Commerce B.Com.

PA Even Semester 2017-18

Guest lecture
On

GST
Dr. A. SUKUMAR
Associate Professor and Head
Department of Commerce PA
Sri Krishna Adithya College of Arts and Science

Introduction & Important terms used in Indirect taxes

Indirect taxes – Meaning and Nature -Special features of
Indirect Taxes - Contribution to government revenues -
Taxation under the Constitution - Advantages and
Disadvantages of Indirect Taxes.
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Tax

A tax is legally compulsory payment levied by the government on

the persons or companies to meet the expenditure incurred on
conferring common benefits upon the people of a country. In
other words a tax can also be describe as a compulsory levy
where those who are taxed have to pay the sums irrespective of
any corresponding return of services or goods by the
government.

Fee

Fee is also compulsory payment made by a person who receives

in return a particular benefit or services from the government.

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Taxation

Taxation refers to the act of a taxing authority actually

levying tax. Taxation as a term applies to all types of
taxes from income to gift to a estate taxes. It is usually
refer to as an act any revenue collected is usually called
Taxation.

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Fines

These are compulsory payments without any quid pro que but
are different from taxes because fines are imposed to curb
certain offences and discipline people and not to get revenue for
the State. In this sense, fines are not taxes.

Surcharges

It is an additional charge or an extra fee for a special service. It

is also called tax on tax e.g. a 10% surcharge is applicable on
income tax for incomes above Rs. 10 lakh. In other words
surcharges are often a charge in addition to a charge, or a tax
added to the original tax.

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Two aspects of tax follow from the definition:

1.A tax is a compulsory payment and no one can

refuse to pay it.
2.Proceeds from taxes are used for common
benefits or general purposes of the state.
It means there is no direct quid pro que
involvement in the payment of a tax. Taxes are
mainly classified into direct and indirect
taxes:

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History of Taxation

It is a matter of general belief that taxation are of

recent origin but in ancient time also taxes were levied
in some form on sale and purchase of merchandise or
livestock.

It was all over world. In India Kautilya’s Arthshastra,

which deals with he system of Taxation in a real
elaborate & planned manner.

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Definition

It was only for the good of his subjects that he collected taxes
from them, just as Sun draws moisture from the Earth to give it
back a thousands fold.
- Kalidas in Raghuvansh eulogizing King Dalip

Modern Definition

Tax is imposition of financial charge or other levying upon a

taxpayer by Government or other functional equivalent of the
state.

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Government Policy

 The organisational history of Income-tax department starts in

the year 1922.

 In 1961 Direct Tax Advisory Committee set up- Direct Taxes

Administrative Enquiry Committee constituted & Income Tax
Act 1961 came into existence which extends to whole india &
became effective from 1st April 1962.

 Every year a Budget is presented before Parliament by Finance

Minister. Most important component of Budget is Finance Bill,
which contains amendments which are sought to be made in the
area of Direct tax levied by Central Government.

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Indirect Tax System in India

In general, the Indirect Tax in India is a complex system of
interconnecting laws and regulations, which includes specific laws of
different states. For this there are many reliable organizations in
India, which employs efficient Indirect Tax professionals to help
their clients.
These tax professionals with their in-depth knowledge and
wide-ranging experience offers effective planning methods to their
clients in order to help in their cost minimization.
The Indirect Taxation regime encompasses various types of
taxes like Sales Tax, Service Tax, Custom and Excise Duties, VAT and
Anti-Dumping Duties, and the organizations provide services in all
these related fields.
In the recent year, the Indian government has undertaken
significant reform of indirect taxation system. This includes the
initiation of a region-based and state-level VAT on goods.
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However, it should be noted that as taxes still forms a barrier to inter-

state trading in order to attain a secured market for the activities
related to services and goods more reform is needed. Some of the
reforms that can be introduced for a better indirect taxation system
in India are –

The serialized set of Indirect Taxes so far activated at the central

and state levels should be amalgamated and treated as a single tax.

The integrated Indirect Tax should be neutral at all levels such that
chances of fraudulence would be minimized.

The Central Sales Tax, which obstructs easy trading between

different states, is being under the process of termination that would
help to abolish the control measures on the inter-state trade.
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Indirect Taxes during Pre-Reforms

The indirect tax structure was extremely irrational between the

reforms. The Constitution gives the permission to levy a multitude of
indirect taxes. But the most important ones are customs and excise
duties charged by the Central government and sales tax excepting
inter state sales tax to be charged by the state government.

The indirect taxes levied by the centre like customs, excise and
central sales tax and the major indirect taxes levied by the states and
civic bodies like passenger and goods tax, electricity duty and octroi
when taken together did not present a rational system.

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Indirect Taxes in Post Reforms

Even post reforms, the indirect tax regime in India is still in

the early stages of growth. Both the Central and State
governments charge a multitude of indirect taxes.

The Central Government charges tax on goods at the point of

import (Customs duty), manufacture (Excise duty), interstate
sales (Central sales tax or CST) and on provision of services
(Service tax).

The State Governments charge tax on goods sold within the state
(Sales tax/Value Added Tax or VAT), and on the goods that enter
the state (Entry tax).

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In the present scenario corporate would have to analyze the tax

cost involved in a transaction, have enough backup
documentation to support their tax positions and keep looking
for ways for tax maximization.

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Types of taxes

i. Direct Tax
ii. Indirect Tax

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DIRECT TAXES

The taxes whose burden falls directly on taxpayers are Direct

Tax.
e.g.-Income tax, Wealth tax, Property tax etc.

INDIRECT TAXES
Indirect taxes are the taxes in which the burden of paying tax is
shifted through a change in price.
e.g.-Custom Duty, Excise Duty, Sales tax, Service tax etc.

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Indirect Tax Concept

• Indirect taxes are those whose burden can be shifted to

others so that those who pay these taxes to the
government do not bear the whole burden but pass it on
wholly or partly to others.
• Indirect taxes are levied on production and sale of
commodities and services and small or a large part of the
burden of indirect taxes are passed on to the consumers.
• Excise duties on the product of commodities, sales tax,
service tax, customs duty, tax on rail or bus fare are
some examples of indirect taxes.

INDIRECT TAXES types of taxes 16

Components of Direct and Indirect Taxes
Direct Taxes Indirect Taxes

Corporation
Excise duty
Tax

Income Tax Custom duty

Service tax
Wealth Tax
VAT
Others
CST
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METHODS OF TAXATION

Progressive Tax :
Increasing rate of tax for Increasing Value or Volume.

Regressive Tax :
Decreasing rate tax for Increasing Value or Volume

Proportional Tax :
Fixed rate of tax for every level of income or production
INDIRECT TAXES Methods of taxation 18
 Indirect Tax .

On Goods Sold On Service Provider

By Dealer By Manufacturer By Service Provider

Within State Within State Within State
VAT Excise + VAT Service Tax
Outside State Outside State Outside State
CST Excise + CST Service Tax
Outside Country Outside Country Outside Country
Customs Excise + Customs Service Tax
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Objective of Indirect Taxes

• Resource Mobilization
• Reduction in
Inequalities of Income
• Social Welfare
• Foreign exchange
• Regional Development
• Control of Inflation

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Nature / Characteristics of indirect tax

● Tax is a legal collection

● Tax is personal obligation
● Tax is compulsory contribution
● Tax is imposed by government alone
● Revenue collection
● Socio- economic objectives

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Special Features of Indirect Taxes

 Shilling of tax burden
 Indirect taxation is commodity taxation
 While imposing direct taxes, the ability of the tax-payer is
directly determined, whereas in respect of indirect taxes,
the ability of tax-payer is indirectly determined.
 The tax-payer does not perceive a direct pinch while paying
indirect taxes.
 Indirect taxes are easier to collect and greater amount of
generation of revenue is assured

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 Tax imposed on commodities directly affects the prices of

commodities.

 Indirect taxes include Central Excise Duty, Customs Duty,

Central Sales Tax, Service Tax, State VAT, Octroi, Interest Tax,
Expenditure Tax, Foreign Travel Tax, etc.

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Advantages

1. Convenient Indirect taxes are more convenient to pay.

2. Not Easily Evadable
3. Broad-based
4. Social Value
5. Forced Savings
6. Complementary
7. Progressive

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Disadvantages
1.Inequitability
2.Less Productive
3.Inflationary Potentiality
4.Disincentive Effect on Savings
5.No Educative Value

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Problem of indirect tax

● Multiplicity of tax – union, state and local body

● Adhocism – political reasons
● Bias in incidence of taxes- charge rural and urban
● Complex and corruption
● Imbalance in tax system -100% not covered
● Lack of co-ordination – union and state relation
● Lack of built –in elasticity - direct and indirect tax
● Administration inefficiency

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Indian constitution and tax

● In 1950 Indian constitution came into effect is a federal in

structure.

● Clear distinction is made between sources of revenue of union

and state

● The constitution is supreme in India and it is the sources for all

laws three list union, state and concurrent list

● Union ,state, both the union and state have exclusive power to
make law

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Constitutional Aspects Of Taxation By The Union And

States

● Financial Arrangements Under Constitution -• Distribution Of

Taxation Heads (Articles 246 248 And 265 Read With The Lists
I And Ii)

● And Distribution Of Revenues And Sharing Of Resources

Between The Union And The States (Chapters I & Ii Of Part Xii
Of The Constitution).

