Module_16_3_

GOODS AND
SEVICES TAX

CERTIFICATE COURSE

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DEVELOPED BY

MODULE - 3

BASIC CONCEPTS OF GST

3.1 GOODS AND SERVICES TAX COUNCIL (GSTC) ➢ There would be four tax rates namely 5%,
12%, 18% and 28%. Besides, some goods and
The GSTC has been notified with effect from 12th services would be under the list of exempt
September, 2016. GSTC is being assisted by a items. Rate for precious metals is yet to be
Secretariat. Thirteen meetings of the GSTC have fixed. A cess over the peak rate of 28% on
been held so far. The following decisions have been certain specified luxury and sin goods would
taken by the GSTC: be imposed for a period of five years to
compensate States for any revenue loss on
➢ The threshold exemption limit would be Rs. account of implementation of GST. The
20 lac. For special category States Council has asked the Committee of officers
enumerated in article 279A of the to fit various goods and services in these four
Constitution, threshold exemption limit has slabs keeping in view the present incidence of
been fixed at Rs. 10 lac. tax.

➢ Composition threshold shall be Rs. 50 lac. ➢ The five laws namely CGST Law, UTGST Law,
Composition scheme shall not be available to IGST Law, SGST Law and GST Compensation
inter-State suppliers, service providers Law have been recommended.
(except restaurant service) and specified
category of manufacturers. ➢ In order to ensure single interface, all
administrative control over 90% of taxpayers
➢ Existing tax incentive schemes of Central or having turnover below Rs. 1.5 crore would
State governments may be continued by vest with State tax administration and 10%
respective government by way of with the Central tax administration. Further
reimbursement through budgetary route. all administrative control over taxpayers
The schemes, in the present form, would not having turnover above Rs. 1.5 crore shall be
continue in GST.

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divided equally in the ratio of 50% each for execution of shared IT framework and the services to
the Central and State tax Page 4 of 12 Central and State Governments and other
administration. stakeholders including the tax payers. The prime
➢ Powers under the IGST Act shall also be objective of this network is to provide for a definite
cross-empowered on the same basis as under and unvaried interface to the taxpayers, and shared
CGST and SGST Acts with few exceptions. services of the related type to the Central and the
➢ Power to collect GST in territorial waters State Government including the Union Territories.
shall be delegated by Central Government to
the States. With the aid of the GSTN a unique IT framework is
➢ Formula and mechanism for GST under development which consists of a uniform GST
Compensation Cess has been finalised. portal which is going to provide services related to
➢ Four rules on input tax credit, composition registration, returns and payments to all the
levy, transitional provisions and valuation taxpayers, also the stern IT services for certain states
have been recommended. Further five Rules that consist of the procedure for processing of
on registration, invoice, payments, returns returns, registrations, audits, appeals etc. Each and
and refund, finalized in September, 2016 and every state, various accounting authorities, RBI and
as amended in light of the GST bills Banks are also formulating their IT mechanism for the
introduced in the Parliament, have also been administration of GST.
recommended.
Under the GST Regime, there will be no physical or
3.2 GOODS AND SERVICE TAX NETWORK manual filing of returns. All taxes can also be paid
3.2.1 What is GSTN (Goods And Service Tax online. Majority of the returns would be self-
Network)? assessed. There would be no requirement for manual-
intervention and all the mis-matched returns would
In order to execute the regime of GST in the country, be automatically generated.
both the Central and the State Government have
registered a Network which is known as “Goods and 3.2.2 What is the GSTIN?
Services Tax Network (GSTN)” which is a non-profit,
non-Governmental Company that would support in When the taxpayer registers himself on the GST
portal, he gets a unique number. This unique number

