2. 1. Introduction to Taxation in India
2. Constitutional Validity of Taxation in India
3. Tax Administration in India
4. Basic Definition
A. Income
B. Assessment year and Previous Year
C. Person
D. Gross Total Income and Taxable Income
E. Residential Status
Table of
Contents
11. Income Tax Act 1961 - Basic Concepts
Assessment Year and Previous Year
Assessment Year (AY): means period starting from April 1 and ending on 31 March
of next year.
Previous Year (PY): The year in which income is earned is known as previous year.
12. Basic Concept - Person
Who are Included in Person?
An Individual.
A Hindu Undivided Family
A Company
A Firm.
An Association of Person or Body of Individual, incorporated or not
A Local Authority
Every Artificial Judicial Person not falling within any of the preceding categories
13. Basic Concepts - Assessee
Who is Assessee?
Any person by whom any tax or any sum of money is payable under the Act.
14. Basic Concepts – Meaning of Income
Compensation received by ‘Jackie Shroff’ for withdrawing criminal case
Sum received by Sushmita Sen as compensation for being sexually harassed
Priyanka Chopra received car gifted to her by ‘Toyota’ for brand promotion
15. Features of Income
What is Regarded as “Income” under the Income Tax Act
The definition of Income is inclusive and not exhaustive. The term income does not
only include those things which are defined in sec. 2(24) but also includes such
things which the term signifies, according to general and common meaning.
The following broad principles will helpful for understanding the concept of income
Regular and definite source
Different forms of Income (Cash or Kind)
Receipt Vs Accrual (Due but not received is also taxable).
Illegal Income
16. Features of Income
Temporary and Permanent Income
Income includes Losses
Perquisites in the hands of Employee
BURDEN OF PROOFF?
Relief or Reimbursement of Expenses can not be treated as Income
Pin money is not Income
Revenue Receipts Vs Capital Receipts
Note: Revenue Receipts
are always taxable unless
they are specifically
exempted and Capital
receipts are always
exempted unless they are
specifically taxed.
17. Compensation received by ‘Jackie Shroff’ for withdrawing criminal case was capital receipt and not taxable:
[ACIT v. Jackie Shroff – [2018] 97 taxmann.com 277 (Mumbai – Trib.)] Shares held by the assessee, Mr. Jackie Shroff, in
a company were sold due to forged signature by another person. Assessee filed a criminal complaint before the Economic
Offences Wing. After filing of complaint, the accused came forward for amicable settlement of dispute and a settlement
deed was executed in order to settle the dispute. As per the terms of settlement deed, assessee received Rs. 6.97 crores as
compensation in lieu of withdrawing the criminal complaint. Assessee treated said compensation as capital in nature and
did not offer it for taxation at the time of filing of return. However, during assessment proceedings, the Assessing Officer
treated the compensation as income and added it to income of assessee. The Mumbai ITAT held in favour of assessee that
the compensation received by the assessee was not for his professional activities but for settlement of dispute between him
and some other party resulting in filing of a criminal complaint. The amount received towards compensation could not fit
in to the definition of income as per section 2(24), read with section 4 of the Income-tax Act, 1961. The Bombay High
Court in the case of CIT v. Amar Dye Chem Ltd. [1994] 74 Taxman 254 also held that the amount received towards
compensation or damage for settlement of dispute was capital receipt which was not taxable. Thus, compensation received
by assessee for withdrawing criminal complaint was a capital receipt and couldn’t be treated as income.
