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Study Material _ GST Inter Course _ FOR VIDEO

Study Material _ GST Inter Course _ FOR VIDEO

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 1

© Copyright by Topmans Education and Career Horizons (P) Ltd. (TEACH)

This book may not be duplicated in any way without the express written consent of the
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information contained herein is for the personal use of the reader and may not be
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Limits of Liability / disclaimer of Warranty: The author and publisher have used their best
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disclaims any implied warranties of merchantability or fitness of any particular purpose.
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The accuracy and completeness of the information provided herein and the opinions stated
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other damages.

GST CENTRE® and Diploma in Goods & Services Tax TM are the trademarks of
Topmans Education And Career Horizons (P) Ltd. (TEACH) in respect of providing
teaching and training, Academic Courses and Activities, Computerized Accounting
and Training Programmes in Goods & Services Tax and related courses as per Trade
Marks Act, 1999.

Trademarks: All brand names and product names used in this book are trademarks,
registered trademarks, or trade names of their respective holders.

Edition: 2017 www.gstcentre.in 2

DIPLOMA IN GOODS & SERVICES TAX TM

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE

GST in India is a reality now. GST (Goods & Service Tax) is going to subsume
most of the Indirect Taxes of our country such as Central Excise, Service Tax, VAT &
CST, Entry Tax, etc. and would bring in significant amount of change in way of doing
business.

Topmans Education And Career Horizons (P) Ltd., (TEACH), approved by
Ministry of Skill Development & Entrepreneurship and ISO 9001:2015 Certified
Company is ready to address this larger need of the hour, through our project “GST
CENTRE®” through which we impart best training on GST across India. We are
committed to the mission of providing quality and authoritative training at
reasonable cost to trade, industry and other stake holders.

We have launched various Courses on Diploma in Goods and Services Tax
(DGST)TM. GST INTERMEDIATE Course will give a detailed understanding about the
Laws, Rules and Forms issued in GST Law that is relevant to Accountants and
Finance Professionals. We have included Forms, Diagrams, Self Examination
Questions etc. after each Chapter. It is always advised that A highlight of the Revised
Model GST Law with a comparison to previous Model GST Law is also included.

We provide E-Learning and Blended Learning Management System
(Direct Training + E-Learning). Our learners can learn with their Mobile /
Computer as our Video Tutorials will be available to them on 24x7 hours basis.

Learners can also attend classes at our GST CENTRE® Direct Training Centres
where you can get Professional Training from Certified Faculties.

We always strive for quality in anything and everything we do. We salute the
Government of India to implement GST in India which will make our Nation as the
best economy in the world. We are also thankful to National Academy of Customs,
Excise and Narcotics (Ministry of Finance), Govt. of India for providing us
necessary guidance and support for training on GST. My heartfelt thanks to my
family and colleagues for their valuable support and contribution.

We promise you that “We will teach you well”.

Wish you a Great Learning!!!

Sd/-

CA. Naison Louis

For any suggestions / concerns / feedbacks plz contact us at [email protected]

ICONS USED IN THE TRAINEE MANUAL

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 3

GST – Intermediate Course will help you to understand the basic things in GST.
We have 12 Chapters based on SGST, CGST and IGST Acts and structured in a
professional manner. With the implementation of GST, there will be a high demand for
GST Professionals in India.

Icon Icon Name Description

Lesson What you can learn from the particular
Objectives chapter. Hope after learning the Chapter, one
can easily understand these points.

Video You can see the Video Tutorial in the learning
Tutorial Management System with your Mobile /
Computer. Watch the Video Tutorial for
understanding the Concept.

Form to All applications, Reply to the notices, Returns,
Submit Appeals or any other document that should be
submitted through the Common Portal. It can
be either directly or from a Facilitation Centre
notified by the Commissioner.

Form Notices, certificates and orders under various
received Rules that will be issued electronically by the
Proper Officer.

Self- Learners are advised to attend these questions
Examination to analyse their understanding. Key Answers
Questions are given at the end of the Study Material.

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 4

INDEX

Chapter 1 Registration 6
1.1 Introduction
1.2 Application for Registration 26
1.3 Special Persons 41
1.4 Migration of Persons 51
1.5 Amendment of Registration 67
1.6 Cancellation of Registration 84

 Self-Examination Questions www.gstcentre.in

Chapter 2 Accounts & Records
2.1 Books of Accounts required
2.2 Maintenance of Books
2.3 Special Persons
2.4 Journal Entries – Intra-state
2.5 Journal Entries – Inter-state

 Self-Examination Questions

Chapter 3 Composition Scheme
3.1 Introduction
3.2 Intimation for Composition Levy

3.3 Conditions and Restrictions
 Self-Examination Questions

Chapter 4 Tax Invoice, Credit and Debit Notes
4.1 Tax Invoice.
4.2 Important Documents
4.3 Credit Note and Debit Note
4.4 Tax Invoice in Special Cases

 Self-Examination Questions

Chapter 5 E-way Bill

4.1 Introduction.
4.2 Preparation of E-way Bill
4.3 Important Points for Transporter

 Self-Examination Questions

Chapter 6 Payment of Tax
 Calculation of Tax Liability
 Tax Liability Register
 Electronic Credit Ledger

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE 5

 Electronic Cash Ledger
 Self-Examination Questions

Chapter 7 Input Tax Credit 98
 Introduction 107
 Claiming Input Tax Credit 123
 Self-Examination Questions 137
148
Chapter 8 Returns 162
 GSTR 1 & 2
 Monthly / Quarterly Returns

 Self-Examination Questions

Chapter 9 Refund
 Introduction
 Provisional Refund
 Important Points
 Self-Examination Questions

Chapter 10 Tax Rates and Classifications
 Introduction
 Tax Rates for Goods

 Tax Rates for Goods
 Self-Examination Questions

Chapter 11 Offences and Penalties
 Introduction
 Offences – Part I
 Offences – Part I
 Self-Examination Questions

Chapter 12 Facilities to Taxable Persons
 Tax Return Preparer

 Facilitation Centres
 GST Suvidha Providers
 Self-Examination Questions

Annexures
Definitions
HSN Codes
SA Codes

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 6

CHAPTER I:-REGISTRATION

Lesson Objectives
On completion of this lesson, you will be able to understand:
 Application for Registration under GST Act.

 Registration for Special Persons.

 Amendment / Cancellation of Registration.

 Migration of Existing Registrants.

 Method of Authentication of Forms.

1.1 Introduction

Learners are advised to go through the First Video of the Chapter I.
Registration - Introduction

Every person who is liable to be registered under the GST law should apply for
registration within thirty days from the date on which he becomes liable to
registration. Any person can apply for voluntary registration, even though he is not
liable to be registered under the GST Law.

A casual taxable person or a non-resident taxable person should apply for
registration at least five days prior to the commencement of business.

SI No. Person Time for Registration
1 Person liable to be registered Within 30 days from the liability

2 Casual Taxable Person / Non- At least 5 days prior to commencement of

Resident Taxable Person Business.

Important Points

 A person seeking registration under this Act shall be granted a single
registration in a State or Union territory.

 Separate registration can be granted for each business vertical if the person
has multiple business verticals.

 Every person who makes a supply from the territorial waters of India shall
obtain registration in the coastal State or Union territory where the nearest
point of the appropriate base line is located.

Business in Different States
Where a Taxable person already registered in a state or Union territory and has
establishments in another state or Union Territory, then such establishments will be

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 7

treated as establishments of distinct persons. Separate registration should be taken
in each State or Union Territory as per GST Law.