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is called The Goods and Service Tax Identification Shareholder Shareholding
Number (GSTIN). It is based on that taxpayer’s PAN. Central Government 24.5%
State Governments & EC 24.5%
3.2.3 Structure of GSTN LIC Housing Finance Ltd 11%
HDFC 10%
Since The Goods and Service Tax Network is a non- HDFC Bank 10%
profit, non-government organisation promoted by NSE Strategic Investment Co 10%
the State and the Central governments. Shares of ICICI Bank 10%
GSTN is divided amongst the private players and the Total 100%
government. 51% of the shares are owned by the
private players and rest of the shares, ie., 49% are 3.2.4 Salient Features of the GSTN
owned by the government. This 49% shared are
divided equally between the State and the Central ➢ Open Application Program Interface (API)
governments. Authorised capital of GSTN is Rs10
crore. It is an open Application Program Interface (API)
which provides an interface by connecting third
Infosys was offered with the contract to develop party application which makes it convenient for
this huge technological aspect of GST in September taxpayers to use it through their gadgets.
2005. The GSTN has been sanctioned for a non-
recurring grant of Rs.315 crores

Mr. Navin Kumar is the chairperson of GTN. He has
been an IAS servant and has also served with the
Bihar government and the Central government.

Below is the equity structure of GSTN which is as
follows:

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➢ Simplicity of Compliance mechanisms of Special Resolution and Shareholders
Agreement, and agreements between the GSTN and
GSTN has ensured simplicity of compliance and save other state governments.
of time by automating invoice matching from their
software itself without the need to log on to the ➢ Expenses Will Be Shared
portal. GSTN has introduced such a technology
which has brought efficiency in tax administration The user charges will be paid wholly by the Central
for registration, data exchange, returns filing, Government and the State Governments in equal
effectual auditing, monitoring, investigation and percentage (i.e. 50:50) on the behalf of all users. The
performance analysis with minimal or zero human state share will be then allocated to individual states,
intervention. in proportion to the number of taxpayers in the state.

➢ Handles Complex Transactions 3.2.5. Functions of GSTN

GST is a destination based tax. Keeping in mind the GSTN is the backbone of the Common Portal which
volume of transactions in India, it is extremely has the main responsibility of providing a well-built IT
complex to adjust IGST, for inter-state trade, at the infrastructure and the related services to the State
Centre and several states level. To tackle this and Central Governments, stakeholders and
problem, strong IT infrastructure and service taxpayers for the implementation of GST.
backbone is needed which captures, processes and Approximately 68 to 72 Lakh returns and around
exchanges information for speedy settlement three billion accounts are supported by it every
mechanism amongst the States. month.

➢ Secured Information Following are the main functions of GSTNi:

As GSTN is known to be mother database, it is ➢ facilitating registration;
necessary for the government to assure the ➢ computation and settlement of IGST;
confidentiality and security of taxpayer’s ➢ filing and forwarding the returns to Central
information. The Central Government will have
control over the composition of the Board, and State tax authorities;
➢ running the matching engine for inPpauget |ta4x

credit.

➢ providing various Management Information ✓ Additional Duties of Customs (commonly
System reports to Governments. known as CVD)

➢ matching of tax payment details with banking ✓ Special Additional Duty of Customs
network; (SAD)

➢ analysis of tax payers’ profile; and ✓ Service Tax
➢ Taxes previously levied and collected by the
3.3. EXTENT AND COMMENCEMENT
State
Short Title, Extent And Commencement
✓ State VAT
➢ This Act may be called the Central Goods and ✓ Central Sales Tax
Services Tax Act, 2017. ✓ Entertainment and Amusement Tax

➢ It extends to the whole of India except the (except when levied by the local bodies)
State of Jammu and Kashmir. ✓ Taxes on lotteries, betting, and gambling
✓ Luxury Tax
➢ It shall come into force on such date as the ✓ Octroi
Central Government may, by notification in
the Official Gazette, appoint: 3.5. STATUTORY DEFINITIONS
Provided that different dates may be 3.5.1 Actionable Claim
appointed for different provisions of this Act
and any reference in any such provision to the Section 2(1) of CGST
commencement of this Act shall be construed “actionable claim” shall have the same meaning as
as a reference to the coming into force of that assigned to it in section 3 of the Transfer of Property
provision. Act, 1882;

3.4. TAXES TO BE SUBSUMED IN GST “Actionable claim” means a claim to any debt, other
than a debt secured by mortgage of immoveable
➢ Taxes previously levied and collected by the property or by hypothecation or pledge of moveable
Centre
✓ Central Excise duty

