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Are You GST Ready?
Preface
The Goods and Services Tax (GST) which is set to replace a plethora of current indirect
taxes is undoubtedly the most iconic structural financial reform undertaken in India.
Indirect taxes generally account for 10% to 20% of the turnover and as such, GST will have
far reaching impact for virtually every business in terms of tax rates; overall tax incidence,
input credits, distribution system, prices and costs. GST seeks to reduce the cascading
effect of the multiple indirect taxes such as excise duty, VAT, service tax, central sales tax,
countervailing duty (CVD), octroi duty and harmonize tax administration between the
Centre and the States which will improve the ease of doing business. The destination
based GST provides businesses with seamless credit across the value chain. The
agreement and coherence between the Centre and the States is indeed a remarkable feat
and envisages creation of a common market throughout India. The GST regime will enable
a vast majority of Indian businesses to access the entire national market without having
to invest heavily in a country wide warehousing and distribution network and in the
process further propel Indias economy.
Electronic return filing and assessment will smoothen the process of tax credits and set
offs across the value chain, reduce tax evasion, significantly reduce compliance cost and
eventually transaction cost. Also, reduction in multiple product and area based
exemptions will make the tax system more transparent, regular and predictable. A single
taxable event viz. supply makes it easier for businessmen to understand the levy and the
subject matter of taxation.
While it is good and admirable to ponder on the benefits of GST, businesses need to
undertake a series of concrete actions that would ensure they are well poised and
equipped to benefit from the GST regime. GST is a complex legislation and does have far
reaching impacts on businesses, some of which are extremely challenging and disruptive.
It is easy to get lost in the jargon of GST and get lost in the labyrinth of legislative
changes. It is with this intention that we have come out with this publication so that we
can serve as a roadmap for businesses to navigate through this complex mist and haze
surrounding GST. The book presents a one-stop roadmap for consideration of the impact
of GST from a business perspective. These include pricing and renegotiation of
agreements, changes in Enterprise Resource Planner (ERP) and supporting IT
infrastructure, supply chain optimisation, compliances and consideration of impact on
| Are You GST Ready? RSM

cash flows and business processes. GST presents an opportunity for those who are
willing to make suitable adjustments to cope with the same and could result in
tremendous cost savings and improve competitiveness.
We hope that the publication serves as a ready reckoner for the businesses and gives you
a clear GST blueprint. We have tried to do away with the jargon as much as possible and
tried to give the publication an entirely business oriented perspective.
RSM Are You GST Ready? |

Table of Contents
Section I Introduction
Present Indirect taxes Vs. GST An Overview
1. GST Readiness Checklist 1
2. Taxes to be subsumed 2-3
3. Effective Date 4-6
4. GST Laws, Regulations And Chargeability 7 - 14
Section II Understanding the Law
5. Rate Structure 16 - 18
6. Minimum Threshold And Registration Requirement 19 - 24
7. Time of Supply 25 - 27
8. Place of Supply 28 - 45
9. Value of Taxable Supply 46 - 52
10. Input Tax Credit 53 - 65
Section III Operational Aspects
11. Returns, Payments And Refunds 67 - 78
12. Records And Audit Related Provisions 79 - 80
13. E - Way Bill 81 - 85
14. Job Work 86 - 88
15. E-commerce 89 - 91
16. Transitional Provisions 92 - 102
17. Anti-Profiteering Measure 103
Section IV Leveraging the GST Law
18. IT And ERP Readiness 105 - 109
19. GST Optimization Opportunities 110 - 115
20. Vendor, Customer And Other Contracts 116 - 117
Way Forward 118 - 119
Appendix - List of forms under GST Law 120 - 125
| Are You GST Ready? RSM

Section I INTRODUCTION
COUNTRY BORDER Manufacturer - present IDT landscape STATE BORDER
Branch
Branch
Transfer
Foreign vendor Import of Excise Duty Branch
goods Transfer Intra state
BCD, No Tax Sale
CVD, Depot VAT
Service provider SAD
Inter State
Manufacturer Sale
Import of Clearance Intra state CST
services Excise Duty Sale Customer
Service Tax, Intra State
VAT
SBC, KKC purchase
Excise Duty, Customer
VAT Intra state
Sale Inter State
Excise Duty, Sale
VAT Excise Duty,
Export of CST
goods
No Tax Inter State
purchase
Customer
Excise Duty,
CST
Manufacturer
Intra State Inter State
purchase purchase
VAT CST
Dealer Dealer
service received service received
Service Tax, Service Tax,
Tax - Eligible credit SBC, KKC SBC, KKC
Tax - Ineligible credit
Service provider Service provider
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COUNTRY BORDER Manufacturer - GST regime landscape STATE BORDER
Branch
Branch
Transfer
Foreign vendor Import of IGST Branch
BCD, IGST Sale
IGST Depot CGST,
Service provider SGST
Inter State
Manufacturer Intra state Sale
Import of Clearance Sale IGST
services No Tax CGST, Customer
IGST Intra State
SGST
purchase
CGST, Customer
SGST Intra state
Sale Inter State
CGST, Sale
SGST IGST
Export of
goods
No Tax Inter State
Customer purchase
IGST
Intra State Manufacturer
purchase Inter State
CGST, purchase
SGST IGST
Dealer Dealer
Intra State
Inter State
service received
service received
CGST,
IGST
Tax - Eligible credit SGST

COUNTRY BORDER Dealer - present IDT landscape STATE BORDER
Branch
Branch
Transfer
Foreign vendor Import of No Tax Branch
BCD, No Tax Sale
CVD, Depot VAT
Service provider SAD
Inter State
Manufacturer Sale
Import of Branch Intra state CST
services Transfer Sale Customer
Service Tax, Intra State No Tax VAT
SBC, KKC purchase
VAT Intra state
Sale Inter State
VAT Sale
DEALER CST
Export of
goods
No Tax Inter State
purchase
Customer
Excise Duty,
CST
Manufacturer
purchase purchase
VAT CST
Dealer Dealer

COUNTRY BORDER Dealer - GST regime landscape STATE BORDER
Branch
Branch
Transfer
BCD, IGST Sale
IGST Depot CGST,
Inter State
Manufacturer Intra state Sale
Import of Branch Sale IGST
services Transfer CGST, Customer
IGST Intra State No Tax SGST
purchase
CGST, Customer
SGST Intra state
Sale Inter State
CGST, Sale
DEALER IGST
SGST
Export of
goods
No Tax Inter State
Customer purchase
IGST
CGST, purchase
SGST IGST
Dealer Dealer
Intra State
Inter State
service received
service received
CGST,
IGST

COUNTRY BORDER Service Provider - present IDT landscape STATE BORDER
Branch
Branch
Transfer
Foreign vendor Import of No Tax Branch
Intra state
goods Transfer
service
BCD, No Tax
Service Tax,
CVD, Branch SBC, KKC
Service provider SAD Inter State
service
Import of Manufacturer Intra state Service Tax,
Branch service
services SBC, KKC
Transfer Service Tax, Customer
Service Tax, Intra State No Tax
SBC, KKC SBC, KKC
purchase
VAT Intra state Inter State
service service
SERVICE Service Tax, Service Tax,
Export of
services
PROVIDER SBC, KKC SBC, KKC
No Tax Inter State

purchase
Customer
Excise Duty,
CST
Manufacturer
purchase purchase
VAT CST
Dealer Dealer

COUNTRY BORDER Service Provider - GST regime landscape STATE BORDER
Branch
Branch
Transfer
BCD, IGST service
IGST Branch CGST,
Inter State
Manufacturer Intra state service
Import of Branch service IGST
services Transfer CGST, Customer
IGST Intra State No Tax SGST
purchase
CGST, Customer
SGST Intra state
service Inter State
SERVICE CGST, service
Export of
services
PROVIDER SGST IGST
No Tax Inter State

Customer purchase
IGST
CGST, purchase
SGST IGST
Dealer Dealer
Intra State
Inter State
service received
service received
CGST,
IGST

Chapter 1 GST Readiness Checklist
GST is an indirect tax to be levied on supply of goods and services. It is a nation-wide tax
seeking to unify several fragmented indirect taxes. GST is based on the principle ofOne
Nation One Tax. With such a major tax reform in the history of India which is likely to take
effect from 1 July 2017 and which shall change the outlook of present indirect tax regime,
are you ready for adopting GST as a part of your business operations?
GST Readiness Checklist
What is or are the rates of GST applicable to my products and services?
Which of the current indirect taxes such as customs duty, excise duty, VAT, CST,
service tax, etc. will cease to be applicable to me on introduction of GST?
What tax credits would I be able to claim against my GST liability?
What is CGST, IGST and SGST and is there a seamless credit available across these taxes?
On which date will the GST replace the present indirect taxes?
What is the last date for registration and migration of existing registration under the GST
law? Is it already overdue?
What will happen to my credit balances and refunds against the present indirect tax laws
such as CENVAT credit, VAT refunds and set offs and tax holidays?
Is there any reverse charge applicable for my input goods and services and import?
Will the branch tansfers continue to be exempt?
Will there be any additional input cost due to vendors charging a higher GST rate? will I be
able to claim set off?
Do I have to file a single tax return or there are multiple tax returns and state wise tax
returns?
Do I need to rework my prices and costs?
Do I need to rework my customer and vendor contract to ensure recovery of GST and
grant/receipt of input credit?
Do I need to relook at my supply chain, warehousing and distribution system?
Is there any additional working capital or blockage of funds?
Are there any credits for which I need to claim refunds from the government and if so, what is
the time line and certainty of refund?
What is the GST treatment of my on-line sales and e-comerce business?
Is my IT and ERP system ready to ensure GST compliances and tax credits?
Can I improve my bottom line by optimizing GST taxes, set offs and operating costs?
GST
READY
1 | Are You GST Ready? Back to table of contents RSM

Chapter 2 Taxes To Be Subsumed
2.1 GST is an indirect tax for the whole nation, which proposes to make India one
unified common market. GST is a tax on the supply of goods and services, across
the entire industry value chain. Credits of input taxes paid at each stage will be
available in the subsequent stage of value addition, which makes GST essentially a
tax only on value addition at each stage. The final consumer will thus bear only the
GST charged by the last dealer in the supply chain, with set-off benefits at all the
previous stages.
2.2 GST is the biggest ever tax reform of Independent India whereby multiple indirect
taxes are subsumed in a single regime called GST. The GST regime shall subsume
taxes like Central Excise Duty Act, 1944, Central Sales Tax Act, 1956, Chapter V of
the Finance Act, 1994 (Service Tax) and a host of other state levied taxes including
state-wise Value Added Tax (VAT).
2.3 The Central level taxes that are being subsumed in GST are as under:
Service Additional Custom

Duty (ACD) known as
Tax
Countervailing Duty
Special Additional
Additional
Duty of Customs
Excise Duty
(SAD)
Central Level
subsumed
Central Excise Central Sales Tax
into GST
Duty (CST)
RSM Back to table of contents Are You GST Ready? | 2

Chapter 2 Taxes to be subsumed
2.4 The State level taxes that are being subsumed in GST are as under:
Octroi and Purchase

Entry Tax Tax
Entertainment Luxury
Tax * Tax
State Level
State Sales Tax subsumed into Taxes on lottery,
(VAT) GST betting and
gambling
* Other than the entertainment tax to be levied by the local bodies
2.5 The following taxes shall not be subsumed in GST
- Alcoholic Liquor for Human Consumption - The same shall be exclusively

taxed by States.
- Tax on Petroleum Crude/High Speed Diesel/ Motor Spirit/Natural

Gas/Aviation Turbine Fuel - The states would continue as per current laws
to impose Value Added Tax (VAT) on intra state sales while inter-state sales
would continue to attract Central Sales Tax. Also, Excise duty will continue
on petroleum products.
The said Petroleum products shall be subject to GST at a future date as per
the recommendation of GST Council.
- Stamp duties - Typically imposed on legal agreements by the state. Stamp

duty will continue to be levied by the States.
- Taxes by Local Bodies - Taxes levied by local bodies.
- Basic Custom Duties (BCD)
- Export Duty - Duty imposed at the time of export of certain goods which
are not available in India in abundance.

Chapter 3 Effective Date
3.1 The earlier provisions of Constitution did not provide for imposition of GST. Hence,
Constitutional Amendment was required before introduction of GST. The
Constitution (101st Amendment) Act, 2016 received assent of president on 8
September 2016 to make it an Act. The Constitution Amendments were notified
and made effective from 16 September 2016. As per Section of 19 of the
Constitution Amendment Act, indirect tax laws which are inconsistent with the
provisions of the constitution amendment for levying GST shall continue to be in
force until amended/repealed or until expiration of 1 year from the date of
commencement of Constitution amendment, whichever is earlier.
3.2 The Constitution (101st amendment) Bill, 2014 was introduced in December 2014.
The Constitution (101st Amendment) Bill, 2014 relating to GST was passed by Lok
Sabha on 7 May 2015. It was passed by Rajya Sabha on 3 August 2016 with certain
amendments. These amendments were later ratified by Lok Sabha. The assent of
president was received on 8 September 2016 to make it an Act.
3.3 The Constitution Amendments were notified and made effective from 16
September 2016. As per Section of 19 of the Constitution Amendment Act, indirect
tax laws which are inconsistent with the provisions of the constitution amendment
for levying GST shall continue to be in force until amended/repealed or until
expiration of 1 year from the date of commencement of Constitution amendment,
whichever is earlier.
3.4 Hence, appointed date for GST cannot be delayed beyond 15 September 2017 as
the Constitutional validity of existing regulations ends on 16 September 2017.
However, Government is taking effective steps with a proposed target of making
appointed date of GST as 1 July 2017.
3.5 The Goods and Services Tax Council (GST Council) has been constituted vide
Notification No.SO2957 (E) dated 15 September 2016. As per Article 279A of
Constitution of India, the GST council shall make recommendations to the Union
and the States on:
- The taxes, cesses and surcharges levied by the Union, the States and the
local bodies which may be subsumed in GST.
- The goods and services that may be subjected to or exempted from GST.

- Model GST laws, principles of levy, apportionment of GST levied on supplies

in the course of Inter-State trade or commerce under Article 269A and the
principles that govern the place of supply.
- The threshold limit of turnover below which the registration is not

compulsory for supplier of Goods or Services.
- The rates including floor rates.
- Any special rate or rates for a specified period to raise additional resources
during any natural calamity or disaster.
- Special provision with respect to the Special category States.
- Any other matter relating to GST as the Council may decide.
3.6 The Union Finance Minister is the Chairman of the GST Council. Following are
members of the council:
- 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.
- The GST Council has started the work in right earnest and various meetings
of GST Council have already been held.
3.7 The GST Council consisting of representatives from the Centre as well as the
States, after being constituted, met on 12 occasions to discuss various issues
including dual control, GST laws, exemptions, thresholds, rate structure,
compensation cess etc. and reached consensus on the same. Council had also
recommended four-tier GST rate structure and the thresholds.
3.8 The following Bills were introduced in the Lok Sabha, during the Budget session of
the Parliament :
- The Central Goods and Services Tax Bill ,2017 (CGST)
- The Integrated Goods and Services Tax, Bill 2017 (IGST)
- The Union Territory Goods and Services Tax Bill, 2017

- The Goods and Services Tax (Compensation to States) Bill, 2017.
3.9 Discussions on the above Bills commenced in the Lok Sabha on 29 March 2017 and
were passed on the same day after a long debate. The Rajya Sabha has also
approved the 4 bills on 6 April 2017. The Bills got presidential assent on 12 April
2017 to become an Act.
3.10 Further, each state will introduce its own The State Goods and Service Tax Bill,
2017 in the respective state assembly within due course.
3.11 The 13th Meeting of GST Council was held on 31 March 2017. In the said meeting,
the GST council approved drafts of following 4 sets of Rules. The said 4 Draft Rules
have been tentatively approved and put in public domain for suggestions:
- Composition Scheme
- Valuation
- Input Tax Credit (ITC)
- Transitional Provisions
3.12 In the said meeting the Council decided to amend partly the previously approved 5
sets of Draft Rules in relation to following Rules to bring them in conformity with
the provisions of the Act:
- Registration
- Refunds
- Returns
- Payments
- Invoice, Debit Note and Credit Note
3.13 The focus is now on classification of goods and services under different rates of
taxes. The next meeting of the Council will be held on 18-19 May in Srinagar where
besides finalizing the rules, the rate structure in relation to individual commodities
or services will be taken up for consideration.

Chapter 4 GST Laws, Regulations And
Chargeability
4.1 GST Laws, Regulations & chargeability
- 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.
Further, the Parliament has been given exclusive power to legislate matters
with respect to inter-state trade or commerce. The GST related provisions
will extend to the whole of India except the State of Jammu and Kashmir.
- India is a federal country where both the Centre and the States have been
assigned the powers to levy and collect taxes through appropriate
legislation. Both the Governments have distinct responsibilities to perform
according to the division of powers prescribed in the Constitution for which
they need to raise resources. A dual GST is thus proposed keeping in mind
the constitutional requirement of fiscal federalism.
4.2 Taxable event under GST is supply of goods or services or both
- The GST shall be levied by the Central Government on the intra-state supply
of goods and / or services which would be called as the Central Goods and
Services Tax (CGST). Further, States / Union Territories will also levy GST on
intra-state / union territory supply of goods and / or services which would
be called as the State Goods and Services Tax /Union Territory Goods and
Services Tax (SGST) / (UTGST). For the inter-state supply of goods and / or
services, Integrated GST (IGST) will be levied and administered by the
Centre. The collection in IGST will be compensated to the consuming State
as per the compensation mechanism framed.
- Tax Collection in case of Intra and Inter-state / union territory supplies of

goods and /or services is depicted as shown on next page

Chapter 4 GST Laws, Regulations And Chargeability
Intra-state / UT CGST SGST/UTGST
Inter-state / UT IGST
The Place of Supply related provisions (Refer Chapter 8 of this publication)

determine whether the transaction is deemed to be intra-state / inter-state
supply.
- The Union territories with legislature, i.e., Delhi and Puducherry are treated
at par with States and will have their own State GST Acts. While other 5
union territories will adopt Union Territory GST Acts. The Union Territories
without legislatures to adopt UTGST are as follows:
Sr. No. Union Territories

1 The Andaman and Nicobar Islands
2 Lakshadweep
3 Dadra and Nagar Haveli
4 Daman and Diu
5 Chandigarh
4.3 India means
Air space above its territory

and territorial waters
Extends Territorial Continental Shelf

up to 12 Waters Territory
nautical of India Exclusive Economic Zone
miles
Other Maritime Zone
from
baseline
Seabed and subsoil

underlying territorial waters

4.4 The liability to discharge GST will be on taxable person who makes supplies.
However, for certain categories of supplies of goods / services, the liability to
discharge GST will be on recipient of supplies under reverse charge mechanism.
Further supplies from un-registered person to registered person will be liable to
GST under reverse charge.
4.5 As taxable event under GST is that of supply of Goods / Services or both,
understanding the meaning of Supply under GST law is very critical for analyzing
taxability of GST on a transaction. The definition of Supply under GST laws is an
inclusive definition, which is depicted below:
All forms of supply of goods Importation of services by a taxable

/ services such as sale, person from a related person or
transfer, barter, exchange, from any of his other
license, rental, lease or establishments outside India, in the
disposal made or agreed to course of furtherance of business.
be made for a consideration
by a person in the course or Permanent transfer /disposal of
furtherance of business, business assets where Input Tax
Credit has been availed on such
Importation of service, for a assets.
Supply Includes:
consideration whether or
Supply of goods / services between
not in the course or
related persons or between distinct
furtherance of business,
taxable persons, when made in the
and
course or furtherance of business
(Except gift not exceeding Rs.
Specific supply made or
50,000/- in value in FY by employer
agreed to be made without
to employee.)
consideration:
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.

