`

CA/CMA FINAL
MAY, NOV 2023
 Index

INDEX

Ch No Chapter name

1 Introduction

2 Supply

3 Charge

4 Exemptions

5 Place of Supply

6 Time of Supply

7 Value of Supply

8 ITC

9 Registration

10 Invoice

11 E Way bill

12 Payment of Taxes, TDS & TCS

13 Returns

14 Customs – Introduction

15 Customs - Classification

CA CMA MANI DEEP

 Index

16 Customs - Valuation

17 Customs - Baggage

18 Customs – Import & Export procedures

19 Customs - Warehousing

20 Customs – Duty drawback

21 Customs - Miscellaneous

22 FTP( Part 1 & 2)

CA CMA MANI DEEP

 Introduction
G
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Direct tax Vs Indirect taxes:

Particulars Direct taxes Indirect Taxes

▪ Incidence of Tax - On the Tax payer - On the End consumer

▪ Basis - Income generation - Consumption

▪ Shifting of Tax - Not Possible - Burden can be shifted by the

burden tax payer to someone else.

▪ Nature - Progressive - Regressive

▪ Example - Income Tax - GST, Customs duty.

▪ Administrative Body - CBDT - CBIC

Features of Indirect taxes:

➢ Revenue source for Government: Indirect tax is a
major source of revenue for Government; Indirect

taxes contribute more than 50% of the total tax

revenues of government.

➢ Regressive in nature: The rich and poor have to pay the

same rate of taxes on majority of the items.

➢ Inflationary: Tax imposed on commodities and services

causes an all-round price raise, which leads to

inflationary trend.

➢ Tax on Commodities and Services: It is levied on goods at the time of manufacture,

purchase, and sale and also on provision of services.

➢ Shifting of burden: Clear shifting of tax burden in respect of Indirect taxes. Tax paid
by seller is recovered from buyer.
 Introduction

➢ Higher Tax base: Since, majority of the products or services or covered under Indirect
taxes with less exemptions.

➢ Welfare: High taxes are imposed on SIN goods (alcoholic products, tobacco), which reduces
their consumption and promotes social welfare.

Evolution of GST:

In the Year 2000, Prime minister Proposed the concept of GST and set up a commitee.

In 2003 "CG" formed a Task force which recommended fully integrated GST

In 2006-07, Then Finance minister Chidambaram announced that GST would be introduced
from 1st April 2010.

Loksabha Passed the Constitution amendment bill on 6th May 2015, Rajya sabha on 3rd Aug
2016. On subsequent ratification of 50% states, it received assent of president on 8th Sept
2016 and became Constitution (101st Ammendment) Act, 2016.

On 27th March 2017, CGST Bill, IGST Bill, UTGST Bill, GST Compensation Bill were presented
and obtained president assent on 12th April 2017.

Back ground of GST:

st
• GST came in to force after making the constitution’s 101 amendment.

• GST came in to force on 1st July 2017.

• GST applicable to whole of India including Jammu and Kashmir.

What is the need for GST in INDIA ??

• Deficiencies in the existing value-added taxation system have led to GST.

• GST is the cure for ills of existing indirect tax regime.

• In the earlier regime, only manufacturers are eligible for availing input tax credit on the
 Introduction

input services and inputs (goods) used in the course of manufacture. Whereas the retailers

and service providers are entitled to avail either credit on Inputs (goods) or on Input

services only, Which leads to cascading of taxes.

• Even the Central Sales Tax paid on interstate transfers is not eligible for taking the credit

• The sales tax laws are different from one state to another which leads to lot of confusion

among the tax payers.

• Non-Inclusion of several local levies in State VAT such as luxury tax, entertainment tax,

etc.

• Non-integration of VAT & Service tax.

Article 246: Gives the authority to Union and State governments to levy taxes. The Seventh
schedule of article 246 contains three lists which explains the matters on which CG and SG have

authority.

Article 246A: Grants power to CG and SG to make laws with respect to GST.

Article 269A: States that GST on Inter-state trade shall be levied and collected by CG, such
taxes collected will be apportioned between the centre and states.

Article 366: Defines GST, which means any tax on supply of goods or services orboth except on
the supply of alcoholic liquor for human consumption.

Article 279A: Empowers the president to constitute GST council.

➢ Council consists of the following members, namely: -

a) Union finance Minister – Chairperson

b) State finance Minister or any other minister nominated by SG -Members.

c) Union Minister of state for finance or taxation - Member.

➢ Every decision of the Council shall be taken at a meeting, by a majority of not less than

3/4th of the members present.

➢ The vote of CG shall have a weightage of 1/3rd whereas the weightage of the State

governments in aggregate are 2/3rd.

➢ Quorum for GST council meeting – 50 % of the total number of members

 Introduction

- Functions of the GST council:

✓ to make recommendations on Tax rates,

✓ to make recommendations on exemptions,

✓ to make recommendations on threshold limits

✓ to make recommendations on the date from which petroleum products can be taxed

✓ to make recommendations on principles of levy

✓ to make recommendations on taxes, cesses, surcharge which may be subsumed into GST

Concept of GST:

▪ GST is a value added tax levied on manufacture, sale and consumption of goods and

services.

▪ It offers continuous chain of tax credits from manufacturer to retailer.

▪ Supplier at each stage is allowed to avail the credit on purchases which can be adjusted

with the output tax liability. Thus, only the end consumer bears the full liability.

▪ Valued added on goods and services alone is taxable, hence there is no tax on tax

(Cascading)

▪ GST is a destination-based tax applicable on all transactions, which involves supply of

goods and services for a consideration. (Exceptions are there)

Framework of GST as Introduced in India.

 Dual GST:

Centre and states can simultaneously levy GST on taxable supply of goods or services or

both. Because of this now the centre can tax even intra state sales and states are also

empowered to tax services.

 CGST/SGST/IGST/UTGST:

CGST/ SGST is applicable on intra state transactions, if it is a union territory instead of

SGST, UTGST will be levied.

(Example: X purchased watch from Titan show room located in Hyderabad, on that

transaction both CGST and SGST will be levied)

 Introduction

IGST is leviable on Inter-state transactions.

(Example: X ltd located in Hyderabad purchased goods from Y Ltd located in Chennai, which

is an interstate transaction on which IGST will be levied.)

 Seamless flow of credit:

The revenue of interstate sale does not accrue to the exporting state, the exporting state

transfers to the Centre the credit of SGST/UTGST used in payment of IGST.

The centre transfers to the importing state the credit of IGST used in payment of SGST/

UTGST.

GST Common portal:

- A common portal was required to act as a clearing house for settlement of credits in

between the centre and state.

- A common GST system provides linkage to all the stakeholders involved.

- Resultantly, Common GST Electronic Portal “www.gst.gov.in”– a website managed by Goods

and Services Network (GSTN) [a company incorporated under the provisions of section 8 of

the Companies Act, 2013] has been set by the Government.

Functions of GSTN:

▲ Facilitating the registration.

▲ Forwarding the return to central and state authorities.

▲ Settlement and computation of IGST.

▲ Matching tax payment details with bank networks.

▲ Providing various MIS reports to central and state governments.

▲ Providing analysis on tax payers profile.

▲ Running the matching engine.

GSPs/ASPs:

- GSTN has selected certain IT and financial technology companies, to be called as GST

Suvidha Providers (GSPs).

 Introduction

- GSPs develop applications to be used by taxpayers for interacting with the GSTN.

- They facilitate the tax payers in uploading invoices as well as filing of returns.

Compensation cess:

- Compensation cess is leviable on intra-State supplies and inter-State supplies with a view

to provide for compensation to the States for the loss of revenue arising on account of

implementation of the GST.

- Levied on specified luxury products or demerit goods (pan masala, tobacco, motor cars etc.)

- GST Compensation cess levied for the first 10 years of the GST regime.

Goods/Services which are out of the ambit of GST:

- High speed diesel oil.

- Crude petroleum.

- Motor spirit.

- Aviation turbine fuel Natural gas

- Alcoholic liquor.

- Sale or purchase of immovable property.

Taxes subsumed by GST:

- Central sales tax, Countervailing duty

- Advertisement tax.

- Luxury tax.

- Lottery Tax

- Octroi tax.

- Vat/sales tax.

- Excise duty.

- Entertainment tax.

- Service tax.

Points to be noted:

- Entertainment tax levied by local authorities is not subsumed in to GST.

 Introduction

- Union Government has also retained the power to levy excise duties on Tobacco & tobacco

products, hence there is GST as well as Excise duty on tobacco products.

- State Government has also retained the power to levy excise duty on Opium, Indian hemp

and other narcotic drugs, hence they are subject to GST as well as state Excise duties.

Benefits of GST:

GST is a win-win situation for the entire country. It brings benefits to all the stakeholders of

industry, Government and the consumer.

 Boost to ‘Make in India' initiative:

- GST will give a major boost to the ‘Make in India'

initiative by making goods and services produced in

India competitive (i.e. cheaper)

 Increase in Government Revenue:

- GST will increase the Government revenue by widening

the tax base and improving the tax compliances.

 Elimination of Double taxation:

- GST has subsumed most of the indirect taxes, Which will make doing business easier and

will also tackle the highly disputed issues relating to double taxation of a transaction as

both goods and services.

 Creation of Unified national market:

- With common tax rates and procedures all over the country, removes the economic

barriers and creates a way for integrating the economy at national level.

 Mitigating the ill effects of Cascading

- Set off of prior stage taxes for the transactions across the value chain, will mitigates

the ill effects if cascading.

 Introduction

Applicability, Definitions & Administration under GST :

Section (CGST Act) Relevance

Sec 1 Applicability of CGST Act

Sec 2 Definitions

Sec 3 (Officers under a. Principal Chief commissioners or principal directors General

this Act) b. Chief commissioner or directors general

c. Principal commissioner or Principal Additional Directors general

d. Commissioners or Additional directors general

e. Additional commissioners or Additional directors

f. Joint commissioners or Joint directors

g. Deputy commissioners or Deputy directors

h. Assistant commissioners or Assistant directors

i. Any other officers as it deem fit

Sec 4 (Appointment of • Board can appoint additional director as it may think fit

Officers) • Board can authorize officer in sec (a to h) to appoint

Sec 5 (Powers of • Central tax officers to exercise powers and

Officers) duties given by the act

• Central tax officer may exercise the power

and the discharge duties of his subordinates

• Even commissioner can delegate his powers

to subordinate

• Appellate authority cannot exercise the powers and discharge

duties of the central tax officers

Sec 6 (Authorization) • Officers appoint under SGST/UTGST act authorized to act as

officers under CGST also

• If a proper officer under CGST act issues an order, he shall

also issue an order under SGST/UTGST act and intimate the

 Introduction

SGST officer

Example: Mr Akhil of Hyderabad purchased goods from Mr Balayya of Hyderabad for Rs

1,00,000. Mr Akhil subsequently sold those goods to Chiranjeevi of Vijayawada for Rs 1,20,000.
GST rate applicable at 18%

Explain how the revenue accrues to central and state Government

Particulars Telengana Andhra Central

Pradesh Government

Transation – 1 (Supply of goods by Balayya to

Akhil) CGST & SGST

Transaction -2 (Supply of goods by Akhil to

Chiranjeevi) IGST

Adjustment of revenue received by Telangana

state by GSTN

Transfer of revenue from central govt to AP

government by GSTN

Total revenue
 Supply
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Goods: [2(52) of CGST] :

 Means Every kind of movable property

Excludes money and Securities Includes Actionable claims, growin crops, grass and
things attached to land.

Which are agreed to be severed before supply.

Service: [2(102)]:
 Service means anything other than goods, money and
securities but
 Includes the use of money or its conversion by cash or
by any other mode, from one form, currency or
denomination, to another form, currency or
denomination for which a separate consideration is
charged.
 Services includes facilitating or arranging transactions
in securities.

Money includes instruments like cheques, drafts, pay orders, promissory notes, letters of credit,
etc. Therefore, activities that are only transactions in such instruments will not be considered as
service.
Money also includes transactions in commercial papers and certificate of deposits.

Taxability of transactions in Securities:

- ‘GST implications on forward contracts: Where the settlement takes place by way of actual
delivery of underlying commodity/currency, then such forward contracts would be treated as
normal supply of goods and liable to GST.
- GST implications on future contracts: Since future contracts are in the nature of derivatives,
these qualify as ‘securities’ and thus, are not subject to GST. However, where the future
contracts have a delivery option and the settlement of contract takes place by way of
actual delivery of underlying commodity/currency, then such forward contracts would be
treated as normal supply of goods and liable to GST.
 Supply

- GST implications on secured debt: Sale, purchase, acquisition or assignment of a secured debt
does not constitute a transaction in money; it is in the nature of a derivative and hence a
security
- Transactions in instruments like interest rate swaps, and foreign exchange swaps would be
excluded from the definition of ‘supply’ since such instruments are derivatives, being
securities
- GST implications on services by way of extending deposits, loans or advances: Services by
way of extending deposits, loans or advances in so far as the consideration is represented
by way of interest or discount is exempt from the levy of GST.

Nature of supply Value Taxability Nature of supply Value Taxability

in Rs in
Loan given by Bank xxxx Not Goods sold or supplied Xxxx Taxable
taxable services on credit basis supply
Interest on loan xxxx Exempted Interest charged by supplier Xxxx Taxable
supply of goods or services on supply
periodic payment
Penal interest on xxxx Exempted Penal interest on delay in Xxxx Taxable
delay in repayment supply repayment of value of goods supply
of loan or services
Short term lending of securities:

Lendor Approved Borrower

Intermediary

Lends Securities and Borrower will return

gets lending fees the same class of
from borrowers securities

There is no direct agreement between the lender and borrower

SLS doesn’t treat lending of securities as disposal of securities and therefore is not
excluded from the definition of services. The lending fee charged from the borrowers of
securities has the character of consideration and is taxable under GST

The activities of the intermediaries facilitating lending and borrowing of securities for
commission or fee are also taxable separately
 Supply

Principal: [2(88)]:
 Means a person on whose behalf an agent carries on the business of supply (or) receipt
of goods or services or both.

Family: [2(49)]:
 Spouse and children of the person, and
 Parents
If they are wholly or
 Grand parents
 Brothers & Sisters mainly dependent.

Business: [2(17)]:
a) Any trade, commerce, manufacture, profession, vocation, adventure, wager or any other
similar activity, whether or not is for a monetary benefit.
b) Transaction connected with or incidental to (a) above.
Example -1: A retail store providing door delivery service for the goods sold.
c) Transaction in the nature of (a) above irrespective of volume, continuity, frequency,
regularity of such transaction.
Example -2: Sale of old newspapers by a Professional.
d) Clubs, associations, society providing facilities to its members.
Example -3: Member ship fee collected by Residential flat associations.
e) Admission of persons into premises for a consideration.
Example -4: Movie theatres, Parks.
f) Activities of a race club by way of a totalisator.
Example -5: Conducting Horse Races.

g) Transaction undertaken by the government in which they are engaged as public

authorities.

Consideration: [2(31)]:
 Any payment made or agreed to be made whether in
money or otherwise, in relation to the supply of
goods or services or both, whether by the
recipient or by any other person but shall not
include any subsidy given by the Central
Government or a State Government.
Example -6:
CSK agrees to hire services of Mr. Dhoni for a
consideration of Rs 12 crores. In addition to this,
the agreement provides that the player shall be provided with a car valued for Rs 80
lakhs. The entire value of Rs 12.80 crores will be considered as consideration and
subject to tax.
 Supply

Example -7:
The Government provides subsidy, for the benefit of Students but it is given to the
manufacturer of books, it will not be considered as
consideration.

 The monetary value of any act or forbearance, in respect

of, in response to, or for the inducement of, the supply
of goods or services or both, whether by the recipient or
by any other person but shall not include any subsidy given
by the Central Government or a State Government.
Example -8:
Paru Ltd paid Rs 50,00,000 to Devdas Ltd to supply goods and
paid Rs 20,00,000 for not supplying the same goods to any other
person. Consideration in this case will be Rs 70 Lakhs.

Actionable claim: [2(1)]:

 Means a claim to any debt, other than a debt secured by
mortgage or claim to beneficial interest in moveable property.
Example – 9: Bills of Exchange, lottery tickets.

Recipient: [2(93)]:
 Consideration payable – Person paying the consideration
 No consideration - Goods – Person to whom the goods are made available
 No consideration – Services – Person to whom the service is rendered.
Person : [2(84)]:

Trust,
Individu
Society al / HUF
.

Company
/Foreigh Firm,
n
LLP
Company

CG/SG/
AOP,
Local
BOI,
Authorit AJP
y
 Supply

Related persons:
 A person who is under influence of another person is called a related person like members of
the same family or subsidiaries of a group company etc.
 The term “Related person” has been explained in explanation given to sec – 15.
 Persons deemed as Related persons if
 Such persons are officers/directors of one another’s business
 Such persons are legally recognised partners
 Such persons are employer and employee
 A third person controls/own/holds (directly/indirectly) > 25% Voting power.
 One of them directly or indirectly controls the
other
 A third person controls directly or indirectly both of
themD
 Such persons together control a third person
 Such persons are members of the same family
 One of them is the sole agent/distributor of the
other

Works contract:
Means a contract for building, construction, fabrication,
completion, erection, installation, fitting out, improvement,
modification, repair, maintenance, renovation, alteration or
commissioning of any immovable property wherein transfer of
property in goods (whether as goods or in some other form) is
involved in the execution of such contract;

Distinct persons: Sec [24(4&5)] Each of such

 A person who is required to obtain more than one registration in registration, be
a state. treated as
 A person who is required to obtain registration in more than one distinct persons
state.
 Where a person has obtained registration in one state in respect
of an establishment, has an establishment in another state,
then they will be treated as establishments of distinct persons.
Example – 10:
If BCCA has one place of business (branch) in Telangana for which registration is obtained and
another place of business in Andhra Pradesh for which registration is obtained then such place
of businesses will be considered as distinct person.
 Supply

 Supply [Sec 7 CGST]

Supply is the triggering point to levy GST. Hence it is crucial to analyse what is called supply.
▲ Sec 7(1)(a):
1. As per sec 7(1)(a) in order to be supply, Supply should be of GOODS or SERVICES or
BOTH.
2. What is called Supply ?
There is no standard definition for supply, Sec 7(1) gives the list transactions/activities
which are considered as supply. Supply includes
• Sale
• Transfer
• Exchange
• Barter
• Licence
• Lease
• Rental
• Disposal
•
7(1)(aa) – Newly inserted with retrospective effect from 01.07.2017 : Activities or
transactions by a person other than individual to its members or constituents or vice versa
for cash, deferred payment or other valuable consideration amounts to supply

3. Supply should be made for CONSIDERATION. (There are certain exceptions which will be
discussed in Sec 7(1(c))
4. Should be made by a TAXABLE Person.
5. Should be in the course or furtherance of business. (There are certain exceptions which
will be discussed in Sec 7(1(b))

In the course of business: Every person carries out certain activities regularly for
running trade or commerce.
Furtherance of business: Every business person use to think how to develop his business
or carrying out new activities. Such activities called as furtherance of business

Sale - Sale involves transfer of goods from one person to another person for consideration.
Transfer – Means ownership may not be transferred but right in the goods is transferred.
Barter – Means exchange of goods and services for other goods and services.
Exchange – When two persons mutually transfer the ownership of one thing for the ownership of
another, neither of the things being money , the transaction is called as an exchange.
Licence - A right to do or continue to do in or upon the immovable property.
Rentals: Periodical payment for use of another’s property.
 Supply

Lease: A lease is an agreement whereby the lessor conveys to the lessee in return for a
payment or series of payments for the right to use an asset for an agreed period of time.
Disposal: Disposal normally considered as selling of assets when the organization is about to
close down and various assets are required to be disposed of. Such transactions will also be
considered as supply liable to tax under GST Law.

Who is called a taxable person?

- A “taxable person” is a person who is registered or liable to be registered u/s 22 or 24.
✓ Hence, the transactions are outside the ambit of supply.
✓ However, for a related activity if a separate consideration is charged then they will be
considered as supply if other elements of taxable supply are there. (Charges for drafts,
Issuance charges for LOC etc.)

Sec 7(1(b)) – Importation of services for consideration

- This is the only exception for the condition that, the supply should be in the course or
furtherance of business.
- Importation of services whether or not in the course or furtherance of business amounts
to supply. (If all other conditions mentioned in 7(1(a)) are satisfied)
Example:
Import (Downloading) of a song for consideration for personal use by Mr. Sen. Is it supply of
service?
Answer: Yes. It is supply of service and IGST will be levied.
Note: Services may be in the course or furtherance of business or not

Example:
Mr. C of Chennai paid fees for online coaching obtained from a teacher located in USA for
coaching of Accountancy course for his son.
Is it supply. If so who is liable to pay GST.
Answer: Yes, it is supply. Even if receipt of this service is not for business or furtherance of
business. Mr. C is not liable to pay GST under reverse charge mechanism. It is exempt from
GST. Since, it is not OIDAR service.
Sec 7(1(c)) – Activities made or agreed to be made without a consideration.
[SCHEDULE 1]
- Previously under Excise, VAT, etc consideration played the vital role for levying taxes.
- However, under GST the importance of consideration has been diluted in certain
scenarios.

 Principal – Agent:
- Supply of goods by agent to principal or principal to agent, without consideration, where
the agent supply/receive such goods on behalf of principal – amounts to SUPPLY.
 Supply

- Only goods were covered services are excluded here.

Clarification has been issued to determine whether a particular principal – agent

relationship falls under this head or not.
- Invoice is the determining factor.
- When the goods are further supplied by an agent on behalf of principal and invoice is
issued by the agent in his name then the supply between agent and principal falls under
this head (i.e it is a supply).
- If the invoice is issued in the name of principal then the supply between agent and
principal is not covered here (i.e not a supply).
- Same principle is applied even at the time of procurement by agent.
Clarification on scope and ambit of principal and agent relation ship in the
context of a del-credere agent:
Whether the temporary short-term transaction-based loan extended by the DCA to the
recipient (buyer), for which interest is charged by the DCA, is to be included in the value of
goods being supplied by the supplier ?

Sit.2 Principal Sit.2 Agent

issues Invoice issues invoice
too agent to customer

Custome
Principal Agent
r

Sit.1 Principal directly issues

invoice to customer
 Supply

If DCA is not an AGENT as per Schedule – I If DCA is an AGENT as per Schedule – I

(Invoice given by principal directly on the name (Invoice given by principal on the name of
of third Party (Buyer). Agent, and agent issues invoice to third PARTY
(Buyer).

Involves the following activities: Involves the following activities:

1. Supply of goods from supplier (principal) to 1. Supply of goods by the supplier (principal)
recipient; to the DCA;
2. Supply of agency services from DCA to the 2. Further supply of goods by the DCA to
supplier or both; the recipient;
3. Supply of extension of loan services by the 3. Supply of agency services by the DCA to
DCA to the recipient. the supplier or the recipient or both;
4. Extension of credit by the DCA to the
recipient

Extension of credit by Agent to recipient – Extension of credit by Agent to recipient – Is

Not a supply a supply made in conjunction with supply of
goods or services.
Hence the consideration for extension of
credit is includable in value of supply.

 Permanent transfer or disposal of Business assets:

- Transfer or disposal should be on permanent basis.
- Treated as supply only if input tax credit has been availed
on such assets.

 Supply between related person or distinct person:

- Will qualify as supply
- Should be made in the course or furtherance of business.(Refer related person and distinct
person definitions)
- On analysing the related person and distinct person definition we can conclude that the
following are also covered under supply:
✓ Stock transfers or branch transfers.
✓ Supply of goods or services or both between an employer and employee.{ However
services provided in the course of employment are not treated as supply as per
SCHEDULE –III}
✓ Proviso to Schedule – I, states that gifts not exceeding Rs 50,000 in value in a F/Y
given by employer to employee shall not be treated as supply. Gifts of value more
than 50,000 made without consideration are subject to GST when made in the course
or furtherance of business.
 Supply

 Importation of Services:
- By a person from a related person
from his establishments located outside India. Shall be treated as
- Without consideration SUPPLY.
- In the course or furtherance of business

 Taxability on Import of Services covered under 7(1(b)) & 7(1(c))

Import of
Services

With Without
Consideration Consideration

In the course Not In the In the course Not In the

or course or or course or
Furtherance Furtherance Furtherance Furtherance
of Business of Business of Business of Business

Other than
Supply Supply From a
from a
related Not a Supply
7(1(b)) 7(1(b)) related
person
person

Supply
Not a supply
7(1(c))

Sec 7(1A):
If an activity or transaction, constitutes supply as per Sec 7(1), they shall be treated
as either supply of goods or supply of services as referred to in Schedule – II.
 Supply

Schedule - II

Title in goods
Goods transferred for Composite supplies
transferred
usage/rent/lease/constr Works contract
Supply of Goods uction Supply of Service
Supply of Service

Transaction. Supply of Good Supply of service

1 Transfer
(a) Transfer of the title in goods. Yes No
(b) Transfer of right in goods or share (undivided) in No Yes
goods without the transfer of title.
(c) Transfer of title in goods under an agreement Yes No
which stipulates that property in goods shall pass
at a future date upon payment of full
consideration as agreed
2 Land and Building
(a) Lease, tenancy, easement, licence to occupy No Yes
land
(b) Lease or letting of any building including for No Yes
business or commerce.
(Building might be a commercial, industrial or
residential complex rent out wholly or partly)
3 Treatment or process
Any treatment or process which is applied to No Yes
another person’s GoodsRs
4 Transfer of business assets
(a) Goods forming part of business are Yes No
transferred or disposed off by the owner
whether or not for a consideration.

5 Supply of services
(a) Renting of immovable property (however, No Yes
residential dwelling
is exempted from GST)
 Supply

(b) Construction of a complex, building, civil No Yes

structure or a part thereof, except where
the entire consideration has been received
after issuance of completion certificate,
where required, by the competent authority
or after its first occupation, whichever is
earlier.

(c) Temporary transfer or permitting the use or No Yes

enjoyment of any intellectual property right;

(d) Development, design, programming, No Yes

implementation of information technology
software;
(e) Agreeing to the obligation to refrain from No Yes
an act, or to tolerate an act or a situation,
or to do an act
(f) Transfer of the right to use any goods for No Yes
any purpose (whether or not for a specified
period) for cash, deferred payment or other
valuable consideration.

6 Composite supply
(a) Works contract services; No Yes
(b) Supply by way of or as part of any other No Yes
service or in any other manner whatsoever,
of goods being food or any other article for
human consumption or any drink (other than
alcoholic liquor for human consumption)

7 Supply of Goods
Supply of goods by any unincorporated Yes No
association or body of persons to a member
thereof for cash, deferred payment or other
valuable consideration.

CBIC clarification on Taxability of tenancy rights/pagadi under GST:

- Pagadi system is prelevant in some states
 Supply

- The activity of transfer of tenancy right against consideration is squarely covered under
supply of service.
- Although stamp duty and registration charges have been levied on such transfer of tenancy
rights, it would not exempt them from the scope of supply and from payment of GST.

Sec 7(2): Not withstanding anything contained in sub -section (1), Activities or transactions
- Mentioned in SCHEDULE – III or
Not a Supply

- Undertaken by CG/SG/ local authority as notified by the Government

Schedule – III [Negative list]

Activities or transactions which shall be neither treated as supply of goods nor
services.
1. Services of Funeral, burial, crematorium or mortuary including transportation of the
deceased.
2. Sale of Land and building. { After receiving the completion certificate or after its first
occupation whichever is earlier}
3. Actionable claims other than lottery, betting and gambling.
4. a) Functions performed by MPs/ MLAs/ members of Local authorities panchayats etc.
b) Duties performed by any person who holds any post in pursuance of the provisions of
the constitution.
5. Services by an Employee to employer in the course of or in relation to his employment.
• Services provided outside the ambit of employment for a consideration would
qualify as supply.
6. Services by Supreme court, any court or tribunal established under any law for the
time being in force.
7. The following paragraphs inserted vide the CGST (Amendment) Act, 2018, namely:–
Supply of goods from a place in the non-taxable territory to another place in the non-
taxable territory without such goods entering into India.
Supply of warehoused goods to any person before clearance for home consumption;
8. Supply of goods by the consignee to any other person, by endorsement of documents of
title to the goods, after the goods have been dispatched from the port of origin
located outside India but before clearance for home consumption.
 Supply

Service provided by employee to the employer

Regular Basis No GST

Employed by the
In the course Company
of employment Contract Basis No GST

Employed by the
Pay GST
Contractor
Not In the
course of Pay GST
employment

9.

Director Contractual GST is Who is liable to

relationship of liable to pay
master and pay
servant
Managing Director No Yes Company (under
RCM)
Whole-time Director Yes No Nil
Executive Director Yes No Nil
Non-Executive Directors No Yes Company (under
RCM)
Independent Directors / Nominee No Yes Company (under
Director RCM)

Fringe benefits - GST

“The compensation to employees in the form of money is not a supply.

However, fringe benefits are supply of goods or services and are liable to tax if not
exempted,” as per the CBEC clarification.

The fringe benefits are transactions in furtherance of business. “Even if supplied without
consideration, the same are deemed supply” and will attract GST.

Clarification – Inter – State movement of various modes of conveyance

- Inter-sate movement of conveyance(Trains, buses, trucks, tankers, trailers, vessels,
containers, aircrafts) between distinct persons for
Not a Supply (Except
- Carrying goods or passengers or both (or)
where movement is
- For repairs and maintenance
for further supply)
 Supply

(However GST shall be leviable on repairs and maintenance done for such repairs)
- The above clarification shall mutatis mutandis apply to inter-state movement of rigs,
tools and spares and all goods on wheels.

 (Sec – 8) Composite and Mixed Supplies:

Sec - 8

Composite Supply Mixed Supply

Treated as the supply of Treated as a supply that

principal supply attracts highest rate of tax.

Composite Supply: Means a supply made by

taxable person and
- Comprises two or more taxable supplies of goods
or services or both.
- Are naturally bundled and supplied in conjunction
with each other in the course of business.
- One of which is a principal supply.
Principal Supply: Which constitutes the
predominant element of a composite supply and to
which other supplies in the composite supply are
ancillary.
Example – 25:
A hotel provides four days and three-night package, with breakfast. This is a composite
supply as the package of accommodation facilities and breakfast is a natural combination in
the ordinary course of business for a hotel. In this case, the hotel accommodation is the
principal supply, and breakfast is ancillary to the hotel accommodation.

How to determine whether the services are bundled in the ordinary course of
business ?
- There are no straight jacket formulae to determine whether they are naturally
bundled.
- Can be ascertained from several indicators which are listed below.
• The perception of the consumer or service receiver
• If majority of service providers in a particular area provides similar
bundle of services.
• Nature of various services in a bundle
 Supply

• Single price for the package

• Elements are normally advertised as a package
• Elements are not available separately
• Elements are integral.
Printing:
Supply of Service

Printing of books,
Supply of printed
pamphlets, brochures,
envelopes, printed
annual reports,
boxes, tissues,
where content is
napkins etc. Inputs
provided by publisher,
belong to printer to
inputs including paper
print logo design etc.
used for printing

Supply of Goods
belongs to printer. Predominant supply is
supply of goods.
Printing is the
Principal supply. Supply of goods.
Supply of Service

Mixed Supply:
- Two or more individual supplies of goods or services, or any combination thereof, made in
conjunction with each other by a taxable person
- For a single price where such supply does not constitute a composite supply.
- The individual supplies are independent of each other and are not naturally bundled.
Example – 26:
Diwali gift hamper which consist of different Items like sweets, chocolates, cakes, dry fruits
packed in one pack is Mixed supply as these items can be sold separately and it shall be treated
as a supply of that particular item which attracts the highest rate of tax.
Servicing of cars:
- Involves supply of goods and services
- If they are shown separately then GST also has to be levied separately based on the
applicable rates.

Re-treading of Tyres:
- Pre-dominant element is process of re-treading
which is a Supply of service. Rubber used for re-
treading is an ancillary supply.
 Supply

- Supply of re-treaded tyres, where the old tyres belong to the supply of re-treaded
tyres, is supply of goods.

Clarification on treatment of sales promotion schemes under GST:

Free Samples Buy 1 get 1

• Not a supply since not covered • It need not to be considered as

under Schedule -1 one of the item is for free.
• Has to be conidered as both the
items are sold for same price.
• Tax has to be levied by
considering whether it is a
composite or mixed supply.

Service by way of grant of alcoholic liquor licence is neither a supply of goods

nor a supply of service:
• Government has notified the following activity
or transaction undertaken by the State
Governments in which they are engaged as
public authorities, to be treated neither as a
supply of goods nor a supply of service,
namely:-

• “Service by way of grant of alcoholic liquor

licence, against consideration in the form of
licence fee or application fee or by whatever
name it is called.”

• Circular No. 121/40/2019 GST dated 11.10.2019 has clarified that the above special
dispensation applies only to supply of service by way of grant of liquor licenses by the
State Governments as an agreement between the Centre and States and has no applicability
or precedence value in relation to grant of other licenses and privileges for a fee in other
situations, where GST is payable.

• It may be noted that services provided by the Government to business entities including
by way of grant of privileges, licences, mining rights, natural resources such as
spectrum etc. against payment of consideration in the form of fee, royalty etc. are
taxable under GST. Tax is required to be paid by the business entities on such
services under reverse charge.
 Supply

Levy of GST on the service of display of name

or placing of name plates of the donor in the
premises of charitable organisations receiving
donation or gifts from individual donors
• Individual donors provide financial help or any
other support in the form of donation or gift to
institutions such as religious institutions, charitable
organisations, schools, hospitals, orphanages, old
age homes etc.
• The recipient institutions place a name plate or
similar such acknowledgement in their premises to
express the gratitude.
• When the name of the donor is displayed in
recipient institution premises, in such a manner,
which can be said to be an expression of gratitude
and public recognition of donor’s act of philanthropy and is not aimed at giving publicity to
the donor in such manner that it would be an advertising or promotion of his business, then
it can be said that there is no supply of service for a consideration (in the form of
donation).

• There is no obligation ( quid pro quo) on part of recipient of the donation or gift to do
anything (supply a service). Therefore, there is no GST liability on such consideration.

Clarification regarding applicability of GST on the petroleum gases retained for the
manufacture of petrochemical and chemical products:

• Applicability of GST on petroleum gases, which are supplied by oil refineries to them
on a continuous basis through dedicated pipelines, while a portion of the raw material
is retained by these manufacturers (recipient of supply), and the remaining quantity
is returned to the oil refineries.
 Supply

• It is hereby clarified that, in the aforesaid cases, GST will be payable by the
refinery only on the net quantity of petroleum gases retained by the recipient.

Joint Vetures:
- JV being an unincorporated temporary association
- Agreements between members of the JV holds the key to understanding of the taxation of
transactions
Situation - 1
- There are 4 members in the JV including the operating
- Member and each one contributes Rs 100 as part of their share. A total amount of Rs 400 is
collected The operating member purchases machinery for Rs 400 for the JV to be used in oil
production. In above case, cash calls will not be subject to GST since the operating member
is not carrying out an activity for another for consideration

Situation - 2
- There are 4 members in the JV including the operating member and each one contributes Rs
100 as part of their share. A total amount of Rs 400 is collected. The operating
member thereafter uses its own machine and performs exploration and production activities on
behalf of the JV.
- In above case, the operating member uses its own machinery and is therefore providing
‘service’ within the scope of ‘supply’ because here operating member is recovering the cost
appropriated towards machinery & services from other JV members in their participating
interest ratio

- Art works sent by artists to galleries for exhibition is not a supply as no consideration flows
from the gallery to the artists
 Supply

Taxability of cost petroleum:

- When an oil exploration & production contractor gets a license/lease to explore/mine the
petroleum crude and/or natural gas from the Government, it enters into a Production Sharing
Contract (PSC) with the Government
- The relationship of the contractors with the Government is not that of partners but that
of licensor/lessor and licensee/lessee.
- The value of petroleum which the contractor is entitled to take in a year for recovery of the
contract costs is called the cost petroleum
- Further, the total value of petroleum produced and saved from the contract area in a
particular period, as reduced by cost petroleum, is called the profit petroleum
- The Government’s share of profit petroleum which is the consideration paid by the contractor
to the Central Government for the services of grant of license/lease to explore/mine petroleum
crude and/natural gas is exempt from GST
- The cost petroleum is not a consideration received by the contractor for the services
provided to Government and thus not taxable

Clarifications :

Perquisites provided in terms of contractual agreement to employee – not liable to GST

• Perquisites provided by the employer to the employee in terms of contractual agreement

entered into between the employer and the employee will not be subjected to GST.

Clarification regarding GST applicability on liquidated damages, compensation and penalty

arising out of breach of contract or other provisions of law:
to the obligation to refrain from an act
or to tolerate an act or a situation, or to do an

obligation to
refrain Agreeing Not to compete
act” has three limbs

A shopkeeper allowing a hawker to operate from the

Obligation to
common pavement in front of his shop against a monthly
tolerate
payment

Industrial unit agrees to install equipment for zero

emission/discharge at the behest of the RWA of a
neighbouring residential complex against a consideration
Obligation to
paid by such RWA, even though the emission/discharge
do
“Agreeing

from the industrial unit was within permissible limits and

there was no legal obligation upon the individual unit to
do so
 Supply

• Above Three activities must be under an agreement or Contract

• It Must be Independent arrangement in its own right
• Such arrangement/agreement can take the form of an independent stand- alone contract
or may form part of another contract.
• A contract cannot be imagined or presumed to exist just because there is a flow of money
from one party to another. There must be an expressed or implied promise by the
recipient of money to agree to do or abstain from doing something in return for the
money paid
• Consideration must flow in return to this contract/agreement

Liquidated Damages:

1. Where the amount paid as ‘liquidated damages’ is an amount paid only to compensate for
injury, loss or damage suffered by the aggrieved party due to breach of the contract and
there is no agreement, express or implied, by the aggrieved party receiving the liquidated
damages, to refrain from or tolerate an act or to do anything for the party paying the
liquidated damages.
2. In such cases liquidated damages are merely a flow of money from the party who causes
breach of the contract to the party who suffers loss or damage due to such breach. Such
payments do not constitute consideration for a supply and are not taxable
3. On the contrary amounts paid for acceptance of late payment, early termination of lease or
for pre-payment of loan or the amounts forfeited on cancellation of service by the
customer as contemplated by the contract as part of commercial terms agreed to by the
parties, constitute consideration for the supply of a facility, namely, of acceptance of late
payment, early termination of a lease agreement, of prepayment of loan and of making
arrangements for the intended supply by the tour operator respectively. Therefore, such
payments, even though they may be referred to as fine or penalty, are actually
payments that amount to consideration for supply, and are subject to GST, in cases where
such supply is taxable.

Examples – Damages – Not a Supply Examples – Damages – Considered as Supply

(1) damages resulting from damage to (1) A contract may provide that
property, negligence, piracy, payment by the recipient of goods or
unauthorized use of trade name, services shall be made before a
copyright, certain date and failure to make
(2) penalty stipulated in a contract for payment by the due date shall
delayed construction of houses, attract late fee or penalty.
(3) forfeiture of earnest money by a (2) A contract for transport of
seller in case of breach of ‘an passengers may stipulate that the
agreement to sell’ an immovable ticket amount shall be partly or wholly
property by the buyer or by forfeited if the passenger does not
Government or local authority in the show up.
event of a successful bidder failing to (3) A contract for package tour may
act after winning the bid, for stipulate forfeiture of security deposit
allotment of natural resources. in the event of cancellation of tour
by the customer.
 Supply

(4) A contract for lease of movable or

immovable property may stipulate that
the lessee shall not terminate the
lease before a certain period and if he
does so he will have to pay certain
amount as early termination fee or
penalty.

Cheque dishonor fine/ penalty:

• There is never an implied or express offer or willingness on part of the supplier that he
would tolerate deposit of an invalid, fake or unworthy instrument of payment against
consideration in the form of cheque dishonour fine or penalty
• The fine or penalty that the supplier or a banker imposes, for dishonour of a cheque, is
a penalty imposed not for tolerating the act but for deterring and discouraging such an
act or situation. Therefore, cheque dishonor fine or penalty is not a consideration for any
service and not taxable
Penalty Imposed for Violation of laws:
• Fines and penalty chargeable by Government or a local authority imposed for violation of a
statute, bye-laws, rules or regulations are not leviable to tax
Forfeiture of salary or payment of bond amount in the event of the employee leaving the
employment before the minimum agreed period
- These clauses are incorporated in the employment contract to discourage non-serious
candidates from taking up employment
- amounts are recovered by the employer not as a consideration for tolerating the act
- The employee does not get anything in return from the employer against payment of such
amounts
- Such amounts not taxable
Late payment Surcharge or fee:
- Almost all service providers across the world provide the facility of accepting late payments
with late fine or penalty.
- Even if this service is described as a service of tolerating the act of late payment, it is an
ancillary supply naturally bundled and supplied in conjunction with the principal supply, and
therefore should be assessed as the principal supply.
- Since it is ancillary to and naturally bundled with the principal supply such as of
electricity, water, telecommunication, cooking gas, insurance etc. it should be assessed at
the same rate as the principal supply.
- However, the same cannot be said of cheque dishonor fine or penalty as discussed
earlier.
Fixed Charges for Power:
 Supply

- The fact that the minimum fixed charges remain the same whether electricity is consumed
or not or it is scheduled/consumed below the contracted or available capacity or a minimum
threshold, does not mean that minimum fixed charge or part of it is a charge for
tolerating the act of not scheduling or consuming the minimum the contracted or
available capacity or a minimum threshold
- Both the components of the price, the minimum fixed charges/capacity charges and the
variable/energy charges are charged for sale of electricity and are thus not taxable as
electricity is exempt from GST.
Cancellation Charges:
- Cancellation fee can be considered as the charges for the costs involved in making
arrangements for the intended supply and the costs involved in cancellation of the supply
- Services such as transportation travel and tour constitute a bundle of services. The
transportation service, for instance, starts with booking of the ticket for travel and
lasts at least till exit of the passenger from the destination terminal, all this constitutes
a composite supply.
- The facilitation service of allowing cancellation against payment of cancellation charges is
also a natural part of this bundle
- Therefore, facilitation supply of allowing cancellation of an intended supply against payment
of cancellation fee or retention or forfeiture of a part or whole of the consideration or
security deposit in such cases should be assessed as the principal supply
 Charge
G
S
T

 Central Tax[2(21)] – CGST

 Integrated Tax: [2(58)] - IGST
 State Tax: [2(104] - SGST
 Exempt Supply [2(47)]:
- Means the supply of any goods or services or both which attracts NIL rate of tax or wholly
exempt from tax.
 Taxable supply [2(108)]:
- Means the supply of goods or services or both which is chargeable to tax.
 Non -Taxable supply [2(78)]:
- Means the supply of goods or services or both which is not leviable to tax.
 Reverse charge [2(98)]:
- Means the liability to pay tax is by the recipient of supply of goods or services or both,
Instead of the supplier.

India [2(56)]: - Means

 Territory of India as referred to in
article- 1 of the Constitution
 Territorial waters
 Seabed and subsoil underlying such
waters
 Continental Shelf
 Exclusive Economic Zone & other
Maritime Zone
 Air space above its territory and
territorial waters
 Territorial waters = 12 nm
 Exclusive economic zone is upto 200 nm
from the baseline.
 Charge

Territorial
Waters High Sea
Contiguous
(TWI)
Zone

Exclusive Economic Zone

s
Baseline

Continental Shelf

• UTGST Act: Applicable to Union territories.

- Union territories – Andaman & Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli Daman
& Diu, Chandigarh, and Ladakh

• Reverse charge:
- Means the liability to pay tax by the recipient of supply of goods or services or both
instead of the supplier of such goods or services or both under section 9(3)/9(4), or under
section 5(3)/5(4) of the IGST Act

 Special category states:

- Tripura
- Arunachal pradesh

- Assam - Manipur
- Uttarakhand - Sikkim - Meghalaya
- Jammu & Kashmir - Mizoram
- Nagaland
- Himachal pradesh
 Charge

 Aggregate turnover:

Includes Excludes
Turnover
will be - Taxable supplies
computed
pan wise. - Exempt supplies - CGST/ SGST/ UTGST/
- Exports IGST/ Cess
- Supplies made on behalf - Value of inward supplies
of principial on which tax payable under
reverse charge.
- Interstate supplies
between distinct persons

• Aggregate turnover includes all the other Indirect taxes except CGST/ SGST UTGST
/IGST /CESS

Sec 7 of IGST Act: Inter state Supply:

• 7(1) and 7(3) Supply of goods/ services when location of the supplier and the place of
supply are in two different States / UTs or state and a UT
• 7(2) & 7(4) Supply of goods/ services imported into the territory of India till they cross
customs frontiers of India
• 7(5) Supplier located in India and the place of supply is outside India
• 7(5) Supply to/by an SEZ developer or SEZ unit
• 7(5) Supply in the taxable territory, not being an intra-State supply & not specified
anywhere

Sec 8 of IGST Act: Intra State Supply:

• 8(1) and 8(2) Supply of goods/ services when location of the supplier and the place of
supply are in same State or same UT
However the following are not Intra state supplies
✓ Supply to/by an SEZ developer or SEZ unit
✓ Goods Imported into India till they cross customs frontier

• Establishments of same entity shall be considered as establishments of distinct persons

where a person has:
✓ an establishment in India and any other establishment outside India;
✓ an establishment in a State or Union territory and any other establishment
outside that State or Union territory; or
 Charge

✓ an establishment in a State or Union territory and any other establishment

registered within that State or Union territory.

• Levy & Collection [Sec – 9]:

 Sec 9(1):
A tax named CGST will be levied on Intra- State supplies (Except alcoholic liquor for
human consumption).

- Tax will be levied on the value of supply determined as per Sec – 15. (Discussed in
Chapter – 5b).
- Tax will be levied by using the rates notified by Government, however the maximum
rate of tax is 20%. (i.e., CGST + SGST cannot be more than 40%).

 Sec 9(2):
- GST on HP MAN (Petroleum products) can be levied only from the date notified by
Government on recommendations of GST Council.

 Sec 9(3):
- On certain notified categories of supply, Reverse charge is applicable. (i.e., buyer has
to pay the taxes instead of seller).
- 11 Services and certain goods were notified till now under RCM.

 Goods on Which RCM applicable:

S.No Description of supply of goods Supplier of goods Recipient of Goods

.
1 Cashew nuts not shelled or Agriculturist Any registered person.
peeled. Recipient of goods is liable to pay
GST.
2 Bidi wrapper leaves (tendu) Agriculturist Any registered person.
Recipient of goods is liable to pay
GST.
3 Tobacco leaves Agriculturist Any registered person.
Recipient of goods is liable to pay
GST.
4 Supply of lottery State Government, Lottery distributor or selling
Union Territory or agent.
any local authority Distributor or selling agent is
liable to pay GST.
5 Silk yarn Any person who Any registered person.
manufactures silk Recipient of goods is liable to pay
yarn from raw silk or GST.
silkworm cocoons for
 Charge

supply of silk yarn.

6 Used vehicles, seized and Central Any registered person.

confiscated goods, old and Government, State Recipient of goods is liable to pay
used goods, waste and Government, Union GST.
scrap. territory or a local
authority.
7 Raw Cotton Agriculturist Any registered person

8. Priority Sector Lending Any Any registered

Certificate registered person
person

Services on Which RCM applicable:

1. Supply of services of “Music composer”,
Photographer, etc by way of transfer or permitting
the use or enjoyment of Copyright.
If a Music composer or photographer provides supply to
Publisher or Music Company located in taxable territory – RCM
is applicable.

2. Services provided by way of renting of Motor vehicle to a

body corporate located in taxable territory by any person
other than body corporate paying GST @ 5%.
- Motor vehicle is designed to carry the passengers
- Fuel cost is included in the consideration charged from the
recipient.

3. Services supplied by “Arbitral Tribunal” to a business entity.

- Supplies made by Arbitral tribunal to a business entity located in
taxable territory are covered under RCM.

4. Services supplied by an “Author” by way of permitting the use or

enjoyment of copyright.
A publisher located in the taxable territory has to pay GST on RCM
RCM is not applicable in the following cases.
➢ Author registered
➢ Author files a declaration exercises the right to pay
 Charge

tax under forward charge with in the time limit

➢ Not to withdraw the option with in a period of 1 year from date of exercising
the option.
➢ Has to comply with all other provisions applicable

5. Services supplied by “Director”.

- Supply of services by a Director to Company/Body corporate
located in taxable territory – RCM is applicable.

6. Services supplied by “Direct selling agents” to Banks and

NBFCs:
- Services supplied by Individual Direct selling agents (Other
than Body corporates, Firm, LLP) to a Banking company or NBFC located in taxable
territory – RCM is applicable.

7. (A) Services Supplied by Central/State “Government”, Union

territories, Local authority to a business entity.

Services supplied by Government to a

Business entity located in taxable territory
are covered under RCM except the
following:

- Renting of Immovable property

- Services related to Air craft or vessel in
port/Airport
- Transport of goods and passengers

- Services by Department of posts such as Speed

post, Express post, Parcel Post,Life Insurance and
agency services to a person other than Govt.
 Charge

S. Nature of service Taxability Who is liable Remarks

No. to pay
(i) Speed Post Service Exempted NA Coved under entry
provided by Department of supply no. 8 of exemption
Post to Government list.
(ii) Express Parcel Post Services Taxable Dept. of Not covered under
by Department of Post supply Post RCM
provided to a business entity (not specially
exempted)
(iii) Services in relation to an Taxable Supplier of Not covered under
aircraft or a vessel, inside or supply service RCM
outside the precincts of a port (also not exempted)
or an airport.
(iv) Transport of goods or Taxable Supplier of -do-
passengers supply service
(v) Renting of immovable property Taxable Supplier of Not covered under
for commercial nature to Service (i.e. RCM and also not
Business Entity whose turnover supply
in the P.Y.is Rs 18 lakh. Govt. or Local covered under any
Authority) exemption.
(vi) Other services provided to Exempted NA Covered under entry
business entity whose P.Y. supply no. 7 and hence
turnover is Rs 8 lakh. exempted from GST.

(vii) Other services provided to Taxabl Business entity Covered under RCM.
business entity whose P.Y. e being recipient It is not covered
turnover is Rs 22 lakh. supply is liable to pay under any
GST exemptions.

7. (B) Renting of Immovable Property Services Supplied by any person to any registered person.
- Supply of service being RENTING of IMMOVABLE property by government to a registered
person is covered under RCM.
8. Supply of Services by a “Goods Transport Agency” (GTA):

Specified recepient

• Factory - Regd under Factories Act

• Society - Regd under Societies Act
• Cooperative society established by or under any law.
• Body corporate established under any law
• Firm - Regd under Partnership Act
• Casual taxable person
• Any person registered under GST
 Charge

Specified Recepient - RCM applicable

Irrespective Recepient Unregistered Individual (End

Person liable to pay consumer)
of Tax rate
tax under GTA
opted EXEMPT

Recepient - Department or Establishment of

CG/SG, Local Authority - Exempt

Where GTA (Supplier) is registered and Issuing tax Invoice – Option to pay tax under FCM
allowed

9. Services supplied by “Insurance agent”:

Services supplied by an Insurance agent to any person carrying on Insurance business located
in the taxable territory – RCM is applicable.

10. Services supplied by “Recovery agent”:

Services supplied by a recovery agent to a banking company, financial institution or NBFC
located in a taxable territory – RCM applicable.

11. Services supplied by Members of overseeing committee to “RBI”:

Services supplied by members of overseeing committee to RBI –
RCM applicable.

12. Services supplied by “Lawyers”

Services supplied by an Individual Advocate including a Senior
advocate or firm of Advocates to any business entity located in
taxable territory – RCM applicable.

13. Long term Lease of Land :

Long term lease of land by any person against consideration in the form of upfront amount
and/or periodic rent for construction of a project by promoter, in that case GST is
payable by promoter under RCM.

14. Services provided by way of “Sponsorship” to any body corporate or FIRM:

Any person providing sponsorship services to any Body corporate or partnership firm
located in taxable territory - RCM
 Charge

GT Jewellers Ltd. paid Rs 50 lakhs for sponsorship of Miss India beauty pageant in Mumbai to
a Stylish & Co., a partnership firm. It is taxable supply, if so who is liable to pay GST ?

15. Services of lending Securities under securities lending scheme.

• Borrower has to pay tax under RCM.
• Borrower means the person who borrows the secuirites under the secheme.
16. Security services provided by any person other than a body corporate to a registered
person located in the taxable territory.
- However RCM is not applicable if the service receiver is
a. Department or Establishment of SG/CG
b. Local authority
c. Governmental authorities
d. A registered person paying tax under composition scheme.
17. Services provided by “Business facilitator” to a Banking company located in taxable territory
18. Services provided by “an agent of Business correspondent” to a Business correspondent
located in taxable territory
19. Services supplied by any person by way of transfer of development rights or Floor Space
Index (FSI) (including additional FSI) for construction of a project by a promoter.
20. Any service supplied by any person who is located in a non- taxable territory to any person
other than non- taxable online recipient.
21. Services supplied by a person located in non- taxable territory by way of transportation of
goods by a vessel from a place outside India up to the customs station of clearance in
India to an Importer, located in the taxable territory.

 Sec 9(4):
The government, on recommendations of council, by notification, will specify the class of
persons, in respect of supply of specified categories of goods and services or both received
from unregistered supplier has to pay tax on reverse charge basis.

The Central Government vide Notification No. 07/2019-Central Tax (R), dated 29th March
2019 has notified that the registered person specified below shall in respect of supply of
specified goods or services or both received from an unregistered supplier shall pay tax
on reverse charge basis as recipient of such goods or services.

GST on Real Estate Sector:

The effective rate of GST on real estate sector for the new projects by promoters are as
follows:

(i) 1% without ITC on construction of affordable houses (area 60 sqm in metros/ 90

sqm in non-metros and value upto Rs 45 lakh).
(ii) 5% without ITC is applicable on construction of:
(a) all houses other than affordable houses, and
(b) commercial apartments such as shops, offices etc. in a residential real estate
project (RREP) in which the carpet area of commercial apartments is not more
 Charge

than 15% of total carpet area of all apartments.

Conditions:
Above tax rates shall be available subject to following conditions:

(a) ITC shall not be available.

(b) 80% of inputs and input services [other than services by way of grant of development rights,
long term lease of land (against upfront payment in the form of premium, salami, development
charges etc.) or FSI (including additional FSI), electricity, high speed diesel, motor spirit,
natural gas], used in supplying the service shall be purchased from registered persons16.
However, if value of inputs and input services purchased from registered supplier is less than
80%, promoter has to pay GST on reverse charge basis, under section 9(4) of the

CGST Act [discussed earlier], at the rate of 18% on all such inward supplies (to the extent
short of 80% of the inward supplies from registered supplier).

Further, where cement is received from an unregistered person, the promoter shall pay tax on
supply of such cement on reverse charge basis, under section 9(4) of the CGST Act, at the
applicable rate which is 28% (CGST 14% + SGST 14%) at present.
Moreover, GST on capital goods shall be paid by the promoter on reverse charge basis

 Sec 9(5):
- On recommendations from the council, Government by notification, specify the categories
of services (is sentence incomplete?) the tax on Intra-state supplies is paid by the e-
commerce operator.
- If e commerce operator does not have a physical presence, nor doesn’t even have a
representative in India, then he has to appoint a person to pay the taxes.

Service Original Recipient Tax payable

Supplier by

Services by way of transportation of Driver Any person. ECO

passengers by a radio-taxi, motorcab, (ECO).
maxicab and motor cycle;
+ OMNI bus or any other Motor
vehicle

Services by way of providing Unregistered Any person. ECO

accommodation in hotels, inns, guest person
houses, clubs, campsites meant
for Supplying
residential or lodging purposes, except services
where the person supplying such service through ECO.
through electronic commerce operator
is liable for registration
 Charge

services by way of house-keeping, such Unregistered Any person ECO

as plumbing, carpentering etc person
Supplying
services
through ECO

Supply of services by Restuarants, Restaurant Any Person ECO

Eating joints. (Other than those
supplying from specified premises)

Specified Premises - Where Hotel

accommodation is available and tariff
> 7500 per day

Example:
Reon operating radio taxi services in India. In the month of Nov 2017, the following
services are rendered by it:
(a) Free services provided to new customers who travelled for the first time. However,
payment made to taxi drivers Rs 10,00,000.
(b) Hire charges collected from customers Rs 12,25,500. Payment made to taxi drivers
Rs 11,00,000.
Reon appointed X Pvt. Ltd., as their representative in India. Person liable to pay GST is
willing to avail exemption if any.
You are required to find:
a) Who is liable to pay GST.
b) Taxable value of supply.
c) Net GST liability.

