Taxation Law

Goods and Services Tax (GST) | Meaning,

Advantages and Characteristics

In India, Goods and Services Tax, (GST), came into

effect on July 1, 2017. Goods and Services Tax was
introduced to avoid the cascading effect of indirect tax.
GST Council was constituted to fix the rates of Goods and
Services Tax. Union Finance Minister is the Chairman of
the GST Council. Other members of the GST Councils
are:

(i) Union Minister of State-in-charge of Revenue or

Finance, and

(ii) Minister-in-charge of Finance or Taxation or any other

minister nominated by each state Government and Union
Territory.

1. Meaning of Goods and Services Tax (GST)

As per Article 366 (12A) of the Constitution of India,
Goods and Services Tax means a tax on supply of goods
or services, or both, except taxes on supply of alcoholic
liquor for human consumption. For the time being, GST is
not levied on petroleum products.

It is an indirect tax levied on supply of goods and

services, except on exempted goods and services. The
word used in Article 366(12A) is ‘supply’ and not ‘sale’.
Thus, stock transfers, branch transfers will also get
covered under GST net.

GST is a consumption or destination based tax. It is

payable in the State in which goods and services are

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finally consumed. Most of the indirect taxes have merged
into Goods and Services Tax.

States can levy tax on sale, within the state of alcoholic

liquor for human consumption and on petroleum
products.

Every registered person/tax payer who makes supply of

goods or services or both which were leviable to tax and
his aggregate turnover in a financial year exceeds the
prescribed limit is required to register himself in the
State or Union Territory where he makes a taxable
supply.

Goods and Service Tax is chargeable by a registered

person/tax payer at the prescribed rates until goods
and/or services reach their final destination, i.e. the
consumer. After reaching the final destination, i.e., the
consumer, they are not further supplied.

2. Major defects in the earlier structure of indirect taxes

Following were the major defects in the earlier structure
of indirect taxes:

Central Sales Tax was payable for every movement of

goods from one state to another. Even in case of stock
transfers and branch transfers, there was incident of tax
and input tax credit was not fully available. (Note: Input
tax credit has been explained later in this chapter). Thus,
cascading effect of taxes could not be avoided due to
Central Sales Tax.
Millions of man-hours and truck-hours used to be lost at
check costs.
The Central Government could not impose tax on goods
beyond manufacturing level. Central Sales Tax was
collected by the Central Government and retained by the
State Government only.

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Objectives and Advantages of Goods and Services Tax
To make tax rate uniform throughout the country: Only
of the main objective of GST is to have uniformity of
indirect tax rates throughout the country. GST rates are
same throughout the country. Earlier there were different
rates of Sales Tax/Value Added Tax in the States. Its
motto is One Nation, One Market. The main objective or
advantage of GST is single tax structure right the
manufacturing.
To remove cascading effect of Taxes: Cascading effect of
taxes means levy of tax on tax. GST is levied only
towards the net value added portion and not towards the
full portion of value as the taxpayer enjoys input tax
credit. Goods and services will cost less due to removal of
cascading effect of taxes. Due to input tax credit, GST
would be finally paid by the consumer for the goods and
services purchased.
To Simplify Taxation Process: GST is a comprehensive
indirect tax. The taxes which have been subsumed in
GST include:
(i) Central Excise Duty (except on petroleum products),

(ii) Service Tax,

(iii) Value Added Tax levied by the State Government,

(iv) Central Sales Tax,

(v) Additional Customs Duties,

(vi) Entry Tax,

(vii) Entertainment Tax,

(viii) Luxury Tax,

(ix) Tax on Lotteries, etc.

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Thus, GST has integrated different tax line and it
prevents multiple tax layers imposed on goods and
services.

GST reduces the burden of taxes and ensure compliance

of tax payment. The number of compliances is lesser.
Thus, GST simplifies taxation process and helps in ease
of doing business. This is a huge benefit for the business
enterprises.

To make Indirect Tax Management Effective: The State

Government and Central Government has to administer
now mainly one indirect tax, i.e., GST after
implementation of GST. Therefore, administration of GST
will be more effective. As a result, tax evasion is likely to
reduce. Previously, management of indirect taxes was a
complicated tax for the Government.
To attract more Foreign Direct Investment: Goods and
Services Tax helps in ease of doing business. Therefore,
it will attract more Foreign Direct Investment.
Simple and Easy online Procedure: GST returns are filed
online. The online procedure is simple and easy. Online
filing of GST returns helps in making tax administration
corruption free.
Composition Scheme for Small Businesses: Composition
Scheme is a simple and easy scheme under GST for small
tax payers as they can get rid of GST formalities and pay
GST at a fixed rate of turnover. This scheme can be
opted by small tax payer whose turnover is less than the
prescribed limit and is not engaged in making inter-State
supplies.
Enhanced Productivity of Logistics: After abolition of
octroi and entry tax restriction on inter statement
movement of goods has reduced. This has increased the
productivity of logistics companies.
Creation of Common National Market: GST has given a
boost to India’s tax to Gross Domestic Product ratio

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which helps in promoting economic efficiency and long-
term growth. GST has led to uniform tax law and it has
formed a common national market.
Regulation of Unregulated and Unorganised Sector under
GST: GST has brought unregulated and unorganised
sectors such as textiles and construction under
regulation.
4. Characteristics of Goods and Services Tax
1. Comprehensive Indirect Tax: GST is a comprehensive
indirect tax. It has subsumed 17 indirect taxes levied by
the State Governments and the Central Government
under the earlier indirect tax regime. GST has integrated
various taxes on goods and services into one unified tax.
Thus, GST has brought about unified tax regime.

2. Consumption or Destination Based Tax: GST is payable

in the state in which goods and services are finally
consumed. Thus, it is a consumption or destination based
tax.

3. Same GST Rates throughout the country: The motto of

GST is One Nation One Tax One Market. Under the GST
regime, the GST rates are same throughout the country.
Earlier, the rates of VAT/Sales Tax were different in the
States.

4. Tax on Supply of Goods and Services: GST is a tax on

supply of goods and services, or both, except taxes on
supply of alcoholic liquor for human consumption. At
present petroleum products will be out of GST. Petroleum
products can be brought into the GST network if the GST
Council so decides. Petroleum products means petroleum
crude, high speed diesel, motor spirit, i.e., petrol, natural
gas and aviation turbine fuel.
The word used is “Supply” as against the earlier concept
of tax on the manufacture of goods or on sale. Therefore,
stock transfers and branch transfers will also come under

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the GST net. GST is charged by the registered person/tax
payer from the purchaser of goods and services.

5. No Tax on due to Input Tax credit: Goods and Services

Tax belongs to family of Value Added Tax. GST is levied
on the incremental value of the goods. Further, Input Tax
Credit (in short, ITC) is allowed which avoid cascading
effect of taxes. Every registered taxable person who
carries on business at any place in India is entitled to
credit of tax on inputs admissible to him which will be
credited to the electronic credit ledger of such person in
the records of the Government. Thus, there is no tax on
tax.

6. Collection of GST by Registered Person/Tax payer:

GST can be collected only by a person/tax payer who is
registered under the Central Goods and Services tax Act,
2017.
Person includes:

(a) an individual;

(b) Hindu Undivided Family;

(c) a company;

(d) a firm;

(e) a Limited Liability Partnership;

(f) an association of persons;

(g) any corporation established by or under any Central

Act, State Act or a Government Company;

(h) any body corporate;

(i) a cooperative society;

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(j) a local authority;

(k) Central Government or State Government;

(l) trust.

7. GST Collected is Payable to the Government: GST is

collected on supply of goods and services. GST collected
on supply of goods and/or services, after deduction of
GST paid on purchases of good and/or services, is
payable to the Government.

8. Multiple Rate Structure: GST has multiple rate

structure. GST rates for goods include 5%, 12%, 18%,
28% and 3%. GST rates for services are 5%, 12%, 18%
and 28%.