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Financial Relations between the Union and the States

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Contribution to Government Revenues

• Indirect Tax
– Customs Duty
– Central Excise Duty
– Service Tax
– Sales Tax
– Value Added Tax (VAT)
– Securities Transaction Tax (STT)

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Contribution to Government Revenues

Indirect % on Total Tax Indirect % on Total Tax
Year Year
Tax Total Tax Collection Tax Total Tax Collection
1991-92 521.54 77.43 673.61 2002-03 1315.8 61.3 2146.7
1992-93 565.05 75.71 746.36 2003-04 1476.6 58.42 2527.5
1993-94 554.45 73.2 757.43 2004-05 1705.5 56.21 3033.9
1994-95 653.28 70.78 922.94 2005-06 1994 54.68 3646.5
1995-96 776.61 69.82 1112.2 2006-07 2412.6 51.17 4715.1
1996-97 898.71 69.8 1287.6 2007-08 2791 47.2 5913.5
1997-98 909.71 65.33 1392.2 2008-09 2696.5 44.68 6035
1998-99 971.97 67.6 1437.9 2009-10 2438.8 39.25 6213.7
1999-00 1137.9 66.25 1717.5 2010-11 3431.8 43.49 7891.7
2000-01 1200.4 63.73 1883.5 2011-12 3970.2 44.23 8976.7
2001-02 1171.8 62.87 1863.7 2012-13 5027.34 46.85 10729.99
Source: Various Issues of Statistical handbook on Indian Economy and Reserve Bank
of India.
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CONSTITUTIONAL POWERS OF TAXATION

Constitution of India is the supreme law of
India.

It lays down the framework defining fundamental political

principles, establishes the structure, procedures, powers and duties
of government institutions and sets out fundamental rights, directive
principles and the duties of citizens.

Constitution of India thus lays down the foundation brick for

arranging the powers, duties and the supremacy to legislate all laws
of India.

The authority to levy a tax is hence derived from the Constitution of

India.
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Article 246 of the Indian Constitution, lays down three types of

lists and distributes legislative powers including taxation,
between the Parliament of India and the State Legislatures.

It lays down the subject matters with respect to which only the
Parliament can make rules, where the State Legislatures can
exclusively lay down the rules and a Concurrent List whereby
both the Parliament as well as State Legislatures can legislate.

Thus the Constitution of India allocates the power to levy various

taxes between the Centre and the states.

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CONSTITUTION AMENDMENT ACT, 2016

Article 246A

(1) Notwithstanding anything contained in Article 246 and Article

254, Parliament, and subject to clause

(2) Legislature of every State, has the power to make laws with
respect to goods and services tax imposed by the Union or by
such State.

(3) Parliament has exclusive power to make laws with respect to

goods and services tax where the supply of goods, or of
services, or both takes place in the course of inter-State trade
or commerce.
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Explanation : Provisions of Article 246A, shall, in respect of goods

and service tax referred to Article 279A (5), will be effective
from the date recommended by the Goods and
Services Tax Council. Article 246 deals with subject matter
of laws made by Parliament and by the legislatures of the States
and Article 254 with Inconsistency between laws made by the
Legislatures of State.

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Amendment to Article 248

Article 248(1) : Subject to Article 246A, Parliament has
exclusive power to make any law with respect to any matter not
enumerated in the Concurrent List or State List. Article

248(2) : Such power shall include the power of making any

imposing a tax not mentioned in either of those Lists.

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Amendment to Article 249

Article 249 deals with the power of Parliament to legislate with respect to a matter in the
State List in the national interest. After amendment Article 249(1) reads as follows –

Article 249(1) : Notwithstanding anything in the foregoing provisions of this Chapter, if the
Council of States has declared by resolution supported by not less than two-thirds of the
members present and voting that it is necessary or expedient in the national interest that
Parliament should make laws with respect to goods and services tax provided
under

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Amendment to Article 250

Article 250 deals with the power of Parliament to legislate with

respect to any matter in the State List if a Proclamation of
emergency is in operation. After amendment Article 250(1) reads as
follows

Article 250(1) - Notwithstanding anything in this Chapter, Parliament

shall, while a Proclamation of Emergency is in operation, have
power to make laws for the whole or any part of the territory of
India with respect to goods and services tax provided under Article
246A or any of the matters enumerated in the State List.

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Amendment to Article 268

Article 268 deals with duties levied by the Union but collected
and appropriated by the states. The amendment proposes
deletion of some words. After amendment, Article 268 reads as
follows –

Article 268(1) : Such stamp duties as are mentioned in the Union

List shall be levied by the Government of India but shall be
collected – In the case where such duties are leviable within any
Union territory. In other cases, by the States within which such
duties are respectively leviable.
Article 268(2) : The proceeds in any
financial year of any such duty leviable
within any State shall not form part of the
Consolidated Fund of India, but shall be assigned to that State.
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Omission of Article 268A

Article 268A dealt with service tax levied by Union and collected and
appropriated by the Union and States. This has been omitted being
irrelevant.

Amendment to Article 269 Article 269 deals with taxes levied and
collected by the Union but assigned to the states. The amended
Article 269 (1) reads as follows –
Article 269(1) - Taxes on the sale or purchase of goods and taxes on
the consignment of goods except as provided in Article 269A shall
be levied and collected by the Government of India but shall be
assigned and shall be deemed to have been assigned to the States
on or after the 1st day of April, 1996 in the manner provided in
clause (2).

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Article 269A The newly inserted Article 269A provides for levy
and collection of goods and services tax in course of interstate
trade or commerce.
Article 269A(1) provides that goods and services tax on supplies
in the course of inter-State trade or commerce shall be levied and
collected by the Government of India and such tax shall be
apportioned between the Union and the States in the manner as
may be provided by Parliament by law on the recommendations of
the Goods and Services Tax Council. The explanation to this clause
provides that supply of goods, or of services, or both in the course
of import into the territory of India shall be deemed to be supply
of goods, or of services, or both in the course of inter-state trade or
commerce.
Note: Integrated Goods & Services Tax Act, 2017 was passed by
Parliament on the basis of Article 269A

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Article 269A (2) provides that the amount apportioned under clause
(1) shall not form part of the Consolidated Fund of India.
Article 269A(3) provides that where an amount collected as tax levied
has been used for payment of the tax levied by a State under Article
246A, such amount shall not form part of the Consolidated Fund of
India.
Article 269A (4) provides that where an amount collected as tax
levied by a State under article 246A has been used for payment of
the tax levied under clause (1), such amount shall not form part of
the Consolidated Fund of the State.
Article 269A(5) provides that the Parliament may, by law, formulate
the principles for determining the place of supply, and when a supply
of goods, or of services, or both takes places in the course of inter-
state trade or commerce.

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 Commerce B.Com PA Even Semester 2017-18

Guest lecture
On

GST
Dr. A. SUKUMAR
Associate Professor and Head
Department of Commerce PA
Sri Krishna Adithya College of Arts and Science

GOODS AND SERVICE TAX - MODEL

Good and Service Tax Introduction – Meaning-Need for GST-
Advantages of GST-Structure of GST in India – Dual concepts -
SGST-CGST-IGST-UTGST- Types of Rates under GST – Taxes
subsumed under State Goods and Services Tax Act 2017- Taxes
subsumed under Central Goods and Services Tax Act 2017.
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MODEL OF GST
GST Structure

centre GST State GST Dual GST

GST to be levied GST to be levied

by the by the State GST to be levied by the Centre and the
Centre States concurrently

INDIRECT TAXES Models of GST

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Model of GST

The dual GST model proposed by the Empowered Committee

and accepted by the Centre will have dual system for imposing the
tax. GST shall have two components i.e.

(i) Central GST

(ii) State GST

Central Excise duty, additional excise duty, services tax and

additional duty of customs (equivalent to excise), state VAT
entertainment tax, taxes on lotteries, betting and gambling and
entry tax (not levied by local bodies)would be subsumed within
GST

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Chargeability

S G S T- State GST Both Tax charged on all Intra

state transactions S G S T levied by
State Govt. and

CGST levied by the Central Govt. C G S T-

Central GST

I G S T-Integrated GST Applicable on interstate transaction,

aggregate of C G S T and S G S T Rate
of funds through Clearing Agency.

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IGST(Inter-State
SGST (State GST) GST)
CGST (Central GST)

• Replace central • Replace State Vat, • Levied on all inter –

Excise Duty & service Entry Tax, state supplies of
Tax. Entertainment Tax, & goods or services
• Cover Sale Luxury Tax. which are sold or
transaction. • Cover taxing of transferred.
• Administered by CG. Services • Applicable to imports
• Administered by SG of goods or services.

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SGST (State IGST(Inter-State

CGST GST) GST)

(Centr
• Further it is • Rate can be a bit • It is expected that
al
expected that the
duty and tax paid
higher than CGST
rate .
the duty and tax
paid on closing
on closing stock • It is expected that
would beGST)
available the duty and tax
stock would be
available as credit.
as credit. paid on closing
stock would be
available as credit.