4.6 Distinct Persons
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.
4.7 Agent
Agent means a person, including a factor, broker, commission agent, arhatia, del
credere agent, an auctioneer or any other mercantile agent, by whatever name
called, who carries on the business of supply or receipt of goods or services or
both on behalf of another.
4.8 Related Person
a) Person shall deemed to be related if -
i. such persons are officers or directors of one anothers businesses;
ii. such person are legally recognized partners in business;
iii. such persons are employer and employee;
iv. any person directly or indirectly owns, controls or holds 25% or more
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
b) the term person also includes legal person
c) persons who are associated in the business of one another in that one is
the sole agent or sole distributor or sole concessionaire, howsoever
described, of the other, shall be deemed to be related.

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Chapter 4
4.9 The transactions which are deemed as supply of goods / services or which are deemed to be neither a
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supply of goods / services are given below

Supply of Goods Supply of Services Neither supply of Goods
nor Services
GST Laws, Regulations And Chargeability

- Goods means every kind of - Services means anything other than goods, - Services by an employee
movable property other than money and securities but includes activities to the employer in the
money and securities but relating to use of money or conversion by cash course of or in relation to
includes actionable claim, or by any other mode, from one form, his employment.
growing crops, grass and things currency or denomination, to another form, - Services by any Court or
attached to or forming part of currency or denomination for which separate Tribunal established under
the land which are agreed to be consideration is charged. any law for the time being
severed before supply or under - Following shall be deemed to be treated as in force.
the contract of supply. supply of services: (a) The functions
- Following shall be deemed to be performed by the
(1) Transfer of right in goods or of undivided

treated as supply of goods: share in goods without transfer of title Members of
(1) Transfer of title in goods thereof. Parliament, Members
(2) An agreement in which of State Legislature,
(2) Lease, tenancy, easement, license to
transfer of title in property Members of
occupy land.
in goods will pass at a Panchayats, Members
(3) Lease or letting out of the building of Municipalities and
future date upon payment
including a commercial, industrial or Members of other local
of full consideration
residential complex for business or authorities;
(3) Where goods forming part
commerce, either wholly or partly.
of the assets of a business (b) The duties performed
are transferred or disposed (4) Treatment or process being applied to by any person who
of by or under the another persons goods. holds any post in
directions of the person (5) Where, by or under the direction of a pursuance of the
carrying on the business so person carrying on a business, goods held provisions of the
as no longer to form part of or used for the purposes of the business Constitution in that
RSM
those assets, whether or are put to any private use or are used, or capacity; or
Chapter 4
RSM
nor Services
not for a consideration, such made available to any person for use, for any (c) The duties performed
transfer or disposal purpose other than a purpose of the business, by any person as a

(4) Where any person ceases whether or not for a consideration, the usage Chairperson or a
to be a taxable person, any or making available of such goods. Member or a Director in
goods forming part of the (6) Renting of immovable property. a body established by
assets of any business the CG / SG / local
(7) Construction of a complex, building, civil
carried on by him shall be authority and who is
structure or a part thereof, including a
deemed to be supplied by not deemed as an
complex or building intended for sale to a

him in the course or employee before the
buyer, wholly or partly, except where the
furtherance of his business commencement of this
entire consideration has been received
immediately before he clause.
after issuance of completion certificate,
ceases to be a taxable where required, by the competent - Services of funeral, burial,
person, unless authority or before its first occupation, crematorium or mortuary
a) The business is whichever is earlier. including transportation of
transferred as a going the deceased.
(8) Temporary transfer or permitting the use
concern to another - Actionable claims, other
or enjoyment of any intellectual property
person; or than lottery, betting and
right.
b) The business is carried gambling
(9) Development, design, programming,
on by a personal - Sale of land and building
customization, adaptation, up gradation,
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representative who is (Building subject to

enhancement, implementation of
deemed to be a taxable construction of complex,
information technology software.
person civil structure or a part
(10) Agreeing to the obligation to refrain from thereof, including a
(5) Any unincorporated an act, or to tolerate an act or a situation,
association or body of complex or building
or to do an act.
persons supplies goods to a intended for sale to a
(11) Works contract buyer, wholly or partly,
member for cash, deferred
| 12
payment or other valuable (Works Contract means a contract for except where entire
13
Chapter 4
nor Services
consideration building, construction, fabrication, consideration is received

completion, erection, installation, fitting after issuance of

out, improvement, modification, repair, completion certificate by
maintenance, renovation, alteration or competent authority or
commissioning of any immovable property after first occupation
wherein transfer of property in goods whichever is earlier)
(whether as goods or in some other form)
- Activities or transactions
is involved in execution of such contract)
undertaken by Central
(12) Transfer of the right to use any goods for Government, a State
any purpose (whether or not for a Government or any local
specified period) for cash, deferred authority in which they are
payment or other valuable consideration. engaged as public
(13) Supply, by way of or as part of any authorities as may be

service or in any other manner notified on
whatsoever, of goods, being food or any recommendations of
other article for human consumption or Council
any drink (other than alcoholic liquor for
human consumption), where such supply
or service is for cash, deferred payment or
other valuable consideration.
4.10 Composite or Mixed Supply
Particulars Composite Supply Mixed Supply

Definition Means a supply made by a taxable person to a Means two or more individual supplies of goods /
recipient consisting of two or more taxable services, or any combination thereof, made in
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supplies of goods or services or both, or any conjunction with each other by a taxable person
Chapter 4
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Particulars Composite Supply Mixed Supply
combination thereof, which are naturally bundled for a single price where such supply does not
and supplied in conjunction with each other in constitute a composite supply.
the ordinary course of business, one of which is

principal supply.
Principal supply means the supply of goods or
services which constitutes the predominant
element of a composite supply and to which any
other supply forming part of that composite
supply is ancillary.
Illustration Where goods are packed and transported with A supply of a package consisting of canned
insurance, the supply of goods, packing foods, sweets, chocolates, cakes, dry fruits,
materials, transport and insurance is a composite aerated drink and fruit juices when supplied for a
supply and supply of goods is the principal single price is a mixed supply. Each of these
supply. 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.
Tax liability A composite supply comprising 2 or more A mixed supply comprising 2 or more supplies
supplies, one of which is a principal supply, shall shall be treated as supply of that particular
be treated as a supply of such principal supply. supply which attracts the highest rate of tax.
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4.11 Outward and Inward Supply
Outward Supply Inward Supply

Outward supply in relation to a taxable person, means supply of Inward supply in relation to a person, shall
goods or services or both, whether by sale, transfer, barter, exchange, mean receipt of goods or services or both
licence, rental, lease or disposal or any other mode, made or agreed to whether by purchase, acquisition or any
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be made by such person in the course or furtherance of business. other means with or without consideration.
Section II UNDERSTANDING THE LAW
Chapter 5 Rate Structure
5.1 The GST Council in its meeting dated 3 November 2016 finalised the below
mentioned GST rate structure.
Essential
items Common use items
including 0% 5%
food
Proposed
GST Rate 12% Standard Rate
Structure
Luxury items,
tobacco, aerated Maximum goods
drinks and other 28% 18% and all services
demerit items standard rate
- It is expected that luxury cars, tobacco and aerated drinks (Demerit Goods)
would be levied with additional cess on top of highest tax rate. The
collection from cess would create revenue pool for compensating states for
loss of revenue during the first 5 years of implementation of GST.
- Different GST rate for bullion i.e. Gold & Silver is expected.
5.2 The Revenue Neutral Rate (RNR) is an important concept in GST Regime. The RNR
is the rate at which tax revenue of the Central Government and State Government
will remain same under proposed GST as is under the present Indirect Tax
structure in India.
5.3 Classification of goods / services in the rate structure is yet to be finalized and
recommended by GST Council.
5.4 The CGST on the supply of petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas and turbine fuel shall be levied with effect
from such date as may be notified by the government.

5.5 Composition Levy
- The Composition Scheme for small businesses has been provided to help
them with maintaining minimal compliance. The Composition Scheme will
make compliance with tax laws hassle free for eligible businesses opting for
the scheme.
- The Composition Scheme is available as an option subject to certain

conditions in respect of registered taxable person whose aggregate
turnover during preceding FY does not exceed Rs. 50 Lakhs.
l Manufacturers - not exceeding 2/% of turnover in State / Union

Territory
l Restaurants - not exceeding 5% of turnover in State / Union

Territory
l Other Supplies - not exceeding 1 % of turnover in State / Union

Territory
Manufacture means processing of raw material or inputs in any manner

that results in emergence of a new product having a distinct name,
character and use and the term manufacturer shall be construed
accordingly.
- The Composition Scheme is subject to certain conditions. The scheme is

not applicable to taxable person who is engaged in the following supplies:
l Engaged in the supply of services other than supplies in relation to

services of a restaurant
l Makes any supply of goods which are not leviable to tax
l Makes any inter-state outward supplies of goods
l Makes any supply of goods through an electronic commerce

operator who is required to collect tax at source

l Manufacturer of such goods as may be notified on the

recommendation of the council
l Composition Scheme is once opted, said scheme will be applicable to

all registered person holding same PAN
l The option availed by registered person in respect of Composition

Scheme shall lapse with effect from the date his aggregate turnover
during the FY exceeds Rs. 50 lakhs.
l A taxable person who opts for the said scheme shall not collect any
tax from the recipient supplies made by him nor shall he be entitled
to any ITC.
- A registered person paying tax under the Composition Scheme shall issue a
bill of supply with prescribed particulars instead of a tax invoice and shall be
liable to file quarterly returns.
- The GST law also provides for specific provisions in case of switch over from
normal scheme to composition scheme and vice a versa.

Chapter 6 Minimum Threshold And Registration
Requirement
6.1 General Provisions and Threshold limit
- Every supplier shall be liable to be registered under each State GST Act or
UTGST Act for the state or union territory, other than special category
states, from where he makes a taxable supply, if his aggregate turnover in a
FY exceeds Rs. 20 lakhs.
- With respect to the special category states of Arunachal Pradesh, Assam,

Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh
and Uttarakhand, the supplier shall be liable to be registered if his aggregate
turnover in a FY exceeds Rs.10 lakhs.
- The grant for registration under SGST Act or UTGST Act shall be deemed to
be grant of registration under CGST Act.
- Aggregate turnover means aggregate value of all taxable supplies (whether

on his own account or behalf of principal), computed on all India basis having
same PAN. The aggregate turnover includes/excludes the following:
Includes Excludes
- Exempt supplies - Inwards supplies on which tax is
- Exports of goods/services payable under Reverse Charge
Mechanism (RCM)
- Inter-state supplies
- Tax & Cess under GST Law
- Supply of goods after completion
of job work shall be treated as
supply by principal and not of job
work.
- Any person though not liable for registration, has an option for obtaining
voluntarily registration.
- In case where a person liable to obtain registration, fails to obtain

registration, the proper officer may proceed to register such person in a
prescribed manner.

Chapter 6 Minimum Threshold And Registration Requirement
- Person having multiple business verticals in a State has an option for

obtaining separate registration for each business vertical. Business vertical
means a distinguishable component of an enterprise that is engaged in
supply of individual goods or service or a group of related goods or services
and that is subject to risks and returns that are different from those of other
business verticals.
- In case person is making supply from territorial waters of India (i.e. 12

nautical miles from the baseline of coastal line), he shall be required to obtain
registration in the coastal States or Union territory where the nearest point
of the appropriate base line is located.
- A person without GST registration can neither collect GST from recipient
nor claim any ITC.
- PAN based registration having 15 digit alphanumeric structure will be

allotted to every assessee. For non-resident taxable person, registration
may be granted based on a prescribed document other than PAN.
- Registration certificate and GSTIN has to be displayed at the principal/every

additional place of registered person.
- Physical Verification of business premises in certain cases shall be done

after the grant of registration of the place of business. The proper officer is
required to get such verification done and upload the verification report
along with other documents including photographs on the next day of such
verification.
- All applications including reply to the notices, returns, appeals or any other
document required to be submitted electronically at the common portal
shall be digitally signed or e-signed.
6.2 Registration of SEZ Units
Special Economic Zone unit (SEZ) or developer shall make a separate application

for registration as a business vertical distinct from its other units located outside
the SEZ.
6.3 Time Limit for Registration
- Every person who, on the day immediately preceding the appointed day, is
registered or holds a license under an existing law, shall be liable to be
registered under respective GST Acts with effect from the appointed day.
- Every supplier shall apply for registration in every such State or Union
Territory in which he is so liable within 30 days from the date on which he
becomes liable to registration.
6.4 Not Liable for Registration
The following persons shall not be liable to be registered:
a. Any person engaged exclusively in the business of supplying goods /

services that are not liable to tax or are wholly exempt from tax under this
Act.
b. An agriculturist, to the extent of supply of produce out of cultivation of land.
6.5 Registration for Casual Taxable Person (CTP) or Non-Resident Taxable Person
(NRTP)
- Casual taxable person means a person who occasionally undertakes

transactions involving supply of goods or services or both in the course or
furtherance of business, whether as principal, agent or in any other
capacity, in a State or a Union territory where he has no fixed place of
business.
- Non-resident taxable person means any person who occasionally

undertakes transactions involving supply of goods or services or both,
whether as principal or agent or in any other capacity, but who has no fixed
place of business or residence in India.

- A CTP or a NRTP shall apply for registration at least 5 days prior to the
commencement of business. CTP or NRTP can make taxable supplies only
after issuance of registration certificate. Registration certificate to CTP or
NRTP shall be valid for a period specified in application for registration or 90
days from effective date of registration, whichever is earlier.
- The period of 90 days can be extended by a further period not exceeding 90

days. CTP or NRTP along with registration application requires to make an
advance deposit of tax in an amount equivalent to estimated tax liability.
The said advance shall be credited to electronic cash ledger and can be
utilized in a prescribed manner.
6.6 Mandatory Registration
The Central Government has notified following category of persons to obtain

mandatory registration:
Persons making Casual taxable Persons liable Categories of
any inter-State persons making under RCM services the tax
taxable supply taxable supply on which shall be
paid by the e -
commerce
operator
Non-resident Persons who are Persons who Input service
taxable persons required to supply on behalf distributor
making taxable deduct TDS of other
supply registered
taxable persons
whether as an
agent or
otherwise
Persons who Electronic OIDAR from a Such other

supply, through commerce place outside person or class of
e- commerce operator India to persons as may
operator who is unregistered be notified
required to person in India
collect TCS

6.7 Cancellation of Registration
- The registration granted to a person is liable to be cancelled if the said

person:
l does not conduct any business from the declared place of business;
or
l issues invoices or bill without supply of goods or services in violation

of the provisions of this Act / Rules
- The proper officer, either on own motion or on application filed, cancel the
registration where:
l the business has been discontinued, transferred fully for any reason
including death of the proprietor, amalgamated with other legal
entity, demerged or otherwise disposed of; or
l there is any change in the constitution of the business; or
l the taxable person is no longer liable to be registered under section

22 or section 24
- The officer may cancel the registration from any retrospective date after
giving the person an opportunity of being heard in case registered person
has:
l contravened any provisions of the Act; or
l liable under composition scheme has not furnished returns for 3

consecutive period; or
l has not furnished returns for a continuous period of 6 months; or
l obtained voluntary registration and has not commenced business

within 6 months from the date of registration; or

l obtained registration by means of fraud, wilful misstatement or

suppression of facts.
- Person whose registration is cancelled shall pay an amount equal to the ITC
held in stock or inputs contained in semi-finished/finished goods held in
stock or capital goods or plant and machinery on the day immediately
preceding the date of such cancellation or output tax payable on such
goods, whichever is higher.
6.8 Revocation of Cancellation
A registered person can apply for revocation of registration within 30 days from
date of service of cancellation order.

Chapter 7 Time of Supply
7.1 The liability to pay CGST / SGST / UTGST or IGST on the supply of goods /
services shall arise at the time of supply of goods / services. Further the
provisions as in force on the date of time of supply will be applicable to said
transaction of supply. The time of supply to be determined is as given below:
Nature of Time of Supply of Goods Time of Supply of Services

supply
General Earliest of the following:
If invoice is issued within time
Rule
Date of issue of invoice limit*
The time limit within which Earliest of the following:

invoice is required to be (i) Date of issue of invoice; or
issued; (ii) Date of receipt of payment
Date of receipt of payment If Invoice is not issued within
The time limit for issuing invoice is time limit*
before or at time of :- Earliest of the following:
(i) Removal of goods where (i) Date of provision of service
supply involves movement of or
goods; or
(ii) Date of Receipt of payment
(ii) In other cases, at the time
when goods are delivered. * The time limit for raising invoice
is within 30 days from the date of
supply of service.
In case of amount received up to Rs.1,000/- in excess of amount
indicated in the tax invoice, the time of supply at an option of supplier
will be the date of issue of invoice.
Supply by (i) Date of issue of voucher, if supply is identifiable at that point; or

vouchers (ii) The date of redemption of voucher, in all other cases
Voucher means an instrument where there is an obligation to
accept it as consideration or part consideration for a supply of goods
or services or both and where the goods or services or both to be
supplied or the identities of their potential suppliers are either
indicated on the instrument itself or in related documentation,
including the terms and conditions of use of such instrument.

