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Index

Chapter 1 - Basics of GST 1


Chapter 2 - Understanding IGST, CGST, SGST & UTGST 5
Chapter 3 - Registration 11
Chapter 4 - GST Rates 21
Chapter 5 - Composition Scheme 29
Chapter 6 - Invoicing 39
Chapter 7 - Payment 49
Chapter 8 - Input Tax Credit 53
Chapter 9 - Returns 63
Chapter 10 - Audit 73
Chapter 11 - E-way Bill 77
Chapter 12 - Valuation of Goods/ Services 81
Chapter 13 - Time of Taxation 91
Chapter 14 - Place of Supply 95
Chapter 15 - Accounting Records 101
Chapter 16 - Refunds 107
Chapter 17 - TDS under GST 111
Chapter 18 - TCS under GST by E-Commerce Operator 115
Chapter 19 - GST Compliance Rating 119
Chapter 20 - Accounting 121
Basics of GST| 1

Chapter 1

Basics of GST
2 | GST – The Businessman’s Guide

What is Goods & Service Tax (GST) and its


Fundamentals

Goods and Service Tax (GST) is a system of indirect taxation which is


adopted by 150 countries all over the world. In India GST bill is passed by
loksabha in 2015 and by rajyasabha on 3rd of Aug, 2016. It is expected to be
roll out on 1st of July, 2017.

After implementation of GST, all the indirect taxes will be subsumed in it. The
taxes which are subsumed by GST are:

Central Indirect Taxes

 Central Excise Duty


 Additional Excise Duties
 Service Tax
 Additional Customs Duty (CVD)
 Special additional custom duty
 Central Surcharges and Cess

State Indirect Taxes

 VAT/Sales Tax
 Entertainment Tax
 Central Sales Tax
 Octroi and Entry Tax
 Purchase Tax
 Luxury Tax
 Tax on Lottery
 State Cesses and Surcharges
Basics of GST| 3

GST is a consumption based tax; it means that the state in which the final sale
to consumer is made is entitled to get the tax. GST would apply to all goods
other than alcohol, crude petroleum, motor spirit, diesel, aviation turbine fuel
and natural gas.

The GST system in India will contain three structures of tax:

1. Central GST (CGST) – levied by centre


2. State GST (SGST) – levied by state
3. Integrated GST (IGST) – levied by Central government on inter-state
supply of goods and services.
Understanding IGST, CGST, SGST & UTGST| 5

Chapter 2

Understanding IGST, CGST,


SGST & UTGST
6 | GST – The Businessman’s Guide

Understanding IGST, CGST and SGST

When learning about the GST, the first question comes to almost every person
is: What is IGST, CGST, UTGST and SGST. On one hand it is said that
almost all indirect taxes are merged into a single tax called Goods and Service
Tax and on other hand it is stated that there will be four taxes as IGST, CGST,
UTGST and SGST.

IGST stands for Integrated Goods and Service Tax


CGST stands for Central Goods and Service Tax
SGST stands for State Goods and Service Tax
UTGST stands for Union Territory Goods and Service Tax

What is CGST, SGST and UTGST?

Since GST subsumed both indirect taxes of central government (excise duty,
service tax, custom duty etc) and state governments (VAT, Luxury tax
etc), both of the government now depends on GST for their indirect tax
revenue. Therefore the GST rate is composed of two rates, one of CGST and
one of SGST. Therefore while making intra state sale (i.e. within same state),
CGST collected will go to the central government and SGST collected will go
the respective state government in which sale is made.

UTGST is more or less similar to SGST. In a state SGST will be applicable


while in a union territory UTGST will be applicable.

For e.g.:- A dealer in Maharashtra sold goods to the consumer worth Rs.
10,000. The GST rate is 18% comprising of CGST rate of 9% and SGST rate
of 9%, in such case the dealer collects Rs. 1800 and Rs. 900 will go to the
central government and Rs. 900 will go to the Maharashtra government.

What is IGST?

GST is a consumption based tax i.e. the tax should be received by the state in
which the goods or service are consumed, not by the state in which such goods
are manufactured.

IGST is designed to ensure seamless flow of input tax credit from one state to
another. It is designed so that a state doesn’t have to deal with every other
Understanding IGST, CGST, SGST & UTGST| 7

state to settle the tax amounts and a state has to deal with only centre
government.

Therefore if inter-state sales (i.e. from one state to another state) are made then
seller will charge IGST in place of CGST + SGST.

For ex: A dealer in Maharashtra sold goods to its dealer in Rajasthan worth
Rs. 1,00,000. The GST rate is 18% comprising of CGST rate of 9% and SGST
rate of 9%, in such case the dealer has to charge Rs. 18,000 as IGST.

How GST credits will be adjusted between states and


Centre

The exporting State will transfer to the Centre the credit of SGST used in
payment of IGST. This way the exporting state will not get any revenue from
tax.

The Centre will transfer to the importing State the credit of IGST used in
payment of SGST. This way the importer’s state will get the full amount of
SGST.

This way any tax earned by exporting state in such goods in transferred to the
importing state. And the net result is that the Centre government got his share
and importer’s state gets his.
8 | GST – The Businessman’s Guide

For ex:

Goods sold by a manufacturer (A) to a trader (B) in same state i.e. Rajasthan
for Rs. 100. Now the goods are sold by B to a trader in Gujarat i.e. C for Rs.
175 and finally sold by C to the consumer D. Assuming CGST @ 9% and
SGST @ 9%.
Understanding IGST, CGST, SGST & UTGST| 9

Amount Received as Tax by

Sale Rajastha Gujarat Central Invoice Amount


Price n

A to B Rs.100 100*9%= Rs.0 100*9%=Rs.9 100+18=Rs.118


Rs.9

B to C Rs.175 Rs.0 Rs.0 175*18%= 175+31.5=Rs.206.5


Rs.31.5
Less: CGST
Credit of Rs.9
Less: SGST
Credit of Rs.9
Payment of
Rs.13.5

C to D Rs.300 Rs.0 300*9%= 300*9%= 300+54=Rs.354


Rs.27 Rs.27
Less:IGST Less: IGST
Credit of Credit of
Rs.4.5 Rs.27*
Payment of Payment of
Rs.22.5 Rs.0

Total Rs.9 Rs.22.5 Rs.22.5


Receipt

* Any credit standing for IGST should be first utilized for payment of CGST
and then for payment of SGST.

This will complete the procedure on behalf of the tax payers but as you can see
from the above example the Rajasthan Government gets Rs. 9 as tax when he
was not eligible to receive it. Because the goods finally consumes in Gujarat
and GST is a consumption based tax. And also Gujarat and Central
government should receiveRs. 27 (300*9%) as tax each while they have
received only Rs. 22.5 each. Therefore following transaction takes place as
defined above.

The exporting State (Rajasthan) will transfer to the Centre the credit of SGST
used in payment of IGST which is Rs. 9. (Transaction B to C).
10 | GST – The Businessman’s Guide

The Centre will transfer to the importing State (Gujarat) the credit of IGST
used in payment of SGST which is Rs. 4.5 (Transaction C to D).

This way Rajasthan Government revenue is Nil, Gujarat’s revenue is Rs. 27


and Centre’s revenue is also Rs. 27.
Registration| 11

Chapter 3

Registration
12 | GST – The Businessman’s Guide

Persons required to register compulsorily

a. Persons in states of Arunachal Pradesh, Assam, Jammu and Kashmir,


Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal
Pradeshand Uttarakhand with aggregate Turnover of more than Rs. 10
lakhs.
b. Persons in any other state with aggregate Turnover of more than Rs. 20
lakhs.
c. Person who is registered under VAT, CST, Excise, Service Tax or custom
on 30th June 2017.
d. Persons making any inter-State taxable supply.
e. casual taxable persons
f. persons who are required to pay tax under reverse charges
g. non-resident taxable persons
h. persons who are required to deduct tax under section 51
i. persons who supply goods and/or services on behalf of other registered
taxable persons whether as an agent or otherwise
j. input service distributor
k. persons who supply goods and/or services, other than branded services,
through electronic commerce operator
l. every electronic commerce operator
m. 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
n. an aggregator who supplies services under his brand name or his trade
name
o. such other person or class of persons as may be notified by the Central
Government or a State Government on the recommendations of the
Council.
p. 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
Registration| 13

may be, shall be liable to be registered with effect from the date of such
transfer or succession.
q. In case of amalgamation or demerger of two or more companies by order
of High Court or Tribunal, the transferee shall be liable to be registered,
where required, with effect from the date on which the Registrar of
Companies issues a certificate of incorporation.
Other Points-

 A farmer shall not be considered as a taxable person and shall not be liable
to take registration.
 The supplier shall not be liable to registration if his aggregate turnover
consists of only goods and/or services which are not liable to tax or wholly
exempt under this Act.
 Provided that if the person, other than an Input Service Distributor, is
registered under an earlier law, it shall not be necessary for him to apply
for fresh registration under this section and he shall follow the procedure as
may be prescribed in this behalf.
 A person doing more than one business in a state may obtain separate
registration for each business. However, he is not compulsorily required to
do so. If he makes separate registration then all his firms are taken as
separate firms for all purpose. And they have to pay tax and issue invoice
for supply of goods/service between themselves.
 If a person operates in more than one states than such person is required to
register separately in every such state. Every such establishment will be
treated as distinct person.
 There is no option for centralized registration, registration needs to be done
state wise
 Where a person who is liable to be registered under this Act fails to obtain
registration, the proper officer may proceed to register such person in the
manner as may be prescribed.
Aggregate Turnover is the total value of following amounts of a person
having same PAN on all India basis

(i) all taxable and non-taxable supplies,


(ii) exempt supplies, and
(iii) exports of goods and/or service
(iv) supplies made on behalf of principal (in case of agent)
14 | GST – The Businessman’s Guide

But it doesn’t include

(i) the value of supplies on which tax is levied on reverse charge basis
(ii) supply of goods by job worker to the principal
(iii) the value of inward supplies
(iv) IGST, CGST, SGST

Therefore if an individual does two different business and its total turnover
exceeds the threshold limit then such person has to compulsorily require to
register. And a person who is working in two states and his total turnover
exceed the threshold limit also required to register in both such states.

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• and the value of such
goods shall not be included in the aggregate turnover of the registered job
worker.

The liability to pay tax, however, will start only when the registered person
reaches a threshold limit of turnover (Excluding cases where the threshold is
not applicable).

Voluntarily Registration

A person who is not liable to be registered may get himself registered


voluntarily. The person who gets himself registered voluntarily shall be liable
for payment of tax and all provisions of the act will apply to him in same
manner as applicable to registered persons.

Time Limit for Registration

A person has to apply for registration within 30 days from the date on which
he becomes liable to registration. A casual taxable person or a non-resident
taxable person shall apply for registration at least five days prior to the
commencement of business.

Effective Date of Registration

Where the application for registration has been submitted within thirty days
from the date on which the person becomes liable to registration, the effective
Registration| 15

date of registration shall be the date on which he becomes liable for


registration.

Where an application for registration has been submitted by the applicant after
thirty days from the date of his becoming liable to registration, the effective
date of registration shall be the date of grant of registration. In case of
suomoto registration, i.e. taking registration voluntarily while being within the
threshold exemption limit for paying tax, the effective date of registration shall
be the date of the order of registration.

Requirements for registration

A person needs to have PAN (Permanent Account Number) to register under


Goods and Service Tax. The GST number is linked to the PAN of the taxable
person.
Non-Taxable Person may be granted registration on any other document
prescribed in this behalf. No separate registration is required under CGST,
SGST/IGST and IGST. Only single registration is made under all the three
taxes.

TAN number is sufficient for persons who are required to deduct TDS under
Section 51, they are not required compulsorily to have PAN.
A valid passport is required for registration by Non resident persons.

Separate registration for multiple business verticals


within a State or a Union territory

Any person having multiple business verticals within a State or a Union


territory, requiring a separate registration for any of its business verticals shall
be granted separate registration in respect of each of the verticals subject to the
following conditions-

 Such person has more than one business vertical.


 Either all firms of a single taxable person must pay tax under composition
scheme or all firms must pay tax under normal scheme.
 Such separate entities should issue tax invoice and pay tax in respect of
supply made to each other.
Business vertical is defined as
16 | GST – The Businessman’s Guide

“Business vertical” means a distinguishable component of an enterprise that is


engaged in the supply of individual goods or services or a group of related
goods or services which is subject to risks and returns that are different from
those of the other business verticals.

Explanation.––For the purposes of this clause, factors that should be


considered in determining whether goods or services are related include–

(a) the nature of the goods or services.


(b) the nature of the production processes.
(c) the type or class of customers for the goods or services.
(d) the methods used to distribute the goods or supply of services.
(e) the nature of regulatory environment (wherever applicable), including
banking, insurance, or public utilities.

Things that un-registered persons are not allowed to

Persons who are not registered under GST are not allowed to collect GST and
are not allowed to take Input Tax Credit (ITC) of GST paid by him. Therefore
if an unregistered person purchases goods from a registered dealer and pays
GST then he cannot claim GST as well as cannot pass on the GST to another
dealer to which he sells goods/services.

Casual taxable person and non-resident taxable


person

Casual taxable person refers to a person who occasionally undertakes


transactions in a state or union territory where he has no fixed place of
business. For e.g. a person who has his business in Delhi wants to attend an
exhibition in Gujarat, so he can register as a casual taxable person in the state
of Gujarat.

Non-Resident Taxable person is a person residing outside India and coming


to India to occasionally undertake the transaction in the country but has no
fixed place of business in India.
Casual taxable person and Non-Resident Person must file an application at
least five days prior to the commencement of the business. Such persons shall
make taxable supplies only after the issuance of the certificate of
registration.
Registration| 17

The certificate of registration issued to a casual taxable person or a non-


resident taxable person shall be valid for a period of ninety days or period
specified in the application whichever is earlier, from the effective date of
registration. Provided that the proper officer may, at the request of the said
taxable person, extend the aforesaid period of ninety days by a further period
not exceeding ninety days.

Casual taxable person and non-taxable person has to make an advance deposit
of tax at the time of submitting an application for registration of an amount
equivalent to estimated tax liability. If extension of time is sought then
additional amount of estimated tax for such extended time is to be deposited.

Casual Taxable Person shall be given a temporary identification number by


the Common Portal for making advance deposit of tax and acknowledgement
in Form GST REG-02 shall be issued electronically thereafter.

Amendment of Registration

Every registered taxable person shall inform the proper officer of any changes
in the information previously furnished by him. The proper officer may accept
or reject the amendments. The proper officer shall not reject the request for
amendment in the registration particulars without giving a notice to show
cause and without giving the person a reasonable opportunity of being heard.
No separate information is required to be furnished for the SGST or CGST or
IGST as there is only single registration for all three.