 Clarification of Cut pieces of fabrics under GST:

- Mere cutting and packing of fabrics into pieces of different lengths from bundles or
thans, will not change the nature.
 Charge

 Composition Levy [Sec 10(1)]:

Composition levy for Goods
- Objective is to bring simplicity and relax the compliances.
- A registered person with an aggregate turnover in the preceding financial year does not
exceed Rs 1.5 crore (Normal states), Rs 75 lakhs (SPL category states except J&K,
Assam and Himachal pradesh.) are eligible for this scheme.
- Aggregate turnover for the purpose of compositions scheme:

Includes Excludes

- CGST/ SGST/ UTGST/ IGST/

- Taxable supplies Cess
- Exempt supplies - Value of inward supplies on
- Exports which tax payable under reverse
- Supplies made on behalf of charge.
principial - Value of exempt supply of
- Interstate supplies between services provided by way of
distinct persons extending deposits, loans or
advances in so far as the
consideration is represented by
way of interest or discount

- The turnover will be computed PAN wise.

- The partner and partnership firm will have different PAN Nos. Thus the turnover of
the partner and partnership firm will not be aggregated.
- The HUF and individual coparcener of the family have different PAN Nos. Hence,
turnover of Karta of HUF in his individual capacity and turnover of Karta as a
Karta of HUF will not be aggregated.
- It means turnover limit for J&K, Assam and Himachal Pradesh is also 1.5 crores.
- Amendment: A registered person who is in supply of services also can opt for
composition scheme if the services provided are of specified value.
- Specified value: 10% of turnover in the state/UT in the preceding financial year or Rs
5L, whichever is higher.
- While computing value of services [other than restaurant services] as referred in the
above proviso, interest on loans/deposit/advances shall not be taken into account.
 10 (2A) of CGSTL: Composition Scheme for Services
✓ Eligibility:
- Person in eligible for composition scheme u/s 10(1) and turnover is < 50 Lakhs.
 Charge

- Turnover of state:

Includes Excludes

- Supplies from 1st April of a FY up

to the date when such person
becomes liable for registration
- Taxable supplies within state
under this Act
- Exempt supplies within state
- CGST/ SGST/ UTGST/ IGST/
- Exports Cess
- Supplies made on behalf of - Value of inward supplies on which
principial tax payable under reverse charge.
- Interstate supplies between - Value of exempt supply of
distinct persons services provided by way of
extending deposits, loans or
advances in so far as the
consideration is represented by way
of interest or discount

- For trader Exempt supplies will not be taken into consideration

R
a
t
e Manufacturers - Other than
notified - 0.5% of turnover in
the State/UT
O
f Supply of food for human
consumption - 2.5% of turnover
in the State/UT
t
Any other person eligible for
a composition levy - 0.5% of
x turnover of taxable supplies.
e
s Registred persons not eligilble for
composition levy (10(2A) - 3% of
TO of supplies of G&S

NOTIFIED MANFACTURES

- Tobacco
- Ice cream
- PAN masala
- Fly ash bricks/building blocks,Roof tiles
 Charge

- Aerated water
- A person who is going for new registration can opt for Composition levy by Intimating in
Part – B of GST registration form. (GST – REG -01)
- A registered person who wishes to opt for composition levy has to file an intimation
within 60 days from the commencement of financial year.
- A person who filed intimation shall also has to furnish the following details within a
period of 90 days from the date of intimation electronically.
• Details of Stock lying (FG, WIP, RM)
• as on the day preceding the date which he opts for composition levy.

 Conditions
- Sec 9 (3) & 9 (4) has overriding effect which means even a person opts for composition
scheme he has to pay taxes at normal rates if RCM is applicable on his inward supplies.
- A person registered under Composition scheme cannot collect tax on supplies.
- He cannot enter into credit chain. (credit cannot be passed on, he acts as a barrier to
the seam less flow of credit).
- He has to mention “Composition taxable person” on every notice or signboard displayed.

 Ineligible persons for composition scheme for both sec 10(1) & 10(2A)
- Supplier of Services (exceeding the specified value) other than supplier of food articles
- Person who has Stock purchased from unregistered persons
- Supplier of Inter-state outward supplies of goods
- Manufacturer of Notified goods. (TIP)
- Person making Non-taxable supplies.
- Non-resident taxable persons & Casual Taxable persons
- Person supplying goods through an E-commerce operator.

 Validity of Composition Levy:

- The Option exercised is valid until he satisfies all the conditions.
- The option taken will be lapsed from the day his turnover exceeds the threshold limit (1
crore/75 lakhs)
- From the day he ceases to satisfy any of the conditions mentioned, he has to charge
taxes at normal rates and should issue a tax invoice.
- He is eligible to take credit related to the stock lying as on the day he violates any
condition mentioned.

If a person has units in different states then all the units should opt for composition Scheme,
If one unit becomes ineligible all the other units also become ineligible. (Since PAN Specific).

Clarification: If a person is having Interest income, due to extension of deposits, loans are
advances which are exempted, the same should not be considered in calculating the turnover.

Composition Scheme
 Charge

Goods + Restaurant Services u/s 10(1) Services (Except restaurant services) u/s 10(2A)
A Registered person with an aggregate Person with a TO – 5OL
TO - 1.5 Cr (Normal states) And who is in eligible for sec 10(1)
A Registered persom with an aggregate
TO – 75L (Special states except J&K,
Assam, HP

Even a service provider can come under this No such sub limit for goods.
scheme provided it should be within the
sublimit.
- 10% of state TO (OR)
- 5L
Whichever is higher
Tax rates Tax rates
Manufacturer – 1% (CGST+SGST)on State TO CGST – 3%
Restaurant - 5% (CGST+SGST) on State TO SGST – 3%
Other retailers- 1% (CGST+SGST) on TO of On state TO
taxable supplies

RCM for supply services - Summary

Supply of service Supplier Recipient Conditions

Music composer, Author, Composer or To publisher or Music Transfer or usage of

Photographer photographer company copyright

Renting of motor Any person other Body corporate in Tax rate – 5%

vehicles to passengers than body Taxable territory Fuel cost included in
corporate consideration
Arbitral tribunal Arbitral tribunal Any business entity
services -

Author permitting the Author Publisher in TT Author can pay tax

use of copyright FCM as well If
He is registered and files
a Declaration.
Director services Director Company in TT
-

Direct selling agent Individual direct Bank or NBFC in TT Applicable only when if
services selling agent DSA is an Individual

Government services CG, SG, UT, LA Business entity in TT RCM not applicable if
1. Renting of immovable
Property
2. Transportation
3. Services related
aircraft
 Charge

Or vessel
4. Department of Post

Renting of immovable Any Person Registered person in

property TT -

Goods transport agency GTA Specified recipient Tax rate Opted – 5%

services (Note 1) GTA Can opt 12% and pay
tax under FCM
Insurance services Insurance agent Insurance company in
TT

Recovery agent services Recovery agent Bank or NBFC or

Financial
institution
Members of RBI Members RBI
overseeing committee

Lawyer services Any lawyer Business entity in TT

Long term lease of land Land owner Promoter in TT

Sponsorship services Any person Body corporate or

partnership firm in
TT
Lending of securities Intermidiary Borrower in TT

Security services Any person other Registered person in Exempted if the services
than TT Provided to Government or
Body corporate person registered un
composition
scheme
Business facilitator Business facilitator Bank in TT
services

Business correspondent Agent of business Business

services correspondent correspondent in TT

Development rights or Any person ( land Promoter in TT

Floor Space Index (FSI) Owner)
Services
Services from outside Any person Any person other
India located in non than non taxable
taxable territory online recipient
 Exemptions
G
S
T

Exempt Supply Non-Taxable supply

Defined u/s 2(47) of CGST Act Defined u/s 2(47) of CGST Act
Supply of goods and services or both which Supply of goods and services are both which
attracts nil rate of tax or which are wholly are not leviable to tax.
exempt from tax and includes non-taxable
supplies.

Eg: Health services, Education services. Eg: Alcohol for Human Consumption,
petroleum products

Power to grant exemption from tax Sec 11 of the CGST Act/Sec 6 of IGST Act:

11(1) 11(2)

•Exemption by way of notification •Exemption by way of special order

•Issued in Public intrest •Issued in Public intrest
•General exemption •Under circumstances of exceptional
nature.

11(3):

Any explanation inserted within 1 year, for the purpose of clarifying the scope or applicability of
any notification/order, to have retrospective effect. (i.e explanation issued at a later date also
has to be considered as issued on the date of issue of exemption notification/order)
 Exemptions

 Charitable & Religious activity related services:

In relation to
- Public Health
Entity registered u/s (Care or counseling or
Providing Chartitable
12AA / 12AB/10(23C) Public awareness/ Family
Acivities
of the Income tax Act planning)
- Advancement of Relegion
- Education (Note -1)
- Environment
- Spitual, Yoga
CHARITABLE & RELEGIOUS ACTIVITY

KMVN
Specified Organisation (Uttarakhand Govt U.T)
Religious Piligrimage
providing services in
(Notified Organisations)
RELATED SERVICES

respect to
Haj committee's

Conducting Religious By a person authorized by

cermony such relegious texts

Except
Sevices by a person by
way of Renting of Rooms
Renting of religious - > ₹ 1,000 per day
premises - owned &
Premises, Kalyanamandaps
managed by a
12AA/12AB entity - > 10,000 per day
Renting shops
- > 10,000 per month

Arts or Culture (or)

Services by way of Recreational activity. Sports by Charitable
training or coaching (Being) entities (Reg u/s
12AA/AB)

12AA/ 12AB means – 12AA/12AB as per Income Tax Act 1961

 Exemptions

Note-1:
- Educational institutions run by charitable trusts for
• Abondoned
• Orphons
• Homeless (or)
• Persons over age of 65 years or above residimg in a rural area will be considered as
charitable activities.

 Points to be noted
- Services provided by charitable and religious trusts, which are not covered under charitable
activities are liable to GST.
- KMVN – Kumaon Mandal Vikas Nigam limited
- Residential programs or camps where the fee charged includes cost of lodging and boarding
shall also be exempt as long as the predominant activity is advancement of relegion,
spirituality, yoga.
- Services provided to charitable or religious trusts were not exempted unless covered
specifically.
- Recreational activites in the areas other than arts, culture or sports are taxable.

 Clarification:
- Hostel accomodation services provided by trusts to students do not fall with in the ambit of
charitable activities as defined above.

Example:
Ananda Trust, an entity registered under section 12AA of the Income-tax Act, 1961, has
furnished you the following details with respect to the activities undertaken by it. You are
required to compute its tax liability from the information given below:
Particulars Rs
Amount received for the Yoga camps organized for elderly people 4,83,000
Payment made for the services received from a service provider located in US, 5,50,000
for the purposes of
providing ‘charitable activities’
Amount received for counseling of mentally disabled persons 10,50,000
Amount received for renting of commercial property owned by the trust 1,50,000
Amount received for activities relating to preservation of forests and wildlife 12,35,000

Note: Applicable CGST 9% and SGST 9% have been charged separately wherever applicable.
Ananda Trust is not eligible for composition levy.

Particulars Rs
Amount received for the Yoga camps organized for elderly people Exempted supply
Payment made for the services received from a service provider located in Exempted supply
US, for the
 Exemptions

purposes of providing ‘charitable activities’

Amount received for counseling of mentally disabled persons Exempted supply

Amount received for renting of commercial property owned by the trust 1,50,000
Amount received for activities relating to preservation of forests and Exempted supply
wildlife
CGST 9% x 1,50,000 13,500
SGST 9% x 1,50,000 13,500
Total GST liability 27,000

 Services by an Artist: - Services by an artist by way of a

Performance in folk or classical

art form of

Dance
Music

Theatr
e

are exempted if the

consideration charged is <
1,50,000.

If the consideration charged is more than 1,50,000

then entire consideration is taxable.
 Exemptions

 Health care services:

Health care of Animals,

HEALTH CARE SERVICES

By Veternary Clinic
Birds

Services provided by way

of Transportation of
patient in an Amubulance

Health care services. by an Medical practitioner

By a clinical establishment or para-medics

 Points to be Noted:
- Ambulance service provided by private service providers on behalf of SG’s against
consideration in the form of fee from SG, since ambulance services are activity in relation
to functions entrusted to muncipalities under Article 243G and 243W would be exempted.
- Health care services means any service by way of diagnosis or treatment for illness, injury,
abnormality, in any recognised system of medicines in India.
- Health care services does not include hair transplant or cosmetic or plastic surgery, except
when undertaken to restore or to reconstruct anatomy or functions of body affected.
- Recognised system of medicines in India:
 A - Ayurvedic
 N - Naturopathy
 A - Allopathy
 S - Siddha
 U - Unani
 Y – Yoga
 A – Any other system of medicine recognised. (Homeopathy).
- Paramedics are trained health care professionals. (Nursing Staff, Physiotherapists etc).

 Clarifications:
- Rent of rooms other than ICU provided to in-patients in Hospital less than RS.5000 per
day are exempted and
- Senior doctors/ specialists hired by hospital to provide service to patients. They are also
covered under Health care services – hence Exempted.
- Out of the fees collected from patients a part will be paid to senior doctors/specialists and
the balance will be retained by hospitals – Both Exempted.
- Food Supplied in hospital canteens:
 Exemptions

Food supplied
to patients/
doctors

By Own By Out sourced

Canteens person

To Doctors, To Out patients To In patients

Staff - GST and Visitors - (advised by GST Applicable
Applicable GST applicable Doctor) Exempt

 Entry to various events:

• Museum
• National park
Services by
• Wildlife Sanctuary
way of Exempted
• Tiger Reserve
Admission to
• Zoo
• Protected Monuments

• Circus, drama, theatrical/Musical If

Services by Performance. consideration
way of
• Award function, concert, sporting event. charged is <
Admission to
• Planteorium 500
 Exemptions

Education services :

 Points to be Noted:
- Services provided by Private coaching centres, unrecognised institutions were taxable.
- Central and state Educational boards shall be treated as “Educational Institutions” for the
limited purpose of providing services by way of conducting exams.
- Boarding schools – Education + Hostel facility = Composite supply, Principal supply is
education hence no GST.
- Hobby classes, extra-curricular activities in furtherance of overall well-being is an example
of natural bundled, Hence No GST.
- Vocational educational courses means – ITI courses. (Private ITI if approved and
government it is) / Skill development courses.
 Exemptions

- Maritime training institutes and their courses are approved by director of shipping,
therefore these institutes are educational institutions and the courses conducted by them
are exempted from GST subject to fulfilment of other conditions.

- College Hostel or Mess facility.

Owned and maintained by

Educational Institution
Provided to Faculty,
Catering Services

Staff, students -
Exempt.

Provided to faculty,
Staff, Students - Exempt

3rd party to Eductaional

Outsourced to 3rd party Institution is
taxable.(Exempted upto
12th)

- All long duration programs (one year or more) conferring diploma as recommended by
board of governors as per the power vested in them under the IIM act, 2017
include one year post graduate programs for executives – EXEMPT from GST
- All short duration executive (less than one year) development programs or need
based specially defined programs which are not a qualification recognised by law –
TAXABLE under GST

 Electricity:

Transmission/distribution of electricity by a transmission/distribution utility exempt from tax.

The following charges collected by distribution Company are taxable.
- Application fee for electricity connection.
- Rental Charges against metering equipment.
- Testing fee for meters/transformers, capacitators, etc.
- Labour charges from customers for shifting of meters or shifting of service lines.
- Charges for duplicate bill.

Electricity transmission or distribution utility means

- The central or state electricity authority or the central or state transmission
utility notified under the Electricity act, 2003
- Or any entity entrusted with such function by central government or, as the case
may be the state government.
 Exemptions

 Legal Services:

Any Person other than

Business Entity

Business entity (σ 𝑻. 𝑶 ≤
- Arbitral Tribunal during the preceeding FY
- Senior Advocate such amount as it makes
eligible for exemption)

Legal Services CG/SG/UT/LA/Govt

Entity

- Partnership firm
An Advocate or
of Advocates
Partnership of
- Advocate Advocates.

 Leasing Services:
- Upfront amount payable in respect of service by way of granting of long term lease of
30 years or more for development of infrastructure for financial business by the SG/CG
or corporations – Exempt.
- Services of leasing of assets by the Indian Railways finance corporation to Indian
railways
 Renting Services:
- Services by way of renting of residential dwelling for use as residence where the
residential dwelling is rented to a registered person is Exempt.

By way of reimbursement of charges or share of

contribution
Unincorporated body or Non

-As a trade union

Services provided by

-Profit entity to its

- provison of exempted activity

- housing society up to an amount of Rs 7,500
members

p.m (NOTE)

- Engaged in activities relating to welfare of

labour, farmers.
- promotion of trade , commerce, art, literature,
sports etc. (NOTE)
 Exemptions

 Services provided by Unincorporated body or Non -Profit entity

Services provided by Unincorporated body or Non -Profit entity to its members against
consideration in the form of membership fee upto an amount of RS.1000 per member per
year

 Agriculture related services:

Services provided by way of :
- Loading, unloading, packing, storage, or warehousing of rice/Agricultural produce.
- Warehousing of minor forest produce.
- Artificial Insemination of livestock (Other than
Horses)
- Services by way of pre-conditioning, precooling,
ripening, waxing, retail packing, labelling of
fruits and vegetables.
- Services relating to cultivation of plants and
rearing of animals(except horses) by way of :
 Agricultural operations directly related to
production.
 Supply of farm labour
- Processes carried out at an agricultural farm which doesn’t alter its charecterstics.
 Renting or leasing of agro machinery or vacant land.
 Agricultural extension services.
 Services provided by Agricultural produce marketing committee.
- Job work in relation to cultivation and rearing of animals except horses.

 Points to be noted:
➢ The term Agricultural produce cover only the process which were done by the cultivator
and doesn’t alter its essential characteristics.
➢ On the following processes GST applicable
✓ Processes which alters essential characteristics. (Ketchup, Potato chips.)
✓ Marketing agricultural produce in the retail market.

 Clarifications:
 TEA:
- On green tea leaves, certain processes (drying, rolling, shaping, refining oxidation,
packing etc) were carried to make it green tea, black tea etc.
- Green tea leaves were “agricultural produce” eligible for exemption, not the green tea,
black tea.
 Jaggery:
- Conversion of sugarcane in to jaggery, jaggery is not an agricultural produce.
 Pulses:
 Exemptions

- Dehusking or splitting both. The process of dehusking is not usually carried out by
farmers. Hence after dehusking and splitting they cannot be treated as agricultural
produce.
 Milling of Paddy in to Rice:
- Processing of Paddy in to Rice is not usually carried out by cultivators, but by rice
millers. Milling of rice is not an intermediate production process, in relation to cultivation
of plants for food. Hence, it is clarified that milling of paddy in to rice is not eligible
for exemption.

 Constructions Services:

Service provided by way

of pure labour contracts Services Supplied by Services by way of pure
of construction, repair, Electricity distribution labour contracts of
fitting, or any orginal utilities by way of construction, erection, of
works under Housing for construction, erection, for orginal works, pertaining
all mission & PMAY, extending the electricity to a Single residential unit
pertaining to beneficiary distribution network upto otherwise than as a part
individual house the tube well of farmers of residential complex.
construction
Exempt

 Transportation Services: - Transportation of Passengers

 Exemptions

•By air embarking or terminating from "U ASK -

TAMANNAH" ( Except Uttarakand, Kashmir, Himachal
Pradesh) + Bagdogra
Transport of
•Non Air conditioned contract carriage other than radio
Passengers taxi, State carriage (except AC) except for Tourism 
6 passebger(including Driver charter, hire (Supplied
through ECO taxable)

Provided to the CG
• By air embarking or terminating at a RCS
by way of (Regional conncetivity scheme airport). ( For
transportation of Initial 3 Years)
passengers

• Railways other than (AC)

• Metro/Mono/Tramways, Inland waterways
Transportation of
passengers • Metred cabs, autos, Public transort (Except
tourism) (Exemption not avilable when service is
provided through ECO)

- Satellite launch services provided by ISRO, Antrix corporation limited or New Space
India limited.
- Service by way of granting national permit to a goods carriage to operate throughout
India.
- Services by way of public conveniences. (Sulabh complex)
Transportaion of Goods:

Goods
Transpor •By Road (Except GTA,
tation of Courier)
Goods •By Inland Water ways

Transpor
•Relief Materials
tation by
•ONAM
Rail or
Vessel •Relief materials
•ONAM
•To unregistered
Tranport Indivdual
ation By •Transportaion of
goods to CG/SG/UT or
GTA
Local authority. which
is reg because of its
applicability U/s 51
 Exemptions

 GTA:
- Provides service in relation to transport of goods by road and
- Issues a consignment note.

 ONAM:
- O - Organic Manure
- N - News papers
- A - Agricultural Produce
- M - Military and defence items
- M - Milk, salt, edible oils etc.

 Transportation of Goods:
• Services by way of transportation of goods by an aircraft/Vessel from customs station
of clearance India to a placed outside India. – EXEMPT
• Services by way of transportation of goods by an aircraft from place outside India
customs station of clearance – EXEMPT
• Services provided by GTA to Un Registered individual except specified recepients
exempt.
- Services by way of giving on hire:
• To a state transport undertaking. (Capacity more than 12 passengers) excluding
driver.
• Motor vehicle for transportation of students, faculty and staff to an Educational
institution upto 12th.
• To a local authority an Electrically operated Vehicle.

 Tour Operator Services:

• Tour operator service which is performed partly in India and Partly outside India supplied by
a Tour operator to a foreign Tourist, to the extent of the value of the tour operator service
which is performed outside India.
• Value of tour operator service O/S should be in proportionate to the total number of days or
50 % of the total consideration whichever is lower.
• While making above calculation time > 12 hrs shall be considered as full day.
• Where the supply is wholly outside India to a foreign tourist – Exempt

 Insurance Services:
 Exemptions

Life Insurance Services General Insurance Services

•Provided by way of annuity under the •Hut Insurannce

National Pension System Catlle Insurance
•Provided by Army, Naval, & Air force group • Restructured Weather based Crop Insurance
Insurance funds. •Pradhan Mantri fasal bima Yojona
•Naval group Insurance fund Services by way of reinsurance. etc notified
•Other Notified (Janashree, Aam Aadmi Bima
Yojana)

- Reinsurance - Exempt
 Notified Bodies:
➢ Services provided by
- Employee State Insurance Corporation (ESIC)
- Employee Provident Fund Organisation (EPFO)
- National Pension Scheme Trust (NPS)
- Coal Mines Provident Fund Organisation

 News Services: - Collecting or providing news by an

- Independent Journalist
- Press trust of India
- United News of India.

 Government services:

Entry Supplier Recipient Conditions

No.
6 CG, SG, UT, LA - To other than business
Excluding entity
- Department of posts
- Aircraft or vessel in Exempt
airport
- Transportation of goods
or passengers (TAP)
7 CG, SG, UT, LA - To a un registered
Excluding business entity whose TO Exempt
- Department of posts Within the thresholds U/s
- Aircraft or vessel in 22(1)
airport
- Transportation of goods
 Exemptions

or passengers
- Renting of immovable
property (TRAP)
8 CG,SG, UT, LA - CG, SG, UT, LA Exempt
Excluded TAP
9 CG, SG, UT, LA Any person Exempt
Excluded TAP For such services where
consideration does not
exceed RS.5000
24 C By department of of posts Any person Exempt
- Post card
- Inland letter
- Book post
9 C By govt entity in form of - CG, SG, UT, LA or person Exempt
grants specified by them
34 A CG, SG, UT for providing - To PSU’s or their Exempt
guarantee for loans undertakings Guarantee services
42 CG, SG, UT, LA - Allowing a business entity Exempt
to operate as a telecom
service provider
47 CG, SG, UT, LA - By way of registration Exempt
required under any law.
- Testing, calibration, safety
check clarification.
61 CG, SG, UT, LA Any person Exempt
By way of issuance of of
passport, visa, driving
licence
62 CG, SG, UT, LA Any person Exempt
By way of tolerating non
performance of a
contract (fines)
63 CG, SG, UT, LA Any person Exempt
Giving the right to use
land (Agro or Forest on
or before 1/4/2017
64 SG Any person Exempt
Transferring the right to
collect royatlty (Mining
contracts)
65 CG, SG, UT, LA By way of deputing officers Exempt
after office hours for
inspection on payment of
merchant overtime charges
SG, CG, 12AA,12AB Entity Resident ≥ 60 years Old age home
consideration < 25,000
pm.
 Exemptions

 Other Services:
- Services provided to a recognised sports body by an Individual as a player, referee,
umpire, coach, team manager, for participation in a sporting event organised by a
recognised sports body, another recognised sports body. However, services by Individuals
such as selectors, commentators, curators, technical experts are taxable.
- Services provided by and to Federation Internationale de Football Association (FIFA) and
its subsidiaries directly or indirectly related to events under FIFA U-17 Women’s World
cup to be hosted in India, provided that Director, Ministry of youth affairs and sports
certifies that the services are directly or indirectly related to any of the events under
FIFA U-17 Women’s world cup 2020.
- Services by way of right ta admission to the events organised under FIFA U-17 Women’s
world cup 2020.
- Services by RBI.
- Services of accepting deposits, providing loans and advances for consideration in the the
form of interest or discount.
 Interest is exempted.
 Service charges, documentation fees, broking charges, administrative charges,
entry charges or such like fees or charges collected are over and above interest
hence they are chargeable to GST.
 Charges for late payment of credit card exempted.
 Discount on bills discounted and cheques discounted – Exempt.
- Services by an acquiring bank in relation to settlement of an amount up to Rs 2000 in a
single transaction exempt.
- Sale or purchase of foreign currency among the banks and authorised dealers.
- Business facilitator or correspondent services provided to a Banking/Insurance company
with respect to accounts/services in rural area.
- Services provided by fair price shops to govt.
- Services by way collection of contribution under Atal pension Yojona or any pension
scheme of the SG.
- Services provided to CG,SG, UT under any Insurance scheme.
- Services provided to CG/SG/UT under any training programme
- Services provided by the GSTN to CG/SG/UT.
- Services provided by NSDC and SSC. (Skill development)
- Services provided by way of transfer of going concern.
- Supply of services associated with transit cargo to Nepal & Bhutan.
- Toll charges
- Services by way of access to road or a bridge on payment of annuity.
- Services provided by an Incubate up to a turnover of 50 Lakhs in a financial
year.(Turnover in preceding FY < 50L, 3 years not lapsed from date of agreement,)
- Services by way of testing, licencing etc, by FSSAI.(Food safety and standards authority
of India).
- Services by Public libraries.
- Services in relation business exhibition held outside India.
- Services by a Foreign diplomatic mission.
 Exemptions

- Services by way of providing information under RTI act.

- Services provided by a banking company to BASIC SAVING BANK DEPOSIT (BSBD)
account holders under Pradhan Mantri Jan Dhan Yojana.
- Services provided by rehabilitation professionals (recognised) by way of rehabilitation,
therapy or counselling and such other activity as covered by the said Act at medical
establishments, educational institutions, rehabilitation centres established by
Central/State Government/ Union territory or an entity registered under section 12AA of
the Income Tax Act, 1961

Example:

Robinson Bank Ltd furnishes the following information relating to services provided and the gross
amount received during the month of December 2017. Compute the value of taxable supply of
services and GST payable:
Particulars Rs in Lakhs
(i) Amount of commission received for debt collection service 10
(ii) Discount earned on bills discounted 4.5
(iii) Dealing in sale and purchase of forward contract 5.7
(iv) Charges received on credit card and debit card facilities extended 3.8
(v) Penal interest recovered from the customers for the delay in repayment of 2.6
loan
(vi) Commission received for service rendered to Government for tax collection 6.0
(vii) Interest earned on reverse repo transaction 25.0

(Show the workings with explanation wherever required)

Answer:

Particulars Rs in Lakhs
(i) Amount of commission received for debt collection service 10
(ii) Discount earned on bills discounted nil
(iii) Dealing in sale and purchase of forward contract nil
(iv) Charges received on credit card and debit card facilities extended 3.8
(v) Penal interest recovered from the customers for the delay in repayment nil
of loan
(vi) Commission received for service rendered to Government for tax 6.0
collection
(vii) Interest earned on reverse repo transaction nil
Taxable supply of services 19.80
Total tax GST 18% 3.564
 Place of Supply
G
S
T

INTRODUCTION:
• The provisions related to place of supply are covered under IGST Act 2017.
• Place of supply is key to decide whether the supply is inter-state or intra-state.
• In case if cross border transactions place of supply is significant to decide whether tax is to
be levied or not.
• Place of supply rules have been framed by keeping in mind the destination based tax principle.
• It is typical to decide place of supply of services rather than place of supply of goods.
• For supply of service a fixed location of supplier is not required which made it complex to
determine the place of supply of services.
• In this chapter, we will be discussing the place of supply of goods and place of supply of
services under different situations comprehensively.

Definitions:
Export of goods 2(5):
• Means taking goods out of India to a place outside India.
Export of Services 2(6):
• Means the supply of any service when
- The supplier of service is located in India
- The recipient of service is located outside India
- The place of supply of service is outside India
- The payment from recipient is received in
convertible foreign exchange
- The supplier of service and recipient are not merely
establishments of a distinct person.

Import of goods 2(10):

• Means bringing goods into India from a place outside India.

Import of Services 2(11):

• Means the supply of any service where
- The supplier of service is located outside India
- The recipient of service is located in India, and
- The place of supply of service is in India.

Location of Supplier
 Place of Supply

• Where supply is made from place of business for which registration is obtained -
Location of such place of business.
• Supply made from a place other than place of
business registered (i.e Fixed establishment) -
Location of such fixed establishment.
• Supply is made from more than one
establishment - Then location of establishment
which is directly concerned.
• In the absence of such place - Location of
usual place of residence of such supplier.

Place of Supply in goods:

▪ While determining the levy of taxes based on place of supply, two things are considered
namely:
❖ Location of supplier (Registered place of business of the supplier).
❖ Place of Supply

Place of supply of goods will be decided under the following different circumstances (Other than
Import and Export).

Supply - Involves Movement of goods

Goods delivered on direction of third

party

No Movement of Goods

Goods are assembled or installed at

site
Goods supplied on a
Vessel/Conveyance

Other case
 Place of Supply

As per section 10 of the CGST Act, 2017 place of supply of goods other than supply of goods
imported into, or exported from India, shall be as under:

Supply involves movement of goods [Section 10(1)(a) of the IGST Act, 2017]:

Nature of supply Place of supply of goods

Supply involves movement of goods whether by Location of the goods at the time at which
supplier or recipient or by any other person. the movement of goods terminates for
delivery to the recipient.

Example:

Mr. C of Chennai received purchase order from Mr. H of Hyderabad for want of commercial
goods. Now supply involves movement of goods by supplier from Chennai to Hyderabad in a truck
by road.

The supplier delivers goods to a recipient or any other person on the direction of a third person
by way of transfer of documents of title to the goods or otherwise [Section 10(1)(b) of the IGST
Act 2017]:

Nature of supply Place of supply of goods

Goods are delivered by the supplier to a recipient or It shall be deemed that the said third
any other person on the direction of a third person, person has received the goods and the
whether acting as an agent or otherwise, before or Place of Supply of such goods shall be
during movement of goods by way of transfer of the principal place of business of such
documents of title to the goods or otherwise. person.
 Place of Supply

Example :

Mr. C of Chennai received purchase order from Mr. H of Hyderabad for want of commercial
goods. Now supply involves movement of goods by supplier from Chennai to Hyderabad by road in
a truck.Upon the direction of Mr. H of Hyderabad these goods are redirect to Branch office of Mr.
H located in Vijayawada,(in Andhra Pradesh) by way of transfer of documents of title to the
goods (i.e. Lorry Receipt or LR copy).

Supply does not involve movement of goods [Section 10(1)(c) of the IGST Act, 2017]:

Nature of supply Place of supply of goods

Where the supply does not involve movement of Location of such goods at the time of
goods, whether by the supplier or the recipient. the delivery to the recipient
(This place of supply is irrespective of
the location of the buyer and seller)

Example:
A and B both located in Kerala. B comes to shop of A. A delivered goods to B. What is the
place of supply of goods. Which levy will attract?
Answer:
Place of supply goods = Kerala. CGST & SGST will be levied, Location of such goods at the time
of the delivery to the recipient.
This is irrespective of the location of the buyer and seller.
Example:
M/s X Ltd. has place of business in Chennai, being an NBFC given an asset under financial lease
to M/s ABC Ltd. of Chennai. The said asset so far used by M/s ABC Ltd. in their factory located
at Hyderabad. At the end of lease period the said asset acquired by M/s ABC Ltd. at a nominal
amount. Find the place of supply of goods and levy of GST.
Answer:
Place of supply of goods = Hyderabad. IGST will be levied.Since, there is no movement of goods
from one place to another, provisions of Sec. 10(1)(c) of IGST Act will be applicable.
 Place of Supply

Goods are assembled or installed at Site [Sec 10(1)(d) of IGST Act, 2017]:

Nature of supply Place of supply of goods

Where the goods are assembled or installed at Place of such installation or assembly
site.
Example:
Mr. D located in New Delhi, place order on
Mr. Delhi of New Delhi for installation of Air-
condition machine in his factory located in
Chennai. Mr. D procures the Indoor and out-
door units, set of plugs, electrical cables,
distribution boards and other items from
different States in India and arranges for
delivery in Chennai. The said machine assembled
by Mr. Dehli in Chennai. Find the Place of
supply of goods and levy tax?

Place of supply of goods = Chennai Mr. Delhi is

liable to pay IGST.

Goods supplied on a vessel/conveyance [Section 10(1)(e) of IGST Act, 2017]:

Nature of supply Place of supply of goods

Where the goods are supplied on board a conveyance Location at which such goods are taken
including a vessel, an aircraft, a train or a motor on board.
vehicle.

Example:
Chennai express train going from Chennai to Cochin, M/s
X Ltd. located in Cochin has supplied the food which are
given to passengers during night time. The food packets
are loaded at Chennai Central Station, Chennai. Find the
place of supply of goods and levy of GST.
Answer:
Place of supply of goods = Chennai [Refer above for the
provision]
M/s X Ltd. is liable to pay IGST.
 Place of Supply

Place of Supply of goods cannot be determined [Section 10(2) of the IGST Act, 2017]:

Nature of supply Place of supply of goods

Any thing not covered under sub-section (a) Determined in such manner as may be
to (e) of Section 10(1) prescribed

Place of supply of goods imported into or exported from India [Sec. 11 of the IGST Act,
2017]

Nature of supply Place of supply of goods

Import into India Location of the importer

Export from India Location of outside India

Place of supply [Sec. 12(2) of IGST Act]:

Place of supply of
services – default section
[Sec. 12(2) of IGST

Supply made to
Supply made to
registered
un-reg person
person

Address of Address of
POS = Loaction
recepient recepient
of recepient
available unavailable

POS = location POS = location

of recepient of supplier

S. No. Nature of service Place of supply of

service
1 Architects Any services Immovable property
2 Interior decorator ancillary to located or intended to
3 Surveyors these services be located in India:
4 Engineers and other related exports or [Sec. • Location of
estate agents 12(3)(d)]
Immovable
5 Any service provided by way of grant of property
rights to use immovable property
 Place of Supply

6 for carrying out or co-ordination of Outside India:

construction work
Location
• of the
recipient.
Place of supply of services directly in relation to an immovable property [Sec. 12(3)(a) of IGST
Act, 2017]:

Example:
Mr. X located in Chennai engaged the services of Mr. Y an Architect in Chennai. Mr. X requests
him to make design of residential complex to be constructed in Cochin, Kerala. Mr. Y provided
drawing and design services in relation to immovable property located at Cochin.
Find the place of supply of service and levy of tax.
Answer:
Place of supply of service = location of intended to be located the property (i.e. Cochin) IGST is
liable to be paid by Mr. Y.
Place of supply of services by way of lodging accommodation by a [Sec. 12(3)(b) of IGST Act,
2017]:

S. No. Nature of service Place of supply of service

1 Hotel any services ancillary
Property located or intended
2 Inn to these services
to be located in India:
3 Guest house [Sec. • Location of Immovable
4 Home stay 12(3)(d)] property or boat or vessel.
5 Club or campsite by whatever name Outside India:
called and including a house boat or any • Location of the recipient.

other vessel

Example:
Mr. Rohit registered person in Jaipur. He went to Kolkata and stays in Taj hotel at Kolkata. He
also availed beauty treatment services at hotel. Find the place of supply of service and tax
liability in the hands of Taj hotel.
Answer:
Place of supply of service = Kolkata. Place of supply of service is same for accommodation
service by hotel as well as Beauty treatment as it is an ancillary service to the accommodation

Place of supply of services by way of accommodation in any immovable property for organizing
[Sec. 12(3)(c) of IGST Act, 2017]:

S. No. Nature of service Place of supply of service

1 Any marriage or reception or any services Property located or intended to
matters related thereto, ancillary be located in India:
2 Official, social, cultural, to these • Location of immovable property.
religious or business function services
[Sec. Outside India:
including services provided in
 Place of Supply

relation to such function at 12(3)(d)] • Location of the recipient.

such property

Explanation to [Sec 12(3)(a) to (d) of IGST Act]:

If the immovable property or boat or vessel is located in more than one State or Union Territory,
the supply of service shall be treated as made in each of the respective States or Union
Territories in proportion to value of services separately collected or determined in terms of the
contract or agreement.

If there is no such contract or agreement, the value of service between two States or Union
Territories shall be determined on reasonable basis as may be provided.

S. Type of service in relation to Factor which

No. immovable property determines the
proportionate value of
service supplied in different
States/Union territories

(a) Service provided by way of lodging Number of nights stayed in

accommodation by hotel, inn, guest house such property
etc. and its ancillary services (other than
the cases where such property is a single
property located in 2 or more contiguous
States/ Union territories or both)

(b) • All other services provided in Area of the immovable

relation to immovable property property lying in each
including services by way of State/ Union territories
accommodation in any immovable
property for organising any marriage
or reception etc. and in cases of
supply of accommodation by a hotel,
inn, guest house, club or campsite, by
whatever name called where such
property is a single property located
in 2 or more contiguous States or/and
Union territories
• Services ancillary to services
mentioned above
 Place of Supply

(c) Services by way of lodging accommodation Time spent by the boat or

by a house boat or vessel and its vessel in each such State/
ancillary services Union territories, to be
determined on the basis of
declaration made by the
service provider
 Place of Supply

Place of supply of services in relation to [Sec. 12(4) of IGST Act, 2017]:

S. No. Nature of service Place of supply of service

1 Restaurant Location where the services are
2 Catering services actually performed.
3 Personal grooming
4 Fitness services
5 Beauty treatment services
6 Health services including cosmetic and
plastic surgery

Example:
M/s Cut Ltd., provider of hair cutting saloon services, located in Mumbai. Mr. Pritam came from
Jharkhand to Mumbai after appointment for haircut. The services are provided in Mumbai. Find
the place of supply of service and tax liability in the hands of M/s Cut Ltd.

Answer:
Place of supply of service = Mumbai
M/s Cut Ltd. is liable to pay CGST and SGST.

Place of supply of services in relation to training and performance appraisal [Sec. 12(5) of IGST
Act, 2017]:

S. No. Nature of service Place of supply of service

1 Services in relation to Provided to a registered person:
training and performance
• Location of recipient of Service
appraisal.
Provided to a un-registered person:

• Location where the services are actually

performed.

Example:
Guideline Academy registered person provides commercial training and coaching services to
budding CMA’s at Chennai. Many students (who are unregistered persons) from Telangana, Andhra
Pradesh, Tamil Nadu, Karnata and Kerala came and stay in Chennai for the purpose of undergoing
training in the Guideline Academy. Find the Place of supply of service.
Answer:
Place of supply of service = Chennai As the training is performed in Chennai. Guideline Academy
is liable to pay CGST and SGST.
Example:
 Place of Supply

Mr. A located at Kolkata provides training at Kolkata to employees of M/s Infosys Ltd., which
is registered at Mumbai. Find the place of supply of service and GST liability in the following two
cases: Case 1: Infosys is registered person under GST
Case 2: Infosys is not registered person under GST Answer:

Case 1:If Infosys Ltd. is a registered person POS will be Mumbai. Mr. A. is liable to pay IGST.
Case 2: If Infosys Ltd is not a registered then POS will be Kolkata. Mr. A. liable to pay CGST
and SGST.

Place of supply of services provided by way of admission to a [Sec. 12(6) of IGST Act, 2017]:

S. No. Nature of service Place of supply of

service
1 Cultural Services Where the event is
2 Artistic ancillary actually held or
3 Sporting thereto where the park or
4 Scientific such other place is
5 Educational located.
6 Entertainment event or Amusement part or any
other place.

Example:
Board of Control for Cricket in India (BCCI) located at Mumbai, sold tickets on-line for IPL
match, is going to conduct at Chepauk Stadium, Chennai. However, finally match conduct at
Mumbai. Find the place of supply of service of admission to sporting event?
Answer:
POS = Mumbai
BCCI is liable to pay CGST and SGST.

Place of supply of services provided by way of organization of a [Sec. 12(7) of IGST Act,
2017]:

S. No. Nature of service Place of supply of

service
1 Cultural Services Provided to a registered
2 Artistic ancil- lary person:
3 Sporting thereto or • Location of recipient of
4 Scientific assigning of Service
5 Educational sponsorship Provided to an un-registered
6 Entertainment event including supply of to such person:
services in relation to a conference, events. • Location where the event is
fair, exhibition, celebration or similar actually held and
 Place of Supply

events • if the event is held

outside India, the place
of supply shall be the
location of the recipient.

Explanation to [Sec 12(7)(a)&(b) of IGST Act]:

Where the event is held in more than one State or Union Territory and a consolidated amount is
charged for supply of services relating to such event, the place of supply of services shall be in
proportion to the value for services separately collected in terms of the contract.

In the absence of a contract or agreement between the supplier and recipient of services, the
proportionate value of services made in different States/Union territories (where the event is
held) is computed in accordance with rule 5 of IGST Rules by the application of generally
accepted accounting principles.

Example:
Mr. Kapil Sharma, a Jalandhar based comedian hosted a comedy show at Singapore on birth day
occasion of Mumbai based actor’s son.
Answer: POS = Mumbai (i.e. location of service recipient). GST = IGST is liable to be paid by
Mr. Anil Sharma.
Example:

The Royce Group being an event organizer located at New Delhi organized Miss India 2017
beauty pageant in India in the following Cities for M/s ASK Miss India, who is a registered
person located in Mumbai:
City No. of Days Fee in Rs
New Delhi 12 12 crores
Chennai 18 18 crores
Mumbai 20 20 crores
Total 50 50 crores
Find the place of supply of service if contract specifies clear details.
Find the place of supply of service if contract specifies lump sum amount of Rs 48 crores.

Answer:
The place of supply of service if contract specifies clear details:
City No. Rs in Location of Place of supply of service = GST
of cro supplier of where the respective
re
Days service event is held.
New Delhi 12 12 New Delhi New Delhi CGST &
SGST
Chennai 18 18 New Delhi Chennai IGST
Mumbai 20 20 New Delhi Mumbai IGST
Total 50 50
 Place of Supply

The place of supply of service if contract specifies lump sum amount:

City No. of Rs in Location Place of supply of service GST

Days crore of supplier = where the respective
of service event is held.
New Delhi 12 11.52 New Delhi New Delhi CGST &
SGST
Chennai 18 17.28 New Delhi Chennai IGST
Mumbai 20 19.20 New Delhi Mumbai IGST
Total 50 48.00

Place of supply of services by way of transportation of goods including by mail or courier

[Sec. 12(8) of IGST Act, 2017:

S. No. Nature of service Place of supply of service

1 Services by way of Provided to a registered person:
Transportation of • Location of recipient of Service.
goods including by mail
Provided to a un-registered person:
or courier
• Location at which such goods are handed over for their
transportation.

Place of supply of passenger transportation service to [Sec 12(9) of IGST Act]:

S. Nature of service Place of supply of service

No
.
1 Passenger transportation Provided to a registered person:
service. Including: • Location of recipient of Service.
Rail, Mono Rail, Metro Rail, Provided to a un-registered person:
Road, Air, Vessel, boat, Cycle • Place where the passenger embarks on the continuous
rickshaw, Bullock journey.
cart, Camel etc.
2 Right to passage is given for Provided to a registered person:
future use and point of • Location of recipient of Service.
embarkation is not known at Provided to a un-registered person:

the time of issue of such • Location of recipient when address on record is

available.
right
• Location of supplier in other cases
 Place of Supply

Sec 2(3) of IGST Act, 2017 defines Continuous journey:

Means a journey for which a single or more than one ticket or invoice is issued at the same time,
either by a single supplier of service or through an agent acting on behalf of more than one
supplier of service, and which involves no stopover between any of the legs of the journey for
which one or more separate tickets or invoices are issued.

Example:
Mr. Ram working in Ramsay Company having office in Bengaluru is registered under GST. Mr. Ram
purchased the ticket from Hyderabad for transportation of passenger by Air from Hyderabad to
Chennai. Mr. Ram discloses the name of the organization and its registration number and the place
where the organization is registered. Supplier of service is located at Hyderabad.

Find the following

a) Place of supply of service and GST liability.

b) Whether your answer will be different if Mr. Ram is not disclosed the name of the
organization and its registration number?
Answer:

a) POS = Bengaluru (i.e. location of recipient of service) GST = IGST is liable to be

paid by Air Travel Operator
b) POS = Hyderabad (i.e. Place where the passenger embarks on the continuous
journey) GST = CGST & SGST is liable to be paid by Air Travel Operator.

Place of Supply of service on board a conveyance [Sec 12(10) of IGST Act]:

S. No. Nature of Place of supply of service

service
1 Vessel Location of the first scheduled point of departure of that
2 Aircraft conveyance for the
3 Train journey.
4 Motor vehicle

A movie on demand is provided as onboard entertainment during the Delhi-Chennai leg of a

Dubai-Delhi-Chennai flight.

Find the place of supply of service. Answer: POS = Dubai (outside the taxable territory, hence

not liable to GST).

Place of supply of telecommunication services [Sec 12(11) of IGST Act]:

 Place of Supply

Place of supply
telecommunication
charges

Pre paid sold

Fixed line Post Paid Pre Paid
through internet

Location where Location where

the line is Billing address the prepaid Billing address
installed voucher is sold

Example:
M/s Air Call registered under GST and located in Chennai. M/s Air Call have appointed Mr. C
as a selling agent for supplying pre-payment voucher to the subscriber. Find the Place of supply
of service and GST liability?

Answer:

POS = Chennai (i.e. Address of the selling agent on the record of M/s Air Call). GST = CGST &
SGST is liable to be paid by M/s Air Call.

Leased circuit is installed in more than one State/Union territory

If the leased circuit is installed in more than one State/Union territory and a consolidated
amount is charged for supply of services, the place of supply is deemed to be in each of the
respective States/Union territories in proportion to the value for services determined in terms
of the contract

In the absence of a contract or agreement between the supplier and recipient of services, the
value of services supplied in different States/Union territories (where the leased circuit is
installed) is determined in accordance with rule 6 of the IGST Rules in proportion to the
number of points lying in each such State/ Union territory.
The number of points in a circuit is determined in the following manner-
(i) In the case of a circuit between two points or places, the starting point or place of the
circuit and the end point or place of the circuit will invariably constitute two points – Refer
Example 49
(ii) Any intermediate point or place in the circuit will also constitute a point provided that the
benefit of the leased circuit is also available at that intermediate point – Refer Example
50 & 51
Example:
A company T installs a leased circuit between the Delhi and Mumbai offices of a company C. The
starting point of this circuit is in Delhi and the end point of the circuit is in Mumbai. Hence, one
point of this circuit is in Delhi and another in Maharashtra. The place of supply of this service is in
 Place of Supply

the Union territory of Delhi and the State of Maharashtra. The service shall be deemed to have
been provided in the ratio of 1:1 in the Union territory of Delhi and the State of Maharashtra,
respectively.

Example:
A company T installs a leased circuit between the Kolkata, Patna and Patna and Guwahati. One
point each of this circuit is, therefore, in West Bengal, Bihar and Assam. The place of supply of
this service is in the States of West Bengal, Bihar and Assam. The service shall be deemed to
have been provided in the ratio of 1:1:1 in the States of West Bengal, Bihar and Assam,
respectively
 Place of Supply

Place of supply of banking and NBFC service including stock broking services [Sec 12(12) of IGST
Act]:

S. No. Nature of service Place of supply of service

1 Banking and NBFC • Location of recipient of service on the records of the
service including stock supplier of service.
broking services Otherwise:
• Location of supplier of service.

Example:
Mr. Harsha being a registered stock broker at BSE, located in Mumbai. He has clients in
Chennai, Kolkata, Bengaluru. He purchase and sells shares of clients located in Chennai, Kolkata,
Bengaluru. Find the place of supply of service and GST liability.
Answer:
POS = Chennai, Kolkata & Bengaluru.
GST = IGST is liable to be paid by Mr. Harsha.

Place of supply of insurance services [Sec 12(13) of IGST Act]:

S. Nature of service Place of supply of service

No.
1 Insurance services To a registered person
• Location of recipient of Service.
To a person other than registered person
• Location of the recipient of services on the records of the
supplier of service.

Place of supply of advertisement services to specified persons [Sec 12(14) of IGST Act,
2017]:

S. Nature of service Place of supply of service

No.
1 Advertisement services to Located in each of such states and the value of
• Central Government such supplies specific to each state shall be in
• State Government proportion to amount attributable to service
• Statutory Body provided by way of dissemination in the
• Local Authority respective states.

Example:
The Government has hired 200 hoardings in Lakshadweep and 175 hoardings in Chennai for
providing advertisement of Gas subsidy and contract contains the consideration for these
 Place of Supply

hoardings separately. Hoarding services supplied by M/s X Ltd. located in Hyderabad. Find the
place of supply of service and GST.
Answer:
POS = Lakshadweep & Chennai
GST = IGST is liable to be paid by M/s X Ltd.

Manner of determining proportionate value of service in the absence of a contract or

agreement:
Sl. Type of Value of service attributable to dissemination in
No advertisement different States/Union territories where the
advertisement is broadcasted/ run
/played/disseminated
1. Advertisements in newspapers Amount payable for publishing an advertisement in all
and publications the editions of a newspaper or publication, which are
published in each State/Union territory
2 Advertisements through printed Amount payable for the distribution of a specific
material number of such material in each State/Union like pa
territory

3 Advertisements in hoardings Amount payable for the hoardings located in each

(Other than those on trains) State/ Union territory

4 Advertisements on trains Amount attributable to each State/Union territory

calculated in the ratio of length of the railway
track in each of such State/Union territory, for
that train

5 Advertisements on the back of Amount payable to each State/Union territory for

utility bills of oil and gas the advertisements on bills pertaining to consumers
companies, etc. having billing addresses in each of such State/Union
territory
6 Advertisements on railway Amount attributable to each State/Union territory
tickets calculated in the ratio of number of Railway Stations
in each of such State/Union territory

7 Advertisements on radio Amount payable to such radio station, which by

stations virtue of its name is part of each State/Union
territory

8 Advertisement on television Amount attributable to each State/Union territory

channels calculated basis the viewership of such channel in
each of such State/ Union territory which shall be
 Place of Supply

derived as under:
(a) Viewership can be ascertained from the channel
viewership figures published by the Broadcast
Audience Research Council.
Figures for the last week of a given
quarter is used for calculating viewership for the
succeeding quarter.
(c) Where the channel viewership figures relate to a
region comprising of more than one State/Union
territory, the viewership figures for a State/
Union territory of that region, is calculated in
ratio of the populations of that State/Union
territory, as determined in the latest Census.
(d) The ratio of the viewership figures for each
State or Union territory so calculated, when
applied to the amount payable for the service,
shall represent the portion of the value
attributable to the dissemination in that State
or Union territory

9 Advertisements in cinema halls Amount payable to a cinema hall or screens in a

multiplex in each State/ Union territory.
10 Advertisements on internet it is Amount attributable to each State/Union territory
deemed that such service is calculated basis the internet subscribers in each of
provided all over India such State/ Union territory which shall be derived in
the following manner:
(a) Internet subscribers can be ascertained from the
internet subscriber figures published by the
Telecom Regulatory Authority of India (TRAI).
(b) Figures for the last quarter of a given financial
year will be used for calculating the number of
internet subscribers for the succeeding financial
year.
(c) Where the internet subscriber figures relate
to a region comprising of more than one
State/Union territory, the subscriber figures for
a State/Union territory of that region shall be
calculated in the ratio of the populations of that
State/Union territory, as determined in the
latest census.
(d) The ratio of the subscriber figures for each
State or Union territory so calculated, when
applied to the amount payable for the service,
shall represent the portion of the value
attributable to the dissemination in that State
or Union territory
 Place of Supply

11 Advertisements through SMS Amount attributable to each State/Union territory

calculated on the basis of the telecom subscribers
in each of such State/ Union territory.
(a) Telecom subscribers in a telecom circle can be
ascertained from the telecom subscribers figures
published by the TRAI. Figures for a given
quarter will be used for calculating the
subscribers for the succeeding quarter.
Where such figures relate to a telecom circle
comprising of more than one State/Union territory,
the subscriber figures for that State/Union
territory shall be calculated in the ratio of the
populations of that State/Union territory, as
determined in the latest census
 Place of Supply

Place of supply of service where location of Supplier of Service or Location of Recipient

of Service is outside India [Sec. 13 (1) of the IGST Act, 2017]

Default Section 13(2):

Place of supply of services –

The default section 13(2) of
IGST

Location of service receiver

is available in the ordinary
course of business
Yes No

Location of the service Location of the service

recipient is the place of provider is the place of
supply of service supply of service

Service recepient located in Service provider located in

taxable territory taxable territory

Yes No Yes No

GST will be GST will not be GST will be GST will not be
levied levied levied levied
 Place of Supply

Place of supply services on Goods [Sec. 13(3)(a) of IGST Act]:

S. No. Nature of service Place of supply of

service
1 “in respect of goods that are made physically location where the
available, by the services are
receiver to the service provider in order to actually performed.
provide the service”
2 services provided by way of electronic means in the actual location of
relation to goods.
tangible goods,

Sec 13(3)(a) of IGST Act, 2017 is not applicable:

If the following two conditions are satisfied then Sec 13(2) of IGST Act, 2017 is applicable:
i. If goods are to be temporarily imported into India for repairs only as against repairs and
are exported after repairs

ii. without being put to any other use in India, than that which is required for such repairs.

ABC Fabricators has its factory located in Gujarat. It has temporarily imported certain goods
from its customer located in China and re-exported them to China after carrying out the
necessary repairs without putting them to any use in Gujarat.

Examine what would be the place of supply of service in the given case.

Will your answer be different if the repaired goods are re-exported after being put to use in
Gujarat for some time?

Answer:

In the given case, since goods have been temporarily imported by ABC Fabricators and have been
re-exported after the repairs without being put to any use in Gujarat (taxable territory), place
of supply of repair services carried out by ABC Fabricators will be determined by Sec 13(2) of
IGST Act, 2017. Consequently, the place of supply of service will be the location of service
receiver, viz. China (non-taxable territory).

However, if repaired goods are re-exported after being put to use, the place of supply of
service will be determined according to Sec 13(3)(a) of IGST Act, 2017, if the use to which
such goods are put to is not required for such repair.

Therefore in such a case, the place of supply of service will be the location where the service is
actually performed, which in the given case is Gujarat.
 Place of Supply

However, if the use is of such nature, which is necessary for carrying out the repairs, the
place of supply of service will again be determined as per Sec 13(2) of IGST Act, 2017.

Place of supply services on Goods [Sec. 13(3)(b) of IGST Act]:

S. No. Nature of service Place of supply of

service
1 Services supplied to an Individual, location where the services
represented either as the service receiver or are actually performed.
a person acting on behalf of the receiver,
which require physical presence of the
recipient or the person acting on his behalf,
with the supplier for the supply of services.

A famous actress went to London, and avail cosmetic or plastic surgery services for her nose.
Find the place of supply or service. Whether GST is liable to be paid?

Answer:

POS = London (Non-taxable territory) GST is not liable to be paid.

Place of supply of services supplied directly in relation to an immovable property [Sec 13(4) of
IGST Act]

Nature of Service Place of Supply of Service

● Lease or a right to use, occupation enjoyment or provision of Where immovable property
hotel accommodation by a hotel, guest house, club is located or intended to be
● Construction service located
● Architects
● Interior decorators
● Renting of immovable property
● Real estate agents,
● Auctioneers, engineers and similar experts or professional
people, relating to land,
buildings or civil engineering works etc.