Nature of Time of Supply of Goods Time of Supply of Services

supply
Supplies Earliest of the following: Earliest of the following:
liable i. Date of receipt of goods; i. Date of payment;
under
ii. Date of payment; ii. Date immediately following 60
RCM days of issue of invoice or any
iii. Date immediately following 30
days of issue of invoice or any other document.
other document. If not determinable as above, date
If not determinable as per above, of entry in the books of accounts
date of entry in the books of of recipient.
accounts of recipient of supply. In case of supply received from
Associated Enterprise located
outside India, earlier of:
i. Date of entry in books of
accounts; or
ii. The date of payment.
Not i. Date on which return is to be filed.
possible ii. Date on which the tax is paid.
to
determine
time of
supply
Addition Date on which supplier receives such addition in value.
in value of
supply by
way of
interest,
late fee or
penalty

7.2 Where there is change in effective rate of tax in respect of supply of goods /
services, the time of supply shall be determined as follows:
Goods or Services have been supplied Goods or Services have been supplied
before the change of rate after the change of rate
Particulars Payment Payment Particulars Payment Payment
before After before After
change in change in change in change in
rate rate rate rate
Issue of Normal Issue of
invoice before Rule invoice before
change in rate change in rate
Issue of Issue of Normal

invoice after invoice after Rule
change in rate change in rate
Date of invoice (old rate) Date of invoice (new rate)

Date of receipt of payment (old Date of receipt of payment (new
rate) rate)
Date of invoice or payment, Date of invoice or payment,
whichever is earlier (new rate) whichever is earlier (old rate)
The date of receipt of payment shall be the date of credit in the bank account when
such credit in the bank account is after 4 working days from the date of change in
the rate of tax.

Chapter 8 Place of Supply
8.1 Chargeability
- The Integrated Goods and Services Tax Act, 2017 (IGST Act) shall be
applicable to the whole of India except Jammu and Kashmir for levying
Integrated Goods and Services Tax (IGST) on the inter-state supply of any
goods / services at the rate to be specified in the schedule to the IGST Act.
- Intra State Vs. Inter State
Location Same Intra State

Place of
of state / Supplies
supply
Supplier UT
Location Different Inter State

Place of
of state / Supplies
supply
Supplier UT
The following shall be treated as Inter-state supply:

1. Supply of goods / services imported into the territory of India.
2. Supply where supplier is located in India and place of supply is
outside India.
3. Supply to or by Special Economic Zone developer or Special
Economic Zone unit.
4. Supply made to a tourist.
5. Supply within taxable territory which is neither Intra-state nor
covered anywhere under the Act.
- For chargeability under IGST Act, the following shall be treated as

establishment of distinct persons:
i. an establishment of a person in India and any of his other

establishments outside India, or
ii. an establishment of a person in a State and any of his other

establishments outside that State, or

iii. an establishment in a state or union territory and any other

establishment being business vertical registered within state or
union territory.
8.2 Import & Export of goods / services
- Import of goods / services:
Import of Goods means Import of Services means

Bringing goods into India from a place The supply of any service, where
outside India. (a) the supplier of service is located
outside India,
(b) the recipient of service is located in
India, and
(c) the place of supply of service is in
India.
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 (CTA) at the point when
duties of customs are levied on the said goods under section 12 of the Customs
Act, 1962 , on a value as determined under the CTA.
- Export of goods / services:

Export of Goods means Export of Services means
Taking goods out of India to a place The supply of any service when
outside India. (a) the supplier of service is located in India,
(b) the recipient of service is located outside
India,
(c) the place of supply of service is outside
India,
(d) the payment for such service has been
received by the supplier of service in
convertible foreign exchange, and
(e) the supplier of service and recipient of
service are not merely establishments
of a distinct person.

8.3 Location of Supplier & Receiver
Particulars Supplier Receiver
Definition In relation to any goods / Recipient of supply of goods /

services, shall mean the person services means-
supplying the said goods / (a) where a consideration is
services and shall include an payable for the supply of
agent acting as such on behalf of goods and/or services, the
such supplier in relation to the person who is liable to pay
goods or services or both that consideration,
supplied.
(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.
The expression recipient shall
also include an agent acting as
such on behalf of the recipient in
relation to the goods / services
supplied.
Location of (a) where a supply is made from a (a) where a supply is received at a
supplier / place of business for which place of business for which
receiver in registration has been registration has been
case of obtained, the location of such obtained, the location of such
supply of place of business; place of business;
services (b) where a supply is made from a (b) where a supply is received at a

Particulars Supplier Receiver
place other than the place of place other than the place of
business for which business for which
registration has been registration has been
obtained, that is to say, a fixed obtained, that is to say, a fixed
establishment elsewhere, the establishment elsewhere, the
location of such fixed location of such fixed
establishment; establishment;
(c) where a supply is made from (c) where a supply is received at
more than one establishment, more than one establishment,
whether the place of business whether the place of business
or fixed establishment, the or fixed establishment, the
location of the establishment location of the establishment
most directly concerned with most directly concerned with
the provision of the supply; the receipt of the supply; and
and (d) in absence of such places, the
(d) in absence of such places, the location of the usual place of
location of the usual place of residence of the recipient.
residence of the supplier.
Place of Place of business includes:
Business a) A place from where the business is ordinarily carried on, and
includes a warehouse, a godown or any other place where a
taxable person stores his goods, supplies or receives goods or
services or both; or
b) A place where a taxable person maintains his books of account;
or
c) A place where a taxable person is engaged in business through an
agent, by whatever name called.
Fixed A place other than the registered place of business which is
Establish- characterized by a sufficient degree of permanence and suitable
ment structure in terms of human and technical resources to supply
services, or to receive and use services for its own needs.

8.4 Place of Supply of Goods:
The Place of Supply of Goods to be determined as follows:

Nature of supply Deemed place of supply
Supply involving movement of goods Location of goods at the time at
which the movement of goods
terminates for delivery to recipient
Goods delivered by supplier to recipient on The principal place of business of
direction of third person whether acting as third person
an agent or otherwise, before or during
movement of goods, either by way of
transfer of documents of title to the goods
or otherwise
Supply not involving movement of goods Location of goods at time of
delivery to recipient
Goods assembled or installed at site Place of installation or assembly
Goods supplied on board a conveyance such Location at which goods taken on
as vessel, an aircraft, a train or motor vehicle board
Goods imported into India Location of the Importer
Goods exported from India Location outside India
8.5 Place of Supply of Services:
- The rules for determining Place of Supply of Services have been divided in
two parts-
(a) Where both the location of supplier and recipient is in India
(b) Where either the location of supplier or recipient is outside India
- General Rule -
Place of Supply where both the Place of Supply where either the
location of supplier and recipient of location of supplier or the location of
service is in India recipient of service is outside India
(a) In case of supply made to registered (a) Location of recipient available in the
person - location of such person ordinary course of business

Place of Supply where both the Place of Supply where either the
location of supplier and recipient of location of supplier or the location of
service is in India recipient of service is outside India
(b) In case of supply made to person Location of recipient
other than registered person: (b) Other cases - Location of supplier
(i) Address of recipient exists on
record - Location of recipient
(ii) Other cases - Location of
supplier

Chapter 8
RSM
- Exception rules to general rule to determine the Place of Supply of Services are as follows:
Particulars Deemed place of Supply in case of location of Deemed place of Supply in case location of
SP & SR is located in India either of SP or SR is located outside India
Related to immovable property or boat or vessel
Place of Supply
Place of (a) Immovable property or boat or vessel is Place where immovable property is located or
Supply located or intended to be located in India - intended to be located.
Location where immovable property or boat
or vessel is located or intended to be located
(b) Other than above - Location of recipient

Services (a) Services directly relating to immovable Services supplied directly in relation to an
covered property including services provided by immovable property, including services by
architects, interior decorators, surveyors, experts and estate agents, supply of hotel
engineers and other related experts or estate accommodation by a hotel, inn, guest house, club
agents, any service provided by way of grant or campsite, by whatever name called, grant of
of rights to use immovable property or for rights to use immovable property, services for
carrying out or co-ordination of construction carrying out or co-ordination of construction
work work, including architects or interior decorators
(b) services by way of lodging accommodation by
a hotel, inn, guest house, homestay, club or
campsite and including house boat or any
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other vessel
(c) services by way of accommodation in any
immovable property for organizing any
marriage or reception or matters related
therewith, official, social, cultural, religious or
business function including services provided
| 34
in relation to such function at such property
35
Chapter 8
(d) service ancillary to above services

Remarks (a) Where the immovable property or boat or (a) Value of service provided in each state to be
Place of Supply
vessel is located in more than state or union ascertained separately, in proportion to value
territory, value of service provided in each for services separately collected or
state to be ascertained separately, in determined as per terms of contract or
proportion to value for services separately agreement as place of supply is in each such
collected or determined as per terms of state.
contract or agreement.as place of supply is in (b) In absence of contract/agreement on such
each such state. other basis as may be prescribed in this
(b) In absence of contract/agreement on such behalf.
other basis as may be prescribed in this (c) If services are supplied at more than one
behalf. location, including a location in the taxable

territory, place of supply shall be location in
taxable territory.
Performance based services
Place of Places where services are actually performed (a) Places where services are actually performed
Supply (b) For services requiring physical availability of
goods and provided from a remote location by
way of electronic means - Location where
goods are situated at the time of supply of
service
Services Services provided by restaurant and catering (a) Services in respect of goods that are required
covered services, personal grooming, fitness, beauty to be made physically available by the
treatment, health service including cosmetic and recipient of service to the supplier of service,
RSM
plastic surgery or to a person acting on behalf of the supplier
Chapter 8
RSM
of service in order to provide the service
(b) Services supplied to an individual,
Place of Supply
represented either as the recipient of service
or a person acting on behalf of the recipient,
which require the physical presence of the
receiver or the person acting on behalf of the
recipient, with the supplier for the supply of
the service
(c) Nothing shall apply in respect of goods

imported into India for repairs and re-
exported.
Remarks (a) Value of service provided in each state /
union territory to be ascertained separately,
in proportion to value for services separately
collected or determined as per terms of
contract or agreement as place of supply is in
each such state.
(b) In absence of contract/agreement on such
other basis as may be prescribed in this
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behalf
(c) If services are supplied at more than one
location, including a location in the taxable
territory, place of supply shall be location in
taxable territory
Training and Performance Appraisal
| 36
Place of (a) Supplied to a registered person - location of No exception rule

37
Chapter 8
Supply recipient;
(b) Other than above - location where services
Place of Supply
are actually performed.
Admission to events or amusement parks
Place of Location where the event is actually held or Location where the event is actually held
Supply where the park or such other place is located
Services a) Services provided by way of admission to a Services supplied by way of admission to, or
covered cultural ,artistic, sporting, scientific, educational,
organization of, a cultural, artistic, sporting,
entertainment event or amusement park scientific, educational, or entertainment event, or
b) Services or any place ancillary to point a celebration, conference, fair, exhibition, or
similar events, and of services ancillary to such
admission
Remarks In case of event held in more than one state, value (a) Value of service provided in each state to be
of service provided in each state to be ascertained separately, in proportion to value
ascertained separately.as place of supply is in for services separately collected or
each such state. determined as per terms of contract or
agreement as place of supply is in each such
state.
other basis as may be prescribed in this
behalf
Organization of event or services ancillary to the event
Place of (a) If provided to a registered person , then Location where the event is actually held
Supply location of such person
RSM
(b) Other than above,

Chapter 8
RSM
(i) If event is held in India - location where the
event is actually held
Place of Supply
(ii) if the event is held outside India, location of
the recipient.
Services (a) Service by organization of a cultural, artistic, Services supplied by way of admission to, or
covered sporting, scientific, educational or organization of, a cultural, artistic, sporting,
entertainment event including supply of scientific, educational, or entertainment event, or
service in relation to a conference, fair, a celebration, conference, fair, exhibition, or

exhibition, celebration or similar event similar events, and of services ancillary to such
(b) Services ancillary to services in point (a) admission
(c) Services of assigning sponsorship for an
event
Remarks (a) If service is provided in more than one state, If services are supplied at more than one
value of service provided in each state to be location, including a location in the taxable
ascertained separately, in proportion to value territory, place of supply shall be location in
for services separately collected or taxable territory.
determined as per terms of contract or
agreement as place of supply is in each such
state.
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other basis as may be prescribed in this behalf
Transportation of Goods
Place of (a) Transportation of goods including by mail or (a) Transportation of goods other than by mail or
Supply courier courier Destination of goods
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(i) If provided to a registered person (b) Transportation of goods by mail or courier
39
Chapter 8
Location of recipient No Exception Rule

(ii) Other than above - location where goods
Place of Supply
are handed over for transportation
Passenger Transportation service
Place of Passenger Transportation service Location where the passenger embarks on the
Supply (a) Right of passage to be exercised in future conveyance for a continuous journey
and point of embarkation not known No
Exception Rule
(b) Other than above -
(i) Provided to a registered person Location
of recipient
(ii) Provided to an unregistered person -

Location where the passenger embarks on
the conveyance for a continuous journey
Remarks Return journey shall be treated as a separate
journey even if right of passage issued at the
same time as right of passage for onward journey
Services provided on board a conveyance including a vessel, an aircraft, a train or a motor vehicle
Place of Location of first scheduled point of departure of First scheduled point of departure of that
Supply that conveyance for that journey conveyance for the journey.
Banking and other Financial Services
Place of (a) Banking and other financial services (a) Banking and other financial services
Supply (i) Location of recipient on records of supplier (i) To account holders Location of supplier
RSM
- Location of recipient of service

Chapter 8
RSM
(ii) Other than above - Location of supplier (ii) Other than above No Exception Rule
(b) Stock broking Same as above (b) Stock broking No Exception Rule
Place of Supply
Remarks Non-banking financial company means
(a) a financial institution which is a company;
(b) a non-banking institution which is a company
and which has as its principal business
receiving of deposits, under any scheme or
arrangement or in any other manner, or

lending in any manner; or
(c) such other non-banking institution or class of
such institutions, as the Reserve Bank of
India may, with the previous approval of the
Central Government and by notification in the
Official Gazette specify
Intermediary services
Place of No exception Rule Location of the supplier of service
Supply
Are You GST Ready?
Remarks Intermediary means a broker, an agent or any other person, by whatever name called, who arranges
or facilitates the supply of a service (hereinafter called the main service) or the supply of goods,
between two or more persons, but does not include a person who supplies such goods or service or
both or securities on his own account .
Supply of insurance services
Place of (a) Supplied to a registered person - Location of No Exception Rule
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Supply recipient;
41
Chapter 8
(b) Other than above - Location of recipient of

service on records of supplier of service
Place of Supply
Advertisement services to Government, Statutory Body or a Local Authority
Place of (a) Value of service provided in each state to be No Exception Rule
Supply ascertained separately, as per terms of
contract or agreement as place of supply is in
each such state.
(ii) In absence of contract/agreement on such
Telecommunication services including data transfer, broadcasting, cable and direct to home television (D2H)
services to any person

Place of (a) Services by way of fixed telecommunication No Exception Rule
Supply line, leased circuits, internet leased circuit,
cable or dish antenna - Location where
telecommunication line, leased circuit or cable
connection or dish antenna is installed for
receipt of services
(b) In case of mobile connection for
telecommunication and internet services
provided on post-paid basis - Location of
billing address of the recipient of services on
record of the supplier of services
(c) In cases where mobile connection for
telecommunication, internet service and D2H
RSM
are provided on pre-payment through a

Chapter 8
RSM
voucher or any other means
(i) Sold through agent - Location of selling
Place of Supply
agent/ re-seller/ distributor of sim card/
recharge voucher as per record of supplier
at the time of supply.
(ii) Sold to final subscriber - Location where
such pre-payment is received or such
vouchers are sold
(d) Pre-paid service availed or the recharge made

through internet banking or other
electronic mode of payment - Location of
recipient of services on record of the
supplier of services
(e) In cases other than (a) to (d)
(i) Address of the recipient as per the records
of the supplier of service is available
address of such recipient
(ii) In other cases - Location of supplier of
services
Are You GST Ready?
Remarks If leased circuit is installed in more than one

state
(i) Value of service provided in each state to be
ascertained separately, as per terms of
contract or agreement.as place of supply is in
| 42
each such state.
43
Chapter 8
(ii) In absence of contract/agreement on such

Place of Supply
Vehicle Hiring Service
Place of No exception Rule Location of Supplier of service
Supply
Remarks Services consisting of hiring of means of
transport up to a period of 1 month other than
aircrafts and vessels, but including yachts
Particulars Online information and database access or retrieval services - Deemed place of Supply in case
location of either of SP or SR is located outside India

Supply by a person located in non-taxable territory Other supply in respect to online information
and received by a non-taxable online recipient and database access or retrieval services
Place of Location of recipient of service
supply
Person liable (a) An Intermediary except where the following Person receiving such services shall be deemed
/ Recipient conditions are fulfilled: to be located in the taxable territory if any two of
(i) the invoice or customers bill or receipt the following non-contradictory conditions are
issued or made available by such satisfied:
intermediary taking part in the supply (i) the location of address presented by the
clearly identifies the service in question recipient of service via internet is in taxable
and its supplier in non-taxable territory; territory;
(ii) the intermediary involved in the supply (ii) the credit card or debit card or store value
RSM
does not authorise the charge to the card or charge card or smart card or any other
Chapter 8
RSM
Place of Supply
customer or take part in its charge which is card by which the recipient of service settles
that the intermediary neither collects or payment has been issued in the taxable
processes payment in any manner nor is territory;
responsible for the payment between the (iii) the billing address of recipient of service is in
non-taxable online recipient and the supplier the taxable territory;
of such services;
(iv)the internet protocol address of the device

