GST NOTES FOR VI SEMESTER

UNIT - I

The definition of supply as laid under section 7, of the Central GST Act, 2017 is an inclusive definition.
Thus, any form of supply of goods or services would get covered. The term ‘supply’ includes all forms of
supply of goods or services for a consideration, in the course of or for furtherance of business or even
without a consideration. Supply can be categorized as follows;

Part I: Supplies for consideration;

Sale Any sale of goods or services which broadly result in the transfer
of title in case of goods, and transfer of right to use in case of
services

Transfer Any branches/stock transfers form a part of supply and are

taxable

Barter/Exchange When the consideration is paid through goods instead of money.

For example: a seller has supplied goods and the buyer supplies
goods to the extent of payment or when one product is exchanged
with another product

License Any grant of license to use forms part of supply. For example:
online subscriptions

Rental Renting of property fully or partially is a supply under GST

Lease Lease Letting out the building or property on lease is a supply

under GST

Disposal Disposal of business assets forms part of supply.

Part II: Supplies without consideration

Section 7 (1) (c) read with Schedule I of the Central GST Act, 2017 specifies services which are made or
agreed to be made without a consideration. Thus, the following transaction will be subject to GST, even
if there is no consideration.

• Permanent transfer/ disposal of business assets where input tax credit has been availed.

In case of event of sale or transfer of business assets where input tax credit has been availed the
transaction shall be treated as supply even when these are cleared or transferred without consideration,
and the business is liable to pay GST.

• Supply of goods or services or both between related persons, or between distinct persons when
made in the course or furtherance of business.
Supply of goods by a principal to his agent where the agent undertakes to supply such goods on behalf
of the principal, or by an agent to his principal where the agent undertakes to supply such goods on
behalf of the principal.

As per aforesaid clause, the agent will be liable for GST on value of goods or services only if he
undertakes to supply any goods and/or services on behalf of any principal. However, if the agent does
not supply goods or services, he is not liable for GST on the value of goods or services. He would be
liable for GST only on his commission. Moreover, in case of goods returned by an agent to principal
would be covered under this clause and attract GST.

• Importation of services by a taxable person from a related person or from any of his other
establishments outside India, in the course or furtherance of business.

This implies that services imported without consideration from related persons situated outside
India will be subject to levy of GST only if it is in the course of or for furtherance of business.

Part III: Deemed Supply

As per Schedule II of Central GST Act, 2017 read with Section 7(1)(d) provides clarity on determining
the type of supply as supply of goods or supply of services. This aims at eliminating the ambiguity that
exists in the current indirect tax system, regarding, Service Tax Vs VAT on works contract, AC Restaurant
Service, etc.

It is, therefore, important for businesses to know whether supply amounts to supply of goods or
supply of services, and treat them accordingly. The list of the prescribed deemed supply are as under:

Transactions Deemed as Supply of Goods:

• Any transfer of the title in goods is a supply of goods •

Any transfer of title of goods under an agreement which stipulates that property in goods will pass at a
future date upon payment of full consideration as agreed like hire purchase

• Permanent transfer or disposal of business assets with or without consideration

• Supply of goods by any unincorporated association or body of persons to a member thereof

Transactions Deemed as Supply of Services:

•transfer of right or undivided share in goods without transfer of title

• Any lease, tenancy, easement, license to occupy land

• Any lease or letting out of the building for business or commerce either wholly or partially

• Any treatment or process applied on another person’s goods like job work

• Any business assets put for private use whether or not for consideration

• Renting of immovable property

• Construction of a complex, building, civil structure or part thereof

• Temporary transfer or permitting the use or enjoyment of any intellectual property right

• Development, design, programming, customization, adaptation, up -gradation, enhancement,

implementation of information technology software

• Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act

• Works contracts

Supply of goods, being food or any other article for human consumption or any drink

Part IV: Specific Exclusions

There are certain categories of services which are specifically excluded from the levy of GST. As in the
present service tax law concept of negative list prevails similar concept has been introduced in the GST.

As per schedule III read with section 7(2) (a) of the Central GST Act, 2017 the following matters shall be
treated as neither supply of goods nor supply of services:

• Services by an employee to the employer in the course of or in relation to his employment.

• Services by any court or tribunal

• The functions performed by any Members of Parliament, State legislature, Panchayats, Municipalities
and other local authorities

• The duties performed by any person as a Chairperson/Member/Director in a body established by the

Central Government, State Government or local authority and who is not deemed as an employee
before the commencement of this clause

• Services of funeral, burial, crematorium or mortuary including transportation of deceased

• Sale of land, sale of building after the issuance of completion certificate and

• Actionable claims other than lottery, betting and gambling

Certain categories of activities or transaction undertaken by the Central Government, State

Government or any local authority in which they are engaged as public authorities as may be specified
by the Central/ State Government, shall be treated neither as a supply of goods nor a supply of services.
Therefore, no tax is payable by recipient of such services..

Part V: Mixed and Composite Supply

As per Section 8 of the Central GST Act, 2017 certain specific provisions have been made to determine
rate of GST in case of composite supply and mixed supply.

“Composite supply” means a supply made by a taxable person to a recipient comprising two or more
supplies of goods or services, or any combination thereof, which are naturally bundled and supplied in
conjunction with each other in the ordinary course of business, one of which is principal supply. For e.g.
In case where goods are packed and transported with insurance, the supply of goods , packing materials,
transportation and insurance is a composite supply and supply of goods is the principal supply.
Also the work contracts and supply of goods, being food or any other article for human consumption or
any drink are considered to be deemed composite supply as per clause 6 of Schedule II of the law.

Example 1: A gift-wrapped box of chocolates. Here, the chocolates are the principal supply, while the
box, gift wrapper, message card and gift wrapping service offered by the salesperson are supporting
elements that cannot be supplied individually without the chocolates. This is a composite supply, and its
GST rate will be same as the rate for the chocolates.

Example 2: A dealer sells a brand-new vehicle along with registration, insurance, a tool kit and first aid
kit, and 4 free maintenance services. This is a composite supply, because vehicle insurance, registration
and free maintenance services cannot be supplied without the vehicle (which is the principal supply).

“Mixed supply” means two or more individual supplies of goods or services, or any combination
thereof, made in conjunction with each other by a taxable person for a single price where such supply
does not constitute a composite supply. For e.g. In case of supply of a package consisting of watch, tie,
belts as a combo pack then although always these items can be sold individually and are not dependent
on each other. Then such a supply would be termed as mixed supply.

1: A plant nursery sells cut flowers, ornamental plants, and gardening services together as a bundle.
When they’re sold separately, the plants and flowers incur GST at a rate of 5%, and the gardening
services incur GST at a rate of 18%. When they’re offered together as a bundle, the whole bundle will
incur GST at the 18% rate.

Example 2: A travel and tour package includes hotel rooms (room rent < Rs.1000, so GST exempt), taxi
service (GST 5%), and meals (non-AC restaurant GST 12%) bundled together. This is a mixed supply
because each of these can be offered individually. The meals have the highest GST tax rate, so it is
treated as the principal supply, but the hotel rooms and taxi service could still be sold separately if the
supplier wished.

Characteristics of supply.

In the GST system, a taxable event is called a Supply. For an event to be considered as a supply by the
government, it should have the following characteristics

1.Supply should be taxable: Supply of goods or services can either be taxable or tax-exempt. Taxable
supplies are goods and services that attract GST. Tax-exempt supplies include supply of goods or
services that belong to a specific category mentioned in the GST Act.

2.Supply should be made by a taxable person: A taxable person is defined as a person who is registered
under the GST, or is a liable to register, or a person who has voluntarily registered. Supply between two
non-taxable people will not be considered as supply under GST. If a person supplies goods or services in
different states or has multiple business verticals, then they are required to register separately for each
state or vertical. Each of these registered entities will be considered as a taxable person.

3.Supply should be made within a taxable territory: Taxable territory means any place in India except
the State of Jammu and Kashmir. Read more about the place of supply here (insert link).
4.Supply should be made in exchange for consideration: Consideration can be defined as a barter of
goods or services, or payment made for a supply in money, or in kind. A prepayment or deposit toward a
supply is also as accepted as a consideration by the government.According to CGST Act, the following
activities that will be treated as supply even if it is made without consideration.

 When a business permanently transfers or disposes its assets for which input tax credits have
been availed.

 Supply made between two related or separate persons for business purposes.

 Supply of goods by an agent on behalf of the supplier or supply received by an agent on behalf
of a customer.

 When a taxable person imports services from a related person, or from his or her own business
outside of India for business purposes.

5.Supply should be made in the course of business or in the interest of growing a business:

GST is applicable only on business transactions. Hence, for a transaction to be a considered as supply
under GST, it has to be made for business purposes. If supplies are made for personal purposes, it will
not be considered as a supply under GST. Taxable supply refers to a supply of goods and/or services
which is chargeable to tax under the GST Act. Supplies which are exempt or subject to NIL rate of tax will
not be treated as taxable supplies. However, exempt supplies shall be included for the purpose of
computing the aggregate turnover to determine the threshold / composition limits.

IV. Types of Supply:

(i). Taxable supply

Taxable supply refers to a supply of goods and/or services which is chargeable to tax under the GST Act.
Supplies which are exempt or subject to NIL rate of tax will not be treated as taxable supplies. However,
exempt supplies shall be included for the purpose of computing the aggregate turnover to determine
the threshold / composition limits.

(ii). Exempt supply

Exempt supply means supply of any goods and/or services which are not taxable under the GST Act
and includes such supply of goods/or services which are specified in the Schedule to the Act or which
may be exempt from payment of tax under Sec. 10 of the GST Law.

Under Section 10 of the GST Law, a supply may be exempt generally either absolutely or subject to such
conditions as may be specified in a notification issued by the appropriate government. Further, where
an exemption in respect of any goods and/or services from the whole of the tax leviable thereon has
been granted absolutely, the taxable person providing such goods and/or services shall not be eligible
pay tax on such goods and/or services

(iii). Zero-rated supply

Zero rated supply is a supply of any goods and/or services on which no tax is payable but credit of the
input tax related to that supply is admissible. Exports shall be treated as zero-rated supply. Zero rated
supplies will be treated as taxable supply.

(iv). Composite / Mixed supply

Section 2(27) of the GST Law defines composite supply to mean a supply consisting of two or more
goods, two or more services or a combination of goods and services provided in the course or
furtherance of business, whether or not the same can be segregated. Many transactions that fall within
the scope of GST may consist of more than one element. These elements may be a mix of goods, or
services, or both. Sometimes these elements, if supplied separately, may have different GST liabilities
depending upon the rates, applicability of time of supply and place of supply provisions. To avoid
disputes about whether the supplier is making a single supply with one liability, or multiple supplies with
different liabilities, it has to be determined whether the supply is one of goods, or of services, or it is a
supply constituted of both goods and services (composite supplies).

To determine whether a particular supply consists of various elements to be treated as a single

supply or as multiple supplies, one has to first identify the essential features of the transaction which
involves, ascertaining what the recipient has received. If a component of the supply is to be treated
separately from the overall supply of which it is a part, it should be distinct and independent and should
amount to more than merely a component of the overall supply. For instance, when a car is given for
servicing, as a part of the service, engine oil may be replaced. The supply of the oil cannot be considered
as distinct or independent in the context of the overall service required by the recipient. It is also
necessary to ascertain whether each supply shall be properly regarded as a principal supply or some of
them are merely ancillary to principal supply.

