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Short title, extent and commencement.

Sec.1 of CGST Act

(1) This Act may be called the Central Goods and Services Tax Act, 2017.
(2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may, by notification in
the Official Gazette, appoint:

Provided that different dates may be appointed for different provisions of this Act and any
reference in any such provision to the commencement of this Act shall be construed as a
reference to the coming into force of that provision.

RATES OF TAXES

 The Government has notified IGST rates for goods at 0.25%, 3%, 5%, 12%, 18% and
28% for different specified goods in six Schedules notified vide Notification No.1/2017-
IT(Rate). Goods not listed in the said notification and those not specifically exempted are
to be taxed at 18%.
 The rates of CGST and SGST/UTGST for the same goods are half of above rates.
CGST and UTGST rates have been notified by Central Government and SGST rates by
respective State Governments.
 In addition to the above some goods like aerated water, tobacco products, motor
vehicles etc. are also liable for Compensation Cess.
 The Government has also notified the IGST rate of service at 5%, 9%, 12%, 18% and
28% vide Notification No.8/2017-IT(Rate). The services not listed in the said notification
and those are not specifically exempted are to be taxed at 18%.
 The rates of CGST and SGST/UTGST for the same services are half of above rates.
CGST and UTGST rates have been notified by Central Government and SGST rates by
respective State Governments.

OUR COMMENTS ABOUT MEANING & SCOPE OF GST

 GST is a tax levied across goods and services on all India basis, including J & K.
 It has subsumed 8 taxes/cesses hereinbefore levied by the Central Govt. mainly Central
Excise duty and service tax and nine taxes herein before levied by States mainly VAT
and Entertainment Tax.
 Alcohol for human consumption is excluded from GST altogether.
 Petroleum products have been temporarily left out from GST altogether.
 Tobacco and Tobacco products though subject to GST are additionally subject to Central
Excise duty also.
 Taxable event under GST is supply of goods or services or both and not manufacture of
goods.
 It is a dual levy wherein both Centre and States are empowered to levy tax on a
common platform of law and tariff on intra state (within state) supply of goods or
services. The tax is called CGST when levied by Centre. For this Central Goods and
Service Tax Act has been enacted by Parliament. The tax is called SGST when levied by
State and UTGST when levied in an Union Territory. While UTGST act has been enacted
by Centre, representative States Assemblies have enacted SGST Act.
 The CGST & SGST is payable on the supplies made within same State
 The CGST & UTGST is payable on the supplies made within same Union
Territory
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 For inter-state (outside state) supply of goods and services, the tax is called Integrated
GST (IGST) which has been levied by the Centre by enacting IGST Act. Thus the IGST
is payable, -
 On supplies from one State to other State
 On supplies from one State to a Union Territory
 On supplies from one Union Territory to other Union Territory
 IGST is to be collected by Centre to ensure maintenance of credit chain. This tax is sum
total of CGST and SGST/UTGST.
 GST is a destination based tax, meaning thereby that Tax belongs to consuming State.
This is a departure from earlier indirect tax regime where levy was on origin based
concept.
 Import of goods is to be treated as inter-State supplies of goods. Thus in addition to
applicable customs duties, IGST is levied in lieu of CVD and SAD.
 Import of services is an inter-State supplies of services and hence subject to IGST.
 Supplies in Territorial Waters – Where the location of the supplier or place of supply is in
the territorial waters of India then such location or place is deemed to be in the coastal
State of Union Territory where the nearest point of the appropriate baseline is located.
The term Territorial waters of India has not been defined in the IGST Act. Accordingly,
the definition used in the Territorial Waters, Continental Shelf, Exclusive Economic Zone
and other Maritime Zones Act, 1976 is to be applied. Under this law Territorial Water
means a belt of coastal waters extending 12 nautical miles (i.e.22.2 km or 13.8 miles)
from the nearest point of appropriate base line or as notified by the Central Government.
 A Goods and Service Tax Council (GSTC) complaining of Union Finance Minister and
Finance ministers of all States/Union Territories with assembly is the epicenter/nodal
authority to decide on Rules, Procedure, Rates of Taxation, Exemption and all other
related matter relating to levy, payment, demand, penalties etc.. Thus, some of the
powers and function of Parliament/State Legislature now vest in GST Council.
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REGISTRATION UNDER GST

Sec.22 of CGST Act – Persons liable for registration

(1) Every supplier shall be liable to be registered under this Act in the State or Union
territory, other than special category States, from where he makes a taxable supply of
goods or services or both, if his aggregate turnover in a financial year exceeds twenty
lakh rupees:

Provided that where such person makes taxable supplies of goods or services or both
from any of the special category States, he shall be liable to be registered if his
aggregate turnover in a financial year exceeds ten lakh rupees.

Provided further that the Government may, at the request of a special category State
and on the recommendations of the Council, enhance the aggregate turnover referred to
in the first proviso from ten lakh rupees to such amount, not exceeding twenty lakh
rupees and subject to such conditions and limitations, as may be so notified;

(2) Every person who, on the day immediately preceding the appointed day, is registered or
holds a licence under an existing law, shall be liable to be registered under this Act with
effect from the appointed day.

(3) Where a business carried on by a taxable person registered under this Act is transferred,
whether on account of succession or otherwise, to another person as a going concern,
the transferee or the successor, as the case may be, shall be liable to be registered with
effect from the date of such transfer or succession.

(4) Notwithstanding anything contained in sub-sections (1) and (3), in a case of transfer
pursuant to sanction of a scheme or an arrangement for amalgamation or, as the case
may be, demerger of two or more companies pursuant to an order of a High Court,
Tribunal or otherwise, the transferee shall be liable to be registered, with effect from the
date on which the Registrar of Companies issues a certificate of incorporation giving
effect to such order of the High Court or Tribunal.

Explanation.––For the purposes of this section,––

(i) the expression “aggregate turnover” shall include all supplies made by the
taxable person, whether on his own account or made on behalf of all his
principals;

(ii) the supply of goods, after completion of job work, by a registered job worker shall
be treated as the supply of goods by the principal referred to in section 143, and
the value of such goods shall not be included in the aggregate turnover of the
registered job worker;

(iii) the expression “special category States” shall mean the States as specified in
sub-clause (g) of clause (4) of article 279A of the Constitution except the State of
Jammu and Kashmir.

Sec.23 of CGST Act – Persons not liable for registration

(1) The following persons shall not be liable to registration, namely:––

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(a) any person engaged exclusively in the business of supplying goods or services
or both that are not liable to tax or wholly exempt from tax under this Act or under
the Integrated Goods and Services Tax Act;
(b) an agriculturist, to the extent of supply of produce out of cultivation of land.

(2) The Government may, on the recommendations of the Council, by notification, specify
the category of persons who may be exempted from obtaining registration under this Act.

Sec.24 of CGST Act – Compulsory registration in certain cases

Notwithstanding anything contained in sub-section (1) of section 22, the following categories of
persons shall be required to be registered under this Act, –

(i) persons making any inter-State taxable supply;

(ii) casual taxable persons making taxable supply;
(iii) persons who are required to pay tax under reverse charge;
(iv) person who are required to pay tax under sub-section (5) of section 9;
(v) non-resident taxable persons making taxable supply;
(vi) persons who are required to deduct tax under section 51, whether or not separately
registered under this Act;
(vii) persons who make taxable supply of goods or services or both on behalf of other taxable
persons whether as an agent or otherwise;
(viii) Input Service Distributor, whether or not separately registered under this Act;
(ix) persons who supply goods or services or both, other than supplies specified under sub-
section (5) of section 9, through such electronic commerce operator who is required to
collect tax at source under section 52;
(x) every electronic commerce operator who is required to collect tax at source under
section 52;
(xi) every person supplying online information and database access or retrieval services
from a place outside India to a person in India, other than a registered person; and
(xii) such other person or class of persons as may be notified by the Government on the
recommendations of the Council.

Sec.25 of CGST Act – Procedure for registration

(1) Every person who is liable to be registered under section 22 or section 24 shall apply for
registration in every such State or Union territory in which he is so liable within thirty
days from the date on which he becomes liable to registration, in such manner and
subject to such conditions as may be prescribed:

Provided that a casual taxable person or a non-resident taxable person shall apply for
registration at least five days prior to the commencement of business.

Provided further that a person having a unit, as defined in the Special Economic Zones
Act, 2005, in a Special Economic Zone or being a Special Economic Zone developer
shall have to apply for a separate registration, as distinct from his place of business
located outside the Special Economic Zone in the same State or Union territory.

Explanation.— Every person who makes a supply from the territorial waters of India
shall obtain registration in the coastal State or Union territory where the nearest point of
the appropriate baseline is located.
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(2) A person seeking registration under this Act shall be granted a single registration in a
State or Union territory:

Provided that a person having multiple places of business in a State or Union territory
may be granted a separate registration for each such place of business, subject to such
conditions as may be prescribed.

(3) A person, though not liable to be registered under section 22 or section 24 may get
himself registered voluntarily, and all provisions of this Act, as are applicable to a
registered person, shall apply to such person.

(4) A person who has obtained or is required to obtain more than one registration, whether
in one State or Union territory or more than one State or Union territory shall, in respect
of each such registration, be treated as distinct persons for the purposes of this Act.

(5) Where a person who has obtained or is required to obtain registration in a State or Union
territory in respect of an establishment, has an establishment in another State or Union
territory, then such establishments shall be treated as establishments of distinct persons
for the purposes of this Act.

(6) Every person shall have a Permanent Account Number issued under the Income tax Act,
1961 in order to be eligible for grant of registration:

Provided that a person required to deduct tax under section 51 may have, in lieu of a
Permanent Account Number, a Tax Deduction and Collection Account Number issued
under the said Act in order to be eligible for grant of registration.

(7) Notwithstanding anything contained in sub-section (6), a non-resident taxable person

may be granted registration under sub-section (1) on the basis of such other documents
as may be prescribed.

(8) Where a person who is liable to be registered under this Act fails to obtain registration,
the proper officer may, without prejudice to any action which may be taken under this Act
or under any other law for the time being in force, proceed to register such person in
such manner as may be prescribed.

(9) Notwithstanding anything contained in sub-section (1),––

(a) any specialized agency of the United Nations Organization or any Multilateral
Financial Institution and Organization notified under the United Nations
(Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign
countries; and

(b) any other person or class of persons, as may be notified by the Commissioner,

shall be granted a Unique Identity Number in such manner and for such purposes,
including refund of taxes on the notified supplies of goods or services or both received
by them, as may be prescribed.

(10) The registration or the Unique Identity Number shall be granted or rejected after due
verification in such manner and within such period as may be prescribed.
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(11) A certificate of registration shall be issued in such form and with effect from such date as
may be prescribed.

(12) A registration or a Unique Identity Number shall be deemed to have been granted after
the expiry of the period prescribed under sub-section (10), if no deficiency has been
communicated to the applicant within that period.

Rule 8 of CGST Rules – Application for registration

Every person, other than a non-resident taxable person, a person required to deduct tax
at source under section 51, a person required to collect tax at source under section 52
and a person supplying online information and database access or retrieval services
from a place outside India to a non-taxable online recipient referred to in section 14 of
the Integrated Goods and Services Tax Act, 2017 (13 of 2017) who is liable to be
registered under sub-section (1) of section 25 and every person seeking registration
under sub-section (3) of section 25 (hereafter in this Chapter referred to as ―the
applicant‖) shall, before applying for registration, declare his Permanent Account
Number, mobile number, e-mail address, State or Union territory in Part A of FORM GST
REG-01 on the common portal, either directly or through a Facilitation Centre notified by
the Commissioner:

Provided that every person being an Input Service Distributor shall make a separate
application for registration as such Input Service Distributor

(2)(a) The Permanent Account Number shall be validated online by the common portal from
the database maintained by the Central Board of Direct Taxes.

(b) The mobile number declared under sub-rule (1) shall be verified through a one-time
password sent to the said mobile number; and

(c) The e-mail address declared under sub-rule (1) shall be verified through a separate one-
time password sent to the said e-mail address.

(3) On successful verification of the Permanent Account Number, mobile number and email
address, a temporary reference number shall be generated and communicated to the
applicant on the said mobile number and e-mail address.

(4) Using the reference number generated under sub-rule (3), the applicant shall
electronically submit an application in Part B of FORM GST REG-01, duly signed or
verified through electronic verification code, along with the documents specified in the
said Form at the common portal, either directly or through a Facilitation Centre notified
by the Commissioner.

(5) On receipt of an application under sub-rule (4), an acknowledgement shall be issued

electronically to the applicant in FORM GST REG-02.

(6) A person applying for registration as a casual taxable person shall be given a temporary
reference number by the common portal for making advance deposit of tax in
accordance with the provisions of section 27 and the acknowledgement under sub-rule
(5) shall be issued electronically only after the said deposit.

Rule 9 of CGST Rules – Verification of the application and approval

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(1) The application shall be forwarded to the proper officer who shall examine the
application and the accompanying documents and if the same are found to be in order,
approve the grant of registration to the applicant within a period of three working days
from the date of submission of the application.

(2) Where the application submitted under rule 8 is found to be deficient, either in terms of
any information or any document required to be furnished under the said rule, or where
the proper officer requires any clarification with regard to any information provided in the
application or documents furnished therewith, he may issue a notice to the applicant
electronically in FORM GST REG-03 within a period of three working days from the date
of submission of the application and the applicant shall furnish such clarification,
information or documents electronically, in FORM GST REG-04, within a period of seven
working days from the date of the receipt of such notice.

Explanation.- For the purposes of this sub-rule, the expression ― clarification includes
modification or correction of particulars declared in the application for registration, other
than Permanent Account Number, State, mobile number and e-mail address declared in
Part A of FORM GST REG-01.

(3) Where the proper officer is satisfied with the clarification, information or documents
furnished by the applicant, he may approve the grant of registration to the applicant
within a period of seven working days from the date of the receipt of such clarification or
information or documents.

(4) Where no reply is furnished by the applicant in response to the notice issued under sub-
rule (2) or where the proper officer is not satisfied with the clarification, information or
documents furnished, he shall, for reasons to be recorded in writing, reject such
application and inform the applicant electronically in FORM GST REG-05.

(5) If the proper officer fails to take any action, -

(a) within a period of three working days from the date of submission of the
application; or
(b) within a period of seven working days from the date of the receipt of the
clarification, information or documents furnished by the applicant under sub-rule
(2),the application for grant of registration shall be deemed to have been
approved.

Rule 25 of CGST Rules - Physical verification of business premises in certain cases

Where the proper officer is satisfied that the physical verification of the place of business of a
registered person is required after the grant of registration, he may get such verification done
and the verification report along with the other documents, including photographs, shall be
uploaded in FORM GST REG-30 on the common portal within a period of fifteen working days
following the date of such verification.

Rule 10 of CGST Rules - Issue of registration certificate

(1) Subject to the provisions of sub-section (12) of section 25, where the application for
grant of registration has been approved under rule 9, a certificate of registration in
FORM GST REG-06 showing the principal place of business and additional place or
places of business shall be made available to the applicant on the common portal and a
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Goods and Services Tax Identification Number shall be assigned subject to the following
characters, namely:-

(a) two characters for the State code;

(b) ten characters for the Permanent Account Number or the Tax Deduction and
Collection Account Number;
(c) two characters for the entity code; and
(d) one checksum character.

(2) The registration shall be effective from the date on which the person becomes liable to
registration where the application for registration has been submitted within a period of
thirty days from such date.

(3) Where an application for registration has been submitted by the applicant after the expiry
of thirty days from the date of his becoming liable to registration, the effective date of
registration shall be the date of the grant of registration under sub-rule (1) or sub-rule (3)
or sub-rule (5) of rule 9.

(4) Every certificate of registration shall be duly signed or verified through electronic
verification code by the proper officer under the Act.

(5) Where the registration has been granted under sub-rule (5) of rule 9, the applicant shall
be communicated the registration number, and the certificate of registration under sub-
rule (1), duly signed or verified through electronic verification code, shall be made
available to him on the common portal, within a period of three days after the expiry of
the period specified in sub-rule (5) of rule 9.

Rule 11 of CGST Rules - Separate registration for multiple places of business within a
State or a Union territory.

(1) Any person having multiple places of business within a State or a Union territory,
requiring a separate registration for any such place of business under sub-section (2) of
section 25 shall be granted separate registration in respect of each such place of
business subject to the following conditions, namely:-

(a) such person has more than one place of business as defined in clause (85) of
section 2;
(b) such person shall not pay tax under section 10 for any of his places of business if
he is paying tax under section 9 for any other place of business;
(c) all separately registered places of business of such person shall pay tax under
the Act on supply of goods or services or both made to another registered place
of business of such person and issue a tax invoice or a bill of supply, as the case
may be, for such supply.

Explanation. - For the purposes of clause (b), it is hereby clarified that where any place
of business of a registered person that has been granted a separate registration
becomes ineligible to pay tax under section 10, all other registered places of business of
the said person shall become ineligible to pay tax under the said section.

(2) A registered person opting to obtain separate registration for a place of business shall
submit a separate application in FORM GST REG-01 in respect of such place of
business.
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(3) The provisions of rule 9 and rule 10 relating to the verification and the grant of
registration shall, mutatis mutandis, apply to an application submitted under this rule.

Sec.27 of CGST Act – Special provisions relating to casual taxable person and non-
resident taxable person

(1) The certificate of registration issued to a casual taxable person or a nonresident taxable
person shall be valid for the period specified in the application for registration or ninety
days from the effective date of registration, whichever is earlier and such person shall
make taxable supplies only after the issuance of the certificate of registration:

Provided that the proper officer may, on sufficient cause being shown by the said
taxable person, extend the said period of ninety days by a further period not exceeding
ninety days.

(2) A casual taxable person or a non-resident taxable person shall, at the time of submission
of application for registration under sub-section (1) of section 25, make an advance
deposit of tax in an amount equivalent to the estimated tax liability of such person for the
period for which the registration is sought:

Provided that where any extension of time is sought under sub-section (1), such taxable
person shall deposit an additional amount of tax equivalent to the estimated tax liability
of such person for the period for which the extension is sought.

(3) The amount deposited under sub-section (2) shall be credited to the electronic cash
ledger of such person and shall be utilised in the manner provided under section 49.

Rule 13 of CGST Rules - Grant of registration to non-resident taxable person

(1) A non-resident taxable person shall electronically submit an application, along with a
self-attested copy of his valid passport, for registration, duly signed or verified through
electronic verification code, in FORM GST REG-09, at least five days prior to the
commencement of business at the common portal either directly or through a Facilitation
Centre notified by the Commissioner:

Provided that in the case of a business entity incorporated or established outside India,
the application for registration shall be submitted along with its tax identification number
or unique number on the basis of which the entity is identified by the Government of that
country or its Permanent Account Number, if available.

(2) A person applying for registration as a non-resident taxable person shall be given a
temporary reference number by the common portal for making an advance deposit of tax
in accordance with the provisions of section 27 and the acknowledgement under sub-
rule (5) of rule 8 shall be issued electronically only after the said deposit in his electronic
cash ledger.

(3) The provisions of rule 9 and rule 10 relating to the verification and the grant of
registration shall, mutatis mutandis, apply to an application submitted under this rule.

(4) The application for registration made by a non-resident taxable person shall be duly
signed or verified through electronic verification code by his authorised signatory who
shall be a person resident in India having a valid Permanent Account Number.
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Rule 14 of CGST Rules - Grant of registration to a person supplying online information

and database access or retrieval services from a place outside India to a non-taxable
online recipient

(1) Any person supplying online information and database access or retrieval services from
a place outside India to a non-taxable online recipient shall electronically submit an
application for registration, duly signed or verified through electronic verification code, in
FORM GST REG-10, at the common portal, either directly or through a Facilitation
Centre notified by the Commissioner.

(2) The applicant referred to in sub-rule (1) shall be granted registration, in FORM GST
REG-06, subject to such conditions and restrictions and by such officer as may be
notified by the Central Government on the recommendations of the Council.

Rule 15 of CGST Rules - Extension in period of operation by casual taxable person and
non-resident taxable person

(1) Where a registered casual taxable person or a non-resident taxable person intends to
extend the period of registration indicated in his application of registration, an application
in FORM GST REG-11 shall be submitted electronically through the common portal,
either directly or through a Facilitation Centre notified by the Commissioner, by such
person before the end of the validity of registration granted to him.

(2) The application under sub-rule (1) shall be acknowledged only on payment of the
amount specified in sub-section (2) of section 27.

Rule 16 of CGST Rules - Suo moto registration

(1) Where, pursuant to any survey, enquiry, inspection, search or any other proceedings
under the Act, the proper officer finds that a person liable to registration under the Act
has failed to apply for such registration, such officer may register the said person on a
temporary basis and issue an order in FORM GST REG- 12.

(2) The registration granted under sub-rule (1) shall be effective from the date of such order
granting registration.

(3) Every person to whom a temporary registration has been granted under sub-rule (1)
shall, within a period of ninety days from the date of the grant of such registration, submit
an application for registration in the form and manner provided in rule 8 or rule 12:

Provided that where the said person has filed an appeal against the grant of temporary
registration, in such case, the application for registration shall be submitted within a
period of thirty days from the date of the issuance of the order upholding the liability to
registration by the Appellate Authority.

(4) The provisions of rule 9 and rule 10 relating to verification and the issue of the certificate
of registration shall, mutatis mutandis, apply to an application submitted under sub-rule
(3).

(5) The Goods and Services Tax Identification Number assigned, pursuant to the verification
under sub-rule (4), shall be effective from the date of the order granting registration
under sub-rule (1).
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Sec.28 of CGST Act – Amendment of registration

(1) Every registered person and a person to whom a Unique Identity Number has been
assigned shall inform the proper officer of any changes in the information furnished at
the time of registration or subsequent thereto, in such form and manner and within such
period as may be prescribed.

(2) The proper officer may, on the basis of information furnished under sub-section (1) or as
ascertained by him, approve or reject amendments in the registration particulars in such
manner and within such period as may be prescribed:

Provided that approval of the proper officer shall not be required in respect of
amendment of such particulars as may be prescribed:

Provided further that the proper officer shall not reject the application for amendment in
the registration particulars without giving the person an opportunity of being heard.

(3) Any rejection or approval of amendments under the State Goods and Services Tax Act
or the Union Territory Goods and Services Tax Act, as the case may be, shall be deemed
to be a rejection or approval under this Act.

Rule 19 of CGST Rules - Amendment of registration

(1) Where there is any change in any of the particulars furnished in the application for
registration in FORM GST REG-01 or FORM GST REG-07 or FORM GST REG-09 or
FORM GST REG-10 or for Unique Identity Number in FORM GST-REG-13,either at the
time of obtaining registration or Unique Identity Number or as amended from time to
time, the registered person shall, within a period of fifteen days of such change, submit
an application, duly signed or verified through electronic verification code, electronically
in FORM GST REG-14, along with the documents relating to such change at the
common portal, either directly or through a Facilitation Centre notified by the
Commissioner:

Provided that –
(a) where the change relates to,-
(i) legal name of business;
(ii) address of the principal place of business or any additional place(s) of
business; or
(iii) addition, deletion or retirement of partners or directors, Karta, Managing
Committee, Board of Trustees, Chief Executive Officer or equivalent,
responsible for the day to day affairs of the business,-

which does not warrant cancellation of registration under section 29, the proper
officer shall, after due verification, approve the amendment within a period of
fifteen working days from the date of the receipt of the application in FORM GST
REG-14 and issue an order in FORM GST REG-15 electronically and such
amendment shall take effect from the date of the occurrence of the event
warranting such amendment;

(b) the change relating to sub-clause (i) and sub-clause (iii) of clause (a) in any State
or Union territory shall be applicable for all registrations of the registered person
obtained under the provisions of this Chapter on the same Permanent Account
Number;
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(c) where the change relates to any particulars other than those specified in clause
(a), the certificate of registration shall stand amended upon submission of the
application in FORM GST REG- 14 on the common portal;

(d) where a change in the constitution of any business results in the change of the
Permanent Account Number of a registered person, the said person shall apply for
fresh registration in FORM GST REG-01:

Provided further that any change in the mobile number or e-mail address of the
authorised signatory submitted under this rule, as amended from time to time, shall be
carried out only after online verification through the common portal in the manner
provided under sub-rule (2) of rule 8.

(1A) Notwithstanding anything contained in sub-rule (1), any particular of the application for
registration shall not stand amended with effect from a date earlier than the date of
submission of the application in FORM GST REG-14 on the common portal except with
the order of the Commissioner for reasons to be recorded in writing and subject to such
conditions as the Commissioner may, in the said order, specify.

(2) Where the proper officer is of the opinion that the amendment sought under sub-rule (1)
is either not warranted or the documents furnished therewith are incomplete or incorrect,
he may, within a period of fifteen working days from the date of the receipt of the
application in FORM GST REG-14, serve a notice in FORM GST REG-03, requiring the
registered person to show cause, within a period of seven working days of the service of
the said notice, as to why the application submitted under sub-rule (1) shall not be
rejected.

(3) The registered person shall furnish a reply to the notice to show cause, issued under
sub-rule (2), in FORM GST REG-04, within a period of seven working days from the date
of the service of the said notice.

(4) Where the reply furnished under sub-rule (3) is found to be not satisfactory or where no
reply is furnished in response to the notice issued under sub-rule (2) within the period
prescribed in sub-rule (3), the proper officer shall reject the application submitted under
sub-rule (1) and pass an order in FORM GST REG -05.

(5) If the proper officer fails to take any action,-

(a) within a period of fifteen working days from the date of submission of the
application, or
(b) within a period of seven working days from the date of the receipt of the reply to
the notice to show cause under sub-rule (3),

the certificate of registration shall stand amended to the extent applied for and the
amended certificate shall be made available to the registered person on the common
portal.

Sec.29 of CGST Act – Cancellation or suspension of registration

(1) The proper officer may, either on his own motion or on an application filed by the
registered 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, having regard
to the circumstances where,––
 Page 13 of 371

(a) the business has been discontinued, transferred fully for any reason including
death of the proprietor, amalgamated with other legal entity, demerged or
otherwise disposed of; or

(b) there is any change in the constitution of the business; or

(c) the taxable person, other than the person registered under sub-section (3) of
section 25, is no longer liable to be registered under section 22 or section 24.

Provided that during pendency of the proceedings relating to cancellation of registration

filed by the registered person, the registration may be suspended for such period and in
such manner as may be prescribed.

(2) The proper officer may cancel the registration of a person from such date, including any
retrospective date, as he may deem fit, where,––

(a) a registered person has contravened such provisions of the Act or the rules made
thereunder as may be prescribed; or
(b) a person paying tax under section 10 has not furnished returns for three
consecutive tax periods; or
(c) any registered person, other than a person specified in clause (b), has not
furnished returns for a continuous period of six months; or
(d) any person who has taken voluntary registration under sub-section (3) of section
25 has not commenced business within six months from the date of registration;
or
(e) registration has been obtained by means of fraud, wilful misstatement or
suppression of facts:

Provided that the proper officer shall not cancel the registration without giving the
person an opportunity of being heard.

Provided further that during pendency of the proceedings relating to cancellation of

registration, the proper officer may suspend the registration for such period and in such
manner as may be prescribed.

(3) The cancellation of registration under this section shall not affect the liability of the
person to pay tax and other dues under this Act or to discharge any obligation under this
Act or the rules made thereunder for any period prior to the date of cancellation whether
or not such tax and other dues are determined before or after the date of cancellation.

(4) The cancellation of registration under the State Goods and Services Tax Act or the Union
Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a
cancellation of registration under this Act.

(5) Every registered person whose registration is cancelled shall pay an amount, by way of
debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of
input tax in respect of inputs held in stock and inputs contained in semi-finished or
finished goods held in stock or capital goods or plant and machinery on the day
 Page 14 of 371

immediately preceding the date of such cancellation or the output tax payable on such
goods, whichever is higher, calculated in such manner as may be prescribed:

Provided that in case of capital goods or plant and machinery, the taxable person shall
pay an amount equal to the input tax credit taken on the said capital goods or plant and
machinery, reduced by such percentage points as may be prescribed or the tax on the
transaction value of such capital goods or plant and machinery under section 15,
whichever is higher.

(6) The amount payable under sub-section (5) shall be calculated in such manner as may
be prescribed.

Rule 20 of CGST Rules - Application for cancellation of registration

A registered person, other than a person to whom a registration has been granted under rule 12
or a person to whom a Unique Identity Number has been granted under rule 17, seeking
cancellation of his registration under sub-section (1) of section 29 shall electronically submit an
application in FORM GST REG-16, including therein the details of inputs held in stock or inputs
contained in semi-finished or finished goods held in stock and of capital goods held in stock on
the date from which the cancellation of registration is sought, liability thereon, the details of the
payment, if any, made against such liability and may furnish, along with the application, relevant
documents in support thereof, at the common portal within a period of thirty days of the
occurrence of the event warranting the cancellation, either directly or through a Facilitation
Centre notified by the Commissioner:

Rule 21 of CGST Rules - Registration to be cancelled in certain cases

The registration granted to a person is liable to be cancelled, if the said person,-

(a) does not conduct any business from the declared place of business; or
(b) issues invoice or bill without supply of goods or services in violation of the provisions of
this Act, or the rules made thereunder; or
(c) violates the provisions of section 171 of the Act or the rules made thereunder.

Rule 21A of CGST Rules - Suspension of registration.-

(1) Where a registered person has applied for cancellation of registration under rule 20, the
registration shall be deemed to be suspended from the date of submission of the
application or the date from which the cancellation is sought, whichever is later, pending
the completion of proceedings for cancellation of registration under rule 22.

(2) Where the proper officer has reasons to believe that the registration of a person is liable
to be cancelled under section 29 or under rule 21, he may, after affording the said
person a reasonable opportunity of being heard, suspend the registration of such person
with effect from a date to be determined by him, pending the completion of the
proceedings for cancellation of registration under rule 22.

(3) A registered person, whose registration has been suspended under sub-rule (1) or sub-
rule (2), shall not make any taxable supply during the period of suspension and shall not
be required to furnish any return under section 39.

(4) The suspension of registration under sub-rule (1) or sub-rule (2) shall be deemed to be
revoked upon completion of the proceedings by the proper officer under rule 22 and
 Page 15 of 371

such revocation shall be effective from the date on which the suspension had come into
effect.

Rule 22 of CGST Rules - Cancellation of registration

(1) Where the proper officer has reasons to believe that the registration of a person is liable
to be cancelled under section 29, he shall issue a notice to such person in FORM GST
REG-17,requiring him to show cause, within a period of seven working days from the
date of the service of such notice, as to why his registration shall not be cancelled.

(2) The reply to the show cause notice issued under sub-rule (1) shall be furnished in FORM
REG–18 within the period specified in the said sub-rule.

(3) Where a person who has submitted an application for cancellation of his registration is
no longer liable to be registered or his registration is liable to be cancelled, the proper
officer shall issue an order in FORM GST REG-19, within a period of thirty days from the
date of application submitted under sub-rule 1 of rule 20 or, as the case may be, the
date of the reply to the show cause issued under sub-rule (1), cancel the registration,
with effect from a date to be determined by him and notify the taxable person, directing
him to pay arrears of any tax, interest or penalty including the amount liable to be paid
under sub-section (5) of section 29.

(4) Where the reply furnished under sub-rule (2) is found to be satisfactory, the proper
officer shall drop the proceedings and pass an order in FORM GST REG –20.

Provided that where the person instead of replying to the notice served under sub-rule
(1) for contravention of the provisions contained in clause (b) or clause (c) of sub-section
(2) of section 29, furnishes all the pending returns and makes full payment of the tax
dues along with applicable interest and late fee, the proper officer shall drop the
proceedings and pass an order in FORM GST-REG 20

(5) The provisions of sub-rule (3) shall, mutatis mutandis, apply to the legal heirs of a
deceased proprietor, as if the application had been submitted by the proprietor himself.

Sec.30 of CGST Act – Revocation of cancellation of registration

(1) Subject to such conditions as may be prescribed, any registered person, whose
registration is cancelled by the proper officer on his own motion, may apply to such
officer for revocation of cancellation of the registration in the prescribed manner within
thirty days from the date of service of the cancellation order.

(2) The proper officer may, in such manner and within such period as may be prescribed, by
order, either revoke cancellation of the registration or reject the application:

Provided that the application for revocation of cancellation of registration shall not be
rejected unless the applicant has been given an opportunity of being heard.

(3) The revocation of cancellation of registration under the State Goods and Services Tax
Act or the Union Territory Goods and Services Tax Act, as the case may be, shall be
deemed to be a revocation of cancellation of registration under this Act.

Provided that the registered person who was served notice under sub-section (2) of
section 29 in the manner as provided in clause (c) or clause (d) of sub-section (1) of
 Page 16 of 371

section 169 and who could not reply to the said notice, thereby resulting in cancellation
of his registration certificate and is hence unable to file application for revocation of
cancellation of registration under sub-section (1) of section 30 of the Act, against such
order passed up to 31.03.2019, shall be allowed to file application for revocation of
cancellation of the registration not later than 22.07.2019.

Rule 23 of CGST Rules - Revocation of cancellation of registration

(1) A registered person, whose registration is cancelled by the proper officer on his own
motion, may submit an application for revocation of cancellation of registration, in FORM
GST REG-21, to such proper officer, within a period of thirty days from the date of the
service of the order of cancellation of registration at the common portal, either directly or
through a Facilitation Centre notified by the Commissioner:

Provided that no application for revocation shall be filed, if the registration has been
cancelled for the failure of the registered person to furnish returns, unless such returns
are furnished and any amount due as tax, in terms of such returns, has been paid along
with any amount payable towards interest, penalty and late fee in respect of the said
returns.

Provided further that all returns due for the period from the date of the order of
cancellation of registration till the date of the order of revocation of cancellation of
registration shall be furnished by the said person within a period of thirty days from the
date of order of revocation of cancellation of registration:

Provided also that where the registration has been cancelled with retrospective effect,
the registered person shall furnish all returns relating to period from the effective date of
cancellation of registration till the date of order of revocation of cancellation of
registration within a period of thirty days from the date of order of revocation of
cancellation of registration.

(2)(a) Where the proper officer is satisfied, for reasons to be recorded in writing, that there are
sufficient grounds for revocation of cancellation of registration, he shall revoke the
cancellation of registration by an order in FORM GST REG-22 within a period of thirty
days from the date of the receipt of the application and communicate the same to the
applicant.

(b) The proper officer may, for reasons to be recorded in writing, under circumstances other
than those specified in clause (a), by an order in FORM GST REG05, reject the
application for revocation of cancellation of registration and communicate the same to
the applicant.

(3) The proper officer shall, before passing the order referred to in clause (b) of sub-rule (2),
issue a notice in FORM GST REG–23 requiring the applicant to show cause as to why
the application submitted for revocation under sub-rule (1) should not be rejected and
the applicant shall furnish the reply within a period of seven working days from the date
of the service of the notice inFORMGSTREG-24.

(4) Upon receipt of the information or clarification in FORM GST REG-24, the proper officer
shall proceed to dispose of the application in the manner specified in sub-rule (2) within
a period of thirty days from the date of the receipt of such information or clarification from
the applicant.
 Page 17 of 371

Rule 18 of CGST Rules - Display of registration certificate and Goods and Services Tax
Identification Number on the name board

(1) Every registered person shall display his certificate of registration in a prominent location
at his principal place of business and at every additional place or places of business.

(2) Every registered person shall display his Goods and Services Tax Identification Number
on the name board exhibited at the entry of his principal place of business and at every
additional place or places of business.

FAQ on Registration

Q 1. What is advantage of taking registration in GST?

Ans. Registration under Goods and Service Tax (GST) regime will confer following advantages to
the business:

Legally recognized as supplier of goods or services.

Proper accounting of taxes paid on the input goods or services which can be utilized for
payment of GST 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.
Getting eligible to avail various other benefits and privileges rendered under the GST laws.

Q2. 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 can
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 the
date on which he became liable for registration.

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 a person taking registration voluntarily while being within the threshold exemption
limit for paying tax, the effective date of registration shall be the date of order of registration.

