Module 1 – Basics of Taxation

Tax – Meaning and Types, Differences between Direct and Indirect Taxation, Brief History of
Indirect Taxation in India, Structure of Indian Taxation.

Tax Meaning

a tax is a financial charge or levy imposed by the government on individuals, businesses, or other
entities to fund public services and infrastructure. Taxes are essential for the functioning of the
government and the development of the country.

Types

1. Direct Taxes:

 Income Tax: Levied on individuals and businesses based on their income.

 Corporate Tax: Charged on the income or profit of corporations.
 Wealth Tax: (Now abolished) Imposed on the net wealth of an individual or entity.
 Capital Gains Tax: Applied to the profit from the sale of assets or investments.
 Property Tax: Levied on property owners based on the value of their property.

2. Indirect Taxes:

 Goods and Services Tax (GST): A unified tax on the supply of goods and services,
replacing various other indirect taxes.
 Customs Duty: Charged on goods imported into India.
 Excise Duty: (Now subsumed under GST) Previously levied on the manufacture of
goods within India.
 Service Tax: (Now subsumed under GST) Previously imposed on services provided.
 Value Added Tax (VAT): (Now subsumed under GST) Previously levied at each stage
of production and distribution of goods.

Difference between Direct and Indirect Tax

Direct Tax Indirect Tax

 Definition: Levied directly on the  Definition: Levied on goods and
income or wealth of individuals or services rather than on income or
organizations. profits.
 Incidence and Impact: The burden of  Incidence and Impact: The tax
the tax cannot be shifted to another burden can be shifted to another
person; the taxpayer is responsible for person, typically the final consumer
paying the tax. bears the tax.
 Examples: Income tax, corporate tax.  Examples: GST, customs duty.
  Progressiveness: Generally  Regressiveness: Often considered
progressive, meaning the tax rate regressive, as the tax is the same
increases as the income or wealth regardless of the individual's income
increases. level, disproportionately affecting
lower-income individuals.

Brief History of Indirect Taxation in India

 Pre-Independence: Indirect taxes were primarily in the form of customs and excise
duties imposed by the British government to regulate trade and generate revenue.
 Post-Independence (1947-1985): India inherited a complex and inefficient tax structure.
Excise duty and sales tax were major sources of revenue.
 1986: Introduction of the Modified Value Added Tax (MODVAT) to streamline the
excise duty structure.
 1994: Introduction of service tax to tap the growing service sector.
 2000s: Continued reforms to simplify and harmonize the tax structure, including the
introduction of VAT at the state level.
 2017: Implementation of the Goods and Services Tax (GST), a comprehensive indirect
tax replacing various central and state taxes, aimed at creating a unified market and
reducing the cascading effect of taxes.

Structure of Indian Taxation

1. Central Taxes:
o Income Tax: Administered by the Central Board of Direct Taxes (CBDT).
o Corporate Tax: Levied on companies by the central government.
o GST: Administered by the Central Board of Indirect Taxes and Customs (CBIC).
o Customs Duty: Charged on imports and exports.
2. State Taxes:
o State GST (SGST): Part of the GST, levied by state governments.
o Stamp Duty: Imposed on legal documents.
o State Excise Duty: Levied on the manufacture of alcoholic beverages and certain
goods within the state.
o Property Tax: Collected by local municipal bodies.
3. Local Taxes:
o Municipal Taxes: Include property tax, water tax, and other local levies imposed
by municipal corporations or local governing bodies.

The Indian tax system is designed to generate revenue for the government while promoting
economic growth and development. Ongoing reforms aim to simplify and streamline the tax
structure, improve compliance, and reduce evasion.
Module 2 – GST
GST Meaning

Constitutional Framework

CGST

SGST

IGST

Supply – Meaning

Types of Supply
Exemptions from GST

GST Meaning:

GST stands for Goods and Services Tax. It is an indirect tax levied on the supply of goods and
services. GST has replaced many indirect taxes that previously existed in India.

Constitutional Framework:

GST is governed by the 101st Amendment Act of the Constitution of India, which introduced the
necessary provisions for the implementation of GST.

CGST (Central Goods and Services Tax):

CGST is the tax levied by the Central Government on intra-state supplies of goods and services.

SGST (State Goods and Services Tax):

SGST is the tax levied by State Governments on intra-state supplies of goods and services.

