UNIT 2

1. What are the taxes that got replaced by GST?

Unlike earlier when there were multiple taxes such as Central Excise, Service Tax and State
VAT etc., under GST, there is just one tax. GST is categorized into CGST, SGST or IGST
depending on whether the transaction is Intra-State or Inter-State.

2. What determines if CGST, SGST or IGST is applicable?

To determine whether Central Goods & Services Tax (CGST), State Goods & Services Tax
(SGST) or Integrated Goods & Services Tax (IGST) will be applicable in a taxable transaction, it
is important to first know if the transaction is an Intra State or an Inter-State supply.

Intra-State supply of goods or services is when the location of the supplier and the place of
supply i.e., location of the buyer are in the same state. In Intra-State transactions, a seller has to
collect both CGST and SGST from the buyer. The CGST gets deposited with Central
Government and SGST gets deposited with State Government.

Inter-State supply of goods or services is when the location of the supplier and the place of
supply are in different states. Also, in cases of export or import of goods or services or when the
supply of goods or services is made to or by a SEZ unit, the transaction is assumed to be Inter-
State. In an Inter-State transaction, a seller has to collect IGST from the buyer.

3. What is Central Goods and Services Tax (CGST)?

Under GST, CGST is a tax levied on Intra State supplies of both goods and services by the
Central Government and will be governed by the CGST Act. SGST will also be levied on the
same Intra State supply but will be governed by the State Government.

This implies that both the Central and the State governments will agree on combining their levies
with an appropriate proportion for revenue sharing between them. However, it is clearly
mentioned in Section 8 of the GST Act that the taxes be levied on all Intra-State supplies of
goods and/or services but the rate of tax shall not be exceeding 14%, each.

4. What is State Goods and Services Tax (SGST)?

Under GST, SGST is a tax levied on Intra State supplies of both goods and services by the State
Government and will be governed by the SGST Act. As explained above, CGST will also be
levied on the same Intra State supply but will be governed by the Central Government.
 5. What is Integrated Goods and Services Tax (IGST)?

Under GST, IGST is a tax levied on all Inter-State supplies of goods and/or services and will
be governed by the IGST Act. IGST will be applicable on any supply of goods and/or
services in both cases of import into India and export from India.

Note: Under IGST,

Exports would be zero-rated.

Tax will be shared between the Central and State Government.

6. Why the split into SGST, CGST, and IGST?’

India is a federal country where both the Centre and the States have been assigned the
powers to levy and collect taxes. Both the Governments have distinct responsibilities to
perform, as per the Constitution, for which they need to raise tax revenue.

The Centre and States are simultaneously levying GST.

The three types tax structure is implemented to help taxpayers take the credit against each
other, thus ensuring “One Nation, One Tax”.

7. UTGST full form is Union Territory Goods and Services Tax.

The Union Territory Goods and Services Tax, commonly referred to as UTGST, is the
GST applicable on the goods and services supply that takes place in any of the five Union
Territories of India, including Andaman and Nicobar Islands, Dadra and Nagar Haveli,
Chandigarh, Lakshadweep and Daman and Diu. This UTGST will be charged in addition
to the Central GST (CGST) explained above. For any transaction of goods/services
within a Union Territory: CGST + UTGST

The reason why a separate GST was implemented for the Union Territories is that the
common State GST (SGST) cannot be applied in a Union Territory without legislature.
Delhi and Puducherry UTs already have their own legislatures, so SGST is applicable to
them.
 UNIT 3

CONCEPT OF SUPPLY

The Central Goods and Service Tax Act, 2017 was notified on 12 th April 2017. State GST Laws
will be passed by the States on similar lines. The Government is working overtime to bring the
indirect tax reform from the 1st July 2017.
In the GST Law, the taxable event would be SUPPLY. Under the existing laws there were
multiple taxable events, i.e. manufacturing, provision of services, sales, etc. Under the GST law
a single taxable event ‘supply’ will replace the multiple taxable events. Hence it is the most
important part of the GST law, as it will determine the taxability or otherwise in the GST law.
Let us discuss the concept of Supply, as provided under the CGST Act. The definition of Supply
in the CGST Act, is an inclusive one. It is contained in Section 7 of the CGST Act.
Apart from Section 7, Schedules I to III are provided which explain various provisions related to
supply.
The law provides for the definition and scope of apply. In simple terms, supply includes all the
following –

