Levy and Collection (10 Marks)

CA-FINAL
OVERVIEW OF
GST
10 MARKS PORTION APPLICABLE
FOR NOV-2017 EXAMINATION
By CA Vishal Bhattad
INDEX
1. GST in India-An Introduction 2
2. Genesis of GST in India 2
3. Concept of GST 3
4. Constitutional Amendment 3
5. Benefits of GST 6
6. Inter-State and Intra-State Supply 9
7. Relevant Definitions 14
8. Taxable Event- Supply [Section 7 of CGST Act] 18
9. Import of Service 26
18. Schedule I [Section 7 of CGST Act] 27
19. Schedule II [Section 7 of CGST Act] 30
20. Schedule III [Section 7 of CGST Act] 36
13. Composite and Mixed Supply 37
14. Levy and Collection 40
GST
Chapter 1: Levy & Collection
V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 1

CHAPTER 1
GENESIS OF GST IN INDIA
Introduction We will begin our discussion with what is the meaning of GST. GST is a
comprehensive Indirect Tax on manufacture, sale and consumption of goods
and services throughout India to replace taxes levied by the central and state
governments.
It is introduced as Constitution (101st Amendment) Act, 2016. The GST is
governed by GST Council and its Chairman is Union Finance Minister of
India - Arun Jaitley.
16-07-2004 Dr. Kelkar Task Force recommended the need of a National GST
Referring to the archives of GST the idea of national GST was mooted by
Kelkar Task Force in the year 2004. In 2000 the Vajpayee Government
started discussion on GST by setting up an empowered committee headed
by Asim Dasgupta (Finance Minister of West Bengal).
The committee was given the task of designing the GST model and
overseeing the IT back-end preparedness for its rollout.
28-02-2006 Union FM moots the idea of GST from April, 2010
Later in 2006 Union Finance Misniter Shri P Chidambaram moved towards
GST in his budget and proposed to introduce it by 1st April, 2010. However
the Empowered Committee of State Finance Ministers released its First
Discussion Paper (FDP) on the GST in November 2009.
This spells out the features of GST and has formed the basis for
discussion between the Centre and States.
19-12-2014 Constitutional (122nd Amendment) Bill, 2014 introduced in Lok Sabha
The talks of ushering in GST gained momentum in the year 2014 when the
NDA Governement tabled the (122nd Amendment) Bill, 2014 on GST in the
Parliament on 19th December, 2014.
The bill concived more than a decade ago being a constitutional
amendment has to be passed by both the houses of parliament by a two-third
majority and once passed it needs ratification of more than half of the 29
states before its scheduled roll out in April 2016. It was kept pending because
there were some changes required in the basic bill and all States were not in
favour of various provisions of the Bill particularly in sharing of the revenue
collected through GST.
12-04-2017 Central GST Legislations- CGST Bill 2017, IGST Bill 2017, UTGST Bill
2017, GST (Compensation to states) Bill 2017 received assent of
President and Bills enacted
On 27th March, 2017 the Central GST legislations-Central Goods and
Services Tax Bill, 2017, Integrated Goods and Services Tax Bill, 2017, Union
Territory Goods and Services Tax Bill, 2017 were introduced in the Lok
Sabha. Lok Sabha passed these bills on 29th March, 2017 and with the
receipt of President's assent on 12th April, 2017, the Bills were enacted
Implementation of GST across India

GST is all set to roll out by 1st July 2017
GST Overseas
France was the first country to implement GST in the year 1954. Presently
about 160 countries across the world have adopted GST with Canada has a
dual GST model just like India
2 CA Vishal Bhattad 09850850800 www.vsmartacademy.com V’Smart Academy

CONCEPT OF GST
GST is a destination based consumption tax levied at multiple stage of production
GST is Value & distribution of goods & services in which taxes paid on inputs are allowed as set-
added Tax off against taxes payable on output. Thus, GST will be a single comprehensive
integrated indirect tax on pure value addition at each stage
Continues GST offers comprehensive and continous chain of tax credits from the producer's
Chain of Tax point/service upto the retailer's level/consumer's level thereby taxing only the
Credits value added at each stage of supply chain
Ultimate Since GST permits availment of input credit at every stage hence it can be noted
burden on final that the final burden of GST is borne by the consumer as it is charged by the last
consumer supplier with set off benefits at all previous stages
No Cascading The present tax structure of India has number of indirect taxes collected both by
Effect of state and central govt as per power vested to them under Constitution of India.
Taxes Due to such multiple taxes, there has been cascading effect of taxes (tax on
tax) and double taxation (a value being subject to tax twice or subject to two or
more than two taxes)GST will subsume all these indirect taxes and will thus,
facilitate seamless flow of credit resolving the problem of double taxation and
cascading effect of taxes. This will check the cost of goods along with making
compliances easy and bringing stability in govt’s tax revenues
DEFICIENCIES IN THE EXISTING VALUE ADDED TAXATION

Cascading As per status quo a manufacturer of excisable goods charges excise duty and
effect- due to VAT on intra-state sale of goods. However, the VAT dealer again charges VAT
inclusion of on the subsequent intra-state sale of goods. As in case of CST on Inter State
several local Sales, no set off is allowed . This leads to cascading effect.
levies
Applicability Further, in respect of tax on services, service tax is payable on taxable services
of Service provided. W.e.f. 1 July, 2012, service tax is levied on all ‘services’ other than the
Tax as per Negative list of services as provided under Section 66D of the Finance Act,
Finance 1994 or else otherwise exempted vide the Mega Exemption Notification No.
Act, 1994
25/2012-ST dated 20 June, 2012 (“The Mega Exemption Notification”)
Rate under Presently, from 1 June, 2016, service tax is levied @ 15% [Service tax @ 14%,
Finance Swachh Bharat Cess (SBC) @ 0.5% (w.e.f. November 15, 2015) and Krishi
Act, 1994 Kalyan Cess (KKC) @ 0.5% (w.e.f. June 1, 2016)] on specified services provided
by service providers in India
Limitations The existing tax structure suffers from a number of shortcomings. To understand it
in a more holistic manner we consider an example that when a manufacturer
manufactures and sells any excisable goods there is a levy of excise duty as well
as state level VAT. There is no set off of excise duty against state level VAT as
excise duty comes under the Central Govt and State level VAT under the State
Govt.
Compliances At present there are more than fifteen taxes under Indirect Tax System. All these
which are taxes are of different rates and required to be filed through different forms and
cumbersome returns. Example the State Government is levying Entry Tax and Octroi and
especially for compliance for the same is time consuming. The transporters are required to wait
SME'S more than four hours on border of a state, while entering in other state.
Conclusion Hence we can conclude that the tax structure in India is complex and burden sum.
GST-A CURE FOR ILLS OF EXISTING INDIRECT TAX REGIME

GST a Introduction of the GST will address the above stated shortcomings. It will play a crucial
diagnosis to role under Indirect Taxes regime. As large number of Central and State taxes are being
the current amalgamated into single taxe the allowance of set-off with the previous stage taxes will
regime remove the cascading effect. The biggest gain is that it will reduce the overall tax burden of
the consumer which is currently 25% to 30% overall

Constitutional Amendment
Title Particulars
Introduction The Constitutional provisions had delineated separate powers for the Center and the
States to impose various taxes. Center levied excise duty on all goods manufactured
in India as well as Service Tax along with the applicable cesses. With respect to
goods imported from overseas into India Customs Duty and additional duties of
customs were levied by the Center. The States levied Value Added Tax once the
goods entered the stream of trade. State's also had the power to levy State specific
taxes such as entertainment tax, luxury tax etc
Need for a A Constitutional amendment was needed in order to integrate Excise Duty, Service
Constitutional Tax, Additional Duties of Customs, State VAT, CST and certain State specific taxes
Amendment into a comprehensive goods and service tax
Ratification The One Hundred and Twenty Second Amendment Bill of the Constitution of India,
officially known as The Constitution (One Hundred and First Amendment) Act, 2016,
introduced a national Goods and Services Tax in India from 1 July 2017. The same
was enacted on 8th September, 2016
Significant 1) Concurrent powers on Parliament and State Legislatures to make laws governing
Amendments goods and services
2) Levy of IGST on inter-state transactions of goods and services to be levied and
collected by the Central Government and apportioned between the Union and the
States in a manner as per the law on the recommendation of the GST Council
3) In case of tobacco and tobacco products the Center alone would have the power
to levy excise duty in addition to the GST
Principles for Nature of Supply under IGST Act
determining Section 7: Inter-State Supply
place of Section 8: Intra-State Supply
supply as POS of Goods under IGST Act
per the law Section 10: POS of Goods (other than import/export)
formulated by Section 11: POS of Goods in case of import/export
Parliament POS of Services under IGST Act
Section 12: POS of services where both supplier and recipient are located in India
Section 13: POS of services where supplier or recipient is located outside India
Section 14: Special provision for payment of tax by a supplier of online information
and database access or retrieval services
Principles for Time of Supply under CGST Act

determining time Section 12: Time of Supply of Goods
of supply as per Section 13: Time of Supply of Services
the law formulated Section 14: Change in Rate of Tax in respect of Supply of goods or services
by Parliament
Levy 1) GST will be levied on all supply of goods and services except alcoholic liquor
for human consumption as per Section 9 (1) of CGST Act
2) On the following products, GST shall not be levied till a date to be notified on
the recommendations of the GST Council as per Section 9 (2) of CGST Act
(i) Petroleum Crude
(ii) High Speed Diesel
(iii) Motor Spirit (commonly known as Petrol)
(iv) Natural Gas
(v) Aviation Turbine Fuel
GST Article 279-A of the Constitution empowers the President to constitute a joint
Council forum of the Centre and States namely, Goods and Service Tax Council (GST
Council). GST Council came into force on 12th September, 2016. President
constituted the GST Council on 15th September, 2016
GST Council consists of the following members
1) Chairperson-Union Finance Minister
2) Members- Union Minister of State in charge of Revenue or Finance, Minister
in charge of Finance or Taxation or any other Minister nominated by each
State Government

Dual GST Model Introduced in India
1 Dual GST India is a federal country where both the Centre and the States have been
along with assigned the powers to levy and collect taxes through appropriate legislation.
Legislative Both the levels of Government have distinct responsibilities to perform
Framewor according to the division of powers prescribed in the Constitution for which
k they need to raise resources.
A dual GST will, therefore, be in keeping with the Constitutional requirement of
fiscal federalism. GST in India will be dual model based – i.e. state and
central govt will both levy GST termed as SGST and CGST respectively.
However, chargeability, definition of taxable event and taxable person,
measure of levy including valuation provisions, basis of classification etc.
would be uniform in both CGST and SGST
CGST/ 1) GST is a destination based tax applicable on all transactions involving

