PRESENTS CA -FINAL STRAIGHT FORWARD APPROACH ......CA - Final G ST No tes for Nov 17 E xam ww w.caki...

PRESENTS

CA-FINAL

STRAIGHT FORWARD APPROACH

ON

GOODS AND SERVICE TAX

Applicable for Nov 17 Exam

(10 Marks)

Author:

CA. Santosh Gupta

Assisted By:

Miss Raksha Mehta

CA- Final GST Notes for Nov 17 Exam www.cakit.in

Compiled By: CA. Santosh Gupta Page 1

COVERAGE OF 10 MARKS

Chapter 1: Basics of GST

1. Why we need GST

2. GSTN

3. Concept of GST

4. Taxable Territory

5. Constitutional Amendment bill

6. Threshold limit

Chapter 2: Levy and Collection of Tax

1. Meaning and Scope of Supply

2. Mixed and Composite Supply

3. Charge of Tax



Chapter 1 Basics of GST

Learning Objective:

1. Why we need GST

2. GSTN

3. Concept of GST

4. Taxable Territory

5. Constitutional Amendment bill

6. Threshold limit

Introduction:

‘’One Tax, One Nation”

About 160 Countries across the World have adopted GST because this Tax has the capacity to

increase revenue in the most transparent and neutral way. In India the idea of National Goods

and Services Tax (GST) was suggested by Kelkar Task Force in 2004. The Task Force suggested

fully integrated ‘GST’ on national basis.

GST has subsumed multiple indirect taxes like

Excise duty,

Service tax,

VAT, CST,

Luxury tax,

Entertainment tax,

Entry tax, etc.

GST is a route of breaking Indirect tax reform in India which will make a common national

market by dismantling inter-State trade barriers.



NDA Government Placed the Constitution (122nd Amendment) Bill, 2014 on GST in the

Parliament on 19th December, 2014.

The Lok Sabha passed the Bill on 6th May, 2015 and

Rajya Sabha on 3rd August, 2016.

Subsequent to ratification of the Bill by more than 50% of the States, Constitution (122nd

Amendment) Bill, 2014 received the assent of the President on 8th September, 2016 and

Became Constitution (101st Amendment) Act, 2016, which paved the way for introduction of

GST in India

GST Bill Become Law

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 and

Goods and Services Tax (Compensation to States) Bill, 2017

Were introduced in Lok Sabha.

Lok Sabha passed these bills on 29th March, 2017 and with the receipt of the President’s assent

on 12th April, 2017, the Bills were enacted.

Why we need tax Reforms in India?

The need for Tax Reforms arise in India out of the following factors

Cascading effect:

A manufacturer of excisable goods charges excise duty and value added tax (VAT) on intra-

State sale of goods. However, the VAT dealer on his subsequent intra-State sale of goods

charges VAT (as per prevalent VAT rate as applicable in the respective state) on value

comprising of (basic value + excise duty charged by manufacturer+ profit by dealer)

When the goods are manufactured and sold both central excise duty (CENVAT) and State-Level

VAT are levied. Though CENVAT and State-Level VAT are essentially value added taxes, set

off of one against the credit of another is not possible as CENVAT is a central levy and State-

Level VAT is a State levy

In GST regime the problem of Cascading effect removed

There is no tax on tax or cascading of taxes under GST system. GST offers comprehensive

and continuous chain of tax credits from the producer's point/service provider's point upto

the retailer's level/consumer’s level thereby taxing only the value added at each stage of supply

chain.

The supplier at each stage is permitted to avail credit of GST paid on the purchase of goods

and/or services and can set off this credit against the GST payable on the supply of goods and

services to be made by him. Thus, only the final consumer bears the GST charged by the last

supplier in the supply chain, with set-off benefits at all the previous stages

Differentiate Goods and Services

GST does not differentiate between goods and services and thus, the two are taxed at a single

rate, In the GST Regime, the major indirect taxes have been subsumed in the ambit of GST. The

present concepts 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’’



Remove Trade Barriers

Benefit: GST will facilitate ‘Make in India’ by converting the geographical landscape of the

country into a single market. Despite being one country, India is a union of 30 or more markets.