Cancellation of Registration

Registration can be cancelled by

 registered taxable person himself


 by his legal heirs, in case of death of such person
 proper officer in its own motion
Registration can be cancelled in following circumstances

 the business has been discontinued


 transferred fully
 death of proprietor
18 | GST – The Businessman’s Guide

 amalgamation with other entity


 demerged
 there is change in constitution of business
 the person is no longer liable to be registered compulsorily
Registration can be cancelled by proper officer in its own motion from any
date including a past date where

 a person under composition scheme has not furnished returns for three
continuous quarters
 a person not under composition scheme has not furnished returns for six
continuous months
 any person who has taken voluntary registration and not commenced
business within six months from the date of registration
 a person who has contravened such provisions of the Act or the rules made
there under as may be prescribed
 registration has been obtained by means of fraud, wilful misstatement or
suppression of facts
The proper officer shall not cancel the registration without giving a notice to
show cause and without giving the person a reasonable opportunity of being
heard.

A person whose registration is cancelled shall pay an amount equivalent to the


credit of input tax in respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the day immediately
preceding the date of such cancellation or the output tax payable on such
goods, whichever is higher, calculated in such manner as may be prescribed.

Provided that in case of capital goods, the taxable person shall pay an amount
equal to the input tax credit taken on the said capital goods reduced by the
percentage points as may be prescribed in this behalf or the tax on the
transaction value of such capital goods under sub-section (1) of section 15,
whichever is higher.
Registration| 19

Revocation of Cancellation of Registration

(1) Subject to such conditions and in such circumstances as may be prescribed,


any registered taxable person, whose registration is cancelled by the proper
officer on his own motion, may apply to such officer for revocation of
cancellation of the registration in the prescribed manner within thirty days
from the date of service of the cancellation order.

(2) The proper officer may, in the manner and within such period as may be
prescribed in this behalf, by way of an order, either revoke cancellation of the
registration or reject the application for revocation for good and sufficient
reasons.

(3) The proper officer shall not reject the application for revocation of
cancellation of registration without giving a notice to show cause and without
giving the person a reasonable opportunity of being heard.

(4) Revocation of cancellation of registration under the CGST Act / SGST Act
shall be deemed to be a revocation of cancellation of registration under the
SGST Act / CGST Act.

Input Service Distributor (ISD)

Input Service Distributor is basically an office meant to receive tax invoices


towards receipt of input services and further distribute the credit to supplier
units proportionately. There is no threshold limit for ISD, therefore
registration under GST is mandatory for ISD. Also ISD registered under
earlier law are also required to register under GST. They will not auto move
on to GSTN.The ISD registration is for one office of the taxpayer which will
be different from the normal registration. Different offices of a taxpayer can
apply for ISD registration.

UN bodies and Government Organisations

UN Bodies

All UN bodies Consulate or Embassy of foreign countries and any other class
of persons so notified would be required to obtain a unique identification
number (UIN) from the GST portal. The structure of the said ID would be
uniform across the States in conformity with GSTIN structure and the same
20 | GST – The Businessman’s Guide

will be common for the Centre and the States. This UIN will be needed for
claiming refund of taxes paid by them and for any other purpose as may be
prescribed in the GST Rules. The taxable supplier supplying to these
organizations is expected to mention the UIN on the invoices and treat such
supplies as supplies to another registered person (B2B) and the invoices of the
same will be uploaded by the supplier.

Government Organisations

A unique identification number (ID) would be given by the respective state tax
authorities through GST portal to Government authorities / PSUs not making
outwards supplies of GST goods (and thus not liable to obtain GST
registration) but are making inter-state purchases.
GST Rates| 21

Chapter 4

GST Rates
22 | GST – The Businessman’s Guide

GST Rates

GST Rates for Biscuits, Biris, Textiles, Footwear, precious or semi-precious


stones, precious metals, imitation jewellery are yet to be decided.

GST Rates for Goods

No tax
No tax will be imposed on items like fresh meat, fish chicken, eggs, milk,
butter milk, curd, natural honey, fresh fruits and vegetables, flour, besan,
bread, prasad, salt, bindi. Sindoor, stamps, judicial papers, printed books,
newspapers, bangles, handloom etc.

5%
Items such as fish fillet, cream, skimmed milk powder, branded paneer, frozen
vegetables, coffee, tea, spices, pizza bread, rusk, sabudana, kerosene, coal,
medicines, stent, lifeboats will attract tax of 5 %.

12%
Frozen meat products , butter, cheese, ghee, dry fruits in packaged form,
animal fat, sausage, fruit juices, Bhutia, namkeen, Ayurvedic medicines, tooth
powder, agarbatti, colouring books, picture books, umbrella, sewing machine,
and cellphones will be under 12 % tax slab.

18%
Most items are under this tax slab which include flavoured refined sugar,
pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces,
soups, ice cream, instant food mixes, mineral water, tissues, envelopes,
tampons, note books, steel products, printed circuits, camera, speakers and
monitors.

28%
Chewing gum, molasses, chocolate not containing cocoa, waffles and wafers
coated with choclate, pan masala, aerated water, paint, deodorants, shaving
creams, after shave, hair shampoo, dye, sunscreen, wallpaper, ceramic tiles,
water heater, dishwasher, weighing machine, washing machine, ATM,
vending machines, vacuum cleaner, shavers, hair clippers, automobiles,
motorcycles, aircraft for personal use, and yachts will attract 28 % tax.
GST Rates| 23

GST Rates for Services

Sr.
DESCRIPTION OF SERVICES GST RATE
No.

1. Transport of goods by rail 5%with ITC of input services

Transport of passengers by rail (other


2. 5%with ITC of input services
than sleeper class)

Services of goods transport agency


(GTA) in relation to transportation of
3. 5%No ITC
goods[other than used household goods
for personal use]

Services of goods transport agency in


4. relation to transportation of used 5%No ITC
household goods for personal use.

Transport of goods in a vessel including


services provided or agreed to be
provided by a person located in non-
taxable territory to a person located in
5. 5%with ITC of input services
non-taxable territory by way of
transportation of goods by a vessel from
a place outside India up to the customs
station of clearance in India

Renting of motor cab(If fuel cost is


6. borne by the service recipient, then 18% 5%No ITC
GST will apply)

Transport of passengers, by-(i) Air


7. conditioned contract/stage carriage other 5% No ITC
than motor cab;(ii) a radio taxi.
24 | GST – The Businessman’s Guide

Transport of passengers by air in


8. 5%with ITC of input services
economy class

Transport of passengers, with or without


accompanied belongings, by air,
9. 5%with ITC of input
embarking from or terminating in a
Regional Connectivity Scheme Airport.

10. Supply of tour operators€™ services 5%No ITC

Leasing of aircrafts under Schedule II [5


11. (f)] by a scheduled airlines for scheduled 5%with ITC of input services
operations

Selling of space for advertisement in


12. 5%With Full ITC
print media

Services by way of job work in relation


13. 5%With Full ITC
to printing of newspapers;

Transport of goods in containers by rail


14. by any person other than Indian 12%With Full ITC
Railways

Transport of passengers by air in other


15. 12%With Full ITC
than economy class

Supply of Food/drinks in restaurant not


having facility of air-conditioning or
16. central heating at any time during the 12%With Full ITC
year and not having licence to serve
liquor.
GST Rates| 25

Renting of hotels, inns, guest houses,


clubs, campsites or other commercial
places meant for residential or lodging
17. 12%With Full ITC
purposes having room tariff Rs.1000 and
above but less than Rs.2500 per room
per day

Services provided by foreman of chit


18. 12%with ITC of input services
fund in relation to chit

Construction of a complex, building,


civil structure or a part thereof, intended 12%With Full ITC but no refund
19. forsake to a buyer, wholly or partly.[The
value of land is included in the amount of overflow of ITC
charged from the service recipient]

Temporary transfer or permitting the use


or enjoyment of any Intellectual
20. 12%with full ITC
Property(IP) to attract the same rate as in
respect of permanent transfer of IP;

Supply of Food/drinks in restaurant


21. 18%With Full ITC
having licence to serve liquor

Supply of Food/drinks in restaurant


having facility of air-conditioning or
22. 18%With Full ITC
central heating at any time during the
year

Supply of Food/drinks in outdoor


23. 18%With Full ITC
catering
26 | GST – The Businessman’s Guide

Renting of hotels, inns, guest houses,


clubs, campsites or other commercial
places meant for residential or lodging
24. 18%With Full ITC
purposes where room tariff of Rs 2500/
and above but less than Rs 5000/- per
room per day

Bundled service by way of supply of


food or any other article of human
consumption or any drink, in a premises
(including hotel, convention centre, club,
25. 18%With Full ITC
pandal, shamiana or any other place,
specially arranged for organizing a
function) together with renting of such
premises

Services by way of admission or access


to circus, Indian classical dance
26. 18%With Full ITC
including folk dance, theatrical
performance, drama

Composite supply of Works contract as


27. defined in clause 119 of section 2 of 18%With Full ITC
CGSTAct

Services by way of admission to


entertainment events or access to
amusement facilities including
exhibition of cinematograph films,
28. 28%With Full ITC
theme parks, water parks, joy rides,
merry-go rounds, go-carting, casinos,
race-course, ballet, any sporting event
such as IPL and the like;

Services provided by a race club by way


29. of totalisator or a licensed bookmaker in 28%With Full ITC
such club;
GST Rates| 27

30. Gambling; 28%With Full ITC

Supply of Food/drinks in air-


31. conditioned restaurant in 5-star or above 28%With Full ITC
rated Hotel

Accommodation in hotels including 5


star and above rated hotels, inns,
guesthouses, clubs, campsites or other
32. 28%With Full ITC
commercial places meant for residential
or lodging purposes, where room rent is
Rs 5000/- and above per night per room

Transfer of the right to use any goods for


any purpose (whether or not for a
specified period) for cash, deferred
payment or other valuable
consideration(supply of service) to Same rate of GST and compensation
33.
attract cess as on supply of similar goods
the same GST rate and compensation
cess as applicable on supply of similar
goods which involves any transfer of
title in goods(supply of goods)

Any transfer of right in goods or of


undivided share in goods without the
transfer of title thereof (supply of
services) to attract the same GST rate Same rate of GSTand compensation
34.
and compensation cess as applicable on cess as on supply of similar goods
supply of similar goods which involves
any transfer of title in goods (supply of
goods).
28 | GST – The Businessman’s Guide

Supply consisting of transfer of title in


goods under an agreement which
stipulates that property in goods shall GST and compensation cess as on
35. pass at a future date upon payment of
full consideration as agreed (supply of supply of similar goods
goods): value of leasing services shall be
included in the value of goods supplied.

All other services not specified


36. 18%With Full ITC
elsewhere

Services which are exempted under current Service Tax will continue to remain
exempted under GST as decided by GST Council.
Composition Scheme| 29

Chapter 5

Composition Scheme
30 | GST – The Businessman’s Guide

Goods and Services Tax is the largest indirect tax reform since independence.
The Government claims to make the flow of goods and legal compliance
easier. However monthly returns are required to be filed under GST which
will only increase the legal compliance as under the current vat system mostly
quarterly returns are required to be filed.

To decrease the burden of compliance and legal formalities there is a provision


under GST to register under composition scheme. This composition scheme is
almost similar to the composition schemes prevalent in current vat regime in
almost all states.

Persons Eligible to Register under Composition


Scheme

 Only persons who deal in goods can opt for such scheme. Manufacturers
can also opt for composition scheme. Manufacturers of certain goods may
be kept outside this scheme by the council. Service providers are kept
outside the scope of the scheme. Although restaurants who does not serve
alcohol can opt for the composition scheme.
 Persons whose Aggregate Turnover in the preceding financial year doesn’t
exceeds Rs. 50 lakh are only eligible under this scheme. Aggregate
turnover means aggregate value of all taxable and non taxable supplies,
exempt supplies and export of goods and/or services of a person having
same PAN. GST is not included in the aggregate turnover. So if an
individual open two firms and combined turnover is more than Rs. 50 lakh
then he cannot take composition scheme.
 If a person wants to opt for the composition scheme then all of his firms
should opt for composition scheme. It is not allowed that some of his firms
are in composition scheme and some are not. If one of the firm becomes
ineligible for composition scheme then all other firms also becomes
ineligible.
 Person should not make interstate sales of goods. Such person is only
allowed to make intra-state sales i.e. in the same state or union territory in
which firm is registered.
 Person should not make sales through any e commerce portal like Amazon
or Flipkart.
 Casual taxable person and non-resident taxable person cannot register
under composition scheme.
Composition Scheme| 31

 The goods held in stock by person on 1st July 2017 have not been
purchased in the course of inter-State trade or commerce or imported from
a place outside India or received from his branch situated outside the State
or from his agent or principal outside the State.
Such limit of Rs. 50 lakh may be increased up to Rs. 1 crore by the GST
council.

What will happen if turnover exceeds?

The person ceases to be in composition scheme with effect from the day on
which his aggregate turnover during a financial year exceeds the specified
limit. If the person continues to pay tax under this scheme then he will be
liable for penalty as mentioned below.

Penalty in case of wrongful claim

If the officer founds that the person is not eligible to pay tax under this scheme
and continuing to pay tax under this scheme then the person is liable to pay tax
at normal GST rate and also a penalty equivalent to the tax payable. Proper
officer should issue notice in Form GST CMP-05 to such defaulting person
to show cause within fifteen days of the receipt of such notice as to why
option to pay tax under composition scheme should not be denied. The person
has to reply in Form GST CMP-06 and the proper officer has to issue order
under Form GST CMP-07 within 30 days of such reply.

Restrictions on persons registered under composition


scheme

 Such persons shall not be entitled to input tax credit. Net tax payable =
Turnover multiplied by Composition Rate
 Such person also breaks the input credit chain so it also cannot pass the
input tax credit. In other words if another dealer purchases goods/services
from composition dealer then such dealer also cannot take input tax credit.
So composition scheme is not suitable for wholesalers and B2B businesses.
 Such person cannot charge composition tax separately in the invoice
issued.
 It is not stated in GST Act that person under composition scheme cannot
buy goods or services from outside state. In present scenario a person under
32 | GST – The Businessman’s Guide

composition scheme cannot purchase goods from another state. This point
needs more clarification.
 Such person cannot make sales through any e commerce portal like
Amazon or flipkart.
 Such person is liable to pay tax on purchases of goods or services from un-
registered persons.
 Such person should mention the words “composition taxable person, not
eligible to collect tax on supplies” at the top of the bill of supply issued by
him.
 Such person shall mention the words “composition taxable person” on
every notice or signboard displayed at a prominent place at his principal
place of business and at every additional place or places of business.

GST Rates under Composition Scheme

Particulars GST Rate

Manufacturers 1%

Restaurants 2.5%

All other traders 0.5%

GST Return and Payment


Persons in composition scheme are required to file quarterly returns and also
pay GST on quarterly basis. All other normal dealers are required to file
monthly returns and also make monthly payment.

Due date for return filing and also for GST payment is 18 days from the end of
the quarter. Such quarterly return is to be filed in Form GSTR-4 and the
details of input supplies will be made available in Form GSTR-4A.

An annual return is also to be filed in Form GSTR-9A on or before 31st


December after the end of the financial year.
Composition Scheme| 33

Benefits of registering under composition scheme


1. Less compliance
Composite dealer has to file quarterly returns and make quarterly payment
while normal dealers has to file monthly returns and make monthly
payments. Record keeping work also decreases to a substantial level.

