendered by a senior advocate.

(b) Since the turnover of Mr. Surana, a business entity, is more than Rs. 20 lakh (i.e., more than exemption limit for registration in GST) in the preceding financial year [2017-18], the same will be liable to GST. Further, here Mr. Surana will be liable to pay GST under RCM.

Such services, when provided by senior advocate, will also be liable to GST. Further, here Mr. Surana will be liable to pay GST under RCM.

(c) Legal consultancy provided by an advocate to partnership firm of advocates is exempt from GST.

Such services, when provided by a senior advocate, will be liable to GST if the turnover of the partnership firm (business entity) in the preceding financial year 2017- 18 is more than Rs. 20 lakh (i.e. more than exemption limit for registration in GST). Thus, legal consultancy provided by Mr. Mangal will be liable to GST if the turnover of the partnership firm (business entity) in the financial year 2017- 18 is more than Rs. 20 lakh Thus, legal consultancy provided by Mr. Mangal to Bansal Associates, a partnership firm of advocates, will be liable to GST. Further, here Bansal Associates will be liable to pay GST under RCM.

3. Services by way of collecting or providing news by an independent journalist, Press Trust of India or United News of India. [Entry No. 49 of NN. 12/2017 CT (R)]


4. Services of public libraries by way of lending of books, publications or any other knowledge-enhancing content or material. [Entry No. 50 of NN. 12/2017 CT (R)]

5. Services by an organiser to any person in respect of a business exhibition held outside India. [Entry No. 52 of NN. 12/2017 CT (R)] Analysis : (i) The organiser is a person who arranges for holding of the exhibition and carries out various activities

like booking of area of land for holding exhibition, approaching various prospective participants for selling the stall to be established at exhibition, advertising for holding of exhibition, etc.

(ii) The amount received will be the amount charged by the organiser for allotting the stall or space in the exhibition centre to the participants (i.e. business exhibitors), which is a taxable service.

(iii) But, if such amount is received for holding business exhibition outside India, then, it will be exempt from GST under this entry.

(iv) The exemption is available to the organiser even if the amount is received in Indian currency, as this clause does not provide that amount must be received by organiser in foreign currency.

(v) The participants of business exhibition may be from India or outside India.

6. Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution – (a) as a trade union; (b) for the provision of carrying out any activity which is exempt from the levy of Goods and Services

Tax; or (c) up to an amount of Rs. 5,000 Rs. 7,500 [Rs. 5,000 is substituted by Rs. 7,500 by NN 02/2018 CT (R),

dated 25.01.2018] per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex.

[Entry No. 77 of NN. 12/2017 CT (R)] Analysis: (i) Since, AOP/BOI and its members are two different persons. Therefore, membership fees (i.e.

reimbursement of charges or share of contribution) of any club (AOP/BOI) are chargeable to GST. However, this entry covers few cases where GST would be exempt on such membership fees (i.e. reimbursement of charges or share of contribution).

(ii) Membership fee (i.e. reimbursement of charges or share of contribution) charged from members of any AOP/BOI for carrying out an activity which is already exempt from GST, is also exempt from the levy of GST (e.g. holding camps to provide health care services which are exempt from GST). But, if contribution is for carrying out an activity which is taxable, then, GST would be required to be paid on such membership fees also.

(iii) Service of Resident Welfare Association (RWA) to its own members upto an amount of Rs. 7,500/- per member per month by way of reimbursement of charges or share of contribution is exempt from GST. But, if the membership fees is more than Rs. 7,500/- (say, Rs. 8,000/-), then, GST would be charged on entire membership fees (i.e. Rs. 8,000/-).

(iv) Where any club (AOP/BOI) is working just as a pure agent of its members for sourcing of goods or services from a third person, then, the amount collected by such club (AOP/BOI) from its members will be excluded from the value of taxable service in terms of Rule 33 of CGST Rules, 2017, subject to compliance with the specified conditions.

Issues related to GST on monthly subscription/contribution charged by a Residential Welfare Association from its members [Circular No. 109/28/2019 – GST, dated 22.07.2019]

Sl. No.

Issue Clarification


1. Are the maintenance charges paid by residents to the Resident Welfare Association (RWA) in a housing society exempt from GST and if yes, is there an upper limit on the amount of such charges for the exemption to be available?

Supply of service by RWA (unincorporated body or a non- profit entity registered under any law) to its own members by way of reimbursement of charges or share of contribution up to an amount of Rs. 7500 per month per member for providing services and goods for the common use of its members in a housing society or a residential complex are exempt from GST. Prior to 25th January 2018, the exemption was available if the charges or share of contribution did not exceed Rs 5000/- per month per member. The limit was increased to Rs. 7500/- per month per member with effect from 25th January 2018. [Refer clause (c) of Sl. No. 77 to the notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 as amended vide notification No. 2/2018- Central Tax (Rate), dated 25.01.2018]

2. A RWA has aggregate turnover of Rs.20 lakh or less in a financial year. Is it required to take registration and pay GST on maintenance charges if the amount of such charges is more than Rs. 7500/- per month per member?

No. If aggregate turnover of an RWA does not exceed Rs.20 Lakh in a financial year, it shall not be required to take registration and pay GST even if the amount of maintenance charges exceeds Rs. 7500/- per month per member. RWA shall be required to pay GST on monthly subscription/ contribution charged from its members, only if such subscription is more than Rs. 7500/- per month per member and the annual aggregate turnover of RWA by way of supplying of services and goods is also Rs. 20 lakhs or more.

Annual turnover of RWA

Monthly maintenance charge

Whether exempt?

More than Rs. 20 lakhs

More than Rs. 20 lakhs

No

Rs. 7500/- or less

Yes

Rs. 20 lakhs or less

More than Rs. 7500/-

Yes

Rs. 7500/- or less

Yes

3. Is the RWA entitled to take input tax credit of GST paid on input and services used by it for making supplies to its members and use such ITC for discharge of GST liability on such supplies where the amount charged for such supplies is more than Rs. 7,500/- per month per member?

RWAs are entitled to take ITC of GST paid by them on capital goods (generators, water pumps, lawn furniture etc.), goods (taps, pipes, other sanitary/hardware fillings etc.) and input services such as repair and maintenance services.


4. Where a person owns two or more flats in the housing society or residential complex, whether the ceiling of Rs. 7500/- per month per member on the maintenance for the exemption to be available shall be applied per residential apartment or per person?

As per general business sense, a person who owns two or more residential apartments in a housing society or a residential complex shall normally be a member of the RWA for each residential apartment owned by him separately. The ceiling of Rs. 7500/- per month per member shall be applied separately for each residential apartment owned by him. For example, if a person owns two residential apartments in a residential complex and pays Rs. 15000/- per month as maintenance charges towards maintenance of each apartment to the RWA (Rs. 7500/- per month in respect of each residential apartment), the exemption from GST shall be available to each apartment.

5. How should the RWA calculate GST payable where the maintenance charges exceed Rs. 7500/- per month per member? Is the GST payable only on the amount exceeding Rs. 7500/- or on the entire amount of maintenance charges?

The exemption from GST on maintenance charges charged by a RWA from residents is available only if such charges do not exceed Rs. 7500/- per month per member. In case the charges exceed Rs. 7500/- per month per member, the entire amount is taxable. For example, if the maintenance charges are Rs. 9000/- per month per member, GST @18% shall be payable on the entire amount of Rs. 9000/- and not on [Rs. 9000 - Rs. 7500] = Rs. 1500/- .

7. Services provided by an unincorporated body or a non-profit entity registered under any law for the time being in force, engaged in,- (i) activities relating to the welfare of industrial or agricultural labour or farmers; or (ii) promotion of trade, commerce, industry, agriculture, art, science, literature, culture, sports,

education, social welfare, charitable activities and protection of environment, to its own members against consideration in the form of membership fee upto an amount of one thousand rupees (Rs 1000/-) per member per year.

[Entry no. 77A of NN 12/2017 CT(R), inserted by NN 14/2018 CT(R) w.e.f. 27.07.2018]

Illustration 32 : Services Provided by Unincorporated Association Compute value of taxable services from the following receipts (exclusive of GST) of an unincorporated association for the financial year 2018-19 : 1. Collections from members for medical camp Rs. 12 lakhs. 2. Collections from 100 members @ Rs. 8,000 per month per members for maintenance of residential

complex. 3. Collections from 80 members @ Rs. 7,500 per month per members in a commercial complex for

maintenance of commercial complex. Answer : [Refer Entry No. 77 of NN. 12/2017 CT (R)]

Sr. No. Particulars Amount in Rs.

1 Collection from members for medical camp (since medical services are exempt, hence medical camp by such association is also exempt) Exempt


2 Collection from 100 members @ Rs. 8,000 per month per members for maintenance of a residential complex [since amount upto Rs. 7,500 per month per member is exempt. Hence, entire Rs. 8,000 per month per member is taxable] (100 members x Rs. 8,000 × 12 months) [Circular No. 175/01/2014 - S.T., dated 10-01-2014]

96,00,000

3 Collections from 80 members @ Rs. 7,500 per month per member in a commercial complex (since, it is a case of ‘Commercial Complex’. Hence, exemption is not available. GST liability shall arise) (Rs. 7,500 × 12 month × 80 members)

72,20,000

Taxable Value 1,68,00,000

Illustration 33 : Services Provided by Unincorporated Association Compute value of taxable service and GST payable from the following receipts (exclusive of GST) of a Resident Welfare Association (RWA):

Particulars Amount in Rs.

Contribution from 20 residents of Rs. 6,000 each 1,20,000

Contribution from 80 residents of Rs. 8,500 each 6,80,000

Collection towards payment of Electricity bills of residents for 20 residents as per bills submitted 76,000

Collection in respect of Electricity bill issued in the name of RWA towards electricity consumption for common use

48,000

Provide brief notes and explanations for your answer. Answer : [Refer Entry No. 77 of NN. 12/2017 CT (R)]

Computation of GST Payable by a Resident Welfare Association (RWA)

Particulars Reasoning

Contribution from 20 Residents of Rs. 6,000 each.

NIL Contribution upto Rs. 7,500 p.m. per member is exempt. If contribution is above Rs. 7,500 p.m, the entire amount is taxable.

Contribution from 80 Residents of Rs. 8,500 each.

6,80,000

Collection towards payment of Electricity bills of residents for 20 residents as per bills submitted

NIL Expenditure or costs incurred by a RWA as a Pure Agent of the members, is excluded from the Value of Taxable Services in terms of Rule 33 of CGST Rules, 2017. Hence, members’ electricity bills collections are excluded. Further, common use electricity bills collections are also exempt from GST, as these are collected for the provision of carrying out any activity which is exempt from GST [Entry No. 77 (b)].

Collection towards payment of Electricity bills issued in the name of RWA for common use

NIL


CGST @ 9% 61,200

SGST @ 9% 61,200

Illustration 34 : The Resident Welfare Association (RWA) of Gokul Dham Society, Mumbai provides the following information with respect to the various amounts received by it in the month of Oct., 2018.



1) Electricity charges levied by State Electricity Board on the RWA in respect of electricity consumed for common use of lifts and lights in common area. [Bill was raised in the name of RWA. RWA collected the said charges by apportioning them equally among 100 families and then, remitted the same to the Board.] 5,75,000

2) Proceeds from sale of entry tickets to a musical performance conducted by the RWA in the park of Gokul Dham Society [Where the consideration for admission is not more than Rs. 500 per person.] 50,000

3) Monthly subscription collected from member families (Rs. 8,500 each from 100 families) 8,50,000

4) Electricity charges levied by State Electricity Board on the members of RWA [The same was collected from members and remitted to the Board on behalf of member] 4,70,000

5) Other Services to non-members 4,95,000

Compute the value of taxable supply and GST liability of RWA of Gokul Dham Society for the month of Oct., 2017. Notes : i. Wherever applicable, GST is not included in the receipts of RWA. ii. Wherever applicable, the time of supply falls in the month of Oct., 2017. iii. Rate of GST - 18 %. Answer : Computation of Value of taxable supply and GST liability

S.N. Particulars Amount (Rs.)

1)

Electricity charges levied by State Electricity Board on the RWA in respect of electricity consumed for common use of lifts and lights in common area. [Bill was raised in the name of RWA. RWA collected the said charges by apportioningthem equally among 100 families and then, remitted the same to the Board.] [Note 1] -

2) Proceeds from sale of entry tickets to a musical performance conducted by the RWA in the park of Gokul Dham Society [Where the consideration for admission is not more than Rs. 500 per person.] [Note 2] -

3) Monthly subscription collected from member families (Rs. 8,500 each from 100 families) [Note 3]

8,50,000

4) Electricity charges levied by State Electricity Board on the members of RWA [The same was collected from members and remitted to the Board on behalf of member] [Note 4] -

5) Other Services to non-members 4,95,000

Value of taxable supply 13,45,000

GST payable [13,45,000 x 18 /100] 2,42,100

Notes : 1) In the case of electricity bills issued in the name of RWA, in respect of electricity consumed for

common use of lifts and lights in common area, etc., GST would be exempt as these are collected for


the provision of carrying out any activity which is exempt from GST [Entry No. 77 (b)]. 2) Entry to entertainment events where the consideration for admission is not more than Rs. 500 per

person is exempt as per Entry No. 81 of NN 12/2017-CT (R). 3) If per month per member contribution of any or some members of a RWA exceeds Rs. 7,500 entire

contribution of such members whose per month contribution exceeds Rs. 7,500 would be ineligible for the exemption under the said notification. GST would then be leviable on the aggregate amount of monthly contribution of such members.

4) Services provided by a RWA in the name of its members, acting as a “pure agent” of its members, are excluded from value of taxable supply.

8. Services received from a provider of service located in a non- taxable territory by – (a) the Central Government, State Government, Union territory, a local authority, a governmental

authority or an individual in relation to any purpose other than commerce, industry or any other business or profession;

(b) an entity registered under section 12AA of the Income-tax Act, 1961 for the purposes of providing charitable activities; or

(c) a person located in a non-taxable territory. Provided that the exemption shall not apply to - (i) online information and database access or retrieval services received by persons specified in entry (a)

or entry (b); or (ii) services by way of transportation of goods by a vessel from a place outside India up to the customs

station of clearance in India received by persons specified in the entry. [Entry No. 10 of NN. 09/2017 IT (R)] Note : (1) As per clause (zq) under this notification, ‘Online information and database access or retrieval

services’ shall have the same meaning as assigned to it in clause (17) of the section 2 of the Integrated Goods and Services Tax Act, 2017.

(2) As per Sec. 2(17) of the IGST Act, Online information and database access or retrieval services means services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services such as, – (i) advertising on the internet; (ii) providing cloud services; (iii) provision of e-books, movie, music, software and other intangibles through telecommunication

networks or internet; (iv) providing data or information, retrievable or otherwise, to any person in electronic form

through a computer network; (v) online supplies of digital content (movies, television shows, music and the like); (vi) digital data storage; and (vii) online gaming.

9. Supply of services having place of supply in Nepal or Bhutan, against payment in Indian Rupees. [Entry no. 10D of NN 09/2017 IT (R), omitted by NN 02/2019 - IT (R), w.e.f. 04.02.2019]

10. Services by an intermediary of financial services located in a multi services SEZ with International Financial Services Centre (IFSC) status to a customer located outside India for international financial services in currencies other than Indian rupees (INR). Explanation. - For the purposes of this entry, the intermediary of financial services in IFSC is a person,- (i) who is permitted or recognised as such by the Government of India or any Regulator appointed for

regulation of IFSC; or


(ii) who is treated as a person resident outside India under the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015; or

(iii) who is registered under the Insurance Regulatory and Development Authority of India (International Financial Service Centre) Guidelines, 2015 as IFSC Insurance Office; or

(iv) who is permitted as such by Securities and Exchange Board of India (SEBI) under the Securities and Exchange Board of India (International Financial Services Centres) Guidelines, 2015.

[Entry No. 39A of NN 12/2017 CT (R), inserted by NN 02/2018 – CT (R), dated 25.01.2018]

11. Services supplied by an establishment of a person in India to any establishment of that person outside India, which are treated as establishments of distinct persons in accordance with Explanation 1 in section 8 of the IGST Act, 2017. Provided the place of supply of the service is outside India in accordance with section 13 of IGST Act, 2017. [Entry No. 10F of NN. 09/2017 – IT (R), inserted by NN 15/2018 – IT (R), w.e.f. 27.07.2018]

12. Import of services by United Nations or a specified international organisation for official use of the United Nations or the specified international organisation. Explanation. - For the purposes of this entry, unless the context otherwise requires, “specified international organisation” means an international organisation declared by the Central Government in pursuance of section 3 of the United Nations (Privileges and Immunities Act) 1947 (46 of 1947), to which the provisions of the Schedule to the said Act apply. [Entry No. 10G of NN. 09/2017 – IT (R), inserted by NN 15/2018 – IT (R), w.e.f. 27.07.2018]

13. Import of services by Foreign diplomatic mission or consular post in India, or diplomatic agents or career consular officers posted therein. Foreign diplomatic mission or consular post in India, or diplomatic agents or career consular officers posted therein shall be entitled to exemption from integrated tax leviable on the import of services subject to the conditions, - (i) that the foreign diplomatic mission or consular post in India, or diplomatic agents or career consular

officers posted therein, are entitled to exemption from integrated tax, as stipulated in the certificate issued by the Protocol Division of the Ministry of External Affairs, based on the principle of reciprocity;

(ii) that the services imported are for official purpose of the said foreign diplomatic mission or consular post or for personal use of the said diplomatic agent or career consular officer or members of his or her family;

(iii) that in case the Protocol Division of the Ministry of External Affairs, after having issued a certificate to any foreign diplomatic mission or consular post in India, decides to withdraw the same subsequently, it shall communicate the withdrawal of such certificate to the foreign diplomatic mission or consular post;

(iv) that the exemption from the whole of the integrated tax granted to the foreign diplomatic mission or consular post in India for official purpose or for the personal use or use of their family members shall not be available from the date of withdrawal of such certificate.

[Entry No. 10H of NN. 09/2017 – IT (R), inserted by NN 15/2018 – IT (R), w.e.f. 27.07.2018]

14. Services provided by an intermediary when location of both supplier and recipient of goods is outside the taxable territory. However, to avail this exemption, following documents shall be maintained for a minimum duration of 5 years:

(i) Copy of Bill of Lading (ii) Copy of executed contract between Supplier/Seller and Receiver/Buyer of goods

(iii) Copy of commission debit note raised by an intermediary service provider in taxable territory from service recipient located in non-taxable territory

(iv) Copy of certificate of origin issued by service recipient located in non-taxable territory (v) Declaration letter from an intermediary service provider in taxable territory on company letter


head confirming that commission debit note raised relates to contract when both supplier and receiver of goods are outside the taxable territory.

[Entry No. 12AA of NN 09/2017 – IT (R), inserted by NN 20/2019 – IT (R), w.e.f. 01.10.2019]

Notes :

1. Above services have been exempted from CGST, SGST and IGST by virtue of notifications issued under respective Acts.

2. A “Limited Liability Partnership” formed and registered under the provisions of the Limited Liability Partnership Act, 2008 shall also be considered as a partnership firm or a firm. [inserted by NN 21/2017 CT (R), dated 22.08.2017]

9.5 Other Exemptions

S. N. Description of Services

1

Intra-State supplies received by a TDS deductor from any unregistered supplier exempt from CGST Intra-State supplies of goods or services or both received by a deductor under section 51, from any unregistered supplier, is exempt from the whole of the central tax leviable thereon under section 9(4), subject to the condition that the deductor is not liable to be registered otherwise than under section 24(vi) [Notification No. 9/2017 CT (R) dated 28.06.2017].

2 Services imported by unit/developer in SEZ exempt from IGST All services imported by a unit/developer in the Special Economic Zone (SEZ) for authorised operations are exempt from the whole of the integrated tax leviable thereon under section 3(7) of the Customs Tariff Act, 1975 read with section 5 of the IGST Act, 2017 [Notification No. 18/2017 IT (R) dated 05.07.2017].

3. IGST Exempted to the extent it is paid on the consideration attributable to royalty and license fee included in transaction value u/r 10(1)(c) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 Import of services in relation to temporary transfer or permitting the use or enjoyment of any intellectual property right, to the extent of the aggregate of the Customs duties leviable u/s 3(7) of the Customs Tariff Act, 1975 (i.e. IGST), on the consideration declared u/s 14(1) of the Customs Act, 1962 towards royalties and license fees included in the transaction value as specified u/r 10(1)(c) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 on which the appropriate duties of Customs have been paid. [Notification No. 06/2018 – IT (R), dated 25.01.2018]

4. Procurement of taxable goods by exporters on payment of GST only @ 0.1% irrespective of actual rate of GST (NN. 40/2017-Central Tax (Rate) and NN 41/2017 - IT (R), dated 23.10.2017) The Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the intra-State or inter-State supply of taxable goods by a registered supplier to a registered recipient for export, from so much of the GST leviable thereon u/s 9 of the said Act, as is in excess of the amount calculated at the rate of 0.1% [(0.05% CGST + 0.05% SGST) or 0.1% IGST], [i.e. an exporter who is registered under GST can purchase the taxable goods from a registered supplier on payment of GST only @ 0.1%, irrespective of actual rate of GST], subject to fulfillment of the following conditions, namely : (i) the registered supplier shall supply the goods to the registered recipient on a tax invoice; (ii) the registered recipient shall export the said goods within a period of 90 days from the date of

issue of a tax invoice by the registered supplier; (iii) the registered recipient shall indicate the Goods and Services Tax Identification Number

(GSTIN) of the registered supplier and the tax invoice number issued by the registered supplier


in respect of the said goods in the shipping bill or bill of export, as the case may be; (iv) the registered recipient shall be registered with an Export Promotion Council or a Commodity

Board recognised by the Department of Commerce; (v) the registered recipient shall place an order on registered supplier for procuring goods at

concessional rate and a copy of the same shall also be provided to the jurisdictional tax officer of the registered supplier;

(vi) the registered recipient shall move the said goods from place of registered supplier – (a) directly to the Port, Inland Container Depot, Airport or Land Customs Station from where

the said goods are to be exported; or (b) directly to a registered warehouse from where the said goods shall move to the Port, Inland

Container Deport, Airport or Land Customs Station from where the said goods are to be exported;

(vii) if the registered recipient intends to aggregate supplies from multiple registered suppliers and then export, then, the goods from each registered supplier shall move to a registered warehouse and after aggregation, the registered recipient shall move goods to the Port, Inland Container Deport, Airport or Land Customs Station from where they shall be exported;

(viii) in case of situation referred to in condition (vii), the registered recipient shall endorse receipt of goods on the tax invoice and also obtain acknowledgement of receipt of goods in the registered warehouse from the warehouse operator and the endorsed tax invoice and the acknowledgment of the warehouse operator shall be provided to the registered supplier as well as to the jurisdictional tax officer of such supplier; and

(ix) when goods have been exported, the registered recipient shall provide copy of shipping bill or bill of export containing details of Goods and Services Tax Identification Number (GSTIN) and tax invoice of the registered supplier along with proof of export general manifest or export report having been filed, to the registered supplier as well as jurisdictional tax officer of such supplier.

Note : The registered supplier shall not be eligible for the above mentioned exemption if the registered recipient fails to export the said goods within a period of 90 days from the date of issue of tax invoice.

5 Exemption to Central Government’s share of Profit Petroleum from GST [NN 05/2018 – CT (R) and NN 05 2018 – IT (R), dated 25.01.2018]: The Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, has exempted the intra-State and inter-state supply of services by way of grant of license or lease to explore or mine petroleum crude or natural gas or both, from so much of the GST as is leviable on the consideration paid to the Central Government in the form of Central Government’s share of profit petroleum as defined in the contract entered into by the Central Government in this behalf.

6 Clarification regarding applicability of GST on Asian Development Bank (ADB) and International Finance Corporation (IFC) [Circular No. 83/02/2019- GST, dated 01-01-2019] 1. The ADB Act, 1966 provides that notwithstanding anything to the contrary contained in any

other law, the Bank, its assets, properties, income and its operations and transactions shall be exempt from all the taxation and from all customs duties. The Bank shall also be exempt from any obligation for payment, withholding or collection of any tax or duty [Section 5(1) of the ADB Act, 1966 read with Article 56(1) of the schedule thereto refers]. DEA has already conveyed vide letter No. 1/28/2002-ADB dated 22-01-2004 addressed to ADB that taxable services provided by ADB are exempted from service tax.

2. Similarly, IFC Act, 1958 also provides that notwithstanding anything to the contrary contained in any other law, the Corporation, its assets, properties, income and its operations and transactions authorised by the Agreement, shall be immune from all taxation and from all customs duties. The Corporation shall also be immune from liability for the collection or payment of any tax or duty [Section 3 (1) of IFC Act, 1958 read with Article VI, Section 9 (a) of the Schedule thereto refers].

3. CESTAT Mumbai vide final order dated 17-10-2016 in the case of M/s Coastal Gujarat Power Ltd.


has held that when the enactments that honour international agreements specifically immunize the operations of the service provider from taxability, a law contrary to that in the form of Section 66A of Finance Act, 1994 will not prevail. With the provider being not only immune from taxation but also absolved of any obligation to collect and deposit any tax, there is no scope for subjecting the recipient to tax. There is no need for a separate exemption and existing laws enacted by the sovereign legislature of the Union suffice for the purpose of giving effect to Agreements.

Accordingly, it is clarified that the services provided by IFC and ADB are exempt from GST in terms of provisions of IFC Act, 1958 and ADB Act. The exemption will be available only to the services provided by ADB and IFC and not to any entity appointed by or working on behalf of ADB or IFC.

Note : Above services have been exempted from CGST, SGST and IGST (if any) by virtue of notifications issued under respective Acts.

327

CHAPTER


10.1 Introduction Under any taxation system, registration is the most fundamental requirement for Identification of taxpayers ensuring tax compliance in the economy. Under indirect tax regime, without registration, a person can neither collect tax from his customers nor claim any credit of tax paid by him. Registration legally recognizes a person as supplier of goods or services and legally authorizes him to collect taxes from his customers and pass on the credit of the taxes paid on the goods or services supplied to the purchasers/recipients. He can claim the input tax credit of taxes paid and can utilize the same for payment of taxes due on supply of goods or services. There is seamless flow of input tax credit from suppliers to recipients at the national level, if all suppliers are registered.

Prior to introduction of GST, a service provider was required to be registered with the Service Tax Department, while a trader of goods had to be registered with the VAT Department. Similarly, a manufacturer of goods has to be registered with Central Excise and VAT Department with respect to the goods manufactured as also with the Service Tax Department in respect of services availed which were taxed under reverse charge mechanism.

The Central Excise law prescribed factory wise registration with few exceptions where centralized registration was permitted, VAT laws provided for State-wise registrations while the Service Tax law provided for either centralised or premise-wise registration. The registration numbers allotted under central laws were PAN-based which was not the case under State laws.

Under GST, registrations need to be taken State-wise, i.e. there are no centralized registrations under GST. A business entity having its branches in multiple States will have to take separate State wise registration for the branches in different States. Further, an entity having multiple branches in a single State would compulsorily have single registration only (PAN based legal entity), wherein it can declare one place as principal place of business (PPoB) and other branches as additional place(s) of business (APoB) - Goods and Services Tax Identification Number (GSTIN) per State. However, a business entity having separate business verticals in a State may obtain separate registration for each of its business verticals.

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.

Chapter VI - Registration [Sections 22 to 30] of the CGST Act stipulates the provisions relating to registration. State GST laws also prescribe identical provisions in relation to Registration.

Provisions of registration under CGST Act have also been made applicable to IGST Act vide section 20 of the IGST Act.

10.2 Relevant Definitions 1. As per Sec. 2(107) of CGST Act, 2017, Taxable person means a person who is registered or liable to be

registered under section 22 or section 24.

2. As per Sec. 2(94) of CGST Act, 2017, Registered person means a person who is registered under section 25, but does not include a person having a Unique Identity Number.

328 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 3. As per Sec. 2(85) of CGST Act, 2017, Place of Business includes :

(a) a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services or both; or

(b) a place where a taxable person maintains his books of account; or

(c) a place where a taxable person is engaged in business through an agent, by whatever name called.

4. As per Sec. 2(7) of CGST Act, 2017, Agriculturist means an individual/HUF who undertakes cultivation of land -

(a) by own labour, or

(b) by the labour of family, or

(c) by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family.

5. As per Sec. 2(17) of CGST Act, 2017, Business includes

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;

(b) any activity or transaction in connection with or incidental or ancillary to (a) above;

(c) any activity or transaction in the nature of (a) above, whether or not there is volume, frequency, continuity or regularity of such transaction;

(d) supply or acquisition of goods including capital assets and services in connection with commencement or closure of business;

(e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members, as the case may be;

(f) admission, for a consideration, of persons to any premises; and

(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;

(h) services provided by a race club by way of totalisator or a licence to book maker in such club activities of a race club including by way of totalisator or a license to book master or activities of a licensed book maker in such club [substituted by CGST (Amendment) Act,2018, w.e.f.01.02.2019]; and

(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities.

6. As per Sec. 2(50) of CGST Act, 2017, Fixed establishment means a place (other than the registered place of business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services, or to receive and use services for its own needs.

7. As per Sec. 2(89) of CGST Act, 2017, Principal place of business means the place of business specified as the principal place of business in the certificate of registration.

8. As per Sec. 2(20) of the CGST Act, 2017, “casual taxable person” means 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;

9. As per Sec. 2(77) of the CGST Act, 2017, “non-resident taxable person” means any person who occasionally undertakes transactions involving supply of goods or services or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India;

10. As per Sec. 2(45) of CGST Act, 2017, “electronic commerce operator” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce;

11. As per Sec. 2(44) of CGST Act, 2017, “electronic commerce” means the supply of goods or services or both, including digital products over digital or electronic network;

10.3 Persons Liable For Registration [Section 22]


Sec. 22 Persons liable for registration


(1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees: Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees. Provided further that the Government may, at the request of a special category State and on the recommendations of the Council, enhance the aggregate turnover referred to in the first proviso from ten lakh rupees to such amount, not exceeding twenty lakh rupees and subject to such conditions and limitations, as may be so notified. [proviso inserted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019]

(2) Every person who, on the day immediately preceding the appointed day, is registered or holds a license under an existing law, shall be liable to be registered under this Act with effect from the appointed day.

(3) Where a business carried on by a taxable person registered under this Act is transferred, whether on account of succession or otherwise, to another person as a going concern, the transferee or the successor, as the case may be, shall be liable to be registered with effect from the date of such transfer or succession.

(4) Notwithstanding anything contained in sub-sections (1) and (3), in a case of transfer pursuant to sanction of a scheme or an arrangement for amalgamation or, as the case may be, de-merger 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.

Explanation : For the purposes of this section, -

(i) the expression “aggregate turnover” shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals

(ii) the supply of goods, after completion of job work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and the value of such goods shall not be included in the aggregate turnover of the registered job worker;

(iii) the expression “special category States” shall mean the States as specified in sub-clause (g) of clause (4) of


article 279A of the Constitution except the State of Jammu and Kashmir and States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand [as amended by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019].


1. Threshold limit for registration :

Every supplier of goods or services or both is required to obtain registration

in the State or the Union territory from where he makes the taxable supply

if his aggregate turnover exceeds Rs. 20 lakhs in a F.Y.

However, the limit of Rs. 20 lakhs will be reduced to Rs. 10 lakhs, if the person is carrying out business in the Special category States as specified in article 279A(4)(g) of the Constitution except the State of Jammu & Kashmir and States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand [as amended by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019].

11 Special category States as are specified in Article 279A(4)(g) of the Constitution are - States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.

2. Analysis of Aggregate Turnover :

(i) As per Sec. 2(6) of CGST Act, 2017, “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess;

(ii) “Aggregate Turnover” means the aggregate value of all outward supplies :

Taxable supplies

Exempt supplies

Exports

Inter-State supplies

of persons having the same PAN be computed on all India basis.

But, it excludes :

CGST

SGST

UTGST

IGST

Compensation cess

Value of inward supplies on which tax is payable under reverse charge.

(iii) Outward Supplies taxable under reverse charge would continue to be part of the ‘aggregate turnover’ of the supplier of such supplies.

(iv) As per Sec 2(108) of the CGST Act, 2017, “taxable supply” means a supply of goods or services or both which is leviable to tax under this Act;


(v) As per Sec 2(47) of the CGST Act, 2017, “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;

(vi) As per Sec 2(78) of the CGST Act, 2017, “non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act;

(vii) Aggregate turnover to include total turnover of all branches with same PAN :

Example : Mr. B, a Chartered Accountant has two offices – one in Maharashtra and another in Rajasthan. In order to determine whether Mr. B is liable for registration, turnover of both the offices would be taken into account and only if the same exceeds Rs. 20 lakh, Mr. B is liable for registration.

Point to be noted: If a person having place of business in different States across India has one branch in any of the Special Category States, the threshold limit for GST registration will be reduced to Rs. 10 lakh.

(viii) Value of exported goods/services, exempted goods/services, inter-state supplies between distinct persons having same PAN to be included in aggregate turnover.

Example : M/s M.R. Mor Pvt. Ltd., owner of a petrol pump, is engaged in supplying Diesel as well as lubricating oils. Supply of Diesel is not leviable to GST, but supply of lubricant oil is taxable. In order to determine whether M/s M.R. Mor Pvt. Ltd., is liable for registration, turnover of both the supplies – non-taxable as well as taxable - would be taken into account and if the same exceeds Rs. 20 lakh, M/s M.R. Mor Pvt. Ltd., is liable for registration. Suppose, T/O of diesel = Rs. 78 lakhs + Lubricant oil = Rs. 2 lakhs. Aggregate Turnover = 80 lakhs. Therefore, M/s M.R. Mor Pvt. Ltd. is liable for registration. However, GST will be payable only on Rs. 2 lakhs.

(ix) Aggregate turnover to include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals :

Example : M/s Nitesh Trading Company has appointed M/s MNO as its agent. All the supplies of goods made by M/s MNO as agent of M/s Nitesh Trading Company will also be included in the aggregate turnover of M/s MNO.

(x) Value of Goods, after completion of job work, supplied directly from the premises of the registered job worker not to be included in its aggregate turnover :

Job work implies 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’.

Schedule II of the CGST Act stipulates that job work is a services. Principal can supply the goods directly from the premises of the job worker without bringing it to back to his own premises.

In case the job worker is unregistered, principal should declare job worker’s premises as his additional place of business and remove goods from the same.

If the job worker is registered person/principal supplies notified goods, goods can be supplied directly from the premises of the job worker.

Supply of goods, after completion of the job work, directly from the registered job worker’s premises is treated as supply of goods by the principal.

Further, the value of such goods supplied will be included in the aggregate turnover of the principal and not job worker.

332 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 3. Registration required only for a place of business from where taxable supply takes place : A person is

required to obtain registration with respect to his each place of business in India from where a taxable supply has taken place. However, a supplier is not liable to obtain registration in those states from where he is exclusively supplying of goods or services or both which are not taxable (not leviable) under GST.

4. Tax payers registered under earlier indirect tax laws required to migrate :

All the taxpayers who were registered under various earlier indirect tax laws are Liable to be registered under GST with effect from the appointed day [when the CGST Act came into force, i.e. 22nd June, 2017].

Such tax payers have been issued a Provisional ID and password by their respective tax Departments to log on on GST Common Portal (https://www.gst.gov.in/) to fill up the required details and upload the supporting documents. After they provided the requisite details, an ARN (Application Reference Number) is communicated to them.

Once a taxpayer had the ARN, he would have migrated to GST on the appointed day with issue of provisional certificate and would have received a provisional GSTIN.

Final registration certificate and GSTIN would be granted within 6 months of the appointed day.

5. Transferee liable for registration in case of transfer of business : Where a business is transferred, whether on account of succession/any other reason, to another person as a going concern, the transferee/successor, is to be registered with effect from the date of such transfer/succession.

Where the business is transferred, pursuant to sanction of a scheme/arrangement for amalgamation/de-merger of two or more companies, pursuant to an order of a High Court/Tribunal, the transferee is to be registered with effect from the date on which the Registrar of Companies issues a certificate of incorporation giving effect to such order.

Illustration 1 :

Rishabh Enterprises – a sole proprietorship firm – started an air-conditioned restaurant in Virar, Maharashtra in the month of February wherein the customers are served cooked food as well as cold drinks/non-alcoholic beverages. In March, the firm opened a liquor shop in Nagaland for trading of alcoholic liquor for human consumption.

Determine whether Rishabh Enterprises is liable to be registered under GST law with the help of the following information:

Particulars February (Rs.)* March (Rs.)*

Serving of cooked food and cold drinks/non-alcoholic beverages in restaurant in Maharashtra 5,50,000 6,50,000

Sale of alcoholic liquor for human consumption in Nagaland 5,00,000

Interest received from banks on the fixed deposits 1,00,000 1,00,000

Supply of packed food items from restaurant in Maharashtra 1,50,000 2,00,000

* excluding GST

You are required to provide reasons for treatment of various items given above. [RTP - May 2018]

Answer :

As per section 22 of the CGST Act, 2017, a supplier is liable to be registered in the State/Union territory from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds Rs. 20 lakh.


However, if such taxable supplies are made from any of the specified special category States, namely, States of Manipur, Mizoram, Nagaland and Tripura, he shall be liable to be registered if his aggregate turnover in a financial year exceeds Rs. 10 lakh.

In the given question, since Rishabh Enterprises is engaged in making taxable supplies only from Maharashtra which is not a specified Special Category State, the threshold limit for obtaining registration is Rs. 20 lakh.

The threshold limit is not reduced to Rs. 10 lakh in this case, as sale of alcoholic liquor for human consumption from Nagaland (one of the specified Special Category States) are non-taxable supplies in terms of section 9(1) of CGST Act, 2017.

As per section 2(6) of the CGST Act, 2017, aggregate turnover includes the aggregate value of:

(i) all taxable supplies,

(ii) all exempt supplies,

(iii) exports of goods and/or services and

(iv) all inter-State supplies of persons having the same PAN.

The above is computed on all India basis. Further, the aggregate turnover excludes central tax, State tax, Union territory tax, integrated tax and cess. Moreover, the value of inward supplies on which tax is payable under reverse charge is not taken into account for calculation of ‘aggregate turnover’.

In the light of the aforementioned provisions, the aggregate turnover of Rishabh Enterprises is computed as under:

Computation of aggregate turnover of Rishabh Enterprises

Particulars Turnover of February (Rs.)

Cumulative turnover of February & March (Rs.)

Serving of cooked food and cold drinks/non-alcoholic beverages in restaurant in Maharashtra 5,50,000

12,00,000 [Rs. 5,50,000 + Rs. 6,50,000]

Add: Sale of alcoholic liquor for human consumption in Nagaland [Note-1] 5,00,000

Add: Interest received from banks on the Fixed Deposits [Note-2] 1,00,000

2,00,000[Rs. 1,00,000 + Rs. 1,00,000]

Add: Supply of packed food items from restaurant in Maharashtra 1,50,000

3,50,000[Rs. 1,50,000 + Rs. 2,00,000]

Aggregate Turnover 8,00,000 22,50,000

Notes :

1. As per section 2(47) of the CGST Act, 2017, exempt supply includes non-taxable supply. Thus, supply of alcoholic liquor for human consumption in Nagaland, being a non-taxable supply, is an exempt supply and is, therefore, includible while computing the aggregate turnover.

2. Services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services) is exempt vide Notification No. 12/2017 CT (R) dated 28.06.2017. Thus, interest received from banks on the fixed deposits is an exempt supply and is, therefore, includible while computing the aggregate turnover.

Rishabh Enterprises was not liable to be registered in the month of February since its aggregate turnover did not exceed Rs. 20 lakh in that month. However, since its aggregate turnover exceeds Rs. 20 lakh in the month of March, it should apply for registration within 30 days from the date on which it becomes liable to registration.

334 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Illustration 2 :

With the help of the following information in the case of M/s Jayant Enterprises, Jaipur (Rajasthan) for the year 2017- 18, determine the aggregate turnover for the purpose of registration under CGST Act, 2017.

S.No. Particulars Amount

i. Sale of diesel on which Sale Tax (VAT) is levied by Rajasthan Government. 1,00,000

ii. Supply of goods, after completion of job work, from the place of Jayant Enterprises directly by principal. 3,00,000

iii. Export supply to England (U.K). 5,00,000

iv. Supply to its own additional place of business in Rajasthan. 5,00,000

v. Outward supply on which OST is to be paid by recipient under reverse charge. 1,00,000

All the above amounts are excluding GST.

You are required to provide reasons for treatment of various items given above. [CA Final, May 2018 - New] (5 Marks)

Solution:

Computation of Aggregate Turnover for the Purpose of registration

Sale of diesel on which Sale Tax (VAT) is levied by Rajasthan Government (petroleum products are outside the scope of GST hence it is non-taxable supply. Exempt supply includes non-taxable supply. Aggregate turnover includes exempt supplies) 1,00,000

Goods directly supplied from the job worker’s premises (by the principal) [ Not includible in value of job-worker viz. assessee; However , it would be included in the ‘Aggregate turnover’ of the principal] Nil

Export supply to England (U.K.) (export supplies are specifically included in aggregate turnover) 5,00,000

Supply to its own additional place of business in Rajasthan [supply made without consideration to units within the same state (under same registration) is not a supply] Nil

Outward supply on which GST is to be paid by recipient under reverse charge. (Aggregate turnover excludes value of inward supplies on which tax is payable by a person on reverse charge basis. However, outward supplies on which tax is payable by recipient are not excluded) 1,00,000

Total Aggregate Turnover 7,00,000

10.4 Compulsory Registration in Certain Cases [Section 24]

Statutory Provisions Sec. 24 Compulsory registration in certain cases

Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act, –

(i) persons making any inter-State taxable supply (also refer Note 1);

(ii) casual taxable persons making taxable supply;

(iii) persons who are required to pay tax under reverse charge;


(iv) person who are required to pay tax under sub-section (5) of section 9;

(v) non-resident taxable persons making taxable supply;

(vi) persons who are required to deduct tax under section 51, whether or not separately registered under this Act;

(vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise;

(viii) Input Service Distributor, whether or not separately registered under this Act;

(ix) 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;

(x) every electronic commerce operator who is required to collect tax at source under section 52 [as amended by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019];.

(xi) every person supplying online information and data base access or retrieval services from a place outside India to a person in India, other than a registered person; and

(xii) such other person or class of persons as may be notified by the Government on the recommendations of the Council.


Notes :

(1) In exercise of the powers conferred by Sec. 20 of IGST Act read with Sec. 23(2) of the CGST Act, the Central Government, on the recommendation of the council, has exempted the persons making inter-state supplies of taxable services and having an aggregate turnover, to be computed on all India basis, not exceeding Rs. 20 lakhs in a financial year from obtaining registration under GST Act. [Aggregate turnover limit is Rs. 10 lakhs, in case of "Special Category States" other than the state of Jammu and Kashmir. and States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand. In these states, it is Rs. 20 lakhs. [NN 10/2017 - I.T., dated 13.10.2017, as amended by NN 03/2019- I.T., w.e.f. 01.02.2019] [Sec. 23(2) of CGST Act, 2017.]

(2) Exemption from registration to job-workers making inter-State supply of services to a registered person from the requirement of obtaining registration [NN 07/2017 – IT, dated 14.09.2017, as amended by NN 02/2019 – IT, w.e.f. 01.02.2019]:

In exercise of the powers conferred by section 20 of the IGST Act, 2017 read with section 23(2) of the CGST Act, 2017, the Central Government, on the recommendations of the Council, hereby specifies the job workers engaged in making inter-State supply of services to a registered person as the category of persons exempted from obtaining registration under the said Act:

Provided that nothing contained in this notification shall apply to a job-worker –

(a) who is liable to be registered u/s 22(1) or who opts to take registration voluntarily u/s 25(3) of the said Act; or

(b) who is involved in making supply of services in relation to the goods mentioned against serial number 151 5 in the Annexure to rule 138 of the CGST Rules, 2017 [i.e. Jewellery, goldsmiths’ and silversmiths’ wares and other articles (Chapter 71)].

(3) In case a person who is already registered under GST is required to deduct tax under Section 51, he is required to take separate registration for the purpose of deducting tax u/s 51.

(4) An Input Service Distributor (ISD) is required to obtain a separate registration even though it may be separately registered.

336 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal CONCEPT OF TAXABLE PERSON

As per section 2(107) of the CGST Act, taxable person means a person who is registered or liable to be registered under section 22 or section 24.

From the definition of ‘taxable person’ provided above, it may be inferred that even an unregistered person who is liable to be registered is a taxable person. Similarly, a person not liable to be registered, but has taken voluntary registration and got himself registered is also a taxable person.

Illustration 3 :

Whether homestays providing accommodation through an Electronic Commerce Operator, below threshold limit are exempt from taking registration?

Answer :

Notification No. 17/2017-Central Tax (Rate), has been issued under section 9(5) of CGST Act, 2017, making ECOs liable for payment of GST in case of accommodation services provided in hotels, inns, guest houses or other commercial places meant for residential or lodging purposes provided by a person having turnover below Rs. 20 lakhs (Rs. 10 lakhs in special category states) per annum and thus, such homestays providing accommodation are not required to take registration under section 22(1) of CGST Act. Such persons, even though they provide services through ECO, are not required to take registration in view of section 24(ix) of CGST Act, 2017, as this service is taxable under section 9(5) of the CGST Act, 2017. [Circular No. 27/01/2018 – GST, dated 04.01.2018]

10.5 Persons Not Liable For Registration [Section 23]


Sec. 23 Persons not liable for registration


(1)

The following persons shall not be liable to registration, namely :

(a) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act

(b) an agriculturist, to the extent of supply of produce out of cultivation of land

(2) The Government may, on the recommendations of the Council, by notification, specify the category of persons who may be exempted from obtaining registration under this Act.


1. Persons not liable for registration :

(i) Person engaged exclusively in supplying goods/services/both not liable to tax

(ii) Person engaged exclusively in supplying goods/services/both wholly exempt from tax

(iii) Agriculturist to the extent of supply of produce out of cultivation of land

(iv) Specified category of persons notified by the Government**

2. As per Sec. 2(7) of CGST Act, 2017, Agriculturist means an individual/HUF who undertakes cultivation of land -


(a) by own labour, or

(b) by the labour of family, or

(c) by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family.

3. **Persons making only reverse charge supplies exempted from obtaining registration [Notification No. 5/2017 CT dated 19.06.2017] : Persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or services or both under section 9(3) have been notified as the category of persons exempted from obtaining registration under GST law. [Sec. 23(2) of the CGST Act, 2017]

4. Exemption from registration for any person engaged exclusively in supply of goods and whose aggregate turnover in the FY does not exceed Rs. 40 Lakhs [NN. 10/2019-CT, w.e.f. 01.04.2019]

In exercise of the powers conferred by sub-section (2) of section 23 of the CGST Act, 2017, the Central Government, on the recommendations of the Council, hereby specifies the following category of persons, as the category of persons exempt from obtaining registration under the said Act, namely,-

Any person, who is engaged in exclusive supply of goods and whose aggregate turnover in the financial year does not exceed Rs. 40 lakhs, except, -

(a) persons required to take compulsory registration under section 24 of the said Act;

(b) persons engaged in making supplies of the following goods:

Sl. No. Tariff item, sub-heading, heading or Chapter Description

(1) (2) (3)

1 2105 00 00 Ice cream and other edible ice, whether or not containing cocoa.

2 2106 90 20 Pan masala

3 24 All goods, i.e. Tobacco and manufactured tobacco substitutes

(c) persons engaged in making intra-State supplies in the States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand; and

(d) persons exercising option under the provisions of sub-section (3) of section 25 (i.e. Voluntary Registration), or such registered persons who intend to continue with their registration under the said Act.

In view the above discussion, the registration requirements under GST can be summarised as follows:

Threshold limit for persons engaged

exclusively in supply of goods

in supply of services/ both goods & services

States other than Special

Category States

Puducherry Rs. 20 lakh Rs. 20 Lakh

Telangana Rs. 20 lakh Rs. 20 Lakh


Others Rs. 40 lakh Rs. 20 Lakh

Special Category

States as per Indian

Constitution

Special

Category States as per

section 22

Manipur Rs. 10 lakh Rs. 10 Lakh

Mizoram Rs. 10 lakh Rs. 10 Lakh

Nagaland Rs. 10 lakh Rs. 10 Lakh

Tripura Rs. 10 lakh Rs. 10 Lakh

Others

Jammu and Kashmir

Rs. 40 lakh Rs. 20 Lakh

Assam Rs. 40 lakh Rs. 20 Lakh

Himachal Pradesh

Rs. 40 lakh Rs. 20 Lakh

Arunachal Pradesh

Rs. 20 Lakh Rs. 20 Lakh

Meghalaya Rs. 20 Lakh Rs. 20 Lakh

Sikkim Rs. 20 Lakh Rs. 20 Lakh

Uttarakhand Rs. 20 Lakh Rs. 20 Lakh

States with threshold limit of Rs. 10 lakh for both goods and services

Manipur, Mizoram, Nagaland, Tripura

States with threshold limit of Rs. 20 lakh for both goods and services

Arunachal Pradesh, Meghalaya, Sikkim, Uttarakhand, Puducherry, Telangana

States with threshold limit of Rs. 20 lakh for services and Rs. 40 lakh for goods**

Jammu & Kashmir, Assam, HimachalPradesh, All other States

Example: Prithviraj of Assam is exclusively engaged in intra-State supply of shoes. His aggregate turnover in the current financial year is Rs. 22 lakh. In view of the discussion in the above paras, the applicable threshold limit for registration for Prithviraj in the given case is Rs. 40 lakh. Thus, he is not liable to get registered under GST.

If in above example, all other things remaining the same, Prithiviraj is exclusively engaged in supply of pan masala instead of shoes, he will not be eligible for higher threshold limit of Rs. 40 lakh and the applicable threshold limit for registration in that given case will be Rs. 20 lakh. Thus, Prithiviraj will be liable to get registered under GST.


If instead of pan masala, Prithiviraj is exclusively engaged in supply of taxable services, the applicable threshold limit for registration will still be Rs. 20 lakh. Thus, Prithiviraj will be liable to get registered under GST.

Further, if Prithiviraj is engaged in supply of both taxable goods and services, the applicable threshold limit for registration will be Rs. 20 lakh. Thus, Prithiviraj will be liable to get registered under GST.

Example: Shivaji of Telangana is exclusively engaged in intra-State supply of toys. Its aggregate turnover in the current financial year is Rs. 22 lakh. Since Shivaji is making taxable supplies from Telangana, he will not be eligible for higher threshold limit available in case of exclusive supply of goods. The applicable threshold limit for registration for Shivaji in the given case is Rs. 20 lakh. Thus, he is liable to get registered under GST.

If in above example, all other things remaining the same, Shivaji is exclusively engaged in supply of taxable services instead of toys, the applicable threshold limit for registration will still be Rs. 20 lakh. Thus, Shivaji will be liable to get registered under GST.

Further, if Shivaji is engaged in supply of both taxable goods and services, the applicable threshold limit for registration will be Rs. 20 lakh only. Thus, Shivaji will be liable to get registered under GST.

Example: Ashoka of Manipur is exclusively engaged in intra-State supply of paper. Its aggregate turnover in the current financial year is Rs. 12 lakh. Since Ashoka is making taxable supplies from Manipur which is a Special Category State, the applicable threshold limit for registration for Ashoka in the given case is Rs. 10 lakh. Thus, he is liable to get registered under GST.

If in above example, all other things remaining the same, Ashoka is exclusively engaged in supply of taxable services instead of toys, the applicable threshold limit for registration will still be Rs. 10 lakh. Thus, Ashoka will be liable to get registered under GST.

Further, if Ashoka is engaged in supply of both taxable goods and services, the applicable threshold limit for registration in that given case will be Rs. 10 lakh only. Thus, Ashoka will be liable to get registered under GST.

Example: Raghav of Assam is exclusively engaged in intra-State supply of readymade garments. Its turnover in the current FY from Assam showroom is Rs. 28 lakh. It has another showroom in Tripura with a turnover of Rs. 11 lakh in the current FY. Since Raghav is engaged in supplying garments from a Special Category State, the applicable threshold limit for him gets reduced to Rs. 10 lakh. Further, Raghav is liable to get registered under GST in both Assam and Tripura on his aggregate turnover crossing the threshold limit of Rs. 10 lakh.

5. **Exemption from obtaining compulsory registration to supplier of services supplying services through an E-Commerce platform, if such service provider is having aggregate turnover upto Rs. 20 Lakhs in a financial year [Notification No. 65/2017 – CT, dated 15.11.2017]:

Persons making supplies of services, other than supplies specified under sub-section (5) of section 9 of the said Act through an electronic commerce operator who is required to collect tax at source under section 52 of the said Act, and having an aggregate turnover, to be computed on all India basis, not exceeding Rs. 20 lakhs in a financial year are exempted from obtaining registration under GST Act. [Aggregate turnover limit is Rs. 10 lakhs, in case of “Special Category States” other than the state of Jammu and Kashmir and States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand [as amended by NN 06/2019 – CT, w.e.f. 01.02.2019]. In these states, it is Rs. 20 lakhs. [Sec. 23(2) of CGST Act, 2017]

Illustration 4 :

AB Pvt. Ltd., Pune provides house-keeping services. The company supplies its services exclusively through an e-commerce website owned and managed by Hi-Tech Indya Pvt. Ltd., Pune. The turnover of AB Pvt. Ltd. in the current financial year is Rs. 18 lakh.

340 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Advise AB Pvt. Ltd. as to whether they are required to obtain GST registration. Will your advice be any different if AB Pvt. Ltd. sells readymade garments exclusively through the e-commerce website owned and managed by Hi-Tech Indya Pvt. Ltd.? [MTP - Nov. 2018], [MTP - May 2018]

Answer :

As per section 22 of the CGST Act every supplier of goods or services or both is required to obtain registration in the State/ Union territory from where he makes the taxable supply if his aggregate turnover exceeds Rs. 20 lakh [Rs. 10 lakh in case of specified Special Category States] in a financial year.

However, section 24 of the said Act enlists certain categories of persons who are mandatorily required to obtain registration, irrespective of their turnover. Persons who supply goods or services or both through such electronic commerce operator (ECO), who is required to collect tax at source under section 52, is one such person specified under clause (ix) of section 24.

However, where the ECO is liable to pay tax on behalf of the suppliers of services under a notification issued under section 9(5), the suppliers of such services are entitled for threshold exemption. [Persons making supplies of services, other than supplies specified under section 9(5) through an ECO who is required to collect tax at source under section 52, and having an aggregate turnover, to be computed on all India basis, not exceeding an amount of Rs. 20 lakh [Rs. 10 lakh for specified special category States] in a financial year, have been exempted from obtaining registration vide Notification No. 65/2017 CT dated 15.11.2017.]

Section 2(45) of the CGST Act defines ECO as any person who owns, operates or manages digital or electronic facility or platform for electronic commerce. Electronic commerce is defined under section 2(44) to mean the supply of goods or services or both, including digital products over digital or electronic network. Since Hi-Tech Indya Pvt. Ltd. owns and manages a website for e commerce where both goods and services are supplied, it will be classified as an ECO under section 2(45).

Notification No. 17/2017 CT (R) dated 28.06.2017 issued under section 9(5) specifies services by way of house-keeping, except where the person supplying such service through ECO is liable for registration under section 22(1), as one such service where the ECO is liable to pay tax on behalf of the suppliers.

In the given case, AB Pvt. Ltd. provides house-keeping services through an ECO. It is presumed that Hi-Tech Indya is an ECO which is required to collect tax at source under section 52. However, house-keeping services provided by AB Pvt. Ltd., which is not liable for registration under section 22(1) as its turnover is less than Rs. 20 lakh, is a service notified under section 9(5). Thus, AB Pvt. Ltd. will be entitled for threshold exemption for registration and will not be required to obtain registration even though it supplies services through ECO.

In the second case, AB Pvt. Ltd. sells readymade garments through ECO. Such supply cannot be notified under section 9(5) as only supplies of services are notified under that section. Therefore, in the second case, AB Pvt. Ltd. will not be entitled for threshold exemption and will have to compulsorily obtain registration in terms of section 24(ix).

Illustration 5:

Determine whether registration has to be obtained under GST in case of the following as per provisions contained under CGST Act, 2017.

(1) Fine oils is engaged in the business of machine oil as well as petrol and diesel. The total turnover on supply of machine oil is only Rs. 8 lakhs and in case of petrol and diesel is Rs. 8 crores.

(2) Ramlal, an agriculturist, for supply of produce out of cultivation of land amounting to Rs. 21 lakhs.

Answer :

(1) Supply of petrol and diesel is not leviable to GST, but supply of machine oil is taxable. In order to determine whether Fine oils is liable for registration, turnover of both the supplies, non taxable as well as taxable would be taken into account for the threshold of Rs. 20 lakhs. Here the turnover of machine oil, petrol and diesel exceeds Rs. 20 lakhs (Rs. 8.08 crores). Thus, Fine oils is liable for registration.


(2) As per section 23 of the CGST Act, an agriculturist, to the extent of supply of produce out of cultivation of land is not liable for registration under GST. In the case of Mr. Ramlal, even though the turnover of produce out of cultivation has exceeded Rs. 20 lakhs, he will not be liable for registration.

10.6 Procedure For Registration [Sections 25, 26 and 27] Procedure for registration is governed by section 25 of the CGST Act read with Chapter III - Registration of

Central Goods and Services Tax (CGST) Rules, 2017. Relevant provisions of CGST Rules, 2017 have been incorporated at the relevant places. Further, special provisions have been provided for registration of casual taxable person and non-resident taxable person under section 27. Concept of deemed registration has been elaborated under section 26.

Under GST, the application for registration has to be submitted electronically at the GST Common Portal – www.gst.gov.in, duly signed or verified through Electronic Verification Code (EVC) [Aadhar OTP].

Around 30 forms/formats have been prescribed in the CGST Rules, 2017. For every process in the registration chain such as application for registration, acknowledgment, query, rejection, registration certificate, show cause notice for cancellation, reply, cancellation, amendment, field visit report etc., there are standard formats. This makes the process uniform all over the country. The decision-making process will also be fast. Strict time lines have been stipulated for completion of different stages of registration process.

1. As per Sec. 2(20) of the CGST Act, 2017, “casual taxable person” means 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;

2. As per Sec. 2(77) of the CGST Act, 2017, “non-resident taxable person” means any person who occasionally undertakes transactions involving supply of goods or services or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India;

3. Where and by when to apply for registration? [Section 25(1)]

Particulars When Where Person who is liable to be registered under section 22 or section 24

within 30 days from the date on which he becomes liable to registration

in every such State/UT in which he is so liable

A casual taxable person or a non-resident taxable person

at least 5 days prior to the commencement of business

Every person who makes a supply from the territorial waters of India

within 30 days from the date on which he becomes liable to registration

in the coastal State/UT where the nearest point of the appropriate base line is located.

Example : Mind Parichay Ltd. is engaged in taxable supply of services in Rajasthan. The turnover of Mind Parichay Ltd. exceeded Rs. 20 lakh on 1st December. It is liable to apply for registration by 31st December in the State of Rajasthan.

Illustration 6 :

State the time-period within which registration needs to be obtained in each of the following independent cases:

(1) Casual taxable person

(2) Person making inter-State taxable supply (IPCC MTP May 2018, 4 Marks)

Answer :

Section 25(1) of the CGST Act stipulates the time-period within which registration needs to be obtained in various cases. It provides the following time-limits:


In case of Registration needs to be obtained

a person who is liable to be registered under section 22 or section 24

within 30 days from the date on which he becomes to registration

a casual taxable person or a non- resident taxable person

at least 5 days prior to the commencement of business

In view of the aforesaid provisions:

(1) A casual taxable person must obtain registration at least 5 days prior to the commencement of its business.

(2) As per section 24 of the CGST Act, person making inter-State taxable supply is liable to get compulsorily registered. Therefore, such person must obtain registration within 30 days from the date on which he becomes liable to registration.

4. State-wise registration [Section 25(2) read with rule 11, as amended by CGST (Amendment) Act, 2018, and NN 03/2019- C.T., w.e.f. 01.02.2019] :

(a) One registration per State :

Registration needs to be taken State-wise, i.e. there are no centralized registrations under GST. A business entity having its branches in multiple States will have to take separate State-wise registration for the branches in different States.

Further, within a State, an entity with different branches would have single registration wherein it can declare one place as principal place of business (PPoB) and other branches as additional place of business (APoB).

(b) Separate registration for different business verticals places of business within a State/UT may be granted [“business verticals” words are substituted by “place of business”] :

A person having multiple places of business in a State or Union territory may be granted a separate registration for each such place of business, subject to such conditions as may be prescribed. [Proviso to Sec. 25(2), substituted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019]

Although a taxpayer having multiple places of [POB] in one State is not mandatorily required to obtain separate registration for each such POB in the State, he has an option to obtain separate registration with respect to each such separate POB.

Note :

If separate registration for each POB is taken, then, all separately registered POB shall be treated as distinct person and shall pay tax on supply of goods/services/both made to another registered POB of such person and issue a tax invoice or a bill of supply for such supply. Separate registration application needs to be filed for each POB.

(c) Registration under composition levy :

If one of the POB of a taxable person is paying tax under normal levy [Section 9], no other POB shall be granted registration to pay tax under composition levy [Section 10].

If one of the POB [separately registered] becomes ineligible to pay tax under composition levy, all other POB would also become so ineligible.

The provisions of rules 9 and 10 relating to verification and grant of registration shall mutatis mutandis apply to an application submitted under this rule.


5. Voluntary registration [Section 25(3)] :

(a) A person who is not liable to be registered under section 22 or section 24 may get himself registered voluntarily. In case of voluntary registration, all provisions of this Act, as are applicable to a registered person, shall apply to voluntarily registered person.

(b) Voluntary registration is advantageous for the persons which supply of goods or services or both to registered persons. The reason for the same is that by virtue of section 9(4) of the CGST Act, in case of supplies received from unregistered supplier by registered recipient, recipient has to pay the tax under reverse charge. Therefore, business units would prefer receiving supplies from the registered persons only. Thus, voluntary registration enables a supplier of goods or services or both to enhance its B2B [Business to Business] transactions. Further, voluntary registered person shall be eligible to take ITC & ITC chain will not break.

(c) However, once a person obtains voluntary registration, he has to pay tax even though his aggregate turnover does not exceed Rs. 20 lakh/Rs. 10 lakh.

6. Distinct Persons /establishments of distinct persons [Section 25(4) &(5)] :

(a) A person who has obtained/is required to obtain more than one registration, whether in one State/ Union territory or more than one State/Union territory shall, in respect of each such registration, be treated as distinct persons.

(b) Further, where a person who has obtained or is required to obtain registration in a State or Union territory in respect of an establishment, has an establishment in another State or Union territory, then such establishments shall be treated as establishments of distinct persons.

Example : Mr. Harshit Garg, a consultant, has a registered head office in Rajasthan. He has also obtained registration in the State of Gujarat in respect of his newly opened branch office. Mr. Harshit Garg, shall be treated as distinct persons in respect of registrations in Rajasthan and Gujarat.

7. PAN must for obtaining registration [Section 25(6) & (7)] :

A Permanent Account Number is mandatory to be eligible for grant of registration.

A Non-Resident Taxable Person (NRTP) may be granted registration on the basis of other prescribed documents.

8. Unique Identity Number (UIN) [Section 25(9) & (10) read with rule 17] :

(a) Any specialized agency of the United Nations Organization or any Multilateral Financial institution and organization as notified under the United Nations (Privileges and Immunities) Act, 1947, consulate or embassy of foreign countries and any other person notified by the Commissioner, is required to obtain a UIN from the GSTN portal.

(b) This UIN is needed for claiming refund of taxes paid on notified supplies of goods and/or services received by them, and for such other purpose as may be notified.

(c) Such person shall file an application in a different prescribed form. UIN shall be assigned and registration certificate shall be issued within 3 working days from the date of submission of application.

(d) Rule 17(1A): The Unique Identity Number granted to a person under clause (a) of sub-section (9) of section 25 shall be applicable to the territory of India. [inserted by NN 75/2018 – CT, dated 29.12.2017]

9. Suo-Moto Compulsory registration (Temporary Registration) by the proper officer [Section 25(8) read with rule 16] : Where, pursuant to any survey, enquiry, inspection, search or any other proceedings under the Act, the proper officer finds that a person liable to registration under the Act** has failed to apply for such


registration, such officer may register the said person on a temporary basis and issue an order in prescribed form.

**Such person shall either:

(i) submit an application for registration in prescribed form within 90 days from the date of grant of temporary registration, or

(ii) file an appeal against such temporary registration.

In case of (ii), if the Appellate Authority upholds the liability to registration, application for registration shall be submitted within 30 days from the date of issuance of such order of the Appellate Authority.

Provisions relating to verification and issue of registration certificate [as contained in rules 9 and 10] [discussed in subsequent paras] shall, mutatis mutandis, apply to such application submitted by the person granted temporary registration. GSTIN thereafter granted shall be effective from the date of order of proper officer granting temporary registration.

10. Procedure for registration [Section 25 read with rules 8, 9 & 10] : Provisions relating to procedure for application for registration, verification of the application and approval & issue of registration certificate are contained in the rules 8, 9 and 10 of the CGST Rules, 2017 respectively. The same have to be read in conjunction with section 25 provisions. However, procedure so laid down will not apply to:

Non-resident taxable person

A person required to deduct tax at source under section 51

A person required to collect tax at source under section 52

A person supplying online information and database access or retrieval services from a place outside India to a non-taxable online recipient referred to in section 14 of IGST Act who is liable to be registered under section 25(1).

Thus, procedure for registration prescribed under rules 8, 9 and 10 are also applicable to a person paying tax under composition levy, every person seeking voluntary registration under section 25(3) as well as a casual taxable person. Such persons shall apply for registration in Form GST REG 01. The application for registration in GST Form REG 01 is divided into two parts – Part A and Part B.

In order to cater to the needs of tax payers who are not IT savvy, Facilitation centres have been established which help the taxpayer in submitting the application for registration, amending the registration certificate, submitting application for cancellation of registration, revocation of cancellation of registration, etc. Facilitation Centre shall be responsible for the digitization and/or uploading of the forms and documents.

11. Application for registration by Special Economic Zone (SEZ) .

A person having a unit, as defined in the Special Economic Zones Act, 2005, in a Special Economic Zone or being a Special Economic Zone developer shall have to apply for a separate registration, as distinct from his place of business located outside the Special Economic Zone in the same State or Union territory. [second proviso to Sec. 25(1), inserted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019]

Thus, there may be a case where two units of a tax payer are located in same State – one in SEZ and another outside SEZ. Separate registrations have to be obtained for each of the two units as separate business vertical.

SEZ is a geographically bound zone where the economic laws relating to export and import are more liberal as compared to other parts of the country. SEZ is considered to be a place outside India for all tax purposes.


