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3. Definitions 15-24
Note:
1. CGST = Central Goods and Services Tax
2. SGST = State Goods and Services Tax
3. UTGST = Union Territory Goods and Services Tax
4. IGST = Integrated Goods and Services Tax
5. Reference to any section in the material shall be taken as reference to Section of CGST Act, 2017, unless otherwise
mentioned.
GST in India An Introduction
Genesis, Concept, Need and Benefits of GST
1. Genesis of GST:
16-07-2004 Dr. Kelkar Task Force recommended the need of a National GST
28-02-2006 Union FM moots the idea of GST from April, 2010 in Budget Speech 2007-08
Central GST Legislations- CGST Bill, 2017, IGST Bill,2017, UTGST Bill,2017,
27-03-2016
GST (Compensation to states) Bill, 2017 introduced in Lok-Sabha
Central GST Legislations- CGST Bill, 2017, IGST Bill,2017, UTGST Bill,2017,
29-03-2016
GST (Compensation to states) Bill, 2017 passed in Lok-Sabha
Central GST Legislations- CGST Bill, 2017, IGST Bill,2017, UTGST Bill,2017,
12-04-2017 GST (Compensation to states) Bill, 2017 received assent of president and Bills
enacted
_________
Implementation of GST across India
(01-07-2017)
Note: France was the first country to implement GST in 1954. Within 62 years, about 160 countries has adopted GST.
2. Concept of GST:
GST is Value added tax
GST is the value added tax on activity of supply of goods and/or services, irrespective of such activity being
manufacture of goods, sale of goods (intra-state or inter-state sale), provisioning of services or consumption of
goods and services.
3. Need of GST:
Deficiency in existing value addition taxation system necessitated needs of GST
Cascading effect due to non-integration of VAT and Service tax
Double taxation due to same subject matter being treated as goods and service
Over the years, distinction between goods and services has become haze, due to which there is overlapping of
State VAT and CST on transactions like catering services (restaurant services and outdoor catering services).
Same transaction is getting taxed both by the CG and SG which is creating double taxation and resultant
litigation.
.
4. Benefits of GST:
GST is a win-win situation for the entire country.
Benefits to Central / State Government
Unified Common national market: GST aims to make India a common market with common tax rates and
procedures and remove the economic barriers thus paving the way for an integrated economy at the
national level.
Boost to export / make in India: GST will give a major boost to the Make in India' initiative of the
Government of India by making goods and services produced in India competitive in the national as well
as international market
Increase in revenue: GST is expected to bring buoyancy to the Government Revenue by widening the tax
base and improving the taxpayer compliance.
Benefits to Trade
Reduction in multiplicity of taxes: GST will subsume majority of existing indirect tax levies both at
Central and State level into one tax i.e., GST which will be leviable uniformly on goods and services.
Mitigation of cascading effect: By subsuming most of the Central and State taxes into a single tax and by
allowing a set-off of prior-stage taxes for the transactions across the entire value chain, it would mitigate
the ill effects of cascading, improve competitiveness and improve liquidity of the businesses.
Mitigation of double taxation: GST law makes provisions for treatment of composite/mixed supply either
as treatment of goods and/or services, thereby mitigating the situation of double taxation.
Benefits to Consumer
Simplex tax system
(ii) The tax shall be levied as dual GST separately by the Union and the States.
Parliament will have power to make laws with respect to GST imposed by the Union (CGST) and the
State Legislatures will have power to make laws with respect to GST imposed by the States (SGST).
Parliament will have exclusive power to make laws with respect to GST where the supply of goods
and/or services takes place in the course of inter-State trade or commerce (IGST).
.
Article 246-A: Special provisions with respect to GST (detailed discussion later)
(iv) In the case of tobacco and tobacco products, the Centre alone would have the power to levy
excise duty in addition to the GST.
(v) Taxes on entertainments and amusements to the extent levied and collected by a Panchayat or a
Municipality or a Regional Council or a District Council shall not be subsumed under GST.
The local bodies of States could continue to levy such taxes.
(vi) Article 279-A of the Constitution empowers the President to constitute a joint forum of the Centre
and States namely, Goods & Services Tax Council (GST Council). GST Council has been constituted
th
on 15 Sep, 2016.
GST Council Consists of following:
Union FM & Union Minister of State (Revenue)
Ministers in charge of Finance / Taxation of each State
Chairperson Union FM
Vice Chairperson - to be chosen amongst the Ministers of State Government
Council to be guided by need for
a harmonized structure of GST; and
a harmonized national market for goods & services
Council to make recommendations on
Taxes to be subsumed in GST
Exemptions & thresholds
GST rates
Model GST Law & procedures
GST Model = Dual Model
Dual Model: The Centre and States simultaneously levying it on a common tax base.
Constitutional Provisions
.
.
Article 246-A: : Special provision with respect to Goods And Services Tax. (new article inserted)
Intra-State Supply: Power to levy GST vested with Parliament as well as State Legislature
(1) Notwithstanding anything contained in articles 246 and 254,
Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with
respect to goods and services tax imposed by the Union or by such State.
.
Author :
Legislative Competence to make law w.r.t. to levy/imposition of GST:
Parliament empowered to levy GST.
Simultaneously, Legislature of State also empowered to levy GST.
Article 246 Subject matter of laws made by Parliament and by the Legislatures of States
Matters specified in List I (of VII law making power vests exclusively with
Schedule of Constitution) Parliament
Matters specified in List II (of VII law making power vests exclusively with State
Schedule of Constitution) Legislature
Matters specified in List III (of VII law making power vests with Parliament as well
Schedule of Constitution) as with State Legislature
.
Article 254 Inconsistency between laws made by Parliament and laws made by the Legislatures of States
(It provides that law made by Parliament shall prevail over law made by Legislature of the State)
.
Author :
GST leviable on inter-state supply = Integrated GST (IGST)
Parliament has exclusive power to make law with respect to IGST.
Explanation.- The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of
article 279A*, take effect from the date recommended by the Goods and Services Tax Council.
Author :
Article 279-A (5) covers following 5 goods:
petroleum crude,
high speed diesel, motor spirit (commonly known as petrol),
.
natural gas and aviation turbine fuel.
GST on these will be applicable from such date as will be recommended by GST Council in future.
Article 269-A: :Levy and collection of goods and services tax in course of inter-State trade or
commerce
(new article inserted)
GST on inter-state supply shall be levied & collected by GoI, but shall be apportioned
(1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and
collected by the Government of India and
such tax shall be apportioned between the Union and the States
in the manner
as may be provided by Parliament by law on the recommendations of the Goods and Services Tax
Council.
Explanation.-For the purposes of this clause, supply of goods, or of services, or both in the course of
import into the territory of India shall be deemed to be supply of goods, or of services, or
both in the course of inter-State trade or commerce.
Author :
GST leviable on inter-state supply = Integrated GST (IGST)
GoI will levy and collect IGST.
IGST shall be apportioned between the Union (CG) and the States.
Manner of apportionment has been laid down under IGST Act made by Parliament.
POS of Goods Sec 10: POS of goods (other than import/ export supply)
Sec 11: POS of in case of import/ export supply
POS of Services Sec 12: POS of services where both supplier and recipient are located in India
Sec 13: POS of services where supplier or recipient is located outside India
.
Principles for determination nature of supply Inter-State supply or Intra-State Supply
Intra-State Supply
o The GST to be levied by the Centre on intra-State supply of goods and / or services would be called the
Central GST (CGST) and that to be levied by the States would be called the State GST (SGST).
The CGST and SGST would be levied at rates to be jointly decided by the Centre and States.
The rates would be notified on the recommendations of the GST Council.
o Supply within Union Territory (without legislature) is also intra-state supply. Such supply would attract
CGST and UTGST.
