Goods and Service Tax
Unit: 4
Overview of GST Act:
GST is known as the Goods and Services Tax. It is an indirect tax which has replaced many
indirect taxes in India such as the excise duty, VAT, services tax, etc. The Goods and Service
Tax Act was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017.
In other words, Goods and Service Tax (GST) is levied on the supply of goods and services.
Goods and Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that
is levied on every value addition. GST is a single domestic indirect tax law for the entire country.
The Journey of GST in India:
The GST journey began in the year 2000 when a committee was set up to draft law. It took 17
years from then for the Law to evolve. In 2017, the GST Bill was passed in the Lok Sabha and
Rajya Sabha. On 1st July 2017, the GST Law came into force.
Objectives of GST:
1. To achieve the ideology of “One Nation, One Tax”
GST has replaced multiple indirect taxes, which were existing under the previous tax
regime. The advantage of having one single tax means every state follows the same rate
for a particular product or service. Tax administration is easier with the Central
Government deciding the rates and policies. Common laws can be introduced, such as eway bills for goods transport and e-invoicing for transaction reporting. Tax compliance is
also better as taxpayers are not bogged down with multiple return forms and deadlines.
Overall, it’s a unified system of indirect tax compliance.
2. To subsume a majority of the indirect taxes in India:
India had several erstwhile indirect taxes such as service tax, Value Added Tax (VAT),
Central Excise, etc., which used to be levied at multiple supply chain stages. Some taxes
were governed by the states and some by the Centre. There was no unified and
centralised tax on both goods and services. Hence, GST was introduced. Under GST, all
the major indirect taxes were subsumed into one. It has greatly reduced the compliance
burden on taxpayers and eased tax administration for the government.
3. To eliminate the cascading effect of taxes:
One of the primary objectives of GST was to remove the cascading effect of taxes.
Previously, due to different indirect tax laws, taxpayers could not set off the tax credits of
one tax against the other. For example, the excise duties paid during manufacture could
not be set off against the VAT payable during the sale. This led to a cascading effect of
taxes. Under GST, the tax levy is only on the net value added at each stage of the supply
chain. This has helped eliminate the cascading effect of taxes and contributed to the
seamless flow of input tax credits across both goods and services.
4. To curb tax evasion:
GST laws in India are far more stringent compared to any of the erstwhile indirect tax
laws. Under GST, taxpayers can claim an input tax credit only on invoices uploaded by
their respective suppliers. This way, the chances of claiming input tax credits on fake
invoices are minimal. The introduction of e-invoicing has further reinforced this
objective. Also, due to GST being a nationwide tax and having a centralised surveillance
system, the clampdown on defaulters is quicker and far more efficient. Hence, GST has
curbed tax evasion and minimised tax fraud from taking place to a large extent.
5. To increase taxpayer base:
GST has helped in widening the tax base in India. Previously, each of the tax laws had a
different threshold limit for registration based on turnover. As GST is a consolidated tax
levied on both goods and services both, it has increased tax-registered businesses.
Besides, the stricter laws surrounding input tax credits have helped bring certain
unorganised sectors under the tax net. For example, the construction industry in India.
6. Online procedure for ease of doing business:
Previously, taxpayers faced a lot of hardships dealing with different tax authorities under
each tax law. Besides, while return filing was online, most of the assessment and refund
procedures took place offline. Now, GST procedures are carried out almost entirely
online. Everything is done with a click of a button, from registration to return filing to
refunds to e-way bill generation. It has contributed to the overall ease of doing business
in India and simplified taxpayer compliance to a massive extent. The government also
plans to introduce a centralised portal soon for all indirect tax compliance such as einvoicing, e-way bills and GST return filing.
7. An improved logistics and distribution system:
A single indirect tax system reduces the need for multiple documentation for the supply
of goods. GST minimises transportation cycle times, improves supply chain and
turnaround time, and leads to warehouse consolidation, among other benefits. With the eway bill system under GST, the removal of interstate checkpoints is most beneficial to
the sector in improving transit and destination efficiency. Ultimately, it helps in cutting
down the high logistics and warehousing costs.
8. To promote competitive pricing and increase consumption:
Introducing GST has also led to an increase in consumption and indirect tax revenues.
Due to the cascading effect of taxes under the previous regime, the prices of goods in
India were higher than in global markets. Even between states, the lower VAT rates in
certain states led to an imbalance of purchases in these states. Having uniform GST rates
have contributed to overall competitive pricing across India and on the global front. This
has hence increased consumption and led to higher revenues, which has been another
important objective achieved.
Advantages of GST:
GST has mainly removed the cascading effect on the sale of goods and services. Removal of the
cascading effect has impacted the cost of goods. Since the GST regime eliminates the tax on tax,
the cost of goods decreases.
Also, GST is mainly technologically driven. All the activities like registration, return filing,
application for refund and response to notice needs to be done online on the GST portal, which
accelerates the processes.
1. Easy compliance:
A robust and comprehensive IT system would be the foundation of the GST regime in India.
Therefore, all taxpayer services such as registrations, returns, payments, etc. would be available
to the taxpayers online, which would make compliance easy and transparent.
2. Uniformity of tax rates and structures:
GST will ensure that indirect tax rates and structures are common across the country, thereby
