Taxable Event under GST – In Detail

What is a Taxable Event?

A taxable event is the occurrence or action that gives rise to the liability to pay tax. In any tax law, identifying the taxable event is crucial because it determines when and how tax is to be levied.

Under the previous indirect tax regime in India, different taxes had different taxable events. For example:

Excise Duty was levied on manufacture.
VAT was levied on sale.
Service Tax was levied on provision of services.

However, under the Goods and Services Tax (GST) regime, the government has adopted a unified taxable event, which is “Supply”.

Taxable Event under GST: SUPPLY

According to Section 9 of the Central Goods and Services Tax (CGST) Act, 2017, “the levy of GST is on the supply of goods or services or both”. This means that supply is the only taxable event under GST.

Scope of Supply (Section 7 of CGST Act)

The term ‘supply’ is broadly defined to include:

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.
Certain activities specified in Schedule I, even if made without consideration (such as transactions between related parties).
Activities referred to in Schedule II, which specify whether a supply is of goods or services.
Imports of services for a consideration, whether or not in the course of business.

Essential Elements of a Taxable Supply

To constitute a taxable supply (and hence a taxable event), the following conditions must be satisfied:

There must be a supply of goods or services or both
The supply can be in any form—sale, barter, lease, exchange, etc.
The supply must be made for a consideration
Consideration usually means payment in money or money’s worth. However, there are exceptions as per Schedule I.
The supply must be made in the course or furtherance of business
If an individual sells personal property (such as a used household item), it is not considered a taxable supply under GST.
The supply must be made by a taxable person
A taxable person is someone who is registered or is liable to be registered under GST.
The supply must take place within the taxable territory of India
GST is a destination-based consumption tax and applies to supplies within India, except where specific provisions apply to imports and exports.

Types of Supply as Taxable Events

The nature of supply also determines the type of GST applicable:

Intra-State Supply: When the supplier and the place of supply are in the same state, CGST and SGST are levied.
Inter-State Supply: When the supplier and the place of supply are in different states or union territories, IGST is levied.
Import of Goods or Services: Treated as inter-State supply, hence subject to IGST along with applicable customs duties.
Export of Goods or Services: Treated as zero-rated supply—GST is not levied but input tax credit can be claimed or refund obtained.

Supply without Consideration (Still Taxable)

Normally, tax is applicable only when there is a consideration. However, Schedule I of the CGST Act provides a list of transactions that are taxable even when made without consideration, including:

Permanent transfer or disposal of business assets where input tax credit has been claimed.
Supply between related persons or between distinct persons (e.g., branches of the same company in different states).
Supply of goods by a principal to his agent and vice versa.
Gifts exceeding ₹50,000 by an employer to an employee.

Examples of Taxable Events

Sale of Mobile Phones: A wholesaler sells 100 mobile phones to a retailer. This is a supply of goods for consideration in the course of business and is a taxable event.
Provision of Consulting Services: A consulting firm provides services to a client for a fee. This is a supply of service for consideration and attracts GST.
Import of Software Services: A company in India avails services from a foreign software vendor. This is an import of service and is a taxable event under GST.
Barter Transaction: A mobile shop gives a ₹2,000 discount for exchanging an old phone. The exchange is considered a barter and is treated as a supply.

Non-Taxable Events under GST

Certain activities are outside the scope of GST and do not constitute a taxable event, such as:

Salary paid by an employer to an employee (as per Schedule III).
Sale of land or completed building (Schedule III).
Services by courts or tribunals.
Funeral, burial, crematorium, or mortuary services.

These are not treated as “supply” under GST, and therefore, no GST is levied on them.

Conclusion

The introduction of “supply” as a single taxable event under GST simplifies the previous system of multiple taxable events. It brings consistency and transparency across goods and services. A clear understanding of what constitutes a supply, and when and how it is taxed, is essential for businesses to ensure GST compliance and avoid legal complications.

Certainly. Below is a practical illustration of GST based on the concept of “supply” as the taxable event, with full step-by-step explanation of the calculation and applicable GST rules.

Practical Illustration of GST – Supply as a Taxable Event

Scenario:

ABC Traders, a registered dealer in Maharashtra, sells 10 laptops to XYZ Solutions, a registered business in Gujarat, at a rate of ₹50,000 per laptop. The GST rate applicable on laptops is 18%.

Step-by-Step GST Calculation

1. Nature of Supply

Since the supplier (Maharashtra) and the recipient (Gujarat) are in different states, this is an inter-State supply.

Therefore, IGST is applicable (not CGST + SGST).

2. Details of the Supply

Quantity: 10 laptops
Rate per unit: ₹50,000
Total value of supply: 10 × ₹50,000 = ₹5,00,000
GST rate: 18%
- IGST only (since it is inter-State)

3. GST Amount Calculation

IGST = 18% of ₹5,00,000
= ₹90,000

4. Invoice Summary

Particulars	Amount (₹)
Value of Goods	5,00,000
IGST @ 18%	90,000
Total Invoice Value	5,90,000

5. Journal Entry (Accounting View)

Account	Debit (₹)	Credit (₹)
XYZ Solutions A/c (Customer)	5,90,000
To Sales A/c		5,00,000
To IGST Payable A/c		90,000

Explanation:

Supply took place as a sale of goods for consideration (₹5,00,000) in the course of business.
Since buyer and seller are in different states, the transaction qualifies as inter-State supply.
Thus, IGST was charged and is payable to the Central Government.

📌 Optional Add-On: Credit Available to Buyer

Since XYZ Solutions is a registered business, it can claim Input Tax Credit (ITC) of ₹90,000 (IGST paid) while filing its GST returns. This helps in reducing the tax burden and avoiding cascading of taxes.

✅ Conclusion

This practical illustration demonstrates:

How supply becomes a taxable event under GST.
The method of applying the correct type of GST (IGST, CGST, SGST).
How GST is calculated and recorded in real-life business transactions.
How businesses benefit from Input Tax Credit (ITC) under GST.

Certainly. Below is a detailed explanation of the Meaning and Scope of Supply under GST, with reference to relevant sections of the GST law.

Meaning and Scope of Supply under GST

1. Introduction

Under the GST (Goods and Services Tax) regime in India, the entire tax structure is centered around the concept of “Supply”. It is the taxable event, meaning GST is levied only when there is a supply of goods or services (or both).

The term “supply” is defined under Section 7 of the Central Goods and Services Tax (CGST) Act, 2017, and its interpretation is very broad, covering almost every form of transaction related to goods and services.

2. Legal Definition of Supply (Section 7 of CGST Act)

Section 7(1) states that “Supply” includes:

(a) All forms of supply of goods or services or both such as:

Sale
Transfer
Barter
Exchange
License
Rental
Lease
Disposal

made or agreed to be made for a consideration by a person in the course or furtherance of business.

(b) Import of services for a consideration, whether or not in the course or furtherance of business.

(c) Activities specified in Schedule I, made without consideration, will also be treated as supply.

Section 7(1A):

Activities or transactions that qualify as a supply of goods or supply of services, as referred to in Schedule II of the CGST Act.

Section 7(2):

Specifies activities that shall not be treated as supply, listed under Schedule III, such as:

Salary paid to employees
Services by courts or tribunals
Sale of land or completed buildings

3. Important Components of Supply

For any transaction to qualify as “supply” under GST, the following elements must be satisfied:

(i) Involvement of goods or services or both

Supply can be of:

Tangible goods (e.g., machinery, computers)
Intangible services (e.g., consulting, software)

(ii) Supply must be made for consideration

Usually, this means payment in money or money’s worth. However, certain transactions are taxable even without consideration (as per Schedule I).

(iii) Must be in the course or furtherance of business

Casual or personal sales (e.g., selling old furniture by a private individual) are not considered supply unless done as part of business activity.

(iv) Made by a taxable person

Only transactions by a taxable person (i.e., someone registered or liable to register under GST) are considered supply.

4. Scope of Supply – Key Inclusions

The scope of the term supply under GST is intentionally made very wide to ensure that most commercial transactions are covered. It includes:

a) Barter and Exchange

Supply is not limited to traditional sales. Even if goods or services are exchanged without money, it is considered supply if other conditions are satisfied.

Example: A builder provides office space to a lawyer in exchange for legal services. Both are considered supplies.

b) Deemed Supplies (without consideration) – Schedule I

Even if there is no consideration, certain supplies are still taxable. Some examples:

Transfer of business assets where ITC was claimed
Supply between related persons (e.g., branches in different states)
Gifts exceeding ₹50,000 to employees
Principal-agent supplies

c) Import of Services

Even if imported for personal use, GST is applicable if consideration is involved. If imported for business, Reverse Charge Mechanism (RCM) applies.

d) Composite and Mixed Supplies

Special provisions apply when multiple goods/services are supplied together. For example:

Composite Supply: Goods/services supplied together that are naturally bundled (e.g., sale of goods with delivery and insurance)
Mixed Supply: Two or more goods/services supplied together but not naturally bundled (e.g., gift hampers)

GST treatment varies based on classification.

5. Exclusions from the Scope of Supply – Schedule III

Certain activities are excluded from the definition of supply and are not taxable, such as:

Services by employee to employer in course of employment
Services by any court or tribunal
Sale of land and completed buildings
Actionable claims (other than lottery, betting, gambling)

6. Examples of Supply

Type of Supply	Example
Sale	Selling a car to a customer
Transfer	Donating stock to a charity (if ITC was claimed, it’s a deemed supply)
Barter	Giving goods in exchange for services
Lease	Leasing office equipment to another business
Import of Service	Hiring a foreign consultant for a business project
Inter-branch Transfer	Goods sent from Delhi branch to Mumbai branch (distinct persons)

7. Conclusion

The concept of “supply” under GST is very broad and forms the foundation of the entire tax system. It is not confined to sales alone but includes a wide range of transactions involving goods and services. A proper understanding of what constitutes a supply—and what doesn’t—is essential for ensuring GST compliance and accurate tax reporting.

✅ Activities under GST: Explanation and Illustration

In the Goods and Services Tax (GST) regime in India, “activities” refer to any transactions or operations that constitute supply of goods or services for a consideration in the course or furtherance of business. These activities are what trigger the taxable event under GST — i.e., “supply”.

What is an Activity under GST?

An activity under GST can be:

A sale, transfer, barter, exchange, license, rental, lease, or disposal
Involving either goods, services, or both
Done with or without consideration
Carried out by a person in the course or furtherance of business

These are specified under Section 7 of the CGST Act, 2017, which defines the scope of supply.

🔹 2. Types of Activities under GST

Type of Activity	Description
Taxable Supplies	Supplies that attract GST (e.g., selling furniture, providing IT services)
Exempt Supplies	Supplies that are not taxed (e.g., education services, milk, etc.)
Zero-rated Supplies	Exports or supplies to SEZ (GST @ 0%)
Non-GST Supplies	Supplies not covered under GST (e.g., petrol, alcohol for human consumption)
Composite Supply	Bundle of goods/services naturally bundled together (e.g., air travel with meals)
Mixed Supply	Two or more goods/services offered together but not naturally bundled

🔹 3. Examples of Activities

Activity	GST Treatment
Sale of a laptop	Taxable supply (18% GST)
Renting out commercial property	Taxable service (18% GST)
Export of software services	Zero-rated supply
Donation to a charitable trust	Not a supply (no GST)
Giving employee free lunch	Considered supply (if crossed limit)
Job work done by a fabric processor	Taxable supply (5% or 12%)

🧾 4. Practical Illustration

💼 Scenario: Sale of Goods

Business: XYZ Pvt Ltd sells mobile phones.

Activity: Selling a mobile phone to a customer for ₹20,000.
GST Rate: 18%
GST Calculation:
- CGST (9%): ₹1,800
- SGST (9%): ₹1,800
Total Invoice Amount: ₹23,600 (₹20,000 + ₹3,600 GST)

👉 This is a taxable activity under GST as it involves supply of goods for consideration in the course of business.

🛫 Scenario: Export of IT Services

Business: ABC Technologies provides software development to a US client.

Invoice Raised: $1,000
Nature of Activity: Export of services
GST Impact: Zero-rated supply

👉 No GST is charged, but the exporter can claim refund of input tax credit.

🧑‍🏫 Scenario: Educational Services

Activity: A school provides primary education to students.

👉 This is an exempt supply under GST. No GST is charged, and the school cannot claim ITC on purchases.

✅ Summary

Activity Type	GST Impact
Sale of goods/services	Taxable (GST applicable)
Export of services	Zero-rated (No GST)
Education services	Exempt (No GST, no ITC)
Petrol sale	Non-GST supply
Gift to employee > ₹50,000	Taxable (under Schedule I)

✅ Activities under GST: Explanation and Illustration

🔷 1. What is an Activity under GST?

An activity under GST can be:

A sale, transfer, barter, exchange, license, rental, lease, or disposal
Involving either goods, services, or both
Done with or without consideration
Carried out by a person in the course or furtherance of business

These are specified under Section 7 of the CGST Act, 2017, which defines the scope of supply.

🔹 2. Types of Activities under GST

Type of Activity	Description
Taxable Supplies	Supplies that attract GST (e.g., selling furniture, providing IT services)
Exempt Supplies	Supplies that are not taxed (e.g., education services, milk, etc.)
Zero-rated Supplies	Exports or supplies to SEZ (GST @ 0%)
Non-GST Supplies	Supplies not covered under GST (e.g., petrol, alcohol for human consumption)
Composite Supply	Bundle of goods/services naturally bundled together (e.g., air travel with meals)
Mixed Supply	Two or more goods/services offered together but not naturally bundled

🔹 3. Examples of Activities

Activity	GST Treatment
Sale of a laptop	Taxable supply (18% GST)
Renting out commercial property	Taxable service (18% GST)
Export of software services	Zero-rated supply
Donation to a charitable trust	Not a supply (no GST)
Giving employee free lunch	Considered supply (if crossed limit)
Job work done by a fabric processor	Taxable supply (5% or 12%)

🧾 4. Practical Illustration

💼 Scenario: Sale of Goods

Business: XYZ Pvt Ltd sells mobile phones.

Activity: Selling a mobile phone to a customer for ₹20,000.
GST Rate: 18%
GST Calculation:
- CGST (9%): ₹1,800
- SGST (9%): ₹1,800
Total Invoice Amount: ₹23,600 (₹20,000 + ₹3,600 GST)

👉 This is a taxable activity under GST as it involves supply of goods for consideration in the course of business.

🛫 Scenario: Export of IT Services

Business: ABC Technologies provides software development to a US client.

Invoice Raised: $1,000
Nature of Activity: Export of services
GST Impact: Zero-rated supply

👉 No GST is charged, but the exporter can claim refund of input tax credit.

🧑‍🏫 Scenario: Educational Services

Activity: A school provides primary education to students.

👉 This is an exempt supply under GST. No GST is charged, and the school cannot claim ITC on purchases.

✅ Summary

Activity Type	GST Impact
Sale of goods/services	Taxable (GST applicable)
Export of services	Zero-rated (No GST)
Education services	Exempt (No GST, no ITC)
Petrol sale	Non-GST supply
Gift to employee > ₹50,000	Taxable (under Schedule I)

Supply Analysis under GST: Full Explanation

The concept of “Supply” is the foundation of the entire GST (Goods and Services Tax) regime in India. Every transaction is analyzed to determine whether it qualifies as a “supply”, because GST is levied on supply, not on manufacture or sale as in previous indirect tax systems.

🔷 1. What is “Supply” under GST?

As per Section 7 of the CGST Act, 2017, “Supply” includes all forms of supply of goods or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration in the course or furtherance of business.

🔹 2. Key Elements of Supply

To analyze whether a transaction qualifies as a “supply”, consider these five elements:

Element	Explanation
1. Involves goods/services	The transaction must involve goods, services, or both
2. Consideration involved	Usually involves payment (money or kind), unless covered under Schedule I
3. Made in course of business	Activity must be linked to business (exceptions apply)
4. Made by a taxable person	The supplier must be a registered or liable to be registered under GST
5. Taxable supply	The supply must not be exempt or non-taxable

🔹 3. Types of Supply under GST

Type of Supply	Description
Taxable Supply	Supplies on which GST is levied
Exempt Supply	Supplies attracting nil rate or wholly exempt from GST
Zero-Rated Supply	Mainly exports and supplies to SEZ (GST @ 0%)
Non-GST Supply	Supplies that are outside the scope of GST (e.g., alcohol, petrol)
Composite Supply	Naturally bundled supplies (e.g., travel + insurance) – taxed at principal rate
Mixed Supply	Artificially bundled items (e.g., gift hampers) – taxed at the highest rate
Deemed Supply	Supply without consideration under Schedule I (e.g., gifts > ₹50,000 to employees)

🔹 4. Schedule I: Supply without Consideration (Still Taxable)

Some supplies are taxable even without consideration, such as:

Permanent transfer of business assets
Supply between related persons or distinct persons (branches)
Gifts to employees exceeding ₹50,000 in a financial year
Import of services from related persons for business

🔹 5. Schedule II: Classification of Goods vs. Services

Schedule II helps in deciding whether a supply is goods or services, for example:

Activity	Treated as
Renting of immovable property	Supply of service
Transfer of business assets	Supply of goods
Job work	Supply of service

🔹 6. Place, Time, and Value of Supply

To determine GST liability, three more aspects are crucial:

Aspect	Importance
Place of Supply	Determines whether CGST+SGST (intra-state) or IGST (inter-state) applies
Time of Supply	Helps determine when the liability to pay GST arises
Value of Supply	GST is calculated on the transaction value including all charges

🧾 7. Practical Examples of Supply Analysis

✅ Example 1: Renting Shop Space

Nature: Renting of commercial property
Type of Supply: Supply of service
Taxability: Taxable (18% GST)
Consideration: Monthly rent ₹25,000

👉 Fully taxable as it meets all five conditions of supply.

✅ Example 2: Export of Software Services

Nature: Software development for client in USA
Type of Supply: Zero-rated
Consideration: Yes, in USD
Taxability: No GST charged, but input tax credit (ITC) can be claimed

👉 Still considered a supply; eligible for refund.

✅ Example 3: Free Sample Distribution

Nature: Company gives free samples to dealers
Consideration: No
Taxability: Not taxable unless covered under Schedule I

👉 Usually not taxable, but input credit may be reversed.

✅ Example 4: Transfer of Goods Between Branches

Nature: Branch in Delhi sends stock to branch in Mumbai
Persons: Distinct (under same PAN but different GSTINs)
Taxability: Yes, under Schedule I

👉 Supply between distinct persons is taxable even without consideration.

✅ Summary Table

Scenario	Is it a Supply?	GST Applicable?	Type
Sale of product to customer	✅ Yes	✅ Yes	Taxable supply
Export to foreign client	✅ Yes	🚫 No (zero-rated)	Zero-rated supply
Donation to NGO	❌ No	🚫 No	Not a supply
Free samples to dealer	✅ Maybe	🚫 No (no consideration)	Not a taxable supply
Inter-branch stock transfer	✅ Yes	✅ Yes	Deemed supply (Schedule I)

📌 Final Notes

Every supply is not taxable — analyze all five elements.
GST applies only if it qualifies as a supply.
Legal analysis, schedules, and valuation rules all come together in proper supply classification.

Activities Constituting Supply under GST

Under the Goods and Services Tax (GST) regime in India, “Supply” is the fundamental taxable event. The GST system taxes the supply of goods and/or services, and not the manufacture or sale alone, as was the case in earlier indirect tax laws.

The term “activities” under GST refers to the various forms of supply defined under the GST law. These are the transactions or operations that qualify as supply and thus become taxable under GST.

🔷 Definition of Supply under GST

As per Section 7(1) of the CGST Act, 2017, “supply” includes:

“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.”

🔹 Key Activities Treated as Supply

Below are the main activities that constitute supply under GST:

Activity Type	Description
Sale	Selling of goods or services for a price. E.g., selling a laptop.
Transfer	Permanent transfer of goods or assets without consideration in some cases.
Barter	Exchange of goods/services for other goods/services (no money involved).
Exchange	Similar to barter but with partial monetary consideration.
License	Granting rights to use property/intellectual property.
Rental	Leasing goods or property for temporary use.
Lease	Long-term rental with specific terms.
Disposal	Getting rid of goods/assets (e.g., scrap) for value.

🔹 Activities Specified in Schedules of CGST Act

There are two key schedules related to activities under GST:

🧾 Schedule I – Supplies without Consideration (Still Taxable)

Even without consideration, these are treated as supply:

Permanent transfer of business assets
Supply between related/distinct persons (e.g., branch transfers across states)
Gifts > ₹50,000 to employees
Import of services from a related person or own establishment outside India

🧾 Schedule II – Classification of Supply

Defines whether an activity is a supply of goods or supply of services:

Activity	Classified as
Renting of immovable property	Service
Transfer of right to use goods	Service
Treatment or process on goods (job work)	Service
Permanent transfer of business assets	Goods
Construction of building (under contract)	Service

🧾 Practical Examples of Supply Activities

✅ Example 1: Sale of Goods

Activity: A dealer sells a washing machine for ₹20,000
Supply Type: Sale (taxable supply)
GST Rate: 18%
GST Payable: ₹3,600

✅ Example 2: Rental of Property

Activity: A person rents a commercial shop
Supply Type: Renting (service)
Taxable?: Yes (GST @18%)

✅ Example 3: Free Gift to Employee

Activity: Employer gifts a mobile worth ₹55,000
Supply Type: Deemed supply (Schedule I)
Taxable?: Yes (value above ₹50,000)

✅ Example 4: Barter Exchange

Activity: A graphic designer creates a logo in exchange for a mobile phone
Supply Type: Barter
Taxable?: Yes, GST on both sides

✅ Summary Table: Activities Considered Supply

Activity	Considered Supply?	GST Applicable?	Notes
Sale of goods	✅ Yes	✅ Yes	Most common taxable activity
Renting commercial space	✅ Yes	✅ Yes	Treated as supply of service
Free sample distribution	❌ Not usually	🚫 No	Unless covered under Schedule I
Branch stock transfer	✅ Yes	✅ Yes	Inter-state between same PAN (Schedule I)
Donation to NGO	❌ No	🚫 No	Not in course of business
Job work processing	✅ Yes	✅ Yes	Supply of service

📌 Conclusion

The term “activities under GST” broadly refers to all transactions that fall within the definition of supply.
Even non-monetary and internal activities may be taxable under certain conditions (e.g., branch transfers).
Proper classification of activity is critical to determine the GST rate, compliance requirements, and input tax credit eligibility.

Schedule III of CGST Act: Activities Neither Treated as Supply of Goods Nor as Supply of Services

In the GST framework, Schedule III of the Central Goods and Services Tax (CGST) Act, 2017 lists certain activities and transactions that are neither considered a supply of goods nor a supply of services.

👉 This means that GST is not applicable on these activities at all, and such transactions are outside the scope of GST.

🔷 Why Schedule III is Important?

Even if a transaction:

Involves movement of goods/services,
Is done in the course of business,
Has consideration,

➡️ It will not be taxable under GST if it falls under Schedule III.

🔹 List of Activities under Schedule III

Here’s a complete list of activities or transactions that are NOT considered as supply under Schedule III:

Sl. No.	Activity	Description
1	Services by employee to employer in the course of employment	Regular salary and perks – not taxable
2	Services by a court or tribunal	Legal adjudication services – not taxable
3	Functions performed by MPs, MLAs, Panchayats, etc.	Constitutional and statutory functions – no GST
4	Duties performed by persons holding constitutional posts without remuneration	Like President, Governor, etc.
5	Duties of persons as per provisions of law (e.g., police officers, returning officers)	Public duties – not supply
6	Funeral, burial, crematorium or mortuary services including transportation of the deceased	Not taxable
7	Sale of land	Outside GST (Stamp duty applies)
8	Sale of completed building (after occupancy/completion certificate)	Not taxable under GST
9	Actionable claims, other than lottery, betting and gambling	Debt claims, insurance payouts, etc. – no GST

🔹 Explanation of Major Items

✅ 1. Services by an employee to employer

Example: Salary paid to a software engineer by his employer
GST Impact: No GST as it is covered under employer-employee relationship

✅ 2. Sale of land and completed building

Example: Sale of a plot or a house after receiving the completion certificate
GST Impact: No GST (but stamp duty/registration fees may apply)

✅ 3. Services by courts or tribunals

Example: A High Court issuing a judgment
GST Impact: Not a supply, so GST not applicable

✅ 4. Actionable Claims (except lottery/gambling)

Example: Bank loans, insurance claims, right to claim debt
GST Impact: These are not supplies, so no GST

🧾 Practical Examples

Transaction	Schedule III?	GST Applicable?
Monthly salary to employee	✅ Yes	🚫 No
Sale of a flat after completion certificate	✅ Yes	🚫 No
Court case filing or judgment	✅ Yes	🚫 No
Police services by government	✅ Yes	🚫 No
Lottery ticket sales	❌ No	✅ Yes (GST @28%)
Sale of under-construction flat	❌ No	✅ Yes (GST @5% or 12%)
Rent received from mortuary services	✅ Yes	🚫 No

✅ Impact of Schedule III on Business

Reduces compliance burden – no GST calculation or return filing on these transactions.
Input Tax Credit (ITC) is not available on inward supplies used exclusively for these non-GST activities.
Helps in correct valuation of taxable turnover.

📌 Final Summary

Feature	Schedule III Transactions
Taxable under GST?	❌ No
Input Tax Credit Allowed?	❌ No (if used exclusively for these)
Should be reported in GSTR?	✅ Sometimes in GSTR-3B (non-GST turnover)
Examples	Salary, sale of land, court judgments

Chargeability under GST: A Complete Explanation

Chargeability under GST refers to the point at which GST becomes applicable on a transaction. It determines when, how, and on whom the tax is levied, and at what rate.

Understanding chargeability is crucial for:

Applying the correct tax rate
Determining whether GST applies
Identifying the person liable to pay GST
Ensuring timely payment and compliance

🔷 1. What is Chargeability in GST?

In simple terms:

Chargeability = The event, conditions, and rules under which a transaction becomes liable to GST.

🔹 2. Statutory Basis of Chargeability

The statutory basis for GST chargeability is laid down in:

Law	Section	Explanation
CGST Act, 2017	Section 9	Levy and collection of Central GST
IGST Act, 2017	Section 5	Levy and collection of Integrated GST
UTGST/SGST Act, 2017	Similar provisions	Levy of Union Territory/State GST respectively

🔹 3. Key Conditions for Chargeability

For any supply to be chargeable under GST, the following conditions must be fulfilled:

Condition	Explanation
✅ There must be a supply	As per Section 7 of CGST Act
✅ Supply should be of goods/services	Or both, excluding non-GST items like alcohol
✅ It should be a taxable supply	Not exempt, nil-rated, or non-GST
✅ Made by a taxable person	Someone registered or liable to register under GST
✅ In the course or furtherance of business	Personal transactions are usually not chargeable
✅ In India	Except for import of services
✅ At a prescribed rate	Based on HSN/SAC Code – 0%, 5%, 12%, 18%, or 28%

🔹 4. Types of Chargeability

Type	Description
Forward Charge	Supplier collects GST from recipient and pays to government (most common)
Reverse Charge	Recipient pays GST directly instead of the supplier
Composition Scheme	Small taxpayers pay GST at a fixed rate on turnover (not on supply)

🔹 5. Reverse Charge Mechanism (RCM)

In certain cases, GST is payable by the recipient, not the supplier. Common examples:

Supply Type	Reverse Charge Applicable?	Who Pays GST?
Legal services from advocate	✅ Yes	Business recipient
Services by GTA (Transport)	✅ Yes	Recipient of services
Unregistered to registered person	✅ Yes (in specified cases)	Registered buyer

🔹 6. Time of Supply: When GST is Charged?

To apply chargeability, you must determine the Time of Supply – i.e., the exact time GST becomes payable.

Type of Supply	Time of Supply Determined By
Goods	Earlier of: Date of invoice or date of payment receipt
Services	Earlier of: Date of invoice (within 30 days) or date of payment
RCM Cases	Earlier of: Payment date or 60 days from invoice date

🔹 7. Value of Supply: On What GST is Charged?

GST is calculated on the transaction value, which includes:

Price paid or payable
Extra charges like freight, packing, commission
Any government duties (if not already included)

Excludes:

Discounts (if recorded on invoice)
GST itself

🔹 8. Place of Supply: Which GST Type Applies?

Place of supply determines whether the supply is:

Intra-State → CGST + SGST
Inter-State → IGST

🧾 Example of Chargeability

✅ Example 1: Sale of Laptop (Intra-state)

Supplier: Delhi
Buyer: Delhi
Invoice Amount: ₹50,000
Rate: 18%
Chargeability: ✅ Forward charge
GST Payable: ₹9,000 (CGST ₹4,500 + SGST ₹4,500)

✅ Example 2: Advocate Service (RCM)

Advocate: Unregistered
Client: ABC Pvt Ltd (Registered)
Chargeability: ✅ Reverse charge
GST Payable: Client pays directly under RCM

✅ Example 3: Free Samples

Activity: Free samples to customers
Consideration: ❌ No
Chargeability: ❌ Not taxable (unless covered under Schedule I)

✅ Summary: Chargeability in GST

Element	Key Rule
What is taxed	Supply of goods/services
Who pays	Supplier (forward charge) or recipient (reverse charge)
When to pay	Based on time of supply
How much	Based on value of supply and applicable GST rate
Where to pay	Depends on place of supply (Intra vs Inter-State)

Meaning and Ingredients of “Goods” under GST

In the context of the Goods and Services Tax (GST) in India, understanding the meaning of “goods” is crucial because GST is levied on the supply of goods and/or services. Let’s explore the concept in full detail.

🔷 Meaning of Goods under GST

As per Section 2(52) of the CGST Act, 2017,

“Goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before supply or under the contract of supply.”

✅ Key Ingredients / Elements of Goods

Let’s break down the definition into its essential ingredients to understand what qualifies as “goods”:

1️⃣ Movable Property

Goods must be movable (can be moved from one place to another).
Immovable properties like land and buildings are not goods under GST.

🟩 Example: Furniture, books, mobile phones, vehicles, etc.

2️⃣ Excludes Money and Securities

Money: Currency, coins (used as legal tender) are not goods.
Securities: Shares, debentures, bonds, etc., are also excluded from goods.

🟥 Example (Not Goods): ₹500 currency note, shares of a company

3️⃣ Includes Actionable Claims

Actionable Claim: A claim to any debt other than a secured debt, which can be recovered through a court.
Examples like lotteries, betting, and gambling are taxable actionable claims under GST.

🟨 Note: While most actionable claims are not taxed, specific ones like lotteries are included under GST.

4️⃣ Includes Growing Crops, Grass, etc.

Crops, grass, trees attached to land but intended to be severed before supply are considered goods.

🟩 Example: Sugarcane, wheat, grass (if sold after harvesting)

5️⃣ Things Attached to Land (if severed)

Trees, fixtures, or minerals, if agreed to be detached before supply, become movable and thus qualify as goods.

🟨 Example: Timber agreed to be cut and sold

📌 What Are Not Goods?

Not Considered Goods	Reason
Immovable property	Not movable
Legal tender money	Excluded in definition
Securities	Excluded (regulated elsewhere)
Services	Covered separately under GST

🧾 Examples of Goods under GST

Item	Is it Goods?	Reason
Laptop	✅ Yes	Movable and tangible
Gold ornaments	✅ Yes	Movable goods
Wheat crop (harvested)	✅ Yes	Agreed to be severed
Money transfer service	❌ No	It’s a service
Bank deposit	❌ No	Money and securities excluded
Lottery ticket	✅ Yes	Taxable actionable claim

✅ Summary Table: Ingredients of Goods

Ingredient	Included?	Notes
Movable property	✅ Yes	Core requirement for being treated as goods
Money	❌ No	Explicitly excluded
Securities (shares, debentures)	❌ No	Not covered under GST
Actionable claims	✅ Yes	Only certain types like lottery, betting, gambling are taxable
Growing crops, grass	✅ Yes	If agreed to be severed before supply
Attached goods (to land)	✅ Yes	Only if agreed to be severed

📘 Legal Reference

CGST Act, 2017
- Section 2(52): Definition of Goods
- Section 7: Scope of Supply (relevant when determining chargeability)

Meaning of Services under GST – Full Explanation

Under the Goods and Services Tax (GST) law in India, all transactions are categorized as either goods or services. Anything that does not qualify as “goods” is generally treated as a service.