 All forms of supply of goods and/or services 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
 Importation of service, whether or not for a consideration and whether or not in
the course or furtherance of business,
 A supply specified in schedule I, made or agreed to be made without a
consideration.
 Schedule I – All the following matters will be considered as supply without
consideration
 Permanent transfer or disposal of business assets.
 Temporary application of business assets to a private or non-business use.
 Services put to a private non-business use.
 Assets retained after deregistration.
 Supply of goods and/or services by a taxable person to another taxable or non-taxable
person in the course of furtherance of business.
 However, the supply of goods by a registered taxable person to a job worker in terms of section
43A shall not be treated as supply of good

IMPORT OF SERVICES
 To be treated as supply if received for a consideration, whether for personal use or
business use.
 However if import of services is received without any consideration, then it will be
treated as supply if it is received by a Taxable person from a related person or from any of his
other establishment outside India, and it is in course or furtherance of business.

ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT
CONSIDERATION
 Permanent transfer/disposal of business assets where input tax credit has been availed on
such assets.
 Supply of goods or services between related persons, or between distinct persons as
specified in section 25, when made in the course or furtherance of business. The value of supply
in such case shall be open market value of such supply. If open market value is not available, be
the value of supply of goods or services of the like kind and quality. If value is still not
determinable, it will be as determined by application of rule 4 or rule 5 of Determination of
Value of Supply Rules.
 Supply of goods—
o by a principal to his agent where the agent undertakes to supply such goods on
behalf of the principal, or
o by an agent to his principal where the agent undertakes to receive such goods on
behalf of the principal.

Mixed Supply under GST

Mixed Supply – means two or more individual supplies of goods or services, or any
combination thereof, made in conjunction with each other by a taxable person for a single price
where such supply does not constitute a composite supply.

Example – A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry
fruits, aerated drink and fruit juices when supplied for a single price is a mixed supply. Each of
these items can be supplied separately and is not dependent on any other. It shall not be a mixed
supply if these items are supplied separately.

Taxability – The tax liability on a mixed supply comprising two or more supplies shall be treated
as supply of that particular supply which attracts the highest rate of tax .

Composite Supply & Principal Supply under GST

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

Example – Where goods are packed and transported with insurance, the supply of goods, packing
materials, transport and insurance is a composite supply and supply of goods is the principal
supply.

Principal Supply Means: The supply of goods or services which constitutes the predominant
element of a composite supply and to which any other supply forming part of that composite
supply is ancillary and does not constitute, for the recipient an aim in itself, but a means for
better enjoyment of the principal supply.

LIST OF SUPPLIES AND TAXABILITY

Activities considered as a supply of goods as per Schedule II of the GST Act

Transfer – Transfer of title of goods

Transfer of business assets:

1. Business assets transferred/disposed of with or without consideration

2. If the owner ceases to be a taxable person then his business assets will be assumed
to be supplied to him in course of his business-

This is not applicable in the following cases:

 Business is transferred to another person

 Business is carried by a taxable representative

Supply of goods by an unincorporated AOP/BOP for a consideration

 
Activities considered as a supply of services as per Schedule II of GST Act

Transfer -Transfer of right in goods without transfer of title

Land and building –

1. Lease, rent, tenancy, easement, licence to occupy land

 2. Lease or letting out of the building (Building includes commercial/
industrial/residential complex for business use either wholly or partly)

Transfer of business assets: The owner uses or allows to use business assets for personal
use.

Construction of a building/complex intended for sale to a buyer wholly or partly

Temporary transfer or permitting the use of intellectual property right

Renting of immovable property (Rented residence is exempted from GST)

Development of information technology software

Agreeing to refrain from an act – Non-competition agreements

Transfer of right to use any goods for a consideration

Any treatment or process which is applied to another person’s goods is a supply of services.
 
