Goods And Service Tax 2

Unit : 1 Introduction
VAT (Value Added Tax)
INTRODUCTION:

 In 1995 VAT is introduced in Tamilunadu

 In 2000 VAT is introduced in Karnataka
 In 1-4-2005 it is applicable to all the states in INDIA

Meaning of VAT

VAT is a consumption tax added to a products sales price. It represents a tax on the “value
added” to the product through its production process.

Or

VAT is a consumption tax placed on Product whenever value is added at each stage of supply
chain, from Production to point of Sale. The ultimate burden of VAT will be shifted to Final
Consumer.

Advantages of VAT

1. VAT is a consumption tax so the revenue generated will be constant.

2. Compare to other indirect taxes, VAT is easy to manage.
3. Huge amount of revenue generated on low tax rate through VAT
4. VAT is a neutral tax so it can be imposed on alltypes of goods
5. It replaces many indirect taxes like: Sales tax, additional Sales tax, turnover tax.
6. No lock up of funds in taxation system.
7. It is supported by documents which is easy to audit.
8. Due to catch-up effect of VAT it minimizes the tax avoidance.
9. It is equitable & Transparent.

Disadvantages of VAT

1. Cascading effect of taxes: major issue with respect to earlier indirect tax system was
lervy of tax on tax. VATwas being levied on basic value and excise duty amount.
2. Inability of states to tax on services: excluding the states from levying of of service tax
was another negative impact on states revenues. Now in GST even states have got powers
to tax services.
3. Lack of uniformity across States: previous VAT structure lacked uniformity. VAT rates
and rules across ststes varied. Not only the VAT rates but also other rules like definition
of items, set-offs, etc. such different rules, rate of taxes made tax compliance complex.

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4. Complex: VAT is relatively complex to understand, the calculation of VAT in each

stage is not an easy task.
5. Cost:VAT is costly to implement because it is based on full billing system
6. Tax evasion: To implement the VAT successfully customers need to be conscious,
otherwise Tax evasion will be wider spread.
7. Price of goods increased: high prices of certain goods may increase because of levy of
high rate of VAT specially when the benefit is not passed to ultimate consumer.
8. CST Vs State VAT: It is difficulty to classification of transaction whether CST or State
VAT.

Current status of VAT in India

While GST has replaced VAT, there are still a few products that are not covered under GST and
they continue to levy VAT.
Some example of such products are Petroleum products & items that contains alchohol.

GST (Goods & Service Tax)

INTRODUCTION:

 GST first introduced by france in the year 1954

 Around 64 years 160 countries adopt GST
 In india 1st July 2017 Finance Minister Arun jetly introduced the GST under the headed
government of Narendra modi( BJP government)
 In India Atal bihar Vajapeyi is the father of GST

Meaning of GST
GST is an Indirect tax levied on supply of goods & services . This law has been replaced many
indirct laws that previously existing in India.
GST is a value added tax on most goods & services sold for domestic consumption. The
GST is paid by the consumers but it can be paid to government by business institution which
involved in selling goods & services.

Definition of GST
According to GST act of 2017 “GST is a tax on goods & sevices with value addition at each
stage having comprehensive and continuous chain of set of benefit from producer‟s or service
providers point upto retailers level . Where only the final consumer will bear the Tax”.

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Objectives of GST
1. To eliminate the cascading effect of indirect taxes on single transactions: The basic
objective of GST is to remove the cascading effect of the taxes. cascading effect of the
taxes means levy of tax on tax. GST would be levied only towards the net value added
portion and not towards the entire portion of values as the tax payer would enjoy input
tax credit.
2. To achieve the policy of one nation one tax: GST replaces multiple indirect taxes which
were existing in the previous tax regime. There is a single and neutral tax in most cases
so there would not be any differences in the tax rates between one state to another state.
In this way, GST law has achieved the policy of one nation one tax.
3. To subsume all the indirect taxes at the center and state level: Barring few indirect
taxes, all the major indirect taxes levied by Cental & State governments have been
subsumed into GST. Thus, the tax payer and supplier need not bother about paying
multiple indirect taxes under different laws.
4. To reduce the tax evasion and corruption: GST would help in curbing of tax evasion
and reduce corruption in tax department. In the system of GST, would be less chance to
claim false input tax credit as it requires matching of invoices between recipient and the
suppliers. Each invoice wise matching and verification would be made to ensure that
taxes are properly paid to government.
5. To increases the productivity: GST would help in increasing the enterprise productivity
and efficiency. Under the previous tax regime, there many constraints relating to logistics
and impractical procedures regarding claim of ITC (input tax credit). There was also
levy of entry tax in few states on entry of goods into states. In GST regime, entry tax has
been subsumed. Numbers of checks on state borders would reduce due to removal of
check posts. These factors help in increase of productivity.
6. To increase tax compliance: Tax compliance under GST is expected to be more
compared to the previous tax regime. As the number opf tax laws have been subsumed ,
the tax payer would have to comply mainly with GST law with returns & registrations
needed. There is no need to file different returns and obtain different registration for
compliance.
7. To provide a seamless credit of input taxes: cross sectional credit of inpus was not
allowed earlier. also there were many restrictions ands conditions in previous tax
regime. in GST, much simplier rules have been laid to utilize the cross sectional credit of
inputs.
8. To increase the tax GDP ratio
9. To reduce the litigations
10. Decreasing the un healthy competition among states due to taxes & revenue

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Salient Features of GST

1. GST applicable: GST applicable on “supply of goods & services as against the present
concept of tax on the manufacturer of goods or on sale of goods or on provisionof
services.

2. Dual GST : It would be a dual GST with centre and the state simultaneously levying it
on a common base. The GST to be levied by the Centre would be called Central GST
(CGST) & GST which i8s levied by the state government (including union territory with
legislation ) is called as state GST (SGST). Union territory without legislation would levy
Union territory GST (UTGST).
3. State wise registration: under GST though it is applicable all India level. State wise
registration is compulsory. Every registered person would be assigned separate State wise
GSTIN.
Ex: Suppose company A has a unit in Banglore and another unit in Chennai and both are
operating separately, then company A is required to obtain GST registration for
Karnataka as well as for Tamilunadu. In GST law there is also an option of traking
separate GST registration with in the same State for different business verticals.
4. Destination -based tax: indirect taxation can be either origin-based or destination
based. Under destination based tax system , the tax would accrue to the State where the
supply is consumed where as under origin-based tax system, taxes would be accrued to
the state where supply originates. GST is destination based taxes where taxes would
accrue or levied at the place of supply.
5. Subsuming of States and Central taxes: excluding few taxes which are continued from
tax law. GST all the major indirect taxes are subsumed into one central tax called GST.
Now, GSTis an uniform unified tax.
6. No surcharge would be levied on GST: there would be no surcharges levied on the
GST. All the major surcharges have been subsumed into the GST. However , there shall
be levied a cess called Compensation cess on certain notified goods.
7. Turnoner limit for registration: under GST, the turnover threshold limit for registration
for normal taxable person in all the States of India is Rs 20 lakh, in the special category
States such as Arunachal Pradesh, Sikkim, Uttarakhand, Himachal Pradesh, Assam and
the other States of the North-East like Meghalaya, Manipur, Mizoram, Tripura, Nagaland,
it is Rs 10 lakh per annum.

8. GST on Exports: GST on exports will be treated as Zero rated, in this case the exporter
will refund of the input tax credit from the Government.
9. GST on Imports: imports of goods will be treated as interstate supply, so require to pay
IGST along with the customduty.

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10. Payment of taxes under GST: the taxes shall be paid either through making payment
through an account called „Electranic ledger‟ where taxpayer would first deposit the cash
and later make payment of taxes.
11. Items kept out of GST: GST would applicable to all goods & services except alcohol
and petroleum products
12. GST on tobacco : Tobacco & Tobacco products would be subjected to GST in addition
to central excise duty (with special referene)
13. GST council: GST council is the joint forum of Centre and States consisting of finance
ministers as its members. It would make necessary recommendation regarding
procedures, tax rates, exemptions, threshold limits, etc. GST council till date has made
many recommendations in the GST regarding rates, rules, etc. the administration of GST
would be responsibility of GST Council.