IGST (Integrated Goods and Services Tax):

IGST is the tax levied by the Central Government on inter-state supplies of goods and services. It
is applicable when goods or services are sold from one state to another.
Supply – Meaning:

Supply in the context of GST refers to the transactions involving goods or services, including
their sale, transfer, barter, exchange, license, rental, lease, or disposal made or agreed to be made
for a consideration by a person in the course or furtherance of business.

Types of Supply:

Under GST, there are different types of supplies:

 Taxable Supply: A supply of goods or services which attracts GST.

 Exempt Supply: A supply of goods or services which does not attract GST.
 Zero-Rated Supply: Supplies of goods or services that are taxed at a rate of 0%, but
credit for input taxes can be claimed.
 Inter-State Supply: Supply of goods or services from one state to another, attracting
IGST.
 Intra-State Supply: Supply of goods or services within the same state, attracting both
CGST and SGST.

Exemptions from GST:

Certain goods and services are exempted from GST, meaning they are not subject to GST. This
includes essential items like fresh produce, certain agricultural products, healthcare, educational
services, and more as specified by the GST Council.

Certainly! Here's a list of 50 common exemptions from GST that you can remember:

1. Fresh fruits and vegetables

2. Unprocessed grains

3. Milk and dairy products

4. Curd, lassi, butter milk

5. Eggs

6. Natural honey

7. Prasad distributed by religious places

8. Live animals

9. Meat and fish

10. Salt

11. Contraceptives

12. Human blood

13. Books (including newspapers and periodicals)

14. Educational services

15. Healthcare services

16. Healthcare supplies (e.g., medicines)

17. Sanitary napkins

18. Legal aid services

19. Postal services

20. Basic accommodation services

21. Transportation of passengers by metro, monorail, and local trains

22. Services provided to the United Nations and other international organizations

23. Services by way of public conveniences like parks, beaches

24. Services by way of admission to entertainment events or amusement parks

25. Cultural activities by charitable organizations

26. Financial services (e.g., loans, deposits)

27. Interest on loans and deposits

28. Services provided by the Reserve Bank of India

29. Services provided by an educational institution to its students, faculty, and staff

30. Services provided by a trust or entity registered under Section 12AA of the Income Tax Act
31. Renting of residential properties

32. Agricultural services (e.g., cultivation, harvesting)

33. Services by way of loading, unloading, packing, storage of rice

34. Services by way of loading, unloading, packing, storage of fruits and vegetables

35. Services by way of loading, unloading, packing, storage of eggs

36. Services by way of loading, unloading, packing, storage of milk

37. Services by way of loading, unloading, packing, storage of cereals

38. Services by way of loading, unloading, packing, storage of edible oilseeds

39. Services by way of loading, unloading, packing, storage of pulses

40. Services by way of loading, unloading, packing, storage of jaggery

41. Services by way of loading, unloading, packing, storage of salt

42. Services by way of loading, unloading, packing, storage of newsprint

43. Services by way of loading, unloading, packing, storage of ginger

44. Services by way of loading, unloading, packing, storage of turmeric

45. Services by way of loading, unloading, packing, storage of coffee

46. Services by way of loading, unloading, packing, storage of tea

47. Services by way of loading, unloading, packing, storage of tobacco leaves

48. Services by way of loading, unloading, packing, storage of jute

49. Services by way of loading, unloading, packing, storage of betel leaves

50. Services by way of loading, unloading, packing, storage of betel nuts

These exemptions cover a range of essential goods, services, and agricultural products, reflecting
the government's intent to provide relief on basic necessities and essential services under GST.
Module 3 – Time, Place and Value of Supply
Time of Supply

1. In case of Goods
2. In case of Services

Place of Supply

1. In case of Goods
2. In case of Services (general & specific)

Value of Supply meaning

Inclusions and Exclusions

Time of Supply:

In Case of Goods:

The time of supply for goods under GST is determined by the earliest of the following dates:

 Date of issue of invoice by the supplier

 Date of receipt of payment
 Date of delivery of goods
 Date of entry in the books of accounts of the recipient

In Case of Services:

The time of supply for services under GST is determined by the earliest of the following dates:

 Date of issue of invoice by the supplier

 Date of receipt of payment
 Date of completion of service
 Date of entry in the books of accounts of the recipient

Place of Supply:

In Case of Goods:

The place of supply for goods is generally the location of delivery of goods.
In Case of Services:

 General Rule: The place of supply for services is the location of the recipient of services.
 Specific Rules: Various specific rules apply depending on the nature of services, such as
services related to immovable property, transportation services, etc.

