Frequently Asked Questions (FAQ) on GST – as released by CBEC as on 21.09.2016
GST
Dated:- 22-9-2016
GST – FAQ – Chapter wise / Question Wise
As part of this capacity building exercise, the NACEN has prepared a compilation of Frequently Asked Questions (FAQ) based on inputs gathered while conducting training and interactive sessions, as a training tool for helping the officers as well as public, to get acquainted with the Model GST Law and its nuances. The FAQs have been prepared and reviewed by a team of officials from both Centre and States.
Najib Shah
Chairman, CBEC
This FAQ on GST compiled by NACEN and vetted by the Source Trainers is based on the draft Model GST Law released in pub-lic domain in June, 2016. This FAQ is for training and academic purposes only.
The information in this booklet is intended only to provide a general overview and is not intended to be treated
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orm, with effect from 01 April
2017. One of the biggest challenges is to train the indirect
tax officials of both Centre and State, as well as the trade
on the concepts, processes and procedures of GST.
National Academy of Customs, Excise & Narcotics
(NACEN), the apex training institution for capacity building
in indirect taxation under the Central Board of Excise
and Customs, has been mandated to impart training on
GST to Central and State Government officers. NACEN is
conducting a mammoth capacity building exercise to train
about 60,000 indirect tax officers of the Centre and State so
that officers are well equipped to implement GST when it
is rolled out. NACEN has already created a team of almost
2000 trainers across the country to train the field officers.
Considering the limited time available, NACEN apart
from Classroom training, is also planning to use advanced
information technology tools, such as Virtual Classrooms
and E-Learning modules, to ensure larger cove
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Overview of Goods and Services Tax (GST)
2. Levy of and Exemption from Tax…………
3. Registration
–
4. Meaning and Scope of Supply …..
5. Time of Supply………
6. Valuation in GST..
7. GST Payment of Tax….
8. Electronic Commerce
9. Job Work……………………………..
10. Input Tax Credit.
_
3
19
27
45
53
59
65
77
85
91
11. Concept of Input Service Distributor in GST …105
12. Returns Process and matching of Input Tax Credit…..113
13. Assessment and Audit…………
14. Refunds………………..
.125
.137
15. Demands and Recovery
16. Appeals, Review and Revision in GST
17. Advance Ruling…
-……………
………………145
.155
.165
18. Settlement Commission..
…… 175
19. Inspection, Search, Seizure and Arrest..
187
20. Offences and Penalties, Prosecution and Compounding….211
21. Overview of the IGST Act ………..
.227
22. Place of
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G.D. Lohani, CCE, Faridabad (Chap. 21 & 22); and Shri
Prakash Kumar, CEO, GSTN (Chap.23).
Comments and Suggestions on FAQ may please be sent to
dg.nacen-cbec@nic.in
Disclaimer:
This FAQ on GST compiled by NACEN and vetted by the Source
Trainers is based on the draft Model GST Law released in pub-
lic domain in June, 2016. This FAQ is for training and academic
purposes only.
The information in this booklet is intended only to provide a
general overview and is not intended to be treated as legal ad-
vice or opinion. For greater details, you are requested to refer to
the model GST law.
viii
Overview of Goods and
Services Tax (GST)
1.
Overview of Goods and Services
Tax (GST)
Q 1. What is Goods and Service Tax (GST)?
Ans. It is a destination based tax on consumption of goods
and services. It is proposed to be levied at all stages right
from manufacture up to final consumption with credit
of taxes paid at previous stages available as setoff. In a
nutshell, only value
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Tax
C.
Luxury Tax
d. Entry Tax (all forms)
e.
Entertainment and Amusement Tax (except when
levied by the local bodies)
Taxes on advertisements
Purchase Tax
f.
g.
h.
Taxes on lotteries, betting and gambling
i.
State Surcharges and Cesses so far as they relate to
supply of goods and services
The GST Council shall make recommendations to the Union
and States on the taxes, cesses and surcharges levied by
the Centre, the States and the local bodies which may be
subsumed in the GST.
Q4.
What principles were adopted for subsuming
the above taxes under GST?
Ans. The various Central, State and Local levies were
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examined to identify their possibility of being subsumed
under GST. While identifying, the following principles were
kept in mind:
(i) Taxes or levies to be subsumed should be primarily in
the nature of indirect taxes, either on the supply of goods
or on the supply of services.
(ii) Taxes or levies to be subsumed should be part of
the transaction chain
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products under the GST regime?
Ans. Tobacco and tobacco products would be subject to
GST. In addition, the Centre would have the power to levy
Central Excise duty on these products.
Q7. What type of GST is proposed to be
implemented?
Ans. It would be a dual GST with the Centre and States
simultaneously levying it on a common tax base. The GST
to be levied by the Centre on intra-State supply of goods
and/or services would be called the Central GST (CGST)
and that to be levied by the States would be called the State
GST (SGST). Similarly Integrated GST (IGST) will be levied
and administered by Centre on every inter-state supply of
goods and services.
Q8. Why is Dual GST required?
Ans. India is a federal country where both the Centre and
the States have been assigned the powers to levy and collect
taxes through appropriate legislation. Both the levels
of Government have distinct responsibilities to perform
according to the division of powers prescribed in the
Constitut
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x.
Introduction of the GST required amendments in the
Constitution so as to simultaneously empower the Centre
and the States to levy and collect this tax. The Constitution
of India has been amended by the Constitution (one hundred
and first amendment) Act, 2016 recently for this purpose.
Article 246A of the Constitution empowers the Centre and
the States to levy and collect the GST.
Q 11. How a particular transaction of goods and
services would be taxed simultaneously under
Central GST (CGST) and State GST (SGST)?
Ans. The Central GST and the State GST would be levied
simultaneously on every transaction of supply of goods and
services except the exempted goods and services, goods
which are outside the purview of GST and the transactions
which are below the prescribed threshold limits. Further,
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both would be levied on the same price or value unlike
State VAT which is levied on the value of the goods inclusive
of CENVAT. While the location of the supplier and the
re
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can utilize the credit of SGST alone. In other
words, CGST credit cannot, in general, be used for payment
of SGST. Nor can SGST credit be used for payment of CGST.
Illustration II: Suppose, again hypothetically, that the
rate of CGST is 10% and that of SGST is 10%. When
an advertising company located in Mumbai supplies
advertising services to a company manufacturing soap
also located within the State of Maharashtra for, let
us say Rs. 100, the ad company would charge CGST of
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Rs. 10 as well as SGST of Rs. 10 to the basic value of
the service. He would be required to deposit the CGST
component into a Central Government account while
the SGST portion into the account of the concerned State
Government. Of course, he need not again actually pay
Rs. 20 (Rs. 10+Rs. 10) in cash as it would be entitled to
set-off this liability against the CGST or SGST paid on
his purchase (say, of inputs such as stationery, office
equipment, services of an artist etc). But for paying
CGST
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for the Centre and the States due to widening
of the tax base, increase in trade volumes and improved
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tax compliance. Last but not the least, this tax, because of
its transparent character, would be easier to administer.
Q 13. What is IGST?
Ans. Under the GST regime, an Integrated GST (IGST)
would be levied and collected by the Centre on inter-State
supply of goods and services. Under Article 269A of the
Constitution, the GST on supplies in the course of inter-
State trade or commerce shall be levied and collected by
the Government of India and such tax shall be apportioned
between the Union and the States in the manner as may be
provided by Parliament by law on the recommendations of
the Goods and Services Tax Council.
Q 14. Who will decide rates for levy of GST?
Ans. The CGST and SGST would be levied at rates to be
jointly decided by the Centre and States. The rates would
be notified on the recommendations of the GST Council.
Q 15. What would be the role of GST C
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rces during any natural
calamity or disaster;
(viii) special provision with respect to the North-
East States, J&K, Himachal Pradesh and
Uttarakhand; and
(ix) any other matter relating to the GST, as the
Council may decide.
Q 16. What is the guiding principle of GST Council?
Ans. The mechanism of GST Council would ensure
harmonization on different aspects of GST between the
Centre and the States as well as among States. It has
been provided in the Constitution (one hundred and
first amendment) Act, 2016 that the GST Council, in its
discharge of various functions, shall be guided by the need
for a harmonized structure of GST and for the development
of a harmonized national market for goods and services.
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Q 17. How will decisions be taken by GST Council?
Ans. The Constitution (one hundred and first amendment)
Act, 2016 provides that every decision of the GST Council
shall be taken at a meeting by a majority of not less than
3/4th of the weighted votes of the Member
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the Schedules to
the respective Acts.
Q 19. What are the benefits available to small tax
payers under the GST regime?
Ans. Tax payers with an aggregate turnover in a financial
year up to [Rs.10 lakhs] would be exempt from tax.
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[Aggregate turnover shall include the aggregate value of
all taxable and non-taxable supplies, exempt supplies and
exports of goods and/or services and exclude taxes viz.
GST.] Aggregate turnover shall be computed on all India
basis. For NE States and Sikkim, the exemption threshold
shall be [Rs. 5 lakhs]. All taxpayers eligible for threshold
exemption will have the option of paying tax with input
tax credit (ITC) benefits. Tax payers making inter-State
supplies or paying tax on reverse charge basis shall not be
eligible for threshold exemption.
Q 20. How will the goods and services be classified
under GST regime?
Ans. HSN (Harmonised System of Nomenclature) code
shall be used for classifying the goods under the GST regime.
Taxpayers whose
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credit will be available and same will be
available as refund to the exporters.
Q 23. What is the scope of composition scheme under
GST?
Ans. Small taxpayers with an aggregate turnover in
a financial year up to [Rs. 50 lakhs] shall be eligible for
composition levy. Under the scheme, a taxpayer shall
pay tax as a percentage of his turnover during the year
without the benefit of ITC. The floor rate of tax for CGST
and SGST shall not be less than [1%]. A tax payer opting
for composition levy shall not collect any tax from his
customers. Tax payers making inter- state supplies or
paying tax on reverse charge basis shall not be eligible for
composition scheme.
Q 24. Whether the composition scheme will be
optional or compulsory?
Ans. Optional.
Q 25. What is GSTN and its role in the GST regime?
Ans. GSTN stands for Goods and Service Tax Network
(GSTN). A Special Purpose Vehicle called the GSTN has
been set up to cater to the needs of GST. The GSTN shall
provide a shared I
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, appeal etc. for 19 States and UTs (Model
II States). The CBEC and Model I States (15 States) are
themselves developing their GST back-end systems.
Integration of GST front-end system with back-end systems
will have to be completed and tested well in advance for
making the transition smooth.
Q 26. How are the disputes going to be resolved
under the GST regime?
Ans. The Constitution (one hundred and first amendment)
Act, 2016 provides that the Goods and Services Tax Council
shall establish a mechanism to adjudicate any dispute-
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(a) between the Government of India and one or more
States; or
(b) between the Government of India and any State or
States on one side and one or more other Sates on the other
side; or
(c) between two or more States,
arising out of the recommendations of the Council or
implementation thereof.
Q 27. What are the other legislative requirements
for introduction of the GST?
Ans. Suitable legislation for the levy of GST (Central GST
Bill, In
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. CGST & SGST will be
levied on intra-state supplies while IGST will be levied on
inter-state supplies. The charging section is section 7 (1)
of CGST/SGST Act and Section 4(1) of the IGST Act.
Q3.
Is the reverse charge mechanism applicable
only to services?
Ans. No, reverse charge applies to supplies of both goods
and services.
Q4.
What will be the implications in case of
purchase of goods from unregistered dealers?
Ans. The receiver of goods will not be able to get
ITC. Further, the recipients who are registered under
composition schemes would be liable to pay tax under
reverse charge.
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Q 5. In respect of exchange of goods, namely gold
watch for restaurant services will the transaction be
taxable as two different supplies or will it be taxable
only in the hands of the main supplier?
Ans. No. In the above case the transaction of supply of
watch from consumer to the restaurant will not be an
independent supply as the same is not in the course of
business. It is
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oes not affect inter-
state supplies.
Q 10. Can the taxable person under composition
scheme claim input tax credit?
Ans. No, taxable person under composition scheme is not
eligible to claim input tax credit.
Q11. Can the customer who buys from a taxable
person who is under the composition scheme claim
composition tax as input tax credit?
Ans. No, customer who buys goods from taxable person
who is under composition scheme is not eligible for
composition input tax credit because a composition scheme
supplier cannot issue a tax invoice
Q 12. Can composition tax be collected from
customers?
Ans. No, the taxable person under composition scheme is
restricted from collecting tax. It means that a composition
scheme supplier cannot issue a tax invoice.
Q 13. What is the threshold for opting to pay tax
under the composition scheme?
Ans. The threshold for composition scheme is Rs. 50 Lakhs
of aggregate turnover in financial year.
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Q 14. How to compute 'aggregate turnover'
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conditionally, can taxable person pay tax?
Ans. No, the taxable person providing such goods or
services shall not collect the tax on such goods or services.
Q 18. What is remission of tax/duty?
Ans. It means relieving the tax payer from the obligation
to pay taxon goods when they are lost or destroyed due
22
to any natural causes. Remission is subject to conditions
stipulated under the law and rules made thereunder.
Q 19. Whether remission is allowed under GST law?
Ans. Yes, proposed section 11 of Model GST law permits
remission of tax on supply of goods.
Q 20. Whether remission is allowed for goods lost or
destroyed before supply?
Ans. Remission of tax will apply only when tax is payable
as per law i.e. taxable event should have happened and tax
is required to be paid as per law. Under GST Law, levy is
applicable upon supply of goods. Where goods are lost or
destroyed before supply, taxable event does not occur in
order to pay tax. Accordingly, question of remission
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ST due on supply of goods or
services or both by the business.
Legally authorized to collect tax from his
purchasers and pass on the credit of the taxes
paid on the goods or services supplied to
purchasers or recipients.
Can a person without GST registration claim
ITC and collect tax?
Ans. No. A person without GST registration can neither
collect GST from his customers nor claim any input tax credit
of GST paid by him.
Q3.
What will be the effective date of
registration?
Ans. Where the application for registration has been
submitted within thirty days from the date on which the
person becomes liable to registration, the effective date of
registration shall be date of his liability for registration.
