Special Focus

A Book Of on GST

INDIRECT TAXATION
Finance Specialisation - Core Subject
Course Code : 403 (FIN)

For
MBA Semester - IV
As Per the New Revised Syllabus

Prof. (Dr.) Devidas B. Bharati Prof. (Dr.) Babasaheb R. Jadhav

B. Com., M. Com., M. Phil., B.B.A., M.B.A., Ph.D.,
Ph.D. (Banking and Finance) Professor,
Director, Rajgad Institute of Management Financial Management and International
Research and Development, Pune. Business Management, MIT-School of Management,
Pune.

Prof. (CA) Dnyanesh A. Kulkarni

M.Com., CA
Chairman of Ahmednagar
Branch of WIRC of ICAI (Institute of Chartered
Accounts of India)
Accredited Management Teacher, AIMA, New Delhi.

Price ` 180.00

N2102
MBA : Indirect Taxation (S-IV) ISBN 978-93-87686-39-7
First Edition : April 2018
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 Dedicated To
Our Beloved Parents and
Guru’s
Foreword …
I am very much delighted to write the foreword for this textbook titled “Indirect Taxation”
as per revised syllabus could possibly be described as one stop centre for all your questions
and answers regarding the current position of the indirect tax law, GST and practices in India.
It is a comprehensive analysis of all concepts, principles, practices and perspectives arising in
the indirect taxation on natural and legal persons. This makes it essential reading for anyone
with the aspiration of understanding taxation as a student, teacher and practitioner.
The textbook is structured with a view to enabling a proper understanding of the
philosophy and principles of indirect tax practices and procedure. It then goes on to explain
both legal and economic concepts that underlie in the taxation, laws and practices, touching
virtually on all areas of taxation like introduction, overview and evolution of GST, registration
under GST, supply under GST and valuation of supply, input tax credit and returns under GST,
custom duty etc. with solved practical problems.
The structure and content of the textbook qualify it to be mandatory reading and
reference material for any academic effort on indirect taxation practices and procedures
including solved practical problems and multiple choice questions.
I particularly like the fact that the textbook is written in simple, lucid and understandable
language. This makes it easy reading material for students, teaching fraternity and
experienced practitioners who are looking to learn and refresh their knowledge on indirect
taxation.
I commend the author for adding valuable material to the body of textbook of indirect
taxation that will, without doubt, play a valuable and significant role in guiding and shaping
the direction and content of the book.

Place: Pune Prof. (Dr.) Prafulla Pawar

Dean
Faculty of Commerce and Management
Savitribai Phule Pune University, Pune
Preface …
“Knowledge is like a deep well fed by perennial springs and your mind is the little
bucket that you drop into it, you will get as much you can assimilate”.
It is with great pride and pleasure that we bring our book ‘Indirect Taxation’ to our
young, dynamic and beloved readers, students and teaching fraternity of commerce and
management studies.
The book brings out the subject of Indirect Taxation in a very simple and lucid manner
for easy and comprehensive understanding of the concepts, acts, sections, legal provisions,
practices and procedures and practical problems.
The book of Indirect Taxation is divided into five chapters dealing with important and
vital aspects of GST and Custom Duty including multiple choice questions on each chapter in
line with the Savitribai Phule Pune University.
We sincerely hope that the students of all the management and commerce related
streams of Savitribai Phule Pune University as well as other Universities find this book
valuable in their preparations.
We would like to express our deep gratitude towards our Dean, Faculty of Commerce
and Management, SPPU Dr. Prafulla Pawar, for his timely guidance and motivation for
completion and writing of this book. A successful achiever has to work on all possible
parameters to maintain work life balance. One important parameter is ‘time’. Our parents
kept reminding us about the timely completion of the book.
We take this as an opportunity to express our sincere thanks to Mr. Jignesh Furia, Dhairya
Furia and their entire staff of Nirali Prakashan for their encouragement, active co-operation,
support and helps in bringing out this publication.
Our students, colleagues and readers have always appreciated our writings. They are the
ultimate ‘value drivers’. Their ‘value expectations’ assess our performance towards quality of
work. They should decide whether this book is really ‘high value storage’. As an author’s our
indebtedness to all of them is perpetual.
At the end, how do we forget the ‘almighty’ who reminds us of our inner strength!
Readers are most welcome to help us to improve the contents and presentation of this
book. Let ‘creative thinking’ continue endlessly, so that the purpose and quality of book
‘Indirect Taxation’ improve perpetually.