The GST Law contains specific provisions [sub-Section (3) Section 3] empowering the Central or a
State government to specify, by notification, on the recommendations of the GST Council, whether a
transaction involving composite supply will be treated as a supply of goods and not a supply of service or
a supply of service and not a supply of goods.

(v). Continuous supply of goods/services

Continuous supply of goods means a supply of goods which is provided or agreed to be provided,
continuously or on recurrent basis for more than 3 months under a contract, for which the supplier
invoices the recipient on a regular or periodic basis. Continuous supply of services means a supply of
service notified by the Central or a State government, provided or agreed to be provided, continuously
or on recurrent basis under a contract, for a period of exceeding three months, with periodic payment
obligations. A few examples of “Continuous supply” can be supply of bricks for construction, security
service, supply of water cans on a weekly basis, annual maintenance contract, or telecom and internet
services.
 Identifying a supply as a continuous supply of goods/services is required in view of the time of supply of
provisions. Section 12 of the GST Law provides that in the case of continuous supply of goods, involving
successive statement of accounts or successive payments, the time of supply shall be the date of expiry
of the period to which such successive statements of accounts or successive payments relate. Where
there are no successive statements of accounts, the date of issue of invoice or the date of receipt of
payment, whichever is earlier, shall be the time of supply.

Section 13 of GST Law provides that in case of continuous supply of services, the time of supply to be
(a) where the due date of payment is ascertainable from the contract, the date on which the payment is
liable to be made by the recipient of service, whether or not any invoice has been issued or any payment
has been received by the supplier of service;(b) where the due date of payment is not ascertainable
from the contract, each such time when the supplier of service receives the payment, or issues an
invoice, whichever is earlier;(c) where the payment is linked to the completion of an event, the time of
completion of that event.

(vi). Inward/Outward supply

An inward supply [Section 2(61)] refers to receipt of goods and/or services whether by purchase,
acquisition or any other means by a person registered under the Act. Section 26 of the GST Law
mandates every registered taxable person other than an input service distributor, a person paying tax
under composite scheme or a tax deductor at source, to file details of inward supplies as a part of
monthly / quarterly return.

An outward supply [Section 2(73)] refers to supply of goods and/or services, whether by sale, transfer,
barter, exchange, licence, rental, lease or disposal made or agreed to be made by such person in the
course or furtherance of business except in case of such supplies where the tax is payable on reverse
charge basis. Section 25 of the GST Law mandates every registered taxable person other than an input
service distributor, a person paying tax under composite scheme or a tax deductor at source to file
details of outward supplies as a part of monthly / quarterly return.

(vii). Inter/Intra State supply

The location of the supplier and the place of supply determines whether a supply is treated as an Intra
State supply or an Inter State supply. Determination of the nature of supply is essential to ascertain
which type of GST is payable (i.e. CGST/SGST or IGST). Inter State supply of goods means (subject to
Section 5 of the draft IGST Act), supply of goods where the location of the supplier and place of supply
are in different States. Inter State supply of service means (subject to Section 6 of the draft IGST Act),
supply of services where the location of the supplier and place of supply are in different States.

Intra State supply of goods means (subject to Section 5 of the draft IGST Act), supply of goods where
the location of the supplier and place of supply are in the same State. Intra State supply of service
means (subject to Section 6 of the draft IGST Act), where the location of supplier and the place of supply
are in the same State.

(viii). Deemed supply

 Schedule I of the GST Law lists specific transactions made without consideration as deemed supply
for GST purposes. They include (i) permanent transfer / disposal of business assets (ii) temporary
application of business assets to a private or non-business use (iii) services put to a private or non-
business use (iv) assets retained after deregistration of a company and (v) supply of goods / or services
by a taxable person to another taxable or non-taxable person in the course or furtherance of business.

Time of Supply

I. Introduction

The liability to pay the goods and services tax arises only when a supply has been made. The time of
supply fixes the point when the liability has to be discharged. The time of supply is the time when a
supply of goods and / or services is treated as being made under the GST law. It is important to
determine the time of supply because a taxable person should charge GST at the time when the supply
is made / deemed to have been made. A supplier becomes liable to account for GST once a tax point has
occurred and must include it in the return covering the period in which it falls. The time of supply differs
for supply of goods and supply of services. This is because goods are tangible and involve physical
movement / removal or transport whereas services are intangible that involve performance, for making
supply.

2. There are general provisions for determining the time of supply. However in certain cases and in
particular situations, specific time of supply provisions are to be applied. It is important to note that
where a specific time of supply provision applies, it will override the general provisions

Important terminologies:

1. “Open market value” (OMV)– which is the ‘full value in money payable by an unrelated person as its
sole consideration at the same time as the supply under inquiry;

2. “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

Time of supply of goods: (Section 12) :

(1) The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with
the provisions of this section.

(2) The time of supply of goods shall be the earlier of the following dates, namely: —

(a) the date of issue of invoice by the supplier or the last date on which he is required, under sub-
section (1) of section 31, to issue the invoice with respect to the supply; or

(b) the date on which the supplier receives the payment with respect to the supply:
Provided that where the supplier of taxable goods receives an amount up to one thousand rupees in
excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess
amount shall, at the option of the said supplier, be the date of issue of invoice in respect of such excess
amount.
Explanation 1.––For the purposes of clauses (a) and (b), “supply” shall be deemed to have been made to
the extent it is covered by the invoice or, as the case may be, the payment.

Explanation 2. ––For the purposes of clause (b), “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.

(3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time
of supply shall be the earliest of the following dates, namely:

(a) the date of the receipt of goods; or

(b) 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; or

(c) 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:

Provided that where it is not possible to determine the time of supply under clause (a) or clause (b) or
clause (c), the time of supply shall be the date of entry in the books of account of the recipient of supply.

(4) In case of supply of vouchers by a supplier, the time of supply shall be—

(a) the date of issue of voucher, if the supply is identifiable at that point; or
(b) the date of redemption of voucher, in all other cases.

(5) Where it is not possible to determine the time of supply under the provisions of subsection (2) or
sub-section (3) or sub-section (4), the time of supply shall––

(a) in a case where a periodical return has to be filed, be the date on which such return is to be filed; or

(b) in any other case, be the date on which the tax is paid.

(6) The time of supply to the extent it relates to an addition in the value of supply by way of interest,
late fee or penalty for delayed payment of any consideration shall be the date on which the supplier
receives such addition in value;

Section 31(1) provides that a registered person supplying taxable goods shall before or at the time of
(a) Removal of goods for supply to the recipient where supply involves the movement of goods or
(b) Delivery of goods or making available thereof to the recipient in any other case issue a tax
invoice showing the description, quantity and value of goods, the tax charged etc.

2) A registered person supplying taxable services shall, before or after the provision of service but within
a prescribed period, issue a tax invoice, showing the description, value, the tax charged thereon and
such other particulars as may be prescribed.
 Prescribed period is the time limit beyond which tax invoice to be issued in arrears cannot be delayed
after completion of the provision of service

(3) Notwithstanding anything contained in sub-sections (1) and (2):

(a) a registered taxable person may, within one month from the date of issuance of certificate of
registration and in such manner as may be prescribed, issue a revised invoice against the invoice
already issued during the period beginning with the effective date of registration till the date of
issuance of certificate of registration to him;

(b) a registered person may not issue a tax invoice if the value of goods or services or both supplies is
less than two hundred rupees’ subject to such conditions and in such manner as may be prescribed;

(c) A registered person supplying exempted goods or services or both or paying tax under the provisions
of section 10 shall issue, instead of a tax invoice, a bill of supply containing such particulars and in such
manner as may be prescribed:

(d) a registered person shall, on receipt of advance payment with respect to any supply of goods or
services or both,, issue a receipt voucher or any other document, containing such particulars as may be
prescribed, evidencing receipt of such payment;
(e) where on receipt of advance payment with respect to any supply of goods or services or both the
registered person issues a receipt voucher, but subsequently no supply is made and no tax invoice is
issued in pursuance thereof, the said registered person may issue to the person who made the
payment, refund voucher against such payment;
(f) a registered person who is liable to pay tax under sub-section (3) or sub section (4) of section 9 shall
issue an invoice in respect of goods or services or both received by him from the supplier who is not
registered on the date of receipt of goods or services or both ;
(g) a registered person who is liable to pay tax under sub section 3 or sub section 4 of section 9 shall
issue a payment voucher at the time of making payment to the supplier.

(4) 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.

(5) Subject to the provisions of clause (d) of sub section 3, 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.ec

(6) In a case where the supply of services ceases under a contract before the completion of the supply,
the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the
extent of the supply made before such cessation.
(7) Notwithstanding anything contained in sub-section (1), 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.

The above provisions have been discussed in detail as under:

1.Time of Supply-Forward charge:

The GST Law provides that the time of supply of goods shall be the earliest of the following dates:

(a) (i) the date on which the goods are removed by the supplier for supply to the recipient, in a case
where the goods are required to be removed or

(ii) the date on which the goods are made available to the recipient, in a case where the goods are not
required to be removed, or

(b) the date on which the supplier issues the invoice with respect to the supply, or

(c) the date on which the supplier receives the payment with respect to the supply, or

(d) the date on which the recipient shows the receipt of the goods in his books of account.

Where goods are made available to the recipient refers to cases where the goods (i) are physically
not capable of being moved; or (ii) are supplied in assembled or installed form; or (iii) are supplied by
the supplier to his agent or his principal.

The expression ‘made available to the recipient’ mean when the goods are placed at the disposal of
the recipient. For the purposes of clauses (b) and (c) above, the supply shall be deemed to have been
made to the extent it is covered by the invoice or, as the case may be, the payment. For the purpose of
clause (c) above, “the date on which the supplier receives the payment” shall be the date on which the
payment is entered in his books of accounts or the date on which the payment is credited to his bank
account, whichever is earlier.

2. Time of Supply-Reverse Charge: In case of reverse charge, the time of supply shall be the earliest of
the following dates: 1.the date of receipt of goods; 2.the date of payment; 3.the date immediately
after 30 days from the date of issue of an invoice by the supplier. If it is not possible to determine the
time of supply, the time of supply shall be the date of entry in the books of account of the recipient.

3.Time of Supply – Vouchers

The Act introduces time of supply in respect of ‘vouchers’ as a separate category such that the
provisions relating to time of supply of goods is made inapplicable when the supply is of such vouchers.

Vouchers are not defined in the Act but its general definition is “a small printed piece of paper that
entitles the holder to a discount or that may be exchanged for goods or services” and examples of
voucher are coupon, token, ticket, license, permit, pass.

Now, the time of supply in the case of vouchers is stated to be:

(i) the date of issue of voucher if the supply is identifiable at that point or

(ii) and in all other instances, the date of redemption of the voucher.

Interesting situations arise in respect of such transactions. For instance, the points accumulated in a
credit card could be used to exchange for goods or issue of an air ticket. Difficulty arises in taxing such
transactions in the hands of the person issuing such points. However, the taxability or otherwise of such
accumulated points would need detailed deliberations based on facts and surrounding circumstances of
each case

4.Time of Supply – Residuary

Where none of the above provisions are able to satisfactorily answer the time of supply, it is to
be determined based on the residuary provision which states that the time of supply is:

(i) where a periodical return has to be filed, the due date prescribed for such return or

(ii) in any other case, the date of payment of the tax

Time of supply under this residuary provision is applicable only when the other provisions are
found to be inapplicable and not merely when there is some difficulty in determining the facts
that are sought for by the relevant provision.

