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CA Saumil Manglani

Index

Chapter Number Page Numbers

Chapter Name

1 Concept of Indirect Taxes at a Glance 1.01 – 1.11

2 Basics of Goods and Services Tax 2.01 – 2.24

Concept of Time, Value and Place of

3 3.01 – 3.29
Taxable Supply

Input Tax Credit and Computation of GST

4 4.01 – 4.24
Liability

5 Procedural Compliance under GST 5.01 – 5.57

Basic overview of IGST, UTGST and GST

6 6.01 – 6.9
(Compensation to States) Act

7 Overview of Customs Law 7.01 -7.37

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1. Concept of IDT at a glance 1.1

Lesson – 1

Concept of Indirect Taxes at a Glance !!

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 1. Concept of IDT at a glance 1.2

History of GST in India

Following are some of the distinctions between direct and indirect taxes:

DIRECT TAXES INDIRECT TAXES

These are mainly on income, wealth, profession etc. These are consumption based taxes on goods and
of persons. services.
Tax payer pays taxes directly to government. Tax payer pays taxes indirectly through
intermediaries like importers , suppliers etc.
Direct taxes become payable after the benefit/ Indirect taxes are payable even before the goods/
income reaches the tax payer. services reach the tax payer.
Income tax, corporation tax are main sources of Customs and GST are major indirect taxes in India.
direct tax.
Individuals, HUFs, firms and companies are the Tax End-consumer of the goods and services bear the
payers. final burden of tax.
Direct Tax is progressive in nature i.e., its rate Indirect Tax is regressive in nature i.e., its rate
increases with taxpayer’s income. decreases with increase in income.
CBDT governs Direct Taxes in India. CBIC governs Indirect Taxes in India.

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1. Concept of IDT at a glance 1.3

Basic summary of Goods & Services Tax

➢ First country to implement GST → France in as early as 1954.

➢ GST was rolled out in India from 1st July, 2017

➢ India has the highest tax slab in the world i.e.,28%, next only to Argentina which is
at 27%

➢ Almost 160 countries around the world follow GST.

➢ Indian GST → four rate structure, viz. 5%, 12%, 18% and 28% with cess on sin
goods and luxury items

➢ There is a special rate of 3% on precious metals like gold

➢ GST is covered under five legislations i.e., Central GST Act, State GST Act,
Integrated GST Act, Union Territory GST Act and GST (Compensation to States) Act

➢ Integrated GST, Compensation cess and Central GST are charged by Central
Government

➢ All taxation policies and their implementation are based on the recommendations
of the GST Council

➢ The taxable event under GST is Supply

➢ GST Bill was introduced under 122nd Constitutional Amendment Bill, but
passed under 101st Amendment Act,2016

➢ Assam was the first state to ratify GST Bill but Telangana was the first state to pass
State GST Bill

➢ GST Council was constituted with its headquarters in Delhi. The Union Finance
Minister is the Chairperson

➢ State Finance Ministers are members of GST Council

➢ 1st July will be observed as the GST day

➢ The threshold limit under GST is Rs. 20 Lakhs,40 lakhs for some special category
states it is Rs. 10 Lakhs

➢ There is a special purpose vehicle called GSTN which caters the IT needs of GST.
GSTN comes under Companies Act, 2013 with combined stake of Central and
State Governments is 49%. The rest is contributed by LIC Finance with 11% and
ICICI Bank, HDFC, HDFC Bank and NSE Strategic Investment Corporation with
10% each.
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1. Concept of IDT at a glance 1.4

Constitutional articles

Article 246A Article 269A Article 279A

Inserted Inserted Inserted
Parliament to
Overrides A federal body
levy IGST on
Article 246 constituted by
interstate supply
president on 15th
Import / export September,2016
States can
levy tax on is a deemed
goods & interstate Union FM, Union
supply minister of state +
services
state FMs
only parliament
IGST distributed
can levy tax on
between centre
interstate Union - 1/3 weightage
& state /UT – Votes Cast
supplies

Parliament to States- 2/3 weightage

determine place – Votes Cast
& time of suppy

Decision by 3/4th present

& Voting

All powerful Body to re- commend on

numerous issues

➢ Article 246 deals with →subject matter of laws made by Parliament & States.

➢ Article 254 with Inconsistency between laws made by the Legislatures of State.

➢ Article 269A - IGST passed by Parliament on the basis of Article 269A

➢ Article 269A GST amount shall not form part of the Consolidated Fund of India.

Article 279A

A. GST Council would consist of the following members –

(i) The Chairperson of the council would be the Union Finance Minister of the country.
(ii) The Union Minister of State would be a member of the GST Council. He/she would be in charge of
Revenue of Finance.
(iii) The members of the GST Council would be the minister who is in charge of finance or taxation or
any other minister as nominated by the respective State Governments.
(iv) Each State Government would nominate 1 minister to act as a member of the GST Council.
B. GST Council is the Key decision making body.
C. While discharging the functions conferred by this article, the Goods and Services Tax Council shall be
guided by the need for a harmonized structure of goods and services tax and for the development of a
harmonized national market for goods and services.
D. GST Council shall make recommendations on –

a. Taxes, cesses and surcharges levied & subsumed, exemptions, principles of levy,
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 1. Concept of IDT at a glance 1.5
apportionment, place of supply, threshold limit of turnover, rates.

b. Special provision with respect to the States of Arunachal Pradesh, Assam,

Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Himachal Pradesh and Uttarakhand

c. Date on which the goods and services tax be levied on petroleum crude, high speed
diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel.

E. Quorum – ½ (Half or 50%)

F. The Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute
—
(a) between the Government of India and one or more States; or
(b) between the Government of India and any State or States on one side and one or more
other States on the other side; or
(c) between two or more States, arising out of the recommendations of the Council or
implementation thereof.

Few pointers of Constitutional powers of Taxation

1. Constitution of India is the supreme law of India.

2. Authority to levy a tax is derived from the Constitution of India

3. To bring out GST laws governing goods and services, Article 246A has been
inserted.

Article Description

Article 366 Clause 12A - Goods and services tax’ means any tax on supply of
goods, or services or both except any tax on the supply of the alcoholic
liquor for human consumption.

Clause 26A - Defines the term ‘services’ as anything other than

goods.

26B - “State” including a Union territory with Legislature.

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 1. Concept of IDT at a glance 1.6

Amendment of Seventh Schedule

➢ Seventh Schedule deals with three types of Lists viz., Union List, State List and Concurrent List.

➢ On below 6 items central excise duty is continued to be levied. On 1 to 5 only Central excise
duty is levied and no GST. But on item No. 6 both GST and Central excise duty are imposed.

➢ Petroleum crude;
➢ High speed diesel;
➢ Motor spirit (commonly known as petrol);
➢ Natural gas
➢ Aviation turbine fuel; &
➢ Tobacco and tobacco products
➢ On Petroleum products imported, IGST is payable
Parliament has passed the law to compensate states for revenue deficit. The Act is ‘GST
(Compensation to States) Act, 2017 for a period of 5 years

Section 20 gives powers to the President to remove difficulties by passing an order

within 3 years from the date of such assent to the GST act.

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1. Concept of IDT at a glance 1.7

The following diagram summarizes the erstwhile indirect taxation in India:

TAXABLE
COLLECTION
AUTHORITY

Customs Act,
Customs duty Import/ export Central Govt. 83
1962

Central Excise Manufacture/

Central Excise Central Govt. 84
Act, 1944 Production

Central Sales Central sales

Tax tax Act, 1956 Interstate sale State Govt . 92A

Finance Act,
Service Tax Taxable service Central Govt. 97
1994

Sale within the

VAT State VAT Act state State Govt. 54 of state list

➢ In 2003, Haryana was the only state to introduce VAT

Pre GST Tax Structures and Deficiencies – Few Pointers

a. For Imports →In place of Excise – CVD was imposed and in place of VAT/ CST → Special
CVD (SAD) were imposed.
b. Major reasons for implementation of a new indirect tax regime –

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 1. Concept of IDT at a glance 1.8

ADMINISTRATION OF INDIRECT TAXATION IN INDIA

ADMINISTRATIVE MECHANISM AT THE CENTRAL LEVEL

AUTHORITY HEADED BY
MINISTRY OF FINANCE Union Finance Minister
REVENUE DEPARTMENT Revenue Secretary
CBIT (Central Board of Indirect Taxes) Chairman and Members
REGIONS Principal Chief Commissioners
ZONES Chief Commissioners
COMMISSIONERATES Commissioners/ Principal Commissioners
DIVISIONS Divisional officers/ deputy commissioner etc.

GST Council is the apex body for making recommendations on various issues relating
to policy making.

Administration and Procedural Aspects of Goods and Services tax are administered
by the Central Board of Indirect Taxes & Customs (CBIC) which is under the control
of the Department of Revenue, Ministry of Finance.

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1. Concept of IDT at a glance 1.9

GST in India

➢ GST is implemented with an intention for supporting the Make in India initiative.

➢ GST is a consumption-based tax which is levied on the basis of “Destination

principle.”

➢ The essence of GST is in removing the cascading effects

➢ The following subject matters kept outside the purview of GST

Alcohol for human

consumption

Entertainment tax Tobacco and tobacco

Petroleum Products products would be
collected by local :petroleum crude, motor
bodies spirit (petrol), high speed subject to GST. In
diesel, natural gas and addition, the Centre
aviation turbine fuel would have the power
to levy Central Excise
duty on these products

Motor vehicles tax Electricity

Property taxes, such

as stamp duty

Note –

Though, electricity has not been explicitily excluded from GST but it is considered as Nil rated in GST and
continues to be charged with pre-GST taxes, i.e., electricity duty by the State Governments

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 1. Concept of IDT at a glance 1.10

The following taxes have been subsumed under GST:

(Medicinal
and Toilet

Excise(Goods of

known as CVD)

(SAD)

Taxes on

Cesses and

State cesses and

goods or services
Models of GST

➢ Different countries follow different model of GST -

• Australian Model wherein, tax is collected by the Centre and distributed to the States

• Canadian Model wherein there are 3 variants of taxes

• Kelkar-Shah Model based on Canada Model wherein taxes are collected by the

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 1. Concept of IDT at a glance 1.11

Centre however, 2 different rates of tax are to be levied by the Centre and the
States and

• Bagchi - Poddar Model which envisages a combination of Central Excise, Service

Tax and VAT to make it a common base of GST to be levied both by the Centre and the
States separately.

➢ Considering the federal nature of Indian Constitution, dual model of GST was required

➢ Currently, Brazil and Canada also follow dual GST model.

➢ Brazil is the only country in the world which follows a similar dual GST System

➢ In Canada, though GST scheme closely resembles that of India, it failed to achieve
consensus among states. As a result the GST was made optional not mandatory. States
are free to adopt or reject GST.

➢ In India, GST is uniformly applicable all over India including the State of Jammu and
Kashmir

Passage of GST in India

17 July 2000 (Empowered 12 Aug 20014 (Govt.

committee of Few State ministers) Constituted E.C)

2004 -KTF
based on
Nov 09
VAT
FDP by EC Nov. 12
First Committee
to design GST
model headed by March 13
Asim Das Gupta – GSTN
by Infosys 19 Dec 14 –
12 April 17 – 122nd amend
Parliament Bill introduced
passed 4 in Lok Sabha
bills and
President 6 May 15 –
gave assent Passed in
14 June 16 –
Lok Sabha
MOF
released draft
3 August 16 – model for
Rajya Sabha public
passed 122nd
8 August amendment
16 – Lok bill
8 Sep 16 – Sabha
101
amendment
act passed

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2. Basics of GST 2. 1

Lesson – 2

Basics of Goods & Services Tax

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 2. Basics of GST 2. 2

Introduction
Destination based Tax is the tax based on destination or consumption of the goods or services.
It is different from Origin based taxation because Origin based tax is levied where goods or services are
produced.

India follows a Dual GST Model.

Regulatory Framework
Central Goods and Services Act, 2017

Section Deals with

Section 2(30) Definition of Composite Supply
Section 2(74) Definition of Mixed Supply
Section 7 Meaning and Scope of Supply
Section 10 Composition Scheme
Section 11 Power to grant exemption from tax
Section 15 Value of taxable Supply
Section 25 Procedure for registration

BASIC CONCEPTS AND OVERVIEW OF GOODS AND SERVICES TAX

. Presently not taxable under GST

Crude
• In respect of these goods, GST would Petrol eum

apply from the date when recommended

by the GST Council. VAT/ CST
iation
Continues on these products. Petrol
Av
• Central Excise Duty continues to be Turbine
Central
levied on manufacture these products
Fuel Excise
Duty
• State Excise Duty continues to be levied
on manufacture of alcohol.
• Tobacco attracts both Excise (By Centre) and Natural
H igh
Speed
GST. Gas
Diesel

Outside the scope of GST

Alcoholic Liquor for human consumption has
been kept outside the ambit of GST

TAXABLE EVENT – Supply

Point at which tax would be levied = Taxable
Event i.e. “Supply” - Supply of goods or
services or both

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2. Basics of GST 2. 3

Definitions

1. Goods & Services

For Services
Explanation 1 Services include transactions in money but does not include money and securities.
Meaning thereby that if transaction is done without any separate charge /consideration 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 denomination for
which a separate consideration is charged then it is service.

2. Money [Section 2(75) of CGST Act, 2017]

as defined in Section 2(75) “money means
• Indian legal tender or
• any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay
order, traveller cheque, money order, postal or electronic remittance or
• any other instrument recognized by the Reserve Bank of India when used as consideration
to settle an obligation or exchange with Indian legal tender of another denomination
• but shall not include any currency that is held for its numismatic value".

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 2. Basics of GST 2. 4

3. Securities [Section 2(90) of CGST Act, 2017]

“securities” shall have meaning assigned to it in sub-section (h) of section 2 of the Securities Contracts
(Regulation) Act, 1956 ”
Under Section 2(h) of SCRA “Securities” include—
• shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like
nature in or of any incorporated company or other body corporate;
• derivatives;
• Units issued by any Collective Investment Scheme to the investors in such scheme (Example – Schemes
like Mutual Funds, Exchange Traded Funds – ETF’s)
• Security receipt as defined in Section 2(zg) of the Securitization and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002; (SARFAESI Act)
• Units or any other such instruments issued to the investors under any Mutual fund scheme;
• Government Securities;
• Such other instruments, rights or interest therein shall be declared by the government to be
securities be declared by the government to be securities.

4. Actionable Claim
Section 2(1) of GST Act states – Refer section 3 of Transfer of Property Act, 1882.
As per section 3 of above act, actionable claim means
✓ a claims to any debt
✓ other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable
property, or by any beneficial interest in movable property, either actual or constructive, of claimant
✓ which the civil courts recognize as affording ground for relief
✓ whether such debt or beneficial interest be existent, accruing, conditional or contingent.

5. Consideration [Section 2(31) of CGST Act 2017]

Section 2(31) ‘Consideration‘ in relation to the supply of goods or services or both includes––

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 2. Basics of GST 2. 5

CONCEPT OF SUPPLY

(a) Generic meaning of ‘supply’: Supply includes all forms of supply (goods and / or services) and
includes agreeing to supply when the supply is for a consideration and in the course or furtherance of
business (as defined under Section 7 of the Act). It specifically provides for the inclusion of the following 8
classes of transactions:
(i) Sale
Sale is a lawful, permanent and absolute transfer of ownership of property in goods for money
consideration under a valid contract such that no rights are left behind with the transferor;
(ii) Transfer
Transfer is to lawfully convey property from one person to another. Here, consent of transferor
and capacity of transferee (Major, Sound Mind etc.) need not be present although all other
ingredients of a lawful contract are necessary;
(iii) Barter
Barter is where the consideration is in the form of goods or services (and not in money) for a sale
or transfer. So in general, barter is form of consideration.

But, when barter is called one of the forms of supply, it covers other forms of supply whose
consideration is non- monetary. Therefore, barter will involve two supplies and not one. Each of
these supplies would need to be examined for its respective taxability;
(iv) Exchange
Exchange is where consideration is still not in money but in the form of immovable property
(CIT v. Motors and General Stores Pvt Ltd AIR 1968 SC 200).
Exchange also involves two supplies.
Given that land and (completed) building is excluded from supply, exchange would be the supply
whose consideration is immovable property.
(v) License
License is similar to lease except that possession is not transferred but mere permission to
enter and use the property (movable or immovable) is allowed along with all other ingredients
of a lease.
Supplier of a license retains possession of the property during the term of license without right
to use
And after expiry of the term or on termination of license, the licensee will be a trespasser;
(vi) Rental
Rental is lease in respect of movable property.
And since recurring payment in lease (of immovable property) is called rental, transfer of
possession with user rights for recurring payment of consideration is interchangeably applied for
movable and immovable property;
(vii) Lease
Lease is where possession is transferred along with the right to use immovable property with a
duty to care, protect and return subject to normal wear and tear along for consideration in the
form of non- recurring premium only (One Time Lump Sum ) or along with recurring rent.
Essence of lease being delivery of possession along with user rights is the reason lease is also
used in the context of movable property (under the earlier laws).
Supplier of a lease does not have possession hence not enjoy the right to use but retains right
to repossess after term of lease.

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2. Basics of GST 2. 6

(viii) Disposal
Disposal is sale or transfer but property that does not possess merchantable warranty.
Articles that are not merchantable are not ‘fit for sale’ but trade does take place for the reason that
the supplier disposes the article without ascribing any worth but the recipient accepts the article for
some intrinsic worth that he is able to extract or obtain.
Section 7 of the CGST Act 2017 is as under -

Heading Provisions
General meaning “Supply” includes––
[Sec. 7(1)(a)] All forms of supply of goods or services or both such as sale,
transfer, barter, exchange, license, rental, lease or disposal
made or agreed to be made for a consideration by a person in
the course or furtherance of business
[Sec. 7(1)(aa)] – Inserted (aa) the activities or transactions, by a person, other than
w.e.f.1 July 2017 an individual, to its members or constituents or vice-
versa, for cash, deferred payment or other valuable
consideration.

Explanation - For the purposes of this clause, it is hereby

clarified that, notwithstanding anything contained in any
other law for the time being in force or any judgment,
decree or order of any Court, tribunal or authority, the
person and its members or constituents shall be deemed
to be two separate persons and the supply of activities or
transactions inter se shall be deemed to take place from
one such person to another;”.
Import of services Import of services for a consideration whether or not in the
[Sec. 7(1)(b)] course or furtherance of business; [and]
Supply without consideration The activities specified in Schedule I, made or agreed to be
[Sec. 7(1)(c)] made without a consideration

Deeming certain activities as Where certain activities or transactions, constitute a supply in

either supply of goods or accordance with the provisions of sub-section (1), they shall
supply of services [Sec. 7(1A)] be treated either as supply of goods or supply of services as
referred to in Schedule II.
Neither a Supply of goods or Notwithstanding anything contained in sub-section (1),~
services
(a) activities or transactions specified in Schedule III; or
[Sec. 7(2)]
(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 shall
be treated neither as a supply of goods nor a supply of
services.
Issue of Notification by Subject to the provisions of sub-sections (1) and (2), the
Government Government may, on the recommendations of the Council,
[Sec. 7(3)] specify, by notification, the transactions that are to be
treated as –
(a) a supply of goods and not services; or
(b) a supply of services and not as a supply of goods.

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2. Basics of GST 2. 7

25/2019-Central Tax (Rate) dated 30-09-2019 - Seeks to notify the grant of alcoholic liquor
license neither a supply of goods nor a supply of service as per Section 7(2) of CGST
Act, 2017

Circular
Donation received by charitable institutions from individual donors without quid pro-quo:
An important feature of consideration is quid pro-quo [something in return]. Donation received by
charitable institutions. Donations received by the charitable organization are treated as
consideration only if there exist quid pro quo, i.e, there is an obligation on part of recipient of the
donation or gift to do anything (supply a service).
Individual donors provide financial help or any other support in the form of donation or gift to institutions
such as religious institutions, charitable organizations, schools, hospitals, orphanages, old age homes etc.
The recipient institutions place a name plate or similar such acknowledgement in their premises to
express the gratitude.
When the name of the donor is displayed in recipient institution premises, in such a manner, which can be
said to be an expression of gratitude and public recognition of donor’s act of philanthropy and is not aimed
at giving publicity to the donor in such manner that it would be an advertising or promotion of his
business, then it can be said that there is no supply of service for a consideration (in the form of
donation). There is no obligation (quid pro quo) on part of recipient of the donation or gift to do anything
(supply a service). Therefore, there is no GST liability on such consideration

Analysis - The term supply is characterized by the following necessary traits:

• Supply should be of goods or services.

• Anything which is not goods / services (like money, securities etc.) is not supply

• It must be reiterated that only movable property is construed as goods

• Barters and exchanges would be leviable to GST

• Licenses, leases, rentals with or without transfer of the right to use are considered as
supply and leviable to GST

• Supply should be made for a consideration which could be in the form of money or otherwise
• Supply includes the flow of money from a 3rd party in lieu of OR on behalf of the recipient.

• Deposit is not consideration unless specifically applied to by the supplier

• Supply should be made in the course of OR for the furtherance of business

• Any supply made for personal consumption OR in personal capacity does not attract GST.

• Supply should be made by a taxable person.

• A taxable person is one who is registered OR is liable to be registered under the Act.

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2. Basics of GST 2. 8

Schedule I: Few transactions which, even without consideration are construed as

supply, also known as deemed supplies as specified in Schedule I:

Schedule – 1
Starting with meaning of Distinct Person

Distinct Person [Section 25]

Section 25(4) of the CGST Act:

• A person who has obtained/is required to obtain

• more than 1 registration,

• whether in one State/union territory or more than one State/union

territory shall,

• in respect of each such registration, be treated as distinct persons

Section 25(5) of the CGST act:
• Where a person who has obtained or is required to obtain registration in a
State or union territory in respect of an establishment, has an establishment
in another State or union territory,
• then such establishments shall be treated as establishments of distinct
persons

Schedule I – Clarification on Taxability of goods given by Employer to Employee

If the amount of gift exceeds Rs. 50,000 then whole amount shall be charged to GST

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 2. Basics of GST 2. 9

Schedule I - Principal Agent Relationship explained through examples

Principal – agent [Para 3. of Schedule i]:
Supply of goods by a principal to his agent and vice-versa, without consideration, where the
agent undertakes to supply such goods on behalf of the principal and vice-versa, is considered
as supply.
CBIC has clarified by way of Circular No. 57/31/2018-GST
Example 1:

✓ Mr. B is only acting as the Procurement agent, and has in no way involved himself in
the supply or receipt of the goods. Hence Mr. B is not an agent of Mr. A for supply of
goods in terms of Schedule I.

Example 2:.

In this scenario, the auctioneer is merely providing the auctioneering services with no role
played in the supply of the goods. Even in this scenario, B is not an agent of M/s XYZ for the
supply of goods in terms of Para 3. of Schedule I

Example 3:

In this scenario, Mr. B is not merely providing auctioneering services, but is also supplying
the painting on behalf of Mr. A to the bidder, and has the authority to transfer the title of the

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2. Basics of GST 2. 10

painting on behalf of Mr. a. This scenario is covered under Schedule I

Whether or
not by related
person

Schedule II - It lists activities which are to be treated as supply of goods and supply of
services.

Form of Supply Description

Goods
Transfer of title in goods -Transfer of Title of Television

Transfer Transfer of title in goods under an agreement where property in goods

passes at a future date on payment of full consideration – Car purchased on
instalments

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Transfer of business Permanent transfer or disposal of goods forming part of business assets by or
assets under the directions of the person carrying on the business
Example – Defective refrigerator of Rs. 3.5 lacs disposed only for Rs.
50,000
Any goods forming a part of business assets will be deemed to be
transferred in furtherance of business, before any person ceases to be a
taxable person
Exception
• The business is transferred as a going concern
• The business is carried on by a personal representative who is deemed to
be a taxable person
Supply by Supply of goods by any unincorporated association or body of persons to a
unincorporated member thereof for cash, defer red payment or other valuable consideration.
association
(Omitted)
Services

Transfer Any transfer of right in goods or undivided share in goods, without

transfer of title
Example – Transfer of Right to use of a generator for a period of 2 months.
Transferring rights without transfer of ownership is supply of service
Land and Building Any lease, tenancy, easement, license to occupy land
Any lease or letting out of the building including a commercial. industrial or
residential complex for business or commerce, either wholly or partly
Example – Leasing land for 1 year
Treatment or Any treatment or process which is applied to another person’s goods
process • A is a manufacturer sends goods for special packaging to B on job work
activity
• Special packing by B shall be treated as supply of services
• It shall be immaterial whether B uses his own packing material or the
same is provided by A
Transfer of business Where, by or under the direction of a person carrying on a business, goods held
assets assets or used for the purpose of business are put for any private use or
made available to any person for any use other than for the purpose of
business, at the direction of the person carrying on the business.

A deals in home appliances takes one of his computer used in business to home to
be used by his son for his studies during the month of January 2020 & thereafter
computer should be brought back.

This is a supply of Service

Immovable property Renting of immovable property

Construction or Sale Construction of a complex, building, civil structure or a part thereof, including a
complex or building intended for sale to a buyer, wholly or partly, except
where the entire consideration has been received after issuance of
completion certificate, where required, by the competent authority or after
its first
occupation, whichever is earlier
Intellectual Property Temporary transfer or permitting the use or enjoyment of any intellectual
rights property right

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Information Development design, programming, customization, adaptation, upgradation,

technology enhancement, implementation
software
Action Agreeing to the obligation to refrain from an act, or to tolerate an act or
a situation, or to do an act
Example - A wants to take loan from some bank but does not have any
collateral security,
A approaches B who agrees to mortgage his property as collateral
security to the bank for advancing loan to A.
B charges some consideration from ‘A’ for providing such collateral
security.
Consideration received by B shall be covered under the scope of this
entry and shall be subject to tax as a supply of services.
Rights to use goods 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
Composite Supplies Works Contract as defined under Section 2(119)
Supply of goods, as a part of any service or in any manner, 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

Circular No. 47/2018 – CGST, dated 8th June, 2018

Issue Clarification
How is servicing of cars involving The taxability of supply would have to be
both supply of goods (spare determined on a case to case basis looking at the
parts) and services (labour), facts and circumstances of each case.
where the value of goods and
services are shown separately, to Where a supply involves supply of both goods and
be treated under GST? services and the value of such goods and services
supplied are shown separately, the goods and
services would be liable to tax at the rates as
applicable to such goods and services
separately.

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Schedule III - Not to be considered as Supply

Actionable claims (other than lottery, betting and gambling)

• Actionable Claims’ means claims which can be enforced only by a legal action or a suit,
• Example a book debt, bill of exchange, promissory note.
• A book debt (debtor) is not goods because it can be transferred as per Transfer of
Property Act but cannot be sold.
• Bill of exchange, promissory note can be transferred under Negotiable Instruments
Act by delivery or endorsement but cannot be sold.
• Actionable claims are neither products nor services. They can be considered as
something in lieu of money. So GST will not apply on these.

Exception - Lottery, betting and gambling attract 28% GST.

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Composite and Mixed Supply (Section 8)

2(74)
Section2(30)

Clarification on various doubts related to treatment of sales promotion schemes under

GST

A. Free samples and gifts

It is a common practice among certain sections of trade and industry, such as,
pharmaceutical companies which often provide drug samples to their stockists,
dealers, medical practitioners, etc. without charging any consideration.
Accordingly, it is clarified that samples which are supplied free of cost,
without any consideration, do not qualify as “supply” under GST, except
where the activity falls within the ambit of Schedule I of the CGST Act.
B. Buy one get one free offer

Sometimes, companies announce offers like ‘Buy One, Get One free’. For example,
“buy one soap and get one soap free” or “Get one tooth brush free along with the
purchase of tooth paste”.
It may appear at first glance that in case of offers like “Buy One, Get One Free”,
one item is being “supplied free of cost” without any consideration. In fact, it is not
an individual supply of free goods, but a case of two or more individual supplies
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where a single price is being charged for the entire supply. It can at best be treated
as supplying two goods for the price of one.
Taxability of such supply will be dependent upon as to whether the supply is a
composite supply or a mixed supply and the rate of tax shall be determined
as per the provisions of section 8 of the CGST Act.
S.
No. Issue Clarification
1. Supply of books, pamphlets, brochures, In the case of printing of books, pamphlets,
envelopes, annual reports, leaflets, brochures, annual reports, and the like, where only content is
cartons, boxes etc. printed with logo, supplied by the publisher or the person who owns the usage rights
design, name, address or other contents to the intangible inputs while the physical inputs including paper
supplied by the recipient of such printed used for printing belong to the printer, supply of printing [of
goods, are composite supplies and the
question, whether such supplies the content supplied by the recipient of supply] is the principal
constitute supply of goods or services supply and therefore such supplies would constitute supply of
would be determined on the basis of what service falling under heading 9989 of the scheme of classification of
constitutes the principal supply. services.

Principal supply has been defined in In case of supply of printed envelopes, letter cards, printed
Section 2(90) of the Central Goods and boxes, tissues, napkins, wall paper etc. falling under Chapter 48
Services Tax Act, 2017 as supply of goods or or 49, printed with design, logo etc. supplied by the recipient of
services which constitutes the goods but made using physical inputs including paper
predominant element of a composite belonging to the printer, predominant supply is that of goods
supply and to which any other supply and the supply of printing of the content [supplied by the recipient
forming part of that composite supply is of supply] is ancillary to the principal supply of goods and therefore
ancillary. such supplies would constitute supply of goods falling under
respective headings of Chapter 48 or 49 of the Customs Tariff.

2. Whether retreading of tyres is a supply of 1. In retreading of tyres, which is a composite

goods or services? supply, the pre-dominant element is the process of retreading
which is a supply of service.

Rubber used for retreading is an ancillary supply. Which part of

a composite supply is the principal supply, must be determined
keeping in view the nature of the supply involved.
Value may be one of the guiding factors in this determination,
but not the sole factor.
The primary question that should be asked is what is the
essential nature of the composite supply and which element of
the supply imparts that essential nature to the composite supply.
2. Supply of retreaded tyres, where the old tyres belong to the
supplier of retreaded tyres, is a supply of goods.
3. Whether Priority Sector Lending In Reserve Bank of India FAQ on PSLC, it
Certificates (PSLCs) are outside the has been mentioned that PSLC may be construed to be in the
purview of GST and therefore not nature of goods, dealing in which has been notified as a
taxable? permissible activity
PSLC are not securities. PSLC are akin to freely tradeable duty
scrips, Renewable Energy Certificates.
In GST there is no exemption to trading in PSLCs. Thus, PSLCs
are taxable as goods at standard rate of 18%.
GST payable on the certificates would be available as ITC to the
bank buying the certificates.

LEVY AND COLLECTION OF TAX

• GST is levied at the point of supply
• GST would be levied on the transaction value as per Section 15.
• Rates (For goods) are broadly 0.25%, 3%, 5%, 12%, 18% and 28% and that is split into CGST and SGST
equally for Intra- state sales and fully leviable as IGST for Inter-state sale.
• Rates (For services) are broadly 5%, 12%, 18% and 28% and that is split in to CGST and SGST equally
for Intra-state sales and fully leviable as IGST for Inter-state sale.

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Few Basics before moving on to the Composition Levy

A. Aggregate Turnover

Taxable Exempt ZRS Inter State Aggregate

Supplies supplies supplies Turnover
(Exports &
SEZ)

Aggregate Turnover will be computed on All-India basis for same PAN

But excludes
1. CGST/SGST/UTGST/IGST/Cess,
2. Value of inward supplies on which tax is payable under reverse charge.
B. Normal Registration Requirements under GST (Just an overview, not complete
provision)

Difference between Nil Rated, Exempt, Zero Rated and Non-GST supplies

Supply Name Description

Zero Rated Exports - Supplies made to SEZ or SEZ Developers.