Advantages of GST

1. Creation of unified and national market: GST aims to make India a common
market with common tax rates and procedures and remove the economic barriers, thus
paving the way for an integrated economy at the national level.
2. Boost to ‘make in India’ Initiative: GST will give a major boost to the „make in
India‟ Initiative of the Government of India by making goods and services produced in
India competitive in the national as well as international market.
3. Revenue generation to the government: GST is expected to bring revenue to
Government by widening the tax base and improving the taxpayer compliance.
4. Exports from India are Zero rated: The goods export from India are Zero rated ,
this will encourage to exporter to produce more goods and services and making
products more competitive in global market thus boosting exports from india.
5. Eradicate corruption: Under GST all interactions to be through common GSTIN
portal.it will ensure least manual interface between the taxpayer and the tax
administration. It will definitely effect the corruption.
6. No manual interface: GST will based on IT (information system), which will
improve the compliances as all returns to be filed online, ITC to be verified online.
7. Reduced tax evasion: Uniform SGST and IGST rates will reduce the incentive for tax
evasion by eliminating rate arbitrage between neighbouring states and that between
intra and inter-state supplies.
8. Electronic presentation: under GST everything in online. Electranic matching of
input tax credit(ITC) all across India, thus making the process more transparent and
accountable.
9. To eliminate the cascading effect of indirect taxes on single transactions: The
basic objective of GST is to remove the cascading effect of the taxes. cascading effect
of the taxes means levy of tax on tax. GST would be levied only towards the net value
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added portion and not towards the entire portion of values as the tax payer would
enjoy input tax credit.
10. Reduced and uniform tax rates: the main purpose of introduction of GST is to
remove complexities by reducing the multiple oe taxes and bringing the uniformity in
rate all over India. Thus resulting in simplicity and uniformity.
11. Boost to economic growth: GST will boost exports and manufacturing activities,
generation of more employment and thus increased GDP with gainful employment
will increase economic growth and poverty reduction.]
12. Greater certainty: GST brings common procedures for registrations of taxpayers,
refund of taxes, the uniform formate of returns, common system of classification of
goods and services. By all these measures greater certainty will be exist in taxation
system.
13. Reductions in prices of goods and services due to single structure and elimination of
cascading effect of tax.
14. Single taxation and easy compliance for manufacturers

Disadvantages of GST

1. Transaction proved complex: Adoption and migration into new GST system is a
complex task for which the GST council has made various relaxations over the
period.
2. Increased costs: under GST Businesses have to either update their existing
accounting or ERP software to GST-compliant one, or buy a GST software so that
they can keep their Business going. But both option lead to increased cost.
3. Not a single tax: GST is being referred as a single taxation system but in reality it is
a dual tax in which state and centre both collects separate tax on a single transaction
of sale and service. GST is a confusing term where double tax is charged in the name
of single taxation system.
4. Multiple of tax rates: under GST also there are multiple tax rates. Presently it has 5
slabs in GST-0, 5, 12, 18 and 28%.
5. Multiple state registration: under GST there are problems due to multiple State
registrations. Businesses and firms are now needed to register for GST in every state
they operate.
6. Professional needed: Under new businesses and small people may require hiring
professionals. It will create problems for small and new businesses.

7. Computerized GST: Under GST everything in online and it is problem for small
businesses/ taxpayers people are computer illiterates and do not have computers and
related infrastructure.

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8. Increase in operational cost: GST will increase the operational costs due to
employing of tax professionals to be GST-complaint. Further. Business will need to
train their employees in GST compliance.
9. Old wine in a new bottle: it looks that terms such as GST which includes CGST,
SGST and IGST is nothing but just a new name in accordance with the existing tax
systems.
10. Problems due to dual control: The GST act has given the control of businesses to
central and State Governments with businessmen binding by-laws. This has given
raise to complexity for many businessmen across the nation .

Different models of GST

There are different models of GST around the world. The popular models of GST and Indirect
taxes followed are given below:

Generally , there are 3 models under GST:

1. Central model of GST

2. State model of GST
3. Dual GST
a. Concurrent Dual GST
b. Non-concurrent Dual GST

1. Central model of GST: Under this model of GST , the two levels of government that is
at the Centre and at the State, the tax levy would be in the form of single national GST
with appropriate revenue sharing agreements between Central government and the State
governments. In this model of GST, most of the revenue would be collected by the
Central government and the little percentage would be shared with the State
governments. This model is currently followed in Australia and China.

2. State model of GST: Under this model of GST, States would have the power to levy
GST and Central government would withdraw from levying GST and the revenue loss
suffered by the Central government would be set-off by suitable compensating reduction
in the fiscal transfers to the States. This model is followed in America.

3. Dual model of GST: there are two types of models as provided below:

a. Concurrent Dual GST: Indian GST model is concurrent GST model as both
Centre and the State governments levying at the same time. There would be

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Central GST levied by Central government and State GST levied by State
government. In this model both goods and services would be con-currently taxed.
Some of the countries following other than India are Brazil and Canada.

b. Non-concurrent Dual GST: Under this model, GST on goods would be levied by
States only and on services by the Centre only.

Structure of Indian Dual GST Model:

The indian GST model include the following.

1. Central Goods and Services Tax (CGST): CGST refers to Central Goods and Services
Tax. It is levied as per the Central Goods and Service tax, act 2017. Taxes collected
under CGST would be revenue for the Central Government. However, the input tax
credits on CGST would be given to the respective State of the destination of
goods/services/ both in the supply chain.
The CGST input tax credits can be utilized only for the Output taxes of CGST, and IGST
only. CGST has subsumed various previous tax regime Indirect taxes like: Service tax,
Central excise duty, Additional Duty of Excise, Excise duty levied under the Medical and
Toiletries Preparation act 1955.

2. State Goods and Services Tax (SGST) : State Goods and Services Tax is levied as per
the State Goods and Services Tax, act 2017. SGST would be levied on the Intra-state
supplies of goods and services and both. Any input tax credit of state taxes can be
utilized against SGST output tax and IGST output tax only.
SGST has subsumed various previous tax regime Indirect taxes like: Value added
tax(VAT), Entertainment taxes, Luxury taxes, Taxes on lottery, Betting and gambling,
Entry taxes and Octrois imposed by the State governments such other state duties and
surcharges.

3. Integrated Goods and Service Tax (IGST): Integrated Goods and Service Tax is levied
as per the Integrated Goods and Service Tax, act 21017. IGST would be levied towards
supply of goods or services or both in the Inter -state trade and Imports/Exports. IGST
collected would be divided between Centre and States as per the recommendations made
by the GST Council with constitutional Amendments. The input tax credit of IGST can
be utilized firstly for payment of IGST output tax, CGST Output tax and then for SGST
Output tax.
IGST subsumed various previous tax regime Indirect taxes like: Central sales tax, the
countervailing duty of customs (CVD), Special Additional Duty of Customs (SAD).

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4. Union Territory Goods and Service Tax (UTGST): UTGST has been levied as per the
clause 26B of Article 366 of constitution. As per this clause includes State includes
Union Territory with Legislature Like: Delhi, Puduchery, Jammu These Three Union
Territories would have the SGST provisions as have separate state legislatures and can
operate in terms os SGST. UTGST is levied as per the UTGST Act, 2017. The purpose of
levying UTGST for Indian union territories is apply tax collection on inter-state
transactions on every union territory where there is the absence of legislature and have
similar state properties of SGST (i.e., union territories of Andaman and Nicobar,
Lakshadweep, Dadra and Nagar Haveli, Diu and Daman Chandigarh, Kashmir, Ladakh).
The input tax credit of UTGST can be utilized for payment of UTGST output tax and for
IGST Output tax.

SALIENT FEATURES OF CGST ACT, 2017

1. A state-wise single registration for a taxpayer for filing returns, paying

taxes, and to fulfill other compliance requirements.

2. Most of the compliance requirements would be fulfilled online.

3. CGST will be levied on all the Intera-state taxable supplies

4. CGST will be governed by the Central Government

5. The CGST input tax credits can be utilized only for the Output taxes of CGST, and
IGST only.
6. This act will provide only registered person will be eligible to claim Input Tax credit

7. A taxpayer has to file one single return state-wise to report all his
supplies, whether made within or outside the state or exported out of the
country and pay the applicable taxes on them.

8. A business entity with an annual turnover of upto Rs 20 lakh would not be

required to take registration in the GST regime.

9. The Composition Scheme is available for all traders, select manufacturing

sectors and for restaurants in the services sector.

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10. An, agriculturist, to the extent of supply of produce out of cultivation of land, would
not be liable to take registration in the GST regime.

11. An anti-profiteering provision has been incorporated to ensure that the reduction of tax
incidence is passed on customers.

SALIENT FEATURES OF SGST/UTGST ACT, 2017

1. A state-wise single registration for a taxpayer for filing returns, paying

taxes, and to fulfill other compliance requirements.

2. Most of the compliance requirements would be fulfilled online.

3. SGST will be levied on all the Intra-state taxable supplies

4. SGST will be governed by the respective State Government

5. The SGST input tax credits can be utilized only for the Output taxes of SGST, and IGST
only.

6. This act will provide only registered person will be eligible to claim Input Tax credit

7. SGST would be applicable on supplies where the location of supplier and place of supply
are in the Same state.

SALIENT FEATURES OF IGST ACT, 2017

1. IGST will be levied on all the Inter-state taxable supplies and imports of goods.

2. This act will provide only registered person will be eligible to claim Input Tax credit

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3. The input tax credit of IGST can be utilized firstly for payment of IGST output tax,
CGST Output tax and then for SGST Output tax.

4. IGST would be applicable on supplies where the location of supplier and place of supply
are in the two different state or two different Union territories or one State and another is
Union territory.

