GST THEORY AND PRACTICE

PRACTICAL RECORD FOR

B.Com., VI SEMISTER
OSMANIA UNIVERSITY

1. Draw a chart showing tax structure in India.

 NOTE: UNDER

2. Draw a chart and write a note on Pre-GST Indirect tax structure in

India.
 Tax structure in India is a three tier federal structure. The central
government, state governments, and local municipal bodies make
up this structure. Article 256 of the constitution states that “No tax
shall be levied or collected except by the authority of law”. Hence,
each and every tax that is collected needs to backed by an
accompanying law.

Tax System in India:

The tax system in India allows for two types of taxes—Direct and Indirect
Tax.

The tax system in India for long was a complex one considering the
length and breadth of India. Post GST implementation, which is one of the
biggest tax reforms in India, the process has become smoother. It serves
as an all-inclusive indirect tax which has helped in eradicating the
cascading effect of tax as a whole. It is simpler in nature and has led to
upgraded the productivity of logistics.

Direct Tax:
Direct Tax is levied directly on individuals and corporate entities. This tax
cannot be transferred or borne by anybody else. Examples of direct tax
include income tax, wealth tax, gift tax, capital gains tax.

Income tax is the most popular tax within this section. Levied on individuals
on the income earned with different tax slabs for income levels. The term
‘individuals’ includes individuals, Hindu Undivided Family (HUF), Company,
firm, Co-operative Societies, Trusts.

Indirect Tax:

Indirect taxes are taxes which are indirectly levied on the public through
goods and services. The sellers of the goods and services collect the tax
which is then collected by the government bodies.

 Value Added Tax (VAT)– A sales tax levied on goods sold in the
state. The rate depends on the government.
 Octroi Tax– Levied on goods which move from one state to another.
The rates depend on the state governments.
 Service Tax– Government levies the tax on service providers.
 Customs Duty– It is a tax levied on anything which is imported into
India from a foreign nation.

3. Write any five limitations of Pre-GST Indirect taxes.

Shortcomings in the current indirect tax laws which would

be mitigated and addressed by the introduction of GST

a. Cascading Effect Presently, the various indirect taxes

being levied are not necessarily mutually exclusive. To
illustrate, when the goods are manufactured and sold both
excise duty and state level VAT are levied. The tax credit of
one levy is not available for set-off with another as excise is
a central tax and VAT is State level tax. GST will overcome
this issue.
b. Complexity in determining the nature of
transaction – Goods vs. Service Double taxation of a
particular transaction where both Goods and services
 are provided to the consumer will be mitigated . For eg-
in case of Restaurant , where food in form of goods and
services are provided to customers, both VAT and
Service TAX is levied. Under GST both the components
will be integrated and charged to TAX only once.
c. Exemptions & Concessions Under the current system,
businesses enjoy many kinds of exemptions & concessions
under different levies which break the chain of VAT and
thus create distortion. Also these kinds of benefits do not
create a level playing field especially when the same
commodity is taxed at different rates in different state
jurisdictions.
d. Narrow TAX Base Due to different thresholds under
different laws as well as numerous exemptions and
concessions, the current tax base under indirect tax is
very narrow and its covers only a small percentage of
population. GST will seek to broaden the TAX base and
engulf more and more business unit.
e. Multiple administrations Under the current system,
businessmen are required to visit different tax offices, file
returns, keep records according to the applicable laws to
his business. These increases the compliance cost of
businesses and breeds unnecessary complexity. GST will
lower down the cost of compliance for the business units.
Above are the main points of distinction between current
Indirect Tax Structure and GST .

4. What was the significance of Introduction of VAT in Indirect Taxes

priorto implementation of GST . Write a short note.

Value added tax (VAT) is a type of tax that is applied to the goods
or services produced. It is a form of an informal tax that is also
known as a multi-stage tax. The government implements this tax
for the betterment of services that are provided to the residents.
With this additional source of finance, the government will be
able to provide better services to the people. The VAT is applied
on all the goods that are produced in the companies that are
registered with VAT. It is the tax that is applied on every step of
production and the total amount is calculated after the
completion of the production process.

The difference between VAT and general sales tax:

A sales tax and VAT are both a type of consumption tax. For a
layman, there is no difference between the sales tax and the VAT.
Some may also think that there is no difference between the
working of both taxes. However, there is some key difference
between both taxes. The sales tax is the one that is imposed on
the customers only at the final stage. VAT, on the other hand, is
imposed on each and every step of production. Moreover, VAT is
also applied on the imports of services and goods to ensure and
maintain a proper working of tax.
The preference is given to VAT instead of other sales taxes
because, in VAT, the business owners or the companies act as
the tax collector for the government. It is a more sophisticated
form of tax.

5. Need for GST in India.

There are various taxes that have to pay at every stage and
differently collected by State and Central Government and rates
differ from one state to another. If we talk about GST, it will
unified whole nation and taxes will be divided among Central and
State Government, which will make easier to provide services and
goods across country, as no more additional state taxes will be
imposed.

Why in India, there is a need for GST?

Imposing several taxes on goods and services can lead to high

cost and inefficient tax structure which can subject to shirking
and revenue disclosures. The need for GST in Indian Taxation
System will add value at each stage and will set off the rates both
at state and at central level. Introducing GST, will increase the
efficiency of taxation, improves the economic growth and it will
bring whole nation to one national market.

What happen in present scenario? Our present taxation system is

very complex and very confusing, corruption chance is there,
which leads to distrust of government, there are hidden tax for
exports, whereas no charge applicable on Importing of
Goods/Services from one state to another.

Just to overcome these issues, Rajya Sabha introduced GST bill,

which will bring transparency to taxation and consumer will get to
know how much tax amount they are paying to government for
sale/ purchase/ manufacturing.

Following are some of the points that can easily explain the need
for GST:-

Tax Structure will be Simple: – At present, there are huge

number of taxes that has to pay by consumers, with GST it will
single tax to pay, which is much easier to understand. For
businesses, accounting complexities will reduce and results less
paperwork, which will save both time and money. GST will
increase economic GDP by 2%-2.5%.

Tax revenue will increase: Simple tax structure will bring more
tax payers and in return it will be revenue for government.

Competitive pricing: What GST will do? Well, it will eliminate all
other taxes of indirect taxes and this will effectively mean that tax
amount paid by end users (consumers) will reduce. As in
Economics, lower will the prices, more will be demand for that
product, results in more consumption of goods, which will be
benefited to companies.

Boost to exports: If Indian market will be competitive in pricing,

then more and more foreign players will try to enter the market,
which results in more numbers of exporters and benefits to Indian
Market. As far there is no tax rate is finalized, but yes GST is
much needed in the countries where, it lacks transparency and
complex taxation system.
There is a question in everyone’s mind……”Do we have to pay tax
at different different rates and at different different levels? Is
there no solution to this? Yes, the solution to this
is implementation of GST. GST will take away cascading effect
of various taxes that are charged on sale/ production/ purchase
and so. Products reaches to customers at very high rate as
compared to manufacturing, so with GST there will be only one
tax and it will reduce burden to pay off.

6. What are the important stages in implementation of GST.

Here are the top 9 steps for GST implementation that

every business should follow:-

Step-1 Registration :-

Every business carrying out a taxable supply of goods or services

under GST regime and whose turnover exceeds the threshold
limit which can be known in GST guidelines, if you are applicable
you will be required to register as a normal taxable person. This
process is of registration is referred as GST registration.

Now that we know who needs to register, the question arises

that are there any benefits for registration? GST registration is
critical because it will enable you to avail various benefits that
are available under the GST regime. One such benefit is to avail
seamless input tax credit. Multiple taxes are being clubbed under
GST and thus the cascading of taxes that is prevailing currently
will no longer be the case. Also, timely registration will help you
avoid any kind of interface with tax authorities.

Step-2 Organization realignment:–

GST is going to affect each business in one way or other, so a
proper information should be found out about the supply chain of
the organization i.e. which area will be most affected by GST and
which area will be least affected and according to this proper
organization realignment should be done.

Step-3 Alignment of invoicing :–

We know how important invoices are , there importance will

increase after the implementation of GST , A tax invoice is an
essential evidence to:

 support a registered person’s claim for the ITC of GST

(input tax) incurred;
 trigger the time of supply as the invoice date will
determine when GST is to be accounted for by a
registered person on the supply of goods and services
(accounting on invoice basis);
now there are certain guidelines that needs to be followed when
making this invoices. To know format of tax invoice please refer
article “GST tax invoice”

other invoices like debit, credit notes and other accounting

formats should also be aligned according to GST requirements.

Step- 4 IT systems:

with GST comes a large number of challenges for various

organization like detail record keeping has become necessary,
input credit rules are complicated, large number of
compliances ,the cost of compliance is too high for the whole
supply chain , a good IT infrastructure can help the organizations
in tackling this challenges hence an updated IT system should be
put into place before GST. To know various ways in which IT can
help during GST implementations please read the article”Do you
need IT system for GST? ”

Step-5 Update GSTIN to your trade network :-

GST registration is required to be obtained for each state from

where taxable supplies are being made. Each taxpayer will be
allotted a State wise PAN-based 15-digit Goods and Services
Taxpayer Identification Number (GSTIN). This number will
serves as an identification prove for businesses and have to used
while making invoices, hence GSTIN of both vendors and
customers have should be found out to make invoices therefore it
is necessary for businesses to update GSTIN to Vendors and
customers which will be different in different states.