5. Time of Supply – Special Charges

Special charges imposed for delay in payment of consideration will enjoy the facility of time of
supply being date of receipt of the charges imposed, that is, cash-basis of payment of GST. The various
issues involved in these special charges are discussed in detail under time of supply of services which
may kindly be referred.

(1) The liability to pay tax on services shall arise at the time of supply, as determined in accordance with
the provisions of this section.
:
(2) The time of supply of services in case of forward charge shall be the earliest of the following dates,
namely:—

(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under
sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or

(b) the date of provision of service, if the invoice is not issued within the period prescribed under sub-
section (2) of section 31 or the date of receipt of payment, whichever is earlier; or

(c) the date on which the recipient shows the receipt of services in his books of account, in a case where
the provisions of clause (a) or clause (b) do not apply:

Provided that where the supplier of taxable service receives an amount up to one thousand rupees in
excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess
amount shall, at the option of the said supplier, be the date of issue of invoice relating to such excess
amount.

(3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the
time of supply shall be the earlier of the following dates, namely:––

(a) 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; or

(b) 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:
Provided that where it is not possible to determine the time of supply under clause (a) or clause (b), the
time of supply shall be the date of entry in the books of account of the recipient of supply:

Provided further that 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 of account of the
recipient of supply or the date of payment, whichever is earlier

Explanation: ––For the purposes of clauses (a) and (b)––

(i) the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the
case may be, the payment;
(ii) “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

4) In case of supply of vouchers by a supplier, the time of supply shall be––

(a) the date of issue of voucher, if the supply is identifiable at that point; or
(b) the date of redemption of voucher, in all other cases.
5) Where it is not possible to determine the time of supply under the provisions of subsection (2) or sub-
section (3) or sub-section (4), the time of supply shall––
(a) in a case where a periodical return has to be filed, be the date on which such return is to be filed; or
(b) in any other case, be the date on which the tax is paid.

(6) The time of supply to the extent it relates to an addition in the value of supply by way of interest,
late fee or penalty for delayed payment of any consideration shall be the date on which the supplier
receives such addition in value.

The GST Law provides that the time of supply of services shall be;

(a) the date of issue of invoice or the date of receipt of payment, whichever is earlier, if the invoice is
issued within the prescribed period, or

(b) The date of completion of the provision of service or the date of receipt of payment, whichever is
earlier, if the invoice is not issued within the prescribed period, or

(c) The date on which the recipient shows the receipt of services in his books of account, in a case where
the provisions of clause (a) or (b) do not apply.
 For the purposes of clauses (a) and (b) above , the supply shall be deemed to have been made to the
extent it is covered by the invoice or, as the case may be, the payment. For the purpose of clause (a) and
(b) above, “the date of receipt of payment” shall be the date on which the payment is entered in the
books of accounts of the supplier or the date on which the payment is credited to his bank account,
whichever is earlier.

(ii) Continuous supply of services:

In case of continuous supply of services, the time of supply shall be –

(a) where the due date of payment is ascertainable from the contract, the date on which the payment is
liable to be made by the recipient of service, whether or not any invoice has been issued or any payment
has been received by the supplier of service;

(b) where the due date of payment is not ascertainable from the contract, each such time when the
supplier of service receives the payment, or issues an invoice, whichever is earlier;

(c) Where the payment is linked to the completion of an event, the time of completion of that event;

The GST Law empowers the Central or State government to notify specified supply of services as
continuous supply of services.

iv) Residual provisions:

In a case where the supply of services ceases under a contract before the completion of the
supply, such services shall be deemed to have been provided at the time when the supply ceases. Where
it is not possible to determine the time of supply of services under any of the above mentioned
provisions, the time of supply shall be (a) in a case where a periodical return has to be filed, the date on
which such return is to be filed or in any other case, the date on which the CGST/SGST is paid.

V. Change in rate of tax in respect of supply of goods and services-Section 14:

14. Change in rate of tax in respect of supply of goods or services:

Notwithstanding anything contained in section 12 or section 13, 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.

UNIT II

Valuation of Supply

I. Introduction

The value of the supply is the value on which the GST is chargeable. Determination of value of the supply
is not only required to charge the goods and services tax, but also for arriving at the value of supply to
compute the turnover prescribed for obtaining registration under GST. The GST Law proposes to adopt
the concept of ‘transaction value’ for determining the taxable value of supply on which the goods and
services tax shall be levied. Currently, the concept of transaction value is followed both under Central
Excise and Customs legislations for levying central excise and customs duties by the Central government.

Section 15: Value of taxable supply

(1) The value of a supply of goods or services or both shall be the transaction value, which is the price
actually paid or payable for the said supply of goods or services or both where the supplier and the
recipient of the supply are not related and the price is the sole consideration for the supply.

(2) The value of supply shall include–––

(a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than
this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the
Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;

(b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred
by the recipient of the supply and not included in the price actually paid or payable for the goods or
services or both;

(c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a
supply and any amount charged for anything done by the supplier in respect of the supply of goods or
services or both at the time of, or before delivery of goods or supply of services;

(d) interest or late fee or penalty for delayed payment of any consideration for any supply; and

(e) subsidies directly linked to the price excluding subsidies provided by the Central Government and
State Governments.

Explanation.––For the purposes of this sub-section, the amount of subsidy shall be included in the value
of supply of the supplier who receives the subsidy.

(3) The value of the supply shall not include any discount which is given––

(a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in
respect of such supply; and

(b) after the supply has been effected, if— (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 as is attributable to the discount on the basis of document issued by the supplier has
been reversed by the recipient of the supply.

(4) Where the value of the supply of goods or services or both cannot be determined under sub-section
(1), the same shall be determined in such manner as may be prescribed.
 (5) Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies
as may be notified by the Government on the recommendations of the Council shall be determined in
such manner as may be prescribed.

Explanation.—For the purposes of this Act,––

(a)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

(viii) they are members of the same family;

(b) the term “person” also includes legal persons;

(c) 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.

We need to understand four important terms involved in the definition.

Transaction Value: – Transaction value is the consideration charged from the recipient for supply.

Consideration in relation to the supply of goods or services or both includes––

(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or
for the inducement of, the supply of goods or services or both, whether by the recipient or by any other
person but shall not include any subsidy given by the Central Government or a State Government;

(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of,
the supply of goods or services or both, whether by the recipient or by any other person but shall not
include any subsidy given by the Central Government or a State Government:

Provided that a deposit given in respect of the supply of goods or services or both shall not be
considered as payment made for such supply unless the supplier applies such deposit as consideration
for the said supply;
Price actually paid or payable: – It means the consideration paid or to be paid by the supplier for the
supply.

Condition-1: Supplier and Recipient of the supply are not related: Supplier and recipient should not be
related party.

Condition-2: Price is the sole consideration: Price will be sole consideration if it is on the arm length
price. It means if the price charged which is equivalent to Open Market Value or Fair Market Value then
the same will be sole consideration.

One important aspect is that both the conditions will apply simultaneously. It means if only one
condition is dissatisfied then the actual consideration will be value of supply.

If the above conditions are not satisfied then value of supply will be determined with the help of
valuation rules.

Valuation rules under GST Act 2017-

Rule-27 Value of supply of goods or services where consideration is not wholly in money:

Where the supply of goods or services is for a consideration not wholly in money, the value of the
supply shall,

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

(b) if the open market value is not available under clause (a), be the sum total of consideration in money
and any such further amount in money as is equivalent to the consideration not in money, if such
amount is known at the time of supply;

(c) if the value of supply is not determinable under clause (a) or clause (b), be the value of supply of
goods or services or both of like kind and quality;

(d) if the value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of
consideration in money and such further amount in money that is equivalent to consideration not in
money as determined by the application of rule 30 or rule 31 in that order.

Rule-28 Value of supply of goods or services or both 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 sub-section
(4) and (5) of section 25 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 the open market value is not available, be the value of supply of goods or services of like kind and
quality;
(c) if the value is not determinable under clause (a) or (b), be the value as determined by the application
of rule 30 or rule 31, in that order:

Provided that where the goods are intended for further supply as such by the recipient, the value shall,
at the option of the supplier, be an amount equivalent to 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:
Provided further that 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 the goods or services.

Rule-29 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 per cent 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.

(b) where the value of a supply is not determinable under clause (a), the same shall be determined by
the application of rule 30 or rule 31 in that order

Illustration: 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 five thousand rupees per quintal on the day of the
supply. Another independent supplier is supplying groundnuts of like kind and quality to the said agent
at the price of four thousand five hundred and fifty rupees per quintal. The value of the supply made by
the principal shall be four thousand five hundred and fifty rupees per quintal or where he exercises the
option, the value shall be 90 per cent. Of five thousand rupees i.e., four thousand five hundred rupees
per quintal.

Rule-30 Value of supply of goods or services or both based on cost:

Where the value of a supply of goods or services or both is not determinable by any of the preceding
rules of this Chapter, the value shall be one hundred and ten percent of the cost of production or
manufacture or the cost of acquisition of such goods or the cost of provision of such service

Rule-31. Residual method for determination of value of supply of goods or services or both:

Where the value of supply of goods or services or both cannot be determined under rules 27 to 30, the
same shall be determined using reasonable means consistent with the principles and the general
provisions of section 15 and the provisions of this Chapter: Provided that in the case of supply of
services, the supplier may opt for this rule, ignoring rule 30.

Rule 32. Determination of value in respect of certain supplies:

(1) Notwithstanding anything contained in the provisions of this Chapter, the value in respect of
supplies specified below shall, at the option of the supplier, be determined in the manner provided
hereinafter.
(2) The value of supply of services in relation to the purchase or sale of foreign currency, including
money changing, shall be determined by the supplier of services in the following manner, namely:-

(a) For a currency, when exchanged from, or to, Indian Rupees, the value shall be equal to the difference
in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India reference rate
for that currency at that time, multiplied by the total units of currency:

Provided that in case where the Reserve Bank of India reference rate for a currency is not available,
the value shall be one per cent. of the gross amount of Indian Rupees provided or received by the
person changing the money:

Provided further that in case where neither of the currencies exchanged is Indian Rupees, the value shall
be equal to one per cent of the 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 the Reserve Bank of India.

Provided also that a person supplying the services may exercise the option to ascertain the value in
terms of clause (b) for a financial year and such option shall not be withdrawn during the remaining part
of that financial year.

(b) At the option of the supplier of services, the value in relation to the supply of foreign currency,
including money changing, shall be deemed to be

(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

iii) Five thousand and five hundred rupees and one tenth of a per cent. of the gross amount of currency
exchanged for an amount exceeding ten lakh rupees, subject to a maximum amount of sixty thousand
rupees.

(3) The value of the supply of services in relation to booking of tickets for travel by air provided by an air
travel agent shall be deemed to be an amount calculated at the rate of five per cent. of the basic fare in
the case of domestic bookings, and at the rate of ten per cent. of the basic fare in the case of
international bookings of passage for travel by air. Explanation.- For the purposes of this sub-rule, the
expression “basic fare” means that part of the air fare on which commission is normally paid to the air
travel agent by the airlines.