Special Economic Zone
A Special Economic Zone unit or Special Economic Zone developer should make a
separate application for registration as a business vertical distinct from its other
units located outside the Special Economic Zone.

1. Application for registration
Every person who is liable to be registered should before applying for registration,

declare his Permanent Account Number (PAN), mobile number, e-mail

address, State or Union territory in Part A of FORM GST REG-01 on the
Common Portal. It can be filed either directly or through a Facilitation
Centre notified by the Commissioner.

Generation of Temporary Reference Number

Verification of data submitted by the Applicant will be verified as follows.

SI No. Particulars Verified with

1 PAN Database of CBDT (Income Tax)

2 Mobile Number One time Password will send to Mobile

3 E-mail One time Password will send to E-mail

On successful verification of the PAN, mobile number and e-mail address, a
temporary reference number will be generated and communicated to the
applicant on the said mobile number and e-mail address.

Submission of Part B – FORM GST REG-01
Using the reference number generated as above, the applicant should
electronically submit an application in Part B of FORM GST REG-01. It
should be duly signed and necessary documents should be filed.

On receipt of an application, an acknowledgement shall be issued
electronically to the applicant in FORM GST REG-02.

Verification of the application and approval
The proper Officer will examine the application and the accompanying documents
and registration will be granted if the same are found to be in order. It should be
done within three working days from the date of submission of application.

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 8

Notice for Additional Information / Documents

The proper Officer may issue a notice to the applicant electronically in
FORM GST REG-03 in case of application submitted is found to be
deficient. It should be issued within three working days from the date of
submission of application.

This can be done for

a) Asking any additional information or any document required to be furnished.

b) Requires any clarification with regard to any information provided in the
application or documents furnished. The clarification includes modification or
correction of particulars declared in the application for registration, other
than PAN, State, mobile number and e-mail address declared in Part A of
FORM GST REG-01.

Reply for Notice for Additional Information / Documents

The applicant should furnish such clarification, information or documents
sought electronically, in FORM GST REG-04. It should be given within
seven working days from the date of receipt of such intimation.

Where the proper officer is satisfied with the clarification, information or
documents furnished by the applicant, he may approve the grant of registration. It
should be done within seven working days from the date of receipt of such
clarification or information or documents.

Rejection of Reply for Notice

The proper Officer can reject such application after recording the
reasons in writing and inform the applicant electronically in FORM GST
REG-05.

The rejection can be done in the following situations.
1. No reply is furnished by the applicant in response to the notice issued within the

prescribed period i.e. seven days or
2. Not satisfied with the clarification, information or documents furnished.

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 9

Failure of Officer
If the proper officer fails to take any action within the prescribed period,
information or documents furnished by the applicant the application for grant of
registration shall be deemed to have been approved.

Prescribed period is
1. Within three working days from the date of submission of application, or
2. Within seven working days from the date of receipt of clarification,

Issue of registration certificate
A Certificate of Registration in FORM GST REG-06 will be issued where
the application for grant of registration has been approved. It will show
the principal place of business. Additional place(s) of business will be
made available to the applicant on the Common Portal.

After granting the registration under the GST Law, the registration number will be
communicated to the applicant. The certificate of registration will be available in the
GST Common Portal. Every certificate of registration made available on the Common
Portal will be with the digital signature of the proper officer under the Act.

Goods and Services Tax Identification Number (GSTIN)
A Goods and Services Tax Identification Number (GSTIN) will be assigned in the
following format:
(a) Two characters for the State code;

(b) Ten characters for the PAN or the Tax Deduction and Collection Account
Number;

(c) Two characters for the entity code; and

(d) One checksum character.

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Effective Date of Registration
The registration shall be effective from the date on which the person becomes liable
to registration where the application for registration has been submitted within
thirty days from such date.

Where an application for registration has been submitted by the applicant after
thirty days from the date of his becoming liable to registration, the effective date of
registration shall be the date of grant of registration.

SI No. Application Filed Effective Date of Registration
1
Within 30 days from the date of The Date of Liability for
2
liable to register Registration
3
After 30 days from the date of The Date of Grant of Registration
liable to register

Voluntary Registration Date of Order of the Registration

(Under the Threshold Limit etc.)

Display of registration certificate and GSTIN on the name board
The Certificate of Registration should be displayed in a prominent location at

 Principal place of business and
 Every additional place or places of business.

Goods and Services Tax Identification Number (GSTIN) should be displayed on the
name board exhibited at

 Entry of his principal place of business and
 Every additional place or places of business.

*** Chapter – end ***
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1.2 SPECIAL PERSONS
Learners are advised to go through the Second Video of the Chapter I.
Registration – Special Persons

Multiple business verticals within a State or a Union territory
“Business Vertical” means a distinguishable component of an enterprise that is
engaged in the supply of individual goods or services or a group of related goods or
services which is subject to risks and returns that are different from those of the
other business verticals.

The following factors should be considered in determining whether the business has
different verticals.
(a) The nature of the goods or services.
(b) The nature of the production processes.
(c) The type or class of customers for the goods or services.
(d) The methods used to distribute the goods or supply of services and
(e) The nature of regulatory environment (wherever applicable), including banking,
insurance, or public utilities;

Optional Registration for Business vertical
If a person has multiple business verticals within a State or a Union territory and
requires separate registration for any of its business verticals it shall be granted
separate registration in respect of each of the verticals.

He should submit a separate application in FORM GST REG-01 in respect
of each such vertical for registration.

The following Conditions should be taken care….
a) The Business Person will not be granted registration to pay tax under
Composition Scheme if any one of the other business verticals is paying tax
under the regular scheme.

b) Where any business vertical becomes ineligible to pay tax under Composition
Scheme, all other business verticals of the said person will become ineligible
to pay tax under the composition scheme.

c) On supply of goods or services from one vertical to another registered
business vertical, he should issue a tax invoice for such supply and pay tax.

Persons required to deduct tax at source or to collect tax at source

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 12

Any person required to deduct tax or a person required to collect tax at
source should electronically submit an application, duly signed, in
FORM GST REG-07 for grant of registration through the Common
Portal. It can be either directly or from a Facilitation Centre notified by
the Commissioner.

The proper officer may grant registration after due verification and issue
a certificate of registration in FORM GST REG-06. It shall be issued within
three working days from the date of submission of application.

The proper officer may cancel such registration if he is satisfied that a
person to whom the above certificate is issued and no longer liable to
deduct tax at source or collect tax at source. Such cancellation should be
communicated to the said person in FORM GST REG-08.

Casual Taxable Persons
A person applying for registration as a casual taxable person will be given a
temporary reference number by the Common Portal for making advance deposit of
tax and the acknowledgement will be issued electronically only after the said
deposit in the electronic cash ledger.

Non Resident Persons
A non-resident taxable person has to apply for registration in FORM GST
REG-09 prior to 5 days of commencement of business. It should be filed
along with valid Passport.

 Temporary reference number by GSTN (Common Portal) will be issued for
making advance deposit. The amount will be the estimated tax liability for the
period i.e. 90 days for which registration is sought.

 The application for registration made by a non-resident taxable person shall
be signed by his authorized signatory who shall be a person resident in India
having a valid PAN.

Extension in period of operation by casual taxable person and non-resident
taxable person

Normal period allowed to a casual taxable person or a non-resident
taxable person is 90days. It can be extended for a further period by an
application in FORM GST REG-10.