Step-6 Input tax credit arrangement:–

A taxable person can accumulate credits of taxes paid and carry

them forward in a return. With the introduction of the GST, the
last set of credits will have to be transferred. To do this, you
must furnish proof of his/her last return filed under the old
regime. You will, therefore, need to make sure that all input
taxes paid are included in it; by doing so, you will be claiming the
credit of the same under the new regime.

For example, let’s consider July 1, 2017 as the appointed day for
the GST rollout. The taxpayer must make sure that he/she has
taken into account all the stock lying on June 30, 2017 and claim
input credit during the filing of returns for the period ending
June 30, 2017. The taxpayer, thus, must ensure that all such
goods and services are eligible for such a credit under the new
GST law.

Step-7 Understanding various GST tools and its working :-

When GST rolls out, each registered taxpayer will get a profile
created on the government’s GST website. The taxpayer using
the login credentials will be able to access all features along with
a dashboard. All the taxpayers will also get three electronic
ledgers namely E-cash Ledger, E-credit Ledger & E-liability
Ledger. These ledgers will reflect the amount of tax payable,
input credit balance, and on adding money to the cash ledger the
taxpayer will also be able to settle the tax liability online.

Step-8 Monitor progress and keep your employees

informed:-
Getting ready for GST compliance is a huge challenge.
Companies need to keep on monitoring their progress from time
to time so as not to fall back. For this proper flow of information
is required as fast information about status can make you make
right decisions at right time.

As companies take steps to get ready for GST compliance, they

may encounter disruption of internal processes. They need to
take their employees into confidence and explain that this is just
a transition phase and soon they will get used to this, and things
will fall into place.

Step-9 Review and validate results:-

GST is much more stringent than our old taxation system hence
even when it seems that your organization is completely
prepared for GST reviewing the rules and your preparedness for
GST posses no harm. Keep reviewing may result in detection of
some error which can cause the company to dodge many
difficulties in the future. Hence reviewing and validating the
results will be an important step for GST implementation.

Know the best ERP for manufacturing which is GST ready and
can save you a lot of trouble.

7. what are the Taxes Sub summed under GST?

To be able to make the most of the new indirect taxation law,

taxpayers need to understand it’s components well.
The GST Council which was set up by the Central Government to
execute GST implementation has proposed a new tax framework-
structure for GST.
First and foremost, GST represents a "One Nation, One tax"
outlook, which is necessary to do away with multi-tax regimes
that lead to inefficiencies such as cascading taxes, levy of excise
at the point of manufacturing and lack of uniformity in tax levies.
Currently, Goods and Services are taxed under various disparate
tax categories such as Excise Duty, VAT or Central Sales Tax,
Service Tax (in the case of services dispensed) and Customs Duty
(for imports). Some of these taxes are levied by the central
government, and others by the state government. A unified
approach – GST – will help do away with these
Complexities by enabling a single tax regime right from
manufacturer to consumer. It is important to know that GST is a
destination-based tax i.e., the tax is credited to the taxation
authority whose jurisdiction prevails at the place of consumption
(also called the place of supply). Moreover, GST will be levied on
value-addition, by allowing for input tax credit at each stage of
the transaction chain.
Taxes subsumed under GST :
The following are the disparate taxes (levied by the Centre and
States) which will be subsumed under the new dual-GST regime.
A) Taxes currently levied and collected by the Centre :
✧ Central Excise Duty.
✧ Duties of Excise. (Medicinal and Toilet Preparations)
✧ Additional Duties of Excise. (Goods of Special Importance)
✧ Additional Duties of Excise. (Textiles and Textile Products)
✧ Additional Duties of Customs. (commonly known as CVD)
✧ Special Additional Duty of Customs. (SAD)
✧ Service Tax.
✧ Central Surcharges and Cesses so far as they relate to supply of
goods and services.
B) Taxes currently levied and collected by the States :
✧ State VAT
✧ Central Sales Tax, Entry Tax (all forms)
✧ Entertainment and Amusement Tax (except when levied by the
local bodies)
✧ Taxes on advertisements
✧ Purchase tax
✧ Taxes on lotteries, betting and gambling
✧ State Surcharges and Cesses so far as they relate to supply of
goods and services.
The taxes to be subsumed were decided after intense debate and
consideration of some core principles that were in line with the
GST ethos. Each tax was first examined to ensure it qualified for
indirect taxation and was related to the supply of goods or
services. Moreover, a tax which was to be subsumed needed to
be part of the transaction chain right from imports through
manufacturing to the provision of services and the consumption
of goods and services. Another important criteria to allow a tax to
be subsumed was that the sub summation should lead to free
flow of tax credit at Intra-and Inter-State levels. Also, the revenue
considerations of both the Centre and the State were taken into
perspective while arriving at the final list of subsumed taxes.

8. Visit CBIC Website and make a note of important contents.

 9. What is the major difference in incidence of tax during pre and
post GST implementation with respect to inter-state transfer.
Explain with example.

The GST is about to bring the Indian marketplace into the foray of a
single unified tax system – the largest tax reform that the nation has
witnessed since independence. The aim of the GST is to subsume all
the existing taxes into a single tax for bringing about ease of credit
flow across the nation (interstate), and across the supply chain – right
from the manufacturer to the consumer. Additionally, with the advent
of the GST, concepts such as manufacture, trade and service provisions
become irrelevant as supply becomes the taxable event.

What does Supply mean under the GST?

Under the GST regime, supply has been defined to include transfers.
Since certain specific supplies made without consideration are taxable,
this amounts to stock transfers under the GST also being taxable.
Businesses are required to understand the implications that a stock
transfer can have – something we have provided an overview of here.
Taxability of stock transfers
 A registered manufacturer is required to pay 100% excise duty +
10% of the production cost under the central excise laws for
making a stock transfer of excisable goods.
 A registered manufacturer is required to furnish Form F which
makes stock transfers non-taxable under the VAT. It is however
pertinent to note that different states have different percentages
under the VAT on the basis of which the input on purchase of
goods can be reversed.
Tax is levied on supply (inclusive of transfers). When coupled with the
definition of a distinct person, it must be understood that a branch has
the meaning of a different entity. Therefore, stock transfers become
taxable in the following manner –

 Intrastate – when a business entity is registered in one state with

more than one registration
 Interstate – when there occurs a transfer between two business
entities in different states (which is a taxable event)
The cash flow of a business is greatly impacted under the GST due to
the taxability of stock transfers as tax is paid against a stock transfer
on the date of such transfer and the input tax credit is utilized only
when such transfer has been liquidated by the branch receiving the
transfer. Therefore, businesses should keep in mind requirements of
additional working capital that may arise due to taxability of stock
transfers, especially businesses operating in the fast-moving consumer
goods and pharmaceutical sectors. SMEs may find this aspect as an
obstacle if they don’t pay attention to their working capital needs.

It may also be noted that funds for seasonal businesses are blocked
for long periods of time as the sales mostly take place only during a
particular period in a year – additionally,GST is paid during the month
when the transfers are made from the branch however, the credit shall
only be utilized during the month when the actual sale takes place.
ITC Impact
 Reduction in rate of availability of input VAT for goods or inputs
that are used for manufacturing of finished goods, which are then
transferred, with the reversal rate differing from one state to the
other.
 Input VAT credit is mostly available at a rate of 4% excess of the tax
paid on the purchase of the goods. In case VAT is paid at 12.5 % for
the purchase of a textile bundle, then an excess of 4 % amounting
to 8.5% shall be permitted as input VAT credit. This 4% will further
be reversed. When such input tax credit is reversed, it is added to
the main product cost and leads to a cascading effect.
Let us consider the following example, under the current tax regime
–

VAT

Value of purchase of 10 textile bundles 10,000

14.5% VAT 1,450

Total Value 11,450

Stock transfer NIL

Exemption from VAT NIL

Eligibility in terms of Input Tax Credit

14.5% VAT 1,450

Excess of 4% Input tax credit – 10.5%

(14.5% Minus 4%) 1,050
 Reversal Rate at 4% 4,00

Therefore, INR 400 is added to the total product cost.

Under the GST regime, input tax credit is available basis the tax paid
on the transferred stock. Assuming GST is levied at 18% –

GST

Value of purchase of 10 textile bundles 10,000

CGST 9% 900

SGST 9% 900

Total Value 11,800

Stock Transfer NIL

CGST 9% 900

SGST 9% 900

Eligibility in terms of Input Tax Credit

CGST 9% 900

SGST 9% 900

Therefore, INR 1,800 is available as input tax credit.

The lack of requirement of declaration forms under the GST makes the
processing of stock transfers a much faster process. Under the current
regime (VAT), the hassle of furnishing Form F for being eligible to get
an exemption on the stock transfer is cumbersome. The assessing
authority needs to be notified of sending the goods to a different
branch where the sale takes place on a different date.

Under the GST regime, there are no declaration forms required to be

filed for stock transfers, making the process extremely smooth and
doing away with extra effort and costs that dealers had to earlier incur.

Ascertaining tax basis the stock transfers

Stock transfers are usually done when goods are moved from one
branch or unit to another without involving a consideration. However,
it is difficult to ascertain how much tax liability arises on such
transactions. Under the central excise laws, as mentioned above, the
cost is taken as follows –

 100% – for payment of excise duty

 10% – for the cost of production
Under the VAT laws, levy of tax is exempt on stock transfers.

