The document provides an introduction to Goods and Service Tax (GST) in India. It discusses the limitations of the previous indirect tax system, including tax cascading, lack of uniformity, and a narrow tax base. The key objectives of GST are outlined as creating a single, unified Indian market by reducing tax burden on consumers through elimination of cascading and providing comprehensive and wider coverage of goods and services. The salient features of GST discussed include applying to all supplies of goods and services (except a few), being a dual levy by Centre and States, and allowing input tax credit to reduce burden of tax on business.

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Unit 2 – Goods and Service tax
INTRODUCTION
The pre-GST system of indirect taxation has multiplicity of taxes levied by the Centre and State.
This has led to a complex and conflicting principles in indirect tax structure, adding to the multiple
compliance and administrative costs. There is no uniformity in tax rates and structure across States.
There is cascading of taxes due to ‘tax on tax’. There are too many restrictions on seamless credit
available, i.e., credit of excise duty and service tax paid at the stage of manufacture is not available to
the traders while paying the State level sales tax or VAT, and vice-versa. Further, no credit of State
taxes paid in one State can be availed in other States. (GST)Goods and Service Tax, which subsumes a
large number of Central and State taxes into a single tax, is meant to mitigate the cascading effect of
taxes, provide near seamless credit and make way for a common market.
The Constitution (One Hundred and Twenty Second Amendment) Bill, 2014 was passed by
Lok Sabha on 6th May, 2015. The proposed amendments in the Constitution are targeted to achieve
the objective of conferring simultaneous power on Parliament and State legislatures to make laws for
levying GST simultaneously on every transaction of supply of goods & services. In addition, the
proposed amendments would allow subsuming of a number of indirect taxes presently being levied by
Central & State Governments into GST and thus will remove cascading of taxes and provide a
common national market for goods and services.
The Bill contains 21 clauses and these clauses propose to, inter alia, and amend Constitution of
India by inserting new Articles-246A, 269A and 279A with respect to special provision to Goods and
Services Tax, levy and collection of Goods and Services Tax in course of inter-state trade or
commerce and Goods and Services Tax council, respectively. Apart from that, the bill also purports to
amend Articles 248, 249, 250, 268, 269, 270, 271, 286, 366 and 368 of Constitution of India and
amendment of the Sixth and the Seventh schedule of the Constitution as well. The Bill also seeks to
repeal Article 268A of the Constitution.
GST is one indirect tax for the whole nation, which will make India one unified common
market. The GST intends to subsume most indirect taxes under a single taxation regime. GST is a
single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of
input taxes paid at each stage will be available in the subsequent stages of value addition, which makes
GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the
GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. This
is expected to help broaden the tax base, increase tax compliance, and reduce economic distortions
caused by interstate variations in taxes.
INDIRECT TAXATION IN INDIA:
India currently has a dual system of taxation of goods and services, which is quite different from
dual GST. Taxes on goods are described as “VAT” at both Central and State level. It has adopted
value added tax principle with input tax credit mechanism for taxation of goods and services,
respectively, with limited cross-levy set-off.
Limitation of previous indirect tax system / Needs of GST
(a) Tax Cascading: Tax cascading occurs under both Centre and State taxes. The most significant
contributing factor to tax cascading is the partial coverage by Central and State taxes. Oil and gas
production and mining, agriculture, real estate construction, infrastructure projects, wholesale and
retail trade, and range of services remain outside the ambit of the CENVAT and the Service Tax levied
by the Centre. The exempt sectors are not allowed to claim any credit for the CENVAT or the Service
Tax paid on their inputs.
Similarly, under the State VAT, no credits are allowed for the inputs to the exempted sectors,
which include the entire service sector. Another major contributing factor to tax cascading is the

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Central Sales Tax (CST) on inter- State sales, collected by the Origin State for which no credit is
allowed by any State Government
b) Levy of Excise Duty on manufacturing point: The CENVAT is levied on goods manufactured or
produced in India. Limiting the tax to the point of manufacturing is a severe impediment to an efficient
and neutral application of tax. Taxable event at manufacturing point itself forms a narrow base.
For example, valuation as per excise valuation rules of a product, whose consumer price is Rs.
100/-, is, say, Rs. 70/-. In such a case, excise duty as per the present provisions is payable only on
Rs.70/-, and not on Rs.100/-.
c) Complexity in determining the nature of transaction – Sale vs. Service: The distinctions
between goods and services found in the Indian Constitution have become more complex. Today,
goods, services, and other types of supplies are being packaged as composite bundles and offered for
sale to consumers under a variety of supply-chain arrangements. Under the current division of taxation
powers in the Constitution, neither the Centre nor the States can apply the tax to such bundles. Each
Government can tax only parts of the bundle, creating the possibility of gaps or overlaps in taxation.
d) Inability of States to levy tax on services: Exclusion of services from the State taxation powers is
its negative impact on the buoyancy of State tax revenues. With no powers to levy tax on incomes or
the fastest growing components of consumer expenditures, the States have to rely almost exclusively
on compliance improvements or rate increases for any buoyancy in their own-source revenues.
Alternatives to assigning the taxation of services to the States include assigning to the States a share of
the Central VAT (including the tax from services).
(e) Lack of Uniformity in Provisions and Rates: Present VAT structure across the States lacks
uniformity, which is not restricted only to the rates of tax, but also extends to procedures and,
sometimes, to the definitions, computation and exemptions.
f) Local Sale vs. Central Sale: Whether a sale takes place in one State or another, i.e. to fix the sites
of a sale transaction, is the major conflict, as its taxability affects the revenue of the State. Though
CST is a tax levied by the Central Government, it is collected and retained by the collecting State.
Whether a transaction is a direct inter-State sale from State ‘Karnataka’ to the customer ‘ABC’ located
in State ‘Delhi’ or is a stock transfer from State ‘Karnataka’ to branch in State ‘Delhi’ first, and then a
local sale to the customer ‘ABC’ in the State ‘Delhi’, will have a bearing on the revenue of the State
‘Karnataka’ or State ‘Delhi’, as the case may be.
A significant number of litigations pertain to this issue. Ultimately, the Central Government made
provisions under the Central Sales Tax Act, 1956 and created a Central Appellate Authority to resolve
such matters.
g) Interpretational Issues: Another problem arises in respect of interpretation of various provisions
and determining the category of the commodities. We find a significant number of litigation
surrounding this issue only. To decide whether an activity is sale or works contract; sale or service, is
not free from doubt in many cases.
(h) Narrow Base: The starting base for the CENVAT is narrow, and is being further eroded by variety
of area-specific and conditional exemptions. Earlier the service tax was applicable on selective
services but after the implementation of Finance Act, 2012 the system of comprehensive taxation of
services was implemented, while excluding few service by specifying them in “negative list”.
i) Complexities in Administration: Compounding the structural or design deficiencies of each of the
taxes is the poor or archaic infrastructure for their administration. Taxpayer services, which are a
lynchpin of a successful self-assessment system, are virtually non-existent or grossly inadequate under
both Central and State administrations. Many of the administrative processes are still manual, not
benefiting from the efficiencies of automation. All these not only increase the costs of compliance, but
also undermine the revenue collection

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In order to eliminate all the above problems in the present indirect taxation system the government
decided to implement the Goods and Service tax.
Meaning and definition of GST:
Under new Article 246A (inserted by the Constitution Amendment Act, 2016), the Parliament has
exclusive power to make laws with respect to GST where the supply of goods or services or both take
place in the course of inter-State trade or commerce. Subject to the above, every State would have
powers to make laws with regard to GST imposed by the Union or that State.
GST stands for “Goods and Services Tax”, and is proposed to be a comprehensive indirect tax
levy on manufacture, sale and consumption of goods as well as services at the national level. Its main
objective is to consolidates all indirect tax levies into a single tax, except customs (excluding SAD),
replacing multiple tax levies, overcoming the limitations of existing indirect tax structure, and creating
efficiencies in tax administration.
Definition of Good and Service Tax (GST) - The term GST is defined in Article 366 (12A) to mean
“any tax on supply of goods or services or both except taxes on supply of the alcoholic liquor for
human consumption”.
In terms of Section 2 (52) of the CGST Act “Goods” means every kind of movable property other
than money and securities but includes actionable claims, growing crops, grass and other things
attached to or forming part of land which are agreed to be severed before supply or under a contract of
supply.
In terms of Section 2(102) of the CGST Act “Services” means anything other than goods, money
and securities but includes activity relating to the use of money or its conversion by cash or by any
other mode, from one form, currency or denomination, to another form, currency or denomination for
which a separate consideration is charged.
Under section 2(92) read with section 3 ‘supply’ includes all forms of supply of goods and/or
services such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to
be made for a consideration by a person in the course or furtherance of business.
Thus, all supply of goods or services or both would attract CGST (to be levied by Centre) and SGST
(to be levied by State) unless kept out of the purview of GST.
Example: - A product whose base price is Rs.100 and after levying excise duty @ 12% value
of the product is Rs. 112. On sale of such goods VAT is levied @ 12.5% and value to the ultimate
consumer is Rs. 126. In the proposed GST system on base price of Rs.100 CGST and SGST both will
be charged, say @ 8% each, and then the value to the ultimate consumer is Rs. 116. So, in such a case
the industry can better compete in global environment.
Objectives of GST
(a) One country – One tax: Implementation of goods and service tax aims at creating one tax rate
one market across the country by removing different rates of taxes applicable. By the
implementation of GST only one rate of tax is applicable on a particular product across the
country.
(b) Consumption based tax instead of Manufacturing: Goods and Services tax on consumption. It
is a destination based tax i.e., the tax will be paid to the state where the final product is
purchased/consumed by the final consumer rather than where the product is produced or
manufactured.
(c) Uniform GST Registration, Payment and Input tax Credit: To create simple administrative
procedure this GST system needs only a Single Uniform GST registration across the states. The
manufacturer, wholesaler, trader will be eligible for input tax credit on the inputs used for the final
product being sold.