5. Anti-profiteering provisions would be applicable even in IGST act as well

6. IGST act provides necessary provisions for determining the type of tax payable on
Taxable supplies.

7. IGST subsumed various previous tax regime Indirect taxes like: Central sales tax, the
countervailing duty of customs (CVD), Special Additional Duty of Customs (SAD).

Subsumed of Taxes under GST in India

Subsumed into CGST Subsumed into SGST Subsumed into IGST

1. Central excise 1. VAT 1. Central sales tax

duty
2. Entertainment taxes 2. Countervailing duty
2. Additional Duty of customs (CVD)
of Excise

3. Luxury taxes 3. Special Additional

3. Excise duty Duty of Customs
levied under the 4. Taxes on lottery, (SAD)
Medical and Betting gambling 4. Cesses Surcharges
Toiletries
Preparation act 5. Entry taxes
Central
1955.

4. Also other
surcharges 6. Octrois
&cesses
7. State duties &
Taxes

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Taxes which are not Subsumed into GST

1. Basic custom duty: These are protective duties levied at the time of import of goods into
India
2. Exports duty: This duty is imposed on export of certain goods which are not available in
India in Abundance.
3. Road and passenger tax: These are in the nature of fees and not in the nature of taxes on
goods & services.
4. Toll tax: These are in the nature of user fees and not in the nature of taxes on goods and
services.
5. Property tax
6. Stump Duty
7. Electricity Duty
8. Excise Duty bon alcoholic liquor and tobacco products.
9. Excise duty on Petroleum and its products.

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Unit -2 Procedure and levy under GST

Some important definition:

1. Aggregate Turnover[Sec 2(6)

the term Aggregate Turnover means under GST would include the following
a. Aggregate values of all taxable supplies (excluding the inward supplies on which
the person is liable to pay under reverse charge).
b. Exempt supplies, Nil rated supplies, Non-GST supplies such as alcoholic liquor,
petrol, diesel.
c. Exports of goods or Services or both.
d. Inter-state supplies of persons having the same PAN .
Note: The Aggregate Turnover shall not include Central tax, State tax, Union
territory tax, Integrated tax & cess

2. Agent [Sec 2(5)]

Agent means a person including a factor, broker, commission agent, arhatia, del credere
agent, an auctioneer or any other mercantile agent, by whatever name called, who carries
on the business of supply or receipt of goods or services or both on behalf of other.

3. Business vertical [Sec 2(18)]

Business vertical means a distinguishable component of an enterprise that is engaged in
supplying an individual product or service or group of related products or services which
is subject to risks and returns that are different from those of other business verticals.

4. Capital goods [Sec 2(119)]

Capital goods for GST purpose refers to goods whose value is capitalized in the books
account of the person claiming the input Tax Credit and which are used or intended to be
used in the course or furtherance of business.

5. Casual taxable Person [Sec 2(20)]

Casual taxable Person refers to the person who occasionally undertakes transactions
involving supply of goods or services or both in the course or furtherance of business,
whether as Principal, Agent or any other capacity, in a State or a Union Territory where
he has no fixed place of business.

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6. Input Service Distributor (ISD) [Sec 2(61)]

ISD means an officer of the supplier of goods or services or both which receive tax
invoices issued U/S 31 towards the receipt of input services and issues a prescribed
document for the purposes of distributing the credit of Central tax, Integrated tax or
Union Territory tax paid on the said services to a supplier of taxable goods or services or
both having the same permanent account Number as that of the said office.

7. Job Work [Sec 2(86)]

Job Work means any treatment or process undertaken by a person on goods belonging to
another registered person and the expression “job worker” shall be construed accordingly.
The expression “job worker” refers to a “treatment or Process”, which is undertaken by
one person, who may or may not be registered person.

8. Input Tax [Sec 2(62)]

Input tax in relation to the registered person means the Central tax, State tax, Integrated
tax or Union Territory tax charged on any supply of goods or services or both made to
him.

9. Input Tax Credit (ITC) [Sec 2(63)]

Input Credit Tax Credit means Credit of Input Tax on Inputs, Input services and Capital
goods.
For a tax qualify as “Input Credit Tax Credit”, it must be “input tax”. The law
creates a separate terminology for this purpose as all input tax not qualify as credit. Credit
of input tax would be available subject to specific conditions and restrictions, and to
specific persons being registered persons. Input Credit Tax Credit could be utilized for
payment of output GST liability.

10. Reverse Charge [Sec 2(98)]

Reverse Charge refers to 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) or section 9(4) of CGST/SGST Act or under section 5(4) of IGST Act 2017.

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11. Principal supply [Sec 2(90)]

Principal supply means supply of any 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. The concept of „Principal supply‟ emerges only for
determining if a supply is a composite supply is or not.

12. Non-Resident Taxable person [Sec 2(77)]

Non-Resident Taxable person means any person who occasionally undertakes
transactions involving supply of goods or services or both, whether as Principal or agent
or any other capacity but who has no fixed place of business or residence in India.

13. Electronic Cash Ledger

Electronic Cash Ledger refers to a cash ledger maintained in electronic form by cash
registered person. The amount deposited through various modes of Payment (i.e., Internet
banking, debit/credit cards, NEFT/RTGS, or any other mode), shall be credited to the
electronic cash ledger. The amount available in this ledger can be used fair the payment
of :
a. GST
b. Interest
c. Penalty
d. Fees or
e. Any other amount payable.

Goods and Service Tax Identification Number ( GSTIN)

Each tax payer is assigned a state-wise PAN-based 15 digit Goods and Services Taxpayer
Identification Number (GSTIN). The features of GSTIN are as follows:

 The first two digits represent the State code as per Indian Census 2011. Every State has a
unique code. For instance, the state code of Karnataka is 29 where as for New Delhi it
is 07.
 The next 10 digits will be the PAN number of the Taxpayer.
 The Thirteenth digit will be assigned based on the number of registration within a State.
 The fourteenth digit will be Z by default
 The last digit will be for check code. It may be an alphabet or a number.

Unique Identification Number (UIN)

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Unique Identification Number (UIN) is a special class of GST registration for foreign diplomatic
missions and embassies which are not liable for taxes in the Indian territory. GSTIN and UIN are
two different types of identification numbers under GST. GSTIN is allotted to regular tax payers
who are require to collect GST and file GST returns. UIN is allotted to only the following
organizations:

a) A specialized agency of the United Nations Organization

b) A multilateral financial institution and organization notified under the United Nations
Act, 1947
c) Consulate or Embassy of foreign countries
d) Any other person or class of persons as notified by the Commissioner

Registration in GST

Compliance under GST starts with obtaining registration certificate. Only after obtaining
registration, a person can collect taxes issuing tax invoices or Claim Input tax Credit of taxes
paid by him to the suppliers. In GST, registration would not be required would not be required if
the aggregate turnover in a financial year is within Rs 20 lakhs in case of all states. However, this
limit is Rs 10 lakh in special category States. Turnover has to be computed on all india basis.
Registration has to be obtained in all states where the business entity is operating business if the
aggregate turnover is crossing Rs 20 lakh.

If the business entity is having multiple branches with in the same State, it could take Single
registration and shall declare one of the branch or head office as principal place of business and
other branches as additional place of business. If there are separate business verticals, then in
spite of being in the same State, the business entity opt for separate GST registration.

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Procedure \ Process of registration

1. Application for registration:

Every person shall, before applying for registration declare his Permanent Account
Number(PAN) Mobile No, Email address, State or Union Territory.
On receipt of an Application under GST an acknowledgement shall be issued
electronically to the applicant.
2. Verification of Application & Approval:
Application shall be forwarded to proper officer who shall examine the Application and
accompanying document and if the same are found to be in order, Approve the grant of
registration to the applicant fro the date of 3 working days from the date of submission of
application.
If the document which is submitted by the applicant are insufficient will be rejected
by examining officer.
3. Issue of Registration certificate:
Where the application for grant of registration has ben approved under rule2, a certificate
of registration will be sanctioned and then Goods & Service Tax Identification Number
(GSTIN).
In GSTIN
a. The first Two digits represents the State code.
b. The next Ten digits will be the PAN number of the tax payer.
c. The thirteen digit will be assigned based on on the number of registration with in
the State.
d. The fourteenth digit will be Z by default
e. The last digit will be for check code. It may be alphabet ore a number
4. Separate registration for multiple business vertical with in a State or Union territory:
Any person having multiple business vertical with in a State or Union territory, requiring
a separate registration for any of its business vertical.
A registered person is eligible to obtain sepate registration for business vertical may
submit separate application for each.
5. Grant of registration to person required to deduct Tax at Source:
Any person required to deduct tax in accordance with the provision of Sec.51 shall
electronically submit an application duly signed in. in that case GSTIN may grant within 3
working days from the date of submission of application. If in case given document are not
Valid, then application can be cancelled & this can be communicated to appropriate person.
6. Grant for registration to Non-Resident Taxable person:
A Non-Resident Taxable person shall be electronically submit an application along with a
Valid passport for registration which is duly signed.