9. Types of Tax: There are four types of tax leviable on

supply of goods and services.
These are as follows:

Types of Tax

Leviable on Supply of Good or Services or Both

Levied by

State GST (in short, SGST) In case of supply within

the State Respective State Government
Union Territory GST (in short, UTGST) In case of supply
within the Union Territory where there is no legislature
Central Government
Central GST (in short, CGST) In case of Supply within
the State or Union Territory Central Government
Integrated GST (in short, IGST) In case of inter State
supply, i.e., on supply outside the state Central
Government

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It means that on supply of goods and services within the
State/Union Territory both CGST and SGST/UTGST are
levied.

Integrated GST is distributed between the Central

Government and the States as per the recommendation
of the GST Council.

5. Legal Provisions Regarding Alcoholic Liquor, Tobacco

Products And Petroleum Products
(a) Manufacture of alcoholic liquor for human
consumption has been kept out of GST. States would
continue to levy State Excise Duty and Sales Tax/VAT on
alcoholic liquor for human consumption.

(b) On tobacco and tobacco products the Central

Government would continue to levy Central Excise Duty
in addition to GST.

GST has been levied on most of the tobacco products at

the highest tax bracket of 28%. Further, Cess has also
been imposed on most of the to- bacco products.

(c) At present, petroleum products are out of GST,

Petroleum products can be brought into GST network if
the GST council so decides. The specified petroleum
products are as follows:

(i) Crude Petroleum

(ii) Diesel (i.e. High Speed Diesel);

(iii) Petrol (motor spirit);

(iv) Natural Gas; and

(v) Aviation Turbine Fuel

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All other fuels and petroleum products other than these
five would be covered under GST.
Notes: Basic Customs Duty on Imports, Stamp Duties
and Motor Vehicles Taxes would continue even after
implementation of GST.

Entertainment Tax can be imposed by Municipality,

Panchayat, Regional Council and District Council.

6. Categories of Goods And Services Tax

Dual GST for Supply of Goods and Services within State
and Union Territory: As per Article 246A of the
Constitution of India, there will be State Goods and
Services Tax (in short, SGST) and Central Goods and
Services Tax (in short, CGST). State Goods and Services
Tax will be applicable in States and in Union Territories
having Legislature (e.g., Delhi, Puducherry and Jammu
and Kashmir). SGST and CGST are levied on supply of
goods and services within the state or within Union
Territory having Legislature.

Union Territory Goods and Services Tax (in short, UTGST)

is applicable in Union Territories which do not have
Legislature (e.g. Andaman and Nicobar Islands,
Lakshadweep, Dadra and Nagar Haveli, Daman and Diu,
Chandigarh, Ladakh and ‘Other territory’). UTGST is
levied on supply of goods and services with Union
Territory not having Legislature.

Integrated Goods and Services Tax: As per Article

269A(1) of the Constitution of India, there will be
Integrated Goods and Services Tax (in short, IGST) on
supply of goods and services from one State to another
State or from one State to Union Territory or one Union
Territory to another Union Territory or from one Union
Territory to State. In short, IGST is levied on supply in
case of interstate trade or commerce.

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Further, IGST is also levied on import of goods or
services or both. IGST is collected by the Central
Government. Revenue from IGST will be apportioned
among the Centre and the States on the basis of
recommendation of the GST Council.

CGST, SGST and UTGST: CGST is the revenue of the

Central Government. SGST is the revenue of the
respective State Government and Union Territory having
Legislature. UTGST is the revenue of the Union Territory
not having Legislature. IGST is levied on inter-State
supply of goods and services. It is collected by the
Centre.

Apart from the above three categories of GST, Cess may

be imposed in certain cases. Cess means the goods and
services tax compensation cess. It is levied on tobacco
products such as cigarettes, gutka, etc. in addition to
GST at the highest rate of 28%. It is collected by the
Central Government and also used to compensate the
States for shortfall in GST collections./

Levy or Charging of GST

The following are the provisions regarding levy of GST in
summarised form:

1. Levy by registered supplier of goods and/or services:

GST is levied, i.e. charged by the supplier of goods or
services, or both, who is registered under the GST Act. It
is levied each time when the goods or services, or both,
are supplied and at the prescribed rate of GST.

2. On intra-State Supply: When the supply is intra-state

(e.g., when the supplier is located in Delhi and place
where goods are supplied is also in Delhi), both CGST
and SGST are charged at half the prescribed rate. For
example, if the GST rate is 18%, then both CGST and
SGST will be charged @ 9% each.

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3. On inter-State supply: When the supply is inter-state
i.e. outside the state (e.g., if the supplier is located in
Delhi and goods are supplied in Haryana), IGST is
charged at the prescribed rate. For example, if the GST
rate is 18%, then IGST will be charged at 18%.

4. Value on which GST is charged: When goods are sold,

GST is levied by the seller of the goods at the prescribed
rate on the net sale value after adjusting trade discount
and also cash discount, if any, given at the time of sale.

5. Input GST and Output GST: Input GST is paid on

Inward Supply. Inward Supply, in relation to a person,
means receipt of goods or services or both whether by
purchase, acquisition or any other means with or without
consideration. Inward supply may be good (inputs or
capital goods) or of input services. In simple words, Input
GST is the GST paid by the purchaser of goods or
services or both on the purchases.

Input GST is paid on Outward Supply. Outward Supply, in

relation to a taxable person, means supply of goods or
services or both, whether by sale, transfer, barter,
exchange, licence, rental, lease or disposal or any other
mode, made or agreed to be made by such person in the
course or furtherance of business. In simple words,
Output GST is the GST levied and collected by the seller
of goods or services or both for and on behalf of the
Government.

6. Input Tax Credit and Set-off of Input GST against

Output GST: GST paid by a registered taxable person on
purchase of goods and/or services which can be set-off
against the Output GST is called the Input Tax Credit.
GST paid on purchases, i.e. Input GST is set-off against
GST collected on sales, i.e. against Output GST in the
prescribed manner, except where input tax credit is not

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allowed. Where Input GST can be set-off against Output
GST, Input GST is not treated as cost of the goods
purchased, asset purchased, etc. Similarly, Output GST is
not treated as income. Input GST is treated as an asset
until it is set-off against Output GST. After setting-of
Input GST against Output GST the balance of the Output
GST is payable to the Government. Until it is paid, it is
shown as liability. Usually Output GST is more than the
Input GST. However, if Input GST is more than the
Output GST, the excess of Input GST over Output GST is
receivable from the Government. Until it is received, it is
shown as an asset.

The manner in which Input GST is set-off against Output

GST has been ex- plained later in this chapter.

The Input Tax Credit (In short, ITC) is the tax paid by the
buyer on purchase of goods and/or services which is used
to reduce his tax liability on the sale of goods and/or
services. Thus, businesses can reduce their tax liability
on sale of goods and/or services by claiming credit to the
extent of GST paid on purchases.

For example, a trader sells goods to consumer and

collects GST based on the goods sold and the place of
destination. Let us assume that selling price of the good
is ` 10,000 excluding GST and the rate of applicable GST
is 18%. The consumer will, therefore, pay a total of `
11,800 for the goods including GST of ` 1,800. Without,
ITC, the trader will have to pay ` 1,800 to the
Government as GST. With ITC, the trader can reduce the
tax that he will have to pay to the Government.

Let us assume further that he has purchased those goods

for ` 9,440 including GST ` 1,440. The trader can claim `
1,440 as input tax credit and reduce his original tax
liability of ` 1,800 by ` 1,440. The trader will be required
to pay only ` 360 (i.e. ` 1,800 – ` 1,440) to the

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Government. Thus, Input GST can be set-off against
output GST.

7. GST belongs to family of Value Added Tax: As stated

above, Input GST can be set-off against output GST. It
means that GST is levied on the incremental value of the
goods and/or services. Thus, it belongs to the family of
Value Added Tax.

8. Cases where Input Tax Credit is not available: GST

paid is not allowed to be set-off against Output GST in
some cases. In other words, Input Tax Credit is not
allowed in certain cases. Where Input Tax Credit is not
allowed, GST paid is not treated as Input GST. GST paid
debited to Expense Account or capitalised, depending on
the circumstances.
In the following cases, Input Tax Credit is not allowed:

(a) Motor Vehicle for transportation of persons having

approved seating
capacity of not more than 13 persons (including driver),
except when they are used for making the following
taxable supplies:

(i) further supply of such motor vehicles; or

(ii) transportation of passenger; or

(iii) imparting training on driving such motor vehicles.