Activities or transactions treated neither as the sale of goods nor sale of services as per
Schedule III of GST Act
Following are the transactions covered under negative list:

1. Services provided by an employee to the employer.

2. Gifts up to Rs.50,000/- in value in a Financial Year, by an employer to an employee
3. Services of the funeral, burial, crematorium or mortuary including transportation of the
deceased
4. Services by any court or Tribunal.
5. Duties performed by the MP/MLA/MLC/ Members of Local Bodies.
6. Duties performed by any person as a Chairperson or a Member or a Director in a body
established by the Central Government or a State Government or local authority.
7. Duties performed by any person who holds any post in pursuance of the provisions of the
Constitution in that capacity.
8. Sale of Land
9. Sale of Building (However, If construction of a complex /building intended for sale to a
buyer and part of the consideration is received before completion, then it will be treated
as Supply of Services)
10. Actionable claims, other than lottery, betting and gambling.

Zero Rated, NIL, Exempted and Non-GST Supply

The terms zero rated, nil rated, exempted and non-taxable supply under GST have always been
misused and misinterpreted. There has always been confusion regarding the said terms and the
said confusion still prevails even after introduction of GST. In this article, we analyse each of
these terms and its implications.

Zero Rated Supply

The relevant provisions of zero rated supplies are contained in section 16 (1) of the IGST Act,
2017 which states as under:

Zero rated supply means any of the following supplies of goods or services or both, namely
export of goods or services or both; orMsupply of goods or services or both to a Special
Economic Zone developer or a Special Economic Zone unit.

Under zero rated supply, the output supplies as well as the inputs or input services used in
supplying the supplies would be free from GST. Following are the important points under zero
rated supply:

The taxes paid on the supplies which are zero rated are refunded;

The credit of inputs and input services are allowed;

Wherever the supplies are exempted, or the supplies are made without payment of tax, the taxes
paid on the inputs and / or input services will be refunded (i.e. unutilized input tax credit would
be refunded).

Further, the provisions for the refund of unutilized input credit are contained in the explanation
to Section 54 of the CGST Act, 2017, which defines refund as below:

“Refund” includes refund of tax paid on zero-rated supplies of goods or services or both or on
inputs or input services used in making such zero-rated supplies, or refund of tax on the supply
of goods regarded as deemed exports, or refund of unutilized input tax credit as provided under
sub-section (3).

Nil Rated

Goods or services on which GST rate of 0 % is applicable are called NIL rated goods or services.
Such goods or services, on which GST rate of 0% is applicable, are listed in schedule 1 under
GST rate schedule. Example of Nil rated supplies is salt, jaggery, cereals etc.

Input tax credit of inputs and / or input services used in providing supply attracting Nil rate is not
available i.e. no input tax credit on Nil rated supplies.

Find GST Rate for all goods and services.

Exempted Supply

Exempted supply means supply of any goods or services or both which attracts nil rate of tax or
which may be wholly exempt from tax under section 11 of CGST Act or under section 6 of the
IGST Act, and includes non-taxable supply.
Following points are to be noted for exempted supply:

There is no GST applicable on outward exempted supplies;

Input tax credit of inputs and / or input services used in providing exempted supply is not
available i.e. no input tax credit on exempted supplies;

A registered person supplying exempted goods or services or both shall issue ‘bill of supply’
instead of tax invoice.

What is a non-taxable supply?

“non-taxable supply” means a supply of goods or services or both which is not leviable to tax
under CGST Act or under the IGST Act.

A transaction must be a ‘supply’ as defined under the GST law to qualify as a non-taxable supply
under the GST.

Note: Only those supplies that are excluded from the scope of taxation under GST are covered by
this definition – i.e., alcoholic liquor for human consumption, articles listed in section 9(2) or in
schedule III.

It must also be noted that the following items are not out of scope of GST. That means GST Rate
has not yet been announced or notified for them. Petroleum crude high-speed diesel motor spirit
(commonly known as petrol) natural gas and aviation turbine fuel

DIFFRENCE BETWEEN THE THREEE

 GST
Type of Eligibilit
Supply Applicabl Examples
Supply y for ITC
e

Grains,
Nil Everyday Salt,
0% No
Rated items Jaggery,
etc.

Bread,
Fresh
Exempt Basic fruits,
- No
ed essentials Fresh
milk,
Curd, etc.