Mrs. Neelam Goel, an Interior Designer based in Delhi provides her service to an Indian Hotel
Chain (which has business establishment in Mumbai) for its newly acquired property in London.
Find the place of supply of service and the person liable to pay GST if any.

Answer:

As per section 12(3)(a) of IGST Act, 2017, Location of service recipient is the place of supply
of service. PoS = Mumbai. Taxable territory. Hence, attract IGST in the hands of Mrs. Neelam
Goel.
 Place of Supply

Place of supply of services supplied by way of admission to or organization of [Sec 13(5)

of IGST Act]:

Nature of Service Place of Supply of

Service
● Cultural Where event is
● Artistic actually held.
● Sporting
● Scientific
● Educational
● Entertainment event
● Celebration
● Conference
● Fair
● Exhibition
● Similar events and
● Services ancillary to such admission or organisation

Mr. Kapil Sharma, a Jalandhar based comedian hosted a comedy show at Singapore with help of
event organizer located in Dubai.

POS = Singapore.

Mr. D of Dhaka being an event organizer hosted an exhibition in Mumbai to exhibit the
products of exhibitor (namely M/s S Silks Ltd. of Shimla).

Answer:

PPS = Mumbai

GST = IGST is liable to pay by M/s S Silks Ltd. of Shimla (RCM)

13(6): Services supplied at more than one location, including a location in the taxable territory
POS = Location in the taxable territory.

Sec 13(3) or (4) or (5) Services performed in more than one State [Sec. 13(7) of IGST Act]:

In case of Sec 13(3) or (4) or (5) services performed in more than one State or Union Territory,
the place of supply of such services shall be taken as deemed in each of the State or Union
Territories in proportion to the value of services so provided.
The value of services is required to be determined in terms of the agreement or any reasonable
means.
 Place of Supply

Mr. Harsha a event organiser located in Malaysia undertaken to organize comedy shows
of Mr. Bhrami of Hyderabad and Mr. Vadivelu of Chennai in India. The comedy shows are
hosted in Telangana, Andhra Pradesh, Tamil Nadu and Pondicherry.
Gross value of contract is Rs 60 crores.
State No. of Days Recipient of Service
Telangana 20 Mr Bhrami
Andhra Pradesh 15 Mr. Bhram
Tamil Nadu 14 Mr. Vadivelu
Pondicherry 01 Mr. Vadivelu
Total 50
Find the place of supply of services, value of service and person liable to pay tax.

Answer:
Place of Supply of Value Rs in Who is liable to pay GST Nature of
service crores GST
Telangana 24 Mr. Harsha being a non- IGST
resident
Andhra Pradesh 18 Mr. Harsha being a non- IGST
resident
Tamil Nadu 16.80 Mr. Harsha being a non- IGST
resident
Pondicherry 1.20 Mr. Harsha being a non- IGST
resident
Total 60

Place of supply of services = Location of the service provider

13(8) Specified services includes:

(a) Services provided by a banking company, or financial company, or a NBFC to account
holders
(b) Intermediary services
(c) Services consisting of hiring of means of transport, other than, -
(i) aircrafts, and vessels except yachts upto a period of one month

Services provided by a banking company,

or financial company, or a NBFC to
account holders
Intermediary services
Place of Supply = Location of supplier
 Place of Supply

Services consisting of hiring of means of

transport, other than aircrafts, and
vessels except yachts upto a period of one
month

Write a brief note on the applicability of GST in the following cases:

(i) Whether the representation service provided by State Bank of India Chennai to a foreign
MTSO (Money Transfer Service Operator) in relation to money transfer to a beneficiary in
India falls in the category of intermediary service.

(ii) Whether GST is leviable on the services provided as mentioned in (i) above by an intermediary
/ agent located in India (in taxable territory) to MTSO’s located outside in India.

Answer:

(i) Yes, the given service falls under intermediary service under section 13(8)(b) of the IGST
Act, 2017.

(ii) Place of supply of service is location of the supplier of service (i.e. taxable territory namely
Chennai) and hence, GST is liable to be paid by intermediary/agent.

Place of provision of a service of transportation of goods other than by way of mail or courier
[Sec. 13(9) of IGST Act]

Place of supply of Service = Destination of such Goods

Passenger Transportation Services [Sec 13(10) of IGST Act]:

The place of supply of service = where the passenger embarks on the conveyance for a continuous
journey.

NEW DELHI LONDON NEW YORK

Passengers Embarks from New Delhi.

Place of supply is New Delhi. Hence, Taxable

Services Provided on Board Conveyances [Sec. 13(11) of IGST Act]:

Any service provided on board a conveyance (air craft, vessel, rail, or roadways bus) will be
covered here.
 Place of Supply

POS = The first scheduled point of departure of that conveyance for the journey.

Online information and database access or retrieval services [Sec 13(12) of IGST Act]:

POS = Location of the recipient of service

Recipient of service deemed to be located in the taxable territory, if any two of the following
conditions are satisfied:
(a) the location of address presented by the recipient of services through internet is in the
taxable territory;
(b) the credit card or debit card or store value card or charge card or smart card or any
other card by which the recipient of services settles payment has been issued in the
taxable territory;

(c) the billing address of the recipient of services is in the taxable territory;
(d) the internet protocol address of the device used by the recipient of services is in the
taxable territory;
(e) the bank of the recipient of services in which the account used for payment is
maintained is in the taxable territory;

(f) the country code of the subscriber identity module card used by the recipient of services
is of taxable territory;
(g) the location of the fixed land line through which the service is received by the
recipient is in the taxable territory.
OIDAR services includes:

Online information and database access or retrieval [OIDAR] services 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

OIDAR Services includes OIDAR Services excludes

 Place of Supply

(i) advertising on the internet; (i) Supplies of goods, where the order and
(ii) providing cloud services; processing is done electronically

(iii) provision of e-books, movie, music, (ii) Supplies of physical books, newsletters,
newspapers or journals
software and other intangibles via
telecommunication networks or internet; (iii) Services of lawyers and financial consultants
who advise
(iv) providing data or information,
clients through email
retrievable or otherwise, to any person,
in electronic form through a computer (iv) Booking services or tickets to entertainment

network; events, hotel accommodation or car hire

(v) online supplies of digital content (v) Educational or professional courses, where the
(movies, television shows, music, etc.); content is delivered by a teacher over the
internet or an electronic network (in other
(vi) digital data storage; and
words, using a remote link)
(vii) online gaming.
(vi) Offline physical repair services of computer
equipment
(vii) Advertising services in newspapers, on posters
and on television

Clarification on place of supply for service provided by Antrix Corporation

POS - Destination
Recipient - Outside
of goods (space) -
India {Sec 13(9)}
Antrix Corporation treated as export
New Space
Authority of India
Recipient within POS- Location of
India {Sec 12(8)} recipient ( India)

However this is exempted specifically

by way of a notification
z
 Time of Supply
G
S
T

 Introduction:
- It is required to find out the time of supply, to know when a supply will be taxable.
- Suppose, if goods have been sold on 10th May, Payment is made on 29th April, where as
Invoice has been issued on 1st June, there is an ambiguity in deciding the month in which
supply has been made.
- Time of supply gives the clarity about the period in which supply is chargeable to tax.
- The concept of time of supply has been discussed under Sec 12 and 13 of CGST act, but
before discussing Sec 12 & 13 it is pertinent to discuss Sec 31.

 Sec 31(Tax Invoice) – Relevant parts related to TOS.

- In Sec 31, Sub sections (1,4,7) are about goods whereas sub sections (2,5,6) are related to
services.

 Sec(31(1)):

A registered person
making taxable supply of
GOODS
Tax Invoice
should have the

- Description
- Quantity
- Value of goods
Shall issue invoice before
- Tax charged
or at the time of,
- Such other
prescribed

Removal of goods - Delivery or making available

If it Involves movement of of goods
goods - in any other case

 Sec 31(2) read with Rule 47:

 Time of Supply

FBI
A registered person
making taxable supply of - F – Financial Institution
SERVICES - B – Banks (Including NBFC)
- I - Insurer

Shall issue invoice before or

after the provison of service but
with in -

"FBI", telecom person

30 days from the date 45 days from the date
making supply to distinct
of supply (Generally of supply (FBI)
persons

Issue Invoice before or at the

time supplier records in BOA or
before the end of the quarter in
which supply was made

 Sec 31(4) Vs Sec 31(5)

- Due date for Invoice in the case of Continuous supply :

Continuous supply - Goods Continuous supply - Services

Due date ascertainale - Invoice

Where succesive statements or
to be issued before or on the due
payments involved
date

Event linked - Invocie to be

the Invoice shall be issued before
issued before or on the date of
or at the time of
completion of that event.

each such statement or Other case - before or at the

each such payment. time he receives payment.

- “Payment” here means the date of credit in Books of accounts or date of receipt in bank
account whichever is earlier.

 Sec 31(6): Cessation of supply (Services)

 Time of Supply

- Where supply of services ceases under a contract before the completion of the supply, the
invoice shall be issued at the time when the supply ceases.
- To the extent of supply made before such cessation.

 Sec 31(7): Sale on approval basis:

- When the goods were sold on sale on approval basis, the invoice should be issued before
• Before or at the time of supply (or)
• Six months from the date of removal whichever is earlier.

 Sec 12 & 13 – Time of Supply – Goods & Services (along with Notification No.66/2017 dated
15.11.2017)

Time of Supply of Goods Time of Supply of Services

Section The liability to pay tax on goods Section The liability to pay tax on
12(1)
shall arise at the time of supply, 13(1): services shall arise at the time
of supply
Section Time of Supply of Goods under Section Time of Supply of Services
12(2)
Forward Charge. 13(2) under Forward Charge.
Section Time of Supply of Goods under Section Time of Supply of Services
12(3)
Reverse Charge. 13(3) under Reverse Charge.
Section Time of Supply in case of Supply of Section
Time of Supply in case of Supply
12(4)
Vouchers. 13(4)
of Vouchers.
Section Residuary Clause. [where the time Section Residuary Clause. [where the
12(5) of supply cannot be determined 13(5) time of supply cannot be
under sub-section (2) to sub- determined under sub-section (2)
section (4) of Section 12] to sub-section (4) of section 13]
Section The time of supply to the extent Section The time of supply to the extent
12(6) it relates to an addition in the 13(6) it relates to an addition in the
value of supply by way of value of supply by way of
interest, late fee or penalty for interest, late fee or penalty for
delayed payment of any delayed payment of any
consideration shall be the date on consideration shall be the date
which the supplier receives such on which the supplier receives
addition in value. such addition in value.

 Forward charge mechanism: TOS of Goods 12(2):

As per section 12(2), the time of supply of goods that are taxable under forward
charge, is the earlier of the following two dates: 
• Date of issue of invoice by the supplier or
• the last date on which the invoice ought to have been issued in terms of section
31, to the extent the invoice covers the supply of goods;
• No tax payable at the time of receipt of advance for supply of goods – Special
procedure for payment of tax in case of supply of goods
 Time of Supply

 Forward charge mechanism: TOS of Services : 13(3):

The time of supply

of services shall be BOA – Books of Accounts
the earliest of the
following

(b) If Invocie Not

(a) Invoice Issued If a & b doesnt
issued with in sec 31
with in sec 31 time apply, the date of
time limit from the
limit from date of recording in BOA of
date of supply of
supply of service recepient
service

Payment means
Date of Provision of - earlier of
Date of Invoice (or)
service or Payment
Cr in BOA
Payment which ever which ever is
is earlier earlier. Cr in Bank

- Where the supplier of taxable services receives Rs 1,000 in excess of the amount indicated in
Tax Invoice, the time of supply in relation to such excess shall at the option of supplier, be
the date of Issue of Invoice in respect of such excess amount.
- If there is any advance payment in relation to supply of service then Time of supply has to be
calculated separately for advance payment and balance payment.
- On Interpretation of above provision, we can come to a thumb rule that
Time of supply for service to the extent advance payment will be date of payment, except when
the advance paid is < 1,000.
 Reverse charge mechanism ( Goods) :12(3)
- The time of supply shall be the earliest of the following dates:

RCM

31st day Payment

Date of Date of from the means -
receipt payment date of earlier of
of the
(or) issue of
goods (or) Dr in BOA
Invoice
Dr in Bank

• While counting 31 days exclude the actual invoice date and count 31 days

 Reverse charge mechanism (Services):13(3):

- The time of supply shall be the earliest of the following dates namely
 Time of Supply

(b)
(a)
61st Day from the date
Date of Payment
of Issue of Invoice

• Where (a) & (b) not available then TOS is date of recording in recipient BOA
 Vouchers :12 (4) & 13(4):
- Time of Supply in the case of Vouchers:

Date of
Redemptio
n -
Other Date of
cases Issue of
voucher if
Supply is
Identifiabl
e

As per proviso sec 13(3) - In case of associated enterprises

• Supplier should be located in outside India.

• TOS is earlier of the following
- Date of entry in BOA of recipient
- Date of payment

Where it is not possible to determine TOS as per Sub sec (2,3,4) of 12 & 13:

Incase periodical
return has to be Other case
filed

The date on which The date on which

such return is filed. tax is paid.

12(6) & 13(6):

 Time of Supply

- The time of supply in relation to addition in the value of supply by way of

Shall be the
 Interest For delayed
date on which
 Late fee payment
supplier
 Penalty
receives

payment
Consolidated time of Supply in chart form – GOODS for a registered person other opted for
composition scheme
Time of Supply
When supply
completes at Date of removal or
suppliers Date of Invoice
premises

RCM Supply Incudes Date of delivery or

Delivery Date of Invoice
Payment means -
earlier of

Dr in BOA

Dr in Bank Date of maiking it

Supply Includes
installation, available or
trail run etc. Date of Invoice

Forward charge

Date of periodical
Continous supply payment or Statement

Time of Supply Or Date of Invoice

- Goods

Date of Approval or
Sale on approval 6 Months from date of
basis removal or
Date of Invoice

Date of receipt of Goods or

Reverse charge 31st day from invoice or
Date of Payment
 Time of Supply

Change in Rate of Tax in respect of supply of goods or services Sec. 14 of the CGST
Act, 2017:

No. Supply is Invoice issued Payment Time of supply Applicable

completed before before the received before rate of
the change in rate date of the date of tax
of tax change in tax change in tax
rate
1 Yes No No Earliest of the New Rate
date of invoice of Tax
or payment
2 Yes Yes No Date of Old Rate of
issue of tax
invoice
3 Yes No Yes Date of Old Rate of
receipt of tax
payment
4 No Yes Yes Earliest of the Old Rate of
date of invoice Tax
or payment
5 No Yes No Date of New Rate
receipt of of tax
payment
6 No No Yes Date of New Rate
issue of of tax
Invoice

Date of Payment

Amount is credited to Amount is credited to

the bank account ≤ 4 the bank account > 4
working days after the working days after the
date of such change date of such change

Date of Book Entry or

Date of Bank entry Date of Bank Entry
earlier
 Value of Supply
G
S
T

 Market value: 2(73): Means the full amount which a recipient of a supply is required to pay
in order to obtain the goods or services or both of like kind and quality at or about the same
time and at the same commercial level where the recipient and supplier are not related.

 Voucher: 2(118): Means an Instrument where there is an obligation to accept it as

consideration or part consideration for supply of goods or services or both and where the goods
or services are to be supplied or identifies of their potential supplier are either indicated on the
instrument itself or in related documentation including the terms and conditions of use of such
instrument.

 Sec (15) – Value of a Taxable Supply:

 15(1):
- The value of Supply of Goods/Services or both shall be the TRANSACTION VALUE.
• Transaction value is the price paid/payable.
• For the said supply of goods or services or both.
• Where, Supplier and the recipient of the supply are not related.
• Price is the sole consideration.
 Value of Supply

 15(2): Inclusions and exclusions to the value of supply:

1. Taxes, duties,cess, fees and 1. Taxes, duties, cess, fees levied

charges levied other than GST, TCS under GST.
levied under income tax act. 2. Subsidies directly linked to price,
2. Any amount that supplier is liable provided by the CG and SG.
to pay, but which has been incurred
by the recepient.
3. Incidental expenses
4. Interest or late fee for delayed
payment.
5. Subsidies directly linked to price
provided by other than Govt. (i.e
add back if already taken.)

✓ It has been clarified that for the purpose of determination of value of supply under GST,
tax collected at source (TCS) under the provisions of the Income Tax Act, 1961 would not
be includible as it is an interim levy not having the character of tax.
Incidental Expenses:
• Commission and packing expenses charged by the supplier.
• Inspection or certification charges.
• Installation and testing charges.
• Weighment charges, loading & designing charges incurred before supply.
• Outward freight, transit insurance.

Example:
Mr. Ram sold goods to Mr. Lakshman for Rs 2,50,000. As per the contract of sale, Mr. Ram is
required to deliver the goods in the premises of Mr. Lakshman. Mr. Ram hires transporter for
transportation for delivery of goods. However, the freight paid by Mr. Lakshman to transporter.
Freight paid Rs 2,500.
Find the transaction value of supply of goods.
Solution:

Particulars Value in Rs
Value of supply of goods 2,50,000
Add: Freight paid by recipient of supply (which the supplier is so liable to 2,500
pay)
Taxable value of supply of goods 2,52,500
 Value of Supply

Example:
Motor vehicle worth Rs 20 lakh is sold by M/s Sundar Pvt. Ltd. to a customer in retail market
and for which Rs 5 lakh has been paid in cash and balance amount by way of cheque.
Find the following:
(a) TCS under section 206C of the Income Tax Act, 1961 is applicable in the given
case?
(b) who is required to collect TCS?
(c) value TCS if any?
(d) value of taxable supply under section 15 of CGST Act, 2017?
(e) Invoice Price of M/s Sunder Pvt. Ltd.?
Note: Assume applicable TCS is @1% and GST 28%.
Solution:
(a) Yes, TCS is applicable in the given case.
(b) Under section 206C the seller has to collect Tax at Source (TCS) at the rate of 1%
from purchaser while selling the specified items or services beyond specified limits. In
the given case M/s Sundar Pvt. Ltd. must collect the TCS.
(c) TCS = Rs20,000 (i.e. @1% on Rs20 lakh)
(d) Value of taxable supply under Section 15 of CGST Act, 2017 is Rs20 lakh only.
(e) Invoice price
Particulars Value in (Rs)
Cost of Motor Vehicle 20,20,000
Add: TCS under Sec 206C of IT Act, 1961 20,000
Sub-total 20,20,000
Add: GST 28% on Rs20 lakh 5,60,000
Invoice price 25,80,000
Example:
Bharat Gas sells cooking gas cylinders. Subsidy directly transferred to the account of the
customer. Selling price per cylinder is Rs 800. Customer received subsidy Rs 200 directly from
Government to his bank account. Net outflow of the buyer is Rs 600. Find the value of supply of
goods (per cylinder) in the hands of Bharat Gas.
Answer:
Since, the amount of subsidy is directly credited to the account holder and not received by the
Bharat Gas making the supply. Therefore, such subsidy will not be considered as part of
transaction value as it is not received by the Bharat Gas making the supply.
Hence, transaction value is Rs 800 per cylinder.

Example:
The Government provides subsidy, for the benefit of farmers but it is given to the manufacturer
of fertilizers. Such subsidy will form part of value of supply?
Answer:
The buyer of goods does not provide subsidy, but the Government as per the scheme provides it.
 Value of Supply

Therefore, this will not form part of value of supply as it is specifically specified that such
subsidy provided by the
Government will not form part of the value of supply.

Example:
Admission to True Theater is Rs 90 per ticket for a Tamil Movie as well as for a Hindi Movie
plus entertainment tax Rs 10% on Tamil Movie and 20% on other languages. In the month of
November, True Theater sold 2000 tickets of Tamil Movie and 1500 tickets of Hindi Movie. Find
the value of taxable supply of service. Applicable rate of GST 18% & 28%. Find the GST liability
if any?
Answer: To be solved in class room.
 Value of Supply

 15(3): Discount:

Discount

Given before are at the time

After the supply has been
of supply, If such discount is
effected
recorded in the Invoice.

Has to be Established as per terms of Other wise - Dicount

excluded from agreement before making need not to be
VOS. the supply Excluded.

Invoice revised - Dicount

has to be excluded.
Recipient has to reverse the
excess ITC claim.

 Where the value of the supply of goods/services cannot be determined as per the 15(1), Shall
be determined in such manner as may be prescribed. – Which will be discussed at the final
level.

Illustration:
Examine whether the following discounts ought to be excluded to determine the value of
supply:
o Company offering 20% discount for single purchase above Rs 10,000
o Company offering additional discount of 1% on purchase of 10,000 pieces in a year
o After selling a product, the company re-valued the product at a lower value and issued
credit note to the buyer for the differential amount.
Solution:
The given case is a case of staggered discounts where rate of discount increases with increase
in purchase volume. Such discounts are shown on the invoice itself. Therefore, the same are
excluded to determine the value of supply.
The given case is a case of volume discount which are offered by the suppliers to their stockists,
etc. Such discounts are established in terms of an agreement entered into at or before the
 Value of Supply

time of supply which can be specifically linked to the relevant invoices though not shown on the invoice
as the actual quantum of such discounts gets determined after the supply has been effected
and generally at the year end. Such type of volume discounts are excluded/deducted to
determine the value of supply provided they satisfy the parameters laid down in section 15(3)
including the reversal of ITC by the recipient of the supply as is attributable to the discount on
the basis of document (s) issued by the supplier.
This is a case of secondary discounts. These are the discounts which are not known at the time
of supply or are offered after the supply is already over as per the agreement made at or before
the time of supply.Therefore, such discounts shall not be excluded while determining the value of
supply.
 Clarification on Discounts

Buy more save more offers Secondary Discounts

• It is clarified that discounts • It is clarified that such

offered by the suppliers to secondary discounts shall not
customers (including staggered be excluded while
discount under “Buy more, save determining the value of
more” scheme and post supply / supply as such discounts are
volume discounts established not known at the time of
before or at the time of supply and the conditions laid
supply) shall be excluded to down in clause (b) of sub-
determine the value of supply section (3) of section 15 of
provided they satisfy the the CGST Act are not
parameters laid down in sub- satisfied.
section (3) of section 15 of the
CGST Act, including the
reversal of ITC
 Value of Supply

a) Open market Value of Such

Supply

Rule 27 b) Sum total of consideration

Where Consideration is not wholly equal to money, if such amount is
in Money known at the time of supply
Determination of VOS where transaction value is not

C)The value of supply of like kind

and quality

a) Open market Value of Such

Rule 28 Supply
Supplier and recepient are
available

related persons or Distinct

persons b)The value of supply of like kind
and quality
Rule 29
Goods made or received through
Agent

Rule 30
value of supply of goods or
services or both based on Cost

Rule 31
Residual method for
determination of value of supply
of goods or services or both

• If it is a service then we can skip Rule 30 and can go to Rule 31(optional).

 Value of Supply

Rule 27:Where price is not sole consideration

Examples of Supplies being Valued under Rule 27:
• Barter transaction
• Exchange transaction
• Permanent transfer or disposal of business assets where input tax credit has been
availed on such assets

a) Value based on Open market value of Such Supply:

“Open market value” = Means the full value in money, excluding the integrated tax,
central tax, State tax, Union territory tax and the cess payable by a person in a
transaction, where the supplier and the recipient of the supply are not related and
price is the sole consideration, to obtain such supply at the same time when the
supply being valued is made.

Example:
1. Where a new phone is supplied for Rs 20,000/- along with the exchange of an old
phone and if the price of the new phone without exchange is Rs 24,000/-, the open
market value of the new phone is Rs 24000/-.
2. Mr. A being a registered person sells TVs to all customers at Rs 45,000. He supplied
new TV for Rs 42,000 along with the exchange of an old TV. Find the open market
value of TV.
Answer: Open market value is Rs 45,000.

b) Sum total of consideration equal to money, if such amount is known at the time of
supply provided open market value is not available.
VOS = Consideration paid in monetary terms + Value of consideration of Non-
Monetary terms in Monetary terms

Example:
M/s X Ltd. is supplier of security services provided such services to M/s Y Ltd. As per
the contract M/s Y Ltd is to pay monthly Rs 1,00,000. In the month of November M/s
Y Ltd. supplied uniforms to all employees of M/s X Ltd. by spending Rs 20,000. As a
result M/s X Ltd. raised the bill for Rs 80,000 in the month of November. In the given
case M/s X Ltd. received consideration for security service is partially in terms of
money Rs 80,000 and partially in kind (i.e uniforms). Find the taxable value of service
on which GST will be levied.

Answer:

GST will be levied on the value of Rs 1,00,000 (Rs 80,000 + uniforms equal to monetary
value of Rs 20,000) in the hands of M/s X Ltd.
 Value of Supply

c) The value of supply of like kind and quality if (a) and (b) not applicable:

Supply of like kind & quality means

✓ any other supply made under similar circumstances,

✓ which is same or closely or substantially resembles
✓ in respect of characteristics, quality, quantity, functionality, reputation
✓ to the supply being valued.
Example:

Guidelines Academy teaching or coaching budding CMA’s Tuition fee of Guidelines

Academy can be compared with another academy of same kind and nature. It means we
should not compare with home tuition of a faculty to 4th Standard students.

Feathure light chairs price compare with identical or similar nature product. It means
feather light product compare with Godrej chair products.

Example:
A cosmetics company buys its products from a subcontractor, who supplies “testers” of each
product, to be placed in retail outlets, free of charge. These are of different size from the
product that is sold.

The company and the sub-contractor are related persons. The sub-contractor does not have
details of cost of acquisition of such testers. As none of the methods in rules 27 to 30 will work
for valuing these testers, the value will have to be determined by using reasonable means
consistent with the principles and general provisions of section 15 and the Rules.

A possible method may be pro rata reduction of the price based on difference in size from the
product that is sold.

Rule 28: value of supply or goods or services or both between distinct or related persons other than
through an agent:
Examples:

• Intra-State stock transfer of goods between different registrations of an entity under

same PAN
• Inter-State stock transfer of goods between different registrations of an entity under
same PAN
• Import of services by a company from a holding/ subsidiary company in course or
furtherance of buisness
VOS:

a) Open market value of such supply

b) if the open market value is not available, be the value of supply of goods or
services of like kind and quality
c) if value is not determinable under clause (a) or (b), be the value as determined by
applica tion of rule 30 or rule 31, in that order.
 Value of Supply

Option 2:

If the goods are intended to be supplied AS SUCH by the recipient

Value = 90% of the price charged for the supply of goods of like kind and quality by the
recipient to his unrelated customer

However, it is not mandatory for the supplier to adopt this method of valuation. He can opt
to value his goods in accordance with the valuation methods prescribed in clause (a), (b) or
(c) above.
Example:

ABC Pvt. Ltd., a registered supplier, is a manufacturer of taxable goods. The company’s factory
is located in Noida, Uttar Pradesh and depot in Gurugram, Haryana. Gurugram depot is
eligible for full ITC.

Noida factory agrees to supply goods worth Rs 1,00,000 to a customer of Gurugram depot (on its
behalf). Noida factory ships the goods directly to the customer in Gurugram and bills the
Gurugram depot. Noida factory has the option of billing to Gurugram depot at Rs 90,000 (90% of
Rs 1,00,000). It can also bill the Gurugram depot on actual cost as Gurugram depot is eligible
for full ITC.

Option 3

Where the Recepient is Eligible to claim the the value mentioned on the Invoice can be taken as
Value of Supply.

In the same scenario, if goods are replaced by services, the option of valuing the services @
90% of value charged by the recipient to unrelated customer will not be available. However,
since recipient is eligible for full ITC, the value of supply of service declared in the invoice shall
be taken as open market value (taxable value).

Rule: 29 of the CGST Rules 2017 value of supply of goods made or received from an
agent:
Following methods, applied in sequence:

Method -1

90% of the price

charged for the supply
Open market value of of goods of like kind and
goods being supplied quality by the recipient
Or to his unrelated
customer
 Value of Supply

Method -2
In case value cannot be determined under (a) then following values have to be considered
sequentially to determine the taxable value:

i. Value of supply based on cost i.e. cost of supply plus 10% mark-up

ii. Value of supply determined by using reasonable means consistent with principles & general
provisions of GST law (Best Judgement Method)

It may be noted that only the supply of goods between principal and agent is valued vide this
rule. Therefore, supply of services like commission-based services provided by a commission
agent for procuring orders, undertaking market research etc. are not valued as per rule 29.
Example:

A principal supplies groundnut to his agent and the agent is supplying groundnuts of like kind and
quality in subsequent supplies at a price of Rs 5,000 per quintal on the day of the supply.
Another independent supplier is supplying groundnuts of like kind and quality to the said agent at
the price of Rs 4,550 per quintal.

Find the value of taxable supply in the hands of principal as per Rule 29(a) of the CGST Rules,
2017.

Answer:

The value of taxable supply made by the principal shall be Rs 4,550 or where he exercises the
option, the value shall be Rs 4,500 (i.e. 90% of Rs5,000) per quintal.

Rule:30: Value of supply of goods or services or both based on Cost

As per rule 30 of the CGST Rules, 2017 value of supply of goods or services or both
on cost. The value shall be 110% of the cost of production or manufacture or the
cost of acquisition of such goods or the cost of provision of such services.
Rule 31:

It is provided that where the value of supply of goods or services or both cannot be
determined under rule 27 to rule 30 of the CGST Rules, 2017, value shall be
determined by using reasonable means consistent with the principles and the general
provisions of Sec. 15 and the provisions of this Chapter IV of the CGST Rules,
2017.

The supplier of goods needs to sequentially follow rules 27 to 30 before valuing goods as
per this residual rule 31. Service providers, however, have the option of valuing services
as per rule 30 or rule 31 after sequentially following rules 27 to 29.
 Value of Supply

Rule 31A. Value of supply in case of lottery, betting, gambling, and horse racing

Supply Value
W.E.F. 1.3.2020 Higher of the two amounts to be deemed as value:
Supply of lottery run by State Govt. (OR) 100/128 of the face value of ticket
OR
Supply of lottery authorised by State
100/128 of the price as notified in the official
Govt. Gazette by the
organising State.
Supply of actionable claim in the form of 100% of the face value of the bet or the amount
chance to win in betting, gambling or horse paid into totalisator
racing in a race club

Example:

The Government of a State runs a lottery where face value of a lottery ticket is Rs 250 and the
price notified by the State Government in the Official Gazette is Rs 240. Here, the value of
lottery is Rs 195.313.e. higher of Rs 187.50 (240 x 100/128) or Rs 195.313 (250 x 100/128).

Rule 32 – Determination of value in

respect of certain supplies

Purchase or sale Value of

Booking of
of foreign Value of supply Reedemable
tickets for air Life insurance
currency of second hand vouchers/
travel by an air business
including money goods stamps/
travel agent
changing coupons/ tokens
 Value of Supply

Purchase or sale of foreign currency including money changing:

Difference between RBI reference rate

Case 1
and Buying/selling Rate x units of foreign
Transaction where currency exchanged.
one of the
If RBI ref rate is not available then
currencies exchanged
VOS is 1% of Gross amount of Indian
is Indian Rupees
rupees provided

Method 1 The value of supply is 1% of the lesser

Case 2
of the two amounts the person changing
Purchase or sale of foreign currency

Transaction where the money would have received by

neither of the converting (at RBI reference rate) any
currencies exchanged of the two currencies in Indian Rupees
including money changing

is Indian Rupees

1% of the gross amount of currency

exchanged OR Rs 250, whichever is
Upto Rs 1,00,000 higher

Exceeding Rs Rs 1,000 + 0.50% of the (gross amount

Method 2 1,00,000 and upto of currency exchanged - Rs 1,00,000)
Rs 10,00,000

Rs 5,500 + 0.1% of the (gross amount

of currency exchanged - Rs 10,00,000)
Exceeding OR Rs 60,000, whichever is lower
Rs10,00,000

Method 2 once opted he cannot withdraw it during the remaining part of

the financial year
 Value of Supply

Special provision relating to determination of value of service of booking of tickets for air
travel by an air travel agent [Sub-rule (3)]:

Internation
Domestic
al Air
travel
travel

5 % of basic fare 10% of basic fare

Basic fare = Air fare on which commission is normally paid to the air tarvel agent by the
airlines

Special provision relating to determination of value of service in relation to life insurance

business [Sub-rule (4)]

•Taxable value = Gross premium charged (less) amount

Policy with dual benefits
allocated for investments/savings if such allocation is
of risk coverage and
intimated to the policy holder at the time of collection of
investment
premium

•Taxable value = 10% of the single premium charged from

Single premium annuity
the policy holder where allocation for investments/savings is
policy
not intimated to the policy holder

•Taxable value = 25% of premium charged from the policy

Other cases holder in the 1st year and 12.5% of premium charged for
subsequent years

Policy with ONLY risk •Taxable value = Entire premium charged from the policy
cover holder

Special provision relating to determination of value of second hand goods by a

dealer of second hand goods – Margin Scheme [Sub-rule (5)]
 Value of Supply

When ITC is not availed [Margin

When ITC is availed
Scheme]

•Value = Selling price - Purchase price •Normal valuation as per other applicable
•Selling price < Purchase price provisions
• Ignore negative value
•CGST on second hand goods received
from unregistered supplier exempt

Margin scheme is available only for supply of used goods by a person dealing in buying and selling
of second-hand goods.

Example:
A company X Ltd., which deals in buying and selling of second hand cars, purchases a second
hand Maruti Alto Car of March, 2014 make (Original price Rs 5 lakh) for Rs 3 lakh from an
unregistered person. It incurs Rs 30,000 on minor furbishing and sells the car for Rs 3,50,000.
The company does not avail any ITC. The value for GST purpose shall be Rs 50,000, i.e. the
difference between the selling and the purchase price of the company.
Purchase value of supply of goods repossessed from a defaulting borrower
Many a times goods taken on loan are repossessed by the lender in the event of default in payment
of the loan. The purchase value of such repossessed asset is actual price or 5 %.

Special provisions relating to determination of value of redeemable

vouchers/stamps/coupons/tokens [Sub rules (6)]:

The value of a token, voucher or coupon, or a stamp (other than postage stamp) which is
redeemable against a supply of goods and/or services is equal to the money value of the goods
and/or services redeemable against such token, voucher, coupon or stamp.

Rule 33- Value of supply in case of Pure agent:

“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
supplied 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 in addition to the
amount received for supply he provides on his own account.

The supplier needs to fulfil all the above conditions in order to qualify as a pure agent.
 Value of Supply

Subject to fulfilment of certain conditions, the expenditure and costs incurred by the supplier
as a pure agent of the recipient of supply of service, has to be excluded from the value of
supply.

Example:

Corporate services firm A is engaged to handle the legal work pertaining to the incorporation
of Company B.

• Other than its service fees, A also recovers from B, registration fee
• and approval fee for the name of the company paid to Registrar of the Companies.
• The fees charged by the Registrar of the Companies for registration and approval of the
name are compulsorily levied on B.
• A is merely acting as a pure agent in the payment of those fees.
• Therefore, A’s recovery of such expenses is a disbursement and not part of the value
of supply made by A to B.

Some examples of expenditure/costs incurred as pure agent are:

Port fees, port charges, custom duty, dock dues, transport charges etc. paid by customs
broker on behalf of the owner of goods.
Rule 34 – Rate of exchange of currency, other than Indian rupees, for determination of
value

GOODS: Rate notified by CBIC under section 14 of the Customs Act, 1962, prevalent on the
date of time of supply of said goods.
Services: is the rate determined as per GAAP, prevalent on the date of time of supply of said
service.
Rule 35 – Value of supply inclusive of integrated tax, central tax, State tax, Union territory tax

Tax amount = (Value inclusive of taxes x GST rate in %) [IGST or CGST, SGST/UTGST] / (100
+ sum of GST rates in %)

Clarification on Moulds & Dies

Situation 1 Situation 2
• Transfer between OEM & CM is not a If there is a contract between OEM & CM
supply (Origial Equipment Manufacturer) that moulds and dies has to be acquired by
CM only (Component Manufacturer)
• Need not to include the cost of Moulds & • But OEM supplied Moulds & Dies free of
Dies in VOS cost – is not a supply
• In the invoice of CM, VOS should include
Moulds & Dies cost as well
• OEM can avail ITC on Moulds & Dies OEM cannot avail and CM can avail ITC
 ITC
G
S
T

Introduction:
- The main reason for providing ITC is to eliminate the double taxation.
- In this chapter we discuss about the provisions related to availing ITC and the conditions,
restrictions in availing ITC.

Capital Goods [Sec 2(19): Means goods, the value of which is

capitalized in the Books of accounts of the person claiming ITC and which
are used or intended to be used in the course or furtherance of business.

Exempt Supply[Sec 2(47)]: Means supply of any goods or services or

both which attracts nil rate of tax, or which may be wholly exempt from
tax under sec 11, or under Sec 6 of the IGST Act, and includes non-
taxable supply.

Input [Sec 2(59)]: Means any goods other than capital

goods used or intended to be used by a supplier in the course
or furtherance of business.

Input Service [2(60)]: Means any service used or

intended to be used by a supplier in the course or furtherance of business.

Input Tax [2(62)]: In relation to a registered person means, the Central tax, State tax,
Integrated tax or Union territory tax charged on any supply of goods or services or both made
to him and includes –
- IGST on Import of Goods.
- Tax payable under 9(3) & 9 (4).

But does not include the tax paid under composition scheme.
 ITC

Sec 16 Eligibility and conditions for taking ITC.

Sec 16(1):
- Only registered person is eligible to take the ITC.
- Credit can be availed as per the manner specified in Sec: 49.
- Can take the credit of INPUT TAX.
- Charged on the Inward supply of goods/Services or both.
- Goods/Services must be used or intended to be used in the course or furtherance of business.
- The ITC eligible will be credited in the Electronic credit ledger.
- The entire credit on the input and capital goods allowed can be availed at the time of
receipt of input and capital goods. Thus, to this extent there is no difference between
input and capital goods under GST Law.

Sec 16(2):
Notwithstanding G R I P
A registered person is not eligible to take the ITC unless he satisfies the conditions mentioned
below:

• Goods and services has been received.

- “Bill to ship to” model also included – The goods are delivered to the Third
party under the directions of customer (registered person) to a third
party.
• The details of Input tax credit in respect of the supply communicated to recipient
\under GSTR 2A/2B (Sec 38) has not been recieved.
• Return u/s 39 (GSTR-3b) has been furnished by recipient.
• Invoice/debit note (Tax paying document) is furnished by the supplier, was in the possession
of recipient
• The details of Invoice or debit note referred above has been furnished by the supplier in the
statement of outward supplies (GSTR 1) and such details have been communicated to recipient
in the manner specified ( GSTR 2A/2B)
• Payment of tax to the Government by the supplier (Subject to Sec 41).

Rule 36 Documentary requirements and conditions for availing ITC

- Invoice issued by supplier.
- Invoice issued by recipient.
- Debit note.
- Revised Invoice.
- Documents issued by the Input service distributor.

The document basis which ITC is being taken should contain at least the following details.

 Amount of tax charged.

 Description of goods & Services.
 ITC

 Total value of supply of goods & Services.

 GSTIN of the supplier and recipient.
 Place of supply in case of Inter-state supply.
• No ITC shall be availed by a registered person on all invoices/debit notes which are not
uploaded by the suppliers in their GSTR-1.
• The details of all invoices/debit notes should be reflected in GSTR 1 or invoice furnishing
facility These details of such invoices and debit notes shall be reflecting the recipients GSTR-
2A and GSTR -2B.
• Tax paid under pursuance of any order where demand has confimed on account fraud, will full
misstatement is not available as ITC.
Where goods are received in lots:
- In case the goods covered under a single invoice are not received in single consignment but
are received in Lots/instalments, then the ITC can be taken only on upon receipt of the last
lot/instalment.

Payment to be made within 180 days:

- Recipient (being a registered supplier) must pay the supplier, the value of the goods and/or
services along with the tax within 180 days from the date of issue of invoice.
- If the recipient fails to pay, then the corresponding “input credits” availed by the registered
person will be reversed. (Will be added to his output tax liability).
- Along with that, Interest will be levied as per Sec 51. (18% from the date of availing the
credit till the date when the amount added to the output tax liability is paid.)
- However, once the recipient makes the payment along with tax, he will be entitled to avail the
credit again without any time limit.
- Exceptions:
• Supplies on which tax is payable under RCM
• Deemed supplies without consideration.
• Additions made to the value of supplies on account of suppliers liability, which
has been incurred by recipient.

Example:
M/s A Ltd of Aluva (Kerala) receives the input service from M/s B Ltd of Bengaluru who raises
the invoice for supply of service on 17th Dec 2017 and availed the credit on the same date.
Find the time limit within which M/s A Ltd is required to pay the bill amount inclusive of tax to
supplier of service. Also explain consequence if payment is not made within the stipulated time
period as mentioned in 2nd proviso to section 16(2) of the CGST Act, 2017.
Re-credit is allowed if the payment is made to the supplier of service after expiry of time period
as mentioned in 2nd proviso to section 16(2) of the CGST Act, 2017.

Answer:
 ITC

In the given case M/s A Ltd must pay to M/s B Ltd the value of services and GST payable
thereon by 15th June 2018.
Working note:
From To No. of days

18th Dec 2017 15th June 2018 180

In case M/s A Ltd does not pay by 15th June 2018, the credit availed by it will be added to his
output liability. The amount will be added to their output tax liability with interest.

Sec 16(3): - If depreciation claimed on tax component, ITC not allowed.

If a person taking the ITC on capital goods & plant & machinery has claimed the depreciation on
tax component under Income tax, the ITC on the said tax component shall not be allowed.

Sec 16(4): - Time limit for availing ITC.

E
30th November of succeeding Financial year (or) A

Date of filing of annual return I

R
The time limit u/s 16(4) does not apply to claim for re-availing of credit that had been
reversed earlier under proviso 2 16(2)

Clarification on time limit for availing ITC pertaining to a Debit Note:

Prior to 01.01.2021 On or After 01.01.2021

Date of underlying Invoice (not the date of Date of Issuance of Debit note (not the date
Issue if debit note) shall determine the of linked invoice) shall determine the relevant
relevant FY for the purpose of 16(4) FY for the purpose of 16(4)

Example:
M/s X Ltd. purchased input for Rs 2,00,000 vide Tax Invoice No. 12 dated 1st December 2017.
M/s X Ltd. has submitted annual return for the financial year 2017-18 on 15th September 2018
and return for September 2018 has been filed 19th Oct 2018. Find the time limit within which
 ITC

input tax credit can be availed on input by X Ltd. M/s X Ltd. wants to take input tax credit on
such input on 30th September 2018, advise.
Answer:
Time limit to avail the credit is earlier of the following:
20th October 2018 or
15th September 2018
Therefore, M/s X Ltd has to avail the input tax credit on or before 15th September 2018.
Advise:
After 15th September 2018, the registered taxable person cannot take credit based on invoice
pertaining to supply of goods or services for the period 1st April 2017 to 31 March 2018. Hence,
in the given case M/s X Ltd is NOT eligible to avail the input tax credit on 30th September
2018.
Manner of availing ITC:

Compensation
ITC of IGST ITC of CGST ITC of SGST
cess

Compensatio
IGST CGST SGST
n cess

IGST IGST
CGST/SGST

CGST SGST

- ITC of IGST has to be first adjusted towards payment of IGST, remaining can be used for
payment of CGST or SGST/UTGST in any order in any proportion.
- ITC of CGST or SGST/UTGST can be utilized for payment of CGST OR SGST/UTGST only
after the ITC of IGST has been utilized fully.
- Order for Adjustment credits, when the tax payable is IGST
• First with IGST Credit
• Next with CGST Credit
• If still there is IGST payable then with SGST Credit.
- CGST shall be first utilized for payment of CGST balance for IGST.
- SGST shall be first utilized for payment of SGST balance for IGST.
 ITC

- CGST cannot be adjusted with SGST, vice versa.

Rule 36
Restriction of ITC on Invoices/debit notes not uploaded by supplier in his GSTR -1:
- No ITC shall be availed by a registered person on all invoices/debit notes which are not
uploaded by the suppliers in their GSTR-1.
- The details of all invoices/debit notes should be reflected in GSTR 1 or invoice furnishing
facility
- These details of such invoices and debit notes shall be reflecting the recipients GSTR-2A and
GSTR -2B.
 ITC

 Apportionment of credit & Blocked credits [Sec – 17]:

 Sec 17(5) Blocked credits:
- ITC of tax paid on almost every inputs and input services used for supply of taxable goods or
Services can be availed other than those covered u/s 17(5)

Health service/ Plastic surgery`

Works contract service when supplied for construction of

Immovable property (Other than P & M). (Refer Note - 1)

Goods and services received for construction of an Immovable

property. (Other than P&M), Insurance (Refer Note -2) .

Goods and services recieved by a NRTP, except on goods

imported by him.

Goods Destroyed,lost, stolen, Disposed of by way of gift or

Blocked
free samples.

Cosmetic, Beauty treatment services.

Catering, food and beverages supply. (Refer Note -3

Motor vehicles for transportation of passengers with seating capacity < 13

persons. (Note 4), Vessels & Air crafts (Refer Note - 5)
Membership of a club, health and fitness centre.

Cars in Goods or services or both on which tax has been paid u/s 10.
the

Goods or services or both used for Personal consumption..

Rent-a-cab service (Refer Note - 2(b))

Travel benefits extended to employees on vacation such as

LTC
 ITC

Note - 1:
- Works contract services for construction of an
immovable property is a Blocked credit
Except when
- It is input service for further supply of works
contract service
- Immovable property is plant and machinery
excludes Mobile Towers, Pipelines outside the
factory premises

Note – 2(a)
- General Insurance, servicing, repair and maintenance relating to Motor vehicles for
transportation of persons < 13, Vessels, aircrafts will not be allowed except where they
are used for
• Further supply of such vehicle or conveyance
• Transportation of passengers
• Imparting training on driving, flying, navigating, such vehicles or conveyances.
• By a person who is engaged in the manufacture of such vehicles.
• In the supply of general insurance services

Note – 2(b)

- Rent a cab, Life insurance and health insurance,

Except where,
• The Government made it Mandatory
• Such goods and/or services when used by a
registered person for making an outward
taxable supply of the same category of
goods and/or services (sub-contracting) or as
an element of a taxable composite or mixed
supply
• Inward supply of these services is used for
making an outward taxable supply of the
same category of service.

Note – 3:
- Foods and beverages, outdoor catering, beauty
treatment, health services, cosmetic and plastic
surgery and Life insurance & health insurance
except when
• An Inward of supply of these is used for
making an outward taxable supply of the
same category.
 ITC

• Under an statutory obligation.

• Such goods or services when used by a registered person as an element of a taxable
composite or mixed supply.

Note – 4:
- Motor vehicles for transportation of persons with seating
capacity< 13 (including the driver) , Except when used for
• Further supply of such vehicle or conveyance
• Transportation of passengers including hiring & leasing
• Imparting training on driving, flying, navigating, such
vehicles or conveyances.
 ITC on MOTOR VEHICLES for transportation of passengers
with seating capacity > 13 and used for transportation of
goods will be allowed irrespective of the usage.

Note - 5:
- Vessels and aircrafts, Except when used for
• Further supply of such vessels or aircraft.
• Transportation of passengers or goods including
hiring & Leasing.
• Imparting training on driving, flying, navigating,
such vessels or aircrafts.

Tax paid in fraud cases, detention, confiscation etc. [Clause (i) of section 17(5)]:
Tax paid under sections 74, 129 and 130 is not available as ITC. These sections prescribe the
provisions relating to tax paid as a result of evasion of taxes, or upon detention of goods or
conveyances in transit, or towards redemption of confiscated goods/conveyances.
Illustration:
Advise regarding availability of input tax credit (ITC) under the CGST Act, 2017 in the following
independent cases:-
o AMT Co. Ltd. purchased a mini bus having seating capacity of 16 persons for
transportation of its employees from their residence to office and back.
o Bangur Ceramics Ltd., a manufacturing company purchased two trucks for transportation of
its finished goods from the factory to dealers located in various locations within the
country.
o “Hans premium” dealing in luxury cars in Chankyapuri, Delhi purchased five Skoda VRS cars
for sale to customers.
o Sun & Moon Packers Pvt. Ltd. availed outdoor catering service to run a canteen in its
factory. The Factories Act, 1948 requires the company to set up a canteen in its factory
RTP Nov 19

Solution:
 ITC

i. Section 17(5) of the CGST Act, 2017, inter alia, blocks input tax credit in respect of
motor vehicles for transportation of persons having approved seating capac ity of not more
than 13 persons (including the driver), except when they are used for certain specified
purposes.Since in the given case, the mini bus has a seating capacity of 16 persons, the
ITC thereon will not be blocked.
ii. Section 17(5) of the CGST Act, 2017, inter alia, blocks input tax credit in respect of
motor vehicles for transportation of persons with certain exceptions. Thus, ITC on
motor vehicles for transportation of goods is allowed unconditionally. Therefore, ITC on
trucks purchased by Bangur Ceramics Ltd for transportation of its finished goods from the
factory to dealers located in various locations within the country is allowed.
iii. Section 17(5) of the CGST Act, 2017, inter alia, blocks input tax credit in respect of
motor vehicles for transportation of persons having approved seating capacity of not more
than 13 persons (including the driver), except when they are used for making further
supply of such motor vehicles. Being a dealer of cars, “Hans Premium” has purchased the
cars for further supply. Therefore, ITC on such cars is allowed even though seating
capacity is less than 13.
iv. Section 17(5) of the CGST Act, 2017 inter alia, blocks input tax credit in respect of
outdoor catering services. However, ITC is available on such services, when the same
are provided by an employer to its employees under a statutory obligation. Thus, in view of
the above- mentioned provisions, Sun & Moon packers Pvt. Ltd. can avail ITC in
respect of outdoor catering services availed by it as the same is being provided under a
statutory obligation

 Sec 17(1):
- Goods and services or both are used by the registered person partly for business and
partly for other, then the credit attributable to business alone can be taken.

 Sec 17(2):
- Goods and services or both are used by the registered person partly for Exempted and
partly for Taxable (Including Zero rated) , then the credit attributable to Taxable supplies
alone can be taken.

 Sec 17(3):
- Supplies on which RCM applicable are also be treated as Exempted supplies for the Purpose
of ITC.
Note: Aggregate value of exempt supplies and total turnover excludes the central excise duty,
State excise duty, central sales tax and VAT

Exempted supplies for the purpose of Rule 42 & 43

Inclusions Exclusions
Transactions covered in negative
Reverse charge supplies
list(Except Sale of Land / L&B)
 ITC

Supply of services by way of accepting

Transactions in securities (1% of sale value of
deposits, extending loans or advances
security)
where the consideration is either interest
or discount by other than banks.
Sale of land and sale of building when entire Transportation of goods by a vessel from
consideration is received after completion the customs station of clearance in India
(Value adopted for paying stamp duty) to a place outside India.

Central and State Excise duty,

supply of services by way of accepting
VAT,Central sales tax
deposits, extending loans or advances where
the consideration is either interest or
discount, rovided by a banking company or a
financial institution including a NBFC.

Manner of apportionment of ITC with respect to INPUT goods and INPUT services (Rule
42):

Step 1 – Compute common credit:

(T1)
Less: Input tax on inputs & input services that are intended to be
used exclusively for non-business purposes.
(T2)
Less: Input tax on inputs & input services that are intended to be
used exclusively for exempt supplies.
(T3)
Less: Input tax on inputs & input services which are ineligible for
credit [blocked credits- see discussion under point (ii)]
C1
ITC credited to Electronic Credit Ledger

(T4)
Less: ITC on inputs & input services that are intended to be used
exclusively for taxable supplies including zero rated supplies
C2
Common ITC available for apportionment

Step 2 – Compute credit attributable to exempt supplies (Ineligible):

- Credit related to exempt supplies
𝑬
𝑫𝟏 = ( ) × 𝑪𝟐
𝑭

• E = ∑ Value of exempt supplies during the tax period.

 ITC

• F = Total turnover in the state during the tax period.

- Credit related to Non Business purposes.

D2 = 5 % of C2
Step 3 : - Reverse the Ineligible credits which were credited to credit ledger. (Items
computed in Step – 2).
Step 4 :
❖ Compute ∑ (D1 + D2) for the whole financial year, by taking exempted turnover and aggregate
turnover for the whole financial year, before the due date for filing the return for
September in the following financial year.
❖ If ∑ (D1 + D2) > the amount already reversed every month, the differential amount has to be
reversed in any month till September in the following financial year and interest @ rate 18%
should be paid on such differential amount from 1st April of succeeding year till the date of
payment

Example:

M/s. Abishek Industries Ltd., has given the following information pertaining to the month of
October, 2019:

Sl. No. Particulars Amount

1. Total Input Tax Credit (ITC) on inputs and input services 18,00,000
2. ITC attributable exclusively for non-business purposes (included 1,50,000
in S.No. 1 above)
3.
ITC attributable exclusively for effecting exempt supplies (included 6,50,000
in S. No. 1 above)
4.
ITC in respect of inputs on which credit is not available u/s.17(5) 50,000
(included in S.No. 1 above)
5.
ITC attributable exclusively for effecting taxable supplies 5,50,000
(included in S.No. 1 above)
6.
Total turnover 1,12,65,00
0
7.
Total value of exempt supplies 54,16,000

You are required to calculate the amount of common input tax credit to be reversed in
respect of exempt supplies as per rule 42 of CGST Rules, 2017.

Solution:

Sl. Particulars Amount Denotes

No.
1 Total Input Tax Credit (ITC) on inputs and input 18,00,000 T
 ITC

Services

2 ITC attributable exclusively for non-business 1,50,000 T1

purposes (included in S. No. 1 above)
3 ITC attributable exclusively for effecting exempt 6,50,000 T2
supplies (included in S. No. 1 above)
4 ITC in respect of inputs on which credit is not 50,000 T3
available u/s. 17(5) (included in S. No. 1 above)
5 ITC attributable exclusively for effecting taxable 5,50,000 T4
supplies (included in S. No. 1 above)
6 Total value of exempt supplies 54,16,000 E
7 Total Turnover 1,12,65,000 F
8 Total ITC credited to Electronic Credit Ledger C1 = 9,50,000 C1 = T –
18,00,000 – (1,50,000 + 6,50,000 + 50,000) (T1+T2+T3)
9 Common Credit C2 = 9,50,000 – 5,50,000 4,00,000 C2 = C1 –
T4
10 ITC attributable towards exempt supplies D1 = 1,92,312 D1 =
(54,16,000 ÷ 1,12,65,000) × 4,00,000 (E÷F)×C2
11 ITC attributable to non-business purposes presumed to be 20,000 D2 = 5% of
included in common credit D2 = C2
4,00,000 × 5%
12 ITC attributable to the purposes of effecting 1,87,688 C3 = C2 –
taxable supplies C3 = 4,00,000 – (1,92,312 + 20,000) (D1 + D2)
13 ITC to be reversed as per rule 42 2,12,312 D1 + D2
 ITC

Methodology of apportionment of credit of capital goods and reversal thereof [Rule 43 of the
CGST Rules]:

Total input tax (IT) on

capital goods (CG)

a) Input tax on Capital b) IT on CG used C) IT on CG not covered under (a) &

Goods used exclusively exclusively for taxable (b) and used commonly denoted as
for non-business/exempt supplies including zero ‘A’ and useful life of such CG 5
supplies (Form 3B) rated supply (ZRS) years from Date of Invoice

Not credited to Credited to Electronic Credited to electronic

Electronic credit ledger credit ledger credit ledger

Rs
d) Change from exclusive use for non-business purpose/exempt supplies to common use:
Where capital goods which were initially covered under (a) above get subsequently covered
under (c), credit input tax in respect of the same, denoted as ‘A’, in the ECrL.

