CHAPTER a

CHARGE OF GST
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, unless
otherwise specified. Examples/illustrations/Questions and Answers given in the
Chapter are based on the position of GST law existing as on 30.04.2023.

LEARNING OUTCOMES

After studying this Chapter, you will be able to –

❑ explain the extent and commencement of CGST Act, IGST Act,
SGST Act & UTGST Act.
❑ describe the provisions pertaining to levy and collection of
CGST & IGST.
❑ identify and analyse the services on which tax is payable
under reverse charge mechanism.
❑ comprehend and analyse the composition levy - eligibility for
the same and conditions to be fulfilled.

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 a 3.2 a GOODS AND SERVICE TAX

CHAPTER OVERVIEW

Levy and collection of

GST in India Extent and commencement of CGST
Act/ UTGST Act/ SGST Act/IGST Act

Levy and collection of CGST/IGST

Composition levy

1. INTRODUCTION
Power to levy tax is drawn from the Constitution of India. To pave way for the
introduction of Goods and Services Tax (“GST”), 101st Constitutional Amendment
Act, 2016 was passed. By virtue of this Act, enabling provision was made to levy
GST on supply of goods or services or both in India. Central excise duty, State VAT
and certain State specific taxes and service tax were subsumed into a
comprehensive GST [Discussed in detail in Chapter-1: GST in India – An Introduction
in this Module of the Study Material].
The very basis for the charge of tax in any taxing statute is the taxable event i.e the
occurrence of the event which triggers levy of tax. As discussed earlier, the taxable
event under GST is SUPPLY [Discussed in detail in Chapter – 2: Supply under GST in
this Module of the Study Material]. CGST and SGST/UTGST are levied on all intra-
State supplies of goods and/or services while IGST is levied on all inter-State
supplies of goods and/ or services.
The provisions relating to levy and collection of CGST and IGST are contained in
section 9 of the CGST Act, 2017 and section 5 of the IGST Act, 2017, respectively.
Let us now have a fundamental idea of intra-State supply and inter-State supply.
As a general rule, where the location of the supplier and the place of supply of
goods or services are in the same State/Union
territory, it is treated as intra-State supply of
goods or services respectively.

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Similarly, where the location of the supplier and the place of supply of goods or
services are in (i) two different States or (ii) two
different Union Territories or (iii) a State and a
Union territory, it is treated as inter-State supply of goods or services
respectively.
The concepts of ‘place of supply’ and meaning of the ‘location of the supplier’
have been elaborated in the next chapter, Chapter 4 – Place of Supply, in this Module
of the Study Material. Consequently, the meaning of terms ‘inter-State supply’ and
‘intra-State supply’ has been explained in detail in that chapter.
It is important to note that at intermediate level, provisions pertaining to
import and export of goods and/or services have not been covered. These
provisions will be discussed in detail at the Final level.

2. RELEVANT DEFINITIONS
❑ Central tax: means the central goods and services tax levied under section
9 of the CGST Act [Section 2(21)].
❑ Integrated tax: means the integrated goods and services tax levied under
❑ State tax: means the tax levied under any State Goods and Services Tax Act
[Section 2(104)].
❑ Goods: means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed before
supply or under a contract of supply. [Section 2(52)].
❑ Electronic Commerce: means the supply of goods or services or both
including digital products over digital or electronic networks. [Section 2(44)]
❑ Electronic Commerce Operator: means any person who owns, operates or
manages a digital or electronic facility or platform for electronic commerce.
[Section 2(45)]
❑ Exempt supply: means supply of any goods or services or both which attracts
nil rate of tax or which may be wholly exempt from tax under section 11, or
under section 6 of the Integrated Goods and Services Tax Act, and includes
non-taxable supply [Section 2(47)].Non-taxable supply: means a supply of
goods or services or both which is not leviable to tax under this Act or under
the Integrated Goods and Services Tax Act [Section 2(79)].

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❑ Aggregate turnover: means the aggregate value of all taxable supplies

(excluding the value of inward supplies on which tax is payable by a person
on reverse charge basis), exempt supplies, exports of goods or services or
both and inter-State supplies of persons having the same Permanent Account
be computed on all India basis but excludes central tax, State tax, Union
territory tax, integrated tax and cess [Section 2(6)].
❑ Prescribed: means prescribed by rules made under this Act on the
recommendations of the council. [Section 2(87)]
❑ Business: includes –

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any
other similar activity, whether or not it is for a pecuniary benefit;

(b) any activity or transaction in connection with or incidental or ancillary to (a) above;

(c) any activity or transaction in the nature of (a) above, whether or not there is volume,
frequency, continuity or regularity of such transaction;

(d) supply or acquisition of goods including capital assets and services in connection
with commencement or closure of business;

(e) provision by a club, association, society, or any such body for a subscription or any
other consideration) of the facilities or benefits to its members, as the case may be;

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

(g) services supplied by a person as the holder of an office which has been accepted by
him in the course or furtherance of his trade, profession or vocation;

(h) activities of a race club including by way of totalisator or a license to book maker or
activities of a licensed book maker in such club;

(i) any activity or transaction undertaken by the Central Government, a State Government
or any local authority in which they are engaged as public authorities

[Section 2(17)].
❑ Consideration: in relation to the supply of goods or services or both
includes:
✓ any payment made or to be made, whether in money or otherwise,
in respect of, in response to, or for the inducement of, the supply of

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goods or services or both, whether by the recipient or by any other

person but shall not include any subsidy given by the Central
Government or a State Government,
✓ the monetary value of any act or forbearance, in respect of, in
response to, or for the inducement of, the supply of goods or
services or both, whether by the recipient or by any other person but
shall not include any subsidy given by the Central Government or a
State Government.
However, a deposit given in respect of the supply of goods or services or both
shall not be considered as payment made for such supply unless the supplier
applies such deposit as consideration for the said supply [Section 2(31)].
❑ Person: includes [Section 2(84)]-

An individual A HUF A company

An association of persons or
A Limited Liability a body of individuals,
A firm
Partnership whether incorporated or not,
in India or outside India

Any corporation established Any body corporate A co-operative society

by/under any Central, State or
incorporated by or registered under any law
Provincial Act or Government
company as defined in section under the laws of a relating to cooperative
2(45) of Companies Act, 2013 country outside India societies

Central Society as defined

A local authority Government/State under the Societies
Government Registration Act, 1860

Every artificial juridical

Trust person, not falling
above

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❑ Recipient: of supply of goods and/or services means-

(a) where a consideration is payable for the supply of goods or services
or both, the person who is liable to pay that consideration,
(b) where no consideration is payable for the supply of goods, the
person to whom the goods are delivered or made available, or to
whom possession or use of the goods is given or made available,
and
(c) where no consideration is payable for the supply of a service, the
person to whom the service is rendered,
and any reference to a person to whom a supply is made shall be
construed as a reference to the recipient of the supply and shall include
an agent acting as such on behalf of the recipient in relation to the goods
or services or both supplied [Section 2(93)].
❑ Registered Person: means a person who is registered under section 25 but
does not include a person having unique identity number.
❑ Reverse charge: means the liability to pay tax by the recipient of supply of
goods or services or both instead of the supplier of such goods or services
or both under section 9(3)/9(4), or under section 5(3)/5(4) of the IGST Act
[Section 2(98)].
❑ Services: means anything other than goods, money and securities but
includes activities relating to the use of money or its conversion by cash
or by any other mode, from one form, currency or denomination, to
another form, currency or denomination for which a separate
consideration is charged [Section 2(102)].
Explanation.––For the removal of doubts, it is hereby clarified that the
expression “services” includes facilitating or arranging transactions in
securities.
❑ Supplier: in relation to any goods or services or both, shall mean the
person supplying the said goods or services or both and shall include an
agent acting as such on behalf of such supplier in relation to the goods
or services or both supplied [Section 2(105)].

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❑ Taxable supply: means a supply of goods and/or services which is

leviable to tax under CGST Act [Section 2(108)].

❑ Taxable person: means a person who is registered or liable to be registered

under section 22 or section 24 of the CGST Act [Section 2(107)].

It is important to note that a person who is liable to be registered but

does not take a registration and remains an unregistered person shall be
construed as a taxable person. Similarly, a person not liable to be
registered, but has taken voluntary registration and got himself registered
is also a taxable person.

Section 22 enumerates the persons liable to be registered under CGST Act and section
24 lists the persons liable to be registered compulsorily under the GST law. The said
sections and the concept of taxable person thereto has been discussed in detail in
Chapter 9 – Registration in Module 2 of this Study Material.

3. EXTENT & COMMENCEMENT OF GST LAW

(i) Central Goods and Services Tax Act, 2017 extends to the whole of India
[Section 1 of the CGST Act].

India: “India” means [Section 2(56) of CGST Act]-

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territory of India as referred to in article 1 of the Constitution

its territorial waters, seabed and sub-soil underlying such waters,

continental shelf, exclusive economic zone or any other maritime
zone as referred to in the Territorial Waters, Continental Shelf,
Exclusive Economic Zone and other Maritime Zones Act, 1976

the air space above its territory and territorial waters

24 200
12
NM NM
NM

Territoria
l Waters
(TWI) Contiguous High Sea
Zone

Exclusive Economic Zone

Baseline s

Continental Shelf

(ii) State GST law of the respective State/Union Territory with Legislature [Delhi,
Puducherry and Jammu & Kashmir]* extends to whole of that State/Union
Territory.
(1) Maharashtra GST Act, 2017 extends to whole of the State of the
Maharashtra.
*State: includes a Union territory with Legislature [Section 2(103) of the CGST
Act].

(iii) Integrated Goods and Services Tax Act, 2017 extends to the whole of India
[Section 1 of the IGST Act].

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(iv) Union Territory Goods and Services Tax Act, 2017 extends to the Union
territories** of the Andaman and Nicobar Islands, Lakshadweep, Dadra and
Nagar Haveli and Daman and Diu, Ladakh 1, Chandigarh and other territory,
i.e. the Union Territories without Legislature [Section 1 of the UTGST Act].
**Union territory: means the territory of—
means the territory of—

(a) the Andaman and Nicobar Islands;

(b) Lakshadweep;
(c) Dadra and Nagar Haveli and Daman and Diu;
(d) Ladakh
(e) Chandigarh; and
(f) other territory.

Explanation––For the purposes of this Act, each of the territories specified in

sub-clauses (a) to (f) shall be considered to be a separate Union territory
[Section 2(114) of CGST Act].

Quiz
Quiz
Time!
time! Sudhakar Enterprises has undertaken an intra-State
supply of taxable goods. CGST and UTGST will be
payable on said supply provided the supply is made
1 within _________________________.

(b) Jammu &

(a) Delhi (b) Puducherry (c) Ladakh
Kashmir

1
Students may note that the erstwhile State of Jammu and Kashmir has been reorganised
into the Union territory of Jammu and Kashmir (with Legislature) and Union territory of
Ladakh vide the Jammu and Kashmir Reorganisation Act, 2019. Further, the erstwhile Union
territories of Dadra and Nagar Haveli and Daman and Diu have been merged into a new
Union territory of Dadra and Nagar Haveli and Daman and Diu vide the Dadra and Nagar
Haveli and Daman and Diu (Merger of Union Territories) Act, 2019.

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Our discussion in this Study Material will principally be confined to the

provisions of CGST and IGST laws as the specific State GST laws are outside
the scope of syllabus.

4. LEVY & COLLECTION OF CGST & IGST

[SECTION 9 OF THE CGST ACT & SECTION 5 OF
THE IGST ACT]

STATUTORY PROVISIONS

Section 9 of the Levy and collection (CGST)

CGST Act, 2017

Sub-section Particulars

(1) Subject to the provisions of sub-section (2), there shall be

levied a tax called the central goods and services tax on all
intra-State supplies of goods or services or both, except on
the supply of alcoholic liquor for human consumption, on the
value determined under section 15 and at such rates, not
exceeding twenty per cent., as may be notified by the
Government on the recommendations of the Council and
collected in such manner as may be prescribed and shall be
paid by the taxable person.

(2) The central tax on the supply of petroleum crude, high speed
diesel, motor spirit (commonly known as petrol), natural gas
and aviation turbine fuel shall be levied with effect from such
date as may be notified by the Government on the
recommendations of the Council.

(3) The Government may, on the recommendations of the

Council, by notification, specify categories of supply of
goods or services or both, the tax on which shall be paid

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on reverse charge basis by the recipient of such goods or

services or both and all the provisions of this Act shall
apply to such recipient as if he is the person liable for
paying the tax in relation to the supply of such goods or
services or both.

(4) The Government may, on the recommendations of the

Council, by notification, specify a class of registered
persons who shall, in respect of supply of specified
categories of goods or services or both received from an
unregistered supplier, pay the tax on reverse charge basis
as the recipient of such supply of goods or services or both,
and all the provisions of this Act shall apply to such
recipient as if he is the person liable for paying the tax in
relation to such supply of goods or services or both.

(5) The Government may, on the recommendations of the Council,

by notification, specify categories of services the tax on intra-
State supplies of which shall be paid by the electronic commerce
operator if such services are supplied through it, and all the
provisions of this Act shall apply to such electronic commerce
operator as if he is the supplier liable for paying the tax in
relation to the supply of such services.
Provided that where an electronic commerce operator does
not have a physical presence in the taxable territory, any
person representing such electronic commerce operator for
any purpose in the taxable territory shall be liable to pay tax:
Provided further that where an electronic commerce
operator does not have a physical presence in the taxable
territory and also he does not have a representative in the
said territory, such electronic commerce operator shall
appoint a person in the taxable territory for the purpose of
paying tax and such person shall be liable to pay tax.

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Section 5 of the Levy and Collection of Tax (IGST)

IGST Act, 2017

Sub-section Particulars

(1) Subject to the provisions of sub-section (2), there shall be

levied a tax called the integrated goods and services tax on
all inter-State supplies of goods or services or both; except on
the supply of alcoholic liquor for human consumption, on the
value determined under section 15 of the Central Goods and
Services Tax Act and at such rates, not exceeding forty per
cent., as may be notified by the Government on the
recommendations of the Council and collected in such
manner as may be prescribed and shall be paid by the taxable
person.