12. Application for registration by Input Service Distributor (ISD) [Second proviso to rule 8(1) of the CGST Rules, 2017] :

As per Sec. 2(61) of the CGST Act, 2017, “Input Service Distributor” means an office of the supplier of goods or services or both which receives tax invoices issued under section 31 towards the receipt of input services and issues a prescribed document for the purposes of distributing the credit of central tax, State tax, integrated tax or Union territory tax paid on the said services to a supplier of taxable goods or services or both having the same Permanent Account Number as that of the said office.

Every person being an input Service Distributor shall make a separate application for registration as such Input Service Distributor. There is no threshold limit for registration for an ISD. An ISD is required to obtain a separate registration even though it may be otherwise registered, though the application shall be made in Form GST REG 01 only. Different offices like marketing division, security division etc. may apply for separate ISD registration.

Procedure for Registration

Every person liable to get registered and person seeking voluntary registration shall, before applying for registration, declare his Permanent Account Number (PAN), mobile number, e-mail address, State/UT in Part A of FORM GST REG-01 on GST Common Portal.

Temporary Reference Number (TRN) is generated and communicated to the applicant on the validated mobile number and e-mail address.

Using TRN, applicant shall electronically submit application in Part B of application form, along with specified documents at the Common Portal.

On receipt of such application, an acknowledgement in the prescribed form shall be issued to the applicant electronically. A Casual Taxable Person (CTP) applying for registration gets a TRN for making an advance deposit of tax in his electronic cash ledger and an acknowledgement is issued only after said deposit. Application shall be forwarded to the proper officer.

Proper officer examines the application and accompanying documents.


Deemed Approval of Application

If the proper officer fails to take any action -

1. within 3 working days from the date of submission of application, or

2. within 7 working days from the date of receipt of clarification, information or documents furnished by the applicants,

the application for grant of registration shall be deemed to have been approved.

Information required while filing application for Registration:

(i) Valid PAN

(ii) Valid Indian Mobile Phone Number

(iii) Valid E-mail Address

(iv) Prescribed documents & information on all mandatory fields of registration application

(v) Place of Business

(vi) Jurisdiction Details

(vii) Valid Bank Account Number from India

(viii) Indian Financial system code (IFSC) number of the same bank and branch

(ix) Atleast one proprietor/partner/director/trustee/karta/member with corresponding PAN

(x) An authorized signatory who is resident of India with valid details, including PAN

Physical verification of business premises in certain cases after grant of registration [Rule 25] : Where the proper officer is satisfied that the physical verification of the place of business of a registered person is required after grant of registration, he may get such verification done and the verification report along with


other documents, including photographs, shall be uploaded in the prescribed form on the GST Common Portal, within 15 working days following the date of such verification.

Issuance of registration certificate [Rule 10] : Where the application for grant of registration has been approved, a certificate of registration [duly signed or verified through EVC by the proper officer] in FORM GST REG-06 showing the principal place of business (PPoB) and additional place(s) of business (APoB) is made available to the applicant on the Common Portal and a Goods and Services Tax Identification Number (hereinafter referred to as “GSTIN”) i.e. the GST registration no. is communicated to applicant, within 3 days after the grant of registration.

GSTIN Format

State Code PAN Entity

Code Check sum

character

Display of registration certificate and GSTIN on the name board [Rule 18] : Every registered person shall display his registration certificate in a prominent location at his PPoB and at every APoB. Further, his GSTIN also has to be displayed on the name board exhibited at the entry of his PPoB and at every APoB.

13. Effective date of registration [Rule 10] :

Where an applicant submits application for registration

Effective date of registration is

within 30 days from the date he becomes liable to registration

the date on which he becomes liable to registration

after 30 days from the date he becomes liable to registration

date of grant of registration

Example: Mangal Industries Ltd. is engaged in taxable supply of services in Jharkhand. The turnover of Mangal Industries Ltd. exceeded Rs. 20 lakh on 1st January. It is liable to get registered by 31st January [30 days] in the State of Jharkhand. It applies for registration on 20th January and is granted registration certificate on 2nd February. The effective date of registration of Mangal Industries Ltd. is 1st January.

Example: In above example, if Mangal Industries Ltd. applies for registration on 5th February and is granted registration certificate on 14th February. The effective date of registration of Mangal Industries Ltd. will be 14th February.

14. Furnishing of Bank Account Details [Rule 10A] [inserted by NN. 31/2019 – CT, w.e.f. 28.06.2019] – After a certificate of registration in FORM GST REG-06 has been made available on the common portal and a GSTIN has been assigned, the registered person shall furnish information with respect to details of bank account, or any other information, as may be required on the common portal in order to comply with any other provisions, within 45 days from

the date of grant of registration or

the date on which the return required under section 39 is due to be furnished,

whichever is earlier.

However, this rule does not apply to the following persons:

(i) Persons who have been granted registration under rule 12 (TDS/TCS);


(ii) Persons who have been granted registration under rule 16 (Compulsory / Suo Motu Registration by Proper officer).

15. Special provisions for grant of registration in case of Non-Resident Taxable Person (NRTP) and Casual Taxable Person (CTP) [Sections 25 & 27 read with rules 13 & 15] : The two terms have been defined in the CGST Act as follows:

As per Sec. 2(20) of the CGST Act, 2017, Casual Taxable Person (CTP): means 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/Union Territory where he has no fixed place of business.

As per Sec. 2(77) of the CGST Act, 2017, Non-Resident Taxable Person (NRTP): means any person who occasionally undertakes transactions involving supply of goods or services or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India.

Based on the aforesaid definitions, following points merit consideration:

A CTP does not have a fixed place of business in the State/UT where he undertakes supply though he might be registered with regard to his fixed place of business in some other State/UT, while a NRTP does not have fixed place of business/residence in India at all.

A CTP has to undertake transactions in the course or furtherance of business whereas this condition is absent in the definition of NRTP.

The special registration provisions pertaining to CTP and NRTP are as follows:

A. Both CTP and NRTP have to compulsorily get registered under GST irrespective of the threshold limit, at least 5 days prior to commencement of business.

B. As per section 25(6), every person must have a PAN to be eligible for registration. Since NRTP will generally not have a PAN of India, he may be granted registration on the basis of other prescribed documents.

He has to submit a self-attested copy of his valid passport along with the application signed by his authorized signatory who is an Indian Resident having valid PAN. However, in case of a business entity incorporated or established outside India, the application for registration shall be submitted along with its tax identification number or unique number on the basis of which the entity is identified by the Government of that country or its PAN, if available.

Application will be submitted by NRTP in a different prescribed form whereas CTP will submit the application for registration in the normal form for application for registration i.e. Form GST REG 01 and his registration of CTP will be a PAN based registration.

C. Period of validity of registration certificate granted to CTP/NRTP : Registration Certificate granted to CTP/ NRTP will be valid for:

(a) Period specified in the registration application, or

(b) 90 days from the effective date of registration [can be extended further by a period not exceeding 90 days by making an application before the end of the validity of registration granted to him**]


Provisions relating to verification of application and grant of registration [under rules 9 and 10] will apply mutatis mutandis, to an application for registration filed by NRTP and CTP.


D. Advance deposit of tax : At the time of submitting the registration application, CTP/NRTP are required to make an advance deposit of tax in an amount equivalent to the estimated tax liability of such person for the period for which the registration is sought.

Such person will get a TRN for making an advance deposit of tax which shall be credited to his electronic cash ledger. An acknowledgement of receipt of application for registration is issued only after said deposit.

**Where extension of time is sought, such registered taxable person will deposit an additional amount of tax equivalent to the estimated tax liability of such person for the period for which the extension is sought.

Clarifications of issues under GST related to casual taxable person [Circular No. 71/45/2018-GST, dated 26.10.2018]

Issue 1: Whether the amount required to be deposited as advance tax while taking registration as a casual taxable person (CTP) should be 100% of the estimated gross tax liability or the estimated tax liability payable in cash should be calculated after deducting the due eligible ITC which might be available to CTP?

Clarification:

(i) It has been noted that while applying for registration as a casual taxable person, the FORM GST REG-1 (S. No. 11) seeks information regarding the “estimated net tax liability” only and not the gross tax liability.

(ii) It is accordingly clarified that the amount of advance tax which a casual taxable person is required to deposit while obtaining registration should be calculated after considering the due eligible ITC which might be available to such taxable person.

Issue 2 : As per section 27 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the said Act), period of operation by causal taxable person is ninety days with provision for extension of same by the proper officer for a further period not exceeding ninety days. Various representations have been received for further extension of the said period beyond the period of 180 days, as mandated in law.

Clarification:

(i) It is clarified that in case of long running exhibitions (for a period more than 180 days), the taxable person cannot be treated as a CTP and thus such person would be required to obtain registration as a normal taxable person.

(ii) While applying for normal registration the said person should upload a copy of the allotment letter granting him permission to use the premises for the exhibition and the allotment letter/consent letter shall be treated as the proper document as a proof for his place of business.

(iii) In such cases he would not be required to pay advance tax for the purpose of registration.

(iv) He can surrender such registration once the exhibition is over.

Illustration 7 :

What is the difference between casual and non- resident taxable persons?

Answer :

Casual and Non-resident taxable persons are separately defined in the CGST Act in Sections 2(20) and 2(77) respectively.

Some of the differences are outlined below:


Casual Taxable Person Non-resident Taxable Person

Occasionally undertakes transactions involving supply of goods or services or both in a State or Union territory where he has no fixed place of business.

Occasionally undertakes transactions involving supply of goods or services or both, but has no fixed place of business or residence in India.

Has a PAN Number Do not have a PAN Number; A non- resident person, if having PAN number may take registration as a casual taxable person

Same application form for registration as for normal taxable persons.

Separate application form for registration by non resident taxable person.

Has to undertake transactions in the course or furtherance of business.

Business test is absent in the definition.

Can claim input tax credit of all inward supplies. Can get input tax credit only in respect of import of goods.

16. Deemed registration [Section 26] :

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.

Grant of registration/UIN under any SGST Act/ UTGST Act is deemed to be registration/UIN granted under CGST Act provided application for registration has not been rejected under CGST Act.

Further, rejection of application for registration/UIN under SGST Act/UTGST Act is deemed to be rejection of application for registration under CGST Act.

17. Special Provision for grant of Registration in case of Person required to deduct tax at source (TDS) u/s 51 or to collect tax at source (TCS) u/s 52 [Rule 12] :

Application for registration has to be submitted by such person in a different prescribed form at GST common portal. They would be granted registration within 3 working days from the date of submission of application after due verification.

Registration will be cancelled if proper officer is satisfied that such person is no longer liable to deduct tax at source or collect tax at source. Cancellation of registration will be communicated to such person electronically in prescribed form. Proper officer shall follow the procedure laid down for cancellation of registration prescribed under this act and rules therein.

18. Special Provision for grant of Registration in case of Person supplying online information & database access or retrieval services [OIDAR Services] from a place outside India to a non-taxable online recipient [Rule 14]:

Application for registration has to be submitted by such person in a different prescribed form at GST common portal. They would be granted registration subject to such conditions and restrictions by such officer as may be notified by the Central Government on the recommendations of the Council.

10.7 Amendment of Registration [Section 28] The provisions relating to amendment of registration are contained in section 28 read with rule 19 of CGST Rules, 2017.


The significant aspects of the same are discussed hereunder :

Where there is any change in the particulars furnished in registration application/UIN application, registered person shall submit an application in prescribed manner, within 15 days of such change, along with documents relating to such change at the Common Portal.

Rule 19(1A): Any particular of the application for registration shall not stand amended with effect from a date earlier than the date of submission of the amendment application except with the order of the Commissioner for reasons to be recorded in writing and subject to such conditions as the Commissioner may, in the said order, specify. [inserted by NN 75/2018 – CT, dated 29.12.2017]

In case of amendment of core fields of information, the proper officer may, on the basis of information furnished or as ascertained by him, approve or reject amendments in the registration particulars in the prescribed manner. Such amendment shall take effect from the date of occurrence of event warranting such amendment.

However, where change relates to non-core fields of information, registration certificate shall stand amended upon submission of the application for amendment on the Common Portal.

Where a change in the constitution of any business results in change of PAN of a registered person, the said person shall apply for fresh registration. The reason for the same is that GSTIN is PAN based. Any change in PAN would warrant a new registration.


*PPoB: Principal Place of Business

APoB: Additional Place of Business

Note : Mobile no./e-mail address of authorised signatory can be amended only after online verification through GST Portal.

If the proper officer fails to take any action,-

(a) within a period of fifteen working days from the date of submission of the application, or


(b) within a period of seven working days from the date of the receipt of the reply to the show cause notice,

the certificate of registration shall stand amended to the extent applied for and the amended certificate shall be made available to the registered person on the common portal.

Illustration 8 :

Discuss the procedure for amendment of registration under CGST Act and rules thereto? [MTP - May 2018]

Answer :

The procedure for amendment of registration are contained in section 28 read with rule 19 of CGST Rules. The significant aspects of the same are discussed hereunder:

1. Where there is any change in the particulars furnished in registration application/UIN application, registered person shall submit an application in prescribed manner, within 15 days of such change, along with documents relating to such change at the Common Portal.

2. In case of amendment of core fields of information, the proper officer may, on the basis of information furnished or as ascertained by him, approve or reject amendments in the registration particulars in the prescribed manner. Such amendment shall take effect from the date of occurrence of event warranting such amendment.

3. However, where change relates to non-core fields of information, registration certificate shall stand amended upon submission of the application for amendment on the Common Portal.

4. Where a change in the constitution of any business results in change of PAN of a registered person, the said person shall apply for fresh registration. The reason for the same is that GSTIN is PAN based. Any change in PAN would warrant a new registration.

10.8 Cancellation, Suspension of Registration And Revocation of Cancellation [Section 29 & 30]

The provisions relating to cancellation of registration and its revocation are contained in sections 29 & 30 respectively read with rules 20 to 23 of the CGST Rules, 2017:

1. Circumstances where registration is liable to be cancelled [Section 29(1) & (2)] :

A. Circumstances when the registration can be cancelled either suo motu by proper officer or on an application of the registered person or his legal heirs (in case of death of such person)

(i) Business discontinued

Transferred fully for any reason including death of the proprietor

Amalgamated with other legal entity

Demerged or


Otherwise disposed of

(ii) Change in the constitution of the business

(iii) Taxable person who is no longer liable to be registered under section 22 or section 24.

(iv) However, during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed. [inserted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019]

B. Circumstances when the proper officer can cancel registration on his own : In the following cases, registration can be cancelled by the proper officer from such date, including any retrospective date, as he may deem fit:

(i) Following contraventions done by the registered person [Rule 21] :

(a) He does not conduct any business from the declared place of business; or

(b) He issues invoice/bill without supply of goods/services in violation of the provisions of this Act, or the rules made thereunder; or

(c) If he violates the provisions of section 171 of the CGST Act (i.e. provisions relating to anti-profiteering measure).

(d) If he violates the provisions of Rule 10A [i.e. Furnishing of Bank Account Details] [inserted by NN. 31/2019 – CT, w.e.f. 28.06.2019]

(ii) A registered person has not filed returns for continuous 6 months.

(iii) A registered person who has opted for composition levy, has not filed returns for 3 consecutive tax periods.

(iv) Voluntarily registered person has not commenced the business within 6 months from the date of registration.

(v) Registration was obtained by means of fraud, willful misstatement or suppression of facts.

(vi) However, during pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner as may be prescribed. [inserted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019]

2. Procedure for cancellation of registration : [Rule 20, 21A and 22]

A registered person seeking cancellation of registration shall electronically submit the application for cancellation of registration in prescribed form within 30 days of occurrence of the event warranting cancellation.

He is required to furnish in the application the details of inputs held in stock or inputs contained in semi-finished/finished goods held in stock and of capital goods held in stock on the date from which cancellation of registration is sought, liability thereon, details of the payment, if any, made against such liability and may furnish relevant documents thereof.

Where a person who has submitted an application for cancellation of his registration is no longer liable to be registered, proper officer shall issue the order of cancellation of registration within 30 days from the date of submission of application for cancellation.


Where the proper officer cancels the registration suo-motu, he shall not cancel the same without giving a show cause notice and without giving a reasonable opportunity of being heard, to the registered person. The reply to such show cause notice (SCN) has to be submitted within 7 days of service of notice.

If reply to SCN is satisfactory proper officer shall drop the proceedings and pass an order in prescribed form. Where registration of a person is liable to be cancelled, proper officer shall issue the order of cancellation of registration within 30 days from the date of reply to SCN.

Provided that where the person, instead of replying to the notice, furnishes all the pending returns and makes full payment of the tax dues along with applicable interest and late fee, the proper officer shall drop the proceedings and pass an order in prescribed form. [as amended by NN 39/2018 CT w.e.f. 04.09.2018]

Rule 21A. Suspension of registration [inserted by NN 03/2019 – CT, w.e.f. 01.02.2019] :

(1) Where a registered person has applied for cancellation of registration, the registration shall be deemed to be suspended from the date of submission of the application or the date from which the cancellation is sought, whichever is later, pending the completion of proceedings for cancellation of registration.

(2) Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29 or under rule 21, he may, after affording the said person a reasonable opportunity of being heard, suspend the registration of such person with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration.

(3) A registered person, whose registration has been suspended under sub-rule (1) or sub-rule (2), shall not make any taxable supply during the period of suspension and shall not be required to furnish any return under section 39.

Explanation: For the purposes of this sub-rule, the expression “shall not make any taxable supply” shall mean that the registered person shall not issue a tax invoice and, accordingly, not charge tax on supplies made by him during the period of suspension. [Explanation inserted by NN 49/2019 – CT, dated 09.10.2019]

(4) The suspension of registration under sub-rule (1) or sub-rule (2) shall be deemed to be revoked upon completion of the proceedings by the proper officer and such revocation shall be effective from the date on which the suspension had come into effect.

(5) Where any order having the effect of revocation of suspension of registration has been passed, the provisions of section 31(3)(a) [i.e. Revised Tax Invoice] and section 40 [i.e. First Return] in respect of the supplies made during the period of suspension and the procedure specified therein shall apply [Rule 21A(5) inserted by NN 49/2019 – CT, dated 09.10.2019].

The cancellation of registration shall be effective from a date to be determined by the proper officer. He will direct the taxable person to pay arrears of any tax, interest or penalty including the amount liable to be paid under section 29(5) [as discussed in the next para].

3. Reversal of credit [Section 29(5) & (6)] [also discussed in Chapter 5, Topic 5.7] :

A registered person whose registration is cancelled will have to debit the electronic credit or cash ledger by an amount equal to

(1) input tax credit (ITC) in respect of :

stock of inputs and inputs contained in semi-finished/finished goods stock and

capital goods or plant and machinery on the day immediately preceding the date of cancellation,

or


(2) the output tax payable on such goods,

whichever is higher, calculated in such manner as may be prescribed.

However, in case of capital goods or plant and machinery, the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery, reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher.

The manner of determination of amount of credit to be reversed is prescribed under rule 44 of the CGST Rules, 2017. On conjoint reading of section 29(5) and rule 44, it can be inferred as follows:

Amount of credit to be reversed in respect of INPUTS:

(1) ITC in respect of inputs calculated in accordance with rule 44 of the CGST Rules, 2017 (i.e. ITC on inputs computed proportionately on the basis of corresponding invoices* on which credit had been availed on such inputs) or

(2) Output tax payable on such goods,

whichever is higher

*If tax invoices are not available, the ITC to be reversed will be based on the prevailing market price of such goods on the date of cancellation.

Amount of credit to be reversed in respect of CAPITAL GOODS OR PLANT & MACHINERY:

(1) ITC in respect of capital goods or plant & machinery calculated in accordance with rule 44 of the CGST Rules, 2017 (i.e. ITC involved in the remaining useful life in months of the capital goods will be reversed on pro-rata basis, taking the useful life as 5 years) or

(2) Tax on the transaction value of such capital goods or plant and machinery under section 15,

whichever is higher

Example : Capital goods have been in use for 3 years, 7 month and 10 days.

The useful remaining life in months = 16 months, ignoring a part of the month.

ITC taken on such capital goods = Rs. 6,00,000/-

ITC attributable to remaining useful life = Rs. 6,00,000 x 16/60 = 1,60,000/-.

4. Other points :

(1) A voluntarily registered person cannot seek cancellation before the expiry of a period of 1 year from the effective date of registration [Proviso to rule 20]. [Omitted by NN 03/2018 - CT, dated 23.01.2018]

(2) A person to whom a UIN has been granted under rule 17 cannot apply for cancellation of registration [Rule 20].

(3) The cancellation of registration will not affect liability of registered person to pay tax and other dues under the Act for any period prior to the date of cancellation [Section 29(3)].

(4) The cancellation of registration under either SGST Act/UTGST Act shall be deemed to be a cancellation of registration under CGST Act [Section 29(4)].

5. Revocation of cancellation of registration [Section 30 read with rule 23] :


(1) Where the registration of a person is cancelled suo-motu by the proper officer, such registered person may apply for revocation of the cancellation to such proper officer, within 30 days from the date of service of the order of cancellation of registration, at the GST Common Portal in the prescribed manner.

(2) However, in case registration was cancelled for failure of registered person to furnish returns, before applying for revocation the person has to rectify the defaults (by filing all pending returns, making payment of all dues in terms of such returns alongwith interest, penalty, late fee, etc.) for which the registration was cancelled by the officer.

(3) If the proper officer is satisfied that there are sufficient grounds for revokation of cancellation, he may revoke the cancellation of registration, by an order within 30 days of receipt of application and communicate the same to applicant.

(4) Otherwise, he may reject the revocation application. However, before rejecting the application, he has to first issue Show Cause Notice (SCN) to the applicant who shall furnish the clarification within 7 working days of service of SCN. The proper officer shall dispose the application (accept/reject the same) within 30 days of receipt of clarification.

(5) The revocation of cancellation of registration under the SGST Act/ UTGST Act, as the case may be, shall be deemed to be a revocation of cancellation of registration under CGST Act.

(6) In case of Revocation of cancellation, all returns due for the period from the date of the order of cancellation of registration till the date of the order of revocation of cancellation of registration shall be furnished by the said person within a period of thirty days from the date of order of revocation of cancellation of registration.

(7) In case of Revocation of cancellation, where the registration was cancelled with retrospective effect, the registered person shall furnish all returns relating to period from the effective date of cancellation of registration till the date of order of revocation of cancellation of registration within a period of thirty days from the date of order of revocation of cancellation of registration.

[Point no. 6 & 7, inserted by NN 20/2019 – CT, w.e.f. 23.04.2019]

Clarification in respect of transfer of input tax credit in case of death of sole proprietor [Circular No. 96/15/2019-GST, dated 28.03.2019]

1. Doubts have been raised whether sub-section (3) of section 18 of the CGST Act, 2017 provides for transfer of input tax credit which remains unutilized to the transferee in case of death of the sole proprietor. As per sub-rule (1) of rule 41 of the CGST Rules, 2017, the registered person (transferor of business) can file FORM GST ITC-02 electronically on the common portal along with a request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee. Further, clarification has also been sought regarding procedure of filing of FORM GST ITC-02 in case of death of the sole proprietor. In order to clarify these issues and to ensure uniformity in the implementation of the provisions of the law, the Board, in exercise of its powers conferred by section 168 (1) of the CGST Act, hereby clarifies the issues raised as below.

2. Clause (a) of sub-section (1) of section 29 of the CGST Act provides that reason of transfer of business includes “death of the proprietor”. Similarly, for uniformity and for the purpose of sub-section (3) of section 18, sub-section (3) of section 22, sub-section (1) of section 85 of the CGST Act and sub-rule (1) of rule 41 of the CGST Rules, it is clarified that transfer or change in the ownership of business will include transfer or change in the ownership of business due to death of the sole proprietor.

3. In case of death of sole proprietor if the business is continued by any person being transferee or successor, the input tax credit which remains un-utilized in the electronic credit ledger is allowed to be transferred to the transferee as per provisions and in the manner stated below –


a. Registration liability of the transferee / successor: As per provisions of sub-section (3) of section 22 of the CGST Act, the transferee or the successor, as the case may be, shall be liable to be registered with effect from the date of such transfer or succession, where a business is transferred to another person for any reasons including death of the proprietor. While filing application in FORM GST REG-01 electronically in the common portal the applicant is required to mention the reason to obtain registration as “death of the proprietor”.

b. Cancellation of registration on account of death of the proprietor : Clause (a) of sub-section (1) of section 29 of the CGST Act, allows the legal heirs in case of death of sole proprietor of a business, to file application for cancellation of registration in FORM GST REG-16 electronically on common portal on account of transfer of business for any reason including death of the proprietor. In FORM GST REG-16, reason for cancellation is required to be mentioned as “death of sole proprietor”. The GSTIN of transferee to whom the business has been transferred is also required to be mentioned to link the GSTIN of the transferor with the GSTIN of transferee.

c. Transfer of input tax credit and liability : In case of death of sole proprietor, if the business is continued by any person being transferee or successor of business, it shall be construed as transfer of business. Sub-section (3) of section 18 of the CGST Act, allows the registered person to transfer the unutilized input tax credit lying in his electronic credit ledger to the transferee in the manner prescribed in rule 41 of the CGST Rules, where there is specific provision for transfer of liabilities. As per sub-section (1) of section 85 of the CGST Act, the transferor and the transferee / successor shall jointly and severally be liable to pay any tax, interest or any penalty due from the transferor in cases of transfer of business “in whole or in part, by sale, gift, lease, leave and license, hire or in any other manner whatsoever”. Furthermore, sub-section (1) of section 93 of the CGST Act provides that where a person, liable to pay tax, interest or penalty under the CGST Act, dies, then the person who continues business after his death, shall be liable to pay tax, interest or penalty due from such person under this Act. It is therefore clarified that the transferee / successor shall be liable to pay any tax, interest or any penalty due from the transferor in cases of transfer of business due to death of sole proprietor.

Manner of transfer of credit : As per sub-rule (1) of rule 41 of the CGST Rules, a registered person shall file FORM GST ITC-02 electronically on the common portal with a request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee, in the event of sale, merger, de-merger, amalgamation, lease or transfer or change in the ownership of business for any reason. In case of transfer of business on account of death of sole proprietor, the transferee / successor shall file FORM GST ITC-02 in respect of the registration which is required to be cancelled on account of death of the sole proprietor. FORM GST ITC-02 is required to be filed by the transferee/successor before filing the application for cancellation of such registration. Upon acceptance by the transferee / successor, the un-utilized input tax credit specified in FORM GST ITC-02 shall be credited to his electronic credit ledger.

10.9 Tax Deduction at Source And Collection of Tax at Source

INTRODUCTION

TDS stands for Tax Deduction at Source (TDS). Tax Deduction at Source (TDS) is a system, initially introduced by the income Tax Department. It is one of the modes/methods to collect tax, under which, certain percentage of amount is deducted by a recipient at the time of making payment to the supplier. It acts as a powerful instrument to prevent tax evasion and expands the tax net, as it provides for the creation of an audit trail.

Section 51 of CGST Act provides for deduction of tax at source in certain circumstances. This Section specifically lists out the deductors who are mandated by the Central Government to deduct tax at source, the rate of tax deduction and the procedure for remittance of the tax deducted.

On the other hand, Tax Collection at Source (TCS) has similarities with TDS, as well as a few distinctive features. TDS refers to the tax which is deducted when the recipient of goods or services makes some


payments under a contract etc., while TCS refers to the tax which is collected by the Electronic Commerce Operator (ECO) when a supplier supplies some goods or services through its portal and the payment for that supply is collected by the ECO and then, it is remitted to the supplier.

Section 52 provides for collection of tax at source in certain circumstances. The Section specifically lists out the tax collecting persons who are mandated by the Central Government to collect tax at source, the rate of tax collection and the procedure for remittance of the tax collected.

The amount of tax deducted/collected is reflected in the Electronic Cash Ledger of the deductee / supplier respectively.

The Provisions of TDS & TCS under CGST Act have also been made applicable to IGST Act vide Sec. 20 of the IGST Act.

The provisions relating to tax deduction at source (TDS) under section 51, collection of tax at source (TCS) under section 52, have been made effective w.e.f. 01.10.2018.

RELEVANT DEFINITIONS

1. As per Sec. 2(43) of CGST Act, 2017, “electronic cash ledger” means the electronic cash ledger referred to in subsection (1) of section 49;

2. As per Sec. 2(44) of CGST Act, 2017, “electronic commerce” means the supply of goods or services or both, including digital products over digital or electronic network;

3. As per Sec. 2(45) of CGST Act, 2017, “electronic commerce operator” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce;

4. As per Sec. 2(46) of CGST Act, 2017, “electronic credit ledger” means the electronic credit ledger referred to in sub-section (2) of section 49;

10.10 Tax Deduction at Source (TDS) [Sec. 51 of CGST Act]


Sec. 51 Tax deduction at source

Sub-Sec. Particulars

(1) Notwithstanding anything to the contrary contained in this Act, the government may mandate, -

(a) A department or establishment of the central government or state government; or

(b) Local authority; or

(c) Governmental agencies; or

(d) Such persons or category of persons as may be notified by the government on the recommendations of the council,

(hereafter in this section referred to as “the deductor”), to deduct tax at the rate of 1% from the payment made or credited to the supplier (hereafter in this section referred to as “the deductee”) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees:

Provided that no deduction shall be made if the location of the supplier and the place of supply is in a state or Union territory which is different from the state or as the case may be, Union territory of


registration of the recipient.

Explanation : For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the Central tax, state tax, Union territory tax, integrated tax and cess indicated in the invoice.

(2) The amount deducted as tax under this section shall be paid to the Government by the deductor within ten days after the end of the month in which such deduction is made, in such manner as may be prescribed.

(3) The deductor shall furnish to the deductee a certificate mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the government and such other particulars in such manner as may be prescribed.

(4) If any deductor fails to furnish to the deductee the certificate, after deducting the tax at source, within five days of crediting the amount so deducted to the Government, the deductor shall pay, by way of a late fee, a sum of Rs. 100 per day from the day after the expiry of such five day period until the failure is rectified, subject to a maximum amount of Rs. 5,000.

(5) The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor furnished under sub-section (3) of section 39, in such manner as may be prescribed.

(6) If any deductor fails to pay to the Government the amount deducted as tax under sub-section (1), he shall pay interest in accordance with the provisions of sub-section (1) of section 50, in addition to the amount of tax deducted.

(7) The determination of the amount in default under this section shall be made in the manner specified in section 73 or section 74.

(8) The refund to the deductor or the deductee arising on account of excess or erroneous deduction shall be dealt with in accordance with the provisions of section 54:

Provided that no refund to the deductor shall be granted, if the amount deducted has been credited to the electronic cash ledger of the deductee.


Deductors of Tax at Source

Under the GST regime, section 51 of the CGST Act, 2017 empower the Central Government to make it mandatory for the following persons (the deductor) to deduct tax at source from payments made to the suppliers of taxable goods and/or services:

(a) Central/State Government department or establishment

(b) Local Authority

(c) Governmental Agencies

(d) Notified Persons/category of persons

Using this power, the Central Government has appointed 01.10.2018, as the date on which the provisions of section 51 of the said Act shall come into force with respect to persons specified under clauses (a), (b) and (c) of sub-section (1) of section 51 of the said Act and the persons specified below under clause (d) of sub-section (1) of section 51 of the said Act, namely:-

(a) an authority or a board or any other body, -


(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with 51% or more participation by way of equity or control, to carry out any function;

(b) Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860);

(c) public sector undertakings.

[NN 50/2018 – CT, dated 13.09.2018]

However with respect to persons specified u/s 51(1)(a) of the Act, the provisions of TDS shall not apply to the authorities under the Ministry of Defence, other than the authorities specified in the Annexure-A and their offices, with effect from the 1st day of October, 2018. [Proviso inserted by NN 57/2018 – CT, w.e.f. 01.10.2018]

Further, no TDS is required to be deducted in respect of the supply of goods or services or both from a public sector undertaking to another public sector undertaking, whether or not a distinct person, with effect from the 1st day of October, 2018. [Proviso inserted by Notification No. 61/2018 – Central Tax, dated 05.11.2018]

Further, no TDS is required to be deducted in respect of the supply of goods or services or both which takes place between one person to another person specified under clauses (a), (b), (c) and (d) of sub-section (1) of section 51 of the said Act. [Proviso inserted by Notification No. 73/2018 – Central Tax, dated 31.12.2018]

Circular No. 76/50/2018-GST, dated 31.12.2018

The provisions of section 51 of the CGST Act are applicable only to such authority or a board or any other body set up by an Act of parliament or a State legislature or established by any Government in which 51% or more participation by way of equity or control is with the Government.

Deductees

The deductees are the suppliers whose total value of supply of taxable goods and/or services under a contract exceeds Rs. 2,50,000/- exclusive of GST & cess as per the invoice.

Rate of Deduction

The tax would be deducted @ 1% (CGST) of the payment made to the supplier (the deductee) of taxable goods and/or services, where the total value of such supply, under a contract, exceeds Rs. 2,50,000/- (excluding the amount of Central tax, State tax, Union Territory tax, Integrated tax and cess indicated in the invoice). Thus, individual supplies may be less than Rs. 2,50,000/-, but if total value of supply under a contract is more than Rs. 2,50,000/-, TDS will have to be deducted.

The deductors have to deduct tax at the rate of 1% from the payment made or credited to the supplier of taxable goods and/or services.

Note:

It may be noted that Section 20 of IGST Act provides that in the case of tax deducted at source, the deductor shall deduct tax at the rate of 2% from the payment made or credited to the supplier.

Further, the value of supply shall include any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST Act, and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier:

No Tax to be Deducted

362 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal The Proviso to Section 51(1) lays down that when the location of the supplier and the place of supply is in a State/ Union territory which is different from the State/Union territory of registration of the recipient, there will be no TDS.

The above statement can be explained in the following situations:

(a) Supplier, place of supply and recipient are in the same state : It would be intra-State supply and TDS (Central plus State tax) shall be deducted. It would be possible for the supplier (i.e. the deductee) to take credit of TDS in his electronic cash ledger.

(b) Supplier as well as the place of supply are in different states : In such cases, Integrated tax would be levied. TDS to be deducted would be TDS (Integrated tax) and it would be possible for the supplier (i.e. the deductee) to take credit of TDS in his electronic cash ledger.

(c) Supplier as well as the place of supply are in State A and the recipient is located in State B : The supply would be intra-State supply and Central tax and State tax would be levied. In such case, transfer of TDS (Central tax + State tax of State B) to the cash ledger of the supplier (Central tax + State tax of State A) would be difficult. So, in such cases, TDS would not be deducted.

Thus, when both the supplier as well as the place of supply are different from that of the recipient, no tax deduction at source would be made.

Value of Supply

The amount indicated in the invoice excluding the Central tax, State tax, Union territory tax, Integrated tax and cess element, is the value of supply.

Deposit of TDS with the Government

The amount of tax deducted at source should be deposited to the government account by deductor by 10th of the succeeding month.

TDS Certificate

A TDS certificate is required to be issued by deductor (the person who is deducting tax) in prescribed form to the deductee (the supplier from whose payment TDS is deducted).

TDS Certificate includes:

1. Contract value

2. Rate of deduction

3. Amount deducted

4. Amount paid to appropriate government

5. Any other particulars as may be prescribed

TDS Certificate to be furnished within 5 days of remittance to the Government.

Example : The Brihanmumbai Municipal Corporation (BMC) of Mumbai deducts TDS @ 2% from the payment to be made to a notified supplier on 2nd December. This TDS amount has to be remitted to the Government on or before 10th January. The TDS certificate with the above mentioned details has to be issued on or before 15th of January.

Certificate not Furnished by the Deductor


If the deductor does not furnish the certificate of deduction-cum-remittance within 5 days of the remittance, the deductor has to pay a late fee of Rs. 100 (CGST) from the expiry of the 5th day until the day he furnished the certificate. This late fee would not be more than Rs. 5,000 (CGST) .

Non-Remittance by the Deductor

If the deductor has not remitted the amount deducted as TDS to the Government within the prescribed time limit, he is liable to pay penal interest under section 50 (@ 18% p.a.) in addition to the amount of tax deducted.

Reflection of Amount of TDS

The amount of tax deducted is reflected in

(i) Electronic Cash Ledger of deductee and

(ii) Return filed by deductor under section 39(3).

The deductee can claim credit of the tax deducted, in his electronic cash ledger. This provision enables the Government to cross check whether the amount deducted by the deductor is correct and that there is no miss-match between the amount reflected in the electronic cash ledger and the amount shown in the return filed by deductor.

This is similar to existing practice in income tax relating to E-TDS returns filed by deductor and 26AS statement available for viewing the TDS remitted in respect of transactions by deductee.

Refund on Excess/Erroneous Deduction

The deductor or the deductee can claim refund of excess deduction or erroneous deduction. The provisions of section 54 relating to refunds would apply in such cases. However, if the deducted amount is already credited to the electronic cash ledger of the supplier, the same shall not be refunded.

Other Key Concepts Relating to TDS

Registration of TDS deductors :

(i) A TDS deductor has to compulsorily register without any threshold limit whether or not separtely registred under this Act.

(ii) The deductor has a privilege of obtaining registration under GST without requiring PAN. He can obtain registration using his Tax Deduction and Collection Account Number (TAN) issued under the Income tax Act, 1961.

TDS Return [Rule 66]:

(i) The deductor is also required to file a return in form GSTR-7 within 10 days from the end of the month. If the supplier is unregistered, name of the supplier rather than GSTIN shall be mentioned in the return.

(ii) The details of tax deducted at source furnished by the deductor in FORM GSTR-7 shall be made available to each of the supplier in PART C of the FORM GSTR-2A and FORM GSTR 4A deductees electronically on the common portal after the due date of filing of FORM GSTR-7 for claiming the amount of tax deducted in his electronic cash ledger after validation. [as amended by NN 31/2019- C.T., w.e.f. 28.06.2019]

(iii) The supplier can take this amount as credit in his electronic cash register and use the same for payment of tax liability.

Example : Mr. Nirbhay, a supplier makes a supply worth Rs. 5,00,000/- to BMC of Mumbai and issues the invoice of Rs. 5,00,000 plus 18% GST. While making the payment of Rs. 5,00,000/- to Mr. Nirbhay, the BMC shall deduct 2% of Rs. 5,00,000 (i.e. Rs. 10,000/-) as TDS.

364 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal The value for the purposes of TDS shall not include 18% GST. The TDS, so deducted, shall be deposited in the account of Government by 10th of the succeeding month.

The value so deposited in Government Account shall be reflected in the electronic cash ledger of Mr. Nirbhay (i.e. deductee) who would be able to use the same for the payment of tax or any other amount. The purpose of TDS is just to enable the Government to have a trail of transactions and to monitor and verify the compliances.

NOTE : The time limit for furnishing the TDS return u/s 51 of the CGST Act, 2017 in FORM GSTR-7 for the months of October, 2018 to July, 2019 is extended till 31.08.2019. [NN 26/2019 – C.T., dated 28.06.2019]

10.11 Collection of Tax at Source [Sec. 52 of CGST Act]


Sec. 52 Collection of Tax at Source


(1) Notwithstanding anything to the contrary contained in this Act, every electronic commerce operator (hereafter in this section referred to as the “operator”), not being an agent, shall collect an amount calculated at such rate not exceeding 1%, as may be notified by the Government on the recommendations of the Council, of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator.

Explanation : For the purposes of this sub-section, the expression “net value of taxable supplies” shall mean the aggregate value of taxable supplies of goods or services or both, other than services notified under sub-section (5) of section 9, made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.

(2) The power to collect the amount specified in sub-section (1) shall be without prejudice to any other mode of recovery from the operator.

(3) The amount collected under sub-section (1) shall be paid to the Government by the operator within ten days after the end of the month in which such collection is made, in such manner as may be prescribed.

(4) Every operator who collects the amount specified in sub-section (1) shall furnish a statement, electronically, containing the details of outward supplies of goods or services or both effected through it, including the supplies of goods or services or both returned through it, and the amount collected under sub-section (1) during a month, in such form and manner as may be prescribed, within ten days after the end of such month.

(5) Every operator who collects the amount specified in sub-section (1) shall furnish an annual statement, electronically, containing the details of outward supplies of goods or services or both effected through it, including the supplies of goods or services or both returned through it, and the amount collected under the said sub-section during the financial year, in such form and manner as may be prescribed, before the thirty first day of December following the end of such financial year.

(6) If any operator after furnishing a statement under sub-section (4) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in the statement to be furnished for the month during which such omission or incorrect particulars are noticed, subject to payment of interest, as specified in sub-section (1) of section 50: Provided that no such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of statement for the month of September following the end of the financial year or


the actual date of furnishing of the relevant annual statement, whichever is earlier.

(7) The supplier who has supplied the goods or services or both through the operator shall claim credit, in his electronic cash ledger, of the amount collected and reflected in the statement of the operator furnished under sub-section (4), in such manner as may be prescribed.

(8) The details of supplies furnished by every operator under sub-section (4) shall be matched with the corresponding details of outward supplies furnished by the concerned supplier registered under this Act in such manner and within such time as may be prescribed.

(9) Where the details of outward supplies furnished by the operator under sub-section (4) do not match with the corresponding details furnished by the supplier under section 37 or Section 39, the discrepancy shall be communicated to both persons in such manner and within such time as may be prescribed. [Bold & italic words inserted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019]

(10) The amount in respect of which any discrepancy is communicated under sub-section (9) and which is not rectified by the supplier in his valid return or the operator in his statement for the month in which discrepancy is communicated, shall be added to the output tax liability of the said supplier, where the value of outward supplies furnished by the operator is more than the value of outward supplies furnished by the supplier, in his return for the month succeeding the month in which the discrepancy is communicated in such manner as may be prescribed.

(11) The concerned supplier, in whose output tax liability any amount has been added under sub-section (10), shall pay the tax payable in respect of such supply along with interest, at the rate specified under sub-section (1) of section 50 on the amount so added from the date such tax was due till the date of its payment.

(12) Any authority not below the rank of Deputy Commissioner may serve a notice, either before or during the course of any proceedings under this Act, requiring the operator to furnish such details relating to

(a) supplies of goods or services or both effected through such operator during any period; or

(b) stock of goods held by the suppliers making supplies through such operator in the godowns or warehouses, by whatever name called, managed by such operator and declared as additional places of business by such suppliers, as may be specified in the notice.

(13) Every operator on whom a notice has been served under sub-section (12) shall furnish the required information within fifteen working days of the date of service of such notice.

(14) Any person who fails to furnish the information required by the notice served under sub-section (12) shall, without prejudice to any action that may be taken under section 122, be liable to a penalty which may extend to Rs. 25,000/-.

Explanation : For the purposes of this section, the expression “concerned supplier” shall mean the supplier of goods or services or both making supplies through the operator.


The Central Government has appointed 01.10.2018, as the date on which the provisions of section 52 of the said Act shall come into force. [NN 51/2018 – CT, dated 13.09.2018]

TCS refers to the tax which is collected by the electronic commerce operator (ECO) when a supplier supplies some goods or services through its portal and the payment for that supply is firstly collected by the ECO and then, it is paid by the ECO to the supplier.

But, the provisions of TCS will not apply, if the payment in respect of supply of goods or services through ECO is directly received in the account of the supplier (i.e. not through ECO).

The nature of working of ECO can be better understood with the following example:


Example: There are many e-commerce operators (hereinafter referred to as an operator) like Amazon, Flipkart, Jabong etc. operating in India. These operators display on their portal products as well as services which are actually supplied by some other person to the consumer.

The goods and services belonging to the other supplier are displayed on the portals of the operators and consumers buy such goods/services through these portals. On placing the order for a particular product/service, the actual supplier supplies the selected product/service to the consumer.

The price/consideration for the product/service is collected by the Operator from the consumer and passed on to the actual supplier after the deduction of commission by the operator.

– It may be noted that section 20 of IGST Act provides that in case of tax collected at source, the operator shall collect tax at such rate not exceeding 2%, as may be notified on the recommendations of the council, of the net value of the taxable supplies.

– Further, the value of a supply shall include any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, and the Goods and Services tax (Compensation to States) Act, if charged separately by the supplier.

– Further, the power conferred on the e-commerce operator to collect tax at source, is without prejudice to other modes of recovery from operator. This Sub-section establishes that the powers of e-commerce operator is restricted only to the extent of tax collection at source under circumstances specified therein and nothing more. [Sub-section (2)]

Who is liable to collect TCS?

Every electronic commerce operator (ECO), not being an agent, has been mandated to collect tax at source (TCS) from the net value of the taxable supplies made through it by the other suppliers, whenever the ECO collects the consideration on the behalf of the supplier.

Rate of TCS

Rate not exceeding 1% as may be notified by the government on the recommendations of the council, of the net value of the taxable supplies. [Sub-section (1)] [At present notified rate is 0.5% CGST].

The Central Government, on the recommendations of the Council, has notified that every electronic commerce operator, not being an agent, shall collect an amount calculated at a rate of 0.5% (CGST) of the net value of intra-State taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the said operator. [NN 52/2018 – CT, dated 20.09.2018]

The Central Government, on the recommendations of the Council, has notified that every electronic commerce operator, not being an agent, shall collect an amount calculated at a rate of 1% (IGST) of the net value of inter-State taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the said operator. [NN 02/2018 – IT, dated 20.09.2018]

Example : Mr. Ankit supplied a mobile inter-state at Rs. 5,000/- through an ECO (say, Flipkart). The ECO i.e. Flipkart would collect tax @ 1% of the net value of Rs. 5,000/- i.e. Rs. 50/-.

Net Value of the Taxable Supplies

Net Value of the Taxable Supplies =

Aggregate value of taxable supplies of goods and /or services [other than notified services u/s 9(5) by all registered persons through ECO]

(–)

Taxable supplies returned to suppliers

Deposit of TCS by ECO to Government


The TCS amount collected by the ECO has to be remitted to the Government Treasury within 10 days after the end of the month in which the collection was made. [Sub-section (3)]

Example: If the TCS has been collected in the month of December, the amount has to be remitted into the government Treasury on or before 10th January.

Filing of Monthly & Annual Statement by ECO

An electronic statement has to be filed by ECO containing details of the outward supplies of the goods/or services effected through it, including the supplies returned through it and the amount collected by it as TCS during the month within 10 days after the end of each month in which supplies are made. [Sub- section(4)]

Additionally, the ECO is also mandated to file an Annual Statement on or before 31st day of December following the end of financial year. [Sub-section (5)]

Rectification in Monthly Statement by ECO

If the ECO discovers any discrepancy on his own, not being the result of any scrutiny, inspection or enforcement proceeding, he has to rectify the statement along with payment of applicable interest.

However the limit for rectification is the :

1. Due date for filing statement for the month of September following the end of the financial year

Or

2. The actual date of furnishing of relevant annual statement,

Whichever is earlier.

Claim of Credit by the Supplier

Supplier can claim credit of the TCS amount in his electronic cash ledger. This amount should reflect in the monthly statement filed by the e-commerce operator. [Sub-section(7)]

Matching of the Details of Supplies

The details of supplies, including the value of supplies, submitted by every operator in the statements will be matched with the details of supplies submitted by all such supplier in their returns. [Sub-section (8)]

If there is any discrepancy in the value of the supplies, the same would be communicated to both of them. If such discrepancy in value is not rectified within the given time, then such amount would be added to the output tax liability of such supplier succeeding the calendar month in which the discrepancy is communicated, where outward supplies furnished by the operator is more than the value as shown by the supplier.

The supplier will have to pay the differential amount of the output tax along with the interest from the date such tax was due till the date of its payment. [Sub-sections 9 to 11]

Notice to Operator

An officer not below the rank of deputy commissioner can issue notice to an operator, asking him to furnish detail relating to volume of the goods/services supplied, stock of the goods lying in the warehouse/godowns etc. [Sub-section (12)]

The operator is required to furnish such details within 15 working days [Sub-section (13)]

In case an operator fails to furnish the information, besides being liable for penal action under section 122, it shall also be liable for penalty up to Rs. 25,000 (CGST) . [Sub-section (14)]

Other Key Relating to TCS

368 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Registration : The e-commerce operator who is required to collect tax at source as well as the supplier supplying goods or services through an operator need to compulsorily register under GST. The threshold limit of Rs. 20 lakhs (Rs. 10 lakhs for special category states) is not applicable to them. Section 24(x) of CGST Act 2017 makes it mandatory for every e-commerce operator who is required to collect tax at source to get registered under GST. Similarly, section 24(ix) of the CGST Act, 2017 makes it mandatory for every person who supplies goods/services through such operator to get registered under GST.

TCS statement Form GSTR -8 by the 10th of the following month : The amount of tax collected by the operator is required to be deposited by the 10th of the following month, during which such collection is made. The operator is also required to furnish the monthly statement in Form GSTR-8 by the 10th of the following month. The operator is also required to file an Annual statement in prescribed form by 31st of December following the end of every financial year. The operator can rectify errors in the statement filed, if any, latest by the due date of return to be filed for the month of September, following the end of every financial year or actual date of filing of annual statement, whichever is earlier.

The details furnished by the operator in GSTR -8 shall be made available electronically to each of the supplier in Part-C of the form GSTR-2A on the common portal after the due date of filing of FORM GSTR-8 for claiming the amount of tax collected in his electronic cash ledger after validation. [as amended by NN 31/2019 – C.T., w.e.f. 28.06.2019]

Matching and Reversal of Credit of the Amount Collected and Reflected in TCS Statement

Every electronic commerce operator (ECO), required to collect TCS under section 52, would furnish TCS Statement in Form GSTR-8 containing the details of outward supplies of goods or services effected through it, including the supplies of goods or services returned through it, and the amount of tax collected during a month, within 10 days after the end of such month.

In return, the supplier is also required to furnish the details of outward supplies made though e-commerce operator in Table 4C as also in Table 10 of GSTR-1 (which is also required to be filed within 10 days of the next month).

The details of supplies furnished by every e-commerce operator in his statement for the month will be matched with the corresponding details of outward supplies furnished by the concerned supplier in his valid return for the same month or any preceding month.

Where the details of outward supplies declared by the operator in his statement do not match with the corresponding details declared by the supplier, the discrepancy shall be communicated to both persons.

The amount in respect of which any discrepancy is communicated and which is not rectified by the supplier in his valid return or the operator in his statement for the month in which discrepancy is communicated shall be added to the output liability of the said supplier in his return for the month succeeding the month in which the discrepancy is communicated.

The concerned supplier in whose output tax liability any amount has been added, shall be liable to pay the tax payable in respect of such supply along with interest on the amount so added from the date such tax was due till the date of its payment.

1. Matching of details furnished by the e-commerce operator with the details furnished by the supplier [Section 52(7) and (8) read with rule 78]

A. TCS amount claimed by the supplier: The supplier who has supplied the goods or services or both through the e-commerce operator shall claim credit, in his electronic cash ledger, of the amount collected and reflected in TCS Statement (viz. the TCS amount) furnished in GSTR-8 by such operator.

B. Matching: The details of supplies furnished by every operator in TCS Statement (Form GSTR-8) shall be matched with the corresponding details of outward supplies furnished by the concerned registered supplier in Form GSTR-1.

C. Details to be matched: The following details shall be matched:


(a) State of place of supply; and

(b) Net taxable value

However, where the time limit for furnishing Form GSTR-1 under section 37 has been extended, the date of matching of the above mentioned details shall be extended accordingly.

Further that the Commissioner may, on the recommendations of the Council, by order, extend the date of matching to such date as may be specified therein.

2. Communication and rectification of discrepancy in details furnished by the e-commerce operator and the supplier [ Sec. 52(9), (10) and (11) read with rule 79]

A. Communication of discrepancy: Where the details of outward supplies furnished by the operator do not match with the corresponding details furnished by the supplier, the discrepancy shall be communicated to the supplier electronically in Form GST MIS-3 and to the e-commerce operator electronically in Form GST MIS-4.

Discrepancy shall be communicated on the common portal on or before the last date of the month in which the matching has been carried out.

B. Suitable rectification of discrepancy:

Rectification by Supplier Rectification by e-commerce Operator

Supplier may make suitable rectifications in the Statement of Outward Supplies to be furnished for the month in which the discrepancy is made available.

E-commerce operator may make suitable rectifications in the TCS Statement to be furnished for the month in which the discrepancy is made available.

C. Non-rectification of discrepancy, addition of amount of discrepancy to output tax liability of supplier:

The amount in respect of which any discrepancy is communicated and which is not rectified by the supplier in his valid return or the operator in his TCS statement for the month in which discrepancy is communicated, shall be added to the output tax liability of the said supplier in his return in Form GSTR-3, where the value of outward supplies furnished by the operator is more than the value of outward supplies furnished by the supplier, in his return for the month succeeding the month in which the discrepancy is communicated.

Such addition to the output tax liability and interest payable thereon shall be made available to the supplier electronically on the common portal in Form GST MIS-3.

Interest payable on amount added to the output tax liability of the supplier: The concerned supplier, in whose output tax liability any amount has been added, shall pay the tax payable in respect of such supply along with interest @ 18% p.a. [rate specified under subsection (1) of section 50] on the amount so added from the date such tax was due till the date of its payment.

Collection of tax at source by Tea Board of India [Circular No. 74/48/2018-GST, dated 05.11.2018]

1. Tea Board of India (hereinafter referred to as the, “Tea Board”), being the operator of the electronic auction system for trading of tea across the country including for collection and settlement of payments, admittedly falls under the category of electronic commerce operator liable to collect Tax at Source (TCS) in accordance with the provisions of section 52 of the CGST Act.

2. The participants in the said auction are the sellers i.e. the tea producers and auctioneers who carry out the auction on behalf of such sellers and buyers.

3. It has been represented that the buyers in the said auction make payment of a consolidated amount to an escrow Account maintained by the Tea Board. The said consolidated amount is towards the


value of the tea, the selling and buying brokerages charged by the auctioneers and also the amount charged by the Tea Board from sellers, auctioneers and buyers. Thereafter, Tea Board pays to the sellers (i.e. tea producers), from the said escrow account, for the supply of goods made by them (i.e. tea) and to the auctioneers for the supply of services made by them (i.e. brokerage). Under no circumstances, the payment is made by the Tea Board to the auctioneers on account of supply of goods i.e., tea sold at auction.

4. A representation has been received from Tea Board, seeking clarification whether they should collect TCS under section 52 of the CGST Act from the sellers of tea (i.e. the tea producers), or from the auctioneers of tea or from both.

5. The matter has been examined. In exercise of the powers conferred under sub-section (1) of section 168 of the CGST Act, for the purpose of uniformity in the implementation of the Act, it is hereby clarified, that TCS at the notified rate, in terms of section 52 of the CGST Act, shall be collected by Tea Board respectively from the -

(i) sellers (i.e. tea producers) on the net value of supply of goods i.e. tea; and

(ii) auctioneers on the net value of supply of services (i.e. brokerage).

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Payment of Tax 11

11.1 Introduction In the GST regime, for any intra-state supply, taxes to be paid are the Central GST (CGST), going into the account of the Central Government and the State/UTGST (SGST), going into the account of the concerned State Government. For any interstate supply, tax to be paid is Integrated GST (IGST) which will have components of both CGST and SGST. In addition, certain categories of registered persons will be required to pay TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) to the government account. In addition, wherever applicable, interest, penalty, fees and any other payment will also be required to be made.

The introduction of E-ledgers (Electronic Ledgers) is a unique feature under the GST regime. E-Ledgers are statements of cash and input tax credit in respect of each registered taxpayer. In addition, each taxpayer shall also have an electronic tax liability register. Once a taxpayer is registered on common portal (GSTN), two e-ledgers (Electronic Cash Ledger & Electronic Credit ledger) and an electronic liability register will be automatically opened and displayed on his dash board at all times.

Chapter X of the CGST Act prescribes the provisions relating to payment of tax containing sections 49 to 53. While section 49 discusses the three ledgers namely the electronic cash ledger, electronic credit ledger and electronic liability register, section 50 discusses about the interest on delayed payment of tax. Section 51 lays down the circumstances in which tax deduction at source (TDS) becomes mandatory. Section 52 deals with the circumstances when tax is to be collected at source (TCS) by the Electronic Commerce Operator. Further, the manner of utilization of ITC is laid down in section 53.

Chapter IX of CGST Rules deals with provisions relating to payment of tax.

11.2 Payment of Tax, Interest, Penalty And Other Amounts [Section 49]

(a) Electronic Cash Ledger [Section 49(1) & (3) Read With Rule 87 of CGST Rules]

The Electronic Cash Ledger contains a summary of all the deposits/payments made by a tax payer. Electronic Cash Ledger is maintained on the GST Portal. The Electronic Cash Ledger has to be maintained in prescribed form on the common portal by a person liable to pay tax.

I. Mode of Deposit in Electronic Cash Ledger

1. Online Payment (without any limit)

(i) Internet Banking

(ii) Credit cards/Debit cards

2. Offline Payment

(i) NEFT (National Electronic Fund Transfer)/RTGS (Real Time Gross Settlement) - No limits


(ii) Over the counter (OTC) - Rs. 10,000 per challan, per tax period by cash, cheque or demand draft

(iii) Any other mode as may be prescribed

3. Non applicability of limit of Over the Counter payment on deposit to be made by -

(i) Government Departments or Persons notified by Commissioner

(ii) Proper officer or any other officer authorized

To recover outstanding dues including attachment proceedings or sale of movable/immovable properties

To collect the amount by way of cash/cheque/demand draft during any investigation/ enforcement activity/any ad hoc deposit

II. Are manual Challans applicable as allowed earlier under the VAT regimes?

Manual or physical Challans are not allowed under the GST regime. It is mandatory to generate Challans online on the GST Portal.

III. How many types of Challans are prescribed for various taxes and payments to be paid under the GST regime?

There is single Challan prescribed for all taxes, fees, penalty, interest, and other payments to be made under the GST regime.

IV. Other Aspects relating to Challan

E- challan validity is for 15 days. The commission for making payment through e-challan has to be borne by the person making the payment.

Any unregistered person has to make payment on the basis of temporary identification number generated through common portal.

The 'deposit' made by one of the modes and in the prescribed manner will be credited to the Electronic Cash Ledger of the taxable person.

V. Manner of utilization of amount reflected in Electronic Cash Ledger [Section 49(3) of CGST Act]

The amount reflected in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fee, or any other amount under the relevant tax head in the prescribed manner.

In the ledger, information is kept minor head-wise for each major head. The ledger is displayed major head-wise i.e., IGST, CGST, SGST/UTGST, and CESS. Each major head is divided into five minor heads: Tax, Interest, Penalty, Fee, and Others.

A registered taxpayer can make cash deposits in the recognized Banks through the prescribed modes to the Electronic Cash Ledger using any of the Online or Offline modes permitted by the GST Portal. The Cash deposits can be used for making payment(s) like tax liability, interest, penalties, fee, and others.

VI. How can the cash available in the Electronic Cash Ledger be utilised? Can a taxpayer utilise the amount available in any minor head of a major head for any other minor head of the same major head?

The amount available in the Electronic Cash Ledger can be utilised for payment of any liability for the respective major and minor heads. For example, liability for the tax under SGST/UTGST can be settled only from the available amount of cash under SGST/UTGST Major head.

Example: An amount of Rs. 1,000 is available under minor head ‘tax’ of major head ‘SGST/UTGST’ and the taxpayer has a liability of Rs. 200 for minor head ‘interest’ under the same major head ‘SGST/UTGST’. Since, there is no amount available under minor head ‘interest’ under major head “SGST/UTGST”, therefore, interest payment cannot be made from the amount available under ‘tax’ of the same major head.

Payment of Tax 373

VII. Is transfer of funds between the major heads permissible for discharging liabilities?

Amount available under one major head (SGST/UTGST, CGST, IGST or CESS) cannot be utilised for discharging the liability under any other major head. For example, amount available in SGST/UTGST cannot be utilised for discharging liabilities under CGST, IGST, or CESS and vice versa.

Example: A taxpayer made a cash deposit of Rs. 1,000 to IGST – Tax, through net banking. The tax payer can utilise this cash deposit of Rs. 1,000 in the cash ledger to make payment ONLY of the IGST – Tax liability, by debiting the Cash Ledger.

(b) Electronic Credit Ledger [Section 49(2),(4) & (5) Read With Rule 86 Of CGST Rules]

Sub-section (2) of section 49 of the CGST Act provides that the self-assessed input tax credit (ITC) by a registered person shall be credited to its Electronic Credit Ledger or Electronic Input Tax Credit Ledger. This is to be maintained in the prescribed form.

Input Tax Credit as self-assessed in monthly returns will be reflected in the ITC ledger. The credit in this ledger can be used to make payment of tax only and not other amount such as interest, penalty, fees, etc.

I. Manner of utilisation of ITC

The electronic credit ledger can be debited only to the extent of the discharge of any liability in accordance with section 49 or section 49A or section 49B [as amended by NN NN 03/2019 – CT, w.e.f. 01.02.2019].

The input tax credit available under the head IGST in the electronic credit ledger will first be utilized against IGST payment.

Remaining amount if any, will be utilized for payment of CGST/SGST/UGST in any order.

Available CGST Credit in the credit ledger shall first be utilized for payment of CGST.

– Remaining amount if any, will be utilized for payment of IGST

Available SGST/UTGST credit in the credit ledger shall first be utilized for payment of SGST/UTGST.

– Remaining amount if any, will be utilized for payment of IGST

CGST Credit cannot be utilized for payment of SGST/UTGST.

Similarly, SGST/UTGST credit cannot be utilized for payment of CGST.

II. Order of utilisation of ITC for payment of liabilities [As per amendments made by CGST (Amendment) Act, 2018, w.e.f. 29.08.2018] :

For payment of liability of IGST – First ITC of IGST, then, ITC of CGST and then, ITC of SGST / UTGST will be utilised.

For payment of liability of CGST – First ITC of IGST, and then, ITC of CGST will be utilised. But, ITC of SGST / UTGST will never be utilised for payment of liability of CGST.

For payment of liability of SGST/UTGST – First ITC of IGST, and then, ITC of SGST/UTGST will be utilised. But, ITC of CGST will never be utilised for payment of liability of SGST/UTGST.

However, the Government may, on the recommendations of the Council, prescribe the order and manner of utilisation of the ITC on account of IGST, CGST, SGST or UTGST, as the case may be, towards payment of any such tax.

III. Order of Utilisation of ITC [Rule 88A, inserted by NN 16/2019 – CT, dated 29.03.2019]

Input tax credit on account of integrated tax shall first be utilised towards payment of integrated tax, and the amount remaining, if any, may be utilised towards the payment of central tax and State tax or Union territory tax, as the case may be, in any order:


Provided that the input tax credit on account of central tax, State tax or Union territory tax shall be utilised towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has first been utilised fully.

Above provisions may be summarized as follows:

ITC Available

First Set off (Output Liability)

Next Set off (Output Liability)

Not allowed to Set off

Impact of Rule 88A and related Proviso

IGST IGST CGST/SGST/UTGST (in any order)

NA IGST credit is to be utilised first against IGST liability then against CGST/SGST/UTGST liability in any order. Taxpayer has to exhaust ITC of IGST first followed by CGST/SGST/ UTGST credit.

CGST CGST

IGST SGST and UTGST

SGST SGST IGST CGST

UTGST UTGST IGST CGST

Clarification in respect of utilization of input tax credit under GST [Circular No. 98/17/2019-GST, dated 23.04.2019]

1. Section 49 was amended and Section 49A and Section 49B were inserted vide Central Goods and Services Tax (Amendment) Act, 2018 [hereinafter referred to as the CGST (Amendment) Act]. The amended provisions came into effect from 1st February 2019.

2. Various representations have been received from the trade and industry regarding challenges being faced by taxpayers due to bringing into force of section 49A of the CGST Act, 2017. The issue has arisen on account of order of utilization of input tax credit of integrated tax in a particular order, resulting in accumulation of input tax credit for one kind of tax (say State tax) in electronic credit ledger and discharge of liability for the other kind of tax (say Central tax) through electronic cash ledger in certain scenarios. Accordingly, rule 88A was inserted in the CGST Rules, 2017 in exercise of the powers under Section 49B of the CGST Act vide notification No. 16/2019-Central Tax, dated 29th March, 2019. In order to ensure uniformity in the implementation of the provisions of the law, the Board, in exercise of its powers conferred by section 168 (1) of the CGST Act, hereby clarifies the issues raised as below.

3. The newly inserted Section 49A of the CGST Act provides that the input tax credit of Integrated tax has to be utilized completely before input tax credit of Central tax / State tax can be utilized for discharge of any tax liability. Further, as per the provisions of section 49 of the CGST Act, credit of Integrated tax has to be utilized first for payment of Integrated tax, then Central tax and then State tax in that order mandatorily. This led to a situation, in certain cases, where a taxpayer has to discharge his tax liability on account of one type of tax (say State tax) through electronic cash ledger, while the input tax credit on account of other type of tax (say Central tax) remains un-utilized in electronic credit ledger.

4. The newly inserted rule 88A in the CGST Rules allows utilization of input tax credit of Integrated tax towards the payment of Central tax and State tax, or as the case may be, Union territory tax, in any order subject to the condition that the entire input tax credit on account of Integrated tax is completely exhausted first before the input tax credit on account of Central tax or State / Union territory tax can be utilized. It is clarified that after the insertion of the said rule, the order of utilization of input tax credit will be as per the order (of numerals) given below:

Input tax Credit on account of

Output liability on account of Integrated tax

Output liability on account of Central tax

Output liability on account of State tax / Union Territory tax

Payment of Tax 375

Integrated tax (I) (II) – In any order and in any proportion

(III) Input tax Credit on account of Integrated tax to be completely exhausted mandatorily

Central tax (V) (IV) Not permitted

State tax / Union Territory tax

(VII) Not permitted (VI)

5. The following illustration would further amplify the impact of newly inserted rule 88A of the CGST Rules:

Illustration:

Amount of Input tax Credit available and output liability under different tax heads

Head Output Liability Input tax Credit

Integrated tax 1000 1300

Central tax 300 200

State tax / Union Territory tax 300 200

Total 1600 1700 Option 1:


Discharge of output liability on account of Integrated tax

Discharge of output liability on account of

Central tax



Balance of Input Tax Credit

Integrated tax 1000 200 100 0

Input tax Credit on account of Integrated tax has been completely exhausted

Central tax 0 100 - 100

State tax / Union territory tax

0 - 200 0

Total 1000 300 300 100 Option 2:


Discharge of output liability on account of Integrated tax


Central tax



Balance of Input Tax Credit

Integrated tax 1000 100 200 0

Input tax Credit on account of Integrated tax has been completely exhausted

Central tax 0 200 - 0

State tax / Union territory tax

0 - 100 100

Total 1000 300 300 100

Presently, the common portal supports the order of utilization of input tax credit in accordance with the provisions before implementation of the provisions of the CGST (Amendment) Act i.e. pre-insertion of Section


49A and Section 49B of the CGST Act. Therefore, till the new order of utilization as per newly inserted Rule 88A of the CGST Rules is implemented on the common portal, taxpayers may continue to utilize their input tax credit as per the functionality available on the common portal.