2. Less cost to customer


If the person have a high margin then the cost to the final customer also
decreases if he opts for composition scheme.
Example –
Normal Dealer Composite Dealer

Purchase Price 50 50

GST @ 18% on purchase 9 9

Cost 50 59

Margin 50 50

Sale Price (Without GST) 100 109

GST @ 18% 18

Composition Fees 1.10 (109*1%/.99)

Cost to customer 118 110.10

3. Composition Fees is assumed at 1%. Composition fees cannot be charged


by dealer from customer separately.

4. In the above example both dealers are enjoying a margin of Rs. 50 but the
final cost to customer is 9.33% less in case of sale by composite dealer.
34 | GST – The Businessman’s Guide

Drawbacks of registering in composition scheme

1. Such person cannot make sales through E commerce operator


As discussed above the person registered in this scheme cannot make sales
through an e commerce operator like flipkart, amazon etc. So composition
scheme is not for those who are making online sales or planning in near
future.

2. Not suitable for wholesalers


Such persons cannot pass the input tax credit and any other dealer would
not like to purchase from such person. If any dealer wants to purchase
goods from such person, then it would amount to double taxation and will
increase costs.

3. Cannotmake sales outside state


Such person cannot make sales outside the state or union territory in which
he is registered. This decreases the scope for the business.

4. Heavy penalty
If the person is not eligible to register under composition scheme but
continue to do so then the officer may ask to deposit tax at standard rates
and penalty equal to tax. If person makes a mistake in following the
eligibility criteria then he may be liable for a very hefty penalty.

Procedure to be followed on GST Applicable Date


(1st July 2017)

Persons who wants to pay tax under composition scheme has to file an
intimation in Form GST CMP-01 before 1st July 2017 although such form can
be also filed till 30th July 2017. If the form is filed after 1st July 2017 even
then the person should not collect tax and should issue bill of supply rather
than tax invoice.

And he also has to file Form GST CMP-03 within sixty days of the date from
which the option for composition levy is exercised. This form contains details
about details of stock, including the inward supply of goods received from
unregistered persons, held by him on the day preceding the date from which he
opts to pay tax under composition scheme.
Composition Scheme| 35

An intimation sent to any state or union territory shall be to be an intimation in


respect of all other places of business registered on the same PAN. Therefore
no separate intimation is required in every state or union territory in which
person is registered.

Opting for Composition Scheme after GST


Applicable Date (1st July 2017)

Procedure to opt

Any person who is registering directly under GST and wants to opt for
composition scheme has to opt such option given in Part B of Form GST
REG-01.

Any person who wants to opt composition scheme after registration has to file
Form GST CMP-02 before the commencement of the financial year for which
person wants to opt. And he also has to file Form GST ITC-03 within sixty
days from the commencement of the relevant financial year. Such intimations
should be filed only once at time of opting and not in all financial years.

The goods held in stock by him on start of financial year should not be
purchased from an unregistered person and if such purchases was made then
tax is to be paid on such stock.

Effective date for composition levy

The effective date for composition levy will be the beginning of the financial
year for which intimation is filed in Form GST CMP-02. In case person opts
for composition scheme at time of registration only the effective date will be
the date of registration. Such person should also take due care that if his
registration is not accepted under composition scheme then he may be liable to
pay tax at full rate for the sales already made.

Opting out from the composition scheme

The person who doesn’t satisfy any condition for eligibility under this scheme
has to pay tax at normal rates and issue tax invoice from the day such
condition ceases to be satisfied. He is also required to file an intimation for
withdrawal from the scheme in Form GST CMP-04 within seven days of such
date.
36 | GST – The Businessman’s Guide

The person who wants to withdraw from such scheme voluntarily has to file
Form GST CMP-04 before the date of such withdrawal.

Every person who has filed GST CMP-04 or has been issued order for
withdrawal of scheme under GST CMP-07 has to furnish GST ITC-
01 containing details of the stock of inputs and inputs contained in semi-
finished or finished goods held in stock by him on the date on which the
option is withdrawn or denied, within 30 days, from the date from which the
option is withdrawn or from the date of order passed in FORM GST CMP-07,
as the case may be.

An intimation sent to any state or union territory or withdrawal of option by


officer shall be deemed to be an intimation or withdrawal in respect of all
other places of business registered on the same PAN.

Withdrawal of Scheme for a person by proper officer

Where the GST officer has reasons to believe that the registered person was
not eligible to pay tax under section 10 or has contravened the provisions of
the Act or these rules, he may issue a notice to such person in FORM GST
CMP-05 to show cause within fifteen days of the receipt of such notice as to
why option to pay tax under composition scheme should not be denied.

The person have to reply to the notice in Form GST CMP-06. The proper
officer has to issue an order in FORM GST CMP-07 within thirty days of
receipt of such reply, either accepting the reply, or denying the option to pay
tax under section 10 from the date of option or from the date of the event
concerning such contravention, as the case may be.
Composition Scheme| 37

GST Forms
Form No. Description

Intimation to pay tax under section 10 (composition levy)


GST CMP-
01 (Only for persons registered under the existing law migrating on the appointed
day)

GST CMP- Intimation to pay tax under section 10 (composition levy)


02 (For persons registered under the Act)

Intimation of details of stock on date of opting for composition levy


GST CMP-
03 (Only for persons registered under the existing law migrating on the appointed
day)

GST CMP-
Intimation/Application for withdrawal from composition Levy
04

GST CMP-
Notice for denial of option to pay tax under section 10
05

GST CMP-
Reply to the notice to show cause
06

GST CMP-
Order for acceptance / rejection of reply to show cause notice
07
Invoicing| 39

Chapter 6

Invoicing
40 | GST – The Businessman’s Guide

Invoicing for Sales of Goods


A registered person who is making a taxable sales of goods has to issue a tax
invoice showing the description, quantity and value of goods, the tax charged
thereon. Such invoice is to be issued before or at time of delivery of goods or
removal of goods for supply or making available thereof to the recipient as the
case may be.

Invoicing for providing Services


A registered person supplying taxable services is required to issue invoice
either before or within 30 days of providing the service, showing the
description, value, tax charged thereon.

Where the supplier of services is an insurer or a banking company or a


financial institution, including a non-banking financial company, the period
within which the invoice or any document in lieu thereof is to be issued shall
be 45 days from the date of supply of service.

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.

Details to be mentioned in Tax Invoice


A tax invoice referred to in section 31 shall be issued by the registered person
containing the following particulars:-

(a) name, address and GSTIN of the supplier.


(b) a consecutive serial number, 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.
(c) date of its issue.
(d) name, address and GSTIN or UIN, if registered, of the recipient.
(e) 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 and where the
value of taxable supply is fifty thousand rupees or more.
(f) HSN code of goods or Accounting Code of 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
Invoicing| 41

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.
(p) signature or digital signature of the supplier or his authorized
representative.
In case of exports of goods or services, the invoice shall carry an endorsement
“SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST” or “SUPPLY
MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING
WITHOUT PAYMENT OF IGST”, as the case may be, and shall, in lieu of
the details specified in clause (e), contain the following details:

(i) name and address of the recipient;


(ii) address of delivery;
(iii) name of the country of destination; and
(iv) number and date of application for removal of goods for export:

Manner of issuing invoice


(1) The invoice shall be prepared in triplicate, in case of supply of goods, in
the following manner:–

(a) the original copy being marked as ORIGINAL FOR RECIPIENT;


(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER;
and
(c) the triplicate copy being marked as TRIPLICATE FOR SUPPLIER.
(2) The invoice shall be prepared in duplicate, in case of supply of services, in
the following manner:-

(a) the original copy being marked as ORIGINAL FOR RECIPIENT; and
(b) the duplicate copy being marked as DUPLICATE FOR SUPPLIER.
(3) The serial number of invoices issued during a tax period shall be furnished
electronically through the Common Portal in FORM GSTR-1.
42 | GST – The Businessman’s Guide

Revision of Invoices issued before issue of registration


certificate
A registered person may issue revised invoices within one month from the
date of issue of certificate of registration for the invoices which are issued
after effective date of registration but before date of issue of registration
certificate.
Such person may issue a consolidated revised tax invoice in respect of all
taxable supplies made to a recipient who is not registered in GST.

In case of inter-State supplies, where the value of a supply does not exceed Rs.
2,50,000, a consolidated revised invoice may be issued separately in respect of
all recipients located in a State, who are not registered under the Act.

Invoices not required to be issued below specified


amount
A registered person may not issue a tax invoice if the value of the goods or
services or both supplied is less than two hundred rupees. If the recipient is a
registered person or the recipient requires a tax invoice then the supplier needs
to issue a tax invoice.

Such person also has to issue a consolidated tax invoice for such supplies at
the close of each day in respect of all such supplies.

Bill of Supply in place of Tax Invoice


Persons who is making sales of exempted goods/services or paying tax
under composition scheme has to issue Bill of Supply instead of a tax invoice.
Such bill of supply should contain the following details
(a) name, address and GSTIN of the supplier.
(b) a consecutive serial number, 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.
(c) date of its issue.
(d) name, address and GSTIN or UIN, if registered, of the recipient.
(e) HSN Code of goods or Accounting Code for services.
(f) description of goods or services or both.
(g) value of supply of goods or services or both taking into account discount or
abatement, if any.
Invoicing| 43

(h) signature or digital signature of the supplier or his authorized


representative.

Receipt Voucher in case of Advance payment


received
On receipt of advance payment with respect to supply of goods/services the
registered person is required to issue a receipt voucher evidencing receipt of
such payment. Such receipt should contain the following details

(a) name, address and GSTIN of the supplier.


(b) a consecutive serial number 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.
(c) date of its issue.
(d) name, address and GSTIN or UIN, if registered, of the recipient.
(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.
(k) signature or digital signature of the supplier or his authorized
representative.
Provided that where at the time of receipt of advance,

(i) the rate of tax is not determinable, the tax shall be paid at the rate of
eighteen per cent.;
(ii) the nature of supply is not determinable, the same shall be treated as inter-
State supply

Refund Voucher
If after receiving of advance payment no supply is made and no tax invoice is
issued then the said registered
person may issue to the person who had made the payment, a refund voucher
against such payment.
A refund voucher shall contain the following particulars:
44 | GST – The Businessman’s Guide

(a) name, address and GSTIN of the supplier


(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 symbolised as “-” and “/”respectively, and any combination
thereof, unique for a financial year
(c) date of its issue
(d) name, address and GSTIN or UIN, if registered, of the recipient
(e) number and date of receipt voucher issued in accordance with provisions of
sub- rule 5
(f) description of goods or 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
(k) signature or digital signature of the supplier or his authorized
representative.

Payment Voucher
A registered person who is liable to pay tax under sub-section (3) or
subsection (4) of section 9 shall issue a payment voucher at the time of making
payment to the supplier.

Such payment voucher shall contain the following particulars

(a) name, address and GSTIN of the supplier if registered


(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 symbolised as “-” and “/”respectively, and any combination
thereof, unique for a financial year
(c) date of its issue
(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
(j) signature or digital signature of the supplier or his authorized
representative.
Invoicing| 45

Revised tax invoice and credit or debit notes


(A revised tax invoice referred to in section 31 and credit or debit note referred
to in section 34 shall contain the following particulars –

(a) the word “Revised Invoice”, wherever applicable, indicated prominently


(b) name, address and GSTIN of the supplier
(c) nature of the document
(d) 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
(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 or, as the case may be, debited to the recipient
(j) signature or digital signature of the supplier or his authorized representative

Continuous Supply of Goods


In case of continuous supply of goods, where successive statements of
accounts or successive payments are involved, the invoice shall be issued
before or at the time each such statement is issued or, as the case may be, each
such payment is received.

Continuous Supply of Services


In case of continuous supply of services

(a) where the due date of payment is ascertainable from the contract, the
invoice shall be issued on or before the due date of payment.
(b) where the due date of payment is not ascertainable from the contract, the
invoice shall be issued before or at the time when the supplier of service
receives the payment.
(c) where the payment is linked to the completion of an event, the invoice
shall be issued on or before the date of completion of that event.
46 | GST – The Businessman’s Guide

Sale on Approval Basis


Where the goods being sent or taken on approval for sale or return are
removed before the supply takes place, the invoice shall be issued before or at
the time of supply or six months from the date of removal, whichever is
earlier.

Transportation of goods through Delivery Challan


(1) For the purposes of

(a) supply of liquid gas where the quantity at the time of removal from the
place of business of the supplier is not known
(b) transportation of goods for job work
(c) transportation of goods for reasons other than by ay of supply
(d) such other supplies as may be notified by the Board
the consigner may issue a delivery challan, serially numbered not exceeding
sixteen characters, in one or multiple series, in lieu of invoice at the time of
removal of goods for transportation, containing the following details:

(i) date and number of the delivery challan


(ii) name, address and GSTIN of the consigner, if registered
(iii) name, address and GSTIN or UIN of the consignee, if registered
(iv) HSN code and description of goods
(v) quantity (provisional, where the exact quantity being supplied is not
known)
(vi) taxable value
(vii) 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
(viii) place of supply, in case of inter-State movement
(ix) signature
(2) The delivery challan shall be prepared in triplicate, in case of supply of
goods, in the following manner:–

(a) the original copy being marked as ORIGINAL FOR CONSIGNEE


(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER
(c) the triplicate copy being marked as TRIPLICATE FOR CONSIGNOR
(3) Where goods are being transported on a delivery challan in lieu of invoice,
the same shall be declared in E-way bill.
(4) 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.
Invoicing| 47

(5) Where the goods are being transported in a semi knocked down or
completely knocked down condition,

(a) the supplier shall issue the complete invoice before dispatch of the first
consignment
(b) the supplier shall issue a delivery challan for each of the subsequent
consignments, giving reference of the invoice
(c) each consignment shall be accompanied by copies of the corresponding
delivery challan along with a duly certified copy of the invoice
(d) the original copy of the invoice shall be sent along with the last
consignment

Additional Information to be contained by


Transporter in his Tax Invoice
When a transporter is supplying services of transportation by goods then such
additional information are also required to be included in tax invoice

 Gross weight
 Name of consignor and consignee
 Registration number of vehicle
 Details of goods
 Place of origin and destination
 GSTIN of person liable for paying tax
Payment| 49

Chapter 7

Payment
50 | GST – The Businessman’s Guide

GST Payment Due Date


Due date for payment of GST is 20 days from the end of the month. For
persons registered under composition scheme the due date will be 18 days
after the end of the quarter.

Rules and Regulations regarding GST payment


Electronic Cash Ledger

The payment made towards tax, interest, penalty, fee or any other amount by
internet banking, credit card, NEFT, RTGS or any other mode shall be
credited to electronic cash ledger of the person. The amount standing in a
person’s electronic cash ledger may be used for the payment of tax, interest,
penalty, fee or any other amount payable under this act.

Payment is to be made by challan in From GST PMT-06. Such challan is valid


for a period of 15 days. Challan Identification Number (CIN) is generated after
successful payment. If the CIN is not generated or not communicated to the
common portal then Form GST PMT-07 can be filed by the person.