(2) The integrated tax on the supply of petroleum crude, high

speed diesel, motor spirit (commonly known as petrol),
natural gas and aviation turbine fuel shall be levied with
effect from such date as may be notified by the Government
on the recommendations of the Council.

(3) The Government may, on the recommendations of the Council,

by notification, specify categories of supply of goods or services
or both, the tax on which shall be paid on reverse charge basis
by the recipient of such goods or services or both and all the
provisions of this Act shall apply to such recipient as if he is the
person liable for paying the tax in relation to the supply of such
goods or services or both.

(4) The Government may, on the recommendations of the

Council, by notification, specify a class of registered persons
who shall, in respect of supply of specified categories of goods
or services or both received from an unregistered supplier,
pay the tax on reverse charge basis as the recipient of such
supply of goods or services or both, and all the provisions of
this Act shall apply to such recipient as if he is the person

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liable for paying the tax in relation to such supply of goods

or services or both

(5) The Government may, on the recommendations of the

Council, by notification, specify categories of services, the
tax on inter-State supplies of which shall be paid by the
electronic commerce operator if such services are supplied
through it, and all the provisions of this Act shall apply to
such electronic commerce operator as if he is the supplier
liable for paying the tax in relation to the supply of such
services.
Provided that where an electronic commerce operator does
not have a physical presence in the taxable territory, any
person representing such electronic commerce operator for
any purpose in the taxable territory shall be liable to pay
tax.
Provided further that where an electronic commerce
operator does not have a physical presence in the taxable
territory and also does not have a representative in the
said territory, such electronic commerce operator shall
appoint a person in the taxable territory for the purpose of
paying tax and such person shall be liable to pay tax.

ANALYSIS
Central Goods and Services Tax (CGST) shall be levied on all intra-State supplies of
goods or services or both 2.
The tax shall be collected in such manner as may be prescribed and shall be paid
by the taxable person. However, intra-State supply of alcoholic liquor for human
consumption is outside the purview of CGST.

2
IGST is leviable on import of goods and on import of services.

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Value for levy: Transaction value under section 15 of the CGST Act– Discussed in
detail in Chapter 7 – Value of supply in this Module of Study Material.

Rates of CGST: Rates for CGST are rates as may be notified by the Government on
the recommendations of the GST Council. [Discussed in detail subsequently in this
Chapter]. Maximum rate of CGST can be 20%.

💡In case of inter-State supplies of goods and/or services, Integrated Goods and
Services Tax (IGST) is levied on the transaction value under section 15 of the CGST
Act. Since alcoholic liquor for human consumption is outside the purview of GST
law, IGST is also not leviable on the same. IGST is the sum total of CGST and
SGST/UTGST. The maximum rate of IGST can be 40%.
However, CGST/IGST on supply of the following items has not yet been levied. It
shall be levied with effect from such date as may be notified by the Government on
the recommendations of the Council:
❑ petroleum crude
❑ high speed diesel
❑ motor spirit (commonly known as petrol)
❑ natural gas and
❑ aviation turbine fuel
Tax payable on supply of goods or services or both under reverse charge
CGST/IGST shall be paid by the recipient of goods or services or both, on reverse
charge basis, in the following cases:
❑ Supply of such goods or services or both, as notified by the Government on
the recommendations of the GST Council.

❑ Supply of specified categories of goods or services or both by an

unregistered supplier to specified class of registered persons, as notified by
the Government on recommendation of GST Council.
All the provisions of the CGST Act/ IGST Act shall apply to the recipient in the
aforesaid cases as if he is the person liable for paying the tax in relation to the
supply of such goods or services or both. Let us first understand the concept of
reverse charge mechanism:

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Generally, the supplier of goods or services is liable to pay GST. However, under
the reverse charge mechanism, the liability to pay GST is cast on the recipient of
the goods or services.
Reverse charge means the liability to pay tax is on the recipient of supply of goods
or services instead of the supplier of such goods or services in respect of notified
categories of supply [Section 2(98)].
It may be noted that the underlying principle of an indirect tax is that burden of tax
has to be ultimately passed on to the recipient. GST being an indirect tax, this
principle holds good for GST. Under normal circumstances, the statutory liability to
deposit GST and undertake compliances [i.e. to obtain registration under GST, deposit
the tax with the Government, filing returns, etc.] is on the supplier while he may recover
the same from its recipient. However, under reverse charge mechanism, the
statutory liability to deposit GST and undertaking compliance requirements, [i.e. to
obtain registration under GST, deposit the tax with the Government, filing returns, etc.] shifts
from supplier to recipient.
There are two types of reverse charge scenarios provided in law.
(i) First scenario occurs in case of supply of specified categories of goods or
services, covered by section 9(3) of the CGST/ SGST (UTGST) Act. Similar
provisions are contained under section 5(3) of the IGST Act.

(ii) Second scenario occurs in case of supply of specified categories of goods

or services made by an unregistered supplier to specified class of
registered recipients, covered by section 9(4) of the CGST Act. Similar
provisions are contained under section 5(4) of the IGST Act. Goods
and services notified under this case have been discussed subsequently in
this chapter.

Goods and services notified under reverse charge mechanism under section
9(3) of the CGST Act/ section 5(3) of the IGST Act are as follows:
A. Supplies of goods taxable under reverse charge, i.e. supply of the
goods where tax is payable by the recipient: Goods like cashewnuts
[not shelled/peeled], bidi wrapper leaves, tobacco leaves and raw cotton

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(when supplied by an agriculturist to any registered person), supply of

lottery (when supplied by State Government, Union Territory or any local
authority to lottery distributor or selling agent), silk yarn (when supplied
by manufacturer of silk yarn to any registered person), used vehicles,
seized and confiscated goods, old and used goods, waste and scrap (when
supplied by Central Government, State Government, Union Territory or
any local authority to any registered person), priority sector lending
certificate – when supplied by registered person to any registered person,
etc. are taxable under reverse charge 3.
B. Supply of services taxable under reverse charge under section 9(3) of
the CGST Act, i.e. the services where tax is payable by the recipient:
Notification No. 13/2017 CT (R) dated 28.06.2017 as amended has notified
the following categories of supply of services wherein whole of the tax
shall be paid on reverse charge basis by the recipient of services:

S. Category of supply Supplier of Recipient of

No. of services service Service

1. Supply of services by a Goods Transport (a) Any factory

Goods Transport Agency (GTA) registered
Agency (GTA) in under or
respect of governed by
transportation of the Factories
goods by road to- Act, 1948; or
(a) any factory (b) any society
registered registered
under or under the
governed by the Societies
Factories Act, Registration
1948; or Act, 1860 or
(b) any society under any
registered other law for
under the the time

3
Examples of goods on which tax is payable by the recipient under reverse charge have been
given hereunder only for the knowledge of the students. These are not relevant for
examination purposes.

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 CHARGE OF GST a 3.17 a

Societies being in force

Registration Act, in any part of
1860 or under India; or
any other law (c) any co-
for the time operative
being in force in society
any part of established by
India; or or under any
(c) any co- law; or
operative (d) any person
society registered
established by under the
or under any CGST Act or
law; or the IGST Act
(d) any person or the SGST
registered Act or the
under the CGST UTGST Act; or
Act or the IGST (e) any body
Act or the SGST corporate
Act or the established,
UTGST Act; or by or under
(e) any body any law; or
corporate (f) any
established, by partnership
or under any firm whether
law; or registered or
(f) any partnership not under any
firm whether law including
registered or association of
not under any persons; or
law including (g) any casual
association of taxable
persons; or person;
(g) any casual located in the
taxable person. taxable territory.
[Hereinafter referred as
Specified recipients]

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However, reverse charge mechanism (RCM) shall not apply to

services provided by a GTA, by way of transport of goods in a
goods carriage by road to-
(a) a Department/ establishment of the Central Government/
State Government/ Union territory; or
(b) local authority; or
(c) Governmental agencies,
which has taken registration under the CGST Act only for the
purpose of deducting tax under section 51 4 and not for making a
taxable supply of goods or services 5.
Further, nothing contained in this entry shall apply where, -
i. the supplier has taken registration under the CGST Act,
2017 and exercised the option to pay tax on the services
of GTA in relation to transport of goods supplied by him
under forward charge; and
ii. the supplier has issued a tax invoice to the recipient
charging CGST at the applicable rates and has made the
prescribed declaration on such invoice issued by him.

2. Services provided by An individual Any business entity

an individual advocate including located in the
advocate including a a senior advocate taxable territory.
senior advocate or or firm of
firm of advocates by advocates.
way of legal services,
directly or indirectly.
“Legal service” means
any service provided
in relation to advice,
consultancy or

4
Provisions relating to tax deducted at source contained in section 51 shall be discussed in
Chapter 14 – Tax Deduction at Source and Collection of Tax at Source.
5
These services have been simultaneously exempted from GST vide entry 21B of Notification
No. 12/2017 CT(R) dated 28.06.2017. Thus, there will be no tax liability in this case. [Refer
Chapter 5: Exemptions from GST in this Module of the Study Material for discussion on this
exemption].

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 CHARGE OF GST a 3.19 a

assistance in any
branch of law, in any
manner and includes
representational
services before any
court, tribunal or
authority.

3. Services supplied by An arbitral tribunal. Any business entity

an arbitral tribunal located in taxable
to a business entity. territory.

4. Services provided by Any person Any body corporate

way of sponsorship or partnership firm
to any body corporate located in the
or partnership firm. taxable territory.

5. Services supplied by Central Any business entity

the Central Government, State located in the
Government, State Government, taxable territory.
Government, Union Union territory or
territory or local local authority
authority to a
business entity
excluding, -
(1) renting of
immovable
property, and
(2) services
specified below-
(i) services by
the
Department
of Posts;
(ii) services in
relation to
an aircraft
or a vessel,
inside or

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outside the
precincts of
a port or an
airport;
(iii) transport of
goods or
passengers.

5A. Services supplied by Central Any person

Central Government, Government, State registered under
State Government, Government, the CGST Act, 2017
Union territory or Union territory or
local authority by way local authority
of renting of
immovable property
to a person
registered under
CGST Act, 2017

5AA. Service by way of Any person Any registered

renting of residential person
dwelling to a
registered person

6. Services supplied by A director of a Company or a body

a director of a company or a body corporate located in
company/ body corporate the taxable
corporate to the said territory.
company/body
corporate.

7. Services supplied by An insurance agent Any person carrying

an insurance agent on insurance
to any person carrying business, located in
on insurance business. the taxable territory.

8. Services supplied by A recovery agent A banking

a recovery agent company/financial
to a banking company institution or a non-

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 CHARGE OF GST a 3.21 a

or a financial banking financial

institution or a non- company, located in
banking financial the taxable territory.
company.

9. Supply of services by a Music composer, Music company,

music composer, photographer, producer or the like,
photographer, artist artist, or the like located in the
or the like by way of taxable territory.
transfer or permitting
the use or enjoyment
of a copyright covered
under section 13(1)(a)
of the Copyright Act,
1957 relating to
original dramatic,
musical or artistic
works to a music
company, producer
or the like.

9A. Supply of services by Author Publisher located in

an author by way of the taxable
transfer or permitting territory.
the use or enjoyment
of a copyright covered
under section 13(1)(a)
of the Copyright Act,
1957 relating to
original literary works
to a publisher.

However, an author can choose to pay tax under forward

charge if-
(i) he has taken registration under the CGST Act and filed a
declaration, in the prescribed form, that he exercises the
option to pay CGST on the said service under forward charge
in accordance with section 9(1) and to comply with all the
provisions as they apply to a person liable for paying the tax

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 a 3.22 a GOODS AND SERVICE TAX

in relation to the supply of any goods and/or services and that

he shall not withdraw the said option within a period of 1 year
from the date of exercising such option;
(ii) he makes a declaration on the invoice issued by him in
prescribed form to the publisher.

10. Supply of services by Members of RBI

the members of Overseeing
Overseeing Committee
Committee to constituted by the
Reserve Bank of India RBI
(RBI)

11. Services supplied by Individual Direct A banking company

individual Direct Selling Agents or a NBFC, located
Selling Agents (DSAs) other than a in the taxable
(DSAs) other than a body corporate, territory
body corporate, partnership or LLP
partnership or limited firm
liability partnership
(LLP) firm to bank or
non-banking
financial company
(NBFCs).

12. Services provided by Business facilitator A banking

business facilitator company, located in
to a banking taxable territory
company.

13. Services provided by An agent of A business

an agent of business business correspondent,
correspondent to correspondent located in the
business taxable territory.
correspondent.

14. Security services Any person other A registered person,

(services provided by than a body located in the
way of supply of corporate taxable territory.

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 CHARGE OF GST a 3.23 a

security personnel)
provided to a
registered person.
However, nothing
contained in this entry
shall apply to:
(i) (a) a Department
or
Establishmen
t of the
Central
Government
or State
Government
or Union
territory; or
(b) local
authority; or
(c) Governmental
agencies;
which has
taken
registration
under the
CGST Act,
2017 only for
the purpose
of deducting
tax under
section 51 of
the said Act
and not for
making a
taxable
supply of
goods or
services; or

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(ii) a registered
person paying tax
under
composition
scheme.

15. Services provided by Any person, other Any body corporate

way of renting of any than a body located in the
motor vehicle corporate who taxable territory.
designed to carry supplies service to a
passengers where the body corporate &
cost of fuel is doesn’t issue an
included in the invoice charging
consideration CGST @ 6% to
charged from the service recipient.
service recipient,
provided to a body
corporate.

16. Services of lending of Lender i.e., a Borrower i.e., a

securities under person who person who
Securities Lending deposits securities borrows the
Scheme, 1997 6 registered in his securities under the
(“Scheme”) of name/in the name Scheme through an
Securities and of any other person approved
Exchange Board of duly authorised on intermediary of
India, as amended his behalf with an SEBI.
approved
intermediary for
the purpose of
lending under
Scheme of SEBI

🔔 All the above services have also been notified for reverse charge under
IGST Act vide Notification No. 10/2017 IT (R) dated 28.06.2017 as

6
Circular No. 116/35/2019 GST dated 11.10.2019 explaining the GST implication on security
lending mechanism under Securities Lending Scheme, 1997 has been covered at the Final level.