Simultaneously compute the ineligible credit attributable to the period during which such
capital goods were used for non- business purpose/making exempt supplies @ 5% per quarter
or part thereof andadd to OUT PUT tax liability

e) Add together the amount of A credited to electronic credit ledger in respect of common
capital goods whose useful life remains during the tax period to arrive at common credit
‘T ’

f) Where capital goods which were initially covered under (b) above get subsequently covered
under (c), add input tax claimed in respect of the same to aggregate value of ‘Tc’

• Common credit during the useful life of capital goods for a tax period as under and denote
the same as ‘Tm

Tm = Tc ÷ 60
 ITC

Steps
1. Take credit to electronic credit ledger (Capital goods Take credit to electronic
used for solely taxable Purpose) ledger (CG used commonly)
Denote it as “A”
2. • Capital goods used for Exempted changed to to Take credit to Electronic
common credit ledger (Capital goods
used for exempted initially
now for common)
Add the amount to “A”
- Simultaneously add to to liability (reversal for the quarter used)
3. CG used initially for Taxable shifted to common Need not to credit
electronic credit ledger
Add the amount to “A”
4. Aggregate of “A” for which 5 yrs useful life not elapsed
5. Aggregate of “A” / 60 = Tm

Apportion common credit attributable to exempt supplies as under: Te = (E ÷ F) x Tr

Where
E = Aggregate value of exempt supplies made during the tax period
F = Total turnover in the State during the tax period

Amount of Te are to be computed separately for CGST, SGST/UTGST and IGST and declared in
GSTR 3B.

Add Te to the output tax liability along with applicable interest during every tax period of
the useful life of the capital goods concerned.

17(4)Special provisions for banking companies, NBFCs and Financial Institutions

Option 1: Avail proportionate ITC
Option 2: Avail 50% of eligible ITC

• Remaining 50% ITC will get lapse.

• Restriction of 50% shall not apply to the tax paid on supplies received
from another registration within the same entity.
• Option once exercised cannot be withdrawn during remaining part of the year.
• Credit not available on
- Inputs used for non business purpose
- Blocked credit u\s 17(5)
 ITC

Sec -18

Entitiled to take
ITC on Inputs
Person applied for ITC to be availed within 1
contained in finshed
registration with year from the date of the
(a) goods/RM/WIP as
in 30 days from issue of the tax invoice by
on the day
date of liability the supplier.
precceding the date
liable to pay tax

Entitiled to take
Person who ITC on Inputs
ITC to be availed within 1
isnotrequired to contained in finshed
year from the date of the
(b) register, but goods/RM/WIP as
issue of the tax invoice by
obtainsvoluntary on the day
the supplier
registration precceding the date
of registration

Entitiled to take
ITC on Inputs
18(1)

contained in ITC to be availed within 1

FG/RM/WIP as on year from the date of the
Registered person
the day precceding issue of the tax invoice by
who ceases to pay
the date from the supplier
(c) composition taxand
which he is liable
switches to regular
to pay tax u\s 9
scheme
ITC Available= Total Input
ITC on capital tax (-) 5% per quarter of a
goods also available year or part of the year
from the date of invoice
Entitiled to take
ITC on Inputs
contained in finshed ITC to be availed within 1
goods/RM/WIP as year from the date of the
Registered person on the day issue of the tax invoice by
whose exempt precceding the the supplier
(d)
supplies become from which supply
taxable supplies becomes taxable.
ITC Available= Total Input
ITC on capital tax (-) 5% per quarter of a
goods also available year or part of the year
from the date of invoice

Other Points:
• In all the above cases, the registered person has to make an electronic declaration in the
prescribed form on the common portal, clearly specifying the details relating to the inputs
 ITC

held in stock, inputs contained in semi- finished or finished goods held in stock and capital
goods.
• The declaration is to be filed within 30 days (extendable by Commissioner/Commissioner of
State GST/Commissioner of UTGST) from the date when the registered person becomes
eligible to avail ITC.
• If the claim of ITC pertaining to CGST, SGST/UTGST, IGST put together exceeds Rs
2,00,000, the declaration needs to be certified by a practicing Chartered Accountant/Cost
Accountant.

18(3) & Rule 41: Transfer of ITC on account of change in constitution of registered person:

In case of ITC that remains unutilized

in the electronic credit
- Sale
ledger of the registered
- Merger
person can be transferred to
- Demerger
the new entity
- Amalgamation
- Transfer Provided there is a specific
- Change in ownership of business etc provision for transfer of
liabilities in such change of
constitution.
➢ If the capital goods supplies are
- Moulds
- Dies
- Jigs
Tax to be paid on transaction value.
In the case of demerger:
- ITC will be apportioned in the ratio of the value of assets of the new units as specified in
the demerger scheme.
- The value of assets of the new units is to be taken at the State level (at the level of
distinct person) and not at the all-India level. The transferor would be required to file
Form GST ITC-02 only in those States where both transferor and transferee are
registered
- The total amount of ITC to be transferred to the transferee (i.e. sum of CGST, SGST/
UTGST and IGST credit) should not exceed the amount of ITC to be transferred.
- The apportionment formula shall be applied on the ITC balance of the transferor as
available in electronic credit ledger on the date of filing of Form GST ITC – 02 by the
transferor.
- The ratio of the value of assets should be taken as on the “appointed date of demerger”
as specified in the respective scheme for demerger
Example:

A company XYZ is registered in two States of M.P. and U.P. Its total value of assets is
worth Rs 100 crore, while its assets in State of M.P. and U.P are Rs 60 crore and Rs 40
 ITC

crore respectively. It demerges a part of its business to company ABC. As a part of such
demerger, assets of XYZ amounting to Rs 30 Crore are transferred to company ABC in State of
M.P, while assets amounting to Rs 10 crore only are transferred to ABC in State of U.P.
(Total assets amounting to Rs 40 crore at all-India level are transferred from XYZ to ABC).

The unutilized ITC of XYZ in State of M.P. shall be transferred to ABC on the basis of ratio
of value of assets in State of M.P., i.e. 30/60 = 0.5 and not on the basis of all-India ratio
of value of assets, i.e. 40/100=0.4. Similarly, unutilized ITC of XYZ in State of U.P. will be
transferred to ABC in ratio of value of assets in State of U.P, i.e. 10/40 = 0.25.

Above formula for apportionment of ITC shall be applicable for all forms of business re-
organization that results in partial transfer of business assets along with liabilities

Other Points:
- The registered person should furnish the details of change in constitution in the ITC - 02
on the common portal and
- Submit a certificate from practicing Chartered Account/Cost Accountant certifying that
the change in constitution has been done with a specific provision for transfer of liabilities.
- Upon acceptance of such details by the transferee on the common portal, the unutilized
ITC gets credited to his electronic credit ledger

18(4) & Rule 44: Reversal of ITC on switching to composition levy or exit from tax-paying
status:
- When a registered person who has availed ITC switches to composition levy or when his
supplies get wholly exempted from tax it requires reversal of ITC
- ITC on inputs should be reversed proportionately on the basis of corresponding invoices on
which credit had been availed on such inputs.
- If invoices are not available, ITC can be reversed on the basis of the prevailing market
price of such goods on the date of switch over/exemption.
- The details furnished on the basis of prevailing market value need to be duly certified by
a practicing Chartered Accountant/ Cost Accountant.
- ITC involved in the remaining useful life (in months) of the capital goods should be
reversed on pro-rata basis, taking the useful life as 5 years.
- Credit ledger will be debited to the extent of ITC reversal.
- Balance of ITC, if any, lying in the electronic credit ledger lapses.
- Cancellation of registration also requires reversal of ITC on inputs held in stock/
contained in semi-finished goods or finished goods held in stock, capital goods or plant and
machinery on the day immediately preceding the cancellation date.
- ITC to be reversed on inputs and capital goods is calculated separately for ITC of CGST,
SGST/UTGST and IGST

Clarification 18(3) Transfer of ITC in case of Death os sole proprietor :

Sec 85 (1) e
 ITC

- When there succession both transferor & transferee are liable to pay tax, penalty,
interest, penalty (jointly & severally responsible)
Sec 93(1)
- When the person responsible to pay tax expires successor continuing business shall be
liable to pay tax, interest, penalty.
- This section establish that even though there is no explicit agreement to transfer
liablities. Successor is obligated to discharge liablities of expired sole proprietor.
- Legal heirs of deceased sole proprietor will apply for cancellation of registration in REG 16
in that GSTN of transferee is required to be mentioned to link GSTN of transferor and
transferee
- Successor has to register stating the reason for registration as death of the sole
proprietor
 Availment of credit in special circumstances. [Sec – 18(6)]:
- If capital goods or plant and machinery on which ITC has been taken are supplied
outward by the registered person.
- He must pay an amount HIGHER of the following:

ITC taken on such

goods Tax on transaction
less: 5 % per value
quarter (Even part)

Higher

Rule 41A of CGST rules: Transfer of ITC on obtaining separate registrations for
multiple places of business within a State/ Union Territory:

• The registered person (transferor), having separate registrations for multiple places of
business within a State/Union Territory, can transfer the unutilised ITC (wholly or
partly) lying in his electronic credit ledger to any or all of the newly registered place(s) of
business in the ratio of the value of assets held by them at the time of registration.
• Here, the ‘value of assets’ means the value of the entire assets of the business
irrespective of whether ITC has been availed thereon or not
• The registered person should furnish the prescribed details on the common portal within a
period of 30 days from obtaining such separate registrations.
• Upon acceptance of such details by the newly registered person (transferee) on the
common portal, the unutilised ITC gets credited to his electronic credit ledger.

Sec 20 & 21 of CGST – Distribution of Credit by Input service distributor:

 ITC

- The ISD is required to maintain arithmetical accuracy and ensure that the credit distributed
does not exceed the credit available with it for distribution. Further, in distributing the
credit among different locations of the entity - which are supplying goods and/or services
and have same PAN as that of the ISD (‘recipients’):
• The credit connected to an input service must be distributed only to the particular
recipient to whom that input service is attributable.
• If the input service is attributable to more than one recipient, the relevant ITC is
distributed to such recipients in the ratio of turnover of the recipient in a State / Union
Territory to the aggregate turnover of all the recipients to whom the input service is
attributable and which are operational during the current year.
• ITC pertaining to input services which are common for all units, is distributed to all the
recipients in the ratio of turnover as described in (b) above.
• Both ineligible and eligible ITC are distributed separately.
• ITC of CGST, SGST/UTGST and IGST are distributed separately.

Turnover excludes central excise duty, State excise duty, central sales tax and VAT

Relevant period:
• All the recipients of credit had turnover in their State / Union Territory during that year
Distribution based on turnover of previous financial year.
• If some or all the recipients did not have turnover during the previous financial year - then t
last quarter for which details of turnover of all the recipients is available, prior to the mon
for which credit is to be distributed.

• The credit attributable to a recipient is distributed even if such recipient is unregistered

or is making exempt supplies.

Distribution of taxes

• ITC of CGST, SGST/UTGST in respect of recipient located in the same State/Union

Territory is distributed as CGST and SGST/UTGST respectively.
• ITC of CGST and SGST/UTGST, in respect of a recipient located in a different
State/Union territory, is distributed as IGST (total of ITC of CGST and SGST/UTGST
which were to be distributed to such recipient).
• ITC on account of IGST is distributed as IGST.

Procedural aspects of distribution of credit [Rule 39 of the CGST Rules]

• The ISD has to issue an ISD invoice, as prescribed in rule 54(1) of the CGST Rules, for
distributing ITC. It should be clearly indicated in such invoice that it is issued only for
distribution of ITC.
• The ISD needs to issue a ISD credit note, as prescribed in rule 54(1) of the CGST
Rules, for reduction in credit if the distributed credit gets reduced for any reason.
 ITC

• The ISD invoice and ISD credit note must contain the following information:
- Name, address and GSTIN of the ISD and recipient of credit;
- A consecutive serial number up to 16 characters, containing alphabets or
numerals or special characters or any combination thereof, for a financial year;
- Date of issue;
- Amount of the credit distributed;
- Signature of the ISD or his authorized representative.
• Relaxation for banks & FIs: If the ISD is a banking company/ financial institution
including NBFC, the document for distributing credit need not be serially numbered.

ITC available for distribution in a month is to be distributed in the same month.

• Details of distribution of credit and all ISD invoices issued should be furnished by ISD in
monthly GSTR-6 within 13 days after the end of the month. The details in the returns
are made available to the respective recipients in their GSTR 2A.

• An ISD cannot accept any invoices on which tax is to be discharged under reverse charge
mechanism. This is because the ISD mechanism is only to facilitate distribution of credit
of taxes paid. The ISD itself cannot discharge any tax liability (as person liable to pay
tax) and remit tax to Government account. If ISD wants to take reverse charge
supplies, then in that case ISD has to separately register as normal taxpayer.

Example:

XYZ Ltd, having its head Office at Mumbai, is registered as ISD. It has three units in
different cities situated in different States namely ‘Mumbai’, ‘Jabalpur’ and ‘Delhi’ which are
operational in the current year.
M/s XYZ Ltd furnishes the following information for the month of July:
(i) CGST paid on services used only for Mumbai Unit: Rs 3,00,000
IGST, CGST & SGST paid on services used for all units: Rs 12,00,000 Total turnover of the
units for the previous financial year are as follows

Unit Turnover (Rs)

Total Turnover of three units Rs
10,00,00,000
Turnover of Mumbai unit Rs
5,00,00,000
Turnover of Jabalpur unit Rs
3,00,00,000

Determine the credit to be distributed by XYZ Ltd. to each of its three units.

Solution:
 ITC

Particulars Credit distributed to all units (Rs)

Total credit Mumbai Jabalpur Delhi
available
CGST paid on services used only for 300000 300000 0 0
Mumbai Unit

IGST, CGST & SGST paid on services 12,00,000 6,00,000 3,60,000 2,40,000
used for all units
Distribution on pro rata basis to all the
units which are operational in the
current year

Total 15,00,000 9,00,000 3,60,000 2,40,000

Note 1: Credit distributed pro rata on the basis of the turnover of all the units
is as under: -
(a) Unit Mumbai: (Rs 5,00,00,000/ Rs 10,00,00,000) * Rs 12,00,000 =
Rs 6,00,000
(b) Unit Jabalpur: (Rs 3,00,00,000/ Rs 10,00,00,000) * Rs 12,00,000 =
Rs 3,60,000
(c) Unit Delhi: (Rs 2,00,00,000/ Rs10,00,00,000) * Rs 12,00,000 = Rs 2,40,000

Issue of debit note and credit note on ISD [Rule 39 of the CGST Rules]
Issue of a debit note

• The additional ITC on account of issue of a debit note to the ISD is distributed by the
ISD, in accordance with the provisions discussed above, in the month in which such debit
note is included in GSTR-6.
Issue of a credit note

• If a credit note is issued to the ISD, the ITC to be reduced is apportioned amongst the
relevant recipients in the same ratio in which the original credit was distributed.
• Such apportioned credit is reduced from the credit to be distributed in the month in which
the credit note is included in GSTR-6. If the apportioned credit exceeds the credit to be
distributed, the same is added to the output tax liability of the recipient.
• This process is also followed in case of reduction of credit already distributed for any
other reason e.g., when the credit is distributed to a wrong recipient.

Recovery of excess credit distributed to a recipient (Sec 21):

 ITC

• If the ISD has distributed excess credit to any recipient, the excess will be recovered
from the recipient with interest as if it was tax not paid by initiating action under section
73 or 74
• Penalties may be applicable depending on the circumstances.
• Has clarified that the ISD would also be liable to a general penalty under section
122(1)(ix).

Restrictions on utilisation of ITC [Rule 86A]

Restrictions can be imposed on the following circumstances:

• ITC has been availed on the basis of tax invoices/valid documents -
❖ issued by a non-existent supplier or by a person not conducting any business from
the registered place of business; or
❖ without receipt of goods or services or both; or
❖ the tax in relation to which has not been paid to the Government
• the registered person availing ITC has been found non-existent or not to be conducting any
business from the registered place of business; or
• The registered person availing ITC is not in possession of tax invoice/valid document.

If the ITC is so availed, the restrictions can be imposed by not allowing such ITC to be used
for discharging any liability under section 49 or not allowing refund of any unutilised amount of
such ITC.

Restrictions on use of amount available in electronic credit ledger [Rule 86B]

• A new rule 86B has been inserted in the CGST Rules to restrict the amount available in
electronic credit ledger which a registered person can use to discharge his output tax
liability to 99% of such tax liability in cases where the value of taxable supply other
than exempt supply and zero-rated supply, in a month exceeds Rs 50 lakh. This rule
overrides all other rules.
• It implies that a registered person shall not use the amount available in electronic credit
ledger to discharge his liability towards output tax in excess of 99% of such tax
liability, in cases where the value of taxable supply other than exempt supply and zero-
rated supply, in a month exceeds Rs 50 lakh.

Example:
The total value of inter-State supply of Raman & Sons for the month of February 2021 is of Rs
100 lakh. Said supply is taxable @ 18% IGST. Thus, total output tax liability of Raman &
Sons is 18 lakh. Amount available in electronic credit ledger is Rs 20 lakh (IGST). In terms of
restriction imposed by rule 86B, Raman & Sons can discharge 99% of its output tax liability,
i.e. Rs 17,82,000 (99% of Rs 18,00,000) from the amount available in electronic credit ledger.
However, it has to mandatorily discharge the balance 1% of the output tax liability i.e. ₹ 18,000
(1% of Rs 18,00,000) through electronic cash ledger only.
 ITC

This restriction shall not apply in following cases:-

• Where the said person/proprietor/karta/managing director/any of its two partners, whole-

time directors, members of Managing Committee of Associations or Board of Trustees, as
the case may be, have paid more than Rs 1 lakh as income tax1 in each of the last 2
financial years
• Where the registered person has received a refund of more than Rs 1 lakh in the preceding
FY on account of unutilised ITC in case of (i) zero rated supplies made without payment of
tax or (ii) inverted duty structure.
• Where the registered person has discharged his liability towards output tax through the
electronic cash ledger for an amount which is in excess of 1% of the total output tax
liability, applied cumulatively, upto the said month in the current financial year.
• Where the registered person is:-
• Government Department
• Public Sector Undertaking
• Local authority
• Statutory body
However, the Commissioner or an officer authorised by him in this behalf may remove the said
restriction after such verifications and such safeguards as he may deem fit.

Example:

Determine the amount of tax payable through electronic credit ledger /electronic cash ledger
from the given information:-

Taxable turnover of ABC Ltd in the month of February = Rs 1,25,00,000 (excluding zero-
rated and exempt supply)

Total amount of input tax credit (as per books) for the month of February - Rs
25,00,000

Total amount of input tax credit (as per GSTR-2A/2B for February – Rs 22,00,000

❖ Applicable tax rate: 18%

Solution:
In the given case, ABC Ltd. would be liable to pay tax of Rs 22,50,000 (ie Rs 1,25,00,000 X
18%). In terms of Rule 36(4) of CGST Rules, the availment of ITC is restricted to 5% of
reported invoices i.e. invoices on unreported invoices auto-populated in GSTR-2A/2B. Hence, ABC
Ltd would be entitled to avail the input tax credit of :
Rs 22,00,000 (matched ITC) + 5% of 22,00,000
= Rs 23,10,000

It can be seen from the above that ABC Ltd. can pay entire tax liability through utilization of
 ITC

available input tax credit. It is pertinent to note that taxable turnover of ABC Ltd. for
February 2021 is more than Rs 50 lakh, hence, rule 86B would be applicable and accordingly, ABC
Ltd. cannot use input tax credit in excess of 99% of the output tax liability in the instant
scenario.
Therefore, liability of Rs 22,50,000 would be paid in the following manner:
Rs 22,27,500 (99% of output liability) to be paid via electronic credit ledger; and
Rs 22,500 to be paid via electronic cash ledger.

Clarification 18(3) T/fr of ITC in case of death of sole proprietor

Sec 85(1) – When there is succession both transferor and transferee are liable to pay tax,
Interest, Penalty(Jointly & severally responsible).
Sec 93(1)

When the person responsible to pay tax expires successor continuing business shall be liable to
pay tax,interest,penalty.

This section establishes that even though there is no explicit agreement to transfer
liablities.Successor is obligated to discharge liabalities of expired sole proprietor

Legal heirs of deceased sole proprietor will apply for cancellation of registration in REG 16 in
that GSTN of transferee is required to be mentioned to link GSTN of transferor &transferee

Successor has to register stating the reason for registration as death of the sole proprietor
 Registration
G
S
T

 Introduction:
- Registration is the most fundamental requirement for identification of tax payers and
ensuring tax compliance.
- Without registration a person can neither collect tax from his customers nor claim any
credit of tax paid by him.

 Advantages of registration:
- He is legally recognized as supplier of goods or services or both.
- He is legally authorized to collect taxes from his customers and pass on the credit of
the taxes paid.
- He can claim Input Tax Credit of taxes paid and can utilize the same for payment of
taxes..
- Seamless flow of Input Tax Credit from suppliers to recipients at the national level.
- Registered person is eligible to apply for Government bids or contracts or assignments.
- Registered person under GST can easily gain trust from customers.

 Agent: [2(5)]
- Means a person, Including
• Broker
• Auctioneer By whatever name called, Who

• Del credere agent carries on the business of supply or

receipt of goods or services or both
• Commission agent
on behalf of another.
• Mercantile agent

 Principal place of business: [2(89)]

- Means the place of business specified as the principal place of business in the
certificate of registration.
 Tax period [2(106)]:
- Means the period for which return is required to be furnished.
- While calculating aggregate TO for 22(1) exclude value of exempt supply by way of
offering/accepting loans, advances, deposits & consideration in the form of discount.
 Registration

 Sec – 22 Persons liable for registration

22(1)

22(2)

22(3&4)
Every person making Where a regisetered
taxable supply of goods person making taxable
or services or both supply transferred
whose aggregate Person who is business on account of
turnover in a registered under earlier succession/
financialyear exceeds laws is liable to amalgmation, the
40 lakhs. register under this act. successor or transferee
For J&K, Mizorm, is liable to be
Tripura, Manipur & registered.
Nagaland are special
category states for
said purpose.

Clarification : Transfer or change in the ownership of business will include transfer/change in

the ownership of business due to death of the sole proprietor.
• Transferee liable to register, with effect from the date on which the ROC issues a
Certificate of Incorporation giving effect to court/tribunal order.

Threshold limit for persons engaged

exclusively in in supply of services/

supply of goods both goods and
services
States other than Special All Rs 20 lakh Rs 20 Lakh
Category States Except J&K
Special Special “U ASK Rs 10 lakh Rs 10 Lakh
Category Category TAMMANAH”
States as per States as per except J&K
Constitution section 22
Position prior to Ammendment:

Position after amendment

Threshold limit for persons engaged

Exclusively in supply
In supply of services/
of goods both goods and services
 Registration

States other than Special Category Puducherry Rs 20 lakh Rs 20 Lakh

States Telangana Rs 20 lakh Rs 20 Lakh
Others Rs 40 lakh Rs 20 Lakh
Special Category States
Special
as Mizoram Rs 10 lakh Rs 10 Lakh
per Constitution Category Manipur Rs 10 lakh Rs 10 Lakh
States as per Nagaland Rs 10 lakh Rs 10 Lakh
section 22 Tripura Rs 10 lakh Rs 10 Lakh
Others Jammu Rs 40 lakh
and Kashmir Rs 20 Lakh

Himachal Pradesh Rs 40 lakh Rs 20 Lakh

Assam Rs 40 lakh Rs 20 Lakh

Sikkim Rs 20 Lakh Rs 20 Lakh

Uttarakhand Rs 20 Lakh Rs 20 Lakh
Meghalaya Rs 20 Lakh Rs 20 Lakh
Arunachal Pradesh Rs 20 Lakh Rs 20 Lakh
Illustration:
Examine whether the supplier is liable to get registered in the following independent
cases:-
(i) Raghav of Assam is exclusively engaged in intra-State taxable supply of readymade
garments. His turnover in the current financial year (FY) from Assam showroom is Rs 28
lakh. He has another showroom in Tripura with a turnover of Rs 11 lakh in the current FY.
(ii) Pulkit of Panjim, Goa is exclusively engaged in intra-State taxable supply of shoes. His
aggregate turnover in the current financial year is Rs 22 lakh.
(iii) Harshit of Himachal Pradesh is exclusively engaged in intra-State supply of pan masala.
His aggregate turnover in the current financial year is Rs 24 lakh.
(iv) Ankit of Assam is exclusively engaged in intra-State supply of taxable services. His
aggregate turnover in the current financial year is Rs 25 lakh.
(v) Sanchit of Assam is engaged in intra-State supply of both taxable goods and services.
His aggregate turnover in the current financial year is Rs 30 lakh. RTP – NOV 19
Solution:
(i) Raghav is eligible for higher threshold limit of turnover for registration, i.e. Rs 40 lakh
as he is exclusively engaged in intra-State supply of goods. However, since Raghav is
engaged in supplying readymade garments from a Special Category State i.e. Tripura,
the threshold limit gets reduced to Rs 10 lakh. Thus, Raghav is liable to get registered
under GST as his turnover exceeds Rs10 lakh. Further, he is required to obtain registration
in both Assam and Tripura as he is making taxable supplies from both the States.
(ii) The applicable threshold limit for registration for Pulkit in the given case is Rs 40 lakh as
he is exclusively engaged in intra-State taxable supply of goods. Thus, he is not liable to
get registered under GST as his turnover is less than the threshold limit.
(iii) Harshit being exclusively engaged in supply of pan masala is not eligible for higher threshold
limit of Rs40 lakh. The applicable threshold limit for registration in this case is Rs20
 Registration

lakh. Thus, Harshit is liable to get registered under GST.

(iv) Though Ankit is dealing in Assam, he is not entitled for higher threshold limit for
registration as the same is applicable only in case of exclusive supply of goods while he
is exclusively engaged in providing services. Thus, the applicable threshold limit for
registration in this case is Rs 20 lakh and hence, Ankit is liable to get registered under
GST.
(v) Since Sanchit is engaged in supply of both taxable goods and services, the applicable
threshold limit for registration in his case is Rs 20 lakh. Thus, Sanchit is liable to get
registered under GST as his turnover is more than the threshold limit.

 Aggregate turnover vs Turnover of a state:

- Aggregate turnover is used for determining the threshold limit for registration as well as
eligibility for composition scheme.
- However, the amount payable under the composition levy would be calculated on the basis of
‘turnover in the state/UT’.

 Casual Taxable person & Non Resident taxable person: [Sec 25 & 27]

Casual taxable person Non Resident taxable person

Person who occasionally un dertakes Person who occasionally un dertakes

transactions involving supply of transactions involving supply of
goods/services or both whether as goods/services or both whether as
principal, or agent, in a STATE/UT principal, or agent, but who has NO
where he has NO FIXED PLACE OF FIXED PLACE OF BUSINESS or
BUSINESS RESIDENCE in INDIA.

- They cannot opt for composition levy

- Has to get registered compulsorily, at least 5 days prior to the commencement of business
- Registration is valid for period specified in the registration or 90 days from the effective
date of registration (can be extended further 90 days by proper officer)
- Has to make an advance deposit of tax. (an amount equivalent to the estimated tax liability.)

 Compulsory registration in certain cases: [Sec 24]

- Input service Distributor.
- Persons making Interstate supply.
- Persons who are required to pay tax under Reverse charge.
- Persons to whom TDS (sec 51) provisions are applicable.
- Every person supplying Online information and data base access or retrieval (OIDAR)
services from a place Outside India to a person in India, other than a registered
person.
 Registration

- Casual taxable persons making taxable supply.

- E commerce:
• E-commerce operator who has to collect TCS (ECO).
• Persons who supply goods and services other than supplies specified u/s 9(5),
through such ECO who is required to colled tax at source under Sec 52
- Persons who make taxable supply on behalf of other taxable persons whether as an
Agent or otherwise.
- Non-resident taxable persons making taxable supply.

 Persons not liable for registration: [Sec – 23]

1. Any person engaged exclusively in the business of supplying of goods or services or both
they are not liable to tax or wholly exempt from tax under CGST or IGST.
2. An agriculturist, to the extent of supply of produce out of cultivation of land.
3. The Government may, on the recommendation of the GST Council

i. Persons making only reverse charge supplies.

- A person who is engaged in making a supply on which entire tax is payable
on RCM basis, has been exempted for obtaining registration

ii. Persons making inter-state supplies of taxable services.

- Even it is mentioned under Sec -24, that every person making an
interstate supply has to be registered compulsorily irrespective of the
turnover, a relaxation has been provided in respect of supply of inter-
state taxable services.
- Interstate taxable supply of services are < 22 (1) Then they are
exempted from obtaining registration

iii. Casual taxable persons making taxable supplies of handicraft goods.

- Even though covered under sec -24, if the person is involved in supply of
handicraft goods and aggregate value of such supplies < 22 (1) then
Exempted from obtaining registration.
- Where made by craftsman predominantly

iv. Job workers making inter-State supply of services to a registered person.

- Job workers engaged in making inter-state supply of services to a
registered person have been exempted from obtaining registration.
- However, if 𝜮 Turnover exceeds 20/10 lakhs – then the exemption will not
be applicable.

v. Persons making supplies of services through an ECO.

- Persons making supply through ECO has to be registered compulsorily,
however this notification says that if supply of services are made through
 Registration

ECO and aggregate turnover < 20/10 lakhs then they are exempted from
obtaining registration.

Clarification : A commission agent who is making supplies on behalf of such an agriculturist, who
is not a taxable person, is not liable for compulsory registration under sec 24

• Services provided by the commission agent for sale of purchase of agricultural produce is
exempted, hence such commissions agents (even when they qualify as agent under Schedule 1)
are not liable to registered according to section 23(1)(a) of the CGST Act
 Procedure for registration: Where and when to apply for registration – Sec 25(1)

Casual
Normal taxable
Person person or
Has to apply for NRT Has to apply for
registration in every regisration in every
such state/UT in such state/UT in
which he is so liable. which he is so liable.

With in 30 days from At least 5 days prior

the date he becomes to commencement of
liable to registration business.

• Where a person is operating from territorial waters he has to register in the nearest
coastal state or UT
 State wise registration [Sec 25(2)]:
- Registration needs to be taken state wise. (There are no centralised registrations in GST)
- A business entity having its branches in multiple states have to take separate state wise
registration for the branches in different states.
- If a taxpayer has multiple Place of Business in one state than he has an option to obtain
independent registration with respect to each Place of Business.

 Voluntary registration [Sec 25(3)]:

- A person who is not required to be registered u/s 22/24 can register himself voluntarily.
- A person once registered has to pay taxes irrespective of the turnover.

 Distinct persons [ Sec 25(4 &5)]: - Discussed in chapter – 2(Supply)

 PAN is mandatory for obtaining registration [Sec 25(6) & (7)]

 Suomoto registration [Sec 25(8)]:

 Registration

- On search, enquiry or inspection, the proper officer concludes that a person liable
register has failed to do so, then he may register the said person on temporary
basis.
- Such person shall either submit an application for registration within 90 days from
the date of grant of temporary registration or should file an appeal against such
temporary registration.
 Unique Identity Number [Sec 25(9) & (10)]:
- UNO, consulate or embassy of foreign countries and any person notified by the
commissioner, is required to obtain UIN from the GSTN portal.
- UIN is required to claim refund of taxes paid on notified supplies of goods and/or
services.
- UIN granted is a centralised one.

 Effective date of registration & applicable for Sec 10

With in 30 days from date

Effective date =
he becomes liable to
Date of liability
register
Application
Submitted Effective date =
After 30 days from date he date of grant of
becomes liable to register registration
certificate
 Registration

Procedure for registration:

PAN, Mobile and e-mail address are validated

Mobile No and E mail will be

PAN validated from CBDT portal
verified through OTP.

TRN (Temporary reference number) generated and

communicated to applicant

Using TRN applicant logins and fills the On submission of application an

PART - B acknowledgement will be issued

Application submitted will be forwarded to proper officer for

examination.
If same are found in order Proper office
Not in order has to to issue notice with in 7
grants registration ( in 7 working days) days from apllication seeking clarification.

Notice may be issued not later than 30 days

from application submission date when the
person fails to undergo aadhar authentication.

• Where Aadhaar authentication is not made then the date of submissiom of application is
- Date of authentivation of Aadhaar or
- 15th day from date of of submission of application.
 Registration

Applicant furnished Not furnished

clarification with in 7 clarification with in
days 7days

Proper officer Proper officer will

satisfied reject the application.
Reasons to be
recorded in writing.

Will grant registration

with in 7 days from
date of clarification.

The time limit for grant of registration after physical verification of the place of business
of a person who fails to undergo the aadhaar authentication/does not opt for aadhaar
authentication has been reduced to 30 days fromc 60 days

Deemed approval of APPLICATION:

Sucessfully undergoes
authentication of aadhaar or • Within a period of 7 days from the date of
is exempt from aaadhar submission of application.
authentication.

Fails to undergo aadhaar

• With in a period of 30 days from the date of
authentication or doesnot opt
submission of application.
for aadhar authentication.

In case proper officer issues • with 7 working days from the date of submission
notice seeking clarrification of clarrification.
 Registration

Aadhaar authentication:

- Aadhaar e-KYC based registration has been introduced under the GST law.
- Aadhaar authentication is mandatory for the new applicants.
- Applicants, who, either do not provide Aadhaar, while applying for new registration or
whose aadhar authentication fails in validation, would be subjected to site verification by
the tax department.
- However, tax authority based on the documents produced can grant registration.
- Existing registrants also be required to undergo aadhaar authentication otherwise their
registration will be deemed to be invalid.(However no notification has been issued
prescribing this manner).
Aadhaar authentication for registered person
The registered person other than a person notified under sec 25(6D) who has been issues
a certificate of registration under rule 10 shall undergo authentication of Aadhaar
number
• the proprietor in the case of proprietorship firm, or
• any partner, in the case of a partnership firm, or
• of the Karta, in the case of a HUF, or
• of the managing director in case of a company or
• any of the members of the Managing committee of an AOP or BOI or
• of trustees in the Board of Trustees

in order to be eligible for the purposes as specified in the table below

Sl. No Purpose
1. For filing of application for revocation of cancellation of registration in FORM
GST REG-21 under RULE 23
2. For filing of refund application in FORM RFD -01 under RULE 89
3. For refund under RULE 96 of the integrated tax paid on goods exported out of
India

Where aadhaar is not assigned ?

If Aadhar number has not assigned to the person required to undergo authentication of Aadhar
number, such person shall furnish the following identification documents namely, -
I. Her/his Aadhaar Enrolment ID slip,
II. and
- Bank passbook with photograph, or
- Voter ID card or
- Passport or
- Driving license

RULE 18 Display of Registration certificate and GSTIN on the name board

• Every registered person shall display his certificate of registration in a prominent location
at his principal place of business and at every additional place of business.
 Registration

• Every registered person shall display his GSTIN on the name board exhibited at the entry
of his principal place of business and at every additional place of business.

Class of persons exempted from Aadhaar authentication:

- Department or establishment of State Government or Central Government
- A person who is not citizen of India.
- Local Authority
- Statutory Body
- Public sector undertaking
- A person applied for Unique Identity number
 Furnishing of bank account details:
- In Part B of the application for registration, a person is required to furnish the details
of his bank account.
- Rule 10A relaxes this requirement to a limited extent.
- A tax payer has an option to give his bank account details after obtaining registration,
within 45 days from the date of grant of registration or the due date of furnishing
return, whichever is earlier.
- However, this relaxation is not applicable to persons registered as
 TDS deductor.
 TCS collector or
 Granted suo-motu registration.
 Grant of registration to TDS deductor/TCS collector
- Submit an application in FORM GST REG-07
- Physical premises not necessary in all states for ECO to obtain registration
- A person applying for registration to deduct or collect tax in accordance with provisions of
sec 51, pr as the case may be sec 52, in a state/UT where he does not have a physical
presence, shall
• mention the name of state/UT in PART A of the application in FORM GST REG-07 and
• mention the name of the state/UT in PART B thereof in which the principal place of
business is located which may be different from the state or UT mentioned in PART A
- After due verification – PO may grant within 3 working days from the date of submission
- PO may cancel : If upon an enquiry, PO is satisfied that a person no longer liable to
deduct/collet tax & cancellation shall be communicated GST REG - 08
- Deemed registration: [Sec 26]
- Registration is not tax specific
- Grant of registration/UIN under SGST/UTGST Act is deemed to be registration/UIN
under CGST Act.
 Registration

 Amendment of Registration [Sec 28]:

Core Items

Non- core Items

PAN
•Has to submit
application with in 15
days of CHANGE
•Proper officer satisfies •Registration
with the details certificate shall •Where the change
provided then the stand amended is in relation to
registration stands upon submission of PAN the person
ammended in 15 days the application for has to apply for
•Not satisfied issues a amendment NEW registration
SCN asking why not to
reject (Person has to
reply in 7 days)
•Explanation is
satisfactory accepts
the registration
otherwise rejects.

 Core Items:
- Legal name of business
- Address of principal or additional place of business
- Changes in ownership, directors, CEOS, signing persons.

 If the proper officer fails to take any action,-

- within a period of fifteen working days from the date of submission of the
application, or
within a period of seven working days from the date of the receipt of the reply to
-
the show cause notice,
then the certificate of registration shall be deemed to be amended.

Cancellation of registration [Sec – 29]:

Circumstances where registration can be cancelled on application or suomoto by PO
• Business dicontinued(Eg: Death)
• Amalgmation/demerger
• Change in the constitution busineess (eg conversion of firm to company.
• Turn over with in the threshold limit u/s 22 and 24 not applicable.

Where proper officer can cancel on his own with retrospective effect

• Violates the provison of rule 86b

• Voilates Anti profiteering provisions

 Registration

• Registration obtaines by way of Fraud

OBH has to
• Issues Invoice without making supply. be given

• Not conducting businees from Declared place of business.

• Furnishes the details of outward supplies in Form GSTR-1 for one or more tax periods
which is in excess of the outward supplies declared by him in his valid return under
section 39 for the said tax periods

• Avails ITC in violation of the provisions of section 16 of the CGST Act or the rules made
thereunder

• Being a registered person required to file return under section 39(1) for each month or
part thereof, has not furnished returns for a continous period of six months.

• Being a registerd perosn required to file under sec 39(1)for each quarter or part
thereof, has not furnished returns for a contionous period of two tax periods.

• A person paying tax under section 10 has not furnished return for a financial year
beyond three months from the due date of furnishing the said return

• Any person who has taken voluntary registration u/s 25(3) has not commenced business
within six months from the date of registration

 Procedure for cancellation:

- Should submit the application in online within 30 days from the occurrence of the event
warranting cancellation.
- Details of inputs held in stock, WIP, FG, and capital goods held in stock and required
documents has to be furnished.
Will be
- On satisfaction of details submitted by the taxable person PO can cancel the
discussed
registration.
in ITC
- Input tax credit availed on goods which were lying in stock, WIP, FG has to be
chapter.
reversed.
- Even Proportionately ITC availed on capital goods also have to be reversed.

Suspension of registration:
Once a registered person has applied for cancellation of registration or the proper officer seeks
to cancel his registration, the proper officer may suspend his registration during Pendency of
the proceedings relating to cancellation of registration filed. In this way, a taxpayer is freed
from the routine compliances, including filing returns, under GST law during the pendency of the
proceedings related to cancellation of registration.

Where registered person has applied for cancellation of registration:

Where a registered person has applied for cancellation of registration, the registration shall be
deemed to be suspended from:
A) The date of submission of the application or
B) The date from which the cancellation is sought, whichever is later, pending the
 Registration

completion of proceedings for cancellation of registration.

Where, a comparison of the returns furnished by a registered person under

section 39 with:
A) The details of outward supplies furnished in Form GSTR-1; or
B) the details of inward supplies derived based on the details of outward supplies furnished by
his suppliers in their Form GSTR-1,
or such other analysis, as may be carried out on the recommendations of the Council, show that
there are significant differences or anomalies indicating contravention of the provisions of the
CGST Act or the rules made thereunder, leading to cancellation of registration of the said
person, his registration shall be suspended.

• Said person shall be intimated in prescribed form by sending a communication to his e-

mail address provided at the time of registration or as amended from time to time.
• In this intimation for suspension and notice for cancellation of registration, the said
differences and anomalies are highlighted and said person is asked to explain, within a
period of 30 days, as to why his registration shall not be cancelled.
• In cases where the cancellation is initiated by the Department on its own and registration
of a person has been suspended, such person shall not be granted any refund under section
54, during the period of suspension of his registration.
• The suspension of registration may be revoked by the proper officer, anytime during the
pendency of the proceedings for cancellation, if he deems fit.

 Revocation of Cancellation of registration: [Sec 30]:

- Where the registration of a person is cancelled suo-motu by the proper officer, such
registered person may apply for revocation of the cancellation to such proper officer,
within 30 days from the date of service of the order of cancellation of registration.
- Provide that such period may, on sufficient cause being shown, and for reasons to be
recorded in writing be extended, -
- By the additional commissioner or joint commissioner, as the case may be for a period
not exceeding 30 days
- By the commissioner, for a further period not exceeding 30 days, beyond the period
specified in clause (a)
- Before applying for revocation the person has to make good the defaults (by filing all
pending returns, making payment of all dues in terms of such returns along interest
penalty, late fee, etc.) for which the registration was cancelled.
- If the proper officer is satisfied that there are sufficient grounds for revocation of
cancellation, he may revoke the cancellation of registration, by an order within 30 days
of receipt of application and communicate the same to applicant
- Otherwise, he may reject the revocation application. However, before rejecting the
application, he has to first issue SCN to the applicant who shall furnish the clarification
within 7 working days of service of SCN. The proper officer shall dispose the application
(accept/reject the same) within 30 days of receipt of clarification
 Registration

Illustration:

M/s Siya Ram is a trader of decorative items in Hauz Khas, Delhi. His aggregate turnover
exceeded Rs 20 lakh in the month of October, 20XX. He applied for registration on GST portal,
but missed to submit the details of his bank account. His tax consultant advised him that prior
submission of bank details is mandatory to obtain registration. Examine whether the advice of
Mr. Siya Ram’s tax consultant is correct.
The advice of Mr. Siya Ram’s consultant that prior submission of bank details is mandatory to
obtain registration is no more valid in law.
A new rule 10A has been inserted in the CGST Rules, 2017 vide Notification No. 31/2019 CT
dated 28.06.2019 which allows the registered person to furnish information with respect to
details of bank account, or any other information, as may be required on the common portal in
order to comply with any other provision, soon after obtaining certificate of registration and a
GSTIN, but not later than 45 days from the date of grant of registration or the date on which
the return required under section 39 is due to be furnished, whichever is earlier.
This relaxation is however not available for those who have been granted registration as TDS
deductor/ TCS collector under rule 12 or who have obtained suo-motu registration under rule
16.
Examine whether the liability to register compulsorily under section 24 of the CGST Act, 2017
arises in each of the independent cases mentioned below:
(1) Heera, a supplier in Haryana, is exclusively engaged in supply of potatoes produced out of
cultivation of his own land, within Haryana and also outside Haryana.
(2) Aanya of Telangana is exclusively engaged in intra-State supply of toys. Its aggregate
turnover in the current financial year is Rs 22 lakh.
Solution:
As per section 22 of the CGST Act, 2017 read with Notification No. 10/2019 CT dated
07.03.2019, a supplier is liable to be registered in the State/Union territory from where he
makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year
exceeds the threshold limit. The threshold limit for a person making exclusive intra-State
taxable supplies of goods is as under:-
• Rs 10 lakh for the Special Category States of Mizoram, Tripura, Manipur and Nagaland.
• Rs 20 lakh for the States, namely, States of Arunachal Pradesh, Meghalaya, Puducherry,
Sikkim, Telangana and Uttarakhand.
• Rs 40 lakh for rest of India except persons engaged in making supplies of ice cream and
other edible ice, whether or not containing cocoa, Pan masala and Tobacco and manufactured
tobacco substitutes.
Since Aanya is making taxable supplies from Telangana, she will not be eligible for higher
threshold limit available in case of exclusive supply of goods. The applicable threshold limit for
registration for Aanya in the given case is Rs 20 lakh. Thus, she is liable to get registered
under GST.
 Invoice
G
S
T

a supply of goods which is provided, or continuously or on recurrent basis

agreed to be provided,

under a contract

Continous supply whether or not by means of a wire, cable, pipeline or other conduit, and
of goods

for which the supplier invoices the recipient on a regular or periodic basis
and

includes supply of such goods as the Government may, subject to such

conditions, as it may, by notification, specify

a supply of SERVICES which is provided, or continuously or on recurrent

basis agreed to be provided,

under a contract
Continous supply
of SERVICES
for a period exceeding 3 months with periodic payment obligations and

includes supply of such services as the Government may, subject to such

conditions, as it may, by notification, specify
 Invoice

 Sec 31( Tax Invoice):

- In Sec 31, Sub sections (1,4,7) are about goods whereas sub sections (2,5,6) are related
to services. Sub section 3 is about the Issue of invoice or other documents in various
situations.
 Sec(31(1)):
A registered
person making
taxable supply of Tax Invoice should
GOODS have the

- Description
Shall issue invoice - Quantity
before or at the - Vale of goods
time of, - Tax charged
- Such other
prescribed
Delivery or making
Removal of goods -
available of goods
If it Involves
- in any other
movement of goods
case
`

 Sec 31(2) read with Rule 47:

Shall issue invoice before (or) after the provison of service but
with in -

FBI
- 30 days from the date of
A supply (Generally) - F – Financial Institution
registered - B – Banks (Including NBFC)
person - I - Insurer
making
taxable - 45 days from the date of
supply of supply (FBI)
SERVICE
S
- "FBI", telecom person Issue Invoice before or at the
making supply to distinct time supplier records in BOA or
persons before the end of the quarter in
which supply was made
 Invoice

Sec 31(4) Vs Sec 31(5)

- Due date for Invoice in the case of Continuous supply:

Continuous supply - Goods Continuous supply - Services

Due date ascertainable - Invoice

Where successive statements or
to be issued before or on the due
payments involved
date

Event linked - Invocie to be

the Invoice shall be issued before
issued before or on the date of
or at the time of
completion of that event.

each such statement or Other case - before or at the

each such payment. time he receives payment.

- “Payment” here means the date of credit in Books of accounts or date of receipt in bank
account whichever is earlier.

 Sec 31(6): Cessation of supply (Services)

- Where supply of services ceases under a contract before the completion of the supply,
the invoice shall be issued at the time when the supply ceases.
- To the extent of supply made before such cessation.

 Sec 31(7): Sale on approval basis:

- When the goods were sold on sale on approval basis, the invoice should be issued:
• Before or at the time of supply (or)
• Six months from the date of removal whichever is earlier.
 Invoice

 Sec 31(3):

Tax Invoice
• When a registered taxable person supplies taxable goods or services, a tax
invoice is issued.
Bill of Supply
• Issued when supplier cannot charge tax. [Paying taxes under composition scheme
or supplying exempt goods]
Supplimentary invoice
• Issued where any deficency is found in a tax invoice already issued by a taxable
person.

Revised Invoice
• Revised invoices are issued for the bills already raised without collecting the tax
during the period one becomes liable to pay tax but registration is not granted.
Receipt voucher
• Issued in case of receipt of any adavance payment.

Payment Voucher
• Issued in case of payment made to unregistered dealer.

 Goods sent/ taken out of India for exhibition or on consignment basis for export promotion

Sometimes the goods are sent or taken out of India for exhibition or on consignment basis for
export promotion.

The activity of sending/ taking the goods out of India for exhibition or on consignment basis
for export promotion, except when such activity satisfy the tests laid down in Schedule I
(hereinafter referred to as specified goods), do not constitute supply as the said activity does
not fall within the scope of section 7 as there is no consideration at that point in time.

The specified goods sent/taken out of India are required to be either sold or brought back
within the stipulated period of 6 months from the date of removal as per the provisions
contained in section 31(7).

The supply would be deemed to have taken place, on the expiry of 6 months from the date of
removal, if the specified goods are neither sold abroad nor brought back within the said
period.

 If the specified goods are sold abroad, fully or partially, within the specified period of 6
months, the supply is effected, in respect of quantity so sold, on the date of such sale. In
that case, the sender shall issue a tax invoice in respect of such quantity of specified goods
which has been sold abroad.
 Invoice

 When the specified goods sent / taken out of India have neither been sold nor brought back,
either fully or partially, within the stipulated period of 6 months, as laid down in section
31(7), the sender shall issue a tax invoice on the date of expiry of 6 months from the date
of removal, in respect of such quantity of specified goods which have neither been sold nor
brought back, in accordance with the provisions contained in section 12 and section 31 read
with rule 46 [Circular No. 108/27/2019 GST dated 18.07.2019].

Example:
M/s. ABC sends 100 units of specified goods out of India. The activity of merely sending/
taking such specified goods out of India is not a supply. No tax invoice is required to be issued
in this case, but the specified goods shall be accompanied with a delivery challan issued in
accordance with the provisions contained in rule 55.

In case the entire quantity of specified goods is brought back within the stipulated period of 6
months from the date of removal, no tax invoice is required to be issued as no supply has
taken place in such a case.

In case, however, the entire quantity of specified goods is neither sold nor brought back
within 6 months from the date of removal, a tax invoice would be required to be issued for
entire 100 units of specified goods in accordance with the provisions contained in section 12
and section 31 with rule 46 within the time period stipulated under section 31(7).

 Particulars of a tax invoice [Sections 31(1) & (2) read with rule 46]:
- There is no standard format prescribed for an Invoice. But rales make certain fields
mandatory.
a) Signature of the Supplier or his authorised representative.
b) HSN code for goods or services.
c) Rate of Tax
d) Address of Recepient, Delivery,GSTIN of recepient.
e) Date of its issue.
f) Description of goods or services.
g) Amount of tax charged in respect of goods or services.

h) Value of supply of goods or services or both.

i) Weight (Quantity) in case of Goods.
 Invoice

 Number of HSN digits required on tax invoice.

S.No Annual Turnover in the Number of Digits of HSN

preceding FY

1 < 5 Cr B2B - 4 Digits of HSN

B2C – 4 Digits (Optional)
3 >5 Crores B2B - 6 Digits of HSN
B2C – 6 Digits of HSN

 Manner of issuing the Invoice:

Goods Services
• Invoice in TRIPLICATE • Invoice in DUPLICATE
• Orginal - Recipient • Orginal - Recipient
• Duplicate - Transporter • Duplicate - Supplier
• Triplicate - Supplier

 Sec 32 Prohibition of unauthorised collection of tax

- Unregistered person shall not collect taxes.
- No registered person shall not collect tax except in accordance with the provisions
under this act.

 Sec 33 Amount of tax to be indicated in tax invoice

- When supply is for consideration every person is liable to pay tax for such supply
shall prominently indicate tax in the invoice.
 E-Invoicing;
- All registered businesses with an aggregate turnover in any preceeding financial year
from 2017-18 onwards greater than Rs 10 crores will be required to issue e-Invoices.
- E-invoicing is not generation of invoice by a Government portal. Taxpayers will continue
to create their GST invoices on their own Accounting/Billing/ERP Systems as per e-
invoice schema. These invoices will then be reported to ‘Invoice Registration Portal
(IRP)’. On such reporting, IRP will generate a unique ‘Invoice Reference Number (IRN)’,
digitally sign it and return the e-invoice to the supplier. A GST e-invoice will be valid
only with a valid IRN.
- Invoice shall be prepared in GST INV-01.
- Where e-invoicing is applicable, there is no need of issuing invoice copies in
triplicate/duplicate.
- E-Invoicing is not applicable for B2C supplies and invoices issued by ISD.
 Invoice

- IRP sends the e-invoice data along with IRN9 to the GST System as well as to E-Way Bill
System.
- The GST system will auto-populate them into GSTR-1 of the supplier and GSTR-2A of
respective receivers. With source marked as ‘e-invoice’, IRN and IRN date will also be
shown in GSTR-1 and GSTR-2A.
- Where needed, the seller can cancel IRN for an e-invoice already reported by reporting
it on IRP within specified time.
- Amendment of e-invoice already uploaded on IRP will be done only on GST portal.
Amendment of invoices is not possible through the IRP.
- The e-invoicing system is also available for the E-Commerce Operators (ECO) to report
the invoices to the Invoice Registration portal, generated by them on behalf of the
suppliers.
- Bulk uploading of invoices to IRP is also possible.
- Upon successful registration of invoice on IRP, it will return a signed e-invoice to the
supplier with IRN and QR Code. IRN is embedded in the QR Code which shall be
extracted and printed on the invoice. The QR code enables quick view, validation and
access of the invoices from the GST system from hand-held devices.
- The digitally signed QR code will have a unique IRN which can be verified on the central
portal as well as by an offline app by the officer.]
 Advantages of E-Invoicing:
- Auto reporting of invoices in to GST return and auto generation of E-way bill.
- There will be substantial reduction in transcription errors since same data will be
reported to tax department and buyers
- It will facilitate standardisation and inter- operability leading to reduction of disputes
among transacting parties
- Improve payment cycles, reduction of processing costs and thereby greatly improving
overall business efficiency.
- Since a complete trail of B2B invoices is available with the Department, it will enable the
system-level matching of input tax credit and output tax thereby reducing the tax
evasion.

 Exemption from E-invoicing:

 Special Economic Zone units**

 A Government Department

 A Local Authority

 Insurer or banking company or financial institution including NBFC

 GTA supplying services in relation to transportation of goods by road in a goods

carriage

 Supplier of passenger transportation service

 Person supplying services by way of admission to exhibition of cinematograph films in

 Invoice

multiplex screens

How e-invoice is generated?

• The taxpayer first prepares and generates his invoice using his own ERP/ accounting/
billing system or manual system9. The invoice must conform to the e-invoice schema
(standard notified) and must have the mandatory parameters.
• The details of this invoice are uploaded/reported by the taxpayer to the Invoice
Registration Portal (IRP). This way taxpayer registers his supply transaction on IRP.
On uploading, IRP returns the e-invoice with a unique ‘Invoice Reference Number (IRN)’
(explained in detail subsequent paras) after digitally signing the e-invoice and adding a
QR Code (Quick Response Code). Then, the supplier shares the e-invoice with the
receiver (along with QR Code).
• The GST system will auto-populate them into GSTR-1 of the supplier and GSTR-2A of
respective receivers. With source marked as ‘e-invoice’, IRN and IRN date will also be
shown in GSTR-1 and GSTR-2A.

Quick Response (QR) code

• Upon successful registration of invoice on IRP, it will return a signed e-invoice to the
supplier with IRN and QR Code.
• IRN is embedded in the QR Code which shall be extracted and printed on the invoice.
• The QR code enables quick view, validation and access of the invoices from the GST
system from hand-held devices. T
• he digitally signed QR code will have a unique IRN which can be verified on the central
portal as well as by an offline app by the officer.
• This will be helpful for tax officers checking the invoice offline on the roadside where
internet may not be available all the time.

Applicability of requirement of Dynamic QR code:

Aggregate turnove
Dynamic QR code
rin the preceeding
Applicable
FYs is > 500 Crs
Applicability of
B2C
Dynamic QR code

Aggregate turnove
Dynamic QR code
rin the preceeding
is not4 Applicable
FYs is < 500 Crs
 Invoice

Non-applicability of requirement of Dynamic QR code:

Dynamic QR code is not applicable to an invoice issued to an unregistered person byfollowing
suppliers:

1. Insurer or banking company or financial institution including NBFC

2. Goods transport agency supplying services in relation to transportation of goods by road in

a goods carriage

3. Supplier of passenger transportation service

4. Person supplying services by way of admission to exhibition of cinematograph films in

multiplex screens

5. Supplier of online information and database access or retrieval (OIDAR) services7.

No Dynamic QR code in case of exports:

As regards the supplies made for exports, though such supplies are made by a registered
person to an unregistered person, however, since e-invoices are required to be issued in
respect of supplies for exports treating them as B2B supplies, Dynamic QR code requirement
will not be applicable to them.

Parameters/ details are required to be captured in the Dynamic QR Code:

Dynamic QR Code, inter-alia, shall contain the following:

 Supplier GSTIN number

 Supplier UPI ID

 Payee’s Bank A/c number and IFSC

 Invoice number & invoice date,

 Total Invoice value and

 GST amount along with breakup i.e. CGST, SGST, IGST, CESS, etc.

 Further, Dynamic QR Code should be such that it can be scanned to make a digital
payment.
Compliance with the Dynamic QR Code requirements in certain cases:
If the supplier has issued invoice having Dynamic QR Code for payment, the said invoice shall
be deemed to have complied with Dynamic QR Code requirements. Compliance with the
Dynamic QR Code requirements has been examined in the following cases:
 Invoice

Case-I: If a supplier provides/ displays Dynamic QR Code, but the customer opts to
make payment without using Dynamic QR Code

Case-II: If a supplier makes available to customers an electronic mode of payment

like UPI Collect, UPI Intent or similar other modes of payment, through mobile
applications or computer-based applications, where though Dynamic QR Code is not
displayed, but the details of merchant as well as transaction are displayed/ captured
otherwise

Case-III: In case of pre-paid invoices i.e. where payment has been made before
issuance of the invoice

Case-IV: In case where the e-commerce operator (ECO)/online application has

complied with the Dynamic QR Code requirements, whether the suppliers using such e-
commerce portal or application will still be required to comply with the requirement
of Dynamic QR Code?