(iii) the intermediary involved in the supply used by the recipient of service is in the
does not authorise delivery; and taxable territory;
(iv)the general terms and conditions of the (v) the bank of recipient of service in which the
supply are not set by the intermediary account used for payment is maintained is in
involved in the supply but by the supplier the taxable territory;
of services.
(vi)the country code of the subscriber identity
(b) In all other cases - Supplier of service located module (SIM) card used by the recipient of
in non-taxable territory service is of taxable territory;
(vii)the location of the fixed land line through
which the service is received by the recipient
is in taxable territory
Are You GST Ready?
Remarks - The following shall get registered under the Simplified Registration Scheme to be notified by the
Government and discharge IGST under OIDAR service:
(i) The supplier of online information and database access or retrieval services
(ii) Intermediary (as discussed above)
(iii) Any person located in the taxable territory and representing such supplier for any purpose in
| 44
the taxable territory
45
Chapter 8
Place of Supply
(iv) A person appointed by the supplier in taxable territory for the purpose of paying IGST
- Online information and database access or retrieval services (OIDAR service) means services
whose delivery is mediated by information technology over the internet or an electronic network
and the nature of which renders their supply essentially automated and involving minimal human
intervention, and impossible to ensure in the absence of information technology and includes
electronic services such as-
(i) advertising on the internet
(ii) providing cloud services
(iii) provision of e-books, movie, music, software and other intangibles via telecommunication
networks or internet
(iv) providing data or information, retrievable or otherwise, to any person, in electronic form
through a computer network
(v) online supplies of digital content (movies, television shows, music, etc.)
(vi) digital data storage and
(vii) online gaming
In order to prevent double taxation or non-taxation of supply of a service or for uniform application
of rules, the Government shall have the power to notify any description of service or circumstances
in which the place of supply shall be the place of effective use and enjoyment of service.
RSM
Chapter 9 Value of Taxable Supply
9.1 GST is required to be calculated on the value of taxable supply
Supplier and
recipient not
related
Price is the
Value of Transaction
sole
Supply Value
consideration
9.2 The value of supply includes & excludes the following:
The value of supply shall include:

1. Any taxes, duties, cess, fees and charges levied under any statue other
than taxes under GST
2. Any amount that supplier is liable to pay in relation to such supply but
which has been incurred by the recipient of the supply and not included in
the price actually paid or payable for the supply
3. Incidental expenses, including commission and packing, charged by the
supplier to the recipient and any amount charged for anything done by
the supplier in respect of the supply at the time of, or before delivery of
supply
4. Interest or late fee or penalty for delayed payment of any consideration
for any supply
5. Subsidies directly linked to the price excluding subsidies provided by the
Central / State Government. The subsidy received by supplier only to be
included
The value of supply shall not include:
Any discount given, if such discount is recorded in invoice. However where such

discount is given after the supply is effected, such deduction of discount should
be considered from the value only if
a. It is established in terms of agreement entered; and
b. Input Tax Credit attributable to the discount has been reversed by
recipient of the supply.
9.3 The Draft Valuation Rules provides for valuation in the following nature of
transactions:
Sr. No. Particulars Value of Supply
1. Where consideration is a) Open Market value
not wholly in money b) If open market value is not available:
Sum total of Consideration in money and any
such further amount in money as equivalent
to the consideration not in money if such
amount is known at the time of supply
c) If not determinable as per above,
the value of supply of like kind and quality
d) If not determinable as per above,
be the sum total of consideration in money
and such further amount in money that is
equivalent to consideration not in money as
determined under Sr. No. 4 or 5, in that order.
2. Where supplies are a) Open Market value
made between distinct b) If open market value is not available,
or related persons,
the value of supply of goods or service or
other than through an
both of like kind and quality
agent
c) If value is not determinable as per above,
as determined under Sr. No. 4 or 5, in that
order
3. Where Supply of a) The open market value of the goods supplied
goods between the or
principal and his agent
At the option of the supplier (not less than
90% of the price charged for the supply of
goods of kind and quality to his customer

Sr. No. Particulars Value of Supply

and customer not being a related person
where the goods intended for further
supply)
b) If value is not determinable as per above,
as determined under Sr. No. 4 or 5, in that
order
4. Value of Supply based Where value is not determinable as per above,
on cost then value shall be:
Cost of Production or Manufacture; or
110% of
} Cost of acquisition of such goods; or
Cost of provision of such services
The supplier of service has an option to
disregard this rule and apply residual method
5. Residual Method Where value is not determinable as per above,
then value shall be determined using reasonable
means consistent with the principles and
general provisions of valuation provisions.
- Open Market Value of supply means the full value in money, excluding
taxes under GST, where the supplier and the recipient are not related and
price is the sole consideration, to obtain such supply at the same time when
the supply being valued is made.
- Supply of like kind and quality means any other supply made under similar
circumstances that, in respect of the characteristics, quality, quantity,
functional components, materials, and reputation first mentioned, is the
same as, or closely or substantially resembles, that supply.
9.4 Foreign Currency Exchange
- The Draft Valuation Rules provides for valuation provisions in following

nature of transaction:

Sr. No. Particulars Valuation

1 Currency exchanged RBI reference rate for currency available
from, or to, Indian (Buying Rate or Selling Rate - RBI reference
Rupees (INR) Rate) X Total Unit of currency
RBI reference rate for currency not available
1% of the gross amount of Indian Rupees
provided or received by the person exchanging
the money
2. In case where neither The value shall be equal to 1% of the lower of the
of the currencies two amounts the person changing the money
exchanged is Indian would have received by converting any of the
Rupees two currencies into Indian Rupee on that day at
reference rate provided by RBI.
- Such Service provider also has an option to consider the deemed value in
case of foreign currency supply, including money changing as follows:
Sr. No. Particulars Valuation

1 For amount of currency 1% of gross amount of currency
exchanged up to Rs.1 Lakh exchanged or Rs.250 whichever is higher
2. For amount of currency Rs.1,000 + 0.5% of gross amount of
exchanged exceeding Rs. 1 currency exchanged
Lakh and up to 10 Lakhs
3. For amount of currency Rs. 5,000 + 0.1% of gross amount of
exchanged exceeding Rs. 10 currency exchanged subject to maximum
Lakhs of Rs. 60,000/-
The person supplying the service shall exercise such option for a
financial year and such option shall not be withdrawn during the
remaining part of that financial year
9.5 Air Travel Agents
Value of Supply of services in relation to booking of air tickets by an air travel

agent, shall be determined as under:
- Domestic Bookings - 5% of the Basic Fare

- International Bookings 10% of the Basic Fare
Basic Fare means that part of air fare on which commission is normally paid to the
air travel agent by the airline.
9.6 Insurer Carrying on Life Insurance Business
The Value of services in case of services provided by the insurer carrying on life
insurance business shall be determined as under:
- The Gross premium charged from a policy holder, reduced by the amount
allocated for investment, or saving on behalf of the policy holder, if such
amount is intimated to the policy holder at the time of supply of service; or
- In case of single premium annuity policies other than above, 10% of single
premium charged from the policy holder; or
- In all other cases, 25% of the premium charged from the policy holder in the
1st first year and 12.5% of premium charged from policy holder in
subsequent years.
Provided that such option shall not be available in cases where the entire premium
paid by the policy holder is only towards the risk cover in life insurance.
9.7 Person dealing in taxable supply of second hand goods
A person dealing in buying and selling of taxable second hand goods i.e. used goods
as such or after such minor processing which does not change the nature of the
goods and where no ITC has availed on purchase of such goods:
- The value of supply shall be difference between the selling price and
purchase price.
- The value of supply shall be ignored where difference between the selling
price and purchase price is negative.

9.8 Valuations in case of Token, Voucher or Coupon
The value of a token, or a voucher, or a coupon or a stamp (other than postage

stamp) which is redeemable against a supply shall be equal to the money value of
the supply redeemable against such token, voucher, coupon, or stamp.
9.9 Value of supply of services in case of pure agent
The expenditure or cost incurred by the supplier as a pure agent of the recipient of
supply of service shall be excluded from the value of supply if all the following
conditions are satisfied:
Sr. No. Conditions to be satisfied
1. When agent makes payment to the third party for services procured as
the contract for supply made by third party is between third party and
the recipient of supply
2. The recipient of supply uses the services so procured by the supplier
service provider in his capacity as pure agent of the recipient of supply
3. The recipient of supply is liable to make payment to the third party;
4. The recipient of supply authorizes the supplier to make payment on his
behalf;
5. the recipient of supply knows that the services for which payment has
been made by the supplier shall be provided by the third party;
6. The payment made by the supplier on behalf of the recipient of supply
has been separately indicated in the invoice issued by the supplier to
the recipient of service;
7. The supplier recovers from the recipient of supply only such amount as
has been paid by him to the third party; and
8. The services procured by the supplier from the third party as a pure
agent of the recipient of supply are in addition to the supply he provides
on his own account.
Pure Agent means: a person who-

a) Enters into a contractual agreement with the recipient of supply to act as
his pure agent to incur expenditure or costs in the course of supply of
goods or services or both;

b) Neither intends to hold nor holds any title to the goods or services or both
so procured or provided as pure agent of the recipient of supply;
c) Does not use for his own interest such goods or services so procured; and
d) Receives only the actual amount incurred to procure such goods or
services.
9.10 Consideration of Rate of exchange of currency for determination of value
The rate of exchange for determination of value of supply shall be the applicable
reference rate for that currency as determined by the RBI at the time of supply.

Chapter 10 Input Tax Credit
10.1 Availability of Input Tax Credit (ITC)
- Every registered person shall be entitled to take credit of input tax

admissible on any supplies which are used or intended to be used in the
course or furtherance of his business and said amount shall be credited to
the electronic credit ledger of such person.
- The inward supplies shall be classified either as Input, Capital Goods or Input
Service which are defined as under:
Input Capital Goods Input Service

Means any goods other Means goods, the value Means any service used
than capital goods used of which is capitalized in or intended to be used by
or intended to be used by the books of accounts of a supplier in the course or
supplier in course or the person claiming the furtherance of business.
furtherance of business. ITC and which are used or
intended to be used in the
course or furtherance of
business.
10.2 Non admissible Credits
The ITC shall not be available in respect of the following inward supplies:
Motor vehicles and other conveyances except when they are used
(a) For making the following taxable supplies:
(i) Further supply of such vehicles or conveyances; or
(ii) Transportation of passengers; or
(iii) Imparting training on driving, flying, navigating such vehicles or
conveyances
(b) For transportation of goods
Food and beverages, outdoor catering, beauty treatment, health services,

cosmetic and plastic surgery except where such inward supply of a particular
category is used by a registered person for making an outward taxable supply
of the same category or as an element of taxable composite or mixed supply

Membership of a club, health and fitness Centre
Rent-a-cab, life insurance, health insurance except where

a) the Government notifies the services which are obligatory for an
employer to provide to its employees under any law for the time being in
force; or
b) such inward supply of a particular category is used by a registered
person for making an outward taxable supply of the same category or as
an element of taxable composite or mixed supply
Travel benefits extended to employees on vacation such as leave or home travel

concession
(A) Works contract services when supplied for construction of immovable

property, other than plant and machinery, except where it is an input
service for further supply of works contract service
(B) Supply received by a taxable person for construction of an immovable
property, other than plant and machinery, on his own account including
when used in course or furtherance of business
The word construction includes re-construction, renovation, additions or
alterations or repairs, to the extent of capitalization, to the said immovable
property.
Plant and Machinery means apparatus, equipment, machinery fixed to earth
by foundation or structural support that are used for making outward supply
and includes such foundation and structural supports but excludes
- land, building or any other civil structures;
- telecommunication towers; &
- pipelines laid outside the factory premises
Supply on which tax has been paid under composition scheme

Supply received by non-resident taxable person except on goods imported by

him
Supply used for personal consumption
Goods lost, stolen, destroyed, written off or disposed of by way of gift or free
samples
Any tax paid in accordance with

- Determination of tax not paid / short paid / erroneous refunded / ITC
wrongly availed or utilized by reason of fraud / any willful misstatements
/ suppression of facts.
- Detention, seizure & release of goods & conveyances in transit
- Confiscation of goods or conveyances and levy of penalty
10.3 Conditions for availing ITC
- ITC in respect of inward supply shall be eligible only if:
l He is in possession of tax invoice, debit note or such other tax paying

document;
l The goods / services are received; (in respect of goods received in

lots or installments, he is entitled to ITC upon receipt of last lot or
installment.)
l The tax charged in respect of such supply been paid to the credit of
appropriate government either by cash or utilization of ITC; (except in
case of ITC availed on provisional basis)
l He has filed the return

10.4 Utilization of ITC for making payment towards output tax
IGST SGST /
credit IGST CGST
UTGST
CGST SGST /
Credit CGST IGST
UTGST
SGST / UTGST SGST /

IGST CGST
Credit UTGST
To be utilized in the Sequence from left to right
10.5 Tax paying document for claiming ITC
- ITC can be availed on following documents:
l A Tax invoice issued by the supplier, containing all the details as are
required in tax invoice
l A Debit Note issued by the supplier, containing all the details as are
required in debit note
l A Bill of Entry
l An invoice raised by recipient where supplies are received from

unregistered person
l Document issued by Input Service Distributor
10.6 Conditions for making payment to inward supplier
- Where a recipient fails to pay to the supplier within a period of 180 days from
the date of issue of invoice towards value of supply along with tax payable
thereon, other than the supplies on which tax is payable on RCM, an amount

equal to the ITC availed by the recipient shall be added to his output tax
liability, along with interest for the period starting from date of availing ITC
till the date when the amount is added to the output tax liability.
- The credit on such inward supplies shall be eligible on making payment to

inward supplier along with tax payable thereon.
10.7 Depreciation and ITC cannot be availed together
- No ITC shall be allowed of tax component on the cost of capital goods and
plant & machinery of which registered person has claimed depreciation
under the Income-tax Act, 1961.
10.8 Time limit for availing ITC
- No ITC in respect of any invoice / debit note for supply after following period:
l Filing return for the month of September
}
following the end of F.Y. to which such invoice
or invoice relating to such debit note pertains Whichever is earlier
OR
l filing of annual return
10.9 Reversals of ITC
- The reversal of Input, Input Service & Capital Goods is required to be made in
case of:
l Partial use of inputs for non-business
The goods / services used by registered person partly for business and
partly for other purposes the credit amount shall be restricted to input tax
attributable to purposes of business.
l Proportionate Reversal
Goods / services used by registered person partly for effecting taxable

supplies including zero-rated supplies and partly for:

- effecting exempted supplies; or
- Outward supplies where recipient is liable to pay tax;
- transactions in securities, sale of land & sale of building except under

construction sale of flat;
the credit shall be restricted to such amount of ITC as attributable to taxable

supplies including zero-rated supplies.
The reversal of ITC on Inputs & Input Services (I & IS) shall in following
manner for each tax period:
Denoted as Particulars Amount

T Total ITC in a tax period XXX
T1 ITC on I & IS intended to be used exclusively for
purposes other than business XXX
T2 ITC on I & IS intended to be used exclusively for
exempt supplies XXX
T3 ITC on I & IS which are non-admissible XXX
C1 T (T1 + T2 + T3) (ITC credited to electronic credit ledger) XXX
T4 ITC on I & IS used exclusively for taxable supplies
including zero rated XXX
C2 C1 - T4 (Common Credits) XXX
E Aggregate value of exempt supplies XXX
F Total Turnover XXX
D1 (E / F) * C2 (reversal on account common ITC used for XXX
exempt supplies)
D2 5% * C2 (reversal on account common ITC used for XXX
non-business purposes)
C3 C2 (D1 + D2) XXX
a. The amount C3 shall be computed separately for input tax credit of

Central Tax, State Tax, Union territory Tax and Integrated Tax

b. The computation to be made finally for the financial year before the
due date for filing the return for the month of September following
the end of FY
l Short Reversal - If as per the final computation, the reversal

i.e. (D1 + D2) exceeds the aggregate reversal already made, the
difference shall be paid along with interest starting from 1st
April of succeeding F.Y. till the date of payment.
l Excess Reversal - If as per the final computation, the reversal

i.e. (D1 + D2) is lesser than the aggregate reversal already
made, the difference shall be claimed as credit in return not
later than for the month of September following the end of FY.
The reversal of ITC on Capital Goods (CG) shall in following manner:
c. ITC in respect of CG used or intended to be used exclusively for

exempted supplies or non- business purpose shall be indicated in the
return and not to be credit in electronic credit ledger.
d. ITC in respect of CG used exclusively for taxable supplies including

zero rated shall be indicated in the return and be credited in electronic
credit ledger.
e. ITC in respect of CG which are used commonly for taxable supplies,

exempted supplies & non business purpose shall be reversed on
applying tax period turnover ratio of taxable and exempted supplies.
The amount of ITC shall be computed per month for the purpose of
reversal based on taking 5 years as useful life of CG.
- Exempt supply means supply of any goods or services or both which

attracts nil rate of tax or which may be wholly exempt and includes non-
taxable supply.
- The value of exempt supply shall include supplies on which the recipient is

liable to pay tax on reverse charge basis, transactions in securities, sale of

land and sale of building (other than that regarded as supply).
The value of land and building shall be taken as the same as adopted for the
purpose of paying stamp duty and the value of security shall be taken as
one per cent of the sale value of such security.
10.10 Banking Cos. & NBFC
a. A banking Cos. or a financial institution including a NBFC, engaged in

supplying services by way of accepting deposits, extending loans or
advances shall have the option to either comply with the provisions of
proportionate reversal, or avail of, every month, an amount equal to 50% of
the eligible ITC in that month.
b. Restriction of 50% shall not apply to the tax paid on supplies made by one
registered person to another registered person having same PAN.
c. Option once exercised shall not be withdrawn during the remaining part of
the FY.
10.11 Availing ITC on Inputs / Capital Goods held in stock
- The tax paid on Inputs held in stock or contained in semi-finished or finished

goods (Inputs in Stock) or on Capital Goods are eligible as ITC in the
following circumstances:
Scenario Inputs in Stock Capital Goods Conditions
New As on date on Not admissible - A taxable person
registration which he becomes shall not be entitled
obtained liable to register to take ITC in
within 30 days respect of any
from the date supply after expiry
when person of 1 year from date
becomes liable of issue of tax
to register invoice relating to
such supply

Scenario Inputs in Stock Capital Goods Conditions

Voluntary As on date of grant Not admissible - Electronic
Registration of registration Declaration to be
Ceases out of As on date on As on date on filed within 30 days
composition which person liable which person liable from the date of his
scheme to pay tax at to pay tax at becoming eligible
normal rate normal rate. - Certificate from
After reducing 5% practicing CA/CWA
per quarter of a if credit claims
year or part exceeds Rs.2 lakhs
thereof from the
date of invoice till
the date person
ceases out of
composition
scheme
Exempt supply ITC on inputs ITC on capital
becomes relating to exempt goods exclusively
taxable supply supplies used for exempt
Day immediately supplies
preceding the date Day immediately
from which supply preceding the date
becomes taxable from which supply
becomes taxable
After reducing 5%
per quarter of a
year or part
thereof from the
date of invoice till
the date supply
becomes taxable
10.12 Transfer of ITC in case of change in constitution
- In case of change in constitution of registered person on account of sale,

merger, demerger, amalgamation, lease or transfer of business with

specific provision for transfer of liabilities, registered person shall be allowed

to transfer ITC remaining unutilized in its books of accounts to such sold,
merged, demerged, amalgamated, leased or transferred business as per
following:
a. In case of demerger, the ITC shall be apportioned in the ratio of the

value of assets of the new units as specified in the demerger.
b. Certificate from practicing CA/CWA certifying that the transfer of

business been done with the specific provision for transfer of
liabilities.
c. The inputs and capital goods so transferred shall be duly accounted

for by the transferee in his books of account.
10.13 Lapse of ITC in case of opting for Composition Scheme or supply becomes
exempted
- Registered person who has availed ITC switches over as a taxable person
for paying tax under composition scheme or where supplies by him become
absolutely exempt, he shall pay an amount by debit in electronic credit or
cash ledger, equivalent to ITC in respect of Inputs in Stock and on capital
goods, on day immediately preceding the date of such switch over, or the
date of exemption reduced as per following:
a. For ITC on Inputs in Stock, reversal on proportionate basis of

corresponding invoices on which credit had been availed. If invoices
are not available, estimated prevailing market price of inputs to be
applied.
b. For ITC on capital goods lying in stock, the remaining residual life in
months shall be computed on pro-rata basis, taking the residual life
as 5 years.
Illustration: Capital goods have been in use for 4 years, 6 month and
15 days.