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 CHARGE OF GST a 3.25 a

amended. In addition to them, following service is also notified by said

notification under reverse charge for IGST purposes:
Any service supplied by any person who is located in a non-taxable territory
to any person located in the taxable territory other than non-taxable online
recipient7 located in taxable territory. Thus, in case of import of service, tax
is payable by the person importing such service 8.
For purpose of the notification notifying the above services under
reverse charge mechanism, following explanations shall apply-
(a) The person who pays or is liable to pay freight for the transportation of
goods by road in goods carriage, located in the taxable territory shall
be treated as the person who receives the service for the purpose of
this notification.
(b) Body Corporate: has the same meaning as assigned to it in clause (11)
of section 2 of the Companies Act, 2013.
As per section 2(11) of the Companies Act, 2013, body corporate or
corporation includes a company incorporated outside India, but does
not include—
(i) a co-operative society registered under any law relating to
co-operative societies; and
(ii) any other body corporate (not being a company as defined in this
Act), which the Central Government may, by notification, specify
in this behalf.
(c) the business entity located in the taxable territory who is litigant,
applicant or petitioner, as the case may be, shall be treated as the
person who receives the legal services for the purpose of this
notification.

7
The concept of non-taxable online recipient has been discussed at the Final level.
8
Following service has also been notified under reverse charge vide Notification No. 10/2017 IT
(R) dated 28.06.2017 for IGST purposes:
Services supplied by a person located in non- taxable territory by way of transportation of goods
by a vessel from a place outside India up to the customs station of clearance in India to an
importer located in the taxable territory. Said service has not been covered at the Intermediate
level and shall be covered at the Final level.

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(d) the words and expressions used and not defined in reverse charge
notification but defined in the CGST Act, the IGST Act, and the UTGST
Act shall have the same meanings as assigned to them in those Acts.
(e) Limited Liability Partnership formed and registered under the
provisions of the Limited Liability Partnership Act, 2008 shall also be
considered as a partnership firm or a firm.
(f) Insurance agent means an insurance agent licensed under section 42
of the Insurance Act, 1938 who receives agrees to receive payment by
way of commission or other remuneration in consideration of his
soliciting or procuring insurance business including business relating to
the continuance, renewal or revival of policies of insurance [Section
2(10) of the Insurance Act, 1938].
(g) Renting of immovable property means allowing, permitting or
granting access, entry, occupation, use or any such facility, wholly or
partly, in an immovable property, with or without the transfer of
possession or control of the said immovable property and includes
letting, leasing, licensing or other similar arrangements in respect of
immovable property.
(h) the provisions of reverse charge notification, in so far as they apply to
the Central Government, State Government, shall also apply to the
Parliament and State Legislature, Courts and Tribunals.

GTA services are taxable at the following two rates:

(i) @ 5% (2.5% CGST+2.5% SGST/UTGST or 5% IGST) where GTA
has not taken the Input Tax Credit (ITC) on goods or
services used in supplying GTA service (there can be
either of the cases - where GTA exercises the option to itself pay GST
at said rate or /does not exercise the option to itself pay GST at said
rate, on services supplied by it) or
(ii) @ 12% (6% CGST+6% SGST/UTGST or 12% IGST) where GTA exercises the option
to itself pay GST at said rate on services supplied by it. In this case,

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 CHARGE OF GST a 3.27 a

there is no restriction on availing ITC on goods or services used in

supplying GTA service by GTA.
In the following paras, we have explained as to who is the person liable to
pay tax in case of each of the above two rates:

Person liable to pay tax under GTA service where

Recipient** is one of the Specified Recipients

Registered GTA exercises the option to GTA does not exercise the option to
itself pay tax
itself pay tax

@ 12% @ 5% GST is payable @ 5%

Forward charge Forward charge Reverse charge

Person liable to pay Person liable to Person liable to pay GST

GST is GTA pay GST is GTA is recipient

Note - Where recipient is other than the specified recipients (Unregistered

individual end consumer or unregistered casual taxable person), GST will be
exempt – Discussed in detail in Chapter 5 – Exemptions under GST in this
Module of the Study Material.
** Recipient of GTA service is the person who pays/is liable to pay freight for
transportation of goods by road in goods carriage, located in the taxable
territory.

Service by way of renting of any motor vehicle designed to

carry passengers where the cost of fuel is included in the
consideration charged from the service recipient are
taxable at the following two rates:
(i) @ 5% (2.5% CGST+2.5% SGST/UTGST or 5% IGST) provided supplier of
services has taken only the limited ITC (of input services in the same
line of business) or

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 a 3.28 a GOODS AND SERVICE TAX

(ii) @ 12% (6% CGST+6% SGST/UTGST or 12% IGST) where supplier of services
opts to pay GST at said rate. In this case, there is no restriction on
availing ITC on goods or services used in supplying renting of motor
vehicles service by the supplier of service.
In the following paras, we have explained as to who is the person liable to
pay tax in case of each of the above two rates 9:
Person liable to pay tax under renting of motor vehicle service

Where GST is payable @ 5% Where GST is payable @

12%

Supplier is other than Supplier is Body

Body Corporate Corporate

Recipient is a Recipient is other Forward charge

Body Corporate than Body Corporate

Person liable to pay GST

Reverse charge is Supplier

**
Person liable to pay GST is Recipient

**
It is important to note here that when any service is placed under RCM, the supplier
shall not charge any tax from the service recipient as this is the settled procedure
under RCM. Thus, the notification specifies that RCM is applicable here only when
the supplier does not issue an invoice charging GST @12% (6% CGST+6%
SGST/UTGST or 12% IGST) from the service recipient.

9
Entry 15 of Notification No. 13/2017 CT (R) dated 28.06.2017 read with Circular No.
130/49/2019 GST dated 31.12.2019

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 CHARGE OF GST a 3.29 a

Now there may arise a doubt as to whether RCM is applicable on:

(i) service of renting of motor vehicle designed to carry passengers
or
(ii) service of transportation of passengers.
It is clarified10 that there is a clear distinction between the two services which
is as under:
A. The two services fall under two different headings in the Tariff.
B. (i) Services of renting of motor vehicles designed to carry passengers
covers:
• renting of motor vehicle
• for transport of passengers
• for a period of time
• where the renter defines how and when the vehicles will be
operated, determining schedules, routes and other
operational considerations.
(ii) ‘Passenger transport services’ covers passenger transport services
over pre-determined routes on pre-determined schedules.
Accordingly, where the body corporate hires the motor vehicle (for transport
of employees etc.) for a period of time, during which the motor vehicle shall
be at the disposal of the body corporate, the service would fall under ‘services
of renting of motor vehicles designed to carry passengers’, and the body
corporate shall be liable to pay GST on the same under RCM.
Thus, reverse charge would apply on act of renting of vehicles by body
corporate and in such a case, it is for the body corporate to use in the manner
as it likes subject to agreement with the person providing vehicle on rent.
However, where the body corporate avails the passenger transport service for
specific journeys or voyages and does not take vehicle on rent for any
particular period of time, the service would fall under ‘passenger transport
services’ and the body corporate shall not be liable to pay GST on the same
under RCM.

10
vide Circular No. 177/09/2022 GST dated 03.08.2022

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In order to determine the leviability of tax on the remuneration paid to the

directors, we first need to ascertain whether the director is an employee of the
company or not. Following two situations are possible:
(i) Services provided by the independent directors 11/those directors (by
whatever name called) who are not employees of the said company to such
company, in lieu of remuneration as the consideration for the said services,
are clearly outside the scope of Schedule III of the CGST Act12 and are
therefore taxable. As seen in the table given above illustrating the reverse
charge services (Entry No. 6), such remuneration paid to the directors is
taxable in hands of the company, on reverse charge basis.
(ii) In case where it is ascertained that a director, irrespective of name and
designation, is an employee, next step would be to examine whether all the
activities performed by the director are in the course of employer-employee
relation (i.e. a “contract of service”) or is there any element of “contract for
service”.
The part of director’s remuneration which are declared as Salaries in the books
of a company and subjected to TDS under section 192 of the Income-tax Act (IT
Act), are not taxable being consideration for services by an employee to the
employer in the course of or in relation to his employment in terms of Para 1 of
Schedule III. Further, the part of employee director’s remuneration which is
declared separately other than salaries in the company’s accounts and subjected
to TDS under section 194J of the IT Act as fees for professional or technical services
are treated as consideration for providing services which are outside the scope
of Schedule III and is therefore, taxable. Besides, as already discussed, the
recipient of the said services i.e. the company, is liable to discharge the applicable
GST on it on reverse charge basis 13.

11
The definition of “independent directors” under section 149(6) of the Companies Act,
2013 read with Rule 12 of Companies (Share Capital and Debentures) Rules, 2014 makes it
amply clear that the independent director should not have been an employee of the company.
12
As per Para 1 of Schedule III of the CGST Act, services by an employee to the employer in
the course of or in relation to his employment are non-supplies, i.e. they are neither supply
of goods nor supply of services. The provisions of Schedule III of the CGST Act have been
discussed in detail in Chapter 2 – Supply under GST in this Module of the Study Material.
13
as clarified vide Circular No. 140/10/2020 GST dated 10.06.2020

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 CHARGE OF GST a 3.31 a

Quiz
Quiz
Time!
time! Sindhu Transporters, an unregistered Goods Transport
Agency, provides the services of transportation of goods
by road to Bindusaar Manufacturers, registered under GST.
2 GST is payable by ___________ @ ___________, in the given
case.

(b) Bindusaar
(a) Sindhu (b) Sindhu (c) Bindusaar
Manufacturers;
Transporters; 5% Transporters; 12% Manufacturers; 5%
12%

Quiz
Quiz Nilanchal Chamber of Commerce organized a business
Time!
time! summit. Safal Private Limited, a manufacturer of
readymade garments, sponsored the summit and paid a
sponsorship fee of ` 1,20,000 to Nilanchal Chamber of
3 Commerce. Mr. Godbole, an independent director of Safal
Private Limited, provided the services worth ` 50,000 to the
company. The value on which Safal Private Limited is liable
to pay GST is ____________.

(a) ` 1,20,000 (b) ` 1,70,000 (c) ` 50,000 (b) Nil

Electronic Commerce Operator (ECO) is any

person who owns/operates/manages an electronic
platform for supply of goods/services/both.

Sometimes, ECO itself supplies the goods or services

or both through its electronic portal. However, many
a times, the products/services displayed on the electronic portal are actually
supplied by some other person to the consumer.

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When a consumer places an order for a particular product/ service on this electronic
portal, the actual supplier supplies the selected product/ service to the
consumer. The price/ consideration for the product/ service is collected by the ECO
from the consumer and passed on to the actual supplier after the deduction of
commission by the ECO.
The Government may, on the recommendations of the
GST Council, notify specific categories of services the tax
[CGST/SGST/IGST] on supplies of which shall be paid by
the electronic commerce operator (ECO) if such
services are supplied through it. Such services shall be
notified on the recommendations of the GST Council.
Notification No. 17/2017 CT (R) dated 28.06.2017/ Notification No. 14/2017
IT (R) dated 28.06.2017 as amended has notified the following categories of
services supplied through ECO for this purpose –
(a) services by way of transportation of passengers by a radio-taxi, motorcab,
maxicab, motor cycle, omnibus or any other motor vehicle;
(b) services by way of providing accommodation in hotels, inns, guest houses,
clubs, campsites or other commercial places meant for residential or lodging
purposes, except where the person supplying such service through electronic
commerce operator is liable for registration under section 22(1) of the
CGST Act.
(c) services by way of house-keeping, such as plumbing, carpentering etc, except
where the person supplying such service through electronic commerce
operator is liable for registration under sub-section 22(1) of the CGST Act.

(d) supply of restaurant service other than the services supplied by

restaurant, eating joints etc. located at specified premises.

Meaning of various terms

(i) Radio taxi: means a taxi including a radio cab, by whatever name called,
which is in two- way radio communication with a central control office and
is enabled for tracking using Global Positioning System (GPS) or General
Packet Radio Service (GPRS).

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 CHARGE OF GST a 3.33 a

(ii) Maxi cab: means any motor vehicle constructed or adapted to carry more
than 6 passengers, but not more than 12 passengers, excluding the driver,
for hire or reward.
Motor cab: means any motor vehicle constructed or adapted to carry not
more than 6 passengers excluding the driver for hire or reward.
Motor car: means any motor vehicle other than a transport vehicle,
omnibus, road-roller, tractor, motor cycle or invalid carriage.
Omnibus means any motor vehicle constructed or adapted to carry
more than 6 persons excluding the driver.

(iii) ‘Specified premises’ would mean premises providing hotel

accommodation service having declared tariff of any unit of
accommodation above ` 7,500 per unit per day or equivalent.

It is important to note here

that the above provision shall
apply only in case of supply of
services.

Tax on above services supplied through ECO shall be paid by the ECO. All the
provisions of the CGST/IGST Act shall apply to such ECO as if he is the supplier
liable for paying the tax in relation to the supply of above services.

The ECO may, on services notified under section 9(5), including on restaurant
service provided through ECO, pay GST, by furnishing the details in Form
GSTR-3B14, reporting them as outward taxable supplies.

14
Provisions relating to GST return in Form GSTR-3B have been discussed in Chapter 15 –
Returns in Module 2 of this Study Material.

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 a 3.34 a GOODS AND SERVICE TAX

In this regard, following issues have been clarified:

(i) ECOs not to collect TCS in respect of restaurant services so notified

ECOs will no longer be required to collect TCS (Tax Collected at Source)

and file Form GSTR-815 in respect of restaurant services on which it pays
tax in terms of section 9(5)16.
(ii) ECOs not required to take separate registration for paying tax on
restaurant service supplied through them
As ECOs are already registered in accordance with rule 8 (as a supplier
of their own goods or services), there would be no mandatory
requirement of taking separate registration by ECOs for payment of tax
on restaurant service under section 9(5).
(iii) ECO to pay tax on any restaurant services supplied through them
ECOs will be liable to pay GST on any restaurant service supplied through
them including services supplied by an unregistered person.
(iv) Supply of restaurant services to be included in aggregate turnover of
person supplying restaurant services through ECO
It is clarified that the aggregate turnover of person supplying restaurant
service through ECOs shall be computed in accordance with definition of
aggregate turnover under section 2(6) and shall include the aggregate
value of supplies made by the restaurant through ECOs. Accordingly, for
threshold consideration or any other purpose in the CGST Act, the person
providing restaurant service through ECO shall account for such services
in his aggregate turnover.