(4) The value of supply of services in relation to life insurance business shall be,-

(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 an 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 the 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.

(5) Where a taxable supply is provided by a person dealing in buying and selling of second hand goods
i.e., used goods as such or after such minor processing which does not change the nature of the goods
and where no input tax credit has been availed on the purchase of such goods, the value of supply shall
be the difference between the selling price and the purchase price and where the value of such supply is
negative, it shall be ignored:

Provided that 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.

(6) 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.

(7) The value of taxable services provided by such class of service providers as may be notified by the
Government, on the recommendations of the Council, as referred to in paragraph 2 of Schedule I of the
said Act between distinct persons as referred to in section 25, where input tax credit is available, shall
be deemed to be NIL.

Rule-33- Value of supply of services in case of pure agent:

Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred
by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all
the following conditions are satisfied, namely,-

(a) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to
the third party on transportation 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, the expression “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;

© does not use for his own interest such goods or services so procured; and

(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 the Registrar of Companies. The fees charged by the
Registrar of Companies for the 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

Rule-34- Rate of exchange of currency, other than Indian rupees, for determination of value

The rate of exchange for the determination of the 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
of time of supply in respect of such supply in terms of section 12 or, as the case may be, section 13 of
the Act.

Rule-35 Value of supply inclusive of integrated tax, central tax, State tax, Union territory tax:

Where the value of supply is inclusive of integrated tax or, as the case may be, central tax, State tax,
Union territory tax, the tax amount shall be determined in the following manner, namely,- Tax amount =
(Value inclusive of taxes X tax rate in % of IGST or, as the case may be, CGST, SGST or UTGST) ÷ (100+
sum of tax rates, as applicable, in %). Explanation.- For the purposes of the provisions of this Chapter,
the expressions

(a) “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 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 the price is the
sole consideration, to obtain such supply at the same time when the supply being valued is made;

(b) “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 the 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.

Unit III
INPUT TAX CREDIT:

Introduction
The input tax credit eligibility is based on whether the same is used for taxable supplies or zero rated
supplies. Where the goods or service is used for both taxable and exempted supplies, only proportionate
credit is eligible for registered person, Further, a list of ineligible input tax credit is also Provided.

RELEVANT DEFINITIONS:

(a) Taxable person: Means a person who is registered or liable to be registered under section 22 or
section 24.

(b) Input tax credit: means the credit of “input tax” in terms of section 2(63).

(c) Input tax: "Input tax" in terms of section 2(62) in relation to a registered person, means the central
tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both
made to him and includes
— integrated goods and service tax charged on import of goods
— tax payable on reverse charge basis under IGST Act/SGST Act/CGST
Act/UTGST Act.

— but excludes tax paid under composition levy.

Section 9(3) and 9(4) of CGST Act levies tax on goods or services or both on reverse charge.
Therefore, ‘input tax credit’ is the tax paid by a registered person under the Act whether on forward
charge or reverse charge for the use of such goods or services or both in the course or furtherance of his
business.

(d). Electronic credit ledger: The input tax credit as self-assessed in return of registered person shall be
credited to electronic credit ledger in accordance with section 41, to be maintained in the manner as
may be prescribed. [Section 2(46) read with Section 49(2)].

(e)“Capital goods” means. -

goods, the value of which is capitalised in the books of account of the person claiming the input tax
credit and which are used or intended to be used in the course or furtherance of business [Section
2(19)].

Input: “Input” in terms of section 2(59) means — any goods,

— other than capital goods,
— used or intended to be used by a supplier
— in the course or furtherance of business

(g) Input service: “Input service” in terms of section 2(60) means —

any service
— used or intended to be used by a supplier
— in the course or furtherance of business.
“zero-rated supply” means any of the following supplies of goods or services or both, namely:––

(a) export of goods or services or both; or

(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic
Zone unit.16(1)

Section 16
(a) Registered person to take credit: Every registered person subject to Section 49 (payment of tax
related), shall be entitled to take credit of input tax charged on any supply of goods or services or
both to him which are used or intended to be used in the course or furtherance of his business.
The input tax credit is credited to the electronic credit ledger. Rule 36 of the Central Goods and
Service Tax Rules, 2017 provides that input tax credit can be taken on the basis of any of the
following documents:
(i) Invoice issued under section 31
(ii) Debit note issued under section 34
(iii) Bill of entry
(iv) Invoice prepared in respect of supplies made under reverse charge basis
(v) Invoice/ Credit Note issued by Input service Distributor.

Conditions for availment of credit by registered person:

Input tax credit is available only if –
(i) The said goods or services or both are used or intended to be used in the course or in the
furtherance of his business;
(ii) He is in possession of tax invoice/ debit note / tax-paying document issued by a supplier
registered under this Act (listed above);
(iii) He has received the said goods or services or both subject to job-work facilities and restrictions
relating to input tax credit in Section 19;
(iv) The supplier has uploaded the relevant invoice on the GSTN;
(v) Subject to section 41 (claim of ITC and provisional acceptance thereof),the supplier has paid the
said amount of tax (as charged in the invoice) to appropriate Government in cash or by way of
utilization of input tax credit, as admissible;
(vi) He – claimant of input tax credit – has furnished return under section 39 in FORM-GSTR 2;

a) Goods received in instalments: If goods are received in instalments against a single invoice,
credit can be taken upon receipt of last instalment of goods.

(b) Failure to pay to supplier of goods or service or both, the value of supply and tax thereon: If
recipient of goods or service or both has not paid the supplier within 180 days from date of invoice,
the amount of input tax credit availed of proportionate to such amount not paid to supplier along
with the interest will be added to output liability of the recipient. Such non-payment of the value of
invoice must be admitted in the return filed in FORM-GSTR 2 (Rule 37 of CGST Rules, 2017) for the
month immediately following the period of 180 days from the date of issue of invoice. The said
input tax credit can be re-availed on payment of value of supply and tax payable thereon.
(c) Please note that this condition does not apply for supplies which are payable under reverse
charge basis. This exception has been expressly created in second proviso to section 16(2) of the
Act.
(d) Capital goods on which depreciation is claimed: Where the registered person has claimed
depreciation on the tax component of the cost of capital goods and plant and machinery under the
provisions of the Income Tax Act, 1961, the input tax credit shall not be allowed on the said tax
component.
(e) Time limit to avail the input tax credit: A registered person is not entitled to take input tax
credit on invoice/ debit notes after due date of furnishing of the return under section 39 for the
month of September of the subsequent financial year or furnishing of the relevant annual return,
whichever is earlier.

Therefore, input tax credit shall be available to a registered person only if invoice/challan is in his
possession for the goods or services or both are received and the payment of such tax has been
made by the supplier and a return u/s 39 has been filed. Receipt of goods shall include delivery to
any other person as directed by the registered person.

Note: Goods are deemed to be received by a registered person when the supplier delivers the
goods to the recipient/ any other person, on the direction provided by the registered person to the
supplier. Credit would be available in case goods are directly sent to the job worker subject to
provisions under section 19.

In summary among others the following facts are crucial for availment of Input tax credit:
(a) The goods and/ or services must be used “by him” in the course or furtherance “of his”
business.
(b) Possession of Output Invoice/Supplementary Invoice/ Debit or Credit note/ ISD invoice/ Bill of
Entry and other related documents is a must.
(c) The said document must contain all the prescribed particulars specified in Rule 46 of Central
Goods and Service Tax Rules, 2017 relating to Invoice. It may be noted that Invoice or such other
document can contain additional details other than those prescribed but NO LESS.
(d) Supplier of goods and/ or services must upload the details of such documents in the common
portal i.e. GSTN.
(e) Vesting condition for claiming input tax credit is the return u/s 39 and not the supply per se.
(f) Input tax credit in case of supplies in instalment would be receipt of last instalment of goods.
(g) The law casts an obligation on the recipient of goods and/or services who avails the credit to
effect payment to the supplier within a period of 180 days from the date of invoice. If such payment
is not effected by the recipient to the supplier, Rule 37 obligates removal of input tax credit so
availed leading to consequential levy of tax, interest and penalty.
(h) Claim of depreciation on tax component disqualifies a recipient of Capital goods from availment
of input tax credit.
(i) ITC cannot be availed after the due date of filing the return for September month of the next
Financial year or on furnishing the Annual Return whichever is earlier.
(j) No registered person is permitted to avail any input tax credit pursuant to an order of demand
on account of fraud, willful misstatement, or suppression of fact.

Section 17: Apportionment of credit

(1) Where the goods or services or both are used by the registered person partly for the purpose of any
business and partly for other purposes, the amount of credit shall be restricted to so much of the
input tax as is attributable to the purposes of his business.

(2) Where the goods or services or both are used by the registered person partly for effecting taxable
supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax
Act, and partly for effecting exempt supplies under the said Acts, the amount of credit shall be
restricted to so much of the input tax as is attributable to the said taxable supplies including zero-
rated supplies.

(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall
include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in
securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

(4) A banking company or a financial institution including a non-banking financial company, engaged in
supplying services by way of accepting deposits, extending loans or advances shall have the option
to either comply with the provisions of sub-section (2), or avail of, every month, an amount equal to
fifty per cent of the eligible input tax credit on inputs, capital goods and input services in that month
and the rest shall lapse

(5) Provided that the option once exercised shall not be withdrawn during the remaining part of the
financial year. Provided further that the restriction of fifty per cent. shall not apply to the tax paid on
supplies made by one registered person to another registered person having the same Permanent
Account Number

STEPS TO BE FOLLOWED FOR CLAIMING INPUT TAX CREDIT ON IINPUT TAX ON INPUT GOODS AND
INPUT SERVICES:

Steps in calculation of eligible input tax credit

1. Compute the total input tax on inputs and input services-T
2. Comptue the input tax on inputs and input services use for non business purposes-T1
3. Compute the input tax on inputs and input services used for exempt supplies-T2
4. Compute the ineligible input tax on ineligible inputs and services -T3
5. Compute C1 ie ITC credited to electronic ledger- C1=T-(T1+T2+T3)
6. Compute T4 ie ITC used exclusively for taxable supplies and Zero rate supplies.
7. Compute C2 ie common credit: C2=C1-T4
8. Compute ITC attributable to exempt supplies ie D1=(E/F)XC2
9. Compute credit attributable to non-business purposes
10. Compute net eligible Common credit ie C3=C2-(D1+D2)
11. Total credit eligible- ie G=T4+C3

STEPS TO BE FOLLOWED FOR COMPUTATION OF ITC ON INPUT TAX CREDIT ON CAPITAL GOODS:

In case of Capital Goods is used commonly for providing taxable supply, exempt supply or used for
personal purpose, the GST credit shall be calculate as per details given below:
Step : 1 : Take the entire Amount of Credit to Electronic Credit Ledger.
Step : 2 : The total life of assets is to be taken at 5 years ( 60 Months). Calculate the credit attributable
for each tax period i.e. month based on estimated life of assets.
Credit for Tax Period: Total Tax Credit / 60 months
Step : 3 : Calculate amount of credit towards Exempt supply:
Credit toward exempt supply =(Value of Exempt supply / Total Turnover) X Credit for tax period as per
step 2
Step : 4: The amount calculated under step 3 shall be added to output tax liability for that month.
Step : 5 : The same activity is to be done separately for CGST SGST IGST
UGST
Note: if depreciation claimed on the GST paid while purchasing the capital asset, you cannot claim input
tax credit.
Ineligible input tax credit(blocked credit):

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

(i) Motor vehicle and other conveyance except when they are used for making the following taxable
supplies , namely(a) Further supply of such vehicles or conveyances or (b) Transportation of passenger
or (c) Imparting training on driving, flying, navigating such vehicles or conveyances;

(ii) Motor vehicle and other conveyance except used for transportation of goods

(iii) Supply of goods and/or services such as – (a) food and beverages, outdoor catering, beauty
treatment, health services, cosmetic and plastic surgery except where such supply of goods or services
of each category is used for making an outward taxable supply of the particular category of goods or
services or both or as an element of a taxable composite or mixed supply
(b) membership of a club, health and fitness centre
(c) rent-a-cab, life insurance, health insurance except where it is notified by the Government as
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; and
(d) travel benefits to employees on vacation i.e. leave or home travel concession.