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Where an application for registration has been submitted
by the applicant after thirty days from the date of his
becoming liable to registration, the effective date of
registration shall be the date of grant of registration.
In case of suomoto registration, i.e. tak
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l be computed on all India basis and excludes
taxes charged under the CGST Act, SGST Act and the IGST
Act.
Aggregate turnover does not include value of supplies on
which tax is levied on reverse charge basis, and value of
inward supplies.
Q6.
Which are the cases in which registration is
compulsory?
Ans. As per paragraph 5 in Schedule III of MGL, the
following categories of persons shall be required to be
registered compulsorily irrespective of the threshold limit:
a) persons making any inter-State taxable supply;
b) casual taxable persons;
c) persons who are required to pay tax under reverse
charge;
d)
non-resident taxable persons;
e) persons who are required to deduct tax under
section 37;
f) persons who supply goods and/or services
on behalf of other registered taxable persons
whether as an agent or otherwise;
g) input service distributor;
h) persons who supply goods and/or services,
other than branded services, through electronic
commerce operator;
i) ever
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for different
registrations?
Ans. Yes. In terms of Sub-Section (2) of Section 19, a person
having multiple business verticals in a State may obtain a
separate registration for each business vertical, subject to
such conditions as may be prescribed.
30
Q 10. Is there a provision for a person to get himself
voluntarily registered though he may not be liable to
pay GST?
Ans. Yes. In terms of Sub-section (3) of Section 19, a person,
though not liable to be registered under Schedule III, may
get himself registered voluntarily, and all provisions of this
Act, as are applicable to a registered taxable person, shall
apply to such person.
Q 11. Is possession of a Permanent Account Number
(PAN) mandatory for obtaining a Registration?
Ans. Yes. Every person shall have a Permanent Account
Number issued under the Income Tax Act, 1961 (43 of
1961) in order to be eligible for grant of registration under
Section 19 of the Model GST Law.
However as per section 19 (4A) of MGL, PAN i
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ntity Number
without giving a notice to show cause and without giving
the person a reasonable opportunity of being heard.
Q 14. Whether the Registration granted to any
person is permanent?
Ans. Yes, the registration Certificate once granted is
permanent unless surrendered, cancelled, suspended or
revoked.
Q 15. Is it necessary for the UN bodies to get
registration under MGL?
Ans. All UN bodies Consulate or Embassy of foreign
countries and any other class of persons so notified would
be required to obtain a unique identification number (UIN)
from the GST portal. The structure of the said ID would
be uniform across the States in conformity with GSTIN
structure and the same will be common for the Centre and
the States. This UIN will be needed for claiming refund of
taxes paid by them and for any other purpose as may be
prescribed in the GST Rules.
Q 16. What is the responsibility of the taxable person
supplying to UN bodies?
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Ans. The taxable supplier supplying to
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ndia is a non-resident
taxable person in terms of Section 2 (69) of the MGL.
Q 20. What is the validity period of the Registration
certificate issued to a Casual Taxable Person and non-
Resident Taxable person?
Ans. The certificate of registration issued to a “casual
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taxable person” or a “non-resident taxable person” shall
be valid for a period of ninety days from the effective date
of registration. However, the proper officer, at the request
of the said taxable person, may extend the validity of the
aforesaid period of ninety days by a further period not
exceeding ninety days.
Q 21. Is there any Advance tax to be paid by a Casual
Taxable Person and Non-resident Taxable Person at
the time of obtaining registration under this Special
Category?
Ans. Yes. While a normal taxable person does not have to
make any deposit of money to obtain registration, a casual
taxable person or a non-resident taxable person shall, at
the time of submission of application for registra
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himself carry out the amendments.
Q 23. Whether
Cancellation
Certificate is permissible?
of Registration
Ans. Yes. Any Registration granted under this Act may
be cancelled by the Proper Officer, in circumstances
mentioned in Section 21 of the MGL. The proper officer
may, either on his own motion or on an application filed,
in the prescribed manner, by the registered taxable person
or by his legal heirs, in case of death of such person, cancel
the registration, in such manner and within such period as
may be prescribed.
Q 24. Whether cancellation of Registration under
CGST Act means cancellation under SGST Act also?
Ans. Yes. The cancellation of registration under one Act
(say CGST Act) shall be deemed to be a cancellation of
registration under the other Act (i.e. SGST Act). (Section
21 (6))
Q 25. Can the proper Officer Cancel the Registration
on his own?
Ans. Yes, in certain circumstances specified under section
21(2) of MGL, the proper officer can cancel the reg
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n terms of
Section 19(2) of MGL.
Q 29. Who is an ISD?
Ans. ISD stands for Input Service Distributor and has
been defined under Section 2 (56) of MGL. It is basically
an office meant to receive tax invoices towards receipt of
input services and further distribute the credit to supplier
units proportionately.
36
Q 30. Will ISD be required to be separately registered
other than the existing taxpayer registration?
Ans. Yes. The ISD registration is for one office of
the taxpayer which will be different from the normal
registration.
Q 31. Can a taxpayer have multiple ISDs?
Ans. Yes. Different offices of a taxpayer can apply for ISD
registration.
Q 32. What could be the liabilities (in so far as
registration is concerned) on transfer of a business?
Ans. The transferee or the successor shall be liable to be
registered with effect from such transfer or succession and he
will have to obtain a fresh registration with effect from such
date. (Schedule III of MGL).
Q 33. Wheth
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ional place of business.
Q 36. At the time of registration will the assessee
have to declare all his places of business?
Ans. Yes. The principal place of business and place of
business have been separately defined under section 2(78)
& 2(75) of MGL respectively. The taxpayer will have to
declare the principal place of business as well as the details
of additional places of business in the registration form.
Q 37. Is there any system to facilitate smaller dealers
or dealers having no IT infrastructure?
Ans. In order to cater to the needs of taxpayers who are
not IT savvy, following facilities shall be made available:-
Tax Return Preparer (TRP): A taxable person may prepare
his registration application /returns himself or can
approach the TRP for assistance. TRP will prepare the
said registration document / return in prescribed format
on the basis of the information furnished to him by the
taxable person. The legal responsibility of the correctness
38
of information co
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hose who do not have a
digital signature, alternative mechanisms will be provided
in the GST Rules on Registration.
Q 39. What will be the time limit for the decision on
the online application?
Ans. If the information and the uploaded documents
are found in order, the State and the Central authorities
shall approve the application and communicate the
approval to the common portal within three common
working days. The portal will then automatically
39
generate the Registration Certificate. In case по
deficiency is communicated to the applicant by both
the tax authorities within three common working days,
the registration shall be deemed to have been granted
[section 19(9) of MGL] and the portal will automatically
generate the Registration Certificate.
Q 40. What will be the time of response by the
applicant if any query is raised in the online
application?
Ans. If during the process of verification, one of the tax
authorities raises some query or notices some
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t/CGST Act).
Q 42. Will there be any communication related to
the application disposal?
Ans. The applicant shall be informed of the fact of grant or
rejection of his registration application through an e-mail
and SMS by the GST common portal. Jurisdictional details
would be intimated to the applicant at this stage.
Q 43. Can the registration certificate be downloaded
from the GSTN portal?
Ans. In case registration is granted, applicant can
download the Registration Certificate from the GST
common portal.]
****
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Meaning and Scope of
Supply
4.
Meaning and Scope of Supply
Q 1. What is the taxable event under GST?
Ans. The taxable event under GST shall be the supply
of goods and/or services made for consideration in the
course or furtherance of business. The taxable events under
the existing indirect tax laws such as manufacture, sale, or
provision of services shall stand subsumed in the taxable
event known as 'supply.
Q2.
What is the meaning of 'Supply'?
Ans.
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pply; and
(vi) Supply is made by a taxable person.
Can a transaction in which any one or more of
the above criteria is not fulfilled, be still considered as
supply under GST?
Ans. Yes. Under certain circumstances such as importation
of service (Section 3(1) (b)) or supplies made without
consideration, specified under Schedule-I of MGL, where
one or more ingredients specified in answer to question no.
4 are not satisfied, it shall still be treated as supply under
GST Law
Q 6. Importation of Goods is conspicuous by its
absence in Section 3. Why?
Ans. Importation of goods is dealt separately under
the Customs Act, 1962, wherein IGST shall be levied as
additional duty of customs in addition to basic customs
duty.
Q7.
Are self-supplies taxable under GST?
Ans. Inter-state self-supplies such as stock transfers will
be taxable as a taxable person has to take state wise
46
registration in terms of Schedule 1(5). Such transactions
have been made taxable even if there is no
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the course or furtherance of business:
1. Is the activity, a serious undertaking earnestly
pursued?
2.
Is the activity is pursued with reasonable or
recognisable continuity?
3. Is the activity conducted in a regular manner based
on sound and recognised business principles?
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4.
Is the activity predominantly concerned with
the making of taxable supply for consideration/
profit motive?
The test may ensure that occasional supplies, even if
made for consideration, will not be subjected to GST.
Q 10. An individual buys a car for personal use and
after a year sells it to a car dealer. Will the transaction
be a supply in terms of MGL? Give reasons for the
answer.
Ans. No, because supply is not made by the individual in
the course or furtherance of business. Further, no input
tax credit was admissible on such car at the time of its
acquisition as it was meant for non-business use.
Q 11. A dealer of air-conditioners transfers an air
conditioner from his stock in trade,
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s or supply of service?
Why?
Ans. Transfer of right to use goods shall be treated as
supply of service because there is no transfer of title in
such supplies. Such transactions are specifically treated as
supply of service in Schedule-II of MGL
Q 15. Whether Works contracts and Catering
services will be treated as supply of goods or supply
of services? Why?
Ans. Works contract and catering services shall be treated
as supply of service as specified in Schedule-II of MGL.
Q 16. Whether goods supplied on hire purchase
basis will be treated as supply of goods or supply of
services? Why?
Ans. Supply of goods on hire purchase shall be treated
as supply of goods as there is transfer of title, albeit at a
future date.
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Time of Supply
5.
Time of Supply
Q 1.
What is time of supply?
Ans. The time of supply fixes the point when the liability
to charge GST arises. It also indicates when a supply is
deemed to have been made. The MGL provides separate
time of supply
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e.
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Q4.
b) where there are no successive statements of
account or successive payments involved, the
date of issue of the invoice or the date of receipt
of payment whichever is earlier.
What is time of supply of goods sent on
approval basis?
Ans. In case of supply on approval basis, the time of supply
shall be the time at which it is known whether a supply will
take place or six months from the date of supply, whichever
is earlier.
Q5.
Where it is not possible to determine the
time of supply in terms of sub-section 2, 3, 5 or 6
of Section 12 or that of Section 13 of MGL, how will
time of supply be determined?
Ans. There is a residual entry in Section 12(7) as well as
13 (7) which say that if periodical return has to be filed,
then the due date of filing of such periodical return shall
be the time of supply. In other cases, it will be the date
on which the CGST/SGST/IGST is paid.
Q 6. When does the liability to pay GST arise in
respect of supply of services?
An
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is not issued and date of
payment or date of completion of provision of service
are also not ascertainable, what will be the time of
supply?
Ans. The time of supply shall be the date on which the
recipient shows the receipt of services in his books of
accounts.
Q 11. Suppose part advance payment is made or
invoice issued is for part payment, whether the time
of supply will cover the full supply?
Ans. No. The supply shall be deemed to have been made
55
to the extent it is covered by the invoice or the part
payment.
Q 12. What is time of supply of service in case of tax
payable under reverse charge?
Ans. The time of supply will be the earliest of the following
dates:
a) date of receipt of services;
b) date on which payment is made;
c) date of receipt of invoice;
d) date of debit in the books of accounts by
supplier.
Q 13. What will be the time of supply in continuous
supply of services?
Ans. The time of supply shall be the due date of payment,
if ascertainable f
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e, the
transaction value shall not include refundable deposit,
discount allowed before or at the time of supply.
Q 2. What is transaction value?
Ans. Transaction value refers to the price actually paid or
payable for the supply of goods and or services where the
supplier and the recipient are not related and price is the
sole consideration for the supply. It includes any amount
which the supplier is liable to pay but which has been
incurred by the recipient of the supply.
Q3.
Are there separate valuation provisions for
CGST, SGST and IGST and Goods and Services?
Ans. No, section 15 is common for all three taxes and also
common for goods and services.
Q4. Is contract price not sufficient to determine
valuation of supply?
Ans. Contract price is more specifically referred to as
'transaction value' and that is the basis for computing tax.
59
However, when the price is influenced by some factors like
relationship of parties or certain transactions are deemed
to be supp
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on rules)
Q 8. Whether post-supply discounts or incentives are
to be included in the transaction value?
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60
Ans. Yes. Unless the post-supply discount is established as
per the agreement and is known at or before the time of
supply and specifically linked to relevant invoice.
Q 9.
Whether pre-supply
pre-supply discounts allowed
before or at the time of supply are includible in the
transaction value?
Ans. No, provided it is allowed in the course of normal
trade practice and has been duly recorded in the invoice.
Q 10. When are Valuation Rules applicable?
Ans. Valuation Rules are applicable when (i) Consideration
not in money terms; (ii) parties are related or supply by
any specified category of supplier; and (iii) transaction
value declared is not reliable.
Q 11. What are the reasons for doubting transaction
value declared?
Ans. The reasons have been indicated in Rule 7(b) of the
draft GST Valuation Rules. It is:- (i) comparable supplies
are at significantly hig
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as follows:
a) Any amounts paid by recipient that are
obligation of supplier to pay;
b) Money value of goods or services provided free
or at concession by recipient;
c) Royalties and license fees payable by recipient
as a condition of supply;
d) Taxes levied under any other law(s) (other than
SGST/CGST or IGST);
e) Expenses incurred by supplier before supply and
charged separately;
f) Subsidy realized by supplier on the supply;
g) Reimbursements
supplier;
claimed separately by
h) Discounts allowed 'after' supply except when
known before supply; (Discounts allowed as a
normal trade practice and reflected on the face
of the invoice shall not be included).
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GST Payment of Tax
7.
GST Payment of Tax
What are the Payments to be made in GST
Q 1.
regime?