The residual remaining life in months = 5 months ignoring a part of

the month
Input tax credit taken on such capital goods = C
Input tax credit attributable to remaining residual life = C multiplied by

5/6
c. After payment, the balance of ITC, if any, shall lapse.
10.14 Reversal of ITC on account of removal of capital goods or plant & machinery
- In case of supply of capital goods or plant and machinery, on which ITC is

taken, the registered person shall pay an amount equal to ITC taken on the
said capital goods or plant and machinery as reduced by such % as specified
or tax on transaction value of such capital goods or plant & machinery,
whichever is higher. However, refractory, bricks, moulds and dies, jigs and
fixtures are supplied as scrap, the registered person may pay tax on the
transaction value of such goods.
10.15 Input Service Distributor
- Input Service Distributor means an office of the supplier which receives

tax invoices issued towards the receipt of input services and issues a
prescribed document for the purposes of distributing the credit of Central
tax, State tax, Integrated tax or Union territory tax paid on the said services
to a supplier having the same PAN as that of the said office.
- Conditions for distribution of ITC by ISD:
l ITC can be distributed to recipients against a document
l ITC distributed shall not exceed the amount of credit available for
distribution
l The credit of tax paid on input services attributable to a recipient of

credit shall be distributed only to that recipient
l ITC attributable to more than 1 recipient shall be distributed amongst

such recipients to whom the input service is attributable on pro-rata
basis of the turnover in a State or turnover in a Union territory of
such recipient, during the relevant period, to the aggregate of the
turnover of all such recipients to whom such input service is
attributable and which are operational in the current year, during the
relevant period
l ITC attributable to all recipients shall be distributed amongst such

recipients to whom the input service is attributable on pro-rata basis
of the turnover in a State or turnover in a Union territory of such
recipient, during the relevant period, to the aggregate of the turnover
of all recipients and which are operational in the current year, during
the relevant period
The relevant period shall be
i. If the recipients of credit have turnover in their States or Union

territories in the financial year preceding the year during which credit
is to be distributed, the said financial year; or
ii. If some or all recipients of the credit do not have any turnover in their
States or Union territories in the financial year preceding the year
during which the credit is to be distributed, the last quarter for
which details of such turnover of all the recipients are available,
previous to the month during which credit is to be distributed
- ISD shall separately distribute amount of ITC as eligible and ineligible.
- ITC on account of central tax and state tax shall be distributed as follows:
a. Recipient located in same state in which ISD is located, ITC shall be

distributed as Central Tax and State Tax respectively.

b. Recipient is located in different state other than that of ISD, ITC shall
be distributed as Integrated Tax
- Any ITC required to be reduced on issuance of credit note shall be

apportioned to each recipient in the same ratio in which ITC was distributed
and the amount so distributed shall be reduced from the amount to be
distributed in the month in which credit note is included in the return and
shall be added to the output tax liability, if the amount of credit available is
negative.
- Where the amount of credit to be reversed is short reversed, then such

short amount shall be added to the output tax liability for a month not later
than the month of September following the end of the FY to which it
belongs and the person shall be liable to pay interest for the period starting
from 1st day of April of the succeeding FY till the date of payment.

Section III OPERATIONAL ASPECTS
Chapter 11 Returns, Payments And Refund
11.1 Periodical Returns under GST Law
- Under GST regime, the Government lays ample amount of thrust on making
technology driven communications between tax department and assesse.
Filing of periodical returns whether under present IDT regime or GST regime
has always been a key communication between department and assessee.
Given that, it will be mandatory under GST regime to file periodical returns
electronically.
- The framework of compliances under GST regime is designed in such a

manner that the seamless credit chain, which is a major highlight, would get
break if an assessee does not comply with requirement of periodical
returns. The Input Tax Credit on inward supplies will be eligible to assessee
only if he files his periodical returns. Further, the GST charged to his
customers on outward supplies made by him will be eligible to his
customers, only if an assessee files his periodical returns.
- Also as per the draft returns format, which is yet to be finalized by GST
Council, it is expected to provide line- wise detailing of outward and inward
supplies. The details will be mapped and reconciled by the government
website and any difference in that will be communicated to both supplier &
recipient.
- Nil Return needs to be filed even if there are no outward or inward supplies.
- Subsequent returns shall not be allowed in case previous period returns had
not been filed.
- The detailed list of forms & returns which are likely to be notified under GST
law is given in Appendix.
11.2 For the purposes of the Act, tax period means the period for which the return is
required to be furnished.

Chapter 11
RSM
11.3 The list of certain relevant returns under GST law as per the draft return rules are outlined herein below:
Due Date of filing Form No Periodicity Who is liable to file? Nature of Return
10th of month GSTR-1 Monthly Every registered person, Details of Outward Supplies
Returns, Payments And Refund

succeeding tax other than The details of outward supplies shall
period - ISD; include :
(Cannot be filed - Non-resident taxable (a) Invoice wise details of all
between 11th to person; i) Inter and intra state supplies
15th of month
- Person paying tax under made to registered persons
succeeding the tax
composition scheme; ii) Inter-state supplies made to

period)
- Person deducting tax as unregistered persons
TDS; amounting to more than Rs.2.5
- Person collecting tax as lakhs.
TCS (b) Consolidated details of
i) Intra-state supplies made to
unregistered person for each
rate of tax and
ii) State wise inter-state supplies
with invoice value less than
Rs.2.5 lakhs made to
Are You GST Ready?
unregistered persons for each

rate of tax
(c) Debit and credit note if any issued
during the month for invoices
issued previously.
Before due date of GSTR-2A Monthly Auto generated Details of Inward Supplies received by
| 68
GSTR 2 the recipient.
69
Chapter 11
The details of inward supplies shall

include-
(a) Invoice wise inter-state and intra-

state supplies from registered and
unregistered persons.
(b) Import of supply.
(c) Credit and debit notes if any.
15th of month GSTR-2 Monthly Every registered person, Details of Inward Supplies.
succeeding tax other than
period - ISD;
- Non-resident taxable
person;
- Person paying tax under

composition scheme;
- Person deducting tax as
TDS;
- Person collecting tax as
TCS
17th of month GSTR-1A Monthly Auto generated Details of outward supplies which are
succeeding tax not reconciled with GSTR-2 of
period customers filed by them
20th of month GSTR-3 Monthly Every registered person, Monthly return to be filed.
succeeding tax other than Return cannot be filed without making
period - ISD; payment of GST liability
RSM
person;
Chapter 11
RSM
- Person paying tax under
composition scheme;

TDS;
- Person collecting tax as
TCS
18th of month GSTR-4 Quarterly Person registered under Quarterly return covering details of
succeeding tax Composition Scheme inward & outward supplies.
period Return cannot be filed without making

payment of GST liability
20th of month GSTR-5 Monthly Non-Resident Taxable Details of Outward & Inward supplies
succeeding tax Person
period / within 7
days from the last
day of validity of
registration,
whichever is earlier
13th of month GSTR-6 Monthly Input Service Distributor Details of ITC availed, utilized &
succeeding tax distributed
Are You GST Ready?
period
10th of month GSTR-7 Monthly Person liable to deduct TDS Details of TDS liable to be deducted &
succeeding tax paid
period
10th of month GSTR-8 Monthly Every person registered as Details of TDS liable to be collected &
succeeding tax e-commerce operator paid
period
| 70
71
Chapter 11
31st December of GSTR-9 Yearly Every registered person, Annual Return

following year other than
- ISD

- Casual Taxable person
person
TDS
31st December of GSTR-9A Yearly Registered person paying tax Annual Return
following year under composition scheme
31st December of GSTR-9B Yearly Every Registered Taxable Furnishing of audited annual accounts
following year person whose aggregate and a reconciliation statement
turnover during financial year

exceeds Rs. 1 Crore
RSM
11.4 Under GST regime, the procedure to pay tax is quite different from payment of tax
under existing law. In GST there is a common portal system for debiting and
crediting of tax liability. Taxes can be paid through credit ledger of the registered
person. However, interest, penalty and fees cannot be paid by debiting the credit
ledger.
S. No. Particulars Description
1. Electronic Tax Liability The electronic tax liability register shall be
Register maintained in FORM GST PMT 01 on the
common portal.
All the amounts payable by the taxable person
shall be debited to this register which includes
tax liability, interest, late fees, penalty or any
other amount payable.
2. Electronic Credit - Every claim of input tax credit shall be
Ledger maintained in electronic credit ledger in
FORM GST PMT 02 on the common portal
by every taxable person.
- Any payment of liability or refund of
unutilized amount shall be routed through
this ledger. Refund claim of such unutilized
amount, if rejected, then the ledger should
be re-credited to the ledger by the officer by
an order made in FORM GST PMT 03
Communication regarding any discrepancy in
Electronic Credit Ledger shall be made in FORM
GST PMT 04 to proper officer.
3. Electronic Cash Ledger - A taxable person shall maintain electronic
cash ledger in FORM GST PMT 05 on the
common portal for crediting the amount
deposited and debiting the payment
therefrom towards tax, interest, penalty, fee
or any other amount.
- A challan in FORM GST PMT 06 shall be
generated and details of the amount to be
deposited shall be entered.
- GST payment can be done through following

S. No. Particulars Description

modes:
lInternet banking
lCredit Card or Debit Card
lNEFT or RTGS
lOver the Counter payment (OTC)
- FORM GST PMT 06 shall be valid for a

period of 15 days.
- Unregistered person can make payment on
the basis of a temporary identification
number generated.
If no CIN is generated or generated but not
communicated to common portal, same can be
communicated to the bank or electronic
gateway by FORM GST PMT - 07.
4. Identification number - A unique identification number shall be
for each transaction generated at the common portal for each
debit / credit to the electronic cash or credit
ledger.
The unique identification number relating to
discharge of any liability shall be indicated in the
corresponding entry in the electronic tax
liability register.
11.5 Tax wrongfully collected and paid to Central Government or State Government.
- In case of a registered person who has paid IGST on supply considered by

him as inter-State supply and subsequently if it is held to be an intra-State
supply, then CGST and SGST/ UTGST shall be payable (along with interest)
and the IGST so paid shall be refunded subject to such condition as may be
prescribed.
- In case of a registered who has paid CGST and SGST / UTGST on supply
considered by him as intra-State supply and subsequently if it is held to be
an inter-state supply, then the same can be adjusted against IGST and no
interest shall be leviable on the same.

11.6 Tax deducted at source and Tax collected at Source
Tax Deducted at source Tax Collected at source

- The following category of persons may - Every E-Commerce Operator
deduct tax at rate of 1% from payment (referred as operator), not
made or credited to supplier of taxable being an agent, shall collect an
goods / services where total value of amount at rate of 1% of the
such supply under a contract exceeds Rs. net value of taxable supplies
2.5 lakh. made through it by other
l Department or establishment of suppliers where consideration
Central or State government; or with respect to such supplies
is to be collected by the
l local authority; or
operator.
l government agencies; or
- The amount so collected shall
l such persons as may be notified be paid to the Government by
- No deduction shall be made if location of the operator within 10 day
supplier and place of supply is different. after the end of month in
- Amount deducted needs to be deposited which deduction is made.
by deductor within 10 days after end of - Operator shall furnish a
month in which deduction is made statement within 10 days
- Deductor shall furnish certificate to the after the end of such month.
deductee mentioning contract value, rate - Operator shall also furnish an
of deduction, amount deducted. annual statement before 31st
- Deductor shall be liable to pay sum of day of December following
Rs.100 per day after expiry of 5 days of the end of such financial year.
crediting the amount so deducted - The Supplier who has supplied
subject to maximum of 5,000/- if the goods or services through
deductor fails to furnish certificate within the operator shall claim credit,
5 days to the deductee. in his electronic cash ledger,
- Deductee shall claim credit, in his of the tax so collected and
electronic cash ledger, of the tax so reflected in the statement
deducted and reflected in the returns filed by the operator.
filed by deductor.
- Interest not exceeding 18% shall be
charged if deductor fails to pay to credit
of appropriate government the amount
deducted as tax

11.7 Refunds
- Any person claiming refund of any tax and interest, if any, paid on such tax
or any other amount paid by him, needs to make an application before the
expiry of 2 years from the relevant date.
- Refund of unutilized ITC
Refund on unutilized ITC shall be allowed to
l Zero rated supply without payment of tax (under bond or letter of

undertaking) except in case where export duty is payable;
l Where credit has been accumulated on account of rate of tax on

inputs being higher than the rate of taxes on outputs.
- Refund in case of zero rated supply
l zero rated supply means any of the following supplies:
a) export of goods or services or both; or
b) supply of goods or services or both to a Special Economic

Zone developer or a Special Economic Zone unit.
l The calculation of refund of ITC in respect of zero rated supply

without payment of tax under bond or letter undertaking as are
follows:
Refund Amount = (Turnover of zero rated supplies * Net ITC)
Adjusted Total Turnover
Net ITC = ITC availed on inputs and input services during the relevant
period;
Turnover of supplies = means the value of zero rated supply during

the period without payment of tax under bond or letter of

undertaking.
Adjusted Total Turnover = means turnover in a State or Union

territory excluding the value of exempt supplies other than zero
rated supplies.
- In case of zero rated supply, refund shall be made on provisional basis i.e.
refund of 90% of the total amount claimed excluding amount of ITC
accepted on provisional basis, subject to following conditions:
l Person claiming the refund has not been prosecuted for evasion of
tax exceeding Rs.2.5 lakhs for any offence for the period of 5 years
immediately preceding the tax period.
l GST compliance rating should not be < 5 on a scale of 10.
l No proceeding of any appeal, review or revision is pending on any of

the issues which form the basis of refund.
l A person making zero rated supply also has an option of payment of

IGST and thereafter claiming refund of IGST paid.
l In case of export of goods, refund application shall be filed only after

the export manifest or export report is provided by the Customs
Authorities.
l Refund of ITC is not allowed in case supplier avails drawback.
- Refund to Casual Taxable Person / Non Resident Taxable person
Casual Taxable Person or Non Resident Indian shall claim refund in the last
return for the amount deposited in advance at the time of registration after
adjustment of tax liability.

11.8 Relevant date for refund
Relevant date for calculating time limit for filing refund claim is as follows:
Situation Relevant Date

Goods are exported by sea or air Date on which the ship/aircraft in which
such goods are loaded, leaves India
Goods are exported by land Date on which such goods pass the frontier
Goods are exported by post Date of dispatch of goods by the Post Office
Goods regarded as deemed export Date on which the return relating to such
deemed export is filed
Services exported and supply of Date of receipt of payment in convertible
services had been completed prior foreign exchange
to the receipt of payment
Services exported and payment Date of issue of invoice
received in advance prior to date of
issue of invoice
Tax refundable as a consequence Date of communication of such judgement,
of judgment, decree, order or decree, order or direction
direction of the Appellate
Authority, Appellate Tribunal or any
court
Unutilized input tax credit End of FY in which such claim for refund
arises
Tax paid on provisional basis Date of adjustment of tax after the final
assessment
For person, other than supplier The date of receipt of goods/services by
such person
In other cases Date of payment of tax
11.9 Other key provisions relating to refund
- No refund shall be granted for the amount less than Rs. 1,000/-
- If the amount of refund claim is less than Rs. 2 Lakhs, there is no need of
furnishing documentary evidence instead a self-declaration based on the

documentary and other evidence by the applicant certifying that he has not
passed on the incidence of such tax and interest is sufficient to claim refund.
- Refund order shall be sanctioned within 60 days from the date of receipt of
complete application. In case amount is not refunded within 60 days then
interest shall be payable after the expiry of 60 days till the date of refund.
- If any person has defaulted in furnishing return or payment of tax, interest

or penalty, the officer may withhold the payment of refund or may deduct
such tax, interest or penalty which remains unpaid from the refund claim.

Chapter 12 Records And Audit Related Provisions
12.1 General Provisions
- Every registered person shall keep and maintain at his principal place of
business the following true and correct account:
l Production/manufacture of goods
l Inward and outward supplies
l Stock of goods
l ITC availed
l Details of output tax and
l Such other particulars as may be prescribed
- In case of additional place of business, accounts relating to such additional

places shall be kept at the respective places.
- The books of accounts or other records shall be retained for a period of 72

months from the last day of filing of annual return.
- The Commissioner may notify a class of taxable persons to maintain

additional accounts or documents.
- Every transporter and owner/operator (registered or not) of

warehouse/godown or any other place used for storage of goods shall
maintain records of consigner, consignee and other details of goods.
- Registered person who fails to record supplies other than goods

lost/stolen/destroyed/written of /disposed of by way of gift/free sample,
then in such cases the officers shall calculate tax payable on such supplies.
- Records pertaining to appeals, revision, proceedings or investigation shall be

kept for a period of 1 year after final disposal.

Chapter 12 Records And Audit Related Provisions
12.2 Audit by Chartered Accountant / Cost Accountant
Every registered person whose turnover during a FY exceeds the prescribed limit
shall get his accounts audited by a CA or a Cost Accountant on or before
31 December of following the end of the FY and submit a copy of audited financial
accounts, the reconciliation statement and other documents.
12.3 Audit by Tax Authorities
- The Commissioner or any officer authorized, by way of a general/specific

order may undertake audit of any registered person. The registered person
shall be informed not less than 15 working days prior to conduct of audit.
- The audit shall be completed within 3 months from the date of

commencement of audit and shall be extended by further 6 months.
- The audit findings shall be communicated to the registered person within 30

days.
- Assistant commissioner with prior approval of Commissioner, may / can

direct any registered person by notice in writing to gets his accounts audited
by a CA/CWA.

