GST Notes – Part 2

TYPES OF GST

The Goods and Services Tax (GST) in India is a comprehensive, multi-stage, destination-
based tax that is levied on every value addition. It is divided into different types to distinguish
between the taxation authority of the central and state governments. The types of GST are
designed to ensure that both the central and state governments share the tax revenues in a
coordinated manner.

Here are the four types of GST:

1. Central Goods and Services Tax (CGST)

• Description: CGST is the tax levied by the Central Government on intra-state (within
the same state) supplies of goods and services.
• Who Levies It: The Central Government.
• Applicability: It applies when goods or services are sold or provided within a state.
• Rates: The tax rate under CGST is usually half of the total GST rate applicable on the
supply. For example, if the total GST rate on a product is 18%, the CGST would be 9%.
• Example: A business selling goods in Karnataka to a customer in Karnataka will charge
CGST on the sale.

2. State Goods and Services Tax (SGST)

• Description: SGST is the tax levied by the State Government on intra-state (within
the same state) supplies of goods and services.
• Who Levies It: The State Governments.
• Applicability: Like CGST, SGST applies when goods or services are sold or provided
within a state.
• Rates: SGST is the same as CGST. Together, CGST and SGST make up the total tax
rate. If the total GST rate is 18%, the SGST portion would be 9%.
• Example: In the same sale of goods in Karnataka to a customer in Karnataka, SGST
will also be charged in addition to CGST.

Note: In the case of union territories without a legislature (such as Andaman and Nicobar
Islands), UTGST (Union Territory Goods and Services Tax) is levied instead of SGST. For
Delhi and Puducherry, SGST applies, as they have their own legislatures.

3. Integrated Goods and Services Tax (IGST)

• Description: IGST is levied by the Central Government on inter-state (between

different states) supplies of goods and services, as well as on imports and exports.
• Who Levies It: The Central Government, but the revenue is shared between the
Centre and the states.
• Applicability: It applies when goods or services are sold from one state to another, or
for imports into India and exports out of India.
• Rates: The IGST rate is equal to the sum of CGST and SGST rates combined. For
example, if the total GST rate on an inter-state supply is 18%, the IGST rate will also
be 18%.
 • Example: If goods are sold from Maharashtra to Tamil Nadu, IGST will be applicable.

4. Union Territory Goods and Services Tax (UTGST)

• Description: UTGST is similar to SGST but applies to union territories without their
own legislatures. UTGST is levied along with CGST for supplies made within a union
territory.
• Who Levies It: The Union Territory Governments.
• Applicability: It applies to intra-UT (within the same union territory) supplies of goods
and services in union territories like Lakshadweep, Andaman and Nicobar Islands,
Dadra and Nagar Haveli, and Daman and Diu, etc.
• Rates: UTGST is equal to the SGST portion of the total GST rate. If the total GST rate
is 18%, UTGST will be 9%.
• Example: A sale made within the union territory of Andaman and Nicobar Islands will
attract both CGST and UTGST.

Comparison of Different Types of GST:

GST
Levied By Applicable On Shared With
Type
CGST Central Government Intra-state supplies Central Government
SGST State Government Intra-state supplies State Government
Inter-state supplies and Shared between Centre and
IGST Central Government
imports/exports States
Union Territory
UTGST Intra-UT supplies Union Territory Government
Government

How It Works in Practice:

• Intra-state supplies (within the same state):

o CGST and SGST are both charged. The taxes are equally divided between the
central and state governments. For instance, if the GST rate is 18%, 9% would
go to CGST and 9% to SGST.
• Inter-state supplies (between states):
o IGST is charged. The central government collects the tax and later distributes a
portion to the state where the goods or services are consumed.
• Imports and Exports:
o IGST is levied on imports. Exports, on the other hand, are zero-rated under
GST, meaning no tax is charged on exports, but input tax credits can be claimed
on inputs used for producing exported goods or services.