Value of Supply Meaning:

The value of supply refers to the amount on which GST is levied. It includes all forms of
consideration such as money, goods, services, credits, tokens, etc., exchanged or to be exchanged
for the supply of goods or services.

Inclusions and Exclusions:

Inclusions:

 Taxes and duties

 Subsidies directly linked to the price excluding subsidies provided by the Central and
State governments
 Any amount charged for anything done by the supplier in respect of the supply of goods
or services
 Incidental expenses

Exclusions:

 Discounts
 Subsidies provided by the Central and State governments
 Any penalty imposed on the supplier
 Amount of GST

Module 4 – GST Liability and Input Tax Credit

Rates of GST

Classification of Goods and Sevices based on tax rates

Input tax credit meaning

Process for availing input tax credit

Rates of GST:

GST in India is categorized into several rates:

 0% (Zero-rated): Certain essential goods and services.

 5%: Basic necessities.
 12% and 18%: Standard rates covering most goods and services.
 28%: Luxury items and sin goods.
 Special Rates: Applicable to specific items like gold, petroleum products, etc.

0% GST Rate:

 Fresh Fruits and Vegetables: Includes all fresh fruits and vegetables without any
processing.
 Unpacked Grains: Grains like rice, wheat, and pulses in their natural form.
 Milk: Fresh milk, without added flavors or preservatives.
 Education Services: Services provided by educational institutions up to higher
secondary.
 Healthcare Services: Medical services provided by doctors, hospitals, and clinics.
 Postal Services: Basic postal services provided by India Post.

Notes: These goods and services are essential for daily living and basic education and healthcare,
hence they are exempt from GST to make them more affordable.

5% GST Rate:

 Processed Food Items: Packaged food products like pickles, sauces, and preserved
vegetables.
 Coffee: Roasted coffee beans and ground coffee.
 Apparel: Garments costing less than Rs. 1,000.
 Footwear: Shoes costing less than Rs. 500 per pair.
 Transport Services: Economy class air travel and railways.
 Ayurvedic Medicines: Medicines classified as Ayurvedic, Unani, Siddha, or
Homeopathic.

Notes: These items are considered moderately essential and are taxed at a lower rate to keep
them affordable for consumers.

12% GST Rate:

 Butter: Dairy products like butter and ghee.

 Processed Foods: Packaged snacks like biscuits and cakes.
  Mobile Phones: Smartphones and feature phones.
 Spectacles: Optical glasses and lenses.
 Fertilizers: Chemical fertilizers used in agriculture.
 Sewing Machines: Mechanical and electric sewing machines.

Notes: This tax rate applies to goods that are neither essential nor luxury items, falling in the
mid-range of necessity and comfort.

18% GST Rate:

 Footwear: Shoes costing more than Rs. 500 per pair.

 Small Cars: Cars with engine capacity less than 1200 cc.
 AC Hotels: Hotel accommodation with tariff between Rs. 1,001 and Rs. 7,500 per night.
 Cement: Cement used in construction.
 Televisions: LED and LCD TVs.
 Digital Cameras: Digital and video cameras.

Notes: These goods and services are considered more luxurious or are used for leisure, attracting
a higher GST rate.

28% GST Rate:

 Luxury Cars: High-end cars and SUVs.

 Tobacco Products: Cigarettes and cigars.
 Aerated Drinks: Soft drinks and beverages.
 High-end Watches: Luxury watches and accessories.
 Cinema Tickets: Movie tickets priced above a certain threshold.
 Luxury Hotels: Hotel accommodation with tariff above Rs. 7,500 per night.

Notes: Goods and services under this category are considered luxury items or attract higher taxes
due to their non-essential nature.

Special Rates:

 Gold: Bullion and gold jewelry.

 Petroleum Products: Crude oil, petrol, diesel, and natural gas.
 Alcoholic Beverages: Alcoholic drinks for human consumption.
 Electricity: Supply of electricity.
 Aviation Turbine Fuel (ATF): Used in aircraft.
 Lottery Tickets: Lottery tickets sold under state government regulations
Classification of Goods and Services Based on Tax Rates:

Goods and services are classified into different tax rates under GST based on their nature and
usage, ranging from 0% to 28%.