15
Provisions relating to Statement for tax collection at source in Form GSTR-8 have been
discussed in Chapter 15 – Returns in Module 2 of this Study Material.
16
Provisions relating to TCS contained in section 52 have been discussed in Chapter 14 – Tax
Deduction at Source and Collection of Tax at Source in Module 2 of this Study Material.

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 CHARGE OF GST a 3.35 a

(v) Restaurant services provided through ECO not to be considered as inward

supply for ECOs liable to RCM
ECOs are not the recipient of restaurant service supplied through them.
Since these are not input services to ECO, these are not to be reported
as inward supply (liable to reverse charge) in Form GSTR-3B.
(vi) Reversal of proportionate ITC on input goods and services not required
by ECO
ECOs provide their own services as an electronic platform and as an
intermediary for which it would acquire inputs/input service on which
ECOs avail input tax credit (ITC). The ECO charges commission/fee etc.
for the services it provides. The ITC is utilised by ECO for payment of GST
on services provided by ECO on its own account (say, to a restaurant).
The situation in this regard remains unchanged even after ECO is made
liable to pay tax on restaurant service. ECO would be eligible to ITC as
before. Accordingly, it is clarified that ECO shall not be required to
reverse ITC on account of restaurant services on which it pays GST in
terms of section 9(5). It may also be noted that on restaurant service, ECO
shall pay the entire GST liability in cash (No ITC could be utilised for
payment of GST on restaurant service supplied through ECO).
(vii) GST to be paid by the supplier on services not notified under section 9(5)
of CGST Act but supplied through ECO

In respect of supplies not notified under section 9(5) but supplied through
ECO, the liability to pay GST continues on such supplier and ECO shall
continue to deposit TCS on such supplies.
(viii) ECO to raise invoice in respect of restaurant service supplied through ECO
The invoice in respect of restaurant service supplied through ECO under
section 9(5) will be issued by ECO.
(ix) Billing in case of ‘restaurant service’ and goods/services other than
restaurant service being sold by a restaurant to a customer under the
same order
There can a situation where ‘restaurant service’ and goods or services
other than restaurant service are sold by a restaurant to a customer

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 a 3.36 a GOODS AND SERVICE TAX

under the same order. The question arises as to who shall be liable for
raising invoices in such cases.

Considering that liability to pay GST on supplies

other than ‘restaurant service’ through the ECO,
and other compliances under the CGST Act,
including issuance of invoice to customer,
continues to lie with the respective suppliers (and
ECOs being liable only to collect tax at source (TCS) on such supplies), it
is advisable that ECO raises separate bill on restaurant service in such
cases where ECO provides other supplies to a customer under the same
order17.
Person liable to pay GST for above specified services when supplied
through ECO

If the ECO is located in taxable Person liable to pay tax is the ECO
territory

If the ECO does not have physical Person liable to pay tax is the person
presence in the taxable territory representing the ECO

If the ECO has neither the physical Person liable to pay tax is the person
presence nor any representative in the appointed by the ECO for the purpose
taxable territory of paying the tax

In order to determine the rate applicable on a particular supply of goods or services,

one needs to first determine the classification of such goods or services.
Classification of goods and services assumes significance since there are different
rates prescribed for supply of different goods and services. Therefore, classification
is crucial for determining the rate of tax applicable on a particular product or
service.

17
Circular No. 167/23/2021 GST dated 17.12.2021

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 CHARGE OF GST a 3.37 a

Classification of goods
Classification of goods means identification of the chapter, heading, sub-heading
and tariff item in which a particular product will be classified.

Sections

Chapter

Heading

Sub-heading

Tariff item

Chapter, heading, sub-heading and tariff item are referred in the Schedules of rate
notification for goods under GST are the Chapter, heading, sub-heading and tariff
item of the First Schedule to the Customs Tariff Act, 1975. Indian Customs Tariff is
based on HSN. HSN stands for Harmonized System of Nomenclature. It is a
multipurpose international product nomenclature developed by the World
Customs Organization (WCO) for the purpose of classifying goods across the World
in a systematic manner. It comprises of about 5,000 commodity groups; each
identified by a 6 digit code [code can be extended], arranged in a legal and logical
structure and is supported by well-defined rules to achieve uniform classification.
India has extended the HSN codes upto 8-digits.
Along the lines of HSN, the Indian Customs Tariff has a set of Rules of Interpretation
of the First Schedule and General Explanatory notes. These rules and the general
explanatory notes give clear direction as to how the nomenclature in the schedule
is to be interpreted. These Rules for Interpretation including section and chapter

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notes and the General Explanatory Notes of the First Schedule 1819 apply to the
interpretation of the rate notification for goods under GST also.

Consequently, under GST, goods are classified on the basis of HSN in accordance
with the Rules for the Interpretation of the Customs Tariff.
Once classification for a product has been determined on this basis, applicable rate
has to be determined as per the rate prescribed in the rate notification issued under
GST.
Classification of services
A new Scheme of Classification of Services has been devised under GST. It is a
modified version of the United Nations Central Product Classification. Under this
scheme, the services of various descriptions have been classified under various
sections, headings and groups. Chapter 99 has been assigned for services. This
chapter has following sections:

Section 5 Construction Services

Section 6 Distributive Trade Services; Accommodation, Food and Beverage Service;
Transport Services; Gas and Electricity Distribution Services

Section 7 Financial and related services; real estate services; and rental and leasing
services
Section 8 Business and Production Services
Section 9 Community, social and personal services and other miscellaneous
services

18
The provisions relating to Customs Act and Customs Tariff Act will be discussed at Final
Level.
19
Sections: A group of Chapters representing a particular class of goods.Chapters:
Each section is divided into various chapters and sub-chapters. Each chapter contains
goods of one class.
Chapter notes: They are mentioned at the beginning of each chapter. These notes are
part of the statute and hence have the legal authority in determining the
classification of goods.
Heading: Each chapter and sub-chapter is further divided into various headings.
Sub-heading: Each heading is further divided into various sub-headings.

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 CHARGE OF GST a 3.39 a

Each section is divided into various headings which are further divided into Groups.
Its further division is made in the form of ‘Tariff item’/ Service Codes.

Chapter

Section

Heading

Group

Tariff item/Service Code

Rate of tax is determined in accordance with the Service Code in which the service
is classified.

Broadly, six rates of CGST have been notified in six Schedules of

rate notification for goods, viz., 0.125%, 1.5%, 2.5%, 6%, 9% and
GST rates
14%. SGST/ UTGST at the equivalent rate is also leviable. With
for goods
regard to IGST, broadly six rates have been notified in six
Schedules of rate notification for goods, viz., 0.25%, 3%, 5%, 12%,
18% and 28%20. Certain specified goods have been exempted from tax.

Broadly, six rates of CGST have been notified for services, viz.,
GST rates
0.75%, 2.5%, 3.75%, 6%, 9% and 14%21. Equivalent rate of
for services
SGST/ UTGST will also be levied. For IGST, six rates have been
notified for services, viz., 1.5%, 5%, 7.5%, 12%, 18% and
28%2223. For certain specified services, nil rate of tax has been notified.

20
Students may refer the CBIC website for the complete Schedule of GST Rates for goods for
knowledge purposes. Rates for goods have been notified vide Notification No. 1/2017 CT (R)
dated 28.06.2017.
21
notified vide Notification No. 11/2017 CT (R) dated 28.06.2017
22
notified vide Notification No. 8/2017 IT (R) dated 28.06.2017
23
Students may refer the CBIC website for the complete Schedule of GST Rates for services
for knowledge purposes.

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Services of gambling, services by way of admission to (a) casinos or race clubs or

any place having casinos or race clubs or (b) sporting events like IPL, services
provided by a race club by way of totalisator or a license to bookmaker in such
club, gambling etc. attract the highest rate of 28% (CGST @ 14% and SGST @ 14%
or IGST @ 28%).
A number of services are subject to a lower rate of 5% (CGST @ 2.5% and SGST @
2.5% or IGST @ 5%). For instance, GTA service is taxed @ 5% subject to the
condition that credit of input tax charged on goods/services used in supplying said
service has not been taken. Similarly, tax rate for supply of restaurant service, other
than at ‘specified premises 24’, is 5% without any input tax credit.
Services not covered under any specific heading are taxed at the rate of 18%
(CGST @ 9% and SGST @9% or IGST @ 18%).
In the following paras, applicability of GST in real estate sector has been briefly
discussed:
GST rates in real estate sector

The effective rate of GST on real estate sector for the new projects by promoters
are as follows:
(i) 1% without ITC on construction of affordable houses (area 60 sqm in
metros/ 90 sqm in non-metros and value upto ` 45 lakh).

(ii) 5% without ITC is applicable on construction of:

(a) all houses other than affordable houses, and
(b) commercial apartments such as shops, offices etc. in a residential real
estate project (RREP) in which the carpet area of commercial
apartments is not more than 15% of total carpet area of all
apartments.

24
“Specified premises” means premises providing “hotel accommodation” services having
declared tariff of any unit of accommodation above ` 7,500 per unit per day or equivalent.

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Conditions:
Above tax rates shall be available subject to following conditions:
(a) ITC shall not be available.
(b) 80% of inputs and input services [other than services by way of grant of
development rights, long term lease of land (against upfront payment in the form of
premium, salami, development charges etc.) or FSI (including additional FSI), electricity,
high speed diesel, motor spirit, natural gas] ,
used in supplying the service shall
be purchased from registered persons 25.
However, if value of inputs and input services purchased from registered
supplier is less than 80%, promoter has to pay GST
on reverse charge basis, under section 9(4) Supply of services
[discussed earlier], at the rate of 18% on all such notified under
inward supplies (to the extent short of 80% of the section 9(4)
inward supplies from registered supplier).
Further, where cement is received from an unregistered person, the promoter
shall pay tax on supply of such cement on reverse charge basis, under section
9(4), at the applicable rate which is 28% (CGST 14% + SGST 14%) at present.
Moreover, GST on capital goods shall be paid by the promoter on reverse
charge basis, under section 9(4) of the CGST Act at the applicable rates
[Notification No. 07/2019 CT (R) dated 29.03.2019/ Notification No. 07/2019
IT (R) dated 29.03.2019].

5. COMPOSITION LEVY [SECTION 10 OF THE

CGST ACT]

STATUTORY PROVISIONS
Section 10 Composition levy
Sub-section Particulars
(1) Notwithstanding anything to the contrary contained in this Act
but subject to the provisions of sub-sections (3) and (4) of section

25
Discussion in above paras highlighted in blue is solely for the purpose of knowledge of the
students and is not meant for examination purposes.

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 a 3.42 a GOODS AND SERVICE TAX

9, a registered person, whose aggregate turnover in the preceding

financial year did not exceed fifty lakh rupees, may opt to pay, in
lieu of the tax payable by him under sub-section (1) of section 9,
an amount of tax calculated at such rate as may be prescribed,
but not exceeding,––
a one percent.26 of the turnover in State or turnover in Union
territory in case of a manufacturer
b two and a half per cent. of the turnover in State or
turnover in Union territory in case of persons engaged in
making supplies referred to in clause (b) of paragraph 6
of Schedule II, and
c half per cent. of the turnover in State or turnover in
Union territory in case of other suppliers
subject to such conditions and restrictions as may be
prescribed.
Provided that the Government may, by notification, increase the
said limit of fifty lakh rupees to such higher amount, not exceeding
one crore and fifty lakh rupees27, as may be recommended by the
Council.
Provided further that a person who opts to pay tax under clause
(a) or clause (b) or clause (c) may supply services (other than those
referred to in clause (b) of paragraph 6 of Schedule II), of value not
exceeding ten percent of turnover in a State or Union territory in
the preceding financial year or five lakh rupees, whichever is
higher.
Explanation - For the purposes of second proviso, the value of
exempt supply of services provided by way of extending deposits,
loans or advances in so far as the consideration is represented by
way of interest or discount shall not be taken into account for
determining the value of turnover in a State or Union territory.

26
Rate of tax prescribed in case of a manufacturer is half percent of the turnover in State /UT.
The same has been discussed in detail in subsequent paras.
27
The turnover limit for composition levy has been increased from ` 50 lakh to ` 1.5 crore
vide Notification No. 14/2019 CT dated 07.03.2019.