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(d) To eliminate the cascading effect of Indirect taxes on single transaction: The key objective of
implementation of goods and services tax is to remove cascading effect of tax i.e., tax on taxes. In
the earlier system where the value added tax / sales tax was levied on excise duty, customs duty
included in the purchase price of the inputs which was lead to cascading of taxes and thereby the
selling price will be increased, it was burden to the final consumers. Under GST the tax paid on
inputs in earlier stages will be allowed as input tax credit hence the tax will be levied only on value
addition in each state of consumption. Hence, the cascading of taxes will be removed to a
maximum extent.
(e) Subsume all Indirect taxes At Centre and State Level: The Pre-GST implementation taxes like
Central excise duty, special additional duty, value added tax, service tax etc. Will be subsumed
under dual system i.e. Central goods and services tax and State Goods and service tax.
(f) Reduce tax evasion and corruption: Implementation of GST aims at reducing the tax Evasion
by the businessmen, public and entities.
(g) Increase Tax to GDP Ratio and revenue surplus: The implementation of GST assists all the
sectors to contribute to the higher extent than at present contribution.
Salient features of GST
(a) The GST would be applicable on the supply of goods or services as against the present concept of
tax on the manufacture and sale of goods or provision of services. It would be a destination based
consumption tax.
(b) It would be a dual GST with the Centre and States simultaneously levying it on a common tax
base. The GST to be levied by the Centre on intra- State supply of goods and / or services would be
called the Central GST (CGST) and that to be levied by the States would be called the State GST
(SGST).
(c) The GST would apply to all goods other than alcoholic liquor for human consumption and five
petroleum products, viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and
aviation turbine fuel. It would apply to all services barring a few to be specified.
(d)Tobacco and tobacco products would be subject to GST.
(e) The GST would replace the following taxes currently levied and collected by the Centre:
a. Central Excise duty
b. Duties of Excise (Medicinal and Toilet Preparations)
c. Additional Duties of Excise (Goods of Special Importance)
d. Additional Duties of Excise (Textiles and Textile Products)
e. Additional Duties of Customs (commonly known as CVD)
f. Special Additional Duty of Customs (SAD)
g. Service Tax
h. Central Surcharges and Cesses
(f) State taxes that would be subsumed under the GST are:
a. State VAT
b. Central Sales Tax
c. Luxury Tax
d. Entry Tax (all forms)
e. Entertainment and Amusement Tax (except when levied by the local bodies)
f. Taxes on advertisements
g. Purchase Tax
h. Taxes on lotteries, betting and gambling
i. State Surcharges and Cesses
(g) The CGST and SGST would be levied at rates recommended by the GST Council.
(h) There would be a floor rate with a small band of rates within which the States may fix the rates for
SGST.

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(i) The list of exempted goods and services would be common for the Centre and the States which
would be finalized by GST Council.
(j) An Integrated GST (IGST) would be levied and collected by the Centre on inter-State supply of
goods and services. Accounts would be settled periodically between the Centre and the States to
ensure that the SGST portion of IGST is transferred to the Destination State where the goods or
services are eventually consumed.
(k) Tax payers shall be allowed to take credit of taxes paid on inputs (input tax credit) and utilize the
same for payment of output tax. However, no input tax credit on account of CGST shall be utilized
towards payment of SGST and vice versa. The credit of IGST would be permitted to be utilized for
payment of IGST, CGST and SGST in that order.
(l) HSN (Harmonized System of Nomenclature) code shall be used for classifying the goods under the
GST regime. It is being proposed that taxpayers whose turnover is above Rs. 1.5 crores but below Rs.
5 crores shall use 2 digit code and the taxpayers whose turnover is Rs. 5 crores and above shall use 4
digit code. Taxpayers whose turnover is below Rs. 1.5 crores will not be required to mention HSN
Code in their invoices.
(m) Exports shall be treated as zero-rated supply. No tax is payable on export of goods or services but
credit of the input tax related to the supply shall be admissible to exporters and the same can be
claimed as refund by them.
(n) Import of goods and services would be treated as inter-State supplies and would be subject to IGST
in addition to the applicable customs duties. The IGST paid shall be available as ITC for payment of
taxes on further supplies.
(o) The laws, regulations and procedures for levy and collection of CGST and SGST would be
harmonized to the extent possible.
Bills for implementation of GST regime
I. The Central Goods and Services Tax Bill 2017 (The CGST Bill): The CGST Bill makes
provisions for levy and collection of tax on intra-state supply of goods or services or both by the
Central Government.
THE CENTRAL GOODS AND SERVICES TAX ACT, 2017
An Act to make a provision for levy and collection of tax on intra-State supply of goods or services or
both by the Central Government and for matters connected therewith or incidental thereto.
(1) This Act may be called the Central Goods and Services Tax Act, 2017.
(2) It extends to the whole of India except the State of Jammu and Kashmir.
(3) It shall come into force on such date as the Central Government may, by notification in the Official
Gazette, appoint:
THE CENTRAL GOODS AND SERVICES TAX (EXTENSION TO JAMMU AND KASHMIR)
ACT, 2017 [23rd August, 2017.]
An Act to provide for the extension of the Central Goods and Services Tax Act, 2017 to the State of
Jammu and Kashmir.
it enacted by Parliament in the Sixty-eighth Year of the Republic of India as follows:—
(1) This Act may be called the Central Goods and Services Tax (Extension to Jammu and Kashmir)
Act, 2017.
(2) It shall be deemed to have come into force on the 8th day of July, 2017. The Central Goods and
Services Tax Act, 2017 (here in after referred to as the principal Act) and all rules, notifications and
orders made there under by the Central Government are hereby extended to, and shall be in force in,
the State of Jammu and Kashmir.

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II. The Integrated Goods and Services Tax Bill 2017 (The IGST Bill): IGST Bill makes provisions
for levy and collection of tax on inter-state supply of goods or services or both by the Central
Government.
THE INTEGRATED GOODS AND SERVICES TAX ACT, 2017 [12th April, 2017.]
An Act to make a provision for levy and collection of tax on inter-State supply of goods or
services or both by the Central Government and for matters connected therewith or incidental thereto.
1. (1) This Act may be called the Integrated Goods and Services Tax Act, 2017.
(2) It shall extend to the whole of India except the State of Jammu and Kashmir.
(3) It shall come into force on such date as the Central Government may, by notification in the Official
Gazette, appoint:
THE INTEGRATED GOODS AND SERVICES TAX (EXTENSION TO JAMMU AND KASHMIR)
ACT, 2017 [23rd August, 2017.]
An Act to provide for the extension of the Integrated Goods and Services Tax Act, 2017 to the State of
Jammu and Kashmir. This Act may be called the Integrated Goods and Services Tax (Extension to
Jammu and Kashmir) Act, 2017.
(2) It shall be deemed to have come into force on the 8th day of July, 2017. The Integrated Goods and
Services Tax Act, 2017 (hereinafter referred to as the principal Act) and all rules, notifications,
schemes and orders made there under by the Central Government are hereby extended to, and shall be
in force in, the State of Jammu and Kashmir Extension GST Council has approved a bill for State
compensation for revenue loss arising out of GST in the country. A bill called Goods and Services
(State compensation for loss of revenue) bill shall provide for compensation to the states for loss of
revenue arising on the account of implementation of the Goods and Services Tax for a period of 5
Year as per section 18 of the Constitution Act.
III. The Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill): The UTGST Bill
makes provisions for levy on collection of tax on intra-UT supply of goods and services in the Union
Territories without legislature. Union Territory GST is akin to States Goods and Services Tax (SGST)
which shall be levied and collected by the States/Union Territories on intra-state supply of goods or
services or both.
The following Act of Parliament received the assent of the President on the 12th April, 2017,
An Act to make a provision for levy and collection of tax on intra-State supply of goods or services or
both by the Union territories and for matters connected therewith or incidental thereto. This Act may
be called the Union Territory Goods and Services Tax Act, 2017. It extends to the Union territories of
the Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and Diu,
Chandigarh and other territory.
It shall come into force on such date as the Central Government may, by notification in the
Official Gazette, ‘‘Union territory’’ means the territory of,—
(i) the Andaman and Nicobar Islands;
(ii) Lakshadweep;
(iii) Dadra and Nagar Haveli;
(iv) Daman and Diu;
(v) Chandigarh; or
(vi) Other territory.
IV. The Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation
Bill): The Compensation Bill provides for compensation to the states for loss of revenue arising on
account of implementation of the goods and services tax for a period of five years as per section 18 of
the Constitution (One Hundred and First Amendment) Act, 2016.

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THE GOODS AND SERVICES TAX (COMPENSATION TO STATES) ACT, 2017 received the
assent of the President on the 12th April, 2017. BE it enacted by Parliament in the Sixty-eighth Year
of the Republic of India as follows:—
 This Act may be called the Goods and Services Tax (Compensation to States) Act, 2017.
 It extends to the whole of India
 It shall come into force on such date as the Central Government may, by notification in the
Official Gazette, appoint.
Applicability of GST
1. GST is applicable on the supply of goods and services.
2. GST is not levied (initially) on:
(a) Petroleum crude
(b) High speed diesel
(c) Motor spirit (petrol)
(d) Natural gas
(e) Aviation Turbine fuel
3. Alcoholic liquor for human consumption is exempted from GST.
4. Tobacco and tobacco products will be subjected to GST. The centre may apply excise duty on
tobacco.
GST COUNCIL
How would GST be administered in India?
GST Council will be tasked with optimizing tax collection for goods and services by the State
and Centre. The Council will consist of the Union Finance Minister (as Chairman), the Union Minister
of State in charge of revenue or Finance, and the Minister in charge of Finance or Taxation or any
other, nominated by each State government. The GST Council will be the body that decides which
taxes levied by the Centre, States and local bodies will go into the GST; which goods and services will
be subjected to GST; and the basis and the rates at which GST will be applied.
Composition of GST Council
The Gods and Services tax council shall consist of the following members.
Chairperson The Union Finance Minister, Government of India
Vice-Chairperson The members of the GST council referred to in sub-clause (c) of (2)
shall, as soon as may be, choose one amongst themselves to be the
Vice-Chairperson of the Council for such period as they may decide.
Members The Union Minister of State in charge of Revenue or Finance,
Members The Minister in charge of Finance or Taxation or any other Minister,
nominated by each state government.
STATUTORY POWERS
a) When petroleum products should be brought in the GST net.
b) Distribution of revenue of IGST and CGST among Union and States
c) Compensation to States for loss of revenue for period up to five years.
The Goods and Services tax Council shall make recommendations to the Union and the State On:
(a) Taxes, cesses, and surcharges levied by the Union, the States and the local bodies which may be
subsumed in the goods and services tax
(b) Goods and services which may be subject to, or exempt from GST,
(c) The threshold limit of turnover for application of GST,