Too many taxes in the current system like the Central Sales Tax (CST) on inter-state sales of

goods; numerous intra-state taxes; and the extensive nature of countervailing duty exemptions,

favour imports over domestic production

Structure of Indirect Taxes is very complex in India:

In GST regime

1. To bring out tax certainty in indirect taxation system

2. The incidence of tax falls only on domestic consumption;

3. The efficiency and equity of the system is optimized;

What is Constitutional 101 Amendment bill 2016?

This is one of the most important Constitutional Amendments Bill in order to bring GST into

reality. Insertion of New Article 246A, while overriding the provisions contained in articles 246

and 254 deals with the grant of powers to the Union and the States to impose tax with respect to

GST. But in case of Inter-State trade or commerce relating to supply of goods or services or both,

the Union shall have exclusive powers to frame relevant laws.

Residuary Power of Legislature

Article 248 deals with the residuary powers of the legislation. Parliament has exclusive powers

to make laws on the matters not mentioned in the State and Concurrent Lists.

Constitution (101st Amendment) Act, 2016 was enacted on 8th September, 2016. Significant

amendments made by the Constitution (101st Amendment) Act, 2016 are as follows:

1. Concurrent powers on Parliament and State Legislatures to make laws governing

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 the manner provided by Parliament by Law as per the recommendation of

the GST Council.

3. Principles for determining the place of supply and when a supply takes place in the

course of inter-State trade or commerce shall be formulated by the Parliament, by law.

4. GST will be levied on all supply of goods and services except alcoholic liquor for

human consumption.



On the following products, GST shall not be levied till a date to be notified on the

recommendations of the GST Council:

Petroleum Crude

High Speed Diesel

Motor Spirit (commonly known as Petrol)

Natural Gas

Aviation Turbine Fuel

The Union Government shall retain the power to levy duties of excise on the aforesaid products

besides tobacco and tobacco products manufactured or produced in India.

Article 279A of the Constitution empowers the President to constitute a joint forum of the

Centre and States namely, Goods & Services Tax Council (GST Council).

The provisions relating to GST Council came into force on 12th September, 2016. President

constituted the GST Council on 15th September, 2016.

The Union Finance Minister is the Chairman of this Council and Ministers in charge of

Finance/Taxation or any other Minister nominated by each of the States & UTs with

Legislatures are its members

Besides, the Union Minister of State in charge of Revenue or Finance is also its member.

The function of the Council is to make recommendations to the Union and the States on

important issues like tax rates, exemptions, threshold limits, dispute resolution etc. The GST

Council has decided the threshold exemption, composition threshold, GST rates, GST

legislations including rules and notifications.

What is Goods and Services Network (GSTN)

Goods and Services Network (GSTN)

a Special Purpose Vehicle – has been set to provide a shared IT infrastructure and

services

Central and State Governments, taxpayers and other stakeholders for implementation of

GST.

The functions of the GSTN, inter alia, include:

o facilitating registration;

o forwarding the returns to Central and State authorities;

o computation and settlement of IGST

o matching of tax payment details with banking network;

o providing various MIS reports to the Central and the State Governments based

on the taxpayer return information;



o providing analysis of taxpayers' profile; and

o running the matching engine for matching, reversal and reclaim of input tax

credit

What is Tax?

Section 2(94) provides that Goods and Service tax

Levied on Supply of Goods and/or service under this act, and

Includes any amount payable under section 8.

From the above definition here we conclude that Supply of Goods and/or Services is the

Taxable Event

What do you mean by the term Goods and Services?

As per Section 2(52) ‘’Goods’’ means

Every kind of movable property Other than money and securities But includes actionable claim, growing

crops, grass and General Clauses Act 1897 things attached to or forming part of the land which are

agreed to be severed before supply or under a contract of supply.

The first Part of the definition is wide enough to include

Every kind of movable property in its extent

Except money and securities.