Place: Pune Prof. (Dr.) Devidas B. Bharati

Prof. (Dr.) Babasaheb R. Jadhav
Prof. (CA) Dnyanesh A. Kulkarni
Syllabus
Syllabus and Contents
1. Introduction, Overview and Evolution of GST 1.1 - 1.72
1.1 Indirect tax structure in India
1.2 Introduction to Goods and Service Tax (GST) - Key Concepts
1.3 Phases of GST, GST Council
1.4 Taxes under GST, Cess

2. Registration under GST 2.1 - 2.70

2.1 Threshold for Registration
2.2 Regular Tax Payer
2.3 Composition Tax Payer
2.4 Casual Taxable Person
2.5 Non-Resident Taxable Person
2.6 Unique Identification Number
2.7 Registration Number Format

3. Supply under GST and Valuation of Supply 3.1 - 3.32

3.1 Supply
3.2 Place of Supply, Interstate Supply, Export of Service, Export of Goods, Import of
Service, Import of Goods
3.3 Valuation of Supply (Numerical on valuation and calculation of tax)

4. Input Tax Credit under GST and Returns 4.1 - 4.32

4.1 Input tax credit process
4.2 Negative List for Input tax credit
4.3 Input Tax Credit Utilization and Input Tax Credit Reversal
4.4 Types of GST returns and their due dates, late filing, late fee and interest

5. Custom Duty and Indirect Taxation 5.1 - 5.18

5.1 Definitions of certain terms relating to the custom act, custom tariff act, Levy and
types of custom duties
5.2 Indirect taxation applicable to few commodities levied by either Central or State
Government.

Important Note: 20% numerical questions and 80% theory questions will be asked.
,,,
Chapter 1…
Introduction, Overview and
Evolution of GST
Contents …
• Introduction of GST
1.1 Indirect Tax Structure in India
1.2 Introduction to Goods and Service Tax (GST) - Key Concepts
1.3 Phases of GST, GST Council
1.4 Taxes under GST and Cess
• Questions
• Multiple Choice Questions (MCQs)

Introduction of GST
Goods and Services Tax (GST) is an indirect tax levied in India on the sale of goods and
services.
Goods and services tax are divided into five tax slabs for collection of tax that are 0%, 5%,
12%, 18% and 28%. Petroleum products and Alcoholic drinks are taxed separately by the
individual State Governments. There is a special rate of 0.25% on rough precious and semi-
precious stones and 3% on gold. In addition a cess of 22% or other rates on top of 28% GST
applies on few items like aerated drinks, luxury cars and tobacco products.
The tax came into effect from 1st July 2017 through the implementation of one hundred
and first amendments (150) by the Government of India. The tax replaced existing multiple
cascading taxes levied by the Central and State Governments. The tax rates, rules and
regulations are governed by the Goods and Services Tax Council which comprises of finance
ministers of centre and all the States. GST simplified a slew of indirect taxes with a unified tax
and is therefore expected to dramatically reshape the country’s 2 trillion dollar economy.
The President of India approved the Constitution Amendment Bill for Goods and Services
Tax (GST) on 8th September 2016, following the bill’s passage in the Indian Parliament and its
ratification by more than 50% of State legislatures. This law will replace all indirect taxes
1.1
Indirect Taxation Introduction, Overview and Evolution of GST

