Unit 1

1. Advantages of GST:

 Elimination of Cascading Effect: Prior to GST, multiple indirect taxes were levied
at different stages of production and distribution. This resulted in a "tax on tax"
situation, where taxes were paid on the cost that already included other taxes. This
inflated the final price of goods and services for consumers. GST eliminates this
cascading effect by imposing a single tax on the final value added at each stage. This
leads to:
o Reduced Tax Burden: Businesses pay taxes only on the value they add,
reducing the overall tax burden.
o Lower Prices for Consumers: The elimination of cascading taxes often
translates to lower prices for consumers, as businesses may pass on the tax
savings.
 Boost to Exports: With a reduced tax burden on exports, Indian products become
more competitive in the global market. GST removes the tax paid on earlier stages of
production, leading to:
o Increased Export Competitiveness: Lower production costs make Indian
exports more attractive to foreign buyers.
o Potential for Export Growth: This can contribute to increased exports and
foreign exchange earnings for India.

2. State Compensation Mechanism:

The State Compensation Mechanism was a temporary arrangement (typically 5 years)

designed to smooth the transition for states potentially experiencing revenue shortfalls due to
GST implementation. This mechanism ensured:

 Financial Stability for States: States received compensation for any revenue losses
incurred during the initial period.
 Smoother Transition: This financial support helped states adjust to the new GST
system without significant disruption to their public finances.

3. Rational GST Rate Structure:

While the term "Rational GST" isn't commonly used, it likely refers to the GST Council's
efforts to establish a fair, efficient, and balanced tax rate structure. The Council considers
various factors when determining tax rates, including:

 Merit Goods and Demerit Goods: Essential goods like food grains may be taxed at a
lower rate, while luxury items might have a higher rate.
 Impact on Consumers and Businesses: The Council strives to strike a balance
between generating revenue and minimizing the burden on consumers and businesses.
 Economic Considerations: Tax rates may be adjusted to support specific industries
or sectors deemed crucial for economic development.
4. GST Council:

The GST Council is a key decision-making body established under the Constitution (101st
Amendment) Act, 2016. It comprises representatives from:

 Central Government: Finance Minister and other nominated members.

 State Governments: Finance Ministers of all Indian states and union territories with
legislatures.

The Council's primary functions include:

 Recommending Tax Rates: Deciding the rates for CGST, SGST, and IGST.
 Developing Rules and Procedures: Establishing regulations for GST
implementation.
 Dispute Resolution: Addressing any issues or challenges arising between the central
government and states regarding GST.

The GST Council plays a crucial role in ensuring a smooth and efficient GST regime across
India.

5. GST Network (GSTN):

The GST Network is a robust IT infrastructure specifically designed to facilitate GST

administration. It acts as a central platform for:

 Registration: Businesses can register themselves for GST on the GSTN portal.
 Returns Filing: Taxpayers can electronically submit their GST returns on the
platform.
 Tax Payment: Taxes can be conveniently paid online through the GSTN.
 Information Exchange: The GSTN facilitates seamless exchange of information
between taxpayers, tax authorities, and other stakeholders.

The efficiency and effectiveness of GST administration heavily depend on the GSTN.

6. Structure of GST:

GST is a dual GST system, meaning both the central government and state governments levy
taxes:

 Central Goods and Services Tax (CGST): Levied on the supply of goods and
services by the central government.
 State Goods and Services Tax (SGST): Levied on the supply of goods and services
within a specific state by the respective state government.

Additionally:

 Integrated Goods and Services Tax (IGST): Levied on interstate transactions

(between states). It's a combination of CGST and SGST.

7. Differences Between CGST and SGST:

While both CGST and SGST are components of GST, they differ in the following aspects:

 Collection: CGST is collected by the central government, whereas SGST is collected

by the respective state government where the supply takes place.
 Distribution: Both CGST and SGST are ultimately transferred to the central and state
governments, respectively. However, in case of interstate transactions (IGST), a
portion of the collected tax goes to the central government and the remaining amount
is distributed to the consuming state

UNIT 2

1. Taxable Event:

In the context of GST, a taxable event is any action or transaction that triggers the liability to
pay GST. It's the point at which the tax becomes due. Common examples of taxable events
under GST include:

 Sale of goods or services: This is the most common taxable event, where a business
supplies goods or services to a customer for a consideration.
 Barter exchange: When goods or services are exchanged for other goods or services
instead of money, it's considered a taxable event.
 Import of goods: Importing goods into India attracts GST liability.
 Withdrawal of goods from a bonded warehouse: When goods stored in a bonded
warehouse (without paying GST) are removed for domestic consumption, it triggers a
taxable event.

2. Time of Supply:

Time of supply in GST refers to the specific point in time when a supplier is considered to
have supplied goods or services, and consequently, the liability to pay GST arises.
Determining the time of supply is crucial for accurate tax calculations and filing returns.

Example: You run a clothing store.

 Scenario 1: You issue an invoice for a shirt on June 1st, and the customer pays for it
on June 10th. The time of supply would be June 1st (date of invoice issue).
 Scenario 2: You deliver a dress to a customer on July 15th, but the customer pays for
it later on July 20th. The time of supply would be July 15th (date of delivery).

3. Composite and Mixed Supply:

These terms differentiate between bundled goods and services:

 Composite Supply: This refers to a single, bundled supply where two or more
elements (goods or services) are naturally bundled together and cannot be
independently provided. The tax rate for a composite supply is determined based on
the principal supply, which is the main element of the bundle.
o Example: A restaurant meal typically combines food and service. The food is
the principal supply, so the entire meal is taxed at the rate applicable to food.
  Mixed Supply: This refers to a combination of two or more goods or services that
can be independently provided. In this case, each element is taxed at its respective
rate.
o Example: A grocery store sells a bundle of fruits and a cleaning product. The
fruits would be taxed at the rate applicable to food items, while the cleaning
product would be taxed at its specific rate.