Explanation of the terms used in Definition of Goods

Movable Property The Term movable property is not defined under GGST Act, As per Section 3(36) of the General Clauses Act 1897 “Movable property” shall mean property of every description, except immovable property For Example: Machinery Installed in a factory. The same machinery can be treated as goods if it can be moved from one place to another place in its original shape

Money under Section 2(75) “money” means the Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or 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 but shall not include any currency that is held for its numismatic value;

Securities 2(h) of SCRA 'Securities' include —



(i) shares, scrips, stocks, bonds, debentures, debenture

stock or other marketable securities of a like nature in

or of any incorporated company or other body

corporate;

(ia) derivative;

(ib) units or any other instrument issued by any collective

investment scheme to the investors in such schemes;]

(ic) security receipt as defined in clause (zg) of section 2 of

the Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002;]

(id) units or any other such instrument issued to the

investors under any mutual fund scheme;]

(ie) any certificate or instrument (by whatever name called),

issued to an investor by any issuer being a special purpose

distinct entity which possesses any debt or receivable,

including mortgage debt, assigned to such entity, and

acknowledging beneficial interest of such investor in such

debt or receivable, including mortgage debt, as the case may

be;

(ii) Government securities;

(iia)such other instruments as may be declared by the

Central Government to be securities; and

(iii) rights or interest in securities;

Actionable Claim 2(1) Section 3 of the Transfer of Property Act, 1882 defined actionable claim as “actionable claim” means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the civil courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent;

As per section 2(102) “Services” means

Anything other than

o goods,

o money and

o 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 form, currency or

denomination for which a separate consideration is charged;

Important to Note that Money and Securities are neither Good nor Services but the conversion

of money is covered under the ambit of services.

What is GST?

It is a destination based tax on consumption of goods and services. It is proposed to be levied at

all stages right from manufacture up to final consumption with credit of taxes paid at previous

stages available as setoff.

Analysis

1. GST is a comprehensive indirect tax on

Manufacture,

Service,

Sale and

consumption of



Goods and Services in PAN India.

2. GST is imposed on the value added of all taxable products that are consumed

domestically.

3. GST is applied on goods and services at the place where final/actual consumption

happens.

What is Dual GST MODEL?

India is adopting dual GST concept, wherein tax would be jointly levied by both Centre and the states on supply of goods and services.

The components of Dual GST are:

CGST: Central GST SGST: State GST UTGST: Union Territory GST IGST: Integrated GST

GST Model

CGST

Stands for

Central Goods

& Service Tax

Applicable on

Supplies within

the State

Tax Collected by

Central

Government

Example:Goods

send from

Indore (M.P.) to

Bhopal (M.P.)

SGST

Stands for State

Goods & Service

Tax

Applicable on

supplies within

the state

Tax collected by

State

Example:Goods send

from Indore (M.P.)

to Bhopal (M.P.)

UTGST

Stands for union

territory Goods &

Service Tax

Supplies within the

union territory

Tax Collected By

Union

Example Designer

Services Supplied

Within the

Panducherry

IGST

Stands for

Integrated Goods &

Service Tax

Interstate Supply

Tax is collected by

Central Government

but it is shared by

Central & State

Goverment

For Example:Goods

sent from

Mumbai(M.H) to

Chennai (Tamilnadu)



What is Territorial Jurisdiction under GST?

1. Central excise is applicable to whole of India.

2. Service tax is applicable to whole of India except State of Jammu and Kashmir.

3. VAT laws were applicable to specific State and Central sales tax was applicable on Inter-

State sale of goods only.

GST will subsume all the above laws, Under GST regime Section 1 of CGST Act, 2017 extends

to the whole of India except the State of Jammu and Kashmir.

Section 1 of GST Act specified commencement: It shall come into force on such date as the

Central Government may, by notification in the Official Gazette, appoint:

Provided that different dates may be appointed for different provisions of this Act and any

reference in any such provision to the commencement of this Act shall be construed as a

reference to the coming into force of that provision.