Q4. Who are the persons liable to take a Registration under the Model GST Law?
Ans. As per Section 22 of the CGST/SGST Act 2017, every supplier (including his agent) who
makes a taxable supply i.e. supply of goods and / or services which are leviable to tax under
GST law, and his aggregate turn over in a financial year exceeds the threshold limit of twenty
lakh rupees shall be liable to register himself in the State or the Union territory of Delhi or
Puducherry from where he makes the taxable supply.

In case of eleven special category states (as mentioned in Art.279A(4)(g) of the Constitution
of India), this threshold limit for registration liability is ten lakh rupees.

Besides, Section 24 of the Act mentions certain categories of suppliers, who shall be liable
to take registration even if their aggregate turnover is below the said threshold limit of 20
lakh rupees.
 Page 18 of 371

On the other hand, as per Section 23 of the Act, an agriculturist in respect of supply of his
agricultural produce; as also any person exclusively making supply of non-taxable or wholly
exempted goods and/or services under GST law will not be liable for registration.

Q5. What is aggregate turnover?

Ans. As per section 2(6) of the CGST/SGST Act “aggregate turnover” includes the aggregate
value of:

(i) all taxable supplies,

(ii) all exempt supplies,
(iii) exports of goods and/or service, and,
(iv) all inter-state supplies of a person having the same PAN.

The above shall be computed on all India basis and excludes taxes charged under the
CGST Act, SGST Act, UTGST Act, and the IGST Act. Aggregate turnover shall include all
supplies made by the Taxable person, whether on his own account or made on behalf of all
his principals.

Aggregate turnover does not include value of supplies on which tax is levied on reverse
charge basis, and value of inward supplies.

The value of goods after completion of job work is not includible in the turnover of the job-
worker. It will be treated as supply of goods by the principal and will accordingly be includible
in the turnover of the Principal.

Q6. Which are the cases in which registration is compulsory?

Ans. As per Section 24 of the CGST/SGST Act, the following categories of persons shall be
required to be registered compulsorily irrespective of the threshold limit:

i) persons making any inter-State taxable supply;

ii) casual taxable persons;
iii) persons who are required to pay tax under reverse charge;
iv) electronic commerce operators required to pay tax under sub-section (5) of section 9;
v) non-resident taxable persons;
vi) persons who are required to deduct tax under section 51;
vii) persons who supply goods and/or services on behalf of other registered taxable persons
whether as an agent or otherwise;
viii) Input service distributor (whether or not separately registered under the Act)
ix) persons who are required to collect tax under section 52;
x) every electronic commerce operator
xi) every person supplying online information and data base retrieval services from a place
outside India to a person in India, other than a registered person; and,
xii) such other person or class of persons as may be notified by the Central Government or a
State Government on the recommendations of the Council.

Q7. What is the time limit for taking a Registration under GST?
Ans. A person should take a Registration, within thirty days from the date on which he becomes
liable to registration, in such manner and subject to such conditions as is prescribed under
the Registration Rules. A Casual Taxable person and a non-resident taxable person should
however apply for registration at least 5 days prior to commencement of business.

Q8. If a person is operating in different states, with the same PAN number, whether he can
operate with a single Registration?
Ans. No. Every person who is liable to take a Registration will have to get registered separately
for each of the States where he has a business operation and is liable to pay GST in terms
of Sub-section (1) of Section 22 of the CGST/SGST Act.
 Page 19 of 371

Q9. 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 25, a person, though not liable to be registered
under Section 22 may get himself registered voluntarily, and all provisions of this Act, as are
applicable to a registered taxable person, shall apply to such person.

Q10. Is possession of a Permanent Account Number (PAN) mandatory for obtaining a

Registration?
Ans. Yes. As per Section 25(6) of the CGST/SGST Act 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.

However as per the proviso to the aforesaid section 25(6), a person required to deduct tax
under Section 51, may have, in lieu of a PAN, a Tax Deduction and Collection Account
Number issued under the said Income Tax Act, in order to be eligible for grant of registration.

Also, as per Section 25(7) PAN is not mandatory for a non-resident taxable person who may
be granted registration on the basis of any other document as maybe prescribed.

Q11. Whether the Department through the proper officer, can suo-moto proceed to register
of a Person under this Act?
Ans. Yes. In terms of sub-section (8) of Section 25, where a person who is liable to be registered
under this Act fails to obtain registration, the proper officer may, without prejudice to any
action which may be taken under this Act, or under any other law for the time being in force,
proceed to register such person in the manner as is prescribed in the Registration rules.

Q12. Whether the proper officer can reject an Application for Registration?
Ans. Yes. In terms of sub-section 10 of section 25 of the CGST/SGST Act, the proper officer can
reject an application for registration after due verification.

Q13. Whether the Registration granted to any person is permanent?

Ans. Yes, the registration Certificate once granted is permanent unless surrendered, cancelled,
suspended or revoked.

Q14. Is it necessary for the Govt. Organization to get registration?

Ans. A unique identification number (ID) would be given by the respective state tax authorities
through GST portal to Government authorities / PSUs not making outwards supplies of GST
goods (and thus not liable to obtain GST registration) but are making inter-state purchases.

Q15. Who is a Casual Taxable Person?

Ans. Casual Taxable Person has been defined in Section 2 (20) of the CGST/SGST Act meaning
a person who occasionally undertakes transactions involving supply of goods and/or
services in the course or furtherance of business, whether as principal, or agent or in any
other capacity, in a State or a Union territory where he has no fixed place of business.

Q16. Who is a Non-resident Taxable Person?

Ans. In terms of Section 2(77) of the CGST/SGST Act, a non-resident taxable person means any
person who occasionally undertakes transactions involving supply of goods and/or services
whether as principal or agent or in any other capacity, but who has no fixed place of
business or residence in India.

Q17. What is the validity period of the Registration certificate issued to a Casual Taxable
Person and non- Resident Taxable person?
Ans. In terms of Section 27(1) read with proviso thereto, the certificate of registration issued to a
“casual taxable person” or a “non-resident taxable person” shall be valid for a period
 Page 20 of 371

specified in the application for registration or ninety days from the effective date of
registration, whichever is earlier. 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.

Q18. 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 advance deposit of tax to
obtain registration, a casual taxable person or a non-resident taxable person shall, at the
time of submission of application for registration is required, in terms of Section 27(2) read
with proviso thereto, make an advance deposit of tax in an amount equivalent to the
estimated tax liability of such person for the period for which the registration is sought. If
registration is to be extended beyond the initial period of ninety days, an advance additional
amount of tax equivalent to the estimated tax liability is to be deposited for the period for
which the extension beyond ninety days is being sought.

Q19. Whether Amendments to the Registration Certificate is permissible?

Ans. Yes. In terms of Section 28, the proper officer may, on the basis of such information
furnished either by the registrant or as ascertained by him, approve or reject amendments in
the registration particulars within a period of 15 common working days from the date of
receipt of application for amendment.

It is to be noted that permission of the proper officer for making amendments will be required
for only certain core fields of information, whereas for the other fields, the certificate of
registration shall stand amended upon submission of application in the GST common portal.

Q20. Whether Cancellation of Registration Certificate is permissible?

Ans. Yes. Any Registration granted under this Act may be cancelled by the Proper Officer, in
circumstances mentioned in Section 29 of the CGST/SGST Act. 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. As per the
Registration Rules, an order for cancellation is to be issued within 30 days from the date of
receipt of reply to SCN (in cases where the cancellation is proposed to be carried out suo
moto by the proper officer) or from the date of receipt of application for cancellation (in case
where the taxable person/legal heir applies for such cancellation)

Q21. 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 29 (4))

Q22. Can the proper Officer Cancel the Registration on his own?
Ans. Yes, in certain circumstances specified under section 29(2) of the CGST/SGST Act, the
proper officer can cancel the registration on his own. Such circumstances include
contravention of any of the prescribed provisions of the CGST Act or the rules made there
under, not filing return by a composition dealer for three consecutive tax periods or non-
furnishing of returns by a regular taxpayer for a continuous period of six months, and not
commencing business within six months from the date of voluntary registration. However,
before cancelling the registration, the proper officer has to follow the principles of natural
justice. (proviso to Section 29(2)(e))

Q23. What happens when the registration is obtained by means of willful mis-statement,
fraud or suppression of facts?
Ans. In such cases, the registration may be cancelled with retrospective effect by the proper
officer. (Section 29(2)(e))
 Page 21 of 371

Q24. Is there an option to take centralized registration for services under GST Law?
Ans. No, the tax paper has to take separate registration in every state from where he makes
taxable supplies.

Q25. 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 the date of such
transfer or succession. (Section 22(3)).

Q26. Whether the job worker will have to be compulsorily registered?

Ans. No, a Job worker is a supplier of services and will be obliged to take registration only when
his turnover crosses the prescribed threshold of 20/10 Lakhs.

Q27. Whether the goods will be permitted to be supplied from the place of business of a job
worker?
Ans. Yes. But only in cases where the job worker is registered, or if not, the principal declares the
place of business of the job worker as his additional place of business.

Q28. 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(89) & 2(85) of the CGST/SGST Act 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.

Q29. Is there any system to facilitate smaller dealers or dealers having no IT infrastructure?
Ans. In order to cater to the needs of tax payers 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 of information
contained in the forms prepared by the TRP will rest with the taxable person only and the
TRP shall not be liable for any errors or incorrect information.

Facilitation Centre (FC): shall be responsible for the digitization and/or uploading of the
forms and documents including summary sheet duly signed by the Authorized Signatory and
given to it by the taxable person. After uploading the data on common portal using the ID
and Password of FC, a print-out of acknowledgement will be taken and signed by the FC
and handed over to the taxable person for his records. The FC will scan and upload the
summary sheet duly signed by the Authorized Signatory.

Q30. Is there any facility for digital signature in the GSTN registration?
Ans. Tax payers would have the option to sign the submitted application using valid digital
signatures. There will be two options for electronically signing the application or other
submissions- by e-signing through Aadhar number, or through DSC i.e. by registering the tax
payer’s digital signature certificate with GST portal. However, companies or limited liability
partnership entities will have to sign mandatorily through DSC only. Only level 2 and level 3
DSC certificates will be acceptable for signature purpose.

Q31. What will be the time limit for the decision on the on line registration application?
Ans. If the information and the uploaded documents are found in order, the State and the Central
authorities shall have to respond to the application within three common working days. If
they communicate any deficiency or discrepancy in the application within such time, then the
 Page 22 of 371

applicant will have to remove the discrepancy / deficiency within 7 days of such
communication. Thereafter, for either approving the application or rejecting it, the State and
the Central authorities will have 7 days from the date when the taxable person
communicates removal of deficiencies. In case no response is given by the departmental
authorities within the said time line, the portal shall automatically generate the registration.

Q32. 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 error, the same shall be communicated to the applicant and to the other tax authority
through the GST Common Portal within 3 common working days. The applicant will reply to
the query/rectify the error/ answer the query within a period of seven days from the date of
receipt of deficiency intimation.

On receipt of additional document or clarification, the relevant tax authority will respond
within seven common working days from the date of receipt of clarification.

Q33. What is the process of refusal of registration?

Ans. In case registration is refused, the applicant will be informed about the reasons for such
refusal through a speaking order. The applicant shall have the right to appeal against the
decision of the Authority. As per sub-section (2) of section 26 of the CGST Act, any rejection
of application for registration by one authority (i.e. under the CGST Act / SGST Act) shall be
deemed to be a rejection of application for registration by the other tax authority (i.e. under
the SGST Act / UTGST Act/ CGST Act).

Q34. 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.

Q35. 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.

Q36. Can cancellation of registration order be revoked?

Ans. Yes, but only in cases where the initial cancellation has been done by the proper officer suo
moto, and not on the request of the taxable person or his legal heirs. A person whose
registration has been cancelled suo moto can apply to the proper officer for revocation of
cancellation of registration within 30 days from the date of communication of the cancellation
order. The proper officer may within a period of 30 days from the date of receipt of
application for revocation of cancellation or receipt of information/clarification, either revoke
the cancellation or reject the application for revocation of cancellation of registration.

Q37. Does cancellation of registration impose any tax obligations on the person whose
registration is so cancelled?
Ans. Yes, as per Section 29(5) of the CGST/SGST Act, every registered taxable person whose
registration is cancelled shall pay an amount, by way of debit in the electronic cash/credit
ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs
contained in semi-finished or finished goods held in stock or capital goods or plant and
machinery on the day immediately preceding the date of such cancellation or the output tax
payable on such goods, whichever is higher.

Q38. What is the difference between casual and non-resident taxable persons?
Ans. Casual and Non-resident taxable persons are separately defined in the CGST/SGST Act in
Sections 2(20) and 2(77) respectively. Some of the differences are outlined below:

Casual Taxable Person
Occasional undertakes transactions
involving supply of goods or services in a
state or UT where he has no fixed place of
business.
Has a PAN Number
Twitter FAQ on Registration
Does aggregate turnover include value of inward
supplies received on which RCM is payable?
What if the dealer migrated with wrong PAN as the
status of firm was changed from proprietorship to
partnership?
A taxable person’s business is in many States. All
supplies are below ` 10 Lakhs. He makes an inter-
State supply from one State. Is he liable for
registration?
Can we use provisional GSTIN or do we get new
GSTIN?
Can we start using provisional GSTIN till new one is
issued?
Whether trader of country liquor is required to
migrate to GST from VAT as liquor is out of GST
law?
Not liable to tax as mentioned u/s 23 of CGST
means nil rated supply or abated value of supply?
Whether civil contractor doing projects in various
States requires separate registration for all States or
a single registration at State of head office will
suffice?
Whether aggregate turnover includes turnover of
supplies on which tax is payable by the recipient
under reverse charge?
If there are two SEZ units within same State,
whether two registrations are required to be
obtained?
Is an advocate providing inter-state supply
chargeable under Reverse Charge liable for
registration?
When is registration in other State required? Will
giving service from Nasik to other State require
registration in other state?
I have migrated under GST but want to register as
ISD. Whether I can apply now & what is the
procedure?
I have enrolled in GST but I forgot to enter SAC
codes. What should I do? The status is migrated.
Page 23 of 371
Non-resident Taxable Person
Occasional undertakes transactions
involving supply of goods or services but has
no fixed place of business residence in India.
Do not have a PAN Number; A non-resident
person, if
Refer Section 2(6) of CGST Act. Aggregate
turnover does not include value of inward supplies
on which tax is payable on reverse charge basis.
New registration would be required as partnership
firm would have new PAN.
He is liable to register if the aggregate turnover (all
India) is more than ` 20 lacs or if he is engaged in
inter-State supplies.
Provisional GSTIN (PID) should be converted into
final GSTIN within 90 days. Yes, provisional
GSTIN can be used till final GSTIN is issued. PID
& final GSTIN would be same.
If the person is involved in 100% supply of goods
which are not liable for GST, then no registration is
required.
Not liable to tax means supplies which is not
leviable to tax under the CGST/SGST/IGST Act.
Please refer to definition under Section 2(78) of
the CGST Act.
A supplier of service will have to register at the
location from where he is supplying services.
Outward supplies on which tax is paid on reverse
charge basis by the recipient will be included in the
aggregate turnover of the supplier.
SEZs under same PAN in a state require one
registration. Please see proviso to Rule 8(1) of
CGST Rules.
Exemption from registration has been provided to
such suppliers who are making only those supplies
on which recipient is liable to discharge GST under
RCM.
If services are being provided from Nasik then
registration is required to be taken only in
Maharashtra and IGST to be paid on inter-State
supplies.
A separate & new registration is required for ISD.
New registrations are being opened from 0800 hrs.
on 25-6-2017.
The same can be filled while filing FORM REG-26
for converting provisional ID to final registration.

I have ST number on individual name and have
migrated to GST. I wish to transfer this on my
proprietorship firm.
Please tell if rental income up to 20 lacs attracts
GST or attracts any other charge?
If someone trades only 0% GST items (grains,
pulses) then is it necessary to register for GST, if the
turnover exceeds ` 20 lacs?
Is it correct that person dealing exclusively in NIL
rated or exempt goods/services liable to register if
turnover ` 20/10 Lakh?
If I register voluntarily though turnover is less than `
20 Lakhs, am I required to pay tax from 1st supply I
make post registration?
Whether a separate GSTIN would be allotted to a
registered person for deducting TDS (he has PAN
and TAN as well)?
Is separate registration required for trading and
manufacturing by same entity in one state?
I am registered in TN and getting the service from
unregistered dealer of AP, should I take registration
in AP to discharge GST under RCM?
Is there any concept of area based exemption under
GST?
If a company in Maharashtra holds only one event in
Delhi, will they have to register in Delhi? Will paying
IGST from Maharashtra suffice?
How long can I wait to register in GST ?
What If I am not liable to register under GST but I
was registered under Service tax?
When turnover of agents will be added to that of the
principal for registration?
If I am not an existing taxpayer and wish to newly
register under GST, when can I do so?
If I buy raw material from a supplier unregistered
under GST, do I have to pay GST in RCM and can I
avail ITC of the same?
Can an unregistered dealer supply goods to other
States if his turnover is below Rs. 20 lakh?
Existing taxpayer registering a branch office in
another state comes under fresh registration or under
existing taxpayer registration?
Is registration necessary if only Inter-State supply of If exclusively making supplies of Nil rated goods,
Nil rated goods is being made?
Whether franchisor company will have to take No, a franchisor company need not take registration
Page 24 of 371
This conversion may be done while filling FORM
REG-26 for converting provisional ID to final
registration.
GST is leviable only if aggregate turnover is more
than 20 lacs (10 lacs in 11 special category
States). For computing aggregate supplies
turnover of all supplies made by you would be
added.
A person dealing with 100% exempted supply is
not liable to register irrespective of turnover.
There is no liability of registration if the person is
dealing with 100% exempt supplies.
Yes, you would be treated as a normal taxable
person.
Separate registration as tax deductor is required.
There will be only one registration per State for all
activities.
Any person who makes make inter-State taxable
supply is required to take registration. Therefore in
this case AP dealer shall take registration and pay
tax.
There will be no area based exemptions in GST.
Only if you provide any supply from Delhi you need
to take registration in Delhi. Else, registration at
Mumbai is sufficient (and pay IGST on supplies
made from Mumbai to Delhi).
An unregistered person has 30 days to complete
its registration formalities from its date of liability to
obtain registration.
You can apply for cancellation of Provisional ID on
or before 31st July 2017.
No.
You would be able to apply for new registration at
the GST Portal gst.gov.in from 0800 hrs. on 25th
June 2017.
Yes, you have to pay GST via Reverse Charge
Mechanism (RCM). You can avail ITC of the GST so
paid if you are otherwise eligible.
No. The supplier would be liable to obtain
registration in case of Inter-State supplies
irrespective of his turnover.
For every State, a fresh registration is needed.
registration is not compulsory. Kindly refer Section
23 of CGST Act.
 Page 25 of 371

registration in each State where outlets are located? in a State where only its franchisee is located.
If I'm starting a new business today, do I still need to You may directly take GST registration on
get TIN and then apply for GST? Or can I directly www.gst.gov.in
register with GST?
A firm dealing exclusively in exempted products has If registered, then you need to file returns. You may
GST registration. Does it need to file return? choose to cancel your registration since you are
dealing only in exempted products.
My all outward supplies are export services. In such Yes. Since exports are zero-rated, one needs to
case is it compulsory to register under GST? register under GST to claim refunds.
Can a person operating two different companies with One PAN holder gets one registration in every
different names but with same PAN get two GST State, but he has the option of getting different
registrations? registrations for different business verticals.
Is a job-worker required to register? Whether Job-workers making taxable supplies above the
composition scheme is available to a job-worker? threshold aggregate turnover need to register.
Composition scheme is not available to job-workers.
They can, however, avail benefit of Section 143 of
the CGST Act.
I am a service provider with turnover of Rs. 50 lakh in Service providers, except restaurants/caterers, are
one State only. Am I eligible for the composition not eligible for composition scheme.
scheme?
I am an ice-cream manufacturer with sales in one No. The manufacturers of following goods, namely -
State only. Can I avail the option of composition? • Ice-cream and other edible ice, whether or
not containing cocoa,
• Pan-masala,
• Tobacco and manufactured tobacco
substitutes, are not eligible for benefit of
composition scheme.
If I register under the composition scheme, can I opt Those availing composition can exit and opt for
out of it later? What happens to my stock if I do so? normal tax scheme anytime. They would be eligible
for ITC on stocks available on the date of switch
over in terms of Section 18(1)(c) of CGST Act, 2017.
Can I register as a normal taxable person now and You can opt for composition scheme from the
avail of the composition scheme later? beginning of the next financial year on submitting
the option to avail composition scheme before
beginning of the Financial Year. It may please be
noted that composition scheme cannot be availed
from the middle of a financial year.
If I was registered earlier but not required to register Please apply for cancellation of registration under
under GST, what to do about provisional ID and Section 29(1) of the CGST Act, 2017 read with Rule
accumulated ITC? 24(4) of CGST Rules, 2017. You will be required to
calculate and pay ITC availed on goods held in
stock on the date of cancellation of registration.
I was registered under Central Excise or Service Tax, In your new registration application, if you have
but could not migrate and therefore have taken a new referred to your past registration no. of Central
registration. Will I be eligible for transitional credit? Excise or Service Tax, you will be eligible for
transitional credit under Section 140 of CGST Act,
2017 read with Rule 117 of CGST Rules, 2017.
I have migrated and received provisional ID but not Provisional ID (PID) will be your GSTIN. You can
GSTIN, how do I supply goods or services or both? supply goods or services or both specifying PID as
your GSTIN on Invoice.
I have not received ARN or have received ARN but You can supply goods or services or both on bill of
not GSTIN, how do I supply goods or services or supply without mentioning GSTIN and/or ARN. On
both? receipt of GSTIN, you will need to issue revised
invoice mentioning GSTIN. You are required to
reflect this supply in your return and also pay tax
 Page 26 of 371

I am a supplier of exempted goods based out of Delhi
and procure raw material from Kerala. My supplier
from Kerala insists that I have to be registered in Delhi
for procurement of Inter-State goods. Is he right?
Is GST registration mandatory for small retailers to
buy from dealers/wholesalers?
thereon.
No, if you are dealing in 100% exempted supplies,
you are not liable to be registered under GST. There
is no requirement of registration for making Inter-
State purchases.
There is no such requirement under GST law.

Circulars issued by us on registration

Circular dt.07/03/2019

Sub.:- GST – Increase in threshold limit for exemption from GST registration for supplier of the
goods – Reg….

Please note that, as per the decision taken in the GST councils 32nd meeting, the
Government vide its Notification No.10/2019-CT, dt.07.03.2019 to increase the GST
exemption limit for supplier of the goods from Rs.20 lakhs to Rs.40 lakhs.

[2] The Government vide above said notification, has notified that a person engaged in
exclusive supply of goods and whose aggregate turnover in the financial year does not
exceed Rs 40 lakhs is exempt from taking Registration in GST. The said notification is
effective from 01.04.2019 (i.e.from FY.2019-2020).

[3] However, the above said exemption limit is not applicable to the supplier of goods
namely Ice-cream/Pan masala/Tabocco and Tabocco products and such supplier are
bound to get registration even if their turnover is below Rs.40 lakhs.

[4] Also note that, the exemption limit for registration for service providers would continue to
be Rs.20 lakhs only. On the sameline, if the person is engaged in both supply of goods
and services then in that case also the exemption limit for registration would continue to
be Rs.20 lakhs only.

OUR COMMENTS ON REGISTRATION UDNER GST

Registration under GST

 A common threshold exemption limit upto aggregate Turnover of Rs.20 lakhs is available
for intra state (within state) supplies of goods and services (Refer Sec.22(1) of CGST
Act).
 However, for the person exclusively engaged in supply of goods only(no service at all),
the said threshold exemption limit is increased to Rs.40 lakhs, w.e.f.1.4.2019. Whereas if
any person is supplying only service or is supplying both goods and service, the
aggregate turnover limit will be Rs.20 lakhs only.
 Thus, if the turnover of a person of supplying goods only has not exceeded Rs.40 lakhs
in the F.Y.2018-19, he is not required to register under GST in F.Y.2019-20. Whereas, if
the turnover of a person supplying only service or service and goods has not exceeded
Rs.20 lakhs in F.Y.2018-19, he is not required to register under GST in F.Y.2019-20.
 Aggregate turnover includes value of taxable and exempted/export goods or services but
does not include value of inward supplies on which tax is payable on Reverse Charge.
 The above said threshold exemption is not available to the person engaged in inter-state
(out of State) supply of goods, the person who is required to pay tax under reverse
charge mechanism, the person required to deduct TDS/TCS, Input service Distributor.
 Page 27 of 371

 A separate and new registration is required for ISD.

 A separate registration is required for Tax Deductor.

Registration for more than one unit/depot/sale office

 As per earlier provisions one State one Registration for all units/depots/sale office of the
same person in same State. But now separate registration can be obtained per
unit/depot/sale office though they are within same State.
 However separate Registration for unit/depot/sale office situated in other State is
compulsory.
 If the goods are stored in the outside godown to be registered as additional place of
business if it is situated in the same State. However, if the outside godown is registered
in other State then separate registration to be taken.
 If the goods are stored in the godown of transporter and from the said godown the
receiver is taking delivery in piecemeal, then the receiver is required to register the said
transporters godown as his additional place of business.

Change in Registration

 Any change of information to be done within 30 days by amending the existing

registration
 New registration is required if the PAN number is changed or ownership is changed
 In case of death of proprietor, the successor has to obtain new registration

Penalty for not displaying GST Number outside registered premises

 Registration number is required to be displayed on the board outside the registered

premises. In case of failure the penalty of Rs.25,000/- can be imposed.
 Page 28 of 371

COMPOSITION LEVY UNDER GST

Sec.10 of CGST Act - Composition levy

(1) Notwithstanding anything to the contrary contained in this Act but subject to the
provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate
turnover in the preceding financial year did not exceed fifty lakh rupees in lieu of the tax
payable by him under sub-section (1) of section 9, an amount of tax calculated at such
rate, as may be prescribed, but not exceeding,––

(a) one per cent of the turnover in State or turnover in Union territory in case of a
manufacturer,
(b) two and a half per cent. of the turnover in State or turnover in Union territory in
case of persons engaged in making supplies referred to in clause (b) of
paragraph 6 of Schedule II, and
(c) half per cent. of the turnover in State or turnover in Union territory in case of
other suppliers,

subject to such conditions and restrictions as may be prescribed:

Provided that the Government may, by notification, increase the said limit of fifty lakh
rupees to such higher amount, not exceeding one crore and fifty lakh rupees, as may be
recommended by the Council.

Provided further that a person who opts to pay tax under clause (a) or clause (b) or
clause (c) may supply services (other than those referred to in clause (b) of paragraph 6
of Schedule II), of value not exceeding ten per cent. of turnover in a State or Union
territory in the preceding financial year or five lakh rupees, whichever is higher.

(2) The registered person shall be eligible to opt under sub-section (1), if:—

(a) save as provided in sub-section (1), he is not engaged in the supply of services;
(b) he is not engaged in making any supply of goods which are not leviable to tax
under this Act;
(c) he is not engaged in making any inter-State outward supplies of goods;
(d) he is not engaged in making any supply of goods through an electronic
commerce operator who is required to collect tax at source under section 52; and
(e) he is not a manufacturer of such goods as may be notified by the Government on
the recommendations of the Council:

Provided that where more than one registered persons are having the same Permanent
Account Number (issued under the Income-tax Act, 1961), the registered person shall
not be eligible to opt for the scheme under sub-section (1) unless all such registered
persons opt to pay tax under that sub-section.

(3) The option availed of by a registered person under sub-section (1) shall lapse with effect
from the day on which his aggregate turnover during a financial year exceeds the limit
specified under sub-section (1).

(4) A taxable person to whom the provisions of sub-section (1) apply shall not collect any tax
from the recipient on supplies made by him nor shall he be entitled to any credit of input
tax.
 Page 29 of 371

(5) If the proper officer has reasons to believe that a taxable person has paid tax under sub-
section (1) despite not being eligible, such person shall, in addition to any tax that may
be payable by him under any other provisions of this Act, be liable to a penalty and the
provisions of section 73 or section 74 shall, mutatis mutandis, apply for determination of
tax and penalty.

SCHEDULE II
ACTIVITIES OR TRANSACTIONS TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY
OF SERVICES

6. Composite supply

The following composite supplies shall be treated as a supply of services, namely:-

(a) works contract as defined in clause (119) of section 2; and

(b) supply, by way of or as part of any service or in any other manner whatsoever, of goods,
being food or any other article for human consumption or any drink (other than alcoholic
liquor for human consumption), where such supply or service is for cash, deferred
payment or other valuable consideration.

Rule 3 of CGST Rules - Intimation for composition levy

(1) Any person who has been granted registration on a provisional basis under clause (b) of
sub-rule (1) of rule 24 and who opts to pay tax under section 10, shall electronically file
an intimation in FORM GST CMP-01, duly signed or verified through electronic
verification code, on the common portal, either directly or through a Facilitation Centre
notified by the Commissioner, prior to the appointed day, but not later than thirty days
after the said day, or such further period as may be extended by the Commissioner in
this behalf:

Provided that where the intimation in FORM GST CMP-01 is filed after the appointed
day, the registered person shall not collect any tax from the appointed day but shall
issue bill of supply for supplies made after the said day.

(2) Any person who applies for registration under sub-rule (1) of rule 8 may give an option to
pay tax under section 10 in Part B of FORM GST REG-01, which shall be considered as
an intimation to pay tax under the said section.

(3) Any registered person who opts to pay tax under section 10 shall electronically file an
intimation in FORM GST CMP-02, duly signed or verified through electronic verification
code, on the common portal, either directly or through a Facilitation Centre notified by
the Commissioner, prior to the commencement of the financial year for which the option
to pay tax under the aforesaid section is exercised and shall furnish the statement in
FORM GST ITC-03 in accordance with the provisions of sub-rule (4) of rule 44 within a
period of sixty days from the commencement of the relevant financial year.

(3A) Notwithstanding anything contained in sub-rules (1), (2) and (3), a person who has been
granted registration on a provisional basis under rule 24 or who has been granted
certificate of registration under sub-rule (1) of rule 10 may opt to pay tax under section
10 with effect from the first day of the month immediately succeeding the month in which
he files an intimation in FORM GST CMP-02, on the common portal either directly or
through a Facilitation Centre notified by the Commissioner, on or before the 31st day of
March, 2018, and shall furnish the statement in FORM GST ITC-03 in accordance with
 Page 30 of 371

the provisions of sub-rule (4) of rule 44 within a period of [one hundred and eighty days
from the day on which such person commences to pay tax under section 10:

Provided that the said persons shall not be allowed to furnish the declaration in FORM
GST TRAN-1 after the statement in FORM GST ITC-03 has been furnished.

(4) Any person who files an intimation under sub-rule (1) to pay tax under section 10 shall
furnish the details of stock, including the inward supply of goods received from
unregistered persons, held by him on the day preceding the date from which he opts to
pay tax under the said section, electronically, in FORM GST CMP-03, on the common
portal, either directly or through a Facilitation Centre notified by the Commissioner, within
a period of ninety days from the date on which the option for composition levy is
exercised or within such further period as may be extended by the Commissioner in this
behalf.

(5) Any intimation under sub-rule (1) or sub-rule (3) or sub-rule (3A) in respect of any place
of business in any State or Union territory shall be deemed to be an intimation in respect
of all other places of business registered on the same Permanent Account Number.

Rule 4 of CGST Rules - Effective date for composition levy

(1) The option to pay tax under section 10 shall be effective from the beginning of the
financial year, where the intimation is filed under subrule (3) of rule 3 and the appointed
day where the intimation is filed under sub-rule (1) of the said rule.

(2) The intimation under sub-rule (2) of rule 3, shall be considered only after the grant of
registration to the applicant and his option to pay tax under section 10 shall be effective
from the date fixed under sub-rule (2) or (3) of rule 10.

Rule 5 of CGST Rules - Conditions and restrictions for composition levy.

(1) The person exercising the option to pay tax under section 10 shall comply with the
following conditions, namely:-
(a) he is neither a casual taxable person nor a non-resident taxable person;
(b) the goods held in stock by him on the appointed day have not been purchased in
the course of inter-State trade or commerce or imported from a place outside
India or received from his branch situated outside the State or from his agent or
principal outside the State, where the option is exercised under sub-rule (1) of
rule 3;
(c) the goods held in stock by him have not been purchased from an unregistered
supplier and where purchased, he pays the tax under sub-section (4) of section
9;
(d) he shall pay tax under sub-section (3) or sub-section (4) of section 9 on inward
supply of goods or services or both;
(e) he was not engaged in the manufacture of goods as notified under clause (e) of
sub-section (2) of section 10, during the preceding financial year;
(f) he shall mention the words ―composition taxable person, not eligible to collect
tax on supplies‖ at the top of the bill of supply issued by him; and
(g) he shall furnish the statement in FORM GST ITC-03 in accordance with the
provisions of sub - rule (4) of rule 44 within a period of ninety days from the said
date:
 Page 31 of 371

(2) The registered person paying tax under section 10 may not file a fresh intimation every
year and he may continue to pay tax under the said section subject to the provisions of
the Act and these rules.

Rule 6 of CGST Rules - Validity of composition levy

(1) The option exercised by a registered person to pay tax under section 10 shall remain
valid so long as he satisfies all the conditions mentioned in the said section and under
these rules.

(2) The person referred to in sub-rule (1) shall be liable to pay tax under sub-section (1) of
section 9 from the day he ceases to satisfy any of the conditions mentioned in section 10
or the provisions of this Chapter and shall issue tax invoice for every taxable supply
made thereafter and he shall also file an intimation for withdrawal from the scheme in
FORM GST CMP-04 within seven days of the occurrence of such event.

(3) The registered person who intends to withdraw from the composition scheme shall,
before the date of such withdrawal, file an application in FORM GST CMP-04, duly
signed or verified through electronic verification code, electronically on the common
portal.

(4) Where the proper officer has reasons to believe that the registered person was not
eligible to pay tax under section 10 or has contravened the provisions of the Act or
provisions of this Chapter, he may issue a notice to such person in FORM GST CMP-05
to show cause within fifteen days of the receipt of such notice as to why the option to
pay tax under section 10 shall not be denied.

(5) Upon receipt of the reply to the show cause notice issued under sub-rule (4) from the
registered person in FORM GST CMP-06, the proper officer shall issue an order in
FORM GST CMP-07within a period of thirty days of the receipt of such reply, either
accepting the reply, or denying the option to pay tax under section 10 from the date of
the option or from the date of the event concerning such contravention, as the case may
be.

(6) Every person who has furnished an intimation under sub-rule (2) or filed an application
for withdrawal under sub-rule (3) or a person in respect of whom an order of withdrawal
of option has been passed in FORM GST CMP-07 under sub-rule (5), may electronically
furnish at the common portal, either directly or through a Facilitation Centre notified by
the Commissioner, a statement in FORM GST ITC-01 containing details of the stock of
inputs and inputs contained in semi-finished or finished goods held in stock by him on
the date on which the option is withdrawn or denied, within a period of thirty days from
the date from which the option is withdrawn or from the date of the order passed in
FORM GST CMP-07, as the case may be.

(7) Any intimation or application for withdrawal under sub-rule (2) or (3) or denial of the
option to pay tax under section 10 in accordance with sub-rule (5) in respect of any place
of business in any State or Union territory, shall be deemed to be an intimation in respect
of all other places of business registered on the same Permanent Account Number.