🔷 Statutory Definition of Services under GST

As per Section 2(102) of the CGST Act, 2017:

“Services” means anything other than goods, money and securities but includes activities 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.”

✅ Key Ingredients / Elements of Services

Let’s break down the definition to understand what constitutes a service under GST:

1️⃣ Anything Other Than Goods

Services are defined negatively, i.e., whatever is not goods is considered service (except money and securities).

🟩 Example: Transport service, banking, telecom, education, consulting

2️⃣ Excludes Money and Securities

Transactions involving money itself (like depositing ₹500) or buying shares are not services.
However, conversion of currency for a fee is a service.

🟨 Example: Currency exchange from INR to USD for a fee → taxable service

3️⃣ Separate Consideration Must Be Charged

If any consideration (fee or charge) is taken for providing something (except goods/money), it is treated as a service.

🔹 Examples of Services under GST

Activity	Service?	Notes
Software development	✅ Yes	Intangible work, not goods
Renting of property	✅ Yes	Treated as supply of service
Hotel accommodation	✅ Yes	Even though tangible, treated as service
Stock brokerage	✅ Yes	Involves securities, but fee is taxed
Currency conversion	✅ Yes	Fee charged = service
Surgery or medical services	✅ Yes	Healthcare services (often exempt)
Electricity distribution by DISCOMs	❌ No	Exempt under specific notification

🔹 Types of Services Covered under GST

Business services: Consultancy, advertising, BPO, audit
Financial services: Banking, insurance, investment
Hospitality: Hotels, catering, renting of halls
Education & Healthcare: If not exempt
Construction services: Under-construction property
Digital & Online Services: OTT, gaming, cloud, SaaS

🔹 Special Case: Composite and Mixed Supplies

A transaction involving both goods and services is taxed based on whether it is:
- Composite Supply: Taxed as principal supply (e.g., supply of goods with transportation)
- Mixed Supply: Taxed at highest applicable rate

🟨 Example: A gift hamper containing chocolate, perfume, and a gift card → Mixed supply

🧾 Illustration Examples

Situation	Nature	GST Applicable?
Lawyer charging fees for a case	Service	✅ Yes (under RCM for business clients)
Renting a commercial shop	Service	✅ Yes (normal charge)
Giving a gift of ₹5000 in cash	Money (not service)	❌ No
Selling air tickets through an agent	Service (agency)	✅ Yes (commission is taxed)
Buying shares directly from market	Securities	❌ No GST
Foreign exchange conversion (₹ to USD)	Service	✅ Yes (fee charged is taxable)

📌 Summary Table: Meaning of Service in GST

Criteria	Explanation
Definition	Anything other than goods, money, and securities
Includes	Currency exchange, digital services, renting, etc.
Excludes	Sale of goods, pure money transactions, buying shares
Consideration	Required for service to be taxable
Taxable under GST?	✅ Yes, if not specifically exempt
Valuation	Based on value charged for service (Section 15)

📘 Legal Reference:

Section 2(102), CGST Act, 2017
Schedules II & III for classification and exemptions

Taxability under GST – Full Explanation with Examples

Taxability under GST means determining whether a particular supply of goods or services is liable to tax, at what rate, and under what conditions. It is the foundation for applying GST correctly.

🔷 What is Taxability in GST?

Taxability refers to the liability to pay tax on a particular supply under the GST law. It depends on the nature of the supply, the status of the supplier, the place of supply, and the applicable GST rate.

✅ Key Components of Taxability

To determine whether GST is applicable, the following conditions must be analyzed:

Component	Explanation
1. Supply	There must be a supply of goods or services (Section 7 of CGST Act)
2. Consideration	Usually, there should be a payment or value exchanged
3. Taxable Person	The person making the supply must be registered or liable to register under GST
4. Taxable Supply	The supply must be taxable (not exempt, nil-rated, or non-GST)
5. Place of Supply	Determines whether CGST+SGST (Intra-state) or IGST (Inter-state) applies
6. Time of Supply	Identifies when the GST becomes due
7. Valuation of Supply	Determines the value on which GST is calculated (usually the transaction value)
8. Rate of Tax	Depends on the classification (HSN/SAC code) – 0%, 5%, 12%, 18%, or 28%

🔹 Types of Supplies under GST (Taxability Classification)

Supply Type	Taxable?	Details
Taxable Supplies	✅ Yes	Attract GST at standard/nil rate
Exempt Supplies	❌ No	Specifically exempted under GST law
Zero-Rated Supplies	✅ Yes (0%)	Exports or supplies to SEZ – taxable at 0%, eligible for ITC/refund
Non-Taxable Supplies	❌ No	Not covered under GST at all (e.g., alcoholic liquor)
Nil-Rated Supplies	✅ Yes (0%)	Tax rate is 0%, but supply is still considered taxable
Composite & Mixed Supply	✅ Depends	Taxed based on dominant supply (composite) or highest rate (mixed)

🔸 Example: Taxability Decision Table

Scenario	Taxable under GST?	GST Type	Notes
Sale of mobile phone by a dealer	✅ Yes	CGST + SGST or IGST	Taxable supply
Free samples without consideration	❌ No*	—	Not taxable unless under Schedule I
Export of garments	✅ Yes (0%)	Zero-rated	Eligible for refund
Health care services by hospital	❌ No	Exempt	Covered under exemption list
Supply of alcohol for human consumption	❌ No	Non-GST	Outside GST scope
Renting of commercial property	✅ Yes	CGST + SGST or IGST	Taxable service

🧾 Taxability vs Non-Taxability: How to Distinguish

Criteria	Taxable Supply	Non-Taxable / Exempt Supply
Consideration involved	✅ Yes	Usually ❌ No or specifically exempted
Covered under GST?	✅ Yes	❌ No (like petrol, alcohol) or exempt by law
Input Tax Credit (ITC)	✅ Allowed (except for nil-rated)	❌ Not allowed
Appears in GST returns?	✅ Yes	✅ Yes (exempt) / ❌ No (non-GST items)

🔍 Special Cases

1. Reverse Charge Mechanism (RCM)

Recipient of supply pays GST instead of supplier
Applicable in cases like advocate services, GTA, imports

2. Composite Supply

A bundle of goods/services supplied together where one is principal
Taxed at the rate applicable to the principal item

3. Mixed Supply

Two or more independent supplies bundled together
Taxed at the highest rate among the items

📘 Legal Provisions

Section	Description
7	Definition of Supply
9	Levy and collection of CGST
2(108)	Definition of Taxable Supply
2(47)	Taxable Person
15	Valuation of taxable supply

📌 Summary Table: Taxability under GST

Condition	Must Be Met?
Is there a supply of goods/services?	✅ Yes
Is it for consideration (paid)?	✅ Usually
Is it made by a taxable person?	✅ Yes
Is the supply taxable?	✅ Yes
Is the place/time/value identified?	✅ Yes
Is there any applicable exemption?	❌ No

Charging Section of GST – Section 9 of CGST Act (Detailed Explanation)

The charging section is the core provision in any tax law, as it gives the legal authority to levy and collect tax. In the GST regime, Section 9 of the CGST Act, 2017 is the main charging section for Central GST (CGST). There are similar charging sections under State GST (SGST) and Integrated GST (IGST) laws.

📘 Section 9 – Charging Section of CGST Act, 2017

🔹 Text of Section 9(1)

“There shall be levied a tax called the Central Goods and Services Tax (CGST) on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding 20%, as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed.“

✅ Key Elements of Section 9(1) – Explained

Component	Explanation
Type of Tax	Central Goods and Services Tax (CGST)
Applicability	Applies to intra-State supplies (within the same state) of goods and/or services
Exclusion	Does not apply to alcoholic liquor for human consumption (outside GST scope)
Valuation Basis	Tax to be levied on transaction value as per Section 15
Maximum Rate	Can be up to 20%, as notified by government (actual rates vary: 0%, 5%, 12%, 18%, 28%)
Collection Method	As per rules framed under the GST law

🔹 Other Clauses under Section 9

🔸 Section 9(2): Petroleum Products

GST not applicable currently on:
- Petroleum crude
- High-speed diesel
- Motor spirit (petrol)
- Natural gas
- Aviation turbine fuel
These may be notified later for GST.

🔸 Section 9(3): Reverse Charge Mechanism (RCM)

Government can notify categories of goods or services where recipient (instead of supplier) is liable to pay GST.

🧾 Example: Services by a lawyer, goods transport agency (GTA)

🔸 Section 9(4): RCM on Unregistered Purchases

GST payable by registered persons on supplies received from unregistered suppliers, but only in specific cases notified by the government.

🔸 Section 9(5): E-Commerce Operator Liability

In certain e-commerce services, the e-commerce platform is liable to pay GST instead of the actual supplier.

🧾 Example: Ola, Uber (for passenger transport)

🔹 Comparison: Charging Sections in Other GST Laws

Law	Charging Section	Type of Supply
CGST Act	Section 9	Intra-state supply (Central share)
SGST/UTGST Act	Section 9	Intra-state supply (State/UT share)
IGST Act	Section 5	Inter-state or export/import supplies

📌 Summary Table: Section 9 of CGST Act

Section	Purpose
9(1)	Basic levy on intra-state supply of goods/services
9(2)	Petroleum products excluded temporarily
9(3)	RCM on notified goods/services
9(4)	RCM on unregistered purchases (if notified)
9(5)	E-commerce operator liable in special cases

🧾 Illustrative Examples

Situation	Section 9 Applicability
Sale of mobile phone in Mumbai to a customer in Mumbai	9(1) – CGST + SGST
Export of garments to USA	Covered under IGST Act
Uber ride booked by customer	9(5) – GST paid by Uber
Legal service by advocate to a company	9(3) – RCM
Purchase from unregistered carpenter (if notified)	9(4) – RCM (if applicable)

Charging Section of SGST – Section 9 of SGST Act (Detailed Explanation)

Just like the Central GST (CGST), the State GST (SGST) also has a charging section that legally empowers states to levy and collect GST. This is found under Section 9 of the SGST Act, 2017.

This section is almost identical to Section 9 of the CGST Act, but it applies to the State Government’s share of tax on intra-State transactions.

📘 Section 9 – Charging Section of SGST Act, 2017

🔹 Text of Section 9(1)

“There shall be levied a tax called the State Goods and Services Tax (SGST) on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the CGST Act and at such rates, not exceeding 20%, as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed.“

✅ Key Points of Section 9 of SGST Act

Component	Explanation
Type of Tax	State Goods and Services Tax (SGST)
Applicability	Levied on all intra-State supplies of goods/services within a state
Exclusion	Does not apply to alcoholic liquor for human consumption
Valuation	Based on Section 15 of CGST Act (Transaction value)
Maximum Rate	Can be notified up to 20%, actual rates are lower (5%, 12%, 18%, 28%)
Collection	SGST is collected by respective State Governments

🔸 Structure of GST on Intra-State Supply

When goods or services are supplied within the same state, the tax is split into:

CGST – Collected by the Central Government
SGST – Collected by the State Government

🧾 Example:
A dealer in Maharashtra sells machinery to a customer in Maharashtra for ₹1,00,000.
GST rate = 18% ⇒ 9% CGST + 9% SGST
So,

₹9,000 to Central Govt (CGST)
₹9,000 to State Govt (SGST)

🔹 Other Clauses in SGST Section 9 (Similar to CGST Act)

Sub-Section	Provision	Explanation
9(2)	Exclusion of petroleum products	Petroleum, diesel, ATF, etc. excluded until notified
9(3)	Reverse Charge Mechanism (RCM)	State can notify services/items where recipient pays SGST
9(4)	RCM on unregistered supplier	Purchases from unregistered persons may attract SGST in specific cases
9(5)	E-Commerce operator liable to pay SGST	Platforms like Ola, Uber pay SGST for certain services they facilitate

🔍 Comparison with Other Charging Sections

GST Type	Charging Section	Applies To
CGST	Section 9, CGST Act	Intra-state supply (Central share)
SGST	Section 9, SGST Act	Intra-state supply (State share)
IGST	Section 5, IGST Act	Inter-state, imports, exports

📌 Important Notes

SGST is applicable only if buyer and seller are in the same state.
If buyer and seller are in different states, IGST (not SGST) is applicable.
SGST is governed by the respective State Government (Maharashtra SGST, UP SGST, etc.).

🧾 Illustrative Example

Transaction	Applicable GST Type	Charged Under
Sale of goods in Gujarat (seller and buyer in Gujarat)	CGST + SGST	Section 9 of CGST & SGST Act
Sale of services from Delhi to Karnataka	IGST	Section 5 of IGST Act
Lawyer providing services to a company in same state	RCM applies, SGST payable by recipient	Section 9(3) SGST Act

📝 Summary of SGST Charging Section (Section 9)

Topic	Details
Law	Section 9, SGST Act
Tax	SGST (State GST)
Type of Supply	Intra-State
Excludes	Alcohol, petroleum (until notified)
Max Rate	20% (actual notified rates are lower)
Collected By	Respective State Governments

Charging Section of IGST – Section 5 of IGST Act, 2017 (Detailed Explanation)

The Integrated Goods and Services Tax (IGST) is levied on inter-state supplies of goods and services and imports into India. The charging section for IGST is found under Section 5 of the IGST Act, 2017.

This section empowers the Central Government to levy and collect IGST on all inter-state supplies, ensuring seamless flow of credit and tax across state boundaries.

📘 Section 5 – Charging Section of IGST Act, 2017

🔹 Text of Section 5(1)

“There shall be levied a tax called the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the CGST Act and at such rates, not exceeding 40%, as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed.“

✅ Key Features of Section 5

Component	Explanation
Type of Tax	Integrated Goods and Services Tax (IGST)
Applicability	Levied on all inter-State supplies of goods or services
Exclusion	Supply of alcoholic liquor for human consumption is excluded
Valuation	Based on transaction value under Section 15 of CGST Act
Maximum Rate	Up to 40%, as notified by government (actual rates are usually sum of CGST + SGST rates)
Collection	Collected by the Central Government

🔹 Scope of IGST

IGST applies when goods or services move from one state to another (Inter-state supply).
IGST also applies on imports of goods and services.
The tax collected under IGST is shared between the Central and State Governments.

🔹 Why IGST?

To avoid double taxation on inter-state supplies.
To maintain the seamless flow of input tax credit (ITC) between states.
To ensure a single national market without state barriers.

🔸 Tax Rate under IGST

The IGST rate is generally the sum of CGST and SGST rates applicable to the goods or services.

For example:
If CGST is 9% and SGST is 9%, then IGST = 18%.

🔹 Other Clauses under Section 5

Sub-Section	Provision	Explanation
5(2)	Excludes petroleum products currently	Petroleum, diesel, etc. are excluded until notified for GST
5(3)	Reverse Charge Mechanism (RCM) applies	Recipient pays IGST if notified, instead of supplier

🔍 Summary of IGST Charging Section

Aspect	Description
Law	Section 5 of IGST Act, 2017
Tax	Integrated GST (IGST)
Type of Supply	Inter-State supply of goods and services
Exclusion	Alcoholic liquor for human consumption
Maximum Rate	Up to 40% (normally sum of CGST + SGST rates)
Collected by	Central Government

🧾 Illustrative Examples

Scenario	GST Type	Section Applied
Sale of goods from Maharashtra to Gujarat	IGST	Section 5, IGST Act
Import of electronic goods into India	IGST	Section 5, IGST Act
Legal services supplied from Delhi to Mumbai	IGST	Section 5, IGST Act
Supply of alcohol within a state	Not covered under GST	N/A

📝 How IGST Works in Practice

Supplier in State A sells goods to buyer in State B.
Supplier charges IGST on the invoice (at the combined CGST + SGST rate).
Buyer can claim input tax credit of IGST paid.
The Central Government later settles the SGST share with the destination state.

Intra-State Supply under GST (Detailed Explanation)

Intra-State Supply means the supply of goods or services where the place of supply and the place of origin (location of supplier) are in the same state or Union Territory.

This type of supply attracts both CGST and SGST (or UTGST) because the transaction occurs within one state.

📘 Definition of Intra-State Supply

Section 8 of the IGST Act, 2017 explains the concept of place of supply, which helps determine if a supply is intra-state or inter-state.
If the place of supply of goods or services is in the same state as the supplier’s location, it is considered Intra-State Supply.

✅ Key Characteristics of Intra-State Supply

Aspect	Explanation
Location of Supplier	State A
Place of Supply	State A (same as supplier’s location)
GST Applicable	CGST + SGST (or UTGST in Union Territories)
Tax Rate	CGST and SGST rates, usually equal halves of total GST rate
Example	Seller in Maharashtra sells goods to buyer in Maharashtra

🔹 Why is Intra-State Supply Important?

It determines which tax components apply: CGST and SGST for intra-state, vs. IGST for inter-state.
GST collection is split between Central Government (CGST) and State Government (SGST) in intra-state supplies.
Helps states earn revenue on local transactions.

🔸 Example of Intra-State Supply

Supplier Location	Buyer Location	Type of Supply	GST Charged
Delhi	Delhi	Intra-State	CGST + SGST
Tamil Nadu	Tamil Nadu	Intra-State	CGST + SGST
Chandigarh (UT)	Chandigarh	Intra-State	CGST + UTGST

🔹 Intra-State Supply under GST Law

Section 2(6) of CGST Act, 2017 defines “State” which includes Union Territories for this purpose.
Section 8 of IGST Act provides rules for determining place of supply to confirm if it’s intra-state.

📝 Summary Table

Feature	Intra-State Supply
Supply Type	Goods or services within same state
Tax Components	CGST + SGST (or UTGST)
Tax Rates	As notified by government
Tax Authority	Central + State Government
Determined By	Place of supply = location of supplier

🧾 Practical Illustration

A business in Karnataka sells goods to a customer also in Karnataka.
The invoice shows CGST and Karnataka SGST, each at half the total GST rate (e.g., 9% + 9% for an 18% total GST).
Taxes are paid separately to the Central and State Governments.

Illustration of Intra-State Supply in GST

Let’s understand Intra-State Supply with a practical example:

Scenario:

Supplier: ABC Traders located in Maharashtra
Buyer: XYZ Enterprises located in Maharashtra
Goods supplied: Office chairs
Invoice Value: ₹50,000
GST Rate: 18% (split into 9% CGST + 9% SGST)

Step-by-step Illustration:

Step	Details
Step 1: Confirm Supply Type	Both supplier and buyer are in Maharashtra ⇒ Intra-State Supply
Step 2: Calculate GST	Total GST = 18% of ₹50,000 = ₹9,000
Step 3: Split GST	CGST = 9% of ₹50,000 = ₹4,500
	SGST = 9% of ₹50,000 = ₹4,500
Step 4: Invoice Amount	Value + CGST + SGST = ₹50,000 + ₹4,500 + ₹4,500 = ₹59,000

What happens next?

ABC Traders charges ₹59,000 to XYZ Enterprises (₹50,000 + ₹9,000 GST).
ABC Traders remits ₹4,500 to the Central Government (CGST).
ABC Traders remits ₹4,500 to the Maharashtra State Government (SGST).
XYZ Enterprises can claim input tax credit of ₹9,000 (₹4,500 CGST + ₹4,500 SGST) while filing their GST returns.

Summary Table

Parameter	Amount (₹)
Invoice Value	50,000
CGST @ 9%	4,500
SGST @ 9%	4,500
Total Invoice	59,000

Key Takeaway:

Intra-State Supply means both supplier and buyer are in the same state.
GST is charged and collected separately as CGST and SGST.
Each government receives their respective share of tax.
Buyer gets input tax credit on both CGST and SGST paid.

Illustration of CGST (Central Goods and Services Tax)

CGST is the portion of GST collected by the Central Government on intra-state supplies of goods or services.

Practical Illustration:

Scenario:

Supplier: XYZ Traders located in Delhi
Buyer: ABC Pvt Ltd located in Delhi
Goods Supplied: Laptops
Invoice Value: ₹1,00,000
GST Rate: 18% (split equally as 9% CGST + 9% SGST)

Step-by-step Calculation of CGST:

Step	Details
Step 1: Confirm Supply Type	Both supplier and buyer are in Delhi ⇒ Intra-State Supply
Step 2: Calculate Total GST	Total GST = 18% of ₹1,00,000 = ₹18,000
Step 3: Calculate CGST	CGST = 9% of ₹1,00,000 = ₹9,000
Step 4: Calculate SGST	SGST = 9% of ₹1,00,000 = ₹9,000
Step 5: Invoice Amount	₹1,00,000 + ₹9,000 (CGST) + ₹9,000 (SGST) = ₹1,18,000

What happens?

XYZ Traders charges ABC Pvt Ltd ₹1,18,000 including GST.
XYZ Traders remits ₹9,000 as CGST to the Central Government.
XYZ Traders remits ₹9,000 as SGST to the Delhi Government.
ABC Pvt Ltd can claim input tax credit of ₹18,000 (CGST + SGST) when filing GST returns.

Summary Table

Parameter	Amount (₹)
Invoice Value	1,00,000
CGST @ 9%	9,000
SGST @ 9%	9,000
Total Invoice	1,18,000

Key Points:

CGST is collected by the Central Government on intra-state supplies.
It is equal to half of the total GST rate for intra-state transactions.
Helps fund central government operations.

Taxability of Petroleum Products under GST

Petroleum products have a special status under the GST regime. They are excluded from GST for the time being, and their taxation continues under the existing indirect tax laws until they are brought under GST by the government.

🚦 Current Status of Petroleum Products in GST

Petroleum products like crude oil, natural gas, petrol, diesel, aviation turbine fuel (ATF), and bitumen are outside the purview of GST for now.
These products are governed by State VAT (Value Added Tax), central excise duty, and other state/local taxes.
The government has the power to include petroleum products under GST by notification, but this has not happened yet.

🔎 Why Are Petroleum Products Excluded?

Petroleum products contribute a significant share of state revenues through VAT.
Including them under GST would require states to compensate revenue losses for a longer period.
Complex pricing and taxation structures make transition difficult.

📜 Legal Reference

Section 9(2) of the CGST Act, 2017, and Section 5(2) of the IGST Act, 2017 state that petroleum products are excluded from GST until notified otherwise.
This means CGST, SGST, and IGST are not charged on petroleum products currently.

🛢️ Taxation on Petroleum Products (Current Regime)

Product	Tax Structure
Crude Oil	Central Excise Duty + State VAT
Petrol & Diesel	Excise Duty + State VAT (varies by state)
Aviation Turbine Fuel	Central Excise + VAT (varies)
Bitumen	Excise Duty + VAT

🔮 Future Outlook

Government plans to bring petroleum products under GST after resolving revenue concerns.
Once included, these products will be taxed under the unified GST structure.

📝 Summary

Aspect	Details
Current GST Status	Excluded from GST
Applicable Taxes	Central Excise Duty + State VAT
Products Excluded	Crude oil, petrol, diesel, ATF, bitumen
Governing Provisions	Section 9(2) CGST Act; Section 5(2) IGST Act
Future Possibility	May be included under GST later

Taxability of Composite Supply under GST

Composite Supply is an important concept in GST that affects how tax is applied when multiple goods or services are supplied together as a single package.

📘 What is Composite Supply?

Section 2(30) of CGST Act, 2017 defines Composite Supply as:

A supply consisting of two or more taxable supplies of goods or services, or both, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.

✅ Key Points:

The supplies are naturally bundled and supplied together.
There is a principal supply which predominates over other supplies.
Tax rate and liability are determined by the principal supply.

🔍 Principal Supply

The supply that dominates or characterizes the composite supply.
Tax rate of composite supply is the tax rate applicable on the principal supply.

📊 Taxability Mechanism

Scenario	Tax Applicability
Composite supply with principal supply	Entire supply taxed at the rate of principal supply
All supplies must be taxable or non-exempt	If any part is exempt, special rules apply

📝 Examples of Composite Supply

Composite Supply Example	Principal Supply	Tax Rate Applies On
Supply of a laptop along with a warranty service	Laptop	GST on Laptop (e.g., 18%)
Supply of food along with free water bottles	Food	GST on Food (e.g., 5%)
Supply of a car with free insurance	Car	GST on Car (e.g., 28%)

⚠️ Important Distinction

Composite Supply is different from Mixed Supply.
In mixed supply, two or more goods or services are supplied together but are not naturally bundled and each can be sold separately.
In composite supply, the supplies are naturally bundled and one supply dominates.

🔎 Legal Reference

Section 2(30), CGST Act 2017 — Definition of Composite Supply
Section 8, CGST Act 2017 — Tax on Composite and Mixed Supplies

🧾 Summary Table

Feature	Composite Supply
Supplies bundled together	Yes, naturally bundled
Number of supplies	Two or more
Presence of principal supply	Mandatory
Tax rate applied	Tax rate of principal supply
Examples	Laptop + Warranty, Food + Free Bottle

Taxability of Mixed Supply under GST

Mixed Supply refers to a combination of two or more individual supplies of goods or services, which are not naturally bundled, but are offered together for a single price. The highest tax rate among the items in the package is applied to the entire supply.

📘 Definition (As per GST Law)

According to Section 2(74) of the CGST Act, 2017:

“Mixed supply” means two or more individual supplies of goods or services, or both, made in conjunction with each other for a single price, where such supply does not constitute a composite supply.

🔍 Key Features of Mixed Supply

Feature	Explanation
Number of items	2 or more individual supplies
Bundling nature	Not naturally bundled
Supplied for a single price?	Yes
Sold as a combo or offer	Yes, usually during promotional sales
Taxability	Highest GST rate among the items applies

🧾 Example of Mixed Supply

A combo offer: ₹500 gift pack containing:

1 bottle of juice (GST 12%)
1 pack of dry fruits (GST 5%)
1 chocolate bar (GST 18%)

Since this is not naturally bundled and offered for a single price, entire ₹500 will be taxed at the highest rate = 18% (chocolate’s rate).

🧮 Tax Calculation on Mixed Supply

Item	Value (₹)	GST Rate	Tax (if sold separately)
Juice Bottle	150	12%	18
Dry Fruits	200	5%	10
Chocolate Bar	150	18%	27
Combo Price	500	18% (due to chocolate)	90

🟢 Tax applied on ₹500 @ 18% = ₹90

⚠️ Important Points to Remember

If the items can be sold individually, and the combination is not naturally bundled, it’s a Mixed Supply.
If the items are naturally bundled with a dominant supply, it’s a Composite Supply (taxed as per principal supply).
Mixed Supply = Highest GST Rate among items.

📊 Mixed vs Composite Supply (Quick Comparison)

Basis	Mixed Supply	Composite Supply
Nature of bundling	Not naturally bundled	Naturally bundled
Tax rate	Highest rate among all items	Rate of principal supply
Supplied for one price?	Yes	Yes
Example	Combo of unrelated items (gifts)	Laptop + warranty

📌 Legal Reference:

Section 2(74), CGST Act – Defines Mixed Supply
Section 8(b), CGST Act – Explains taxability of mixed supply

✅ Summary:

Mixed Supply is taxed at the highest rate among the items in the combo, even if the individual items have lower tax rates, because they are sold together for a single price and are not naturally bundled.

Composition Levy under GST

The Composition Levy Scheme is a simplified taxation mechanism under GST, designed to reduce compliance burden for small taxpayers. It allows eligible businesses to pay GST at a fixed percentage of their turnover, without the need for complex invoice-wise filings or detailed ITC (Input Tax Credit) tracking.

🔍 Legal Basis

Governed by Section 10 of the CGST Act, 2017
Also referred to as the Composition Scheme

✅ Who Can Opt for Composition Levy?

Small taxpayers whose aggregate turnover in the preceding financial year does not exceed ₹1.5 crore (₹75 lakh in some special category states).
Must be engaged in:
- Supply of goods (manufacturers and traders)
- Restaurants (not serving alcohol)
- Service providers (limited categories, under special notification)

❌ Who Cannot Opt?

Businesses supplying non-taxable goods (like petrol, alcohol)
Engaged in inter-state supply
Supplying goods through e-commerce operators (like Amazon, Flipkart)
Manufacturers of notified goods (like ice cream, pan masala, tobacco)

💰 Tax Rates Under Composition Scheme

Category	GST Rate on Turnover
Manufacturers (other than notified goods)	1% (0.5% CGST + 0.5% SGST)
Traders (Goods)	1% (0.5% + 0.5%)
Restaurants (non-alcoholic)	5% (2.5% + 2.5%)
Service providers (up to ₹50 lakhs turnover)	6% (3% + 3%)

📊 Key Features of Composition Levy

Feature	Details
Input Tax Credit (ITC)	❌ Not allowed
Invoice format	Cannot issue tax invoice (must issue bill of supply)
GST on Reverse Charge (RCM)	✅ Payable as per normal rules
Returns filing	Quarterly in CMP-08 + annual return in GSTR-4
Mention on invoice	“Composition taxable person, not eligible to collect tax on supplies”

🧾 Example:

A trader in Gujarat has a turnover of ₹50,00,000 in the financial year.
He opts for the Composition Scheme.

Applicable GST rate = 1%
Tax payable = 1% of ₹50,00,000 = ₹50,000
He cannot collect tax from customers, and cannot claim ITC.

📌 Benefits of Composition Scheme:

✅ Simple returns filing
✅ Reduced compliance burden
✅ Lesser paperwork
✅ Fixed tax rate, no detailed records required

⚠️ Limitations:

❌ Cannot issue tax invoice
❌ No inter-state sales allowed
❌ No ITC on purchases
❌ Cannot supply through e-commerce platforms

✒️ Summary Table

Particulars	Details
Applicable Section	Section 10 of CGST Act
Turnover Limit	₹1.5 Cr (₹75 Lakh in special category states)
Tax Rates	1% / 5% / 6% depending on type
Return Forms	CMP-08 (quarterly), GSTR-4 (annually)
Invoice Format	Bill of supply
Tax Collection from Buyers	❌ Not Allowed
Input Tax Credit (ITC)	❌ Not Allowed

Illustration of Composition Scheme under GST

Here’s a practical example to understand how the Composition Scheme works in real life for a small business.

🧾 Illustration Scenario

Name of Business: M/s A1 Kirana Store
Location: Jaipur, Rajasthan
Nature of Business: Trading of grocery items
Annual Turnover: ₹60,00,000
Opted for: GST Composition Scheme
Applicable GST Rate: 1% (0.5% CGST + 0.5% SGST)

✅ Step-by-Step Tax Computation:

Total Turnover for the Year = ₹60,00,000
GST Payable (Composition Rate) = 1% of ₹60,00,000
Total Tax Liability = ₹60,000
1. CGST = ₹30,000
1. SGST = ₹30,000

📄 How A1 Kirana Store Operates Under Composition Scheme

Parameter	Details
Invoices Issued To Customers	Bill of Supply (no tax shown)
Tax Collected from Customers	❌ Not allowed
Input Tax Credit on Purchases	❌ Not allowed
Returns Filed	CMP-08 quarterly, GSTR-4 annually
Label on Bill	“Composition taxable person, not eligible to collect tax on supplies”

📊 Summary Table

Particulars	Amount/Details
Annual Turnover	₹60,00,000
GST Rate (for Trader)	1%
Total Tax Liability	₹60,000
Return Forms	CMP-08 (quarterly), GSTR-4 (annual)
Tax Collection from Buyer	❌ Not allowed
ITC Claim Allowed	❌ Not allowed

📝 Important Notes:

Even though the taxpayer pays ₹60,000 as GST, they cannot charge this to customers.
The tax is paid out of profit margins, not passed on.
Helps in maintaining compliance with minimal paperwork and fixed rates.

Rate of Composition Tax under GST

The Composition Scheme under GST allows small taxpayers to pay tax at a fixed percentage of their turnover, instead of the regular GST rates. It simplifies compliance and reduces the tax burden for eligible businesses.