Under the GST regime, the value of a transaction is based on the value
of the GST levied on the goods. Where a stock transfer is in question,
the value of the transaction cannot be used to determine the tax levy
as such transfer is made in the absence of a consideration. The
determination of tax still remains a complicated matter under the GST
as the tax to be imposed is expected to be valued on the basis of
goods grouped together on the basis of factors such as their qualities,
likenes etc. shall enable the business to decide the cost of production
and the profit on the product.

Finalizing of the GST laws and rules are awaited in order to shed light
and clarity on these aspects.

The need for having units and branches

Most businesses today have units and branches in order to feed their
statutory needs and gain tax advantages. Having operations in several
states enables a business to gain benefits from the local VAT, in turn
allowing the buyer to avail of credit. Further, branch transfers are
voluminous as stock transfers are not taxable.

Since interstate transactions under the GST allow for seamless flow of
input tax credit, businesses are not required to open branches in all
the states in which they operate, for statutory reasons. Branches or
units under the GST are now only required if it is viable for the
business in terms of its commercial operations. This helps a business
to cut down costs incurred on opening branches, enables better
planning and preparation, and more importantly, reduces the high
volume of branch transfers.

Impact of cross branch transfer under the GST

Businesses having branches are bound to engage in transfers across
branches based on demand and availability of inventory in one branch
as opposed to the other. For example, a head office branch may
transfer goods to a unit based in a different state. The goods received
by the unit are then transferred to another unit of the same business –
this entire transaction is very costly under the GST regime. Under the
GST regime, every time a transfer takes place, GST is payable, resulting
in an impact on the cash flow of the branch / unit. This process is
required to be avoided in order to make transfers more cost effective
and beneficial and enable transfers directly from a warehouse to a
branch or unit.

Businesses can avoid working capital pressure by transferring all stock

to a branch that has high demand – this will ensure that liquidation of
stock happens faster.

In conclusion, stock transfers are allowed as credit under the GST

despite being fully taxable – leading to an elimination of the cascading
effect of tax as under the current tax system. This will enable products
to be more cost effective at their final value. Finally, working capital
pressure is expected to reduce to a great extent as branch transfers
are likely to be more effective under the GST regime.

7. What are the exclusive products not included in the purview of GST.
Why?

There are certain activities which are items not covered under GST. They
are beyond the scope of GST, i.e., GST will not apply on them. These are
classified under Schedule III of the GST Act as “Neither goods nor
services”.
1.Services by an employee to the employer in relation to his
employment
Related parties include employer-employee which raised many concerns
whether employment now attracted GST. This clarification has been
brought in to clarify whether GST is not applicable on employment. An
employee will still pay income tax on salary earned.
2. Court/Tribunal Services including District Court, High Court and
Supreme Court
Courts will not charge GST to pass judgement.
3. Duties performed by:

 The Members of Parliament, State Legislature, Panchayats,

Municipalities and other local authorities
 Any person who holds a post under the provisions of the Constitution
 Chairperson/Member/Director in a body established by the
government or a local body and who is not an employee of the same

4. Services of a funeral, burial, crematorium or mortuary including

transportation of the deceased
There are no taxes on funeral services for any religion.
5. Sale of land and sale of building
Construction of a new building is subject to GST (being works contract).
6. Actionable claims (other than lottery, betting and gambling)
Actionable Claims’ means claims which can be enforced only by a legal
action or a suit, example a book debt, bill of exchange, promissory note. A
book debt (debtor) is not goods because it can be transferred as per
Transfer of Property Act but cannot be sold. Bill of exchange, promissory
note can be transferred under Negotiable Instruments Act by delivery or
endorsement but cannot be sold.
Actionable claims are neither products nor services. They can be
considered as something in lieu of money. So GST will not apply on these.
Lottery, betting and gambling attract 28% GST.
7. 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*.
8. Supply in Customs port before Home consumption*:
(a) Supply of warehoused goods to any person before clearance for home
consumption;
(b) Supply of goods by the consignee to any other person, by an
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.
*Newly inserted items to be applicable from 1st February 2019

Apart from Schedule III, GST is also not applicable on the following,i.e.,
they are beyond the scope of GST:

1. Petroleum products

2. Alcohol
11. When GST council was notified and what is its composition.
As provided for in Article 279A of the Constitution, the Goods and Services Tax
Council (the Council) was notified with effect from 12th September, 2016. The
Council is comprised of the Union Finance Minister (who will be the Chairman of
the Council), the Minister of State (Revenue) and the State Finance/Taxation
Ministers as members. It shall make recommendations to the Union and the States
on the following issues:
a) the taxes, cesses and surcharges levied by the Centre, the States and the
local bodies which may be subsumed under GST;

b) the goods and services that may be subjected to or exempted from the
GST;

c) model GST laws, principles of levy, apportionment of IGST and the

principles that govern the place of supply;

d) the threshold limit of turnover below which the goods and services may
be exempted from GST;

e) the rates including floor rates with bands of GST;

 f) any special rate or rates for a specified period to raise additional resources
during any natural calamity or disaster;

g) special provision with respect to the North- East States, J&K, Himachal
Pradesh and Uttarakhand; and

h) any other matter relating to the GST, as the Council may decide.

COMPOSITION OF GST COUNCIL:

One half of the total number of Members of the Goods and Services Tax Council
shall constitute the quorum at its meetings. The Goods and Services Tax Council
shall determine the procedure in the performance of its functions. Every decision
of the Goods and Services Tax Council shall be taken at a meeting, by a majority
of not less than three-fourths of the weighted votes of the members present and
voting, in accordance with the following principles, namely: —
a) the vote of the Central Government shall have a weightage of one-third of
the total votes cast, and

b) the votes of all the State Governments taken together shall have a
weightage of two-thirds of the total votes cast, in that meeting.

12. What are different types of taxes levied under GST.

Concurrent dual model of GST: India has adopted dual GST model because of
its unique federal nature. Under this model, tax is levied concurrently by the Centre
as well as the States on a common base, i.e. supply of goods or services or both.
GST to be levied by the Centre would be called Central GST (Central tax / CGST)
and that to be levied by the States would be called State GST (State Tax / SGST).
State GST (State Tax / SGST) would be called UTGST (Union territory tax) in
Union Territories without legislature. CGST & SGST / UTGST shall be levied on
all taxable intra-State supplies.

The IGST Model: Inter-State supply of goods or services shall be subjected to

integrated GST (Integrated tax / IGST). The IGST model is a unique contribution
of India in the field of VAT. The IGST Model envisages that Centre would levy
IGST (Integrated Goods and Service Tax) which would be CGST plus SGST on all
inter-State supply of goods or services or both. The inter-State supplier will pay
IGST on value addition after adjusting available credit of IGST, CGST, and SGST
on his purchases. The Exporting State will transfer to the Centre the credit of
SGST used in payment of IGST. The person based in the destination State will
claim credit of IGST while discharging his output tax liability in his own State.
The Centre will transfer to the importing State the credit of IGST used in payment
of SGST. The relevant information will also be submitted to the Central Agency
which will act as a clearing house mechanism, verify the claims and inform the
respective governments to transfer the funds. The major advantages of IGST
Model are:

a) Maintenance of uninterrupted ITC chain on inter-State transactions.

b) No upfront payment of tax or substantial blockage of funds for the inter-

State supplier or recipient.

c) No refund claim in exporting State, as ITC is used up while paying the

tax.

d) Self-monitoring model.

e) Model takes ‘Business to Business’ as well as ‘Business to Consumer’

transactions into account. levied on all taxable intra-State supplies.

Tax Rates: Owing to unique Indian socio-economic milieu, four rates namely 5%,
12%, 18% and 28% have been adopted. Besides, some goods and services are
exempt also. Rate for precious metals is an exception to ‘four-tax slab-rule’ and
the same has been fixed at 3%.

13. What are the laws supporting the levy of GST. Explain with
examples or rules.

The One Hundred and Twenty Second Amendment Bill of

the Constitution of India, officially known as The Constitution (One
Hundred and First Amendment) Act, 2016, introduced a national Goods
and Services Tax in India from 1 July 2017.[1]
The GST is a Value added Tax (VAT) proposed to be a comprehensive
indirect tax levy on manufacture, sale and consumption of goods as well as
services at the national level. It replaces all indirect taxes levied on goods
and services by the Indian Central and state governments. It is aimed at
being comprehensive for most goods and services.
The Union Government in third week of December, 2014 (19 December,
2014) introduced Constitution (122nd Amendment) Bill, 2014 in Parliament
which when passed shall pave the way for introduction of proposed Goods
and Service Tax (GST) in India. This is an improvised version of lapsed
115th Amendment Bill of 2011.