increasing certainty and ease of doing business. In other words, GST would make doing business
in the country tax neutral, irrespective of the choice of place of doing business.
3. Removal of cascading:
A system of seamless tax credits throughout the value-chain, and across boundaries of States,
would ensure that there is minimal cascading of taxes. This would reduce the hidden costs of
doing business.
4. Improved competitiveness:
Reduction in transaction costs of doing business would eventually lead to improved
competitiveness for the trade and industry. World Bank believes that the implementation of the
Goods and Service Tax (GST), combined with the dismantling of inter-state check-posts, is the
most crucial reform that could improve the competitiveness of India’s manufacturing sector.
5. Gain to manufacturers and exporters:
The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of
input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of
locally manufactured goods and services. This will increase the competitiveness of Indian
goods and services in the international market and give a boost to Indian exports. The uniformity
in tax rates and procedures across the country will also go a long way in reducing compliance
costs.
6. Simple and easy to administer:
Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a
robust end-to-end IT system, GST would be simpler and easier to administer than all other
indirect taxes of the Centre and State levied so far.
7. Better controls on leakage:
GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless
transfer of input tax credit from one stage to another in the chain of value addition, there is an inbuilt mechanism in the design of GST that would incentivize tax compliance by traders.
8. Higher revenue efficiency:
GST is expected to decrease the cost of collection of tax revenues of the Government, and
will, therefore, lead to higher revenue efficiency.
9. Single and transparent tax proportionate to the value of goods and services:
Due to multiple indirect taxes being levied by the Centre and State, with incomplete or no input
tax credits available at progressive stages of value addition, the cost of most goods and services
in the country today is laden with many hidden taxes. Under GST, there would be only one tax
from the manufacturer to the consumer, leading to transparency of taxes paid to the final
consumer.
10. Relief in the overall tax burden:
Credits of input taxes paid at each stage will be available in the subsequent stage of value
addition, which makes GST essentially a tax only on value addition at each stage. Because
of efficiency gains and the prevention of leakages, the overall tax burden on most commodities
will come down, which will benefit consumers. The final consumer will thus bear only the GST
charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
Types of GST:
There are Four GST types namely Integrated Goods and Services Tax (IGST), State Goods and
Services Tax (SGST), Central Goods and Services Tax (CGST), and Union Territory Goods and
Services Tax (UTGST). The taxation rate under each of them is different.
The new indirect tax regime under the Goods and Services Tax (GST) which was rolled out on 1
July 2017, had witnessed a considerable amount of confusion over how the new taxation system
will affect businesses and the payment of taxes. The Goods and Services Tax (GST) has
subsumed several local taxes that were levied on goods and services.
As per the newly implemented tax system, there are 4 different types of GST:
1.
2.
3.
4.
Integrated Goods and Services Tax (IGST)
State Goods and Services Tax (SGST)
Central Goods and Services Tax (CGST)
Union Territory Goods and Services Tax (UTGST)
Additionally, the government has fixed different taxation rates under each, which will be
applicable to the payment of tax for goods and/or services rendered.
1. Integrated Goods and Services Tax or IGST
The Integrated Goods and Services Tax or IGST is a tax under the GST regime that is applied on
the interstate (between 2 states) supply of goods and/or services as well as on imports and
exports.
The IGST is governed by the IGST Act. Under IGST, the body responsible for collecting the
taxes is the Central Government. After the collection of taxes, it is further divided among the
respective states by the Central Government.
For instance, if a trader from West Bengal has sold goods to a customer in Karnataka worth
Rs.5,000, then IGST will be applicable as the transaction is an interstate transaction. If the rate of
GST charged on the goods is 18%, the trader will charge Rs.5900 for the goods. The IGST
collected is Rs.900, which will be going to the Central Government.
2. State Goods and Services Tax or SGST
The State Goods and Services Tax or SGST is a tax under the GST regime that is applicable on
intrastate (within the same state) transactions. In the case of an intrastate supply of goods and/or
services, both State GST and Central GST are levied.
However, the State GST or SGST is levied by the state on the goods and/or services that are
purchased or sold within the state. It is governed by the SGST Act. The revenue earned through
SGST is solely claimed by the respective state government.
For instance, if a trader from West Bengal has sold goods to a customer in West Bengal worth
Rs.5,000, then the GST applicable on the transaction will be partly CGST and partly SGST. If
the rate of GST charged is 18%, it will be divided equally in the form of 9% CGST and 9%
SGST. The total amount to be charged by the trader, in this case, will be Rs.5,900. Out of the
revenue earned from GST under the head of SGST, i.e. Rs. 450, will go to the West Bengal state
government in the form of SGST.
3. Central Goods and Services Tax or CGST
Just like State GST, the Central Goods and Services Tax of CGST is a tax under the GST regime
that is applicable on intrastate (within the same state) transactions. The CGST is governed by the
CGST Act. The revenue earned from CGST is collected by the Central Government.
As mentioned in the above instance, if a trader from West Bengal has sold goods to a customer
in West Bengal worth Rs.5000 then the GST applicable on the transaction will be partly CGST
and partly SGST. If the rate of GST charged is 18%, it will be divided equally in the form of 9%
CGST and 9% SGST. The total amount to be charged by the trader, in this case, will be Rs.5900.
Out of the revenue earned from GST under the head of CGST, i.e. Rs.450 will go to the Central