Nil Rated Supplies that have a declared rate of 0% GST. → Example: Salt, grains, jaggery etc.
Exempt Supplies are taxable but do not attract GST and for which ITC cannot be claimed.
Example: Fresh milk, Fresh fruits, Curd, Bread etc.

Non-GST These supplies do not come under the purview of GST law.
Example: Alcohol for human consumption, Petrol etc.

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2. Basics of GST 2. 17

Composition Scheme (Section 10)

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 2. Basics of GST 2. 18

Relevant points in the Composition Scheme

A. Tax payable under composition scheme is payable in lieu of tax

payable under section 9(1) [Section 10 of CGST Act]. Such Tax is
payable as a percentage of their turnover.

B. Turnover limit for determining the eligibility for composition

scheme enhanced to Rs. 1.5 crore
In other words, a registered person, whose aggregate turnover in the
preceding financial year did not exceed Rs. 1.5 crore is eligible to opt
for composition scheme.

C. Turnover limit for determining the eligibility for composition scheme in case of Special
Category States

Eligibility turnover limit for composition for 8 Special Category States -

Arunachal Pradesh, Uttarakhand, Manipur, Meghalaya, Mizoram, Nagaland,
Sikkim and Tripura is Rs. 75 lakh

Composition levy rates table updated in rule 7

Registered Person CGST Rate SGST/ UTGST Rate Total Liability

1. Manufacturers 0.5% 0.5% 1% of TO in the state/
UT
2. Restaurant and 2.5% 2.5% 5% of TO in the state/
Caterers UT
3. any other 0.5% 0.5% 1% of TO of Taxable
supplier eligible supplies of goods and
for composition Services in the state/
levy UT
4. Composition 3% 3% 6% of TO of supplies
for Service of goods and
Providers Services in the state/
UT
Explanations added in composition scheme

a. For Computing Aggregate Turnover, Exempt services provided for which Interest/ Discount
is received/ given as consideration shall not be taken into account

b. For determining the tax payable by a person under this section, the expression “turnover in
State or turnover in Union territory” shall not include the value of following supplies,
namely:––
a. supplies from the first day of April of a financial year up to the date when
such person becomes liable for registration under this Act; and
b. exempt supply of services provided by way of extending deposits, loans or
advances in so far as the consideration is represented by way of interest or
discount.’

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Conditions & Restrictions

2) The supplier who opts for Composition Levy cannot raise tax invoice (Raise Bill of
Supply)
3) Therefore, they need not collect any tax on supply.

4) Hence, the recipient of such supplies can’t claim any Input Tax Credit (ITC)

5) Mention on the invoices issued that he has opted for such scheme.

6) He shall also mention “composition taxable person” on every notice board displayed
at the place of business

7) The following cannot opt for composition levy:

a. Supplier of exempt goods/ Non-taxable goods or services

b. Supplier of Inter-state outward supplies of goods or services

c. Person supplying goods through E-commerce operators

d. CTP / NRTP

e. Manufacturers of ice-cream, edible ice, pan masala, tobacco, aerated water,

Additional Conditions

• The composition levy if opted is applicable under one PAN, and then it is applicable for
all businesses under that PAN, or none.
• It is not allowed for some businesses to opt under normal levy and some under
composition levy.

Withdrawal from Composition Scheme

• Once the turnover breaches the threshold, the composition levy is switched off and the
normal levy is applicable.
If he ceases to satisfy any of the conditions required to opt for composition scheme.
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A. Composition scheme taxpayers permitted to render services other than restaurant

services upto a specified limit [Second proviso to section 10 of CGST Act] – Marginal Supply of
Services.
There are cases where a manufacturer/ trader is also engaged in
supply of services other than restaurant service though the percentage
of such supply of services is very small as compared to the supplies of
goods.

Now, second proviso has been added to section 10(1) which permits a
registered person opting for composition scheme to supply services
in the current year [other than restaurant services] of specified value.
This specified value is value not exceeding:

(a) 10% of the turnover in a State/Union territory in the preceding financial

year or

(b) Rs. 5 lakh, whichever is higher.

Supply services [other than restaurant services] upto a value of not exceeding:
(a) 10% of Rs. 60 lakh, i.e. Rs. 6 lakh
Or
(b) Rs. 5 lakh,
Whichever is higher. Thus, he can supply services upto a value of Rs. 6 lakh in FY 2019-2020.

B. Interest income to be excluded while computing aggregate turnover for determining

eligibility for composition scheme. Interest income not to render a person ineligible for
composition scheme.

It is clarified that the value of supply of exempt services by way of extending deposits, loans
or advances in so far as the consideration is represented by way of interest or discount,
shall not be taken into account -

i. for determining the eligibility for composition scheme under second

proviso to section 10(1). Under this proviso, a registered person opting
for composition scheme may supply services [other than restaurant
services] of value not exceeding 10% of the turnover in the preceding
financial year in a State/Union territory or Rs. 5 lakh, whichever is higher.
Thus, while computing value of services [other than restaurant services] as
referred in second proviso to section 10(1), interest on
loans/deposit/advances will not be taken into account.

ii. In computing aggregate turnover in order to determine eligibility for

composition scheme.

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2. Basics of GST 2. 21

iii. The value of exempt supply of services provided by way of

extending deposits, loans or advances in so far as the consideration
is represented by way of Interest/ Discount, shall not be taken into
account while calculating Turnover in a state.

Significant Notifications/Circulars/Orders
- Section 10(2A)

New Option Introduced - Option to pay concessional tax @ 3% (CGST)

With effect from 01.04.2019, Notification No. 2/2019 CT (R) dated 07.03.2019
has provided an option to a registered person whose

Aggregate turnover in the preceding financial year is upto Rs.50 lakh

and

who is not eligible to pay tax under composition scheme

to pay tax @ 3% [ Effective rate 6% (CGST+ SGST/UTGST)]

on first supplies of goods and/or services
upto an aggregate turnover of Rs. 50 lakh

made on/after 1st April in any FY, subject to specified conditions.

Composition Rules [Chapter II, CGST Rules, 2017]

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2. Basics of GST 2. 22

S. Form Description Due date

No. Required

1. GST Intimation to pay tax under section 10 (Only Prior to appointed date or
CMP-01 for persons registered under the existing within 30 days of the appointed
law migrating on the appointed day) date

2 GST New Registration directly opting for -

REG- 01 Composition Levy

3 GST Intimation to pay tax under section 10 Prior to commencement of

CMP-02 (For persons registered under the Act) + financial year for which the
GST ITC 03 in 60 days scheme is opted for

4 GST In the mid of the year also a person can File an intimation → Then opt
CMP-02 opt for composition levy. for composition Levy from 1st
day of Next Month.

GST ITC 03 in 180 days from date of

opting for composition levy

3. GST Registered under old laws - Intimation Within 90 days of exercise of

CMP-03 of details of stock and inward supplies option
from unregistered person

4. GST Intimation/Application for withdrawal Within 7 days of occurrence

CMP-04 from composition scheme of event

5. GST Show cause notice on contravention of On contravention

CMP-05 rules or act by proper officer

6. GST Reply to the notice to show cause Within 15 days from service
CMP-06 of such Notice

7. GST Order for acceptance / rejection of reply Within 30 days of receipt of

reply
CMP-07 to show cause notice
FORM GST ITC 01 – 30 days from
withdrawal/ order passed

Effective date in case of denial of composition option by tax authorities

In case of denial of option to pay tax under composition levy by the tax authorities, it has been
clarified that the effective date of such denial shall be from a date, including any retrospective
date, as may be determined by tax authorities.
However, such effective date shall not be prior to the date of contravention of the provisions of
the CGST Act/ CGST Rules

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2. Basics of GST 2. 23

REVERSE CHARGE MECHANISM

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 section 9(3)/9(4), or under
section 5(3)/5(4) of the IGST Act [Section 2(98) of CGST Act].

Section 9(3) of the CGST Act - 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.
Section 9(4) - Tax under reverse charge is payable by the NOTIFIED class of registered persons
on NOTIFIED categories of intra-State supplies of goods and/or services received
by such registered persons from any unregistered supplier.

Similar amendment has also been carried out in section 5(4) of the IGST Act by the IGST
(Amendment) Act, 2018. Consequently, tax under reverse charge is payable by the NOTIFIED
class of registered persons on NOTIFIED categories of inter-State supplies of goods and/or
services received by such registered persons from any unregistered supplier.

Forward Charge Mechanism Reverse Charge Mechanism

• Supplier is registered with GST • Supplier is not registered with

• Supplier issues a tax invoice GST
• Supplier collects the GST and • Cannot issue a tax invoice
pays it to the Government. • Recipient pays the GST on the
supply on behalf of the supplier,
directly to the Government.

EXEMPTIONS Under Goods & Services Tax

Distinction Between
GENERAL EXEMPTION SECTION 11(1) of EXEMPTION BY SPECIAL ORDER SECTION
CGST Act
11(2) of CGST Act

This is granted by a notification This is granted by a special order

This is goods/ services specific. Any This is person specific and purpose specific.
supplier supplying these notified goods The goods are generally chargeable but
or services can enjoy the exemption exempted in special circumstances and
hence not available to all persons generally

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 2. Basics of GST 2. 24

It may be absolute or conditional. No such distinction

If absolute, the supplier has to avail it and
he can collect tax only at effective rates.
It may be partial or total. It is always total.

Note –Both the exemptions are granted in the public interest and both can be explained within
one year of issue by the government. All the exemptions are based on the recommendations of
the GST Council.

EXEMPTIONS Under GST

Exempt supply has been defined as supply of any goods / services / both, which attract a
NIL rate of tax, or which may be wholly exempt from tax, and therefore includes non-
taxable supplies.
Essential goods / services, have been exempted, some of the key ones are –

• Services by the Government • Unbranded Atta / Besan / Maida

(except Post Office, transport of
• Milk
goods / passengers etc.)
• Services by RBI • Fresh vegetables

• Services by ESIC / EPFO • Health care &

• Services by IRDA, SEBI
• Education

• Eggs

• Curd

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 3. Time – Value and Place of Supply 3.1

Lesson 3
Concept of Time, Value and Place of Taxable Supply

REGULATORY FRAMEWORK
1. Central Goods and Services Act, 2017

Section Deals with

Section 7 Scope of Supply
Section 12 time of Supply of Goods
Section 13 time of Supply of Services
Section 14 time of Supply in case of change in rate
Section 15 Value of Supply

2. Integrated Goods and Services Act, 2017

Section Deals with

Section 7 inter-State Supply
Section 8 intra-State Supply
Section 9 Supplies in territorial Waters
Section 10 Place of supply of goods
Section 11 Place of supply of goods imported into, or exported from India
Section 12 Place of supply of services where location of supplier and recipient is in India
Section 13 Place of supply of services where location of supplier or location of recipient is outside
India

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3. Time – Value and Place of Supply 3.2

CONCEPT OF SUPPLY
Nature of Supply [Section 7 to 9 of Integrated Goods & Services Tax Act, 2017]
• There are two types of supply, intra state and interstate.

• IGST is payable for interstate supply and CGST +SGST is payable for intra-state
supply.
The following services shall be treated as inter-state supply –
Transaction Type Goods Services Nature of supply

Domestic
Supply of goods [Section 7(1)] and/ or services two different States; interstate
[Section 7(3)] where location of the supplier and
two different Union territories; or
the place of supply are in
a State and a union territory
Imports
Supply of imported goods into the territory of India Interstate
till they cross the customs frontiers of india
[Section7(2)]
[For ex. High Sea Sales]
Supply of service imported into the territory of
India [Section 7(4)]
Exports and other scenarios
Supply of goods or services or both- I
N
(1) supplier located in India and the place of
supply is outside India t
(2) to or by a Special economic Zone e
developer or a Special economic Zone (SEZ)
r
unit
S
(3) in the taxable territory, not being an intra-
State supply and not covered elsewhere in t
this section
a
t
e
Supply
Section 8 of the IGST act deals with the situations where a supply is categorized as intra-state supply.
Such situations are tabulated as under
The following supplies shall be treated as intra- state supply:

Intra State Supply

Supply of Goods [Section 8(1)] Services [Section 8(2)] Nature of Supply
Where location of the same State or same Union Territory Intra State
supplier and the
place of
supply are in

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 3. Time – Value and Place of Supply 3.3

What is not intra-state supply?

(i) Supply of goods to and by SEZ [even if the location of supplier and recipient are in the same state or union
territory]
(ii) Supply of imported goods into the territory of India till they cross the customs frontiers of India [for example High
Sea Sales]
(iii) Supplies made to a tourist till they cross the custom frontiers of India
Earlier, purchases made by foreign tourists in India were chargeable to VAT/ CST. Now under GST
regime, IGST paid on goods taken out of India by a foreign tourist will be treated at par with exports and
tax paid, if any, shall be refunded under the IGST Act, 2017. This practice is to conform to global taxation
policies.
The following supplies will be treated as interstate supplies:
The following supplies will be treated as interstate supplies:
(i) Supplies received in Domestic Tariff Area from SEZ unit located in Noida
(ii) Supplies made to SEZ developer in Kandla from Ahmedabad.
(iii) Goods imported from France
(iv) Goods sold by the importer located in Noida to a person located in Ludhiana before the bill of entry for clearance
from the customs area is filed by the importer.
(v) Supplier is in Delhi and supply is made in Switzerland
(vi) Supplier is within Rajasthan and supply is made in Punjab, place of supply being Punjab
(vii) Supplier is in Chandigarh (UT) and supply is made in Himachal Pradesh

Supply in Territorial Waters [Section 9 IGST Act, 2017]

where location of the supplier is in the be in the nearest coastal State or Union
territorial waters, then location of such territory
supplier;
or
where the place of supply is in the territorial
waters, then place of supply

Example: Suppose there is a supply from the territorial waters where the supplier is located
and the nearest base line is at Kandla, Gujarat state, then the place of supply will be Gujarat.

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 3. Time – Value and Place of Supply 3.4

The expression territorial waters should be understood that area upto 12 nautical miles
from base line of sea coast into the sea.

Note: 1 nautical mile = 1.853 Km approx.

PLACE OF SUPPLY

Place of Supply of Goods other than supply of goods imported into, or exported from
India [Section 10 of IGST Act, 2017]

SITUATION PLACE OF SUPPLY OF GOODS

A Supply involves movement of Termination of goods for delivery
Goods
B Where the goods are delivered by the said third person has received the goods and the place of
the supplier to a recipient or any supply of such goods shall be the Principal place of business
other person on the direction of a of third party
third person, whether acting as an
agent or otherwise, before or
during movement of goods, either
by way of transfer of documents of
title to the goods or otherwise, it
shall be deemed that
C No movement of goods in a Location of goods at the time of delivery
supply
D Installation/ assembly Place of assembly or installation
E Supply on board a conveyance Location where goods are taken on board

Place of supply in case of import/ export [Section 11 of IGST Act, 2017]

In case of import of goods→ place of supply → location of importer
&
where goods are exported → location is outside India.

Illustration 1

A having registered place of business at Pune, placed an order on B Ltd. in New Delhi, for delivering a
parcel to C who was at Nasik.
Ans - In this case, the place of supply would be Maharashtra [for transaction between B Ltd. and A. Since the
location of supplier (New Delhi) and place of supply (Maharashtra) are different, IGST would be charged.
However, the place of supply for a second leg of the transaction i.e. between A and C Ltd. would be
determined under Scenario ‘A’, which shall be Maharashtra, considering that the movement of goods
terminates at Nasik. Here, since the location of supplier (Pune/ Maharashtra) and place of supply (Nasik/
Maharashtra) are in the same state, CGST + SGST would be charged
Illustration 2
Howrah – New Delhi Rajdhani Express supplies food which was taken on board at Mugalsarai in Uttar Pradesh.
Ans - The place of supply of food for a transaction between the supplier of food and the railways would be
Uttar Pradesh.
However, the place of supply of food for a transaction between railways and the passengers would be
determined under Section 12 of the IGST Act as such supply would be treated as ancillary to the supply of
passenger transportation service.
Illustration 3
Srinivasan from Bangalore travelled to Chennai for a vacation and purchased a laptop from Croma at Chennai.
Ans - In this case, the place of supply would be Tamil Nadu and since the location of supplier and place of
supply are same, CGST + SGST would be charged, being an intra-State supply.

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 3. Time – Value and Place of Supply 3.5

Place of supply of services [Section 12 & 13 of IGST Act, 2017]

Section 12 (Only for Domestic Supplies): Supplier and Recipient both are located in India →
Focus is “Place of Supply”

SERVICES STATUS OF RECIPIENT

Registered Unregistered
Section 12(2): General Principle Location of if address on records exists → location of
Recipient recipient or
Other cases → location of supplier
Section 12(3): Exception/Special a)Where the immovable property is situated.
cases –
b) If the location of immovable property is outside India, Place of
a) Directly related to immovable Supply will be Location of recipient.
property (Architects,
c) If immovable property is located at more than one state value be
designers, agents etc.)
taken proportionately as per contract/ Rules
(b) Lodging accommodation (hotel,
inn, guest house, camp site etc.)
(c) Accommodation in immovable
property for marriage, business
events, social,religious activities etc.)
(d) Ancillary services to above
Section 12(4): Beauty parlor, fitness, Place of performance of service
restaurant and catering services
plastic cosmetic surgery etc.
Section 12(5): Training & Location of Location of performance
Performance Appraisal recipient

Section 12(6): Admission to where the event is held or

cultural, artistic, sporting, educational where the park or such place is located
entertainment, amusement event etc.
and ancillary services
Section 12(7):
(a) Organization of a cultural, artistic,
sporting, scientific, educational or
entertainment event including supply of
services in relation to a conference,
Location where the event is actually held
fair, exhibition, celebration or similar
events; or

ancillary to organization of any of the Location of

events or Services referred to in Registered person
clause (a), or assigning of
sponsorship of such events
Event is held outside India Location of the recepient

Event is held in more than one state or Respective value assigned to each state or union
union territory a consolidated amount is territory on proportionate basis.
charged

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 3. Time – Value and Place of Supply 3.6

SERVICES STATUS OF RECIPIENT

Registered Unregistered

Section 12(8): Transport of Location of recipient where goods are handed over for
goods, including Courier/mail (Registered Person) transportation. (Refer note below.)
Note 1: A new proviso has been inserted in this sub-section to lay down that where the transportation of
goods is to a place outside India, the place of supply shall be the place of destination of such goods.
Therefore, in case where the location of supplier and recipient is in India and goods are transported to a
place outside India, the place of supply of transportation service shall be the place of destination of such
goods, i.e. outside India.
Section12(9): Transportation of Location of recipient Place where the passenger embarks on (gets
passengers, right to passage into) the conveyance for a continuous journey.
given for a future use & point of If embarkment location not known –
embankment not known
Location of recipient on records
else
Location of supplier

Explanation.– For the purposes of this sub- section,

the return journey shall be treated as a separate
journey, even if the right to passage for onward and
return journey is issued at the same time.
Section 12(10): On board a Location of first, scheduled point of departure of that conveyance for
conveyance while in transit. the journey.
Conveyance may be a ship, air
craft, train, vehicle etc.
Section 12(12): Banking & if address on records exists → location of recipient or
Financial services and Stock Other cases → location of supplier
broking services [Like 12(1)]
Section 12(13): Insurance Location of recipient Location of recipient of services as on the
services records of the supplier.
Section12(11):
Telecommunication services
including data transfer, broad
casting, cable TV services
etc.
(a) fixed telecom line, leased Place of fixing/installation
circuits, internet leased circuit,
cable or dish antenna
(b) postpaid mobile, internet Billing address of recipient
services
(c) Prepaid through agent Address of selling Agent, or re- seller or distributor as per the record
(Mobile,Internet,DTH etc.) of the supplier at the time of supply; or
(ii) the location where such pre- payment is received or such vouchers
are sold;
(d) In other cases Address of recipient as per record
Or
If address is not available → place of supplier of services

Provided further that if such pre-paid service is availed or the recharge

is made through internet banking or other electronic mode of payment,
the location of the recipient of services on the record of the supplier of
services shall be the place of supply of such services.

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 3. Time – Value and Place of Supply 3.7
Explanation - Where leased circuit is installed in more than one state/ union territory, place of supply shall be
determined for respective value assigned to each state or union territory on proportionate basis as per contract.
Section 12(14): advertisement Place of supply shall be taken as –
services to being in each of such States or Union territories
• CG
and
the value of such supplies specific to each State or Union territory shall
• SG be in proportion to the amount attributable to services provided by way
of dissemination in the respective States or Union territories as may be
• A Statutory body or determined in terms of the contract or agreement entered into in this
regard
• a local authority
meant for the States or Union or
territories identified in the contract in the absence of such contract or agreement, on such other basis as
or agreement shall be may be prescribed.

Note 1 – Continuous supply of goods – 2(32) → means a supply of goods which is provided, or
agreed to be provided, continuously or on recurrent basis, under a contract, whether or not by means of
a wire, cable, pipeline or other conduit, and for which the supplier invoices the recipient on a regular or
periodic basis and includes supply of such goods as the Government may, subject to such conditions, as
it may, by notification, specify.

Note 2 – Continuous supply of Services - 2(33) → means a supply of services which is provided,
or agreed to be provided, continuously or on recurrent basis, under a contract, for a period
exceeding three months with periodic payment obligations and includes supply of such services as
the Government may, subject to such conditions, as it may, by notification, specify

Analysis
1. 12(5) XYZ Consultants (registered at Bangalore) provides training to its client’s
employees at Mumbai. The clients are registered at Chennai.

In this case, if the client (recipient) is registered, the place of supply would be the location of recipient,
that is Chennai and consequently IGST would be charged as the location of Supplier (State of
Karnataka) and the Place of Supply (State of Tamil Nadu) are different. (Training & Performance
Appraisal Services)

In the above example, if the client was unregistered, the place of supply would have been
Mumbai and again IGST would be charged. (Training & Performance Appraisal Services)
2. 12(7) Mr. X based in Ahmedabad, solicits the services of an event management company
based in New Delhi, for his daughter’s marriage. They plan for a destination wedding at a
palace in Udaipur.

In this case, if Mr. X is registered, the place of supply would be Ahmedabad (Gujarat) and IGST would
be charged.

But if he is unregistered the place of supply would be Udaipur (Rajasthan) and IGST would be
charged.

3. 12(9) Tarun books a round trip for AHM – PNQ – BLR – PNQ – AHM, with a stopover at
Bangalore. The tickets are booked with a Bangalore based airline.

This is a continuous journey with a stopover.

For the first leg (AHM – PNQ – BLR), the place of supply would be Ahmedabad and since the
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 3. Time – Value and Place of Supply 3.8
Location of Supplier (BLR) and the Place of Supply (AHM) are different, IGST would be charged.

For the second leg (BLR – PNQ – AHM) of the journey, the place of supply would be Bangalore,
and since the Location of Supplier (BLR) and the place of supply are same, CGST
+ IGST would be charged. (Passenger Transportation Services).

4. 12(12) Priya, an unregistered person, from New Delhi, has an account with a Bank at New
Delhi. She is on a vacation in Nainital, and visits a bank for getting a Demand Draft

made.

In this case, since the address of the recipient will be available in the records of the supplier, the
place of supply would be New Delhi.

In case she went to a branch at Nainital for availing currency exchange services which isn’t linked to
her account in New Delhi, the address of the recipient would not be available in the records of the
supplier, and hence the place of supply would be Nainital.

Place of supply of service [Section 13 of IGST ACT, 2017] → Where Location of supplier or
Receiver is outside India

Section 13 of IGST Act, 2017 deals with place of supply of service the parties is outside India
Section 13(2) General: Location of recipient
or
If location of recipient is not available - Location of Supplier

Section 13(3) Specific cases -

• Where, service is in relation to goods required to be made physically available by the

recipient of services to the supplier of services, or to a person acting on behalf of the supplier of
services in order to provide the services: - location of actual performance

• Where the service in relation to goods is provided from a remote location through electronic
means – location where the goods are actually situated.
Provided further that nothing contained in this clause shall
apply in the case of services supplied in respect of goods which
are temporarily imported into India for repairs or for any other
treatment or process
And
are exported after such repairs or treatment or process without
being put to any use in India, other than that which is required for
such repairs or treatment or process.
These are determined as per 13(2)
Same applies to cutting and polishing activity on unpolished diamonds

• Where, service is in relation to an individual represented either as the recipient of services or a

person acting on behalf of the recipient, which requires physical presence of the recipient or
the person acting on his behalf, with the supplier for the supply of services. – location of actual
performance

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 3. Time – Value and Place of Supply 3.9
Section 13(4) Immovable Property: location of such property
Section 13(5) Admission to/organization of events etc.: location of event
Section 13(6) Multi location: Services covered under Section 13(3), Section 13(4) and Section 13(5)
provided at multiple locations and one or more location falls in taxable territory - Location falling in
taxable territory
Section 13(7) Multi locations involving more than one State/UT: Proportional to value in each
State/UT
Section 13(8) Banking, or Financial Institutions NBFC’c tocustomers, intermediary and hiring of
means of transport including Yatch but excluding aircraft or vessel up to a period of one month.:
location of supplier
Section 13(9) Goods transport other than mail/courier: destination of goods
Section 13(10) Passenger transport services: location of embarkment
Section 13(11) services on board a conveyance during the course of a passenger transport operation,
including services intended to be wholly or substantially consumed while on board: first scheduled point of
departure
Section 13 (12) on line info, database access or retrieval services etc. location of recipient

Section 13(13) : In order to prevent double taxation or no-taxation of the supply of a service or for the
uniform application of rules the Government shall have the power to notify any description of service or
circumstance in which the place of supply shall be the place of effective use and enjoyment of a service.

Note - In case of advertisements over internet, the advertisement service shall be deemed to
have been provided all over India. Thus, the value of such service will be apportioned amongst all
States and UTs, of India. The amount attributable to the value of advertisement service
disseminated in a State/UT shall be calculated on the basis of the internet subscribers in such
State/UT.

Research and Development services related to pharmaceutical sector

In the below given 10 cases the Place of Supply will be –

✓ Services provided by
✓ person located in taxable territory to a person located in the non-taxable territory
✓ the location of recipient
✓ The following conditions
(i) Services are provided as per a contract
(ii) Such supply of services fulfills certain conditions in the definition of export of services

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 3. Time – Value and Place of Supply 3.10

S.No Nature of General Description of Supply

Supply
.
1. Integrated • Discovery and development of molecules
discovery and • Designing of compound, evaluation of the drug metabolism, biological activity,
development manufacture of target compounds, stability study and long-term impact.
2. Integrated
development
3. Evaluation of the This is in vivo research (i.e. within the animal) and
efficacy of new involves development of customized animal model diseases and
chemical/ administration of novel chemical in doses to animals to evaluate the gene and
biological entities protein expression in response to disease.
in animal models In nutshell, this process tries to discover if a novel (New) chemical entity that can
of disease reduce or modify the severity of diseases. The novel chemical is supplied by the
service recipient located in non-taxable territory.

4. Evaluation of This is in vitro research (i.e. outside the animal).

biological activity
of novel chemical/
biological entities in
in-vitro assays
5. Drug metabolism This process involves investigation whether a new compound synthesized by supplier
and can be developed as new drug to treat human diseases in respect of solubility, stability
pharmacokinetics in body fluids, stability in liver tissue and its toxic effect on body tissues.
(Time taken by Promising compounds are further evaluated in animal experiments using rat and mice.
drug to work)
of new chemical
entities
6. Safety Safety assessment involves evaluation of new chemical entities in laboratory
Assessment/ research animal models to support filing of investigational new drug and new drug
Toxicology application.
(Scientific study Toxicology team analyses the potential toxicity of a drug to enable fast and effective drug
of poisons) development.
7. Stability Studies Stability studies are conducted to support formulation, development, safety and efficacy
of a new drug. It is also done to ascertain the quality and shelf life of the drug in their
intended packaging configuration.
8. Bio-equivalence and Bio-equivalence – Finding effect of similar drug and the time it takes to reach the
Bio- availability effected part of the body.
Studies
9. Clinical trials The drugs that are developed for human consumption would undergo human testing
to confirm its utility and safety before being registered for marketing.
10. Bio Bio analysis is a sub-discipline of analytical chemistry covering the quantitative
analytical measurement of drugs and their metabolites, and biological molecules.
studies

B2B maintenance, repair and overhaul services of aircrafts or aircraft

engines/components/parts:

S. No. Description of Services or circumstances Place of Supply

1. Supply of maintenance, repair or overhaul service in respect of The place of supply of services shall be the
aircrafts, aircraft engines and other aircraft components or parts location of the recipient of service.
supplied to a person for use in the course or furtherance of
business.

Clarification regarding determination of place of supply in certain cases:

1. Services provided by Ports –

It is hereby clarified that such services are ancillary to or related to cargo
handling services and are not related to immovable property.
Determined as per general sub section - sub-section (2) of Section 12 or
sub-section (2) of Section 13 of the IGST Act.

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 3. Time – Value and Place of Supply 3.11
2. Place of supply in case of software/design services related to Electronics Semi-conductor and Design
Manufacturing (ESDM) industry
• This is related to Electronics Semiconductor and Design
Manufacturing (ESDM) industry in India.
• Process of developing software and designing integrated
circuits electronically for customers located overseas.
• Foreign clients provide design requirements
• Then Indian company digitally integrates the design to
develop the software and the hardware design.
• These designs are communicated abroad (in industry
standard electronic formats) for the manufacture of
hardware based on such designs.
• In addition, the software developed is also integrated upon
or customized to this hardware.
• On some occasions, samples of such prototype hardware are
then provided back to the Indian development and design
companies to test and validate the software and design to ensure that it is error free.
Question arised – Whether this will be covered under 13(3) (a)- “goods required to be made physically
available by the recipient to the provider” ?
Clarified
Above activity is a composite supply
Chip design/software development is the principal supply of the service provider.
The testing of software/design is aimed at improving the quality of is an ancillary activity.
POS will be location of the service recipient as per Section 13(2) of the IGST Act – General Section.
Provisions of Section 13(3)(a) of IGST Act do not apply separately for determining the place of supply for
ancillary supply in such cases.

TIME OF SUPPLY
Concept of Time: Time is the essence of levy. Hence it is important to determine the time of supply.
The point of taxation enables us to determine the rate of tax, value, and due dates for payment of taxes.

Forward Charge
Time of Supply

Mechanism
Reverse
Charge
Mechanism

Vouchers

All other
instances

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 3. Time – Value and Place of Supply 3.12

Time of Supply of Goods [Section 12 of CGST Act, 2017]

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3. Time – Value and Place of Supply 3.13

Illustration 1
ABC Ltd. supplied goods to XYZ Ltd., under a contract for the goods to be delivered to the factory of
XYZ Ltd. The goods were removed from the factory of ABC Ltd. on 9th September, 2022 and the
goods were delivered to the factory of XYZ on 15th September, 2022.
The invoice was issued on 18th September, 2022 and the payment was credited to ABC’s a/c on 20th
October, 2022 although the entry in the books was made on 19th September, 2022 when the cheque was
received. Please advise on the time of supply.
Soln.
In the above case, the dates are as under:
o Date of issue of invoice: 18th September, 2022
o Due date for issue of invoice: 9th September, 2022 (as the supply involved movement of goods)
Hence, the time of supply will be the earliest of the above dates, i.e., 9th September, 2022. Note –
Date of payment is not to be considered in case of supply of goods in forward charge.