18. Sum received by Sushmita Sen as compensation for being sexually harassed not taxable:
[Sushmita Sen v. ACIT [2018] 99 taxmann.com 252 (Mumbai – Trib.)] The assessee, Sushmita Sen,
received a sum of Rs. 145 lakhs from Coca Cola India Limited. Out of total sum, she offered to pay tax
only on Rs. 50 Lacs and claimed that balance Rs. 95 lakhs was capital receipt. She claimed that Rs. 95
lakhs represented the compensation received towards damages caused to her reputation. The Mumbai ITAT
held that compensation received by the assessee was not income liable to tax. Though she had received
total amount of Rs. 145 lacs in lieu of settlement for breach of terms of celebrity engagement contract, yet
only an amount of Rs. 50 lakhs was due to assessee under the contractual terms, and additional amount of
Rs. 95 lakhs did not arise out of exercise of profession. Rs. 95 lacs was received towards damages arising
out of her being sexually harassed by CCIL employee, disparaging her professional reputation by false
allegations and for the repudiatory breach of contract by CCIL. Such compensation could not be termed
as any benefit, perquisite arising to assessee out of exercise of profession, hence, it couldn’t be
construed to be assessee’s income under section 2(24)
19. Priyanka Chopra shall pay tax on car gifted to her by ‘Toyota’ for brand promotion: Mumbai ITAT:
[Priyanka Chopra v. DCIT [2018] 89 taxmann.com 286 (Mumbai – Trib.)] The assessee, Priyanka Chopra,
had entered into agreement with NDTV for promoting the causes of environmental issues in association
with Toyota. She was given a Toyota Prius hybrid luxury sedan car for being the brand ambassador of
NDTV-Toyota Greenathon Campaign. The Assessing Officer taxed the market value of such car in the
hands of assessee as business income under section 28(iv). However, the assessee contended that the
remuneration received against her services as brand ambassador had been offered to tax in the year of
receipt. Since she didn’t render any services to Toyota Company, the value of the car given to her for
promotional purpose couldn’t be taxed in her hands. The Mumbai ITAT held in favour revenue that
assessee had done the promotional activity by rendering the services as a brand ambassador of NDTV
Toyota Greenathon Campaign, which had also promoted the brand of Toyota. Therefore, value of Toyota
car in this connection had rightly been added in her hands under Section 28(iv).
20.
21.
22. Residential Status and its Effect on
Tax Incidence
There are two types of Persons – Resident in India and Non-Resident in India.
Indian income is taxable in India whether the person earning income is resident or
non-resident. Conversely, foreign income of a person is taxable in India only if such
person is resident in India. Foreign income of non-resident is not taxable in India.
Example: Gift of Rs. 200,000 received out side India by an Individual from a friend.
This is taxable in case of resident Indian and not taxable in case of non-resident. This
income will be termed as foreign income
Example: Gift of Rs. 200,000 received in Delhi by an Individual from a friend.
This is taxable in case of resident Indian as well as in case of non-resident since it is
termed as Indian income.
23. Payment of Taxes
Tax Deducted at Source (TDS)
Direct Payment which include
1. Advance Tax
2. Self-Assessment Challan
3. Under special Circumstances
26. 1. Introduction to GST
2. Meaning of Supply, Time, Place and Value of Supply
3. Registration under GST
4. Input Tax Credit under GST
5. GST in Construction
6. GST Invoicing
7. GST AAR
Table of
Contents
27.
28. Goods and Services Tax (GST) is a destination-based tax on consumption of goods and services. It is
levied at all stages right from manufacture to final consumption with credit of taxes paid at previous
stages available as set-off. In a nutshell, only value addition will be taxed and burden of tax is to be
borne by the final consumer. It is a single, unified tax on every value-addition, right from manufacture to
sale / consumption of goods / services. Hence, with the advent of GST, the legacy taxes on manufacture
(Excise), inter-State sales (CST), intra State sales (VAT) and Service Tax have been subsumed. By
subsuming more than a score of taxes under GST, road to a harmonized system of indirect tax has been
paved making India an economic union. There has been a paradigm shift in the way the tax is being
levied. We have now moved from source based to destination-based taxation, with GST coming into
foray. Hence GST is also labelled as a destination-based / consumption-based tax.
29. GST does away with the cascading effects of taxation, by providing a
comprehensive and continuous chain of tax credits, end to end and taxing only the
value-added at every stage. The final tax is borne by the end consumer, as all the
parties in the interim can extinguish their respective collections against their
respective liabilities and the tax already paid by them (Input Tax Credit). In India we
have adopted dual GST Model in which States and Union Government impose tax
simultaneously. Federal structure of the Constitution is also retained under this
model. To ensure seamless flow of credit throughout the territory of India a link Act
was necessary and hence IGST Act, 2017 was passed. Compensation to states for
the loss due to introduction of GST is provided through an Act, GST (Compensation
to States) Act, 2017.