4. Valuation Rules for Goods under GST:

The valuation of goods under GST is crucial for calculating the amount of tax payable. The
GST Act and Rules specify various methods for determining the taxable value, such as:

 Transaction value: The price at which the goods are sold or disposed of.
 Modified Transaction Value: The transaction value with adjustments for certain
inclusions or exclusions like discounts, packing, transport charges, etc.
 Detachable value: The price at which similar goods are sold in the open market,
excluding the value of any services included in the supply.
 Retail Price Inclusive of Tax (RPI): The price printed on the packaging, including
GST.

The specific method used depends on the nature of the transaction and other factors.

5. Classification of Goods and Services:

GST categorizes goods and services into various tax brackets based on the Harmonized
System of Nomenclature (HSN) for goods and a separate code system for services. These
categories determine the applicable tax rate. You can find the complete list of HSN codes and
service codes on the official GSTN website.

6. Supply under GST:

In GST, "supply" encompasses the provision or sale of goods or services, or both, in the
course of furtherance of business. It's a broad term that includes various activities, such as:

 Sale of goods
 Provision of services
 Barter exchange
 Import of goods
 Withdrawal of goods from a bonded warehouse

UNIT 3

1. Eligibility for Input Tax Credit (ITC) under GST:

To claim Input Tax Credit (ITC) on GST paid on purchases, a registered taxpayer must fulfill
several conditions. Here are two key points:

 Use for Business: The goods or services purchased must be used for the furtherance
of business. Goods used for personal consumption or exempt supplies are not eligible
for ITC.
  Tax Invoice Possession: The taxpayer must possess a valid tax invoice or debit note
issued by the supplier, reflecting the GST paid. This document serves as proof of
purchase and the amount of tax paid.

2. Reverse Charge Mechanism (RCM) under GST:

In a typical GST scenario, the supplier of goods or services is responsible for collecting and
paying GST to the government. However, under the Reverse Charge Mechanism (RCM), the
recipient of the goods or services becomes liable for paying GST instead. This is typically
applicable in certain situations:

 Import of services: When a registered taxpayer imports services from a foreign

supplier, they are liable to pay GST under RCM.
 Purchase from unregistered dealers: When a registered taxpayer purchases goods
or services from an unregistered dealer, they must pay GST under RCM.
 Supplies notified under RCM: Certain specific categories of goods or services are
notified by the government as being subject to RCM.

3. Differences between TDS (Tax Deducted at Source) and TCS (Tax Collected at
Source):

Here are two key differences between TDS and TCS:

 Party Responsible:
o TDS: The payer of the income is responsible for deducting TDS at source
before making the payment to the recipient.
o TCS: The seller of the goods or services is responsible for collecting TCS at
the time of sale from the buyer.
 Applicability:
o TDS: Applies to various types of income, such as salaries, rent, professional
fees, interest payments, etc., exceeding a threshold limit.
o TCS: Applies to specific categories of goods or services notified by the
government, often exceeding a certain value.

4. Doctrine of Unjust Enrichment:

The doctrine of unjust enrichment is a legal principle that prevents someone from gaining an
unfair advantage at the expense of another. In the context of GST, it can be applied in
situations where:

 Mistake in Tax Payment: If a taxpayer mistakenly pays excess tax due to clerical
error or a misinterpretation of the law, they may seek recovery based on unjust
enrichment.
 Improper ITC Claim: If a person has claimed ITC on supplies not eligible or has
knowingly provided false information, the government may invoke unjust enrichment
to recover the undue ITC availed.

5. Blocked Credit and Apportionment of Credit under GST:

These terms deal with situations where the full amount of Input Tax Credit (ITC) claimed on
purchases might not be available for utilization.

 Blocked Credit:

The CGST Act specifies certain categories of goods and services on which a
registered taxpayer cannot claim ITC. These are considered "blocked credits."
Common examples include:

o Expenses for personal consumption or entertainment

o Purchase of goods or services used for exempt supplies (those not subject to
GST)
o Hospitality expenses exceeding a certain limit
o Travel expenses for personal purposes
 Apportionment of Credit:

When goods or services purchased are used partly for business purposes (where ITC
is available) and partly for non-business purposes (where ITC is blocked), the ITC
needs to be apportioned. This means calculating the portion of ITC attributable to the
business use and claiming only that amount.

6. Transfer of Input Tax Credit (ITC):

In some cases, ITC can be transferred between registered taxpayers under specific conditions:

 Main Unit and Branch Transfer: A registered taxpayer can transfer ITC between
their main unit and branches within the same state.
 Input Service Distributor (ISD) Mechanism: A registered taxpayer can appoint an
ISD to receive ITC on common input services (like rent, insurance) and distribute it
proportionately to other registered units within the state.

7. Excess Tax Credit:

An excess tax credit arises when the ITC accumulated by a taxpayer exceeds their GST
liability in a particular tax period. This can happen due to reasons like:

 Higher ITC due to large purchases compared to sales

 Seasonal businesses with fluctuating sales
 Advance payments of GST on purchases

There are ways to utilize excess credit:

 Offset against future GST liability: The excess credit can be carried forward and
used to offset GST liability in subsequent tax periods.
 Claim refund: Under certain conditions, a taxpayer can file for a refund of excess
ITC from the government