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Taxes proposed to be
subsumed in
GSTCentral Taxes
Excise Duty
Additional Excise duty

Excise duty under medicinal and toilet

preparation Act
Service Tax
Additional Custom duty commonly known as
countervailing duty (CVD), special additional duty(
SAD)
Surcharge
CENVAT
INDIRECT TAXES
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Taxes proposed to be
subsumed in GST
State Taxes
Value added tax (VAT)
Entertainment tax levied by states
Luxury Tax
Tax on Lottery, betting and gambling
Entry tax other than for local bodies
(Octroi)

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PRODUCT EXCLUDED FROM GST

Petroleum Product
Alcohol
Tobacco Product

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To determine whether Central Goods & Services Tax (CGST), State

Goods & Services Tax (SGST) or Integrated Goods & Services Tax
(IGST) will be applicable in a taxable transaction, it is important to
first know if the transaction is an Intra State or an Inter-State
supply.

Intra-State supply of goods or services is when the location of the

supplier and the place of supply i.e., location of the buyer are in the
same state. In Intra-State transactions, a seller has to collect both
CGST and SGST from the buyer. The CGST gets deposited with
Central Government and SGST gets deposited with State
Government.

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Inter-State supply of goods or services is when the location of

the supplier and the place of supply are in different states. Also, in
cases of export or import of goods or services or when the supply
of goods or services is made to or by a SEZ unit, the transaction is
assumed to be Inter-State. In an Inter-State transaction, a seller
has to collect IGST from the buyer.

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State Goods and Services Tax

Under GST, SGST is a tax levied on Intra State supplies of both goods
and services by the State Government and will be governed by the
SGST Act. As explained above, CGST will also be levied on the same
Intra State supply but will be governed by the Central Government.

Note: Any tax liability obtained under SGST can be set off against
SGST or IGST input tax credit only.

An example for CGST and SGST:

Let’s suppose Rajesh is a dealer in Maharashtra who sold goods to
Anand in Maharashtra worth Rs. 10,000. The GST rate is 18%
comprising of CGST rate of 9% and SGST rate of 9%. In such case, the
dealer collects Rs. 1800 of which Rs. 900 will go to the Central
Government and Rs. 900 will go to the Maharashtra Government.
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Central Goods and Services Tax (CGST)

Under GST, CGST is a tax levied on Intra State supplies of

both goods and services by the Central Government and will be
governed by the CGST Act. SGST will also be levied on the same
Intra State supply but will be governed by the State Government.

This implies that both the Central and the State

governments will agree on combining their levies with an
appropriate proportion for revenue sharing between them.
However, it is clearly mentioned in Section 8 of the GST Act that
the taxes be levied on all Intra-State supplies of goods and/or
services but the rate of tax shall not be exceeding 14%, each.

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Integrated Goods and Services Tax (IGST)

Under GST, IGST is a tax levied on all Inter-State supplies of goods

and/or services and will be governed by the IGST Act. IGST will
be applicable on any supply of goods and/or services in both
cases of import into India and export from India.

Note: Under IGST,

Exports would be zero-rated.
Tax will be shared between the Central and State Government.

An example for IGST:

Consider that a businessman Rajesh from Maharashtra had sold
goods to Anand from Gujarat worth Rs. 1,00,000. The GST rate is
18% comprised of 18% IGST. In such case, the dealer has to
charge Rs. 18,000 as IGST. This IGST will go to the Centre.
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The split into SGST, CGST, and IGST?

India is a federal country where both the Centre and the States have
been assigned the powers to levy and collect taxes.

Both the Governments have distinct responsibilities to perform, as

per the Constitution, for which they need to raise tax revenue.

The Centre and States are simultaneously levying GST.

The three types tax structure is implemented to help taxpayers take

the credit against each other, thus ensuring “One Nation, One Tax”.

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Taxable Person
It will cover all types of person carrying on business activities, i.e.
manufacturer, job-worker, trader, importer, exporter, all types of
service providers, etc.

If a company is having four branches in four different states, all

the four branches will be considered as TP under each jurisdiction
of SGs.

All the dealers/ business entities will have to pay both the types
of taxes on all the transactions.

A dealer must get registered under CGST as it will make him

entitle to claim ITC of CGST thereby attracting buyers under B2B
transactions.
Importers have to registerunder both CGST and SGST as well.
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Applicability of GST regime:

 GST on Exports is zero rated, but on the other hand in

“import” IGST will be levied.

 GST does not apply on Alcohol & petroleum products.

 But in the mean time tobacco products should be in the

frame of GST.

 In fact, Gov. Can levy extra % of tax apart from GST .

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Indirect Taxes Applicability of GST regime
 Commerce B.Com PA Even Semester 2018-19

 Full exemption is applicable on basic necessities goods like Flour,

rice, pulses, textiles, buildings, education & healthcare etc.

 Gross Turnover of Goods up to Rs. 1.50 cr may be assigned

exclusively to the states.

 Gross Turnover of Services up to Rs. 1.50 cr may be assigned

exclusively to the center.

 Assessed can have an option to pay tax as per composition

scheme or may join the GST law whose turnover is up to Rs. 1.50
cr .

 But, those assessed whose turnover is and above Rs. 1.50 Cr will
need to be within the framework of GST.

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Indirect Taxes
Commerce B.Com PA Even Semester 2018-19

Rates under GST:

 No GST on necessities.

 5% GST on agricultural, medicines and daily needs

products.

 12% GST on utility items like salt, biscuits, computer

parts etc.

 18% GST on manufacturing and services like air travelling,

hotel stay, cars etc.

 28% GST on luxury items like expensive cars, expensive

perfumes, stay at 5 star hotels etc.

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Indirect Taxes
Commerce B.Com PA Even Semester 2018-19

Benefits under GST:

 Reduces Transaction cost.

 Eliminates the cascading effect of taxes.

 Single taxation point.

 Reduces corruption.

 Uniform tax rate .

 Cheaper exports.

 Reduction in purchase price.

 Transparency.

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Indirect Taxes
Commerce B.Com PA Even Semester 2018-19

 Increased collection of CGST & IGST.

 Increased FDI.

 Growth in overall Revenues.

 Simplified tax laws.

 Increase in exports & employments.

 GDP Growth Go Up by about 3%.

 International competitiveness Go Up by about 8%.

 Common market.

 Prevention of unhealthy competition among states.

 Increasing the tax base & raising compliance.

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Indirect Taxes
Commerce B.Com PA Even Semester 2018-19

Impact of GST:
Automobiles Industries

 Rate of Tax is expected b/w 20-22% as compared to 30-47% in

current scenario.
 Drive overall demand & reduce cost for end user by about 10%.
 Transportation time & overall cost will be reduced.
 Cost of Logistics will be reduced in quantity by almost 30-40%

Key beneficiaries : Maruti Suzuki, Hero MotoCorp, Bajaj

Auto, Eicher Motors, Ashok Leyland

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Indirect Taxes
Commerce B.Com PA Even Semester 2018-19

Consumer durables:
 Reduction of the Price gap between organized & unorganized
sector.
 Warehouse/logistics costs will be curtailed.
 Improve the operational profitability by almost 300-400 bps.

Key beneficiaries: Havells, Voltas, Blue Star, Bajaj

Electricals, Hitachi

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Indirect Taxes
Commerce B.Com PA Even Semester 2018-19

Logistics:
 Boost demand for high tonnage trucks.
 Overall reduction in transportation costs.
 Improving growth opportunities for the organized players.
 Facilitate smooth inter-state flow of Goods.

Key beneficiaries : VRL Logistics, GATI Ltd, Blue Dart,

Snowman Logistics

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Indirect Taxes
Commerce B.Com PA Even Semester 2018-19

Banking & Financial services:

 Under GST , effective tax rate is expected to increase to 18-

20% as 14% earlier.
 Moderate increase in the cost of financial services like loan
processing fees, debit/credit charges, insurance premium etc.

IT:

 Tax Rate is expected to increase to 18-20%.

 Legal actions around taxability of pre-recorded software will
probably end under GST Regime.

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Indirect Taxes
Commerce B.Com PA Even Semester 2018-19

Textile /Garments:
 May be negatively impacted in case the output tax rate is high.
 No clarity whether a lower rate will continue in the proposed
Tax regime.
 No clarity about the duty drawback benefits.

Key Players : Arvind, Raymond, Page Industries

Media:

 Tax rate of around 18-20% as compared to 20-21%.

 Post GST, we expect concessional rate in news & Print sector.

Key beneficiary : Dish TV

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Indirect Taxes
Commerce B.Com PA Even Semester 2018-19

Conclusion:
 GST being a dynamic & comprehensive legislation which
shall replace most of the Indirect Taxes of our Country.

 Since it is a major indirect tax reform in India, there would

be new legislation and procedures.