2
SGST/ supply of goods and services for a consideration subject to exceptions
UTGST/ thereof.
IGST 2) GST in India will comprise of
Central Goods and Service Tax (CGST) - levied and collected by
Central Government,
State Goods and Service Tax (SGST) - levied and collected by State
Governments with State Legislatures and
Union Territory Goods and Service Tax (UTGST)(Andaman and
Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and Diu
and Chandigarh)- levied and collected by Union Territories without State
Legislatures, on intra-State supplies of taxable goods and/or services.
Integrated Goods and Service Tax (IGST)-Inter-State supplies of
taxable goods and/or services will be subject to Integrated Goods and
Service Tax (IGST).
3) IGST will approximately be a sum total of CGST and SGST/UTGST and
will be levied by Centre on all inter-State supplies
3 Relief For providing relief to small businesses, a simpler method of paying taxes
and accounting thereof is also prescribed, known as Composition Scheme.
Along with providing relief to small-scale business, the law also contains
provisions for granting exemption from payment of tax on specified goods
and/or services
4 Manner of INWARD SUPPLY OUTWARD SUPPLY
Utilization
First Second
of ITC
1. CGST CGST IGST
First Second
2. SGST SGST IGST
First Second Third
3. IGST IGST CGST SGST
2)It should be noted that CGST cannot be used against SGST/UGST or

vice-versa
5 Seamless 1) GST is a destination based consumption tax. When an Inter-state sale

flow of takes place the credit will be utilized in the manner as stated above. The
Credit buyer will be allowed to avail the credit of IGST. This methodology is a
complete constrast of the present scenario wherein there is no credit
availed for CST. Hence we can conclude that there is a seamless flow of

credit.
2) It should be noted that for inter-state sale the supplier state will have to
transfer the credit to the center when the credit of SGST/UTGST is used in
the payment of IGST.The center will transfer to the buyer state the credit of
IGST used in the payment of SGST/UTGST
6 Goods and Resultantly, Goods and Services Network (GSTN) - a Special Purpose
Services Vehicle – has been set to provide a shared IT infrastructure and services to
Network Central and State Governments, taxpayers and other stakeholders for
(GSTN) implementation of GST. The functions of the GSTN, inter alia, include:
1) facilitating registration
2)forwarding the returns to Central and State authorities
3)computation and settlement of IGST
4) matching of tax payment details with banking network
5) providing various MIS reports to the Central and the State
Governments based on the taxpayer return information
6)providing analysis of taxpayers' profile
7) running the matching engine for matching, reversal and reclaim of
input tax credit
Benefits of GST
GST is a win-win situation for the entire country. It brings benefits to all the stakeholders of industry,
Government and the consumer. It will lower the cost of goods and services, give a boost to the
economy and make the products and services globally competitive. The significant benefits of
GST are discussed hereunder:
Creation of unified national market

GST aims to make India a common market with common tax rates and procedures and remove
the economic barriers thus paving the way for an integrated economy at the national level.
GST would create rates and structure common across the country and thus make doing
business in the country tax neutral, irrespective of the choice of place of doing business.
Mitigation of ill effects of cascading

By subsuming most of the Central and State taxes into a single tax and by allowing a set-off of
prior-stage taxes for the transactions across the entire value chain, it would mitigate the ill effects
of cascading, improve competitiveness and improve liquidity of the businesses. Eradication of
"tax on tax" & allows cross utilization of input tax credits by making the entire supply chain tax
neutral - benefit to industry sector
A system of seamless tax credits throughout the value chain & across boundaries of States,
would ensure that there is minimal cascading of taxes thus will reduce hidden costs of doing
business
Elimination of multiple taxes and double taxation:

GST will subsume majority of existing indirect tax levies both at Central and State level into one
tax i.e., GST which will be leviable uniformly on goods and services. This will make doing
business easier and will also tackle the highly disputed issues relating to double taxation of a
transaction as both goods and services.
Greater transparency as end of multiple taxes & removal of cascading effect will make life
simpler.

Boost to ‘Make in India' initiative
GST will give a major boost to the ‘Make in India' initiative of the Government of India by making
goods and services produced in India competitive in the national as well as international market.
Buoyancy to the Government Revenue

GST is expected to bring buoyancy to the Government Revenue by widening the tax base and
improving the taxpayer compliance
As GST is backed by robust end to end IT system this will lead to better tax compliance &
expected to reduce cost of collection of tax revenues & therefore lead to higher revenue
efficiency
Benefits of GST from different prospects

For overall business sector
Ü Ease in compliance process:- As its technology driven. There will be simplified &
automated procedure for various processes, such as registration, returns, tax payment
etc.
Ü Speedy decisions:- As reduced human interface between the tax payer and tax
administration though a common portal GSTN
Ü More transparency & accountability :- Online electronic verification, matching of input tax
credit across India will lead to encourage culture of compliance
Ü Harmonized laws, procedures & rates of tax:- This will make compliance easier & simple
also lead to greater certainty to taxation system.
Ü Reduced compliance cost:- removal of multiple taxation of same transaction will alleviate
the need for multiple record keeping for variety of taxes, thus lesser manpower in
maintaining records.
Gain to manufacturers & exporters

Ü As majority of central & state taxes are subsumed in GST with full set off of input goods
& sefvices , and complete phase out of central sales tax would reduce the cost of locally
manufactured goods.
Ü This will increase the competitiveness of Indian goods and services in the international
market and give boost to Indian exports.
For the Consumer

Ü Single & transparent tax proportionate to the value of goods & services under GST,
There would be only one tax from manufacturers to the consumer & thus lead to
transparency of taxes paid to final consumer.
Ü Relief in overall tax burden as result of better control mechanism & prevention of
leakages this will reduce tax on most of commodities & ultimately lead to reduced prices
which will benefit the consumer.
For Central & State government:-

Ü Higher revenue efficiency :- By widening tax base & improved taxpayer compliance it will
reduce cost of collection of tax revenues of the government.
Ü Simple and easy administration :- As multiple indirect taxes at the Central and State
levels are being replaced by GST. Backed with a robust end-to-end IT system, it would
be simpler & administer than the current indirect tax law.
Better control mechanism:- As a result of better compliance through robust IT
infrastructure, And an in-bulit mechanism in design of GST that would incentivize tax
compliance by traders.

Taxes to be subsumed in GST
In the GST Regime, the major indirect taxes have been subsumed in the ambit of GST.
The present concept of manufacture or sale of goods or rendering of services are no longer
applicable since the tax is now levied on “Supply of Goods and/or services”
Central Taxes State Taxes

Central Excise duty State VAT/Sales Tax
Additional duties of excise Central Sales Tax
Excise duty levied under Medicinal Purchase Tax
& Toiletries preparation Act Entertainment Tax (other than those
Additional duties of Customs (CVD & SAD) levied by local bodies)
Service Tax Luxury Tax
Surcharges & Cesses Entry Tax (All forms)
Taxes on lottery, betting & gambling
Surcharges & Cesses
Taxes not subsumed under GST
1. Property Tax & Stamp Duty
2. Electricity Duty
3. Excise Duty on Alcohol
4. Basic Custom Duty
5. Excise Duty on Petrol Diesel

Inter State Supply Intra-State Supply
Sec 7 of IGST Act, 2017 Sec 8 of IGST Act, 2017
Supply of goods/services shall be treated Supply of goods/services shall be
as inter-state supply treated as intra-state supply
Where the location of the supplier and the Where the location of the suppler and the
place of supply are in- place of supply are in
(a) two different States (a) same State
(b) two different Union territories; or (b) same Union territory
(c) a State and a Union territory
SUPPLY OF GOODS
Dealer
TELEVISION
45:30
WASHING MACHINE
45:30
45:30
45:30
45:30
45:30
Gujarat
45:30
Maharashtra
SUPPLY OF SERVICE
Flat Booking
Gujarat
Maharashtra

GST FLOW - WITHIN STATE MOVEMENT
INPUT TAX CREDIT INPUT TAX CREDIT INPUT TAX CREDIT
RM Price : ` 100
IGST ` 13.5 CGST ` 18 CGST ` 22.5
CGST 9 % :`9
SGST ` 13.5 SGST ` 18 SGST ` 22.5
SGST 9% :`9 TOTAL COST
Supply ` 27/ - ` 36 ` 45
Manufacturer “A” ` 354/ -
Supply
Manufacturer “B”
Consumer
WholeSupplyr Supply
“E”
Tax Invoice - “A” “C”
Supply Price: 150/ - Tax Invoice - “B” Retailer
CGST 9% 13.5 Supply Price: 200/ - “D”
SGST 9% 13.5 CGST 9% 18 Tax Invoice - “C”
SGST 9% 18 Sale
Supply Price: 250/ -
Total 177 CGST 9 % 22.5 Tax Invoice - “D”
Total 236 SGST 9% 22.5 Supply Price: 300/ -
CGST 9 % 27
Total 295 SGST 9% 27
Tax Payments
Tax Payments
Payable (in `)
Payable (in `) Total 354
CGST 13.5 Tax Payments
CGST 18
SGST 13.5 Payable (in `)
SGST 18
27/ - CGST 22.5 Tax Payments
36/ -
Less: Receivable SGST 22.5 Payable (in ` )
Less: Receivable
CGST 9 45/ -
CGST 13.5 CGST 27
SGST 9 Less: Receivable
SGST 13.5 SGST 27
18/ - CGST 18
27/ - 54
Net Payable `9 SGST 18
Net Payable `9 Less: Receivable
36/ - IGST 22.5
Net Payable `9 SGST 22.5
45
Net Payable `9
GST FLOW - INTER - STATE MOVEMENT

RM Price : ` 100
CGST 9% : ` 9 INPUT TAX CREDIT INPUT TAX CREDIT INPUT TAX CREDIT
SGST 9% : ` 9 IGST ` 27 C GST ` 18 IGST ` 45
SGST ` 18
Manufacturer “A” TOTAL COST
Supply
36 ` 354/ -
Supply
Manufacturer “B”
Consumer
Supply
Tax Invoice - “A” Wholesaler “E”
Supply Price: 150 “C”
IGST 18% 27 Tax Invoice - “B” Retailer
---- Supply Price: 200 “D”
Total 177 CGST 9% 18
Tax Invoice - “C” Sale
SGST 9% 18
Supply Price: 250 Tax Invoice - “D”
----
IGST 18% 45 SupplyPrice: 300
Total 236
Tax Payments ---- CGST 9% 27
Payable (in `) Total 295 SGST 9% 27
IGST 27 Tax Payments
---
Less: Receivable Payable (in `)
Total 354
CGST 9 CGST 18 Tax Payments
SGST 9 SGST 18
Payable (in `) Tax Payments
---- ---- IGST 45
36 Payable (in `)
18 Less: Receivable CGST 27
Net Payable ` 9 Less: Receivable CGST 18
IGST 27 SGST 27
IGST CGST 18 ----
Net Payable `9 ----
SGST 54
36 Less: Receivable
Net Payable `9 IGST 45
IGST Net Payable `9
SGST

Illustration1 : The below case pertains to the local supply of goods/services. Rate applicable
for CGST and SGST @ 9% respectively.
Supply of goods/services by Mr. A to Mr. B the value of which is Rs. 10,000.
I) Calculate the total price charged by Mr. A from Mr. B. Also state the amount of credit
availed by Mr. A.
II) Assuming there is a value addition @ 20% on the supply of goods/services by Mr. B to
Mr. C. Calculate the price charged by Mr. B.
III) On the basis of the working for the above two questions compute the CGST and SGST
payable by Mr. B to the Government.
IV) Prepare statement of revenue earned by Central and State Government.
Answer : In case of local supply of goods/services, the supplier would charge dual GST i.e.,
CGST and SGST at specified rates on the supply.
1. Supply of goods/Services by A to B
Amount (in `)
Value charged for supply of goods/services
Add: CGST @ 9%
Add : SGST @ 9%
Total price charged by A from B for local supply of goods/services
II. Supply of goods/services by B to C