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property, or to any beneficial interest in moveable Associated Enterprises
property not in the possession, either actual or
constructive, of the claimant, which the Civil Courts The term “associated enterprise” in relation to
recognise as affording grounds for relief, whether another enterprise is defined in section 92A(1). It
such debt or beneficial interest be existent, accruing, means an enterprise –
conditional or contingent;
(a) which participates, directly or indirectly, or
SOME OF THE EXAMPLES WHICH ARE HELD TO through one or more intermediaries, in the
BE ACTIONABLE CLAIMS management or control or capital of the other
enterprise; or
1. Claims for arrear of rent
2. Right to claim PF (b) in respect of which one or more persons who
3. 3. Lottery Ticket is actionable claims participate, directly or indirectly, or through one or
4. Recharge coupon which is advance receipt more intermediaries, in its management or control or
capital are the same persons who participate, directly
of money for providing service in future or indirectly, or through one or more intermediaries,
5. A right to a benefit of a contract in the management or control of the other enterprise.
6. A right to credit in a provident fund
7. Debentures Section 92A(2) provides that two enterprises shall be
deemed to be associated enterprises for the
3.5.2 Associated Enterprises purposes of sub-section(1) if, at any time during the
As per Section 2(12) of the Central Goods and previous year –
Services Tax (CGST) Act, 2017, unless the context
otherwise requires, the term “associated enterprises” ➢ one enterprise holds, directly or indirectly,
shall have the same meaning as assigned to it in shares carrying not less than twenty six
Section 92A of the Income-tax Act, 1961. per cent of the voting power in the other
enterprise; or

➢ any person or enterprise holds, directly or
indirectly, shares carrying not less
than twenty-six per cent of the voting power
in each of such enterprises; or

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➢ a loan advanced by one enterprise to the invention, model, design, secret formula or
other enterprise constitutes not less than process, of which the other enterprise is the
fifty one per cent of the book value of the owner or in respect of which the other
total assets of the other enterprise; or enterprise has exclusive rights; or

➢ one enterprise guarantees not less than ten ➢ ninety per cent, or more of the raw materials
per cent of the total borrowing of the and consumables required for
other enterprise; or the manufacture or processing of goods or
articles carried out by one enterprise are
➢ more than half of the board of directors or supplied by the other enterprise, or by
members of the governing board, or one persons specified by the other enterprise, and
or more executive directors or executive the prices and other conditions relating to the
members of the governing board of one supply are influenced by such other
enterprise, are appointed by the other enterprise; or
enterprise; or
➢ the goods or articles manufactured or
➢ more than half of the directors or members of processed by one enterprise, are sold to the
the governing board, or one or more of other enterprise or to persons specified by
the executive directors or members of the the other enterprise, and the prices and
governing board, of each of the two other conditions relating thereto are
enterprises are appointed by the same person influenced by such other enterprise; or
or persons; or
➢ where one enterprise is controlled by an
➢ the manufacture or processing of goods or individual, the other enterprise is also
articles or business carried out by controlled by such individual or his relative or
one enterprise is wholly dependent on the jointly by such individual and relative of
use of know-how, patent, copyrights, such individual; or
trademarks, licences, franchises or any other
business or commercial rights of similar ➢ where one enterprise is controlled by a Hindu
nature, or any data, documentation, drawing undivided family, the other enterprise
or specification relating to any patent, is controlled by a member of such Hindu

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undivided family, or by a relative of a member combination thereof, which are naturally bundled
of such Hindu undivided family, or jointly by and supplied in conjunction with each other in the
such member and his relative; or ordinary course of business, one of which is a
principal supply
➢ where one enterprise is a firm, association of
persons or body of individuals, the 3.5.4 Exempt Supply
other enterprise holds not less than ten per
cent interest in such firm, association of “exempt supply” means supply of any goods or
persons or body of individuals; or services or both which attracts nil rate of tax or which
may be wholly exempt from tax under section 11, or
➢ there exists between the two enterprises, any under section 6 of the Integrated Goods and Services
relationship of mutual interest, as may Tax Act, and includes non-taxable supply. It also
be prescribed. It may be noted that the Rules includes non-taxable supply. In such cases, the
10A to 10E do not refer to any relationship taxable person is not required to pay tax.
of mutual interest.
3.5.5 Zero-Rated Supply
The provisions of Section 92A(1) provides us with the
circumstances where two enterprises can be It means export or supply of goods or services to
considered as associated enterprises. The mere fact a Special Economic Zone developer or a Special
of participation by one enterprise in the control, Economic Zone unit.
management, or capital of the other enterprise, or
participation by one or more persons in 3.5.6 Inward Supply
the management, control or capital of both the
enterprises is not sufficient unless the tests laid down ‘Inward supply’ means in relation to a person, as
in section 92A(2) are fulfilled. receipt of goods or services or both whether by
purchase, acquisition or any other means with or
3.5.3 Composite Supply without consideration.

