BASAVA GOODS AND SERVICE TAX ACT-2017

GST is considered as an indirect tax for the whole nation that would make India one
unified common market. It is a tax which is imposed on the sale, manufacturing and the
usage of the goods and services. It is a single tax that is imposed on the supply of the goods
and services, right from the manufacturer to the customer. The credits of all the input taxes
which are paid at each and every stage would be allowed in the subsequent stages of value
addition that makes GST basically a tax on value addition only at every stage. The final
consumers will bear only the tax charged by the last dealer in the supply chain with the set
of benefits that are at all the previous stages.

It is charged at the national and state level at similar rates for the same products and
it also replaces almost all the current indirect taxes that are imposed separately by the
Centre and the States. Goods & Services Tax is a destination based tax which means that
the tax is paid at the place of supply.

Business Vertical: Means a distinguishable component of an enterprise that is engaged in

the supply of individual goods or services or a group of related goods or services which is
subject to risks and returns that are different from those of the other business verticals.

Explanation: - For the purposes of this clause, factors that should be considered in
determining whether goods or services are related include:

(a) The nature of the goods or services;

(b) The nature of the production processes;
(c) The type or class of customers for the goods or services;
(d) The methods used to distribute the goods or supply of services; and
(e).The nature of regulatory environment (wherever applicable), including banking,
insurance or public utilities;

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 a contract of supply.

Service:

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.
Aggregate Turnover:

Means the aggregate value of all taxable supplies (excluding the value of inward
supplies on which tax is payable by a person on reverse charge basis), exempt supplies,
exports of goods or services or both and inter-State supplies of persons having the same
Permanent Account Number, to be computed on all India basis but excludes central tax,
State tax, Union territory tax, integrated tax and cess;

Agent:

Means a person, including a factor, broker, commission agent, arhatia, del credere
agent, an auctioneer or any other mercantile agent, by whatever name called, who carries
on the business of supply or receipt of goods or services or both on behalf of another

Voucher:

Means an instrument where there is an obligation to accept it as consideration or

part consideration for a supply of goods or services or both and where the goods or services
or both to be supplied or the identities of their potential suppliers are either indicated on
the instrument itself or in related documentation, including the terms and conditions of use
of such instrument

Supply:

Supplier: in relation to any goods or services or both, shall mean the person supplying the
said goods or services or both and shall include an agent acting as such on behalf of such
supplier in relation to the goods or services or both supplied.

Outward Supply: in relation to a taxable person, means supply of goods or services or both,
whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other
mode, made or agreed to be made by such person in the course or furtherance of business.

Inward Supply: in relation to a person, shall mean receipt of goods or services or both
whether by purchase, acquisition or any other means, with or without consideration.

Consideration: in relation to the supply of goods or services or both includes

A. Any payment made or to be made, whether in money or otherwise, in respect of, in

response to, or for the inducement of, the supply of goods or services or both,
whether by the recipient or by any other person but shall not include any subsidy
given by the Central Government or a State Government.

B. The monetary value of any act or forbearance, in respect of, in response to, or for
the inducement of, the supply of goods or services or both, whether by the recipient
or by any other person but shall not include any subsidy given by the Central
Government or a State Government.
Provided that a deposit given in respect of the supply of goods or services or both shall not
be considered as payment made for such supply unless the supplier applies such deposit as
consideration for the said supply

Principal Supply: Means the supply of goods or services which constitutes the predominant
element of a composite supply and to which any other supply forming part of that
composite supply is ancillary.

Composite Supply: Means a supply made by a taxable person to a recipient consisting of

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

For example: Where goods are packed and transported with insurance, the supply of goods,
packing materials, transport and insurance is a composite supply and supply of goods is a
principal supply.

• Composite supply shall be treated as supply of the principal supply.

Mixed Supply: Means two or more individual supplies of goods or services, or any
combination thereof, made in conjunction with each other by a taxable person for a single
price where such supply does not constitute a composite supply.

For Example: A supply of a package consisting of canned foods, sweets, chocolates, cakes,
dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply.
Each of these items can be supplied separately and is not dependent on any other. It shall
not be a mixed supply if these items are supplied separately.

• Mixed supply would be treated as supply of that particular goods or services which
attracts the highest rate of tax.

Meaning & Scope of “Supply”

1. In GST Regime all supply such as sale, transfer, barter, lease, Import of services etc.
of goods and/ or services made for a consideration will attract CGST and SGST.

A supply specified in Schedule-I made or agreed to be made without

consideration.

2. Schedule-II in respect of matters mentioned therein shall apply for determining what
is, or is to be treated as a supply of goods or a supply of services.

3. Following activities shall be treated neither as a supply of goods nor a supply of

services.
a) Activities or transactions specified in Scheduled-III or
 b) Activities or transactions undertaken by the central Govt., a State Govt. or any
local authority in which they are engaged as public authorities as specified in
scheduled IV

Schedules-I (Supply without Consideration)

1. Permanent transfer/disposal of business assets where ITC has been availed on such
assets.

2. Supply of goods and services between related persons, or between distinct persons
as specified in section 10 when made in the course of business.