🔍 Legal Basis

Section 10 of the CGST Act, 2017
Rules under Chapter II of CGST Rules
Applicable only to intra-state supply

📊 Composition Tax Rates Table

Category of Taxpayer	Nature of Supply	GST Rate	Break-up (CGST + SGST)	Max Turnover Limit
1. Manufacturers (except notified goods)	Goods only	1%	0.5% + 0.5%	₹1.5 crore (₹75 lakh in special category states)
2. Traders / Dealers	Goods only	1%	0.5% + 0.5%	₹1.5 crore
3. Restaurants (non-alcoholic beverages only)	Supply of food or drinks (non-alcoholic)	5%	2.5% + 2.5%	₹1.5 crore
4. Service Providers (as per 2019 Notification)	Services or mixed supplies (goods + services)	6%	3% + 3%	₹50 lakh (under special composition scheme)

📌 Notes on the Tax Rates:

✅ 1. Manufacturers (Non-notified)

Those manufacturing goods (other than ice cream, pan masala, tobacco).
Pay 1% on turnover in the state or union territory.

✅ 2. Traders / Dealers

Buy and sell goods, without manufacturing.
Pay 1% on total turnover.

✅ 3. Restaurants (Non-alcoholic only)

For restaurants not serving alcoholic drinks.
Pay 5% tax on turnover.

✅ 4. Service Providers (Notified in 2019)

Allowed under special notification [Notification No. 2/2019 – Central Tax (Rate)]
Pay 6% tax on first ₹50 lakh turnover
Must not cross ₹50 lakh threshold during the year.

❌ Ineligible Businesses (Not Allowed to Opt)

Ice cream, pan masala, tobacco manufacturers
Suppliers of inter-state goods
Suppliers through e-commerce platforms
Non-resident taxable persons
Casual taxable persons

🧾 Illustrative Example:

M/s ABC Stationery Store
Annual turnover: ₹80,00,000
Nature of business: Trading (eligible under composition)
Applicable GST Rate: 1%
Tax Payable: ₹80,000 (₹40,000 CGST + ₹40,000 SGST)

📝 Summary Table of Composition Tax Rates

Business Type	Rate	Turnover Limit	Can Supply Services?
Manufacturer	1%	₹1.5 crore	No
Trader	1%	₹1.5 crore	No
Restaurant (Non-Alcoholic)	5%	₹1.5 crore	Yes (food service only)
Service Provider	6%	₹50 lakh	Yes

Conditions for Availing the Composition Scheme under GST

The Composition Scheme is a simplified tax scheme under the Goods and Services Tax (GST) law, aimed at small businesses to ease their compliance burden. However, certain conditions must be fulfilled to opt and continue under this scheme.

✅ 1. Turnover Limit

The aggregate turnover in the preceding financial year should not exceed ₹1.5 crore
(₹75 lakh for special category states like Arunachal Pradesh, Mizoram, Manipur, etc.)
For service providers, the limit is ₹50 lakh.

✅ 2. Intra-State Supply Only

The registered person cannot engage in inter-state supply of goods or services.
Only intra-state sales are allowed under the scheme.

✅ 3. Restriction on E-Commerce

The taxpayer cannot supply goods through e-commerce platforms that are required to collect TCS (Tax Collected at Source) under Section 52.
- Example: Cannot sell through Amazon, Flipkart, Meesho, etc.

✅ 4. No Input Tax Credit (ITC)

A composition taxpayer cannot claim ITC on purchases.
Likewise, they cannot issue a tax invoice, only bill of supply.

✅ 5. Notifying “Composition Taxable Person”

On every bill of supply, the taxpayer must mention:

“Composition taxable person, not eligible to collect tax on supplies”

Also, this must be displayed prominently at their place of business.

✅ 6. No Supply of Non-Taxable Goods

The taxpayer cannot supply goods or services that are exempt or non-taxable under GST, like:
- Petrol, diesel, alcohol, etc.

✅ 7. Cannot Be a Casual or Non-Resident Taxable Person

Casual taxable persons or non-resident taxable persons are not allowed to opt for the composition scheme.

✅ 8. Filing of Returns

Must file:
- CMP-08: Quarterly statement of tax payment
- GSTR-4: Annual return

✅ 9. Applicable to Certain Notified Persons Only

For manufacturers (except ice cream, pan masala, tobacco)
Traders / dealers
Restaurants not serving alcohol
Service providers (under special scheme – 6% rate)

❌ Persons Not Eligible for Composition Scheme

Category	Reason for Ineligibility
Inter-State suppliers	Only intra-state supplies allowed
E-commerce sellers	Not allowed to sell via e-commerce sites
Casual/Non-resident taxable persons	Specifically excluded
Ice cream, pan masala, tobacco manufacturers	Notified as ineligible
Input service distributors (ISDs)	Not eligible

🧾 Example:

M/s Lucky Garments is a trader in Rajasthan.
Turnover: ₹60 lakh, selling only within Rajasthan.
He doesn’t sell on Flipkart or Amazon.
✅ Eligible for composition scheme at 1% rate.

But if he starts selling to Delhi (inter-state), ❌ he becomes ineligible.

📌 Summary Table

Condition	Required?
Turnover ≤ ₹1.5 Cr (₹50 lakh for services)	✅ Yes
Inter-state supply allowed	❌ No
Sell through e-commerce platforms	❌ No
Claim ITC allowed	❌ No
Must issue bill of supply, not tax invoice	✅ Yes
Display “composition taxable person” signage	✅ Yes

Process of Intimation for Composition Scheme under GST

To opt into the Composition Scheme, a registered or new taxpayer must intimate the tax authorities using a prescribed online process via the GST Portal. Below is a step-by-step guide to how this intimation is done.

🧾 A. For New Taxpayers (at the time of GST Registration)

✅ Step-by-Step Process:

Visit the GST Portal:
👉 www.gst.gov.in
Click on “New Registration”.
Fill in the Application Form (GST REG-01):
1. While filling, you’ll see an option:

“Do you want to opt for Composition Scheme?”

✅ Select “Yes”.
Submit your application with supporting documents.
Once registration is approved, you will be considered a Composition Taxpayer from the date of registration.

🧾 B. For Existing Registered Taxpayers

If you are already registered under GST and want to switch to Composition Scheme, follow these steps:

✅ Step-by-Step Process:

Login to GST Portal with your credentials.
Navigate to:
Services > Registration > Application to Opt for Composition Levy
Fill Form GST CMP-02:
1. Select the Financial Year.
1. Choose the relevant reason for opting.
Submit the form electronically.
After filing CMP-02, file Form GST ITC-03 within 60 days, declaring:
1. Input held in stock
1. Input contained in semi-finished/finished goods
1. Capital goods on which ITC was availed earlier

📌 Important Notes:

Point	Details
When to Opt?	Before the beginning of financial year
Effective Date	From the start of the next financial year
Withdrawal	File CMP-04 if you want to exit the scheme
Form for ITC reversal	File GST ITC-03 within 60 days of opting in

❌ Failure to Intimate Properly

If a taxpayer fails to submit Form CMP-02 on time, they will be treated as a regular taxable person, and will have to:
- File monthly GSTR-1 & GSTR-3B
- Maintain full compliance
- Pay tax at regular rates
- Reverse any wrongly availed benefit

🧾 Example:

M/s Bharat Furniture is registered under GST since 2022 and wants to opt into the Composition Scheme for FY 2025–26.
They must:

Log in before 31st March 2025
File Form CMP-02
Then file Form ITC-03 within 60 days

📄 Summary of Forms Involved:

Form	Purpose
GST REG-01	Registration with Composition Scheme (New)
GST CMP-02	Opt for Composition Scheme (Existing)
GST ITC-03	Declare ITC reversal on stock/capital goods
GST CMP-04	Withdrawal from Composition Scheme

Withdrawal of Composition Scheme under GST

A registered taxpayer under the Composition Scheme may withdraw voluntarily or may be compelled to exit if they become ineligible. The process and rules are defined under Section 10 of the CGST Act and relevant GST Rules.

🔁 Two Ways to Withdraw from Composition Scheme:

🔹 1. Voluntary Withdrawal

When a taxpayer chooses to leave the scheme due to business expansion, inter-state supply, or other reasons.

🔹 2. Compulsory Withdrawal (Suo-moto by Tax Department)

When a taxpayer violates any condition, such as:

Exceeding turnover limit
Making inter-state supplies
Selling via e-commerce platforms
Manufacturing restricted goods (e.g., ice cream, pan masala, tobacco)

✅ Process of Voluntary Withdrawal

🔄 Step-by-Step (Form GST CMP-04):

Login to GST portal www.gst.gov.in
Navigate to:
Services > Registration > Application for Withdrawal from Composition Levy
Select Reason for withdrawal
Submit Form GST CMP-04
Acknowledgment will be generated.

📌 What Happens Next?

You become a regular taxpayer from the date of withdrawal.
You must start:
1. Filing GSTR-1 and GSTR-3B
1. Charging tax at applicable rates
1. Issuing tax invoices instead of bills of supply
File Form ITC-01 within 30 days to claim ITC on:
1. Inputs held in stock
1. Semi-finished goods
1. Capital goods

⚠️ If Department Initiates Withdrawal

Tax officer will issue Show Cause Notice in Form GST CMP-05
Taxpayer must reply using Form GST CMP-06
Officer will pass final order in Form GST CMP-07

🧾 Illustration

M/s Suresh Electricals was under Composition Scheme. In FY 2024–25, turnover exceeded ₹1.6 crore.
They filed CMP-04 in April 2025.
From April 1, 2025:

They are treated as a regular taxpayer
They start charging regular GST rates
They file ITC-01 to claim credit on stock

📄 Summary of Forms

Form	Purpose
GST CMP-04	Application for withdrawal (voluntary)
GST CMP-05	Show cause notice for ineligibility
GST CMP-06	Reply to show cause
GST CMP-07	Order of acceptance/rejection by officer
GST ITC-01	Claim of ITC after switching to regular scheme

📌 Important Points

Withdrawal is mandatory if any condition is violated
Once withdrawn, rejoining is allowed next FY if conditions are fulfilled again
Failing to comply leads to penalty and demand for tax and interest

Reverse Charge Mechanism (RCM) under GST

🔄 What is Reverse Charge Mechanism (RCM)?

In a normal GST scenario, the supplier of goods or services collects and pays the tax to the government.

Under Reverse Charge Mechanism (RCM), this responsibility is reversed — the recipient of goods or services is liable to pay GST instead of the supplier.

🔍 Legal Basis

Section 9(3) of CGST Act: For notified supplies.
Section 9(4) of CGST Act: For purchases from unregistered suppliers.
Section 5(3) and 5(4) of IGST Act: For inter-state supplies.

✅ Why RCM Exists?

To bring certain unorganized sectors into the tax net.
To ensure tax compliance where the supplier is not in a position to collect or pay tax.
To ensure revenue collection from recipients with better compliance.

📌 Types of Reverse Charge Scenarios

🔹 1. Notified Goods and Services (Section 9(3))

GST is payable under RCM on specific categories of goods or services, irrespective of whether the supplier is registered or not.

Examples:

Service / Goods	Supplier	Recipient (Liable to Pay)
Legal Services	Individual advocate or firm	Any business entity
Services of a Director	Director (non-employee)	Company or body corporate
Transportation of Goods by Road (GTA)	Goods Transport Agency	Registered business (consignee/consignor)
Security Services	Security Agency	Registered person (except govt)
Sponsorship Services	Sponsor	Company / partnership firm

🔹 2. Supply from Unregistered Dealer (Section 9(4))

RCM applies when a registered person purchases from an unregistered person — but only for specified notified classes of persons, such as:

Promoters in real estate sector
Builders buying from unregistered suppliers

Note: Section 9(4) RCM was amended and is now not applicable to all, only to notified situations.

🔹 3. Import of Services (IGST under RCM)

Any import of services from outside India by a person in India is liable to IGST under RCM, even if the supplier is unregistered.

📊 GST Rates under RCM

The same GST rate as applicable to the supply of that good or service is payable by the recipient under RCM.
Both CGST + SGST (intra-state) or IGST (inter-state) apply accordingly.

🧾 Invoice and Payment Rules under RCM

Requirement	Responsibility
Issue of Self-Invoice (for URD purchases)	Recipient
Issue of Payment Voucher	Recipient
Payment of Tax	Recipient via cash only
ITC Claim	Allowed (if eligible) after tax paid under RCM

📌 Time of Supply under RCM

👉 For Goods:

Earlier of:

Date of receipt of goods
Date of payment
30 days from invoice date

👉 For Services:

Earlier of:

Date of payment
60 days from invoice date

✅ Input Tax Credit (ITC) on RCM

GST paid under RCM is available as ITC, if:
- The goods/services are used for business purposes
- Recipient is eligible for ITC

🧾 Illustration Example:

M/s Shyam Ltd. receives legal services from a lawyer in May 2025 worth ₹1,00,000.

GST @ 18% under RCM = ₹18,000
M/s Shyam Ltd. pays ₹1,00,000 to the lawyer (no GST charged)
M/s Shyam Ltd. pays ₹18,000 to the government under RCM
M/s Shyam Ltd. can claim ₹18,000 as Input Tax Credit

🚫 RCM Not Applicable To:

Exempted or nil-rated goods/services
Services provided by employees
Specific transactions where conditions are not met

📋 RCM Compliance Checklist

Action	✅ Required?
Self-invoice for URD supplies	Yes
Payment voucher	Yes
GST payment via cash ledger	Yes
ITC claim (if eligible)	Yes
Separate accounting	Recommended

Reverse Charge Mechanism (RCM) for Specified Goods and Services under GST

[Section 9(3) of CGST Act & Section 5(3) of IGST Act]

Under Reverse Charge, GST is payable by the recipient instead of the supplier — but only for certain notified goods and services. Below is the officially notified list under Section 9(3).

✅ A. List of Goods under Reverse Charge (RCM)

Sl. No.	Goods Description	Supplier	Recipient Liable	GST Rate
1	Cashew nuts (not shelled or peeled)	Any supplier	Any registered person	5%
2	Bidi wrapper leaves (tendu)	Any supplier	Any registered person	5%
3	Tobacco leaves	Any supplier	Any registered person	5% (or as applicable)
4	Silk yarn	Any supplier	Any registered person	5%
5	Raw cotton	Agriculturist	Registered buyer	5%
6	Supply of lottery	State Govt/Lottery distributor	Lottery selling agent	28%

✅ B. List of Services under Reverse Charge (RCM)

Sl. No.	Service Description	Supplier	Recipient (RCM Liable)	GST Rate
1	Services by Goods Transport Agency (GTA)	GTA	Registered business	5% (No ITC) or 12%
2	Legal services by advocate or firm	Advocate/firm	Any business entity	18%
3	Services of a director (not employee)	Director	Company or body corporate	18%
4	Sponsorship services	Sponsor	Company or partnership firm	18%
5	Arbitral tribunal services	Arbitral Tribunal	Business entity	18%
6	Services by recovery agent to a bank/NBFC	Recovery agent	Bank or NBFC	18%
7	Rent-a-cab service (non-ITC eligible supplier)	Any person	Body corporate	5% (No ITC)
8	Insurance agent services	Insurance agent	Insurance company	18%
9	Security services (manpower agency)	Any person	Registered person (not Govt.)	18%
10	Services by music composers, authors, artists etc.	Individual	Publisher, music company, etc.	12% or 18%
11	Services by Department of Post (speed post, parcels, etc.)	India Post	Registered business	18%
12	Services of an individual port/airport authority	Individual or firm	Business entity	18%
13	Services supplied by a person located outside India (import)	Foreign service provider	Any person in India	As per applicable rate

⚠️ Special Notes:

RCM applies only if recipient is registered under GST (unless import of services).
In case of composite and mixed supplies, RCM applies based on principal supply.
Rate is same as applicable to that supply under normal forward charge.

🧾 Example:

M/s Alpha Pvt. Ltd. receives security service from XYZ Security Agency (not a body corporate).

Alpha is a registered company
XYZ is an individual firm
✅ RCM is applicable → Alpha pays GST @ 18% under RCM

📄 Summary Table: Goods and Services Under RCM

🔷 Goods

Goods	Supplier	Receiver Must Be	RCM?
Cashew nuts	Any	Registered	✅ Yes
Raw cotton	Agriculturist	Registered	✅ Yes
Lottery	State Government	Lottery agent	✅ Yes

🔷 Services

Service	Supplier Type	Recipient Must Be	RCM?
GTA	GTA (any)	Registered business	✅ Yes
Legal services	Advocate/firm	Business entity	✅ Yes
Director (non-employee)	Individual	Company/Corp	✅ Yes
Insurance agent	Individual	Insurance co.	✅ Yes
Security (non-corp supplier)	Individual/Firm	Registered person	✅ Yes

Reverse Charge under GST for Supplies from Unregistered Persons

(Section 9(4) of CGST Act, 2017)

🔄 What is Section 9(4) Reverse Charge?

When a registered person purchases goods or services from an unregistered person, the GST liability shifts to the recipient (registered person).

✅ This is known as Reverse Charge for Unregistered Supplies.

🧾 Example of the Situation:

Mr. Raj (a registered dealer) buys furniture worth ₹50,000 from a local unregistered carpenter.
Under Section 9(4), Raj must:

Pay GST on ₹50,000 under RCM
File it in GSTR-3B
Issue a self-invoice
Can claim ITC (if eligible)

🛑 Important Update – Post Amendment:

🔴 This provision is now restricted to only specified classes of registered persons.
After Notification No. 07/2019–Central Tax (Rate) dated 29th March 2019, Section 9(4) is not applicable to all registered persons.

✅ Currently Applicable Only To:

👉 Promoters / Builders in Real Estate Sector

They are liable to pay GST under reverse charge when they procure goods or services from an unregistered person, such as:

Cement
Bricks
Labour services
Painting, plumbing etc.

🏗️ Example in Real Estate Sector:

ABC Constructions (a builder) buys cement worth ₹2,00,000 from an unregistered dealer.

They must pay GST under RCM (e.g., 28% on cement = ₹56,000)
Issue a self-invoice
Cannot claim ITC for cement (as per Notification 03/2019 – CT Rate)

📌 RCM Not Applicable When:

The recipient is not a notified class (e.g., normal traders, service providers)
Supplies are exempt
Aggregate value of supplies from unregistered persons is below ₹5,000/day (Note: This limit was withdrawn later)

✅ Compliance Checklist for RCM from Unregistered Suppliers:

Task	Mandatory?
Issue of self-invoice	✅ Yes
Issue of payment voucher	✅ Yes
Payment of GST in cash	✅ Yes
Claim ITC (if eligible)	✅ Yes (subject to rules)
Maintain proper records	✅ Yes

📄 Forms and Return Filing

Form	Purpose
GSTR-3B	Pay GST under RCM
GSTR-1	Not applicable (RCM not outward supply)
Self-Invoice	To document URD purchases

🧾 Summary Table

Scenario	RCM on URD Supply?	Remarks
Registered trader buys from URD	❌ No	Not applicable post amendment
Promoter buys from URD	✅ Yes	Cement, goods > 80% URD – RCM applies
URD to URD	❌ No	RCM not applicable
Import of services (URD)	✅ Yes	Normal IGST RCM

📘 Final Notes

RCM under Section 9(4) is no longer applicable generally, only to specific notified persons like promoters.
For most businesses, purchases from unregistered suppliers are not taxable under RCM unless you are a real estate promoter.

Registration Requirement Related to Reverse Charge Mechanism (RCM) under GST

🔄 Why is Registration Important in RCM?

Under the Reverse Charge Mechanism (RCM), the recipient of goods or services is liable to pay GST instead of the supplier. But for this to apply:

The recipient must be registered under GST (with a valid GSTIN).
If the recipient is unregistered, in most cases RCM does not apply to them.

✅ Key Points on Registration and RCM

Scenario	Registration Required?	RCM Applicable?
Recipient is a registered person	Yes, mandatory	RCM applies if supply is notified under RCM
Recipient is an unregistered person	No	Generally no RCM, except for import of services
Supplier is unregistered	Recipient must be registered to pay RCM under Section 9(4) (only notified persons like real estate promoters)
Supply of goods or services from registered to registered	Recipient must be registered	RCM applies on notified supplies
Supply from unregistered to unregistered	No registration required	RCM does not apply

🔑 Registration Requirement for RCM

Recipient must be GST registered if GST is payable under RCM on notified goods or services.
Only registered persons can be liable to pay RCM, except for import of services where the recipient may not be registered but must pay IGST under RCM.
In case of supply by unregistered persons, the recipient must be registered to pay GST under RCM (Section 9(4)) if applicable.

📝 Practical Implications

If you receive services from an unregistered supplier (except notified sectors like real estate promoter), you do not pay GST under RCM.
If you receive goods or services listed under RCM (e.g., legal services, GTA, sponsorship), and you are registered, you must pay GST under RCM and comply with GST filings.
For import of services, RCM is applicable and IGST must be paid regardless of registration status.

Summary Table

Recipient Status	Supplier Status	RCM Applicability	Registration Requirement
Registered	Registered	Yes, if supply notified under RCM	Recipient must be registered
Registered	Unregistered	Yes, if notified under Section 9(4) (restricted cases)	Recipient must be registered
Unregistered	Registered/Unregistered	No	No GST liability under RCM
Import of Services	Foreign Supplier	Yes, IGST under RCM	Registration generally required for importers

Time of Supply under GST

🔍 What is Time of Supply?

Time of Supply means the point in time when the liability to pay GST arises on the supply of goods or services.

It determines:

When GST must be paid,
When the supplier must issue an invoice,
When the recipient can claim Input Tax Credit (ITC).

⏰ Why is Time of Supply Important?

To fix the tax period for payment.
To avoid disputes regarding due date of tax payment.
To ensure correct rate of tax is applied (if rates change over time).
To claim Input Tax Credit timely by the recipient.

📝 Time of Supply Rules

1. Time of Supply of Goods (Section 12 CGST Act)

Whichever is earlier among the following:

Situation	Time of Supply is the earlier of:
Goods are supplied and invoice is issued	Date of issue of invoice, or date of receipt of payment
Invoice is not issued	Date of receipt of goods, or date of receipt of payment

If goods are sent on approval or trial basis, time of supply is the earlier of:
- Date of removal of goods, or
- Date of receipt of payment
If goods are supplied on approval basis and the recipient rejects, no supply is deemed.

2. Time of Supply of Services (Section 13 CGST Act)

Whichever is earlier of:

Situation	Time of Supply is the earlier of:
Invoice issued within prescribed time (30 days)	Date of issue of invoice, or date of receipt of payment
Invoice not issued within prescribed time	Date on which supplier receives payment

If payment is received before invoice, time of supply is date of payment.
If invoice is issued before payment, time of supply is date of invoice.

3. Time of Supply in Case of Continuous Supply of Goods

If periodic payments are made, time of supply is the earliest of:
- Date of issue of invoice or receipt of payment for each installment,
- Date when goods are made available to recipient,
- Due date for payment as per contract.

4. Time of Supply in Case of Continuous Supply of Services

If periodic payment is made:
- Time of supply is date of receipt of payment or due date for payment, whichever is earlier.

5. Time of Supply in Case of Reverse Charge

Time of supply is the earliest of:
- Date of receipt of goods or services,
- Date on which payment is made,
- Date of issue of invoice by supplier (if any).

⚠️ Special Cases

Goods sent on approval or trial basis: Time of supply is when goods are removed.
When goods or services are supplied free of cost: Time of supply is when they are actually supplied.
In case of change in rate: Time of supply decides which tax rate applies.

🧾 Summary Table

Supply Type	Time of Supply Trigger
Goods	Invoice date or payment date, whichever is earlier
Services	Invoice date or payment date, whichever is earlier
Continuous Goods Supply	Invoice/payment date for installment or goods delivery
Continuous Services Supply	Payment date or due date, whichever is earlier
Reverse Charge	Receipt of goods/services, payment, or invoice date

Need for Time of Supply in GST

The Time of Supply concept is critical in GST for several important reasons:

1. Determining the Tax Liability Date

Time of Supply fixes when the GST becomes payable by the supplier or recipient.
It ensures the tax is paid in the correct tax period, avoiding confusion or disputes over delayed payments.

2. Rate of Tax Applicability

GST rates may change over time.
Time of Supply decides which rate of tax is applicable — the rate prevailing at the time of supply.
This prevents manipulation by delaying invoicing or payment.

3. Invoice Issuance Compliance

GST law mandates issuing an invoice within a specified time.
Time of Supply helps track when an invoice must be issued to comply with GST regulations.

4. Input Tax Credit (ITC) Eligibility

The recipient can claim ITC only after the time of supply.
It prevents premature ITC claims and ensures proper matching of invoices and payments.

5. Avoidance of Litigation and Disputes

Clearly defining Time of Supply reduces tax disputes between taxpayers and authorities.
It provides certainty on tax liability and filing timelines.

6. Helps in Proper Accounting and Compliance

Businesses can plan their cash flows and tax payments better.
It aligns tax payment with accounting records.

7. Critical for Reverse Charge Mechanism (RCM)

In RCM cases, the recipient needs to know the time when GST liability arises to comply timely.

In short:

Need for Time of Supply	Purpose/Benefit
Fixing liability date	Timely tax payment
Determining applicable tax rate	Correct GST rate application
Ensuring invoice compliance	Avoid penalties and legal issues
Enabling proper ITC claim	Prevent wrong or early credit claims
Reducing disputes	Certainty in tax obligations
Facilitating cash flow management	Better business financial planning

Statutory Provisions Related to Time of Supply under GST

The Time of Supply is governed by specific sections and rules in the CGST Act, 2017, and corresponding rules under IGST and SGST Acts.

🔍 Key Statutory Provisions:

Provision	Description
Section 12 of CGST Act, 2017	Time of Supply of Goods
Section 13 of CGST Act, 2017	Time of Supply of Services
Section 14 of CGST Act, 2017	Time of Supply in case of Continuous Supply of Goods or Services
Section 31 of CGST Act, 2017	Tax Invoice issuance (linked with time of supply)
Section 9 of CGST Act, 2017	Levy and Collection of GST (tax liability arises from time of supply)
CGST Rules, 2017 (Rules 27 to 31)	Detailed procedural rules for determining time of supply

📋 Detailed Overview:

1. Section 12: Time of Supply of Goods

Time of supply is the earlier of the following:
- Date of issue of invoice or last date for issue of invoice
- Date of receipt of goods by the recipient
- Date of payment, if payment is received before invoice or goods received

2. Section 13: Time of Supply of Services

Time of supply is the earlier of:
- Date of issue of invoice or receipt of payment
- If invoice is not issued within prescribed time (30 days), then time of supply is date of payment

3. Section 14: Continuous Supply

Provides special rules for continuous supply of goods or services with periodic payment.

4. Section 31: Tax Invoice

Invoice must be issued within the time limit prescribed, or before supply.

5. CGST Rules 2017 (Rules 27 to 31)

Rule 27 to 31 lay down detailed rules for various scenarios of time of supply, such as:
- Supply involving advance payment
- Supplies made without invoice
- Continuous supply
- Supplies under reverse charge

📌 References for Further Reading

CGST Act, 2017: Sections 12, 13, 14, 31
CGST Rules, 2017: Rules 27 to 31
Notifications issued by Central Board of Indirect Taxes and Customs (CBIC) related to time of supply.

Time of Supply of Goods under Forward Charge in GST

Forward Charge means the supplier of goods is liable to pay GST.

⏰ Time of Supply of Goods under Forward Charge (Section 12 of CGST Act)

The time of supply of goods shall be the earlier of the following dates:

Situation	Time of Supply is the earlier of:
When invoice is issued within prescribed time	Date of issue of invoice, or
	Date of receipt of payment
When invoice is not issued within prescribed time	Date of receipt of goods, or
	Date of receipt of payment

Note: The prescribed time for issuing an invoice for goods is 30 days from the date of supply.

🔄 Summary Table

Scenario	Time of Supply Trigger
Invoice issued within 30 days	Earlier of invoice date or payment date
Invoice not issued within 30 days	Earlier of receipt of goods or payment date

📚 Examples

Example 1: Invoice issued within prescribed time

Goods dispatched: 10th June
Invoice issued: 15th June
Payment received: 20th June

Time of Supply = Earlier of invoice date (15th June) or payment date (20th June) = 15th June

Example 2: Invoice not issued within prescribed time

Goods dispatched: 1st June
Invoice not issued till: 5th July (beyond 30 days)
Payment received: 25th June
Goods received by buyer: 10th June

Time of Supply = Earlier of goods receipt (10th June) or payment (25th June) = 10th June

Example 3: Payment received before invoice

Goods dispatched: 5th May
Payment received: 1st May
Invoice issued: 10th May

Time of Supply = Earlier of invoice date (10th May) or payment date (1st May) = 1st May

⚠️ Important Points

If advance payment is received before supply, time of supply is the date of receipt of advance.
If goods are sent on approval/trial basis, time of supply is date of removal of goods.
Correct determination helps in applying correct GST rate and filing timely returns.
Examples of Goods under Forward Charge (Supplier Pays GST)

Example Item	Description	Explanation
Electronics	Mobile phones, laptops, TVs	Supplier charges and pays GST on sale
Clothing and Apparel	Shirts, jeans, jackets	Supplier invoices GST and deposits tax
Furniture	Chairs, tables, sofas	GST charged by manufacturer or dealer
Automobiles	Cars, two-wheelers, commercial vehicles	Dealer/supplier pays GST at point of sale
Groceries and Packaged Food	Packaged cereals, beverages, snacks	Supplier charges GST and remits to government
Industrial Machinery	Manufacturing equipment	Supplier liable to pay GST under forward charge
Building Materials	Cement, bricks, steel rods	Supplier collects and pays GST

💡 Key Point:
Under Forward Charge, the supplier of goods issues a tax invoice charging GST, collects the tax from the buyer, and pays it to the government.

Time of Supply of Services under Forward Charge in GST

Forward Charge means the service provider (supplier) is liable to pay GST.

⏰ Time of Supply of Services (Section 13 of CGST Act)

The time of supply of services shall be the earlier of the following dates:

Situation	Time of Supply is the earlier of:
Invoice issued within prescribed time (30 days)	Date of issue of invoice, or
	Date of receipt of payment
Invoice not issued within prescribed time	Date of receipt of payment

Note:

Invoice must be issued within 30 days from the date of supply of services.
If invoice is not issued within 30 days, time of supply is the date of payment receipt.

🔄 Summary Table

Scenario	Time of Supply Trigger
Invoice issued within 30 days	Earlier of invoice date or payment date
Invoice not issued within 30 days	Date of receipt of payment

📚 Examples

Example 1: Invoice issued within prescribed time

Service provided: 1st June
Invoice issued: 10th June
Payment received: 20th June

Time of Supply = Earlier of invoice date (10th June) or payment date (20th June) = 10th June

Example 2: Invoice not issued within prescribed time

Service provided: 1st June
Invoice not issued till: 5th July (beyond 30 days)
Payment received: 25th June

Time of Supply = Date of receipt of payment = 25th June

Example 3: Payment received before invoice

Service provided: 15th May
Payment received: 10th May
Invoice issued: 20th May

Time of Supply = Earlier of invoice date (20th May) or payment date (10th May) = 10th May

⚠️ Important Notes

If advance payment is received for service, time of supply is date of receipt of advance.
Correct time of supply is important for applying correct GST rate and timely tax payment.
If invoice is delayed beyond 30 days, GST liability arises on payment date.

Meaning of Reverse Charge under GST

Reverse Charge Mechanism (RCM) means that the recipient of goods or services is liable to pay the GST instead of the supplier.

🔍 What is Reverse Charge?

Normally, the supplier of goods or services collects GST from the buyer and pays it to the government.
Under Reverse Charge, this responsibility shifts from the supplier to the recipient.
The recipient must pay the GST directly to the government and also avail Input Tax Credit (ITC), if eligible.

Why Reverse Charge?

To tax goods/services supplied by unregistered persons (who can’t charge GST).
To regulate specific categories of goods/services as notified by the government.
To ensure tax compliance in certain sectors or transactions.

Key Points:

Aspect	Details
Liability to pay GST	On recipient under reverse charge
Supplier’s role	No GST charged or collected from recipient
Input Tax Credit (ITC)	Recipient can claim ITC on reverse charge GST
Applicability	As notified by government via notifications

Example:

A registered business buys legal services from an advocate (who is unregistered).
Under reverse charge, the business (recipient) pays GST directly, not the advocate.

Time of Supply of Goods under Reverse Charge in GST

Under Reverse Charge Mechanism (RCM), the recipient is liable to pay GST. The Time of Supply rules help determine when the recipient must discharge this liability.