Section 2(56) defines the meaning of India

“India” means

the territory of India as referred to in article 1 of the Constitution,

its territorial waters,

seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone

or any other maritime zone as referred to in the Territorial Waters, Continental Shelf,

Exclusive Economic Zone and

other Maritime Zones Act, 1976, and

the air space above its territory and territorial waters;

What is Taxable Event?

GST Law, by levying tax on the ‘supply’ of goods and/or services, will depart from the

historically understood concepts of ‘taxable event’ under the State VAT Laws, Excise Laws

and Service Tax Laws i.e. sale, manufacture and service respectively

What is Concept of threshold limit?

Traders would not be covered under indirect tax reform if turnover is less than the threshold

limit per annum

GST council decides threshold limit Rs. 20 lakh for exemption from tax under GST.

For the North-Eastern this limit is upto Rs 10 Lakh.

Turnover less than Rs. 1.5 Cr will be assessed by state authorities.



Let’s Rehearse

Nature of Tax would be depend on

1. Intra State Supply

2. Inter State Supply

3. Both

Ans: Both

In Which Date GST Bill Become Law

1. 27th March 2017

2. 29th March 2017

3. 12th April 2017

Ans: 12th April 2017

Which of the Following tax leviable on Intra State supply

1. CGST

2. SGST

3. IGST

4. CGST/SGST/UTGST

Ans: CGST/SGST/UTGST

Imposition of SGST by Government of India, Comment whether Statement is correct or not

Incorrect, Imposition of SGST by State Government of India

Write a name of Union Territories

1. Chandigarh

2. Lakshadweep

3. Puducheery

4. Daman and Diu

5. Delhi

6. Dadar and Nagar Haveli

7. Andman and Nichobar Islands

Which authority will levy and administer GST?

Centre will levy and administer CGST & IGST while respective states /UTs will levy and

administer SGST/ UTGST



How a particular transaction of goods and services would be taxed simultaneously under

Central GST (CGST) and State GST (SGST)?

The Central GST and the State GST would be levied simultaneously on every transaction of

supply of goods and services except the exempted goods and services, goods which are outside

the purview of GST and the transactions which are below the prescribed threshold limits.

Further, both would be levied on the same price or value

Intra-State Supply

Mr. A (Indore) Supplied to Mr. B (Indore) Mobile Rs. 10,000, and paid CGST & SGST, Rate of

GST are 18% after that Mr. B Dealer supplied this Mobile to Customer C with value addition by

20%. Calculate Price charge by A from B and Price Charged by B from C

Solution:

Supply of Mobile by A to B

Amount (in `)

Value charged for supply Mobile 10,000

Add: CGST @ 9% 900

Add: SGST @ 9% 900

Total price charged by A from B for Mobile 11,800

The CGST & SGST charged on B for supply of Mobile will be remitted by A to the appropriate

account of the Central and State Government respectively.

A is the first stage supplier of Mobile and hence, does not have credit of CGST/SGST

Further Supply of Mobile by B to C – Value addition @ 20%

B will avail credit of CGST and SGST paid by him on the purchase of Mobile and will utilise

such credit for being set off against the CGST and SGST payable on the supply of Mobile made

by him to C.

Amount (in

`) Value charged for Mobile (` 10,000 x 120%) 12,000

Add: CGST @ 9% 1080

Add: SGST @ 9% 1080

Total price charged by B from C for Mobile 14160



Computation of CGST, SGST payable by B to Government

Amount (in

`) CGST payable 1080

Less: Credit of CGST 900

CGST payable to Central Government 180

SGST payable 1080

Less: Credit of SGST 900

SGST payable to State Government 180

What is IGST?

Under the GST regime, an Integrated GST (IGST) would be levied and collected by the Centre

on inter-State supply of goods and services. Under Article 269A of the Constitution, the GST on

supplies in the course of interstate trade or commerce shall be levied and collected by the

Government of India and such tax shall be apportioned between the Union and the States in the

manner as may be provided by Parliament by law on the recommendations of the Goods and

Services Tax Council.