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(2) The registered person shall be eligible to opt under sub-section (1),
if–
(a) save as provided in sub-section (1), he is not engaged in
the supply of services
(b) he is not engaged in making any supply of goods or
services which are not leviable to tax under this Act
(c) he is not engaged in making any inter-State outward
supplies of goods or services
(d) he is not engaged in making any supply of goods or services
through an electronic commerce operator who is required to
collect tax at source under section 52;
(e) he is not a manufacturer of such goods as may be notified by
the Government on the recommendations of the Council;
and
(f) he is neither a casual taxable person nor a non-resident
taxable person.
Provided that where more than one registered persons are having
the same Permanent Account Number (issued under the Income-
tax Act, 1961), the registered person shall not be eligible to opt
for the scheme under sub-section (1) unless all such registered
persons opt to pay tax under that sub-section.
(2A) Notwithstanding anything to the contrary contained in this Act,
but subject to the provisions of sub-sections (3) and (4) of section
9, a registered person, not eligible to opt to pay tax under sub-
section (1) and sub-section (2), whose aggregate turnover in the
preceding financial year did not exceed fifty lakh rupees, may opt
to pay, in lieu of the tax payable by him under sub-section (1) of
section 9, an amount of tax calculated at such rate as may be
prescribed, but not exceeding three per cent. of the turnover in
State or turnover in Union territory, if he is not––
(a) engaged in making any supply of goods or services which
are not leviable to tax under this Act;
(b) engaged in making any inter-State outward supplies of
goods or services;

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(c) engaged in making any supply of goods or services through

an electronic commerce operator who is required to collect
tax at source under section 52;
(d) a manufacturer of such goods or supplier of such services
as may be notified by the Government on the
recommendations of the Council; and
(e) a casual taxable person or a non-resident taxable person.
Provided that where more than one registered person are having
the same Permanent Account Number issued under the Income-
tax Act, 1961, the registered person shall not be eligible to opt for
the scheme under this sub-section unless all such registered
persons opt to pay tax under this sub-section.
(3) The option availed of by a registered person under sub-section
(1) or sub-section (2A), as the case may be, shall lapse with effect
from the day on which his aggregate turnover during a financial
year exceeds the limit specified under sub-section (1) or sub-
section (2A), as the case may be.
(4) A taxable person to whom the provisions of sub-section (1) or, as
the case may be, sub-section (2A) apply shall not collect any tax
from the recipient on supplies made by him nor shall he be
entitled to any credit of input tax.
(5) If the proper officer has reasons to believe that a taxable person
has paid tax under sub-section (1) or sub-section (2A), as the case
may be despite not being eligible, such person shall, in addition
to any tax that may be payable by him under any other provisions
of this Act, be liable to a penalty and the provisions of section 73
or section 74 shall, mutatis mutandis, apply for determination of
tax and penalty.
Explanation 1 –– For the purposes of computing aggregate
turnover of a person for determining his eligibility to pay tax
under this section, the expression “aggregate turnover” shall
include the value of supplies made by such person from the 1st
day of April of a financial year upto the date when he becomes
liable for registration under this Act, but shall not include the
value of exempt supply of services provided by way of extending

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deposits, loans or advances in so far as the consideration is

represented by way of interest or discount.
Explanation 2 –– For the purposes of determining the tax payable
by a person under this section, the expression “turnover in State
or turnover in Union territory” shall not include the value of
following supplies, namely:––
(i) supplies from the first day of April of a financial year upto
the date when such person becomes liable for registration
under this Act; and
(ii) exempt supply of services provided by way of extending
deposits, loans or advances in so far as the consideration is
represented by way of interest or discount.

ANALYSIS
(1) Overview of the Scheme
The composition levy is an alternative method of levy
of tax designed for small taxpayers whose turnover is Voluntary and
optional scheme
up to a prescribed limit. The objective of composition
scheme is to bring simplicity and to reduce the
compliance cost for the small taxpayers.
Initially, the scheme
was designed to
benefit the small
traders, manufacturers
and restaurant service
providers. So, the scheme was
fundamentally for the suppliers of goods
and only for restaurant service providers (not supplying alcoholic liquor for
human consumption). However, subsequently, suppliers availing
composition scheme were permitted to supply other services also, though
only upto a small specified value. This scheme is contained in sub-sections
(1) and (2) of section 10 of the CGST Act (hereinafter referred to as
composition scheme for goods).

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Under this scheme, suppliers of goods have the option to pay tax at the
concessional rate of 1% (CGST + SGST/UTGST) of the turnover and restaurant
service providers (not supplying alcoholic liquor for human consumption)
have the option to pay tax @ 5% (CGST + SGST/UTGST) of the
turnover. Small taxpayers with an aggregate turnover in the
preceding financial year up to ` 1.5 crore are eligible to pay tax
at these rates in the current financial year upto an aggregate
turnover of ` 1.5 crore. However, a person engaged exclusively in supply of
services other than restaurant service is not eligible for this composition
scheme stipulated under sub-sections (1) and (2).

In order to provide benefit of composition

scheme to persons engaged in supply of
services other than restaurant service whose
aggregate turnover in the preceding
financial year is up to ` 50 lakh, a scheme to pay tax @ 6% (CGST + SGST/UTGST)

of the turnover was introduced subsequently. A mixed supplier who is

primarily engaged in supplying services other than restaurant service along
with marginal supply of goods could also avail the benefit of this scheme. The
provisions of this scheme are contained in sub-section (2A) of section 10 28.

Essentially, the composition scheme under sub-section (2A) (hereinafter

referred to as composition scheme for services) is for small service
providers like salon stylist, tailors, etc. This scheme provides an option to
such suppliers to pay tax @ 6% of the turnover in the current financial year
upto an aggregate turnover of ` 50 lakh.

Suppliers opting for composition levy need not Easy compliance as

worry about the classification of their goods or no elaborate
services or both, the rate of GST applicable on accounts and records
to be maintained

28
This scheme was initially introduced with effect from 1 st April, 2019 vide Notification No.
2/2019 CT (R) dated 07.03.2019. With effect from 01.01.2020, the provisions of this scheme
have been incorporated in sub-section (2A) of section 10 vide the Finance (No. 2) Act, 2019.
It is important to note that Notification No. 2/2019 CT (R) dated 07.03.2019 has not yet been
rescinded and is still operational.

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their goods and/ or services, etc. They are not required to raise any tax
invoice, but simply need to issue a Bill of Supply 29 wherein no tax will be
charged from the recipient.

Simple annual An eligible person opting to pay tax under the

return composition scheme shall, instead of paying tax on
Quarterly every invoice at the specified rate, pay tax at the
payment of tax prescribed percentage of his turnover every quarter
through prescribed form [Form GST CMP 08].

At the end of a quarter, he would pay the tax, without availing the benefit of
input tax credit. Return is to be filed annually by a composition supplier.
Registration under GST law is compulsory for opting for the composition
scheme.

The provisions relating to composition levy are contained in section 10 of

CGST Act, 2017 and Chapter-II [Composition Levy] of Central Goods and
Services Tax (CGST) Rules, 2017. The said rules have been incorporated in the
discussion in the following paras at the relevant places.

As seen above, section 10 stipulates two types of composition schemes –

Composition scheme

Composition scheme provided Hereinafter referred to as

under section 10

under sections 10(1) & 10(2) Composition scheme for goods

Hereinafter referred to as
Composition scheme provided
Composition scheme for
under section 10(2A)
services

Provisions relating to these schemes have been discussed in detail in

subsequent paras:

29
Discussed in detail in Chapter-10: Tax Invoice, Credit and Debit Notes in Module-2 of this
Study Material.

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(2) Turnover limit for opting for composition levy [Section 10(1), 10(2A)
& 10(3)]
Turnover limit in case of composition levy for goods
Section 10(1) provides the turnover limit of ` 50 lakh
in the preceding financial year for becoming eligible
for composition levy for goods. However, proviso to Turnover limit is
section 10(1) empowers the Government to increase ` 1.5 crore
the said limit of ` 50 lakh upto ` 1.5 crore, on the
recommendation of the GST Council. In view of
said power of the Government, the turnover limit for composition levy for
goods has been increased from ` 50 lakh to ` 1.5 crore vide Notification
No. 14/2019 CT dated 07.03.2019.
However, the said notification further stipulates that the turnover limit for
composition levy for goods shall be ` 75 lakh in respect of 8 of the
Special Category States namely:

Special Category States

Arunachal Pradesh Mizoram

Uttarakhand Nagaland

Manipur Sikkim

Meghalaya Tripura

In case of Special Category States of Assam, Himachal Pradesh and

Jammu and Kashmir, the turnover limit will be ` 1.5 crore only.
Thus, if the aggregate turnover of a supplier in a State/UT other than
Special Category States (except Assam, Himachal Pradesh and Jammu and
Kashmir) is upto ` 1.5 crore in the preceding financial year, said supplier
is eligible for composition scheme for goods. Further, it is important to
note that the aggregate turnover is computed on all India basis for a person
having same Permanent Account Number (PAN) – Refer the definition of
aggregate turnover discussed in subsequent paras.

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Arunachal Pradesh

Turnover Limit for composition levy for goods

Uttarakhand

Manipur

Meghalaya
` 75 lakh
Mizoram

Nagaland

Sikkim

Tripura

` 1.5 crore All other States/UTs

(2) A shoes’ dealer ‘Prithviraj’ has offices in Maharashtra and Goa.

He makes intra-State supply of goods from both these offices. In
order to determine whether ‘Prithviraj’ is eligible to avail benefit of
the composition scheme for goods, turnover of both the offices would be
taken into account and if the same does not exceed ` 1.5 crore in the
preceding financial year, ‘Prithviraj’ can opt to avail the composition levy
scheme (subject to fulfilment of other prescribed conditions) for goods for
both the offices in the current financial year.
Further, the option of a registered person to avail composition scheme for
goods shall lapse with effect from the day on which his aggregate
turnover during a financial year exceeds the threshold limit of ` 1.5 crore
[` 75 lakh in 8 specified special category States] [Section 10(3)].
Turnover limit in case of composition levy for services
Section 10(2A) provides the turnover limit of ` 50 lakh in the preceding
financial year for becoming eligible for composition levy for services.

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(3) A hair stylist ‘Billoo Barber’ has his salon in Delhi and
Haryana, making intra-State supplies.

In order to determine whether ‘Billoo’ is eligible to avail benefit

of the composition scheme for services, turnover of both the salons would be
taken into account and if the same does not exceed ` 50 lakh in the preceding
financial year, ‘Billoo’ can opt to avail the composition levy scheme (subject
to fulfilment of other prescribed conditions) for services for both the salons
in the current financial year.

Further, the option of a registered person to

avail composition scheme for services shall
lapse with effect from the day on which his Turnover limit is
aggregate turnover during a financial year ` 50 lakh
exceeds the threshold limit of ` 50 lakh
[Section 10(3)].
To summarise, a registered person opting for
composition scheme for goods should have an
aggregate turnover upto ` 1.5 crore [` 75 lakh in 8
Summary specified Special Category States] in the preceding
FY and he can avail the benefit of said scheme 30 for
the current FY till the time his aggregate turnover in
the current FY does not exceed ` 1.5 crore/` 75 lakh.
Similarly, a registered person opting for composition scheme for services
should have an aggregate turnover upto ` 50 lakh in the preceding FY and
he can avail the benefit of said scheme for the current FY till the time his
aggregate turnover in the current FY does not exceed ` 50 lakh.
From the above discussion, it is apparent that the term aggregate turnover
is of utmost importance. So, let us understand this term in detail.

30
Intimation for opting to pay tax under composition scheme must be filed prior to the
commencement of the FY for which said option is exercised [Rule 3].

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(3) Aggregate turnover under composition levy [Section 2(6) read with
explanation 1 to section 10]
The definition of aggregate turnover as contained in section 2(6) of the
CGST Act is analysed as follows:
The aggregate turnover is the sum of value of all outward supplies falling in
the following four categories:
❑ Taxable supplies
❑ Exempt supplies
❑ Exports of goods or services or both
❑ Inter-State supplies
It excludes:
❑ The value of inward supplies on which tax is payable by a person on
reverse charge basis
❑ Taxes including cess paid under GST law.
It is computed on all India basis for a person having same Permanent Account
Number (PAN).
Further, explanation 1 to section 10 clarifies that for the purposes of
computing aggregate turnover of a registered person for determining his
eligibility to pay tax under this section, aggregate turnover includes value
of supplies from 1st April of a FY up to the date of his becoming liable for
registration and excludes value of exempt supply of services provided by way
of extending deposits, loans or advances in so far as the consideration is
represented by way of interest or discount.
On combined reading of the aforesaid provisions, the method of computing
the aggregate turnover for the purpose of determining the eligibility of a
registered person for the composition scheme [for both goods and services]
can be depicted in a diagram as follows:

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While computing the threshold limit of ` 1.5 crore/ ` 75 lakh / ` 50 lakh,

inclusions in and exclusions from ‘aggregate turnover’ are as follows:

Excludes

Includes --CGST/ SGST/ UTGST/ IGST/ Cess

Value of all outward supplies --Value of inward supplies on which tax is
--Taxable supplies payable under reverse charge.
--Exempt supplies
--Value of exempt supply of services
--Exports*
provided by way of extending deposits,
--Inter-State supplies*
of persons having the same PAN be loans or advances in so far as the
computed on all India basis. consideration is represented by way of
interest or discount
These also include

Value of supplies made by

registered person from 1 st April of a
FY up to the date when he becomes
liable for registration under this Act

*Note: The value of exports and inter-State supplies are relevant only while
determining the aggregate turnover of the preceding FY. These values are not
relevant for determining the aggregate turnover of the current FY in which the
composition supplier has opted for composition levy as he is not permitted to make
inter-State supplies and exports in the said FY 31.

(4) Rates of tax under the composition levy scheme [Section 10(1) and
section 10(2A) read with rule 7]

Rule 7 prescribes the rates at which tax is payable by a registered person

opting for composition levy – composition levy for goods and composition
levy for services.

31
Section 10(2)(c)

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Rates of tax in case of composition levy for goods

A registered person opting for composition levy for goods shall pay tax
calculated at the prescribed rates [mentioned in table below] during the
current FY, in lieu of the tax payable by him under regular scheme:

S. No. Category of registered persons Rate of tax

1 Manufacturers, other than ½ %32 of the
manufacturers of notified goods, i.e. turnover in the
ice cream, pan masala, tobacco, State/Union territory
aerated waters, fly ash bricks; fly ash
aggregate, fly ash blocks, bricks of
fossil meals or similar siliceous
earths, building bricks, earthen or
roofing tiles.
2 Suppliers making supplies referred to in 2½ %33 of the
clause (b) of paragraph 6 of Schedule II turnover in the
[referred to as “Restaurant service” in State/Union territory
discussion under this chapter]
3 Any other supplier eligible for ½ %34 of turnover of
composition levy under section 10 of taxable supplies of
CGST Act and Chapter-II goods & services in
[Composition Levy] of CGST Rules. the State/Union
territory
Note - Students may note that the ‘aggregate turnover’ of preceding FY is relevant for
the purpose of determining eligibility to avail composition scheme, but the tax has to
be paid in accordance with the applicable rates on the ‘turnover’ (or ‘turnover of
taxable supplies’ in case of third category of registered persons above) in a State/UT.
The concept of ‘Turnover in the State/UT’ under the composition levy has been
explained subsequently in this chapter.