The division of GST into CGST, SGST, IGST, and UTGST ensures that both the central
and state/union territory governments receive their share of tax revenue in a structured and
transparent manner. This also ensures that there is no overlap in taxation, reducing confusion
and simplifying the tax process for businesses across India.
 Taxable Event under GST

Under the Goods and Services Tax (GST) in India, a taxable event is the occurrence or
action that makes a transaction liable to GST. The concept of a taxable event is important as it
determines when the tax needs to be paid and on what transaction.

Taxable Event under GST: Supply of Goods or Services

The taxable event under GST is the supply of goods or services. GST is levied on all
supplies, except for those that are specifically exempt or fall under a negative list (such as
alcohol for human consumption or petroleum products).

According to Section 7 of the Central Goods and Services Tax (CGST) Act, 2017,
"supply" is broadly defined to include:

1. Supply of Goods:

• Goods: Every kind of movable property, including materials, commodities, and

products that are traded or transferred.
• Examples: Sale of a mobile phone, purchase of food items, etc.

2. Supply of Services:

• Services: Anything other than goods, money, and securities, which includes intangible
offerings like expertise, advice, or actions performed for a fee.
• Examples: Consulting services, maintenance services, hotel accommodations, etc.

Key Elements of Supply:

To be considered a taxable supply under GST, a transaction must meet the following
conditions:

1. Supply for Consideration:

• GST is applicable when there is a transfer of goods or services in exchange for

consideration, which typically means a monetary payment. However, in some cases,
barter or exchange of goods/services without direct payment can also be treated as
taxable.
• Example: A sale of a car for ₹5,00,000 involves consideration, so it is a taxable event
under GST.

2. Supply Made in the Course or Furtherance of Business:

• The supply must be made by a person in the course or furtherance of business, meaning
it should be a part of their regular business activities or intended to promote business
operations.
• Example: A company selling computers to customers is supplying goods in the course
of its business, and GST applies.

3. Supply between Two or More Parties:

 • Supply requires two or more parties: a supplier and a recipient. The supplier transfers
goods or services, and the recipient receives and provides consideration.
• Example: A retailer selling a smartphone to a customer involves a supplier (retailer)
and a recipient (customer), making it a taxable event.

Types of Supply Under GST:

GST classifies supplies into different categories for taxation purposes:

1. Taxable Supplies:

• These are supplies on which GST is levied. Taxable supplies include all goods and
services except those that are exempted or zero-rated.
• Example: Sale of furniture, consulting services.

2. Exempt Supplies:

• These are goods or services on which no GST is levied due to exemptions specified by
the government.
• Example: Fresh fruits and vegetables, education services provided by recognized
institutions.

3. Zero-Rated Supplies:

• Supplies on which GST is not charged but input tax credits (ITC) can still be claimed
on inputs used in the supply. Zero-rating applies mainly to exports.
• Example: Export of software services.

4. Composite and Mixed Supplies:

• Composite Supply: A supply involving two or more goods/services that are naturally
bundled, with one principal item. The tax rate for the principal supply is applied.
o Example: A hotel stay that includes breakfast.
• Mixed Supply: A supply involving two or more goods/services that are provided
together but are not naturally bundled. The highest tax rate among the items is applied.
o Example: A gift hamper containing chocolates, perfume, and wine.

Deemed Supply:

Under certain conditions, even without actual consideration, a transaction can be

considered a supply under GST. These are called deemed supplies. Examples include:

• Gifts: If goods worth more than ₹50,000 are given by an employer to an employee in a
financial year, the transfer is treated as a deemed supply and is taxable.
• Transfer of business assets: If a company gives its business assets (like machinery) to
another party without consideration, it can be deemed as supply.

Additional Considerations for Taxable Events:

1. Place of Supply:
 • GST is a destination-based tax, meaning the place where the goods or services are
consumed (not where they are produced) determines where the tax is paid.
• Intra-State Supply: When supply happens within the same state, CGST and SGST
are levied.
• Inter-State Supply: When supply happens between two different states, IGST is
levied.