Illustration 2
A supplier delivers consignments of bricks on a continuous supply basis to various
contractors. With respect to one of the supplies, the following details are available:

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 3. Time – Value and Place of Supply 3.14

Invoice Date Statement of Receipt of Time of Supply

Account Payment
(Due Date) Date
1st November 5th November 1st November 1st November
11th December 5th December 11th December 5th December
1st January 5th January 1st January 1st January

Illustration 3
Seema is an unregistered trader and supplies the goods to a registered recipient on 1st Feb
2021. The goods were received by Vir at his factory on 28th February, 2021. The invoice was issued
on 15th February, 2021 and the payment was made on 5th March, 2021. Advise on the time of
supply.

Answer
As the transaction stated above exhibits “reverse charge mechanism”, supplier i.e. Seema being
unregistered, the time of supply would be the earliest of:
a) Date of receipt of goods: in this case, 28th February, 2021

b) 31st day from date of invoice: in this case, 18th March, 2021

c) Date of payment: in this case 5th March, 2021

Hence the time of supply would be 28th February, 2021.
Illustration 4

ABC Ltd., enters in to an arrangement with “Hush Puppies”, buys the vouchers, these vouchers were
issued on 14th December, 2021. The Company then distributes these vouchers with denomination INR
4,000/- to all its employees on 24th December, 2021valid until 31st January, 2022, so that they can
use these vouchers for buying shoes of their choice. The employees make the most of it and redeem
these vouchers on the New Year’s, i.e., on 1st January, 2022.
Answer
In this case, the supply is identifiable at the point of issue of the voucher and hence the time of supply
would be construed as 14th December, 2021.
Illustration 5
Mr. A, an agriculturist supplies raw cotton (under reverse charge) to Mr. B who manufactures cotton shirts. The
date wise turnout of events is given below:
01.04.2021- Mr. B approaches Mr. A and places an order for 1 ton of cotton
10.05.2021- Mr. B receives the goods
15.05.2021- Mr. A issues an invoice
20.05.2021- Mr. B makes a payment by cheque and accordingly records it in his books of accounts.
25.05.2021- The payment gets debited from Mr. B’ s bank account
In this case, the time of supply shall be the earlier of the following dates:
a) the date of receipt of goods i.e. 10.05.2021
b) the date of payment as recorded in the books of Mr. B i.e. 20.05.2021 or the date when the payment
gets debited in the books of the recipient i.e. 25.05.2021 whichever is earlier
c) the date immediately following thirty days from the date of issue of invoice, i.e. 15.05.2021 + 30 days
+ 1day =15.06.2021
Therefore, the time of supply will be 10.05.2021.
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 3. Time – Value and Place of Supply 3.15
Illustration 6
Nisha buys a voucher from Shoppers Stop for INR 10,000 and gifts it to Tarun on 14th February. The
voucher was valid until 29th February. Tarun redeems the vouchers at the nearby Shoppers Stop store on
29th February.
Answer: In this case, the supply was not identifiable at the point of issue of the voucher as Tarun was open
to purchase anything from Shoppers Stop, therefore the time of supply would be construed as the date of
redemption of the voucher, that is 29th February.

Note
Goods which will be subject to reverse charge mechanism subject to the category of supplier
and recipient specified therein. These goods include cashew nuts (not shelled or peeled), bidi
wrapper leaves (tendu), tobacco leaves, raw cotton, silk yarn, supply of lottery etc.

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3. Time – Value and Place of Supply 3.16

Time of supply of services [Section 13 of CGST Act, 2017]

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3. Time – Value and Place of Supply 3.17

As per Section 13(2), if there is an excess payment received, up to INR 1000/- → the
supplier can choose to take the date of the invoice issued with respect to such excess
amount, as the time of supply of services for such excess value.

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 3. Time – Value and Place of Supply 3.18

Illustration 1
Determine the time of supply from the following particulars:

15th October The marriage hall was fixed and the advance of INR 25000 was paid
(amount agreed was INR 100,000)
30th November The marriage ceremony took place in the hall
14th December The invoice was issued for balance INR 75000 indicating & adjusting
the advance paid earlier
31st December The balance payment was received
In the above case, the invoice was issued within the prescribed time (that is within 30 days
of the event) and hence the time of supply would be the earlier of:
a) The date of invoice: which is 14th December and

b) The date of receipt of payment: which is 31st December

Therefore, for the amount of INR 75000, the time of supply would be 14th December. For
the advance of INR 25000, the date of payment precedes the invoice and hence the time of
supply for that amount would be 15th October.

Illustration 2
DEF Ltd., an unregistered supplier, renders professional services to GHI Ltd. and issues
the invoice on 7th August, 2020. There is a dispute on the quality of services and the
payment gets delayed and is finally released on 14th November, 2020 by cheque and an
entry is made in the books of account of the recipient.
In this case, the time of supply would be the earlier of:
a) 60 days from date of invoice: 7th October, 2020
b) Date of payment: 14th November, 2020.
Hence the time of supply would be 7th October, 2020.

Illustration 3
Mr. A provides legal services as an advocate to Mr. B which fall under reverse charge basis.
10.04.2020 – The services are provided to Mr. B

12.04.2020 – Mr. A issues an invoice to Mr. B

10.07.2020 – The payment is made by Mr. B through a cheque and recorded in his books of accounts
15.07.2020 – The payment gets debited from Mr. B’s bank account
In this case, the time of supply shall be earlier of the following dates:
The date of payment i.e. 10.07.2020 (earlier of 10.07.2020 and 15.07.2020)
The date immediately following sixty days from the date of issue of invoice i.e. 12.06.2020 (12.04.2020 + 60
days + 1day).
Therefore, the time of supply shall be 12.06.2020.

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3. Time – Value and Place of Supply 3.19

Time of Supply in case of change in rate of tax [Section 14 of CGST Act, 2017]

Simply solve by “Majority Rule” as discussed in class

Note - Provided that the date of receipt of payment shall be the date of credit in the
bank account if such credit in the bank account is after 4 working days from the
date of change in the rate of tax.

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3. Time – Value and Place of Supply 3.20

Illustration
Supply was made on 10th May, 2022. From the following particulars, find out the rate of GST
applicable.

Event Date of event Rate applicable

Change of rate 31st May, 2022 Rate changed from 18% to
12%
Issue of Invoice 5th June, 2022 12%
Payment received 6th July, 2022 12%
Applicable rate is 12%. i.e. which is applicable on earlier of the two events, date of invoice and
date of payment which in this case would be 5th June, 2022.
Illustration
Supply was made on 10th May, 2022. From the following particulars, find out the rate of GST
applicable.

Event Date of event Rate applicable

Change of rate 30th June, 2022 Rate changed from 18% to
12%
Issue of Invoice 5th June, 2022 18%
Payment received 6th July, 2022 12%
Answer: Applicable rate is 18%. i.e. date of invoice i.e. 5th June, 2022 because it is earlier
than the date of payment.
VALUE OF TAXABLE SUPPLY [SECTION 15 OF CGST ACT, 2017]
Section 15 is applicable to interstate supplies under IGST also.
Transaction value means

price actually
where supplier and the price is the sole
paid/payable for
recipient of supply are consideration forthe
supply of
not related and supply
goods/services /both

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3. Time – Value and Place of Supply 3.21

Note: Interest or late fee or penalty for delayed payment of any consideration for any
supply was not taxable under Central Excise or Sales Tax laws.
Now they are all part of value.

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3. Time – Value and Place of Supply 3.22

Clarification on valuation methodology for ascertainment of GST on TCS under Income Tax
Act, 1961

For the purpose of determination of value of supply under GST, tax collected at source (TCS) under the
provisions of the Income Tax Act, 1961 would not be includible as it is an interim levy not having the
character of tax.

Clarification on discounts

A. Discounts including ‘Buy more, Save more’ offers

(i) Sometimes, the supplier offers staggered discount to his customers (increase in
discount rate with increase in purchase volume). For example - Get 10 % discount for
purchases above Rs. 5,000/-, 20% discount for purchases above Rs. 10,000/- and 30%
discount for purchases above Rs. 20,000/-. Such discounts are shown on the invoice
itself.

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3. Time – Value and Place of Supply 3.23

(ii) Some suppliers also offer periodic / year ending discounts to their stockists, etc. For
example- Get additional discount of 1% if you purchase 10,000 pieces in a year, get
additional discount of 2% if you purchase 15,000 pieces in a year. Such discounts are
established in terms of an agreement entered into at or before the time of supply though
not shown on the invoice as the actual quantum of such discounts gets determined after
the supply has been effected and generally at the year end. In commercial parlance, such
discounts are colloquially referred to as “volume discounts”. Such discounts are
passed on by the supplier through credit notes.

(iii) It is clarified that discounts offered by the suppliers to customers (including staggered
discount under “Buy more, save more” scheme and post supply / volume discounts
established before or at the time of supply) shall be excluded to determine the value of
supply provided they satisfy the parameters laid down in sub-section (3) of section 15
of the CGST Act, including the reversal of ITC by the recipient of the supply as is
attributable to the discount on the basis of document (s) issued by the supplier.

B. Secondary Discounts

(i) These are the discounts which are not known at the time of supply or are offered
after the supply is already over. For example, M/s A supplies 10,000 packets of
biscuits to M/s B at Rs. 10/- per packet. Afterwards M/s A re-values it at Rs. 9/- per
packet. Subsequently, M/s A issues credit note to M/s B for Rs. 1/- per packet.

(ii) It is clarified that such secondary discounts shall not be excluded while determining
the value of supply as such discounts are not known at the time of supply.

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3. Time – Value and Place of Supply 3.24

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3. Time – Value and Place of Supply 3.25

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3. Time – Value and Place of Supply 3.26

Special provision relating to determination of value of service in relation to life

insurance business [Sub-rule (4) of Rule 32]
Value of life insurance service varies with nature of insurance policy. The details are as follows:

• Taxable value = Gross premium charged

Policy with dual
less amount allocated for
benefits of risk
coverage and investments/savings if such allocation is
investment intimated to the policy holder at the time of
collection of premium

• Taxable value = 10% of the single premium

Single premium charged from the policy holder where allocation
annuity policy for investments/savings is not intimated to the
policy holder

• Taxable value = 25% of premium charged from the

policy holder in the 1st year and 12.5% of premium
Other cases charged for subsequent years

Policy with ONLY risk • Taxable value = Entire premium charged from the
cover policy holder

ILLUSTRATION
Arihant Life Insurance Company Ltd. (ALICL) has charged gross premium of
` 180 lakh from policy holders with respect to life insurance policies in the 2020-
21; out of which ` 100 lakh have been allocated for investment on behalf of the
policy holders.
Compute the value of supply of life insurance services provided by ALICL:

(i) if the amount allocated for investment has been intimated by ALICL to
policy holders at the time of supply of service.
(ii) if the amount allocated for investment has not been intimated by ALICL to
policy holders at the time of providing of service.
(iii) if the gross premium charged by ALICL from policy holders is only
towards risk cover.
Note: ALICL has started its operations in the year 2020-21. Thus, the entire
gross premium of ` 180 lakh is the premium for the first year of all the policies.
ALICL has not issued any single premium annuity policy.
ANSWER
(i) Amount allocated for investment intimated to policy holder at the time of supply of service
Value of service = Rs. (180-100) lakh = Rs. 80,00,000
(ii) Amount allocated for investment not intimated to policyholders at the time of supply of service
Value of service = 25% of Rs. 180 lakhs = Rs. 45,00,000
(iii) Gross premium received is only towards risk cover Value of service = Rs. 180 lakhs

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3. Time – Value and Place of Supply 3.27

Special provision relating to determination of value of secondhand goods– Margin Sceme

(Sub Rule 5)

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3. Time – Value and Place of Supply 3.28

Example (Rule 27):

(1) Where a new phone is supplied for 20,000 Rs. rupees along with the exchange
of an old phone and if the price of the new phone without exchange is 24,000
Rs. the open market value of the new phone is 24,000 Rs.

For Rule 32 (Certain Supplies)

• Rule 32 can be opted at the option of the supplier.

• The expression “basic fare” means that part of the air fare on which commission
is normally paid to the air travel agent by the airlines.

For Rule 33 (Pure Agent)

Costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded
from the value of supply, if ALL the following conditions are satisfied, namely -

the supplier acts as a pure agent when he makes the

payment to the third party
Conditions

(i)the payment made by the pure agent on behalf of the

recipient of supply has been separately indicated in the
invoice and

(i)the
supplies procured by the pure agent from the
third party as a pure agent of the recipient of supply
are in addition to the services he supplies on
his own account.

Explanation. - “Pure agent” means a person who satisfies all conditions -

Pure agent - who satisfies ALL conditions

enters into a contractual agreement

neither intends to hold nor holds any title to the

goods or services

does not use for his own interest such goods or

services so procured; and

receives only the actual amount incurred to procure

such goods or services in addition to the amount
received for supply he provides on his own account

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3. Time – Value and Place of Supply 3.29
Explanation – For all above Rules (Imp)

Illustration

Nisha Enterprises had made supplies of INR 750,000 to Tee Kay Services. There was a tax

levied by Municipal Authorities on such sale of INR 75,000/-. CGST and SGST chargeable
on the supply was 37500/-. Packing charges, not included in the price above amounted to
INR 15,000.
Nisha Enterprises received a subsidy of INR 30000/- from an NGO on the sale of such goods,
and the price mentioned above is after taking in to account the subsidy. Discount offered is @
1% and that’s mentioned on the Invoice. Determine the Value of Supply.

Price Charged 7,50,000

Add: Tax charged by Municipal Authorities 75,000
Packing Charges 15,000
Subsidy from NGO 30,000
Total after all inclusions 8,70,000
Less: Discount @ 1% 7,500
Notes
1. CGST and SGST is not included in the determination of value of supply, rather
taxed post determination on the same
2. Subsidy since received from a non-governmental body is added back to determine the
value of supply
3. Discount on basic price is an exclusion
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 4. ITC and Computation of GST Liability 4.1

Lesson – 4
INPUT TAX CREDIT AND COMPUTATION OF GST LIABILITY

Regulatory Framework

. Central Goods and Services Act, 2017

Section Deals with

Section 2(62) input tax
Section 2(63) input tax Credit
Section 2(61) input Service distributor
Section 2(68) Job Work
Section 16 eligibility and Conditions for taking ITC
Section 17 apportionment of Credit and Blocked Credits
Section 18 availability of Credit in special circumstances
Section 19 taking input tax Credit in respect of inputs and Capital Goods sent for Job Work
Section 20 Manner of distribution of credit by input Service distributor
Section 21 Manner of recovery of credit distributed in excess
Section 39 Furnishing of returns
Section 41 Claim of input tax credit and provisional acceptance thereof
Section 49 Payment of tax, interest, penalty and other amounts
Section 49A utilization of input tax credit subject to certain conditions
Section 49B Order of utilization of input tax credit

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 4. ITC and Computation of GST Liability 4.2

Definitions
Section 2(52) “Input” means any goods other than capital goods used or intended to be used by
a supplier in the course or furtherance of business

Section 2(62)

Section 2(63) “input tax credit” means the credit of input tax;

• Input Tax Credit (ITC) is considered as a cornerstone of GST.

• To avail the benefit of ITC, it is required that the person availing such benefit is registered under
GST.
• An unregistered person is not eligible to take the benefit of ITC.
• Section 155, of the CGST Act, 2017 states that where any person claims that he is eligible for input
tax credit under this Act, the burden of proving such claim shall lie on such person.
Section 2(19) “Capital goods” means goods,
the value of which is capitalized in the books of accounts of the person claiming the credit and
which are used or intended to be used in the course or furtherance of business.
Section 2(53) “Input service” means any service used or intended to be used by a supplier in the course or
furtherance of business;
Section 2(82) “Output tax” in relation to a taxable person, means the tax chargeable under the Act on taxable
supply of goods and/or services by him or his agent and excludes tax payable by him on reverse charge basis.

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4. ITC and Computation of GST Liability 4.3

Section 16- Eligibility & Conditions to obtain ITC

–In relation to the point that the buyer must possess the documentary evidence for claiming ITC –
section 16 (2) (aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the
supplier in the statement of outward supplies and such details have been communicated to the recipient
of such invoice or debit note in the manner specified under section 37 (Section for GSTR 1).

Amendment - 16 (2) (ba) the details of ITC communicated under section 38 has not been
restricted.

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4. ITC and Computation of GST Liability 4.4

Illustration

For an Invoice dated 31st July 2023, the same pertains to the financial year 2023-24.

Hence the date for FY 23-24 will be 30th Nov, 2024.

Let’s say that the annual return is filed on 12th August, 2024.

The ITC therefore needs to be claimed within 12th August, 2024, which is the earlier of the two
dates.

Apportionment of credit [Section17 (1) to (4)]

Attributable to
Used partly for business business purposes
and partly for non-
business purposes

Goods and/or
services
ITC available
only as

Used partly for making

taxable (including zero Attributable to taxable
supplies including zero rated
rated supplies) supplies &
supplies, schedule III
partly for exempt supplies
supplies except Sale of Land
and Building

ITC is available on zero rated supplies, Schedule III items except Sale of Land and
Building and taxable supplies but not on exempt supplies.

Section 17(4):
Illustration

Input X is used to produce and supply output Y which is exempt. No ITC is available on
input X because it was used for exempt supply.

In the above example if the output Y is exported or supplied to an SEZ unit, ITC is available
on Input X as the out-ward supply is zero rated.

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4. ITC and Computation of GST Liability 4.5

Meaning of Business
As per Sec 2(17) of CGST Act, 2017 “Business” includes :
a. any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether
or not it is for a pecuniary benefit;
i. Bank providing financial services to its customers.
ii. Company manufacturing turbines for export and local sale.
iii. Provision of CA services to client such as audit and consultancy.
iv. An artist earning income for dance performances.
v. Gambling in a Derby.
vi. Charitable hospital providing free medicines to farmers.

Note: Pecuniary benefit means monetary benefits. It’s a benefit or compensation that is quantifiable in
monetary terms. The primary significance of this term is economic gain by the entity.
b. any activity or transaction in connection with or incidental or ancillary to (a) above;
i. Provisions of lockers for rent to customers in the Bank premises as Banks have high security.
ii. Turbine Manufacturing company letting out R&D facilities to research units towards improvement of product
and expansion.
c. any activity or transaction in the nature of (a) above, whether or not there is volume, frequency, continuity or
regularity of such transaction;
i. Mr.X gambles for the first time in Derby and wins.
ii. Sale of mangoes by a farmer during summer in flea market.
iii. Sale of old newspapers by a CA firm.

d. supply or acquisition of goods including capital assets and services in connection with commencement or closure
of business;
i. Services rendered by a Company Secretary to incorporate a Company.
ii. Real estate agent helping Company to acquire factory godown for a commission.

e. provision by a club, association, society, or any such body (for a subscription or any other consideration) of the
facilities or benefits to its members, as the case may be;
i. Cooperative society formed for lending loans to farmers.
ii. Recreation club formed by apartment owners.

f. admission, for a consideration, of persons to any premises; and

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 4. ITC and Computation of GST Liability 4.6
i. PVR selling movie tickets.
ii. Entry / Admission fee collected by Art exhibitions to display artifacts, paintings and sculptures made by
artists.
iii. Museums run by Governments for an entry fee to public to display objects of historical significance.

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;
i. Consultancy service provided by a Company CFO regarding Mergers to another company.

h. services provided by a race club by way of totalisator or a licence to bookmaker in such club;
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;
(i). Acquisition of land for Metro construction by the State Government from the landowners for some
compensation.
(ii). Government running BBMP service for the welfare of citizens.

Blocked Credits [Section17 (5)]

Scope of blocked credits reduced [Clauses (a) and (b) of section 17(5) of the CGST Act,
2017]
The CGST (Amendment) Act, 2018 has substituted clauses (a) and (b) of section 17(5) with
a view to expand the scope of ITC availability. Under the amended position, the restriction
and availability of ITC in respect of such goods and services is as under:-

S. Goods and/or Exceptions to goods and/or Remarks

No. Services on which services mentioned in column
credit is blocked
(2) on which credit is allowed

(1) (2) (3) (4)

(i) Motor vehicles for Such motor vehicles when used for- • ITC on motor vehicles for
transportation of • making further taxable supply of transportation of persons
persons with seating such motor vehicles; with seating capacity > 13
capacity ≤ persons (including the
• making taxable supply of
13 persons driver) used for any purpose
transportation of passengers;
(including the is allowed.
• making taxable supply of
driver) • ITC on any other motor
imparting training on driving
vehicle (e.g. motor vehicle
such motor vehicles.
used for transportation
of goods, dumpers, tippers etc.)
used for any purpose is
allowed.

Examples
1. ITC on cars purchased by a manufacturing company for official use of its employees is blocked.
2. ITC on cars purchased by a car dealer for sale to customers is allowed.
3. ITC on cars purchased by a company engaged in renting out cars for transportation of passengers, is
allowed.
4. ITC on cars purchased by a car driving school is allowed.
5. ITC on buses purchased by a company for transportation of its employees from their
residence to office and back, is allowed.
6. ITC on trucks purchased by a company for transportation of its finished goods is allowed.

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 4. ITC and Computation of GST Liability 4.7

(ii) Vessels and Vessels and aircraft when used for- -

aircrafts • making further taxable supply of such vessels or aircraft;
• making taxable supply of transportation of passengers;
• making taxable supply of imparting training on
navigating such vessels;
• making taxable supply of imparting training on flying such
aircrafts;
• transportation of goods.
Examples
1. ITC on aircraft purchased by a manufacturing company for official use of its CEO is blocked.
2. ITC on aircraft purchased by an Aviation School providing training on flying aircrafts, is allowed.

(iii) General insurance, • Such services relating to • ITC is not allowed on services of
servicing,repair and motor vehicles for general insurance, servicing,
maintenance relating to: transportation of persons repair and maintenance relating to
• Motor vehicles for with seating capacity ≤ motor vehicles, vessels or
transportation of 13 persons (including the aircraft, ITC on which is not
persons with driver) when used for allowed.
seating capacity ≤ 13 purposes mentioned in Sl • ITC is allowed on services of
persons (including Nos. (i) of column general insurance, servicing, repair
the driver), (3) above and maintenance relating to motor
• Vessels • Such services relating to vehicles, vessels or aircraft, ITC on
vessels or aircraft when which is allowed.
• Aircraft
used for purposes
mentioned in Sl. No. (ii) of
column (3) above
• Such services when
received by a taxable
person engaged –
o in the
manufacture of such
motor vehicles (as
mentioned in Sl. No. (iii)
of column 2),
vessels or aircraft; or
o in the supply of general
insurance services in
respect of such motor
vehicles (as mentioned
in Sl. No. (iii) of column
2), vessels or aircraft
insured by him

Examples
1. ITC on general insurance taken on a car used by employees of a manufacturing company for official
purposes, is blocked.
2. ITC on maintenance & repair services availed by a company for a truck used for transporting its finished
goods, is allowed.

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4. ITC and Computation of GST Liability 4.8

Examples
3. ITC on general insurance taken on a car used by employees of a manufacturing company for official
purposes, is blocked.
4. ITC on maintenance & repair services availed by a company for a truck used for transporting its
finished goods, is allowed.
(iv) • Food and beverages • Such goods and/or services when -
• Outdoor catering used by a registered person for
• Beauty treatment making an outward taxable supply
of the same category of goods
• Health services
and/or services (sub-contracting) or
• Cosmetic and plastic surgery as an element of a taxable
• Leasing, renting or composite or mixed supply
hiring of motor vehicles, vessels or • When such goods and/or services
aircraft on which ITC is not allowed are provided by an employer to its
• Life insurance and health employees under a statutory
insurance obligation

Examples
1. AB & Co., a caterer of Amritsar, has been awarded a contract for catering in a marriage to be held at
Ludhiana. The firm has given the contract for supply of snacks, to be served in the marriage, to CD &
Sons, a local caterer of Ludhiana. ITC on such outdoor catering services availed by AB & Co., is
allowed.
2. ITC on outdoor catering services availed by a company, for a team development event organised for
its employees, is blocked.

3. ITC on outdoor catering service availed by a company to run a canteen in its factory. The Factories
Act, 1948 requires the company to set up a canteen in its factory. ITC on such outdoor catering is
allowed.

(v) Membership of a club, health When such services are provided by an -

and fitness centre. employer to its employees under a
statutory obligation

(vi) Travel benefits extended to When such services are provided by an -

employees on vacation such as employer to its employees under a
leave or home travel statutory obligation
concession

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4. ITC and Computation of GST Liability 4.9

Further Clauses of Section 17(5)

c. works contract services when supplied for construction of an immovable property (other
than plant and machinery) except where it is an input service for further supply of works
contract service;

d. goods or services or both received by a taxable person for construction of an immovable

property (other than plant or machinery) on his own account including when such goods or
services or both are used in the course or furtherance of business

Explanation.–– “construction” includes re-construction, renovation, additions or alterations or

repairs, to the extent of capitalization, to the said immovable property

Explanation.–– “plant and machinery” means apparatus, equipment, and machinery fixed to
earth by foundation or structural support that are used for making outward supply of goods or
services or both and includes such foundation and structural supports but excludes—

a. land, building or any other civil structures;

b. telecommunication towers; and

c. pipelines laid outside the factory premises.

e. goods or services or both on which tax has been paid under section 10;

f. goods or services or both received by a non-resident taxable person except on goods

imported by him;

g. goods or services or both used for personal consumption;

h. goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples;
and

i. any tax paid in accordance with the provisions of sections 74, 129 and 130.

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4. ITC and Computation of GST Liability 4.10

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4. ITC and Computation of GST Liability 4.11

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4. ITC and Computation of GST Liability 4.12

Clarification on ITC in the hands of the supplier in respect of sales promotional

schemes

A. Free samples and gifts

✓ ITC shall not be available in respect of goods lost, stolen, destroyed, written off
or disposed of by way of gift or free samples.

✓ It has been clarified that ITC shall not be available to the supplier on the inputs, input
services and capital goods to the extent they are used in relation to the gifts or free
samples distributed without any consideration.

✓ However, where the activity of distribution of gifts or free samples falls within
the scope of “supply” on account of the provisions contained in Schedule I of the
said Act, the supplier would be eligible to avail the ITC.

B. Buy one get one free offer:

It is clarified that ITC shall be available to the supplier for the inputs, input services and
capital goods used in relation to supply of goods or services or both as part of such offers.

C. Discounts including ‘Buy more, save more’ offers

It is clarified that the supplier shall be entitled to avail the ITC for such inputs, input services
and capital goods used in relation to the supply of goods or services or both on such
discounts.

Further Clarification regarding ITC

A. Transfer of credit on obtaining separate registrations for multiple places of

business within a State/Union territory [New rule 41A inserted in the CGST Rules,
2017]

The new rule lays down that a registered person (transferor) who has obtained
separate registration for multiple places of business and who intends to
transfer, either wholly or partly, the unutilized ITC lying in his electronic
credit ledger to any or all of the newly registered place of business, should
furnish the prescribed details on the common portal within a period of 30 days
from obtaining such separate registrations.

The ITC is transferred to the newly registered entities in the ratio of the
value of assets held by them at the time of registration. Here, the ‘value of
assets’ means the value of the entire assets of the business whether or
not ITC has been availed thereon.

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4. ITC and Computation of GST Liability 4.13
B. Transfer of ITC on account of change in constitution of registered person [Section 18(3) read with
rule 41 of CGST Rules]
✓ In case of sale, merger, demerger, amalgamation, transfer or change in ownership of business
etc.,
✓ ITC that remains unutilized
✓ can be transferred to the new entity,
✓ provided there is a specific provision for transfer of liabilities
✓ Clarified that transfer or change in the ownership of business includes transfer or change in
the ownership due to death of the sole proprietor.
✓ In the case of demerger, ITC will be apportioned
✓ in the ratio of the value of assets of the new units as specified in the demerger scheme.
✓ Here, “value of assets” means the value of the entire assets of the business irrespective of
whether ITC has been availed thereon or not.

The registered person should furnish the details of change in constitution on the common
portal and submit a certificate from practicing Chartered Account/Cost Accountant.
S. No. Issue / Question Clarification

1. (i) In case of demerger, The value of assets of the new units is to be taken at the State level (at
proviso to rule 41 (1) of the the level of distinct person) and not at the all-India level.
CGST Rules provides that
the input tax credit shall be
apportioned in the ratio of the
value of assets of the new Illustration
units as specified in the A company XYZ is registered in two States of M.P. and U.P. Its total value of
demerger scheme. assets is worth Rs. 100 crore, while its assets in State of M.P. and U.P
However, it is not clear as toare Rs. 60 crore and Rs. 40 crore respectively.
whether the value of It demerges a part of its business to company ABC. As a part of such
assets of the new units is demerger, assets of XYZ amounting to Rs. 30 Crore are transferred to
to be considered at State
company ABC in State of M.P, while assets amounting to Rs. 10 crore only are
level or at all-India level.
transferred to ABC in State of U.P. (Total assets amounting to Rs. 40 crore
at all-India level are transferred from XYZ to ABC). The unutilized ITC of XYZ
in State of M.P. shall be transferred to ABC on the basis of ratio of value of
assets in State of M.P., i.e., 30/60 = 0.5
Similarly, unutilized ITC of XYZ in State of U.P. will be transferred to ABC in
ratio of value of assets in State of U.P.,i.e., 10/40 = 0.25.
2. Is the transferor required No. The transferor is required to file FORM GST ITC-02 only in those States
to file FORM GST ITC – 02 where both transferor and transferee are registered.
in all States where it is
registered?
ITC – 02 → Form for
transferring ITC
3. The proviso to rule 41 (1) of Yes
the CGST Rules explicitly
mentions ‘demerger’.

Whether other type of

business restructuring is
also covered here ?

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4. ITC and Computation of GST Liability 4.14
4. Whether the ratio of value No it shall be applied to the total amount of unutilized input tax credit
of assets, as prescribed (ITC) of the transferor, i.e., sum of CGST, SGST/UTGST and IGST credit.
under proviso to rule 41 (1) of
the CGST Rules, shall be Further, the said formula shall also be applicable for apportionment of
applied in respect of each Cess between the transferor and transferee.
of the heads of input tax
credit viz. CGST/ SGST/ Illustration : The ITC balances of transferor X in the State of Maharashtra
IGST/ Cess? under CGST, SGST and IGST heads are 5 lakh, 5 lakh and 10 lakh
respectively.
Pursuant to a scheme of demerger, X transfers 60% of its assets to transferee
B. Accordingly, the amount of ITC to be transferred from A to B shall be 60%
of 20 lakh (total sum of CGST, SGST and IGST credit), i.e., 12 lakh.

5. How to determine the The total amount of ITC to be transferred to the transferee (i.e., sum of
amount of ITC that is to be CGST, SGST/UTGST and IGST credit) should not exceed the amount of
transferred to the transferee eligible ITC to be transferred.
under each tax head
(IGST/CGST/SGST) while However, the transferor shall be at liberty to determine the amount to
filing of FORM GST ITC– 02 be transferred under each tax head (IGST, CGST, SGST/UTGST) within
by the transferor? this total amount, subject to the ITC balance available with the transferor
under the concerned tax head.
6. which date shall be ITC balance of the transferor as available in electronic credit ledger on the
relevant to calculate the date of filing of FORM GST ITC – 02 by the transferor.
amount of unutilized ITC
balance of transferor.
7. Which date shall be The said legal provision appears to indicate that the “Appointed date of
relevant to calculate the demerger” as per the companies act
ratio of value of assets, as
prescribed in the proviso to
rule 41 (1) of the CGST
Rules, 2017?