The application will be acknowledged only after the payment of amount as specified
in GST Law.

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6A. Registration to a person supplying online information, Data base access or
retrieval services from a place outside India to a non-taxable online recipient

Any person supplying online information and data base access or retrieval
services from a place outside India to a non-taxable online recipient should
apply for registration. It include advertising on the internet, providing
cloud services, provision of e-books, movie, music, software and other
intangibles etc.

The application for registration should be submitted electronically in FORM GST
REG-09A.

Assignment of unique identity number to certain special entities
The following persons should be granted with a Unique Identity Number. It can be
used for refund of taxes on the notified supplies of goods or services received by
them.

 Any specialized agency of the United Nations Organization
 Any Multilateral Financial Institution and
 Organization notified under the United Nations (Privileges and Immunities)

Act, 1947
 Consulate or Embassy of foreign countries and
 any notified persons

Every such person is required to submit an application in FORM GST
REG-12. The proper officer may assign a Unique Identity Number to the
said person and issue a certificate in FORM GST REG-06 within three
working days from the date of submission of application.

Suo-moto registration
If there was some enquiry, survey, inspection, search etc. and the proper officer has
the reason to believe that the person is liable to be registered, the proper Officer
may register a person on temporary basis.

He can register the said person on a temporary basis and issue an order in
FORM GST REG-11. The registration granted will be effective from the
date of order granting registration.

He should apply for registration within ninety days from the date of the grant of
such registration. If the said person has filed an appeal against the grant of
temporary registration but failed, the application for registration shall be submitted
within thirty days from the date of issuance of order upholding the liability to
registration by the Appellate Authority.

*** Chapter – end ***

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 14

1.3 MIGRATION OF PERSONS
Learners are advised to go through the Third Video of the Chapter 1.
Registration – Migration of Persons

Migration of persons registered under the existing law
All persons having PAN and registered under existing law like VAT, Excise Law,
Service Tax etc. have to enroll on Common GST Portal by validating E-mail ID and
Mobile Number. It can be done directly or through a Facilitation Centre notified by
the Commissioner.

 This is not applicable to Persons deducting Tax at Source or Input Service
Distributors.

 Provisional Registration will be granted on basis of PAN and not the number
of existing registrations. If a taxable person has been granted multiple
registrations under the existing law on the basis of a single PAN, he will be
granted only one provisional registration.

 A person having centralized registration will be granted only one provisional
registration in the State or Union territory in which he is registered under the
existing law.

The registration will be granted on a provisional basis and a certificate of
registration in FORM GST REG-25, incorporating the GSTIN therein, will
be made available to him on the Common Portal.

On receiving the provisional registration, the person has to submit FORM
GST REG-24 along with the information and documents required. It
should be furnished within 3 months of granting such provisional
registration.

On verification of the documents and details so provided, the proper
officer will issue the Registration Certificate in FORM GST REG-06.

Incorrect or Incomplete Information

Where the particulars or information have either not been furnished or
not found to be correct or complete, the proper officer shall cancel the
provisional registration granted and issue an order in FORM GST REG-26.

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 15

A show cause notice should be served before cancelling such provisional
registration in FORM GST REG-27 and reasonable opportunity of being
heard should be given.

A show cause notice issued in FORM GST REG-27 can be vacated by issuing
an order in FORM GST REG-19, after affording the person an opportunity
of being heard and found that no such cause exists.

Cancellation of Provisional Registration

Any person, who has been granted provisional registration but is not
liable to be registered under the CGST Act, may apply for cancellation of
such provisional registration in FORM GST REG-28.

It should be submitted within thirty days of the appointed day.

Physical verification of business premises in certain cases
The proper officer has been given a power to physically verify the place of business
if he feels to do so. This can be done only after grating registration.

The verification report along with other documents, including
photographs, should be uploaded in FORM GST REG-29 on the Common
Portal. It should be done within fifteen working days following the date of
such verification.

This is good so that there will not be any delay in granting registration and also no
misuse of the power as photos are to be uploaded.

Method of authentication
All documents as specified in various rules should be submitted electronically at the
Common Portal.

 All applications
 Reply to the notices
 Returns
 Appeals or any other document.

It should be signed with
 Digital signature certificate or
 E-signature as specified under the Information Technology Act, 2000 (21 of
2000) or
 Any other mode of signature notified by the Board in this behalf.

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 16

All such documents should be signed by

SI No. Organization Authorized Person
1
2 Individual Himself or Person authorized by him.
3
HUF Karta or Person authorized by him.
4
5 Firm Any Partner (not being minor) or

6 Authorized Signatory
7
Company CEO or Authorized Signatory
8
Association Any member of Association or Person

Authorized.

Trust Trustee or Authorized Signatory

Government / It’s Agency Authorized Signatory

/Local Authority

Any other Person Competent Person or Authorized Persons

i.e. Approved Goods and Service Tax

Practitioners.

 Where the Individual is mentally incapacitated his guardian can sign.
 In the case of HUF, where the Karta is absent from India or mentally

incapacitated from attending to his affairs, any other adult member can sign.

All notices, certificates and orders under these Rules will be issued electronically by
the Proper Officer. He should sign through digital signature certificate specified
under the Information Technology Act, 2000 (21 of 2000).

Importance of PAN Card

Every person shall have a Permanent Account Number issued under the Income tax
Act, 1961 in order to be eligible for grant of registration.

 A person required to deduct tax under section 51 may have a Tax Deduction

and Collection Account Number issued under the said Act in order to be
eligible for grant of registration.

 A non-resident taxable person may be granted registration on the basis of
such prescribed documents.

*** Chapter – end ***
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DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 17

1.4 AMENDMENT OF REGISTRATION

Learners are advised to go through the Fourth Video of the Chapter I.
Registration – Amendment

Persons have to submit different forms for registration.

SI No. Form Persons
1 GST REG-01 Every Person other than specified otherwise
2 GST REG-07
3 GST REG-09 Tax Deductor or Tax / Collector at Source
4 GST REG-09A Non Resident Taxable Persons
Person supplying Online information and data base
5 GST REG-12 access or retrieval services
Unique ID to UN Bodies/ Embassies /any other person

Amendment of registration
There can be change in the details already submitted by the Taxable Person. The
change can happen either at the time of obtaining registration or on happening of
various events. If there is any change in any of the particulars furnished in the
application for registration another form should be filed.

Reasons for Changes

There can be changes in
(i) Legal name of business;
(ii) Address of the principal place of business or any additional place of business; or
(iii) Addition, deletion or retirement of partners or directors, Karta, Managing
Committee, Board of Trustees, Chief Executive Officer or equivalent, responsible for
day to day affairs of the business.

 There is no need for the person to get these changes done in all states

separately if the change is relating to the below details
o Legal name of business;
o Addition, deletion or retirement of partners or directors, Karta,
Managing Committee, Board of Trustees, Chief Executive Officer or
equivalent, responsible for day to day affairs of the business.

 Where the change relates to any particulars other than legal status, address

and responsible persons as specified above, the certificate of registration
shall stand amended upon submission of the application in FORM GST REG-
13 on the Common Portal.

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 18

 Any change in the mobile number or e-mail address of the authorised

signatory will be carried out only after online verification through the
Common Portal.

Procedure for Amendment
The registered person should submit an application within fifteen days of
such change. It should be submitted in FORM GST REG-13, along with
documents relating to such change, duly signed, electronically at the
Common Portal.