IV. Transfer of input tax credit

Section 53 of CGST Act provides simple but important modus operandi in respect of post CGST utilisation towards IGST liability. Under section 49(5)(b),(c) and (d) of the Act, CGST/SGST/UTGST credits can be utilised by a tax payer on priority basis to respective CGST/SGST/UTGST dues first. Then, in case of CGST, balance, if any, can be used to pay towards IGST. If used so, there shall be reduction in central tax caused by Central Government and equal credit shall be ensured to IGST in the prescribed manner.

In other words, if CGST is utilised to pay towards dues of IGST, there shall be reduction in CGST on such utilisation and the Central Government shall transfer equivalent amount to the credit of IGST account. Thus, in this manner the Central Government shall ensure due credit to IGST.

Such treatment shall be ensured by the Central Government for UTGST and SGST also in respective cases.

It may be noted that equivalent provision is there in Section 18 of IGST Act, 2017.

V. What happens if the taxable person files the return but does not make payment of tax?

In such cases, the return is not considered as a valid return. Section 2(117) defines a valid return to mean a return furnished under sub-section (1) of section 39 on which self-assessed tax has been paid in full. It is only the valid return that would be used for allowing input tax credit (ITC) to the recipient. In other words, unless the supplier has paid the entire self-assessed tax and filed his return and the recipient has filed his return, the ITC of the recipient would not be confirmed.

VI. Common Points for Electronic Cash & Credit Ledger

Where a person has claimed refund of any amount from the electronic cash or credit ledger, the said amount shall be debited to the electronic cash or credit ledger.

If the refund so claimed is rejected, either fully or partly, the amount debited earlier, to the extent of rejection, shall be credited to the electronic cash or credit ledger by the proper officer by an order made in prescribed form

(c) Electronic Liability Register [Section 49(7), (8) & (9) Read With Rule 85 of CGST Rules]

Sub-section (7) of section 49 speaks about the third kind of ledger to be maintained by a taxable person viz. Electronic Liability Register. While the terms “Electronic Cash Ledger” and “Electronic Credit Ledger” are defined in the Act, the term “Electronic Liability Register” is not defined. The Section lays down that all liabilities of a taxable person will be maintained in a separate register.

Electronic liability register will reflect the total tax liability of a taxpayer (after netting) for the particular month.

I. Order of discharge of tax and other dues

Sub-section (8) prescribes the chronological order in which the liability of a taxable person has to be discharged:

self -assessed tax and other dues for the previous tax periods have to be discharged first.

the self -assessed tax and other dues for the current period have to be discharged next.

Once these two steps are exhausted, thereafter any other amount payable including demand determined under section 73 or section 74 to be discharged. In other words, the liability if any, arising out of demand notice and adjudication proceedings comes last. This sequence has to be mandatorily followed.

Payment of Tax 377

The expression “other dues” referred above mean interest, penalty, fee or any other amount payable under the Act or the rules made thereunder.

II. Presumption that incidence of tax is passed on

Sub-section (9) contains a deeming clause. This part of the section provides that when a taxable person has paid the GST under the corresponding Act, the taxable person is deemed to have passed on the incidence of such payment of tax to the recipient of such goods and /or services. Thus, if tax has been paid under the CGST Act, then the taxable person is deemed to have passed on the incidence of such payment of CGST to the recipient. This is subject to the contrary being proved.

III. Chapter IX of CGST Rules provide the following:

(1) Debit to electronic liability register:

all amounts payable towards tax, interest, late fee and any other amount as per return filed;

all amounts payable towards tax, interest, penalty and any other amount determined in a proceeding by an Assessing authority or as ascertained by the taxable person;

the amount of tax and interest as a result of mismatch.

any interest amount that may accrue from time to time.

(2) Debit to Electronic Credit/Cash ledger:

Debit to Electronic Credit Ledger and Credit to Electronic Liability Register

Debit to Electronic Cash Ledger and Credit to Electronic Liability Register

Payment of all the liabilities of a registered person as per his return subject to section 49.

Payment of all the liabilities of a registered person as per his return subject to sec. 49.

Payment of TDS deducted u/s 51, TCS deducted by e-commerce operator u/s 52, amount payable under reverse charge basis, amount payable u/s 10, amount payable towards payment of interest, penalty, fee or any other amount under the Act.

IV. How do the new payment systems benefit the taxpayer and the Commercial Tax Department?

No more queues and waiting for making payments as payments can be made online 24 X 7.

Instant online receipts for payments made online.

Tax Consultants can make payments on behalf of the clients.

Single Challan form to be created online, replacing the three or four copy Challan.

Revenue will come earlier into the Government Treasury as compared to the old system.

Greater transparency.

Online payments made after 8 pm will be credited to the taxpayer’s account on the same day.

11.3 Interest on Delayed Payment of Tax [Sec. 50]


Sec. 50 Interest on delayed payment of tax


(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding


eighteen per cent, as may be notified by the Government on the recommendations of the Council.

(2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid.

(3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent, as may be notified by the Government on the recommendations of the Council.


When Interest is Payable ?

Interest is payable in following 3 circumstances :

Delay in payment of tax, in full or in part within the prescribed period.

Undue or excess claim of input tax credit under section 42(10) [Section 42 (10) of CGST Act deals with contravention of provisions for matching of claims for input tax credit by a recipient].

Undue or excess reduction in output tax liability under section 43(10) [Section 43 (10) of CGST Act deals with contravention of provisions for matching of claims for reduction in output tax liability by a supplier].

Rate of Interest

The rate of interest shall be notified by the Government on the basis of recommendation of the Council. However, such rate to be notified shall not exceed-

(a) 18% in case of belated payment of tax i.e. on failure to pay tax (or part of tax) to the Government’s account. Notification No. 13/2017 CT dated 28.06.2017 has notified the rate of interest as 18% per annum.

(b) 24% on undue or excess claim of ITC or on such undue or excess reduction in output tax liability. Notification No. 13/2017 CT dated 28.06.2017 has notified the rate of interest as 24% per annum.

Computation of Period for Calculation of Interest

The period of interest will be from the date following the due date of payment to the actual date of payment of tax.

Other Relevant Points Relating to Interest

The term “tax” here means the tax payable under the Act or Rules made thereunder.

The payment of interest in case of belated payment of tax should be made voluntarily i.e. even without a demand.

The interest payable under this section shall be debited to the Electronic Liability Register.

The liability for interest can be settled by adjustment with balance in Electronic Cash Ledger but not with balance in electronic credit ledger.

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Tax Invoice, Credit And Debit Notes 12

12.1 Introduction An invoice is a commercial instrument issued by a supplier of goods/services to a recipient. It identifies both the parties involved, and lists, describes the items sold/services supplied, quantifies the items sold, shows the date of shipment and mode of transport, prices and discounts, if any, and the delivery and payment terms (in case of supply of goods).

Invoicing is very crucial aspect for ensuring tax compliance under any indirect taxation system. In order to ensure transparency, issuance of invoice for every taxable transaction is a pre-requisite. In case of supply of goods or provision of services, an invoice is raised by the supplier of such goods or services to the recipient of the same. Tax invoice acts as a document evidencing the payment of the value of the goods or services or both as also the tax portion in the same. In certain cases, an invoice serves as a demand for payment and becomes a document of title when paid in full.

Significance of invoices has enhanced manifolds under GST regime. The reason behind the same is the invoice matching mechanism that has been introduced under GST. For the purpose of claiming the input tax credit, the invoice matching needs to be done. The inwards supplies of the person claiming the credit (recipient) should match with the outward supplies of the supplier(s). Thus, a registered person cannot avail Input Tax Credit unless he is in possession of a tax invoice or a debit note.

Under the GST regime, an “invoice” or “tax invoice” means the tax invoice referred to in section 31 of the CGST Act, 2017. This section mandates the issuance of an invoice or a bill of supply for every supply of goods or services. It is not necessary that only a person supplying goods or services needs to issue an invoice. The GST law mandates that any registered person buying goods or services from an unregistered person also needs to issue a payment voucher as well as a tax invoice. The type of invoice to be issued depends upon the category of registered person making the supply.

The provisions relating to tax invoices, debit and credit notes are contained in Chapter VI - Tax Invoice, Credit and Debit Notes [Sections 31 to 34] of the CGST Act. State GST laws also prescribe identical provisions in relation to Tax Invoice, Credit and Debit Notes.

12.2 Tax Invoice [Sec. 31]

The provisions relating to Tax Invoice are provided under section 31 of the CGST Act as well as Chapter-VI : Tax Invoice, Credit and Debit Notes of Central Goods and Services (CGST) Rules, 2017.

The provisions contained in these rules have been incorporated at the relevant places.

There is no format prescribed for the Tax Invoice. Only certain fields have been prescribed as mandatory fields. Further, invoices may be issued manually or electronically. Issuance of electronic invoices is not mandatory.

I. Tax Invoice Issued by a Supplier of Taxable Goods / Taxable Services

A tax invoice shall be issued by a registered person supplying taxable goods or taxable services or both. Such tax invoice shall show the prescribed particulars.

380 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 1. Time limit for issuance of invoice [Sections 31(1), (2), (4) & (5) read with rule 47] : The time for issuing an

invoice would depend on the nature of supply viz. whether it is a supply of goods or services.

(i) In case of taxable supply of goods, invoice shall be issued before or at the time of, -

(a) removal of goods for supply to the recipient, where the supply involves movement of goods; or

(b) delivery of goods or making available thereof to the recipient, in any other case.

Note : In case of continuous supply of goods.

Where successive statements of accounts/successive payments are involved, the invoice shall be issued before/at the time each such statement is issued or each such payment is received.

As per section 2(32) of the CGST Act, 2017, “continuous supply of goods” means a supply of goods which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, whether or not by means of a wire, cable, pipeline or other conduit, and for which the supplier invoices the recipient on a regular or periodic basis and includes supply of such goods as the Government may, subject to such conditions, as it may, by notification, specify;

(ii) In case of taxable supply of services, Invoice shall be issued before or after the provision of service, but within a period of 30 days* from the date of supply of service.

*45 days in case of an insurer or banking company or financial institution, including a non- banking financial company (NBFC).

An insurer or a banking company or a financial institution, including NBFC, or a telecom operator, or any other class of supplier of services as may be notified by the Government, making taxable supplies of services between distinct persons as specified in section 25 may issue the invoice before or at the time such supplier records the same in his books of account or before the expiry of the quarter during which the supply was made.

Note : In case of continuous supply of services:

Where The invoice shall be issued

(a) due date of payment is ascertainable from the Contract

on or before the due date of payment

(b) due date of payment is not ascertainable from the Contract

before or at the time when the supplier of service receives the payment

(c) payment is linked to the completion of an event on or before the date of completion of that event.

Note : As per section 2(33) of the CGST Act, 2017, “continuous supply of services” means a supply of services which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding three months with periodic payment obligations and includes supply of such services as the Government may, subject to such conditions, as it may, by notification, specify;

Illustration 1 :

Bhumika Caretakers, a registered person, provides the services of repair and maintenance of electrical appliances. On April 1, it has entered into an annual maintenance contract with Naveen for its Air Conditioner and Washing Machine.

As per the terms of contract, maintenance services will be provided on the first day of each quarter of the relevant financial year and payment for the same will also be due on the date on which service is rendered. During the year, it provided the services on April 1, July 1, October 1, and January 1 in accordance with the terms of contract. When should Bhumika Caretakers issue the invoice for the services rendered? [MTP - May 2018]

Tax Invoice, Debit & Credit Notes 381

Answer :

Continuous supply of service means, inter alia, supply of any service which is provided, or agreed to be provided continuously or on recurrent basis, under a contract, for a period exceeding 3 months with the periodic payment obligations.

Therefore, the given situation is a case of continuous supply of service as repair and maintenance services have been provided by Bhumika Caretakers on a quarterly basis, under a contract, for a period of 1 year with the obligation for quarterly payment.

In terms of section 31 of the CGST Act, in case of continuous supply of service, where due date of payment is ascertainable from the contract (as in the given case), invoice shall be issued on or before the due date of payment.

Therefore, in the given case, Bhumika Caretakers should issue quarterly invoices on or before April 1, July 1, October 1, and January 1.

Illustration 2 :

M/s Mangal Industries supplies goods to M/s Garg Industries. The goods were removed from its factory on 5th August.

M/s Mangal Industries needs to issue a tax invoice on or before 5th August.

Illustration 3 :

M/s Mangal Associates provide Consultancy Services to M/s Garg Industries on 5th August. M/s Mangal Associates needs to issue a tax invoice within 30 days of supply of Consultancy Services, i.e. on or before 4th September.

Illustration 4 :

M/s Mangal Industries entered into an annual maintenance contract with M/s Garg Services Ltd. for 1 year [Jan.-Dec., 2018] for the water purifiers fitted in their factories. As per the contract, payment for said services had to be made on first 5th of each quarter. For the quarter Jan. - March, 2018, Mangal Industries made the payment on 20th February. Since, services provided by M/s Garg Services Ltd. to M/s Mangal Industries is a continuous supply of services and due date of payment is ascertainable from the contract, therefore, M/s Garg Services Ltd. had to issue a tax invoice on or before such due date, viz. 5th January for quarter Jan. - March, 2018 and so on for every quarter.

2. Where supply of services ceases before its completion [Section 31(6)] : In a case where the supply of services ceases under a contract before the completion of the supply, the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the extent of the supply made before such cessation.

3. Goods sent on Approval basis [Section 31(7)] : 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:

(a) before/at the time of supply or

(b) 6 months from the date of removal


4. Particulars of a tax invoice [Sections 31(1) & (2) read with rule 46] : As discussed earlier, there is no format prescribed for an invoice, but rules make it mandatory for an invoice to have the following fields (only applicable fields are to be filled) :

(a) Name, address and GSTIN of the supplier;

(b) A consecutive serial number not exceeding 16 characters, in one or multiple series, containing alphabets numerals/special characters hyphen or dash and slash, and any combination thereof, unique for a F.Y.;

(c) Date of its issue;

382 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (d) If recipient is registered - Name, address and GSTIN or UIN of recipient

(e) If recipient is unregistered and value of supply is Particulars of invoice

Rs. 50,000 or more Name and address of the recipient and the address of delivery, along with the name of State and its code

less than Rs. 50,000 unregistered recipient may still request the aforesaid details to be recorded in the tax invoice

(f) HSN code for goods or services;

(g) Description of goods or services;

(h) Quantity in case of goods and unit or Unique Quantity Code thereof;

(i) Total value of supply of goods or services or both;

(j) Taxable value of supply of goods or services or both taking into account discount or abatement, if any;

(k) Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);

(l) Amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory tax or cess);

(m) Place of supply along with the name of State, in case of a supply in the course of inter-State trade or commerce;

(n) Address of delivery where the same is different from the place of supply;

(o) Whether the tax is payable on reverse charge basis; and

(p) Signature or digital signature of the supplier or his authorized representative

However, the signature or digital signature of the supplier or his authorized representative shall not be required in the case of issuance of an electronic invoice in accordance with the provisions of the Information Technology Act, 2000. [Proviso inserted by NN 74/2018 – CT, w.e.f. 31.12.2018]

5. Number of HSN digits required on tax invoice and class of registered person not required to mention HSN [Rule 46] : Board may, on the recommendations of the Council, by notification, specify -

(i) the number of digits of HSN code for goods or services, that a class of registered persons shall be required to mention, for such period as may be specified in the said notification.

(ii) the class of registered persons that would not be required to mention the HSN code for goods or services, for such period as may be specified in the said notification.

In this regard, Notification No. 12/2017 CT dated 28.06.2017 has notified the following:

S. No. Annual Turnover (AT) in the preceding F.Y. Number of Digits of HSN Code

1 AT is less than or equal to Rs. 1.50 crores Nil

2 AT is more than Rs. 1.50 crores but less than or equal to Rs. 5 crores 2

3 AT is more than Rs. 5 crores 4

Above provisions are also applicable to Bill of Supply [The concept of Bill of Supply is discussed in subsequent paras].

6. Manner of issuing the invoice [Sections 31(1) & (2) read with rule 48] :

In case of taxable supply of goods In case of taxable supply of services

Invoice shall be prepared in TRIPLICATE Invoice shall be prepared in DUPLICATE

Original Copy For Recipient Original Copy For Recipient

Duplicate Copy For Transporter Duplicate Copy For Supplier

Triplicate Copy For Supplier


Note : The serial number of invoices issued during a tax period shall be furnished electronically [through the Common Portal - www.gst.gov.in], in FORM GSTR-1 [Details of outward Supplies of goods or services].

7. Invoice in case of export of goods or services : The invoice shall carry an endorsement “Supply meant for export on payment of integrated tax” or “Supply meant for export under bond or letter of undertaking without payment of integrated tax”, as the case may be.

Particular of an export Invoice are same as a Tax Invoice. However, where recipient is unregistered and value of supply is Rs. 50,000 or more, instead of name of state and its code, in case of an export invoice, name of the country of destination is to be mentioned.

8. In view of the aforesaid discussion, following points merit consideration:

All GST taxpayers are free to design their own Tax Invoice Format.

The law requires that only certain fields as mandatory fields in the Tax Invoice.

The time period for issuance of invoice is different for goods and services. For goods, it is any time before or at its delivery and for services, it is within 30 days from the date of supply of services.

In order to keep the compliance burden low for the small tax payers, taxpayers with annual turnover of Rs. 1.5 crores need not mention the HSN code of the goods in the invoices.

Compliance of Rule 46 of the CGST Rules, 2017 while issuing invoices in case of inter- State supply [Circular No. 90/09/2019-GST, dated 18.02.2019]

It has been brought to the notice of the Board that a number of registered persons (especially in the banking, insurance and telecom sectors, etc.) are not mentioning the place of supply along with the name of the State in case of a supply made in the course of inter-state trade or commerce in contravention of rule 46 of the CGST Rules which mandates that the said details must be mentioned in a tax invoice. In order to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168(1) of the CGST Act, 2017, hereby issues the following instructions.

After introduction of GST, which is a destination-based consumption tax, it is essential to ensure that the tax paid by a registered person accrues to the State in which the consumption of goods or services or both takes place. In case of inter-State supply of goods or services or both, this is ensured by capturing the details of the place of supply along with the name of the State in the tax invoice.

It is therefore, instructed that all registered persons making supply of goods or services or both in the course of inter-State trade or commerce shall specify the place of supply along with the name of the State in the tax invoice. The provisions of sections 10 and 12 of the IGST Act, 2017 may be referred to in order to determine the place of supply in case of supply of goods and services respectively. Contravention of any of the provisions of the Act or the rules made there under attracts penal action under the provisions of sections 122 or 125 of the CGST Act.

II. Special Cases

1. Revised Tax Invoice [Section 31(3)(a) read with rule 53] : When issued?

Every registered person who has been granted registration with effect from a date earlier than the date of issuance of certificate of registration to him, may issue Revised Tax Invoices. Such invoices shall be issued against the invoices already issued during said period.

Revised Tax Invoices shall be issued within 1 month from the date of issuance of certificate of registration.


Note : For the purposes of this section, the expression “tax invoice” shall include any revised invoice issued by the supplier in respect of a supply made earlier [Explanation to section 32].

This provision is necessary, as a person who becomes liable for registration has to apply for registration within 30 days of becoming liable for registration. When such an application is made within the time period and registration is granted, the effective date of registration is the date on which the person became liable for registration.

Thus there would be a time lag between the date of grant of certificate of registration and the effective date of registration. For supplies made by such person during this intervening period, the law enables the issuance of a revised invoice, so that ITC can be availed by the recipient on such supplies.

Revised Tax Invoices to be issued in respect of taxable supplies effected during this period

Effective date of registration

Date of issuance of certificate of registration

Example: Sarabhai Private Ltd. commenced business of supply of goods on 1st April in Delhi. Its turnover exceeded 20,00,000 on 3rd September. Thus it became liable to registration on 3rd September. It applied for registration on 29th September and granted registration certificate on 5th October. Since it applied for registration within 30 days of becoming liable to registration, it was granted registration with effect from 3rd September. Sarabhai Private Ltd. may issue Revised Tax Invoices in respect of taxable supplies effected between 3rd September and 5th October.

Consolidated Revised Tax Invoices in certain cases : A registered person may issue a Consolidated Revised Tax Invoice in respect of all taxable supplies made to unregistered recipients during such period.

However, in case of inter-State supplies, a consolidated Revised Tax Invoice cannot be issued in respect of supplies to unregistered recipients, if the value of a supply exceeds Rs. 2,50,000.

Particulars of Revised Tax Invoice

(a) The word “Revised Invoice”, wherever applicable, indicated prominently;

(b) Name, address and GSTIN of the supplier;

(c) Nature of the document; [Omitted by NN 03/2019 – CT, w.e.f. 01.02.2019]

(d) A consecutive serial number not exceeding 16 characters, in one or multiple series, containing alphabets or numerals or special characters -hyphen or dash and slash and any combination thereof, unique for a F.Y.;

(e) Date of issue of the document;

(f) Name, address and GSTIN or UIN, if registered, of the recipient;

(g) Name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered;

(h) Serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;

(i) Value of taxable supply of goods or services, rate of tax and the amount of the tax credited/debited to the recipient; [Omitted by NN 03/2019 – CT, w.e.f. 01.02.2019]

(j) Signature/digital signature of the supplier/his authorized representative.

Note : Particulars of the Debit and Credit Notes are also same as revised tax invoices. [Omitted by NN 03/2019 – CT, w.e.f. 01.02.2019]


Rule 53(1A): A credit or debit note referred to in section 34 shall contain the following particulars, namely:–

(a) name, address and Goods and Services Tax Identification Number of the supplier;

(b) nature of the document;

(c) a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters-hyphen or dash and slash symbolised as “-” and “/” respectively, and any combination thereof, unique for a financial year;

(d) date of issue of the document;

(e) name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient;

(f) name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered;

(g) serial number(s) and date(s) of the corresponding tax invoice(s) or, as the case may be, bill(s) of supply;

(h) value of taxable supply of goods or services, rate of tax and the amount of the tax credited or, as the case may be, debited to the recipient; and

(i) signature or digital signature of the supplier or his authorised representative.

[Rule 53(1A) inserted by NN 03/2019 – CT, w.e.f. 01.02.2019]

Note : Any invoice or debit note issued in pursuance of any tax payable in accordance with the provisions of section 74 or section 129 or section 130 shall prominently contain the words “INPUT TAX CREDIT NOT ADMISSIBLE”.

Section 74 - Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by person of fraud or any wilful misstatement or suppression of facts.

Section 129 - Detention, seizure and release of goods and conveyance in transit.

Section 130 - Confiscation of goods or conveyances and levy of penalty.

Illustration 5 :

Avtaar Enterprises, Kanpur started trading in ayurvedic medicines from July 1, 20XX. Its turnover exceeded Threshold limit for registration on October 3, 20XX. The firm applied for registration on October 31, 20XX and was issued registration certificate on November 5, 20XX.

Examine whether any revised invoice can be issued in the given scenario. If the answer to the first question is in affirmative, determine the period for which the revised invoices can be issued as also the last date upto which the same can be issued. [CA Final-May 2018(New), Modified](5 Marks) [MTP - May 2018]

Answer :

As per section 31(3)(a) of the CGST Act, a registered person may, within one month from the date of issuance of certificate of registration, issue a revised invoice against the invoice already issued during the period beginning with the effective date of registration till the date of issuance of certificate of registration to him.

Further, rule 10(2) of CGST Rules lays down that the registration shall be effective from the date on which the person becomes liable to registration where the application for registration has been submitted within a period of 30 days from such date.

In the given case, Avtaar Enterprises has applied for registration within 30 days of becoming liable for registration and the registration has been granted. Thus, the effective date of registration is the date on which Avtaar

386 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Enterprises became liable for registration i.e., October 3, 20XX. Therefore, since in the given case there is a time lag between the effective date of registration (October 3, 20XX) and the date of grant of certificate of registration (November 5, 20XX), revised invoices can be issued. The same can be issued for supplies made during this intervening period i.e., for the period beginning with October 3, 20XX till November 5, 20XX. Further, the revised invoices can be issued for the said period till December 5, 20XX.

2. No Tax Invoice required to be issued if value < Rs. 200 - A consolidated Tax Invoice can be issued [Section 31(3)(b) read with fourth proviso to rule 46] : A registered person may not issue a Tax Invoice if:

Value of the goods/services/both supplied < Rs. 200,

the recipient is unregistered; and

the recipient does not require such invoice.

Instead such registered person shall issue a Consolidated Tax Invoice for such supplies at the close of each day in respect of all such supplies.

Thus, small taxpayers, like small retailers, doing a large number of small transactions for less than a value of Rs. 200 per transaction to unregistered customers need not issue invoice for every such transaction. They can issue one consolidated invoice at the end of each day for all transactions done during the day. However, they should also issue an invoice when the customer demands.

Above provisions are also applicable to Bill of Supply. [The concept of Bill of Supply is discussed in next para].

However, these provisions are not applicable to the supplier engaged in making supply of services by way of admission to exhibition of cinematograph films in multiplex screens. [inserted by NN. 33/2019 – CT, w.e.f. 01.09.2019] Analysis: It means exhibitors of cinematograph films in multiplex screen are required to issue tax invoice even if the value of supply of services by way of admission to exhibition of cinematograph films is less than Rs. 200/-.

Illustration 6 :

AY & Sons is a trader dealing in stationery items. It is registered under GST and has undertaken following sales during the day:

S. No. Recipient of Supply Amount (Rs.)

1 A – [a registered composition dealer] 100

2 B – [an unregistered trader] 400

3 C – [an unregistered person] 300

4 D – a school [an unregistered entity] 150

5 E – a Student [unregistered] 70

None of the recipients require a tax invoice.

Determine in respect of which of the above supplies, AY & Sons may issue a Consolidated Tax Invoice instead of Tax Invoice at the end of the day?

Answer :


In the given illustration, AY & Sons can issue a Consolidated Tax Invoice only with respect to supplies made to D [worth Rs. 150] and E [worth Rs. 70] as the value of goods supplied to these recipients is less than Rs. 200, as also these recipients are unregistered and don’t require a tax invoice.

As regards the supply made to A, although the value of goods supplied to it is less than Rs. 200, A is registered under GST.

So, Consolidated Tax Invoice cannot be issued.

Consolidated Tax Invoice can also not be issued for supplies of goods made to B and C although both of them are unregistered. The reason for the same is that the value of goods supplied is not less than Rs. 200.

3. Bill of Supply [Section 31(3)(c) read with rule 49] : A registered person supplying exempted goods or services or both or paying tax under composition levy shall issue a bill of supply instead of a tax invoice.

Note: It is hereby clarified that provisions of section 31(3)(c) shall also apply to a supplier of services paying tax under Composition Scheme as per NN 02/2019 – CT (R), dated 07.03.2019. [Removal of Difficulty Order No. 03/2019 – CT, dated 08.03.2019]

Particulars of Bill of Supply : A registered person opting for the composition levy does not collect tax from the recipient on outward supplies made by him. Similarly, in case of a registered person supplying exempted goods and/or services, no tax implications are there. Recipients should not expect Tax Invoice from such suppliers as they cannot issue tax invoice.

Since no tax is collected from the recipient by a registered person opting for the composition levy as well as registered person supplying exempted goods and/or services, Bill of Supply issued by such persons does not contain the details pertaining to rate of tax and amount of tax. Further, value to be mentioned in the Bill of Supply is not also taxable value.


(b) A consecutive serial number not exceeding 16 characters, in one or more multiple series, containing alphabets or numerals or special characters -hyphen or dash and slash and any combination thereof, unique for a F.Y.;


(d) Name, address and GSTIN or UIN, if registered, of the recipient;

(e) HSN Code for goods or services;

(f) Description of goods or services or both;

(g) Value of supply of goods or services or both taking into account discount/abatement, if any; and

(h) Signature/digital signature of supplier/his authorized representative.


Note : Any tax invoice or any other similar document issued under any other Act for the time being in force in respect of any non-taxable supply shall be treated as bill of supply for the purposes of the Act.

Illustration 7 :

AY & Sons, a manufacturer, opted for composition levy under section 10. It will issue a Bill of Supply to the buyers of goods and not the tax invoice as it does not collect any tax from the buyers.

388 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 4. Invoice-cum-bill of supply (Rule 46A) : Notwithstanding anything contained in rule 46 or rule 49 or rule 54,

where a registered person is supplying taxable as well as exempted goods or services or both to an unregistered person, a single “invoice-cum-bill of supply” may be issued for all such supplies. [Rule 46A, inserted by NN 45/ 2017 – CT, w.e.f. 13.10.2017]

5. Receipt Voucher [Section 31(3)(d) read with rule 50] : A registered person shall, on receipt of advance payment with respect to any supply of goods or services or both, issue a Receipt Voucher evidencing receipt of such payment.

Particulars of Receipt Voucher


(b) A consecutive serial number not exceeding 16 characters, in one or multiple series, containing alphabets or numerals or special characters -hyphen or dash and slash and any combination thereof, unique for a F.Y.



(e) Description of goods or services;

(f) Amount of advance taken;

(g) Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);

(h) Amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory tax or cess);

(i) Place of supply along with the name of State and its code, in case of a supply in the course of inter-state trade or commerce;

(j) Whether the tax is payable on reverse charge basis; and

(k) Signature/digital signature of supplier/his authorized representative

Where at the time of receipt of advance, rate of tax/ nature of supply is not determinable

Where at the time of receipt of advance

(i) rate of tax is not determinable tax shall be paid at the rate of 18%

(ii) nature of supply is not determinable same shall be treated as inter-State supply

6. Refund Voucher [Section 31(3)(e) read with rule 51] : Where, on receipt of advance payment with respect to any supply of goods or services or both the registered person issues a Receipt Voucher, but subsequently no supply is made and no tax invoice is issued in pursuance thereof, the said registered person may issue to the person who had made the payment, a Refund Voucher against such payment.

Particulars of Refund Voucher


(b) A consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters-hyphen or dash and slash and any combination thereof, unique for a F.Y.;



(e) Number and date of Receipt Voucher issued


(f) Description of goods/services in respect of which refund is made

(g) Amount of refund made

(h) Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess)

(i) Amount of tax paid in respect of such goods or services (central tax, State tax, integrated tax, Union territory tax or cess)

(j) Whether the tax is payable on reverse charge basis; and

(k) Signature/digital signature of supplier/his authorized representative

7. Invoice and Payment Vouchers to be issued by recipient of supply liable to pay tax under reverse charge [Section 31(3)(f) & (g) read with second proviso to rule 46 and rule 52] : Recipient is liable to pay tax on reverse charge basis where he receives supply of such goods/services/both which are notified for reverse charge purposes. Such supplies can be received from a registered or an unregistered supplier [Section 9(3)].

Further, recipient [who is registered] is also liable to pay tax where taxable goods/services/both have been received from an unregistered supplier [Section 9(4)].

Supplies received from unregistered supplier : A registered person who is liable to pay tax under reverse charge [under section 9(3)/9(4) of the CGST Act] shall issue an Invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both. Thus, a recipient liable to pay tax by virtue of section 9(3) has to issue invoice only when supplies have been received from an unregistered supplier.

Besides, a registered person who is liable to pay tax under reverse charge [under section 9(3)/9(4) of the CGST Act] shall issue a Payment Voucher at the time of making payment to the supplier.

Particulars of Payment Voucher

(a) Name, address and GSTIN of the supplier if registered;

(b) A consecutive serial number not exceeding 16 characters, in one or multiple series, containing alphabets or numerals or special characters -hyphen or dash and any combination thereof, unique for a F.Y.


(d) Name, address and GSTIN of the recipient;

(e) Description of goods or services;

(f) Amount paid;

(g) Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);

(h) Amount of tax payable in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory tax or cess);

(i) Place of supply along with the name of State and its code, in case of a supply in the course of inter-State trade or commerce; and

(j) Signature/digital signature of supplier/his authorized representative

8. Supplier permitted to issue any document other than tax invoice [Section 31(2) and proviso to section 31(1) read with rules 54 and 55] : Government may, on the recommendations of the Council, by notification and subject to such conditions as may be mentioned therein, specify the categories of services in respect of which -

(a) any other document issued in relation to the supply shall be deemed to be a tax invoice; or

(b) tax invoice may not be issued.

390 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Further, Government may, on the recommendations of the Council, by notification, specify the categories of

goods or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed.

Following suppliers may issue a tax invoice, but they are also permitted to issue any other document in lieu of tax invoice, by whatever name called :

Supplier of taxable service Document in lieu of the tax invoice

Optional information Mandatory information

Insurer/Banking company/Financial institution, including NBFC shall may (word "shall" substituted by "may", by NN 55/2017 - C.T., dated 15.11.2017) issue a consolidated tax invoice or any other document in lieu thereof, by whatever name called for the supply of services made during a month at the end of the month. [Permission to issue “monthly consolidated invoice” to these service providers, given by NN 45/2017 – CT, w.e.f. 13.10.2017]

● Serial number ● Address of the recipient of

taxable service

Other information as prescribed for a Tax Invoice, under rule 46

Such document may be issued or made available, physically/ electronically


Goods Transport Agency (GTA) supplying services in relation to transportation of goods by road in a goods carriage

Gross weight of the consignment

Name of the consignor and the consignee

Registration number of goods carriage in which the goods are transported

Details of goods transported

Details of place of origin and destination

GSTIN of the person liable for paying tax whether as consignor, consignee or GTA

Other information as prescribed for a tax invoice, under rule 46

Supplier of passenger transportation service

● Serial number ● Address of the recipient of

taxable service

Other information as prescribed for a tax invoice, under rule 46

Tax invoice shall include ticket in any form, by whatever name called.



Registered person supplying services by way of admission to exhibition of cinematograph films in multiplex screens. [Rule 54(4A)] [inserted by NN. 33/2019 – CT, w.e.f. 01.09.2019]

Details of the recipient of service

Other information as prescribed for a tax invoice under rule 46

Such persons shall be required to issue an electronic ticket and the said electronic ticket shall be deemed to be a tax invoice for all purposes of the Act

However, the supplier of such service in a screen other than multiplex screens may, at his option, follow this procedure

Note : It is important to note here that keeping in view the large number of transactions in banking, insurance and passenger transportation sector, taxpayers need not mention the address of the customer and the serial number in their invoices.

Delivery Challan : Rule 55 specifies the cases where at the time of removal of goods, goods may be removed on delivery challan and invoice may be issued after delivery. These are provided in the following table:

Nature of supply Delivery challan to be issued Particulars of Delivery Challan

(1) Supply of liquid gas where the quantity at the time of removal from the place of business of the supplier is not known,

(2) Transportation of goods for job work,

(3) Transportation of goods for reasons other than by way of supply, or

(4) Such other supplies as may be notified by the Board

Serially numbered not exceeding 16 characters in one or multiple series

at the time of removal of goods for transportation

Date and number of the delivery challan

Name, address and GSTIN of the consigner, if registered

Name, address and GSTIN or UIN of the consignee, if registered

HSN code and description of goods,

Quantity (provisional, where the exact quantity being supplied is not known)

Taxable value

Tax rate and tax amount–central tax, state tax, integrated tax, union territory tax or cess, where the transportation is for supply to the consignee

Place of supply, in case of inter-state movement

Signature

Delivery challan in Triplicate : The delivery challan shall be prepared in TRIPLICATE, in case of supply of goods, in the following manner:


– Original Copy For Consignee

– Duplicate Copy For transporter

– Triplicate Copy For consignor

Declaration in E-way Bill : Where goods are being transported on a delivery challan in lieu of invoice, the same shall be declared in E-Way Bill.

Tax invoice to be issued after delivery of goods : Where the goods being transported are for the purpose of supply to the recipient but the tax invoice could not be issued at the time of removal of goods for the purpose of supply, the supplier shall issue a tax invoice after delivery of goods.

Goods transported in SKD/CKD condition or in batches or lots: Where the goods are being transported in a semi knocked down or completely knocked down condition or in batches or lots.

– 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;

– Copies of the corresponding delivery challan shall accompany each consignment along with a duly certified copy of the invoice; and

– the original copy of the invoice shall be sent along with the last consignment.

Clarification on issues wherein the goods are moved within the State or from the State of registration to another State for supply on approval basis [Circular No. 10/10/2017 – GST, dated 18.10.2017]

Issue: Suppliers of goods such as jewellery, etc. who are registered in one State may have to visit other States (other than their State of registration) and need to carry the goods (such as jewellery) along for approval. In such cases, if jewellery etc. is approved by the buyer, then, the supplier issues a tax invoice only at the time of supply. Since the suppliers are not able to ascertain their actual supplies beforehand and while ascertainment of tax liability in advance is a mandatory requirement for registration as a casual taxable person, the supplier is not able to register as a casual taxable person. Such goods are also carried within the same State for the purposes of supply. What would be the documentation in such cases...?

Clarification: In exercise of the powers conferred under section 168(1) of the CGST Act for the purpose of uniformity in the implementation of the Act, it has been decided to clarify this matter as follows –

(i) It is seen that clause (c) of sub-rule (1) of rule 55 of the CGST Rules provides that the supplier shall issue a delivery challan for the initial transportation of goods where such transportation is for reasons other than by way of supply. Further, sub-rule (3) of the said rule also provides that the said delivery challan shall be declared as specified in rule 138 of the said Rules. It is also seen that sub-rule (4) of rule 55 of the said Rules provides that “Where the goods being transported are for the purpose of supply to the recipient but the tax invoice could not be issued at the time of removal of goods for the purpose of supply, the supplier shall issue a tax invoice after delivery of goods”.

(ii) A combined reading of the above provisions indicates that the goods which are taken for supply on approval basis can be moved from the place of business of the registered supplier to another place within the same State or to a place outside the State on a delivery challan along with the e-way bill wherever applicable and the invoice may be issued at the time of delivery of goods. For this purpose, the person carrying the goods for such supply can carry the invoice book with him so that he can issue the invoice once the supply is fructified.


(iii) It is further clarified that all such supplies, where the supplier carries goods from one State to another and supplies them in a different State, will be inter-state supplies and attract integrated tax in terms of section 5 of the IGST Act.

(iv) It is also clarified that this clarification would be applicable to all goods supplied under similar situations.

Clarification on issues regarding treatment of supply of art works by an artist in various States and supply of such art works by artists from galleries [Circular No. 22/22/2017 – GST, dated 21.12.2017]

Issue: What will be the taxation treatment under GST on the supply of art works by artists in different States other than the State in which they are registered as a taxable person. In such cases, if the art work is selected by the buyer, then, at the time of supply itself, the supplier issues a tax invoice. Further, the artists give their work of art to galleries where it is exhibited for supply. Now the confusion is regarding the treatment of this activity whether it is taxable in the hands of the artist when the same is given to the art gallery or at the time of actual supply by the gallery.

Clarification: The above mentioned matter is absolutely same as discussed in previous circular [i.e. Circular No. 10/10/2017 – GST, dated 18.10.2017]

Therefore, conclusively, it can be said that the art work for supply on approval basis can be moved from the place of business of the registered person (artist) to another place within the same State or to a place outside the State on a delivery challan along with the e-way bill wherever applicable and the invoice may be issued at the time of actual supply of art work.

The supplies of the art work from one State to another State will be inter-State supplies and attract integrated tax in terms of section 5 of the IGST Act, 2017.

It is further clarified that in case of supply by artists through galleries, there is no consideration flowing from the gallery to the artist when the art works are sent to the gallery for exhibition and therefore, the same is not a supply. It is only when the buyer selects a particular art work displayed at the gallery, that the actual supply takes place and applicable GST would be payable at the time of such supply.

Clarification in respect of goods sent/taken out of India for exhibition or on consignment basis for export promotion [Circular No.108/27/2019-GST,dated 18-07-2019]

1. Various representations have been received from the trade and industry regarding procedure to be followed in respect of goods sent / taken out of India for exhibition or on consignment basis for export promotion. Such goods sent / taken out of India crystallise into exports, wholly or partly, only after a gap of certain period from the date they were physically sent / taken out of India.

2. As per section 7 of the CGST Act, for any activity or transaction to be considered a supply, it must satisfy twin tests namely-

(i) it should be for a consideration by a person; and

(ii) it should be in the course or furtherance of business.

3. The exceptions to the above are the activities enumerated in Schedule I of the CGST Act which are treated as supply even if made without consideration.

4. Section 16 of the IGST Act deals with “Zero rated supply”. The provisions contained in the said section read as under:

Sec.16. (1) “zero rated supply” means any of the following supplies of goods or services or both, namely:–– (a) export of goods or services or both; or

(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.


Therefore, it can be concluded that only such ‘supplies’ which are either ‘export’ or are ‘supply to SEZ unit / developer’ would qualify as zero-rated supply.

5. It is, accordingly, clarified that the activity of sending / taking the goods out of India for exhibition or on consignment basis for export promotion, except when such activity satisfy the tests laid down in Schedule I of the CGST Act (hereinafter referred to as the “specified goods”), do not constitute supply as the said activity does not fall within the scope of section 7 of the CGST Act as there is no consideration at that point in time. Since such activity is not a supply, the same cannot be considered as „Zero rated supply‟ as per the provisions contained in section 16 of the IGST Act.

6. Since the activity of sending / taking specified goods out of India is not a supply, doubts have been raised by the trade and industry on issues relating to maintenance of records, issuance of delivery challan / tax invoice etc. These issues have been examined and the clarification on each of these points is as under: -

Sl.No Issue Clarification

1. Whether any records are required to be maintained by registered person for sending / taking specified goods out of India

The registered person dealing in specified goods shall maintain a record of such goods as per the format at Annexure to this Circular.

2. What is the documentation required for sending / taking the specified goods out of India?

(a) As clarified above, the activity of sending / taking specified goods out of India is not a supply.

(b) The said activity is in the nature of “sale on approval basis” wherein the goods are sent / taken outside India for the approval of the person located abroad and it is only when the said goods are approved that the actual supply from the exporter located in India to the importer located abroad takes place. The activity of sending / taking specified goods is covered under the provisions of sub-section (7) of section 31 of the CGST Act read with rule 55 of CGST Rules, 2017.

(c) The specified goods shall be accompanied with a delivery challan issued in accordance with the provisions contained in rule 55 of the CGST Rules.

(d) As clarified in paragraph 6 above, the activity of sending / taking specified goods out of India is not a zero-rated supply. That being the case, execution of a bond or LUT, as required under section 16 of the IGST Act, is not required.

3. When is the supply of specified goods sent / taken out of India said to take place?

(a) The specified goods sent / taken out of India are required to be either sold or brought back within the stipulated period of six months from the date of removal as per the provisions contained in sub-section (7) of section 31 of the CGST Act.

(b) The supply would be deemed to have taken place, on the expiry of six months from the date of removal, if the specified goods are neither sold abroad nor brought back within the said period.

If the specified goods are sold abroad, fully or partially, within the specified period of six months, the supply is effected, in respect of quantity so sold, on the date of such sale.

4. Whether invoice is required to be issued when the specified goods sent / taken out of India are not brought back, either fully or partially, within the

(a) When the specified goods sent / taken out of India have been sold fully or partially, within the stipulated period of six months, as laid down in sub-section (7) of section 31 of the CGST Act, the sender shall issue a tax invoice in respect of such quantity of specified goods which has been sold abroad, in accordance with the provisions contained in section 12 and


stipulated period of 6 months?

section 31 of the CGST Act read with rule 46 of the CGST Rules.

When the specified goods sent / taken out of India have neither been sold nor brought back, either fully or partially, within the stipulated period of six months, as laid down in sub-section (7) of section 31 of the CGST Act, the sender shall issue a tax invoice on the date of expiry of six months from the date of removal, in respect of such quantity of specified goods which have neither been sold nor brought back, in accordance with the provisions contained in section 12 and section 31 of the CGST Act read with rule 46 of the CGST Rules.

5. Whether the refund claims can be preferred in respect of specified goods sent / taken out of India but not brought back?

(a) As clarified in para 4 above, the activity of sending / taking specified goods out of India is not a zero-rated supply. That being the case, the sender of goods cannot prefer any refund claim when the specified goods are sent / taken out of India.

(b) It has further been clarified in answer to question no. 3 above that the supply would be deemed to have taken place: (i) on the date of expiry of six months from the date of

removal, if the specified goods are neither sold nor brought back within the said period; or

(ii) on the date of sale, in respect of such quantity of specified goods which have been sold abroad within the specified period of six months.

(c) It is clarified accordingly that the sender can prefer refund claim even when the specified goods were sent / taken out of India without execution of a bond or LUT, if he is otherwise eligible for refund as per the provisions contained in sub-section (3) of section 54 the CGST Act read with sub-rule (4) of rule 89 of the CGST Rules, in respect of zero rated supply of goods after he has issued the tax invoice on the dates as has been clarified in answer to the question no. 4 above. It is further clarified that refund claim cannot be preferred under rule 96 of CGST Rules [Refund of IGST paid on Goods/Services exported out of India] as supply is taking place at a time after the goods have already been sent / taken out of India earlier.

6. Whether Customs Duty is payable at the time of re-import of specified goods into India?

No. Whole of the Customs duty is exempted in such cases vide NN 45/2017 – Customs, we.f. 01.07.2017. Because specified goods were sent/taken out of India just for exhibition or on consignment basis.

7. Whether IGST u/s 3(7) of the Customs Tariff Act is payable at the time of re-import of specified goods into India?

No. As in the case of re-import of specified goods, no IGST was required to be paid for specified goods at the time of taking these goods out of India, the activity being not a supply. Hence, no IGST is payable at the time of re-import of specified goods into India. [Circular No. 21/2019 – Customs, dated 24.07.2019]

7. The above position is explained by way of illustrations below::

i) M/s ABC sends 100 units of specified goods out of India. The activity of merely sending / taking such specified goods out of India is not a supply. No tax invoice is required to be issued in this case but the specified goods shall be accompanied with a delivery challan. In case the entire quantity of specified goods is brought back within the stipulated period of six months from the date of removal, no tax invoice is required to be issued as no supply has taken place in such a case. In case, however, the entire quantity of specified goods is neither sold nor brought back within six months from the date of removal, a tax invoice


would be required to be issued for entire 100 units of specified goods on or before the expiry of 6 months from the date of removal.

ii) M/s ABC sends 100 units of specified goods out of India. The activity of sending / taking such specified goods out of India is not a supply. No tax invoice is required to be issued in this case but the specified goods shall be accompanied with a delivery challan. If 10 units of specified goods are sold abroad say after one month of sending / taking out and another 50 units are sold say after two months of sending / taking out, a tax invoice would be required to be issued for 10 units and 50 units at the time of each of such sale. If the remaining 40 units are not brought back within the stipulated period of six months from the date of removal, a tax invoice would be required to be issued for 40 units on or before the expiry of 6 months from the date of removal. Further, M/s ABC may claim refund of accumulated input tax credit in accordance with the provisions contained in sub-section (3) of section 54 of the CGST Act read with sub-rule (4) of rule 89 of the CGST Rules in respect of zero-rated supply of 60 units.

9. Tax Invoice or bill of supply to accompany transport of goods [Rule 55A]

The person-in-charge of the conveyance shall carry a copy of the tax invoice or the bill of supply issued in accordance with the provisions of rules 46, 46A or 49 in a case where such person is not required to carry an e-way bill under these rules.

[Rule 55A inserted by NN 03/2018 – CT, w.e.f. 23.01.2018]

10. Tax invoice by input service Distributor (ISD) [Rule 54 (1)] : An ISD invoice or, as the case may be, an ISD credit note issued by an input Service distributor shall contain the following details :

(a) Name, address and GSTIN of the ISD

(b) A consecutive serial number not exceeding 16 characters, in one or multiple series, containing alphabets or numerals or special characters – hyphen or dash or any combination thereof, unique for a F.Y.

(c) Date of its issue

(d) Name, address and GSTIN of the recipient to whom the credit is distributed

(e) Amount of credit distributed

(f) Signature/Digital Signature of ISD/his authorized representative However, where the ISD is an office of a banking company or a financial institution, including NBFC, a tax invoice shall include any document in lieu thereof, by whatever name called, whether or not serially numbered but containing the information as mentioned above.

RULE 54(1A)

(a) A registered person, having the same PAN and State code as an Input Service Distributor, may issue an invoice or, as the case may be, a credit or debit note to transfer the credit of common input services to the Input Service Distributor, which shall contain the following details :-

(i) name, address and Goods and Services Tax Identification Number of the registered person having the same PAN and same State code as the Input Service Distributor;

(ii) a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters-hyphen or dash and slash symbolised as “-” and “/” respectively, and any combination thereof, unique for a financial year;

(iii) date of its issue;


(iv) Goods and Services Tax Identification Number of supplier of common service and original invoice number whose credit is sought to be transferred to the Input Service Distributor;

(v) name, address and Goods and Services Tax Identification Number of the Input Service Distributor;

(vi) taxable value, rate and amount of the credit to be transferred; and

(vii) signature or digital signature of the registered person or his authorised representative.

(b) The taxable value in the invoice issued under clause (a) shall be the same as the value of the common services. [Rule 54(1A) inserted by NN 03/2018 – CT, w.e.f. 23.01.2018]

12.3 Credit And Debit Notes [Section 34]


Sec. 34 Credit and Debit Notes


(1)

Where a tax invoice Where one or more tax invoices have [substituted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019] has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note one or more credit notes for supplies made in a financial year [substituted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019] containing such particulars as may be prescribed.

(2)

Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed:

Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.

(3) Where a tax invoice has Where one or more tax invoices have [substituted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019] been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note one or more debit notes for supplies made in a financial year [substituted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019] containing such particulars as may be prescribed.

(4)

Any registered person who issues a debit note in relation to a supply of goods or services or both shall declare the details of such debit note in the return for the month during which such debit note has been issued and the tax liability shall be adjusted in such manner as may be prescribed.

Explanation : For the purposes of this Act, the expression “debit note” shall include a supplementary invoice.


398 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 1. Issuance of Credit Note : A supplier of goods or services or both is mandatorily required to issue a tax

invoice. However, during the course of trade or commerce, after the invoice has been issued there could be situations like:

The supplier has erroneously declared a value which is more than the actual value of the goods or services provided.

The supplier has erroneously declared a higher tax rate than what is applicable for the kind of the goods or services or both supplied.

The quantity received by the recipient is less than what has been declared in the invoice.

The quality of goods or services or both supplied is not to the satisfaction of the recipient thereby necessitating a partial or total reimbursement on the invoice value.

In order to regularize these kind of situations, the supplier is allowed to issue what is called as credit note to the recipient. Once the credit note has been issued, the tax liability of such supplier will reduce.

Where a tax invoice has Where one or more tax invoices have [substituted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019] been issued for supply of any goods or services or both

Taxable value in invoice > Taxable value in respect of such supply

Tax charged in invoice > Tax payable in respect of such supply

OR

where the goods supplied are returned by the recipient

OR

where goods or services or both supplied are found to be deficient

Registered Supplier of goods or services or both may issue a credit note one or more credit notes for supplies made in a financial year [substituted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019] to Recipient of goods or services or both.

2. Issuance of Debit Note : Where a tax invoice has Where one or more tax invoices have [substituted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019] been issued for supply of any goods or services or both.

Taxable value in invoice < Taxable value in respect of such supply

Tax charged in invoice < Tax payable in respect of such supply

Registered Supplier of goods or services or both may issue a debit note one or more debit notes for supplies made in a financial year [substituted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019] to Recipient of goods or services or both.

Important Note: By making amendment in section 34 of the CGST Act, the Government has permitted a registered person to issue consolidated credit / debit notes as prescribed under Section 34 of the CGST Act in respect of multiple invoices issued in a Financial Year without linking the same to individual invoices.

3. Details of Debit Note/Credit Note to be declared in Return

(i) Credit Note :


Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than:

– September following the end of the financial year in which such supply was made,

OR

– the date of furnishing of the relevant annual return,


The tax liability shall be adjusted in such manner as may be prescribed. However, no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.

(ii) Debit Note:

Any registered person who issues a debit note in relation to a supply of goods or services or both shall declare the details of such debit note in the return for the month during which such debit note has been issued.

The tax liability shall be adjusted in such manner as may be prescribed.

Circular to clarify the procedure in respect of return of time expired drugs or medicines [Circular No. 72/46/2018-GST dated 26.10.2018]

1. Various representations have been received seeking clarification on the procedure to be followed in respect of return of time expired drugs or medicines under the GST laws. The issues raised in the said representations have been examined and to ensure uniformity in the implementation of the law across the field formations, the Board, in exercise of its powers conferred under section 168(1) of the CGST Act has clarified the issue in succeeding paragraphs.

2. The common trade practice in the pharmaceutical sector is that the drugs or medicines (hereinafter referred to as “goods”) are sold by the manufacturer to the wholesaler and by the wholesaler to the retailer on the basis of an invoice/bill of supply as case may be. It is significant to mention here that such goods have a defined life term which is normally referred to as the date of expiry. Such goods which have crossed their date of expiry are colloquially referred to as time expired goods and are returned back to the manufacturer, on account of expiry, through the supply chain.

3. It is clarified that the retailer/wholesaler can follow either of the below mentioned procedures for the return of the time expired goods:

(A) Return of time expired goods to be treated as fresh supply:

a) In case the person returning the time expired goods is a registered person (other than a composition taxpayer), he may, at his option, return the said goods by treating it is as a fresh supply and thereby issuing an invoice for the same (hereinafter referred to as the, “return supply”). The value of the said goods as shown in the invoice on the basis of which the goods were supplied earlier may be taken as the value of such return supply. The wholesaler or manufacturer, as the case may be, who is the recipient of such return supply, shall be eligible to avail Input Tax Credit (hereinafter referred to as “ITC”) of the tax levied on the said return supply subject to the fulfilment of the conditions specified in Section 16 of the CGST Act.

b) In case the person returning the time expired goods is a composition taxpayer, he may return the said goods by issuing a bill of supply and pay tax at the rate applicable to a composition taxpayer. In this scenario there will not be any availability of ITC to the recipient of return supply.


c) In case the person returning the time expired goods is an unregistered person, he may return the said goods by issuing any commercial document without charging any tax on the same.

d) Where the time expired goods which have been returned by the retailer/wholesaler are destroyed by the manufacturer, he/she is required to reverse the ITC availed on the return supply in terms of the provisions of clause (h) of sub-section (5) of section 17 of the CGST Act. It is pertinent to mention here that the ITC which is required to be reversed in such scenario is the ITC availed on the return supply and not the ITC that is attributable to the manufacture of such time expired goods.

Illustration 8 :

Supposedly, manufacturer has availed ITC of Rs. 10/- at the time of manufacture of medicines valued at Rs. 100/-. At the time of return of such medicine on the account of expiry, the ITC available to the manufacturer on the basis of fresh invoice issued by wholesaler is Rs. 15/-. So, when the time expired goods are destroyed by the manufacturer he would be required to reverse ITC of Rs. 15/- and not of Rs. 10/-.

(B) Return of time expired goods by issuing Credit Note:

a) As per sub-section (1) of Section 34 of the CGST Act the supplier can issue a credit note where the goods are returned back by the recipient. Thus, the manufacturer or the wholesaler who has supplied the goods to the wholesaler or retailer, as the case may be, has the option to issue a credit note in relation to the time expired goods returned by the wholesaler or retailer, as the case may be. In such a scenario, the retailer or wholesaler may return the time expired goods by issuing a delivery challan. It may be noted that there is no time limit for the issuance of a credit note in the law except with regard to the adjustment of the tax liability in case of the credit notes issued prior to the month of September following the end of the financial year and those issued after it.

b) It may further be noted that if the credit note is issued within the time limit specified in sub-section (2) of section 34 of the CGST Act, the tax liability may be adjusted by the supplier, subject to the condition that the person returning the time expired goods has either not availed the ITC or if availed has reversed the ITC so availed against the goods being returned.

c) However, if the time limit specified in sub-section (2) of section 34 of the CGST Act has lapsed, a credit note may still be issued by the supplier for such return of goods but the tax liability cannot be adjusted by him in his hands. It may further be noted that in case time expired goods are returned beyond the time period specified in the sub-section (2) of section 34 of the CGST Act and a credit note is issued consequently, there is no requirement to declare such credit note on the common portal by the supplier (i.e. by the person who has issued the credit note) as tax liability cannot be adjusted in this case.

d) Further, where the time expired goods, which have been returned by the retailer/wholesaler, are destroyed by the manufacturer, he/she is required to reverse the ITC attributable to the manufacture of such goods, in terms of the provisions of clause (h) of sub-section (5) of section 17 of the CGST Act. This has been illustrated in table below:

Date of Supply of goods from manufacturer/ wholesaler to wholesaler / retailer

Date of return of time expired goods from retailer / wholesaler to wholesaler / manufacturer

Treatment in terms of tax liability & credit note


Case 1 1st July, 2017 20th September, 2018

Credit note will be issued by the supplier (manufacturer / wholesaler) and the same to be uploaded by him on the common portal. Subsequently, tax liability can be adjusted by such supplier provided the recipient (wholesaler/ retailer) has either not availed the ITC or if availed has reversed the ITC.

Case 2 1st July, 2017 20th October, 2018 Credit note will be issued by the supplier (manufacturer/wholesaler) but there is no requirement to upload the same on the common portal. Subsequently tax liability cannot be adjusted by such supplier.

4. It may be noted that though this circular discusses the scenarios in relation to return of goods on account of expiry of the same, it may be applicable to such other scenarios where the goods are returned on account of reasons other than the one detailed above.

12.4 Prohibition of Unauthorised Collection of Tax [Sec. 32]

A person who is not a registered person shall not collect in respect of any supply of goods or services or both any amount by way of tax under this Act.

No registered person shall collect tax except in accordance with the provisions of this Act or the rules made thereunder.

12.5 Amount of Tax to be indicated in Tax Invoice and Other Documents [Sec. 33]

Notwithstanding anything contained in this Act or any other law for the time being in force, where any supply is made for a consideration, every person who is liable to pay tax for such supply shall prominently indicate in all documents relating to assessment, tax invoice and other like documents, the amount of tax which shall form part of the price at which such supply is made.

402 CHAPTER


13.1 Introduction

The term “return” ordinarily means statement of information (facts) furnished by the taxpayer, to tax administrators, at regular intervals. The information to be furnished in the return generally comprises of the details pertaining to the nature of activities/business operations forming the subject matter of taxation; the measure of taxation such as sale price, turnover, or value; deductions and exemptions; and determination and discharge of tax liability for a given period. In any tax law, “filing of returns” constitutes the most important compliance procedure which enables the Government/tax administrator to estimate the tax collection for a particular period and determine the correctness and completeness of the tax compliance of the taxpayers.

The returns serve the following purposes :

(a) Mode for transfer of information to tax administration;

(b) Compliance verification program of tax administration;

(c) Finalization of the tax liabilities of the taxpayer within stipulated period of limitation;

(d) Providing necessary inputs for taking policy decision;

(e) Management of audit and anti-evasion programs of tax administration

The taxpayer is generally required to furnish the return in a specific statutory format. These formats are, therefore, designed to take care of all the provisions of the law that have a bearing on computation of tax liability of a taxpayer. Hence, a study of various fields contained in the form of return vis-à-vis the relevant corresponding provisions of the tax law, can facilitate overall understanding of the tax law in a better manner.

Under the GST laws, the correct and timely filing of returns is of utmost importance because of two reasons. Firstly, under GST laws, a taxpayer is required to estimate his tax liability on “self-assessment” basis and deposit the tax amount along with/before the filing of such return. The return, therefore, constitutes a kind of working sheet/supporting document for the tax authorities that can be relied upon as the basis on which the tax has been computed by the taxpayer. Secondly, under the GST regime, filing of returns not only determines the tax liability of the person filing the same, but it also has a huge bearing on determination of tax liability of other persons with whom the former has entered into taxable activities.

In this Chapter, we will study various provisions concerning filing of returns under the GST laws including types of returns, due dates for filing of returns, particulars contained in the returns, how the returns filed by a taxpayer will be processed by the tax administrators for determining the tax liability of the person filing the return as well as other taxable persons etc.


Chapter IX of the CGST Act [Sections 37 to 48] prescribes the provisions relating to filing of returns as under:

Section 37 Furnishing details of outward supplies

Section 38 Furnishing details of inward supplies

Section 39 Furnishing of returns

Section 40 First return

Section 41 Claim of input tax credit and provisional acceptance thereof

Section 42 Matching, reversal and re-claim of input tax credit

Section 43 Matching, reversal and re-claim of reduction in output tax liability

Section 44 Annual Return

Section 45 Final Return

Section 46 Notice to return defaulters

Section 47 Levy of late fee

Section 48 Goods and services tax practitioners

The provisions relating to form and manner, in which information is to be furnished through returns, are given under Chapter VIII of the CGST Rules [Rules 59-84]. State GST laws also prescribe identical provisions in relation to filing of returns.

Note : The basic features of the return mechanism in GST include electronic filing of returns, uploading of invoice level information and auto-population of information relating to ITC from returns of supplier to that of recipient, invoice-level information matching and auto-reversal of ITC in case of mismatch. The returns mechanism is designed to assist the taxpayer to file returns and avail ITC.

All the returns under GST laws are to be filed electronically. Taxpayers can file the statements and returns by various modes. Firstly, they can file their statement and returns directly on the GST common portal online. However, this may be tedious and time consuming for taxpayers with large number of invoices. For such taxpayers, offline utilities have been provided by GSTN that can be used for preparing the statements offline after downloading the auto populated details and uploading them on the common portal. GSTN has also developed an ecosystem of GST Suvidha Providers (GSP) that will integrate with the common portal.

The details furnished by the taxpayer in the form of returns shall be consolidated and stored at the common portal which will be common for both, i.e. Central Government and State Governments.

13.2 Furnishing Details of Outward Supplies [Section 37] 1. Who is required to furnish details of outward supplies? [Section 37(1) read with rule 59(1) of CGST Rules] :

The details of outward supplies of both goods and services are required to be furnished by every registered person including casual taxable person, except the following:

input service distributor (ISD)

non-resident taxable person

person paying tax under composition scheme

person deducting tax at source (TDS)

E-commerce operator (ECO) who is liable to collect tax at source (TCS)

a supplier of online information and database access or retrieval services (OIDAR)

404 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 2. What is the form for submission of details of outward supplies? [Section 37(1) read with rule 59(1) of

CGST Rules] : The details of outward supplies are required to be furnished, electronically, in Form GSTR-1. Such details can be furnished through the common portal, either directly or from a notified Facilitation Centre.

3. What is the due date of submission of GSTR-1? [Section 37(1)] : GSTR-1 for a particular month is filed on or before the 10th day of the immediately succeeding month. In other words, GSTR-1 of a month can be filed any time between 1st and 10th day of the succeeding month.

The due date of filing GSTR-1 may be extended by the Commissioner/Commissioner of State GST/Commissioner of UTGST for a class of taxable persons by way of a notification.

Note :

(i) The Central Government, on the recommendations of the Council, has notified the registered persons having aggregate turnover of goods or services or both up to 1.5 crore rupees in the preceding financial year or the current financial year, as the class of registered persons who may file GSTR – 1 on quarterly basis. [NN. 71/ 2017 – CT (R), dated 29.12.2017]

However,the said registered persons shall furnish the details of outward supply of goods or services or both in FORM GSTR-1 for the quarters till the following time period:

S.NO Quarter Time Period

1. July, 2019 to Sept., 2019 31-10-2019

2. Oct., 2019 to Dec., 2019 31-01-2020

3. Jan., 2020 to Mar., 2020 30-04-2020

[NN.27/2019-C.T., dated 28-06-2019 and NN.45/2019-CT,dated 09-10-2019]

(ii) The Commissioner, on the recommendations of the Council, has extended the time limit for furnishing the details of outward supplies in FORM GSTR-1 of the CGST Rules, 2017, by such class of registered persons having aggregate turnover of more than 1.5 crore rupees in the preceding financial year or the current financial year, for each of the months from July, 2018 to March June September 2019 March ,2020 till the eleventh day of the month succeeding such month. [NN 32/2018 – CT, dated 10.08.2018, Further extended till June, 2019 by NN 12/2019 – C.T., dated 07.03.2019, Further extended till Sept.,2019 by NN.28/2019-C.T.,dated 28-06-2019 which is further extended till March, 2020 by NN.46/2019-C.T.,dated 9-10-2019].

(iii) A taxpayer cannot file GSTR-1 before the end of the current tax period. However, following are the exceptions to this rule:

(a) Casual taxpayers, after the closure of their business

(b) Cancellation of GSTIN of a normal taxpayer

(iv) A taxpayer who has applied for cancellation of registration will be allowed to file GSTR-1 after confirming receipt of the application.

Example : The details of outward supplies pertaining to the month of October will be required to be furnished on or before 10th November and GSTR-1 for October cannot be filed between 11th November to 15th November.

4. What kind of details of outward supplies are required to be furnished in GSTR-1? [Explanation to section 37 read with rule 59(2) of CGST Rules] : The registered person is required to furnish details of invoices and revised invoices issued in relation to supplies made by him to registered and unregistered persons during a month and debit notes and credit notes in GSTR-1 in the following manner :


Sr. No. Invoice-wise Details of ALL Consolidated Details of ALL Debit and Credit Notes

(i) Inter-State and Intra-State supplies made to registered persons.

Intra-State supplies made to unregistered persons for each rate of tax.

Issued during the month for invoices issued previously.

(ii) Inter-State supplies made to Unregistered persons with invoice value exceeding Rs. 2,50,000

Inter-State supplies made to unregistered persons with invoice value upto Rs. 2,50,000 for each rate of tax separately for each State

It can be seen from the above table that uploading of invoices depends on whether the supply is B2B [Business to Business] or B2C [Business to Consumer] plus whether the supply is intra-State or inter-State.

For B2B supplies, all invoices will have to be uploaded irrespective of whether they are intra-State or inter- State supplies. This is so because the recipient will take ITC and thus, invoice matching is required to be done. For B2C supplies, uploading in general may not be required as the buyer will not be taking ITC. However, still in order to implement the destination based principle, invoices of value more than Rs. 2.5 lakh in inter-State B2C supplies will have to be uploaded. For inter-State invoices below Rs. 2.5 lakh, State wise summary will be sufficient and for all intra-State invoices, only consolidated details will have to be given. Invoices can be uploaded at any time during the tax period and not just at the time of filing.

Example: For the month of October, the taxpayer can upload invoices from 1st October to 10th November. In case of late filing of GSTR-1, invoices can be uploaded after 15th November.

Invoices can be modified/deleted any number of times till the submission of GSTR-1 of a tax period. The uploaded invoice details are in a draft version till the GSTR-1 is submitted and can be changed irrespective of due date.

Note :

Scanned copies of invoices are not required to be uploaded. Only certain prescribed fields of information from invoices need to be uploaded e.g., invoice no., date, value, taxable value, rate of tax, amount of tax etc. In case there is no consideration, but the activity is a supply by virtue of Schedule 1 of CGST Act, the taxable value will have to be worked out as prescribed and uploaded.

Description of each item in the invoice will not be uploaded. Only HSN code in respect of supply of goods and accounting code in respect of supply of services will have to be fed.

Indication of HSN details : The minimum number of digits of HSN code that a filer has to upload depend on his turnover in the last year.