Over the Counter payment (OTC) payment can be made through authorized
banks for deposits up to ten thousand rupees per challan per tax period, by
cash, cheque or demand draft. For payment above that amount the payment
should be made through digital mode only.

The restriction for deposit up to ten thousand rupees per challan in case of an
Over the Counter (OTC) payment shall not apply to deposit to be made by –

(a) Government Departments or any other deposit to be made by persons as


may be notified by the Commissioner in this behalf;
(b) Proper officer or any other officer authorised to recover outstanding dues
from any person, whether registered or not, including recovery made through
attachment or sale of movable or immovable properties;
(c) Proper officer or any other officer authorized for the amounts collected by
way of cash, cheque or demand draft during any investigation or enforcement
activity or any ad hoc deposit:

Electronic Credit Ledger

The amount Input Tax Credit (ITC) as filed by the person in his return shall be
credited to electronic credit ledger. The amount standing in electronic credit
ledger may be used for payment of tax only. A person upon noticing any
Payment| 51

discrepancy in his electronic credit ledger should communicate it to the officer


through form GST PMT-04
The person shall discharge his tax and other dues in following order:

 self-assessed tax, and other dues related to returns of previous tax periods
 self-assessed tax, and other dues related to return of current tax period
 any other amount payable under the Act or the rules made there under
including the demand determined under section 73 or 74.

Interest on late payment of GST


If payment is not made within due date then interest is to be paid on the GST
payable. The rate of interest in not yet specified by the council but it cannot be
more than 18%.

In case a person makes an undue or excess claim of input tax credit or undue
or excess reduction in output tax liability, he shall be liable to pay interest on
such excess claim or excess reduction at the rate which is 24% or less (Yet to
be decided)

Penalty on Late Payment of GST


Penalty for the same is governed by the provisions of Section 122(1) of the
GST Act, which provide for a penalty of Rs. 10,000 or 10% of the tax short
paid or unpaid whichever is higher. Such Penalty is leviable in the event of
non-payment of taxes for a period exceeding 3 months from the date on which
such amount was originally payable. If a case is proved for fraud or wilful
misstatement due to which tax was not paid, then in such cases the penalty
shall be 10,000 or 100% of the tax short paid or unpaid, whichever is higher.

All Forms related to GST Payment


Form Use of form

GST PMT-
Electronic Tax liability register is maintained in this form
01

GST PMT-
Electronic credit ledger is maintained in this form
02
52 | GST – The Businessman’s Guide

GST PMT-
Order by proper officer to re-credit amount on rejection of refund
03

GST PMT- Communication of discrepancy in electronic credit ledger, cash ledger or


04 liability ledger

GST PMT-
Electronic cash ledger is maintained in this form
05

GST PMT-
Challan for payment of GST
06

GST PMT- Application when CIN is not generated or not communicated to common
07 Portal

Payment by person not registered


Any payment required to be made by a person who is not registered under the
Act, shall be made on the basis of a temporary identification number generated
through the Common Portal.
Input Tax Credit| 53

Chapter 8

Input Tax Credit


54 | GST – The Businessman’s Guide

What is Input Tax Credit (ITC)


Input Tax Credit refers to the tax already paid by a person and which is
available as deduction from tax payable to him. Since, tax paid or received by
the dealer is not an expense or income for him, it will not appear in financial
statements of the firm as expense or income.

For e.g.- A trader purchases good worth Rs. 100 and pay tax of 10% on it.
And now this trader sold such goods at Rs. 150 and collect tax of Rs. 15 from
buyer. Now the trader has to pay Rs. 15 to government but he had already paid
Rs. 10, so this Rs. 10 is ITC of the trader and will be allowed as deduction
from tax payable and he has to pay net Rs. 5 as tax. Although availment of
ITC is subject to certain conditions as covered in this article.

SGST,UTGST, CGST and IGST – How ITC


allowed
Amount of Input Tax Credit on account of IGST shall first be utilized for the
payment of IGST then for payment of CGST and then for payment of SGST or
UTGST.

Amount of Input Tax Credit on account of CGST shall first be utilized for the
payment of CGST then for payment of IGST. Such amount cannot be used for
payment of SGST or UTGST.
Amount of Input Tax Credit on account of SGST or UTGST shall first be
utilized for the payment of SGST or UTGST then for payment of IGST. Such
amount cannot be used for payment of CGST.

SGST/UTGST payable or Input tax credit of SGST/UTGST will be calculated


state wise i.e.. ITC of SGST in one state cannot be utilized for payment of
SGST of another state.

Input tax credit cannot be used for payment of interest, penalty, fees or any
amount payable under the act other than the GST in manner mentioned above.
Input Tax Credit| 55

Example
IGST CGST SGST

Tax Payable 10,000 8,000 5,000

Input Tax Credit 12,000 7,500 1,200

IGST CGST SGST

Tax Payable 10,000 8,000 5,000

Less: Input Tax Credit of IGST from IGST


CGST from CGST and SGST from SGST 10,000 7,500 1,200
(up to maximum of tax payable)

Gross Tax Payable NIL 500 3,800

Less: Input Tax Credit of Remaining IGST of Rs. 2,000


– 500 1.500
from CGST first and then SGST

Net Tax Payable – – 2,300

Persons who are allowed to take Input Tax Credit


1. All registered person are allowed to take input tax credit other than person
who are paying tax under composition scheme.
2. A person who has applied for registration within 30 days from the date on
which he is liable for registration is allowed to take input tax credit in
respect of inputs held in stock and inputs contained in semi-finished or
finished goods held in stock on the day immediately preceding the date
from which he becomes liable to pay tax.
3. A person who hast taken voluntarily registration is allowed to take input
tax credit in respect of inputs held in stock and inputs contained in semi-
finished or finished goods held in stock on the day immediately preceding
the date of grant of registration.
56 | GST – The Businessman’s Guide

4. A person who has ceased to pay tax under composition scheme is entitled
to take credit of input tax in respect of inputs held in stock, inputs
contained in semi-finished or finished goods held in stock and on capital
goods on the day immediately preceding the date from which he ceases to
pay tax under composition scheme.
Under the points 2, 3 and 4 above, the input tax credit is allowed only for the
stock which is purchased in last one year from the aforementioned date. Such
person needs to file Form GST ITC-01 within 30 days of his becoming
eligible for availing input tax credit. Details furnished in the form is to be
certified by a practicing chartered accountant or cost accountant if the input
tax credit claimed is more than Rs. 2 lakhs.

Persons NOT allowed to take Input Tax Credit


1. Persons who are not registered in GST
2. Persons who are registered under composition scheme

Time limit for taking ITC


ITC is not allowed after any of the following happens

 due date of return for month of September of next financial year


 annual return filed for relevant year (Filing date, not due date)

Conditions for taking ITC


Input Tax Credit is allowed to a person only if following conditions are
satisfied

1. he is in possession of a tax invoice or debit note issued by a supplier


registered under GST
2. he has received the goods and/or services
3. the tax charged in respect of such supply has been actually paid to the
account of the appropriate Government
4. he has furnished the return under section 39
5. ITC is not allowed after any of the following
1. due date of return for month of September of next financial year
Input Tax Credit| 57

2. annual return filed for relevant year (Filing date, not due date)
The person who obtains voluntary registration is entitled to take the input
tax credit of input tax on inputs in stock, inputs in semi finished goods and
finished goods in stock, held on the day immediately preceding the date of
registration.
Input tax credit is allowed only on purchases made for selling taxable or
zero rated goods or services. ITC is not allowed for purchases made for
exempted supplies.
The input tax credit of goods and / or service attributable to only
taxable supplies can be taken by registered taxable person. The
amount of eligible credit would be calculated in a manner to be
prescribed in terms of section 16(7) of the MGL read with GST ITC
Rules (yet to be issued). It is important to note that credit on capital
goods also would now be permitted on proportionate basis.
Where the goods against an invoice are received in lots or instalments, the
registered taxable person shall be entitled to take credit upon receipt of the
last lot or instalment.
Input tax credit of GST component of capital goods is not allowed if the
person has claimed depreciation in income tax act for GST component. In
other words, a person can either take input tax credit of GST on capital
goods or claim depreciation on tax component.

Input Tax Credit shall not be available for


Input tax credit shall not be available in respect of the following:

(a) motor vehicles and other conveyances except when they are used

(i) for making the following taxable supplies, namely

(A) further supply of such vehicles or conveyances ; or


(B) transportation of passengers; or
(C) imparting training on driving, flying, navigating such vehicles or
conveyances;
(ii) for transportation of goods.

(b) supply of goods and services, namely,

(i) food and beverages, outdoor catering, beauty treatment, health services,
cosmetic and plastic surgery except where such inward supply of goods or
58 | GST – The Businessman’s Guide

services of a particular category is used by a registered taxable person for


making an outward taxable supply of the same category of goods or services;
(ii) membership of a club, health and fitness centre,
(iii) rent-a-cab, life insurance, health insurance except where the Government
notifies the services which are obligatory for an employer to provide to its
employees under any law for the time being in force or such inward supply of
goods or services or both of a particular category is used by a registered
person for making an outward taxable supply of the same category of goods or
services or both or as part of a taxable composite or mixed supply
(iv) travel benefits extended to employees on vacation such as leave or home
travel concession.
(c) works contract services when supplied for construction of immovable
property, other than plant and machinery, except where it is an input service
for further supply of works contract service;

(d) goods or services received by a taxable person for construction of an


immovable property on his own account, other than plant and machinery, even
when used in course or furtherance of business;

Explanation 1.- For the purpose of this clause, the word “construction”
includes re-construction, renovation, additions or alterations or repairs, to the
extent of capitalization, to the said immovable property.

Explanation 2.- ‘Plant and Machinery’ means apparatus, equipment,


machinery, pipelines, telecommunication tower fixed to earth by foundation or
structural support that are used for making outward supply and includes such
foundation and structural supports but excludes land, building or any other
civil structures.

(e) goods and/or services on which tax has been paid under composition
scheme;
(f) goods and/or services used for personal consumption;

(g) goods lost, stolen, destroyed, written off or disposed of by way of gift or
free samples; and

(h) any tax paid in terms of sections 74, 129 or 130.

Reversal of Input tax credit


If a person who is paying tax in normal scheme and wants to shift to
Composition scheme or where goods or services supplied by him become
wholly exempt, he has to pay credit of input tax in respect of inputs held in
Input Tax Credit| 59

stock and inputs contained in semi-finished or finished goods held in stock and
on capital goods, reduced by such percentage points as may be prescribed, on
the day immediately preceding the date of exercising of such option or, as the
case may be, the date of such exemption. After payment of such amount, the
balance of input tax credit, if any, lying in his electronic credit ledger shall
lapse.
Where a recipient fails to pay to the supplier of services, the amount towards
the value of supply of services along with tax payable thereon within a period
of 180 days from the date of issue of invoice by the supplier, an amount equal
to the input tax credit availed by the recipient shall be added to his output tax
liability, along with interest thereon. This rule doesn’t apply where the
recipient is liable to pay tax on reverse charge basis. Such person has to
furnish such details in From GSTR-2 for the month in which such period of
180 days lapse.

ITC for GST paid on reverse charge


GST paid on reverse charge is also allowed as Input Tax Credit.

ITC on Capital Goods and Reversal on its sale


Credit of tax paid on capital goods is also permitted to be availed in one
instalment.

Input tax credit of tax component of capital goods is not allowed if the person
has claimed depreciation in income tax act for GST component. In other
words, a person can either take input tax credit of GST on capital goods or
claim depreciation on tax component.
If the taxable person sells such capital goods on which ITC had been taken
then such person is liable to pay GST of higher amount from the following

 ITC taken on such capital goods less 5 percentage points per quarter of a year
or part thereof from the date of invoice
 Sale price of capital goods multiplied by GST rate
Where refractory bricks, moulds and dies, jigs and fixtures are supplied as
scrap, the taxable person may pay tax on the transaction value of such goods
determined.
60 | GST – The Businessman’s Guide

ITC in respect of inputs sent for job work


Principal is allowed to take ITC of the goods or capital goods sent to a job
worker for job work. Input is allowed even if the inputs are directly sent to a
job worker for job-work without their being first brought to his place of
business.

If such goods are not received back by principal or supplied from place of job
worker within one year from the date of sending goods to job worker, then it
shall be deemed that such inputs had been supplied by the principal to the job-
worker on the day when the said inputs were sent out. This limit of one year is
increased to three years in case of capital goods.

Where the inputs are sent directly to a job worker, the period of one year or
three year shall be counted from the date of receipt of inputs by the job
worker.
This rule of deemed supply shall not apply to moulds and dies, jigs and
fixtures, or tools sent out to a job-worker for job-work.

Manner of distribution of credit by Input Service


Distributor
(1) The Input Service Distributor shall distribute the credit of central tax as
central tax or integrated tax and integrated tax as integrated tax or central tax,
by way of issue of a document containing the amount of input tax credit being
distributed in such manner as may be prescribed.

(2) The Input Service Distributor may distribute the credit subject to the
following conditions, namely:––

(a) the credit can be distributed to the recipients of credit against a document
containing such details as may be prescribed;
(b) the amount of the credit distributed shall not exceed the amount of credit
available for distribution;
(c) the credit of tax paid on input services attributable to a recipient of credit
shall be distributed only to that recipient;
(d) the credit of tax paid on input services attributable to more than one
recipient of credit shall be distributed amongst such recipients to whom the
input service is attributable and such distribution shall be pro rata on the basis
of the turnover in a State or turnover in a Union territory of such recipient,
during the relevant period, to the aggregate of the turnover of all such
recipients to whom such input service is attributable and which are operational
Input Tax Credit| 61

in the current year, during the said relevant period;


(e) the credit of tax paid on input services attributable to all recipients of credit
shall be distributed amongst such recipients and such distribution shall be pro
rata on the basis of the turnover in a State or turnover in a Union territory of
such recipient, during the relevant period, to the aggregate of the turnover of
all recipients and which are operational in the current year, during the said
relevant period.
Explanation.––For the purposes of this section,––

(a) the “relevant period” shall be––

(i) if the recipients of credit have turnover in their States or Union territories in
the financial year preceding the year during which credit is to be distributed,
the said financial year; or
(ii) if some or all recipients of the credit do not have any turnover in their
States or Union territories in the financial year preceding the year during
which the credit is to be distributed, the last quarter for which details of such
turnover of all the recipients are available, previous to the month during which
credit is to be distributed;
(b) the expression “recipient of credit” means the supplier of goods or services
or both having the same Permanent Account Number as that of the Input
Service Distributor;
(c) the term ‘turnover’, in relation to any registered person engaged in the
supply of taxable goods as well as goods not taxable under this Act, means the
value of turnover, reduced by the amount of any duty or tax levied under entry
84 of List I of the Seventh Schedule to the Constitution and entry 51 and 54 of
List II of the said Schedule.