Government in the form of CGST.
4. Union Territory Goods and Services Tax or UTGST
The Union Territory Goods and Services Tax or UTGST is the counterpart of State Goods and
Services Tax (SGST) which is levied on the supply of goods and/or services in the Union
Territories (UTs) of India.
The UTGST is applicable on the supply of goods and/or services in Andaman and Nicobar
Islands, Chandigarh, Daman Diu, Dadra, and Nagar Haveli, and Lakshadweep. The UTGST is
governed by the UTGST Act. The revenue earned from UTGST is collected by the Union
Territory government. The UTGST is a replacement for the SGST in Union Territories. Thus, the
UTGST will be levied in addition to the CGST in Union Territories.
GST Council:
GST council is a governing body to regulate and directs each and every step for the
implementation of goods and service tax in the nation with decisions over tax rates and further
implementation measures. GST council assimilates suggestions and regulation into one form
and improvise the changes formally through notifications and circulars with its departments and
finance ministry.
GST Council Constitution
According to Article 279A, it is on the part of the president to give the order to constitute the
council of GST within 60 days from the 12th of September 2016 which is already notified by the
Government.
Following are the designated personnel, who will form the GST Council together:
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The Union Finance Minister who will be the CHAIRMAN of the council;
The Union Minister of State in charge of Revenue or Finance who will be the MEMBER of the
Council.
ONE MEMBER from each state who is Minister in charge of Finance or Taxation or any other
Minister and any one of them will be VICE Chairman of the GST Council who will be mutually
elected by them.
Note
The Secretary of Revenue Department will work as EX-Officio Secretary to the GST Council,
The Chairperson of the Central Board of Excise and Customs will be the permanent invitee in all
the proceedings of the GST Council who will not have voting rights.
Quorum and Decision-Making
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o
o
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o
o
o
o
For a valid meeting of the members of the GST Council, at least 50 per cent of the total number
of members should be present at the meeting.
Every Decision made during the meeting should be supported by at least 75% majority of the we
ighted votes of the members who are present and voting at the meeting. In “article 279A” a princ
iple is there which divides the total weighted vote cast between Central Government and State G
overnment:The vote of the Central Government shall have the weight of one-third of the total votes
The votes of the State Government shall have the weight of two-thirds of the total votes, cast in t
he meeting
Any act, decision or proceedings shall not be declared invalid on the basis of any remaining defic
iency at the time of the establishment of the GST Council i.e.
if there is any vacancy remaining in the Council
if there is any defect in the constitution of the Council
if there is any defect in the appointment of a person as a member of the Council
if there is any procedural non-compliance.
Functions of the GST Council
The GST council will be supposed to make the recommendation to the Union and State on the
following matters:-
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Principles of levy, model Goods and Services Tax Laws, the appointment of Goods and Services
Tax levied on supplies in the course of Inter-State trade or commerce under article 269A, and the
principles that govern the place of supply;
For raising resources during any natural calamity or disaster, or any special rate or rates for a spe
cified period, to raise additional.
As the Council may decide, any other matter relating to the goods and services tax.
On subsuming various taxes, cess, and surcharges in GST.
Details of services and goods that will be subjected to GST or which will be exempted from GST
On the Threshold limit below which, services and goods will be exempted from GST.
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On GST rates including floor rate with bands of GST and any special rate for time being to arran
ge resources to face any natural calamity.
Making special provisions for the following states: Arunachal Pradesh, Assam, Jammu and Kash
mir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakh
and.
On model law on GST, Principal of levy of GST and the principals which will govern the Place
of Supply.
Provisions and Procedure of Registration under GST:
Introduction
In the tax system, Registration of the business entity plays a vital role in collecting the tax on
behalf of the government and to avail the Input Tax Credit. For collecting the tax from customers
and availing the Input Tax Credit the registration of any business entity is very necessary under
GST Law. If any business entity cannot register themselves then they can neither collect the tax
from the customer and nor take the benefit of Input Tax Credit. Basically, after the registration of
any business entity, the tax authority provides the Unique Identification number which includes
the Permanent Account Number (PAN) and State-specific number. Basically. Unique
Identification Number is termed as the GST Identification Number (GSTIN) which is a fifteendigit number. The first two digits of the GST Identification Number (GSTIN) represent the State
code and the next ten digits represent the Permanent Account Number (PAN) of the taxpayer.
After that, the thirteenth digit of the Unique Identification Number denotes the number of
registration within the state and the fourteenth digit is Z by default and the fifteenth digit is for
check code.
However, GST is divided into four categories like CGST, SGST, UTGST, and IGST but a
person need not register himself for all categories, there is a single registration for all the
taxes.
What is the benefit of Registration of GST?
The GST is an indirect tax whose main objective is to abolish several other indirect taxes in
India. After the abolition of many indirect taxes, the government came up with one platform
where a person could pay tax.
There is the following benefit of Registration of GST, which are as follows:
The scrapping of cascading effect: After the enactment of GST in India, the cascading effect
has been eliminated which used to cause double taxation on Goods. After the scrapping of the