Rule 7 of CGST Rules - Rate of tax of the composition levy

 Page 32 of 371

The category of registered persons, eligible for composition levy under section 10 and the
provisions of this Chapter, specified in column (2) of the Table below shall pay tax under section
10 at the rate specified in column (3) of the said Table:-

Sl. Category of registered persons Rate of tax

No.
(1) (2) (3)
1. Manufacturers, other than manufacturers of such half per cent. of the turnover in
goods as may be notified by the Government the State or Union
territory

2. Suppliers making supplies referred to in clause (b) of two and a half per cent. of the
paragraph 6 of Schedule II turnover in the State or Union
territory

3. Any other supplier eligible for composition levy under half per cent. of the turnover of
section 10 and the provisions of this Chapter taxable supplies of goods and
services in the State or Union
territory

Sec.31(3)(c) of CGST Act & Rule 49 of CGST Rules, 2017- Bill of Supply

31(3)(c) a registered person supplying exempted goods or services or both or paying tax
under the provisions of section 10 shall issue, instead of a tax invoice, a bill of
supply containing such particulars and in such manner as may be prescribed:

Provided that the registered person may not issue a bill of supply if the value of
the goods or services or both supplied is less than two hundred rupees subject to
such conditions and in such manner as may be prescribed;

Rule 49 A bill of supply referred to in clause (c) of sub-section (3) of section 31 shall be
issued by the supplier containing the following details, namely

(a) name, address and Goods and Services Tax Identification Number of the
supplier;
(b) a consecutive serial number not exceeding sixteen characters, in one or
multiple series, containing alphabets or numerals or special characters
hyphen or dash and slash symbolised as “-“ and “/” respectively, and any
combination thereof, unique for a financial year;
(c) date of its issue;
(d) name, address and Goods and Services Tax Identification Number or
Unique Identity Number, if registered, of the recipient;
(e) Harmonised System of Nomenclature Code for goods or services;
(f) description of goods or services or both;
(g) value of supply of goods or services or both taking into account discount
or abatement, if any; and
(h) signature or digital signature of the supplier or his authorised
representative:

Provided that the provisos to rule 46 shall, mutatis mutandis, apply to the bill of
supply issued under this rule:
 Page 33 of 371

Provided further that any tax invoice or any other similar document issued under
any other Act for the time being in force in respect of any non-taxable supply
shall be treated as a bill of supply for the purposes of the Act.

Provided also that the signature or digital signature of the supplier or his
authorised representative shall not be required in the case of issuance of an
electronic bill of supply in accordance with the provisions of the Information
Technology Act, 2000 (21 of 2000)

Rule 62 of CGST Rules - Form and manner of submission of statement and return

(1) Every registered person paying tax under section 10 or paying tax by availing the benefit
of notification of the Government of India, Ministry of Finance, Department of Revenue
No. 02/2019– Central Tax (Rate), dated the 7th March, 2019, published in the Gazette of
India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R.189 (E), dated
the 7th March, 2019 shall-

(i) furnish a statement, every quarter or, as the case may be, part thereof,
containing the details of payment of self-assessed tax in FORM GST CMP-08, till
the 18th day of the month succeeding such quarter; and
(ii) furnish a return for every financial year or, as the case may be, part thereof
in FORM GSTR-4, till the thirtieth day of April following the end of such financial
year, electronically through the common portal, either directly or through a
Facilitation Centre notified by the Commissioner.

(2) Every registered person furnishing the statement under sub-rule (1) shall discharge his
liability towards tax or interest payable under the Act or the provisions of this Chapter by
debiting the electronic cash ledger.

(3) The return furnished under sub-rule (1) shall include the-
(a) invoice wise inter-State and intra-State inward supplies received from registered
and un-registered persons; and
(b) consolidated details of outward supplies made.

(4) A registered person who has opted to pay tax under section 10 or by availing the benefit
of notification of the Government of India, Ministry of Finance, Department of Revenue
No. 02/2019– Central Tax (Rate), dated the 7th March, 2019, published in the Gazette of
India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R.189 (E), dated
the 7th March, 2019 from the beginning of a financial year shall, where required, furnish
the details of outward and inward supplies and return under rules 59, 60 and 61 relating
to the period during which the person was liable to furnish such details and returns till
the due date of furnishing the return for the month of September of the succeeding
financial year or furnishing of annual return of the preceding financial year, whichever is
earlier.

Explanation.– For the purposes of this sub-rule, it is hereby declared that the person
shall not be eligible to avail input tax credit on receipt of invoices or debit notes from the
supplier for the period prior to his opting for the composition scheme or opting for paying
tax by availing the benefit of notification of the Government of India, Ministry of Finance,
Department of Revenue No. 02/2019– Central Tax (Rate), dated the 7th March, 2019,
published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide
number G.S.R.189 (E), dated the 7th March, 2019.
 Page 34 of 371

(5) A registered person opting to withdraw from the composition scheme at his own motion
or where option is withdrawn at the instance of the proper officer shall, where required,
furnish a statement in FORM GST CMP-08 for the period for which he has paid tax
under the composition scheme till the 18th day of the month succeeding the quarter in
which the date of withdrawal falls and furnish a return in FORM GSTR-4 for the said
period till the thirtieth day of April following the end of the financial year during which
such withdrawal falls.

(6) A registered person who ceases to avail the benefit of notification of the Government of
India, Ministry of Finance, Department of Revenue No. 02/2019– Central Tax (Rate),
dated the 7th March, 2019, published in the Gazette of India, Extraordinary, Part II,
Section 3, Sub-section (i) vide number G.S.R.189 (E) , dated the 7th March, 2019, shall,
where required, furnish a statement in FORM GST CMP-08 for the period for which he
has paid tax by availing the benefit under the said notification till the 18th day of the
month succeeding the quarter in which the date of cessation takes place and furnish a
return in FORM GSTR - 4 for the said period till the thirtieth day of April following the end
of the financial year during which such cessation happens.

FAQ ON COMPOSITION SCHEME

Q1. 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 the
preceding financial year. The benefit of composition scheme can be availed up to the
turnover of Rs. 50 Lakhs in current financial year.

Q2. What are the rates of tax for composition scheme?

Ans. There are different rates for different sectors. In normal cases of supplier of goods (i.e.
traders), the composition rate is 0.5 % of the turnover in a State or Union territory. If the
person opting for composition scheme is manufacturer, then the rate is 1% of the turnover in
a State or Union territory. In case of restaurant services, it is 2.5% of the turnover in a State
or Union territory. These rates are under one Act, and same rate would be applicable in the
other Act also. So, effectively, the composition rates (combined rate under CGST and
SGST/UTGST) are 1%, 2% and 5% for normal supplier, manufacturer and restaurant service
respectively.

Q3. A person availing composition scheme during a financial year crosses the turnover of
Rs.50 Lakhs during the course of the year i.e. say he crosses the turnover of Rs.50
Lakhs in December? Will he be allowed to pay tax under composition scheme for the
remainder of the year i.e. till 31st March?
Ans. No. The option availed shall lapse from the day on which his aggregate turnover during the
financial year exceeds Rs.50 Lakhs.

Q4. Will a taxable person, having multiple registrations, be eligible to opt for composition
scheme only for a few of registrations?
Ans. All registered persons having the same Permanent Account Number (PAN) have to opt for
composition scheme. If one registered person opts for normal scheme, others become
ineligible for composition scheme.

Q5. Can composition scheme be availed of by a manufacturer and a service supplier?

Ans. Yes, a manufacturer can opt for composition scheme generally. However, a manufacturer of
goods, which would be notified on the recommendations of the GST Council, cannot opt for
this scheme. This scheme is not available for services sector, except restaurants.
 Page 35 of 371

Q6. Who are not eligible to opt for composition scheme?

Ans. Broadly, five categories of registered person are not eligible to opt for the composition
scheme. These are:

(i) supplier of services other than supplier of restaurant service;

(ii) supplier of goods which are not taxable under the CGST Act/SGST Act/UTGST Act.
(iii) an inter-State supplier of goods;
(iv) person supplying goods through an electronic commerce operator;
(v) manufacturer of certain notified goods.

Q.7 Can the registered person under composition scheme claim input tax credit?
Ans. No, registered person under composition scheme is not eligible to claim input tax credit.

Q8. Can the customer who buys from a registered person who is under the composition
scheme claim composition tax as input tax credit?
Ans. No, customer who buys goods from registered person who is under composition scheme is
not eligible for composition input tax credit because a composition scheme supplier cannot
issue a tax invoice.

Q9. Can composition tax be collected from customers?

Ans. No, the registered person under composition scheme is not permitted to collect tax. It means
that a composition scheme supplier cannot issue a tax invoice.

Q10. How to compute ‘aggregate turnover’ to determine eligibility for composition scheme?
Ans. The methodology to compute aggregate turnover is given in Section 2(6). Accordingly,
‘aggregate turnover’ means value of all outward supplies (taxable supplies +exempt supplies
+exports + inter-state supplies) of a person having the same PAN and it excludes taxes
levied under central tax (CGST), State tax (SGST), Union territory tax (UTGST), integrated
tax(IGST) and compensation cess. Also, the value of inward supplies on which tax is payable
under reverse charge is not taken into account for calculation of ‘aggregate turnover’.

Q11. What are the penal consequences if a person opts for the composition scheme in
violation of the conditions?
Ans. If a taxable person has paid tax under the composition scheme though he was not eligible for
the scheme then the person would be liable to penalty and the provisions of section 73 or 74
shall be applicable for determination of tax and penalty.

Q12. A person paying tax under compounding scheme crosses the compounding threshold
and becomes a regular taxable person. Can he avail ITC and if so from what date?
Ans. He can avail ITC in respect of inputs held in stock and inputs contained in semi-finished or
finished goods held in stock and on capital goods (reduced by prescribed percentage points)
on the day immediately preceding the date from which he ceases to be eligible for
composition scheme. The manner of calculation of eligible credit would be provided by rules.

Notification No. 2/2019- Union Territory Tax (Rate)

New Delhi, the 7th March, 2019
G.S.R. 191 (E).- In exercise of the powers conferred by sub-section (1) of section 7, sub-section
(1) of section 8, clause (v) of section 21 of the Union Territory Goods and Services Tax Act, 2017
(14 of 2017), read with sub-section (1) of section 16 of the Central Goods and Services Tax Act,
2017 (12 of 2017) (herein after referred to as the “said Act”), the Central Government, on the
recommendations of the Council, and on being satisfied that it is necessary in the public interest
so to do, hereby notifies that the Union Territory Tax, on the intra-State supply of goods or
services or both as specified in column (1) of the Table below, shall be levied at the rate

specified in the corresponding entry in column (2), subject to the conditions as specified in the
corresponding entry in column (3) of the said table below, namely:-
Description of supply
(1)
First supplies of goods or services or
both upto an aggregate turnover of
fifty lakh rupees made on or after the
1st day of April in any financial year,
by a registered person.
Page 36 of 371
Table
Rate (per Conditions
cent.)
(2) (3)
3 1.Supplies are made by a registered person, -
(i) whose aggregate turnover in the preceding
financial year was fifty lakh rupees or below;
(ii) who is not eligible to pay tax under sub-
section (1) of section 10 of the said Act;
(iii) who is not engaged in making any supply
which is not leviable to tax under the said Act;
(iv) who is not engaged in making any inter-
State outward supply;
(v) who is neither a casual taxable person nor
a non-resident taxable person;
(vi) who is not engaged in making any supply
through an electronic commerce operator who
is required to collect tax at source under
section 52; and
(vii) who is not engaged in making supplies of
the goods, the description of which is specified
in column (3) of the Annexure below and falling
under the tariff item, sub-heading, heading or
Chapter, as the case may be, as specified in
the corresponding entry in column (2) of the
said annexure.
2.Where more than one registered persons are
having the same Permanent Account Number,
issued under the Income Tax Act, 1961(43 of
1961), union territory tax on supplies by all
such registered persons is paid at the rate
specified in column (2) under this notification.
3. The registered person shall not collect any
tax from the recipient on supplies made by him
nor shall he be entitled to any credit of input
tax.
4. The registered person shall issue, instead of
tax invoice, a bill of supply as referred to
in clause (c) of sub-section (3) of section 31 of
the said Act with particulars as prescribed
in rule 49 of Central Goods and Services Tax
Rules.
5. The registered person shall mention the
following words at the top of the bill of supply,
namely: - ‘taxable person paying tax in terms
of notification No. 2/2019- Union Territory Tax
(Rate) dated 07.03.2019, not eligible to collect
tax on supplies’.
6. The registered person opting to pay union
territory tax at the rate of three percent under
 Page 37 of 371

this notification shall be liable to pay union

territory tax at the rate of three percent on all
outward supplies specified in column (1)
notwithstanding any other notification issued
under sub-section (1) of section 9 or
under section 11of said Act.
7. The registered person opting to pay union
territory tax at the rate of three percent under
this notification shall be liable to pay union
territory tax on inward supplies on which he is
liable to pay tax under sub-section (3) or, as
the case may be, under sub-section (4) of
section 9 of said Act at the applicable rates.
8. Where any registered person who has
availed of input tax credit opts to pay tax under
this notification, he shall pay an amount, by
way of debit in the electronic credit ledger or
electronic cash ledger, equivalent to the credit
of input tax in respect of inputs held in stock
and inputs contained in semi-finished or
finished goods held in stock and on capital
goods as if the supply made under this
notification attracts the provisions of section
18(4) of the said Act and the rules made there-
under and after payment of such amount, the
balance of input tax credit, if any, lying in his
electronic credit ledger shall lapse.
Explanation.-For the purposes of this
notification, the expression “first supplies of
goods or services or both” shall, for the
purposes of determining eligibility of a person
to pay tax under this notification, include the
supplies from the first day of April of a financial
year to the date from which he becomes liable
for registration under the said Act but for the
purpose of determination of tax payable under
this notification shall not include the supplies
from the first day of April of a financial year to
the date from which he becomes liable for
registration under the Act.
ANNEXURE
Sl. No. Tariff item, sub-heading, Description
heading or Chapter
(1) (2) (3)
1 2105 00 00 Ice cream and other edible ice, whether or not containing
cocoa.
2 2106 90 20 Pan masala
3 24 All goods, i.e. Tobacco and manufactured tobacco
substitutes
 Page 38 of 371

2. In computing aggregate turnover in order to determine eligibility of a registered person to pay

union territory tax at the rate of three percent under this notification, value of supply of exempt
services by way of extending deposits, loans or advances in so far as the consideration is
represented by way of interest or discount, shall not be taken into account.
3. Explanation. –For the purpose of this notification, -
(i) “tariff item”, “sub-heading”, “heading” and “chapter” shall mean respectively a tariff item, sub-
heading, heading and chapters specified in the First Schedule to the Customs Tariff Act, 1975
(51 of 1975).
(ii) the rules for the interpretation of the First Schedule to the said Customs Tariff Act, 1975 (51
of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the
First Schedule shall, so far as may be, apply to the interpretation of this notification.
(iii) the Central Goods and Services Tax Rules, 2017, as applicable to a person paying tax
under section 10 of the said Act shall, mutatis mutandis, apply to a person paying tax under this
notification.
4. This notification shall come into force on the 1st day of April, 2019.

OUR COMMENTS ON COMPOSITION LEVY UDNER GST

 The composition is an alternative method of levy of tax for taxpayers whose aggregate
turnover of supply of goods or/and supply of Works Contract Service/restaurant/canteen
service in the preceding financial year is not exceeding Rs.1.5 Cr., can opt. for
Composition Scheme under Sec.10 of CGST Act, 2017 and can pay concessional GST
viz. –

2% For manufacturers
5% For Works Contract and Restaurant/Canteen service
1% For traders

 The composition scheme is not applicable for inter-state supplies (out of State)
 The aggregate turnover includes value of exempted/export goods or services but does
not include value of inward supplies on which tax is payable on Reverse Charge.
 The Composition Supplier has to register himself under Sec.22 as Composite Taxpayer
 The composition scheme is not applicable to the service except restaurant/canteen and
works contract services. However as a special concession the Government has provided
concessional rate of 6% GST for those persons who are supplying both services and
goods or only service if his aggregate turnover in the preceding financial year has not
exceeding Rs.50 lakhs, such person also can get himself registered as composite
taxpayer. Refer Notification No.2/2019-CT(Rate), dt.07.03.2019.
 The person having multiple places of business within a State or Union Territory seeking
separate registration for each place of business are not entitled for availing composition
scheme if he is paying regular GST from another place.
 The option availed under this scheme shall lapse with effect from the day on which the
aggregate turnover during a financial year exceeds the prescribed limit.
 Composition supplier can’t take any credit on goods/services. He cannot recover the
GST payable by him from his customer and he is under obligation to issue Bill of Supply
and in that Bill of Supply he cannot charge any GST.
 However, such composite supplier has to pay GST at applicable rates on the inward
supplies of goods/services if they fall under RCM provisions under Sec.9(3) & 9(4) of
CGST Act, 2017 and he cannot take credit of the same.
 Page 39 of 371

CONCEPT OF SUPPLY UNDER GST

TIME OF SUPPLY/PLACE OF SUPPLY/COMPOSITE SUPPLY/MIX SUPPLY OF GOODS &

SERVICES

Sec.2 of CGST Act - Definitions

(30) “composite supply” means a supply made by a taxable person to a recipient

consisting of two or more taxable supplies of goods or services or both, or any
combination thereof, which are naturally bundled and supplied in conjunction with each
other in the ordinary course of business, one of which is a principal supply;

Illustration.— Where goods are packed and transported with insurance, the supply of
goods, packing materials, transport and insurance is a composite supply and supply of
goods is a principal supply;

(31) “consideration” in relation to the supply of goods or services or both includes––

(a) any payment made or to be made, whether in money or otherwise, in respect of,
in response to, or for the inducement of, the supply of goods or services or both,
whether by the recipient or by any other person but shall not include any subsidy
given by the Central Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in response to, or for
the inducement of, the supply of goods or services or both, whether by the
recipient or by any other person but shall not include any subsidy given by the
Central Government or a State Government:

Provided that a deposit given in respect of the supply of goods or services or both shall
not be considered as payment made for such supply unless the supplier applies such
deposit as consideration for the said supply;

(32) “continuous supply of goods” means a supply of goods which is provided, or agreed
to be provided, continuously or on recurrent basis, under a contract, whether or not by
means of a wire, cable, pipeline or other conduit, and for which the supplier invoices the
recipient on a regular or periodic basis and includes supply of such goods as the
Government may, subject to such conditions, as it may, by notification, specify;

(33) “continuous supply of services” means a supply of services which is provided, or

agreed to be provided, continuously or on recurrent basis, under a contract, for a period
exceeding three months with periodic payment obligations and includes supply of such
services as the Government may, subject to such conditions, as it may, by notification,
specify;

(47) “exempt supply” means supply of any goods or services or both which attracts nil rate
of tax or which may be wholly exempt from tax under section 11, or under section 6 of
the Integrated Goods and Services Tax Act, and includes non-taxable supply;

(64) “intra-State supply of goods” shall have the same meaning as assigned to it in section
8 of the Integrated Goods and Services Tax Act;

(65) “intra-State supply of services” shall have the same meaning as assigned to it in
section 8 of the Integrated Goods and Services Tax Act;
 Page 40 of 371

(67) “inward supply” in relation to a person, shall mean receipt of goods or services or both
whether by purchase, acquisition or any other means with or without consideration;

(70) “location of the recipient of services” means,—

(a) where a supply is received at a place of business for which the registration has been
obtained, the location of such place of business;
(b) where a supply is received at a place other than the place of business for which
registration has been obtained (a fixed establishment elsewhere), the location of
such fixed establishment;
(c) where a supply is received at more than one establishment, whether the place
of business or fixed establishment, the location of the establishment most directly
concerned with the receipt of the supply; and
(d) in absence of such places, the location of the usual place of residence of the
recipient;

(71) “location of the supplier of services” means,—

(a) where a supply is made from a place of business for which the registration has been
obtained, the location of such place of business;
(b) where a supply is made from a place other than the place of business for which
registration has been obtained (a fixed establishment elsewhere), the location of
such fixed establishment;
(c) where a supply is made from more than one establishment, whether the place of
business or fixed establishment, the location of the establishment most directly
concerned with the provisions of the supply; and
(d) in absence of such places, the location of the usual place of residence of the
supplier;

(74) “mixed supply” means two or more individual supplies of goods or services, or any
combination thereof, made in conjunction with each other by a taxable person for a
single price where such supply does not constitute a composite supply.

Illustration.— A supply of a package consisting of canned foods, sweets, chocolates,

cakes, dry fruits, aerated drinks and fruit juices when supplied for a
single price is a mixed supply. Each of these items can be supplied separately and is not
dependent on any other. It shall not be a mixed supply if these items are supplied
separately;

(78) “non-taxable supply” means a supply of goods or services or both which is not leviable
to tax under this Act or under the Integrated Goods and Services Tax Act;

(83) “outward supply” in relation to a taxable person, means supply of goods or services or
both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any
other mode, made or agreed to be made by such person in the course or furtherance of
business;

(85) “place of business” includes––

(a) a place from where the business is ordinarily carried on, and includes a
warehouse, a godown or any other place where a taxable person stores his
goods, supplies or receives goods or services or both; or
(b) a place where a taxable person maintains his books of account; or
 Page 41 of 371

(c) a place where a taxable person is engaged in business through an agent, by

whatever name called;

(86) “place of supply” means the place of supply as referred to in Chapter V of the
Integrated Goods and Services Tax Act;

(88) “principal” means a person on whose behalf an agent carries on the business of supply
or receipt of goods or services or both;

(89) “principal place of business” means the place of business specified as the principal
place of business in the certificate of registration;

(90) “principal supply” means the supply of goods or services which constitutes the
predominant element of a composite supply and to which any other supply forming part
of that composite supply is ancillary;

(93) “recipient” of supply of goods or services or both, means—

(a) where a consideration is payable for the supply of goods or services or both, the
person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the person to whom the
goods are delivered or made available, or to whom possession or use of the goods
is given or made available; and
(c) where no consideration is payable for the supply of a service, the person to whom
the service is rendered, and any reference to a person to whom a supply is made
shall be construed as a reference to the recipient of the supply and shall include an
agent acting as such on behalf of the recipient in relation to the goods or services or
both supplied;

(94) “registered person” means a person who is registered under section 25 but does not
include a person having a Unique Identity Number;

(96) “removal’’ in relation to goods, means—

(a) despatch of the goods for delivery by the supplier thereof or by any other person
acting on behalf of such supplier; or
(b) collection of the goods by the recipient thereof or by any other person acting on
behalf of such recipient;

(113) “usual place of residence” means––

(a) in case of an individual, the place where he ordinarily resides;

(b) in other cases, the place where the person is incorporated or otherwise legally
constituted;

Sec.7 of CGST Act - Scope of supply

(1) For the purposes of this Act, the expression “supply” includes––

(a) all forms of supply of goods or services or both such as sale, transfer, barter,
exchange, licence, rental, lease or disposal made or agreed to be made for a
consideration by a person in the course or furtherance of business;
 Page 42 of 371

(b) import of services for a consideration whether or not in the course or furtherance of
business and;
(c) the activities specified in Schedule I, made or agreed to be made without a
consideration

(1A) where certain activities or transactions constitute a supply in accordance with the
provisions of sub-section (1), they shall be treated either as supply of goods or supply of
services as referred to in Schedule II

(2) Notwithstanding anything contained in sub-section (1),––

(a) activities or transactions specified in Schedule III; or

(b) such activities or transactions undertaken by the Central Government, a State
Government or any local authority in which they are engaged as public authorities,
as may be notified by the Government on the recommendations of the Council,

shall be treated neither as a supply of goods nor a supply of services.

(3) Subject to the provisions of sub-sections (1), (1A) and (2), the Government may, on the
recommendations of the Council, specify, by notification, the transactions that are to be
treated as—

(a) a supply of goods and not as a supply of services; or

(b) a supply of services and not as a supply of goods.

SCHEDULE I TO CGST ACT

ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION

1. Permanent transfer or disposal of business assets where input tax credit has been
availed on such assets.

2. Supply of goods or services or both between related persons or between distinct

persons as specified in section 25, when made in the course or furtherance of business:

Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an
employer to an employee shall not be treated as supply of goods or services or both.

3. Supply of goods—

(a) by a principal to his agent where the agent undertakes to supply such goods on
behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on
behalf of the principal.

4. Import of services by a person from a related person or from any of his other
establishments outside India, in the course or furtherance of business.

SCHEDULE II TO CGST ACT

ACTIVITIES OR TRANSACTIONS TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY

OF SERVICES
 Page 43 of 371

1. Transfer

(a) any transfer of the title in goods is a supply of goods;

(b) any transfer of right in goods or of undivided share in goods without the transfer
of title thereof, is a supply of services;
(c) any transfer of title in goods under an agreement which stipulates that property in
goods shall pass at a future date upon payment of full consideration as agreed, is
a supply of goods.

2. Land and Building

(a) any lease, tenancy, easement, licence to occupy land is a supply of services;
(b) any lease or letting out of the building including a commercial, industrial or
residential complex for business or commerce, either wholly or partly, is a supply
of services.

3. Treatment or process

Any treatment or process which is applied to another person's goods is a supply of

services.

4. Transfer of business assets

(a) where goods forming part of the assets of a business are transferred or disposed
of by or under the directions of the person carrying on the business so as no
longer to form part of those assets, whether or not for a consideration, such
transfer or disposal is a supply of goods by the person;
(b) where, by or under the direction of a person carrying on a business, goods held
or used for the purposes of the business are put to any private use or are used,
or made available to any person for use, for any purpose other than a purpose of
the business, whether or not for a consideration, the usage or making available
of such goods is a supply of services;
(c) where any person ceases to be a taxable person, any goods forming part of the
assets of any business carried on by him shall be deemed to be supplied by him
in the course or furtherance of his business immediately before he ceases to be
a taxable person, unless -

(i) the business is transferred as a going concern to another person; or

(ii) the business is carried on by a personal representative who is deemed to
be a taxable person.

5. Supply of services

The following shall be treated as supply of services, namely:—

(a) renting of immovable property;

(b) construction of a complex, building, civil structure or a part thereof, including a
complex or building intended for sale to a buyer, wholly or partly, except where
the entire consideration has been received after issuance of completion
certificate, where required, by the competent authority or after its first occupation,
whichever is earlier.

Explanation.—For the purposes of this clause—

 Page 44 of 371

(1) the expression "competent authority" means the Government or any

authority authorised to issue completion certificate under any law for the
time being in force and in case of non-requirement of such certificate from
such authority, from any of the following, namely:-

(i) an architect registered with the Council of Architecture constituted

under the Architects Act, 1972; or
(ii) a chartered engineer registered with the Institution of Engineers
(India); or
(iii) a licensed surveyor of the respective local body of the city or town
or village or development or planning authority;

(2) the expression "construction" includes additions, alterations,

replacements or remodelling of any existing civil structure;

(c) temporary transfer or permitting the use or enjoyment of any intellectual property
right;
(d) development, design, programming, customisation, adaptation, upgradation,
enhancement, implementation of information technology software;
(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a
situation, or to do an act; and
(f) transfer of the right to use any goods for any purpose (whether or not for a
specified period) for cash, deferred payment or other valuable consideration.

6. Composite supply

The following composite supplies shall be treated as a supply of services, namely:—

(a) works contract as defined in clause (119) of section 2; and
(b) supply, by way of or as part of any service or in any other manner whatsoever, of
goods, being food or any other article for human consumption or any drink (other
than alcoholic liquor for human consumption), where such supply or service is for
cash, deferred payment or other valuable consideration.

7. Supply of Goods

The following shall be treated as supply of goods, namely:-

Supply of goods by any unincorporated association or body of persons to a member

thereof for cash, deferred payment or other valuable consideration.

SCHEDULE III TO CGST ACT

ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF

GOODS NOR A SUPPLY OF SERVICES

1. Services by an employee to the employer in the course of or in relation to his

employment.

2. Services by any court or Tribunal established under any law for the time being in force.

3. (a) the functions performed by the Members of Parliament, Members of State

 Page 45 of 371

Legislature, Members of Panchayats, Members of Municipalities and Members of

other local authorities;
(b) the duties performed by any person who holds any post in pursuance of the
provisions of the Constitution in that capacity; or
(c) the duties performed by any person as a Chairperson or a Member or a Director
in a body established by the Central Government or a State Government or local
authority and who is not deemed as an employee before the commencement of
this clause.

4. Services of funeral, burial, crematorium or mortuary including transportation of the

deceased.

5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

6. Actionable claims, other than lottery, betting and gambling.

7. Supply of goods from a place in the non-taxable territory to another place in the non-
taxable territory without such goods entering into India.

8. (a) Supply of warehoused goods to any person before clearance for home
consumption;
(b) Supply of goods by the consignee to any other person, by endorsement of
documents of title to the goods, after the goods have been dispatched from the
port of origin located outside India but before clearance for home consumption.”;

Explanation.—For the purposes of paragraph 2, the term "court" includes District Court,
High Court and Supreme Court.

Explanation 2.––For the purposes of paragraph 8, the expression “warehoused goods” shall
have the same meaning as assigned to it in the Customs Act, 1962

Sec.8 of CGST Act - Tax liability on composite and mixed supplies

The tax liability on a composite or a mixed supply shall be determined in the following manner,
namely:—

(a) a composite supply comprising two or more supplies, one of which is a principal supply,
shall be treated as a supply of such principal supply; and

(b) a mixed supply comprising two or more supplies shall be treated as a supply of that
particular supply which attracts the highest rate of tax.

Sec.9 of CGST Act - Levy and collection

(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central
goods and services tax on all intra-State supplies of goods or services or both, except on
the supply of alcoholic liquor for human consumption, on the value determined under
section 15 and at such rates, not exceeding twenty per cent., as may be notified by the
Government on the recommendations of the Council and collected in such manner as
may be prescribed and shall be paid by the taxable person.

(2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas and aviation turbine fuel shall be levied with
 Page 46 of 371

effect from such date as may be notified by the Government on the recommendations of
the Council.

(3) The Government may, on the recommendations of the Council, by notification, specify
categories of supply of goods or services or both, the tax on which shall be paid on
reverse charge basis by the recipient of such goods or services or both and all the
provisions of this Act shall apply to such recipient as if he is the person liable for paying
the tax in relation to the supply of such goods or services or both.

(4) The Government may, on the recommendations of the Council, by notification, specify a
class of registered persons who shall, in respect of supply of specified categories of
goods or services or both received from an unregistered supplier, pay the tax on reverse
charge basis as the recipient of such supply of goods or services or both, and all the
provisions of this Act shall apply to such recipient as if he is the person liable for paying
the tax in relation to such supply of goods or services or both.

(5) The Government may, on the recommendations of the Council, by notification, specify
categories of services the tax on intra-State supplies of which shall be paid by the
electronic commerce operator if such services are supplied through it, and all the
provisions of this Act shall apply to such electronic commerce operator as if he is the
supplier liable for paying the tax in relation to the supply of such services:

Provided that where an electronic commerce operator does not have a physical
presence in the taxable territory, any person representing such electronic commerce
operator for any purpose in the taxable territory shall be liable to pay tax:

Provided further that where an electronic commerce operator does not have a physical
presence in the taxable territory and also he does not have a representative in the said
territory, such electronic commerce operator shall appoint a person in the taxable
territory for the purpose of paying tax and such person shall be liable to pay tax.

Sec.12 of CGST Act - Time of supply of goods

(1) The liability to pay tax on goods shall arise at the time of supply, as determined in
accordance with the provisions of this section.

(2) The time of supply of goods shall be the earlier of the following dates, namely:—

(a) the date of issue of invoice by the supplier or the last date on which he is
required, under section 31, to issue the invoice with respect to the supply; or
(b) the date on which the supplier receives the payment with respect to the supply:

Provided that where the supplier of taxable goods receives an amount up to one
thousand rupees in excess of the amount indicated in the tax invoice, the time of supply
to the extent of such excess amount shall, at the option of the said supplier, be the date
of issue of invoice in respect of such excess amount.

Explanation 1.––For the purposes of clauses (a) and (b), “supply” shall be deemed to
have been made to the extent it is covered by the invoice or, as the case may be, the
payment.

Explanation 2.––For the purposes of clause (b), “the date on which the supplier
receives the payment” shall be the date on which the payment is entered in his books of
 Page 47 of 371

account or the date on which the payment is credited to his bank account, whichever is
earlier.

(3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge
basis, the time of supply shall be the earliest of the following dates, namely:—

(a) the date of the receipt of goods; or

(b) the date of payment as entered in the books of account of the recipient or the
date on which the payment is debited in his bank account, whichever is earlier; or
(c) the date immediately following thirty days from the date of issue of invoice or any
other document, by whatever name called, in lieu thereof by the supplier:

Provided that where it is not possible to determine the time of supply under clause (a) or
clause (b) or clause (c), the time of supply shall be the date of entry in the books of
account of the recipient of supply.

(4) In case of supply of vouchers by a supplier, the time of supply shall be—

(a) the date of issue of voucher, if the supply is identifiable at that point; or
(b) the date of redemption of voucher, in all other cases.

(5) Where it is not possible to determine the time of supply under the provisions of sub-
section (2) or sub-section (3) or sub-section (4), the time of supply shall––

(a) in a case where a periodical return has to be filed, be the date on which such
return is to be filed; or
(b) in any other case, be the date on which the tax is paid.

(6) The time of supply to the extent it relates to an addition in the value of supply by way of
interest, late fee or penalty for delayed payment of any consideration shall be the date
on which the supplier receives such addition in value.

Sec.13 of CGST Act - Time of supply of services

(1) The liability to pay tax on services shall arise at the time of supply, as determined in
accordance with the provisions of this section.

(2) The time of supply of services shall be the earliest of the following dates, namely:—

(a) the date of issue of invoice by the supplier, if the invoice is issued within the
period prescribed under section 31 or the date of receipt of payment, whichever
is earlier; or
(b) the date of provision of service, if the invoice is not issued within the period
prescribed under section 31 or the date of receipt of payment, whichever is
earlier; or
(c) the date on which the recipient shows the receipt of services in his books of
account, in a case where the provisions of clause (a) or clause (b) do not apply:

Provided that where the supplier of taxable service receives an amount up to one
thousand rupees in excess of the amount indicated in the tax invoice, the time of supply
to the extent of such excess amount shall, at the option of the said supplier, be the date
of issue of invoice relating to such excess amount.
 Page 48 of 371

Explanation.––For the purposes of clauses (a) and (b)––

(i) the supply shall be deemed to have been made to the extent it is covered by the
invoice or, as the case may be, the payment;
(ii) “the date of receipt of payment” shall be the date on which the payment is
entered in the books of account of the supplier or the date on which the payment
is credited to his bank account, whichever is earlier.

(3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge
basis, the time of supply shall be the earlier of the following dates, namely:––

(a) the date of payment as entered in the books of account of the recipient or the
date on which the payment is debited in his bank account, whichever is earlier; or
(b) the date immediately following sixty days from the date of issue of invoice or any
other document, by whatever name called, in lieu thereof by the supplier:

Provided that where it is not possible to determine the time of supply under clause (a) or
clause (b), the time of supply shall be the date of entry in the books of account of the
recipient of supply:

Provided further that in case of supply by associated enterprises, where the supplier of
service is located outside India, the time of supply shall be the date of entry in the books
of account of the recipient of supply or the date of payment, whichever is earlier.

(4) In case of supply of vouchers by a supplier, the time of supply shall be––

(a) the date of issue of voucher, if the supply is identifiable at that point; or
(b) the date of redemption of voucher, in all other cases.

(5) Where it is not possible to determine the time of supply under the provisions of sub-
section (2) or sub-section (3) or sub-section (4), the time of supply shall––

(a) in a case where a periodical return has to be filed, be the date on which such
return is to be filed; or
(b) in any other case, be the date on which the tax is paid.

(6) The time of supply to the extent it relates to an addition in the value of supply by way of
interest, late fee or penalty for delayed payment of any consideration shall be the date
on which the supplier receives such addition in value.