Input Tax Credit (ITC) Meaning:

Input Tax Credit allows businesses to set off the GST they paid on purchase of goods or services
against the GST they collect on sales. It ensures that tax is paid only on the value added at each
stage of the supply chain.

Process for Availing Input Tax Credit:

To avail Input Tax Credit under GST, businesses must follow these steps:

 Registered Business: Be a registered taxable person under GST.

 Receipt of Goods or Services: Receive goods or services along with a valid tax invoice.
 Compliance: Ensure supplier has filed GST returns and paid the tax to government.
 ITC Claim: File monthly/quarterly GST returns and claim eligible ITC through the
online portal.
 Verification: Verify and reconcile ITC claimed with supplier details.

Module 5: GST Procedure

Registration under GST

Tax Invoice

Levy and Collection under GST

Composition Scheme

Due dates for Payment of GST

Accounting Record for GST

Features of GST in Tally Package

GST Returns

Types of Returns – Monthly, Annual, Final

Due Dates for filing of returns

Final Assessment
Accounts and Audit under GST

Registration under GST:

Overview:

 Mandatory: Businesses with an aggregate turnover exceeding specified thresholds (Rs.

20 lakhs for normal states, Rs. 10 lakhs for special category states) must register under
GST.
 Voluntary: Businesses below the threshold can opt for voluntary registration to avail
Input Tax Credit (ITC).
 Process: Registration is done online via the GST portal (www.gst.gov.in) by submitting
PAN, Aadhaar, business details, and bank account details.

Points to Note:

 GSTIN: Each registered taxpayer receives a unique GST Identification Number

(GSTIN).
 Threshold Limits: Different thresholds apply for goods and services.
 Composition Scheme: Optional for businesses with turnover up to Rs. 1.5 crores (Rs. 75
lakhs for certain states) offering simplified compliance.

Tax Invoice:

Overview:

 Purpose: A tax invoice is a document issued by a registered supplier to the recipient for
goods or services supplied.
 Contents: Must include supplier details (name, address, GSTIN), recipient details,
invoice number, date, description, quantity, value, applicable GST rates (CGST,
SGST/UTGST, IGST), and taxes charged.
 Types: Different types include regular invoice, bill of supply (for exempt
goods/services), and revised invoice (corrections).

Points to Note:

 Compliance: Invoices must comply with GST rules to claim Input Tax Credit (ITC).
 Electronic Format: Invoices can be issued electronically (e-invoice) through GST-
compliant software.
Levy and Collection under GST:

Overview:

 Tax Levy: GST is levied on the supply of goods or services at rates prescribed by the
GST Council (0%, 5%, 12%, 18%, 28%).
 Tax Collection: Registered suppliers collect GST from customers (output tax) and
deposit it with the government.
 Input Tax Credit (ITC): Businesses can claim credit for GST paid on purchases (input
tax) against GST collected on sales.

Points to Note:

 Reverse Charge: Applicable when the recipient is liable to pay GST instead of the
supplier (for specified goods/services).
 Credit Matching: GSTN facilitates matching of ITC claimed by recipients with tax paid
by suppliers to prevent tax evasion.

Composition Scheme:

Overview:

 Purpose: Designed for small businesses to reduce compliance burden and tax liability.
 Eligibility: Businesses with annual turnover up to Rs. 1.5 crores (Rs. 75 lakhs for certain
states) can opt for the scheme.
 Tax Rate: Pay tax at a fixed rate (1% for manufacturers/traders, 5% for restaurants)
without claiming ITC.

Points to Note:

 Ineligible Businesses: Service providers (except restaurants) and interstate sellers cannot
opt for the composition scheme.
 Limitations: Cannot issue tax invoices, collect GST from customers, or claim ITC on
purchases.

Due Dates for Payment of GST:

Overview:

 Frequency: GST returns are filed monthly or quarterly based on turnover.

  GST Payment: Payments are made online through net banking, NEFT/RTGS,
debit/credit card on the GST portal.
 Due Dates: GSTR-3B (summary return) is due by the 20th of the following month
(monthly) or by the 22nd/24th of the following month (quarterly).

Points to Note:

 Late Fees: Penalties apply for late filing and payment of GST.
 Interest: Charged on delayed payments at specified rates (18% per annum).