(iv) Works contract services when supplied for construction of immovable property, other than plant
and machinery, except where it is for further supply of works contract service;

(v) Goods or services received by a taxable person for construction of an immovable property on his own
account, other than plant and machinery, even though it is used in course or furtherance of business;

(vi) Goods or services or both on which the tax paid under composition scheme
(vii) goods or services or both received by a non-resident taxable person except on goods imported by
him
(viii) Goods or services or both used for personal consumption
(ix) Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples
(x) Tax paid in terms of sections 74, 129 and 130
Procedure for availing ITC:
a. Provisional credit:
The electronic credit leder maintains separate the tax credits separately for CGST, SGST/UGST
and IGST. Such details are available from the GSTR 2 filed by the 15th of the month following the
month in which supplies are received.
b. Matching of Credit:
Matching of ITC would be done only after the due date of furnishing GSTR 3. ITC provisionally
taken by the recipient on the basis of GSTR 2 shall be matched by the system with the details of
outward supplies furnished in GSTR 3; with the IGST paid on import of goods by him and for
verification of duplication of claims of ITC.
c.Utilization of ITC:
in terms of sec 49(5):
- ITC of IGST can be used to pay IGST, CGST and SGST/UGST
- ITC of CGST can be used to pay CGST and SGST
- ITC of SGST/UGST can be used to pay SGST/UGST and IGST
- ITC of CGST can not be used to pay SGST/UGST

Section 18: Availability of credit in special circumstances;

(1) Subject to such conditions and restrictions as may be prescribed

(a) A person who has applied for registration under the Act within thirty days from the date on which he
becomes liable to registration and has been granted such registration shall, be entitled to take 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 from which he becomes liable to pay tax under the
provisions of this Act.

Example: (i) A person becomes liable to pay tax on 1st August 2017 and has obtained registration on
15th August 2017. Such person is eligible for input tax credit on inputs held in stock as on 31st July 2017.

(b) A person, who takes registration under sub-section (3) of section 25 shall, be entitled to take 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 grant of registration.

(ii) Mr. A applies for voluntary registration on 5th June 2017 and obtained registration on 22th June
2017. Mr. A is eligible for input tax credit on inputs in stock as on 21st June 2017.

(c) Where any registered person ceases to pay tax under section 10, he shall be 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 becomes liable to
pay tax under section 9 PROVIDED that the credit on capital goods shall be reduced by such percentage
points as may be prescribed

(b) Where an exempt supply of goods or services or both by a registered person becomes a taxable
supply, such person shall be entitled to take credit of input tax in respect of inputs held in stock and
inputs contained in semi-finished or finished goods held in stock relatable to such exempt supply
and on capital goods exclusively used for such exempt supply on the day immediately preceding the
date from which such supply becomes taxable:
 PROVIDED that the credit on capital goods shall be reduced by such percentage points as may be
prescribed

(2) A registered person shall not be entitled to take input tax credit under sub-section (1), in respect
of any supply of goods or services or both to him after the expiry of one year from the date of issue
of tax invoice relating to such supply.

(3) Where there is a change in the constitution of a registered person on account of sale, merger,
demerger, amalgamation, lease or transfer of the business with the specific provision for transfer of
liabilities, the said registered person shall be allowed to transfer the input tax credit which remains
unutilized in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or
transferred business in such manner as may be prescribed.

(4) Where any registered person who has availed of input tax credit opts to pay tax under section
10 or, where the goods or services or both supplied by him become wholly exempt, he shall pay an
amount, by way of debit in the electronic credit ledger or electronic cash ledger, 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 and on capital goods, reduced by such percentage points as may be prescribed,
on the day \immediately preceding the date of exercising such option or, as the case may be, the
date of such exemption: Provided that after payment of such amount, the balance of input tax
credit, if any, lying in his electronic credit ledger shall lapse.

(5) The amount of credit under sub-section (1) and the amount payable under sub-section (4) shall
be calculated in such manner as may be prescribed

(6) In case of supply of capital goods or plant and machinery, on which input tax credit has been taken,
the registered person shall pay an amount equal to the input tax credit taken on the said capital
goods or plant and machinery reduced by such percentage points as may be prescribed or the tax on
the transaction value of such capital goods or plant and machinery determined under section 15,
whichever is higher: Provided that 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 under section 15.

Declaration in FORM GST ITC 1 must be filed within thirty (30) days from the date of becoming
eligible to input tax credit.
Rule 40 of Central Goods and Service Tax Rules, 2017 requires a declaration to be filed containing
details of stocks and capital goods along with a certificate from a Chartered Accountant or Cost
Accountant where the credit so claimed exceeds Rs.2 lakhs.
 The supplier will not be entitled to credit of goods and/ or services or both after expiry of 1 year
from date of tax invoice.
 The credit on capital goods shall be reduced by five (5) percentage per quarter or part thereof
from the date of invoice.
 Such credits are subject to verification of details furnished by the supplier in GSTR - 1 or GSTR – 4
on the common portal.

Input tax credit and change in constitution of registered person:

 The change in constitution of registered person due to sale merger, demerger, amalgamation, lease or
transfer of business with provision for transfer of liabilities envisages that:

(i) The registered person is allowed to transfer the input tax credit remaining unutilized in the electronic
credit ledger .to such sold, merged, demerged, amalgamated, leased or transferred business.

(ii) Rule 41 prescribes such credit transfer be made on the Common Portal in FORM GST ITC 2 and in
case of demerger, credit to be transferred must be apportioned to the value of assets transferred in the
arrangement to each such unit.

(iii) Chartered Accountant or Cost Accountant to certify that the arrangement contains a specific
provision for the transfer of liabilities.

(iv) Form GST ITC 2 filed by the transferor will have to be accepted by the transferee on the Common
Portal.

(v) Transferee to duly account for the stocks capital goods received in books of accounts. The analysis of
above provision in a pictorial form is summarised as follows:

(f) When registered person switches over from regular scheme to composition scheme:
 Pay an amount by debiting electronic cash ledger / credit ledger, equivalent to input tax credit of –
— Inputs held in stock
— Inputs contained in semi-finished or finished goods held in stock and
— Capital goods
 On the day immediately preceding the date of such switch over.
 Balance of input tax credit lying in the electronic credit ledger, after payment of the above said
amount, shall lapse.
 Such amount is calculated in manner to be prescribed

Taking input tax credit in respect of inputs and capital goods sent for job work:

Entitlement of credit on inputs:

The principal can take credit of input tax on inputs sent to job-worker subject to fulfilment of the
following conditions:
 Rule 45 of Central Goods and Service Tax Rules, 2017 provides the following:
- To issue a challan for transfer of inputs to the job-worker including where they are sent directly (to
maintain paper trail of transaction)

- The details of Challans for goods dispatched to job worker or received from job worker or sent
from one job worker to another during the quarter are to be included in Form GST ITC-04 to be
furnished on or before 25th day of the month succeeding that quarter.

- Challan is to contain all details as required in respect of an invoice prescribed in Rule 55 of Central
Goods and Service Tax Rules, 2017. All challans issued in respect of inputs sent to job-worker and
those received back are to be reported in GSTR-1

- In case of non-receipt of the inputs within the time prescribed, the challan issued will be deemed
to be invoice for the implied supply of inputs
 - The inputs, after completion of job-work, are received back by the principal within 1 year of their
being sent out.

- In case of direct supply , the period of 1 year shall be reckoned from the date the job worker
receives such inputs.

-The credit of inputs can be taken even if inputs are sent directly to job-worker’s premises without
bringing it to principal’s place of business.
- If the inputs are not received back within 1 year, it shall be deemed that such inputs had been
supplied by principal to the job worker on the day when the said inputs were sent out.

iii) Entitlement to credit on capital goods:

The principal can take credit of input tax on capital goods sent to job-worker subject to the
fulfilment of the following conditions:
 The capital goods, after completion of job-work, are received back by him within 3 years of their
being sent out.
 The principal can take credit of capital goods even if such capital goods are sent directly to job-
worker’s place without bringing to principal’s place of business
.  If the capital goods are not received back within 3 years, it shall be deemed that such capital
goods had been supplied by principal to the job worker on the day when the said capital goods were
sent out.
 Procedures listed in respect of inputs under Rule 45 of the Central Goods and Service Tax
Rules,2017 will apply to capital goods also

Manner of Distribution of Credit by Input Service Distributor (ISD)

Input Service Distributor (ISD)

ISD is an office of the supplier of goods or services or both where a document (like invoice) of services
attributable to other locations are received (since they might be registered separately). Since the
services relate to other locations the corresponding credit should be transferred to such locations
(having separate registrations) as services are supplied from there. Care should be taken to ensure that
an inter-branch supply of services should not be misinterpreted as a distribution by ISD. Please recollect
that ISD cannot be an office that does any supply of its own but must be one that merely collects invoice
for services and issues prescribed document for its distribution

(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, 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 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 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 recipient(s) 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 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

UNIT - IV
Returns under GST

FORM PARTICULARS DUE DATE APPLICABLE FOR

Outward th
GSTR1 10 of the next month Normal / Regular Taxpayer
Supplies

Inward th
GSTR2 15 of the next month Normal / Regular Taxpayer
Supplies
Monthly th
GSTR3 20 of the next month Normal / Regular Taxpayer
return
 [periodic]

Return by th
18 of the month next to the
GSTR4 Composition Composition Taxpayer
quarter
tax payers
th
20 of the next month or
Return by
within
nonresident
GSTR5 7 days after expiry of Foreign Non-Resident Taxpayer
tax payers
registration, whichever is
[foreigners]
earlier

Return by
th
GSTR6 input service 13 of the next month Input Service Distributor
distributors
th
GSTR7 TDS 10 of the next month Tax Deductor
th
GSTR8 TCS 10 of the next month E-Commerce

GSTR- st Normal tax payer(other than casual

9 Annual return 31 December next FY
tax payer)
GSTR- st
9A Annual return 31 December next FY Compounding Taxpayer

Annual return
along with
the copy of
audited Normal tax payer having turnover
GSTR- st
9B annual 31 December next FY more
accounts and than 1 crore
a
reconciliation
statement

Returns Process

Upload GSTR-1

Can include missing invoice upto 17th

 

Auto-drafted GSTR-2A based on details from GSTR-1 filed by other suppliers

Generate GSTR-2 by accepting / rejecting / modifying details from GSTR-2A

Add missing purchase invoices

Supplier to accept modifications by 17th but not before 15th

General net tax: Pay / carried forward in GST 3

UNIT – V

GST REGISTRATION NOTES

Introduction

The GST (Goods and Service Tax) Bill was approved by Central Government in an effort to
replace all state or central government-imposed indirect taxes. As a result, it is now compulsory for
entities engaging in the supply of goods and services across states to do GST registration online.