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A Non-Resident Taxable person compulsorily provide PAN which can be issued by

Indian Income Tax Department.
7. Suo-motu registration:
Where any servey, enquiry, Inspection, search or any other proceeding under the act, the
proper officer find that the person liable to registration under the act as failed to apply for
such registration, such officer may register the said person on a temporary basis.
8. Display of registration Certificate & GSTIN on the name board:
Every registered person shall display his registration Certificate & GSTIN in a prominent
location at his principal place of his business.
9. Registration to be cancelled in certain cases :
The registration granted to a person is to be cancelled for the following circumstances:
A. Does not conduct any business from the declared place of business.
B. Issue of invoice or bill without supply of good or service
C. In violation of the provision of sec.171of the CGST act.
10. Revocation of cancellation of Registration:
A registered person, whose registration is cancelled on his own motion, may submit an
application for revocation of cancellation of Registration in Form-20 to such proper
officer within 30 days of cancellation of registration.

Need/ Benift of Registration

1. If the turnover of the person exceed the threshold limit, registration is mandatory or
Compulsory. Violation there of is subject to imposition of Penalty.
2. It legally recognizes the person as Supplier of Goods & Services.
3. It authorizes to collection of GST from Customer.
4. To claim Input Tax Credit
Proper accounting of Taxes paid on the input goods & Services.

Persons Liable for Registration

1. Who makes the taxable supply of goods or Service or both and the aggregate turnover
in any State of India croses Rs 20 lakh and Rs 10lakh for any Special category States.
Special category States :
Special category States shall means States as specified in subclause (g) of clause (4) of
Article 279A of the Constitution which covers the following states:
Arunachal Pradesh, Assam, Jammu & Kashmir, Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim, Tripura, Himachal Pradesh, & Uttarkhand.

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2. If a person is registered under any previous law such as VAT, Central Excise or Service
tax as on the day immediately preceding 1st july29 2017, he is required to get
registration under GST law.
3. Where business on by any person registered under GST regime is transferred as a going
concern an account of succession or otherwise to another person such business entities
will be liable to be registered with effect from the date of such transfer or succession.
4. In case of any transfer which is pursuant to the sanction of a scheme or an arrangement
for amalgamation or merger or demerger of two or more companies pursuant to an
order of High court tribunal, or otherwise, transferee shall be liable to get registered
with effect from the date on which the register of companies issues a certificate of
incorporation giving effect the order of the court or tribunal.

Persons not Liable for Registration

1. Who is into the business of supplying of not taxable goods or services or both that are not
liable to tax or which are 100% exempt from GST
2. An Agriculturist to the extent of the produce of cultivation of his land
3. Specified category of persons notified by the government through a notification which
exempts such persons from obtaining registration.

For this purpose, “Agriculturist” means an individual or HUF who undertakes cultivation of
Land-

a. By own Labour, or
b. By the Labour of the family, or
c. By servants on wages payable in Cash or kind or hired labour under personel
supervision or the personal supervision of any member of the family;

Persons notified for exemption by Government

Following person are notified by the Government for exemption from GST regime:

1. Person making any reverse charge supply: person who are engaged only in making the
supply of taxable goods or services or both the tax on which shall be paid by the recipient
instead of Supplier of goods & services.
2. Casual Taxable Person making taxable supply of the handicraft goods provided the
following conditions are satisfied:
i. Aggregate turnover of such supplies should not exceed Rs 20lakh or Rs 10
lakh(in special category states for GST)

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ii. The Casual Taxable Persons who are making taxable supplies of the Handicraft
goods or persons making ant inter-state supplies of handicraft goods shall be
required to obtain a PAN and should generate an e-way bill while making such
supply.
3. Job worker is not required to obtain registration provided the following conditions are
satisfied:
i. Job work service is provided to the registered person
ii. Job worker‟s aggregate turnover should be les than or equal to Rs 20lakh or Rs 10
lakh in special category states.
iii. Job worker should not be voluntary registered under GST law.
iv. Jobworker should not be provided any supply of services in relation to the Jewelry,
goldsmiths and silversmith wares and other articles of Jewelry and ornaments.
4. Persons making inter-state supplies of services and whose aggregate turnoverdoes not
exceed Rs 20lakh or Rs 10 as the case may be are not required to get registered under
GST.

Compulsory Registration or Mandatory Registration under GST

The GST law states that the following suppliers irrespective of the turnover limit are required to
take the registration compulsory irrespective of the threshold limits of Rs20 lakh/Rs 10 lakh.

1. Persons making the inter-state supplies (except those stated in above as exception)
2. Casual Taxable Person making taxable supplies (other than Casual Taxable Person
making supplies of handicraft goods stated above)
3. Non-resident taxable person
4. Persons who are receiving supplies on which they are require to pay Reverse charge.
5. E-commerce operators.
6. Persons who are require to deduct deduct tax U/S 51, i.e., TDS deductions.
7. Persons who makes taxable supplies on behalf of another person,i.e., as an agent making
supplies for his principal.
8. Input Service Distributor (ISD) whether or not separately registered under this act.
9. Every person supplying online information & database access or retrieval services from a
place outside India to a person in India, other than a registered person.
10. Person/class of persons notified by the Central/State Government.

Voluntary Registration
A person who is not liable to be registered under the GST provisions may get himself
registered voluntarily. In case of Voluntary Registration of this act, as are to be registered
person, shall apply to Voluntary registered person. Once a person obtains Voluntary

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Registration, he has to pay tax even though his aggregate turnover does not exceed Rs
20lakh or Rs 10 lakh.

Registration by department/ suo-motu registtation

Where any servey, enquiry, Inspection, search or any other proceeding under the act, the
proper officer find that the person liable to registration under the act as failed to apply for
such registration, such officer may register the said person by issuing an order.

Deemed Registration
Registration under GST is not tax specific, which means that there is single registration
for all the taxes i.e., CGST, SGST, IGST, UTGST.
OR
It covers the following aspect called deemed registration:
a. Grant of registration or Unique identity Number under the State GST act or
UTGST act shall be deemed to be a grant of registration or Unique identity
Number under this act subject to condition to that the application for registration
or Unique identity Number has not been rejected within the time specified

b. Any rejection of application for registration or the Unique identity Number

under the State GST act or UTGST act shall be deemed to be a rejection of
application for registration under the CGST act.

Special provisions for Casual and Non-resident taxable Peron

Sec.27 of the CGST act 2017 has provisions for registration of Casual taxable person and Non-
resident taxable Person which are discussed below:

1. Registration certificate issued would be valid for a period specified in the registration
application or 90 days from the effective date of registration, whichever is earlier. Such
persons shall make taxable supplies only after the issuance of the registration certificate.
90period could be extended on requested to proper officer.
2. An Advance deposit of tax equivalent to the estimated tax liability is must for such
persons at the time of applying for registration, in case of extension of validity, additional
estimated liability to be deposited.
3. Advance deposit made shall be credited to the Electronic cash ledger of such person and
shall be utilized in a specified manner.
4. Registration application should be filed 5 days prior to commencement of business.
5. The amount of advance tax deposited is eligible for the refund to the extent it exceeds
actual liability.
6. Registration certificate shall be issued electronically only after the said deposit appears in
his Electronic cash ledger.
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7. The casual taxable person shall furnish the details of outward supplies in form GSTR-1,
details of inward supplies in Form GSTR-2 and the monthly return in GSTR-3. The non-
resident taxable person shall furnish the details of outward supplies in form GSTR-5

Rates of GST

There are 5 slabs in GST they are 0%, 5%, 12%, 18%, 28%

Exempted goods:

1. Live Sheep & Goats

2. Natural Honey
3. Human hair
4. Fruits: Apple, watermelon, Papaya, Pomegranate, Strawberry, kiwi fruit, banana
5. Vegetables: potato, Onion, carrot, beetroot, Turnip, cauliflower, cabbage, coffee beans
not roasted.
6. Pig fat
7. Plastic bangles
8. Curd & butter milk
9. Human blood &its components
10. Indian National plag
11. Salt, all types
12. Slate
13. Gandhi topi
14. Raw silk
15. Khadi yarn

Exempted services

1. Ambulance services
2. Agricultural services
3. Educational services
4. ESI services
5. Training services
6. Religious services
7. Service by RBI
8. Distribution of electricity
9. Services by Central Government , State Government, Union territory, local authority
10. Services by diplomatic mission located in India
11. Services by a veterinary clinic in relation to health care of animals or birds.