⏰ Time of Supply of Goods in Reverse Charge (Section 12 of CGST Act, read with Rule 31 of CGST Rules)

The time of supply shall be the earlier of the following dates:

Situation	Time of Supply (earlier of)
Invoice is issued by the supplier	Date of issue of invoice by the supplier
Invoice not issued within prescribed time	Date of receipt of goods by recipient
	Date on which payment is made by the recipient

📝 Key Points:

The supplier may or may not be registered.
If invoice is issued, time of supply is invoice date.
If no invoice, then time of supply is earlier of receipt of goods or payment.
Time of supply triggers when recipient’s liability to pay GST arises.

📚 Examples

Example 1: Invoice issued within time

Supplier (unregistered) sends goods on 1st July
Invoice issued on 5th July
Goods received on 7th July
Payment made on 10th July

Time of Supply = Invoice date = 5th July

Example 2: No invoice issued within time

Supplier (unregistered) sends goods on 1st July
No invoice issued
Goods received on 7th July
Payment made on 10th July

Time of Supply = Earlier of receipt of goods (7th July) or payment (10th July) = 7th July

Example 3: Payment before receipt of goods

Supplier (unregistered) sends goods on 10th June
Payment made on 5th June
Goods received on 12th June
No invoice issued

Time of Supply = Earlier of payment (5th June) or receipt of goods (12th June) = 5th June

⚠️ Important

Recipient must pay GST within 30 days from time of supply.
Failure to pay on time attracts interest and penalties.
Proper knowledge of time of supply ensures compliance and avoids litigation.

Time of Supply of Services under Reverse Charge in GST

Under Reverse Charge Mechanism (RCM), the recipient of services is liable to pay GST instead of the supplier.

⏰ Time of Supply of Services under Reverse Charge

(As per Section 13(3) of CGST Act and Rule 31(2) of CGST Rules)

The time of supply shall be the earlier of the following dates:

Situation	Time of Supply is the earlier of:
Invoice is issued by the supplier	Date of issue of invoice by the supplier
Invoice not issued within prescribed time	Date of receipt of payment by the recipient
	Date of provision of service (if payment not received)

🔍 Explanation:

The supplier may or may not be registered.
If invoice is issued within the prescribed period, time of supply is invoice date.
If invoice is not issued within prescribed period (usually 30 days from provision of service), time of supply is the earlier of:
- Date of payment received by recipient
- Date when service is deemed to be provided
If no payment received till date of filing return for the month following the quarter, time of supply is due date of filing such return.

📚 Examples

Example 1: Invoice issued within time

Service provided: 1st July
Invoice issued: 5th July
Payment received: 10th July

Time of Supply = Invoice date = 5th July

Example 2: Invoice not issued within time

Service provided: 1st July
Invoice not issued by 31st July (30 days period)
Payment received: 15th July

Time of Supply = Earlier of payment date (15th July) or service date (1st July) = 1st July

Example 3: No payment received till filing return

Service provided: 1st April
Invoice not issued
No payment received till 31st July
Return for April to June filed on 20th July

Time of Supply = Due date of filing return for July (month after quarter) = 20th July

⚠️ Important Points:

Recipient must pay GST within 30 days of time of supply.
If payment is not made within 30 days, interest is payable.
Reverse charge applies only on notified goods/services or when supplier is unregistered.

Time of Supply of Vouchers & Types of Vouchers under GST

1. What are Vouchers in GST?

Vouchers are documents, tokens, or electronic codes that entitle the holder to receive goods or services or both. They are broadly categorized as:

Type of Voucher	Description
Single-purpose Voucher (SPV)	Voucher redeemable for a specific good or service with known GST rate at the time of issue.
Multi-purpose Voucher (MPV)	Voucher redeemable for multiple goods or services or combination with different GST rates or suppliers unknown at issue.

2. Types of Vouchers Explained

🔹 Single-purpose Voucher (SPV)

Covers a specific good or service.
GST rate and supplier are known at issuance.
GST is charged at the time of issue of the voucher.
Example: A movie ticket voucher valid for one specific movie show.

🔹 Multi-purpose Voucher (MPV)

Can be redeemed for multiple goods/services or combinations.
GST rates or suppliers are not known at issuance.
GST is charged at the time of redemption (when goods/services are supplied).
Example: A gift card that can be used at various stores or for various products.

3. Time of Supply of Vouchers (Section 14 of CGST Act)

Voucher Type	Time of Supply Trigger
Single-purpose Voucher	Date of issue of the voucher (taxable event happens here)
Multi-purpose Voucher	Date of redemption of the voucher (when goods/services supplied)

4. Why is Time of Supply Important for Vouchers?

Determines when GST is payable.
Helps businesses account for GST either on issuance or redemption.
Affects input tax credit timing and compliance.

5. Examples

Example 1: Single-purpose Voucher

Gift voucher for a spa service costing ₹5,000 with 18% GST.
Voucher issued on 1st June.
Customer redeems voucher on 10th July.

GST payable: On voucher issue date — 1st June.

Example 2: Multi-purpose Voucher

Gift card usable at various stores with different GST rates.
Voucher issued on 1st June.
Customer redeems goods worth ₹5,000 on 10th July.

GST payable: On redemption date — 10th July.

6. Summary Table

Voucher Type	GST Payable on	Time of Supply (Taxable Event)
Single-purpose Voucher	Issuance of voucher	Date of issue of voucher
Multi-purpose Voucher	Redemption of voucher	Date when goods/services supplied

Residuary Cases in Time of Supply under GST

Residuary cases refer to situations where the time of supply is not specifically covered by the standard rules for goods or services. For such cases, GST law provides a general or “residual” provision to determine the time of supply.

⏰ Time of Supply in Residuary Cases (Section 12(5) and Section 13(4) of CGST Act)

When no other specific time of supply provisions apply,
The time of supply shall be the date on which the recipient shows the receipt of goods or services in their books of account, or
The date on which the recipient actually pays for the goods or services,
Whichever is earlier.

Summary Table for Residuary Cases

Condition	Time of Supply is the earlier of:
Goods or Services received without specific time rules	Date recipient records receipt in books
	Date of payment by recipient

Why Residuary Rules Are Important

To avoid ambiguity where standard rules don’t apply.
Ensures GST is accounted for in a timely manner.
Prevents delay in tax payment or undue advantage.

Example

A service is provided but no invoice is issued and no prescribed time of supply rule exists.
Recipient records service receipt in books on 10th June.
Payment is made on 15th June.

Time of Supply = Earlier of recording date (10th June) or payment date (15th June) = 10th June

⚠️ Notes:

Residuary rules act as a fallback mechanism.
Both supplier and recipient should maintain proper records.
Helps in compliance and avoiding disputes.

Changes in Rate of Tax under GST

When there is a change in the GST rate (increase or decrease) on goods or services during a supply, the GST law provides rules on how to handle such situations for time of supply and tax payment.

Key Points on Changes in Rate of Tax

Aspect	Explanation
Effective Date	Rate change is effective from the date notified by Govt.
Supply straddling change	If supply period crosses rate change date, rules apply
Invoice & Payment	GST charged at the rate applicable as per time of supply
Adjustments	May require supplementary invoices or credit/debit notes

Time of Supply & Tax Rate Change (Section 14 of CGST Act)

If invoice issued after the rate change date:
Tax is calculated at the new GST rate applicable on invoice date.
If invoice issued before rate change but payment after:
GST is charged at the rate prevailing on invoice date (not payment date).
If supply happens before rate change but invoice issued after:
Tax should be charged at the rate applicable on the date of supply (which may be invoice date or payment date as per time of supply rules).

Practical Example

Date	Event	GST Rate	Tax Calculation
1st June	Supply of goods made	12%	Rate before change
15th June	Govt notifies rate change to 18%	18%	New rate effective from this date
10th June	Invoice issued	12%	GST charged @12% as invoice before change
20th June	Payment received	18%	GST charged remains @12% (invoice date)
25th June	Invoice issued for June supply	18%	GST charged @18% (after rate change date)

Important Notes

Businesses must be vigilant about rate change notifications.
Proper accounting to avoid tax shortfall or excess tax.
Timely issuance of invoices and communication with customers helps compliance.
Credit/debit notes may be required if rates are corrected after invoicing.

Provisions for Place of Supply under GST

The Place of Supply is crucial in GST to determine whether a supply is intra-state (CGST + SGST) or inter-state (IGST). This helps decide the type of tax applicable.

🧭 Why Place of Supply Matters?

Identifies jurisdiction where GST is to be paid.
Determines correct tax (CGST/SGST or IGST).
Ensures credit flow to the right state.

👥 Classification of Supply

Type of Supply	Based on	Tax Type
Intra-State Supply	Location of supplier = place of supply	CGST + SGST
Inter-State Supply	Location of supplier ≠ place of supply	IGST

📦 Place of Supply for Goods

A. When Movement of Goods is Involved (Section 10 of IGST Act)

Scenario	Place of Supply
Supply involves movement of goods	Location where movement ends
Goods delivered to recipient on direction of third person	Principal place of third person
No movement of goods	Location where goods are made available
Installed/assembled at site	Place of installation
Goods supplied on board (train, aircraft)	Place where goods are taken on board

🔍 Example for Goods

A Delhi supplier sends goods to a customer in Mumbai.
Movement ends in Mumbai → Place of Supply = Mumbai
Since supplier is in Delhi and supply is in Maharashtra → Inter-State Supply → IGST applicable

🧾 Place of Supply for Services

B. General Rule for B2B Services (Section 12 of IGST Act)

Rule	Place of Supply
B2B (Business to Business)	Location of recipient
B2C (Business to Consumer)	Location of supplier

C. Special Cases for Services (Overriding the general rule)

Service Type	Place of Supply
Immovable property related (rent, construction)	Location of property
Restaurant/catering services	Location where service is performed
Training & performance appraisal	B2B – recipient’s location; B2C – where service performed
Admission to events	Where event is held
Transportation of goods (except mail)	B2B – recipient location; B2C – where goods handed over
Passenger transportation	Where passenger embarks on journey
Banking, financial & insurance	Location of recipient, or branch
Intermediary services	Location of supplier
Online Information & Database Access (OIDAR)	Location of recipient

🔍 Example for Services

A Chennai consultant provides training in Delhi.
If recipient is a company (B2B) in Mumbai → Place of supply = Mumbai
If recipient is an individual (B2C) → Place of supply = Delhi

🌍 Place of Supply in Case of Import & Export

Type of Supply	Place of Supply	GST Type
Import of goods	Location of importer in India	IGST
Export of goods	Location outside India	Zero-rated
Import of services	Location of recipient in India	IGST
Export of services	Recipient located outside India	Zero-rated

✅ Key Takeaways

Place of Supply helps determine which state or centre gets the GST revenue.
Mistakes in identifying place of supply can lead to wrong tax payment and penalties.
Place of supply rules differ for goods and services.
Special rules override general ones in specified situations.

Goods on Board in GST – Explained

In the context of GST (Goods and Services Tax) in India, “Goods on Board” refers to goods that are in the course of being transported — i.e., they are already in transit and have been handed over to the transporter or loaded onto a vehicle for delivery to the buyer.

Let’s break it down in detail:

🔍 Meaning of “Goods on Board”

“Goods on board” typically arises in cases where:

The ownership/title of goods is transferred when they are handed over to the transporter.
The seller’s responsibility ends once goods are loaded on the vehicle or handed to courier.

This term is especially relevant under “Free On Board (FOB)” or “Ex-works” contract terms used in trade.

📜 GST Implications of Goods on Board

1. ✅ Time of Supply (Goods)

Under GST, time of supply is crucial to determine when tax becomes payable.

If ownership transfers when goods are handed over to the transporter, the invoice date or date of handing over becomes the time of supply.
- Even if delivery happens later, GST liability arises once goods are “on board” (i.e., when risk transfers to buyer).

2. 🧾 Issuance of Invoice

As per Section 31(1) of CGST Act, a tax invoice must be issued before or at the time of removal of goods for supply.

So, if goods are being loaded (on board), invoice must be issued before or at that time.
- This includes movement from supplier to recipient, whether by transporter, courier, or delivery van.

3. 🚛 E-Way Bill

An e-Way bill is required before the movement of goods, if value exceeds ₹50,000.
- Once goods are “on board”, the transporter’s details, vehicle number, etc., should be updated in the e-Way bill system.

📦 Example:

Scenario:
A trader in Delhi sells goods to a buyer in Mumbai. As per the agreement, ownership passes when goods are handed to the transporter in Delhi.

Date of goods being handed over (on board): 7th June
Delivery at Mumbai: 10th June

✅ GST Time of Supply: 7th June
✅ Invoice Date: On or before 7th June
✅ Place of Supply: Maharashtra
✅ Type of Supply: Inter-state → IGST applicable

📝 Summary Table

Aspect	When Goods Are “On Board”
Time of Supply	Date of handing over to transporter
Invoice Issue	Before or at removal of goods
GST Liability	Arises at removal, not delivery
E-Way Bill	Must be generated before movement
Place of Supply	Depends on location of buyer

Place of Business

🔍 Definition (as per GST Law)

As per Section 2(85) of the CGST Act, 2017,

“Place of business” includes:

A place from where business is ordinarily carried out;
A place where books of account are maintained;
A place where business is conducted through an agent.

✅ Key Components of Place of Business

Type	Explanation
🏬 Principal Place of Business	The main location declared in the GST registration where the taxpayer conducts most of their business activities.
🏢 Additional Place(s) of Business	Any other places where the registered person carries out business — like branches, warehouses, or depots.
🧾 Books & Records Location	Even if no transactions occur, if books are kept there, it qualifies as a place of business.
👥 Agent’s Place	If a business operates through a selling agent or consignment agent, their location is also considered a place of business.

📌 Importance of Declaring Place of Business in GST

✅ GST Registration:
1. Every registered taxpayer must declare their principal and additional places of business in the GST registration application (FORM GST REG-01).
📦 Inspection & Verification:
1. GST officers can inspect any declared place to verify business activities.
🧾 E-Way Bill Generation:
1. Dispatch address and delivery address in an e-Way Bill must match the declared place(s) of business.
🧮 Return Filing:
1. Place of business affects reporting of supplies, input tax credit, and branch-wise turnover.

📘 Example:

ABC Pvt. Ltd., a registered taxpayer in Gujarat:

📍 Principal Place: Ahmedabad office
🏭 Additional Place: Warehouse in Vadodara
📚 Books kept: Head office in Ahmedabad
🧑‍💼 Sells via agent in Rajkot

✅ All these are places of business under GST.

❗ Penalty for Non-Declaration

If a business operates from an undeclared location, it may be treated as unregistered for that location and attract:

Penalties
Seizure of goods
Cancellation of GST registration

📝 Summary

Criteria	Included in “Place of Business”?
Physical office	✅ Yes
Warehouse	✅ Yes
Agent’s premises	✅ Yes
Virtual office with proper agreement	✅ Yes (with documents)
Residence (if used for business)	✅ Yes (if declared)

Illustration: Understanding Place of Business in GST

🏢 Business Entity:

XYZ Traders Pvt. Ltd. – A company dealing in electronic goods.

✅ Scenario:

XYZ Traders has the following setup:

🏬 Head Office in Bengaluru (Karnataka)
1. Main administrative office.
1. Sales and purchase activities are conducted here.
1. All books of accounts are maintained here.
1. Declared as Principal Place of Business in GST registration.
🏭 Warehouse in Mysuru (Karnataka)
1. Goods are stored and dispatched to customers from here.
1. No sales counter, only storage.
1. Declared as Additional Place of Business.
🧑‍💼 Sales Agent Operating from Hubli (Karnataka)
1. Agent books orders on behalf of XYZ Traders.
1. Collects payments from customers.
1. Declared as Place of Business since business is carried out through an agent.
🏠 Owner’s Home Office (also in Bengaluru)
1. Occasionally used for reviewing reports and meetings.
1. Not declared in GST registration.
1. Not considered an official place of business unless declared and documented.

📌 GST Compliance Based on This Setup:

Location	Activity	Place of Business?	Required in GST Registration?
Bengaluru Office	Main operations, books kept	✅ Yes	✅ Must be declared as principal place
Mysuru Warehouse	Stock and dispatch	✅ Yes	✅ Declare as additional place
Hubli Agent Office	Sales via agent	✅ Yes	✅ Declare as place of business
Home Office	Occasional work	❌ No (unless declared)	❌ Not required unless regularly used for business

🚫 Violation Example

If XYZ Traders stores goods in an undeclared godown in Mangalore and a GST officer inspects it:

The officer may seize goods and impose a penalty.
This is considered supplying goods from an unregistered place, which violates GST norms.

✅ Conclusion:

A Place of Business isn’t just where you sell — it includes offices, godowns, agents’ locations, and any place where business or record-keeping is conducted.
👉 Make sure all such places are declared during GST registration and updated promptly to stay compliant.

Goods Imported and Exported under GST

Under GST (Goods and Services Tax) in India, import and export of goods are subject to specific rules and tax treatments. These are essential for businesses involved in international trade.

🔄 1. Meaning of Import and Export of Goods

Term	Definition (As per GST law)
📥 Import of Goods	Bringing goods into India from a place outside India.
📤 Export of Goods	Taking goods out of India to a place outside India.

⚖️ 2. Statutory Provisions

Defined under Section 2(10) and 2(5) of the IGST Act, 2017
Governed by both GST and Customs laws.

📥 IMPORT OF GOODS – Detailed

🧾 Tax Treatment:

Imports are treated as Inter-State Supplies.
IGST is levied under Customs Act at the time of clearance.
No CGST + SGST, only IGST under Section 5 of IGST Act.

Tax	When Charged	Authority
Basic Customs Duty (BCD)	On value of goods	Customs
IGST	On value + BCD	Customs
Compensation Cess	If applicable (luxury/sin goods)	Customs

📘 Example:

Importing laptops worth ₹1,00,000 from the USA.
BCD = 10%, IGST = 18%

Component	Amount (₹)
Value of Goods	1,00,000
BCD (10%)	10,000
Subtotal	1,10,000
IGST (18%)	19,800
Total Cost	1,29,800

🧾 You can claim Input Tax Credit (ITC) of ₹19,800 IGST.

📤 EXPORT OF GOODS – Detailed

✅ Tax Treatment:

Exports are treated as Zero-Rated Supplies under Section 16 of the IGST Act.

✅ Exporters have two options:

Option	Description	Refund Available
1. Export with IGST	Charge IGST on invoice	Refund of IGST paid
2. Export under LUT/Bond	No IGST charged	Refund of Input Tax Credit (ITC)

🔖 LUT = Letter of Undertaking (filed online to export without IGST)

📘 Example:

Exporting garments worth ₹5,00,000 to UK.
Inputs (fabric, packing, etc.) had GST of ₹30,000.
✅ With IGST
- IGST charged: ₹90,000 (18%)
- Later, exporter claims refund of ₹90,000.
✅ Under LUT
- No tax charged.
- Exporter claims refund of ₹30,000 as unutilized ITC.

✈️ Other Key Points

Aspect	Import	Export
GST Type	IGST under Customs	Zero-rated (with/without IGST)
ITC Available?	✅ Yes (on IGST paid)	✅ Yes (on inputs used)
E-Way Bill	❌ Not needed for imports	✅ Required for movement within India
Invoice Currency	INR + Foreign currency	Foreign currency
Customs Clearance	✅ Required	✅ Required

🚫 Penalty for Non-Compliance

Import without customs declaration → Goods can be seized, and heavy penalties imposed.
Export without LUT or IGST → Refund may be denied.

✅ Summary

Action	Treated As	GST Rate	Refund Option
Import	Inter-State Supply	IGST (levied by Customs)	ITC available
Export	Zero-Rated Supply	0% (under LUT) / IGST	Refund of ITC or IGST paid

Supply of Services under GST – Explained in Detail

🔍 What is “Supply of Services”?

Under GST, “supply” includes all forms of supply of goods or services made for a consideration in the course or furtherance of business.

👉 “Supply of services” refers to any activity that does not involve goods, but provides value through intangible means such as work, labor, access, or expertise.

📘 Definition (Section 2(102) of CGST Act)

“Services” means anything other than goods, money, and securities.
It includes activities relating to the use of money or its conversion, for which a separate consideration is charged.

✅ It is a residual definition — anything that isn’t goods is treated as services.

🛠️ Examples of Supply of Services

Type of Service	Example
📱 Digital Services	Web designing, app development
🧾 Professional Services	Legal, accounting, consultancy
🧹 Facility Services	Cleaning, pest control
📚 Educational	Online training, tutoring
💼 Job Work	Repairing, testing, assembling
🏢 Renting	Renting of commercial property
🚖 Transportation	Passenger transport, logistics
💰 Financial	Loan processing, brokerage

⚖️ Key Provisions in GST Law

✅ 1. Chargeability

Supply of services is taxable under GST if:
- There is a supply,
- By a taxable person,
- Made in the course or furtherance of business,
- For consideration.

✅ 2. Place of Supply

Important for deciding whether CGST + SGST or IGST is applicable:

Intra-State: Location of supplier = Place of supply → CGST + SGST
Inter-State: Location differs → IGST applicable

✅ 3. Time of Supply (Section 13)

Scenario	Time of Supply
Invoice issued	Date of invoice
No invoice	Date of service completion
Advance received	Date of advance

📘 Example 1: Intra-State Service

ABC Consultants (Delhi) provides management consulting to a client in Delhi.

Invoice: ₹50,000
GST Rate: 18%
Tax: ₹9,000 (CGST ₹4,500 + SGST ₹4,500)
Total Invoice: ₹59,000

📘 Example 2: Inter-State Service

ABC Consultants (Delhi) provides service to a client in Mumbai.

Invoice: ₹50,000
GST Rate: 18%
IGST: ₹9,000
Total Invoice: ₹59,000

🔄 Services Treated as Supply Even Without Consideration

(As per Schedule I of CGST Act)

Services between related persons or distinct persons (branches across states).
Services by employer to employee beyond ₹50,000.
Import of services from related person for business use.

📝 Summary Table

Criteria	Supply of Services
Tangibility	Intangible
Taxable?	✅ Yes (if all supply conditions met)
Place of Supply	Determines IGST vs CGST+SGST
Time of Supply	Based on invoice/date of payment
Input Tax Credit	✅ Available (if used for business)

Registered and Unregistered Person under GST

In the GST (Goods and Services Tax) framework, businesses and individuals are classified as registered or unregistered based on whether they have obtained GST registration. This classification directly impacts how they can charge tax, claim input credit, and file returns.

✅ 1. Who is a Registered Person?

As per Section 2(94) of the CGST Act, 2017,

A Registered Person means a person who is registered under Section 25 of the Act but does not include a person having a Unique Identity Number (UIN).

📌 Characteristics of a Registered Person:

Has a valid GSTIN (Goods and Services Tax Identification Number)
Can collect GST on outward supplies
Can claim Input Tax Credit (ITC)
Required to file regular GST returns
Must issue tax invoices
Subject to audit, assessment, and compliance rules

🧾 Example:

ABC Pvt. Ltd., with turnover of ₹60 lakhs, registers under GST.

It gets a GSTIN, charges GST on sales, and files GSTR-1, GSTR-3B monthly.

❌ 2. Who is an Unregistered Person?

An Unregistered Person is someone who is not registered under GST, either because they are not liable to be registered or they failed to register despite being liable.

📌 Types of Unregistered Persons:

👤 Small suppliers below the threshold limit (₹20 lakh or ₹40 lakh for goods depending on state)
🌾 Agriculturists (for produce out of cultivation)
🛍️ Individuals doing occasional business or casual taxable persons not registered
📦 Businesses that should be registered but haven’t applied (liable to penalty)

⚠️ Limitations:

Cannot charge GST on sales
Cannot claim ITC
Cannot issue tax invoices, only bill of supply
Buyers from them may pay tax under Reverse Charge Mechanism (RCM)

🔄 Comparison Table: Registered vs Unregistered Person

Basis	Registered Person	Unregistered Person
✅ GSTIN	Has a valid GSTIN	No GSTIN
🧾 Invoice Type	Tax Invoice	Bill of Supply
💰 Can Collect GST	Yes	No
💳 Can Claim ITC	Yes	No
📈 Threshold Turnover	Above limit or opted voluntarily	Below threshold or non-compliant
📄 GST Returns	Must file returns	No returns
⚠️ Penalty	Subject to audit & penalty if non-compliant	May face penalty if liable but not registered

📘 Examples for Better Understanding:

✅ Registered Person:

Mr. A runs a mobile shop in Delhi with turnover of ₹55 lakhs annually.

Registered under GST
Charges GST on invoices
Files GSTR-1 and GSTR-3B
Can claim ITC on purchases

❌ Unregistered Person:

Ms. B is a freelance graphic designer earning ₹12 lakhs/year.

Below ₹20 lakh threshold
Not registered
Cannot charge GST
Cannot claim ITC on purchases

🔐 Registration Requirement – When it’s Mandatory

Type of Supply	Threshold Limit for Registration
Goods (Normal States)	₹40 lakhs
Services	₹20 lakhs
Special Category States	₹10 lakhs

Also mandatory for:

Inter-State supply
E-commerce sellers
Casual taxable persons
Input service distributors

📝 Conclusion:

Person Type	Should You Register?	Can You Claim ITC?	Can You Charge GST?
Registered	✅ Yes	✅ Yes	✅ Yes
Unregistered	Optional (unless mandatory)	❌ No	❌ No

Restaurant and Catering Services

In the GST regime, Restaurant Services and Catering Services fall under the category of Supply of Services. These services have distinct GST rates and compliance rules.

🍴 1. Definition under GST

✅ Restaurant Services

Supply of prepared food and drinks (whether or not alcoholic) for consumption on or away from the premises, provided by restaurants, hotels, cafes, or similar establishments.

✅ Catering Services

Supply of food and beverages at a premises other than the supplier’s own, usually for events (weddings, parties, etc.), including service and setup.

⚖️ 2. Statutory Provisions

Defined under:

Heading 9963 of GST Rate Notification
Treated as Supply of Services (even though food is involved)
Time and Place of Supply rules of services apply

💰 3. GST Rate on Restaurant and Catering Services

Type of Service	GST Rate	ITC Available?
🍽️ Regular Restaurant (Non-AC or AC, not in hotel)	5%	❌ No ITC
🏨 Restaurant in Hotel (Room tariff > ₹7,500)	18%	✅ Yes
🚚 Cloud Kitchen or Takeaway	5%	❌ No ITC
🧑‍🍳 Catering Services (including outdoor)	18%	✅ Yes

📘 4. Examples

🍛 Restaurant Example:

A restaurant in Delhi provides dine-in services and takeaway.

Bill value: ₹2,000
GST @ 5% = ₹100
Total: ₹2,100
❌ Cannot claim ITC on inputs like furniture, food items, etc.

🎉 Catering Example:

A catering company provides food at a wedding in Mumbai.

Bill value: ₹1,00,000
GST @ 18% = ₹18,000
Total = ₹1,18,000
✅ Can claim ITC on inputs like raw food, serving utensils, etc.

🧾 5. Invoicing Rules

Criteria	Restaurant	Catering
Invoice Type	Tax Invoice	Tax Invoice
GST Component	5% or 18%	18%
HSN Code	9963	9963
Place of Supply	Location of restaurant	Location of event

❓ 6. Difference Between Restaurant & Catering Services

Basis	Restaurant Service	Catering Service
Location	Supplier’s premises (hotel, café)	Customer’s location (event site)
GST Rate	Mostly 5% without ITC	18% with ITC
Setup & Service	Minimal	Full-service at client site
Input Tax Credit	❌ Not allowed (at 5%)	✅ Allowed (at 18%)

⚠️ 7. Important Notes

Alcohol sale is not under GST — taxed by state excise separately.
Delivery platforms like Zomato/Swiggy collect GST on behalf of restaurants (w.e.f. Jan 2022).
Restaurants cannot claim ITC unless they opt for 18% rate (only hotels with room tariff > ₹7500).

✅ 8. Summary Chart

Service Type	GST Rate	ITC	Supply Type
Regular Restaurant	5%	❌	Service
Restaurant in Luxury Hotel	18%	✅	Service
Catering (Outdoor)	18%	✅	Service
Takeaway / Cloud Kitchen	5%	❌	Service

Organising an Event under GST

Organising events — whether cultural, business, educational, or entertainment — is classified under “supply of services” in the GST framework. This includes planning, managing, or hosting events, whether physical or virtual.

📘 1. Definition under GST

Event Organisation Services refer to services provided by:

Event managers/planners
Stage decorators
Wedding coordinators
Seminar or conference organisers

Covered under Service Accounting Code (SAC) 9985 – “Event organisation and management services.”

💡 2. Examples of Events Covered

Type of Event	Examples
🎉 Social	Weddings, birthdays, anniversaries
🎓 Educational	Workshops, seminars, training
🎤 Entertainment	Music shows, stand-up comedy, exhibitions
📈 Business	Product launches, corporate meetings
🛍️ Commercial	Trade fairs, expos, promotional events

⚖️ 3. Taxability of Event Organisation

✅ Treated as:

Supply of Services under GST law

✅ GST Rate:

18% (Standard rate for event management services)

SAC Code	Description	GST Rate
998596	Events, exhibitions, conventions	18%
998597	Event management and support services	18%

📦 4. Input Tax Credit (ITC)

✅ ITC is available to the event organizer if used for business purposes.

❌ However, ITC is not allowed for:

Personal use events (like weddings by individuals)
Events where composition scheme is opted

🌍 5. Place of Supply Rules for Event Services

Scenario	Place of Supply
B2B – Registered recipient	Location of recipient
B2C – Unregistered recipient	Location where event is actually held
Outside India (export)	Location of recipient (zero-rated supply)

🧾 6. Invoicing and Compliance

Requirement	Details
Invoice Type	Tax Invoice (with GST @18%)
HSN/SAC Code	998596 / 998597
Return Filing	GSTR-1, GSTR-3B
E-invoicing	Applicable if turnover > ₹5 Cr

📘 7. Example of Event Organising

🎤 Example 1 – B2B Conference

ABC Events Pvt. Ltd. (Delhi) organises a corporate training event for XYZ Ltd. (Mumbai).

Invoice Value: ₹2,00,000
GST @18% = ₹36,000
Total = ₹2,36,000
ITC: ✅ XYZ Ltd. can claim ₹36,000 as ITC

🎉 Example 2 – Personal Wedding

Mr. Raj hires a planner for his wedding in Jaipur.

Value: ₹5,00,000
GST @18% = ₹90,000
Total = ₹5,90,000
ITC: ❌ Mr. Raj (individual) cannot claim ITC

⚠️ 8. Special Cases

Type	GST Applicability
Foreign Event Organised in India	GST applicable
Indian Event Organised Outside India	May qualify as Export of Service (Zero-rated)
Sponsorship of Event	Taxable at 18%
Renting hall/stage for event	Treated as separate supply – also taxable

✅ 9. Summary Table

Criteria	Organising an Event
GST Type	Supply of Services
SAC Code	998596 / 998597
Rate	18%
ITC	✅ Yes for business; ❌ No for personal use
Place of Supply	Recipient’s location (B2B) or event location (B2C)

Transportation Services under GST

Transportation services under GST involve the movement of goods or passengers by various means like road, rail, air, or sea. These services are treated as supply of services under the GST regime and are subject to specific rates, exemptions, and compliance rules.

🚛 1. Types of Transportation Services

Type	Examples
Goods Transport	By truck, rail, air cargo, courier
Passenger Transport	By bus, taxi, train, airplane
Multimodal Transport	Use of more than one mode (road + rail)
Courier Services	Express delivery of documents/parcels

📦 2. Goods Transport Agency (GTA)

✅ Definition (as per GST Notification):

A GTA means any person who provides service in relation to transportation of goods by road and issues a consignment note.

📝 Consignment Note:

A document that proves the responsibility of goods transfer lies with the transporter. If no consignment note is issued, it is not GTA service — it may be exempt.