“composite supply” means a supply made by a taxable 3.5.7 Outward Supply
person to a recipient consisting of two or more
taxable supplies of goods or services or both, or any ‘Outward supply’ means in relation to a taxable

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person, as supply of goods or services or both, Whereas, Tax Credit means producer while paying
whether by sale, transfer, barter, exchange, licence, his tax on credit, he was able to reduce his tax.
rental, lease or disposal or any other mode, made or
agreed to be made by such person in the course or 3.5.10 Manufacture
furtherance of business.
“Manufacture” means processing of raw material or
3.5.8 Goods inputs in any manner that results in emergence of a
new product having a distinct name, character and
“Goods’’ means every kind of movable property other use and the term “manufacturer” shall be construed
than money and securities but includes actionable accordingly
claim, growing crops, grass and things attached to or
forming part of the land which are agreed to be 3.5.11 Person
severed before supply or under a contract of supply;
“Person” includes—
In other words, Goods include -
➢ Every kind of movable property ➢ an individual;
➢ Actionable claims ➢ a Hindu Undivided Family;
➢ Growing crops ➢ a company;
➢ grass and things attached to or forming part ➢ a firm;
of the land which are agreed to be severed ➢ a Limited Liability Partnership;
before supply or under a contract of supply. ➢ an association of persons or a body of

But excludes individuals, whether incorporated or not, in
➢ Money and India or outside India;
➢ Securities ➢ any corporation established by or under any
Central Act, State Act or Provincial Act or a
3.5.9 Input Tax Credit Government company as defined in clause
(45) of section 2 of the Companies Act, 2013;
“Input tax credit” means the credit of input tax ➢ anybody corporate incorporated by or under
the laws of a country outside India;
The term ‘Input Tax Credit’ defines itself – ‘Input’ + ➢ a co-operative society registered under any
‘Tax Credit’. Input means in order to manufacture a law relating to co-operative societies
product or services the materials purchased is Input. ➢ a local authority;

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➢ Central Government or a State Government; 3.5.12. Time of supply of goods
➢ society as defined under the Societies
➢ The liability to pay tax on goods shall arise at
Registration Act, 1860; the time of supply, as determined in
➢ trust; and accordance with the provisions of this
➢ every artificial juridical person, not falling section.

within any of the above; ➢ The time of supply of goods shall be the earlier
of the following dates, namely:—
3.5.11 Services (a) the date of issue of invoice by the supplier
or the last date on which he is required, under
“Services’’: means anything other than goods, money sub-section (1) of section 31, to issue the
and securities but includes activities relating to the invoice with respect to the supply; or
use of money or its conversion by cash or by any other (b) the date on which the supplier receives the
mode, from one form, currency or denomination, to payment with respect to the supply: Provided
another form, currency or denomination for which a that where the supplier of taxable goods
separate consideration is charged. receives an amount up to one thousand
rupees in excess of the amount indicated in
Explanation 1 the tax invoice, the time of supply to the
extent of such excess amount shall, at the
Services include transactions in money but does not option of the said supplier, be the date of issue
include money and securities. Meaning thereby that of invoice in respect of such excess amount.
if transaction is done without any separate charge Power to grant exemption from tax. Time of
/consideration, it will not be covered under the supply of goods.
definition of service.
Explanation 1.––For the purposes of clauses
Explanation 2 (a) and (b), “supply” shall be deemed to have
been made to the extent it is covered by the
But transaction in money relating to the use of money invoice or, as the case may be, the payment.
or its conversion by cash or by any other mode, from Explanation 2.––For the purposes of clause
one form, currency or denomination, to another form,
currency or denomination for which a separate
consideration is charged then it is service.