3. Supply of Goods- By a principal to his agent or by an agent to his principal.

Scheduled-II (Matters to be treated as goods or services)

1. Goods: - Transfer of title in goods, Transfer at a future date, Banks selling assets.

2. Services: - Transfer of right in goods without transfer of title, Lease of Immovable

Property/Land, Use of business assets for private purpose, Declared Services,
Treatment/Process which applied to another person goods.

Scheduled-III (Following shall be treated neither as a supply of goods nor a supply of

services.)

1. Services by an employee to the employer in the course of or in relation to his

employment.

2. Services by any court or tribunal established under any law for the time being in
force.
3. The Functions performed by MP, MLA, Members of Panchayat / Muncipalities /Local
Authorities etc.

4. The duties performed by any person as a Chairperson/Member/Director in a Body

established by the CG or SG or Local Authority

5. Services by a foreign diplomatic mission located in India.

6. Services of Funeral, Burial, Crematorium or mortuary including transportation of the

deceased.
GST Payable as per time of Supply (The Liability to pay GST arises at the earliest)

1. Goods: - Removal of goods or receipt of payment or issuance of Invoice or Date on

which buyer shows receipt of goods.

2. Services: - Issuance of invoice or receipt of payment or date on which recipient

shows receipt of services.

Determining Place of Supply could be the Key

1. At present Inter State supply of goods attract CST Now its provides that an interstate
supply of goods and / or services will attract IGST.

2. In case of goods the place of supply would be location where the goods are
delivered.

3. And In case of Services the place of supply would be Location of Service Recipient.

Valuation in GST

GST would be payable on the ‘Transaction value’ is the price actually paid or payable
for the said supply of goods and/or services between un-related parties.

Includes packing, commission, subsidies and discounts/incentives if it is allowed after

supply.

Excludes Discounts/Incentives given before or at the time of supply will be

permissible as a deduction from transaction value.

Sections 15(4) explains that, where the value of the supply of goods or services or
both cannot be determined under sub-section (1), the same shall be determined in
such manner as may be prescribed.

Rule:

1. Where the consideration is not wholly in money.

2. Supply is between distinct/related persons, other than through an agent.
3. Supply made or received through an agent.
4. Supply based on cost.
5. Residual Method.
6. Determination of value in respect of certain supplies.
7. Value of supply of services in case of pure agent.
8. Value of supply inclusive of CGST, SGST, Integrated Tax, Union Territory Tax.
INPUT TAX CREDIT

Prologue:
Finally the long awaited Single Indirect Tax Regime GST Law received the assent of
the President on the 12th day of April, 2017. GST Law extends to whole of India except the
State of Jammu and Kashmir. It supercedes about 17 indirect tax laws which eliminate the
Cascading-Effect (“Tax on Tax”). GST is destination/consumption based taxing method thus
the term “supply” of goods/ services plays a vital role in GST. GST is similar to existing VAT
system i.e., Tax on Value Addition. Input Tax Credit is the backbone of the GST regime

Input Tax Credit:

Input tax credit means the credit available in the Electronic Ledger (E-Cash Ledger or
E-Credit Ledger) of a Registered Person in the form of Central tax (CGST), State tax (SGST),
integrated tax (IGST) or Union territory tax (UTGST) charged on supply of goods or services
or both made to another Registered Person. It includes tax paid on reverse charge basis and
IGST charged on Import of Goods but does not include tax paid under composition levy.

Section 49 (5) specifies manner of utilizing the input tax credit as follows:
i) IGST shall first be utilized towards payment of IGST, then remaining towards
payment of CGST and SGST / UTGST
ii) CGST shall first be utilized towards payment of CGST, then remaining towards
payment of IGST
iii) SGST shall first be utilized towards payment of SGST, then remaining towards
payment of IGST
iv) UTGST shall first be utilized towards payment of UTGST, then remaining towards
payment of IGST
v) The CGST SHALL NOT be utilized towards payment of SGST or UTGST
vi) The SGST or UTGST SHALL NOT be utilized towards payment of CGST
vii) The remaining balance either in E- Cash Ledger or E-Credit Ledger after payment
of Tax, Interest, Penalty, Fee or any other amount payable may be refunded in
accordance with provisions of section 54

Eligibility and Conditions to Claim ITC:

1. To avail input tax credit in respect of any supply of goods or services or both the
Registered Person should possess a tax invoice or debit note raised by registered
supplier or any other document as listed below

a. An Invoice issued U/S 31

b. An Invoice prepared in respect of Reverse Charge basis U/S 9(3) and U/S 9(4)
c. A Debit Note issued U/S 34
d. Bill of Entry or similar documents under Customs Act,1962
e. An ISD Invoice or ISD Credit Note or Any other document issued by Input
Service Distributor U/R 7(1) for distribution of credit referred U/R 4(1)(g)

2. The document should contain all the prescribed particulars and the details are to be
furnished in FORM GSTR-2.
 3. ITC is not available on any tax paid in pursuance of order demanded on account of
fraud, willful misstatement or suppression of facts

4. Registered Person should have received the goods or service. If received in lots or
instalments Registered Person is entitled to take input credit only upon receipt of
last lot or instalment. Registered person is deemed to have received the goods if
supplier delivers to an agent, by way of transfer of document of title, before or
during the movement of goods as directed by him.