Sec.14 of CGST Act - Change in rate of tax in respect of supply of goods or services

Notwithstanding anything contained in section 12 or section 13, the time of supply, where there
is a change in the rate of tax in respect of goods or services or both, shall be determined in the
following manner, namely:––

(a) in case the goods or services or both have been supplied before the change in rate of
tax, -
(i) where the invoice for the same has been issued and the payment is also
received after the change in rate of tax, the time of supply shall be the date of
receipt of payment or the date of issue of invoice, whichever is earlier; or
 Page 49 of 371

(ii) where the invoice has been issued prior to the change in rate of tax but payment
is received after the change in rate of tax, the time of supply shall be the date of
issue of invoice; or
(iii) where the payment has been received before the change in rate of tax, but the
invoice for the same is issued after the change in rate of tax, the time of supply
shall be the date of receipt of payment;

(b) in case the goods or services or both have been supplied after the change in rate of tax,-

(i) where the payment is received after the change in rate of tax but the invoice has
been issued prior to the change in rate of tax, the time of supply shall be the date
of receipt of payment; or
(ii) where the invoice has been issued and payment is received before the change in
rate of tax, the time of supply shall be the date of receipt of payment or date of
issue of invoice, whichever is earlier; or
(iii) where the invoice has been issued after the change in rate of tax but the
payment is received before the change in rate of tax, the time of supply shall be
the date of issue of invoice:

Provided that the date of receipt of payment shall be the date of credit in the bank
account if such credit in the bank account is after four working days from the date of
change in the rate of tax.

Explanation.––For the purposes of this section, “the date of receipt of payment” shall be
the date on which the payment is entered in the books of account of the supplier or the
date on which the payment is credited to his bank account, whichever is earlier.

Sec.7 of IGST Act - Inter-State supply

(1) Subject to the provisions of section 10, supply of goods, where the location of the
supplier and the place of supply are in––

(a) two different States;

(b) two different Union territories; or
(c) a State and a Union territory,

shall be treated as a supply of goods in the course of inter-State trade or commerce.

(2) Supply of goods imported into the territory of India, till they cross the customs frontiers of
India, shall be treated to be a supply of goods in the course of inter-State trade or
commerce.

(3) Subject to the provisions of section 12, supply of services, where the location of the
supplier and the place of supply are in––

(a) two different States;

(b) two different Union territories; or
(c) a State and a Union territory,

shall be treated as a supply of services in the course of inter-State trade or commerce.

(4) Supply of services imported into the territory of India shall be treated to be a supply of
services in the course of inter-State trade or commerce.
 Page 50 of 371

(5) Supply of goods or services or both,––

(a) when the supplier is located in India and the place of supply is outside India;
(b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or
(c) in the taxable territory, not being an intra-State supply and not covered
elsewhere in this section,

shall be treated to be a supply of goods or services or both in the course of inter- State
trade or commerce.

Sec.8 of IGST Act - Intra-State supply

(1) Subject to the provisions of section 10, supply of goods where the location of the
supplier and the place of supply of goods are in the same State or same Union territory
shall be treated as intra-State supply:

Provided that the following supply of goods shall not be treated as intra- State supply,
namely:––
(i) supply of goods to or by a Special Economic Zone developer or a Special
Economic Zone unit;
(ii) goods imported into the territory of India till they cross the customs frontiers of
India; or
(iii) supplies made to a tourist referred to in section 15.

(2) Subject to the provisions of section 12, supply of services where the location of the
supplier and the place of supply of services are in the same State or same Union
territory shall be treated as intra-State supply:

Provided that the intra-State supply of services shall not include supply of services to or
by a Special Economic Zone developer or a Special Economic Zone unit.

Explanation 1.–For the purposes of this Act, where a person has,–

(i) an establishment in India and any other establishment outside India;

(ii) an establishment in a State or Union territory and any other establishment
outside that State or Union territory; or
(iii) an establishment in a State or Union territory and any other establishment
registered within that State or Union territory,

then such establishments shall be treated as establishments of distinct persons.

Explanation 2.–A person carrying on a business through a branch or an agency or a

representational office in any territory shall be treated as having an establishment in that
territory.

Sec.9 of IGST Act- Supplies in territorial waters

Notwithstanding anything contained in this Act,–

(a) where the location of the supplier is in the territorial waters, the location of such
supplier; or
(b) where the place of supply is in the territorial waters, the place of supply,
 Page 51 of 371

shall, for the purposes of this Act, be deemed to be in the coastal State or Union territory
where the nearest point of the appropriate baseline is located.

Sec.10 of IGST Act - Place of supply of goods other than supply of goods imported into,
or exported from India.

(1) The place of supply of goods, other than supply of goods imported into, or exported from
India, shall be as under,––

(a) where the supply involves movement of goods, whether by the supplier or the
recipient or by any other person, the place of supply of such goods shall be the
location of the goods at the time at which the movement of goods terminates for
delivery to the recipient;
(b) where the goods are delivered by the supplier to a recipient or any other person
on the direction of a third person, whether acting as an agent or otherwise,
before or during movement of goods, either by way of transfer of documents of
title to the goods or otherwise, it shall be deemed that the said third person has
received the goods and the place of supply of such goods shall be the principal
place of business of such person;
(c) where the supply does not involve movement of goods, whether by the supplier
or the recipient, the place of supply shall be the location of such goods at the
time of the delivery to the recipient;
(d) where the goods are assembled or installed at site, the place of supply shall be
the place of such installation or assembly;
(e) where the goods are supplied on board a conveyance, including a vessel, an
aircraft, a train or a motor vehicle, the place of supply shall be the location at
which such goods are taken on board.

(2) Where the place of supply of goods cannot be determined, the place of supply shall be
determined in such manner as may be prescribed.

Sec.12 of IGST Act - Place of supply of services where location of supplier and recipient
is in India

(1) The provisions of this section shall apply to determine the place of supply of services
where the location of supplier of services and the location of the recipient of services is
in India.

(2) The place of supply of services, except the services specified in sub-sections (3) to
(14),–

(a) made to a registered person shall be the location of such person;

(b) made to any person other than a registered person shall be,–
(i) the location of the recipient where the address on record exists; and
(ii) the location of the supplier of services in other cases.

(3) The place of supply of services,–

(a) directly in relation to an immovable property, including services provided by

architects, interior decorators, surveyors, engineers and other related experts or
estate agents, any service provided by way of grant of rights to use immovable
property or for carrying out or co-ordination of construction work; or
 Page 52 of 371

(b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club
or campsite, by whatever name called, and including a house boat or any other
vessel; or
(c) by way of accommodation in any immovable property for organising any
marriage or reception or matters related thereto, official, social, cultural, religious
or business function including services provided in relation to such function at
such property; or
(d) any services ancillary to the services referred to in clauses (a), (b) and (c),

shall be the location at which the immovable property or boat or vessel, as the case may
be, is located or intended to be located:

Provided that if the location of the immovable property or boat or vessel is located or
intended to be located outside India, the place of supply shall be the location of the
recipient.

Explanation.––Where the immovable property or boat or vessel is located in more than

one State or Union territory, the supply of services shall be treated as made in each of
the respective States or Union territories, in proportion 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 or agreement, on such other basis as may
be prescribed.

(4) The place of supply of restaurant and catering services, personal grooming, fitness,
beauty treatment, health service including cosmetic and plastic surgery shall be the
location where the services are actually performed.

(5) The place of supply of services in relation to training and performance appraisal to,––

(a) a registered person, shall be the location of such person;

(b) a person other than a registered person, shall be the location where the services
are actually performed.

(6) The place of supply of services provided by way of admission to a cultural, artistic,
sporting, scientific, educational, entertainment event or amusement park or any other
place and services ancillary thereto, shall be the place where the event is actually held
or where the park or such other place is located.

(7) The place of supply of services provided by way of,—

(a) organisation of a cultural, artistic, sporting, scientific, educational or

entertainment event including supply of services in relation to a conference, fair,
exhibition, celebration or similar events; or
(b) services ancillary to organisation of any of the events or services referred to in
clause (a), or assigning of sponsorship to such events,–

(i) to a registered person, shall be the location of such person;

(ii) to a person other than a registered person, shall be the place where the
event is actually held and if the event is held outside India, the place of
supply shall be the location of the recipient.

Explanation.– Where the event is held in more than one State or Union territory and a
consolidated amount is charged for supply of services relating to such event, the place
 Page 53 of 371

of supply of such services shall be taken as being in each of the respective States or
Union territories in proportion 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 or agreement, on such other basis as may be prescribed.

(8) The place of supply of services by way of transportation of goods, including by mail or
courier to,––

(a) a registered person, shall be the location of such person;

(b) a person other than a registered person, shall be the location at which such
goods are handed over for their transportation.

Provided that where the transportation of goods is to a place outside India, the place of
supply shall be the place of destination of such goods.

(9) The place of supply of passenger transportation service to,—

(a) a registered person, shall be the location of such person;

(b) a person other than a registered person, shall be the place where the passenger
embarks on the conveyance for a continuous journey:

Provided that where the right to passage is given for future use and the point of
embarkation is not known at the time of issue of right to passage, the place of supply of
such service shall be determined in accordance with the provisions of
sub-section (2).

Explanation.––For the purposes of this sub-section, the return journey shall be treated
as a separate journey, even if the right to passage for onward and return journey is
issued at the same time.

(10) The place of supply of services on board a conveyance, including a vessel, an aircraft, a
train or a motor vehicle, shall be the location of the first scheduled point of departure of
that conveyance for the journey.

(11) The place of supply of telecommunication services including data transfer, broadcasting,
cable and direct to home television services to any person shall,—

(a) in case of services by way of fixed telecommunication line, leased circuits,

internet leased circuit, cable or dish antenna, be the location where the
telecommunication line, leased circuit or cable connection or dish antenna is
installed for receipt of services;
(b) in case of mobile connection for telecommunication and internet services
provided on post-paid basis, be the location of billing address of the recipient of
services on the record of the supplier of services;
(c) in cases where mobile connection for telecommunication, internet service and
direct to home television services are provided on pre-payment basis through a
voucher or any other means,–

(i) through a selling agent or a re-seller or a distributor of subscriber identity

module card or re-charge voucher, be the address of the selling agent or
re-seller or distributor as per the record of the supplier at the time of
supply; or
 Page 54 of 371

(ii) by any person to the final subscriber, be the location where such
prepayment is received or such vouchers are sold;

(d) in other cases, be the address of the recipient as per the records of the supplier
of services and where such address is not available, the place of supply shall be
location of the supplier of services:

Provided that where the address of the recipient as per the records of the supplier of
services is not available, the place of supply shall be location of the supplier of services:

Provided further that if such pre-paid service is availed or the recharge is made through
internet banking or other electronic mode of payment, the location of the recipient of
services on the record of the supplier of services shall be the place of supply of such
services.

Explanation.––Where the leased circuit is installed in more than one State or Union
territory and a consolidated amount is charged for supply of services relating to such
circuit, the place of supply of such services shall be taken as being in each of the
respective States or Union territories in proportion 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 or agreement, on such other basis as may be
prescribed.

(12) The place of supply of banking and other financial services, including stock broking
services to any person shall be the location of the recipient of services on the records of
the supplier of services:

Provided that if the location of recipient of services is not on the records of the supplier,
the place of supply shall be the location of the supplier of services.

(13) The place of supply of insurance services shall,–

(a) to a registered person, be the location of such person;

(b) to a person other than a registered person, be the location of the recipient of
services on the records of the supplier of services.

(14) The place of supply of advertisement services to the Central Government, a State
Government, a statutory body or a local authority meant for the States or Union
territories identified in the contract or agreement shall be taken as being in each of such
States or Union territories and the value of such supplies specific to each State or Union
territory shall be in proportion to the amount attributable to services provided by way of
dissemination in the respective States or Union territories as may be determined in
terms of the contract or agreement entered into in this regard or, in the absence of such
contract or agreement, on such other basis as may be prescribed.

FAQ - SCOPE/PLACE OF SUPPLY OF GOODS & SERVICES

Q1. What is the taxable event under GST?

Ans. The taxable event under GST shall be the supply of goods or services or both 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’.
 Page 55 of 371

Q2. What is the scope of ‘supply’ under the GST law?

Ans. The term ‘supply’ is wide in its import covers all forms of supply of goods or services or both
that includes sale, transfer, barter, exchange, license, rental, lease or disposal made or
agreed to be made for a consideration by a person in the course or furtherance of business.
It also includes import of service. The model GST law also provides for including certain
transactions made without consideration within the scope of supply.

Q3. What is a taxable supply?

Ans. A ‘taxable supply’ means a supply of goods or services or both which is chargeable to goods
and services tax under the GST Act.

Q4. What are the necessary elements that constitute supply under CGST/SGST Act?
Ans. In order to constitute a ‘supply’, the following elements are required to be satisfied, i.e.-
(i) the activity involves supply of goods or services or both;
(ii) the supply is for a consideration unless otherwise specifically provided for;
(iii) the supply is made in the course or furtherance of business;
(iv) the supply is made in the taxable territory;
(i) the supply is a taxable supply; and
(ii) the supply is made by a taxable person.

Q5. 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 import of services for a consideration whether or
not in the course or furtherance of business (Section 7(1) (b)) or supplies made without
consideration, specified under Schedule-I of CGST /SGST Act, where one or more
ingredients specified in answer to question no.4 are not satisfied, it shall still be treated as
supply for levy of GST.

Q6. Import of Goods is conspicuous by its absence in Section 7. Why?

Ans. Import 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 under the Customs
Tariff Act, 1975.

Q7. Are self-supplies taxable under GST?

Ans. Inter-state self-supplies such as stock transfers, branch transfers or consignment sales shall
be taxable under IGST even though such transactions may not involve payment of
consideration. Every supplier is liable to register under the GST law in the State or Union
territory from where he makes a taxable supply of goods or services or both in terms of
Section 22 of the model GST law. However, intra-state self-supplies are not taxable subject
to not opting for registration as business vertical.

Q8. Whether transfer of title and/or possession is necessary for a transaction to constitute
supply of goods?
Ans. Title as well as possession both have to be transferred for a transaction to be considered as
a supply of goods. In case title is not transferred, the transaction would be treated as supply
of service in terms of Schedule II (1) (b). In some cases, possession may be transferred
immediately but title may be transferred at a future date like in case of sale on approval basis
or hire purchase arrangement. Such transactions will also be termed as supply of goods.

Q9. What do you mean by “supply made in the course or furtherance of business”?
Ans. “Business” is defined under Section 2(17) include any trade, commerce, manufacture,
profession, vocation etc. whether or not undertaken for a pecuniary benefit. Business also
includes any activity or transaction which is incidental or ancillary to the aforementioned
listed activities. In addition, any activity undertaken by the Central Govt. or a State Govt. or
any local authority in which they are engaged as public authority shall also be construed as
 Page 56 of 371

business. From the above, it may be noted that any activity undertaken included in the
definition for furtherance or promoting of a business could constitute a supply under GST
law.

Q10. 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 CGST/SGST Act? 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.

Q11. A dealer of air-conditioners permanently transfers an air conditioner from his stock in
trade, for personal use at his residence. Will the transaction constitute a supply?
Ans. Yes. As per Sl. No.1 of Schedule-I, permanent transfer or disposal of business assets where
input tax credit has been availed on such assets shall constitute a supply under GST even
where no consideration is involved.

Q12. Whether provision of service or goods by a club or association or society to its

members will be treated as supply or not?
Ans. Yes. Provision of facilities by a club, association, society or any such body to its members
shall be treated as supply. This is included in the definition of ‘business’ in section 2(17) of
CGST/SGST Act.

Q13. What are the different types of supplies under the GST law?
Ans. (i) Taxable and exempt supplies. (ii) Inter-State and Intra-State supplies, (iii) Composite and
mixed supplies and (iv) Zero rated supplies.

Q14. What are inter-state supplies and intra-state supplies?

Ans. Inter-state and intra-state supplies have specifically been defined in Section 7(1), 7(2) and
8(1), 8(2) of the IGST Act respectively. Broadly, where the location of the supplier and the
place of supply are in same state it will be intra-state and where it is in different states it will
be inter-state supplies.

Q15. Whether transfer of right to use goods will be treated as supply of goods 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 CGST/SGST Act.

Q16. Whether Works contracts and Catering services will be treated as supply of goods or
supply of services? Why?
Ans. Works contracts and catering services shall be treated as supply of services as both are
specified under Sl. No. 6 (a) and (b) in Schedule-II of the model GST law.

Q17. Whether supply of software would be treated as supply of goods or supply of services
under GST law?
Ans. Development, design, programming, customization, adaptation, upgradation, enhancement,
implementation of information technology software shall be treated as supply of services as
listed in Sl. No. 5 (2)(d) of Schedule –II of the model GST law.

Q18. 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.

Q19. What is a Composite Supply under CGST/ SGST/UTGST Act?

 Page 57 of 371

Ans. Composite Supply means a supply made by a taxable person to a recipient comprising two
or more supplies of goods or services, or any combination thereof, which are naturally
bundled and supplied in conjunction with each other in the ordinary course of business, one
of which is a principal supply. For example, where goods are packed and transported with
insurance, the supply of goods, packing materials, transport and insurance is a composite
supply and supply of goods is the principal supply.

Q20. How will tax liability on a composite supply be determined under GST?
Ans. A composite supply comprising two or more supplies, one of which is a principal supply, shall
be treated as a supply of such principal supply.

Q21. What is a mixed supply?

Ans. Mixed Supply means two or more individual supplies of goods or services or any
combination thereof, made in conjunction with each other by a taxable person for a single
price where such supply does not constitute a composite supply. For example, a supply of
package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink and
fruit juice when supplied for a single price is a mixed supply. Each of these items can be
supplied separately and it is not dependent on any other. It shall not be a mixed supply if
these items are supplied separately.

Q22. How will tax liability on a mixed supply be determined under GST?
Ans. A mixed supply comprising two or more supplies shall be treated as supply of that particular
supply which attracts the highest rate of tax.

Q23. Are there any activities which are treated as neither a supply of goods nor a supply of
services?
Ans. Yes. Schedule-III of the model GST law lists certain activities such as (i) services by an
employee to the employer in the course of or in relation to his employment, (ii) services by
any Court or Tribunal established under any law, (iii) functions performed by members of
Parliament, State Legislatures, members of the local authorities, Constitutional functionaries
(iv) services of funeral, burial, crematorium or mortuary and (v) sale of land and (vi),
actionable claims other than lottery, betting and gambling shall be treated neither a supply of
goods or supply of services.

Q24. What is meant by zero rated supply under GST?

Ans. Zero rated supply means export of goods and/or services or supply of goods and/or services
to a SEZ developer or a SEZ Unit.

Q25. Will import of services without consideration be taxable under GST?

Ans. As a general principle, import of services without consideration will not be considered as
supply under GST in terms of Section 7. However, import of services by a taxable person
from a related person or from any of his other establishments outside India, in the course or
furtherance of business, even without consideration will be treated as supply in terms of Sl.
No.4 of Schedule I.

FAQ on Time of Supply of Goods/Services

Q1. 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 CGST/SGST Act provides separate time
of supply for goods and services.

Q2. When does the liability to pay GST arise in respect of supply of goods and Services?
Ans. Section12 & 13 of the CGST/SGST Act provides for time of supply of goods. The time of
supply of goods shall be the earlier of the following namely,
 Page 58 of 371

(i) the date of issue of invoice by the supplier or the last date on which he is required
under Section 31, to issue the invoice with respect to the supply; or
(ii) the date on which the supplier receives the payment with respect to the supply.

Q3. What is time of supply in case of supply of vouchers in respect of goods and
services?
Ans. The time of supply of voucher in respect of goods and services shall be;

a) the date of issue of voucher, if the supply is identifiable at that point; or

b) the date of redemption of voucher in all other cases.

Q4. Where it is not possible to determine the time of supply in terms of sub-section 2, 3, 4
of Section 12 or that of Section 13 of CGST/SGST Act, how will time of supply be
determined?
Ans. There is a residual entry in Section 12(5) as well as 13 (5) which says 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 actually paid.

Q5. What does “date of receipt of payment” mean?

Ans. It is the earliest of the date on which the payment is entered in the books of accounts of the
supplier or the date on which the payment is credited to his bank account.

Q6. 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 to the extent it is covered by the invoice
or the part payment.

Q9. What is the time of supply applicable with regard to addition in the value by way of
interest, late fee or penalty or any delayed payment of consideration?
Ans. The time of supply with regard to an addition in value on account of interest, late fee or
penalty or delayed consideration shall be the date on which the supplier received such
additional consideration.

Q10. Is there any change in time of supply, where supply is completed prior to or after
change in rate of tax?
Ans. Yes. In such cases provisions of Section 14 will apply.

Q11. What is the time of supply, where supply is completed prior to change in rate of tax?
Ans. In such cases time of supply will be

(i) where the invoice for the same has been issued and the payment is also received
after the change in rate of tax, the time of supply shall be the date of receipt of
payment or the date of issue of invoice, whichever is earlier; or
(ii) where the invoice has been issued prior to change in rate of tax but the payment is
received after the change in rate of tax, the time of supply shall be the date of issue
of invoice; or
(iii) where the payment is received before the change in rate of tax, but the invoice for
the same has been issued after the change in rate of tax, the time of supply shall be
the date of receipt of payment;

Q12. What is the time of supply, where supply is completed after to change in rate of tax?
Ans. In such cases time of supply will be
 Page 59 of 371

(i) where the payment is received after the change in rate of tax but the invoice has
been issued prior to the change in rate of tax, the time of supply shall be the date of
receipt of payment; or
(ii) where the invoice has been issued and the payment is received before the change in
rate of tax, the time of supply shall be the date of receipt of payment or date of issue
of invoice, whichever is earlier; or
(iii) where the invoice has been issued after the change in rate of tax but the payment is
received before the change in rate of tax, the time of supply shall be the date of issue
of invoice

Q13. Let’s say there was increase in tax rate from 18% to 20% w.e.f.1.6.2017. What is the tax
rate applicable when services provided and invoice issued before change in rate in
April 2017, but payment received after change in rate in June2017?
Ans. The old rate of 18% shall be applicable as services are provided prior to 1.6.2017.

Q14. Let’s say there was increase in tax rate from 18% to 20% w.e.f. 1.6.2017. What is the
tax rate applicable when goods are supplied and invoice issued after change in rate in
June 2017, but full advance payment was already received in April 2017?
Ans. The new rate of 20% shall be applicable as goods are supplied and invoice issued after
1.6.2017

Q15. What is the time period within which invoice has to be issued for supply of Goods?
Ans. As per Section 31 of CGST/SGST Act a registered taxable person shall issue a tax invoice
showing description, quantity and value of goods, tax charged thereon and other prescribed
particulars, before or at the time of

(a) removal of goods for supply to the recipient, where supply involves movement of goods
or
(b) delivery of goods or making available thereof to the recipient in other cases.

Q16. What is the time period within which invoice has to be issued for supply of Services?
Ans. As per Section 31 of CGST/SGST Act a registered taxable person shall, before or after the
provision of service, but within a period prescribed in this behalf, issue a tax invoice showing
description, value of goods, tax payable thereon and other prescribed particulars.

Q17. What is the time period within which invoice has to be issued in a case involving
continuous supply of goods?
Ans. In case of continuous supply of goods, where successive statements of accounts or
successive payments are involved, the invoice shall be issued before or at the time each
such statement is issued or, as the case may be, each such payment is received.

Q18. What is the time period within which invoice has to be issued in a case involving
continuous supply of services?
Ans. In case of continuous supply of services,

(a) where the due date of payment is ascertainable from the contract, the invoice shall be
issued before or after the payment is liable to be made by the recipient but within a
period prescribed in this behalf whether or not any payment has been received by the
supplier of the service;
(b) where the due date of payment is not ascertainable from the contract, the invoice shall
be issued before or after each such time when the supplier of service receives the
payment but within a period prescribed in this behalf;
(c) where the payment is linked to the completion of an event, the invoice shall be issued
before or after the time of completion of that event but within a period prescribed in this
behalf.

Q19. What is the time period within which invoice has to be issued where the goods being
sent or taken on approval for sale?
Ans. The invoice in respect of goods sent or taken on approval for sale or return shall be issued
before or at the time of supply or six months from the date of approval, whichever is earlier.
Twitter FAQ on Supply
What is treatment of promotional item given
free to end consumers by FMCG
companies?
How to comply with 9(4) of CGST Act if POS
is in another State of the unregistered
supplier?
Under supply from unregistered dealer the
purchaser have to pay GST on RCM basis.
So whether stipend paid to intern will also
come under RCM?
Salary by partnership firm to Partners as per
Income Tax Act liable to GST?
What is the treatment of promotional item
given free to end consumers by FMCG
companies? If taxable, whether ITC is
allowed?
Whether GST will be leviable in case of
returnable packing material like drums
supplied with finished goods?
How will disposal of scrap be treated in
GST?
I am from MP and providing service to a
customer in Maharashtra. I outsource the
work to a service provider in Maharashtra,
what tax I need to charge?
If address of buyer is Punjab and place of
supply is same State of supplier
(Rajasthan), then IGST will apply or
CGST/SGST?
Why is bifurcation of cash deposit as CGST-
SGST-IGST required? Is cash held against a
GSTIN, to be adjusted via return u/s 39?
What is the difference in between ‘Nil rated’,
‘taxable at 0%’ and exempted goods and
services? Especially in relation with ITC?
Will professional tax will be abolished in
Maharashtra after introducing of GST?
Employer provides bus service, meal
coupon, telephone at residence, gives
vehicle for official and personal use, uniform
and shoes, any GST?
The definition of composite supply and the
description of same under Section 8 differ.
Please explain consequences.
Page 60 of 371
Tax will be charged only on the total consideration
charged for such supply.
Any person making inter-State supply has to
compulsorily obtain registration and therefore in
such cases, Section 9(4) will not come into play.
Stipend paid to interns will be employer-employee
transactions. Hence, not liable for GST.
Salary will not be liable for GST.
Tax is payable on consideration received for the
supply.
GST will be levied on the value charged for the
supply only.
If the disposal is in the course or furtherance of
business purposes, it will be considered as a
supply.
Generally these will be two supplies where the
supplier from MP will charge IGST from the
recipient in Maharashtra. Whereas, the service
provider in Maharashtra will charge IGST from the
recipient in MP.
If the place of supply and the location of the
supplier are in the same State then it will be intra-
State supply and CGST/SGST will be applicable.
Three levies are under three different statutes and
are required to be separately accounted for.
Exempt supply includes Nil rated (taxable at 0%)
and non-Taxable supplies and no ITC is available
for such supplies.
Professional tax is not a tax on supply of goods or
services but on being in a profession. Professional
tax not subsumed in GST.
Where the value of such supplies is in the nature
of gifts, no GST will apply till value of such gifts
exceeds ` 50000/- in a financial year.
Section 2(30) defines what will be considered as a
composite supply. Whereas, Section 8 provides
that in case of a composite supply, the treatment
 Page 61 of 371

for tax rate etc., will be that of principal supply.

Whether slump sale will attract GST. If yes It will have the same treatment as normal supply.
then under which Section?
Salary by Partnership firm to Partners as per Salary will not be leviable of GST.
Income Tax Act liable to GST? Partners are
not employees of the firm.

CIRCULARS ISSUED BY US

dt.06/03/2019.

Sub.:- GST – Re-melting/reprocessing of damaged sugar/brown sugar – Procedure to the

followed under GST – Reg….

Some of the sugar factories has asked me as to whether there is any permission required
from the GST department before re-melting/reprocessing the damaged sugar/brown sugar
laying in stock and to manufacture good quality sugar out of the said damaged sugar/brown
sugar.

[2] In this regard I herewith inform you that, the activity of reprocessing/re-melting of the
damaged/brown sugar laying in stock is not getting covered under the definition of “supply”
given under Sec.7 of CGST Act, 2017 as it amounts to captive consumption by the same
person and hence the said activity is not attracting any GST liability and hence under the
GST Act/Rules there is no provision made to compel the assessee to obtain the
permission/file a intimation from/with the GST department for taking the damaged/brown
sugar for re-melting/reprocessing purpose. Hence, there is no necessity for the sugar
factories of obtaining any prior permission or of intimating the GST department before taking
the damaged sugar/brown sugar for re-melting/reprocessing.

[3] However, the sugar factories should keep all the documentary evidence/records to prove that
the damaged sugar/brown sugar is indeed re-melted/reprocessed and the resultant good
quality sugar obtained by reprocessing/re-melting of the said damaged sugar/brown sugar is
duly accounted for and is/will be cleared on payment of appropriate GST.

dt.13/12/2018

Sub.:- GST –
i) Payment of GST on the parts supplied free as replacement during warranty
period of the final product –

ii) Reversal of credit of GST availed on the parts supplied free as replacement
during warranty period of the final product –

Reg…..

Various assesses are manufacturing the final products and are selling the same to the
customers on payment of GST. The said manufacturers are also giving warranty of particular
period for the said final products and are undertaking to repair the said final products free of
cost by replacing the defective parts thereof during the said warranty period or to replace the
defective final product with new final product without any cost.

Accordingly, whenever the said final product is found defective during the warranty period,
the customer is returning the said final product to the manufacturer and the manufacturer is
repairing the said final product by replacing the defective parts, if any, and is returning the
 Page 62 of 371

said final product to the customer and is not recovering any charges for repairing of the final
product/cost of the replaced parts from the customer.

Sometimes, it may happen that, the manufacturer after receiving back the defective final
product from the customer during warranty period founds that the said final product is
irrepairable and hence keeps the defective final product with him and provides a new final
product free of cost to the said customer to fulfill the warranty obligation.

[2] Under GST regime, there was no clarity as to whether, -

i) The manufacturer supplying the parts/final product free of cost during warranty
period is required to pay any GST on the said free supply of parts/final product ?

ii) The manufacturer supplying the parts/final product free of cost during warranty
period is required to reverse the credit availed on the said parts/final products ?

[3] Right from the beginning I have adviced all the assesses that, there is no question of
payment of any GST on the parts/final product replaced free of cost during warranty period
as no consideration is received for the said parts/final product by the supplier from the
receiver and also that as the price of the original product is decided considering the
possibility of free repair/replacement of part during warranty period, there is no need to
reverse the credit availed on the said parts/final product replaced free of cost during warranty
period as the transaction is not treatable as disposal of goods by way of gift or free samples
falling under Sec.17(5)(h) of CGST Act, 2017.

[4] I herewith inform you that, the above said advice is now fully supported by the Advance
Ruling given by the Hon’ble Advance Ruling Authority under GST, Kerala in the case of
Saraswathi Metal Works, 2018(18)GSTL-834 whereunder it is laid down that, -

“The replacement of parts during warranty period is a free supply. Warranty is a written
guarantee, issued to the purchaser of goods by its manufacturer, promising to repair or
replace it if necessary within a specified period of time. If the goods are supplied with
warranty, the consideration received as part of supply includes the consideration for “the
promise to repair or replace”. Since the parts are provided to a customer without
consideration under warranty no GST is chargeable on such replacement. The value of
supply made earlier includes the charges to be incurred during the warranty period.
Therefore, the supplier who has undertaken the warranty replacement is not required to
reverse the input tax credit on the parts/components replaced free of cost.”

[5] I request you to take not of the above said important legal development and verify the
practice you are following at your end regarding free supplies during warranty period and
correct the same in the light of above said decision.

dt.22/02/2019.

Sub.:- GST – Supply of Goods – Transactions in which IGST is chargeable and the
transactions in which CGST/SGST are chargeable – Clarification – Reg…..

I have observed that various assesses are facing difficulties in identifying the transactions in
which they have to charge IGST and the transactions in which they have to charge
CGST/SGST.

[2] Hence I am giving herein below the examples which will help you all to understand the
transactions in which the IGST is chargeable and the transactions in which the CGST/SGST
are chargeable, -
 Page 63 of 371

A] The supplier is situated/registeredin State “M” and the buyer is situated/registered in State
“K” and the goods are being delivered to the registered place of business of the buyer in
State “K”.

The supplier is situated/registeredin State “K” and the buyer is situated/registered in State
“M” and the goods are being delivered to the registered place of business of the buyer in
State “M”.

In the above said transactions as the buyer and supplier are situated in two different States
and the goods are physically going from one State to another State, the supply is an Inter-
State Supply (i.e.from one State to another State) and hence in the above said transactions
the IGST is chargeable.

B] The supplier is situated/registered in State “M” and the buyer is situated/registered in State
“K”. The buyer is instructing the supplier to deliver the goods on his behalf to a person
situated/registered in State “T”.

In the above said transaction since the supplier and the buyer are situated/registeredin
different States and the goods are physically going from one State to another State, the
supply is Inter-State Supply only and hence in the above said transaction the supplier has to
charge IGST only. The buyer will take the credit of the said IGST and then will issue his own
invoice in favour of his customer (to whom the goods are delivered by the supplier as per the
instructions of the buyer) and he will also charge IGST in his invoice as his supply to his
customer also is Inter-State supply(i.e.from one State to another State).

C] The supplier is situated/registered in State “M” and the buyer is situated/registered in State
“K”. The buyer is instructing the supplier to deliver the goods on his behalf to a person
situated/registered in State “M”.

In the above said transactionevenif the goods are physically not going out of the State of
supplier and are being delivered in the same State,(where the supplier is situated), stillsince
the supplier and the buyer are situated/registered in different States, the supply is Inter-State
Supply only and hence in the above said transaction the supplier has to charge IGST only.
The buyer will take the credit of the said IGST and then will issue his own invoice in favour of
his customer (to whom the goods are delivered by the supplier as per the instructions of the
buyer) and he will also charge IGST in his invoice as his supply to his customer also is Inter-
State supply(i.e.from one State to another State).

D] The supplier is situated/registeredin State “M” and the buyer is situated/registered in State
“K”. The buyer is instructing the supplier to deliver the goods on his behalf to a person
situated/registered in State “K”.

In the above said transaction since the supplier and the buyer are situated/registered in
different States and the goods also are physically going from one State to another State, the
supply is Inter-State Supply only and hence in the above said transaction the supplier has to
charge IGST only. The buyer will take the credit of the said IGST and then will issue his own
invoice in favour of his customer (to whom the goods are delivered by the supplier as per the
instructions of the buyer). However, he will charge CGST/SGST in his invoice as his supply
to his customer is Intra-State supply (i.e.within same State).

E] The supplier is situated/registered in State “M” and the buyer also is situated/registered in
State “M” and the goods are being delivered to the registered place of business of the buyer
in State “M”.
 Page 64 of 371

The supplier is situated/registered in State “M” and the buyer also is situated/registered in
State “M” and as per the instruction of the buyer the goods are being delivered to a person
who also is situated/registered in State “M”.

In the above said transactions since the supplier and buyer both are situated/registered in
the same State and the goods are not going out of the State of the supplier, the supply is
Intra-State supply (i.e.within the same State) and hence in the above said transactions the
supplier has to charge CGST/SGST only. The buyer will take the credit of the said
CGST/SGST and then will issue his own invoice in favour of his customer (to whom the
goods are delivered by the supplier as per the instructions of the buyer) and he will also
charge CGST/SGST in his invoice as his supply to his customer also is Intra-State (within the
same State supply).

F] The supplier is situated/registered in State “M” and the buyer also is situated/registered in
State “M” but as per the instructions of the buyer the goods are being delivered to a person
who is situated/registered in State “K”.

In this transaction eventhough the goods are physically going out of the supplier’s State/are
being delivered to a person situated in other State still since the supplier and buyer both are
situated/registered in the same State, the supply is Intra-State supply (i.e.within the same
State) and hence in the above said transaction the supplier has to charge CGST/SGST only.
The buyer will take the credit of the said CGST/SGST and then will issue his own invoice in
favour of his customer (to whom the goods are delivered by the supplier as per the
instructions of the buyer). However he will charge IGST in his invoice as his supply to his
customer is Inter-State Supply (i.e.from one Sate to another State).

G] The supplier is situated/registered in State “M” and the buyer also is situated/registered in
State “M”. However the buyer has instructed the supplier to deliver the goods to his other
unit which is situated/registered in State “K”.

In this transaction also eventhough the goods are physically going out of the supplier’s
State/are being delivered to the unit of the buyer which is situated in other State, still since
the supplier and buyer both are situated/registered in the same State, the supply is Intra-
State supply (i.e.within the same State) and hence in the above said transaction the supplier
has to charge CGST/SGST only. The buyer will take the credit of the said CGST/SGST and
then will issue his own invoice in favour of his unit situated in other State (where the goods
are delivered by the supplier as per the instructions of the buyer). However he will charge
IGST in his invoice as his supply to his other unit is Inter-State Supply (i.e.from one Sate to
another State).