Ans. In the GST regime, for any intra-state supply, taxes to
be paid are the Central GST (CGST, going into the account
of the Central Government) and the State GST (SGST, going
into the account of the concerned S
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of supply of services as explained in
Section 13. The time is generally the earliest of one of the
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three events, namely receiving payment, issuance of invoice
or completion of supply. Different situations envisaged and
different tax points have been explained in the aforesaid
sections.
Q4.
What are the main features of GST payment
process?
Ans. The payment processes under proposed GST regime
will have the following features:
•
Electronically generated challan from GSTN
Common Portal in all modes of payment and no
use of manually prepared challan;
Facilitation for the taxpayer by providing hassle
free, anytime, anywhere mode of payment of tax;
Convenience of making payment online;
Logical tax collection data in electronic format;
.
Faster remittance of tax
revenue to the
Government Account;
.
Paperless transactions;
.
Speedy Accounting and reporting;
Electronic reconciliation of all receipts;
Simplified procedure for banks;
Warehousing of Digital
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posit of GST.
Q6.
When is payment of taxes to be made by the
Supplier?
Ans. Payment of taxes by the normal taxpayer is to be done
on monthly basis by the 20th of the succeeding month. Cash
payments will be first deposited in the Cash Ledger and the
taxpayer shall debit the ledger while making payment in
the monthly returns and shall reflect the relevant debit
entry number in his return. As mentioned earlier, payment
can also be debited from the Credit Ledger. Payment of
taxes for the month of March shall be paid by the 20th
of April. Composition tax payers will need to pay tax on
67
quarterly basis. Timing of payment will be from 0000 Hrs
to 2000 Hrs.
Q7.
Whether time limit for payment of tax can be
extended or paid in monthly installments?
Ans. No, this is not permitted in case of self-assessed
liability. In other cases, competent authority has been
empowered to extend the time period or allow payment in
installments. (Section 55 of MGL).
Q 8. What happens if th
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o the Government account.
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Q 10. What are E-Ledgers?
Ans. Electronic Ledgers or E-Ledgers are statements of
cash and input tax credit in respect of each registered
taxpayer. In addition, each taxpayer shall also have
an electronic tax liability register. Once a taxpayer
is registered on Common Portal (GSTN), 2 e-ledgers
(Cash & Input Tax Credit) and an electronic tax liability
register will be automatically opened and displayed on
his dashboard at all times.
Q 11. What is a tax liability register?
Ans. Tax Liability Register will reflect the total tax liability
of a taxpayer (after netting) for the particular month.
Q 12. What is a Cash Ledger?
Ans. The cash ledger will reflect all deposits made in
cash, and TDS/TCS made on account of the taxpayer. The
information will be reflected on real time basis. This ledger
can be used for making any payment on account of GST.
Q 13. What is an ITC Ledger?
Ans. Input Tax Credit as self-assessed in monthly returns
will be ref
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the
challan, for use of payment of taxes. The remitter will have
option of printing the challan for his record.
Q 16. Can a challan generated online be modified?
Ans. No. After logging into GSTN portal for generation of
challan, payment particulars have to be fed in by the tax
payer or his authorized person. He can save the challan
midway for future updation. However once the challan is
finalized and CPIN generated, no further changes can be
made to it by the taxpayer.
Q 17. Is there a validity period of challan?
Ans. Yes, a challan will be valid for fifteen days after its
generation and thereafter it will be purged from the System.
However, the taxpayer can generate another challan at his
convenience.
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70
Q 18. What is a CPIN?
Ans. CPIN stands for Common Portal Identification
Number (CPIN) given at the time of generation of challan.
It is a 14 digit unique number to identify the challan. As
stated above, the CPIN remains valid for a period of 15
days.
Q 19. W
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er amounts
payable including any confirmed demands under section
51. This sequence has to be mandatorily followed.
71
14
Q 21. What is an E-FPB?
Ans. E-FPB stands for Electronic Focal Point Branch.
These are branches of authorized banks which are
authorized to collect payment of GST. Each authorized
bank will nominate only one branch as its E-FPB for
pan India Transactions. The E-FPB will have to open
accounts under each major head for all governments.
Total 38 accounts (one each for CGST, IGST and one
each for SGST for each State/UT Govt.) will have to be
opened. Any amount received by such E-FPB towards
GST will be credited to the appropriate account held by
such E-FPB.
For NEFT/RTGS Transactions, RBI will act as E-FPB.
Q 22. What is TDS?
Ans. TDS stands for Tax Deducted at Source (TDS). As
per section 37, this provision is meant for Government
and Government undertakings and other notified
entities making contractual payments in excess of Rs.
10 Lakhs to suppl
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within 5 days of deducting TDS failing
which fees of Rs. 100 per day subject to maximum of
Rs. 5000/- will be payable by such deductor.
Q 25. What is Tax Collected at Source (TCS)?
Ans. This provision is applicable only for E-Commerce
Operator under section 43C of MGL. Every E-Commerce
Operator needs to withhold a percentage (to be notified
later on the recommendation of the GST Council) of the
amount which is due from him to the supplier at the time
of making actual payment to the supplier. Such withheld
amount is to be deposited by such E-Commerce Operator
to the appropriate GST account by the 10th of the next
73
month. The amount deposited as TCS will be reflected in
the electronic cash ledger of the supplier.
Q 26. Is the pre-registration of credit card necessary
in the GSTN portal for the GST payment?
Ans. Yes. The taxpayer would be required to pre-register
his credit card, from which the tax payment is intended,
with the Common Portal maintained on GSTN. GSTN m
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ommerce operator?
Ans. Section 43B(e) of the MGL defines an Electronic
Commerce Operator (Operator) as every person who,
directly or indirectly, owns, operates or manages an
electronic platform which is engaged in facilitating
the supply of any goods and/or services. Also a person
providing any information or any other services incidental
to or in connection with such supply of goods and services
through electronic platform would be considered as an
Operator. A person supplying goods/services on his own
account, however, would not be considered as an Operator.
For instance, Amazon and Flipkart are e-commerce
Operators because they are facilitating actual suppliers
to supply goods through their platform (popularly called
Market place model or Fulfillment Model). However, Titan
77
supplying watches and jewels through its own website
would not be considered as an e-commerce operator for the
purposes of this provision. Similarly Amazon and Flipkart
will not be treated as
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connect with the
persons providing service of a particular kind under the
brand name or trade name of the said aggregator. For
instance, Ola cabs would be an aggregator.
78
Q6. Is an aggregator required to be registered
under GST?
Ans. Yes. Section 19 r/w Schedule-III of the MGL, provides
that the threshold exemption is not available to aggregators
and they would be liable to be registered irrespective of the
value of supply made by them.
Q7.
What is Tax Collection at Source (TCS)?
Ans. In terms of Section 43C(1) of the MGL, the e-commerce
operator is required to collect (i.e. deduct) an amount out
of the consideration paid or payable to the actual supplier
of goods or services in respect of supplies of goods and/
or services made through such operator. The amount so
deducted/collected is called as Tax Collection at Source
(TCS).
Q 8.
At what time/intervals should the e-commerce
operator make such deductions?
Ans. The timings for such collection/deduction are ea
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f respective supplies made by them
and the amount collected on their behalf. The Form and
Manner of the said Statement would be prescribed in the
GST Rules.
Q 10. How can actual suppliers claim credit of this
TCS?
Ans. Such TCS which is deposited by the operator into
government account will be reflected in the cash ledger
of the actual registered supplier (on whose account such
collection has been made) on the basis of the statement
filed by the operator. The same can be used at the time of
discharge of tax liability in respect of the supplies by the
actual supplier.
Q 11. Is the e-commerce operator required to furnish
information to the Government?
Ans. Yes. In terms of section 43C(10), an officer not below
the rank of Joint Commissioner may require the operator
to furnish details relating to:
80
(i) supplies of goods / services effected through the
operator during any period;
(ii) stock of goods held by actual supplier making
supplies through such operator in th
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ails of
such supplies during the said calendar month.
Q 13. What is the concept of matching in e-commerce
provisions and how it is going to work?
Ans. As per section 43C (6), the details of supplies and the
amount collected during a calendar month, and furnished
81
by every operator in his statement will be matched with the
corresponding details of outward supplies furnished by the
concerned supplier in his valid return filed under section
27 for the same calendar month or any preceding calendar
month. Where the details of outward supply, on which
the tax has been collected, as declared by the operator
in his statement do not match with the corresponding
details declared by the supplier the discrepancy shall be
communicated to both persons.
Q 14. What will happen if the details remain
mismatched?
Ans. As per section 43C (8), the value of a supply relating
to any payment in respect of which any discrepancy is
communicated and which is not rectified by the supplier
i
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a manner so as to ensure that the activity of job-work
must amount to manufacture. Thus the definition of job-
work itself reflects the change in basic scheme of taxation
relating to job-work in the proposed GST regime.
Q 2.
Whether goods sent by a taxable person to a
job-worker will be treated as supply and liable to
GST? Why?
Ans. No. It will not be treated as a supply. In terms of
proviso to Para 5 of Schedule I of the MGL the supply of
goods by a registered taxable person (principal) to job-
worker, in terms of Section 43A, shall not be regarded as
supply of goods. Therefore, it can be inferred that no GST
shall be applicable on the goods supplied by the registered
principal to a job-worker.
Q 3.
Can a registered taxable person send goods
without payment of tax to his job-worker?
Ans. Yes. Section 43A of the MGL provides that the
registered taxable person (principal) can send the taxable
59
85
goods to a job-worker for job-work without payment of
tax. He ca
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tered
person or where the goods have been notified.
Q7.
Under what circumstances can the principal
directly supply goods from the premises of job-worker?
Ans. The goods can be supplied directly from the place of
business of job-worker without declaring it as additional
86
place of business in two circumstances namely where the
job-worker is a registered taxable person or where the
principal is engaged in supply of such goods as may be
notified in this behalf.
Q 8. What are the provisions concerning taking
of ITC in respect of inputs/capital goods sent to a
job-worker?
Ans. In the MGL, aspects relating to taking input tax credit
in respect of inputs/capital goods sent for job-work have
been specifically dealt in Section 16A, which provides that
the credit of taxes paid on inputs or capital goods can be
taken in the following manner:
Principal shall be entitled to take credit of inputs sent to a
job-worker if the said inputs, after completion of job-work
are receive
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to a taxable person, means the {IGST and CGST} in
respect of CGST Act and {IGST and SGST} in respect of SGST
Act, charged on any supply of goods and/or services to him
which are used, or are intended to be used, in the course
or furtherance of his business and includes the tax payable
under sub-section (3) of section 7.
Under the IGST Act, input tax is defined as IGST, CGST or
SGST charged on any supply of goods and/or services.
Q2. What is the implication of different definition of
“input tax” in three acts viz CGST, SGST and IGST Acts?
Ans. It implies that input tax consists of IGST & CGST in CGST
Act and IGST & SGST in SGST Act. In the IGST Act, input tax
consists of all three taxes namely, IGST, CGST and SGST.
It further implies that credit of all three can be used for
discharging IGST liability, whereas only credit of IGST &
CGST can be taken in CGST Act and that of IGST & SGST
can be taken under SGST Act. Further the credit of CGST &
SGST cannot be cross-utilize
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ished goods held in stock on the day
immediately preceding the date from which he becomes
liable to pay tax under the provisions of this Act. It may be
noted that the credit on pre-registration stock would not be
admissible if the registration has not been obtained within
a period of 30 days from the date on which he becomes
liable to registration.
Q 6.
A person becomes liable to pay tax on 1st
August, 2017 and has obtained registration on 15th
August, 2017. Such person is eligible for input tax
credit on inputs held in stock as on ……..
Ans. 31st July, 2017.
92
Q7. What is the eligibility of input tax credit on
inputs in stock for a person who obtains voluntary
registration?
Ans. As per section 16(2A) of MGL, the person who
obtains voluntary registration is entitled to take the input
tax credit of input tax on inputs in stock, inputs in semi-
finished goods and finished goods in stock, held on the day
immediately preceding the date of registration.
Q 8. Where
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gistered taxable
person. The amount of eligible credit would be calculated
in a manner to be prescribed in terms of section 16(7) of
the MGL read with GST ITC Rules (yet to be issued). It is
important to note that credit on capital goods also would
now be permitted on proportionate basis.
Q 10. What would be input tax eligibility in cases
where there is a change in the constitution of a
registered taxable person?
Ans. As per section 16(8) of the MGL, the transferor shall
be allowed to transfer the input tax credit that remains
unutilized in its books of accounts to the transferee
provided that there is a specific provision for transfer of
liabilities.
Q 11. What would be input tax eligibility in case where
the goods and/or services supplied by a registered
taxable person become absolutely exempt?
Ans. As per section 16(12) of the MGL, the registered
taxable person who supplies goods and / or services
which become absolutely exempt, has to pay an amount
equivalent to
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r. It has also been provided that after
payment of the amount on such goods, the balance, if any
available in electronic credit ledger would lapse. The amount,
required to be paid, is to be calculated as per GAAP in terms of
section 16(13) of the MGL.
Q 13. A dealer paying tax on compounding basis
crosses the compounding threshold and becomes
a regular taxable person. Can he avail ITC and if so
from what date?
Ans. As per section 16(3) of the MGL, he can avail ITC
in respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the day
immediately preceding the date from which he becomes
liable to pay tax under section 7.
Q 14. Mr. B, a registered taxable person was paying
tax under composition rate up to 30th July, 2017.
However, w.e.f 31st July, 2017. Mr. B becomes liable to
pay tax under regular scheme. Is he eligible for ITC?
95
Ans. Mr. B is eligible for input tax credit on inputs held
in stock and inputs contained in
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in terms of
Section 16A(2) of the MGL.
Q 18. What is the time period within which the
inputs sent for job work has to be received back by
the principal?
Ans. 180 days.
96
Q 19. Whether principal has to reverse the input tax
credit on inputs which have not been received back
from the job worker within 180 days?
Ans. Yes, the principal has to reverse the credit along with
interest on inputs which have not been received back from
job worker within 180 days but he can reclaim the credit
on receipt of inputs.
Q 20. Which of the following is included for
computation of taxable supplies for the purpose of
availing credit:
(a) Zero-rated supplies;
(b) Exempt supplies;
(c) Both?