In such situations, the proper officer shall approve the amendment within fifteen

working days from the date of receipt of application in FORM GST REG-13 after due
verification.

The proper Officer should issue an order in FORM GST REG-14
electronically. Such amendment will take effect from the date of
occurrence of the event warranting such amendment.

Change in PAN – Fresh Registration
If any change in the constitution of any business results in change of the
Permanent Account Number (PAN) of that registered person, the said
person should apply for fresh registration in FORM GST REG-01.

Show cause Notice
If any deficiency or clarification required by the proper officer with
regards to the application for amendments may serve a Show Cause
Notice in FORM GST REG-03 within 15 working days. The dhow cause
notice can be issued in the following circumstances.

 Proper officer has the opinion that the amendment is not warranted.

 Documents furnished are incomplete or incorrect.

The taxable person should furnish a reply to the show cause notice
within seven working days. The same should be served in FORM GST

REG-04.

If no reply or unsatisfactory reply is given to the notice, the officer may
reject the application by passing an order in FORM GST REG -05 with
reasons given in writing.

Failure of the Officer
The registration certificate will stand amended if the Officer fails to take any action
within

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 15 working days from the date of application in FORM GST REG-13 or
 7 working days from receipt of reply to show cause notice.

The amended Registration Certificate will be available on the Common Portal.

*** Chapter – end ***
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1.5 CANCELLATION OF REGISTRATION
Learners are advised to go through the Fifth Video of the Chapter I.
Cancellation of Registration

Application for cancellation of registration
A registered person other than the below persons may apply for cancellation.

a) Person liable to deduct or collect tax at source or
b) Person to whom a unique identification number has been granted

A person, who has registered voluntarily, cannot apply for cancellation within one
year from effective date of registration.

Procedure for Cancellation
One should apply for Cancellation in the FORM GST REG-14. It should
include the following stock details as on the date of cancellation.
 Input held in stock or contained in semi-finished goods.
 Finished goods held in stock.
 Capital goods held in stock.

The form also should include details about the respective tax liability and details of
payment of tax against such liability and other documents. Form GST REG-14 should
be filed within 30 days of the occurrence of event warranting cancellation.

Cancellation of Registration
Cancellation of Registration can be done on

a) His own motion or
b) Application filed by the registered person or
c) Legal heirs, in case of death of such person.

Cancellation of Registration
In the following situations the registration granted to a person is liable to be
cancelled. If the said person—
(a) does not conduct any business from the declared place of business; or
(b) issues invoice or bill without supply of goods or services in violation of the
provisions of this Act, or the rules under GST Law.

Cancellation by Officer
The proper officer should cancel the registration only after giving the person an
opportunity of being heard.

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 21

The Officer should issue a notice to such person in FORM GST REG-16. It
should mention asking reasons why his registrations should not be
cancelled. A period of seven working days is allowed to the Taxable
Person.

The reply to the show cause notice issued by the Officer should be
furnished in FORM REG–17 within seven working days.

Where the reply furnished by the Taxable Person is found to be
satisfactory, the proper officer shall drop the proceedings and pass an
order in FORM GST REG –19.

The above provisions will equally apply to the legal heirs of a deceased proprietor,
as if the application had been submitted by the proprietor himself.

Order for Cancellation

The Proper Officer should issue an Order for Cancellation. It can be issued within
 30 days from the Date of Application for Cancellation or
 30 days from the Date of reply submitted to Show cause notice.

The Proper Officer will also direct to pay arrears of any tax, interest or penalty.

Application for Revocation of cancellation of registration
A registered person can make Online Application for revocation of
cancelation order issued by Officer on his own motion. The form to be
used is FORM GST REG-20. It should be filed within 30 days from the
date of service of the order for cancellation.

 If the cancellation was due to non-filing of the return, the same has to be filed
and corresponding tax liability along with interest, penalty and late fees
should be paid.

Revocation of Cancellation by Officer
If the proper officer is satisfied with the reasons filed by the Applicant, he
can revoke the cancellation of registration. It will be done by an order in
FORM GST REG-21 within thirty days from the date of receipt of the

application. The same should be communicated to the applicant.

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Rejection of Application for revocation of Cancellation
On the other hand, if the proper officer is not satisfied with the reasons,
can reject the application for revocation of Cancellation of Registration. It
should be done by an order in FORM GST REG-05 and communicate the

same to the applicant.

In such circumstances, the proper officer has to issue a show cause notice
as to why his application for revocation shall not be rejected. It should be
done in FORM GST REG-22.

The applicant should furnish the reply within seven working days from
the date of the service of notice in FORM GST REG-23.

Upon receipt of the information or clarification in FORM GST REG-23, the proper
officer may proceed to dispose of the application within thirty days from the date of
receipt of such information or clarification from the applicant. That can be done
within 30 days.

*** Chapter – end ***
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RELEVANT REGISTRATION FORMS

SI No. Form Number Content
1 GST REG-01
Application for Registration
Part A – Declaration of PAN, E-mail Address,
State or Union Territory of the Applicant.
Part B – Application for Registration

2 GST REG-02 Acknowledgement
3 GST REG-03
Notice for seeking Additional Information /
4 GST REG-04 Clarification / Documents relating to
5 GST REG-05 Application.
6 GST REG-06
7 GST REG-07 Furnishing of clarification / additional
8 GST REG-08 information / document sought in GST REG-03
9 GST REG-09
10 GST REG-09 A Order of rejection of Application

11 GST REG-10 Issue of Registration Certificate

12 GST REG-11 Application for Registration as Tax Deductor or
Tax Collector at source

Order of Cancellation of Application for
Registration

Application for Registration for Non-resident
Taxable Person

Application for Registration for a person
supplying online information and database
access or retrieval services from a place outside
India to a non-taxable online recipient.

Application for extension in period of operation
by Casual Taxable Person and Non-resident
Taxable Person

Temporary Registration by Proper Officer /
Suo moto Registration

13 GST REG-12 Application to grant Unique Identity Number
14 GST REG-13
Application for Amendment in Particulars
15 GST REG-16 subsequent to Registration

16 GST REG-17 Show Cause Notice for Cancellation of
17 GST REG-18 Registration

Reply to SCN for Cancellation of Registration

Order for Cancellation of Registration

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18 GST REG-19 Order for dropping the SCN for Cancellation of
19 GST REG-20 Registration.
20 GST REG-21
21 GST REG-22 Application for revocation of Cancellation of
22 GST REG-23 Registration
23 GST REG-24
24 GST REG-25 Order for revocation of Cancellation of
Registration.
25 GST REG-26
Show Cause Notice for rejecting Revocation of
26 GST REG-27 Cancellation of Registration.
27 GST REG-28
28 GST REG-29 Furnishing of clarification / additional
information / in respect of application filed for
revocation of cancelation of Registration.
Application for Migration of Persons registered
under the existing law on a provisional basis.

Certificate of provisional registration to every
person, other than TDS Deductor or an ISD,
registered under an existing law and having
PAN (For migration of persons under Existing
Law)

Cancellation of provisional registration where
particulars or information asked for, have
either not been furnished or not found to be
correct or complete.

Show cause notice for cancelling provisional
registration granted.

Application by every person registered under
any of the existing laws, who is not liable to be
registered under the GST.

Physical Verification of Business Premises.