Inter-State Supply
o An Integrated GST (IGST) would be levied and collected by the Centre on inter- State supply of goods and
services. IGST will be a sum total of CGST and SGST / UTGST.
o Accounts would be settled periodically between the Centre and the States to ensure that the SGST portion
of IGST is transferred to the destination State where the goods or services are eventually consumed.
Legislative Framework
Intra-State Supply Central Goods and Services Tax Act, 2017 It is levying CGST.
State Goods and Services Tax Act, 2017 It is levying SGST.
[29 States and 2 Union Territories (with state legislature) will be having their
respective SGST Acts]
Though there would be multiple SGST legislations, the basic features of
law, such as chargeability, definition of taxable event and taxable
person, classification and valuation of goods and services, procedure
for collection and levy of tax and the like would be uniform in all the
SGST legislations, as far as feasible. This would be necessary to
preserve the essence of dual GST.
Union Territory Goods and Services Tax Act, 2017 It is levying UTGST.
[All 5 Union Territories (without state legislature) will governed by single
UTGST Act]
It
Inter-State Supply Integrated Goods and Services Tax Act, 2017 It is levying IGST.
Composition Optional facility to supplier having aggregate turnover This optional facility is only for
Levy in the preceding year didn't exceed Rs 50 lakhs. supplier making intra-state
supply.
Such supplier shall be liable to pay GST at notified
rates (No ITC shall be admissible to them).
o Further, composition levy cannot be collected
from recipient.
STATE A
CGST (CG) Supplier-1 IGST (CG) Set off of SGST against IGST
SGST (SG) State A shall be liable to pay this to CG.
IGST (CG) Supplier-1 CGST (CG) Set off of IGST against SGST
SGST (SG) State A shall be entitled to claim this from CG.
ILLUSTRATION
Illustration 1 (ICAI Material)
.
INTRA-STATE SUPPLY
STATE-1
CGST SGST
Output 1,080 1,080
liability
ITC (900) (900)
Cash 180 180
INTER-STATE SUPPLY
STATE-1
CRUX
Inter-State Supply = LoS + PoS in different states/UT Intra-State Supply = LoS + PoS in same state/UT
India, State & Union Territory
.
Author
1. State includes Union Territories with Legislature.
2. Delhi and Pondicherry are two such states. These shall
have SGST rather than UTGST.
UNION TERRITORY [Sec 2(114) of CGST Act]
Union territory means the territory of
(a) the Andaman and Nicobar Islands;
(b) Lakshadweep;
(c) Dadra and Nagar Haveli;
(d) Daman and Diu
(e) Chandigarh; and
(f) other territory*.
Explanation.For the purposes of this Act, each of the territories specified in sub-clauses (a) to (f) shall be
considered to be a separate Union territory;
Author
1. Union Territory with legislature are treated as State [Sec 2(103) of CGST Act]
SGST is applicable to such Union Territories.
Delhi and Pondicherry are two such Union Territories,
.
3. UT shall also include other territory as defined in Sec 2(81) of CGST Act.
1. Other Territory = Territory which is neither comprised in State nor comprised in Union Territories as defined
in Sec 114 (a) to (e).
.
2. Such other territory shall be treated as Union Territory under CGST Act [Sec 2(114) of CSGT Act, 2017]
UTGST Act, 2017 also provides similar definition of UT [Sec 2(8) of UTGST Act, 2017]. Thus, supply in such
other territory shall also attract UTGST.
.
DEFINTIONS
Sec 2 of CGST Act, 2017
.
.
Relevant Definitions
.
Author
1. GST is leviable on supply of goods.
2. Something which is not goods, supply thereof will not attract GST (ofcourse, such supply shall also not qualify as supply
of service also)
2. Though money is not service, but activities relating to use of money (e.g., lending) and activities relating to conversion of
money (e.g., DD making, money changing) will constitute service. Thus, such transactions will attract GST.
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;
Author
1. GST is leviable on supply of goods or services or both.
2. In general, the definition of supply for GST purposes covers all forms of supply where goods and services are supplied in
return for a consideration. Any supply of goods and services without consideration is not a supply unless it is deemed
to be a supply.
Sec 2(31)(a): Consideration includes 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, whether by the person or by any other person.
1. The phrase in respect of, in response to, or for the inducement of means there must be a direct link between the
supply and the consideration, i.e. for the supply of goods or services made under an invoice, a contract or an agreement,
there is a consideration received or to be received for such supply.
.
Inducement means to gives something to a person so that he will do something else in return.
Illustration 1: A football player is offered a branded car as an inducement for him to join the club. In this case, the car
offered is the consideration that induces the player to join the club to provide his football skills. There is a direct link
between the act of joining the club and the provision of the car.
Illustration 2: A restaurateur offered free meals to drivers of buses carrying passengers as an inducement to bring
potential customers to his business premise. Since the meals were not given to drivers of empty buses, there is a direct
link between the act of bringing passengers to the food outlet and the provision of the free meals. The consideration here
is the free meals provided.
2. Consideration may flow from recipient of supply or from any other person.
.
Normally, when a supplier makes a supply of goods or services to a recipient, he receives a consideration directly from
the recipient. However, in some cases consideration may have been received from a third party. This is known as a
supply made under a tripartite arrangement. As long as there is a direct link between the supply made and the
consideration given, there is a supply for GST purposes.
Illustration 1: A Ltd. contracts with a Big Bazaar (B Ltd) to provide bedsheets worth Rs 10,000 to its business clients
during Diwali. The consideration for the supply of bed sheets is paid by A Ltd. as stipulated in the contract.
B Ltd. is having binding contract with A Ltd. to supply bedsheets to business clients of A Ltd.
This transaction will qualify as supply as there is supply of goods for consideration.
However, Governments Subsidy shall not be treated, as consideration and thus, amount of subsidy shall not be
considered for the purpose of charge of GST.
However, if there is a direct link between the payment and the supply or if there is a supply of goods or services in return for the
payment, then such payment is a consideration for the supply and subject to GST.
Illustration 1: A rich man donates a large sum of money to an orphanage without receiving any benefit in return. The donation
(payment) is not a consideration because there is no supply of goods or services by the orphanage to the donor in return.
4. Treatment of Deposits
Deposit shall not be treated as consideration unless it is appropriated by the supplier towards supply of goods and /
or services.
.
Illustration 1: MTNL, telecom service provider, receives security deposits from subscriber in connection with supply of
telecom services. This security deposit is refundable. This security deposit is not consideration for supply of service and
hence, shall not be taxable. However, if in future, if it is adjusted towards value of services supplied, then this security deposit
shall be treated as consideration.
.
Illustration 2: Any Deposit made which is intended by the parties to the contract to be offset against the purchase price once
the supply has been made. Such deposit (better to call them as advance) will represent consideration and thus, fall within
the scope of GST. [These become liable for the tax the day it is received]
Sec 2(31)(b): Consideration includes any act or forbearance in respect of, in response to, or for the inducement of,
the supply of goods or services, whether by the person or by any other person.
Illustration 1: Mr A, top level management personnel of A ltd., retires from X Ltd. X Ltd. enters into non-competence
agreement with Mr A. In lieu, it agrees to allow possession of companys bunglow for another 10 years.
In this case,
Renting of bunglow/building = Supply of service
Act/ forbearance on part of Mr A (i.e., not to carry on competitive business) = Consideration Mr A is supplier of services
to A ltd.
Thus, such transaction becomes transaction in taxable supply and thus, liable to GST.