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(d) Rates of GST,
(e) Model GST laws, principles of levy, apportionment of IGST and principles related to place of
supply,
(f) Special provisions with respect to the eight north eastern states, Himachal Pradesh, Jammu and
Kashmir, and Uttarakhand,
(g) And other matter relating to the goods and service tax, as the council may decide.
GUIDING PRINCIPLES FOR GST COUNCIL
While discharging the functions conferred by this article, the Goods and Services Tax council
shall be guided by the need:
a) For a harmonized structure of goods and service tax.
b) For the development of a harmonized national market for goods and services.
QUORUM
One-half (1/2) of the total number of Members of the Goods and Services tax council shall
constitute the quorum at its meetings.
DECISION TAKEN BY GST COUNCIL
Every decision of the GST Council shall be taken at meeting, by a majority of not less than
three-fourths of the weighted votes of the members present and voting in accordance with the
following principles, namely:
a. The vote of the Central Government shall have a weightage of one-third of the total votes cast,
and
b. The votes of all the State Governments taken together shall have a weightage of two-thirds of
the total vote’s case, in that meeting.
Central Goods and Service Tax Authorities
An Act to make a provision for levy and collection of tax on intra-State supply of goods or
services or both by the Central Government and for matters connected therewith or incidental thereto.
This Act may be called the Central Goods and Services Tax Act, 2017.
Officers under this Act
The Government shall, by notification, appoint the following classes of officers for the purposes of
this Act, namely:
a) Principal Chief Commissioners of Central Tax or Principal Directors General of
b) Central Tax,
c) Chief Commissioners of Central Tax or Directors General of Central Tax,
d) Principal Commissioners of Central Tax or Principal Additional Directors
e) General of Central Tax,
f) Commissioners of Central Tax or Additional Directors General of Central Tax,
g) Additional Commissioners of Central Tax or Additional Directors of
h) Central Tax,
i) Joint Commissioners of Central Tax or Joint Directors of Central Tax,
j) Deputy Commissioners of Central Tax or Deputy Directors of Central Tax,
k) Assistant Commissioners of Central Tax or Assistant Directors of
l) Central Tax, and
m) any other class of officers as it may deem fit:
n) Provided that the officers appointed under the Central Excise Act, 1944 shall be deemed to be
the officers appointed under the provisions of this Act.

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GST ALL OVER THE WORLD
The spread of GST in different countries has been one of the most important developments in
taxation over the last six decades. France was the first country to introduce GST in 1954. With the
increase of international trade in services, the GST has become a preferred global standard. All
OECD countries, except the US, follow this taxation structure. Worldwide, Almost 160 countries
have introduced GST in one or the other form since now. Generally, GST consist two prime
models:-
1. Unified/Single GST
a. Central GST-(CGST)
b. States GST-(SGST)
2. Dual GST
a. Non concurrent dual GST
b. Concurrent dual GST
Unified/Single GST
Under CGST,
 Both Central and State government combine their levels to bring into existence a single unified
taxation system at the centre level, with appropriate revenue sharing arrangement among them
and leaving no room or very little for tax levy by state government..
 CGST on supply of goods or services or both will be charged for within the state transactions.
 Tax revenue is meant for Central Government and tax rates will be common all over country
Under SGST,
 only States alone levy GST
 The Centre withdraws power to levy the tax completely on goods or services. This would
significantly enhances the revenue generating power of states and
 The centre offsets its revenue loss by reducing its fiscal transfer benefit to the states or by
suitable revenue sharing arrangement if required. State GST increases the compliance cost to
business houses as it will have to comply with tax laws of each state within same country and
brings unhealthy competition among the states
 Tax revenue is meant for State Government and tax rates will be decided by each State
Dual GST
Non concurrent dual GST
 GST on goods can be levied by the States only
 On services by the Centre only.
Concurrent dual GST
 GST will be levied by both tiers of Governments concurrently.
 Central GST to be administered by the Central Government and
 State GST to be administered by State Governments.
 Both goods and services would be subject to concurrent taxation by the Centre and the States.
All types of goods and services will be brought under GST structure except few exceptions.
Most of the countries have a unified GST system. Brazil and Canada follow a dual system vis-à-
vis India is introduced.
INDIAN MODEL OF GST /Framework of GST in India
India implements dual GST. In dual GST regime, all the transactions of goods and services
made for a consideration would attract two levies i.e. CGST (Central GST) and SGST (State GST).

10. PGD SC M Page 10
1. CENTRAL GOODS AND SERVICE TAX (CGST): The Central GST (CGST) replaces the
existing central excise duty and service tax. CGST would also cover sale transactions. CGST
would be administered by the Central Government. It Enables the Central government for levy
and collection of tax on intra-State supply of goods or services or both by the Central
Government and for matters connected therewith or incidental thereto.
2. STATE GOODS AND SERVICE TAX (SGST): State GST would replace State VAT, Entry
tax, Octroi, Luxury tax, Entertainment tax etc. SGST would be levied on services as well. To
enable taxing of services by the State, the Constitutional Amendment Act, 2016 contains
suitable provisions. SGST levied on Intra State supplies of both goods and services by the
State Government and will be governed by the SGST Act. SGST is to be administered by the
State Governments. The SGST payable could be set off from the SGST credit or the IGST
credit available.
3. INTER-STATE GOODS AND SERVICE TAX (IGST): IGST would be levied on all
supplies of goods and /or services in the course of inter-state trade or commerce. IGST would
be applicable to import of goods or services from outside country as well, which is indicated in
the Constitutional Amendment Act, 2016.
4. THE UNION TERRITORY GOODS AND SERVICES TAX (UTGST) : It would be
levied on intra-State supply of goods or services or both by the Central Government and for
matters connected therewith or incidental thereto.
Under GST, the SGST Act applies to all the states in India. The definition of ‘States’ in the Indian
Constitution includes union territories with their own legislature. Hence, the SGST Act also applies to
the union territories of Delhi and Puducherry. This means that on supplies within the union territories
of Delhi and Puducherry, the taxes levied will be CGST +SGST, and on supplies from
Delhi/Puducherry to another state/union territory, the tax levied will be IGST.
As the SGST Act cannot be applied on a union territory without its own legislature, the GST
Council has introduced the UTGST Act, to levy a tax, called UTGST, in the union territories of
Chandigarh, Lakshadweep, Daman and Diu, Dadra and Nagar Haveli and Andaman and Nicobar
Islands. UTGST will be levied in place of SGST in these union territories.
Why Dual Model is implemented in India
India is a federal country where both the Centre and the States have been assigned the powers to levy
and collect taxes. Both the Governments have distinct responsibilities to perform, as per the
Constitution, for which they need to raise tax revenue.
 The Centre and States are simultaneously levying GST.
 The three type’s tax structure is implemented to help taxpayers take the credit against each
other, thus ensuring “One Nation, One Tax”.
CONSTITUTIONAL AMENDEMENTS
GST and Centre-State Financial Relations
Before the Constitutional amendment, the fiscal powers between the Centre and the States are
clearly demarcated in the Constitution with almost no overlap between the respective domains. The
Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human
consumption, opium, narcotics etc.) while the States have the powers to levy tax on the sale of goods.
In the case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the
tax is collected and retained entirely by the States. As for services, it is the Centre alone that is
empowered to levy service tax.
The required amendments in the Constitution for the introduction of the GST so as to
simultaneously empower the Centre and the States to levy and collect this tax are already made. The
assignment of simultaneous jurisdiction to the Centre and the States for the levy of GST would require

11. PGD SC M Page 11
a unique institutional mechanism that would ensure that decisions about the structure, design and
operation of GST are taken jointly by the two. For it to be effective, such a mechanism also needs to
have Constitutional force.
Amendment of the Constitution and Other Legislative Requirements
(a) Constitution (One Hundred and Twenty Second) Amendment Bill, 2014 and the One
Hundred First Constitution Amendment Act, 2016
To address all these and other issues, a Constitution Amendment Bill was introduced in the
Lok Sabha in December, 2014 and the Bill (122nd Amendment Bill) has been passed by both the
Houses of Parliament (August 2016). After one half of the State legislatures have ratified the Bill and
the assent of the President (September 2016), the Constitution stands amended vide the 101st
Constitution Amendment Act 2016. The salient features of the Amendment Act are as under:
(a) The GST shall be levied on all goods and services except alcoholic liquor for human
consumption.
(b) The tax shall be levied as dual GST separately by the Union and the States.
(c) Parliament will have power to make laws with respect to GST imposed by the Union
(CGST) and the State Legislatures will have power to make laws with respect to GST imposed
by the States (SGST).
(d)Parliament will have exclusive power to make laws with respect to GST where the supply of
goods and/or services takes place in the course of inter- State trade or commerce (IGST).
(e) The Government of India (GoI) will have exclusive power to levy and collect GST on inter-
State trade or commerce. This tax shall be apportioned between the Union and States on the
recommendations of the GST Council by Parliament by law.
(f)Petroleum & petroleum products would be subject to GST. [However, it has been decided
that five products, viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and
aviation turbine fuel would be kept out of the purview of GST in the initial years of
implementation]. In the case of tobacco and tobacco products, the Centre alone would have the
power to levy excise duty in addition to the GST.
(g) Taxes on entertainments and amusements to the extent levied and collected by a Panchayat
or a Municipality or a Regional Council or a District Council shall not be subsumed under
GST. The local bodies of States could continue to levy such taxes.
(h) Parliament may, by law, provide for compensation to States for revenue loss arising out of
the implementation of the GST, based on the recommendations of the GST Council. Such
compensation would be for a period of 5 years.
(i) The GST Council has been constituted comprising the Union Finance Minister (who is the
Chairman of the Council), the Minister of State (Revenue) and the State Finance/Taxation
Ministers to recommend on
 The taxes, cesses and surcharges to be subsumed under GST;
 (b) The goods and services that may be subjected to or exempted from the GST;
 the date from which the specified petroleum products would be subject to GST;
 Model GST laws, principles of levy, apportionment of IGST and the principles that
govern the place of supply;
 The threshold limit of turnover below which the goods and services may be exempted
from GST;
 The rates including floor rates with bands of GST;
 Any special rate or rates for a specified period to raise additional resources during any
natural calamity or disaster; and
 Special provision with respect to the North-East States, J&K, Himachal Pradesh and
Uttarkhand.