 Most concerns expressed about the implementation of GST

can be divided into 3 categories :

I) Design Issues
II) Operational Issues
III) Infrastructure Issues

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Indirect Taxes
 Commerce B.Com PA Even Semester 2018-19

Taxes to be Subsumed into CGST

Excise
Duty
Medicinal Service
Excise Tax

CGST
CVD SAD

SURCHA
CESSES
RGES

INDIRECT TAXES Taxes subsumed under central Goods and Services Tax Act 2017
 Commerce B.Com PA Even Semester 2018-19

Taxes to be Subsumed into SGST

VAT / Sales Tax
Entry Tax /
Luxury Tax
Octroi / LBT

Entertainment
Tax Purchase Tax

Taxes on lottery,
State Cesses &
SGST betting and
Surcharges
gambling

INDIRECT TAXES Taxes subsumed under central Goods and Services Tax Act 2017
 Commerce Department III B.Com. PA Even Sem.: 2018-19

Guest lecture
On

GST
Dr. A. SUKUMAR
Associate Professor and Head
Department of Commerce PA
Sri Krishna Adithya College of Arts and Science
Levy and Collection of TNGST / CGST
Levy and Collection under TNGST/CGST Acts - Meaning of important terms:
Goods, services, supplier, business, manufacture, casual taxable person,
aggregate turnover, input tax and output tax. Concept of supply - Composite
and Mixed supplies - Composition Levy - Time of supply of goods and
services- Value of Taxable supply. Input Tax credit-Eligibility and conditions
for taking input credit-Reverse charge under the GST – Registration
procedure under GST-Filing of Returns.
- Indirect Tax Unit III – Session Levy and Collection 1
 Commerce Department III B.Com. PA Even Sem.: 2018-19

Goods Sec. 2(52)

• movable property
• other than money and securities
• actionable claim
• growing crops
• grass and forming part of the land
• agreed to be severed before supply
• under a contract of supply.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Service Sec. 2(102)

• Anything other than
• Goods
• Money and Securities
• Includes
• Activities relating to the use of money
• or its conversion by cash
• or by any other mode

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Supplier Sec. 2(105)

• The person supplying the goods or services
• Includes
• an agent
• person acting on behalf of such supplier

Simply any person giving goods or service to another

person is called supplier.

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Business Sec. 2(17)

• “Business” includes–
• Any trade
• Commerce
• Manufacture
• Profession
• Vocation
• Adventure
• Wager
• Or any other similar activity

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Manufacture Sec. 2(72)

• “Manufacture” means
• Processing of
• Raw material
• Or inputs
• Emergence of a new product
• Having a distinct
• Name
•Character
• use

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Casual taxable person Sec. 2(20)

• “Casual taxable person”
• occasionally undertakes transactions
• Involving supply of goods or services
• In business
• Whether as
• Principal
• Agent
• or in any other capacity
• In a state or a union territory
• No fixed place of business.
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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Aggregate turnover Sec. 2(6)

• “Aggregate turnover” means
• Aggregate taxable supplies
• Excluding
• Inward supplies
• Exempt
• Supplies
• Exports of goods
• inter-state supplies

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Input tax Sec. 2(62)

• “Input tax” includes-
(a) The integrated goods and services tax charged on
import of goods

(b) The tax payable under the provisions of sub-sections

(3) and (4) of section 9;
(c) The tax payable under the provisions of sub-sections (3)
and (4) of section 5 of the IGST act;

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Output tax Sec. 2(82)

• “Output tax” means
• The tax chargeable
• On taxable supply of goods or services
• By principal
• By his agent
• But excludes
•Tax payable by them on reverse charge basis.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Composite Supply Sec. 2(30)

• “Composite supply” means
• A supply made by a taxable person
• To a recipient
• Two or more taxable supplies of goods
• Bundled
• Conjunction with each other

Illustration: 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.
Indirect Tax Unit III – Session Levy and Collection 11
 Commerce Department III B.Com. PA Even Sem.: 2018-19

Mixed Supply Sec. 2(74)

• “Mixed supply” means
• Two or more individual supplies
• In any combination thereof
• Made in conjunction with each other
• By a taxable person
• For a single price

Illustration: A supply of a package consisting of canned foods,

sweets, chocolates, dry fruits, drinks and 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.
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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Composition Levy U/S 10

• Section 10 of the CGST act, 2017

• Tax levied
• Composition scheme
• Not required to maintain detailed records
• Filling of detailed returns.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Limit under Composition Scheme:

• As per Section 10(1) of CGST Act, 2017

• A registered person
• Aggregate turnover
• In the previous financial year
• Not exceed Rs. 1.5 crore
• (Rs. 75 Lakh for Northeastern state)

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Persons not entitled to availed Composition

Scheme:
(1) Supply of services

(1) Other than restaurant and outdoor catering services

(2) Making supply of no tax goods. (Exempt supplies)

(3) Making any interstate outward supplies of goods.

(4) Making any supply of goods through an electronic commerce

operator.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Condition & Restriction for Composition levy

(As per Rule 5 of Chapter II of the CGST Rules, 2017)

(a)The person must be neither a causal taxable person

nor a non – resident taxable person.
(b)The goods have not been
a.Purchased in interstate trade or commerce.

b. Imported from outside India

c. Received from his branch situated outside the state or
d. From his agent or principal outside the state.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Composition Rate of Tax:

Sr. Rate of Rate of

Category of Registered Person Total
No. CGST SGST
Manufacturers other than
1 manufacturers of such goods as may 0.5% 0.5% 1.0%
be notified by the Government.
Restaurant services and Outdoor
2 2.5% 2.5% 5.0%
catering services (not serving alcohol)

Any other supplier eligible for

3 0.5% 0.5% 1.0%
composition levy (section 10)

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Returns:

Sr Due Date for filing of

Returns to be filed
No. Return

th
18 of the month
1 GSTR – 4 (Quarterly return) after the end of the
quarter.

st
31 December of
2 GSTR – 9A (Annual return)
next financial year.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Penalty for delay filing of GSTR 4:

• Penalty levied
• Rs. 100 for CGST
• Rs. 100 for SGST per day
• Or Rs. 5000 each CGST & SGST
whichever is lower.

GSTR 4 cannot be revised after filing on GSTN Portal. Any

mistake in the filed return can be revised in the next quarters
return only.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Important Notes for Composition Dealers:

 No Input Tax Credit

 cannot make interstate sales.

 No detailed records.
 cannot issue Tax Invoice.
 cannot charge tax from their customers.
 issue Bill of Supply instead of Tax Invoice
 should mention “composition taxable person”.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Content of Bill of Supply:

 Name, Address and GSTIN of the supplier

 Bill of supply Number
 Date of Issue
 Recipient Name, Address and GSTIN of the recipient.
 Description of goods/services
 Harmonized System Nomenclature code for goods
 Accounting code for Services.
 Value of goods / services after adjusting any discount
 Signature or Digital signature of the supplier

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Time of Supply:
• Point in time
• When goods/services are supplied.
• When the seller knows the ‘time’
•Helps to identify due date for payment of taxes.
• CGST/SGST or IGST paid at the time of supply
• Goods and services have a separate basis
• Identify their time of supply.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Time of Supply of Goods

Time of supply of goods is earliest of:
1.Date of issue of invoice
2. Last date on which invoice should have been issued
3. Date of receipt of advance/ payment*.

Note: GST is not applicable to advances under GST. GST in

Advance is payable at the time of issue of the invoice.
Notification No. 66/2017 – Central Tax issued on 15.11.2017

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

For example:
Mr. X sold goods to Mr. Y worth Rs 1,00,000. The
invoice was issued on 15th January. The payment was
received on 31st January. The goods were supplied on
20th January.
Time of supply is earliest of –
1.Date of issue of invoice = 15th January
2.Last date on which invoice should have been issued = 20th
January
Thus the time of supply is 15th January.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Time of Supply for Services

Time of supply of services is earliest of:

1.Date of issue of invoice

2. Date of receipt of advance/ payment.

3. Date of provision of services

(if invoice is not issued within prescribed period)

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

For Example:
Mr. A provides services worth Rs.20000 to Mr. B on 1st January.
The invoice was issued on 20th January and the payment for the
same was received on 1st February.
In the present case, we need to 1st check if the invoice was
issued within the prescribed time. The prescribed time is 30 days
from the date of supply i.e. 31st January. The invoice was issued
on 20th January. This means that the invoice was issued within a
prescribed time limit.
The time of supply will be earliest of –
1.Date of issue of invoice = 20th January
2.Date of payment = 1st February
This means that the time of supply of services will be 20th January.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Time of Supply under Reverse Charge

In case of reverse charge the time of supply for service receiver
is earliest of:

1.Date of payment*
2. 30 days from date of issue of invoice for goods (60 days for
services)

*w.e.f. 15.11.2017 ‘Date of Payment’ is not applicable for goods

and applies only to services. Notification No. 66/2017 – Central
Tax

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Fro example:
M/s ABC Pvt. Ltd undertook service of a director Mr. X worth
Rs.50,000 on 15th January. The invoice was raised on 1st
February. M/s ABC Pvt Ltd made the payment on 1st May.

The time of supply, in this case, will be earliest of –

1.Date of payment = 1st May
2. 60 days from date of date of invoice = 2nd April

Thus, the time of supply of services is 2nd April.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Place of supply
It is very important to understand the term ‘place of supply’ for
determining the right tax to be charged on the invoice.
Here is an example:

Location of
Place of Nature of GST
Service
supply Supply Applicable
Receiver

Maharashtra Maharashtra Intra-state CGST + SGST

Maharashtra Kerala Inter-state IGST

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Place of Supply of Goods

• Where the goods are delivered
• Where the ownership of goods changes
• If there is no movement of goods, location of goods at the time
of delivery to the recipient.