(b) Vessels and aircraft except when they are used for a
purpose similar to those mentioned in (a) (i), (a) (ii) and
(a) (iii) above.

(c) Services of general insurance.

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(d) Servicing, repair and maintenance insofar as they
relate to motor vehicles referred to in point (a) or vessels
and aircraft referred to in point (b).

(e) Food and beverages

(f) Outdoor catering

(g) Beauty treatment

(h) Health Services

(i) Cosmetic and health surgery

(j) Leasing of motor vehicles, vessels and aircraft

referred to in point ( a) except when used for the
purposes mentioned (a) (i), (a) (ii) and (a) (iii).

(k) Life insurance and health insurance.

(l) Membership of clubs.

(m) Membership of health and fitness centres.

(n) Travel benefits extended to employees on vacation

such as leave or home travel

9. Reversal of GST Paid: Input GST paid on purchase of

goods and/or services is reversed in the following cases:

(a) Purchases Return;

(b) Goods taken by the proprietor for personal use;

(c) Goods given as charity or donation;

(d) Goods lost by theft or destroyed by fire, floods, or

any other natural calamity;

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(e) Goods distributed as free samples;

(f) Rebate received on purchases; and

(g) Good used as furniture.

10. Reversal of GST collected: Output GST collected on

sale of goods and/or services is reversed in the following
cases:

(a) Sales return;

(b) Cash discount allowed after the invoice has been

made.

11. No GST on certain Supplies: GST is not levied on the

following supplies:

(a) Education Services;

(b) Health Services (Consulting only);

(c) Electricity and water services;

(d) Salaries and Wages;

(e) Interest;

(f) Supply of Services to the Government;

(g) Supply to Embassies of other countries; and

(h) Supply to United Nations Organisation.

Note: GST Council reviews, from time to time, the GST

rates and goods and services on which GST is to be
levied to be abolished. In the GST Council meeting held

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in July, 2022, it has imposed GST on hospital rooms
where charges are more than ` 5,000 per day. Thus, on
certain health services GST has been imposed.

12. No GST on Advance to Suppliers and from

Customers: GST is not charged when advance is received
from customers for supply of goods or services. Similarly,
GST is not paid on advance given to the suppliers for
purchase of goods or services.

13. Reverse Charge: Reverse charge means the liability

to pay tax by the recipient of supply of goods or services
or both, instead of supplier of such goods or services or
both.
Recipient of the goods and/or service is liable to pay tax
on the notified categories of supply of goods and/or
services.

Example In case of Goods Transport Agency, the

Government has given option to it to deposit the GST or
it may ask the factory, etc. to whom the services are
supplied to deposit the GST for supply of service. If the
Goods Transport Agency opts not to deposit GST itself,
supply of services by any goods transport agency in
respect of goods by road to any factory is one such
supply of services. In this case, supplier of service is
goods transparent agency and recipient of service is any
factory registered under or governed by the Factories
Act, 1948. GST will be payable by the factory and not by
the goods transport agency.

Goods on which tax is payable under reverse charge

include bidi wrapper leaves (i.e. tendu leaves), tobacco
leaves, silk yarn, etc.

Services on which tax is payable under reverse charge

include services by goods transport agency, legal service,

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sponsorship service, import of service i.e., payment of
fees outside India, etc.

14. Accounts to be Debited and Credit: It is explained as

follows:

(a) When ITC on GST Paid is Allowed

For CGST paid: Input CGST is debited
For SGST paid: Input SGST is debited
For IGST paid: Input IGST is debited

(b) When GST Paid is Reversed

For CGST paid is reversed: Input CGST is credited
For SGST paid is reversed: Input SGST is credited
For IGST paid is reversed: Input IGST is credited

(c) When GST is collected

For CGST collected: Output CGST is credited
For SGST collected: Output SGST is credited
For IGST collected: Output IGST is credited

(d) When GST is collected is Reversed

For CGST collected is reversed: Output CGST is debited
For SGST collected is reversed: Output SGST is debited
For IGST collected is reversed: Output IGST is debited

15. Exempt Supply: Exempt supply means supply of any

goods or services or both which attract nil rate of GST or
which is wholly exempt from GST.

What are the components of service tax?

There are 4 components of GST such as CGST, SGST,

IGST, and UTGST. So, the kind of tax to be paid
under GST depends on whether the nature of supply
is inter-state and intra-state. When the supply of

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goods or services happens within a state or intra-
state transactions, both the CGST and SGST will be
claimed.

What are the components of tax in India?

The direct tax includes income tax, gift tax, capital

gain tax, etc while indirect tax includes value-added
tax, service tax, goods and services tax, customs
duty, etc. The Central Government of India imposes
taxes such as customs duty, central excise duty,
income tax, and service tax.

Income-tax is levied on the income of every person.

As per Income-tax Law what constitutes income?

Under the Income-tax Law, the word income has a
very broad and inclusive meaning. In case of a
salaried person all that is received from an employer
in cash, kind or as a facility is considered as an
income. For a businessman his net profit will
constitute his income. Income may also flow from
investments in the form of Interest, Dividend,
Commission, etc. Further, income may be earned on
account of sale of capital assets like building, gold,
etc. Income shall be computed as per relevant
provision of Income-tax Act, 1961 which lays down
detail condition for computation of income chargeable
to tax under various heads of income What is exempt
income and taxable income? An exempt income is not
charged to tax, i.e., Income-tax Law specifically
grants exemption from tax to such income. Incomes
which are chargeable to tax are called as taxable
incomes.

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What is Section 10 under the Income Tax Act?
Section 10 of the IT Act, 1961, provides for income
tax exemption benefits concerning various allowances
paid. For example, rent allowance, tuition fees
allowance, travel allowance, insurance policy
premiums, gratuity, and so on.

What is Section 10 exemption limit?

Usually, people below the age of 60 are eligible to get
a basic tax exemption limit of ₹ 2.50 Lakhs. For senior
citizens, the exemption limit is up to ₹ 3 Lakhs.
However, the various conditions and subsections
under Section 10 of the Income Tax Act apply to any
Indian salaried professional.

How is exemption under section 10 calculated?

Maximum HRA limit under Section 10 13A

The maximum House Rent Allowance under Section

10 13A is calculated as the minimum of the following
three amounts: Actual HRA received from the
employer. 50% of basic salary for employees living in
metro cities (40% for non-metro cities) Rent paid
minus 10% of basic salary.

Residential Status Under Income Tax Act

It is critical for the Income Tax Department to

establish a taxable individual’s or company’s

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residence status. It is especially important during the
tax filing season. In reality, this is one of the variables
used to determine a person’s taxability.

Residential Status for Income Tax

An individual’s taxability in India is determined by his

residential status under the income tax act in India for
any given fiscal year. The phrase “residential status”
was coined by India’s income tax rules and should not
be confused with an individual’s citizenship in India.

An individual may be an Indian citizen but become a

non-resident for a certain year. Similarly, a foreign
citizen may become a resident of India for income
tax purposes in a given year.

It is also worth noting that the residential status as

per income tax differs to sorts of people, such as an
individual, a corporation, a company, and so on,
decided differently.

Resident Status Classifications

Income Tax Law has divided the residence status of

an individual in India into three categories based on
the length of time he or she has lived in India. An
individual’s residential status will include his or her
current fiscal year as well as previous years of stay.

The following categories are used to classify an

individual’s residence status.

o Resident (ROR)
o Resident but Not Ordinarily Resident (RNOR)
o Non-Resident (NR)

• Resident and Ordinarily Resident

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Individuals are deemed to be residents of India under
Section 6(1) of the Income Tax Act if they meet the
following conditions: If he/she stays in India for 182
days or more in a fiscal year, or if he/she stays in
India for 60 days or more in a fiscal year, and if
he/she stays in India for 365 days or more in the four
years immediately before the previous year and
comes under ordinary resident in income tax.