Notification No. 12/2017 CT 28.06.2017, which has been issued in this regard, provides as under :

Annual turnover in the preceding financial year Number of Digits of HSN Code

Upto Rs. 1.5 crore Nil

More than Rs. 1.5 crore and upto Rs. 5 crore 2

More than Rs. 5 crore 4

5. Communication of details of GSTR-1 to the recipient of supply [Section 37(2) read with sub-rules (3) and (4) of rule 59] : The details of outward supplies for a month furnished by the supplier are communicated and made available electronically (auto populated) to the respective recipient(s) in Part A of Form GSTR- 2A / Form GSTR-4A (in case of registered person opting for composition levy) through the common portal after the 10th day of the succeeding month (due date of filing of GSTR-1). The recipient is provided an opportunity to add, correct or delete such details in a two-way communication process. After such modifications, recipient files the details of inward supplies in Form GSTR-2 by 15th day of that month.

406 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 6. How are the details of outward supply furnished in prior periods amended? [Section 37(3)] :

(a) Scope of amendment / correction entries : Tables 9, 10 and 11(II) provide for amendments in details of taxable outward supplies furnished in earlier periods (hereinafter referred to as “Amendment Table”). The supplier can make amendments in the particulars furnished in GSTR-1 filed by him for the prior periods if he agrees to the mismatch report communicated to him by the system every month, after the processing of the return.

The details of original debit notes/credit notes /refund vouchers issued by the tax-payer in the current tax period as also the revision in the debit notes/credit notes/refund vouchers issued in the earlier tax periods are required to be shown in Table 9 of the GSTR-1.

Ordinarily in Amendment Table the suppler is required to give details of original invoice (No and Date), the particulars of which have been wrongly entered in GSTR-1 of the earlier months and are now sought to be amended. However, it may happen that, a supplier altogether forgets to include the entire original invoice while furnishing the GSTR-1 for a particular month. In such cases also, he would be required to show the details of the said missing invoice which was issued in earlier month in the Amendment Table only, as such type of errors would also be regarded as data entry error.

(b) Rectification of errors : Consequent to the mismatch report communicated to the supplier u/s 42 or 43, if he discovers any error or omission, he shall rectify the same in the tax period during which such error or omission is noticed, and pay the tax and interest, if any, in case there is short payment, in the return to be furnished for such tax period.

Example : GSTR-1 for the month of August, 2017 was filed on 10th September, 2017 and the consolidated return u/s 39 pertaining to the month of August, 2017 was filed on 20th September, 2017. The said return is processed in the month of October, 2017 and errors discovered during matching are communicated to the supplier in the mismatch report in the month of October, 2017.

Example : The supplier has to rectify the said errors in GSTR-1 for the month of October, 2017 (due date of submission of which is 10th November, 2017). If there is any tax liability because of the said amendment/ rectification, it will be automatically calculated in his return u/s 39 for the month of October, 2017.

(c) Time limit for Rectification : Suppose for some reason, supplier could not make correction at the time of filing of GSTR-1 for the month of October, 2017 then he can make such amendments in the subsequent periods.

However, the maximum time limit within which such amendments are permissible is earlier of the following dates:

– Date of filing of monthly return u/s 39 for the month of September following the end of the financial year to which such details pertain or

– Date of filing of the relevant annual return

Example : In the above example, the last return in which a supplier can make amendments/ corrections pertaining to financial year 2017-18 will be GSTR-3 for the month of September, 2018 or the annual return for the financial year 2017-18 if the same is filed before 20th October, 2018.

Thus, if the supplier, files his return for September, 2018 on 20th October, 2018 and annual return for financial year 2017-2018 after 20th October, 2018), he can rectify errors discovered in the month of October, 2017 in any of the GSTR-3 till the month of September, 2018.


However, if the supplier files his annual return for the year 2017-18, before filing of GSTR-3 for September 2018, (say on 4th October, 2018), he cannot make any amendment relating to financial year 2017-18 in his GSTR-3 for the month of September, 2018.

In other words, once annual return for financial year 2017-18 is filed before the filing of return for the month of September, 2018, no amendments relating to financial year 2017-18 will be permitted thereafter and in such case, mismatch will become permanent and liability to that extent will be fastened on the receiver.

Example: An entity has furnished the annual return for the year 2017-18 on August 15, 2018. An error is discovered in respect of a transaction pertaining to November, 2017. The entity has filed the returns for the month of September, 2018 on October 20, 2018. In this case, the rectification of the error pertaining to the transaction in November, 2017 cannot be rectified beyond August 15, 2018.

Removal of Difficulty Order No. 02/2018 – CT, dated 31.12.2018

The financial year 2017-18 was the first year of the implementation of the Goods and Services Tax in India and the taxpayers were still in the process of familiarising themselves with the new taxation system and due to lack of said familiarity, the registered persons could not rectify the error or omission in terms of provisions of section 37(3) within the stipulated time, as a result whereof certain difficulties have arisen in giving effects to the provisions of section 37(3).

THEREFORE, in exercise of the powers conferred by section 172 of the CGST Act, 2017, the Central Government, on recommendations of the Council, hereby makes the following Order, to remove the difficulties, namely:

The rectification of error or omission in respect of the details furnished u/s 37(1) shall be allowed after furnishing of the return under section 39 for the month of September, 2018 till the due date for furnishing the details u/s 37(1) for the month of March, 2019 or for the quarter January, 2019 to March, 2019.

Notes :

GSTR 1 needs to be filed even if there is no business activity (Nil Return) in the tax period.

Filing of GSTR-1 for current month is possible only when GSTR-1 for the previous month has been filed.

All values like invoice value, taxable value and tax amounts in GSTR-1 are to be declared up to 2 decimal digits. The rounding off of the self-declared tax liability to the nearest rupee will be done in GSTR 3B.

Taxpayer opting for voluntary cancellation of GSTIN will have to file GSTR-1 for active period.

In cases where a taxpayer has been converted from a normal taxpayer to composition taxpayer, GSTR 1 will be available for filing only for the period during which the taxpayer was registered as normal taxpayer. The GSTR 1 for the said period, even if filed with delay would accept invoices for the period prior to conversion.

Illustration 1 :

Mr. Anand Kumar, a regular taxpayer, filed his return of outward supply (GSTR-1) for the month of August, 2017 before the due date, Later on, in February, 2018 he discovered error in the GSTR-1 return of August 2017 already filed and wants to revise it.

You are required to advise him as to the future course of action to be taken by him according to statutory provisions. [CA Final, May 2018 - New] (5 Marks)

Solution :

Any registered person, who has furnished the details in GSTR-1 u/s 37 for any tax period and which have remained unmatched under section 42 or section 43, shall, upon discovery of any error or omission therein, rectify

408 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal such error or omission in such manner as may be prescribed, and shall pay the tax and interest, if any, in case there is a short payment of tax on account of such error or omission, in the return to be furnished for such tax period.

However, no rectification of error or omission in respect of the details furnished in GSTR-1 shall be allowed after:

Furnishing of the return under section 39 (GSTR-3) for the month of September following the end of the financial year to which such details pertains i.e. Due Date for GSTR 3 for September 2018= 20/10/2018 ,or

Furnishing of the relevant annual return (due date 31/12/2018), Whichever is earlier.

Since mistake or omission is found in February, 2018, hence, he may rectify the same, as it is within time.

No revision: There is no provision for revision of return. It is a mere rectification.

Interest: Interest would also be payable.

13.3 Furnishing of Returns [Sec. 39]


1. Persons liable to file returns, forms, periodicity and due dates of furnishing returns [Section 39 read with rules 61, 62 and 63 of CGST Rules] :

List of Statements/Returns under GST:-

Sr. No.

Section and Rule Type of Taxable Person Form No. Periodicity Due Date*

1.

Section 37(1) Read with Rule 59(1)

Person registered under regular scheme with annual aggregate turnover greater than Rs. 1.5crore (including a casual taxable person)

GSTR-1 Monthly statement of outward supplies of goods and/or services

10th of the next Month

Person registered under regular scheme with annual aggregate turnover up to Rs. 1.5crore (including a casual taxable person)

Quarterly statement of outward supplies of goods and/or services

10th of the month succeeding the quarter

2. Section 39(1) and rule 61(1)

Every registered person other than:- (a) Supplier of OIDAR

services (b) Composition taxpayer (c) Non-resident taxable

person (d) ISD (e) Person deducting tax at

source (f) ECO

GSTR-3B Monthly (or a part of month) Even if no supplies

have been effected during a month, a nil return is required to be filed mandatorily.

20th of the next month

3. Section 39(2) and Rule 62

Registered person paying tax under Composition Scheme/ Notification No.02/2019

Statement GST CMP – 08 (For

Quarterly (or a part of quarter) Even if no supplies

18th of the month next to relevant Quarter


CT(R), dated 07.03.2019 payment of liability)

have been effected, a nil return is required to be filed mandatorily.

GSTR – 4 (Return)

Even if no supplies have been effected, a nil return is required to be filed mandatorily.

30th day of April following the end of the F.Y.

4. Section 39(5) and rule 63

Registered non-resident taxable person

GSTR-5 Monthly (or a part of month)

20th of the next month or 7th day after the last day of the validity of registration, whichever is earlier.

5. Rule 64 OIDAR GSTR-5A Monthly (or a part of month)


6. Section 39(4) read with rule 65

ISD GSTR-6 Monthly (or a part of month)



Registered person deducting tax at source [TDS]

GSTR-7 Monthly 10th of the next month


E-Commerce operator (not being an agent) [TCS]

GSTR-8 Monthly 10th of the next month

9. Section 44(1) Rule80(1)

Registered person other than an ISD, tax deductor/tax collector, casual taxable person and a non-resident taxpayer

GSTR-9 Annual return 31st December of the next financial /year

10. Section 44(1) Rule80(1)

Registered person paying tax under composition scheme

GSTR-9A Annual return 31st December of the next financial year

11. Section52(5) Rule 80(2)

E-commerce operator required to collect tax at source

GSTR-9B Annual statement 31st December of the next financial year

12. Section44(2) Section35(5) Rule 80(3)

Registered person whose aggregate turnover during a financial year exceeds Rs. 2 crore.

GSTR-9C Reconciliation Statement

To be submitted along with the annual return [GSTR-9/9A]

13. Section 45 Rule 81

Taxable person whose registration has been surrendered or cancelled

GSTR-10 Final return Within three months of the date of cancellation or date of order of cancellation, whichever is later.

14. Section 55 Rule Persons who have been issued GSTR-11 Details of inward -


82 a Unique Identity Number (UIN)

Supplies

Note: Returns under S. Nos. 3 and 4 have been discussed in detail under Heading “Special Returns”.

Extension of due date : The due date of filing of the returns mentioned in the above table may be extended by the Commissioner/Commissioner of State GST/Commissioner of UTGST for a class of taxable persons by way of a notification.

Important Note : For the time being, the GST Council has suspended the requirement of furnishing form GSTR-3 [i.e. GST Return]

2. Due date for payment of tax [Section 39(7)] : Due dates for payment of tax in respect of the persons required to file GSTR-3B, GSTR-4 and GSTR-5 are linked with the due dates for filing of such returns i.e., the last dates (due dates) of filing such returns are also the due dates for payment of tax in respect of persons required to file such returns.

Example: In respect of taxpayers filing GSTR-3B, due date of payment of tax for the month of October is 20th November. Similarly, for composition taxpayers, due date for payment of tax for the quarter ended September is 18th October.

However, non-resident taxable persons or casual taxable persons are required to make advance deposit of tax of an amount equivalent to the estimated tax liability of such person for a period for which registration is sought or extension of registration is sought in terms of section 27(2).

Note : GSTR-3B filed without payment of self-assessed tax disclosed therein, is not be regarded as a valid return in terms of section 2(117).

3. Rectification of errors/omissions [Section 39(9)] : Omission or incorrect particulars discovered in the returns filed u/s 39 can be rectified in the return to be filed for the month/quarter during which such omission or incorrect particulars are noticed.

Any tax payable as a result of such error or omission will be required to be paid along with interest. The rectification of errors/omissions is carried out by entering appropriate particulars in “Amendment Tables” contained in GSTR-1.

Exception : It is important to note that section 39(9) does not permit rectification of error or omission discovered on account of scrutiny, audit, inspection or enforcement activities by tax authorities. Hence, assessee may not be able to pass on the ITC to the receiver in respect of tax payments made by him in pursuance of account of any of the aforementioned situations.

Time limit for making rectification : The maximum time limit within which the rectification of errors/omissions is permissible is earlier of the following dates:

Due date of filing of return for the month of September/quarter ending September following the end of the financial year [i.e., 20th October of next financial year] or

Actual date of filing of the relevant annual return

The last date of filing of annual return is 31st December of next financial year.

Hence, if annual return for the year 2017-18 is filed before 20th October 2018, then no rectification of errors/ omissions in returns pertaining to F.Y. 2017-18 would be permitted thereafter.

Note : It may be noted that, the expression ‘due date’ is missing in time limits prescribed for making amendments u/s 37(3) [GSTR-1] and u/s 38(5) [GSTR-2].

Therefore, dates mentioned in these sections apparently mean actual date of filing and not the due date.


4. GSTR-3B [Sub rule (5) of rule 61 of CGST Rules] : Where the time limit for furnishing of details in FORM GSTR-1 u/s 37 or in FORM GSTR-2 u/s 38 has been extended, the return specified u/s 39(1) shall, in such manner and subject to such conditions as the Commissioner may, by notification, specify, be furnished in FORM GSTR-3B electronically through the common portal:

Provided that where a return in FORM GSTR-3B is required to be furnished by a person, then, such person shall not be required to furnish the return in FORM GSTR-3.

[Rule 61(5) substituted Retrospectively w.e.f. 01.07.2017, by NN 49/2019 – CT, dated 09.10.2019]

GSTR-3B is a simple return containing summary of outward and inward supplies liable to reverse charge, /eligible ITC, payment of tax etc. Thus, GSTR-3B does not require invoice-wise data of outward supplies.

GSTR-3B can be submitted electronically through the common portal, either directly or through a notified Facilitation Centre.

Payment of Tax

The registered person will discharge his liability towards tax, interest, penalty, fees and other amounts by debiting electronic cash ledger and/or electronic credit ledger and include the details in GSTR-3B.

GSTR-3B filed without discharging complete liability will not be treated as valid return.

Refund

Refund of any balance in the electronic cash ledger can be claimed in GSTR-3B.

Such return will be deemed to be an application filed under section 54.

Such refund can be claimed only when all the return related liabilities for that tax period have been discharged.

Electronic cash ledger will be debited on filing of valid GSTR-3B as a result of such refund.

Note :

A taxpayer needs to electronically sign the submitted returns otherwise it will be considered not-filed.

Taxpayers can electronically sign their returns using a DSC (mandatory for all types of companies and LLPs), E-sign (Aadhaar-based OTP verification), or EVC (Electronic Verification Code sent to the registered mobile number and E-mail ID of the authorized signatory).

Illustration 2 :

Explain the provisions of section 39(9) of the CGST Act, 2017 with reference to rectification of returns. [RTP, May 2019]

Solution :

As per section 39(9) of the CGST Act, 2017, if any registered person after furnishing a return discovers any omission or incorrect particulars therein, he shall rectify such omission or incorrect particulars in the return to be furnished for the month or quarter during which such omission or incorrect particulars are noticed, subject to payment of interest.

However, section 39(9) does not permit rectification of error or omission discovered on account of scrutiny, audit, inspection or enforcement activities by tax authorities. Further, no such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of return for the month of September or second quarter following the end of the financial year, or the actual date of furnishing of relevant annual return, whichever is earlier.

412 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 13.4 Special Returns As discussed above, a regular taxpayer has to file GSTR-1 and GSTR-3B. However, there are certain specified category of taxpayers for whom a simplified return is specified owing to the nature of their activities. They are taxpayers under composition scheme, non-resident taxable persons, persons having UIN, Persons required to deduct tax at source [TDS] and e-commerce operators required to collect tax at source [TCS].

These Special Returns are discussed below.

1. Filing of Statements / Returns by Composition Supplier [Section 39(2) read with Rule 62 of CGST Rules, as amended by NN 20/2019 – CT, dated 23.04.2019]

(a) Persons eligible to file Statement, Return, Periodicity and Forms: Every registered person being supplier of goods/services under composition scheme shall-

(i) furnish a statement, every quarter or, as the case may be, part thereof, containing the details of payment of self-assessed tax in FORM GST CMP-08, till the 18th day of the month succeeding such quarter; and

(ii) furnish a return for every financial year or, as the case may be, part thereof in FORM GSTR-4, till the 30th day of April following the end of such financial year,

electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner.

(b) Every registered person furnishing the statement under sub-rule (1) shall discharge his liability towards tax or interest payable under the Act or the provisions of this Chapter by debiting the electronic cash ledger.

(c) Auto-population of inward supplies: The inward supplies of a composition supplier received from registered persons filing GSTR-1 will be auto populated in FORM GSTR-4A.

The composition supplier can view the auto-populated details of inward supplies in GSTR-4A and, where required, after adding, correcting or deleting the details, furnish GSTR-4.

(d) The return furnished under sub-rule (1) shall include the –

(i) invoice wise inter-State and intra-State inward supplies received from registered and un-registered persons; and

(ii) consolidated details of outward supplies made.

(e) Statements/returns for the period prior to opting for composition scheme : A registered person who has opted to pay tax under composition scheme (goods/services) from the beginning of a financial year shall, where required, furnish the details of outward and inward supplies and return under rules 59, 60 and 61 [i.e. GSTR-1 & GSTR–3B] relating to the period during which the person was liable to furnish such details and returns till the due date of furnishing the return for the month of September of the succeeding financial year or furnishing of annual return of the preceding financial year, whichever is earlier.

Explanation.– For the purposes of this sub-rule, it is hereby declared that the person shall not be eligible to avail input tax credit on receipt of invoices or debit notes from the supplier for the period prior to his opting for the composition scheme for goods/services.

(f) Statements/returns for the period prior to exiting from composition scheme for Goods : A registered person opting to withdraw from the composition scheme at his own motion or where option is withdrawn at the instance of the proper officer shall, where required, furnish a statement in FORM GST CMP-08 for the period for which he has paid tax under the composition scheme till the 18th day of the month succeeding the quarter in which the date of withdrawal falls and furnish a return in FORM GSTR-4 for the said period till the 30th day of April following the end of the financial year during which such withdrawal falls.


(g) Statements/returns for the period prior to exiting from composition scheme for Services : A registered person who ceases to avail the benefit of composition scheme for services, shall, where required, furnish a statement in FORM GST CMP-08 for the period for which he has paid tax by availing the benefit under the said notification till the 18th day of the month succeeding the quarter in which the date of cessation takes place and furnish a return in FORM GSTR-4 for the said period till the 30th day of April following the end of the financial year during which such cessation happens.

Note: Procedure for Quarterly Tax payment and annual filing of Return for Composition taxpayers of goods/services [NN 21/2019 – CT, dated 23.04.2019]

In exercise of the powers conferred by section 148 of the CGST Act, 2017, the Central Government, on the recommendations of the Council, hereby notifies the supplier of goods/services under composition scheme, as the class of registered persons who shall follow the special procedure as mentioned below for furnishing of return and payment of tax:

(a) The said persons shall furnish a statement, every quarter or, as the case may be, part thereof containing the details of payment of self-assessed tax in FORM GST CMP-08 of the CGST Rules, 2017, till the 18th day of the month succeeding such quarter.

(b) The said persons shall furnish a return for every financial year or, as the case may be, part thereof in FORM GSTR-4 of the CGST Rules, 2017, on or before the 30th day of April following the end of such financial year.

(c) The registered persons paying tax by availing the benefit of the said notification, in respect of the period for which he has availed the said benefit, shall be deemed to have complied with the provisions of section 37 and section 39 of the said Act if they have furnished FORM GST CMP-08 and FORM GSTR-4 as provided above.

2. Filing of Returns by Non-Resident Taxable Persons [Section 39(5) read with rule 63 of CGST Rules]

Non-Resident Taxable Persons (NRTPs) are those suppliers who do not have a business establishment in India and have come for a short period to make supplies in India. They would normally import their products into India and make local supplies.

A. Monthly return: A registered NRTP is not required to file separately the Statement of Outward Supplies, Statement of Inward Supplies and Return for a normal tax payer. In place of the same, a simplified monthly tax return has been prescribed in Form GSTR-5 for a NRTP for every calendar month or part thereof. NRTP shall incorporate the details of outward supplies and inward supplies in GSTR-5.

B. Last date of filing return: The details in GSTR-5 should be furnished within 20 days after the end of the calendar month or within 7 days after the last day of validity period of the registration, whichever is earlier.

C. Payment of interest, penalty, fees or any other amount payable: NRTP shall pay the tax, interest, penalty, fees or any other amount payable under the CGST Act or the provisions of the Returns Chapter under CGST Rules, 2017 till the last date of filing return.

3. Details of inward supplies of persons having UIN [Rule 82 of CGST Rules, 2017]

A. UIN issued for claiming refund of taxes paid on his inward supplies of a person: Such person shall furnish the details of those inward supplies of taxable goods and/or services on which refund of taxes has been claimed in Form GSTR-11, along with application for such refund claim.

B. UIN issued for purposes other than refund of taxes paid: Such person shall furnish the details of inward supplies of taxable goods and/or services as may be required by the proper officer in Form GSTR-11.

4. Filing of Returns by person required to deduct tax at source (TDS) [Sec. 39(3) read with sec. 51 and rule 60(6) and rule 66 of CGST Rules, 2017]


Whenever taxable goods or services or both are supplied to a Central/ State Government’s Department/ establishment or, local authority, or Governmental agencies, recipient is required to deduct tax at source under section 51. Such deductor [person deducting TDS] is required to be compulsorily registered and deduct tax @ 2% [1% CGST + 1% SGST] of the payment made to the supplier (the deductee) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds Rs. 2,50,000 (excluding the amount of CGST, SGST, IGST, UTGST and cess indicated in the invoice).

A. Monthly return : Deductor shall furnish a monthly return in Form GSTR-7 electronically through the common portal.

B. Last date of filing return : The details in GSTR-7 should be furnished on / before 10th of the month succeeding the calendar month in which tax has been deducted at source.

NOTE: The time limit for furnishing the TDS return u/s 51 of the CGST Act, 2017 in FORM GSTR-7 for the months of October, 2018 to July, 2019 is extended till 31-08-2019.

[NN 26/2019-C.T.,dated 28-06-2019].

C. TDS details made available to deductees : The details of TDS furnished by the deductor in GSTR-7 shall be made available electronically to each of the suppliers in Part C of Form GSTR-2A (Normal Assessee)/ Form GSTR-4A (Composition Supplier) deductees on the common portal after the due date of filing of form GSTR-7 for claiming the amount of tax deducted in his electronic cash ledger after validated. [as amended by NN/31/2019-C.T.,w.e.f. 28-06-2019]

The deductees can take this amount as credit in his Electronic Cash Register and use the same for payment of tax liability.

D. Tax Deduction at Source (TDS) Certificate : A TDS certificate is required to be issued by deductor (the person who is deducting tax) in Form GSTR-7A to the deductee (the supplier from whose payment, TDS is deducted), within 5 days of crediting the amount to the Government. It contains the details pertaining to value on which tax has been deducted, rate of deduction, amount of tax deducted at source and amount paid to the Government.

5. Filing of Statement of Supplies effected through an e-commerce operator (TCS Statement) [ Sec. 52(4) read with rule 60(7) and rule 67 of CGST Rules, 2017]

When a supplier supplies some goods or services to the consumer through the portal of an electronic commerce operator (ECO), the consideration for the product/ service is collected by the ECO from the consumer and passed on to the actual supplier after the deduction of its commission.

The Government has placed the responsibility on ECO to collect the ‘tax’ at @ 1% [(0.5%CGST +0.5% SGST) OR 1% IGST] from the supplier under section 52.

This shall be done by the ECO by paying the supplier, the consideration of the product/ services, less the tax, calculated at the rate of 1%. The amount so collected by ECO [while making the payment to the supplier] is referred as Tax Collected at Source (TCS). TCS will be calculated on the net value of goods/services supplied through the portal of ECO.

A. Monthly return : ECO shall furnish a monthly return in Form GSTR-8 electronically through the common portal. Form GSTR-8 contains the details of supplies of goods or services or both effected through ECO, including the supplies of goods or services or both returned through it and the amount of tax collected at source.

B. Last date of filing return : The details in GSTR-8 should be furnished on/ before 10th of the month succeeding the calendar month in which tax has been collected at source.

Further, the amount of tax collected by ECO (TCS amount) is required to be deposited by the 10th of the month succeeding the calendar month in which tax has been collected at source.


C. TCS details made available to suppliers : The details of TCS furnished by the ECO in Form GSTR-8 shall be made available electronically to each of the suppliers in Part C of Form GSTR-2A on the common portal after the due date of filing of Form GSTR-8 for claiming the amount of tax deducted in his electronic cash ledger after validated .[as amended by NN 31/2019-C.T.,w.e.f.28-06-2019]

6. Filing of return by an Input Service Distributor [Section 39(4) read with rule 60(5) and rule 65 of CGST Rules, 2017]

Input Service Distributor (ISD) means an office of the supplier of goods or services or both which receives tax invoices issued towards the receipt of input services and issues “ISD Invoice” for the purposes of distributing the credit of central tax, State tax, integrated tax or Union territory tax paid on the said services to a supplier of taxable goods or services or both having the same PAN as that of ISD.

Many times, the Head Office procures certain services which are for common utilization of all units across the country. The bills for such expenses are raised on the Head Office. However, the Head Office itself does not provide any output supply so as to utilize the credit which gets accumulated on account of such input services. Since the common expenditure is meant for the business of all units, it is but natural that the credit of input services in respect of such common invoices should be apportioned between all the consuming units. ISD mechanism enables such proportionate distribution of credit of input services amongst all the consuming units.

Thus, ISD can distribute the credit of “input services” (and not of inputs or capital goods) on common invoices pertaining to input services to various units belonging to the entities having same PAN (recipient of credit).

An ISD is required to distribute both eligible as well as ineligible credit as per rule 39 of the CGST Rules, 2017.

A. Monthly Return : ISD is not required to file separate statements of outward and inward supplies with its return. It needs to file only a monthly return in Form GSTR-6 electronically through the common portal. Form GSTR-6 contains the details of input tax credit received for distribution, total ITC/eligible/ ineligible ITC to be distributed for the tax period, distribution of ITC, details of debit/ credit notes, etc.

B. Last date of filing return : The details in GSTR-6 should be furnished on/ before 13th of the month succeeding the calendar month. GSTR-6 can only be filed after 10th of the month and before 13th of the month succeeding the tax period.

C. Auto-population of input tax credit received for distribution : The details of input tax credit received for distribution by an ISD will be auto populated in Form GSTR-6A. Such details are auto-populated in Form GSTR-6A when the registered suppliers file their GSTR-1.

ISD can view the auto-populated details of ITC received for distribution in GSTR-6A and, where required, after adding, correcting or deleting the details, furnish GSTR-6.

D. ISD will not have reverse charge supplies : An ISD cannot accept any invoices on which tax is to be discharged under reverse charge mechanism. If ISD wants to take reverse charge supplies, in that case it has to separately register as a Normal taxpayer. This is because the ISD mechanism is only to facilitate distribution of credit of taxes paid. The ISD itself cannot discharge any tax liability (as person liable to pay tax) and remit tax to Government account. ISD will have late fee and any other liability only.

E. Details of GSTR-6 to be available in GSTR-2A of the recipients : The details of invoices furnished by an ISD in his return will be made available to the respective registered recipients of credit in their GSTR 2A (Form GSTR 4A in case of composition supplier). The recipients may include these in their GSTR-2 (Form GSTR 4 in case of composition supplier) and take credit.

13.5 First Return [Section 40]



Sec. 40 First Return


Every registered person who has made outward supplies in the period between the date on which he became liable to registration till the date on which registration has been granted shall declare the same in the first return furnished by him after grant of registration.


When a person becomes liable to registration after his turnover crossing the threshold limit of Rs. 20 lakh (Rs. 10 lakh in case of Special Category States), he may apply for registration within 30 days of so becoming liable. Thus, there might be a time lag between a person becoming liable to registration and grant of registration certificate.

During the intervening period, such person might have made the outward supplies, i.e. after becoming liable to registration but before grant of the certificate of registration. Now, in order to enable such registered person to declare the taxable supplies made by him for the period between the date on which he became liable to registration till the date on which registration has been granted so that ITC can be availed by the recipient on such supplies, firstly, the registered person may issue Revised Tax Invoices against the invoices already issued during said period within 1 month from the date of issuance of certificate of registration [Section 31(3)(a) read with rule 53 of CGST Rules, 2017]. Further, section 40 provides that registered person shall declare his outward supplies made during said period in the first return furnished by him after grant of registration. The format for this return is the same as that for regular return.

13.6 Annual Return [Sec. 44]


Sec. 44 Annual Return


(1) Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year.

(2) Every registered person who is required to get his accounts audited in accordance with the provisions of sub section (5) of section 35 shall furnish, electronically, the annual return under sub-section (1) along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and such other particulars as may be prescribed.


1. Who are required to furnish Annual Return and what is the due date? [Section 44(1) read with rule 80]

All taxpayers filing return in GSTR-1 to GSTR-3, are required to file an annual return. However, following persons are not required to file annual return:

(i) Casual Taxable Persons

(ii) Non- resident taxable person


(iii) Input Service Distributors and

(iv) Persons authorized to deduct/collect tax at source under section 51/52.

(v) Persons supplying online information and data base access or retrieval services from a place outside India to a person in India.[NN.30/2019-C.T.,dated 28-06-2019]

This return needs to be filed by 31st December of the next Financial Year.

Explanation – For the purposes of this section, it is hereby declared that the annual return for the period from the 1st July, 2017 to the 31st March, 2018 shall be furnished on or before 31.03.2019 30.06.2019 31.08.2019 30.11.2019 [Removal of Difficulty Order No.7/2019-C.T., dated 26-08-2019]

The Central Government, on the recommendations of the Council, has notified the registered persons whose aggregate turnover in a financial year does not exceed Rs. 2 Crores and who have not furnished the annual return before the due date, as the class of registered persons who shall have the OPTION TO FURNISH THE ANNUAL RETURN, in respect of financial years 2017-18 and 2018-19.

Further, the said return shall be deemed to be furnished on the due date if it has not been furnished before the due date.

[NN 47/2019 – CT, dated 09.10.2019]

2. What is the prescribed form for Annual Return? [Section 44(1) read with rule 80(1)]

Annual Return is to be filed electronically in Form GSTR-9 through the common portal.

Composition scheme supplier: A person paying tax under composition scheme is required to file the Annual Return in Form GSTR-9A.

3. Who is required to furnish a Reconciliation Statement? [Section 44(2) read with section 35(5) and rule 80(3)] Section 35 contains the provisions relating to Accounts and Records.

Sub-section (5) of section 35 read alongwith section 44(2) and rule 80 of the CGST Rules, 2017 stipulates as follows:

(a) Every registered person must get his accounts audited by a Chartered Accountant or a Cost Accountant if his aggregate turnover during a F.Y. exceeds Rs. 2 crores.

(b) Such registered person is required to furnish electronically through the common portal alongwith Annual Return a copy of

Audited annual accounts

A Reconciliation Statement, duly certified, in prescribed form Reconciliation Statement will reconcile the value of supplies declared in the return furnished for the financial year with the audited annual financial statement and such other particulars, as may be prescribed.

(c) However, any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force, are not required to get their accounts audited and are not required to submit Reconciliation Statement [Proviso to Sec. 35(5) inserted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019].

(d) The person supplying online information and database access or retrieval services from a place outside India to a person in India shall not be required to furnish Annual Return in FORM GSTR-9 and reconciliation statement in FORM GSTR-9C. [NN 30/2019-C.T., dated 28.06.2019]

418 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 13.7 Final Return [Sec. 45]


Sec. 45 Final Return


Every registered person who is required to furnish a return under sub-section (1) of section 39 and whose registration has been cancelled shall furnish a final return within three months of the date of cancellation or date of order of cancellation, whichever is later, in such form and manner as may be prescribed.


1. Who are required to furnish Final Return? [Section 45 read with rule 81]

Every registered person who is required to furnish return u/s 39(1) and whose registration has been surrendered or cancelled shall file a Final Return electronically in Form GSTR-10 through the common portal.

2. What is the time-limit for furnishing Final Return? [Section 45]

Final Return has to be filed within 3 months of the:

(i) date of cancellation or

(ii) date of order of cancellation

whichever is later.

13.8 Default in Furnishing Return [Sec. 46 & 47]


Sec. 46 Notice to return defaulters

Particulars

Where a registered person fails to furnish a return under section 39 or section 44 or section 45, a notice shall be issued requiring him to furnish such return within fifteen days in such form and manner as may be prescribed.

Sec. 47 Levy of late fee


(1)

Any registered person who fails to furnish the details of outward or inward supplies required under section 37 or section 38 or returns required under section 39 or section 45 by the due date shall pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum amount of five thousand rupees.

(2)

Any registered person who fails to furnish the return required under section 44 by the due date shall be liable to pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum of an amount calculated at a quarter per cent of his turnover in the State or Union territory.



1. Notice to return defaulters [Sec. 46 read with sec. 52 and rule 68] : A notice in prescribed form shall be issued, electronically, to a registered person who fails to furnish return under section 39 [Normal Return] or section 44 [Annual Return] or section 45 [Final Return]. Such notice shall require such registered person to furnish such return within 15 days.

Illustration 3 :

Miss Vaishno, a registered tax payer paying tax under regular scheme failed to file the return for the month of January, 2018. Explain the legal recourse available to the tax officer, if any.

Answer :

The proper officer has to first issue a notice to the Miss Vaishno under section 46 of CGST Act, 2017 requiring him to furnish the return within a period of 15 days. If Miss Vaishno fails to file return within the given time, the proper officer shall proceed to assess the tax liability of the return defaulter to the best of his judgement taking into account all the relevant material available with him in terms of section 62 of CGST Act, 2017.

2. Late fees levied for delay in filing return [Sec. 47(1)] : Any registered person who fails to furnish following by the due date:

(A) Statement of Outward Supplies [Section 37]

(B) Statement of Inward Supplies [Section 38]

(C) Returns [Section 39]

(D) Final Return [Section 45],

shall pay a late fee = Rs. 100 per day (CGST Act) during which such failure continues or Rs. 5,000/- (CGST Act), whichever is lower.

However this late fees is reduced by Government which is discussed in next Paras.

3. Late Fee for delayed filing of details of outward supplies for any month /quarter in Form GSTR – 1 [NN. 04/2018 – CT, dated 23.01.2018] :

(i) Where there is no outward supply in any month / quarter – Rs. 10/- per day (under CGST) during which such failure continues or Rs. 5,000 (under CGST), whichever is lower.

(ii) Other Cases – Rs. 25/- per day (under CGST) during which such failure continues or Rs. 5,000 (under CGST), whichever is lower.

4. Late Fee for delayed filing of Return in Form GSTR – 3B, GSTR – 4, and GSTR – 5 [NN. 64/2017 – CT, dated 15.11.2017, NN. 73/2017 – CT, dated 29.12.2017, NN. 5/2018 – CT, dated 23.01.2018]:

(i) Where the total amount of central tax payable in the said return is NIL – Rs. 10/- per day (under CGST) during which such failure continues or Rs. 5,000 (under CGST), whichever is lower.

(ii) Other Cases – Rs. 25/- per day (under CGST) during which such failure continues or Rs. 5,000 (under CGST), whichever is lower.

5. Late Fee for delayed filing of Return in Form GSTR – 6 [NN. 7/2018 – CT, dated 23.01.2018]: Rs. 25/- per day (under CGST) during which such failure continues or Rs. 5,000 (under CGST), whichever is lower.

6. Late fees levied for delay in filing annual return [Section 47(2)] : Any registered person who fails to furnish the Annual Return by the due date shall be liable to pay a late fee = Rs. 100 per day (CGST Act) during which such failure continues or 0.25% (CGST Act) of the turnover of registered person in the State/UT, whichever is lower.

420 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 13.9 Goods and Service Tax Practitioners [Sec. 48] Section 48 provides for the authorisation of an eligible person to act as approved Goods and Services Tax Practitioner (GSTP). A registered person may authorize an approved GSTP to furnish information, on his behalf, to the Government. The manner of approval of GSTPs, their eligibility conditions, duties and obligations, manner of removal and other conditions relevant for their functioning have been prescribed in the rules 83 and 84 of the CGST Rules, 2017.

GSTN will provide separate user ID and Password to GSTP to enable him to work on behalf of his clients without asking for their user ID and passwords. They can do all the work on behalf of taxpayers as allowed under GST Law. A taxpayer may choose a different GSTP by simply unselecting the previous one and then choosing a new GSTP on the GST portal.

Standardised formats from GST PCT-1 to GST PCT-5 have been prescribed for making application for enrolment as GSTP, certificate of enrolment, show cause notice for disqualification, order of rejection of application of enrolment, list of approved GSTPs, authorisation letter and withdrawal of authorisation.

A GSTP enrolled in any State or Union Territory shall be treated as enrolled in the other States/Union territories.

1. What is the eligibility criteria for GSTP?

(i) A person who is

Indian citizen

Person of sound mind

Not adjudicated as insolvent

Not been convicted by a competent court

(ii) Satisfies any of the condition

Retired officer of Commercial Tax Department of any State Govt./CBIC who, during service under Government had worked in a post not lower than the rank of a Group-B gazetted officer for a period ≥ 2 years.

Enrolled as a Sales Tax Practitioner or Tax Return Preparer under the earlier indirect tax law for a period of not less than 5 years.

Has acquired any of the prescribed qualifications (mentioned below).

Prescribed Qualification :

(i) Graduate or postgraduate degree or its equivalent examination having a degree in Commerce, Law, Banking including Higher Auditing, or Business Administration or Business Management from any Indian University established by any law for the time being in force.

(ii) Degree examination of any Foreign University recognised by any Indian University as equivalent to the degree examination mentioned in sub-clause (i).

(iii) Any other examination notified by the Government, on the recommendation of the Council, for this purpose.

(iv) Any degree examination of an Indian University or of any Foreign University recognized by any Indian University as equivalent of the degree examination.

(v) Has passed final examination of ICAI/ ICSI/ Institute of Cost Accountants of India.


2. What are the activities which can be undertaken by a GSTP?

A GSTP can undertake any/all of the following activities on behalf of a registered person, if so authorised by him:

(a) Furnish details of outward and inward supplies

(b) Furnish monthly, quarterly, annual or final return

(c) Make deposit for credit into the electronic cash ledger

(d) File a claim for refund

(e) File an application for registration amendment/cancellation

(f) furnish information for generation of e-way bill;

(g) furnish details of challan in FORM GST ITC-04;

(h) file an application for amendment or cancellation of enrolment under rule 58; and

(i) file an intimation to pay tax under the composition scheme or withdraw from the said scheme.

(Where any application relating to cases covered in (d), (e) and (i) above has been submitted by the goods and services tax practitioner authorised by the registered person, a confirmation shall be sought from the registered person and the application submitted by the said practitioner shall be made available to the registered person on the common portal and such application shall not be further proceeded with until the registered person gives his consent to the same.)

[as amended by NN 03/2019 – CT, w.e.f. 01.02.2019]

Furnishing returns through GSTP: When a registered person opts to furnish his return through GSTP, such registered person:

Gives his consent in prescribed form to any GSTP to prepare and furnish his return before confirming submission of any statement prepared by GSTP, ensure that the facts mentioned in the return are true and correct.

Thus, the responsibility for correctness of any particulars furnished in the return or other details filed by the GST practitioners shall continue to rest with the registered person on whose behalf such return and details are furnished.

The registered person before confirming should ensure that the facts mentioned in the return are true and correct before signature. However, failure to respond to request for confirmation shall be treated as deemed confirmation.

3. Other Points

Any registered person may give consent and authorise a GST practitioner in the prescribed form by listing the authorised activities in which he intends to authorise the GST practitioner.

The registered person authorising a GSTP shall have to authorise in the prescribed form and the GST practitioner will have to accept the authorisation in Part B of the same form.

The GST practitioner shall be allowed to undertake only such tasks as indicated in the prescribed form. The registered person may, at any time, withdraw such authorisation in the prescribed form.


Any statement furnished by the GST practitioner shall be made available to the registered person on the GST Common Portal. For every statement furnished by the GST practitioner, a confirmation shall be sought from the registered person over email or SMS.

The GST practitioner shall prepare all statements with due diligence and affix his digital signature on the statements prepared by him or electronically verify using his credentials.

If the GST practitioner is found guilty of misconduct, his enrolment will be liable to be cancelled. A show cause notice would be issued to him in the prescribed form.

4. What is the procedure for enrolment as GSTP?

An application in prescribed form may be made electronically through the common portal for enrolment as GSTP.

The application shall be scrutinized and GST practitioner certificate shall be granted in the prescribed form.

In case, the application is rejected, proper reasons shall have to be given.

The enrolment once done remains valid till it is cancelled.

No person enrolled as a GSTP shall be eligible to remain enrolled unless he passes such examination conducted at such periods and by such authority as may be notified by the Commissioner on the recommendations of the Council.

Any person who has been enrolled as GSTP by virtue of him being enrolled as a Sales Tax Practitioner or Tax Return Preparer under the earlier Indirect Tax law shall remain enrolled only for a period of 1 year 18 months 30 months from the appointed date unless he passes the said examination within the said period of 1 year 18 months 30 months [1year, substituted by NN 26/2018 - CT, w.e.f. 13.06.2018] [18 months, substituted by NN 03/2019 – CT, w.e.f. 01.02.2019]

13.10 Information Return 1. Who shall furnish the information return? [Sec. 150(1)]

Information return is based on the idea of verifying the compliance levels of registered persons through information procured from independent third party sources. Many authorities who is responsible for maintaining record of registration or statement of accounts or any periodic return or document containing details of payment of tax and other details of transaction of goods or services or both or transactions related to a bank account or consumption of electricity or transaction of purchase, sale or exchange of goods or property or right or interest in a property under any law for the time being in force, shall furnish an Information Return of the same in respect of such periods, within such time, in such form and manner and to such authority/agency as may be prescribed.

Persons required to furnish Information Return are as follows [Sec. 150(1)] :Any person, being -

(a) a taxable person; or

(b) a local authority or other public body or association; or

(c) any authority of the State Government responsible for the collection of value added tax or sales tax or State excise duty or an authority of the Central Government responsible for the collection of excise duty or customs duty; or

(d) an income tax authority appointed under the provisions of the Income-tax Act, 1961; or


(e) a banking company within the meaning of clause (a) of section 45A of the Reserve Bank of India Act, 1934; or

(f) a State Electricity Board or an electricity distribution or transmission licensee under the Electricity Act, 2003, or any other entity entrusted with such functions by the Central Government or the State Government; or

(g) the Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908; or

(h) a Registrar within the meaning of the Companies Act, 2013; or

(i) the registering authority empowered to register motor vehicles under the Motor Vehicles Act, 1988; or

(j) the Collector referred to in clause (c) of section 3 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013; or

(k) the recognised stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956; or

(l) a depository referred to in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996; or

(m) an officer of the Reserve Bank of India as constituted under section 3 of the Reserve Bank of India Act, 1934; or

(n) the Goods and Services Tax Network, a company registered under the Companies Act, 2013; or

(o) a person to whom a Unique Identity Number has been granted under sub-section (9) of section 25; or

(p) any other person as may be specified, on the recommendations of the Council, by the Government, who is responsible for maintaining record of registration or statement of accounts or any periodic return or document containing details of payment of tax and other details of transaction of goods or services or both or transactions related to a bank account or consumption of electricity or transaction of purchase, sale or exchange of goods or property or right or interest in a property under any law for the time being in force.

2. Defective Information Return [Section 150(2)] : Where the Commissioner, or an officer authorised by him in this behalf, considers that the information furnished in the information return is defective, he may intimate the defect to the person who has furnished such information return.

He shall give such person an opportunity of rectifying the defect within a period of 30 days from the date of such intimation [or within such further period which, on an application made in this behalf, the said authority may allow].

However, if the defect is not rectified within the said period of 30 days [or, the further period so allowed], then, notwithstanding anything contained in any other provisions of this Act, such information return shall be treated as not furnished and the provisions of this Act shall apply.

3. Issuance of notice for failure to furnish the information return within stipulated time [Section 150(3)] : Where a person who is required to furnish information return has not furnished the same within the aforesaid specified time, the said authority may serve upon him a notice requiring furnishing of such information return within a period not exceeding 90 days from the date of service of the notice and such person shall furnish the information return.

Sec. 123 : Penalty for failure to furnish information return If a person who is required to furnish an information return under section 150 fails to do so within the period specified in the notice issued under sub-section (3) thereof, the proper officer may direct that such person shall be liable to pay a penalty of one hundred rupees for each day of the period during which the failure to furnish


such return continues: Provided that the penalty imposed under this section shall not exceed five thousand rupees.

Analysis: If the person to whom the notice has been issued under section 150(3) fails to furnish the information return within the period specified in said notice, the proper officer may direct that such person shall be liable to pay a penalty = Rs. 100 per day (CGST) during which such failure continues or Rs. 5,000/- (CGST), whichever is lower.

Sec. 151 : Power to collect statistics (1) The Commissioner may, if he considers that it is necessary so to do, by notification, direct that statistics may

be collected relating to any matter dealt with by or in connection with this Act. (2) Upon such notification being issued, the Commissioner, or any person authorized by him in this behalf,

may call upon the concerned persons to furnish such information or returns, in such form and manner as may be prescribed, relating to any matter in respect of which statistics is to be collected.

Sec. 124 : Fine for failure to furnish statistics If any person required to furnish any information or return under section 151, - (a) without reasonable cause fails to furnish such information or return as may be required under that section,

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

punishable with a fine which may extend to ten thousand rupees and in case of a continuing offence to a further fine which may extend to one hundred rupees for each day after the first day during which the offence continues subject to a maximum limit of twenty five thousand rupees.

Analysis :

This Section authorises the Commissioner for the purpose of administration of the Act, to collect any statistics relating to any matter that may be required.

The Commissioner may, by way of a notification, direct collection of statistics for the purpose of better administration of the Act.

After issuance of such notification, the Commissioner or any person authorised by Commissioner in this regard may call all concerned persons to furnish such information or return relating to any matter in respect of which statistics is being collected.

The form in which the information need to be filed, the authority to whom such return need to be filed, the details that are captured on the return, the periodicity of filing such return shall be prescribed by rules.

Fine = Rs. 10,000/- (CGST) and in case of continuing offence, a further fine which may extend to Rs. 100 (CGST) for each day after the first day during which offence continues subject to a maximum limit of Rs. 25,000 (CGST).

Sec. 152 : Bar on disclosure of information

(1) No information of any individual return or part thereof with respect to any matter given for the purposes of section 150 or section 151 shall, without the previous consent in writing of the concerned person or his authorised representative, be published in such manner so as to enable such particulars to be identified as referring to a particular person and no such information shall be used for the purpose of any proceedings under this Act.

(2) Except for the purposes of prosecution under this Act or any other Act for the time being in force, no person


who is not engaged in the collection of statistics under this Act or compilation or computerisation thereof for the purposes of this Act, shall be permitted to see or have access to any information or any individual return referred to in section 151.

(3) Nothing in this section shall apply to the publication of any information relating to a class of taxable persons or class of transactions, if in the opinion of the Commissioner, it is desirable in the public interest to publish such information.

Analysis :

This Section discusses about the way in which the information obtained under Sections 150 and 151 needs to be handled.

Any information obtained shall not be published so as to enable any particulars to be identified as referring to a particular taxpayer, without the previous consent of the tax payer or his authorised representative. This consent should be in writing. Further the information so obtained shall not be used for the purpose of any proceedings under this Act.

A person who is not engaged in the collection of statistics under this Act or compliance or computerisation for the purpose of Act, shall not be permitted to see or have access to any information or any individual return.

However, for the purpose of prosecution under the Act, or under any other Act, access to such information can be given.

Any person, who is engaged in connection with collection of statistics under Section 151 or compilation or computerisation, willfully discloses any information or contents of any return under this Section, or otherwise in execution of his duties shall be punished with imprisonment or fine or both in terms of section 133.

Sec. 133 : Liability of Officers and Certain Other Persons

(1) Where any person engaged in connection with the collection of statistics under section 151 or compilation or computerisation thereof or if any officer of central tax having access to information specified under sub-section (1) of section 150, or if any person engaged in connection with the provision of service on the common portal or the agent of common portal, wilfully discloses any information or the contents of any return furnished under this Act or rules made thereunder otherwise than in execution of his duties under the said sections or for the purposes of prosecution for an offence under this Act or under any other Act for the time being in force, he shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to twenty-five thousand rupees, or with both.

(2) Any person -

(a) who is a Government servant shall not be prosecuted for any offence under this section except with the previous sanction of the Government;

(b) who is not a Government servant shall not be prosecuted for any offence under this section except with the previous sanction of the Commissioner.


Since the Officers of the department are dealing with sensitive information, the secrecy and security of such information is of utmost importance.

If the officers who are dealing with the statistical data or data collected from the information returns, he has to maintain utmost secrecy of the same.

426 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal If the officer wilfully discloses such information or contents by any reason other than by reason of his duties cast upon him under the Act, he shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to Rs. 25,000 (under CGST) or both.

Further any prosecution under this section would be carried out with the prior sanction of the Government in case of prosecution of a Government Servant and with the sanction of commissioner in case of others.

427 CHAPTER

Refunds Under GST 14

14.1 Meaning of word “Refund” [Section 54, Expl. (1)] ‘Refund’ includes –

Refund of tax paid on zero-rated supplies of goods or services or both, or

Refund of tax paid on input or input services used in making such zero-rated supplies, or

Refund of tax on the supply of goods regarded as deemed exports, or

Refund of unutilised input tax credit as provided u/s 54(3).

Thus, all kinds of refund will be dealt with as per this section [including export incentives granted by way of refund.]

14.2 Refund of Tax [Section 54 of The CGST Act]

14.2.1 SITUATIONS LEADING TO REFUND CLAIMS

The relevant date provision embodied in section 54 of the CGST Act, 2017, provision contained in Section 77 of the CGST Act, 2017 and the requirement of submission of relevant documents as listed in the CGST Rules, 2017 is an indicator of the various situations that may necessitate a refund claim. A claim for refund may arise in the following situations:

(i) Goods or services or both are exported or, goods or services or both supplied to an SEZ developer/unit, on payment of IGST and refund of such IGST paid on goods or services or both supplied is claimed [Section 16(3)(b) of IGST Act].

(ii) A registered person may claim refund of any unutilized input tax credit (ITC) at the end of any tax period in the following cases:

(a) Zero rated supplies: Supply of goods/services/both to an SEZ developer/unit or export of goods or services or both, and

(b) Accumulated ITC on account of inverted duty structure: Where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council.

However, refund of unutilized ITC shall NOT be allowed if:

The goods exported out of India are subjected to export duty;

The supplier of goods or services or both avails of drawback in respect of CGST or claims refund of the IGST paid on such supplies.

428 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (iii) Tax paid on the supply of goods regarded as deemed exports may be claimed by recipient or supplier.

(iv) Refund of any balance in the electronic cash ledger after payment of tax, interest, penalty, fee or any other amount payable under this Act or the rules made there under may be claimed [Section 49(6)].

(v) Refund on account of issuance of refund vouchers for taxes paid on advances against which goods or services have not been supplied, may be claimed [Section 31(3)].

(vi) Refund of tax wrongly collected and paid to the Government i.e. CGST & SGST paid by treating the supply as intra-State supply which is subsequently held as inter-State supply and vice versa [Section 77 of the CGST Act and section 19 of the IGST Act].

(vii) The IGST paid by tourist leaving India on any supply of goods taken out of India by him [Section 15 of IGST Act].

(viii) Tax becomes refundable as a consequence of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court.

(ix) On finalization of provisional assessment, if any tax becomes refundable to assessee (on account of assessed tax on final assessment being less than the tax deposited by the assessee) [Section 60].

(x) Refund of taxes on purchase made by UN bodies or embassies etc. [Section 54(2)].

Detailed provisions relating to various sections referred above have been discussed in the respective chapters.

14.2.2 TIME LIMIT WITHIN WHICH REFUND CLAIM CAN BE FILED

Any person claiming refund of any tax, interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of 2 years from the ‘Relevant Date’ in such form and manner as may be prescribed [Section 54(1)].

A registered person may claim refund of any unutilised ITC in case of zero rated supplies or accumulated ITC on account of inverted duty structure at the end of any tax period [Section 54(3)].

14.2.3 MEANING OF ‘RELEVANT DATE’ [EXPLANATION 2 TO SECTION 54]

‘Relevant Date’ has been defined in Explanation 2 to section 54. Accordingly it means:-

S. No. Cases Relevant Date

1 In case of goods exported out of India where a refund of tax paid is available in respect of goods themselves or, as the case may be, the inputs or input services used in such goods and

(i) Goods are exported by sea or air Date on which the ship or the aircraft in which such goods are loaded, leaves India

(ii) Goods are exported by land Date on which such goods pass the frontier

(iii) Goods are exported by post Date of dispatch of goods by the Post Office concerned to a place outside India

2 In case of supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods

Date on which the return relating to such deemed exports is furnished

Refunds under GST 429

3 In case of services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, and

(i) the supply of services had been completed prior to the receipt of such payment

Date of receipt of payment in convertible foreign exchange or in Indian rupees wherever permitted by the RBI [as amended by CGST Amendment Act, 2018]

(ii) Payment for the services had been received in advance prior to the date of issue of the invoice

Date of issue of Invoice

4 Where tax becomes refundable as a consequence of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court

Date of communication of such judgment, decree, order or direction

5 In case of refund of unutilized ITC in case of zero rated supplies or accumulated ITC on account of inverted duty structure

End of the Financial Year in which such claim for refund arises Due date for furnishing of return u/s 39 for the period in which such claim for refund arises. [As amended by CGST Amendment Act, 2018]

6 In the case where tax is paid provisionally under this Act or the rules made there under

Date of adjustment of tax after the final assessment thereof

7 In the case of a person, other than the supplier Date of receipt of such goods or services or both by such person

8 Any other case Date of payment of tax

14.2.4 DOCUMENTS FOR FILING REFUND CLAIM

Documents required for filing refund claim has been provided under the provisions of section 54(4) read with rule 89(2).

Section 54(4) of the CGST Act stipulates that the application shall be accompanied by —

(a) such documentary evidence as may be prescribed to establish that a refund is due to the applicant; and

(b) such documentary or other evidence (including the documents referred to in section 33) as the applicant may furnish to establish that there is no unjust enrichment (i.e. the amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such tax and interest had not been passed on to any other person).

However, where the amount claimed as refund is less than Rs. 2 lakh, it shall not be necessary for the applicant to furnish any documentary and other evidences but he may file a declaration, based on the documentary or other evidences available with him, certifying that there is no unjust enrichment i.e. the incidence of such tax and interest had not been passed on to any other person.

However, where the amount of refund claimed exceeds Rs. 2 lakh, a Certificate in Annexure 2 of Form GST RFD-01 by a Chartered Accountant or a Cost Accountant to the effect that there is not unjust enrichment in the case of the applicant [i.e. incidence of tax, interest or any other amount claimed as refund has not been passed on to any other person].

Further, neither a declaration by the applicant nor a certificate by a Chartered Accountant/Cost Accountant is required to be furnished in the following cases:

(a) Refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies;

430 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (b) Refund of unutilized ITC in case of zero rated supplies or accumulated ITC on account of inverted duty

structure;

(c) Refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued. The expression “invoice” referred here means invoice conforming to the provisions contained in section 31.

(d) Refund of tax in pursuance of section 77, i.e. tax paid tax on a transaction treating it as an intra-State supply, but which is subsequently held to be an inter-State supply or vice-versa.

(e) The tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify.

NOTE : Where the amount of tax has been recovered from the recipient, it shall be deemed that THE ‘INCIDENCE OF TAX HAS BEEN PASSED ON TO THE ULTIMATE CONSUMER’. [Explanation (ii) to rule 89]

14.3 Order of Refund [Section 54(5), (7)] Section 54(5) stipulates that if, on receipt of any such application, the proper officer is satisfied that the whole

or part of the amount claimed as refund is refundable, he may make an order accordingly and the amount so determined shall be credited to the Consumer Welfare Fund [discussed in detail in subsequent paras].

Refund order shall be issued by the proper officer within 60 days from the date of receipt of application complete in all respects [Section 54(7)].

The time limit of 60 days shall be counted from the date of filing claim for refund as mentioned in the acknowledgment received for refund claim [Section 54(7) read with rule 90(1) and 90(2)].

Section 54(8A): The Central Government may disburse the refund of the SGST in such manner as may be prescribed. [Sec.54 (8A) inserted by Finance (No.2) Act, 2019, w.e.f. 01-09-2019 vide NN 39/2019-C.T., dated 31-08-2019]

I. Grant of provisional refund [Section 54(6) read with rule 91]

The proper officer may, in the case of any claim for refund on account of zero-rated supply of goods or services or both made by registered persons,

other than such category of registered persons as may be notified by the Government on the recommendations of the Council,

refund on a provisional basis, 90% of the total amount so claimed, excluding the amount of ITC provisionally accepted

in such manner and subject to such conditions, limitations and safeguards as may be prescribed and

thereafter make an order under section 56(5) for final settlement of the refund claim after due verification of documents furnished by the applicant.

14.4 Principal of Unjust Enrichment [Section 54(8) & (9)] Theory of unjust enrichment postulates that only the person who has NOT passed the incidence of tax will be

eligible to claim the refund. Under GST law, related provisions are contained under section 54(8).

Under unjust enrichment, a presumption is always drawn that the businessman will shift the incidence of tax to the final consumer. This is because GST is an indirect tax whose incidence is to be borne by the consumer. It is for this reason that every refund claim if sanctioned is first transferred to the Consumer Welfare Fund.


If the refund claim of refund (barring specified exceptions) passes the test of unjust enrichment, it is paid to the applicant. The GST law makes this test inapplicable in case of refund of accumulated ITC, refund on account of exports, refund of payment of wrong tax (IGST instead of CGST + SGST and vice versa), refund of tax paid on a supply, which is not provided or when refund voucher is issued or if the applicant shows that he has not passed on the incidence of tax to any other person [Listed below in detail]. In all other cases, the test of unjust enrichment needs to be satisfied for the claim to be paid to the applicant.

For crossing the bar of unjust enrichment, if the refund claim is less than Rs. 2 lakh, then a self-declaration of the applicant to the effect that the incidence of tax has not been passed to any other person will suffice to process the refund claim.

For refund claims exceeding Rs. 2 lakh, a certificate from a Chartered Accountant/Cost Accountant will have to be given.

Cases where refundable amount shall be paid to the applicant [Exceptions to Doctrine of Unjust Enrichment]: Section 54(8) stipulates that the refundable amount shall, instead of being credited to the Consumer Welfare Fund, be paid to the applicant, if such amount is relatable to —

(a) Refund of tax paid on zero rated supplies export of goods or services or both or on inputs or input services used in making such zero-rated supplies exports; [as amended by CGST (Amendment) Act, 2018]

(b) refund of unutilized ITC in case of zero rated supplies or accumulated ITC on account of inverted duty structure;

(c) refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued;

(d) refund of tax in pursuance of section 77, i.e. tax paid tax on a transaction treated to be an intra-State supply, but which is subsequently held to be an inter-State supply or vice-versa.;

(e) the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or

(f) the tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify.

Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provisions of this Act or the rules made there under or in any other law for the time being in force, no refund shall be made except in accordance with the provisions of sub-section (8). Instead, refundable amount shall be credited to Consumer Welfare Fund [Section 54(9)].

Illustration 1 :

State five cases where refundable amount shall be paid to the applicant, instated of being credited to Consumer Welfare Fund under CGST Act, 2017. [CA Final, May 2018 - New] (5 Marks)

Solution :

Section 54(8) stipulates that the refundable amount shall, instead of being credited to the Consumer Welfare Fund, be paid to the applicant, if such amount is relatable to —

(a) Refund of tax paid on export of goods or services or both or on inputs or input services used in making such export.

(b) refund of unutilized ITC in case of zero rated supplies or accumulated ITC on account of inverted duty structure;

432 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (c) refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not

been issued, or where a refund voucher has been issued;

(d) refund of tax in pursuance of section 77, i.e. tax paid tax on a transaction treated to be an intra-State supply, but which is subsequently held to be an inter-State supply or vice-versa.;

(e) the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or

the tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify.

14.5 No Refund of Advance tax by casual or NR persons [sec 54(13)]

Notwithstanding anything to contrary contained in this section, the amount of advance tax deposited by a casual taxable person or a non-resident taxable person u/s 27(2), shall not be refunded unless such person has, in respect of the entire period for which the certificate of registration granted to him had remained in force, furnished all the return required u/s 39.

Non-resident taxable person: Refund of any amount, after adjusting the tax payable by the applicant out of the advance tax deposited by him u/s 27 at the time of registration, shall be claimed in the last return required to be furnished by him. [Rule 589(1), 4th proviso]

14.6 Withholding of Refund Claim [Section 54(10), (11) & (12)] GST law provides that where an order giving rise to a refund is the subject matter of an appeal or further proceedings or where any other proceedings under this Act is pending and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue in the said appeal or other proceedings on account of malfeasance or fraud committed, he may, after giving the taxable person an opportunity of being heard, withhold the refund till such time as he may determine.

14.7 Minimum Refund Claim [Section 54(14)] No refund shall be paid to an applicant, if the amount is less than Rs. 1,000.

14.8 Refund of ITC [Section 54(3)] Subject to the provision of sub-section 10, the registered person may claim refund of any unutilized input tax credit at the end of any tax period; however, refund is allowed only in following cases - (i) Zero rated supplies made without payment of tax;

(ii) Inverted tax: where the credit has accumulated on account of-

Rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempted)

Except supplies of goods or services or both as may be notified by the Government.

Nil-rated/Exempt supplies not covered here [Analysis]: The nil-rated/exempted supplies cannot claim benefit of inverted tax structure and therefore, cannot claim benefit of input tax borne by tax. Inverted tax means there is same tax but it is lower than input tax.


No refund on exports, if export liable to export duty: no refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subject to export duty.

No refund, if drawback of CGST or refund of IGST claimed: no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central GST or has availed refund of integrated tax paid on such supplies.

14.9 Refund of Inverted-tax Structure [Rule 89(5)] As per Rule 89(5) of the CGST Rules, 2018, in the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula:-

Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} - tax payable on such inverted rated supply of goods and services.

Explanation:- For the purposes of this sub-rule, the expressions –

(a) Net ITC shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; and

(b) “Adjusted Total turnover” and “relevant period” shall have the same meaning as assigned to it in sub-rule (4). [as amended by NN 74/2018 – C.T., dated 31.12.2018] [Rule 89(5), as substituted retrospectively by NN 26/2018 – CT, w.e.f. 01.07.2017]

As per sub-rule (4) “Adjusted Total Turnover” means the sum total of the value of-

(a) the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the turnover of services; and

(b) the turnover of zero-rated supply of services determined in terms of clause (D) above and non-zero-rated supply of services,

excluding-

(i) the value of exempt supplies other than zero-rated supplies; and

(ii) the turnover of supplies in respect of which refund is claimed under sub-rule (4A) or sub-rule (4B) or both, if any, during the relevant period. [This definition as substituted by NN 39/2018 – CT, w.e.f. 04.09.2018]

Clarification on refund related issues [Circular No. 79/53/2018-GST, dated 31-12-2018]

1. Refund of accumulated ITC of input services and capital goods arising on account of inverted duty structure:

Section 54(3) of the CGST Act provides that refund of any unutilized ITC may be claimed where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies). Further, section 2(59) of the CGST Act defines inputs as any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. Thus, inputs do not include services or capital goods. Therefore, clearly, the intent of the law is not to allow refund of tax paid on input services or capital goods as part of refund of unutilized input tax credit. Accordingly, in order to align the CGST Rules with the CGST Act, notification No.26/2018-Central Tax dated 13.06.2018 was issued wherein it was stated that the term Net ITC, as used in the formula for calculating the maximum refund amount under rule 89(5) of the CGST Rules, shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both. In view of the above, it is clarified that both the law and the related rules clearly prevent


the refund of tax paid on input services and capital goods as part of refund of input tax credit accumulated on account of inverted duty structure.

2. Misinterpretation of the meaning of the term “inputs”:

It has been represented that on certain occasions, departmental officers do not consider ITC on stores and spares, packing materials, materials purchased for machinery repairs, printing and stationery items, as part of Net ITC on the grounds that these are not directly consumed in the manufacturing process and therefore, do not qualify as input. There are also instances where stores and spares charged to revenue are considered as capital goods and therefore the ITC availed on them is not included in Net ITC, even though the value of these goods has not been capitalized in his books of account by the claimant.

In relation to the above, it is clarified that the input tax credit of the GST paid on inputs shall be available to a registered person as long as he/she uses or intends to use such inputs for the purposes of his/her business and there is no specific restriction on the availment of such ITC anywhere else in the GST Act. The GST paid on inward supplies of stores and spares, packing materials etc. shall be available as ITC as long as these inputs are used for the purpose of the business and/or for effecting taxable supplies, including zero-rated supplies, and the ITC for such inputs is not restricted under section 17(5) of the CGST Act. Further, capital goods have been clearly defined in section 2(19) of the CGST Act as goods whose value has been capitalized in the books of account and which are used or intended to be used in the course or furtherance of business. Stores and spares, the expenditure on which has been charged as a revenue expense in the books of account, cannot be held to be capital goods.

3. Calculation of refund amount for claims of refund of accumulated Input Tax Credit (ITC) on account of inverted duty structure:

Representations have been received stating that while processing the refund of unutilized ITC on account of inverted tax structure, the departmental officers are denying the refund of ITC of GST paid on those inputs which are procured at equal or lower rate of GST than the rate of GST on outward supply, by not including the amount of such ITC while calculating the maximum refund amount as specified in rule 89(5) of the CGST Rules. The matter has been examined and the following issues are clarified:

a) Refund of unutilized ITC in case of inverted tax structure, as provided in section 54(3) of the CGST Act, is available where ITC remains unutilized even after setting off of available ITC for the payment of output tax liability. Where there are multiple inputs attracting different rates of tax, in the formula provided in rule 89(5) of the CGST Rules, the term „Net ITC‟ covers the ITC availed on all inputs in the relevant period, irrespective of their rate of tax.

b) The calculation of refund of accumulated ITC on account of inverted tax structure, in cases where several inputs are used in supplying the final product/output, can be clearly understood with help of the following example:

i. Suppose a manufacturing process involves the use of an input A (attracting 5 per cent GST) and input B (attracting 18% GST) to manufacture output Y (attracting 12% GST).

ii. The refund of accumulated ITC in the situation at (i) above, will be available under section 54(3) of the CGST Act read with rule 89(5) of the CGST Rules, which prescribes the formula for the maximum refund amount permissible in such situations.

iii. Further assume that the claimant supplies the output Y having value of Rs. 3,000/- during the relevant period for which the refund is being claimed. Therefore, the turnover of inverted rated supply of goods and services will be Rs. 3,000/-. Since the claimant has no other outward supplies, his adjusted total turnover will also be Rs. 3,000/-.


iv. If we assume that Input A, having value of Rs. 500/- and Input B, having value of Rs. 2,000/-, have been purchased in the relevant period for the manufacture of Y, then Net ITC shall be equal to Rs. 385/- (Rs. 25/- and Rs. 360/- on Input A and Input B respectively).

v. Therefore, multiplying Net ITC by the ratio of turnover of inverted rated supply of goods and services to the adjusted total turnover will give the figure of Rs. 385/-.

