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Unlike earlier when there were multiple taxes such as Central Excise, Service Tax and State
VAT etc., under GST, there is just one tax. GST is categorized into CGST, SGST or IGST
depending on whether the transaction is Intra-State or Inter-State.
To determine whether Central Goods & Services Tax (CGST), State Goods & Services Tax
(SGST) or Integrated Goods & Services Tax (IGST) will be applicable in a taxable transaction, it
is important to first know if the transaction is an Intra State or an Inter-State supply.
Intra-State supply of goods or services is when the location of the supplier and the place of
supply i.e., location of the buyer are in the same state. In Intra-State transactions, a seller has to
collect both CGST and SGST from the buyer. The CGST gets deposited with Central
Government and SGST gets deposited with State Government.
Inter-State supply of goods or services is when the location of the supplier and the place of
supply are in different states. Also, in cases of export or import of goods or services or when the
supply of goods or services is made to or by a SEZ unit, the transaction is assumed to be Inter-
State. In an Inter-State transaction, a seller has to collect IGST from the buyer.
Under GST, CGST is a tax levied on Intra State supplies of both goods and services by the
Central Government and will be governed by the CGST Act. SGST will also be levied on the
same Intra State supply but will be governed by the State Government.
This implies that both the Central and the State governments will agree on combining their levies
with an appropriate proportion for revenue sharing between them. However, it is clearly
mentioned in Section 8 of the GST Act that the taxes be levied on all Intra-State supplies of
goods and/or services but the rate of tax shall not be exceeding 14%, each.
Under GST, SGST is a tax levied on Intra State supplies of both goods and services by the State
Government and will be governed by the SGST Act. As explained above, CGST will also be
levied on the same Intra State supply but will be governed by the Central Government.
5. What is Integrated Goods and Services Tax (IGST)?
Under GST, IGST is a tax levied on all Inter-State supplies of goods and/or services and will
be governed by the IGST Act. IGST will be applicable on any supply of goods and/or
services in both cases of import into India and export from India.
The three types tax structure is implemented to help taxpayers take the credit against each
other, thus ensuring “One Nation, One Tax”.
The Union Territory Goods and Services Tax, commonly referred to as UTGST, is the
GST applicable on the goods and services supply that takes place in any of the five Union
Territories of India, including Andaman and Nicobar Islands, Dadra and Nagar Haveli,
Chandigarh, Lakshadweep and Daman and Diu. This UTGST will be charged in addition
to the Central GST (CGST) explained above. For any transaction of goods/services
within a Union Territory: CGST + UTGST
The reason why a separate GST was implemented for the Union Territories is that the
common State GST (SGST) cannot be applied in a Union Territory without legislature.
Delhi and Puducherry UTs already have their own legislatures, so SGST is applicable to
them.
UNIT 3
CONCEPT OF SUPPLY
The Central Goods and Service Tax Act, 2017 was notified on 12 th April 2017. State GST Laws
will be passed by the States on similar lines. The Government is working overtime to bring the
indirect tax reform from the 1st July 2017.
In the GST Law, the taxable event would be SUPPLY. Under the existing laws there were
multiple taxable events, i.e. manufacturing, provision of services, sales, etc. Under the GST law
a single taxable event ‘supply’ will replace the multiple taxable events. Hence it is the most
important part of the GST law, as it will determine the taxability or otherwise in the GST law.
Let us discuss the concept of Supply, as provided under the CGST Act. The definition of Supply
in the CGST Act, is an inclusive one. It is contained in Section 7 of the CGST Act.
Apart from Section 7, Schedules I to III are provided which explain various provisions related to
supply.
The law provides for the definition and scope of apply. In simple terms, supply includes all the
following –
IMPORT OF SERVICES
To be treated as supply if received for a consideration, whether for personal use or
business use.
However if import of services is received without any consideration, then it will be
treated as supply if it is received by a Taxable person from a related person or from any of his
other establishment outside India, and it is in course or furtherance of business.
ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT
CONSIDERATION
Permanent transfer/disposal of business assets where input tax credit has been availed on
such assets.
Supply of goods or services between related persons, or between distinct persons as
specified in section 25, when made in the course or furtherance of business. The value of supply
in such case shall be open market value of such supply. If open market value is not available, be
the value of supply of goods or services of the like kind and quality. If value is still not
determinable, it will be as determined by application of rule 4 or rule 5 of Determination of
Value of Supply Rules.
Supply of goods—
o by a principal to his agent where the agent undertakes to supply such goods on
behalf of the principal, or
o by an agent to his principal where the agent undertakes to receive such goods on
behalf of the principal.
Mixed Supply – means two or more individual supplies of goods or services, or any
combination thereof, made in conjunction with each other by a taxable person for a single price
where such supply does not constitute a composite supply.
Example – A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry
fruits, aerated drink and fruit juices when supplied for a single price is a mixed supply. Each of
these items can be supplied separately and is not dependent on any other. It shall not be a mixed
supply if these items are supplied separately.