Contrary to the general perception amongst many quarters that this Bill
itself is a GST Bill, let it be very clearly understood that this is not a GST
Bill. In fact, GST Bill is not in sight at all at this point in time. What has been
introduced is only the Constitutional Amendment Bill enabling or
empowering the union Government to levy a tax to be called GST which it
cannot levy under the present Constitution. The Bill on passage would
enable the Central Government and the State Governments to levy GST.
This tax (GST) shall be levied concurrently by various states as well as
Union Government. Once this is passed by two-third majority in the
Parliament, atleast 50 per cent of the states will have to pass it. Once this
amendment is through, the road will be clear for GST Bill (and then Act),
given the political will. Eventually, we will then have the following taxes –

 National level GST [Central GST (CGST) and Inter-state GST

(IGST)]
 State Level GST (SGST)
Salient Features of Constitution (One Hundred And
Twenty-Second Amendment) Bill, 2014
The Constitution (One Hundred and Twenty-Second Amendment) Bill,
2014 was introduced in the Lok Sabha on December 19, 2014. The
following is the gist of amendments proposed by this Bill:

1. The Bill seeks to amend the Constitution to introduce the goods

and services tax (GST). Consequently, the GST subsumes
various central indirect taxes including the Central Excise Duty,
Additional Excise Duties, Service Tax, Additional Customs Duty
(CVD) and Special Additional Duty of Customs (SAD), etc. It
also subsumes state Value Added Tax (VAT)/Sales Tax, Central
Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase
Tax and Luxury Tax, etc.
2. Concurrent powers for GST: The Bill inserts a new Article 246A
in the Constitution to give the central and state governments
the concurrent power to make laws on the taxation of goods
and services
3. Integrated GST (IGST): However, only the centre may levy and
collect GST on supplies in the course of inter-state trade or
commerce. The tax collected would be divided between the
centre and the states in a manner to be provided by
Parliament, by law, on the recommendations of the GST
Council.
4. GST Council: The President must constitute a Goods and
Services Tax Council within sixty days of this Act coming into
force. The GST Council aim to develop a harmonized national
market of goods and services.
5. GST council examines issues relating to goods, services tax and
make recommendations to the Union, and the States on
parameters like rates, exemption list and threshold limits. The
Council shall function under the Chairmanship of the Union
Finance Minister and will have the Union Minister of State in
charge of Revenue or Finance as member, along with the
Minister in-charge of Finance or Taxation or any other Minister
nominated by each State Government.
6. Composition of the GST Council: The GST Council is to comprise
of the following three members / class of members:
1. the Union Finance Minister (as Chairman),
2. the Union Minister of State in charge of Revenue or Finance,
and
3. the Minister in charge of Finance or Taxation or any other,
nominated by each state government.
7. Functions of the GST Council: These include making
recommendations on:
 taxes, cess and surcharges levied by the centre, states and
local bodies which may be subsumed in the GST;
 goods and services which may be subjected to or exempted
from GST;
 model GST laws, principles of levy, apportionment of IGST
and principles that govern the place of supply;
 the threshold limit of turnover below which goods and
services may be exempted from GST;
  rates including floor rates with bands of GST;
 special rates to raise additional resources during any natural
calamity;
 special provision with respect to Arunachal Pradesh, Jammu
and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland,
Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and
 Any other matters relating to the goods and services tax, as
the Council may decide.
8. The Goods and Service Tax Council shall recommend the date
from which the goods and service tax be levied on petroleum
crude, high speed diesel, motor spirit (commonly known as
petrol), natural gas and aviation turbine fuel.
9. Resolution of disputes: The GST Council may decide upon the
modalities for the resolution of disputes arising out of its
recommendations.
10. Restrictions on imposition of tax: The Constitution imposes
certain restrictions on states on the imposition of tax on the
sale or purchase of goods. The Bill amends this provision to
restrict the imposition of tax on the supply of goods and
services and not on its sale.

14. What is RNR?

Focus under GST is to arrive at such rates which would not decrease the
current revenue generation by Central & State government. Revenue
Neutral Rate (RNR) is a structure of different rates established in order to
match the current revenue generation with revenue under GST. RNR
calculation has to include the cascading effect on certain goods having no
excise or sales tax implications.
For example-: Wheat would get costlier due to RNR fixed for diesel being
higher than current tax rate even though wheat does not have any excise
or sales tax implications.
The government of India had appointed a committee which is headed by
Dr. Arvind Subramanian. Committee had released a detailed report on the
calculation of RNR and the tax structure. RNR is calculated by the
committee with three different approaches-:

 Macro approach-:
 RNR is calculated on basis of total data for domestic output/net
imports and consumption of capital inputs. GST has a positive rate and
zero rates on exports are two assumptions under this approach. RNR
found to be 11.6% after factoring compliance of GST at 80%.

 Indirect tax turnover approach-:

This Approach was shared by NIPFP(National Institute of Public

Finance Policy). There are three steps under this approach-:

1. Estimate goods revenue base at the state level.

2. Estimate the services revenue base at the national level.
3. Adjustments for certain goods & services not to be taxed under GST.

This approach puts the RNR at 18.86%.

 Direct tax turnover approach

The approach was shared by the Thirteenth Finance Commission. RNR is

calculated on the basis of input tax data of all the registered entities. This
approach puts the RNR at 11.98 %.
RNR is likely to be selected around 18% after making few changes to the
indirect tax turnover approach.

Ratio for Distribution of RNR

One of the biggest hurdle in deciding the RNR is the distribution ratio
among the central and state government. The ratio has to include the
effects of the loss to be borne by different state governments. Two different
ratios were selected for assessment. Central to state ratio of 60:40 or the
reverse ratio of 40:60.
“Coming up with an RNR is as much soft judgment as hard science” as
quoted by the subramanian committee on the report shared by them with
CBEC on RNR and GST rates. The drawback of setting a RNR low would
lead to decrease in growth rate of the economy in long term.

15. What are the categories of Goods and Services for levying GST.
According to Government of India, nearly 50% of regularly using items
including food items are included in exempted categories which do not
attract GST at present. The GST council and other GST authorities notifies
list of exempted goods time to time. Such goods are not fallen under
payment of GST tax.

GST rate for Essential Goods and Services in India (Common Goods
and services)
Essential category of goods and services (common goods and services)
are charged lower GST rate of 5%. Essential goods and services
(Commonly used) are the goods and services for necessary items and
items under basic importance.

GST rate for Standard Goods and Services for GST in India
A major share of GST tax payers falls under this category of Standard
Goods and Services. There are two slabs of GST under standard goods
and services. Standard Goods and services fall under one slab attract 12%
GST and the items under 2nd slab attract 18% GST.
GST rate for Special category of Goods and Services in India.
A GST rate of 28% is levied at present against Goods and Services of
special category of Goods and Services. The luxury items also fall under
this special category of goods and services
GST rates categories at a glance:

Tax Rates Products

Household necessities such as edible oil, sugar, spices, tea, and coffee (except i
5% are included. Coal , Mishti/Mithai (Indian Sweets) and Life-saving drugs are also
under this GST slab

12% This includes computers and processed food

 Hair oil, toothpaste and soaps, capital goods and industrial
18%
intermediaries are covered in this slab

Luxury items such as small cars , consumer durables like AC and Refrigerators, p
28%
cars, cigarettes and aerated drinks , High-end motorcycles are included here.

Though edible items like sugar, tea and coffee are included in the 5% slab,
milk does not attract any tax under the new GST regime. The idea behind
this is to ensure that basic food items are available for everyone but instant
food is kept out of this category.

No Tax

Apart from other items that enjoy zero GST tax rate, these are the
commodities added to the list after 11th June rate revision –

 Hulled cereal grains like barley, wheat, oat, rye, etc.

 Bones and horn-cores unworked and waste of these products.
 Palmyra jaggery
 All types of salt
 Dicalcium Phosphate (DCP) of animal feed grade conforming to IS
specification No. 5470 :2002
 Kajal [other than kajal pencil sticks]
 Picture books, colouring books or drawing books for children
 Human hair – dressed, thinned, bleached or otherwise worked
 Sanitary Napkins
 Unit container-packed frozen branded vegetables
(uncooked/steamed)
 Vegetables preserved using various techniques including brine and
other preservatives that are unsuitable for immediate human
consumption.
 Music Books/manuscripts

GST stands for Goods and Services Tax. It is classified into three
types:

 CGST –Central GST

  SGST –State GST
 IGST –Integrated GST

Finance Minister Arun Jaitley said that the government wanted to keep the
GST rates close to the original rates. But there were differences in case of
some items because of the changes in the economy as well as customer
preferences. Some commodities were kept in the high tax bracket (18-28%)
but on scrutinizing the list, they found that these commodities should be
considered as necessities and not luxuries. This is why the GST rates were
revised for commodities such as notebooks, exercise books, spectacles
and lenses and some other items.

16. Briefly explain the important components of Supply.

Definition of ‘supply’ Under section 2(92) read with section 3 ‘supply’
includes all forms of supply of goods and/or services such as sale,
transfer, barter, exchange, licence, rental, lease or disposal made or
agreed to be made for a consideration by a person in the course or
furtherance of business. Schedule I specified the supply.
Analysis: Supply is the term replaced for the term sale; no scope has been
left for any confusion and the definition includes every term which shall be
coined as sale. Even the supply which is made or agreed to be made
without a consideration will also amount to sale.
Any transfer of title to goods is a supply of goods, transfer of right to use
goods [section 4(8) of APVAT Act, 2005], Hire purchase transactions,
transfer of business assets are also brought under the ambit of term
‘supply’ as per Schedule II.
1.Supply includes
(a)all forms of supply of goods and/or services such as sale, transfer,
barter, exchange, license, rental, lease or disposal made or agreed to be
made for a consideration by a person in the course or furtherance of
business,
 (b) importation of service, whether or not for a consideration and whether or
not
in the course or furtherance of business, and
(c) a supply specified in Schedule I, made or agreed to be made without a
consideration
2.Schedule II, in respect of matters mentioned therein, shall apply for
determining what is, or is to be treated as a supply of goods or a supply of
services.