ITC in special cases


Banks and Financial Institutions

Banks, financial institutions and non banking financial companies (NBFC)


engaged in business of deposits, extending loans or advances have an option to
avail an amount equal to fifty per cent of the eligible input tax credit on inputs,
capital goods and input services in that month or to take Input tax credit only
on purchases made for selling taxable or zero rated goods or services and leave
out the tax paid on purchases made for exempted supplies.

Option once exercised cannot be changes during the financial year. Also
restriction of 50% doesn’t apply where the tax is paid on supply from one
registered person to another registered person having the same Permanent
Account Number.
62 | GST – The Businessman’s Guide

Pipelines and Telecommunication Tower

PROVIDED that credit of input tax in respect of pipelines and


telecommunication tower fixed to earth by foundation or structural support
including foundation and structural support thereto shall not exceed—

(a) one-third of the total input tax in the financial year in which the said goods
are received,
(b) two-third of the total input tax, including the credit availed in the first
financial year, in the financial year immediately succeeding the year referred
to in clause (a) in which the said goods are received, and
(c) the balance of the amount of credit in any subsequent financial year.
Returns| 63

Chapter 9

Returns
64 | GST – The Businessman’s Guide

First Return
Every registered taxable person who has made sales in the period between the
dates on which he became liable to registration till the date on which
registration has been granted shall declare the same in the first return filed by
him after grant of registration.

Monthly or Quarterly Return


Every registered taxable person has to file monthly returns for GST. Persons
registered under composition scheme is required to file quarterly return.
Return can be filed only through electronic form. Return is to be filed even if
there is no sales or purchases. In other words NIL return is also required to be
filed.

Annual Return
All registered taxable person other than input service distributor, a person
paying tax under section 51 or section 52, a casual taxable person and a non-
resident taxable person has to file annual return on or before 31st December of
the following financial year. Such annual return is to be filed in Form GSTR-
9. For persons under composition scheme the form for annual return in Form
GSTR-9A.
Person who is required to get his accounts audited under section 35(5) has to
furnish electronically, audited copy of the annual accounts and a reconciliation
statement in form GSTR-9B, reconciling the value of supplies declared in the
return furnished for the year with the audited annual financial statement along
with annual return.

Due date for filing GST Return


Type of Dealer Due Date Monthly/Quarterly
Composition 18th of Next Month Quarterly
Input Service
13th of Next Month Monthly
Distributor
Earlier of
1) 20th of Next Month
Non Resident Monthly
2) 7th Day of validity of
Registration
Returns| 65

For TDS Deducted


10th of Next Month Monthly
under section 51
All other Dealers 20th of Next Month Monthly

The last date of payment of tax is also the same dates as mentioned above.

Components of Monthly/Quarterly Returns


Details of Outward Supplies

Details of Outward Supplies is to be furnished in form GSTR – 1 within 10


days from the end of month/quarter. Details of outward supplies cannot be
filed from 11th day to 15th day from the end of month/quarter. Such details
are made available to the recipients of such supplies from the 11th day in form
GSTR – 2A. Details of outward supplies shall include details of invoices,
debit notes, credit notes and revised invoices issued in relation to outward
supplies made during any tax period.
The changes which are communicated by buyers are to be accepted or rejected
from 15th day to 17th day from the end of the month/quarter.

Details of Inward Supplies

Taxable person shall validate, modify, delete the details furnished by the
supplier in his details of outward supplies. The taxable person can also add the
details if not provided by any supplier. Such details of inward supplies is to be
furnished from 11th day to 15th day from the end of month/quarter in Form
GSTR – 2.

The return

The return is to be filed by or 20th of the next month. For composition dealers
the last date is 18th of the month after the quarter.

Revised Return
If the taxable person finds any omission or incorrect particulars he can rectify
it in the month/quarter’s return in which such error is noticed. The rectification
cannot be done in following cases
Error is found as a result of scrutiny, audit, inspection or enforcement activity
by the tax authorities.
66 | GST – The Businessman’s Guide

After any of the following dates


(a) due date of return of month of September or quarter July to September of
following year
(b) actual date of furnishing annual return of relevant year

Late fees for delay in filing GST Return


Late fee of Rs. 100 per day is liable to be paid if any monthly/quarterly return
is not submitted within due date. Maximum penalty would be of Rs. 5,000.
In case of Annual return penalty is payable at Rs. 100 per day. Maximum
penalty in such case is 0.25% of the turnover in the state or union territory.
A notice in FORM GSTR-3A shall be issued, electronically, to a registered
person who fails to furnish return.

How to file GST returns


These provisions are applicable to dealers other than Input service distributor,
dealers under composition scheme, non resident dealers.
The GST return is to filed in three steps in three different forms. These three
steps are
Details of Outward Supplies
Details of Inward Supplies
Main Return
The process to furnish each of these

Details of Outward Supplies

The dealer has to furnish the following details relevant to the month in Form
GSTR-1.
(a) invoice wise details of all –
(i) inter-State and intra-State supplies made to registered persons;
(ii) inter-State supplies with invoice value more than two and a half lakh
rupees made to unregistered persons;
(b) consolidated details of all –
(i) intra-State supplies made to unregistered persons for each rate of tax; and
(ii) State wise inter-State supplies with invoice value less than two and a half
lakh rupees made to unregistered persons for each rate of tax; and
(c) debit and credit notes, if any issued during the month for invoices issued
previously.
Such details will be available to the purchaser of goods/services in Part A of
Form GSTR – 2A from 11th day of the next month. Such details may be
added, corrected or deleted by purchaser.
Returns| 67

Addition, correction or deletion made by purchaser shall be made available to


seller in Form GSTR – 1A . And if the dealer accepts such change then its
From GSTR-1 shall stand amended. Such changes are to be accepted or
rejected from 15th day to 17th day from the end of the month/quarter.

Details of Inward Supplies

Details in Form GSTR-2A will be available from 11th day of month. (as
discussed above)
On basis of such details the dealer can accepts, reject, modify or add the
details of inward supplied to him. The last date for such changes is 15th from
the end of month.
The dealer has also to specify the inward supplies in respect of which he is not
eligible to take input tax credit either fully or partially.
He also has to declare the amount of ineligible input tax credit on inward
supplies which is related to non-taxable supplies or for purposes other than
business.
Similarly the details of TDS deducted under section 51 and Furnished in Form
GSTR- 7 shall be made available to deductee in Part C of Form GSTR-2A and
the deductee may include such details in his Form GSTR-2 to claim input tax
credit of such amount.
Similarly the details of TCS collected under section 52 by E commerce
operator and Furnished in Form GSTR- 8 shall be made available to deductee
in Part D of Form GSTR-2A and the deductee may include such details in his
Form GSTR-2.
Form GSTR-2 shall also include
(a) invoice wise details of all inter-State and intra-State supplies received from
registered persons or unregistered persons.
(b) import of goods and services made.
(c) debit and credit notes, if any, received from supplier.

Main Return

Return is to be filed in Form GSTR-3.


Part A of GSTR-3 will contain information furnished through returns in Form
GSTR-1, GSTR-2, electronic cash ledger, electronic credit ledger and details
based on other liabilities of preceding tax periods.
Liability of tax, interest, penalty or any other amount payable is to be paid by
debiting the electronic cash ledger or electronic credit ledger and these details
is to be included in Part B of Form GSTR-3.
If any refund is to be claimed then it may be claimed in Part B of Form GSTR-
3.
68 | GST – The Businessman’s Guide

Where the time limit for furnishing of FORM GSTR-1 and in FORM GSTR-2
has been extended, return in FORM GSTR-3B, in lieu of FORM GSTR-3,
may be furnished.

Conditions for filing GST Return

For filing a return for a period it is necessary that valid returns for all previous
period has been already filed.
Also a person cannot file returns unless all the payment regarding GST had
been made.
Returns| 69
70 | GST – The Businessman’s Guide

GST Return by dealer under Composition Scheme


Details as furnished in Details of outward supplies in Form GSTR-1 will be
available to the composite dealer in Form GSTR – 4A. The dealer can add,
correct or delete such details. After such addition, correction or
deletion quarterly return in Form GSTR-4 is to be furnished.
Form GSTR-4 shall include-
(a) invoice wise inter-State and intra-State inward supplies received from
registered and un-registered persons;
(b) import of goods and services made;
(c) consolidated details of outward supplies made; and
(d) debit and credit notes issued and received, if any;
Liability of tax, interest, penalty or any other amount payable is to be paid
before filing return.

All GST Return Forms


Sr
Form No. Form to be used for
No.
Form Details of outward supplies of taxable goods and/or
1
GSTR-1 services effected

Form Details of outward supplies as added, corrected or deleted


2
GSTR-1A by the recipient

Form Details of inward supplies of taxable goods and/or services


3
GSTR-2 claiming input tax credit
Form Details of inward supplies made available to the recipient
4
GSTR-2A on the basis of FORM GSTR-1 furnished by the supplier
Monthly return on the basis of finalization of details of
Form
5 outward supplies and inward supplies along with the
GSTR-3
payment of amount of tax
Form Notice to a registered taxable person who fails to furnish
6
GSTR-3A return under section 27 and section 31
Form
7 Quarterly Return for compounding Taxable persons
GSTR-4
Returns| 71

Details of inward supplies made available to the recipient


Form
8 registered under composition scheme on the basis of
GSTR-4A
FORM GSTR-1 furnished by the supplier

Form
9 Return for Non-Resident foreign taxable person
GSTR-5

Form
10 ISD return
GSTR-6
Details of inward supplies made available to the ISD
Form
11 recipient on the basis of FORM GSTR-1 furnished by the
GSTR-6A
supplier
Form
12 Return for authorities deducting tax at source
GSTR-7

Form
13 TDS Certificate
GSTR-7A

Form
Communication of acceptance, discrepancy or duplication
14 GST-ITC-
of input tax credit claim
1
Details of supplies effected through e-commerce operator
Form
15 and the amount of tax collected as required under section
GSTR-8
52

Form
16 Annual return
GSTR-9

Form Simplified Annual return by Compounding taxable persons


17
GSTR-9A registered under section 10
Form
18 Reconciliation Statement
GSTR-9B

Form
19 Final return
GSTR-10

Form Details of inward supplies to be furnished by a person


20
GSTR-11 having UIN
72 | GST – The Businessman’s Guide

Final Return
Every registered taxable person who applies for cancellation of registration
shall furnish a final return within three months of the date of cancellation or
date of cancellation order, whichever is later, in such form and in such manner
as may be prescribed. Such return is to be filed in Form GSTR-10.

Goods and Service Tax Practitioners


Government will prescribe the eligibility criteria, duties and obligations,
manner of removal etc for becoming a goods and service tax practitioner. A
registered taxable person may authorise a goods and service tax practitioner to
furnish Details of inward supplies, outward supplies and returns on behalf of
such person. The responsibility for correctness of the details in such returns
shall remain with the taxable person.
Audit| 73

Chapter 10

Audit
74 | GST – The Businessman’s Guide

Audit of Accounts
Every registered person whose turnover exceeds Rs. 1 crore during a financial
year has to get his accounts audited under GST. Accounts is to be audited by a
Chartered Accountant or Cost Accountant only.
He shall furnish a copy of audited annual accounts and a reconciliation
statement, duly certified, in FORM GSTR-9B along with annual return.

Audit by Tax Authorities


(1) The Commissioner or any officer authorised by him, by way of a general
or a specific order, may undertake audit of any registered person for such
period, at such frequency and in such manner as may be prescribed.
(2) The officers referred to in sub-section (1) may conduct audit at the place of
business of the registered person or in their office.
(3) The registered person shall be informed by way of a notice not less than
fifteen working days prior to the conduct of audit in such manner as may be
prescribed.
(4) The audit under sub-section (1) shall be completed within a period of three
months from the date of commencement of the audit:
Provided that where the Commissioner is satisfied that audit in respect of such
registered person cannot be completed within three months, he may, for the
reasons to be recorded in writing, extend the period by a further period not
exceeding six months.
Explanation.––For the purposes of this sub-section, the expression
“commencement of audit” shall mean the date on which the records and other
documents, called for 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.
(5) During the course of audit, the authorised officer may require the
registered person,—
(i) to afford him the necessary facility to verify the books of account or other
documents as he may require;
(ii) to furnish such information as he may require and render assistance for
timely completion of the audit.
(6) On conclusion of audit, the proper officer shall, within thirty days, inform
the registered person, whose records are audited, about the findings, his rights
and obligations and the reasons for such findings.
(7) Where the audit conducted under sub-section (1) 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.
Audit| 75

The period of audit to be conducted under sub-section (1) of section 65 shall


be a financial year or multiples thereof.
Where it is decided to undertake the audit of a registered person in accordance
with the provisions of section 65, the proper officer shall issue a notice in
FORM GST ADT-01 3 within the time specified in sub-section (3) of the said
section.
The proper officer may inform the registered person of the discrepancies, if
any, noticed as observations of the audit and the said person may file his reply
and the proper officer shall finalise the findings of the audit after due
consideration of the reply furnished.
On conclusion of the audit, the proper officer shall inform the findings of audit
to the registered person in accordance with the provisions of sub-section (6) of
section 65 in FORM GST ADT-02.

Special audit
(1) If at any stage of scrutiny, inquiry, investigation or any other proceedings
before him, any officer not below the rank of Assistant Commissioner, having
regard to the nature and complexity of the case and the interest of revenue, is
of the opinion that the value has not been correctly declared or the credit
availed is not within the normal limits, he may, with the prior approval of the
Commissioner, direct such registered person by a communication in writing to
get his records including books of account examined and audited by a
chartered accountant or a cost accountant as may be nominated by the
Commissioner.
(2) The chartered accountant or cost accountant so nominated shall, within the
period of ninety days, submit a report of such audit duly signed and certified
by him to the said Assistant Commissioner mentioning therein such other
particulars as may be specified:
Provided that the Assistant Commissioner may, on an application made to him
in this behalf by the registered person or the chartered accountant or cost
accountant or for any material and sufficient reason, extend the said period by
a further period of ninety days.
(3) The provisions of sub-section (1) shall have effect notwithstanding 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.
(4) The registered person shall be given an opportunity of being heard in
respect of any material gathered on the basis of special audit under sub-section
(1) which is proposed to be used in any proceedings against him under this Act
or the rules made there under.
(5) The expenses of the examination and audit of records under sub-section
(1), including the remuneration of such chartered accountant or cost
76 | GST – The Businessman’s Guide

accountant, shall be determined and paid by the Commissioner and such


determination shall be final.
(6) Where the special audit conducted under sub-section (1) 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.
Where special audit is required to be conducted under section 66, the officer
referred to in the said section shall issue a direction in FORM GST ADT-03 to
the registered person to get his records audited by the chartered accountant or
cost accountant specified in the said direction.
On conclusion of special audit, the registered person shall be informed of the
findings of special audit in FORM GST ADT-04.
E-way Bill| 77

Chapter 11

E-way Bill
78 | GST – The Businessman’s Guide

Conditions in Which E-way bill is required


A registered person needs to generate a e-way bill where the goods need to be
moved from one place to another and the value of goods is more than Rs.
50,000. Such e-way bill is also required where value of goods exceeding Rs.
50,000 is purchased from an unregistered person by a registered person and
goods need to be moved. In such case the recipient registered person needs to
generate the e-way bill.
E-way bill is required even for movement of goods within the same state or
union territory (Intra state sales).
The registered person or the transporter may generate and carry the e-way bill
on his own will even if the value of goods in less than Rs. 50,000.