cascading effect, the tax liability has been reduced on the business entity.
Lesser Compliance: Before the enactment of GST in India, there were many indirect taxes used
to exist such as the Service tax, VAT, Excise, etc. So after the enactment of GST, all the indirect
tax combined into the single tax regime with which the number of filing has decreased.
Easy Application Procedure: A person can register himself online and he can file the GST
through the GST portal which saves the time of the person.
Recognition: After the registration of GST, a person becomes legally recognized as a supplier of
goods and services.
Regulation of Input Tax Credit: After the registration, a person can claim Input Tax Credit of
taxes paid and can utilize the same for payment of taxes due to supply of goods and services
which ensure transparency in the tax collection system.
Document required for registration of GST
A person has to submit the following documents at the time of registration of GST which are as
follows:
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PAN of the Applicant
Aadhar card
Address proof of the place of the business
Bank Account Statement
Digital Signature
Letter of Authorization
Incorporation Certificate
Identity and Address proof of the Directors
Person liable for Registration (Sec 22)
1. Section 22 of the CGST Act talks about the person liable for registration. If a taxable
supply of goods and services of a person exceeds forty lakh rupees in a financial year
then he shall be liable for registration. However, for some special category state
(Jammu & Kashmir, Ladakh, Assam, Puducherry, Meghalaya, Mizoram, Tripura,
Manipur, Sikkim, Nagaland, Arunachal Pradesh, and Uttrakhand) the threshold limit
of taxable supply of goods and services is twenty Lakh in a financial year which
means that such special category state shall be liable for registration if his aggregate
turnover in a financial year exceeds ten Lakh rupees.
2. Every person who, on the day immediately preceding the appointed day, is registered
or holds a license under existing law, shall be liable to be registered under this Act
with effect from the appointed day.
3. If in the case of transfer of business by the registered person then the transferee shall
be liable to be registered with effect from the date of such transfer or succession.
4. In the case of transfer according to the sanction of a scheme, amalgamation or in the
case of the demerger of two companies by the order of High Court, Tribunals then the
transferee of business shall be liable to be registered.
What is the Procedure for Registration (Section 25)
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After checking the criteria for registration under Section 22 or 24 of the CGST Act, if
a person fulfils the criteria for registration then such person shall apply for registration
in every state or Union territory within the thirty days from the date on which he
becomes liable to registration.
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After the submission of the application, a proper officer has to take action within the
three days of submission of the application or within the seven days of receiving the
clarification so solicited, the applicant for the grant of registration is deemed to be
approved.
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In the case of a casual taxable person or non-resident taxable person, a person shall
apply for registration at least five days before the commencement of business.
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If a person is making the supply of Goods and services from territorial waters of India
then in such a situation a person shall obtain the registration in the coastal State or
Union Territory where the nearest point of the appropriate baseline is located.
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Only one registration has to be done for a single business in a State or Union
Territory. However, if a person is engaged in multiple businesses in a State or Union
Territory then in such a condition a person shall have to apply for separate
registration.
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If a person is not liable to register under Section 22 or 24 of the CGST Act, then such
person may get himself registered voluntarily and all the acts which apply to the
registered person shall apply to such person.
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If a person has registered himself in more than one state or union territory, then in
such a situation the person will be treated as a distinct person.
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Establishment of the same person in different states or Union territory to be treated as
the establishment of a distinct person.
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A person shall have a Permanent Account Number issued under the Income Tax Act,
1961 to be eligible for grant of registration.
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Authority shall verify the registration details and after the verification, he shall issue
the Unique Identity Number. However, if the authority finds any error then he has the
authority to eject after the verification.
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A certificate of registration shall be issued in such form and with effect from such date
as may be prescribed
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Amendment of GST Registration
After the allotment of the Unique Identification Number, if a registered person wants to change
the information given at the time of registration then in such a situation a registered person shall
have to inform the proper office within fifteen days of receiving the unique identification
number.
After the submission of changes required, it depends upon the discretion of the proper officer
that they approve it or reject it. However, the proper officer shall not reject the application for
registration without giving the person an opportunity of being heard
Cancellation of Registration (Section 29)
Section 29 of CGST talks about the cancellation of Registration. After the death of the registered
person, the Proper officer himself or an application filed by the registered person, or his legal
heirs cancel the registration. Cancelation of registration depends upon the discretion of the
proper officer whether he wants to cancel it from a prospective or retrospective date. A registered