Chapter 13 E-way Bill
13.1 Applicability
- Every registered person who causes movement of goods of consignment

value more than Rs. 50,000:
l In relation to a supply; or
l For reasons other than supply; or
l Due to inward supply from an unregistered person
shall provide such information prior to commencement of movement of goods and

generate electronic way bill (E-way bill).
- The registered person or the transporter may at his option generate and
carry the e-way bill even if the value of the consignment is less than
Rs. 50,000.
13.2 Who will generate E-way bill?
In case of registered person In case of unregistered person

- Wherein goods are transported by a - Where movement of goods is
registered person as a consignor or caused by an unregistered person
the recipient of supply as the either in his own conveyance or a
consignee, in his own conveyance or hired one, or through a transporter,
a hired one, the registered person then he or the transporter shall
shall furnish information relating to generate the e-way bill in FORM
the movement of goods in Part A of GST INS-01 on the common portal.
FORM GST INS - 01 electronically.
- Wherein goods are supplied by an
- The registered person or the unregistered supplier to a recipient
recipient may generate the e-way who is registered, the movement
bill in FORM GST INS-01 shall be said to be caused by such
electronically on common portal recipient, if the recipient is known at
after furnishing information relating the time of commencement.
to transporter in Part B of FORM
GST-01.

In case of registered person In case of unregistered person

- In case where e-way bill is not
generated through above process by
registered person and goods are
handed over to a transporter, the
registered person shall furnish the
information relating to the
transporter in Part B of FORM GST
INS - 01 on the common portal and
the e - way bill shall be generated by
the transporter on the said portal on
the basis of the information
furnished by the registered person
in Part A of FORM GST INS 01.
13.3 In case of transporter - multiple conveyance or multiple consignments:
i) Multiple conveyance for single consignment
Where in case of any transporter transferring goods from one conveyance

to another in the course of transit shall generate a new e-way bill on the
common portal in FORM GST INS-01 specifying therein the mode of
transport. However a new e-way bill should be issued before such transfer
and further movement of goods.
ii) Multiple consignments in one conveyance
- Where multiple consignment are intended to be transported in one

conveyance, the transporter shall indicate the serial number of e-
way bills generated in respect of each such consignment
electronically in FORM GST INS-02 and same shall be generated by
him prior to the movement of goods.
- Where the consignor has not generated FORM GST INS 01 and the
value of goods carried in the conveyance is more than Rs. 50,000, the
transporter shall generate FORM GST INS 01 on the basis of invoice

or bill of supply or delivery challan, as the case may be, and also
generate a consolidated e-way bill in FORM GST INS 02 on the
common portal prior to the movement of goods.
13.4 E-way bill shall be valid from the time at which it has been generated. An e-way
bill or consolidated e-way bill shall be valid as per table below:
Sr. No. Distance Validity Period

1. Less than 100 km 1 Day
2. 100 km or more but less than 300 km 3 Days
5. 1000 km or more 15 Days
It has been provided that the validity of the e-way bill may be extended by the
Commissioner for certain categories of goods as may be specified therein.
13.5 Documents and devices to be carried by a person in charge of a conveyance
- Person in charge of a conveyance shall carry:
a) Invoice or bill of supply or delivery challan; and
b) Copy of e-way bill or e-way bill number, either physically or through a

Radio Frequency Identification Device (RFID) embedded on to
conveyance.
- In lieu of invoice, person in charge of a conveyance can furnish an Invoice

reference number to the proper officer conducting the verification of the
goods. Invoice reference number can be obtained by registered person from
the common portal by uploading a tax invoice issued by him which shall be
valid for 30 days from the date of uploading.
- Every class of transporters who are notified by the commissioner to obtain

a unique RFID, shall get such RFID embedded to the conveyance and map
the e-way bill to the RFID prior to the movement of goods.

- Commissioner may, where the circumstances so warrant, require the

person in-charge of conveyance to carry the following instead of e-way
bill:
a) Tax invoice or bill of supply or bill of entry , or
b) A delivery challan, where the goods are transported other than by

way of supply.
13.6 Verification of documents and conveyances
- The Commissioner or an officer empowered by him may authorize the

proper officer to intercept any conveyance to verify the e-way bill or the e-
way bill number in physical form for all intra and inter-state movement of
goods.
- Verification of movement of goods and vehicles shall be done through RFID

readers where the e-way bill has been mapped with RFID.
- Physical verification of conveyances can also be carried out by proper

officer.
13.7 Other Key aspects
- A unique e-way bill number (EBN) shall be made available to the supplier,
the recipient and the transporter on the common portal
- The information furnished in Part A of FORM GST INS-01 shall be made

available to the registered supplier on the GST portal and same shall be
utilized for furnishing details in FORM GSTR-1 (Outward supply return).
- An e-way bill can be cancelled within 24 hours of its generation, in case

where goods are either not being transported or are not being transported
as per the details furnished in the e-way bill. However once e-way bill has
been verified in transit, it cannot be cancelled.

- E-way bill generated shall be made available to the recipient and he shall
communicate his acceptance or rejection of the consignment covered by
the e-way bill. The recipient has option to reject e-way bill within 72 hours
of the details being made available on him on the common portal, otherwise
it shall be deemed that he has accepted. The facility of generation and
cancellation of e-way bill may also be made available through SMS.

Chapter 14 Job Work
14.1 Job Work means undertaking any treatment or process by a person on goods
belonging to another registered person.
14.2 The Inputs / Capital Goods can be sent to the place of the job worker with
following conditions:
Registered person (principal) may

send goods without payment
of GST to a job worker
To bring back such inputs or To directly supply such inputs or

capital goods, within capital goods within 1 or 3 years
1 or 3 years respectively respectively from place of
at his place of business job worker.
Permitted only when principal declares

the place of business of the job worker as
The period of 1 or 3 years
his additional place of business. except in
does not apply to moulds
case where:
and dies, jigs and fixtures or
1) The job worker is registered; or
tools sent out for job work
2) where the principal is engaged in the
supply of such goods as may be notified.
- Even if goods are sent directly to job worker premise, principal can take ITC
on goods. Time limit in case of goods sent directly to job worker premise will
be counted from the date of receipt of goods by job worker.
- Intermediate goods arising from any treatment or process carried out on

inputs shall also be treated as to be inputs. The responsibility for proper
accounts for inputs / capital goods shall lie with the principal.
- Waste and scrap generated during job work can be supplied from the place
of job worker after making payment of GST by job worker if he is so

Chapter 14 Job Work
registered, else by the principal.
- The movement of goods between principal and job worker has to be under
the cover of the challans which also needs to be incorporated in the monthly
GST returns.
- If the inputs / capital goods are not brought back or supplied from the place
of job worker within the stipulated time limit, it will be deemed that the
inputs / capital goods sent to job worker were supplied by principal to job
worker on the day when they were sent out. The challan itself will be
deemed to be a tax invoice.
14.3 The transitional provisions in relation to job worker related transactions are as
follows:
- In case of removal of goods for job work before appointed day and which are
not returned or after the appointed day:
Goods sent to job worker, received back within

6 months from appointed day or such further
extended period of not exceeding 2 months
Yes No
Not Taxable Taxable
- Goods include the following:
a. Inputs removed as such or removed after being partially processed to

a job worker for further processing, testing, repair, reconditioning or
any other purpose
b. Semi-finished goods had been removed for carrying out certain

manufacturing processes

Chapter 14 Job Work
c. Excisable goods removed without payment of duty for carrying out

tests or any other process not amounting to manufacture
- Disclosure to be made by the manufacturer and the job worker regarding

details of inputs or goods held in stock by the job worker on behalf of the
manufacturer on the appointed day in the prescribed manner and form
within 60 days of the appointed day.

Chapter 15 Electronic Commerce
15.1 Supplies through e-commerce companies are undertaken on a large scale in India
and the same is continuously growing at a fast pace. In e-commerce, generally,
suppliers supply goods / services based on order placed by the customer on
portal. The said supply of goods / services is done by third party. The payment of
such goods / services is made to the e-commerce operator, who then passes the
consideration to the supplier.
The Act defines both electronic commerce and electronic commerce operator. The
definitions are given in the table below:
Electronic Commerce Electronic Commerce Operator
Means the supply of goods or services Means any person who owns, operates
or both, including digital products over or manages digital or electronic facility
digital or electronic network or platform for electronic commerce
15.2 Tax Collected at Source (TCS) by e-commerce operator
E-commerce operator shall, at time of credit of any amount to supplier or at time

of payment whichever is earlier, collect an amount, out of the consideration paid or
payable to actual supplier of goods or service in respect to supply made by him.
TCS by e-commerce
operator
Rate Monthly return Annual Statement Rectification

At rate not Furnish monthly details Furnish annual E- In case of any ommission/incorrect
exceeding 1%, of net outward supplies statement indicating particulars other than as a result of
of the net & tax thereof in e form. details of net outward scrutiny, audit, inspection or
value of supplies & tax thereof enforcement activity
taxable
supplies (Pay To be filed within 10 To be filed before 31st
Rectification Due date would
to the Govt. days after the end of december following the
statement be earliest of (a)
within 10 days such month end of such financial year
to be actual date of
after the end furnished filing annual
of the month in along with return; (b) due
which payment of date of return for
collection is interest the month of
made) Sept. following
FY

Other relevant provisions in relation to TCS
- Net value of taxable supplies shall mean aggregate value of taxable

supplies of goods or services or both, other than notified services, made
during any month by all registered persons through the operator reduced
by the aggregate value of taxable supplies returned to the suppliers
during the said month.
- Supplier who has done supply through e-commerce operator, can claim
credit in his electronic credit ledger
- Details furnished by operator will be matched with outward supply detail

furnished by supplier and discrepancy, if any will be communicated to
both persons.
- If amount of discrepancy is not rectified, then the same shall be added to

the outward supply of the supplier in succeeding month (If outward
supply by operator is more than outward supply by supplier)
- Supplier needs to pay tax along with interest on difference from date of
addition in liability to date of payment.
- A proper authority may serve a notice, requiring details from operator of:
l Supplies made during the period
l Stock with supplier, managed by operator at place declared as

additional place of business
- Operator is required to furnish details within 15 working days of date of

serve of notice. In case of failure to furnish details, he shall be liable to
penalty, which may extend to Rs.25,000

15.3 Certain specific conditions in relation to e-commerce operators
Particulars Provision
Compulsory - For every E-Commerce operator (no threshold exemption)
Registration - Person engaged in supply, except notified services, through
requirement such electronic commerce operator who is required to collect
tax at source (such person shall also be ineligible for
composition levy scheme)
Tax on E- Commerce operator would be liable to pay tax on services as
notified notified by government, if such services are supplied through him.
Services All the other provisions of the Act would apply to him as if he is
supplier of such goods/ services.
- If the operator is not having physical presence in India, then
representative shall be liable to pay tax.
- In case of no representative, the operator shall appoint a
person in taxable territory for the purpose of paying tax.

Chapter 16 Transitional Provisions
16.1 Background
One of the biggest challenges in implementing GST Act would be the technicalities
that will affect the business during the phase of shifting from existing law (to be
defined in respective GST Act) to GST regime. To mitigate such issues, transitional
provisions have been incorporated in the GST Act for effective transition to CGST,
SGST, UTGST and IGST.
16.2 Migration of existing taxpayers to GST
- Every registered person under existing laws other than a person deducting
tax at source (under VAT regime) or an Input Service Distributor shall be
issued a provisional registration certificate. On receipt of such provisional
registration certificate, person is required to fill details in specified form to
obtain certificate of registration.
- The information required to be furnished for obtaining certificate of

registration after receipt of provisional registration certificate needs to be
submitted within 3 months from the appointed day.
- Person registered under existing laws, who is not liable to be registered

under GST law, requires to first obtain the certificate of registration,
thereafter submit an application for cancellation of registration in specified
form within 30 days from the appointed day.
16.3 Balance of CENVAT Credit as on appointed day
- The balance of CENVAT Credit as on appointed day can be availed as under:

S. No. Particulars Applicable to Remarks
1. Balance of Registered person - Balance of admissible (unutilized)
Credit on except for person CENVAT Credit, Credit of VAT and
the opting to pay tax Entry Tax carried forward in
appointed under Composition return furnished under existing
day Scheme. law, is allowed to be carried
forward by incorporating it in
electronic credit ledger.


- VAT and Entry Tax credit shall be
availed within 90 days after the
appointed day.
- In case any of the following
condition is fulfilled, the CENVAT
credit shall not be allowed to
carry forward:
l Said amount of credit is not
admissible as ITC under GST.
l If all returns under existing law
are not furnished for the period
of 6 months immediately
preceding the appointed day.
l If the amount of credit relates
to goods which are exempt
under existing law.
- Credit attributable to the
following which is not
substantiated as per CST Rules
shall not be credited to the
electronic credit ledger as per
CST provisions:
l Interstate sale / purchase
including the liability to tax
l Penultimate sale for export
l Interstate transfer of goods
(excluding sale related
transfer)
l Exemption from payment of
tax on receipt of a declaration
in prescribed form and manner
by the registered buyer
- The amount equivalent to such
credit shall be refunded when the
same is substantiated as per the
CST Rules.


2. Un-availed - Registered person - Entitled to avail credit of un-
CENVAT other than person availed admissible CENVAT / ITC
credit/ ITC opting to pay tax on Capital Goods subject to the
on capital under Composition condition that the said credit was
goods Scheme eligible as CENVAT / ITC under
under existing provisions and are
existing eligible as ITC under GST
law - Further, the amount of credit
already availed and yet to be
availed are required to be
disclosed.
3. Credit in - A registered person - Entitled to take eligible duties
respect of under GST Law, (Refer Note 1)/ credit of VAT/
inputs held who was not liable Entry Tax in respect of inputs
in stock on to seek registration l held in stock;
appointed under existing law;
l contained in semi-finished; or
day - manufacturer of l contained in finished goods
exempted goods; held in stock on the appointed
- provider of day.
exempted services; - The following conditions are
- seller of exempted required to be fulfilled:
goods / tax free l Such inputs/goods shall be
goods / goods used for making taxable
suffered tax at first supplies
point of their sale;
l Eligible for ITC under GST
- who was providing
l Possession of invoice or any
works contract
such document evidencing
service by availing
payment of duty/tax
the benefit of
abatement, l Invoice issued not earlier than
12 months preceding appointed
- 1st Stage dealer;
day.
- 2nd Stage dealer;
l Disclosure of stock as on
- A registered appointed day
importer;
l Not eligible for any abatement
- A depot of a under CGST provisions
manufacturer;


- A person entitled to
ITC at time of
manufacture or sale
of goods
4. Credit in - Assesses specified A registered person (other than a
respect of in serial no 3 above manufacturer or a supplier of
inputs held who are not in service who is not in possession of
in stock on possession of invoice or any document
appointed invoice evidencing payment of Excise
day Duty/ Tax) would be eligible for
duties (Refer Note 1) subject to
following conditions:
- Pass on the benefit of such credit
by way of reduced prices to the
recipient.
- Credit shall be allowed at 40% of
tax applicable on supply of such
goods after appointed day.
- Credit shall be allowed after
payment of tax on such supply
- This scheme shall be available for
6 tax periods.
- Such goods were not wholly
exempt or Nil rated under excise
laws
- Document of procurement for
such goods is available with
registered person
- Details of stock to be furnished in
prescribed form at the end of
each of 6 tax periods indicating
supply of such goods
- Stock of such goods should be
stored and easily identifiable.