Ans. Zero rated supplies.
Q 21. What is the time period within which the
capital goods sent for job work has to be received
back by the principal?
Ans. Two years.
Q 22. What is the liability of the principal if the
capital goods sent to job worker have not been
received within 2 years from the
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ning ITC?
Ans. As per Section 16(11) of the MGL, following four
conditions are stipulated:
(a) The registered taxable person should be in possession
of tax paying document issued by a supplier;
(b) The taxable person must have received the goods
and/or services;
(c)
(d)
The tax charged on such supply has been actually
paid to the government either in cash or through
utilization of input tax credit; and
The taxable person should have furnished the return
under section 27.
98
Q26. Where the goods against an invoice are received
in lots or instalments, how will a registered taxable
person be entitled to ITC?
Ans. As per proviso to section 16(11) of the MGL, the
registered taxable person shall be entitled to the credit
upon receipt of the last lot or installment.
Q 27. Who will get the ITC where goods have been
delivered to a person other than taxable person ('bill
to'- 'ship to' scenarios)?
Ans. As per explanation clause to section 16(11) of the MGL,
for this purp
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be availed:
(a) motor vehicles, except when they are supplied in the
usual course of business or are used for providing the
following taxable services—
(i) transportation of passengers, or
(ii) transportation of goods, or
(iii) imparting training on motor driving skills;
(b) goods and/or services provided in relation to food
and beverages, outdoor catering, beauty treatment,
health services, cosmetic and plastic surgery,
membership of a club, health and fitness center,
life insurance, health insurance and travel benefits
extended to employees on vacation such as leave
or home travel concession, when such goods and/
or services are used primarily for personal use or
consumption of any employee;
(c) goods and/or services acquired by the principal in
the execution of works contract when such contract
results in construction of immovable property, other
than plant and machinery;
(d) goods acquired by a principal, the property in which
is not transferred (whether
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ital goods on which input tax credit has been taken, the
registered taxable person shall pay an amount equal to the
input tax credit taken on the said capital goods reduced
by the percentage points as may be specified in this behalf
or the tax on the transaction value of such capital goods,
whichever is higher.
Q 32. What is the recovery mechanism for wrongly
availed credit?
Ans. As per section 16(16) of the MGL, the wrongly availed
credit would be recovered from the registered taxable
person in terms of section 51 of MGL.
101
Concept of Input Service
Distributor
in GST
11. Concept of Input Service
Q 1.
Distributor in GST
What is Input Service Distributor (ISD)?
Ans. As per Section 2(56) of MGL, ISD means an office of
the supplier of goods and/or services which receives tax
invoices issued under section 23 towards receipt of input
services and issues tax invoice or such other document as
prescribed for the purposes of distributing the credit of
CGST (SGST in Sta
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mount of credit distributed should not exceed
the amount of credit available;
C.
d.
Credit should be distributed only to such suppliers
to whom such services are attributable;
Credit in respect of services attributable to
more than one supplier should be distributed
proportionately on the basis of turnover of
respective supplier during the preceding
financial year.
Is the ISD required to file return?
Ans. Yes, as per Section 27(6) of MGL, ISD is required to
file monthly return by 13th of the following month in form
GSTR-6.
Q 5.
Can a company have multiple ISD?
Ans. Yes, different offices like marketing division, security
division etc. may apply for separate ISD.
Q 6.
What are the provisions for recovery of excess/
wrongly distributed credit by ISD?
Ans. Sections 18(1) and 18(2) provide for recovery of
excess/wrongly distributed credit by initiating action
against the ISD itself or against the recipient of credit so
distributed under section 51 of the Model GST
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be
distributed is yet to be prescribed. The Act provides that
the credit can be distributed only through prescribed
document.
Q 12. How to distribute common credit among all
the units of an ISD?
Ans. The common credit used by all the units can be
distributed by ISD on pro rata basis i.e. based on the
turnover of each unit to the aggregate turnover of all the
units to which credit is distributed.
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Q 13. The ISD may distribute the CGST and IGST
credit to recipient outside the State as
(a) IGST
(b) CGST
(c) SGST
Ans. (a) IGST.
Q 14. The ISD may distribute the CGST credit within
the State as
(a) IGST
(b) CGST
(c) SGST
(d) Any of the above.
Ans. (b) CGST.
Q 15. The credit of tax paid on input service used by
more than one supplier is
(a) Distributed among the suppliers who used such
input service on pro rata basis of turnover in
such State.
(b) Distributed equally among all the suppliers.
(c) Distributed only to one supplier.
(d) Cannot be distributed.
An
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necessary inputs for taking policy
decision;
e) Management of audit and anti-evasion programs
of tax administration.
Who needs to file Return in GST regime?
Ans. Every registered taxable person – who crosses the
threshold limit for payment of taxes. A supplier needs to be
registered when the aggregate turnover crosses Rs. nine
lacs but he become taxable person ONLY when he crosses
Rs. ten lacs. So he will be required to file returns when he
crosses the threshold limit of Rs. ten lacs. There are some
other class of persons who need to be registered and
therefore will have to file returns like interstate suppliers,
TDS deductors, e-commerce operators, suppliers supplying
goods through e-commerce operators etc (reference
Schedule-III and Question 6 of the Registration Chapter).
113
Q 3.
What type of outward supply details are to be
filed in the return?
Ans. A normal registered taxpayer has to file the outward
supply details in GSTR-1 in relation to various types of
s
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s of
value more than Rs.2.5 lacs in inter-state B2B supplies will
have to be uploaded. For intra-state invoices below Rs. 2.5
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lacs and all intra-state invoices, state wise summary will
be sufficient.
Q6.
Whether description of each item in the invoice
will have to be uploaded?
Ans. No. In fact description will not have to be uploaded.
Only HSN code in respect of supply of goods and Accounting
code in respect of supply of services will have to be fed. The
minimum number of digits that the filer will have to upload
would depend on his turnover in the last year.
Q7.
Whether value for each transaction will have
to be fed? What if no consideration?
Ans. Yes. Not only value but taxable value will also have to
be fed. In some cases both may be different.
In case there is no consideration, but it is supply by
virtue of schedule 1, the taxable value will have to be
uploaded.
Q 8.
Can a recipient feed information in his GSTR-2
which has been missed by the supplier?
A
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ty GSTR-1, the ITC will be reversed if the
mismatch continues even after it is made known to both
and still it is not rectified. Mismatch can be because of two
reasons. First, it could be due to mistake at the side of the
recipient, and in such a case, no further action is required.
Secondly, it could be possible that the said invoice was
issued by supplier but he did not upload it and pay tax on
it. In such a case, recovery action shall be taken against the
supplier. In short, all mismatches will lead to proceedings
if the supplier has made a supply but not paid tax on it.
Q 11. What will be the legal position in regard to the
reversed input tax credit if the supplier later realises
the mistake and feeds the information?
Ans. At any stage, but before September of the next
financial year, supplier can upload the invoice and pay
duty and interest on such missing invoices in his GSTR-3 of
116
the month in which he uploaded the invoice. The recipient
will then automatica
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gible for any input tax credit, there is no relevance
of GSTR-2 for them and since they do not pass on any
credit to their recipients, there is no relevance of GSTR-1
for them. In their return, they have to declare summary
details of their outward supplies along with the details
of tax payment. They also have to give details of their
117
purchases in their quarterly return itself, most of which
will be auto populated.
Q 15. Do Input Service Distributors (ISDs) need
to file separate statement of outward and inward
supplies with their return?
Ans. No, the ISDs need to file only a return in GSTR-6 and
the return has the details of credit received by them from
the service provider and the credit distributed by them
to the subsidiaries. Since their return itself covers these
aspects, there is no requirement to file separate statement
of inward and outward supplies.
Q 16. How does a taxpayer get the credit of the tax
deducted at source on his behalf? Does he need to
produ
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ons authorized to deduct
tax at source are not required to file annual return.
Q 18. Is an Annual Return and a Final Return one
and the same?
Ans. No. Annual Return has to be filed by every
registered taxable person paying tax as a normal or a
compounding taxpayer. Final Return has to be filed only
by those registered taxable persons who have applied for
cancellation of registration. This has to be filed within
three months of the date of cancellation or the date of
cancellation order.
Q 19. If a return has been filed, how can it be revised
if some changes are required to be made?
Ans. In GST since the returns are built from details of
individual transactions, there is no requirement for having
a revised return. Any need to revise a return may arise
due to the need to change a set of invoices or debit/credit
notes. Instead of revising the return already submitted, the
system will allow changing the details of those transactions
(invoices or debit/credit notes) that a
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Form
GSTR-1 by 10th of next month. How best this can be ensured
will depend on the number of B2B invoices that the taxpayer
issues. If the number is small, the taxpayer can upload all the
information in one go. However, if the number of invoices is
large, the invoices (or debit/credit notes) should be uploaded
on a regular basis. GSTN will allow regular uploading of
invoices even on a real time basis. Till the statement is
actually submitted, the system will also allow the taxpayer to
modify the uploaded invoices. Therefore, it would always be
beneficial for the taxpayers to regularly upload the invoices.
Last minute rush will make uploading difficult and will
come with higher risk of possible failure and default. The
second thing would be to ensure that taxpayers follow up
on uploading the invoices of their inward supplies by their
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suppliers. This would be helpful in ensuring that the input tax
credit is available without any hassle and delay. Recipients
can als
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on can also get his
return filed through a Tax Return Preparer, duly approved
by the Central or the State tax administration.
Q 23. What is the consequence of not filing the
return within the prescribed date?
Ans. A registered taxable person who files return beyond
the prescribed date will have to pay late fees of rupees one
hundred for every day of delay subject to a maximum of
rupees five thousand.
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Assessment and Audit
13. Assessment and Audit
Q 1.
Who is the person responsible to make
assessment of taxes payable under the Act?
Ans. Every person registered under the Act shall himself
assess the tax payable by him for a tax period and after
such assessment he shall file the return required under
section 27.
Q2. Is there any provision in MGL for tax treatment
of goods returned by the recipient?
Ans. Yes, Explanation to Section 44 of MGL has such a
provision. It provides that where goods received as an
inward supply is returned by the recipient to the supplier
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a request for paying tax on provisional basis has to come
from the taxpayer which will then have to be permitted
by the proper officer. In other words, no tax officer can
suomoto order payment of tax on provisional basis. This
is governed by section 44A of MGL. Tax can be paid on a
provisional basis only after the proper officer has permitted
it through an order passed by him. For this purpose, the
taxable person has to make a written request to the proper
officer, giving reasons for payment of tax on a provisional
basis. Such a request can be made by the taxable person
only in such cases where he is unable to determine:
a) the value of goods or services to be supplied by
him, or
b) determine the tax rate applicable to the goods
or services to be supplied by him.
In such cases the taxable person has to execute a bond in
the prescribed form, and with such surety or security as
the proper officer may deem fit.
Q 5.
What is the latest time by which final
assessment i
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tory
explanation within 30 days of being informed (extendable
by the officer concerned) or does not take corrective
action within a reasonable period after accepting the
discrepancies, the Proper Officer may take recourse to any
of the following provisions:
(a) Proceed to conduct audit under Section 49 of
the Act;
127
Q 8.
(b) Direct the conduct of a special audit under Section
50 which is to be conducted by a Chartered
Accountant or a Cost Accountant nominated for
this purpose by the Commissioner; or
(c) Undertake procedures of inspection, search and
seizure under Section 60 of the Act; or
(d) Initiate proceeding for determination of tax
under Section 51 of the Act.
Whether Proper Officer is required to give
any notice to taxable person before completing
assessment u/s 46?
Ans. As this provision relates to 'best judgment assessment,
giving a notice to the taxable person is not required.
Q 9. If a taxable person fails to file the return
required under law (under
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n thirty days of the receipt of the
best judgment assessment order.
Q 11. What is the time limit for passing order u/s 46
and 47?
Ans. The time limit for passing an assessment order under
section 46 or 47 is three or five years from the due date for
filing the annual return.
Q 12. What is the legal recourse available in respect
of a person who is liable to pay tax but has failed to
obtain registration?
Ans. Section 47 of MGL provides that in such a case, the
proper officer can assess the tax liability and pass an order
to his best judgment for the relevant tax periods. However,
such an order must be passed within a period of five years
from the due date of filing of the annual return for the
financial year to which non-payment of tax relates.
Q 13. Under what circumstances can a tax officer
initiate Summary Assessment?
Ans. As per section 48 of MGL, Summary Assessments can
be initiated to protect the interest of revenue when:
129
a) the proper officer has evidence
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Q 15. Is summary assessment order to be necessarily
passed against the taxable person?
Ans. No. In certain cases like when goods are under
transportation or are stored in a warehouse, and the
taxable person in respect of such goods cannot be
130
ascertained, the person in charge of such goods shall be
deemed to be the taxable person and will be assessed to
tax (section 48 of MGL).
Q 16. Who can conduct audit of taxpayers?
Ans. As per section 49 of MGL, any officer of CGST or SGST
authorized by his Commissioner by a general or specific
order may conduct audit of a taxpayer. The frequency and
manner of audit will be prescribed in due course.
Q 17. Whether any prior intimation is required
before conducting the audit?
Ans. Yes, prior intimation is required and the taxable
person should be informed at least 15 days prior to conduct
of audit.
Q 18. What is the period within which the audit is to
be completed?
Ans. The audit is required to be completed within 3
months
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be the action by the proper officer
upon conclusion of the audit?
Ans. The proper officer must without delay inform the
taxable person about his findings, reasons for findings and
the taxable person's rights and obligations in respect of
such findings.
Q 22. Under what circumstances can a special audit
be instituted?
Ans. A special audit can be instituted in limited
circumstances where during scrutiny, investigation, etc. it
comes to the notice that a case is complex or the revenue
stake is high. This power is given in section 50 of MGL.
Q 23. Who can serve the notice for special audit?
Ans. The Assistant / Deputy Commissioner is to serve the
132
notice for special audit only after prior approval of the
Commissioner.
Q 24. Who will do the special audit?
Ans. A Chartered Accountant or a Cost Accountant so
nominated by the Commissioner may undertake the audit.
Q 25. What is the time limit to submit the audit
report?