2. Time of Supply:

• The time of supply determines when the GST needs to be paid. GST law specifies time-
of-supply rules separately for goods and services:
o For Goods: Time of supply is typically the earlier of:
1. The date of issuing the invoice.
2. The date of receiving payment.
o For Services: Time of supply is typically the earlier of:
1. The date of issuing the invoice.
2. The date of receiving payment.

The time of supply is crucial for determining when the tax liability arises.

3. Value of Supply:

• GST is calculated on the transaction value, which is the price actually paid or payable
for the supply of goods or services. This value includes all charges related to the supply
(e.g., taxes, transportation charges) except the GST itself.

Non-Taxable Events under GST:

Some transactions do not trigger GST liability and are not considered taxable events,
including:

• Supply of alcoholic liquor for human consumption.

• Supply of petroleum crude, diesel, petrol, aviation turbine fuel (ATF), and natural
gas (currently excluded from GST).
• Salaries and wages paid by an employer to an employee.
• Barter or exchange of goods/services without consideration, unless specifically
deemed taxable by law.

The taxable event under GST is primarily the supply of goods or services. It encompasses
the transfer, sale, exchange, or provision of goods and services for consideration in the course
of business. By clearly defining what constitutes a supply and when it becomes taxable, GST
creates a transparent, predictable, and efficient tax system.

Time of Supply

Time of Supply under the Goods and Services Tax (GST) is a critical concept as it
determines when the liability to pay tax arises. Knowing the time of supply helps businesses
understand the exact point when they need to pay GST to the government. GST laws have
different provisions for determining the time of supply for goods and services.
 Here’s a detailed breakdown of how the time of supply is determined for goods and
services:

1. Time of Supply for Goods

For goods, the time of supply is typically the earliest of the following three events:

a. Date of Issue of Invoice

• The date when the supplier issues the invoice for the sale of goods.

b. Last Date for Issuing Invoice

• Under GST, the invoice for the supply of goods must be issued:
o Before or at the time of removal of goods for supply, in the case of moving
goods (such as when the goods are delivered to the customer).
o Before or at the time of delivery to the recipient, in the case of goods that do
not involve movement.

c. Date of Receipt of Payment

• The date on which the supplier receives the payment, either in full or part, for the goods
supplied.

Example:

• Suppose business supplies goods on 15th October 2024.

o The invoice is issued on 20th October 2024.
o Payment is received on 25th October 2024.
o The due date for issuing the invoice is 15th October 2024 (the same date as the
supply).

The time of supply will be 15th October 2024, since that is the earliest of the three events.

2. Time of Supply for Services

For services, the time of supply is determined as the earliest of the following three events:

a. Date of Issue of Invoice

• The date when the supplier issues the invoice for the services rendered.
• The invoice must be issued within 30 days from the date of service completion.

b. Date of Provision of Service

• The date on which the service is actually provided or completed.

c. Date of Receipt of Payment

• The date on which the supplier receives payment for the service, either in full or part.
 If an invoice is not issued within the stipulated time (30 days), the time of supply will be
the date when the service was provided or when the payment was received, whichever is earlier.

Example:

• A company provides consulting services on 5th October 2024.

o The invoice is issued on 12th October 2024.
o Payment is received on 15th October 2024.

The time of supply will be 12th October 2024, as it is the earliest of the events (issue of
invoice, receipt of payment, or provision of service).

3. Special Cases for Time of Supply

In some specific cases, the time of supply can vary from the general rules. These include:

a. Advance Payments:

• If an advance is received for goods or services, the time of supply is the date of receipt
of advance. GST is payable on the advance, even if the goods or services are yet to be
delivered.
• Note: As per recent amendments, advances received for the supply of goods (for
registered taxpayers) are not subject to GST. However, advances for services are still
taxable.

b. Reverse Charge Mechanism (RCM):

In the case of reverse charge, where the recipient is liable to pay tax instead of the supplier,
the time of supply is determined as the earliest of:

• The date of receipt of goods or services.