For example: In case of sales in a supermarket, the place of

supply is the supermarket itself.
Place of supply in cases where goods that are assembled and
installed will be the location where the installation is done.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Place of Supply for Services

•The location of the service recipient
• Special provisions for the following services:
•Services related to immovable property

•Restaurant services

•Admission to events
•Transportation of goods and passengers

•Telecom services

•Banking, Financial and Insurance services.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Place of Supply for Services

In case of services related to immovable property, the location of
the property is the place of provision of services.
Example 1:
Mr. Anil from Delhi provides interior designing services to Mr. Ajay(Mumbai).
The property is located in Ooty(Tamil Nadu).
In this case, place of supply will be the location of the immovable property
i.e. Ooty, Tamil Nadu.
Example 2:
A registered taxpayer offers passenger transport services from Bangalore to
Hampi. The passengers do not have GST registration. What will be the place
of supply in this case?
The place of supply is the place from where the departure takes place i.e.
Bangalore in this case.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Valuation of supply under GST

• Charged on the ‘transaction value’.

• Transaction value is
• The price actually paid

• Price payable
• The supply of goods/services
• Un-related parties

• (i.e., price is the sole consideration)

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Valuation of supply under GST

The value of supply under GST shall include:
1.Any taxes under any act, except GST
2.Any amount incurred by the recipient and is not included in the
price.
3. All incidental expenses
4.Subsidies linked to supply, except Government subsidies
5.Interest
6. Late fee
7. Penalty for delayed payment

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Example
ABC, a manufacturer, selling tools and
valuation of supply under gsthardware
like drills, polishers, spades etc. It sells a
power drill to XYZ a wholesaler. The MRP
is Rs. 5,500 but ABC sells it for Rs. 3,000.
Assuming CGST=9% and SGST= 9%
Power Drill 3,000
Add: CGST @9% 270
Add: SGST @9% 270
Total 3,540

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Discounts
• Given before supply
• At the time of supply
• Allowed as a deduction from transaction value.
• After supply discount is applicable if:
• There is a written agreement between the supplier and the
receiver, at or before the time of supply.
• For example, an agreement that if the customer paid the amount due within
30 days, a discount of 10% would be applicable.

• Discount offered should be specifically linked to the

relevant invoice.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Valuation of supply when a transaction is not in INR

• Exports are made with invoice

• In Foreign Currency
• IGST charged will be converted
• RBI Exchange Rate
• Exchange rates used in imports too.
• When reverse charge is applicable to imports.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Input Tax Credit (ITC) – Meaning

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Eligibility
a. Possession of tax invoice
b. The said goods/services have been received
c. Returns have been filed.
d. The tax charged has been paid to the government by
the supplier.
e. ITC can be claimed after last lot is received.
f. No ITC will be allowed on capital good

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Reversal of Input Tax Credit

• ITC only for business purposes

• If non-business (personal) purposes

• or for making exempt supplies

• ITC cannot be claimed

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Reversal of Input Tax Credit

ITC will be reversed in the following cases-
1) Non-payment of invoices in 180 days.
2) Credit note issued to ISD by seller.
3) Inputs partly for business purpose.
4) Capital goods partly for business use
5) ITC reversed is less than required
6) Interest will be applicable.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Reconciliation of ITC

• Claimed must match with his supplier GST return.

• Any mismatch

• Communication to supplier

• Communication to recipient

• After the filling of GSTR 3.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Documents Required for Claiming ITC

The following documents are required for claiming ITC:
1.Invoice issued by the supplier of goods/services
2. The debit note issued by the supplier
3. Bill of entry
4. An invoice issued under certain circumstances
5. An invoice or credit note issued by the Input Service
Distributor(ISD).
6. A bill of supply issued by the supplier

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Special cases of ITC

a.ITC for Capital Goods

b. ITC on Job Work

c. ITC Provided by Input Service Distributor (ISD)

d. ITC on Transfer of Business

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Registration under GST

• It is important to avail various benefits
• timely registration will avoid interface with tax
authorities.
• It is mandatory for every business entity
• Carrying out a taxable supply of goods or services
• Turnover exceeds the threshold limit of Rs. 20 lakh/
10 Lakh as applicable for different states.
• Without GST registration can neither collect GST from
his customers/ Consumers/ Clients nor claim any input
tax credit
Indirect Tax Unit III – Session Registration procedure under GST 45
 Commerce Department III B.Com. PA Even Sem.: 2018-19

GST registration is Mandatory

• annual turnover exceeds Rs 20 lakhs (limit is Rs 10
lakhs for special category States) Section 22 (1)
• persons making any inter-State taxable supply;
• casual taxable persons making taxable supply;
• who required to pay tax under reverse charge;
• non-resident taxable persons making taxable
supply;
• taxable supply on behalf of other taxable persons;
• Input Service Distributor
Indirect Tax Unit III – Session Registration procedure under GST 46
 Commerce Department III B.Com. PA Even Sem.: 2018-19

Exemptions from GST registration

• business of supplying goods or services wholly

exempted

• An agriculturist

• The Government notification.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Registration Process - Step 1

• Logon to the GST online portal and select New

registration.
• need to submit
•PAN
• mobile number

• email address.

• Temporary Reference Number (TRN) with a validity of

a period of 15 days.
Indirect Tax Unit III – Session Registration procedure under GST 48
 Commerce Department III B.Com. PA Even Sem.: 2018-19

Step 2 & 3
Step Two:
• fill Part- B of Form GST REG-01
• submit after attaching required documents.
Step Three:
• Application is Submitted and under process
• The GST Officer will verify the application
• Three Days process
• results will be give either approve or objections and
clarification.
Indirect Tax Unit III – Session Registration procedure under GST 49
 Commerce Department III B.Com. PA Even Sem.: 2018-19

Step 4
• If the information and the uploaded documents are found
in order, the State and the Central authorities shall approve the
application and communicate the approval to the common
portal within three common working days. The portal will then
automatically generate the Registration Certificate Form GST REG
–06.
(In case no deficiency is communicated to the applicant by the
tax authorities within three common working days, the
registration shall be deemed to have been granted)
• The applicant shall be informed of the fact of grant or
rejection of his registration application through an e-mail and
SMS by the GST common portal.
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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Step 5 & 6
Step Five:
• If additional information is required, Form GST REG-03 will
be issued. Applicant needs to respond in Form GST REG-04 with
required information within 7 working days from the date of
receipt of Form GST REG-03.
Step Six:
• The officer will further look in to the application /
documents submitted in detail and then either approve or reject
the application with in seven days.
In case registration is refused, the applicant will be informed
about the reasons for such refusal through a speaking order.The
applicant shall have the right to appeal against the decision of
Indirectthe
Tax Authority. Unit III – Session Registration procedure under GST 51
 Commerce Department III B.Com. PA Even Sem.: 2018-19

Final Step
• If the applicant have provided all required information via
Form GST REG-01 or Form GST REG-04,the registration certificate
in Form GST REG –06 will be issued to the applicant, for the
principal place of business as well as for every additional place of
business

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Documents Required
• Photographs of applicant as per business entity i.e. Individual /
Partners/ MD/ Directors/ Authorised person etc
• PAN card No./ Aadhar card No./ Valid Mobile No./ E-mail ID of
the Applicant
• Proof of constitution like partnership deed, Memorandum of
Association (MOA) /Articles of Association (AOA), certificate of
incorporation any other Registration Certificate issued by government.
• Details and proof of place of business like Rent Agreement/Lease
Deed/Electricity Bill/ Consent Letter/ Affidavit as the case may be.
• Cancelled cheque/ Bank Passbook of your bank account showing
name of account holder, MICR code, IFSC code and bank branch
details.
• Authority Letter/ Board Resolution for applying for GST
Indirect Tax Unit III – Session Registration procedure under GST 53
 Commerce Department III B.Com. PA Even Sem.: 2018-19

Procedures to Filing of Returns

• Visit the GST portal (www.gst.gov.in).

• A 15-digit GST identification number
• Upload invoices on the GST portal
• Upload outward return, inward return, and
cumulative monthly return
• File the outward supply returns on or before 10th of
the following month.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Procedures to Filing of Returns

• Details of outward supplies

• Recipient has to
• verify,
• validate,
• and modify the details of outward supplies,
• And file details of credit or debit notes.
• furnish the details of inward supplies in GSTR-2
form.
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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Types of Returns applicable under GST

Return Who should file the return and what should Due date for filing
form be filed? returns
Registered taxable supplier should file details
10th of the
GSTR-1 of outward supplies of taxable goods and
subsequent month.
services as effected.
Registered taxable recipient should file details
15th of the
GSTR-2 of inward supplies of taxable goods and
subsequent month.
services claiming input tax credit.
Registered taxable person should file monthly
return on the basis of finalization of details of 20th of the
GSTR-3
outward supplies and inward supplies plus the subsequent month.
payment of amount of tax.
Composition supplier should file quarterly 18th of the month
GSTR-4
return. succeeding quarter.
20th of the
GSTR-5 Return for non-resident taxable person.
subsequent month.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Types of Returns applicable under GST

Return Who should file the return and what should Due date for filing
form be filed? returns

13th of the
GSTR-6 Return for input service distributor.
subsequent month.

Return for authorities carrying out tax 10th of the

GSTR-7
deduction at source. subsequent month.