person whose registration is cancelled will have to debit the electronic cash ledger or electronic
credit ledger, by an amount equal to Input Tax Credit (ITC) so availed or the output tax liability,
whichever is higher.
Conclusion
After coming to GST in India many indirect taxes have come under one umbrella which
simplifies the tax process in India. Digitalization plays an important role in paying the tax via an
easy mechanism online. GST reduces the multiplicity of taxes. Nowadays a person himself can
check the criteria for registration and they can register themselves online. Registration of GST is
a very easy process where there is no need to hire tax expertise. From time to time the
government also issues the notification regarding the person liable for registration or the
threshold limit for the registration of GST.
A person who has an aggregate turnover of more than 40 Lacs in the financial year then he is
liable to be registered under the act, while for some special category states the aggregate turnover
is 20 Lacs in a financial year for the registration of any business entity.
Input Tax
“Input tax” has been defined in section 2 (57) of the MGL (Model GST Law) and section 2 (1)
(d) of the IGST Act. Input tax in relation to a taxable person, means the (IGST and CGST) in
respect of CGST Act and (IGST and SGST) in respect of SGST Act, charged on any supply of
goods and/or services to him which are used, or are intended to be used, in the course or
furtherance of his business and includes the tax payable under sub-section (3) of section 7.
Input Tax Credit (ITC)
Input Tax Credit or ITC is the tax that a business pays on a purchase and that it can use to reduce
its tax liability when it makes a sale. In other words, businesses can reduce their tax liability by
claiming credit to the extent of GST paid on purchases. Goods and Services Tax (GST) is an
integrated tax system where every purchase by a business should be matched with a sale by
another business. This makes flow of credit across an entire supply chain a seamless process.
Conditions for availing of ITC
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Taxpaying documents such as tax invoice, debit note etc.,
Goods / service should have been received/deemed to be received by the taxable person
Tax charged on the invoice and should have been paid to the credit of government.
Return should have been furnished by the tax payer.
Credit for goods against an invoice received in lots / installments can be availed only on
last lot in installment.
The timelines for entitlement of credit against a particular invoice shall lapse on the
expiry of one year from date of issue.
At each stage of the supply chain, the buyer gets credit for the input tax paid, and they can use it
to offset the GST that needs to be paid to the Centre and State governments.
Time limits for claiming Input Tax Credit
ITC can only be claimed for tax invoices and debit notes which are less than a year old. In any
other case, the last date to claim ITC is the earlier of the following:
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Before filing valid GST returns for month of September following the end of the financial
year applicable to that invoice. For example, for an invoice issued on June 26, 2018, ITC
should be claimed by August 2018.
Before filing a relevant annual return
Input Tax Credit in case of Imports –
Under the GST Regime, the input tax credit of IGST and GST Compensation Cess is available to
the importer. However, the input tax credit of Basic Customs Duty (BCD) would not be
available. In order to avail ITC of IGST and GST Compensation Cess, an importer has to
mandatorily declare GST Registration number (GSTIN) in the Bill of Entry. The Customs EDI
system would be interconnected with the GST portal for the validation of ITC. Bill of entry in
the non-edi locations would be digitised and used for validation of input tax credit provided by
the GST portal.
Reversal of Input tax credit
Input tax credit may be reversed under certain circumstances as mentioned below –
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Failure to pay supplier within 180 days from the date of invoice.
Goods and services whether inputs or capital goods used for personal purpose.
Goods and services utilized for producing or supplying exempted goods or services.
Sale of capital goods or plant and machinery on which input tax credit was claimed.
Credit note issued by input service distributor.
Supplies ineligible under section 17(5) of the Act.
Transition from registered regular dealer to composite dealer
Where input tax credit (ITC) is reversed,
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The amount reversed may be added to output tax liability in the month in which it is
reversed,
Interest shall be paid from the date of availing credit till the date when the amount is
reversed and paid
No time limit shall be applicable for reclaiming the reversed credit.
Definition
Goods
Section
2(52)
of
GST
Act
Goods’’ means every kind of movable property other than money and securities but includes acti
onable claims ,growing crops, grass and things attached to or forming part of the land which are
agreed to be severed before supply or under a contract of supply.
The above is summarized as under:
Goods include: Every kind of movable property Actionable claims Growing crops, grass and thi
ngs attached to or forming part of the land which are agreed to be severed before supply or under
a contract of supply.
A goods does not include: Money and Securities Whether actionable claims liable to GST?
As per section 2(52) of the CGST/SGST Act actionable claims are to be considered as goods. Sc
hedule III read with Section 7 of the CGST/SGST Act lists the activities or transactions which sh
all be treated neither as supply of goods nor supply of services. The Schedule lists actionable clai
ms other than lottery, betting and gambling as one of such transactions. Thus only lottery, betting
and gambling shall be treated as supplies under the GST regime.
All the other actionable claims shall not be supplies and therefore GST is not applicable on it.
Whether transaction in securities be taxable in GST? Securities have been specifically excluded
from the definition of goods as well as services.
Thus,
the
transaction
in
securities
shall
not
be
liable
to
GST.
Services
Anything other than goods, money and securities but includes activities relating to the use of mo
ney or its conversion by cash or by any other mode, from one form, currency or denomination, to