Zero 0% Overseas Yes -

Rated supplies,
Supply to
Special
Economic
Zones (SEZ)
or SEZ
 GST
Type of Eligibilit
Supply Applicabl Examples
Supply y for ITC
e

Developers

Supplies for
which GST is
not Petrol,
Non-
- applicable No Alchohol,
GST
but can etc.
attract other
taxes
 UNIT 4

PENALTIES

The major offenses under GST are:

 Not registering under GST, even though required by law. (Read our article for the list of
those who have to register mandatorily under GST)
 Supply of any goods/services without any invoice or issuing a false invoice
 The issue of invoices by a taxable person using the GSTIN of another bona fide taxpayer
 Submission of false information while registering under GST
 Submission of fake financial records/documents or files, or fake returns to evade tax
 Obtaining refunds by fraud
 Deliberate suppression of sales to evade tax
 Opting for composition scheme even though a taxpayer is ineligible

Penalty

If any of the offenses are committed then a penalty will have to be paid under GST. The
principles on which these penalties are based are also mentioned by law.

For late filing

Late filing attracts penalty called late fee. The late fee is Rs. 100 per day per Act. So it is 100
under CGST & 100 under SGST. Total will be Rs. 200/day*. The maximum is Rs. 5,000. There
is no late fee on IGST in case of delayed filing. 
Along with late fee, interest has to be paid at 18% per annum. It has to be calculated by the
taxpayer on the tax to be paid. The time period will be from the next day of filing to the date of
payment.

For not filing

If you don’t file any GST return then subsequent returns cannot be filed. For example, if GSTR-2
return of August is not filed then the next return GSTR-3 and subsequent returns of September
cannot be filed.  Hence, late filing of GST return will have a cascading effect leading to heavy
fines and penalty (see below).

Offenses with no intention of fraud or tax evasion

An offender not paying tax or making short payments must pay a penalty of 10% of the tax
amount due subject to a minimum of Rs. 10,000.
Consider — in case tax has not been paid or a short payment is made, a minimum penalty of Rs
10,000 has to be paid. The maximum penalty is 10% of the tax unpaid.
Offenses with the intention of fraud or tax evasion

An offender has to pay a penalty amount of tax evaded/short deducted etc., i.e., 100% penalty,
subject to a minimum of Rs. 10,000.
Additional penalties as follows-

Tax amount involved 100-200 lakhs 200-500 lakhs Above 500 lakhs

Jail term Upto 1 year Upto 3 years Upto 5 year

Fine In all three cases

Cases of fraud also face penalties, prosecution, and arrest.

Inspection Under GST

The Joint Commissioner of SGST/CGST (or a higher officer) may have reasons to
believe that in order to evade tax, a person has suppressed any transaction or claimed excess
input tax credit etc. Then the Joint Commissioner can authorize any other officer of CGST/SGST
(in writing) to inspect places of business of the suspected evader.

Search & Seizure Under GST

The Joint Commissioner of SGST/CGST can order for a search. He will order a search on the
basis of results of inspection (or other reason) if he has reasons to believe –

 There are goods which might be confiscated

 Any documents or books or other things which are hidden somewhere. Such items can be
useful during proceedings

Such incriminating goods and documents can be seized.

Goods in Transit 
The person in charge of a vehicle carrying goods exceeding Rs. 50,000 is required to carry the
following documents:

 Invoice or bill of supply or delivery challan

 Copy of e-way bill (hard copy or via RFID)

The proper officer has the power to intercept goods in transit and inspect the goods and the
documents.
If the goods are in contravention of the GST Act then the goods, related documents, and the
vehicle carrying them will be seized. The goods will be released only on payment of tax and
penalty.
Before confiscating the goods, the tax officer shall give an option of paying a fine instead of
confiscation.

Compounding of Offences Under GST

Compounding of offenses is a shortcut method to avoid litigation. In case of prosecution for
an offense in a criminal court, the accused has to appear before the Magistrate at every hearing
through an advocate. This becomes expensive and time-consuming.
Compounding will save time and money. However, compounding under GST is not available for
cases where the value involved exceeds 1 crore.