Whether transaction in securities be taxable in GST?

Securities have been specifically excluded from the definition of goods as well as services. Thus,

the transaction in securities shall not be liable to GST.

Where is the power to levy GST derived from?

Article 246A of the Constitution, which was introduced by the Constitution (101st Amendment)

Act, 2016 confers concurrent powers to both, Parliament and State Legislatures to make laws

with respect to GST i. e. central tax (CGST) and state tax (SGST) or union territory tax (UTGST).

However, clause 2 of Article 246A read with Article 269A provides exclusive power to the

Parliament to legislate with respect to inter-State trade or commerce i.e. integrated tax (IGST).

What is the taxable event under GST?

Taxable event under GST is supply of goods or services or both. CGST and SGST/ UTGST will

be levied on intra-State supplies. IGST will be levied on inter-State supplies.



Chapter 2 Levy and Collection of

Tax

Learning Objective:

1. Basic Terms Used in this Chapter

2. Meaning and Scope of Supply [Section 7]

3. Taxability of Mixed and Composite Supply [Section 8]

4. Charge of Tax

What is Taxable Supply?

A ‘Taxable Supply‘ means

A supply of goods or services or both

Which is chargeable to Goods and Services tax under the GST Act.

What is Non-Taxable Supply?

As per section 2(78) 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.

What is Exempt Supply?

As per Section 2(47) Exempt supply means Supply of any goods or services or both which

Attracts nil rate of tax or which may be wholly exempt from tax under section 11,

or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply

What is Taxable Person?

As per Section 2(107) taxable person means a person who is registered or liable to be registered

under section 22 or section 24;



Who is Supplier?

As per Section 2(105) “Supplier” 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;

Who is Recipient?

As per section 2(93) 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;

What do you mean by Inward, outward and Continuous supply of goods & services

As per Section 2(67) inward supply in relation to a person, shall mean receipt of goods or

services or both whether by purchase, acquisition or any other means with or without consideration;

As per Section 2(83) outward supply in relation to a taxable person, means supply of goods or

services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or

any other mode, made or agreed to be made by such person in the course or furtherance of

business;

As per Section 2(32) continuous supply of goods means a supply of goods which is provided,

or agreed to be provided, continuously or on recurrent basis, under a contract, whether or not

by means of a wire, cable, pipeline or other conduit, and for which the supplier invoices the

recipient on a regular or periodic basis and includes supply of such goods as the Government

may, subject to such conditions, as it may, by notification, specify;

As per Section 2(33) continuous supply of services means a supply of services which is

provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a

period exceeding three months with periodic payment obligations and includes supply of such

services as the Government may, subject to such conditions, as it may, by notification, specify;



What do you mean by Business?

To understand the supply should be in the course or furtherance of business, the term business

defined under Section 2(17) of CGST Act, 2017

“Business” includes–

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other

similar activity, whether or not it is for a pecuniary benefit;

(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);

(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;

(d) supply or acquisition of goods including capital goods and services in connection with

commencement or 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;

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

(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;

(h) services provided by a race club by way of totalisator or a licence to book maker in such

club ; and

(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;

What do you mean by Consideration?

The term Consideration defined under Section 2(31)

“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 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:



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 such

deposit as consideration for the said supply;

What do you mean by Intra state supply and Interstate Supply?

Intra State Supply: Where the location of the supplier and the place of supply of goods or

services are in the same State/Union territory, it is treated as intra-State supply of goods or

services respectively

Interstate Supply: Where the location of the supplier and the place of supply of goods or

services are in

(a) two different States or

(b) two different Union Territories or

(c) a State and a Union territory, it is treated as inter-State supply of goods or

services respectively

Charge of Tax (Section 9)

Section 9 of CGST Act, Prescribe Charge of Tax

There shall be levied a tax called the central goods and services tax on

all intra-State supplies of goods or services or both,

Except on the supply of alcoholic liquor for human consumption,

on the value determined under section 15 and

at such rates, not exceeding 20%, 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

Important to Note

A tax called the Central Goods and Services Tax (CGST)/ Union Territory Goods and Services

Tax (UTGST)/ State Goods and Services Tax (SGST)shall be levied on all intra-State supplies of

goods or services or both and shall be collected in such manner as may be prescribed and shall

be paid by the taxable person.