BUSINSESS [Sec 2(17) of CGST Act]
Business includes
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity,
whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency,
continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection with commencement
or closure of business;
(e) provision by a club, association, society, or any such body (for a subscription or any other
consideration) of the facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been accepted by him in the course or
furtherance of his trade, profession or vocation;
(h) services provided by a race club by way of totalisator or a licence to book maker in such club; and
(i) any activity or transaction undertaken by the Central Government, a State Government or any local
authority in which they are engaged as public authorities;
.
Author:
1. Wider definition: Business has been defined in inclusive manner.
.
Wager (* Wager has been included as GST is also there on betting 1. Sale of used car, sale of scrap, sale of old machineries,
transactions) sale of old furniture etc. is subject to GST, though the
taxable person may not be in business of selling cars,
Other Similar Activity furniture or machinery.
2. Sale of unserviceable parts by transport undertaking;
3. Sale of old machinery and scrap by manufacturer;
Whether or not for a pecuniary benefit:
4. Sale in stores for employees;
This means that financial profitability is not a criterion in
5. Sale of hypothecated/ pledged goods by Bank;
determining the status of business.
6. Sale of repossessed goods by Insurance Company.
(c)
Volume of activity is irrelevant.
Frequency, continuity or regularity is irrelevant.
(Thus, even occasional transaction are subject to GST)
.
Specific activity
(d) Acquisition of Goods in connection with commencement or closure of business
[Transactions effected for commencement of business, though actual commencement of business takes place later on,
shall also be treated as business.
Similarly, the transaction of sale of goods such as stock or fixed assets after the closure of business shall also be
considered within the scope of business.]
(e) Facilities provided by club, association, society, or any such body to its members
[Club/ association / society / other such body operates on principles of mutuality they provide facilities / benefits to its
own members. Such transactions shall still be regarded as business.
- some of the facilities / benefits provided by club etc. are --- 1) Sports facilities like swimming pool, table tennis, cricket
etc. 2) Restaurant facility; 3) Banquet Hall or open ground; 4) Accommodation facility (rooms); 5) Library; 6) Conference
room etc.
(g) Services provided by person as holder of officer- such office accepted by him is in furtherance of his trade,
profession or vocation
[e.g., if a CA in practice provides CFO or independent director services, he would be covered]
(i) Activities / Transaction by CG, SG or LA in which they are engaged as public authorities
[*Activities of CG, SG or LA undertaken as public authorities don't constitute business. GST cannot be imposed on
sovereign activities of CG, SG or LA as such activities don't constitute business.]
.
Deemed Distinct Persons : Fiction of Sec 25 of CGST Act (Procedure for Registration)
.
One person carrying more than one GST registration = Each registrant is deemed distinct persons
25 (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.
Illustration
Suppli State-A State B Requirement of separate registration Deemed Distinct
er of
goods Place of Place of Place of u/Sec 25 Persons or not
Business Business Business
Mr A Yes ---- Yes Separate registration (mandatory) Deemed Distinct
- Sec 25(1) persons
Mr B Yes Yes --- If these 2 places of business Deemed Distinct
constitutes different business persons
verticals
- Separate registration can be taken
optionally
- Sec 25(2)
If these 2 places of business does Not Deemed Distinct
not constitute different business persons
verticals
- Separate registration cannot be
taken
- Sec 25(2)
Person carrying registration in one State/UT, but having establishments in other State/UT also: Such establishments
are deemed distinct persons (even if such other establishment is not registered)
25 (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.
Illustration:
A Ltd., manufacturer and service provider, having HO in Mumbai (engaged in supply of goods) and BO in Gujarat
(engaged in supply of services)
HO- supplying goods [GST registered in Maharashtra]
BO- supplying service [Not registered under GST as Y service is under reverse charge mechanism]
.
- Though BO is not GST registered, still it shall be treated as distinct person being it is an establishment in other State Sec
25(5)]
.
.
.
Author
Supplier = Person supplying goods and/or services + Agent acting on behalf of such supplier
RECIPIENT [Sec 2(93) of CGST Act]
Recipient of supply of goods or services or both, means
(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to
pay that consideration;
(b) where no consideration is payable for the supply of GOODS, the person to whom the goods are
delivered or made available, or to whom possession or use of the goods is given or made available; and
(c) where no consideration is payable for the supply of A SERVICE, the person to whom the service is
rendered,
and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of
the supply
and shall include AN AGENT acting as such on behalf of the recipient in relation to the goods or services
or both supplied;
..
Author :
In general, Recipient of Supply = Person to whom supply is made
Situation Goods and/or services Recipient of supply
Supply for consideration Goods and/ or services Recipient = Person liable to pay consideration
Supply without consideration Goods Recipient = Person to whom goods are delivered or made
[Section 7 read with Schedule I available
(4 Activities)] Services Recipient = Person to whom services are rendered
Illustration:
.
Taxable Supply means a supply of goods or services or both which is leviable to tax under this Act.
Author
Taxable Supply = Supply which is leviable to CGST under CGST Act, 2017 (Intra-State supply falling within scope of Sec 9)
.
Author :
Non-taxable supply = Supply not leviable to tax under CGST Act, 2017 or under IGST Act, 2017
EXEMPT SUPPLY
means Supply attracting NIL rate of tax [Nil levy attracted]
Supply wholly exempt u/Sec 11 of CGST Act [Levy attracted, but exempted]
Supply wholly exempt u/Sec 6 of ICGST Act [Levy attracted, but exempted]
Author
1. Taxable Person = Person registered or person liable to be registered u/Sec 22 or 24
.
Reverse Charge means the liability to pay tax by the recipient of supply of goods or services or both instead of
the supplier of such goods or services or both
under sub-section (3) or sub-section (4) of section 9, or
Under sub-section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act;
Author:
1. Reverse Charge means the liability to pay tax on the recipient instead of supplier.
2. REVERSE CHARGE
.
REVERSE CHARGE: Notified supplies (goods / services / both): Recipient Sec 9(3) of Sec 5(3) of
shall be liable to pay CGST Act IGST Act
Automatic REVERSE CHARGE: (Unregistered supplier supplying to Sec 9(4) of Sec 5(4) of
Registered recipient): Recipient liable to pay CGST Act IGST Act
.
.
ELECTRONIC COMMERCE OPERATOR [Sec 2(45) of CGST Act]
.
Electronic Commerce Operator means any person who owns, operates or manages digital or electronic facility
or platform for electronic commerce;
Digital Goods/products is a general phrase used to describe any goods that are stored, delivered and used in its
electronic format. Digital goods are shipped electronically to the consumer through email or download from the Internet.
Physical stores that supply goods and/or services with the help of digital network facilitated by third party will also fall
within scope of this definition.
e.g., Sale of perfumes over Flipkart,
.
.
Author:
1. ECO = Person owning, operating or managing digital or electronic facility/platform for e-commerce
e.g., Flipkart, Amazon, OLA cab, Uber Cab.
Supply of other services Supplier shall be liable to pay GST Sec 52 of CGST Sec 20 of IGST
through ECO Supplier shall be required to take Act Act makes Sec
Supply of any goods through registration. 52 applicable to
ECO [But ECO shall be liable to comply IGST Also.
with TCS provisions under which ECO
shall deposit TCS (at notified rates)
with Government. For this purpose,
ECO shall still be required to take
registration]
.
TAXABLE EVENT: SUPPLY
Sec 7 of CGST Act, 2017
.
GST is levied on activity of supply of goods and/or services. In other words, taxable event under GST law is supply.
o Under the current tax laws, Central Excise is levied on manufacture of goods, VAT / CST is levied on sale of goods and service tax is
charged on service provided or agreed to be provided. Unlike such different incidences, under the GST law, it is supply which would
be the taxable event.
Why we need to understand SUPPLY under GST?