Anyone who has a valid PAN, is registered under the current Income Tax Law and crosses the
turnover GST limit can register for GST. People who have to pay TDS, casual traders, etc., have to
register for GST. Existing assesses have to get their provisional ID and password for GST portal from their
state’s ACES or VAT website. After they login on to the GST portal, they will have to create a new user ID
and password.

Registration is the most fundamental requirement for identification of tax payers ensuring tax
compliance in the economy. Registration of any business entity under the GST Law implies obtaining a
unique number from the concerned tax authorities for the purpose of collecting tax on behalf of the
government and to avail Input Tax Credit for the taxes on his inward supplies. Without registration, a
person can neither collect tax from his customers nor claim any input Tax Credit of tax paid by him.

Advantages of registration under GST

Registration under Goods and Service Tax (GST) regime will confer following advantages to the business:

 Legally recognized as supplier of goods or services.

 Proper accounting of taxes paid on the input goods or services which can be utilized for
payment of GST due on supply of goods or services or both by the business.

 Legally authorized to collect tax from his purchasers and pass on the credit of the taxes paid on
the goods or services supplied to purchasers or recipients.
PERSONS LIABLE FOR REGISTRATION

Aggregate turnover requirement for GST registration is as below:

Aggregate Turnover
Region

Liability to Register Liability for Payment of Tax

Rs. 9 Lakhs Rs. 10 Lakhs

North East India

Rs. 19 Lakhs Rs. 20 Lakhs

Rest of India

The following persons Liable for GST Registration – Section 22 of the CGST Act:

a) State or UTs:

Every supplier of the goods or services or both needs to register in a State or a Union Territory, if his
turnover exceeds Rs.20 lakhs.

b) Special Category States:

In case of special category states namely AP, J&K, Assam, Nagaland, Mizoram, Sikkim, Uttarakhand, etc.,
the person shall be liable to be registered if his turnover exceeds Rs.10 lakhs.

c) Aggregate Turnover:

Means aggregate value of all taxable supplies, exempt supplies, Exports, and inter-State supplies of
persons having the same PAN but excludes taxes.

d) Registration:

Any person who is registered before the appointed day i.e. 1st July 2017 is liable to be registered under
the CGST Act.

e) Registration of Transferee or Successor:

If a registered business by a taxable person is transferred to another person, then such a person, be it
successor or a transferee, shall be liable to be registered under the Act.

f) Registration in case of amalgamation or demerger:

A transfer due to sanction of a scheme or an arrangement for amalgamation or a demerger takes place
of two or more companies in accordance with the order of the High Court or Tribunal, the transferee
shall be liable to be registered.
Explanation. ––For the purposes of this section,––

( i ) the expression “aggregate turnover” shall include all supplies made by the taxable person,
whether on his own account or made on behalf of all his principals;

( ii ) the supply of goods, after completion of job work, by a registered job worker shall be
treated as the supply of goods by the principal referred to in section 143, and the value of such
goods shall not be included in the aggregate turnover of the registered job worker;
( iii ) the expression “special category States” shall mean the States as specified in sub-clause ( g
) of clause ( 4 ) of article 279A of the Constitution.
(special provision with respect to the States of Arunachal Pradesh,Assam, Jammu and Kashmir,
Manipur, Meghalaya, Mizoram, Nagaland, Sikkim,Tripura, Himachal Pradesh and Uttarakhand)

Persons Not Liable to be Registered – Section 23 of the CGST Act:

Following persons are not liable for registration:

a) Exempted Goods or Services:

Any person who is engaged exclusively in supply of those goods or services which are wholly exempted
from tax or are not liable to pay tax under CGST or under IGST Act.

b) An Agriculturist:

For those supply only which is produced out of cultivation of land.

c) Notified Person:

Furthermore, the government on the recommendation of the GST council may issue notification &
specify special category of persons who are not liable for registration.

COMPULSORY REGISTRATION IN CERTAIN CASES

Notwithstanding anything contained in sub-section ( 1 ) of section 22, the following categories

of persons shall be required to be registered under this Act,––
( i ) persons making any inter-State taxable supply;
( ii ) casual taxable persons making taxable supply;
( iii ) persons who are required to pay tax under reverse charge;
( iv ) person who are required to pay tax under sub-section ( 5 ) of section 9;
( v ) non-resident taxable persons making taxable supply;
 ( vi ) persons who are required to deduct tax under section 51, whether or not separately
registered under this Act;
( vii ) persons who make taxable supply of goods or services or both on behalf of other taxable
persons whether as an agent or otherwise;
( viii ) Input Service Distributor, whether or not separately registered under this Act;
( ix ) persons who supply goods or services or both, other than supplies specified under
subsection ( 5 ) of section 9, through such electronic commerce operator who is required to
collect tax at source under section 52;
( x ) every electronic commerce operator;
( xi ) every person supplying online information and database access or retrieval services from a
place outside India to a person in India, other than a registered person; and
( xii ) such other person or class of persons as may be notified by the Government on the
recommendations of the Council.

PROCEDURE FOR REGISTRATION

GST registration process will be online through a portal maintained by Central Government of India.
Govt. will also appoint GSPs (GST Suvidha Providers) to help businesses with the registration process.

(1) Every person who is liable to be registered under section 22 or section 24 shall apply for
registration in every such State or Union territory in which he is so liable within thirty days from
the date on which he becomes liable to registration, in such manner and subject to such
conditions as may be prescribed:

Provided that a casual taxable person or a non-resident taxable person shall apply for registration at
least five days prior to the commencement of business.

Explanation.—Every person who makes a supply from the territorial waters of India shall obtain
registration in the coastal State or Union territory where the nearest point of the appropriate baseline is
located.

( 2 ) A person seeking registration under this Act shall be granted a single registration in a State or Union
territory:

Provided that a person having multiple business verticals in a State or Union territory may be granted a
separate registration for each business vertical, subject to such conditions as may be prescribed.
( 3 ) A person, though not liable to be registered under section 22 or section 24 may get himself
registered voluntarily, and all provisions of this Act, as are applicable to a registered person, shall apply
to such person.

( 4 ) 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.

( 5 ) 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.

( 6 ) Every person shall have a Permanent Account Number issued under the Income-tax Act, 1961 in
order to be eligible for grant of registration:

Provided that a person required to deduct tax under section 51 may have, in lieu of a Permanent
Account Number, a Tax Deduction and Collection Account Number issued under the said Act in order to
be eligible for grant of registration.

( 7 ) Notwithstanding anything contained in sub-section ( 6 ), a non-resident taxable person may be

granted registration under sub-section ( 1 ) on the basis of such other documents as may be prescribed.

( 8 ) Where a person who is liable to be registered under this Act fails to obtain registration, the proper
officer may, without prejudice to any action which may be taken under this Act or under any other law
for the time being in force, proceed to register such person in such manner as may be prescribed.

( 9 ) Notwithstanding anything contained in sub-section ( 1 ),––

( a ) any specialised agency of the United Nations Organisation or any Multilateral Financial Institution
and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or
Embassy of foreign countries; and

( b ) any other person or class of persons, as may be notified by the Commissioner,

shall be granted a Unique Identity Number in such manner and for such purposes, including refund of
taxes on the notified supplies of goods or services or both received by them, as may be prescribed.

( 10 ) The registration or the Unique Identity Number shall be granted or rejected after due verification
in such manner and within such period as may be prescribed.
( 11 ) A certificate of registration shall be issued in such form and with effect from such date as may be
prescribed.

( 12 ) A registration or a Unique Identity Number shall be deemed to have been granted after the expiry
of the period prescribed under sub-section ( 10 ), if no deficiency has been communicated to the
applicant within that period.

For registration the following details to be furnished by different persons:

a) Details to be furnished:

Before applying for registration process, person has to declare the following:

• PAN

• Mobile number

• E-mail address

• State or UT

In Part A of FORM GST REG-01 on the Common Portal, either directly or through a Facilitation Centre
notified by Commissioner.

b) Reference Number:

On successful verification of the PAN, mobile number and e-mail, a temporary reference number shall
be generated and communicated to the applicant.

c) Application:

Using the reference number, the applicant shall electronically submit an application in Part B of FORM
GST REG-01, duly signed or verified through electronic verification code (EVC), along with documents
specified in the form.

d) Specified Documents:

The following specified documents are required to be submitted along with the application:

A. Documents required for Private Limited Company, Public Company (limited company) / One Person
Company (OPC):

i)Company documents

• PAN card of the company

• Registration Certificate of the company

• Memorandum of Association (MOA)/ Articles of Association (AOA)

• Copy of Bank Statement

• Declaration to comply with the provisions

• Copy of Board resolution

ii) Director related documents

• PAN and ID proof of directors

iii) Registered Office documents

• Copy of electricity bill/ landline bill, water bill

• No objection certificate of the owner

• Rent agreement (in case premises are rented)

B. Documents required for Limited Liability Partnerships (LLPs):

i) LLP Documents

• PAN card of the LLP

• Registration Certificate of the LLP

• LLP Partnership agreement

• Copy of Bank Statement of the LLP

• Declaration to comply with the provisions

• Copy of Board resolution

ii) Designated Partner related documents

• PAN and ID proof of designated partners

iii) Registered Office documents

• Copy of electricity bill, landline bill, water bill

• No objection certificate of the owner

• Rent agreement (in case premises are rented)

C. Documents required for Normal Partnerships

i) Partnership documents

• PAN card of the Partnership

• Partnership Deed

• Copy of Bank Statement

• Declaration to comply with the provisions

ii) Partner related documents

• PAN and ID proof of designated partners

iii) Registered Office documents

• Copy of electricity bill / landline bill, water bill

• No objection certificate of the owner

• Rent agreement (in case premises are rented)

• Documents required for Sole proprietorship / Individual

iv) Individual documents

• PAN card and ID proof of the individual

• Copy of Cancelled cheque or bank statement

• Declaration to comply with the provisions

v) Registered Office documents

• Copy of electricity bill/ landline bill, water bill

• No objection certificate of the owner

• Rent agreement ( in case premises are rented)

D. Acknowledgement:

On the receipt of an application, an acknowledgement shall be issued to the applicant in FORM GST
REG-02.

DEEMED REGISTRATION
(1) The grant of registration or the Unique Identity Number under the State Goods and Services Tax Act
or the Union Territory Goods and Services Tax Act shall be deemed to be a grant of registration or the
Unique Identity Number under this Act subject to the condition that the application for registration or
the Unique Identity Number has not been rejected under this Act within the time specified in sub-
section (10) of section 25.

(2) Notwithstanding anything contained in sub-section (10) of section 25, any rejection of application
for registration or the Unique Identity Number under the State Goods and Services Tax Act or the Union
Territory Goods and Services Tax Act shall be deemed to be a rejection of application for registration
under this Act.