E-commerce operator or tax collector should

10th of the
GSTR-8 file details of supplies effected and the
subsequent month.
amount of tax collected.

Registered taxable person should file annual 31 December of

GSTR-9
return. the next fiscal year.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Types of Returns applicable under GST

Return Who should file the return and what should Due date for filing
form be filed? returns

Within 3 months of
Taxable person whose registration has been date of cancellation
GSTR-10 cancelled or surrendered should file final or date of
return. cancellation order,
whichever is later.

28th of the month,

following the
Person having UIN claiming refund should file
GSTR-11 month for which
details of inward supplies.
the statement was
filed.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Guest lecture
On

GST
Dr. A. SUKUMAR
Associate Professor and Head
Department of Commerce PA
Sri Krishna Adithya College of Arts and Science
Levy and Collection under IGST
Levy and Collection under The Integrated Goods and Services
Tax Act 2017- Meaning of important terms: Integrated tax,
intermediary, location of the recipient and supplier of services,
output tax. Levy and Collection of Tax- Determination of nature
of Supply- Inter-State supply and Intra-State supply-Place of
Supply of Goods or Services - zero-rated supply.
- Indirect Tax Unit III – Session Levy and Collection under IGST 1
 Commerce Department III B.Com. PA Even Sem.: 2018-19

Meaning
Integrated Tax Sec. 2(58)
• “integrated tax” means the integrated goods and services tax
levied under the Integrated Goods and Services Tax Act.

Intermediary Sec. 2(13)

• “Intermediary” means
• Broker
• an agent
• any other person,
• who arranges or facilitates the supply of goods or services
• between two or more persons

Indirect Tax Unit III – Session Levy and Collection under IGST 2
 Commerce Department III B.Com. PA Even Sem.: 2018-19

Location of Recipient of Service Sec.2(70)

• “location of the recipient of services” means,-

• supply is received at a place of business

• the location of such fixed establishment;

• supply is received at more than one establishment

• the location of the usual place of residence of the

recipient.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Location of Supplier of Service Sec.2(71)

• “location of the supplier of services” means,-

• the location of such place of business;

• the location of such fixed establishment;

• Location directly concerned with the provisions of the

supply; and

• the location of the usual place of residence of the supplier

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Meaning of Output Tax Sec.2(82)

• Tax collected

• At sales

• From customer

• Exclude input tax.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Meaning of Levy and Collection of tax

• Levy means charge of tax

• On goods or services or both
• On the supplier or manufacture or agent
• Collection by supplier
• For the goods or services
• From the customer

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Determining the nature of supply

• Place of supply
• Place of supplier
• Place of customer
• Source and distribution of supply
• Tax application for supply

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Intra-State Supply of Goods [Section 8 (1)]

• Supply of goods where the location of the supplier and the place of
supply of goods are in the same State or same Union territory shall
be treated as intra-State supply.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Intra-State Supply of Services [Section 8 (2)]

• Supply of services where the location of the supplier and the place
of supply of services are in the same State or same Union territory
shall be treated as intra-State supply

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Inter-State supply of Goods [Section 7 (1) & (2)]

• Inter-state transactions, IGST would be levied under GST regime,
which would be sum of total of both CGST and SGST and will be
administered and levied by the Central Government.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Inter-State supply of Services [Section 7 (3) & (4)]

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Establishment [Section 8]

• Note: A person carrying on a business through a branch or an

agency or a representational office in any territory shall be treated
as having an establishment in that territory.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Place of Supply of Goods

• GST is a destination based tax

• Intra-state or Inter-state transaction

• Levy of SGST, CGST & IGST will be determined.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Movement of Goods
Supply Place of Supply
Involves movement of goods, Location of the goods when the
whether by the supplier or the movement of goods terminates
recipient or by any other person for delivery to the recipient

Goods are delivered by the It is assumed that the third

seller to a recipient on the person has received the goods
direction of a third person, and the place of supply of such
(whether agent or not) before or goods will be the principal place
during movement of goods, by of business of 3rd person.
way of transfer of documents of
title to the goods or some other
way.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Movement of Goods
Example 1- Intra-state sales
Mr. Raj of Mumbai, Maharashtra sells 10 TV sets to Mr. Vijay of
Nagpur, Maharashtra
The place of supply is Nagpur in Maharashtra. Since it is the
same state CGST & SGST will be charged.

Example 2-Inter-State sales

Mr. Raj of Mumbai, Maharashtra sells 30 TV sets to Mr. Vinod of
Bangalore, Karnataka
The place of supply is Bangalore in Karnataka. Since it is a
different state IGST will be charged.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Movement of Goods
Example 3- Deliver to a 3rd party as per instructions
Anand in Lucknow buys goods from Mr. Raj in Mumbai (Maharashtra). The
buyer requests the seller to send the goods to Nagpur (Maharashtra)
In this case, it will be assumed that the buyer in Lucknow has received the
goods & IGST will be charged.
Place of supply: Lucknow (UP) GST: IGST

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Movement of Goods
Example 4- Receiver takes the goods ex-factory
Mr. Raj of Mumbai, Maharashtra gets an order of 100 TV sets from Sales
Heaven Ltd. of Chennai, Tamil Nadu. Sales Heaven mentions that it will
arrange its own transportation and take TV sets from Mr. Raj ex-factory
Place of supply: Chennai, Tamil Nadu GST: IGST
Although the goods are received ex-factory i.e in Maharashtra by the
recipient, the movement of the goods terminates for delivery to the recipient
only at Chennai, Tamil Nadu. Irrespective of whether the supplier or the
recipient is actually undertaking the movement of goods, the place of supply
is the location of goods where movement of goods terminates for delivery to
the recipient which is at Chennai. Hence, IGST is applicable.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Movement of Goods
Example 5 – E-commerce sale
Mr. Raj of Mumbai, Maharashtra orders a mobile from Amazon to be
delivered to his mother in Lucknow (UP) as a gift. M/s ABC (online seller
registered in Gujarat) processes the order and sends the mobile accordingly
and Mr. Raj is billed by Amazon.

Similar to example 3, it will be assumed that the buyer in Mumbai has

received the goods & IGST will be charged.

Place of supply: Mumbai, Maharashtra GST: IGST

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

No Movement of Goods
Supply Place of Supply
No movement of goods, either Location of such goods at the
by the supplier or the recipient time of the delivery to the
recipient (at the time of transfer
of ownership)
The goods are assembled or Place of such installation or
installed at site assembly

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

No Movement of Goods
Example 1- No movement of goods
Sales Heaven Ltd. (Chennai) opens a new showroom in Bangalore. It
purchases a building for showroom from ABC Realtors (Bangalore) along with
pre-installed workstations
Place of supply: Bangalore GST: CGST& SGST
There is no movement of goods (work stations), so the place of supply will be
the location of such goods at the time of delivery (handing over) to the
receiver.

Note: There is no GST on purchase of building or part thereof. RENT of

commercial space attracts GST

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

No Movement of Goods
Example 2- Installing goods
Strong Iron & Steel Ltd. (Jharkhand) asks M/s SAAS Constructions (West
Bengal) to build a blast furnace in their Jharkhand steel plant
Place of supply: Jharkhand GST: CGST & SGST
Although M/s SAAS is in West Bengal, the goods (blast furnace) is being
installed at site in Jharkhand which will be the place of supply.

Note: M/s SAAS will have to be registered in Jharkhand to take up this

contract. They can opt to register as a casual taxable person which will be
valid for 90 days (extendable by 90 days more, on basis of a reasonable
cause).

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Goods Supplied on a Vessel/Conveyance

Supply Place of Supply

Goods are supplied on board a Location at which such goods

conveyance, including a vessel, are taken on board.
an aircraft, a train or a motor
vehicle

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Goods Supplied on a Vessel/Conveyance

Example 1- Plane
Mr. Ajay is travelling from Mumbai to Delhi by air. He purchases coffee and
snacks while on the plane. The airlines is registered in both Mumbai and Delhi.
Place of supply: Mumbai GST: CGST& SGST
The food items were loaded into the plane at Mumbai. So, place of supply
becomes Mumbai.

Example 2- Plane- Business travel

Mr. Ajay is travelling from Mumbai to Chennai by air on behalf of his company
Ram Gopal and Sons (registered in Bangalore). In the plane he purchases
lunch. The airlines is registered in Mumbai & Chennai.
Place of supply: Mumbai GST: CGST & SGST
The food items were loaded into the plane at Mumbai. So, place of supply
becomes Mumbai. It does not matter where the buyer is registered.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Goods Supplied on a Vessel/Conveyance

Example 3- Train
Mr. Vinod is travelling to Mumbai via train. The train starts at Delhi and stops
at certain stations before Mumbai. Vinod boards the train at Vadodara
(Gujarat) and promptly purchases lunch on board. The lunch had been
boarded in Delhi.

Place of supply: Delhi GST: CGST & UTGST

The food items were loaded into the train at Delhi. So, place of supply
becomes Delhi.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Imports & Exports

The place of supply of goods:
• Imported into India will be the location of the importer.
• Exported from India shall be the location outside India.