Transaction / Current Treatment Treatment under GST
Activity
Taxable Liability Taxable Liability Remarks
Event Event
Sale of Manufacture ED leviable Supply GST leviable
manufactured
Sale VAT/CST leviable
goods
Author :
1. Taxable Event under GST = Supply (as defined in Sec 7)
2. Sec 7 defines supply in an inclusive manner. The law has provided an inclusive meaning to the word supply which implies
that the specific transactions which are listed in the said section are only illustrative.
Detailed Analysis
1. Supply under Section 7(1)(a)
Supply (goods and/or services) for consideration in the course or furtherance of business
.
.
Exception to above:
In view of specific inclusion provided by Sec 7(1)(b), activity of import of service shall constitute supply even if it is not in course or
furtherance of business.
e.g., Mr A is a salaried employee in A Ltd. it has availed services of an foreign architect for construction of his house. Such supply
of service is not in course or furtherance of any business in hands of Mr A. But it will constitute supply in terms of Sec 7(1)(b).
.
Related provisions
Business Sec 2(17) of CGST Act
The word supply includes import of a service, made for a consideration (as defined in Section 2(31)) and
whether or not in the course or furtherance of business. This implies that import of services even for
personal consumption would qualify as supply and therefore would be liable to tax.
.
e.g., Mr A is a salaried employee in A Ltd. it has availed services of an foreign architect for construction of his house. Such supply of service
is not in course or furtherance of any business in hands of Mr A. But it will constitute supply in terms of Sec 7(1)(b).
.
o Compulsory registration, no threshold limit [Sec 20 of IGST Act read with Sec 24(iii) of CGST
Act]: Threshold limits of registration (20 lakhs / 10 lakhs) do not apply in case of supplies attracting
tax on reverse charge basis. Thus, importer of service shall be liable to get himself compulsorily
registered under GST and make payment of GST liability.
1. The law provides that in certain cases, even though there is no consideration, the same would be treated as supply. Such
cases are listed in Schedule I as stated below:
1. Sale of business assets (goods) on which ITC has been availed
2. Supplies of goods and/or services between related persons, except gift upto Rs 50,000 to employees
Supplies of goods and/or services between deemed distinct persons
3. Agent to principal or vice-versa, if agent supplies / receives goods on behalf of principal
4. Import of services from related parties
2. In all such cases, value of such supplies shall be determined as per Sec 15 (4) of CGST Act read with Valuation Rules.
Activity without consideration Treatment under GST
Getting covered by Schedule I Such supply will attract GST liability (presuming other conditions of taxability are
e.g., Gift to relatives satisfied)
Value = Value determined as per rules Sec 15 (4) of CGST Act read with
Valuation Rules
Related ITC shall be admissible.
Not Getting covered by Schedule I Such supply will not attract GST liability.
e.g., Gift to non-relatives dealer or However, related ITC shall not be admissible (i.e., it shall be reversible).
distributor
.
1. In many cases, demarcation line between goods and services is very thin. Historically, also there have been disputes
as to treatment of certain transaction as transaction of goods or transaction of service. Few disputes settled by
Courts and many are still under litigation. To avoid this situation, GST law provided for following mechanism:
Steps to be followed
1. Check Schedule II Activities shall be provided the treatment which has been specified in Schedule II.
.
2. Check Notification Notified activities shall be provided the same treatment which been notified for them.
u/Sec 7(3) of CGST Act No notification has been issued presently.
3. Apply Sec 8 of CGST, Sec 8 makes provisions for handling of composite supply and mixed supply.
Act -- For details refer Sec 8 (discussed later)
.
Out of Scope Supply = [Schedule III Activities + Notified activities of Govt / Local Authorities as public authorities]
(2) Notwithstanding anything contained in sub-section (1),
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central Government, a State Government or any local
authority in which they are engaged as public authorities, as may be notified by the Government* on the
recommendations of the Council,
shall be treated neither as a supply of goods nor a supply of services.
Author :
Out of Scope supply = Schedule III Activities/transactions
.
Supply Transaction: Govt empowered to deemed any supply as supply of goods or supply of service
(3) Subject to the provisions of sub-sections (1) and (2),
the Government* may, on the recommendations of the Council, specify, by notification, the transactions that
are to be treated as
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.
.
Author :
1. Differential treatment of goods and services under GST
Applicable rates: GST applicable to supply of goods as well as supply of services. But rates applicable on supply of goods
are different from rates applicable on supply of services. Thus, even under GST regime, it is important to identify supply
transaction and classify them into either of the category.
Principle governing determination of place of supply: Principles governing determination of place of supply of goods
and services are different. [Place of supply is required to determine the nature of supply, viz, inter-state supply or intra-
state supply]
Principle governing determination of time of supply: Principles governing determination of time of supply of goods
and services are different. [Time of supply is required to determine timing of payment of GST laibility]
.
2. Schedule II of CGST Act specifies which activities will be considered as supply of goods and which activities will be
considered as supply of service.
Schedule II: (7 Paras)
.
3. Additionally, Sec 7(3) empowers Government to declare certain activity/transaction as supply of goods or supply of
services. But Government can use this power only with the approval of GST Council.
SCHEDULE I [See section 7]
ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION
1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.
Author :
1. Permanent transfer or disposal of business assets on which ITC has been availed:
Permanent Transfer or disposal: It implies that the goods should be transferred without any intention or requirement of
having to receive the goods back.
E.g.,
Goods sent on job-work for carrying out certain job-work (like testing or some processing): Entry 1 is not applicable
Donation of business assets to some charitable organization: Entry 1 is applicable
Supply of goods must of those on which ITC has been availed: It implies that the goods should be transferred without any
intention or requirement of having to receive the goods back.
E.g.,
Motor car purchased by a manufacturing company for use of its director. ITC not admissible on such motor car and
hence, not availed. Subsequently, such car is donated to some charitable organization: Entry 1 is not applicable.
ILLUSTRATIONS
Activity Supply GST applicability
Inputs purchased (ITC availed) Yes GST applicable
Subsequent, sold for consideration [Sec 7(1)(a)] Value of such supply= Transaction
Value (determined as per Sec 15 of
CGST Act)
.
Motor Car purchased (ITC not availed being Not a supply GST not applicable
not admissible) [Sec 7(1)(c) + Schedule I (Entry 1)]
Subsequent, disposed off without
consideration
Author :
1. Supply of goods and/or services to related persons / deemed distinct persons:
Related provisions
Family Sec 2(49) of CGST Act
Family means,
(i) the spouse and children of the person, and
(ii) the parents, grand-parents, brothers and sisters of the person if they are wholly or mainly dependent on
.
the said person;
.
E.g.,
Gifts to relatives:
o Gift to employee: Gifts upto value of Rs 50,000 in a year to an employee shall not be treated as supply. Gifts in
value in excess of Rs 50,000 shall be taxable as supply. [Note: Gifts may be in terms of supply of good and/or
services]
o Gift to all other relatives: Gifts of any value shall be taxable as supply. [Note: Gifts may be in terms of supply of
good and/or services]
ILLUSTRATIONS
Activity Supply GST Levy
Free air travel tickets provided to Yes (presuming such supply is in over GST Leviable
employees by Airline and above of gifts of value of Rs 50,000) Value of such supply= as determined as per Sec
[Note: Employer & Employee = Related [Sec 7(1)(c) read with Schedule I 15 read with Valuation Rules
.
Supply to distinct persons as specified u/Sec 25 (made in the course or furtherance of business):
Distinct Person Sec 25 of CGST Act (Procedure for Registration)
.
One person carrying more than one GST registration = Each registrant is deemed distinct
persons
25 (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.
Person carrying registration in one State/UT, but having establishments in other State/UT
also: Such establishments are deemed distinct persons (even if such other establishment is not
registered)
25 (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.
.