ILLUSTRATION 1
Taxpayer ‘Tolaram’ is a manufacturer who has opted for composition levy for
goods, having one unit – A1 in UP and another unit – A2 in MP. Total turnover of

32
Effective rate 1% (CGST+ SGST/UTGST)
33
Effective rate 5% (CGST+ SGST/UTGST)
34
Effective rate 1% (CGST+ SGST/UTGST)

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two units in preceding FY was ` 115 lakh (` 85 lakh + ` 30 lakh). Turnover of units
A1 and A2 in the first quarter of current financial year is ` 5 lakh and ` 10 lakh
respectively. Compute the amount payable under composition levy under section
10(1) & 10(2) of the CGST Act, 2017 by ‘Tolaram’.
ANSWER

Unit Location Turnover in Turnover in Total tax (@1%)

previous FY 1st quarter
of this FY
A1 U.P. ` 85 lakh ` 5 lakh ` 5,000
A2 M.P. ` 30 lakh ` 10 lakh ` 10,000

Total ` 115 lakh ` 15 lakh ` 15,000

ILLUSTRATION 2
Taxpayer ‘Bholaram’ is a trader (who has opted for composition levy for goods) of
both taxable and exempted goods (goods exempted by way of a notification).
It has one retail showroom – A1 in Punjab and another retail showroom – A2 in
Rajasthan, both selling taxable as well as exempted goods. Total turnover
(including taxable and exempted goods) of the two showrooms in last FY was
` 115 lakh (` 85 lakh + ` 30 lakh respectively).
Turnover of showrooms A1 and A2 in the first quarter of current financial year is
` 35 lakh [A1 - ` 15 lakh (` 5 lakh from sale of taxable goods and ` 10 lakh from
sale of exempted goods) and A2 - ` 20 lakh (` 10 lakh from sale of taxable goods
and ` 10 lakh from sale of exempted goods)]. Compute the amount payable under
composition levy under section 10(1) & 10(2) of the CGST Act, 2017 by ‘Bholaram’.
ANSWER

Retail Location Turnover Taxable Total tax

showroom in previous turnover* in 1st (@1%)
FY quarter of this FY

A1 Punjab ` 85 lakh ` 5 lakh ` 5,000

A2 Rajasthan ` 30 lakh ` 10 lakh ` 10,000

Total ` 115 lakh ` 15 lakh ` 15,000

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*Note: A supplier, other than manufacturer and restaurant service provider, eligible for
composition levy under section 10(1) & 10(2) has to pay tax @ 1% (CGST+ SGST) of
the turnover of only taxable supplies of goods and services in the State.

Rates of tax in case of composition levy for services

A registered person opting for composition levy for services shall pay tax
@ 3% [Effective rate 6% (CGST+ SGST/UTGST) ] of the turnover of supplies of
goods and services in the State or Union territory.
ILLUSTRATION 3
Taxpayer ‘Padmavati’ is a salon stylist, who has opted for composition levy for
services, having one branch – B1 in Vasant Kunj, Delhi and another branch –
B2 in Gurgaon, Haryana. Total turnover of the two branches in last FY was
` 45 lakh (` 25 lakh + ` 20 lakh respectively ). The turnover of branches B1 and
B2 in the first quarter of current financial year is ` 5 lakh and ` 10 lakh
respectively. Compute the amount payable under composition levy under
section 10(2A) of the CGST Act, 2017 by ‘Padmavati’.
ANSWER

Branch Location Turnover in Turnover in 1st Total tax

previous FY quarter of this FY (@6%)

B1 Delhi ` 25 lakh ` 5 lakh ` 30,000

B2 Haryana ` 20 lakh ` 10 lakh ` 60,000

Total ` 45 lakh ` 15 lakh ` 90,000

As seen above, since the tax under composition scheme has to computed as a
specified % of the turnover in State or turnover in Union territory, it is pertinent
to understand what is turnover in `State or turnover in Union territory.
(5) Turnover in State or turnover in Union territory under composition
levy [Section 2(112) read with explanation 2 to section 10]
As per section 2(112), turnover in State/ turnover in Union territory means the
aggregate value of all taxable supplies (excluding the
value of inward supplies on which tax is payable by a
person on reverse charge basis) and exempt
supplies made within a State or Union territory by
a taxable person, exports of goods or services or
both and inter-State supplies of goods or services or both made from the

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State or Union territory by the said taxable person but excludes central tax,
State tax, Union territory tax, integrated tax and cess.
Further, explanation 2 to section 10 clarifies that for the purposes of
determining the tax payable by a person under this section, the
expression turnover in State or turnover in Union territory shall not include
the value of following supplies, namely:
(i) supplies from 1st April of a FY up to the date when such person
becomes liable for registration under this Act; and
(ii) exempt supply of services provided by way of extending deposits,
loans or advances in so far as the consideration is represented by
way of interest or discount.
On combined reading of the aforesaid provisions, the method of computing
the turnover in a State/UT for paying tax under the composition scheme
can be depicted in a diagram on the next page:

While computing the Turnover in a State/UT to pay tax under

composition levy, inclusions and exclusions are as follows:

Excludes
Includes
--CGST/ SGST/ UTGST/ IGST/ Cess
--All taxable supplies and exempt --Value of inward supplies on which tax
is payable under reverse charge.
supplies made within the State/UT*
--Value of supplies from the first day of
(While computing turnover in a April of a FY up to the date when such
State/UT of a supplier, other than person becomes liable for registration
manufacturer and restaurant service under this Act
provider, eligible for composition levy
--Value of exempt supply of services
for goods - trader, etc., the exempt
provided by way of extending deposits,
supplies will not be taken into
loans or advances in so far as the
consideration)
consideration is represented by way of
interest or discount

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(4) A photographer ‘Champak’ has commenced providing

photography services in Delhi from April this year. His turnover
for various quarters till December is as follows:

April-June ` 20 lakh
July-Sept ` 30 lakh
Oct-Dec ` 20 lakh

In the given case, since Champak has started the supply of services in the
current financial year, his aggregate turnover in the preceding FY is Nil.
Consequently, in the current FY, he is eligible for composition scheme for
services. He becomes eligible for the registration when his aggregate
turnover exceeds ` 20 lakh.
While registering under GST, he opts for composition scheme for services.
For determining his turnover of the State for payment of tax under
composition scheme for services, turnover of April-June quarter [` 20 lakh]
shall be excluded as the value of supplies from the first day of April of a
financial year up to the date when such person becomes liable for
registration under this Act are to be excluded for this purpose.
On next ` 30 lakh [turnover of July-Sept quarter], he shall pay tax @ 6% [3%
CGST and 3% SGST], i.e. CGST ` 90,000 and SGST ` 90,000.
By the end of July-Sept quarter, his aggregate turnover reaches ` 50 lakh*.
Consequently, his option to avail composition scheme for services shall
lapse by the end of July-Sept quarter and thereafter, he is required to
pay tax at the normal rate of 18%. Thus, the tax payable for Oct-Dec
quarter is ` 20 lakh × 18%, i.e. ` 3,60,000.

*while computing aggregate turnover for determining Champak’s eligibility

to pay tax under composition scheme, value of supplies from the first day of
April of a financial year up to the date when such person becomes liable
for registration under this Act (i.e. turnover of April-June quarter), are
included.

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(6) Who are NOT eligible to opt for composition scheme? [Section 10(2)
and (2A)]

Registered person who is not eligible for Registered person who is not eligible for
composition scheme for goods composition scheme for services

Supplier engaged in making any Supplier engaged in making any

supply of goods or services supply of goods or services
which are not leviable to tax which are not leviable to tax

Supplier engaged in making any Supplier engaged in making any

inter-State outward supplies of inter-State outward supplies of
goods or services goods or services

Person supplying any goods or Person supplying any goods or

services through an electronic services through an electronic
commerce operator who is commerce operator who is
required to collect tax at source required to collect tax at source
under section 52* under section 52*

Manufacturer of ice cream,

panmasala, tobacco, aerated
waters, fly ash bricks; fly ash Manufacturer of notified goods
aggregate, fly ash blocks, or supplier of notified services
bricks of fossil meals or
similar siliceous earths,
building bricks, earthen or
Supplier who is either a casual
roofing tiles.
taxable person or a non-resident
Supplier who is either a casual taxable taxable person.
person or a non-resident taxable
person

Supplier of services, save as provided in section

10(1) [Refer discussion below diagram]

*Section 52 relating to tax collected at source has been discussed in detail in Chapter 14 –
Tax Deduction at Source and Collection of Tax at Source in Module 2 of this Study Material.

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 CHARGE OF GST a 3.59 a

There is no restriction on
composition supplier to receive
inter-State inward supplies of
goods or services.

A person engaged in marginal supply of services other than

restaurant service also eligible for composition levy for goods
[Second proviso to section 10(1) read with section 10(2)(a)]

Fundamentally, the composition scheme for goods can be availed in

respect of goods and only one service namely, restaurant service.
However, there are cases where a manufacturer/ trader is also engaged in
supply of services other than restaurant service though the percentage of
such supply of services is very small as compared to the supplies of goods.
There may also be cases where a restaurant service provider is also
engaged in supplying a small percentage of other services.

With a view to enable such taxpayers to avail of the benefit of composition

scheme for goods, second proviso to section 10(1) permits marginal
supply of services [other than restaurant services – not supplying alcoholic
liquor for human consumption] for a specified value along with the supply
of goods and/or restaurant service, as the case may be. This specified
value is value not exceeding:

(a) 10% of the turnover in a State/U.T. in the preceding financial year

or

(b) ` 5 lakh,

whichever is higher.

Thus, it can be inferred that where the turnover of a registered person

opting for composition scheme for goods is upto ` 50 lakh in the
preceding financial year, he can supply services [other than restaurant
services] upto a maximum value of ` 5 lakh in the current financial year.
Further, where the turnover of a registered person opting for composition

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 a 3.60 a GOODS AND SERVICE TAX

scheme is more than ` 50 lakh and upto ` 1.5 crore in the preceding
financial year, he can supply services [other than restaurant services] in
the current financial year upto a maximum value of 10% of the turnover
in a State/Union territory in the preceding financial year.
(5) Ramsewak is engaged in supply of goods. His turnover in
preceding FY is ` 60 lakh. Since his aggregate turnover in the
preceding FY does not exceed ` 1.5 crore, he is eligible for
composition scheme for goods in current FY. Further, in current FY, he can
supply services [other than restaurant services] upto a value of not exceeding:

(a) 10% of ` 60 lakh, i.e. ` 6 lakh

or

(b) ` 5 lakh,

whichever is higher.

Thus, he can supply services upto a value of ` 6 lakh in current FY. If the value
of services supplied exceeds ` 6 lakh, he becomes ineligible for the
composition scheme for goods and has to opt out of the same.

Interest income to be excluded for determining the value of

turnover in a State or Union territory under second proviso to
section 10(1) [Explanation to second proviso to section 10(1)]

Generally, businesses tend to save and invest money in the form of

deposits, loans or advances. However, this way they get engaged in
supply of service by way of extending deposits, loans or advances 35 – a
service other than restaurant service. And where the income from such
services cause the value of services 36 supplied to exceed the value referred
in second proviso to section 10(1) 37 [10% of the turnover in the preceding
FY in a State/Union territory or ` 5 lakh, whichever is higher], said business

35
It is, however, pertinent to note that services by way of extending deposits, loans or
advances in so far as the consideration is represented by way of interest or discount are
exempt from GST – Discussed in detail in Chapter 5 – Exemptions from GST in this Module of
the Study Material.
36
other than restaurant services
37
as discussed in preceding paras

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 CHARGE OF GST a 3.61 a

would have become ineligible for the composition scheme for goods and
one has to opt out of the composition scheme. This can cause a lot of
hardship to small businesses.

In view of the above, an explanation is inserted after second proviso to

section 10(1) to clarify that for the purposes of second proviso to section
10(1), the value of supply of exempt services by way of extending deposits,
loans or advances in so far as the consideration is represented by way of
interest or discount, shall not be taken into account for determining the
value of turnover in a State or Union territory.

Under second proviso to section 10(1), a registered person opting for

composition scheme may supply services [other than restaurant services] of
value not exceeding 10% of the turnover in the preceding financial year in a
State/Union territory or ` 5 lakh, whichever is higher. Thus, while computing
value of services [other than restaurant services] as referred in this
proviso, interest on loans/deposit/advances will not be taken into
account.
The provisions relating to composition levy discussed hereafter are
applicable to both composition levy for goods as well as composition levy
for services.

(7) Conditions and restrictions for composition levy [Rule 5]

Person opting for composition levy has to comply with the following
conditions:

❑ he shall pay tax under section 9(3)/9(4) 38 (reverse charge) on inward

supply of goods or services or both.

❑ he is neither a casual taxable person nor a non-resident taxable

person

❑ he shall mention the words “composition taxable person, not eligible

to collect tax on supplies” at the top of the bill of supply issued by
him; and

38
wherever applicable

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 a 3.62 a GOODS AND SERVICE TAX

❑ he shall mention the words “composition taxable person”

on every notice or signboard displayed at a prominent
place at his principal place of business and at every
additional place or places of business.

Further, where the goods held in stock by him are liable to be taxed under
reverse charge under section 9(4)39, the tax thereon has been paid under
reverse charge under section 9(4).

In addition to the above conditions, a registered person opting for

composition scheme for goods must not be engaged in the
manufacture of goods as notified under section 10(2)(e), during the
preceding FY. The following goods have been hereby notified vide
Notification No. 14/2019 CT dated 07.03.2019 as amended:

Tariff item, Description

subheading, heading or
Chapter*

2105 00 00 Ice cream and other edible ice,

whether or not containing
cocoa

2106 90 20 Pan masala Pan Masala

39
This condition applies in case where a builder/promoter opting for composition scheme has
the stock of the goods on which he is required to pay GST on reverse charge basis under
section 9(4) in one or more of the following cases:
(i) Builder/promoter must purchase at least 80% of inputs and input services used in
supplying the service, from registered persons. In case of shortfall, he’s required to pay
tax under reverse charge on all such inward supplies (to the extent short of 80% of the
inward supplies from registered supplier).
(ii) Where cement is received from an unregistered person, promoter/builder has to pay tax
on supply of such cement under reverse charge and
(iii) GST on capital goods is payable by the promoter on reverse charge basis.