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Goods

5% 12% 18% 28%

Agar batti Butter Alluminium frames Aircraft for peersonel use
Ayurvedic Medicine Frozen meat Artificial flower Bidies
Braille paper Fruit Juice Artificial fruits Cigarattes
Coirmates Ghee Cakes Paint
Glass Mobile Camera Pan masala
Domestic LPG Note book CC Tv Vending machines
Fertilizers Umbrella Chocolates Washing machine
Frozen vegetables Erasers Computer Water heater
Insulin Cotton & cotton waste Fans Luxury cars
Skimmed milk Sugar cane Ice creams
Sugar chalk Mirror, Monitors
Tea Printers

Services

5% 12% 18% 28%

 AC & non AC  Business class air Cinema tickets with  Race club
restaurants tickets in 100 rupees betting &
 Restaurants in  Restaurants in Outdoor catering gambling
hotels tariff less hotels tariff more (ITC available)  Five star hotels
than Rs 7500 (no than Rs 7500 ( Information  Amusement
ITC) ITC available) technology services facilities
 Transport services  Mining & drilling Telephone services
like: Railway & for crude or Theme parks, water
Airway Natural gas parks
 Transport by  Metro & monorail
passengers by Air construction
in economy class
 Job work for
footwear &
leather goods

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0% rate of services

 Hotel accommodation with a transaction value of RS 1000 or less than per day
 Group insurance scheme for parlimentry forces under home affair ministry
 Non-AC rail fare, Metro, local train
 Services relating to cultivation of plants & Animal Husbandry

Supply
As per section 7 of the CGST act 2017, the term supply incudes the following:

a. All forms of supply of goods or services or both such as 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;
b. Import of services for a consideration whether or not in the course or furtherance of
business.
c. Activities which are considered as supply which are made or agreed to be made in the
course or furtherance of business without a consideration as per the schedule I of the
CGST act2017.

Types of supply
SUPPLY

Based on Based on Based on Based on

Locaton Recipient tax treatment Combination

Intrastate supply Inward supply Exempt supply Composition supply

Inter-state supply Outward supply Zero rate supply Mixed supply

Territorial waters Taxable supply

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Based on Location

1. Intrastate supply Sec 8

Sec 8 of the IGST act 2017, Intrastate supply of goods or services refers to “Supply of
goods or services where the location of the supplier and the Place of the supply of goods
or services are in the same State or Union territory”.
2. Interstate-supply Sec 7
Sec 7 of the IGST act 2017, Inter- state supply of goods or services refers to the Supply
transactions where location of supplier and the place of supply are in:
a) Two different States; or
b) Two different Union Territories; or
c) A State and a Union territory
3. Territorial waters
 where the location of the supplier is in the Territorial waters; or
 where the Place of the supply is in the Territorial waters;

The place of supply, will be in the nearest Coastal State or Union territory.

Based on Recipient

1. Inward supply
It means Supply of goods or services or both whether by Purchase, acquisition, or any
other means with or without consideration.

2. Outward supply Sec2(83)

Outward supply refers to supply of goods or services or both, whether by Sale, transfer,
barter, exchange, license, rental, lease or disposal or any other mode, made or agreed to
be made by such person in the course or furtherance of business.

Based on tax treatment

1. Exempt supply Section (2 47)

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 U/S 11 of CGST /SGST act, or U/S of
IGST act, and includes a non-taxable supply.
Exempt supplies comprise the following three types of supplies:
i. Supplies taxable at a „NIL‟ rate of tax;
ii. Supplies that are wholly or partially exempted from CGST or IGST, by way of
notification;
iii. Non-taxable supplies as defined U/S 2(78) which are supplies that are not taxable
under the act such as alcoholic liquor for human consumption.

The following should not be considered as exempt supply:

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i. Zero rated supplies for exports

ii. Supplies to SEZ units or SEZ developers.
2. Zero rated supply
It means export or Supply of goods or services to a SEZ or SEZ developers.
3. Taxable supply
Supply on which tax shall be paid under GST

Based on Combination

1. Composite Supply Sec 2 (30)

Composite Supply means a supply made by a taxable person to a recipient consisting of
two or more taxable supplies of goods or services or both, any Combination thereof,
which are naturally bundled and supplied in conjunction with each other in the ordinary
course of the business, one of which is a principal supply.

Ex:1 Goods are packed and transported with Insurance. In this case, goods would be
principal supply. Transportation and insurance would be ancillary which are naturally
bundled.
Ex:2 sale of Television with installation facility. Television would be Principal supply
and installation would be ancillary service.

2. Mixed supply Sec 2 (74)

Mixed supply means supply 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.

In another words: supply of two or more individual supplies of goods or services or any
combination for a single price which does not constitute composite supply. In this case,
supplies are not naturally bundled and they are capable of being indually. In case of
mixed supplies GST rates would be Higher rate applicable to goods or services supplied.

Ex: Supply of a kit contains a tie, Watch, wallet and ball pen which could be bundled and
priced together. However each of these items can be supplied individually also. Hence,
this would be a mixed supply.

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Difference b/w Composite and mixed supply

Composite supply Mixed supply

1. Naurally bundled Not naturally bundled
2. Not capable of supply indully Capable of supply individually
3. In conjuction with each other Though can be supplied individually but still
supplied together.

4. Tax liability shall be rate of principal Tax liability shall be rate applicable to the
supply` supply that attract higher rate of tax

Taxability on Mixed and Composite Supply

The tax liability on a Composite or Mixed supply shall be determined in the following manner,
namely:

a. A Composite supply comprising two or more supplies, one of which is a principal supply,
shall be treated as a supply of such Principal supply; and
b. A Mixed supply comprising two or more supplies shall be treated as a supply of that
particular supply which attracts the highest rate of tax.

Input tax credit

Input Tax Credit (ITC) [Sec 2(63)]

Input Credit Tax Credit means Credit of Input Tax on Inputs, Input services and Capital
goods.
Input tax would not include the taxes paid under the Composition Scheme. Concept of
input tax credit ensures that GST is collected in the supply chain after allowing the credit
of input taxes on the supplies of Inputs, Capital goods and input services procured.

Credit of input tax would be available subject to specific conditions and restrictions,
and to specific persons being registered persons. Input Credit Tax Credit could be utilized
for payment of output GST liability.

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Conditions to claim ITC

A registered person will be eligible to claim input Tax Credit(ITC) on fulfillment of the
following Conditions:

1. Possession of tax invoice or Debit note or document evidencing payment.

2. Receipt of goods or services.
3. Goods delivered by Supplier to other person on the direction of registered person against
a document of transfer of title of goods.
4. Furnishing a return.
5. Where goods are received in lots or installments ITC will be allowed to be availed when
the last lot or installment is received
6. Failure to the supplier towards supply of goods and/ or services 180 days from the date of
invoice , ITC already claimed will be added to output tax liability and interest to paid on
such tax involved. On payment to supplier, ITC will be again allowed to be claimed.
7. No ITC will be allowed if depreciation have been claimed on tax component of a capital
goods.
8. If invoice or debit note is after
 The due date of filling return for September of next Financial year
or
 Filing annual return
9. Common credit of ITC used commonly for
 Effecting exempt and taxable supplies
 Credit will be allowed according to the ruled.

Items on which credit is not allowed

1. Motor vehicles and conveyances except below cases

2. Such motor vehicle and further supplied i.e., Sold
3. Transport of passengers
4. Used for imparting training on driving, Flying, navigating such vehicle or conveyances.
5. Transportation of goods
6. Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and
plastic surgery.
7. Sale of membership in a club, health, fitness centre.
8. Goods and/ or services for construction of an immovable property whether to be used for
personal or business use.
9. Goods and/ or services where tax has been paid under composition scheme.

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10. Goods and/ or services used for personal use.

11. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample.

Utilization of Input Tax Credit (ITC)

According the provision, GST Input Tax Credit should be utilized for payment of tax only in the
following manner and order:

Input Tax Credit

IGST ITC CGST ITC SGST/UTGST ITC
st st st
1 against IGST output tax 1 against CGST output tax 1 against SGST/UTGST
output tax
Balance if any against CGST Balance if any against IGST Balance if any against IGST
output tax output tax output tax
Balance if any against - -
SGST/UTGST output tax

UNIT : 3

Assessment And Return

Meaning of assessment

Assessment is the process of computation of taxable income and determination of tax liability of
a person for the relevant accounting period is called Assessment.

Definition of assessment

As per Sec 2(11) of the Central Goods And Services Tax (CGST) Act, 2017,assessment means
determination of tax liability under this act and includes self-assessment, re-assessment,
provisional assessment, summary assessment and best judgement assessment.

Types of assessment

Assessment by the tax authorities are of 4 types:

1. Provisional assessment
2. Scrutiny assessment
3. Best judgement assessmen
4. Summary assessment

1. Provisional assessment

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If a taxable person is unable to determine the value of goods and/ or services or determine
the rate of tax applicable, the person can request an officer to allow payment of the tax on
a provisional basis. The officer will pass an order allowing the person to pay the tax on a
provisional basis. The rate of tax and taxable value will be specified by the officer. The
person has to execute a bond and surety or security, as the officer thinks is fit . the bond
is binding on the person for payment of the difference between the amount of tax
provisionally assessed and finally assessed.