5. Tax should actually be paid either in cash or through utilization of input credit

6. Other than supplies on which tax is payable on reverse charge basis, the recipient
should pay the amount towards the value of supply of goods or services or both
along with tax payable within 180 days from the date invoice issued by the supplier.
If not the ITC availed shall become output tax liability of that recipient along with
interest. Such output tax liability is eligible to be taken as credit by that recipient

7. If Depreciation is claimed on the tax component of cost of capital goods and plant
and machinery for Income Tax purposes then ITC is not allowed on such tax
component

8. Return should be furnished under section 39 in FORM GSTR 2

9. ITC in respect of invoice or debit note pertaining to F.Y.2017-18 is entitled for

claiming only up to
o Return filed U/S 39 for September 2018 (or) Whichever
o Annual Return filed is earlier

Apportionment of credit:

CASE A - ITC based on usage in business

Where the goods or services or both are used by the registered person partly for the
purpose of any business and partly for other purposes, the amount of credit shall be
restricted to so much of the input tax as is attributable to the purposes of his business.

CASE B - ITC based on use of Inputs

Where the goods or services or both are used by the registered person partly for
effecting taxable supplies and partly for effecting exempt supplies, the amount of credit
shall be restricted to so much of the input tax as is attributable to the said taxable supplies.
 CASE A CASE B

Partly
Partly
Taxable
Business Purposes Supply* ITC Available
ITC Available
only attributable
only attributable to TAXABLE
to BUSINESS Supply
purposes
Partly
Partly
Exempt Supply#
Other Purposes

*Taxable supply includes zero rated supply

#Exempt supply includes supply taxed on reverse charge

basis, transaction in securities, sale of land & sale of building
CASE C -Banking & Finance

Banks /FIs including NBFCs, engaged in supplying services by way of accepting

deposits, extending loans or advances shall either
i.) Follow CASE – B (above) or
ii.) Furnish details in FORM GSTR – 2 and avail 50% of admissible ITC every
month

Note: The option once exercised is same throughout that F.Y

Blocked Credits / Ineligible ITC:

ITC shall not be available on the following

1. Motor vehicles and other conveyances except the following categories

Used in following
Taxable supplies

further supply of such imparting training on driving,

for transportation of transportation of
vehicles or flying, navigating such vehicles
goods passengers
conveyances or conveyances
 2. Credit of Input tax is blocked on Supply of Goods or Services or Both as following.
following

*Food and Beverages

*Outdoor Catering *Rent-A-Cab
*Membership of *Travel Benefits
*Beauty Treatment *Life Insurance extended to employees
i) A Club
*Health Services *Health Insurance on vacation such as
ii) Health & leave or home travel
*Cosmetic & "Note 1"
iii)Fitness Centre concession.
*Plastic Surgery "Note 2"
"Note 1"

“Note1”: ITC is eligible when these inward supplies of goods or services or both are used for
making an outward taxable supply of the same category of goods or services or both or used
as an element of a taxable composite or mixed supply

“Note2”: ITC is eligible where

re the Government notifies the services which are obligatory for
an employer to provide to its employees under any law for the time being in force

3. Works contract services when supplied for construction of immovable

property(other than Plant & Machinery), except where it is an input service for
further supply of works contract service;

4. Goods or services received by a taxable person for construction of an immovable

machinery even when used
property on his own account, other than plant and machinery,
in course or furtherance
rtherance of business;

Construction Plant & Machinery

Includes
•Apparatus,
•Equipment,
•Machinery
Machinery fixed to
earth by foundation
and structural support*
#Construction Excludes
•Land,
•Building
•or
or any other civil
structures.
•Re-construction
•Telecom
Telecom Tower
•Renovation
•Pipelines
Pipelines laid
•Additions
outside the factory
• Alterations
premises
•Repairs

# To the extent of capitalization, relating *That

That are used for making outward supply of
to such immovable property. goods or services or both and includes such
foundation and structural support
 5. Goods or Services or Both on which tax has been paid under section 10
(Composition Levy)

6. Goods or Services or Both received by a non-resident taxable person except on

goods imported by him

7. Goods or Services or Both used for personal consumption

8. Goods lost/ stolen/ destroyed/written off or disposed of by way of gift or free

samples

9. Any tax paid U/S 74, 129 or 130.

Availability of credit in special circumstances:

Circumstance 1 - Newly Registered Person

 When a person becomes liable to register he should apply for registration within
thirty days from the date he becomes liable to register
 Consider he is liable to pay tax w.e.f. 1st August 2017 but he is granted such
registration on 15th August 2017
 He is entitled to take credit of input tax in respect of inputs held in stock and inputs
contained in semi-finished or finished goods held on 31st July 2017

Circumstance 2 - Voluntary Registration

 When a person applies registration U/S 25(3) (Voluntary Registration)

 Let’s assume he applies on 5th June 2017 and obtained registration on 22nd June
2017
 He is entitled to take credit of input tax in respect of inputs held in stock and inputs
contained in semi-finished or finished goods held in stock on 21st June 2017

Circumstance 3 - Crosses the Compounding Threshold

 Hypothetically, a Registered Person who was paying tax U/S 10(Composition

Scheme) becomes liable to pay tax under regular scheme w.e.f. 31st July 2017.
 He shall take credit for ITC on the inputs held as stock, inputs contained in semi
finished/finished goods in stock, even on capital goods (which shall be reduced by
5% points per quarter of a year or part thereof) held on 30th July 2017.