SPECIAL PROVISIONS RELATING TO CASUAL TAXABLE PERSON AND NON-RESIDENT TAXABLE PERSON

(1) The certificate of registration issued to a casual taxable person or a non-resident taxable person
shall be valid for the period specified in the application for registration or ninety days from the effective
date of registration, whichever is earlier and such person shall make taxable supplies only after the
issuance of the certificate of registration:

Provided that the proper officer may, on sufficient cause being shown by the said taxable person,
extend the said period of ninety days by a further period not exceeding ninety days.

(2) A casual taxable person or a non-resident taxable person shall, at the time of submission of
application for registration under sub-section ( 1 ) of section 25, make an advance deposit of tax in an
amount equivalent to the estimated tax liability of such person for the period for which the registration
is sought:

Provided that where any extension of time is sought under sub-section (1), such taxable person shall
deposit an additional amount of tax equivalent to the estimated tax liability of such person for the
period for which the extension is sought.

(3) The amount deposited under sub-section ( 2 ) shall be credited to the electronic cash ledger of such
person and shall be utilized in the manner provided under section 49.

AMENDMENT OF REGISTRATION

Every registered person and a person to whom a Unique Identity Number has been
assigned shall inform the proper officer of any changes in the information furnished at the time of
registration or subsequent thereto, in such form and manner and within such period as may be
prescribed.

( 2 ) The proper officer may, on the basis of information furnished under sub-section ( 1 ) or as
ascertained by him, approve or reject amendments in the registration particulars in such manner and
within such period as may be prescribed:

Provided that approval of the proper officer shall not be required in respect of amendment of such
particulars as may be prescribed:

Provided further that the proper officer shall not reject the application for amendment in the
registration particulars without giving the person an opportunity of being heard.

( 3 ) Any rejection or approval of amendments under the State Goods and Services Tax Act or the Union
Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a rejection or approval
under this Act.

CANCELLATION OF REGISTRATION

( 1 ) The proper officer may, either on his own motion or on an application filed by the registered
person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and
within such period as may be prescribed, having regard to the circumstances where,––

( a ) the business has been discontinued, transferred fully for any reason including death of the
proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or

( b ) there is any change in the constitution of the business; or

( c ) the taxable person, other than the person registered under sub-section ( 3 ) of section 25, is no
longer liable to be registered under section 22 or section 24.

( 2 ) The proper officer may cancel the registration of a person from such date, including any
retrospective date, as he may deem fit, where,––

( a ) a registered person has contravened such provisions of the Act or the rules made thereunder as
may be prescribed; or

( b ) a person paying tax under section 10 has not furnished returns for three consecutive tax periods; or
( c ) any registered person, other than a person specified in clause ( b ), has not furnished returns for a
continuous period of six months; or

( d ) any person who has taken voluntary registration under sub-section ( 3 ) of section 25 has not
commenced business within six months from the date of registration; or

( e ) registration has been obtained by means of fraud, wilful misstatement or suppression of facts:

Provided that the proper officer shall not cancel the registration without giving the person an
opportunity of being heard.

( 3 ) The cancellation of registration under this section shall not affect the liability of the person to pay
tax and other dues under this Act or to discharge any obligation under this Act or the rules made
thereunder for any period prior to the date of cancellation whether or not such tax and other dues are
determined before or after the date of cancellation.

( 4 ) The cancellation of registration under the State Goods and Services Tax Act or the Union Territory
Goods and Services Tax Act, as the case may be, shall be deemed to be a cancellation of registration
under this Act.

( 5 ) Every registered person whose registration is cancelled shall pay an amount, by way of debit in the
electronic credit ledger or electronic cash ledger, 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 or capital
goods or plant and machinery 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 or plant and machinery, the taxable person shall pay an amount
equal to the input tax credit taken on the said capital goods or plant and machinery, reduced by such
percentage points as may be prescribed or the tax on the transaction value of such capital goods or
plant and machinery under section 15, whichever is higher.

( 6 ) The amount payable under sub-section ( 5 ) shall be calculated in such manner as may be
prescribed.

REVOCATION OF CANCELLATION OF REGISTRATION

( 1 ) Subject to such conditions as may be prescribed, any registered 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 such manner and within such period as may be prescribed, by order,
either revoke cancellation of the registration or reject the application:

Provided that the application for revocation of cancellation of registration shall not be rejected unless
the applicant has been given an opportunity of being heard.

( 3 ) The revocation of cancellation of registration under the State Goods and Services Tax Act or the
Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a revocation of
cancellation of registration under this Act.

UNIT – VI

CUSTOMS ACT 1962:

INTRODUCTION:

Customs Act, 1962 is the basic statute which governs entry or exit of different categories of vessels,
aircrafts, goods, passengers etc., into or outside the country. The Act extends to the whole of the India.

Customs Act, 1962 just like any other tax law is primarily for the levy and collection of duties but at the
same time it has the other and equally important purposes such as:

(i) regulation of imports and exports;

(ii) protection of domestic industry;

(iii) prevention of smuggling;

(iv) conservation and augmentation of foreign exchange and so on.

Section 12 of the Custom Act provides that duties of customs shall be levied at such rates as may be
specified under the Customs Tariff Act, 1975 or other applicable Acts on goods imported into or
exported from India.

TAXABLE EVENT:

Basic condition for levy of customs duty is import/export of goods i.e. goods become liable to duty when
there is import into or export from India.

— Import means bringing into India from a place outside India [Section 2(23)].

— Export means taking out of India to a place outside India [Section 2(18)].

— "India" includes the territorial waters of India [Section 2(27)]. The limit of the territorial waters is the
line every point of which is at a distance of twelve nautical miles from the nearest point of the
appropriate baseline.

“Coastal goods” means goods, other than imported goods, transported in a vessel from one port in
India to another[Section 2(7)];

“dutiable goods” means any goods which are chargeable to duty and on which duty has not been paid
[Section 2(14)];

"entry" in relation to goods means an entry made in a bill of entry, shipping bill or bill of export and
includes the entry made under the regulations made under section 84; [Section 2(16)];

“export”, with its grammatical variations and cognate expressions, means taking out of India to a place
outside India [Section 2(18)];

“export goods” means any goods which are to be taken out of India to a place outside India [Section
2(19)];

“Board” means the Central Board of Excise and Customs constituted under the Central Boards of
Revenue Act, 1963 (54 of 1963) [Section 2(6)];

“Board” means the Central Board of Excise and Customs constituted under the Central Boards of
Revenue Act, 1963 (54 of 1963) [Section 2(6)];
“goods” includes -

(a) vessels, aircrafts and vehicles;

(b) stores;

(c) baggage;

(d) currency and negotiable instruments; and

(e) any other kind of movable property [Section 2(22)].

“import”, with its grammatical variations and cognate expressions, means bringing into India from a
place outside India [Section 2(23)];

“Indian customs waters” means the waters extending into the sea up to the limit of contiguous zone of
India under section 5 of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other
Maritime Zones Act, 1976 (80 of 1976) and includes any bay, gulf, harbour, creek or tidal river [Section
2(28)];

The concept of territorial waters and Indian customs waters are highly relevant for customs law.
Territorial waters extend upto twelve nautical miles from the baseline on the coast of India. The
significance of Indian customs waters is that the Customs Officer has powers to arrest a person; to stop
and search any vessel; to confiscate a vessel concealing goods; to search any person on board any vessel
and; to confiscate goods in the these waters.

Integrated Goods and Services Act came to effect from June 22, 2017.Through ordinance, The President
of India extended the Act to the state of Jammu & Kashmir also with effect from 8th July, 2017.

Accordingly, goods imported into India are now subjected to IGST, not CVD and Special CVD. However,
petroleum products and tobacco products are outside the scope of GST and hence CVD and special CVD
are applicable to them as usual.

Relevant Provisions under IGST Act:

As per section 5 of the IGST Act that subject to the provisions of sub-section (2), there shall be levied a
tax called the integrated goods and services tax on all inter-State supplies of goods or services or both,
except on the supply of alcoholic liquor for human consumption, on the value determined under section
15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per cent., as may be
notified by the Government on the recommendations of the Council and collected in such manner as
may be prescribed and shall be paid by the taxable person.

Provided that the integrated tax on goods imported into India shall be levied and collected in
accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined
under the said Act under section 12 of the Customs Act, 1962.

The integrated tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known
as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be
notified by the Government on the recommendations of the Council.

DETERMINATION OF NATURE OF SUPPLY [SECTION 7(2)]

Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be
treated to be a supply of goods in the course of inter-State trade or commerce.

Section 8. (1) Proviso:

Provided that the following supply of goods shall not be treated as intra-State supply, namely:

(i) supply of goods to or by a Special Economic Zone developer or a Special Economic Zone unit;

(ii) goods imported into the territory of India till they cross the customs frontiers of India;

Part (ii) above is dealing with high sea purchases for which IGST is payable.

Section 3 of Customs Tariff Act, 1975 has been amended and new subsections added as given below:

Section 3(7) (Substituted): Any article which is imported into India shall, in addition, be liable to
integrated tax at such rate, not exceeding forty per cent as is leviable under section 5 of the Integrated
Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported
article as determined under sub-section (8).

Types of duties;

(1) BASIC CUSTOM DUTY

It is levied under Section 12 of Customs Act, 1962, and specified under Section 2 of the Customs Tariff
Act, 1975. Normally, it is levied as a percentage of Value as determined under section 14(1). There are
different rates for different goods. But the general basic rate is 10%. This basic duty may be exempted
by a notification under Section 25. The basic duty may have two rates under the First Schedule to
Customs Tariff Act, 1975; viz. standard rates and preferential rates

Duty at the ―Standard rate‖ is charged where there is no provision for preferential treatment. To be
eligible, for the preferential treatment the goods should be the one which are imported from any
preferential area covered under the Government of India Agreements for charging preferential rate of
duty.

(2) ADDITIONAL CUSTOM DUTY/COUNTERVAILING DUTY [Section 3(1)]

This is levied under Section 3(1) of the Customs Tariff Act, 1975. The amount of this duty is equivalent to
the amount of excise duty payable on like goods manufactured or produced in India.Countervailing duty
is imposed when excisable articles are imported in order to counter balance the excise duty, which is
leviable on similar goods if manufactured in India:

— Countervailing Duty is payable at effective rates.

— When excise duty is exempt/nil rate is applicable on goods imported, no Countervailing Duty is
levied.

— Countervailing Duty is leviable even if similar goods are not produced in India.

— Exemption of basic customs duty doesn‘t automatically mean exemption of Countervailing Duty.

— Countervailing Duty is payable in case of goods leviable under State Excise also.
(3) ADDITIONAL DUTY/SPECIAL ADDITIONAL DUTY (SAD) UNDER SECTION 3(5)

It is levied to offset the effect of sales tax, VAT, local tax or other charges leviable on articles on its sale,
purchase or transaction in India. It is leviable on imported goods even if article was not sold in India.

The Central Government may levy additional duty to counter balance the sales tax, value added tax,
local tax or any other charges leviable in the like article on its sale, purchase or transportation in India.
The rate shall be notified by the Central Government which cannot exceed 4%.

4) PROTECTIVE DUTY - SECTION 6 & 7 OF THE CUSTOMS TARIFF ACT, 1975: The protective duties
should not be very stiff so as to discourage imports. It should be sufficiently attractive to encourage
imports to bridge the gap between demand and supply of those articles in the market. Section 6
provides that the protective duties are levied by the Central Government upon the recommendation
made to it by the Tariff Commission established under the Tariff Commission Act,1951, and upon it
being satisfied that circumstances exist which render it necessary to take immediate action to provide
protection to any industry established in India. As per section 7(1), the protective duty shall be effective
only upto and inclusive of the date if any, specified in the First Schedule.