2. Scrutiny assessment
Under Scrutiny assessment, an officer can examine the return and other information
furnished by a person, to verify the correctness of the return.
If any discrepancy is noticed, the officer will inform the person and seek his
explanation. If the explanation is satisfactory, no further action will be taken. In case no
satisfactory explanation is given within 30 days of being informed or if the person
person does not make corrections in the return after accepting the discrepancies, the
officer will initiate appropriate action.

3. Best judgement assessment

Under Best judgement assessment ,an officer will assess the tax liability of a person to
the best of his/her judgement. The circumstances for this are:
a. Assessment of non-filers of returns:
If a person fail to furnish a return even after a notice is served to the person, an
officer will assess the tax liability of the person to the best of his judgement. All
material which is available or which the officer has gathered will be taken into
account. He will then issued an assessment order within 5 years from the due date
of filing of the annual return for the year in which the tax return was not filed.
If the person furnishes the return within 30 days from the assessment order,
the assessment order will be withdrawn.
b. Assessment of unregistered persons:
If a taxable person fail to obtain registration even though he/she is liable to do so,
an officer will assess the tax liability of the person to the best of his judgement for
the relevant tax periods, and issue an assessment order within 5 years from the
due date of filing of the annual return for the year in which tax was not paid.

4. Summary assessment
In certain special cases, an officer may, on finding any evidence showing tax liability of
a person which comes to his notice, with the permission of the Additional/ Joint
Commissioner, assess the tax liability of the person to protect the interest of the revenue

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and issue an assessment order if he has sufficient grounds to believe that any delay in
doing so will adversely affect the interest of revenue

Furnishing details of Outward Supplies (GSTR-1) Sec 37 of CGST act 2017

Every registered person including Casual taxable person (hereafter refered as „Supplier) must fle
details of outward supplies in form GSTR-1. This return need not be filed by following persons.

1. Input service distributor

2. Composition taxable person
3. Non-resident taxable person
4. Person who deducts tax at source (TDS)
5. Those who are require to collect tax at source (TCS)

Important features of Outward Supply Statement or Return GSTR-1

1. Returns shall be furnished in form GSTR-1on or before 10th of the month following the
tax period. (ex: for April month, due date would be 10th of May). The commissioner may
extend the due dates for filing the returns if necessary.
2. This shall contain details of tax invoices, debit notes, credit notes and revised invoices
issued in relation to outward supplies made during any tax period.
3. The reurns in form GSTR-1 would be applicable for both supplies of goods or services or
both as effected during a tax period and required to be filed electronically on
www.gstn.gov.in website.
4. The registered person would not be allowed to furnish any details of outward supplies
during the period from the 11th day to the 15th day of the month succeeding the tax
period. This implies that the filing portal may not be available for the person filing the
return of outward supplies during the period in which return for inward supply is required
to be filed.
5. The recipient of the supply (customer, client etc.)would be provided an opportunity to
accept, reject, amend, or delete the details in a two-way communication
process.(presently this process is not active)
6. Such rectification of error or omission, however, is not permitted after filing of annual
return or the return for the month of September of the following Financial year to which
the details pertain to, whichever is earlier.
7. This returns needs to be filed by the regular registered dealers even in case there is no
business activities any tax period as „NIL‟ return.
8. GSTR-1 for the current tax period can be filed only if the GSTR-1 for previous tax period
is filed.

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9. For the normal taxpayers filing GSTR-1 before the end of current tax period is not
possible.

Details and Contents of Form GSTR-1

It contains two parts

Part A: Basic Details

Part B: Specific Details

Part A: Basic Details

1. GSTIN of the supplier (registration number)

2. Legal name and trade name of the supplier
3. Aggregate turnover in the previous year
4. Tax period (month or quarter)

Part B: Specific Details

1. The transaction of outward supplies should be submitted at invoice/ consolidated level

based on the requirement laid by the GST rules. Let us look at the level of submission of
taxable outward supplies by registered suppliers:

Transaction Supplies made by registered Invoice value Levels of submission

type supplies to:
Interstate Registered recipients Any Invoice level (B2B supplies)
Interstate Unregistered recipients Upto Rs 2.5 lakhs Consolidated details of outward
supplies (after adding debit notes
values and subtracting credit
note values).
Interstate Unregistered recipients Above Rs 2.5 lakhs Invoice wise details
Interstate Registered recipients Any Invoice level (B2B supplies)
Interstate Unregistered recipients Any Consolidated details of outward
supplies (after adding debit notes
values and subtracting credit
note values).
2. The details of outward supplies of NIL rated, exempted and non-GST outward supplies
must be shown separately in Table 8 of Form GSTR-1.

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3. Invoice wise details of Zero-rated supplies (exports), deemed exports must be shown in
table 6 of Form GSTR-1
4. Consolidated statements of advance received, advance adjusted in a tax period must be
shown in table 11 of Form GSTR-1
5. HSN wise summary of outward supplies
6. Documents issued/canceled during the tax period must be disclosed in Table 13. The
other details to be disclosed here are:
a. Serial number of the invoices issued for outward supplies.
b. Self-invoices issued for inward supplies from unregistered persons
c. Revised invoices issued in case of any errors
d. Debit notes, credit notes raised during the tax period
e. Receipt voucher raised for advance received, refund voucher raised for any advances
refunded, payment vouchers raised in case of payments made for inward supplies
where taxes to be paid under reverse charge.
f. Delivery challans issued for goods sent to job work and sale on approval basis.

Furnishing details of Outward Supplies (GSTR-2) Sec 38 of CGST act 2017

Sec 38 of the CGST act 2017 provides that every registered person needs to furnish the details of
inward supplies procured by him for every tax period. The details of inward supplies of both
goods and services and credit or debit notes received are required to be furnished by registered
person except the following.

1. Input service distributor

2. Composition taxable person
3. Non-resident taxable person
4. Person who deducts tax at source (TDS)
5. Those who are require to collect tax at source (TCS)
6. Suppliers of OIDAR

Important features of Inward Supply Statement or Return GSTR-2

1. Details of inward supplies are to be furnished and submitted in Form GSTR-2.

2. The due dates for furnishing Form GSTR-2 is on or after 10th of the succeeding month
and before 15th of succeeding month.
3. The information which are required to be furnished in Form GSTR-2:
a. Invoice wise details of all interstate and intrastate supplies received from
registered persons or unregistered persons including inward supplies on which
taxes to be paid under reverse charge;

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b. Imports of goods and services made;

c. Debit and credit notes, if any, received by the registered person from suppliers
in respect of above supplies.
4. Input service credits received by the Input Service Distributors.
5. Input tax credits reversed and reclaimed.
6. Amendments to details of inward supplies furnished in earlier tax periods including debit
notes and credit notes issued and their subsequent amendments.
7. Inputs/capital goods received from overseas or from SEZ units on bill of entry

Steps in filing GSTR Returns

GSTR-2 And GSTR-3forms have been suspended now. However, assuming that they are valid
return to be filed, the steps involved in filing GST returns would be as under.

Step1: Filing of details of outward supplies in Form GSTR-1 by 10th day of the next month.

Step2: Details of outward supplies made by the supplier made to available to the recipient in
Form GSTR-2A for modifications / acceptance /deletion/ addition after 10th
day of month succeeding month of the tax period.

Step3: Necessary modifications, filing of details of inward supply in Form GSTR-2 by 15th
Of the month.

Step4: Modifications /deletion/ addition made by recipient made available to supplier for
acceptance/rejection b/w 15th day and 17th day of the next month in Form GSTR-1A.

Step5: After finalization in Form GSTR-3, payment of taxes if taxes if any additional
Payment is required and submission of GSTR-3 should happen by 20th day of the
next month.

First Return under GST

In terms of Sec 40 of the CGST act 2017, every registered person who has made outward
supplies in the period b/w the date on which he become liable to registration till the date on
which registration has been granted shall declare the same in the first return furnished by him
after grant of registration.

The First Return contains the details of outward supplies made from date on which he
becomes liable to get registered till the date on which registration is granted. This could also
contain the details of input tax credit claimed which he entitled to claim on goods held as inputs
as such, inputs contained in semi-finished goods or finished goods held in stock by such person

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on the day immediately preceding the date from which such person is liable to obtain
registration.

Annual Return under GST

In terms of Sec 44 of the CGST act 2017, every registered persons are required to file the annual
returns except the following:
1. Input service distributor
2. Composition taxable person
3. Non-resident taxable person
4. Person who deducts tax at source (TDS)
5. Those who are require to collect tax at source (TCS)

Due date of for filing annual return is on or before 31st December following the end of the
Financial year to which the said annual return is to be submitted. The frequency of filing the
annual return is yearly. For example, the due date for GST annual return for financial year 2018-
19 would be 31st December 2018.