Process of Generating E way Bill


Information is to be furnished in Part A of Form GST INS-01, in electronic
manner only before commencement of movement of goods. Then Part B of
GST INS-01 is to be generated as per the point applicable below

Goods sent by own conveyance or hired one


The person has to generate the Form GST INS-1 by furnishing the details in
Part B.

Goods are handed over to transporter


In such case the person has to furnish details of transporter in Part B and then
the e-way bill will be generated by the transporter.
Upon generation of the e-way bill, a unique e-way bill number (EBN) shall be
made available to the supplier, the recipient and the transporter on the
common portal.
The facility of generation and cancellation of e-way bill may also be made
available through SMS.

E-way bill requirements for Transporter


If a transporter wants to transfer goods from one vehicle to another in course
of transit then such transporter has to generate a new e-way bill in Form GST
INS-01 before such transfer.
If transporter wants to transport multiple consignments in one vehicle then he
has to indicate serial number of e-way bills generated in respect of each such
consignment and a consolidated e-way bill in FORM GST INS-02 is to be
generated before movement of goods.
E-way Bill| 79

If the consignor of goods has not generated e-way bill then the transporter has
to generate Form GST INS-01 on the basis of invoice or bill of supply or
delivery challan, if the value of goods is exceeding Rs. 50,000.
The Commissioner may, by notification, require a class of transporters to
obtain a unique Radio Frequency Identification Device (RFID) and get the
said device embedded on to the conveyance and map the e-way bill to the
RFID prior to the movement of goods.

Validity of E-way Bill


An e-way bill or consolidated e-way bill generated under this rule shall be
valid for a period from the relevant date as mentioned below

S No. Distance Validity Period


1. Less than 100 km 1 day
2. 100 km or more but less than 300km 3 days
3. 300 km or more but less than 500km 5 days
4. 500 km or more but less than 1000km 10 days
5. 1000 km or more 15 days

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.
Commissioner may extend the validity period for certain categories of goods.

Acceptance or Rejection by the Recipient


The details which are filed in Part A of Form GST INS-01 shall be made
available to the registered recipients on the GST portal. The recipient can
accept or reject such the consignment covered by e-way bill. If the recipient
doesn’t accepts or rejects within 72 hours from the time on which details is
made available to him, it shall be deemed that it is accepted.

Cancellation of E-way Bill


If the goods are not being transported or not being transported as per the
details furnished in a e-way bill then such e-way bill may be cancelled within
24 hours of its generation. If the transporter has generated Form GST INS-01
80 | GST – The Businessman’s Guide

for transfer of such goods to another vehicle then such e-way billycan not be
cancelled.

Verification of documents, conveyances and Goods


The Commissioner or an officer empowered by him in this behalf may
authorise the proper officer to intercept any conveyance to verify the e-way
bill or the e-way bill number in physical form for all inter-State and intra-State
movement of goods.
The Commissioner shall get RFID readers installed at places where
verification of movement of goods is required to be carried out and
verification of movement of vehicles shall be done through such RFID readers
where the e-way bill has been mapped with RFID.
Physical verification of conveyances shall be carried out by the proper officer
as authorized by the Commissioner or an officer empowered by him in this
behalf:
Provided that on receipt of specific information of evasion of tax, physical
verification of a specific conveyance can also be carried out by any officer
after obtaining necessary approval of the Commissioner or an officer
authorized by him in this behalf.
A summary report of every inspection of goods in transit shall be recorded
online by the proper officer in Part A of FORM GST INS – 03 within twenty
four hours of inspection and the final report in Part B of FORM GST INS – 03
shall be recorded within three days of the inspection.
Where the physical verification of goods being transported on any conveyance
has been done during transit at one place within the State or in any other State,
no further physical verification of the said conveyance shall be carried out
again in the State, unless specific information relating to evasion of tax is
made available subsequently.
Where a vehicle has been intercepted and detained for a period exceeding
thirty minutes, the transporter may upload the said information in FORM GST
INS- 04 on the common portal.

Other Points
The information provided in Form GST INS-01 by a person will be made
available to him on the portal so that he may utilize such information to file
his Details of Outward Supplies for filing GST Returns.
Valuation of Goods/Services | 81

Chapter 12

Valuation of Goods/Services
82 | GST – The Businessman’s Guide

Valuation at Transaction Value


If the recipient and supplier of Goods/Services are not related then the price
actually paid or payable is taken as value of good/services. The transaction
value shall be accepted even where the supplier and recipient of supply are
related, provided that the relationship has not influenced the price.

Where goods are transferred from one place of business to another place of the
same business or from the principal to an agent or from an agent to the
principal whether or not situated in the same State, the value of such supply
shall be the transaction value.

Inclusions
The value of goods/services also include the following:-

1. any taxes, duties, cesses or fee charged separately by the supplier other
than GST itself.
2. other incidental expenses such as commission or packing charged
separately by the supplier.
3. amount charged for anything done by the supplier at the time of, or before
delivery of the goods/services. For e.g. gift packing or special packing
4. interest, late fee or penalty charged for delayed payment
5. subsidies directly linked to the price excluding subsidies provided by the
Central and State governments

Exclusions
The value of the supply shall not include any discount that is given:
(a) before or at the time of the supply provided such discount has been
mentioned in the invoice

(b) after the supply has been effected, provided that:

(i) such discount is established in terms of an agreement entered into at or


before the time of such supply and specifically linked to relevant invoices; and
(ii) input tax credit has been reversed by the recipient of the supply as is
attributable to the discount on the basis of document issued by the supplier.
A summary of the effect of discount on transaction value is given below-
Valuation of Goods/Services | 83

Type of discount Effect on transaction value

If the discount is given before or at the


Can be claimed as deduction from
time of supply, and is recorded in the
transaction value
invoice

If the discount is given after supply, but


agreed upon before or at the time of Can be claimed as deduction from
supply, and can be specifically linked to transaction value
relevant invoices

If the discount is given after supply, and Cannot be claimed as deduction from
not known at the time of supply transaction value

Valuation where consideration in not wholly in money


The valuation will be done in such a case at

 Open market value


 If open market value is not available then at total of consideration in money
and other consideration’s equivalent money value
 If value cannot be determined with above two methods then value of like
kind and quality goods or services will be taken as value
 If value cannot be determined with above three methods then
Examples:-

1. Where a new phone is supplied for Rs.20000 along with the exchange of an
old phone and if the price of the new phone without exchange is Rs.24000,
the open market value of the new phone is Rs 24000.
2. Where a laptop is supplied for Rs.40000 along with a barter of printer that
is manufactured by the recipient and the value of the printer known at the
time of supply is Rs.4000 but the open market value of the laptop is not
known, the value of the supply of laptop is Rs.44000.
84 | GST – The Businessman’s Guide

Valuation of supplies between distinct or related


persons other than through an agent
The value of the supply of goods or services or both between distinct persons
as specified in 25(4) and 25(5) or where the supplier and recipient are related,
other than where the supply is made through an agent, shall,-

(a) be the open market value of such supply;


(b) if open market value is not available, be the value of supply of goods or
services of like kind and quality;
(c) if value is not determinable under clause (a) or (b), be the value as
determined by application of rule 4 or rule 5, in that order:
Provided where the recipient is eligible for full input tax credit, the value
declared in the invoice shall be deemed to be the open market value of goods
or services.

Value of supply of goods made or received through an


agent
The value of supply of goods between the principal and his agent shall,-

(a) be the open market value of the goods being supplied, or at the option of
the supplier, be ninety percent of the price charged for the supply of goods of
like kind and quality by the recipient to his customer not being a related
person, where the goods are intended for further supply by the said recipient.

Illustration: Where a principal supplies groundnut to his agent and the agent is
supplying groundnuts of like kind and quality in subsequent supplies at a price
of Rs.5000 per quintal on the day of supply. Another independent supplier is
supplying groundnuts of like kind and quality to the said agent at the price of
Rs.4550 per quintal. The value of the supply made by the principal shall be
Rs.4550 per quintal or where he exercises the option the value shall be 90% of
the Rs.5000 i.e. is Rs.4500 per quintal.

(b) where the value of a supply is not determinable under clause (a), the same
shall be determined by application of rule 4 or rule 5 in that order.

Rule 4 – Valuation based on Cost


If the value cannot be determined by any rules or provisions mentioned above
then value will be determined under rule 4. Under rule 4 value shall be one
Valuation of Goods/Services | 85

hundred and ten percent of the cost of production or manufacture or cost of


acquisition of such goods or cost of provision of such services.

Rule 5 – Residual method for determination of value


of supply of goods or services or both
If the value cannot be determined by any rules or provisions mentioned above
and through rule 4 then value will be determined under rule 5. Under rule 5
value shall be determined using reasonable means consistent with the
principles and general provisions of section 15 and these rules.

Provided that in case of supply of services, the supplier may opt for this rule,
disregarding rule 4.

Valuation in Special Cases


1. Money Changer
The value in case when currency is exchanged

From or to Indian Rupees (INR)


(Buying rate or selling rate – RBI reference rate for that currency)* Total units
of currency

If reference rate for any currency is not available then value = 1% of Indian
rupees provided or received by such money changer.

NOT from or to Indian Rupees (INR)


Value is equal to 1% of lesser of the two amounts the person changing the
money would have received by converting any of the two currencies into
Indian Rupee on that day at the reference rate provided by RBI.

Option with money changer


Also a money changer may exercise option to ascertain value with below
mentioned method. Such option once exercised cannot be withdrawn during
that financial year.

(i) one per cent. of the gross amount of currency exchanged for an amount up
to one lakh rupees, subject to a minimum amount of two hundred and fifty
rupees.
(ii) one thousand rupees and half of a per cent of the gross amount of currency
exchanged for an amount exceeding one lakh rupees and up to ten lakh rupees;
and
86 | GST – The Businessman’s Guide

(iii) five thousand rupees and one tenth of a per cent. of the gross amount of
currency exchanged for an amount exceeding ten lakh rupees, subject to
maximum amount of sixty thousand rupees.
2. Air Travel Agent
Value of services provided by air travel agent is calculated at rate of 5% of the
basic fare in the case of domestic bookings and at the rate of 10% of the basic
fare in the case of international bookings.

Basic fare means that part of the air fare on which commission is normally
paid to the air travel agent by the airline.

3. Life Insurance Business


(a) the gross premium charged from a policy holder reduced by the amount
allocated for investment, or savings on behalf of the policy holder, if such
amount is intimated to the policy holder at the time of supply of service;
(b) in case of single premium annuity policies other than (a), ten per cent. of
single premium charged from the policy holder; or
(c) in all other cases, twenty five per cent. of the premium charged from the
policy holder in the first year and twelve and a half per cent. of the premium
charged from policy holder in subsequent years:
Provided that nothing contained in this sub-rule shall apply where the entire
premium paid by the policy holder is only towards the risk cover in life
insurance.

4. Person dealing in second hand goods


In case of person who is dealing in second hand goods, the value of supply
taken for application of GST is the difference between selling price and
purchase price. If such difference is negative then such amount should be
ignored and no GST is payable on that transaction.

This provision is applicable only when the used goods is sold in same
condition or after minor processing and nature of the goods is not changed
after purchasing. Also such person should not avail input tax credit if paid on
such transaction.

For example – A person deals in second hand cars. He buys a car for Rs.
5,00,000. No GST is paid on it. Now he make an expense of Rs. 20,000 for its
servicing and repairs and then sold it for Rs. 6,00,000. The amount on which
GST is payable is Rs. 1,00,000.

5. Pure Agent
Notwithstanding anything contained in these rules, the expenditure or costs
incurred by a supplier as a pure agent of the recipient of supply shall be
Valuation of Goods/Services | 87

excluded from the value of supply, if all the following conditions are satisfied,
namely:-

(i) the supplier acts as a pure agent of the recipient of the supply, when he
makes payment to the third party on authorization by such recipient.
(ii) the payment made by the pure agent on behalf of the recipient of supply
has been separately indicated in the invoice issued by the pure agent to the
recipient of service; and
(iii) the supplies procured by the pure agent from the third party as a pure
agent of the recipient of supply are in addition to the services he supplies on
his own account.
Explanation . – For the purposes of this rule, “pure agent” means a person
who:
(a) enters into a contractual agreement with the recipient of supply to act as his
pure agent to incur expenditure or costs in the course of supply of goods or
services or both.
(b) neither intends to hold nor holds any title to the goods or services or both
so procured or supplied as pure agent of the recipient of supply.
(c) does not use for his own interest such goods or services so procured.
(d) receives only the actual amount incurred to procure such goods or services
in addition to the amount received for supply he provides on his own account .
Illustration. Corporate services firm A is engaged to handle the legal work
pertaining to the incorporation of Company B. Other than its service fees, A
also recovers from B, registration fee and approval fee for the name of the
company paid to Registrar of the Companies. The fees charged by the
Registrar of the companies registration and approval of the name are
compulsorily levied on B. A is merely acting as a pure agent in the payment of
those fees. Therefore, A’s recovery of such expenses is a disbursement and not
part of the value of supply made by A to B.

6. Goods repossessed from a defaulting borrower


The purchase value of goods repossessed from a defaulting borrower, who is
not registered, for the purpose of recovery of a loan or debt shall be deemed to
be the purchase price of such goods by the defaulting borrower reduced by
five percentage points for every quarter or part thereof, between the date of
purchase and the date of disposal by the person making such repossession.

7. The value of a token, or a voucher, or a coupon, or a stamp (other than


postage stamp) which is redeemable against a supply of goods or services or
both shall be equal to the money value of the goods or services or both
redeemable against such token, voucher, coupon, or stamp.
88 | GST – The Businessman’s Guide

Rate of exchange of currency, other than Indian


rupees, for determination of value
The rate of exchange for determination of value of taxable goods or services or
both shall be the applicable reference rate for that currency as determined by
the Reserve Bank of India on the date when point of taxation arises in respect
of such supply in terms of timing of supply provisions.

Meaning of Related Persons


Persons shall be deemed to be “related persons” if

(i) such persons are officers or directors of one another’s businesses;


(ii) such persons are legally recognised partners in business;
(iii) such persons are employer and employee;
(iv) any person directly or indirectly owns, controls or holds twenty-five per
cent or more of the outstanding voting stock or shares of both of them;
(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third person;
(vii) together they directly or indirectly control a third person; or they are
members of the same family;
The term “person” also includes legal persons.
Persons who are associated in the business of one another in that one is the
sole agent or sole distributor or sole concessionaire, howsoever described, of
the other, shall be deemed to be related.