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4. ITC and Computation of GST Liability 4.15

Availability of Input Tax Credit in Special Cases [Section 18]

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4. ITC and Computation of GST Liability 4.16

Illustration

Mr. B becomes liable to pay tax on 1st August and has obtained registration on 17th
August.

He will hence be entitled to take ITC effective 31st July on inputs (Raw Materials/Finished
Goods & Capital Work in Process); except on Capital Goods.

It must be noted that if the application is not made within 30 days, then he will be able to
claim ITC effective the Date of grant of such registration.
Illustration

Mr. Z applies for voluntary registration on 1st September and is granted such registration on
9th September.

He will hence be entitled to take ITC effective 8th September on inputs (Raw Material/Work in
Process/Finished Goods); except on Capital Goods.
Illustration (Imp.)

Mr. C acquired a Capital Asset on 1st April, 2023 and used it for production of exempt
supplies only. Now, in November 2024, his supplies become taxable. The cost of the asset
was INR 250,000 and GST 18% was charged on it.

Hence the ITC applicable is INR 250,000*18%, which is INR 45,000.

Now, number of quarters of usage that have elapsed between April 2023 to November 2024
are: seven. Hence, there would be a reduction of 5% per quarter for 7 quarters, that is
35%. Therefore, ITC available would be as under.

Total ITC 45000

Less: Reduction for 7 15750
quarters
Net ITC available 29250

Note that this ITC would be available from the date immediately preceding the date from which
the supply becomes taxable.

Rule 40(2) of CGST RULES, 2017, states that the amount of credit shall be calculated by
reducing the input tax @ 5% for every quarter or part thereof. It shall be calculated from
the date of issue of invoice for the capital goods

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4. ITC and Computation of GST Liability 4.17

Reversal of ITC on switching to composition levy or exit from tax-paying status [Section 18(4)
read with rule 44 of CGST Rules]

Where any registered person → shifts to Composition Levy

Or
Where the goods or services or both → become wholly exempt

He shall pay an amount equivalent to the credit of input tax in respect of inputs held in stock and inputs
contained in semi-finished or finished goods held in stock and on capital goods, reduced by such percentage
points as may be prescribed [5% per quarter of a year or part thereof from the date of issue of invoice for such
goods
[i.e., ITC pertaining to remaining useful life of the capital goods (in quarters)], on the day immediately
preceding the date of exercising of such option or, as the case may be, the date of such exemption:

Amount payable on supply of capital goods or plant and machinery on which ITC has been
taken [Section 18(6)

The registered person shall pay an amount

• equal to the input tax credit taken on the said capital goods or plant and machinery reduced by 5% per
quarter of a year or part thereof from the date of issue of invoice for such goods [i.e., ITC pertaining to
remaining useful life of the capital goods (in quarters)

OR
the tax on the transaction value of such capital goods or plant and machinery determined under
section 15,

whichever is higher

Provided that where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable
person may pay tax on the transaction value of such goods determined under section 15.
Illustration

X Ltd. purchased a machine for Rs. 100,000 and brought it on 1-8- 2023 and paid 12% IGST. He
availed input tax credit and used the capital goods in his business. On 5-11 2024 he resold it as
second-hand machine for 65,000. Find out the amount of tax payable/ ITC reversible in the above
case.
Input Tax 12000

Less: 5% per quarter of usage 3600

Net ITC available 8400

Transaction Value 65000
Tax on Transaction Value 7800
Notes:

• 6 quarters have elapsed and therefore 6*5%, that is 30% would be the reduction for usage
• Tax on Transaction Value @ GST would be computed and compared to the Net ITC
available
• The higher of the two would be payable for disposal of Capital Goods
• If the supply is intra state, it should be payable in two equal parts (4200) to Centre and the
concerned State (that is CGST + SGST).
• If it is an interstate supply, Rs. 8,400 is payable as IGST.
• An invoice has to be issued to the recipient with the details of tax amount
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4. ITC and Computation of GST Liability 4.18

GOODS SENT TO JOBWORKER (Section 19)

Section 2(68): “Job Work” means any treatment or process undertaken by a person on goods
belonging to another registered person.

• The person who undertakes the job of treatment or process for another person is called
job worker.

• Owner of the goods who engages the job worker is called Principal.

• Inputs and Capital goods sent to Job worker on that Principal can avail ITC on the
same.

• The goods can be sent directly from the job worker’s place without bringing them to the
premises of the Principal. [sec 19(2)]

• [Sec 19(3)] Inputs should be brought back to the Principal place OR alternatively sold
from the job worker’s premises on behalf of the Principal:

o within one year in case of normal goods and,

o within 3 years in case of capital goods.

Amendments made by the CGST (Amendment) Act, 2018 – Effective from 01.02.2019
Second proviso has been inserted to section 143(1) of CGST Act, to provide that the period
of 1 year and 3 years may, on sufficient cause being shown, be extended by the
Commissioner for a further period not exceeding 1 year and 2 years respectively.

Where the same are not sold/bought back within the stipulated time the supply between the
Principal and the job worker is treated as “deemed supply” and tax is payable thereon by the
Principal.

(1) Deemed that such inputs had been supplied by the principal to the job worker on the
day when the said inputs were sent out

(2) where the inputs are sent directly to a job worker, the period of one year shall be
counted from the date of receipt of inputs by the job worker.

• Moulds and dies, jigs and fixtures, or tools sent out to a job worker for job work need
not be brought within 3 years’ time (Capital Goods excludes moulds and dies, jigs and
fixtures, or tools.)

• Where Principal declares place of job worker as his additional Place of business, then he
can supply the goods directly from job worker’s place, except in following two conditions:

o where the job worker is registered or

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4. ITC and Computation of GST Liability 4.19

o where the Principal is engaged in the supply of such goods as may be notified by the
Commissioner

• The responsibility for keeping proper accounts for the inputs or capital goods shall lie with
the Principal.

• Any waste and scrap generated during the job work may be supplied by the job worker
directly from his place of business on payment of tax, if such job worker is registered, or by
the Principal, if the job worker is not registered.

• For the purposes of job work, input includes intermediate goods arising from any
treatment or process carried out on the inputs by the Principal or the job worker.

Illustration(Job work)

ABC Ltd., sends T Shirts to it’s job workers for fixing the collar, in batches and a
batch was sent on 14th July, 2023. The collars were fixed and the T-shirts were sent
back to the Principal on 31st October, 2024.

In this case, since the goods were not returned to the Principal by the job worker after
completion of the work within one year of it being sent back, the supply between the
principal and the job worker would be a deemed supply, and hence tax would be
need to be paid along with applicable interest.

Also, in such a case, when the goods are returned by the job worker to the
Principal, that again would be construed as a separate supply.

Input Tax Credit Rules – Rule 36 - Documentary requirements and conditions

An invoice issued by the supplier of goods or services or

both in accordance with the provisions of section31;

An invoice issued in accordance with the provisions of

section 31(3)(f); - Reverse Charge – Self Invoice
Required
Documents for
availing the Input A debit note issued by a supplier in accordance with the
tax credit provisions of section 34;
including the
Input Service
Distributor, A bill of entry or any similar document prescribed under the
Customs Act, 1962 or rules made there under for the
assessment f integrated tax on imports;

An Input Service Distributor invoice or Input Service

Distributor credit note or any document issued by an Input
These Service Distributor in accordance with the provisions of sub-
rule (1) of rule54.
documents shall
Be furnished
FORM GSTR-2

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4. ITC and Computation of GST Liability 4.20

Provided that if the said document does not contain all the specified particulars but contains the
details of the amount of tax charged, description of goods or services, total value of supply of goods
or services or both, GSTIN of the supplier and recipient and place of supply in case of inter-State
supply, input tax credit may be availed by such registered person

INPUT SERVICE
DISTRIBUTOR

Section 2(61): “Input Service Distributor” means an office of the supplier of goods or services or
both Which Receives tax invoices issued under Section 31 towards the receipt of input services
And Issues a prescribed document for the purpose of distributing credit Paid on the said
services to a supplier of taxable goods or services or both having the same Permanent Account
Number as that of the said office.

Manner of distribution of credit by Input Service Distributor [Section20]

1

Input Service Distributor shall distribute the

credit of

Central Tax as Central tax Or Integrated

Tax

Integrated Tax as Integrated Or Central Tax

Tax

State Tax As State Tax Or Integrated

Tax

by way of issue of documents containing the amount of input tax credit being distributed
in such manner as prescribed.

2 The ISD may distribute the credit subject to the following conditions, namely:–

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 4. ITC and Computation of GST Liability 4.21

Explanation –

Relevant period” shall be –

(i) If the recipients of credit have turnover in their States or Union territories in the

financial year “preceding the year” during which credit is to be distributed, the said

financial year; or

(ii) If some or all recipients of the credit do not have any turnover in their States or
Union territories in the financial year preceding the year during which the credit is to be

distributed, the last quarter for which details of such turnover of all the recipients

are available, previous to the month during which credit is to be distributed;

“Recipient of credit” means the supplier of goods or services or both having the same
Permanent Account Number as that of the Input Service Distributor;
Utilization of ITC

A. ITC of IGST to be fully utilized first [New section 49A of the CGST Act, 2017]

Section 49A provides that ITC of CGST, SGST/UTGST should be utilized towards payment of
IGST, CGST, SGST/UTGST only after the ITC of IGST has first been utilized fully towards such
payment.

B. SGST/ UTGST to be used for payment of IGST only when credit of CGST is not available
[Section 49 of the CGST Act, 2017]

ITC on account of SGST/UTGST can be utilized towards payment of IGST only where the
balance of the ITC on account of CGST is not available for payment of IGST.
C. New mechanism prescribed for utilization of ITC [New rule 88A inserted in the CGST
Rules, 2017]
The new rule provides as under:

• ITC of IGST should first be utilized towards payment of IGST.

• Remaining ITC of IGST, if any, can be utilized towards the payment of CGST
and SGST/UTGST in any order, i.e. ITC of IGST can be first utilized either
against CGST or SGST.
• ITC of CGST, SGST/UTGST can be utilized towards payment of IGST, CGST,
SGST/UTGST only after the ITC of IGST has first been utilized fully.
D. Clarification in respect of utilization of ITC under GST

CBIC has clarified that after the insertion of new rule 88A in the CGST Rules, 2017, the order of
utilization of ITC will be as per the order (of numerals) given below:

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 4. ITC and Computation of GST Liability 4.22

ITC of Output IGST Output CGST Output SGST/ UTGST

liability liability liability
IGST (I) (II) – In any in any
order and proportion

(III) ITC of IGST to be completely exhausted mandatorily

CGST (V) (IV) Not permitted

SGST/UTGST (VII)14 Not permitted (VI)

The following illustration would further amplify the impact of newly inserted rule 88A:
Illustration:
Amount of ITC available and output tax liability under different tax heads
Head Output tax ITC
liability
IGST 1000 1300

CGST 300 200

SGST/UTGST 300 200

Total 1600 1700

Option 1:
ITC of Discharge of Discharge of output Discharge of output Balance of
output IGST CGST liability SGST/UTGST liability ITC
liability

IGST 1000 200 100 0

ITC of IGST has been completely exhausted
CGST 0 100 - 100
SGST/U 0 - 200 0
TGST
Total 1000 300 300 100

Option 2:
ITC of Discharge of Discharge of Discharge of output Balance of
output IGST output CGST SGST/UTGST ITC
liability liability liability
IGST 1000 100 200 0
ITC of IGST has been completely exhausted
CGST 0 200 - 0
SGST/U 0 - 100 100
TGST
Total 1000 300 300 100

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 4. ITC and Computation of GST Liability 4.23

Illustration
ABC Ltd. is engaged in the manufacture of electrical appliances and following details are
available, advice ITC eligibility of the following:

Item GST Paid

Electrical Transformers utilized in the INR 250,000
manufacturing process
Trucks used for transporting materials INR 125,000
Cakes and Pastries for consumption within INR 12,500
factory
Treatment
(1) The ITC on electrical transformers would be fully available as these are used in the course of
business/ Furtherance of business
(2) The ITC on trucks used for transporting vehicles would be available as these are used in the
course of business/furtherance of business
(3) ITC on food and beverages is a blocked credit unless the inward taxable supplies are
consumed to make outward taxable supplies in the same category whereas the above is for
consumption and hence disallowed

Illustration
Mr. X has procured a machinery for INR 25,00,000 and paid GST of INR 450,000 (18%
GST). He has capitalized the invoice value and will claim depreciation of the entire
Invoice Value. Please advice on the availability of ITC.
If the depreciation is claimed on the ITC component, ITC cannot be availed and hence
Mr. X will not be able to avail ITC in this case.
Illustration Imp.
Mr. B procured stocks worth INR 50, 00,000 inclusive of GST but these goods were lost to
dacoit, however, he now wants to avail ITC as he has anyways paid the entire Invoice.

ITC can only be availed if the goods / services so availed are consumed to make outward
taxable supplies or if they are required during the course of business / furtherance of
business. In this case, the goods were lost and hence ITC cannot be availed.
Illustration
Mr. Z, a supplier of goods, pays GST under regular scheme. Mr. Z is an inter-state supplier
and hence is not eligible to any threshold exemptions. He has made the following taxable
supplies:

Outward Taxable Supplies

Intra State 12,00,000
Inter State 4,50,000
He has also furnished the following details about his purchases:

Inward Taxable Supplies

Intra State 4,50,000
Inter State 75,000

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 4. ITC and Computation of GST Liability 4.24

He has opening balances of ITC as under:

CGST INR45,000
SGST INR45,000
IGST INR105,000
If the supplies are exclusive of taxes (18% GST), compute his tax liability.
The following represents his tax liability with respect to Outward Taxable Supplies:

Tax
Liability
CGST SGST IGST
1,08,000 1,08,000 81,000
The following statement explains his ITC situation:

Tax
Liability
CGST SGST IGST
For Current Purchases 40,500 40,500 13,500
Opening 45,000 45,000 105,000
Total ITC 85,500 85,500 1,18,500
The following table represents his discharge of liabilities:

Discharge
CGST SGST IGST
Liability 1,08,000 1,08,000 81,000

ITC (IGST) (37,500) (81,000)

Balance 1,08,000 70,500 -
ITC (CGST/SGST) (85,500) (70,500)
Paid 22,500 NIL NIL

Balance ITC of SGST – Rs. 85,500 – Rs. 70,500 = Rs. 15,000

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 5. Procedural compliances 5.1

Lesson 5 – Procedural Compliance under GST

Introduction
Registration is the most fundamental requirement for identification of tax payers ensuring tax compliance in the
economy.
Regulatory Framework
Central Goods and Services Act, 2017

Section Deals with

Section 22 Persons liable for registration
Section 23 Persons not liable for registration
Section 24 Compulsory registration in certain cases
Section 25 Procedure for registration
Section 29 Cancellation of registration
Section 31 Tax invoice
Section 34 Credit and debit Notes
Section 35 accounts and other records
Section 36 Period of retention of accounts
Section 37 Furnishing details of outward supplies
Section 38 Furnishing details of inward supplies
Section 39 Furnishing of returns
Section 40 First return
Section 41 Claim of input tax credit and provisional acceptance thereof
Section 42 Matching, reversal and reclaim of input tax credit
Section 43 Matching, reversal and reclaim of reduction in Output tax liability.
Section 44 Annual return
Section 45 Final return
Section 46 Notice to return defaulters
Section 49 Payment of tax, interest, Penalty and other amounts
Section 51 Tax deducted at Source (TDS)
Section 54 Refund of tax
Section 56 Interest on delayed refunds
Section 57 Consumer Welfare Fund
Section 58 Utilization of Fund
Section 65 Audit by tax authorities
Section 66 Special audit
Section 68 Electronic Way Bill
Section 146 Common Portal
Section 171 Anti-Profiteering Measure

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 5. Procedural compliances 5.2

RULES FOR REGISTRATION [CHAPTER III]

CHAPTER III of Central Goods & Services Tax Act, 2017 deals with the registration provisions.
Rules of CGST Act, Description
2017
Rule 8 Application for registration
Rule 9 Verification of the application and approval
Rule 10 Issue of registration certificate
Rule 10A Furnishing of Bank Account Details
Rule 11 Separate registration for multiple places of business within a State or a
Union
territory
Rule 12 Grant of registration to persons required to deduct tax at source or to collect tax
at source
Rule 13 Grant of registration to non-resident taxable person
Rule 14 Grant of registration to a person supplying online information and database
access or retrieval services from a place outside India to a non-taxable online
recipient
Rule 15 Extension in period of operation by casual taxable person and non-resident
taxable person
Rule 16 Suo-moto registration
Rule 17 Assignment of Unique Identity Number to certain special entities
Rule 18 Display of registration certificate and Goods and Services Tax Identification
Number on the name board
Rule 19 Amendment of registration
Rule 20 Application for cancellation of registration
Rule 21 Registration to be cancelled in certain cases
Rule 21A Suspension of registration
Rule 22 Cancellation of registration
Rule 23 Revocation of cancellation of registration
Rule 24 Migration of persons registered under the existing law
Rule 25 Physical verification of business premises in certain cases
Rule 26 Method of authentication

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 5. Procedural compliances 5.3

Registration
1. Nature of registration

2. Separate registration for a person having multiple place of business in a State [Rule 11]
Now a person having multiple places of business in a State or Union territory MAY be granted a
separate registration for each such place of business, subject to such conditions as may
be prescribed.
Example: Meethalal & Sons - a supplier in Delhi has three branches – two engaged in supply of
garments and one engaged in supply of shoes. While as per the erstwhile provisions, Meethalal &
Sons could obtain only registrations – one for business vertical of garments and another for
business vertical of shoes, now it can obtain separate GST registration for each three branches
3. New rule 11 stipulates that any person having multiple places of business within a State/UT,
requiring a separate registration for any such place of business shall be granted separate
registration in respect of each such place of business subject to the following conditions,
namely:-
a. such person has more than one place of business as defined in section 2(85);
b. such person shall not pay tax under composition levy for any of his places of
business if he is paying tax under normal scheme for any other place of
business.
Where any place of business of a registered person that has been granted a
separate registration becomes ineligible to pay tax under composition scheme,
all other registered places of business of the said person shall become ineligible
to pay tax under said scheme.
c. all separately registered places of business of such person shall pay tax under
the Act on supply of goods or services or both made to another registered place
of business of such person and issue a tax invoice or a bill of supply, as the
case may be, for such supply.
d. A registered person opting to obtain separate registration for a place of business
shall submit a separate application in prescribed form in respect of such place
of business.

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 5. Procedural compliances 5.4

4. Separate registration for SEZ unit or SEZ developer

Person having a unit in SEZ or being a SEZ developer shall have to apply for a separate
registration, as distinct from his place of business located outside the SEZ in the same State or
Union territory.
5. Registration requirements – Nearest Coastal Area
Where, a person makes a supply from the territorial waters of India, it shall obtain registration in the
coastal State or Union territory where the nearest point of the appropriate baseline is located.

6. Aggregate Turnover

Taxable Exempt ZRS Inter State Aggregate

Supplies supplies supplies Turnover
(Exports &
SEZ)

Aggregate Turnover will be computed on All-India basis for same PAN

• Aggregate Turnover doesn’t include the inward taxable supplies under the Reverse Charge
Mechanism.
• The supplies by the agents on behalf of the principal would be included in the
aggregate turnover of both, the principal and the agent.
• Registration is mandatory at every place of business from wherein a taxable supply has
been made.
7. GSTIN

• The thirteenth digit will be assigned based on the number of registrations within a state
• The fourteenth digit will be Z by default
• The last digit will be for check code

Persons liable for Registration [Section 22]

A. Now, only Mizoram, Tripura, Manipur and Nagaland are Special Category States for the
purpose of section 22.

B. With effect from 01.04.2019, Notification No. 10/2019 CT dated 07.03.2019 is issued which
exempts any person who is engaged in exclusive supply of goods and whose aggregate
turnover in the financial year does not exceed Rs. 40 lakh.
Exceptions to this exemption are as follows:

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5. Procedural compliances 5.5

(a) persons required to take compulsory registration under section 24 of the

CGST Act.
(b) persons engaged in making supplies of ice cream and other edible ice, ,Pan
masala and all goods of Chapter 24, i.e. Tobacco and manufactured tobacco
substitutes
• Fly ash bricks or fly ash aggregate with 90% ormore fly ash content; Fly ash
blocks
• Bricks of fossil meals or similar siliceous earths
• Building bricks
• Earthen or roofing tiles
(c) Persons engaged in making intra-State supplies in the States of Arunachal
Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim,
Telangana, Tripura, Uttarakhand.
(d) Inter-State supplies of goods are nevertheless liable to compulsory
registration.
(e) Person who has opted for voluntary registration or such registered persons
who intend to continue with their registration under the CGST Act.

Turnover Limits

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5. Procedural compliances 5.6
• Threshold Limit for Registration for Suppliers of Ice cream and other
edible ice, whether or not containing cocoa; Pan masala; Tobacco
and manufactured tobacco substitutes, Fly ash bricks or fly ash
aggregate with 90% ormore fly ash content; Fly ash blocks,
Bricks of fossil meals or similar siliceous earths, Building
bricks, Earthen or roofing tiles
Rs. 10 Lacs Rs. 20 Lacs

1. Manipur Remaining 27 States and 5 Union Territories.

2. Mizoram
3. Nagaland
4. Tripura

Notes:
1. These suppliers are also not eligible for exemption limit of Rs. 40 lacs.
2. Registration is mandatory in case of inter-state supply of these goods.

a. Provided further that the Government may, at the request of a special category State and on
the recommendations of the Council, enhance the aggregate turnover referred to in the first
proviso from ten lakh rupees to such amount, not exceeding twenty lakh rupees and
subject to such conditions and limitations, as may be so notified.
b. Also may increase limit from twenty lakh rupees to such amount not exceeding forty lakh
rupees in case of supplier who is engaged exclusively in the supply of goods

c. Explanation––For the purposes of this sub-section, a person shall be considered to

be engaged exclusively in the supply of goods even if he is engaged in exempt supply
of services provided by way of extending deposits, loans or advances in so far as the
consideration is represented by way of interest or discount.
Explanation. – For the purposes of this section, –
(i) the expression “aggregate turnover” shall include all supplies made by the taxable
person, whether on his own account or made on behalf of all his principals;
(ii) the supply of goods, after completion of job work, by a registered job worker shall
be treated as the supply of goods by the principal and the value of such goods shall
not be included in the aggregate turnover of the registered job worker;
d. In case of inter-state supply of goods registration is mandatory u/s 24 of the CGST Act but

e. The exemption is granted to person making inter-state taxable supplies of handicraft goods
upto an aggregate turnover of Rs. 10 lacs/ 20 lacs as long as the person has a PAN and the
goods move under the cover of an e-way bill, irrespective of the value of the consignment.
f. All service providers, whether supplying intra-state, inter-state or through e-commerce operator,
will be exempt from obtaining GST registration, provided their aggregate turnover doesn’t exceed
Rs. 20 lacs (Rs. 10 lacs in case of Manipur, Mizoram, Nagaland & Tripura).

Examples:
Supplier engaged Aggregate Applicable threshold Whether
turnover limit for liable to
registration obtain
registration?
Prithiviraj
of Assam
exclusively
of shoes
in supply Rs. 22 lakh Rs.40 lakh

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5. Procedural compliances 5.7
Rs. 22 lakh Rs.20 lakh
exclusively
of pan masala
in supply
✓

Rs. 22 lakh Rs.20 lakh

exclusively in supply
of taxable services
✓

in supply of both taxable

goods and services
Rs. 22 lakh Rs.20 lakh
✓

Shivaji of
Telangana
exclusively
of toys
in supply Rs. 22 lakh Rs.20 lakh
✓
exclusively
of ice cream
in supply Rs. 22 lakh Rs.20 lakh
✓
exclusively in supply
of taxable services
Rs. 22 lakh Rs.20 lakh
✓
in supply of both
taxable goods and
Rs. 22 lakh Rs.20 lakh
✓
services
Ashoka of
Manipur
exclusively
of paper
in supply Rs. 12 lakh Rs.10 lakh
✓
exclusively
of tobacco
in supply Rs. 12 lakh Rs.10 lakh
✓
exclusively in supply
of taxable services
Rs. 12 lakh Rs.10 lakh
✓
in supply of both
taxable goods and
Rs. 12
lakh
Rs.10 lakh
✓
services

Imp.

Note – In case of transfer – succession, transferee shall be liable to be registered with effect from the date of such
transfer or succession.

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 5. Procedural compliances 5.8

Persons not liable to register & Compulsory registration [Section 23 & 24]

“agriculturist” has been defined under sub-section (7) of Section 2 of the CGST Act, 2017, means an
individual or a Hindu Undivided Family who undertakes cultivation of land –
(a) by own labour, or
(b) by the labour of family, or
by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision
of any member of the family

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 5. Procedural compliances 5.9

Compulsory Registration

Of Goods

All service providers, whether supplying intra-state, inter-state or through e-commerce operator,
will be exempt from obtaining GST registration, provided their aggregate turnover doesn’t exceed
Rs. 20 lacs (Rs. 10 lacs in case of Manipur, Mizoram, Nagaland & Tripura).

1. Compulsory registration for e-commerce operator who is required to collect tax at source
[Section 24(x) of CGST Act]
Only those e-commerce operators who are required to collect tax at source under section 52
of the CGST Act would only be required to obtain compulsory registration.

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 5. Procedural compliances 5.10

2. Persons making inter-State taxable or Casual Taxable Persons (CTP supplies of notified
goods up to Rs. 20,00,000 exempted from obtaining compulsory registration
Following categories of persons have been exempted from obtaining registration although they
are making inter-state supplies:
(a) CTP’s/ Persons making inter-State taxable supplies of notified handicraft
goods*
(b) Persons making inter-State taxable supplies of notified products, when made
by the craftsmen predominantly by hand even though some machinery may also
be used in the process.
*Handicraft goods means goods predominantly made by hand even though some tools or machinery
may also have been used in the process; such goods are graced with visual appeal in the nature of
ornamentation or in-lay work or some similar work of a substantial nature; possess distinctive
features, which can be aesthetic, artistic, ethnic or culturally attached and are amply different from
mechanically produced goods of similar utility.

Conditions to be fulfilled:
1*. The aggregate value of such supplies, to be computed on all India basis, does
not exceed an amount of Rs. 20 lakh/Rs.10 lakh in a FY.
2*. Such persons have obtained a PAN and have generated an e-way bill

Procedure for Registration [Section 25]

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 5. Procedural compliances 5.11

Definitions -

Section 2(20) → “Casual taxable person” as a person who occasionally undertakes

transactions involving supply of goods or services or both in the course or furtherance of
business, whether as principal, agent or in any other capacity, in a State or a Union territory
where he has no fixed place of business.
CTP will be granted registration for a maximum period of 90 days.
Section 2(77) → “Non-resident taxable person” as any person who occasionally undertakes
transactions involving supply of goods or services or both, whether as principal or agent or in
any other capacity, but who has no fixed place of business or residence in India.
NRTP will be granted registration for a maximum period of 90 days.
Clarifications regarding Casual Taxable Person
S.N Issue Clarification
Whether the amount required to
be deposited as advance tax It should be calculated after considering the due
while taking registration as a eligible ITC which might be available to such taxable
casual taxable person (CTP) person i.e. “Net Tax Liability”
should be 100% of the
1 estimated gross tax liability or
the estimated tax liability payable
in cash should be calculated after
deducting the due eligible ITC?

As per section 27 of the Central 1. It is clarified that in case of long running exhibitions
Goods and Services Tax Act, (for a period more than 180 days), the taxable person
2017 (hereinafter referred to as cannot be treated as a CTP and thus such person would
the said Act), period of operation be required to obtain registration as a normal taxable
by causal taxable person is person.
ninety days with provision for
extension of same by the proper 2. While applying for normal registration the said person
officer for a further period not should upload a copy of the allotment letter granting him
2 exceeding ninety days. Various permission to use the premises for the exhibition and the
representations have been allotment letter/consent letter shall be treated as the
received for further extension of proper document as a proof for his place
the said period beyond the period of business.
of 180 days, as mandated in law. 3. In such cases he would not be required to pay
advance tax for the purpose of registration.
4. He can surrender such registration once the
exhibition is over.
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 5. Procedural compliances 5.12

Eligibility for Registration [Section 25(6)]

Every person shall have a Permanent Account Number issued under the Income tax Act, 1961 in order to be
eligible for grant of registration.
Provided that a person required to deduct tax under section 51 may have, in lieu of a Permanent Account
Number, a Tax Deduction and Collection Account Number (TAN) issued under the said Act in order to be
eligible for grant of registration.

Sub-sections (6A) to (6D) inserted in section 25

Sub-section(6A)
• Every registered person shall undergo authentication, or furnish proof of possession of
Aadhaar number or thorough any other viable means of identification.
• In case of failure , registration allotted to such person shall be deemed to be invalid and
the other provisions of this Act shall apply as if such person does not have a registration.

Rule 10B – Newly Inserted

A registered person, who has been issued a certificate of registration underGST, shall
undergo authentication of the Aadhaar number of:-
✓ Proprietor, in the case of proprietorship firm,

✓ Any partner, in the case of a partnership firm,

✓ Karta, in the case of a Hindu undivided family,

✓ Managing director or any whole-time director, in the case of a company,
✓ Any of the Members of the Managing Committee of an Association of persons or body
of individuals or a Society, or
✓ Trustee in the Board of Trustees, in the case of a Trust; and of the
Authorized Signatory,
In order to be eligible for the following purposes:
✓ for filing of application for revocation of cancellation of registration[Rule 23]
✓ for filing of refund application in Form RFD-01 [Rule 89]
✓ for refund of the IGST paid on goods exported out of India [Rule 96]

If Aadhaar number has not been assigned to the person required to undergo authentication of
the Aadhaar number, such person shall furnish the following identification documents, namely:
–
(a) his/ her Aadhaar Enrolment ID slip; and
(b)
(i) Bank passbook with photograph; or
(ii) Voter identity card issued by the Election Commission of India; or
(iii) Passport; or
(iv) Driving license issued by the Licensing Authority
However, once Aadhaar number is allotted to such person, he shall undergo the
authentication of Aadhaar number within a period of 30 days of the allotment of the Aadhaar
number.
The afore-said rule 10B shall not be applicable to persons notified undersection 25(6D), i.e.
to persons exempt from Aadhaar authentication.
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 5. Procedural compliances 5.13

Sub-section (6B)
• In case of Individual, the person should under go authentication or give proof of Aadhar
and if Aadhar is not available any other means can be adopted
Subsection (6C)
• In case of other than Individuals, Aadhaar number of the Karta, Managing Director,
whole time Director, such number of partners, Members of Managing Committee of
Association, Board of Trustees, authorised representative, authorised signatory and
such other class of persons can be checked or any alternative method can be adopted.

• Subsection (6D)
Aadhar authentication provisions should not be applicable to
❖ a person who is not a citizen of India
❖ a Department or establishment of the Central Government or State Government; or

❖ a local authority; or

❖ a statutory body; or

❖ a Public Sector Undertaking; or

❖ a person applying for registration under the provisions of sub-section (9) of section 25
CGSTAct. – Specialized agencies – UNO, Embassies, persons having UIN etc.