From this, if we deduct the tax payable on such inverted rated supply of goods or services, which is Rs. 360/-, we get the maximum refund amount, as per rule 89(5) of the CGST Rules which is Rs. 25/-.

Illustration 2:

Super Engineering Works, a registered supplier in Haryana, is engaged in supply of taxable goods within the State. Given below are the details of the turnover and applicable GST rates of the final products manufactured by Super Engineering Works as also the input tax credit (ITC) availed on inputs used in manufacture of each of the final products and GST rates applicable on the same, during a tax period:

Products Turnover* (Rs.) Output GST Rates ITC availed (Rs.) Input GST Rates

A 500,000 5% 54,000 18%

B 350,000 5% 54,000 18%

C 100,000 18% 10,000 18%

*excluding GST

Determine the maximum amount of refund of the unutilized input tax credit that Super Engineering Works is eligible to claim under section 54(3)(ii) of the CGST Act, 2017 provided that Product B is notified as a product, in respect of which no refund of unutilised input tax credit shall be allowed under said section.

Answer :

Section 54(3)(ii) of the CGST Act, 2017 allows refund of unutilized input tax credit (ITC) at the end of any tax period to a registered person where the credit has accumulated on account of inverted duty structure i.e. rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council.

In the given case, the rates of tax on inputs used in Products A and B (18% each) are higher than rates of tax on output supplies of Products A and B (5% each). However, Product B is notified as a product, in respect of which no refund of unutilised ITC shall be allowed under section 54(3)(ii) of the CGST Act, 2017. Therefore, only Product A is eligible for refund under section 54(3)(ii).

Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} - tax payable on such inverted rated supply of goods and services.

Explanation:- For the purposes of this sub-rule, the expressions –

(a) Net ITC shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; and

(b) Adjusted Total turnover shall have the same meaning as assigned to it in sub-rule (4). [Rule 89(5), as substituted retrospectively by NN 26/2018 – CT, w.e.f. 01.07.2017]

As per sub-rule (4) “Adjusted Total Turnover” means the sum total of the value of-

436 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (a) the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the turnover

of services; and


excluding-



Tax payable on inverted rated supply of Product A = Rs. 5,00,000 × 5% = Rs. 25,000

Net ITC = Rs. 1,18,000 (Rs. 54,000 + Rs. 54,000 + Rs. 10,000) [Net ITC availed during the relevant period needs to be considered irrespective of whether the ITC pertains to inputs eligible for refund of inverted rated supply of goods or not]

Adjusted Total Turnover = Rs. 9,50,000 (Rs. 5,00,000 + Rs. 3,50,000 + Rs. 1,00,000) Turnover of inverted rated supply of Product A = Rs. 5,00,000

Maximum refund amount for Super Engineering Works is as follows:

= [(Rs. 5,00,000 × Rs. 1,18,000)/ Rs. 9,50,000] - Rs. 25,000

= Rs. 37,105 (rounded off)

14.10 Refund to UN Bodies, Embassies, etc. [Section 55 Read With Section 54(2) of CGST Act]

Supplies made to UN bodies and embassies may be exempted from payment of GST as per international obligations. However, this exemption has been operationalized by way of a refund mechanism. So, a taxable person making supplies to such bodies would charge the tax due and remit the same to Government account.

However, the UN bodies and other entities notified under section 55 of the CGST Act, 2017 can claim refund of the taxes paid by them on their purchases. The claim has to be made before the expiry of 18 months from the last day of the quarter in which such supply was received. Detailed provisions have been discussed hereunder:

A. WHO IS ENTITLED TO REFUND UNDER SECTION 55?

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

(i) any specialized agency of the United Nations Organization; or

(ii) any Multilateral Financial Institution and Organization notified under the United Nations (Privileges and Immunities) Act, 1947; or

(iii) Consulate or Embassy of foreign countries;

(iv) Retail outlets established in departure area of an international Airport, beyond the immigration counters, making tax free supply to an outgoing international tourist [specified by NN 11/2019 – CT (R), w.e.f. 01.07.2019] [discussed in detail in subsequent topic]; and

(v) any other person or class of persons as may be specified in this behalf,

who shall, subject to such conditions and restrictions as may be prescribed, be entitled to claim a refund of taxes paid on the notified inward supplies of goods or services or both received by them.

Clarifications [Circular no. 36/10/2018-GST, dated 13-03-2018 & 43/17/2018-GST, dated 13-4-2018]:


Entities having UINs are not covered under registered person and are granted UINs to enable them to claim refund of GST paid on inward supplies. Therefore, if any such entity is making outward supply, then, it will have to apply for GSTIN.

Entity may opt to have single UIN all over India or may seek more than one UIN.

Recording of UIN on the invoice is a necessary condition under Rule 46 of the CGST Rules, 2017. If suppliers / vendors are not recording the UINs, action may be initiated against them under the provisions of the CGST Act, 2017.

B. TIME LIMIT FOR FILING REFUND CLAIM [SECTION 54(2) READ WITH RULE 95(1)]

Persons eligible to claim refund under section 55 [as mentioned in point A above], entitled to a refund of tax paid by it on inward supplies of goods or services or both, may make an application for such refund, in such form and manner as may be prescribed, once in every quarter, but before the expiry of 6 months from the last day of the quarter in which such supply was received.

Extension of time to 18 months [NN. 20/2018-C.T., dated 28/03/2018]: The said persons shall make application for refund of tax paid by it on inward supplies of goods or services or both, to the jurisdictional tax authority, in such form and manner as may be specified, before the expiry of 18 months from the last date of the quarter in which such supply was received.

Notifications issued under CGST Act, 2017 are also applicable to GST (Compensation to States) Act, 2017 [Circular No. 68/42/2018-GST, dated 05.10.2018]

1. Section 11 of the Goods and Services Tax (Compensation to States) Act, 2017(hereinafter referred to as ‘the Compensation Cess Act’), provides that provisions of CGST Act and IGST Act apply in relation to levy and collection of Compensation Cess. Further, section 9(2) of the Compensation Cess Act provides that for all the purposes of claiming refunds, except the form to be filed, the provisions of the CGST Act and the rules made thereunder, shall apply in relation to the levy and collection of Compensation Cess. Therefore, notifications issued under the CGST Act except those prescribing rate or granting exemptions, are applicable for the purpose of the Compensation Cess Act.

2. In view of the above, it is clarified that UN and specified international organizations, foreign diplomatic missions or consular posts in India, or diplomatic agents or career consular officers posted therein, having being specified under section 55 of the CGST Act, 2017, are entitled to refund of Compensation Cess payable on intra-State and inter-State supply of goods or services or both received by them subject to the same conditions and restrictions, mutatis mutandis, as prescribed in Notifications issued in the CGST Act.

14.11 Rule 97A – Manual Filing and Processing In the Refund Chapter, manual filing of the application, intimation, reply, declaration, statement or issuance of the notice, order or certificate in respect of refund is also allowed in the prescribed Forms.

[Rule 97A inserted by NN 55/2017 – CT, dated 15.11.2017]

Notwithstanding anything contained in this chapter, in respect of any process or procedure prescribed herein-

Any reference to electronic filing of an application, intimation, reply, declaration, statement or issuance of notice, order or certificate on the common portal

Shall, in respect of that process or procedure, include manual filing of the said application, intimation, reply, declaration, statement or issuance of said notice, order or certificate in such Forms as appended to these Rules.

14.12 Consumer Welfare Fund [Sections 57 & 58 of CGST Act]

438 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Consumer Welfare Fund was created to promote and protect the welfare of consumer, create consumer awareness and strengthen consumer movement in the country, particularly in rural areas. Amount of refund which is not payable to the applicant is credited to the Consumer Welfare Fund.

As already discussed in this chapter, amount of refund is paid to the applicant in case where there is no unjust enrichment; i.e. the incidence of tax has not been passed by the supplier to the recipient as also in the circumstances where the principle of unjust enrichment is not applicable [specified in section 54(8)]. Otherwise, the said amount is credited to the Consumer Welfare Fund.

Amount to be credited to Consumer Welfare Fund

Section 57 of the CGST Act stipulates that the Government shall constitute a Fund, to be called the Consumer Welfare Fund and there shall be credited to the Fund:

(a) Amount of refund determined by an order passed under section 54(5),

(b) any income from investment of the amount credited to the Fund; and

(c) such other monies received by it,

in such manner as may be prescribed.

All sums credited to the Consumer Welfare Fund shall be utilised by the Government for the welfare of the consumers in such manner as may be prescribed [Section 58(1) of the CGST Act].

Maintenance of Books of Accounts

The Government or the authority specified by it shall maintain proper and separate account and other relevant records in relation to the Fund and prepare an annual statement of accounts in such form as may be prescribed in consultation with the CAG (Comptroller and Auditor- General of India).

Amounts to be credited to/paid from Consumer Welfare Fund [Rule 97 of the CGST Rules, 2017]

- All amounts of duty CGST/ SGST/ IGST/ UTGST/cess and income from investment along with other monies specified in section 12C(2) of the erstwhile Central Excise Act, 1944, section 57 of the CGST Act, 2017 read with section 20 of the IGST Act, 2017, section 21 of the UTGST Act, 2017 and section 12 of the GST (Compensation to States) Act, 2017 shall be credited to the Fund [discussed earlier in this chapter] [Rule 97(1)].

- An amount equivalent to 50% of the amount of IGST determined under section 54(5) of the CGST Act, read with section 20 of the IGST Act, shall be deposited in the Fund [Proviso to rule 97(1)].

- An amount equivalent to 50% of the amount of compensation cess determined under section 54(5) of the CGST Act, read with section 11 of the GST (Compensation to States) Act, shall be deposited in the Fund. [Second Proviso to rule 97(1)]

- Any amount, having been credited to the Consumer Welfare Fund, ordered or directed as payable to any claimant by orders of the proper officer, Appellate Authority or Appellate Tribunal or Court, shall be paid from the Fund [Rule 97(2)].

14.13 Interest On Delayed Refunds [Section 56 of CGST Act] A. Interest on amount refundable consequent to order passed by Proper Officer under section 54(5)

Where any tax ordered to be refunded under section 54(5) to any applicant is not refunded within 60 days from the date of receipt of application under section 54(1), interest shall be payable to the applicant.

Interest is payable on such refund @6% p.a.*.

Interest is payable from the date immediately after the expiry of 60 days from the date of receipt of application under the section 54(1) till the date of refund of such tax [Section 56 of CGST Act].


*as notified vide Notification No. 13/2017 CT dated 28.06.2017

B. Interest on amount refundable consequent to order passed in an appeal or further proceedings

Where any claim of refund arises from an order passed by an Adjudicating Authority or Appellate Authority or Appellate Tribunal or Court which has attained finality and the same is not refunded within 60 days from the date of receipt of application filed consequent to such order, interest shall be payable on such refund.

Interest is payable on such refund @ 9% p.a.*.

Interest is payable from the date immediately after the expiry of 60 days from the date of receipt of application till the date of refund. [Proviso to Section 56 of CGST Act].

*as notified vide Notification No. 13/2017 CT dated 28.06.2017

Note: For the purpose of this section, the order of refund made by an Appellate Authority, Appellate Tribunal or any court against an order of the proper officer under section 54(5), shall also be deemed to be an order passed under the said section 54 (5) [Explanation to section 56].

C. Order sanctioning interest on delayed refunds [Rule 94]

Where any interest is due and payable to the applicant under section 56, the proper officer shall make an order along with a payment advice payment order in prescribed form.

[“Payment advice “ words are replaced by “Payment order”, by NN 31/2019-C.T.,w.e.f. 24-03-2019]

Such order shall specify therein:

- the amount of refund which is delayed,

- the period of delay for which interest is payable and

- the amount of interest payable.

Such interest shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund.

14.14 Refund of Integrated Tax Paid on Supply of Goods To Tourist Leaving India [Section 15 of IGST Act]

The integrated tax paid by tourist leaving India on any supply of goods taken out of India by him shall be refunded in such manner and subject to such conditions and safeguards as may be prescribed.

The term “tourist” means a person not normally resident in India, who enters India for a stay of not more than 6 months for legitimate non-immigrant purposes.

14.15 Refund of taxes to the retail outlets established in departure area of international Airport beyond immigration counters making tax free supply to an outgoing international tourist [Rule95A] [inserted by NN 31/2019 -CT, w.e.f. 01.07.2019]

(1) Retail outlet established in departure area of an international airport, beyond the immigration counters,

supplying indigenous goods to an outgoing international tourist who is leaving India shall be eligible to claim refund of tax paid by it on inward supply of such goods.

440 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (2) Retail outlet claiming refund of the taxes paid on his inward supplies, shall furnish the application for refund

claim in FORM GST RFD- 10B on a monthly or quarterly basis, as the case may be, through the common portal either directly or through a Facilitation Centre notified by the Commissioner.

(3) The self-certified compiled information of invoices issued for the supply made during the month or the quarter, as the case may be, along with concerned purchase invoice shall be submitted along with the refund application.

(4) The refund of tax paid by the said retail outlet shall be available if-

(a) the inward supplies of goods were received by the said retail outlet from a registered person against a tax invoice;

(b) the said goods were supplied by the said retail outlet to an outgoing international tourist against foreign exchange without charging any tax;

(c) name and GSTIN of the retail outlet is mentioned in the tax invoice for the inward supply; and

(d) such other restrictions or conditions, as may be specified, are satisfied.

(5) The provisions of rule 92 shall, mutatis mutandis, apply for the sanction and payment of refund under this rule.

Explanation.- For the purposes of this rule, the expression “outgoing international tourist” shall mean a person not normally resident in India, who enters India for a stay of not more than six months for legitimate non-immigrant purposes.”

Note:

The Central Government, on the recommendations of the Council, has exempted whole of the IGST on any supply of goods by a retail outlet established in the departure area of an international airport, beyond the immigration counters, to an outgoing international tourist. [NN 11/2019 – IT (R), w.e.f. 01.07.2019]

14.16 Sec. 147 : Deemed Export

The Government may, on the recommendations of the Council, notify certain supplies of goods as deemed exports, where goods supplied do not leave India, and payment for such supplies is received either in Indian rupees or in convertible foreign exchange, if such goods are manufactured in India.


Vide NN 48/2017-CT, dated 18.10.2017, the Central Government, on the recommendations of the Council, hereby notifies the supplies of goods listed in column (2) of the Table below as deemed exports, namely :

Sr. No. Description of Supply

1 Supply of goods by a registered person against Advance Authorisation Provided that goods so supplied, when exports have already been made after availing input tax credit on inputs used in manufacture of such exports, shall be used in manufacture and supply of taxable goods (other than nil rated or fully exempted goods) and a certificate to this effect from a chartered accountant is submitted to the jurisdictional commissioner of GST or any other officer authorised by him within 6 months of such supply, Provided further that no such certificate shall be required if input tax credit has not been availed on inputs used in manufacture of export goods. [as amended by Notification No. 1/2019-Central Tax, dated 15.01.2019]

2 Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation

3 Supply of goods by a registered person to Export Oriented Unit


4 Supply of gold by a bank or Public Sector Undertaking specified in the notification No. 50/2017 - Customs, dated the 30th June, 2017 (as amended) against Advance Authorisation.

Explanation :

For the purposes of this notification, -

1. “Advance Authorisation” means an authorisation issued by the Director General of Foreign Trade under Chapter 4 of the Foreign Trade Policy 2015-20 for import or domestic procurement of inputs on pre-import basis for physical exports. [Omitted words omitted by NN 01/2019 – C.T., w.e.f. 15.01.2019]

2. Export Promotion Capital Goods Authorisation means an authorisation issued by the Director General of Foreign Trade under Chapter 5 of the Foreign Trade Policy 2015-20 for import of capital goods for physical exports.

3. “Export Oriented Unit” means an Export Oriented Unit (EOU) or Electronic Hardware Technology Park Unit (EHTPU) or Software Technology Park Unit (STPU) or Bio-Technology Park Unit (BTPU) approved in accordance with the provisions of Chapter 6 of the Foreign Trade Policy 2015-20.

14.17 Zero Rated Supply [Section 16(3) of IGST] A registered person making Zero rated supply shall be eligible to claim refund under either of the following option, namely

Option (a) Supply without tax & refund of credit: He may -

Supply goods or services or both under bond or Letter of undertaking, subject to such condition, safeguard and procedure as may be prescribed, without payment of integrated tax and,

Claim refund of unutilized input tax credit; or

Option (b) Pay IGST (using credit/otherwise) & claim refund: He may -

Supply goods or services or both, subject to such condition, safeguard and procedure as may be prescribed, on payment of integrated tax and,

Claim refund of tax paid on goods or services or both supplied, in accordance with the provision of section 54 of CGST Act or Rules made thereunder.

Amount to be claimed as refund in case of zero rated supply of goods or services made without payment of tax [Rule 89(4), 89(4A), 89(4B)]:

Rule 89(4) stipulates that in the case of zero- rated supply of goods or services or both without payment of tax under bond/LUT in accordance with the provisions of section 16(3) of the IGST Act, 2017, refund of ITC shall be granted as per the following formula:

Maximum refund that is admissible = [(A + B) / C × Net ITC]

where,-

a. “Refund amount” means the maximum refund that is admissible;

b. “Net ITC” means ITC availed on inputs and input services during the relevant period;

c. A (i.e. “Turnover of zero-rated supply of goods”) means the value of zero- rated supply of goods made during the relevant period without payment of tax under bond/LUT;

442 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal d. B (i.e. “Turnover of zero-rated supply of services”) means the value of zero- rated supply of services made

without payment of tax under bond or LUT, calculated in the following manner, namely:-

Zero-rated supply of services is the aggregate of the payments received during the relevant period for zero-rated supply of services and zero- rated supply of services where supply has been completed for which payment had been received in advance in any period prior to the relevant period reduced by advances received for zero-rated supply of services for which the supply of services has not been completed during the relevant period.

e. C (i.e. “Adjusted Total Turnover” as per sub-rule (4)) means the sum total of the value of-

(a) the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the turnover of services; and


excluding-



f. “Relevant period” means the period for which the claim has been filed.

NOTE : Where the application relates to refund of ITC, the electronic credit ledger shall be debited by the applicant by an amount equal to the refund so claimed [Rule 89(3)].

Refund of integrated tax paid on goods exported out of India [Rule 96]

The shipping bill filed by an exporter shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India and such application shall be deemed to have been filed only when:

(a) the person in charge of the conveyance carrying the export goods duly files a departure manifest or an export manifest or an export report covering the number and the date of shipping bills or bills of export; and

(b) the applicant has furnished a valid return in Form GSTR-3/Form GSTR-3B.

[“a departure manifest or” words inserted by NN 74/2018 – C.T., dated 31.12.2018]

The details of the relevant export invoices contained in Form GSTR-1 shall be transmitted electronically by the GST common portal to the system designated by the Customs.

The said system shall electronically transmit to the common portal, a confirmation that the goods covered by the said invoices have been exported out of India.

Refund of integrated tax paid on export of goods or services under bond or Letter of Undertaking (LUT) [Rule 96A]

Rule 96A(1): Any registered person availing the option to supply goods/services for export without payment of IGST shall furnish, prior to export, a bond/LUT in prescribed form to the jurisdictional Commissioner, binding himself to pay the tax due along with the interest specified under section 50(1) [@18% p.a.*] within a period of:

(a) 15 days after the expiry of 3 months or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the goods are not exported out of India; or


(b) 15 days after the expiry of one year, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange or in Indian rupees, wherever permitted by the RBI [as amended by NN NN 03/2019 – CT, w.e.f. 01.02.2019].

*( as notified by Notification No. 13/2017 CT dated 28.06.2017)

All registered persons who intend to supply goods or services for export without payment of IGST shall be eligible to furnish a LUT in place of a bond except those who have been prosecuted for any offence under the CGST Act or the IGST Act or any of the existing laws in force in a case where the amount of tax evaded exceeds Rs. 2,50,00,000.

14.18 Duty Drawback under GST [Section 2(42) of CGST] As per section 2(42), “ drawback” in relation to any goods manufactured in India and exported, means the rebate of duty, tax or cess chargeable on any imported inputs or on any domestic input or input services used in the manufacture of such goods.

Under Customs, full drawback (BCD, GST etc.) is allowed in case of re-export of imported goods.

However, in case of manufacture of goods using duty/tax paid inputs, drawback is allowed only of customs duties and not of IGST or GST cess paid on import.

14.19 Imports by SEZ Imports of goods by SEZ exempt from IGST [ NN. 64/2017- Customs New Delhi, 05/07/2017]:

All goods imported-

by a unit or a developer in the Special Economic Zone

for authorized operations,

are exempt from whole of IGST leviable u/s 3(7) of Customs Tariff Act, 1975.

Imports of services by SEZ exempt from IGST [NN. 18/2017-Integrated tax (rate) dated 05/07/2017]:

The Central Government has exempted-

Services imported by a unit or a developer in the Special Economic Zone

For authorised operations,

From the whole of the integrated tax leviable thereon u/s 5 of IGST Act, 2017.

444 CHAPTER

Assessment 15

15.1 Sec. 59 : Self Assessment

Every registered person shall self-assess the taxes payable under this Act and furnish a return for each tax period as specified under section 39.


1. Self-assessment means an assessment by the tax payer himself and not an assessment by the Proper Officer. The GST regime continues to promote the scheme of self-assessment.

2. Hence, every registered taxable person would be required to assess his tax dues in accordance with the provisions of GST Act and report the basis of calculation of tax dues to the tax administrations, by filing periodic tax returns.

15.2 Sec. 60 : Provisional Assessment

Under which circumstances, provisional assessment can be demanded:

1. A Provisional assessment can be resorted to in the following situations:

(i) Value of supply cannot be determined by the taxable person, viz, there is a difficulty in ascertaining:

Transaction value to be adopted for determination of tax payable;

Inclusion or exclusion of any amounts in the value of supply;

Existence of any circumstance causing failure of transaction value declared.

(ii) Rate of tax applicable on the supply cannot be determined by the taxable person, viz there is difficulty in ascertaining:

Classification of the goods and/or services under the relevant Schedule;

Eligibility to any exemption notification or compliance with conditions associated with such exemption.

2. Except for the above instances i.e. the value or rate of tax applicable thereto the facility of provisional assessment is not available in any other instance. For example, there may be uncertainty about the kind of tax (IGST or CGST-SGST) applicable, time of supply, supplies to be treated as “supply of goods” or “supply of services”, etc. In these cases, no recourse is available to the taxable person to seek provisional assessment of tax.

Assessment 445

Procedure of Provisional Assessment:

1. Once it is determined that this section is applicable, then the following conditions are to be fulfilled:

(a) Taxable person must initiate a request to the Proper Officer in writing giving reasons (i.e. information for which self-assessment cannot be done by him) to be permitted to pay tax on provisional basis;

(b) Proper Officer is to pass an order within 90 days of receipt of request allowing payment of taxes on provisional basis subject to execution of bond by the registered person with surety or security for any differential tax that may be finally assessed.

2. Thus, provisional assessment can be made only upon a written request made by the registered person electronically through common portal, along with the documents in support of his request. The provisional assessment cannot be resorted to by the Proper Officer on his own.

3. The proper officer may, issue a notice wherein it requires the registered person seeking provisional assessment to appear in person or furnish additional information or documents in support of his request. The applicant has to file a reply to the notice.

4. After considering the reply filed, the proper officer has to pass an order, either rejecting the application, stating the grounds for such rejection or allowing payment of tax on provisional basis.

5. Such order should indicate the value or the rate or both on the basis of which the provisional assessment is to be made.

6. The order so passed should also indicate the amount for which bond has to be executed by the taxable person for payment of the difference between the amount of tax (IGST, CGST, SGST as well as UTGST), as may be finally assessed, and the amount of tax provisionally assessed. Further the said order would also intimate the quantum of security to be furnished which shall not exceed 25% of the bond amount.

7. On such order by the proper officer, the registered person has to execute a bond along with a security in the form of a bank guarantee as ordered.

8. A bond furnished to the proper officer under the Central/State Goods and Services Tax Act or Integrated Goods and Services Tax Act or Union Territory Goods and Services Tax Act and cess, if any shall be deemed to be a bond furnished under the provisions of this Act and the rules thereunder.

Finalisation of Provisional Assessment:

1. Under the GST Act, a Proper Officer shall be required to finalise the assessment and pass the final assessment order. For this purpose, the proper officer shall issue a notice, calling for information and records required for finalization of assessment.

2. After that the proper officer would issue a final assessment order, specifying the amount payable by the registered person or the amount refundable, if any.

3. The finalisation of assessment has to be completed, within a period of 6 months from the date of communication of provisional assessment order. However, on sufficient cause being shown and for reasons to be recorded in writing, this period can be extended by Joint/Additional Commissioner or by the Commissioner for such further period as mentioned below: (6M + 6M + 4 years)

Additional/Joint Commissioner Maximum of 6 months

Commissioner Maximum of 4 years

446 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal If Tax liability under Final Assessment is higher than tax liability under Provisional Assessment:

If the amount of tax determined to be payable under final assessment order, is more than tax which is already paid under provisional assessment, then, the registered person shall be liable to pay interest on the shortfall, at the rates specified in Section 50(1) of the Act (i.e. 18% p.a.), from the first day after due date of payment of tax in respect of the said goods and /or services, till the date of actual payment, irrespective of whether such shortfall is paid before or after the issuance of order for final assessment.

If Tax liability under Final Assessment is lower than tax liability under Provisional Assessment:

When the registered person is entitled to refund consequent upon the order for final assessment, interest shall be paid on such refund at the rates specified in Section 56 (i.e. 6% p.a.) from the date immediately after the expiry of 60 days from the date of receipt of application in accordance with provisions of section 54(1) till the date of refund of such tax.

Refund is subject to Doctrine of Unjust Enrichment.

Release of Security:

On issue of final assessment order, the applicant may file an application for release of security furnished.

On such application, the proper officer, after ensuring the payment of the amount specified in the order, will release the security furnished and shall issue an order within a period of 7 working days from the date of receipt of the application for release of security.

Illustration 1 :

Kulbhushan & Sons has entered into a contract to supply two consignments of certain taxable goods. However, since it is unable to determine the value of the goods to be supplied by it, it applies for payment of tax on such goods on a provisional basis along with the required documents in support of its request.

On 12.01.20XX, the Assistant Commissioner of Central Tax issues an order allowing payment of tax on provisional basis indicating the value on the basis of which the assessment is allowed on provisional basis and the amount for which the bond is to be executed and security is to be furnished.

Kulbhushan & Sons complies with the same and supplies both the consignments of goods on 25.01.20XX thereafter paying the tax on provisional basis in respect of both the consignments on 19.02.20XX.

Consequent to the final assessment order passed by the Assistant Commissioner of Central Tax on 21.03.20XX, a tax of Rs. 1,80,000 becomes due on 1st consignment whereas a tax of Rs. 4,20,000 becomes refundable on 2nd consignment. Kulbhushan & Sons pays the tax due on 1st consignment on 09.04.20XX and applies for the refund of the tax on 2nd consignment same day. Tax was actually refunded to it on 05.06.20XX.

Determine the interest payable and receivable, if any, by Kulbhushan & Sons in the above case.

Answer:

Section 60(4) of the CGST Act, 2017 stipulates that where the tax liability as per the final assessment is higher than under provisional assessment i.e. tax becomes due consequent to order of final assessment, the registered person shall be liable to pay interest on tax payable on supply of goods but not paid on the due date, at the rate specified under section 50(1) [18% p.a.], from the first day after the due date of payment of tax in respect of the goods supplied under provisional assessment till the date of actual payment, whether such amount is paid before/after the issuance of order for final assessment.

In the given case, due date for payment of tax on goods cleared on 25.01.20XX under provisional assessment is 20.02.20XX.

Assessment 447

In view of the provisions of section 60(4), in the given case, Kulbhushan & Sons is liable to pay following interest in respect of 1st consignment:

= Rs. 1,80,000 × 18% × 48/365

= Rs. 4,261 (rounded off)

Further, section 60(5) of the CGST Act, 2017 stipulates that where the tax liability as per the final assessment is less than in provisional assessment i.e. tax becomes refundable consequent to the order of final assessment, the registered person shall be paid interest at the rate specified under section 56 [6% p.a.] from the date immediately after the expiry of 60 days from the date of receipt of application under section 54(1) till the date of refund of such tax.

However, since in the given case, refund has been made (05.06.20XX) within 60 days from the date of receipt of application of refund (09.04.20XX), interest is not payable to Kulbhushan& Sons on tax refunded in respect of 2nd consignment.

15.3 Sec. 61 : Scrutiny of Returns

1. Section 61 deals with a discretionary power to a Proper Officer to scrutinize returns filed by registered persons to verify the correctness of the return. It can be considered as first stage in any assessment.

2. During such scrutiny, discrepancies, if any, noticed has to be communicated vide notice to the registered person to seek his explanation. And, in case where the assessee accepts the discrepancy, he is required to pay the tax, interest and any other amount and inform the same to the Proper Officer.

3. Where the explanations offered are satisfactory, this fact shall be informed to the registered person and no further action is to be taken in this regard.

4. In case, satisfactory explanation is not obtained within 30 days of being informed or such further period as permitted by proper officer or after accepting discrepancies, registered person fails to take corrective measures, in his return for the month in which the discrepancy is accepted by him, the proper officer, may, take recourse after issuance of notice to any of the following provisions:

(i) Conduct audit at the place of business of registered person in a manner Provided in Section 65 of the Act; or

(ii) Direct such registered person by notice in writing to get his records including books of accounts examined and audited by a Chartered Accountant or Cost Accountant under Section 66 of the Act; or

(iii) Undertake procedures of inspection, search and seizure under Section 67 of the Act;

(iv) And proceed to determine dues under sections 73 & 74 of the CGST Act.

Illustration 2 :

Mr. Venkateshwara, the taxable person under GST filed the prescribed tax return. During the course of scrutiny of the tax returns, the proper officer detected certain discrepancy in the return filed by Mr. Venkateshwara and asked him to explain the same. However, Mr. Venkateshwara could not offer any proper explanation for the said discrepancy within the prescribed time.

Examine the scenario and offer your views/comments on as to what recourse may be taken by the proper officer in such a case.

Answer :

448 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Section 61 of the CGST Act, 2017 inter alia provides that if during scrutiny of returns, the taxable person does not provide a satisfactory explanation within 30 days of being informed (extendable by the officer concerned) or after accepting discrepancies, fails to take corrective action in the return for the month in which the discrepancy is accepted, the proper officer may take recourse to any of the following provisions:

(a) Proceed to conduct audit under section 65 of the Act;

(b) Direct the conduct of a special audit under section 66 which is to be conducted by a Chartered Accountant or a Cost Accountant nominated for this purpose by the Commissioner; or

(c) Undertake procedures of inspection, search and seizure under section 67 of the Act; or

(d) Initiate proceeding for determination of tax and other dues under section 73 or 74 of the Act.

Thus, in view of the above mentioned provisions, the proper officer may take any of the recourse mentioned above against Mr. Venkateshwara.

15.4 Sec. 62: Assessment of Non-Filers of Returns [Best Judgement Assessment by Proper Officer]

(1) Notwithstanding anything to the contrary contained in section 73 or section 74, where a registered person fails to furnish the return under section 39 or section 45, even after the service of a notice under section 46, the proper officer may proceed to assess the tax liability of the said person to the best of his judgement taking into account all the relevant material which is available or which he has gathered and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates.

(2) Where the registered person furnishes a valid return within 30 days of the service of the assessment order under sub-section (1), the said assessment order shall be deemed to have been withdrawn but the liability for payment of interest under sub-section (1) of section 50 or for payment of late fee under section 47 shall continue.

Example:

If a person defaults in filing of return for any tax period falling in F/Y 2019-20, period of 5 years shall be reckoned from the due date of filing of Annual Return for F/Y 2019-20 i.e. 31.12.2020. Accordingly, Best judgment Assessment can be made by Proper Officer on or before 31.12.2025.

15.5 Sec. 63 : Assessment of Unregistered Persons [Best Judgement Assessment by Proper Officer]

Sec. 63 applies to whom:

1. This Section is applicable to unregistered persons i.e., persons who are liable to obtain registration under Section 22 and have failed to obtain registration will come within scope of operation of this Section.

2. This provision also covers the cases whose registration was cancelled as per section 29 (2) claiming of the GST Act. Section 29(2) of the Act covers 5 instances as follows:

(i) A person who contravenes the provisions of this Act or Rules made thereunder;

Assessment 449

(ii) A composition person who fails to furnish returns for 3 consecutive tax periods.

(iii) A person other than composition person who fails to furnish returns for 6 consecutive months.

(iv) A person who has sought voluntary registration but has failed to commence business within 6 months.

(v) Where registration has been obtained by way of fraud, wilful misstatement or suppression of facts.

Issue of Notice:

1. This Section is applicable to unregistered taxable persons. In such cases, the proper officer is required to give a reasonable opportunity of being heard to such persons before proceeding to assess such person.

2. For assessment under this section, notice has to be issued by the proper officer. The notice would contain the grounds on which the assessment is proposed to be made on best judgment basis.

3. The taxable person is allowed a time of 15 days to furnish his reply, if any. After considering the said explanation, the order will be passed.

Time Limit for Assessment Order:

The Assessment order shall be passed by the proper officer within a period of 5 years from due date applicable for filing annual return for the year to which tax not paid relates.

Example:

If the liability of a person to take registration arises at any time in the F/Y 2019-20for the reason that his turnover crosses the prescribed threshold limit, period of 5 years shall be reckoned fromthe due date of filing of Annual Return for F/Y 2019-20i.e. 31.12.2020. Accordingly, Best judgment Assessment can be made by proper officer on or before 31.12.2025.

15.6 Sec. 64 : Summary Assessment in Certain Special Cases When Summary Assessment can be done:

1. The summary assessment can be undertaken in case all of the following conditions are satisfied :

The Proper Officer must have evidence that there may be a tax liability.

The Proper Officer has obtained prior permission of Additional/Joint Commissioner to assess the tax liability summarily.

The Proper Officer must have sufficient ground to believe that any delay in passing assessment order would result in loss of revenue.

2. Summary assessment under this Section of the CGST Act can therefore be construed in some sense as a ‘protective assessment’ carried out in special circumstances, where there are sufficient grounds to believe that taxable person will fail to make payment of any tax, penalty or interest, if the assessment is not completed immediately.

3. Such failure to pay tax, penalty or interest must be due to reasons attributable to the tax payer (ex. : insolvency, instances of defaulting, absconding etc.).

4. Further, mere possibility of non-payment cannot be a grounds for resorting to summary assessment, unless there are factors indicating that such non-payment pertains to admitted or undisputed tax liability.

450 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 5. This assessment can be based on the information gathered from intelligence wing of the tax authorities in a

particular case.

Withdrawal of Assessment Order:

1. The Summary assessment order can be withdrawn by the Additional/Joint Commissioner, if he considers that such order is erroneous,

(a) on an application by the taxable person for withdrawal of summary assessment order within 30 days from the date of receipt of order; or

(b) on his own motion, and

follow the procedure laid down in Section 73 or Section 74 for determination of tax liability of such taxable person.

2. From the above, it appears that every summary assessment order so withdrawn, must be followed by a notice under Section 73 or Section 74.

3. On receipt of application the proper officer has to pass the order of withdrawal or, rejection of the application.

Deemed taxable person in case of Supply of Goods:

1. Many times, summary assessments are undertaken in circumstances, when a taxable person to whom liability pertains is not ascertainable.

2. In such cases, the law provides that, if the liability pertains to supply of goods, then person in charge of such goods shall be deemed to be the taxable person liable to be assessed and pay tax and amount due on completion of summary assessment. (e.g. when goods are in transit or in warehouse and the taxable person is not ascertainable.)

3. There is no deeming provision when unpaid tax liability relates to supply of services.

Illustration 3 :

A summary assessment order has been issued against Mr. Kanhaiya Mittal, a taxable person under GST. Mr. Kanhaiya Mittal does not wish to take recourse to appellate machinery against the assessment order.

He has approached you for seeking advice on whether there is any other recourse available to him against the said summary assessment?

Answer :

Yes, Mr. Kanhaiya Mittal has other recourse available to him against summary assessment order other than appellate remedy. Mr. Kanhaiya Mittal against whom a summary assessment order has been passed can apply for its withdrawal to the jurisdictional Additional/Joint Commissioner within 30 days of the date of receipt of the order vide section 64 of CGST Act. If the said officer finds the order erroneous, he can withdraw it and direct the proper officer to carry out determination of tax liability in terms of section 73 or 74 of CGST Act. The Additional/Joint Commissioner can follow a similar course of action on his own motion if he finds the summary assessment order to be erroneous.

Illustration 4 :

Explain in what cases, assessment order passed by proper officer may be withdrawn under CGST Act, 2017? [CA Final, May 2018 - New] (5 Marks)

Solution :

Assessment order passed by proper officer may be withdrawn in the following cases :-

Assessment 451

(i) Assessment of Non-filers of return –Best judgment order passed by proper officer u/s 62 shall automatically stand withdrawn if taxable person furnishes a valid return for the default period (i.e. files the return and pays the tax as assessed by him), within 30 days of the receipt of the best judgment assessment order.

(ii) Summary Assessment- A taxable person against whom a summary assessment order has been passed can apply for its withdrawal to the jurisdictional Additional/Joint Commissioner within 30 days of the date of receipt of order. If the said officer finds the order erroneous, he can withdraw it and direct the proper officer to carry out determination of tax liability in terms of section 73 or 74. Additional/Joint Commissioner can follow a similar course of action on his own motion if he finds summary assessment order to be erroneous.

SUMMARY OF CHAPTER: 15 – ASSESSMENT

1. SELF ASSESSMENT (Sec.59)

Every registered person shall himself assess tax liability and furnish return.

2. PROVISIONAL ASSESSMENT (Sec.60)

Person unable to determine value of supply of rate of tax.

Payment of tax on provisional basis on execution bond on a request made.

Final Assessment:

Time: 6 months from the date of communication of order.

Extension: 6 months by Joint/Additional Commissioner.

4 years by Commissioner if

Short paid, pay with interest u/s 50.

If excess paid, refund with interest u/s 56.

3. SCRUTINY OF RETURNS (Sec.61)

In order to verify accuracy of return, the Proper Officer may examine return and seek explanation.

If explanation offered is adequate, no further action.

If no adequate explanation offered or no corrective measures.

Proper Action u/s 65, 66,67, 73 or 74.

4. ASSESSMENT OF NON-FILERS OF RETURN(Sec.62)

If return is not furnished even after service of notice u/s 46

Proper officer shall assess the liability of tax within a period of 5 years from the date specified u/s 44 for furnishing of annual return.

5. ASSESSMENT OF UNREGISTERED PERSON (Sec.63)

Proper officer to the best of his judgment, may issue an assessment order within a period of 5 years from the date specified u/s 44 for furnishing of the annual return.


6. SUMMARY ASSESSMENT IN CERTAIN SPECIAL CASES (Sec.64)

Proper officer may issue an assessment order imposing tax liability on a person based on a ny evidence showing a tax liability.

If person to whom liability pertains is not ascertainable, the person in charge of goods shall be assessed.

If order is erroneous, proper officer may withdraw such order and follow the procedure laid down in section 73 or section 74.

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CHAPTER

Audit 16

16.1 Sec. 65 : Audit by Tax Authorities Audit of records of tax payers is a very important step for the proper functioning of a self assessment based tax system. This provision provides for audit of the business transactions of any registered person. It is an important tool in the tax administration to ensure compliance of law and prevent revenue leakage.

Who may conduct audit ?

The Commissioner; or

Any officer authorised by him, by way of a general or a specific order.

The audit will be conducted at the place of business of the registered person or in the office of tax authorities.

Intimation of audit is to be issued to the taxable person at least 15 working days in advance.

It is important to note that the said order of Commissioner must be specific to the auditee and the tax period selected for audit.

Period of Audit [Rule 101 (1)] :

The period of audit to be conducted u/s 65(1) shall be a financial year or part thereof or multiples thereof. [as amended by NN 74/2018 – C.T., dated 31.12.2018]

What is the meaning of the date of commencement of audit ?

The date of commencement of audit means the date on which the records and documents requisitioned by the tax authorities are made available by the registered person or the actual institution of audit at the place of business, whichever is later.

Time limit of Completion of Audit:

The audit is to be completed within 3 months from the date of commencement of audit.

This time limit may be extended by the Commissioner, where required, by a further period not exceeding 6 months.

The Commissioner needs to record reasons in writing for grant of any such extension.

How to conduct Audit ?

During the course of audit, the authorized officer may require the registered person to afford him the necessary facility to verify the books of account and also to furnish the required information and render assistance for timely completion of the audit.

The proper officer while conducting the audit is authorized to verify:


– Books and records

– Returns and statements

– Rate of tax applicable in respect of supply of goods and/or services

– Correctness of the input tax credit claimed/availed/unutilized and refund claimed

– Correctness of turnover, exemptions and deductions.

Completion of Audit:

On audit completion, information is required to be provided to the registered person including the findings during the audit within 30 days of conclusion of the audit.

In cases where tax liability is identified during the audit or input tax credit wrongly availed or utilized by the auditee, the procedure laid down under Section 73 or 74 is to be followed.

Audit cannot conclude automatically resulting in a demand. It has to follow procedure given in Section 73 or 74.

CASE STUDY

A notice for audit was served to M/s. PQR Ltd., on 10.01.2018. Required information was given by M/s. PQR Ltd., on 25.01.2018. The audit officers visited the place of business on 12.02.2018. What is the last date within which the audit is to be completed?

It will be 3 months from 12.02.2018, viz., 11.05.2018 or within an extended period of 6 months. The extended period would be 11.11.2018.

16.2 Sec. 66 : Special Audit Availing the services of experts is an age old practice of due process of law. One such facility extended by the Act is in Section 66 where an officer not below the rank of Assistant Commissioner, duly approved, may avail the services of a Chartered Accountant or Cost Accountant to conduct a detailed examination of specific areas of operations of a registered person.

Who can give the order of Special Audit and when :

An Assistant Commissioner or officer of above rank, at any stage of scrutiny, enquiry, investigation or any other proceedings under the Act, may direct a registered person to get his books of accounts audited by a Chartered Accountant or Cost Accountant, if having regard to the nature & complexity of the business, he is of the opinion that:

– Value has not been correctly declared; or

– Credit availed is not within the normal limits.

The Assistant Commissioner needs to obtain prior permission of the Commissioner to issue such direction to the taxable person.

The Chartered Accountant or Cost Accountant is to be nominated by the Commissioner.

Special Audit under this section has to be conducted irrespective of the fact that the accounts of the registered person have been audited under any other provisions of this Act or any other law for the time being in force.

Audit 455

Time limit of Completion of Audit :

The Chartered Accountant or the Cost Accountant so appointed shall submit the audit report, mentioning the specified particulars therein, within a period of 90 days, to the Assistant Commissioner.

The due date of submission of audit report may be extended by another 90 days, on the application to the Assistant Commissioner by Chartered Accountant or the Cost Accountant or the registered person, due to any material or sufficient reason.

Action on the basis of Audit Report:

The registered person shall be given an opportunity of being heard in respect of any material gathered on the basis of special audit which is proposed to be used in any proceedings against him under this Act or the rules made thereunder.

Where the special audit 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 action under section 73 or section 74.

Who will bear the expenses of the Audit:

The expenses of the audit of records, including the remuneration of such chartered accountant or cost accountant, shall be determined and paid by the Commissioner and such determination shall be final.

AUDIT

Special Audit

Commissioner or any officer authorized by him may undertake audit of any registered person

Audit may be conducted at the place of business or in their office

At least 15 days prior notice should be given

Time Period: 3 months from the date of conduct of audit

Extension: not exceeding six months

On conclusion, registered person shall be informed about findings, rights & obligations

If results in demand of tax, shall be recovered under section 73 or 74

At any stage of scrutiny, inquiry or investigation

Assistant Commissioner is of the opinion that the value has not been correctly declared or the credit availed is not within the normal limits

may nominate a Chartered Accountant or Cost Accountant

Time period: 90 days

Extension: further 90 days

Audit will be conducted even if accounts have already been audited

If results in demand of tax, shall be recovered under section 73 or74

Audit by tax authorities

456

CHAPTER


17.1 Sec. 35 : Accounts and Other Records

1. Place of business : Section 2 (85) of The CGST Act, 2017 defines “place of business” to include -

(a) a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, provides or receives goods or services or both; or

(b) a place where a taxable person maintains his books of account; or

(c) a place where a taxable person is engaged in business through an agent, by whatever name called;

2. ‘Principal place of business’ : Section 2(89) of defines to mean the place of business specified as the principal place of business in the certificate of registration.

3. Who is required to maintain his books of accounts and at which place? [Section 35(1) read with rule 56(7) and 56(10)]

Every registered person shall keep and maintain, his books of accounts at his principal place of business. Where more than one place of business is specified in the certificate of registration, the accounts relating to each place of business shall be kept at such places of business.

Unless proved otherwise, if any document, registers, or any books of accounts belonging to registered person are found at any premises other than those mentioned in the certificate of registration, they shall be presumed to be maintained by the said registered person.

Clarification in respect of maintenance of books of accounts relating to additional place of business by a principal or an auctioneer for the purpose of auction of tea, coffee, rubber, etc. [Circular No. 23/23/2017 - GST dated 21.12.2017]

Issue :

Maintenance of books of accounts at each and every additional place of business related to stock of goods like tea, coffee, rubber, etc. meant for supply through an auction.

As per the first proviso of section 35(1) of the CGST Act, both the principal and the auctioneer are required to maintain the books of accounts relating to their additional place(s) of business in such places.

It has been represented that both the principal as well as the auctioneer may be allowed to maintain the books of accounts relating to the additional place(s) of business at their principal place of business itself.

Clarification :

(1) The principal and the auctioneer of tea, coffee, rubber etc. are required to declare warehouses where such goods are stored as their additional place of business. The buyer is also required to disclose such


warehouse as his additional place of business if he wants to store the goods purchased through auction in such warehouses.

(2) Both the principal and the auctioneer are required to maintain the books of accounts relating to each and every place of business in that place itself as per the first proviso to sub-section (1) of section 35 of the CGST Act. However, in case difficulties are faced in maintaining the books of accounts, it is clarified that they may maintain the books of accounts relating to the additional place(s) of business at their principal place of business instead of such additional place(s).

(3) Such principal or auctioneer shall intimate their jurisdictional proper officer in writing about the maintenance of books of accounts relating to additional place(s) of business at their principal place of business.

(4) Further, the principal or the auctioneer shall be eligible to avail input tax credit (ITC) subject to the fulfilment of other provisions of the Act and the rules made thereunder.

(5) It is further clarified that this Circular is applicable to the supply of tea, coffee, rubber, etc. where the auctioneer claims ITC in respect of the supply made to him by the principal before the auction of such goods and the said goods are supplied only through auction.

4. Every registered person shall keep and maintain, at his principal place of business, a true and correct account of the following :

Production or manufacture of goods;

Inward supply of goods or services or both;

Outward supply of goods and/or services or both;

Stock of goods;

Input tax credit availed;

Output tax payable and paid; and

Such other particulars as may be prescribed in this behalf.

I. Records prescribed by rules [Rule 56(1), (3), (5) and (6)]

In addition to the particulars mentioned in section 35(1), the rules also provide that the registered person is required to maintain true and correct account of:

the goods/services imported/exported,

supplies attracting payment of tax on reverse charge along with relevant documents, including invoices, bills of supply, delivery challans, creditnotes, debit notes, receipt vouchers, payment vouchers and refund vouchers

separate account of advances received, paid and adjustments made thereto.

particulars of:

(a) names and complete addresses of suppliers from whom he has received the goods or services chargeable to tax under the Act;

(b) names and complete addresses of the persons to whom he has supplied goods or services, where required under the provisions of this Chapter.


particulars of the complete address of the premises where goods are stored by him, including goods stored during transit along with the particulars of the stock stored therein.

However, if any taxable goods are found to be stored at any place(s) other than those so declared without the cover of any valid documents, the proper officer shall determine the amount of tax payable on such goods as if such goods have been supplied by the registered person.

II. Records which are to be maintained only by a supplier other than a supplier opting for composition levy [Rule 56(2) and (4)]

A supplier is required to maintain following records relating to stock of goods and tax details. However, a supplier who has opted for composition scheme is not required to maintain such records.

(i) Stock of goods: Accounts of stock in respect of goods received and supplied by him, and such accounts shall contain particulars of the opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample and the balance of stock including raw materials, finished goods, scrap and wastage thereof.

(ii) Details of tax: Account, containing the details of tax payable (including tax payable under reverse charge), tax collected and paid, input tax, input tax credit claimed, together with a register of tax invoice, credit notes, debit notes, delivery challan issued or received during any tax period.

III. Records to be maintained by agent [Rule 56(11)]

Every agent shall maintain accounts depicting the-

(a) particulars of authorization received by him from each principal to receive or supply goods or services on behalf of such principal separately;

(b) particulars including description, value and quantity (wherever applicable) of goods or services received on behalf of every principal;

(c) particulars including description, value and quantity (wherever applicable) of goods or services supplied on behalf of every principal;

(d) details of accounts furnished to every principal; and

(e) tax paid on receipts or on supply of goods or services effected on behalf of every principal.

Agent means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another [Section 2(5)].

IV. Records to be maintained by a manufacturer [Rule 56(12)]

Apart from other records, every registered person manufacturing goods has to maintain monthly production accounts showing quantitative details of raw materials or services used in the manufacture and quantitative details of the goods so manufactured including the waste and by products thereof.

V. Records to be maintained by a service provider [Rule 56(13)]

Every registered person supplying services has to additionally maintain the accounts showing quantitative details of goods used in the provision of services, details of input services utilised and the services supplied.

VI. Records to be maintained by a person executing works contract [Rule 56(14)]

Every registered person executing works contract shall keep separate accounts for works contract showing


- the names and addresses of the persons on whose behalf the works contract is executed;

- description, value and quantity (wherever applicable) of goods or services received for the execution of works contract;

- description, value and quantity (wherever applicable) of goods or services utilized in the execution of works contract;

- the details of payment received in respect of each works contract; and

- the names and addresses of suppliers from whom he received goods or services.

VII. Records to be maintained by owner or operator of godown or warehouse and transporters [Section 35(2) read with rule 58]

Every 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 manner as may be prescribed.

Enrolment, if not already registered in GST: If such persons are not already registered, they shall obtain a unique enrollment number by applying electronically at the GST Common Portal.

The person enrolled as aforesaid in any other State or Union territory shall be deemed to be enrolled in the State or Union territory.

Such person may also amend the details furnished in the prescribed form.

Records to be maintained by the transporter: Any person engaged in the business of transporting goods shall maintain records of goods transported, delivered and goods stored in transit by him along with GSTIN of the registered consignor and consignee for each of his branches.

A transporter having registration in more than one State/UT would have more than one GSTIN as well. A transporter who is registered in more than one State/UT having the same PAN, may apply for a unique common enrolment number by submitting the details in prescribed form using any one of his GSTINs.

Upon validation of the details furnished, a unique common enrolment number shall be generated and communicated to the said transporter. Once a transporter has obtained a unique common enrolment number, he shall not be eligible to use any of the GSTIN for the purposes of E-Way Bills under Chapter XVI of these rules.

Records to be maintained by an owner/operator of a warehouse/ godown : Every owner or operator of a warehouse or godown shall maintain books of accounts with respect to the period for which particular goods remain in the warehouse, including the particulars relating to dispatch, movement, receipt, and disposal of such goods.

The owner or the operator of the godown shall store the goods in such manner that they can be identified item-wise and owner- wise and shall facilitate any physical verification or inspection by the proper officer on demand.

VIII. Records to be maintained by a custodian/clearing and forwarding agent [Rule 56(17)]

Any person having custody over the goods in the capacity of a carrier or a clearing and forwarding agent for delivery or dispatch thereof to a recipient on behalf of any registered person shall maintain true and correct records in respect of such goods handled by him on behalf of such registered person and shall produce the details thereof as and when required by the proper officer.

5. The Commissioner may notify a class of taxable persons to maintain additional accounts or documents for such purpose as may be specified therein [Section 35(3)].


6. Where the Commissioner considers that any class of taxable persons is not in a position to keep and maintain accounts in accordance with the provisions of this section, he may, for reasons to be recorded in writing, permit such class of taxable persons to maintain accounts in such manner as may be prescribed [Section 35(4)].

7. How the accounts and records will be maintained? [Second proviso to section 35(1) read with rule 56(7), (8), (9), (15), (16) and (18) and rule 57]

Records may be in electronic form

Books of account include any electronic form of data stored on any electronic device.

The registered person may keep and maintain such accounts and other particulars in electronic form stored on any electronic device and record so maintained shall be authenticated by means of a digital signature.

Proper electronic back-up of records shall be maintained and preserved in such manner that, in the event of destruction of such records due to accidents or natural causes, the information can be restored within a reasonable period of time.

The registered person maintaining electronic records shall produce, on demand, the relevant records or documents, duly authenticated by him, in hard copy or in any electronically readable format.

Where the accounts and records are stored electronically by any registered person, he shall, on demand, provide the details of such files, passwords of such files and explanation for codes used, where necessary, for access and any other information which is required for such access along with a sample copy in print form of the information stored in such files.

No entry to be erased/overwritten

Any entry in registers, accounts and documents shall not be erased, effaced or overwritten.

All incorrect entries, otherwise than those of clerical nature, shall be scored out under attestation and there after correct entry shall be recorded.

Where the registers and other documents are maintained electronically, a log of every entry edited or deleted shall be maintained.

Accounts maintained by the registered person together with all the invoices, bills of supply, credit and debit notes, and delivery challans relating to stocks, deliveries, inward supply and outward supply shall be preserved for the period as provided in section 36 [discussed subsequently in this Chapter] and shall, where such accounts and documents are maintained manually, be kept at every related place of business mentioned in the certificate of registration and shall be accessible at every related place of business where such accounts and documents are maintained digitally.

Each volume of books of account maintained manually by the registered person shall be serially numbered.

Every registered person shall, on demand, produce the books of accounts which he is required to maintain under any law for the time being in force.

8. Audit of accounts [Section 35(5) read alongwith section 44(2) and rule 80]

Sub-section (5) of section 35 read alongwith section 44(2) and rule 80 of the CGST Rules, 2017 stipulates as follows:


A. Every registered person must get his accounts audited by a Chartered Accountant or a Cost Accountant if his aggregate turnover during a FY exceeds Rs. 2 crores.

However, the books of accounts of the Central/ State Government or local authority would not be subject to audit by a Chartered Accountant/ Cost Accountant if the same are subject to audit by CAG of India or any statutory auditor appointed for auditing the accounts of local authorities. Consequently, they are not required to submit the copy of the audited annual accounts and the reconciliation statement. [inserted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019]

B. Such registered person is required to furnish electronically through the common portal alongwith Annual Return a copy of:

Audited annual accounts

A Reconciliation Statement, duly certified, in prescribed form

Reconciliation Statement will reconcile the value of supplies declared in the return furnished for the financial year with the audited annual financial statement and such other particulars, as may be prescribed.

9. Failure to maintain the accounts [Section 35(6)]

Where the registered person fails to account for the goods or services or both in accordance with the provisions of section 35(1), the proper officer shall determine the amount of tax payable on the goods or services or both that are not accounted for, as if such goods or services or both had been supplied by such person and the provisions of section 73 or section 74, as tax.

17.2 Sec. 36 : Period of Retention of Accounts

1. Every assessee shall retain the books of accounts and other records until the expiry of 72 months (6 years) from the due date for filing of Annual Return for the year pertaining to such accounts and records.

Example : If the annual returns for the F.Y. 2017-18 are filed on say 25.10.2018, even then, the books of account and other records are to be maintained till 31.12.2024.

2. In case an appeal or revision or any other proceeding is pending before any Appellate Authority or Revisional Authority or Appellate Tribunal or Court, or in case the assessee is under investigation for an offence under Chapter XIX, the assessee shall retain the books of account and other records pertaining to the subject matter of such appeal or revision or proceeding or investigation for a period of one year after final disposal of such appeal or revision or proceeding, or for the period as specified above, whichever is later.

Illustration 1 :

Mr. Bala, a registered person in Chennai wants to maintain proper accounts and records relating to GST. Advise him about the accounts and other records to be maintained under Section 35 (1) of the CGST Act, 2017. [CA Final, May 2018 - Old](Marks 4)

Solution :

As per section 35(1) of CGST Act 2017, every registered person shall keep and maintain, at his principal place of business, as mentioned in the certificate of registration, a true and correct account of-

(a) production or manufacture of goods;

(b) inward and outward supply of goods or services or both;

(c) stock of goods;

462 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (d) input tax credit availed;

(e) output tax payable and paid; and

(f) such other particulars as may be prescribed:

Provided that where more than one place of business is specified in the certificate of registration, the accounts relating to each place of business shall be kept at such places of business:

Provided further that the registered person may keep and maintain such accounts and other particulars in electronic form in such manner as may be prescribed.

Illustration 2 :

Explain the provisions relating to period of retention of accounts as provided under section 36 of CGST Act, 2017? [MTP- May 2018]

Answer :

Section 36 of the CGST Act explains the provisions relating to period of retention of accounts as under: Every registered person required to keep and maintain books of account or other records shall retain them until the expiry of 72 months from the due date of furnishing of annual return for the year pertaining to such accounts and records.

However, 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 1 year after final disposal of such appeal or revision or proceedings or investigation, or for the period specified above, whichever is later.

463

CHAPTER

Inspection, Search, Seizure and E-Way Bill 18

18.1 Sec. 67 : Power of Inspection, Search and Seizure

Circumstances for carrying out Inspection:

1. The action under this section is initiated when the proper officer not below the rank of Joint Commissioner ‘has reason to believe’ that

(a) the taxable person has suppressed the following:

(i) any transaction of supply of goods or services or both or

(ii) information relating to stock in hand or

(iii) claimed excess input tax credit or

(iv) has contravened any of the statutory provisions, with an intent to evade taxes;

(b) any person engaged in the business of transportation of goods which have escaped tax payment or has kept his accounts or goods in a manner likely to cause tax evasion, whether or not he is registered taxable person; or

(c) an owner or operator of a warehouse or godown or any other place is storing goods, which have escaped tax payment or has kept his accounts or goods in a manner likely to cause tax evasion, whether or not he is registered taxable person.

2. The phrase ‘reason to believe’ has been interpreted by various courts distinguishing it from ‘reason to suspect’.

Powers of Officer during Search:

Under the circumstances mentioned above, the proper officer not below the rank of Joint Commissioner, can authorize another officer in writing to :

(i) Inspect any place of business of the taxable person who has evaded tax or of the transporter who transported such tax evading goods or godown/warehouse in which such tax evaded goods or accounts relating thereto have been stored.

(ii) Search and seize the goods or any documents or books or things which are liable for confiscation including anything concealed and which will be useful or relevant in the proceedings under this Act.

(iii) Seal or break open the door of any premises, storage, box, electronic device or receptacle where goods, books of accounts etc. are concealed and when access to the same is denied to the officer.

(iv) If it is not practicable to seize the goods, then the Officer may serve an order on owner or custodian of the goods for not removing, part or deal with the goods without his prior permission.

464 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Return of Seized Documents, Books or Things:

(i) The said officer shall return the documents, books or things seized or produced by a taxable or any other person on which no reliance has been placed for issuing notice, within a period of 30 days from the issue of notice.

(ii) However, the documents, books or things, which are relied upon while issuing the notice, will be retained.

(iii) The person from whose custody documents are seized is entitled to take photocopy or extract of such documents in the presence of a GST officer at the place and time as predetermined. Copies or extracts may be denied if he is of the opinion that such an act will prejudicially affect the investigation.

Release of Seized Goods:

(i) Provisional Basis: The goods so seized can be released on a provisional basis, on execution of a bond and furnishing of prescribed amount of security or on payment of applicable tax, interest and penalty.

(ii) Actual releases of goods: The seized goods shall be returned, if no notice has been issued within 6 months of its seizure or an extended period of another 6 months by commissioner on justified grounds.

(iii) Disposal of Goods: The officer can dispose of certain notified goods immediately after the seizure, if those goods are of perishable or hazardous nature, or would depreciate in value by passage of time or there are constraints of storage space or any other relevant considerations as may be prescribed.

Other Provisions:

(i) The officer can even seize accounts, registers or documents of any person, in case he has a reason to believe that the said person has evaded or is attempting to evade the taxes. However, he has to record the reasons in writing and also shall grant receipt of such seizure. There is no time limit prescribed for such retention by the officer.

(ii) The Commissioner or officer authorized by him can authorize any person for purchase of any goods/services to check issue of tax invoices/bills of supply. The goods so purchased by such person through appointed person, if returned, the taxable person from whom the goods were purchased shall refund the amount so paid and cancel the tax invoice. There is no time limit prescribed for return of the goods. It should be noted that this provision deals only with return of goods so purchased and there is no provision of return of services so purchased.

Procedure for conducting search

To ensure that the provisions for search and seizure are implemented in a proper and transparent manner, the Act stipulates that the searches and seizures shall be carried out in accordance with the provisions of Criminal Procedure Code, 1973. Section 100 of the Code of Criminal Procedure describes the procedure for search.

Basic requirements to be observed during search operations

The following principles should be observed during Search:

(i) No search of premises should be carried out without a valid search warrant issued by the proper officer.

(ii) There should invariably be a lady officer accompanying the search team to residence.

(iii) The officers before starting the search should disclose their identity by showing their identity cards to the person in-charge of the premises.

(iv) The search warrant should be executed before the start of the search by showing the same to the person in-charge of the premises and his signature should be taken on the body of the search warrant in token of having seen the same. The signatures of at least two witnesses should also be taken on the body of the search warrant.


(v) The search should be made in the presence of at least two independent witnesses of the locality. If no such inhabitants are available /willing, the inhabitants of any other locality should be asked to be witness to the search. The witnesses should be briefed about the purpose of the search.

(vi) Before the start of the search proceedings, the team of officers conducting the search and the accompanying witnesses should offer themselves for their personal search to the person in-charge of the premises being searched. Similarly, after the completion of search all the officers and the witnesses should again offer themselves for their personal search.

(vii) A Panchnama / Mahazar of the proceedings of the search should necessarily be prepared on the spot. A list of all goods, documents recovered and seized/detained should be prepared and annexed to the Panchnama/Mahazar. The Panchnama / Mahazar and the list of goods/ documents seized/detained should invariably be signed by the witnesses, the in-charge/ owner of the premises before whom the search is conducted and also by the officer(s) duly authorized for conducting the search.

(viii) After the search is over, the search warrant duly executed should be returned in original to the issuing officer with a report regarding the outcome of the search. The names of the officers who participated in the search may also be written on the reverse of the search warrant.

(ix) The issuing authority of search warrant should maintain register of records of search warrant issued and returned and used search warrants should be kept in records

(x) A copy of the Panchnama / Mahazar along with its annexure should be given to the person incharge/owner of the premises being searched under acknowledgement.

Search Warrant and its contents

The written authority to conduct search is generally called search warrant. The competent authority to issue search warrant is an officer of the rank of Joint Commissioner or above. A search warrant must indicate the existence of a reasonable belief leading to the search. Search Warrant should contain the following details:

(i) the violation under the Act,

(ii) the premise to be searched,

(iii) the name and designation of the person authorized for search,

(iv) the name of the issuing officer with full designation along with his round seal,

(v) date and place of issue,

(vi) serial number of the search warrant, period of validity i.e. a day or two days etc.

Safeguards provided for in respect of Search or Seizure

Certain safeguards are provided in section 67 of CGST Act in respect of the power of search or seizure. These are as follows:

(i) Seized goods or documents should not be retained beyond the period necessary for their examination;

(ii) An inventory of seized goods shall be made by the seizing officer;

(iii) Provisions of Code of Criminal Procedure 1973 relating to search and seizure shall apply. However, one important modification is in relation to sub- section (5) of section 165 of Code of Criminal Procedure – instead of sending copies of any record made in course of search to the nearest Magistrate empowered to take cognizance of the offence, it has to be sent to the Principal Commissioner/ Commissioner of CGST.

466 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 18.2 Sec. 70 : Power to Summon Persons to Give Evidence and Produce Documents

During the course of any enquiry under this Act, the proper officer may summon any person, to appear before him and give evidence or produce documents. The person to whom such summon has been issued is duty bound to appear before the officer and bound to tender evidence. He is also bound to produce all documents which were required to be furnished.

Responsibilities of the person so summoned

A person who is issued summon is legally bound to attend either in person or byan authorized representative and he is bound to state the truth before the officer who has issued the summon upon any subject which is the subject matter of examination and to produce such documents and other things as may be required.

Consequences of non-appearance to summons

The proceeding before the official who has issued summons is deemed to be a judicial proceeding. If a person does not appear on the date when summoned without any reasonable justification, he can be prosecuted under section 174 of the Indian Penal Code (IPC). If he absconds to avoid service of summons, he can be prosecuted under section 172 of the IPC and in case he does not produce the documents or electronic records required to be produced, he can be prosecuted under section 175 of the IPC. In case he gives false evidence, he can be prosecuted under section 193 of the IPC. In addition, if a person does not appear before a CGST/ SGST officer who has issued the summon, he is liable to a penalty upto Rs. 25,000 under section 122(3)(d) of the Act.

Guidelines for issue of summons

CBIC in the Department of Revenue, Ministry of Finance has issued guidelines from time to time to ensure that summons provisions are not misused in the field. Some of the important highlights of these guidelines are given below:

(i) summons are to be issued as a last resort where assesses are not co-operating and this section should not be used for the top management;

(ii) the language of the summons should not be harsh and legal which causes unnecessary mental stress and embarrassment to the receiver;

(iii) summons by Superintendents should be issued after obtaining prior written permission from an officer not below the rank of Assistant Commissioner with the reasons for issuance of summons to be recorded in writing;

(iv) where for operational reasons, it is not possible to obtain such prior written permission, oral/ telephonic permission from such officer must be obtained and the same should be reduced to writing and intimated to the officer according such permission at the earliest opportunity;

(v) in all cases, where summons is issued, the officer issuing summons shouldsubmit a report or should record a brief of the proceedings in the case file and submit the same to the officer who had authorized the issuance of summons;

(vi) senior management officials such as CEO, CFO, General Managers of a large company or a Public Sector Undertaking should not generally be issued summons at the first instance. They should be summoned only when there are indications in the investigation of their involvement in the decision making process which led to loss of revenue.