Distinct Persons
As per section 25(5) of CGST Act

 A person who has obtained or is required to obtain more than one


registration, whether in one State or Union territory or more than one State
or Union territory shall, in respect of each such registration, be treated as
distinct persons for the purposes of this Act.
 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 for the purposes of this Act.
Open market value of a supply of goods or services or both means the full
value in money, excluding the integrated tax, central tax, State tax, Union
Valuation of Goods/Services | 89

territory tax and the cess payable by a person in a transaction, where the
supplier and the recipient of the supply are not related and price is the sole
consideration, to obtain such supply at the same time when the supply being
valued is made.

Supply of goods or services or both of like kind and quality means any
other supply of goods or services or both made under similar circumstances
that, in respect of the characteristics, quality, quantity, functional components,
materials, and reputation of the goods or services or both first mentioned, is
the same as, or closely or substantially resembles, that supply of goods or
services or both.
Time of Taxation| 91

Chapter 13

Time of Taxation
92 | GST – The Businessman’s Guide

Time of Supply of Goods


Time of supply of goods is earlier of the following dates-

1. Date of invoice
2. Last date on which invoice is required to issue under section 31(1).
3. The date on which seller receives the payment
The date on which the supplier receives the payment shall be the date on
which the payment is entered in his books of account or the date on which the
payment is credited to his bank account, whichever is earlier.

From above provision it is clear that GST is payable at time of receiving


advance payment. At time of receiving advance payment, a Receipt Voucher is
to be issued. The person making advance payment is eligible to take input tax
credit only after generation of invoice. Refer to this guide on advance
payment.
If the seller receives excess payment of Rs. 1,000 or less as compared to tax
invoice then seller has option to consider time of supply of such excess
amount from any two dates mentioned below

 date of receipt of such excess amount


 date of issue of invoice in respect of such excess amount
Tax on Reverse Charge basis

In case tax is payable on reverse charge basis the time of supply shall be
earliest of the following dates

1. Date of receipt of goods


2. the date of payment as entered in the books of account of the recipient or
the date on which the payment is debited in his bank account, whichever is
earlier
3. the date immediately following thirty days from the date of issue of invoice
or any other document, by whatever name called, in lieu thereof by the
supplier
In case where date of supply cannot be determined by above method, the time
of supply shall be the date of entry in the books of account of the recipient of
supply.
Time of Taxation| 93

Time of Supply of Services


Times of supply of services shall be the earliest of the following dates-

1. Date of issue of invoice if invoice is issued within period prescribed in


section 31(2)
2. Date of provision of service if invoice is not issued within period
prescribed in section 31(2)
3. Date of receipt of payment
In case where date of supply cannot be determined by above method, the time
of supply shall be the date on which the recipient shows the receipt of services
in his books of account.

The date on which the supplier receives the payment shall be the date on
which the payment is entered in his books of account or the date on which the
payment is credited to his bank account, whichever is earlier.

If the seller receives excess payment of Rs. 1,000 or less as compared to tax
invoice then seller has option to consider time of supply of such excess
amount from any two dates mentioned below

 date of receipt of such excess amount


 date of issue of invoice in respect of such excess amount
Tax on Reverse Charge basis

In case tax is payable on reverse charge basis the time of supply shall be
earliest of the following dates:
1. the date of payment as entered in the books of account of the recipient or
the date on which the payment is debited in his bank account, whichever is
earlier.
2. the date immediately following sixty days from the date of issue of invoice
or any other document, by whatever name called, in lieu thereof by the
supplier.

In case where date of supply cannot be determined by above method, the time
of supply shall be the date of entry in the books of account of the recipient of
supply.

In case of supply by associated enterprises, where the supplier of service is


located outside India, the time of supply shall be the date of entry in the books
94 | GST – The Businessman’s Guide

of account of the recipient of supply or the date of payment, whichever is


earlier.

Time of Supply of Goods/Services in case of Change


in Rate of Tax
The time of supply, where there is a change in the rate of tax in respect of
goods or services or both, shall be
determined in the following manner, namely:––
(a) in case the goods or services or both have been supplied before the change
in rate of tax-(i) where the invoice for the same has been issued and the
payment is also received after the change in rate of tax, the time of supply
shall be the date of receipt of payment or the date of issue of invoice,
whichever is earlier; or
(ii) where the invoice has been issued prior to the change in rate of tax but
payment is received after the change in rate of tax, the time of supply shall be
the date of issue of invoice; or
(iii) where the payment has been received before the change in rate of tax, but
the invoice for the same is issued after the change in rate of tax, the time of
supply shall be the date of receipt of payment;

(b) in case the goods or services or both have been supplied after the change in
rate of tax-(i) where the payment is received after the change in rate of tax but
the invoice has been issued prior to the change in rate of tax, the time of
supply shall be the date of receipt of payment; or
(ii) where the invoice has been issued and payment is received before the
change in rate of tax, the time of supply shall be the date of receipt of payment
or date of issue of invoice, whichever is earlier; or
(iii) where the invoice has been issued after the change in rate of tax but the
payment is received before the change in rate of tax, the time of supply shall
be the date of issue of invoice:

Provided that the date of receipt of payment shall be the date of credit in the
bank account if such credit in the bank account is after four working days from
the date of change in the rate of tax.

Explanation.––For the purposes of this section, “the date of receipt of


payment” shall be the date on which the payment is entered in the books of
account of the supplier or the date on which the payment is credited to his
bank account, whichever is earlier.
Place of Supply| 95

Chapter 14

Place of Supply
96 | GST – The Businessman’s Guide

Place of Supply of Goods/Services under GST


GST is a consumption based tax. So the tax should be received by the
government of the state or union territory where goods/services are consumed.
So there should be proper determination of the place where supply took place.
Also there is a requirement to determine whether sales is within state (intra
state) or to outside state (inter state) so that proper taxes can be charged. GST
act and rules specifies the place where goods/services should be considered as
supplied.

Place of Supply of Goods


Where the supply involves movement of goods, the place of supply will be
the location of the goods at the time at which the movement of goods
terminates for delivery to the recipient.

Where the supply does not involve movement of goods, whether by the
supplier or the recipient, the place of supply shall be the location of such
goods at the time of the delivery to the recipient.

Where the goods are assembled or installed at site, the place of supply shall be
the place of such installation or assembly.

Where the goods are supplied on board a conveyance, including a vessel, an


aircraft, a train or a motor vehicle, the place of supply shall be the location at
which such goods are taken on board.

The place of supply of goods imported into India shall be the location of the
importer.
The place of supply of goods exported from India shall be the location
outside India.

Place of Supply of Services


 made to a registered person shall be the location of such registered person.
 made to any person other than a registered person shall be
– the location of the recipient where the address on record exists.
– the location of the supplier of services in other cases.
Place of Supply| 97

Place of Supply of Services in Specific Cases


Immovable Property – Location of Immovable Property
Services directly in relation to an immovable property, including services
provided by architects, interior decorators, surveyors, engineers and other
related experts or estate agents, any service provided by way of grant of rights
to use immovable property or for carrying out or co-ordination of construction
work.

Hotel, Guest House, Club, Houseboat – Location of such property


Service of accommodation in such immovable property including organising
of marriage or reception or any official, social, cultural, religious function. If
the location of the immovable property or boat or vessel is located or intended
to be located outside India, the place of supply shall be the location of the
recipient.

Restaurant and catering services, personal grooming, fitness, beauty


treatment, health service including cosmetic and plastic surgery –
Location where the services are actually performed.
The place of supply of services in relation to training and performance
appraisal to
(a) a registered person, shall be the location of such person;
(b) a person other than a registered person, shall be the location where the
services are actually performed.
Admission to a cultural, artistic, sporting, scientific, educational,
entertainment event or amusement park or any other place – Place where
the event is actually held or where the park or such other place is located.
The place of supply of services by way of transportation of goods, including
by mail or courier to
(a) a registered person, shall be the location of such person;
(b) a person other than a registered person, shall be the location at which such
goods are handed over for their transportation.
The place of supply of passenger transportation service to,
(a) a registered person, shall be the location of such person;
(b) a person other than a registered person, shall be the place where the
passenger embarks on the conveyance for a continuous journey
The return journey shall be treated as a separate journey, even if the right to
passage for onward and return journey is issued at the same time.

The place of supply of services on board a conveyance, including a vessel, an


aircraft, a train or a motor vehicle, shall be the location of the first
scheduled point of departure of that conveyance for the journey.
98 | GST – The Businessman’s Guide

The place of supply of telecommunication services including data transfer,


broadcasting, cable and direct to home television services to any person
shall,—
(a) in case of services by way of fixed telecommunication line, leased circuits,
internet leased circuit, cable or dish antenna, be the location where the
telecommunication line, leased circuit or cable connection or dish antenna is
installed for receipt of services.
(b) in case of mobile connection for telecommunication and internet services
provided on post-paid basis, be the location of billing address of the recipient
of services on the record of the supplier of services.
(c) in cases where mobile connection for telecommunication, internet service
and direct to home television services are provided on pre-payment basis
through a voucher or any other means,
(i) through a selling agent or a re-seller or a distributor of subscriber identity
module card or re-charge voucher, be the address of the selling agent or re-
seller or distributor as per the record of the supplier at the time of
supply; or
(ii) by any person to the final subscriber, be the location where such
prepayment is received or such vouchers are sold;
(d) in other cases, be the address of the recipient as per the records of the
supplier of services and where such address is not available, the place of
supply shall be location of the supplier of services.

Provided that where the address of the recipient as per the records of the
supplier of services is not available, the place of supply shall be location of the
supplier of services.

Provided further that if such pre-paid service is availed or the recharge is made
through internet banking or other electronic mode of payment, the location of
the recipient of services on the record of the supplier of services shall be the
place of supply of such services.

The place of supply of banking and other financial services, including


stock broking services to any person shall be the location of the recipient of
services on the records of the supplier of services. Provided that if the location
of recipient of services is not on the records of the supplier, the place of supply
shall be the location of the supplier of services.
The place of supply of insurance services shall
(a) to a registered person, be the location of such person.
(b) to a person other than a registered person, be the location of the recipient
of services on the records of the supplier of services.
Place of Supply| 99

Place of supply of services where location of supplier


or location of recipient is outside India
The place of supply of services shall be the location of the recipient of
services. Where the location of the recipient of services is not available in the
ordinary course of business, the place of supply shall be the location of the
supplier of services.

Place of supply of the following services shall be the location of the supplier
of services-

(a) services supplied by a banking company, or a financial institution, or a


non-banking financial company, to account holders.
(b) intermediary services.
(c) services consisting of hiring of means of transport, including yachts but
excluding aircrafts and vessels, up to a period of one month.
Place of supply of online information and database access or retrieval services
shall be the location of the recipient of services. Person receiving such services
shall be deemed to be located in the taxable territory, if any two of the
following non-contradictory conditions are satisfied

(a) the location of address presented by the recipient of services through


internet is in the taxable territory;
(b) the credit card or debit card or store value card or charge card or smart card
or any other card by which the recipient of services settles payment has been
issued in the taxable territory.
(c) the billing address of the recipient of services is in the taxable territory.
(d) the internet protocol address of the device used by the recipient of services
is in the taxable territory.
(e) the bank of the recipient of services in which the account used for payment
is maintained is in the taxable territory.
(f) the country code of the subscriber identity module card used by the
recipient of services is of taxable territory.
(g) the location of the fixed land line through which the service is received by
the recipient is in the taxable territory.
Accounting Records| 101

Chapter 15

Accounting Records
102 | GST – The Businessman’s Guide

Requirements Regarding Maintenance of Accounts


1. Every registered person is required to maintain at his principal place of
business, account of
(a) Production or manufacture of goods
(b) Inward and outward supply of goods or services or both
(c) Stock of goods
(d) Input tax credit availed
(e) Output tax payable and paid
(f) Import or Export of Goods/Services
(g) Supplies on which tax is payable on reverse charge
(h) Invoices, bills of supply, delivery challans, credit notes, debit notes, receipt
vouchers, payment vouchers, refund vouchers and e-way bills.
(i) Such other particulars as may be prescribed
2. The account or records specified above shall be maintained separately for
each activity including manufacturing, trading and provision of services, etc.
3. Every registered person, other than a person paying tax under composition
scheme, shall maintain accounts of stock in respect of each commodity
received and supplied by him, and such account shall contain particulars of
the opening balance, receipt, supply, goods lost, stolen, destroyed, written
off or disposed of by way of gift or free samples and balance of stock
including raw materials, finished goods, scrap and wastage thereof.
4. Every registered person shall keep and maintain a separate account of
advances received, paid and adjustments made thereto.
5. Every registered persons hall keep the particulars of –
(a) names and complete addresses of suppliers from whom he has received the
goods or services;
(b) names and complete addresses of the persons to whom he has supplied the
goods or services;
(c) the complete addresses of the premises where the goods are stored by him,
including goods stored during transit along with the particulars of the stock
stored therein.
6. 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.
7. Such accounts and records can be maintained in electronic manner.
8. Every registered person manufacturing goods shall maintain monthly
production accounts, showing the quantitative details of raw materials or
Accounting Records| 103

services used in the manufacture and quantitative details of the goods so


manufactured including the waste and by products thereof.
9. Every registered person supplying services shall maintain the accounts
showing the quantitative details of goods used in the provision of each
service, details of input services utilised and the services supplied.

Additional Requirements for an Agent


Following additional information is also required to be maintained by an agent

(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.

Additional Requirements for Work Contractor


Every registered person executing works contract shall keep separate accounts
for each works contract showing –

(a) the names and addresses of the persons on whose behalf the works contract
is executed;
(b) description, value and quantity (wherever applicable) of goods or services
received for the execution of works contract;
(c) description, value and quantity (wherever applicable) of goods or services
utilized in the execution of each works contract;
(d) the details of payment received in respect of each works contract; and
(e) the names and addresses of suppliers from whom he has received goods or
services.

Person operating a warehouse and transporter


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. Also the goods should be stored in such manner
104 | GST – The Businessman’s Guide

that they can be identified item wise and owner wise and shall facilitate any
physical verification or inspection by the proper officer.

Any person engaged in the business of transporting goods shall maintain


records of goods transported, delivered and goods stored in transit by him and
for each of his branches.

Such person has to maintain records even if he is not registered under GST. If
he is not registered then he shall submit the details regarding his business in
Form GST ENR-01. Upon validation of the details furnished, a unique
enrolment number shall be generated and communicated to the said person. A
person is not required to enrol for each state or union territory separately.

Commissioner’s Power regarding Accounts


Maintenance Rules
Commissioner may notify a class of taxable persons to maintain additional
accounts or documents for such purpose as may be specified therein.

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.

Audit of Accounts
Every registered person whose turnover exceeds Rs. 1 crore during a financial
year has to get his accounts audited under GST. Accounts is to be audited by a
Chartered Accountant or Cost Accountant only.
He shall furnish a copy of audited annual accounts and a reconciliation
statement, duly certified, in FORM GSTR-9B.