According to section 6(6) of the Income Tax Act of

1961, there are two criteria under which an individual
will be considered a “Resident and Ordinarily
Resident” (ROR) in India.

o If he or she spends 730 days or more in India in

the seven years preceding the current year.
o If he/she has resided in India for at least two of
the ten prior fiscal years before the current year.

• Resident but Not Ordinarily Resident

What is an assessee?
An assessee is any individual who is liable to pay taxes to
the government against any kind of income earned or
any losses incurred by him for a particular assessment
year. Each and every person who has been taxed in the
previous years for income earned by him is treated as an
Assessee under the Income Tax Act, 1961.

When an assessee meets the following fundamental

requirements, he or she will be regarded as RNOR: If
an individual stays in India for a time of 182 days or
more in a fiscal year; or if he/she stays in India for a
period of 60 days in a fiscal year and 365 days or
more in the four preceding fiscal years.

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An Assessee, on the other hand, will be classified as a
Resident but Not Ordinarily Resident (RNOR) if they
meet one of the following fundamental conditions:

o If he/she stays in India for 730 days or more in

the previous fiscal year.
o If he/she was a resident of India for at least 2 out
of 10 days in the previous fiscal year.

• Non Resident

An individual will be eligible for Non-Resident (NR)

status if he or she meets the following criteria:

o If an individual spends less than 181 days in India

within a fiscal year.
o If an individual stays in India for no more than 60
days in a fiscal year.
o If an individual stays in India for more than 60
days in a fiscal year but does not remain for 365
days or more in the preceding four fiscal years.

Tax for Residents, NR, NROR

For a A resident will be taxed in India on his total

Resident income, which includes money generated in
India as well as income obtained outside of
India.

For NR Their tax burden in India is limited to the

and RNOR income they make in the country. They are not
required to pay any tax in India on their
international earnings. Also, in the event of
double taxation of income, when the same
income is taxed in India and overseas, one may

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 rely on the Double Taxation Avoidance
Agreement (DTAA) that India would have
signed with the other nation to avoid paying
taxes twice.

How to Calculate the Residential Status of an

Individual?

• First, it is noted if the individual falls under the

category of exceptions for primary conditions.

• After which, it is noted if they satisfy the basic

condition of 182 days or more. If they do come
under the classification, they would be treated as
a resident or a non-resident.

Section 80G of the Income Tax Act, 1961, allows

taxpayers to save tax by donating money to eligible
charitable institutions. By donating to eligible
institutions and organisations, taxpayers can claim
deductions ranging from 50% to 100% of the amount
donated.

What is 80G 100% qualifying limit?

What is Adjusted Gross Total Income for 80G?
Particulars Amount
(INR)

Donation with 100% tax deduction

25,000
qualifying limit

Donation with 50% tax deduction

40,000
qualifying limit

Page 23 of 52
Total Donation 65,000

45,000
(25,000*1
10% of ATI 00% +
20,000*50
%)

What is the adjusted total income for

80G deduction?
Adjusted Gross Income is simply your
total gross income minus specific
deductions. Additionally, Adjusted Gross
Income is used by a taxpayer as the
starting point for calculating taxes and
determining your eligibility for certain
tax credits and deductions to help lower
your overall tax bill.

Page 24 of 52
How do I claim 80G deduction in ITR 2?
In Schedule 80G and Schedule 80GGA,
you need to provide details of details of
donations entitled for deduction under
Section 80G and Section 80GGA. In
Schedule AMT, you need to confirm the
computation of Alternate Minimum Tax
payable u/s 115JC. In Schedule AMTC,
you need to add details of tax credits
u/s 115JD.

Section 80C – Deductions on InvestmentsIt allows a

maximum deduction of Rs 1.5 lakh every year from
the taxpayers total income. The benefit of this
deduction can be availed by Individuals and HUFs.
Companies, partnership firms, LLPs cannot avail the
benefit of this deduction

Expenses that Qualify for Tax Deductions under

Section 80C

Premium payments made towards Life insurance

policies. Tuition fees for children's education.
Repayment of principal amount on home loan.
Registration fees and stamp duty for house property

What is the deduction for Section 80D?

Section 80D includes a deduction of Rs 5,000 for any

payments made towards preventive health check-ups.

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This deduction will be within the overall limit of Rs
25,000/Rs 50,000, as the case may be. This
deduction can also be claimed either by the individual
for himself, his spouse, dependent children or
parents.

What is advance GST?

An advance is received by a supplier for a Service
contract which got cancelled subsequently. The
supplier has issued receipt voucher and paid the GST
on such advance received

Can GST be paid in advance?

For regular transactions, businesses issue a GST tax
invoice once they complete the payment. However, in
the case of advance payments, they issue a different
document called a GST advance receipt voucher.

What is the rule of advance ruling in GST?

A legally constituted body called Authority for
Advance Ruling (AAR) can give a binding ruling to an
applicant who is a registered taxable person or is
liable to be registered. The advance ruling given by
the Authority can be appealed before an Appellate
authority for Advance Ruling (AAAR).

What are the types of GST?

The Four Different Types of GST Tax in India are:
• Integrated Goods and Services Tax (IGST)

• State Goods and Services Tax (SGST)

• Central Goods and Services Tax (CGST)
• Union Territory Goods and Services Tax (UTGST)

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Advantages of GST
• GST eliminates the cascading effect of tax. ...

• Higher threshold for registration. ...

• Composition scheme for small businesses. ...
• Simple and easy online procedure. ...
• The number of compliances is lesser. ...
• Defined treatment for E-commerce operators. ...
• Improved efficiency of logistics. ...
• Increased costs due to software purchase.
• What is the advantages and disadvantages of
GST?

• GST is a transparent tax and also reduces the

number of indirect taxes. GST will not be a cost to
registered retailers therefore there will be no
hidden taxes and the cost of doing business will
be lower. Benefit people as prices will come down
which in turn will help companies as consumption
will increase.

Can we pay GST directly?

You can make a GST payment either online or offline.
Businesses must assess the tax that needs to be paid
in cash after the offset of the input tax credit availed.
Thereafter, it must generate a GST challan either
before or after logging into the GST portal or while
filing the GST return

How to calculate standard deduction under section

24?
The taxpayer gets a standard deduction of 30% on
the net annual income. The taxpayer can deduct the

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property paid in that financial year from the net
annual income. The taxpayer can claim a deduction of
the entire home loan interest under Section 24B.

Can I claim both 80C and section 24?

If you jointly own a property with, say, your spouse,
after jointly applying for a home loan, you can claim
deductions on interest under Section 24 for up to Rs.
2,00,000 each. Under Section 80C for Principal
component repayment and deductions on the same,
each co-applicant can claim up to Rs. 1,50,000.

Section 24 of the Income Tax Act lets homeowners

claim a deduction of up to Rs. 2 lakhs (Rs. 1,50,000 if
you are filing returns for last financial year) on their
home loan interest if the owner or his family reside in
the house property. The entire interest is waived off
as a deduction when the house is on rent.

How do I claim deduction under section 24 in ITR 2?

A taxpayer can claim deduction under Section 24 of
interest paid on home loan for each of the houses
separately. However, the overall loss from house
property that can be claimed for a year is restricted to
Rs 2 lakhs

Gratuity and pension are both considered part of an

employee's salary and are taxable under the Income
Tax Act. Gratuity is a token of appreciation from an
employer to an employee for their work. Pension is a
retirement plan where the employer invests a set
amount to guarantee payment to the employee upon
retirement.
Gratuity is usually paid by the employer to an
employee at the time of retirement. The amount is

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equal to one-fourth of the employee's last-drawn
basic salary for each completed six-month period. The
retirement gratuity amount is 16 times the basic
salary, but is subject to a cap of Rs.20 lakh.
Pension is partially exempt for non-government
employees. If gratuity is also received with a pension,
1/3rd of the amount of pension is exempt from
commuted pension. The remaining amount is taxed as
salary.
The tax on gratuity is limited because the government
offers exemptions on the tax on gratuity under certain
conditions.

What is the new rule for gratuity and pension?