levied on goods and services by the Central Government and State Government and
implement GST by April 2017. The implementation of GST will have a far-reaching impact on
almost all the aspects of the business operations in India. With more than 140 countries now
adopting some form of GST, India has long been a stand-out exception.
GST is a value-added tax levied at all points in the supply chain, with credit allowed for
any tax paid on input acquired for use in making the supply. It would apply to both goods
and services in a comprehensive manner, with exemptions restricted to a minimum.
In keeping with the federal structure of India, it is proposed that the GST will be levied
concurrently by the Central Government (CGST) and the State Government (SGST). It is
expected that the base and other essential design features would be common between CGST
and SGST for individual States. The inter-State supplies within India would attract an
integrated GST (IGST), which is the aggregate of CGST and the SGST of the destination State.
Salient Features of the Proposed GST System:
The following are the salient features of the proposed GST system:
• The power to make laws in respect of supplies in the course of inter-State trade or
commerce will remain with the Central Government. The States will have the right to levy
GST on intra-State transactions, including on services.
• The administration of GST will be the responsibility of the GST Council, which will be the
apex policy-making body for GST. Members of GST Council will comprise central and
State ministers in charge of the finance portfolio.
• The threshold for levy of GST is a turnover of ` 1 million. For a taxpayer who conducts
business in a northeastern State of India the threshold is ` 5,00,000.
• The Central Government will levy IGST on inter-State supply of goods and services.
Import of goods will be subject to basic customs duty and IGST.
• GST is defined as any tax on supply of goods and services (other than on alcohol for
human consumption).
• Central taxes such as central excise duty, additional excise duty, service tax, additional
custom duty and special additional duty, as well as State-level taxes such as VAT or sales
tax, central sales tax, entertainment tax, entry tax, purchase tax, luxury tax and octroi was
subsumed in GST.
• A provision was made for removing imposition of entry tax/octroi across India.
• Entertainment tax, imposed by States on movies, theatre, etc., was subsumed in GST, but
taxes on entertainment at Panchayat, municipality or district level will continue.
• Stamp duties, typically imposed on legal agreements by States, will continue to be levied.
GST would be levied on the basis of the destination principle. Exports would be zero-
rated and imports would attract tax in the same manner as domestic goods and services. In
addition to the IGST in respect of supply of goods, an additional tax of up to 1% has been
proposed to be levied by the Central Government. The revenue from this tax is to be
assigned to the origin States. This tax is proposed to be levied for the first two years or a
longer period, as recommended by the GST Council.
1.2
Indirect Taxation Introduction, Overview and Evolution of GST

With GST, it is anticipated that the tax base will be comprehensive, as virtually all goods
and services will be taxable, with minimum exemptions. GST would bring in a modern tax
system to ensure efficient and effective tax administration. It will bring in greater
transparency and strengthen monitoring, thus making tax evasion difficult. While the process
of implementation of GST unfolds in the next few months, it is important for industry to
understand the impact and opportunities offered by this reform. GST will affect all industries,
irrespective of the sector. It will impact the entire value chain of operations, namely
procurement, manufacturing, distribution, warehousing, sales and pricing.
Tax Structure before GST:
1. Before the implementation of GST, taxation laws between the Centre and States were
clearly demarcated. There were no overlaps between the fiscal powers, whatsoever. The
Centre would levy tax on goods manufacture, except alcohol for consumption, narcotics,
opium, etc.
2. The States had the power to charge tax on the sale of goods.
3. The Centre would levy the Central Sales Tax that was collected by the originating States.
4. The Centre was also levying service tax on all types of services.
5. Additionally, the Centre was charging and collecting additional duties of customs on
goods that were imported into or exported from India. This tax was levied in addition to
the Basic Customs Duty. This additional duty of customs is referred to as Countervailing
Duty (CVD) and Special Additional Duty (SAD) and it counter balances excise duties, State
VAT, sales tax, and other such taxes.
The introduction of the GST regime made amendments to the Constitution so that the
Centre and States are empowered at the same time to levy and collect GST. This concurrent
jurisdiction of the States and Centre also requires an institutional mechanism that ensures
joint decisions are taken about the structure and operation of GST.
Constitution (One Hundred and First) Amendment Act, 2016:
In order to address prevalent issues in taxation, the Constitution 122nd Amendment Bill
was put forth in the 16th Lok Sabha on 19th December 2014.