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SELF EXAMINATION QUESTIONS

CHAPTER 1: REGISTRATION

These Questions are for analyzing the understanding of the above
Chapter. Learners are advised to go through the Chapter and find out the correct
answers. They can also appear the Questions in the Learning Management System.
Similar types of questions are appearing in the Certification Exam also.

1. A Casual Taxable Person or Non-Resident should apply for Registration

a. Within 30 days of starting the Business.
b. Within one week of starting the Business.
c. Before 5 days of Starting the Business.
d. Before one month of starting the Business.

2. If a person has Head Office and Branches in different states, he has to

a. take registration for Head Office
b. take registration in each state
c. take registration as per the guidance of Officer
d. register Head Office and all branches separately

3. How many characters are there in a GSTIN?
a. 15 Characters
b. 12 Characters
c. 14 Characters
d. 16 Characters

4. Registration Certificate will be issued in _____________________
a. Form GST REG-10
b. Form GST REG-6
c. Form GST REG-9
d. Form GST REG-1

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CHAPTER 2:- ACCOUNTS & RECORDS

Lesson Objectives
On completion of this lesson, you will be able to understand:
 Records to be maintained as per GST Law.
 How to maintain and store Accounts
 Audit of Accounts
 Books of Accounts for Certain Persons
 Journal Entries to be passed.

2.1 Introduction
Learners are advised to go through the First Video of the Chapter II.
Introduction – Accounts & Records

Introduction
Every registered person should keep and maintain a true and correct account of the
below details at his principal place of business as mentioned in the Certificate of
Registration.
It should include
(a) Production or manufacture of goods
(b) Inward and outward supply of goods or services or both

(c) Stock of goods
(d) Input tax credit availed
(e) Output tax payable and paid and
(f) Other details as prescribed by Law.

The registered person shall also keep and maintain true and correct account of

 The goods or services imported or exported.

 The supplies attracting payment of tax on reverse charge along with relevant
documents, including
o Invoices
o Bills of supply
o Delivery challans
o Credit notes
o Debit notes
o Receipt vouchers
o Payment vouchers
o Refund vouchers and
o E-way bills.

The account or records should be maintained separately for each activity including

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 27

 Manufacturing
 Trading and
 Provision of services etc.

Details to be kept
Every registered person should keep the particulars of
(a) Names and complete addresses of suppliers who provided the goods or services
(b) Names and complete addresses of the Customers to whom he has supplied the
goods or services
(c) The complete addresses of the premises where the goods are stored by him with
the particulars of stock. He also should record goods stored during transit.

Advance
Every registered person shall keep and maintain a separate account of advances
received, paid and adjustments made thereto.

Accounts of Stock details should be maintained
Every registered person except under Composition Scheme should maintain accounts
of stock in respect of each commodity received and supplied by him. It should
include details such as

 Particulars of the opening balance

 Receipt, supply, goods lost, stolen, destroyed, written off or disposed of by
way of gift or free samples and

 Balance of stock including raw materials, finished goods, scrap, wastage etc.

Tax Details
Every registered person (including persons paying tax under reverse charge
mechanism) should keep and maintain an account, containing the details of

a. Tax payable Tax collected and paid
b. Input tax, input tax credit claimed
c. Register of tax invoice, credit note, debit note,
d. Delivery Challan issued or received during any tax period.

The Taxable Persons under Composition Scheme do not need to maintain the above
Tax Details.

Additional Accounts or Documents
The Commissioner may notify a class of taxable persons to maintain additional
accounts or documents for such purpose as may be specified therein.

Where the Commissioner considers that any class of taxable persons is not in a
position to keep and maintain accounts in accordance with the GST Law, he can

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 28

permit such class of taxable persons to maintain accounts in such manner as may be
prescribed.

Electronic Records
The registered person can keep and maintain accounts and other particulars in
electronic form as per the conditions. The records may be maintained in electronic
form and the record so maintained shall be authenticated by means of a digital
signature.

Annexure: Important Registers / Documents to be maintained. By Whom?
Account/Records Information Required

Register of Account should contain detail of goods Every assessee carrying
Goods Produced manufactured in a factory or production house out manufacturing
activity

Purchase All the purchases made within a tax period for All Assessee
Register manufacturing of goods or provision of services

Sales Register Account of all the sales made within a tax All Assessee
period must be maintained

Stock Register This register should contain a correct stock of All Assessee
inventory available at any given point of time

Input Tax Credit This register should maintain the details of All Assessee

Availed Input Tax Credit availed for a given tax period

Output Tax This register should maintain the details of GST All Assessee
Liability liability outstanding to be adjusted against
input credit or paid out directly

Output Tax Paid This register should maintain the details of GST All Assessee
paid for a particular tax period

Other Records Government can further specify by way of a Specific Businesses as
Specified
notification, additional records and accounts to notified by the

be maintained government

*** Chapter – end ***

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2.2 Maintenance of Books of Accounts
Learners are advised to go through the Second Video of the Chapter II.
Accounts & Records - Maintenance of Books of Accounts

Place for Keeping Business Records
Every registered person shall keep the books of account at the below places as
mentioned in his certificate of registration.

1. The principal place of business and
2. Every related place(s) of business

 Where a person has more than one place of business, the accounts relating to
each place of business should be kept at those places of business.

 The books of accounts should also include any electronic form of data stored
on any electronic device.

Editing / Deleting
We should be very careful in recording entries. Any entry in registers, accounts and
documents should not be erased, effaced or overwritten.

 All incorrect entries shall be scored out under attestation and thereafter
correct entry should be recorded.

 Where the registers and other documents are maintained electronically, a log
of every entry edited or deleted should be maintained.

Serially Numbering
Each volume of books of accounts maintained by the registered person should be
serially numbered.

Period of storing of Books of Accounts
Every registered person required keeping and maintaining books of account or
other records should retain them until the expiry of seventy two months (6 years)

from the due date of furnishing of annual return for the year pertaining to such
accounts and records.

Due Date of Furnishing of Annual Return + 72 Months (6 Years)

The Accounts should include all invoices, bills of supply, credit and debit notes, and
delivery challans relating to stocks, deliveries, inward supply and outward supply. It
should be kept at every related place of business mentioned in the certificate of
registration.

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 30

Appeal / Revision / Investigation
There is a special provision for registered person who is a party to an appeal or
revision or any other proceedings before any Appellate Authority or Revisional
Authority or Appellate Tribunal or court or is under investigation.

In such cases, he should retain the books of account and other records pertaining to
the subject matter of such appeal or revision or proceedings or investigation for a
period of One Year after final disposal of such appeal or revision or proceedings or
investigation, or for the period specified above, whichever is later.

Penalties

 Where the registered person fails to account for the goods or services, the

proper officer shall determine the amount of tax payable on the goods or
services that are not accounted for, as if such goods or services or both had
been supplied by such person and the provisions of Demands and Recovery
as per the GST Law will be applied for determination of such tax.

 If any documents, registers, or any books of account belonging to a registered

person are found at any premises other than those mentioned in the
certificate of registration, the proper officer can presume those accounts are
maintained by the said registered person.

 If any taxable goods are found to be stored at any place(s) other than those

declared without the cover of any valid documents, the proper officer shall
determine the amount of tax payable on such goods as if such goods have
been supplied by the registered person.

Demanding Books of Accounts
Every registered person should produce the books of accounts which he is required
to be maintained whenever it is demanded.