12. PGD SC M Page 12
The mechanism of GST Council would ensure some degree of harmonization on different
aspects of GST between the Centre and the States as well as among States. It is being specifically
provided that the GST Council, in its discharge of various functions, shall be guided by the need for a
harmonized structure of GST and for the development of a harmonized national market for goods and
services.
As per the provisions of the Amendment Act, every decision of the GST Council shall be
taken by a majority of not less than 3/4th of the weighted votes of the Members present and voting.
The vote of the Central Government shall have a weight age of 1/3rd of the votes cast and the votes of
all the State Governments taken together shall have a weight age of 2/3rd of the total votes cast in the
meeting. One half of the total number of members of the GST Council shall constitute the quorum at
its meetings.
The GST Council shall decide about the modalities to resolve disputes arising out of its
recommendation. The GST Council has already deliberated and taken decisions on issues like
threshold limit of exemption under the GST regime, compensation to States and tax slabs under GST.
(b) Other Legislative Requirements
Suitable legislation for the levy of GST (Central GST Bill, Integrated GST Bill and State GST
Bills) drawing powers from the Constitution can be introduced in Parliament or the State Legislatures
in due course. Unlike the Constitutional Amendment which requires 2/3rd majority, the GST Bills
would need to be passed by a simple majority. Obviously, the levy of the tax can commence only after
the GST law has been enacted by the respective Legislatures. Also, unlike the State VAT, the date of
commencement of this levy would need to be synchronized across the Centre and the States. This is
because the IGST model cannot function effectively unless the Centre and all the States participate
simultaneously.
The Constitution Amendment Bill was passed by the Lok Sabha in May, 2015. The Bill was
referred to the Select Committee of Rajya Sabha on 12.05.2015. The Select Committee had submitted
its Report on the Bill on 22.07.2015. The Bill with certain amendments was finally passed in the Rajya
Sabha and thereafter by Lok Sabha in August, 2016. Further the bill had been ratified by required
number of States and received assent of the President on 8th September, 2016 and has since been
enacted as Constitution (101stAmendment) Act, 2016 w.e.f. 16th September, 2016.
The constitution was amended to introduce the GST for confirming concurrent taxing powers
on the centre as well as the states includes Union territory and legislature, to make laws for levying
goods and services tax on every transaction of supply of goods service or both.
As part of the exercise on constitutional amendment special attention was provided to the
formation of a mechanism for upholding a need for harmonious structure for GST along with the
concern for the powers of the centre and the states in Federal structure.
The one Hundered and Twenty Second Amendment Bill of the Constitution of India, officially
known as the Constitution on Hundered and First Amendment) Act, 2016, introduced a national goods
and Services tax in India from 1st July 2017.
Impact of GST on the Indian Economy
GST the biggest tax reform in India founded on the notion of “one nation, one market, one tax”
is finally here. The moment that the Indian government was waiting for a decade has finally arrived.
The single biggest indirect tax regime has kicked into force, dismantling all the inter-state barriers
with respect to trade. The GST rollout, with a single stroke, has converted India into a unified market
of 1.3 billion citizens. Fundamentally, the $2.4-trillion economy is attempting to transform itself by
doing away with the internal tariff barriers and subsuming central, state and local taxes into a unified
GST.

13. PGD SC M Page 13
The rollout has renewed the hope of India’s fiscal reform program regaining momentum and
widening the economy. Then again, there are fears of disruption, embedded in what’s perceived as a
rushed transition which may not assist the interests of the country.
Will the hopes triumph over uncertainty would be determined by how our government works towards
making GST a “good and simple tax”. The idea behind implementing GST across the country in 29
states and 7 Union Territories is that it would offer a win-win situation for everyone. Manufacturers
and traders would benefit from fewer tax filings, transparent rules, and easy bookkeeping; consumers
would be paying less for the goods and services, and the government would generate more revenues as
revenue leaks would be plugged. Ground realities, as we all know, vary. So, how has GST really
impacted India? Let’s take a look.
GST: The Short-Term Impact
From the viewpoint of the consumer, they would now have pay more tax for most of the goods
and services they consume. The majority of everyday consumables now draw the same or a slightly
higher rate of tax. Furthermore, the GST implementation has a cost of compliance attached to it. It
seems that this cost of compliance will be prohibitive and high for the small scale manufacturers and
traders, who have also protested against the same. They may end up pricing their goods at higher rates.
What the Future Looks Like
Talking about the long-term benefits, it is expected that GST would not just mean a lower rate
of taxes, but also minimum tax slabs. Countries where the Goods and Service Tax has helped in
reforming the economy, currently, in India, we have 5 slabs, with as many as 3 rates – an integrated
rate, a central rate, and a state rate. In addition to these, cess is also levied. The fear of losing out on
revenue has kept the government from gambling on fewer or lower rates. This is very unlikely to see a
shift anytime soon; though the government has said that rates may be revisited once the RNR (revenue
neutral rate) is reached.
The impact of GST on macroeconomic indicators is likely to be very positive in the medium-
term. Inflation would be reduced as the cascading (tax on tax) effect of taxes would be eliminated. The
revenue from the taxes for the government is very likely to increase with an extended tax net, and the
fiscal deficit is expected to remain under the checks. Moreover, exports would grow, while FDI
(Foreign Direct Investment) would also increase. The industry leaders believe that the country would
climb several ladders in the ease of doing business with the implementation of the most important tax
reform ever in the history of the country.
Advantages of GST on different sectors
For the government
 Will help to create a unified common national market for India, giving a boost to foreign
investment and “Make in India” campaign;
 Will mitigate cascading of taxes as Input Tax Credit will be available across goods and services
at every stage of supply;
 Harmonization of laws, procedures and rates of tax between Centre and States and across States;
 Improved environment for compliance as all returns are to be filed online, input credits to be
verified online, encouraging more paper trail of transactions at each level of supply chain;
 Similar uniform SGST and IGST rates will reduce the incentive for evasion by eliminating rate
arbitrage between neighboring States and that between intra and inter-state sales;
 Common procedures for registration of taxpayers, refund of taxes, uniform formats of tax
return, common tax base, common system of classification of goods and services will lend
greater certainty to taxation system;

14. PGD SC M Page 14
 Greater use of IT will reduce human interface between the taxpayer and the tax administration,
which will go a long way in reducing corruption;
 It will boost export and manufacturing activity, generate more employment and thus increase
GDP with gainful employment leading to substantive economic growth;
 Ultimately it will help in poverty eradication by generating more employment and more
financial resources.
Trade and Industry
India has been grappling with multiple indirect taxes for a long time; the introduction of GST is,
therefore, a landmark in the country’s taxation regime. GST is touted to simplify doing business in
India, allowing supply chains to be integrated and aligned, as well as allowing for greater
transparency.
 Simpler tax regime with fewer exemptions: In pre-GST structure of tax, there are various
kinds of taxes such as excise duty, Service tax, VAT, Entry tax, Central Sales Tax etc. But in
GST regime there is only one tax i.e. GST however, there will be three parts such CGST,
SGST, IGST. This is measure relief for the manufacturer.
 Increased ease of doing business: Reduction in multiplicity of taxes that are at present
governing our indirect tax system leading to simplification and uniformity. In current tax
regime the consumer pays approximately 25-26% more than the cost of production due to
excise duty (at 12.5%) and value added tax (almost 14.5%).In GST, goods may become
cheaper marginally which a good sign for manufacture to compete with international market.
The Impact of rate of tax depends on industry wise, but mostly it is beneficial.
 Elimination of double taxation on certain sectors like works contract, software, and hospitality
sector.
 Will mitigate cascading of taxes as Input Tax Credit will be available across goods and
services at every stage of supply.
 Reduction in compliance costs - No multiple record keeping for a variety of taxes - so lesser
investment of resources and manpower in maintaining records;
 More efficient neutralization of taxes especially for exports thereby making our products more
competitive in the international market and give boost to Indian Exports;
 Simplified and automated procedures for various processes such as registration, returns,
refunds, tax payments, etc;
 Average tax burden on supply of goods or services is expected to come down which would lead
to more consumption, which in turn means more production thereby helping in the growth of the
industries manufacturing in India.
 No dispute good Versus Service: In present regime of tax structure, the big issue is whether the
transaction amount to sale of good or service. Though this dispute still may arise from view of
time/place of supply from good or time/place of supply of services as both are separately given.
However, net impact is neutral, on either of them needs to pay GST.
 Composition levy Increased: In pre-GST regime of taxation the limit under Composition
Scheme is 40 lakhs where as under GST it is increased up to 1 crore for all states and 75 Lakhs
for special category states. Except Jammu & Kashmir and Uttarakhand. (special Category States
under GST as per Explanation (3) of Section 22 of CGST act 2017 , Arunachal Pradesh,
.Assam, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Himachal Pradesh, Uttarakhand.)

15. PGD SC M Page 15
 Credit of Excise Duty and Service tax: In pre-GST regime of taxation then a trader is not
eligible to take credit of input service as well as the Excise duty. However, in GST regime he
will be eligible to take all credits and it will make positive impact on trader.
 Credit of CST: In pre-GST regime of tax, on inter- state purchases CST paid became the cost to
the trader as the Credit was not available where as under GST regime it will be available as
IGST Credit.
For Consumers
 Final price of goods is expected to be transparent due to seamless flow of input tax credit
between the manufacturer, retailer and service supplier;
 Reduction in prices of commodities and goods in long run due to reduction in cascading impact
of taxation;
 Relatively large segment of small retailers will be either exempted from tax or will suffer very
low tax rates under a compounding scheme - purchases from such entities will cost less for the
consumers;
 Poverty eradication by generating more employment and more financial resources.
For States
 Expansion of the tax base as they will be able to tax the entire supply chain from manufacturing
to retail;
 Power to tax services, which was hitherto with the Central Government only, will boost revenue
and give States access to the fastest growing sector of the economy;
 GST being destination based consumption tax will favour consuming States;
 Improve the overall investment climate in the country which will naturally benefit the
development in the States;
 Largely uniform SGST and IGST rates will reduce the incentive for evasion by eliminating rate
arbitrage between neighboring States and that between intra and inter-state sales;
Improved Compliance levels of the tax payers will contribute greatly in improving the revenue
collection of the State.
Impact of GST on E-Commerce
Electronic commerce or EC is buying and selling of goods and services, or the transmitting of
funds or data, over an electronic network, primarily the internet. GST has a noticeable impact on each
and every sector including E commerce sector.
India’s e-commerce market is estimated to have crossed Rs. 211,005 crore in December 2016
as per the study conducted by Internet and Mobile Association of India. The report further claim that
India is expected to generate $100 billion online retail revenue by the year 2020
The uprising of Electronic Commerce in India has also resulted in conception of online
marketplaces. A Marketplace is an e-commerce platform owned by the E-commerce Operator such as
Flipkart, Snapdeal and Amazon.
There can be two types of E commerce sellers:
a. E commerce operator/ marketplace (e.g. Flipkart, Amazon etc): It is an entity which owns,
operates or manages digital or electronic facility or platform for E commerce.
b. Suppliers on E commerce platform: It is an entity which supplies goods or services
on/through an E commerce platform.
No trade barriers—one nation one tax - In the present regime, there is no uniformity in the tax rates
among the different states and therefore every state determines its own tax rates specific to the