Dual GST Model: The Dual GST Model refers to a concept where both the Centre
and States simultaneously levy taxes on the supply of goods and services while the
administration is run separately. India has adopted a dual GST model, i.e., where
the tax is imposed concurrently by the Centre and the States. For an intra-State
sale, the GST is equally divided between the Centre and the State (CGST + SGST),
and for inter-State sales, the GST is collected by the Centre (IGST).
30. CGST stands for Central Goods and Services tax. It replaced all the previous taxes under the Central
Government. Some examples of such taxes are central surcharges & cess and central excise duty. CGST is
levied on the movement of goods within a state. To understand the meaning of CGST, let us take an
example.
If a manufacturer produces a good in West Bengal and sells it INTRASTATE (within the state), both SGST
and CGST will be levied. The former will go to the West Bengal State Government, whereas the latter will
reach the Central Government. In most cases, the tax is divided equally between the State and Central
Governments as per the GST council mandate
The GST collected by the State Government is known as SGST, which is applicable on transactions within
its geographical boundaries. Under the new tax regime, previous state taxes like entertainment tax, VAT,
and State Sales tax became non-functional.
SGST stands for State Goods and Services tax, a single tax levied on INTRASTATE supplies of goods and
services, except for alcoholic liquor. It can be charged solely on a product’s transactional value – an
amount the buyer needs to pay.
SGST features might vary state-wise since each State Government has individual acts. However, specific
characteristics like taxable events, valuation, classification of goods and services, and measures are
similar across the nation.
31. IGST stands for Integrated Goods and Services tax. It is generally applicable during interstate transactions,
i.e., transactions between two different states. Among the types of GST, it’s levied on supplies of
products and services between two states and even on exports and imports (IGST + customs). The
Central Government is responsible for its collection as per the IGST Act. Let’s simplify this with the help
of an example.
Suppose a manufacturer from West Bengal sells goods to a customer in Maharashtra. In this case, IGST
will apply to the transaction value. The Central Government will collect this sum. Later, this amount will
be divided between the consumer state – in this case, Maharashtra – and the Central Government.
Why does the tax go to the consumer state and not the manufacturing state? Because the buyer incurs
the tax.
UTGST stands for Union Territory Goods and Services tax, applicable to the transaction of goods and
services in the Union Territories. It is levied on the supply of products in Andaman and Nicobar Islands,
Lakshadweep, Daman Diu, Chandigarh, and Dadra and Nagar Haveli
32.
33. A Ltd Jaipur IGST @ 28% CGST @ 14% SGST @ 14%
B Ltd Patna
C Ltd Mumbai
D Ltd Pune
E Ltd Andaman
F Ltd Delhi
X Ltd. NASIK is a wholesale Dealer makes following supply
34. STEP-1: Application at GST Common Portal
The applicant declare his Permanent Account Number, mobile
number, e-mail address and place of registration in Part A of
Form GST REG-01 at the GST common portal.
STEP-2: Submission of Documents at GST Common Portal
Using the Temporary Reference Number (TRN), the applicant has
to submit an application in Part B of Form GST REG-01 with
required documents at the common portal duly signed and
verified with Digital Signature
STEP-3: Acknowledgement of Application
STEP-4: Verification of the application and approval
STEP-5: Issue of GST Registration certificate
For GOODS: Registration under GST is mandatory for all businesses
whose annual turnover exceeds Rs 40 lakhs in a financial year. This threshold
is Rs 20 lakhs for special category states such as Arunachal Pradesh, Assam,
Meghalaya, Sikkim, Himachal Pradesh and Uttarakhand. For Mizoram ,
Manipur, Nagaland and Tripura is 10 Lakhs.
For SERVICES: Threshold is
Rs. 20 lakhs and in special
state Rs. 10 lakhs.
Suomoto
Registration.