Supply Place of Supply GST

Goods imported into Location of the importer Always IGST on imports
India

Exported from India Location outside india Exports are exempted

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Imports & Exports

Example 1- Import
Ms. Malini imports school bags from China for her shop (registered in Mumbai)

Place of supply: Mumbai GST: IGST

Example 2- Export
Ms. Anita (Kolkata) exports Indian perfumes to UK

Place of supply: Kolkata GST: Exempted

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Zero rated supply

• GST is not applicable in India for exports.
• all export supplies under GST would be classified as
zero rated supply.
• According to Section 16, IGST Act:
•Export of goods or services or both;
•Supply of goods or services or both to a Special Economic
Zone developer
•Supply of goods or services or both to a Special Economic
Zone unit.
Indirect Tax Unit III – Session Zero Rated Supply 27
 Commerce Department III B.Com. PA Even Sem.: 2018-19

Criterion table
Particulars NIL Rated Non-Taxable Exempt Zero-Rated
Supplies Supplies Supplies Supplies
Meaning Goods and Goods and Supplies which Goods or
services on services on are exempt services which
which 0% GST is which GST is from payment are exported
applicable not levied at of GST or supplied to
all SEZ
Input credit Not available Not available Not available Available
availability
GST Falls within GST Doesn’t fall Falls within Falls within
applicability ambit within GST GST ambit GST ambit
ambit
Example Hotel Supply of Inward Export of
accommodation alcohol for supplies from shoes to South
with tariff below human unregistered Africa
Rs. 1,000 consumption dealers
Indirect Tax Unit III – Session Zero Rated Supply 28
 Commerce Department III B.Com. PA Even Sem.: 2018-19

Refund of Zero Rated Supplies

• Zero-rated supplies entitled to claim refunds.
• for the input tax paid on the goods and services

For example:- An exporter supplies shoes to Dubai and uses soles

in the production of such shoes. The exporter has an option of
claiming Input tax credit of GST paid on the purchase of soles.

There are two options available with a dealer to claim refunds:

I. The dealer can export under Bond or LUT (Letter of
Undertaking) and claim a refund of the accumulated Input
credit of tax; or
II. II. The dealer can pay IGST while making the supplies and
claim refund of the same.
Indirect Tax Unit III – Session Zero Rated Supply 29
 Commerce Department III B.Com. PA Even Sem.: 2018-19

Refund procedures for Export of goods

• No separate refund application
• The shipping bill is a refund claim.
• two conditions for shipping bill:
I. A person carrying the export goods should file an export
manifest; and
II. Applicant should have filed the returns GSTR-3 or GSTR-3B
appropriately.

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Refund procedures for Export of Services and Supplies to SEZ

The option to pay IGST and claim a refund is always available. In this
case, the refund claim has to be filed in Form GST RFD-01.

For exporters of services, the following are also required to be filed

along with the refund claim:

I. A Statement containing Number and Date of Invoices; and

II. Bank Realisation Certificates / Foreign Inward Remittance
Certificates

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Refund procedures for Export of Services and Supplies to SEZ

The supplier of goods or services to an SEZ are required to file the

following along with the refund claim:

1. A Statement containing Number and Date of Invoices; and

2. Proof of Receipt of goods or services authorised by the officer of
SEZ
3. Details of payment made
4. developer of SEZ has not claimed the input tax credit of the taxes
paid by the supplier

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 Commerce Department III B.Com. PA Even Sem.: 2018-19

Provisional Refund
1. The exporters and suppliers of SEZ are entitled for refund
2. 90% refund on a provisional basis.
3. Provisional refund is granted within seven (7) days.
4. provisional refund is credited directly to the claimant’s bank
account.
5. Condition for provisional refunds:
1. It is not granted if the applicant has been prosecuted for any offense
under the GST law or earlier law within past five (5) years.
2. The amount of tax evaded in such prosecution shall be more than
Rupees Two Hundred and Fifty Lakhs (Rs. 2.5 Crores).

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 DEPARTMENT OF COMMERCE III B.Com PA 2018-2019

Guest lecture
On

GST
Dr. A. SUKUMAR
Associate Professor and Head
Department of Commerce PA
Sri Krishna Adithya College of Arts and Science

Introduction to Customs Laws in India – The Customs Act 1962-The

Customs Tariff Act 1975- Levy and Exemption from Custom duty-
Taxable event - Charge of Custom duty- Exemptions from duty-
Meaning of Classification of goods- Methods of valuation of
imported goods-Abatement of duty in damaged or deteriorated
goods-Remission on duty on lost, destroyed or abandoned goods-
Customs duty draw back.

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CUSTOMS ACT

The term Customs has derived its essence from the Custom, which means a
customary practice or a course of action that is observes and repeated in the like
circumstances. Customs Duty has been in vogue from ancient times. As per ancient
custom, a merchant entering a kingdom with his goods had to make a suitable gift to
the king.

In the course of time, this customs was formalized into Customs Duty. This is
collected on imports and occasionally on exports too. The word Customary is
derived from customs, which indicates that it is a very old tax. Taxes on goods were
levied on various goods right from the Veda period. Customs duty as we understand
today has its origin in British period.

In the present time customs duty means a tax which is levied by the Government on
import of goods into India and export out of India. It is a central tax and mainly
imposed on imported goods. Generally govt. levies export duty on a very few items
due to export promotion.

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1. Customs Act 1962 – Is the main Act, which provides

for levy and collection of Duty, Import / Export
procedure, Prohibition, Penalties, Offences etc.
2. Customs Tariff Act 1975 – Is for the classification and
rates of Duty for Import and Export
3. Rules under Customs Act – Under section 156 of
Customs Act, 1962, Central Government has been
empowered to make rules, consistent with
Provisions of the Act

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4. Notification under Customs Act –

Various sections authorize Central
Government to issue notifications
5. Board Circulars – Are instructions
and directions to Customs officials
6. Public Notice – Issued by
Commissioner of Customs. Can be
issued for local requirement too.

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MAIN FEATURES OF CUSTOMS DUTY

 Customs Duty levied on Import and Export

 Levying of customs duty
 Indirect Tax
 Goods under Customs Act
 Objects of Customs Duty
 Important source of Revenue
 Rate of Customs Duty

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Levy and Exemption from Custom duty

There are four stages in any tax structure, viz., levy,

assessment, collection and postponement. The
basis of levy of tax is specified in Section 12,
charging section of the Customs Act. It identifies
the person or properties in respect of which tax or
duty is to be levied or charged. Under assessment,
the liability for payment of duty is quantified and
the last stage is the collection of duty which is may
be postponed for administrative convenience.

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As per Section 12, customs duty is imposed on goods

imported into or exported out of India as per the rates
specified under the Customs Tariff Act, 1975 or any other
law. On analysis of Section 12, the following points:

(i) Customs duty is imposed on goods when such goods

are imported into or exported out of India;
(ii) The levy is subject to other provisions of this Act or any
other law;
(iii) The rates of Basic Custom Duty are as specified under
the Tariff Act, 1975 or any other law;
(iv) Even goods belonging to Government are subject to
levy, though they may be exempted by notification(s)
under Section 25.

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TAXABLE EVENT

In case of Importation
Import of goods will commerce when they cross
the territorial waters of India but is completed
when it becomes part of the mass of the goods
within the country. Taxable event is reached when
the goods reach the customs barrier and the bill of
entry for home consumption is filed.

In case of Exportation
Exportation commences when the shipping bill in
respect of such goods is filed but the taxable event
is completed when the goods cross the territorial
waters of India.
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CHARGE OF CUSTOM DUTY

Customs duty is payable on goods imported

from outside India. Calculating the amount
of duty the procedure can be divided in two
steps-
a. Determination of Assessable value
b. Calculation of Customs Duty Payable

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CALCULATION OF CUSTOMS DUTY PAYABLE

Basic Customs Duty (BCD)

This is the duty levied under Section 12 of the Customs

Act. It is levied as a Percentage of value as determine
under Section 14(1) of the Act. Basic duties prescribed
in the Customs Tariff Act.

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Additional Duty of Customs (CVD)

This duty is popularly known as countervailing duty.
Under Section 3 (1) of the Customs Act, an additional
duty on goods imported into the country is leviable.

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COMPUTATION OF ASSESSABLE VALUE AND CALCULATION OF

CUSTOMS DUTY

Following procedure is adopted for determining

the customs duty on the imported goods:
1. Determining the Assessable Value of goods.
2. Converting the foreign exchange value of the
imported goods into Indian Currency i.e., Rupees.
3. Computing the Customs Duty.

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COMPUTATION OF ASSESSABLE VALUE OF GOODS

1. Purchase Price of Goods xxxx

2. Commission and Brokerage (except buying Commission) xx
3. Cost of Packing xx
4. Material and Services provided by the Importer xx
5. Royalty and Licence Fee x x (+)xxx
FOB Value of Goods Tag Total
6. Transportation Cost (upto 20% of F.O.B. Value) xx
7. Insurance Premium (upto 1.125% of F.O.B. Value) x x (+)xxx
CIF Value of Goods Total
a. Loading, Unloading and Handling charges at 1% of the CIF Value x x (+) xx
Assessable Value of Goods in Foreign Currency G. Total
x Rate of Exchange
x Rate of exchange
Assessable Value of Goods in Indian Currency As ascertained

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EXEMPTION OF CUSTOM DUTY

A crew member of an aircraft shall be allowed

to bring gift items like chocolates, cheese,
cosmetics and other petty gift items at the time
of the returning of the aircraft from foreign
journey for their personal or family use which
shall not exceed the value of rupees six
hundred.