B will avail credit of CGST and SGST paid by him on the purchase of goods/services and will utilise
such credit for being set off against the CGST and SGST payable on the supply of goods/services
made by him to C.
Amount (in `)
Value charged for supply of goods/services (`10,000x120%)
Add: CGST @ 9%
Add : SGST @ 9%
Total price charged by B from C for local supply of goods/services
Computation of CGST, SGST payable by B to Government
Amount (in `)
CGST payable
Less : Credit of CGST
CGST payable to Central Government
SGST payable
Less : Credit of SGST
SGST payable to State Government
Note : Rates of CGST and SGST have been assumed to be 9% each
Statement of revenue earned by Central and State Government
Transaction Revenue to Central Revenue to State

Government (`) Government (`)
Supply of goods/services by A to B 900 900
Supply of goods/services by B to C 180 180
Total 1080 1080

Illustration 2 : The below case pertains to inter-state supply of goods/services. Rate applicable for
IGST @ 18%, CGST & SGST @ 9% respectively.
I) Supply of goods/services by Mr. X of Maharashtra to Mr. A of the same state the value of
which is Rs. 10,000. Calculate the total price charged by Mr. X. Also state the amount of
credit availed by Mr. X.
II) Assuming there is value addition @ 20% calculate the total price charged for supply of
goods/services by Mr. A of Maharashtra to Mr. B of Karnataka.
III) On the basis of working of the above two questions compute IGST payable to the
Government by Mr. B.
IV) Assuming a further value addition @ 20% on supply of goods/services by Mr. B of
Karnataka to Mr. C of the same state, calculate the total price charged by Mr. B.
V) As per the working above compute IGST payable to the Government by Mr. B.
VI) Calculate the revenue earned by Central and State Governments respectively.
Answer : In case of inter-state supply of goods/services, the supplier would charge IGST at
specified rates on the supply.
1. Supply of goods/Services by X of State 1 to A of State 1
Amount (in `)
Value charged for supply of goods/services
Add: CGST @ 9%
Add : SGST @ 9%
Total price charged by X from A for intra-State supply of goods/services
X is the first stage supplier of goods/services and hence, does not have any credit of CGST, SGST
of IGST
II. Supply of goods/services by A of State 1 to B of State 2 - Value addition @ 20%
Amount (in `)
Value charged for supply of goods/services (` 10,000x120%)
Add: IGST @ 18%
Total price charged by A from B for intra-State supply of goods/services
Computation of IGST payable to Government
Amount (in `)
IGST payable
Less : Credit of CGST
Less : Credit of SGST
IGST payable to Central Government
The IGST charged on B of State 2 for supply of goods/services will be remitted by A of State 1 to
the appropriate account of the Central Government. State 1 (Exporting State) will transfer SGST
credit of ` 900 utilised in the payment of IGST to the Central Government.
III. Supply of Goods/services by B of State 2 to C of State 2 - Value addition @ 20%

B will avail credit of IGST paid by him on the purchase of goods/ services and will utilise such
credit for being set off against the CGST and SGST payable on the local supply of goods/services
made by him to C.
Amount (in `)
Value charged for supply of goods/services(` 12,000x120%)
Add: CGST @ 9%
Add : SGST @ 9%
Total price charged by B from C for local supply of goods/services

Computation of IGST payable to Government
Amount (in `)
CGST payable
Less : Credit of IGST
CGST payable to Central Government
SGST payable
Less : Credit of IGST (` 2,160 - ` 1,296)
SGST payable to State Government
Central Government will transfer IGST Credit of ` 864 utilised in the payment of SGST to State 2
(importing State).
Note : Rates of CGST, SGST and IGST have been assumed to be 9%, 9% and 18% respectively.
Statement of revenue earned by Central and State Governments

Transaction Revenue to Revenue to Revenue to
Central Government of Government of
Government(`) State 1(`) State 2 (`)
Supply of goods/services by X to A 900 900
Supply of goods/services by A to B 360
Transfer by State 1 to Centre 900 (900)
Supply of goods/services by B to C 432
Transfer by Centre to State 2 (864) 864
Total 1,296 Nil 1,296

RELEVANT DEFINITIONS
Sec 2 of CGST Act, 2017
2(52) : Goods 2(31) : Consideration 2(84) : Person 2(108) : Taxable Supply
2(102) : Services 2(17) : Business 2(105) : Supplier 2(78) : Non-Taxable Supply
2(93) : Recipient 2(47) : Non-Taxable Supply
2(107) : Taxable Person
2(98) : Reverse Charge
2(45) : E-Commerce Operator
Goods & Services
Rule 2(52) “goods” - Discussed Later
Rule 2(102) “Services” - Discussed Later
Business & Consideration

Rule 2(17) “Business” includes-
(a) Ü any trade, commerce, manufacture, Ü profession, vocation,
Ü adventure, Ü wager (a place of bet)
or
Ü any other similar activity,
whether or not it is for a pecuniary benefit (it means intention to earn the profit is not a criterion in determining
the states of business.)
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a)
Examples :
i)Sale of old furniture or scrap by a trader of mobile shop.
ii) Sale of old machinery by manufacturer.
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is
volume, frequency, continuity or regularity of such transaction
Examples : Even occasional transactions are also subject to GST e.g. Trader of computer also
providing consultancy for “how to set up Computer Shop” to his friend for consideration.
(d) supply or acquisition of goods including capital goods and services in connection with
commencement or closure of business
Examples : If covers purchase of capital asset or material before commencement of business or sale of
stock or fixed asset at the closure of business.
(e) provision by a club, association, society, or any such body (for a subscription or any
other consideration) of the facilities or benefits to its members
Examples : Facilities or benefits provided by club etc. are i)Sports facilities like swimming pool, table
tennis, cricket etc. ii) Restaurant facility iii) banquet hall or open ground iv) Accomodation facility
(rooms) v) Library vi) Conference room etc.
(f) admission, for a consideration, of persons to any premises

Examples : Entry tickets to amusement park, diwali mela, cinema theater etc.
(g) services supplied by a person as the holder of an office which has been accepted by
him in the course or furtherance of his trade, profession or vocation
Examples : I) An advocate get appointed as member of the Arbitration Tribunal.
ii) CA in practice provides CFO or independent director services, he would be covered

(h) services provided by a race club by way of totalisator or a licence to book maker in such
club ; and
Totalisator : A device showing the number and amount of bets staked on a race, to facilitate the
division of the total among those backing the winner.
(i) any activity or transaction undertaken by the Central Government, a State Government
or any local authority in which they are engaged as public authorities
Notes : This clause makes it clear that even the supplies of goods or services or both undertaken by
the Central Government, a State Government or any local authority shall also get covered in the
definition of business.
Sec 2(31)consideration - discussed later

Consideration in relation to the supply of goods or services or both includes
a) Any payment made or to be made, whether in money or otherwise, in respect of, in
response to, or for the inducement of, the supply of goods or services or both, whether
by the recipient or by any other person but shall not include any subsidy given by the
Central Government or a State Government;
(b) The monetary value of any act or forbearance, in respect of, in response to, or for the
inducement of, the supply of goods or services, whether by the recipient or by any other
person but shall not include any subsidy given by the Central Government or a State
Government:
PROVIDED that a deposit, given in respect of the supply of goods or services or both shall not be
considered as payment made for such supply unless the supplier applies the deposit as
consideration for the said supply;
Person, Supplier & Recipient

Rule 2(52) “Person” - includes
An Individual A hindu undivided family
A Company A Partner Firm
A limited Liability Partnership An association of persons or

a body of individuals, whether
Any corporation established incorporated or not, in India or
by or under any Central Act, outside India
State Act or Provincial Act or
a Government company as any body corporate
defined in clause (45) of incorporated by or under the
section 2 of the Companies laws of a country outside India
Act, 2013
A local authority
A co-operative society
registered under any law
relating to co-operative Society as defined under the
societies Societies Registration Act,
1860
Central Government or a
State Government
Every artificial juridical person,
not falling within any of the
Trust above

Deemed Distinct Persons : Sec 25 CGST Act
25 (4) A person who has obtained or is required to obtain more than one registration. whether
in one State or Union territory or more than one State or Union territory shall, in respect
of each such registration, be treated as distinct persons for the purposes of this Act.
25 (5) Where a person who obtained or is required to obtain registration in a State or Union
territory in respect of an establishment, has an establishment in another State or Union
territory, then such establishment shall be treated as establishment of distinct persons
for the purposes of this Act.
Rule 2 (105) “Supplier”

“Supplier” means in relation to any goods or services or both, shall mean the person supplying
the said goods or services or both and shall include an agent acting as such on behalf of such
supplier in relation to the goods or services or both supplied
Rule 2 (93) “Recipient”

“recipient” of supply of goods or services or both, means—
(a) Where a consideration is payable for the supply of goods or services or both, the person
who is liable to pay that consideration;
(b) Where no consideration is payable for the supply of goods, the person to whom the
goods are delivered or made available, or to whom possession or use of the goods is
given or made available; and
(c) Where no consideration is payable for the supply of a service, the person to whom the
service is rendered, and any reference to a person to whom a supply is made shall be
construed as a reference to the recipient of the supply and
shall include an agent acting as such on behalf of the recipient in relation to the
goods or services or both supplied
Other Important Definition
2(108) : Taxable Supply “taxable supply” means a supply of goods or services or both
which is leviable to tax under this Act
2(78) : Non-Taxable Supply “non-taxable supply” means a supply of goods or services or

both which is not leviable to tax under this Act or under the
Integrated Goods and Services Tax Act
2(107) : Taxable Person “taxable person” means a person who is registered or liable to
be registered under section 22 or section 24

2(98) : Reverse Charge “reverse charge” means the liability to pay tax by the recipient of
supply of goods or services or both instead of the supplier of such
goods or services or both under sub-section (3) or sub-section (4) of
section 9, or under sub-section (3) or subsection (4) of section 5 of
the Integrated Goods and Services Tax Act
2(45) : E-Commerce Operator “Electronic Commerce Operator” means any person who owns,
operates or manages digital or electronic facility or platform for
electronic commerce
SEC 2 (56) “INDIA"

Means
a) Territory of India as reffered to in article 1 of Constitution (The territory of the Union of India
viz., state and the union territories.)
b) Its Territorial Water, seabed and sub-soil underlying such waters, continental shelf,
exclusive economic zone or any other maritime zone as defined in the Territorial Waters,
Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976
c) The air space above its territory and territorial waters
USA
Oil Extraction
Exclusive
Contiguous Zone Territorial Water
Economic zone
The High Seas 200 NM 24M 12M
Seabed & Subsoil

Continental Shelf

Taxable event - Supply
Levy of tax: Every supply of goods or services will be liable to tax. The tax would depend
upon the nature of supply, viz.,
Ü inter-State supplies will be liable to IGST and
Ü intra-State supplies will be liable to CGST and SGST (UTGST).
Section 7 - Meaning and scope of supply

1 Supply includes -
(a) All forms of supply of goods and/ or services or both 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.
(b) Importation of services, for a consideration whether or not in the course or
furtherance of business
(c) The activities specified in Schedule I, made or agreed to be made without
a consideration.
(d) The activities to be treated as supply of goods or supply of services as
referred to in Schedule II.
2 Notwithstanding anything contained in sub-section(1)
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central Government, a
State Government or any local authority in which they are engaged as
public authorities, as may be notified by the Government on the
recommendations of the Council,
Shall be treated neither as a supply of goods nor a supply of services.
3 Subject to sub-sections (1) & (2), the Government may, on the recommendations of
the Council, specify, by notification, the transactions that are to be treated as
(a) A supply of goods and not as a supply of services; or

(b) A supply of services and not as a supply of goods.
Therefore, following shall be discussed herein :

Section 7 Meaning and scope of supply
Schedule I Matters to be treated as supply even if made without consideration
Schedule II matters to be treated as supply of goods or as supply of services
Schedule III matters or transactions which shall be treated neither as supply of

goods nor as supply of services.