Activities which are not Supply

Activities and transactions specified in Schedule III –
 Services by an employee to the employer in the course of or in relation to
his employment;
 Services of funeral, burial, crematorium or mortuary including
transportation of the deceased.
 Actionable claims, other than lottery, betting and gambling
 Sale of land / Sale of building after occupation or completion will not
attract GST. Thus, sale of building before completion or before
occupancy will attract GST
Such activities or transactions undertaken by the Central Government, a
State Government or any local authority in which they are engaged as
public authorities, as may be notified by the Government on the
recommendations of the Council.

Deemed Supply of Goods & Services

Following matters will be treated as deemed supply of goods and services
and will attract GST :
1.In case of Transfer of title in goods, OR, Right in goods, OR of
undivided share in goods without the transfer of title, OR, transfer under an
agreement which stipulates that property will pass at a future date upon
payment of full consideration
2.In case of Land & Building, – Any lease, tenancy, easement, license to
occupy land or building ( both for commercial or residential purpose, fully or
partly)
 3.Treatment or Process , which is being applied to another person’s goods
is a supply
4.Transfer of Business Assets – Where goods forming part of the assets of
a business are transferred or disposed of, and are no longer forming part of
business OR Where goods held for business are put to use for any private
use, in such a way, as not for business OR Where any person ceases to be
a taxable person, any goods earlier forming part of business, unless (a) the
business is transferred as a going concern to another person, or (b) the
business is carried on by a personal representative who is deemed to be a
taxable person With or Without for a Consideration
5.Supply of Services – Following shall be treated as deemed “supply of
Services” :
 renting of immovable property;
 construction of a complex, building, civil structure or a part thereof,
including a complex or building intended for a sale to a buyer, wholly or
partly, except where the entire consideration has been received after
issuance of completion certificate;
 Temporary transfer or permitting the use or enjoyment of any intellectual
property right;
1. Composite Supply – Following shall be treated as deemed “supply
of Services” :
o works contract as defined in section 2 (119) of CGST Act
o Supply, by way of or as part of any service or in any other manner
whatsoever, of goods, being food or any other article for human
consumption or any drink ( other than alcoholic liquor for human
consumption), where such supply or service is for cash, deferred
payment or other valuable consideration.
7.Supply of goods – supply of goods by any unincorporated association
or body of persons to a member thereof for cash, deferred payment or
other valuable consideration.

17. What activities are included in supply?

 1.Supply includes
(a)all forms of supply of goods and/or services such as sale, transfer,
barter, exchange, license, rental, lease or disposal made or agreed to be
made for a consideration by a person in the course or furtherance of
business,
(b) importation of service, whether or not for a consideration and whether or
not
in the course or furtherance of business, and
(c) a supply specified in Schedule I, made or agreed to be made without a
consideration
2.Schedule II, in respect of matters mentioned therein, shall apply for
determining what is, or is to be treated as a supply of goods or a supply of
services.

Activities which are not Supply

Activities and transactions specified in Schedule III –
 Services by an employee to the employer in the course of or in relation to
his employment;
 Services of funeral, burial, crematorium or mortuary including
transportation of the deceased.
 Actionable claims, other than lottery, betting and gambling
 Sale of land / Sale of building after occupation or completion will not
attract GST. Thus, sale of building before completion or before
occupancy will attract GST.
Such activities or transactions undertaken by the Central Government, a
State Government or any local authority in which they are engaged as
public authorities, as may be notified by the Government on the
recommendations of the Council.
18. Brief registration process of GST.
The structure of GST stands on the foundation of the registration
system, for it is a registered
person who is liable to pay tax and who is eligible to avail the
benefits of the input tax
credit mechanism. A registered person can also collect GST from
his recipients.

The GST law gives a limited option to certain categories of

persons to avoid registration
and thus avoid the tax liability lawfully. However, if one falls
within the reach of an extensive
list of statutorily prescribed criteria requiring compulsory
registration, the supplier must
get registered.
Persons Liable for GST Registration - Section 22 of the
CGST Act :
a) State or UTs :
Every supplier of the goods or services or both needs to register
in a State or a Union
Territory, if his turnover exceeds _ 20 lakhs.
b) Special Category States :
In case of special category states namely AP, J & K, Assam,
Nagaland, Mizoram, Sikkim,
Uttarakhand, etc., the person shall be liable to be registered if his
turnover exceeds _ 10
lakhs.
c) Aggregate Turnover :
Means aggregate value of all taxable supplies, exempt supplies,
Exports and inter-State
supplies of persons having the same PAN but excludes taxes.
Persons Not Liable to be Registered – Section 23 of the
CGST Act :
Following persons are not liable for registration.
a) Exempted Goods or Services :
Any person who is engaged exclusively in supply of those goods
or services which are
wholly exempted from tax or not liable to pay tax under CGST or
under IGST Act.
b) An Agriculturist :
For those supply only which is produced out of cultivation of land.
c) Notified Person :
Furthermore, the government on the recommendation of the GST
council may issue
notification & specify special category of persons who are not
liable for registration.
Procedure for GST Registration :
a) Details to be furnished :
Before applying for registration process, person has to declare the
following :
✧ PAN
✧ Mobile number
✧ E-mail address
✧ State or UT
In Part A of FORM GST REG-01 on the Common Portal, either
directly or through a
Facilitation Centre notified by Commissioner.
b) Reference Number :
On successful verification of the PAN, mobile number and e-mail,
a temporary reference
number shall be generated and communicated to the applicant.
c) Application :
Using the reference number, the applicant shall electronically
submit an application in
Part B of FORM GST REG-01, duly signed or verified through
electronic verification code
(EVC), along with documents specified in the form.
III B.Com., __Theory & Practice of GST 10

d) Specified Documents :
The following specified documents are required to be submitted
along with the application :
A. Documents required for Private Limited Company,
Public Company (limited company)/
One Person Company (OPC) :
i) Company documents :
✧ PAN card of the company
✧ Registration Certificate of the company
✧ Memorandum of Association (MOA)/Articles of Association
(AOA)
✧ Copy of Bank Statement
✧ Declaration to comply with the provisions
✧ Copy of Board resolution.
ii) Director related documents :
✧ PAN and ID proof of directors.
iii) Registered Office documents :
✧ Copy of electricity bill/landline bill, water bill
✧ No objection certificate of the owner
✧ Rent agreement. (in case premises are rented)
B. Documents required for Normal Partnerships :
i) Partnership documents :
✧ PAN card of the Partnership
✧ Partnership Deed
✧ Copy of Bank Statement
✧ Declaration to comply with the provisions.
ii) Partner related documents :
✧ PAN and ID proof of designated partners.
iii) Registered Office documents :
✧ Copy of electricity bill/landline bill, water bill
✧ No objection certificate of the owner
✧ Rent agreement (in case premises are rented)
✧ Documents required for Sole proprietorship/Individual.
iv) Individual documents :
✧ PAN card and ID proof of the individual
✧ Copy of Cancelled cheque or bank statement
✧ Declaration to comply with the provisions.
v) Registered Office documents :
✧ Copy of electricity bill/landline bill, water bill
✧ No objection certificate of the owner
✧ Rent agreement. (in case premises are rented)

19. Ram Enterprises purchased goods from Shyam Enterprises. The goods were
supplied on 15/01/2018. Ram Enterprises paid an advance of Rs. 1,00,000 for
purchases on 10/01/2018. The invoice was raised on 30/01/2018. Explain with
respect to supply
Ans: Time of supply of services is earliest of :
1. Date of issue of invoice.
2. Date of receipt of advance/ payment.
3. Date of provision of services (if invoice is not issued within
prescribed period).
In the above example, on Jan 10 the Advance was paid
On Jan 15, goods were supplied
On Jan 30, Invoice was issued.
Earliest of the above was, 10 th January, hence that was the Time
of Supply.

20.Mr. Y was travelling from Hyderabad to Bengaluru on flight. During his journey
he purchased some books. Determine the incidence of tax. Identify place of
supply.
Ans. In the case of transport, origin place will be treated as place of supply. Hence
place of supply would be Hyderabad. And incidence of tax would be CGST and
SGST.
21. What is Composite supply and Mixed Supply. What is the rate of tax applied?
Composite supply means a supply made by a taxable person to a
recipient and :
✧ Comprises two or more taxable supplies of goods or services or
both, or any combination
there of.
✧ Are naturally bundled and supplied in conjunction with each
other, in the ordinary
course of business.
This means that in a composite supply, goods or services or both
are bundled owing to
natural necessities. The elements in a composite supply are
dependent on the principal
supply.
A composite supply comprising of two or more supplies, one of
which is a principal supply,
shall be treated as a supply of such principal supply.
Example : when a consumer buys a refrigerator and he also gets
warranty and a
maintenance contract with the manufacturer. This is a composite
supply. In this example
supply of Refrigerator is the principal supply, warranty and
maintenance services are
ancillary.
In the same manor, in a hotel you booked a Room for stay, and
they offered complimentary
breakfast, here Room is principal supply and breakfast is
ancillary.
Principal Supply :
“Principal Supply” is the supply of goods or services which
constitutes the predominant
element of a composite supply and to which any other supply
forming part of that composite
supply is ancillary.
The concept of principal supply emerges only for the
determination of composite supply.
Tax liability will be the tax on the principal supply i.e., GST
rate on the goods.