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 CHARGE OF GST a 3.63 a

24 All goods, i.e. Tobacco and

manufactured tobacco
substitutes

2202 1010 Aerated Waters

6815 Fly ash bricks; fly ash aggregate; Fly ash

blocks

6901 00 10 Bricks of fossil meals or similar siliceous

earths

6904 10 00 Building bricks

6905 10 00 Earthen or roofing tiles

* as specified in the First Schedule to the Customs Tariff Act, 1975

(8) Intimation of opting for composition levy [Rules 3 & 4]

(i) Intimation by person applying for registration: Any person who

is not registered and applies for registration may give an option to
pay tax under composition levy in Part B of the registration form,
viz., Form GST REG-01. The same shall be considered as an
intimation to pay tax under composition levy. Such intimation shall
be considered only after the grant of registration to the applicant .

The option to pay tax under composition levy shall be effective

from the date from which registration is effective 40.

40
Registration shall be effective from the date on which the person becomes liable to
registration where the application for registration has been submitted within a period of
thirty days from such date.
Where an application for registration has been submitted by the applicant after the expiry of
thirty days from the date of his becoming liable to registration, the effective date of
registration shall be the date of the grant of registration. Discussed in detail in Chapter 9 –
Registration in Module 2 of this Study Material.

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 a 3.64 a GOODS AND SERVICE TAX

(ii) Intimation by a registered person: A registered person who opts

to pay tax under composition levy scheme shall electronically file
an intimation in prescribed form on the GST Common Portal
[www.gst.gov.in]. The intimation shall be filed prior to the
commencement of the FY for which said option is exercised.

He shall also furnish the statement in prescribed form in

accordance with the provisions of rule 44(4) of CGST Rules, 2017
[Discussed in detail in Chapter 8 – Input Tax Credit in Module 2 of this
Study Material] within 60 days from the commencement of the
relevant FY.

Any intimation in respect of any place of business in a State/UT shall

be deemed to be an intimation in respect of all other places of
business registered on the same PAN.

The option to pay tax under composition levy shall be effective

from the beginning of the FY.

A person applying for registration can opt for

composition at the time of applying for registration
Summary [this time being any time of the financial year] and
composition levy shall be effective from the date from
which registration is effective.

A registered person can opt for composition scheme from the

beginning of any FY and composition levy shall be effective from the
beginning of said FY. Intimation for opting to pay tax under
composition scheme must be filed prior to the commencement of the
FY for which said option is exercised.

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 CHARGE OF GST a 3.65 a

composition levy
can opt for shall be effective
composition levy from

•at any time •the date from

during the year which
while applying registration is
for registration effective
Person applying
for registration

composition levy
can opt for shall be effective
composition levy from

•from the •the

beginning of beginning of
any FY said FY
Registered
person

(9) Validity of composition levy [Section 10(3) read with rule 6 41]

I. Withdrawal from the composition scheme by a taxpayer who

ceases to satisfy any of the prescribed conditions
❑ The option exercised by a registered person to pay amount under
composition levy shall remain valid so long as he satisfies all the
conditions mentioned in the relevant section and rules. For instance,
the option to pay tax under composition scheme lapses from the day
on which aggregate turnover of a registered person exceeds the
specified limit (` 1.5 crore/ ` 75 lakh/ ` 50 lakh) during the FY.

41
read with Circular No. 77/51/2018 GST dated 31.12.2018

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 a 3.66 a GOODS AND SERVICE TAX

❑ Such person is required to pay tax under regular scheme under

section 9(1) from the day he ceases to satisfy any of the conditions
prescribed for composition levy. He shall issue tax invoice for
every taxable supply made thereafter. Further, he is required to
file an intimation for withdrawal from the scheme in prescribed
form within 7 days of the occurrence of such event.
❑ The effective date from which withdrawal from the
composition scheme shall take effect shall be the date
indicated by him in his intimation, but such date may not be prior
to the commencement of the financial year in which such
intimation is being filed.
II. Withdrawal from the composition scheme by a taxpayer who
intends to withdraw from the said scheme
❑ The registered person who intends to withdraw from the
composition scheme shall, before the date of such withdrawal, file
an application in prescribed form.
❑ The effective date from which withdrawal from the
composition scheme shall take effect shall be the date
indicated by him in his application, but such date may not be prior
to the commencement of the financial year in which such
application for withdrawal is being filed.
III. Denial of option to pay tax under the composition scheme by tax
authorities
❑ Where the proper officer has reasons to believe that the
registered person was not eligible to pay tax under composition
scheme or has contravened the provisions of the CGST Act or
provisions of this Chapter, he may issue a show cause notice (SCN)
to such person. Upon receipt of reply to SCN, the proper officer
shall pass an order either accepting the reply or denying the
option to pay tax under composition scheme from the date of the
option or from the date of the event concerning such
contravention, as the case may be.

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 CHARGE OF GST a 3.67 a

❑ In case of denial of option to pay tax under composition levy by

the tax authorities, the effective date of such denial shall be from
a date, including any retrospective date, as may be determined by
tax authorities. However, such effective date shall not be prior to the
date of contravention of the provisions of the CGST Act/ CGST Rules.
In each of the above cases, such person may furnish a statement in prescribed
form containing details of the stock of inputs and inputs contained in semi-
finished or finished goods held in stock by him on the date on which the
option is withdrawn/denied, within a period of 30 days from the date from
which the option is withdrawn/ or from the date of the order denying
composition scheme.
Any intimation or application for withdrawal or denial of the option to pay
tax under section 10 in respect of any place of business in any State or Union
territory, shall be deemed to be an intimation in respect of all other places of
business registered on the same PAN.
(6) A person availing composition scheme during a financial year
crosses the turnover of ` 1.5 crore on 9th of December. The option
availed shall lapse from the day on which his aggregate turnover
during the financial year exceeds ` 1.5 crore, i.e. on 9th December, in this case.
(10) Composition scheme to be adopted uniformly by all the registered
persons having the same PAN [Proviso to section 10(2) and proviso
to section 10(2A)]
All registered persons having the same Permanent Account Number (PAN)
have to opt for composition scheme. If one such registered person opts for
normal scheme, others become ineligible for composition scheme.
(7) A dealer ‘Kishorilal & Sons’ has two offices in Delhi and is
eligible for composition levy for goods. If ‘Kishorilal & Sons’ opts
for the composition scheme for goods, both the offices would pay
taxes under composition scheme and abide by all the conditions as may be
prescribed for the said composition scheme.
(11) Composition scheme supplier cannot collect tax [Section 10(4)]

Taxable person opting for the composition scheme shall not collect tax from
the recipient on supplies made by him. It implies that a composition scheme
supplier cannot issue a tax invoice.

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(12) Composition scheme supplier cannot enter into credit chain [Section 10(4)]
Taxable person opting for the composition scheme shall not be entitled to
any credit of input tax.
(13) Imposition of penalty in case of irregular availment of the
composition scheme [Section 10(5)]
If a taxable person has paid tax under the composition scheme though he
was not eligible for the scheme, the person would be liable to penalty and
the provisions of section 73 or 74 of the CGST Act shall be applicable for
determination of tax and penalty.

Quiz
Quiz
Time!
time!
A registered person _______________ is not eligible for
composition scheme even though his aggregate turnover
4 does not exceed ` 1.5 crore in preceding FY.

(b) making supply

(c) receiving any
(a) trading in pan (b) manufacturing of goods
inter-State inward
masala aerated waters exempted by way
supplies of goods
of a notification

Quiz
Quiz Alladin Electronics is engaged in intra-State supply of air-
Time!
time! conditioners and has an aggregate turnover of ` 90 lakh in
the preceding financial year. In the current financial year, it
wishes to opt for composition scheme under section 10(1)
5 and 10(2). It will start providing services of repairing of air
conditioners also from 1st April of current financial year.
Alladin Electronics can provide services upto the value of
_______ to continue availing benefit of composition levy, in
the current financial year
year.

(a) ` 5 lakh (b) ` 4.5 lakh (c) ` 10 lakh (b) ` 9 lakh

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 CHARGE OF GST a 3.69 a

LET US RECAPITULATE

1. Extent & commencement of CGST Act/ SGST Act/ UTGST Act/ IGST Act

Applicability CGST SGST UTGST IGST

Intra-State supply Inter-State

supply

States of
India

Union
Territories
with
Legislature

Union
Territories
without
Legislature

2. Levy and collection of CGST/IGST

Particulars CGST IGST

Levied on Intra-State supplies of Inter-State supplies of

goods/services/both goods/services/both

Collected and Taxable person

paid by

Supply outside Alcoholic liquor for human consumption

purview of GST

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 a 3.70 a GOODS AND SERVICE TAX

Value for levy Transaction value under section 15 of the CGST Act

Rates Rates as notified by IGST rate= CGST rate + SGST

Government. rate/UTGST rate
Maximum rate of CGST Maximum rate of IGST can be
can be 20%. 40%.

Supplies on ❑ petroleum crude

which tax ❑ high speed diesel
would be ❑ motor spirit (commonly known as petrol)
levied w.e.f. a ❑ natural gas and
notified date ❑ aviation turbine fuel

Tax payable ❑ Supply of goods or services or both, notified by the

under reverse Government.
charge ❑ Supply of specified categories of goods or services
or both by an unregistered supplier to specified
class of registered persons.

Tax payable by The Government may notify specific categories of

the electronic services the tax on supplies of which shall be paid by
commerce electronic commerce operator (ECO) as if such services
operator are supplied through it.

3. Composition levy [Section 10]

Composition levy
Advantages
•An option for specified
categories of small •Low rates of tax
taxpayers to pay GST at •Hassel free simple procedures for such
a very low rate on the taxpayers
basis of turnover. •Simple calculation of tax based on turnover
•A very simple annual return

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 CHARGE OF GST a 3.71 a

Composition levy provided

•Referred in this chapter as composition levy for
under section 10(1) and
goods
10(2)

Composition levy provided •Referred in this chapter as composition levy for

under section 10(2A) services

Procedure for opting for the scheme

Category of persons How to exercise Effective date of

option composition levy

New registration under Intimation in the From the effective date of

GST registration form registration

Registered person opting Intimation in Beginning of the financial

for composition levy prescribed form year

Turnover limit for composition levy

Turnover limit in preceding FY to opt for composition levy for goods

For Special Category States • ` 75 lakh

except Assam, Himachal Pradesh
and J&K

• ` 1.5 crore
For remaining States

Turnover limit in preceding FY to opt for composition levy for services

Turnover for composition • ` 50 lakh

levy for services

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 a 3.72 a GOODS AND SERVICE TAX

Rates of tax

Composition Category of Rate

scheme registered persons

For goods Manufacturer 1% (½% CGST + ½%

SGST/UTGST) of turnover

Restaurant service 5% (2½% CGST + 2½%

SGST/UTGST) of turnover

Others 1% (½% CGST + ½%

SGST/UTGST) of turnover of
taxable supplies

For services 6% (3% CGST + 3% SGST/UTGST)

of turnover

Conditions and restrictions for composition levy

Person opting for composition:

is neither a casual taxable person nor a non-resident taxable person

shall pay tax under section 9(3)/9(4) on inward supply

is not engaged in the manufacture of notified goods** (or notified services also in
case of composition scheme for services)

shall mention the words “composition taxable person, not eligible to collect tax
on supplies” at the top of the bill of supply issued by him

shall mention the words “composition taxable person” at a prominent place at his
place of business

** Goods notified for a registered person opting for composition scheme for goods
are ice cream, pan masala, tobacco, aerated waters fly ash bricks, fly ash aggregate,
fly ash blocks, bricks of fossil meals or similar siliceous earths, building bricks,
earthen or roofing tiles.

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 CHARGE OF GST a 3.73 a

Who are NOT eligible to opt for composition scheme?

Registered person who is not eligible Registered person who is not

for composition scheme for goods eligible for composition scheme
for services

Supplier engaged in making any supply Supplier engaged in making any

of goods or services which are not supply of goods or services which
leviable to tax i.e. non-taxable supplies are not leviable to tax i.e. non-
taxable supplies

Supplier engaged in making any inter- Supplier engaged in making any

State outward supplies of goods or inter-State outward supplies of
services goods or services

Person supplying any goods or services Person supplying any goods or

through an electronic commerce services through an electronic
operator who is required to collect tax commerce operator who is required
at source under section 52 to collect tax at source under section
52

Manufacturer of ice cream, panmasala, Manufacturer of notified goods or

tobacco, aerated waters fly ash bricks, supplier of notified services
fly ash aggregate, fly ash blocks,
bricks of fossil meals or similar
siliceous earths, building bricks,
earthen or roofing tiles.
Supplier who is either a casual taxable Supplier who is either a casual
person or a non-resident taxable taxable person or a non-resident
person taxable person.

Supplier of services, save as provided in

section 10(1)**

**A registered person opting for composition scheme for goods is allowed to supply services
[other than restaurant services] alongwith supply of goods or supply of restaurant services
of value not exceeding 10% of the turnover in the preceding financial year in a State/Union
territory or ` 5 lakh, whichever is higher. Here, while computing turnover in a State/UT,
interest on loans/deposit/advances will not be taken into account.

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Other points

Bill of supply shall be issued instead of tax invoice.