1) Proper electronic back-up of records shall be maintained and preserved in

such manner that, in the event of destruction of such records due to accidents
or natural causes, the information can be restored within reasonable period
of time.
2) The registered person maintaining electronic records should produce the
relevant records or documents, duly authenticated by him, in hard copy or in
any electronically readable format.
3) The registered person should provide an account of the audit trail and inter-
linkages including the source document, whether paper or electronic, and the
financial accounts, record layout, data dictionary and explanation for codes

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used and total number of records in each field along with sample copies of
documents.

Audit of Accounts
Every registered person whose turnover during a financial year exceeds ONE
CRORE should get his accounts audited by a chartered accountant or a cost
accountant. A copy of the audited annual accounts, the reconciliation statement and
such other documents should be submitted to the Department in FORM GSTR-9B.
The same can be submitted electronically through the Common Portal either
directly or through a Facilitation Centre notified by the Commissioner.

*** Chapter – end ***
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2.3 Special Persons
Learners are advised to go through the Third Video of the Chapter II.
Accounts & Records - Special Persons

A. Agents
Agent means a person, including a factor, broker, commission agent, arhatia, del
credere agent, an auctioneer or any other mercantile agent who carries on the
business of supply or receipt of goods or services on behalf of another.

Every agent should maintain separate accounts for each Principal depicting the -
(a) Authorization received from each principal to receive or supply goods or

services.
(b) Description, value and quantity etc. of goods or services received.
(c) Description, value and quantity of goods or services supplied.
(d) Details of accounts furnished to every principal and
(e) Tax paid on receipts or on supply of goods or services.

B. Manufacturer
Every Manufacturer of goods should maintain the following.
a) Monthly production accounts
b) Quantitative details of raw materials or services used in the manufacture
c) Quantitative details of the goods manufactured

d) Details of waste and by products.

C. Supplier of Services
Every Supplier of Services should maintain the accounts showing
a) Quantitative details of goods used in the provision of each service
b) Details of input services utilized and
c) Services supplied.

D. Works Contractors
Works Contract Executors should keep separate accounts for each works
contract executed showing –

(a)Names and addresses of the persons on whose behalf the works contract is
executed.
(b)Description, value and quantity of goods or services received for the execution
of works contract.
(c)Description, value and quantity of goods or services utilized in the execution
of each works contract
(d)Details of payment received in respect of each works contract and
(e)Names and addresses of suppliers from whom he has received goods or
services.

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 33

E. Carrier or a Clearing and Forwarding agent

It is applicable to any person having custody over the goods in the capacity of a
carrier or a clearing and Forwarding agent. He should maintain true and correct
records in respect of goods handled by him on behalf of the other person. He
should produce the details thereof as and when required by the proper officer.

F. Owner or Operator of warehouse or godown

Every owner or operator of warehouse or godown or any other place used for
storage of goods and every transporter should maintain records of the consigner,
consignee and other relevant details of the goods. Even when these persons are
not registered, they have to maintain the specified accounts.

He should maintain books of accounts with respect to the period for which
particular goods remain in the warehouse. It should include the particulars
relating to dispatch, movement, receipt, and disposal of such goods.

Storing Goods
The owner or the operator of the godown shall store the goods in such manner

that they can be identified item wise and owner wise. It should facilitate any
physical verification or inspection by the proper officer on demand.

He should submit the details regarding his business electronically on
the Common Portal in FORM GST ENR-01, either directly or through a
Facilitation Centre. On validation of the details furnished, a unique
enrollment number shall be generated and communicated to the said

person.

G. Transporter of Goods

Any transporter of goods should maintain records of goods transported,
delivered and goods stored in transit by him. It should be maintained for each of
his branches.

*** Chapter – end ***

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2.4 Journal Entries - I
Learners are advised to go through the Fourth Video of the Chapter
II.
Accounts & Records – Journal Entries

In the present scenario, Separate accounts have to be maintained for excise, VAT,
CST and service tax. Here’s a list of the few accounts currently any business has to
maintain (apart from accounts like purchase, sales, stock) –

 Excise payable a/c (for manufacturers)
 CENVAT credit a/c (for manufacturers)
 Output VAT a/c
 Input VAT a/c
 Input Service tax a/c
 Output Service tax a/c

For example, a trader Mr. X must maintain the minimum basic accounts –

 Output VAT a/c
 Input VAT a/c
 CST A/c (for inter-state sales and purchases)
 Service tax a/c [He will not be able to claim any service tax input credit as he

is a trader with output VAT. Service tax cannot be setoff against VAT/ CST]

Accounts in GST

Under GST all indirect taxes (excise, VAT, service tax) will get subsumed into one
GST, thus reducing the number of accounts required to be maintained. Once you go
through the accounting you will find it is much easier for record keeping. One of the
biggest advantages is that one can set off his input tax on service with his output tax
on sale.

Under GST, a trader has to maintain the following a/cs (apart from accounts like
purchase, sales, stock) –

 Input CGST a/c
 Output CGST a/c
 Input SGST a/c
 Output SGST a/c
 Input IGST a/c
 Output IGST a/c
 Electronic Cash Ledger (to be maintained on Government GST portal to pay

GST)

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 35

GST will bring in much clarity in many areas of business including accounting and
bookkeeping. Read on to find out about accounting entries under GST.

Accounting entries under GST
How to pass accounting entries in GST
Let us consider a few basic business transactions (all amounts excluding GST)-
Example 1: Intra-state Transactions

1. Mr. Ravi purchased goods Rs. 2,00,000 locally (intrastate)
2. He sold them for Rs. 2,50,000 in the same state
3. He paid legal consultation fees Rs. 10,000
4. He purchased furniture for his office for Rs. 25,000

Assuming CGST @5% and SGST@5%
The entries will be-

SI No. Journal Entries Amount Amount

1 Purchase A/c ………………Dr. 2,00,000

Input CGST A/c ……………Dr. 10,000

Input SGST A/c ……… …Dr. 10,000

To Creditors A/c 2,20,000

2 Debtors A/c ………………Dr. 2,75,000/-
To Sales A/c
To Output CGST A/c 2,50,000
To Output SGST A/c 12,500
12,500

3 Legal fees A/c ………..……Dr. 10,000
Input CGST A/c ……………Dr. 500
Input SGST A/c ……………Dr. 500
To Bank A/c
11,000
DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE 36
www.gstcentre.in

4 Furniture A/c ………..……Dr. 25,000

Input CGST A/c ……………Dr. 1,250

Input SGST A/c ……………Dr. 1,250

To ABC Furniture Shop A/c 27,500

Particulars Input Tax Output Tax Net Tax Payable
SGST 11,750/- 12,500/- 750/-
CGST 11,750/- 12,500/- 750/-

Now we can input the entry for the net tax payable.

5 Output CGST A/c ……………Dr. 12,000

Output SGST A/c ……………Dr. 12,000

To Input CGST A/c 11,750
11,750
To Input SGST A/c 1,500

To Electronic Cash Ledger A/c

Please note that we are able to claim Input Tax Credit for purchasing furniture and
also on legal fees which was not possible before GST.
If there had been any input tax credit left it would have been carried forward to the
next year.

*** Chapter – end ***

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2.5 Journal Entries - II
Learners are advised to go through the Fourth Video of the Chapter
II.
Journal Entries - Inter-state Transactions

Let’s look upon these transactions for understanding the journal entries and
set-off procedures in inter-state transactions.