another form, currency or denomination for which a separate consideration is charged;
Explanation 1 Services include transactions in money but does not include money and securities.
Meaning thereby that if transaction is done without any seprate charge /consideratopn no service;
Explanation 2 But transaction in money relating to the use of money or its conversion by cash or
by any other mode, from one form, currency or denomination, to another form, currency or deno
mination for which a separate consideration is charged then it is service
Aggregate Turnover:As per section 2(6) of CGST Act, 2017 ‘aggregate turnover’ means the aggregate value of all tax
able supplies (excluding the value of inward supplies on which tax is payable by a person on rev
erse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies
of persons having the same Permanent Account Number, to be computed on all India basis but e
xcludes central tax, State tax, Union territory tax, integrated tax and cess.
Supply
Supply includes sale, transfer, exchange, barter, license, rental, lease and disposal. If a person un
dertakes either of these transactions during the course or furtherance of business for consideratio
n, it will be covered under the meaning of Supply under GST
Elements of Supply:
Supply is done for consideration
Supply is done in course of furtherance of business.
Taxable Person:
Under the GST law a taxable person is a person who carries on any business at any business plac
e in India and who is registered or required to be registered under the GST Act. Any person who
engages in economic activity including trade and commerce is treated as taxable person.
Person here includes individual, HUF, company, firm, LLP, AN AOP/BOI, any corporation or g
overnment company, body corporate incorporated under laws of foreign country, co- operative s
ociety, local authority, government, trust and artificial juridical person.
Business:
Business includes(a) Any trade ,commerce,manufacture,profession,vocation or any other similar activit
y whether or not it is for a pecuniary benefit,
(b) Any activity or transaction in connection with or incidental or ancilliary to (a) abo
ve
(c) Any activity or transaction in the nature of (a) above whether or not there is volu
me, frequency, continuity or regularity of such transaction
(d) Supply or acquisition of goods including capital assets and services in connection
with commencement or closure of business
(e) Provision by a club, association, society,or any such body of the facilities or benef
its to its members, as the case may be
(f) Admission, for a consideration, of persons to any premises, and services supplied
by a person as the holder of an office which has been accepted by him in the cours
e or furtherance of his trade profession or vocation
(g) Any activity or transaction undertaken by the central Government, a State Govern
ment or any local authority in which they are engaged as public authorities shall b
e deemed to be business.
Place of Business:
(a) A place from where the business is ordinarily carried on, and includes a w
arehouse, a godown or any other place where a taxable person stores his g
oods, supplies or receives goods or services or both,
(b) A place where a taxable person maintains his books of account, or
(c) A place where a taxable person is engaged in business through an agent, b
y whatever name called.
Reverse charge
Generally, the supplier of goods or services is liable to pay GST. However, in specified cases lik
e imports and other notified supplies, the liabilitymay be cast on the recipient under the reverse c
harge means the liability to pay tax is on the recipient of supply of goods or services instead of th
e supplier of such goods or services in respect of notified categories of supply.
There are two type of reverse charge scenarios provided in law:
1. First is dependent on the nature of supply and/or nature of supplier.
2. Second scenario relates to taxable supplies by any unregistered person to a registe
red person.
The government may, on the recommendations of the council, by notification, spe
cify categories of supply of goods or services or both, the tax on which shall be pa
id on reverse charge basis by the recipient of such goods or services or both and al
l the provisions of this Act shall apply to such recipient as if he is the person liabl
e for paying the tax in relation to the supply of such goods or services or both.
Composition levy Section 10
This Section provides for a registered person to opt for payment of taxes under a scheme of
composition, the conditions attached thereto and the persons who are entitled, but not mandated,
to make payment of tax under this Scheme.
Payment of taxes- The registered person opting to pay tax under composition scheme needs only
to ascertain the aggregate value of outward taxable supplies and compute the tax thereon at a
fixed rate, regardless of the actual rate of tax applicable on the said outward supply.
Any registered person who opts to pay tax under section 10 shall electronically file an intimation
in FORM GST CMP-02, duly signed or verified through electronic verification code, on the
common portal, either directly or through a Facilitation Centre notified by the Commissioner,
prior to the commencement of the financial year for which the option to pay tax under the
aforesaid section is exercised and shall furnish the statement in FORM GST ITC-03 in
accordance with the provisions of sub-rule (4) of rule 44 within a period of sixty days from the
commencement of the relevant financial year Any person who files an intimation under sub-rule
(1) to pay tax under section 10 shall furnish the details of stock, including the inward supply of
goods received from unregistered persons, held by him on the day preceding the date from which
he opts to pay tax under the said section, electronically, in FORM GST CMP-03, on the common
portal, eitherdirectly or through a Facilitation Centre notified by the Commissioner, within a
period of sixty days from the date on which the option for composition levy is exercised or
within such further period as may be extended by the Commissioner in this behalfAny intimation
under sub-rule (1) or sub-rule (3) in respect of any place of business in any State or Union
territory shall be deemed to be an intimation in respect of all other places of business registered
on the same Permanent Account Number.
Conditions and Restrictions for Composition levy:

he is neither a casual taxable person nor a non-resident taxable person;

the goods held in stock by him on the appointed day have not been purchased in the
course of inter-State trade or commerce or imported from a place outside India or
received from his branch situated outside the State or from his agent or principal
outside the State, where the option is exercised under sub-rule (1) of rule 3;

the goods held in stock by him have not been purchased from an unregistered
supplier and where purchased, he pays the tax under sub-section (4) of section 9;

he shall pay tax under sub-section (3) or sub-section (4) of section 9 on inward
supply of goods or services or both;

he was not engaged in the manufacture of goods as notified under clause (e) of subsection (2) of section 10, during the preceding financial year;

he shall mention the words “composition taxable person, not eligible to collect tax
on supplies” at the top of the bill of supply issued by him; and

he shall mention the words “composition taxable person” on every notice or
signboard displayed at a prominent place at his principal place of business and at
every additional place or places of business.

The registered person paying tax under section 10 may not file a fresh intimation
every year and he may continue to pay tax under the said section subject to the
provisions of the Act and these rules
Validity of Composition Levy

The option exercised by a registered person to pay tax under section 10 shall remain valid
so long as he satisfies all the conditions mentioned in the said section and under these
rules.

The person referred to in sub-rule (1) shall be liable to pay tax under sub-section (1) of
section 9 from the day he ceases to satisfy any of the conditions mentioned in section 10 or
the provisions of this Chapter and shall issue tax invoice for every taxable supply made
thereafter and he shall also file an intimation for withdrawal from the scheme in FORM
GST CMP-04 within seven days of the occurrence of such event.

The registered person who intends to withdraw from the composition scheme shall, before
the date of such withdrawal, file an application in FORM GST CMP-04, duly signed or
verified through electronic verification code, electronically on the common portal.

Where the proper officer has reasons to believe that the registered person was not eligible
to pay tax under section 10 or has contravened the provisions of the Act or provisions of
this Chapter, he may issue a notice to such person in FORM GST CMP-05 to show cause
within fifteen days of the receipt of such notice as to why the option to pay tax under
section 10 shall not be denied.

Upon receipt of the reply to the show cause notice issued under sub-rule (4) from the
registered person in FORM GST CMP-06, the proper officer shall issue an order in FORM
GST CMP-07 within a period of thirty days of the receipt of such reply, either accepting
the reply, or denying the option to pay tax under section 10 from the date of the option or
from the date of the event concerning such contravention, as the case may be.

Every person who has furnished an intimation under sub-rule (2) or filed an application for
withdrawal under sub-rule (3) or a person in respect of whom an order of withdrawal of
option has been passed in FORM GST CMP-07 under sub-rule (5), may electronically
furnish at the common portal, either directly or through a Facilitation Centre notified by
the Commissioner, a statement in FORM GST ITC-01 containing details of the stock of
inputs and inputs contained in semi-finished or finished goods held in stock by him on the
date on which the option is withdrawn or denied, within a period of thirty days from the
date from which the option is withdrawn or from the date of the order passed in FORM
GST CMP-07, as the case may be.