In accordance with sub-rule (1)(a) of Rule 45 of the
Central Civil Service (Pension) Rules, 2021,
retirement gratuity is admissible on retirement of a
Government servant, who has completed five years'
qualifying service and has become eligible for service
gratuity or pension under Rule 44.

Is pension and gratuity taxable?

Gratuity is a benefit given by the employer to
employees. A recently approved amendment by the
Centre has increased the maximum limit of gratuity.
Now it is tax exempt up to Rs 20 lakh from the
previous ceiling of Rs 10 lakh, which comes Section
10(10) of the Income Tax Act

Is gratuity a part of salary?

Gratuity is an amount paid by an employer to its
employees for rendering their services for equal to or
more than 5 years. Gratuity is paid to an employee as
part of his/her salary and is considered to be a benefit

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plan which is designed to help the employee during
his/her retirement.

A gratuity is nothing more than a token of

appreciation from an employer to an employee for the
latter's work. Instead, the pension is a retirement
plan where the employer invests a set amount in
guaranteeing payment to the employee upon
retirement. The employer pays the entire Gratuity
amount in one lump sum.

What is the place of supply for goods and services?

Place of Supply: In most cases, this is the buyer's

registered business location, or the place where the
goods or services are received. However, there are
some special cases under sections 10 and 11 for
goods, and sections 12 and 13 of the IGST law where
the place of supply can be different for goods and
services.

What are the provisions for determining time of

supply of goods and services?

(c) the date immediately after THIRTY days from the

date of issue of invoice by the supplier (60 days for
services). If it is not possible to determine the time of
supply under (a), (b) or (c), the time of supply shall
be the date of entry in the books of account of the
recipient.

What is provision of supply of services under GST?

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For a supply to attract GST, the supply must be
taxable. Taxable supply has been broadly defined and
means any supply of goods or services or both which,
is leviable to tax under the Act. Exemptions may be
provided to the specified goods or services or to a
specified category of persons/ entities making supply.

Business Under GST – Overview, Meaning

& Examples
Updated on:

Any trade, commerce, manufacture, profession, vocation

or any other similar activity can be called as Business
under GST. It can either be a core or an ancillary activity
whether or not involving monetary benefits. This article
explains the definition with examples.

Definition of Business under GST- Overview

From the above definition it can be noted that: Business

includes any activity carried out by a person whether or
not, there is volume, frequency, continuity or regularity
of such transaction. Meaning a single transaction of
supply also is considered business Also occasional trade
or even one time trade constitutes business.

For example: Selling of mangoes by a farmer during

summer Mr.Z find a piece of jewellery on the road and
sells it to Mr.Y for a profit (one time trade)

Meaning of Furtherance of Business Under GST

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The term “business” has been defined but the phrase “in
the course or furtherance of” has not been dealt with in
any manner under the GST law. The literal meaning of
the said phrase ‘in the course of or furtherance of ‘ is
‘during the act of or in continuation of carrying out such
act in future’ Thus, in course or furtherance of Business
means either of following:

Anything done in relation to business, while carrying out

business or simply a revenue-generating ordinary activity
of that organisation/concern.

For example: Selling scrap generated in process of

manufacturing turbines. Purchases & Sales of spare parts
by an automobile vendor. Anything done to achieve the
objectives of continuing to conduct the same business in
future.

For example: Activities done as part of CSR by a

Company. Hence the phrase also covers any supplies
made in connection with the business.

Purpose of the phrase ‘in the course or furtherance of

Business’ under GST
Any activity carried out by the entity in the course or
furtherance of business is included in the ambit of
business definition and hence will be considered as
‘supply’ under GST. Further one must check for the
taxability of supply and exemptions.

‘In the course or furtherance’ is not defined, but is broad

enough to cover any supplies made in connection with
the business. The phrase widens the scope of Business
definition to bring more activities in its ambit. Important
to note that any supplies received by a taxable person
used/ consumed in the course or further of business is
eligible for claiming input tax credit.

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The phrase further enables the entity to supply and to
receive supplies where the act is towards achieving the
goals of the business. This impacts the eligibility to claim
input tax credit. Hence, it becomes important for an
entity to understand and justify that a particular act is
done in the course and furtherance of its business goals
and intentions.

Meaning of Business under GST explained with

illustrations
As per Sec 2(17) of CGST Act, 2017 “Business” includes :

any trade, commerce, manufacture, profession, vocation,

adventure, wager or any other similar activity, whether
or not it is for a pecuniary benefit;
Banks providing financial services to its customers.
Company manufacturing turbines for export and local
sale.
Provision of CA services to client such as audit and
consultancy.
An artist earning income for dance performances.
Gambling in a Derby.
Charitable hospital providing free medicines to farmers.
Note: Pecuniary benefit means monetary benefits. It’s a
benefit or compensation that is quantifiable in monetary
terms. The primary significance of this term is economic
gain by the entity.
any activity or transaction in connection with or incidental
or ancillary to (a) above;
Provisions of lockers for rent to customers in the Bank
premises as Banks have high security.
Turbine Manufacturing company letting out R&D facilities
to research units towards improvement of product and
expansion.
any activity or transaction in the nature of(a) above,
whether or not there is volume, frequency, continuity or
regularity of such transaction;
Mr. X gambles for the first time in Derby and wins.

Page 33 of 52
Sale of mangoes by a farmer during summer in flea
market.
Sale of old newspapers by a CA firm.
supply or acquisition of goods including capital assets and
services in connection with commencement or closure of
business;
Services rendered by a Company Secretary to
incorporate a Company.
Real estate agent helping Company to acquire factory
godown for a commission.
provision by a club, association, society, or any such
body (for a subscription or any other consideration) of
the facilities or benefits to its members, as the case may
be;
Cooperative society formed for lending loans to farmers.
Recreation club formed by apartment owners.
admission, for a consideration, of persons to any
premises; and
PVR selling movie tickets.
Entry / Admission fee collected by Art exhibitions to
display artifacts, paintings and sculptures made by
artists.
Museums run by Governments for an entry fee to public
to display objects of historical significance.
services supplied by a person as the holder of an office
which has been accepted by him in the course or
furtherance of his trade, profession or vocation;
Consultancy service provided by a Company CFO
regarding Mergers to another company.
services provided by a race club by way of totalisator or a
licence to bookmaker in such club;
any activity or transaction undertaken by the Central
Government, a State Government or any local authority
in which they are engaged as public authorities;
Acquisition of land for Metro construction by the State
Government from the landowners for some
compensation.

Page 34 of 52
Government running BBMP service for the welfare of
citizens.
Examples to understand Supplies made in the course and
furtherance of business

Supply of goods to an orphanage by any manufacturing

company for free distribution to meet its CSR obligations
will not get covered as a taxable as it is without
consideration. Such distribution would be in the course of
business for the company as meeting CSR obligations is
ancillary or incidental to its main business.
A Banking company selling hypothecated assets due to
default in debt payment by its borrowers is in the course
and furtherance of business.
A turbine manufacturing company running a staff canteen
is in the course and furtherance of business.
A non resident person Mr.X visits India as a tourist and
sells his camera for Rs.10000. This doesn’t amount to
supply as it is not in the course and furtherance of
business.
A practicing CA who is registered under GST sells his
personal Rado watch. It doesn’t amount to supply as it is
not in the course and furtherance of business.