Supply: Generic Meaning The word 'supply' should be understood as follows:
Ü It should involve delivery of goods and / or services to another person.
Ü Transfer of property in goods from the supplier to recipient is not necessary
Supply: Legal Meaning-Supply includes following Important terms u/s Sec 7(1)(a)
1 Sale Transferring the property in goods from one to another, upon Goods
valuable consideration
2 Transfer Any transfer of goods or right in goods or of undivided share in Goods
goods without transfer of title thereof
3 Barter To exchange one commodity for another without use of money Both
4 Exchange To swap, to part with, give or transfer for an equivalent with the Goods
use of money
5 Licence Permission granted by competent authority to exercise certain Service
privileges without such authorization the activity would have
constituted as illegal an act
6 Rental Periodical payment for the use of another property Service
7 Lease Contractual agreement by which one party conveys an estate in Service
property to another party, for a limited period, subject to various
conditions, in exchange for something of value, but still remain
ownership
8 Disposal To pass or into the control of someone else; to alienate, bestow, Goods
or part with
As per Sec 7 supply includes three events

Ü Wholly supply of Goods
Ü Wholly supply of services
Ü Supply of both (Goods and services)
Wholly supply of Goods
All form of Such as Made For

Goods
supply of FSale consideration
FTransfer or By a person
Agreed to
FBarter be made
FExchange
FDisposal
In the course
or furtherance
of business

Sec 2(52): Goods
Means every kind of movable property
Other than money and securities
But includes actionable claim,
growing crops, grass and things attached to or forming part of the land
which are agreed to be severed before supply or under a contract of supply
Actionable claims: under the GST laws, actionable claims would be reckoned as goods. But
Actionable claim, other than lottery, betting and gambling will not be treated as supply of goods or
services by virtue of Schedule III (Activities or transactions which shall be treated neither as a supply
of goods nor a supply of services).
Intangible Goods: Intangibles like DEPB license, copyright and carbon credit would continue to be
covered under 'goods'
Examples
Money 1. Deposit or withdrawal of Money from Bank
2. Borrowing or repayment of laon
3. Conversion of Currency
4. Conversion of Rupees in to Coin
Securities Transaction of Securities does not attract GST example sale or
purchase of Stock, Shares, Derivatives etc.
Actionable claim i)Unsecured debts
ii) Right to participate in the draw to be held in a lottery.
Supply of Goods by following ways liable to GST
1 Sale Furniture House sold furniture to Mr. Ganesh. This will be treated as
supply of goods, because on sale, the title of the furniture is transferred
to Mr. Ganesh.
2 Transfer 1) Transfer between branches, between factory and warehouse ,

factory premise to depot.
2) vishal buys a dump truck for RM125,000 under a hire purchase
agreement with a bank. The ownership of the truck is caveat by the
bank until the company makes full payment of the hire purchase
loan amount. This hire purchase transaction is a supply of goods
and subject to GST
3 Barter 1) Mr. A trades his motorcycle with Mr B’s second hand car without
cash exchange between the two parties
4 Exchange 1) Where a a new phone is supplied for 24000 along with an

exchange of an old phone and if the price of the new phone without
exchange is 24000 the open market alue is 24000
5 Disposal 1. Sale of Machinery after the completion of its life as a scrap sale

Wholly supply of Service
All form of Such as Made For

Service
supply of Sale consideration
Transfer By a person
or Agreed to
Barter
Exchange be made
Disposal
Lease
Licence In the course
Rent or furtherance
of business
Sec 2(102): Services

Means anything
Other than goods, money and securities
But includes activities relating to the use of money or its conversion by cash or by any
other mode, from one form, currency or denomination, to another from
currency or denomination for which a separate consideration is charged.
The word “anything” could be read as “everything”. i.e. services means everything that is not goods, and is
not specifically excluded (such as money, securities, transactions specified in schedule III, etc.)
Schedule II of the CGST Act list down matters which shall be regarded as a supply of goods, or supply of
services.
The GST law empowers the Government to require to require treatment of supply of notified goods as
supply of services, and vice versa.
Activity relating to use or conversion of Money

1. Deposit or Withdrawal
of Money from Bank
Transaction in Money
2. Borrowing or repayment
of loan.
3. Interest on loans or
deposits It is a Supply of Service
(separate consideration in relation to use of money)
Interest
It is a Supply of Service
4. Processing fees
(separate consideration in relation to use of money)
Conversion of Currency
Commission
Commission
(separate consideration in relation to conversion of money)
Conversion of Rupees in
to Coins
Commission
(separate consideration in relation to conversion of money)
Commission

Supply in the context of Service
The term 'Sale' is normally used for goods. For service it can be considered as provision of
1 Sale service. For eg Mr X is providing GST consultation to his client. This is a provision of service
by Mr. X to his clients.
2 Transfer A wedding planner hires the services of a pendal or shamiana contractor wherein the supply
of furniture (goods) by the contractor, the title of which remains with him is used by the
wedding planner for a short duration, is a supply of service and liable to GST.
3 Barter A CMA providing consultancy service and in return an Architect designing the house of the
CMA
4 Exchange As per the understanding of the term 'Exchange' one service cannot be exchanged for
another as providing of service requires requisite skill which is developed over a period of
time and hence exchange is not applicable for service
5 Licence Licence required for the use of Software eg use of Tally software
6 Rental Furniture House supplied furniture to Mr. Rakesh, on rental basis, for a period of 3 months.
This amounts supply of service because furniture is transferred for Mr. Rakesh's usage, and
the title of the furniture is still with Furniture House.
7 Lease 1) Mr. Suresh lets out land on lease to Furniture House. The letting out of land on lease is
considered as supply of services.
2) Mr. Suresh lets out a building to Furniture House. Furniture House used the building for
display and sale of furniture. This is a supply of services.
8 Disposal Disposal means to alienate (transfer ownership of (property rights) to another person or
group) which cant be done with services. A person can choose to either avail services or not
but not alienate hence not applicable to services.
Supply of Both (Goods and Services)
All form of supply of BOTH (Goods & services) made or agreed to be made for consideration
by a person in the course or furtherance of business
Normally it includes following types of contract
1) Works contract
2) Catering, restaurant etc.
Sec 2(119) : Works contract
Building,
}
Construction,
Fabrication,
Completion,
Erection, of any immovable property
Installation,
Fitting Out,
Improvement, wherein transfer of property in goods
Modification, (whether as goods or in some other
Repair, form) is involved in the execution of
Maintenance, such contract
Renovation,
Alteration or Commissioning

Labour + Material = Works Contract
Contractor
Chandulal Builders
Labour + Material = Works Contract
Contractor
Catering, restaurant etc.

Supply, by way of or as part of any service or 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), where such supply or service is for cash, deferred payment or other valuable
consideration.
Even though under Section 7(1)(a) ‘Supply’ includes ‘both’ i.e. goods and services it is necessary to note
that even in a case where there is a combination of goods and services the same has to be classified under
one heading of either ‘Supply of Goods’ or ‘Supply of Service’ as various provisions under the GST Act are
separately applicable to supply of goods and supply of services.
Going further from this understanding it should be noted that Schedule II (to be discussed later)
and Section 8 pertaining to tax liability on ‘Composite’ and ‘Mixed’ Supply, should be read along with
Section 7(1)(a) to classify whether the activity is supply of goods or supply of Services. Section 8 helps us
to identify whether or not a supply is naturally bundled (Composite supply) or not (Mixed Supply).
Catering Restaurant
- Bread
- eggs
- milk
S P

Supply made or agreed to be made
No Particulars Explanation Examples of Goods Examples of Services
1 Made Goods are already Mr A a trader who is in Mr X who is a CMA
delivered or Service is the business of has provided the
already provided to the selling electronic service of Statutory
recipient items has made the Cost Audit for his
delivery of a TV to the client XYZ pvt ltd
customer location
2 Agreed to This is split up in two Mr M a trader in Mr B an Architect has
be Made parts namely: imitation jewellery has entered into a contract
(i) There is an agreement taken an advance from with Mr C, his client, to
for supply of goods or his customer Miss Y to design Mr C's house
provision of service be supplied at a later
(ii) An advance has been date
received against the
supply of goods or
provision of service
Supply made or agreed to be made for consideration

As per section 2(31) of CGST act : Consideration in relation to the supply of goods or services
or both includes
a) Any payment made or to be made, whether in money or otherwise, in respect of, in
response to, or for the inducement of, the supply of goods or services or both,
whether by the recipient or by any other person but shall not include any subsidy
given by the Central Government or a State Government;
(b) The monetary value of any act or forbearance, in respect of, in response to, or for the
inducement of, the supply of goods or services, whether by the recipient or by any
other person but shall not include any subsidy given by the Central Government or a
State Government:
PROVIDED that a deposit, given in respect of the supply of goods or services or both shall not
be considered as payment made for such supply unless the supplier applies the deposit as
consideration for the said supply;
Consideration As per sec 2(75) of CGST act means the

Ü Indian legal tender or any foreign currency, cheque, promissory note,
bill of exchange, letter of credit, draft, pay order, traveller
Monetory
cheque,money order, postal or electronic remittance or
Ü any other instrument recognised by the Reserve Bank of India when
used as a consideration to settle an obligation or exchange with
Indian legal tender of another denomination
Ü but shall not include any currency that is held for its numismatic value.
Non The following shall be consideration -

Ø Supply of goods and services in return for provision of service
Monetory
To do an Act The monetary value of any act or forbearance, in respect of, in response
to, or for the inducement of, the supply of goods or services,
or forbearance

Illustrations:
If........ And in return...
A agrees to dry clean B's clothes B agrees to click A's photograph
A agrees not to open dry clean shop in B's neighbourhood B agrees not to open photography shop in A's neighborhood
A agrees to design B's house B agrees not to object to construction of A's house in his neighbourhood
A agrees to construct 3 flats for B on land owned by B B agrees to provide one flat to A without any monetary consideration
Inducement means to gives something to a person so that he will do something else in return
Illustration 1 : A restaurateur offered ‘free’ meals to drivers of buses carrying passengers as an inducement to bring
Meaning of potential customers to his business premise. Since the meals were not given to drivers of empty buses, there is a
Term inducement direct link between the act of bringing passengers to the food outlet and the provision of the free meals. The
of consideration here is the free meals provided.
Illustration 2 : A football player is offered a branded car as an inducement for him to join the club. In this case, the car
offered is the consideration that induces the player to join the club to provide his football skills. There is a direct link
between the act of joining the club and the provision of the car.
Supply for With