[Note :- My above said opinion is supported by the ruling passed by the Advance Ruling
Authority in the case of Umax Packaging, 2019(20)GSTL-677 as well as the answer given to
the question No.158 asked in respect of e-way bill in FAQ dt.1.12.2018].

OUR COMMENTS ON SUPPLY UDNER GST

 All forms of supply of goods or services such as sale, transfer, barter, exchange, licence,
rental, lease or disposal made or agreed to be made for a consideration are covered
under term of supply on which GST is levied.
 Certain activities like transfer of business, supply to or form related person etc. are
treatable as supply eventhough made without consideration. These are listed in
Schedule-I of CGST/SGST/IGST Acts.
 Page 65 of 371

 In Schedule-II of CGST/SGST Act certain activities are declared as a supply.

 Negative supplies are listed in Schedule-III of CGST/SGAST Acts which are neither
supply of goods nor services or both.
 Transfer of title in goods at present or in future and transfer of business assets are
declared supplies of goods.
 Lease, tenancy, easement, licence to occupy land or lease and letting out of building is a
supply of services.
 Job work done on another person's goods is a supply of service.

TIME OF SUPPLY
 Time of supply attains a great importance to decide rate of tax value and due dates for
payment of tax. This aspect attains more significance when there is a change in rate of
tax.
 Time of supply means the point in time when goods/services are deemed to be supplied
for determining liability of GST on them.

 Supplies of Goods – The time of supply of goods is the earlier of -

 the date of issue of invoice by the supplier or the last date on which he is
required to issue the invoice with respect to the supply
 the date on which the supplier received the payment with respect to the supply
i.e.date on which the payment is entered in his books of account or the date on
which the payment is credited to his bank account whichever is earlier
 where the supplier of taxable goods receives an amount upto Rs.1,000 in excess
of the amount indicated in the tax invoice the time of supply to the extent of such
excess amount shall at the option of the said supplier be the date of issue of
invoice in respect of such excess amount

 Supplies of services – The time of supply of services is the earliest of –

 the date of issue of invoice by the supplier, if the invoice is issued within the
period prescribed or the date of receipt of payment whichever is earlier
 date of provision of service if the invoice is not issued within the period or the
date of receipt of payment whichever is earlier
 the date on which the recipient shows the receipt of services in his books of
account or credited in his bank account whichever is earlier
 where the supplier of taxable goods or services receives and amount upto
Rs.1,000 in excess of the amount indicated in the tax invoice, the time of supply
to the extent of such excess amount shall at the option of said supplier, be the
date of invoice in respect of such excess amount

 Other Supplies

 Where it is not possible to determine the time of supply under any provisions, the
time of supply is in a case where a periodical return has to be fixed, be the date
on which such return is to be filed and in any other case, be the date on which
the tax is paid.
 Page 66 of 371

VALUATION UNDER GST

Sec.2 of CGST Act, 2017 - Definitions

(84) “person” includes–

(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;
(e) a Limited Liability Partnership;
(f) an association of persons or a body of individuals, whether incorporated or not, in
India or outside India;
(g) any corporation established by or under any Central Act, State Act or Provincial
Act or a Government company as defined in clause (45) of section 2 of the
Companies Act, 2013 (18 of 2013);
(h) any body corporate incorporated by or under the laws of a country outside India;
(i) a co-operative society registered under any law relating to co-operative societies;
(j) a local authority;
(k) Central Government or a State Government;
(l) society as defined under the Societies Registration Act, 1860 (21 of 1860);
(m) trust; and
(n) every artificial juridical person, not falling within any of the above;

Sec.15 of CGST Act – Value of Taxable Supply

(1) The value of a supply of goods or services or both shall be the transaction value, which
is the price actually paid or payable for the said supply of goods or services or both
where the supplier and the recipient of the supply are not related and the price is the
sole consideration for the supply.

(2) The value of supply shall include–

(a) any taxes, duties, cesses, fees and charges levied under any law for the time
being in force other than this Act, the State Goods and Services Tax Act, the
Union Territory Goods and Services Tax Act and the Goods and Services Tax
(Compensation to States) Act, if charged separately by the supplier;
(b) any amount that the supplier is liable to pay in relation to such supply but which
has been incurred by the recipient of the supply and not included in the price
actually paid or payable for the goods or services or both;
(c) incidental expenses, including commission and packing, charged by the supplier
to the recipient of a supply and any amount charged for anything done by the
supplier in respect of the supply of goods or services or both at the time of, or
before delivery of goods or supply of services;
(d) interest or late fee or penalty for delayed payment of any consideration for any
supply; and
(e) subsidies directly linked to the price excluding subsidies provided by the Central
Government and State Governments.

Explanation.––For the purposes of this sub-section, the amount of subsidy shall be

included in the value of supply of the supplier who receives the subsidy.

(3) The value of the supply shall not include any discount which is given––
 Page 67 of 371

(a) before or at the time of the supply if such discount has been duly recorded in the
invoice issued in respect of such supply; and
(b) after the supply has been effected, if—
(i) such discount is established in terms of an agreement entered into at or
before the time of such supply and specifically linked to relevant invoices; and
(ii) input tax credit as is attributable to the discount on the basis of document
issued by the supplier has been reversed by the recipient of the supply.

(4) Where the value of the supply of goods or services or both cannot be determined
under sub-section (1), the same shall be determined in such manner as may be
prescribed.

(5) Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of
such supplies as may be notified by the Government on the recommendations of the
Council shall be determined in such manner as may be prescribed.

Explanation.—For the purposes of this Act,––

(a) persons shall be deemed to be “related persons” if––

(i) such persons are officers or directors of one another’s businesses;
(ii) such persons are legally recognized partners in business;
(iii) such persons are employer and employee;
(iv) any person directly or indirectly owns, controls or holds twenty-five
percent or more of the outstanding voting stock or shares of both of them;
(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third person;
(vii) together they directly or indirectly control a third person; or
(viii) they are members of the same family;

(b) the term “person” also includes legal persons;

(c) persons who are associated in the business of one another in that one is the sole
agent or sole distributor or sole concessionaire, howsoever described, of the other,
shall be deemed to be related.

Rule 27 of CGST Rules - Value of supply of goods or services where the consideration is
not wholly in money

Where the supply of goods or services is for a consideration not wholly in money, the value of
the supply shall,-

(a) be the open market value of such supply;

(b) if the open market value is not available under clause (a), be the sum total of
consideration in money and any such further amount in money as is equivalent to the
consideration not in money, if such amount is known at the time of supply;
(c) if the value of supply is not determinable under clause (a) or clause (b), be the value of
supply of goods or services or both of like kind and quality;
(d) if the value is not determinable under clause (a) or clause (b) or clause (c), be the sum
total of consideration in money and such further amount in money that is equivalent to
consideration not in money as determined by the application of rule 30 or rule 31 in that
order.

Illustration:
 Page 68 of 371

(1) Where a new phone is supplied for twenty thousand rupees along with the exchange of
an old phone and if the price of the new phone without exchange is twenty four
thousand rupees, the open market value of the new phone is twenty four thousand
rupees.
(2) Where a laptop is supplied for forty thousand rupees along with the barter of a printer
that is manufactured by the recipient and the value of the printer known at the time of
supply is four thousand rupees but the open market value of the laptop is not known, the
value of the supply of the laptop is forty four thousand rupees.

Rule 28 of CGST Rules - Value of supply of goods or services or both between distinct or
related persons, other than through an agent.

The value of the supply of goods or services or both between distinct persons as specified in
sub-section (4) and (5) of section 25 or where the supplier and recipient are related, other than
where the supply is made through an agent, shall-

(a) be the open market value of such supply;

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

Provided that where the goods are intended for further supply as such by the recipient, the
value shall, at the option of the supplier, be an amount equivalent to ninety percent of the price
charged for the supply of goods of like kind and quality by the recipient to his customer not
being a related person:

Provided further that where the recipient is eligible for full input tax credit, the value
declared in the invoice shall be deemed to be the open market value of the goods or
services.

Rule 29 of CGST Rules - Value of supply of goods made or received through an agent.

The value of supply of goods between the principal and his agent shall-

(a) be the open market value of the goods being supplied, or at the option of the supplier, be
ninety percent. of the price charged for the supply of goods of like kind and quality by the
recipient to his customer not being a related person, where the goods are intended for
further supply by the said recipient.

Illustration: A principal supplies groundnut to his agent and the agent is supplying
groundnuts of like kind and quality in subsequent supplies at a price of five thousand
rupees per quintal on the day of the supply. Another independent supplier is supplying
groundnuts of like kind and quality to the said agent at the price of four thousand five
hundred and fifty rupees per quintal. The value of the supply made by the principal shall
be four thousand five hundred and fifty rupees per quintal or where he exercises the
option, the value shall be 90 per cent. of five thousand rupees i.e., four thousand five
hundred rupees per quintal.

(b) where the value of a supply is not determinable under clause (a), the same shall be
determined by the application of rule 30 or rule 31 in that order.
 Page 69 of 371

Rule 30 of CGST Rules - Value of supply of goods or services or both based on cost

Where the value of a supply of goods or services or both is not determinable by any of the
preceding rules of this Chapter, the value shall be one hundred and ten percent of the cost of
production or manufacture or the cost of acquisition of such goods or the cost of provision of
such services.

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

Where the value of supply of goods or services or both cannot be determined under rules 27 to
30, the same shall be determined using reasonable means consistent with the principles and
the general provisions of section 15 and the provisions of this Chapter:

Provided that in the case of supply of services, the supplier may opt for this rule, ignoring rule
30.

Rule 31A of CGST Rules - Value of supply in case of lottery, betting, gambling and horse
racing

(1) Notwithstanding anything contained in the provisions of this Chapter, the value in respect
of supplies specified below shall be determined in the manner provided hereinafter.

(2)(a) The value of supply of lottery run by State Governments shall be deemed to be 100/112
of the face value of ticket or of the price as notified in the Official Gazette by the
organising State, whichever is higher.
(b) The value of supply of lottery authorised by State Governments shall be deemed to be
100/128 of the face value of ticket or of the price as notified in the Official Gazette by the
organising State, whichever is higher.

Explanation:– For the purposes of this sub-rule, the expressions-

(a) lottery run by State Governments‖ means a lottery not allowed to be sold in any
State other than the organizing State;
(b) lottery authorised by State Governments means a lottery which is authorised to
be sold in State(s) other than the organising State also; and
(c) Organising State‖ has the same meaning as assigned to it in clause (f) of sub-
rule (1) of rule 2 of the Lotteries (Regulation) Rules, 2010.

(3) The value of supply of actionable claim in the form of chance to win in betting, gambling
or horse racing in a race club shall be 100% of the face value of the bet or the amount
paid into the totalisator.

Rule 32 of CGST Rules - Determination of value in respect of certain supplies.

(1) Notwithstanding anything contained in the provisions of this Chapter, the value in respect
of supplies specified below shall, at the option of the supplier, be determined in the
manner provided hereinafter.

(2) The value of supply of services in relation to the purchase or sale of foreign currency,
including money changing, shall be determined by the supplier of services in the
following manner, namely:-
 Page 70 of 371

(a) for a currency, when exchanged from, or to, Indian Rupees, the value shall be
equal to the difference in the buying rate or the selling rate, as the case may be,
and the Reserve Bank of India reference rate for that currency at that time,
multiplied by the total units of currency:

Provided that in case where the Reserve Bank of India reference rate for a currency is
not available, the value shall be one per cent. of the gross amount of Indian Rupees
provided or received by the person changing the money:

Provided further that in case where neither of the currencies exchanged is Indian
Rupees, the value shall be equal to one per cent. of the lesser of the two amounts the
person changing the money would have received by converting any of the two
currencies into Indian Rupee on that day at the reference rate provided by the Reserve
Bank of India.

Provided also that a person supplying the services may exercise the option to ascertain
the value in terms of clause (b) for a financial year and such option shall not be
withdrawn during the remaining part of that financial year.

(b) at the option of the supplier of services, the value in relation to the supply of
foreign currency, including money changing, shall be deemed to be-

(i) one per cent. of the gross amount of currency exchanged for an amount
up to one lakh rupees, subject to a minimum amount of two hundred and
fifty rupees;
(ii) one thousand rupees and half of a per cent. of the gross amount of
currency exchanged for an amount exceeding one lakh rupees and up to
ten lakh rupees; and
(iii) five thousand and five hundred rupees and one tenth of a per cent. of the
gross amount of currency exchanged for an amount exceeding ten lakh
rupees, subject to a maximum amount of sixty thousand rupees.

(3) The value of the supply of services in relation to booking of tickets for travel by air
provided by an air travel agent shall be deemed to be an amount calculated at the rate of
five percent. of the basic fare in the case of domestic bookings, and at the rate of ten per
cent. of the basic fare in the case of international bookings of passage for travel by air.

Explanation.- For the purposes of this sub-rule, the expression basic fare means that
part of the air fare on which commission is normally paid to the air travel agent by the
airlines.

(4) The value of supply of services in relation to life insurance business shall be,-

(a) the gross premium charged from a policy holder reduced by the amount allocated
for investment, or savings on behalf of the policy holder, if such an amount is
intimated to the policy holder at the time of supply of service;
(b) in case of single premium annuity policies other than (a), ten per cent. of single
premium charged from the policy holder; or
(c) in all other cases, twenty five per cent. of the premium charged from the policy
holder in the first year and twelve and a half per cent. of the premium charged
from the policy holder in subsequent years:
 Page 71 of 371

Provided that nothing contained in this sub-rule shall apply where the entire premium
paid by the policy holder is only towards the risk cover in life insurance.

(5) Where a taxable supply is provided by a person dealing in buying and selling of second
hand goods i.e., used goods as such or after such minor processing which does not
change the nature of the goods and where no input tax credit has been availed on the
purchase of such goods, the value of supply shall be the difference between the selling
price and the purchase price and where the value of such supply is negative, it shall be
ignored:

Provided that the purchase value of goods repossessed from a defaulting borrower,
who is not registered, for the purpose of recovery of a loan or debt shall be deemed to
be the purchase price of such goods by the defaulting borrower reduced by five
percentage points for every quarter or part thereof, between the date of purchase and
the date of disposal by the person making such repossession.

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

(7) The value of taxable services provided by such class of service providers as may be
notified by the Government, on the recommendations of the Council, as referred to in
paragraph 2 of Schedule I of the said Act between distinct persons as referred to in
section 25, where input tax credit is available, shall be deemed to be NIL.

Rule 33 of CGST Rules - Value of supply of services in case of pure agent.

Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs
incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value
of supply, if all the following conditions are satisfied, namely,-

(i) the supplier acts as a pure agent of the recipient of the supply, when he makes the
payment to the third party on authorisation by such recipient;
(ii) the payment made by the pure agent on behalf of the recipient of supply has been
separately indicated in the invoice issued by the pure agent to the recipient of service;
and
(iii) the supplies procured by the pure agent from the third party as a pure agent of the
recipient of supply are in addition to the services he supplies on his own account.

Explanation.- For the purposes of this rule, the expression ―pure agent means a person who-

(a) enters into a contractual agreement with the recipient of supply to act as his pure
agent to incur expenditure or costs in the course of supply of goods or services or
both;
(b) neither intends to hold nor holds any title to the goods or services or both so
procured or supplied as pure agent of the recipient of supply;
(c) does not use for his own interest such goods or services so procured; and
(d) receives only the actual amount incurred to procure such goods or services in
addition to the amount received for supply he provides on his own account.

Illustration.- Corporate services firm A is engaged to handle the legal work pertaining to the
incorporation of Company B. Other than its service fees, A also recovers from B, registration fee
 Page 72 of 371

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

Rule 34 of CGST Rules - Rate of exchange of currency, other than Indian rupees, for
determination of value.

(1) The rate of exchange for determination of value of taxable goods shall be the applicable
rate of exchange as notified by the Board under section 14 of the Customs Act, 1962 for
the date of time of supply of such goods in terms of section 12 of the Act.

(2) The rate of exchange for determination of value of taxable services shall be the
applicable rate of exchange determined as per the generally accepted accounting
principles for the date of time of supply of such services in terms of section 13 of the Act.

Rule 35 of CGST Rules - Value of supply inclusive of integrated tax, central tax, State tax,
Union territory tax.

Where the value of supply is inclusive of integrated tax or, as the case may be, central tax, State
tax, Union territory tax, the tax amount shall be determined in the following manner, namely,-

Tax amount = (Value inclusive of taxes X tax rate in % of IGST or, as the case may be, CGST,
SGST or UTGST) ÷ (100+ sum of tax rates, as applicable, in %)

Explanation.-For the purposes of the provisions of this Chapter, the expressions-

(a) open market value of a supply of goods or services or both means the full value in
money, excluding the integrated tax, central tax, State tax, Union territory tax and the
cess payable by a person in a transaction, where the supplier and the recipient of the
supply are not related and the price is the sole consideration, to obtain such supply
at the same time when the supply being valued is made;

(b) supply of goods or services or both of like kind and quality‖ means any other supply
of goods or services or both made under similar circumstances that, in respect of the
characteristics, quality, quantity, functional components, materials, and the reputation
of the goods or services or both first mentioned, is the same as, or closely or
substantially resembles, that supply of goods or services or both.

FAQ on Valuation

Q1. What is the value of taxable supply to be adopted for the levy of GST?
Ans. The value of taxable supply of goods and services shall ordinarily be ‘the transaction value’
which is the price paid or payable, when the parties are not related and price is the sole
consideration. Section 15 of the CGST/SGST Act further elaborates various inclusions and
exclusions from the ambit of transaction value. For example, the transaction value shall not
include refundable deposit, discount allowed subject to certain conditions before or at the
time of supply.

Q2. 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
 Page 73 of 371

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 for 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. However, when the price is influenced by factors like relationship of parties or
where certain transactions are deemed to be supply, which do not have a price, the value
has to be determined in accordance with the GST Valuation Rules.

Q5. Is reference to GST Valuation Rules required in all cases?

Ans. No. Reference to GST Valuation Rules is required only in cases where value cannot be
determined under sub-section (1) of Section 15.

Q6. Can the transaction value declared under section 15(1) be accepted?
Ans. Yes, it can be accepted after examining for inclusions in section 15(2). Furthermore, the
transaction value can be accepted even where the supplier and recipient are related,
provided the relationship has not influenced the price.

Q7. Whether post-supply discounts or incentives are to be included in the transaction

value?
Ans. Yes. where the post-supply discount is established as per the agreement which is known at
or before the time of supply and where such discount specifically linked to the relevant
invoice and the recipient has reversed input tax credit attributable to such discount, the
discount is allowed as admissible deduction under Section 15 of the model GST law.

Q8. Whether 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.

Q9. When are the provisions of the Valuation Rules applicable?

Ans. Valuation Rules are applicable when (i) consideration either wholly or in part not in money
terms; (ii) parties are related or supply by any specified category of supplier; and (iii)
transaction value declared is not reliable.

Q10. What are the inclusions specified in Section 15(2) which could be added to
Transaction Value?
Ans. The inclusions specified in Section15 (2) which could be added to transaction value are as
follows:

a) Any taxes, duties, cesses, fees and charges levied under any statute, other than the
SGST/CGST Act and the Goods and Services Tax (Compensation to the States for
Loss of Revenue) Act, 2016, if charged separately by the supplier to the recipient;
b) Any amount that the supplier is liable to pay in relation to such supply but which has
been incurred by the recipient of the supply and not included in the price actually
paid or payable for the goods and/or services;
c) Incidental expenses, such as commission and packing, charged by the supplier to
the recipient of a supply, including any amount charged for anything done by the
supplier in respect of the supply of goods and/or services at the time of, or before
delivery of the goods or as the case may be supply of the services;
d) Interest or late fee or penalty for delayed payment of any consideration for any
supply; and
 Page 74 of 371

e) Subsidies directly linked to the price excluding subsidies provided by the Central and
State Government.

Circular No. 92/11/2019-GST

F. No. 20/16/04/2018-GST

New Delhi, Dated the 7th March, 2019

To,
The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners /
Commissioners of Central Tax (All) The Principal Director Generals/Director Generals (All)

Madam/Sir,

Subject: Clarification on various doubts related to treatment of sales promotion schemes

under GST - Reg.

Various representations have been received seeking clarification on issues raised with
respect to tax treatment of sales promotion schemes under GST. To ensure uniformity in the
implementation of the law across the field formations, the Board, in exercise of its powers
conferred under section 168(1) of the Central Goods and Services Tax Act, 2017 (hereinafter
referred to as “the said Act”) hereby clarifies the issues in succeeding paragraphs.

2. It has been noticed that there are several promotional schemes which are offered by taxable
persons to increase sales volume and to attract new customers for their products. Some of
these schemes have been examined and clarification on the aspects of taxability, valuation,
availability or otherwise of Input Tax Credit in the hands of the supplier (hereinafter referred
to as the “ITC”) in relation to the said schemes are detailed hereunder:

A. Free samples and gifts:

i. It is a common practice among certain sections of trade and industry, such as,
pharmaceutical companies which often provide drug samples to their stockists, dealers,
medical practitioners, etc. without charging any consideration. As per sub-clause (a) of sub-
section (1) of section 7 of the said Act, the expression “supply” includes all forms of supply of
goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or
disposal made or agreed to be made for a consideration by a person in the course or
furtherance of business. Therefore, the goods or services or both which are supplied free of
cost (without any consideration) shall not be treated as 'supply' under GST (except in case of
activities mentioned in Schedule I of the said Act). Accordingly, it is clarified that samples
which are supplied free of cost, without any consideration, do not qualify as 'supply' under
GST, except where the activity falls within the ambit of Schedule I of the said Act.

ii. Further, clause (h) of sub-section (5) of section 17 of the said Act provides that ITC shall not
be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of
gift or free samples. Thus, it is clarified that input tax credit shall not be available to the
supplier on the inputs, input services and capital goods to the extent they are used in relation
to the gifts or free samples distributed without any consideration. However, where the activity
of distribution of gifts or free samples falls within the scope of 'supply' on account of the
provisions contained in Schedule I of the said Act, the supplier would be eligible to avail of
the ITC.

B. Buy one get one free offer:

 Page 75 of 371

i. Sometimes, companies announce offers like ‘Buy One, Get One free‟ For example, 'buy one
soap and get one soap free' or 'Get one tooth brush free along with the purchase of tooth
paste'. As per sub-clause (a) of sub-section (1) of section 7 of the said Act, the goods or
services which are supplied free of cost (without any consideration) shall not be treated as
'supply' under GST (except in case of activities mentioned in Schedule I of the said Act). It
may appear at first glance that in case of offers like 'Buy One, Get One Free', one item is
being 'supplied free of cost' without any consideration. In fact, it is not an individual supply of
free goods but a case of two or more individual supplies where a single price is being
charged for the entire supply. It can at best be treated as supplying two goods for the price of
one.

ii. Taxability of such supply will be dependent upon as to whether the supply is a composite
supply or a mixed supply and the rate of tax shall be determined as per the provisions
of section 8 of the said Act.

iii. It is also clarified that ITC shall be available to the supplier for the inputs, input services and
capital goods used in relation to supply of goods or services or both as part of such offers.

C. Discounts including ‘Buy more, save more’ offers:

i. Sometimes, the supplier offers staggered discount to his customers (increase in discount
rate with increase in purchase volume). For example- Get 10 % discount for purchases
above ₹ 5000/-, 20% discount for purchases above ₹ 10,000/- and 30% discount for
purchases above ₹ 20,000/-. Such discounts are shown on the invoice itself.

ii. Some suppliers also offer periodic / year ending discounts to their stockists, etc. For
example- Get additional discount of 1% if you purchase 10000 pieces in a year, get
additional discount of 2% if you purchase 15000 pieces in a year. Such discounts are
established in terms of an agreement entered into at or before the time of supply though not
shown on the invoice as the actual quantum of such discounts gets determined after the
supply has been effected and generally at the year end. In commercial parlance, such
discounts are colloquially referred to as “volume discounts”. Such discounts are passed on
by the supplier through credit notes.

iii. It is clarified that discounts offered by the suppliers to customers (including staggered
discount under 'Buy more, save more' scheme and post supply / volume discounts
established before or at the time of supply) shall be excluded to determine the value of
supply provided they satisfy the parameters laid down in sub-section (3) of section 15 of
the said Act, including the reversal of ITC by the recipient of the supply as is attributable to
the discount on the basis of document (s) issued by the supplier.

iv. It is further clarified that the supplier shall be entitled to avail the ITC for such inputs, input
services and capital goods used in relation to the supply of goods or services or both on
such discounts.

D. Secondary Discounts

i. These are the discounts which are not known at the time of supply or are offered after the
supply is already over. For example, M/s A supplies 10000 packets of biscuits to M/s B at ₹
10/- per packet. Afterwards M/s A re-values it at ₹ 9/- per packet. Subsequently, M/s A issues
credit note to M/s B for ₹ 1/- per packet.

ii. The provisions of sub-section (1) of section 34 of the said Act provides as under:

“Where one or more tax invoices have been issued for supply of any goods or services or
both and the taxable value or tax charged in that tax invoice is found to exceed the taxable
 Page 76 of 371

value or tax payable in respect of such supply, or where the goods supplied are returned by
the recipient, or where goods or services or both supplied are found to be deficient, the
registered person, who has supplied such goods or services or both, may issue to the
recipient one or more credit notes for supplies made in a financial year containing such
particulars as may be prescribed.”

iii. Representations have been received from the trade and industry that whether credit notes(s)
under sub-section (1) of section 34 of the said Act can be issued in such cases even if the
conditions laid down in clause (b) of sub-section (3) of section 15 of the said Act are not
satisfied. It is hereby clarified that financial / commercial credit note(s) can be issued by the
supplier even if the conditions mentioned in clause (b) of sub-section (3) of section 15 of
the said Act are not satisfied. In other words, credit note(s) can be issued as a commercial
transaction between the two contracting parties.

iv. It is further clarified that such secondary discounts shall not be excluded while determining
the value of supply as such discounts are not known at the time of supply and the conditions
laid down in clause (b) of sub-section (3) of section 15 of the said Act are not satisfied.

v. In other words, value of supply shall not include any discount by way of issuance of credit
note(s) as explained above in para 2 (D)(iii) or by any other means, except in cases where
the provisions contained in clause (b) of sub-section (3) of section 15 of the said Act are
satisfied.

vi. There is no impact on availability or otherwise of ITC in the hands of supplier in this case.

3. It is requested that suitable trade notices may be issued to publicize the contents of this
Circular.

4. Difficulty if any, in the implementation of this Circular may be brought to the notice of the
Board. Hindi version will follow.

Government of India,
Ministry of Finance, Department of Revenue
Trade Notice No. 13/2018
Dated, Shillong the 11th June 2018

Subject: Clarifications on certain issues under GST-reg.

The Central Board of Indirect Taxes & Customs has issued a Circular No. 47/21/2018-GST
dated 8thJune, 2018 for the Trade and as well as all concerned regarding clarifications on certain
refund related issues.

2. Representations have been received seeking clarification on certain issues under the GST
laws. The same have been examined and the clarifications on the same are as below:

Sl.No. Issue Clarification

1. Whether moulds and dies owned by 1.1 Moulds and dies owned by the original equipment
Original Equipment Manufacturers manufacturer (OEM) which are provided to a
(OEM) that are sent free of cost (FOC) component manufacturer (the two not being related
to a component manufacturer is leviable persons or distinct persons) on FOC basis does not
to tax and whether OEMs are required constitute a supply as there is no consideration
to reverse input tax credit in this case? involved. Further, since the moulds and dies are
provided on FOC basis by the OEM to the
 Page 77 of 371

component manufacturer in the course or furtherance

of his business, there is no requirement for reversal
of input tax credit availed on such moulds and dies
by the OEM.

1.2 It is further clarified that while calculating the

value of the supply made by the component
manufacturer, the value of moulds and dies provided
by the OEM to the component manufacturer on FOC
basis shall not be added to the value of such supply
because the cost of moulds/dies was not to be
incurred by the component manufacturer and thus,
does not merit inclusion in the value of supply in
terms of section 15(2)(b) of the Central Goods and
Services Tax Act, 2017 (CGST Act for short).

1.3 However, if the contract between OEM and

2. How is servicing of cars involving both
supply of goods (spare parts) and
Services (labour), where the value of
goods and services are shown
separately, to be treated under GST?
component manufacturer was for supply of
components made by using the moulds/dies
belonging to the component manufacturer, but the
same have been supplied by the OEM to the
component manufacturer on FOC basis, the
amortised cost of such moulds/dies shall be added to
the value of the components. In such cases, the
OEM will be required to reverse the credit availed on
such moulds/ dies, as the same Will not be
considered to be provided by OEM to the component
manufacturer in the course or furtherance of the
former's business.
2.1 The taxability of supply would have to be
determined on a case to case basis looking at the
facts and circumstances of each case.
2.2 Where a supply involves supply of both goods
and services and the value of such goods and
services supplied are shown separately, the goods
and services would be liable to tax at the rates as
applicable to such goods and services separately.

This Trade Notice is being issued so as to sensitize the trade and field formations about the
contents of the aforesaid references and for complete details, the respective references may
please be referred in the CBIC's website www.cbec.gov.in.

All Commissioners are requested to bring the contents of the Trade Notice to the notice of all
the officers working under their charge and the assessees falling under their respective
jurisdiction.

OUR COMMENTS ON VALUATION UDNER GST

 Transaction value –
 The value of supply of goods or services or both is the transaction value, which is
the price actually paid or payable for the said supply of goods or service or both
and not the MRP affixed on the goods.
 Page 78 of 371

 Transaction value is not applicable where the supplier and the recipient of the
supply are related persons.
 Transaction value is also not applicable where price is not the sole consideration
for the supply.
 Inclusion in value –
 All taxes, duties, cesses, fees and charges levied under any Act except GST
 Any amount that the supplier is liable to pay which has been incurred by the
recipient and is not included in the price.
 Freight.
 All incidental expenses in relation to sale like packing, commission,
loading/unloading etc.
 Subsidies linked to supply except Govt. subsidies
 Interest/late fees, penalty for delayed payment of consideration.
 Exclusion from value –
 Discount given before or at the time of the supply
 After supply discount only if such discount is in terms of an agreement entered
into at or before the time of such supply and specifically linked to relevant
invoices and input tax credit as is attributable to the discount on the basis of
document issued by the supplier has been reversed by the recipient of the
supply.
 Where consideration is received partly in cash and partly in kind the valuation to be done
as per Rule 27 of CGST Rules.
 Valuation of supplies to the related/distinct person to be made as per Rule 28 of the
CGST Rules. However, if the receiver is eligible for entire credit of GST to be charged on
the value of the goods, the said value will be accepted as open market value.
 Where the value of supply is not determinable correctly due to any reasons, the
valuation can be done as 110% of cost of production/acquisition as per Rule 30 of CGST
Rules.
 If the value not determinable by any of the Rules, the best judgement method can be
applied as per Rule 31 of the CGST Rules.
 Where old goods are sold as such or minor processing not changing essential character
of the goods and where ITC is not availed, the difference between purchase price and
sale price will be the value of levy of GST.
 Page 79 of 371

PAYMENT OF TAX UNDER GST

Sec.49 of CGST Act - Payment of tax, interest, penalty and other amounts

(1) Every deposit made towards tax, interest, penalty, fee or any other amount by a person
by internet banking or by using credit or debit cards or National Electronic Fund Transfer
or Real Time Gross Settlement or by such other mode and subject to such conditions
and restrictions as may be prescribed, shall be credited to the electronic cash ledger of
such person to be maintained in such manner as may be prescribed.

(2) The input tax credit as self-assessed in the return of a registered person shall be
credited to his electronic credit ledger, in accordance with section 41 or section 43A, to
be maintained in such manner as may be prescribed.

(3) The amount available in the electronic cash ledger may be used for making any payment
towards tax, interest, penalty, fees or any other amount payable under the provisions of
this Act or the rules made thereunder in such manner and subject to such conditions and
within such time as may be prescribed.

(4) The amount available in the electronic credit ledger may be used for making any
payment towards output tax under this Act or under the Integrated Goods and Services
Tax Act in such manner and subject to such conditions and within such time as may be
prescribed.

(5) The amount of input tax credit available in the electronic credit ledger of the registered
person on account of––

(a) integrated tax shall first be utilised towards payment of integrated tax and the
amount remaining, if any, may be utilised towards the payment of central tax and
State tax, or as the case may be, Union territory tax, in that order;
(b) the central tax shall first be utilised towards payment of central tax and the
amount remaining, if any, may be utilised towards the payment of integrated tax;
(c) the State tax shall first be utilised towards payment of State tax and the amount
remaining, if any, may be utilised towards payment of integrated tax;

Provided that the input tax credit on account of State tax shall be utilised
towards payment of integrated tax only where the balance of the input tax credit
on account of central tax is not available for payment of integrated tax;

(d) the Union territory tax shall first be utilised towards payment of Union territory tax
and the amount remaining, if any, may be utilised towards payment of integrated
tax;

Provided that the input tax credit on account of Union territory tax shall be
utilised towards payment of integrated tax only where the balance of the input tax
credit on account of central tax is not available for payment of integrated tax;

(e) the central tax shall not be utilised towards payment of State tax or Union
territory tax; and
(f) the State tax or Union territory tax shall not be utilised towards payment of
central tax.
 Page 80 of 371

(6) The balance in the electronic cash ledger or electronic credit ledger after payment of tax,
interest, penalty, fee or any other amount payable under this Act or the rules made
thereunder may be refunded in accordance with the provisions of section 54.

(7) All liabilities of a taxable person under this Act shall be recorded and maintained in an
electronic liability register in such manner as may be prescribed.

(8) Every taxable person shall discharge his tax and other dues under this Act or the rules
made thereunder in the following order, namely:––

(a) self-assessed tax, and other dues related to returns of previous tax periods;
(b) self-assessed tax, and other dues related to the return of the current tax period;
(c) any other amount payable under this Act or the rules made thereunder including
the demand determined under section 73 or section 74.

(9) Every person who has paid the tax on goods or services or both under this Act shall,
unless the contrary is proved by him, be deemed to have passed on the full incidence of
such tax to the recipient of such goods or services or both.

Explanation.––For the purposes of this section,—

(a) the date of credit to the account of the Government in the authorised bank shall
be deemed to be the date of deposit in the electronic cash ledger;
(b) the expression,—
i) “tax dues” means the tax payable under this Act and does not include
interest, fee and penalty; and
ii) “other dues” means interest, penalty, fee or any other amount payable
under this Act or the rules made thereunder.

Sec.49A of CGST Act - Utilisation of input tax credit subject to certain conditions

Notwithstanding anything contained in section 49, the input tax credit on account of
central tax, State tax or Union territory tax shall be utilised towards payment of
integrated tax, central tax, State tax or Union territory tax, as the case may be, only after
the input tax credit available on account of integrated tax has first been utilised fully
towards such payment.

Sec.49B of CGST Act - Order of utilisation of input tax credit

Notwithstanding anything contained in this Chapter and subject to the provisions of

clause (e) and clause (f) of sub-section (5) of section 49, the Government may, on the
recommendations of the Council, prescribe the order and manner of utilisation of the
input tax credit on account of integrated tax, central tax, State tax or Union territory tax,
as the case may be, towards payment of any such tax

Sec.50 of CGST Act - Interest on delayed payment of tax

(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the
rules made thereunder, but fails to pay the tax or any part thereof to the Government
within the period prescribed, shall for the period for which the tax or any part thereof
remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent.,
as may be notified by the Government on the recommendations of the Council.
 Page 81 of 371

(2) The interest under sub-section (1) shall be calculated, in such manner as may be
prescribed, from the day succeeding the day on which such tax was due to be paid.

(3) A taxable person who makes an undue or excess claim of input tax credit under sub-
section (10) of section 42 or undue or excess reduction in output tax liability under sub-
section (10) of section 43, shall pay interest on such undue or excess claim or on such
undue or excess reduction, as the case may be, at such rate not exceeding twenty-four
per cent., as may be notified by the Government on the recommendations of the
Council.