Circumstance 4 - Exempted Goods became Taxable

 If a person dealing in exempted goods or services or both becomes taxable supply

 Hypothetically, such goods become taxable w.e.f. 1stApril 2018.
  He shall take credit for ITC on the inputs held as stock, inputs contained in semi
finished/ finished goods in stock (relatable to such exempt supply), even on capital
goods (used for such exempt supply)(which shall be reduced by 5% points per
quarter of a year or part thereof) held on 31st March 2018.

Manner and conditions for claiming credit in above circumstances

 Within 30 days from the date of becoming eligible to avail of ITC on above 4
circumstances
 The registered person shall make declaration in FORM GST ITC – 01and furnish
details
 If the aggregate claim exceeds Rs.2 lakhs, then a Certificate from a chartered
accountant should be obtained
 Tax invoice date must not be older than one year to claim ITC
 ITC of 3rd and 4th circumstances shall be verified with the corresponding details
furnished by the corresponding supplier in FORM GSTR-1 or FORM GSTR-4
respectively

Circumstance 5 - Change in Constitution

 If there is UNUTILIZED ITC during the course of sale, merger, demerger,

amalgamation, lease or transfer of the business with a specific provision for transfer
of liabilities
 Registered Person shall furnish the details in FORM GST ITC – 02 along with a
Certificate from a Chartered Accountant to transfer the SAME into the Electronic
Credit Ledger of the concerned party due to change in the constitution.

Circumstance 6 – Regular to Composition Scheme or Taxable to Exempt

 Situation 1: When a Registered Person who was taxable under regular scheme opts
to pay tax U/S.10 (composition scheme) w.e.f. 1st July 2017
 Situation 2: When the taxable goods/services under regular scheme supplied by a
Registered Person become wholly exempt w.e.f. 1st July 2017
 In both situations, he should first nullify his electronic credit or cash ledger by paying
an amount equivalent to the credit of ITC on the inputs held as stock, inputs
contained in semi finished / finished goods in stock, even on capital goods (which
shall be reduced by 5% points per quarter of a year or part thereof) held on 30th June
2017
 If after payment of such amount, any balance of ITC in his electronic credit ledger
shall lapse.
Circumstance 7 - Sale of Capital Goods

 If capital goods or plant and machinery is disposed after utilizing ITC in the first
place, Registered Person shall pay an amount equivalent to
o Input Tax Credit taken on Capital Goods
(Reduced by 5% points every quarter or part thereof) Whichever is higher
Or
o The tax on the transaction value of such Capital Goods

 Note: But if refractory bricks, moulds & dies, jigs & fixtures are supplied as scrap,
then tax may be paid on the transaction value as per Section 15
 To summarize, the credit of input tax can be taken as and when the person applies
for the registration but the entitlement of credit of inputs would be from the day
liability to tax arises.

ITC on JOB Work:

Principal referred u/s 143 shall take ITC on Inputs/Capital Goods sent to job worker
either Directly or through Principal’s Place of Business provided within TIME LIMITS the job
worker supplies back to Principal’s Place of business else it is DEEMED AS SUPPLY of Input/
Capital goods in the hands of Principal.
Principal U/S 143

Principal’s
“Place of Business”

Inputs/Capital Goods
Directly

{JOB WORKER}

Time Limits:

Time limits on inputs sent for job work is that Job worker has to send back the inputs
received by him within 1 year to the Principal’s place of business. Likewise capital
goods should be sent back within 3 years
 1 Year
Inputs

Capital Goods
3 Years

{JOB WORKER} “Place of Business”

Note: The Time Limits of 1 year or or 3 year shall not be applied in case of moulds, dies,
jigs and fixture, or tools sent out to job worker for job work.