However, intra-State supply of alcoholic liquor for human consumption is outside the

purview of CGST/UTGST/SGST.

Similarly, Integrated Goods and Services Tax (IGST) shall be levied on all inter-State supplies of

goods or services or both with the exception of alcoholic liquor. However, IGST on goods

imported into India shall be levied and collected in accordance with the provisions of section 3



of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when

duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.

Value for levy: Transaction value under section 15 of the CGST Act

Rates of CGST/IGST/SGST/UTGST: Rates for CGST/UTGST/SGST are rates as may be

notified by the Government on the recommendations of the GST Council [Rates notified are 5%,

12%, 18% and 28%]. IGST will be approximately the sum total of CGST and SGST/UTGST.

Maximum rate of CGST will be 20% while for IGST; maximum rate will be 40%.

In which circumstances tax payable by Recipient of Supply

Reverse charge - Tax payable by recipient of supply of goods or services or both

CGST/UTGST/SGST/IGST shall be paid by the recipient of goods or services or both, on

reverse charge basis, in the following cases:

1. Supply of goods or services or both, notified by the Government on the recommendations of

the GST Council.

2. Supply of taxable goods or services or both by an unregistered supplier to a registered

person

All the provisions of the relevant GST law shall apply to the recipient in the aforesaid cases as if

he is the person liable for paying the tax in relation to the supply of such goods or services or

both.



Scope and Meaning of Supply (Section 7)

What is Scope of Supply under CGST Act 2017?

Section 7(1) defined the meaning of Supply as inclusive manner

Section Topic Bare Provision Analysis No.

7(1)(a) Supply For Consideration in course or Furtherance of Business

All forms of supply of goods or services or both

such as sale, transfer, barter, exchange, license, rental, lease or disposal

made or agreed to be made for

a consideration

by a person

in the course or furtherance of business;

1

7(1)(b) Import of Service treated as supply

Import of services for

a consideration

whether or not in the course or furtherance of business;

2

7(1)(c) Transaction without a consideration to be treated as supply

The activities specified in Schedule I,

made or agreed to be made without

a consideration; and

3

7(1)(d) Declared Supply

The activities to be treated as supply of goods or supply of services as

Referred to in Schedule II.

4

Analysis 1: Supply for Consideration in course or Furtherance of Business

Following element to be satisfied for constitute Supply as per section 7(1)(a)

1. Transactions involve Supply of Good or services or both

2. Supply made or agreed to be made for a consideration [Consideration defined u/s 2(31)]

3. Supply made in course or furtherance of Business [Business defined u/s 2(17) ]

It should be clear that the forms of supply have two pre-requisites

the supply should be for a consideration; and

in the course or furtherance of business



Further 3T must be satisfied for levy of Tax

Supply is

o Taxable Supply

o Made in Taxable Territory

o Made by Taxable Person

Analysis 2: Import of Service treated as supply

Under GST, a supply will be considered as an import of service when-

1. The supplier of the service is located outside India. 2. The recipient of the service is located in India and 3. The place of supply of the service is in India.

For example: Rajesh Apparels in Hyderabad, Telengana, avails fashion designing services of INR 50,00,000 from Kaushi Designs in Colombo, Sri Lanka

Location of supplier: Colombo, Sri Lanka

Location of recipient: Hyderabad, Telengana

Place of supply: Place of supply will be the location of the recipient, i.e. Hyderabad, Telengana.

Analysis 3: Activities to be Treated As Supply Even If Made Without Consideration

Section 7(1) (c) defined that transaction without consideration will be considered as supply

specified in Schedule I

1. Permanent transfer or disposal of business assets where input tax credit has been

availed on such assets.

