1.
Constitutional Framework of Indirect Taxes Before GST
Taxation Powers of Union & State Government:
• Union Government (Central):
o Excise Duty: Tax on manufacture/production of goods.
o Service Tax: Tax on services provided.
o Central Sales Tax (CST): Tax on interstate sales of goods.
• State Government:
o VAT (Value Added Tax): Tax on intra-state sales of goods.
o Other Taxes: Entry Tax, Luxury Tax, Entertainment Tax, etc.
Issue:
• Overlapping of taxes between Union and States.
• Lack of uniformity, leading to confusion and tax burden.
2. Concept of VAT (Value Added Tax)
Meaning:
VAT is a tax on the value added to a product at each stage of its production or distribution.
Variants of VAT:
1. Gross Product Variant:
o Tax = Total Sales – Raw Material Purchases.
2. Income Variant:
o Tax = Sales – (Raw Materials + Capital Goods).
3. Consumption Variant (Most Common):
o Tax = Sales – Purchases (only raw material; capital goods excluded from tax again).
Methods of VAT Calculation:
1. Addition Method:
o VAT = Tax on total value added (profit + wages + interest, etc.).
2. Invoice Method (Credit Method):
o VAT = Tax on sales – Tax on purchases.
o Most widely used method.
3. Subtraction Method:
o VAT = Tax on (Selling Price – Purchase Price).
3. Major Defects in Indirect Tax System Before GST
• Cascading Effect:
o Tax on tax; no seamless credit system.
• Multiple Taxes:
o Numerous overlapping central and state levies.
• Complex Structure:
o Varied tax laws and procedures across states.
• Trade Barriers:
o Taxation on inter-state movement created logistical challenges.
• Lack of Uniformity:
o VAT rates differed from state to state.
4. Overview of GST (Goods and Services Tax)
• GST is a comprehensive indirect tax on the supply of goods and services.
• Replaced almost all previous indirect taxes.
• One Nation, One Tax system.
• Launched on 1st July 2017.
• Based on:
o Value Addition at each stage.
o Input Tax Credit mechanism.
5. Structure of GST
Component Applies To Collected By
CGST Intra-state supply Central Govt
SGST Intra-state supply State Govt
UTGST Intra-UT supply Union Territory Govt
IGST Inter-state supply & imports Central Govt (shared with States)
6. GST Council
• Constitutional Body under Article 279A.
• Recommends:
o GST rates
o Exemptions
o Threshold limits
o Tax slabs, etc.
• Chairperson: Union Finance Minister.
• Members Include:
o Union Minister of State for Finance.
o Finance Ministers of all States/UTs.
• Decision-making: By 75% majority.
Unit 2: Supply of Goods and Services
1. Definition of Supply (Section 7 of CGST Act)
Supply includes:
• Sale, Transfer, Barter, Exchange
• License, Rental, Lease, Disposal
• Must be for consideration (payment in money or value)
• Must be in the course or furtherance of business
2. Place of Supply
• Intra-State Supply: Buyer & seller in same state → CGST + SGST
• Inter-State Supply: Buyer & seller in different states/UTs → IGST
3. Composite and Mixed Supply
Type Meaning Tax Treatment Example
Composite Naturally bundled; one is principal Tax rate of principal Flight + meal (Flight is
Supply supply supply principal)
Two/more items sold together, not Tax at highest Gift pack (chocolates,
Mixed Supply
naturally bundled applicable rate soap, juice)
4. Import and Export
• Import of Goods/Services → Treated as Inter-State supply → IGST
• Export of Goods/Services → Zero-rated supply
5. Reverse Charge Mechanism (RCM)
• Normally: Supplier pays GST.
• Under RCM: Recipient pays GST.