Date of Deemed Supply:

 When Inputs / capital goods sent directly to job worker date of deemed supply is the
date when job worker receives such inputs and capital goods
 If they are sent from principal's place of business then the date of deemed supply is
when inputs/capital goods are sent out from principal's place of business

Date for deemed supply:

Directly Job Worker receives
Inputs/ Inputs/ Capital Goods
Capital
Goods Principal's Date for deemed supply:
"Place of Inputs/ Capital Goods sent
Business" out from Place of Business

Conditions to Claim ITC on JOB work:

(1) The inputs, semi-finished
finished goods or capital goods shall be sent to the job worker
under the cover of a challan issued by the principal
(2) The challan issued by the principal to the job worker shall contain the details
specified in rule Invoice.10
(3) The details of challan in respect of goods dispatched to a job worker or received
from a job worker shall be included in FORM GSTR-1
(4) Where the inputs or capital goods are not returned to the principal within the time
limits, the challan issued shall be deemed to be an invoice.
Set off Heads

Tax Credit (ITC) IGST CGST SGST

IGST Credit YES (1st) YES (2nd) YES (3rd)

CGST Credit YES (2nd) YES (1st) NO
SGST Credit YES (2nd) NO YES (1st)

Utilization of CGST & SGST is not available Cross

Reverse Charge

Introduction: - With the introduction of GST, a new provision is introduced which is not
there is any of the earlier tax laws. As per the new law, in case one registered person
receives any goods or services or both, which is taxable, from the unregistered person,
registered person shall be required to pay tax and all the other liabilities like issue of invoice,
filing return, assessment of the same shall be the responsibility of the recipient/registered
person.

As per section 9(4) of the CGST Act, the central tax in respect of the supply of taxable goods
or services or both by a supplier, who is not registered, to a registered person shall be paid
by such person on reverse charge basis as the recipient and all the provisions of this Act
shall apply to such recipient as if he is the person liable for paying the tax in relation to the
supply of such goods or services or both.

Important Component

There are following elements which need to be present to trigger this section:-

1. There should be supply.

2. Supply should be in respect of taxable goods or services or both.
3. Supply must be by unregistered person.
4. Supply must be to registered person.

Analysis

1. If the transaction is not covered under the definition of supply, this section won’t be
applicable.

Examples: - Sale of Land from unregistered person or agriculturist to ABC Ltd. who is
registered in GST: - Sale of Land is not considered as supply so the provision of 9(4) is not
applicable.

2. If the supply involved exempt goods or services or both this section won’t be
applicable.

a) A registered person hire auto rickshaw for commuting from one place to
another: - Section 9(4) won’t be applicable since transportation of passenger by
auto rickshaw is exempted services.

b) A registered person stay in a hotel whose room tariff is less than Rs. 1,000/-:-
Section 9(4) won’t be applicable since services by a hotel having declared tariff
less than Rs. 1,000/- per day is an exempt service.

3. The Section is applicable to intra state taxable supplies only. As per section 24, in
case of inter-state taxable supply, registration is mandatory without any turnover
limit. So there could not be any taxable supply between the two states.
 4. Supplier should be unregistered whether he is liable to registered or not.

5. Recipient should be registered

Exemption to section 9(4) of CGST:- As per section 11(1) of the CGST Act, if the Government
is satisfied that it is in interest of the public to exempt some goods or services or both,
either fully or partly of the tax leviable thereon.

On using this power, Government has issued notification No. 8/2017- Central Tax (Rate)
which shall be in force from July 1, 2017.

As per the notification, exemption shall be applicable where the aggregate value of such
supplies of goods or service or both received by a registered person from any or all the
suppliers, who is or are not registered, is upto five thousand rupees in a day.

Analysis

1. Exemption is on intra state taxable supply.

2. There is a limit of transaction value of Rs. 5,000/- per day: - means in case of supply
more than Rs. 5,000/- per day, whole of such supply shall be taxable under reverse
charge 9(4).

3. Limit is in respect of all suppliers: - This should be noted that the limit is not respect
to one supplier.

What will be the time of supply in case purchase of goods / Service in Reverse charge
mechanism?

The time of supply for purchase of goods in reverse charge mechanism will be the earlier of
the following-

1. The date of receipt of goods or

2. Date on which payment is made or
3. The date immediately following 30 days from the date of issue of invoice.

For Examples:- If a taxpayer purchases stationary from an unregistered person on 25th July
2017 and he provides the bill for the same on 2nd August 2017 and if the consideration is
paid on 28th August 2017, then according to the provisions of RCM the time of supply will be
25th July 2017.

The time of supply for services in reverse charge mechanism will be the earlier of the
following-

1. The date on which payment is made.

2. The date immediately following 60 days from the date of issue of invoice.
Exemption under GST v/s RCM

Section.22 (1) of the CSGT Act (Persons Liable for Registration):- Every supplier shall be
liable to be registered under this Act in the State or Union territory, other than special
category States, from where he makes a taxable supply of goods or services or both, if his
aggregate turnover in a financial year exceeds twenty lakh rupees:

Provided that where such person makes taxable supplies of goods or services or both from
any of the special category States, he shall be liable to be registered if his aggregate
turnover in a financial year exceeds ten lakh rupees.

Section 23 of the CGST Act (Persons not Liable for Registration):-

1. It provides that the following persons shall not be liable to registration, namely –

(a) Any person engaged exclusively in the business of supplying goods or services
or both that are not liable to tax or wholly exempt from tax under this Act or
under the Integrated Goods and Services Tax Act;
(b) An agriculturist, to the extent of supply of produce out of cultivation of land.

2. The Government may, on the recommendations of the Council, by notification,

specify the category of persons who may be exempted from obtaining registration
under this Act.