It is important to note that

this provision would apply if input tax credit has been availed on such assets

The use of the words ‘permanent transfer’ implies that the goods should be transferred

without any intention or requirement of having to receive the goods back. However,

even in these types of transactions, it is essential that there is delivery of the business

assets.



For Example: Pankhuri Ltd. Purchased 10 laptop worth Rs. 2,00,000/- and paid GST @ 18%

Amount to Rs. 36,000/-. Pankhuri Ltd. Availed credit of Rs. 36000/- as a input tax credit. After

few years using of laptop in company decided to donate laptops charitable institutions for free

of Cost. In the given case laptop donate without consideration would qualify as supply hence

Pankhuri Ltd. Need to pay GST.

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

The definition of “Related Person” is similar to the current Customs Valuation Rules. The

supply is considered as between related persons only if the supply of goods or services is

made between:

1. Officers or directors of one another’s businesses: In a supply, the supplier and the

recipient are actually officers or directors of the other business.

For Example: Mr. Harshit Director of HMLSPL and officer in CA Kit, Miss Pankhuri

Director of CA Kit and officer in HMLSPL. Supply between Mr. Harshit and Miss

Pankhuri will be Related Person.

2. Legally recognized partners in business: The supplier and the recipient are partners in

the same business or associated business.

For Example: Mr. Harshit and Mr. Sanjay are partners in Harshit Trading Ltd. Any

supply between Mr. Harshit and Mr. Sanjay will be treated as supply between related

persons.

3. Employer and employee: Any supply of goods and services between employer and

employee.

For Example: Mr. Sanjay is an employee of Harshit Trading Ltd. Any supply from

Harshit Trading Ltd to Mr. Sanjay is considered as supply between related persons.

4. The supplier or recipient directly or indirectly owns, controls or holds twenty-five per

cent or more of the outstanding voting stock or shares.



5. One of them directly or indirectly controls the other: If in any supply, the supplier or

the recipient directly or indirectly controls the other, then it is considered as supply

between related persons.

For Example: Harshit Trading Ltd holds equity in Sanjay Trading Ltd. The supply

between Harshit Trading and Sanjay Trading are related since Harshit Trading Ltd

directly controls Sanjay Trading Ltd.’s business

6. Both of them are directly or indirectly controlled by a third person: If in any supply,

the supplier and the recipient are directly or indirectly controlled by a third person.

For Example: Harshit Trading Ltd holds equity in Sanjay Trading ltd and Shanti

Trading. The supply between Sanjay Trading Ltd and Shanti Trading ltd are related

since both of them are directly controlled by Harshit Trading Ltd.

7. Together they directly or indirectly control a third person: If in any supply, the

supplier and the recipient, together, directly or indirectly control a third person.

8. They are members of the same family: A supply made between the members of the

same family is considered as supply between related persons.

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

For Example: ABC Motors Ltd. engages Asian Cars Ltd. as an agent to sell cars on its behalf. For

the purpose, ABC Motors Ltd. has supplied 20 cars to the showroom of Asian Cars Ltd. located

in Haryana. Supply of cars by ABC Motors Ltd. to Asian Cars Ltd. will qualify as supply.

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.

For Example: ABC Associates received legal consultancy services from its head office located in

Malaysia. 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 4: Declared Supply

The Activities to Be Treated As Supply of Goods or Supply of Services As Referred To In

Schedule II.

1. Transfer

S.no. Transfer Nature of Supply

1 Any transfer of the title in goods Supply of Goods

2 any transfer of right in goods or of undivided share in goods without the transfer of title thereof,

Supply of Services

3 any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed,

Supply of Goods

2. Land and Building

Any lease, tenancy, easement, licence to occupy land is a supply of services;

Any lease or letting out of the building including a commercial, industrial or residential

complex for business or commerce, either wholly or partly, is a supply of services.

For Example: Lease rentals collected shall be taxable as supply of services under GST

3. Treatment or process

Any treatment or process which is applied to another person's goods is a supply of services.