16. PGD SC M Page 16
products. For example, a mobile phone in state 1 is taxed under VAT at five percent and in state 2 at
14.50 percent. As a result, the sellers in state 2 would not want to sell locally but would prefer to sell
from state 1, resulting in loss of revenue for state.
E-commerce operators have set up distribution centres only in certain locations and collect the
VAT applicable on sales made from such centres. In order to compensate for the loss of VAT revenue,
many states have recently imposed entry tax on goods coming from other states, which discourages
sales made from other states. The entry tax acts as a trade barrier, restricts free movement of goods
from one state to another and increases the cost for traders.
However, such trade barriers will cease to exist as GST is inclusive of entry tax. The
destination state earns the revenue from GST on sales regardless of where the sale was made. Further,
there is no rate arbitrage under GST because the classification of goods and rate of GST is common
across states.
Tax collection at source (TCS) - It is mandatory for all e-commerce operators to collect tax at the
rate of two percent as TCS on the net value of sales made by suppliers through e-commerce operators.
Such TCS has to be deducted in each state and deposited accordingly. This brings in significant
compliance challenges to sellers and may discourage sales through marketplace model. However, this
may not be applicable for inventory based models, where the e-commerce operator makes the sale
from its own inventory. The key purpose of this provision is to encourage compliances under GST and
provide a mechanism for the government to track suppliers who sell through e-commerce operators.
Increase in compliances for e-commerce operators – The e-commerce operators should report all
supplies made by the seller and the TCS collected thereof on a monthly basis. The sales reported by
the e-commerce operator will have to match with the sales declared by the supplier himself at the end
of every month, and any difference will be added to the turnover of the supplier and consequently be
liable to discharge GST on such additional turnover.
The e-commerce operator has to report the product/service code and the applicable rates for
each item level individually. This requires them to map every sale done by the dealer and ensure TCS
is deducted at the right value. The implementation of compliance is cumbersome for both e-commerce
operator and the supplier.
Additionally, the e-commerce operators will have to register in each state and file the reports
separately on a monthly basis. This process increases the challenges in compliance and costs of
running the business.
Mandatory registration of sellers and unavailability of composition scheme - GST mandates that
all sellers supplying through an e-commerce operator need to be registered under GST irrespective of
the threshold limit of Rs 20 lakh. These sellers cannot opt for composition scheme, where they pay a
flat tax at the rate of two percent and do not maintain details of each product sold. In this scenario, it is
not feasible for small businesses to maintain a detailed record of purchases and sales and pay higher
rate of tax. Because of this, many small retailers may not prefer to work with an e-commerce
company, which impacts the business for e-commerce operators.
Increase in credits - The GST law has extended the meaning of ‘input tax’ to cover any
goods/services used by the company in the course of business, which has widened the ambit of input
GST credits. This has removed the requirement to establish the direct nexus of inputs/input services
with the final product/service provided by companies. For e-commerce operators and sellers, the
unavailability of credit towards excise duty and VAT on goods and service tax on certain services adds
to the cost of running the business, which would be avoided under GST on account of increase in
credits.
Impact of GST on Traders
Positive Impact on Traders

17. PGD SC M Page 17
1. No dispute good Versus Service: In present regime of tax structure, the big issue is whether the
transaction amount to sale of good or service. Though this dispute still may arise from view of
time/place of supply from good or time/place of supply of services as both are separately given.
However, net impact is neutral, on either of them needs to pay GST.
2. Composition levy Increased: In pre-GST regime of taxation the limit under Composition Scheme is
40 lakhs where as under GST it is increased up to 1 crore for all states and 75 Lakhs for special
category states. Except Jammu & Kashmir and Uttarakhand. (special Category States under GST as
per Explanation (3) of Section 22 of CGST act 2017 , Arunachal Pradesh, .Assam, Jammu & Kashmir,
Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand.)
3. Credit of Excise Duty and Service tax: In current regime of taxation then a trader is not eligible to
take credit of input service as well as the Excise duty. However, in GST regime he will be eligible to
take all credits and it will make positive impact on trader.
4. No Margin to Disclose: Currently a trader who wants to pass on the CENVAT Credit of excise duty
needs to obtain dealer registration and have to disclose the margin. But now this is no more relevant as
trader is eligible to take credit as well as no requirement of separate dealer registration.
5. No Reversal of Credit on goods sent for stock transfer: Currently as stock transfer is not liable to
Vat as well as CST hence, credit pertains to goods sent to stock transfer needs to be reversed.
However, in GST Regime stock transfer got made taxable, hence No reversal of credit is required.
6. Credit of CST: In pre-GST regime of tax, on inter- state purchases CST paid became the cost to the
trader as the Credit was not available where as under GST regime it will be available as IGST Credit.
Negative Impact on Traders
1. Stock transfer made taxable: In pre-GST regime of tax, stock transfer are not taxable on being made
available “Form F” where as in current regime stock transfer made taxable. Due to this Warehouse
decision to be taken more appropriately.
2. No Form “C”: In pre-GST regime of tax, on being made available the Form C, CST rates charged at
the rate of 2% instead of 14.5% which is local tax rate, however in GST regime interstate will be taxed
at standard rate i.e IGST.
3. Goods sent to job work are taxable: In pre-GST regime of tax, the goods sent for job work are not
liable to CST on being made available of Form “H” whereas in Current GST regime it became taxable.
4. Increased burden of Compliances: Instead of 4/12 Returns (state wise vary), now a trader needs to
file 37 returns in year and much more compliances.
Impact on Manufacturers
Positive Impact on Manufacturers
1. One Tax: In pre-GST structure of tax, there is various kind of taxes such as excise duty, Service tax,
VAT, Entry tax, Central Sales Tax etc. But in GST regime there is only one tax i.e GST however,
there will be three parts such CGST, SGST, IGST. This is measure relief for the manufacturer.

18. PGD SC M Page 18
2. Rate of tax: In pre-GST tax regime the consumer pays approximately 25-26% more than the cost of
production due to excise duty (at 12.5%) and value added tax (almost 14.5%).In GST, goods may
become cheaper marginally which a good sign for manufacture to compete with international market.
The Impact of rate of tax depends on industry wise, but mostly it is beneficial.
3. No Concept of Manufacture : In pre-GST regime the biggest litigation and issues are whether the
transaction amount to manufacture or not. The interpretation related to term “Manufacture” will no
more be relevant. It may result in ease of doing business without having litigation about the process.
4. Reduction in Cost: In GST regime there will be reduction in cost of production as credit will be
eligible of tax on purchases made from interstate purchases and no cascading effect. Hence, a
manufacturer need not take the decision regarding purchase from point of view of tax implication as
credit is eligible on all purchases.
5. Minimization of Classification issues: In pre-GST of tax there are numerous issues on classification
of goods due to separate rates on different goods and exemptions on certain goods. But in regime of
GST there shall be minimization of classification issues due to uniform rate and less expected
exemptions.
6. Speedy Movement of Goods: In GST Regime of tax structure there will be minimization of trade
barriers, such as filing of way bills/entry permits. Compliance under entry tax will be abolished. There
is much compliance in current regime on interstate movements or locally such as way bills, statutory
forms etc which lead to slow movements of goods where as this concept is going to be abolished
though check points will still be eligible.
7. CENVAT Credit: In pre-GST regime, the manufacturer is unable to utilize the credit of Central Sales
tax and VAT provided output is charged under Composition Scheme, which becomes the cost for him.
But in Regime of GST, a manufacturer will be eligible to take Credit of SGST (VAT) as well as IGST
(CST) on the purchases. There will be seamless flow of Credit in GST.
8. Valuation of Samples: pre-GST goods removed on sample basis, tax needs to paid by adopting the
nearest aggregate value. However, in GST regime, time up to six months is granted to decide whether
the good sold on sample basis has been approved or not which beneficial thing for manufacturer.
However, after 6 months tax needs to be paid if the same is still in process of approval.
9. State Wise Registration: Generally it has been observed that many manufacturers have two premises
of factory within same locality or in same state and they are liable to take separate registration for each
factory. But in GST Regime, registration has to be taken state wise and not factory wise. This will
abolish the difficulties which have been faced due to separate registration.
10. No assessment by multiple tax authorities: Generally, manufacturers are facing many difficulties in
handling the assessments done by the Separate authorities for VAT, Service Tax, Central Excise, CST,
etc. In GST regime it is expected that assessment will be done by State authorities for SGST, Central
Authorities for CGST, and Interstate authorities for IGST.
11. Electronic Mode for Forms: In current regime of tax there is very much manual filing of documents
such as initial declaration, Numbering of Invoices etc. But in GST regime there will be less manual

19. PGD SC M Page 19
filing of documents and more through electronic mode. Further, the communication with department
also could be through electronic mode.
Impact of GST on Consumer
Positive impact on Consumer
 Final price of goods is expected to be transparent due to seamless flow of input tax credit
between the manufacturer, retailer and service supplier;
 Reduction in prices of commodities and goods in long run due to reduction in cascading impact
of taxation;
 Relatively large segment of small retailers will be either exempted from tax or will suffer very
low tax rates under a compounding scheme - purchases from such entities will cost less for the
consumers;
 Poverty eradication by generating more employment and more financial resources.
Negative impact on Consumer
 Consumers are not very hopeful about GST benefits and implementation and therefore, they
are reluctant to adapt to the new system.
 The tax rate has been increased for many products, thus increasing their costs.
Issues and challenges of GST
GST, the greatest tax reform since Independence is here. As are the challenges for businesses
across the country. Like everything else, all is not smooth sailing for GST and there are some obvious
challenges for businesses and end consumers.
 Change in Business Software - Most businesses use accounting software or ERPs for filing
tax returns which have excise, VAT, and service tax already incorporated in them. The
transition to GST will require businesses to change their ERPs, too; either by upgrading the
software or by purchasing new GST-compliant software. This will lead to increased costs of
buying new software and training employees on how to use it.
 GST Compliance - SMEs are still not completely aware of the nuances of the new tax regime.
Changing over to a completely new system of taxation requires understanding of the minutiae,
which businesses lack right now. Most of them are worried about filing timely returns, but it is
important to note that even before businesses can reach the filing stage they have to issue GST-
compliant invoices. For a traditionally pen-and-paper economy like India, this change to digital
record-keeping is going to be massive. Invoices after 1st July will need to be GST-compliant
with all details such as GSTIN, place of supply, HSN code etc. as mandated by the law.
 Increase in Operating Costs - Most small businesses in India do not employ tax
professionals, and have traditionally preferred to pay taxes and file returns on their own to save
costs. However, they will require professional assistance to become GST compliant as it is a
completely new system. While this will benefit the professionals, the small businesses will
have to bear the additional cost of hiring experts.