Section 24 of the CGST Act (Compulsory Registration) starts with “Non-Obstante Clause”
and states that: - Notwithstanding anything contained in sub-section (1) of section 22, the
following categories of persons shall be required to be registered under this Act,–

(i) Persons making any inter-State taxable supply;

(ii) Casual taxable persons making taxable supply;
(iii) Persons who are required to pay tax under reverse charge;

Conclusion:

• It is clear from the above that Section 24 is superseding / overriding provisions of

section 22 and not the provisions of section 23.

• It means if a person is exclusively engaged in the business of supplying of goods or

services that are not liable to tax or wholly exempt from tax, there is no requirement
of registration irrespective of the provisions of section 24, which is stipulating cases
for “compulsory registration”.

• Similarly, if the Govt., by notification, specify the category of persons, who may be
exempted from obtaining registration, provisions of section 24 shall not apply on
those persons.
 The Central Govt., by virtue of provisions of Sec.23, has issued Notification No.
5/2017-Central Tax dt.19.06.2017, wherein it has exempted persons from obtaining
registration who are only engaged in making supplies of taxable goods or services or both,
the total tax on which is liable to be paid on reverse charge basis by the recipient of such
goods or services or both under sub-section (3) of section 9

Credit Note and Debit Note

Credit Note:- Where a tax invoice has been issued for supply of any goods or services or both
and the taxable value or tax charged in that tax invoice is found to exceed the taxable value
or tax payable in respect of such supply, or where the goods supplied are returned by the
recipient, or where goods or services or both supplied are found to be deficient, the
registered person, who has supplied such goods or services or both, may issue to the
recipient a credit note containing such particulars as may be prescribed.

Debit Note: - Where a tax invoice has been issued for supply of any goods or services or both
and the taxable value or tax charged in that tax invoice is found to be less than the taxable
value or tax payable in respect of such supply, the registered person, who has supplied such
goods or services or both, shall issue to the recipient a debit note containing such
particulars as may be prescribed.

Accounts and Records under GST

Provisions relating to Accounts and Records under GST

1. Every registered person shall keep and maintain, at his principal place of business, as
mentioned in the certificate of registration, a true and correct account of-

[A]. Production or Manufacture of goods;

[B]. Inward and Outward supply of goods or services or both;
[C]. Stock of goods;
[D]. Input Tax Credit availed;
[E]. Output Tax payable and paid.

Each volume of books of account maintained manually by the registered person shall
be serially numbered.

2. How long to be Kept Books of Accounts:- 72 Months from the end of the due date
of filing annual return i.e. the Records relating to FY 2017-18 would be kept up to
31st December, 2024 either in paper form or in electronic form. Proper electronic
back-up of records shall be maintained and preserved in such manner that, in the
event of destruction of such records due to accidents or natural causes, the
information can be restored within a reasonable period of time.

3. Place of Keeping Records: - At his principal place of business as mentioned in the

certificate of registration.
Assessments under GST

In term of Section 2 (11) of the CGST “Assessment” means determining the tax
liability under GST Act. Assessment simply means calculation of the tax liability. It is
integrating part of the GST as without assessment it is very much difficult to determine tax
liability of a taxable person.

According to CGST act, Types of Assessment are as under: –

1 Self-Assessment (Section 59):- Self-Assessment means an assessment by assessee or

taxable person himself. Proper Officer has no role to play in this type of assessment.
The GST regime always continues to promote the scheme of self-assessment.

How liability is calculated in Self-Assessment?

• In this type of assessment, every register taxable person would require

calculating his/her tax liability according to the provision of GST act. A taxable
person who is register under GST can calculate his own liability to the
provisions of GST and it is always assumed that he acts in a good faith.

2 Provisional Assessment (Section 60):- Provisional Assessment is the assessment the

proper officer calculates the tax liability of tax assesses. When This type of
assessment can be restored in following: –

• When value of supply cannot be determined by the taxable person. It is

difficult to in ascertaining: –
i. Transaction Value of supply for determination of tax.
ii. Inclusion or exclusion of any amount in the value of supply.
iii. Circumstance causing failure of transaction value declared.

• Rate of tax applicable on the supply cannot be determined:-

I. For ex- an industry which provide Intra and Inter State supplies have
uncertainty about the kind of taxes (CGST / IGST) application, time of
supply etc in these cases, assess have to seek Provisional Assessment.

• Special Note:- A Proper Officer have no right to give his judgement, unless
and until the assess request officer in writing in FORM GST ASMT-01
electronically along with the supported documents giving reason to get
permit to pay tax on provisional basis.

• Time limit: - The Proper Officer have to pass order of assessment within 90
days from the receipt of the request by the assessee on the surety or security
for any differential tax that may be eventually grossed.