⚖️ 3. Taxability and GST Rates

A. Goods Transportation

Service Type	GST Rate	ITC Availability
GTA (Forward charge)	12%	✅ ITC allowed
GTA (Reverse charge)	5%	❌ ITC not allowed to GTA
Transport by Indian Railways	5%	❌ No ITC
Transport by air/ocean (export/import)	18%	✅ ITC allowed

B. Passenger Transportation

Mode	GST Rate	ITC
Air (Economy class)	5%	❌ No ITC
Air (Business class)	12%	✅ ITC allowed
AC Bus	5%	❌ No ITC
Non-AC Bus, Metro, Auto	Exempt	–
Taxi Services (e.g., Ola/Uber)	5% or 12%	Depends on operator’s choice

💡 4. Reverse Charge in Goods Transport

If goods are transported by GTA and the service recipient is:

A registered business
A factory, company, cooperative society, partnership firm, or GST-registered person

Then GST is payable under Reverse Charge Mechanism (RCM) at 5%.

🌍 5. Place of Supply Rules

Type of Service	Place of Supply
Goods Transport – B2B	Location of recipient
Goods Transport – B2C	Location at which goods are handed over
Passenger Transport	Place where the passenger embarks for journey

📘 6. Examples

📦 Example 1: GTA under RCM

A GTA transports goods for ABC Pvt. Ltd. (a registered business) from Delhi to Mumbai.

Freight: ₹10,000
GST @5% = ₹500
ABC Pvt. Ltd. pays tax under RCM, GTA does not charge GST.

✈️ Example 2: Passenger by Air

A customer books a business-class flight from Mumbai to Delhi.

Fare: ₹8,000
GST @12% = ₹960
Airline charges GST and can claim ITC on input services.

🚕 Example 3: Cab Service

Mr. Rakesh books a cab from Ola (aggregator).

Fare: ₹300
GST @5% = ₹15
Ola pays GST (not the individual driver) under Section 9(5)

📄 7. Exemptions in Transportation

Exempt Service	Condition
Transport of agricultural produce, milk, salt, food grains by GTA	✅ Exempt
Non-AC bus service	✅ Exempt
Metro rail	✅ Exempt
Goods transport by individual (no consignment note)	✅ Exempt

✅ 8. Summary Table

Service Type	GST Rate	ITC	Place of Supply
GTA (RCM)	5%	❌ GTA can’t claim ITC	Recipient’s location
GTA (FCM)	12%	✅ ITC allowed	Recipient’s location
Railways (Goods)	5%	❌	Destination of goods
Air Cargo (International)	18%	✅	Location of recipient
Passenger by AC Bus	5%	❌	Boarding point

Board of Conveyance under GST

Board of Conveyance is a term used in GST law related to the transportation of goods and passengers. It refers to the vehicle or mode of transport used to carry goods or passengers from one place to another.

📘 1. Meaning of Board of Conveyance

The Board of Conveyance refers to the means of transport—such as a truck, ship, aircraft, train, or any other vehicle—used for transporting goods or passengers.
It is significant in determining the place of supply, time of supply, and liability to pay tax.

⚖️ 2. Role of Board of Conveyance in GST

In goods transportation services, the place of supply can depend on the location of the goods at the time they are loaded onto the board of conveyance.
For example, in inter-state movement, the tax implications depend on whether the goods have been placed on the conveyance that will take them to the destination.

📍 3. Place of Supply Rules related to Board of Conveyance

According to the GST Place of Supply rules for transportation of goods:

If the goods are moved through a conveyance, the place of supply is the location where the goods are handed over for transportation (i.e., where they are loaded onto the board of conveyance).
In other words, the place where the goods are put on the transport vehicle is critical for deciding which state’s GST applies.

📝 4. Example

Suppose goods are transported by truck from Delhi to Mumbai.

The goods are loaded onto the truck at Delhi (the board of conveyance).
The place of supply for GST purposes is Delhi because that is the place where goods were handed over onto the conveyance.
GST would be applicable as an interstate supply, attracting IGST.

✅ 5. Summary

Term	Explanation
Board of Conveyance	The vehicle or mode of transport used to carry goods or passengers
Importance	Determines place of supply and GST applicability
Place of Supply	Location where goods are loaded on the board of conveyance

Services of Import and Export under GST

Under GST, import and export of services have special treatment because they involve cross-border supply and are critical for foreign trade.

1. Definition

Import of Services:
When a person in India receives services from a supplier located outside India, it is called import of services.
Export of Services:
When a supplier in India provides services to a recipient located outside India, it is called export of services.

2. Legal Provisions

Covered under Section 2(6) of the IGST Act, 2017.
Export of services is considered a zero-rated supply under GST.
Import of services is subject to GST under the reverse charge mechanism (RCM).

3. Conditions for Export of Services

To qualify as export, all these conditions must be met:

Condition	Explanation
Supplier Location	Supplier of service must be located in India
Recipient Location	Recipient must be located outside India
Supply Place	Place of supply is outside India
Payment	Payment must be received in convertible foreign exchange or in Indian rupees wherever permitted by RBI
Recipient	Recipient is registered under GST or is a foreign entity

4. GST Treatment

Type	GST Rate	ITC Availability	Comments
Export of Services	0% (Zero-rated)	ITC can be claimed and refund can be taken	Treated as zero-rated supply
Import of Services	Applicable GST under RCM (IGST)	ITC allowed to recipient	Recipient must pay GST via reverse charge

5. Reverse Charge Mechanism (RCM) on Import of Services

The Indian recipient of imported services must pay IGST under reverse charge.
No invoice from the foreign supplier is necessary for paying GST under RCM.
Example: A company in India receives consultancy services from a US-based firm. The Indian company pays GST under reverse charge.

6. Examples

🌐 Export of Services Example:

An Indian IT firm provides software development services to a US client and receives payment in USD.

GST Rate: 0%
ITC on inputs used can be claimed.
Refund of unutilized input tax credit is available.

🌍 Import of Services Example:

An Indian business hires a marketing consultant based in UK.

Indian business pays GST @18% under reverse charge.
Business can claim ITC if services are used for business purposes.

7. Place of Supply Rules

The place of supply for export/import of services is typically the location of the recipient (outside India for export; inside India for import).

8. Summary Table

Aspect	Export of Services	Import of Services
Supplier Location	India	Outside India
Recipient Location	Outside India	India
GST Rate	0% (Zero-rated)	Applicable (IGST under RCM)
Payment	In convertible foreign exchange or INR	Not applicable
ITC	Allowed and refundable	Allowed for recipient

Transportation of Goods under GST

Transportation of goods refers to the service of moving goods from one place to another by road, rail, air, or water. It is classified as a supply of service under GST.

1. Types of Transportation Services

Mode	Description
Road Transport	Transportation by trucks, goods carriers, or Goods Transport Agencies (GTAs)
Rail Transport	Goods transported by Indian Railways or private operators
Air Transport	Cargo transported by air freight
Sea Transport	Goods shipped by vessels

2. Goods Transport Agency (GTA)

A Goods Transport Agency is a person who provides service in relation to transportation of goods by road and issues a consignment note.
GST on GTA services can be charged under forward charge (12%) or reverse charge (5%) depending on the recipient and type of goods.

3. GST Rates on Transportation of Goods

Service Type	GST Rate	Remarks
GTA (Forward Charge)	12%	Supplier charges GST to recipient
GTA (Reverse Charge)	5%	Recipient pays GST on RCM if registered business
Indian Railways	5%	No ITC allowed on freight
Air and Sea Freight	18%	Standard rate, ITC allowed
Courier Services	18%

4. Reverse Charge Mechanism (RCM)

When GTA transports goods for a registered recipient (company, partnership firm, factory, cooperative society), GST is payable by the recipient on reverse charge basis at 5%.
The GTA does not charge GST but issues a consignment note.

5. Place of Supply Rules

Scenario	Place of Supply
Goods transported to a registered person (B2B)	Location of recipient
Goods transported to unregistered person (B2C)	Location where goods are handed over for transport

6. Exemptions

Transport of agricultural produce, milk, salt, food grains by GTA is exempt.
Transport of passengers by non-AC buses, metro, or auto-rickshaws is exempt.
Transport of goods by non-GTA persons without consignment note may be exempt.

7. Example

ABC Ltd. in Delhi hires a GTA to transport goods to Mumbai.

Freight Charges: ₹10,000
GST @5% under RCM is paid by ABC Ltd.
GTA issues consignment note but does not charge GST.
ABC Ltd. claims ITC on GST paid.

8. Summary

Aspect	Details
Type of Service	Transportation of goods
GST Rates	5%, 12%, or 18% depending on mode and charges
RCM Applicable	Yes, for GTA services to registered recipients
Place of Supply	Recipient location (B2B), handover location (B2C)
ITC	Allowed except on exempted transport

Concepts of Taxable Person under GST

A Taxable Person is a fundamental concept in GST law. It determines who is liable to register under GST and who must pay tax on supplies made.

1. Definition

As per Section 2(107) of the CGST Act, 2017:

A Taxable Person means a person who is registered or required to be registered under the GST Act.

2. Who is a Taxable Person?

Any individual, firm, company, LLP, association, body of individuals, trust, or any other entity engaged in:
- Supply of goods or services or both
- In the course or furtherance of business
The supply may be taxable, exempt, or nil-rated.
Includes persons required to pay tax under Reverse Charge Mechanism (RCM).

3. Key Points

Feature	Explanation
Business Activity	Must be engaged in business (commercial, industrial, or professional activity)
Casual Taxable Person	A person who occasionally supplies goods/services but has no fixed place of business
Non-resident Taxable Person	Person who occasionally supplies goods/services but has no fixed place of business in India
Separate Business Verticals	Can have multiple registrations for different verticals under one PAN

4. Types of Taxable Persons

Type	Description
Regular Taxable Person	Has a fixed place of business and carries out regular business
Casual Taxable Person	Temporary supplier with no fixed place of business, e.g., stall at exhibition
Non-Resident Taxable Person	Foreign supplier with occasional supplies in India
Input Service Distributor (ISD)	Distributes input tax credit to branches
Composition Taxable Person	Small taxpayers opting for composition scheme

5. Registration Requirement

Every taxable person whose aggregate turnover exceeds the prescribed threshold (₹20 lakhs or ₹10 lakhs for special category states) must register.
Casual and non-resident taxable persons must register mandatorily, regardless of turnover.
Registration is mandatory for those paying tax under RCM.

6. Example

A shopkeeper selling clothes regularly is a taxable person.
An event organizer setting up a stall for a few days is a casual taxable person and must register temporarily.
A foreign consultant supplying services in India occasionally is a non-resident taxable person.

7. Summary Table

Aspect	Explanation
Definition	Person engaged in supply of goods/services in course or furtherance of business
Registration	Mandatory if turnover exceeds threshold or casual/non-resident
Includes	Regular, casual, non-resident, ISD, composition taxpayers
Liability	Responsible for GST compliance

Non-Resident Taxable Person (NRTP) under GST

1. Definition

A Non-Resident Taxable Person (NRTP) is a person who:

Occasionally supplies goods or services or both,
Has no fixed place of business or residence in India, and
Supplies goods or services in India, either directly or through an agent.

This definition is given under Section 2(77) of the CGST Act, 2017.

2. Key Characteristics

Feature	Explanation
Occasional Supplier	Supplies goods/services occasionally and not on a regular basis in India
No Fixed Place of Business in India	Does not have a permanent establishment or office in India
Supplies in India	Engages in supply of goods or services within India
May use Agent	Can supply directly or through an agent

3. Registration Requirement

Mandatory registration for NRTP before making any supply in India.
Registration is temporary but necessary even if turnover is below threshold.
Valid for 90 days, extendable by the proper officer.

4. Tax Compliance

NRTP must comply with GST rules, including:
- Filing GST returns
- Payment of tax
- Maintaining records for supplies made in India
GST is charged on their supplies made in India.

5. Example

A foreign IT consultant (no office in India) provides services to an Indian company.
Before starting supply, the consultant must obtain GST registration as a NRTP.
They will file returns and pay GST as applicable on the service.

6. Why is NRTP Registration Important?

Ensures GST compliance for foreign entities supplying goods or services in India.
Helps Indian tax authorities track cross-border transactions.
Allows claiming of input tax credits by Indian recipients of services.

7. Summary Table

Aspect	Explanation
Who	Person supplying goods/services in India without fixed place of business here
Registration	Mandatory before supply
Validity	90 days (extendable)
Tax	GST applicable on supplies made in India
Compliance	Filing returns, payment of tax, record maintenance

Aggregate Turnover under GST

1. Definition

Aggregate Turnover means the total value of all taxable supplies, including:

Exempt supplies
Exports
Inter-state supplies of persons having the same PAN

It excludes the value of inward supplies on which tax is payable by reverse charge.

2. Legal Reference

Defined under Section 2(6) of the CGST Act, 2017 as:

“Aggregate turnover means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by reverse charge), exempt supplies, exports of goods or services or both, and inter-state supplies of persons having the same Permanent Account Number, computed on all India basis but excludes central tax, state tax, union territory tax, integrated tax and cess.”

3. What Does it Include?

Included in Aggregate Turnover	Explanation
Taxable supplies	All goods/services taxable under GST
Exempt supplies	Supplies not attracting GST (e.g., healthcare, education)
Export of goods/services	Supplies going outside India
Inter-state supplies	Supplies between states by the same PAN holder

4. What is Excluded?

Excluded from Aggregate Turnover	Explanation
Inward supplies under reverse charge	Purchases on which recipient pays GST
CGST, SGST, IGST, and Cess	Taxes are excluded from turnover calculation

5. Importance of Aggregate Turnover

Determines threshold limit for GST registration.
Helps to decide eligibility for Composition Scheme.
Used to calculate annual turnover for compliance.

6. Example

A business makes the following supplies in a year:
- Taxable supplies (₹40 lakhs)
- Exempt supplies (₹10 lakhs)
- Export of goods (₹15 lakhs)
- Inward supplies under reverse charge (₹5 lakhs)
Aggregate turnover = ₹40L + ₹10L + ₹15L = ₹65 lakhs (excluding inward supplies under RCM)

7. Summary Table

Parameter	Included / Excluded
Taxable supplies	Included
Exempt supplies	Included
Export supplies	Included
Inward supplies under RCM	Excluded
GST tax components	Excluded

Illustration: Understanding Taxable Person with an Example

🎯 Scenario:

Mr. Raj owns a wholesale business of electronic appliances in Delhi. His annual turnover from the business is ₹30 lakhs.

✔ Step-by-Step Explanation:

Check Turnover Limit:
1. For goods, the threshold for GST registration is ₹40 lakhs (₹20 lakhs in some states).
1. Mr. Raj’s turnover is ₹30 lakhs, which is below the threshold limit.
Voluntary Registration:
1. Although Mr. Raj is not mandatorily required to register, he decides to voluntarily register under GST to avail Input Tax Credit (ITC) and to build credibility with customers.
Registration:
1. Once Mr. Raj registers on the GST portal and gets a GSTIN (GST Identification Number), he becomes a Taxable Person under the law.
Tax Collection:
1. He is now required to collect GST on the appliances he sells and file GST returns periodically.

📌 Key Points:

A Taxable Person can be:
- An individual
- HUF (Hindu Undivided Family)
- Company
- Partnership Firm
- LLP
- Trust
- Society
- Any other legal entity
Being a Taxable Person brings responsibilities like:
- Issuing tax invoices
- Collecting GST
- Filing monthly/quarterly returns
- Maintaining proper records

📝 Another Example (For Services):

Ms. Anita, a freelance web designer based in Mumbai, earns ₹25 lakhs annually from her clients.

As a service provider, her threshold for registration is ₹20 lakhs.
Since her income exceeds this, she is required to register under GST.
Once registered, Ms. Anita becomes a Taxable Person and must charge 18% GST on her services.

Liability for Registration under GST (India)

Liability for registration refers to the legal obligation of a person or business to register under the GST Act when certain conditions are met. Once liable, the person must apply for registration within a prescribed time.

📘 Statutory Provision:

Under Section 22 to 24 of the CGST Act, 2017, the following persons are liable or required to register under GST.

🔹 1. Section 22 – Persons Liable for Registration

A person is liable to register under GST if:

A. Aggregate Turnover Exceeds the Threshold Limit:

Type of Supply	State Type	Threshold Limit
Goods	Normal Category	₹40 Lakhs
Goods	Special Category*	₹20 Lakhs
Services	All States	₹20 Lakhs
Services	Special Category*	₹10 Lakhs

🔹 *Special Category States: Mizoram, Manipur, Nagaland, Tripura, etc.

B. Aggregate Turnover Includes:

Taxable supplies
Exempt supplies
Exports
Inter-State supplies
Supplies on behalf of principals (agent transactions)

🔹 2. Section 23 – Persons Not Liable for Registration

The following are not required to register:

Engaged exclusively in exempt supplies or non-taxable supplies
Agriculturists, to the extent of supply of produce from land cultivation
Persons below the prescribed threshold limit

🔹 3. Section 24 – Compulsory Registration (Irrespective of Turnover)

The following persons must register, even if turnover is below the threshold:

Inter-State supplier
Casual taxable person
Non-resident taxable person
Person liable to pay tax under Reverse Charge
E-commerce operators
Supplier supplying through e-commerce platform
TDS/TCS deductor under GST
Input Service Distributors (ISD)

💡 Illustration: Understanding with Examples

🎯 Example 1: Voluntary Registration

Mr. Ajay runs a mobile accessories shop in Maharashtra and has an annual turnover of ₹18 lakhs.

Since his turnover is below ₹40 lakhs, he is not liable to register.
But he wants to claim Input Tax Credit (ITC), so he opts for voluntary registration.

🎯 Example 2: Compulsory Registration

Ms. Priya sells handmade jewellery through Amazon across different states. Her annual turnover is ₹8 lakhs.

Despite being under ₹40 lakhs, she is compulsorily liable to register as she is selling through an e-commerce operator.

📌 Key Points to Remember

Registration must be done within 30 days from the date liability arises.
If registration is delayed, penalties and interest may apply.
GST registration is PAN-based and state-specific.
Once registered, you are treated as a taxable person.

Sections of Registration under GST (India)

Registration under GST is governed primarily by Sections 22 to 30 of the Central Goods and Services Tax (CGST) Act, 2017. Each section deals with a specific aspect of registration.

🔹 Section 22 – Persons Liable for Registration

This section specifies who must register under GST:

Every supplier is liable to register if aggregate turnover exceeds the threshold limit:
- ₹40 lakhs for goods (normal states)
- ₹20 lakhs for goods (special category states)
- ₹20 lakhs for services (normal states)
- ₹10 lakhs for services (special category states)

💡 Threshold applies to aggregate turnover on all-India basis for PAN.

🔹 Section 23 – Persons Not Liable for Registration

This section exempts certain persons from registration:

Persons engaged exclusively in exempt or non-taxable supply
Agriculturists supplying produce from cultivation
Other categories notified by the Government

🔹 Section 24 – Compulsory Registration in Certain Cases

This section lists categories that must register irrespective of turnover, such as:

Inter-State suppliers
Casual taxable persons
Non-resident taxable persons
Persons liable under reverse charge
Agents of a supplier
E-commerce operators
Persons supplying through e-commerce platforms
TDS/TCS deductors
Input Service Distributors (ISD)

🔹 Section 25 – Procedure for Registration

This section lays out the registration process:

Registration application through the GST portal
Single PAN-based registration per state/UT
Separate registration for different business verticals (optional)
Voluntary registration is allowed even if not liable
A unique GSTIN (Goods and Services Tax Identification Number) is issued

🔹 Section 26 – Deemed Registration

This section covers automatic registration:

If a person is registered under State GST law, it shall be deemed registered under CGST law (and vice versa).

🔹 Section 27 – Special Provisions for Casual and Non-Resident Taxable Persons

This section applies to:

Casual taxable persons: Temporary businesses, like stalls at exhibitions.
Non-resident taxable persons: Persons residing outside India but supplying goods/services in India.

They must take temporary registration valid for 90 days (extendable), and pay tax in advance.

🔹 Section 28 – Amendment of Registration

This section allows:

Changes in registration details (business name, address, etc.)
Application through GST portal
Approval from GST officer (for certain changes)

🔹 Section 29 – Cancellation of Registration

Covers cancellation by:

The taxpayer (e.g., business closed)
The officer (e.g., non-filing of returns, fraud)

After cancellation, the taxpayer must file a final return.

🔹 Section 30 – Revocation of Cancellation

This section allows revocation (i.e., restoration) of registration:

Applicable when cancellation is by officer
Application to be made within 30 days (or as extended)
Subject to conditions prescribed

📘 Summary Table:

Section	Description
Sec 22	Persons liable for registration
Sec 23	Persons not liable for registration
Sec 24	Compulsory registration
Sec 25	Procedure for registration
Sec 26	Deemed registration
Sec 27	Special provisions (casual & non-resident)
Sec 28	Amendment of registration
Sec 29	Cancellation of registration
Sec 30	Revocation of cancellation

Notification for Registration under GST – Explained

Under the Goods and Services Tax (GST) framework, the Central Government issues various notifications from time to time under the CGST Act, 2017 to:

Prescribe threshold limits
Specify exempt categories from registration
Provide procedural relief
Define applicability of compulsory registration

These notifications act as legal instruments and are issued under the powers granted by Sections 22, 23, and 24 of the CGST Act.

🔔 Key Notifications for GST Registration

Here are some important notifications related to GST registration:

🔹 1. Notification No. 10/2017 – Central Tax (Rate)

Date: 28th June 2017
📌 Purpose: Exempts persons engaged in exclusive supply of exempted goods or services from obtaining registration under GST.
✅ Example: A person dealing only in unprocessed agricultural produce.

🔹 2. Notification No. 65/2017 – Central Tax

Date: 15th November 2017
📌 Purpose: Exempts suppliers of services with turnover up to ₹20 lakhs (₹10 lakhs for special category states) from GST registration.

🔹 3. Notification No. 10/2019 – Integrated Tax

Date: 7th March 2019
📌 Purpose: Exempts persons supplying services (even through e-commerce) with turnover up to ₹20 lakhs (₹10 lakhs for special category states) from mandatory registration.

🔹 4. Notification No. 03/2019 – Central Tax

Date: 29th January 2019
📌 Purpose: Raised the threshold limit for registration for suppliers of goods from ₹20 lakhs to ₹40 lakhs, effective from 1st April 2019.

❗ This does not apply to:

Ice cream, pan masala, tobacco manufacturers
Inter-state suppliers
Persons supplying through e-commerce operators

🔹 5. Notification No. 07/2017 – Integrated Tax

📌 Purpose: Exempts certain inter-state service providers from obtaining compulsory registration if turnover is below threshold.

📝 Summary Table

Notification	Date	Purpose
10/2017-CT(R)	28-Jun-2017	Exempts exclusive exempt supply providers
65/2017-CT	15-Nov-2017	Exempts small service providers (below ₹20/₹10 lakhs)
10/2019-IGST	07-Mar-2019	Eases registration for small e-commerce service providers
03/2019-CT	29-Jan-2019	Raises threshold limit for goods to ₹40 lakhs
07/2017-IGST	14-Sep-2017	Relaxes registration for small inter-state service providers

💡 Practical Example

Example:
Mr. Ravi runs a grocery store in Gujarat with annual turnover of ₹38 lakhs.

As per Notification 03/2019, since he only supplies goods and his turnover is below ₹40 lakhs, he is not required to register under GST.

But if he supplies goods interstate, or is involved in tobacco products, this exemption will not apply.

📌 Notes:

Notifications are issued under the CGST Act and IGST Act.
They provide clarity and conditional relief to taxpayers.
Every notification has legal force and is published in the Official Gazette.
They are interpreted in conjunction with the main sections of the CGST Act.

Supply of Handicraft Goods under GST – Explained

Handicraft goods are specially recognized under GST to encourage traditional and small-scale artisans, especially those supplying across states. The government has provided relaxation in registration and other compliance norms for handicraft suppliers under certain conditions.

🧵 What are Handicraft Goods?

Handicraft goods are defined as goods predominantly made by hand, even if some machinery is used. These goods:

Have artistic value
Represent traditional or cultural heritage
Are distinct in design and form

📜 Recognized by Notification No. 32/2017 – Central Tax, dated 15th September 2017.

📌 Key Characteristics of Handicraft Goods:

Made by hand (may use small tools/machines)
Have visual appeal and traditional significance
Are not mass produced
Examples include: handmade jewelry, wooden sculptures, textiles, bamboo crafts, terracotta items, hand-embroidered garments

🔍 GST Implications on Handicraft Goods

🔹 1. Exemption from Compulsory Registration (Even for Inter-State Supply)

📑 Notification No. 8/2017 – Integrated Tax, dated 14.09.2017
📌 Allows inter-state supply of handicraft goods without compulsory registration if:

Aggregate turnover does not exceed ₹20 lakhs (₹10 lakhs for special category states)
The supplier is making only handicraft goods
Proper tax is being paid (under forward charge)
An e-way bill is generated (if applicable)

✅ Relief: Normally, inter-state suppliers must register under GST regardless of turnover (Section 24). This is an exception.

🔹 2. Tax Rates on Handicraft Goods

Tax rate depends on the type of product.
For example:
- Hand-made wooden frames: 12%
- Hand-woven textile products: 5% or 12%
- Handmade jewelry (non-precious): 5%
- Terracotta idols: 5%

GST rate must be checked item-wise using HSN code as per notifications.

🎯 Example Scenario

Mrs. Leela, a self-employed artisan from Rajasthan, handcrafts and sells wooden toys. Her total turnover is ₹14 lakhs annually.

She sells her products both within Rajasthan and to customers in Delhi and Mumbai.
She is eligible for exemption from registration under GST since:
- Her turnover is below ₹20 lakhs
- She sells handicraft goods
- She pays tax correctly on sales and maintains invoices

✅ She can supply across India without GST registration, thanks to the exemption.

📝 Important Conditions to Avail Exemption:

Requirement	Must Be Followed?
Supplies only handicraft goods	✅ Yes
Turnover within ₹20/10 lakhs	✅ Yes
Inter-state supply	✅ Allowed
Charging GST properly	✅ Mandatory
E-way bill (if applicable)	✅ Required

🔚 Conclusion

The supply of handicraft goods receives special treatment under GST to promote artisans and small-scale industries. By offering:

Turnover-based registration exemption
Freedom to sell inter-state without registration
Lower tax rates

…the government supports the growth of traditional crafts in the Indian and global market.

Exemptions to Suppliers under GST (India)

Under GST, certain suppliers are exempted from registering or paying GST based on nature of goods/services, turnover, location, or specific government notifications. These exemptions reduce compliance burden, especially for small businesses, charitable institutions, and traditional artisans.

🔹 1. Exemption Based on Aggregate Turnover (Section 22)

Type of Supply	Normal States	Special Category States
Goods	₹40 lakhs	₹20 lakhs
Services	₹20 lakhs	₹10 lakhs

🔸 Suppliers below the threshold are not liable to register or pay GST.

🔹 2. Exemption for Exclusive Supply of Exempt or Non-Taxable Goods/Services (Section 23)

Suppliers only supplying exempted or non-GST items (e.g., fresh fruits, education services) are not required to register under GST.

📜 Example: A supplier dealing only in unprocessed food grains or conducting yoga classes is exempt.

🔹 3. Exemption to Agriculturists (Section 23)

Agriculturists, to the extent of supply of agricultural produce out of cultivation, are fully exempt from registration and tax under GST.

🔹 4. Exemption for Handicraft Goods Suppliers

As per Notification No. 8/2017 – IGST, handicraft goods suppliers are exempt from compulsory registration (even for inter-state supply) if:

Annual turnover is below ₹20 lakhs (₹10 lakhs in special states)
GST is charged on supply
E-way bill (if applicable) is maintained

✅ Promotes traditional artisans and MSMEs

🔹 5. Exemption for Job Workers (Specific Cases)

Job workers making inter-state supply of services (except jewellery, etc.) were exempted from compulsory registration via Notification No. 7/2017 – IGST, provided turnover is within limit.

🔹 6. Exemption for Small Service Providers (Notification No. 65/2017 – Central Tax)

Suppliers of pure services (not involving goods) with turnover up to ₹20 lakhs (₹10 lakhs in special category states) are exempted.

🔹 7. Exemption to E-Commerce Sellers (Selective)

Under Notification No. 10/2019 – IGST, service providers supplying through e-commerce operators (like Amazon, Flipkart) are exempt from registration if:

Annual turnover is below limit
Supplies are of services only
Not liable under reverse charge

❗ This does not apply to suppliers of goods through e-commerce.

🔹 8. Exemption for Charitable Trusts and Religious Institutions

As per Notification No. 12/2017 – CT(R):

Services by charitable/religious institutions for public welfare (e.g., education, health) are exempt
Renting of religious places for general public (under certain limits) is exempt

📝 Summary Table

Exemption Type	Conditions
Turnover-based exemption	Below threshold limit (₹40L/₹20L/₹10L)
Exempt supply only	Supplies only exempted/non-GST goods or services
Agriculturist	Supply from own cultivation
Handicraft suppliers	Below ₹20L/₹10L, inter-state allowed without registration
Small service providers	Below ₹20L/₹10L, not involved in goods
E-commerce service providers	Below limit, supplies services only
Religious/charitable trusts	Engaged in specific public welfare services

🔚 Conclusion

These exemptions under GST help:

Reduce compliance burden for small suppliers
Support traditional and rural businesses
Encourage non-profit and public welfare activities

Exemption to Job Workers under GST

Job work refers to processing or working on goods supplied by the principal (owner of goods) to the job worker. Under GST, job workers play a crucial role in the manufacturing and production ecosystem, and certain exemptions and reliefs have been provided to them to ease compliance.

🔧 Definition of Job Work

As per Section 2(68) of the CGST Act, 2017:

“Job work” means any treatment or process undertaken by a person on goods belonging to another registered person.

🔹 1. GST Registration Exemption for Job Workers

📜 Notification No. 07/2017 – Integrated Tax, dated 14.09.2017

Provides exemption from compulsory registration under Section 24 of the CGST Act for certain job workers making inter-State supply of services, subject to conditions.

✅ Conditions for Exemption:

The job worker’s turnover is below the threshold limit (₹20 lakhs / ₹10 lakhs)
The job work does not involve jewelry, goldsmith or silversmith wares
Job worker is not supplying goods on own account (only providing service)

📌 Conclusion:
A small job worker providing services like textile processing, cutting, dyeing, embroidery, etc., can make inter-state supply without registration if these conditions are met.

🔹 2. Tax Rate on Job Work Services

Type of Job Work	GST Rate
Job work on textile, apparel, leather	5%
Job work on printing, metal, furniture	12%
Job work on food items, engineering goods	18%
Job work on precious metals/jewelry	5% / 18%

Rates notified under Notification No. 11/2017 – Central Tax (Rate) and amendments.

🔹 3. Input Tax Credit (ITC) Provisions

The principal (owner of goods) can claim ITC on inputs sent to the job worker.
Goods can be sent without payment of tax, using a delivery challan.
Final goods must be received back within 1 year (inputs) or 3 years (capital goods), else tax is payable.

🔹 4. No GST on Goods Sent to Job Worker

As per Section 143 of the CGST Act:

Sending goods to a job worker does not constitute supply if they are returned within specified time.
No GST on interstate movement of goods to a job worker with proper documentation.

👩‍🏭 Example:

Mr. A (registered in Gujarat) sends raw fabric to Mr. B, a job worker in Maharashtra, for stitching.

Mr. B is a small job worker, earning ₹12 lakhs/year.
He only provides services and does not supply goods on his own.
He can claim exemption from registration, despite inter-state supply, under Notification 07/2017-IGST.

📌 Summary of Exemption for Job Workers

Criteria	Exemption Available?
Turnover below threshold (₹20L/₹10L)	✅ Yes
Provides inter-state job work services	✅ Yes (if not involving jewelry)
Involves gold/silver jewelry	❌ No (registration compulsory)
Supplies own goods	❌ No

Electronic Commerce Operator (ECO) under GST

An Electronic Commerce Operator (ECO) is a person or platform who owns, operates, or manages a digital platform for facilitating the supply of goods or services (or both), either directly or indirectly, over the internet.

📜 Defined under Section 2(45) of the CGST Act, 2017:

“Electronic commerce operator” means any person who owns, operates, or manages digital or electronic facility or platform for electronic commerce.”