Supplier State-A State B Requirement of separate Deemed Whether stock-
of registration Distinct transfer
goods Place of Place of Place of
u/Sec 25 Persons or taxable as
Business Business Business
not supply?
Mr A Yes ---- Yes Separate registration Deemed Yes
(mandatory) Distinct [Stock transfer =
persons Supply (Schedule I-
- Sec 25(1) Entry 2)]
Related provisions
Business Vertical Sec 2(18) of CGST Act
Business Vertical means a distinguishable component of an enterprise that is engaged in the supply of
individual goods or services or a group of related goods or services which is subject to risks and returns that are
different from those of the other business verticals.
.
Explanation.For the purposes of this clause, factors that should be considered in determining whether goods or
services are related include
(a) the nature of the goods or services; (d) the methods used to distribute the goods or supply of
(b) the nature of the production processes; services; and
(c) the type or class of customers for the goods or (e) the nature of regulatory environment (wherever applicable),
services; including banking, insurance, or public utilities;
.
ILLUSTRATIONS
Activity Supply GST Levy
Stock transfer/ branch transfer from Yes GST Leviable
Mumbai Head Office to Gujarat [Sec 7(1)(c) read with Schedule I Value of such supply= as determined as per Sec
Branch Office (Entry 2)] 15 read with Valuation Rules
..
[HO GST registered in Maharashtra HO shall be liable to pay GST on such stock-
transfer.
BO GST Registered in Gujarat]
.
Stock transfer/ branch transfer from Yes GST Leviable
Mumbai Head Office to Pune [Sec 7(1)(c) read with Schedule I Value of such supply= as determined as per Sec
Branch Office (Entry 2)] 15 read with Valuation Rules
..
[HO GST registered in Maharashtra HO shall be liable to pay GST on such stock-
transfer.
BO GST Registered in Maharashtra ]
.
Stock transfer/ branch transfer from NO GST not leviable
Mumbai Head Office to Pune [Schedule I (Entry 2)- not applicable] .
Branch Office
[HO GST registered in Maharashtra
BO not separately Registered (rather
shown as additional place of business in
registration certificate) ]
to BO
HO- supplying goods [GST
registered in Maharashtra]
BO- supplying service [Not
registered under GST as Y
service is under reverse charge
mechanism]
[Note: Though BO is not GST registered,
still it shall be treated as distinct person
being it is an establishment in other State
Sec 25(5)]
.
3. Supply of GOODS
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.
Author :
1. Supply of goods between principal and agent:
.
.
Related provisions
Principal Sec 2(88) of CGST Act
Principal means a person on whose behalf an agent carries on the business of supply or
receipt of goods or services or both;
- A ltd. has supplied 20 goods to B A Ltd. shall be liable to pay GST on such supply of
Ltd. goods
.
Author :
1. Import of services (without consideration) by a taxable person under following 2 situations shall be considered as
supply:
.
- Import of service from a related person (made in the course or furtherance of business):
- Import of service from his other establishment outside India (made in the course or furtherance of business):
E.g.,
ABC Associates received legal consultancy services from its head office located in Malaysia. The head office has rendered
such services free of cost to its branch office. Since ABC Associates and the branch office are related persons, services
received by ABC Associates will qualify as supply even though the head office has not charged anything from it.
.
SCHEDULE II [See section 7]
ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES
1. TRANSFER
(a) any transfer of the title in goods is a supply of GOODS;
(b) any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of
SERVICES;
(c) any transfer of the title in goods under an agreement which stipulates that property in goods shall pass at a
future date upon payment of full consideration as agreed, is a supply of GOODS.
Author :
Activity Treatment under GST
(a) Transfer of title in GOODS Supply of Goods
.
Mr A, a manufacturer of TV, donates TV Transfer of title in goods Sec 7 read with Schedule I (Entry 1 / 2)
to charitable organization (without consideration) - Not supply at all.
(Note: TV being output of Mr A, no question [Entry 1 not applicable as it is not a
of availment of any ITC by Mr A) business asset (input/ CG)]
[Entry 2 is not applicable as supply is not
between related person or deemed distinct
person]
Mr A, a manufacturer of TV, distributes Transfer of title in goods Sec 7 read with Schedule I (Entry 1 / 2)
samples of new model of TV (without consideration) - Not supply at all.
[Entry 1 not applicable as it is not a
business asset (input/ CG)]
[Entry 2 is not applicable as supply is not
between related person or deemed distinct
person]
Note: Undivided share in goods refers to goods that are owned by more than one person.
When one owner of the goods decides to sell his share in goods, it is a supply of services.
When all owners of the goods sell the property, it is a supply of goods.
Author :
Activity Treatment under GST
(a) Land: Lease, tenancy, easement, license to occupy Supply of Service
3. TREATMENT or PROCESS
Any treatment or process which is applied to another persons goods is a supply of SERVICES.
Author :
Any treatment or process which is being applied to another persons goods is a supply of services.
e.g.
1) XYZ Ltd. sent their tools to M Ltd. for heat treatment to harden them. The heat treatment done by M Ltd. is a supply of
service. (Note: GST shall be chargeable on job-charges)
2) New Glass Ltd. sent their glass to B Ltd. for heat treatment to produce tempered glass. The heat treatment done by B Ltd. is a
supply of service.
3) D ltd. sent their wrought iron gates to C Ltd. for chemical treatment to produce rust- resistant gates. The chemical treatment
done by C ltd. is a supply of service.
4) MR Furniture Ltd. sent their semi-finished dining sets to D Ltd. for the process of varnishing. The varnishing work done by D
ltd. is a supply of service.
.
(b) such process does not amount to manufacture Supply Supply of Service
(d) Contract is composite contract- labour cum material Supply Supply of Service
(b) Output = Alcoholic Liqour Supply Supply of Service but not taxable supply
Author :
Motor Vehicles used in factory (ITC not Transfer of goods forming Sec 7 read with Schedule I
availed being blocked as per Sec 17) part of business assets - Not supply at all.
- Disposal to some charitable organization (without consideration)
Sec 7 read with Schedule II (Para 1)
for free
Supply of Goods.
.
.
4(b) Goods held/used as business assets: Now put to private use Supply of Services
Generally, there is no supply when goods acquired by a person are used for his own business purposes.
However, if the goods are:
(i) put to private or personal use; or
(ii) used for the purpose other than business; or
(iii) made available for another persons use but not done in the course or furtherance of the business of the
owner of the goods.
it is a supply of services.
Illustration Activity GST Treatment
Mr A = Shamiana Contractor Goods (chairs) held/use for Sec 7 read with Schedule I
In birthday function of his son, he used business purposes, now put - Not supply at all.
200 chairs to private use
(without consideration) Sec 7 read with Schedule II (Para 4(b))
Supply of Goods.
.
[Note:
1. ITC shall not be admissible in
respect of goods/services used for
personal consumption (i.e., private
use) Sec 17(5)(g)
2. Apportionment of credit shall be
done Sec 17(1)
Mr A = Shamiana Contractor Goods (chairs) used for non- Sec 7 read with Schedule I (Entry 2)
In birthday function of managers son, he business purposes - Supply.
supplied 200 chairs for use without any (without consideration)
Sec 7 read with Schedule II (Para 4(b)
charges.
Supply of Services (GST leviable)
A manufacturing company allows one of Goods (lorry) made available Sec 7 read with Schedule I (Entry 2)
his employees to use the companys lorry to any person (here, - Supply
without any charge when the employee employee) for non-business
wants to transport his household goods to purposes Sec 7 read with Schedule II (Para 4(b))
his new house. (without consideration) Supply of Services (GST leviable)
E Ltd. bought a bulldozer to be used in its Goods (bulldozer) made Sec 7
own construction business. However, it available to any person - Supply
made the bulldozer available to be used (here, related party) for non-
in the construction business of its sister business purposes (for Sec 7 read with Schedule II (Para 4(b))
company, F ltd. purposes other than its own Supply of Services (GST leviable)
business purpose)
(for consideration)
.