20. PGD SC M Page 20
 Also, businesses will need to train their employees in GST compliance, further increasing their
overhead expenses.
 Policy Change during the Middle of the Year - GST will go live three months into the
financial year 2017-18. So, for FY 2017-18, business will follow the old tax structure for the
first 3 months, and GST for the rest of the time. It is impossible to cross over from one tax
structure to the other in just a day, and hence businesses will end up running both tax systems
in parallel, which might result in confusion and compliance issues.
 Online Procedure - GST compliance, return filing and payments all have to be done online.
Many small businesses are not tech-savvy and do not have the resources for fully computerized
compliance. Even as the rest of the nation gets ready to go digital, businesses in small cities
across India face a huge technology problem in the days ahead.
 Higher Tax Burden for Manufacturing SMEs - Small businesses in the manufacturing
sector will not have it easy in the GST regime. Under the excise laws, only manufacturing
business with a turnover exceeding Rs. 1.50 crores had to pay excise duty. Whereas, under
GST the turnover limit has been reduced to Rs. 20 lakh, thus increasing the tax burden for
many manufacturing SMEs. However, SMEs with a turnover of up to 1 crore can opt for the
composition scheme and pay only 1% tax on turnover in lieu of GST and enjoy lesser
compliances. The catch though is these businesses will then not be able to claim any input tax
credit. The decision to choose between higher taxes or the composition scheme (and thereby no
ITC) will be a tough one for many SMEs.
 No Clarity on Tax Holidays - Many manufacturers (textile, pharmaceutical, FMCG
industries) enjoy tax holidays and state benefit schemes. There is still no notification regarding
these benefits. This will mean increased costs for these industries, which will probably be
passed on to the end consumers.
 Disruption to Business - Cloth merchants (unorganized) are going on strike to protest against
GST. Eateries and drug shops in Chennai are also threatening to protest the regime change –
and this is only the tip of the iceberg. In the coming days, we can expect to see more of these
protests happening across the country and these will undoubtedly disrupt business. If there’s
any solace, it’s in knowing that other countries who implemented GST never had it easy either.
Malaysia recently introduced GST in 2014 and faced nationwide strikes and protests. How the
Indian government will handle these events is left to be seen.

21. PGD SC M Page 21
Unit 3: Levy of GST
Meaning and conditions of supply
Generic meaning of ‘supply’: Supply includes all forms of supply (goods and / or services)
and includes agreeing to supply when they are for a consideration and in the course or furtherance of
business (as defined under Section 7 of the Act). It specifically includes: (i)Sale (ii) Transfer (iii)
Barter (iv) Exchange (v) License (vi) Rental (vii) Lease (viii) Disposal.
The word ‘supply’ is all-encompassing, subject to exceptions carved out in the relevant
provisions.
Supply should be in the course or furtherance of business: For a transaction to qualify as
‘supply’, it is essential that the same is ‘in the course or furtherance of business’. This implies that any
supply of goods and / or services by a business entity would be liable to tax, so long as it is in the
course or furtherance of business.
Import of service will be taxable in the hands of the recipient (importer): The word
‘supply’ includes import of a service, made for a consideration (as defined in Section 2(31)) and
whether or not in the course or furtherance of business. This implies that import of services even for
personal consumption would qualify as ‘supply’ and therefore would be liable to tax.
Transactions without consideration: The law provides that in certain cases, even though
there is no consideration, the same would be treated as ‘supply’. The items listed in schedule I of GST
are treated as supply without consideration.
Certain supplies will be neither a supply of goods, nor a supply of services: The law lists
down matters which shall not be considered as ‘supply’ for GST. The items listed in schedule III of
GST are treated as neither supply of goods nor supply of services.
List of transactions without consideration
The following transactions are listed under Schedule I as transactions without consideration but they
are treated as supply:
(i)Permanent transfer of business assets where input tax credit has been availed: The word
‘transfer’ in this clause suggests that there should be another person who would receive the business
assets at the other end. The use of the words ‘permanent transfer’ implies that the goods should be
transferred without any intention or requirement of having to receive the goods back.
Typically, donation of business assets or scrapping or disposal in any other manner (other than as
a sale – i.e., for a consideration) would qualify as ‘supply’ under this clause, where input tax credit has
been claimed on the same.
(ii) Supply of goods and / or services between related person, or between distinct persons:
Any supply of goods and / or services in the course of business or furtherance of business by a
taxable person to a related person (as defined by way of explanation below Section15 (5)), or by one
taxable person to another taxable person (as provided in Section 25 of the Act), when made without
consideration, would qualify as ‘supply.
(iii) Supply of goods by a principal to his agent: where the agent undertakes to supply such goods
on behalf of the principal: E.g. A Company is located in the suburbs and employs an agent in the city
to undertake sales on behalf of the company. The transfer of goods by the company to the premises of
the agent will be treated as supply.
(iv) Supply of goods by an agent to his principal: Where the agent undertakes to receive such goods
on behalf of the principal: E.g. A Company is located in the suburbs and employs an agent in the small
town nearby to undertake purchases on behalf of the company. Goods procured and transferred by the
agent to the company would qualify as a ‘supply.’

22. PGD SC M Page 22
v) Import of services: Import of services by a taxable person from a related person, or from any of
his other establishments outside India, in the course or furtherance of business. Importation of
services as covered by the definition does not include importation without consideration. Therefore,
this clause is inserted to rope in such services that are received from related persons / their
establishments outside India
List of Neither A Supply Of Goods Nor Services
The law lists down matters which shall not be considered as ‘supply’ for GST. This list includes:
(a) Activities/ transactions in Schedule III:
(i) Services by an employee to an employer in the course or in relation to his
employment;
(ii) Services by any Court or Tribunal established under any law for the time being in force;
(iii) Functions performed by MPs, MLAs, etc.; the duties performed by a person who holds any
post in pursuance of the provisions of the Constitution in that capacity; the duties
performed by specified persons in a body established by the Central State Government or
local authority, not deemed as an employee;
(iv) Sale of land and Sale of Building (except sale of under-construction premises where the
part or full consideration is received before issuance of completion certificate or before
its first occupation, whichever is earlier.
(v) Actionable claims, other than lottery, betting and gambling and
(vi) Services of funeral, burial, crematorium or mortuary including transportation of the
deceased
(b) An employer and employee are treated as “related persons” and hence any supply of goods or
services by employer to employee without consideration would be considered as supply as per
schedule I. However, gifts not exceeding Rs.50,000 in value in a financial year by an employer to
employee shall not be treated as supply of goods or services or both
Meaning And Treatment of Mixed Supply:
If it involves supply of more than one goods and / or services which are not naturally bundled
together: These are referred to as mixed supply of goods and / or services. It shall be deemed to be a
supply of that goods or services therein, which are liable to tax at the highest rate of GST.
A supply of more than one goods and / or services as a bundle will be reckoned as’ mixed supply’
if:
(i) such goods and / or services are supplied together for a single price
(ii) they are not naturally bundled together and
(iii) it does not qualify as composite supply.
Example: (Provided in Section 2(66)): A supply of a package consisting of canned foods, sweets,
chocolates, cakes, dry fruits, aerated drink and fruit juices when supplied for a single price is a mixed
supply. Each of these items can be supplied separately and is not dependent on any other. It shall not
be a mixed supply if these items are supplied separately. This implies that the supply will be taxed
wholly as supply of those goods which are liable to the highest rate of GST.
Example-2:
If a tooth paste (say for instance it is liable to GST at 12%) is bundled along with a tooth brush
(say for instance it is liable to GST at 18%) and is sold as a single unit for a single price, it would be
reckoned as a mixed supply. This would therefore be liable to GST at 18% (higher of 12% or 18%
applicable to each of the goods therein).

23. PGD SC M Page 23
Meaning And Treatment of Composite Supply:
Where a supply involves multiple (more than one) goods or services, or a combination of goods and
services, the treatment of such supplies would be as follows:
If it involves more than one goods and / or services which are naturally bundled together: These
are referred to as composite supply of goods and / or services. It shall be deemed to be a supply of
those goods or services, which constitutes the principal supply therein.
Example (Provided in Section 2(27)): Where goods are packed, and transported with
insurance, the supply of goods, packing materials, transport and insurance is a composite supply and
supply of goods is the principal supply. This implies that the supply will be taxed wholly as supply of
goods.
Reverse Charge Mechanism
Normally, the supplier of goods and / or services will be liable to discharge tax on the supplies
affected. Reverse charge mechanism is applicable under circumstances specified in sec 9(3) and 9(4).
The Central or State Governments upon recommendation of the GST Council are empowered to
specify by notification the categories of supplies in respect of which the recipient of goods and / or
services will be liable to discharge the tax 9(3).
Similarly, under sec 9(4), when any registered taxable persons receive any supply from
unregistered person, he shall be required to pay tax on such inward supplies under reverse charge
mechanism. Ex: Mr A is not registered in GST as his aggregate turnover of taxable supplies is below
threshold limit. Mr. B purchased goods from Mr. A. In such case, Mr. A would be required to pay tax
under reverse charge on value of such goods.
Note that any supply of goods or services from an unregistered person does not exceed Rs.5000 per
day, and then the recipient is not liable to pay tax under GST.
It’s also important to note that, a taxable person who is eligible for payment of tax under
composition scheme under section 10 of CGST/SGST Act, is also under obligation to pay tax under
normal rates in respect of supply of goods/service received by him from unregistered persons, failing
which benefit of composition scheme would not be applicable to him.
Composition Levy- Sec 9:
In pre-GST regime of taxation the limit under Composition Scheme is 40 lakhs where as under
GST it is increased up to 1 crore for all states and 75 Lakhs for special category states. Except Jammu
& Kashmir and Uttarakhand. (special Category States under GST as per Explanation (3) of Section
22 of CGST act 2017 , Arunachal Pradesh, .Assam, Jammu & Kashmir, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand.)
Rate of tax:
1. The rate of tax would be as under:
 2% (CGST1%+SGST1%) of the turnover in the State/UT in case of manufacturers.
 5% (CGST2.5%+SGST2.5%) of the turnover in the State/UT in case of food/restaurant
services.
 1% (0.5% CGST &0.5%SGST) of the turnover in the State/UT in case of other suppliers (like
traders, agents).
2) The registered person shall be eligible to opt under sub-section (1), if:
(a) he is not engaged in the supply of services other than supplies referred to in clause (b) of
paragraph 6 of Schedule II( Food with services);
(b) he is not engaged in making any supply of goods which are not livable to tax under this Act;
(c) He is not engaged in making any inter-State outward supplies of goods;