& Should be applicable to –

RULES FOR REGISTRATION [CHAPTER III]

Rule 8(1) – Every person other than

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 5. Procedural compliances 5.14

Application for registration [Rule 8]

Other than above 4 shall declare his

in Part A of Form GST REG-01

• Every person being an Input Service Distributor shall make a separate application for
registration.
Rule 8(2): It lays down the verification of details entered for registration:

PAN through portal of CBDT

Mobile number and E- Mail though OTP
Rule 8(3) - On successful verification of above temporary reference number be communicated to the
applicant on the said mobile number and e-mail address

Rule 8(4) - Using reference number generated, applicant should fill Part B of GST REG - 01 using sign.
/ EVC

Subrule 4A substituted

Application made in GST REG – 01 shall be followed by

(a) If opted for Aadhar authentication → biometric-based Aadhaar authentication and taking
photograph
or
(b) Not opted for Aadhar authentication → taking biometric information, photograph and
verification of such other KYC documents

along with the verification of the original copy of the documents uploaded with the application in FORM
GST REG-01 at one of the Facilitation Centres notified by the Commissioner and the application shall be
deemed to be complete only after completion of the process laid down.

• Rule 8(5) - Acknowledgement issued via GST REG – 02

• Rule - 8(6) Casual Taxable Person shall be given TRN and acknowledgement in REG - 02

Verification of the application and approval [Rule 9]

Further Rule 9 amendments (1) substituted stating –

Subrule 1 –
If all the documents are in order then Approve the grant of registration to the applicant within 7
working days from the date of submission of application.
Proviso
✓ If a person fails to undergo authentication of Aadhaar number or does not opt for
authentication of Aadhaar number
or

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 5. Procedural compliances 5.15

The proper officer, with the approval of an officer authorized by the Commissioner not below the
rank of Assistant Commissioner, deems it fit to carry out physical verification of places of business
✓ then the registration shall be granted within 30 days of application only after physical
verification of the principal place of business in the presence of the said person,
✓ Also the automatic approval of registration on expiry of 3/7 days will not be provided in this
case.

Sub Rule 2
If application is deficient regarding documents issue a notice in FORM GST REG-03
within 7 working days from the date of submission of application

Proviso added

Provided that where-

a. person fails to undergo authentication of Aadhaar number
or does not opt for authentication of Aadhaar number;
or
the proper officer, with the approval of an officer authorised by the Commissioner not below the rank
of Assistant Commissioner, deems it fit to carry out physical verification of places of business,

the notice in FORM GST REG-03 may be issued not later than 30 Days from the date of submission of the
application.

Applicant furnish such clarification in FORM GST REG-04, within 7 working days from the
date of receipt of such intimation.
Sub Rule 3

PO (proper officer) is satisfied may approve the grant of registration within 7 working days
from the date of receipt of such clarification

Sub Rule 4
Where no reply furnished/ PO not satisfied reasons to be recorded in writing May reject such
application FORM GST REG-05.

Sub Rule 5 - Deemed Approval

If the proper officer fails to take any action, -

(a) within a period of 7 working days from the date of submission of the
or

(b) within a period of 30 days from the date of submission of the application in cases where Aadhar
authentication was not done or physical verification of premises was not done
or

(c) within a period of 7 working days from the date of the receipt of the clarification, information or
documents furnished by the applicant
the application for grant of registration shall be deemed to have been approved

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 5. Procedural compliances 5.16

Issue of registration certificate [Rule 10]

Issue in FORM GST REG-06 showing the (PPOB)principal place of business & additional
place(s) of business(APOB)
Assessee be communicated the registration number and the certificate of registration
→ be made available to him on the common portal within → 3 days from the end of the
period when PO failed to take any action. (Refer Sub Rule 5 above)
→ Every certificate of registration shall be duly signed or verified through electronic
verification code by the proper officer under the Act

Furnishing bank details [Rule 10A]

• After receiving GST-REG 06 on common portal the registered person shall furnish the
bank account details within –
a. Next 45 days from date of grant of registration

or
b. Due date of return under
section 39,
whichever is earlier
• This relaxation is not available for those who have been granted registration as TDS
deductor/ TCS collector under rule 124 or who have obtained suo-motu registration
under rule 16.

Grant of registration to persons responsible for TDS/ TCS [Rule 12]

• However, if a person violates the provisions of rule 10A, his GST registration is liable to
be cancelled [Rule 21].
The procedure is as under:

• Such persons shall submit an application, duly signed or verified, in FORM

a GST REG-07

• The PO may grant registration after due verification and issue a certificate of
registration in FORM GST REG-06 within a period of 3 working days from the
b date of submission of the application

• The PO may cancel the registration of such persons and communicate to the
c said person electronically in FORM GST REG-08

Grant of registration to NRTP (REG – 09) – Rule 13/ CTP(REG – 01)

NRTP to submit application with a valid passport, for registration, duly signed, in FORM
GST REG-09
Application → Temporary reference number will be given → Deposit advance →Reg certificate will be issued

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 5. Procedural compliances 5.17

A business entity incorporated or established outside India → shall submit→ its tax identification
number or unique number on the basis of which the entity is identified by the Government of that
country or its Permanent Account Number, if available. The application of NRTP shall be duly signed
or verified through electronic verification code by his authorized signatory who is resident in India having
a valid PAN.

Rule 15 – For extension of registration CTP/ NRTP shall submit FORM GST REG-11 –
Maximum extension 90 more days else get registered as Normal Taxable person

Rule 14 – Person supplying OIDAR shall submit an application in FORM GST REG-10

Suo moto registration [Rule 16]

In case applicable, PO may register the said person on a temporary basis and issue an
order in FORM GST REG-12.
The registration shall be effective from the date of order granting registration.

Granted
temporary
registration

If appealed by assessee and

assessee to submit an
decision not in favour of the
application for registration
assessee --> apply within 30
within 90 days
days form date of issuing order

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5. Procedural compliances 5.18

Assignment of unique identity number to certain special entities [Rule 17] (Ex. to
UNO, WHO)

Specified persons may submit an application, electronically in FORM GST REG-13

FORM GST REG-06 to be issued within 3 working days from the date of
submission of application.
PO may also assign UIN After receiving a recommendation from the Ministry of External
Affairs, Government of India

Display of registration certificate and GSTIN on the name board [Rule 18]
Display certificate of registration at his principal prominent place of business & at
every additional place business.

Display his GSTIN on the name board exhibited at the entry of his principal place of business
and at every additional place of business.

Amendment of Registration [Rule 19] (15-15-15)

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5. Procedural compliances 5.19

• Apply for amendment in - FORM GST REG-14

• Amendment order issued in GST REG – 15

• If documents insufficient → Notice in GST REG – 03 → Furnish reply in GST REG – 04 → In

case of rejection → GST REG – 05

(1A) Notwithstanding anything contained in sub-rule (1), any particular of the application for registration
shall not stand amended with effect from a date earlier than the date of submission of the
application in FORM GST REG-14 on the common portal except with the order of the
Commissioner for reasons to be recorded in writing and subject to such conditions as the
Commissioner may, in the said order, specify.

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 5. Procedural compliances 5.20

Cancellation or Suspension of Registration [Section 29]

✓ By The proper officer may, either himself

Or
✓ on application filed by a registered person, or his legal heirs in case of a death of a
registered person, cancel / revoke the registration of such person.

This cancellation could be from a prospective / retrospective date as the officer may
deem fit.

Cancellation of registration can be because of –

✓ Once a registered person has applied for cancellation of registration or the proper officer
seeks to cancel his registration, the proper officer may suspend his registration during
pendency of the proceedings.
Application for cancellation of registration [Rule 20]
• Person other than responsible for TDS/ TCS and UIN → submit REG – 16 → furnish
details of stock, WIP, FG, CG and liability of payment.
• Furnish documents within a period of 30 days of the occurrence of the event warranting
the cancellation

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 5. Procedural compliances 5.21

Circumstances when the proper officer can cancel registration on his own → Rule 21

Following contraventions done by the registered person:

(a)He does not conduct any business from the declared place of business,
or
(b)He issues invoice/bill without supply of goods/services or Both in
violation of the provisions of this Act, or the rules made thereunder.
(c) If he violates the provisions of section 171 of the CGST Act. → anti-
profiteering measure
(d)Violates Rule 10A
(e) avails input tax credit in violation of the provisions of section 16 of the Act or the
rules made thereunder (ITC covered in detail in Chapter 4)
(f) Outward supplies in FORM GSTR-1 under section 37 for one or more tax periods
which is in excess of the outward supplies declared by him in his valid return
under section 39 for the said tax periods; or
(g) violates the provision of rule 86B (Newly inserted putting restrictions on ITC)

Period and manner of suspension of registration - Rule 21A

1. Where registered person has applied for cancellation of registration: The

registration shall be deemed to be suspended from:

(a) The date of submission of the application

or
(b) The date from which the cancellation is sought,
whichever is later,
pending the completion of proceedings for cancellation of registration.
2. Where cancellation of the registration has been initiated by the Department
on their own motion: PO may, after affording the said suspend the registration
of such person with effect from a date to be determined by him, pending the
completion of the proceedings for cancellation of registration.
Sub Rule (2A)
Where, a comparison of the returns furnished by a registered person under section 39 – GSTR 3B with
(a) the details of outward supplies furnished in FORM GSTR-1;
or
(b) the details of inward supplies derived based on the details of outward supplies furnished by his
suppliers in their FORM GSTR-1,
Or
(c) such other analysis, as may be carried out on the recommendations of the Council,
show that there are significant differences or anomalies indicating contravention of the provisions of
the Act or the rules made thereunder, leading to cancellation of registration → his registration shall be
suspended and be intimated in FORM GST REG-31 (Newly introduced), electronically, on the

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 5. Procedural compliances 5.22

common portal, or by sending a communication to his e-mail, highlighting the said differences and
anomalies and asking him to explain, within a period of 30 days, as to why his registration shall not be
cancelled.”

3. A registered person, whose registration has been suspended as above:

• shall not make any taxable supply during the period suspension of
and

• shall not be required to furnish any return under section 39.

“shall not make any taxable supply” shall mean that the registered person can make the supplies but
should not issue a tax invoice and, accordingly, should not charge tax on supplies made by him during the
period of suspension.”
Sub Rule (3A)
A registered person, whose registration has been suspended under sub-rule (2) or sub-rule (2A), shall not
be granted any refund under section 54, during the period of suspension of his registration

4. The suspension of registration shall be deemed to be revoked upon completion of the

cancellation proceedings by the proper officer. Such revocation shall be effective from the
date on which the suspension had come into effect. and Pending returns to be filed before
revocation of cancellation of registration.
Proviso added
Provided that the suspension of registration under this rule may be revoked by the proper officer,
anytime during the pendency of the proceedings for cancellation, if he deems fit.

5. New sub rule (5) has been inserted to specify that, in case of revocation of suspension, the
supplier shall –

a. Issue revised invoices (Tax invoice) for the invoices already issued – (Sec 31(3)(a))
b. Declare all such turnover in the first return to be filed after revocation of cancellation – (Sec 40)

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 5. Procedural compliances 5.23
Cancellation of registration [Rule 22]

PO to issue notice GST REG 17

Reply within 7 working days in REG 18 or furnishes all the pending returns and makes full
payment of the tax dues along with applicable interest and late fee

PO may drop the proceeding in REG 20

Registration cancellation order issued in REG 19 within 30 days

Revocation of cancellation of registration [Rule 23]

Application for revocation of cancellation → of registration, in FORM GST REG-21 →

within 30 days from the date of service of the order.

“Provided that such period may, on sufficient cause being shown, and for reasons to be recorded
in writing, be extended,–
(a) by the Additional Commissioner or the Joint Commissioner, as the case may be, for a period
not exceeding 30 days;
(b) by the Commissioner, for a further period not exceeding 30 days, beyond the period
specified in clause (a).”

PO revoke the cancellation → in FORM GST REG-22 → within 30 days → from the date
of receipt of the application

PO may Issue SCN in FORM GST REG–23

Reply within 7 working days from the date of the service of notice in FORM GST REG-
24.

PO may dispose of the application → within 30 days from the date of receipt of such
information or clarification from the applicant

✓ Pending returns to be filed before revocation of cancellation of registration [Section 23(1)

read with Rule 23 of the CGST Rules, 2017]
Iif the registration has been cancelled on account of failure of the registered person to
furnish returns, no application for revocation of cancellation of registration shall be filed,
unless such returns are furnished and any amount in terms of such returns is paid.

A. Where the registration has been cancelled with effect from the date of order
of cancellation of registration,

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5. Procedural compliances 5.24
(i) all returns due till the date of such cancellation are required to be
furnished before the application for revocation can be filed.
and
(ii) all returns required to be furnished in respect of the period from the date of
order of cancellation till the date of order of revocation of cancellation of
registration have to be furnished within a period of 30 days from the date of the
order of revocation.

B. However, where the registration has been cancelled with retrospective effect, the
application for revocation of cancellation of registration can be filed, subject to the
condition that all returns relating to the period from the effective date of cancellation of
registration till the date of order of revocation of cancellation of registration shall be
filed within a period of 30 days from the date of order of such revocation of cancellation
of registration

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 5. Procedural compliances 5.25

Physical verification of business premises in certain cases [Rule 25]

• the physical verification of the place of business of a person is required due to failure of
Aadhaar authentication or “due to not opting for Aadhaar authentication” before the grant of
registration
• Or due to any other reason after the grant of registration
• Verification report by PO → FORM GST REG-30 → within 15 working days following the date of
such verification.

Method of Authentication [Rule 26]

(1) Each document be online shall be signed or verified through electronic verification code –

(a) Individual →, individual himself or person duly authorized → if mentally

incapacitated → by his guardian or by any other person competent to act on his
behalf
(b) HUF → Karta → Karta is absent from India or is mentally incapacitated → by any
other adult member or of such family or by the authorized signatory;
(c) Company (shall furnish the documents or application verified through digital signature
certificate) → CEO or authorized signatory;
(d) Government / Governmental agency / local authority → officer authorized
(e) Firm → by any partner or authorized signatory;
(f) Any other association → any member or authorized signatory;
(g) Trust → by the trustee or authorized signatory;
(h) Any other person → by some person competent to act on his behalf, or GST
Practitioner

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 5. Procedural compliances 5.26

Time Limit for issuance of Invoice

Goods Sent on approval basis -

1. Removal of artwork to galleries for subsequent sale - delivery challan and e-way bill (where applicable).
Once the artwork is sold, the tax invoice should be generated.
2. Removal of goods outside India for the exhibition :
✓ It is neither ‘supply’ nor ‘export’. CBI&C Circular No. 108/27/2019-GST dated 18.07.2019
✓ Since it is not ‘export’, LUT or bond is not required. Goods should be sent under Delivery Challan.
✓ As and when goods are sold, the tax invoice should be issued.
✓ If goods are not brought back within six months, a tax invoice should be issued and GST paid.
✓ If goods are sold within six months, refund claim under rule 89(4) of CGST for ITC can be filed
even if goods were cleared without bond or LUT.

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5. Procedural compliances 5.27

Illustration
Meenakshi enterprises, Kolkata makes a supply of goods to Dhirani enterprises, Ghaziabad. The goods
were removed from the factory at Kolkata on 3rd May.
Hence, the tax invoice must be issued on or before 3rd May.

Illustration
Mohan Ltd. an event management company has provided its services for an event at Photo Film Agencies
at Kolkata, on 1st June. The tax invoice must therefore be issued within 30 days, i.e. on or before 1st July.

Illustration
Seema & Co. has entered into an AMC (Annual Maintenance Contract) with Vir Enterprises for one-year
effective 1st September, 2023 for the stabilizers installed in the factory. As per contract, the invoice must be
issued by 9th September, 2023. In this case, since there is a continuous supply of services where the due
date is ascertainable from the contract, the tax invoice must be issued before or on 9th September, 2023.

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 5. Procedural compliances 5.28

Rule Particulars Important points

Number
46 Tax Invoice • If recipient is un-registered + value of taxable supply
is minimum Rs. 50,000 → mention name, recipient
delivery and address name of State and its code
• in case of exports of goods or services, the invoice
shall carry an endorsement “SUPPLY MEANT FOR
EXPORT supply to SEZ unit or SEZ developer for
authorized operations ON PAYMENT OF IGST” or
“SUPPLY MEANT FOR EXPORT/ supply to SEZ unit

or SEZ developer for authorized operations

UNDER BOND OR LETTER OF UNDERTAKING
WITHOUT PAYMENT OF IGST”
46A Invoice-cum-bill of A registered person can issue Invoice-cum-bill of supply
supply

1. name and address of the recipient and the address of delivery, along with the name of State and its
code, if such recipient is un-registered and where the value of taxable supply is fifty thousand
rupees or more;
2. name and address of recipient, address of delivery with the name of the State and its code
recipient is un-registered and where the value of the taxable supply is less than fifty thousand
rupees and the recipient requests that such details be recorded in the tax invoice

5.4 HSN Code

Number of HSN digits required on tax invoice and class of registered person not required to
mention HSN [Rule 46]

As mentioned above, a registered person having aggregate turnover up to Rs. 5 crores in the
previous financial year has been exempted from the requirement of mentioning the HSN Code in
the manner specified in above table in a tax invoice issued by him under the said rules in respect
of supplies made to unregistered persons.

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 5. Procedural compliances 5.29

5.5 E-Invoicing
1. Basics
• All registered businesses with an aggregate turnover (based on PAN)in any preceding financial year
from 2017-18 onwards > than Rs. 10 crore (hereinafter referred to as ‘notified persons’) will be required
to issue e-invoices.

2. E-Invoicing
Before we proceed further, let us first understand what is ‘e-invoicing’?
E-invoicing is not generation of invoice by a Government portal.Taxpayers will continue to create their GST
invoices on their own Accounting/Billing/ERP Systems. These invoices will then be reported to ‘Invoice
Registration Portal (IRP)’.

On such reporting, IRP will generate a unique ‘Invoice Reference Number (IRN)’, digitally sign it and return
the e-invoice to the supplier. A GST e-invoice will be valid only with a valid IRN.
Sample IRN - 35054cc24d97033afc24f49ec4444dbab81f542c555f9d30359dc75794e06bbe
E-invoicing statutory provisions
✓ Rule 48(4) stipulates that the e-invoice shall be in Form GST INV-01.
✓ Where e-invoicing is applicable, there is no need of issuing invoice copies in triplicate/duplicate.
3. Class of persons notified to mandatorily issue e-invoice
✓ Registered persons whose aggregate turnover in any preceding financial year from 2017-18
onwards exceeds Rs. 10 crore has been notified as class of persons who shall prepare e-invoice in
respect of B2B supplies (supply of goods or services or both to a registered person) or for exports.
✓ Thus, presently, such notified persons are not required/allowed to report B2C invoices.
✓ Further, e-invoicingis also not applicable to invoices issued by Input Service Distributor (ISD).
✓ Supplier making a supply under reverse charge under section 9(3), e-invoicing is applicable to the
supplier.
✓ Supplies are received by notified person from unregistered persons [attracting reverse charge under
section 9(4)] or through import of services, e-invoicing doesn’t arise/ not applicable.
✓ E-invoicing is also not applicable for import of goods (Bills of Entry).

4. Exemption from e-invoicing

Following entities are exempt from the mandatory requirement of e-invoicing:

A. Special Economic Zone units

It is important to note here that only SEZ units and not SEZ developers are exempt from issuing e-

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 5. Procedural compliances 5.30
invoices.

Thus, SEZ developers whose turnover exceeds 10 crores in any preceding financial year from 2017-
18 onwards are mandatorily required to issue e-invoices.

Further, in case of supplies made by notified persons to SEZ units, e-invoices need to be issued.
B. Insurer or banking company or financial institution including NBFC
C. GTA (Goods Transporter Agency – Transporter) supplying services in relation to transportation of
goods by road in a goods carriage
D. Supplier of passenger transportation service
E. Person supplying services by way of admission to exhibition of cinematograph films in multiplex
screens
F. Govt. Department or Local authority

5. Quick Response (QR) code

Upon successful registration of invoice on IRP, it will return a signed e-invoice to the supplier with
IRN and QR Code. IRN is embedded in the QR Code which shall be extracted and printed on the
invoice.
Dynamic QR Code

The Aggregate Turnover limit for Dynamic QR Code to be issued for B2C customers remains the same as
ATO exceeding Rs. 500 Crore. The dynamic QR code,on the other hand, will have the payment details
and thus ‘scan andpay’ in one go is possible
Few Clarifications-

A. Dynamic QR Code is not applicable to –

i. Where the supplier of taxable service is:
a) an insurer or a banking company or a financial institution, including a non- banking
financial company;
b) a goods transport agency supplying services in relation to transportation of goods by
road in a goods carriage;
c) supplying passenger transportation service;
d) supplying services by way of admission to exhibition of cinematograph in films in
multiplex screens
e) Person having UIN is not considered as registered person→ So supply to UIN is B2C
→ Therefore Dynamic QR Code is required.
ii. OIDAR supplies made by any registered person, who has obtained registration under
section 14 of the IGST Act 2017, to an unregistered person.
iii. For exports, as e-invoices are required to be issued in respect of supplies for exports, so
provision of Dynamic QR code is not applicable.

B. What parameters/ details are required to be captured in the Quick Response (QR) Code?
To contain the following information: -
i. Supplier GSTIN number
ii. Supplier UPI ID
iii. Payee’s Bank A/C number and IFSC
iv. Invoice number & invoice date,
v. Total Invoice Value and
vi. GST amount along with breakup i.e. CGST, SGST, IGST, CESS, etc.
Further, Dynamic QR Code should be such that it can be scanned to make a digital payment.

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 5. Procedural compliances 5.31

2.
What is to be captured in To contain the following information: -
Dynamic QR Code ? vii. Supplier GSTIN number
viii. Supplier UPI ID
ix. Payee’s Bank A/C number and IFSC
x. Invoice number & invoice date,
xi. Total Invoice Value and
xii. GST amount along with breakup i.e. CGST,
SGST, IGST, CESS, etc.
Further, Dynamic QR Code should be such that it can be scanned
to make a digital payment.
6. Particulars of a tax invoice [Sections 31(1) & (2) read with rule 46]
Invoice should have Quick Response code, having embedded Invoice Reference Number(IRN) in it, in
case e-invoice has been issue.
7. Documents to be carried by Person in Charge – QR Code may be produced electronically by
person in charge.
In the said rules, in rule 138A, for sub-rule (2), the following sub-rule shall be substituted, namely:- “
(2) In case, invoice is issued in the manner prescribed under sub-rule (4) of rule 48, the Quick Reference
(QR) code having an embedded Invoice Reference Number (IRN) in it, may be produced
electronically, for verification by the proper officer in lieu of the physical copy of such tax invoice.

.
Rule 48

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5. Procedural compliances 5.32

Reverse Charge

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5. Procedural compliances 5.33

Receipt and Refund Voucher

Rule 50

Rule 51

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5. Procedural compliances 5.34

Declaration in
return

Credit
Debit Note
Note
issued
issued

Return for the month Return for the month in

in which Cr. note was which Dr. note was issued
issued but

Not later than

a. 30th November after FY or
b. Date of annual return
(earlier of two)

The CGST (Amendment) Act, 2018 has amended sub-section (1) of section 34 to allow the
registered person to issue one (consolidated) or more credit notes in respect of
multiple invoices issued in a financial year without linking the same to individual
invoices.
Similarly, sub-section (3) of section 34 has been amended to allow the registered person
to issue one (consolidated) or more debit notes in respect of multiple invoices issued in
a financial year without linking the same to individual invoices.

Any invoice or debit note issued because of Tax defaults (section 74 - 129 - 130) contain the
words “INPUT TAX CREDIT NOT ADMISSIBLE”

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 5. Procedural compliances 5.35

RULES FOR TAX INVOICES, DEBIT & CREDIT NOTES

Rule 53 - Revised tax invoice (word Revised Invoice” shall be indicated prominently)

Issue of Revised Tax Invoices

Consolidated
Revised Tax
Invoice

Intra State Inter State

Buyer with Even if 1

Consolidated individual supply > Rs.
Allowed supplies upto 2.5 Lacs
Rs. 2.5 lacs

Issue
Consolidated Separate
Allowed Invoices

Revised Tax invoice - Within one month from the date of issuance of a certificate of registration, issue a revised
invoice against the invoice already issued.

54 Tax Invoice • Suppliers → Insurer or a banking company or a financial

in special
cases institution, NBFC’s → may issue a consolidated tax
invoice → at the end of the month
• passenger transportation service, a tax invoice shall
include ticket

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5. Procedural compliances 5.36

Rule 55 - few situations where a delivery challan, serially numbered, should be issued
instead of invoice

• supply of liquid gas → where the quantity at the time of removal from the place of
business of the supplier is not known
• transportation of goods for job work
• transportation of goods for reasons other than by way of supply

Original for
Consignee
Goods
Duplicate
Delivery Challan
for

Triplicate for
Consignor

For goods in semi knocked down or completely knocked down condition or in batches or
lots –:
• the supplier shall issue the complete invoice before dispatch of the first
consignment;
• the supplier shall issue a delivery challan for each of the subsequent consignments,
giving reference of the invoice;
• each consignment shall be accompanied by copies of the corresponding delivery
challan along with a duly certified copy of the invoice; and

• the original copy of the invoice shall be sent along with the last consignment

Accounts Records

• Place of maintenance - At principal place of business & where more than one place
of business is specified at every such place of business too.

• Every owner or operator of warehouse or godown or any other place used for storage of goods and
every transporter, irrespective of whether he is a registered person or not, shall maintain records of
the consigner, consignee and other relevant details

Audit requirements –
• Budget 2021 removes the requirement of getting a GST audit as well as the reconciliation
statement done / certified by the specified professional i.e. ,CA and CMA.

• Section 35(5) and Section 44 of CGST Act, 2017 are proposed to be amended in Finance Bill, 2021. Budget
on February 01, 2021 omitted Section 35(5) and substituted Section 44 [by Section 110 & 111 of the Finance
Act, 2021 respectively] of the CGST Act, 2017, so as to remove the mandatory requirement of furnishing a
Reconciliation Statement (GSTR-9C) duly audited by a Practicing Chartered Accountants or Cost
Accountants

and

• To provide for filing of the Annual Return (GSTR-9) on self-certification basis with a reconciliation
statement. Limit provided now is of > 5 Crores.
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 5. Procedural compliances 5.37

Period of retention of accounts [Section 36]

Until the expiry of 72 months, from the due date of furnishing the annual return (31st
December) for the year to which the records relate.

However, → in case of appeals / any other proceedings → to maintain the accounts and
books / records, → for a minimum period of 1 year after disposal of such appeal / revision
as the case may be.
ELECTRONIC WAY BILLS

• E- Way bill to be generated if consignment value > Rs. 50,000 whether for supply or
otherwise or due to the inward supply from an unregistered person, shall before
commencement of such movement generate E-Way Bill.

• Upon generation of E-Way Bill, E-Way Bill number is being generated.

Calculation of Value of Rs. 50,000

A. Calculation of Value
For calculating value of Rs. 50,000 The Value shall
Include
✓ CGST/SGST/UTGST/IGST/Compensation Cess
& Shall Exclude
✓ value of exempt supply of goods

• The E-way bill so generated is valid for one day if the distance involved is less than or equal to 200
kms. and one additional day for every 200 kms. over and above

E-Way Bill validity for Over Dimensional Cargo or multimodal shipment in which at least one
leg involves transport by ship

Validity shall be one day for first 20 KM and one additional day for every 20 KM.

Rule 138E added regarding generation of E-Way Bill

Simplifying
E-Way Bill can’t be generated for
a. A composition levy buyer if he has not furnished GST CMP-08 for 2 consecutive quarters
or

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 5. Procedural compliances 5.38
b. Normal registered person if he has not furnished returns (GSTR 3B) etc. for a consecutive
period of 2 tax periods or

c. Any Normal registered person has not furnished the statement of outward supplies (GSTR
1) for any two months or quarters, as the case may be
d. being a person, whose registration has been suspended

But Commissioner on receiving application in FORM GST EWB-05 allow generation of E-Way Bill
in FORM GST EWB-06

Blocking of GSTIN for e-way bill generation facility is only in respect of any outward movement
of goods of the registered person who is ineligible for e-way bill generation as per rule 138E. E-way
bills can be generated in respect of inward supplies received by said registered person.
Example - Mr. A, a registered person paying tax under regular scheme in Delhi, has not filed Form
GSTR-1 for last 2 months. Mr. B Haryana, (a regular return filer) wants to generate an e-way bill for
goods to be supplied to Mr. A. As per earlier position of law Mr. B would not have been able to generate e-
way bill with Mr. A’s GSTIN In terms of the amended position of law, there will be no more restriction in
generating e-way bill as Mr. B who is making outward movement of goods isa regular return filer.

Mr. A wants to generate an e-way bill in respect of an outward supply of goods to Mr. H. E-way bill generation
is blocked in this case as it’s an outward movement of goods of Mr. A who has not filed GSTR-1 for past 2
months.

Returns
A registered person may authorize an approved goods and services tax practitioner to furnish
the details of outward supplies under section 37 (GSTR 1), the details of inward supplies under
section 38 (GSTR 2) and the return under section 39 (GSTR 3) or section 44 (Annual return) or
section 45 (Final Return) and to perform such other functions in such manner as may be prescribed.”
Return Description Who Files? Date for filing
GSTR-1 Monthly Statement of Registered Person including Casual 11th of the next month
Outward supplies of registered person
Goods or Services other than supplier of
Composition levy subscribers
, NR taxable persons
ISD and persons effecting
TDS/TCS,
OIDAR

If business either has an annual aggregate

turnover of > Rs.5 crore or has not opted
into the QRMP

GSTR- 3B Monthly Return for a Registered Person 20th of next month

normal taxpayer
If business either has an annual aggregate
turnover of > Rs.5 crore or has not opted
into the QRMP

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 5. Procedural compliances 5.39

Section 37 – For GSTR-1

✓ In GSTR-1, on discovery of any error or omission, rectify till
30th November after year end
Or
or furnishing of the relevant annual return, whichever is earlier.

✓ A registered person shall not be allowed to furnish the details of outward supplies under
sub-section (1) i.e. GSTR-1 for a tax period, if the details of outward supplies
for any of the previous tax periods has not been furnished by him.
Section 39 – For GSTR – 3B
✓ Provide an option to the persons to
pay either the self-assessed tax i.e. output tax – input tax
or
an amount that may be prescribed;

✓ In GSTR-3B, on discovery of any error or omission, rectify till

30th November after year end
Or
or furnishing of the relevant annual return, whichever is earlier.
With payment of applicable interest.
✓ The person shall not be allowed to file GSTR-3B if
a. Any previous GSTR – 3B 8or current Tax period’s GSTR-1 is pending

GST PMT FORMS

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 5. Procedural compliances 5.40

Payments

Types of Cash Ledgers

PMT - 05

Challan
generated in
GST PMT - 06
(Valid for 15
Days)

Note - Manual Challans are not allowed under the GST

Payment of Tax

ITC of Output IGST Output CGST Output SGST/ UTGST liability

liability liability
IGST (I) (II) – In any order in any
and proportion

(III) ITC of IGST to be completely exhausted mandatorily

CGST (V) (IV) Not permitted

SGST/UTGST (VII)14 Not permitted (VI)

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5. Procedural compliances 5.41

Interest

Interest Rates

Input tax credit wrongly

If person pays the unpaid availed & Utilized
amount on his own

18% per annum 24% per annum

Interest to be charged only on the net cash tax liability i.e. the amount which is to be paid in cash , except in
those cases where returns are filed subsequent to initiation of any proceedings under section 73 or 74 of the
CGST Act.

a. The period of interest will be from the date following the due date of payment → until the
date of actual payment of tax.