5. Credit in A Registered person - The amount of CENVAT credit
respect of under GST provisions: carried forward in the return
inputs held - who provides non furnished under the existing law
in stock on exempted as well as shall be allowed to be
appointed exempted services incorporated in electronic credit
day under existing law; or ledger subject to fulfillment of
conditions given in serial no. 1.
- who was engaged in
manufacture of - The amount of CENVAT credit of
exempted as well as eligible duties (Refer Note 1)
non-exempted relating to exempted goods or
goods under services shall be allowed subject
existing law; or to fulfillment of conditions given
in serial no. 3.
- who is engaged in
sale of taxable as
well as exempted or
tax free goods
under existing law.
6. Credit in Every Registered Entitled to avail eligible duties or
respect of person taxes (Refer Note 1 & 2)/
inputs or VAT/Entry Tax in respect of inputs
input or input services received on or
services / after the appointed day subject to
VAT/ Entry the condition that:
Tax - The invoice or any other duty /
received tax paying document of the
after same is recorded in the books of
appointed accounts of such person within
day on 30 days from appointed day
which tax - Time limit can be further
paid been extended for 30 days if sufficient
under cause is provided to the
existing Commissioner
law - A statement comprising
following details to be submitted:
l Name of supplier, Sr. No. and
date of issue of invoice or any
other document


l Description, quantity and value
of such goods/services
l Amount of eligible taxes and
duties charged by the supplier
l Date of entry in books of
accounts of receipt of such
goods/services
7. Credit on Registered person - Registered person shall be
inputs/VAT either paying tax at a entitled to avail eligible duties or
held in fixed rate or paying a taxes (Refer Note 1) in respect of:
stock fixed amount of tax l inputs held in stock and
under existing law l inputs contained in semi-
finished goods
l inputs contained in finished
goods held in stock on the
appointed day.
- The following conditions are
required to be fulfilled:
l Such inputs/goods shall be
used for making taxable
supplies.
l Eligible for ITC under GST
l Possession of invoice or any
such document evidencing
payment of duty/tax.
l Invoice issued not earlier than
12 months preceding the
appointed day.
l Not paying tax under
Composition scheme under
GST
l Disclosure of stock as on
appointed day
8. Credit to be Input Service Shall be eligible for distribution as
distributed Distributor under credit under GST even if the


by ISD on existing law invoices relating to such services
account of are received on or after the
services appointed day.
received
prior to
appoint-
ment date
9. Carry Every registered Eligible to take ITC of CENVAT
forward of person who is having carried forward immediately
CENVAT centralized preceding appointed day, subject
credit registration under the to following conditions:
existing law - Has filed his return for the period
ending with day immediately
preceding the appointed day
within 3 months from the
appointed day provided the
return is either original or revised
return where the credit has been
reduced from that claimed
earlier.
- Eligible as ITC under GST
- Has disclosed the stock as on
appointed date
- Such credit can be transferred to
any of the registered person with
same PAN for which centralized
registration was obtained under
existing law.
10. Credit on Every registered Credit can be reclaimed provided
Input person the payment of consideration
Services towards value of Input Service &
reversed tax thereon has been made within
under 3 months from the appointed day
existing and disclosure of stock has been
law on made as on appointed date.
account of


non-
payment
of
considera-
tion
- Disclosure is to be made separately in an application which is to be filed
electronically on the common portal which shall be duly signed and in such
prescribed form within 60 days from the appointed day, regarding the
amount of tax or duty, credit of which is eligible under above mentioned
points.
- In case of inputs received from Export Oriented Units and Electronic

Hardware Technology Parks, credit shall be allowed as per the provisions of
CENVAT Credit Rules under the existing law.
16.4 Other Key Transitional provisions

S. No. Particulars Remarks
1. Removal /Sale of - Unregistered person returning the goods
goods before
Time of Time of return of Refund
appointed day on
removal goods
which duty or tax has
been paid under 6 months Within 6 months after Eligible
existing law and before appointed day
returned after appointed After 6 months from Ineligible
appointed day date the appointed day
- In case the said goods are returned by a
registered person, such return of goods shall
be deemed as supply of goods.
2. Price revision of goods - Supplementary invoice, debit note, credit
or services in note, etc. to be issued by such a registered
pursuance of an supplier within 30 days of such revision of
ongoing contract price.
- Such supplementary invoice, debit note,
credit note, etc. shall be deemed to have been
issued in respect of outward supply made


under GST.
- In case of downward revision in price, GST tax
liability shall be reduced only if the recipient
has reduced the ITC accordingly.
3. Taxability is case of - Shall be liable to tax under GST.
goods / services /
both supplied on or
after the appointed
day in pursuance of a
contract entered prior
to appointed day.
4. Taxability in case of - Shall not be liable to tax under GST.
supply of goods /
services where VAT /
Service Tax was
leviable under existing
law.
5. Taxability in case tax - Shall be liable to tax under GST.
was paid on supply of - Shall be eligible to take ITC of the VAT /
both goods and Service Tax paid under existing laws to the
services under existing extent of supplies made after the appointed
laws day.
6. Taxability of goods - Goods (taxable under GST) sent on approval
sent on approval basis basis and are:
returned on or after
Time period of return Taxability
the appointed day
Rejected/ not Not Taxable
approved and returned
within 6 months from
the appointed day
Approved after 6 Tax shall be payable
months from the by the supplier
appointed day
Rejected/ not Tax shall be payable
approved and returned by the supplier and
after 6 months from the recipient
the appointed day


- Period of six months can be extended for a
further period of 2 months.
- Details of goods sent on approval basis shall
be furnished in a prescribed form within 60
days of the appointed day.
7. - Refund claim filed - Shall be disposed of as per the provisions of
before, on or after existing law.
the appointed day for - Refund shall be paid in cash.
refund of any - Rejected claim shall lapse.
amount of CENVAT
- No refund of credit which is carried forwarded
credit, ITC, duty, tax
as on appointed day.
or interest paid under
existing law.
- Refund filed after
appointed day in case
of export of goods or
services
8. Refund claim filed after - Shall be disposed of as per the provision of
the appointed day in existing law
respect of services not - Refund shall be paid in cash
provided
9. - Pending Litigation - Pending litigation shall be disposed of as per
(Appeal, Reference, the provisions of existing law.
Review, Revision) - Any amount found admissible, shall be
- Treatment of the refunded in cash under existing law.
amount recoverable - Any refund claim which is rejected shall not be
or refundable in admissible as ITC under GST regime.
pursuance of - In case any amount becomes recoverable,
assessment or shall be recovered as arrear of tax under GST
adjudication regime.
proceedings
- Such recovered amount shall not be
- Revision of returns admissible as ITC under GST.
- No refund shall be allowed in case of CENVAT
Credit carried forward to GST Regime.


10. Applicability of No deduction under GST regime where
deduction of tax at payment to the supplier is made on after the
source under earlier appointed day.
law and invoice is
issued prior the
appointed day
Note 1 (Applicable only for CGST)

The following are eligible duties:
- Additional Excise Duties of Goods of Special Importance Act 1957
- Countervailing Duty
- Special Additional Duty
- Additional Excise duties of Textile and Textile Articles Act 1978
- Basic Excise Duty
- Additional Excise Duty and
- National Calamity Contingent Duty
In respect of inputs held in stock and inputs contained in semi-finished or finished
goods held in stock on the appointed day
Note 2: (Applicable only for CGST)

Eligible tax refers to the service tax leviable under section 66B of the Finance Act,
1994 in respect of inputs and input services received on or after the appointed day.

Chapter 17 Anti-Profiteering Measure
17.1 Anti-Profiteering Measure under GST
- The GST regime proposes to bring in a price control mechanism to ensure

that ITC availed by any registered person or the reduction in price on
account of any reduction in the tax rate under GST, have actually resulted in
a commensurate reduction in the price of the goods/services.
- Countries like Malaysia, New Zealand and Canada, have witnessed a

significant increase in inflation for a very short period post implementation
of GST. GST being a multi-stage, consumption-based value added tax
which proposes to abolish the cascading effect in the present tax structure.
Such change provides room to improve profit margin at every stage of
supply chain. Therefore the said clause is proposed to ensure that the
benefits of an efficient tax system are passed on to the consumers.
- Government, on recommendations of the council, may propose to

constitute an authority or entrust an existing authority to exercise powers
and functions and impose penalty where it finds that the price has not been
reduced on account of additional ITC or reduced tax rate under GST regime.
- If Anti-profiteering measure is not prescribed then GST implementation

may result in increase in prices of the goods and services and the benefits
of GST will be absorbed by the dealers only .

Section IV LEVERAGING THE GST LAW
Chapter 18 IT And ERP Readiness
18.1 Introduction
So far, we have seen the impact that GST has on various aspects of business such
as procurement, vendor and customer relationship management and the supply
chain. In todays age, information technology has become vital for businesses. GST
not only entails changes in the tax and regulatory infrastructure but also requires
changes to be made in IT and ERP infrastructure of the enterprise. It is thus
imperative for businesses to assess their IT readiness and keep track of changes
required in the ERP systems.
18.2 Is your IT team ready to make your system GST ready?
- Is your IT team aware of the new version of your ERP that may be required
to make your system GST ready?
- Has your IT team identified all types of configuration changes to

accommodate the new taxation requirement?
- Has your IT team identified and understood how the appropriate forms and
reports related to GST needs to be developed in the system?
- Has your IT team identified master data amendments that need to be

updated as per the new taxation requirement?
- Is there a technical specification document prepared for all forms and

reports related to GST which needs to be developed in the system?
- Is the IT requirement identified based on the mapping of all applicable

business scenarios as per the new taxation regime?
- Is there a techno commercial team who can liaison between your business
and IT team during implementation?
- Is there a time frame for transitioning to new GST regime determined by

your IT team?
If the answer to any of the questions above is No, it is strongly suggested that
businesses should take up changes to IT and ERP very seriously and start follow

up with their ERP vendors. In the next segment, we capture some of the key
things that need to be considered for businesses to prepare the IT and ERP
systems for the onslaught of GST.
18.3 Key considerations for system preparedness
Under GST laws, there is a requirement of transaction level reporting.

Implementation of GST wherever ERPs are implemented is like re-implementation
of ERP or upgradation from a lower version to higher version. To implement these
changes in the ERP, the following milestones shall be considered, to name a few:
- Tax Registration numbers: GST registration numbers shall replace the

existing registration numbers. The first and most important change in the
system shall be updation of these GST registration numbers. There shall be
multiple GST registration numbers for a single entity operating from
different states which shall be PAN based. The ERP system should be
modified to operate as per the new GST registration systems.
- Vendor and Customer database: With the advent of GST, details of vendors,
customers and other business partners shall be required to be updated.
Further a single vendor/ customer may operate with multiple GST
registration numbers depending on its location. Accordingly, Vendor /
customer details like name, address, GST registration number, category of
products etc. shall be required to be captured in a master data file.
- Products / Services: Classification of Goods / Services in HSN / SAC codes

respectively shall be as per the various GST schedules. The said schedules
shall form the basis for classification of Goods / Services supplied by the
entity at the state level, along with the GST tax rates. Accordingly, new tax
codes shall be required to be created in the new ERP which shall be
compliant with GST. Further, capturing of appropriate taxes e.g. CGST, SGST,
IGST, UTGST shall be imperative. This may require creation of rules to be built
in the ERP depending upon the nature of the transaction.
- Applicability / Computation of Tax: GST is a destination based tax.

Applicability of tax shall depend on place of supply. ERP shall be required to

support the said rule. Further, ERP should also compute GST on the supplies
such as CGST, SGST, IGST or UTGST. The computation shall depend on
classification and nature of supply. ERP should be capable to correctly
calculate the GST on supplies.
- Input Tax Credit: GST requires capturing credits at state level. Accordingly,
state wise credit pools shall be created. Further such credits shall be
classified under CGST, SGST, IGST and UTGST respectively. The said entries
shall be transaction level entries. Further, the input tax credit can be taken
only on the payment of taxes by the supplier and receipt of goods or
services and possession of the tax invoice. The input tax credit has to be
processed based on the data given in the GSTIN. A new process/session
/form has to be provided by the ERP vendor to avail the input tax credit.
There should also be a provision in the system to reverse the input tax credit
availed on inward supplies of services if the payment to the supplier is not
made within the time limit prescribed under GST Law.
- GST Accounts: New accounts shall be required to be created to capture the

inwards, outwards, recoveries, liabilities, credits etc. ERP is further required
to maintain an electronic credit ledger, electronic cash ledger, electronic
cash liability ledger, as per GST guidelines. The said accounts shall work in
tandem with the new tax codes generated above and GST regulations for
correct and efficient recording of transactions. Further, multiple accounts
shall be required to be maintained in ERP for correct disclosure. These
accounts shall be responsible for effective record keeping and making
correct disclosures. These accounts should further be able to auto populate
the report which are essential for filing returns and other disclosures with
the department.
- Tax invoice and other documents: GST changes shall be incorporated from
Purchase Order (PO) level itself. PO should be able to identify the GST based
on the vendor details, place of supply etc. Such recording shall be at a
transactional level. Further, GST requires generation of tax invoice based on
time of supply. Further, such invoice shall contain all the particulars as

mandated by GST provisions, for it to be treated as a valid tax invoice.

Further, GST does not have a provision for cancellation of invoice. In addition
to tax invoices, a company may be required to issue invoice for exports, bill
of supply, receipt voucher, refund voucher, supplementary tax invoice, debit
notes, credit notes etc. These documents shall adhere with the GST
provisions and ERP systems should be able to generate such multiple
documents correctly. Further, ERP should also be capable of providing
reference numbers of advances against the invoices.
- Document numbering: The documents required to be issued under GST

shall be sequentially numbered. There shall be a separate numbering for
each type of documents. Document numbering shall also correspond with
the transaction reference number generated by ERP for efficient correlation.
- Filing of returns: Further, the returns under GST have to be filed through a
GST Suvidha Provider (GSP) and there will be some nominal charges also.
Before rollout of GST, engage with GSP and ensure that all the data required
for the return filing is available in the system. To file the returns, ensure that
two primary reports, one for inward supplies and another for outward
supplies are generated in the system. The file format of the reports can be in
.xls or any other format which is user-friendly. The data file generated in
the respective format has to be mapped one time with the format given by
the GSP. The GSP then processes the data and submits it to the GST
servers for validation of the returns. This mapping is a one-time activity,
but the filing of return is on monthly basis, so ensure that all periods are
closed in the ERP as per process and then only data is generated.
- Recording and business processes: Updating existing accounting standard

operating procedures shall be required for recording of transactions
resulting in effective and easy reporting. The said recording shall be required
to be developed at state level. Further, the business process also has to be
re-engineered to adapt to the changes to the GST regulations. The core
team has to evaluate all the existing business process and then see the
impact of each business process under GST and make an assessment.

if there are any changes to the business process, the same has to discussed
with the senior management and take their concurrence for the changes.
Once this activity is completed, the same had to be updated in the standard
operating procedures and explained to the users. The changes required are
to be evaluated in the ERP and seen if the same is supported or not, if not
then the same has to be discussed with the ERP vendors to provide the
same.
- End user training: Even though GST requires a lot of automation in ERP, the
accuracy of data still depends on correct data entry by the user. Further,
generation of correct reports are also necessary for a successful GST ERP
interface. Accordingly, exhaustive training shall be imparted to the users to
make operation of ERP under GST, a success, since they are the process
owners and would run the system on a day to day basis. Additionally,
training shall also be imparted to vendors and customers who are in the
medium and small segment as they do not have the required infrastructure
and resources. The reason is that the input tax credit chain will be
established only once the returns filed by buyer and seller are matched.
- Transitional data: Successful implementation of ERP also requires smooth

transition support to GST. Carry forward of existing credits, recording of
open transactions under GST, recording of stock in hand on appointed date
etc. are certain areas of concentration, since ERP should be capable of
recording such open transaction automatically. Thus, a migration strategy
shall be required to be devised by the stake holders.
- Post implementation support: Once the users are trained and GST is rolled
out, there will be some unforeseen issues arising due to last minute changes
in the rules or understanding or for any other reason, in such cases there
should a core team in place to evaluate the same and suggest the next
course of action, this ensures smooth running of the business.
The above aspects are described on a broader perspective for generic business
process and the same may change from organization to organization based on the
nature of the industry.

Chapter 19 GST Optimization Opportunities
19.1 Introduction
One of the biggest areas of impact of GST is on the area of operations and supply
chain management. This is an underappreciated aspect of GST and represents that
part of the GST ecosystem where businesses are the master of their own destiny.
Rate, classification and the law as such are aspects the businesses have limited
influence over. However, they can exert influence over the supply chain. Although
the degree of influence depends upon several factors such as the industry itself,
bargaining power of customers and buyers, investments in capital assets, we have,
in this segment, given some general guidelines that businesses can follow to
optimize their supply chain, without compromising on quality, cost, speed of
operations and performance.
19.2 Re-negotiation with suppliers
- The biggest advantage of GST law is that there is no cascading effect of

taxes. We have discussed in an earlier section, the taxes subsumed under
the GST regime. Under the old regime, CST paid on inter-state purchases
was not an eligible input tax credit against output excise and VAT liability.
The benefit of excise duty paid on production and manufacture of excisable
goods could not be passed on to the third stage dealer and subsequent
dealers. Various other state levies such as Entry Tax, Luxury tax,
Entertainment tax (in case of media and entertainment industry) were also
ineligible for set-off against other taxes. These indirect taxes, the set-off of
which could not be availed, were considered as part of the product costs.
The laws governing each of these taxes were also different and each of the
taxes had different taxable events. Under the GST regime, the taxable event
is the supply of goods and services. All the manufacturers, traders and
service providers who were not eligible to input tax credit on inter-state
purchases, will now be eligible to claim input tax credit of IGST paid.
- For example, consider a company XYZ located in Maharashtra and selling

100% of its products exclusively in the state of Maharashtra. They have the
option of procuring inputs from Gujarat as well as Maharashtra. Under the

older IDT regime, XYZ would have to pay 2% CST as well as entry tax on
purchases from Gujarat, which were not eligible for set-off against sales
made in Maharashtra, which attracted Maharashtra State VAT. This would
result in XYZ preferring to procure from Maharashtra instead of Gujarat even
if quality of products in Gujarat may have been better. Under GST law, IGST
paid on purchases from Gujarat would be freely available for set-off against
CGST and SGST paid on Maharashtra sales. Thus, XYZ would be indifferent
from which location he procures the goods. Thus, the ability to source from
anywhere in India is a major lever of negotiations for businesses and they
can now source inter-state as well as within state without having to worry
about tax incidence. It also helps them in obtaining high quality inputs for
their businesses.
- While we have examined the ability to source anywhere within India, one
must also look at sourcing of supplies from outside India. It would be a good
exercise for businesses to compare the landed cost of imports against the
cost of procuring locally. Earlier, under the previous indirect tax laws, upon
importation of goods, Basic Customs Duty, Countervailing duty (CVD) and
Special Additional Duty (SAD) became leviable. Businesses could claim
refund of SAD, but this required extensive follow up with the government
and resulted in blocking of working capital until the refund would be
received. In respect of CVD, there were certain onerous conditions
prescribed which made it difficult for businesses to pass on the credit.
Under the GST regime, CVD and SAD, (but not BCD) will be subsumed and
IGST shall be payable upon importation of goods. IGST, upon payment can
be used as input tax credit and thus, does not form part of the landed cost
or CIF value of imports. In addition to reduction in import costs, there will
also be reduction in cost of compliances and monitoring. Thus, the reduction
in the landed cost of imports may create an opportunity for international
and cross-border sourcing, especially from countries like Bangladesh,
where BCD is not leviable in case of certain imports.
- Input tax credit is also available on input services and capital goods subject
to certain restrictions. Anti-profiteering clause provides that the vendor

should not retain the benefit of GST and should pass it on to the customer
by way of reduction in prices. This throws open a very big opportunity for
business to renegotiate the contracts by claiming share of input tax credit
which was hitherto not available to vendors. Anti-profiteering provision of
the GST law may impact on cash flows, working capital, pricing and vendor
as well as customer relationship management.
19.3 Review of Supply Chain and Distribution / Warehousing Arrangements
- Business used to, under the earlier IDT regime, open branches, depots,
warehouses and retail outlets, depending upon the state in which the major
customers made their sales so that they could issue a local invoice to enable
customers to claim input tax credit in that state. The location was thus
dependent on customer criticality and concentration and not business
expediency factors like proximity to sources of raw materials, availability of
infrastructure and labour force productivity. Under this scenario, the
business also bore the cost of operating the branch office and transport
charges as well as relocation of labour and related expenses thereto. Under
state based VAT laws, there was a possibility of disallowances of form F
issued by dispatching state if the movement of goods was against a pre-
existing order. If the assessing officer finds out that the goods were
dispatched to the branch and from there the goods were directly forwarded
to the customer under the same lorry receipt to fulfill the existing order, the
sales tax departments used to disallow the branch transfer and
corresponding Form F and would levy full tax even though the form is
produced. The claim of the department was that branch transfer was a sham
transaction and really it was an interstate transaction with the customer
against order placed with branch or HO. Then after lapse of time, in view of
customer having taken full set off under the local VAT law, obtaining Form C
from customer would also be a big challenge. In this scenario, the business
had to go in litigation and end up paying tax, interest and penalty.
- Now with GST coming in and full credit available in terms of IGST, there is no
necessity to locate branch / depot / warehouse in each state where there is

demand. It will be cost effective to locate the warehouses at a centralized

place and then further distribute goods in various states all over India. That
is why such central locations are preferred by businesses.
19.4 Capital asset purchases and decisions on capital work in progress
Under the earlier indirect tax regime, input tax credit in relation to capital goods
was allowed on pro rata basis, with 50% being allowed in the year of installation and
the subsequent 50% in the year after that. Allowing input tax credit over a two-
year period instead of allowing 100% credit in the first year itself would result in
blocking of working capital and the business would bear interest and opportunity
cost due to temporary blockage of working capital. Also, CST and Entry tax paid on
capital assets were not eligible for set-off against major indirect tax levies,
resulting in a rise in the cost of capital assets as well as capital work in progress.
Now, under the GST regime, the entire input tax credit of CGST/SGST or IGST shall
be available in the year of installation or purchase itself. This releases working
capital and thus, we believe that it would be, in certain cases, prudent for
businesses to defer capital investments and ongoing purchases for capital work in
progress to the GST regime. The possible cost savings due to release of working
capital, to the extent of 50% of eligible input tax credit, would warrant
consideration in businesses capital budgeting decisions.
19.5 Avoid Pitfalls
- The emphasis of GST is on supply of goods / services. The meaning of

supply under the Act has wider amplitude and also covers situations like
import of services from AE without consideration, use of business asset for
personal use etc. Tax needs to be paid on supply of goods on the value to be
computed as per prescribed guidelines.
- The Business has to understand how to identify intra state or interstate

transactions and pay the GST as SGST and CGST or IGST. If the transaction
is classified as interstate transaction and IGST is paid and if it is
subsequently challenged by the respective state, the SGST and CGST would

be payable with interest and refund has to be claimed under IGST. This
would block funds for some period of time.
- Another possibility is time of supply. Now under GST, tax would be payable
even on advances received against supply of goods and balance tax would
be payable on final invoice in which the advance is adjusted. This should be
captured in the software.
- In case of inter-state branch supplies, tax invoice will have to be issued and
ITC should be claimed by the branch.
- The business should identify the places from where the business is
conducted including the place of business and if they are required to take
registration as a casual taxable person. ITC will be available in respective
state subject to such registration.
- Invoicing, accounting and filing returns and payments will be through IT