Any intimation or application for withdrawal under sub-rule (2) or (3) or denial of the
option to pay tax under section 10 in accordance with sub-rule (5) in respect of any place
of business in any State or Union territory, shall be deemed to be an intimation in respect
of all other places of business registered on the same Permanent Account Number.
GST exemptions for goods:
There is a list of goods which do not attract GST as recommended by the GST Council. The
reasons for granting exemption on goods might include any of the following –




In the interest of the public
The exemption is as per the GST Council’s recommendation
The exemption is granted by the Government through a special order
The exemption is allowed on specific goods through an official notification
Moreover, there are two types of GST exemptions on goods. These are as follows –


Absolute exemption - under this type of exemption, the supply of specific types of goods
would be exempted from GST without considering the details of the supplier or receiver
and whether the good is supplied within or outside the State.
Conditional exemption – under this type of exemption, supply of specific types of goods
would be GST exempt subject to certain terms and conditions which have been specified
under the GST Act or any amendment or notification.
Here is a list of some of the most common goods which are GST exempt –
Types of goods
Examples
Live animals
Asses, cows, sheep, goat, poultry, etc.
Meat
Fresh and frozen meat of sheep, cows, goats, pigs, horses,
etc.
Fish
Fresh or frozen fish
Natural products
Honey, fresh and pasteurized milk, cheese, eggs, etc.
Live trees and plants
Bulbs, roots, flowers, foliage, etc.
Vegetables
Tomatoes, potatoes, onions, etc.
Fruits
Bananas, grapes, apples, etc.
Dry fruits
Cashew nuts, walnuts, etc.
Tea, coffee and spices
Coffee beans, tea leaves, turmeric, ginger, etc.
Grains
Wheat, rice, oats, barley, etc.
Products
industry
of
the
milling
Flours of different types
Seeds
Flower seeds, oil seeds, cereal husks, etc.
Sugar
Sugar, jaggery, etc.
Water
Mineral water, tender coconut water, etc.
Baked goods
Bread, pizza base, puffed rice, etc.
Fossil fuels
Electrical energy
Drugs and pharmaceuticals
Human blood, contraceptives, etc.
Fertilizers
Goods and organic manure
Beauty products
Bindi, kajal, kumkum, etc.
Waste
Sewage sludge, municipal waste, etc.
Ornaments
Plastic and glass bangles bangles, etc.
Newsprint
Judicial stamp paper, envelopes, rupee notes, etc.
Printed items
Printed books, newspapers, maps, etc.
Fabrics
Raw silk, silkworm cocoon, khadi, etc.
Hand tools
Spade, hammer, etc.
Pottery
Earthen pots, clay lamps, etc.
GST Exemption on services
Just like specific goods, specific services are also GST exempt. There are three types of supply
of services which would qualify for GST exemption. These include the following –



Supplies which have a 0% tax rate
Supplies which do not attract CGST or IGST due to the provisions stated in a notification
which amends either Section 11 of CGST Act or Section 6 of IGST Act
Supplies which are defined under Section 2(78) of the GST Act which are not taxable.
Since these types of supplies are GST exempt, any Input Tax Credit which is applicable on these
supplies would not be available to utilise or set off the GST liability.
Moreover, even under supply of services, there can be two types of GST exemptions which are
as follows –


Absolute exemption wherein the service would be exempted from GST without any
conditions
Conditional exemption or partial exemption wherein exemption is granted based on a
condition. This condition states that if the service is supplied intra-State or if the service
is supplied by a registered person to an unregistered one, GST would be exempted if the
total value of such supplies received by a registered person is not more than INR
5000/day.
Types of services
Agricultural services
Examples
Cultivation, supplying farm labour, harvesting, warehouse related
activities, renting or leading agricultural machinery, services
provided by a commission agent or the Agricultural Produce
Marketing Committee or Board for buying or selling agriculture
produce, etc.
Government services
Postal service, transportation of people or goods, services by a
foreign diplomat in India, services offered by the Reserve Bank of
India, services offered to diplomats, etc.
Transportation services
Transportation of goods by road, rail, water, etc., payment of toll,
transportation of passengers by air, transportation of goods where
the cost of transport is less than INR 1500, etc.
Judicial services
Services offered by arbitral tribunal, partnership firm of advocates,
senior advocates to an individual or business entity whose aggregate
turnover is up to INR 40 lakhs
Educational services
Transportation of faculty or students, mid-day meal scheme,
examination services, services offered by IIMs, etc.
Medical services
Services offered by ambulance, charities, veterinary doctors,
medical professionals, etc.
Organizational services
Services offered by exhibition organisers for international business
exhibitions, tour operators for foreign tourists, etc.
Other services
Services offered by GSTN to the Central or State Government or
Union Territories, admission fee payable to theatres, circuses, sports
events, etc. which charge a fee up to INR 250
Here is a list of some of the services which enjoy GST exemption –
Though GST is applicable for all businesses and on the supply of goods and services, the abovementioned exemptions are available. These exemptions reduce the GST burden and help in the
socio-economic development of the country.