In all the cases the supplier provides a cross reference of the payment (transaction id
along with date, time and amount of payment, mode of payment like UPI, Credit card,
Debit card, online banking etc.) on the invoice; said invoice shall be deemed to have complied
with the requirement of having Dynamic QR Code.

 Revised Tax Invoice [Section 31(3)(a) read with rule 53:

- Revised invoices are issued for the bills already raised without collecting the tax,
during the period one becomes liable to pay tax but registration is not granted.
- Revised Tax invoice shall be issued with in 1 month from the date of issuance of
certificate of registration.
- A registered person may issue a Consolidated Revised Tax Invoice in respect of all
taxable supplies made to an unregistered recipient during such period.
- However, in case of inter-State supplies, a consolidated Revised Tax Invoice cannot be
issued in respect of all unregistered recipients if the value of a supply exceeds Rs
2,50,000.
- Contents of Revised Tax Invoice.
✓ Signature of the Supplier or his authorised representative.
✓ HSN code for goods or services.
✓ Rate of Tax, REVISED TAX INVOICE.
✓ Address of Recepient, Delivery,GSTIN of recepient.
✓ Date of its issue.
✓ Description of goods or services.
 Invoice

✓ Amount of tax charged in respect of goods or services.

✓ Value of supply of goods or services or both.

✓ Weight (Quantity) in case of Goods.

 A registered person may not issue a Tax Invoice if:

• Value of the goods/services/both supplied < Rs 200,
• The recipient is unregistered; and
• The recipient does not require such invoice
• However, he has to Issue a consolidated tax Invoice for such supplies at
the close of each day in respect of all such supplies.

 Bill of Supply [Section 31(3)(c) read with rule 49]:

- A registered person supplying exempted goods or services or both or paying tax under
composition levy shall issue a bill of supply instead of a tax invoice
- Where a registered person is supplying taxable as well as exempted goods or services or
both to an unregistered person, a single “invoice- cum-bill of supply” may be issued for all
such supplies.

 Receipt Voucher [Section 31(3)(d) read with rule 50]:

- Issued in case of receipt of any advance payment.
- Where at the time of receipt of advance, rate of tax/ nature of supply is not
determinable.

Where at the time of receipt of

Advance
- Rate of Tax is not determinable. - Tax shall be paid at a rate of
18%
- Nature of Supply is not determinable. - Shall be treated as inter-state
supply.
 Refund Voucher:
- Where a person received advance payment but subsequently no supply is made then a
Refund Voucher against such payment.

 Payment Voucher:
- Issued in case of payment is made to unregistered dealer.
 Invoice

RCM Transactions

Supplies received from Supplies on which RCM Supplies on which RCM

unregistered Supplier applicable 9(3) applicable 9(3)
9(4). - Supplier unregistered - Supplier registered

Receiver shall raise Receiver shall raise

Invoice and issue Invoice and issue Issue payment voucher.
Payment voucher. Payment voucher.

 Rule 55 specifies the cases where at the time of removal of goods, goods may be
removed on delivery challan and invoice may be issued after delivery. These are
provided in the following table:
Nature of supply Deliver challan to Particulars of Delivery Challan
be issued

Supply of liquid gas where Serially Date and number of

the quantity at the time numbered not the delivery challan
of removal from the place exceeding 16 Name, address and GSTIN of the
of business of the characters consigner, if registered
supplier is not known, • in one or multiple
Name,series
address and GSTIN or UIN
• at the of the consignee, if registered
time of HSN code and description of goods
removal of
(2)Transportation of goods Quantity (provisional, where the
goods for
for job work, exact quantity being supplied is not
transportation
known)
(3)Transportation of Tax rate and tax amount – central
goods for reasons tax, state tax, integrated tax,
other than by way of union territory tax or cess, where
supply, or the transportation is for supply to
the consignee
(4)Transportation of Taxable value
goods other than by
Place of supply & Signature
way supply
 Invoice

The delivery challan shall be prepared in TRIPLICATE, in case of supply of goods, in the
following manner:

 Orginal – Consignee
 Duplicate – Transporter
 Triplicate – Consumer

 Goods transported in SKD/CKD condition or in batches or lots

• Where the goods are being transported in a semi knocked down or completely knocked
down condition or in batches or lots,
(a) the supplier shall issue the complete invoice before dispatch of the first
consignment;
(b) the supplier shall issue a delivery challan for each of the subsequent
consignments, giving reference of the invoice;
(c) Copies of the corresponding delivery challan shall accompany each consignment
along with a duly certified copy of the invoice; and
(d) the original copy of the invoice shall be sent along with the last consignment.
 Clarification:

- Goods moved within the State or from the State of registration to another State for
supply on approval basis and Art works sent by artists to galleries for exhibition

• It is clarified that the goods which are taken for supply on approval basis can be
moved from the place of business of the registered supplier to another place within
the same State or to a place outside the State on a delivery challan along with the
e-way bill wherever applicable and
• The invoice may be issued at the time of delivery of goods. For this purpose, the
person carrying the goods for such supply can carry the invoice book with him so that
he can issue the invoice once the supply is fructified.
 Credit Note [Sec 34]:

Invoice has been issued for supply of goods and services and

- Value in invoice >

Value of supply Where goods ande
Where the goods are
Or services supplied are
- Tax charged in returned.
found defective
Invoice > Tax payable

Register supplier may issue Credit note to registered supplier

 Invoice

• Time limit for issuance of credit note

• 3oth Day of November
• Date of filing of the relevant annual return.
 Debit Note [Sec 34]:.

Invoice has been issued for supply of goods and services and
Or

Or
- Taxable value in invoice < Tax charged in Invoice < Tax
Taxable value of supply payable

Earlier

Register supplier may issue Debit note to registered supplier

 There is no limit for debit note

One or more credit/ debit notes can be issued for multiple invoices:

 Earlier, a credit/debit note, which is issued by the registered person under section 34, was
required to be issued invoice-wise.
 The CGST (Amendment) Act, 2018 has amended sub-section (1) of section 34 to allow the
registered person to issue one (consolidated) or more credit or debit notes in respect of
multiple invoices issued in a financial year without linking the same to individual invoices

Contents prescribed for credit and debit notes

✓ Signature of the Supplier or his authorised representative & Serial number of tax
invoice.
✓ HSN code for goods or services.
✓ Rate of Tax,Reference of original invoice number.
✓ Address of Recepient, Delivery,GSTIN of recepient.
✓ Date of its issue, Debit note,Credit note
✓ Description of goods or services.
✓ Amount of tax charged in respect of goods or services.
✓ Value of supply of goods or services or both.
✓ Weight (Quantity) in case of Goods.
 Invoice

 Clarification:

Electronic tax invoice

Signature or digital Electronic bill of supply

signature of supplier/
authorised representative
not required on the Electronic consolidated tax invoice in case of
following Insurance/Banking companies, financial isntitutions
including NBFCs

Electronic ticket issued for passenger transportation

service
 E Way Bill
G
S
T

E-WAY BILL
 Section 68 stipulates that the Government may require the person in charge of a conveyance
carrying any consignment of goods of value exceeding such amount as may be specified to
carry with him such documents and such devices as may be prescribed.
 Rule 138 prescribes e-way bill as the document to be carried for the consignment of goods in
certain prescribed cases.

 What is an e-way bill ?

- E-way bill is an electronic document generated on the GST portal evidencing movement of
goods.

 What are the benefits of e-way bill ?

Following benefits are expected from e-way bill mechanism:
- Physical interface to pave way for digital interface resulting in elimination of state
boundary check-posts
- It will facilitate faster movement of goods
- It will improve the turnaround time of trucks and help the logistics industry by
increasing the average distances travelled, reducing the travel time as well as costs.

 Where the E-way bill is generated ?

- E-way bill is generated electronically in form GST EWB – 01 on the common portal.
- Information is to be furnished prior to the commencement of movement of goods.

 When the E-way bill has to be generated ?

- Whenever there is a movement of goods consignment value > 50,000.
- Whether it is a supply or not.
- Due to inward supply from an unregistered person.

 Who needs to raise an E way bill ?

Supplier Recepient Obligation to generate E way bill
Registered Registered Whoever causing the movement of Goods
(Generally Supplier)
Registered Un- Registered Supplier
Un- Registered Registered (Known at the time of Recepient
Movement)
Un- Registered Registered ( Not Known at the time Need not to Raise E way Bil
 E Way Bill

of Movement)
Un- Registered Un-Registered Not applicable

- If supplier is registered and undertakes to transport the goods, movement of goods is

caused by the supplier.
- If recipient arranges transport, movement is caused by him.
- If goods are supplied by an unregistered supplier to a registered known recipient,
movement shall be caused by such recipient.

 Special situations where e-way bill needs to be issued even if the value of
the consignment is less than Rs 50,000:
- Inter-state transfer of goods by principal to job worker.
- Inter-state transfer of handicraft goods by a person exempted from obtaining
registration.

 E-way bill in case of “Bill To Ship To” Model.

- Only one e-Way Bill is required to be generated

 Info in E-way Bill:

PART A
PART B
GSTIn of Supplier & recepient
Place of Dispatch & Delivery (Pin code) Transporter details (Vehicle number,
Transport doc Number etc.)
Document Number & Date
Furnished by the person who is
Value of Goods transporting goods.
HSN
reason for transportation

**However, info in Part A may be furnished by

- Transporter on authorization.
- E-commerce operator or courier agency when the goods are supplied through them.

 When is it not mandatory to furnish the details of conveyance in Part-B?

➢ Details of conveyance may not be furnished in Part-B of the e-way bill where the
goods are transported for a distance of upto 50 km within the State/Union territory:

• from the place of business of the consignor to the place of business of the
transporter for further transportation (or)
 E Way Bill

• from the place of business of the transporter finally to the place of business of
the consignee.

 Upon generation of the e-way bill on the common portal, a unique e-way bill number (EBN)
shall be made available to the supplier, the recipient and the transporter on the common
portal
 Where the goods are transported by railways:
There is no requirement to carry e-way bill along with the goods, but railways has to
carry invoice or delivery challan or bill of supply as the case may be along with goods.
Further, e-way bill generated for the movement is required to be produced at the time of
delivery of the goods. Railways shall not deliver goods unless the e-way bill required
under rules is produced at the time of delivery.

 Transfer of goods from one conveyance to another:

- Where the goods are transferred from one conveyance to another, the consignor or the
recipient, who has provided information in Part A, or the transporter shall, before such
transfer and further movement of goods, update the details of conveyance in Part B of
the e-way bill on the common portal.

 Consolidated E-way bill:

- Where multiple consignments are transported in one conveyance
- The transporter may indicate the serial number of e-way bills generated in respect of
each such consignment electronically on the common portal and
- A consolidated e-way bill in Form GST EWB-02 may be generated by him on the
common portal prior to the movement of goods.
- Consolidated EWB is like a trip sheet and it contains details of different e-way bills in
respect of various consignments being transported in one vehicle and these e-way bills
will have different validity periods.
- Hence, Consolidated EWB does not have any independent validity period.

 Cancellation of e-way bill:

With in 24
hours from
generation

Earlier

Before
verification

 Validity of e-way bill:

 E Way Bill

S.No Distance with in country Validity period

1 < 2OO KM One day

2 For every 200 KM or part thereof One additional day

3 < 2O KM One day in case of Over Dimensional

Cargo
4 For every 20 km or part thereof One additional day in case of Over
Dimensional Cargo

- The validity of E-way bill may be extended within 8 hours from the time of its expiry.
- Extension of validity period can be made by Commissioner on certain notified goods.

 Acceptance of e-way bill:

- The details of the e-way bill generated shall be made available to the -
a) supplier, if registered, where the information in Part A has been furnished by the
recipient/transporter; or
b) recipient, if registered, where the information in Part A has been furnished by
the supplier/transporter,
- The time-limit specified for this purpose is:
(i) 72 hours of the details being made available to him on the common portal
Or
(ii) the time of delivery of goods, EARLIER.
- If the person does not communicate his acceptance or rejection within the specified time,
it shall be deemed that he has accepted the said details.

Invoice Reference Number in lieu of tax invoice

 In case, e-invoice is issued, the Quick Response (QR) code having an embedded Invoice
Reference Number (IRN) in it, may be produced electronically, for verification by the
proper officer in lieu of the physical copy of such tax invoice.
 In such a case, the registered person will not have to upload the information in Part A of
E-way bill for generation of e-way bill and the same shall be auto-populated by the common
portal on the basis of the information furnished in the prescribed form [Rule 138A(3)].

 E-Way bill issued in one state is valid in another state.

 Restriction on furnishing of information in Part A of Form

GST EWB 01 [Rule 138E]
• No person shall not be allowed to furnish the information in Part A of Form GST EWB-01 in
respect of following registered persons, whether as a supplier or a recipient:
 A person paying tax under composition scheme has not furnished the statement for
 E Way Bill

payment of self-assessed tax for 2 consecutive quarters, or

 A person paying tax under regular scheme has not furnished the returns for 2
consecutive months, or
 A person paying tax under regular scheme has not furnished GSTR 1 (Statement of
outward supplies) for any 2 months or quarters, as the case may be.
 Persons whose registration has suspended under Rule 21A

• Commissioner (jurisdictional commissioner) may, on receipt of an application from a

registered person on sufficient cause being shown and for reasons to be recorded in
writing, by order, in prescribed form allow furnishing of the said information in Part A of
Form GST EWB-01.
• An order rejecting said request shall not be passed without giving the said person a
reasonable opportunity of being heard.

Situations where E-Way bill is not required to be Genererated:

(a) where the goods are being transported by a non-motorised conveyance
(b) where the goods are being transported from the customs port, airport, air cargo complex
and land customs station to an inland container depot or a container freight station for
clearance by Customs
(c) in respect of movement of goods within such areas as are notified
(d) where the goods [other than de-oiled cake], being transported, are exempt from tax
(e) where the goods being transported are Petroleum Products
(f) Goods covered in Sch III
(g) where the goods are being transported
• under customs bond from an Inland container freight station to a customs port,
airport, air cargo complex and land customs station, or from one customs station
or customs port to another customs station or customs port, or
• under customs supervision or under customs seal
(i) where the goods being transported are transit cargo from or to Nepal or Bhutan
(j) any movement of goods caused by defence formation under Ministry of defence as a
consignor or consignee
(k) where the consignor of goods is the Central Government, Government of any State or a
local authority for transport of goods by rail
(l) where empty cargo containers are being transported
(m) where the goods are being transported upto a distance of 20 km from the place of the
business of the consignor to a weighbridge for weighment or from the weighbridge back to
the place of the business of the said consignor subject to the condition that the
movement of goods is accompanied by a delivery challan issued in accordance with rule 55.
(n) where empty cylinders for packing of liquefied petroleum gas are being moved for
reasons other than supply
 E Way Bill

 Inspection and Verification of e-way bill:

- A summary report of every inspection of goods in transit shall be recorded online by the
proper officer in Part A of a prescribed form within 24 hours of inspection and the final
report in Part B of said form shall be recorded within 3 days of such inspection.
- However, where the circumstances so warrant, the Commissioner, or any other officer
authorised by him, may, on sufficient cause being shown, extend the time for recording
of the final report in Part B of said form, for a further period not exceeding 3 days.
 Payment of Taxes
G
S
T

 What are CPIN, CIN, BRN, E -FPB?

 The above terminology(words) will come at the time of payment of GST.
- CPIN - Common Portal Identification Number.
- CIN - Challan Identification Number.
- BRN – Bank Reference Number.
- E-FPB – Electronic Focal point branch.

CPIN -is created for

every challan CIN - is generated
sucessfully generated by the banks, once
by the tax payer. It payment is sucessful.
is a 14 digit unique It is a 17 digit
number valid for 15 number.
days.

E-FPBs are branches

BRN is the of authorised banks
transaction Number which are authorised
given by bank for a to collect payment of
payment against a GST. Each bank will
challan. nominate only one
branch as its EFPB.
 Payment of Taxes

 Types of Ledgers:

Electronic
Cash
Ledger.

Electronic
Credit
Ledger.

Electronic
Liability ledger

 Electronic Liability Ledger Sec 49 (7) & Rule 85:

 All liabilities of a taxable person under this Act shall be recorded and maintained in an
Electronic Liability register.
 Liability ledger shall be maintained in FORM GST PMT – 01.
 All the liabilities shall be debited to the electronic credit ledger.
 Liabilities that will be debited to electronic Liability ledger are
• Tax
• Interest
• Late fee
• TDS/TCS
• Tax payable under RCM.
• Tax and interest payable due to mismatch U/s 42/43/50. (Matching concept)
• Penalties

Penalties
Tax and
Interest
due to Tax
Mismatc
h Liability
ledger
Tax Interest
under /Late
RCM fee
Tax
payable
u/s 10.
 Payment of Taxes

- To the extent of relief given by Tribunal, Court, Appellate authority, will be reduced
from the liability ledger.
- Payment of every liability as per his return shall be made by crediting the Electronic
Liability ledger and debiting the Electronic Credit/Cash ledgers.
- Any discrepancy in the Electronic liability ledger shall be communicated to the
Jurisdictional officer through the common portal in GST -PMT – 04.

 Presumption that Incidence of tax is passed on [Sec 47(9)]:

- When a taxable person has paid the tax, it is deemed that Incidence of such payment of
tax (burden) has been passed on to the recipient.
 Order of Discharge of Tax dues: [Sec 49(8)]:
- The chronological order for discharge of liabilities by taxable person has been provided as
follows:

1St
Self assessed tax and dues
for Previous tax periods.

Self assesed tax and

other dues for current 2nd
period.
Amount payable
under demand
(73/74) 3rd
d

 Electronic Cash ledger [Sec 49(1) & (3) read with rule 87]:
- Electronic cash ledger shall be maintained in Form GST PMT – 05.
- Shall generate a challan online in form GST PMT – 06, which is valid for 15 days.
- Every deposit towards GST liability (Tax, interest, penalty, fee) by any of the following
modes shall be credited to electronic cash ledger.
- Prescribed Modes:
 Payment of Taxes

Online
- NEFT/RTGS
- Internet - Over the
Banking counter - Rs
- Credit/debit 10,000 per tax
cards period.

- UPI, IMPS - Any other

prescribed.

Offline
 Challan Related Points:
- Over the counter payment limit (Through challan) are not applicable on the following:
• Proper officer or any officer authorized to recover outstanding dues.
• Proper officer or any officer authorized to collect the amount by way of
cash/cheque/demand draft during any investigation/enforcement.
• Government department – Notified by commissioner.
- Manual or Physical challans are not valid, it is mandatory to generate challans online.
- Single challan can be taken for deposit of all
• Taxes
• Fees
• Penalty
• Interest and other payments to be made under GST.
- E-challan is valid for 15 days.
- Commission for making payment through e-challan has to be borne by the tax payer.
- Unregistered person makes payment by using Temporary Identification Number.
- After receiving the CIN from collecting bank, amount is credited into the Cash ledger.
- If CIN is not generated or amount not reflected in cash ledger, the tax payer has to
make a representation in GST PMT – 07 through the GST portal.
- If any refund is claimed, the said amount shall be debited to the cash ledger.
- To the extent of refund claim rejected shall be credited to the cash ledger.
- Any discrepancy in Cash ledger has to be communicated to Jurisdictional officer through
GST portal by GST PMT – 04.
- The amount reflected in cash ledger can be used for payment of any GST liability.
- Cash ledger has 4 major heads and each major head consist minor heads:
 Payment of Taxes

• IGST
• CGST
Major Heads
• SGST/UTGST
• CESS

• Tax
• Interest
Minor Heads • Penalty
• Fee
• Others

- 49(10) & 49(11):

- provides a facility to the registered person to transfer an amount from one (major/minor)
head to another (major/minor) head in the electronic cash ledger.
- The amount available in the electronic cash ledger can be utilised for payment of any
liability for the major and minor heads.
- The same can be transferred to the respective intended head vide Form GST PMT-09
- This Form can be used either for
- transfer of erroneous deposits under any minor head of a major head to any other
minor head of same or other major heads or
- transfer of any of the amounts already lying unutilised under any of the minor
heads in Electronic Cash ledger.
- The new section 53A provides for transfer of amount between Centre and States
consequential to amendment in section 49 of the CGST Act allowing transfer of an
amount from one head to another head in the electronic cash ledger of the registered
person.
-
 Electronic Credit ledger [Sec 49(2)(4) & (5) read with rule 86]:
- ITC as self-assessed in the return of a registered person shall be credited to his
Electronic credit ledger.
- Electronic credit ledger shall be maintained in FORM GST PMT – 02.
- Credit ledger shall be debited to the extent adjusted with the liability.
- If any refund is claimed, the said amount shall be debited to the credit ledger.
- To the extent of refund claim rejected shall be credited to the credit ledger.
- No entry can be made directly to the electronic credit ledger.
- Any discrepancy in Credit ledger has to be communicated to Jurisdictional officer through
GST portal by GST PMT – 04.
- ITC cannot be utilized for payment of taxes under RCM
- The amount available in credit ledger can be used for payment of the following under
FCM: (Other than tax levied under Search/sezure)
 Payment of Taxes

• IGST
• CGST
• SGST
• Cess

In the manner as specified in Sec – 49.

- Manner of apportionment of ITC:

ITC of IGST ITC of CGST ITC of SGST

IGST CGST SGST

CGST/SGST IGST IGST

CGST SGST

- ITC of IGST has to be first adjusted towards payment of IGST, remaining can be used
for payment of CGST or SGST/UTGST in any order.
- ITC of CGST or SGST/UTGST can be utilised for payment of CGST OR SGST/UTGST
only after the ITC of IGST has been utilised fully.
- CGST shall be first utilised for payment of CGST balance for IGST.
- SGST shall be first utilised for payment of SGST balance for IGST.
- CGST cannot be adjusted with SGST, vice versa.

 Other Points:
- A unique Identification number shall be generated in the portal for each debit or credit
made to the Liability/cash/credit ledger.
- Return filed without payment of tax is not considered as a valid return.
- In case the Commissioner or an officer authorised by him in this behalf, not below the
rank of an Assistant Commissioner, has reasons to believe that ITC available in the
electronic credit ledger has been fraudulently availed or is ineligible, he may prohibit use
 Payment of Taxes

of ITC for discharge of any liability under section 49 or for claim of any refund of any
unutilised amount.

 How do the new payment systems benefit the taxpayer and the Commercial
Tax Department?

- No more queues and waiting for making payments as payments can be made online 24 X
7
- Instant online receipts for payments made online
- Tax Consultants can make payments on behalf of the clients
- Single Challan form to be created online, replacing the three or four copy Challans.
- Revenue will come earlier into the Government Treasury as compared to the old
system
- Greater transparency
- Online payments made after 8 pm will be credited to the taxpayer’s account on the
same day.

 Interest on delayed payment of Tax[Sec 50]:

 In case a registered person does not have sufficient amount available in electronic
credit ledger to pay the tax dues for a particular tax period. Also, the
registered person does not have sufficient money for making deposit of balance tax
amount in electronic cash ledger. In such a situation, GST common portal doesn’t
have a mechanism to allow a registered person to make part payment of taxes.
 If the law maker demands tax dues along with interest on the gross payments
tax paid through electronic cash ledger and credit ledger, it may be an unhealthy
practice from business perspective.
 To counter such recovery mechanism, a proviso has been inserted under Section
50 to provide that when a registered person has paid his taxes through a return
specified under Section 39 of CGST Act, 2017 belatedly, interest shall be
applicable only on the net taxes paid through electronic cash ledger and not on the
gross taxes paid for such tax period
 Payment of Taxes

 Interest computation:

The period
of Interest
Interest is payable in the will be from
following situations Delay in payment of Tax
18% p.a the date
full or partly.
following
Undue or excess claim of the date of
24 % p.a payment to
ITC sec(42(10))
the actual
Undue or excess claim of date of
24% p.a payment of
ITC sec(43(10))
tax.

Illustration:
Suhasini is a registered software consultant. On account of her ill health, she could not provide
any services during the month of October. However, she had to incur all the expenses relating to
her office. She paid Rs 75,000 to various vendors. Total GST involved on the goods and services
procured by her is Rs 13,500. Out of the total bills paid by her, one bill for Rs 15,000 relates
to security services availed for security of her office, tax on which is payable under reverse
charge. GST involved in such bill isRs 2,700.
Suhasini is of the opinion that for the month of October, no GST is payable from electronic cash
ledger as she has sufficient balance of ITC for payment of GST under reverse charge on
security services.
Do you think Suhasini is right? Explain with reasons.

Solution:
The amount available in the electronic credit ledger, i.e. input tax credit may be used for making
any payment towards output tax. Output tax, in relation to a taxable person, means the tax
chargeable on taxable supply of goods or services or both made by him or by his agent but
excludes tax payable by him on reverse charge basis.
Therefore, input tax credit cannot be used to pay the tax liability under reverse charge. The
same is always required to be paid through electronic cash ledger and not electronic credit
ledger. Thus, Suhasini is wrong and she should pay GST of Rs 2,700 on security service through
electronic cash ledger.
Rates of CGST, SGST and IGST for all services, office stationery and calculator are 9%, 9%
and 18% respectively. Rates of CGST, SGST and IGST for diary are 14%, 14% and 28%
respectively.
Subject to the information given above, all the necessary con ditions for availing input tax credit
have been fulfilled.
 Payment of Taxes

Illustration:
Details of opening balances of input tax credit as on 1st July is given hereunder:

Tax Amount (Rs)

CGST 5,000

SGST 5,000

IGST 80,000

Compute the minimum net GST [CGST, SGST or IGST, as the case may be] payable in cash by
‘XY’ for the month of July.
 TDS & TCS
G
S
T

Sec 51 TDS Sec 52 TCS

Sec 51Tax deducted at source:

51(1) – Persons liable to deduct TDS

Sec 20 of IGST –
TDS, which says
Deductor TDS rate = 2%

• CG/SG department or
establishment
• Local authority
• Governmental agencies Deductee
• Notified persons by CG
Suppliers whose total
- PSU’s
value of supply of
- Society established by
taxable goods and/or
CG/SG/LA under societies
services under a
registration act
contract exceeds Rs
- Authority or a board or
2,50,000 exclusive of
any other body set up by
tax and cess
an act or established by
govt with 51% or more
equity/control.

The tax would be deducted @ 1% CGST and 1% SGST of the

payment made to the supplier of taxable goods and/or services.
where the total value of such supply, under a contract, exceeds
2,50,000

Categories of persons not liable to deduct TDS:

 TDS & TCS

Tax is not liable to be deducted at source in the following cases:-

(i) When goods and/or services are supplied from a public sector undertaking (PSU) to another
PSU, whether or not a distinct person
(ii) When supply of goods and/or services takes place between one person to another person
specified in clauses (a), (b), (c) and (d) of section 51(1) of the CGST Act.

Proviso 51(1)

Supplier, place of supply Supplier as well as the

and recipient are in the Supplier as well as the
place of supply are in State
same state. place of supply are in
A and the recipient is
different states
located in State B

TDS has to be deducted. TDS has to be deducted TDS need not to be

CGST + SGST IGST deducted.

Location of Supplier Place of Supply Registration of TDS u/s 51

Recipient
State A State A State A Yes
State A State A State B No
State A State B State B Yes
UT1 UT1 UT1 Yes
UT1 UT2 UT2 Yes
UT1 UT1 UT2 No

• For the purpose of deduction of TDS, VOS shall be taken as the amount excluding
CGST/SGST/UTGST/IGST and cess indicated in Invoice.
• The amount of tax deducted at source should be deposited to the Government account by
deductor by 10th of the succeeding month.
• Every Registered Person required to deduct TDS shall file a return in GSTR 7.
• A TDS certificate is required to be issued by deductor in GSTR 7A to the deductee within 5
days of remittance to Government.
• If the deductor does not furnish the certificate of deduction-cum- remittance within 5 days
of the remittance, the deductor has to pay a late fee ofRs 100/day from the expiry of
the 5th day until the day he furnishes the certificate. This late fee would not be more
than Rs 5000/-.
• For delayed deposit of TDS Interest @ 18 % also applicable
 TDS & TCS

CBIC Clarifications:
• Taxabble value should be > 2.5L under a single contract
• Where both taxable and exempted supply are made together, the value of Taxable supply
alone should be > 2.5L
• TDS applicable on advance payments made on or after 01.10.2018

Non Applicability of TDS:

• Goods & Services recived are exempted
• Petroleum Products (HIGHly CRUel MAN), Alcoholic liquor for HC.
• Where LOS of supplier & POS of suppli is in a state/UT different from LOR.
• Transactions covered in Sch III
• RCM transactions
• Supplier is Un-registered
 TDS & TCS

The content of Form GSTR 7A (TDS Certificate) are given below:

1. TDS Certificate No.
2. GSTIN of deductor
3. Name of deductor
4. GSTIN of deductee
5. (a) Legal name of the deductee
(b) Trade name, if any
6. Tax period in which tax deducted and accounted for in GSTR-7
7. Details of supplies
8. Amount of tax deducted

Other points:

• The amount of tax deducted is reflected in Electronic Cash Ledger of deductee.

• The deductor or the deductee can claim refund of excess deduction or erroneous deduction.
The provisions of section 54 relating to refunds would apply in such cases. However, if the
deducted amount is already credited to the electronic cash ledger of the supplier, the same
shall not be refunded.
 TDS & TCS

Sec 52: Tax collected at source by E-Commerce operator

TCS refers to the tax which is collected by the electronic commerce operator when a supplier
supplies taxable goods or services through its portal and the payment for that supply is collected
by the electronic commerce operator

Every Electronic
Commerce Operator
Suppliers who
(ECO), not being an
made supplies
agent
through ECO

Deductor Deductee

TCS = Half percent of the net value of intra-State taxable supplies. 1% of the net value
of inter-State taxable supplies.
Net taxable supplies = Total supplies - Returns if any. (Other than the services notified
under 9(5)

• The TCS amount collected by the ECO has to be remitted to the Government Treasury within 10
days after the end of the month in which the collection was made.
• An electronic statement has to be filed by the ECO containing details of the outward supplies of
goods and/ or services effected through it, including the supplies returned through it and the
amount collected by it as TCS during the month within 10 days after the end of the each month
in which supplies are made. (GSTR 8)
• TSC credit will be claimed in Electronic cash ledger.
• Additionally, the ECO is also mandated to file an Annual Statement on or before 31st day of
December following the end of the financial year. (Commissioner has the power to extend due
dates) (GSTR 9B)
• If any operator after furnishing a return (GSTR 8)
• Discovers a omission or Incorrect particulars
• Other than as a result of scrutiny, audit, inspection, or enforcement activity
• He shall rectify those omission or correction in the month in which such omission noticed.
• Due Date for Rectification : 30th day of November following the FY or actual date of filing
of Annual return.
 TDS & TCS

• The details of supplies furnished by operator in GSTR 8 will be matched with GSTR 1 of
suppliers.
• Where there is any mismatch, the discrepancy shall be communicated to both the parties.
• Where nay discrepancy is not rectified by the supplier in his GSTR 1, then the discrepancy shall
be added to the OW tax liability of supplier in the succeeding month in which discrepancy is
communicated.
• For delay in payment by supplier Interest @ 18%
• An officer not below the rank of Deputy Commissioner can issue notice to an operator, asking him
to furnish details relating to volume of the goods/services supplied, stock of goods lying in
warehouses/godowns etc.
• The operator is required to furnish such details within 15 working days.
• In case an operator fails to furnish the information, besides being liable for penal action under
section 122, it shall also be liable for penalty up to Rs 25,000.
 Returns
G
S
T

 What is the purpose of filing returns?

 Returns serve the following purposes:

Mode for transfer of information to tax administration

Compliance verification program of tax administration.

Providing necessary inputs for taking policy descisions.

Management of audit and anti evasion programs of tax administrtion.

Finalization of the tax liabilities of the tax payer within stipulated period
of limitation.

 Quarter [2(92)]:
- Means a period comprising three consecutive calendar months, ending on the last day of
March, June, September, December of a calendar year.

 Furnishing details of outward supplies: [Sec 37 read with rule 59 ]

- The details of outward supplies of both goods & services are required to be furnished by
every registered person including CASUAL registered person except the following:
 Input service distributor
 Non -Resident taxable person.
 Person paying tax under composition scheme.
 Person deducting tax at source, collecting at source.
 OIDAR.
- The details of outward supplies are required to be furnished in Form GSTR – 1.
- A nil GSTR-1 can be filed through an SMS using the registered mobile number of the
tax payer.
 Returns

- Due date of filing GSTR – 1 is 10th day of the immediately succeeding month. As a
measure of easing the compliance requirement for small tax payers, GSTR 1 has been
allowed to be filed quarterly.

Optional Due date -

Aggregate 13th of the
Return filing -
turnover < 1.5 month
Quaterly
crores succeeding the
quarter
GSTR 1 filing
due dates

Due date 10 th
Aggregate
Return Filing - of the
turnover > 1.5
Monthly succeeding
crores
month

Turnover of preceding financial year

- A tax payer cannot file GSTR – 1 before the end of the current tax period.

Exceptions

CTP'S after the

closure of their Cancellation of
business GSTIN of a normal
tax payer.

- Contents of GSTR -1
 Returns

- GSTIN - B2B Supplies

- Legal name & Trade - B2C Supplies
name - Zero rated supplies
- σ 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝒊𝒏 𝑷/𝒀 - Tax period

- HSN wise summary

- Debit/ Credit notes
of supplies.
- Nil/exempted/Non
- Details of
- GST Supplies
Documents issued.
- Ammendments for
- Advances recieved
prior period.
and adjusted.

- The details of outward supplies for a month furnished by the supplier are communicated
and made available electronically (auto populated) to the respective recipient(s) in Part A
of Form GSTR- 2A/ Form GSTR-4A (in case of registered person opting for composition
levy through the common portal after the 10th day of the succeeding month (due date
of filing of GSTR-1
- B2B – Means business to business transaction. In such transactions the recipient is also a
registered supplier and hence, takes ITC.
- B2C – Means business to consumer transaction. In such type of transactions, the
recipient is consumer or unregistered and hence, will not take or cannot take ITC.
- The registered person is required to furnish details of invoices and revised invoices issued
in relation to supplies made by him to registered and unregistered person during a month
along with debit notes and credit notes.
 Returns

If any Supplies made with

Registered person Un registered person

B2B B2C

Should be mentioned
Intra - state Inter- State
Invoice wise.

Invoices < 2.5L

Invoice>2.5L
can be shown state wise
consolidatedly Invoice details has
consolidated details
to be mentioned
to be uploaded

- Indication of HSN details subject to the notification issued.

Annual turnover
in the
preceding
< 5 crores
Financial year
< 5cr - 4 - 4 digits
digits of (Optional)
HSN
(B2C
(B2B supply) supply)

> 5 cr - 6 digits
of HSN

- Amendment of particulars furnished in GSTR – 1.

 Returns

Particulars
furnished in
GSTR - 1 of
prior periods
By way of
Amendment of
tables given in
GSTR -1 of
subsequent tax
periods.
Can be
ammended

- Rectification of errors – Any error or omission discovered can be rectified in the tax
period in which such error or omission is noticed.
- Time limit for rectification.
• 3oth Day of November Earlier
• Date of filing of the relevant annual return.
- GSTR -1 needs to be filed even if there is no business activity in the tax period.
- A registered person not allowed to furnish the details of GSTR 1 for a tax period if details of
OW supplies for any of the previous tax periods has not furnished by him.

Example:
Mr. Gauri Shiva, a registered person in Punjab, supplies goods taxable @ 12% [CGST @ 6%,
SGST @ 6% & IGST @ 12%] in the States of Punjab and Haryana. He has furnished the
following details in relation to independent supplies made by him in the quarter ending June,
20XX:-
Supply Recipient Nature of Value (Rs)
supply
1 Mr. A, a registered person Inter-State 2,20,000
2 Mr. B, a registered person Inter-State 2,55,000
3 Mr. C, an unregistered person Intra -State 1,80,000
4 Mr. D, an unregistered person Intra-State 2,60,000
5 Mr. M, an unregistered person Inter-State 3,00,000
6 Mr. N, an unregistered person Inter-State 50,000
7 Mr. O, an unregistered person Inter-State 2,50,000
8 Mr. P, an unregistered person Inter-State 2,80,000
9 Mr. Q, a registered person Intra-State 1,50,000
10 Mr. R, a registered person Intra-State 4,10,000
The aggregate annual turnover of Mr. Gauri Shiva in the preceding financial year was
Rs 1.20 crore. With reference to rule 59 of the CGST Rules, 2017, discuss the manner in which
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the details of above supplies are required to be furnished in GSTR-1.

Solution:
Rule 59 of the CGST Rules, 2017, inter alia, stipulates that the details of outward supplies of
goods and/or services furnished in form GSTR-1 shall include the–
(a) invoice wise details of all –
• inter-State and intra-State supplies made to the registered persons; and
• inter-State supplies with invoice value more than two and a half lakh rupees made to
the unregistered persons;
(b) consolidated details of all –
• intra-State supplies made to unregistered persons for each rate of tax; and
• State wise inter-State supplies with invoice value upto two and a half lakh rupees
made to unregistered persons for each rate of tax;

(c) Thus, in view of the above-mentioned provisions, Mr. Gauri Shiva should furnish the details of
outward supplies of goods made by him during the quarter ending June 20XX in the following
manner:-

Supply Recipient Nature of Value (Rs) Manner of furnishing

supply details

1 Mr. A, a registered person Inter-State 2,20,000 Invoice-wise details

2 Mr. B, a registered person Inter-State 2,55,000 Invoice-wise details

3 Mr. C, an unregistered person Intra-State 1,80,000 Consolidated details

of
4 Mr. D, an unregistered person Intra-State 2,60,000 supplies 3 and 4

5 Mr. M, an unregistered person Inter-State 3,00,000 Invoice-wise details

6 Mr. N, an unregistered person Inter-State 50,000 Consolidated details

of
7 Mr. O, an unregistered person Inter-State 2,50,000 supplies 6 and 7

8 Mr. P, an unregistered person Inter-State 2,80,000 Invoice-wise details

9 Mr. Q, a registered person Intra-State 1,50,000 Invoice-wise details

10 Mr. R, a registered person Intra-State 4,10,000 Invoice-wise details

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GSTR -2: (Substituted Newly)

Sub-section (1) of Section 38 provides that information filed by the supplier in his outward supply
return shall be made available to the recipient through an auto-generated statement, i.e., GSTR-
2A and GSTR-2B.
Such auto-generated ITC statement shall bifurcate the ITC into the following 2 parts:

I. ITC which is available to the recipient, i.e., eligible ITC

II. ITC which is restricted to the recipient due to any one of the following conditions,
i.e., ineligible ITC:
1. Statement of outward supply, i.e., GSTR-1 is filed by a registered person
within the prescribed time of taking registration.
2. GSTR-1 filed by a person who has defaulted in payment of GST
3. Output Tax payable in GSTR-1 exceeds actual payment of GST
4. ITC availed by supplier in excess of eligible ITC appearing in GSTR-2A/2B
5. Registered persons defaulted Section 49(12) ( Earlier Rule 86B) of the CGST
Act

Form and manner of ascertaining details of inward supplies – GSTR-2A and

GSTR-2B
Form GSTR-2A - is a system generated read only statement of inward supplies for a recipient.
This statement is updated on a real time basis. The details become available to the recipient
for view/download and are updated incrementally as and when supplier(s) upload or change
details in their respective form of return/statement, for the given tax period.

Details of outward supplies furnished by the supplier in Form GSTR-1 or using the IFF is made
available electronically to the concerned registered persons (recipients) in Form GSTR-2A, in
Form GSTR-4A and in Form GSTR-6A, as the case may be.

Details of invoices furnished by a non-resident taxable person in Form GSTR- 5 and by an

Input Service Distributor in Form GSTR-6, details of TDS by deductor furnished in Form GSTR-
7 and details of TCS by an e-commerce operator6 furnished in Form GSTR-8, are made available
to the recipient, deductee or concerned person, in Form GSTR-2A.

Further, details of the integrated tax paid on the import of goods or goods brought in DTA from
SEZ unit/developer on a bill of entry are also made available in Form GSTR-2A.

Form GSTR-2B – an auto-drafted read only statement containing the details of eligible ITC - is
made available to the registered person (recipient) for every month. It is a static statement
and is available only once a month.
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 Furnishing of returns [U/s 39] – GSTR – 3B

- Currently GSTR – 3B, has been notified as the Monthly return to be filed by registered
person.
- Persons not required to file GSTR - 3B
• Input service distributor
• Non -Resident taxable person.
• Person paying tax under composition scheme.
• Person deducting tax at source, collecting at source.
• OIDAR.

- GSTR-3B is a simple return containing summary of outward supplies, inward supplies liable
to reverse charge, eligible ITC, payment of tax etc. Thus, GSTR-3B does not require
invoice-wise data of outward supplies.

- Contents of GSTR – 3B
Basic details

Supplies related

Tax related
- GSTIN - Summary of - Eligible ITC
- Legal Name outward and - Payment of Tax
Inward supplies
- Tax period - TDS/TCS credit.
- Exempted/ Nil
rated/ Non - GST
supplies

- Due date of GSTR 3b – 20th of the Following Month

 Return for Composition supplier [U/s 39(2)] – GSTR – 4
- Every registered person paying tax under Sec.10, Every registered person paying tax by
availing the benefit of notification No.2/2019 (Concessional tax scheme) will file an
annual return in Form GSTR -4.
- GSTR-4 should be filed by 30th April of the succeeding financial year.
- GST CMP -08 should be filed quarterly by 18th day of the month succeeding such
quarter, which is a quarterly statement for payment of self-assessed tax.
- A Nil GST CMP-08 can be filed through an SMS using the registered mobile number of
the taxpayer. A Nil GST CMP-08 submitted through SMS is verified by registered mobile
number-based OTP facility.
- The inward supplies of a composition supplier received from registered persons filing
GSTR-1 will be auto populated in FORM GSTR-4A.
- Contents of GSTR-4
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Details of Supplies
Basic Details
•Invoice wise details of
•GSTIN Inward supplies.
•Legal & trade name. •Tax on outward supplies.
•Tax details •Consolidated statement of
•Interest/late fee. advance paid.
•Refund claimed from •Amendments made in
cash ledger. supplies of earlier tax
period,

- Composition taxpayers are required to provide consolidated details of outward supplies

in GSTR-4 and not invoice-wise details of outward supplies.
- If a registered person opts for composition scheme from the beginning of a financial
year, he will, where required, furnish statements/return relating to the period prior
to opting for composition levy till the

• Due date of furnishing the return for the month of

September of the succeeding financial year, or
Earlier
• Furnishing of annual return of the preceding financial year.

 Return for Non-Resident Taxable persons [U/s 39(5)] – GSTR – 5:

- A simplified monthly tax return has been prescribed in Form GSTR-5 for a NRTP for
every calendar month or part thereof.
- The details in GSTR-5 should be furnished within 20 days after the end of the calendar
month or within 7 days after the last day of validity period of the registration,
whichever is earlier.
 Return for INPUT SERVICE DISTRIBUTOR (U/s 39(4) – GSTR – 6
- Every taxable person registered as input service distributor shall for every calendar
month furnish a return
- Monthly return in form GSTR 6
- Last date of filing of retuen on or befire 13th of the month succeeding the tax period
- The detail of ITC received for distribution by an ISD will be auto populate in FORM
GSTR 6A
 Return for TAX DEDUCTED AT SOURCE (U/s 39(3) – GSTR – 7
- Every person registered required to deduct TDS under the provisions of Sec 51 shall
furnish in GSTR 7
- For claiming the amount of tax deducted in his electronic cash ledger after validation.
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- The certificate referred in sec 51(3) shall be made available electronically to the
deductee in GSTR 7A
- Monthly return in form GSTR 7
- Last date of filing of return on or before 10th of the month succeeding the calendar
month
 Return for TAX COLLECTED AT SOURCE (U/S 52) – GSTR – 8
- The details of TCS furnished by an ECO in GSTR -8

 First return [Sec 40]:

- A person has to register within 30 days from the date he is liable to register.
- There will be a time gap between the “date of liability” to register and grant of
registration certificate.
- To enable such registered person to declare the taxable supplies made by him for the
period between the date on which he became liable to registration till the date on which
registration has been granted, First return has been introduced.
- Registered person shall declare his outward supplies made during said period in the first
return furnished by him after grant of registration
- The format for this return is the same as that for regular return.

 Annual return [Sec 44]:

- All registered persons are required to file an annual return. However, following persons
are not required to file annual return:
▪ Casual Taxable Persons.
▪ Non- resident taxable person
▪ Input Service Distributors and
▪ Persons authorized to deduct/collect tax at source under
section 51/52.
▪ Person supplying OIDAR services from outside India to
unregistered persons in India

- This return needs to be filed by 31st December of the next Financial Year.
- Annual Return is to be filed electronically in Form GSTR-9 through the common portal.
- A person paying tax under composition scheme is required to file the Annual Return in
Form GSTR-9A.
- ECO required to collect tax at source: An ECO required to collect tax at source is
required to file an annual statement referred to in section 52(5) in Form GST-9B (yet to
be notified). The statement for a financial year needs to be filed by 31st December of
the next financial year.
- Such registered person is required to furnish electronically through the common portal
along with Annual Return a copy of
• Audited annual accounts
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• A Reconciliation Statement, duly certified, in form GSTR 9C

- However, a person supplying OIDAR services from outside India to unregistered
persons in India has been exempted from the requirement to furnish the
reconciliation statement in Form GSTR-9C.

 Final return [Sec 45]:

- Every registered person who is required to furnish return and whose registration
has been surrendered or cancelled shall file a Final Return in Form GSTR-10.
- Final return has to be filed within 3 months of

Date of cancellation Date of order of

(or) cancellation.

Which ever is later

 Late fees levied for delay in filing return:

Other returns

Rs 100 for every Rs 100 for every

day (or) day (or)
Rs 5,000 which 0.25% Turnover
ever is lower. of the state.
Annual return

which ever is
lower.

Quarterly Return Monthly Payment (QRMP) Scheme:

Proviso to Section 39(7) of the CGST act 2017.

1. Eligibilty for QRMP

a. Registered person having an aggregate annual turnover (PAN based) up to Rs.5crore in
preceding FY.
b. QRMP scheme can be opted GSTIN wise.

2. Conditions and restrictions

a. Pending returns on the date of exercising the option has to be filed.
b. Time limit for exercising the QRMP scheme: 1st day of the 2nd month from the
preceding quarter till the last day of the 1st month of the quarter for which the option
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is being exercised.

3. Payment of tax
a. Every registered person under QRMP scheme shall pay the tax due for the 1st&2nd month
of the quarter by depositing the said amount in form GST PMT-06 by 25th day of the
succeeding month.
b. While making Payment For the 1st month of the quarter, take into account the balance in
the electronic cash ledger, for the 2nd month of the quarter, take into account the balance
in the electronic cash ledger excluding the tax due for the 1st month.

c. Commissioner may, on the recommendations of the council, by notification, extend the due
date for form GST PMT-06, for specified class of taxable persons.

4. Methods for payment of tax under QRMP

a. Fixed sum method: if tax payer chooses this option, a facility is available on GST portal
for generating auto-generated/prefilled challan in form GST PMT-06.
b. The amount of challan under fixed sum method is equal to 35% of the tax paid in cash in
the return for the preceding quarter where the return was furnished quarterly
c. The amount of challan under fixed sum method is equal to 100% of the tax paid in cash in
the return for the preceding Month where the return was furnished Monthly
d. Self-assessment method: the said persons, in any case, can pay the tax due by
considering the tax liability on inward and outward supplies and the input tax credit
available, in form GST PMT-06.
e. Under fixed sum method the balance in electronic credit/cash ledger is adequate for the
tax liability for said month, then no such amount may be required to be deposited.

Examples:
(i) In case the last return filed was on quarterly basis for quarter ending March:
Tax paid in cash in quarter (January - Tax required to be paid in each of the
March) months – April and May

CGST 100 CGST 35

SGST 100 SGST 35
IGST 500 IGST 175
Cess 50 Cess 17.5

(ii) In case the last return filed was monthly for tax period March:

Tax paid in cash in March Tax required to be paid in each of the months –
April and May
CGST 50 CGST 50
SGST 50 SGST 50
IGST 80 IGST 80
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Cess - Cess -

However, no such amount may be required to be deposited-

(a) for the 1st month of the quarter, where the balance in the electronic cash ledger/electronic
credit ledger is adequate for the tax liability for the said month or where there is nil tax
liability;
for the 2nd month of the quarter, where the balance in the electronic cash
ledger/electronic credit ledger is adequate for the cumulative tax liability for
the 1st and the 2nd month of the quarter or where there is nil tax liability

5. Due date for filing of returns

a. GSTR-3B has to be filed on or before 22nd or 24th of the succeeding quarter.
b. GSTR-1 has to be filed on or before 13th of the 1st month of succeeding quarter.

6. Invoice furnishing facility (IFF) under QRMP scheme

a. Facility provided to QRMP scheme tax payers to file their detais of outward supplies in
first two months of the quarter to pass on credit to their recipients.
b. Maximum cumulative value of the all invoice uploaded in the IFF is of RS.50lakhs per
month.
c. The invoices are to be furnished in the IFF between 1st to 13th of the succeeding month.
d. After 13th of the month, this facility for furnishing IFF for previous month would not
be available.
e. The details of invoices furnished using IFF in the first 2 months of the quarter are not
required to be furnished again in GSTR-1 for the said quarter
f. The details of outward supplies furnished using IFF shall include the –
• invoice wise details of inter-State and intra-State supplies made to the registered
persons;
• debit and credit notes, if any, issued during the month for such invoices issued
previously.
However, if a registered person does not opt to upload invoices using IFF, then he has to
upload invoice details for all the 3 months of the quarter in Form GSTR-1
7. Opting out from QRMP scheme
a. The facility from opting out of the scheme for quarter will be available from 1st day of
2nd month of preceding quarter to last day in the 1st month of the quarter.

8. Applicability of the interest

a. Under self assessment method interest amount would be payable as per the provisions of
section 50 of CGST act for tax or any part of tax thereof (net of ITC) which remains
unpaid/paid beyond the due date for the first two months of the quarter.
b. Under fixed sum method no interest to be paid on the amount short fall of tax liability.
c. Under both the methods if payment is done beyond the due date than the interest would
be payable at the applicable rates.
d. Interest payable if any under both the methods shall be paid through form GSTR-3B
e. It is clarified that no late fee is applicable for th delay in payment of tax in the 1st
2months of the quarter
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Example:

A registered person who has availed the QRMP scheme wants to declare 2 invoices out of the
total 10 invoices issued in the 1st month of quarter since the recipient of supplies covered by
those 2 invoices desires to avail ITC in that month itself. Details of these 2 invoices may be
furnished using IFF. The details of the remaining 8 invoices shall be furnished in Form GSTR-1
of the said quarter. The two invoices furnished in IFF shall be reflected in Form GSTR-2B of the
concerned recipient of the 1st month of the quarter and remaining 8 invoices furnished in Form
GSTR-1 shall be reflected in Form GSTR-2B of the concerned recipient of the last month of the
quarter.

What are the cases where a registered person is debarred from furnishing
details of outward supplies in GSTR-1/IFF?
(i) A registered person shall not be allowed to furnish the details of outward supplies in Form
GSTR-1, if he has not furnished the return in Form GSTR-3B for preceding two months.
(ii) A registered person, opting for QRMP scheme shall not be allowed to furnish the details of
outward supplies in Form GSTR-1 or using IFF, if he has not furnished the return in Form
GSTR-3B for preceding tax period.
(iii) A registered person, who is restricted from using the amount available in electronic credit
ledger to discharge his liability towards tax in excess of 99% of such tax liability under
rule 86B of the CGST Rules, shall not be allowed to furnish the details of outward supplies
in Form GSTR-1 or using IFF, if he has not furnished the return in Form GSTR-3B for
preceding tax period.

Reflection of Supplies in GSTR 2A/2B

- the details of outward supplies furnished by his supplier who has opted for QRMP scheme,
in Form GSTR-1 or using the IFF, as the case may be7,-
(a) for the 1st month of the quarter, between the day immediately after the due
date of furnishing of Form GSTR-1 for the preceding quarter to the due date
of furnishing details using the IFF for the 1st month of the quarter;
(b) for the 2nd month of the quarter, between the day immediately after the due
date of furnishing details using the IFF for the 1st month of the quarter to
the due date of furnishing details using the IFF for the 2nd month of the
quarter;
(c) for the 3rd month of the quarter, between the day immediately after the due
date of furnishing of details using the IFF for the 2nd month of the quarter to
the due date of furnishing of Form GSTR-1 for the quarter.
(ii) the details of the integrated tax paid on the import of goods or goods brought in the DTA
from SEZ unit/developer on a bill of entry in the month.
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The statement in Form GSTR-2B for every month shall be made available to the registered
person:

(i) for the 1st and 2nd month of a quarter, a day after the due date of furnishing of details of
outward supplies for the said month,
• in the IFF by a registered person opting for QRMP, or
• in Form GSTR-1 by a registered person other than opting for QRMP,
Whichever is later.

(ii) in the 3rd month of the quarter, a day after the due date of furnishing of details of outward
supplies for the said month, in Form GSTR-1 by a registered person opting for QRMP.

Due date for filing – GSTR-3B

Registered persons whose principal place of business is in
the States of
Chhattisgarh, Madhya Pradesh, Gujarat,
Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu,
Telangana, Andhra Pradesh, Union territories of Daman
& Diu & Dadra & Nagar Haveli,Puducherry, Andaman and
Nicobar Islands Lakshadweep. 22nd day of the month
succeeding such quarter.
Registered persons whose principal place of business is in
the States of
Himachal Pradesh, Punjab, Uttarakhand, Haryana,
Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal
Pradesh, Nagaland, Manipur, Mizoram, Tripura,
Meghalaya, Assam, West Bengal, Jharkhand
Odisha, the Union territories of Jammu and Kashmir,
Ladakh, Chandigarh, Delhi.
24th day of the
month succeeding
such quarter.

Applicability of interest:
For registered person making payment of tax by opting Fixed Sum Method

No interest would be payable in case the tax due is paid in the first 2 months of the quarter by
way of depositing auto-calculated fixed sum amount (as discussed above) by the due date.

In other words, if while furnishing return in Form GSTR-3B, it is found that in any or both of the
first 2 months of the quarter, the tax liability net of available credit on the supplies made
/received was higher than the amount paid in challan, then, no interest would be charged provided
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they deposit system calculated amount for each of the first 2 months and discharge their entire
liability for the quarter in Form GSTR-3B of the quarter by the due date. In case such payment
of tax by depositing the system calculated amount in Form GST PMT-06 is not done by due date,
interest would be payable at the applicable rate, from the due date of furnishing Form GST
PMT-06 till the date of making such payment.

Further, in case Form GSTR-3B for the quarter is furnished beyond the due date, interest would
be payable as per the provisions of section 50 of the CGST Act for the tax liability net of ITC.

For registered person making payment of tax by opting Self- Assessment Method:
Interest amount would be payable as per the provision of section 50 of the CGST Act for tax or
any part thereof (net of ITC) which remains unpaid / paid beyond the due date for the first 2
months of the quarter.

Interest payable, if any, shall be paid through Form GSTR-3B.