Tax shall not be collected from recipient of supply

Input tax credit shall not be availed

Composition Scheme not applicable for tax payable under RCM

Composition Scheme if availed shall include all registered persons having same
PAN
Penalty shall be imposed in case of irregular availment of the composition
scheme

TEST YOUR KNOWLEDGE

1. State the person liable to pay GST in the following independent cases provided
recipient is located in the taxable territory:
(a) Services provided by an arbitral tribunal to any business entity.
(b) Sponsorship services provided by a company to an individual.
(c) Renting of immovable property service provided by the Central
Government to a registered business entity.
2. Vivek Goyal, an independent director, appointed in accordance with the
provisions of the Companies Act, 2013, of A2Z Pvt. Ltd., has received sitting fee
amounting to ` 1 lakh from A2Z Pvt. Ltd for attending the Board meetings.
Who is the person liable to pay tax in this case?
3. Raghu Associates provided sponsorship services to WE-WIN Cricket Academy
LLP. Determine the person liable to pay tax in this case.
4. Legal Fees is received by Sushrut, an advocate, from M/s. Tatva Trading
Company, engaged in making taxable supplies and located in Maharashtra,

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 CHARGE OF GST a 3.75 a

having turnover of ` 50 lakh in preceding financial year. Who is the person

liable to pay tax in this case?
5. State the person liable to pay GST in the following independent cases provided
recipient is located in the taxable territory:
(a) Services supplied by an insurance agent to an insurance company.
(b) Services supplied by a recovery agent to a car dealer.
(c) Security services (services provided by way of supply of security
personnel) provided by a partnership firm to a registered person paying
tax under regular scheme.
6. Sultan & Sons, a partnership firm, based in Nagpur, Maharashtra is a
wholesaler of a taxable product ‘P’ and product ‘Q’ exempt by way of a
notification, only within the State of Maharashtra. Its aggregate turnover in
the preceding financial year is ` 130 lakh. The firm wishes to opt for
composition scheme under sub-sections (1) & (2) of section 10 in the current
financial year. However, its accountant is of the view that a person engaged in
making supply of exempt goods is not eligible for the said scheme. Discuss.
Note: Assume that Sultan & Sons is not engaged in manufacture of goods as
notified under section 10(2)(e).
7. A person availing composition scheme, under sub-sections (1) & (2) of section
10, in Haryana during a financial year crosses the turnover of ` 1.5 crore in the
month of December. Will he be allowed to pay tax under composition scheme
for the remainder of the year, i.e. till 31st March? Please advise.
8. Determine whether the suppliers in the following cases are eligible for
composition levy, under section 10(1) & 10(2), provided their turnover in
preceding year does not exceed ` 1.5 crore:
(i) Mohan Enterprises is engaged only in trading of pan masala in
Rajasthan and is registered in the same State.

(ii) Sugam Manufacturers has registered offices in Punjab and Haryana

and sells goods manufactured by it in the neighbouring States.
9. Subramanian Enterprises has two registered places of business in Delhi. Its
aggregate turnover in the preceding financial year for both the places of
business is ` 120 lakh. It wishes to pay tax under composition levy, under
section 10(1) & 10(2), for one of the places of business for the current financial

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while continuing paying under normal levy for other. You are required to advice
Subramanian Enterprises whether he can do so?
10. Mr. Ajay has a repair centre, registered under GST, where electronic goods are
repaired/serviced. His repair centre is located in State of Rajasthan and he is
not engaged in making any inter-State supply of services. His aggregate
turnover in the preceding financial year (FY) is ` 45 lakh.
With reference to the provisions of the CGST Act, 2017, examine whether Mr.
Ajay can opt for the composition scheme under section 10(1) &10(2) for the
current financial year? Or whether he is eligible to avail benefit of composition
scheme under section 10(2A)? Considering the option of payment of tax
available to Mr. Ajay, compute the amount of total tax payable by him in the
current F.Y. assuming that his aggregate turnover in the current financial year
is ` 35 lakh.
Will your answer be different if Mr. Ajay procures few items required for
providing repair services from neighbouring State of Madhya Pradesh?
11. M/s United Electronics, a registered dealer, is supplying all types of electronic
appliances in the State of Karnataka. Its aggregate turnover in the preceding
financial year by way of supply of appliances is ` 120 lakh.
The firm also expects to provide repair and maintenance service of such
appliances from the current financial year.
With reference to the provisions of the CGST Act, 2017, examine:
(i) Whether the firm can opt for the composition scheme, under section 10(1)
and 10(2), for the current financial year, as the turnover may include
supply of both goods and services?
(ii) If yes, up to what amount, the services can be supplied?

ANSWERS/HINTS

1. (a) Since GST on services provided or agreed to be provided by an arbitral

tribunal to any business entity located in the taxable territory is payable
under reverse charge, in the given case, GST is payable by the recipient
- business entity.

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 CHARGE OF GST a 3.77 a

(b) GST on sponsorship services provided by any person to any body

corporate or partnership firm located in the taxable territory is
payable under reverse charge. Since in the given case, services have
been provided to an individual, reverse charge provisions will not be
attracted. GST is payable under forward charge by the supplier –
company.
(c) GST on services supplied by Central Government, State Government,
Union territory or local authority by way of renting of immovable
property to a person registered under CGST Act, 2017 is payable
under reverse charge. Therefore, in the given case, GST is payable
under reverse charge by the recipient – registered business entity.
2. GST on supply of services by director of a company to the said company
located in the taxable territory is payable on reverse charge basis.
Therefore, in the given case, person liable to pay GST is the recipient of
services, i.e., A2Z Pvt. Ltd.
3. In case of services provided by any person by way of sponsorship to any body
corporate or partnership firm, GST is liable to be paid under reverse charge
by such body corporate or partnership firm located in the taxable territory.

Further, for the reverse charge purposes, Limited Liability Partnership formed
and registered under the provisions of the Limited Liability Partnership Act,
2008 is also be considered as a partnership firm.
Therefore, in the given case, WE-WIN Cricket Academy LLP is liable to pay
GST under reverse charge.
4. GST on legal services supplied by an advocate [Mr. Sushrut] to any business
entity [M/s. Tatva Trading Company] located in the taxable territory is payable
on reverse charge basis.
Therefore, in the given case, person liable to pay GST is the recipient of
services, i.e., M/s. Tatva Trading Company.
5. (a) GST on services supplied by an insurance agent to any person
carrying on insurance business located in the taxable territory is
payable under reverse charge. Therefore, in the given case, GST is
payable under reverse charge by the recipient – Insurance Company.

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(b) GST on services supplied by a recovery agent to a banking company

or a financial institution or a non-banking financial company located
in the taxable territory is payable under reverse charge. However,
since, in the given case, services are being supplied by a recovery
agent to a car dealer, GST is payable under forward charge by the
service provider - recovery agent.
(c) GST on security services (services provided by way of supply of
security personnel) provided by any person other than a body
corporate to a registered person, located in the taxable territory is
payable under reverse charge. Therefore, in the given case, GST is
payable under reverse charge by the recipient – registered person
receiving the services.
6. The view taken by the accountant of Sultan & Sons is not valid in law. A
registered person with an aggregate turnover in a preceding financial year up
to ` 1.5 crore is eligible for composition levy, under section 10(1) & 10(2), in
Delhi. Further, such person must not be engaged in making any supply of
goods or services which are not leviable to tax under this Act and must not
be engaged in making any inter-State outward supplies of goods or services,
for being eligible to pay tax under said scheme.
In the given case, the aggregate turnover of Sultan & Sons does not exceed
` 1.5 crore. Further, it is engaged in making only intra-State supply of goods
and Product P supplied by it is taxable and Product Q supplied by it is leviable
to tax, though exempted by way of notification. Therefore, it is eligible for
composition levy under section 10(1) & 10(2) in the current year.
7. No. The option to pay tax under composition scheme lapses immediately
from the day on which the aggregate turnover of the person availing
composition scheme for goods during the financial year exceeds the specified
limit (` 1.5 crore). Once he crosses the threshold, he is required to file an
intimation for withdrawal from the scheme in prescribed form within 7 days
of the occurrence of such event.
Every person who has furnished such an intimation, may electronically furnish
at the common portal, a statement in prescribed form containing details of
the stock of inputs and inputs contained in semi-finished or finished goods

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 CHARGE OF GST a 3.79 a

held in stock by him on the date on which the option is withdrawn, within a
period of 30 days from the date from which the option is withdrawn.
8. (i) A supplier engaged in the manufacture of goods as notified under
section 10(2)(e), during the preceding FY is not eligible for composition
scheme under section 10(1) and 10(2). Ice cream and other edible ice,
whether or not containing cocoa, Pan masala, Tobacco and
manufactured tobacco substitutes, aerated waters, fly ash bricks, fly ash
aggregate, fly ash blocks, bricks of fossil meals or similar siliceous
earths, building bricks, earthen or roofing tiles are notified under this
category. However, in the given case, since Mohan Enterprises is
engaged in trading of pan masala and not manufacture and his turnover
does not exceed ` 1.5 crore, he is eligible for composition scheme
subject to fulfilment of specified conditions.
(ii) Since supplier of inter-State outward supplies of goods or services
is not eligible for composition levy, Sugam Manufacturers is not
eligible for composition levy.
9. A registered person with an aggregate turnover in a preceding financial year
up to ` 1.5 crore is eligible for composition levy, under section 10(1) & 10(2),
in Delhi. Since the aggregate turnover of Subramanian Enterprises does not
exceed ` 1.5 crore, it is eligible for composition levy in the current year.
However, all registered persons having the same Permanent Account Number
(PAN) have to opt for composition scheme. If one such registered person opts
for normal scheme, others become ineligible for composition scheme. Thus,
Subramanian Enterprises either have to opt for composition levy for both the
places of business or under normal levy for both the places of business.
10. Section 10(1) provides that a registered person, whose aggregate turnover in
the preceding financial year did not exceed ` 1.5 crore (` 75 lakh in Special
Category States except Assam, Himachal Pradesh and Jammu and Kashmir),
may opt to pay, in lieu of the tax payable by him, an amount calculated at the
specified rates. However, as per proviso to section 10(1), person who opts
to pay tax under composition scheme may supply services other than
restaurant services, of value not exceeding 10% of the turnover in a State or
Union territory in the preceding financial year or ` 5 lakh, whichever is higher.

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In the given case, since Mr. Ajay is an exclusive supplier of services other
than restaurant services [viz. repair services], he is not eligible for
composition scheme under section 10(1) & 10(2).
However, section 10(2A) provides an option to a registered person
(subject to certain conditions) whose aggregate turnover in the preceding
financial year is upto ` 50 lakh and who is not eligible to pay tax under
composition scheme under section 10(1) & 10(2), to pay tax @ 3%
[Effective rate 6% (CGST+ SGST/UTGST)] of the turnover of supplies of
goods and services in the State or Union territory.
Thus, in view of the above-mentioned provisions, Mr. Ajay is eligible to
avail the composition scheme under section 10(2A) as his aggregate
turnover in the preceding FY does not exceed ` 50 lakh and he is not
eligible to opt for the composition scheme under section 10(1) & 10(2).
Thus, the amount of tax payable by him as per the composition scheme
under section 10(2A) is ` 2,10,000 [6% of ` 35 lakh].
A registered person cannot opt for composition scheme under section
10(2A), if, inter alia, he is engaged in making any inter-State outward
supplies. However, there is no restriction on inter-State procurement of
goods. Hence, answer will remain the same even if Mr. Ajay procures few
items from neighboring State of Madhya Pradesh.
11. (i) The registered person, whose aggregate turnover in the preceding
financial year does not exceed ` 1.5 crore, may opt to pay tax under
composition levy, under section 10(1) and 10(2).
The scheme can be availed by an intra-State supplier of goods and
supplier of restaurant service.
However, the composition scheme permits supply of marginal
services (other than restaurant services) for a specified value along
with the supply of goods and restaurant service, as the case may be.
Thus, M/s United Electronics can opt for composition scheme for the
current financial year as its aggregate turnover is less than ` 1.5 crore
in the preceding financial year and it is not engaged in inter-State
outward supplies.

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 CHARGE OF GST a 3.81 a

(ii) The registered person opting for composition scheme, under section
10(1) and 10(2), can also supply services (other than restaurant
services) for a value up to 10% of the turnover in the preceding year
or ` 5 lakh, whichever is higher, in the current financial year.
Thus, M/s United Electronics can supply repair and maintenance
services up to a value of ` 12 lakh [10% of ` 120 lakh or ` 5 lakh,
whichever is higher] in the current financial year.

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 a 3.82 a GOODS AND SERVICE TAX

CROSSWORD PUZZLE

6 7

10

11

ACROSS

3. Manufacturer of ___________are not eligible for opting for composition levy for
goods.

5. GST on _______ shall be levied with effect from such date as may be notified
by the Government on the recommendations of the Council.

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 CHARGE OF GST a 3.83 a

6. Tax on service by way of renting of residential __________ to a registered

partnership firm is payable under reverse charge.
8. Tax on renting of immovable property services supplied by a __________
authority to a registered person is payable under reverse charge.
10. Supply of goods which attracts nil rate of tax is an ________ supply.
11. Supplier engaged in making any ______ State outward supplies of goods or
services is not eligible for opting for composition levy for goods.
DOWNWARDS
1. HSN stands for Harmonized ______________ of Nomenclature.
2. Tax on services provided by business __________ to a banking company is
payable under reverse charge.
4. Tax on supply of services of security personnel by a body corporate to a
registered person is payable under __________ charge.
5. Electronic Commerce means the supply of goods and/or services including
digital products over __________ or electronic networks.
7. Supplier engaged in making any supply of goods not ______to tax is not
eligible for opting for composition levy for goods.
9. CGST and __________ are payable on intra-State supply of goods in Ladakh.
(Acronym)

Scan the following QR code for accessing the answers to MCQs in Quiz Time
and Cross word puzzle of this chapter.

Scan the code

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 a 3.84 a GOODS AND SERVICE TAX

AMENDMENTS MADE VIDE THE FINANCE ACT, 2023

The Finance Act, 2023 has come into force from 31.03.2023. However, most of the
amendments made under the CGST Act and the IGST Act vide the Finance Act, 2023
would become effective only from a date to be notified by the Central Government
in the Official Gazette. Such a notification has not been issued till 30.04.2023.
Therefore, the applicability or otherwise of such amendment for May 2024 and/ or
November, 2024 examinations shall be informed by the ICAI by way of an
announcement.
In the table given below, the existing provisions of section 10(2)(d) and 10(2A)(c)
are compared with the provisions as amended by the Finance Act, 2023.
Once the announcement for applicability of such amendments for examination(s) is
made by the ICAI, students should read the amended provisions given hereunder in
place of the related provisions discussed in the chapter.

Section Existing provisions Provisions as Remarks

No. amended by the
Finance Act, 2023
10(2)(d) he is not engaged in he is not engaged in Presently, composition
making any supply of making any supply of supplier is barred from
goods or services goods or services making supply of goods
through an electronic through an electronic as well as services
commerce operator commerce operator through e commerce
who is required to who is required to operator.
collect tax at source collect tax at source It is now proposed to
under section 52. under section 52. permit composition
10(2A)(c) engaged in making engaged in making supplier to supply
any supply of goods any supply of goods goods through e
or services through an or services through commerce operator.
electronic commerce an electronic
operator who is commerce operator
required to collect tax who is required to
at source under collect tax at source
section 52. under section 52.

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India
© The Institute of Chartered Accountants of India