🛒 Examples of ECOs

Amazon, Flipkart, Meesho, Snapdeal – for goods
Swiggy, Zomato, Uber, Ola, UrbanClap – for services
MakeMyTrip, Airbnb – for travel/hotel bookings

🔹 Key Features of an ECO

Feature	Description
Digital Platform	Supplies are facilitated via website/app
Does Not Always Supply Goods	ECO is not the supplier, just a facilitator
Involves Third Parties	Sellers/service providers use the platform to reach customers
Collects Consideration	Usually collects payment and settles with suppliers

🔍 Taxation and Responsibilities of ECO under GST

1. 🧾 Compulsory Registration – Section 24

An ECO must register under GST irrespective of turnover. There is no threshold limit for exemption.

❗ Mandatory registration even if turnover is below ₹20 lakhs / ₹10 lakhs.

2. 🧮 Tax Collection at Source (TCS) – Section 52

ECOs are required to collect tax at source (TCS) @ 1% (0.5% CGST + 0.5% SGST or 1% IGST) on net value of taxable supplies made through the platform.

✅ TCS is deposited monthly and a TCS return (GSTR-8) must be filed.

3. 🚫 Liability to Pay GST in Some Cases – Section 9(5)

In certain notified services, ECO is treated as the supplier, and hence is liable to pay full GST, not the actual service provider.

📌 Applicable to:

Passenger transport (e.g., Ola, Uber)
Accommodation booking (e.g., Airbnb, Oyo)
Housekeeping services (e.g., UrbanClap)
Restaurant services through ECO (e.g., Zomato, Swiggy)

In such cases, the ECO pays GST under forward charge on behalf of unregistered suppliers.

📦 ECO vs Supplier through ECO

Point	ECO	Supplier through ECO
Who pays GST?	ECO (in 9(5) cases) or collects TCS otherwise	Supplier (in most other cases)
Needs to register?	Yes, compulsory	Yes, if supplying goods through ECO
Return filing	GSTR-8 (TCS return)	GSTR-1, GSTR-3B etc.
Issues Invoice?	Only if required (in 9(5) cases)	Yes

📘 Example:

Scenario 1: Seller on Amazon

Mr. Ramesh sells mobile accessories via Amazon.
He collects ₹1,000 per order.
Amazon deducts 1% TCS (₹10) and deposits it with the government.
Mr. Ramesh must register under GST (compulsory if supplying goods through ECO).

Scenario 2: Swiggy Orders

A small, unregistered restaurant gets orders via Swiggy.
Swiggy collects payment and pays GST directly (under Section 9(5)).
The restaurant need not register under GST.

📝 Summary

Topic	ECO’s Responsibility
Registration	✅ Mandatory (No threshold exemption)
TCS (1%)	✅ Deduct and file monthly (GSTR-8)
Forward charge (9(5))	✅ Pay GST for notified services
Maintain Records	✅ Keep seller-wise transaction details
Compliance Burden	✅ High due to regulatory obligations

Requirements for GST Registration (Section 22 to 25, CGST Act)

🔹 Who Needs to Register?

A person must register under GST if they:

Cross the aggregate turnover threshold in a financial year:
1. ₹40 lakhs for goods (₹20 lakhs for some states)
1. ₹20 lakhs for services (₹10 lakhs for some special category states)
Make inter-state supply
Act as agent, ECO, TDS/TCS deductor, Input Service Distributor, etc.
Are required under Section 24 to register compulsorily, even if turnover is below the threshold.

📌 Voluntary registration is allowed under Section 25.

🧾 List of Persons Required to Register Compulsorily (Section 24)

Person Type	GST Registration Mandatory?
Inter-state supplier	✅ Yes
Casual taxable person	✅ Yes
Non-resident taxable person	✅ Yes
ECO (Electronic Commerce Operator)	✅ Yes
Supplier through ECO	✅ Yes
Person liable to deduct/collect TDS/TCS	✅ Yes
Input Service Distributor (ISD)	✅ Yes
Agents of other taxable persons	✅ Yes

📂 Documents Required for Registration

Type of Person	Documents Required
Individual/Proprietor	PAN, Aadhaar, Photo, Address proof of business, Bank proof
Company	PAN of Company, Incorporation Certificate, Address & bank proof
Partnership	Partnership deed, PAN, address proof, authorized signatory documents

🔄 Single vs. Multiple GST Registration

🔹 Single GST Registration

A person with operations in one state/UT and only one place of business can obtain a single registration under GST for that state.

📘 Example:
A textile trader operating from one shop in Delhi needs one GSTIN.

🔹 Multiple GST Registrations

✅ A person must or may obtain multiple GST registrations under the following cases:

1. Multiple States/UTs (Compulsory)

If a person operates in more than one state/UT, separate registration is compulsory in each state.

📘 Example:
A company with branches in Maharashtra and Karnataka must register in both states.

2. Multiple Places of Business in the Same State (Optional)

A person can opt for separate registration for different business verticals/units within the same state, even under the same PAN.

📌 Conditions under Rule 11 of CGST Rules:

Business must have separate books of account
Must pay tax separately for each GSTIN
Must not supply between units without invoice

📘 Example:
A manufacturer with two units in Gujarat—one for pharmaceuticals and one for garments—may register them separately if conditions are met.

🔐 Benefits of Multiple Registrations

Separate compliance and ITC tracking per unit
Easier to transfer credit and manage location-specific operations
No confusion over stock or turnover limits

⚠️ Disadvantages of Multiple Registrations

Increased compliance burden (GSTR-1, GSTR-3B, etc. for each unit)
No automatic credit transfer between units
Supplies between branches are treated as taxable, even within the same PAN

📝 Registration Process (Online via GST Portal)

Fill Part A of GST REG-01 (basic details, PAN, contact)
Receive OTP and TRN (Temporary Reference Number)
Fill Part B with documents and verification
ARN (Application Reference Number) is generated
GST officer approves and issues GSTIN within 7 working days

🧾 Final Summary

Aspect	Single Registration	Multiple Registrations
States/UTs	1	More than 1
Units in Same State	1 (default)	Optional – must fulfill Rule 11 conditions
Number of GSTINs	One	One per state or per unit
Compliance Burden	Less	More (returns per registration)
Intra-entity supply	Not applicable	Taxable between GSTINs, requires documentation

Steps for GST Registration (Regular Taxpayer)

📍 All GST registrations are done online through the official GST portal. Follow the steps below for a new registration:

🔹 Step 1: Visit the GST Portal

Go to 👉 https://www.gst.gov.in
Click on ‘Services > Registration > New Registration’

🔹 Step 2: Fill Part-A of GST REG-01 (Basic Details)

You will be asked for the following:

Field	Details to Enter
I am a	Taxpayer / Casual Taxable Person / NRTP etc.
State / UT	Where you want to register
Legal Name of Business	As per PAN (Auto-validated)
PAN	PAN of individual/company/firm
Email ID	Valid email (OTP verification)
Mobile Number	Active mobile (OTP verification)
Captcha	Enter as shown

✅ After submission, you’ll receive a Temporary Reference Number (TRN) via SMS & Email.

🔹 Step 3: Fill Part-B of GST REG-01 (Business Details)

A. Business Information

Trade Name
Constitution (Proprietorship, Partnership, Company, etc.)
District, Sector/Circle
Date of Commencement

B. Principal Place of Business

Address with proof (rent agreement, utility bill)
Nature of possession (Owned / Rented / Shared)
Nature of business activity at that location

C. Additional Places of Business (if any)

D. Goods and Services

List of top 5 goods and top 5 services supplied (HSN/SAC codes)

E. Bank Account Details

Bank name, account number, IFSC, and copy of bank proof (passbook/statement)

F. Authorized Signatory

PAN, Aadhaar, photograph, mobile/email, designation

🔹 Step 4: Upload Documents

Document Type	Examples
Photograph	JPEG of promoter/partner/director
Constitution Document	Partnership Deed, Company Incorporation Certificate, etc.
Address Proof	Rent agreement, electricity bill, property tax receipt
Bank Proof	Cancelled cheque, bank statement, or passbook
Authorization Letter/Board Resolution	For authorized signatory

🔹 Step 5: Aadhaar Authentication (Optional but Recommended)

You’ll receive a prompt for Aadhaar-based e-KYC.
If successful, registration is processed within 3 days.
If skipped, it may take 7+ days, and officer verification may be needed.

🔹 Step 6: Verification and Submission

Once all sections are filled and documents uploaded:
- Submit application using DSC (Digital Signature) or EVC (OTP on mobile/email)
- ARN (Application Reference Number) is generated

🔹 Step 7: GSTIN Allotment

If everything is correct and approved:
- You’ll receive a GSTIN (15-digit registration number)
- GST Registration Certificate (Form GST REG-06) can be downloaded from the portal

📝 Important Notes

GST Registration is free of cost
Display the GST certificate at place of business
File returns as per prescribed schedule (GSTR-1, 3B, etc.)
Registration is PAN-based and state-specific

📘 Summary Flow:

Visit GST portal
Fill Part-A → Get TRN
Fill Part-B → Business + Documents
Submit with Aadhaar verification
GST officer approves → GSTIN issued

Verification of GST Registration

After a person applies for GST registration, the application goes through a verification process by GST officers to ensure that the details provided are accurate and comply with law.

🔹 1. Acknowledgment & ARN

Once the registration application is submitted, the applicant receives an Acknowledgment with an Application Reference Number (ARN).
ARN can be used to track the status of registration on the GST portal.

🔹 2. Verification by GST Officer

The GST officer (typically from the jurisdiction where the business is located) verifies the application based on:

PAN details
Business address proof
Constitution of business
Other documents uploaded (bank proof, Aadhaar, etc.)
Aadhaar authentication (if opted)

🔹 3. Physical Verification (if required)

The officer may conduct a physical visit to the place of business to confirm existence and genuineness.
This usually happens if there is doubt about the authenticity of the application or if the application is selected for scrutiny.

🔹 4. Issuance or Rejection of Registration

Outcome	Explanation
Registration Granted	If all documents and information are satisfactory, a GSTIN is issued.
Registration Rejected	If information is incorrect, or documents are invalid, the officer can reject the application with reasons.

🔹 5. Time Limit

Registration should be granted within 7 working days from the date of application.
If rejected, the applicant is informed with reasons and can appeal or re-apply.

🔹 6. Verification Using Digital Signature or EVC

Verification during submission can be done by:
- Digital Signature Certificate (DSC) – for companies, LLPs, etc.
- Electronic Verification Code (EVC) – OTP on registered mobile/email
This ensures authenticity of the applicant.

🔹 7. Checking Registration Status

Applicants can check the status using their ARN on the GST portal under:
- Services > Registration > Track Application Status

📌 Summary

Step	Description
Submit application	Fill GST REG-01 and upload documents
Receive ARN	Acknowledgment number for tracking
Officer verification	Check details, documents, Aadhaar authentication
Physical verification (if any)	Visit business premises
Decision	Approve and issue GSTIN or reject application
Time limit	Within 7 working days

Steps for Registration of a Non-Taxable Person under GST

🧐 Who is a Non-Taxable Person?

A Non-Taxable Person is someone who is not liable to pay GST but is required to register under GST for specific reasons.
Example: Input Service Distributor (ISD), E-commerce Operator (ECO), Persons deducting TDS/TCS, casual taxable person, non-resident taxable person, etc.

🔹 Why Do Non-Taxable Persons Need Registration?

To comply with GST rules when involved in supply chains or special activities.
Even if not liable to pay GST on their own supplies, registration enables proper reporting, TDS/TCS deduction, or distribution of input tax credit.

🔹 Stepwise Process

Step 1: Visit GST Portal

Go to https://www.gst.gov.in
Select Services > Registration > New Registration

Step 2: Select the Relevant Person Type

Under “I am a”, select the correct category, for example:
- Input Service Distributor
- E-commerce Operator
- Casual Taxable Person
- Non-Resident Taxable Person
- Person Deducting TDS/TCS

Step 3: Fill Part A – Basic Details

Enter State, PAN, Email, Mobile, etc.
Submit to receive Temporary Reference Number (TRN) via email and SMS.

Step 4: Complete Part B – Business Details

Enter business name, address, bank details, authorized signatory info, etc.
Upload required documents based on the person type (e.g., for TDS deductor, PAN of deductor, authorization letter, etc.).

Step 5: Aadhaar Authentication / Verification

Aadhaar authentication is optional but recommended.
Verification can also be done through DSC (Digital Signature Certificate) or EVC (OTP).

Step 6: Submit Application

Submit with DSC or EVC.
Application is forwarded to GST officer for verification.

Step 7: Verification and Approval

GST officer reviews the application and documents.
If satisfied, GSTIN is granted within 7 working days.
If rejected, reasons are provided and re-application is possible.

🔹 Documents Required for Non-Taxable Person Registration

Person Type	Documents Typically Required
Input Service Distributor	PAN, Address proof, Bank details, Authorization letter
E-Commerce Operator	PAN, Address proof, Bank details, Authorization letter
Casual Taxable Person	PAN, Address proof of place of business, Photograph
Non-Resident Taxable Person	PAN, Address proof in home country, Passport copy
Person Deducting TDS/TCS	PAN, Authorization letter, Address proof

🔹 Important Points

Registration is mandatory for non-taxable persons involved in notified roles.
They are required to file specific returns related to their activity (e.g., ISD returns, TCS returns).
Failure to register when required can attract penalties.

📝 Summary Table

Step No.	Activity	Description
1	Visit GST Portal	Online application on gst.gov.in
2	Select Person Type	Choose appropriate non-taxable person category
3	Fill Part A	Basic details, PAN, email, mobile
4	Fill Part B	Business details, bank info, upload documents
5	Aadhaar Auth / Verification	Optional but recommended
6	Submit Application	With DSC or EVC
7	Verification & Approval	GST officer approves and issues GSTIN

Structure of GSTIN

GSTIN is a 15-digit unique identification number assigned to every registered taxpayer under GST in India. It is used for all GST-related transactions and filings.

📊 Breakdown of the 15 Digits

Position	Description	Example
1st – 2nd	State Code as per the Indian Census 2011	27 = Maharashtra
3rd – 12th	PAN Number of the taxpayer	ABCDE1234F
13th	Entity Number for the same PAN in a state	1, 2, 3 … (to differentiate multiple registrations under same PAN in a state)
14th	Alphabet ‘Z’ (default by GST system)	Z
15th	Check Digit for error detection	Alphanumeric (0-9 or A-Z)

🔍 Detailed Explanation

State Code (1st & 2nd digit):
1. Based on the state or union territory where the business is registered.
1. Example: 27 = Maharashtra, 07 = Delhi, 09 = Uttar Pradesh.
PAN Number (3rd to 12th digit):
1. The permanent account number of the business/entity/person registered.
1. It ensures uniqueness across all GST registrations.
Entity Number (13th digit):
1. Distinguishes multiple registrations under the same PAN within the same state.
1. For example, if a business has two registrations in Maharashtra under the same PAN, the first will have “1” and the second “2”.
Alphabet ‘Z’ (14th digit):
1. By default, this is always “Z” in the GSTIN format.
Check Digit (15th digit):
1. Calculated using a formula based on the preceding 14 characters.
1. Helps verify the validity of the GSTIN and avoid errors.

📌 Example GSTIN

27ABCDE1234F1Z5

Part	Value	Meaning
27	State Code	Maharashtra
ABCDE1234F	PAN	Taxpayer’s PAN
1	Entity Number	First registration for this PAN
Z	Default letter	Fixed as ‘Z’
5	Check Digit	Calculated check digit

🔑 Key Points

GSTIN is unique per state per PAN. So the same PAN can have multiple GSTINs if registered in different states.
The GSTIN must be quoted in all GST returns, invoices, and related correspondence.
Helps track taxpayer’s compliance and transactions under GST.

Cancellation of GST Registration

Cancellation of GST registration means terminating the GSTIN allotted to a taxpayer. Once canceled, the taxpayer is no longer recognized under GST and must stop charging GST on supplies.

🔹 When Can Cancellation Occur?

Voluntary Cancellation by the taxpayer
1. When the business is discontinued, sold, or transferred
1. If the turnover falls below the threshold and the taxpayer opts out voluntarily
1. Any other reason where registration is no longer required
Mandatory Cancellation by GST Officer
1. If taxpayer violates GST laws (e.g., non-filing of returns for continuous 6 months)
1. If registration was obtained fraudulently or by misrepresentation
1. Business does not exist or is not traceable
1. Non-compliance detected during audits/inspections

🔹 Who Can Apply for Cancellation?

Registered taxpayer can apply for voluntary cancellation.
GST officers can initiate suo-motu cancellation on valid grounds.

🔹 How to Apply for Cancellation?

Step 1: Application by Taxpayer

Log in to the GST portal
Go to Services > Registration > Application for Cancellation of Registration
Fill Part-A of Form GST REG-16 (reason for cancellation, date of cessation, etc.)
Submit application electronically.

Step 2: Officer’s Response

GST officer may call for additional documents or clarification via Form REG-17
Taxpayer must respond within 7 working days

Step 3: Final Cancellation Order

Officer reviews application and documents
If satisfied, issues cancellation order in Form GST REG-19
Cancellation is effective from the date mentioned or date of order

🔹 Effect of Cancellation

Taxpayer must stop charging GST from cancellation effective date
Must file final GST returns (e.g., GSTR-10, Final Return)
May have to pay any outstanding tax dues, penalties, or interest
All GST liabilities before cancellation remain payable

🔹 Cancellation by Officer (Suo-motu)

Officer sends show cause notice (SCN) in Form GST REG-18
Taxpayer replies within 7 working days (Form GST REG-19)
If unsatisfactory, officer cancels registration
Taxpayer can appeal the order under GST law

🔹 Time Limit

Cancellation application is usually processed within 30 days from submission
Officer must complete suo-motu cancellation after due process within reasonable time

🔹 Summary Table

Step	Description
Voluntary Application	Taxpayer applies via GST REG-16
Officer Notice	Additional info requested via REG-17
Final Order	Cancellation order issued in REG-19
Suo-motu Cancellation	Officer initiates with SCN (REG-18)
Appeal	Taxpayer can appeal cancellation order

Job Worker under GST

🔹 Who is a Job Worker?

A Job Worker is a person who carries out any treatment or process on goods belonging to another registered person (called the Principal) without owning those goods.

The Job Worker performs a specific job or process on goods but does not take ownership of the goods.
The Principal retains ownership during and after the process.

🔹 Examples of Job Work

Dyeing or printing fabrics for a textile manufacturer
Component machining for an automobile manufacturer
Assembling parts on behalf of an electronics company
Manufacturing services on raw materials supplied by the Principal

🔹 Key Provisions under GST

Aspect	Details
Registration	Job workers need to register if aggregate turnover exceeds ₹20 lakhs (₹10 lakhs in some states).
Movement of Goods	Goods can be sent to a job worker without payment of tax under specific conditions.
Return of Goods	After processing, goods must be returned to the Principal within a specified time (usually 1 year for inputs, 3 years for capital goods).
Input Tax Credit (ITC)	The Principal can avail ITC on goods sent for job work. Job worker cannot claim ITC on goods they do not own.
Invoices	The Principal issues challans or invoices while sending goods to the job worker.

🔹 Movement of Goods for Job Work

The Principal can send raw materials or semi-finished goods to a Job Worker without paying GST by issuing a challan.
The goods must be returned or supplied within the prescribed period to avoid tax liability.
If goods are not returned within time, the Principal must pay tax as if the goods were supplied.

🔹 Registration of Job Worker

If turnover exceeds threshold, job worker must register.
Even if turnover is below threshold, voluntary registration is allowed.
Separate registration may be required if job worker operates in multiple states.

🔹 Tax Treatment

The Job Worker does not charge GST on the job work services if the goods belong to the Principal.
GST is payable when the job worker supplies goods or services on their own account.

🔹 Summary

Feature	Details
Definition	Person doing processing/treatment on goods of another
Registration Threshold	₹20 lakh / ₹10 lakh depending on state
Tax Payment	No GST on goods sent for job work (under challan)
Return Time	1 year (inputs), 3 years (capital goods)
ITC Benefit	Principal can claim ITC on inputs sent to job worker

Removal of Goods for Job Work under GST

🔹 What is Removal of Goods for Job Work?

Removal of goods for job work refers to the sending of raw materials, semi-finished goods, or inputs by the Principal to a Job Worker for processing, treatment, or manufacturing without transferring ownership.

🔹 Key Provisions

Aspect	Details
Without Payment of Tax	The Principal can send goods to the Job Worker without paying GST at the time of removal by issuing a challan instead of a tax invoice.
Challan in place of Invoice	A Delivery Challan must be issued when goods are sent for job work instead of an invoice.
Time Limit for Return	Goods sent for job work must be returned to the Principal within:
	– 1 year for inputs/raw materials.
	– 3 years for capital goods.
Taxable Event if Time Exceeded	If goods are not returned within the prescribed period, the Principal must pay GST as if the goods were supplied on the date they were sent out.
Goods Sent Outside State	If goods are sent to a job worker in another state, interstate supply rules apply, but tax is still not payable at removal if conditions are met.
No Transfer of Ownership	Ownership remains with the Principal during the job work process.

🔹 Documents Required

Delivery Challan containing:
- Details of goods
- Quantity
- Name and address of Principal and Job Worker
- Date and reason for removal (i.e., job work)
- Signature of authorized person

🔹 Return or Disposal of Goods

After job work, the goods must be:
- Returned to the Principal within the prescribed time, or
- Supplied by the Job Worker on behalf of the Principal within the prescribed time.

🔹 Consequences of Non-Compliance

If goods are not returned or supplied within the specified period, GST becomes payable on such goods at the time of removal.
The Principal must maintain proper records of goods sent and received.

🔹 Summary Table

Step	Detail
Goods removal without tax	Via delivery challan, no GST payable initially
Time limit for return	1 year (inputs), 3 years (capital goods)
Tax payable if time exceeded	GST payable as if goods were supplied
Document to be issued	Delivery Challan
Ownership during process	Remains with Principal

Sections Related to Job Work under GST

1. Section 143 – Job Work

Definition & Scope:
Section 143 defines Job Work and governs the movement of goods to and from a job worker without payment of tax.
Key Provisions:
- The Principal may send goods to a Job Worker for job work without payment of tax, subject to prescribed conditions.
- Goods sent for job work can be returned back to the Principal within 1 year for inputs and 3 years for capital goods without tax liability.
- If goods are not returned within the specified time, the Principal is liable to pay GST as if the goods were supplied on the date of removal.
Important:
Goods can also be supplied from the job worker’s premises by the Principal directly without attracting tax at the time of sending the goods for job work.

2. Section 2(68) – Definition of Job Work

Defines job work as any treatment or process undertaken by a person (Job Worker) on goods belonging to another registered person (Principal).

3. Section 143(2) – Time Limit for Return

Specifies the time limit within which goods must be returned to the Principal:
- Inputs/raw materials: within 1 year
- Capital goods: within 3 years
If goods are not returned within the time limit, tax becomes payable.

4. Section 143(3) – Transfer of Goods from Job Worker’s Premises

Allows the Principal to supply goods directly from the job worker’s premises without treating it as a supply by the Job Worker.

5. Section 16 – Input Tax Credit (Related)

The Principal is eligible to claim Input Tax Credit on goods sent for job work.
Job Worker cannot claim ITC on goods they do not own.

6. Rule 45 – Procedure for Job Work

Details the procedural aspects for sending and receiving goods for job work including documentation, time limits, and record-keeping.

📋 Summary Table

Section	Key Point
Section 2(68)	Defines job work
Section 143(1)	Goods sent for job work without payment of tax
Section 143(2)	Time limits for return of goods (1 & 3 years)
Section 143(3)	Supply from job worker’s premises allowed
Section 16	Input Tax Credit eligibility for Principal
Rule 45	Procedure and documentation

Illustration on Goods for Job Work

🧾 Scenario:

ABC Industries (Principal), registered in Maharashtra, manufactures automobile parts. It sends some unfinished metal parts to XYZ Engineering (Job Worker), also in Maharashtra, for machining and surface finishing.

🔹 Details of the Transaction:

Particulars	Details
Goods sent for job work	1,000 metal shafts
Date of removal	1st July 2025
Value of goods	₹5,00,000 (cost for ITC purposes)
Nature of job work	Machining and polishing
Job work charges	₹50,000 + GST
Return date of goods	20th July 2025

🔹 Steps & Tax Treatment:

Challan Issued:
1. ABC Industries issues a delivery challan (not a tax invoice) under Rule 45 to XYZ Engineering.
1. The challan includes quantity, description, HSN code, value, job work reason, etc.
Goods Sent Without GST:
1. No GST is charged at the time of sending goods to job worker as per Section 143(1).
Job Worker Performs Work:
1. XYZ Engineering completes the machining and finishing work.
Return of Goods:
1. The job-worked goods are returned within 1 year (only 20 days in this case).
1. Returned via delivery challan along with a tax invoice for job work services.
Invoice Raised:
1. XYZ Engineering raises a tax invoice for ₹50,000 + 18% GST = ₹59,000.
ITC Claim:
1. ABC Industries can claim input tax credit of ₹9,000 paid on job work charges.

🔹 Summary of Tax Impact:

Activity	GST Implication
Sending goods to job worker	✅ No GST – sent under delivery challan
Job work service by XYZ	✅ GST applicable on job work charges
Return of goods by job worker	✅ No GST – if returned within 1 year
ITC on job work charges	✅ Available to Principal

🔍 What if Not Returned Within 1 Year?

If the 1,000 metal shafts were not returned or supplied from the job worker’s premises by 30 June 2026, ABC Industries would have to pay GST treating it as a deemed supply as on 1 July 2025 (date of original dispatch).

🛠️ This illustration shows:

Practical application of Section 143
How to manage documentation and tax
Importance of time limits under job work rules

Clearance of Waste and Scrap – Job Work under GST

When goods are sent for job work, waste and scrap are often generated during the process. GST law provides specific guidelines for how such waste or scrap should be cleared and taxed.

🔹 Relevant Provision: Section 143(5) of CGST Act

“Waste and scrap generated during the job work may be supplied by the job worker directly from his premises, if he is registered under GST. Otherwise, it must be returned to the Principal and supplied by the Principal.”

🔍 Two Scenarios Explained

✅ Case 1: Job Worker is Registered

The job worker can directly sell the waste/scrap from their premises.
The job worker must:
- Issue a tax invoice
- Charge GST at applicable rates
- Pay the tax liability on their GSTIN
The Principal does not include this in their own GST returns.

🧾 Example:
XYZ Engineering (Registered Job Worker) generates 200 kg of scrap.
It sells it to a local dealer for ₹20,000 + 18% GST.
XYZ collects ₹3,600 as GST and deposits it.

✅ Case 2: Job Worker is Not Registered

The Principal must take back the scrap from the job worker.
The Principal is responsible for:
- Issuing the tax invoice for the sale
- Charging and paying GST
- Reflecting the sale in Principal’s GST returns

🧾 Example:
If XYZ Engineering (Unregistered) returns 200 kg of scrap to ABC Industries (Principal),
ABC can sell it and charge GST in their invoice.

📋 GST Rates on Waste/Scrap (Common Examples)

Type of Scrap/Waste	HSN Code	GST Rate
Iron & Steel Scrap	7204	18%
Aluminium Scrap	7602	18%
Plastic Waste or Scrap	3915	18%
Paper Scrap	4707	12%

✅ Always refer to latest GST rate notifications or HSN Code book.

🔐 Key Points to Remember

Sale of scrap is always taxable under GST unless specifically exempted.
Proper documentation (invoice, challan) is mandatory.
Maintain records of scrap generation and disposal for audit.

📦 Summary Table

Situation	Who Raises Invoice	Who Pays GST	Remarks
Registered Job Worker	Job Worker	Job Worker	Direct sale from job worker’s premises
Unregistered Job Worker	Principal	Principal	Scrap must be brought back

Restrictions for Inputs and Capital Goods Sent for Job Work

When a Principal sends inputs or capital goods to a Job Worker without payment of tax under Section 143 of the CGST Act, there are specific conditions and restrictions laid out to ensure compliance.

🔹 1. Time Limit Restriction

Item	Maximum Time Allowed to Return to Principal
Inputs	1 year from the date of dispatch
Capital Goods	3 years from the date of dispatch
Exemption	Moulds, dies, jigs, fixtures, tools — No time limit

⏳ If goods are not returned within these time limits, it will be deemed that the Principal supplied the goods to the job worker on the date of dispatch, and GST is payable accordingly.

🔹 2. Ownership Must Remain with the Principal

Goods sent for job work should not be transferred in ownership to the job worker.
If the job worker assumes ownership, it is treated as a taxable supply immediately.

🔹 3. Proper Documentation Required

Inputs/capital goods must be moved under a Delivery Challan.
The Principal must maintain:
- Challan details
- Quantity and description of goods
- Date of sending and return
- Place of job work

🔹 4. Reporting in GST Returns

Principal must declare details of goods sent for job work in Form GST ITC-04, covering:
- Goods sent to job worker
- Goods returned from job worker
- Goods supplied from job worker’s premises

📅 Must be filed quarterly or half-yearly depending on turnover.

🔹 5. No ITC on Lost or Unaccounted Goods

If any inputs or capital goods sent for job work are:
- Lost
- Destroyed
- Untraceable
  Then ITC is not allowed on such goods.

🔹 6. Capital Goods Condition

Capital goods must not be used for purposes other than job work.
No further manufacturing beyond the scope of job work is permitted unless allowed by the Principal.

📌 Summary Table of Key Restrictions

Aspect	Restriction
Time Limit for Inputs	Must return within 1 year
Time Limit for Capital Goods	Must return within 3 years
ITC Eligibility	Only if goods returned within time limit
Transfer of Ownership	Not allowed; else treated as supply
Record Keeping	Mandatory for both Principal and Job Worker
Reporting	Must be reported in Form GST ITC-04
Lost/Missing Goods	No ITC allowed

Registration Requirement for Job Worker under GST

Under the GST regime, whether a job worker needs to register depends on several factors such as turnover, place of business, and whether they are supplying goods on behalf of the Principal.

🔹 Who is a Job Worker?

A Job Worker is a person who undertakes processing or working on goods supplied by a Principal. The ownership of goods always remains with the Principal.

📘 When is Registration Mandatory for Job Workers?

✅ 1. If Aggregate Turnover Exceeds Threshold

A job worker is required to register if their aggregate turnover exceeds the prescribed limit:

Location	Threshold Limit for Registration
Normal Category States	₹20 Lakhs (₹10 Lakhs for NE/Hilly States)
Special Category (e.g., NE States)	₹10 Lakhs

🔎 Aggregate turnover includes job work charges and all other taxable supplies made.

✅ 2. If Supplying Goods from His Premises on Behalf of the Principal (Section 143(1))

If a job worker supplies the goods after job work from his own premises on behalf of the Principal, GST registration is mandatory, irrespective of turnover, if the Principal is not registered in the same state.

✅ 3. When Inter-State Supply is Made

As per Notification No. 10/2017 – IGST (Rate), a job worker is not required to register, even if inter-state supply of services is involved, provided the turnover is within the threshold limit.

🔄 Earlier inter-state supply required mandatory registration, but this was relaxed for job workers providing services only.

🚫 When is Registration Not Required for a Job Worker?

If:
- The aggregate turnover is below the threshold limit, and
- The job worker is not making supply of goods on behalf of the Principal, and
- The job worker is not making any inter-state taxable supply of goods,
  then registration is not required.

📝 Clarification by CBIC (Circular No. 38/12/2018)

A job worker is not considered an agent under Schedule I (no supply without consideration),
and hence goods sent for job work without payment under challan do not require registration unless the job worker crosses the turnover limit.

📦 Summary Table

Condition	Registration Required?
Aggregate turnover exceeds ₹20/10 lakhs	✅ Yes
Supplying goods from job worker’s premises (Principal in another state)	✅ Yes
Inter-state supply of job work services (within threshold)	❌ No
Job work within state + turnover below threshold	❌ No

Different Rates of Taxes under GST in India

Under the Goods and Services Tax (GST) regime, tax rates are classified across goods and services based on their nature, usage, and economic importance. GST follows a multi-slab rate structure.