Annual returns are to be filed electronically through the common portal in following forms:
 Regular taxable person- Form GSTR-9
 Composition scheme payer- Form GSTR-9A

Final Return under GST

In terms of Sec 45 of the CGST act 2017, the final return must be filed electronically in the
common portal by all registered taxable persons in case of cancellation of registration other than
by
1. Input service distributor
2. Composition taxable person
3. Non-resident taxable person
4. Person who deducts tax at source (TDS)
5. Those who are require to collect tax at source (TCS)
Final return has to be filed within 3 months of the
 Date of cancellation
Or Which ever is later
 Date of order of cancellation

The prescribed form under which the final return should be filed is Form GSTR-10

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Matching, Reversal and Reclaim of Input Tax Credit

In terms of Sec 42 of the CGST act 2017, the details of every inward supplies furnished by the
registered person needs to be matched with the details of outward supplies furnished by the
suppliers in GSTR-1. The details of Input Tax Credit would be made available to the registered
person in Form GSTR-2A which is auto populated based on the returns of outward supplies
furnished by suppliers in Form GSTR-1. The detailed requirement of section 42 for matching of
credit is discussed below:

1. The details of every inward supply which are furnished by the registered person (referred
as „recipient‟) for tax period shall be matched with corresponding details of outward
supply furnished by the corresponding registered person in his valid return for the same
tax period or any preceding tax period. Such matching is would be done with IGST paid
by the recipient on goods imported by him as well.

2. Matching is done to find out duplication claims of Input Tax Credit.

3. If the claim of the Input Tax Credit in respect of the invoices and debit notes relating to
the inward supplies that has matched with the details of outward supplies or with the
IGST paid in respect of the goods imported by him shall be finally accepted and such
acceptance shall be communicated in such prescribed manner to the recipient.

4. In case of the Input Tax Credit claimed by the recipient in respect of any inward supply is
in excess of the taxes declared by the suppliers for the same supply or if the details of
outward supply is not furnished by the supplier in his valid returns, the discrepancy shall
be communicated to both such persons.

5. The duplication of claims of Input Tax Credit if any by the recipient shall be
communicated to him in Form GST MIS-1. If any excess amount of credit claimed on
account of duplication of claims, such amount shall be added to the output tax liability of
the recipient in his return for the month in which the duplication is communicated.

6. The recipient shall be eligible to reduce from his output tax liability the amount added(as
mentione3d in point no. (e) above if the supplier declares the details of the invoice or
debit notes in his valid return for payment of tax).

7. On output tax liability added as discussed in above points, an interest amount at the rate
of 18% P.A to be paid. Such interest would be refunded to the recipient by crediting the
same amount in his electronic cash ledger when the supplier of goods declares the output
tax liability subsequently.

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Unit : 4
GST Network & Technology
Meaning of GST network (GSTN)

GSTN is a nonprofit, non government organization. It will manage the entire goods IT system of
the GST portal, which is the mother data base for everything GST. This portal will be used by
the Government to track every financial transaction, and will provide tax payers with all services
from registration to filling the tax and maintaining all the details.

It is aimed at managing entire It system of the GST portal. It has the responsibility to build and
manage the information technology infrastructure and the services for implementing GST
including the programing and developing the software, updation in the software, which would be
used for filing of GST returns, filing application for registrations etc.

Key Features of GSTN

1. Common portal:
Sec 146 of CGST act, 2017 and Sec 20 of IGST act/2017 requires GSTN as common
portal. This portal would be the official government handle with features to facilitate:
i. Registration
ii. Payment of tax
iii. Furnishing of return
iv. Computation of tax liability and settlement of ITC
v. Electronic way bill
vi. Refund application
vii. To carry out such other features as may be prescribed

GSTN could be called as trusted National Information Utility (NIU) providing

reliable, efficient and robust IT backbone for the smooth functioning of GST in India.

2. Well designed information technology network:

well designed and well functioning Information Technology (IT) infrastructure facility
would be a pre-condition and pre-requisite for smooth administration of tax payers,
processing of returns, controlling collections, making refunds auditing taxpayers, levying
penalties, etc. in the GST regime. On the IT front, all stake holders have agreed for a
common PAN-based taxpayer ID, a common return, and a common challan for tax
payment and therefore a common portal providing three core services (Registration,

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returns & Payments) would ease compliance. GSTN is to built to support about 3 billion
invoices per month.
3. Build to handle complex transaction:
GST is a destination based tax. The adjustment of IGST (inter state trade) at the
government level (Center & various States) will be extremely complex, considering the
sheer volume of transaction all over india. A rapid settlement mechanism among state &
Center will be possible only when there is a strong IT infrastructure and service backbone
which captures, processes and exchanges information. GSTIN would help in this regard.
4. Secure information:
The government would have strategic control over the GSTIN, as it is necessary to keep
the information of all tax payers confidential and secure. The central government would
have control over the composition of the board, mechanisms of special resolution and
shareholders agreement, and agreements between the GSTIN and other State
governments. The share holding pattern of the GSTIN is such that the government
shareholding is the highest than any single private institution shareholding.
5. Share of operating expenses of the GSTIN:
GSTIN is a „Not for profit‟ company. Therefore, the user charges would be paid
entirelyby the Central and State governents on behalf of all the users. The state
government shre of expenses would be apportioned to individual States, in proportion to
the number of taxpayers in the State. Expenses could include the following:
Volume of Expenses Type of expenses
Minimum Expenses IT system designed by Infosys
nd
2 part of Expenses Fraud Analytics Tools, security audit and
other security functions (would be
outsourced based on tender)
rd
3 part of Expenses Operating expenses such as Salary, Rent,
Office expenses, internal IT facilities
6. Compliance rating mechanism:
GST compliance rating mechanism whereby the credit rating of compliances of taxpayers
and lower compliances if any made by the taxpayers would be displayed in the portal and
the lower rating would indicates lower tax compliances.

Structure of GSTIN

1. Organizational Structure of GSTN

Though GSTIN is a non-government organization, there has been a strategic control it by the
Government of India. Structure of GSTN is designed is as follows:

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a) Chairman: chairman of the GSTN would be nominated through a joint applroval

mechanism of Central and State Governments.
b) Board of Directors: Board of Directors of GSTIN would comprise of 14 directors. Out
of these 14 directors, 3 directors would be nominated by the Central government, 3 by the
State governments, 1 would be the Chairman who would be nominated by the Joint
apporoval mechanism of the Center and State governments, 3 would be nominated by the
private equity shareholders, 3 would be nominated as persons of eminent importance and
1 CEO would be selected through a open process

2. Equity structure of GSTN:

Equity structure of the shareholding pattern of GST Network is as follows:

Shareholder Shareholding %
Central Government 24.5%
State Government 24.5%
HDFC & HDFC Bank 20%
ICICI Bank 10%
NSE Strategic Investment Co. 10%
LIC Housing Finance Ltd. 11%
Total 100%

Shareholding %
LIC Housing
Finance Ltd., 11%

NSE Strategic Central

Investment Co., Government,
10% 24.50%

ICICI Bank, 10%

State
Government,
HDFC & HDFC 24.50%
Bank, 20%

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 Private players hold 51% of the shares in GSTN. Central Government and State
Governments aggregately hold 49%. Therefore, GSTIN is a non-government
organization.
 The authorized capital of the GSTN is Rs 10 crores and also GSTIN has been
granted a non-recurring grant of Rs 315 crores. Between 2013-14 to 2015-16
Government of India has released about Rs143 crores as grant in Aid for the
development of GSTN and the actual expenditure by the GSTN is about Rs62
crores. Balance of the grant was returned back to the government of India.

Vision and Mission of GSTN

Vision of GSTN:

 To become a trusted national Information Utility (NIU) which provides reliable, efficient
and robust IT backbone for smooth functioning of the Goods and Services. Tax regime
enbling economic agents to leverage the entire nation as One market with minimal
indirect tax compliance cost.

Mission of GSTN:

1. Provide common and shared IT infrastructure and services to the Central and State
Governments, Taxpayers and other stakeholders for implantation of the Goods and
Service Tax.
2. Provide common Registration, Return and Payment services to the taxpayers.
3. Partner with other agencies for creating an efficient and user-friendly GST Eco-system.
4. Encourage and collaborate with GST Suvidha Providers (GSPs) to roll out GST
Applications for providing simplified services to the stakeholders.
5. Carry out research studybest practices and provide Training and Consultancy to the tax
authorities and other stakeholders.
6. Provide efficient Backend Services to the tax departments of the Central and State
Governments on request.
7. Develop Taxpayer Providing Utility(TPU) for Central and State Tax Administration.
8. Assist Tax authorities in improving tax compliance and transparency of Tax
Administration system.
9. Deliver any other services of relevance to the Central and State Governments and other
stakeholders on request.

Values of GSTN:

1. Inclusiveness
2. Efficiency

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3. Transparency
4. Commitment
5. Collaboration
6. Excellence
7. Innovation
8. Accountability

Main objectives of GSTN:

1. To facilitate Registration
2. To facilitate filing and forwarding of returns
3. To help in computation and settlement of IGST
4. Matching tax payment details with the banking network
5. To act as the matching engine for ITC
6. To help in integration of the common GST portal with the tax administration systems of
the Central/State governments and other stakeholders.
7. To provide common PAN-based registration, enable returns filing and payment
processing for all states on shared platform.
8. To facilitate in the implementation and set standards for providing services to the
taxpayer through common GST portal to State governments and other stakeholders.