Note: It is clarified that no late fee is applicable for delay in payment of tax in
first 2 months of the quarter.
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Late Fees:

Registered person
taxable supplies and Max 250 + 250 (RS.1O p.d)
Tax payable is NIL

Registered person, Max 1000+1000

Aggregate T.O < 1.5
crs (RS.25 p.d)
GSTR 1 and 3B
Aggregate T.O < 5 crs Max 2000 + 2000
but > 1.5 crs (RS.25 p.d)

Rs 100 for every day (or) Rs

Other registered
5,000 which ever is lower
Persons
(RS.25 p.d)
Late fee for delay in filing returns

250 + 250
Tax payable is NIL
(RS.1O p.d)
GSTR 4
1000 + 1000
Others
(RS.25 p.d)

Max 5000
Nil return
(RS.1O p.d)
GSTR 5
other Max 5000 (RS.25 p.d)

GSTR 6 ISD Max 5000 (RS.25 p.d)

GSTR 7 TDS Max 1000 (RS.25 p.d)

GSTR 8 TCS Max 5000 (RS.100 p.d)

Rs 100 for every day (or) 0.25%

Annual return Annual return Turnover of the state which ever is
lower

Goods and service tax practitioners (Sec 48):

A person who is
• Indian citizen and Person of sound mind & Not adjudicated as insolvent and Not been
convicted by a competent court.
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Retired officer of Commercial Tax Department of any State

Govt./CBIC who, during service under Government had worked in a
Satisfies any of he conditions

post not lower than the rank of a Group-B gazetted officer for a
period ≥ 2 years

Enrolled as a Sales Tax Practitioner or Tax Return Preparer under

the earlier indirect tax laws for a period of not less than 5 years

CA/CMA /CS/Graduate

Functions of GSTP:
• Furnish details of outward and inward supplies
• Furnish monthly, annual or final return
• Make deposit for credit into electronic cash ledger
• Furnish information for generation of E-Way bill
• File an application for amendment or cancellation of enrolment under rule 58
• File an intimation to pay tax under the composition scheme or withdraw from the
said scheme
• File a claim for refund
• File an application for registration amendment/ cancellation
• Also allowed to appear as an authorised reperesntative before any officer of
department/Appelatte authority/tribunal.
Due dates for Filing GST returns

Return Section Filed w.r.t Due date

GSTR 1 Sec 37 OW Supplies by Reg person 11th of Succeeding
month
Proviso to OW supplies by reg person Quaterly 13th of Succeeding
37(1) month after Tax Period
GSTR Sec 38 IW Supplies of Reg person/ From ISD / NA
2A/2B TDS deucted /TCS collected
GSTR 3B Sec 39(1) Monthly return 11th of Succeeding
month
Sec 39(1) Quaterly return 22/24 th of Succeeding
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month after Tax Period

GSTR 4 Sec 39(2) Composition scheme person OW (IW 30th April of
reflect in 4A) Succeeding FY
GSTR 5 Sec 39(5) NRTP OW 20 days from tax
period or 7 days from
last day of validity
(Earlier)
GSTR 5A Rules OIDAR O/S India to non taxable person 20th of Succeeding
month
GSTR 6 Sec 39(4) ISD to distribute credits 13th of Succeeding
month
GSTR 7 Sec 39(3) TDS Deductor 10th of Succeeding
month
GSTR 8 Sec 39(3) TCS Collector 10th of Succeeding
month
GSTR 9 Sec 44 Annual Return 31st Dec of Succeeding
FY
GSTR 10 Sec 45 Final return 3 months from
cancellation
GSTR 11 Rules IW of UIN holders 28th of the following
Month
 Intro & Duties

Introduction:
• Entry 83 of the union list of the seventh schedule to the constitution of India is
empowered to levy the customs duty by the central government of India.
• The Customs Act was enacted by the Parliament in the year 1962.
• Acts that will be discussed under the Customs law
▪ Customs Act, 1962
- Consists of the provisions related to charge, collection and assessment of
customs.
- Extends to whole of India
▪ Customs Tariff Act, 1975.
- Consists of tariff rates for various goods on imports and exports.

Sec-156 of customs act:

The Central Government of India has power to make rules and also has the power to
issue Notifications from time to time for the purpose of smooth functioning and
effective administration of the Act.

Sec-157 of the Custom Act, 1962:

The Central Board of Indirect Tax and Customs (CBIC) has been empowered to make
regulations, consistent with provisions of the Act.

Difference between Rules and Regulations:

Rules Regulations

Issued by the Government of India Issued by the CBIC

Rules have to be consistent with Act Regulations have to be consistent with

Act & Rules.
Has statutory force Has statutory force

Definitions:

Adjudicating Authority: Adjudicating authority means any authority competent to pass

any order or decision under this Act, but does not include:

• The Central Board of Excise and Customs (CBIC),

 Intro & Duties

• Commissioner of Customs (Appeals) or

• Customs, Excise and Service Tax Appellate Tribunal (CESTAT)

Section 1: Short title/Extent/Commencement.
- Customs Act 1962
- Whole of India and applies to any offence or contravention there under committed outside
India by any person
Assessment: Means determination of the dutiability of any goods and the amount of
duty, tax, cess or any other sum so payable, if any, under this Act or under the
Customs Tariff Act, 1975

 the tariff classification of such goods as determined in accordance with the

provisions of the Customs Tariff Act;

 the value of such goods as determined in accordance with the provisions of

this Act and the Customs Tariff Act;

 exemption or concession of duty, tax, cess or any other sum, consequent upon
any notification issued therefore under this Act or under the Customs Tariff
Act or under any other law for the time being in force;

 the quantity, weight, volume, measurement or other specifics where such

duty, tax, cess or any other sum is leviable on the basis of the quantity,
weight, volume, measurement or other specifics of such goods;

 the origin of such goods determined in accordance with the provisions of the
Customs Tariff Act or the rules made thereunder, if the amount of duty, tax,
cess or any other sum is affected by the origin of such goods;

 any other specific factor which affects the duty, tax, cess or any other sum
payable on such goods,

Bill of Export:
• Exporter of any goods shall make entry thereof by presenting to the proper officer in the
case of goods to be exported, a bill of export in the prescribed form.
• (Form presented to proper officer to let the goods export is called as Bill of export)
Coastal goods:
• Means goods other than imported goods, transported in a vessel from one port in India to
another.
Customs station:
• Customs station means any customs port, customs airport or land customs station.
 Intro & Duties

India [Section 2(27)]:-

• “India” includes the territorial waters of
India.
• Territorial waters of India extend to 12
nautical miles into sea from the appropriate
base line.
• Indian customs waters” means the waters
extending into the sea up to the limit of
Exclusive Economic Zone, Continental Shelf,
Exclusive Economic Zone and other
Maritime Zones Act, 1976 and includes any
bay, gulf, harbour, creek or tidal river.
• The limit of exclusive economic zone is 200
nautical miles from the nearest point of
the baseline.
• Significance: Power to arrest, power to
stop & search vessel and person, power to
confiscate vessel & goods.

High Seas:

An area beyond 200 nautical miles from the base line is called High Seas. All countries
have equal rights in this area.

Conveyance:
• Conveyance includes a
- Vessel
- Air craft, and
- Vehicle
Person in Charge:
▪ Vessel – Master
▪ Aircraft – Commander or Pilot-In-charge
▪ Train- Conductor or Guard
▪ Vehicle – Driver
▪ Other conveyance – Person in charge

Dutiable Goods:
• Any goods which are chargeable to duty
• and
• On which duty has not been paid.

Export:
 Intro & Duties

The term export means taking out of India to a place outside India.
Import:
The term import means bringing into India from a place outside India.

Goods:

• The term goods includes:

- Vessels, aircrafts, and vehicles
- Stores
- Baggage
- Currency and negotiable
instruments and any other kind Baggage Stores
of movable property.

Stores:
Stores means goods for use in a
vessel or aircraft and includes fuel
and spare parts and other articles of
equipment, whether or not for Vessel Air craft
immediate fitting.

Associated cement companies LTD vs CC 2001

▪ Facts: RST Ltd imported drawings and designs in paper form through professional courier.
▪ Assistant commissioner valued these and levied duty whereas RST ltd contends that they are
not goods
▪ Decision: Apex court observed that though technical advice or information technology are
intangible assets, but the moment they put on media (Paper/cassettes/diskettes) they
become movable and thus they are goods.

Case study:

A Big Ship carrying merchandize and stores enters the territorial waters of India but it
cannot enter the port. In order to unload the merchandize lighter ships are employed.
Stores are consumed on board the ship as well as by the small ships. Examine whether
such consumption of stores attracts customs duty. Quote relevant section and case law
if any. Stores are supplied to the above ships. Will such supplies be treated as exports
and be entitled to draw back?
Answer:
Bringing of ‘stores’ is treated as import. However, there is special provision for stores
under section 87. Imported stores consumed on board an ocean going vessel (i.e.
foreign going vessel) are exempt from import duty under Section 87. Since the ship is
 Intro & Duties

ocean going, stores consumed on board will not attract customs duty.
Regarding the smaller ships which are employed to unload the cargo from the mother ship,
they are termed as “Transhippers”. These are also treated as ocean going vessels as was
decided in UOI v V M Salgaoncar AIR 1998 SC1367: 99 ELT 3 (SC).
Hence stores consumed by small vessels would also be exempt from customs duty.
Stores supplied to the vessel will be treated as export as per Section 89 of Customs
Act and hence will be eligible for duty drawback.

Prohibited goods:

Means any goods the import or export of which is subject to any prohibition under this Act
or any other law for the time being in force but does not include any such goods in
respect of which the conditions subject to which the goods are permitted to be
imported or exported have been complied with.

Examples:
• Pornographic and obscene materials

• Narcotic Drugs and Psychotropic Substances

• Wild life products, Specified Live birds and animals, Wild animals

Domestic Tariff Area:

▪ Means the whole of India (Including the territorial waters and continental shelf) but does
not include the areas of special economic zones and 100% Export oriented units.

Aban Llyod Chilies Offshore Ltd. v UOI (2008) 227 ELT 24 (SC).

Goods imported by the assessee for consumption on oil rigs which are situated in Continental
Shelf/Exclusive Economic Zones of India.

Decision: EEZ deemed to be a part of Indian Territory. Therefore, the supply of imported
spares or goods or equipments to the rigs by a ship will attract import duty.

CCus. (Prev.), Mumbai v M. Ambalal & Co. 2010 (260) E.L.T. 487 (SC)

Point of dispute: Smuggled goods can be treated par with imported goods for the purpose of
granting the benefit of the exemption notification?

Decision: The Apex court held that the smuggled goods could not be considered as ‘imported
goods’ for the purpose of benefit of the exemption notification.
 Intro & Duties

Charging section – 12:

• As per Section 12 of the Customs Act, import or export of goods into or out of India is
the taxable event for payment of the duty of customs as per such rates as may be
specified in Customs Tariff Act.
• Except otherwise provided in any law for being in force
- Customs duty shall be levied
- On goods
- Imported into or exported from India
- At such rates specified under CTA

What is Import?
• The Supreme Court of India has given the landmark judgments in cases of UOI vs Apar
Industries Ltd (1999) and further in Garden Silk Mills Ltd v UOI (1999)that the import
of goods will commence when they cross the territorial waters but continues and is
completed when they become part of the mass of goods within the country.

Taxable event for imported goods:

• In the case of Kiran Spinning Mills (1999) the Hon’ble Supreme Court of India held that
import is completed only when goods cross the customs barrier. The taxable event is the
day of crossing of customs barrier and not on the date when goods landed in India or had
entered territorial waters of India
• The taxable event in case of imported goods can be summed up in the following lines:
o Unloading of imported goods at the customs port – is not a taxable event
o Date of entry into Indian territorial waters – is not a taxable event
o Date of presentation of bill of entry – is not a taxable event
o Date on which the goods cross the customs barrier - is a taxable event

Clearance of Goods for Home Consumption [Sec. 47 (1) of the Customs Act, 1962]:

• Clearance for home consumption implies that, the customs duty on import of the goods
has been discharged and the goods are therefore cleared for utilization or consumption.
• The goods may instead of being cleared for home consumption be deposited in warehouse
and cleared at a later time
• Where the proper officer is satisfied that any goods entered for home consumption are
not prohibited goods and the importer has paid the import duty, if any, assessed thereon
and any charges payable under this Act in respect of the same, the proper officer may
make an order permitting clearance of the goods for home consumption
• Provided that the Central Government may permit certain class of importers to make
deferred payment of said duty
Warehousing:
• It is a statutory facility for depositing imported goods in a warehouse without payment of
duty.
• The advantage of the scheme is that the imported goods can be cleared on payment of duty
 Intro & Duties

in instalments, as and when required during the warehoused period, up to one year.
Exports

Export of goods is complete when the goods cross the territorial waters of India.

Duties can be classiefied in to two types.

levied for the purpose

Revenue duties of raising customs
revenue.

Duties

Intended to give
Protective duties protection to
Indigenous Industries

The protection through protective duties is given by considering the following:

 Protective duties should not be so stiff to discourage Imports.

 It should be sufficiently attractive to encourage imports to bridge the gap between
demand and supply of those articles in the market.

Protective duties are levied by the central government upon the recommendation made to it by
Tariff commission and on being satisfied that the conditions exist.
 Intro & Duties

Sec 3(1) Adtl Equivalent to Excised duty is

Duty to levied. To be levied on Assessable value
compensate computed + BCD + Protective duty
Currently applicable on Alcohol,
Excise duty
Petroleum & Tobaco
(CVD)

3(5) Special
CVD At a rate not exceeding 4 % To be levied on Assessable value
counterbalancin Currently applicable on Alcohol, computed + BCD + Protective duty
g VAT/sales Petroleum products &Tobaco + CVD
tax

Applicable on Imports (Unless

Basic Customs To be levied on Assessable value
exempted) IF specically
Duty computed
mentioned - - Preferential rate
Levied on customs Duty other than
Social Welfare Rate - 10 % on BCD, 3% on on - IGST, Comp Cess, Safeguard
Surcharge Gold, Silver, Petrol, Alcohol. Duty, Anti dumping duty,
Countervailing Duty
Agriculure
Import Duties Levied on Imports

Levied on Import of certain

Infrastructure To be levied on Assessable value
notified Goods (coal, urea,
& Development computed
Silver, gold, apples)
Cess

- Leviable as per sec 5 of IGST

Act To be levied on Assessable
IGST
- To the Max of 40 % value computed + BCD + SWC
+ AIDC + Protective duty +
GST CVD + Spl CVD + Safe Guard
Leviable as per sec 8 of Comp
Compensation Duty + Anti Dumping Duty
cess Act
Cess

Exemption on Imports from

Developing Countries
Levied when goods Imported in
Excess Quantity and Cuasing - When Import from Each Country
Safeguard Duty
Serious injury to Domestic < 3 %
Indutry
- When aggregate of All countries
(share not exceeding 3 %) < 9 %

Condition
Countervailing When the exporting country
offers subsidy 1. Subsidy relates to Export
Duty on
performance
Subsidized - Lies in force for a Max period
Articles of 5 years 2. Use of domesticgoods over
imported in the exported foodss

Where the goods are exported to

Anti Dumping Duty = Dumping Margin or Injury
India at less than their Normal
Duty margin (lower)
value
 Intro & Duties

Basic customs duty:

• Goods imported into India are chargeable to basic custo`ms duty under customs act 1962.
• The rates of BCD are indicated in I schedule of customs tariff act, 1975.
• BCD is levied at standard rate of duty but if certain conditions are satisfied, the importer
can avail the benefit of preferential rate of duty on imported goods.
• Conditions for claiming the benefit of preferential rate of duty:
▪ At the time of import, Specific claim for preferential rate must be made by the
importer
▪ Import must be from a preferential area as notified by the central government.
▪ The goods such be produced/manufactured in such preferential area.
▪ The origin of the goods shall be determined in accordance with the rules framed.
• The fact that the importer has submitted a certificate of origin issued by an Issuing
Authority shall not absolve the importer of the responsibility to exercise reasonable care.
• Where importer fails to provide the requisite information for any reason
- cause further verification consistent with the trade agreement
- pending verification, temporarily suspend the preferential tariff treatment to such
goods
• Unless otherwise specified in the trade agreement, any request for verification shall be
sent within a period of five years from the date of claim of preferential rate of duty by
an importer.
• Notwithstanding anything contained in this section, the preferential tariff treatment may
be refused without verification in the following circumstances, namely:—
o the tariff item is not eligible for preferential tariff treatment;
o complete description of goods is not contained in the certificate of origin;
o any alteration in the certificate of origin is not authenticated by the Issuing
Authority;
o the certificate of origin is produced after the period of its expiry, and in all
such cases, the certificate of origin shall be marked as ‘‘INAPPLICABLE’’.

BCD is leviable on Assessable value as determined under Sec 14 Customs Act.

 Intro & Duties

Basic Customs Duty (BCD) on Imported & Exported goods

Rate of duty at the time

of submission of bill of
entry Rate of BCD
Prevailed on
Imports - Home
consumption that date
Rate of duty at the time whichever is
of Entry inward /Arrival later
date granted to the
vessel / Aircraft
Basic customs duty
Rate to be considered
under different Rate of duty is the date of presentation
circomstances Imports - Removal of
of ex-bond bill of entry (i.e. Sub-bill of
Warehosued goods
Entry) for home consumption

Rate of Duty on the day of let Export

Exports
order

Exchange rate for Imported/Exported goods

Exchange rate of CBIC

Imports (Direct Home
consumption) Exchange of CBIC as on the
More than one
date of submission of Bill of
exchange rate of CBIC
Exchange rate

Entry

Imports (Warehoused Exchange of CBIC as on the date of submission of Bill of

and removing for HC) Entry (In -bond)

Exports Exchange rate on date of filling Shipping Bill

In any other cases mentioned above – Rate of duty is the Rate prevailing on date of payment of
Duty, Exchange rate also rate prevailing on the date of payment of Duty
 Intro & Duties

Illustration – 1

An importer imported some goods for subsequent sale in India at $ 10,000 on Assessable value
basis. Relevant exchange rate and rate of duty are as follows:

Particulars Date Date Date

Date of submission of bill of entry 25th February 25th February 25th

2021 2018 February
2021
Date of entry inwards granted to the 5th March 2021 5th March 2021 5th
vessel March
2021
Assume : Integrated Tax leviable u/s 3(7) of the Customs Tariff Act, 1975 is 18%. Calculate
Assessable value and Customs Duty in Indian rupees?

Solution:

Compute export duty from the following data:

i. FOB price of goods: US $ 1,00,000

ii. Shipping bill presented electronically on 28-02-2018
iii. Proper officer passed order permitting clearance and loading of goods for export
on 01-03-2018.
iv. Rate of exchange and rate of export duty are as under
Rate of Exchange Rate of
Export
Duty
On 28-02-2018 1 US $ = Rs65 10%
On 01-03-2018 1 US $ = Rs66 8%
v. Rate of exchange is notified for export by Central Board of Excise and Customs
(Make suitable assumptions wherever required and show the workings)
 Intro & Duties

Sec 3(1): Additional Duty to compensate Excise Duty (CVD):

- Article Imported to India, in addition shall be liable to a duty
- Equal to the excise duty for the time being leviable on a like article if such article
manufactured or produced in INDIA
- If like article not produced in India, Then the rate applicable on such class or description
of articles to which the imported article belongs. (Multiple rates pick the higher one)
- Currently it is leviable on
▪ Alcoholic Liquour
▪ Petroleum products (HIGHly CRUel MAN)
▪ Tobaco & Tobaco products

Assessable Value: Value determined under Sec 14 + BCD

Sec 3(5): Special CVD counterbalancing VAT/Sales tax:

- If CG satisfies that it is necessary in public interest, such additional duty as would
counterbalance VAT/Sales tax or any other charges
- For the time being leviable on a like article if such article manufactured or produced in
INDIA
- Rate shall not exceed 4 %
- If like article not produced in India, Then the rate applicable on such class or description
of articles to which the imported article belongs. (Multiple rates pick the higher one)
- Currently it is leviable on
▪ Petroleum products (HIGHly CRUel MAN)

Assessable Value: Value determined under Sec 14 + BCD + CVD (3(1))

 Intro & Duties

Social welfare surcharge:

▪ 10% on the aggregate duties of customs levied at the time of import.
▪ 3% on goods like Gold, silver, platinum, petrol, high speed diesel oil.
▪ Following are excluded while calculating social welfare surcharge
❖ Safeguard duty
❖ Countervailing duty
❖ Antidumping duty
❖ IGST (Sec 3(7)) of Customs Tariff Act
❖ GST Compensation cess.

SWC leviable on BCD and on other customs duties except, on IGST, Comp Cess, Safeguard duty,
Countervailing Duty & Antidumping Duty.

Illustration - 2
Mr. X imported the goods from China worth USD 10,000. The Basic Customs Duty @10%,
Social Welfare Surcharge @ 10%. The exchange rate was 1 US $ = Rs 44 on date of
presentation of Bill of Entry. Find the total Customs Duty.

Agricultural Infrastructure and Development Cess (AIDC):

• AIDC levied on import of specified goods at the notified rate

• Some of the notified goods are Apples, gold, silver, Alcohol, Petrol.
• Duty is leviable on the value on the assessable value on which BCD is levied.
• AIDC on Imports is in addition to the other Customs duties leviable
• Rules and regulations made under customs Act are applicable to AIDC (Assessment /Intrest
/refund/Exemptions/penalty)

IGST

▪ GST (Integrated Goods and Services Tax) is a component under GST law, which is levied
on goods being imported into India from other country.
▪ Countervailing duty (Additional Customs duty) and special additional duty, are subsumed in
to GST.
▪ IGST will be levied on Imports.
▪ The rate of IGST shall not exceed 40%.

Taxable value for IGST = Assessable value + All the Duties under Customs (BCD + SWC +
AIDC + Protective duty + CVD + Spl CVD + Safe Guard Duty + Anti Dumping Duty)
 Intro & Duties

Illustration - 3

Compute the duty payable under the Customs Act, 1962 for an imported equipment based on the
following information:

i. Assessable value of the imported equipment US $10,100.

ii. Date of Bill of Entry 25.4.2018 basic customs duty on this date 12% and exchange
rate notified by the Central Board of Excise and Customs Us $ 1 = Rs 65.
iii. Date of Entry inwards 21.4.2018 Basic customs duty on this date 16% and exchange
rate notified by the Central Board of Excise and Customs US $ 1 = Rs 60.

iv. IGST u/s 3(7) of the Customs Tariff Act, 1975: 12%.

v. Social Welfare Surcharge = 10%

Make suitable assumptions where required and show the relevant workings and round off your
answer to the nearest Rupee.
 Intro & Duties

GST compensation cess:

▪ Compensation Cess will be charged on luxury products like high-end cars and demerit
commodities like pan masala, tobacco and aerated drinks for the period of 5 years in
order to compensate states for loss of revenue.
▪ GST Compensation cess, wherever applicable, would be levied on cargo that would arrive
on or after 1st July, 2017.

Taxable value for Compensation Cess = Assessable value + All the Duties under Customs
(BCD + SWC + AIDC + Protective duty + CVD + Spl CVD + Safe Guard Duty + Anti Dumping Duty)

Value to be considered for levying IGST & Compensation Cess where the warehoused goods are
sold before Home consumption:

Goods Sold Multiple times before removal for Home consumption,

transaction value of last transaction has to be taken
consumption or Export - Value to be
Warehoused Goods sold before Home

considered for levying IGST

Value specified in Above para or

Whole Goods Sold
Transaction value Higher

Proportionate value specified in Above

Part of the Goods are sold
para or Transaction value Higher

Goods are Unsold Value specified in Above para

Illustration - 4
Suppose Assessable Value (A.V.) including landing charges = Rs 100/ -

(1) BCD - 10%

(2) CVD - 12%

(3) IGST - 28%

(4) SWS @ 10%

(5) Compensation cess - 10%

 Intro & Duties

Power of Central government to levy protective duty in certain cases

CG on recommendation of tariff commission satisfied that circumstances exist to take immediate

action for protection of interests of any industry established in India.

- Not exceeding the amount proposed in recommendation

- Lies in force till the date specified in notification

Emergency power of CG to increase duties

1. Export duties (sec 8)

CG may notification direct on amendment to be made in Schedule 2 to provide for levy or

increase in export duty - circumstances should exist which render it necessary to take
immediate action

2. Import duties (sec 8A)

CG satisfied that import duty should be increased, CG by notification direct an amendment

to be made to first schedule to provide for increase in import duty .

Safeguard duty:

▪ If imported goods are cleared in DTA, then safeguard duty will be payable if on
conducting enquiry if it is satisfied that
- Those goods are imported into India in increased quantities and
- Such increased importation is causing or threatening to cause serious injury to
domestic industry.
▪ Safeguard duty is product specific
▪ The duty imposed under this section shall be in force for a period of 4 years from the
date of its imposition and can be extended with the total period of levy not exceeding 10
years.
▪ Safeguard duty shall not apply to articles imported by a 100% EOU undertaking or a unit
in a FTZ or in a SEZ unless specifically made applicable.
▪ Central government can even levy Provisional safeguard duty on basis of preliminary
determination that increased imports have caused serious injury to domestic industry
▪ Provided that where, on final determination, the Central Government is of the opinion
that increased imports have not caused serious injury to a domestic industry, it shall
refund the duty so collected
▪ Provisional safe guard duty will remain in force up to a period of 200 days.
▪ Safeguard duties are not taken into consideration while fixing All Industry Rates of
drawback, the drawback of the same can be claimed under an application for Brand Rate
under rule 6 or rule 7 of the Customs where the inputs which suffered safeguard duties
were actually used in the goods exported as confirmed by the verification conducted for
fixation of Brand Rate
▪ Safeguard duty shall not be imposed in the following circumstances
 Intro & Duties

Articles orginating •Share of imports of that article from that

from developing country does not exceed 3% of the total
country imports of that article into India

• Aggregate of imports from developing

Articles orginating countries each with less than 3%
from more than
import share taken together does not
one developing
exceed 9% of the total imports of
country
that article into India

articles Impoeted •Unless the duty is

by a 100% EOU or specifically made
SEZ applicable

Countervailing duty:
▪ Duty levied if the articles are imported into India by getting the subsidies from other
country
▪ The amount of countervailing duty shall not exceed the amount of subsidy paid
▪ CVD cannot be levied unless it is determined that
- Subsidy relates to export performance
- Subsidy relates to use of domestic goods over imported goods
- Subsidy conferred on a limited number of persons who are in manufacturing o or
export of goods.
▪ It shall be in force for a period of 5 years from the date of its imposition and can be
extended for a further period of 5 years.
▪ CG may, pending the determination of CVD can levy provisional countervailing duty not
exceeding such subsidy provisionally estimated.
▪ On final determination if any collected excess has to be refunded
▪ Can Impose CVD with retrospective effect but not prior than 90 days from date of
notification.
▪ CVD not applicable on articles imported by a 100 % EOU or Unit in SEZ, unless
- Unless it is specified in notification
- Such goods are cleared to DTA/ or used in manufacturing goods cleared to DTA

Anti-Dumping duty:
▪ It is imposed on imports of a particular country.
▪ Where any articles exported by an exporter to India at less than its normal value, then,
upon the importation of such article into India, the Central Govt., may impose an anti-
dumping duty.
▪ Antidumping duty is
 Intro & Duties

❖ Margin of dumping or
❖ Injury Margin, whichever is lower.
▪ Margin of dumping = Normal value – Export price
▪ Normal value = Market value in the exporting country. If not available then the
comparable representative export price to a third country.
▪ Export price = The price at which it is exported. If the export price is unreliable
because of association or compensatory arrangement, the price may be taken as the
price at which the imported goods are resold.
▪ Injury Margin = Is the margin adequate to remove the injury to domestic industry.
▪ Where the determination of normal value and margin of dumping is pending then the
central government may impose provisional antidumping duty.
▪ Duty ceases to have effect on expiry of 5 years.
 Classification

What is the need for classification?

• To ascertain the customs duty correctly classification of goods is necessary.

Consists of goods liable

First schedule
to import duty

Customs tariff Act

1975

Consists of goods liable

Second schedule
to export duty

The Indian customs tariff is based upon the harmonised system of nomenclature.
Harmonised system of nomenclature:
• HSN is an internationally standardised system of names and numbers for classifying goods.
• Developed and maintained by World customs organisation (WCO), an independent
intergovernmental organisation.
• HSN consists of eight digits.
✓ First two digits – Indicates chapter name
✓ Subsequent two digits - Heading
✓ 5th and 6th digits – Sub-heading
✓ Last two digits – Tariff item.

Additional notes (First schedule of customs tariff act)

Heading: Means a description in list of tariff provisions, denoted by a four digit number.
Subheading: Means a description in list of tariff provisions, denoted by a six digit number.
Tariff Item: Means a description in list of tariff provisions, denoted by eight digit number and
rate of customs duty..

First schedule of customs tariff act 1975:

• Consists of 98 chapters grouped under 21 sections.
 Classification

Group of chapters representing a particular class of

Sections
goods`

Chapters Contains goods of a particular class

Chapter Mentioned at the begining of each chapter , these are part

notes of the statute and has legal authority.

Each chapter and sub chapter is divided in to various

Heading
headings

Sub-heading Each heading is further divided into various sub-headings.

General Explanatory notes:

One dash[-] Two dash[--] Three dash[---,

-----]

• Preceded by • Denotes that • Denotes that

one dash, it is sub it is sub
denotes that classifcation of classifcation of
article or article or article or
group shall be goods which is goods which is
taken to sub preced by [-] preced by [--]
classification.

 Standard rate of duty applicable, if no preferential rate of duty is specified.

Tariff item Description of goods Units Standa Preferen

rd rate tial duty
of duty
1 2 3 4 5

0904 PEPPER OF THE GENUS PIPER; DRIED OR

CRUSHED OR GROUND FRUITS OF THE
GENUS CAPSICUM OR OF THE GENUS
PIMENTA
- Pepper
 Classification

0904 11 -- Neither crushed nor ground: Kg 70% 62.5%

0904 11 10 --- Pepper, long Kg 70% 62.5%

0904 11 20 --- Light black pepper Kg 70% 62.5%

0904 11 30 --- Black pepper, garbled Kg 70% 62.5%

0904 11 40 --- Black pepper ungarbled Kg 70% 62.5%

0904 11 50 --- Green pepper, dehydrated Kg 70% 62.5%

0904 11 60 --- Pepper pinheads Kg 70% 62.5%

0904 11 70 --- Green pepper, frozen or dried Kg 70% 62.5%

0904 11 80 --- Pepper other than green, frozen Kg 70% 62.5%

0904 11 90 --- Other Kg 70% 62.5%

0904 12 00 -- Crushed or ground Kg 70% 62.5%

- Fruits of the genus Capsicum or of the Kg

genus pimento
0904 21 -- Dried, neiher crushed nor ground: Kg 70% -

0904 21 10 --- Of genus Capsicum Kg 70% -

0904 21 20 --- Of genus Pimenta Kg 70% -

0904 22 -- Crushed or ground : Kg 70% -

--- Of genus Capsicum :

0904 22 11 ---- Chilly Power Kg 70% -

0904 22 12 ---- Chilly Seeds Kg 70% -

---- Other Kg 70% -

0904 22 19

--- Of genus Pimenta:

0904 22 21 ----- Powder Kg 70% -

0904 22 29 ---- Other Kg 70% -

 Classification

Columns:
1) Tariff item
2) Description of goods
3) Units
4) Standard rate of duty
5) Preferential rate of duty.

Rules of Interpretation of the first schedule of customs tariff act:

Rule – 1: General rule of classification- No ambiguity in classification.

• The titles of sections, chapters and sub-chapters do not have any legal force they are
for easy reference only.
• Terms of headings read with relative section and chapter notes are legally relevant for
the purpose of classification.
• The rules of interpretation need not be considered, when classification is possible on the
basis of description in heading, sub-heading, chapter notes and section notes.
• Notes of one chapter or section cannot be applied for interpreting entries in other
chapters or sections

Example

Product: Letter closing and sealing machine

Sub-heading 842230 00: Machinery for filling, closing, sealing or labeling bottles, cans, boxes,
bags or other containers; machinery for capsuling bottles, jars, tubes and similar containers;
machinery for aerating beverages.

Sub-heading 847230 00 - covers machines for closing or sealing mails.

Both the headings appear to be relevant for the product in question. However, chapter note 2
to chapter 84 inter alia provides that Heading No. 8422 does not cover office machinery of
Heading No. 8472. Therefore, the product in question will be classified under 847230 00

Rule – 2(a): Classification of incomplete/unfinished articles.

• Even if the goods are incomplete or unfinished; if they have essential character of
finished goods, then classify them under the same heading.
• The unassembled/dis-assembled form of that article shall also be classified under the
same heading provided the unassembled/dis-assembled goods have the essential
characteristics of the finished goods

• Railway coaches removed without seats would still be railway coaches

• Motor Car not fitted with wheels or tyres will be classified under the heading of Motor Vehicle
 Classification

Note: Only goods requiring minor adjustments would be construed as having the essential
character. Those requiring major processes like turning, grinding, broaching, groove cutting, heat
treatment, surface treatment etc., cannot be construed as having the essential character.

Rule 2(b): Mixture or Combinations of goods falls under different classifications:

• Any reference in a heading to a material or substance shall be taken to include a
reference to mixtures or combinations of that material or substance with other
materials or substances.
• Any reference to goods containing a particular material or substance would include a
reference to goods consisting wholly or partly of such specified material or substance.

The term coffee will include coffee mixed with chicory.

Natural rubber will cover a mixture of natural and synthetic rubber

Rule 3 – Classification in case goods are classifiable under two or more headings:

Specific over general 3(a)

•The heading that provides a more specific description
should be preferred over the heading that provides a
general description.
•It means to say that a specific heading should be
preferred over a general heading

Essential character 3(b)

•If the product consists of different materials or made up
of different components, mixtures or composite goods and
cannot be classified based on Rule 3(a), it should be
classified as if they consisted of material or component
which gives them their essential character

Latter the better 3(c)

•When goods cannot be classified by reference to rule
3(a) or rule 3(b), they shall be classified under the
heading which occurs last in the numerical order among
those which equally merit consideration
 Classification

Rule 3(a):

Relevant case law: Electric shaving machine was classifiable under following two headings:-

Heading No. 8510: Shavers and hair clippers with self-contained electric motors
Heading No. 8509: Electro-mechanical domestic appliances with self- contained electric
motor
The said product in the above instance would be classifiable under heading No. 8510 as heading No.
8510 is more specific as compared to heading No. 8509.

Rule 3(b)

Product: Lead pencil with an eraser at the back.

Classification: Though the above product is composite goods, the essential character is that it
is a pencil and the attachment of eraser at the stub is only for the purpose of adding
convenience to the user. Therefore, it shall be classified as a pencil and not as an eraser.

Rule 3(c)

Mahindra and Mahindra v. CCE [1999 (109) E.L.T. 739 Tribunal)][maintained by SC]
When the goods cleared by assessee were equally classifiable under the following two
headings:-
Heading No. 8703:-Motor cars and other vehicles principally designed for the transport of
persons.
Heading No. 8704: Motor vehicles meant for transport of goods.
It was held that heading 8704 occurs last and as both the headings equally merit
classification, goods shall be classified under 8704 applying the interpretative Rule 3(c).

Rule 4 – Akin Rule:

• Akin[meaning] = of similar character

• If goods cannot be classified as per earlier rules then they shall be classified under the
heading in which the most akin goods are classified

Product: Plastic films used to filter or remove the glare of the sun light, pasted on car glass
windows, window panes etc.

Classification: These goods do not find a specific entry in the tariff schedule. However,
heading 392530 00 covers Builder’s wares of plastic not elsewhere specified – shutters, blinds
(including Venetian blinds) and similar articles & parts thereof. Even though the product in
question is not a builders ware, they are most akin to plastic blinds and hence it can be
classified under 3925 30 00 heading.

Rule 5-
 Classification

(a) Classification of cases/containers used for packaging of goods:

• Packing material used as cases for camera, musical instrument cases, gun cases,
drawing instrument cases, necklace cases and similar containers specially shaped or
fitted to contain a specific article or set of articles, suitable for long term use,
will be classified along with that article, if such articles are normally sold along
with such cases.
(b)Classification of packing materials and packing containers:
• Subject to the provisions of (a) above, packing materials and packing containers
presented with the goods therein shall be classified with the goods, if they are of a kind
normally used for packing such goods.

Leather cases, which are normally supplied along with the goods, however costly they may be,
need not be treated separately for the purpose of classification.

Rule 5(a) and 5(b) shall not apply when such packing material or packing containers are clearly
suitable for repetitive use

Rule 6: Goods compared at the same level of sub-headings:

• The classification of goods in the sub-headings of a heading shall be determined

according to the terms of those sub- headings and any related sub-heading notes and,
mutatis mutandis, to the above rules, on the understanding that only sub-headings at the
same level are comparable.
• For the purposes of this rule the relative section and chapter notes also apply, unless
the context otherwise requires.

Project Imports:
• Chapter 98 of tariff act pertains to project imports.
• Project Imports are the imports of machinery, instruments, and apparatus etc., falling
under different classifications, required for initial set up of a unit or for substantial
expansion of an existing unit.
• It is difficult to assess different products imported for a project at different rates,
hence for such project imports one consolidated rate of customs duty has been made
applicable irrespective customs classification.
• Individual exemption notification will apply even for items grouped under the said heading
of the customs tariff liable to duty at the project rate.
• Project imports include all items of machinery, instruments, apparatus and appliances,
components or raw materials etc. for initial setting up of a unit or for substantial
expansion of the same.
• The spare parts, raw material and consumables stores up to 10% of the value of goods
can be imported.
• This scheme has been made applicable to Industrial Plants, Irrigation Projects, Power
Projects, Mining Projects, Projects for Oil or Mineral Exploration and other projects as
may be notified by the Central Government.
 Classification

Keihin Penalfa Ltd. v. Commissioner of Customs 2012 (278) ELT 578 (SC)
Facts of the Case: Department contended that ‘Electronic Automatic Regulators’ were
classifiable under Chapter sub-heading 8543.89 whereas the assessee was of the view that the
aforesaid goods were classifiable under Chapter sub-heading 9032.89. An exemption
notification dated 1-3- 2002 exempted the disputed goods by classifying them under chapter
sub- heading 9032.89. The period of dispute, however, was prior to 01.03.2002.

Point of Dispute: The dispute was on classification of Electronic Automatic Regulators.

Supreme Court’s Decision: The Apex Court observed that the Central Government had issued
an exemption notification dated 1-3-2002 and in the said notification it had classified the
Electronic Automatic Regulators under Chapter sub-heading 9032.89. Since the Revenue itself
had classified the goods in dispute under Chapter sub-heading 9032.89 from 1-3-2002, the
said classification needs to be accepted for the period prior to it.

M/s CPS Textiles P Ltd. v. Joint Secretary 2010 (255) ELT 228 (Mad.)

High Court’s Decision: The High Court held that the description of the goods as per the
documents submitted along with the Shipping Bill would be a relevant criterion for the purpose of
classification, if not otherwise disputed on the basis of any technical opinion or test. The
petitioner could not plead that the exported goods should be classified under different headings
contrary to the description given in the invoice and the Shipping Bill which had been assessed
and cleared for export.

Further, the Court, while interpreting section 75A(2) of the Customs Act, 1962, noted that
when the claimant is liable to pay the excess amount of drawback, he is liable to pay interest
as well. The section provides for payment of interest automatically along with excess drawback.
No notice for the payment of interest need be issued separately as the payment of interest
becomes automatic, once it is held that excess drawback has to be repaid.

CC v.Hewlett Packard India Sales (p) Ltd. 2007 (215) E.L.T. 484 (S.C.)

In this case the assessee was engaged in the manufacture of, and trading in, computers
including Laptops (otherwise called ‘Notebooks’) falling under Heading 84.71 of the CTA
Schedule. They imported Notebooks (Laptops) with Hard Disc Drivers (Hard Discs, for short)
preloaded with Operating Software like Windows XP, XP Home etc. These computers were also
accompanied by separate Compact Discs (CDs) containing the same software, which were
intended to be used in the event of Hard Disc failure.
The assessee classified the software separately and claimed exemption. The court held that
without operating system like windows, the laptop cannot work. Therefore, the laptop along with
software has to be classified as laptop and valuation to be made as one unit.

Saurashtra Chemicals v. CC 1986 (23) ELT 283 (Tri-LB)[approved by SC]

This case brings out the importance of section notes and chapter notes in the classification of
goods. The Tribunal observed that Section Notes and Chapter Notes in the Customs Tariff are a
 Classification

part of the statute and thus are relevant in the matter of classification of goods. These notes
sometimes restrict and sometimes expand the scope of headings. The scheme of the Customs
Tariff is to determine the coverage of headings in the light of section notes and chapter notes.
These notes, in this sense have an overriding effect on the headings.
 Valuation

Valuation of imported and exported goods [sec -14] :

Transaction value
Ad volerm duty
Sec14(1)
Valuation of imported and
exported goods
Tariff value
Specific duties
14(2)

TARIFF VALUE:

1. 14(2) provides that the Board may fix tariff values for any class of imported goods or
export goods, having regard to the trend of value of such or like goods, by notification in
the Official Gazette if it is satisfied that it is necessary to do so.
2. Where any such tariff values are fixed, the duty shall be chargeable with reference to
such tariff value. Provisions of sub-section (2) have an overriding effect on the provisions of
sub-section (1) providing for transaction value.

Bill of Lading:
A negotiable document given by the carriers of the cargo giving particulars of
a) Port of shipment
b) No. of packages covered by the consignment
c) Marks and numbers on the page
d) Name of the vessel in which the goods have been dispatched
e) Name of the consignee of the goods
f) whether the freight has been pre-paid or is to be collected at the destination.
It is a negotiable document which has to be surrendered to the carrier for getting delivery of
the goods.

Boat/Lighterage Charge: Sometimes the vessel is unable to get a berth alongside the quay in the
harbour. The goods are then transported from the ship to the shore by boats / lighters. The
charges paid therefore are called Boat / Lighterage charges.
 Valuation

Place of importation: Means the customs station, where the goods are brought for being cleared
for home consumption or for being removed for deposit in a warehouse

Related person: Persons shall be deemed to be “related” only if –

(i) they are officers or directors of one another’s businesses;
(ii) they are legally recognised partners in business;
(iii) they are employer and employee;
(iv) any person directly or indirectly owns, controls or holds five per cent 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
(viii) they are members of the same family.

Explanation I. The term “person” also includes legal persons

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 for the purpose of these rules.
 Valuation

Different types of Sale contracts on importation:

Exfactory price Free Alongside

•It is the price of the goods at the factory •It is the cost at which the export goods are
gate. It includes cost of production and delivered alongside the ship, ready for
manufacturer’s margin of profit without cost shipment. It includes ex-factory +local
of freight for outward delivery of goods freight + local taxes

Free on Board Cost Insurance and freight

•FOB means the stage at which the goods are •It is the cost at which the goods are
placed on board the conveyance carrying the delivered at the Indian port (F.O.B.
vessel. It can be said to include FAS + +Insurance + Freight). It covers cost of
loading charges + export duty/cess. goods. Sometimes there is referred as CFC
also.

Valuation of Imported goods:

Rule 1: Customs Valuation (Determination of Value of Imported Goods) Rules, 2007

Rule 2: Various terms defined like Relative, Transaction Value, Computed Value, Deductive
Value, Similar Goods, and Identical Goods etc.,

Rule 3: Transaction Value of import goods read with Rule 10:

This method is applicable only when importer satisfies the following conditions:

1. Seller should not have any control on the imported goods.

There are no restrictions as to the disposition or use of the goods by the buyer other than
restrictions which –
• are imposed or required by law or by the public authorities in India; or
• limit the geographical area in which the goods may be resold; or
• do not substantially affect the value of the goods;

2. the sale or price is not subject to some condition or consideration for which a value cannot
be determined in respect of the goods being valued.

Some examples for this:

(a) The seller establishes the price of the imported goods on condition that the buyer will
also buy other goods in specified quantities;
(b) the price of the imported goods is dependent upon the price or prices at which the
buyer of the imported goods sells other goods to the seller of the imported goods;

3. Sale proceeds should not be shared with exporter by the importer after sale. (unless an
appropriate adjustment can be made in accordance with the provisions of rule 10 of these
rules).

4. The buyer and seller should not be related.

 Valuation

• Where the buyer and seller are related, the transaction value shall be accepted
provided that the examination of the circumstances of the sale of the imported goods
indicates that the relationship did not influence the price.
• Where the Importer demonstrates that the declared value of the goods being valued
closely approximates to one of the following values ascertained at or about the same
time.
1. The Transaction value of Identical goods/Similar goods in sale to unrelated
buyer
2. The deductive value for identical or similar goods
3. The computed value for identical or similar goods

Statement Showing Computation of Assessable value for Imported Goods:

Rs
Value of Material (at ex-factory price) xxxx
Carriage/freight/insurance up to the port (sea/air) of shipment in the exporter’s xxxx
country
Charges for loading on to the ship at the shipping port in the exporter’s country xxxx
Free on Board (FOB) xxxx
FOB xxxx
Add: If not included in the above [Rule 10(1)] xxxx
Commission and brokerage (except buying commissions) xxxx
Packing cost (except cost of durable and returnable packing) xxxx
Cost of engineering, development and plan or sketches (Undertaken outside India) xxxx
Royalties and license fee xxxx
Value of subsequent re-sale if payable to foreign supplier xxxx
Value of material supplied by the buyer free of cost xxxx
FOB value as per the Customs xxxx
Cost of freight if not specified @ 20% of FOB value as per Customs [Rule 10(2)] xxxx
Ship demurrage charges on chartered vessels [Rule 10(2)] xxxx
Lighterage or barge charges [Rule 10(2)] xxxx
Insurance if not specified @1.125% of FOB value as per Customs [Rule 10(2)] xxxx
Cost, Insurance and Freight (CIF)/Assessable Value xxxx

Note:

(1) Assessable Value of Imported Goods=(Free On Board (FOB) + Insurance + Freight)

(2) Service charges paid to canalizing agent: It is includible in the assessable value of imported
goods [Hyderabad Industries Ltd. v. UOI 2000 (115) ELT 593 (SC)].
(3) Who is a canalizing agent: He is not the agent of the importer nor does he represent the
importer abroad. He use to buy goods from foreign seller and subsequently sells to Indian
importer.
(4) Inspection/Certification Charges: If contract specify for certification by the independent
 Valuation

agency for imported goods then charges incurred on such inspection are includible in
assessable value [Bombay Dyeing & Mfg. v. CC 1997 (90) ELT 276 (SC)].

Notes:

1. Except Buying commission all the other commissions has to be added (Either paid in India or O/S India)
2. Value of Material, Tools, dies, components supplied by buyer has to be added
3. Value of design, Artwork, sketches has to be added only when they are undertaken elsewhere in India
4. Royalies & Licence fee that are paid as a condition to sale needs to be added
5. Where any sale proceeds to be share with the supplier (Exporter)- needs to be added.
6. Ship Demurrage charge/ lighterage or bot charges are Part of cost of Transportation hence need to be
added
7. Other Demmurage charges need not to be included
 Valuation

The value of the imported goods shall include –

The cost of transport, loading, unloading and handling charges associated with the delivery of the
imported goods to the place of importation;
The cost of insurance to the place of importation
• Where the transport cost is not ascertainable, such cost shall be twenty per cent of the
free on board value of the goods:
• Where the insurance cost such cost shall be 1.125% of free on board value of the
goods:
• Where the goods imported by air, and the transportation cost is ascertainable, such cost
shall not exceed twenty per cent of free on board value of goods.

Freight

No Air Yes
Freight
Given

Actual Air @ 20% on

No Sea
FOB
Freight Freight
Given
@ 20% on FOB Whichever

is Less
Yes

Actual Sea Freight

Addable
 Valuation

For the purposes of sub-section (1) of section 14 of the Customs Act, 1962 and these rules,
the value of the imported goods shall be the value of such goods, and shall include –
(a) the cost of transport, loading, unloading and handling charges associated with the delivery
of the imported goods to the place of importation;
(b) the cost of insurance to the place of importation:
However, where the cost referred to in clause (a) is not ascertainable, such cost shall be 20%
of the free on board value of the goods:
Further that where the free on board value of the goods is not ascertainable but the sum of
free on board value of the goods and the cost referred to in clause (b) is ascertainable, the
cost referred to in clause (a) shall be 20% of such sum:
Where the cost referred to in clause (b) is not ascertainable, such cost shall be 1.125% of
free on board value of the goods:
Where the free on board value of the goods is not ascertainable but the sum of free on board
value of the goods and the cost referred to in clause (a) is ascertainable, the cost referred to
in clause (b) shall be 1.125% of such sum:

Where frieght is not

given - 20 % of FOB
(Customs) Is freight

Such Freight (20%) is

Inclusive of

Loading and Handling Transportation

Transportation cost
charges in the charged from
from Factory to Port
exporting country Exporting Country to
In Exporting Country
Port Port of Import

• The term “buying commissions” means fees paid by an importer to his agent for
the service of representing him abroad in the purchase of the goods being valued.

• Revenue contended that demurrage charges paid by the assesse are includible in
the assessable value for the levy of custom duty.
• Decision: Demurrage charges are incurred after the goods reached at Indian Ports,
thus it is a post-importation event; relying on the case of Commissioner of Customs v
Essar Steel Ltd. (2015) 51 GST 181/58 taxmann.com 191, the Apex Court has held that
Demurrage charges are not includible in assessable value of imported goods.
Commissioner of Cus., Vishakhapatnam v Aggarwal Industries Ltd. 2011 ELT 641 (SC):
 Valuation

Statement of Facts: The importer entered into contract for supply of crude sunflower
seed oil U.S. $ 435 C.l.F./Metric ton. Under the contract, the consignment was to be
shipped in the month of July, 2011. The period was extended by mutual agreement and
goods were shipped on 5th August, 2011 at old agreed prices.
In the meanwhile, the international prices had gone up due to volatibility in market, and
other imports during August, 2011 were at higher prices.
Department sought to increase the assessable value on the basis of the higher prices as
contemporaneous imports. Decide whether the contention of the department is correct.
You may refer to decided case law, if any, for your decision.
Decision: No. Department view is not correct. It is true that the commodity involved
had volatile fluctuations in its price in the international market, but having delayed the
shipment; the supplier did not increase the price of the commodity even after the
increase in its price in the international market. There was no allegation of the supplier
and importer being in collusion.
Thus, the appeal was allowed in the favour of the respondent- assessee.

Example -1
From the particulars given below, find out the assessable value of the imported goods
under the Customs Act,
1962.
US $
(i) Cost of the machine at the factory of the exporting country 10,000
(ii) Transport charges incurred by the exporter from his factory to the port for
shipment. 500
(iii) Handling charges paid for loading the machine in the ship 50
(iv) Buying commission paid by the importer 50
(v) Freight charges from exporting country to India 1,000
(vi) Exchange Rate to be considered 1$ = Rs 65
 Valuation

Determine the assessable value of imported goods in the following cases:

Case I:

Particulars US $
FOB value 1,000
Freight, loading, unloading and handling charges associated Not known
with the delivery of the imported goods to the place of
importation
Insurance charges 10
Solution:

Case II:
Particulars US $
FOB Value plus insurance charges 1,010
Freight, loading, unloading and handling charges Not known
associated with the delivery of the imported goods
to the place of importation
Solution:

Case III:

Particulars US $
FOB value 1,000
Sea freight, loading, unloading and handling charges associated 60
with the delivery of the imported goods to the place of
importation
Insurance charges Not known
Solution:
 Valuation

Identical Goods:

• Goods which are same in all respects, including physical

quantity.
• Produced in the same country in which the goods being
valued were produced
• Produced by the same person, where no such goods are
available produced by different person.

But shall not include

• Imported goods where engineering, development work,

art work or sketch undertaken in India were completed
directly or indirectly by the buyer free of charge.

Rule 4: Transaction value of Identical Goods

Value of Imported Goods = Transaction value of identical goods

sold for export to India shall be the value of imported goods
• Imported at or about the same time as the goods being valued
• Identical goods should be sold at the same commercial level and substantially the same
quantity and If sold at different commercial level/quantiy, then adjustment to be made
for the difference
• If at different commercial level, Adjustment to be made on account of difference in
distance and means of transport used for import of identical goods
This method is applicable only when following conditions are satisfied:
• Identical goods can be compared with the other goods of the same country from which
import takes place.
• These goods must be valued at a price which is produced by the same manufacturer.
• If those kind of goods are not produced by same manufacturer - price is not available,
then the price of other manufacturers of the same country is to be taken into account.
• If more than one value of identical goods is available, lowest of such value should be
taken.
Example:
A consignment of 800 metric tonnes of edible oil of Malaysian origin was imported by a charitable
organization in India for free distribution to below poverty line citizens in a backward area under
the scheme designed by the Food and Agricultural Organization. This being a special transaction,
a nominal price of US$ 10 per metric tonne was charged for the consignment to cover the
freight and insurance charges. The Customs House found out that at or about the time of import
of this gift consignment, there were following imports of edible oil of Malaysian origin:

S. No. Quantity imported in metric tonnes Unit price in US $ (CIF)

1. 20 260
2. 100 220
 Valuation

3. 500 200
4. 900 175
5. 400 180
6. 780 160
The rate of exchange on the relevant date was 1 US $ = Rs 63.00 and the rate of basic
customs duty was 15% ad valorem. There is no IGST. Calculate the amount of duty leviable on
import.

Rule 5: Transaction value of Similar Goods

“Similar goods” includes— Which although not alike in all

respects, have like characteristics and like component
materials which enable them to perform the same functions
and to be commercially interchangeable with the goods being
valued having regard to the quality, reputation and the
existence of trade mark;

If Trans Value of Identical goods unacceptable, Then use

Trans value of Similar goods.
Valuation:
• Transaction value of similar goods sold for Export to
India at or about the same time as the goods being
valued
• If at different commercial level, Adjustment to be made on account of difference in
distance and means of transport used for import of identical goods
 Valuation

If more than one value of identical goods is available, lowest of such value should be
•
taken.
Difference between identical and Similar Goods

Identical goods Similar goods

Goods must be same in all respects, except Goods have like characteristics and
for minor differences in appearance components and
perform same functions
Example: Hero Honda two Wheeler Products Example: Hero Honda Splendor and Bajaj
namely scooter.
Splendor and Passion

Rule 6: Determination of value:

If the value of imported goods cannot be determined under the provisions of rules 3, 4 and 5,
the value shall be determined under the provisions of rule 7 or, when the value cannot be
determined under that rule, under rule 8.

Rule 7: Deductive Value:

• The value of imported goods shall be based on the unit price at which the imported goods
or identical or similar imported goods are sold in INDIA
• At the same time
• In the greatest aggregate quantity
• to persons who are not related to the sellers in India

From sale price following shall be deducted:

• Profit Included, Selling expenses, selling commission.

• Cost of transportation and Insurance in India
• Customs and other taxes payable because of importation.

Greatest aggregate quantity” means the price at which the greatest number of units is sold.

Note:
1. Value of Identical/similar goods not available on the same day – value closer to Import date
not more than 90 days.
2. Where Identical/similar goods are sold in India only after further processing – The reduce
Further processing cost

Example:
X Ltd., imported 500 units of minerals from High Seas for sale in India. Selling price exclusive
of duties and taxes. Freight from port to depot in India is Rs 10,150 and Insurance Rs 1,250.

Sale quantity Unit price Rs

400 units 100
300 units 90
 Valuation

150 units 100

500 units 95
250 units 105
350 units 90
50 units 100

Basic Customs Duty 12% and education cess as applicable. Calculate total customs duty as per
Rule 7 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Assume
there is no IGST applicable.

Rule – 8: Computed value method

The value of imported goods shall be based on a computed value, which shall consist of the sum
of:—
• The cost or value of materials and fabrication or other processing employed in
producing the imported goods;

• an amount for profit and general expenses equal to that usually reflected in sales of
goods of the same class or kind as the goods being valued which are made by
producers in the country of exportation for export to India;

• The cost or value of all other expenses under sub-rule (2) of rule 10.
 Valuation

This method normally Cost of Materials and General expenses for

is Rs
possible when the importer in producing the xx
India and foreign exporter imported goods
are closely associated and Add: profit of the exporter Rs
xx
the foreign exporter is willing
Add: all expenditure as per Rule 10 Rs
to give necessary costing. xx
Assessable Value Rs
xx

Rule 9: Residual method

Residual method is also called as Best Judgment Method. This method is applicable when all
aforesaid methods are not applicable. The value determined under this method cannot exceed
normal price at which such or like goods are ordinarily sold or offered for sale for delivery at
the time and place of importation in course of International Trade, when seller or the buyer
are non-relatives and the price is sole consideration for such sale.
While determining Assessable Value, we should not consider the following
• The selling price in India of the goods produced in India;

• A system which provides for the acceptance for customs purposes of the highest of the
two alternative values;

• The price of the goods on the domestic market of the country of exportation;

• The cost of production other than computed values which have been determined for
identical or similar goods in accordance with the provisions of rule 8;

• The price of the goods for the export to a country other than India;

• Minimum customs values; or

• Arbitrary or fictitious values.

Rule 11: Declaration by Importer:

• Importer or his agent shall furnish
✓ Full and accurate details of the VALUE of goods being imported.
✓ Invoice, statement or document required by proper officer to determine the value of
goods.
• This cannot prevent proper officer from ascertaining the truth and accuracy of any
information or statement.