Ans. The auditor will have to submit the report w
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in sub-section
(2) of section 38:-
Q3.
(i) Exports of goods on which export duty is not
payable;
(ii) Exports of services;
(iii) Where credit has accumulated on account of
rate of tax on inputs being higher than the rate
of taxes on Outputs.
Can unutilized ITC be given refund, in case goods
exported outside India are subjected to export duty?
Ans. No (Second proviso to Section 38(2) of MGL).
Q4. Can ITC of goods lying in stock at the end of the
financial year (after introduction of GST) be refunded?
Ans. No. It is proposed to be carried forward.
137
Q5. Suppose a taxable person has paid IGST/
CGST/SGST mistakenly as an Interstate/intrastate
supply, but the nature of which is subsequently
clarified. Can the CGST/SGST be adjusted against
wrongly paid IGST or vice versa?
Ans. No. He will have to pay the appropriate tax and
claim refund of the tax wrongly paid. (IGST Sec.30 and
Sec.53 GST).
Q 6.
Whether purchases made by Embassies or UN
be taxed or exempted?
Ans.
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credited to the Consumer Welfare Fund.
Q 10. Is there any time limit for sanctioning of
refund?
Ans. Yes, it is 90 days in all cases, excepting in a case
where the refund to the extent of 80% of the total amount
claimed is refundable to certain categories of exporters
referred to in sub-section (4A) of section 38. If refund is
not sanctioned within the period of three months, interest
will have to be paid by the department.
Q 11. Can refund be withheld by the department?
Ans. Yes, refund can be withheld in the following
circumstances:
If the registered dealer has not submitted
return(s), till he files the return(s);
If the registered taxable person is required to pay
any tax, interest or penalty which has not been
stayed by the appellate authority/Tribunal/
court, till he pays such tax interest or penalty;
[The proper officer can also deduct unpaid
taxes if any of the dealer from the refundable
amount].
139
Commissioner/Board can withhold refund, if,
the Order o
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granted before verification subject to
such conditions and restrictions as may be prescribed –
section 38(4A).
140
Q 16. In case of refund under exports, whether BRC
is necessary for granting refund?
Ans. Since the exporter has a time period of one year from
the date of export for remitting of export proceeds, BRC
may not be available at the time of refund application.
But if export proceeds are received in advance BRC may
be available. Thus, refund should be subject to submission
of BRC details within a period of maximum one year or as
extended by RBI. e-BRC module of DGFT will be integrated
with GST module.
However for export of services BRC would be required
before sanction of refund.
Q 17. Will the principle of unjust enrichment apply
to exports or deemed exports?
Ans. The principle of unjust enrichment is not applicable
in case of actual exports of goods or services as the recipient
is located outside the taxable territory. However, in case of
deemed exports i
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w, exporters are
allowed to obtain duty paid inputs, avail ITC on it and
export goods upon payment of duty (after utilizing
the ITC) and thereafter claim refund of the duty paid
on exports. Will this system continue in GST?
Ans. Under the GST regime exports will be zero rated
which means that the export goods would not suffer
any actual tax liability although inputs for such exports
would be tax paid. Under GST, refund will be allowable on
the accumulated inputs as well as on exported finished
goods.
****
142
Demands and Recovery
15. Demands and Recovery
Q 1.
Which is the applicable section for the purpose
of recovery of tax short paid or not paid or amount
erroneously refunded or input tax credit wrongly
availed or utilized?
Ans. Section 51A in cases where there is no invocation
of fraud/suppression/mis-statement etc and Section 51B
where the ingredients of fraud/suppression/mis-statement
etc are present.
Q2.
Can the person chargeable with tax pay the
amount
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to be
completed within the period of 3 years (for Section 51A
cases) and 5 years (for Section 51B cases) from the relevant
date.
Q6.
Can the person chargeable with tax pay the
amount of demand along-with interest before issue
of notice under section 51B?
Ans. Yes. Before issue of notice under sub section (1) or a
statement under sub-section (2), a person chargeable with
tax, shall have an option to pay the amount of tax along
with interest and fifteen percent penalty, ascertained
either on his own or informed by the proper officer, and on
such payment, no notice shall be issued with respect to the
tax so paid.
Q7. If notice is issued under Section 51B and
thereafter the noticee makes payment, is there any
need to adjudicate the case?
Ans. No if tax/interest and penalty has been paid. Where
the person to whom a notice has been under sub-section (1)
issued, pays the tax along with interest with twenty five percent
penalty within 30 days of issue of notice all procee
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n section 51B (7).
Q 10. What happens if a person collects tax from
another person but does not deposit the same with
Government?
Ans. As per Section 52 of MGL, every person who has
collected from any other person any amount as representing
the tax under this Act, shall deposit the said amount to the
credit of the Central or a State Government, regardless of
whether the supplies in respect of which such amount was
collected are taxable or not.
147
Q 11. In case the person does not deposit tax
collected in contravention of Section 52, what is the
proper course of action to be taken?
Ans. Notice to be issued. Principles of natural justice to
be followed and order to be issued. It is to be noted that
such order has to be invariably issued within 1 year of
date of issue of notice. However there is no time limit for
issue of show cause notice. Thus, in such cases duty can be
recovered even after ten years.
Q 12. Is there any time limit to issue notice in cases
under Sec
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proper officer may, on an authorization by
the competent authority, distrain any movable
or immovable property belonging to or under
the control of such person, and detain the same
until the amount payable is paid; if the dues
remains unpaid for a period of thirty days after
any such distress, he may cause the said property
to be sold and with the proceeds of such sale,
may satisfy the amount payable and the costs
including cost of sale remaining unpaid and pay
the surplus amount, if any, to such person;
e) The proper officer may prepare a certificate
signed by him specifying the amount due
from such person and send it to the Collector
of the district in which such person owns any
property or resides or carries on his business
and on receipt of such certificate, the Collector
shall proceed to recover from such person the
amount specified as if it were an arrear of
land revenue.
Q 14. Can the proper officer allow payment of tax
dues in installments?
Ans. Yes, in c
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immediately before such
disposal.
Q 16. If a person liable to pay tax has certain tax
liability and in the meantime he transfers his business
to another person, what happens to the existing tax
liability?
Ans. Where any person liable to pay tax, transfers his
business in whole/part, by sale, gift, lease, leave and
license, hire, or in any other manner, then such person
and the person to whom the business is transferred shall
150
jointly and severally be liable to pay the tax, interest or
penalty due from the taxable person up to the time of such
transfer, whether such dues has been determined before
such transfer, but has remained unpaid or is determined
thereafter.
Q 17. What happens to tax dues where the Company
(taxable person) goes into liquidation?
Ans. When any company is wound up and any tax or other
dues determined whether before or after liquidation that
remains unrecovered, every person who was a director of
the company during the period for which the ta
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axable
person, whose business is carried on by any guardian
/ trustee or agent of a minor?
Ans. Where the business in respect of which any tax is
payable is carried on by any guardian/trustee / agent of
a minor or other incapacitated person on behalf of and for
the benefit of such minor/incapacitated person, the tax,
interest or penalty shall be levied upon and recoverable
from such guardian / trustee / agent.
Q 20. What happens when the estate of a taxable
person is under the control of Court of Wards?
Ans. Where the estate of a taxable person owning a business
in respect of which any tax, interest or penalty is payable
is under the control of the Court of Wards/Administrator
General/Official Trustee/Receiver or Manager appointed
under any order of a Court, the tax, interest or penalty
shall be levied and recoverable from such Court of Wards/
Administrator General / Official Trustee / Receiver or
Manager to the same extent as it would be determined and
recoverable f
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at the order is not legal and proper and
directing a GSTofficer sub-ordinate to him to file an application
to First Appellate Authority (FAA). Such application is then
treated by the FAA as if it were an appeal.
Q3.
What is the time limit to file appeal to First
Appellate Authority?
Ans. The time limit is fixed as 3 months from the date of
communication of order or decision.
155
Q4.
Whether this time limit applies even for the
departmental appeal/application filed consequent
to order of Commissioner of CGST?
Ans. Yes. It applies even for such applications filed which
are to be treated as appeal and all the provisions of appeal
are made applicable for such application as well.
Q 5.
Whether the first appellate authority has any
powers to condone the delay in filing appeal?
Ans. Yes. He can condone a delay of upto one month from
the end of the prescribed period of 3 months for filing the
appeal (3+1), provided there is “sufficient cause” as laid
down in the proviso
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ount payable under rule-of the GST
Credit Rules 201…; and
(iii) amount of fee levied or penalty imposed.
Q 10. Whether in an appeal the FAA can pass an order
enhancing the quantum ofduty/fine/penalty/reduce
the amount of refund/ITC from the one passed by the
original authority?
Ans. The FAA is empoweredto pass an order enhancing the
fees or penalty or fine in lieu of confiscation or reducing
the amount of refund or input tax credit provided
the appellant has been given reasonable opportunity of
showing cause against the proposed detrimental order.
(First Proviso to Section 79(10)).
In so far as the question of enhancing the duty or deciding
wrong availment of ITC is concerned, the FAA can do so
only after giving specific SCN to the appellant against the
proposed order and the order itself should be passed within
the time limit specified under Section 51. (Second Proviso
to Section 79(10).
157
Q 11. (only for SGST law) What is the provision
relating to pre-deposit
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ST revise any
order passed under the Act by his subordinates?
Ans. Yes. Section 80(1) of SGST Act authorises
Commissioner to call for and examine any order passed by
his subordinates and in case he considers the order of the
lower authority to be erroneous in so far as it is prejudicial
158
to revenue, he can revise the order after giving opportunity
of being heard to the noticee.
Q 14. Can the Commissioner of SGST order for staying
of operation of any order passed by his subordinates
pending such revision?
Ans. Yes.
Q 15. Are there any fetters to the powers of
Commissioner under SGST to revise orders
ofsubordinates?
Ans. Yes. The Commissioner shall not revise any order if
(a) the order has been subject to an appeal under section
79 or under section 82 or under section 87 or under section
88; or
(b) more than three years have expired after the passing of
the decision or order sought to be revised.
For details of these and some other “fetters”, please refer to
Sec
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from the date of receipt of appeal.
Q 20. Bring out the differences in appeal (to
Tribunal) provisions under CGST & SGST?
(i) The provisions under Section 82 of SGST Act for
appeal by any person aggrieved by the order or
decision passed against him by First Appellate
Authority are essentially similar to provisions
contained in Section 82 of CGST Act and
discussions made therein are equally applicable
to section 82 of SGST as well.
160
(ii) In addition to the above the provision of Section
82 of SGST Act also covers an appeal to be filed
to Appellate Tribunal against the revisionary
order passed by Commissioner.
(iii) However the provisions relating to appeal by
the revenue against the order of first appellate
authority as CGST Act is not provided in SGST
Act since the revisionary powers (against the
orders passed by the FAA, who in the states is
likely to be “subordinate” to the Commissioner)
is provided to Commissioner to SGST.
(iv) In addition, the person aggrie
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ave a difference of views regarding the treatment
of a transaction(s) being intra-State or inter-State; or a
matter where two or more States, or a State and Center,
have a difference of views regarding place of supply, then
appeal against such order shall lie to the Supreme Court
and not High Court.
Q 23. What is the time limit for filing an appeal
before the High Court?
Ans. 180 days from the date of receipt of the order
appealed against. However, the High Court has the
power to condone further delay on sufficient cause being
shown.
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162
Advance Ruling
17. Advance Ruling
Q 1. What is the meaning of Advance Ruling?
Ans. As per section 94 of Model CGST/SGST Law, 'advance
ruling' means a written decision provided by the authority
to an applicant on matters or on questions as enumerated
in section 97 and appeals thereon (section 99).
Q2.
Which are the matters enumerated in Section
97 for which advance ruling can be sought?
Ans. Advance Ruling can be sought for
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ertaken
by the applicant;
ii. attract Foreign Direct Investment (FDI);
iii. reduce litigation;
iv. pronounce ruling expeditiously in transparent
and inexpensive manner.
What will be the composition of Authority for
advance rulings (AAR) under GST?
Ans.
'Authority for advance ruling' (AAR) shall comprise
one member CGST and one member SGST. They will
be appointed by the Central and State government
respectively. Their qualification and eligibility condition
for appointment will be prescribed in the Model GST Rules.
(Section 95).
Q 5. What is the Appellate authority for advance
ruling (AAAR) and what would be its composition?
Ans. Appellate authority for advance ruling (AAAR) will
hear appeal against advance ruling given by the AAR. This
will comprise of two members namely Chief Commissioner
166
of CGST designated by the Central Board Excise and Customs
(CBEC) and Commissioner of SGST having jurisdiction over
the applicant. (Section 96).
Q6. How may AAR and AAAR w
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if the AAR or AAAR finds that the
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advance ruling was obtained by the applicant by fraud or
suppression of material facts or misrepresentation of facts. In
such a situation, all the provisions of the CGST/SGST Act shall
apply to the applicant as if such advance ruling had never
been made (but excluding the period when advance ruling
was given and up to the period when the order declaring it
to be void is issued). An order declaring advance ruling to be
void can be passed only after hearing the applicant.
Q 10. What is the procedure for obtaining Advance
Ruling?
Ans. Section 97 and 98 deals with procedure for obtaining
advance ruling. Section 97 provides that the applicant
desirous of obtaining advance ruling should make
application to AAR in a prescribed form and manner. The
format of the form and the detailed procedure for making
application will be prescribed in the Model GST Rules.
Section 98 provides the procedure for dealing with the
application for advance r
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edings in the applicant's case under any of
the provisions of the Act;
(d) if the question raised in the application is the
same as in a matter in the applicant's case
already decided by the adjudicating authority
or assessing authority, whichever is applicable.
If the application is rejected, it should be by way of a
speaking order giving the reasons for rejection.
Q 12. What is the procedure to be followed by AAR
once the application is admitted?
Ans. If the application is admitted, the AAR shall
pronounce its ruling within ninety days of receipt of
application. Before giving its ruling, it shall examine the
application and any further material furnished by the
applicant or by the concerned departmental officer.
Before giving the ruling, AAR must hear the applicant or
his authorized representative as well as the jurisdictional
officers of CGST/SGST.