Prosecution under GST 

The prosecution is conducting legal proceedings against someone in respect of a criminal charge.
A person committing an offense with the deliberate intention of fraud, becomes liable
to prosecution under GST, i.e., face criminal charges. A few examples of these offenses are-

1. Issue of an invoice without supplying any goods/services- thus taking input credit or
refund by fraud
2. Obtaining refund of any CGST/SGST by fraud
3. Submitting fake financial records/documents or files, and fake returns to evade tax
4. Helping another person to commit fraud under GST

Arrest Under GST

If the Commissioner of CGST/SGST believes a person has committed a certain offense he can
be arrested under GST by any authorized CGST/SGST officer (click here for the list of offenses
for which one can be arrested).
The arrested person will be informed of the grounds for his arrest. He will appear before the
magistrate within 24 hours in case of a cognizable offense (Cognizable offenses are those where
the police can arrest a person without an arrest warrant. They are serious crimes like murder,
robbery, counterfeiting).

Appeals
A person unhappy with any decision or order passed against him under GST can appeal against
such decision.
The first appeal against an order by an adjudicating authority goes to the First Appellate
Authority. 
If the taxpayer is not happy with the decision of the First Appellate Authority they can appeal to
the National Appellate Tribunal, then to the High Court, and finally to the Supreme Court.
 TAX RATES

GST Exemption List - Goods & Services

Goods Services

Hotel Services priced

Poultry Products – Fresh Meat, Fish, Chicken, Eggs at less than INR 1000

Dairy Products – Milk, Curd, Butter Milk, Jaggery (Gur), Lassi, Education (exemption
unpacked Paneer continued from before)

Healthcare (exemption
Fresh Fruits & Vegetables continued from before)

Food Items – Natural Honey, Flour (Atta & Maida), Pulses,

Basmati Rice, Gram Flour (Besan), Bread, Vegetable Oil,
Religious Sweets (Prasad), Common Salt

Cosmetics & Accessories – Bindi, Vermillion (Sindoor), Bangles

Stationery – Stamps, Judicial Papers, Printed Books, Newspapers

Handloom Products

Textile – Jute, Silk

Contraceptives

Essential Goods & Services at 5% GST slab

Goods Services

Dairy Products – Skimmed Milk Powder, Milk food for babies,

Condensed milk, Packaged Paneer, Cream Railway Travel

Frozen Vegetables Economy Class Air

 Travel

Food Items – Sugar, Spices, Edible Oil, Pizza Bread, Rusk, Cab Aggregators (e.g.
Sweets, Fish Fillets, Tapioca (sabu daana) Uber & Ola)

Beverages – Coffee, Tea, Juices

Apparel – below 1000 INR

Footwear – below 500 INR

Fuel – Kerosene, LPG, Coal

Solar Panels

Common Utilities - Broom

Medical Goods - Medicines, Stents

Newsprint

Lifeboats

Textile – Cotton, Natural Fibre and yarns

Incense Sticks (Agarbatti)

Standard Goods & Services at 12% GST slab

Goods Services

Non-AC Hotels &

Dairy Products – Butter, Cheese, Ghee Restaurants

Business Class Air

Packaged Dry Fruits Travel

Food Items – Snacks (Namkeen & Bhujia), Packaged Chicken,

Sausages, Jams, Sauces

Beverages – Fruit Juices, Packed Coconut Water

 Apparel – above 1000 INR

Personal Hygiene – Tooth Powder

Stationery – Exercise Books, Notebooks

Common Utilities – Sewing Machine, Umbrella

Ayurvedic Medicine

Mobile Phones

Standard Goods & Services at 18% GST slab

Goods Services

Accommodation at hotels with tariff of

more than 2500 INR but less than 7500
Dairy Products – Ice Cream INR

Supply of food / drinks in AC / 5 star

Preserved Vegetables and above rated restaurants

Food Items – Flavoured refined sugar, Pasta,

Corn Flakes, Pastries, Cakes, Soups, Instant Food
Mixes, Processed Foods Telecom Services

Beverages – Mineral Water IT Services

Branded Garments Financial Services

Footwear – above 500 INR Works Contract

Personal Hygiene – Tissues, Toilet Paper, Hair

Oil, Soap Bars, Toothpaste Cinema Tickets worth 100 INR or les

Stationery – Envelopes, Fountain Pens

Electronic Equipment – Printed Circuits,

Monitors

Iron & Steel Products

 Biri wrapper leaves (Tendu Patta)