Time of Supply Provisions under GST

In order to calculate and discharge tax liability it is

important to know the date when the tax liability arises
i.e. the date on which the charging event has occurred.
In GST Act, it is known as Time of Supply. GST Act has
provided separate provisions to determine the time of
supply of goods and time of supply of services. Once the
time of supply is determined, the rate of GST and the
amount GST payable is calculated at that point of time
and such liability is to be discharged by making payment

Page 35 of 52
of GST within the time specified. 1. TIME OF SUPPLY OF
GOODS The liability to pay tax on goods shall arise at the
time of supply of goods under following circumstances: i.
Supply of goods, where supplier is liable to pay tax under
normal situation i.e forward charge Earliest of the
following dates: Date of issue of invoice by the supplier.
If the invoice is not issued, then the last date on which
the supplier is legally bound to issue the invoice with
respect to the supply Date on which the supplier receives
the payment (Not Relevant for advances received for
supply of goods) Note: a. The last date for issuance of
invoice shall be determined in the following manner-
Where supply involves movement of goods: Before or at
the time of removal of goods for supply to the recipient
Where supply does not involves movement of goods:
Before or at the time of delivery of goods or making the
goods available to the recipient. b. Date of receipt of
payment refers to: Earlier of Date on which the payment
is recorded in books of account of the entity or Date on
which the payment is credited to the entity’s bank
account. ii. Time of Supply of goods where tax is levied
on reverse charge basis Earliest of the following dates: •
Date of receipt of goods Date on which the payment is
entered in the books of accounts of the recipient or the
date on which the payment is debited in his bank
account, whichever is earlier Date immediately following
30 days from the date of issue of invoice or any other
legal document in lieu of invoice by the supplier However,
if it is not possible to determine the time of supply in
aforesaid manner, then the time of supply is the date of
entry of the transaction in the books of accounts of the
recipient of supply. iii. Time of Supply in case of Vouchers
Situation Time of Supply If the supply is identifiable at
the point at which voucher is identified Date of issuance
of the voucher In all other cases i.e the supply is not
identifiable at the point at which voucher is identified
Date of redemption of voucher iv. Residuary Provision
In case it is not possible to determine the time of supply

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under aforesaid provisions, the time of supply is: Due
date of filing of return, in case where periodical return
has to be filed Date of payment of tax in all other cases
v. Time of supply in relation to an addition in the value of
supply by way of interest, late fees or penalty Time of
supply related to an addition in the value of supply by
way of interest, late fee or penalty for delayed payment
of any consideration shall be the date on which supplier
receives such addition in value. For example, a supplier
receives consideration in the month of September instead
of due date of July and for such delay he is eligible to
receive an interest amount of Rs. 1000/- and the said
amount is received on 15.12.22. The time of supply of
such amount (Rs. 1000/-) will be 15.12.22 i.e. the date
on which it is received by the supplier and tax liability on
this is to be discharged by 20.01.23. 2.TIME OF SUPPLY
OF SERVICES The liability to pay tax on services shall
arise at the time of supply of services under following
circumstances: i. Time of Supply of services, where
supplier is liable to pay tax under normal situation i.e
forward charge Earliest of the following dates: If the
invoice is issued within the legally prescribed period
under section 31(2) of the CGST Act:- Date of issue of
invoice by the supplier or the date of receipt of payment,
whichever is earlier If the invoice is not issued within the
legally prescribed period under section 31(2) of the CGST
Act:- Date of completion of provision of service or the
date of receipt of payment, whichever is earlier In case
the aforesaid two provisions do not apply: Date on which
the recipient shows the receipt of service in his books of
account Note: Time Limit for issuance of invoice for
supply of services: Situation Time Limit for issuance of
Invoice u/s 31(2) In case of supply of services in a
normal situation The invoice shall be issued within a
period of thirty days from the date of the supply of
service. (45 days in case of insurance companies/banking
companies/financial institutions including NBFCs) In case
of an insurer/banking company / financial institution,

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including a non-banking financial company/ Telecom
operator, or any other class of supplier of services as
may be notified by the Government making taxable
supplies of services between distinct persons as specified
in Section 25 The Invoice may be issued before or at the
time recording the same in books of account or before
the expiry of the quarter during which the supply was
made. ii. Time of Supply of Services which are taxable on
reverse charge basis Earliest of the following dates: Date
of payment as entered in the books of account of the
recipient or the date on which the payment is debited in
his bank account, whichever is earlier Date immediately
following 60 days from the date of issue of invoice or any
other legal document in lieu of invoice by the supplier
However, if it is not possible to determine the time of
supply in aforesaid manner, then the time of supply is
the date of entry of the transaction in the books of
accounts of the recipient of supply. iii. Time of Supply of
services in case of vouchers Situation Time of Supply If
the supply is identifiable at the point at which voucher is
identified Date of issuance of the voucher In all other
cases i.e the supply is not identifiable at the point at
which voucher is identified Date of redemption of voucher
iv. Residuary Provisions In case it is not possible to
determine the time of supply under aforesaid provisions,
the time of supply is: Due date of filing of return, in case
where periodical return has to be filed Date of payment
of tax in all other cases 3. TIME OF SUPPLY WHERE
THERE IS CHANGE IN RATE OF TAX IN RESPECT OF
SUPPLY OF GOODS OR SERVICES OR BOTH In case the
goods or services or both have been supplied before the
change in rate of tax Invoice Issued Payment Received
Time of Supply Before change in rate After change in rate
Date of Invoice After Change in Rate After change in rate
Date of invoice or Date of Payment, whichever is earlier
After change in rate After change in rate Date of Payment
In case the goods or services or both have been supplied
after the change in rate of tax Invoice Issued Payment

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Received Time of Supply Before change in rate After
change in rate Date of Payment Before Change in Rate
Before change in rate Date of invoice or Date of Payment,
whichever is earlier After change in rate Before change in
rate Date of Invoice Date of receipt of payment in case
of change in rate of tax Normally the date of receipt of
payment is the date of credit in the bank account of the
recipient of payment or the date on which the payment is
entered into his books of account, whichever is earlier.
However, in cases of change in rate of tax, the date of
receipt of payment is the date of credit in the bank
account if such credit is after four working days from the
date of change in rate of tax.

How to Get GST Number?

In order to get the GST number follow the simple steps:

Step 1: Visit the official GST Portal at www.gst.gov.in.

Step 2: Select 'Services' under Services tab and Click on

'Registration'.

Step 3: Now, Click on "New Registration" and enter all

the requested details like valid email address, mobile
number and a PAN for the business.

Step 4: Click on Proceed after submission of details to

get GST Registration Number.

How to Check GST Registration Status Online

Visit GST official portal at https://www.gst.gov.in/
Click to 'Services' > 'Registration' > 'Track Application
Status'.
Enter your ARN number and Captcha code. Next click on
SEARCH button.

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Finally, you will receive any of the following GST
registration status on your screen:
Provisional status
Pending for verification status
Validation against error status
Migrated status
Cancelled status
GST Registration Via Authentication of Aadhaar
New businesses can secure their GST registration with
the help of the Aadhaar. The process is simple and quick.
The new process came into effect from 21 August 2020.
The procedure to opt for Aadhaar authentication is
mentioned below:

When you apply for GST registration, you will be provided

with an option to choose Aadhaar authentication.
Select 'YES'. The authentication link will be sent to the
registered email ID and mobile number.
Click on the authentication link.
Enter the Aadhaar number and select 'Validate'.
Once the details have been matched, an OTP will be sent
to the registered mobile number and email ID.
Enter the OTP to complete the process. You will get the
new GST registration within three working days.

How to Download the GST Registration Certificate?

The procedure to download the GST Registration
Certificate is mentioned below:

Step - 1: Visit https://www.gst.gov.in/

Step - 2: Click on 'Login'.
Step - 3: On the next page, enter the username and
password.
Step - 4: Click on 'Login'.
Step - 5: Next, click on 'Services'.
Step - 6: Click on 'User Services'.
Step - 7: Select 'View/Download Certificates'.

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Step - 8: On the next page, click on 'Download'. The
certificate will have details of the tax transactions.
Penalty for Not Registering or Late Registering Under GST
If you do not pay tax or pay a lesser amount than what is
due, the penalty that is levied is 10% of the due amount
(in case of genuine errors). However, the minimum
penalty is Rs.10,000.

If you have not registered for GST and are deliberately

trying to evade tax, the penalty levied is 100% of the
due tax amount.

Advantages of GST Registration

Given below are the advantages of GST
Registration:

Your business will be recognised legally.