• The date of payment (whichever comes earlier).
• The 31st day (in the case of goods) or 61st day (in the case of services) from the date
of issue of the invoice by the supplier.

c. Vouchers:

For supplies made via vouchers, the time of supply is:

• Date of issue of the voucher if the supply is identifiable at that point.

• Date of redemption of the voucher, if the supply is not identifiable when the voucher
is issued.

d. Continuous Supply of Goods/Services:

• For goods, the time of supply is the earliest of the date of issue of the invoice or receipt
of payment.
• For services, in the case of continuous supply (such as telecom services or construction
services), the time of supply is the earliest of:
1. The date of issue of the invoice.
 2. The date of receipt of payment.
3. The date of completion of the milestone in the contract (if applicable).

4. Time of Supply for Imports and Exports

Imports:

• The time of supply for imported goods is when the goods enter the customs territory
of India.
• For imported services, it follows the general rule (earliest of invoice, provision, or
payment).

Exports:

• For exports of goods, the time of supply is when the goods cross the customs frontier
of India.
• Exports of services follow the general rules for the time of supply for services.

5. Change in Rate of Tax:

If there is a change in the rate of GST, the time of supply rules help determine whether the
old rate or the new rate will apply to a particular supply. The general principle is that:

• If the invoice is issued and payment is received after the change in rate, the new rate
will apply.
• If the invoice is issued and payment is received before the rate change, the old rate
applies.

The time of supply under GST helps determine the exact moment when a business is liable
to pay tax. It ensures that GST is charged and paid at the correct time, based on the occurrence
of specific events like invoicing, delivery of goods/services, or receipt of payment. Correctly
identifying the time of supply is crucial for compliance and avoiding penalties.

Place of Supply

Place of Supply under the Goods and Services Tax (GST) in India is crucial for determining
which state or union territory gets the tax revenue and whether Central GST (CGST), State
GST (SGST), or Integrated GST (IGST) will apply. GST is a destination-based tax,
meaning that tax is collected by the state where the goods or services are consumed.

Understanding the place of supply is important because it helps distinguish between:

• Intra-state supply: Supply within the same state (CGST + SGST).

• Inter-state supply: Supply between different states or union territories (IGST).

Here’s a detailed explanation of how the place of supply is determined for both goods and
services under GST:

1. Place of Supply for Goods

 The place of supply for goods depends on whether the supply is within the same state
(intra-state) or between different states (inter-state).

a. In the case of Goods Involving Movement:

• When the supply involves the movement of goods (either by the supplier or the
recipient), the place of supply is the location where the goods are delivered to the
recipient after the movement.
• Example: A manufacturer in Maharashtra supplies goods to a buyer in Tamil Nadu. The
place of supply is Tamil Nadu, and IGST will apply.

b. In the case of Goods without Movement:

• When there is no movement of goods, and the goods are supplied at the location where
they are currently located, the place of supply is the location of the goods at the time
of delivery to the recipient.
• Example: A seller in Karnataka sells machinery to a customer, but the machinery
remains at the seller’s warehouse, and the customer takes possession there. The place
of supply is Karnataka.

c. Goods Supplied on Board:

• If goods are supplied on board a conveyance (such as aircraft, train, ship), the place of
supply is the location where the goods are taken on board.
• Example: Goods are sold on a flight departing from Delhi. The place of supply is Delhi.

d. Import and Export of Goods:

• Imports: For imported goods, the place of supply is the location of the importer
(where the goods are delivered after customs clearance).
• Exports: The place of supply for exported goods is outside India, meaning exports are
treated as zero-rated supplies and no GST is charged.