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Q 13. What happens if there is a difference of opinion
amongst members of AAR?
Ans. If there is difference of o
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rned officer
will be the officer in whose jurisdiction the applicant is
located. In such cases the concerned officer will be the
jurisdictional CGST/SGST officer.
Any appeal must be filed within thirty days from the receipt
of the advance ruling. The appeal has to be in prescribed
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form and has to be verified in prescribed manner. This will
be prescribed in the Model GST Rules.
The Appellate Authority must pass an order after hearing
the parties to the appeal within a period of ninety days of
the filing of an appeal. If members of AAAR differ on any
point referred to in appeal, it shall be deemed that no
advance ruling is issued in respect of the question under
appeal.
Q 15. Can the AAR & AAAR order for rectification of
mistakes in the ruling?
Ans. Yes. Section 101 of the Act gives power to AAR
and AAAR to amend their order to rectify any mistake
apparent from the record within a period of six months
from the date of the order. Such mistake may be noticed
by the
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isputes and
save the business from the worries of prosecution
in certain situations.
Can tax disputes arising on account of both
intra-state and inter-state transactions be settled
under the MGL?
Ans. In the Model GST Law, the provisions for Settlement
Commission are incorporated only under the IGST Act
(sections 11 to 26). This implies that cases cannot be
settled in relation to tax liability pertaining to intra-state
transactions. However, there is a possibility that those state
tax administrations which want to constitute Settlement
175
Commission can do so on the basis of the template provided
under the IGST Act and the CGST Act can have an enabling
provision drawing from the IGST Act for such states.
Q3.
What is meant by a Case under the provisions
of Settlement in the MGL?
Ans. As per Section 11, Case means any proceeding under
the IGST Act for levy, assessment and collection of IGST
before an IGST officer or before a First Appellate Authority
in connection
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ttlement
application?
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Ans. Section 14 of the IGST Act provides that where the
members of a bench of Settlement Commission differ on any
point, the decision shall be taken on the basis of the majority
opinion. It is provided that a decision can also be taken by a
bench consisting of only two members, if the third member is
not available due to factors like absence, illness or vacancy. If
there is a difference of opinion between such two members, the
matter will then be referred to a third member, and decision
will be taken by the majority opinion.
Q6.
Who can apply for settlement?
Ans As per section 15 of the IGST Act, any taxable person
can apply for settlement of a case in relation to which he
has been issued one or more show cause notice(s) under the
IGST Act and the same is pending before the adjudicating
authority or the First Appellate Authority.
Q7.
What should be the contents of the settlement
application?
Ans. The settlement application should contain
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onfirming the demand of tax issued by the IGST
officer and the same is pending before the First
Appellate Authority;
(c) the additional amount of tax accepted by the
applicant in his application exceeds five lakh
rupees; and
(d) the applicant has paid the additional amount of
tax accepted by him along with the interest due
thereon under section 36 of the CGST Act.
What are
the circumstances in
in
which
application for settlement cannot be entertained?
Ans. As per section 15 of the IGST Act, in the following
circumstances, Settlement Commission will not accept an
application for settlement:
178
i.
ii.
If the case involved in the application is pending
with the Appellate Tribunal or any Court;
If the application involves determination of any
question having a bearing on the rate of tax or
determination of liability to pay tax on goods
and/or services;
iii. If the fees as prescribed has not been paid.
Q 10. Can the applicant withdraw his settlement
application
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liability;
(section 20)
iv. granting immunity from imposition of penalty either
in full or part under the IGST Act; (section 20)
V. Order provisional attachment of property of the
applicant during the pendency of any proceeding
before it. Such provisional attachment shall
cease to have effect, once sums due to the
Central Government for which attachment order
was made, stands discharged and the evidence
to this effect is submitted to the Settlement
Commission; (Section 17)
vi. Send a case back to the jurisdictional IGST
officer or the First Appellate Authority if it
is of the opinion that the applicant has not
cooperated with the Settlement Commission.
In such case, the relevant adjudicating
authority is entitled to use all material and
information produced by taxable person
before the Settlement Commission or the
results of an inquiry held by the Settlement
Commission; (section 21)
vii. Reopen any proceeding connected with the case
concluded earlier and pass ap
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ny false evidence or if he has failed
to pay the sum specified in the settlement order in the
prescribed time. (Section 20)
Q 13. Who cannot use Settlement Commission?
Ans. The following persons cannot avail of the facility of
Settlement Commission?
i. No person can avail the facility of settlement
more than twice. (section 23)
ii.
A person cannot apply for settlement in
any other matter where after passing of a
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settlement order, a person was convicted of any
offence under the IGST Act in relation to that
case or where due to lack of cooperation from
the applicant, the Settlement Commission has
sent back the case to the relevant adjudicating
authority. (section 23)
Q 14. What are the powers of Settlement
Commission?
Ans. The powers and procedures of Settlement Commission
are given in sections 25 and 26 of IGST Act. It is vested
with the powers of a civil court under the Code of Civil
Procedure, 1908, for discovery and inspection, enforcing
the attendance of
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m the record within a period of three
months from the date of the order. Such mistake may be
noticed by the Settlement Commission on its own accord
or may be brought to its notice by the applicant or the
jurisdictional IGST officer. If a rectification has the effect
of enhancing the tax liability or reducing the quantum
of input tax credit, the applicant must be heard before
the order is passed.
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183
Inspection, Search, Seizure
and Arrest
19. Inspection, Search, Seizure and
Q 1.
Arrest
What is the meaning of the term “Search”?
Ans. As per law dictionary and as noted in different judicial
pronouncements, the term 'search, in simple language,
denotes an action of a government machinery to go, look
through or examine carefully a place, area, person, object
etc. in order to find something concealed or for the purpose
of discovering evidence of a crime. The search of a person
or vehicle or premises etc. can only be done under proper
and valid authority of law.
Q2
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a transporter or warehouse owner has kept
goods which have escaped payment of tax or
has kept his accounts or goods in a manner that
is likely to cause evasion of tax.
Can the proper officer authorize Inspection
of any assets/premises of any person under this
Section?
Ans. No. Authorization can be given to an officer of CGST/
SGST to carry out inspection of any of the following:
i.
any place of business of a taxable person;
ii.
any place of business of a person engaged in the
business of transporting goods whether or not
he is a registered taxable person;
iii. any place of business of an owner or an operator
of a warehouse or godown.
Q 5. Who can order for Search and Seizure under
the provisions of MGL?
Ans. An officer of the rank of Joint Commissioner or above
can authorize an officer in writing to carry out search and
seize goods, documents, books or things. Such authorization
can be given only where the Joint Commissioner has reasons
188
to believe that any g
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officer is not required to state the
reasons for such belief before issuing an authorization
for search, he has to disclose the material on which
his belief was formed. 'Reason to believe' need not be
recorded invariably in each case. However, it would be
better if the materials/ information etc. are recorded
before issue of search warrant or before conducting
search.
189
What is a Search Warrant and what are its
Q 8.
contents?
Ans. The written authority to conduct search is generally
called search warrant. The competent authority to
issue search warrant is an officer of the rank of Joint
Commissioner or above. A search warrant must indicate
the existence of a reasonable belief leading to the search.
Search Warrant should contain the following details:
the violation under the Act,
Q 9.
i.
ii. the premise to be searched,
iii. the name and designation of the person
authorized for search,
iv. the name of the issuing officer with full
designation along with his rou
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relevant for any proceedings
under MGL) from the premises searched. During search, the
officer has the power to break open the door of the premises
authorized to be searched if access to the same is denied.
Similarly, while carrying out search within the premises, he
can break open any almirah or box if access to such almirah
or box is denied and in which any goods, account, registers or
documents are suspected to be concealed. He can also seal the
premises if access to it denied.
Q 11. What is the procedure for conducting search?
Ans. Section 60(8) of MGL prescribes that searches must
be carried out in accordance with the provisions of Code
of Criminal Procedure, 1973. Section 100 of the Code of
Criminal Procedure describes the procedure for search.
Q 12. What are the basic requirements to be
observed during Search operations?
Ans. The following principles should be observed during
Search:
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No search of premises should be carried out
without a valid search warra
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accompanying witnesses should offer themselves
for their personal search to the person in-charge
of the premises being searched. Similarly, after
the completion of search all the officers and the
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•
.
witnesses should again offer themselves for their
personal search.
A Panchnama / Mahazar of the proceedings of
the search should necessarily be prepared on
the spot. A list of all goods, documents recovered
and seized/detained should be prepared and
annexed to the Panchnama/Mahazar. The
Panchnama / Mahazar and the list of goods/
documents seized/detained should invariably
be signed by the witnesses, the in-charge/
owner of the premises before whom the search
is conducted and also by the officer(s) duly
authorized for conducting the search.
After the search is over, the search warrant
duly executed should be returned in original to
the issuing officer with a report regarding the
outcome of the search. The names of the officers
who participated in the searc
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f the
rank of Additional/Joint Commissioner of CGST or SGST.
This provision facilitates access to a business premise
which is not registered by a taxable person as a principal
or additional place of business but has books of accounts,
documents, computers etc. which are required for audit or
verification of accounts of a taxable person.
Q 14. When is search said to be illegal? Is evidence
collected in the course of an illegal search admissible
in trial proceedings?
Ans. Search without a valid search warrant (i.e. issued
by other than a competent authority or without a search
warrant) results in an illegal search without authority of
law. However, due to this reason, the accused cannot get
benefit. Accordingly, evidence collected even during an
illegal search and seizure is considered admissible in trial
and adjudication proceedings.
Q 15. What is meant by the term 'Seizure'?
Ans. The term 'seizure' has not been specifically defined
in the Model GST Law. In Law Lexico
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perty or the
person who possesses the property at a particular point
of time by a legal order/notice is called detention. Seizure
is taking over of actual possession of the goods by the
department. Detention order is issued when it is suspected
that the goods are liable to confiscation. Seizure can be
made only on the reasonable belief which is arrived at
after inquiry/investigation that the goods are liable to
confiscation.
195
Q 18. What are the safeguards provided in MGL in
respect of Search or Seizure?
Ans. Certain safeguards are provided in section 60 of
Model CGST/SGST Law in respect of the power of search or
seizure. These are as follows:
i. Seized goods or documents should not be
retained beyond the period necessary for their
examination;
ii. Photocopies of the documents can be taken by
the person from whose custody documents are
seized;
iii. For seized goods, if a notice is not issued within
sixty days of its seizure, goods shall be returned
to the perso
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le may be required to carry a prescribed
document in respect of such consignments whose value is
more than fifty thousand rupees.
Q 20. What is meant by the term “arrest”?
Ans. The term 'arrest' has not been defined in the Model
GST Law. However, as per judicial pronouncements, it
denotes 'the taking into custody of a person under some
lawful command or authority. In other words a person is
said to be arrested when he is taken and restrained of his
liberty by power or colour of lawful warrant.
Q 21. When can the proper officer authorize 'arrest'
of any person under MGL?
Ans. The Commissioner of CGST/SGST can authorize a
CGST/SGST officer to arrest a person if he has reasons to
believe that the person has committed an offence attracting
a punishment prescribed under section 73 (1)(i), 73 (1)(ii)
and 73 (2) of the CGST/SGST Act. This essentially means
that a person can be arrested only where the tax evasion is
more than fifty lakhs rupees or where a person has earlier
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Procedure,
1973 (2 of 1974) relating to arrest and the procedure
thereof must be adhered to. It is therefore necessary that
all field officers of CGST/SGST be fully familiar with the
provisions of the Code of Criminal Procedure, 1973.
198
One important provision to be taken note of is section 57 of
Cr.P.C., 1973 which provides that a person arrested without
warrant shall not be detained for a longer period than,
under the circumstances of the case, is reasonable but this
shall not exceed twenty four hours (excluding the journey
time from place of arrest to the Magistrate's court). Within
this period, as provided under section 56 of Cr.P.C., the
person making the arrest shall send the person arrested
without warrant before a Magistrate having jurisdiction
in the case.
In a landmark judgment in the case of D.K. Basu v. State
of West Bengal reported in 1997 (1) SCC 416, the Hon'ble
Supreme Court has laid down specific guidelines required
to be followed while making arre
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to have one friend or relative or other
person known to him or having interest in his
welfare being informed, as soon as practicable,
that he has been arrested and is being detained
at the particular place, unless the attesting
witness of the memo of arrest is himself such a
friend or a relative of the arrestee.
iv. The time, place of arrest and venue of custody of
an arrestee must be notified by the police where
the next friend or relative of the arrestee lives
outside the district or town through the Legal
Aid Organization in the District and the police
station of the area concerned telegraphically
within a period of 8 to 12 hours after the
arrest.
V.
An entry must be made in the diary at the place
of detention regarding the arrest of the person
which shall also disclose the name of the next
friend of the person who has been informed of
the arrest and the names and particulars of the
police officials in whose custody the arrestee is.
vi. The arrestee should, whe
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ers where
information regarding the arrest and the place
of custody of the arrestee shall be communicated
by the officer causing the arrest, within 12 hours
of effecting the arrest and at the police control
room it should be displayed on a conspicuous
notice board.
Q 24. What are the broad guidelines for arrest
followed in CBEC?
201
Ans. Decision to arrest needs to be taken on case-to-
case basis considering various factors, such as, nature
and gravity of offence, quantum of duty evaded or credit
wrongfully availed, nature and quality of evidence,
possibility of evidences being tampered with or witnesses
being influenced, cooperation with the investigation,
etc. Power to arrest has to be exercised after careful
consideration of the facts of the case which may include:
i. to ensure proper investigation of the offence;
to prevent such person from absconding;
ii.
iii.
cases involving organized smuggling of goods or
evasion of customs duty by way of concealment;
iv.
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e cognizable and non-cognizable
offences under MGL?
Ans. In section 73 (4) of MGL, it is provided that the
offences relating to taxable goods and/or services where
the amount of tax evaded exceeds Rs. 2.5 crores, shall be
cognizable and non-bailable. Other offences under the act
are non-cognizable and bailable.
Q 28. When can the proper officer issue summons
under MGL?