The phrase “in respect of, in response to, or for the inducement of” means there must be a
direct link between the supply and the consideration.
Consideration Contractual 1) A lawyer providing a service for monitory consideration.
reciprocity 2) Services received from a club against membership, there is a direct link of making the
The concept ‘supply facilities available for use. whether or not immediately used.
for a consideration’
An activity done without such a relationship i.e. without the express or implied contractual
involves an element reciprocity of a consideration would not be an ‘activity for consideration’ even though such an
of contractual activity may lead to accrual of gains to the person carrying out the activity.
No
relationship wherein
the person doing an Contractual Question 1: Whether award received in consideration for contribution over a life time or even a
reciprocity singular achievement carried out independently or without reciprocity?
activity does so at
Answer: Thus an award received in consideration for contribution over a life time or even a singular
the desire of the achievement carried out independently or without reciprocity to the amount to be received
person for whom the will not comprise an activity for consideration.
activity is done in
exchange for a Question 2: Whether donations, gifts or free charities received to charitable organization or
consideration. grant to research organization is taxable?
Answer: To be taxable an activity should be carried out by a person for a ‘consideration’
Grant to research organization Activity carried out without any consideration like
donations, gifts or free charities are therefore outside the ambit of service. For example
grants given for a research where the researcher is under no obligation to carry out a
particular research would not be a consideration for such research.
But if in case research grant is given with counter obligation on the researcher to provide
IPR rights on the outcome of research or activity undertaken with the help of such grants
then the grant is a consideration for the provision of service of research.
General grants for researches will not amount to a consideration.
Supply Free supply of goods or Services are not subject to GST unless it is specifically covered in Schedule I or
Sec 7.
without Ø Other examples of activities without consideration are :
" Access to free TV channels
Consideration
" Tourism information free of charge.
" Large number of governmental activities for citizens.
TREATMENT OF DEPOSITS
Deposit shall not be treated as consideration unless it is appriated by the supplier towards supply of goods and/ or services.
Illustration 1 : MTNL telecom service provider, receivers security deposits from subscriber in connection with supply of telecom services.
This Security deposit is refundable. This security deposit is not consideration for supply of service and hence, shall not be taxable. However, if
in future, if it is adjusted towards value of services supplied, then this security deposit shall be treated as consideration.
Illustration 2 : Any Deposit made which is intended by the parties to the offset against the purchase price once the supply has been made.
Such deposit (better to call them as advance) will represent consideration and thus fall within the scope of GST. [These become liable for the
tax the day it is received]

IN THE COURSE OF FURTHERANCE OF BUSINESS
Supply of goods or services must be in the course of or furtherance of business. If any supply not in the
course of or in furtherance of business eventhough for consideration then it shall not be treated as supply
as per Sec 7(1)(a)
Question : An individual buys a car for personal use and after a year sells it to a car dealer. Will the
transaction be a supply in terms of CGST/SGST Act? Give reasons for the answer. (FAQ -CBEC Q.10,
Ch.4)
Answer : No, because supply is not made by the individual in the course of furtherance of business.
Further, no input tax credit was admissible on such car at the time of its acquisition as it was meant for non-
business use.
IMPORT OF SERVICE
As per Sec 7(1) Supply includes “Import of Service” for consideration whether
or not in the course or furtherance of business.
1. If services are imported without consideration then the same shall not fall within the scope of the term
“Supply”. (except the circumstances as provided in Schedule I)
2. The scope of importation of service in this sub-section is very wide as such supply even if received in
personal capacity and not in the course or furtherance of business shall also get covered in this sub-
section. The aforesaid preposition can be understood better with the help of following examples.
Import of Service in the course of furtherance of business

Example 1 : Super Cars Ltd. Pune imported navigation design services from a vendor in Singapore for a
consideration of SGD (Singapore Dollars) 20,000. Now, Super Cars Ltd is liable pay IGST on the above
mentioned import of service on reverse charge.
Example 2 : Mr. Ketan is a supplier of goods located in New Delhi. In July 2017 he shall import ‘Business
Consultancy Services’ from China for a stipulated consideration of USD 50,000. The importation of service
in the given case shall fall within the ambit of term ‘Supply’ and shall be liable to IGST tax in GST.
Import of Service not in the course of furtherance of business

Example 1 : Mr. Happy (an unregistered person) plans to pursue his higher education in UK. He receives
career consultancy services from a UK based consultant for Rs. 1, 20,000. Does it qualify as a supply?
Answer : Yes. Importation of services for a consideration whether or not in the course or furtherance of
business is covered under supply. Hence, in the above case it will be treated as supply. The UK based
consultant would be required to register as Non Resident Taxable Person and shall discharge GST liability.
Example 2 : Mr Sudhir is an Advocate based in Kolkata. he shall import Services of an Architect for a
consideration in respect of his personal home, located in Kolkata, in August, 2017. In the given case,
importation of services shall fall within the scope of term ‘supply’ even if services shall be imported for
personal purposes.

SCHEDULE- I [Sec 7]
Activities to be treated as supply even if made without consideration
1. Permanent transfer or disposal of business assets where input tax credit has been
availed on such assets.
An insurance company disposes its used computer (its book value is more than RM500)
Example 1
by giving it to a charitable organisation. The disposal of the computer is a supply of goods
and subject to GST.
Star Furniture Enterprise, a sole proprietor, is in the business of selling furniture. Its owner
Example 2
took a set of furniture to furnish his bedroom permanently. The transfer of the furniture by
the owner, whether or not for a consideration, is a supply of goods and subject to GST
1. Entry 1 of Schedule I is applicable only in case where business asset is disposed of after
availing input tax credit. However if no ITC is availed on such business asset then no GST is
payable on its disposal or transfer.
2. It also implies that the goods should be transferred without any intention or requirement of
having to receive the goods back.
2. Supply of goods or services or both

Ü between related persons or
Ü between distinct person as specified in section 25,
when made in the course or furtherance of business.
Proviso
Provided that gift not exceeding fifty thousand rupees in value in a financial
year by an employer to an employee shall not be treated as supply of goods
or services or both.
Related Person (as per explanation to Sec 15 of CGST Act
Persons shall be deemed to be “related persons” if
(i) such persons are officers or directors of one another’s business
(ii) such persons are legally recognised partners in business
(iii) such person are employer and employee
(iv) an person directly or indirectly owns, controls or holds twenty-five per cent or ore of the
outstanding voting stock or shares of both of them
(v) one of them directly or indirectly controls the other
(vi) both of them are directly or indirectly controlled by a third person
(vii) together they directly or indirectly control a third person; or they are members of the same family
Happy Ltd provides management services without charge to Joy Ltd. having common
Example
directors - it qualify as a supply and GST is payable.
Distinct person as specified in section 25

business vertical
under same PAN
H.O.
Stock transfers or branch transfers : In view of the aforesaid discussion, transactions between different locations
(with separate GST registrations) of same legal entity (e.g. stock transfers or branch transfers) will quality as ‘supply’
under GST which is in contrast to the existing regime.

Supply of goods or services or both between an employer and employee
By virtue of aforesaid definition of related person, employer and employee are related persons. However,
services provided by an employee to the employer in the course of or in relation to his employment shall not
be treated as supply of services [Schedule III (discussed in subsequent paras)]
Further, Schedule I provides that gifts not exceeding ` 50,000 in value in a financial year by an employer to
an employee shall not be treated as supply of goods or services or both.
It is important to note that an employer does not have to account for the output tax (tax charged on
any taxable supply) for any employee benefits stated in the contract of service of the employee,
and given free to the employee. Therefore it is advisable for the employers to review the
employment contracts to consider whether employee benefits currently provided are covered
within the employment contract because any left out will be subject to the GST output tax (tax
charged on the supply of goods or services) and subject to the gift rule of RM 500
3. Supply of goods -
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf
of the principal; or
Example When Mr. Sagar [the Principal] located in Maharashtra supplies certain goods to his
agent Mr. Mayur [located in Delhi] and Mr. Mayur undertakes to supply the said goods in
Delhi on behalf of Mr. Sagar.
In the aforesaid case, supply of goods by Mr. Sagar to Mr. Mayur shall fall within the ambit
of the term ‘supply’ even if made without consideration and shall be liable to GST
(i.e.IGST)
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of
the principal
Example Mr.Atul works as an agent and is located in Maharashtra. Mr Rajesh is a manufacturer

and located in Maharashtra. Mr. Atul agrees to purchase certain goods from New Delhi
market on behalf of Mr. Rajesh every month and supply the same to Mr. Rajesh.
In the aforesaid case, supply of goods by Mr. Atul to Mr. Rajesh shall fall within the ambit of
term ‘supply’ even if made without consideration. This supply of goods form Atul to Rajesh
shall be subject GST. (i.e. CGST or SGST)
It seems that this entry only applicable to consignment agent who is purchasing or selling goods
on the behalf of principal.
Commission agent, clearing & forwarding agent broker, del-creder agent does not fall under
ambit of this entry and they will charged GST only on their commission on brokerage amount.
(Authors personal comment)
4. Import of services by a taxable person

Ü from a related person outside India or
Ü from any of his other establishments outside India,
in the course or furtherance of business.
Important Terms used in this entry
Term Meaning
Taxable person “Taxabler Person” means a person who is registered or liable to be registered under section 22 or section 24.
Sec 2(107) of CGST Authors Comment : if service is imported by non registered person without consideration then no GST is payable.
Related person Discussed above
As per Explanation
to Sec 15 of CGST
Business Refer definition

Sec 2(17) of CGST
Example John Ltd, USA is the holding company of VB Ltd., India. VB Ltd. imports Business Consultancy
(related Service from John Ltd. in September, 2017 in the course of furtherance of business.
person )
The aforesaid importation of services shall fall within the ambit of term “supply” and VB ltd. shall
be liable to pay integrated tax under IGST Act,2017.
Example ABC Associate received legal consultancy services from its head office located in Malaysia.
(other
establishment)
The head office has rendered such services free of cost to its branch office. Since ABC
Associates and the branch office are related persons, services received by ABC Associates
will qualify as supply even though the head office has not charged anything from it.

Analysis
Sec 7(1)(b) Schedule I - Entry 4
Import of services Import of services by a taxable person
Ü for a consideration Ü from a related person outside India or
Ü whether or not in the course or Ü from any of his other establishments
furtherance of business outside India,
in the course or furtherance of
business.
Lets try to understand Taxability of import of service with the help of Chart
Import of Services
with consideration without consideration
in course or not in course or related person/distinct

furtherance furtherance of business person + in course or Other cases
of business furtherance of business
Non-taxable
Taxable

SCHEDULE- II [Sec 7]
Activities to be treated as Supply of Goods or Supply of Services
1. Transfer
Supply of Goods Supply of Service
(a) Any transfer of the title in goods is a supply (b) Any transfer of right
of goods. Ü in goods or
Ü of undivided share in goods
Example Furniture House sold furniture to Mr. Ganesh. without the transfer of title therefore, is a
This will be treated as supply of goods,
because on sale, the title of the furniture is supply of services.
transferred to Mr. Ganesh.
Example Mr. A shall transfers right to use of a JCB
It already covered under Sec 7(1)(a). Here, it is Machine for a period of two months for an
repeated just to classify as a supply of goods. agreed consideration to Mr. B in August, 2017.
The foregoing transfer of JCB Machine
(c) Any transfer of title in goods under an agreement without transfer of title in JCB Machine shall be
which stipulates that property in goods shall pass treated as a supply of service.
at a future date upon payment of full consideration
as agreed, is a supply of goods. Example Mr. X and Mr. Y are joint-owner/co-owner of a
movable property. Mr. X sells his share in
Example Furniture House supplied furniture to Mr. movable property (goods) to another person.
Ramesh in an agreement to receive payments It would be treated as transfer of undivided
in 6 instalments. This amounts supply of shares in goods.
goods, because the title of the furniture will
pass on to Mr. Ramesh on completing the
payment of 6 instalments.
Ü Typically, it will cover ‘hire purchases
transaction’ and ‘installment purchase
transaction’
Ü Entire consideration for such transaction
shall constitute supply of goods.
2. Land and building

(a) Any lease, tenancy, easement, licence to occupy
land is a supply of services
Example Mr. Suresh lets out land on lease to Furniture
House. The letting out of land on lease is
considered as supply of services.
Basically, it covers Lease, tanancy, easement,
license to occupy land.
(b) Any lease or letting out of the building including

Ü a commercial,
Ü industrial or
Ü residential complex
for business or commerce, either
wholly or partly, is a supply of service.
3. Treatment of process
(a) Any treatment or process which is applied to
another person’s goods is a supply of services.
Example 1 XYZ Tools sent their tools to Mercury for heat
treatment to harden them. The heat treatment
done by Mercury is a supply of services.
Example 2 New Glass sent their glass to PQR for heat

treatment to produce tempered glass. The
heat treatment done by PQR is a supply of
services.
A careful perusal of this entry reveals that any
job-work carried out by a job-worker on
another person’s goods shall be treated as a
supply of services. Further, it shall be
immaterial, whether the job-work is be carried
out by a job-worker with or without any
material.