Taxability – The tax liability on a mixed supply comprising two or more supplies shall be treated
as supply of that particular supply which attracts the highest rate of tax .
Example – Where goods are packed and transported with insurance, the supply of goods, packing
materials, transport and insurance is a composite supply and supply of goods is the principal
supply.
Principal Supply Means: The supply of goods or services which constitutes the predominant
element of a composite supply and to which any other supply forming part of that composite
supply is ancillary and does not constitute, for the recipient an aim in itself, but a means for
better enjoyment of the principal supply.
Transfer of business assets: The owner uses or allows to use business assets for personal
use.
Any treatment or process which is applied to another person’s goods is a supply of services.
Activities or transactions treated neither as the sale of goods nor sale of services as per
Schedule III of GST Act
Following are the transactions covered under negative list:
The terms zero rated, nil rated, exempted and non-taxable supply under GST have always been
misused and misinterpreted. There has always been confusion regarding the said terms and the
said confusion still prevails even after introduction of GST. In this article, we analyse each of
these terms and its implications.
The relevant provisions of zero rated supplies are contained in section 16 (1) of the IGST Act,
2017 which states as under:
Zero rated supply means any of the following supplies of goods or services or both, namely
export of goods or services or both; orMsupply of goods or services or both to a Special
Economic Zone developer or a Special Economic Zone unit.
Under zero rated supply, the output supplies as well as the inputs or input services used in
supplying the supplies would be free from GST. Following are the important points under zero
rated supply:
The taxes paid on the supplies which are zero rated are refunded;
Wherever the supplies are exempted, or the supplies are made without payment of tax, the taxes
paid on the inputs and / or input services will be refunded (i.e. unutilized input tax credit would
be refunded).
Further, the provisions for the refund of unutilized input credit are contained in the explanation
to Section 54 of the CGST Act, 2017, which defines refund as below:
“Refund” includes refund of tax paid on zero-rated supplies of goods or services or both or on
inputs or input services used in making such zero-rated supplies, or refund of tax on the supply
of goods regarded as deemed exports, or refund of unutilized input tax credit as provided under
sub-section (3).
Nil Rated
Goods or services on which GST rate of 0 % is applicable are called NIL rated goods or services.
Such goods or services, on which GST rate of 0% is applicable, are listed in schedule 1 under
GST rate schedule. Example of Nil rated supplies is salt, jaggery, cereals etc.
Input tax credit of inputs and / or input services used in providing supply attracting Nil rate is not
available i.e. no input tax credit on Nil rated supplies.
Exempted Supply
Exempted 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 of CGST Act or under section 6 of the
IGST Act, and includes non-taxable supply.
Following points are to be noted for exempted supply:
Input tax credit of inputs and / or input services used in providing exempted supply is not
available i.e. no input tax credit on exempted supplies;
A registered person supplying exempted goods or services or both shall issue ‘bill of supply’
instead of tax invoice.
“non-taxable supply” means a supply of goods or services or both which is not leviable to tax
under CGST Act or under the IGST Act.
A transaction must be a ‘supply’ as defined under the GST law to qualify as a non-taxable supply
under the GST.
Note: Only those supplies that are excluded from the scope of taxation under GST are covered by
this definition – i.e., alcoholic liquor for human consumption, articles listed in section 9(2) or in
schedule III.
It must also be noted that the following items are not out of scope of GST. That means GST Rate
has not yet been announced or notified for them. Petroleum crude high-speed diesel motor spirit
(commonly known as petrol) natural gas and aviation turbine fuel
Grains,
Nil Everyday Salt,
0% No
Rated items Jaggery,
etc.
Bread,
Fresh
Exempt Basic fruits,
- No
ed essentials Fresh
milk,
Curd, etc.
Developers
Supplies for
which GST is
not Petrol,
Non-
- applicable No Alchohol,
GST
but can etc.
attract other
taxes
UNIT 4
PENALTIES
Not registering under GST, even though required by law. (Read our article for the list of
those who have to register mandatorily under GST)
Supply of any goods/services without any invoice or issuing a false invoice
The issue of invoices by a taxable person using the GSTIN of another bona fide taxpayer
Submission of false information while registering under GST
Submission of fake financial records/documents or files, or fake returns to evade tax
Obtaining refunds by fraud
Deliberate suppression of sales to evade tax
Opting for composition scheme even though a taxpayer is ineligible
Penalty
If any of the offenses are committed then a penalty will have to be paid under GST. The
principles on which these penalties are based are also mentioned by law.
Late filing attracts penalty called late fee. The late fee is Rs. 100 per day per Act. So it is 100
under CGST & 100 under SGST. Total will be Rs. 200/day*. The maximum is Rs. 5,000. There
is no late fee on IGST in case of delayed filing.
Along with late fee, interest has to be paid at 18% per annum. It has to be calculated by the
taxpayer on the tax to be paid. The time period will be from the next day of filing to the date of
payment.