PMT - 05

PMT - 02

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 5. Procedural compliances 5.42

GST PMT - 01

• For all 3 ledgers – If any discrepancy is noticed same should be communicated to

officers in FORM GST PMT-04.
Rule 86 – PMT 03 notified for re crediting amount to credit ledger

For Credit edger - If the refund so filed is rejected, the amount debited earlier shall be re-
credited to the electronic credit ledger by the proper officer by an order made in FORM GST
PMT-03.
Registered person has claimed refund of any amount paid as tax wrongly paid or paid in
excess for which debit has been made from the electronic credit ledger
if found admissible, shall be re-credited to the electronic credit
• by an order made in FORM GST PMT-03.
• Explanation.– For the purposes of this rule, it is hereby clarified that a refund shall be deemed to
be rejected, if the appeal is finally rejected or if the claimant gives an undertaking to the proper
officer that he shall not file an appeal.
GST PMT – 07
Amount deposited in bank but Challan Identification number not generated or amount not
reflected on GST Portal, the complaint can be raised through GST PMT 07
GST PMT - 09
Cash amount from one cash ledger to another can be transferred through GST PMT 09.
Example from CGST Cash Ledger to SGST Cash Ledger

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 5. Procedural compliances 5.43

Section 49
Sub section 10 – A Registered Person may transfer any amount of tax, interest, penalty, fee or
any other amount available in the electronic cash ledger under this Act, to the electronic cash
ledger for,––
(a) integrated tax, central tax, State tax, Union territory tax or cess; or
(b) integrated tax or central tax of a distinct person as specified in subsection (4) or, as the case
may be, sub-section (5) of section 25,

and such transfer shall be deemed to be a refund from the electronic cash ledger under this Act:
Provided that no such transfer under clause (b) shall be allowed if the said registered person has
any unpaid liability in his electronic liability register.
Sub section 12
Government may specify such maximum proportion of output tax liability under this Act or
under the Integrated Goods and Services Tax Act, 2017 which may be discharged through the
electronic credit ledger by a registered person or a class of registered persons, as may be
prescribed.

Form for voluntary payment of tax

Taxpayer has the liberty to self-ascertain the amount of tax amount and pay it through FORM GST
DRC-03. (Intimation of payment made voluntarily or made against the show cause notice (SCN) or statement)
Refund Application forms
GST RFD-01 Application for Refund
GST-RFD-01 A Application For Refund (Manual)
GST-RFD-01 B Refund Order Details
RFD-01W withdraw the said application for refund
GST RFD-02 Acknowledgement
GST RFD-03 Deficiency Memo
GST RFD-04 Provisional Refund Order
GST RFD-05 Payment Advice
GST RFD-06 Refund Sanction/ Rejection Order/Interest on
delayed refund order (same as refund order)
GST RFD-07 Order for complete adjustment of sanctioned Refund
GST RFD-08 Notice for rejection of application for refund
GST RFD-09 Reply to show cause notice
GST RFD-10 Application for Refund by any specialized agency of
UN or Multilateral Financial Institution and
Organization, Consulate or Embassy of foreign
countries, etc
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 5. Procedural compliances 5.44

Electronic Cash Ledger

• OIDAR from a place outside India providing service to non-taxable online recipient may
also make the deposit under sub-rule (2) through international money transfer through Society for
Worldwide Interbank Financial Telecommunication payment network

Note - OIDAR providing service to Non Taxable online recipient – can deposit
amount through SWIFT - Society for Worldwide Interbank Financial Telecommunication payment
network
Other Aspects relating to Challan
Any person, or a person on his behalf, can generate a challan in prescribed form on the common
portal and enter the details of the amount to be deposited by him towards tax, interest, penalty, fees
or any other amount.
Challan validity is for 15 days. The commission for making payment through Validity of
challan-15
e-challan has to be borne by the person making the payment. days
Any unregistered person has to make payment on the basis of temporary identification number
generated through common portal.
The mandate form obtained after making NEFT/RTGS payment has to be submitted in the Bank. The
validity of the mandate form is 15 days.
On successful credit of amount in the concerned (Central/State) Government Account maintained in
the authorized bank, a Challan Identification Number (CIN) will be generated by the collecting bank
which will be indicated in the challan.

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 5. Procedural compliances 5.45
On receipt of the CIN from the collecting bank, the said amount is credited into the electronic cash
ledger of the person on whose behalf the deposit is made and the common portal will generate a
receipt to this effect.
If CIN is not generated even after making payment and submission of mandate form or when after
generation, it has not been reflected in thecommon portal, the person making the deposit or the
person on whose behalf the deposit has been made, can make a representation in prescribed form
i.e. FORM GST PMT-07 through the common portal or e-gateway through which the payment has
been made.
Rule 86A added regarding Credit Ledger i.e. ITC
✓ The Commissioner or an officer authorized by him in this behalf,
✓ not below the rank of an Assistant Commissioner
✓ will not allow utilization of ITC
✓ if they have reasons to believe that ITC has been fraudulently availed or is ineligible in as
much as-
• ITC availed on bases of fake invoices, not having invoices, fake supplier, goods not
received,
• Tax not paid to the Govt
• Person availing ITC is non existent or
• not to be conducting any business from registered place
✓ Later when everything gets okay, the commissioner or officer authorized by him may allow
utilization of ITC

Such restriction shall cease to have effect after the expiry of a period of 1 year from the date
of imposing such restriction
Rule 86B – Restrictions on use of amount available in electronic credit ledger w.e.f 1
Jan 2021
Rule 86B limits the use of input tax credit (ITC) available in the electronic credit ledger for discharging the
output tax liability. This rule has an overriding impact on all the other CGST Rules.
Applicability: Taxable value of supply (other than exempt supply and zero-rated supply) in a month
which is more than Rs.50 lakh. The limit has to be checked every month before filing each return.
Restriction imposed: The applicable registered persons cannot use ITC in excess of 99% of output tax
liability. In simple words, more than 99% of the output tax liability cannot be discharged by using input tax
credit. Means Govt wants you to pat at least 1% in Cash.
Exceptions to the Rule:

1. If the persons mentioned below have paid more than Rs.1 lakh as Income Tax under Income Tax Act,
1961 in each of the last two financial years for which the time limit to file return of income under
subsection (1) of section 139 of the said Act has expired
o The registered person
o Proprietor, karta or Managing Director of the registered person
o Any 2 of the partners or whole time directors or any other person as the case may be.
2. If the registered person under concern has received a refund of amount greater than Rs.1 lakh in the
preceding financial year on account of export under LUT or due to inverted tax structure
3. If the registered person under concern has discharged his liability towards output tax by electronic
cash ledger for an amount in excess of 1% cumulatively of the total output tax liability up to the
said month in the current financial year.
4. If the registered person under concern is any of the following:
o Government department
o Public sector undertaking
o Local authority
o Statutory Authority
Provided further that the Commissioner or an officer authorised by him in this behalf may remove the
said restriction after such verifications and such safeguards as he may deem fit.”
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5. Procedural compliances 5.46

Section 51 of the CGST Act (provisions related to TDS)

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5. Procedural compliances 5.47

*Not being an agent and on money collected by the E-Commerce

operator

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 5. Procedural compliances 5.48

REFUNDS

Refund of tax [Section 54]

a. A person may make an application within → Relevant Date + 2 years

Case Relevant Date

goods are exported by air / Date on which the vessel leaves India
sea
goods are exported by land Date on which the goods pass the
frontiers
In case of services exported Date of receipt of payment in convertible foreign
out of India where a refund of exchange or in Indian rupees wherever permitted
by the Reverse Bank of India
tax paid is available
refund of unutilized ITC in case of End of the Financial Year in which such claim
zero- rated supplies (Exports & SEZ) for refund arises

In case of zero-rated supply of goods or Due date for furnishing of return under section 39
services or both to a Special Economic (GSTR-3B)in respect of such supplies
Zone developer or a Special Economic
Zone unit where a refund of tax paid is
available in respect of such supplies
themselves, or as the case may be, the
inputs or input services used in such
supplies
refund of unutilized ITC in case of Due date for furnishing of return under section 39
inverted duty structures is claimed for the period in which such claim for refund arises

refund arising out of finalization Date of adjustment of tax after the

of provisional assessment final assessment
Any other case Date of payment of tax

b. Any balance in the electronic cash ledger or electronic credit ledger after payment
of tax, interest, penalty, fee or any other amount payable may claim such refund in
the return furnished under section 39.

c. Persons to whom UIN is issued (UNO, any Multilateral Financial Institution etc. →
make an application → Supply Received → Quarter end + 2 years

Refund of unutilized Input tax credit

Refund of unutilized input tax credit

Refund is < Rs 2 lakhs →, not necessary to furnish any documentary and other evidences
but he may file a declaration else RFD – 01 certified by a Chartered Accountant or a Cost
Accountant
PO to make a refund order → Date of receipt of application + 60 days. In RFD 06 → amount
shall be credited to the Consumer Welfare Fund.

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 5. Procedural compliances 5.49

Section 54(3)
• a registered person may claim refund of any unutilized input tax credit at the end of any tax period,
subject to provisions under the section in the following cases :
(I) Goods / Services / both are exported / supplied to a SEZ on payment of IGST and a refund of
such IGST so paid is claimed;
(II) Refund claim for accumulated unutilised ITC, in case of supplies to a SEZ / exports of goods/
services/ both
(III) Inverted Duty Structure - where the credit has accumulated on account of rate of tax on inputs
being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies)
(IV) Refund of any balance in the electronic cash ledger after payment of tax / interest / penalty; and
(V) On finalization of provisional assessment if tax becomes refundable to the assessees

However, refund of unutilized input tax credit shall not be allowed in the following cases :

(i) where the goods exported out of India are subjected to export duty:
(ii) if the supplier of goods or services or both avails of drawback in respect of central tax or claims
refund of the integrated tax paid on such supplies.
Section 54(4), (5) & (7) → PO Shall may make an order within 60 days from the date of receipt of
application and the amount so determined shall be credited to the Consumer Welfare Fund.
However, the refundable amount shall, instead of being credited to the Fund, be paid to the applicant,
if such amount is relatable to –
a. refund of tax paid on export of goods or services or both or on inputs or input services used in
making such export;
b. refund of unutilised input tax credit under sub-section (3);
c. refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice
has not been issued, or where a refund voucher has been issued;
d. refund of tax in pursuance of section 77 (Tax wrongfully collected & Paid to The Govt.)
e. the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the
incidence of such tax and interest to any other person; or
Refund of taxes to the retail outlets established in departure area of an international Airport beyond
immigration counters making tax free supply to an outgoing international tourist (Rule 95A of CGST
Rules)
Retail outlet established in departure area of an international airport, beyond the immigration counters, supplying
indigenous goods to an outgoing international tourist who is leaving India shall be eligible to claim refund of tax
paid by it on inward supply of such goods. The refund of tax paid by the said retail outlet shall be available if-
(a) the inward supplies of goods were received by the said retail outlet from a registered person
against a tax invoice;
(b) the said goods were supplied by the said retail outlet to an outgoing international tourist against foreign
exchange without charging any tax;
(c) name and Goods and Services Tax Identification Number of the retail outlet is mentioned in the
Tax invoice for the inward supply

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5. Procedural compliances 5.50

Interest on delayed refunds [Section 56]

Interest

Normal case - To refund -- Order by court, tribunal etc. -

> date of receipt of To refund --> date of receipt
application + 60 days of application + 60 days

Else Else
Interest @ Interest @
6% p.a 9% p.a

After expiry of 60 days till date of

refund

Audit

Audit

General
Special

Officer not below rank of AC - prior

Commissioner or officer approval of Commissioner
authorized by him audited by CharteredAccountant/
Cost Accountant nominated by
Commissioner

15 days prior notice to Regard to nature or

assessee from complexity of the case
commencement of audit and the interest of
revenue

Complete in 3 month. Extended to

another 6 months by
Commissioner. CA should submit report
within 90 days of
commencement to AC.
PO within 30 days inform the Period extendable for
registered person 90 days.

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 5. Procedural compliances 5.51

Note - Books of accounts of Central/State Government or local authority which are subject to audit by CAG or
an auditor appointed for auditing the accounts of local authorities are not subject to audit by a Chartered
Accountant/Cost Accountant [Rule 80(3) of the CGST Rules, 2017]

Inspection Forms

Sl. Forms Available for Description of the Form

No.

1. FORM GST INS-01 For Tax Authorization for Inspection or Search

Official

2. FORM GST IN S-02 For Tax Order of Seizure

Official

3. FORM GST INS-03 For Tax Order of Prohibition

Official

4. FORM GST INS-04 For Taxpayer Bond for Release Of Goods Seized

5. FORM GST INS-05 For Tax Order of Release ff Goods / Things of

Official Perishable or Hazardous Nature

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 5. Procedural compliances 5.52

Important but removed from ICSI Module

5.1 QRMP & IFF (Amendments in Section 39, Rule 59)

The following amendments shall be applicable with effect from the 1st day of January, 2021 -

1. Understand QRMP first –

• Quarterly Return, Monthly Payment of Taxes (QRMP) Scheme is a scheme to simplify compliance for
small taxpayers.
• QRMP is optional
• Under this scheme, taxpayers having an aggregate turnover at PAN level up to Rs. 5 crore in the
preceding year
• can opt for quarterly GSTR-1 and GSTR-3B filing.
• Payment can be made in the first two months by a simple challan in FORM GST PMT-06 by 25th of
the month.
2. Rule - 61A. Manner of opting for furnishing quarterly return.-

a. Indicate his preference for furnishing of return on a quarterly basis, electronically, on the common
portal, from the 1st day of the second month of the preceding quarter till the last day of the first
month of the quarter for which the option is being exercised.
Example – If Mr. A wants to opt for QRMP in April 21 to June 21 Quarter then he will ave to opt for it
between 1st Feb 21 to 30th April 21.

b. Option once exercised , the said registered person shall continue to furnish the return on a quarterly
basis for future tax periods, unless the said registered person,–

(a) becomes ineligible for furnishing the return on a quarterly basis or

(b) opts for furnishing of return on a monthly basis

c. Provided further that a registered person shall not be eligible to opt for quarterly return in case the
last return due on the date of exercising such option has not been furnished.

d. A registered person, whose aggregate turnover exceeds 5 crore rupees during the current financial
year, shall opt for furnishing of return on a monthly basis, electronically, on the common portal, from
the next quarter i.e. the first month of the quarter, succeeding the quarter during which his
aggregate turnover exceeds 5 crore rupees.

3. Payment of tax by person following QRMP –

Such Person shall deposit of an amount in the electronic cash ledger equivalent to, -
(i) thirty five per cent. of the tax liability paid by debiting the electronic cash ledger in the return
for the preceding quarter where the return is furnished quarterly;
or
(ii) the tax liability paid by debiting the electronic cash ledger in the return for the last
month of the immediately preceding quarter where the return is furnished monthly.

For easy understanding, the same is explained by way of illustration in table below:
i. In case the last return filed was on quarterly basis for Quarter Ending March, 2021:

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 5. Procedural compliances 5.53

Tax paid in Cash in Quarter (January – Tax required to be paid in each of the
March, 2021) months – April and May, 2021
CGST 100 CGST 35
SGST 100 SGST 35
IGST 500 IGST 175

ii. In case the last return filed was monthly for tax period March, 2021:
Tax paid in Cash in March, 2021 Tax required to be paid in each of the
months – April and May, 2021
CGST 50 CGST 50
SGST 50 SGST 50
IGST 80 IGST 80

Provided that no such amount may be required to be deposited-

(a) for the first month of the quarter, where the balance in the electronic cash ledger or
electronic credit ledger (ITC) is adequate for the tax liability for the said month or where there
is nil tax liability ;

(b) for the second month of the quarter, where the balance in the electronic cash ledger or
electronic credit ledger is adequate for the cumulative tax liability for the first and the
second month of the quarter or where there is nil tax liability:
Provided further that registered person shall not be eligible for the said special procedure unless he has
furnished the return for a complete tax period preceding such month

4. Due Date of Return Filing -

A. The due date for GSTR-1 for the periods October 2020 to March 2021 have been notified
as follows:
Quarterly return filers:

1. October 2020 to December 2020: 13th January 2020

2. January 2020 to March 2021: 13th April 2021

Monthly Return Filers :

11th of the next month

B. GSTR-3B have been notified for the months October 2020 till March 2021 as follows:

Annual GST Registration in States New Due Dates

Turnover in and Union Territories
Previous
Financial Year
More than Rs 5 All 20th of the succeeding month
crore
Chhattisgarh, Madhya 22nd of the succeeding month*
Pradesh, Gujarat, Dadra and
Nagar Haveli and Daman
and Diu, Maharashtra,
Karnataka, Goa,
Lakshadweep, Kerala, Tamil
Nadu, Puducherry, Andaman
and Nicobar Islands,
Telangana and Andhra
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 5. Procedural compliances 5.54
Pradesh
upto Rs 5 crore
Jammu and Kashmir, 24th of the succeeding month*
Ladakh, Himachal Pradesh,
Punjab, Chandigarh,
Uttarakhand, Haryana, Delhi,
Rajasthan, Uttar Pradesh,
Bihar, Sikkim, Arunachal
Pradesh, Nagaland, Manipur,
Mizoram, Tripura,
Meghalaya, Assam, West
Bengal, Jharkhand and
Odisha
Those opting for the QRMP scheme must file by 22nd or 24th of the month succeeding the quarter. Further, tax
payments shall be done every month in PMT-06 by 25th of next month for the first two months of the quarter.

Uploading Invoice details in GSTR 1

Invoice
Details
Uploading

B2B B2C
Invoicing Invoicing

Intra State Inter State

Upload invoice Supply Supply
wise details

Upload Invoice
Value > Invoice
consolidated value upto
details 2.5 Lacs
Rs. 2.5 Lacs

Upload Invoice wise

deatails Upload consolidated
State wise details

5. Issue → if the seller opts for QRMP → The buyer has to wait for a quarter for availing ITC. To
remove this hardship IFF has been introduced which is optional.
6. What is the purpose of the Invoice Furnishing Facility ?

• The Invoice Furnishing Facility (IFF) is a facility where quarterly GSTR-1 filers can choose to upload
their Business-to-business (B2B) invoices every month, currently under the QRMP scheme only.
• It is governed by Rule 59(2) of the CGST Rules, available to regular taxpayers having an annual
aggregate turnover of up to Rs.5 crore.
• One should keep the following points in mind before utilising the IFF:
✓ The IFF is an optional facility. Non-usage will not attract any late fee.
✓ The invoices relating to the last month of a quarter are to be uploaded in the GSTR-1 return
only.
✓ There is no requirement to upload invoices in GSTR-1 if the same has been uploaded in the
IFF.
✓ The total value of invoices that can be uploaded per month is restricted to Rs.50 lakh.
✓ The details submitted in IFF will be reflected in the GSTR-2A and auto drafted ITC will be reflected
in GSTR-2B of the recipients.
✓ The Invoice Furnishing Facility will come into effect from 01.01.2021 and the first cut-off date was
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 5. Procedural compliances 5.55
13th February 2021 for January 2021 (being the first month for the January-March 2021 quarter).

Rule 59 – Return for Outward Supplies (Sales) – GSTR 1

Notwithstanding anything contained in this rule -

(a) a registered person shall not be allowed to furnish the details of outward supplies of goods or
services or both under section 37 in FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B
for preceding 2 months;
(b) a registered person, required to furnish return for every quarter shall not be allowed to furnish the
details of outward supplies of goods or services or both under section 37 in FORM GSTR-1 or using the
invoice furnishing facility, if he has not furnished the return in FORM GSTR-3B for preceding tax
period;
(c) a registered person, who is restricted from using the amount available in electronic credit ledger to
discharge his liability towards tax in excess of 99 % of such tax liability under rule 86B, shall not be
allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM
GSTR-1 or using the invoice furnishing facility, if he has not furnished the return in FORM GSTR-3B
for preceding tax period.
Other Returns

Return Description Who Files? Date for filing

GSTR-4 File return annually Taxable Person Payment by 18th of
(GSTR-4) Opting for Composition Levy the month
Or succeeding the
quarter
and make payment Any person opting for Notification No.
quarterly (GST CMP 08) 02/2019 CT (R) dated 07.03.2019
(Paying Tax at 3%) Return File - on or
before 30th day of
April following the end
of such financial year
GSTR-5 Monthly Return for a Non-resident Taxpayer Within 13 days from
NRTP end of calendar
month
or within 7 days
after expiry of
registration,
Whichever is earlier
GSTR- 5A Monthly Return for OIDAR OIDAR providing service from outside 20th of the next month
India to an unregistered person in India
GSTR-6 Monthly return for an Input Distributor By 13th of next month
Input Service Distributor
(ISD)
GSTR- Monthly return for Tax Deductor 10th of the next
7 authorities month
deducting tax at
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 5. Procedural compliances 5.56
source

GSTR- Monthly statement E-Commerce Operator 10th of the next

8 for E- Commerce month
Operator
depicting
supplies
effecting through
it.
GSTR-10 Final Return Taxable Person whose registration has Within three
been months of the date
surrendered or cancelled of cancellation or
date of order of
cancellation,
whichever is
later.
GSTR-11 Details of inward
supplies to be
furnished by a
person having UIN
and claiming a
refund

Section 44 +Rule 80 – Annual return – Self certified reconciliation statement

Section 44
Every registered person
• other than an
• Input Service Distributor,
• a person paying tax under section 51 (TDS) or section 52(TCS)
• a casual taxable person
• and a non-resident taxable person
shall furnish an annual return which may include a self-certified reconciliation statement,
Provided further that nothing contained in this section shall apply to any department
of the Central Government or a State Government or a local authority, whose books
of account are subject to audit by the Comptroller and Auditor-General of India or
an auditor appointed for auditing the accounts of local authorities under any law for
the time being in force.”
Rule - 80

GSTR-9 Annual Return Registered Person other than an 31st December of

Composition Levy person next Financial Year
ISD,
NRTP
TDS/TCS Taxpayer,
OIDAR
UIN holders,
Casual Taxable Person
GSTR- Simplified Return Annual Return for a taxpayer registered 31st December of next
9A under the composition Financial Year
Composition
Scheme – Annual levy anytime during the year
Return

GST 9B Annual ECO required to collect Tax at Source 31st December of

Statement next Financial
Year

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 5. Procedural compliances 5.57
GST 9C Self certified Registered Person If aggregate turnover File along with the
Reconciliation exceeds Rs. 5 Crores during FY. annual return
statement These persons also not required to file
9C –
ISD
CTP
NRTP
TDS/TCS Taxpayer,

Note - The concept of revised returns is not provided in the GST

Note - Further points regarding Taxable Person Opting for Composition Levy Or Any person
opting for Notification No. 02/2019 CT (R) dated 07.03.2019 (Paying Tax at 3%)
1. The return furnished under sub-rule (1) shall include the-
(a) Invoice wise inter- State and intra-State inward supplies received from registered and
un-registered persons; and

(b) Consolidated details of outward supplies made.

2. A registered person opting to withdraw from the composition scheme at his own motion
or where option is withdrawn at the instance of the proper officer
Or
A registered person who ceases to avail the benefit of Notification No. 02/2019 CT (R)
dated 7.03.2019

Shall, where required, furnish a statement in the prescribed form for the period for which he has
paid tax by availing the benefit under the said notification till the 18th day of the month succeeding
the quarter in which the date of cessation takes place and furnish GSTR 4 for the said period till
the 30th day of April following the end of the financial year during which such cessation happens.

5.2 SMS Return Filing

A Nil GSTR-1, Nil GSTR-3B & Nil GST CMP-08 can be filed through an SMS using the registered
mobile number of the taxpayer. GSTR-1 submitted through SMS is verified by registered mobile
number-based OTP facility.

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 6. IGST, UTGST & Compensation to States Act 6.1

Lesson – 6
Basic Overview on IGST, UTGST and GST
(Compensation to States) Act

Introduction

• In India we have adopted dual GST Model

• To ensure seamless flow of credit throughout the territory of India a link act was necessary and
hence IGST act, 2017 was passed.

• Compensation to states for the loss due to introduction of GST is provided through an act, GST
(Compensation to States) act, 2017.

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 6. IGST, UTGST & Compensation to States Act 6.2

REGULATORY FRAMEWORK
1. Integrated Goods and Services Tax Act, 2017

Section Deals with

Section 2 Definitions
Section 5 levy and Collection
Section 16 Zero rated Supply
Section 20 application of provisions of CGST act

2. Union Territory Goods and Services Act, 2017

Section Deals with

Section 7 levy and Collection
Section 8 Power to grant exemption from tax
Section 9 Payment of tax
Section 9a utilisation of input tax Credit
Section 9B Order of utilisation of input tax Credit
Section 10 transfer of input tax credit
Section 14 Advance Ruling Definitions
Section 15 Constitution of authority for advance ruling
Section 16 Constitution of appellate authority for advance ruling
Section 18 transitional arrangements for input tax credit
Section 22 Power to make rules
Section 23 General Power to make regulations
Section 24 every rule made by the Central Government, every regulation made by the Board
Section 25 Power to issue instructions or directions
Section 26 Removal of Difficulties

3. Goods and Services Tax (Compensation to States) Act, 2017

Section Deals with

Section 2 Definitions
Section 3 Projected Growth rate
Section 4 Base year
Section 5 Base year revenue
Section 6 Projected revenue for any year
Section 7 Calculation and release of compensation
Section 8 levy and Collection of Cess
Section 9 returns, Payments and refunds
Section 10 Crediting proceeds of cess to Fund
Section 11 Other Provisions relating to cess
Section 12 Power to make rules

4. Similar Provisions
Section Deals with Act
Section 9 levy and Collection CGSt
Section 5 levy and Collection IGST
Section 7 levy and Collection of tax UTGST

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 6. IGST, UTGST & Compensation to States Act 6.3

Introduction to IGST – Pointers

➢ Lok Sabha passed IGST Bill on 29th March, 2017. Rajya Sabha passed the bill on 6th April,

2017. Assented to by the President on 12th April, 2017

➢ Article 269A - IGST passed by Parliament on the basis of Article 269A

➢ Maximum rate which may be imposed in IGST is 40%.

Important Definitions
Section 2(3): “continuous journey” means a journey for which a single or more than one
ticket or invoice is issued at the same time, either by a single supplier of service or through
an agent acting on behalf of more than one supplier of service, and which involves no
stopover between any of the legs of the journey for which one or more separate tickets or
invoices are issued.

Explanation – For the purposes of this clause, the term “stopover” means a place where a
passenger can disembark either to transfer to another conveyance or break his journey for a
certain period in order to resume it at a later point of time

Section 2(5): “export of goods” means taking goods out of India to a place outside India.

Section 2(6): “export of services” means the supply of any service when, –

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in
convertible foreign exchange or in Indian rupees wherever permitted by the

Reserve Bank of India (Nepal – Bhutan); and

(v) the supplier of service and the recipient of service are not merely establishments of
a distinct person

Section 2(7): “fixed establishment” means a place (other than the registered place of
business) which is characterized by a sufficient degree of permanence and suitable structure
in terms of human and technical resources to supply services or to receive and use services for
its own needs

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 6. IGST, UTGST & Compensation to States Act 6.4

Section 2(11): ‘‘import of services” means the supply of any service, where –

(i) the supplier of service is located outside India;

(ii) the recipient of service is located in India; and

(iii) the place of supply of service is in India

Section 2(14): “location of the recipient of services” means -

a) where a supply is received at a place of business for which the registration has
been obtained, the location of such place of business;

b) where a supply is received at a place other than the place of business for which
registration has been obtained (a fixed establishment elsewhere), the location of such
fixed establishment;

c) where a supply is received at more than one establishment, whether the place of
business or fixed establishment, the location of the establishment most directly
concerned with the receipt of the supply;
and
d) in absence of such places, the location of the usual place of residence of the recipient.
Section 2(15): “location of the supplier of services” means, –

a) where a supply is made from a place of business for which the registration has
been obtained, the location of such place of business;

b) where a supply is made from a place other than the place of business for which
registration has been obtained (a fixed establishment elsewhere), the location of such
fixed establishment;

c) where a supply is made from more than one establishment, whether the place of
business or fixed establishment, the location of the establishment most directly
concerned with the provision of the supply; and

d) in absence of such places, the location of the usual place of residence of the supplier

Section 2(16): “non-taxable online recipient” means any Government, local authority,
governmental authority, an individual or any other person not registered and receiving online
information and database access or retrieval services in relation to any purpose other than
commerce, industry or any other business or profession, located in taxable territory.

Explanation. – For the purposes of this clause, the expression “governmental authority”
means an authority or a board or any other body, –

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 6. IGST, UTGST & Compensation to States Act 6.5

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government, with ninety per cent. or more participation by
way of equity or control, to carry out any function entrusted to a Panchayat under
article 243G or to a municipality under article 243W of the Constitution.
Levy and Collection Under IGST, ACT 2017 [Section 5]
Few Pointers -

(1) IGST is imposed on interstate supply

(2) Value is as determined under Section 15 of CGST Act, 2017

(3) Alcohol for human consumption is out of IGST

(4) The maximum rate of levy under IGST is 40%

(5) Interstate supply includes imports

(6) IGST is levied on imported goods under Section 3 of Customs Tariff Act

(7) Such levy is simultaneous with the levy of Basic Customs Duty under section
12 of the Customs Act, 1962

(8) Petroleum product items will be chargeable under IGST but at a later date to be
recommended by the GST Council.

Zero rated supply: Exports and supplies to SEZs are considered as ‘zero rated supply’ on
which no tax is payable.

Refund of integrated tax paid on supply of goods to tourists leaving India: Section 15 of the
IGST Act,2017 provides for refund of IGST.

An international tourist has been defined as a non-resident of India who enters India for a
stay of less than 6 months.

What are the advantages of IGST Model?

Ans. The major advantages of IGST Model are: a. Maintenance of uninterrupted ITC chain on
inter-State transactions; b. No upfront payment of tax or substantial blockage of funds for the inter-
State seller or buyer; c. No refund claim in exporting State, as ITC is used up while paying the tax;
d. Self-monitoring model; e. Ensures tax neutrality while keeping the tax regime simple; f. Simple
accounting with no additional compliance burden on the taxpayer; g. Would facilitate in ensuring
high level of compliance and thus higher collection efficiency. Model can handle ‘Business to
Business’ as well as ‘Business to Consumer’ transactions.

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 6. IGST, UTGST & Compensation to States Act 6.6

APPLICABILITY OF THE UTGST ACT, 2017

Union
Territories

Andaman
Other
Lakshadweep Chandigarh and Nicobar Ladakh
Territory
Islands
Dadra and
Nagar Haveli
& Daman &
Diu

Delhi, Puducherry & Jammu & Kashmir have their own State Legislature and Government.
State GST would be applicable in their case.
Notification issued for special procedure due to merger of merged Union territory of Daman and Diu
and Dadra and Nagar Haveli -

(i) The tax period the month of January, 2020 and February, 2020 as below :-

(a) January, 2020: 1st January, 2020 to 25th January, 2020;

(b) February, 2020: 26th January, 2020 to 29th February, 2020;
(ii) Pay the appropriate tax irrespective of particulars of Invoice
(iii) Parliament issued merger bill on 3rd Day of December 2019 and it became effective from 26th
January 2020
(iv) State code assigned “26” w.e.f 1st August 2020 (Earlier for Daman & Diu it was 25)

Definitions: In this Act, unless the context otherwise requires:

1) ‘‘appointed day’’ means the date on which the provisions of this Act shall come into force;
2) ‘‘Commissioner’’ means the Commissioner of Union territory tax appointed under section 3;
3) ‘‘designated authority’’ means such authority as may be notified by the Commissioner

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 6. IGST, UTGST & Compensation to States Act 6.7

ADMINISTRATION & POWERS OF OFFICERS [SECTION 4, 5 & 6]

➢ The Administrator, by order, authorize to appoint officers below the rank of Assistant
Commissioner
a) PO issues an order under this Act, shall also issue an order under the CGST Act,
b) PO under the CGST Act has initiated any proceedings on a subject matter, no
proceedings shall be initiated by the PO under this Act on the same subject
matter.
➢ Any proceedings for rectification, appeal and revision, wherever applicable, of any order
passed by an officer appointed under UTGST Act, shall not lie before an officer
appointed under the CGST Act.