4(c) Taxable person ceases to be taxable person: Goods forming part of business Supply of Goods
asset shall be deemed to be supplied
When a person ceases to be registered under GST, the person may be holding goods such as raw materials, products,
trading stocks, land, plant and machinery at the time of deregistration where input tax on these goods has been claimed.
As a result, the deregistered person is holding goods which are free from GST. In line with the GST principles, the
person is deemed to be making a supply of goods which formed part of his business asset at the time of deregistration.
The person is required to account and pay for the GST on such supply.
Illustration: Mr D is a GST registered sundry store owner. As his business has substantially reduced over the last year,
he has decided to close the business and retire. At the time of deregistration he has goods on hand valued at Rs 5,000.
Mr. Ds final GST return will therefore show his supplies made during the last taxable period plus the Rs 5,000 value of
the goods on hand during the deregistration.
Exception to cessation
1) Transfer of Going Concern
A transfer of business as a going concern (TOGC) means a transfer or sale of a business either wholly or partly,
together with the assets of the business, from one taxable person (transferor) to another person (transferee) who
is a taxable person or becomes a taxable person as a result of that transfer.
In case of TOGC, no GST charged and payable on such transfer.
.
5. SUPPLY OF SERVICES
The following shall be treated as supply of SERVICES, namely:
(a) renting of immovable property;
Author :
1. There is some overlapping between Para 2(a)/(b) and Para 5(a).
.
Author :
ABC Builders (P) Ltd. entered into contract for construction of Commercial Complex for M Ltd.
Taxability of transactions
Situation Whether supply Supply of Goods vs Supply of
Services
Construction contract is pure labour contract Supply Supply of Service
(i.e., all materials will be provided by M Ltd.) [Sec 7(1)(d) read with Schedule
II (Para 5(b)]
Construction contract is labour-cum- material contract Supply Supply of Service
(i.e., both labour as well as material will be provided by (Such supply is [Sec 7(1)(d) read with Schedule
M Ltd.) composite supply II (Para 6(a)]
[Note: Such Contract = Works Contract (as defined in Sec of goods and/or
services)
2(119) of CGST Act]
XYZ Builders (P) Ltd. is undertaking construction of Commercial Complex. He intends to sells units of this
complex.
Taxability of transactions
Situation Whether supply Supply of Goods vs Supply of
Services
Entire consideration is received after Not a supply at all Such supply shall be considered
-- issuance of completion certificate, where require by as neither as supply of goods nor
competent authority, as supply of services
-- after its first occupation, [Sec 7(2) read with Schedule III
whichever is earlier (Entry 5)]
Entire consideration or any part of consideration is Supply Supply of Service
received before [Sec 7(1)(d) read with Schedule
-- issuance of completion certificate, where require by II (Para 5(b))]
competent authority,
-- after its first occupation,
whichever is earlier
..
(c) temporary transfer or permitting the use or enjoyment of any Intellectual Property Right (IPR);
Author :
IPR Not The phrase has to be understood as in normal trade parlance. The phrase has to be
defined understood as in normal trade parlance as per which intellectual property right includes the
following:-
Copyright Patents Trademarks
Designs
Any other similar right to an intangible property
Note: Intellectual Property (IP) is a term referring to a number of distinct types of LEGAL
MONOPOLIES over creations of the mind (both artistic and commercial).
.
Notes:
1. IPR = Property (valuable thing)
2. IPR= Movable Property (as it is not immovable property as per General Clauses Act)
3. IPR = property = movable property = Goods as per Sec 2(52) of CGST Act, 2017
Author :
1. This para covers following aspects:
DEVELOPMENT, DESIGN, PROGRAMMING
Development Researching, designing, implementing and testing software [Comprehensive covers all
aspects]
Design Process of creating specification of a software artifact, e.g., thinking as to whether
intended to accomplish goals, using a set of primitive software shall be automated or
components and subject to constraints interactive etc.
Programming Writing software in machine languages JAVA, C++ etc.
CUSTOMIZATION, ADAPTATION
Customization Standard software customized to suit needs of client Basic accounting software
customized to take care of client
customized needs
Adaptation Providing techniques to make arrangements on already Facebook (Computer) to Facebook
developed pieces of software, in order to reuse them in new (Mobile) / Facebook (I-Pad/Tablet)
systems.
UPGRADATION, ENHANCEMENT
Upgradation Increasing software capabilities beyond original clients specific iOS6 (Apple I Phone software) upgraded
Enhancement to iOS7
IMPLEMENTATION
Implementation Effectively integrating a software based service or
component into the workflow of an organizational structure
or an individual end-user.
E.g.,
Supply of GST related software to businesses for smooth processing of returns and accounts = Supply of Services
(e) agreeing
to the obligation to refrain from an act, or
to tolerate an act or a situation, or
to do an act; and
Author :
[A] Agreeing to the obligation to REFRAIN FROM AN ACT (i.e., a promise not to do a particular act)
R, an architect, has prepared building plan of a new hotel for Oberoi Activity of agreeing not to supply
Hotels Ltd. He has charged Rs 10,00,000 (GST extra) for his supply similar design to others = Supply of Service
of architect service. Further, R agrees not to provide similar drawings [Sec 7(1)(d) read with Schedule II (Para 5(e))]
to any other company in hospitability industry in India or abroad. On
Thus, receipt of Rs 3,00,000 is also subject to
this promise, Oberoi Hotels Ltd pays Rs 3,00,000 additionally to R.
GST.
Non-competence agreement entered into by a businessman/ Activity of agreeing not to carry
professional with other businessman / professional Competitive business = Supply of Service
[Sec 7(1)(d) read with Schedule II (Para 5(e))]
(f) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred
payment or other valuable consideration.
Author :
Activity Treatment under GST
(a) Transfer of right to use any goods Supply of Services
[Sec 7(1)(d) read with Schedule II (Para 5(f))]
(b) Transfer of goods without transfer of right to use any Supply of Services
goods (as normally understood presently also)
CRUX: Under the GST regime, such licenses/ leases/ rentals of goods with or without transfer of right to use would be
covered under the supply of SERVICE.
6. COMPOSITE SUPPLY
The following composite supplies shall be treated as a supply of SERVICES, namely:
(a) works contract as defined in clause (119) of section 2; and
(b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any
other article for human consumption or any drink (other than alcoholic liquor for human consumption),
where such supply or service is for cash, deferred payment or other valuable consideration.
Author :
Sec 2(119) defines works contract only in relation to immovable property. Thus, under GST Law, works contract concept
exists only for immovable property. No concept of works contract exists in relation to goods.
CRUX
.
Supply of food/drinks by way of, or as a part of any service = Composite Supply of goods and services (as goods and services
are naturally bundled in ordinary course of business).
However, Para 6(b) of Schedule II to the CGST Act specifically provides that such composite supply shall be treated as
supply of service. Hence, the entire value of invoice shall be treated as value of service and leviable to GST.
.
Restaurant shall ensure that alcoholic liquor is charged/billed separately. Appropriate VAT/CST shall be payable on such
supply of alcoholic liquor.
.
7. SUPPLY OF GOODS
The following shall be treated as supply of GOODS, namely:
Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred
payment or other valuable consideration.
Author :
1. An AOP/ BOI, whether incorporated or note, in India or outside India is a person under GST- [Sec 2(84)f) of CGST Act]
2. Also, provision by club, association, society or any such body (for a subscription or any other consideration) of the facilities or
benefits to its members have been specifically covered in the definition of business in Sec 2(17)(e) of CGST Act.