24. PGD SC M Page 24
(d) He is not engaged in making any supply of goods through an electronic commerce operator
who is required to collect tax at source under section 52; and
(e) He is not a manufacturer of such goods as may be notified by the Government on the
recommendations of the Council:
Provided that where more than one registered persons are having the same Permanent Account
Number (issued under the Income-tax Act, 1961), the registered person shall not be eligible to opt for
the scheme under sub-section (1) unless all such registered persons opt to pay tax under that sub-
section.
2) The option availed of by a registered person under sub-section (1) shall lapse with effect from the
day on which his aggregate turnover during a financial year exceeds the limit specified under sub-
section (1).
(3) A taxable person to whom the provisions of sub-section (1) apply shall not collect any tax from the
recipient on supplies made by him nor shall he be entitled to any credit of input tax.
(4) If the proper officer has reasons to believe that a taxable person has paid tax under sub-section (1)
despite not being eligible, such person shall, in addition to any tax that may be payable by him under
any other provisions of this Act, be liable to a penalty and the provisions of section 73 or section 74
shall, mutatis mutandis, apply for determination of tax and penalty.
Composition scheme is not available for services:
Suppliers of services are excluded from opting to pay tax under composition scheme, except
composite supply, by way of or as a part of any service, in any other manner whatsoever of goods,
being food or any other article for human consumption or any drink (other than alcoholic liquor for
human consumption) which is deemed to be a service under Schedule II, Para 6 (b) (i.e.
food/restaurant services)
CONDITIONS FOR OPTING TO PAY TAX UNDER COMPOSITIONS SCHEME:
(1)Restricted from making supply of goods which are not liable to GST: Certain goods are not
liable to GST, e.g. petroleum, alcohol for human consumption, etc. a person opting for composition
scheme shall not be entitled to make any supply of non GST goods.
(2)Restricted from effecting inter-State outward supplies: The taxable person should not affect any
inter-State outward supplies. This means that even stock transfers to branches outside the State would
not be permitted.
(3) Restricted from making supplies through an e-commerce operator: A person opting for
composition scheme is not allowed to affect any supply of goods through an e-commerce portal,
unless such portal is owned by the same person.
(4) Restriction on manufacture of notified goods: The person opting for the scheme should not be a
manufacturer of certain goods as are notified in this regard. However, there is no restriction in case the
person is engaged in trading of such goods.
(5)Would be applicable for all transactions under the same PAN: Composition scheme would
become applicable for all the business verticals having separate registrations within the State and all
other registrations outside the State which are held by the person with same PAN. e.g.: If a taxable
person has the following businesses separately registered:
o Sale of footwear (Registered in Karnataka)
o Sale of mobiles (Registered in Karnataka)
o Franchisee of McDonalds (Registered in Kerala)
In the above scenario, the composition scheme would be applicable for all the 3 units. Taxable
person will not be eligible to opt for composition scheme say for sale of footwear and sale of mobiles
and opt to pay taxes under the regular scheme for franchisee of McDonalds.

25. PGD SC M Page 25
(6) Shall not collect tax: Taxable person opting to pay tax under the composition scheme is prohibited
from collecting tax on the outward supplies.
(7) Not entitled to input tax credit: Taxable person opting to pay tax under the composition scheme
will not be eligible to claim any input tax credits.
However, if the taxable person becomes ineligible to remain under composition scheme, the
taxable person will become entitled to take input tax in respect of inputs held in stock (as inputs,
contained in semi-finished or finished goods) on the day immediately preceding the date from which
he becomes liable to pay tax under Section 9.
(8) Additional conditions: The following additional conditions are prescribed in the Composition
Rules, in order to be eligible for the composition scheme ;
o Not applicable to persons who are casual taxable persons or non-resident taxable
persons.
o In case of migration of existing registration into registration under GST, option to avail
composition scheme under GST can be exercised only if the goods held in stock by
such taxable person, on the appointed day, have not been purchased in the course of
inter-state trade or commerce or imported from a place outside India or received from
his branch situated outside the State, or from his agent or principal outside the State.
Input Tax Credit U/S 16
The provisions of input tax credit have been prone to litigation. The Model GST law provides
an elaborate mechanism for a ailment and utilization of ITC and seeks to impart clarity with a view to
minimizing disputes.
(i) Tax payer is allowed to take credit of taxes paid on inputs (input tax credit), as self-
assessed, in his return.
(ii) Taxpayer can take credit of taxes paid on all goods and services, other than a few in the
negative list, and utilize the same for payment of output tax.
(iii) Credit of taxes paid on inputs can be taken where the inputs are used for business purposes
or for making taxable supplies.
(iv) Full input tax credit shall be allowed on capital goods on its receipt as against the current
Central Government and many State Government’s present practice of permitting the credit in
two or three equal installments.
(v) Unutilized input tax credit can be carried forward or can be claimed as refund in two
specified situations mentioned below.
(vi) The facility of distribution of input tax credit for services amongst group companies has
been provided for through the mechanism of Input Service Distributor (ISD).
Some important definitions which are relevant for this article:
INPUT TAX means the CGST, SGST, IGST or UGST charged on any supply of goods or
services or both made and includes IGST on Imports & tax payable under reverse charge provisions.
However, Input Tax does not include the tax paid under the composition levy. [Section 2(62)]
INPUT TAX CREDIT means the credit of input tax. [Section 2(63)]
CAPITAL GOODS means goods, the value of which is capitalized in the books of account of
the person claiming the input tax credit and which are used or intended to be used in the course or
furtherance of business. [Section 2(19)]
TAXABLE SUPPLY means a supply of goods or services or both which is livable to tax under
this Act [Section 2(108)]
NON-TAXABLE SUPPLY means a supply of goods or services or both which is not leviable
to tax under this Act or under the IGST Act. [Section 2(78)]
EXEMPT SUPPLY means supply of any goods or services or both which attracts nil rate of
tax or which may be wholly exempt from tax under section 11 of CGST Act, or under section 6 of the
IGST Act, and includes non-taxable supply. [Section 2(47)]

26. PGD SC M Page 26
ZERO RATED SUPPLY means any of the following supplies of goods or services or both,
namely:––
(a) Export of goods or services or both; or
(b) Supply of goods or services or both to a SEZ developer or a SEZ unit. [Section
16(1) of IGST Act]
Credit of input tax may be availed for making zero-rated supplies; notwithstanding that such supply
may be an exempt supply. [Section 16(2) of IGST Act]. The input tax credit shall be credited to the
electronic credit ledger of the registered supplier. [Section 49(2)]
Though you may utilize tax credit of SGST/UGST for payment of IGST & vice-a-versa, also
you may utilize tax credit of CGST for payment of IGST & vice-a-versa, however inter-head
adjustment of SGST/UGST with CSGT and vice-a-versa is not allowed under the proposed GST
regime. [Section 49(5)(e)] Time limit to claim Input Tax Credit. [Section 16(4)]. Input tax credit
cannot be claimed after: The due date of furnishing of the return for the month of September following
the end of financial year to which such credit relates; or the due date of furnishing of the relevant
annual return, whichever is earlier.
As per the provisions of [Section 49 (5)] of CGST act, the amount of input tax credit available
in the electronic credit ledger of the registered person shall be utilized in following order only:–
S.No. Input Tax Credit Output Tax Liability
1. IGST IGST, CGST,SGST/UGST.
2. CGST CGST,CGST
3. SGST SGST, IGST
4. UGST UGST, IGST
As per Section 16 – Manner of taking input tax credit read with Input Tax Credit Rules – By
Empowered Committee of State Finance Ministers June, 2016
1. Eligibility:
 Every registered taxable person shall be entitled to take credit of input tax admissible to him
(The said amount shall be credited to the electronic credit ledger of such person)
 He is in possession of a tax invoice, debit note, supplementary invoice or such other taxpaying
document (Invoice should be issued by a supplier registered under this Act or the IGST Act)
 He has received the goods and/or services (It shall be deemed that the taxable person has
received the goods where the goods are delivered by the supplier to a recipient or any other
person on the direction of such taxable person, whether acting as an agent or otherwise, before
or during movement of goods, either by way of transfer of documents of title to goods or
otherwise)
 The tax charged in respect of such supply has been actually paid to the credit of the appropriate
Government (Tax shall be paid either in cash or through utilization of input tax credit
admissible in respect of the said supply)
 He has furnished the return under section 27 (Provided that where the goods against an invoice
are received in lots or installments, the registered taxable person shall be entitled to the credit
upon receipt of the last lot or installment).