Infrastructure without any manual intervention. Hence, robust system
should be developed in line with GST Law. Automation of GST compliances
is a must for all assessees.
- The businesses will have to estimate impact on working capital due to tax
required to be paid in advance of recovery.
19.6 Ensuring set-off / Input Tax credit
- The Business has to follow up with vendors that tax paid to them in the
input tax invoices has been paid against their own correct GSTIN so that the
tax credit is auto populated in the Inward Register by 15th of the next
month. If such credit is not found in the register, follow up with the vendors
has to be done so that they upload their return and pay proper tax. In case
set off is claimed and vendor has not paid tax or return is not filed, the ITC
claimed would be automatically reversed and tax and interest would be
payable.

- GST paid under reverse charge mechanism will be allowed as ITC and it
should be claimed immediately. Purchase from unregistered dealer will
mandate payment of GST under reverse charge and issue of invoice by the
recipient to claim ITC. Department may come out with some clarifications
with regards quantum on which such reverse charge would be applicable
and other regulations.
- Under Indirect tax laws, expenses debited to profit and loss account were
not allowed as set off. Under GST the same would be allowed subject to
certain conditions.
- In hotel industry, the revenue or capital expenditure on ambience was not

allowed as ITC. Under GST, the same would be allowed subject to certain
conditions.

Chapter 20 Vendor, Customer And Other Contracts
20.1 Introduction
With introduction of GST, it shall be imperative for businesses to re-visit their

vendor / customer contracts to incorporate GST related clauses for ensuring
effective compliance, defining responsibilities and avoiding any disputes later on.
20.2 GST clauses in contracts for supply of goods / services
- The contracts shall contain GST clause covering the following:
a) The applicability of GST, applicability of rate on transaction value at

the time of supply and condition of exclusion or inclusion of such tax
in the contract consideration
b) Issue of valid tax invoice / bill of supply as per GST regulations
c) Condition of receipt of invoice within say 7 days from the date of

issue of invoice
d) Condition of providing contract / purchase order no. in case of receipt

of advance
e) Clarification that the advance, if any, received shall be considered as

inclusive of GST and only the balance shall be treated as a
consideration received towards such provision of goods/service.
- The contract may contain a clause whereby each party in a contract may
agree for doing things that are necessary to enable or assist the other
party/ies to claim or verify any input tax credit, set off, rebate or refund in
relation to any GST payable.
- The contract may also contain a clause on representations and warranties

whereby each party may agree to comply with the provisions of the GST
Act and indemnify the other party from loss, penalty or expense incurred
due to non-compliance.

Chapter 20 Vendor, Customer And Other Contracts
- In case of existing contracts, the parties may enter into an addendum to

contract to amend the terms in respect of payment of GST on consideration
for supply of goods or services.
20.3 Other considerations
The following are the major areas where a contract play an important role in
deciding GST related aspects:
a) Discount mechanism Discount can be excluded from the transaction

value (for the computation of GST) only if the same is established in terms
of contract
b) The contract may specify the manner of determination of value of service

in each state for the purpose of GST in cases of:
- Contract for service in relation to immovable property, boat or

vessel - Where immovable property, boats or vessels are located in
more than one state
- Contracts relating to events Where the event is held in more than

one state
- Contracts relating to telecommunication services Where the

leased circuit is installed in more than one state
c) Advertisement services to Central Government, State Government,

Statutory Body or local authority The contract shall provide means for
identification of place of supply of such services and manner of
determination of value of supply
d) Pure Agent The contract shall expressly provide for action of supplier as a
pure agent for incurrence of cost in the course of supply
e) Continuous supply of goods / services The contract may specify the

payment cycle for such continuous supply

Way Forward
With the enactment of the Central Goods and Services Tax Act, 2017 and achievement of
other milestones by Government, it is now amply clear that the long wait for major
Indirect Tax reform is coming to near end. The Government has kept proposed target date
of 1 July 2017 for implementing GST which leaves industry with only few more months to
understand the nitty-gritty of the GST law and understand as to how it will impact their
business models or business operations.
The Indirect taxes are generally tax on topline which has substantial impact on bottom
line figures. This reason itself makes it imperative to take cognizance of challenges which
GST law can throw on businesses. The challenge will not be just a one-time migration
from IDT regime to GST regime but can be on continual basis on which thorough thought
needs to be given and get the business models or business operations geared up to cope
with transformation.
Transition to GST - Likely impact on -
Vendor/Customer
Cash Flow
Contracts
Pricing &
IT Systems
Margins
Business
Supply Chain
Processes

Way Forward
For a smooth and thoughtful adoption of new IDT regime, businesses needs to
understand the GST related provisions which will have an impact on them and thereafter
plan out detailed transition steps and action points which can be in following manner:
Mapping transactions/Business model with Pre-GST scenario Indirect Taxes
Understanding impact on transactions/Business model with provisions

& rates under GST
Identifying key aspects Rates applicable on outward supplies and major inward
supplies, set off related eligiblity, additional compliance requirements under GST Law
Understanding changes required to be made in the existing ERPs used
Making a to-do list of actions to be taken for transition in GST without missing on
eligible set offs, impact of dual taxation, proper intimation to departments, wherever
required

Appendix
List of various forms required under GST Law
Sr. No. Form No Description of Form
Payment of Tax Rules
1 GST PMT-01 Electronic Tax Liability Register
2 GST PMT-02 Electronic Credit Ledger
3 GST PMT-03 Order made by the proper officer for re-crediting the
rejected amount of refund to the electronic credit ledger
4 GST PMT-04 Communication of any discrepancy noticed in the
electronic credit ledger
5 GST PMT-05 Electronic Cash Ledger
6 GST PMT-06 Challan for payment of tax, interest, penalty, fees or any
other amount
7 GST PMT-07 Communication of Challan Identification Number (CIN) on
non-generation or non-communication to the Common
Portal on generation where the bank account of the
person making payment of tax is debited.
Refund Rules
1 GST RFD-01 Application for Refund
2 GST RFD-02 Acknowledgement of application of refund
3 GST RFD-03 Communication of any deficiencies noticed in the Refund
Application i.e. Form GST RFD-01
4 GST RFD-04 Order Sanctioning Provisional Refund
5 GST RFD-05 Issuance of payment advice of Refund sanctioned
6 GST RFD-06 Order Sanctioning Final Refund
7 GST RFD-07 Order of refund adjusted against outstanding demand
8 GST RFD-08 Notice for non-admissible and non-payable refund
9 GST RFD-09 Reply to notice as per FORM GST RFD 08
10 GST RFD-10 Application for Refund for tax paid on inward supplies
11 GST RFD-11 Statement of inward supplies of goods or services
Registration Rules
1 GST REG-01 Application for Registration
2 GST REG-02 Acknowledgment of Application for Registration
3 GST REG-03 Notice for communicating deficiency in the application

Appendix

Registration Rules
4 GST REG-04 Reply to notice issued under FORM GST REG 03
5 GST REG-05 Rejection of application for registration
6 GST REG-06 Issuance of Registration Certificate
7 GST REG-07 Application by person required to deduct tax at source or
collect tax at source
8 GST REG-08 Cancellation of registration certificate applied in FORM
GST REG 07
9 GST REG-09 Application by a non-resident taxable person
10 GST REG-9A Application by a person supplying online information and
data base access or retrieval services from a place
outside India to a non-taxable online recipient
11 GST REG-10 Application for extension of period of registration for
casual taxable person or non-resident taxable person
12 GST REG-11 Suo Moto registration on temporary basis by way of order
13 GST REG-12 Application by a person who is required to obtain unique
identity number
14 GST REG-13 Application for amendment of registration
15 GST REG-14 Order of amendment of registration
16 GST REG-15 Application for Cancellation of registration
17 GST REG-16 Notice requiring applicant to show cause as to why his
registration should not be cancelled.
18 GST REG-17 Reply to notice issued under FORM GST REG 16
19 GST REG-18 Cancellation of Registration
20 GST REG-19 Order dropping proceedings pertaining notice issued in
Form GST REG-16
21 GST REG-20 Application for revocation of cancellation of registration
22 GST REG-21 Order revoking the cancellation of registration
23 GST REG-22 Notice requiring the applicant to show cause for non-
revocation of registration
24 GST REG-23 Reply to notice issued in FORM GST REG-22
25 GST REG-24 Application for registration who has been granted
provisional registration

Appendix

Registration Rules
26 GST REG-25 Certificate of Registration on Provisional basis
27 GST REG-26 Cancellation of provisional certificate
28 GST REG-27 Notice seeking causes as to why provisional registration
should not be cancelled
29 GST REG-28 Application for cancellation of existing registration by a
person registered under existing law but not liable to
register under GST Act
30 GST REG-29 Uploading of Verification report of physical verification of
place of business
Composition Rules
1 GST CMP-01 Intimation for composition levy within 30 days prior to
appointed date
2 GST CMP-02 Intimation for composition levy before commencement of
F.Y
3 GST CMP-03 Furnishing of the details of stock & inward supply of
goods received from unregistered persons held on the
day preceding the date from which he opts under this
scheme
4 GST CMP-04 Intimation for withdrawal from the composition scheme
5 GST CMP-05 Notice to show cause for non-denial of this scheme
6 GST CMP-06 Reply to notice issued under FORM GST CMP 05
7 GST CMP-07 Order for acceptance or denial of scheme
Transitional Provisions Rules
1 GST TRAN-1 Application in respect of tax or duty credit carried forward
under any existing law or on goods held in stock on the
appointed day
Input Tax Credit Rules
1 GST ITC-01 Declaration for availing ITC once it is eligible under GST
2 GST ITC-02 Transfer of ITC on sale, merger, amalgamation, lease or
transfer of a business
3 GST ITC-03 Furnishing of details of ITC in relation to input and capital
goods lying in stock in respect of :

Appendix

Input Tax Credit Rules
- New registration obtained within 30 days from the
date when person becomes liable to register
- Voluntary Registration
- Ceases out of composition scheme
- Exempt supply becomes taxable supply
Return Rules
1 GSTR-1 Details of outward supplies of goods or services
2 GSTR-1A Details of inward supplies added, corrected or deleted by
the recipient in GSTR-2 to be made available to supplier
3 GSTR-2 Details of inward supplies of goods and /or services
4 GSTR-2A - Details of outward supplies by supplier to be made
available to recipient
- Details of invoices furnished by an Input Service
Distributor in his return Form GSTR-6 to be made
available to recipient
- Details of tax deducted at source to be made available
to deductee
- Details of tax collected at source by e-commerce
operator
5 GSTR-3 Monthly return for every registered person other than
- Input service distributor
- Composition scheme;
- Deducting tax at source.
- Collecting tax at source
6 GSTR-4 Submission of Quarterly return by composition supplier
7 GSTR-4A Communication of details of outward supplies to recipient
8 GSTR-5 Submission of return by every registered non- resident
taxable person
9 GSTR-6 Submission of return by every Input Service Distributor
10 GSTR-6A Details of outward supplies by Input Service Distributor to
recipients

Appendix

Return Rules
11 GSTR-7 Submission of return by every registered taxable person
required to deduct tax at source
12 GSTR-7A Certificate of tax deducted at source to be made available
to deductee
13 GSTR-8 Submission of return by every E-commerce operator
required to collect tax at source
14 GSTR-3A Notice for non-filing of return
15 GSTR-3B Furnishing of return in lieu of Form GSTR-3 on extension
of time limit of filling Form GSTR-1 & GSTR-2
16 GSTR-9 Annual return for person other than
- input service distributor
- composition scheme;
- deducting tax at source.
- collecting tax at source
- Non-resident taxable person
- Casual taxable person
17 GSTR-9A Annual return for composition scheme dealer
18 GSTR-9B Furnishing of audited annual accounts and a reconciliation
statement
19 GSTR-10 Furnishing of Final Return by registered person where
registration has been cancelled
20 GSTR-11 Details of inward supplies of persons having Unique
Identity Number
21 GST PCT-1 Application for enrolment as GST practitioner
22 GST PCT-2 Certificate of registration as GST practitioner
23 GST PCT-3 Order of disqualification as GST practitioner
24 GST PCT-4 Notice to show cause after giving an opportunity for being
heard for disqualification as GST practitioner
25 GST PCT-5 List of tax return preparers enrolled to be maintained on
common portal
26 GST PCT-6 Authorization to tax practitioner by a registered person

Appendix

Return Rules
27 GST PCT-7 Withdrawal of authorization given to tax practitioner by a
registered person
28 GST MIS-1 Final Acceptance of mismatched ITC
29 GST MIS-2 Communication and rectification of discrepancy in claim of
ITC and reversal of claim of ITC
30 GST MIS-3 Final acceptance of reduction in output tax liability and
communication thereof
31 GST MIS-4 Communication and rectification of discrepancy in
reduction in output tax liability and reversal of claim of
reduction
32 GST MIS-5 Discrepancy in the details furnished by the operator and
declared by the supplier shall be made available to the
supplier
33 GST MIS-6 Communication and rectification of discrepancy in details
furnished by the e-commerce operator and the supplier
E-way bill
1 GST INS-01 To be furnished by every registered person
Part A Information of goods (before commencement of
movement)
Part B Information of Transporter (to generate e-way
bill)
2 GST INS - 02 To be furnished by transporter
Multiple consignments (indicating serial number of e-way
bills generated in respect of each consignment)
3 GST INS 03 Report by department
Part A - Summary report of every inspection of goods in
transit shall be recorded online (within 24 hours of
inspection )
Part B - Final report (within 3 days of the inspection)
4 GST INS 04 To be furnished by transporter
Where a vehicle has been intercepted and detained for
more than 30 minutes
5. GST INV 01 Details of tax invoice in case of movement of goods


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ARE YOU GST READY?

| Are You GST Ready? RSM

RSM Are You GST Ready? |

| Are You GST Ready? RSM

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No Tax Inter State

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No Tax Inter State

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1 | Are You GST Ready? Back to table of contents RSM

Service Additional Custom

RSM Back to table of contents Are You GST Ready? | 2

Octroi and Purchase

* Other than the entertainment tax to be levied by the local bodies

2.5 The following taxes shall not be subsumed in GST

- Alcoholic Liquor for Human Consumption - The same shall be exclusively

- Tax on Petroleum Crude/High Speed Diesel/ Motor Spirit/Natural

- Stamp duties - Typically imposed on legal agreements by the state. Stamp

- Taxes by Local Bodies - Taxes levied by local bodies.

- Basic Custom Duties (BCD)

3 | Are You GST Ready? Back to table of contents RSM

RSM Back to table of contents Are You GST Ready? | 4

- Model GST laws, principles of levy, apportionment of GST levied on supplies

- The threshold limit of turnover below which the registration is not

- The rates including floor rates.

- Special provision with respect to the Special category States.

- Any other matter relating to GST as the Council may decide.

- Union Minister of State in charge of Revenue or Finance

- Minister in charge of Finance or Taxation or any other Minister nominated by

- The Central Goods and Services Tax Bill ,2017 (CGST)

- The Integrated Goods and Services Tax, Bill 2017 (IGST)

- The Union Territory Goods and Services Tax Bill, 2017

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

- Input Tax Credit (ITC)

- Invoice, Debit Note and Credit Note

RSM Back to table of contents Are You GST Ready? | 6

- Article 246A of the Constitution, which was introduced by the Constitution

4.2 Taxable event under GST is supply of goods or services or both

- Tax Collection in case of Intra and Inter-state / union territory supplies of

7 | Are You GST Ready? Back to table of contents RSM

Intra-state / UT CGST SGST/UTGST

The Place of Supply related provisions (Refer Chapter 8 of this publication)

Sr. No. Union Territories

4.3 India means

Air space above its territory

Extends Territorial Continental Shelf

Seabed and subsoil

RSM Back to table of contents Are You GST Ready? | 8

All forms of supply of goods Importation of services by a taxable

9 | Are You GST Ready? Back to table of contents RSM

4.6 Distinct Persons

4.8 Related Person

a) Person shall deemed to be related if -

i. such persons are officers or directors of one anothers businesses;