Ans. Section 63 of MGL gives powers to a duly authorized
CGST/SGST officer to call upon a person by issuing a
summon to present himself before the officer issuing the
summon to either give evidence or produce a document or
any other thing in any inquiry which an officer is making. A
summons to produce documents or other things may be for
the production of certain specified documents or things or
for the production of all documents or things of a certain
description in the possession or under the control of the
person summoned.
Q 29. What are the responsibilities of the person so
summoned?
Ans. A pers
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on, if a person does not appear before a CGST/
SGST officer who has issued the summon, he is liable to a
penalty upto twenty five thousand rupees under section
66(3)(d) of MGL.
Q 31. What are the guidelines for issue of
summons?
Ans. The Central Board of Excise and Customs (CBEC)
in the Department of Revenue, Ministry of Finance
has issued guidelines from time to time to ensure that
summons provisions are not misused in the field. Some
204
of the important highlights of these guidelines are given
below:
i. summons are to be issued as a last resort where
assesses are not co-operating and this section
should not be used for the top management;
ii. the language of the summons should not be harsh
and legal which causes unnecessary mental
stress and embarrassment to the receiver;
iii. summons by Superintendents should be issued
after obtaining prior written permission from
an officer not below the rank of Assistant
Commissioner with the reasons for issuance of
summons
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precautions should generally be
observed when summoning a person:-
(i) A summon should not be issued for appearance
where it is not justified. The power to summon
can be exercised only when there is an inquiry
being undertaken and the attendance of the
person is considered necessary.
(ii) Normally, summons should not be issued
repeatedly. As far as practicable, the statement
of the accused or witness should be recorded in
minimum number of appearances.
(iii) Respect the time of appearance given in the
summons. No person should be made to wait
for long hours before his statement is recorded
except when it has been decided very consciously
as a matter of strategy.
(iv) Preferably, statements should be recorded
during office hours; however an exception could
be made regarding time and place of recording
statement having regard to the facts in the
case.
206
Q 33. Are there any class of officers who are required
to assist CGST/SGST officers?
Ans. Under section 65 of
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ing an invoice without making supply;
3) Not paying tax collected for a period exceeding
three months;
4) Not paying tax collected in contravention of the
MGL for a period exceeding 3 months;
5) Non deduction or lower deduction of tax
deducted at source or not depositing tax
deducted at source under section 37;
6) Non collection or lower collection of or non-
payment of tax collectible at source under
section 43C;
7) Availing/utilizing input tax credit without
actual receipt of goods and/or services;
8) Fraudulently obtaining any refund;
9) Availing/distributing input tax credit by an Input
Service Distributor in violation of Section 17;
211
10) Furnishing false information or falsification of
financial records or furnishing of fake accounts/
documents with intent to evade payment of tax;
11) Failure to register despite being liable to pay
tax;
12) Furnishing false information
mandatory fields for registration;
regarding
13) Obstructing or preventing any offici
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ey
imposed by statute, to be paid as punishment for
the commission of a certain offence;
a punishment imposed by law or contract for
doing or failing to do something that was the
duty of a party to do.
What are the general disciplines to be followed
while imposing penalties?
Ans. The levy of penalty is subject to a certain disciplinary
regime which is based on jurisprudence, principles of
natural justice and principles governing international
trade and agreements. Such general discipline is enshrined
in section 68 of the Act. Accordingly-
•
.
no penalty is to be imposed without issuance of
a show cause notice and proper hearing in the
matter, affording an opportunity to the person
proceeded against to rebut the allegations
levelled against him,
the penalty is to depend on the totality of the
facts and circumstances of the case,
the penalty imposed is to be commensurate
with the degree and severity of breach of the
provisions of the law or the rules alleged
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the
following amounts:
The amount of tax evaded, fraudulently obtained
as refund, availed as credit, or not deducted or
collected or short deducted or short collected,
or
214
.
A sum of Rs.10,000/-.
Further Section 66(2) provides that any registered taxable
person who repeatedly makes a short payment of tax shall
be a liable to penalty which will be the higher of:
Q 5.
.
10% of the tax short paid, or
Rs.10,000.
What will be considered as 'repeated short
payments' for the purpose of levy of penalty?
Ans. Section 66(2) explains that three short payment in
respect of three returns during any six consecutive tax
periods shall be considered as repeated short payment for
the purpose of levy of penalty.
Q6. Is any penalty prescribed for any person other
than the taxable person?
Ans. Yes.
Section 66(3) provides for levy of penalty
extending to Rs.25,000/- for any person who-
.
•
aids or abets any of the 21 offences,
deals in any way (whether receiving, supp
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r supplies or stores any goods that have not been
recorded in the books or accounts maintained by him,
then such goods shall be liable for detention along
with any vehicle on which they are being transported.
Such goods may be released only after payment of the
applicable tax, interest and penalty or upon furnishing
of security equivalent to the said amount.
Q 9.
What is the penalty prescribed for a person
who opts for composition scheme despite being
ineligible for the said scheme?
Ans. Section 8(3) provides that if a person who has opted
for composition of his tax liability is found as not being
eligible for compounding then such person shall be liable
to penalty to an amount equivalent to the tax payable by
216
him under the provisions of the Act i.e. as a normal taxable
person and that this penalty shall be in addition to the tax
payable by him.
Q 10. What is meant by confiscation?
Ans. The word 'confiscation' has not been defined in the
Act. The concept is der
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scation, the title in the confiscated goods
shall vest in the Government and every Police officer to
whom the proper officer makes a request in this behalf,
shall assist in taking possession of the goods.
Q 13. After confiscation, is it required to give option
to the person to redeem the goods?
Ans. Yes. In terms of section 70(6), the Owner or the
person in-charge of the goods liable to confiscation is to
be given the option for fine (not exceeding market price of
confiscated goods) in lieu of confiscation. This fine shall be
in addition to the tax and other charges payable in respect
of such goods.
Q 14. Can any conveyance carrying goods without
cover of prescribed documents be subject to
confiscation?
Ans. Yes. Section 71 provides that any conveyance carrying
goods without the cover of any documents or declaration
prescribed under the Act shall be liable to confiscation.
However, if the owner of the conveyance proves that the
goods were being transported without co
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h are the offences which warrant
prosecution under the MGL?
Ans. Section 73 of the MGL codifies the major offences
under the Act which warrant institution of criminal
proceedings and prosecution. 12 such major offences have
been listed as follows:
1) Making a supply without issuing an invoice or
upon issuance of a false/incorrect invoice;
2) Issuing an invoice without making supply;
3) Not paying tax collected for a period exceeding
3 months;
4) Not depositing any tax that has been collected in
contravention of the Act for a period exceeding
3 months;
5) Availing or utilizing credit of input tax without
actual receipt of goods and/or services;
6) Obtaining any fraudulent refund;
219
7) Furnishing false information or falsification of
financial records or furnishing of fake accounts/
documents with intent to evade payment of tax;
8) Obstructing or preventing any official in the
discharge of his duty;
9) Dealing with goods liable to confiscation i.e.
receipt, supp
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less than six
months.
Q 18. What are cognizable and non-cognizable
offences under MGL?
Ans. In terms of Section 73(3) and 73(4) of MGL
•
.
all offences where the evasion of tax is less
than Rs.250 lakh shall be non-cognizable and
bailable,
all offences where the evasion of tax exceeds
Rs.250 lakh shall be cognizable and non-
bailable.
Q 19. Is prior sanction of competent authority
mandatory for initiating prosecution?
Ans. Yes. No person shall be prosecuted for any offence
without the prior sanction of the designated authority.
Q 20. Is'mensrea' or culpable mental state necessary
for prosecution under MGL?
Ans. Yes. However, Section 75 presumes the existence of
a state of mind (i.e. “culpable mental state” or mensrea)
required to commit an offence if it cannot be committed
without such a state of mind
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Q 21. What is a culpable state of mind?
Ans. While committing an act, a “culpable mental state”
is a state of mind wherein-
the act is intentional;
t
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nding of offences?
Ans. Section 320 of the Code of Criminal Procedure
defines “compounding” as to forbear from prosecution for
consideration or any private motive.
Q 24. Can offences under MGL be compounded?
Ans. Yes. As per section 78 of the MGL, any offence, other
than the following, may upon payment of the prescribed
(compounding) amount be compounded and such
compounding is permissible either before or after the
institution of prosecution:
•
•
.
Offences numbered 1 to 7 of the 12 major offences
(outlined in Q. 16 above), if the person charged
with the offence had compounded earlier in
respect of any of the said offences;
Aiding/abetting offences numbered 1 to 7 of the
12 major offences, if the person charged with
the offence had compounded earlier in respect
of any of the said offences;
Any offence (other than the above offences) under
any SGST Act/IGST Act in respect of a supply
with value exceeding Rs.1 crore, if the person
charged with the off
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already initiated shall stand abated.
****
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Overview of the IGST Act
21. Overview of the IGST Act
Q 1. What is IGST?
Ans. “Integrated Goods and Services Tax” (IGST) means tax
levied under the IGST Act on the supply of any goods and/
or services in the course of inter-State trade or commerce.
Q2.
What are inter-state supplies?
Ans. A supply of goods and/or services in the course of
inter-State trade or commerce means any supply where
the location of the supplier and the place of supply are in
different States. (Section 3(1) and 3(2) of the IGST Act)
Q3.
How will the Inter-State supplies of Goods and
Services be taxed under GST?
Ans. IGST shall be levied and collected by Centre on
inter-state supplies. IGST would be broadly CGST plus
SGST and shall be levied on all inter-State taxable
supplies of goods and services. The inter-State seller will
pay IGST on value addition after adjusting available
credit of IGST, CGST, and SGST on his purchases. The
Exporting S
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at the time of
delivery to the recipient. In the case of goods assembled
or installed at site, the place of supply shall be the place of
such installation or assembly. Finally, where the goods are
supplied on board a conveyance, the place of supply shall
be the location at which such goods are taken on board.
Q 5.
What are the advantages of IGST Model?
Ans. 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 seller or
buyer;
C. No refund claim in exporting State, as ITC is
used up while paying the tax;
d. Self-monitoring model;
e.
Ensures tax neutrality while keeping the tax
regime simple;
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f. Simple accounting with по additional
g.
compliance burden on the taxpayer;
Would facilitate in ensuring high level of
compliance and thus higher collection efficiency.
Model can handle 'Business to Business' as well
as '
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done using the following hierarchy,-
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0
0
0
First available ITC of IGST shall be used for
payment of IGST;
Once ITC of IGST is exhausted, the ITC of
CGST shall be used for payment of IGST;
If both ITC of IGST and ITC of CGST are
exhausted, then only the dealer would be
permitted to use ITC of SGST for payment of
IGST.
Remaining IGST liability, if any, shall be discharged using
payment in cash. GST System will ensure maintenance of
this hierarchy for payment of IGST using the credit.
Q 9. How will the settlement between Centre,
exporting state and importing state be done?
Ans. There would be settlement of account between the
centre and the states on two counts, which are as follows-
.
Centre and the exporting state: The exporting
state shall pay the amount equal to the ITC of
SGST used by the supplier in the exporting state
to the Centre.
Centre and the importing state: The centre
shall pay the amount equal to the ITC of IGST
used by a dealer for payment of
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y are place of supply provisions different in
respect of goods and services?
Ans. Goods being tangible do not pose any significant
problems for determination of their place of consumption.
Services being intangible pose problems w.r.t determination
of place of supply mainly due to following factors:
(i) The manner of delivery of service could be altered
easily. For example telecom service could change
from mostly post-paid to mostly pre-paid; billing
address could be changed, billers address could
be changed, repair or maintenance of software
could be changed from onsite to online; banking
services were earlier required customer to go to
the bank, now the customer could avail service
from anywhere;
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(ii) Service provider, service receiver and the service
provided may not be ascertainable or may easily
be suppressed as nothing tangible moves and
there would hardly be a trail;
(iii) For supplying a service, a fixed location of
service provider is not mandatory and
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newer challenges. For
example 15-20 years back no one could have
234
Q3.
thought of DTH, online information, online
banking, online booking of tickets, internet,
mobile telecommunication etc.
What proxies or assumptions in a transaction
can be used to determine the place of supply?
Ans. The various element involved in a transaction in
services can be used as proxies to determine the place
of supply. An assumption or proxy which gives more
appropriate result than others for determining the place of
supply, could be used for determining the place of supply.
The same are discussed below:
(a) location of service provider;
(b) the location of service receiver;
(c) the place where the activity takes place/ place
of performance;
(d) the place where it is consumed; and
(e) the place/person to which actual benefit flows
Q4.
What is the need to have separate rules
for place of supply in respect of B2B (supplies
to registered persons) and B2C (supplies to
unregistered pe
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ry to the recipient. (Section 5(2) of IGST Act)
Q 6.
What will be the place of supply if the goods are
delivered by the supplier to a person on the direction
of a third person?
Ans. It would be deemed that the third person has received
the goods and the place of supply of such goods shall be the
principal place of business of such person. (Section 5(2A)
of IGST Act)
Q7. What will be the place of supply where the goods
or services are supplied on board a conveyance, such
as a vessel, an aircraft, a train or a motor vehicle?
Ans. In respect of goods, the place of supply shall be the
location at which such goods are taken on board. (Section
5(5) of IGST Act)
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However, in respect of services, the place of supply shall be
the location of the first scheduled point of departure of that
conveyance for the journey. (Section 6(11) of IGST Act)
Q 8.
What is the default presumption for place of
supply in respect of B2B supply of services?
Ans. The terms used in the IGST Ac
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tion to the value for
services separately collected or determined, in terms of the
contract or agreement entered into in this regard or, in
the absence of such contract oragreement, on such other
237
reasonable basis as may be prescribed in this behalf. (The
Explanation clause to section 6(5) of the IGST Act)
Q 11. What would be the place of supply of services
provided for organizing an event, say, IPL cricket
series which is held in multiple states?
Ans. In case of an event, if the recipient of service is
registered, the place of supply of services for organizing
the event shall be the location of such person.
However, if the recipient is not registered, the place of
supply shall be the place where event is held. Since the event
is being held in multiple states and a consolidated amount
is charges for such services, the place of supply shall be
taken as being in each state in proportion to the value of
services so provided in each state. (The Explanation clause
to s
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What will
be the place of supply?