Precautions to be observed while issuing summons

The following precautions should generally be observed when summoning a person: -


(i) A summon should not be issued for appearance where it is not justified. The power to summon can be exercised only when there is an inquiry being undertaken and the attendance of the person is considered necessary.

(ii) Normally, summons should not be issued repeatedly. As far as practicable, the statement of the accused or witness should be recorded in minimum number of appearances.

(iii) Respect the time of appearance given in the summons. No person should be made to wait for long hours before his statement is recorded except when it has been decided very consciously as a matter of strategy.

(iv) Preferably, statements should be recorded during office hours; however, an exception could be made regarding time and place of recording statement having regard to the facts in the case.

18.3 Sec. 71 : Access to Business Premises 1. This provision empowers any officer authorised by the officer not below the rank of Joint Commissioner to

have access to any place of business of a registered person to inspect books of account, documents, computers, computer programs, computer software and such other things as may be required and which may be available at such place, for the purposes of carrying out any audit, scrutiny, verification and checks as may be necessary to safeguard the interest of revenue.

2. For this purpose, the officer should be authorized by the officer not below the rank of Joint Commissioner.

3. Such an authorized officer shall have access to any place of business of registered person to inspect books of account, documents, computers, computer programs, computer software (whether installed in a computer or otherwise) and such other things as he may require as available at such premises.

4. The object is to carry out any audit, scrutiny, verification and checks as may be necessary to safeguard the interest of revenue.

5. The person in charge of the premises should make available the following :

(i) Records maintained by the registered person and declared to proper officer;

(ii) Trial balance;

(iii) Audited financial statements wherever required;

(iv) Cost audit report, if any;

(v) Income Tax audit report, if any;

(vi) Other relevant records.

6. The documents/records should be made available within 15 working days or such extended period as may be allowed.

7. The documents/records can be called for by the Audit officer or Chartered Accountant or Cost Accountant nominated by the department.

Illustration 1 :

Explain the situation in which access to business premises is allowed under section 71 of the CGST Act, 2017? Also, list the records which are to be produced during access to business premises? [MTP – May 2018]

Answer :

468 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal During the course of any enquiry under this Act, the duly empowered officer can have access to any business premises, which may be required for the purpose of such enquiry. During such access, the officers can inspect the books of accounts, documents, computers, computer programs, computer software and such other things as may be required.

It is the duty of the persons in charge of such premises to furnish the required documents. Similarly, the persons in charge of business premises are also duty bound to furnish such documents to the audit party deputed by the proper officer or the Chartered Accountant or Cost Accountant, who has been deputed by the Commissioner to carry out special audit. The following records are covered by this provision and are to be produced, if called for.

(i) the records prepared and maintained by the registered person and declared to the proper officer in the prescribed manner.

(ii) trial balance or its equivalent.

(iii) statements of annual financial accounts, duly audited.

(iv) cost audit report, if any.

(v) the income - tax audit report, if any.

(vi) any other relevant record.

18.4 Sec. 72 : Officers to Assist Proper Officers (1) All officers of Police, Railways, Customs, and those officers engaged in the collection of land revenue,

including village officers, officers of State tax and officers of Union territory tax shall assist the proper officers in the implementation of this Act.

(2) The Government may, by notification, empower and require any other class of officers to assist the proper officers in the implementation of this Act when called upon to do so by the Commissioner.

18.5 Sec. 68 : Inspection of Goods in Movement

(1) The Government may require the person in charge of a conveyance carrying any consignment of goods of value exceeding such amount as may be specified to carry with him such documents and such devices as may be prescribed.

(2) The details of documents required to be carried under sub-section (1) shall be validated in such manner as may be prescribed.

(3) Where any conveyance referred to in sub-section (1) is intercepted by the proper officer at any place, he may require the person in charge of the said conveyance to produce the documents prescribed under the said sub-section and devices for verification, and the said person shall be liable to produce the documents and devices and also allow the inspection of goods.

E-WAY BILL RULES

E-way bill

A waybill is a receipt or a document issued by a carrier giving details and instructions relating to the shipment of a consignment of goods and the details include name of consignor, consignee, the point of origin of the consignment, its destination, and route.


E-Way Bill is a compliance mechanism wherein by way of a digital interface the person causing the movement of goods uploads the relevant information prior to the commencement of movement of goods and generates e- way bill on the GST portal. In other words, E-way bill is an electronic document generated on the GST portal evidencing movement of goods.

Benefits of e-way bill

Following benefits are expected from e-way bill mechanism:

(i) Physical interface to pave way for digital interface resulting in elimination of state boundary check-posts

(ii) It will facilitate faster movement of goods

(iii) It will improve the turnaround time of trucks and help the logistics industry by increasing the average distances travelled, reducing the travel time as well as costs.

E-way Bill is generated electronically in Form GST EWB 01 on the common portal.

E-way Bill provisions [as contained in rules 138, 138A, 138B, 138C and 138D – Chapter XVI of the CGST Rules, 2017] are elaborated as under:

Every registered person who causes movement of goods of consignment value exceeding Rs 50,000 -

(i) in relation to a supply; or

(ii) for reasons other than supply; or

(iii) due to inward supply from an unregistered person,

shall, before commencement of such movement, furnish information relating to the said goods as specified in Part A of FORM GST EWB-01, electronically, on the common portal along with such other information as may be required on the common portal and a unique number will be generated on the said portal.

Who causes movement of goods?

If supplier is registered and undertakes to transport the goods, movement of goods is caused by the supplier. If recipient arranges transport, movement is caused by him. If goods are supplied by an unregistered supplier to a registered known recipient, movement shall said to be caused by such recipient.

Consignment Value of Rs. 50,000 includes GST amount also:

For the purposes of this rule, the consignment value of goods shall be the value, determined in accordance with the provisions of section 15, declared in an invoice, a bill of supply or a delivery challan, as the case may be, issued in respect of the said consignment and also includes the central tax, State or Union territory tax, integrated tax and cess charged, if any, in the document and shall exclude the value of exempt supply of goods where the invoice is issued in respect of both exempt and taxable supply of goods.

Special situations where e-way bill needs to be issued even if the value of the consignment is less than Rs. 50,000:

i. Inter-State transfer of goods by principal to job-worker

Where goods are sent by a principal located in one State or Union territory to a job worker located in any other State or Union territory, the e-way bill shall be generated either by the principal or the job worker, if registered, irrespective of the value of the consignment.

470 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal ii. Inter-State transfer of handicraft goods by a person exempted from obtaining registration

Where handicraft goods* are transported from one State or Union territory to another State or Union territory by a person who has been exempted from the requirement of obtaining registration [under clauses (i) and (ii) of section 24], the e-way bill shall be generated by the said person irrespective of the value of the consignment.

*Handicraft goods are the goods specified in Notification No. 56/2018 CT dated 23.10.2018 which exempts the casual taxable persons making inter-State taxable supplies of such handicraft goods from obtaining registration upto specified turnover limit.

Information to be furnished in e-way bill:

An e-way bill Form GST EWB-01 contains two parts:

(i) Part A [comprising of details of GSTIN of supplier & recipient, place of dispatch & delivery (indicating PIN Code also), document (Tax invoice, Bill of Supply, Delivery Challan or Bill of Entry) number and date, value of goods, HSN code, and reasons for transportation, etc.]: to be furnished by the registered person** who is causing movement of goods of consignment value exceeding Rs. 50,000/- and

(ii) Part B (transport details) [Transporter document number (Goods Receipt Number or Railway Receipt Number or Airway Bill Number or Bill of Lading Number) and Vehicle number, in case of transport by road]: to be furnished by the person who is transporting the goods.

**However, information in Part-A may be furnished:

by the transporter, on an authorization received from such registered person or

by the e-commerce operator or courier agency, where the goods to be transported are supplied through such an e-commerce operator or a courier agency, on an authorization received from the consignor.

Who is mandatorily required to generate e-way bill?

(i) Where the goods are transported by a registered person - whether as consignor or recipient as the consignee (whether in his own conveyance or a hired one or a public conveyance, by road), the said person shall have to generate the e-way bill (by furnishing information in part B on the common portal)

(ii) Where the e-way bill is not generated by the registered person and the goods are handed over to the transporter, for transportation of goods by road, the registered person shall furnish the information relating to the transporter in Part B on the common portal and the e-way bill shall be generated by the transporter on the said portal on the basis of the information furnished by the registered person in Part A.

(iii) Where the goods are transported by railways or by air or vessel, the e-way bill shall be generated by the registered person, being the supplier or the recipient, who shall, either before or after the commencement of movement, furnish, information in part B [viz transport document number (Goods Receipt Number or Railway Receipt Number or Airway Bill Number or Bill of Lading Number)] on the common portal.

Other important points:

Where the goods are transported by railways: there is no requirement to carry e-way bill along with the goods, but railways has to carry invoice or delivery challan or bill of supply as the case may be along with goods. Further, e-way bill generated for the movement is required to be produced at the time of delivery of the goods. Railways shall not deliver goods unless the e-way bill required under rules is produced at the time of delivery.

The registered person or, the transporter may, at his option, generate and carry the e-way bill even if the value of the consignment is less than Rs. 50,000.


Where the movement is caused by an unregistered person either in his own conveyance or a hired one or through a transporter, he or the transporter may, at their option, generate the e-way bill.

recipient who is registered, the movement shall be said to be caused by such recipient if the recipient is known at the time of commencement of the movement of goods.

When is it not mandatory to furnish the details of conveyance in Part-B?

Explanation 2 to rule 138(3) stipulates that e-way bill is valid for movement of goods by road only when the information in Part-B is furnished. However, details of conveyance may not be furnished in Part-B of the e-way bill where the goods are transported for a distance of upto 50 km within the State/Union territory:

from the place of business of the consignor to the place of business of the transporter for further transportation

from the place of business of the transporter finally to the place of business of the consignee

Transfer of goods from one conveyance to another

Where the goods are transferred from one conveyance to another, the consignor or the recipient, who has provided information in Part A of the FORM GST EWB-01, or the transporter shall, before such transfer and further movement of goods, update the details of conveyance in the e-way bill on the common portal in Part B of FORM GST EWB-01:

Provided that where the goods are transported for a distance of upto fifty kilometres within the State or Union territory from the place of business of the transporter finally to the place of business of the consignee, the details of the conveyance may not be updated in the e-way bill.

The consignor or the recipient, who has furnished the information in Part A of FORM GST EWB-01, or the transporter, may assign the e-way bill number to another registered or enrolled transporter for updating the information in Part B of FORM GST EWB-01 for further movement of the consignment:

Provided that after the details of the conveyance have been updated by the transporter in Part B of FORM GST EWB-01, the consignor or recipient, as the case may be, who has furnished the information in Part A of FORM GST EWB-01 shall not be allowed to assign the e-way bill number to another transporter.

Consolidated E-way bill

After e-way bill has been generated in accordance with the provisions of sub-rule (1), where multiple consignments are intended to be transported in one conveyance, the transporter may indicate the serial number of e-way bills generated in respect of each such consignment electronically on the common portal and a consolidated e-way bill in FORM GST EWB-02 maybe generated by him on the said common portal prior to the movement of goods.

Generation of E-way Bill by Transporter [Rule 138(7)]

[Note: the following Sub-Rule (7) is not yet applicable]

Where the consignor or the consignee has not generated the e-way bill in FORM GST EWB-01 and the aggregate of the consignment value of goods carried in the conveyance is more than fifty thousand rupees, the transporter, except in case of transportation of goods by railways, air and vessel, shall, in respect of inter-State supply, generate the e-way bill in FORM GST EWB-01 on the basis of invoice or bill of supply or delivery challan, as the case may be, and may also generate a consolidated e-way bill in FORM GST EWB-02 on the common portal prior to the movement of goods:

472 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Provided that where the goods to be transported are supplied through an e-commerce operator or a courier agency, the information in Part A of FORM GST EWB-01 may be furnished by such e-commerce operator or courier agency.

Information submitted for e-way bill can be used for filing GST Returns

The information furnished in Part A of FORM GST EWB-01 shall be made available to the registered supplier on the common portal who may utilize the same for furnishing the details in FORM GSTR-1:

Provided that when the information has been furnished by an unregistered supplier or an unregistered recipient in FORM GST EWB-01, he shall be informed electronically, if the mobile number or the e-mail is available.

Cancellation of e-way bill [Rule 138(9)]

Where an e-way bill has been generated under this rule, but goods are either not transported or are not transported as per the details furnished in the e-way bill, the e-way bill may be cancelled electronically on the common portal within twenty four hours of generation of the e-way bill:

Provided that an e-way bill cannot be cancelled if it has been verified in transit in accordance with the provisions of rule 138B:

Provided further that the unique number generated under sub-rule (1) shall be valid for a period of fifteen days for updation of Part B of FORM GST EWB-01.

Validity period of e-way bill/consolidated e-way bill [Rule 138(10)]

An e-way bill or a consolidated e-way bill generated under this rule shall be valid for the period as mentioned in column (3) of the Table below from the relevant date, for the distance, within the country, the goods have to be transported, as mentioned in column (2) of the said Table:-

Sr. No. Distance Validity Period

1 Upto 100 km. One day in cases other than Over Dimensional Cargo or multimodal shipment in which at least one leg involves transport by ship*

2 For every 100 km. or part thereof thereafter

One additional day in cases other than Over Dimensional Cargo or multimodal shipment in which at least one leg involves transport by ship*

3 Upto 20 km. One day in case of Over Dimensional Cargo or multimodal shipment in which at least one leg involves transport by ship*

4 For every 20 km. or part thereof thereafter

One additional day in case of Over Dimensional Cargo or multimodal shipment in which at least one leg involves transport by ship*

*[bold & italic words inserted by NN 31/2019 – CT, w.e.f. 28.06.2019]

Provided that the Commissioner may, on the recommendations of the Council, by notification, extend the validity period of an e-way bill for certain categories of goods as may be specified therein:

Provided further that where, under circumstances of an exceptional nature, including trans-shipment, the goods cannot be transported within the validity period of the e-way bill, the transporter may extend the validity period after updating the details in Part B of FORM GST EWB-01, if required.


Provided also that the validity of the e-way bill may be extended within 8 hours from the time of its expiry [proviso inserted by NN 31/2019 – CT, w.e.f. 28.06.2019].

Explanation 1 : For the purposes of this rule, the “relevant date” shall mean the date on which the e-way bill has been generated and the period of validity shall be counted from the time at which the e-way bill has been generated and each day shall be counted as the period expiring at midnight of the day immediately following the date of generation of e-way bill.

Explanation 2 : For the purposes of this rule, the expression “Over Dimensional Cargo” shall mean a cargo carried as a single indivisible unit and which exceeds the dimensional limits prescribed in rule 93 of the Central Motor Vehicle Rules, 1989, made under the Motor Vehicles Act, 1988 (59 of 1988).

Acceptance of e-way bill

The details of the e-way bill generated under this rule shall be made available to the-

(a) supplier, if registered, where the information in Part A of FORM GST EWB-01 has been furnished by the recipient or the transporter; or

(b) recipient, if registered, where the information in Part A of FORM GST EWB-01 has been furnished by the supplier or the transporter, on the common portal, and the supplier or the recipient, as the case may be, shall communicate his acceptance or rejection of the consignment covered by the e-way bill.

Where the person to whom the information specified in sub-rule (11) has been made available does not communicate his acceptance or rejection within 72 hours of the details being made available to him on the common portal, or the time of delivery of goods, whichever is earlier, it shall be deemed that he has accepted the said details.

E-way bill generated in one State is valid in another State

The e-way bill generated under this rule or under rule 138 of the Goods and Services Tax Rules of any State or Union territory shall be valid in every State and Union territory.

Situations where E-way Bill is not required to be generated [Rule 138(14)]

Notwithstanding anything contained in this rule, no e-way bill is required to be generated—

(a) where the goods being transported are specified in Annexure (given at the end of this sub-rule);

(b) where the goods are being transported by a non-motorised conveyance;

(c) where the goods are being transported from the customs port, airport, air cargo complex and land customs station to an inland container depot or a container freight station for clearance by Customs;

(d) in respect of movement of goods within such areas as are notified under clause (d) of sub-rule (14) of rule 138 of the State or Union territory Goods and Services Tax Rules in that particular State or Union territory;

(e) where the goods (other than de-oiled cake), being transported, are exempt from GST vide notification No. 2/2017- Central tax (Rate) dated the 28th June, 2017;

(f) where the goods being transported are alcoholic liquor for human consumption, petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas or aviation turbine fuel;

(g) where the supply of goods being transported is treated as no supply under Schedule III of the Act;

(h) where the goods are being transported—

(i) under customs bond from an inland container depot or a container freight station to a customs port, airport, air cargo complex and land customs station, or from one customs station or customs port to another customs station or customs port, or


(ii) under customs supervision or under customs seal;

(i) where the goods being transported are transit cargo from or to Nepal or Bhutan;

(j) where the goods being transported are exempt from tax under notification No. 7/2017-Central Tax (Rate), dated 28th June 2017 [Supply of goods by the Canteen Stores Department (CSD) to the Unit Run Canteens or to the authorized customers and the supply of goods by the Unit Run Canteens to the authorized customers] and notification No. 26/2017-Central Tax (Rate), dated the 21st September, 2017 [Supply of Heavy water and nuclear fuels by the Department of Atomic Energy to the Nuclear Power Corporation of India Ltd. (NPCIL)];

(k) any movement of goods caused by defence formation under Ministry of defence as a consignor or consignee;

(l) where the consignor of goods is the Central Government, Government of any State or a local authority for transport of goods by rail;

(m) where empty cargo containers are being transported; and

(n) where the goods are being transported upto a distance of 20 kilometers from the place of the business of the consignor to a weighbridge for weighment or from the weighbridge back to the place of the business of the said consignor subject to the condition that the movement of goods is accompanied by a delivery challans issued in accordance with rule 55.

(o) where empty cylinders for packing of liquefied petroleum gas are being moved for reasons other than supply [as amended by NN 26/2018 CT w.e.f. 13.06.2018].

Explanation : The facility of generation, cancellation, updation and assignment of e-way bill shall be made available through SMS to the supplier, recipient and the transporter, as the case may be.

ANNEXURE

[(See rule 138 (14)]

Sr. No. Description of Goods

1 Liquefied petroleum gas for supply to household and non domestic exempted category (NDEC) customers

2 Kerosene oil sold under PDS

3 Postal baggage transported by Department of Posts

4 Natural or cultured pearls and precious or semi-precious stones; precious metals and metals clad with precious metal (Chapter 71)

5 Jewellery, goldsmiths’ and silversmiths’ wares and other articles (Chapter 71)

6 Currency

7 Used personal and household effects

8 Coral, unworked (0508) and worked coral (9601)

Rule 138A : Documents and devices to be carried by a person-in-charge of a conveyance

(1) The person in charge of a conveyance shall carry—

(a) the invoice or bill of supply or delivery challan, as the case may be; and

(b) a copy of the e-way bill in physical form or the e-way bill number in electronic form or mapped to a Radio Frequency Identification Device embedded on to the conveyance in such manner as may be notified by the Commissioner:


Provided that nothing contained in clause (b) of this sub-rule shall apply in case of movement of goods by rail or by air or vessel.

Provided further that in case of imported goods, the person in charge of a conveyance shall also carry a copy of the bill of entry filed by the importer of such goods and shall indicate the number and date of the bill of entry in Part A of FORM GST EWB-01. [proviso inserted by NN 39/2018 – CT, w.e.f. 04.09.2018]

(2) A registered person may obtain an Invoice Reference Number from the common portal by uploading, on the said portal, a tax invoice issued by him in FORM GST INV-1 and produce the same for verification by the proper officer in lieu of the tax invoice and such number shall be valid for a period of thirty days from the date of uploading.

(3) Where the registered person uploads the invoice under sub-rule (2), the information in Part A of FORM GST EWB-01 shall be auto-populated by the common portal on the basis of the information furnished in FORM GST INV-1.

(4) The Commissioner may, by notification, require a class of transporters to obtain a unique Radio Frequency Identification Device and get the said device embedded on to the conveyance and map the e-way bill to the Radio Frequency Identification Device prior to the movement of goods.

(5) Notwithstanding anything contained in clause (b) of sub-rule (1), where circumstances so warrant, the Commissioner may, by notification, require the person-in-charge of the conveyance to carry the following documents instead of the e-way bill

(a) tax invoice or bill of supply or bill of entry; or

(b) a delivery challan, where the goods are transported for reasons other than by way of supply.

Rule 138B : Verification of documents and conveyances

(1) The Commissioner or an officer empowered by him in this behalf may authorize the proper officer to intercept any conveyance to verify the e-way bill in physical or electronic form for all inter-State and intra- State movement of goods.

(2) The Commissioner shall get Radio Frequency Identification Device readers installed at places where the verification of movement of goods is required to be carried out and verification of movement of vehicles shall be done through such device readers where the e-way bill has been mapped with the said device.

(3) The physical verification of conveyances shall be carried out by the proper officer as authorised by the Commissioner or an officer empowered by him in this behalf:

Provided that on receipt of specific information on evasion of tax, physical verification of a specific conveyance can also be carried out by any other officer after obtaining necessary approval of the Commissioner or an officer authorised by him in this behalf.

Rule 138C : Inspection and verification of goods

(1) A summary report of every inspection of goods in transit shall be recorded online by the proper officer in Part A of FORM GST EWB-03 within 24 hours of inspection and the final report in Part B of FORM GST EWB-03 shall be recorded within 3 days of such inspection.

Provided that where the circumstances so warrant, the Commissioner, or any other officer authorised by him, may, on sufficient cause being shown, extend the time for recording of the final report in Part B of FORM EWB-03, for a further period not exceeding 3 days.

Explanation.- The period of twenty four hours or, as the case may be, three days shall be counted from the midnight of the date on which the vehicle was intercepted.


[Proviso inserted by NN 28/2018 – CT, w.e.f. 19.06.2018]

(2) Where the physical verification of goods being transported on any conveyance has been done during transit at one place within the State or Union territory or in any other State or Union territory, no further physical verification of the said conveyance shall be carried out again in the State or Union territory, unless a specific information relating to evasion of tax is made available subsequently.”;

Rule 138D : Facility for uploading information regarding detention of vehicle

Where a vehicle has been intercepted and detained for a period exceeding 30 minutes, the transporter may upload the said information in FORM GST EWB-04 on the common portal.

Explanation: For the purposes of E-Way Rules, the expressions ‘transported by railways’, ‘transportation of goods by railways’, ‘transport of goods by rail’ and ‘movement of goods by rail’ does not include cases where leasing of parcel space by Railways takes place. [Explanation to rule 138D, inserted by NN 14/2018 – CT, w.e.f. 01.04.2018]

Note:

Rule 58(1A): For the purposes of E-way bill rules, a transporter who is registered in more than one State or Union Territory having the same Permanent Account Number, he may apply for a unique common enrolment number by submitting the details in FORM GST ENR-02 using any one of his Goods and Services Tax Identification Numbers, and upon validation of the details furnished, a unique common enrolment number shall be generated and communicated to the said transporter.

But, where the said transporter has obtained a unique common enrolment number, he shall not be eligible to use any of the Goods and Services Tax Identification Numbers for the purposes of the said E-way bill rules.

[Rule 58(1A) inserted by NN 28/2018 – CT, w.e.f. 19.06.2018]

Rule 138E : Restriction on furnishing of information in PART A of FORM GST EWB-01

[Rule 138E inserted by NN 74/2018 – CT, but, made applicable w.e.f. 21.06.2019 by NN 22/2019 – CT 21.11.2019 by NN 36/2019-CT, dated 20.08.2019] – Not relevant for May, 2020 Exams

Notwithstanding anything contained in sub-rule (1) of rule 138, no person (including a consignor, consignee, transporter, an e-commerce operator or a courier agency) shall be allowed to furnish the information in PART A of FORM GST EWB-01 in respect of a registered person, whether as a supplier or a recipient, who,—

(a) being a person paying tax under section 10 or availing the benefit of NN 02/2019 – CT (R), dated 07.03.2019, has not furnished the statement in FORM GST CMP-08 for two consecutive quarters; [as amended by NN 31/2019 – CT, dated 28.06.2019] or

(b) being a person other than a person specified in clause (a), has not furnished the returns for a consecutive period of two months:

Provided that the Commissioner may, on receipt of an application from a registered person in FORM GST EWB-05, on sufficient cause being shown and for reasons to be recorded in writing, by order in FORM GST EWB-06, allow furnishing of the said information in PART A of FORM GST EWB 01, subject to such conditions and restrictions as may be specified by him [as amended by NN 33/2019 – CT, dated 18.07.2019]:

Provided further that no order rejecting the request of such person to furnish the information in PART A of FORM GST EWB 01 under the first proviso shall be passed without affording the said person a reasonable opportunity of being heard:

Provided also that the permission granted or rejected by the Commissioner of State tax or Commissioner of Union territory tax shall be deemed to be granted or, as the case may be, rejected by the Commissioner.


Explanation:– For the purposes of this rule, the expression ― Commissioner shall mean the jurisdictional Commissioner in respect of the persons specified in clauses (a) and (b).

Illustration 2:

In case of transportation of goods by railways, whether goods can be delivered even if the e-way bill is not produced at the time of delivery?

Solution: As per proviso to rule 138(2A) of the Central Goods and Services Tax Rules, 2017 (CGST Rules for short), the railways shall not deliver the goods unless the e-way bill is produced at the time of delivery. [Circular No. 47/21/2018 – GST, dated 08.06.2018]

Illustration 3 :

Whether e-way bill is required in the following cases-

(i) Where goods transit through another State while moving from one area in a State to another area in the same State.

(ii) Where goods move from a DTA unit to a SEZ unit or vice versa located in the same State.

Answer :

(i) It may be noted that e-way bill generation is not dependent on whether a supply is inter-State or not, but on whether the movement of goods is inter-State or not. Therefore, if the goods transit through a second State while moving from one place in a State to another place in the same State, an e-way bill is required to be generated.

(ii) Where goods move from a DTA unit to a SEZ unit or vice versa located in the same State, there is no requirement to generate an e-way bill, if the same has been exempted under rule 138(14)(d) of the CGST Rules.

[Circular No. 47/21/2018 – GST, dated 08.06.2018]

E-way bill in case of storing of goods in godown of transporter – [Circular No. 61/35/2018-GST, dated 04.09.2018]

1. Various representations have been received on the matter pertaining to the textile sector and problems being faced by weavers & artisans regarding storage of their goods in the warehouse of the transporter. It has been stated that textile traders use transporters’ godown for storage of their goods due to their weak financial conditions. The transporters providing such warehousing facility will have to get themselves registered under GST and maintain detailed records in cases where the transporter takes delivery of the goods and temporarily stores them in his warehouse for further transportation of the goods till the consignee/recipient taxpayer’s premises. The transport industry is facing difficulties due to the same and a request has been made to treat these godowns as transit godowns.

2. In view of the difficulties being faced by the transporters and the consignee/recipient taxpayer and to ensure uniformity in the procedure across the sectors and the country, the Board in exercise of its power conferred under section 168(1) of the CGST Act, 2017 has clarified the issues in the succeeding paragraphs.

3. As per rule 138 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the CGST Rules) e-way bill is a document which is required for the movement of goods from the supplier’s place of business to the recipient taxpayer’s place of business. Therefore, the goods in movement including when they are stored in the transporter’s godown (even if the godown is located in the recipient taxpayer’s city/town) prior to delivery shall always be accompanied by a valid e-way bill.

4. Further, section 2(85) of the CGST Act defines the “place of business” to include “a place from where the business is ordinarily carried out, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services orboth”. An additional place of business is the


place of business from where taxpayer carries out business related activities within the State, in addition to the principal place of business.

5. Thus, in case the consignee/ recipient taxpayer stores his goods in the godown of the transporter, then the transporter’s godown has to be declared as an additional place of business by the recipient taxpayer. In such cases, mere declaration by the recipient taxpayer to this effect with the concurrence of the transporter in the said declaration will suffice. Where the transporter’s godown has been declared as the additional place of business by the recipient taxpayer, the transportation under the e-way bill shall be deemed to be concluded once the goods have reached the transporter’s godown (recipient taxpayer’ additional place of business). Hence, e-way bill validity in such cases will not be required to be extended.

6. Further, whenever the goods are transported from the transporters’ godown , which has been declared as the additional place of business of the recipient taxpayer, to any other premises of the recipient taxpayer then, the relevant provisions of the e-way bill rules shall apply. Hence, whenever the goods move from the transporter’s godown (i.e, recipient taxpayer’s additional place of business) to the recipient taxpayer’s any other place of business, a valid e-way bill shall be required, as per the extant State-specific e-way bill rules.

7. Further, the obligation of the transporter to maintain accounts and records as specified in section 35 of the CGST Act read with rule 58 of the CGST Rules shall continue as a warehouse-keeper. Furthermore, the recipient taxpayer shall also maintain accounts and records as required under rules 56 and 57 of the CGST Rules. Furthermore, as per rule 56 (7) of the CGST Rules, books of accounts in relation to goods stored at the transporter’s godown (i.e., the recipient taxpayer’s additional place of business) by the recipient taxpayer may be maintained by him at his principal place of business. It may be noted that the facility of declaring additional place of business by the recipient taxpayer is in no way putting any additional compliance requirement on the transporters.

Illustration 4 :

With reference to the provisions relating to the electronic way bill (E-way bill) as prescribed under the GST laws, answer the following questions:

(i) Sindhi Toys Manufacturers, registered in Punjab, sold electronic toys to a retail seller in Gujarat, at a value of Rs. 48,000 (excluding GST leviable @ 18%). Now, it wants to send the consignment of such toys to the retail seller in Gujarat.

You are required to advise Sindhi Toys Manufacturers on the following issues:

(a) Whether e-way bill is mandatorily required to be generated in respect of such movement of goods?

(b) If yes, who is required to generate the e-way bill?

(c) What will be the consequences for non-issuance of e-way bill?

(ii) Power Electricals Ltd., a registered supplier of air-conditioners, is required to send from Mumbai (Maharashtra), a consignment of parts of air-conditioner to be replaced under warranty at various client locations in Gujarat. The value of consignment declared in delivery challan accompanying the goods is Rs. 70,000. Power Electricals Ltd. claims that since movement of goods to Gujarat is caused due to reasons other than supply, e-way bill is not mandatorily required to be generated in this case.

You are required to examine the technical veracity of the claim made by Power Electricals Ltd.

(iii) Beauty Cosmetics Ltd. has multiple wholesale outlets of cosmetic products in Mumbai, Maharashtra. It receives an order for cosmetics worth Rs. 1,20,000 (inclusive of GST leviable @ 18%) from Prasannaa, owner of a retail cosmetic store in Delhi. While checking the stock, it is found that order worth Rs. 55,000 can be fulfilled from the company’s Dadar (Mumbai) store and remaining goods worth Rs. 65,000 can be sent from its Malad


(Mumbai) store. Both the stores are instructed to issue separate invoices for the goods sent to Prasannaa. The goods are transported to Prasanna in Delhi, in a single conveyance owned by Radhey Transporters.

You are required to advise Beauty Cosmetics Ltd. with regard to issuance of e-way bill(s). [RTP, May 2019]

Solution :

(i)(a) Rule 138(1) of the CGST Rules, 2017 provides that e-way Bill is mandatorily required to be generated if the goods are moved, inter alia, in relation to supply and the consignment value exceeds Rs. 50,000. Further, explanation 2 to rule 138(1) stipulates that the consignment value of goods shall be the value, determined in accordance with the provisions of section 15, declared in an invoice, a bill of supply or a delivery challan, as the case may be, issued in respect of the said consignment and also includes CGST, SGST/UTGST, IGST and cess charged, if any, in the document and shall exclude the value of exempt supply of goods where the invoice is issued in respect of both exempt and taxable supply of goods.

Accordingly, in the given case, the consignment value will be as follows:

= Rs. 48,000 × 118%

= Rs. 56,640.

Since the movement of goods is in relation to supply of goods and the consignment value exceeds Rs. 50,000, e-way bill is mandatorily required to be issued in the given case.

(b) An e-way bill contains two parts namely, Part A to be furnished by the registered person who is causing movement of goods of consignment value exceeding Rs. 50,000/- and part B (transport details) is to be furnished by the person who is transporting the goods.

Where the goods are transported by the registered person as a consignor or the recipient of supply as the consignee, whether in his own conveyance or a hired one or a public conveyance, by road, the said person shall generate the e-way bill on the common portal after furnishing information in Part B [Rule 138(2)].

Where the goods are transported by railways or by air or vessel, the e-way bill shall be generated by the registered person, being the supplier or the recipient, who shall, either before or after the commencement of movement, furnish, on the common portal, the information in Part B [Rule 138(2A)].

Where the goods are handed over to a transporter for transportation by road, the registered person shall furnish the information relating to the transporter on the common portal and the e-way bill shall be generated by the transporter on the said portal on the basis of the information furnished by the registered person in Part A [Rule 138(3)].

Where the consignor or the consignee has not generated the e-way bill and the aggregate of the consignment value of goods carried in the conveyance is more than Rs. 50,000/, the transporter, except in case of transportation of goods by railways, air and vessel, shall, in respect of inter-State supply, generate the e-way bill on the basis of invoice or bill of supply or delivery challan, as the case may be, and may also generate a consolidated e-way bill on the common portal prior to the movement of goods [Rule 138(7)].

(c) It is mandatory to generate e-way bill in all cases where the value of consignment of goods being transported is more than Rs. 50,000/- and it is not otherwise exempted in terms of rule 138(14) of CGST Rules, 2017. If e-way bills, wherever required, are not issued in accordance with the provisions contained in rule 138, the same will be considered as contravention of rules. As per section 122(1)(xiv) of CGST Act, 2017, a taxable person who transports any taxable goods without the cover of specified documents (e-way bill is one of the specified documents) shall be liable to a penalty of Rs. 10,000/- or tax sought to be evaded (wherever applicable) whichever is greater. Moreover, as per section 129(1) of CGST Act, 2017, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this


Act or the Rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure.

(ii) The goods to be moved to another State for replacement under warranty is not a ‘supply’. However, rule 138(1) of the CGST Act, 2017, inter alia, stipulates that every registered person who causes movement of goods of consignment value exceeding Rs. 50,000:

(i) in relation to a supply; or

(ii) for reasons other than supply; or

(iii) due to inward supply from an unregistered person,

shall, generate an electronic way bill (E-way Bill) before commencement of such movement.

CBIC vide Q 9. of FAQs on E-way Bill has also clarified that even if the movement of goods is caused due to reasons others than supply [including replacement of goods under warranty], e-way bill is required to be issued.

Thus, in the given case, since the consignment value exceeds Rs. 50,000, e-way bill is required to be mandatorily generated. Therefore, the claim of Power Electricals Ltd. that e-way bill is not mandatorily required to be generated as the movement of goods is caused due to reasons other than supply, is not correct.

(iii) Beauty Cosmetics Ltd. would be required to prepare two separate e-way bills since each invoice value exceeds Rs. 50,000 and each invoice is considered as one consignment for the purpose of generating e-way bills.

The FAQs on E-way Bill issued by CBIC clarify that if multiple invoices are issued by the supplier to one recipient, that is, for movement of goods of more than one invoice of same consignor and consignee, multiple e-way bills have to be generated. In other words, for each invoice, one e-way bill has to be generated, irrespective of the fact whether same or different consignors or consignees are involved. Multiple invoices cannot be clubbed to generate one e-way bill. However, after generating all these e-way bills, one consolidated e-way bill can be prepared for transportation purpose, if goods are going in one vehicle.

481

CHAPTER


19.1 Sec. 73

DETERMINATION OF TAX NOT PAID OR SHORT PAID OR ERRONEOUSLY REFUNDED OR INPUT TAX CREDIT WRONGLY AVAILED OR UTILISED FOR ANY REASON OTHER THAN FRAUD OR ANY WILFUL MIS-STATEMENT OR SUPPRESSION OF FACTS

1. Section 73 deals with determination of tax

not paid; or

short paid; or

tax erroneously refunded; or

input tax credit wrongly availed or utilised.

This section covers determination under circumstances of cases not involving fraud, wilful misstatement or suppression of facts;

2. This section also covers the time limit within which the proper officer shall issue the Notice and order can be issued for the determination/recovery of tax payment defaulted by the taxable person.

3. The time limit for issuance of Notice and order is provided herewith:

Particulars Time limit for issuing show cause notice

Time limit for issuing order

Cases involving other than fraud, wilful misstatement or suppression of facts.

At least 3 months prior to the time limit specified under subsection (10) for issuance of order.

3 years from the due date of filing annual returns/3 years from the date of erroneous refund.

4. Section 73 also applies for recovery of interest payable which is not paid or partly paid or interest erroneously refunded.

5. Section 73 is applicable under the cases other than fraud, or wilful misstatement or suppression of facts with an intention to evade payment of tax.

6. The provision provides for –

(a) Service of notice by proper officer;

(b) Notice shall be served on the person who is chargeable with tax, who has –

Not paid or short paid the tax;

Received the erroneous refund;

Wrongly availed or utilized input tax credit;


(c) Such amounts as mentioned above shall be required to be determined along with the applicable interest as per Section 50 and penalty as specified.

(d) The notice has to be issued at least three months prior to the time limit of three years for issuance of order.

7. Where no notice is required to be issued for demand: In case proper officer has already issued an notice on the person for the period specified under section 73(1), subsequently if such officer finds similar issue for any subsequent period, then in such case instead of issuing a detailed notice for such subsequent period, proper officer may issue a statement for recovering the amount from such person and such statement shall be deemed to be a notice as per Section 73(1) on the condition that the grounds relied upon are the same, for the earlier notice issued for previous period.

8. The proper officer shall communicate the details of any tax, interest and penalty as ascertained by him, to the assessee, before service of Show Cause Notice u/s 73(1) or 74(1). [Rule 142(1A) inserted by NN 49/2019 – CT, w.e.f. 09.10.2019]

9. Voluntary payment of tax and interest before issue of notice/statement: Voluntary payment of tax and interest before issue of notice/statement can be done on the basis of either -

own ascertainment of such tax by assessee himself; or

ascertainment of tax payable by the proper officer;

and the same shall be intimated to the proper officer after receipt of which the officer shall not serve any notice/statement to the extent of such payment. There can be no further proceedings with regard to tax and penalty so paid.

10. Where the person referred to in Rule 142(1A) has made partial payment of the amount communicated to him or desires to file any submissions against the proposed liability, he may make such submission. [Rule 142(2A) inserted by NN 49/2019 – CT, w.e.f. 09.10.2019]

11. After the aforesaid submission, if the proper officer is of the opinion that the justification given in the submission is not acceptable fully/partially and the amount of tax, interest or penalty is still due from the assessee, then, the proper officer shall proceed to issue Show Cause Notice to the assessee for the amount of tax, interest or penalty remaining due from the assessee.

12. Where the assessee makes the payment of tax along with interest within 30 days of issuance of Notice/Statement, then in such case no penalty shall be payable and it shall be deemed that all the proceedings have been concluded.

13. Sec. 73(11): Where any self-assessed tax / any amount collected as tax is not paid within 30 days from the due date of payment of tax, then, inter alia, option to pay such tax before or within 30 days of issuance of SCN to avoid penalty, is not available.

14. After considering the representations of the person, the proper officer shall issue an order consisting the amount of tax, interest and penalty. The amount of penalty of shall be 10% of tax or Rs. 10,000 (CGST), whichever higher.

15. The proper officer shall pass an order within a period of 3 years from the

due date for filing of Annual return for the year to which the short payment or non-payment or input tax credit wrongly availed or utilised relates

date of erroneous refund.

Penalty Implications, in Summary :


If tax, interest and penalty (as indicated below is paid), it is provided that further proceedings should not be continued to that extent:

Pay Tax Plus Interest Amount of Penalty

Before issuance of show cause notice No penalty

Within 30 days after the issuance of show cause notice No penalty

In any other case 10% of the tax or Rs. 10,000, whichever is higher

Whether penalty in accordance with section 73 (11) of the CGST Act should be levied in cases where the return in FORM GSTR-3B has been filed after the due date of filing such return? [Circular No. 76/50/2018-GST, dated 31.12.2018]

1. As per the provisions of section 73(11) of the CGST Act, penalty is payable in case self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.

2. It may be noted that a show cause notice (SCN for short) is required to be issued to a person where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised for any reason under the provisions of section 73(1) of the CGST Act. The provisions of section 73(11) of the CGST Act can be invoked only when the provisions of section 73 are invoked.

3. The provisions of section 73 of the CGST Act are generally not invoked in case of delayed filing of the return in FORM GSTR-3B because tax along with applicable interest has already been paid but after the due date for payment of such tax. It is accordingly clarified that penalty under the provisions of section 73(11) of the CGST Act is not payable in such cases. It is further clarified that since the tax has been paid late in contravention of the provisions of the CGST Act, a general penalty under section 125 of the CGST Act (i.e. upto Rs. 25,000 under CGST) may be imposed after following the due process of law.

Illustration 1 :

Rajul has been issued a show cause notice (SCN) on 31.12.2021 under section 73(1) of the CGST Act, 2017 on account of short payment of tax during the period between 01.07.2017 and 31.12.2017. He has been given an opportunity of personal hearing on 15.01.2022. Advice Rajul as to what should be the written submissions in the reply to the show cause notice issued to him. [RTP - May 2018] Answer :

The written submissions in reply to SCN issued to Rajul are as follows:

i. The show cause notice (SCN) issued for normal period of limitation under section 73(1) of the CGST Act, 2017 is not sustainable.

ii. The SCN under section 73(1) of the CGST Act, 2017 can be issued at least 3 months prior to the time limit specified for issuance of order under section 73(10) of the CGST Act, 2017. The adjudication order under section 73(10) of the CGST Act, 2017 has to be issued within 3 years from the due date for furnishing of annual return for the financial year to which the short-paid tax relates to.

The due date for furnishing annual return for a financial year is on or before the 31st day of December following the end of such financial year [Section 44 of the CGST Act, 2017]. Thus, SCN under section 73(1) of the CGST Act, 2017 can be issued within 2 years and 9 months from the due date for furnishing of annual return for the financial year to which the short-paid tax relates to.

iii. The SCN has been issued for the period between 01.07.2017 to 31.12.2017 which falls in the financial year (FY) 2017-18. Due date for furnishing annual return for the FY 2017-18 is 31.12.2018 and 3 years’ period from due date of filing annual return lapses on 31.12.2021. Thus, SCN under section 73(1) ought to have been issued latest by 30.09.2021.

484 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Since the notice has been issued after 30.09.2021, the entire proceeding is barred by limitation and deemed to be concluded under section 75(10) of the CGST Act, 2017.

Illustration 2 :

Everest Technologies Private Limited has been issued a show cause notice (SCN) on 31.01.2021 under section 73(1) of the CGST Act, 2017 on account of short payment of tax during the period between 01.07.2017 and 31.12.2017. Everest Technologies Private Limited contends that the show cause notice issued to it is time-barred in law.

You are required to examine the technical veracity of the contention of Everest Technologies Private Limited. [MTP - May 2018]

Answer :

The contention of Everest Technologies Private Limited is not valid in law. The SCN under section 73(1) of the CGST Act can be issued at least 3 months prior to the time limit specified for issuance of order under section 73(10) of the CGST Act [Section 73(2) of the CGST Act]. The adjudication order under section 73(10) of the CGST Act has to be issued within 3 years from the due date for furnishing of annual return for the financial year to which the short paid/not paid tax relates to.

The due date for furnishing annual return for a financial year is 31st day of December following the end of such financial year [Section 44 of the CGST Act]. Thus, SCN under section 73(1) of the CGST Act can be issued within 2 years and 9 months from the due date for furnishing of annual return for the financial year to which the short-paid/not paid tax relates to.

The SCN has been issued for the period between 01.07.2017 to 31.12.2017 which falls in the financial year (FY) 2017-18. Due date for furnishing annual return for the FY 2017-18 is 31.12.2018 and 3 year’s period from due date of filing annual return lapses on 31.12.2021. Thus, SCN under section 73(1) ought to have been issued latest by 30.09.2021. Since in the given case, the notice has been issued on 31.01.2021, notice is not time-barred.

Illustration 3 :

Enlist the circumstances for which a show cause notice can be issued by the proper officer under section 73 of the CGST Act, 2017. Specify the time limit for issuance of such show cause notice as also the time period for issuance of order by the proper officer under section 73. [RTP, May 2019]

Solution :

As per section 73 of the CGST Act, 2017, a show cause notice can be issued by the proper officer if it appears to him that:

• tax has not been paid; or

• tax has been short paid; or

• tax has been erroneously refunded; or

• input tax credit has been wrongly availed or utilized,

for any reason other than the reason of fraud or any wilful misstatement or suppression of facts to evade tax.

The notice should be issued at least 3 months prior to the time limit specified for passing the order determining the amount of tax, interest and any penalty payable by defaulter [Sub-section (2) of section 73].

The order referred herein has to be passed within three years from the due date for furnishing the annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund [Sub-section (10) of section 73].


Thus, the time-limit for issuance of show cause notice is 2 years and 9 months from the due date of filing annual return for the financial year to which the demand pertains or from the date of erroneous refund. As per section 44(1) of the CGST Act, 2017, the due date of filing annual return for a financial year is 31st day of December following the end of such financial year.

Illustration 4 :

Checkernot has self-assessed tax liability under IGST Act, 2017, as Rs 80,000 . He fails to pay the tax within 30 days from the due date of payment of such tax.

Determine the interest and penalty payable by him explaining the provisions of law, with the following particulars available from his records:

Date of collection of Tax : 18th December, 2017 Date of payment of Tax : 26th February, 2018

No Show Cause Notice (SCN) has been issued to him so far, while he intends to discharge his liability even before it is issued to him, on the assumption that no penalty is leviable on his as payment is made before issue of SCN.

[CA Final, May 2018 - Old] (Marks 4)

Solution :

Date of collection of Tax : 18th December, 2017

Due date of payment of Tax : 20th January, 2018

Date of payment of Tax : 26th February, 2018

Since, No SCN issued u/s 73 therefore, no penalty is payable. However interest u/s 50 is payable @ 18% p.a.

No. of days from 20th January, 2018 to 26th February, 2018 i.e. 37 days

Interest = 80,000 × 18% × 37 / 365 = Rs 1460.

As per section 73(11) of CGST Act, 2017, where self-assessed tax/any amount collected as tax is not paid within 30 days from due date of payment of tax, then, inter alia, option to pay such tax before issuance of SCN to avoid penalty, is not available.

Consequently, penalty equivalent to

(i) 10% of tax, viz., Rs 8,000 or

(ii) Rs 10,000

whichever is higher,

is payable in terms of section 73(9) of CGST Act, 2017. Therefore, penalty of Rs 10,000 will have to be paid by Checkernot.

19.2 Sec. 74

DETERMINATION OF TAX NOT PAID OR SHORT PAID OR ERRONEOUSLY REFUNDED OR INPUT TAX CREDIT WRONGLY AVAILED OR UTILISED BY REASON OF FRAUD OR ANY WILFUL MISSTATEMENT OR SUPPRESSION OF FACTS

The section covers determination of tax in cases of fraud, or any kind of wilful mis-statement or suppression of facts to evade payment of tax.

1. Whenever the tax is


not paid or

short paid or

credit wrongly availed or utilized or

erroneously refunded

On account of the following to evade tax,

Fraud;

Wilful misstatement;

Suppression of facts;

the proper officer shall issue a notice for such amount along with interest as per Section 50 and penalty which shall be equivalent to amount of tax specified in notice.

2. This section covers the time limit within which the proper officer shall issue the Notice and order for the determination/recovery of tax payment defaulted by the taxable person. As per the table below, the time limit for issuance of Notice and Order is provided herewith:

Particulars Time limit for issuing show cause notice Time limit for issuing order

Cases involving fraud, wilful mis-statement or suppression of facts to evade tax.

At least 6 months prior to the time limit specified under sub-section (10) for issuance of order.

5 years from the due date of filing annual returns/5 years from the date of erroneous refund.

3. Where no notice is required to be issued: Similar to the provisions under 73 explained earlier, this section also provides that a statement of demand may be issued instead of a detailed notice for the period other than the ones covered in the notice issued as per Sec 74(1) on similar issue and shall be deemed to be a notice as per Section 74(1) on the condition that the grounds relied upon are same as the notice for previous period.

4. The proper officer shall not serve any notice on the assessee in case of voluntary payment of tax and interest along with penalty @ 15% of tax on the basis of either

Own ascertainment of such tax by the assessee himself ; or

Ascertainment of tax payable by the proper officer;

Assessee shall intimate the same to the proper officer after receipt of which the officer shall not serve any notice/statement to the extent of such payment. There can be no further proceedings with regard to tax and penalty so paid.

5. In case there exists some shortfall between the amount paid by assessee on his own ascertainment and the actual amount liable to be, the Proper Office shall issue a notice for the tax that remains unpaid.

6. Where the assessee makes the payment of tax and interest along with penalty @ 25 % of tax within 30 days of issuance of Notice/Statement, then in such case it shall be deemed that all the proceedings have been concluded.

7. After considering the representations of the person, the proper officer shall issue an order consisting the amount of tax, interest and penalty. The proper officer shall issue an order after considering the representation made by the person chargeable with tax and the amount determined shall comprise of tax along with interest and penalty as stated above.


8. The proper officer shall pass an order within a period of 5 years from the due date for filing of Annual return for the year to which the short payment or non-payment or input tax credit wrongly availed or utilised relates date of erroneous refund.

9. Where the assessee makes the payment of tax and interest along with penalty @ 50 % of tax within 30 days of communication of Order, then in such case it shall be deemed that all the proceedings have been concluded.

10. The term “suppression” is specifically explained to mean -

non-declaration of facts or information which a taxable person is statutorily required to declare in the return, statement, report or any other document furnished under the Act or the rules made thereunder, or

failure to furnish any information on being asked for, in writing, by the proper officer

Penalty Implications, in Summary :

If tax, interest and penalty (as indicated below is paid), it is Provided that further proceedings should not be continued to that extent.

Payment of Tax, Interest & Penalty Amount of Penalty

Before issuance of show cause notice 15% of the tax amount

Within 30 days after the issuance of show cause notice 25% of the tax amount

Within 30 days from the communication of order 50% of the tax amount

In any other case 100% of the tax amount (equivalent to tax)

Illustration 5 :

What is the time limit for issue of show cause notice as contained under sections 73 and 74 of the CGST Act, 2017? Briefly discuss. [MTP - May 2018]

Answer :

The provisions relating to time limit for issue of show cause notice as contained under sections 73 and 74 of the CGST Act are as under:

(i) In case of section 73 (cases other than fraud/suppression of facts/willful misstatement), the time-limit for issuance of SCN is 2 years and 9 months from the due date of filing Annual Return for the Financial Year to which the demand pertains or from the date of erroneous refund.

(ii) In case of section 74 (cases involving fraud/suppression of facts/willful misstatement), the time-limit for issuance of SCN is 4 years and 6 months from the due date of filing of Annual Return for the Financial Year to which the demand pertains or from the date of erroneous refund.

Illustration 6 :

Discuss briefly the procedure for issue of Adjudication order under Section 74(9) & (11) and the time limit for passing Adjudication order under Section 74(10) of the CGST Act, 2017. (Marks 4)

Solution :

As per section 74(9) the proper officer shall, after considering the representation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order.

488 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Section 74(11) where any person with an order issued under sub-section (9) pays the tax along with interest payable thereon under section 50 and penalty equivalent to fifty percent of such tax within thirty days of communication of the order, all proceeding in respect of the said notice shall be deemed to be concluded.

Time limit for passing Adjudication order under section 74(10) the proper officer shall issue the order under sub- section (9) within a period of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or input tax credit wrongly availed or utilized relates to or within five year from the date of erroneous refund.

19.3 Sec. 75 : General Provisions Relating to Determination of Tax

These provisions are general provisions for determination of tax and are applicable irrespective of whether the notice invokes the extended period or not : 1. If an order of court or Appellate Tribunal stays the service of notice or issuance of order then, the period of

such stay will get excluded from the period of issuance of order i.e. 3 years or 5 years as the case may be.

2. When a notice has been issued considering the case to be for fraud or for wilful representation or for suppression of facts, and whereas the charges of fraud, suppression and misstatement of facts were not sustainable or not established by an order of Appellate Authority or Appellate Tribunal, then in such case the officer shall determine the tax as if the notice is issued for the normal period of 3 years.

3. An order required to be issued in pursuance of the direction of the Tribunal or a Court shall be issued within two years from the date of communication of the said direction.

4. Opportunity of personal hearing has to be granted when requested for in writing by the person chargeable with tax or where any adverse decision is proposed to be taken against the person.

5. Personal hearing can be adjourned when sufficient cause is shown in writing. However, such adjournment can be granted for a maximum of 3 times.

6. The relevant facts and basis of the decision shall be set out in the order, which means a speaking order needs to be placed.

7. The amount of tax along with interest and penalty should not exceed the amount mentioned in the notice and the grounds shall not go beyond what is mentioned in the notice.

8. When the decision of Tribunal/ Court/ Appellate authority modifies the amount of tax, correspondingly interest and penalty shall also be modified to that extent by the proper officer.

9. Interest shall be payable in all cases whether specifically mentioned or not.

10. If the order is not issued within the time limits as prescribed in sub-section (10) of section 73 or (10) of section 74, i.e., 5 years in case of fraud, misstatement or suppression and 3 years in any other case, the adjudication proceedings shall be deemed to be concluded.

11. An issue on which

A first appellate authority or Tribunal or High Court has given its decision which is prejudicial to the interest of the revenue and an appeal to the Appellate Tribunal or High Court or Supreme Court respectively against such decision is pending, then the period spent between the two dates of decision shall be excluded in computing the period of 3 years or 5 years respectively, for issue of order.

12. Any amount of self-assessed tax or interest payable, whether wholly or in part in accordance with a return furnished under section 39 shall be recovered under the provisions of section 79.


13. It is also Provided that when the penalty is imposed under Section 73 & 74 that no penalties shall be imposed under any other provisions of this Act for the same act or omission.

19.4 Sec. 161 : Rectification of Errors Apparent on The Face of Record

While the authority to issue any decision, order, summons, notice, certificate or other document is expected to be free from errors, it is the duty of the authority issuing the same to correct any errors that do not convey the outcome of the process of law resulting in its issuance. This Section provides for an opportunity to make such rectification with some caution and due process being prescribed.

This Section begins with caution in stating that:

– No prejudice will be caused to the validity of proceedings listed in Section 160 from the defects that may be present in the documents concerned;

– But overrides all other provisions of the Act.

This Section provides for rectification of error or mistake apparent by the authority who has issued the document or on being brought to attention by CGST/SGST authority or the affected person.

So there are three ways in which action can be taken under this Section. No person is entitled to take advantage of such errors or mistakes.

The action permitted to be taken is to rectify an error or mistake apparent. Errors or mistakes apparent can cause difficulty in executing the directions contained in the document. This may require seeking the authority’s intervention to rectify.

The power/jurisdiction to rectify is for any error or mistake which is apparent from record.

The error must be self-evident and should not be discoverable by a long process of reasoning.

The error may be (a) factual, (b) legal or (c) clerical. All of them are rectifiable once it is shown that they are apparent on face of the record.

A time limit of 3 months is allowed for the affected person to bring to attention any such error or mistake. This time limit does not apply to a CGST / SGST officer from bringing it to the attention to the issuing authority or for making voluntarily rectification. However, no such rectification is permitted after 6 months from the date of its issuance.

If any such rectification adversely affects any person, it is required that principles of natural justice should be complied with.

Illustration 7: Explain the provisions relating to rectification of errors apparent on the face of record under section 161 of the CGST Act, 2017?

Solution: Section 161 lays down that any authority, who has passed or issued any decision or order or notice or certificate or any other document, may rectify any error which is apparent on the face of record in such decision or order or notice or certificate or any other document, either on its own motion or where such error is brought to its notice by any GST officer or by the affected person within a period of three months from the date of issue of such decision or order or notice or certificate or any other document, as the case may be.


However, no such rectification shall be done after a period of six months from the date of issue of such decision or order or notice or certificate or any other document. Further, the said period of six months shall not apply in such cases where the rectification is purely in the nature of correction of a clerical or arithmetical error, arising from any accidental slip or omission.

Principles of natural justice should be followed by the authority carrying out such rectification, if it adversely affects any person.

19.5 Sec. 76 : Tax Collected But Not Paid to Government (i) This provision deals with payment of any amount collected as tax but not remitted to the Central/State

Government or Union Territory. This section requires him to make the payment forthwith regardless of whether the related supplies are taxable or not.

(ii) This section makes it obligatory on every person who has collected from any other person any amount representing “tax under this Act”, to pay the said amount to the credit of the Central or a State Government regardless of whether the supplies in respect of which the amount was collected are taxable or not.

(iii) Before effecting recovery the Proper Officer has to serve a notice on to any person who has collected any amount representing as tax requiring to show cause as to why -

the said amount should not be paid by him to the Government;

penalty equivalent to such amount specified in the notice should not be imposed on him.

(iv) The person is permitted to make representation against the notice served on to him. The person ought to be given an opportunity of being heard where a request is made by the Notice in writing.

(v) After considering such representation made by the person, the Proper Officer shall determine the amount due from the person and pass an order within one year from the date of issue of notice. Where the service of notice is stayed by order of the Court or Tribunal, the period covered by the stay shall stand excluded for the purpose of computing the time limit.

(vi) The Proper Officer must pass a speaking order.

(vii) Upon such determination, the Person has to pay such amount determined.

(viii) Interest at the rate specified under section 50 (i.e. 18% p.a.) shall be paid on the amount collected as representing tax (either paid voluntarily or on determination by the Proper Officer). Interest shall be calculated from the date of collection of amount till the date of deposit of amount.

(ix) The amount paid by such person to the credit of the Central Government or a State Government shall be adjusted against the tax payable by the person.

If any surplus is left after adjustment against the tax liability, it will be

Credited to consumer welfare fund; or

Refunded to the person who has borne the incidence of such amount.

(x) The person claiming such refund shall follow the conditions and procedure contained in section 54 of CGST Act.

(xi) There appears to be no time limit to commence proceedings under this section.

Illustration 8 :


Subharti Enterprises collected GST on the goods supplied by it from its customers on the belief that said supply is taxable. However, later it discovered that goods supplied by it are exempt from GST.

The accountant of Subharti Enterprises advised it that the amount mistakenly collected by Subharti Enterprises representing as tax was not required to be deposited with Government. Subharti Enterprises has approached you for seeking the advice on the same. You are required to advise it elaborating the relevant provisions.

Answer :

The provisions of section 76 of the CGST Act, 2017 make it mandatory on Subharti Enterprises to pay amount collected from other person representing tax under this Act, to the Government.

Section 76 of the CGST Act, 2017 stipulates that notwithstanding anything to the contrary contained in any order or direction of any Appellate Authority or Appellate Tribunal or Court or in any other provisions of the CGST Act or the rules made thereunder or any other law for the time being in force, every person who has collected from any other person any amount as representing the tax under this Act, and has not paid the said amount to the Government, shall forthwith pay the said amount to the Government, irrespective of whether the supplies in respect of which such amount was collected are taxable or not.

Where any amount is required to be paid to the Government as mentioned above, and which has not been so paid, the proper officer may serve on the person liable to pay such amount a notice requiring him to show cause as to why the said amount as specified in the notice, should not be paid by him to the Government and why a penalty equivalent to the amount specified in the notice should not be imposed on him under the provisions of this Act.

The proper officer shall, after considering the representation, if any, made by the person on whom show cause notice (SCN) is served, determine the amount due from such person and thereupon such person shall pay the amount so determined.

The person who has collected any amount as representing the tax, but not deposited the same with the Government shall in addition to paying the said amount determined by the proper officer shall also be liable to pay interest thereon. Interest is payable at the rate specified under section 50. Interest is payable from the date such amount was collected by him to the date such amount is paid by him to the Government.

The proper officer shall issue an order within 1 year [excluding the period of stay order] from the date of issue of the notice. The proper officer, in his order, shall set out the relevant facts and the basis of his decision.

19.6 Sec. 77 : Tax Wrongfully Collected and Paid To Central Government or State Government

(i) This provision deals with a situation when, if a taxable person wrongly pays CGST/SGST or CGST/UTGST on the transaction treating it as intra-state supply, but which is subsequently held to be inter-state supply. Upon payment of IGST on such transaction, the CGST/SGST or CGST/UTGST will to be refunded in such manner and subject to prescribed conditions.

(ii) The refund of such CGST/SGST or CGST/UTGST would be granted subject to such conditions as may be prescribed in this regard.

(iii) If a taxable person wrongly pays IGST by treating a supply as inter-state supply, which is subsequently held to be intra-state supply, interest is not required to be paid on the CGST/SGST or CGST/UTGST payable.

19.7 Sec. 78 : Initiation of Recovery Proceedings

492 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (a) This provision empowers the proper officer to collect any amount which is payable by a taxable person in

pursuance of an order passed under the Act

(b) This section enables initiation of proceedings for recovery of amount from taxable person.

(c) The amount shall be paid by taxable person within a period of 3 months of the service of order, failing which the proper officer shall initiate the recovery proceedings.

(d) If it is in the interest of revenue, the proper officer after recording the reasons in writing, may initiate the recovery proceedings even before the completion of the said period of 3 months. However it empowers the proper officer in the interest of revenue after recording the reasons to initiate recovery proceedings even before the said completion of 3 months.

19.8 Sec. 79 : Recovery of Tax The section empowers the departmental officers to collect/recover any amount which is payable under GST Act. Section 79 provides for the manner in which the recovery proceedings can be carried out.

(i) When any amount that is payable by any person (hereinafter referred to as defaulter) to Government is not paid, the officer can adopt one or more of the methods set out in section 79 for recovery of amounts payable. The methods are :

(a) Deduction out of any money owing to defaulter:

There should be some money which is being owed by the Government to defaulter;

The amount payable can be deducted out of the said amount due to defaulter;

The deduction can be done by the proper officer himself or he may ask any other specified officer to do so.

(b) By detaining and selling the goods belonging to defaulter:

There should be goods which are under the control of the proper officer or other specified officer;

Such goods should belong to the person who is liable to pay any amount.

The goods may be detained and sold by the proper officer or such other specified officer on request by the proper officer;

Out of the realisation, the amount payable by defaulter shall be recovered.

(c) Recovery from any other person who owes money to defaulter [Garnishee Proceeding]:

This applies when any other person -

– has become due to pay money to the defaulter;

– is likely to become due to pay money to the defaulter;

– holds money for or on account of the defaulter;

– may subsequently hold money for or on account of the defaulter.

In such cases the proper officer may issue notice to such other person to pay to the credit of the Government -

– forthwith

upon the money becoming due or

being held, or


– at or within the time specified in the notice not being before the money becomes due or is held.

The amount directed to be paid in the notice shall be :

– Where the amount due/held by such other person is more than amount due by the defaulter – to the extent of amount due by the defaulter;

– Where the amount due/held by such other person is equal to or less than amount due by defaulter - whole of money due/held.

Such other person to whom such notice is issued is bound to comply with the same.

In cases where such notice is issued to a post office, banking company or an insurer, they are required to comply with the same without insisting on production of any passbook, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like, though that might be the normal practice.

If such person to whom such notice is issued, fails to comply, he shall be treated as defaulter to the extent of the amount mentioned in the notice and all other consequences under the law shall follow;

The notice so issued may be amended or revoked or time may be extended for making any payment;

The payment made by such other person in accordance with the notice issued, shall be deemed to have made the payment on behalf of such defaulter and the amount credited to the government shall be deemed to constitute the discharge of liability of such defaulter to the extent of the payment made. Consequently no civil suit or other proceedings could be filed or initiated by the defaulter on the notice, who has complied with this provision.

Instead of crediting the amount to the government, if such person makes the payment to defaulter, then such other person shall be personally liable to the Government to the extent of the amount due by the defaulter or amount discharged to the defaulter whichever is lower.

However such person shall not be personally liable, if he proves to the officer issuing the notice that

– the money demanded or any part thereof was not due to the person in default or

– at the time of service of the notice he did not hold any money for or on account of the person in default,

– the money was not demanded from him; or

– any part of the money demanded is not likely to become due to such other person or

– any part of the money will not likely be held for or on account of such person.

(d) Collection by detention of any movable or immovable property:

On authorisation by competent authority, proper officer in accordance with the rules framed for this purpose,

– Detain any movable or immovable property belonging to defaulter;

– After which detain such property till the amount payable is paid.

If any part of the amount payable or cost of distress or keeping the property is not paid within 30 days from such distress, the proper officer may sell the property and with the proceeds he may adjust towards,

– amount payable;

– costs including the cost of sale remaining unpaid;

After such adjustment, the remaining surplus shall be returned to the defaulter.


(e) Recovery through District Collector:

Proper officer may prepare a certificate signed by him specifying the amount due from the defaulter.

Such certificate will be sent to the Collector of the District (DC) in which the defaulter

– owns any property; or

– resides; or

– carries on his business.

The DC on receipt of such certificate shall proceed to recover from such defaulter the amount specified in the certificate as if such amount is arrears of land revenue.

(f) Recovery through Magistrate:

This provision has overriding effect over Code of Criminal Procedure;

In this case the proper officer may file an application to the appropriate Magistrate;

The Magistrate to whom application is made shall proceed to recover from the defaulter the amount specified in the application as if it is fine imposed by such Magistrate.

(g) Recovery through execution of a decree, etc. [Rule 146]

Where any amount is payable to the defaulter in the execution of a decree of a Civil Court for the payment of money or for sale in the enforcement of a mortgage or charge, the proper officer shall send a request to the said court and the court shall, subject to the provisions of the Code of Civil Procedure, 1908, execute the attached decree, and credit the net proceeds for settlement of the amount recoverable.

(h) Recovery through surety [Rule 157] Where any person has become surety for the amount due by the defaulter, he may be proceeded against under this chapter as if he was the defaulter.

(i) Recovery from company in liquidation [Rule 160] Where the company is under liquidation as specified in section 88, the Commissioner shall notify the liquidator for the recovery of any amount representing tax, interest, penalty or any other amount due under the Act in prescribed form.

(ii) Under the GST Act, rules or regulations there would be requirement to execute bond or other instruments. If such bond/instrument provides that the amount becoming due shall be recovered in terms of Section 79(1), then the recovery shall be effected as discussed above irrespective of whether other mode of recovery exists or not.

(iii) Further it is also Provided that if either SGST Officer/ UTGST Officer while recovering SGST/UTGST arrears may also recover any amount due from the defaulter the amount due by him under CGST Act as if it is SGST/UTGST and later pass it on to the Central Government.

(iv) Similar provision also exists in SGST/UTGST Act for recovery of any amount due under SGST Act/UTGST Act to be recovered by CGST officers while recovering arrears of CGST as though the amount due was CGST and later pass it on to the concerned State Government/Union Territory.

(v) It is also Provided that in case where the SGST officer/UTGST officer also collects CGST in the course of collection of SGST/UTGST or vice-versa, where the amount recovered is not fully covering both the


liabilities, the amount collected has to be apportioned between Centre and State/Union Territory in the same proportion of the amounts due.