Rule 12: Rejection of declared value:

• Where proper officer has reason to doubt the truth or accuracy he may ask for further
information and after receiving such further information or in the absence of a response if
the proper officer still has reasonable doubt, it shall be deemed that transaction value of
such imported goods cannot be determined under the provisions of sub-rule (1) of rule 3
 Valuation

• At the request of an importer, the proper officer, shall intimate the importer in writing the
grounds for doubting the truth or accuracy of the value declared in relation to goods
imported by such importer and provide a reasonable opportunity of being heard, before
taking a final decision
• This rule by itself does not provide a method for determination of value, it provides a
mechanism and procedure for rejection of declared value, where the value is rejected then
the value shall be determined by proceeding sequentially in accordance with rules 4 to 9.
• Declared value can be accepted on enquiry if proper officer is satisfied.
• Powers to raise doubts on the truth or accuracy of the declared value based on certain
reasons which may include:
✓ the significantly higher value at which identical or similar goods imported at or about
the same time in comparable quantities in a comparable commercial transaction were
assessed;
✓ the sale involves an abnormal discount or abnormal reduction from the ordinary
competitive price;
✓ the sale involves special discounts limited to exclusive agents;
✓ the misdeclaration of goods in parameters such as description, quality, quantity,
country of origin, year of manufacture or production;
✓ the non declaration of parameters such as brand, grade, specifications that have
relevance to value;
✓ the fraudulent or manipulated documents
 Valuation

Valuation of exports:

Rule No Valuation Rules for export.

2 Definitions
3 Determination of the method of valuation
4 Determination of export value by comparison
5 Computed value method
6 Residual Method
7 Declaration by the Exporter
8 Rejection of declared value

Rule 3: Determination of the method of valuation.

1. Subject to rule 8, value of exports goods is transaction value.

2. The transaction value shall be accepted even where the buyer and seller are related,
provided that the relationship has not influenced the price
3. If the value cannot be determined under the provisions of sub-rule (1) and sub-rule (2),
the value shall be determined by proceeding sequentially through rules 4 to 6.

Rule 4: Determination of export value by comparison:

1. The value of the export goods shall be based on the transaction value of goods of like kind
and quality exported at or about the same time to other buyers in the same destination
country of importation or in its absence another destination country of importation adjusted
in accordance with the provisions of sub-rule (2)
2. the proper officer shall make such adjustments as appear to him reasonable, taking into
consideration the relevant factors, including-
i. difference in the dates of exportation,
ii. difference in commercial levels and quantity levels,
iii. difference in composition, quality and design between the goods to be assessed
and the goods with which they are being compared,
iv. difference in domestic freight and insurance charges depending on the place of
exportation.

Rule – 5: Computed value method

The value of imported goods shall be based on a computed value, which shall consist of the sum
of:—
• The cost of production /manufacture /processing of Export goods;

• an amount for profit and charges for design or brand if any.

 Valuation

Rule 6: Residual method

• Residual method is also called as Best Judgment Method. This method is applicable when all
aforesaid methods are not applicable.
• the value shall be determined using reasonable means

Rule 7: Declaration by the exporter:

The exporter shall furnish a declaration relating to the value of export goods in the manner
specified in this behalf

Rule 8: Rejection oif declared value:

• Where proper officer has reason to doubt the truth or accuracy he may ask for further
information and after receiving such further information or in the absence of a response if
the proper officer still has reasonable doubt, it shall be deemed that transaction value of
such Exported goods cannot be determined under the provisions of sub-rule (1) of rule 3
• At the request of an Exporter, the proper officer, shall intimate the Exporter in writing the
grounds for doubting the truth or accuracy of the value declared in relation to goods
Exported by such Exporter and provide a reasonable opportunity of being heard, before
taking a final decision
• This rule by itself does not provide a method for determination of value, it provides a
mechanism and procedure for rejection of declared value, where the value is rejected then
the value shall be determined by proceeding sequentially in accordance with rules 4 to 6.
• Declared value can be accepted on enquiry if proper officer is satisfied.
 Valuation

Gira Enterprises v. CCus. 2014 (307) ELT 209 (SC)

Facts of the Case:

The appellant imported some goods from China. On the basis of certain information obtained
through a computer printout from the Customs House, Department alleged that during the period
in question, large number of such goods were imported at a much higher price than the price
declared by the appellant. Therefore, Department valued such goods on the basis of
transaction value of identical goods as per erstwhile rule 5 [now rule 4 of the Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007] and demanded the
differential duty along with penalty and interest from the appellant. However, Department did
not provide these printouts to the appellant.

The appellant contended that Department’s demand was without any basis in law, without any
legally admissible evidence and opposed to the principles of natural justice as the computer
printout which formed the basis of such demand had not been supplied to them. Resultantly, the
appellant had no means of knowing as to whether any imports of comparable nature were made
at the relevant point of time.
Decision:

The Supreme Court held that mere existence of alleged computer printout was not proof of
existence of comparable imports. Even if assumed that such printout did exist and content thereof
were true, such printout must have been supplied to the appellant and it should have been given
reasonable opportunity to establish that the import transactions were not comparable. Thus, in
the given case, the value of imported goods could not be enhanced on the basis of value of identical
goods as Department was not able to provide evidence of import of identical goods at higher
prices.
 Baggage

Introduction:

• Baggage means luggage of the passenger or member of crew if they travel by Air or
Sea from one country to another country.
• Import duty can be levied on baggage
• Provisions for levy and non-levy of duty on baggage are covered in Chapter XI of
Customs Act, and Baggage Rules, 1988

Sec 2(3) Baggage: - Includes

• Unaccompanied baggage
• But does not include motor vehicles.

If a person does not have any dutiable goods,

Green channel he can go through green channel with out any
check
Channels

If carrying dutiable goods he should pass

Red channel through red channel and should submit the
declaration and his baggage can be inspected

Rate of duty on baggage: Rate of Duty on Baggage is @ 35% plus social welfare surcharge
10% of Basic Customs Duty, effectively 38.5%.

Dutiable goods imported are by passenger or member o crew in his baggage

However partial exemption shall not be applicable to the following i.e 35%

Hence tax rate = 100%

- Fire arms
- Catridges of fire arms exceeding 50
 Baggage

- Cigarettes exceeding 100 sticks, cigars exceeding 25 or tabacco exceeding 125 gms
- Goods imported through a courier service.

General free allowance and duty free allowance:

Passengers GFA Gold AlcoholCigarettes Laptop

Indian resident or a foreigner Personal Gentleman-20 2 100 One
residing in India or a tourist of effects gms. with a ltrs numbers
Indian origin (but not infant) Rs 50,000 value cap of or Cigars
arriving from countries other than other Rs 50,000 upto 25 or
Nepal, Bhutan or Myanmar than Lady - 40 gms Tobacco
(Rule 3) those in with a value 125 grams
Annex 1 cap of Rs
1,00,000
Passengars of Indian origin and Personal Gentleman-20 2 ltrs 100 One
foreigners residing in India, effects gms. with a numbers
excluding infants AND Tourists Rs 15,000 value cap of or Cigars
of foreign origin, excluding infants other Rs50,000 upto 25 or
from Nepal, Bhutan and Myanmar. than Lady - 40 gms Tobacco
(Rule 4) those in with a value 125 grams
Annex 1 cap of
Rs1,00,000
A tourist of foreign origin (but Rs 15,000 NA 2 ltrs 100 One
not infant), arriving from any numbers
country other than Nepal, or Cigars
Bhutan or Myanmar upto 25 or
(Rule 3) Tobacco
125 grams

• The free allowance of one passenger cannot be merged with others.

• Jewellery(Gold) shall be allowed clearance free of duty in his bona fide baggage
for an Indian passenger residing abroad for more than one year, on return to India.

• Firearms, cartridges of firearms exceeding 50, cigarettes exceeding 100 sticks,

cigars exceeding 25 numbers and tobacco exceeding 125 grams are not chargeable
to rate applicable to baggage .These items are charged @ 100% applicable to
baggage under Heading 9803 of the Customs Tariff.
• For infant, only used personal effects shall be allowed duty free. (Infant = Child
age < 2)

Transfer of residence:
A person, who is engaged in a profession abroad, or is transferring his residence to
India, shall, on return, be allowed clearance of articles free of duty in addition to what
was allowed above as bonafide baggage.
 Baggage

Durati Articles allowed free of Conditions Relaxation

on of duty
stay Other than those
abroad covered under Annex 1
& 2 but including
articles mentioned in
Annex 3
3-6 Personal and household Indian passenger —
month articles, upto an
s aggregate value of sixty
thousand rupees.
6-12 Personal and household Indian passenger —
month articles, upto an
s aggregate value of One
lakh rupees.
1-2 Personal and household The Indian passenger —
years articles, upto an should not have availed
aggregate value of two this concession in the
lakhs rupees. preceding three years.
Above Personal and household Minimum stay of two Shortfall upto 2 months
2 articles, upto an years abroad, can be condensed by
years aggregate value of five Immediately preceding DC or AC
lakhsrupees. the date of his arrival
on transfer of
residence;
Total stay in India on Principal commissioner
short visit during the or commissioner can
two preceding years condone short visits
should not exceed six in excess of 6
months; and months on recording
reasons in writing
Passenger has not No relaxation
availed this concession
in the preceding three
years.
 Baggage

Annexure -1 Annexure – 2 Annexure - 3

1. Fire arms. 1. Colour Television. 1. Video Cassette Recorder

2. Cartridgesof fire arms 2. Video Home Theatre or Video Cassette Player
exceeding 50. System. or Video Television
3. Cigarettes exceeding 100 3. Dish Washer. Receiver or Video
sticks or cigars Cassette Disk Player.
4. Domestic Refrigerators
exceeding 25 or tobacco
of capacity above 300 2. Digital Video Disc player.
exceeding 125 gms.
litres or its equivalent.
4. Alcoholic
liquor or wines in 3. Music System.
5. Deep Freezer.
excess of two litres. 4. Air-Conditioner.
6. Video camera
5. Goldor silver in any form 5. Microwave Oven.
or the
other than ornaments.
combination of 6. Word Processing
6. FlatPanel (Liquid Crystal any such Machine.
Display/Light-Emitting Video camera 7. Fax Machine.
Diode/ Plasma) television. with one or
8. Portable Photocopying
more of the
Machine.
following
goods, 9. Washing Machine.
namely:- 10. Electrical or Liquefied
(a) television receiver; Petroleum Gas Cooking
sound recording or
(b) Range
reproducing apparatus; 11. Personal Computer
(c) video reproducing (Desktop Computer)
apparatus. 12. Laptop Computer (Note
7. Cinematographic films of book Computer)
35mm and above.
13. Domestic Refrigerators of
8. 8. Gold or Silver, in any
capacity up to 300 litres
form, other than
or its equivalent
ornaments.

Unaccompanied baggage:

• Baggage not carried by passenger at the time of his arrival, but sent before or
after arrival of passenger.
• Unaccompanied baggage may land in India Upto 2 months before the arrival of
the passenger or within 1 month from the arrival
• Deputy Commissioner of Customs or Assistant Commissioner of Customs may allow
even after two months, not exceeding 1 year in situations like
➢ Illness
➢ Natural calamities
➢ Disruption of transport etc.
 Baggage

Baggage rules to crew members:

Crew member of foreign going vessel Crew member of Air craft

Allowed to bring Items like chocolates, Allowed to bring Items like chocolates,
cheese, cosmetics and other petty gift items cheese, cosmetics and other petty gift items
for their personal or family use Which shall for their personal or family use Which shall
not exceed the value of Rs1,500 not exceed the value of Rs 1,500

Postal Articles:
• As per sec 82 & 84 goods can be cleared by post.
• Any label or declaration accompanying the goods showing the description, quantity and value
thereof, shall be treated as “an entry for import”
• The procedure for clearance:
❖ Post parcels are allowed to pass from port/airport to Foreign Parcel Department of
Government Post Offices without payment of customs duty.
❖ The Postmaster hands over to Principal Appraiser of Customs the memo showing
- Total number of parcels from each country of origin,
- Parcel bills or senders’ declaration,
- Customs declaration and dispatch notes, and
- Other information that may be required.
❖ The mail bags are opened and scrutinized by Postmaster under supervision of Principal
Postal Appraiser of Customs.
❖ Packets suspected of containing dutiable goods are separated and presented to
Customs Appraiser with letter mail bill and assessment memos.
❖ The Customs Appraiser marks the parcels which are required to be detained if:
- necessary particulars are not available, or
- mis-declaration or undervaluation is suspected, or
- goods are prohibited for import.
❖ If everything is in order after verification, goods will be handed over to Post
Master, who will hand over the same to the addressee on receipt of customs
duty.

Samples:
• Samples can be imported by the traders, industry, individuals, research institutes
and so on. These samples can also be brought by the persons as part of their personal
baggage or through port or in courier.
• The current limit for duty free import of samples is of Rs 3 lakh per annum.
 Import & Export procedures

Files IGM before the arrival of

Vessel/Aircraft electronically.

After Verification of IGM, Proper officer

grants Entry Inwards

Unloading of goods at the port under

Ship Arrives at the Port the supervision of Proper Officer on
working days at working hour

Files Bill of entry electronically and

pays the duty on self-assessment

On satisfaction Proper officer Issues

clearance for goods

Goods Warehoused Goods removed for Home

consumption
 Import & Export procedures

Foreign going vessel or aircraft: [Section 2(21)]

Means any vessel or aircraft for the time being engaged in the carriage of goods or
passengers between any port or airport in India and any port or airport outside India,
whether touching any intermediate port or airport in India or not
includes-
- any naval vessel of any foreign Government taking part in any naval exercise;
- any vessel engaged in fishing or any other operations outside the territorial
waters of India;
- any vessel or aircraft proceeding to a place outside India for any purpose
whatsoever.

Sec:29 Arrival of vessel and Aircrafts in India:

Person-in-charge of a vessel or an aircraft entering India from any place outside India shall
not land at other than a customs port or a customs airport unless permitted by board.
Exception under the following circumstances:
Accident, stress of weather or other unavoidable cause
Obligation on person-in-charge;

• Report the arrival to the nearest customs officer or officer in charge of police
station and produce the log book if demanded
• He should not allow any unloading of goods without permission and should not allow
any passengers or crews to leave(Unless necessary for reason of health, safety)

Sec :30 Delivery of Arrival manifest or import report.

Arrival manifest or import manifest or import report is a detailed information to customs about
goods in the vessels/aircrafts which have been brought in for unloading at that particular
port/international airport as also that which would be carried further for other ports/airports
(transhipping goods)
• Declarations of such cargo has to be made in ‘Import General Manifest’
• Import General Manifest’ has to be presented electronically prior to the arrival of the
vessel or the aircraft, as the case may be, and in the case of a vehicle, an import
report within twelve hours after its arrival in the customs station by person-in-charge
or any other person notified.

Particulars Import Document Time limit for Mode of

presentation of IGM Presentation

Where the imported goods Arrival manifest Any time prior to Electronic filing
are brought in a vessel or or import the arrival of the
air craft manifest vessel

Where the imported goods Import Report Within 12 hours Manual filing
are brought in a vehicle after its arrival in
the customs station
 Import & Export procedures

• If it is not possible to deliver IGM electronically then Principal Commissioner or

commissioner of customs may allow to deliver in any other manner.
• IF import manifest not filed with in specified period and if the proper officer is
satisfied that there was no sufficient cause for such delay the person-in- charge would
be liable to a penalty up to RS 50,000.
• The people delivering the arrival manifest or import manifest or import report shall
make a declaration as to the truth of its contents as a footnote thereof.
• Belatedly filed IGM may also be accepted
• Amendment of IGM filed can be made only when proper officer is satisfied that import
manifest is in any way incorrect or incomplete and there is no fraudulent intention.

Sec 30A Passenger and crew arrival manifest and passenger name record Information:
• Passenger and crew arrival manifest and passenger name record Information has to
delivered by a person-in-charge of conveyance that enters in to India from outside
India, before arrival in the case of an aircraft or a vessel and upon arrival in the case
of a vehicle in such manner and within such time, as may be prescribed.
• If it is not delivered to the proper officer within the prescribed time and satisfied
that there was no sufficient cause for such delay, then penalty, not exceeding Rs
50,000 can be levied.

Sec 31 Imported goods not to be unloaded unless entry Inward grnated:

• This rule applicable only for vessel
• Application for entry inward has to be submitted along with the import manifest in the
prescribed form and will be allowed by the proper officer of customs upon verification
• The date of entry inward is entered in the customs record maintained for the purpose.
• Entry inwards will not be granted without filing IGM, unless proper officer is satisfied
that a valid reason is given for not delivering.
• Customs Department is ready to supervise the unloading of the cargo, and is prepared to
assess the goods to duty. It is not given if there is no berth for the ship to dock [Bharat
Surfactants Pvt Ltd v Union of India, 1989 (43) ELT 189 (SC)]
• section will not apply to the unloading of baggage accompanying a passenger or a member
of the crew, mail bags, animals, perishable goods and hazardous goods.

Sec 32:
Imported goods cannot be unloaded without proper officer permission, unless they are
mentioned in the Import General Manifest.
Sec 33:
Loading and unloading of goods are to be undertaken only at places approved (proper places in
any customs port, customs airport, or coastal port)
Sec 34:
 Import & Export procedures

Goods not to be loaded or unloaded except under the supervision of customs officer:
However board may permit for any goods or class of goods to be unloaded or loaded without
the supervision of the proper officer
Sec 35:
No import or export goods shall be waterborne, unless with the permission of board or proper
officer
Sec 36:
No imported goods shall be unloaded on public holidays,Sundays or after working hours without
an application and payment of prescribed fee
Sec 42:
Person in charge shall not permit the conveyance to depart until a return order by proper
officer
Sec 45:
Imported goods will lies in the custody of custodian till clearance.
Sec 46: Filing of Import Bill of entry:

• Bill of Entry is not required for goods intended for transit or transhipment.
• It is the duty of the importer of any goods to make an application electronically on the
customs automated system to the proper officer for clearance of the goods

• Bill of Entry is a document of assessment and when assessed becomes an assessment

order.
• The Principal Commissioner/Commissioner of Customs may, in cases where it is not
feasible to make entry by presenting electronically allow an entry to be presented in the
prescribed manner and form (Manually)
• There are Three types of bill of entries

Form 1 Form II Form III

•For Home •For Warehousing •For clearance from

consumption (Yellow) warehousing
(White) (Green)

• While bill of entry is filed electronically, it is in four copies:

 Import & Export procedures

•meant for the customs authorities for assessment and

Orginal
collection of duty

•For custodian of the cargo to release cargo to the importer

Duplicate

•as a copy for record for the importer

Triplicate

•a copy to be presented to the bank for amking remmitance

Quadruplicate

• The importer is required to declare in the Bill of Entry

✓ particulars of packages
✓ descriptions of the goods (Enables to make classification as per customs tariff
act)

• The importer who presents a bill of entry shall ensure the following, namely:—
➢ the accuracy and completeness of the information given therein;
➢ the authenticity and validity of any document supporting it; and
➢ Compliance with the restriction or prohibition, if any, relating to the goods under
this Act or under any other law for the time being in force.

• The Bill of Entry shall be supported with invoice and such other documents as may be
prescribed.
• The importer shall presented the bill of entry before the end of the next day following
the day (excluding holidays) on which the aircraft or vessel or vehicle carrying the goods
arrives at a customs station at which such goods are to be cleared for home consumption
or for warehousing.
• Bill of entry can even be presented at any time not exceeding 30 days prior to) the
expected arrival of the aircraft or vessel or vehicle, by which the goods have been
shipped for importation into India.
• Where the bill of entry is not presented within the time so specified and the proper
officer is satisfied that there was no sufficient cause for such delay, the importer shall
pay prescribed penalty.
 Import & Export procedures

Imported Goods

White Colour bill of entry submitted for Yellow colour bill of entry submitted for
home consumption warehousing

Green colour bill of entry submitted

Duty paid on the same day from the within 90 days from the date of
date of returning Bill of Entry
warehousing

No Yes No Yes

Interest Interest not Interest Interest not

required to required to required to required to
pay pay pay pay
 Import & Export procedures

Procedure for Imports:

•When the vessel/aircraft carrying imported goods arrives in India the person-in-
Landing charge shall allow calling/landing of the vessel/aircraft only at the customs
port/customs airport
calling

•Person-In-Charge shall deliver IGM electronically before the arrival of vessel or

Import aircraft, with in 12 hrs of arrival in case of vehicle.
manifest

•On recepit of IGM proper officer shall grant Entry Inwards The master of the
vessel shall not permit the goods to be unloaded until the order of Entry Inwards
Entry
has been granted
Inwards

•Goods shall be unloaded only if mentioned in IGM, at approved place under the
Unloading supervision of customs officer during the working hours on a working day.
of goods

•Once the imported goods have entered the customs area, they shall remain in the
Custody
custody of the Custodian. for pilferage in port custodian responsible.
of the
custodian

•importer of any goodsshall file a Bill of Entry electronically for clearance of goods
from the custom station. Which is of 3 types.
Bill of
Entry

•Bill of etry can be filed within 30 days prior to arrival of ship, an d with in
Time of 1+1(2) days from arrival of ship
filing of
BOE:
•importer will self-assess the duty considering the applicable rate of exchange and
Assess rate of import duty, on verification proper officer shall return Bill of entry after
determining duty amount.
ment

•For warehousing payment is differed till clearance, for home consumption duty has
to be paid in prescribed time to avoid intrezt. howevered deffered payment of
Payment
duty benefit can be availed fby certain importers.
of duty

•With in 30 days tfrom unloading goods has to cleared either for home
Clearanc consumption, warehousing are for transhipment.
e
 Import & Export procedures

Customs Audit Sec 99A:

• Section 99A is introduced authorizing the proper officer to audit the assessment that
has already been conducted at the time of customs clearance.
• Auditee: “a person who is subject to an audit under section 99A of the Act and includes
an importer or exporter or custodian approved under section 45 or licensee of a
warehouse and any other person concerned directly or indirectly in clearing, forwarding,
stocking, carrying, selling or purchasing of imported goods or export goods or dutiable
goods

Salient feature of this audit procedure are as follows:

- Auditee is to preserve records for conduct of this audit for a period of five years
- Risk based assessment will identify persons to be audited
- Audit will be conducted at the premises of the auditee by the authorized officers who
will intimate fifteen days in advance of their schedule visit
- Based on the findings, auditee may accept the liabilities and voluntarily discharge the
duty, interest and penalty, as applicable
- Assistance of experts can be availed for conducting this audit such as CA, CWA or IT
professionals with permission of Principal Commissioner/ Commissioner of Customs
- Contravention of these Regulations attracts penalty of Rs 50,000
- Types of Audit:

TBA Audit of transactions PBA Audit of premises

•Here transactions are •In PBA, customs would

audited. TBA may review the import and
subsequently be converted export over a given period
into a Premises based and check all relevant
Audit (PBA) commercial records,
including financial
statements and contracts
to verify the particulars
given in a goods declaration

- The executive Customs Commissionerates shall also assist Audit Commissionerates in the
conduct of Transaction Based Audit and Premises Based Audit.
- Apart from overall supervision Chief Commissioner shall examine on a selective basis,
5% of the Audit reports, selected randomly based on the quarterly reports submitted
by Audit Commissionerates to ensure that audit has been conducted as per prescribed
procedures.
 Import & Export procedures

Procedure for Exports:

Filing of shipping bill/ bill of export (sec 50)

The exporter is required to present electronicallyto a proper officer of customs a Shipping

bill or bill of export.

Order permitting clearance and loading (sec 51)

Where the proper officer satisfied that the goods are not prohibited goods and the exporter
paid export duty he passes order permitting clearance and loading called LET EXPORT ORDER

Grant of Entry Outwards

A vessel intending to start loading of export goods must be first granted an ‘Entry Outwards’
by the proper officer

Loading of goods on conveyance

Export goods shall be loaded on the conveyance for exportation with the permission of
person- in-charge, He shall not permit unless a shipping bill/bill of export/bill of
transhipment, as the case may be, duly passed by the proper officer, has been handed over

Delivery of export manifest/report

The person-in-charge of a conveyancs shall, deliver to the proper officer before departure
an export manifest electronically

No conveyance to leave without written order

until a written order has been given by the proper officer the conveyance cannot be
permitted to depart
 Import & Export procedures

Sec 39: Export goods not to be loaded on vessel until entry outwards granted:

• Until an order has been given by the proper officer granting entry-outwards to such vessel
loading of any export goods, other than baggage and mail bags can be made.

Sec 40: Goods not to be loaded unless shipping bill or Bill of export duly passed by proper
officer:
• Export Goods other than baggage and mail bags can be loaded on to the board only when:

Shipping Bill Bill of export Bill of

transhipment

•In case of •At land customs •For transhipment

seaport and station of goods
airport

Sec 41: Delivery of Departure/Export Manifest/Export report:

• Can be filed by Person-in-charge or by any other person notifed by central government

before departure of conveyance from a customs station.
• In case of vessel and air craft a departure manifest or an export manifest has to be
presented electronically.
• In the case of a vehicle(allowed manually), an export report, in such form and manner
as may be prescribed.
• It consists of a general declaration of
- Particulars of the vessel, its crew and passengers
- Date and port of departure
- List of ship’s stores
- List of crew’s personal effects and
- A cargo declaration (it’s a complete list of goods shipped, transhipped and goods
lying in the vessel which are not unloaded & dutiable goods)
• If there is a delay in filing and proper officer satisfied that there is no sufficient
cause for such delay, such person-in-charge or other person shall be liable to pay
penalty not exceeding fifty thousand rupees.
• The person delivering the departure manifest or export manifest or export report shall
make and subscribe a declaration as to the truth of its contents as a footnote
thereof.
• Proper officer may permit to amend Export manifest or export report, if it is
incorrect and there was no fraudulent intention.

Sec 41A Passenger and crew departure manifest and passenger name record Information:
• Passenger and crew departure manifest and passenger name record Information has to
 Import & Export procedures

delivered by a person-in-charge of conveyance that departs from India to a place

outside India.
• If it is not delivered to the proper officer within the prescibed time and satisfied that
there was no sufficient cause for such delay, then penalty, not exceeding Rs 50,000
can be levied.
Sec 42: No conveyance to leave without written order:

Transit of goods vs Transhipment of Goods:

A vessel Bhishma, sailing from U.S.A to Australia via,, India carries various types of products
namely ‘A, B, C & D’. ‘A &B’ are destined to Mumbai Port. On account of submission of bill of
transshipment product ‘A’ transshipped to Chennai port as ultimate destination in India and
product ‘B’ transshipped to Srilanka. Find the imported goods, Transshipment goods and transit
goods?

Product ‘A’ is imported goods because its ultimate destination is in India. Products ‘A & B’ are
called as Transshipment goods, since these goods are transshipped to another vessel, Product
‘A’ transshipped to Chennai attracts import duty whereas product ‘B’ is destined to Srilanka
without payment of duty.

Products C&D will not be unloaded in India, ship from Mumbai sails to Australia, and the goods
C&D will be unloaded there, they are called as transit goods.

Flow diagram to be drawn in class room:

 Import & Export procedures

Transit of goods in the same vessel or Air (Sec 53) & Transhipment of goods without payment
of duty (Sec 54):
• The provisions of Sec 53/54/55 shall not apply to baggage, stores, goods imported by
post.

Transit of goods in the same vessel or Air Transhipment of goods without payment of
(Sec 53) duty (Sec 54)
•Where any goods imported into a customs
station are intended for transhipment, a
•Where any goods imported in a bill of transhipment shall be presented to
conveyance and mentioned in the import the proper officer in the prescribed form
manifest as for transit in the same •If the goods are transhipped under an
conveyance to any place outside India the international treaty then a declaration of
proper officer may allow the goods and transhipment has to be presented.
the conveyance to transit without •In the IGM if the goods are transhipped
payment of duty to any major port in India or any other
customs station and the proper officer is
satisfied, then the goods may be allowed
to tranship without payment of duty.

Sec 55: Where any goods are allowed to be transited or transhipped (transhipment within
India) they shall, on their arrival at such station, be liable to duty and shall be entered in like
manner as goods are entered on the first importation thereof.

Difference between transit and transhipment of goods under the provisions of the Customs
Act.

Transit Transhipment

• Section 53 of the Customs Act, 1962 • Section 54 of the Customs Act, 1962
provides for transit of goods. provides for transshipment of goods.

• In case of transit of goods, goods are • In case of transshipment of goods, the

allowed to remain on the same conveyance changes i.e., the goods are
conveyance. unloaded from one conveyance and loaded in
another conveyance.

• In case of transit of goods, there is • In transshipment of goods, continuity in the

continuity of records. records is not maintained as the goods are
transferred to another conveyance.
w
 Warehousing

Warehousing:
• It is a statutory facility for depositing imported goods in a warehouse without payment
of duty.
• The advantage of the scheme is that the imported goods can be cleared on payment of
duty in instalments, as and when required during the warehoused period, up to one
year.
• The relevant date for determination of rate of duty is the date of presentation of ex-
bond bill of entry (i.e. Sub-bill of Entry) for home consumption.
• Exchange rate to be considered is the rate of CBIC on the date of submission of bill
of entry by the importer.

Features of Warehousing:

1. Importer can defer payment of import duties by storing the goods in a safe place
2. Importer allowed doing manufacturing in bonded warehouse and then re-exporting from
it.
3. The importer can be allowed to keep the goods up to One year without payment of duty
from the date he deposited the goods into warehouse.
4. The importer minimizes the charges by keeping in a warehouse, otherwise the demurrage
charges at port is heavy.
5. Assistant Commissioner of Customs or Deputy Commissioner of Customs are
competent to appoint a warehouse as public bonded warehouse.

6. The Assistant Commissioner of Customs or Deputy Commissioner of Customs may license

private warehouse. The license to private warehouse can be cancelled by giving ONE
month notice.

7. Only dutiable goods can be deposited in the warehouse.

8. Green Bill of Entry has to be submitted by the importer to clear goods from warehouse
for home consumption.
9. Rate of duty is applicable as on the date of presentation of Bill of Entry (i.e. sub-bill
of entry or ex-bond bill of entry) for home consumption.

10. Reassessment is not allowed after the imported goods originally assessed and
warehoused.
11. The exchange rate is the rate at which the Bill of Entry (i.e. ‘into bond’) is presented
for warehousing.
12. If the goods which are not removed from warehouse within the permissible period, then
 Warehousing

subsequent removal called as improper removal. The rate of BCD which is applicable as
on the last date on which the goods should have been removed but not removed is
applicable, [Kesoram Rayon v Commissioner of Customs (1996)].

Types of Warehousing:

Types of warehousing

Public
Private Warehousing Special Warehousing
Warehousing(PCC/CC)

Licensed u/s 57 Licensed u/s 58 Licensed u/s 58A

wherein dutiable goods Dutiable goods may be

may be deposited. deposited and such
Wherein dutiable goods
warehouse shall be caused
imported by or on behalf
to be locked by the
of the licensee may be
proper officer and no
deposited.wherein dutiable
person shall enter the
goods imported by or on
warehouse or remove any
behalf of the licensee may
goods therefrom without
be deposited.
the permission of the
proper officer.

The following class of goods which shall be deposited in a special warehouse:

i. gold, silver, other precious metals and semi-precious metals and articles thereof;
ii. goods warehoused for the purpose of:
● supply to DFS (Duty Free Shops) in a customs area;

● supply as stores to vessels/aircrafts under Chapter XI of the Customs Act,

1962;

● supply to foreign privileged persons in terms of the Foreign Privileged Persons

(Regulation of Customs Privileges) Rules, 1957.
 Warehousing

Note:
Privileged person means a person entitled to import/purchase locally from bond goods free of
duty for his personal use/for the use of any member of his family/for official use in his Mission,
Consular Post or Office or in Deputy High Commission/Assistant High Commission.
A Duty-Free Shop (DFS) in the airport need not be a licensed as warehouse under section 58A.
a. DFS located in customs area should not be treated as a warehouse.
b. In fact, it is a point of sale for the goods which are to be ex-bonded and
removed from a warehouse for being brought to a DFS in the customs area for
sale to eligible persons, namely international passengers arriving or departing from
India.
Applicability of Interest on Warehoused Goods:

Warehoused goods

Assessee (other
Assessee –
than
EOU/EHTP/STP
EOU/EHTP/STP
units
units

Warehousing period Warehousing period In case of inputs,

In case of Capital
spares and
≤ 90 days > 90 days Goods
consumables

No interest is Interest @ 15%

Till their clearance Till their clearance
payable p.a. is payable

No intrest payable No Intrest payable

 Warehousing

Owner’s Right to deal with Warehoused Goods:

The owner of any warehoused goods may, after warehousing the same:

a) inspect the goods;

b) deal with their containers in such manner as may be necessary to prevent loss or
deterioration or damage to the goods;
c) sort the goods; or
d) show the goods for sale.

Sec 58B: Cancellation of license

• Where licence contravenes any provision/riles/conditions can cancel license on giving OBH
• Where an enquiry is to be carried out license can be suspended during the prnding of
enquiry.
• During the susspension no new goods to be departed old goods can remain.
• Upon cancellation the goods shall be removed within 7 days from serving the order of
cancellation.

Sec 59

Bond has to be executed for thrice of the duty amount and security also will have to be given
binding himself to comply rules, pay taxes, duty, interest, penalty, fines.

The bond executed shall remain in force even in the goods are transferred to another.

Sec 61 Period for which goods may remain warehoused

1. Goods for use in any 100% EOU/EHTP/STP warehoused where manufacturer or other
operator allowed
- If capital goods till clearance no limit
- Others goods till consumption or clearance
2. Goods other than “1” above till the expiry o0f one year from date of 0rder permitting
deposit of goods in warehouse

Sec 68 Clearance of warehoused goods for Home consumption

• Bill of entry has to be filed import duty /interset/penalty/fine applicable paid and order for
clearance has been made.
• Owner of warehoused goods before clearance at any time relinquish the title of goods
• Where any offence committed with respective such goods relinquishment is not possible.

Sec 69 Clearance of warehoused goods for exports

Shipping bill/bill of export presented duty applicable paid order for clearance has been made
(can be even E-clearance)

If capital good is of the opinion is that these warehoused goods exported are likely to be
smuggled – It shall direct such goods not to be exported without payment of duty or impose
 Warehousing

certain restrictions

Warehousing without Warehousing (Section 49 of the Customs Act, 1962):

• If the assessment is delayed for imported goods, then those goods can be stored in
public warehouse without executing the bond is called as warehousing without warehousing.

• There is a time limit of 30 days to remove the goods from warehouse where the goods
has been stored under S.49 of the Customs Act, 1962 i.e. warehousing without
warehousing.

• However, the Commissioner of Customs may extend the period of storage for a further
period not exceeding 30 days at a time.

Transfer of Goods to Another Warehouse:

Warehouse – Private or Public Special warehouse
(1) Licensee (namely incharge of warehouse) (1) Licensee (namely incharge of
shall transfer warehoused goods to another warehouse) shall transfer warehoused
warehouse only when the owner of the goods goods to another warehouse only with
produce the form for transfer of goods the permission of the Bond Officer on
bearing the orders of the bond officer the form for transfer of goods.
permitting such transfer.
(2) After the goods are removed and loaded on (2) Once bond officer permits removal of
means of transport, licensee would: goods from warehouse, licensee shall, in
a) affix a one-time-lock to the means of the presence of Bond Officer,:
transport, a) cause the goods to be loaded onto
b) endorse the number of one-time lock on the means of transport, and
prescribed form for transfer of goods
b) affix a one-time-lock to the means
and on transportation documents,
of transport.
c) cause one copy of each of these
documents to be delivered to bond
officer and
d) record the removal of goods

Taxable event for exported goods:

• Taxable event arises only when proper officer makes an order permitting clearance (i.e.
entry outwards) granted and loading of the goods for exportation
• In case of exports, rate of exchange of the CBIC as in force on the date on which a
shipping bill or bill of export.
• For the purposes of calculation of export duty, the transaction value, that is to say
the price actually paid or payable for the goods for delivery at the time and place of
exportation, shall be the FOB price of such goods at the time and place of exportation.
• Free on Board (FOB): FOB means all expenditure incurred by exporter upto the point
 Warehousing

of loading goods into the vessel or aircraft or vehicle is incurred by the exporter and
hence, from importer point of view it is Free on Board.

Deemed Exports:
The term Deemed Exports means export without actual export, it means goods and services are
sold and provide respectively within India and payment also received in the Indian Rupees. As
per the Foreign Trade Policy the following few transactions can be considered as deemed
exports.

• Sale of goods to units situated in Export Oriented Units, Software Technology Park, and
Electronic Hardware Technology Park etc.

• Sale of capital goods to fertilizer plants

• Sale of goods to United Nations Agencies Sale of goods to projects financed by bilateral
Agencies, etc.
 Intro & Duties

Introduction:
An important principle in the levy of customs duty is that the goods should be consumed within
the country of importation. If the goods are not so consumed, but are exported out of the
country, the cost of export goods gets unduly escalated on account of incidence of customs
duty.
Re-export of the goods imported into the country

Goods not conforming to the specification

of the order
is in the following occasions

Goods not permitted to be imported into

Where the goods are sent back
the country on account of trade-
as such to the foreign country
restriction.

Where the goods are used in

the manufacture of other Objective of the importation was limited
articles and such other articles to temporary retention in India
are exported

Duty Drawback is an export incentive scheme where the duties paid on any exported materials or
excisable materials which are used in the manufacture/processing/carrying out any operations on
the goods that are exported outside India is allowed as refund to the exporter.

Two categories of duty drawback:

1. Duty Drawback on Re-Export of imported goods(Sec. 74)

2. Duty Drawback on when imported materials are used in the manufacture or processing of
goods in India and such goods are then exported (Sec. 75)

Duty Drawback on Re-Export [Section 74]

Drawback:
 Intro & Duties

In relation to any goods exported out of India, means the refund of duty or tax or cess as
referred to in the Customs Tariff Act, 1975 and paid on importation of such goods in terms of
section 74 of the Customs Act.
Analysis:
• Drawback here includes refund of integrated tax and compensation cess along with basic
customs duty, etc.
• In-order to prevent dual benefit a internal circular has been issued by CBIC to its
officers to make it ensured that no ITC on IGST/Compensation cess paid on imports has
been availed or no refund has been claimed, If duty drawback is claimed.
• Safeguard duty, Anti-dumping duty, countervailing duty paid if any can also be claimed as
drawback.

Conditions should be satisfied:

1. Originally the goods should have been imported into India; Customs duty on import should have
been paid.

2. The imported goods should be capable of being easily identifiable as the same goods which
were originally imported.

3. The goods should have been entered for export either on a shipping bill through sea or air; or
on a bill of export through land; or as baggage; or through post and the proper officer after
proper examination of the goods and after ensuring that there is no prohibition or restriction
on their export should have permitted clearance of the goods for export.

4. The goods should have been identified to the satisfaction of the Assistant or Deputy
Commissioner of Customs as the goods, which were imported.

The concerned authority can be satisfied:-

a) Primarily by physical examination of the goods
b) And as alternative through the correspondence exchanged between the overseas
seller of the goods and the Indian importer. In the course of physical examination
emphasis will be laid on
(i) Description of the goods
(ii) Quantity and weight
(iii) Identifying markings/distinguishing features
(iv) Original packing of the goods.

5. The goods should have been entered for export within two years from the date of
payment of duty on the importation thereof. This period can be extended up to two years
by CBIC or by the Commissioner of Customs.

6. The market price of such goods must not be less than the amount of drawback claimed.

Power to make rules under section 74:

 Intro & Duties

Central Government is empowered to make rules for the purpose of carrying out the provision of
section 74 and in particular such rules may provide for the following:
• Establishing the manner of identification of goods imported in different consignments
which are ordinarily stored together in bulk
• Specifying the goods which shall be deemed to be not capable of being easily identified.
• The manner and the time within which a claim for payment of drawback is to be filed.

Duty Drawback on Re-Export not allowed on the following:

Drawback of import duty paid is not allowed if these goods are exported:
• Wearing apparel (after being used), Tea chests,

• Exposed cinematograph film passed by the Board of Film Censors in India,

• Unexposed photographic films, paper and plates and X-Ray films.
 Intro & Duties

Re-export of duty
paid imported goods
[Sec. 74]

Goods are imported for Goods are imported for

business purpose personal purpose

After use Without use After use Without use

Qtr DDB
Exported ≤ % of
18 DDB = @ 98% (%)
DDB on
months from the import DDB = @
Exported ≤ 2
date of payment of duty Yr-1 I 96 98%
Years from
Re-
duty the date of
II 92 exported
payment of
immediately
duty
III 88
≤ 3M 95%
IV 84
> 3M ≤ 6M 85%
Yr-2 I 81
> 6M ≤ 9M 75%
II 78
> 9M ≤ 12M 70%
III 75
> 12M ≤ 15M 65%

IV 72
> 15M ≤ 18M 60%

> 18M NIL

Qtr DDB
Goods are imported (%)
for personal purpose Yr-3 I 69.5
after use re-exported II 67
after 2 years from III 64.5
the date of payment IV 62
of import duty then Yr-4 I 60
with prior permission II 58
from CBIC; DDB can
III 56
be claimed
IV 54
 Intro & Duties

Procedure for claiming drawback on goods exported by post (Rule 3):

Goods exported by post:

• The outer packing shall carry the words “DRAWBACK EXPORT”.
• The exporter shall deliver to the competent Postal Authority a claim in the prescribed
form.

Date of filing of drawback claim:

• The date on which the aforesaid claim form is received by the proper officer of customs
from the postal authorities.
Deficiencies in the claim:
• In case the aforesaid claim form is not complete in all respects, the exporter shall be
informed of the deficiencies therein within 15 days by a deficiency memo and such claim
shall be deemed not to have been received.
• When the exporter complies with the requirements specified in deficiency memo within
30 days, he shall be issued an acknowledgement.
• The date of such acknowledgement shall be deemed to be date of filing the claim for
the purpose of section 75A.

Statements/Declarations to be made on exports other than by post [Rule 4]:

In the case of exports other than by post, the exporter shall at the time of export of the
goods:-
(i) State on the shipping bill or bill of export, the description, quantity and such other
particulars as are necessary for deciding whether the goods are entitled to drawback
under section 74 and make a declaration on the relevant shipping bill
• that the duties of customs were paid on the goods imported
• that the goods imported were not taken into use after importation; or
• that the goods were taken in use

Time-limit for filing drawback claim:

A claim for drawback under these rules shall be filed:-
• In the prescribed form
• Within three months (extendable by another three months) from the date on which
an order permitting clearance and loading of goods for exportation under section 51
is made by proper officer of customs.

Date of filing of drawback claim:

• The date of affixing the dated receipt stamp on the claims which are complete and for
which an acknowledgement shall be issued.
Deficiencies in the claim:
• The exporter shall be informed of the deficiencies therein within 15 days by a
deficiency memo and such claim shall be deemed not to have been received.
• When the exporter complies with the requirements specified in deficiency memo within
30 days, he shall be issued an acknowledgement.
• The date of such acknowledgement shall be deemed to be date of filing the claim for
 Intro & Duties

the purpose of section 75A.

Extension of due date:

Authority Period of Application fee Grant/refuse of

extension extension

Assistant/Deputy Three months (i) 1% of The concerned

Commissioner of Customs The FOB value of authority may, on
exports or an application and
ii) Rs1000/- after making such
enquiry as he
whichever is less
thinks fit, grant
extension or
Principal Further (i) 2% of the FOB refuse to grant
Commissioner/Commissione extension of six value of exports or extension after
r of Customs months (ii) Rs2000/- recording in
Whichever is less writing the
reasons for such
refusal

Documents to be filed along with drawback claim:

The claim shall be filed along with the following documents, namely:-
a) Triplicate copy of the Shipping Bill bearing examination report recorded by the proper
officer of the customs at the time of export.
b) Copy of Bill of Entry or any other prescribed document against which goods were cleared
on importation.
c) Import invoice.
d) Evidence of payment of duty paid at the time of importation of the goods.
e) Permission from Reserve Bank of India for re-export of goods, wherever necessary.
f) Export invoice and packing list.
g) Copy of Bill of lading or Airway bill.
h) Any other documents as may be specified in the deficiency memo.
 Intro & Duties

Drawback on Imported materials used in the manufacture of Export Goods (Sec 75):

The following important aspects should be remembered in this regard:

(i) The goods exported are entirely different from the inputs.
(ii) The input could be either imported goods on which duty of customs has been paid or
indigenous goods on which central excise duty has been paid.
(iii) The existence of the imported/indigenous excise duty paid goods in the final product is
not capable of easy verification at the point of export.
(iv) The goods, namely the inputs might have undergone changes in physical shape, property
etc.
(v) The quantity of inputs per piece of final product may not be uniform and may not also be
capable of verification at the time of exportation.

Drawback:

In relation to any goods manufactured in India and exported, means the rebate of duty
excluding integrated tax leviable under sub-section (7) and compensation cess leviable under
sub- section (9) respectively of section 3 of the Customs Tariff Act, 1975 chargeable on any
imported materials or excisable materials used in the manufacture of such goods.

Power of Central Government to frame rules [Section 75(2)]:

Goods which are exported [Sec. 75]

Goods which are exported [Sec. 75]

No
Exported goods named in
All Industry DDB list

Brand Rate of DDB

Yes applicable

All Industry Duty Drawback Rate applicable, provided such DDB covers 80% of Duties
suffered already.
Otherwise Special Brand Rate of DDB applicable

All Industry Drawback Rates:

• All Industry Drawback rates are fixed by Directorate of Drawback
▪ The rates are periodically revised.
 Intro & Duties

▪ Data from industry is collected for this purpose.

• All Industry Drawback Rate is fixed Rules by considering average quantity and value of
each class of inputs imported. Average amount of customs duties is considered. These
rates are fixed for broad categories of products.
▪ The rates are fixed on basis of broad parameters like prevailing prices of input, SION
published by DGFT, share of imports in total consumption of inputs, FOB value of export
goods, applicable rates of customs duty etc.

Brand Rate of duty drawback

It is possible to fix All Industry Rate only for some standard products. It cannot be fixed for
special type of products. In such cases, brand rate is fixed under Rule 6 of Customs and
Central Excise Duties Drawback Rules, 2017.
Application shall be made to Principal Commissioner or Commissioner of Customs with all details of
inputs etc. in prescribed forms.

Special Brand Rate of duty drawback

All Industry rate is fixed on average basis. Thus, a particular exporter may find that the
actual customs duty paid on inputs is higher than All Industry Rate fixed for his product. In such
case, he can apply under Rule 7 of Customs and Central Excise Duties Drawback Rules, 2017 for
fixation of Special Brand Rate, within three months from export. He has to apply giving details in
prescribed form.
The conditions of eligibility are that the All Industry Rate fixed for that product should be
less than 80% of the duties actually paid by him on imports.

Factors considered while determining amount/rate of drawback (All Industry Brand rate):
(a) the average quantity or value of each class or description of the materials from which a
particular class of goods is ordinarily produced or manufactured in India.
(b) the average quantity or value of the imported materials or excisable materials used for
production or manufacture in India of a particular class of goods.
(c) the average amount of duties paid on imported materials or excisable materials used in the
manufacture of semis, components and intermediate products which are used in the
manufacture of goods.
(d) the average amount of duties paid on materials wasted in the process of manufacture and
catalytic agents.
• However, if any such waste or catalytic agent is re-used in any process of
manufacture or is sold, the average amount of duties on the waste or catalytic
agent re-used or sold shall also be deducted.
(e) the average amount of duties paid on imported materials or excisable materials used for
containing or, packing the export goods.
(f) any other information which the Central Government may consider relevant or useful for
the purpose.
 Intro & Duties

Rule:4 Revision of rates:

The Central Government may revise amount or rates determined under rule 3

Determination of date from which the amount or rate of drawback is to come into force and
the effective date for application of amount or rate of drawback [Rule 5]:
• The Central Government may specify the period upto which any amount or rate of
drawback determined under rule 3 or revised under rule 4, as the case may be, shall be in
force.
• Where the amount or rate of drawback is allowed with retrospective effect, such amount
or rate shall be allowed from such date as may be specified by the Central Government by
notification in the Official Gazette which shall not be earlier than the date of changes in
the rates of duty on inputs used in the export goods.
• The provisions of section 16, or section 83(2), of the Customs Act, 1962 shall determine
the amount or rate of drawback applicable to any goods exported under these rules

Cases where amount or rate of drawback has not been determined [Rule 6] (Brand rate):
• Where no amount or rate of drawback has been determined in respect of any goods, any
exporter has to make an application, within 3 months from the date relevant for the
applicability of the amount/rate of drawback, to the Principal Commissioner/
Commissioner of Customs for determination of the amount or rate of drawback.
• All the relevant facts including the proportion in which the materials or components are
used in the production or manufacture of goods and the duties paid on such materials or
components has to be stated.
• On receipt of an application, the Principal Commissioner/ Commissioner of Customs, as the
case may be, shall, after making or causing to be made such inquiry as it deems fit,
determine the amount or rate of drawback in respect of such goods.

Extension of due date:

Authority Period of Application fee Grant/refuse of

extension extension

Assistant/Deputy Three months (i) 1% of The concerned

Commissioner of Customs The FOB value of authority may, on
exports or an application and
ii) Rs1000/- after making such
enquiry as he
whichever is less
thinks fit, grant
extension or
Principal Further (i) 2% of the FOB refuse to grant
Commissioner/Commissione extension of six value of exports or extension after
r of Customs months (ii) Rs2000/- recording in
Whichever is less writing the
reasons for such
refusal
 Intro & Duties

Provisional drawback:

Exporter may apply for a provisional amount of drawback pending determination

of the amount or rate of drawback

Principal Commissioner/ Commissioner of Customs, may, after considering

the application, allow provisionally not exceeding amount claimed

Exporter may require to enter into a general bond for such amount, and
subject to such conditions

Where the drawback is finally determined, the amount provisionally paid

to such exporter shall be adjusted

Exporter has to pay the deficency or entiltled to get refund of excess paid

Negative list of Duty Drawback [Section 76]

1. DDB amount is less than Rs 50
2. In case of negative sales
3. If CENVAT CREDIT availed (except BCD)
4. Where the DDB amount is more than 1/3rd of Market value of exports.(in excess of 1/3rd
not allowed)
5. Export to Nepal and Bhutan and the export proceeds are not received in hard currency (it
means USD, GBP or Pounds).
6. DDB as % on FOB less than 1% unless amount of DDB is more than or equal to Rs 500
7. Duty drawback is not allowed if the exporter has already availed the Duty Entitlement
Pass Book (DEPB) or other export incentives.
8. If the sale proceeds not received within the time period allowed by Reserve Bank of India.
9. Duty drawback amount exceeds the market value of exported goods.

Power to require submission of information and documents [Rule 10]:

(a) Determining the class or description of materials or components used in the production or
 Intro & Duties

manufacture of goods or for determining the amount of duty paid on such materials or
components; or
(b) verifying the correctness or otherwise of any information furnished
(c) verifying the correctness or otherwise of any claim for drawback; or
(d) obtaining any other information considered by the Principal Commissioner of Customs or
Commissioner of Customs, as the case may be, to be relevant or useful

Access to manufactory [Rule 11]:

Assistant Commissioner/ Deputy Commissioner of Customs if it considers it necessary, the

manufacturer shall give access at all reasonable times to the officer so authorised to every part
of the premises in which the goods are manufactured, so as to enable the said officer to verify
by inspection the process of, and the materials or components used for the manufacture of
such goods, or otherwise the entitlement of the goods for drawback or for a particular amount or
rate of drawback under these rules.

Procedure for claiming drawback on goods exported by post (Rule 12):

Goods exported by post:

• The outer packing shall carry the words “DRAWBACK EXPORT”.
• The exporter shall deliver to the competent Postal Authority along with the parcel or
package, a claim in the Form at Annexure I, in quadruplicate, duly filled in.
Date of filing of drawback claim:
• The date on which the aforesaid claim form is received by the proper officer of customs
from the postal authorities.

Statements/Declarations to be made on exports other than by post [Rule 13]:

In the case of exports other than by post, the exporter shall at the time of export of the
goods:-
i. State on the shipping bill or bill of export, the description, quantity and such other
particulars as are necessary for deciding whether the goods are entitled to drawback
and if so, at what rate and make a declaration on the relevant shipping bill or bill of
export.
• A claim for drawback under these rules is being made;
• No separate claim for rebate is made in respect of these goods
Where brand rate or special brand rate is applicable then additional declaration has to be made
with respect to:
(a) there is no change in the manufacturing formula and in the quantum per unit of the
imported materials or components, if any, utilised in the manufacture of export goods;
and
(b) the materials or components, which have been stated in the application under rule 6 or
rule 7 to have been imported, continue to be so imported and are not being obtained
from indigenous sources.
 Intro & Duties

Manner and time for claiming drawback on goods exported other than by post [Rule 14]:
Electronic shipping bill in Electronic Data Interchange (EDI) under the claim of drawback or
triplicate copy of the shipping bill for export of goods under a claim of drawback shall be
deemed to be a claim for drawback filed on the date on which the proper officer of Customs
makes an order permitting clearance and loading of goods for exportation under section 51 and
said claim for drawback shall be retained by the proper officer making such order.
The said claim for drawback should be accompanied by the following documents, namely:
✓ copy of export contract or letter of credit, as the case may be;
✓ copy of ARE-1, wherever applicable;
✓ insurance certificate, wherever necessary; and
✓ copy of communication regarding rate of drawback where brand rate(Rule 6) or
special brand rate (Rule 7)is determined.
If the claim for drawback is incomplete or is without the documents specified shall be returned
to the claimant within 10 days and shall be deemed not to have been filed
For computing the period of 1 month prescribed under section 75A for payment of drawback to
the claimant, the time taken in testing of the export goods, not more than 1 month, shall be
excluded.

Payment of drawback and interest

The officer of Customs may combine one or more claims for the purpose of payment of drawback
and interest, if any, as well as adjustment of any amount of drawback and interest already paid
and may issue a consolidated order for payment.
The date of payment of drawback and interest, if any, shall be deemed to be, in the case of
payment -
✓ by cheque, the date of issue of such cheque; or
✓ by credit in the exporter’s account maintained with the Custom House, the date of such
credit.

Supplementary claim [Rule 16]:

Where any exporter finds that the amount of drawback paid to him is less than what he is
entitled to on the basis of the amount or rate of drawback determined, he may prefer a
supplementary claim in the specified form.
However, the exporter shall prefer such supplementary claim within a period of 3 months:
(i) All industry brand rate, from the date of publication of such rate in the Official Gazette;
(ii) Brand rate or special brand rate, from the date of communicating the said rate to the
person concerned;
(iii) in all other cases, from the date of payment or settlement of the
original drawback claim by the proper officer.

Authority Period of Application fee Grant/refuse of

 Intro & Duties

extension extension

Assistant/Deputy Nine months (i) 1% of The concerned

Commissioner of Customs The FOB value of authority may, on
(3+9)
exports or an application and
ii) Rs1000/- after making such
enquiry as he
whichever is less
thinks fit, grant
extension or
Principal Further (i) 2% of the FOB refuse to grant
Commissioner/Commissione extension of six value of exports or extension after
r of Customs months (ii) Rs2000/- recording in
(3+9+6) Whichever is less writing the
reasons for such
refusal

Repayment of erroneous or excess payment of drawback and interest [Rule 17]

The claimant shall, on demand by a proper officer of Customs repay the amount so paid
erroneously or in excess, as the case may be, and where the claimant fails to repay the amount
it shall be recovered in the manner laid down in sub-section (1) of section 142 of the Customs
Act, 1962
Recovery of amount of drawback where export proceeds not realized [18]:
Where an amount of drawback has been paid to an exporter or a person authorised by him
(hereinafter referred to as the claimant) but the sale proceeds in respect of such export goods
have not been realised by or on behalf of the exporter in India within the period allowed under
the Foreign Exchange Management Act, 1999 (FEMA), including any extension of such period,
such drawback shall, except under circumstances or conditions specified in in this rule, be
recovered in the manner specified below.
However, the time-limit referred to in this sub-rule shall not be applicable to the goods
exported from the DTA to a SEZ.

If the exporter fails to produce evidence in respect of realisation of export proceeds within the
period allowed under the Foreign Exchange Management Act, 1999, or any extension of the said
period by the Reserve Bank of India, the Deputy/Assistant Commissioner of Customs shall issue a
notice to the exporter to produce evidence of realisation of export proceeds within 30 days.
Where the exporter does not produce such evidence within the said period of thirty days, the
Assistant Commissioner of Customs or Deputy Commissioner of Customs shall pass an order to
recover the amount of drawback paid to the claimant and the exporter shall repay the amount so
demanded within thirty days of the receipt of the said order.
However, such recovery shall not be made in case the non-realisation of sale proceeds is
compensated by the Export Credit Guarantee Corporation of India Ltd. under an insurance cover
and the Reserve Bank of India writes off the requirement of realisation of sale proceeds on
merits and the exporter produces a certificate from the concerned Foreign Mission of India
about the fact of non-recovery of sale proceeds from the buyer.
 Intro & Duties

If export proceeds are not realized, duty drawback allowed can be recovered even if proceedings
under FEMA are dropped.