2. Place of Supply for Services

The place of supply for services can be more complex, as services are intangible and may
be provided across different locations. The GST Act has specific rules for determining the place
of supply for services, which can be categorized as follows:

a. General Rule for Services (Location of the Recipient):

• For B2B transactions (Business-to-Business): The place of supply is the location of

the recipient of the service if the recipient is a registered person under GST.
o Example: A consultancy firm in Karnataka provides services to a business in
Maharashtra. The place of supply is Maharashtra, and IGST is charged.
• For B2C transactions (Business-to-Consumer): The place of supply is the location
of the service provider if the recipient is not registered under GST.
o Example: A freelancer in Kerala provides services to an individual in Tamil
Nadu. The place of supply is Kerala, and CGST + SGST is charged.
b. Specific Cases of Services:

Certain services have specific rules for determining the place of supply:

1. Services Related to Immovable Property:

o The place of supply is the location of the immovable property.
o Example: A property management service provided for a building in Mumbai,
regardless of where the service provider or recipient is located, will have its
place of supply in Mumbai.
2. Restaurant, Catering, Personal Grooming, Fitness, and Beauty Treatment
Services:
o The place of supply is the location where the services are actually performed.
o Example: A beauty treatment service provided in a spa in Delhi. The place of
supply is Delhi, and CGST + SGST will apply.
3. Training and Performance Appraisal Services:
o If provided to a registered person, the place of supply is the location of the
recipient.
o If provided to an unregistered person, the place of supply is the location where
the services are performed.
4. Admission to Events (Cultural, Artistic, Sporting, Scientific, Educational, or
Entertainment Events):
o The place of supply is the location where the event is held.
o Example: Tickets sold for a concert in Gujarat. The place of supply is Gujarat.
5. Transportation of Goods Services:
o If provided to a registered person, the place of supply is the location of the
recipient.
o If provided to an unregistered person, the place of supply is the location where
the goods are handed over for transportation.
6. Passenger Transportation Services:
o The place of supply is the place where the passenger embarks on the journey.
o Example: A flight ticket booked for travel from Bengaluru to New York. The
place of supply is Bengaluru.
7. Telecommunication, Broadcasting, and Online Information Services:
o The place of supply is the location of the recipient in the case of a registered
person.
o For an unregistered person, it is the billing address or location of the service
provider.

3. Place of Supply in Special Cases

a. Place of Supply in Case of Intermediary Services:

• The place of supply for intermediary services (e.g., brokers, agents) is the location of
the supplier of services.
• Example: An intermediary in India providing services to a foreign company. The place
of supply is India, and GST is charged.

b. Place of Supply in the Case of Banking, Financial, and Stockbroking Services:

 • The place of supply is the location of the recipient on the records of the supplier of
services.

c. Place of Supply for Online Database Access and Retrieval Services (ODAR):

• The place of supply for online services provided from outside India to a person in India
(such as software or digital content) is the location of the recipient in India.
• Example: A US-based online platform providing subscription services to an Indian
customer. The place of supply is India.

4. Place of Supply for Imports and Exports of Services

a. Import of Services:

• The place of supply is the location of the recipient.

• Example: An Indian company hiring a marketing consultant from the UK. The place
of supply is India, and the Indian company must pay GST under the reverse charge
mechanism (RCM).

b. Export of Services:

• The place of supply for exported services is outside India, provided certain conditions
are met (such as the recipient being outside India, payment received in foreign
exchange, etc.).
• Exports of services are treated as zero-rated supplies, meaning no GST is charged, but
the exporter can claim a refund of input taxes.

5. Intra-State vs Inter-State Supplies Based on Place of Supply

• Intra-State Supply: If the place of supply and the location of the supplier are in the
same state, CGST + SGST will be charged.
• Inter-State Supply: If the place of supply and the location of the supplier are in
different states, IGST will be charged.

The place of supply under GST is essential for determining whether a transaction will
attract CGST + SGST (intra-state) or IGST (inter-state). The rules vary for goods and services
and also depend on the nature of the transaction, such as immovable property, transportation,
or online services. Understanding the correct place of supply is critical for businesses to ensure
compliance and proper tax payments.