FAQ on Payment of Tax

Q1. What are the Payments to be made in GST 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/UT GST (SGST, going into
the account of the concerned State Government). For any inter-state supply, tax to be paid is
Integrated GST (IGST) which will have components of both CGST and SGST. In addition,
certain categories of registered persons will be required to pay to the government account
Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). In addition, wherever
applicable, Interest, Penalty, Fees and any other payment will also be required to be made.

Q2. Who is liable to pay GST?

Ans. In general, the supplier of goods or services is liable to pay GST. However, in specified cases
like imports and other notified supplies, the liability may be cast on the recipient under the
reverse charge mechanism. Further, in some notified cases of intra-state supply of services,
the liability to pay GST may be cast on e-commerce operators through which such services
are supplied. Also Government Departments making payments to vendors above a specified
limit [2.5 lakh under one contract as per S.51(1)(d)] are required to deduct tax (TDS) and E-
commerce operators are required to collect tax (TCS) on the net value [i.e. aggregate value
of taxable supplies of goods and/or services but excluding such value of services on which
the operator is made liable to pay GST under Section 9(5) of the CGST Act, 2017] of
supplies made through them and deposit it with the Government.

Q3. When does liability to pay GST arises?

Ans. Liability to pay arises at the time of supply of Goods as explained in Section 12 and at the
time of supply of services as explained in Section13.

The time is generally the earliest of one of the 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 GST Act(s) 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 tax payer 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
 Page 82 of 371

• Warehousing of Digital Challan.

Q5. How can payment be done?

Ans. Payment can be done by the following methods:

(i) Through debit of Credit Ledger of the tax payer maintained on the Common Portal –
ONLY Tax can be paid. Interest, Penalty and Fees cannot be paid by debit in the
credit ledger. Tax payers shall be allowed to take credit of taxes paid on inputs (input
tax credit) and utilize the same for payment of output tax. However, no input tax
credit on account of CGST shall be utilized towards payment of SGST and vice
versa. The credit of IGST would be permitted to be utilized for payment of IGST,
CGST and SGST in that order.
(ii) In cash by debit in the Cash Ledger of the tax payer maintained on the Common
Portal. Money can be deposited in the Cash Ledger by different modes, namely, E-
Payment (Internet Banking, Credit Card, Debit Card); Real Time Gross Settlement
(RTGS)/ National Electronic Fund Transfer (NEFT); Over the Counter Payment in
branches of Banks Authorized to accept deposit of GST.

Q6. When is payment of taxes to be made by the Supplier?

Ans. Payment of taxes by the normal tax payer 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 tax
payer 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 quarterly basis.

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 instalments. (Section 80
of the CGST/SGST Act).

Q8. What happens if the taxable person files the return but does not make payment of tax?
Ans. In such cases, the return is not considered as a valid return. Section 2(117) defines a valid
return to mean a return furnished under sub-section (1) of section 39 on which self-assessed
tax has been paid in full. It is only the valid return that would be used for allowing input tax
credit (ITC) to the recipient. In other words, unless the supplier has paid the entire self-
assessed tax and filed his return and the recipient has filed his return, the ITC of the recipient
would not be confirmed.

Q9. Which date is considered as date of deposit of the tax dues – Date of presentation of
cheque or Date of payment or Date of credit of amount in the account of government?
Ans. It is the date of credit to the Government account.

Q10. What is the linkage between GSTN and the authorized Banks?
Ans. There will be real time two-way linkage between the GSTN and the Core Banking Solution
(CBS) of the Bank. CPIN is automatically routed to the Bank via electronic string for
verification and receiving payment and a challan identification number (CIN) is automatically
sent by the Bank to the Common Portal confirming payment receipt. No manual intervention
will be involved in the process by any one including bank cashier or teller or the tax payer.

Q11. Can a tax payer generate challan in multiple sittings?

Ans. Yes, a taxpayer can partially fill in the challan form and temporarily “save” the challan for
completion at a later stage. A saved challan can be “edited” before finalization. After the tax
payer has finalized the challan, he will generate the challan, for use of payment of taxes. The
remitter will have option of printing the challan for his record.
 Page 83 of 371

Q12. 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.

Q13. 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 tax payer can generate another challan at his convenience.

Q14. 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.

Q15. What is a CIN and what is its relevance?

Ans. CIN stands for Challan Identification Number. It is a 17-digit number that is 14-digit CPIN
plus 3-digit Bank Code. CIN is generated by the authorized banks/ Reserve Bank of India
(RBI) when payment is actually received by such authorized banks or RBI and credited in the
relevant government account held with them. It is an indication that the payment has been
realized and credited to the appropriate government account. CIN is communicated by the
authorized bank to taxpayer as well as to GSTN.

Q16. What is the sequence of payment of tax where that taxpayer has liabilities for previous
months also?
Ans. Section 49(8) prescribes an order of payment where the taxpayer has tax liability beyond the
current return period. In such a situation, the order of payment to be followed is: First self-
assessed tax and other dues for the previous period; thereafter self-assessed tax and other
dues for the current period; and thereafter any other amounts payable including any
confirmed demands under section 73 or 74. This sequence has to be mandatorily followed.

Q17. What does the expression “Other dues” referred to above mean?
Ans. The expression “other dues” means interest, penalty, fee or any other amount payable under
the Act or the rules made thereunder.

Q18. 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.

Q19. What does the expression “Net value of taxable supplies” mean?
Ans. The expression “net value of taxable supplies” means the aggregate value of taxable
supplies of goods or services, other than services notified under Section 9(5), made during
any month by all registered taxable persons through the operator reduced by the aggregate
value of taxable supplies returned to the suppliers during the said month.

Q20. Is the pre-registration of credit card necessary in the GSTN portal for the GST
payment?
 Page 84 of 371

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 may also attempt
to put in a system with banks in getting the credit card verified by taking a confirmation from
the credit card service provider. The payments using credit cards can therefore be allowed
without any monetary limit to facilitate ease of doing business.

Circular No. 98/17/2019-GST

F. No. CBEC – 20/16/04/2018 – GST
****
New Delhi, Dated the 23rd April 2019

To,

The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners /

Commissioners of Central Tax (All)The Principal Director Generals / Director Generals (All)

Madam/Sir,

Subject: Clarification in respect of utilization of input tax credit under GST – Reg.

Section 49 was amended and Section 49A and Section 49B were inserted vide Central
Goods and Services Tax (Amendment) Act, 2018 [hereinafter referred to as the CGST
(Amendment) Act]. The amended provisions came into effect from 1st February 2019.

2. Various representations have been received from the trade and industry regarding
challenges being faced by taxpayers due to bringing into force of section 49A of the Central
Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act). The issue has
arisen on account of order of utilization of input tax credit of integrated tax in a particular
order, resulting in accumulation of input tax credit for one kind of tax (say State tax) in
electronic credit ledger and discharge of liability for the other kind of tax (say Central tax)
through electronic cash ledger in certain scenarios. Accordingly, rule 88Awas inserted in
the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the CGST Rules)
in exercise of the powers under Section 49B of the CGST Act vide notification No. 16/2019-
Central Tax, dated 29th March, 2019. In order to ensure uniformity in the implementation of
the provisions of the law, the Board, in exercise of its powers conferred by section 168 (1) of
the CGST Act, hereby clarifies the issues raised as below.

3. The newly inserted Section 49A of the CGST Act provides that the input tax credit of
Integrated tax has to be utilized completely before input tax credit of Central tax / State tax
can be utilized for discharge of any tax liability. Further, as per the provisions of section 49 of
the CGST Act, credit of Integrated tax has to be utilized first for payment of Integrated tax,
then Central tax and then State tax in that order mandatorily. This led to a situation, in certain
cases, where a taxpayer has to ischarge his tax liability on account of one type of tax (say
State tax) through electronic cash ledger, while the input tax credit on account of other type
of tax (say Central tax) remains un-utilized in electronic credit ledger.

4. The newly inserted rule 88A in the CGST Rules allows utilization of input tax credit of
Integrated tax towards the payment of Central tax and State tax, or as the case may be,
Union territory tax, in any order subject to the condition that the entire input tax credit on
account of Integrated tax is completely exhausted first before the input tax credit on account
of Central tax or State / Union territory tax can be utilized. It is clarified that after the insertion
of the said rule, the order of utilization of input tax credit will be as per the order (of numerals)
given below:
 Page 85 of 371

Input tax Credit on Output liability on Output liability on Output liability on

account of account of Integrated account of Central tax account of State tax /
tax Union Territory tax
Integrated tax (I) (II) – In any order and in any proportion
(III) Input tax Credit on account of Integrated tax to be completely exhausted
mandatorily
Central tax (V) (IV) Not permitted
State tax / Union (VII) Not permitted (VI)
Territory tax

5. The following illustration would further amplify the impact of newly inserted rule 88A of
the CGST Rules:

Illustration:

Amount of Input tax Credit available and output liability under different tax heads

Head Output Liability Input tax Credit

Integrated tax 1000 1300
Central tax 300 200
State tax / Union 300 200
Territory tax
Total 1600 1700

Option 1:

Input tax Credit Discharge of Discharge of Discharge of Balance of Input

on account of output liability on output liability on output liability on Tax Credit
account of account of account of State
Integrated tax Central tax tax / Union
Territory tax
Integrated tax 1000 200 100 0
Input tax Credit on account of Integrated tax has been completely exhausted
Central tax 0 100 - 100
State tax / 0 - 200 0
Union territory
tax
Total 1000 300 300 100

Option 2:

Input tax Credit Discharge of Discharge of Discharge of Balance of Input

on account of output liability on output liability on output liability on Tax Credit
account of account of account of State
Integrated tax Central tax tax / Union
Territory tax
Integrated tax 1000 100 200 0
Input tax Credit on account of Integrated tax has been completely exhausted
Central tax 0 200 - 0
State tax / 0 - 100 100
Union territory
 Page 86 of 371

tax

Total 1000 300 300 100

6. Presently, the common portal supports the order of utilization of input tax credit in
accordance with the provisions before implementation of the provisions of the CGST
(Amendment) Act i.e. pre-insertion of Section 49A and Section 49B of the CGST Act.
Therefore, till the new order of utilization as per newly inserted Rule 88A of the CGST
Rules is implemented on the common portal, taxpayers may continue to utilize their input tax
credit as per the functionality available on the common portal.

7. It is requested that suitable trade notices may be issued to publicize the contents of this
circular.

8. Difficulty, if any, in the implementation of this Circular may be brought to the notice of the
Board. Hindi version would follow.

CIRCULARS ISSUED BY US
dt.24/04/2019.

Sir,
Sub.:- GST – Order of utilization of Input Tax Credit – Clarification - Reg….

I herewith inform you that, as per the provisions of Sec.49 and Sec.49A of the CGST Act,
2017, the assessee was allowed to utilize the credit of IGST to discharge his liability of IGST
first and after such utilization if the credit of IGST remains he can utilize the said credit of
IGST to discharge his liability of CGST and even after such utilization if the credit of IGST
remains then only he can utilize the said credit of IGST for payment of SGST/UGST.

[2] Due to the said provision, the assesse’s were facing problem of accumulation of credit of
CGST or SGST/UGST in their Electronic Credit Ledger.

[3] However, by inserting a new Rule 88A in CGST Rules, 2017 vide Notification No.16/2019-
CT, dt.29.03.2019, the Government has relaxed the said order of utilization of credit and has
allowed to utilize the credit of IGST (remained after discharging the liability towards IGST) for
payment of either CGST or SGST/UGST as per the convenience of the assessee.

[4] For example, -

A. If in the month of May’19, the assessee is liable to pay IGST of Rs.1,500/-; CGST of
Rs.400/- and SGST/UGST of Rs.400/- and is having the credit of IGST of Rs.1,700/-;
credit of CGST of Rs.200/- and credit of SGST/UGST of Rs.200/-.

Then, the assessee can adjust the IGST credit of Rs.1,500/- for discharge of IGST
liability of Rs.1,500/-. Then, he can discharge the CGST liability of Rs.400/- by adjusting
the remaining IGST credit of Rs.200/- and CGST credit of Rs.200/-. Then, he can
discharge the SGST/UGST liability of Rs.400/- by adjusting the SGST/UGST credit of
Rs.200/- and by paying Rs.200/- in cash.

or

the assessee can adjust the IGST credit of Rs.1,500/- for discharge of IGST liability of
Rs.1,500/-. Then, he can discharge the CGST liability of Rs.400/- by adjusting the CGST
credit of Rs.200/- and by paying Rs.200/- in cash. Then, he can discharge the
 Page 87 of 371

SGST/UGST liability of Rs.400/- by adjusting the remaining credit of IGST of Rs.200/-

and SGST/UGST credit of Rs.200/-.

In other words, it is not compulsory for him to keep the IGST credit balance of Rs.200/-
intact and to use only the CGST credit of Rs.200/- for payment of CGST liability and use
the SGST/UGST credit of Rs.200/- for payment of SGST/UGST liability of Rs.200/-.

B. If in the month of June’19 the assessee is required to pay CGST of Rs.1,000/- and
SGST/UGST of Rs.1,000/- and don’t have any liability towards IGST. But he is having the
credit of IGST of Rs.1,000/-, credit of CGST of Rs.500/- and credit of SGST/UGST of
Rs.500/-.

Then, the assessee can either use the entire IGST credit of Rs.1,000/- for discharge of
CGST liability of Rs.1,000/- or for discharge of SGST/UGST liability of Rs.1,000/-.

In case if he pays the CGST liability of Rs.1,000/- by adjusting the IGST credit balance of
Rs.1,000/- then he will pay the SGST/UGST liability of Rs.1,000/- by adjusting
SGST/UGST credit of Rs.500/- and by paying Rs.500/- in cash. However, he cannot
adjust the CGST credit balance of Rs.500/- for paying the SGST/UGST liability of
Rs.500/-.

or

In case if he pays SGST/UGST liability of Rs.1,000/- by adjusting the IGST credit

balance of Rs.1,000/-, then he will pay the CGST liability of Rs.1,000/- by adjusting
CGST credit of Rs.500/- and by paying Rs.500/- in cash. However, he cannot adjust the
SGST/UGST credit of Rs.500/- for paying the CGST liability of Rs.500/-.

or

otherwise, he can discharge the CGST liability of Rs.1,000/- by adjusting IGST credit of
Rs.500/- and by paying remaining Rs.500/- in cash. Then, he can discharge the
SGST/UGST liability of Rs.1,000/- by adjusting the remaining IGST Credit of Rs.500/-
and by paying remaining Rs.500/- in cash.

or

otherwise, he can keep the IGST credit balance of Rs.1,000/- unutilized and then can
discharge the CGST liability of Rs.1,000/- by adjusting the CGST credit of Rs.500/- and
by paying Rs.500/- in cash and can discharge the SGST/UGST liability of Rs.1,000/- by
adjusting the SGST/UGST credit of Rs.500/- and by paying Rs.500/- in cash.

C. If in the month of July’19 the assessee is liable to pay IGST of Rs.1,000/-, CGST of
Rs.300/- and SGST/UGST of Rs.300/- and is having the IGST credit balance of
Rs.1,300/-, CGST credit balance of Rs.200/- and SGST/UGST credit balance of Rs.200/-
then, -

he can use the IGST credit of Rs.1,000/- for discharge of liability of IGST of Rs.1,000/-
and then can use the IGST credit of Rs.300/- for discharge of CGST liability of Rs.300/-
and can pay the SGST/UGST liability of Rs.300/- by adjusting SGST/UGST credit
balance of Rs.200/- and by paying Rs.100/- in cash

or
 Page 88 of 371

he can use the IGST credit of Rs.1,000/- for discharge of liability of IGST of Rs.1,000/-
and then out of the remaining IGST credit of Rs.300/- he can use the IGST credit of
Rs.200/- for discharge of CGST liability of Rs.200/- and can pay the remaining CGST
liability of Rs.100/- by utilizing the CGST credit. He can also use the remaining IGST
credit of Rs.100/- for discharge of liability of SGST/UGST of Rs.100/- and can pay the
remaining SGST/UGST liability of Rs.200/- by using the SGST/UGST credit of Rs.200/-

[5] Also refer the CBIC Circular No.98/17/2019-GST, dt.23.04.2019 on the above said subject
for further understanding of the revised manner of utilization of credit of IGST, CGST and
SGST/UGST. (Copy enclosed).

dt.08/06/2019.

Sir,
Sub.:- GST – Change in manner of utilization of Input Tax Credit – Suitable Changes made
in Portal - Reg….

Please refer to my Circular dt.24.04.2019 whereunder I have informed you that, the
Government by inserting a new Rule 88A in CGST Rules, 2017 (vide Notification
No.16/2019-CT, dt.29.03.2019) has allowed the assessee to utilize the credit of IGST for
payment of either CGST or SGST/UGST as per the convenience of the assessee.

[2] However, the appropriate changes in the portal to implement the above said revised ITC
setoff mechanism were not made by the GSTN.

[3] Now, the GSTN has made the suitable changes in the portal to give effect to the above said
revised ITC setoff mechanism and the same will come into play from 11 th June, 2019

[4] Please note that, the said revised ITC setoff mechanism will also be available to discharge
the tax liability for the month of May’19.

OUR COMMENTS ON PAYMENT OF TAX UNDER GST

 Payment of tax is required to be made on or before 20 the day of the next month while
filling GSTR-3B return
 All persons whether filling monthly GSTR-1 return or quarterly GSTR-1 should pay tax
on monthly basis.
 Entire tax liability declared in the monthly GSTR-3B return is bound to be paid on or
before 20th day or has to be paid with interest.
 Unless entire tax liability as declared in GSTR-3B return is paid, the said return cannot
be filed/accepted
 Manner of utilization of credit balance in Electronic Credit Ledger –
a) IGST balance-for-IGST/CGST/SGST
b) CGST balance-for-CGST/IGST
c) SGST balance for SGST/IGST
[No CGST credit can be used against SGST liability]
[No SGST credit can be used against CGST liability]

 Manner for utilisation of IGST credit changed/relaxed – Now the assesee can utilize the
credit balance of IGST for payment of CGST or SGST as per his convenience
 Whatever balance of liability remained after adjustment of credit has to be paid in cash
i.e.vide E-Challan. The amount of E-challan will be credited to Electronic Cash Ledger
automatically. Then from the said balance in Electronic cash ledger the outstanding
 Page 89 of 371

liability has to be paid and the said amount will get debited to Electronic Liability
Register.
 Late payment of tax will attract interest at 18% p.a.
 Page 90 of 371

CONCEPT OF REVERSE CHARGE MECHANISM UNDER GST

Sec.2 of CGST Act - Definitions

(98) “reverse charge” means the liability to pay tax by the recipient of supply of goods or
services or both instead of the supplier of such goods or services or both under sub-
section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of
section 5 of the Integrated Goods and Services Tax Act;

Sec.9 of CGST Act - Levy and collection

(1) …..
(2) …..
(3) The Government may, on the recommendations of the Council, by notification, specify
categories of supply of goods or services or both, the tax on which shall be paid on
reverse charge basis by the recipient of such goods or services or both and all the
provisions of this Act shall apply to such recipient as if he is the person liable for paying
the tax in relation to the supply of such goods or services or both.
(4) The Government may, on the recommendations of the Council, by notification, specify a
class of registered persons who shall, in respect of supply of specified categories of
goods or services or both received from an unregistered supplier, pay the tax on reverse
charge basis as the recipient of such supply of goods or services or both, and all the
provisions of this Act shall apply to such recipient as if he is the person liable for paying
the tax in relation to such supply of goods or services or both.

Sec.12 of CGST Act - Time of supply of goods

(1) …..
(2) …..
(3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge
basis, the time of supply shall be the earliest of the following dates, namely:—

(a) the date of the receipt of goods; or

(b) the date of payment as entered in the books of account of the recipient or the
date on which the payment is debited in his bank account, whichever is earlier; or
(c) the date immediately following thirty days from the date of issue of invoice or any
other document, by whatever name called, in lieu thereof by the supplier:

Provided that where it is not possible to determine the time of supply under clause (a) or
clause (b) or clause (c), the time of supply shall be the date of entry in the books of
account of the recipient of supply.

Sec.13 of CGST Act - Time of supply of services

(1) …..
(2) …..
(3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge
basis, the time of supply shall be the earlier of the following dates, namely:––

(a) the date of payment as entered in the books of account of the recipient or the
date on which the payment is debited in his bank account, whichever is earlier; or
(b) the date immediately following sixty days from the date of issue of invoice or any
other document, by whatever name called, in lieu thereof by the supplier:
 Page 91 of 371

Provided that where it is not possible to determine the time of supply under clause (a) or
clause (b), the time of supply shall be the date of entry in the books of account of the
recipient of supply:

Provided further that in case of supply by associated enterprises, where the supplier of
service is located outside India, the time of supply shall be the date of entry in the books
of account of the recipient of supply or the date of payment, whichever is earlier.

FAQ ON RCM

Q.1 What is the time of supply of goods 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 goods; or
b) date on which payment is made; or
c) the date immediately following 30 days from the date of issue of invoice by the
supplier.

Q.2 What is the time of supply of service in case of tax payable under reverse charge?
Ans. The time of supply will be the earlier of the following dates:

a) date on which payment is made; or

b) the date immediately following sixty days from the date of issue of invoice by the
supplier.

TWITTER FAQ ON RCM

Sl. Question Answer

No.
1 What is meant by Reverse Charge? It means the liability to pay tax is on the recipient of supply
of goods or services instead of the supplier of such goods
or services in respect of notified categories of supply.
2 Is the reverse charge mechanism No, reverse charge applies to supplies of both goods or
applicable only to services? services, as notified by the Government on the
recommendations of the GST Council.
3 What will be the implications in case In case of receipt of supply from an unregistered person,
of receipt of supply from the registered person who is receiving goods or services
unregistered persons? shall be liable to pay tax under reverse charge mechanism.
4 How will a recipient who receives a A person who is required to pay tax under reverse charge
supply under reverse charge has to compulsorily register under GST. The threshold limit
mechanism pay GST? of Rs. 20 lakhs (Rs. 10 lakhs for special category States) is
not applicable in such case.
5 What is the time of supply of goods The time of supply will be the earliest of the following dates
in case of tax payable under :
reverse charge? date of receipt of goods; or (a)
date of payment as per books of account or date of debit in
bank (b) account, whichever is earlier; or
(c)the date immediately following 30 days  from the date
of issue of invoice by the supplier.
6 What is the time of supply of service The time of supply will be the earlier of the following dates :
in case of tax payable under date of payment as per books of account or date of debit in
reverse charge? bank (a) account, whichever is earlier; or
(b)the date immediately following sixty  days from the
date of issue of invoice by the supplier.
7 Can GST paid on reverse charge Yes. The definition of input tax includes the tax payable
 Page 92 of 371

basis be considered as input tax? under reverse charge mechanism.

8 Can a person take input tax credit Yes, the recipient can take ITC. The condition of payment
without payment of consideration of consideration to along with tax within 180 days from the
for the supply along with tax to the date of issue of invoice is not applicable where tax is
supplier? payable on reverse charge basis.
9 Whether old gold jewellery sold by No, even though the sale of old gold by an individual is for
an individual to a jeweller will be a consideration, it cannot be said to be in the course or
taxed under reverse charge furtherance of his business (as selling old gold jewellery is
mechanism? not the business of the said individual), and hence does
not qualify to be a supply per se. Accordingly, the sale of
old jewellery by an individual to a jeweller will not attract
the provisions of Section 9(4) and jeweller will not be liable
to pay tax under reverse charge mechanism on such
purchases.
10 Whether old gold jewellery sold by Yes, as the sale is for consideration and is in the course or
an unregistered supplier will be furtherance of business of such unregistered supplier.
taxed under reverse charge
mechanism?
11 Does aggregate turnover include Aggregate turnover does not include value of inward
value of inward supplies received supplies on which tax is payable on reverse charge basis.
on which RCM is payable? In other words, aggregate turnover, in the hands of
supplier, would include value of those supplies on which
tax is not payable by him but by the recipient of such
supplies.
12 Whether legal services provided by Yes.
advocate firm are under reverse
charge?
13 Is an advocate providing inter-State No, suppliers who are making only those supplies on which
supply chargeable under Reverse recipient is liable to discharge GST under RCM are
Charge liable for registration? exempted from registration.
14 A person receives a supply from an No, the person supplying the inter-State supply will have to
unregistered person in another compulsorily register irrespective of his turnover and will be
State. Whether he has to pay tax on liable to pay tax, unless the supplier has been exempted
reverse charge basis? from taking registration. Thus question of unregistered
supplies making inter-State supplies does not arise.
15 Who will issue the tax invoice in The recipient receiving supplies from unregistered supplier
case of reverse charge supplies? will have to issue invoice on self and pay tax. In other
words, the recipient receiving supplies, which are subject
to reverse charge, from a registered person need not issue
a tax invoice.
16 Under supply from unregistered No, stipend paid to interns will be employer-employee
dealer the purchaser have to pay transactions. Hence, not liable for GST.
GST on RCM basis, so whether
stipend paid to intern will also come
under RCM?
17 Do even small sundry purchases No, purchases by registered persons from any or all
from unregistered persons have to unregistered persons of up to Rs. 5000/- per day are
be levied to tax on reverse charge exempted from GST.
basis?
18 A registered person purchases He will have to pay GST on Rs. 6000/-. Exemption is
goods worth Rs. 6000/- on a single available only if the value of purchases per day is less than
day from unregistered persons. Rs. 5000/-.
Whether he has to pay GST on Rs.
1000/- or Rs. 6000/-?
19 If an Assessee pays GST on behalf Yes, input tax credit of tax paid on reverse charge basis by
 Page 93 of 371

of an unregistered supplier/SSI/ the recipient is allowed to the recipient and the credit can
exempted unit, will he be able to be taken even in the same month.
take Input Tax Credit of the GST
paid on reverse charge basis?
20 Whether, any Indian providing It depends on the nature of charges deducted.
services to PayPal on contract The place of supply is outside India but as the supplier is
basis is required to pay reverse located in India, it is a case of inter-State supply and
charges on charges deducted by subject to IGST. It will be zero rated if the sale proceeds
PayPal? are realized in convertible foreign exchange.
21 Under the new GST Act, the liability Reverse charge mechanism has been provided in GST law
or payment of GST still with for GTA and the recipient of GTA service (he may be
consignee or consignor? consignor or consignee) is required to pay GST.
Notification No. 13/2017-Central Tax (Rate) may be
referred to.
22 Whether RCM is applicable on RCM under section 9(3) is applicable for GTA and not for
payments made for hiring of transport of goods. Where the vehicle is taken on rent or
transport from unregistered GST lease , it will be supply of service under 9966 or 9973 and
traders? supply of service will be taxable under RCM under section
9(4).
23 We are also paying small payments If you are not registered, payment on reverse charge under
like unloading charges, detention section 9(4) of CGST Act, 2017 is not required. That said, if
charges and under miscellaneous such services availed fall within the domain of any service
payments to petty contractors. Is that is subject to reverse charge under section 9(3) of
GSTN under reverse charge CGST Act, 2017 you have to get yourself registered and
applicable for these payments? GST has to be paid.
24 Can any unregistered transporter Yes, GTA can carry the goods. GST on GTA services is
having a turnover below 20 lacks liable to be paid on RCM basis by the recipient. The supply
carry the goods for a registered of services of goods transport by road transporter other
dealer? than a GTA and a courier is exempted under Notification
No. 9/2017-Central Tax (Rate).
25 Whether reimbursement of Re-imbursement is an expense in the course or
expenses to staff comes under furtherance of business and if the same is against a
RCM? taxable supply taken from an unregistered supplier, RCM
will apply.
26 Whether tax under RCM is As per Notification No. 13/2017-Central Tax (Rate), Sl. No.
applicable for expenses incurred 4 sponsorship to anybody Corporate/Partnership firm
towards doctor sponsorship comes under RCM.
programme?
27 An USA based company provides If the place of supply is in India, the registered recipient will
services to its account holders have to pay tax under reverse charge and if the recipient is
spread worldwide. Whether unregistered, company will pay GST in accordance with
services given by it would be Section 14 of IGST Act.
covered under Section 13(8) of
IGST Act?

CIRCULARS ISSUED BY US

dt.04/03/2019.

Sub.:- GST – Payment of GST under reverse charge mechanism Notification No.10/2017-
IT(Rate), dt.28.06.2017 by the importer in India on the service of transportation of
goods by sea provided by the foreign shipping company for transportation of
imported goods from the country of origin to India – Reg….
 Page 94 of 371

Please note that, the Government as per the Sr.No.10 of the Notification No.10/2017-
IT(Rate), dt.28.06.2017 has made liable the importer of goods (as defined in Sec.2(26) of the
Customs Act, 1962) in India to pay the GST on the ocean freight to be paid to the foreign
shipping company who is transporting the goods from country of origin to the Indian Port.

[2] Please note that, as per the provision made in the said notification the importer of goods in
India either has to pay the GST @ 5% on the ocean freight mentioned in the shipping bill/bill
of entry and in case if the ocean freight is not mentioned in the shipping bill/bill of entry then
the importer has to pay the GST @ 5% on 10% of the CIF value of the imported goods
declared in the said shipping bill/bill of entry.

[3] It appears that, most of the assesses are not aware of the above said important provision
and hence I herewith request you to take note of the above said provision made under
reverse charge mechanism Notification No.10/2017-IT(Rate), dt.28.06.2017 and to
implement the same at your end immediately .

[4] Please note that, if till today you have not paid the GST on the ocean freight paid in respect
of the goods imported on or after 01.07.2017, you can now pay the same along with interest.

Please note that, you will have to issue self invoice in respect of the said service as Water
Transport Service of Goods (classifiable under SAC 996521)and will have to pay 5% GST on
the ocean freight (as mentioned in the shipping bill/bill of entry or 10% of the CIF value of
imported goods declared in the shipping bill/bill of entry, as the case maybe) and have to
declare the same in GSTR-3B return and you can avail the credit of the said GST on the
basis of said self invoice.

dt.04/01/2019.

Sub.:- GST – Security Agency service receiver liable to pay GST on security agency service
received from any person (other than body corporate) w.e.f.01.01.2019 –
NotificationNo.13/2017-CT(Rate), dt.28.06.2017 as amended by Notification
No.29/2018-CT(Rate), dt.31.12.2018 – Reg….

Till 31.12.2018, in respect of security agency service, the service provider i.e.security agency
was liable to pay the applicable GST (if his turnover is above Rs.20 lakhs in the preceding
financial year).

[2] Accordingly, the various security agencies (either proprietor/individual or partnership firm or
HUF or Association of persons or any co-operative society, Trust as well as private limited
and public limited companies) registered under GST (having turnover above Rs.20 lakhs in
preceding financial year) were regularly charging the GST in their tax invoices raised on the
clients and were recovering the same from the clients and were paying the same to the
Govt..

Whereas, the unregistered security agencies (having turnover less than Rs.20 lakhs in
preceding financial year) were not charging any GST in their invoices and the receiver of the
said service also was not required to pay the GST on the said service received from
unregistered security agencies under reverse charge mechanism.

[3] However, now, vide Notification No.29/2018-CT(Rate), dt.31.12.2018 the Government has
inserted new Sr.No.14 in the reverse charge mechanism Notification No.13/2017-CT(Rate),
dt.28.6.2017and in result of which, now,w.e.f.01.01.2019 the persons receiving the security
agency service from any proprietor/individual or partnership firm or HUF or Association of
 Page 95 of 371

Persons or Trust or any co-operative society are now bound to pay the GST on the said
services.

In other words, w.e.f.01.01.2019, only if the security agency service is being received from
any body corporate (i.e.private limited or public limited company) the person receiving the
service is not liable to pay the GST thereon under reverse charge mechanism and the said
body corporate (if registered) will remain bound to charge appropriate GST in its Tax Invoice
and to pay the same to the Govt..

[4] In the light of above said legal development, I advise you to verify the factual position at your
end and to make necessary changes in your practice if you are receiving the security agency
service from any person (other than body corporate).

[5] In case if you are receiving the security services from any person (other than body corporate)
then you will have to issue self invoices in respect of security service received from them and
will have to pay 18% GST on the charges paid to the said security service provider by
declaring the same in GSTR-3B return and you can avail the credit of the said GST onthe
basis of said self invoice.

[6] I also advice you to ask your security service provider (other than body corporate) to issue
the bill of month of Dec.’18 on 31.12.2018 (to avoid the dispute about point of taxation).

Further, if at present your security service provider (other than body corporate) is registered
and is accordingly charging GST in his invoice then, you have to inform him to stop charging
the GST in his invoices w.e.f.01.01.2019.

OUR COMMENTS ON REVERSE CHARGE MECHANISM CONCEPT UNDER GST

 As per the provisions of Sec.9(3) of CGST Act, 2017 read with Notification No.13/2017-
CT(Rate), dt.28.06.2017 and Notification No.10/2017-IT(Rate), dt.28.06.2017 which
declares certain services/goods on which tax to be paid by receiver and not by supplier.
 The self invoice is required to be issued by the receiver for such inward supply on which
he is liable to pay tax under reverse charge mechanism.
 The RCM transactions are required to be declared separately in GSTR-3B returns and
the payment of tax on such RCM transaction is to be made in cash only.
 The credit of such RCM tax can be taken in Electronic Cr. Ledger by declaring the same
in GSTR-3B return.
 As per the Sec.9(4) of CGST Act, 2017, the RCM also is applicable to the goods/service
(any) received from URD. However at present the same is suspended and is not
compulsory.

RCM on GTA Service

 The transporter is also allowed to get registered and pay GST @12%/5%. In such case
receiver of service need not have to pay GST under RCM on freight paid to such
transporter.
 If transporter is not availing any credit and is not charging GST in his invoice or the
transporter is not registered, the receiver can pay GST @5%.
 Transportation service received from individual vehicle owner not issuing consignment
note, the RCM for such transportation service is not applicable.
 Security agency service introduced under RCM w.e.f.01.01.2019 and any person
receiving service of security to pay GST under RCM. However, if the security agency is a
Body Corporate then they can pay GST by charging in the bills.
 Page 96 of 371

 Ocean freight paid to shipping line, the GST is payable by importer under RCM. The
credit of such GST is admissible. However the taxability of such service is under dispute
at present Gujarat High Court has granted stay.
 Services received from Govt., the receiver has to pay GST under RCM. The credit of
such GST is admissible.
 On the sameline the Directors Service, sponsorship service also are covered under
RCM notification on which tax is payable by the receiver has to pay GST. The credit of
such GST is admissible.

Time of supply of goods where tax is payable under RCM – Earliest of

 the date of receipt of goods

 the date of payment as entered in the books of account of the recipient or the
date on which the payment is debited in his bank account, whichever is earlier
 the date immediately following 30 days from the date of issue of invoice or any
other document, by whatever name called, in lieu thereof by the supplier
 where it is not possible to determine the time of supply in aforesaid manner the
time of supply shall be the date of entry in the books of account of the recipient of
supply.

Time of supply of services where tax is payable under RCM – Earliest of

 the date of payment as entered in the books of account of the recipient or the
date on which the payment is debited in his bank account, whichever is earlier
 the date immediately following 60 days from the date of issue of invoice or any
other document, by whatever name called, in lieu thereof by the supplier
 where it is not possible to determine the time of supply in aforesaid manner the
time of supply shall be the date of entry in the books of account of the recipient of
supply.
 In case of supply by associate enterprises, where the supplier of service is
located outside India, the time of supply shall be the date of entry in the books of
account of the recipient of supply or the date of payment, whichever is earlier.
 Page 97 of 371

TDS MECHANISM UNDER GST

Sec.51 of CGST Act, 2017 - Tax deduction at source.