If you don’t file any GST return then subsequent returns cannot be filed. For example, if GSTR-2
return of August is not filed then the next return GSTR-3 and subsequent returns of September
cannot be filed. Hence, late filing of GST return will have a cascading effect leading to heavy
fines and penalty (see below).
An offender not paying tax or making short payments must pay a penalty of 10% of the tax
amount due subject to a minimum of Rs. 10,000.
Consider — in case tax has not been paid or a short payment is made, a minimum penalty of Rs
10,000 has to be paid. The maximum penalty is 10% of the tax unpaid.
Offenses with the intention of fraud or tax evasion
An offender has to pay a penalty amount of tax evaded/short deducted etc., i.e., 100% penalty,
subject to a minimum of Rs. 10,000.
Additional penalties as follows-
Tax amount involved 100-200 lakhs 200-500 lakhs Above 500 lakhs
Goods in Transit
The person in charge of a vehicle carrying goods exceeding Rs. 50,000 is required to carry the
following documents:
The proper officer has the power to intercept goods in transit and inspect the goods and the
documents.
If the goods are in contravention of the GST Act then the goods, related documents, and the
vehicle carrying them will be seized. The goods will be released only on payment of tax and
penalty.
Before confiscating the goods, the tax officer shall give an option of paying a fine instead of
confiscation.
1. Issue of an invoice without supplying any goods/services- thus taking input credit or
refund by fraud
2. Obtaining refund of any CGST/SGST by fraud
3. Submitting fake financial records/documents or files, and fake returns to evade tax
4. Helping another person to commit fraud under GST
Appeals
A person unhappy with any decision or order passed against him under GST can appeal against
such decision.
The first appeal against an order by an adjudicating authority goes to the First Appellate
Authority.
If the taxpayer is not happy with the decision of the First Appellate Authority they can appeal to
the National Appellate Tribunal, then to the High Court, and finally to the Supreme Court.
TAX RATES
Goods Services
Dairy Products – Milk, Curd, Butter Milk, Jaggery (Gur), Lassi, Education (exemption
unpacked Paneer continued from before)
Healthcare (exemption
Fresh Fruits & Vegetables continued from before)
Handloom Products
Contraceptives
Goods Services
Food Items – Sugar, Spices, Edible Oil, Pizza Bread, Rusk, Cab Aggregators (e.g.
Sweets, Fish Fillets, Tapioca (sabu daana) Uber & Ola)
Solar Panels
Newsprint
Lifeboats
Goods Services
Ayurvedic Medicine
Mobile Phones
Goods Services
Biscuits
Goods Services
Speakers
Cameras
RETURNS
Every registered person paying GST is required to furnish an electronic return every calendar
month. A “Tax Return” is a document that showcases the income of a registered taxpayer. Such a
document needs to be filed with the tax authorities in order to pay tax to the government. The tax
to be paid by a registered dealer depends upon the income declared by such a person in the tax
return filed with the tax authorities.
From April 1, 2019, the incumbent government is planning to implement the new GST Return
design. This simplified version of return would require the taxpayers having an annual turnover
of over Rs 5 Crores to file one monthly return only. Thus, small business owners,having an
annual turnover of upto Rs 5 Crores would have the option to file quarterly return.
Every normal registered taxpayer under GST is required to file GSTR-1 each month. This return
showcases details of 1) invoices, 2) debit notes, 3) credit notes and 4) revised invoices issued
pertaining to your outward supplies.
The standard date for filing GSTR-1 is 10 days from the end of the month for which such a
return is to be filed. However, the due date to file GSTR 1 can be extended for any class of
persons beyond the tenth of the succeeding month by the Commissioner. The reasons for such an
extension would be notified.
GSTR-2 is a monthly return of inward supply of goods and services as agreed by the recipient of
the goods and services. In other words, GSTR-2 contains details with regards to the purchases
made by the recipient in a particular month. The information contained in GSTR-2 is auto-
populated with the details contained in GSTR-2A.
Every normal registered taxpayer under GST is required to provide details regarding inward
supplies or purchases made for each month in GSTR-2. This return showcases details with
regards to purchases made from registered and unregistered taxable persons, debit notes and
credit notes issued with respect to the inward purchases etc
Hence, the recipient makes use of the details auto-populated in Form GSTR-2A with details
uploaded by supplier in GSTR-1. The recipient makes necessary changes if required in GSTR-2
after verifying the information auto-populated in GSTR-2A.
Due Date for Filing GSTR-2
The process of making changes and filing GSTR-2 is required to be undertaken between 11th
and 15th day of the succeeding month for which return is to be filed.
Every registered person shall furnish electronically an annual return for every financial year in
the prescribed form, except the following:
Furthermore, persons registered under GST but having no transactions during the year are still
required to file a Nil Annual Return.
Such a return needs to be furnished on or before the 31st day of December following the end of
such financial year. To further add to this, Rule 80(1) of the CGST Rules, 2017 states that such
registered person shall furnish an annual return electronically in Form GSTR-9. This return
needs to be filed through the common portal either directly or through a Facilitation Centre
notified by the Commissioner.