Mixed supply means:

✧ Two or more individual supplies of goods or services, or
combinations 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. A
mixed supply comprising of two or more supplies shall be treated
as supply of that particular
supply that attracts highest rate of tax.

For example :
A Diwali gift box consisting of canned foods, sweets, chocolates,
cakes, dry fruits, aerated
drink and fruit juices supplied for a single price is a mixed supply.
All are also sold
separately. Since aerated drinks have the highest GST rate of
28%, aerated drinks will be
treated as principal supply and 28% will apply on the entire gift
box.
22. Write a short note on the process of GST.

Goods and Service Tax (GST) is structured for efficient tax collection,
reduction in corruption, easy inter-state movement of goods and a lot more.
The GST Law provides for self-assessment to facilitate easy compliance
and payment of taxes. It also explains the notices, the demand
and recovery provisions when the taxes are unpaid, short paid and/or
returns are not filed.

1. Audits
Audit under GST is the examination of records maintained by a registered
dealer. The aim is to verify the correctness of information declared, taxes
paid and to assess the compliance with GST.
2. Assessment
Assessment under GST means the determination of tax liability under
GST. Assessment under GST has been divided into 5 types:

a. Self Assessment
Under GST, every registered taxable person shall assess the taxes
payable by them on their own, and furnish a return for each tax period. This
is called self-assessment.
b. Provisional Assessment
A registered dealer can request the officer for provisional assessment if he
is unable to determine the value of goods or rate of tax. The proper officer
can allow the assessee to pay tax on a provisional basis at a rate or a
value specified by him.

c. Scrutiny Assessment
A GST officer can scrutinize the return to verify its correctness. The officer
will ask for explanations on any discrepancies noticed in the returns.

d. Summary Assessment
Summary Assessment is done when the assessing officer comes across
sufficient grounds to believe any delay in showing a tax liability can harm
the interest of the revenue. To protect the interest of the revenue, he can
pass the summary assessment with the prior permission of the
additional/joint commissioner.

e. Best Judgement Assessment

1. Assessment of non-filers of returns
If a registered taxable person does not file his return even after getting a
notice, the proper officer will assess the tax liability to the best of his
judgment using the available relevant material.
2. Assessment of unregistered persons
This assessment is done when a taxable person fails to obtain registration
even though he is liable to do so.
The officer will assess the tax liability of such persons to the best of his
judgement. The taxable person will receive a show cause notice and an
opportunity of being heard.

3. Demand and Recovery

Demand and recovery provisions are applicable when a registered dealer
has paid tax incorrectly or not paid tax at all. It is also applicable when an
incorrect refund or ITC is claimed by the dealer.
The proper officer will issue a show cause notice along with a demand for
payment of tax and penalty in case of fraud.
Demands can arise in the following cases:
1. Unpaid or short paid tax or wrong refund
2. Tax collected but not deposited with the Central or a State Government
3. CGST/SGST paid when IGST was payable and vice versa.
If demand is not paid, the GST authority starts recovery proceedings

4. Advance Ruling
Advance Ruling under GST means seeking clarifications from GST
authority on certain tax matters before starting the proposed activity. This
helps to reduce costly litigation.
An advance ruling is a written decision given by the tax authority to an
applicant on queries related to the supply of goods/services.

23. What are the types a dealer can opt at registration?

GST Department has introduced numerous types of GST
return and GST registration forms. In order to clear any kind
of misconception or confusion regarding GST return and
registration form. We have enlisted in various procedures
to get the required forms applicable to individual dealers.
We have provided a small flow chart depicting the
methods and directions to be used for the fulfilment of the
GST compliances:

 Regular Dealer
 Composition Dealer
 Tax Deductor
 Input Service Distributor
 UN Bodies / Embassies
 Non-Resident Assessee
 Temporary Registration
 E-Commerce Dealer

24.What is the threshold limit for composite dealers & Registered dealers.
 Composition Scheme:

Small businesses having an annual turnover less than Rs. 1 crore*

( Rs. 75 Lakhs for NE States) can opt for Composition scheme.
*GST Council decided to increase the limit to Rs. 1.5 crores but
notification was issued. And new threshold limit is 1.5 Crore p.a...
Composition dealers will pay nominal tax rates based on the type of
business:

 Composition dealers are required to file only one quarterly

return (instead of three monthly returns filed by normal
taxpayers).
 They cannot issue taxable invoices, i.e., collect tax from
customers and are required to pay the tax out of their own
pocket.
 Businesses that have opted for Composition Scheme cannot
claim any input tax credit.

Composition scheme is not applicable to :

 Service providers
 Inter-state sellers
 E-commerce sellers
 Supplier of non-taxable goods
 Manufacturer of Notified goods.

NORMAL/REGULAR REGISTRATION:

In the normal case registration is required once threshold limit of Rs

20 L (Rs 10 L in case of Special Category States) crosses as per Sec
22 of CGST Act.

25. List out five examples of B2C transactions.

The terms B2C and B2B are used very frequently these days, these are stand for
‘Business to Consumers’ and ‘Business to Business’, these two are totally different
kind of transactions because the intention of transaction are altogether different.
The overall transaction volume of B2B is much higher than that of B2C
transactions. The primary reason for this is that in a typical supply chain there will
be many B2B transactions involving subcomponents or raw materials, and only
one B2C transaction, specifically sale of the finished product to the end customer.
For example, an automobile manufacturer makes several B2B transactions such as
buying tires, glass for windscreens, and rubber hoses for its vehicles. The final
transaction, a finished vehicle sold to the consumer, is a single (B2C) transaction.

It might be possible that the subjects of transactions are same for example selling
of a Car to a person who is re-designing or modifying it and then selling it to
ultimate consumers on the other hand a Car sold to the ultimate consumer directly
from show room. Even though the subjects in the transaction are same, but in the
first example it is a B2B transaction and in the other it is a B2C transaction.

For the following differences, the B2C and B2B transactions are taxed under GST
in a different manner:

 Nature of Supply:

There is several B2B transition in one supply chain of a product until it reached to
ultimate consumer where a B2C transaction occurs.

The credit of GSTs (CGST/SGST/IGST) paid in B2B moved through entire supply
chain where the supply receiver is paying GSTs and Supplier gets credit of input
tax paid at the time of acquisition. In B2C transaction the supply receiver is the
ultimate consumer who shall ultimately bear the all GSTs paid on the final supply
and not entitled to get any credit of GSTs paid by him.

 Place of Supply

In B2C in general the transactions happened immediately on the spot, the

determination of place of supply is easier than B2B transactions. In B2C
transactions are generally followed after a long process like, quotation, negotiation,
supply, payment, return/reimbursement on deficiencies etc.

The B2B supplies are completes in several trances of supply, they may be running
in nature also.

 Time of Supply
In B2C the time of supply are immediate after purchase and payment which are
generally on spot. In B2B the time of supply may be at the time of supply actually
made, date of Payment or the date of periodical returns or date of payment of GSTs
depends upon the facts and documentation of transactions.

 Place of taxation

Place of taxation is generally the place of destination of supply, in B2C the place
of destination are generally the place of delivery, but in B2B, the place of taxation
may be different or may be more than one, it may be registered office of the
company or may be the place where actually goods delivered or the services
rendered.

 Business Agreement and Invoicing (general correspondence, purchase

orders, invoices, payment instruments and receipts.

In B2C generally the invoice (or simplified invoice) construed as an agreement and
the sale and purchase are genially governed by the terms and conditions are
mentioned in the invoice itself. In B2C generally a detailed commercial agreement
entered and thereafter Purchase Order issued and payment may be made prior, after
or at the time supply made. The place, time, taxable value of supply will be
determined on the basis of the abovesaid documents. Therefore these documents
must be referred to determining the GST liabilities in a B2B transaction.

 Settlement of transaction and payment process:

In B2C, the payments for consideration are paid at the time of purchase and
supply. However in B2B the payments are being made in installments over a
period after delivery of supply. It is often the supplies are made throughout year
and the supplies are considered to be a continuous supply and the time of supply is
deduced differently in comparison of one time supply.

26. Draw a specimen of Invoice, Tax Invoice and Bill of Supply

27. What is Supplementary invoice?
If a circumstance occurs when additional Invoice to an
Invoice already issued, a supplementary Invoice is issued
with additional amount to original Invoice. So, if any such
supplementary Invoice is issued, the liability to pay GST
on such supplementary Invoice also arises for a taxable
person if liable to pay such tax. Contents of a
Supplementary Tax Invoice under GST Law :
As per GST Law, a supplementary tax invoice under
section 23 and a credit or debit note under section 24
shall contain the following details.
a) Name, address and GSTIN of the supplier.
b) Nature of the document.
c) A consecutive serial number containing only alphabets
and/or numerals, unique for a financial year.
d) Date of issue of the document.
e) Name, address and GSTIN/Unique ID Number, if
registered, of the recipient.
f) Name and address of the recipient and the address of
delivery, along with the name of State and its code, if
such recipient is unregistered.
g) Serial number and date of the corresponding tax
invoice or, as the case may be, bill of supply.
h) Taxable value of goods or services, rate of tax and the
amount of the tax credited or, as the case may be, debited
to the recipient, and
i) Signature or digital signature of the supplier or his
authorized representative. The above information is about
GST Law on preparation of additional GST Tax Invoice
after uploading with GST returns and GST payment.