Tax is accounted in a uniform manner.
Your business will be able to avail all the benefits that
comes under the GST rule.
Authorisation from the law to collect taxes on sales.
GST Registration Exemption
The below-mentioned individuals and entities are exempt
from GST registration:

Businesses that manufacture supplies that come under

reverse charge.
Activities that do not come under the supply of goods or
services. Examples of such activities are the sale of a
building or land, funeral services, and services provided
by an employee.
Businesses that make non-GST/ non-taxable supplies.
Examples are aviation turbine fuel, electricity, natural
gas, high-speed diesel, and petrol.
Businesses that make exempt/ nil-rated supplies.
Businesses that fall under the threshold exemption limit.
Agriculturists.
Features of GST Registration

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Some of the features of GST registration are as follows:

GST registration is PAN-based and state-specific.

An individual who is registered in one state is termed an
‘unregistered person’ in another state.
Suppliers must register in every state or union territory
from which they supply services.
In case a person owns a unit in a Special Economic Zone
(SEZ) or is a SEZ developer and also owns a unit in a
domestic tariff area (outside the SEZ) within the same
state, they must register the SEZ unit separately.
All registered people are expected to display their
registration certificates and GSTIN at their primary place
of business and also at every additional business location.
A particular PAN-based legal organisation will have one
GSTIN per State, which implies that a business company
with branches in many states would have to register
separately in each state. However, a person with several
business locations in a State or Union territory may be
given a separate registration for each location.
GST registration is not tax-specific, which implies that
there is just one registration for all taxes, including IGST,
CGST, SGST/UTGST, and cesses.

Benefits of GST Registration

Eliminates the Cascading Effect of Tax: GST's

comprehensive nature intends to avoid the cascading tax
impact. The cascading effect refers to a tax on tax in
which the tax liability was transferred at each level of the
transaction. Due to this, the cost of the item increases.
GST eliminates this cascading effect since the tax has a
direct impact on the price of goods and services.
Transparent in Nature: GST is a transparent tax system
with no costs or hidden charges for registered retailers.
This makes the expenses involved in business lesser.

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Tax evasion: The input credit is accessible to the receiver
if the supplier includes the data in its return. This
encourages the suppliers hence reducing tax evasion.
Composition Schemes for Small Firms: Many small
businesses are now under less of a tax and compliance
burden. Additionally, small firms, defined as those with a
turnover of Rs.20 lakh to Rs.75 lakh might profit from the
use of composition schemes.
Higher Registration Threshold: Under previous tax laws,
businesses with an annual turnover of more than Rs.5
lakh were subject to VAT. Various states had different
limits. However, in the GST system, the threshold is
raised to Rs.20 lakh thereby exempting small businesses
and service providers.
Reduced Number of Compliances: Previously, each tax
had its own returns and compliances. However, the
compliances have decreased after GST was implemented.
There is only one unified return that must be filed.
Treatment Guidelines for Online Merchants: The e-
commerce industry had no established definition of the
supply of goods prior to the introduction of GST. A few
states would view these as mediators or facilitators,
exempting them from the need to register for VAT. The
GST has eliminated all of these unequal treatment
practises.
Unorganised Sector is Regulated: The textile and
construction industries were mostly disorganised and
unregulated. Online compliance and payment options are
covered by the GST. Therefore, these industries will now
be held accountable and regulated.
Improvement in logistics Efficiency: Due to the GST,
which has reduced obstacles to the free movement of
goods between states, logistics efficiency has grown.
Warehouses are choosing to locate their units in major
cities rather than any other location.
Benefits of GST registration for composition dealers,
normal registered business, and business who opt for
GST registration voluntarily?

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The benefits of registering under GST for composition
dealers are that the impact on working capital reduces;
tax liability decreases, and limited compliance.
Benefits for normal registered business are that it allows
interstate business without restriction and takes input tax
credit.
While for the businesses who opt for GST registration
voluntarily the benefits for registering under GST are
receives competitive advantage over other businesses;
enables taxpayers to avail themselves of input tax credit;
allows easy registration on online and e-commerce
websites; and allows interstate business without
restriction.

Input Tax Credit (ITC) under GST

One of the fundamental features of GST is the seamless

flow of input credit across the chain (from the
manufacture of goods till it is consumed) and across the
country.

What is input tax credit?

Input credit means at the time of paying tax on output,
you can reduce the tax you have already paid on inputs
and pay the balance amount.

Here’s how:

When you buy a product/service from a registered dealer

you pay taxes on the purchase. On selling, you collect
the tax. You adjust the taxes paid at the time of purchase
with the amount of output tax (tax on sales) and balance
liability of tax (tax on sales minus tax on purchase) has

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to be paid to the government. This mechanism is called
utilization of input tax credit.

For example- you are a manufacturer: a. Tax payable on

output (FINAL PRODUCT) is Rs 450 b. Tax paid on input
(PURCHASES) is Rs 300 c. You can claim INPUT CREDIT
of Rs 300 and you only need to deposit Rs 150 in taxes.

Input Tax Credit

Who can claim ITC?

ITC can be claimed by a person registered under GST
only if he fulfils ALL the conditions as prescribed.

a. The dealer should be in possession of tax invoice

b. The said goods/services have been received

c. Returns have been filed.

d. The tax charged has been paid to the government by

the supplier.

e. When goods are received in installments ITC can be

claimed only when the last lot is received.

f. No ITC will be allowed if depreciation has been claimed

on tax component of a capital good

A person registered under composition scheme in GST

cannot claim ITC.

What can be claimed as ITC?

ITC can be claimed only for business purposes. ITC will
not be available for goods or services exclusively used
for: a. Personal use b. Exempt supplies c. Supplies for
which ITC is specifically not available

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How to claim ITC?
input tax credit

All regular taxpayers must report the amount of input tax

credit(ITC) in their monthly GST returns of Form GSTR-
3B. The table 4 requires the summary figure of eligible
ITC, Ineligible ITC and ITC reversed during the tax
period. The format of the Table 4 is given below: A
taxpayer can claim ITC on a provisional basis in the
GSTR-3B to an extent of 20% of the eligible ITC reported
by suppliers in the auto-generated GSTR-2A return.
Hence, a taxpayer should cross-check the GSTR-2A figure
before proceeding to file GSTR-3B. A taxpayer could have
claimed any amount of provisional ITC until 9 October
2019. But, the CBIC has notified that from 9 October
2019, a taxpayer can only claim not more than 20% of
the eligible ITC available in the GSTR-2A as provisional
ITC. This means taht the amount of ITC reported in the
GSTR-3B from 9 October 2019 will be the total of the
actual ITC in GSTR-2A and the provisional ITC being 20%
of the actual eligible ITC in the GSTR-2A. Hence,
matching of the purchase register or expense ledger with
the GSTR-2A becomes crucial.

Reversal of Input Tax Credit

ITC can be availed only on goods and services for
business purposes. If they are used for non-business
(personal) purposes, or for making exempt supplies ITC
cannot be claimed . Apart from these, there are certain
other situations where ITC will be reversed.

ITC will be reversed in the following cases-

1) Non-payment of invoices in 180 days– ITC will be

reversed for invoices which were not paid within 180
days of issue.

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2) Credit note issued to ISD by seller– This is for ISD. If
a credit note was issued by the seller to the HO then the
ITC subsequently reduced will be reversed.

3) Inputs partly for business purpose and partly for

exempted supplies or for personal use – This is for
businesses which use inputs for both business and non-
business (personal) purpose. ITC used in the portion of
input goods/services used for the personal purpose must
be reversed proportionately.

4) Capital goods partly for business and partly for

exempted supplies or for personal use – This is similar to
above except that it concerns capital goods.

5) ITC reversed is less than required- This is calculated

after the annual return is furnished. If total ITC on inputs
of exempted/non-business purpose is more than the ITC
actually reversed during the year then the difference
amount will be added to output liability. Interest will be
applicable.

The details of reversal of ITC will be furnished in GSTR-

3B. To find out more about the segregation of ITC into
business and personal use and subsequent calculations,
please visit our article.

Reconciliation of ITC
ITC claimed by the person has to match with the details
specified by his supplier in his GST return. In case of any
mismatch, the supplier and recipient would be
communicated regarding discrepancies after the filling of
GSTR-3B. Learn how to go about reconciliation through
our article on GSTR-2A Reconciliation. Please read our
article on the detailed explanation of the reasons for
mismatch of ITC and procedure to be followed to apply
for re-claim of ITC.