4. Transfer of business assets

(a) where goods forming part of the assets of a business are transferred or disposed of by or

under the directions of the person carrying on the business so as no longer to form part of those

assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the

person;

(b) where, by or under the direction of a person carrying on a business, goods held or used for

the purposes of the business are put to any private use or are used, or made available to any



person for use, for any purpose other than a purpose of the business, whether or not for a

consideration, the usage or making available of such goods is a supply of services;

For Example: A director using car provided by the company for personal travels

(c) where any person ceases to be a taxable person, 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,

For Example: XYZ, a trader, is winding up his business. Any goods left in stock shall be deemed

to be supplied by him and GST shall be payable.

Exception:

(a) The business is transferred as a going concern to another person; or

(b) The business is carried on by a personal representative who is deemed to be a

taxable person.

5. Supply of services

The following shall be treated as supply of services, namely:—

S.No. Treated as Supply of Service For Example

1 Renting of immovable property;

Renting of Factory

2 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 after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

3 Temporary transfer or permitting the use or enjoyment of any intellectual property right;

Franchisee Rights

4 Development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software;

1. Pre-packaged or canned software is Supply of Goods. 2. On site development of software is covered under the category of development of



information technology software. 3. Upgrade Tally ERP software for GST Accounting

5 Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and

Payment of liquidated damages under a contract for Non-performance/ short performance of obligation under a contract

6 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.

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

(b) 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.

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.

For Example: A local club supplies snacks etc. to its members during its monthly meeting for a

nominal payment



Negative Supply

Are there any activities which are treated as neither a supply of goods nor a supply of

services?

Section Bare Provisions

7(2) Notwithstanding anything contained in Section 7(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.

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

2 Services by any court or Tribunal established under any law for the time being in force.

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; or

(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.

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

Composite & Mixed Supply

How to Determine Tax Liability of Composite or Mixed Supply

According to Section 8 of CGST Act, 2017 The tax liability on a composite or a mixed supply

shall be determined in the following manner, namely: —

Supply Bare Provisions Explanation

Composite Supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply;

The elements in a composite supply of goods and services are dependent elements on the ‘principal supply’ of goods or services For Example Camel Crazy Guest House Jaisalmer provides a 3 days/2 night’s package, with Dinner. This is a composite supply as the package of accommodation facilities and Dinner is natural combination in the ordinary course of business for a Camel Crazy Guest House.

Mixed Supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax

combination of goods and/or services are not bundled due to natural necessities, and they can be supplied individually in the ordinary course of business For Example: A combo pack for Rs 10,000 is supplied which consist of

Tie 10%

Pen 8%

Calculator 12%

Wallet 18%

Here the combo pack will be considered as Mixed supply and will be taxable at highest rate which is 18%



Let’s Rehearse

Whether actionable claims liable to GST?

As per section 2(52) of the CGST/SGST Act actionable claims are to be considered as goods.

Schedule III read with Section 7 of the CGST/SGST Act lists the activities or transactions which

shall be treated neither as supply of goods nor supply of services. The Schedule lists actionable

claims other than lottery, betting and gambling as one of such transactions. Thus only lottery,

betting and gambling shall be treated as supplies under the GST regime. All the other actionable

claims shall not be supplies.

What is meant by Reverse Charge?

It means the liability to pay tax is on the recipient of supply of goods and services instead of the

supplier of such goods or services in respect of notified categories of supply.

Is the reverse charge mechanism applicable only to services?

No, reverse charge applies to supplies of both goods and services, as notified by the

Government on the recommendations of the GST Council.

What will be the implications in case of receipt of supply from unregistered persons?

In case of receipt of supply from an unregistered person, the registered person who is receiving

goods or services shall be liable to pay tax under reverse charge mechanism

Subscribe You-tube Channel for GST Lecture (Nov 17 Students Learn 10 Marks GST from You tube channel)

https://www.youtube.com/channel/UCza6MWI-1KKUpMzrgPILyQg

May 18 Onwards Exam

Offline GST Lectures in Pen drive and Straight Forward

Approach on GST Books will be Available on www.cakit.in

For More Information call: 7566758177

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