27. PGD SC M Page 27
Input Tax credit on Specific Cases:
A person who became liable to get
registeredunder the Act shall apply for
registration within thirty days from the
date on which he becomes liable to
registration and has been granted such
registration
Such person is entitled to take credit
of input tax in respect of inputs held
in stock and inputs contained in
semi-finished or finished goods held
in stock on the day immediately
preceding
The date from which he
becomes liable to pay tax under
the provisions of this Act.
A person, who voluntarily takes
registration under Section 19(3)
The date of registration.
A registered taxable person ceases to pay
tax under Composition Scheme (Section
8)
The date from which he
becomes liable to pay tax under
section 7.
Time Limit for Claiming Credit: within one year from the date of issue of tax invoice relating to
such supply.
Calculation of Credit: Amount of credit shall be calculated in accordance with generally accepted
accounting principles (GAAP’s) as prescribed.
Other Procedures: Registered Person – who is eligible to claim Input Tax Credit shall follow the
following procedure:
 File electronic declaration in Form GST ITC – 01 within 30 days regarding all the details of
inputs lying in stock or inputs contained in semi-finished or finished goods lying in stock or
capital goods
 Get the declaration duly certified by a Practicing Chartered Accountant or Cost Accountant, if
the aggregate value of claim on account of Central Tax, State tax and Integrated Tax
exceeds 2,00,000/-.
As per the provisions of [Section 17(5)], Input tax credit shall not be available in respect of the
following:—
ITC Not allowed / to be reversed ITC allowed / credit to be taken
1) Motor Vehicle & Other Conveyances Motor Vehicles & Other Conveyances:
– For further supply (Trading);
– Transport of passengers; (RTC Bus)
– Transport of Goods; (VRL, NAVATA)
– Driving education/Training (Maruthi Driving
School)
2) Food & Beverages,
Outdoor Catering,
Beauty Treatment,
Health Services,
Cosmetic & Plastic Surgery
If the goods and/or services are taken to
deliver the same category of services or as a part
of a composite supply, credit will be available.
Example:
Mr. D purchases cosmetic creams to supply it to a
customer, and then credit of ITC paid on

28. PGD SC M Page 28
purchases will be allowed.
3) Membership of
– Club
– Health Centre
– Fitness Centre
4) Rent – a -Cab
Life Insurance
Health Insurance
1. Government makes it obligatory for employers
to provide it to its employees
2. Goods and/or services are taken to deliver the
same category of services or as a part of a
composite supply, credit will be available
Example: Mr. D takes the service of rent-a-cab to
supply to Mr. M, a customer, then credit of ITC
paid on purchases will be allowed.
5) Travel benefits to Employees (Ex:
LTA)
6) Works Contract services, when
supplied for construction of an
Immovable Property.
1. Works Contract Services, when supplied for
construction of P&M
2. One works contract service is input for another
works contract;
7) Goods and/or services for construction
of an immovable property, whether to be
used:
– for personal use (or)
– business use
8) Goods / Services on which
Composition Tax is paid;
9) When the Regd. Person opts to
composition scheme (CS), then he needs
to debit e-credit ledger for,
– inputs held in stock;
– inputs held in semi-finished stock
– inputs held finished goods stock;
– on capital goods (after proportionate
reduction)
on the day immediately preceding the
date on which opts for CS.
When the Regd. Person ceases to composition
scheme (CS) & becomes a taxable person, then he
is eligible for taking credit:
– inputs held in stock
– inputs held in semi-finished / finished goods
held in stock;
– on capital goods (after proportionate reduction)
on the day immediately preceding the date of
cease in CS.
Condition: inputs/ capital goods invoice < 12
months;
10) Goods/ Services – received by a Non-
resident taxable person
Goods/ Services – Imported by a Non-resident
taxable person
11) Goods/ Services are used for
– Personal Consumption;

29. PGD SC M Page 29
12) Goods:
– Lost
– Stolen
– Destroyed
– Written off
– Disposed of by Gift/ Free sample
13) any tax paid due to
– non-payment of tax;
– short tax payment of tax;
– excessive refund;
14) ITC utilized or availed by the reason
of
– fraud (or)
– will-full misstatements (or)
– suppression of facts (or)
15) Confiscation and seizure of goods.
16) Input Credit not taken < Time
limited.
17) When depreciation is claimed on the
tax component of the Capital Goods (or)
Plant & Machinery under IT Act.
18) Not applied for GST Registration,
within 30 days from the date which he
becomes liable to for registration
1. When applied for GST Registration, within 30
days from the date which he becomes liable to for
registration under GST can take credit of-
– inputs held in stock;
– inputs held in semi-finished / finished goods
held in stock;
– on capital goods (after proportionate reduction);
on the day immediately preceding the date,
becomes taxable.
Condition: inputs/ capital goods invoice < 12
months.
19) On the exempted goods / services;
20) When taxable goods/services become
non-taxable, need to debit, e-credit ledge,
for the:
– inputs held in stock;
– inputs held in semi-finished / finished
goods held in stock;
– on capital goods (after proportionate
reduction); on the day immediately
preceding the date, becomes exempted.
When exempted goods/ services becomes taxable,
he is eligible for taking credit:
– inputs held in stock
– inputs held in semi-finished / finished goods
held in stock;
– on capital goods (after proportionate reduction)
on the day immediately preceding the date,
becomes taxable.
Condition: inputs/ capital goods invoice < 12
months;

30. PGD SC M Page 30
– When goods are sent to Job work and they are
returned
– < 1 year, in case of inputs, or
– < 3 years, in case of Capital Goods;
When the goods are received:
– in installments (or)
– in lots; credit to be taken, on receipt of final
installment/ lot.
21) When Recipient fails to pay to
supplier for the value of goods/services <
180 days from date of invoice, recipient
to
– reverse the input credit taken; and
– pay interest thereon;
Later on, if recipient pays to supplier, the value of
goods/ services, then
– take credit of, input already reversed; and
– take credit of, interest paid thereon.
General Conditions for taking credit:
– possess Tax Invoice / another document, as
prescribed;
– received the goods / services;
– tax charged by Supplier, has been paid to Govt.
– Supplier has furnished the Tax return;
Registration under GST
In any tax system, registration is the most fundamental requirement for identification of tax
payers ensuring tax compliance in the economy. Registration of any business entity under the GST
Law implies obtaining a unique number from the concerned tax authorities for the purpose of
collecting tax on behalf of the government and to avail Input Tax Credit for the taxes on his inward
supplies. Without registration, a person can neither collect tax from his customers nor claim any input
Tax Credit of tax paid by him.
Need and advantages of registration
• He is legally recognized as supplier of goods or services.
• He is legally authorized to collect taxes from his customers and pass on the credit of the
taxes paid on the goods or services supplied to the purchasers/recipients.
• He can claim Input Tax Credit of taxes paid and can utilize the same for payment of taxes
due on supply of goods or services.
• Seamless flow of Input Tax Credit from suppliers to recipients at the national level.
Registration under Central Goods & Service Tax Act (CGST Act) is governed by the
provisions of section 22 and 24. Section 22 deals with the registration of suppliers of goods and/or
services who are doing a sizeable business in a financial year.
According to section 22, every person whose aggregate turnover in respect of supplies of all
goods and services made by him in a financial year exceeds the threshold limit of Rs.20 Lacs (Rs.10
Lacs in case of business activities are in North East States and Hilly Areas), will be liable for the
registration in the said Act in each of the states and union territories (UT) in which he has some
business activities.
Please note that the main purpose of charging section, that is section 22 of CGST Act, is to
make all the large businesses liable for the registration under the act. Hence section 22 does not make

31. PGD SC M Page 31
any difference in taxable supply or exempt supply or zero rated supply or even non taxable supply
while calculating the aggregate turnover of the person. By the same logic, section 22 takes into
consideration all the supplies made by the person in all the states and UTs.
Section 22 is a general section which mandates the registration for every taxable person if
threshold limit is crossed. However, there is another section 24 which mandates the registration for
some specific class of persons even without reaching the threshold limit, i.e., Compulsory Registration
According to section 24, it is mandatory for the following class of persons to take the
registration, without even checking for their threshold limit:
 Any person making interstate supply
 Casual Taxable person making taxable supply
 Non-Resident taxable person making taxable supply
 Any person who is required to pay GST under reverse charge under any provision of the act
 An Input Service Distributor (ISD)
 E-Commerce Operator in respect of specified services u/s 9(5) if those services are supplied by
the actual service provider through that E-Commerce operator. For those specified services,
actual service provider would not be liable to pay GST, hence he would not even require to
take the registration in respect of those services
 Every E-Commerce Operator. Please note that e-commerce operators through a e-commerce
platform serve as a mediator between buyer and seller, e.g. Flipkart or Amazon. Therefore any
company who is selling its own products through its own website would not be covered under
e-commerce operator, e.g. Titan which sells its watches through its own website. Such players
would be required to get the registration u/s 22, after reaching the threshold limit
 Any person who is supplying goods and/or services, except those services which are specified
u/s 9(5), through such an E-Commerce operator who is required to collect TCS u/s 52.
 Any person who is required to deduct TDS u/s 51. Generally, these persons are govt.
agencies/departments/local authorities which deduct TDS while making payment to supplier of
goods and/or services if the value of that supply is more than Rs.2.5 Lacs
 Any person who is supplying goods and/or services on behalf of any other taxable person
(whether registered or not) whether as an agent or otherwise
 Every person supplying online information (e.g. Netflix) and database access or retrieval
services from a place outside India to a person in India, other than a registered person
 Every other notified person in this behalf by the government.
Types of GST Returns:
S.No Return Particulars
1. GSTR-1 Details of outward supplies of taxable goods or services or both effected
2. GSTR-2 Details of inward supplies of taxable goods or services or both claiming input
tax credit
3 GSTR-3 Monthly return on the basis of finalization of details of outward supplies and
inward supplies along with the payment of amount of tax
4 GSTR-4 Quarterly Return for compounding taxable persons
5 GSTR-5 Return for Non-Resident foreign taxable persons
6 GSTR-6 Input Service Distributor return
7 GSTR-7 Return for authorities deducting tax at source

32. PGD SC M Page 32
8 GSTR-8 Details of supplies effected through e-commerce operator and the amount of
tax collected as required under sub-section (52)
9 GSTR-9 Annual Return
10 GSTR-9A Simplified Annual return by Compounding taxable persons registered under
section 10
GST Identification Number: GSTIN is similar to the existing TIN number (Tax Identification
Number). A Taxable person even though already registered under GST would have to apply for
registration as tax deductor. People can apply for GST registration in Form GST REG-06 for principal
place of business and for additional place of business that is available on a common portal. This
registration is valid for all places of business in a state.
Format of GSTIN Number: On approval of application, a Goods and Service Tax Identification
Number (GSTIN) is assigned, based on the following format:
• First two character for the State Code
• Next ten characters for the PAN or the Tax deductions and Collection Account Number
• Next two characters for the entity code
• Last digit is a check sum character