1. Mr. Ravi purchased goods Rs. 2,00,000 from outside the State

2. He sold Rs. 2,00,000 locally
3. He sold Rs.1,00,000 outside the state
4. He paid telephone bill Rs. 5,000
5. He purchased an air cooler for his office for Rs. 20,000 (locally)

Assuming CGST @5% and SGST@5% Amount Amount
SI No. Journal Entries

1 Purchase A/c ………………Dr. 2,00,000

Input IGST A/c ……………Dr. 20,000

To Creditors A/c 2,20,000

2 Debtors A/c ………………Dr. 2,20,000

To Sales A/c 2,00,000

To Output CGST A/c 10,000

To Output SGST A/c 10,000

3 Debtors A/c ………………Dr. 1,10,000

To Sales A/c 1,00,000

To Output IGST A/c 10,000

4 Telephone Expenses A/c ..…Dr. 5,000

Input CGST A/c ………………..Dr. 250

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 38

Input SGST A/c …..……………Dr. 250
To Bank A/c 5,500

5 Office Equipment A/c.…..Dr. 20,000

Input CGST A/c ……………Dr. 1,000

Input SGST A/c ……………Dr. 1,000

To XYZ Home Appliances A/c 22,000

Particulars IGST CGST SGST Total
10,000 10,000 30,000
Output liability 10,000
1,250/- 1,250/- 1,250/-
Less: Input tax credit 1,250/- 1,250/-
8,750/- 7,500 20,000
CGST NIL 7,500/-

SGST

IGST 10,000

Amount payable NIL

Any IGST credit will first be applied to set off IGST and then CGST. Balance if any will
be applied to setoff SGST.

So out of total input IGST of Rs. 20,000, firstly it will be completely setoff against
IGST. Then balance Rs.8,750 against CGST and Rs. 1,250/- with SGST.
From the total Rs. 40,000, only Rs. 7,500/- is payable.

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 39

So the setoff entries will be-
1 Setoff against IGST output

Output IGST ………………Dr. 10,000

To Input IGST A/c 10,000

Setoff against CGST output 1,250
8,750
2 Output CGST ………………Dr. 10,000
1,250/-
To Input CGST A/c 1,250/-

To Input IGST A/c 7,500/-

2 Setoff against SGST output

Output SGST ………………Dr. 2,500/-

To Input SGST A/c

To Input IGST A/c

4 Final payment

Output SGST A/c ……………Dr. 7,500/-

To Electronic Cash Ledger A/c

*** Chapter – end ***

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SELF EXAMINATION QUESTIONS

CHAPTER -2: ACCOUNTS & RECORDS

These Questions are for analyzing the understanding of the above
Chapter. Learners are advised to go through the Chapter and find
out the correct answers. They can also appear the Questions in
the Learning Management System. Similar types of questions are
appearing in the Certification Exam also.

1. Which of the below persons is not required to keep and maintain an account,
containing the details of Tax payable Tax collected and paid

a. Persons under Reverse Charge Mechanism
b. Composition Tax Payers
c. Non Residents
d. Casual Taxable Persons

2. What is the time period for which a registered person is required to keep and
retain the books of accounts or other records

a. End Date of Financial Year + 5 Years
b. End Date of Financial Year + 72 Months.
c. Due Date of Furnishing of Annual Return + 72 Months.
d. Due Date of Furnishing of Annual Return + 5 Years.

3. What is the turnover limit in a financial year to get the accounts audited by a
chartered accountant or a cost accountant?

a. 50 Lakhs
b. 20 Lakhs
c. One Crore

d. Compulsory for All

4. Which form should be submitted by an Owner or Operator of warehouse or
godown with details regarding his business electronically on the Common
Portal?
a. FORM GST ONR-1
b. FORM GST ENR-1
c. FORM GST TNR-1
d. FORM GST WNR-1

DIPLOMA IN GOODS & SERVICES TAX (DGST) TM – INTERMEDIATE www.gstcentre.in 41

CHAPTER 3:- COMPOSITION SCHEME

Lesson Objectives
On completion of this lesson, you will be able to understand:
 Meaning and Benefits of Composition Scheme
 Intimation for Composition Levy
 Effective Date for Composition Levy
 Conditions and Restrictions for Composition Levy
 Rate of Tax of the Composition Levy

3.1 INTRODUCTION
Learners are advised to go through the First Video of the Chapter IV.
Introduction – Composition Scheme

Every Tax Administration aims towards timely recovery of taxes, filing of returns,
simplified generation and maintenance of records, invoices and other records. Small
Businesses always find it difficult to comply with various provisions of any tax
system. So GST Law has brought a Composition Scheme for Small Businessmen.

GST Composition Scheme contains an option for a registered taxable person having
turnover less than Rs. 50 Lakhs to pay tax at a lower rate respect to certain specified
conditions.

Merits of the Scheme

There are certain benefits available for a person registered under the composition
scheme.

a) Limited Compliance:-GST Law ensures lesser compliance with regard to the
furnishing of returns, maintenance of books of records, issuance of invoices
so that small businessmen get more focus on business.

b) Limited Tax Liability:-On comparison with regular taxpayers, person taxed
under Composite Scheme will be liable to pay less tax.

c) High Liquidity: Unlike normal tax payers, tax payers under Composition
Scheme will be liable to pay taxes at a lower rate resulting in lesser chunk on
his working capital

d) Lesser Returns:-A normal taxpayer is required to submit a minimum of three
returns on monthly basis and one yearly consolidated return i.e. 37 returns in
a whole year non-filing of which will attract penalty. Under the scheme a tax
payer is required to file one return in each quarter, he need not worry on
record keeping and focus more on his business.

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e) Bill of Supply:-Since the person is not required to pay taxes at regular rates,
he is not liable to issue a Tax Invoice rather issue a Bill of Supply making this
a more convenient option as lesser details are required.

Demerits of the Scheme

The demerits of registering under Composite Scheme by a taxable person are as
follows:

 Limited Territory for Business: A taxpayer registered under the
composition scheme is barred from carrying out inter-state transactions and
cannot affect import-export of goods and services.

 No Credit of Input Tax: Under the scheme, the credit of input tax paid on the
purchases of inputs from a normal tax payer will not be allowed. The buyer of
goods supplier by scheme holder will also not enjoy input tax credit. This may
result in price distortion, cascading, loss of business to scheme holders.

 No Collection of Tax: Though the rate of tax for a scheme holder is lower the
burden of such tax is kept on the taxpayer himself, leading to higher cost of
sales.

Taxable Persons Excluded from the Composition Scheme

Following taxable persons are not granted permission to opt for the scheme who:

 Suppliers of goods not leviable under the Act.
 Suppliers of Services.
 Person making Interstate or import/ export of goods.
 Makes a supply of goods through Electronic Commerce Operator i.e.

Ecommerce and liable to collect taxes.
 Manufacturers of notified goods.

Multiple Verticals

In case a taxable person has different business segments having same PAN as held
by the taxable person, he must register all such businesses under the scheme.

If an individual has different business segments such as:

1. Textile
2. Electronics and accessories
3. Groceries

Then he must register all the above segments collectively under the composite
scheme or simply opt not for the scheme.

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Strict Penal Provisions
Under GST if in the opinion of proper officer, it is found that a taxable person not
being eligible for the scheme have opted for the scheme, he shall be liable to pay
differential taxes along with penalty and provisions of demand and recovery will
apply to him.
This means that before opting for the scheme a taxable person must be free from
any or all doubts of his eligibility for the scheme to avoid such penal provisions. He
will be liable to pay tax at standard rate on his total turnover along with a penalty
which will be equal to the total tax liability.