📊 Main GST Rate Slabs

GST Rate	Description	Examples
0%	Exempted Goods and Services	Fresh fruits & vegetables, milk, education, health services
5%	Essential/Basic Goods & Services	Railway tickets, branded curd, small restaurants, footwear under ₹1000
12%	Standard Goods/Services (Lower Bracket)	Mobile phones, processed food, hotel rooms (₹1000–₹7500/night)
18%	Standard Goods/Services (Main Rate)	Capital goods, IT services, financial services, restaurants (AC)
28%	Luxury and Sin Goods	Cars, tobacco, aerated drinks, luxury items, betting

💡 Note: Some items under 28% slab attract compensation cess (e.g., tobacco, pan masala, luxury cars).

🔄 Other GST-Related Taxes

Type	Description
CGST	Central Goods & Services Tax (levied by Centre)
SGST/UTGST	State/Union Territory GST (levied by State/UT)
IGST	Integrated GST (on inter-state supply + imports/exports)
Compensation Cess	Additional tax on sin goods/luxury items (tobacco, coal, cars)

📘 Examples of Goods at Various GST Rates

GST Rate	Goods
0%	Wheat, milk, salt, printed books
5%	Edible oil, sugar, spices, transport services
12%	Toothpaste, umbrellas, garments above ₹1000
18%	Detergents, shampoo, steel utensils, mobile services
28%	Paint, cement, refrigerators, cars, motorcycles

📘 Examples of Services at Various GST Rates

GST Rate	Services
0%	Healthcare, education
5%	Transportation of goods/passengers, small restaurants
12%	Hotel stays (₹1000–₹7500/night), banking services
18%	Telecom, consultancy, software development
28%	Theme parks, racing events, cinema tickets over ₹100

🔍 How Are Rates Decided?

Rates are recommended by the GST Council.
Goods/services are classified under HSN (Harmonized System of Nomenclature) or SAC (Service Accounting Code).

🛠️ Special Cases

Composition Scheme Dealers pay tax at:
- 1% for traders (0.5% CGST + 0.5% SGST)
- 2% for manufacturers
- 5% for restaurants (without input credit)
Reverse Charge Mechanism (RCM) may apply — tax paid by recipient instead of supplier (e.g., legal services, GTA).

What is Input Tax Credit (ITC)?

Input Tax Credit (ITC) means the credit of GST paid on purchases (inputs, capital goods, and input services) that can be set off against the GST payable on sales (output supply).

🧾 Simply Put:

ITC is a mechanism to avoid double taxation. It allows businesses to claim credit for tax paid on purchases and reduce their tax liability on sales.

🛍️ Types of Inputs Eligible for ITC

Category	Meaning	Examples
Inputs	Goods used in production/supply	Raw materials, packing materials
Input Services	Services used in business	Legal, accounting, transportation services
Capital Goods	Assets used in business (long term)	Machinery, computers, office equipment

📌 Conditions to Claim ITC (Section 16 of CGST Act)

To avail ITC, the following conditions must be fulfilled:

✅ You must be a registered person under GST.
✅ You must have a valid tax invoice or debit note.
✅ Goods/services must be received.
✅ Supplier must have filed GST return and paid tax to the government.
✅ The invoice should be reflected in GSTR-2B.
✅ Goods should be used for business purposes.
✅ ITC must be claimed within time limit (see below).

⏳ Time Limit to Avail ITC

You must claim ITC by the earlier of:
- 30th November of the next financial year, or
- Date of filing annual return (GSTR-9)

🚫 Blocked Credits (Section 17(5)) – When ITC is Not Allowed

Not Allowed On	Example
Motor vehicles for personal use	Car used by director
Food and beverages, club memberships	Employee meals
Works contract services (except plant/machinery)	Building construction
Personal consumption	Goods used at home
Goods lost, stolen, or destroyed	Damaged stock in fire

🔄 How ITC Works – Practical Example

Let’s assume:

GST paid on purchases (input): ₹20,000
GST payable on sales (output): ₹30,000

📊 Calculation:

Particulars	Amount
Output GST Liability	₹30,000
Less: Input Tax Credit	₹20,000
Net GST Payable	₹10,000

✅ So, the business pays only ₹10,000 in cash and adjusts ₹20,000 from ITC.

🔀 Utilization Order of ITC

Input Credit	First Used For	Then Used For
IGST	IGST, then CGST, SGST
CGST	CGST, then IGST
SGST	SGST, then IGST

⚠️ CGST and SGST cannot be cross-utilized with each other.

📋 Important Notes

ITC cannot be claimed if you are under the composition scheme.
ITC should be reversed proportionally if inputs are used for exempted supplies or personal use.
Maintain proper invoices and records for audit purposes.

🧠 Summary: Benefits of ITC

✔ Reduces tax burden
✔ Eliminates cascading effect
✔ Increases working capital efficiency
✔ Encourages tax compliance in supply chain

What is Value Addition under GST?

Value Addition refers to the additional value created at each stage of the production and supply chain. Under GST, tax is levied only on the value added, and not on the total value of the good or service.

🧾 Why is Value Addition Important in GST?

GST is a value-added tax, meaning it’s collected at every point of sale where value is added.
Each person in the supply chain charges GST on their sales and takes credit for the GST paid on their purchases (via Input Tax Credit).

🔄 How Value Addition Works – Example

Let’s understand it with a practical supply chain example:

📦 Stage 1: Manufacturer

Cost of Raw Material: ₹100
Value Added: ₹50
Selling Price = ₹150
GST @18% = ₹27
Total Invoice Value = ₹177

GST Paid by Manufacturer to Government = ₹27

🛒 Stage 2: Wholesaler

Cost Price = ₹150
Adds Margin = ₹30
Selling Price = ₹180
GST @18% = ₹32.40
Total Invoice = ₹212.40

Wholesaler collects ₹32.40 as GST, but has paid ₹27 as ITC.
Net GST Payable = ₹32.40 – ₹27 = ₹5.40

🧰 Stage 3: Retailer

Cost Price = ₹180
Adds Margin = ₹20
Selling Price = ₹200
GST @18% = ₹36
Total Invoice = ₹236

Retailer collects ₹36 as GST, but takes ₹32.40 as ITC.
Net GST Payable = ₹36 – ₹32.40 = ₹3.60

📊 Summary Table

Stage	Sale Price	GST Collected	GST Paid (ITC Used)	Net GST Paid
Manufacturer	₹150	₹27	—	₹27
Wholesaler	₹180	₹32.40	₹27	₹5.40
Retailer	₹200	₹36	₹32.40	₹3.60

✔️ Total GST Paid to Govt = ₹27 + ₹5.40 + ₹3.60 = ₹36
✔️ This equals 18% of final consumer price of ₹200.

🎯 Key Takeaways

GST is paid only on value added at each stage, not total value.
Input Tax Credit mechanism helps avoid tax on tax (cascading effect).
The final consumer bears the full tax, while businesses act as tax collectors.

What is Input Tax Variable under GST?

The Input Tax Variable refers to the amount of GST paid on purchases (inputs) that can vary depending on:

the nature of supply (goods/services),
the supplier’s GST rate,
whether inputs are capital or revenue in nature,
eligibility for Input Tax Credit (ITC),
exemptions or restrictions under law.

It is not a fixed amount — it varies transaction-wise, hence called a “variable.”

🧾 Components of Input Tax Variable

Factor	Description
Type of Input	Goods, Services, or Capital Goods
Tax Rate on Input	GST rate applicable to the input (e.g., 5%, 12%, 18%, 28%)
Eligibility for ITC	Whether the tax paid is eligible for credit under Sec 16 & 17 of CGST Act
Time of Claiming ITC	Within due date — if delayed, credit is denied
Usage of Input	Business or personal — ITC only allowed for business use

🔄 Illustrative Example: Input Tax Variable

🎯 Scenario:

A company ABC Ltd. purchases the following for business use:

Item	Purchase Cost	GST Rate	GST Paid (Input Tax)	ITC Eligibility
Raw Material A	₹10,000	18%	₹1,800	✅ Yes
Laptop (Capital Goods)	₹50,000	18%	₹9,000	✅ Yes
Office Furniture	₹20,000	12%	₹2,400	✅ Yes
Lunch for Staff	₹5,000	5%	₹250	❌ No (Blocked Credit)
Car for Director (personal use)	₹8,00,000	28%	₹2,24,000	❌ No (Blocked)

📊 Result: Input Tax Variables Summary

Item	GST Paid	Eligible ITC	Not Eligible (Blocked Credit)
Raw Material A	₹1,800	₹1,800	—
Laptop	₹9,000	₹9,000	—
Furniture	₹2,400	₹2,400	—
Lunch for Staff	₹250	—	₹250
Car for Director	₹2,24,000	—	₹2,24,000

✅ Total GST Paid (Variable Input Tax): ₹2,37,450

💡 Total Eligible ITC: ₹13,200

❌ Total Ineligible (Blocked Credit): ₹2,24,250

🎓 Key Understanding

Input Tax Credit (ITC) is a variable amount.
Depends on input type, business usage, and lawful eligibility.
Not every GST paid on a purchase can be claimed — hence the variability.

Value of Goods for Tax under GST

The Value of Taxable Supply (also called Transaction Value) is the price actually paid or payable for the goods when sold, where both the supplier and recipient are not related and price is the sole consideration.

👉 It is the value on which GST is calculated.

📘 Section 15 of CGST Act, 2017 – Valuation of Supply

According to Section 15:

“The value of supply is the transaction value, i.e., the price actually paid or payable for the goods or services where the supplier and recipient are not related and price is the sole consideration.”

🔍 What All Is Included in the Value of Goods?

Included in Value	Example
✅ Price paid/payable	Selling price of goods
✅ Taxes (excluding GST)	Excise duty, customs (if not refunded)
✅ Incidental expenses	Packing, transport, loading by supplier
✅ Interest/late fee/penalty	For delayed payment by buyer
✅ Subsidies linked to price (except govt subsidies)	NGO or private subsidy received for specific customer

🚫 What is NOT Included in the Value?

Excluded from Value	Example
❌ CGST, SGST, IGST	These are levied separately
❌ Discount given before/in invoice	Trade discount shown in invoice
❌ Subsidy by government	Govt grants/subsidy to reduce cost

🧾 Formula to Calculate Value of Taxable Goods

text

CopyEdit

Transaction Value (Basic Price)

+ Extra Charges (freight, insurance, packing, interest)

+ Non-GST taxes, duties, fees

- Discounts (shown in invoice and agreed beforehand)

= Taxable Value for GST

📊 Example – GST Calculation on Value of Goods

Particulars	Amount (₹)
Basic Price	₹10,000
Packing Charges	₹500
Freight Charges	₹1,000
Discount (shown in invoice)	₹500
Total Taxable Value	₹11,000
GST @18%	₹1,980
Invoice Total	₹12,980

✅ GST is charged on ₹11,000, not on the basic price alone.

🧠 Key Points to Remember

Valuation is based on actual consideration.
You must add incidental charges before tax.
Discounts must be documented to be excluded.
Value must be determined objectively and fairly.

What is Utilization of Credit in GST?

Utilization of Credit refers to the order in which a registered taxpayer can use Input Tax Credit (ITC) of IGST, CGST, and SGST/UTGST to pay output GST liability.

GST laws have prescribed a specific order to utilize the available credits, to ensure proper cross-utilization and avoid revenue loss to the centre or states.

📊 Types of GST and Credits

Tax Type	Levied By	Applicable On	ITC Available As
IGST	Central (on behalf of Centre + State)	Inter-State supply	IGST Credit
CGST	Central Government	Intra-State supply	CGST Credit
SGST/UTGST	State Government	Intra-State supply	SGST/UTGST Credit

📌 Utilization Rules – Prescribed Order (Rule 88A + Section 49)

➤ Step 1: Use IGST Credit

First fully utilize IGST credit to pay:
- IGST
- then CGST
- then SGST/UTGST

➤ Step 2: Use CGST Credit

After IGST is used up:
- Use CGST credit to pay CGST
- Then (if any left), for IGST
- ❌ Not allowed for SGST

➤ Step 3: Use SGST/UTGST Credit

After IGST is used up:
- Use SGST credit to pay SGST
- Then (if any left), for IGST
- ❌ Not allowed for CGST

📘 Summary of ITC Utilization Order

Input Tax Credit	1st Used For	2nd Used For	Not Allowed For
IGST	IGST	CGST, SGST	—
CGST	CGST	IGST	SGST
SGST/UTGST	SGST	IGST	CGST

🔍 Example – Utilization of Credit

🧾 Example Scenario:

Particulars	Amount (₹)
Output IGST Liability	₹10,000
Output CGST Liability	₹5,000
Output SGST Liability	₹5,000
Available IGST Credit	₹12,000
Available CGST Credit	₹3,000
Available SGST Credit	₹4,000

🔄 Step-by-step Utilization

1️⃣ Use IGST Credit (₹12,000)

IGST Liability = ₹10,000 → Fully paid using IGST credit
IGST Credit left = ₹2,000

2️⃣ Use remaining IGST Credit (₹2,000) for CGST

CGST Liability = ₹5,000
₹2,000 from IGST used
Balance CGST Liability = ₹3,000

3️⃣ Use CGST Credit (₹3,000)

Pay remaining CGST liability = ₹3,000
✅ CGST Fully Paid

4️⃣ Use SGST Credit = ₹4,000

SGST Liability = ₹5,000
₹4,000 from SGST used
Balance SGST Liability = ₹1,000 (to be paid in cash)

✅ Final Summary

Tax Type	Liability	Paid via ITC	Paid in Cash
IGST	₹10,000	₹10,000	₹0
CGST	₹5,000	₹5,000	₹0
SGST	₹5,000	₹4,000	₹1,000

🎯 Key Points

IGST credit is most flexible – can be used anywhere.
Cross-utilization between CGST and SGST is not allowed.
Follow prescribed order strictly to avoid mismatch and interest.
Use GSTR-3B and GSTR-2B to reconcile credit.

Input Tax Credit (ITC) under CGST Law

✅ Legal Basis:

Section 16 of the CGST Act, 2017 — Eligibility and Conditions for taking Input Tax Credit.
Section 17 — Apportionment of Credit and blocked credits.
Section 18 — Availability of credit in special cases.
Section 19 — Taking input tax credit in respect of inputs and input services sent for job work.
Section 41 & 42 — ITC in case of provisional assessment and audits.
Rule 36 of CGST Rules — Conditions for claiming ITC (like invoices uploaded).

🔑 Key Provisions in Section 16 CGST Act:

Eligibility:
- Registered person can take credit of CGST paid on inputs, input services, and capital goods.
- Must possess a tax invoice or debit note.
- Goods and services must be used or intended to be used in the course or furtherance of business.
- Must have received the goods or services.
- Tax should have been paid to the government by the supplier.
Conditions:
- ITC can be claimed only if the recipient has furnished the return (GSTR-3B).
- ITC is available only if the supplier has filed their return and paid the tax.
- ITC must be claimed within 180 days from the date of invoice; otherwise, the credit lapses.

🚫 Blocked Credits under Section 17(5) CGST Act:

ITC is not available on:
- Motor vehicles (except used for certain purposes).
- Food, beverages, club memberships (except for specific cases).
- Goods/services used for personal consumption.
- Goods lost, stolen, destroyed, written off.
- Construction of immovable property (except under certain conditions).

📝 How to Claim CGST Input Tax Credit?

Invoice/Debit Note: Must have a valid tax invoice.
Receipt of Goods/Services: Confirm receipt of goods/services.
Return Filing: File monthly GSTR-3B with ITC details.
Matching of Invoices: Supplier must upload invoice details in GSTR-1.
Claim ITC in GST Returns: The ITC reflects in GSTR-2B for claiming.

⚖️ Legal Importance

Section 16 ensures credit can only be availed when proper compliance is met.
Prevents misuse by matching supplier and recipient data.
Ensures smooth flow of credit in the supply chain, reducing tax cascading.

Input Tax Credit on Raw Materials

What are Raw Materials?

Raw materials are the basic materials used by a manufacturer or producer to produce finished goods.
These materials form an integral part of the finished product.

🧾 ITC on Raw Materials

1. Eligibility

GST paid on raw materials can be claimed as Input Tax Credit by a registered manufacturer or business.
Conditions:
- Raw materials must be used or intended to be used in the course or furtherance of business.
- Proper tax invoices/debit notes must be available.
- Goods must be received by the recipient.
- Supplier must have paid the GST and filed returns.
- Recipient must file GSTR-3B and claim credit timely.

2. Benefits

Claiming ITC on raw materials reduces overall GST liability.
Avoids cascading effect of tax on tax.
Ensures cost-effectiveness in manufacturing.

🚫 Blocked ITC on Raw Materials

ITC will not be available if raw materials are used for:
- Personal use or non-business purposes.
- Goods/services falling under blocked credit as per Section 17(5).
- If supplier has not paid the tax or invoice is missing.

🔄 Utilization

ITC on raw materials is first utilized to pay output GST liability on supplies.
Proper records should be maintained for audit and reconciliation.

📊 Example

Description	Amount (₹)
Purchase Price	₹50,000
GST Paid (18%)	₹9,000
Eligible ITC	₹9,000
Use in Production	Yes
ITC Claimed in Return	₹9,000

📝 Summary

Aspect	Details
Nature of Item	Raw Material
GST Paid on Purchase	Eligible for ITC
Conditions for ITC	Invoice, Receipt, Use in Business
Blocked Credits	Personal use or disallowed categories
Benefit	Reduces GST payable, cost-effective

Capital Goods under GST

What are Capital Goods?

Capital goods mean goods used or intended to be used in the course or furtherance of business.
These are goods which are not raw materials or consumables but are used to produce goods or services.
Examples include:
- Machinery
- Equipment
- Tools
- Furniture
- Vehicles (used in business, subject to restrictions)
- Computers and office equipment

Definition as per GST Law (Section 2(19) of CGST Act):

“Capital goods” means goods, the value of which is capitalized in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business.

Conditions for Claiming Input Tax Credit on Capital Goods

Section 16 & 17 of CGST Act lay down conditions:

Possession of Tax Invoice or Debit Note
1. Must have a valid tax invoice/debit note issued by the supplier.
Receipt of Capital Goods
1. Must have received the capital goods.
Use in Business
1. Capital goods should be used or intended to be used for business purposes.
Filing of Returns
1. The claimant must have furnished the required GST returns (like GSTR-3B).
Tax Paid by Supplier
1. Supplier must have paid the GST to the government and filed their returns.
Time Limit for Claiming ITC
1. ITC must be claimed within 180 days from the date of invoice.
1. If not claimed within 180 days, the credit will lapse but can be claimed later by paying interest.
Blocked Credits
1. Some capital goods may be excluded, like motor vehicles used for personal purposes.

🛠️ Special Provisions for Capital Goods

Depreciation Adjustment (Section 43(6))
- If ITC is claimed on capital goods, depreciation claim on the GST portion of such goods in the Income Tax return is not allowed.
Reverse Charge Mechanism
- ITC on capital goods acquired under reverse charge can also be claimed subject to the above conditions.

📊 Example of ITC on Capital Goods

Particulars	Amount (₹)
Purchase Price (Machine)	₹1,00,000
GST @18%	₹18,000
Invoice Date	01-May-2025
ITC Claimed by	15-May-2025

Eligible to claim ₹18,000 ITC on the purchase of the machine within 180 days.

📝 Summary Table

Condition	Requirement
Valid Invoice	Yes
Receipt of Capital Goods	Yes
Use in Business	Yes
Returns Filed	Yes
Supplier Paid GST	Yes
Time Limit for Claiming ITC	Within 180 days
Blocked Credit Applies	Yes (e.g., personal use vehicles)

Manner of Taking Input Tax Credit (ITC)

1. Prerequisites for Claiming ITC

You must be a registered taxable person under GST.
Have a valid tax invoice or debit note issued by a registered supplier.
Have received the goods or services.
Goods or services are used or intended to be used in the course or furtherance of business.
The supplier must have paid the tax to the government and filed returns.
You must have filed the GST returns (like GSTR-3B) for the period in which you are claiming ITC.

2. How to Claim ITC

Enter details of inward supplies in GSTR-2B (auto-populated data).
Match the supplier’s details and invoices filed in their GSTR-1.
Claim eligible ITC in GSTR-3B return for the relevant tax period.
ITC can be claimed only if it appears in GSTR-2B or with supporting documents if manual claim.
Credit will be reflected in the electronic credit ledger once accepted.

3. Important Points on ITC

ITC must be claimed within 180 days from the date of invoice.
ITC should be reversed if goods/services are used partly for exempted supplies.
Certain credits are blocked (e.g., personal use, motor vehicles for personal use).
Proper documentation and records must be maintained.

📘 Example Illustrating Conditions for ITC

Scenario:

Company: ABC Pvt Ltd (registered under GST)
Purchased raw materials on 10th April 2025
Invoice Value: ₹1,00,000 + GST @18% = ₹18,000
Goods received on 12th April 2025
Supplier filed GST return and paid tax
ABC Pvt Ltd filed GSTR-3B for April 2025 on 20th May 2025
ABC Pvt Ltd intends to claim ITC in May 2025 return

Applying the Conditions:

Condition	Status	Result
Registered taxable person	Yes	Eligible
Valid tax invoice present	Yes (dated 10th April 2025)	Eligible
Goods received	Yes (12th April 2025)	Eligible
Supplier paid GST & filed return	Yes	Eligible
Buyer filed GSTR-3B for April	Yes	Eligible
ITC claimed within 180 days of invoice date	Yes (May filing for April purchase)	Eligible

✅ Outcome:

ABC Pvt Ltd can claim ITC of ₹18,000 in the return for the period of April 2025 or May 2025 (latest allowed within 180 days).

📝 Summary

Step	Action Required
1. Verify invoice	Valid and GST compliant invoice
2. Receive goods/services	Physical receipt or acceptance
3. Confirm supplier’s compliance	Supplier paid tax and filed return
4. File your return	GSTR-3B filed timely
5. Claim ITC in return	Match with GSTR-2B and claim credit

Documentary Requirements for Claiming ITC

1. Tax Invoice or Debit Note

Must possess a valid tax invoice or debit note issued by a registered supplier.
Invoice must show:
- Supplier’s GSTIN
- Recipient’s GSTIN
- Description of goods/services
- Quantity and value
- Rate and amount of GST charged
- Invoice number and date

2. Receipt of Goods or Services

Proof of receipt of goods or services is essential.
Examples:
- Delivery challan signed by recipient
- Goods receipt note
- Service acceptance document or contract

3. GST Returns Filed by Supplier

Supplier must have filed the relevant GST returns (especially GSTR-1) with details of the invoice.
Tax should be paid to the government by the supplier.

4. GST Returns Filed by Recipient

Recipient must have filed their GSTR-3B and other applicable returns declaring the ITC.

5. Payment of Tax

The tax charged on the invoice must have been paid to the government either in cash or through utilization of ITC.

6. Other Documents (if applicable)

Bill of Entry for imported goods.
Job work receipt documents if ITC is claimed on goods sent to job workers.
Input service distribution records, if ITC is distributed among units.
Payment vouchers for reverse charge mechanism.

📝 Summary Table

Document Type	Purpose/Use
Tax Invoice / Debit Note	Evidence of GST paid on purchase
Delivery Challan / Receipt	Proof of receipt of goods/services
Supplier’s GST Returns	Verification of tax payment and filing
Recipient’s GST Returns	Declaration and claiming of ITC
Bill of Entry (for imports)	Customs clearance and ITC claim
Payment Vouchers	For reverse charge or other special cases

Solving an Input Tax Credit (ITC) Problem with a practical example:

🔍 Understanding the Problem

Suppose you are a manufacturer who purchases raw materials and capital goods on which GST is paid. You want to calculate how much Input Tax Credit you can claim, and how it impacts your GST liability.

🛠️ Example Problem

Given:

Particulars	Amount (₹)
Purchase of Raw Materials (excluding GST)	1,00,000
GST paid on Raw Materials (18%)	18,000
Purchase of Capital Goods (excluding GST)	50,000
GST paid on Capital Goods (18%)	9,000
Output Sales (excluding GST)	2,00,000
Output GST collected (18%)	36,000
GST Paid on Motor Vehicle (personal use)	20,000

🧮 Step 1: Calculate Total Input Tax Credit Eligible

ITC on Raw Materials = ₹18,000 (eligible)
ITC on Capital Goods = ₹9,000 (eligible)
ITC on Motor Vehicle (personal use) = ₹20,000 (blocked, not eligible)

Total ITC Eligible = ₹18,000 + ₹9,000 = ₹27,000

🧮 Step 2: Calculate GST Liability

Output GST Collected = ₹36,000
Less: ITC Eligible = ₹27,000

Net GST Payable = ₹36,000 – ₹27,000 = ₹9,000

📝 Step 3: Summary

Particulars	Amount (₹)
Output GST Collected	36,000
Less: Total ITC Eligible	27,000
GST Payable to Government	9,000

🔑 Key Takeaways

Input Tax Credit can only be claimed on goods and services used for business.
Credit on blocked goods like motor vehicles for personal use is not allowed.
Proper invoices and compliance must be maintained to claim ITC.
ITC reduces the overall GST liability.

Installment Payment against an Invoice under GST

What is Installment Payment?

Sometimes, a buyer may not pay the full invoice amount at once.
Instead, payment is made in installments over a period of time.
The question arises: How does GST and ITC work when payment is made in installments?

🧾 GST and ITC Treatment for Installment Payments

1. GST Liability

GST is payable on the full invoice value at the time of supply (not on installment basis).
The supplier must discharge GST on the full invoice amount irrespective of installments.

2. Input Tax Credit by Buyer

ITC can be claimed by the buyer only on the amount actually paid to the supplier.
If payment is made in installments, ITC can be claimed proportionately based on installment payments.

3. Section 16(2)(c) of CGST Act

ITC is available only if the buyer has paid the supplier for the invoice (either fully or partially).
The ITC claim is restricted to the amount paid to the supplier.

📝 Example: Installment Payment and ITC

Particulars	Amount (₹)
Invoice value (including GST)	₹1,18,000 (₹1,00,000 + 18% GST)
Installment 1 Paid	₹59,000
Installment 2 Paid	₹59,000

ITC Claim:

After 1st installment:
- ITC eligible = GST portion of ₹59,000 = ₹9,000 (approx)
- Buyer can claim ITC of ₹9,000 only after paying this installment.
After 2nd installment:
- ITC eligible = remaining GST ₹9,000
- Buyer claims remaining ITC after paying second installment.

🔑 Summary

Point	Details
GST Payment by Supplier	On full invoice value at supply time
ITC Claim by Buyer	Only on amount paid to supplier
Partial Payment (Installments)	ITC claimed proportionately

Reversal of Input Tax Credit (ITC)

What is Reversal of ITC?

Reversal of ITC means the process of returning or paying back the credit claimed earlier.
It arises when the ITC availed is not fully eligible, or conditions for ITC are no longer met.
The taxpayer must reverse the credit and pay the corresponding tax and interest.

📝 When Does Reversal of ITC Occur?

Blocked Credits
Certain goods and services are not eligible for ITC, such as personal use goods or motor vehicles for personal use.
Use for Exempted or Non-Business Purpose
If goods/services are partly used for exempt supplies or non-business activities, proportionate ITC must be reversed.
Non-Payment to Supplier within 180 Days
If payment for supply (invoice value + GST) is not made within 180 days from invoice date, ITC claimed must be reversed.
Goods Lost, Stolen, Destroyed, or Written Off
ITC on such goods must be reversed.
Sale of Capital Goods or Inputs on which ITC Claimed
Proportionate reversal is required on sale or disposal.
Erroneous ITC Claimed
If ITC claimed wrongly or fraudulently, reversal plus penalty is required.

⚖️ Legal Provisions for Reversal

Section 16(2)(c): ITC must be reversed if payment to supplier is not made within 180 days.
Section 17(2): Lists blocked credits.
Section 17(3): Provides for apportionment of ITC if inputs used partly for exempt supplies.
Rule 37 & 39 of CGST Rules: Procedures for reversal of ITC and payment of interest.

🔢 How to Reverse ITC?

Calculate the amount of ITC to be reversed based on the proportion of ineligible usage or non-payment.
Include the reversed amount in the outward taxable supplies in GSTR-1.
Pay tax on the reversed ITC amount along with interest (if applicable).
Adjust the electronic credit ledger accordingly in GSTR-3B.

🧮 Example of ITC Reversal due to Non-Payment

Particulars	Amount (₹)
Invoice Value (incl. GST)	1,18,000
ITC Claimed (GST portion)	18,000
Payment made within 180 days	₹90,000 (Partial)
Balance payment after 180 days	₹28,000

Action:

ITC on ₹28,000 (proportionate GST = 4,200) must be reversed.
Pay ₹4,200 as tax along with interest.
Reclaim ITC only after payment is made.

🔑 Summary Table

Cause of Reversal	Reference Section	Action Required
Non-payment in 180 days	Section 16(2)(c)	Reverse ITC, pay tax & interest
Use for exempt/non-business	Section 17(3)	Apportion and reverse ITC proportion
Blocked credits	Section 17(2)	Do not claim ITC
Sale of capital goods	Rule 42	Proportionate reversal
Goods lost/destroyed	Section 16(2)(aa)	Reverse ITC

Tax on Capital Goods under GST

What are Capital Goods?

Capital goods are goods used in the business for producing other goods or services.
Examples: machinery, computers, vehicles used in business (except personal use vehicles), tools, etc.

🔍 GST on Capital Goods

When capital goods are purchased, GST is paid on the purchase price.
Input Tax Credit (ITC) can be claimed on GST paid on capital goods, subject to conditions.
If capital goods are sold, GST is applicable on the sale value.

🧮 How to Calculate GST on Capital Goods Purchase?

Formula:

GST Amount=Purchase Price (excluding GST)×GST Rate\text{GST Amount} = \text{Purchase Price (excluding GST)} \times \text{GST Rate}GST Amount=Purchase Price (excluding GST)×GST Rate

📘 Example 1: Purchase of Capital Goods

Purchase price of machinery (excluding GST): ₹5,00,000
GST rate: 18%

Calculation:

GST=₹5,00,000×18%=₹90,000GST = ₹5,00,000 \times 18\% = ₹90,000GST=₹5,00,000×18%=₹90,000

Total invoice value = ₹5,00,000 + ₹90,000 = ₹5,90,000
ITC claimable on ₹90,000 GST paid (subject to conditions).

🧾 Example 2: Sale of Capital Goods

Sale price of used machinery (excluding GST): ₹3,00,000
GST rate: 18%

Calculation:

GST=₹3,00,000×18%=₹54,000GST = ₹3,00,000 \times 18\% = ₹54,000GST=₹3,00,000×18%=₹54,000

Total sale invoice = ₹3,00,000 + ₹54,000 = ₹3,54,000
GST to be paid by the seller on this sale.

Important Points:

ITC on capital goods must be reversed proportionally if used partly for exempt supplies.
If capital goods are disposed or sold, GST must be paid on the transaction.
Capital goods have a useful life of 5 years for ITC reversal if partly used for exempt supplies.

Specified Supply of Goods and Services under GST

What is a Specified Supply?

Certain goods and services are classified under “specified supplies” due to their special nature or treatment under GST.
These supplies may have special rules for tax rates, exemptions, reverse charge, or restricted Input Tax Credit.

🔍 Categories of Specified Supplies

Exempted Supplies
1. Supplies on which no GST is charged.
1. Examples: Education services, healthcare services, unprocessed food grains, etc.
Zero-Rated Supplies
1. Export of goods/services or supplies to SEZ (Special Economic Zone).
1. GST rate is zero, but input tax credit can be claimed.
Deemed Supplies
1. Transactions treated as supply even if not a sale or purchase.
1. Example: Goods sent for job work, transfer between branches.
Reverse Charge Supplies
1. The recipient pays GST instead of the supplier.
1. Examples: Services by a goods transport agency, legal services by an advocate to a business.
Mixed and Composite Supplies
1. Composite supply: Two or more supplies naturally bundled and supplied in conjunction.
1. Mixed supply: Two or more supplies made together but can be supplied separately.
Supplies liable to Composition Scheme
1. Small taxpayers paying GST at a fixed rate on turnover.
1. Limited ITC availabilities.