• Applies to:
o Purchases from unregistered dealers
o Notified goods/services
6. Time of Supply
When GST becomes payable:
Type Time of Supply = Earlier of:
Goods Date of invoice or payment
Services Date of service provision or payment
7. Types of Supplies
Type GST Rate Features Examples
Nil Rated 0% Taxable but at zero rate Grains, fresh vegetables
Zero Rated 0% Exports/SEZ supplies with ITC allowed Export of goods
Exempted Nil No GST applicable, ITC not allowed Education, healthcare
Non-GST Supply Not under GST Goods/services outside GST law Petrol, liquor for humans
Unit 3: Registration and Documentation
(A) Registration
1. Persons Liable for Registration
• Business turnover above:
o Rs. 40 lakhs (goods)
o Rs. 20 lakhs (services)
• Interstate sellers, e-commerce operators, casual taxable persons
2. Compulsory Registration (Even if turnover is below limit)
• Inter-state supply
• Reverse charge
• Non-resident taxable persons
• E-commerce participants
3. Procedure of Registration
• Apply on www.gst.gov.in
• Fill Form GST REG-01
• Submit documents
• GSTIN (GST Identification Number) is allotted
4. Exemption from Registration
• Agriculturists
• Small businesses below threshold
• Suppliers of only exempted goods/services
5. Composition Scheme
• For small taxpayers (turnover up to Rs. 1.5 crore)
• Pay lower tax (1% to 6%) without input tax credit
• File quarterly returns
(B) Documentation
Important Documents under GST
Document Type Purpose
Tax Invoice For taxable supplies (includes GST)
Bill of Supply For exempted supplies or Composition Scheme
Document Type Purpose
Receipt Voucher When advance is received
Payment Voucher When payment made under reverse charge
Refund Voucher When advance is refunded
Debit Note When tax amount is increased
Credit Note When tax amount is reduced
GST Returns
Return Type Description
GSTR-1 Outward supplies (sales)
GSTR-2 (Currently suspended) Inward supplies
GSTR-3B Monthly summary return
GSTR-9 Annual return (summary of year)
Unit 4: Input Tax Credit (ITC)
1. Introduction
• ITC = Credit of GST paid on purchases used for business
• Can be used to pay GST on sales (output tax)
2. Input Service Distributor (ISD)
• Head office receives invoices and distributes ITC to branches
• Must register separately as ISD
3. Conditions to Claim ITC
• Must have:
o Tax invoice
o Goods/services received
o Supplier has paid tax
• ITC allowed on capital goods if used for business
• ITC not allowed on:
o Personal use
o Exempted supplies
4. Legal Formalities for ISD
• Maintain proper records
• Distribute ITC via ISD Invoice
5. Payment of Tax
• (a) Through ITC:
o Use ITC in the following order:
1. IGST → IGST, CGST, SGST
2. CGST → CGST, IGST
3. SGST → SGST, IGST
• (b) By Cash/Bank:
o If ITC is insufficient, generate Challan and pay through bank
Other Key Concepts
E-Way Bill
• Mandatory for goods worth > Rs. 50,000
• Generated on ewaybillgst.gov.in
• Includes:
o Vehicle number
o Invoice details
o Supplier & buyer info
GST Portal
• Official GST website: www.gst.gov.in
GST Ecosystem
• Includes:
o Taxpayers
o Government authorities
o GSPs (GST Suvidha Providers)
GST Suvidha Provider (GSP)
• Authorized tech firms that help with:
o GST return filing
o Invoice generation
o Reconciliation support
What is GSP (GST Suvidha Provider)?
A GSP is a company or software that helps businesses file GST easily.
• It connects businesses to the official GST system.
• It makes tasks like uploading invoices and filing returns easier and faster.
Examples of GSPs: ClearTax, Tally, Zoho, Marg, etc.
Why Use GSP?
Because the GST portal can be slow or difficult to use if you have:
• Too many invoices
• Many branches (GSTINs)
• Complex tax entries
How to Upload Invoices using GSP (Simple Steps):
1. Login to the GSP software.
2. Prepare invoices with all details like:
o GSTIN, item name, tax rate, HSN/SAC code
3. Upload invoices in bulk (in Excel or JSON format).
4. Check for errors – the software will show mistakes.
5. Submit to GST portal (GSTR-1 is auto-filled).
Benefits of Using GSP
Feature What it Means
Bulk Uploading Upload many invoices at once
Error Checking Tells you if something is missing or wrong
Fast Filing Saves time compared to manual entry
Auto Return Filing Helps file GSTR-1 and other returns easily
All in One Place Manage all branches and GSTINs together
Easy Example:
Imagine you sold 100 items today.
Instead of entering them one by one on GST portal,
GSP lets you upload all 100 invoices at once –
Fast, Easy, and Error-Free!