4. Transfer of business assets
(a) where goods forming part of the assets of a (b) where,
business are Ü by or under the direction of a person carrying
Ü transferred or disposed of on a business,
Ü by or under the directions of the person carrying Ü goods held or used for the purposes of the
on the business business
Ü so as no longer to form part of those assets, are put to any private use or are used, or
whether or not for a consideration, made available to any person for use, for any
such transfer or disposal is a supply of goods purpose other than a purpose of the business,
by the person whether or not for a consideration, the
usage or making available of such goods is a
An insurance company disposes its used supply of services
Example 1 computer for ` 500 (its book value is more
Ramesh Enterprise is a supplier of tents for its
than ` 500) by giving it to a charitable Example 1 business. The company lends a few tents to
organisation. The disposal of the computer is a its manager for his son’s wedding. The private
supply of goods and subject to GST. usage of the tents by the manager (with or
without a consideration) is deemed as a
GST registered retailer is in the business of
Example 2 supplying mineral water. His family is supply of services by the company to him.
consuming 100 bottles of mineral water Suresh Enterprise, a sole proprietor, is in the
Example 2 business of selling furniture. Its owner took a
regularly every month. The disposal of the
mineral water for his family’s consumption is a set of furniture to furnish his house’s Vishal
supply of goods and subject to GST. temporarily for 3 months. The personal use of
the furniture by the owner, whether or not for a
Star Furniture Enterprise, a sole proprietor, is consideration, is deemed as a supply of
Example 3 in the business of selling furniture. Its owner
services by the company to him.
took a set of furniture to furnish his bedroom
permanently. The transfer of the furniture by Mr. Y gives generator-sets on rental basis to
the owner, whether or not for a consideration, Example 3 various customers. he gives a generator-set to
is a supply of goods and subject to GST his brother-in-law for a period of one month in
Sept.,2017 on the occasion of some function
Mr.Anil is carrying on the business of in the home of his brother-in-law and
Example 4 consumer durable products. He disposed of a
thereafter generator brought back to the show
defective refrigerator for ` 50,000/- to Mr. Sunil room of Mr. X. The activity of making available
whereas its normal price is ` 1,50,000/- the said generator for the private use of
Aforsaid disposal shall be considered as brother-in-law of Mr.Y shall be treated as a
supply of goods by Mr. Anil. ‘supply of service’.
where any person ceases to be a taxable person,

(c)
any goods forming part of the assets of any business carried on by him
shall be deemed to be supplied by him in the course or furtherance of his business
immediately before he ceases to be a taxable person, unless—
(i) the business is transferred as a going concern to another person; or
(ii) the business is carried on by a personal representative who is deemed to be a taxable person.
ABC a registered person under GST, acquires a noodle machine from Sim Enterprise who is not registered
Example 1 under GST on 2.1.2018. After the machine has been used for more than 2 years, ABC ceases to be a taxable
person and de-registers on 28.1.2020. The noodle machine held on hand by ABC at the time of its cessation as a
taxable person is not deemed as a supply by him.
A, a trader, is winding up his business because of his ill health. At the time of de-registration he has goods in stock
Example 2 valued ` 2,00,000. Any goods left in stock shall be deemed to be supplied by him and GST shall be payable.
In this case it is immaterial, whether registered person has taken the credit of such goods lying in stock at the
time of its purchased.
Comparative analysis
Schedule I - Entry 1 Schedule II - Entry 4(a)
Permanent transfer or where goods forming part of the assets of a business are
disposal of business Ü transferred or disposed of
assets where input tax Ü by or under the directions of the person carrying on the business
credit has been Ü so as no longer to form part of those assets,
availed on such assets. whether or not for a consideration, such transfer or disposal is a supply of goods by the person
Example Activity GST Liability
Disposal of Printing machine installed Transfer of goods forming part of business Sec 7 read with Schedule I (Entry 1)
(ITC availed) to some charitable organization assets Ü Supply
for free (without consideration) Sec 7 read with Schedule II (Para 4(a))
Ü Supply of Goods
Motor Vehicles used in factory (ITC not Transfer of goods forming part of business Sec 7 read with Schedule II (Para 4(a))
availed - not allowed as per Sec 17) assets Ü Supply of Goods
Sale for ` 50,000 (for consideration)
Motor Vehicles used in factory (ITC not Transfer of goods forming part of business Sec 7 read with Schedule I
availed- being bloked as per Sec 17) assets Ü Not supply at all
Disposal to some charitable organization (without consideration) Sec 7 read with Schedule-II (Para 1)
for free Supply of Goods.

5. Supply of services
The following shall be treated as supply of service, namely:—

(a) renting of immovable property.
1. Immovable property includes land, building for anything permanently fastened attached to earth.
2. Lease, tenancy or letting out of the land and building is already covered in entry 2 of Schedule II. In
this entry it seems that government want cover renting of other immovable property
(b) construction of a complex, building, civil structure or a part thereof,

including a complex or building intended for sale to a buyer, wholly or partly,
except where the entire consideration has been received
Ü after issuance of completion certificate, where required, by the
competent authority or
Ü after its first occupation,
whichever is earlier.
tion
Explana For the purposes of this clause—
(1) the expression "competent authority" means the Government or any authority authorised to
issue completion certificate under any law for the time being in force and in case of non-
requirement of such certificate from such authority, from any of the following, namely:—
(i) an architect registered with the Council of Architecture constituted under the Architects
Act, 1972; or
(ii) a chartered engineer registered with the Institution of Engineers (India); or
(iii) a licensed surveyor of the respective local body of the city or town or village or
development or planning authority;
(2) the expression "construction" includes additions, alterations, replacements or remodelling of
any existing civil structure.
This entry includes following activities

1. Construction contract where only labour is involved and material is provided by client.
2. Services supplied by builder or developers for construction of building where advances
(consideration) received before completion certificate or first occupancy
Construction Service by Contractor
Labour & Construction Land & Material own by Builder
done by contractor or Service recipient
Construction of Service intended for sale before completion
Flat Booking
Under Construction
building
SITE OFFICE
Flat Value 80,00,000/-
before Completion After Completion

Service Taxable
1) 1 2 3 Value = 80,00,000
40,00,000 20,00,000 20,00,000
2) 1 2 Service Taxable
Value = 80,00,000
`1 79,99,999
After Completion
Service Tax
3) 1
Analysis Not applicable
80,00,000
Taxability of transactions
Situation Supply of Goods
Entire consideration is received after Not a supply at all
Ü Issuance of completion certificate, where require by competent authority Such supply shall be considered as neither as
Ü after its first occupation whichever is earlier supply of goods nor as supply of services
[Sec 7(2) read with Schedule III [Entry 5)]
Entire consideration or any part of consideration is received before Supply of Service
Ü issuance of completion certificate, where require by competent authority, [Sec 7(1)(d) read with Schedule II
Ü after its first occupation whichever is earlier (Para 5(b))]

(c) Temporary transfer or permitting the use or enjoyment of any intellectual property right
Intellectual property right in common trade parlance includes the following:

1) Ø Copyright Ø Patents Ø Trademarks Ø Designs
Ø Any other similar right to an intangible property
2) IPR normally treated as movable property i.e. goods hence following analysis you must
have to keep in mind
Sale /permanent transfer of IPR shall Temporary transfer or permitting the

be treated as supply of goods under use or enjoyment of any intellectual
sec 7(1)(d) read with Schedule II (Para property right shall be treated as supply
5(c)) of service under Sec 7(1)(d) read with
Schedule II(Para 5(c))]
(d) F Development,
F design,
F programming,
F customization,
F adaptation,
F upgradation,
F enhancement,
F implementation
of information technology software”
Student X
Management System
Student X
Management System
Development Student
Management System
V’Smart Academy
V’Smart Academy
V’Smart Academy Tally
Tally
50%
Installation
Customized Software Pre-packed / canned / Shrink-Wrapped Software

1) If is tailor made software made as per 1) There software treated as goods when put on any
requirement of customer. media [ Tata Consultancy Service 2002]
2) These contract involved Sale of Pre- License to use prepacked
- provision of service & packed software Software
- transfer of property in goods
[HDD/CD] Supply of goods Supply of Service
3) Pre-dominant nature of transaction is
supply of service
Supply of Service
(e) Analysis
After referring to the aforementioned definition the said clause can be broken in to three parts
which read as follows:
(i) Obligation to refrain from an act: Means any act, which binds a person, of not to do or
not doing a particular thing in a particular manner in a given circumstances.
For example: Non-compete fees for not doing a particular business or not to practice a
particular profession.

(ii) Obligation to tolerate an act or a situation: Means to accept the occurrence or
existence of an act or a particular thing, which is imposed by a condition or
circumstances, in a contract, agreement or any other document which is legally
enforceable by law.
For Example:
a) Penalty on early termination of rental or lease agreement.
b) Prepayment charges on early payment of loan installment.
c) Demurrage charges paid to the port authorities for not clearing the goods within
a specified period of time.
(iii) Obligation to do an Act: Means to perform or to do something, necessarily prescribed
in an agreement, contract or any other document which is required under any law for the
time being in force.
For Example : Non compete Agreements
By virtue of a non-compete agreements, one party agrees, for a consideration, not to
compete with one other in any specified manner. Such action on the part of one person
is an activity for consideration and will be covered by declared services.
(f) Transfer of the right to use any goods for any purpose (whether or not for a
specified period) for cash, deferred payment or other valuable consideration.
Comparative analysis
Schedule II - Entry 1 (b) Schedule II - Entry 5(f)
any transfer of right in goods or of undivided Transfer of the right to use any goods
share in goods for any purpose (whether or not for a
without the transfer of title thereof, specified period) for cash, deferred payment or other
is a supply of services valuable consideration is a supply of service
6. Composite supply
The following composite supplies shall be treated as a supply of services, namely:

(a) works contract as defined in clause (119) of section 2; and
Sec 2 (119) “works contract” means a contract for building, construction, fabrication, completion,
erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration
or commissioning of any immovable property wherein transfer of property in goods (whether as goods
or in some other form) is involved in the execution of such contract.
Note : Under GST regime work contract only in relation to immovable property is covered and no
concept of works contract exist in relation to movable goods.
Works Contract of immovable property=Supply of Service Labour + Material Contract on movable goods =
Entry 6(a) Schedule II processing of goods = supply of service (Entry 3 Schedule II)
Labour + Material = Works Contract (construction) Labour + Material (AMC of Computer) travel guide book
Contractor
the
WORLD
N
DESIGN
IO FASHION
history v.2
DESIGN
GRAPHIC
H
S
IGN
A
DES
F
Chandulal Builders
Labour + Material = Works Contract (Erection/installation) Labour + Material (repairs & maintenance of AC)
Contractor
Labour + Material = Works Contract (Tiling & Painting Labour + Material (Assembly of movable machine)
Assembly & Paper Making

Installation Machine

(b) supply,
Ü by way of or as part of any service or
Ü 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), where such supply or service is for
cash, deferred payment or other valuable consideration.
Catering Restaurant Hotel or Restaurant Mess/ Eating Joints
- Bread
- eggs
- milk
S P
AC
7. Supply of Goods
The following shall be treated as supply of goods, namely
Supply of goods by any unincorporated association or body of persons to a member

thereof for cash, deferred payment or other valuable consideration.
Activity Treatment under GST
(a) Supply of Goods Supply of Goods
Ü by unincorporated AOP/BOI [Sec 7(1)(d) read with Scheule II
Ü to its members (Para7)]
(b) Supply of Services Para 7 is not applicable
Ü by unincorporated AOP/BOI However, it shall still be applicable as
Ü to its members ‘Supply of services’
Ü Definition of ‘supply’ is wide to cover
‘supply of services’ also.
Ü This activity has been specifically
included in the definition of ‘business’

SCHEDULE- III [Sec 7] - Negative List under GST
Activities or Transactions Which shall be treated neither as a supply of goods nor a

supply of Services
1 Services by an employee to the employer in the course of or in relation to his employment.