35. Under GST, Supply is considered a taxable event for charging tax.
Supply includes sale, transfer, exchange, barter, license, rental, lease and disposal. If a
person undertakes either of these transactions during the course or furtherance of
business for consideration, it will be covered under the meaning of Supply under GST.
Basically to know the liability, Taxpayers need to understand :
1. Place of Supply
2. Time of Supply
3. Value of Supply
GST is Payable on SUPPLY of Goods or Services in India
FEW DEFINITIONS: . . .
36. Time of supply means the point in time when goods/services are considered supplied. When the seller
knows the time, it helps him identify due date for payment of taxes.
Time of supply of goods is earliest of:
1. Date of issue of invoice
2. Last date on which invoice should have been issued
3. Date of receipt of advance/ payment.
Time of supply of services is earliest of:
1. Date of issue of invoice
2. Date of receipt of advance/ payment.
Place of supply is required for determining the right tax to be charged on the invoice, whether IGST or
CGST/SGST will apply.
Place of supply of Goods
Usually, in case of goods, the place of supply is where the goods are delivered.
Place of Supply for Services
Generally, the place of supply of services is the location of the service recipient.
Value of supply is important because GST is calculated on the value of the sale. If the value is
calculated incorrectly, then the amount of GST charged is also incorrect.
Value of supply means the money that a seller would want to collect the goods and services supplied.
The amount collected by the seller from the buyer is the value of supply.
37. For example:
Mr. ABC Company sold goods to Mr. Y worth Rs 1,00,000. The invoice was issued on 15th January.
The payment was received on 31st January. The goods were supplied on 20th January.
Time of supply is earliest of –
Date of issue of invoice – 15th January
Thus, the time of supply is 15th January.
What will happen if, in the same example an advance of Rs 50,000 is received by Mr. X on 1st
January?
The time of supply for the advance of Rs 50,000 will be 1st January (since the date of receipt of
advance is before the invoice is issued). For the balance Rs 50,000, the time of supply will be 15th
January.
38. You went to Restaurant – Supply of Services - GST is applicable
Goods or Services in India
You have transferred land to Mr. A – Land is not goods as per GST Act, No GST applicable.
Taken a loan from Bank Rs. 100000 and paid 1000 as documentation charge.
Mr A given his apartment on rent for residential purpose – GST not applicable
Mr A given his apartment on rent for commercial purpose – GST applicable
You hired a Architect for project services – GST applicable
40. Taxpayers who are covered in GST Act. can avail input
credit. Input tax refers to the mechanism whereby you
can get tax deductions that you have paid on the
inputs at the time when you are paying the tax on the
output. Input tax credit or ITC enables businesses to
reduce the tax liability as it makes a sale by claiming
the credit depending on how much GST was paid on
the business’s purchases.
For example, let us say you manufacture a product and the tax payable on output is Rs. 1500 while the
tax paid on input is Rs. 1000. The input credit is Rs. 1000 and so you are only required to deposit Rs. 500
in taxes. This is because the final product is Rs. 1500 while your purchases are Rs. 1000.
The tax levied on your purchases has been paid/deposited to the govt. by the supplier via claiming input
credit or in cash
The supplier has filed GST returns. The invoice has been uploaded in their GSTR-1 by the supplier and it
appears in GSTR-2B of the buyer or recipient.
Log in to the GST website using your credentials. Click on the “Services” button, then on “Ledgers”, and
then on “Electronic Credit Ledger”. On the Electronic Credit Ledger page, you will be able to check the
input tax credit balance as of today’s date
41. INVOICING UNDER GST
Under the GST regime, an “invoice” or “tax invoice” means the tax invoice referred to in section 31 of the
CGST Act, 2017. This section mandates issuance of invoice or a bill of supply for every supply of goods or
services or both. It is necessary for a person supplying goods or services or both to issue invoice. The
type of invoice to be issued depends upon the category of registered person making the supply.