Highest rate of tax as charges as UTGST would not be more than 14% but an enabling
limit of 20% has been prescribed in law.

ITC on Input Stocks (Section 18)

➢ ITC of goods held in stock day immediately preceding the appointed day will be eligible
as input tax credit.

➢ Following registered taxable person will be eligible for the input tax credit -

Was not was involved in Goods which have suffered Person is

liable to be dealing with tax at first point of sale → entitled to tax at
registered exempted goods subsequent sale was not the time of sale
/ tax-free goods liable to tax under the
previous law but → which
are liable to be taxed in
GST

Few Pointers -

➢ Person who has paid the Central tax and the Union territory tax on a transaction considered
by him to be an intra-State supply, but which is subsequently held to be an inter-State
supply, shall be refunded the amount
➢ Paid integrated tax on a transaction considered by him to be an inter-State supply, but which is
subsequently held to be an intra-State supply, shall not be required to pay any interest on
the amount of the central tax and the Union territory tax payable

➢ PO of central tax may recover the amount of Union Territory tax and credit the amount so
recovered to the account of the Govt. of UT.Z

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 6. IGST, UTGST & Compensation to States Act 6.8

➢ If amount recovered is less than the amount due → proportionate amount to the Union
territory tax and Central tax.

➢ CG to make rules on the recommendations of the Council

➢ Contravention of rules → maximum penalty of Rs.10,000

➢ Commissioner has the powers to issue such orders, instructions or direction

Advance Rulings

Formation

Appellate
Authority
authority

1 member - CC of CT &
Central Tax Commissioner
1 member - UT - of UT
appointed by CG

UTGST Act - Questions for which Advance Ruling can be Sought?

Advance Ruling can be sought for the following questions:

• classification of any goods or services or both;
• applicability of a notification issued under provisions of the GST Act(s);
• determination of time and value of supply of goods or services or both;
• admissibility of input tax credit of tax paid or deemed to have been paid;
• determination of the liability to pay tax on any goods or services under the Act;
• whether applicant is required to be registered under the Act;
• whether any particular thing done by the applicant with respect to any goods or services amounts to or
results in a supply of goods or services, within the meaning of that term.

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 6. IGST, UTGST & Compensation to States Act 6.9

THE GOODS AND SERVICES TAX (COMPENSATION TO STATES) ACT, 2017

Important Pointers -
1. GST Council in its 10th meeting held on 18th February, 2017 approved this act.

2. Act is introduced for a period of 5 years.

3. Financial year 2015-16 shall be taken as base year

4. projected growth rate 14%

5. Compensation shall be released bi-monthly at the end of every two months period on a
provisional basis final adjustment shall be made after getting audited accounts of the year
from the C&AG.

6. In case any excess amount has been released then the excess amount so released shall
be adjusted against the compensation amount payable to such State in the subsequent
financial year.

7. If no compensation is due → any excess released → shall be refunded

8. Cess shall be credited to the non lapsable fund called GST Compensation Fund.

9. The balance if any left out in the GST compensation fund after five year shall be equally
shared between the Centre and the states.

10. “input tax” means,

a. cess charged on any supply of goods or services or both made to him;

b. cess charged on import of goods and includes the cess payable on reverse charge basis
11. “Transition date” shall mean, in respect of any State, the date on which the SGST Act of
the concerned State comes into force;
12. No cess shall be leviable on supplies made by a taxable person who has decided to opt for
composition levy under section 10

13. Audit expenditure of “Fund” shall be payable by the Central Government

14. Notwithstanding anything ,50%. of such amount, as may be recommended by the Council,
which remains unutilised in the Fund, at any point of time in any financial year during the
transition period shall be transferred to the Consolidated Fund of India as the share of Centre,
and the balance fifty per cent. shall be distributed amongst the States in the ratio of their
base year revenue determined in accordance with the provisions of section 5:
15. Provided that in case of shortfall in the amount collected in the Fund against the requirement
of compensation to be released under section 7 for any two months’ period, fifty per cent. of
the same, but not exceeding the total amount transferred to the Centre and the States as
recommended by the Council, shall be recovered from the Centre and the balance fifty per
cent. from the States in the ratio of their base year revenue determined in accordance with
the provisions of section 5.

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7. Customs Laws 7.1

Chapter 7 - Overview of Customs Laws

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 7. Customs 7.2

REGULATORY FRAMEWORK
1. Customs Act, 1962

Chapter No. and Title Sections Content

i. Preliminary Section 1 to 2 Short title extent and commencement
and Definitions
II. Officers of Customs Section 3 to 6 Appointment and powers of officers of
customs
iii. appointment of Customs Ports, airports, Section 7 to 10 appointments of Customs
Warehousing stations etc. Ports, airports, Warehousing Stations
etc.
iV. Prohibitions on importation and Section 11 Powers to prohibit import and export
exportation of goods of goods
iVa. detection of illegally imported goods Sections 11a to 11G Provisions for illegal importation of
and prevention of the disposal thereof notified goods and prevention of the
disposal thereof
iVB. Prevention or detection of illegal export Sections 11H to 11M Provisions for illegal export of specified
of Goods
goods
iVC. Power to exempt from the provisions of Section 11N Power to exempt
Chapters iVa and iVB
V. levy of, and exemption from, Sections 12 to 28Ba Chargeable section, valuation
Customs duties of goods, recovery and refund of duty
Va. indicating amount of duty in the price of Section 28C to 28d Price of goods and incidence of duty
goods, etc., for purpose of refund passed on to the buyer
Vaa. administration of rules of origin under Section 28da Procedure regarding claim of
trade agreement preferential rate of duty.
VB. advance rulings Section 28e to 28M Provisions for advance ruling such as
authority, application, procedure and
powers of authority
Vi. Provisions relating to conveyances Sections 29 to 43 arrival or departure of goods, delivery
carrying imported or exported goods of departure manifest or export report
Vii. Clearance of imported goods and export Sections 44 to 51 Clearance of import and export goods
goods other than by way of baggage and
postal articles.
Viia. Payments through electronic cash Section 51a & 51B Payment of duty, interest, penalty, etc
ledger and electronic duty credit ledger

Viii. Goods in transit Sections 52 to 56 transit and transshipment of goods

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 7. Customs 7.3

iX. Warehousing Section 57 to 73 Provision relating to public and private warehouse

X. drawback Sections 74 to 76 duty drawback on re-export of duty paid goods or

material used in the manufacture of goods

Xi. Special provisions regarding Section 77 to 90 Special provisions regarding baggage, goods imported
baggage, goods imported or or exported by post, and stores
exported by post, and stores
Xii. Provisions relating to coastal Section 91 to 99 Provisions relating to coastal goods and vessels
goods and vessels carrying carrying coastal goods other than baggage and stores
coastal goods
Xiii. Searches, seizure and arrest Section 100 to 110a Power to search, inspect, examine persons and
seizure of goods, documents and things

XIV. Confiscation of goods and Section 111 to 127 adjudication proceedings and
conveyances confiscation of goods.
and imposition of penalties

XiVa. Settlement of cases Sections 127N 127a tProvisions relating to Settlement

oCommission
XV. appeals and revision Sections 1f Procedure and time limits for appeals and revisions
Administration to 131C

XVI. Offences and Prosecutions Section 132 to 140a Offences and cognizance of offences
XVii. Miscellaneous Section 141 to 161 Conveyances, duty deferment, licensing of Customs
house agent, appearance by authorised
representative, delegation of power etc.

Customs Duty is an indirect tax, imposed under the Customs Act formulated in 1962. The
Customs Act, 1962 is the basic statute which governs entry or exit of different categories of
vessels, aircrafts, goods, passengers etc., into or outside the country.
The Act extends to whole of India and, save as otherwise provided in this Act, it applies also to any
offence or contravention thereunder committed outside India by any person.[Inserted by the Finance Act,
2018, w.e.f. 29-3-2018]
The Customs Act, 1962, not only regulates the levy and collection of duties, but also, serves equally
important purposes, like :

i) Regulation of Imports & Exports

ii) Protection of Domestic Industry

iii) Prevention of smuggling

iv) Conservation of foreign exchange

Customs Tariff Act, 1975

Customs Act, 1962 and Customs Tariff Act, 1975 are the two limbs of Customs Law in India
which must be read with rules and regulations

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 7. Customs 7.4

Rules and Regulations

The rule making power is delegated to the Central Government while the regulation making power
delegated to CBIC
Differences between Rules and Regulations
Parameter Rules Regulations
Power to make Section 156 Section 157
Authority Central Government is authorized to CBIC is authorized to make the
make the rules regulations
Purpose To supports the Act To support the Act and the Rules
Content Transaction Value; Chargeability of The form of Bill of Entry; shipping bill; bill
accessories & Repairs & of export; import & export manifest; form
Maintenance Spare Parts; Detention & manner of making application for refund
& Confiscation of Goods; Goods of duty; conditions for transhipment &
mentioned in the shipping bill / Bill of removal of good without payment of
Export but either not exported OR duty; manner of conducting audit of duty
exported and subsequently assessment of imported / exported goods
re-landed;

Definitions Section 2

Section 2 of the Customs Act, 1962 contains the definitions of various terms used at various places
in the Act.

✓ Adjudicating Authority: Section 2(1):- adjudicating authority means any authority competent to
pass any order or decision under this act, but does not include the Board, Commissioner
(appeals) or appellate tribunal

✓ Assessment Section 2(2) :- Determination of the dutiability of any goods and the amount of duty,
tax, cess or
any other sum so payable, if any, under this Act or under the Customs Tariff Act, 1975 (hereinafter referred
to as the Customs Tariff Act) or under any other law for the time being in force and includes provisional
assessment, self-assessment, re-assessment and any assessment in which the duty assessed is nil.
✓ Baggage : Section 2(3) :- Includes unaccompanied baggage but does not include motor vehicles;

✓ Conveyance: Section 2(9) :- Includes vessels (by sea), an aircraft (by air), and a vehicle (by
land).
✓ Customs Area: Section 2(11):- Area of a customs station or a warehouse and includes any area
in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities.
✓ Customs Port : Section 2(12) : - Any port appointed under clause (a) of section 7 to be a
customs port [, and includes a place appointed under clause (aa) of that section to be an
inland container depot];
✓ Customs Station: Section 2(13):- Any customs port, Customs Airport, international courier
terminal, foreign post office or land customs station.

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✓ Dutiable Goods : Section 2(14) :- Any goods which are chargeable to duty and on which duty has not
been paid.
✓ Duty : Section 2(15) :- Duty means a duty of customs leviable under this Act.
✓ Export : Section 2(18) :- Taking out of India to a place outside India.
✓ Export Goods : Section 2(19) :- Any goods which are to be taken out of India to a place outside
India.

✓ Exporter : Section 2(20) :- Exporter, in relation to any goods at any time between their entry for
export and the time when they are exported, includes any owner, beneficial owner or any person
holding himself out to be the exporter.
✓ Foreign going Vessel / Aircraft: Section 2(21):-Vessel or aircraft for carriage of goods /
passengers between any port / airport in India and any port / airport outside India whether
touching any intermediary location or not, and includes :
a) Any naval vessel of any foreign government taking part in any naval exercises;

b) Any vessel engaged in fishing or any other operations outside the territorial waters of
India;

c) Any vessel or aircraft proceeding to a place outside India for any purpose whatsoever.
✓ Goods : Section 2(22) :- Includes –
1. vessels, aircrafts and vehicles;
2. stores;
3. baggage;
4. currency and negotiable instruments; and

any other kind of movable property;

✓ Import : Section 2(23) :- Bringing in to India from a place outside India.

✓ Import Report : Section 2(24) : - Report or the manifest required to be delivered under section 30.

✓ Imported Goods : Section 2(25) :-Any goods brought in to India from a place outside
India but doesn’t include Goods which have been cleared for home consumption.

✓ Importer : Section 2(26) :- Importer, in relation to any goods, at any time between their
importation, and the time when they are cleared for home consumption, includes any
owner, beneficial owner or any person holding himself out to be the importer.

✓ India : Section 2(27) :- Includes the territorial waters of India.

Note: Territorial waters extend upto 12 nautical miles from the baseline on the coast of India.
✓ Indian Customs Waters : Section 2(28) :- The waters extending into the sea upto the limit of
Exclusive Economic Zone under section 7 of the Territorial Waters, Continental Shelf, Exclusive
Economic Zone and other Maritime Zones Act, 1976, (80 of 1976) and includes any bay, gulf, harbor,
creek or tidal river.
Note: Indian Customs Waters extend upto 24 nautical miles from the baseline on the coast of India. It
means an area extended upto 12 nautical miles beyond territorial waters.
✓ Person-in-charge : Section 2(31) :- Means
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1. in relation to a vessel, the master of the vessel;

2. in relation to an aircraft, the commander or pilot-in-charge of the aircraft;
3. in relation to a railway train, the conductor, guard or other person having the chief direction of the
train;
4. in relation to any other conveyance, the driver or other person-in-charge of the conveyance;

✓ Prohibited Goods : Section 2(33) :- Any goods, the import or export of which is prohibited
by the Customs Act or any law for the time being in force, but doesn’t include any goods, in
respect of which the conditions subject to which the goods are permitted to be imported
or exported have been complied with.

✓ Smuggling : Section 2(39) :- Any act or omission which will render such goods liable to confiscation
under
section 111 or 113.
✓ Warehouse: Section 2(43) :-Public warehouse licensed under section 57 OR Private
Warehouse licensed under section 58. or a special warehouse licensed under section 58A
✓ Warehoused Goods : Section 2(44) :- Goods deposited in a warehouse
LEVY & COLLECTION OF CUSTOMS DUTIES

Levy of and Exemption from Customs Duty

Goods become liable for import OR export duty when Goods are Imported into India OR
Exported out of India.

Levy is the stage where the declaration of such liability is made and the persons / properties in
respect of which the duty is to be levied is identified.

If the Central Government is satisfied that it is necessary in the public interest to do so, it may,
by notification in the Official Gazette, exempt generally either absolutely or subject to such
conditions (pre-clearance) as may be specified in such notification, goods of the specified
description, from the whole or any part of the customs duty leviable thereon.

An exemption notification cannot be withdrawn and duty cannot be demanded with

retrospective method.
Section 12 of the Customs Act, 1962 is the charging section, which is the basis for levy of tax. As per section
12, customs duty is imposed on goods imported into or exported out of India as per the rates provided in
Customs Tariff Act, 1975 or any other law for the time being in force. This can be analyzed as below:
1. Customs duty is levied on goods where such goods are imported into or exported out of India.
2. Levy is subject to other provisions of this Act or any other law.
3. The rates of Basic Custom Duty are specified under the Tariff Act, 1975 or any other Law.
4. Even goods belonging to Government are subject to levy, though they may be exempted by notification(s).
Customs Tariff Act, 1975 has two schedules:
Schedule I : Tariff rates for imported goods known as Import Tariff
Schedule II : Tariff rates for exported goods known as Export Tariff

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TYPES OF CUSTOMS DUTIES

Import Duty

a) Basic Customs Duty

i) Levied as a percentage of value as determined under section 14(1)

ii)) General basic rate of Basic Custom Duty is 10%

iii)) Could be levied at “Standard” OR “Preferential Rates” (where imported from a

preferential area as may be specified by the Government) (Nepal- Mauritius)

iv) Onus is on the person (owner) to substantiate with the supporting evidence that
the goods are chargeable with a preferential rate of duty

b) Additional Customs Duty / Counterveiling Duty (CVD)

i) It is equivalent to the amount of excise duty on like goods manufactured /

produced in India

ii)) Under the GST regime, this duty is subsumed under GST and additional duty / IGST
is payable on assessable value plus basic customs duty
iii)) In case of alcoholic liquor for human consumption is imported into India, the same is
still under state excise which has not been subsumed under GST. Therefore, IGST
is not leviable under Import

iv) In case inward taxable supplies are in the nature of Imported Goods, which have
been taxed and have been consumed in the manufacture of outward taxable
supplies, Input Tax Credit is available to the extent of IGST paid

c) Additional Duty / Special Additional Duty (SAD)

It used to be levied to offset the Sales Tax / VAT

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Provisions under Goods & Services Tax (GST)

The goods imported in to India, are now subject to IGST and not CVD or SAD. IGST is now
payable on Assessable Value + Basic Customs Duty.
As per section 3(7) of the Customs Tariff Act, 1975 Any article which is imported into India shall, in
addition, be liable to integrated tax at such rate, as is leviable under section 5 of the Integrated Goods and
Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as
determined under section 3(8) of The Customs Tariff Act, 1975.

1. GST Compensation Cess:

Any article which is imported into India shall, in addition, be liable to the goods and services tax
compensation cess at such rate, as is leviable under section 8 of the Goods and Services Tax
(Compensation to States) Cess Act, 2017 on a like article on its supply in India, on the value of the
imported article as determined under section 3(10) of The Customs Tariff Act, 1975 [Section 3(9) of
the Customs Tariff Act,1975].

2. Protective Duty In order to protect any industry established in India, a duty may be imposed on
imported goods on the recommendation of Tariff Commission [Section 6 of the Customs Tariff Act,1975].
3. Safeguard Duty: The Central Government may impose safeguard duty on specified imported goods, if
it is of the opinion that the goods are being imported in large scale and they are causing injury to the
industry in India [Section 8B(1) of the Customs Tariff Act,1975].

This is levied on goods imported into India, when such goods are already manufactured in India, but the
costs are higher as compared to import prices. It is levied to ensure that the Indian manufacturers don’t
suffer owing to import of cheaper goods from outside and therefore aims to create a level playing field for
the Indian manufacturers and importers, thereby with the intent of safeguarding the National interest.
Provisional Safeguard Duty may also be imposed by the Central Government subject to section 8B(1)
of the Customs Tariff Act, 1975 on the basis of a preliminary determination that increased imports have
caused or threatened to cause serious injury to a domestic industry [Section 8B(2) of the Customs Tariff
Act,1975].
Safeguard measures imposed u/s 8B, which were earlier limited to imposition of safeguard duty,
are expanded by Finance Act ,2020 to include tariff-rate quota fixations or any other measures,
as deemed fit. Under tariff- rate quota, a lower tariff rate is imposed on imports of a given product
within a specified quantity and a higher tariff rate on imports exceeding that quantity to provide
the desired degree of import protection.
4. Countervailing Duty on Subsidized Articles: Where any country or territory pays, bestows, directly
or indirectly, any subsidy upon the manufacture or production therein or the exportation therefrom of
any article including any subsidy on transportation of such article, then, the Central Government may,
by notification in the Official Gazette, impose a countervailing duty [Section 9(1) of the Customs Tariff
Act,1975].

5. Anti-Dumping Duty on dumped articles: Where any article is exported by an exporter or producer
from any country or territory to India at less than its normal value, then, upon the importation of such
article into India, the Central Government may, by notification in the Official Gazette, impose an anti-
dumping duty [Section 9A(1) of the Customs Tariff Act,1975].

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Diagrammatic view of types of customs duties.

Social Welfare Surcharge (SWS) on imported goods [Section 110 of Finance Act, 2018 w.e.f 02-02-
2018]
It is a duty of customs levied for the purpose of the Union on the goods specified in the First Schedule to the
Customs tariff Act,1975,being goods imported into India. It is levied @10% on the aggregate of duties, taxes
and cesses which are levied and collected by the Central Government under section 12 of the Customs Act,
1962.It is not applicable on safeguard duty, countervailing duty, antidumping duty, IGST and GST
Compensation cess.

Road and Infrastructure Cess on imported goods - Notification No. 4/2020-Customs 21/2020

It is levied as duty of custom @ rupee 18 per litre on motor spirit (petrol) and high speed
diesel(HSD) imported into India for the purpose of financing infrastructure projects.
Introduction of Health Cess (Finance Act, 2020)
Finance Act 2020 has imposed a Health Cess on import of medical equipment of classified in
4th schedule for augmenting and financing health infrastructure and related services.
Salient features are below
o The applicable rate is 5% on the assessable value of the imported goods;
o Medical devices which are exempt from Basic Customs duty would not be subjected to
Health Cess; and
o Credit of Health Cess is not available to the importer

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CLASSIFICATION & VALUATION OF IMPORT AND EXPORT GOODS

Classification

Classification enables categorizing the goods into groups / sub-groups, in order to apply a single
rate of duty on each group / sub-group. This classification is based on the concept of Harmonized
System of Nomenclature (HSN).
HSN is an internationally accepted coding system and the same was formulated and thereby
enunciated under the General Agreement on Tariffs & Trade (GATT). At international level, the
HSN classification of goods is a six digit coding system but India follows 8 digit coding system,
wherein first two digit represent chapter number, next two digits represents heading number, next
two digits represents sub heading number and last two digits product code. Customs Tariff Act,
1975
Interpretation Rules under the Customs Tariff Act, 1975

General Rule for Classification [Rule 1]

The essence of this rule is that the reference to the rules may be made in case of ambiguity,
that is, the reference to the six rules of interpretation is not required when classification of the
goods is possible on the basis of description in the heading, sub-heading etc.

Unfinished Articles & Mixtures [Rule 2]

a) Any reference in a heading to an article, shall be deemed to include a reference to that

article in an unfinished stage too, as long as in the present stage, the incomplete article

exhibits the essential character of that article in complete / finished form

Example : Car without tyres or without seats would be still construed as Cars, but not Cars
without engines

b) Any reference in a heading to a material or substance, shall be deemed to include a

reference to the mixtures and combinations of that material / substance with other
materials / substances

Example : natural rubber would include its mixture with synthetic or other forms of rubber

Classification of Goods classifiable under more than one head [Rule 3]

a) “Specific Identification”, i.e., the goods shall be classified under the heading which is
closest to the specific description

Example : Mint Tea is not separately classified, but the classification should be tea as the
product is closest to the one under the heading “tea”, mint is only a flavour

b) “Essential Character Principle”, i.e., if composite goods cannot be classified as per

Rule 3(a), then, shall be classified on the basis of material / substance that defines the
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essential character

Example : If one imports “Liquor Gift Sets” that have both, liquor and glasses, it should
be classified under the heading, “Liquor”, as the essential character of the composite item is
the liquor itself and the glasses are pure ancillaries

c) “Latter the Better Principle”, i.e., when goods can’t be classified under rules 3(a) or
3(b), the goods would be classified under the heading that appears last in the numerical
order amongst those which equally merit consideration

Example : A gift set, which has socks and ties, can be classified under any of the above
rules, and therefore should be classified as ties (heading 6117) over socks (heading 6115)

Akin Principle [Rule 4]

This rule states that the goods which cannot be classified in accordance with Rules 1, 2 or 3,
shall be classified under the heading which includes goods that are the most “akin or similar”.
An example would be anti-glare films used for car windows, venetian blinds, all of these are not
separately classified, they would be classified under the heading for “builders’ ware of plastic”,
as that’s the closest these fit into.

Cases / Containers for packaging of goods [Rule 5]

Goods which are in the nature of containers / packages such as necklace boxes, camera cases,
musical instrument cases, will be classified with the specific article which are generally sold

within these packages. However, this is applicable to containers, which are fitted for the
article they will contain, are suitable for long term use, protect the article when not in use,
and are of a kind normally sold with such articles.

Sub-headings [Rule 6]

Only sub-headings at the same level are comparable.

Valuation for Customs Duty

Valuation for Customs Duty begins with determination of “Transaction Value”.

Transaction Value includes the price paid / payable as consideration.

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In case of transaction between related parties, sale transaction would be examined to ascertain
the influence of relationship on the declared value, and whether the same could then be accepted
as transaction value (it needs to be at arm’s length)

Parties are said to be related when –

They are Officers / They are legally

They are employer and
Directors of each recognized partners in
employee
other's business business

One of them directly /

Any person holds directly / indirectly > 5% of the
indirectly controls the
voting rights / shares in the other
other

Where both of them control or are controlled by the

same person

Valuation Rules

The Customs Value fixed as per Section 14 is the value that would be used for calculating the
Customs Duty Payable. This is also called Assessable Value. Criteria for deciding Value –

Price at which such or like goods are ordinarily sold or offered for sale;

Price for delivery at the time and place of Importation or exportation;

Price should be in the course of International Trade;

Seller and Buyer should not be related to each other;

Price to be the sole consideration for the sale; and

Rate of Exchange in force as notified by CBIC as on the date when the Bill of Entry is presented is
considered for Imports and in case of exports – Shipping Bill/Bill of export

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Rule 3(1)

Value of Imported Goods shall be the Transaction Value adjusted in accordance with provisions
of rule 10; as under:

For Imports

Price paid / payable for delivery at the time and place of Importation, which essentially implies
that the price up to a port in India when goods are imported has to be considered (i.e. C.I.F.
Value)

For Exports

Price paid / payable for delivery at the time and place of exportation, which essentially implies
that the price up to a port in India when goods are exported has to be considered (i.e. F.O.B.
Value)

– C.I.F. = F.O.B. + Cost of Transport (Freight) and Insurance

– cost of transport is not ascertainable, such cost shall be 20% of the free on board
value

– In the case of goods imported by air, even where the cost of transportation is
ascertainable, such cost shall not exceed 20% of free on board value of the goods

– the cost of insurance actually incurred to be considered

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

– In the case of goods imported by sea or air and transshipped to another customs
station in India, the cost of insurance, transport, loading, unloading, handling charges
associated with such transshipment shall be excluded.

– The cost of transport of the imported goods referred to in clause (a) includes the ship
demurrage charges on charted vessels, lighterage or barge charges

– Exchange rate (For exports) as applicable on date of presentation of a shipping bill or bill of
export, as determined by Central Board of Excise & Customs (CBEC) or ascertained in manner
determined by CBEC should be considered If the valuation as above cannot be determined,
then sequentially, the following rules will be applied.

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Identical Goods / Comparison Method [Rule 4]

Transaction Value (TV) of identical goods will be used in determining the value of imported goods,
only when such identical goods are sold at the same commercial level, and these goods are
substantially the same quantity as the goods being valued. TV of goods exported would be
based on the transaction value of the goods of like kind and quality exported at or about the same
time to the same destination country, or in absence, another destination country.

In applying this rule, if more than one transaction value of identical goods is found, the lowest
such value shall be used to determine the value of imported goods.

Similar Goods for Imports and Computed Value Method for Exports [Rule 5]

The TV for Imported Goods would be based on that of the similar goods (i.e., like characteristics
& country of production). The TV of goods exported, would be taken at computed value, i.e.,
Cost of Production + Charges for design/brand + Reasonable profit.

Residual Method [Rule 6]

For exports, the TV would then be arrived at by reasonable and consistent means by Customs
Officer. For Imports, Rule 7 and 8, as below would be invoked.
Deductive Value [Rule 7]

Unit price at which the imported goods (or) identical (or) similar imported goods are sold in
the greatest aggregate quantity

Less : - Commission, Selling Expenses, and Profit made, Transport & Insurance &Taxes
within India.

The goods at or about same time can be considered, if not at the earliest date of importation but
before the expiry of 90 days after such importation
Computed Value [Rule 8]

This would be the cost of materials used in producing the imported goods, including fabrication
costs, and usual profits commensurate with sale of goods of same class in India, including specific
additions as per Rule 10 (i.e., Insurance, Freight and Landing Charges)

Valuation Terminologies

FOB : This is also known as “Free on Board” OR “Freight on Board”. It signifies the cost of delivering
the goods to the nearest port and thereafter the Buyer is responsible to ship from there to the
buyer’s address.

CIF : This is known as “Cost, Insurance & Freight” Value. This would add on the Insurance and

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Freight to the FOB Values, as explained below.

Mode of Transportation -> By Air Any other mode
Actual Freight Ascertainable Actual Freight; or Actual Freight
20% of FOB value of the
goods, Whichever is less
Actual Freight Not Ascertainable 20% of FOB value of the goods
Addition of cost of insurance in case of imports:
If Actual cost of insurance available Actual cost of insurance
If Actual cost of insurance not available 1.125% of the FOB value of the goods

Cost of
Cost of
Transport @
Insurance @
20% of FOB if
1.125% of FOB
the actual cost
if actual is not
is not
ascertainable
ascertainable

Relevant date for rate of duty on

Imported Goods (Section 15):

Section Types of Goods Relevant

Date
15(1)(a) Goods cleared for Rate prevailing on the :
home consumption
5. date of presentation of bill of entry; or
under section 46
6. date of entry inwards of the
vessel/aircraft/vehicle whichever is later

15(1)(b) Goods cleared from a Rate prevailing on the date of presentation of Ex-Bond
warehouse under section 68 bill of Entry for home consumption
15(1)(c) In case of any other goods Rate prevailing on the date of payment of duty

Exported Goods (Section 16):

Section Types of Goods Relevant

Date
16(1)(a) Goods entered for export Rate prevailing on the date on which proper officer
under section 50 makes an order permitting clearance and loading of the
goods for exportation under section 51
Note: Provisions of both section 15 and 16 are not applicable to baggage and goods
imported/exported by

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Specific Additions

These would include expenses incurred by the buyer and not included in the price. Any
payments made to the seller as a condition of sale

Template for Calculation of Import Duties

INR

Assessable Value (AV) 1000

Basic Custom Duty(BCD) 100 Taken at 10% of AV

Safeguard Duty 300 Taken at 30% of AV

Social Welfare Surcharge(SWS) 10 Taken at 10% of BCD

Anti Dumping Duty 200

Total 1610

IGST 289.8 Taken 18% of Total

GST Compensation Cess(GCC) 241.50 Taken 15% of Total

Total Taxes and Duties 1141.30

Illustration 1

Ms. Nisha imported 2500 Tonnes of goods and materials valued at USD 50 per tonne (C.I.F.).
Exchange Rate per notification (CBIC) was $1= INR 63.84. The Basic Customs Duty was
chargeable @ 10% and over and above, there was an anti-dumping duty levied on the goods,
which was the differential between the amount so calculated as the Landed Value Incl. Basic
Customs Duty and Cess is INR 100,00,000/-. Calculate the Anti- Dumping Duty.
Description Tonnes Rate USD INR
C.I.F Value 2,500 50 1,25,000 79,80,000

Assessable Value 79,80,000

Basic Custom Duty(BCD) @ 10% 7,98,000

Social Welfare Cess @ 10% of BCD 79,800

Landed Value 88,57,800

Landed value as per Notification 1,00,00,000

Anti Dumping duty 11,42,200

Note : Anti-Dumping duty is levied to promote the local industry and to curb imports, and to
ensure that India is not used as a dumping ground, which could otherwise have serious
repercussions on the economic growth of the nation. This Anti-dumping duty is continued even
under the GST regime.
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Illustration 2

XYZ imports Pan Masala into India and the C.I.F value is INR 500/-. The rates of tax for Pan Masala
(HSN Code 21069020) are Basic Customs Duty 37.5%; IGST 28% and Compensation Cess
60%.

Compute Total Import Duty.

Description INR

CIf Value 500

Assessable Value(AV) 500

Basic Custom duty @ 37.5% 188 A

Social Welfare Cess @ 10% of A 18.8 B

AV + BCD + Cess = 500 + 188 + 18.8 =706.8

IGST @ 28% 197.90 C

Compensation Cess @ 60% 424.08 D

Total Import duty payable(A+B+C+D) 828.78

Total Value incl Import Duty 1328.78

Note : The CBIC notified rate of exchange in force as on the date on which the bill of entry is
filed, is what will be applied for computation of assessable value. Note also, that the above cess,
Compensation Cess is leviable under GST and hence applicable on the same base; i.e. AV + BCD,
like IGST.
Illustration 3

M/s XYZ Chemicals Ltd. imported a machine from ABC Inc. at USA (Boston). The price of the
machine was contracted at USD 12500 and the machine was shipped on 1st February, 2018.
Meanwhile XYZ Chemicals, renegotiated a price reduction owing to the past relationship, and this
price reduction was agreed vide an e-mail and a fax on 15thFebruary, 2018. The machine arrived
in India (Mumbai Port) on 1st March, 2018.