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Documents Required for Claiming ITC
The following documents are required for claiming ITC: 1.
Invoice issued by the supplier of goods/services 2. The
debit note issued by the supplier to the recipient (if any)
3. Bill of entry 4. An invoice issued under certain
circumstances like the bill of supply issued instead of tax
invoice if the amount is less than Rs 200 or in situations
where the reverse charge is applicable as per GST law. 5.
An invoice or credit note issued by the Input Service
Distributor(ISD) as per the invoice rules under GST. 6. A
bill of supply issued by the supplier of goods and services
or both.

Who are not required to register under

GST

Persons Not Liable For Obtaining GST

registration

Section 23 of the Central Goods and Service Tax Act,

2017 deals with the provisions of persons who are not
liable for GST registration. Section 23 (1) states that
persons who are engaged in supplying goods or services
or both that are not liable to be tax or persons who are
engaged in supplying of goods or services or both that
are wholly exempted from tax, then, such persons are
not required to obtain GST registration. Further, section
23 (2) empowers the government to notify a specific
category of persons that are exempted from obtaining
GST registration. List Of Persons Exempted From
Obtaining GST Registration – Following categories of
person are exempted from obtaining Goods and Service
Tax (GST) registration – 1. The person engaged
exclusively in providing business of supplying goods or

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services or both that are not liable to tax or are wholly
exempted from tax under Central Goods and Service Tax
Act, 2017 or under Integrated Goods and Services Tax
Act, 2017. 2. An agriculturist. However, the exemption is
only to the extent of supply of produce out of cultivation
of land. 3. Individual advocates, including senior
advocates. 4. Individual sponsorship service providers,
including players. 5. The person engaged in making inter-
state supplies of taxable services and having an
aggregate turnover of less than INR 20 Lakhs, INR 10
Lakhs in case of special category states, in a financial
year (as per notification no. 10/2017 – Integrated tax
dated 13th October 2017). 6. The person engaged in the
supply of services and having an aggregate turnover of
less than INR 20 Lakhs, INR 10 Lakhs in case of special
category states, in a financial year (as per notification no.
65/2017 – Central Tax dated 15th November 2017).
However above exemption is not available to the person
who is engaged in supplies, specified under sub-section
(5) of section 9 of the Act, through an e-commerce
operator who is required to collect tax at source (TCS)
under section 52 of the Act. 7. The person engaged in
supplying taxable goods or services or both and the total
tax on such supplies is required to be paid by the
recipient of goods or services or both under reverse
charge mechanism (as per notification no. 5/2017 –
Central Tax dated 19th June 2017 effective from 22nd
June 2017).

Person not liable to register under GST | Section 23 |

CGST Act 2017 | GST series part 15 1. Section 23 of the
CGST Act 2017 explains about the person not liable to be
registered under GST. The article covers the statutory
provisions under sec 23 and its simplified analysis along
with relevant notifications. 2. Section 23(1)(a) of CGST
Act – Statutory Provision:- Any person engaged
exclusively in the business of supplying goods or services

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or both that are not liable to tax or are wholly exempt
from tax under this Act or under IGST Act does not
require registration. 2.1 For example, Mr. X is engaged
exclusively in the supply of alcohol for human
consumption. He is not liable to obtain registration as per
sec. 23(1)(a) even if his turnover exceeds Rs 20 Lakhs
2.2 Analysis: – Section 23 is specifically granting
exemption from registration to persons exclusively
engaged in exempt supplies or supplies not liable to tax
even if the aggregate turnover is more than Rs. 20 Lakhs
whereas section 22 mandates to take registration if the
aggregate turnover in a financial year exceeds Rs. 20
Lakhs Irrespective of the fact whether such turnover
includes taxable supplies or exempt supplies. 2.3 Section
23 overrides section 22, wherein section 22 is concerned
about the persons whose aggregate turnover is more
than Rs 20 Lakhs while section 23 is exempting entities
engaged exclusively in making exempt supplies. 2.4
From the above discussion, it is clearly understood that
the person who is engaged exclusively in making exempt
supplies is not liable for registration even if his aggregate
turnover exceeds Rs 20 Lakhs. 3. Section 23(1)(b) of
CGST Act – Statutory Provision: An agriculturist, to the
extent of supply of produce out of cultivation of land,
does not require registration. 3.1 “Agriculturist” means
an individual or a Hindu Undivided Family who
undertakes cultivation of land – (a) by own labour, or (b)
by the labour of family, or (c) by servants on wages
payable in cash or kind or by hired labour under personal
supervision or the personal supervision of any member of
the family – section 2(7) of CGST Act. 3.2 Only those
who are directly engaged in the cultivation of land are
eligible for the exemption. 4. Section 23(2) of the CGST
Act – Statutory Provision: The government can grant an
exemption to other categories of persons on the
recommendation of the GST Council by issuing the
notification. CBIC has issued following notifications for
granting exemptions to other categories of persons:- 4.1

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Notification No. 5/2017-CT dated 19-6-2017– Persons
providing services where the service recipient is liable to
pay GST under reverse charge Persons who are making
supplies of taxable goods or services or both, where total
tax is payable on the recipient of goods or services (
under Reverse Charge Mechanism) are exempt from
registration under GST Act. 4.2 Notification No. 7/2017-
IT dated 14-9-2017 – Job worker making Inter-State
supplies: A job worker with turnover less than 20/10
lakhs is exempt from registration, even if he makes inter-
State supplies to the registered person. This exemption is
not available to Jewellery, goldsmiths’ and silversmiths’
wares and other articles manufactured on job work basis
4.3 Notification No. 10/2017-IT dated 13-10-2017 –
Interstate supply of taxable services if the aggregate
turnover of supplier of service, including inter-state
supplies is less than Rs 20/10 lakhs, he is not required to
register under GST under section 23(2) of CGST Act. 4.4
Notification No. 65/2017-CT dated 15-11-2017 – Persons
supplying services through e-commerce operator Persons
who are suppliers of service and supplying services
through e-commerce operator are not required to
register under GST if their aggregate turnover is less
than Rs 20 lakhs per annum (Rs 10 lakhs in case of
specified States) 4.5 Notification No. 3/2018-IT dated
22-10-2018 – Interstate supply of handicraft goods:
Persons engaged in the supply of handicraft goods
making inter-state supply are exempt from registration.
They are also not required to obtain casual registration if
they supply goods outside the State where they are
having their fixed establishment – They are required to
have income tax PAN and are required to generate e-way
bill – 4.5.1 E-way bill even if the value of consignment
is much below Rs 50,000 – e-way bill should be
generated irrespective of the value of consignment i.e.
even if the value of consignment is below Rs 50,000 in
case of handicraft goods transported inter-state under
the exemption if the turnover of the person below 20/10

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lakhs and enjoying exemption under Notification No.
32/2017-CT dated 15-9-2017 5. Notification No.
10/2019-IT dated 07.03.2019: Exclusive supply of
goods: person engaged in the exclusive supply of goods
and whose aggregate turnover in the financial year does
not exceed Rs 40 lakhs is not required to take
registration 6. Section 24(1) of CGST specified the
persons requiring registration without a threshold limit of
20/10 lakhs. However, Section 24(1) of CGST is not
applicable to persons who are not liable for registration
under section 23 of Act. However, if he is liable under
reverse charge, registration under GST will be required.
6.1 Section 24 of the CGST Act is not subject to section
23 of the CGST Act. Hence, a person dealing only in
exempted products is not required to be registered under
GST, if he is not liable under reverse charge. 6.2 In case
the person is liable under reverse charge, he needs to
take GST registration even if engaged in exempted
supplies. 6.3 AAR MAHARASHTRA held it in Jalaram
Feeds that person engaged exclusively in the
manufacture of exempted product receiving GTA service
which is under reverse charge would require registration
under CGST Act to discharge his duty liability under
reverse charge. The author can be approached at
[email protected]. Part 16 of the series will
cover the topic ” Persons requiring registration without
threshold limit under GST Sec 24 of CGST Act.

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