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GENERAL EXEMPTIONS

Annexure - I
1. Fire arms.
2. Cartridges of fire arms exceeding 50.
3. Cigarettes exceeding 200 or cigars exceeding 50 or tobacco
exceeding 250 gms.
4. Alcoholic liquor or wines in excess of two litres.
5. Gold or silver, in any form, other than ornaments.

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Annexure - II
1. Colour Television or Monochrome Television.
2. Digital Video Disc Player.
3. Video Home Theatre System.
4. Dish Washer.
5. Music System.
6. Air –Conditioner.
7. Domestic refrigerators of capacity above 300 liters or its equivalent .
8. Deep Freezer.
9. Microwave Oven.
10.Video camera or the combination of any such video camera with one
or more of the Following goods, namely:-
(a) Television Receiver;
(b) Sound recording or reproducing apparatus;
(c) Video reproducing apparatus.

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CALCULATION OF CUSTOM DUTY

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METHODS OF VALUATION OF
IMPORTED GOODS

Transaction value method,

Transaction value of identical goods,
Transaction value of similar goods,
Deductive method (price per unit),
Computed method,
Fallback method (available data).

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THE TRANSACTION VALUE METHOD

The transaction value is the price actually paid or payable

for the goods when sold for export to Montenegro, adjusted
in accordance with the provisions of Article 38 and 39 of the
Customs Law. The price actually paid or payable is the total
payment made or to be made by the buyer to or for the
benefit of the seller for the imported goods, and includes all
payments made as a condition of sale of the imported goods
by the buyer to the seller, or by the buyer to a third party to
satisfy an obligation of the seller.

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THE TRANSACTION VALUE OF IDENTICAL

GOODS
IDENTICAL GOODS
- The same in all respects including:
- Physical characteristics,
- Quality, and Reputation,
- Produced in the same country as the goods being valued, and
- Produced by the producer of the goods being valued
When this method is used, the identical goods must
have been exported to Montenegro at or about the
same time as the goods being valued. Where there is
more than one transaction value of identical goods
which meets all requirements, the lowest such value is
to be used.
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THE TRANSACTION VALUE OF SIMILAR

GOODS

Similar Goods are defined as goods which:

- Closely resemble the goods being valued in terms of

component materials and characteristics,
- Are capable of performing the same functions and
are commercially interchangeable with the goods
being valued,
- Are produced in the same country as the goods being
valued,
- Are produced by the producer of the goods being
valued
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The similar goods used must have been

exported to Montenegro at or about the same
time as the goods being valued. Where this is
more than one transaction value of similar
goods which meets all the requirements, the
lowest such value is to be used.

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THE DEDUCTIVE METHOD

(PRICE PER UNIT)

By this method the Customs value is determined on the

basis of sales price in Montenegro of the goods being
valued or of identical or similar imported goods, less
certain specified expenses resulting from the importation
and sale of the goods.

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THE COMPUTED VALUE

(CONSTRUCTION VALUE)

Under this Method, the Customs value is

determined on a basis of the cost of production of
the goods being valued, plus an amount for profit
and general expenses usually reflected in sales
from the country of exportation to Montenegro of
goods of the same class or kind.

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 DEPARTMENT OF COMMERCE III B.Com PA 2018-2019

THE FALLBACK OR FLEXIBLE METHOD

When Customs value can not be determined under any of

the previous methods of valuation, it may be determined by
applying in a flexible manner which ever of the previous
methods most readily enables calculation of the Customs
value. In determining Customs value under this method, no
arbitrary, fictitious or prohibited methods of valuation are to
be used. The Customs value should be fair, reasonable,
uniform and neutral, and should reflect commercial reality
to the extent possible.

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 DEPARTMENT OF COMMERCE III B.Com PA 2018-2019

ABATEMENT OF DUTY IN DAMAGED

OR DETERIORATED GOODS

If any goods are found damaged and are

examined by customs authority for that
purpose on an application made therefor,
the duty can be charged only on the
goods which are serviceable or on the
reduced value as may be determined by
customs authority. Provisions in this
regard have been made under Section 22
of the Customs Act, 1962.
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 DEPARTMENT OF COMMERCE III B.Com PA 2018-2019

Under Section 22, there is allowed abatement of duty on

damaged or deteriorated goods under Sub-section (1), where it
is shown to the satisfaction of the Assistant/Deputy
Commissioner of Customs—
(a) that any imported goods had been damaged or had deteriorated at any
time before or during the unloading of the goods in India; or
(b) that any imported goods, other than warehoused goods, had been
damaged at any time after the unloading thereof in India but before their
examination under Section 17, on account of any accident not due to any
wilful act, negligence or default of the importer, his employee or agent; or
(c) that any warehoused goods have been damaged at any time before
clearance for home consumption on account of any accident not due to any
wilful act, negligence or default of the owner his employee or agent.
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REMISSION OF DUTY ON LOST, DESTROYED

OR ABANDONED GOODS (SECTION 23)

Where any goods are lost or destroyed, except by way of

pilferage, whether totally or partially, even after the out of
charge is signed but before they are physically removed from
customs area, the owner is entitled for remission of duty on
such goods. Further, an owner of goods can surrender the title
to the goods to customs before an order for home consumption
has been made and no duty need be paid on such goods.

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 DEPARTMENT OF COMMERCE III B.Com PA 2018-2019

Section 23 relates to remission of duty on lost,

destroyed or abandoned goods. It reads as follows:

• Without prejudice to the provisions of Section 13, where it is shown to

the satisfaction of the Assistant/Deputy Commissioner of Customs that
any imported goods have been lost otherwise than as a result of pilferage
or destroyed, at any time before clearance for home consumption, the
Assistant/Deputy Commissioner of Customs shall remit the duty on such
goods.

• The owner of any imported goods may, at any time before an order for
clearance of goods for home consumption under Section 47 or an order
for permitting the deposit of goods in a warehouse under Section 60 has
been made, relinquish his title to the goods and thereupon he shall not be
liable to pay the duty thereon‖.

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 DEPARTMENT OF COMMERCE III B.Com PA 2018-2019

Provided that the owner of any such imported goods

shall not be allowed to relinquish his title to such
goods regarding which an offence appears to have
been committed under this Act or any other law for
the time being in force.

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 DEPARTMENT OF COMMERCE III B.Com PA 2018-2019

Drawback also known as Duty Drawback as the refund of

certain duties, internal and revenue taxes and certain fees
collected upon the importation of goods. Such refunds are only
allowed upon the exportation or destruction of goods Duty
drawback is an export promotions program sanctioned by the
World Trade Organization and allows the refund of certain
duties taxes and fees paid upon importation which was
established in 1789 in order to promote U.S. innovation and
manufacturing across the global market.

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DUTY DRAWBACK CAN HELP A CLAIMANT RECOVER THE FOLLOWING

DUTIES, TAXES AND FEES PAID ON THE IMPORTED MERCHANDISE:

 Duties paid on an entry, or withdrawal from warehouse, for

consumption.
 Voluntary tenders of duties
 Marking duties
 Internal revenue tax
 Harbor maintenance tax (except manufacturing drawback)
 Merchandise processing fees (except manufacturing drawback)

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 DEPARTMENT OF COMMERCE III B.Com PA 2018-2019

DIRECT IDENTIFICATION
MANUFACTURING

If articles manufactured with the use of

imported merchandise are subsequently
exported or destroyed then drawback not
exceeding 99 percent of the duties paid on
the imported merchandise may be
recoverable. Title 19 (Section 1313(a))

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SUBSTITUTION MANUFACTURING
If both imported merchandise and any other merchandise of
the same kind and quality are used to manufacture articles,
some of which are exported or destroyed before use, then
drawback not exceeding 99 percent of the duty which was
paid on the imported merchandise may be payable on the
exported or destroyed articles. It is immaterial whether the
actual imported merchandise or the domestic merchandise of
the same kind and quality was used in the exported or
destroyed articles. This provision makes it possible for firms
to obtain drawback without the expense of maintaining
separate inventories for dutiable and other merchandise. Title
19 (Section 1313(b))

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REJECTED MERCHANDISE

If merchandise is exported or destroyed because

it does not conform with samples or
specifications, or has been shipped without the
consent of the consignee, or has been
determined to be defective as of the time of
importation, then 99 percent of the duties which
were paid on the merchandise may be
recovered as drawback. Title 19 (Section
1313(c))

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UNUSED MERCHANDISE

If imported merchandise is unused and exported or

destroyed under Customs supervision, 99 percent of the
duties, taxes or fees paid on the merchandise by reason of
importation may be recovered as drawback. Title 19 (Section
1313(j)(1))

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SUBSTITUTION UNUSED MERCHANDISE

If merchandise that is commercially

interchangeable with imported merchandise upon
which was paid any duty, tax, or fee imposed
under Federal law because of its importation, is
exported or destroyed under Customs supervision
and at the time of exportation or destruction has
not been used, 99 percent of the duties, taxes or
fees paid on the merchandise may be recovered as
drawback. Title 19 Section 1313(j)(2))

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