.
SCHEDULE III [See section 7]
ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF
GOODS NOR A SUPPLY OF SERVICES
1. Services by an employee to the employer in the course of or in relation to his employment.
Author :
Taxability of transactions between EMPLOYER AND EMPLOYEE
.
A) Employee providing services to Employer (in It shall be not treated as supply No GST
courser of employment)
* Employees may be daily wage employee or monthly salaried employee:
Note:
1. Supply of service out of course of employment: Taxable supply GST leviable
e.g., Employee providing coaching to employers son for consideration
2. Employee agreeing not to carry on competitive business subject to receipt of consideration: Taxable
supply GST leviable
Amount received is not in the course of employment.
Agreeing not to do an act is supply of service [Sec 7(1)(d) read with Schedule II (para 5(e)) ].
3. Contract Labour / Casual labour hired from outside, who are employed with labour contractor but working
for client companies:
Services supplied by the workers (referred as contract labour) to contractor (referred as labour contractor) are
in the course of employment Not taxable supply No GST
Services supplied by Contractor (labour contractor) to client --- Taxable supply GST leviable
B) Employer supplying services to Employees Services (and goods) upto an aggregate value of Rs
50,000 per employee in a year shall only be not taxable.
-- Refer Schedule I (Entry 2)
.
2. Services by any court or Tribunal established under any law for the time being in force.
Explanation:For the purposes of paragraph 2, the term court includes District Court, High Court and
Supreme Court.
Author :
1. Fees paid to Court or Tribunal shall not constitute supply and thus, shall not attract GST.
3.
Author :
1. Officials Functions performed by MP/ MLA: No GST
2. Officials Functions performed by members of Panchayat / Municipality/ Other Local Authority for that: No GST
3. Duties performed by person holding constitutional posts and receipt of consideration for that: No GST
E.g.,
- C&AG of India is a constitutional post. Individual holding post of C&AG of India shall not be liable to pay any GST on remuneration
received by him.
- Attorney General of India (AGI), Attorney General of State (AGS) is also constitutional posts. Thus, remuneration received by
them shall be out of GST.
- Similarly, persons holding posts in UPSC, Staff Selection Commission, Finance Commission, Planning Commission,
Central Vigilance Commission (CVC), National Human Rights Commission (NHRC) etc will also not be liable to pay GST in
respect of remunerations received by them for holding these constitutional posts.
4. Duties performed by Chairman/ Member / Director (who are not employees) in a Body Established by Govt (CG/SG) or Local
Authority** and receipt of consideration for that: No GST
E.g.,
- Finance Commission is a body established by President of India (under Article 280 of Constitution of India). Chairman/Member/
Directors (who are not employees) of these bodies shall be out of GST.
- Telecom Regulatory Authority of India (TRAI) is also a body established by CG. Chairman/Member/ Directors (who are not
employees) of these bodies shall be out of GST.
4. Services of
Funeral (vafre laLdkj @ vaR;sf"B lsok,),
Burial (nQukus dh lsok,),
Crematorium ('ke'kku ?kkV dh lsok,)
Mortuary (eqnkZ ?kj dh lsok,)
o .
5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
Author :
1. Supply of Immovable property = Supply of Service
Treatment of supply of immovable property
Immovable property = Not goods as defined in Sec 2(52)
Immovable property = Service as defined in Sec 2 (102)
Author :
1. Actionable Claim has been defined under Transfer of Property Act, 1882 (refer definition chapter)
COLLECTION
Time of supply ToS is determined by applying following PoS is determined by applying following
section: section:
Sec 12 of CGST Act Sec 13 of CGST Act
Supply through third party E- ECO shall not be liable to pay GST on In respect of notified services, ECO
Commerce Operator (ECO) any supply of goods made through it. shall be liable to pay GST.
liability of ECO to pay GST
* Sec 8 shall not be applicable if GST Act makes other specific provisions for treatment of a bundle into a particular manner (like
Schedule II).
Section 8 : TAX LIABILITY ON COMPOSITE AND MIXED SUPPLIES.
The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:
(a) a COMPOSITE SUPPLY comprising two or more supplies, one of which is a principal supply, shall be treated
as a supply of such principal supply;
and
(b) a MIXED SUPPLY comprising two or more supplies shall be treated as a supply of that particular supply
which attracts the highest rate of tax.
Summary Chart
Relevant Definitions
.
Author :
COMPOSITE SUPPLY Sec 2(30)
Combination of supplies Nature of combination Categorization of supplies
Goods + Goods Naturally Bundled One supply if PRINCIPAL SUPPLY [as
Services + Services (*these are supplied together in defined in Sec 2(90)]
Goods + Services ordinary course of Business) Other supply is ancillary supply
ILLUSTRATION
Supply of laptop with Naturally bundled Supply of laptop is PRINCIPAL SUPPLY [as
carry-bag (laptop branded) defined in Sec 2(90)]
Other supply (i.e., supply of carry bag) is
ancillary supply
Supply of healthcare Naturally bundled Supply of healthcare services is
service alongwith PRINCIPAL SUPPLY [as defined in Sec 2(90)]
consumable medicaments Other supply (i.e., supply of consumable
medicaments) is ancillary supply
Levy of GST
Supply CGST SGST UTGST IGST
Intra-State Supply CGST SGST (supply within State) UTGST (supply within UT) -----
Sec 9 of CGST Act Corresponding section may Sec 7 of UTGST Act
vary in different SGST Act
Inter-State Supply --- ----- ---- IGST
(Including imports) Sec 5 o IGST Act
.
Author :
1. Sec 9 = CHARGING SECTION of CGST
LEVY OF IGST
Taxable (i) Supply [as defined in Sec 7 of CGST, 2017]
Event [ISS is defined in Sec 7 of IGST Act, 2017]
(ii) Supply shall be in nature of Inter-State Supply
Excluded Items
Constitutional Exclusions Alcoholic Liquor for Human Consumption [Article 366 (12-A) of
Constitution of India]
Statutory Exclusion Petroleum crude, high speed diesel, motor spirit (commonly known
as petrol), natural gas and aviation turbine fuel [refer Sec 9(2) of
CGST Act (below)]
.
COLLECTION OF IGST
Person Taxable Person [as defined in Sec 2(107) of CGST, 2017]
Manner Prescribed Manner [refer PAYMENT OF TAX Rules]
(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply
of goods or services or both,
the tax on which shall be paid on REVERSE CHARGE basis by the recipient of such goods or
services or both
and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the
tax in relation to the supply of such goods or services or both.
.
(4) The central tax in respect of the supply of taxable goods or services or both
by a supplier, who is not registered,
to a registered person*
shall be paid by such person on REVERSE CHARGE basis as the recipient
and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying
the tax in relation to the supply of such goods or services or both.
.
Provided that where an electronic commerce operator does not have a physical presence in the taxable
territory*, any person representing such electronic commerce operator for any purpose in the taxable
territory shall be liable to pay tax:
Provided further that where an electronic commerce operator does not have a physical presence in the
taxable territory and also he does not have a representative in the said territory, such electronic commerce
operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall
be liable to pay tax.
Author :
E-Commerce [Sec 2(44)] = Supply of goods and/or services, including digital products, over digital or electronic network
.
ECO [Sec 2(45) ] = ANY PERSON who owns, operates or manages digital or electronic facility or platform for e-commerce
..
ECO though which goods are ECO shall not be liable to pay GST.
supplied (like, Flipkart, Amazon) (However, TCS provisions applicable)
ECO though which services are In respect of notified services, ECO shall be liable to pay GST.
supplied (like, OLA cabs) In respect of other services, ECO shall not be liable to pay GST. (However,
TCS provisions applicable)
.