Example, ABC ltd. Is a manufacturer, who supplies its material from Jaipur to
Karnataka. Then, in this case he is not able to find out the rate and the type
of taxes which is to be levied on him. So, this case is Provisional assessment.
 3 Scrutiny of Tax (Section 61):- It means scrutinize return filled by register person by
Proper Officer to verify the correctiveness of the return. The Proper Officer has
power to notice a registered person in any discrepancies. Any shortfall will be
notified by the Proper Officer in FORM GST ASMT-10 and Assessee must give reply in
FORM GST ASMT-11 within 15 days from the date of scrutiny. The notice contains
amount of tax, interest and any other amount of discrepancy.

4 Assessment of Non- filers of return (Section 62):- When registered taxable person
failed to file returns as under section 39 or as the case may be or final return on
cancellation of registration under Section 45 of this act, issuing notice under Section
46 appears to be a precondition for initiating proceedings under Section 62 of the
act.

5 Assessment of unregistered person (Section 63):- In this section, if an unregistered

person i.e., persons who are liable to obtain registration under Section
22(Registration) and have failed to do so or case where registration was cancelled as
per section 29(2) of the ACT.

6 Summary assessment in certain special cases (Section 64):- This assessment is used
in a tax legislation to denote “fast track assessment” based on return filed by the
assessee. This assessment is when, there will be a loss of revenue to the
government. Provided to enforce recovery of dues from potential defaulters and the
requires an assessment of the tax liability. In this assessment, pre-supposes the fact
that the Proper Officer be in possession of sufficient grounds to believe that any
delay will adversely affect the revenue.

Audit under Goods and Services Act

Types of Audit
1. Audit by Tax Authorities
2. Special Audit

Audit by Tax Authorities

1. Under What circumstances: - Not Specific, means order can be given under any
circumstances.
2. Who can order: - Commissioner or any officer authorised by him.
3. What kind of order: - General or Special in GST ADT-01.
4. Period of audit: - Such period as prescribed in order. It shall be a financial year or
multiple thereof.
5. Frequency of audit: - as given in order.
6. Manner of audit: - as prescribed. (Rules)
7. Place of Audit: - Registered office of the taxable person or office of the proper
officer.
8. Notice period: - not less than 15 days.
9. Time Limit of Completed Audit: – three months from the date of commencement.
 10. Extension of Time Limit of completed Audit: - extend to further period of 6 months
11. Who can extend: - Commissioner
12. How can extend: - The Commissioner should record the reason in writing.
13. What is the date of commencement of Audit: - Date when the documents or other
information is made available or Actual institution of Audit at the place of business
whichever is later.
14. Information for Audit: – O. may require the registered person
Afford the facility for the audit
To furnish such information and render assistance for timely completion of audit.
15. Time Limit of giving findings: - within 30 days of completing the audit.
16. What will be included in findings: – Findings, Right, obligation and the reason of the
findings. (GST ADT-02).
17. Results of Audit: - In case of tax not paid, short paid, erroneously refund or wrong
tax credit availed or utilised, action under section 73 or section 74.

Special Audit

1. Who can direct for special audit: - Officer not below the rank of assistant
commissioner with prior approval of commissioner to the registered person to get his
account audited. (GST ADT-03).
2. When such direction shall be made: - At the stage any scrutiny, inspection, inquiry
or any proceedings before him, having regard to the nature and complexity of the
case and the interest of revenue.
♦ Value has not been correctly declared.
♦ Credit availed is not within the normal limit.
3. Who will conduct the special audit: - Chartered Accountant, Cost Accountant or
person nominated by the commissioner.
4. Time Limit of Completion of special Audit and submit the report :- within 90 days
5. Extension of special audit: - further period of 90 days.
6. Who can apply for extension: - Registered person or Auditor.
7. Opportunity of being heard: – The registered person shall be given the opportunity
of being heard before the final audit report being submitted.
8. Who will pay the cost of special audit: - Expenses including remuneration shall be
determined and paid by commissioner and such determination shall be final.
9. Results of Special Audit: - In case of tax not paid, short paid, erroneously refund or
wrong tax credit availed or utilised, action under section 73 or section 74. (GST ADT-
04).

Inspection, Search, Seizure and Arrest under Goods & Services Tax Act

1. In any tax administration the provisions for Inspection, Search, Seizure and Arrest
are provided to protect the interest of genuine tax payers (as the Tax evaders, by
evading the tax, get an unfair advantage over the genuine tax payers) and as a
deterrent for tax evasion. These provisions are also required to safeguard
Government’s legitimate dues. Thus, these provisions act as a deterrent and by
checking evasion provide a level playing field to genuine tax payers.
2. It may be mentioned that the options of Inspection, Search, Seizure and Arrest are
exercised, only in exceptional circumstances and as a last resort, to protect the
Government Revenue. Therefore, to ensure that these provisions are used properly,
effectively and the rights of tax payers are also protected, it is stipulated that
Inspection, Search or Seizure can only be carried out when an officer, of the rank of
Joint Commissioner or above, has reasons to believe the existence of such
exceptional circumstances. In such cases the Joint Commissioner may authorize, in
writing, any other officer to cause inspection, search and seizure. However, in case
of arrests the same can be carried out only where the person is accused of offences
specified for this purpose and the tax amount involved is more than specified limit.
Further, the arrests under GST Act can be made only under authorization from the
Commissioner.