The assessing authorities claimed that the duty would be payable basis the Original Contracted
price, pre- shipment.

Please advise your stand as a Tax Consultant to XYZ Chemicals Ltd.

The stand taken by the Customs Authorities is factually incorrect and can be challenged under the
Law. The basic reason is that the Transaction Value is considered at the time and place of
importation. Hence, it was contended that the Import is complete only when the Goods
become a part of the Country. Here, in the present case, the price was mutually revised while the
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Goods were still in transit. Hence, the revised price could be considered for arriving at the
Assessable Value and the same was also enunciated under the case law : Gujarat Heavy Chemicals
v. Commissioner of Customs, Ahmedabad 2004.
Illustration 4
Calculate the total import duty payable if (Assuming import by air)

a) F.O.B. Value is GBP 18000

b) Freight Charges incurred (actual) are GBP 7500

c) Design & Development Charges incurred at UK are GBP 2500

d) Selling Commission at India paid to a local agent @ 2% of F.O.B. Value by buyer

e) Date of Bill of Entry : 24th Oct 2017 (Rate of Basic Customs Duty is 20% and Exchange Rate
as notified by CBIC is INR 68 to 1 GBP)

f) Date of Entry Inward : 20th Oct 2017 (Rate of Basic Customs Duty is 18% and Exchange
Rate as notified by CBIC is INR 70 to 1 GBP)

g) IGST @ 18%

h) Insurance Charges could not be ascertained

ITEM GBP INR

F.O.B given 18,000

Design & Development 2,500

Local commission 2% of 18000 360

FOB as per customs provisions 20,860

Insurance (20860*1.125%) 234.675

Freight (20860 * 20%) 4172

C.I.F 25,266.675 17,18,134 68rs

Basic Custom Duty 343627 20%

Social Welfare cess @ 10% 34362

Total for IGST(AV + All Custom Duties) 20,96,123

IGST @ 18% 377302 A

Total Import Duty 7,55291 B

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a) Insurance is taken @ 1.125% of F.O.B. value, as the charges aren’t ascertainable

b) Freight can be taken at actuals but capped to 20% of F.O.B.
c) Selling Commission is paid in Indian Rupees to local agents appointed by exporters to
usher their sales in India and hence included in C.I.f. Value

d) The Exchange Rate in force per CBIC notification, on the date when the Bill of Entry is
presented is to be considered

e) IGST is levied on Assessable Value + All Customs Duties

f) Social welfare Cess is levied on BCD @ 10%

Illustration 5
Determine the Customs Duty payable including the safeguard duty of 20%, for Goods with
Assessable Value of INR 50,00,000 considering BCD @ 10%, IGST @ 18%
Item INR

Assessable Value 50,00,000

Basic Custom Duty` 5,00,000 A

Social Welfare Surcharge 50,000 B

Safeguard Duty(On assessable value) 10,00,000 C

Total for IGST(AV + All Custom Duties) 65,50,000

IGST 11,79,000 D

Total Duty & Taxes payable(A+B+C+D) 27,29,000

Customs Valuation (Determination of Value of Imported Goods) Rules, 2007

Custom duties are calculated on specific or ad valorem basis, i.e., on the value of goods. The value of goods is
determined by Rule 3(i) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. This
rule pegs the value of imported goods at the transaction value that has been adjusted according to the provisions
under Rule 10.

In case there are no quantifiable or objective data regarding the valuation factors, valuation conditions aren’t
satisfied, or there are doubts regarding the accuracy or truth of declared value as per Rule 12 of Valuation Rules
2007, valuation of items has to be done through other means as per the following hierarchy,
• Comparative Value Method which compares the transaction value of similar items (Rule 4).
• Comparative Value Method which compares the transaction value of similar items (Rule 5).
• Deductive Value Method which uses the sale price of item in importing country (Rule 7).
• Computed Value Method which uses the costs related to fabrication, materials and profit in production
country (Rule 8).
• Fallback Method which is based on the earlier methods with higher flexibility (Rule 9).

EXEMPTIONS under the Customs Act

If the Central Government is satisfied that it is necessary in the public interest to do so, it may,
by notification in the Official Gazette, exempt generally or subject to such conditions as may
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be specified in the notification, which would need to be fulfilled before / after clearance, goods of
the specified description from the whole or any part of the duty of customs.

It may, by special order, exempt from duty, any goods, on which duty is leviable only under
exceptional circumstances. Further, no duty is to be collected, if the amount of duty leviable is
less than or equal to INR 100.

Both the general and specific exemptions mentioned above, may be granted by providing for the
levy of duty at a rate expressed in a form which is different from the statutory rate.

An exemption notification cannot be withdrawn and the duty cannot be demanded with
retrospective effect.
Power of Customs Officers

The Customs Officers are authorized to:

a) Declare warehousing stations

b) Allow setting up warehouses (Public / Private)

c) Power to search any vessel / conveyance / person

d) Power of Seizure of Goods

e) Power to Arrest

ADMINISTRATION OF CUSTOMS LAW

Person in Charge : Master (in case of a Vessel), Commander or Pilot (in case of an aircraft),
Conductor, guard or any other person having the chief direction of the train (in case of a train), Driver
or other person in charge of the conveyance (any other conveyance).

Responsibilities of a Person In Charge (PIC)

Submitting the Import / Export Manifest

Ensuring that the conveyance comes through the proper route

Ensuring that the conveyance lands at the appropriate place

Ensure that the Goods are loaded / unloaded only after proper permissions / orders

CA Saumil ManglaniManifest
The Import - 9921051593
means the report which is required to be delivered under section 30, which
 7. Customs 7.21

states that the PIC, in the case of a vessel / an aircraft, shall deliver to the proper officer an
import manifest PRIOR to the arrival of vessel / aircraft and in case of a vehicle, within 12
hours post the arrival at the customs station, in the prescribed format.

Also, it’s imperative to note that the import is completed only when the goods so imported are
cleared for home consumption.

Establishment under Customs

CBEC may appoint by notification in Official Gazette

Customs Inland Land International

Ports OR Container
Airports Depots / Air Stations Terminals

Administration

These areas
would then be
earmarked for
Loading /
Unloading

Imports &
Exports Government Commissioner
allowed only appoints a
at designated City as a port
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 7. Customs 7.22

Types of Ports

a) Sea Ports

b) Airports

c) Land Customs Stations (LCS)

d) Inland Container Depots (ICD)

e) Container Freight Stations (CFS) attached to ports

Mode of Clearance

a) Regular Cargo

b) Courier

c) Foreign Post Office

d) Baggage

IMPORT & EXPORT PROCEDURES UNDER

CUSTOMS LAW

Procedure for Import through Sea Route (Cargo Clearance)

For the Carrier

Section 30: Filing the Import General Manifest (IGM) prior to the arrival of the vessel

IGM is generally filed on the basis of Bill of Lading / Airway Bill and is issued by the Carrier.
It contains details around the shipper, consignee, no. of packages, description of goods, date,
vessel details etc.
Note: Sections 31 to 34 prohibit imported goods from being unloaded from vessel until entry inwards
is granted and mentioned in the arrival Manifest or import report.
In all these instances we find that the liability to duty arises as soon as they entered the ‘territorial waters’ of
india and at every point until they remain ‘imported goods’ up to the point where they are to pass for ‘home
consumption’.
Section 31 : entry Inward granted by the Customs

It acts as permission for unloading the Goods. The date herein would be construed as the
relevant date for arrival of goods in India

For the Custodian

Section 45 : Custodian is appointed by the Customs

The custodian would be responsible for keeping proper record of unloaded goods. The
custodian is also responsible to ensure that the goods don’t leave the customs area (that is
clearance) without proper authorization from the Customs Officer

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For the Importer

Section 46 : The importer needs to submit the bill of entry. This Bill of entry needs to be signed
by the Importer. The Bill of entry contains the details of goods along with :
– Bill of Lading

– Invoice
– Packing List

– Product Literature
– License
– Import Permit

– GATT declaration form duly signed by the Importer General Agreement on Tariffs and
Trade (GATT)

For the Customs

The Customs Authorities note the Bill of entry by assigning a number and date stamp. This
date is then construed as the date of presentation of Bill of entry.

Post the above procedures, the assessment as described above is undertaken, and once the
assessed duty is paid vide TR6 Challan, this Challan is submitted as evidence of payment to the
Customs authorities, and the Out of Charge Order is issued, and on the basis of this Order, the
Custodian allows the Clearance of Goods from the Customs Area.

Demurrage is the charges levied by the port authorities, if not cleared within 3 days of
unloading.
Time Limit for Filing Bill of Entry

The importer shall present the bill of entry before the end of the day (including holidays)
preceding the day on which the aircraft or vessel or vehicle carrying the goods arrives at a
customs station at which such goods are to be cleared for home consumption or warehousing

Sr.
Goods arriving at Time limit for filing Bill of Entry
No
Before the end of the day (including holidays)
1 Customs Port
preceding the day arrives
Customs Port
Goods are consigned from
(i) Bangladesh
(ii) Maldives Before the end of the day (including holidays) of said
2
arrival of the vessel
(iii) Myanmar
(iv) Pakistan
(v) Sri Lanka
Before the end of the day (including holidays) of said
3 Customs Airport
arrival of the vessel
an inland container depot or Before the end of the day (including holidays)
4
air freight station preceding the day arrives
Before the end of the day (including holidays) of said arrival
5 Land Customs Station
of the vessel

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Procedure for Export through Sea Route (Cargo Clearance)

For the Carrier

Section 41 : Filing the EGM prior to the departure of the vessel

Export General Manifest (EGM) is generally filed on the basis of Bill of Lading / Airway Bill and
is issued by the Carrier. It contains details around the shipper, consignee, number of packages,
description of goods, date, vessel details etc.

Section 39 : entry Outward granted by the Customs

It acts as permission for loading the Goods. The date herein would be construed as the
relevant date for exportation of goods out of India

For the Exporter

Section 50 : The exporter needs to submit the Shipping Bill. This Shipping Bill needs to be
signed by the exporter. The Shipping Bill contains the details of goods along with :

– Invoice

– Packing List

– Product Literature

– Licence

– export Permit
– Softex / other compliances “Software export valuation” and certification

For the Customs

The Customs Authorities note the Shipping Bill by assigning a number and date stamp. This date
is then construed as the date of presentation of Shipping Bill.

Post the above procedures, the assessment as described above is undertaken, and once the
assessed Duty is paid vide TR6 Challan, this Challan is submitted as evidence of payment to the
Customs authorities, and the Let export Order is issued, and post that the loading can commence.

TRANSPORTATION & WAREHOUSING

Transit and Transhipment

A conveyance/vessel may reach a port but may not unload the goods at that port. It may halt at
the port for any other purpose such as etc. Once the purpose is over, it may start sailing to the
destination port. In repairs, replenishment of supplies, refuelling this case two ports are

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involved :-

1) the halting port(known as transit port) and

2) the destination port (called as port of clearance).

Such a phenomenon of temporary stay at a port other than a destination port is called transit.
In transit; the goods remain in the same vessel and consequently reach the port of clearance.
In transhipment, however, the vessel after reaching an intermediate port, transfers the goods
to another vessel and the second vessel into which the goods are transferred (loaded) from the
first vessel, carries the goods to the destination port.
Transit of Goods without payment of duty [Section 53]

Section 53: Accordingly, any goods imported in a conveyance and mentioned in the import
manifest or the import report, as the case may be, for transit in the conveyance to any place outside
India or any Customs station may be allowed to be so transited without payment of duty, subject

to such conditions, as may be prescribed.

Transshipment of Goods without payment of duty [Section 54]

In case any goods imported into a Customs station are intended for transshipment, a bill of
transshipment shall be presented to the proper officer in the prescribed form.

However, where the goods are being transshipped under an international treaty or bilateral
agreement between the Government of India and Government of a foreign country, a declaration
for transshipment instead of a bill of transhipment shall be presented to the proper officer in the
prescribed form.

Where any goods imported into a Customs station are mentioned in the Import Manifest or import
report as the case may be, as for transhipment to any place outside India, such goods may be
allowed to be so transhipped without payment of duty.

Differences between Transit & Transshipment

Transit Transshipment

Goods remain in the same vessel at the Goods are transferred to a different vessel at
intermediate port the intermediate port

Only import manifest has to be submitted for Bill of Transhipment / declaration is also
entry required to be submitted

no supervision is required at the Intermediate Transhipment process is conducted under

Port the supervision of the Customs Officer

The same vessel reaches the destination port A different vessel reaches the destination
port

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WAREHOUSING
Imported goods need not be cleared for home consumption immediately on arrival. If importer wish or he
may not require the goods immediately or sometime to avoid demurrage charges or intends to re-export of
such imported goods or for any other reasons, he may store such goods in Warehouse without payment of
goods. Warehouses allow goods to be stored and thus deferment of duty. The Goods are to be released from
the Warehouse, subject to “clearance”; i.e.; post assessment and payment of Duty. Warehouse may public
warehouse licensed u/s 57 or private warehouse licensed u/s 58 or special warehouse licensed u/s 58A.
Public Bonded Warehouse
1) These are owned and managed by Government / Governmental Bodies / Agencies

2) Only dutiable goods can be warehoused therein

3) Availability of space certificate from the warehouse keeper would be required

4) A double duty bond would also be required to be furnished for deposit of goods

5) Also, the person seeking warehousing would need to pay rental / warehousing charges to
the warehouse keeper.

Private Bonded Warehouse

1) These are owned and managed by private entities

2) These aren’t generally allowed where the public bonded warehouses are available

3) Only dutiable goods can be warehoused therein

4) Availability of space certificate from the warehouse keeper would not be required in this
case

5) Double bond duty would still be required but, customs officers would need to be posted at
the expense of the warehouse keeper

The Goods so warehoused, can vary, depending on whether these are for 100% Export
Oriented units (EOu’s) or otherwise, as explained by the diagram below (up to a period of 5
years / 3 years / 1 year) :

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BAGGAGE RULES
Goods imported by a passenger or a member of crew in his baggage are classified under one tariff heading
and levied to a single rate of duty. Section 77 provides that the owner of any baggage shall for the purpose
of clearing it makes a declaration of its contents to the proper officer. Baggage includes unaccompanied
baggage but excludes motor car, alcoholic drink (beyond certain limit) and goods imported through courier.
Baggage Rules, 2016 provide for duty free clearance, up to a certain limit, of articles such as used personal
effects, travel souvenirs and other articles when carried on the person or in the accompanying baggage of
the passenger arriving in India. Personal effect means things required for satisfying daily necessities but
does not include jewellery. Generally, duty free allowance is allowed to the Indian resident or foreigner
residing in India.
Duty Free Baggage Allowances of Dutiable and Non-Prohibited Articles (Baggage Rules, 2016)
Rule Passe Passenger arriving Amount of Duty Free Baggage
nger from countries Allowance
Rule 3 An Indian resident or a Other than Nepal, Rs. 50,000
foreigner residing in India Bhutan or Myanmar
or tourist of Indian origin
Proviso to Tourist of foreign origin Other than Nepal, Rs. 15,000
Rule 3 Bhutan or Myanmar
Rule 4 An Indian resident or a Nepal, Bhutan or Rs. 15,000
foreigner residing in India Myanmar
or tourist
Rule 5 Any passenger residing Any country Gold Jewellery:
abroad for more than one
7. Gentlemen – 20 grams with a value
year
cap of Rs. 50,000

8. Lady – 40 grams with a value cap of

Rs. 1 lac

DUTY DRAWBACK

This enables the Exporter to obtain a refund of the Import Duties (Customs Duty) paid on inputs,
which are processed for manufacture of goods to be exported.
The Central Government is empowered to grant duty drawback (Section 74 & Section 75).

This benefit is available not only on the re-export of the duty paid goods (Section 74), but also,
on imported materials used in the manufacture of Goods which are exported (Section 75)

These goods should be entered for export within 18 months. The procedure is as under :
✓ At the time of export, the Exporter shall endorse the shipping bill to the Proper Customs
Officer

✓ Necessary forms like ARE1 are submitted

✓ Customs Officer makes an order permitting clearance for exportation (Section 51)

✓ If an amount of drawback, and interest paid to the exporter turns out to be higher than
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what he is eligible to, this amount would have to be repaid back to the Customs
authorities

✓ If there is a drawback which is made to an exporter, who eventually cannot realise the
Invoice (export proceeds) within the period(s) specified by FEMA, such drawback could
be recovered from the exporter

An exporter could opt for drawback as per the All Industry Rate (AIR) or the Brand Rate. The
AIR’s are fixed annually by the Directorate of Drawback, but the brand rates are for special
products.

Where the goods are not put into use after import, 98% of Duty Drawback is admissible under
Section 74 of the Customs Act, 1962. In cases where the goods have been put into use after import,
Duty Drawback is granted on a sliding scale basis depending upon the extent of use of the goods.
No Duty Drawback is available if the goods are exported 18 months after import. Application
for Duty Drawback is required to be made within 3 months from the date of export of goods,
which can be extended up to 12 months subject to conditions and payment of requisite fee as
provided in the Drawback Rules, 1995.

If the imported goods are used before re-export, the drawback will be allowed at a reduced
percentage. If the goods were in possession of the importer, they might be treated as used by the
importer. As per the rules framed by Central Government, the table is as follows:

Drawback is allowed if the use is over 24 months only with permission of Commissioner of
Customs if sufficient cause is shown.
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The Customs Act, 1962 lays down certain limitations and conditions for grant of Duty Drawback.
no Duty Drawback shall be admissible where :

I. The Duty Drawback amount is less than Rs.50/-.

II. The Duty Drawback amount exceeds one third of the market price of the export
product.

III. The Duty Drawback amount is less than 1% of FOB value of export (except where the
amount of Duty Drawback per shipment exceeds Rs.500/-).

IV. Where value of export goods is less than the value of imported material used in their
manufacture. If necessary, certain minimum value addition over the value of imported
materials can also be prescribed by the Government.
The duty drawback needs to be paid, within 1 month, and if not paid, interest is payable to the
claimant, at a specified rate.

Also, where drawback has been paid to the claimant in excess of what he is eligible to, the
claimant has a time period of 2 months, to repay the excess, else, interest would be charged
on the exporter from the date of payment of drawback until the date of recovery.

Duty Drawback is a scheme that encourages exports and thereby accelerates aggregate
demand. It is intended to propel the economic growth of the nation and thereby accelerates the
GDP.

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DEMAND & RECOVERY

Demand of Duty

The notice of demand, must be served in writing, clearly mentioning the reasons, and providing
the party an opportunity of being heard.

Generally, the Show Cause notice, should be served within 1 year from the relevant date;
that is; 1 year from the date of assessment / payment of duty.

However, in specific cases, where the duty or interest is not paid, or short paid, by reason of
collusion, wilful suppression of facts, or misstatement, then the notice could be served within
a period of 5 years.

The demand of duty provisions also calls for attachment of property for upto 6 months, for
protection of interest of revenue and that could be extended for another period of 6 months, but
the attachment period cannot exceed 2 years.

Post which the duty must be collected, in the name of customs duty and paid to the credit of the
Government.

CONFISCATION OF GOODS & CONVEYANCES

Confiscation would generally tend to connote the forceful seizure / repossession of goods by the
Government, without any compensation to the owner, as the possession of the goods was

contrary to the law.

✓ Section 111 states that the following improperly imported goods, shall be liable to
confiscation

⚫ those which are imported by sea / air and offloaded / attempted to be offloaded in a port
other than the appointed customs’ port

⚫ those which are imported by land / inland water, through a route other than a specified
route

⚫ any dutiable / prohibited goods brought in to any bay / creek / gulf etc. for the purpose
of being landed at a place other than customs’ port

⚫ any dutiable / prohibited goods, found concealed in a conveyance

⚫ any dutiable / prohibited goods which should have been disclosed in the Import
General Manifest but were not

⚫ any dutiable / prohibited goods removed / attempted to be removed from a warehouse

/ customs station, without permission
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⚫ goods which do not match the description in the documents, vis-à-vis value / any other
particulars

⚫ any goods, which were exempted from duty subject to a condition, which was
eventually not met

✓ Section 113 states that the following improperly exported goods, shall be liable to
confiscation

⚫ those which are exported by sea / air and loaded / attempted to be loaded in a port
other than the appointed customs’ port

⚫ those which are exported by land / inland water, through a route other than a specified
route

⚫ any dutiable / prohibited goods brought near any bay / creek / gulf etc. for the purpose
of being exported from a place other than customs’ port

⚫ any dutiable / prohibited goods, found concealed in a conveyance

⚫ any goods loaded in a wrongful manner without necessary permissions

⚫ goods which do not match the description in the documents, vis-à-vis value / any other
particulars

⚫ any goods, on which import duty wasn’t paid and entered for export under a claim for
drawback

✓ Section 115 deals with Conveyances which are liable to confiscation

⚫ Any vessel which has been within the Indian customs waters, any aircraft in India, or
any vehicle, which has been adapted or fitted or structured in a manner that it purports
or enables the concealment of goods

⚫ Any conveyance from which the goods are destroyed to prevent seizure

⚫ Any conveyance which had to stop / land but didn’t do so except for sufficient cause

⚫ Any vessel from which goods which have been cleared for exportation, under a claim for
drawback, were unloaded without necessary permissions

⚫ Any conveyance which carried goods into India, but which were later missing without
any account for the loss
⚫ Any conveyance / animal used for smuggling

✓ Section 118 deals with confiscation of packages

⚫ Where the goods imported / exported are liable to confiscation, the packages within

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which they are cased and carried, are also liable for confiscation

✓ Section 119 states that any goods used to conceal the smuggled goods are also liable to
confiscation

✓ Section 120 & 121 state that where the smuggled goods undergo a change in their
physical form, post smuggling, even then they would be liable for confiscation (example :
gold bars, later converted to ornaments). Also, where the smuggled goods are mixed in a
manner with other goods such that they are inseparable, entire goods would be liable to
confiscation, and if the smuggled goods are sold off, the sale proceeds thereof are liable to
confiscation

✓ Section 122 states that the adjudicating authorities shall be give an opportunity of being
heard to the party concerned

✓ Section 123 clearly states that if goods are seized, the onus is on the owner to prove
that they were not smuggled

✓ Section 124 clearly states that before confiscation, it is necessary that a show cause
notice (SCN) is issued to the owner, citing grounds and he should be given an opportunity
to make a representation / of being heard. The SCn can be issued by a person not below
the rank of Assistant Commissioner of Customs

✓ Section 125 states that the authorised officer may allow the owner an option to pay fine in
lieu of confiscation

✓ Section 126 mentions that confiscated goods vest with the Central Government

✓ Section 127 clarifies that any award of confiscation / penalty shall not interfere with or
prevent the owner from being punished under any other provisions of this or any other law
for the time being in force.
REFUND
Refund of Export Duty

Where on the export of goods; any duty has been paid, such duty shall be refunded to the
person by whom or on whose behalf it was paid, if -

(a) the goods are returned to such person otherwise than by way of re-sale;

(b) the goods are re-imported within one year from the date of exportation; and

An application for refund of such duty is made within 6 months from the date on which the
proper officer makes an order for the clearance of the goods when they are imported back.
Refund of Import Duty

Where on the import of any goods, duty has been paid upon clearance for home consumption,
such duty can be refunded to the person by whom or on whose behalf it was paid, if -
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a) The goods are found to be defective or not in conformity with the specifications

b) The importer does not claim any duty draw back with respect to these goods

c) If the goods are exported back / importer relinquishes his title to the goods / they are
destroyed in the presence of the proper officer

An application for refund of duty is to be made within 6 months from the relevant date, i.e.,

a) The date when the proper officer makes an order for clearance of goods when they are
exported back

b) Date of relinquishment if the importer relinquishes his title to the goods

c) Date of destruction, where the goods are destroyed

Moreover, for all general refunds of duty, apart from the ones covered above, have a limitation
period of 1 year, that is, the refund application must be filed within 1 year from the date of
payment of such duty.

MISCELLANEOUS

Assessment of Duty [Section 17]

Section 17 of the Customs Act, prescribes the method for self-assessment of duty. The importer
and exporter must self-assess the duty if any leviable on such goods. These self-assessed goods
may be verified, examined or tested by the proper officer.

For verification, the proper officer may require the importer, exporter or any other person to
produce any document or information, on the basis of which the duty leviable on the imported
goods or export goods, as the case may be, can be ascertained and thereupon, the importer,
exporter or such other person shall be bound to produce such document or furnish such
information.

Where it is found on verification, examination or testing of the goods or otherwise that the
self-assessment is not done correctly, the proper officer may, re-assess the duty leviable on
such goods.
Where any re-assessment so done is contrary to the self-assessment done by the importer or
exporter with respect to valuation of goods, classification, or concessions of duty availed and where
the importer or exporter, as the case may be, confirms his acceptance of the said re- assessment in
writing, the proper officer shall pass a speaking order on the re-assessment, within fifteen
days from the date of re-assessment.

Where the importer or exporter is unable to make self-assessment and makes a request in
writing to the proper officer for assessment; or where the proper officer deems it necessary for

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any reason whatsoever, the officer may direct that the duty leviable on such goods be subject to
provisional assessment if the importer or the exporter, as the case may be, furnishes such
security as the proper officer deems fit for the payment of the deficiency, if any, between the duty
as may be finally assessed and the duty provisionally assessed.

When the duty leviable on such goods is assessed finally or reassessed by the proper officer
in accordance with the provisions of this Act, then (a) in the case of goods cleared for home
consumption or exportation, the amount paid shall be adjusted against the duty finally
assessed and if the amount so paid falls short of, or is in excess of the duty finally assessed,
the importer or the exporter of the goods shall pay the deficiency or be entitled to a refund,
as the case may be; and (b) in the case of warehoused goods, the proper officer may, where
the duty finally assessed or re-assessed, as the case may be, is in excess of the duty
provisionally assessed, require the importer to execute a bond, binding himself in a sum
equal to twice the amount of the excess duty.

The importer or exporter shall be liable to pay interest, on any amount payable to the Central
Government, consequent to the final assessment order or re-assessment order, at the rate fixed
by the Central Government from the first day of the month in which the duty is provisionally
assessed till the date of payment thereof.

If any refundable amount is not refunded within 3 months from the date of assessment of duty
finally or reassessment of duty, as the case may be, there shall be paid an interest on such un-
refunded amount at such rate fixed by the Central Government until the date of refund of such
amount.
Prohibitions

Central Government may prohibit, either absolutely or subject to such conditions specified in the
notification, the import / export of goods of the specified description, for :
a) Maintenance of national security
b) Maintenance of public order / decency
c) Prevention of smuggling
d) Conservation of exchange
e) Safeguarding the balance of payments
f) Protection of human lives / animals

g) Protection of national treasures

h) Protection of Patents & Trade Marks

i) Prevention of contravention of any laws or in the interest of the public
Offences
j)

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The following would constitute offences under the Act.

a) Any misdeclaration in respect of the goods vis-à-vis its value or description or weight or
origin

b) Violation of allied acts, example, Violation of wild life, Drug & Cosmetics Act, Food laws
etc.

c) Landing of Goods at unauthorised ports

Such offences could result in civil or criminal liabilities or both and both could run simultaneously.
Criminal prosecution could result in imprisonment + fines, and civil prosecution could result in
alienation of wealth and penalties.
Criminal Liabilities

✓ Punishment up to 7 years

✓ Offences involving duty evasion of more than INR 50 Lakhs, or prohibited goods, are
non-bailable

✓ Fraudulent duty drawback claims, exceeding INR 50 Lakhs is also non bailable
Civil Liabilities

✓ Recovery of duties short paid

✓ Interest charge

✓ Penalties

✓ Confiscation of import / export goods

✓ Confiscation of conveyances used for smuggling

✓ up to 200% duty for unaccounted goods

✓ up to 5 times the value of goods for forged documents

The normal limit for the above prosecution is one year, whereas for intended fraud, the time
limit is 5 years.

Advance Ruling

This refers to the determination, by the authority, of a question of law / fact specified in the
application, regarding the liability to pay duty in relation to an activity proposed to be undertaken
by an applicant.

In the context of Customs Act, the activity above in the definition would imply import / export.

The application is made in quadruplicate with the fees specified, and can be withdrawn within

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30 days of the application. It is imperative to note that, for matters already pending before the
Tribunal / Court, would not be admissible under Advance Ruling separately.

The ruling must be made within 90 days of the application.

Settlement Commission

Settlement Commission has been constituted under the Customs Act to provide speedy resolution of
disputes pending before an adjudicating authority.
The cases can be referred by applicants with the Commission. However, no application for
determining the classification can be filed. Even outright fraud cases cannot be referred.

Once the case is submitted before it, it enjoys exclusive jurisdiction over it and then can
consequently perform the functions of a customs officer, and thereafter the customs officer cannot
investigate, adjudicate or issue notice / corrigendum.
The application will be disposed effectively and suitable orders would be issued by the
Commission.
The orders of the Commission are non – appealable, however, amenable to writ jurisdiction
of High Court.

The appellants can also take the route of Tribunal / High Court and Supreme Court under
the litigation mode.
LESSON ROUND UP

1. The CBIC is the authority to appoint and designate establishments under the Act

2. The types of Customs Duties are Basic Customs Duty (BCD). Countervailing duty (CVD) and
Special Additional Duty (CVD) are now subsumed under GST

3. There are other types of duties, which are protective duties, intended to safeguard the interests
of the indigenous goods / industry

4. Goods become liable for duty when they are imported in to / exported out of India
5. The rates of customs duty are specified under the Customs Tariff Act
6. BCD is calculated on Assessable Value (AV). Education Cess (EC) & Secondary Higher
Education Cess (SHEC) is calculated on BCD. IGST is calculated on the entire amount (AV
plus all Customs Duties). GST Compensation Cess, like IGST is calculated on (AV plus all
Duties)

7. Warehouses allow goods to be stored and deferment of duty. The goods are to be released
from the warehouse, subject to “clearance”; i.e.; post assessment and payment of Duty
8. The Duty Drawback is a facility that enables the exporter to obtain a refund of the Import
Duties(Customs Duty) paid on inputs, which are processed for manufacture of goods to be exported
9. In transit, the goods remain in the same vessel and consequently reach the port of clearance.

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In transhipment, however, the vessel after reaching an intermediate port, transfers the goods
to another vessel and the second vessel into which the goods are transferred (loaded) from
the first vessel, carries the goods to the destination port

10. The Act and the Rules provide well defined procedures for import / export and the roles and
responsibilities of the parties involved, including the Importer, the exporter, the Custodian, the
Customs and the Carrier

11. Varied types of assessments could take place pre-post clearances and there could be
circumstances that could allow the refund of the import / the export duty, subject to timelines
and conditions being fulfilled

12. The Act provides and enunciates circumstances wherein the goods can be confiscated or
fines and penalties can be levied in lieu of the confiscation

13. Offences under the Act could attract civil or criminal liabilities or both

14. Advance Ruling refers to the determination, by the authority, of a question of law / fact
specified in the application, regarding the liability to pay duty in relation to an activity
proposed to be undertaken by an applicant

15. The Central Government may if it deems necessary to do so in the general interest of the
public, exempt goods generally or specifically.

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