.
MOCK TEST QUESTIONS
[Source: These have been taken from FAQs and MCQs on GST issued by ICAI (June, 2017)]
Q.2 Is it required to distinguish whether a particular supply involves supply of goods or services or both?
Ans. Yes.
The CGST Act, 2017 specifies separate provisions for ascertaining time of supply of goods and time of supply
of services respectively;
similarly separate provisions have been specified for ascertaining place of supply of goods and place of supply
of services.
Further, the rate of tax applicable to supply of goods and supply of services may be different.
Accordingly, it is important to distinguish whether a particular transaction involves supply of goods or supply of
services.
Q.3 How to distinguish whether a particular supply involves supply of goods or services or both?
Ans. The Schedule II appended to CGST Act, 2017 enlists the activities which are to be treated as supply of goods or
supply of services. One may refer Schedule II with reference to Section 7 to classify whether the transaction involves
supply of goods or supply of services.
Q.5 Whether transfer of goods to another branch located outside the State is taxable?
Ans. In terms of Section 25(4) of the CGST Act, 2017, every person is required to obtain separate registration for every
branch located in different state or union territory and shall be treated as distinct persons. Accordingly, the supply of
goods (stock transfers) to a branch located outside the State would qualify as supply liable to tax in terms of Entry 2
to Schedule I of the CGST Act, 2017.
Further, it is important to note that, supply of goods to a branch / unit located within the same State having
separate registration would also be liable to tax since both such units (supplying unit and recipient unit) would
qualify as distinct person in terms of Section 25(4).
Q.6 Whether gifts given by employer to employee will also qualify as supply?
Ans. In terms of Explanation appended to Section 15 it is clarified that employer and employee will be deemed to be
related persons. Accordingly, in terms of proviso to entry 2 of Schedule I, gift by an employer to employee will be a
supply and will be liable to tax. However, any gifts for a value not exceeding fifty thousand rupees in a financial year
will not qualify as supply and as such will not be liable to tax.
Q.7 Whether supply of goods by principal to his agent or by agent to his principal is taxable in the absence of
consideration?
Ans. In terms of Section 7 read with Schedule I, following would qualify as supply:
1. Supply of goods by a principal to his agent where the agent undertakes to supply such goods on behalf of the
principal; or
2. Supply of goods by an agent to his principal where the agent undertakes to receive such goods on behalf of the
principal.
Q.8 Whether import of services will be liable to tax under GST regime?
Ans. The following import of service will qualify as supply under CGST Act, 2017:
1. import of service for a consideration whether or not in the course or furtherance of business is a supply;
2. import of service (without consideration) by a taxable person from a related person or from any of his other
establishments outside India, in the course or furtherance of business.
Q.10 How would the tax liability be determined in case of Composite supply?
Ans. In terms of Section 8 of the CGST Act, 2017 tax liability in case of composite supply should be determined with
reference to the principal supply forming part of such composite supply.
Q.12 How would the tax liability be determined in case of Mixed supply ?
Ans. In terms of Section 8 of the CGST Act, 2017, the tax liability in case of a mixed supply shall be ascertained with
reference to that particular supply which attracts highest rate of tax.
Q.17 What does the payment of tax under reverse charge mean?
Ans. In terms of Section 2(98), the terms reverse charge is defined to mean liability to pay tax by the recipient of
supply* of goods or services or both instead of the supplier of such goods or services or both.
Note: Liability of E-Commerce operator to pay GST u/Sec 9(5) of CGST Act / Sec 5(5) of IGST Act is not reverse
charge liability as ECO is not recipients of supply.
Q.18 What are the different types of supplies which are liable to tax under reverse charge mechanism?
Ans. As per Section 9 of the CGST Act, 2017 there are two types of supplies which are liable to tax under reverse charge
mechanism which are:-.
1. Specified categories of supply of goods or services or both as notified by government on recommendation of the
council
2. Supply of taxable goods or services or both by an unregistered supplier to a registered person
Note: Parallel provisions are there under SGST Act / UTGST Act / IGST Act.
Q.20 Whether CGST & SGST/UTGST is applicable on import of goods or service or both?
Ans. In terms of Section 7 of the IGST Act, 2017, import of goods or services or both is shall be treated to be a supply in
the course of inter-State trade or commerce. Accordingly, tax under the provisions of IGST Act, 2017 (IGST) shall
apply on import of goods or services or both.
Composition levy (Section 10) [These are for additional knowledge purposes]
Q.21 Can every taxable person opt to pay tax under composition scheme?
Ans. No. The registered taxable person whose aggregate turnover in the preceding financial year does not exceed
fifty lakhs rupees may opt to pay tax subject to satisfaction of certain other conditions like:
1. He is not making inter-state supplies;
2. He is not supplying through ECO;
Q.22 A taxable person having same PAN can opt to pay tax under composition scheme by seeking separate
registration for branches?
Ans. No. A registered person shall not be eligible to opt for the composition scheme unless all such registered persons
(branches having separate registration under a single PAN) opt to pay tax under composition scheme.
Q.23 Whether a taxable person under composition Scheme eligible to claim input tax credit?
Ans. No, a taxable person under composition scheme is not eligible to claim input tax credit.
Q.24 Can a customer who buys from a taxable person who is under composition scheme claim composition
tax as input credit?
Ans. No. The recipient is not eligible to take input tax credit of composition tax paid. Moreover, a taxable person
paying taxes under composition scheme is not entitled to collect taxes from the recipient in terms of Section
10(4) of the CGST Act, 2017. Accordingly, there does not arise a question for the recipient to claim input tax credit.
Q.25 A taxable person can still pay tax under composition scheme even after the turnover in the current financial
year exceeds fifty lakh rupees?
Ans. In terms of Section 10(3), the option availed for paying tax under composition scheme shall lapse with effect from the
day on which his aggregate turnover during a financial year exceeds fifty lakh rupees.
MCQ'S
Meaning and scope of supply (Section 7)
Q.1 What are different types of supplies covered Q.2 What are the factors differentiating Composite
under the scope of Supply? Supply & Mixed Supply?
(a) Supplies made with consideration (a) Nature of bundling i.e. artificial or natural
(b) Supplies made without consideration (b) Existence of Principal Supply
(c) Both of the above (c) Both of the above
(d) None of the above (d) None of the above
Ans. (c) Both of the above Ans. (c) Both of the above
Ans. (d) CG as per the recommendations of GST Council Ans. (c) Both of the above
Q.7 Which of the following taxes will be levied on Q.8 Which of the following taxes would be levied
Imports? on an intra-State supply of goods or services
(a) CGST or both
(b) SGST (a) CGST
(c) IGST (b) Union territory tax
(d) Exempt (c) Both of the above
(d) IGST
Q.12 Can a registered person opt for composition Q.13 Can Composition scheme be availed if the
scheme only for one out of his 3 business registered person effects interstate supplies?
verticals having same Permanent Account (a) Yes
Number? (b) No
(a) Yes (c) Yes, subject to prior approval of the Central
(b) No Government
(c) Yes, subject to prior approval of the Central (d) Yes, subject to prior approval of the concerned
Government State Government
(d) Yes, subject to prior approval of the
concerned State Government
Q.16 Can a registered person under Composition Q.17 Can a registered person opting for
Scheme claim input tax credit? composition scheme collect tax on his outward
(a) Yes supplies?
(b) No (a) Yes
(c) Input tax credit on inward supply of goods (b) No
only can be claimed (c) Yes, if the amount of tax is prominently
(d) Input tax credit on inward supply of services indicated in the invoice issued by him
only can be claimed (d) Yes, only on such goods as may be notified by
the Central Government
Ans. (b) No Ans. (b) No