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3.2 Intimation for Composition Levy
Learners are advised to go through the Second Video of the Chapter III.
Composition Scheme – Procedures in GST

Scenarios for Composition scheme
There can be three scenarios in which a person can opt for Composition Scheme.

1. Person registered under the existing law.
2. New Registrants.
3. Switch over to Composition Scheme from Regular Scheme.

1. Person registered under the existing law.
Person registered under the existing law and has been granted registration on
provisional basis and who opts to pay tax under Composition levy under the GST
regime has to file a separate form.

They should electronically file intimation in FORM GST CMP-01, duly
signed, on the Common Portal, either directly or through a Facilitation
Centre notified by the Commissioner.

The form is to be filed prior to the appointed day but not later than 30 days after the
appointed day. The period can be extended by the Commissioner in this behalf.

Where the intimation in FORM GST CMP-01 is filed after the appointed day, the
registered person should not collect any tax from the appointed day. He can issue a
bill of supply for supplies made after the said day.

2. New Registrants
For new Applicants, they are given an option in Part B of Form GST REG-
01 to pay tax under Composition levy. Same will be considered as
intimation to pay tax under composition levy.

3. Switch over to Composition Scheme from Regular Scheme

Any registered person who opts to pay tax under composition levy has to
file intimation in Form GST CMP-02 prior to the commencement of the
financial year for which the option to pay under composition levy is to be
exercised.

He also should furnish the statement in FORM GST ITC-3 within sixty
days from the commencement of the relevant financial year. The same
will contain

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 Inputs lying in stock.
 Inputs contained in semi-finished and finished goods and
 Goods lying in stock
 Inward supply of goods received from unregistered persons etc.

More Places of Business
Any intimation as per GST CMP-01 or GST CMP-02 in respect of any place of
business in any State or Union territory shall be deemed to be intimation in respect
of all other places of business registered on the same PAN.

So there is no need to file separate intimation for other places of business registered
on same PAN.

Effective date for composition levy
Effective date to pay tax under the Composition levy will be from the beginning of
the financial year where intimation is filed by a registered person.

For a registered person under the existing law, it will be the appointed day.

Rate of tax of the composition levy
The composition tax rates are specified for different class of the registered persons.
The persons eligible for composition levy shall pay tax at the rate specified in below

Table:

SI No. Category of registered persons CGST Tax % SGST Tax %
1 Manufacturers 1% 1%

2 Suppliers making supplies referred to 2.5% 2.5%
in clause (b) of paragraph 6 of
Schedule II Supply of food or any other
article for human consumption or any
drink (other than alcoholic liquor for
human consumption).

3 Any other supplier .5% .5%

The states can add equivalent rate of tax in their respective States Goods & Services
Tax Law. It should be confirmed with the respective State GST Laws.

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3.3 Conditions and Restrictions
Learners are advised to go through the Third Video of the Chapter III.
Conditions and Restrictions – Composition Scheme

Conditions and Restrictions
The option exercised by a registered person to pay tax under Composition Scheme
shall remain valid so long as he satisfies all the conditions mentioned in the said
section and these rules.

Intimation by Composition Tax Payer
There is no necessity to file intimation every year by the Composition Tax Payer. He
can continue to pay tax under the composition scheme subject to the provisions of
the Act and these rules.

Conditions
The person exercising the option to pay tax under Composition Scheme shall comply
with the following conditions:
(a) He should not be a Casual Taxable Person or a Non-resident Taxable Person.
(b) The goods held in stock by him on the appointed day should not be

i. Purchased in the course of inter-State trade or commerce or
ii. Imported from a place outside India or
iii. Received from his branch situated outside the State or from his agent or

principal outside the State
(c) The goods held in stock by him have not been purchased from an unregistered
person. If he has purchased such goods he should have been paid tax under the
reverse charge mechanism.
(d) He should pay tax under reverse charge mechanism purchase of goods or
services from un-registered persons;
(e) He is not engaged in the manufacture of goods as notified in GST Law.

Display of Information
He should mention the words “composition taxable person, not eligible to collect tax
on supplies” at the top of the bill of supply issued by him; and

“Composition Taxable Person, not eligible to collect tax on supplies”

He should also mention the words “composition taxable person” on every notice or
signboard displayed at a prominent place at his principal place of business and at
every additional place or places of business.

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Migration to Regular Scheme
The persons registered under the Composition scheme will be migrated to the
Regular scheme on happening of any of the following.

1. He ceases to satisfy the conditions.
2. He files withdrawal from Composition Scheme or
3. The Proper Officer issue a Notice

1. He ceases to satisfy the conditions.
The person will be liable to pay tax under the regular scheme from the day he ceases
to satisfy any of the conditions mentioned as above.

He should issue tax invoice for every taxable supply made thereafter and
he shall also file intimation for withdrawal from the scheme in FORM GST
CMP-04 within seven days of occurrence of such event.

2. Withdrawal from Composition Scheme
The registered person who intends to withdraw from the composition
scheme should file an application in FORM GST CMP-04, duly signed,
electronically on the Common Portal. It should be done before the date of
such withdrawal.

3. Notice from Officer for Withdrawal
The proper Officer can issue a notice to a person for withdrawal of Composition
Scheme. It can be done when he has reasons to believe that

 The registered person was not eligible to pay tax under the composition
scheme or

 The registered person has contravened the provisions of the Act or rules.

The Proper Office can issue a notice to such person in FORM GST CMP-
05. It can be issued asking the reasons to why option to pay tax under
composition scheme should not be denied.

A period of fifteen days of the receipt of such notice is given for reply by
the Registered Person. He should give reply in FORM GST CMP-06.

Upon receipt of reply to the show cause notice issued from the registered
person in FORM GST CMP-06, the proper officer shall issue an order in
FORM GST CMP-07. He can either accept the reply, or deny the option to
pay tax under composition scheme. He can issue such order within thirty
days of receipt of such reply.

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Filing Form GST ITC-01

Every person who has migrated to the Regular scheme should
electronically furnish at the Common Portal, either directly or through a
Facilitation Centre notified by the Commissioner, a statement in FORM
GST ITC-01.

It should contain details of the stock of inputs and inputs contained in semi-finished
or finished goods held in stock by him on the date on which the option is withdrawn
or denied. It should be filed within 30 days from the date from which the option is
withdrawn or from the date of order passed in FORM GST CMP-07.

Any intimation for such withdrawal or denial of the option in respect of any place of
business in any State or Union territory shall be deemed to be intimation in respect
of all other places of business registered on the same PAN.

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RELEVANT FORMS RELATED TO COMPOSITION LEVY

SI No. Form Number Content
1 FORM GST CMP-01 Intimation for Composition levy by a person who
2 FORM GST CMP-02 has been granted provisional registration and
3 FORM GST CMP-03 who opts to pay tax under Composition Levy.
Intimation for Composition Levy by a registered
4 FORM GST CMP-04 person who opts to pay tax under Composition
5 FORM GST CMP-05 Levy.
6 FORM GST CMP-06 Details of Stock, including the inward supply of
goods received from unregistered persons to be
provided by a person who has been granted
provisional registration adopts pay tax under
Composition Levy.
Application for Withdrawal from the
Composition Scheme.
Show Cause Notice for denying the option to pay
tax under Composition Levy.
Reply to Show cause Notice

7 FORM GST CMP-07 Order for accepting or denying the option to pay
tax under the Composition Levy.

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