The Bill suggests levy of GST on all goods and services, except alcohol that humans
consume.

The tax is levied as Dual GST by the Centre and States/union territories. The component
levied by the Centre is Central Tax - CGST, while that levied by the State is State Tax -
SGST. The tax levied by union territories is Union Territory Tax - UTGST.

The Centre would levy the GST on inter-State trade or imports of services and goods. This
tax is referred to as Integrated Tax - IGST.

The Central Government will also levy excise duty on tobacco products, in addition to
GST.

The tax on five petroleum products, i.e., high speed diesel, crude, petrol, natural gas and
Aviation Turbine Fuel (ATF) will be outlined later after a decision is made by the GST
Council.
1.3
Indirect Taxation Introduction, Overview and Evolution of GST

Decisions taken by GST Council:

Some of the major decisions taken by the GSTC so far are:

There would be four tax rates under the GST regime i.e., 0%, 5%, 12%, 18% and 28%.
Some goods and services were also classified as exempt from tax.

A cess above the peak rate of 28% would be levied on certain sin and luxury goods.

The administrative control over 90% of taxpayers with turnover less than `1.5 crores
would be with the State tax administration. 10% of control would be with the Central tax
administration.

Administrative control over taxpayers having turnover above `1.5 crores would be
equally divided between the State and Centre tax administration.
Goods and Services Tax Network (GSTN):
Goods and Services Tax Network (GSTN) was set up as a private company in 2013 by the
Government under Section 25 of the Companies Act 1956. GSTN is expected to offer the
front-end services of registration, payment and returns to taxpayers. It would also develop
back-end technical modules that will be utilised by 25 States that have opted in.
GSTN has also identified 34 IT and financial technology companies and tagged them as
GST Suvidha Providers (GSPs). These organisations will develop applications that will be used
by taxpayers when they interact with GSTN.
Key features of the GST regime:
The GST system is characterized by the following features:
• GST is applicable on the “supply” of services or goods as opposed to the earlier concept
of taxation on goods manufacture, sale of goods or service provision.
• GST is a destination-based tax structure unlike the origin-based structure that existed
previously.
• CGST, IGST and SGST/UTGST are levied at rates that would be mutually agreed upon by
the States and Centre.
• GST will replace the central taxes mentioned below:

Duties of Excise (medicinal and toilet needs)

Central Excise Duty

Additional Duties of Excise (Goods of Special Importance)

Additional Duties of Customs (CVD)

Service Tax

Special Additional Duty of Customs(SAD)

Additional Duties of Excise (Textiles and Textile Products)

Cesses and surcharges
GST will subsume the following State taxes:

Central Sales Tax

Entry Tax

1.4
Indirect Taxation Introduction, Overview and Evolution of GST

State VAT

Luxury Tax

Purchase Tax

Entertainment Tax, except that levied by local entities

Taxes on lotteries and gambling

Taxes on advertisements

State cesses and surcharges
Overview of GST:
The salient features of GST are as under:
1. Destination based consumption tax: The GST would be applicable on the supply of
goods or services as against the present concept of tax on the manufacture or sale of
goods or provision of services. It would be a destination based consumption tax. This
means that tax would accrue to the State or the Union Territory where the consumption
takes place. It would be a dual GST with the Centre and States simultaneously levying tax
on a common tax base. The GST to be levied by the Centre on intra-State supply of
goods or services would be called the Central tax (CGST) and that to be levied by the
States including Union territories with legislature/Union Territories without legislature
would be called the State tax (SGST)/ Union territory tax (UTGST) respectively.
2. Applied to all goods other than alcoholic liquor and five petroleum products: The
GST would apply to all goods other than alcoholic liquor for human consumption and
five petroleum products viz. petroleum crude, motor spirit (petrol), high speed diesel,
natural gas and aviation turbine fuel. It would apply to all services barring a few to be
specified.
3. Present Central Taxes: The GST would replace the following taxes currently levied and
collected by the Centre:

Central Excise Duty,

Duties of Excise (Medicinal and Toilet Preparations),

Additional Duties of Excise (Goods of Special Importance),

Additional Duties of Excise (Textiles and Textile Products),

Additional Duties of Customs (commonly known as CVD),

Special Additional Duty of Customs (SAD),

Service Tax,

Central Surcharges and Cesses so far as they relate to supply of goods and services.
4. State taxes to be subsumed under GST: State taxes that would be subsumed under the
GST are:
(a) State VAT,
(b) Central Sales Tax,
(c) Luxury Tax,
1.5
Indirect Taxation Introduction, Overview and Evolution of GST

(d) Entry Tax (all forms),

(e) Entertainment and Amusement Tax (except when levied by the local bodies),
(f) Taxes on advertisements,
(g) Purchase Tax,
(h) Taxes on lotteries, betting and gambling,
(i) State Surcharges and Cesses so far as they relate to supply of goods and services,
(j) The list of exempted goods and services would be common for the Centre and the
States.
5. Threshold Exemption: Taxpayers with an aggregate turnover in a financial year up to
` 20 lakhs would be exempt from tax. Aggregate turnover shall be computed on all India
basis. For eleven Special Category States, like those in the North-East and the hilly States,
the exemption threshold shall be ` 10 lakhs. All taxpayers eligible for threshold
exemption will have the option of paying tax with input tax credit (ITC) benefits.
Taxpayers making inter-State supplies or paying tax on reverse charge basis shall not be
eligible for threshold exemption.
6. Composition levy: Small taxpayers with an aggregate turnover in a financial year up to
` 50 lakhs shall be eligible for composition levy. Under the scheme, a taxpayer shall pay
tax as a percentage of his turnover during the year without the benefit of ITC. The rate of
tax for CGST and SGST/UTGST each shall not exceed -

2.5% in case of restaurants etc

1% of the turnover in a State/ UT in case of a manufacturer

0.5% of the turnover in State/UT in case of other suppliers.
A taxpayer opting for composition levy shall not collect any tax from his customers nor
shall he be entitled to claim any input tax credit. The composition scheme is optional.
Taxpayers making inter-State supplies shall not be eligible for composition scheme. The
government, may, on the recommendation of GST Council, increase the threshold for the
scheme to up to rupees one crores.
7. Integrated Tax: An Integrated tax (IGST) would be levied and collected by the Centre on
inter-State supply of goods and services. Accounts would be settled periodically between
the Centre and the States to ensure that the SGST/UTGST portion of IGST is transferred
to the Destination State where the goods or services are eventually consumed.
8. Use of Input Tax Credit: Taxpayers shall be allowed to take credit of taxes paid on
inputs (input tax credit) and utilize the same for payment of output tax. However, no
input tax credit on account of CGST shall be utilized towards payment of SGST/UTGST
and vice versa. The credit of IGST would be permitted to be utilized for payment of IGST,
CGST and SGST/UTGST in that order.
9. HSN (Harmonized System of Nomenclature) Code: HSN shall be used for classifying
the goods under the GST regime. Taxpayers whose turnover is above ` 1.5 crores but

1.6
 Indirect Taxation

60%
OFF

Author : Prof. (Dr.) Devidas

B. Bharati, Prof. (Dr.)
Publisher : Nirali Prakashan ISBN : 9789387686397
Babasaheb R. Jadhav, Prof.
(CA) Dnyanesh A. Kulkarni

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