28. What is the eligibility for availing Input Tax Credit?

Input Tax in relation to a taxable person, means the Goods

and Services Tax charged on any supply of goods and/or
services to him which are used or intended to be used,
during furtherance of his business. Fulfilment of Input Tax
Credit under GST - Conditions To Claim is one of the most
critical activity for every business to settle its tax liability.
ITC being the backbone of GST and a major matter of
concern for the registered persons, conditions for
eligibility to ITC and eligible ITC have been prescribed
which is more or less
in line with pre - GST regime. These rules are also quite
particular and stringent in its approach.

Eligibility to claim Input Tax Credit (ITC):

The following conditions have to be met to be entitled to

Input Tax Credit under the GST scheme :
1. One must be a registered taxable person.
2. One can claim Input Tax Credit only if the goods and
services received is used for business purposes.
3. Input Tax Credit can be claimed on exports/zero-rated
supplies and are taxable.
4. For a registered taxable person, if the constitution
changes due to merger, sale or transfer of business, then
the Input Tax Credit which is unused shall be transferred
to the merged, sold or transferred business.
5. One can credit the Input Tax Credit in his Electronic
Credit Ledger in a provisional manner on the common
portal as prescribed in model GST law.
6. Supporting documents - debit note, tax invoice,
supplementary invoice, are needed to claim the Input Tax
Credit.
7. If there is an actual receipt of goods and services, an
Input Tax Credit can be claimed.
8. The Input Tax should be paid through Electronic
Credit/Cash ledger.
9. All GST returns such as GST-1, 2, 3, 6 and 7 needs to be
filed.

29. With the help of diagram show Input Credit Mechanism.

30. List out masters to be created to effect GST in tally.

Before creating GST accounting entries in Tally, we need

to create certain ledgers. GST includes majorly three types
● CGST – Central Goods and Services Tax
● SGST – State Goods and Services Tax
● IGST – Integrated Goods and Services Tax
● UTGST – Union Territory Goods and Services Tax
We need to create the following GST ledgers in Tally, They
are
● Output CGST Ledger – When you sell goods or services
intrastate
(inside your State )
● Output SGST Ledger – When you sell goods or services
intrastate
(inside your state)
● Output IGST Ledger – When you sell goods or services
interstate
(outside your state )
● Input CGST Ledger – When you buy goods or services
intrastate
(inside your state)
● Input SGST Ledger – When you buy goods or services
intrastate
(inside your state)
● Input IGST Ledger – When you buy goods or services
interstate
(outside of your state)
These ledger are to be created under Duties and Taxes.

31. Draw a table giving details of GSTR-1, GSTR-2,GSTR-3.

HOW TO FILE GSTR - 1.

Form GSTR-1 contains 13 tables in which the outward
supplies details needs to be captured) Based on the
nature of business and the nature of supplies effected
during the month, only the relevant tables are applicable,
not all. The GSTR- 1 format is as follows:
● Table 1, 2 & 3: Details of GSTIN and aggregate turnover
in preceding year.
● Table 4: Taxable outward supplies made to registered
persons (including UIN holders) other than zero rated
supplies and Deemed Exports.
● Table 5 : Taxable outward inter-state supplies to un-
registered persons where the invoice value is more than
INR 2.5 Lakh.
● Table 6 : Details of zero rate supplies and Deemed
Exports.
● Table 7 : Details of Taxable supplies (Net of debit notes
and credit notes) to
Un registered persons other than the supplies covered in
Table 5.
● Table 8: Details of Nil rated, exempted and non GST
outward supplies.
● Table 9 : Details of debit notes, credit notes, refund
vouchers issued during current period and any
amendments to taxable outward supply details furnished
in the GSTR1 returns for earlier tax periods in Table 4, 5 &
6.
● Table 10 : Details of debit note and credit note issued to
unregistered person.
● Table 11 : Details of Advances Received/Advance
adjusted in the current tax period or Amendments of
information furnished in earlier tax period)
● Table 12 : HSN-wise summary of outward supplies.
● Table 13 : Documents issued during the tax period)

Form GSTR - 2 filing contains 13 tables in which the

following details need to be captured:
● Table 1 : Details of GSTIN.
● Table 2 : Traders' details.
● Table 3 : Details of inward supplies received from a
registered person other than the supplies attracting
reverse charge.
● Table 4 : Details of inward supplies on which tax has to
be paid on reverse charge.
● Table 5 : Details Inputs/Capital goods received from
Overseas or from SEZ units on a Bill of Entry.
● Table 6 : Amendments to details of inward supplies
furnished in returns for earlier tax periods and details of
debit notes/credit notes issued)
● Table 7 : Details of supplies received from composition
taxable person and other exempt/Nil rated/Non GST
supplies received.
● Table 8 : Details of Credit received from ISD)
● Table 9 : Details of TDS and TCS credit received)
● Table 10 : Details of advances paid/advance adjusted on
account of receipt of supply
● Table 11 : Details of Input Tax Credit Reversal/ Reclaim.
● Table 12 : Details of addition and reduction of amount in
output tax for mismatch
and other reasons.
● Table 13 : HSN Summary of inward supplies.
GSTR 3/GSTR 3 B:
GSTR - 3 has a total of 15 tables - however the taxable
person need not worry as most of these will be pre-filled)
Tables 3 to 11 are included within Part A, which will be
completely auto-populated Tables 12 to 15 are included
within Part B, which will need to be populated by the
taxpayer.
The GSTR 3 format is as follows :
● Table 1 : GSTIN – It is state-wise PAN-based 15-digit
Goods and Services Taxpayer Identification Number
(GSTIN) for each taxpayer. This column will
be auto-filled.
● Table 2 : Name of the Registered Person – Name of the
taxpayer will be auto-filled at the time of logging into the
common GST Portal. Trade Name, if any, should be
separately provided.
● Table 3 : Turnover - Turnover of all types of supplies are
consolidated under this heading. Gross turnover needs to
be bifurcated between:

1. Taxable Turnover
2. Export Turnover
3. Nil rated and Exempted Turnover
4. Non-GST Turnover.
5. Total Turnover (sum of above all).

● Table - 4 : Outward Supplies - All the details filed in

GSTR - 1 will automatically come under this heading. GSTR
- 1 requires an assessee to furnish details of outward
supplies. All such information gets auto-populated under
their respective subheadings which are as follows :
1. Inter-State Supplies to Registered Taxable Person.
2. Intra-State Supplies to Registered Taxable Person.
3. Inter-State Supplies to Consumers.
4. Intra-State Supplies to Consumers.
5. Exports (including deemed exports).
6. Revision of Supply Invoices / Credit Notes / Debit Notes
7. Total Tax Liability on Outward Supplies
● Table 5 : Inward supplies attracting reverse charge
including import of services (Net of advance adjustments).
● Table 6 : Input Tax Credit - ITC received during the
month – Total amount of eligible input tax credit available
on taxable inward supplies filed in GSTR - 2 relating to
inputs, input services, and capital goods (including
imports and ISD) will get auto-populated here.
● Table 7 : Addition and reduction of amount in output tax
for mismatch and other reasons.
● Table 8 : Total Tax Liability - Total Tax Liability for the
month - All the outward supplies and inward supplies
declared above will be used to automatically calculate the
tax liability under this heading. Taxpayer will determine
his tax liability from dealing in goods and provision of
services both. Also, a separate value will be shown for
CGST, SGST, and IGST respectively.
● Table 9 : Credit of TDS and TCS :
1. TDS credit – Any tax credit available by way of tax
deducted at source will be auto populated here from
taxpayer’s GSTR 2.
2. TCS credit – Similar to TDS above, in the case of E-
commerce market place sellers, any amount of TCS
collected by the E-commerce operator will be available
here. This information will again be flowing from the GSTR
- 2 filed for the same period)
● Table 10 : Interest Liability - Interest Liability on late
filing will be calculated here.
● Table 11 : Late Fee - This will include the details of the
Late Fees that is being paid and payable to the Central
and the State Government.
● Table 12 : Tax payable and paid - This will include the
details of the tax that is being paid and payable to the
Central and the State Government.
● Table 13: Interest, Late Fee and any other amount
payable and paid - This will include the details of the
Interest and Late Fees that is being paid and payable to
the Central and the State Government.

● Table 14 : Refund claimed from Electronic cash ledger.

● Table 15 : Debit entries in electronic cash/Credit ledger
for tax/interest payment - It includes the details of the
debit entries in cash ledger for tax/interest payment and it
is to be populated after payment of tax and submissions
of return.

32. Write the steps for filing GSTR 1, GSTR -2, GSTR-3.

Same as question no 31.