Powers & functions of GSTN

1. It facilitates in payment of taxes including penalties and interest
2. It helps to have 100% matching of invoices between supplier and recipient through the
tax returns.
3. It is the platform for uploading of invoices and data
4. It helps to track the status of the tax returns, invoices and provides an option for the
taxpayers to accept, modify and reject the invoices.
5. It helps the tax authorities to analyse the taxpayers profile
6. It helps the tax authorities in assessments, investigations, refund appeals
7. It act asa single window for interactions between GST payers of the country and the
Department. This portal also facilities end to end compliances. It is to be noted that no
portion of the money paid by the taxpayers for tax payment is retained by GSTN. It only
facilitates as a payment gateway in tax payment.
8. Contains ITC ledger called Electranic credit ledger, Cash ledger and Liability ledger

Services rendered by GSTN

1. Registration of new taxpayers, migration of taxpayers, cancellation of registration,
amendment of registration

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2. Payment gateways and integration with banking system

3. Return filing and processing
4. Computation of settlements including IGST settlements between Centre and States andto
act as clearing house for IGST
5. Management Information System- system based services including the need-based
information and the business intelligence.
6. GSTN maintains interface between common GST portal and tax administrators.
7. It also provides basic training and instructional facilities to the taxpayers.

GST Suvidha Provider (GSP)

GSP Eco-system

GSP stands for GST Suvidha Provider. A GSP is considered as an enabler for the taxpayer to
comply with the provisions of the GST law through its web platform. Goods and Service Tax
Network (GSTN) would receive the returns filed by companies through GST Suvidha Provider.
The main stakeholders are Center and States tax Authorities, RBI, the banks, the tax
professionals (tax returnpreparers, Charted Accountants, tax Advocates, STPs etc.), financial
service providers including ERP providers Tax Accounting Software providers etc. Better
compliance from the taxpayers is the key to success of GST regime. This GSP eco system would
provide the tax payer optionsof using third party applications, which can provide different kinds
of interfaces on computers and mobile phone applications. Few of the GSPs selected by GSTNs
are as follows:

a. Deloitte Touche Thomatsu India LLP

b. Earnst & Young LLP
c. Karvy Data Management Services Limited
d. MothersonSumi infotech & Designs Ltd
e. NSDL E-governance Infrastructure Limited
f. Tally Solutions Private Limited
g. TATA consultancy Services Limited

In GST, invoice level matching of purchases and sales is required. The large organizations may
require an automated way to interact with the GST system as it may not be practically possible
for them to upload large number of invoices through a web portal. So, an Eco system is required
which would help such taxpayers in better GST compliances. GSP would help in facilitating the
tax payers in uploading invoices as well as filing of returns and act as a single stop shop for GST
related services. GSPs can customize products that address the needs of different segment of
users.

Let us understand GSP through an example below:

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ABC Ltd is a private multinational company which is running operations on SAP ERP. All
records with respect to purchases and sales are maintained in it. At the end of each month,
reports are generated from ERP and attached with the tax return and uploaded on
government‟sportal.

Our government is now aiming for single and automated workflow wherein these ERP
companies can build an interface with government‟s portal and all the GST-related compliance
can be done directly through their software.

GSP need not be only ERP companies but can be start-ups or technology companies
havingexpertise in building web application.

Web
portal

Mobile app

Accountin GSP- GST

Server GST
g package
Tax payer server

 Registration
ERP
 Challan
generation
 Invoice
uploading
Custom
 Return filing app
 Ledger

GSP Eco system

g

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GSTN believes in creating an eco system of services pproviders i.e., GST Suvidha Provider
(GSP) providing innovative solutions (Portal, Mobile App, Enriched API) either themselves or
through its third party partners for making tax filing more easy and convenient ta tax payers. The
third party applications would connect with GST system via secure GST system APIs. All
applications are expected to be developed by third party service providers who have been a
generic name, GST Suvidha Provider or GSP. The GSPs are envisaged to provide innovative and
convenient methods to taxpayers and other stakeholders in interacting with the GST systems
from registration of entity to uploading of invoice details to filing of returns.

There would be two sets of interactions, one between the app user and the GSP. Second would
be between the GSP and the GST system. It is envisaged that app provider and GSP could be the
same entity. Another version could where data in required format directly goes to GSP-GST
server. GSPs act as stop shop for GST-related services.

Main functions of GSP

A. Registration:
i. New registrations
ii. Amendment to existing registration
iii. Cancellation of registration
iv. Opting in/out from Composition
v. Revocation of registration
vi. Surrender of registration
B. Returns:
The funcions relating to Returns would consist of the following:
i. Upload invoices (various types B2B, B2C etc.)
ii. Update Uploaded invoices
iii. Accept/Reject/Modify counterparty invoices
iv. Generation of returns based on uploaded invoices and counterparty actions
v. Viewing of liability ledger, ITC ledger and Cash ledger
C. Payments:
Payment functions would include:
i. Creation of challan
ii. Payment history
iii. View of Challans of all companies of the group, having same PAN to authorized
users
D. Ledger maintenance:
The funcions relating to Ledger maintenance would consist of the following:

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i. Utilization of Cash and ITC for tax payment

ii. Checking the balances in Electronic Cash, Credit and Liability ledgers
E. Miscellaneous functions:
The various Miscellaneous functions would include:
i. HSN/SAC code search
ii. Search for Taxpayers
iii. Grievance creation
iv. Notification of alerts and notices.

Guidelines and Architecture for Integration of GSTN and GSP

The guidelines issued in this regard are categorized into “Mandatory” and Recommended”. The
mandatory guidelines are to be followed without any exception. However, the recommended
ones should be taken as best practices to be adopted

Mandatory guidelines and Responsibilities

1. GSPs needs to procure MPLS (multi protocol lable switching) connectivity from any of
the designated ISPs providing integration connectivity to GST system.
2. GSPs must ensure that traffic originating from their end and destined to GST system is
free from viruses, malwares, intrusions, threats eetc. GSTN will reserve the right to
block/suspend the services of GSP if malicious traffic is found which may be impacting
the GST system.
3. GSPs must adhere to all government of India IT security standards and Regulatory
requirements. GSPs must comply with IT act,2000 and amendments thereof.
4. The ISPs (Internet Service Providers) would submit the list of GSPs that they connect to
the GST system. ISPs should also be prepared to sign necessary arrangements for
compliance needs as applicable at various data centers.
5. Each on-boarded ISP shall bring and deploy their own infrastructure in GSTN data
centers in order to provide connectivity services to GSPs.
6. The access to GST will be controlled through GSTN firewalls. The integration boundary
from GSTN side will be the pair of aggregation switches or GST-GSP switches on which
the cross-connect from ISPs device will be terminated.
7. ISP‟s must provide ISP routers (CPE routers) in HA mode both DC1 (Delhi) and DC2
(Bengaluru) locations of GSTN.
8. ISP‟s shall arrange for the required rack space outside the GSTN cage area.
9. ISP routers has to hosted in the ISP‟s cage area or ISP‟s rack near to the GSTN DC1/DC2
cage area, in a highy secured manner.
10. GSPs has to route the GSTN-related URLs IPs inside the respective ISPs/GSPs network
and the IP details will be provided at the time of integration.

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Recommended guidelines and Responsibilities

1. GSPs should also consider a backup link to be provided from different service providers
at their location.
2. For protecting the GSt system, GSPs are recommended to deply various security devices
including but not to Antivirus, Firewalls, NIPS, HIPS and WAF. GSPs should provision
end point security solution including HIPS and Antivirus for all the servers being
used/proposed to be part of the GSTN integration/connectivity.
3. GSPs should meet the security requirements as specified by CERT-In
(http://www.certin.org.in/).
4. GSPs are Recommended to meet and comply with GoI IT security policies and all
applicable GoI standards and guidelines.
5. It is Recommended ISP‟s/GSPs ensure that end to end band with utilization for the links
connecting to GST system should not cross70% at any point of time. And if bandwith
utilization reaches 70%, ISP‟s/GSPs may consider to increase the bandwith at their oen
cost.
6. ISP,s should provision adequate backhaul as per number of on-boarded GSPs. However it
may be noted that bandwith estimation for connecting to GST system shall be done by
GSP based on their user projections and to comply with the serevice level/user
expectations.
7. ISP‟s are recommended to ensure that traffic originating from GSPs and destined to GST
system is logically separated from any other traffic.
8. ISPs and GSPs should perform regular hardening, patch management, testing and
installation of software updates issued by OEM/vendors from time to time as per
industry‟s best practices, thus ensuring overall security of their respective systems at
every layer including physical security.
9. ISPs and GSPs should preferably nominate a project manager and technical SPOC, for
overseeing all project related matters and issues.
10. ISPs and GSPs should preferably nominate a project management chart and document
detailing the project management roles and responsibilities of each of the team members
involved.

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