For example, if a registered person is making supplies, then a tax invoice needs to be issued by such
registered person. However, if a registered person is dealing only in exempted supplies or is availing
composition scheme (composition dealer), then such registered person needs to issue a bill of supply in
lieu of tax invoice. The invoice should contain description, quantity and value & such other prescribed
particulars under rule 46 of CGST Rules, 2017. An invoice or a bill of supply need not be issued if the
value of the supply is less than Rs. 200/- subject to specified conditions.
42. IMPORTANCE OF TAX INVOICE UNDER GST
Under GST a tax invoice is an important document. It not only evidences supply of goods or services or
both, but is also an essential document for the recipient to avail Input Tax Credit (ITC). A registered
person cannot avail input tax credit unless he is in possession of a tax invoice or a debit note. GST is
chargeable at the time of supply. Invoice is an important indicator of the time of supply. Broadly
speaking, the time of supply of goods is the date of issuance of invoice and the time of supply of services
is the date of issuance of invoice or receipt of payment, whichever is earlier. Thus, the importance of
invoice under GST cannot be over-emphasised. Suffice it to say, the tax invoice is the primary document
evidencing the supply by the supplier and vital for availing input tax credit by the recipient.
43. MANNER OF ISSUING INVOICES
The invoice shall be prepared in triplicate, in case of supply of goods, in the following manner:
(a) The original copy being marked as ORIGINAL FOR RECIPIENT;
(b) The duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and
(c) The triplicate copy being marked as TRIPLICATE FOR SUPPLIER.
The invoice shall be prepared in duplicate, in case of supply of services, in the following manner:
(a) The original copy being marked as ORIGINAL FOR RECIPIENT; and
(b) The duplicate copy being marked as DUPLICATE FOR SUPPLIER.
The serial number of invoices issued during a tax period shall be furnished electronically through the
Common Portal in FORM GSTR-1.
44. CONTENTS OF INVOICE
There is no format prescribed for an invoice, however, Invoice rules makes it mandatory for an invoice to have following
fields (only applicable field are to be filled):
(a) Name, address and GSTIN of the supplier;
(b) A consecutive serial number, in one or multiple series, containing alphabets or numerals or special characters hyphen
or dash and slash symbolised as “-” and “/” respectively, and any combination thereof, unique for a financial year;
(c) Date of its issue;
(d) Name, address and GSTIN or UIN, if registered, of the recipient;
(e) Name and address of the recipient and the address of delivery, along with the name of State and its code, if such
recipient is un-registered and where the value of taxable supply is fifty thousand rupees or more;
(f) HSN code of goods or Accounting Code of services;
(g) Description of goods or services;
(h) Quantity in case of goods and unit or Unique Quantity Code thereof;
(i) Total value of supply of goods or services or both;
(j) Taxable value of supply of goods or services or both considering discount or abatement, if any;
(k) Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
(l) Amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory
tax or cess);
(m) Place of supply along with the name of State, in case of a supply in the course of inter-State trade or commerce;
(n) Address of delivery where the same is different from the place of supply;
(o) Signature or digital signature of the supplier or his authorized representative.
45. The e-Invoice System is for GST registered
person for uploading all the B2B invoices to
the Invoice Registration Portal (IRP). The IRP
generates and returns a unique Invoice
Reference Number (IRN), digitally signed e-
invoice and QR code to the user.
46. According to the government-determined definition, housing units worth up to Rs 45 lakh qualify as affordable housing.
However, the unit must also conform to certain measurements limits to qualify as affordable housing. A housing unit in
a metropolitan city qualifies to be an affordable house if it costs up to Rs 45 lakh and measures up to 60 sqmt (carpet
area). The Delhi-National Capital Region, Bengaluru, Chennai, Hyderabad, the Mumbai-Mumbai Metropolitan Region
and Kolkata are categorised as metropolitan cities. A housing unit in any other city barring the ones mentioned above in
India qualify to be an affordable house if it costs up to Rs 45 lakh and has up to 90 sqmt of carpet area.
Residential Property
types
GST rate till
March 2019
GST rate from
April 2019
Affordable housing
under-construction
8% with ITC 1% without ITC
Non-affordable housing 12% with ITC 5% without ITC
For ready-to-move-in
properties
No GST No GST