(vi) Explanation – For the purposes of this section, the word person shall include “distinct persons” as referred to in sub-section (4) or, as the case may be, sub-section (5) of section 25. [Explanation inserted by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019]

Illustration 9 :

Briefly discuss the modes of recovery of tax available to the proper officer. [MTP- CA Final, Nov. 2019]

Answer :

The proper officer may recover the dues in following manner:

(a) Deduction of dues from the amount owned by the tax authorities payable to such person.

(b) Recovery by way of detaining and selling any goods belonging to such person;

(c) Recovery from other person, from whom money is due or may become due to such person or who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central or a State Government;

(d) Distrain any movable or immovable property belonging to such person, until the amount payable is paid. If the dues not paid within 30 days, the said property is to be sold and with the proceeds of such sale the amount payable and cost of sale shall be recovered.

(e) Through the Collector of the district in which such person owns any property or resides or carries on his business, as if it was an arrear of land revenue.

(f) By way of an application to the appropriate Magistrate who in turn shall proceed to recover the amount as if it were a fine imposed by him.

(g) By enforcing the bond/instrument executed under this Act or any rules or regulations made thereunder.

(h) CGST arrears can be recovered as an arrear of SGST and vice versa [Section 79]. [Note: Any of the above five points may be mentioned.]

19.9 Sec. 80 : Payment of Tax and Other Amount in Instalments This section permits a taxable person to make payment of an amount due on instalment basis, other than the amount due as per self-assessed return. The term ‘instalments’ in general parlance would mean equated periodical payments (money due) spread over an agreed period of time. This provision happens to be beneficial piece of law to the tax payers to pay the demand in instalments along with interest.

(i) This section empowers the Commissioner to grant permission only to the taxable person to make payment of any amount due on installment basis, on an application in writing.

(ii) The Commissioner would either extend the time or allow payment of any amount due under the Act on installment basis for reasons to be recorded in writing.

(iii) This section applies to amounts due other than the self-assessed liability shown in any return.

(iv) The installment period shall not exceed 24 months.

496 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (v) The taxable person shall also be liable to pay prescribed interest on the amount due from the first day such tax

was due to be payable till the date tax is paid.

(vi) If default occurs in payment of any one installment the taxable person would be required to pay the whole outstanding balance payable on such date of default itself without further notice.

19.10 Sec. 81 : Transfer of Property to be Void in Certain Cases

This provision is for protecting the Government revenue by avoiding transfer of property by a taxable person to another person. This would prevent any attempt to defraud the revenue by alienating the properties.

(i) The said provision would be applicable only when any tax has become due.

(ii) The following acts done by a person, in favour of any another person, after the tax becomes due, would be void

Situations / Cases – Void Situations / Cases – Valid

Creates a charge on; or Parts with the property Belonging to him; or In his possession By way of sale, mortgage, exchange, or any other mode of transfer whatsoever of any of his properties.

Made for adequate consideration and without notice of the pendency of

proceeding without notice of such tax or other sum

payable by the said person, With previous permission of the proper

officer.

(iii) The transfer will be void, when it is or was with an intention of defrauding the Government revenue.

Illustration 10 :

Mr. Defrauder was served with a notice of demand for Rs. 20 lakhs on 10th June 2018. He filed a reply for the said notice on 20th June 2018, stating that he was unable to deposit tax dues as he was financially stressed. On 15th June 2018, Mr. Defrauder transferred all the property worth Rs. 35 lakhs under his name to the name of his wife for a consideration of Rs. 10,000/-. Is this act of Mr. Defrauder valid?

Answer :

As per section 81, the said transfer would be void and the property worth Rs. 35 lakhs would be considered still to be in the hands of Mr. Defrauders.

Illustration 11 :

In the above illustration, if transfer of property was for a consideration of Rs. 42 lakhs to Mr. X who is unaware of the pending proceedings of Mr. Defrauder. The transfer took place on 15th June 2018. Is the act of Mr. Defrauder valid?

Answer :

In this case the transaction would be a valid act, since the transfer was made for adequate consideration and also without notice of the pendency of proceeding.

Illustration 12 :

On Mr. Perfect, notice was issued on 10th June 2018; however the same was received by Mr. Perfect on 20th June, 2018. Meanwhile the property of Mr. Perfect was sold to Mr. Perfectionist for Rs. 35 crore. Is the sale void or valid?

Answer :


The sale is valid since on the date of sale there was no pending proceeding on Mr. Perfect.

19.11 Sec. 82 : Tax To Be First Charge on Property Other than as provided under Insolvency and Bankruptcy Code, 2016, this provision shall have an overriding effect over the other provisions contained in any law for the time being in force.

This provision provides that if any dues are payable by a taxable person or any other person to the government, then it would have first charge on the property of such taxable or other person.

(i) The provisions of this section would apply to a taxable person or any other person who is liable to pay tax, interest or penalty to Government.

(ii) Any liability to be paid to the Government would be given priority in the matter of effecting recovery by placing a first charge on the property of the taxable person or any other person.

(iii) This provision also covers any other person since there are many provisions in the Act, which provide for creating a liability or recovery from a person other than the taxable person like a legal representative, member of partitioned HUF, etc.

19.12 Sec. 83 : Provisional Attachment to Protect Revenue in Certain Cases

This section confers power to provisionally attach the property of the taxable person in certain situations to protect the interest of the Government.

(i) This section applies only during the pendency of any proceedings under :

(a) Section 62 : Assessment of non-filers of returns.

(b) Section 63 : Assessment of unregistered persons.

(c) Section 64 : Summary assessment in certain special cases.

(d) Section 67 : Power of inspection, search and seizure.

(e) Section 73 : Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any wilful misstatement or suppression of facts.

(f) Section 74 : Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful misstatement or suppression of facts.

(ii) The provisional attachment of property of taxable person shall be executed by the Commissioner.

(iii) The only condition is that the Commissioner should be of the opinion that for the purpose of protecting the interest of the Government revenue it is necessary to provisionally attachment the property. The commissioner may also seize bank accounts of such persons if it is in the interest of revenue.

(iv) Such provisional attachment would be valid for one year from the date of the order made by the Commissioner.

19.13 Sec. 84: Continuation and Validation of Certain Recovery Proceedings

498 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal This section deals with continuation of proceedings, where a notice is already served for recovery of government dues upon a taxable person and upon any appeal, revision application there is reduction or enhancement of such Government dues.

(i) The section refers to -

any notice of demand in respect of Government dues (tax, interest and penalty) served on taxable person or any other person; and

any appeal, revision application is filed or other proceedings are initiated in respect of such Government dues.

Further :

(a) such Government dues may be enhanced; or

(b) reduced in such appeal, revision or in other proceedings

(ii) In such cases, the Commissioner shall -

serve another notice on the taxable person, in respect of the enhanced amount.

if notice of demand is already served on taxable person before such appeal, revision or any other proceedings, then recovery of enhanced amount would be continued from the stage at which the initial proceedings stood. There is no need to issue a fresh notice of demand to the extent already covered by earlier notice.

In case the Government dues are reduced in such appeal, revision or in other proceedings – the Commissioner.

– is not required to serve fresh notice of demand upon the taxable person;

– shall intimate such reduction to taxable person and also to appropriate authority with whom recovery proceedings are pending;

Any recovery proceedings are initiated prior to the disposal of such appeal, revision application or other proceeding may be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal.

499

CHAPTER


20.1 Sec. 85 : Liability in Case of Transfer of Business

(i) This section deals with tax liability that may arise in case of transfer of business. It deals with the following situations:

Liability arising before the transfer of business as a whole or in part; and

Liability arising post transfer of business as a whole or in part.

Such liability may arise on account of sale, gift, lease, leave and license, hire or in any other manner.

(ii) Liability arising prior to transfer : The provision applies when a taxable person who is liable to pay tax transfer his business either wholly or in part, which could be by way of:

Sale

Gift

Lease

Leave and license

Hire or

In any other manner

(iii) Tax liability: Both transferror and transferee will be jointly and severally liable for payment of taxes, interest and/penalty due upto the time of transfer of business (wholly or partly). The joint and several liability will remain even if such amounts were determined and due before the transfer of business.

Interestingly even penal liability, which is quasi-criminal in nature, is sought to be fastened on the transferee, although he would not have been responsible for the non-payment of tax liability by the transferror prior to transfer of business.

(iv) Liability arising post transfer: The tax, interest and/or penalty which is determined and which relates to the period, post transfer of business will clearly be the liability of the transferee of business.

It will remain the liability of the transferee whether or not the business is continued in the same name or otherwise.

As a process, in case the transferee is already an existing taxable person, he needs to apply for amendment of his registration certificate within the prescribed time incorporating the changes as to the acquisition of the business (whole or part).

500 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 20.2 Sec. 86 : Liability of Agent and Principal Under the GST law, in cases where –

1. Taxable Goods are supplied by agent on behalf of principal; or

2. Taxable Goods are procured by agent on behalf of principal;

the agent is primarily liable for tax. However, by virtue of this provision, both agent and principal, will be jointly and severally made liable for tax payable on such supplies.

20.3 Sec. 87: Liability in Case of Amalgamation or Merger of Companies

(i) This section deals with tax liability on transactions between the effective date and date of order (Tribunal/Court) in case of amalgamation or merger of companies.

(ii) In cases of amalgamation or merger of two or more companies by virtue of an order passed by Tribunal/Court/ otherwise., the following two crucial dates are relevant, -

(a) Date from which the amalgamation/merger is effective;

(b) Date of the order pursuant to which the amalgamation/merger takes place;

(iii) Normally, by virtue of the said order the transactions of supply of goods and/or services inter-se the companies merged/amalgamated between two dates would get nullified as they would become one entity from the effective date (and not from the date of the order).

(iv) However, for the purposes of GST, by virtue of this provision, such transactions would continue to be treated as one of supply by one entity and receipt by the other, viz., all provisions of this law would equally apply as if the amalgamation or merger had not taken place and both the entities continue as two different taxable persons. Till the date of order of amalgamation/merger, those companies shall be treated as distinct companies and should discharge their respective tax liabilities.

(v) Thus, this provision would eclipse the order of the Court/Tribunal and its legal effect for the limited purposes of GST law.

(vi) It provides that wherever necessary, the registration certificates of the said companies would stand cancelled with effect from the date of the said order.

Illustration 1 :

Discuss the liability to pay in case of an amalgamation/merger under section 87 of the CGST Act, 2017.

[ RTP-CA Final, Nov. 2019 ]

Answer :

Section 87 of the CGST Act, 2017 stipulates that when two or more companies are amalgamated or merged in pursuance of an order of court or of Tribunal or otherwise and the order is to take effect from a date earlier to the date of the order and any two or more of such companies have supplied or received any goods or services or both to or from each other during the period commencing on the date from which the order takes effect till the date of the order, then such transactions of supply and receipt shall be included in the turnover of supply or receipt of the respective companies and they shall be liable to pay tax accordingly.


Notwithstanding anything contained in the said order, for the purposes of the CGST Act, 2017, the said two or more companies shall be treated as distinct companies f or the period up to the date of the said order. The registration certificates of the said companies shall be cancelled with effect from the date of the said order.

20.4 Sec. 88 : Liability in Case of Company in Liquidation (i) This section deals with the tax and other dues of a company in case it is wound up or liquidated.

(ii) Every person appointed as receiver/liquidator needs to give intimation of his appointment to the Commissioner within 30 days of his appointment.

(iii) Within 3 months from the date of such intimation, the Commissioner will notify the liquidator to set apart a sum of money that would be sufficient to discharge, in his opinion, the amount of tax, interest and penalty payable by the company after making necessary enquiry or calling of information.

(iv) When a private company is not able to clear its dues, then every person who was the Director at any time during the period, for which tax is due, would be liable jointly and severally to pay the dues.

(v) However, if any Director proves to the satisfaction of the Commissioner that such non recovery is not due to his gross neglect, misfeasance or breach of duty, the liability would not arise in the hands of such Director.

Illustration 2 :

Explain the provisions relating to liability for GST in case of company in liquidation (section 88 of the CGST Act, 2017). [CA Final, May 2018 - New](5 Marks)

Solution :

(1) Liquidator to intimate Department within 30 days: When any company is being wound up whether under the orders of a court or Tribunal or otherwise, every person appointed as receiver of any assets of a company (hereafter in this section referred to as the ‘Liquidator’), shall,-

Within 30 days after his appointment,

Give intimation of his appointment to the commissioner.

(2) Department to inform tax dues to liquidator within 3 months: The commissioner shall-

After making such inquiry or calling for such information as he may deem fit, notify the liquidator within 3 months from the date on which he receives intimation of the appointment of the liquidator,

The amount which in the opinion of the commissioner would be sufficient to provide for any tax, interest or penalty,

Which is then, or is likely thereafter to become, payable by the company.

(3) Director of ‘private company in liquidation’ liable if non-recovery because of his fault: when any private company is wound up and any tax, interest or penalty determined under this Act on the company for any period, whether before or in the course of or after its liquidation, cannot be recovered, then-

Every person who was a director of such company at any time during the period for which the tax was due shall, jointly and severally, be liable for the payment of such tax, interest or penalty,

Unless he proves to satisfaction of commissioner that such non-recovery cannot be attributed to any gross neglect, misfeasance or breach on his part in relation to affairs of the company.

20.5 Sec. 89 : Liability of Directors of Private Company

502 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (i) This section deals with recovery of tax dues interest or penalty from the Directors of a private company,

where the private company has not discharged its tax, penalty or interest liability towards the supply of goods or services.

(ii) If the tax, interest or penalty were not paid by a private company in relation to any supply of goods or services for any period, then, every Director of such private company during such period will be liable to pay such dues. The liability of the Director will be relaxed only when, he proves that such non-recovery of dues is not because of his gross negligence, misfeasance or breach of duty in relation to affairs of company.

(iii) This will apply even if that entity is no longer a private limited company [viz., if it was a private limited company during the period to which the tax interest or penalty relate to, but is no longer a private limited company (as on the date on which it is to be recovered)]; every director of such company during such period (when the company was a “Private Company”) will be liable to pay such dues as explained above.

(iv) However, an exception has been carved out for the above provision – viz., this is not applicable to personal penalty imposed on such director.

Illustration 3 :

With reference to the provisions of CGST Act, 2017, explain the liability of directors of private company?

[MTP - May 2018]

Answer :

The provisions relating to liability of directors of private company are contained in section 89 of the CGST Act. It provides that notwithstanding anything contained in the Companies Act, 2013, where any tax, interest or penalty due from a private company in respect of any supply of goods or services or both for any period cannot be recovered, then, every person who was a director of the private company during such period shall, jointly and severally, be liable for the payment of such tax, interest or penalty unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.

Where a private company is converted into a public company and the tax, interest or penalty in respect of any supply of goods or services or both for any period during which such company was a private company cannot be recovered before such conversion, then, above provisions shall apply to any person who was a director of such private company in relation to any tax, interest or penalty in respect of such supply of goods or services or both of such private company. However, this exception does not apply to any personal penalty imposed on such director.

20.6 Sec. 90 : Liability of Partners of Firm to Pay Tax

(i) This section deals with the liability of a partner of a firm to pay any tax, interest or penalty, that was otherwise payable by the firm.

(ii) Where a partnership firm is liable to pay any tax, interest or penalty, all the partners of such firm will be jointly and severally liable to pay such amounts.

(iii) If any of the partners retire, then such partner or the firm shall intimate the Commissioner by a notice in writing of such retirement within one month from the date of retirement. In such cases, the retiring partner shall be liable to pay tax, interest and penalty, if any upto the date of his retirement (whether determined or not prior to retirement).


(iv) However, where no such intimation is given by the partner to the Commissioner within 1 month from retirement date, the liability of such retired partner will continue till the date on which the intimation is received by the Commissioner.

(v) The provision will be equally applicable for LLPs.

(vi) Every partner who retires from a partnership firm should file an intimation to the jurisdictional Commissioner giving the details of his retirement – viz., the name of the firm, registration number of the firm and the date of his/her retirement.

(vii) If the firm is operating in more than one States, such intimation should be filed in all such States.

Illustration 4 :

With reference to the provisions of CGST Act, 2017, explain the liability of partners of firm to pay tax?

[MTP - May 2018]

Answer :

Section 90 of the CGST Act explains the liability of partners of firm to pay tax as under:

Partners of the firm jointly and severally liable to pay any tax, interest or penalty of the firm:

Notwithstanding any contract to the contrary and any other law for the time being in force, where any firm is liable to pay any tax, interest or penalty under this Act, the firm and each of the partners of the firm shall, jointly and severally, be liable for such payment.

Retiring partner liable to pay any tax, interest or penalty of the firm due up to the date of his retirement: Where any partner retires from the firm, he or the firm, shall intimate the date of retirement of the said partner to the Commissioner by a notice in that behalf in writing and such partner shall be liable to pay tax, interest or penalty due up to the date of his retirement whether determined or not, on that date.

However, if no such intimation is given within 1 month from the date of retirement, the liability of such partner shall continue until the date on which such intimation is received by the Commissioner.

20.7 Sec. 91 : Liability of Guardians, Trustees, etc.

(i) This section enables collection of tax, interest or penalty from the guardians, trustees or agents of a minor or any other incapacitated person in respect of the business carried on for them.

(ii) The tax, interest, penalty or any other dues which such minor or incompetent person will be liable to, are the amounts which are recoverable from the minor or any such incapacitated person and which are levied, assessed in the hands of guardian, trustee or agent.

(iii) The dues are recoverable from the guardian, trustee or agent in respect of business of the minor or other incapacitated person by treating them as major or capacitated person, who is conducting the business for himself.

(iv) The deeming fiction is required to overcome the general principle of law, which operates in favour of a minor or incapacitated person to plead minority or incapacity in respect of dues or claims, particularly penal liability.

(v) Interestingly the expression ‘incapacitated person’ is not defined in the Act. It should refer only to a person who is a person of unsound mind or one who is terminally ill.

504 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 20.8 Sec. 92 : Liability of Court of Wards, etc.

In respect of any tax, interest or penalty relating to a business of the taxable person whose estate or part thereof is under the control of the following, (the same persons (following) will be liable as if they were themselves conducting the business as taxable person/s):

(i) Court of Wards (the protector of heirs and their estates when the heirs were deemed to be a minor and therefore incapable of acting independently) or

(ii) Administrator general or

(iii) Official trustee or

(iv) Any receiver or manager or

(v) Including any person, whatever be his designation, who in fact actually manages the business.

Illustration 5 :

Mr. Y is appointed as manager of Mr. A, to manage the estate of Mr. A, who owns a garment business. Mr. A is liable to pay Rs. 1,00,00,000/- of CGST, interest and penalty to the Government. The department can recover such dues from Mr. Y who is managing the estates of Mr. A, by invoking this provision.

20.9 Sec. 93 : Special Provisions Regarding Liability to Pay Tax, Interest or Penalty in Certain Cases

1. This section discusses about the person liable to pay taxes, interest and penalty in certain situations viz., death of taxable person, partition of HUF/AOP, termination of guardianship or trust, dissolution of firm.

2. Death of person (individual)

(i) If a person (an individual) who is liable to pay tax dies :

(a) In case of continuation of business: the legal representative or the any other person who carries on the business after his death is liable to pay tax, interest, penalty or any other due which is due from the deceased person; or

(b) In case of discontinuation of business before or after his death: only the legal representative is liable to pay the tax, interest, penalty or any other dues to the government.

(ii) The liability of the legal representative in case of discontinued business is only to the extent of property or estate received from such deceased person.

(iii) The legal representative or any other person as the case may be is liable to pay the tax, interest or penalty whether -

(a) It has been determined before his death but has remained unpaid or

(b) It has been determined after his death.

3. Partition of HUF or AOP : In case of a HUF or AOP property is partitioned between the member or group of members then the liability to pay tax, interest or penalty

is on each member or group of members (jointly and severally) who got a portion in that property.

The member or the group of members is/are liable only upto the time of partition whether such

– Tax, interest and penalty has been determined before partition but has remained unpaid or


– is determined after such partition

4. Dissolution of firm : In case the firm is dissolved -

Every person who was a partner upto the time of dissolution is jointly and severally liable to pay the tax, interest or penalty.

The person who was a partner is liable to pay tax even if it is

– determined before dissolution but not paid or

– determined after dissolution.

The provision applicable for partnership firm would equally apply for LLP as well.

5. Termination of Guardianship or Trusteeship : In case the guardian is carrying on the business on behalf of a ward or the trustee who carries the business under the trust on behalf of beneficiary, then on the termination of guardianship or trusteeship,

The ward or the beneficiary is liable to pay tax, interest or penalty upto the time of such termination.

The ward or the beneficiary is liable to pay tax, interest or penalty

– determined before the termination of guardianship or trusteeship but not paid or

– determined after such termination

Note : The above provisions are applicable to extent there is no contrary provision in Insolvency and Bankruptcy Code, 2016.

20.10 Sec. 94 : Liability in Other Cases

(i) This section discusses the liability of partners of firm or members of AOP or HUF on discontinuation of business.

(ii) In case of discontinuance of business of the firm or AOP or HUF the liability of the firm/AOP/HUF shall be determined (upto the date of discontinuance) as if no such discontinuance had taken place.

(iii) Every partner of such firm or member of such AOP or HUF at the time of discontinuance shall be jointly and severally liable for payment of tax, interest and penalty imposed.

(iv) In case of change in the constitution of the firm or association, the partners and members who existed before reconstitution shall be liable jointly and severally to pay tax, interest and penalty for any period upto the date of reconstitution. This will operate even if the retirement was intimated to the commissioner in terms of Section 90.

(v) Discontinuance includes dissolution of firm or association and partition in case of HUF.

(vi) This provision, the way it applies to a partnership firm will apply to an LLP as well.

Illustration 6 :

In case of death of a person liable to pay tax, interest or penalty, who shall be liable to pay said dues? Discuss as per the provisions of section 93(1) of the CGST Act, 2017. (4 Marks) [MTP, May 2019]

Solution :

(a) Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016, where a person, liable to pay


tax, interest or penalty under CGST Act, dies, then:

business is continued after his death: if a business carried on by the person is continued after his death by his legal representative or any other person, such legal representative or other person, shall be liable to pay tax, interest or penalty due from such person under this Act.

business is discontinued after his death: if the business carried on by the person is discontinued, whether before or after his death, his legal representative shall be liable to pay, out of the estate of the deceased, to the extent to which the estate is capable of meeting the charge, the tax, interest or penalty due from such person under this Act, whether such tax, interest or penalty has been determined before his death but has remained unpaid or is determined after his death.

507

CHAPTER

Advance Ruling 21

21.1 Sec. 95 : Definitions

In this Chapter, unless the context otherwise requires, -

(a) “Advance ruling” means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant;

(b) “Appellate Authority” means the Appellate Authority for Advance Ruling referred to in section 99;

(c) “Applicant” means any person registered or desirous of obtaining registration under this Act;

(d) “Application” means an application made to the Authority under sub-section (1) of section 97;

(e) “Authority” means the Authority for Advance Ruling referred to in section 96.


1. The expression “Appellate Authority” refers to the Appellate Authority for Advance Ruling constituted under section 99 in each State or Union territory.

2. Advance ruling decision can only be in respect of matters or questions specified in section 97(2) or section 100(1) of the Act in relation to the supply of goods and/or services, which is either proposed to be undertaken or is being undertaken by the applicant and cannot travel beyond that. Thus, an application can be made even before the applicant has undertaken an activity of supplying goods and/or services.

3. Applicant under the GST law may be a person who is already registered under the GST Act or who wishes to obtain a registration. Therefore, registration at the time of making the application is not necessary. One can make an application to the authority under section 97(1) stating the question on which he seeks advance ruling. The term ‘Person’ has been defined in section 2(84) of the Act.

4. Under customs laws, advance ruling can be sought by an applicant on an activity of import or export of goods proposed to be undertaken or a service proposed to be Provided by him. However, under the GST laws, advance ruling can also be sought on a present activity of supply of goods and or services being undertaken by the applicant.

5. Prescribed or jurisdictional CGST/SGST officer or an applicant can appeal to the appellate authority. If aggrieved by the advance ruling pronouncement of the authority.

508 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 21.2 Sec. 96 : Authority for Advance Ruling

1. The AAR shall be located in each State/Union Territory (UT). The authority for advance ruling constituted under the provisions of SGST Act or UTGST Act shall be deemed to be the authority for advance ruling in respect of that State or Union Territory under CGST Act, 2017 also.

2. The Government shall appoint officers not below the rank of Joint Commissioner as member of the authority for advance ruling (AAR). [Rule 103 of CGST Rules, 2017].

3. Thus, it can be seen that the AAR is constituted under the respective State/Union Territory Act and not the Central Act. This would mean that the ruling given by the AAR will be applicable only within the jurisdiction of the concerned State/Union Territory.

21.3 Sec. 97 : Application for Advance Ruling Procedure


1. An applicant who seeks an advance ruling should make an application in the prescribed FORM GST ARA-1 together with a fee of Rs. 5000/- and should state the question on which such a ruling is sought.

2. The question on which the advance ruling is sought under this Act, shall be in respect of, -

(a) classification of any goods or services or both;

(b) applicability of a notification issued under the provisions of this Act;

(c) determination of time and value of supply of goods or services or both;

(d) admissibility of input tax credit of tax paid or deemed to have been paid;

(e) determination of the liability to pay tax on any goods or services or both;

(f) whether applicant is required to be registered;

(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.

3. It is to be noted that questions on determination of place of supply cannot be raised with the AAR.

Illustration 1 :

Discuss briefly provisions of CGST Act, 2017 regarding questions for which advance ruling can be sought.

[CA Final, May 2018 - Old] (Marks 4)

Solution:

As per Sec. 97(2) of CGST Act, 2017 the question on which the advance ruling is sought under this Act, shall be in respect of,-

(a) classification of any goods or services or both;

(b) applicability of a notification issued under the provision of this Act;

(c) determination of time and value of supply of goods or service or both;

(d) admissibility of input tax credit of tax paid or deemed to have been paid;

Advance Ruling 509

(e) determination of the liability to pay tax on any goods or services or both;

(f) whether applicant is required to be registered;

(g) whether any particular thing done by the applicant with respect to any goods or services or both amount to or results in a supply of goods or services or both, within the meaning of that term.

21.4 Sec. 98 : Procedure on Receipt of Application

Receipt of Application :

(i) On receipt of an application in FORM GST ARA-1, the AAR shall forward a copy to the concerned officer and, if necessary, direct him to furnish the relevant records.

(ii) The records so called for by the AAR should be returned as soon as possible to the concerned officer.

(iii) The AAR, at its discretion, would examine the application and the records called for, and after hearing the applicant or his authorized representative and concerned officer or his authorised representative pass an order, either admitting or rejecting the application:

(iv) The AAR shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act.

(v) Before rejecting the application, the applicant ought to be given an opportunity of being heard.

(vi) Where the application is finally rejected, the reasons for such rejection shall be stated in the order.

(vii) A copy of every order made shall be sent to the applicant and to the concerned officer.

Pronouncement of Advance Ruling :

Where the application is admitted, the AAR shall proceed as follows:

Examine such further material as may be placed before it by the applicant or obtained by the AAR.

Provide opportunity of being heard to the applicant or his authorized representatives and concerned officer or this authorized representative.

Pronounce its advance ruling on the question specified in the application.

Reference to Appellate Authority :

(i) Where the members of the AAR differ on any question on which the advance ruling is sought, they shall state the point/s of difference and refer it to the Appellate Authority for advance ruling for final decision.

(ii) The AAR shall pronounce its advance ruling in writing within 90 days of the receipt of application.

(iii) The Appellate Authority to whom a reference is made due to difference of opinion is required to pronounce the ruling within 90 days of such reference.

Submission of Advance Ruling Pronounced :

A copy of the advance ruling pronounced by the concerned AAR/Appellate Authority, duly signed by the Members and certified, shall be sent to the applicant and to the concerned officer after pronouncement.

21.5 Sec. 99 : Appellate Authority for Advance Ruling

1. The appellate authority for advance ruling shall be constituted in each state/UT.

510 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 2. The appellate authority constituted in each state under SGST Act, or UTGST Act shall be deemed to be the

appellate authority in respect of that state/UT for CGST Act also.

21.6 Sec. 100 : Appeal to Appellate Authority

(i) An appeal can be filed by the concerned or jurisdictional officer or the applicant, who is aggrieved by the ruling.

(ii) The appeal should be filed within 30 days from the date of receipt of the ruling. This period can further be extended for another 30 days, if there is sufficient cause for not filing the appeal within the first 30 days.

(iii) The appeal shall be in the prescribed FORM GST ARA-2 together with a fee of Rs. 10,000/-

(iv) The appeal shall be verified in the prescribed manner.

21.7 Sec. 101 : Orders of Appellate Authority

(i) The appellate authority must afford a reasonable opportunity of being heard to the parties before passing the order.

(ii) The said authority can either pass such order as it deems fit, or confirm or modify the ruling appealed against.

(iii) The order should be passed within 90 days from the date of filing appeal.

(iv) If there is a difference of opinion between members on the question covered under the appeal, then it would be considered that no advance ruling is issued in the matter.

(v) A copy of the appellate order should be signed by the members and communicated to the concerned officer and applicant, as soon as possible after such pronouncement.

21.8 Sec. 102 : Rectification of Advance Ruling

1. The advance ruling can be rectified by the authorities if there are any mistakes apparent on the record.

2. The AAR or Appellate authority may amend the order to rectify any mistake apparent from the record, if such mistake:

(a) is noticed by it on its own accord, or

(b) is brought to its notice by the concerned or the jurisdictional officer or

(c) is brought to its notice by the applicant.

3. The application for rectification can be made within 6 months, and cannot result in substantial amendment of the order.

4. If the rectification results in increase in tax liability or reducing of input credit then a hearing has to be given to the applicant/appellant.

21.9 Sec. 103 : Applicability of Advance Ruling

(i) The advance ruling pronounced by the Authority under this chapter shall be binding only on the applicant and on the jurisdictional officer in respect of the applicant.

Advance Ruling 511

(ii) The advance ruling shall be binding on the said persons/authorities unless there is a change in law or facts or circumstances, on the basis of which the advance ruling has been pronounced. When any change occurs in such laws, facts or circumstances, the advance ruling shall no longer remain binding on such person.

21.10 Sec. 104 : Advance Ruling to be Void in Certain Circumstances

(i) If the Authorities (AAR and appellate authority) find that the advance ruling order has been obtained by the applicant/appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab initio.

(ii) Consequently, all the provisions of the Act shall apply to the applicant as if such advance ruling had never been made.

(iii) Before passing the order, an opportunity of being heard should be given to the applicant/appellant.

(iv) The period beginning with the date of advance ruling and ending with the date of order under this sub-section shall be excluded in computing the period for issuance of Show cause notice and adjudication order under sub-section (2) and (10) of both Section 73 and 74 respectively.

(v) A copy of the order so made shall be sent to the applicant and the concerned/jurisdictional officer.

21.11 Sec. 105 : Powers of Authority and Appellate Authority

1. The Authority or the Appellate Authority shall, for the purpose of exercising its powers regarding –

(a) discovery and inspection;

(b) enforcing the attendance of any person and examining him on oath;

(c) issuing commissions and compelling production of books of account and other records, have all the powers of a civil court under the Code of Civil Procedure, 1908.

2. The Authority or the Appellate Authority shall be deemed to be a civil court for the purposes of section 195, but not for the purposes of Chapter XXVI of the Code of Criminal Procedure, 1973, and every proceeding before the Authority or the Appellate Authority shall be deemed to be a judicial proceedings within the meaning of sections 193 and 228, and for the purpose of section 196 of the Indian Penal Code.

21.12 Sec. 106 : Procedure of Authority and Appellate Authority

The Authority or the Appellate Authority shall, subject to the provisions of this Chapter, have power to regulate its own procedure.

Illustration 2 :

Ranjan intends to start selling certain goods in Delhi. However, he is not able to determine (i) the classification of the goods proposed to be supplied by him [as the classification of said goods has been contentious] and (ii) the place of supply if he supplies said goods from Delhi to buyers in U.S. Ranjan’s tax advisor has advised him to apply for the advance ruling in respect of these issues. He told Ranjan that the advance ruling would bring him certainty and transparency in respect of the said issues and would avoid litigation later. Ranjan agreed with his view, but has some apprehensions.

512 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal In view of the information given above, you are required to advise Ranjan with respect to following:

(i) The tax advisor asks Ranjan to get registered under GST law before applying for the advance ruling as only a registered person can apply for the same. Whether Ranjan needs to get registered?

(ii) Can Ranjan seek advance ruling to determine

(a) the classification of the goods proposed to be supplied by him and

(b) the place of supply, if he supplies said goods from Delhi to buyers in U.S?

(iii) Ranjan is apprehensive that if at all advance ruling is permitted to be sought, he has to seek it every year. Whether Ranjan’s apprehension is correct?

(iv) The tax advisor is of the view that the order of Authority for Advance Ruling (AAR) is final and is not appealable. Whether the tax advisor’s view is correct?

(v) Sambhav - Ranjan’s friend - is a supplier registered in Delhi. He is engaged in supply of the goods, which Ranjan proposes to supply at the same commercial level that Ranjan proposes to adopt. He intends to apply the classification of the goods as decided in the advance ruling order to be obtained by Ranjan, to the goods supplied by him in Delhi. Whether Sambhav can do so? [RTP - May 2018]

Answer :

(i) Advance ruling under GST can be sought by a registered person or a person desirous of obtaining registration under GST law [Section 95(c) of the CGST Act, 2017]. Therefore, it is not mandatory for a person seeking advance ruling to be registered.

(ii) Section 97(2) of the CGST Act, 2017 stipulates the questions/matters on which advance ruling can be sought. It provides that advance ruling can be sought for, inter alia, determining the classification of any goods or services or both. Therefore, Ranjan can seek the advance ruling for determining the classification of the goods proposed to be supplied by him.

Determination of place of supply is not one of the specified questions/matters on which advance ruling can be sought under section 97(2). Further, section 96 of the CGST Act, 2017 provides that AAR constituted under the provisions of an SGST Act/UTGST Act shall be deemed to be the AAR in respect of that State/Union territory under CGST Act also.

Thus, AAR is constituted under the respective State/Union Territory Act and not the central Act. This implies that ruling given by AAR will be applicable only within the jurisdiction of the concerned State/Union territory.

It is also for this reason that the questions on determination of place of supply cannot be raised with the AAR. Hence, Ranjan cannot seek the advance ruling for determining the place of supply of the goods proposed to be supplied by him.

Note: The above answer is based on the view taken by the CBEC in its e-flier issued on the subject of advance ruling. The e-flier is available on the CBEC’s website. However, it can be also be argued that the question relating to determination of the liability to pay tax on goods and/or services as provided under section 96(2)(e) of the CGST Act, 2017 encompasses within its ambit the question relating to place of supply. This is so because place of supply is one of the factor to determine as to whether the supply is leviable to CGST & SGST or IGST.

(iii) Section 103(2) of the CGST Act, 2017 stipulates that the advance ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed. Therefore, once Ranjan has sought the advance ruling with respect to an eligible matter/question, it will be binding till the time the law, facts and circumstances supporting the original advance ruling remain same.

Advance Ruling 513

(iv) No, the tax advisor’s view is not correct. As per section 100 of the CGST Act, 2017, if the applicant is aggrieved with the finding of the AAR, he can file an appeal with Appellate Authority for Advance Ruling (AAAR). Similarly, if the concerned/jurisdictional officer of CGST/SGST does not agree with the findings of AAR, he can also file an appeal with AAAR.

Such appeal must be filed within 30 days from the receipt of the advance ruling. The Appellate Authority may allow additional 30 days for filing the appeal, if it is satisfied that there was a sufficient cause for delay in presenting the appeal.

(v) Section 103 of the CGST Act provides that an advance ruling pronounced by AAR is binding only on the applicant who had sought it and on the concerned officer or the jurisdictional officer in respect of the applicant. This implies that an advance ruling is not applicable to similarly placed other taxable persons in the State. It is only limited to the person who has applied for an advance ruling.

Thus, Sambhav will not be able to apply the classification of the goods that will be decided in the advance ruling order to be obtained by Ranjan, to the goods supplied by him in Delhi.

514

CHAPTER


22.1 Sec. 107 : Appeals to Appellate Authority

Introduction :

(a) This section pertains to appeals to appellate authority by any person who is aggrieve against decision or order passed by adjudicating authority.

(b) This section also provides for appeal by revenue against decision or order passed by adjudicating authority.

Analysis :

(i) The appeal is to be filed by the assessee within a period of 3 months from the date of communication of decision or order in Form GST APL 01 electronically or otherwise as notified by the Commissioner against a provisional acknowledgement. The grounds of appeal and form of verification must be duly signed and a hard copy of the appeal in triplicate together with a certified copy of the decision is to be filed before the Appellate Authority within 7 days of filing the appeal electronically. Thereafter, a final acknowledgement indicating the appeal number shall be issued in Form GST APL 02 by the said authority In such a situation the appeal shall be deemed to be filed on the date on which the provisional acknowledgement stands issued. In case the hard copy is filed after a period of 7 days the date of filing of appeal shall be the date of issue of final acknowledgement.

(ii) The Commissioner of Central / State or any Union territory with a view to satisfying himself about the legality or propriety of any order or decision direct a subordinate officer to file an application before the Appellate Authority within 6 months from the date of communication of decision or order in Form APL GST 03 electronically or otherwise as notified against issue of an acknowledgement. A hard copy of the appeal in triplicate together with a certified copy of the decision is to be filed before the Appellate Authority within 7 days of filing the appeal electronically and an appeal number shall be generated accordingly.

(iii) The appellate authority in either of the above cases is empowered to condone the delay upto a period of 1 month.

(iv) Rule 109A – Appointment of Appellate Authority:

The appellate authority in both the above cases shall be:

(a) the Commissioner (Appeals) where the decision or order is passed by the Additional or Joint Commissioner;

(b) the Additional Commissioner (Appeals) any officer not below the rank of Joint Commissioner (Appeals) where the decision or order is passed by the Deputy or Assistant Commissioner or Superintendent. [as amended by NN 60/2018 – CT, w.e.f. 30.10.2018]

[Rule 109A inserted by NN 55/2017 – CT, dated 15.11.2017]


(v) Appeal to be filed in prescribed form duly verified in prescribed manner along with :

Amount of tax, interest, fine, fee and penalty, as is admitted, in full; and

pre-deposit of sum equal to 10% of remaining amount of tax in dispute arising from the said order, subject to a maximum of Rs. 25 crores (under CGST). [as amended by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019].

(vi) On payment of above amount, the recovery proceedings for balance amount are stayed.

(vii) Maximum 3 adjournments shall be granted to a party on showing reasonable cause to be recorded in writing.

(viii) Appellate authority may allow any additional grounds not specified in the grounds of appeal on being satisfied that the omission was not wilful or unreasonable.

(ix) Appellate authority to pass the order confirming, modifying or annulling the decision or order appellate against but shall not remand the case back to the adjudicating authority. [But in customs, appellate authority can remand the case back].

(x) Opportunity of being heard to be granted in case of order for enhancing fees or penalty or fine in lieu of confiscation of goods or reducing amount of refund/input tax credit after issuing show cause notice.

(xi) The appellate authority has power to issue show cause notice in case it is of the opinion that any tax has not been paid or short paid or erroneously refunded or input tax credit is wrongly availed or utilised.

(xii) Appellate authority to hear and decide the appeal, wherever possible, within a period of 1 year from the date of filing.

(xiii) Appellate authority to communicate the copy of order to the appellant, the respondent, the adjudicating authority, jurisdictional Commissioner of CGST, SGST and UTGST.

(xiv) The Appellate Authority shall, along with its order under sub-section (11) of section 107 of the Act, issue a summary of the order in FORM GST APL-04 clearly indicating the final amount of demand confirmed.

Illustration 1 :

Pursuant to audit conducted by the tax authorities under section 65 of the CGST Act, 2017, a show cause notice was issued to Home Furnishers, Surat, a registered supplier, alleging that it had wrongly availed the input tax credit without actual receipt of goods for the month of July, 20XX. In the absence of a satisfactory reply from Home Furnishers, Joint Commissioner of Central Tax passed an adjudication order dated 20.08.20XX (received by Home Furnishers on 22.08.20XX) confirming a tax demand of Rs. 50,00,000 and imposing a penalty of equal amount under section 122 of the CGST Act, 2017.

(1) Home Furnishers does not agree with the order passed by the Joint Commissioner. It decides to file an appeal with the Appellate Authority against the said adjudication order. It has approached you for seeking advice on the following issues in this regard: Can Home Furnishers file an appeal to Appellate Authority against the adjudication order passed by the Joint Commissioner of Central Tax? If yes, till what date can the appeal be filed?

(2) Does Home Furnishers need to approach both the Central and State Appellate Authorities for exercising its right of appeal?

(3) Home Furnishers is of the view that there is no requirement of paying pre-deposit of any kind before filing an appeal with the Appellate Authority. Give your opinion on the issue. [MTP - May 2018]

Answer :

(1) An appeal against a decision/order passed by any adjudicating authority under the CGST Act or SGST Act/ UTGST Act is appealable before the Appellate Authority [Section 107(1) of the CGST Act]. Thus, Home


Furnishers can file an appeal to Appellate Authority against the adjudication order passed by the Joint Commissioner of Central Tax.

Further, such appeal can be filed within 3 months from the date of communication of such decision/order [Section 107(1) of the CGST Act]. Thus, Home Furnishers can file the appeal to Appellate Authority on or before 22.11.20XX. Further, the Appellate Authority can also condone the delay in filing of appeal by 1 month if it is satisfied that there was sufficient cause for such delay [Section 107(4)].

(2) GST law makes provisions for cross empowerment between CGST and SGST/UTGST officers so as to ensure that if a proper officer of one Act (say CGST) passes an order with respect to a transaction, he will also act as the proper officer of SGST for the same transaction and issue the order with respect to the CGST as well as the SGST/UTGST component of the same transaction.

The law further provides that where a proper officer under one Act (say CGST) has passed an order, any appeal/ review/ revision/rectification against the said order will lie only with the proper officers of that Act only (CGST Act). Similarly, if any order is passed by the proper officer of SGST, any appeal/review/ revision/rectification will lie with the proper officer of SGST only. Thus, Home Furnishers is required to file an appeal only with the Central Tax Appellate Authority [Section 6 of CGST Act].

(3) Home Furnishers’ view is not correct in law. Section 107(6) of the CGST Act provides that no appeal shall be filed before the Appellate Authority, unless the appellant has paid—

(a) full amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and

(b) a sum equal to 10% of the remaining amount of tax in dispute arising from the impugned order, subject to a maximum of Rs.25 Crores.

Since in the given case, Home Furnishers disagrees with the entire tax demanded, it has to make a pre-deposit of 10% of the amount of tax in dispute arising from the impugned order, i.e., 10% of Rs. 50,00,000

which is Rs. 5,00,000.

Illustration 2 :

XY Company received an adjudication order passed by the Assistant Commissioner of Central Tax on 01-11-2017 under section 73 of the CGST Act, 2017 wherein it was decided as follows:

Particulars

CGST and SGST due (Total) - Rs. 6,00,000

Interest @ 18% p.a. for number of delayed days

Penalty – Rs. 60,000

The assessee filed an appeal before the Appellate Authority on 26-11-2017.

Case I :

How much the company has to pay as pre-deposit of duty under section 107 (6) of the CGST Act, 2017?

Case II :


Whether your answer would be different if the assessee appeals only against part of the demanded amount say Rs. 4,00,000 and admits the balance liability of tax amounting to Rs. 2,00,000 arising from the said order. [CA Final, May 2018 - New] (5 Marks)

Solution :

Since order is passed by assistant commissioner, appeal would lie to appellate authority. Since it is a case of forst appeal, per-deposit = 100% of admitted dues (with interest and penalty) + 10% of disputed tax, subject to a maximum of Rs. 25 Crores.

Case I : Pre-deposit = 10% of disputed tax = 10% of 6,00,000 = 60,000.

Case II : Pre-deposit = Admitted Dues (2,00,000 + 18% interest for period of delay + Proportionate penalty of 20,000) + 10% of disputed tax of Rs. 4,00,000 viz. 40,000.

22.2 Sec. 108 : Powers of Revisional Authority

(i) The Revisional Authority may, on his own motion, or upon information received by him or on request from the Commissioner, call for and examine the record of any proceedings, and if he considers that any decision or order passed by any officer subordinate to him is erroneous in so far as it is prejudicial to the interest of revenue and is illegal or improper or has not taken into account certain material facts, or in consequence of an observation by the Comptroller and Auditor General of India, the Revisional Authority may stay the operation of any decision or order if he considers that such decision or order passed by any officer subordinate to him is erroneous in so far as it is prejudicial to the interest of the revenue.

(ii) After giving the concerned person an opportunity of being heard and after making further necessary inquiry, the Revisional Authority may pass such order within 3 years of passing of the said order sought to be revised including enhancing or modifying or annulling the said decision or order.

(iii) The Revisional Authority shall not exercise such revisionary powers if :

(a) appeal is filed against the order to -

appellate authority u/s 107

Appellate Tribunal u/s 112

High Court u/s 117

Supreme Court u/s 118

(b) period of 6 months as specified in section 107(2) has not expired or

(c) more than 3 years have expired after passing the decision or order

(d) the order has already been taken for revision at any earlier stage

(e) revisionary order has already been passed once.

(iv) However, the Revisional Authority may pass an order on any point which has not been raised & decided in an appeal, referred to herein above, within 1 year from the date of order passed in such appeal or within 3 years from the date of such order sought to be revised, whichever is later.

Rule 109B : Notice to person and order of revisional authority in case of revision

518 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (1) Where the Revisional Authority decides to pass an order in revision under section 108 which is likely to affect

the person adversely, the Revisional Authority shall serve on him a notice in FORM GST RVN-01 and shall give him a reasonable opportunity of being heard.

(2) The Revisional Authority shall, along with its order under sub-section (1) of section 108, issue a summary of the order in FORM GST APL-04 clearly indicating the final amount of demand confirmed.

[Rule 109B inserted by NN 74/2018 – CT, w.e.f. 31.12.2018]

Illustration 3 :

With reference to section 108 of the CGST Act, 2017, elaborate whether a CGST/SGST authority can revise an order passed by his subordinates.

Answer :

Section 2(99) of the CGST Act, 2017 defines “revisional Authority” as an authority appointed or authorised under the CGST Act for revision of decision or orders referred to in section 108 of the CGST Act, 2017.

Section 108 of the CGST Act, 2017 authorizes such “revisional authority” to call for and examine any order passed by his subordinates and in case he considers the order of the lower authority to be erroneous in so far as it is prejudicial to revenue and is illegal or improper or has not taken into account certain material facts, whether available at the time of issuance of the said order or not or in consequence of an observation by the Comptroller and Auditor General of India, he may, if necessary, can revise the order after giving opportunity of being heard to the noticee. The “revisional authority” can also stay the operation of any order passed by his subordinates pending such revision.

The “revisional authority” shall not revise any order if-

(a) the order has been subject to an appeal under section 107 or under section 112 or under section 117 or under section 118; or

(b) the period specified under section 107(2) has not yet expired or more than three years have expired after the passing of the decision or order sought to be revised.

(c) the order has already been taken up for revision under this section at any earlier stage.

(d) the order is a revisional order.

22.3 Appellate Tribunal under GST Law [Sec. 109 – Sec. 111]

The tribunal is the second level of appeal, where appeal can be filed against the order-in-appeal passed by the appellate authority or order-in-revision passed by revisionary authority, by any person aggrieved by such an order-in-appeal or order-in-revision.

Constitution and Structure of Appellate Tribunal and appointment of members of Appellate Tribunal [Section 109 & Section 110] :

1. Upon recommendation of Council, Central Government to constitute two tier Goods & Service Tax Appellate Tribunal. National Bench/Regional Benches and State Bench/Area Benches.

2. The National Bench or Regional Benches to hear the appeals where one of the issues involved relates to the place of supply.


3. The State Bench or Area Benches to hear the appeals involving matters other than matters covering place of supply.

4. An appeal against the order passed by the National Bench will lie directly to the Supreme Court and an appeal against the order passed by the State Bench will lie to the jurisdictional High Court on substantial question of law.

5. The appointments to the Tribunal shall be in the manner prescribed u/s 110 of the CGST Act, 2017. On ceasing to hold the office of the Tribunal, the appointees to the appellate tribunal shall not be entitled to appear, act or plead before the appellate tribunal.

6. In the absence of any of a member of the tribunal in any Bench due to vacancy or otherwise, any appeal may, with the approval of the President or as the case may be, the State President, be heard by a Bench of Two members.

7. However, any matter (other than matter involving question of law) involving tax, input tax credit, fine, fee or penalty not exceeding Rs. 5 Lacs may, with the approval of the President, be heard by a single member bench.

22.4 Sec. 111 : Procedure Before Appellate Tribunal

Introduction :

This section deals with the procedure to be followed by Appellate Tribunal while disposing of any proceedings before it.

Analysis :

(i) The Appellate Tribunal is not bound by the procedure laid down under the Code of Civil Procedure except in respect of certain matters such as summoning and enforcing attendance of person, receiving evidence on affidavits, requiring production of documents etc.

(ii) The Appellate Tribunal shall, for the purposes of discharging its functions under this Act, have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908.

(iii) All the proceedings before the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of Section 193, 228 & 196 of IPC.

22.5 Sec. 112 : Appeals to Appellate Tribunal

Introduction :

(a) This section pertains to appeals to Appellate Tribunal by any person who is aggrieved against decision or order passed by appellate authority or revisional authority.

(b) This section also provides for appeal by revenue against decision or order passed by appellate authority or revisional authority.

Analysis :

(a) The Appellate Tribunal has discretion to refuse to admit such appeal in case the tax amount or input tax credit or the difference in tax or input tax credit involved or amount of fine, fees or penalty ordered against does not exceed Rs. 50,000/-.

520 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (b) The Commissioner may issue directions to any subordinate officer to file appeal to Appellate Tribunal against

the order passed by the Appellate Authority or Revisional Authority.

(c) Every appeal by assessee to Appellate Tribunal to be filed within 3 months from the date of communication of order or decision appealed against.

(d) The appeal to the Appellate Tribunal by Revenue can be filed within 6 months from the date of order or decision appealed against.

(e) Memorandum of Cross objection to be filed within 45 days from the receipt of notice of filing of such appeal.

(f) Appellate Tribunal is empowered to condone the delay in filing appeal by assessee for a further period of 3 months or memorandum of cross objection for a further period of 45 days.

(g) No powers to Appellate Tribunal to condone the delay in filing appeal by revenue.

(h) Appeal to be filed in prescribed form duly verified in prescribed manner along with prescribed fees and

– Amount of tax, interest, fine, fee & penalty, as is admitted, in full; and

– pre-deposit of sum equal to 20% of remaining amount of tax in dispute in addition to amount deposited while filling appeal before Appellate Authority, subject to a maximum of Rs. 50 crores (under CGST). [ as amended by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019]

(i) On payment of above amount, the recovery proceedings for balance amount are stayed till the disposal of appeal.

(j) No pre-deposit shall be payable in case of appeal filed by department.

(k) Every miscellaneous application shall be filed along with prescribed fees.

Relevant Rules :

1. An appeal to the Appellate Tribunal is to be filed electronically, in FORM GST APL-05 and a provisional acknowledgement shall be issued immediately.

2. A memorandum of cross-objections to the Appellate Tribunal shall be filed in quintuplicate to the Registrar in FORM GST APL-06.

3. The appeal and the memorandum of cross objections shall be signed and verified.

4. A hard copy of the appeal in FORM GST APL-05 shall be submitted to the Registrar in quintuplicate and with a certified copy of the decision or order appealed against within seven days of filing of the appeal and a final acknowledgement, indicating the appeal number shall be issued thereafter in FORM GST APL-02:

5. If the hard copy of the appeal and documents are submitted within seven days from the date of filing the FORM GST APL-05, the date of filing of the appeal shall be the date of issue of provisional acknowledgement and where the hard copy of the appeal and documents are submitted after seven days, the date of filing of the appeal shall be the date of submission of documents. An appeal shall be deemed to be filed only on generation of the final acknowledgement number.

6. The fees for filing and restoration of appeal shall be one thousand rupees for every one lakh rupees of tax or input tax credit involved or the difference in tax or input tax credit involved or the amount of fine, fee or penalty determined in the order appealed against, subject to maximum of twenty-five thousand rupees.

7. There shall be no fee for application made before the Appellate Tribunal for rectification of errors.

Application to the Appellate Tribunal :


(a) A cross appeal or appeal by Revenue to the Appellate Tribunal shall be made electronically, in FORM GST APL-07.

(b) A hard copy of the application in FORM GST APL-07 shall be submitted to the Registrar in quintuplicate and shall be accompanied by a certified copy of the decision or order appealed against within seven days of filing the application under sub-rule (1) and an appeal number shall be generated.

Illustration 4 :

Specify the amount of mandatory pre-deposit which should be made along with every appeal before the Appellate Authority and the Appellate Tribunal. Does making the pre-deposit have any impact on recovery proceedings? Explain. [MTP - May 2018]

Answer :

Section 107(6) of the CGST Act provides that no appeal shall be filed before the Appellate Authority, unless the appellant has paid—

(i) full amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and

(ii) a sum equal to 10% of the remaining amount of tax in dispute arising from the impugned order, subject to a maximum of Rs.25 Crores (under CGST).

Section 112(8) of the CGST Act lays down that no appeal can be filed before the Tribunal, unless the appellant deposits—

(i) full amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and

(ii) 20% of the remaining amount of tax in dispute, in addition to the amount deposited before the Appellate Authority, arising from the said order, in relation to which appeal has been filed, subject to a maximum of Rs.50 Crores (under CGST).

Where the appellant has made the pre-deposit, the recovery proceedings for the balance amount shall be deemed to be stayed till the disposal of the appeal.

PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE APPELLATE AUTHORITY OR THE APPELLATE TRIBUNAL

1. The appellant shall not be allowed to produce before the Appellate Authority or the Appellate Tribunal any evidence, whether oral or documentary, other than the evidence produced by him during the course of the proceedings before the adjudicating authority or, as the case may be, the Appellate Authority except in the following circumstances, namely –

(a) where the adjudicating authority or, as the case may be, the Appellate Authority has refused to admit evidence which ought to have been admitted; or

(b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the adjudicating authority or, as the case may be, the Appellate Authority; or

(c) where the appellant was prevented by sufficient cause from producing before the adjudicating authority or, as the case may be, the Appellate Authority any evidence which is relevant to any ground of appeal; or

(d) where the adjudicating authority or, as the case may be, the Appellate Authority has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.

2. No evidence shall be admitted under sub-rule (1) unless the Appellate Authority or the Appellate Tribunal records in writing the reasons for its admission.

522 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 3. The Appellate Authority or the Appellate Tribunal shall not take any evidence produced under sub-rule (1)

unless the adjudicating authority or an officer authorised in this behalf by the said authority has been allowed a reasonable opportunity -

(a) to examine the evidence or document or to cross-examine any witness produced by the appellant; or

(b) to produce any evidence or any witness in rebuttal of the evidence produced by the appellant under sub-rule (1).

4. Nothing contained in this rule shall affect the power of the Appellate Authority or the Appellate Tribunal to direct the production of any document, or the examination of any witness, to enable it to dispose of the appeal.

22.6 Sec. 113 : Orders of Appellate Tribunal

(i) Appellate Tribunal to pass the order confirming, modifying or annulling the decision or order appealed against.

(ii) The Appellate Tribunal also has power to remand the case back to the appellate authority or the Revisional authority or the original adjudicating authority.

(iii) Maximum 3 adjournments shall be granted to a party on showing reasonable cause to be recorded in writing.

(iv) The Appellate Tribunal is empowered to amend its order to rectify any mistake apparent from record, However tribunal may rectify it’s order if the mistake is brought to it’s notice by commissioner or other party to appeal within period of 3 months of date of such order Opportunity of being heard to be granted in case such rectification results into enhancing an assessment or reducing a refund or input tax credit or otherwise increasing the liability.

(v) The Appellate Tribunal to hear and decide the appeal, as far as possible, within a period of 1 year from the date of filing.

(vi) The Appellate Tribunal to communicate the copy of order to appellate authority / Revisional authority / original adjudicating authority, the appellant, the jurisdictional Commissioner, Commissioner of State Tax or Union Territory Tax.

(vii) The jurisdictional officer shall issue a statement in FORM GST APL-04 clearly indicating the final amount of demand confirmed by the Appellate Tribunal.

Comparative Review :

(a) As per existing provisions of Section 35C of the Central Excise Act, 1944, the time limit for rectification of mistake apparent from records is 6 months of date of order.

(b) As per Section 35C, the preferable time limit for deciding the appeal by CESTAT is 3 years from date of filing.

22.7 Sec. 115 : Interest on Refund of Amount Paid for Admission of Appeal

Where an amount paid by the appellant under sub-section (6) of section 107 or sub-section (8) of section 112 is required to be refunded consequent to any order of the Appellate Authority or of the Appellate Tribunal, interest at the rate specified under section 56 shall be payable in respect of such refund from the date of payment of the amount till the date of refund of such amount.



(i) Interest at the rates specified in Section 56 shall be payable on refund of pre-deposit.

(ii) Such interest to be calculated from the date of payment of such pre-deposit till the date of refund.

22.8 Sec. 116 : Appearance by Authorised Representative

Introduction :

This section provides for appearance by authorised representative in proceedings or appeals except in circumstances where personal appearance is required for examination or oath or affirmation.

Analysis :

(i) “Authorised representative” means -

Relative or regular employee

Practising Advocate

Practising CA, CMA or CS

A retired government officer who had worked for not less than 2 years in a post not lower in rank than Group-B gazetted officer

Goods and Services Tax Practitioner

(ii) Any person, who has retired or resigned after serving more than 2 years [in case of customs, it is 3 years] in the indirect tax departments of Government of India or any State Government as a gazetted officer, shall not be entitled to appear as authorised representative for a period of 1 year [in case of customs, it is 2 years] from the date of retirement or resignation.

(iii) Any person,

who has been dismissed or removed from government service

who is convicted of an offence under CGST Act, SGST Act, IGST Act, UTGST Act or under existing laws

who is found guilty of misconduct by the prescribed authority,

shall not be qualified as authorised representative.

(iv) Any person, who has become insolvent, shall not be qualified as authorized representative during the period of insolvency.

(v) Any disqualification under SGST Act or UTGST Act shall be construed as disqualification under CGST Act.

22.9 Sec. 117 : Appeal to High Court

Introduction :

This section provides for appeal to High Court by any person aggrieved by an order passed by State Bench or Area Benches.

524 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Analysis :

(i) High Court may admit an appeal if it is satisfied that the case involves a substantial question of law.

(ii) No appeal shall lie to High Court if such order is passed by National Bench or Regional Benches.

(iii) Appeal to be filed in the form of appeal memorandum, precisely stating the substantial question of law involved, within 180 days from the date of receipt of order appealed against accompanied by prescribed fee.

(iv) High Court is empowered to condone the delay in filing appeal.

(v) On being satisfied, High Court shall formulate a substantial question of law.

(vi) Appeal to be heard only on the question so formulated and the respondent shall be allowed to argue that the case does not involve such question.

(vii) The High Court may hear the appeal on any other substantial question of law not formulated by it after satisfying, for reasons to be recorded, of involvement of such question in the case.

(viii) The High Court may determine any issue which has not been determined or has been wrongly determined by the Appellate Tribunal.

(ix) Appeal to be heard by a Bench of not less than 2 Judges of High Court and shall be decided in accordance with the majority of opinion of such Judges.

(x) Difference of opinion on any point shall be referred to one or more of the other Judges of High Court and such point shall be decided according to the opinion of majority of Judges who have heard the case including those who first heard it.

(xi) The effect of judgment of High Court shall be given on the basis of a certified copy of the judgment.

(xii) The provisions of Code of Civil Procedure relating to appeals to High Court shall apply to appeals under this section.

Illustration 5 :

Mr. A had filed an appeal before the Appellate Tribunal against an order of the Appellate Authority where the issue involved related to place of supply. The order of Appellate Tribunal is also in favour of the Department. Mr. A now wants to file an appeal against the decision of the Appellate Authority as he feels the stand taken by him is correct.

You are required to advise him suitably with regard to filing of an appeal before the appellate forum higher than the Appellate Tribunal. [RTP - May 2018]

Answer :

As per section 117(1) of the CGST Act, 2017, an appeal against orders passed by the State Bench or Area Benches of the Tribunal lies to the High Court, if the High Court is satisfied that such an appeal involves a substantial question of law.

However, appeal against orders passed by the National Bench or Regional Benches of the Tribunal lies to the Supreme Court and not High Court. As per section 109(5) of the Act, only the National Bench or Regional Benches of the Tribunal can decide appeals where one of the issues involved relates to the place of supply.

Since the issue involved in Mr. A’s case relates to place of supply, the appeal in his case would have been decided by the National Bench or Regional Bench of the Tribunal.


Thus, Mr. A will have to file an appeal with the Supreme Court and not with the High Court.

22.10 Sec. 118 : Appeal to Supreme Court

An appeal can lie with the Supreme Court in case of :

(i) Any judgement or order passed by National Bench, Regional Benches of Appellate Tribunal or High Court.

(ii) When an appeal is reversed, or varied, the effect shall be given to the order of the Supreme Court on the question of law so formulated and delivered.

(iii) The said judgement shall clearly indicate the grounds on which the decision is founded.

(iv) Apart from this, the Supreme Court is empowered to frame any substantial question of law not formulated by any lower authority if it is satisfied that the case before it involves such question of law.

22.11 Sec. 119 : Sums Due to be Paid Notwithstanding Appeal, etc.

The sums due to the Government as a result of an order passed by the Appellate Tribunal or High Court shall be paid notwithstanding that an appeal has been preferred to High Court or Supreme Court, as the case may be.

22.12 Sec. 120 : Appeal Not to be Filed in Certain Cases

1. Board’s power to issue instructions regulating filing of appeal/revision by Department: The Board may, on the recommendations of the Council, from time to time, issue orders or instructions or directions fixing such monetary limits, as it may deem fit, for the purposes of regulating the filing of appeal or application by the officer of the central tax under the provisions of this Chapter.

2. Non filing of appeal, etc. as per aforesaid instructions, No bar on department to file appeal in future: Where, in pursuance of the orders or instructions or directions issued under sub-section (1), the officer of the central tax has not filed an appeal or application against any decision or order passed under the provisions of this Act, it shall not preclude such officer of the central tax from filing appeal or application in any other case involving the same or similar issues or questions of law.

3. Non filing of appeal, etc. as per aforesaid instruction, Assessee cannot contend that matter was accepted by the department : Notwithstanding the fact that no appeal or application has been filed by the officer of the central tax pursuant to the orders or instructions or directions issued under sub-section (1), no person, being a party in appeal or application shall contend that the officer of the central tax has acquiesced in the decision on the disputed issue by not filing an appeal or application.

4. The Commissioner (Appeals) or Appellate Tribunal or court to have regard to this section when appeal, etc. not filed: The Appellate Tribunal or court hearing such appeal or application shall have regard to the circumstances under which appeal or application was not filed by the officer of the central tax in pursuance of the orders or instructions or directions issued under sub-section (1).


(i) On recommendation of Council, the Board may issue order or instructions or directions fixing monetary limits for the purpose of regulating the filing of appeal or application by Officer of central tax.

526 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (ii) In case the Officer has not filed an appeal/application against any decision/order in view of such order/

instruction/directions, it shall not preclude him from filing appeal/application in any other cases involving same/similar issue or question of law.

(iii) No party in appeal/application shall contend that the Officer has acquiesced (agreed /consented) in the decision on the disputed issue by not filing an appeal/application.

(iv) The Appellate Tribunal or court hearing such appeal/application shall have regard to the circumstances under which appeal/application was not filed by the Officer in pursuance of such order/instructions/ directions.

22.13 Sec. 121 : Non Appealable Decisions and Orders

Notwithstanding anything to the contrary in any provisions of this Act, no appeal shall lie against any decision taken or order passed by an officer of central tax if such decision taken or order passed relates to any one or more of the following matters, namely :-

(a) an order of the Commissioner or other authority empowered to direct transfer of proceedings from one officer to another officer; or

(b) an order pertaining to the seizure or retention of books of account, register and other documents; or

(c) an order sanctioning prosecution under this Act; or

(d) an order passed under section 80 (i.e. payment in EMI).

527

CHAPTER


23.1 Sec. 122 : Penalty for Certain Offences

1. Where a taxable person who - (i) supplies any goods or services or both without issue of any invoice or issues an incorrect or false

invoice with regard to any such supply; (ii) issues any invoice or bill without supply of goods or services or both in violation of the provisions

of this Act or the rules made thereunder; (iii) collects any amount as tax but fails to pay the same to the Government beyond a period of three

months from the date on which such payment becomes due; (iv) collects any tax in contravention of the provisions of this Act but fails to pay the same to the

Government beyond a period of three months from the date on which such payment becomes due; (v) fails to deduct the tax in accordance with the provisions of sub-section (1) of section 51, or deducts

an amount which is less than the amount required to be deducted under the said sub-section, or where he fails to pay to the Government under sub-section (2) thereof, the amount deducted as tax;

(vi) fails to collect tax in accordance with the provisions of sub-section (1) of section 52, or collects an amount which is less than the amount required to be collected under the said sub-section or where he fails to pay to the Government the amount collected as tax under sub-section (3) of section 52;

(vii) takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;

(viii) fraudulently obtains refund of tax under this Act; (ix) takes or distributes input tax credit in contravention of section 20, or the rules made thereunder; (x) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any

false information or return with an intention to evade payment of tax due under this Act; (xi) is liable to be registered under this Act but fails to obtain registration; (xii) furnishes any false information with regard to registration particulars, either at the time of applying

for registration, or subsequently; (xiii) obstructs or prevents any officer in discharge of his duties under this Act; (xiv) transports any taxable goods without the cover of documents as may be specified in this behalf; (xv) suppresses his turnover leading to evasion of tax under this Act; (xvi) fails to keep, maintain or retain books of account and other documents in accordance with the

provisions of this Act or the rules made thereunder; (xvii) fails to furnish information or documents called for by an officer in accordance with the provisions

of this Act or the rules made thereunder or furnishes false information or documents during any proceedings under this Act;

(xviii) supplies, transports or stores any goods which he has reasons to believe are liable to confiscation under this Act;

(xix) issues any invoice or document by using the registration number of another registered person; (xx) tampers with, or destroys any material evidence or document;


(xxi) disposes off or tampers with any goods that have been detained, seized, or attached under this Act, he shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher.

(2) Any registered person who supplies any goods or services or both on which any tax has not been paid or short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilised, - (a) for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to

evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent of the tax due from such person, whichever is higher;

(b) for reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty equal to ten thousand rupees or the tax due from such person, whichever is higher.