Analysis - Departmental Clarification
Provision Of Service By An Employee To Employer - Not a supply
i) Service provided in the course of employment
Services that are provided by the employee to the employer in the course of employment are outside the
ambit of supply.
Amounts received by an employee from employer on premature termination of contract of
employment - Not supply, as it arises in course of employment:
Such amounts paid by the employer to the employee for premature termination of a contract of
employment are treatable as amounts paid in relation to services provided by the employee to the
employer in the course of employment. Hence, amounts so paid would not be chargeable to GST.
ii) Service provided not in the course of employment

a) Services provided outside ambit of employment for a consideration would be a service.
For example, if an employee provides his services on contract basis to an associate company of
the employer, then this would be treated as provision of supply.
b) Non-compete fees - Taxable: However, any amount paid for not joining a competing business
would be taxable, as it is paid for providing the service of for bearance to act.
iii) Status of services provided by casual workers or contract labour:
If..... Then......
Services provided by casual worker to These are services provided by the worker in the course of
employer who gives wages on daily employment, to the worker. Hence not included in supply.
basis
2 Services by any court or Tribunal established under any law for the time being in force.
Explanation For the purposes of paragraph 2, the term "court" includes District Court, High Court and
Supreme Court.
3 (a) The functions performed by the Members of Parliament, Members of State Legislature,
Members of Panchayats, Members of Municipalities and Members of other local authorities
(b) The duties performed by any person who holds any post in pursuance of the provisions of the
Constitution in that capacity
Example Diplomats, Governors of the States, C&AG of India, Attorney General of India (AGI) etc.
(c) The duties performed by any person as a Chairperson or a Member or a Director in a body
established by the Central Government or a State Government or local authority and who is not
deemed as an employee before the commencement of this clause.
Example 1. Finance Commission is a body established by President of India (under Article 280 of
Constitution of India). Chairman/Mamber/Directors (who are not employees) of these
bodies shall be out of GST.
2. Telecom Regulatory Authority of India (TRAI) is also a body established by CG.
Chairman/Member/Directors (Who are not employees) of these bodies shall be out of
GST
4 Services of funeral, burial, crematorium or mortuary including transportation of the deceased.
5 Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building
6 Actionable claims, other than lottery, betting and gambling.

Sec 8 : Composite and Mix Supply
Introduction
As we look in market today, we notice that very often, two or more goods or a combination of goods and
services, are supplied together. This could be due to either of the following reasons:
A sales strategy – to attract more customers
The nature or type of goods or services, which requires them to be bundled or supplied together
Under the GST law, supplies which are bundled with two or more supplies of goods or services or
combination of goods and services are classified, with distinct characteristics, as Composite supply or Mixed
supply. This is a new concept introduced in GST which will cover supplies made together whether the
supplies are related or not. The concept of composite supply in GST regime is similar to the concept of
bundled services under Service Tax Laws. However, the concept of mixed supply is entirely new.
Need of Classification of Bundle supplies
Ü In many cases, the transactions that fall within the scope of GST may consist of more than one element.
These elements may be a mix of goods, or services, or both.
Ü Sometimes these elements, if suppled separately, may have different GST liabilities depending upon the
rates.
applicability of time of supply and place of supply provisions.
Ü To avoid disputes about whether the supplier is making a single supply with one liability, or multiple
supplies with different liabilities, it has to be determined whether the supply is one of goods, or of services,
or it is a supply constituted of both goods and services (composite supplies/mixed supplies).
Ü Sec 8 of CGST Act provides for treatment of bundled supply
Definition of Composite and Mixed Supply

Composite Supply as per Sec 2 (30) : means a supply made by a taxable person to a recipient
consisting of
Ü two or more taxable supplies of goods or services or both or any combination
thereof
Ü which are naturally bundled and
Ü supplied in conjunction with each other in ordinary course of business one of
which is a principal supply
Illustration.— 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 a
principal supply;
Mixed Supply as per Sec 2 (74) : means
Ü Two or more individual supplies of goods or services or any combination
thereof
Ü Made in conjunction with each other by a taxable person for a single price
Ü Where such supply does not constitute a composite supply
Illustration.— A supply of a package consisting of canned foods, sweets, chocolates, cakes,
dry fruits, aerated drinks 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
8. The tax liability on a composite or a mixed supply shall be determined in the following
manner, namely:
(a) a composite supply comprising two or more supplies, one of which is
a principal supply, shall be treated as a supply of such principal
supply; and
(b) a mixed supply comprising two or more supplies shall be treated as a
supply of that particular supply which attracts the highest rate of tax.
Analysis
Combination of Supplies
Goods + Goods Service + Service Goods + Service

Classification of Supply ( Goods + Goods)- Examples
Situations Classification Composite or Applicable Rate

Mixed Supply
Supply of Latop with Bag and Power Cable Laptop Rate 18% Composite Supply 18% rate is applicable
A supply of a package consisting of canned foods, Aerated waters, containing added sugar Mixed Supply Aerated drinks will be
sweets, chocolates, cakes, dry fruits, aerated or other sweetening matter or flavoured treated as principal
drink and fruit juices when supplied for a single is taxed at 28% with 12% Compensation supply. Hence rate of
price is a mixed supply. All can be sold separately. Cess. Dry Fruits is taxed at the rate of aerated drinks will be
12%. Cake is taxed at the rate of 18%. considered i.e. 28%
Consider a kit which contains a tie, a watch, a Watch is taxed at 28%. Wallet is taxed at Mixed Supply Hence rate
wallet, and a pen, as a combo, for Rs. 4,500. Tie, 28%. Pens are taxed at the rate of 12%. applicable will be
watch, wallet, and pen are bundled as a kit. The 28%
supply of a tie does not naturally necessitate the
supply of other elements (watch, wallet, pen) and
vice versa. The kit is supplied for a single price.
Classification of Supply ( Service + Service)- Examples

Mixed Supply
A 5-star hotel in Mumbai provides a 4 days/3 Supply of food/drinks in 5-star hotel is Composite Supply In this case, the hotel
nights package, with breakfast. This is a taxed at the rate of 28%. Accomodation accommodation is the
composite supply as the package of in a 5 star hotel where rate is Rs 5000 principal supply, and
accommodation facilities and breakfast is and above per night is taxed at the rate of breakfast is ancillary
natural combination in the ordinary course of 18%. to the hotel
business for a hotel. accommodation.
Hence applicable rate
is 18%
A 5-star hotel in Mumbai provides a 4 day/3 Accomodation in a 5-star hotel where Mixed Supply Higest rate 28% is
nights package with the breakfast and one day rate is Rs 7500 and above is taxed at the applicable
Mumbai Darshan. The inclusion of Mumbai rate of 28% . Supply of services of Tour
Darshan in this package is not a natural Operator is taxed at 5%. The rate
requisite to accommodation in the hotel. applicable will be 28%. (The hotel would
hire an operator for sight seeing
purpose)
Classification of Supply ( Goods + Service)- Examples

Mixed Supply
Mr C buys a car from a car dealer. The contract Transportation of Goods is taxed at the Composite Supply Hence rate
for the purchase of the car is inclusive of its rate of 5%. Motor Cars are taxed at the applicable will be
delivery. In this case, the principal supply is the rate of 28%. 28%
goods (the car) and the incidental supply is the
services (its delivery).
A car repair workshop supplies both repair Batteries are taxed at the rate of 28%. Mixed Supply Hence it will be
services and car batteries to its customers. Service of Repair (others) is at 18%. taxed at 28%
When it charges a customer for supply of repair
services and a car battery at a single inclusive
price.

Sec 9 : Levy and Collection
(1) Subject to the provisions of sub-section (2), there shall be
levied a tax called the central goods and services tax
Ü on all intra-State supplies of goods or services or both, except on the supply of
alcoholic liquor for human consumption,
Ü on the value determined under section 15 and
Ü at such rates, not exceeding twenty per cent., as may be notified by the
Government on the recommendations of the Council and
collected in such manner as may be prescribed and shall be paid by the taxable person.
(2) The central tax on the supply of
Ü petroleum crude,
Ü high speed diesel,
Ü motor spirit (commonly known as petrol),
Ü natural gas and
Ü aviation turbine fuel
shall be levied with effect from such date as may be notified by the
Government on the recommendations of the Council.
(3) The Government may, on the recommendations of the Council, by notification, specify
categories of supply of goods or services or both, the tax on which shall be paid on reverse
charge basis by the recipient of such goods or services or both and all the provisions of this Act
shall apply to such recipient as if he is the person liable for paying the tax in relation to the
supply of such goods or services or both.
(4) The central tax in respect of the

Ü supply of taxable goods or services or both by a supplier, who is not registered,
Ü to a registered person
shall be paid by such person on reverse charge basis as the recipient and
all the provisions of this Act shall apply to such recipient as if he is the
person liable for paying the tax in relation to the supply of such goods or services or both.
(5) The Government may, on the recommendations of the Council, by notification, specify
categories of services the tax on intra-State supplies of which shall be paid by the electronic
commerce operator if such services are supplied through it, and all the provisions of this Act
shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax
in relation to the supply of such services:
Provided that where an electronic commerce operator does not have a physical presence in
the taxable territory, any person representing such electronic commerce operator for any
purpose in the taxable territory shall be liable to pay tax:
Provided further that where an electronic commerce operator does not have a physical
presence in the taxable territory and also he does not have a representative in the said territory,
such electronic commerce operator shall appoint a person in the taxable territory for the
purpose of paying tax and such person shall be liable to pay tax.

FAQ
[Source : These have been taken from FAQs and
MCQs on GST - issued by ICAI (June,2017)
Meaning and scope of supply (Section 7)

Q1. What is the scope of the term ‘supply’ as defined in CGST Act, 2017?
Ans. As per Sub-section (1) of Section 7, Supply includes:
1. all forms of supply of goods or services or both 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;
2. import of services for a consideration whether or not in the course or furtherance of business;
3. the activities specified in Schedule I, made or agreed to be made without a consideration; and
4. the activities to be treated as supply of goods or supply of services as referred to in Schedule II.
Q2. Is it required to distinguish whether a particular supply involves supply of goods or services or
both?
Ans. Yes. The CGST Act, 2017 specifies certain provisions separately for supply of goods and supply of
services viz., Section 12 and Section 13 provides for ascertaining time of supply of goods and time of supply
of services respectively; similarly separate provisions have been specified for ascertaining place of supply
of goods and place of supply of services. Further, the rate of tax applicable to supply of goods and supply of
services may be different. Accordingly, it is important to distinguish whether a particular transaction
involves supply of goods or supply of services.
Q3. How to distinguish whether a particular supply involves supply of goods or services or both?
Ans. The Schedule II appended to CGST Act, 2017 enlists the activities which are to be treated as supply of
goods or supply of services. One may refer Schedule II with reference to Section 7 to classify whether the
transaction involves supply of goods or supply of services.
Q4. Whether supply of goods or services without consideration is liable to tax?