Ans. In the above case, the place of embarkation will not
be available at the time of issue of invoice as the right to
passage is for future use. Accordingly, place of supply cannot
be the place of embarkation. In such cases, the default rule
shall apply. (The proviso clause to section 6(10) (b) of the
IGST Act)
Q 15. What will be the place of supply for mobile
connection? Can it be the location of supplier?
Ans. The location of supplier of mobile services cannot be
the place of supply as the mobile companies are providing
services in multiple states and many of these services are
inter-state. The consumption principle will be broken if
the location of supplier is taken as place of supply and all
the revenue may go to a few states where the suppliers are
located.
The place of supply for mobile connection would depend on
whether the connection is on postpaid or prepaid basis.
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In case of postpaid connections, the place of supply
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place of supply shall be Mumbai, the
location of recipient on the records of the supplier.
Q 18. A person from Gurgaon travels by Air India flight
from Mumbai to Delhi and gets his travel insurance
done in Mumbai. What will be the place of supply?
Ans. The location of the recipient of services on the records
of the supplier of insurance services shall be the place of
supply. So Gurgaon shall be the place of supply. (proviso
clause to section 6(14) of the IGST Act)
240
Frontend Business Process
on GST Portal
23. Frontend Business Process on
GST Portal
Q 1. What is GSTN?
Ans. Goods and Services Tax Network (GSTN) is a non-
profit non-government company, which will provide
shared IT infrastructure and service to both central
and state governments including tax payers and other
stakeholders. The Frontend services of registration,
Returns and payments to all taxpayers will be provided by
GSTN. It will be the interface between the government and
the taxpayers.
Q2.
Wha
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trong
IT Infrastructure and Service back bone which enables
capture, processing and exchange of information amongst
the stakeholders (including taxpayers, States and Central
Government, Bank and RBI)
This aspect was discussed in the 4th meeting of 2010
of the Empowered Committee of State Finance Ministers
held on 21/7/2010. In the said meeting the EC approved
creation of an 'Empowered Group on IT Infrastructure
for GST' (referred as EG) under the chairmanship of
Dr. Nandan Nilekani along with Additional Secretary
(Rev), Member (B&C) CBEC, DG (Systems), CBEC, FA
Ministry of Finance, Member Secretary EC and five state
commissioners of Trade Taxes (Maharashtra, Assam,
Karnataka, West Bengal and Gujarat). The Group was
mandated to suggest, inter alia, the modalities for
setting up a National Information Utility (NIU/ SPV)
for implementing the Common Portal to be called GST
Network (GSTN) and recommend the structure and terms
of reference for the NIU/ SPV, detailed implem
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ce of
management, strategic control of Government, flexibility
in organizational structure, agility in decision making and
ability to hire and retain competent human resources.
In view of the sensitivity of the role of GSTN and the
information that would be available with it, the EG also
considered the issue of strategic control of Government
over GSTN. The Group recommended that strategic control
of the Government over the SPV should be ensured through
measures such as composition of the Board, mechanisms of
Special Resolution and Shareholders Agreement, induction
of Government officers on deputation, and agreements
between GSTN SPV and Governments. Also, the shareholding
pattern would ensure that the Centre individually and
States collectively are the largest stakeholders at 24.5%
each. In combination, the Government shareholding at 49%
would far exceed that of any single private institution.
EG also brought out the need to have technology
specification to run this
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Goods and Services Tax
Network on the lines mentioned above was considered by
the Union Cabinet on 12th April 2012 and approved. The
Union cabinet also approved the following:
i.
ii.
Suitable and willing non-governmentinstitutions
will be identified and firmed up by the Ministry
of Finance to invest in GSTN-SPV prior to its
incorporation.
The strategic control of the Government over
the SPV would be ensured through measures
such as composition of the Board, mechanisms
of Special Resolution and Shareholders
246
Agreement, induction of Government officers on
deputation, and agreements between GSTN SPV
and Governments.
iii. The Board of Directors of GSTN SPV would
comprise 14 Directors with 3 Directors from
the Centre, 3 from the States, a Chairman of the
Board of Directors appointed through a joint
approval mechanism of Centre and States, 3
Directors from private equity stake holders, 3
independent Directors who would be persons of
eminence and a CEO of the GSTN
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registered as a not-for-profit, private limited company
under section 25 of the Companies Act, 1956 with the
following equity structure:
Central Govt
State Govts
HDFC
24.5%
24.5%
10%
HDFC Bank
10%
ICICI Bank
10%
NSE Strategic Investment Co
10%
LIC Housing Finance Ltd
11%
The GSTN in its current form was created after taking
after approval of Empowered Committee of State Finance
Ministers and Union Government after due deliberations
over a long period of time.
Q3.
What services will be rendered by GSTN?
Ans. GSTN will render the following services through the
Common GST Portal:
(a) Registration (including existing taxpayer master
migration and issue of PAN based registration
number);
248
Q4.
(b) Payment management including payment
gateways and integration with banking systems;
(c) Return filing and processing;
(d) Taxpayer management, including account
management, notifications, information, and
status tracking;
(e) Tax authority account and ledger
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tax authorities of States and
Central governments.
Thus, the frontend shall be provided by GSTN and the
backend modules shall be developed by states and Central
Government themselves. However 24 states (termed as Model
2 states) have asked GSTN to develop their backend modules
also. The CBEC and rest of the states (Model 1) have decided
to develop and host the back-end modules themselves.
Q 5. What will be the role of GSTN in registration?
Ans. The application for Registration will be made Online
on GST Portal.
Some of the key data like PAN, Business Constitution,
Aadhaar, CIN/DIN etc. (as applicable) will be validated
online against respective agency i.e. CBDT, UID, MCA etc,
thereby ensuring minimum documentation.
The application data, supporting scanned documents
shall be sent by GSTN to states/ Centre which in turn shall
send the query, if any, approval or rejection intimation
and digitally signed registration to GSTN for eventual
download by the taxpayer.
Q 6. W
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T Eco-system?
Ans. A common GST system will provide linkage to all
State/UT Commercial Tax departments, Central Tax
authorities, Taxpayers, Banks and other stakeholders.
The eco-system consists of all stakeholders starting from
taxpayer to tax professional to tax officials to GST portal to
Banks to accounting authorities. The diagram given below
depicts the whole GST eco-system.
251
10101
Tax payers
Facility Center
Reps
Help desk
Tax Return
Preparers
Assist Tax payers in
return preparation
Self-register, Upload
details, file returns,
make online payment,
apply for refund etc
Taxpayer
Registration/
Return Processing/
Payment Collection/
Any other support
Help services
related to GST
System
Set up GST
system/operation and
maintenance of GST
system
State Tax
Authorities
Approval for
enrolment of tax
payers/Tax
administration
GST System
Functional
Audit/Accounting of
Tax payment
Decision Making
MIS/BI/Dashboar
ds/ Analytics
Reporting
Approval
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igital signature etc.
The GST System will have a G2B portal for taxpayers
to access the GST Systems, however, that would not be
the only way for interacting with the GST system as the
taxpayer via his choice of third party applications, which
252
will provide all user interfaces and convenience via
desktop, mobile, other interfaces, will be able to interact
with the GST system. The third party applications will
connect with GST system via secure GST system APIs. All
such applications are expected to be developed by third
party service providers who have been given a generic
name, GST Suvidha Provider or GSP.
Taxpayers will interface with GST System via GST system
portal or via GSP ecosystem provided by way of applications
for activities such as Registration, Tax payments, Returns
filing and other information exchange with GST core
system. The GSPs will become the user agencies of the GST
system APIs and build applications and web portals as
alternate interface for th
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upload of the invoice/
return and reconciliation of the same is also provided
by the GSP. Whereas in case of GST portal, another set of
exercise manually or otherwise will have to be done to
upload the invoice data or the return. The interface and
features exposed by GST portal will be uniform for all
taxpayers and might be basic in form and design. On the
other hand GSPs are expected to have richer interfaces
and features required by specific group (large taxpayers
with completely automated financial system,SME with
semi-automated system and small size with no system) of
taxpayers. Also, by sheer size the GST portal will not be as
nimble as that provided by a GSP.
GSPs can come up with application to provide GST filing
facility in existing software or develop end-to-end solution
for SME and small taxpayer to manage their sale/purchase
and GST filing e.g. an offline utility like spread sheet, which
taxpayer can fill their invoice details and then upload on
GST portal
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use GSTN information
at the backend for following functions:
Approval/rejection for enrollment/registration
of taxpayers;
Tax administration of state tax(Assessment /
Audit/Refund/Appeal/ Investigation);
MIS and other functions.
255
Q 14. Will GSTN generate a unique identification for
each invoice line in GSTN system?
Ans. No, GSTN will not generate any new identification.
The combination of Supplier's GSTIN, Invoice no and
Financial year with HSN/SAC Code will make each line
unique.
Q 15. Can invoice data be uploaded on day to day
basis?
Ans. Yes, GST Portal will have functionality to take invoice
data on any time basis. Earlier one uploads better it is as
it will get reflected to the receiver who can see the same in
his/her purchase register.
Q 16. Will GSTN provide tools for uploading invoice
data on GST portal?
Ans. Yes, GSTN will provide spreadsheet (like Microsoft
Excel) like tools free of cost to taxpayers to enable them
to compile invoice data in the sa
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nal submission, which will be done by the taxpayers
using e-sign (OTP) or Digital Signature Certificate.
Q 19. Will tax payer be able to change the tax
professional once chosen in above mentioned
facility?
Ans. Yes, a taxpayer may choose a different tax professional
by simply unselecting it at GSTN portal and delegating to a
new tax professional.
Q 20. Will existing taxpayers under Central Excise
or Service Tax or State VAT have to apply for fresh
registration under GST?
Ans. No, the existing taxpayers whose PAN have been
validated from CBDT database will not be required to
apply afresh. They will be issued provisional GSTIN by GST
portal, which will be valid for six months for providing
relevant data as per GST registration form. On completion
of data filing provisional registration will get converted
into regular Registration. Further notification giving
timelines will be issued by respective tax authorities.
257
Q 21. Will GSTN put training videos on various aspe
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ervice security. Besides
high end firewalls, intrusion detection, data encryption
at rest as well as in motion, complete audit trail, tamper
proofing using consistent hashing algorithms, OS and host
hardening etc., GSTN is also establishing a primary and
secondary Security Operations Command & Control center,
which will proactively monitor and protect malicious
attack in real time. GSTN is also ensuring secure coding
practices through continuous scanning of source code to
protect against commonly known and unknown threats.
258
Transitional Provisions
24. Transitional Provisions
Q 1. Will the CENVAT/ITC carried forward in the
last return prior to GST under earlier law be available
as ITC under GST?
Ans. Yes, the registered taxable person shall be entitled to
such credit and it will get credited to his electronic credit
ledger – section 143.
Q2.
A registered taxable person say, purchases
capital goods in the last quarter of 2016-17. Though
the invoice is received wi
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ed under
the earlier law but are required to be registered
under GST?
Ans. A manufacturer having a turnover of say Rs 60
lakhs was enjoying SSI exemption earlier, will have to be
registered in GST as the said turnover exceeds the basic
threshold of Rs 10 lakhs – section 9.
A trader having turnover below the threshold under
VAT making sales through e-commerce operator will be
required to be registered in GST. There will no threshold
for such persons – section 145 read with section 9 and
Schedule III.
Q6.
Will ITC be allowed to a service provider on
VAT paid inputs held as stock on the appointed day?
Ans. No, VAT does not cover services. Under it, only goods
are covered.
Q7. A registered taxable person has Rs 1000 ITC
credited to his electronic credit ledger from the last
return under the earlier law. Now, he switches over
to composition scheme in GST, will he get refund of
that ITC?
Ans. No. He shall have to pay an amount equivalent to
the credit of input tax on i
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s paid under the earlier law at the time of its sale, made
not earlier than 6 months from the appointed day.
The relevant section is section 149.
Q9.
Shall a manufacturer or a job worker become
liable to pay tax if the inputs or semi-finished goods
sent for job work under the earlier law are returned
after completion of job work after the appointed day?
Ans. No tax shall be payable by the manufacturer or the
job worker under the following circumstances:
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Inputs/semi-finished goods are sent to the job
worker in accordance with the provisions of the
earlier law before the appointed day.
The job worker returns the same within six
months from the appointed day (or extended
period of 02 months).
Both the manufacturer and the job worker
declare the details of inputs held in stock by
the job worker on the appointed day in the
prescribed form.
The relevant sections being section 150 and section 151.
Q 10. What happens if the job worker does not
return the goods within
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the appointed day (or
extended period of 02 months) – section 152.
Q 13. When tax shall become payable in GST on
manufactured goods sent to a Job worker under the
earlier law?
Ans. The person returning the goods shall become liable
to pay tax if the said goods are liable to tax in GST and are
returned after 6 months from the appointed day – proviso
to section 152.
–
Q 14. Is extension of two months as discussed in
section 150, section 151 and section 152 automatic?
Ans. No, it is not automatic. It shall be extended by the
competent authority only on sufficient cause being shown.
Q 15. What is the time limit for issue of debit/credit
note(s) for revision of prices?
Ans. The taxable person may issue the debit/credit note(s)
or a supplementary invoice within 30 days of the price
revision.
In case where the price is revised downwards the taxable
person shall be allowed to reduce his tax liability only if the
recipient of the invoice or credit note has reduced h
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n(s) furnished under the earlier law be dealt in
GST?
Ans. The same shall be refunded in accordance with the
provisions of the earlier law – section 158.
Q 20. If any goods or services are supplied in GST,
in pursuance of contract entered under earlier law,
which tax will be payable?
266
Ans. On such supplies GST will be payable – section 159.
Q21. If consideration for a particular supply of
services was received under the earlier law and tax
on it was paid, will GST also become payable where
such supply is made in GST regime?
Ans. No tax shall be payable on supply of goods/services
on or after the appointed day if the consideration for it has
been received prior to the appointed day and the duty/
tax thereon has already been paid under the earlier law
section 160.
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Q 22. The supply of goods/services was made under
the earlier law but a part of the consideration (say
the retention money) is received in GST regime, will
tax be payable in GST?
Ans. No, provided th
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