(1) Notwithstanding anything to the contrary contained in this Act, the Government may
mandate,––

(a) a department or establishment of the Central Government or State Government;

or
(b) local authority; or
(c) Governmental agencies; or
(d) such persons or category of persons as may be notified by the Government on
the recommendations of the Council,

(hereafter in this section referred to as “the deductor”), to deduct tax at the rate of one
per cent. from the payment made or credited to the supplier (hereafter in this section
referred to as “the deductee”) of taxable goods or services or both, where the total value
of such supply, under a contract, exceeds two lakh and fifty thousand rupees:

Provided that no deduction shall be made if the location of the supplier and the place of
supply is in a State or Union territory which is different from the State or as the case may
be, Union territory of registration of the recipient.

Explanation.––For the purpose of deduction of tax specified above, the value of supply
shall be taken as the amount excluding the central tax, State tax, Union territory tax,
integrated tax and cess indicated in the invoice.

(2) The amount deducted as tax under this section shall be paid to the Government by the
deductor within ten days after the end of the month in which such deduction is made, in
such manner as may be prescribed.

(3) The deductor shall furnish to the deductee a certificate mentioning therein the contract
value, rate of deduction, amount deducted, amount paid to the Government and such
other particulars in such manner as may be prescribed.

(4) If any deductor fails to furnish to the deductee the certificate, after deducting the tax at
source, within five days of crediting the amount so deducted to the Government, the
deductor shall pay, by way of a late fee, a sum of one hundred rupees per day from the
day after the expiry of such five days period until the failure is rectified, subject to a
maximum amount of five thousand rupees.

(5) The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and
reflected in the return of the deductor furnished under sub-section (3) of section 39, in
such manner as may be prescribed.

(6) If any deductor fails to pay to the Government the amount deducted as tax under sub-
section (1), he shall pay interest in accordance with the provisions of sub-section (1) of
section 50, in addition to the amount of tax deducted.

(7) The determination of the amount in default under this section shall be made in the
manner specified in section 73 or section 74.
 Page 98 of 371

(8) The refund to the deductor or the deductee arising on account of excess or erroneous
deduction shall be dealt with in accordance with the provisions of section 54:

Provided that no refund to the deductor shall be granted, if the amount deducted has
been credited to the electronic cash ledger of the deductee.

Rule 12 of CGST Rules - Grant of registration to persons required to deduct tax at source
or to collect tax at source

(1) Any person required to deduct tax in accordance with the provisions of section 51 or a
person required to collect tax at source in accordance with the provisions of section 52
shall electronically submit an application, duly signed or verified through electronic
verification code, in FORM GST REG-07 for the grant of registration through the
common portal, either directly or through a Facilitation Centre notified by the
Commissioner.

(1A) A person applying for registration to collect tax in accordance with the provisions of
section 52, in a State or Union territory where he does not have a physical presence,
shall mention the name of the State or Union territory in PART A of the application
in FORM GST REG-07 and mention the name of the State or Union territory in PART
B thereof in which the principal place of business is located which may be different from
the State or Union territory mentioned in PART A.

(2) The proper officer may grant registration after due verification and issue a certificate of
registration in FORM GST REG-06 within a period of three working days from the date of
submission of the application.

(3) Where, upon an enquiry or pursuant to any other proceeding under the Act, the proper
officer is satisfied that a person to whom a certificate of registration in FORM GST REG-
06 has been issued is no longer liable to deduct tax at source under section 51 or collect
tax at source under section 52, the said officer may cancel the registration issued under
sub-rule (2) and such cancellation shall be communicated to the said person
electronically in FORM GST REG-08:

Provided that the proper officer shall follow the procedure as provided in rule 22 for the
cancellation of registration.

Government of India
Ministry of Finance
(Department of Revenue)
Central Board of Indirect Taxes and Customs

Notification No. 50/2018 – Central Tax

New Delhi, the 13th September, 2018

G.S.R. 868 (E).- In exercise of the powers conferred by sub-section (3) of section 1 of the Central Goods
and Services Tax Act, 2017 (12 of 2017) and in supercession of the notification of the Government of
India in the Ministry of Finance, Department of Revenue No. 33/2017-Central Tax, dated the 15th
September, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide
number G.S.R. 1163 (E), dated the 15th September, 2017, except as respects things done or omitted to
be done before such supersession, the Central Government hereby appoints the 1st day of October,
2018, as the date on which the provisions of section 51 of the said Act shall come into force with
 Page 99 of 371

respect to persons specified under clauses (a), (b) and (c) of sub-section (1) of section 51 of the
said Act and the persons specified below under clause (d) of sub-section (1) of section 51 of the
said Act, namely:-

(a) an authority or a board or any other body, -

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with fifty-one per cent. or more participation by way of equity or control, to carry out any function;

(b) Society established by the Central Government or the State Government or a Local Authority
under the Societies Registration Act, 1860 (21 of 1860);

(c) public sector undertakings.

Provided that with respect to persons specified under clause (a) of sub-section (1) of section 51 of
the Act, nothing in this notification shall apply to the authorities under the Ministry of Defence, other than
the authorities specified in the Annexure-A and their offices, with effect from the 1st day of October, 2018.

Provided further that nothing in this notification shall apply to the supply of goods or services or both from
a public sector undertaking to another public sector undertaking, whether or not a distinct person, with
effect from the 1st day of October, 2018.

Provided also that nothing in this notification shall apply to the supply of goods or services or both which
takes place between one person to another person specified under clauses (a), (b), (c) and (d) of sub-
section (1) of section 51 of the said Act.

M.F. (D.R.) DGHRD, Indirect Tax & Customs, New Delhi, Instruction
F. No. 8/B/10(2)/HRD/EMC/2017, dated 26-9-2018

Sub : Implementation of Tax Deduction at Source (TDS) under GST - Regarding.

This is to draw your kind attention to the Implementation of Tax Deduction at Source (TDS) under
GST.

(1) In this regard Notification No. 50/2018-Central Tax, dated 13-9-2018 has been issued to
bring into force the provisions of Sec. 51 of the CGST Act, 2017 w.e.f. 1-10-2018.

(2) Vide this notification, the following persons have been notified under clause (d) of section
51(1) of the CGST Act, 2017.

(a) An authority or a board or any other body, Set up by an Act of Parliament or a State
Legislature, or established by any Government, with fifty-one per cent or more
participation by way of equity or control, to carry out any functions;
(b) Society established by the Central Government or the State Government or a Local
Authority under the Societies Registration Act, 1860 (21 of 1860);
(c) Public sector undertakings

(3) Circular No. 65/39/2018-DOR, dated 14-9-2018 lays down guidelines for deductions and
deposits of TDS by the DDO under GST.

Detailed forms have already been prescribed vide FORM GST REG-07, FORM GSTR-7.
 Page 100 of 371

The persons, who are mandatorily required to deduct tax at Source under GST, have been
specified in Section 51 of the CGST Act, 2017.

As per provisions of section 24 of the CGST Act, 2017, the person so required to deduct Tax
at Source (TDS) are mandatorily required to take registration under 25 of the CGST Act,
2017.

(4) The Rate of TDS to be deducted is specified in Section 51(1) of the CGST Act, 2017 and
Section 20 of the IGST Act, 2017 and the timelines are prescribed under Sub-section (2), (3)
and (4) of Section 51 of CGST Act, 2017.

(5) Returns have to be filed under Rule 66 of the CGST Rules and in case of delayed payment
or non-payment of TDS to the Government, interest is to be paid under sub-section (6) of
Sec. 51 of the CGST Act, 2017.

(6) Penalty is also prescribed for non-deduction/short deduction of TDS or short payment/non-
payment of TDS deducted under Section 122(1)(v) of the CGST Act, 2017.

Identical penalty has been prescribed in the SGST/UTGST Act, 2017 of the States/UTs and
in case of offence been committed as mentioned above, penalty under State/UTGST Act,
2017 is also required to be paid.

As per further proviso to Section 20 of the IGST Act, 2017, in cases where the penalty is
leviable under the CGST Act and State UTGST Act, the penalty leviable under IGST Act,
2017 shall be sum total of the said penalty.

(7) Provisions for Payment of Tax by Deductee and Refund to Deductor/or Deductee in case of
excess/erroneous deduction of TDS have also been made.

(8) Only TDS category GST Registrant not liable to pay GST under Reverse charge on intra-
state supplies received from unregistered supplier (remains ineffective till 30-9-2019). (Ref.
notification No. 9/2017-Central Tax (Rate), dated 28-6-2017).

(9) Rule 12 of the CGST Rules, 2017 provides for Grant of registration to persons required to
deduct tax at source or to collect tax at source.

(10) The details of tax deducted at source furnished by the deductor under sub-section (3) of
section 39 in FORM GSTR-7 shall be made available to the deductee in Part C of FORM
GSTR-2A electronically through the Common Portal and the said deductee may include the
same in FORM GSTR-2 as per Rule 60(6), while as per Rule 80 : Annual Return may be
filed.

(11) Exemption Notification No. 9/2017-Central Tax (Rate), dated 28-6-2017 exempts intra-State
supplies of goods or services or both received by a deductor under section 51 of the said
Act, from any supplier, who is not registered, from the whole of the central tax leviable
thereon under sub-section (4) of section 9 of the said Act, subject to the condition that the
deductor is not liable to be registered otherwise than under sub-clause (vi) of section 24 of
the said Act w.e.f. 1-7-2017.

(12) Rate of interest per annum have been fixed vide Notification No. 13/2017-Central Tax, dated
8-6-2017 and Notification No. 6/2017-Integrated Tax, dated 28-6-2017.

It is requested to conduct handholding sessions in respect of all DDOs in your jurisdiction by

27th/28th September, 2018 & ensure smooth implementation of the TDS provisions under
GST.
 Page 101 of 371

FAQ ON TDS
Q1. What is TDS?
Ans. TDS stands for Tax Deducted at Source (TDS). As per section 51, this provision is meant for
Government and Government undertakings and other notified entities making contractual
payments where total value of such supply under a contract exceeds Rs. 2.5 Lakhs to
suppliers. While making any payments under such contracts, the concerned
Government/authority shall deduct 1% of the total payment made and remit it into the
appropriate GST account.

Q2. How will the Supplier account for this TDS? while filing his return?
Ans. Any amount shown as TDS will be reflected in the electronic cash ledger of the concerned
supplier. He can utilize this amount towards discharging his liability towards tax, interest fees
and any other amount.

Q3. How will the TDS Deductor account for such TDS?
Ans. TDS Deductor will account for such TDS in the following ways:
1. Such deductors needs to get compulsorily registered under section 24 of the
CGST/SGST Act.
2. They need to remit such TDS collected by the 10th day of the month succeeding the
month in which TDS was collected and reported in GSTR 7.
3. The amount deposited as TDS will be reflected in the electronic cash ledger of the
supplier.
4. They need to issue certificate of such TDS to the deductee within 5 days of crediting the
TDS to the govt a/c, failing which fees of Rs. 100 per day subject to maximum of Rs.
5000/- will be payable by such deductor.

OUR COMMENTS ON TDS MECHANISM UNDER GST

 The provisions of TDS under GST were made effective from 01.10.2018 vide Notification
No.50/2018.
 Where the supplies (the value of which is more than Rs.2.5 lakhs) are made to the
Government/any Government Authorities/ Government Departments/Public Sector
Undertakings and other establishments run by the Government are required to deduct
the TDS @ 2% on the value of supply made to them (exclusive of GST) and is required
to pay the said TDS on or before 10th day of next month and has to declare the same in
their GSTR-7 return (to be filed on or before 10th of next month).
 Then the said TDS will automatically get reflected in the electronic cash ledger of the
supplier.
 The said balance can be used by the supplier for payment of his liability of the
earlier/current/next month (as per supplier’s convenience).
 Refund of the said cash balance can be claimed by the assesse.
 Late payment of TDS will attract the interest @ 18% p.a.
 Page 102 of 371

TCS MECHANISM UNDER GST

Sec.52 of CGST Act - Collection of tax at source

(1) Notwithstanding anything to the contrary contained in this Act, every electronic
commerce operator (hereafter in this section referred to as the “operator”), not being an
agent, shall collect an amount calculated at such rate not exceeding one per cent., as
may be notified by the Government on the recommendations of the Council, of the net
value of taxable supplies made through it by other suppliers where the consideration
with respect to such supplies is to be collected by the operator.

Explanation.––For the purposes of this sub-section, the expression “net value of

taxable supplies” shall mean the aggregate value of taxable supplies of goods or
services or both, other than services notified under sub-section (5) of section 9, made
during any month by all registered persons through the operator reduced by the
aggregate value of taxable supplies returned to the suppliers during the said month.

(2) The power to collect the amount specified in sub-section (1) shall be without prejudice to
any other mode of recovery from the operator.

(3) The amount collected under sub-section (1) shall be paid to the Government by the
operator within ten days after the end of the month in which such collection is made, in
such manner as may be prescribed.

(4) Every operator who collects the amount specified in sub-section (1) shall furnish a
statement, electronically, containing the details of outward supplies of goods or services
or both effected through it, including the supplies of goods or services or both returned
through it, and the amount collected under sub-section (1) during a month, in such form
and manner as may be prescribed, within ten days after the end of such month.

Explanation: - For the purposes of this sub-section, it is hereby declared that the due
date for furnishing the said statement for the months of October, November and
December, 2018 shall be the 07th February, 2019

(5) Every operator who collects the amount specified in sub-section (1) shall furnish an
annual statement, electronically, containing the details of outward supplies of goods or
services or both effected through it, including the supplies of goods or services or both
returned through it, and the amount collected under the said sub-section during the
financial year, in such form and manner as may be prescribed, before the thirty first day
of December following the end of such financial year.

(6) If any operator after furnishing a statement under sub-section (4) discovers any omission
or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or
enforcement activity by the tax authorities, he shall rectify such omission or incorrect
particulars in the statement to be furnished for the month during which such omission or
incorrect particulars are noticed, subject to payment of interest, as specified in sub-
section (1) of section 50:

Provided that no such rectification of any omission or incorrect particulars shall be

allowed after the due date for furnishing of statement for the month of September
following the end of the financial year or the actual date of furnishing of the relevant
annual statement, whichever is earlier.
 Page 103 of 371

(7) The supplier who has supplied the goods or services or both through the operator shall
claim credit, in his electronic cash ledger, of the amount collected and reflected in the
statement of the operator furnished under sub-section (4), in such manner as may be
prescribed.

(8) The details of supplies furnished by every operator under sub-section (4) shall be
matched with the corresponding details of outward supplies furnished by the concerned
supplier registered under this Act in such manner and within such time as may be
prescribed.

(9) Where the details of outward supplies furnished by the operator under sub-section (4) do
not match with the corresponding details furnished by the supplier under section 37 or
section 39, the discrepancy shall be communicated to both persons in such manner and
within such time as may be prescribed.

(10) The amount in respect of which any discrepancy is communicated under sub-section (9)
and which is not rectified by the supplier in his valid return or the operator in his
statement for the month in which discrepancy is communicated, shall be added to the
output tax liability of the said supplier, where the value of outward supplies furnished by
the operator is more than the value of outward supplies furnished by the supplier, in his
return for the month succeeding the month in which the discrepancy is communicated in
such manner as may be prescribed.

(11) The concerned supplier, in whose output tax liability any amount has been added under
sub-section (10), shall pay the tax payable in respect of such supply along with interest,
at the rate specified under sub-section (1) of section 50 on the amount so added from
the date such tax was due till the date of its payment.

(12) Any authority not below the rank of Deputy Commissioner may serve a notice, either
before or during the course of any proceedings under this Act, requiring the operator to
furnish such details relating to—

(a) supplies of goods or services or both effected through such operator during any
period; or

(b) stock of goods held by the suppliers making supplies through such operator in
the godowns or warehouses, by whatever name called, managed by such
operator and declared as additional places of business by such suppliers,

as may be specified in the notice.

(13) Every operator on whom a notice has been served under sub-section (12) shall furnish
the required information within fifteen working days of the date of service of such notice.

(14) Any person who fails to furnish the information required by the notice served under sub-
section (12) shall, without prejudice to any action that may be taken under section 122,
be liable to a penalty which may extend to twenty-five thousand rupees.

Explanation.—For the purposes of this section, the expression “concerned supplier”

shall mean the supplier of goods or services or both making supplies through the
operator.
 Page 104 of 371

Rule 12 of CGST Rules - Grant of registration to persons required to deduct tax at source
or to collect tax at source

(1) Any person required to deduct tax in accordance with the provisions of section 51 or a
person required to collect tax at source in accordance with the provisions of section 52
shall electronically submit an application, duly signed or verified through electronic
verification code, in FORM GST REG-07 for the grant of registration through the
common portal, either directly or through a Facilitation Centre notified by the
Commissioner.

(1A) A person applying for registration to collect tax in accordance with the provisions of
section 52, in a State or Union territory where he does not have a physical presence,
shall mention the name of the State or Union territory in PART A of the application
in FORM GST REG-07 and mention the name of the State or Union territory in PART
B thereof in which the principal place of business is located which may be different from
the State or Union territory mentioned in PART A.

(2) The proper officer may grant registration after due verification and issue a certificate of
registration in FORM GST REG-06 within a period of three working days from the date of
submission of the application.

(3) Where, upon an enquiry or pursuant to any other proceeding under the Act, the proper
officer is satisfied that a person to whom a certificate of registration in FORM GST REG-
06 has been issued is no longer liable to deduct tax at source under section 51 or collect
tax at source under section 52, the said officer may cancel the registration issued under
sub-rule (2) and such cancellation shall be communicated to the said person
electronically in FORM GST REG-08:

Provided that the proper officer shall follow the procedure as provided in rule 22 for the
cancellation of registration.

Notification No.52/2018-CT, dt.20.09.2018.

Tax Collection at Source (TCS) for intra-State supplies by E-commerce operator @ half
per cent of the net value

In exercise of the powers conferred by sub-section (1) of section 52 of the Central Goods and
Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the
Council, hereby notifies that every electronic commerce operator, not being an agent, shall
collect an amount calculated at a rate of half per cent. of the net value of intra-State taxable
supplies made through it by other suppliers where the consideration with respect to such
supplies is to be collected by the said operator.

TCS Mechanism under GST

C.B.E. & C. Flyer No. 48, dated 1-1-2018

Tax Collection at Source (TCS) has similarities with TDS, as well as has distinctive features also.
TDS refers to tax which is deducted when recipient of goods or services makes some payments
under a contract, etc. while TCS refers to tax which is collected by the electronic commerce operator
when a supplier supplies some goods or services through its portal and the payment for that supply
is collected by the electronic commerce operator. We will discuss the exact nature of TCS with an
 Page 105 of 371

example. There are many e-Commerce operators [hereinafter referred to as an Operator], like
Amazon, Flipkart, Jabong, etc. operating in India. These operators displays/lists on their portal
products as well as services which are actually supplied by some other person to the consumer. The
goods or services belonging to other suppliers are displayed on the portals of the operators and
consumers buy such goods/services through these portals. On placing the order for a particular
product/services the actual supplier supplies the selected product/services to the consumer. The
price/consideration for the product/services is collected by the Operator from the consumer and
passed on to the actual supplier after deducting his commission by the Operator. The Government
has placed the responsibility on the Operator to collect the ‘tax’ at a rate of 1% from the supplier.
This shall be done by the Operator by paying the supplier the price of the product/services, less the
tax, calculated at the rate of 1%. The said amount will be calculated on the net value of the
goods/services supplied through the portal of the operator.

Suppose a certain product is sold at Rs. 1000/- through an Operator by a seller. The Operator would
deduct tax @ 1% of the net value of Rs. 1000/- i.e. Rs. 100/-.

Let us have a look at the statutory provisions relating to TCS.

Registration :The ecommerce operator as well as the supplier supplying goods or services through
an operator need to compulsorily register under GST. The threshold limit of Rs. 20 lakhs (10 lakhs
for special category states) is not applicable to them. Section 24(x) of the CGST Act, 2017 makes it
mandatory for every e-Commerce Operator to get registered under GST. Similarly, section 24(ix) of
the CGST Act, 2017 makes it mandatory for every person who supplies goods/services through an
Operator to get registered under GST.

Power to collect tax :Section 52 of the CGST Act, 2017 provides for Tax Collection at source, by e-
Commerce operator in respect of the taxable supplies made through it by other suppliers, where the
consideration in respect of such supplies is collected by him.

TCS Statement :The amount of tax so collected by the operator is required to be deposited by the
10th of the following month, during which such collection is made. The operator is also required to
furnish a monthly statement in Form GSTR-8 by the 10th of the following month. The Operator is
also required to file an Annual statement in prescribed form by the 31st of December following the
end of every financial year. The Operator can rectify errors in statements filed, if any, latest by the
return to be filed for the month of September, following the end of every financial year.

The details furnished by the operator in GSTR-8 shall be made available electronically to each of the
suppliers in Part C of FORM GSTR-2A on the Common Portal after the due date of filing of FORM
GSTR-8.

Credit of tax collected :The tax collected by the operator shall be credited to the cash ledger of the
supplier who has supplied the goods/services through the Operator. The supplier can claim credit of
tax collected and reflected in the return by the Operator in his [supplier’s] electronic cash ledger.

Matching of details of supplies :The details of the supplies, including the value of supplies,
submitted by every operator in the statements will be matched with the details of supplies submitted
by all such suppliers in their returns. If there is any discrepancy in the value of supplies, the same
would be communicated to both of them. If such discrepancy in value is not rectified within the given
time, then such amount would be added to the output tax liability of such suppler. The supplier will
have to pay the differential amount of output tax along with interest.

Notice to the Operator : An officer not below the rank of Deputy Commissioner can issue notice to
an Operator asking him to furnish details relating to volume of goods/services supplied, stock of
goods lying in warehouses/godowns, etc. The Operator is required to furnish such details within 15
working days. In case an Operator fails to furnish the information, besides being liable for penal
action under section 122 shall also be liable for penalty up to Rs. 25,000/-
 Page 106 of 371

The GST Council in their 22nd meeting held on 6th October, 2017 at New Delhi decided that
operationalization of TDS/TCS provisions shall be postponed till 31-3-2018.

FAQ ON TCS

Q.1 What is Tax Collected at Source (TCS)?

Ans. This provision is applicable only for E-Commerce Operator under section 52 of CGST/SGST
Act. Every E-Commerce Operator, not being an agent, needs to withhold an amount calculated at
the rate not exceeding one percent of the “net value of taxable supplies” made through it where
the consideration with respect to such supplies is to be collected by the operator. Such withheld
amount is to be deposited by such E-Commerce Operator to the appropriate GST account by the
10th of the next month. The amount deposited as TCS will be reflected in the electronic cash ledger
of the supplier.

Q2. What is the time within which such TCS is to be remitted by the e-commerce operator to
Government account?
Ans. The amount collected by the operator is to be paid to appropriate government within 10 days
after the end of the month in which amount was so collected.

Q3. How can actual suppliers claim credit of this TCS?

Ans. The amount of TCS deposited by the operator with the appropriate government 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.

Q4. Is the e-commerce operator required to submit any statement? What are the details that
are required to be submitted in the statement?
Ans. Yes, every operator is required to furnish a statement, electronically, containing the details of
outward supplies of goods or services effected through it, including the supplies of goods or services
returned through it, and the amount collected by it as TCS during a month within ten days after the
end of such month. The operator is also required to file an annual statement by 31st day of
December following the end of the financial year in which the tax was collected.

OUR COMMENTS ON TCS MECHANISM UNDER GST

 The provisions of TCS under GST were made effective from 01.10.2018 vide Notification
No.52/2018.
 These provisions are applicable to the electronic commerce operators only.
 The E-Commerce operators are required to deduct the TCS @ 1% while making
payment to supplier on the value of supply made to them (exclusive of GST) and are
required to pay the said TCS on or before 10 th day of next month and has to declare the
same in their GSTR-8 return (to be filed on or before 10th of next month).
 Then the said TCS will automatically get reflected in the electronic cash ledger of the
supplier.
 The said balance can be used by the supplier for payment of his liability of the
earlier/current/next month (as per supplier’s convenience).
 Late payment of TCS will attract the interest @ 18% p.a..
 Page 107 of 371

TAX INVOICE, CREDIT NOTE AND DEBIT NOTE UNDER GST

Sec.31 of CGST Act - Tax invoice

(1) A registered person supplying taxable goods shall, before or at the time of,—

(a) removal of goods for supply to the recipient, where the supply involves
movement of goods; or

(b) delivery of goods or making available thereof to the recipient, in any other case,
issue a tax invoice showing the description, quantity and value of goods, the tax
charged thereon and such other particulars as may be prescribed:

Provided that the Government may, on the recommendations of the Council, by

notification, specify the categories of goods or supplies in respect of which a tax invoice
shall be issued, within such time and in such manner as may be prescribed.

(2) A registered person supplying taxable services shall, before or after the provision of
service but within a prescribed period, issue a tax invoice, showing the description,
value, tax charged thereon and such other particulars as may be prescribed:

Provided that the Government may, on the recommendations of the Council, by

notification and subject to such conditions as may be mentioned therein, specify the
categories of services in respect of which––

(a) any other document issued in relation to the supply shall be deemed to be a tax
invoice; or
(b) tax invoice may not be issued.

(3) Notwithstanding anything contained in sub-sections (1) and (2)––

(a) a registered person may, within one month from the date of issuance of
certificate of registration and in such manner as may be prescribed, issue a
revised invoice against the invoice already issued during the period beginning
with the effective date of registration till the date of issuance of certificate of
registration to him;
(b) a registered person may not issue a tax invoice if the value of the goods or
services or both supplied is less than two hundred rupees subject to such
conditions and in such manner as may be prescribed;
(c) a registered person supplying exempted goods or services or both or paying tax
under the provisions of section 10 shall issue, instead of a tax invoice, a bill of
supply containing such particulars and in such manner as may be prescribed:
Provided that the registered person may not issue a bill of supply if the value of
the goods or services or both supplied is less than two hundred rupees subject to
such conditions and in such manner as may be prescribed;
(d) a registered person shall, on receipt of advance payment with respect to any
supply of goods or services or both, issue a receipt voucher or any other
document, containing such particulars as may be prescribed, evidencing receipt
of such payment;
(e) where, on receipt of advance payment with respect to any supply of goods or
services or both the registered person issues a receipt voucher, but subsequently
no supply is made and no tax invoice is issued in pursuance thereof, the said
 Page 108 of 371

registered person may issue to the person who had made the payment, a refund
voucher against such payment;
(f) a registered person who is liable to pay tax under sub-section (3) or sub-section
(4) of section 9 shall issue an invoice in respect of goods or services or both
received by him from the supplier who is not registered on the date of receipt of
goods or services or both;
(g) a registered person who is liable to pay tax under sub-section (3) or sub-section
(4) of section 9 shall issue a payment voucher at the time of making payment to
the supplier.

(4) In case of continuous supply of goods, where successive statements of accounts or

successive payments are involved, the invoice shall be issued before or at the time each
such statement is issued or, as the case may be, each such payment is received.

(5) Subject to the provisions of clause (d) of sub-section (3), in case of continuous supply of
services,––

(a) where the due date of payment is ascertainable from the contract, the invoice
shall be issued on or before the due date of payment;
(b) where the due date of payment is not ascertainable from the contract, the invoice
shall be issued before or at the time when the supplier of service receives the
payment;
(c) where the payment is linked to the completion of an event, the invoice shall be
issued on or before the date of completion of that event.

(6) In a case where the supply of services ceases under a contract before the completion of
the supply, the invoice shall be issued at the time when the supply ceases and such
invoice shall be issued to the extent of the supply made before such cessation.

(7) Notwithstanding anything contained in sub-section (1), where the goods being sent or
taken on approval for sale or return are removed before the supply takes place, the
invoice shall be issued before or at the time of supply or six months from the date of
removal, whichever is earlier.

Explanation.––For the purposes of this section, the expression “tax invoice” shall
include any revised invoice issued by the supplier in respect of a supply made earlier.

Rule 46 of CGST Rules - Tax invoice

Subject to rule 54, a tax invoice referred to in section 31 shall be issued by the registered
person containing the following particulars, namely,-

(a) name, address and Goods and Services Tax Identification Number of the supplier;
(b) a consecutive serial number not exceeding sixteen characters, in one or multiple series,
containing alphabets or numerals or special characters- hyphen or dash and slash
symbolised as “-“ and “/” respectively, and any combination thereof, unique for a financial
year;
(c) date of its issue;
(d) name, address and Goods and Services Tax Identification Number or Unique Identity
Number, if registered, of the recipient;
(e) name and address of the recipient and the address of delivery, along with the name of
the State and its code, if such recipient is un-registered and where the value of the
taxable supply is fifty thousand rupees or more;
 Page 109 of 371

(f) name and address of the recipient and the address of delivery, along with the name of
the State and its code, if such recipient is un-registered and where the value of the
taxable supply is less than fifty thousand rupees and the recipient requests that such
details be recorded in the tax invoice;
(g) Harmonised System of Nomenclature code for goods or services;
(h) description of goods or services;
(i) quantity in case of goods and unit or Unique Quantity Code thereof;
(j) total value of supply of goods or services or both;
(k) taxable value of the supply of goods or services or both taking into account discount or
abatement, if any;
(l) rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
(m) amount of tax charged in respect of taxable goods or services (central tax, State tax,
integrated tax, Union territory tax or cess);
(n) place of supply along with the name of the State, in the case of a supply in the course of
inter-State trade or commerce;
(o) address of delivery where the same is different from the place of supply;
(p) whether the tax is payable on reverse charge basis; and
(q) signature or digital signature of the supplier or his authorised representative:

Provided that the Board may, on the recommendations of the Council, by notification, specify-
(i) the number of digits of Harmonised System of Nomenclature code for goods or
services that a class of registered persons shall be required to mention, for such
period as may be specified in the said notification; and
(ii) the class of registered persons that would not be required to mention the
Harmonised System of Nomenclature code for goods or services, for such period
as may be specified in the said notification:

Provided further that where an invoice is required to be issued under clause (f) of sub-section
(3) of section 31, a registered person may issue a consolidated invoice at the end of a month for
supplies covered under sub-section (4) of section 9, the aggregate value of such supplies
exceeds rupees five thousand in a day from any or all the suppliers:

Provided also that in the case of the export of goods or services, the invoice shall carry an
endorsement ―SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT OR SEZ DEVELOPER
FOR AUTHORISED OPERATIONS ON PAYMENT OF INTEGRATED TAX or SUPPLY MEANT
FOR EXPORT/SUPPLY TO SEZ UNIT OR SEZ DEVELOPER FOR AUTHORISED
OPERATIONS UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF
INTEGRATED TAX, as the case may be, and shall, in lieu of the details specified in clause (e),
contain the following details, namely,-
(i) name and address of the recipient;
(ii) address of delivery; and
(iii) name of the country of destination:

Provided also that a registered person may not issue a tax invoice in accordance with the
provisions of clause (b) of sub-section (3) of section 31 subject to the following conditions,
namely,-
(a) the recipient is not a registered person; and
(b) the recipient does not require such invoice, and

shall issue a consolidated tax invoice for such supplies at the close of each day in respect of all
such supplies.
 Page 110 of 371

Provided also that the signature or digital signature of the supplier or his authorised
representative shall not be required in the case of issuance of an electronic invoice in
accordance with the provisions of the Information Technology Act, 2000 (21 of 2000)

Rule 46A of CGST Rules - Invoice-cum-bill of supply

Notwithstanding anything contained in rule 46 or rule 49 or rule 54, where a registered person is
supplying taxable as well as exempted goods or services or both to an unregistered person, a
single invoice-cum-bill of supply may be issued for all such supplies.

Rule 47 of CGST Rules - Time limit for issuing tax invoice

The invoice referred to in rule 46, in the case of the taxable supply of services, shall be issued
within a period of thirty days from the date of the supply of service:

Provided that where the supplier of services is an insurer or a banking company or a financial
institution, including a non-banking financial company, the period within which the invoice or any
document in lieu thereof is to be issued shall be forty five days from the date of the supply of
service:

Provided further that an insurer or a banking company or a financial institution, including a non-
banking financial company, or a telecom operator, or any other class of supplier of services as
may be notified by the Government on the recommendations of the Council, making taxable
supplies of services between distinct persons as specified in section 25, may issue the invoice
before or at the time such supplier records the same in his books of account or before the expiry
of the quarter during which the supply was made.

Rule 48 of CGST Rules - Manner of issuing invoice

(1) The invoice shall be prepared in triplicate, in the case of supply of goods, in the following
manner, namely,-

(a) the original copy being marked as ORIGINAL FOR RECIPIENT;

(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and
(c) the triplicate copy being marked as TRIPLICATE FOR SUPPLIER.

(2) The invoice shall be prepared in duplicate, in the case of the supply of services, in the
following manner, namely,-

(a) the original copy being marked as ORIGINAL FOR RECIPIENT; and
(b) the duplicate copy being marked as DUPLICATE FOR SUPPLIER.

(3) The serial number of invoices issued during a tax period shall be furnished electronically
through the common portal in FORM GSTR-1.

Rule 50 of CGST Rules - Receipt voucher

A receipt voucher referred to in clause (d) of sub-section (3) of section 31 shall contain the
following particulars, namely,-

(a) name, address and Goods and Services Tax Identification Number of the supplier;
(b) a consecutive serial number not exceeding sixteen characters, in one or multiple series,
containing alphabets or numerals or special characters hyphen or dash and slash
 Page 111 of 371

symbolised as “-“ and “/” respectively, and any combination thereof, unique for a financial
year;
(c) date of its issue;
(d) name, address and Goods and Services Tax Identification Number or Unique
(e) Identity Number, if registered, of the recipient;
(f) description of goods or services;
(g) amount of advance taken;
(h) rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
(i) amount of tax charged in respect of taxable goods or services (central tax, State tax,
integrated tax, Union territory tax or cess);
(j) place of supply along with the name of State and its code, in case of a supply in the
course of inter-State trade or commerce;
(k) whether the tax is payable on reverse charge basis; and
(l) signature or digital signature of the supplier or his authorised representative:

Provided that where at the time of receipt of advance,-

(i) the rate of tax is not determinable, the tax shall be paid at the rate of eighteen per
cent.;
(ii) the nature of supply is not determinable, the same shall be treated as inter-State
supply.

Rule 51 of CGST Rules - Refund voucher

A refund voucher referred to in clause (e) of sub-section (3) of section 31 shall contain the
following particulars, namely:-

(a) name, address and Goods and Services Tax Identification Number of the supplier;
(b) a consecutive serial number not exceeding sixteen characters, in one or multiple series,
containing alphabets or numerals or special characters hyphen or dash and slash
symbolised as “-“ and “/”respectively, and any combination thereof, unique for a financial
year;
(c) date of its issue;
(d) name, address and Goods and Services Tax Identification Number or Unique Identity
Number, if registered, of the recipient;
(e) number and date of receipt voucher issued in accordance with the provisions of rule 50;
(f) description of goods or services in respect of which refund is made;
(g) amount of refund made;
(h) rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
(i) amount of tax paid in respect of such goods or services (central tax, State tax, integrated
tax, Union territory tax or cess);
(j) whether the tax is payable on reverse charge basis; and
(k) signature or digital signature of the supplier or his authorised representative.

Rule 52 of CGST Rules - Payment voucher

A payment voucher referred to in clause (g) of sub-section (3) of section 31 shall contain the
following particulars, namely:-

(a) name, address and Goods and Services Tax Identification Number of the supplier if
registered;
(b) a consecutive serial number not exceeding sixteen characters, in one or multiple series,
containing alphabets or numerals or special characters hyphen or dash and slash
 Page 112 of 371

symbolised as “-“ and “/” respectively, and any combination thereof, unique for a financial
year;
(c) date of its issue;
(d) name, address and Goods and Services Tax Identification Number of the recipient;
(e) description of goods or services;
(f) amount paid;
(g) rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
(h) amount of tax payable in respect of taxable goods or services (central tax, State tax,
integrated tax, Union territory tax or cess);
(i) place of supply along with the name of State and its code, in case of a supply in the
course of inter-State trade or commerce; and
(j) signature or digital signature of the supplier or his authorised representative.