3. The circumstances which may warrant exercise of these options are as follows: –

A. Inspection: - ‘Inspection’ is a softer provision than search which enables officers

to access any place of business or of a person engaged in transporting goods or who
is an owner or an operator of a warehouse or go down. As discussed above the
inspection can be carried out by an officer of CGST/SGST only upon a written
authorization given by an officer of the rank of Joint Commissioner or above. A Joint
Commissioner or an officer higher in rank can give such authorization only if he has
reasons to believe that the person concerned has done one of the following actions:

• Suppression of any transaction relating to supply of goods or services or stock

in hand.
• Claimed excess input tax credit
• Contravention of any provisions of the Act or the Rules to evade tax
• Transporting or keeping goods which escaped payment of tax or
manipulating accounts or stocks which may cause evasion of tax
Inspection can also be done of the conveyance, carrying a consignment of
value exceeding specified limit. The person in charge of the conveyance has
to produce documents/devices for verification and allow inspection.
Inspection during transit can be done even without authorisation of Joint
Commissioner.

B.Inspection in movement

• Any consignment, value of which, is exceeding Rs. 50,000/-, may be stopped

at anyplace for verification of the documents/ devices prescribed for
movement of such consignments.
• If on verification of the consignment, during transit, it is found that the goods
were removed without prescribed document or the same are being supplied
in contravention of any provisions of the Act then the same can be detained
or seized and may be subjected to penalties as prescribed.
• To ensure transparency and minimise hardships to the trade, the law
provides that if during verification, in transit, a consignment is held up
beyond 30 minutes the transporter can feed details on the portal. This will
ensure accountability and transparency for all such verifications. Moreover,
for verification during movement of consignment will also be done through a
Digital interface and therefore the physical intervention will be minimum and
as has already been mentioned that in case of a delay beyond 30 minutes the
transporter can feed the details on the portal.

C. Search & Seizure:- The provisions of search and seizure also provides enough
safeguards and the GST Law stipulates that search of any place of business etc. can
be carried out only under authorisation from an officer of the rank of Joint
Commissioner and if he has a reason to believe that the person concerned has done
at least one of the following:-

• Goods liable to confiscation or any documents/ books/record/things, which

may be useful for or relevant to any proceedings, are secreted in any place
then all such places can be searched

• All such goods/documents/books/record/things may be seized, however, if it

is no practicable to seize any such goods then the same may be detained. The
person from whom these are seized shall be entitled to take copies/extracts
of seized records

• The seized documents/books/things shall be retained only till the time the
same are required for examination/enquiry/proceedings and if these are not
relied on for the case then the same shall be returned within 30 days from
the issuance of show cause notice

• The seized goods shall be provisionally released on execution of bond and

furnishing a security or on payment of applicable tax, interest and penalty

• In case of seizure of goods, a notice has to be issued within six months, if no

notice is issued within a period of six months then all such goods shall be
returned. However, this period of six months can be extended by
Commissioner for another six months on sufficient cause.

• An inventory of the seized goods/documents/ records is required to be made

by the officer and the person, from whom the same are seized, shall be given
a copy of the same.

• To ensure that the provisions for search and seizure are implemented in a
proper and transparent manner, the Act stipulates that the searches and
seizures shall be carried out in accordance with the provisions of Criminal
Procedure Code, 1973. It ensures that any search or seizure should be made
in the presence of two or more independent witnesses, a record of entire
proceedings is made and forwarded to the Commissioner forthwith.
D. Arrests: - In the administration of taxation the provisions for arrests are created
to tackle the situations created by some unscrupulous tax evaders. To some these
may appear very harsh but these are necessary for efficient tax administration and
also act as a deterrent and instil a sense of discipline. The provisions for arrests
under GST Law have sufficient inbuilt safeguards to ensure that these are used only
under authorisation from the Commissioner. Besides this, the GST Law also
stipulates that arrests can be made only in those cases where the person is involved
in offences specified for the purposes of arrest and the tax amount involved in such
offence is more than the specified limit. The salient points of these provisions are:

• Provisions for arrests are used in exceptional circumstance and only with
prior authorisation from the Commissioner.

• The law lays down a stringent criteria and procedure to be followed for
arresting a person. A person can be arrested only if the criteria stipulated
under the law for this purpose is satisfied i.e. if he has committed specified
offences (not any offence) and the tax amount is exceeding rupees 200 lakhs.
However, the monetary limit shall not be applicable if the offences are
committed again even after being convicted earlier i.e. repeat offender of the
specified offences can be arrested irrespective of the tax amount involved in
the case.

• Further, even though a person can be arrested for specified offences

involving tax amount exceeding Rs. 200 lakhs, however, where the tax
involved is less than Rs. 500 lakhs, the offences are classified as non-
cognizable and bailable and all such arrested persons shall be released on Bail
by Deputy/ Assistant Commissioner. But in case of arrests for specified
offences where the tax amount involved is more than Rs. 500 lakhs, the
offence is classified as cognizable and non-bailable and in such cases the bail
can be considered by a Magistrate only.