(3) Any person who - (a) aids or abets any of the offences specified in clauses (i) to (xxi) of sub-section (1); (b) acquires possession of, or in any way concerns himself in transporting, removing, depositing,

keeping, concealing, supplying, or purchasing or in any other manner deals with any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder;

(c) receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder;

(d) fails to appear before the officer of central tax, when issued with a summon for appearance to give evidence or produce a document in an inquiry;

(e) fails to issue invoice in accordance with the provisions of this Act or the rules made thereunder or fails to account for an invoice in his books of account, shall be liable to a penalty which may extend to twenty-five thousand rupees.


At the outset, the section declares the offences that attract penalty as a consequence, apart from the requirement to pay the tax and applicable interest. Some of the offences listed under this section may also attract prosecution under section 132 but that depends on the gravity of the offence defined in that section.

The Section is divided in three main parts:

(i) The first sub-section prescribes 21 types of offences, any one of which if committed, can attract penalty equal to amount of tax involved or Rs. 10,000 (under CGST), whichever is higher.

(ii) The second sub-section deals with two situations, first is where certain offences committed are not due to either fraud or wilful misstatement or suppression of facts. In such a case, penalty will get reduced to 10% of tax involved subject to a minimum of Rs. 10,000 (under CGST). And then, where the offence committed is due to either fraud or any wilful misstatement or suppression of facts to evade tax will result in a penalty equal to tax involved subject to a minimum of Rs. 10,000 (under CGST).

(iii) The third sub-section deals with offences where the person is not directly involved in any evasion but may be a party to evasion or if he does not attend summons or produce documents. Penalty in such a case would be upto Rs. 25,000 (under CGST).

Illustration 1 :

Answer the following questions:

(i) Shagun started supply of goods in Vasai, Maharashtra from 01.01.20XX. Her turnover exceeded Rs. 20 lakh on 25.01.20XX. However, she didn’t apply for registration. Determine the amount of penalty, if any, that may be


imposed on Shagun on 31.03.20XX, if the tax evaded by her, as on said date, on account of failure to obtain registration is Rs. 1,26,000.

(ii) Sagar, managing director of Telecom Solutions Ltd., is issued a summon to appear before the central tax officer to produce the books of accounts of Telecom Solutions Ltd. in an inquiry conducted on said company. Determine the amount of penalty, if any, that may be imposed on Sagar, if he fails to appear before the central tax officer. [RTP - May 2018]

Answer :

(i) Where the aggregate turnover of a supplier making supplies from a State/UT exceeds Rs. 20 lakh in a financial year, he is liable to be registered in the said State/UT. The said supplier must apply for registration within 30 days from the date on which he becomes liable to registration. However, in the given case, although Shagun became liable to registration on 25.01.20XX, she didn’t apply for registration within 30 days of becoming liable to registration.

Section 122(1)(xi) of the CGST Act, 2017 stipulates that a taxable person who is liable to be registered under the CGST Act, 2017 but fails to obtain registration shall be liable to pay a penalty of:

(a) Rs. 10,000

Or

(b) an amount equivalent to the tax evaded [Rs. 1,26,000 in the given case], whichever is higher.

Thus, the amount of penalty that can be imposed on Shagun is Rs. 1,26,000.

(ii) Section 122(3)(d) of the CGST Act, 2017 stipulates that any person who fails to appear before the officer of central tax, when issued with a summon for appearance to give evidence or produce a document in an inquiry is liable to a penalty which may extend to Rs. 25,000. Therefore, penalty upto Rs. 25,000 can be imposed on Sagar, in the given case.

23.2 Sec. 125 : General Penalty

Any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to Rs. 25,000 (under CGST).

23.3 Sec. 126 : General Disciplines Related to Penalty

The following guiding disciplines in certain circumstances apply to substantial penalties :

(a) No penalty can be imposed where the tax involved is less than Rs. 5,000/- (minor breach) or in case of documentation errors apparent on the face of record.

(b) When penalty is still liable to be imposed, the next safety as laid down is to inquire into the degree and severity of the breach to proceed with imposition of penalty. In these cases, if the facts do not demand imposition of penalty, restraint is advised. However, no such discretion is provided in the section while providing for amount of penalty.

(c) Person liable to penalty must be given an opportunity of being heard. Further a speaking order is passed for imposing such penalty.

530 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (d) Voluntary disclosure by a person to an officer (not merely in his own books and records) about the

circumstances of the breach may be considered as a mitigating factor for the quantifying of penalty.

(e) Cases involving fixed sum or fixed percentage of penalty are excluded.

Illustration 2 :

Tripathi, registered under the CGST Act, 2017 has made a breach in payment of tax amounting to Rs. 6,100. Assessing Authority has imposed a penalty as per law applicable to the breach. Invoking the provisions of section 126, Tripathi argues that it is a minor breach and therefore, no penalty is imposable. In another instance, Tripathi has omitted certain details in documentation that is not easily rectifiable. This has occurred due to the gross negligence of his accountant and he makes a plea that he was unaware of it and therefore no penalty should be levied. Tripathi voluntarily writes accepting a major procedural lapse from his side and requests the officer to condone the lapse as the loss caused to the revenue was not significant. Also a lapse on the part of Tripathi has no specific penalty provision under the CGST Act, 2017. He is very confident that no penalty should be levied without a specific provision under the Act.

Discuss, what action may be taken by the Assessing Authority under law for each of the above breaches.

[MTP - Nov. 2018]

Answer :

As per section 126(1) of the CGST Act, 2017, no penalty shall be leviable under the Act for minor breaches of tax regulations. In terms of Explanation (a) to section 126(1), a breach shall be considered as “minor breach”, if tax involved is less than Rs. 5,000. Breach made by Tripathi is not a ‘minor breach’ since the amount involved is not less than Rs. 5,000. So, penalty is imposable. Any omission or mistake in documentation which is easily rectifiable and made without fraudulent intent/gross negligence is not liable for penalty in terms of section 126(1) of the CGST Act, 2017. Thus, penalty is imposable in the present case, since the omission in the documentation is not easily rectifiable and has occurred due to gross negligence. As per section 126(5) of the CGST Act, 2017, where there is a voluntary disclosure of breach, prior to its discovery by the officer, the proper officer may consider this fact as a mitigating factor when quantifying the penalty. Since Tripathi has voluntarily disclosed the breach of procedural requirement to the officer, the proper officer may consider this fact as a mitigating factor when quantifying the penalty. Therefore, the quantum of penalty will depend on the facts and circumstances of the case. As per section 125 of the CGST Act, 2017, when no specific penalty has been specified for contravention of any of the provisions of the Act or any rules made there under, it shall be liable to a penalty which may extend to Rs.25,000. Therefore, general penalty upto Rs. 25,000 may be imposed on Tripathi as when no specific penalty is provided for any contravention, a general penalty may be imposed.

Illustration 3 :

Raghuraman is a registered supplier in Madhya Pradesh. He failed to pay the GST amounting to Rs. 7,400 for the month of January, 20XX. The proper officer imposed a penalty on Raghuraman for failure to pay tax. Raghuraman believes that it is a minor breach and in accordance with the provisions of section 126 of the CGST Act, 2017, no penalty is imposable for minor breaches of tax regulations. Examine the correctness of Raghuraman’s claim.

Answer :

No, Raghuraman’s claim is not tenable in law. Section 126(1) of the CGST Act, 2017 provides that no officer shall impose any penalty under CGST Act, 2017, inter alia, for minor breaches of tax regulations or procedural requirements. Further, explanation to section 126(1) of the CGST Act, 2017 stipulates that a breach shall be considered a ‘minor breach’ if the amount of tax involved is less than Rs. 5,000.


In the given case, breach made by Raghuraman is not a ‘minor breach’ since the amount involved is not less than Rs. 5,000. So, penalty is imposable under the CGST Act, 2017.

23.4 Sec. 127 : Power to Impose Penalty in Certain Cases

Where the proper officer is of the view that a person is liable to a penalty and the same is not covered under any proceedings under section 62 or section 63 or section 64 or section 73 or section 74 or section 129 or section 130, he may issue an order levying such penalty after giving a reasonable opportunity of being heard to such person.


This section empowers to the proper officer to initiate separate penalty proceedings even if the penalty is not covered under any proceedings under any other sections.

Penalty proceedings can be initiated under this Section even if the same are not covered under the following sections:

Section 62 : Assessment of non-filers of returns

Section 63 : Assessment of unregistered persons

Section 64 : Summary assessment

Section 73 and 74 : Determination of tax by proper officer

Section 129 : Detention, seizure and release of goods and conveyances in transit

Section 130 : Confiscation of goods or conveyances and levy of penalty

In other words, penalties can be imposed by proper officer after giving due opportunity even in cases where there are no proceedings open with regard to assessment, adjudication, detention or confiscation. This may involve situations where there is no evasion of tax directly by the person concerned but he may be involved in offences mentioned in sub-section (3) of Section 122. Section 122(3) encompasses the following situations:

(1) Aids or abets any of the offences specified in section 122(1);

(2) Acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with any goods which he knows or has reason to believe are liable to confiscation;

(3) Receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reason to believe are in contravention of any provisions of this Act or the rules made thereunder;

(4) Fails to appear before the officer of central tax, when issued with a summon for appearance to give evidence or produce a document in an enquiry;

(5) Fails to issue invoice in accordance with the provisions of this Act or the rules made thereunder, or fails to account for an invoice in his books of account.

23.5 Sec. 128 : Power to Waive Penalty or Fee or Both

532 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal The Government may, by notification, waive in part or full, any penalty referred to in section 122 or section 123 or section 125 or any late fee referred to in section 47 for such class of taxpayers and under such mitigating circumstances as may be specified therein on the recommendations of the Council.

23.6 Sec. 129 : Detention, Seizure and Release of Goods and Conveyances in Transit

This section provides for the provision relating to detention of goods or conveyances or both in case of certain defaults under the law.

(a) If a person contravenes any provision of the Act while transporting or storing goods, then such goods and the conveyance in which such goods are carried and all the documents relating to such goods and conveyance can be detained or seized. The proper officer detaining and seizing the goods and/or conveyance has to give proper opportunity to the transporter to explain his case by issuing a proper notice to him. After hearing the transporter the officer shall pass an appropriate order.

(b) In case of default, where the owner of the goods comes forward for the payment of tax, penalty will be levied equal to 100% of the amount of tax and in case of exempted goods 2% of the value of goods (under CGST) or Rs. 25,000 (under CGST), whichever is less.

(c) In case where owner of the goods does not come forward for payment of tax, then, an order shall be passed for payment of amount of tax and penalty equal to 50% of the value of goods (under CGST), reduced by CGST amount paid (to be paid by any other person other than owner) and in case of exempted goods 5% of the value of goods (under CGST) or Rs. 25,000 (under CGST), whichever is less.

(d) The proper officer shall release the goods upon the payment of tax and amount of penalty in the above manner or upon furnishing a security equivalent of the amount payable and all the proceedings under this particular section shall deemed to be concluded. However, if the person (either owner of the goods or any other person) fails to discharge the amount of tax and penalty under this section within 14 days, then the goods and/or conveyance shall be liable for confiscation. The period of 14 days can be reduced by proper officer if goods are of perishable or hazardous nature. Further, such goods can be released on provisional basis under bond as per the provisions of section. [Words “7 Days” substituted by “14 Days” by CGST (Amendment) Act, 2018, w.e.f. 01.02.2019]

Who will be considered as the “owner of the goods” for the purposes of section 129(1) of the CGST Act? [Circular No. 76/50/2018-GST, dated 31.12.2018]

It is hereby clarified that if the invoice or any other specified document is accompanying the consignment of goods, then either the consignor or the consignee should be deemed to be the owner. If the invoice or any other specified document is not accompanying the consignment of goods, then in such cases, the proper officer should determine who should be declared as the owner of the goods.

Illustration 4 :

Whether action can be taken for transportation of goods without valid documents or if goods are attempted to be removed without proper record in books? If yes, explain the related provisions under the CGST Act, 2017.

[MTP - May 2018] Answer :

Yes, action can be taken for transportation of goods without valid documents or if goods are attempted to be removed without proper record in books. If any person transports any goods or stores any such goods while in transit without the documents prescribed under the Act (i.e. invoice and a declaration) or supplies or stores any


goods that have not been recorded in the books or accounts maintained by him, then such goods shall be liable for detention along with any vehicle on which they are being transported [Section 129 of CGST Act].

Where owner comes forward: Such goods shall be released on payment of the applicable tax and penalty equal to 100% of the tax payable on such goods or upon furnishing of security equivalent to the said amount.

In case of exempted goods, penalty is 2% of value of goods or Rs. 25,000/- whichever is less.

Where owner does not come forward : Such goods shall be released on payment of the applicable tax and penalty equal to 50% of value of goods reduced by the tax amount paid thereon or upon furnishing of security equivalent to the said amount.

In case of exempted goods, penalty is 5% of value of goods or Rs. 25,000/- whichever is lesser.

23.7 Sec. 130 : Confiscation of Goods or Conveyances and Levy of Penalty

This section provides for specific causes leading to confiscation of goods/conveyances. The nature of authorization to confiscate and opportunity to release goods/conveyances liable for such confiscation are detailed in this section.

There are five precise causes for confiscation of goods specified in this section and they are:

Action Consequence

Supply or receive goods in contravention of the Act or rules made thereunder

Resulting in actual evasion of tax

Not accounting for goods Carrying a liability to payment of tax

Supply of goods liable to tax Without applying registration

Contravention of the provisions of Act or rules made there under

With intent to evade payment of tax

Use of conveyance to transport/store goods In contravention of the Act or rules made there under

In all the above cases, goods or conveyance shall be liable for confiscation. However the conveyance shall not be confiscated where the owner of the conveyance proves that it is without the connivance of owner himself, his agent or person in charge of the conveyance. Further, the person shall be liable to pay penalty under section 122 of the Act.

Confiscation of goods of person/owner :

If the goods are liable to be confiscated under the provisions of this Act, satisfying any of the above causes, the proper officer shall give the owner of the goods, or where the owner is not known, person in whose custody the goods are found or the owner of the conveyance or the person in-charge of the conveyance, an option to pay fine in lieu of confiscation.

The amount of fine shall not exceed the market value of goods as reduced by the amount of tax payable thereon. However, at the same time the same shall not be less the amount of penalty as leviable under section 129 on transporters.

Where the conveyance is used for transportation of goods or passenger on hire, the owner of the conveyance shall be given an option to pay fine equal to amount of tax payable on the goods transported on his


conveyance. It is worthwhile to note that the amount of fine payable is in addition to tax and other charges payable on confiscated goods.

The order for confiscation cannot be issued without giving the person an opportunity of being heard.

The title of the confiscated goods or conveyance shall be vested upon the Government.

The proper officer adjudging confiscation shall take and hold possession of the things confiscated on behalf of the Government and every officer of police shall assist in taking such hold and possession.

If the proper officer is satisfied that the confiscated goods/conveyance are not required for any proceedings under the Act, then, he shall after giving reasonable time not exceeding 3 months to pay fine in lieu of confiscation, dispose the goods and deposit the sale proceeds with the Government.

Illustration 5 :

From the details given below determine the maximum amount of fine in lieu of confiscation leviable under section 130 of CGST, Act, 2017 on:

(1) The goods liable for confiscation.

(2) On the conveyance used for carriage of such goods. Details are as follows:

Cost of the goods for owner before GST 15,00,000

Market Value of Goods 20,00,000

GST on such goods 3,60,000

You are also required to explain relevant legal provisions in brief. [MTP - Nov. 2018]

Answer:

(1) As per section 130(2) of the CGST Act, 2017, in case of goods liable for confiscation, the maximum amount of fine leviable in lieu of confiscation is the market value of the goods confiscated, less the tax chargeable thereon.

Therefore, the fine leviable = Rs. 20,00,000- Rs. 3,60,000 = Rs. 16,40,000 The aggregate of fine and penalty shall not be less than the amount of penalty leviable under section 129(1).

(2) In case of conveyance used for carriage of such goods liable for confiscation, the maximum amount of fine leviable in lieu of confiscation is equal to tax payable on the goods being transported thereon [Third proviso to section 130(2) of the CGST Act, 2017].

Therefore, the fine leviable = Rs. 3,60,000

Illustration 6 :

From the details given below determine the maximum amount of fine in lieu of confiscation leviable under section 130 of CGST, Act, 2017 on:

(i) The goods liable for confiscation.

(ii) On the conveyance used for carriage of such goods.

Details are as follows :


Cost of the goods for owner before GST - 15,00,000

Market Value of Goods - 20,00,000

GST on such goods - 3,60,000

You are also required to explain relevant legal provisions in brief. [CA Final, May 2018 - New] (5 Marks)

Solution :

As per section 130(2), the fine shall be-

(i) Fine on goods cannot exceed ‘Market Value – Tax’: Such fine leviable shall not exceed market value of the goods confiscated, less the tax chargeable thereon. Hence, maximum fine = 20,00,000 – 3,60,000 = 16,40,000.

(ii) Fine in lieu of confiscation of conveyance: where any such conveyance is used for the carriage of goods or passengers for hire, owner of conveyance shall be given an option to pay in lieu of the confiscation of the conveyance a fine = tax payable on the goods being transported thereon. Hence, fine = Rs. 3,60,000.

23.8 Sec. 131 : Confiscation or Penalty Not to Interfere With Other Punishments

This Section provides that in addition to confiscation of goods or penalty already imposed, all /any other proceedings may also be initiated or continued under the GST law or any other law, as applicable. This could be prosecution, arrest, cancellation of registration etc., as applicable and Provided for the relevant non-compliances.

23.9 Sec. 132 : Punishment for Certain Offences

This section talks about cases of tax evasion and penal actions applicable on specific events subject to amount of tax sought to be evaded. This provision speaks of prosecution of offenders and the punishment initiated on them.

A. In this section the law makers have identified situations whereby there can be a leakage or revision of government revenue and have thus penned down 12 such situations of malafide intent which are as follows:

(a) Supply of goods or services or both without the cover of invoice with an intent to evade tax;

(b) If any person issues any invoice or bill without actual supply of goods or services or both leading to wrongful input tax credit or refund of tax;

(c) Any person who avails input tax credit using invoice referred in point (b) above;

(d) Collection of taxes without payment to the government for a period beyond 3 months of due date;

(e) Evasion of tax, availment of credit or obtaining refund with an intent of fraud where such offence is not covered in clause (a) to (d) above.

(f) Falsifying records or production of false records/accounts/documents/information with an intent to evade tax;

(g) Obstructs or prevents any officer from doing his duties under the act;

(h) Acquires or transports or in any manner or deals with any goods which he knows are liable for confiscation under this Act;

(i) Receives or in any way, deals with any services or has reason to believe are in contravention of any provisions of this law;

(j) Tampers with or destroys any material evidence or documents;


(k) Fails to supply any information which he is required to supply under this law or supply false information;

(l) Attempts or abets the commission of any of the offences mention above.

This section enables institution of prosecution proceedings against the offenders and the period of imprisonment and quantum of fine varies depending on the amount of tax evaded or seriousness of the offence listed below.

Amount of Tax evaded/ erroneous refund/ wrong ITC availed or utilized Fine Imprisonment

Exceeding Rs. 5 Crores Yes Upto 5 years

Exceeding Rs. 2 Crores - Upto 5 Crores Yes Upto 3 years

Exceeding Rs. 1 Crores - Upto 2 Crores Yes Upto 1 year

B. If any person commits any offence specified in clause (f), (g) or (j) above, he shall be punishable with imprisonment for a term which may extend to six months or with fine or with both.

C. In case of repetitive offences without any specific/special reason which is recorded by an order of the court will entail an imprisonment term of not less than 6 months which could extend to 5 years plus with a fine.

D. All offences mentioned in this section are non-cognizable and bailable except the following cases: Instances covered by (a) to (d) where the amount exceeds Rs. 5 Crores

E. Every prosecution proceeding initiated requires prior sanction of the Commissioner.

Illustration 7 :

Examine the implications as regards the bailability and quantum of punishment on prosecution, in respect of the following cases pertaining to the period December, 2017 under CGST Act, 2017;

(i) ‘X’ collects Rs. 245 lakh as tax from its clients and deposits Rs. 241 lakh with the Central Government. It is, found that he has falsified financial records and has not maintained proper records.

(ii) ‘Y’ collects Rs. 550 lakh as tax from its clients but deposits only Rs. 30 lakh with the Central Government.

What will be the implications with regard to punishment on prosecution, of ‘X’ and ‘Y’ for the offences? What would be the position, if ‘X’ and ‘Y’ repeat the offences?

It may be assumed that offences are proved in the court. [CA Final, May 2018 - New] (5 Marks)

Solution :

The position is as follows-

Offence Amount involved Bailability Punishment Punishment for repeat offence

Falsifying financial records

4 lakh Bailable & Non- cognizable

Imprisonment for upto 6 months or with fine or both

Imprisonment for a term which may extend to 5 years and with fine

Non-payment of collected tax

520 lakh i.e. > 5 crore

Non-Bailable & cognizable assuming dues are pending for more than 3 months

Imprisonment for upto 5 years and with fine

Imprisonment for a term which may extend to 5 years and with fine


Illustration 8 :

What are cognizable and non-cognizable offences under Section 132 of CGST Act, 2017? [CA Final, May 2018 - Old] (Marks 4)

Solution :

As per section 132(4) notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences under this Act, except the offences referred to in sub-section (5) shall be non-cognizable and bailable.

Under section 132(5) the offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) and punishable under clause (i) of that sub-section shall be cognizable and non-bailable.

23.10 Sec. 69 : Power to Arrest

Introduction :

This section deals with power of arrest when one commits any of the following offences which is punishable under clause (i) or (ii) of sub-section (1), or under sub-section (2) of sec 132 of CGST Act.

(a) Supplies any goods or services or both without issue of invoice with the intention to evade tax.

(b) Issues any invoice or bill without supplies leading to wrongful availment or utilisation of input tax credit or refund of tax.

(c) Avails input tax credit using invoice or bill referred to in (b) above.

(d) Collects any amount as tax but fails to pay the same beyond the period of 3 months from the due date.

Analysis :

The Commissioner is vested with the power to authorise, by an order, any Officer to arrest a person, where there is a reason to believe that such person has committed the specified offences.

The person committing any offence under clauses (a) or (b) or (c) or (d) u/s 132(1) cited supra and punishable under Section 132(1)(i) or 132(1)(ii) or 132(2) can be arrested by the authorized officer.

Section 132(1) clause (i) tax evasion above Rs. 500 Lakhs attracting imprisonment for a term upto 5 years and fine, or clause (ii) tax evasion above Rs. 200 Lakhs attracting imprisonment upto 3 years and fine or offence or section 132(2) [repeated offence – second and subsequent offence attracting imprisonment upto 5 years with fine]

Such person is required to be informed about the grounds of arrest and be produced before the Magistrate within 24 hours in case of cognizable offences and in case of non-cognizable and bailable offences the Assistant/Deputy Commissioner can grant the bail and is conferred powers of an officer-in-charge of a police station subject to the provisions of Code Of Criminal Procedure, 1973.

All arrests should be made as per the provisions of Code of Criminal Procedure, 1973.

List of Related provisions of Section 132 for ready reference for which person can be arrested :

Section Description

132(1)(a) Whoever supplies any goods or services or both without issue of invoice with the intention to evade tax.

132(1)(b) Whoever issues any invoice or bill without supplies leading to wrongful availment or utilisation of input tax credit or refund of tax.


132(1)(c) Whoever avails input tax credit using invoice or bill referred to in (b) above.

132(1)(d) Whoever collects any amount as tax but fails to pay the same beyond the period of 3 months from the due date.

132(1)(i) Prosecution where tax evaded exceeds Rs. 500 lakhs. Imprisonment upto 5 years with fine.

132(1)(ii) Prosecution where tax evaded exceeds Rs. 200 lakhs. Imprisonment upto 3 years with fine.

132(1)(iii) Prosecution where tax evaded exceeds Rs. 100 lakhs. Imprisonment upto 1 year with fine.

132(2) Second or subsequent offence. Imprisonment upto 5 years with fine.

The term ‘arrest’ has not been defined in the GST Act. However, as per judicial pronouncements, it denotes ‘the taking into custody of a person under some lawful command or authority’. In other words, a person is said to be arrested when he is taken and restrained of his liberty by power or colour of lawful warrant. Arrests can be carried out only where the person is accused of offences specified for this purpose and the tax amount involved is more than specified limit. Further, the arrests under GST Act can be made only under authorisation from the Commissioner. Whenever the Commissioner has reason to believe that any person has committed any such offence, he can authorize any other officer subordinate to him, to arrest such person. Various offences committed in connection with evasion of tax are also punishable with imprisonment for which purpose, the offender has to be prosecuted before appropriate Court. The nature of offences which are thus punishable with imprisonment are prescribed in Section 132 of the Act. Safeguards for a person who is placed under arrest

There are certain safeguards provided under section 69 for a person who is placed under arrest. These are:

If a person is arrested for a cognizable offence, he must be informed in writing of the grounds of arrest and he must be produced before a magistrate within 24 hours of his arrest;

If a person is arrested for a non- cognizable and bailable offence, the Deputy/ Assistant Commissioner can release him on bail and he will be subject to the same provisions as an officer in-charge of a police station under section 436 of the Code of Criminal Procedure, 1973;

All arrest must be in accordance with the provisions of the Code of Criminal Procedure,1973 relating to arrest.

Section 132 of the Act also prescribes which types of offences are cognizable and non-bailable and which types of offences are non-cognizable and bailable.

Meaning of cognizable offence Generally, cognizable offence means serious category of offences in respect of which a police officer has the authority to make an arrest without a warrant and to start an investigation with or without the permission of a court. Meaning of non-cognizable offence Non-cognizable offence means relatively less serious offences in respect of which a police officer does not have the authority to make an arrest without a warrant and an investigation cannot be initiated without a court order. Cognizable and non-cognizable offences under CGST Act In section 132 of CGST Act, it is provided that the offences relating to taxable goods and /or services where the amount of tax evaded or the amount of input tax credit wrongly availed or the amount of refund wrongly taken exceeds ` 5 crore, it shall be cognizable and non- bailable and in such cases the bail can be considered by a Judicial Magistrate only. Other offences under the Act are non-cognizable and bailable and all arrested persons shall be released on bail by Deputy/ Assistant Commissioner.


Precaution taken during arrest The provisions of the Code of Criminal Procedure, 1973 relating to arrest and the procedure thereof must be adhered to in all situations amounting to arrest. It is therefore necessary that all field officers of CGST be fully familiar with the provisions of the Code of Criminal Procedure, 1973. One important provision to be taken note of is Section 57 of Cr.P.C., 1973 which provides that a person arrested without warrant shall not be detained for a longer period than, under the circumstances of the case, is reasonable but this shall not exceed 24 hours (excluding the journey time from place of arrest to the Magistrate’s court). Within this period, as provided under section 56 of Cr.P.C., the person making the arrest shall send the person arrested without warrant before a Magistrate having jurisdiction in the case.

23.11 Sec. 134 : Cognizance of Offences

No court shall take cognizance of any offence punishable under this Act or the rules made thereunder except with the previous sanction of the Commissioner, and no court inferior to that of a Magistrate of the First Class, shall try any such offence.

23.12 Sec. 135 : Presumption of Culpable Mental State

In any prosecution for an offence under this Act which requires a culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution.


(i) the expression “culpable mental state” includes intention, motive, knowledge of a fact, and belief in, or reason to believe, a fact;

(ii) a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability.

Illustration 9 :

Explain the meaning of “mensrea”. Is ‘mensrea’ or culpable mental state necessary for prosecution under CGST Act?

Answer :

“Mensrea” means guilty mind, or criminal intent in committing the act. It is the mental element of a person’s intention to commit a crime or knowledge that one’s action or lack of action would cause a crime to be committed.

Yes, ‘mensrea’ or culpable mental state is necessary for prosecution under CGST Act. However, Section 135 of CGST Act, 2017 presumes the existence of a state of mind (i.e. “culpable mental state” or mensrea) required to commit an offence if it cannot be committed without such a state of mind.

23.13 Sec. 136 : Relevancy of Statements Under Certain Circumstances

A statement made and signed by a person on appearance in response to any summons issued under section 70 during the course of any inquiry or proceedings under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, -

540 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal (a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is

kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the court considers unreasonable; or

(b) when the person who made the statement is examined as a witness in the case before the court and the court is of the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice.

23.14 Sec. 137 : Offences by Companies

(1) Where an offence committed by a person under this Act is a company, every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any negligence on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

(3) Where an offence under this Act has been committed by a taxable person being a partnership firm or a Limited Liability Partnership or a Hindu Undivided Family or a trust, the partner or karta or managing trustee shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly and the provisions of sub-section (2) shall, mutatis mutandis, apply to such persons.

(4) Nothing contained in this section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.


(i) “company” means a body corporate and includes a firm or other association of individuals; and (ii) “director”, in relation to a firm, means a partner in the firm.


This section states that where an offence is committed by companies, every person/director/manager/secretary or any other officer who at the time of commitment of the offence, was in charge of and was responsible to the company for the conduct of business of the company, as well as the company shall be deemed to be guilty of such offence and proceeded against and punished accordingly.

Where such offences are committed by the person being Partnership Firm, LLP, HUF or trust, AOP or BOI then the partner or Karta or Managing Trustee (as the case may be) shall be deemed to be guilty and liable to be proceeded against and punished.

Further if the accused person proves that he was in no way related to the offence being committed or he had exercised all possible measures to prevent commission of such offences, then he is not punishable under this section.

23.15 Sec. 138 : Compounding of Offences

1. As per the provisions of Section 138(1), Any offence may be compounded by the Commissioner, either before or after the institution of prosecution, upon payment of such compounding amount in such manner as may be prescribed, by the person accused of the offence, to the Central Government or the State Government, as the case be.

2. However, the compounding of offence is not permissible in case of the following offences:


(i) Offence specified in clauses (a) to (f) of sub-section (1) of section 132, if the person charged with offence had been allowed to compound earlier in respect of any of the said offences;

(ii) Attempting or Aiding or abetting the commission of any of the offences specified in clauses (a) to (f) of sub-section (1) of section 132, if the person charged with offence had been allowed to compound earlier in respect of any of the said offences;

(iii) Any offence (other than the above offences) under this Act or under the provisions of any SGST Act/UTGST Act/IGST Act, in respect of supplies of value > Rs. 1 Crore, if the person charged with offence had been allowed to compound earlier in respect of any of the said offences;

(iv) a person who has been accused of committing an offence under this Act which is also an offence under any other law for the time being in force;

(v) a person who has been convicted for an offence under this Act by a court;

(vi) a person who has been accused of committing an offence specified in clause (g) or clause (j) or clause (k) of sub-section (1) of section 132; and

(vii) any other class of persons or offences as may be prescribed.

3. Compounding shall be allowed only after making payment of tax, interest and penalty involved in such offences. Further, any compounding allowed under the provisions of this section shall not affect the proceedings, if any, instituted under any other law.

4. The compounding amount for compounding of offences under this section shall be such as may be prescribed, subject to –

• The minimum limit for compounding amount is to be the higher of the following amounts:-

(i) 50% of tax involved, or

(ii) Rs. 10,000.

The upper limit for compounding amount is to be higher of the following amounts: -

(i) 150% of tax involved or

(ii) Rs. 30,000.

5. On payment of such compounding amount as may be determined by the Commissioner, no further proceedings shall be initiated under this Act against the accused person in respect of the same offence and any criminal proceedings, if already initiated in respect of the said offence, shall stand abated.

542

CHAPTER

Miscellaneous 24

24.1 Sec. 3 : Officers Under This Act

The Government shall, by notification, appoint the following classes of officers for the purposes of this Act, namely :

(a) Principal Chief Commissioners of Central Tax or Principal Directors General of Central Tax,

(b) Chief Commissioners of Central Tax or Directors General of Central Tax,

(c) Principal Commissioners of Central Tax or Principal Additional Directors General of Central Tax,

(d) Commissioners of Central Tax or Additional Directors General of Central Tax,

(e) Additional Commissioners of Central Tax or Additional Directors of Central Tax,

(f) Joint Commissioners of Central Tax or Joint Directors of Central Tax,

(g) Deputy Commissioners of Central Tax or Deputy Directors of Central Tax,

(h) Assistant Commissioners of Central Tax or Assistant Directors of Central Tax, and

(i) any other class of officers as it may deem fit:

Provided that the officers appointed under the Central Excise Act, 1944 shall be deemed to be the officers appointed under the provisions of this Act.

24.2 Sec. 4 : Appointment of Officers

(1) The Board may, in addition to the officers as may be notified by the Government under section 3, appoint such persons as it may think fit to be the officers under this Act.

(2) Without prejudice to the provisions of sub-section (1), the Board may, by order, authorize any officer referred to in clauses (a) to (h) of section 3 to appoint officers of central tax below the rank of Assistant Commissioner of central tax for the administration of this Act.

24.3 Sec. 5 : Powers of Officers

(1) Subject to such conditions and limitations as the Board may impose, an officer of central tax may exercise the powers and discharge the duties conferred or imposed on him under this Act.

(2) An officer of central tax may exercise the powers and discharge the duties conferred or imposed under this Act on any other officer of central tax who is subordinate to him.

Miscellaneous 543

(3) The Commissioner may, subject to such conditions and limitations as may be specified in this behalf by him, delegate his powers to any other officer who is subordinate to him.

(4) Notwithstanding anything contained in this section, an Appellate Authority shall not exercise the powers and discharge the duties conferred or imposed on any other officer of central tax.

24.4 Sec. 6 : Authorisation of Officers of State Tax or Union Territory Tax as Proper Officer in Certain Circumstances

(1) Without prejudice to the provisions of this Act, the officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to be the proper officers for the purposes of this Act, subject to such conditions as the Government shall, on the recommendations of the Council, by notification, specify.

(2) Subject to the conditions specified in the notification issued under sub-section (1), -

(a) where any proper officer issues an order under this Act, he shall also issue an order under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as authorised by the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, under intimation to the jurisdictional officer of State tax or Union territory tax;

(b) where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under this Act on the same subject matter.

(3) Any proceedings for rectification, appeal and revision, wherever applicable, of any order passed by an officer appointed under this Act shall not lie before an officer appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act.


With the similarity of the taxing base, it is necessary to develop a mechanism to avoid duplication of tax administration by officers of Central Tax and by officers of State/UT Tax.

For purposes of administration of this act, it is permitted to authorise officers of State/UT Tax to simultaneously also be the officer of Central Tax. It is interesting to note that officers of State/UT Tax do not relinquish their authority but accept additional authority as officers of Central Tax. However, to do so requires the recommendations of the Council and adherence to the conditions that the government may impose in this regard.

In order to establish non-overlapping of administrative power, it is Provided that an officer in respect of central tax is required to duly exercise his authority even in respect of State/UT Tax where the executive action is in respect of the same taxing base. In so doing, the officer of central tax is required to intimate the officer of State/UT Tax in respect of all his actions.

Further, in administrative power has been invoked by the officer of the State/UT Tax is any proceeding, such action will preclude the officer of central tax from exercising any administrative power in respect of transactions covered by the said proceedings.

544 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 24.5 Sec. 144 : Presumption as to Documents in Certain Cases

Where any document : (1) is produced by any person under this Act or any other law for the time being in force; or (2) has been seized from the custody or control of any person under this Act or any other law for the time

being in force; or (3) has been received from any place outside India in the course of any proceedings under this Act or any

other law for the time being in force, and such document is tendered by the prosecution in evidence against him or any other person who is tried jointly with him, the court shall - (a) unless the contrary is proved by such person, presume -

(i) the truth of the contents of such document; (ii) that the signature and every other part of such document which purports to be in the

handwriting of any particular person or which the court may reasonably assume to have been signed by, or to be in the handwriting of, any particular person, is in that person’s handwriting, and in the case of a document executed or attested, that it was executed or attested by the person by whom it purports to have been so executed or attested;

(b) admit the document in evidence notwithstanding that it is not duly stamped, if such document is otherwise admissible in evidence.

24.6 Sec. 145: Admissibility of Micro Films, Facsimile Copies of Documents and Computer Printouts as Documents and as Evidence

(1) Notwithstanding anything contained in any other law for the time being in force, -

(a) a micro film of a document or the reproduction of the image or images embodied in such micro film (whether enlarged or not);or

(b) a facsimile copy of a document; or

(c) a statement contained in a document and included in a printed material produced by a computer, subject to such conditions as may be prescribed; or

(d) any information stored electronically in any device or media, including any hard copies made of such information, shall be deemed to be a document for the purposes of this Act and the rules made thereunder and shall be admissible in any proceedings thereunder, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.

(2) In any proceedings under this Act or the rules made thereunder, where it is desired to give a statement in evidence by virtue of this section, a certificate, -

(a) identifying the document containing the statement and describing the manner in which it was produced;

(b) giving such particulars of any device involved in the production of that document as may be appropriate for the purpose of showing that the document was produced by a computer, shall be evidence of any matter stated in the certificate and for the purposes of this sub-section it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it.

24.7 Sec. 146 : Common Portal

Miscellaneous 545

The Government may, on the recommendations of the Council, notify the Common Goods and Services Tax Electronic Portal for facilitating registration, payment of tax, furnishing of returns, computation and settlement of integrated tax, electronic way bill and for carrying out such other functions and for such purposes as may be prescribed.


Vide NN 09/2018 – CT, w.e.f. 16.01.2018, the Central Government has notified www.gst.gov.in as the Common Goods and Services Tax Electronic Portal for facilitating registration, payment of tax, furnishing of returns and computation and settlement of integrated tax and www.ewaybillgst.gov.in as the Common Goods and Services Tax Electronic Portal for furnishing electronic way bill.

Explanation :

(1) For the purposes of this notification, “www.gst.gov.in” means the website managed by the Goods and Services Tax Network, a company incorporated under the provisions of section 8 of the Companies Act, 2013 (18 of 2013); and

(2) For the purposes of this notification, “www.ewaybillgst.gov.in” means the website managed by the National Informatics Centre, Ministry of Electronics & Information Technology, Government of India.

24.8 Sec. 148 : Special Procedure for Certain Processes

The Government may, on the recommendations of the Council, and subject to such conditions and safeguards as may be prescribed, notify certain classes of registered persons, and the special procedures to be followed by such persons including those with regard to registration, furnishing of return, payment of tax and administration of such persons.

24.9 Sec. 149 : Goods and Services Tax Compliance Rating

(1) Every registered person may be assigned a goods and services tax compliance rating score by the Government based on his record of compliance with the provisions of this Act.

(2) The goods and services tax compliance rating score may be determined on the basis of such parameters as may be prescribed.

(3) The goods and services tax compliance rating score may be updated at periodic intervals and intimated to the registered person and also placed in the public domain in such manner as may be prescribed.

24.10 Sec. 153 : Taking Assistance from An Expert

Any officer not below the rank of Assistant Commissioner may, having regard to the nature and complexity of the case and the interest of revenue, take assistance of any expert at any stage of scrutiny, inquiry, investigation or any other proceedings before him.


546 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal This section will enable the Officer to take assistance of experts like IT professional, Lawyer, Technocrat, CA etc. considering the nature and complexity of the case and revenue’s interest. These experts would assist the concerned officer in scrutiny, inquiry, investigation or any other proceedings.

24.11 Sec. 154 : Power to Take Samples

The Commissioner or an officer authorised by him may take samples of goods from the possession of any taxable person, where he considers it necessary, and provide a receipt for any samples so taken.

24.12 Sec. 155 : Burden of Proof

Where any person claims that he is eligible for input tax credit under this Act, the burden of proving such claim shall lie on such person.

24.13 Sec. 156 : Persons Deemed to be Public Servants

All persons discharging functions under this Act shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code.


As the persons discharging official functions are deemed to be public servants, any offences against such persons and offences by such persons would be dealt with in accordance with IPC.

24.14 Sec. 157 : Protection of Action Taken Under This Act

(1) No suit, prosecution or other legal proceedings shall lie against the President, State President, Members, officers or other employees of the Appellate Tribunal or any other person authorised by the said Appellate Tribunal for anything which is in good faith done or intended to be done under this Act or the rules made thereunder.

(2) No suit, prosecution or other legal proceedings shall lie against any officer appointed or authorised under this Act for anything which is done or intended to be done in good faith under this Act or the rules made thereunder.


This Section protects the GST officers and officers of GST Tribunal from legal proceedings in respect of acts done in good faith.

Immunity from any legal or departmental proceedings is provided to the GST officers and officers of the Tribunal for the acts done in good faith under the provisions of this Act.

24.15 Sec. 158 : Disclosure of Information by a Public Servant

Miscellaneous 547

This Section lays down the guidelines for non-disclosure of information obtained during the course of any proceeding and the situations when such information can be disclosed.

Non-disclosure: The following shall be kept confidential and should not be disclosed:

All details obtained in any statement/returns/accounts/documents which are submitted as per the act

All details as per the evidence given during any proceeding under the Act or as per any record of proceedings under the Act

Note : All details obtained from any evidence during the proceedings before a criminal court need not be confidential.

Restrictions on Courts : Courts shall not have the right

To require any GST officer to produce before it or

To require the officer to give evidence before it in relation to matters which cannot be disclosed (covered above in Point (i))

Exceptions to non-disclosure : The following details can be disclosed :

Situation 1 – required under other Law: Statement, return, accounts, documents, evidence, affidavit or deposition, for prosecution under the Indian Penal Code/the Prevention of Corruption Act, 1988/or any other law in force.

Situation 2 – for verification purposes: Particulars which are to be given to the Central/State Government or to any person discharging his functions under this Act, for the purpose of carrying out the object of the Act.

Situation 3 – for service of notice / demand: If such disclosure is necessary for the service of notice or the recovery of demand.

Situation 4 - for Civil Court / Tribunal proceeding: Particulars to be disclosed to a Civil Court.

Note: The disclosure is in relation to any suit or proceeding. In such proceeding, the Government or any authority under the Act is a party. The disclosure relates to any proceeding as per the Act or under any other law authorising any such authority to exercise such powers.

Situation 5 – for Audit: Particulars to any officer appointed for the purpose of audit of tax receipts or refunds of the tax levied under the Act.

Situation 6 – for inquiry on any GST Officer: Particulars relevant for any inquiry into the conduct of any GST officer, to any person(s) appointed as an inquiry officer under any relevant law.

Situation 7 – to levy or realise tax / duty: Such facts to an officer of the Central /State Government as necessary for the purpose of enabling that Government to levy or realise any tax or duty.

Situation 8 – to public servant: Such particulars, if such disclosure is necessary before a public servant or any statutory authority, due to his or its powers under any law.

Situation 9 – to conduct inquiry on professionals: Such particulars as relevant to any inquiry under the Act conducted into a charge of misconduct against a practicing advocate / cost accountant / a chartered accountant, company secretary / tax practitioner to the authority empowered to take disciplinary action against the members practicing such profession. (i.e. ICAI / ICAI (CWA) / ICSI / Bar Council).

548 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Situation 10 – to data entry agency for department: Disclosures to any agency appointed for the purposes of

data entry on any automated system or for operating, upgrading or maintaining any automated system (if such agency is contractually bound not to use or disclose such particulars except for the aforesaid purposes).

Situation 11 – to Government: Particulars to an officer of the Central/State Government necessary for any law for the time being in force.

Situation 12 – for publication: Information relating to any class of taxpayers/transactions for publication, if, in the opinion of the Competent authority, it is desirable in the public interest, to publish such information.

24.16 Sec. 159 : Publication of Information in Respect of Persons in Certain Cases

Powers to publish details:

(i) The Competent Authority may ensure that the following details are published:

Names of any person (and)

Other particulars relating to proceedings or prosecutions under the Act, if related to such person.

(ii) The decision to publish is based on the opinion of the Competent Authority that it is essential or beneficial in the public interest to do so.

(iii) As the provision indicates that the Competent Authority “can decide to publish in such manner as it thinks fit”, Competent Authority can decide:

the category of proceedings/prosecution cases to be published

the category of persons whose details to be published

the extent of particulars to be published

the manner of publishing

the media wherein the information to be published

(iv) In addition, the Competent Authority may also decide to publish the following:

Nature of Organisation Additional Details

In case of Firm Names of partners

In case of Company Names of directors / Managing Agents / Secretaries and Treasurers / Managers

In case of Association of Persons Names of the members Note: However, the additional details can be published only if the Competent Authority opines that the circumstances of the case justify it.

(v) Exception: However, publication can be made in relation to imposition of penalty, only when the following conditions are satisfied:

The time for presenting an appeal to the First Appellate Authority (u/s 107) has expired and the persons involved, did not present any appeal (OR)

The appeal is presented and it is disposed of (against such persons).

Miscellaneous 549

Illustration 1 :

When shall the particulars relating to any proceedings or prosecution be published under GST laws? (4 Marks) [MTP, May 2019]

Soltuion:

When the Commissioner/authorised officer is of opinion that it is necessary or expedient in the public interest to publish the name of any person and any other particulars relating to any proceedings or prosecution under the CGST Act in respect of such person, it may cause to be published such name and particulars [Section 159(1) of the CGST Act, 2017]

No publication under this section shall be made in relation to any penalty imposed under the CGST Act until the time for presenting an appeal to the Appellate Authority under section 107 has expired without an appeal having been presented or the appeal, if presented, has been disposed of [Section 159(2) of the CGST Act, 2017].

24.17 Sec. 160 : Assessment Proceedings, etc., Not to be Invalid on Certain Grounds

Very often proceedings under the Act are questioned for their validity even when there are inadvertent errors. This Section saves the proceedings from such challenge when substantive conformity is found but for these errors.

Assessment, re-assessment and other proceedings that are listed in this Section will be valid even though there may be:

– Mistake

– Defect or

– Omission

Provided they are in ‘substance’ and ‘effect’ in conformity with the intents, purposes and requirements of the Act.

Proceedings listed in this Section are :

– Assessment

– Re-assessment

– Adjudication

– Review

– Revision

– Appeal

– Rectification

– Notice

– Summons

– Other proceedings

550 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal Considering the purpose of this Section, no proceedings under the Act are excluded from the operation of this

Section. It is interesting to see how such a determination will be made – whether deficiency in the proceedings was a mistake, defect or omission and that it is in substance and effect in conformity with the Act.

Further, where a notice, order or communication has:

– Been acted upon or

– Not called into question at the earliest opportunity available.

Then the opportunity to call such notice, order or communication into question will not be available in the course of subsequent proceedings.

24.18 Sec. 162 : Bar on Jurisdiction of Civil Courts

Save as provided in sections 117 and 118, no civil court shall have jurisdiction to deal with or decide any question arising from or relating to anything done or purported to be done under this Act.

24.19 Sec. 163 : Levy of Fee

Wherever a copy of any order or document is to be provided to any person on an application made by him for that purpose, there shall be paid such fee as may be prescribed.

24.20 Sec. 164 : Power of Government to Make Rules

(1) The Government may, on the recommendations of the Council, by notification, make rules for carrying out the provisions of this Act.

(2) Without prejudice to the generality of the provisions of sub-section (1), the Government may make rules for all or any of the matters which by this Act are required to be, or may be, prescribed or in respect of which provisions are to be or may be made by rules.

(3) The power to make rules conferred by this section shall include the power to give retrospective effect to the rules or any of them from a date not earlier than the date on which the provisions of this Act come into force.

(4) Any rules made under sub-section (1) or sub-section (2) may provide that a contravention thereof shall be liable to a penalty not exceeding ten thousand rupees.

24.21 Sec. 165 : Power to Make Regulations

The Board may, by notification, make regulations consistent with this Act and the rules made thereunder to carry out the provisions of this Act.

24.22 Sec. 166 : Laying of Rules, Regulations And Notifications

Every rule made by the Government, every regulation made by the Board and every notification issued by the

Miscellaneous 551

Government under this Act, shall be laid, as soon as may be after it is made or issued, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or regulation or in the notification, as the case may be, or both Houses agree that the rule or regulation or the notification should not be made, the rule or regulation or notification, as the case may be, shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule or regulation or notification, as the case may be.


(a) This Section lays down the general procedure of laying delegated legislations before the Parliament for a prescribed duration.

(b) The Act permits making of rules by Government, issuance of regulation by Board and issuance of notification by the Government.

(c) Such rule, regulation and notification, which is a part of delegated legislation is placed before the Parliament.

(d) It is laid before the Parliament, as soon as may be after it is made or issued, when the Parliament is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions

(e) Before the expiry of the session or successive sessions both Houses may make suitable modifications and would have effect in such modified form.

(f) However, any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule or regulation or notification, as the case may be.

24.23 Sec. 167 : Delegation of Powers

The Commissioner may, by notification, direct that subject to such conditions, if any, as may be specified in the notification, any power exercisable by any authority or officer under this Act may be exercisable also by another authority or officer as may be specified in such notification.

24.24 Sec. 168 : Power to Issue Instructions or Directions

(1) The Board may, if it considers it necessary or expedient so to do for the purpose of uniformity in the implementation of this Act, issue such orders, instructions or directions to the central tax officers as it may deem fit, and thereupon all such officers and all other persons employed in the implementation of this Act shall observe and follow such orders, instructions or directions.

(2) The Commissioner specified in clause (91) of section 2, sub-section (3) of section 5, clause (b) of sub-section (9) of section 25, sub-sections (3) and (4) of section 35, sub-section (1) of section 37, sub-section (2) of section 38, sub-section (6) of section 39, sub-section (5) of section 66, sub-section (1) of section 143, sub-section (1) of section 151, clause (l) of sub-section (3) of section 158 and section 167 shall mean a Commissioner or Joint Secretary posted in the Board and such Commissioner or Joint Secretary shall exercise the powers specified in the said sections with the approval of the Board.


552 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal This Section empowers the Competent Authority to issue orders, instruction or directions to the lower

authorities to bring in uniformity in the implementation of the Act.

There are three aspects to the provision, namely:

– authority issuing the instruction

– persons whom it binds, and

– its efficacy

It is the Competent Authority who is empowered to issue the orders, instruction or directions.

The purpose is to bring in uniformity in the implementation of the Act; and it is binding on all GST officers.

Thus, any circular which is general or administrative in nature is binding on the assessing officer and other officers at basic level. Once the circular is cited they cannot ignore it and decide the matter independently.

The circular or instruction is not binding on the assessee. As regards contrary views regarding binding force of a Circular which is against the legal provisions on the assessee or the Authorities is not expressly addressed in this Section.

However, officers are not liable for passing orders contrary to law involving interpretation by higher judiciary if it can be shown that such orders are in conformity with orders, instruction or directions issued under this Section.

Sub-section (2) designates the Commissioner or Joint Secretary posted in the Board for exercising certain powers conferred under specific provisions. Such powers would be exercised with the approval of the Board.

24.25 Sec. 169 : Service of Notice in Certain Circumstances

(1) Any decision, order, summons, notice or other communication under this Act or the rules made thereunder shall be served by any one of the following methods, namely :

(a) by giving or tendering it directly or by a messenger including a courier to the addressee or the taxable person or to his manager or authorised representative or an advocate or a tax practitioner holding authority to appear in the proceedings on behalf of the taxable person or to a person regularly employed by him in connection with the business, or to any adult member of family residing with the taxable person; or

(b) by registered post or speed post or courier with acknowledgement due, to the person for whom it is intended or his authorised representative, if any, at his last known place of business or residence; or

(c) by sending a communication to his e-mail address provided at the time of registration or as amended from time to time; or

(d) by making it available on the common portal; or

(e) by publication in a newspaper circulating in the locality in which the taxable person or the person to whom it is issued is last known to have resided, carried on business or personally worked for gain; or

(f) if none of the modes aforesaid is practicable, by affixing it in some conspicuous place at his last known place of business or residence and if such mode is not practicable for any reason, then by affixing a copy thereof on the notice board of the office of the concerned officer or authority who or which passed such decision or order or issued such summons or notice.

(2) Every decision, order, summons, notice or any communication shall be deemed to have been served on the date on which it is tendered or published or a copy thereof is affixed in the manner provided in sub-section

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(1).

(3) When such decision, order, summons, notice or any communication is sent by registered post or speed post, it shall be deemed to have been received by the addressee at the expiry of the period normally taken by such post in transit unless the contrary is proved.


1. Communication : Any decision, order, summons, notice or other communication under the Act or the rules.

2. Modes of Communication : The above documents can be served on the assessee in the following modes:

(a) Mode 1 - Physical Delivery

Giving or tendering it directly or

Delivery through a messenger including a courier

The documents can be delivered to:

(i) The addressee/the taxpayer/to his manager

(ii) The agent duly authorized/an advocate/a tax practitioner (who holds authority to appear in the proceeding on behalf of the taxpayer)

(iii) A person regularly employed by him in connection with the business

(iv) Any adult member of family residing with the taxpayer or

(b) Mode 2 - Regd. Post /speed post or Courier with acknowledgement due: It should be sent to intended person or his authorised representative at his last known place of business or residence.

(c) Mode 3 - Electronic Means

Email or notifying in common portal (GSTN).

(d) Mode 4 - Media: Publication in a newspaper (in the locality in which the taxpayer or the person to whom it is issued is known to have resided, carried on business or personally worked for gain)

(e) Mode 5 - Other Modes: If above modes fail, then it can be served by

Affixing it in some conspicuous place at his last known place of business or residence or

If above mode is not practicable, service of notice can be by affixing a copy on the notice board of the officer or authority issuing such communication.

3. Date of Service:

Normal Cases: The above communications shall be treated as served on the date on which it is tendered or published or a copy thereof is affixed (as mentioned above).

Registered or Speed Post: If such communications are sent by registered/speed post, it shall be treated as received by the addressee at the expiry of the normal period taken by such post in transit (unless the contrary is proved).

554 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal 24.26 Sec. 170 : Rounding Off of Tax, etc.

The amount of tax, interest, penalty, fine or any other sum payable, and the amount of refund or any other sum due, under the provisions of this Act shall be rounded off to the nearest rupee and, for this purpose, where such amount contains a part of a rupee consisting of paise, then, if such part is fifty paise or more, it shall be increased to one rupee and if such part is less than fifty paise it shall be ignored.


(i) This provision enables the tax payers and also the departmental authorities to round off the amounts calculated as per the law, if the amounts are in fraction of a rupee.

(ii) Amounts covered: Tax, interest, penalty, fine or any other sum payable, and refund or any other sum due, under the Act.

(iii) The above amounts shall be rounded off as under:

If amount contains a part of the rupee Effect

≥ 50 paise Must be increased to one rupee

< 50 paise Part to be ignored

(iv) In case of the assessee, the rounding off must be done for every part of the tax contained in the invoice.

(v) The above provision is applicable for the assessee, for the department (while issuing show cause notice or passing the order, etc.) and also for the Appellate Authorities.

24.27 Sec. 171 : Anti-Profiteering Measure

The burden of indirect taxation ultimately falls on the consumers. It is expected that the GST regime will result in an increased flow of input tax credit. In such a scenario, the concern that benefit of such increased input tax credit may not be passed on by certain entities to the consumers is not unreasonable.

Section 171 makes it mandatory that any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed to the recipient by way of commensurate reduction in prices.

NATIONAL ANTI-PROFITEERING AUTHORITY [AUTHORITY]

Constitution

National Anti-profiteering Authority is therefore being constituted by the Central Government to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods and/or services supplied by him.

Chapter XV: Anti-profiteering of CGST Rules, 2017 prescribe the provisions relating to constitution of such authority, duties of the authority, orders of the authority etc. The same are discussed hereunder.

The National Anti-Profiteering Authority shall be a 5 members committee consisting of a Chairman who holds or has held a post equivalent in rank to a Secretary to the Government of India; and four Technical Members who are or have been Commissioners of State tax or central tax for at least one year or have held an equivalent post under earlier laws.

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The Authority shall cease to exist after the expiry of 2 years 4 years [‘2 years’ substituted by ‘4 years’ by NN. 33/2019 – CT, w.e.f. 18.07.2019] from the date on which the Chairman enters upon his office unless the GST Council recommends otherwise.

Duties of the Authority [Rule 127]

It shall be the duty of the authority -

(i) to determine whether the reduction in tax rate or the benefit of input tax credit has been passed on by the seller to the buyer (hereinafter collectively referred to as ‘benefit’) by reducing the prices

(ii) to identify the taxpayer who has not passed on the benefit

(iii) to order

(a) reduction in prices

(b) return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest at the rate of 18% from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount not returned, as the case may be. If the eligible person does not claim return of the amount or is not identifiable, the amount must be deposited in the Consumer Welfare Fund;

(c) imposition of penalty

(d) cancellation of registration

(iv) to furnish a performance report to the GST Council by the 10th of the month succeeding each quarter.

Process followed by the Authority

Examination of application by the Standing Committee and Screening Committee

(1) The Standing Committee shall, within a period of two months from the date of the receipt of a written application or within such extended period not exceeding a further period of one month for reasons to be recorded in writing as may be allowed by the Authority, in such form and manner as may be specified by it, from an interested party or from a Commissioner or any other person, examine the accuracy and adequacy of the evidence provided in the application to determine whether there is prima-facie evidence to support the claim of the applicant that the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has not been passed on to the recipient by way of commensurate reduction in prices. [bold & ilatic words inserted by NN 31/2019 – CT, w.e.f. 28.06.2019]

(2) All applications from interested parties on issues of local nature or those forwarded by the standing Committee shall first be examined by the State Level Screening Committee. On being satisfied that the supplier has not passed on the benefit, the Screening Committee will forward the application with its recommendations to the Standing Committee on Anti-profiteering within a period of two months from the date of the receipt of a written application or within such extended period not exceeding a further period of one month for reasons to be recorded in writing as may be allowed by the Authority [bold & ilatic words inserted by NN 31/2019 – CT, w.e.f. 28.06.2019]

Initiation and conduct of proceedings

If the Standing Committee is satisfied that there is a prima facie evidence to show that the supplier has not passed on the benefit, it shall refer the matter to the Directorate General of Anti-profiteering for a detailed investigation.

Investigation: Directorate General of Anti-profiteering shall conduct investigation and collect evidence necessary to determine undue profiteering and before initiation of the investigation, issue a notice to the interested parties (and to such other persons as deemed fit for a fair enquiry into the matter).

556 Indirect Taxation - Goods and Services Tax (GST) Authored by CA. Yashvant Mangal The evidence or information presented to the Directorate General of Anti-profiteering by one interested party can be made available to the other interested parties, participating in the proceedings. The evidence provided will be kept confidential and the provisions of section 11 of the Right to Information Act, 2005, shall apply mutatis mutandis to the disclosure of any information which is provided on a confidential basis.

The Directorate General of Anti-profiteering can seek opinion of any other agency or statutory authorities in the discharge of his duties.

The Authority, [“Authority” word inserted by NN 31/2019-C.T.,w.e.f. 28.06.2019] Directorate General of Anti-profiteering or an officer authorized by him will have the power to summon any person either to give evidence or to produce a document or any other thing. He will also have same powers as that of a civil court and every such inquiry will be deemed to be a judicial proceeding.

The Directorate General of Anti-profiteering will complete the investigation within a period of 3 months 6 months [‘3 months’ substituted by ‘6 months’ by NN 31/2019 – CT, w.e.f. 28.06.2019] or within such extended period not exceeding a further period of 3 months for reasons to be recorded in writing as allowed by the Standing Committee. Upon completion of the investigation, Directorate General of Anti-profiteering will furnish to the Authority, a report of its findings along with the relevant records.

Order of the Authority

Where the Authority determines that a registered person has not passed on the benefit, the Authority may order-

(a) reduction in prices;

(b) return to the recipient, the benefit amount not passed on along with interest @ 18% from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount including interest not returned, as the case may be;

(c) deposition of amount along with interest @ 18% from the date of collection of the higher amount till the date of the deposit of such amount to consumer welfare funds as constituted under Section 57 of CGST & SGST ACT (50% each), where the eligible person is does not claim return of amount or is not identifiable [bold & italic words inserted by NN 31/2019 – CT, w.e.f. 28.06.2019] ;

(d) imposition of penalty as specified under the Act; and

(e) cancellation of registration under the Act.

The following are noteworthy in this regard:

- The Authority may, during the process of determination, seek the clarification from the Director General of Anti Profiteering on the report submitted by it. [inserted by NN 31/2019 – CT, w.e.f. 28.06.2019]

- Any order passed by the Authority shall be immediately complied with by the registered person failing which action shall be initiated to recover the amount.

- The Authority will pass order within 6 months [‘3 months’ substituted by ‘6 months’ by NN 31/2019 – CT, w.e.f. 28.06.2019] from the date of the receipt of the report from the Director General of Anti-Profiteering.

- An opportunity of being heard will be given, if the interested parties request for it in writing.

- If the eligible person (i.e., the buyer) does not claim the return or the person is unidentifiable then the amount must be deposited to the Consumer Welfare Fund along with applicable interest.

- If the report of the Director General of Anti-profiteering recommends that there is contravention or even non-contravention of the provisions of section 171 or these rules, but the Authority is of the opinion that further investigation or inquiry is called for in the matter, it may, for reasons to be recorded in writing,

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refer the matter to the Director General of Anti-profiteering to cause further investigation or inquiry in accordance with the provisions of the Act and these rules.

Rule 133(5):

(a) Further, where upon receipt of the report of the Director General of Anti-profiteering, the Authority has reasons to believe that there has been contravention of the provisions of section 171 in respect of goods or services or both other than those covered in the said report, it may, for reasons to be recorded in writing, within 6 months, direct the Director General of Anti-profiteering to cause investigation or inquiry with regard to such other goods or services or both, in accordance with the provisions of the Act and these rules.

(b) The investigation or enquiry under clause (a) shall be deemed to be a new investigation or enquiry and all the provisions of rule 129 (initiation and conduct of proceedings) shall mutatis mutandis apply to such investigation or enquiry.

[Rule 133(5) inserted by NN 31/2019 – CT, w.e.f. 28.06.2019]

Illustration: 2

What is Anti-profiteering measure?

Solution:

As per section 171 of the CGST Act, any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. National Anti- profiteering Authority may examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him.

24.28 Sec. 172 : Removal of Difficulties

(1) If any difficulty arises in giving effect to any provisions of this Act, the Government may, on the recommendations of the Council, by a general or a special order published in the Official Gazette, make such provisions not inconsistent with the provisions of this Act or the rules or regulations made thereunder, as may be necessary or expedient for the purpose of removing the said difficulty:

Provided that no such order shall be made after the expiry of a period of three years from the date of commencement of this Act.

(2) Every order made under this section shall be laid, as soon as may be, after it is made, before each House of Parliament.

24.29 Sec. 173 : Amendment of Act 32 of 1994

Save as otherwise provided in this Act, Chapter V of the Finance Act, 1994 shall be omitted.

24.30 Sec. 174 : Repeal and Saving

(1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 1944 (except as respects goods included in entry 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, and the Central Excise Tariff Act, 1985 (hereafter referred to as the repealed Acts) are


hereby repealed.

(2) The repeal of the said Acts and the amendment of the Finance Act, 1994 (hereafter referred to as “such amendment” or “amended Act”, as the case may be) to the extent mentioned in the sub-section (1) or section 173 shall not -

(a) revive anything not in force or existing at the time of such amendment or repeal; or

(b) affect the previous operation of the amended Act or repealed Acts and orders or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts:

(d) Provided that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or affect any duty, tax, surcharge, fine, penalty, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the amended Act or repealed Acts; or

(e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed;

(f) affect any proceedings including that relating to an appeal, review or reference, instituted before on, or after the appointed day under the said amended Act or repealed Acts and such proceedings shall be continued under the said amended Act or repealed Acts as if this Act had not come into force and the said Acts had not been amended or repealed.

(3) The mention of the particular matters referred to in sub-sections (1) and (2) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 with regard to the effect of repeal.


Introduction :

These provisions indicate the extent of current indirect tax laws, which would continue upon introduction of CGST Act. It also provides for exceptions as to continuation of certain provisions of the existing laws for the sake of smooth transition. Further certain Acts would be repealed upon introduction of CGST Act.

Analysis :

(a) These provisions have to be read along with the Transition provisions in chapter XX.

(b) It would come into force on the date of enactment of the CGST Act.

(c) Whenever an enactment is repealed or substituted by a new enactment then the new enactment should provide for a clause relating to repeal or saving of certain provisions under the old law.

(d) This would ensure that the rights, powers, liabilities, duties, privileges, obligations etc. created under the old laws are intact and are not affected by the enactment of new law by repealing the old laws.

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(e) Entry 84 of the Union List and Entry 54 of the State List, both forming part of the VII Schedule to the Constitution as amended by the Constitutional (101st Amendment) Act 2016 would continue to apply to certain goods.

(f) For the said purpose, the General Sales Tax/VAT / CST laws and Central Excise Act, 1944 and Central Excise Tariff Act, 1985 would continue to apply - e.g. Certain petroleum products, tobacco products.

(g) Thus these laws would operate even after the GST is introduced and are not repealed.

(h) In other words its application is restricted to few products/goods only.

(i) The following laws would be repealed, as the taxes are subsumed by GST law:

State laws:

– Entry Tax laws

– Entertainment Tax laws

– Luxury Tax laws

Central laws:

– Duty of Excise on Medicinal and Toilet Preparation Act

– Chapter V of the Finance Act, 1994 (Service Tax law).

(j) However such restricted application or repeal of old laws would not affect or revive the following:

Revive anything not in force or existing at the time at which the amendment or repeal takes effect. To illustrate, if a person has not taken credit in the earlier regime due to restrictions on time limit, he does not get a chance to claim it after such time limit is removed due to repeal of ST law.

Affect the previous operation of the amended/repealed Acts or anything duly done or suffered there under. To illustrate, if a person has duly filed returns under the old regime it cannot be questioned now by the department. Similarly, if a person has been penalised earlier for delay in filing returns and has paid late filing fee, it cannot be questioned now by the assessee.

Affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended/repealed Acts. To illustrate, a right of appeal, which accrues under the old regime and duly exercised before the CESTAT or Commissioner (Appeals) does not fail due to restricted application of the old laws. Similarly, the mandatory pre-deposit made under section 35F of the Central Excise Act, 1944, to pursue an appeal cannot be claimed as refund after GST is introduced.

Affect any tax, surcharge, penalty, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed under the provisions of the amended/ repealed Acts. For example, if a Central Excise case is decided by the Supreme Court after enactment of GST and the party’s appeal is rejected then the liabilities can still be enforced even though the CE Act may be repealed or applied in a restricted manner.

Affect any investigation, enquiry, assessment proceeding, any other legal proceeding or remedy in respect of any such tax, surcharge, penalty, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, enquiry, assessment proceeding, adjudication and other legal proceeding or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so restricted or not so enacted. To illustrate, if on the date of enactment of GST law, the matter is under investigation, it can be continued and the SCN can be issued subsequently invoking the old provisions.

Affect any proceeding including that relating to an appeal, revision, review or reference, instituted before the appointed day under the earlier law and such proceeding shall be continued under the earlier law as if this


Act had not come into force and the said law had not been repealed. To illustrate, all the pending matters before the Commissioner (Appeals), Revisionary Authority, CESTAT, High Court and Supreme Court, would be continued and would not abate due to introduction of GST law.

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