Retention of accounts and records


Every person is required to retain such accounts and records with him until 6
years from the due date of furnishing annual return of the relevant year. Due
date for filing annual return in 31st December of the next financial year. For
e.g.. For the year 2017-18 the accounts are to be retained up to 31st December
2024.
A person who is 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
Accounting Records| 105

for an offence under Chapter XIX, shall retain the books of account and other
records pertaining to the subject matter of such appeal or revision or
proceedings or investigation for a period of one year after final disposal of
such appeal or revision or proceedings or investigation.
Refunds| 107

Chapter 16

Refunds
108 | GST – The Businessman’s Guide

Refunds under GST


A person can make an application for refund of GST before expiry of two
years from the relevant date in such form and manner as may be prescribed.
Such refund may be claimed in the return filed in regular manner by the
taxable person if refund is related to credit balance in electronic cash ledger.
No refund shall be paid to an applicant if the amount of refund is less than Rs.
1,000.

Refund allowed in case of


1. Zero rated supplies made without payment of tax
2. Where refund is generated 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).
3. 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.
4. 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.
5. Other conditions which the Government notifies.

Refund not allowed in case of


1. In case of goods or services which are notified by council in this behalf.
2. Refund of unutilized input tax credit in where the goods exported out of
India are subjected to export duty.
3. Refund of unutilized input tax credit if the supplier of goods or services or
both avails of drawback in respect of central tax or claims refund of the
integrated tax paid on such supplies.

Application Procedure
The application is to be submitted along with the documents of

 Documents to establish that a refund is due


Refunds| 109

 Documents to establish that the amount of tax and interest was collected
from or paid by applicant and incidence of tax and interest had not been
passed to any other person.
Where the amount claimed as refund is less than Rs. 2 lakhs, the applicant
may file a declaration rather than the documentary or other
evidence certifying that the incidence of such tax and interest had not been
passed on to any other person.
 A Certificate in Annexure 2 of FORM GST RFD-01 issued by a chartered
accountant or a cost accountant certifying that incidence of tax, interest or
any other amount claimed as refund has not been passed on to any other
person, in a case where the amount of refund claimed exceeds two lakh
rupees.
Such declaration or certificate is not required when the amount of refund is
related to

(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.
(b) refund of unutilised input tax credit under sub-section (3).
(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.

Interest on Delayed Refund


If the refund is not paid within sixty days from the receipt of application then
interest is payable to the applicant at the rate of 6% or lower (Rate yet not
decided) from the date immediately after the expiry of sixty days from the date
of receipt of application till the date of refund of such tax.

Where refund arises from an order passed by an adjudicating authority or


Appellate Authority or Appellate Tribunal or court and which is not
refunded within sixty days from the date of receipt of application filed
consequent to such order, interest at rate of 9% or lower (Rate not notified yet)
is payable.

Withholding of Refund
Refund can be withhold by the officer if the applicant is defaulted in
furnishing any return or who is required to pay any tax, interest or penalty,
which has not been stayed by any court, Tribunal or Appellate Authority by
the specified date. On clearing of such default the officer has to issue the
110 | GST – The Businessman’s Guide

refund.
Specified means the last date for filing an appeal under this Act.
Advance Tax paid by a casual taxable person or non resident taxable person
shall not be refunded until such person files all the returns for entire period for
which he is granted registration.

Forms for Refund


S no. Form Number Purpose

Refund Application form


1 GST RFD-01 –Annexure 1 Details of Goods
–Annexure 2 Certificate by CA

2 GST RFD-02 Acknowledgement

3 GST RFD-03 Notice of Deficiency on Application for Refund

4 GST RFD-04 Provisional Refund Sanction Order

5 GST RFD-05 Payment Advice to bank

6 GST RFD-06 Provisional Refund Sanction Order under section 54(5)

7 GST RFD-07 Refund adjusted against outstanding demand

8 GST RFD-08 Show cause notice for reject of refund application

9 GST RFD-09 Reply for form GST RFD-08

10 GST RFD-10 Refund Application under Section 55


TDS under GST| 111

Chapter 17

TDS under GST


112 | GST – The Businessman’s Guide

Basics
The central or state government may mandate the following enterprises to
deduct TDS at the rate of 1% from the payment made or credited to supplier
for the taxable supplies of value greater than Rs. 2.5 lakh. The limit of Rs.
2.5 lakh is for single contract and not for aggregate value.
 a department or establishment of the Central or State Government

 Local authority
 Governmental agencies
 such persons or category of persons as may be notified, by the Central or a
State Government on the recommendations of the Council
TDS is not required to be deducted if the location of supplier and place of
supply is in different state/union territory from the state/union territory in
which the recipient is registered.

Tax Deduction and Collection Account Number (TAN) issued under Income
Tax Act is required by the persons who are required to deduct TDS under
GST. The value of supplies will be taken as amount excluding taxes.

TDS Certificate
The deductor shall, in the manner prescribed, furnish to the deductee a
certificate in Form GSTR-7A mentioning therein the contract value, rate of
deduction, amount deducted, amount paid to the appropriate Government and
other particulars.

The deductor has to furnish such certificate to deductee within five days of
crediting such amount to the Government. Failure to furnishing such
certificate will make deductor liable for a penalty of Rs. 100 per days,
maximum to Rs. 5,000.
TDS under GST| 113

Payment and Interest on Late Payment


Payment is to be made within 10 days from the end of the month in which
such tax is deducted. If deductor doesn’t pay the amount of TDS before due
date then he is liable to pay interest at rate specified. (Rate not yet specified)

Penalty on non deduction or short deduction


Non deduction / short deduction / non payment or short payment of TDS is an
offence under the act for which a minimum penalty of Rs 10,000/- is
prescribed under the act.
114 | GST – The Businessman’s Guide

Return to be filed
Return for the month in which tax is deducted is to filed on or before 10th of
the succeeding month. Only online return can be filed through Form GSTR-7,
no paper return is allowed.

How can deductee claim such TDS amount?


Such amount as filed by the deductor in his return will be available to
deductee in Part C of Form GSTR-2A, so that the deductee can take input tax
credit by including it in his GSTR-2. This input tax credit is credit to
electronic cash ledger and thus can be used for payment of tax, penalty, fee or
any other amount.

Refund of wrong or excess deduction


If wrong deduction is made by deductor or the amount deducted is excess of
amount required to be deducted then a refund can be made to the deductor. If
the amount wrongly or excessively deducted is credited to electronic cash
ledger of the deductee then no such refund will be made.
TDS under GST by E-Commerce Operator| 115

Chapter 18

TCS under GST by


E-Commerce Operator
116 | GST – The Businessman’s Guide

Electronic commerce operator like amazon, flipkart are required to collect Tax
Collection at Source (TCS) at the rate of one percent of the net sales of goods or
services made through their platform. Tax is to be collected only on the amount
which is collected by the operator itself.

Calculation of Net Sales


Net sales is equal to the sales made through the platform reduced by the
amount of goods returned by customer. The sales of services on which e
commerce operator is itself liable to pay GST under section 9(5) is not
included in the net sales and thus no tax is to be collected on such amount.

Payment of Tax and Statement Filing


The amount collected by operator as TCS is to be deposited within 10 days
from the end of the month in which collection is made. Also details of outward
supplies made, the supplies which are returned and amount collected during
the month is to be filed within 10 days from the end of the month.

If the operator discovers any omission or incorrect particulars in a statement


filed, 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.

No such rectification of any omission or incorrect particulars shall be allowed


after any of the following dates

1. 10th October of the following financial year


2. Actual date of furnishing of the relevant annual statement.
Also an Annual statement is to be filed for every financial year on or before
31st December following the end of the year.

Input Tax Credit to Supplier


The supplier who has supplied the goods or services through the e commerce
portal can claim such amount as input tax credit in his electronic cash ledger.

If the details furnished by the e commerce operator and the supplier doesn’t
match then the discrepancies will be communicated to both the parties. If the
discrepancy is not resolved by the supplier in his return or operator in his
TDS under GST by E-Commerce Operator| 117

statement in the month in which discrepancy is communicated then such


amount will be added to the output tax liability of the supplier. Such amount
will be added to output tax liability of supplier only where the value of
outward supplies furnished by the operator is more than the value of outward
supplies furnished by the supplier and in the month succeeding the month in
which the discrepancy is communicated. The supplier also needs to pay
interest from the due date of payment to the date of its actual payment.

Notice by Officer
An officer not below the rank of joint commissioner may serve a notice to
operator asking for information related to supplies of goods and services
during any period and the stock of goods held by suppliers in godowns or
warehouses managed by such operator and declared as additional places of
business by such suppliers. The operator has to furnished such information
within 15 days of serve of such notice. If the e commerce operator fails to
furnish such information then such operator is liable to penalty which may
extend to Rs. 25,000.

Conclusion
This provision for e commerce portals may bring many hardships to the new
and upcoming portals operating at small scale. It will bring many small service
providers into the ambit of GST. In cab services like uber and ola, the service
providers are the car drivers who also owns the car. In such scenario they have
to file monthly return to claim the amount of tax collected from them.
GST Compliance Rating| 119

Chapter 19

GST Compliance Rating


120 | GST – The Businessman’s Guide

What is GST Compliance Rating?


GST compliance rating is a rating score which will be given to a registered
person on the basis of his history of compliance with the rules and regulation
of GST.

The person who abide by the rules and regulations and file their taxes and
returns will allotted a good rating while person with defaults and late
submission will be allotted a bad rating.
The rating will be available in public domain and will be evaluated at regular
intervals.

What will be the use and benefit of Compliance


Ratings?
Under GST a buyer will be allowed input tax credit only when the seller files
the proper details in his GSTR-1. If the supplier fails to file his returns or
makes a delay, it will surely have an impact on buyer. So GST compliance
rating will be a measure for the buyer to look out before entering into any
transaction. A person will surely try to avoid purchasing from a person with
low ratings.

Other use of GST compliance rating will be on the refund claims. As per GST
law the refunds under GST will be processed on merit basis. A person with
high ratings will be refunded the amount of tax immediately. While the
refunds of person with low rating will be given after due verification and thus
causes to delay the refund with a substantial amount of time.
So, every person should try to maintain a high level of ratings to avoid bad
reputation as well as loss of sales.

How GST compliance rating will be calculated?


The basis on which such rating will be determined in not yet declared. But the
rating will be mostly based on the following parameters

 Timely filing of returns.


 Timely payment of taxes.
 Showing correct sales and GSTIN in Details of outward supplies.
 Timely correction in GSTR-1 when details are added or modified by the
buyers in GSTR-2A.
 No evasion of taxes found.
Accounting| 121

Chapter 20

Accounting
122 | GST – The Businessman’s Guide

Accounting Entries by Businesses other than those


Registered under Composition Scheme
The Accounts to be maintained by a normal dealer are
Input CGST A/c
Input SGST A/c
Input IGST A/c
Output CGST A/c
Output SGST A/c
Output IGST A/c
GST Payable
The person who is registered in Union Territory has to pay and thus maintain
UTGST account in lieu of SGST account. So for the entries and examples
given below such persons has to simply replace UTGST with SGST.

Intra State Sales (Sales within same state or union territory)

Purchase by X from Z who is in same state for Rs. 8,000 and GST rate of 18%
(CGST@9% & SGST@9%)Purchase A/c Dr 8,000
Input CGST A/c Dr 720
Input SGST A/c Dr 720
To Z A/c 9440
Sales by X to Y who is in same state for Rs. 25,000
Y A/c Dr 29,500
To Sales A/c 25,000
To Output CGST A/c 2,250
To Output SGST A/c 2,250
He paid consultation fees to CA of Rs. 5,000
Consultation Fees A/c Dr 5,000
Input CGST A/c Dr 450
Input SGST A/c Dr 450
To CA A/c 5,900
Purchased furniture worth Rs. 3,000
Furniture A/c Dr 3,000
Input CGST A/c Dr 270
Input SGST A/c Dr 270
To Cash A/c 3,540

Total Inputs and Output taxes

Input CGST = 720 + 450 + 270 = 1,440


Input SGST = 720 + 450 + 270 = 1,440
Accounting| 123

Output CGST = 2,250


Output SGST = 2,250
On month end for GST Payable
Output CGST A/c Dr 2,250
Output SGST A/c Dr 2,250
To Input CGST A/c 1,440
To Input SGST A/c 1,440
To GST Payable A/c 1,620
Please note that there are some rules and restrictions on input tax credit and
above entries will be made only for those purchases on which ITC is allowed.
For e.g.- GST paid on purchase of motor car is not allowed except for certain
persons. For a person to whom ITC is not allowed, accounting entry will be
Car A/c Dr 5,00,000
To Bank A/c 5,00,000

Inter State Sales (Sales outside state or union territory)

Purchase by X from Z who is in different state for Rs. 8,000 and GST rate of
18% (CGST@9% & SGST@9%)
Purchase A/c Dr 8,000
Input IGST A/c Dr 1,440
To Z A/c 9,440
Sales by X to Y who is in different state for Rs. 25,000
Y A/c Dr 29,500
To Sales A/c 25,000
To Output IGST A/c 4,500
He paid consultation fees to CA of Rs. 5,000
Consultation Fees A/c Dr 5,000
Input CGST A/c Dr 450
Input SGST A/c Dr 450
To CA A/c 5,900
Sales by X to B who is in same state for Rs. 30,000
Y A/c Dr 35,400
To Sales A/c 30,000
To Output CGST A/c 2,700
To Output SGST A/c 2,700

Total Inputs and Output taxes

Input CGST = 450


Input SGST = 450
Input IGST = 1,440
Output CGST = 2,700
124 | GST – The Businessman’s Guide

Output SGST = 2,700


Output IGST = 4,500
On month end for GST Payable
Output CGST A/c Dr 2,700
Output SGST A/c Dr 2,700
Output IGST A/c Dr 4,500
To Input CGST A/c 450
To Input SGST A/c 450
T0 Input IGST A/c 1,440
To GST Payable A/c 7,560
Please note that there are some rules and restrictions on input tax credit and
above entries will be made only for those purchases on which ITC is allowed.

Impact on Profit and Loss Account and Balance Sheet

All tax accounts are not in the nature of direct/indirect incomes or expenses,
therefore there will be no impact on the Profit and Loss account. However if
there is any GST paid for which input tax credit is not allowed then it should
be booked as expense and thus reducing the profit. (In case payment is for an
expense)
The tax liability or positive input tax credit is to be shown as liability or asset
in the balance sheet. Fixed assets on which input tax credit is allowed and
taken are to be shown as cost excluding gst.

Accounting Entries by Composition Dealer


Persons registered under composition scheme are not allowed to take input tax
credit of tax paid and also not to charge gst from the customer. They also
cannot make inter state sales.
Therefore they are not required to maintain accounts for input and output gst.
They have to make very simple entries as follows
On sale of goods
Cash A/c Dr 5,000
To Sale A/c 5,000
On Purchase of goods
Purchase A/c Dr 4,000
To Cash A/c 4,000
On purchase of Capital asset
Furniture A/c Dr 1,500
To Cash A/c 1,500
On payment of Composition Fees
Composition Fees A/c Dr 25
To Bank A/c 25
Accounting| 125

Impact on Profit and Loss Account and Balance Sheet

Composition fees is an expense and thus show as indirect expense in profit


and loss account. There will be no impact on the Balance Sheet. All capital
assets are shown at Cost including GST.
GAAP is applicable mandatorily on GST. So, all principles following revenue
recognition etc. will be applicable.

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