Section 75A provides for payment of interest on delayed payment of drawback.

(a) Where any drawback payable to a claimant under section 74 or 75 is not paid within a period
of one month from the date of filing a claim for payment of such drawback, there shall be
paid to the claimant, in addition to the amount of drawback, interest at the rate fixed
under section 27A (6%) from the date after the expiry of the said period of one month till
the date of payment of such drawback.
(b) Where any drawback has been paid to the claimant erroneously or it becomes otherwise
recoverable under this Act or the Rules, the claimant shall within a period of 2 months from
the date of demand, pay in addition to the said amount of drawback, interest at the rate
fixed under section 28AA (15%) and the amount of interest shall be calculated for the
period beginning from the date of payment of such drawback to the claimant till the date of
recovery of such drawback.

Case Law:

Union of India v Rajindra Dyeing & Printing Mills Ltd. 2005

(180) ELT 433 (SC):

A Vessel was caught up in the rough weather and sank in the

territorial waters can duty drawback be claimed?
Decision: The vessel sunk within territorial
waters of India and therefore there is no
export. Accordingly, no duty drawback shall be
available in this case. The territorial waters
extend to 12 nautical miles into the sea from
the base line.
 Miscellaneous

Re-importation of goods [Section 20]

Concessional duty payable in case of re-importation of goods exported under duty drawback,
exported for repairs, etc.

S. Description of goods exported Amount of import duty payable if re-

No. imported
1. Goods exported-
(i) under claim for duty drawback; Amount of incentive availed of at the
time of export
(ii) under claim for refund of integrated
tax paid on export goods;

(iii) under bond without payment of

In case of point (iv) amount of IGST
integrated tax
and compensation cess leviable at the
(iv) under duty exemption scheme (DEEC/ time and place of importation of goods
Advance Authorisation/ DFIA) or subject to specified conditions.
Export Promotion Capital Goods
Scheme (EPCG)**

2*. Goods other than those falling under S. Duty of customs which would be
No. 1 exported for repairs abroad leviable if the value of re-imported
goods after repairs were made up of
the fair cost of repairs carried out
including cost of materials used in
repairs (whether such costs are
actually incurred or not), insurance
and freight charges, both ways.

3. Goods other than falling under S. No. 1 & NIL

2 above

Conditions to be satisfied for claiming the above two exemptions:

• The time limit for re-importation is 3 years which can be extended further for a
period up to 2 years.
• The exported goods and the re-imported goods must be the same.
• Ownership should not be changed
 Miscellaneous

However, these concessions would not be applicable if-

• Re-imported goods had been exported by 100% Export Oriented Undertaking (EOU) or a
unit in Free Trade Zone (FTZ).

• Re-imported goods had been exported from a public/private warehouse.

• Re-imported goods which fall under Fourth schedule to the Central Excise Act, 1944
(tobacco products and petroleum products)

Clarification regarding applicability of Notification No. 45/2017 Cus dated 30.06.2017 on goods
which were exported earlier for exhibition purpose/consignment basis

• The activity of sending / taking the specified goods (for exhibition or on consignment
basis for export promotion except the activities satisfying the tests laid down in Schedule
I of the CGST Act, 2017) out of India do not constitute supply within the scope of Section
7 of the CGST Act as there is no consideration at that point in time.
• Since such activity is not a supply, the same cannot be considered as ‘zero rated supply’
as per the provisions contained in Section 16 of the IGST Act, 2017. Also, there is no
requirement of filing any LUT/bond as required under section 16 of IGST Act, 2017 for
such activity of taking specified goods out of India.
• Therefore, no integrated tax is required to be paid for specified goods at the time of
taking these out of India, the activity being not a supply, hence the situation of
Notification No. 45/2017-Customs dated 30.06.2017 (goods exported under bond
without payment of integrated tax) requiring payment of integrated tax at the time of
re- import of specified goods in such cases is not applicable.
• It is clarified that such cases will fall more appropriately under residuary entry2 of the
said Notification and thus the exemption is available.
• Further, this clarification is also applicable to cases where exports have been made to
related or distinct persons or to principals or agents, as the case may be, for
participation in exhibition or on consignment basis, but, such goods exported are returned
after participation in exhibition or the goods are returned by such consignees without
approval or acceptance, as the case may be, the basic requirement of ‘supply’ as defined
cannot be said to be met as there has been no acceptance of the goods by the consignees.
Hence, re import of such goods after return from such exhibition or from such consignees
will be covered under residual entry of the Notification No. 45/2017 dated 30.06.2017,
provided re-import happens before 6 months from the date of delivery challan.

Imported goods have been originally exported to the overseas supplier for repairs:
 Miscellaneous

▪ No duty at the time of re-import will be levied:

▪ If re-imported within 3 years from the date of export (extended up to 5 years)
▪ The exported and imported goods must be in the same form and ownership of the goods
should also not have changed.
Exported goods may come back for repairs and re-export:
No duty at the time of re-import will be levied:
1. The time limit for re-import of goods (manufactured in India and re-imported for repairs
or for reconditioning other than the specified goods) should be within 3 years from
the date of export. In case of export to Nepal, such time limit is 10 years.

2. The time limit for re-export is 6 months from the date of import (extended up to 12
months).
3. The importer at the time of importation executes a Bond.
4. The re-importation is for reprocessing, refining or re-making then the time limit for re-
importation should be within 1 year from the date of exportation.

Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017

Information about intent to avail benefit of exemption notification [Rule 4]:
An importer who intends to avail the benefit of an exemption notification shall provide the
information to the DC/AC having jurisdiction over the premises where the imported goods shall
be put to use for manufacture of goods or for rendering output service, the particulars,
namely: -
(i) the name and address of the manufacturer;
(ii) the goods produced at his manufacturing facility;
(iii) the nature and description of imported goods used in the
manufacture of goods or providing an output service.

Procedure to be followed [Rule 5]

The importer who intends to avail the benefit of an exemption notification shall provide
information -
1. In duplicate, to the DC/AC having jurisdiction of premises where the goods are
manufactured, the estimated quantity and value of the goods to be imported, particulars
of the exemption notification applicable on such import and the port of import in respect
of a particular consignment for a period not exceeding 1 year; and
2. In one set, to the Deputy/ Assistant Commissioner of Customs at the Custom Station of
importation.
3. The importer who intends to avail the benefit of an exemption notification shall submit a
continuity bond with an undertaking to pay the amount equal to the difference between
the duty liveable normally and duty paid by availing exemption, along with interest( under
section 28AA)
4. The Deputy/ Assistant Commissioner of Customs having jurisdiction over the premises
 Miscellaneous

where the imported goods shall be put to use for manufacture of goods or for rendering
output service, shall forward one copy of information received from the importer to the
Deputy/ Assistant Commissioner of Customs at the Custom Station of importation.
5. On receipt of the copy of the information, the Deputy/ Assistant Commissioner of
Customs at the Custom Station of importation shall allow the benefit of the exemption
notification to the importer who intends to avail the benefit of exemption notification.

Importer who intends to avail the benefit of an exemption notification to give information
regarding receipt of imported goods and maintain records [Rule 6]
1. The importer who intends to avail the benefit of an exemption notification shall provide
the information of the receipt of the imported goods in his premises where goods shall be
put to use for manufacture, within 2 days (excluding holidays, if any) of such receipt to the
jurisdictional Customs Officer.
2. The importer who has availed the benefit of an exemption notification shall maintain an
account in such manner so as to clearly indicate
• the quantity and value of goods imported
• the quantity of imported goods consumed n
• the quantity of goods re-exported
• the quantity of goods sent for Job work
• the quantity remaining in stock, bill of entry wise and
shall produce the said account as and when required by the Deputy/ Assistant Commissioner of
Customs having jurisdiction
The importer who has availed the benefit of an exemption notification shall submit a quarterly
return, in the prescribed form, to the Deputy/ Assistant Commissioner of Customs having
jurisdiction by the tenth day of the following quarter.

Re-export or clearance of unutilised or defective goods [Rule 7]

1. The importer who has availed benefit of an exemption notification, prescribing
observance of these rules may re-export the unutilised or defective imported goods,
within 6 months from the date of import, with the permission of the jurisdictional
Deputy/ Assistant Commissioner of Customs However, the value of such goods for re-
export shall not be less than the value of the said goods at the time of import.
2. The importer who has availed benefit of an exemption notification, prescribing
observance of these rules may also clear the unutilised or defective imported goods, with
the permission of the jurisdictional Deputy/ Assistant Commissioner of Customs within a
period of 6 months from the date of import on payment of import duty equal to
difference between the duty liveable normally and duty paid by availing exemption, along
with interest( under section 28AA) for the period starting from the date of importation
of the goods on which the exemption was availed and ending with the date of actual
payment of the entire amount of the difference of duty that he is liable to pay.
Recovery of duty in certain case [Rule 8]:
• The importer who has availed the benefit of an exemption notification shall use the goods
 Miscellaneous

imported in accordance with the conditions mentioned in the concerned exemption

notification
• In the event of any failure, the DC/AC having jurisdiction over the premises where the
imported goods shall be put to use for manufacture of goods or for rendering output
service shall take action by invoking the Bond to initiate the recovery proceedings of the
amount equal to the difference between the duty leviable on such goods but for the
exemption and that already paid, if any, at the time of importation, along with interest, at
the rate fixed by notification issued under section 28AA of the Customs Act, for the
period starting from the date of importation of the goods on which the exemption was
availed and ending with the date of actual payment of the entire amount of the difference
of duty that he is liable to pay.

Pilferage: Section 13 of the Customs Act, 1962

▪ No duty is payable if the pilferage found before goods cleared from customs:
▪ Importer does not have to prove pilferage,
▪ If the duty is paid before finding the pilferage, refund can be claimed
▪ Pilferage does not apply for the warehoused goods.
▪ there shall be no duty liability on a sample of goods consumed/destroyed during the
course of testing/examination.

Circumstances in which pilferage can be claimed

In order to claim pilferage the following circumstances should exist:
a) there should be evidence of tampering with the packages;
b) there should be blank space for the missing articles in the package; and
c) the missing articles should be unit articles [and not part articles]

Conditions to be satisfied for exemption from duty:

▪ The imported goods should have been pilfered.
▪ The pilferage should have occurred after the goods are unloaded, but before the proper
officer makes the order of clearance for home consumption or for deposit into
warehouse.
▪ The pilfered goods should not have been restored back to the importer.

Important points:
a) If goods are pilfered after the order of clearance is made but before the goods are
actually cleared, section 13 is not applicable and thus, duty would be leviable.
b) Section 13 deals with only pilferage. It does not deal with loss/destruction of goods.
c) Provisions of section 13 would not apply if it can be shown that pilferage took place prior
to the unloading of goods.
d) In case of pilferage, only section 13 applies and remission of duty under section 23(1) is
 Miscellaneous

not permissible

Abatement of duty on damaged goods or deteriorated goods, [Sec. 22]:

Abatement of duty Sec. 22

Imported goods had Imported goods had been damaged or Any warehoused goods had
been damaged or had deteriorated at any time after been damaged on account of
had deteriorated at the unloading of goods in India but any accident at any time
any time before or before their examination for before clearance for home
during the unloading assessment by customs authorities consumption provided such
of goods in India provided such damage is not due to damage is not due to any
any willful act. willful act.

Valuation of the damaged or deteriorated goods:

The value shall be: -

(a) Value ascertained by the proper officer
Or
(b) The proper officer may sell such goods by public auction/tender or if the importer
agrees, in any other manner and the gross sale proceeds shall be deemed to be the
value of such goods.

Example: If the value of goods is Rs 10,000 and after damage the value is Rs 2,000 then
duty payable on Rs 10,000/- should be appropriately reduced to 20% (proportion of 2000 to
10000).

Section 23:

(a) This section comes into play in case of loss/destruction (Other than pilferage) of imported
goods at any time before their clearance for home consumption.

(b) The remission of duty is permissible only in the case of total loss of goods. This implies that
the loss is forever and beyond recovery. The loss of goods may be at the warehouse also.

(c) It comes into play after the duty has been paid and even after an order for home
consumption has been passed, but before the goods are actually cleared, and then it is found
that they have been lost/destroyed. In that case the provision is not that goods will not be
liable to duty, but duty paid on such goods shall be remitted by the Assistant/Deputy
 Miscellaneous

Commissioner of Customs.

(d) In the above situation, the loss/ destruction have to be proved to the satisfaction of the
Assistant Commissioner or Deputy Commissioner. Thereupon, he may pass remission orders
canceling the payment of duty. In case duty has already been paid, refund can be obtained
after getting the remission orders.

No duty in case of relinquishment of the title to the goods [Section 23(2)]

“Relinquish” means to give over the possession or control of, to leave off.

The owner of any imported goods may, relinquish his title to the goods before an order for
clearance of goods and thereupon, he shall not be liable to pay the duty thereon.

However, the owner of any such imported goods shall not be allowed to relinquish his title to such
goods regarding which an offence appears to have been committed under this Act or any other
law for the time being in force.

Importer may relinquish his title to the goods in the following cases [Section 23(2)]:

(i) The goods may not be according to the specifications;

(ii) The goods may have been damaged or deteriorated during voyage and as such may not be
useful to the importer;

(iii) There might have been breach of contract and, therefore, the importer may be unwilling to
take delivery of the goods.

In all the above cases, the goods having been imported, the liability to customs duty is
imposed and, therefore, the importer may relinquish his title to the goods unconditionally and
abandon them. If the importer does so, he will not be required to pay the duty amount.

However, the owner of any such imported goods shall not be allowed to relinquish his title to
such goods regarding which an offence appears to have been committed under this Act or any
other law for the time being in force.

Note:

It is open to the importer to exercise the option to relinquish the title on the imported goods
at any time before the passing of order for clearance for home consumption or before order
permitting the deposit of goods in a warehouse.

Denaturing or Mutilation of goods [SECTION 24]

Denture Means – Changing essential nature of things or make them permanently unfit for
human consumption.
 Miscellaneous

Mutilation – Instance of destroying, severely damaging.

Section 24 of the Customs Act, 1962 empowers Central Government to make rules for
permitting to denature/mutilate the imported goods, which are ordinarily used for more than
one purpose, so as to render them unfit for one or more of such purpose. If any imported
goods can be used for more than one purpose and duty is leviable on the basis of its purpose of
utilisation, then denaturing or mutilation of such goods is useful. By denaturing, goods are made
unfit for other purposes. After denaturing process, goods can be used only for one purpose and
accordingly duty can be levied

Example:

Ethyl Alcohol which is not denatured attracts a higher rate of customs duty as it can be used
for industrial as well as human consumption purposes. Whereas, denatured ethyl alcohol can only
be used for industrial purposes and hence attracts lower rate of duty. Assuming undenatured
ethyl alcohol is imported, but is to be used by the importer for industrial purposes only, then
importer may make a request for denaturing of Ethyl Alcohol. Certain very bitter chemicals can
be added to denature the spirits as per Rules and once they are denatured, they attract the
lower rate of duty.
 Miscellaneous

EXEMPTION FROM CUSTOMS DUTY [SECTION 25]

Central Government’s power to grant exemption:

The power for grant of exemption vests with the Central Government subject to the overall
control of the Parliament.

CG satisified that on public intrest it is

necessary, by notification in official gazette
General Exemption
exempt Fully without any conditions or subject
to conditions
Exemptions

CG satisified that on public intrest it is

Special Exemption necessary by special order exempt duty under
exceptional circumstances

No customs duty shall be

collected if amount < Rs
100.

Government can issue clarifications to the exemption notifications within one year from the issue
of the notification and such clarifications will have retrospective effect.
Effective date: The date of effect of the notification will be the date of its issue for
publication in the Official Gazette.

Customs duty on IMPORTED goods used for INWARD PROCESSING [SECTION 25A]

Where the Central Government is satisfied that it is necessary in the public interest so to
do, it may, by notification, exempt such of the goods which are imported for the purposes of
repair, further processing or manufacture, as may be specified therein, from the whole or
any part of duty of customs leviable thereon, subject to the following conditions, namely:—

(a) the goods shall be re-exported after such repair, further processing or manufacture,
as the case may be, within a period of one year from the date on which the order for
clearance of the imported goods is made;
(b) the imported goods are identifiable in the export goods; and
(c) such other conditions as may be specified in that notification.
 Miscellaneous

Exemption from customs duty on RE-IMPORTED goods used for OUTWARD PROCESSING
[SECTION 25B]

Where the Central Government is satisfied that it is necessary in the public interest so to
do, it may, by notification, exempt such of the goods which are re-imported after being
exported for the purposes of repair, further processing or manufacture, as may be specified
therein, from the whole or any part of duty of customs leviable thereon, subject to the
following conditions, namely :—

(a) the goods shall be re-imported into India after such repair, further processing or
manufacture, as the case may be, within a period of one year from the date on which
the order permitting clearance for export is made;

(b) the exported goods are identifiable in the re-imported goods; and
(c) such other conditions as may be specified in that notification.”
 Intro & Duties

INTRODUCTION:
1. Foreign trade policy 2015-20 is notified by Central
government w.e.f 05th Dec 2017 as per the powers given
in Sec 5 of Foreign Trade (Development & Regulation Act
1992
2. Duration of the policy is till 31/03/2023,
3. Central Government has the power to amend the rules
from time to time.
✓ Make provisions for facilitating the trade
✓ Prohibit, restrict, regulate exports & Imports
✓ Authorised to appoint Director General of Foreign
Trade (DGFT) for implementation of EXIM policy
4. DGFT will notify Hand book on procedures, Aayat Niryat forms by means of public
notice.
5. Foreign Trade policy was earlier called as EXIM policy.

Objective:
❖ Generation of employment and increasing value addition in keeping with Make in India
vision.
❖ Ease of doing and Trade facilitation by cutting down
the transaction time and cost.
❖ Encouraging e-commerce exports.
❖ Making Indian exports more competitive.
❖ Special efforts to resolve quality complaints and trade
disputes.
❖ Steps to encourage manufacture and export by SEZ,
EOU, STP, EHTP, and BTP.

Measures taken to achieve the objectives:

1. The number of documents required for export and import has been reduced to 3.
2. 24*7 customs clearance at 18 sea ports and 17 air cargo complexes.
3. Single window scheme to lodge their clearance documents at a single point.
4. Prior online facility of filing shipping bills 7 days for air shipments & 14 days for shipments
through sea.
 Intro & Duties

5. DGFT under the EDI initiatives provided the facility of online-filing of applications to obtain
IEC (Importer Exporter code) and various authorizations & scrips.

Salient features of FTP:

1. Exports-Imports are generally free unless specifically regulated.
2. Export and Import goods are classified into:
a) Free
b) Restricted
c) Prohibited
3. Exports are promoted through various promotional schemes such as :

Advance
Authorisation
schemes
Entitlements
Duty Free
to units
Import
under
authorization
SEZ/EOU
scheme.
etc
Export
promotion
schemes
Export
promotion Status
capital goods Holder
scheme.
Remission of
Duty and
taxes on
Export
Products

4. Duty credit scrips schemes are designed to promote specified exports.

Administration of the FTP:
1. FTP is formulated, controlled and supervised by the office of the director of DGFT, an
attached office to Ministry of commerce & Industry.
a) DGFT issues authorization for Import & Export. ( Authorisation means permission)
b) Grants IEC (Importer Exporter code).
c) Decision of DGFT is final w.r.t interpretation of FTP.
2. CBIC (Central Board of Indirect taxes & Customs):
a) CBIC comes under the Ministry of finance which facilitate in implementing the provisions of
FTP.
 Intro & Duties

b) Customs authority is responsible for clearance of export and import goods after their
valuation and examination, Customs authorities should follow the policy formed by DGFT
while clearing the goods.
c) Since there is GST, even GST authorities will also involve.
3. Reserve bank of India:
a) Works under the Ministry of Finance
b) Nodal bank in the country which formulates the policies related to
management, receipts and payments of foreign currency.

Components of Foreign Trade policy:

Components of
FTP

FTP Hand book of Appendicies Standard ITC-HS

procedures and Aayat Input-Output coding for
(2015-2020) (2015-20) Niryat forms Norms goods

Schedule - Schedule -
I - Import II - Export
policies policies

Importer – Exporter Code (IEC):

➢ Mandatory to Export any goods out of India or to Import any goods into India unless
specifically exempted.
➢ It is a unique 10 digit code issued by DGFT
➢ Pan is a pre-requisite
➢ Only one IEC will be issued with a single PAN
➢ DGFT has decided to use PAN as IEC number.
➢ With the introduction of GST, GSTIN will be used for
• Credit flow of IGST on Import of goods
• Refund or rebate of IGST related to export of goods.
➢ An application for IEC/Modification of IEC to be made only electronically in form “ANF-2A”
through digital signature. Along with the application following should be attached.
• Digital photograph of the signatory applicant
• Copy of PAN
• Cancelled cheque bearing entities pre-printed name.
 Intro & Duties

Export/Import of restricted goods and services:

➢ Any good/service export/import of which is restricted under ITC(HS) may be exported or
imported only in accordance with an Authorization (or)
➢ In terms of a public notice/notification issued in this regard.
➢ Every authorization is valid for prescribed period of validity and shall include
• Quantity, description and value of goods
• Actual User condition
• Export Obligation
• Minimum value addition to be achieved
• Minimum Export/Import price &
• Bank guarantee/ letter of undertaking / Bond with customs authority.
➢ Authorization is not a right, DGFT has the power to refuse grant or renew the authorization.
➢ If an authorization holder violates any conditions are fails to fulfil export obligation he shall
be liable for action.

Principles for imposing restriction:

DGFT may, through a notification adopt and enforce any necessary measure for:
➢ Protection of :
• Public Morals
• Human, animal or plant life or health,
• Patents, trademarks, copyrights and the prevention of deceptive practises
• National treasuries of artistic, historic or archaeological value
• Trade of fissionable material (Which is able to undergo nuclear fissile).
➢ Prevention of traffic in arms and implements of war & use of prison labour.
➢ Conservation of exhaustible natural resources.
Mandatory documents for export/import of goods into India:

Export Import

•Bill of lading/Airway bill/lorry bill/ Postal •Bill of lading/Airway bill/lorry bill/ Postal
bill. bill.
•Commercial Invoice cum packing list •Commercial Invoice cum packing list
•Shipping bill/ bill of export •Bill of entrys

Provisions relating to Import of Goods:

➢ Goods which are importable without any restriction may be imported by any person. However,
if such goods are restricted then actual user alone can import unless exempted by DGFT.
 Intro & Duties

➢ Import of second hand CAPITAL goods shall be allowed freely, However,

• Second hand personal computers
• Laptops
• Photo copier machines
• Air conditioners
• Diesel generation sets
• Second hand goods other than capital goods will only be allowed against
authorization.
➢ Scrap/Waste/remnant generated during manufacturing activity of an SEZ shall be allowed to
dispose in DTA freely on payment of applicable customs duty.
➢ Import of gifts shall be permitted where such goods are freely importable. In other cases a
Customs clearance permit from DGFT is required.
➢ Import of samples up to RS 3,00,000 can be made by all the exporters without payment of
duty, requires authorization only in case of Veg-seeds, bees & new drugs, Samples of tea up
to Rs 2,000(CIF) for consignment allowed without authorization.
➢ Passenger baggage:

Passenger baggage

Exporters coming from

Samples that are abroad are aslo allowed
otherwise freely to import drawings,
Household goods and patterens, labels, price
importable also be
personal effects as per tags, belts, trimmer and
imported as part of
limit can be imported embellishments required
passenger baggage
without an authorization. for export without an
authorization as baggage.

➢ Capital goods, components, parts & accessories can be sent abroad for repairs, improvisation,
testing and can be re-imported without reauthorization unless they are restricted goods.
➢ Import on lease financing is freely permitted, however may require RBI approval in some
cases.
➢ Goods already imported/shipped/arrived can also be cleared against an authorization issued
subsequently.
➢ Where goods imported duty free, imported shall execute Bond, LUT or Bank guarantee with
customs before clearance.
➢ Private/public and bonded warehouses may be set up in DTA, importer can warehouse the
goods and can be cleared for home consumption against authorisation.
 Intro & Duties

Duty Exemption and Remission Schemes:

Advance Authorization
Duty Exemption & Remission Schemes

Duty Exemption

Duty Free Imports under

Authorization

Duty Remission Duty Drawback

Remission of Duties and

taxes on exported products

Advance Authorization Scheme:

• Advance Authorization scheme is a facility to import Inputs to be used/required in the
manufacture of Export product without payment of Import duty (Excluding IGST and Cess)
subject to 15 % value addition
• Advance Authorization can be issued either to a manufacturer exporter or merchant
exporter tied to supporting manufacturer(s)
• AA can also be issued for making

✓ Physical exports(including export to SEZ) by Authorisation holder

✓ Intermediate supply
✓ Supplies made to specified categories of deemed exports
✓ Supply of ‘stores’ on board of foreign going vessel/aircraft provided there is
specific SION in respect of items supplied

Validity period of Authorization:

• Validity period for import of Advance Authorisation shall be 12 months from the date of
issue of Authorisation.
 Intro & Duties

• For deemed exports Contract duration of project execution or 12 months from

authorization earlier
Export obligation (EO) and realization:
• EO needs to be fulfilled within 18 months from Date of Authorization or as notified
• EO shall be realized in convertible Foreign currency, export to Export to SEZ
Developers/Co Developers can be realised in Indian rupees as well.

Items that can be imported duty free against advance authorization:

• Inputs, which are physically incorporated in export product (making normal allowance for
wastage)
• Fuel, oil, catalysts which are consumed/utilised to obtain export product
• Mandatory spares which are required to be exported/supplied with resultant product
permitted upto 10% of CIF value of Authorization.
• Specified spices only when used for activities like crushing/ grinding/sterilization/
manufacture of oils or oleoresins and not for simply cleaning, grading, re-packing etc.
• However, items reserved for imports by STEs cannot be imported against advance
authorization.
Calculation of Value addition: (Except for GEM and Jewellery Sector)
VA = [(A-B) x 100]/B
A = FOB value of export realised/FOR value of supply received.
B = CIF value of inputs covered by authorisation plus any other imported materials used on
which benefit of duty drawback (DBK) is claimed or intended to be claimed.

If some items are supplied free of cost by foreign buyer, its notional value will be
added in the CIF value of import and FOB value of export for purpose of calculating
value addition. Exports to SEZ Developers/ Co- developers, irrespective of currency of
realization, would also be covered.

Basis of AA (Quantity & Value):

• As per Standard Input Output Norms (SION) notified (or)
• On the basis of self-declaration where no SION/adhoc norms have been notified /
published (or)
• Applicant specific prior fixation of norm by the Norms Committee (or)
• On the basis of self-ratification Scheme no SION/valid Adhoc Norms for an export
product

What is SION?

• Are standard norms which define the amount of input(s) required to manufacture unit of
output for export purpose.
• Notified by DGFT on basis of recommendation of Norms Committee

Actual user condition:

 Intro & Duties

• Advance Authorization and/ or materials imported thereunder will be with actual user
condition.
• It will not be transferable even after completion of export obligation.
• However, Authorization holder will have an option to dispose of product manufactured out
of duty free inputs in DTA once export obligation is completed.

Domestic Sourcing of Inputs:

• Holder of AA has an option to procure the materials/ inputs from indigenous
manufacturer/STE in lieu of direct import against Advance Release Order
(ARO)/Invalidation letter/ Back to Back Inland Letter of Credit.
• However, AA holder may obtain supplies from EOU/EHTP/BTP/STP/SEZ units, without
obtaining ARO or Invalidation letter.

Maintenance of Proper Accounts for Authorizations:

• Every AA holder shall maintain a true and proper account of consumption and utilization
of duty free imported / domestically procured inputs against each authorisation as per
the prescribed formats
• Such records shall be preserved for a period of at least three years from the date of
redemption
• While doing export/supply, applicant shall indicate authorisation number on the export
documents.

Redemption or closure of Advance Authorization:

• On completion of exports and imports and other conditions as specified under the advance
authorisation, the Authorisation holder shall submit application in the prescribed form
alongwith supporting documents for redemption of the authorization
• Regional Authority after duly verifying grant issue EODC / Redemption Certificate
• If goods are imported against advance authorization but export obligation is not fulfilled,
duty and interest is payable.

Duty free Imports under Authorization:

• Post Export facility to Import units used in manufacture of export products without
payment of BCD
• Export shall be completd within 12 months from the date of online filing of application.and
generation of file number
• Value addition to be made for 20 % (Except for physical exports for which payment not
received in Conv Forex)
• Authorizations are issued only to products covered under SION
• Exempted only from payment of BCD
• Applicant shall file an online application before regional authority before Import
• Export proceeds shall be realized in Convertible For Ex.
• After realization of export proceeds, request for issue of transferable DFIA can be made
within a period of
• 12 M from date of export or
• 6 M from date of realization of export proceeds (Which ever is later)
• No DFIA shall be issued for an export product where SION prescribes actual user condition
for any input.
 Intro & Duties

• Holder of DFIA can procure inputs from indigenious manufacturer against Advance release
order. DFIA holder may obtain supplies from EOU/EHTP/BTP/STP without obtaining ARO.

Particulars Advance Authorization Duty Free Imports under Authorization

About • Is a facility to import Inputs to be It is a post export facility to import

used/required in the manufacture of inputs used in manufacture of export
Export product without payment of products without payment of BCD
Import duty (Excluding IGST and
Cess) subject to 15 % value addition

Export EO needs to be fulfilled within 18 Export shall be completed within 12 months f

Obligation months from Date of Authorization date of online application
Basis (Qty & SION / Self Declaration / Issued only if SION is notified.
value) Applicant Sp
ecific pror fixation of norm/ On
basis of self ratification scheme
Transferable No Transferable

Value Generally > 15 % (Except Physical > 20 %

Addition exports not realized in FCC) Tea >
50%
Available Jem and Jewellery Sector Not Available
even to
Exemption BCD, Adtnl Customs duty, IGST, Only BCD
comp Cess

Remission of Duties and taxes on Exported Products

RoDTEP scheme is based on the globally accepted principle that taxes and duties should not be
exported, and taxes and levies borne on the exported products should be either exempted or
remitted to exporters

This scheme provides for remission of the amount in the form of duty credit scrip credited
in an exporter’s ledger account with customs.

Objective of the Scheme:

The objective of the scheme is to refund, currently unrefunded:

(i) Duties/ taxes/ levies, at the Central, State & local level, borne on the exported
product, including prior stage cumulative indirect taxes on goods & services used in
production of the exported product, and
(ii) Such indirect duties/taxes/levies in respect of distribution of exported products.
Salient features of the scheme:
 Intro & Duties

• It seeks to refund to exporters the embedded Central, State and local duties/taxes that
were so far not being rebated/refunded.
• Duty credit is issued –
✓ in lieu of remission of any duty/tax/levy chargeable on any material used in the
manufacture/processing of goods or for carrying out any operation on such goods in
India that are exported, where such duty/tax/levy is not
exempted/remitted/credited under any other Scheme;
✓ against export of notified goods under FTP.
• Value of the said goods for calculation of duty credit to be allowed under the scheme
shall be the declared export FOB value of the said goods or up to 1.5 times the market
price of the said goods, whichever is less.
• The refund in the form duty credits would be credited in the electronic credit ledger in the
customs automated account of the exporter.
• Such duty credit shall be used only to pay basic customs duty on imported goods.
• The duty credit scrips are freely transferable, i.e. credits can be transferred to other
importers.
• The rebate under the scheme shall not be available in respect of duties and taxes
already exempted or remitted or credited.

Eligibility for the scheme

All exporters of eligible RoDTEP export items are eligible for the scheme. Reward under the
scheme

Reward
Rebate would be granted to eligible exporters at a notified rate as a % of FOB value with a
value cap per unit of the eligible exported product, wherever required, on export of items.
However, for certain export items, a fixed quantum of rebate amount per unit may also be
notified.

Rebate would not be dependent on the realization of export proceeds at the time of issue of
rebate. However, rebate will be deemed never to have been allowed in case of non-receipt of
sale proceeds within time allowed under the Foreign Exchange Management Act, 1999.

Ineligible supplies/ items/ categories under RoDTEP

• Export of imported goods in same or substantially the same form

• Exports through trans-shipment, meaning thereby exports that are originating in
third country but trans-shipped through India
• Export products which are subject to minimum export price or export duty
• Products which are restricted/prohibited under FTP
• Supplies of products manufactured by DTA units to SEZ/FTWZ units.
• Products manufactured in EHTP and BTP
• Goods which have been taken into use after manufacture
• Exports for which the electronic documentation in ICEGATE EDI has not been generated/
exports from non-EDI ports
 Intro & Duties

• Products manufactured or exported availing the benefit of Notification No. 32/1997 Cus.
dated 01.04.19974
Deemed Exports
• Products manufactured partly or wholly in a warehouse under section 65 of the Customs Act
• Goods for which claim of duty credit is not filed in a shipping bill or bill of export in the
customs automated system
• Products manufactured or exported in discharge of EO against an AA/DFIA/Special AA
issued under a duty exemption scheme of relevant FTP
• Products manufactured/exported by a unit licensed as 100% EOU in terms of the provisions
of FTP or by any of the units situated in FTZ/EPZ/SEZ

EPCG SCHEME (Export Promotion Capital Goods Scheme)

• EPCG scheme allows import of capital goods without payment of duty for pre-production,
production, post production.
• Capital goods imported under EPCG authorisation are exempted from IGST and
compensation cess as well but only up to 31/03/2020.
• Authorisation holder can procure capital goods indigenously (with in India) as well.
• Authorisation is valid for 18 months from the date of issue of its authorisation.
• Import of capital goods shall be subject to ‘Actual User’ condition till export obligation is
completed. After export obligation is completed, capital goods can be sold or transferred.
• Export proceeds shall be realized in freely convertible currency except for deemed
exportspplies
• Export to SEZ Units shall be taken into account for discharge of export obligation provided
payment is realised from Foreign Currency Account of the SEZ unit
• Export to SEZ Developers / Co-developers can also be taken into account for discharge of
export obligation even if payment is realised in Indian Rupees

Capital goods for the purpose of EPCG shall includes:

- Capital Goods including capital goods in CKD/SKD condition

- Computer systems and software which are a part of the Capital Goods being imported
- Spares, moulds, dies, jigs, fixtures, tools & refractories
- Catalysts for initial charge plus one subsequent charge
- Capital goods for Project Imports notified by CBIC

Exporters eligible for EPCG Scheme:

- Manufacturer exporters with or without supporting manufacturer(s),

- Merchant exporters tied to supporting manufacturer(s), and
- Service providers including service providers designated as Common Service Provider (CSP)
subject to prescribed conditions
 Intro & Duties

Export Obligation:
- Export obligation means obligation to export product(s) covered by Authorisation in terms
of quantity or value or both, as may be prescribed.

6 times of duty saved on capital goods This is over and

imported under EPCG scheme to be acheived above the average
with in 6 years from authorisation date export Obligation
Specific
Export
obligation
Export Obligation

In case of indigenous sourcing of capital

goods, specific EO shall be 25% less than the
actual EO, I.e 75% of 6 = 4.5 times

Average The average level of exports made by the

Export applicant in the preceding 3 licensing years
Obligatio for the same and similar products has to be
n acheived within the overall EO period.

While maintaining the average Export obligation, the minimum specific export obligation has to be
fulfilled in the following proportions:

Block 1 to 4th
50 %
Year

Block 5th and 6th

Balance EO
Year

Other conditions:
- Shipments under Advance Authorisation, DFIA, Drawback scheme, or reward schemes;
would also be counted for fulfilment of EO under EPCG Scheme.
- EO can also be fulfilled by the supply of Information Technology Agreement (ITA-1) items
to DTA, provided realization is in free foreign exchange.
 Intro & Duties

- Both physical exports as well as specified deemed exports shall also be counted towards
fulfilment of export obligation.
- EPCG Authorisation holder shall submit to RA concerned by 30thApril of every year, report
on fulfilment of export obligation.
- Every EPCG authorisation holder shall maintain, for a period of 2 years from date of
redemption, a true and proper account of exports/ supplies made and services rendered
towards fulfilment of export obligation.
- Applicant shall indicate authorisation number on the export documents while doing exports.
- On completion of exports and imports and other conditions as specified under the EPCG
authorisation, the Authorisation holder shall submit application in the prescribed form along
with supporting documents for redemption of the authorisation under the prescribed format
- On being satisfied, RA concerned shall issue a EODC / Redemption Certificate to the EPCG
authorisation holder and forward a copy to Customs Authorities indicating the same details
of proof of fulfilment of EO

Incentive for Early fulfilment of Export Obligation:

- Importer fulfilled the export obligation as specified below with in half or less than half of
the original export obligation period
• 75 % or more of specific export obligation
• 100 % of Average export obligation
Status Holder:
• Status Holders are business leaders who have excelled in international trade and have
successfully contributed to country’s foreign trade.
• All exporters of goods, services and technology having an import-export code
(IEC) number shall be eligible for recognition as a status holder.
• An applicant shall be categorized as status holder upon achieving export performance
during current and previous three financial years*
• However, for Gems & Jewellery Sector, the performance during the current and
previous two financial years shall be considered

Status Category Export performance

(FOB/FOR value)
 Intro & Duties

One star export house 3 Million $(US)

Two star export house 25 Million $(US)

Three star export house 100 Million $ (US)

Four Star Export House 500 Million $ (US)

FIve Star Export House 2000 Million $ (US )

• Export performance will be counted on the basis of FOB value of export earnings in free
foreign currencies.
• For deemed export, FOR value of exports in Indian Rupees shall be converted in US$
at the exchange rate notified by CBIC, as applicable on 1st April of each Financial Year.
• For granting status, export performance is necessary in at least 2 out of 4 years
• Export performance of one IEC holder shall not be permitted to be transferred to
another IEC holder. Hence, calculation of exports performance based on disclaimer shall
not be allowed.
• Exports made on re-export basis shall not be counted for recognition.
• Export of items under authorization, including SCOMET items, would be included for
calculation of export performance.
• Export of items under authorization, including SCOMET items, would be included for
calculation of export performance.
• For calculating export performance for grant of One Star Export House Status
category, exports by IEC holders under the following categories shall be granted
double weightage:
✓ Micro, Small & Medium Enterprises (MSME) as defined in Micro, Small &
Medium Enterprises Development (MSMED) Act 2006
✓ Manufacturing units having ISO/BIS
✓ Units located in North Eastern States including Sikkim and Jammu &
Kashmir
✓ Units located in Agri Export Zones

Privileges of Status Holders: Status holders are granted certain benefits like:

(a) Authorisation and custom clearances for both imports and exports on self- declaration
basis.
(b) Fixation of Input Output Norms (SION) on priority i.e. within 60 days by Norms
Committee.
 Intro & Duties

(c) Exemption from compulsory negotiation of documents through banks. The remittance/
receipts, however, would continue to be received through banking channels.
(d) Exemption from furnishing of Bank Guarantee in Schemes under FTP.
(e) Two Star Export Houses and above are permitted to establish export warehouses.
(f) Manufacturers who are also status holders (Three Star/Four Star/Five Star) will be
enabled to self-certify their manufactured goods (as per their IEM/IL/LOI) as
originating from India with a view to qualify for preferential treatment under different
preferential trading agreements (PTA), Free Trade Agreements (FTAs), Comprehensive
Economic Cooperation Agreements (CECA) and Comprehensive Economic Partnership
Agreements (CEPA).
(g) Status holders shall be entitled to export freely exportable items (excluding Gems and
Jewellery, Articles of Gold and precious metals) on free of cost basis for export
promotion subject to a certain annual limit specified for each sector separately.

EOU, EHTP, STP & BTP SCHEMES:

Units under Export Oriented Unit (EOU) Scheme, Electronics Hardware Technology Park
(EHTP) Scheme, Software Technology Park (STP) Scheme or Bio-Technology Park (BTP) Scheme:
- Can export their entire production of goods and services (except permissible sales in
DTA), and
- can import inputs and capital goods without payment of customs duty.
Governance and Admisnistation:
- STP/EHTP/BTP schemes are similar to EOU schemes and provisions are more/ less
identical.
- EOU scheme is administered by Ministry of Commerce and Industry, while
STP/EHTP/BTP schemes are administered by their respective administrative ministries.
- Software Technology Park (STP) is set up for development of software exports. Electronic
Hardware Technology Park (EHTP) are for export of electronics hardware and software.
- STP/EHTP Scheme is administered by Ministry of Information Technology. Bio Technology
Park (BTP) is established on the recommendation of Department of Biotechnology.
Eligibility:
• Such units may be set up for manufacture of goods, including repair, re-making,
reconditioning, re-engineering, rendering of services, development of software, agriculture.
• Trading units are not covered under these schemes.
• Only projects having a minimum investment of Rs 1 crore in plant & machinery shall be
considered for establishment as EOUs. However, this shall not apply to units in EHTP/
STP/ BTP, EOUs in Handicrafts/ Agriculture/ Floriculture/ Aquaculture/ Animal Husbandry/
Information Technology Services, Brass Hardware and Handmade jewellery sectors. Board
of Approvals (BoA) may also allow establishment of EOUs with a lower investment criteria.
Net Foreign Exchange Earnings:
• EOU/ EHTP/ STP/ BTP unit must be a positive net foreign exchange earner. However, a
higher value addition is specified for some sectors.
• How to compute NFE earnings?: NFE Earnings shall be calculated cumulatively in blocks of 5
 Intro & Duties

years, starting from commencement of production.

Relaxation on achieving NFE:
In case unit is not able to achieve NFE due to:
• Prohibition/ restriction imposed on export of any product, 5 years block period may be
extended suitably by BoA.
• Adverse market condition or any grounds of genuine hardship having adverse impact on
functioning of the unit, 5 year block is extendable upto 1 year.

Monitoring of NFE:
Performance of EOU/ EHTP/ STP/ BTP units shall be monitored by Units Approval Committee as
per prescribed guidelines.
Which supplies to DTA can be counted for positive NFE:
Following supplies effected from EOU/ EHTP/ STP/ BTP units to DTA (Domestic Tariff Area)
will be counted for fulfillment of positive NFE:
(a) Supplies in DTA to holders of Advance Authorisation/ Advance Authorisation for annual
requirement/ DFIA / EPCG Authorisation subject to certain exceptions.
(b) Supplies affected in DTA against foreign exchange remittance received from overseas.
(c) Supplies to other EOU/ EHTP/ STP/ BTP/ SEZ units, provided that such goods are permissible
for procurement in terms of relevant provisions of FTP.
(d) Supplies made to bonded warehouses set up under FTP and/ or under section 65 of
Customs Act and free trade and warehousing zones, where payment is received in
foreign exchange.
(e) Supplies of goods and services to such organizations which are entitled for duty free
import of such items in terms of general exemption notification issued by MoF.
(f) Supplies of Information Technology Agreement (ITA-1) items and notified zero duty
telecom/ electronics items.
(g) Supplies of items like tags, labels, printed bags, stickers, belts, buttons or hangers to
DTA unit for export.
(h) Supply of LPG produced in an EOU refinery to Public Sector domestic oil companies for
being supplied to household domestic consumers at subsidized prices under the Public
Distribution System (PDS) Kerosene and Domestic LPG Subsidy Scheme, 2002, subject to
specified conditions.

Entitlements to units under EOU, EHTP, STP & BTP

Entitlements for supplies from DTA
• Supplies from DTA to EOU/ EHTP/ STP/ BTP units will be regarded as “deemed exports”
and DTA supplier shall be eligible for relevant entitlements for deemed exports, besides
discharge of export obligation, if any, on the supplier. The refund of GST paid on
such supply would be available to the supplier subject to specified conditions and
documentations under GST law.
 Intro & Duties

• In addition, EOU / EHTP / STP / BTP units shall be entitled to following:-

✓ Imported goods are exempt from basic customs duty. Further, IGST and GST
compensation cess is exempt upto 30.09.2021.
✓ Input Tax Credit of GST paid on inputs and capital goods.
Other Entitlements
• Units will be allowed to retain 100% of its export earnings in the EEFC account.
• Unit will not be required to furnish bank guarantee at the time of import or going for
job work in DTA, subject to fulfillment of required conditions.
• 100% FDI investment permitted through automatic route similar to SEZ units.
• Under the GST law, IGST or CGST plus SGST will be payable by the suppliers who make
supplies to the EOU. The EOU will be eligible to take Input Tax Credit of the said GST
paid by its suppliers.
Export and Import of Goods:

Export: Following exports are permitted:

✓ All kinds of goods and services except items that are prohibited in ITC(HS),
✓ Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) subject
to fulfillment of the conditions indicated in ITC (HS).
Import: Following imports are permitted:

1. Export promotion material upto a maximum value limit of 1.5% of FOB value of previous
years exports.
2. All types of goods, including capital goods, required for its activities, from (i) DTA, (ii)
bonded warehouses in DTA/ International exhibition held in India, subject to ‘Actual User’
condition, provided such goods are not prohibited items of import in the ITC (HS) subject
following conditions:
(a) The imports and/ or procurement from bonded warehouse in DTA/International exhibition
held in India shall be without payment of basic customs duty. Such imports and/ or
procurements shall be made without payment of integrated tax and GST compensation
cess.
(b) The procurement of goods covered under GST from DTA would be on payment of
applicable GST and compensation cess. The refund of GST paid on such supply from DTA
to EOU would be available to the supplier subject to such conditions and documentations
as specified under GST law.
Goods including capital goods (on a self-certification basis) required for approved activity,
free of cost or on loan/ lease from clients, subject to ‘Actual User’ condition are
permitted to be imported.
3. Certain specified goods from DTA for creating a central facility, with/without payment of
duty/ taxes as provided in point 2(a) and 2(b) above.
4. Procurement and export of spares/ components, upto 5% of FOB value of exports, may be
allowed to same consignee/ buyer of the export article, subject to the condition that it
shall not count for NFE and direct tax benefits.
 Intro & Duties

Leasing of Capital Goods

• An EOU/EHTP/STP/BTP unit may, on the basis of a firm contract between parties, source
capital goods from a domestic/ foreign leasing company with/without payment of duty/
taxes as provided in point 2(a) and 2(b) of heading (IV) above. In such a case,
EOU/EHTP/STP / BTP unit and domestic/ foreign leasing company shall jointly file
documents to enable import/ procurement of capital goods.
• An EOU/ EHTP/ STP/ BTP unit may sell capital goods and lease back the same from a
Non Banking Financial Company (NBFC) subject to fulfillment of specified conditions.

Inter Unit Transfer

• Transfer of manufactured goods from one EOU / EHTP / STP / BTP unit to another EOU
/ EHTP / STP / BTP unit is allowed on payment of applicable GST and compensation cess
with prior intimation to concerned Development Commissioners of the transferor and
transferee units as well as concerned Customs authorities, following the prescribed
procedure.
• Capital goods may be transferred or given on loan to other EOU/ EHTP/ STP/ BTP/ SEZ
units, with prior intimation to concerned DC and Customs authorities on payment of
applicable GST and compensation cess. Such transferred goods may also be returned by
the second unit to the original unit in case of rejection or for any reason on payment of
applicable GST and compensation cess.

Note: Goods supplied by one unit of EOU/ EHTP/ STP/ BTP to another unit shall be on
payment of applicable GST and compensation cess following the prescribed procedure.

Sale of Unutilized Material:

• Unable to utilize goods (including capital goods and spares) and services, imported or
procured from DTA, it may be
- Transferred to another EOU/ EHTP/ STP/ BTP/ SEZ unit; or
- Disposed off in DTA with intimation to Customs authorities on payment of applicable
duties and/ or taxes and compensation cess. Further, exemption of basic customs
duties availed, if any, on the goods, at the time of import will also be payable and
submission of import Authorisation; or
- Exported.
• Such transfer from EOU/ EHTP/ STP/ BTP unit to another such unit would be treated as
import for receiving unit.
• In case of capital goods, benefit of depreciation, as applicable, will be available in case of
disposal in DTA only when the unit has achieved positive NFE taking into consideration the
depreciation allowed.
• No duty shall be payable other than the applicable taxes under GST laws in case capital
goods, raw material, consumables, spares, goods manufactured, processed or packaged, and
scrap/ waste/ remnants/ rejects are destroyed within unit after intimation to Customs
authorities or destroyed outside unit with permission of Customs authorities.
• Disposal of used packing material will be allowed on payment of duty on transaction value.
 Intro & Duties

DTA Sale of finished products/ Rejects/ Waste/Scrap/ Remanants/ and By- Products:
Entire production must be exported. However, the following are allowed as exceptions subject
to the conditions specified:
Sale of goods in DTA:
• Units (other than gem and jewellery units) will be permitted to sell finished goods
manufactured by them which are freely importable under FTP in DTA, subject to
fulfilment of positive NFE, on payment of applicable GST and compensation cess
along with reversal of basic customs duty availed as exemption, if any on the
inputs utilized for the purpose of manufacturing of such finished goods.
• No DTA sale shall be permissible in respect of, pepper & pepper products, marble
and such other notified items as also to units engaged in only packaging. Labelling,
refrigeration, pulverilasiton etc.
• Such DTA sale shall also be subject to refund of deemed export benefits availed by
the EOU/supplier as per FTP, on the goods used for manufacture of the goods
cleared into the DTA.
• An amount equal to Anti-Dumping duty under section 9A of the Customs Tariff Act,
1975 leviable at the time of import, shall be payable on the goods used for the
purpose of manufacture or processing of the goods cleared into DTA from the unit.

Services provided in DTA: For services(including software units), sale in DTA shall also be
permissible up to 50% of FOB value of exports and/ or 50% of foreign exchange earned,
where payment of such services is received in foreign exchange.
Sale of rejects in DTA: Rejects may be sold in DTA on payment of applicable GST and
compensation cess along with reversal of basic customs duty availed as exemption on inputs on
prior intimation to Customs authorities. Sale of rejects upto 5% of FOB value of exports shall
not be subject to achievement of NFE.
Sale of scrap/ waste/ remnants, arising out of production, in DTA: Scrap/ waste/ remnants
arising out of production process or in connection therewith may be sold in DTA, as per SION
notified under Duty Exemption Scheme, on payment of applicable duties and/ or taxes and
compensation cess. Such sales of scrap/ waste/ remnants shall not be subject to achievement
of positive NFE. Scrap/waste/remnants may also be exported.
In case scrap/ waste/ remnants are destroyed with permission of Customs authorities, no
duties/ taxes payable on same. However, the expression “no duties/ taxes” shall not include
applicable taxes and cess under the GST laws.
Sale of by-products in DTA: By-products may also be sold in DTA subject to achievement of
positive NFE, on payment of applicable GST and compensation cess along with reversal of basic
customs duty availed as exemption on inputs.
Procurement of spares / components, up to 2% of the value of manufactured articles, cleared
into DTA, during the preceding year, may be allowed for supply to the same consignee /
buyer for the purpose of after-sale-service. The same can be cleared in DTA on payment of
applicable GST and compensation cess along with reversal of basic customs duty availed as
exemption on inputs.
Export through Other Exporters
An EOU/ EHTP/ STP/ BTP unit may export goods manufactured/ software developed by it
 Intro & Duties

through another exporter or any other EOU/ EHTP/ STP/ SEZ unit subject to specified
conditions.
Exit from EOU Scheme
With approval of DC, an EOU may opt out of scheme. Such exit shall be subject to payment
of applicable IGST/ CGST/ SGST/ UTGST and compensation cess, if any, and industrial policy
in force. If unit has not achieved obligations, it shall also be liable to penalty at the time of
exit.
Conversion
Existing DTA units may also apply for conversion into an EOU/ EHTP/ STP/ BTP unit.
Existing EHTP / STP units, who have applied for conversion / merger to EOU unit and vice-
versa, can avail exemptions in duties and taxes as applicable. Applications for conversion
into an EOU / EHTP / STP / BTP unit from existing DTA units, having an investment of Rs
50 crores and above in plant and machinery or exporting Rs 50 crores and above annually, shall
be placed before BOA for a decision.

Deemed Exports:

The objective of deemed exports is to ensure that the domestic suppliers are not in
disadvantageous position vis-à-vis foreign suppliers in terms of the fiscal concessions.
The underlying theory is that foreign exchange saved must be treated at par with
foreign exchange earned by placing Indian manufacturers at par with foreign suppliers.
Deemed Exports for the purpose of this FTP
It refers to those transactions in which goods supplied do not leave country, and payment
for such supplies is received either in Indian rupees or in free foreign exchange. Supply of
goods as specified in FTP shall be regarded as “Deemed Exports” provided goods are
manufactured in India.
Deemed Exports for the purpose of GST
It would include only the supplies notified under section 147 of the CGST/SGST Act, on the
recommendations of the GST Council. The benefits of GST and conditions applicable for such
benefits would be as specified by the GST Council and as per relevant rules and
notification.
We will restrict our discussion to ‘Deemed exports for the purpose for FTP’ in this
chapter.
Deemed exports broadly cover three areas.
a. Supplies to domestic entities who can import their requirements duty free or
at reduced rates of duty.

b. Supplies to projects/ purposes that involve international competitive bidding

c. Supplies to infrastructure projects of national importance

Supply by manufacturer Supply by main/sub-contractors(s)
Supply of goods against Advance Supply of goods to projects or turnkey
Authorisation/Advance Authorisation for contracts financed by multilateral or bilateral
Annual Requirement/ DFIA agencies/Funds notified by Department of
 Intro & Duties

Economic Affairs (DEA), under International

Competitive Bidding.
Supply of goods to units located in EOU/ Supply of goods to any project where import
STP/BTP/EHTP is permitted at zero customs duty as per
customs Notification No. 50/2017-Customs
dated 30.6.2017, provided supply is made
against International Competitive Bidding.
Supply of capital goods against EPCG Supply of goods to mega power projects
authorisation against International Competitive Bidding (even
if customs duty on imports made by such
project is not zero). The ICB procedures
should be followed. Supplier is eligible for
benefits as specified. International
Competitive Bidding (ICB) is not mandatory for
mega power projects if requisite quantum of
power has been tied up through tariff based
competitive bidding or if project has been
awarded through tariff based competitive
bidding.
Supply to goods to UN or international
organisations for their official use or supplied
to projects financed by them.
Supply of goods to nuclear projects through
competitive bidding (need not be international
competitive bidding).
Benefits for Deemed Exports
Deemed exports shall be eligible for any/ all of following benefits in respect of manufacture
and supply of goods, qualifying as deemed exports, subject to specified terms and
conditions:
a. Advance Authorisation/ Advance Authorisation for Annual requirement/ DFIA
b. Deemed Export Drawback
c. Refund of terminal excise duty for excisable goods mentioned in Schedule 4 of
Central Excise Act 1944 provided the supply is eligible under that category of
deemed exports and there is no exemption
The refund of drawback in the form of basic customs duty of the inputs used in
manufacture and supply under the said category shall be given on brand rate basis upon
submission of documents evidencing actual payment of basic custom duties. Refund of
drawback on the inputs used in manufacture and supply under the deemed exports
category can be claimed on 'All Industry Rate' of Duty Drawback Schedule notified by
Department of Revenue from time to time provided no CENVAT credit has been
availed by supplier of goods on excisable inputs or on ‘Brand rate basis’ upon submission
of documents evidencing actual payment of basic custom duties.
Thus, now the refund of drawback of duty paid on inputs is also allowed on All
Industry Rate basis.
 Intro & Duties

Common Conditions for Deemed Export benefits

(i) Supplies shall be made directly to entities listed in the point (I) above. Third party supply
shall not be eligible for benefits/exemption.
(ii) In all cases, supplies shall be made directly to the designated Projects/Agencies/Units/
Advance Authorisation/ EPCG Authorisation holder. Sub-contractors may, however,
make supplies to main contractor instead of supplying directly to designated Projects/
Agencies. Payments in such cases shall be made to sub-contractor by main-contractor and
not by project Authority.
(iii) Supply of domestically manufactured goods by an Indian Sub-contractor to any Indian or
foreign main contractor, directly at the designated project’s/ Agency’s site, shall also be
eligible for deemed export benefit provided name of sub-contractor is indicated either
originally or subsequently (but before the date of supply of such goods) in the main
contract. In such cases payment shall be made directly to sub-contractor by the Project
Authority.