Accounting Records for GST:

Overview:

 Maintaining Records: Businesses must maintain proper books of accounts, invoices,

vouchers, and records of all GST transactions.
 Retention Period: Records should be retained for at least 6 years (5 years for some
states) from the due date of filing annual returns.

Points to Note:

 Audit: GST audit may be conducted by tax authorities to verify compliance.

 Electronic Records: Electronic records must be stored securely and be accessible for
audit purposes.

Features of GST in Tally Package:

Overview:

 GST-Ready: Tally ERP 9 and TallyPrime are GST-compliant accounting software.

 Invoicing: Generates GST-compliant invoices (regular, bill of supply) with correct tax
calculations.
 GST Returns: Facilitates filing of GSTR-1 (sales), GSTR-3B (summary), and other GST
returns directly from the software.

Points to Note:

 Integration: Seamless integration with GSTN for real-time data exchange and
reconciliation.
  Compliance Updates: Tally updates ensure compliance with latest GST rules and
notifications.

GST Returns:

Overview:

Under GST, registered taxpayers are required to file various returns to report their business
activities, tax liability, and avail Input Tax Credit (ITC).

Types of Returns:

4. GSTR-1 (Monthly/Quarterly Return):

o Details of outward supplies (sales) by the 10th/11th of the following
month/quarter.
5. GSTR-3B (Monthly/Quarterly Summary Return):
o Summary of sales and purchases along with tax payment by the 20th/22nd/24th of
the following month/quarter.
6. GSTR-4 (Quarterly Return for Composition Taxpayers):
o Quarterly return for taxpayers opting for the composition scheme by the 18th of
the month following the quarter.
7. GSTR-9 (Annual Return):
o Consolidated annual return summarizing the details of outward supplies, inward
supplies, taxes paid, and ITC availed by December 31st of the subsequent
financial year.
8. GSTR-9C (Reconciliation Statement and Audit Report):
o Annual return for taxpayers with a turnover exceeding Rs. 2 crores, along with a
certified reconciliation statement and audit report by December 31st of the
subsequent financial year.
9. GSTR-10 (Final Return):
o Final return for taxpayers whose registration has been canceled or surrendered,
filed within 3 months from the date of cancellation or surrender.

Due Dates for Filing of Returns:

 GSTR-1: Monthly by the 10th (for taxpayers with turnover exceeding Rs. 1.5 crores) or
quarterly by the 11th of the following month.
 GSTR-3B: Monthly by the 20th (for all taxpayers) or quarterly by the 22nd/24th of the
following month/quarter.
  GSTR-4: Quarterly by the 18th of the month following the quarter.
 GSTR-9: Annual return by December 31st of the subsequent financial year.
 GSTR-9C: Audit report along with GSTR-9 by December 31st of the subsequent
financial year.
 GSTR-10: Final return within 3 months from the date of cancellation or surrender of
registration.

Final Assessment:

Overview:

 Purpose: Final assessment under GST is conducted to verify the correctness of returns
filed by taxpayers.
 Assessment: Tax authorities may scrutinize returns, audit reports (if applicable), and
other records to ensure compliance with GST laws.
 Adjustments: Taxpayers may be required to rectify any discrepancies or pay additional
tax, interest, or penalties based on the assessment.

Points to Note:

 Notice: Taxpayers may receive notices for final assessment, seeking clarifications or
additional information.
 Representation: Taxpayers have the right to represent their case and provide necessary
documents during the assessment process.
 Consequences: Non-compliance may lead to penalties, prosecution, or other legal
consequences under GST laws.

Accounts and Audit under GST:

Overview:

 Maintenance of Accounts: Businesses must maintain proper books of accounts, records

of purchases, sales, and ITC, as well as invoices and vouchers.
 Audit: GST audit may be conducted by tax authorities to verify the accuracy of financial
statements and GST compliance.
 Types of Audit: Two types of audits under GST:
o Regular Audit: Conducted by a Chartered Accountant or Cost Accountant if
turnover exceeds Rs. 2 crores.
o Special Audit: Ordered by tax authorities if complexity or nature of business
warrants it.
Points to Note:

 Audit Report: Taxpayers must furnish audited financial statements and reconciliation
statements (GSTR-9C) along with annual returns (GSTR-9) as applicable.
 Penalties: Non-compliance with accounting and audit requirements may lead to penalties
and adverse consequences under GST laws.
 GSTN Integration: GST-compliant accounting software like Tally facilitates accurate
record-keeping and compliance with GST regulations.