(5) SAFEGUARD DUTY - SECTION 8B OF CUSTOMS TARIFF ACT, 1975 : The Central Government may
impose safeguard duty on specified imported goods, if it is satisfied that the goods are being imported in
large quantities and they are causing serious injury to domestic industry.

However, the safeguard duty shall not be imposed in the following cases:

Articles originating from developing country, so long as the share of imports of that article from that
country does not exceed 3% of the total imports of that article into India.

Articles originating from more than one developing country, so long as the aggregate of imports from
developing countries each with less than 3% import share taken together does not exceed 9% of the
total imports of that article into India.

Unless specifically made applicable in the notification, the articles imported by a 100% EOU or units in
a Free Trade Zone or Special Economic Zone. The safeguard duty is imposed for the purpose of
protecting the interests of any domestic industry in India aiming to make it more competitive.

However, the total period of levy of safeguard duty is restricted to 10 years. Under section 8B(2), the
Central Government is also empowered to impose provisional safeguard duty pending determination of
the final duty.

6. COUNTERVAILING DUTY ON SUBSIDIZED ARTICLES - SECTION 9 OF THE CUSTOMS TARIFF ACT;

Section 9(1) provides that the countervailing duty on subsidized articles is imposed if any country or
territory, directly or indirectly, pays or bestows subsidy upon the manufacture or production or
exportation of any article. Such subsidy includes subsidy on transportation of such article. Such articles
are imported into India. The importation may or may not directly be from the country of manufacture or
production. The article, may be in the same condition as when exported from the country of
manufacture or production or may be changed in condition by manufacture, production or otherwise.
(7) ANTI-DUMPING DUTY (ADD) ON DUMPED ARTICLES - SECTION 9A OF THE CUSTOMS TARIFF ACT,
1975

Where any article is exported by an exporter or producer from any country or territory to India at less
than its normal value, then, upon the importation of such article into India, the Central Government
may, by notification in the Official Gazette, impose an anti-dumping duty not exceeding the margin of
dumping in relation to such article. The anti dumping duty is dumping margin or injury margin
whichever is lower.

Dumping means exporting goods to India, at prices lower than the ones in the domestic market of the
exporting country, subject to certain adjustments.

To prevent dumping, the Central Government may levy ADD up to margin of dumping (MOD). MOD is
the difference between the normal value and the price charged for exports to India.

Normal value means comparable price in the ordinary course of trade, in the exporting country, after
making adjustments to the extent of conditions of sale, taxation, etc.

Injury margin means difference between fair selling price of domestic industry and landed cost of
imported product.

VALUATION OF GOODS FOR LEVY OF CUSTOMS DUTY

The method of valuation of goods for both import and export for the purposes of levy of customs duty
on the basis of transaction value has been set out under Section 14 of the Customs Act, 1962 (effective
from 10.10.2007). The transaction value is the price actually paid or payable for the goods when sold for
export to India for delivery at the time and place of importation, or for export from India for delivery at
the time and place of exportation, where the buyer and seller of the goods are not related and the price
is the sole consideration for sale, subject to such other conditions as may be specified in the rules made
in this behalf.

Accordingly, the old Customs Valuation (Determination of Imported Goods) Rules, 1988 have also been
replaced by new Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and
Customs Valuation (Determination of Value of Export Goods) Rules, 2007.

In case of export goods, the transaction value shall be:

-the price actually paid or payable for the goods;

-when sold for export from India

-for delivery at the time and place of exportation

-where the buyer and seller are not related

-price is the sole consideration for the sale

In case of imported goods, the transaction value shall be

-the price actually paid or payable for the goods;

-when sold for export to India

-for delivery at the time and place of importation

-where the buyer and seller are not related

-price is the sole consideration for the sale

As per rule 2(g): "transaction value" means the value referred to in sub-section (1) of section 14 of the
Customs Act, 1962.

As already discussed, transaction value as per section 14 of the Customs Act, 1962 is the price actually
paid or payable;

- when sold for export to India for delivery at the time and place of importation in case of imports and

- when sold for export from India the price for delivery at the time and place of exportation,

where the buyer and seller are not related and price is the sole consideration for the sale subject to such
other conditions as ―may be specified in the rules made in this behalf.

Conversion dates: For imported goods the conversion in value shall be done with reference to the
exchange rate prevailing on the date of filing of bill of entry

For export goods the conversion in value shall be done using the exchange rate prevalent on the date
of filling of shipping bill or date of bill of export under section 50.

Conversion rates: The exchange rate is notified by three agencies- CBEC; RBI and foreign exchange
dealers association. For the purpose of conversion in value the rate notified by shall be taken.

ADJUSTMENTS IN TRANSACTION VALUE (RULE 10)

I. Adjustments specified in Rule 10(1)

In determining the transaction value, there shall be added to the price actually paid or payable for the
imported goods, —

(a) the following to the extent they are incurred by the buyer but are not included in the price actually
paid or payable for the imported goods, namely:-

(i) commission and brokerage, except buying commissions; (ii) the cost of containers imported along
with the goods;

iii) the cost of packing whether for labour or materials;

(b) The value, apportioned as appropriate, of the following goods and services where supplied directly
or indirectly by the buyer free of charge or at reduced cost for use in connection with the imported
goods, but not included in the price actually paid or payable namely:-

(i) materials, components, parts and similar items incorporated in the imported goods;

(ii) tools, dies, moulds and similar items used in the production of the Imported goods;

(iii) materials consumed in the production of the imported goods;

 (iv) engineering, development, art work, design work, and plans and sketches undertaken elsewhere
than in India and necessary for the production of the imported goods;

(c) royalties and licence fees related to the imported goods that the buyer is required to pay, directly or
indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees
are not included in the price actually paid or payable(refer the box ),.

(d) The value of any part of the proceeds of any subsequent resale, disposal or use of the imported
goods that accrues, directly or indirectly, to the seller;

(e) all other payments actually made or to be made by the buyer to the seller, or by the buyer to a
third party to satisfy an obligation of the seller and such payments are not included in the price actually
paid or payable .

The value of the imported goods shall be the value of such goods, for delivery at the time and place of
importation and shall include –

(a) the cost of transport of the imported goods to the place of importation;

(b) loading, unloading and handling charges associated with the delivery of the imported goods at the
place of importation; and

(c) the cost of insurance actually incurred

The following points shall also be considered while determining the assessable value:

(i) Where the cost of transport is not ascertainable, such cost shall be 20% of the free on board value of
the goods. In the case of goods imported by air, even where the cost of transportation is ascertainable,
such cost shall not exceed 20% of free on board value of the goods.

(ii) where the cost of insurance is not ascertainable, such cost shall be 1.125% of free on board (FOB)
value of the goods;

(iii) loading, unloading and handling charges shall be 1% of the free on board (FOB) value of the goods +
the cost of transport + cost of insurance i.e. CIF Value.

PROHIBITION OF IMPORT OR EXPORT OF GOODS:

Under sub-section (d) of section 111 and sub-section (d) of Section 113, any goods which are imported
or attempted to be imported and exported or attempted to be exported, contrary to any prohibition
imposed by or under the Customs Act or any other law for the time being in force shall be liable to
confiscation. Section 112 of the Customs Act provides for penalty for improper importation and Section
114 of the Customs Act provides for penalty for attempt to export goods improperly. In respect of
prohibited goods the Adjudicating Officer may impose penalty upto five times the value of the goods. It
is, therefore, absolutely necessary for the trade to know what are the prohibitions or restrictions in
force before they contemplate to import or export any goods.

The terms “Prohibited Goods” have been defined in sub-section 33 of Section 2 of the Customs Act as
meaning “any goods the import or export of which is subject to any prohibition under the Customs Act
or any other law for the time being in force but does not include any goods which have been allowed to
be imported or exported subject to fulfillment of certain conditions;
Under section 11 of the Customs Act, the Central Government has the power to issue Notification under
which export or import of any goods can be declared as prohibited. The prohibition can either be
absolute or conditional.

The specified purposes for which a notification under section 11 can be issued are;

- maintenance of the security of India,

-prevention and shortage of goods in the country,

-conservation of Foreign Exchange,

-safeguarding balance of payments etc.

The Central Govt. has issued many notifications to prohibit import of sensitive goods such as coins,
obscene books, printed waste paper containing pages of any holy books, armored guard, fictitious
stamps, explosives, narcotic drugs, rock salt, saccharine, etc.

Power of central govt to notify goods[section 11B]:

If Central government is satisfied that it is necessary to take special measures for the purpose of

-checking the illegal import of

-checking circulation or disposal of goods or

facilitating the detection of such goods

it may by notification in the official gazette specify goods of such class or descricption. Such notification
shall be issued after considering the quantum of illegal import of such goods.

However, at present the government has not specified any goods as notified goods;

11C. Persons possessing notified goods to intimate the place of storage, etc. - (1) Every person who
owns, possesses or controls, on the notified date, any notified goods, shall, within seven days from that
date, deliver to the proper officer a statement (in such form, in such manner and containing such
particulars as may be specified by rules made in this behalf) in relation to the notified goods owned,
possessed or controlled by him and the place where such goods are kept or stored.

11D. Precautions to be taken by persons acquiring notified goods.

- No person shall acquire (except by gift or succession, from any other individual in India), after the
notified date, any notified goods - (i) unless such goods are accompanied by, - (a) the voucher referred
or the memorandum or

(b) in the case of a person who has himself imported any goods, any evidence showing clearance of such
goods by the Customs Authorities; and (ii) unless he has taken, before acquiring such goods from a
person other than a dealer having a fixed place of business, such reasonable steps as may be specified
by rules made in this behalf, to en sure that the goods so acquired by him are not goods which have
been illegally imported.
11E:Persons possessing notified goods to maintain accounts. - (1) Every person who, on or after the
notified date, owns, possesses, controls or acquires any notified goods shall maintain (in such form and
in such manner as may be specified by rules made in this behalf) a true and complete account of such
goods and shall, as often as he acquires or parts with any notified goods, make an entry in the said
account and shall also state therein the particulars of the person from whom such goods have been
acquired or in whose favour such goods have been parted with.

(2) Every person who hasnotified goods and who uses any such goods for the manufacture of any other
goods, shall maintain a true and complete account of the notified goods so used by him and shall keep
such account at the intimated place.

11F. Sale, etc. of notified goods to be evidenced by vouchers. - On and from the notified date, no
person shall sell or otherwise transfer any notified goods, unless every transaction in relation to the sale
or transfer of such goods is evidenced by a voucher in such form and containing such particulars as may
be specified by rules made in this behalf

11G. not to apply to goods in personal use. - (1) Nothing in sections 11C, 11E and 11F shall apply to any
notified goods which are - (a) in personal use of the person by whom they are owned, possessed or
controlled, or (b) kept in the residential premises of a person for his personal use. (2) If any person, who
is in possession of any notified goods referred to in sub -section (1), sells, or otherwise transfers for a val
uable consideration, any such goods, he shall issue to the purchaser or transferee, a memorandum
containing such particulars as may be specified by rules and no such goods shall be taken from one place
to another unless they are accompanied by the said memorandum.