Ans. The activities enumerated in Schedule I will qualify as supply even if made without consideration.
Accordingly, such supplies in the absence of consideration are liable to tax. To illustrate, following are the
activities which will qualify as supply in the absence of consideration and eventually would be liable to tax:
1. Permanent transfer or disposal of business assets where input tax credit has been availed on such
assets.
2. Supply of goods or services or both between related persons or between distinct persons as specified
in section 25, when made in the course or furtherance of business:
Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an
employee shall not be treated as supply of goods or services or both.
3. Supply of goods—
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the
principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the
principal.
4. 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.
Q5. Whether transfer of goods to another branch located outside the State is taxable?
Ans. In terms of Section 25(4) of the CGST Act, 2017, every person is required to obtain separate
registration for every branch located in different state or union territory and shall be treated as distinct
persons. Accordingly, the supply of goods (stock transfers) to a branch located outside the State would
qualify as supply liable to tax in terms of clause 2 to Schedule I of the CGST Act, 2017. Further, it is important
to note that, supply of goods to a branch / unit located within the same State having separate registration
would also be liable to tax since both such units (supplying unit and recipient unit) would qualify as distinct
person in terms of Section 25(4).
Q6. Whether gifts given by employer to employee will also qualify as supply?
Ans. In terms of Explanation appended to Section 15 it is clarified that employer and employee will be
deemed to be related persons. Accordingly, in terms of proviso to clause 2 of Schedule I, gift by an employer
to employee will be a supply and will be liable to tax. However, any gifts for a value not exceeding fifty
thousand rupees in a financial year will not qualify as supply and as such will not be liable to tax.

Q7. Whether supply of goods by principal to his agent or by agent to his principal is taxable in the
absence of consideration?
Ans. In terms of Section 7 read with Schedule I, following would qualify as supply:
1. Supply of goods by a principal to his agent where the agent undertakes to supply such goods on
behalf of the principal; or
2. Supply of goods by an agent to his principal where the agent undertakes to receive such goods on
behalf of the principal.
Q8. Whether import of services will be liable to tax under GST regime?
Ans. The following import of service will qualify as supply under CGST Act, 2017:
1. import of service for a consideration whether or not in the course or furtherance of business is a
supply;
2. import of service by a taxable person from a related person or from any of his other establishments
outside India, in the course or furtherance of business.
Tax liability on composite and mixed supplies (Section 8)
Q9. What is composite supply?

Ans. In terms of Section 2(30) of CGST Act, 2017 composite supply means supply consisting of two or more
taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and
supplied in conjuction with each other in the ordinary course of business, one of which is a principal supply.
The illustration of composite supply appended to Section 2(30) is as follows:
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 a composite supply.
Q10. How would the tax liability be determined in case of Composite supply?
Ans. In terms of Section 8 of the CGST Act, 2017 tax liability in case of composite supply should be
determined with reference to the principal supply forming part of such composite supply.
Q11. What is Mixed Supply?

Ans. In terms of Section 2(74), mixed supply means two or more individual supplies of goods or services or
any combination thereof, made in conjuction with each other by a taxable person for a single price where
such supply does not constitute a composite supply. The illustration of mixed supply appended to Section
2(74) is as follows:
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.
Q12. How would the tax liability be determined in case of Mixed supply ?
Ans. In terms of Section 8, the tax liability in case of a mixed supply shall be ascertained with reference to
that particular supply which attracts highest rate of tax.
Levy and Collection (Section 9)
Q13. What are the taxes that are levied on an intra-State supply?
Ans. In terms of Section 9 of the CGST Act, 2017, intra-State supplies are liable to CGST & SGST. In terms of
Section 7 of UTGST Act, 2017, intra-State supplies effected by a taxable person located in Union Territory
(within the Union Territory) will be liable to CGST & UTGST.
Q14. How to ascertain the taxable value for levy of CGST & SGST/UTGST?
Ans. Section 15 of the CGST Act, 2017 specifies that the value of supply of goods or services or both shall be
the transaction value, which is the price actually paid or payable for the said supply of goods or services or
both where the supplier and the recipient of the supply are not related and the price is the sole consideration
for the supply. Further Section 15 provides for certain inclusions which will form part of the value viz.,
incidental expenses, commission, interest, penalty etc. In cases where the supplier and recipient are related
persons or where the price is not the sole consideration, the provisions and method for ascertaining the value
of taxable supply as prescribed in valuation rules shall apply..
Q15. What is the rate of tax that is applicable on intra-State supplies?

Ans. The applicable rate of tax is yet to be notified. However, the provisions specifies that
the Central/State Government may specify rate of tax not exceeding 20%.

Q16. Who is responsible to pay taxes?
Ans. Generally, the person effecting taxable supplies is liable to pay taxes. However, following are
certain exceptions:
(a) Reverse charge: Supply of goods or services or both, as may be notified by the Government on
the recommendations of the Council, the tax on which shall be paid by the recipient under reverse
charge; and
(b) E-Commerce: Categories of services as may be notified by the Government on the
recommendation of Council the tax on which shall be paid by the electronic commerce operator if
such services are supplied through it
Q17. What does the payment of tax under reverse charge mean?
Ans. In terms of Section 2(98), the terms reverse charge is defined to mean liability to pay tax by the
recipient of supply of goods or services or both instead of the supplier of such goods or services or both.
Q18. What are the different types of supplies which are liable to tax under reverse charge
mechanism?
Ans. As per Section 9 of the CGST Act, 2017 there are two types of supplies which are liable to tax under
reverse charge mechanism which are:-
1. Specified categories of supply of goods or services or both as notified by government on
recommendation of the council
2. Supply of taxable goods or services or both by an unregistered supplier to a registered person
Q19. Whether the tax on intra-State supplies is applicable to every supplies?

Ans. No. Section 9(1) which is the charging provision for levy and collection of tax on intraState supplies
excludes supply of alcoholic liquor for human consumption. Further, in terms of Section 9(2), tax on
supply of petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine fuel shall be
levied with effect from such date as may be notified by the Government on the recommendations of the
Council. Accordingly, supply of alcoholic liquor for human consumption is not liable to tax under CGST
Act, 2017.
Q20. Whether CGST & SGST/UTGST is applicable on import of goods or service or both?
Ans. In terms of Section 7 of the IGST Act, 2017, import of goods or services or both is shall be treated to
be a supply in the course of inter-State trade or commerce. Accordingly, tax under the provisions of IGST
Act, 2017 (IGST) shall apply on import of goods or services or both.

MCQ’S
Meaning and scope of supply (Section 7)
Q1. What are different types of supplies covered under the scope of Supply?
(a) Supplies made with consideration (b) Supplies made without consideration
(c) Both of the above (d) None of the above
Ans. (c) Both of the above
Q2. What are the factors differentiating Composite Supply & Mixed Supply?
(a) Nature of bundling i.e. artificial or natural (b) Existence of Principal Supply
Levy & collection (Section 9)

Q3. What are the taxes levied on an intra-State Supply?
(a) CGST (b) SGST *
(c) CGST and SGST (d) IGST
Ans. (c) CGST and SGST
Q4. What is the maximum rate prescribed under CGST?

(a) 12% (b) 28% (c) 20% (d) 18%
Ans. (c) 20%
Q5. Who will notify the rate of tax to be levied under CGST?
(a) Central Government suo moto (b) State Government suo moto
(c) GST Council suo moto
(d) Central Government as per the recommendations of the GST Council
Ans. (d) Central Government as per the recommendations of the GST Council
Q6. What are the supplies on which reverse charge mechanism would apply?
(a) Notified categories of goods or services or both
(b) Inward supply of goods or services or both from an unregistered dealer
Q7. Which of the following taxes will be levied on Imports?

(a) CGST (b) SGST (c) IGST (d) Exempt
Ans. (c) IGST
Q8. Which of the following taxes would be levied on an intra-State supply of goods or services
or both
(a) CGST (b) Union territory tax
(c) Both of the above (d) IGST
Q9. Is there any maximum rate prescribed under UTGST?

(a) 14% (b) 28% (c) 20% (d) 30%
Ans. (c) 20%


Levy and Collection (10 Marks)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Levy and Collection (10 Marks)

Uploaded by

Copyright:

Available Formats

CA-FINAL

Chapter 1: Levy & Collection

V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 1

Implementation of GST across India

2 CA Vishal Bhattad 09850850800 www.vsmartacademy.com V’Smart Academy

DEFICIENCIES IN THE EXISTING VALUE ADDED TAXATION

GST-A CURE FOR ILLS OF EXISTING INDIRECT TAX REGIME

V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 3

Principles for Time of Supply under CGST Act

4 CA Vishal Bhattad 09850850800 www.vsmartacademy.com V’Smart Academy

CGST/ 1) GST is a destination based tax applicable on all transactions involving

2)It should be noted that CGST cannot be used against SGST/UGST or

5 Seamless 1) GST is a destination based consumption tax. When an Inter-state sale

V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 5

Creation of uniﬁed national market

Mitigation of ill effects of cascading

Elimination of multiple taxes and double taxation:

6 CA Vishal Bhattad 09850850800 www.vsmartacademy.com V’Smart Academy

Buoyancy to the Government Revenue

Beneﬁts of GST from different prospects

Gain to manufacturers & exporters

For the Consumer

For Central & State government:-

V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 7

Central Taxes State Taxes

Taxes not subsumed under GST

1. Property Tax & Stamp Duty

3. Excise Duty on Alcohol

4. Basic Custom Duty

5. Excise Duty on Petrol Diesel

8 CA Vishal Bhattad 09850850800 www.vsmartacademy.com V’Smart Academy

V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 9

GST FLOW - INTER - STATE MOVEMENT

10 CA Vishal Bhattad 09850850800 www.vsmartacademy.com V’Smart Academy

II. Supply of goods/services by B to C

Statement of revenue earned by Central and State Government

Transaction Revenue to Central Revenue to State

V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 11

III. Supply of Goods/services by B of State 2 to C of State 2 - Value addition @ 20%

12 CA Vishal Bhattad 09850850800 www.vsmartacademy.com V’Smart Academy

Statement of revenue earned by Central and State Governments

V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 13

Business & Consideration

(f) admission, for a consideration, of persons to any premises

14 CA Vishal Bhattad 09850850800 www.vsmartacademy.com V’Smart Academy

Sec 2(31)consideration - discussed later

Person, Supplier & Recipient

An Individual A hindu undivided family

A Company A Partner Firm

A limited Liability Partnership An association of persons or

V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 15

Rule 2 (105) “Supplier”

Rule 2 (93) “Recipient”

Other Important Deﬁnition

2(78) : Non-Taxable Supply “non-taxable supply” means a supply of goods or services or

16 CA Vishal Bhattad 09850850800 www.vsmartacademy.com V’Smart Academy

SEC 2 (56) “INDIA"

Seabed & Subsoil

V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 17

Section 7 - Meaning and scope of supply

(a) A supply of goods and not as a supply of services; or

Therefore, following shall be discussed herein :

Schedule I Matters to be treated as supply even if made without consideration