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(b), “the date on which the supplier receives ➢ Where it is not possible to determine the time
the payment” shall be the date on which the of supply under the provisions of sub-section
payment is entered in his books of account or (2) or sub-section (3) or sub-section (4), the
the date on which the payment is credited to time of supply shall––
his bank account, whichever is earlier. (a) in a case where a periodical return has to
➢ In case of supplies in respect of which tax is be filed, be the date on which such return is to
paid or liable to be paid on reverse charge be filed; or
basis, the time of supply shall be the earliest (b) in any other case, be the date on which the
of the following dates, namely:— tax is paid.
(a) the date of the receipt of goods; or
(b) the date of payment as entered in the ➢ The time of supply to the extent it relates to
books of account of the recipient or the date an addition in the value of supply by way of
on which the payment is debited in his bank interest, late fee or penalty for delayed
account, whichever is earlier; or payment of any consideration shall be the
(c) the date immediately following thirty days date on which the supplier receives such
from the date of issue of invoice or any other addition in value.
document, by whatever name called, in lieu
thereof by the supplier: 3.5.13. Time of Supply Of Services
Provided that where it is not possible to
determine the time of supply under clause (a) ➢ The liability to pay tax on services shall arise
or clause (b) or clause (c), the time of supply at the time of supply, as determined in
shall be the date of entry in the books of accordance with the provisions of this
account of the recipient of supply. section.
➢ In case of supply of vouchers by a supplier, the
time of supply shall be— ➢ The time of supply of services shall be the
(a) the date of issue of voucher, if the supply is earliest of the following dates, namely:—
identifiable at that point; or (b) the date of (a) the date of issue of invoice by the supplier,
redemption of voucher, in all other cases. if the invoice is issued within the period
prescribed under sub-section (2) of section 31
or the date of receipt of payment, whichever
is earlier; or

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(b) the date of provision of service, if the the following dates, namely:––
invoice is not issued within the period (a) the date of payment as entered in the
prescribed under sub-section (2) of section 31 books of account of the recipient or the date
or the date of receipt of payment, whichever on which the payment is debited in his bank
is earlier; or account, whichever is earlier; or
(c) the date on which the recipient shows the (b) the date immediately following sixty days
receipt of services in his books of account, in a from the date of issue of invoice or any other
case where the provisions of clause (a) or document, by whatever name called, in lieu
clause (b) do not apply: Provided that where thereof by the supplier: Provided that where
the supplier of taxable service receives an it is not possible to determine the time of
amount up to one thousand rupees in excess supply under clause (a) or clause (b), the time
of the amount indicated in the tax invoice, the of supply shall be the date of entry in the
time of supply to the extent of such excess books of account of the recipient of supply:
amount shall, at the option of the said Provided further that in case of supply by
supplier, be the date of issue of invoice associated enterprises, where the supplier of
relating to such excess amount. service is located outside India, the time of
Explanation.––For the purposes of clauses (a) supply shall be the date of entry in the books
and (b)–– of account of the recipient of supply or the
(i) the supply shall be deemed to have been date of payment, whichever is earlier.
made to the extent it is covered by the invoice ➢ In case of supply of vouchers by a supplier, the
or, as the case may be, the payment; time of supply shall be––
(ii) “the date of receipt of payment” shall be (a) the date of issue of voucher, if the supply is
the date on which the payment is entered in identifiable at that point; or
the books of account of the supplier or the (b) the date of redemption of voucher, in all
date on which the payment is credited to his other cases.
bank account, whichever is earlier. ➢ Where it is not possible to determine the time
➢ In case of supplies in respect of which tax is of supply under the provisions of sub-section
paid or liable to be paid on reverse charge (2) or sub-section (3) or sub-section (4), the
basis, the time of supply shall be the earlier of time of supply shall––

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➢ (a) in a case where a periodical return has to The time of supply to the extent it relates to an
be filed, be the date on which such return is to addition in the value of supply by way of interest, late
be filed; or fee or penalty for delayed payment of any
(b) in any other case, be the date on which the consideration shall be the date on which the supplier
tax is paid. receives such addition in value

i Understanding Goods and Services Tax (GST)- II, Indian https://www.indianeconomy.net/splclassroom/understanding-
Economy (29 Jun 2017), goods-and-services-tax-gst-ii/.

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