📝 Examples of Specified Supplies

Type	Examples	Special Treatment
Exempted	Education, healthcare, basic food	No GST charged, no ITC on inputs
Zero-Rated	Export of goods, supplies to SEZ	GST at 0%, full ITC claimable
Reverse Charge	Legal services, GTA services	Recipient pays GST
Deemed Supply	Goods sent for job work	Treated as supply under GST
Composite Supply	Mobile phone with warranty	Tax rate on principal supply
Mixed Supply	Gift pack of chocolates + toys	Tax rate on highest rated item

🔑 Why Specified Supply Matters?

Affects how GST is calculated and paid.
Impacts eligibility and amount of Input Tax Credit.
Determines compliance procedures (like filing returns, payment responsibility).

Works Contract Services under GST

What is a Works Contract?

A Works Contract is a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, repair, maintenance, renovation, or alteration of any movable or immovable property.
It involves a combination of goods and services.
It is treated as a supply of service under GST.

🔍 Key Features of Works Contract

Composite Supply:
1. Works contract is a composite supply involving both goods (like materials) and services (like labor and skill).
1. Tax is charged on the total value of the contract.
Taxability:
1. GST is applicable on the entire contract value, not separately on goods and services.
Valuation:
1. The value includes the cost of materials and services provided.
1. In cases where goods supplied under the contract are taxable at a different rate, specific valuation rules apply.
Place of Supply:
1. For immovable property, the place of supply is where the property is located.

🧾 Examples of Works Contract Services

Type of Work	Description
Construction of Building	Building a house or commercial complex
Repair and Maintenance	Fixing or refurbishing a building
Installation	Installing machinery or equipment
Fabrication	Manufacturing a customized structure

📜 Legal Provisions

Section 2(119) of CGST Act: Defines Works Contract.
Schedule II of CGST Act: Treats Works Contract as supply of service.
Notification 11/2017 – CGST: Specific rules for taxation of Works Contract.

🧾 GST Rate on Works Contract

Generally, GST rate is 18% on works contract services.
Certain works related to affordable housing or specific sectors may have concessional rates.

💡 Important Points

Input Tax Credit can be claimed on inputs and input services used in works contract.
Separate bills for goods and services are not mandatory; the contract value is treated as a whole.
Works contract service providers must comply with GST invoicing and return filing.

Concept of Construction Services under GST

What are Construction Services?

Construction Services refer to any work related to the building, erection, installation, completion, repair, maintenance, renovation, or alteration of any building, civil structure, or other immovable property.
These services involve the use of materials, labor, machinery, and skill to create or improve immovable property.

🔍 Key Features of Construction Services

Includes Various Activities:
1. Construction of residential and commercial buildings.
1. Construction of roads, bridges, dams, tunnels.
1. Repair, maintenance, renovation, and alteration of buildings or structures.
1. Installation of equipment as part of construction.
Composite Supply Nature:
1. Like works contract, construction services often involve both goods (materials) and services (labor, design, supervision).
Tax Treatment:
1. Considered as supply of services under GST.
1. Tax is charged on the aggregate value of the service including materials supplied.
Place of Supply:
1. Place of supply for construction services related to immovable property is the location of the property.

📜 Legal Reference

Schedule II of the CGST Act, 2017 classifies construction services as services.
Section 2(119) defines works contract which includes construction services.
GST Council notifications specify tax rates and other rules.

🧾 GST Rates on Construction Services

Generally, GST is charged at 18% on construction services.
Reduced rates or exemptions apply to:
- Affordable housing projects.
- Certain government projects or public-private partnership (PPP) projects.

🧩 Examples of Construction Services

Service Type	Description
Building Construction	Construction of houses, apartments, offices
Infrastructure Construction	Roads, bridges, tunnels, airports
Repair & Renovation	Repair or remodeling of existing buildings
Installation Services	Installing lifts, HVAC systems during construction

💡 Important Points

Input Tax Credit is available on inputs and input services used for construction.
Construction service providers must issue proper GST-compliant invoices.
Proper documentation and compliance are essential for GST filings.

Concept of Input Tax Credit (ITC) on Construction Services

What is ITC?

Input Tax Credit (ITC) allows a taxpayer to claim credit for the GST paid on inputs, input services, and capital goods used in the course of business.
ITC reduces the tax liability by offsetting the GST paid on purchases against GST payable on outward supplies.

🔍 ITC on Construction Services

When can ITC be claimed?

ITC can be claimed on GST paid on goods and services used for providing construction services.
This includes:
- Raw materials (cement, steel, bricks, etc.)
- Input services (contractor services, design consultancy, etc.)
- Capital goods (machinery, tools, equipment used in construction)

⚠️ Restrictions on ITC in Construction Services

Blocked Credits (Section 17(5))
ITC is not available on:
1. Motor vehicles (except when used for specific purposes like transportation of goods or passengers)
1. Goods and services for personal consumption
1. Works contract services for construction of immovable property except when used for further supply of works contract service or for business premises, plant, or machinery.
Works Contract for Own Use
If construction is for own use (e.g., own house), ITC is generally not available.
Construction of Immovable Property
ITC is allowed if the construction is for:
1. Further supply of works contract service (like sub-contracting)
1. Use in business (office building, factory, etc.)
1. Plant and machinery.

🧾 Practical Examples

Scenario	ITC Eligibility
Construction of own residential house	ITC NOT available
Construction of commercial office building	ITC available
Works contract service provided to another business	ITC available
Purchase of cement for repair of own building	ITC not available if for personal use

📜 Relevant Sections and Rules

Section 16(1): Eligibility and conditions for ITC.
Section 17(2) & 17(5): Blocked credits and restrictions.
Rule 36(4): Conditions on claiming ITC on invoices.

💡 Important Tips

Maintain proper documentation (invoices, payment proofs) to claim ITC.
Ensure GST compliance by matching ITC claims with supplier’s outward returns.
Segregate inputs used for business and personal purposes.
Regularly reconcile ITC with GSTR-2B for accurate claims.

Input Tax Credit (ITC) on Capital Goods

What are Capital Goods?

Capital goods are goods used in the course or furtherance of business but are not meant for sale.
Examples: Machinery, computers, vehicles (used for business), tools, furniture, office equipment.

🔍 ITC Eligibility on Capital Goods

GST paid on capital goods can be claimed as ITC if these goods are used for business purposes.
Capital goods include both tangible goods (like machinery) and certain intangible goods (like software licenses).

⚠️ Conditions for Claiming ITC on Capital Goods

Invoice and Payment:
1. Must possess a tax invoice or debit note.
1. Payment to the supplier must have been made.
Receipt of Goods:
1. Goods must be received.
Used in Business:
1. Capital goods must be used or intended to be used in the course of business.
GST Compliance:
1. Supplier should have filed returns with correct details.

⏳ Time Limit to Claim ITC on Capital Goods

ITC on capital goods can be claimed within 5 years from the date of the invoice.

🔄 Reversal of ITC on Capital Goods

If capital goods are partly used for exempt supplies or non-business purposes, ITC must be proportionally reversed.
If capital goods are sold or disposed of before 5 years, ITC reversal applies.

🧾 Example

Purchase of machinery for ₹10,00,000 + GST @18% = ₹1,80,000 GST paid.
Eligible ITC claim = ₹1,80,000 (assuming full business use and other conditions met).

📜 Relevant Provisions

Section 16(1): Eligibility of ITC.
Section 17(5)(d): Blocked credits.
Section 16(4): Time limit to claim ITC.
Section 18: Apportionment and blocked credits.
Section 18(6): Reversal in case of capital goods partly used for exempt supplies.

💡 Important Points

Keep proper documentation for audit and verification.
Maintain records of capital goods for at least 5 years.
Understand the concept of block credits and avoid claiming ITC on ineligible goods.

Manner of Claiming Input Tax Credit (ITC) under GST

Step 1: Possession of Tax Invoice or Debit Note

You must have a tax invoice or debit note issued by a registered supplier.
The invoice should clearly mention GST charged.

Step 2: Receipt of Goods or Services

Goods or services must be received.
In case of continuous supply of goods/services (like electricity), ITC can be claimed based on receipt of periodic invoices.

Step 3: Filing of GST Returns

Claim ITC in GSTR-3B return of the month to which the invoice relates.
The supplier must have uploaded the invoice details in GSTR-1 and filed returns.

Step 4: Matching of Invoices

The invoice details uploaded by the supplier in GSTR-1 are matched with the recipient’s GSTR-2B or GSTR-2.
ITC is allowed only if there is a matching invoice in supplier’s return.

Step 5: Payment of Tax by Supplier

The supplier should have paid the GST to the government.
ITC is not allowed if the supplier has not paid tax or filed returns.

Step 6: Claim in Electronic Credit Ledger

Once the ITC is validated, it gets credited to the recipient’s Electronic Credit Ledger.
This credit can be utilized for payment of output tax liability.

Step 7: Utilization of ITC

ITC can be utilized in the following order:
- CGST credit for payment of CGST.
- SGST credit for payment of SGST.
- IGST credit can be used for payment of IGST, CGST, and SGST (in that order).
ITC cannot be used for payment of penalties, interest, or fees.

Important Notes:

ITC must be claimed within prescribed time limits (usually within 180 days from invoice date).
If ITC is not claimed within time, it lapses.
ITC cannot be claimed on blocked goods or services (Section 17(5)).

📘 Example of Claiming ITC

Step	Description
Invoice Received	₹1,00,000 + ₹18,000 GST (18%)
Supplier Uploaded Invoice	Supplier reports invoice in GSTR-1
Buyer Claims ITC	Claims ₹18,000 in GSTR-3B for that month
Credit Available	₹18,000 credited to Electronic Credit Ledger
Credit Utilized	Used to pay output GST liability

Value of Supply under GST

📘 What is “Value of Supply”?

The Value of Supply is the transaction value — that is, the price actually paid or payable for the goods or services when the supplier and recipient are unrelated, and the price is the sole consideration for the supply.

📜 Legal Reference

Section 15 of the CGST Act, 2017 governs the determination of value of supply.
It includes not just the price of goods/services but also other charges like taxes (except GST), packing, freight, etc.

📦 Inclusions in Value of Supply

According to Section 15(2), the value shall include:

Component	Explanation
Taxes other than GST	Like municipal taxes, if charged separately
Incidental expenses	Packing, commission, loading/unloading, etc.
Interest, late fee or penalty	For delayed payment
Subsidies linked to price	Subsidies (excluding government subsidies) directly linked to the price
Reimbursements	Any amount paid by recipient on behalf of supplier

🚫 Exclusions from Value of Supply

GST itself
Discounts given before or at the time of supply, if mentioned on invoice
Post-supply discounts are excluded only if:
- They are established in an agreement entered before or at the time of supply.
- The recipient reverses proportionate ITC.

🧾 Example 1: Basic Value Calculation

Details:

Product Price: ₹10,000
Packing Charges: ₹500
Freight: ₹1,000
Discount on invoice: ₹500

Value of Supply =
₹10,000 + ₹500 + ₹1,000 – ₹500 = ₹11,000

GST will be calculated on ₹11,000.

🧾 Example 2: Including Late Fees

Invoice Value: ₹20,000
Late Fee for delayed payment: ₹1,000

Value of Supply = ₹21,000

💡 Special Cases Where Transaction Value is Not Acceptable

If:

Supplier and recipient are related parties
Price is not the sole consideration

In such cases, value is determined using Valuation Rules, such as:

Open market value
Value of like goods/services
Cost + 10% method
Best judgment method

🧮 Summary of Valuation Methods under Rules

Method	When Used
Open Market Value	If available, this is the preferred method
Like Kind & Quality	When similar goods/services exist
Cost-Based Valuation	Cost of supply + 10% margin
Residual Method	Based on reasonable means (best judgment)

Transaction Value as Value of Supply under GST

📘 What is Transaction Value?

Under Section 15(1) of the CGST Act, 2017, the transaction value is:

“The price actually paid or payable for the supply of goods or services or both, where the supplier and recipient are not related, and price is the sole consideration for the supply.”

This transaction value becomes the value of supply on which GST is calculated.

✅ Conditions for Using Transaction Value as Value of Supply

To accept the transaction value as the value of supply:

Condition	Must Be Fulfilled
Supplier and recipient are not related	✅ Yes
Price is the only consideration	✅ Yes

If any of the above conditions are not met, then Valuation Rules under GST must be applied.

🧾 Example: Basic Transaction Value

Price charged by seller: ₹10,000
No relationship between supplier and buyer
Price is sole consideration

✅ Transaction value = ₹10,000
If GST @18%, then total invoice = ₹10,000 + ₹1,800 = ₹11,800

📦 What is Included in Transaction Value?

As per Section 15(2), these must be added if not already included:

Included Items	Example
Taxes (other than GST)	Entry Tax, Octroi
Incidental expenses	Packing, loading, commission
Interest or late fees	Charged on late payment
Amount paid on supplier’s behalf	Like transportation paid by recipient
Subsidies linked to price	Except government subsidies

🚫 What is Excluded from Transaction Value?

Excluded Items	Explanation
GST itself	GST is calculated on the transaction value
Pre-supply discounts on invoice	Allowed, if shown on invoice
Post-supply discounts	Allowed only if:

Established in contract
ITC reversed proportionately |

🧮 Illustration: Complete Transaction Value

Particulars	Amount (₹)
Basic Price	20,000
Packing Charges	1,000
Freight	1,500
Discount (shown on invoice)	-500
Total Transaction Value	22,000
GST @18%	3,960
Invoice Value	25,960

🚦 When Transaction Value is NOT Acceptable

If any of the following exists:

Buyer and seller are related parties
There is non-monetary consideration
Price is not the sole consideration

Then, GST Valuation Rules must be followed (like open market value or cost-based value).

Who is a Related Person under GST?

Under Section 15 of the CGST Act, and as per Explanation to Rule 2(1)(c) of the Valuation Rules, certain persons or entities are considered “related persons”. When a supply is made between related persons, the transaction value may not be accepted as the value of supply — and valuation rules apply instead.

🔎 Definition of Related Persons (Rule 2 of Valuation Rules)

Two persons shall be deemed to be “related” if:

✅ They are officers or directors of one another’s businesses

E.g., Director of Company A is also a Director in Company B.

✅ They are legally recognized partners in business

E.g., Partners in an LLP or a partnership firm.

✅ They are employer and employee

E.g., A company providing services or goods to its own employee.

✅ Any person directly or indirectly owns, controls or holds 25% or more of voting stock/shares

E.g., If A owns 30% shares in both Company X and Company Y.

✅ One of them directly or indirectly controls the other

E.g., Holding-subsidiary relationships.

✅ Both are controlled by a third person

E.g., Two sister companies controlled by the same parent company.

✅ They are members of the same family

Family includes spouse, children, parents, grandparents, siblings, etc.

🔁 Effect of Being Related Persons

When supply is made between related persons:

Aspect	Rule Applied
Transaction Value Valid?	❌ Not acceptable
Value of Supply Determined By	✅ Valuation Rules (open market value, etc.)

🧾 Example Scenarios

🔹 Example 1: Between Holding and Subsidiary

Holding Co. A sells goods to its subsidiary Co. B.
Since they are related persons, transaction value is not accepted.
Value must be determined using open market value or cost-based methods.

🔹 Example 2: Employee Benefits

Company provides laptop worth ₹60,000 to its employee.
Employee is a related person.
It is considered a supply, and tax is payable on fair market value.

📘 Important Note:

Supplies between distinct persons (branches or units of the same company in different states) are also treated like related persons, even if they’re not legally separate entities — due to different GSTINs.

🧠 Summary Table

Relationship Type	Related Person?
Parent and Subsidiary Company	✅ Yes
Employer and Employee	✅ Yes
Director in both companies	✅ Yes
Partner A and Partner B in the same firm	✅ Yes
Two unrelated private companies	❌ No

Taxes, Duties, Cesses, Fees & Charges – Under GST Law

📘 Legal Provision – Section 15(2)(a), CGST Act

“The value of supply shall include any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST laws, if charged separately by the supplier to the recipient.”

✅ Inclusions in Value of Supply

These charges are added to the transaction value when:

They are charged separately in the invoice
They are levied under any law other than CGST, SGST, UTGST, or IGST

Type	Example
Taxes	Excise duty (if any for old stock), Entry Tax (if applicable in certain states)
Duties	Customs Duty on imports
Cesses	Swachh Bharat Cess, Education Cess
Fees	Inspection Fees, Registration Fees
Charges	Local Body Tax (LBT), Octroi (pre-GST)

Note: GST is not calculated on GST. But it is calculated on all other taxes/charges included in the invoice amount.

❌ Exclusions from Value of Supply

Item	Included?
CGST / SGST / IGST / UTGST	❌ No
Pre-supply Discounts (on invoice)	❌ No
Government Subsidy	❌ No

🧮 Illustration: Invoicing with Additional Taxes/Fees

Suppose a supplier sells machinery with the following:

Base price: ₹1,00,000
Environmental Fee: ₹2,000
Local Municipality Tax: ₹1,000
GST @18%

➤ Value of Supply =

₹1,00,000 + ₹2,000 + ₹1,000 = ₹1,03,000

➤ GST @18% =

₹18,540

➤ Invoice Total =

₹1,03,000 + ₹18,540 = ₹1,21,540

✅ Both the Environmental Fee and Local Tax are included in taxable value because they are not GST and are charged separately.

📌 Why This Is Important

Helps ensure correct computation of GST
Avoids underpayment or overpayment
Ensures compliance under Section 15(2)

Items to be Included in Value of Taxable Supplies (Section 15(2), CGST Act)

The value of taxable supply means the amount on which GST will be levied. According to Section 15(2), certain additional amounts must be included in this value even if they are charged separately.

✅ List of Items to be Included in Value of Supply

Sl. No.	Items to be Included	Explanation / Example
1️⃣	Taxes, duties, cesses, fees, and charges (except GST)	Any tax under any law (like Customs Duty, Entry Tax), if charged separately
2️⃣	Amount paid by recipient on behalf of supplier	Recipient pays for packaging or freight; it must be included if not reimbursed
3️⃣	Incidental expenses	Expenses like packing, inspection, loading/unloading — incurred by supplier
4️⃣	Interest, late fee or penalty for delayed payment of consideration	If a buyer delays payment and pays interest/penalty, it must be added to value
5️⃣	Subsidies directly linked to price (excluding government subsidies)	If a third-party subsidy reduces price, the full value must be taxed (including subsidy)

🧾 Practical Illustration

Suppose a supplier sells machinery with the following components:

Base Price: ₹1,00,000
Packing Charges: ₹2,000
Freight Charges: ₹3,000
Interest for Late Payment: ₹1,000
Discount (shown on invoice): ₹2,000
GST Rate: 18%

➤ Value of Taxable Supply:

CopyEdit

= Base Price + Packing + Freight + Interest – Discount

= ₹1,00,000 + ₹2,000 + ₹3,000 + ₹1,000 – ₹2,000

= ₹1,04,000

➤ GST Amount @18%:

matlab

CopyEdit

= 18% of ₹1,04,000 = ₹18,720

➤ Invoice Total:

CopyEdit

= ₹1,04,000 + ₹18,720 = ₹1,22,720

🚫 Not to be Included in Value of Supply

Item	Included?	Reason
GST itself (CGST/SGST/IGST)	❌	GST is calculated on the value, not part of it
Discounts (on invoice)	❌	Allowed if recorded on invoice
Government Subsidy	❌	Specifically excluded under the law

🧠 Quick Checklist: To Include in Value of Supply

✔️ Freight/Transportation charges
✔️ Packing/Loading charges
✔️ Interest/Penalty for late payment
✔️ Third-party price-based subsidy
✔️ Any tax/duty other than GST
✔️ Any amount paid on supplier’s behalf

Understanding Discounts in GST

Under GST, discounts can be allowed as a deduction from the value of supply only if certain conditions are met.

Section 15(3) categorizes discounts into two types:

1️⃣ Discounts Given Before or At the Time of Supply

✅ Allowed as Deduction from Value of Supply

But only if it is:

Clearly recorded on the invoice, and
Given at the time of sale

📘 Example: Pre-Supply Discount (Invoice Discount)

A dealer sells a refrigerator for ₹20,000
Offers a 10% discount on MRP (₹2,000)
GST rate: 18%

Taxable Value = ₹18,000
GST = ₹3,240 (18% of ₹18,000)
Total Invoice Value = ₹21,240

✅ Since the discount is shown on the invoice, it is deducted for GST purposes.

2️⃣ Discounts Given After the Supply (Post-Supply Discounts)

✅ Allowed as Deduction ONLY IF:

It is established in terms of an agreement made before or at the time of supply
It is linked to specific invoices
The recipient reverses the proportionate ITC related to the discount

📜 These are often volume-based or performance-based discounts.

📘 Example: Post-Supply Discount (Volume Discount)

Manufacturer sells goods to Dealer A worth ₹5,00,000 in April
As per contract, if purchases exceed ₹10,00,000 in a quarter, a 5% discount is allowed
In June, total purchases = ₹12,00,000
So, post-supply discount = ₹60,000

🧾 This ₹60,000 can be reduced from the value of supply only if:

There was a prior agreement, and
Dealer reverses ITC of the GST portion on ₹60,000

✅ Then, a credit note can be issued and GST liability adjusted.

❌ If Conditions Are Not Met?

If post-supply discount:

Is not agreed upon in advance, or
Cannot be linked to the original supply, or
ITC is not reversed by the recipient

👉 Then GST must still be paid on the original value — discount is NOT allowed as deduction.

🔁 Comparison Table

Type of Discount	Time of Discount	Deduction Allowed?	Conditions
Pre-Supply Discount	Before or on invoice	✅ Yes	Must be shown on invoice
Post-Supply Discount	After supply	✅ Conditional	Must be pre-agreed, invoice-linked, and ITC reversed by recipient
Cash Discounts	After supply	❌ No	Not allowed unless conditions under 15(3)(b) are satisfied

Legal Background: Section 15 + Valuation Rules (Rule 27 to 35)

While Section 15 of the CGST Act lays down the general principles, Rules 27 to 35 of the CGST Rules, 2017 specify how to determine the value when:

Consideration is not wholly in money
Parties are related
Supply is made through agents
There is no consideration (deemed supply)
Or for foreign currency conversion, pure agents, lottery, vouchers, etc.

🧮 Key Valuation Rules & Their Applications

Rule	Scenario	Valuation Method
Rule 27	Consideration not wholly in money	Open market value or sum total of money + monetary equivalent
Rule 28	Supply between related persons/distinct persons	Open market value or like kind and quality
Rule 29	Supply through agent	Open market value or 90% of price charged by recipient agent
Rule 30	Cost-based valuation	110% of cost of production/acquisition
Rule 31	Residual method	Reasonable means consistent with GST principles
Rule 31A	Lottery, betting, gambling, actionable claims	Prescribed % of face value or notified value
Rule 32	Special cases (e.g., foreign currency, air travel agents, insurers)	Specified methods
Rule 33	Pure agent supplies	Deducted from value, subject to conditions
Rule 34	Rate of exchange for currency	RBI reference rate
Rule 35	Value inclusive of GST	Use formula to back-calculate taxable value

✅ Rule-Wise Explanation with Examples

🔹 Rule 27: Consideration Not Wholly in Money

Example: Buyer gives ₹10,000 + 1 old printer in exchange for a new printer.

Open market value of new printer = ₹15,000
So, value of supply = ₹15,000
If open market value not known, then = ₹10,000 + value of old printer

🔹 Rule 28: Supply Between Related/Distinct Persons

Applicable when:

Related parties (e.g., employer to employee)
Branch transfers (same PAN, different states = distinct persons)

Example: Head Office (Delhi) sends goods to Branch (Mumbai)

OMV = ₹1,00,000 → That will be value
If goods are for further supply, then value can be 90% of resale price

🔹 Rule 29: Agent-Based Supply

When principal supplies goods through agent:

Example: Principal supplies goods to agent at ₹10,000; agent sells at ₹12,000.

Value = Open market value or
90% of ₹12,000 = ₹10,800 (if further supply by agent)

🔹 Rule 30: Cost Method

If OMV not available, then:

Value = 110% of cost of production/acquisition

Example: Cost of goods = ₹1,000 → Value = ₹1,100

🔹 Rule 31: Residual Method

Use reasonable means consistent with Section 15 principles.

Example: Barter or rare custom goods — use fair market estimate.

🔹 Rule 33: Pure Agent

A pure agent recovers expenses on behalf of the client.

✅ These amounts are not included in value if:

Payments made to third party on behalf of client
Expenditure is separately indicated
No markup charged

Example: CA pays ROC fees on behalf of client and bills it separately — not part of taxable value.

🔹 Rule 35: Inclusive of GST

Formula:

Value of supply=Invoice value×100100+GSTRate\text{Value of supply} = \frac{\text{Invoice value} × 100}{100 + GST Rate}Value of supply=100+GSTRateInvoice value×100

Example: Invoice = ₹1,180 (incl. 18% GST)

→ Taxable value = ₹1,000, GST = ₹180

🧠 Summary Table

Scenario	Rule	Method Used
Non-monetary part in consideration	27	OMV / comparable value
Related party or branch transfer	28	OMV / 90% of resale price
Agent sale	29	OMV or 90% of resale price
Cost basis	30	110% of cost
No proper method	31	Residual
Pure agent recovery	33	Deducted if conditions met
GST-inclusive price	35	Backward calculation formula

Open Market Value (OMV) under GST

📜 Definition:

As per Rule 27 & Rule 28 of the CGST Rules, 2017:

“Open Market Value” of a supply of goods or services is the full value in money, excluding GST, payable by a person at arm’s length for the same supply, at the same time, and in the same market under similar circumstances.

🎯 When is OMV used?

OMV is used when:

Consideration is not wholly in money (Rule 27)
Parties are related or supply is between distinct persons (Rule 28)
Goods are supplied through agents (Rule 29)

🔹 Example 1: Consideration not wholly in money (Rule 27)

A dealer exchanges an old laptop + ₹20,000 for a new one.

OMV of the new laptop: ₹45,000
Old laptop has no standard price

✅ Value of supply = ₹45,000 (OMV), even though money part is only ₹20,000

🔹 Example 2: Between Distinct Persons (Rule 28)

Head Office (HO) in Delhi transfers goods to its Branch Office in Maharashtra.

OMV (sale price to normal customers): ₹10,000
Value of such inter-state stock transfer (distinct persons) = ₹10,000

✅ OMV is used because no consideration is charged between HO and branch.

🔹 Example 3: Supply Through Agent (Rule 29)

Manufacturer supplies goods to agent who further sells to customer.

Agent sells it to customer at ₹1,200
OMV = ₹1,200 or 90% of this = ₹1,080 can be taken as taxable value

✅ OMV helps ensure tax is paid on fair transaction value.

❓What if OMV is not available?

Use next best method in this order:

Value of goods/services of like kind and quality
Cost method (110% of cost) – Rule 30
Residual method (reasonable means) – Rule 31

📌 Key Points to Remember

Aspect	Description
Use of OMV	When money is partly/non-involved, related party, agent, or stock transfer
Excludes GST	OMV is always considered excluding GST
Must reflect fair value	Price should be market-driven, not under-invoiced

Supply Between Distinct or Related Persons (Other Than Agent) under GST

Under GST law, supply of goods or services between distinct persons or related persons is treated as a taxable supply, even if made without consideration (free of cost)—provided it falls under Schedule I of the CGST Act.

🔍 Key Concepts:

✅ 1. Distinct Persons (Section 25(4) & (5) of CGST Act):

Distinct persons refer to different registrations of the same legal entity in different states or union territories.

Example: ABC Ltd. registered in Delhi and also in Maharashtra — both are distinct persons.

Supply between them is taxable, even if goods/services are transferred without payment.

✅ 2. Related Persons (Explanation to Section 15 of CGST Act):

Related persons include:

Employer and employee
Officers or directors of one another’s business
Entities under common control or management
Family members
Sole agent, sole distributor, etc.

Such supplies are taxable even without consideration, if done in the course or furtherance of business.

📘 Schedule I (Without Consideration):

“Supply of goods or services between related persons or between distinct persons (as specified in Section 25), when made in the course or furtherance of business, shall be treated as supply even if made without consideration.”

📊 Example – Supply Between Distinct Persons:

ABC Ltd has:

Branch A: Registered in Maharashtra
Branch B: Registered in Karnataka

Branch A transfers stock to Branch B:

Even without charging any value or consideration,
It is taxable under GST
Requires tax invoice and GST payment
ITC available to Branch B (if eligible)

📊 Example – Supply Between Related Persons:

Mr. X owns:

X Manufacturing Pvt Ltd
Y Trading Pvt Ltd (both under his control)

X Manufacturing provides free R&D services to Y Trading:

This is considered a taxable supply under GST
Needs to be valued at open market value or by prescribed rules

📄 Valuation Rule (Rule 28 – CGST Rules):

When supply is between distinct or related persons, the value shall be:

Open Market Value (OMV), or
If OMV not available – Value of like kind and quality, or
Cost + 10%, or
Recipient ITC eligible? — then invoice value accepted as transaction value (proviso to Rule 28).

🚫 Exception – Agent Transactions:

This rule does not apply to agents — they are covered separately under Schedule I clause 3.

✅ Summary Table:

Type of Supply	Consideration	Taxable under GST?
Distinct persons (Same PAN, different states)	No	Yes
Related persons (within same state or not)	No	Yes
Unrelated persons	No	No (unless covered otherwise)

The Ultimate GST Handbook: Navigating Goods and Services Tax in India

Taxable Event under GST – In Detail

Practical Illustration of GST – Supply as a Taxable Event

Scenario:

Step-by-Step GST Calculation

1. Nature of Supply

2. Details of the Supply

3. GST Amount Calculation

4. Invoice Summary

5. Journal Entry (Accounting View)

Explanation:

📌 Optional Add-On: Credit Available to Buyer

✅ Conclusion

Meaning and Scope of Supply under GST

1. Introduction

2. Legal Definition of Supply (Section 7 of CGST Act)

Section 7(1) states that “Supply” includes:

Section 7(1A):

Section 7(2):

3. Important Components of Supply

(i) Involvement of goods or services or both

(ii) Supply must be made for consideration

(iii) Must be in the course or furtherance of business

(iv) Made by a taxable person

4. Scope of Supply – Key Inclusions

a) Barter and Exchange

b) Deemed Supplies (without consideration) – Schedule I

c) Import of Services

d) Composite and Mixed Supplies

5. Exclusions from the Scope of Supply – Schedule III

6. Examples of Supply

7. Conclusion

What is an Activity under GST?

✅ Activities under GST: Explanation and Illustration

🔷 1. What is an Activity under GST?

🔹 2. Types of Activities under GST

🔹 3. Examples of Activities

🧾 4. Practical Illustration

💼 Scenario: Sale of Goods

🛫 Scenario: Export of IT Services

🧑‍🏫 Scenario: Educational Services

✅ Summary

Supply Analysis under GST: Full Explanation

🔷 1. What is “Supply” under GST?

🔹 2. Key Elements of Supply

🔹 3. Types of Supply under GST

🔹 4. Schedule I: Supply without Consideration (Still Taxable)

🔹 5. Schedule II: Classification of Goods vs. Services

🔹 6. Place, Time, and Value of Supply

🧾 7. Practical Examples of Supply Analysis

✅ Example 1: Renting Shop Space

✅ Example 2: Export of Software Services

✅ Example 3: Free Sample Distribution

✅ Example 4: Transfer of Goods Between Branches

✅ Summary Table

📌 Final Notes

Activities Constituting Supply under GST

🔷 Definition of Supply under GST

🔹 Key Activities Treated as Supply

🔹 Activities Specified in Schedules of CGST Act

🧾 Schedule I – Supplies without Consideration (Still Taxable)

🧾 Schedule II – Classification of Supply

🧾 Practical Examples of Supply Activities

✅ Example 1: Sale of Goods

✅ Example 2: Rental of Property

✅ Example 3: Free Gift to Employee

✅ Example 4: Barter Exchange

✅ Summary Table: Activities Considered Supply

📌 Conclusion

Schedule III of CGST Act: Activities Neither Treated as Supply of Goods Nor as Supply of Services

🔷 Why Schedule III is Important?

🔹 List of Activities under Schedule III

🔹 Explanation of Major Items

✅ 1. Services by an employee to employer

✅ 2. Sale of land and completed building

✅ 3. Services by courts or tribunals

✅ 4. Actionable Claims (except lottery/gambling)

🧾 Practical Examples

✅ Impact of Schedule III on Business

📌 Final Summary