Biscuits

Textile – Man-made fibre and yarn

Special / Luxury Goods & Services at 28% GST slab

Goods Services

Food Items – Chocolates, Chewing Gum, Custard Accommodation at hotels with

Powder tariff of more than 7500 INR

Beverages – Aerated Water Race course betting

Personal Hygiene – Deodorants, Shaving Cream, After

Shave, Hair Shampoo, Dye, Sunscreen, Perfume, Face Cinema Tickets worth more
Creams, Detergents than 100 INR

White Goods – Vacuum Cleaner, Shavers, Hair Clippers,

Washing Machines, Dish Washers, Water Heaters &
other Home Appliances

Speakers

Cameras

Automobiles & Motor Vehicles*

Housing Materials – Paint, Wallpaper, Ceramic Tiles,

Cement

RETURNS
Every registered person paying GST is required to furnish an electronic return every calendar
month. A “Tax Return” is a document that showcases the income of a registered taxpayer. Such a
document needs to be filed with the tax authorities in order to pay tax to the government. The tax
to be paid by a registered dealer depends upon the income declared by such a person in the tax
return filed with the tax authorities.

From April 1, 2019, the incumbent government is planning to implement the new GST Return
design. This simplified version of return would require the taxpayers having an annual turnover
of over Rs 5 Crores to file one monthly return only. Thus, small business owners,having an
annual turnover of upto Rs 5 Crores would have the option to file quarterly return.

Types Of GST Returns

1. GSTR – 1: Return for Outward Supplies

GSTR-1 is a monthly return of outward supplies undertaken by a normal registered taxpayer

under GST. In other words, this monthly return showcases the sales transactions of a business in
a particular month.

Who Needs To File GSTR-1?

Every normal registered taxpayer under GST is required to file GSTR-1 each month. This return
showcases details of 1) invoices, 2) debit notes, 3) credit notes and 4) revised invoices issued
pertaining to your outward supplies.

Due Date for Filing GSTR-1

The standard date for filing GSTR-1 is 10 days from the end of the month for which such a
return is to be filed. However, the due date to file GSTR 1 can be extended for any class of
persons beyond the tenth of the succeeding month by the Commissioner. The reasons for such an
extension would be notified.

2. GSTR – 2: Return for Inward Supplies

GSTR-2 is a monthly return of inward supply of goods and services as agreed by the recipient of
the goods and services. In other words, GSTR-2 contains details with regards to the purchases
made by the recipient in a particular month. The information contained in GSTR-2 is auto-
populated with the details contained in GSTR-2A.

Who Needs To File GSTR-2?

Every normal registered taxpayer under GST is required to provide details regarding inward
supplies or purchases made for each month in GSTR-2. This return showcases details with
regards to purchases made from registered and unregistered taxable persons, debit notes and
credit notes issued with respect to the inward purchases etc

Hence, the recipient makes use of the details auto-populated in Form GSTR-2A with details
uploaded by supplier in GSTR-1. The recipient makes necessary changes if required in GSTR-2
after verifying the information auto-populated in GSTR-2A.
Due Date for Filing GSTR-2

The process of making changes and filing GSTR-2 is required to be undertaken between 11th
and 15th day of the succeeding month for which return is to be filed.

3. GSTR – 9: Annual Return For Normal Registered Taxpayer Under GST

Section 44(1) requires that:

Every registered person shall furnish electronically an annual return for every financial year in
the prescribed form, except the following:

 Input Service Distributor

 Person paying tax under section 51 or section 52,
 Casual taxable person
 Non-resident taxable person

Furthermore, persons registered under GST but having no transactions during the year are still
required to file a Nil Annual Return.

Due Date for Filing GSTR-9

Such a return needs to be furnished on or before the 31st day of December following the end of
such financial year. To further add to this, Rule 80(1) of the CGST Rules, 2017 states that such
registered person shall furnish an annual return electronically in Form GSTR-9. This return
needs to be filed through the common portal either directly or through a Facilitation Centre
notified by the Commissioner.