33. Who files GSTR-6A.

GSTR 6 is a monthly return that has to be filed by an Input Service

Distributor.
It contains details of ITC received by an Input Service Distributor and
distribution of ITC.
There are a total of 11 sections in this return.
GSTR 6-A

GSTR 6A is an automatically generated form based on the details provided

by the suppliers of an Input Service Distributor in their GSTR 1.
GSTR-6A is a read-only form. Any changes to be made in GSTR-6A have
to be done while filing GSTR-6.
Note: You do not have to file GSTR-6A. It is a read-only document.
You can view GSTR-6A by going to the Return Dashboard on the GST
Portal and clicking on ‘PREPARE ONLINE’ on GSTR6A tile.
34. What type of GST Returns, e-commerce operators need to file.
Form GSTR-8

It is mandatory for an e-commerce operator to obtain a GST

registration and a TCS registration as well. The e-commerce
operators file GSTR-8. The responsibility for collection and
remittance of the TCS to the government is wholly on the e-
commerce operator.
Prerequisites

A few prerequisites to filing GSTR 8 must be kept in mind:

 The person filing GSTR-8 must be an e-commerce operator
 E-commerce operator must be a registered taxpayer under the
GST regime i.e he must have a 15digit PAN based GST
Identification Number (GSTIN)
 e-Commerce operators need to get themselves registered
irrespective of the threshold limit. So, this statement is not in
accordance with the provisions of the law.
 Not opted for Composition scheme nor have a Unique
Identification Number (UIN)
 Not a non-resident tax payer

35. What is Reverse Charge Mechanism?

Reverse Charge under GST is a very important topic. There
are certain goods & services which attract reverse charge.
However, this is not all.
As per Sec 9(4) of CGST Act, if a registered person
purchases goods/services from an unregistered dealer
(URD) then the registered taxpayer is liable to pay GST on
reverse charge basis. All the provisions of the Act will
apply to such recipient as if he were the person liable for
paying the tax in relation to the supply of goods or
services.
This provision will apply if the below conditions are met:
● There should be a supply of goods or services.
● The supply should be in respect of taxable
goods/services.
● Supply must be by an unregistered person.
● Supply must be to a registered person.
● Supply must be an intra-state supply as compulsory
registration is required for interstate sales.

36. What are the activities specified as Negative List according to Schedule -III.

The law lists down matters which shall not be considered as

‘supply’ for GST by way of Schedule III. Since these are
transactions that are not regarded as ‘supply’ under the GST
Laws, there is no requirement to report the inward / outward
supply of such activities in the returns.

1. Services by an employee to the employer in the

course of or in relation to his employment.

2. Services by any court or Tribunal established under

any law for the time being in force.
3. (a) the functions performed by the Members of
Parliament, Members of State Legislature, Members
 of Panchayats, Members of Municipalities and
Members of other local authorities;

(b) The duties performed by any person who holds any

post in pursuance of the provisions of the Constitution in
that capacity; or

(c) the duties performed by any person as a

Chairperson or a Member or a Director in a body
established by the Central Government or a State
Government or local authority and who is not deemed as
an employee before the commencement of this clause.

4. Services of funeral, burial, crematorium or mortuary

including transportation of the deceased.
5. Sale of land and, subject to clause (b) of paragraph
5 of Schedule II, sale of building.
6. Actionable claims, other than lottery, betting and
gambling.

37. Mr. Ankur purchased goods for Rs. 8,00,000 and paid tax @ 5% from a
dealer in same locality. He sold Rs. 4,00,000 worth goods to Raj and collected
tax from him. Record the following transaction with the help of accounting
Software.

PROGRAMME IN TALLY:
Step 1: Create Purchases Ledger Under Purchases Group
Path: Gate Way of Tally > Accounts Info> Ledger > create

Name: Purchases
Under: Purchase Accounts
GST Applicable: Yes
Set/alter GST Details: Yes (purchases are recording in voucher mode, hence
tax rate should be given at Purchase Ledger).
Select Purchases taxable and at Integrated Tax give 5%. Automatically which
bifurcates as 2.5% central and 2.5% for state tax.
Step 2: Is a Local dealer, Created Input CGST & Input SGST ledgers, under
Duties and Taxes.
Path: Gateway Of Tally>Accounts Info > Ledger>Create
CGST Ledger creation:
Input SGST ledger:

Assumed that Purchases and Sales were made for Cash:

Cash Account will be there by default in Tally.
Step 3: Purchase Voucher
Path: Gateway Of Tally>Accounting Voucher>F9
To change the mode in to Voucher (Journal Entry)
Control + V
Journal entry for purchases
Purchases A/c……..Dr. 800000
Input SGST A/c……Dr. 20000
Input CGST A/c……Dr. 20000
To Cash A/c 840000
Give taxes manually.

Press Cntl+A, to save.

Step 4:
To record the sales entry create Sales Ledger.
Gateway Of Tally> Accounts Info > Ledger >Create
Name: Sales
Under: Sales Accounts
GST: Applicable
Set/Alter GST details: yes

Give the GST rate as 5%

Step 5: For Sales have to create Output CGST and Output SGST, under Duties &
Taxes Group.
Output CGST Ledger:
Output SGST Ledger:

Step 6: Sales Voucher posting.

Path: Gateway Of Tally>Accounting Voucher>F8
For voucher mode Cntrl+V
Journal entry for sales:
Cash A/c …….Dr 420000
To Sales A/c 400000
To Output CGST A/c 10000
To Output SGST A/c 10000

38. Mahesh Enterprises of Hyderabad purchased goods from Ashish Enterprises of

Chennai, he paid GST @ 28%. Record the transaction in Accounting software.
Program:
Above one is a Purchases Entry. Stock Items were not mentioned. So we have to
post the purchases in Voucher mode (Journal Entry). And it is a credit transaction.
Hence giving the GST number for creditor ledger is very important. And it is an
Inter-State Transaction. Hence Input IGST ledger is to be created.
Step 1: Create Ashish Enterprises, Chennai. Under Sundry Creditors. And GST
number as 33AAACR4896A1ZK.
Path: Gateway Of Tally>Accounts Info>Ledger> create(single)
Name: Ashish Enterprises
Under : Sundry Creditors
At address give Chennai, and state as Tamilnadu.
Set/alter GST details : Yes

Step 2: Creating Input IGST Ledger under Duties and Taxes Group.
Step 3: Purchase Entry
Path: Gateway of Tally>Accounting Voucher>F9 (Cntrl+V)
Journal Entry: Amount Assumed as 10000
Purchases A/c ………….Dr 10000
Input IGST A/c…………Dr 2800 (28%)
To Ashish Enterprises A/c 12800
Ref no. : 002
Select relevant ledgers and post the amounts and save the entry.
39. Create 3 stock items named milk, bread and Ice creams. Opening balances of
these 3 stock items would be milk – 10 liters, Bread– 20 Pkts and Ice creams – 25
numbers. Create 1 sundry debtor and 1 sundry creditor within state. Record a
purchase entry of 5 liters of milk at 5% GST rate for ₹80 per liter, 10 Pkts of
Bread for Rs.25 per pkt at 5% GST rate and 30 numbers of Ice creams for ₹30 per
Ice cream at 18% GST rate. A sale entry 10liters of milk Rs.90 per liter, 15Pkts of
Bread for Rs.40 per pkt and 35 numbers of Ice creams for ₹50 per Ice cream.
Program:
Step 1: Create Stock items of Milk, Bread and Ice creams along with Opening
Stocks and GST tax rates.
Note: Tax rates should be given @ Stock Item level
Path: Gateway of Tally>Inventory Info>stock item> create
Subjected to Create Unit of Measurements as given
Numbers (for Ice-cream)
Packets (for Bread)
Liter (for Milk)
Creation of stock item
Milk:
Unit of Measurement

Name: Milk
GST: Applicable
Set/alter GST details: yes
Then following screen will appear. Give the GST as 5%
And give the opening stock and rate as given in the example.
Take purchase price as cost.
Opening stock of milk as 10 liters @ 80 Rupees each.

Create other two stock items like above

Bread: (GST @ 5%, Unit Of measurement Packets)

Ice-Cream: (GST @ 18%, Unit Of Measurement Numbers)

Step 2:
Create Creditor Ledger under Sundry Creditor, and Take as GST registered
Regular and give GSTIN. Intra state supply.
Path: Gateway Of Tally>Accounts Info>Ledger>Create (ABC Ltd)

Step 3: Create a Debtor Ledger Under Sundry Debtors, give GST Number.
XYZ Ltd.
Path: Gateway Of Tally>Accounts Info>Ledger>Create
Step 4: Create Purchases Ledger Under Purchases Group
Step 5: create Sales Ledger under Sales Group
Step 6: Create GST Tax Ledgers (Input CGST, Input SGST, Output SGST,
Output CGST) under Duties and Taxes Group.
Step 7: Post the Purchases Entry.
Path: Gateway Of Tally>Accounting Voucher>F9
a. Ref. Number: 121
b. Party A/c Name: ABC Ltd (Creditor)
c. Purchase Ledger: Purchases
d. Select the Stock items milk, Bread, Ice cream, and give the quantity and
rate as given.
e. And Select Input SGST and Input CGST ledgers, tax will get calculated
automatically.
Output:

Step 8: Record a Sales Voucher.

Path: Gateway of Tally>Accounting Voucher > F8
a. Ref. No. : 112
b. Party A/c Name: XYZ Ltd (Debtor)
c. Sales Account: Sales Account
d. Select the Items as given and their quantities and Rates
e. Select Output CGST and Output SGST, Tax amounts will appear
automatically.
OUTPUT:

For Tax analysis

ALT + A, and for details ALT + F1
For stock summary
Path: Gateway of Tally> Stock summary