Sec.33 of CGST Act - Amount of tax to be indicated in tax invoice and other documents

Notwithstanding anything contained in this Act or any other law for the time being in
force, where any supply is made for a consideration, every person who is liable to pay
tax for such supply shall prominently indicate in all documents relating to assessment,
tax invoice and other like documents, the amount of tax which shall form part of the price
at which such supply is made.

Sec.34 of CGST Act - Credit and debit notes

(1) Where one or more tax invoices have been issued for supply of any goods or services or
both and the taxable value or tax charged in that tax invoice is found to exceed the
taxable value or tax payable in respect of such supply, or where the goods supplied are
returned by the recipient, or where goods or services or both supplied are found to be
deficient, the registered person, who has supplied such goods or services or both, may
issue to the recipient a credit note containing such particulars as may be prescribed.

(2) Any registered person who issues one or more credit notes for supplies made in a
financial year in relation to a supply of goods or services or both shall declare the details
of such credit note in the return for the month during which such credit note has been
issued but not later than September following the end of the financial year in which such
supply was made, or the date of furnishing of the relevant annual return, whichever is
earlier, and the tax liability shall be adjusted in such manner as may be prescribed:

Provided that no reduction in output tax liability of the supplier shall be permitted, if the
incidence of tax and interest on such supply has been passed on to any other person.

(3) Where one or more tax invoices have been issued for supply of any goods or services or
both and the taxable value or tax charged in that tax invoice is found to be less than the
taxable value or tax payable in respect of such supply, the registered person, who has
supplied such goods or services or both, shall issue to the recipient one or more debit
notes for supplies made in a financial year containing such particulars as may be
prescribed.

(4) Any registered person who issues a debit note in relation to a supply of goods or
services or both shall declare the details of such debit note in the return for the month
during which such debit note has been issued and the tax liability shall be adjusted in
such manner as may be prescribed.
 Page 113 of 371

Explanation.––For the purposes of this Act, the expression “debit note” shall includes a
supplementary invoice.

Rule 53 of CGST Rules - Revised tax invoice and credit or debit notes

(1) A revised tax invoice referred to in section 31 shall contain the following particulars,
namely:-

(a) the word ―Revised Invoice‖, wherever applicable, indicated prominently;

(b) name, address and Goods and Services Tax Identification Number of the
supplier;
(c) ****
(d) a consecutive serial number not exceeding sixteen characters, in one or multiple
series, containing alphabets or numerals or special characters hyphen or dash
and slash symbolised as “-“ and “/” respectively, and any combination thereof,
unique for a financial year;
(e) date of issue of the document;
(f) name, address and Goods and Services Tax Identification Number or Unique
Identity Number, if registered, of the recipient;
(g) name and address of the recipient and the address of delivery, along with the
name of State and its code, if such recipient is un-registered;
(h) serial number and date of the corresponding tax invoice or, as the case may be,
bill of supply;
(i) *****
(j) signature or digital signature of the supplier or his authorised representative.

(1A) A credit or debit note referred to in section 34 shall contain the following particulars,
namely:–

(a) name, address and Goods and Services Tax Identification Number of the
supplier;
(b) nature of the document;
(c) a consecutive serial number not exceeding sixteen characters, in one or multiple
series, containing alphabets or numerals or special characters-hyphen or dash
and slash symbolised as “-” and “/” respectively, and any combination thereof,
unique for a financial year;
(d) date of issue of the document;
(e) name, address and Goods and Services Tax Identification Number or Unique
Identity Number, if registered, of the recipient;
(f) name and address of the recipient and the address of delivery, along with the
name of State and its code, if such recipient is un-registered;
(g) serial number(s) and date(s) of the corresponding tax invoice(s) or, as the case
may be, bill(s) of supply;
(h) value of taxable supply of goods or services, rate of tax and the amount of the
tax credited or, as the case may be, debited to the recipient; and
(i) signature or digital signature of the supplier or his authorised representative.

(2) Every registered person who has been granted registration with effect from a date earlier
than the date of issuance of certificate of registration to him, may issue revised tax
invoices in respect of taxable supplies effected during the period starting from the
effective date of registration till the date of the issuance of the certificate of registration:
 Page 114 of 371

Provided that the registered person may issue a consolidated revised tax invoice in
respect of all taxable supplies made to a recipient who is not registered under the Act
during such period:

Provided further that in the case of inter-State supplies, where the value of a supply
does not exceed two lakh and fifty thousand rupees, a consolidated revised invoice may
be issued separately in respect of all the recipients located in a State, who are not
registered under the Act.

(3) Any invoice or debit note issued in pursuance of any tax payable in accordance with the
provisions of section 74 or section 129 or section 130 shall prominently contain the
words ―INPUT TAX CREDIT NOT ADMISSIBLE.

Rule 55A of CGST Rules - Tax Invoice or bill of supply to accompany transport of goods

The person in-charge of the conveyance shall carry a copy of the tax invoice or the bill of supply
issued in accordance with the provisions of rules 46, 46A or 49 in a case where such person is
not required to carry an e-way bill under these rules.

Twitter FAQ on Invoice

A shop sells taxable & exempt products to
the same person (B2C), is it required to
issue tax invoice and bill of supply
separately?
Do registered dealers have to record
Aadhaar/PAN while selling goods to
unregistered dealers?
All expenses like freight/transport/pack-ing
which are charged in Sales Invoice are
taxable in GST? How to charge in bill?
How to treat following transaction in GST (i)
Delivered supply shortages in Transit. (ii)
Customer gets less quantity and pays less.
Should we issue Self-invoice for GST liability
discharge on RCM or GST can be discharge
through expenses booking voucher?
If an Assessee has two or more units with
single registration, how the invoices are to
be maintained viz., separate invoices unit
wise or single invoice for all units?
Do we have clarity on when invoice data
uploading will begin on the GSTN?
Would head offices providing centralized HR,
Finance and IT functions also need to raise
invoices to its branches?
Kindly clarify the accounting treatment of
Credit Note while raising Invoice after
implementation of GST?
In such a case the person can issue one tax invoice
for the taxable invoice and also declare exempted
supply in the same invoice.
There is no requirement to take Aadhaar/PAN details
of the customer under the GST Act.
All expenses will have to be included in the value
and invoice needs to be issued accordingly. Please
refer to Section 15 of CGST Act and Invoice Rules.
The supplier may issue credit note to the customers
and adjust his liability.
For RCM liabilities tax invoice has to be issued on
self.
He can issue unit-wise invoice also. But there should
not be any duplication in numbering system.
Government is ready to launch this. However, a
simpler return called GSTR-3B has also been
devised due to the demands from the trade and
industry for extension of time limit for filing of normal
returns.
Yes, if the head office and branches are distinct
persons as specified in Section 25(4) of CGST Act,
2017 invoice is required to be issued and GST
should also be paid.
For the purpose of GST law, credit note can be
issued to reduce the taxable value or to reduce tax
payable or to claim goods return, where the relevant
 Page 115 of 371

invoice had already been issued and taxable value

Whether any trader having turnover of less
than Rs. 20 lakh needs to sell his goods on
proper invoice/billing?
If we are only dealing in exempted items
what is the type of invoice we are required to
issue to our buyers? Is it bill of supply or
regular GST Invoice?
How the invoicing should be done for free
goods given along with sale so that
corresponding input tax credit is not required
to be reversed for products under scheme?
Clarification is sought on the following :
Revision in GSTR Returns.
or tax charged in that tax invoice is in excess.
Section 34 of CGST Act, 2017 may be referred to for
further details.
Only registered persons are required to issue tax
invoices as per provision of Section 31 of CGST Act,
2017 read with rules. An unregistered person may
supply goods on ordinary commercial invoices and
he cannot issue tax invoice.
You may issue a commercial invoice in such cases.
However, if you are a registered person, you may
issue a bill of supply for exempt supplies.
Invoice value would include value of all goods
including those supplied free. In such cases, ITC is
not required to be reversed.
Mistakes can be corrected in subsequent returns to
be filed through amendment Table (For example
Table 11 of GSTR-1). Such mistakes can be
corrected till the due date for filing of the return for
the month of September subsequent to end of the
year or filing of the annual return, whichever is
earlier.

Tax Invoice and other such instruments in GST

C.B.E. & C. Flyer No. 13, dated 1-1-2018
Introduction
Generally speaking, an invoice is a commercial instrument issued by a seller to a buyer. It
identifies both the trading parties and lists, describes, and quantifies the items sold, shows the
date of shipment and mode of transport, prices and discounts, if any, and delivery and
payment terms.

In certain cases, (especially when it is signed by the seller or seller’s agent), an invoice serves
as a demand for payment and becomes a document of title when paid in full. Types of invoice
include commercial invoice, consular invoice, customs invoice, and proforma invoice. It is also
called a bill of sale or contract of sale.

Invoice under GST

Under the GST regime, an “invoice” or “tax invoice” means the tax invoice referred to in
section 31 of the CGST Act, 2017. This section mandates issuance of invoice or a bill of
supply for every supply of goods or services. It is not necessary that only a person supplying
goods or services need to issue invoice. The GST law mandates that any registered person
buying goods or services from an unregistered person needs to issue a payment voucher as
well as a tax invoice. The type of invoice to be issued depends upon the category of
registered person making the supply. For example, if a registered person is making or
receiving supplies (from unregistered persons), then a tax invoice needs to be issued by such
registered person. However, if a registered person is dealing only in exempted supplies or is
availing of composition scheme (composition dealer), then such a registered person needs to
issue a bill of supply in lieu of invoice. The invoice should contain description, quantity and
value & such other prescribed particulars (in case of supply of goods) and the description and
value & such other prescribed particulars (in case of supply of services). An invoice or a bill of
 Page 116 of 371

supply need not be issued if the value of the supply is less than Rs. 200/- subject to specified
conditions.

Importance of tax invoice under GST

Under GST a tax invoice is an important document. It not only evidences supply of goods or
services, but is also an essential document for the recipient to avail Input Tax Credit (ITC). A
registered person cannot avail input tax credit unless he is in possession of a tax invoice or a
debit note.

GST is chargeable at the time of supply. Invoice is an important indicator of the time of supply.
Broadly speaking, the time of supply of goods or services is the date of issuance of invoice or
receipt of payment whichever is earlier. However, a special procedure for payment of tax has
been prescribed for registered persons (other than composition dealers) supplying goods.
Such category of persons (suppliers of goods other than composition dealers) need to pay
GST only at the time of issue of invoice irrespective of when they receive payment.

Thus the importance of invoice under GST cannot be over-emphasised. Suffice it to say, the
tax invoice is the primary document evidencing the supply and vital for availing input tax
credit.

When a tax invoice or a bill of supply should be issued by a registered person Goods
The time for issuing invoice would depend on the nature of supply viz whether it is a supply of
goods or services. A registered person supplying taxable goods shall, before or at the time of
removal of goods (where supply involves movement of goods) or delivery or making available
thereof to the recipient, issue a tax invoice showing the description, quantity and value of
goods, the tax charged thereon and such other particulars has been prescribed in the Invoice
Rules.

The Government may, on the recommendations of the Council, by notification, specify the
categories of goods or supplies in respect of which a tax invoice shall be issued, within such
time and in such manner as may be prescribed.

Contents of invoice
There is no format prescribed for an invoice, however, Invoice rules makes it mandatory for an
invoice to have following fields (only applicable field are to be filled) :

(a) name, address and GSTIN of the supplier;

(b) a consecutive serial number, in one or multiple series, containing alphabets or numerals
or special characters hyphen or dash and slash symbolised as “_” and “/” respectively,
and any combination thereof, unique for a financial year;
(c) date of its issue;
(d) name, address and GSTIN or UIN, if registered, of the recipient;
(e) name and address of the recipient and the address of delivery, along with the name of
State and its code, if such recipient is un-registered and where the value of taxable
supply is fifty thousand rupees or more;
(f) HSN code of goods or Accounting Code of services;
(g) description of goods or services;
(h) quantity in case of goods and unit or Unique Quantity Code thereof;
(i) total value of supply of goods or services or both;
(j) taxable value of supply of goods or services or both taking into account discount or
abatement, if any;
 Page 117 of 371

(k) rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
(l) amount of tax charged in respect of taxable goods or services (central tax, State tax,
integrated tax, Union territory tax or cess);
(m) place of supply along with the name of State, in case of a supply in the course of inter-
State trade or commerce;
(n) address of delivery where the same is different from the place of supply;
(o) whether the tax is payable on reverse charge basis; and
(p) signature or digital signature of the supplier or his authorized representative

Contents of Bill of Supply

A bill of supply shall be issued by the supplier containing the following details

(a) name, address and GSTIN of the supplier;

(b) a consecutive serial number, in one or multiple series, containing alphabets or numerals
or special characters -hyphen or dash and slash symbolised as “-” and “/’’respectively,
and any combination thereof, unique for a financial year;
(c) date of its issue
(d) name, address and GSTIN or UIN, if registered, of the recipient;
(e) HSN Code of goods or Accounting Code for services;
(f) description of goods or services or both;
(g) value of supply of goods or services or both taking into account discount or abatement, if
any; and
(h) signature or digital signature of the supplier or his authorized representative

Services
A registered person supplying taxable services shall, before or after the provision of service
but within a prescribed period, issue a tax invoice, showing the description, value, tax charged
thereon and such other particulars as has been prescribed in the Invoice Rules.

The Government may, on the recommendations of the Council, by notification and subject to
such conditions as may be mentioned therein, specify the categories of services in respect of
which —

(a) any other document issued in relation to the supply shall be deemed to be a tax invoice;
or
(b) tax invoice may not be issued.

Thus it can be seen that in case of goods, an invoice has to be issued before or at the time of
supply. In case of services, however, invoice has to be issued before or after provision of
services. If the invoice is issued after provision of service, it has to be done within the
specified period of 30 days from the date of supply of service, as per invoice rules.

Revised Invoice
A registered person may, within one month from the date of issuance of certificate of
registration and in such manner as has been prescribed in the Invoice Rules, issue a revised
invoice against the invoice already issued during the period beginning with the effective date
of registration till the date of issuance of certificate of registration to him. This provision is
necessary as a person who becomes liable for registration has to apply for registration within
30 days of becoming liable for registration. When such an application is made within the time
period and registration is granted, the effective date of registration is the date on which the
person became liable for registration. Thus there would be a time lag between the date of
 Page 118 of 371

grant of certificate of registration and the effective date of registration. For supplies made by
such person during this intervening period, the law enables issuance of a revised invoice, so
that ITC can be availed by the recipient on such supplies.

Receipt Voucher/Refund voucher on receipt of advance payment

Whenever a registered person receives an advance payment with respect to any supply of
goods or services or both, he has to issue a receipt voucher or any other document,
containing such particulars as has been prescribed in the Invoice Rules, evidencing receipt of
such payment.

Where any such receipt voucher is issued, but subsequently no supply is made and no tax
invoice issued, the registered person who has received the advance payment can issue a
refund voucher against such payment.

A receipt voucher needs to contain the following particulars :

(a) name, address and GSTIN of the supplier;

(b) a consecutive serial number containing alphabets or numerals or special characters
-hyphen or dash and slash symbolised as “-” and “/’’respectively, and any combination
thereof, unique for a financial year;
(c) date of its issue;
(d) name, address and GSTIN or UIN, if registered, of the recipient;
(e) description of goods or services;
(f) amount of advance taken;
(g) rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
(h) amount of tax charged in respect of taxable goods or services (central tax, State tax,
integrated tax, Union territory tax or cess);
(i) place of supply along with the name of State and its code, in case of a supply in the
course of inter-State trade or commerce;
(j) whether the tax is payable on reverse charge basis; and
(k) signature or digital signature of the supplier or his authorized representative.

It has also been provided in the Invoice Rules that if at the time of receipt of advance,

i. the rate of tax is not determinable; the tax may be paid @18%;
ii. the nature of supply is not determinable, the same shall be treated as inter-State supply

Invoice and payment voucher by a person liable to pay tax under reverse charge
A registered person liable to pay tax under reverse charge (both for supplies on which tax is
payable under reverse charge mechanism and supplies received from unregistered persons)
has to issue an invoice in respect of goods or service or both received by him. Such a
registered person in respect of such supplies also has to issue a payment voucher at the
time of making payment to the supplier.

Invoice in case of continuous supply of goods

In case of continuous supply of goods, where successive statements of accounts or
successive payments are involved, the invoice shall be issued before or at the time each such
statement is issued or, as the case maybe, each such payment is received.

Invoice in case of continuous supply of services

 Page 119 of 371

In case of continuous supply of services, where,

(a) the due date of payment is ascertainable from the contract; the invoice shall be issued on
or before the due date of payment;
(b) the due date of payment is not ascertainable from the contract; the invoice shall be
issued before or at the time when the supplier of service receives the payment;
(c) the payment is linked to the completion of an event; the invoice shall be issued on or
before the date of completion of that event.

Issue of invoice in case, where supply of service ceases under a contract before completion
of supply
In a case where the supply of services ceases under a contract before the completion of the
supply, the invoice shall be issued at the time when the supply ceases and such invoice shall
be issued to the extent of the supply made before such cessation.

Sale on approval basis

Where the goods being sent or taken on approval for sale or return are removed before the
supply takes place, the invoice shall be issued before or at the time of supply or six months
from the date of removal, whichever is earlier.

Amount of tax to be indicated in invoice

Where any supply is made for a consideration, every person who is liable to pay tax for such
supply has to prominently indicate in all documents relating to assessment, tax invoice and
other like documents, the amount of tax which shall form part of the price at which such
supply is made.

Credit and Debit Notes

In cases where tax invoice has been issued for a supply and subsequently it is found that the
value or tax charged in that invoice is more than what is actually payable/chargeable or where
the recipient has returned the goods, the supplier can issue a credit note to the recipient. A
registered person who issues such a credit note has to declare details of such credit note in
the return for the month during which such credit note has been issued but not later than
September following the end of the financial year in which such supply was made or date of
furnishing of the relevant annual return whichever is earlier. The tax liability of the registered
person will be adjusted in accordance with the credit note issued, however no reduction in
output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such
supply has been passed on to any other person.

In cases where tax invoice has been issued for a supply and subsequently it is found that the
value or tax charged in that invoice is less than what is actually payable/chargeable, the
supplier can issue a debit note to the recipient.

Any registered person who issues a debit note in relation to a supply of goods or services or
both shall declare the details of such debit note in the return for the month during which such
debit note has been issued and the tax liability shall be adjusted in such manner as may be
prescribed.

A revised tax invoice and credit or debit note has to contain the following particulars -

(a) the word “Revised Invoice”, wherever applicable, indicated prominently;

 Page 120 of 371

(b) name, address and GSTIN of the supplier;

(c) nature of the document;
(d) a consecutive serial number containing alphabets or numerals or special characters
-hyphen or dash and slash symbolised as and “/’’respectively, and any combination
thereof, unique for a financial year;
(e) date of issue of the document;
(f) name, address and GSTIN or UIN, if registered, of the recipient;
(g) name and address of the recipient and the address of delivery, along with the name of
State and its code, if such recipient is un-registered;
(h) serial number and date of the corresponding tax invoice or, as the case may be, bill of
supply;
(i) value of taxable supply of goods or services, rate of tax and the amount of the tax
credited or, as the case may be, debited to the recipient; and
(j) signature or digital signature of the supplier or his authorized representative.

Manner of issuing invoice

The invoice shall be prepared in triplicate, in case of supply of goods, in the following
manner :-

(a) the original copy being marked as ORIGINAL FOR RECIPIENT;

(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and
(c) the triplicate copy being marked as TRIPLICATE FOR SUPPLIER.

The invoice shall be prepared in duplicate, in case of supply of services, in the following
manner :-

(a) the original copy being marked as ORIGINAL FOR RECIPIENT; and
(b) the duplicate copy being marked as DUPLICATE FOR SUPPLIER.

The serial number of invoices issued during a tax period shall be furnished electronically
through the Common Portal in FORM GSTR-1.

Tax invoice in Special Cases

An ISD invoice or, as the case may be, an ISD credit note issued by an Input Service
Distributor shall contain the following details :

(a) name, address and GSTIN of the Input Service Distributor;

(b) a consecutive serial number containing alphabets or numerals or special characters
hyphen or dash and slash symbolised as, “_”, “/”, respectively, and any combination
thereof, unique for a financial year;
(c) date of its issue;
(d) name, address and GSTIN of the recipient to whom the credit is distributed;
(e) amount of the credit distributed; and
(f) signature or digital signature of the Input Service Distributor or his authorized
representative.

Tax Invoice in special cases

Where the Input Service Distributor is an office of a banking company or a financial institution,
including a nonbanking financial company, a tax invoice shall include any document in lieu
 Page 121 of 371

thereof, by whatever name called, whether or not serially numbered but containing the
prescribed information.

Where the supplier of taxable service is an insurer or a banking company or a financial

institution, including a non-banking financial company, the said supplier shall issue a tax
invoice or any other document in lieu thereof, by whatever name called, whether or not serially
numbered, and whether or not containing the address of the recipient of taxable service but
containing other information as prescribed under rule 1 of Invoice Rules.

Where the supplier of taxable service is a goods transport agency supplying services in
relation to transportation of goods by road in a goods carriage, the said supplier shall issue a
tax invoice or any other document in lieu thereof, by whatever name called, containing the
gross weight of the consignment, name of the consignor and the consignee, registration
number of goods carriage in which the goods are transported, details of goods transported,
details of place of origin and destination, GSTIN of the person liable for paying tax whether as
consignor, consignee or goods transport agency, and also containing other information as
prescribed under rule 1 of Invoice Rules.

Where the supplier of taxable service is supplying passenger transportation service, a tax
invoice shall include ticket in any form, by whatever name called, whether or not serially
numbered, and whether or not containing the address of the recipient of service but containing
other information as prescribed under rule 1 of Invoice Rules.

Debit Note in GST

C.B.E. & C. Flyer No. 16, dated 1-1-2018
Introduction
A supplier of goods or services or both is mandatorily required to issue a tax invoice.
However, during the course of trade or commerce, after the invoice has been issued there
could be situations like :

• The supplier has erroneously declared a value which is less than the actual value of the
goods or services or both provided.
• The supplier has erroneously declared a lower tax rate than what is applicable for the
kind of the goods or services or both supplied.
• The quantity received by the recipient is more than what has been declared in the tax
invoice.
• Any other similar reasons.

In order to regularize these kinds of situations the supplier is allowed to issue what is called as
debit note to the recipient. The debit note also includes supplementary invoice.

Meaning
When a tax invoice has been issued for supply of any goods or services or both and the
taxable value or tax charged in that tax invoice is found to be less than the taxable value or
tax payable in respect of such supply, the registered person, who has supplied such goods or
services or both, shall issue to the recipient a debit note containing the prescribed particulars.

Format
There is no prescribed format but debit note issued by a supplier must contain the following
particulars, namely :-
 Page 122 of 371

(a) name, address and Goods and Services Tax Identification Number of the supplier;
(b) nature of the document;
(c) a consecutive serial number not exceeding sixteen characters, in one or multiple series,
containing alphabets or numerals or special characters hyphen or dash and slash
symbolised as “-’’and “/’’respectively, and any combination thereof, unique for a financial
year;
(d) date of issue;
(e) name, address and Goods and Services Tax Identification Number or Unique Identity
Number, if registered, of the recipient;
(f) name and address of the recipient and the address of delivery, along with the name of
State and its code, if such recipient is un-registered;
(g) serial number and date of the corresponding tax invoice or, as the case may be, bill of
supply;
(h) value of taxable supply of goods or services, rate of tax and the amount of the tax
debited to the recipient; and
(i) signature or digital signature of the supplier or his authorized representative.

Tax liability
The issuance of a debit note or a supplementary invoice creates additional tax liability The
treatment of a debit note or a supplementary invoice would be identical to the treatment of a
tax invoice as far as returns and payment are concerned.

Records
The records of the debit note or a supplementary invoice have to be retained until the expiry
of seventy-two months from the due date of furnishing of annual return for the year pertaining
to such accounts and records. Where such accounts and documents are maintained
manually, it should be kept at every related place of business mentioned in the certificate of
registration and shall be accessible at every related place of business where such accounts
and documents are maintained digitally.

Conclusion
The debit note or a supplementary invoice is therefore a convenient and legal method by which
the value of the goods or services in the original tax invoice can be enhanced. The issuance of
the debit note will easily allow the supplier to pay his enhanced tax liability in his returns without
requiring him to undertake any other tedious process.

Credit Note in GST

C.B.E. & C. Flyer No. 15, dated 1-1-2018
Introduction
A supplier of goods or services or both is mandatorily required to issue a tax invoice.
However, during the course of trade or commerce, after the invoice has been issued there
could be situations like :

• The supplier has erroneously declared a value which is more than the actual value of the
goods or services provided.
• The supplier has erroneously declared a higher tax rate than what is applicable for the
kind of the goods or services or both supplied.
• The quantity received by the recipient is less than what has been declared in the tax
invoice.
 Page 123 of 371

• The quality of the goods or services or both supplied is not to the satisfaction of the
recipient thereby necessitating a partial or total reimbursement on the invoice value
• Any other similar reasons.

In order to regularize these kinds of situations the supplier is allowed to issue what is called as
credit note to the recipient. Once the credit note has been issued, the tax liability of the
supplier will reduce.
Meaning
Where a tax invoice has been issued for supply of any goods or services or both and the
taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax
payable in respect of such supply, or where the goods supplied are returned by the recipient,
or where goods or services or both supplied are found to be deficient, the registered person,
who has supplied such goods or services or both, may issue to the recipient what is called as
a credit note containing the prescribed particulars.
Format
There is no prescribed format but credit note issued by a supplier must contain the following
particulars, namely :-

(a) name, address and Goods and Services Tax Identification Number of the supplier;
(b) nature of the document;
(c) a consecutive serial number not exceeding sixteen characters, in one or multiple series,
containing alphabets or numerals or special characters hyphen or dash and slash
symbolised as “-’’and “/’’respectively, and any combination thereof, unique for a financial
year;
(d) date of issue;
(e) name, address and Goods and Services Tax Identification Number or Unique Identity
Number, if registered, of the recipient;
(f) name and address of the recipient and the address of delivery, along with the name of
State and its code, if such recipient is un-registered;
(g) serial number and date of the corresponding tax invoice or, as the case may be, bill of
supply;
(h) value of taxable supply of goods or services, rate of tax and the amount of the tax
credited to the recipient; and
(i) signature or digital signature of the supplier or his authorised representative.

Adjustment of tax liability

The person who issues a credit note in relation to a supply of goods or services or both must
declare the details of such credit note in the return for the month during which such credit note
has been issued but not later than September following the end of the financial year in which
such supply was made, or the date of furnishing of the relevant annual return, whichever is
earlier. In other words, the output tax liability cannot be reduced in cases where credit note
has been issued after September.

The output tax liability of the supplier gets reduced once the credit note is issued and it is
matched. The details of the credit note relating to outward supply furnished by the supplier for
a tax period shall, be matched —

(a) with the corresponding reduction in the claim for input tax credit by the recipient in his
valid return for the same tax period or any subsequent tax period; and
(b) for duplication of claims for reduction in output tax liability
 Page 124 of 371

The claim for reduction in output tax liability by the supplier that matches with the
corresponding reduction in the claim for input tax credit by the recipient shall be finally
accepted and communicated to the supplier. The reduction in output tax liability of the supplier
shall not be permitted, if the incidence of tax and interest on such supply has been passed on
to any other person.

Where the reduction of output tax liability in respect of outward supplies exceeds the
corresponding reduction in the claim for input tax credit or the corresponding credit note is not
declared by the recipient in his valid returns, the discrepancy shall be communicated to both
such persons. Whereas, the duplication of claims for reduction in output tax liability shall be
communicated to the supplier.

The amount in respect of which any discrepancy is communicated and which is not rectified
by the recipient in his valid return for the month in which discrepancy is communicated shall
be added to the output tax liability of the supplier in his return for the month succeeding the
month in which the discrepancy is communicated.

The amount in respect of any reduction in output tax liability that is found to be on account of
duplication of claims shall be added to the output tax liability of the supplier in his return for
the month in which such duplication is communicated.

Records
The records of the credit notes have to be retained until the expiry of seventy-two months
from the due date of furnishing of annual return for the year pertaining to such accounts and
records. Where such accounts and documents are maintained manually, it should be kept at
every related place of business mentioned in the certificate of registration and shall be
accessible at every related place of business where such accounts and documents are
maintained digitally.

Conclusion
The credit note is therefore a convenient and legal method by which the value of the goods or
services in the original tax invoice can be amended or revised. The issuance of the credit note
will easily allow the supplier to decrease his tax liability in his returns without requiring him to
undertake any tedious process of refunds.

Circular No. 90/09/2019-GST

F. No. CBEC-20/16/04/2018 - GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
***
New Delhi, Dated the 18th February, 2019

To,
The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners /
Commissioners of Central Tax (All) The Principal Director Generals / Director Generals (All)

Madam/Sir,

Subject: Compliance of rule 46(n) of the CGST Rules, 2017 while issuing invoices in case of inter-
State supply – Reg.
 Page 125 of 371

A registered person supplying taxable goods or services or both is required to issue a tax
invoice as per the provisions contained in section 31 of the Central Goods and Services Tax Act,
2017 (CGST Act for short). Rule 46 of the Central Goods and Services Tax Rules, 2017 (CGST Rules
for short) specifies the particulars which are required to be mentioned in a tax invoice.

2. It has been brought to the notice of the Board that a number of registered persons (especially
in the banking, insurance and telecom sectors, etc.) are not mentioning the place of supply
along with the name of the State in case of a supply made in the course of inter-State trade or
commerce in contravention of rule 46(n) of the CGST Rules which mandates that the said details
must be mentioned in a tax invoice. In order to ensure uniformity in the implementation of the
provisions of law across the field formations, the Board, in exercise of its powers conferred
by section 168 (1) of the Central Goods and Services Tax Act, 2017, hereby issues the following
instructions.

3. After introduction of GST, which is a destination-based consumption tax, it is essential to

ensure that the tax paid by a registered person accrues to the State in which the consumption of
goods or services or both takes place. In case of inter-State supply of goods or services or both,
this is ensured by capturing the details of the place of supply along with the name of the State in
the tax invoice.

4. It is therefore, instructed that all registered persons making supply of goods or services or
both in the course of inter-State trade or commerce shall specify the place of supply along with
the name of the State in the tax invoice. The provisions of sections 10 and 12 of the Integrated
Goods and Services Tax Act, 2017 may be referred to in order to determine the place of supply in
case of supply of goods and services respectively. Contravention of any of the provisions of the
Act or the rules made there under attracts penal action under the provisions of sections
122 or 125 of the CGST Act.

5. It is requested that suitable trade notices may be issued to publicize the contents of this
Circular.

6. Difficulty, if any, in the implementation of this Circular may be brought to the notice of the
Board. Hindi version would follow.

OUR COMMENTS ON TAX INVOICE, CREDIT NOTE & DEBIT NOTE UNDER GST

TAX INVOICE –

 Sr.No. of the tax invoices are required to be changed every Financial Year
 The assessee can maintain more than one set of invoice. Thus, the assessee can
maintain more than one set of invoices for per product or for domestic sale and export
(on payment of IGST/without payment of IGST) different set of invoices can be used.
 Cancelled Invoices (to be maintained separately) and cancelled invoice details to be
declared in the GSTR-1 return.
 For goods tax invoice has to be issued before or at the time of their removal for supply to
the recipient
 For services tax invoice has to be issued before or after the provision of service but
within 30 days of date of supply.
 For RCM liabilities SELF INVOICE has to be issued on daily, weekly or once at the end
of month.
 Export invoice shall carry an endorsement “Supply meant for export on payment of
IGST” or “Supply meant for export under Bond or LUT without payment of IGST”.
 Page 126 of 371

BILL OF SUPPLY -

 The Composite supplier will issue Bill of Supply instead of tax invoice.

ADVANCE RECEIPT VOUCHER & REFUND VOUCHER –

 For advance payment, a advance receipt voucher is required to be issued. At the

time of actual supply the tax invoice will be issued.
 In case if where the advance is required to be refunded, the refund voucher (giving
cross reference of advance voucher) is required to be issued.

DEBIT NOTE –

 A debit note may be issued by the supplier to the recipient if tax charged in that
original tax invoice is found to be less than the taxable value or tax payable in
respect of such supply.
 A consolidated debit note in respect of multiple invoices issued in a financial year
can be issued.

CREDIT NOTE –

 A credit note may be issued by the supplier to the recipient if recipient returns the
goods to the supplier or the services are found to be deficient.
 A credit note can also be issued to recipient if taxable value in the original invoice
exceeds actual taxable value or tax charged in the original invoice exceeds
actual tax to be paid.
 A consolidated credit note in respect of multiple invoices issued in a financial
year can be issued.
 Page 127 of 371

CHALLAN UNDER GST

Rule 55 of the CGST Rules - Transportation of goods without issue of invoice

(1) For the purposes of-

(a) supply of liquid gas where the quantity at the time of removal from the place of
business of the supplier is not known,
(b) transportation of goods for job work,
(c) transportation of goods for reasons other than by way of supply, or
(d) such other supplies as may be notified by the Board,

the consigner may issue a delivery challan, serially numbered not exceeding sixteen
characters, in one or multiple series, in lieu of invoice at the time of removal of goods for
transportation, containing the following details, namely:-

(i) date and number of the delivery challan;

(ii) name, address and Goods and Services Tax Identification Number of the
consigner, if registered;
(iii) name, address and Goods and Services Tax Identification Number or Unique
Identity Number of the consignee, if registered;
(iv) Harmonised System of Nomenclature code and description of goods;
(v) quantity (provisional, where the exact quantity being supplied is not known);
(vi)taxable value;
(vi) tax rate and tax amount – central tax, State tax, integrated tax, Union territory tax
or cess, where the transportation is for supply to the consignee;
(vii) place of supply, in case of inter-State movement; and
(viii) signature.

(2) The delivery challan shall be prepared in triplicate, in case of supply of goods, in the
following manner, namely:–

(a) the original copy being marked as ORIGINAL FOR CONSIGNEE;

(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and
(c) the triplicate copy being marked as TRIPLICATE FOR CONSIGNER.

(3) Where goods are being transported on a delivery challan in lieu of invoice, the same
shall be declared as specified in rule 138.

(4) Where the goods being transported are for the purpose of supply to the recipient but the
tax invoice could not be issued at the time of removal of goods for the purpose of supply,
the supplier shall issue a tax invoice after delivery of goods.

(5) Where the goods are being transported in a semi knocked down or completely knocked
down condition or in batches or lots -

(a) the supplier shall issue the complete invoice before dispatch of the first consignment;
(b) the supplier shall issue a delivery challan for each of the subsequent consignments,
giving reference of the invoice;
(c) each consignment shall be accompanied by copies of the corresponding delivery
challan along with a duly certified copy of the invoice; and
(d) the original copy of the invoice shall be sent along with the last consignment.
 Page 128 of 371

FAQ ON CHALLANS

Can we move construction material to If the goods are meant to be supplied in the course
builders on delivery challan and issue tax of construction an invoice is necessary. If the
invoice post completion of activity? goods are tools which are to be used for
construction then delivery challan should be
issued.
What is the procedure/documents required Where free replacement is provided to the
for sending free replacement to the customers without consideration under warranty,
customers at free of cost? no GST is chargeable on such replacement. In
such cases goods may be sent on delivery challan
as provided in Rule 55 of the CGST Rules, 2017.
Under GST, how to send demonstration As the goods are sent on returnable basis and no
equipment and instruments to customers transfer of title is involved, it is not a supply of
or branch offices with in India on returnable goods. If some element of service is involved, the
basis? - No sale is involved. same will be a taxable supply. The goods may be
sent on delivery challan without invoice as it is not
a supply of goods.
How to send equipment and instruments to Challan for movement of goods without supply is
manufacturers’ factory for repairs and to be issued in terms of Rule 55 of CGST Rules.
calibration with in India on returnable
basis? - No sale is involved.

Transportation of goods without an invoice

In the following cases it is permissible for the consignor to issue a delivery challan in lieu
of invoice at the time of removal of goods :

(a) supply of liquid gas where the quantity at the time of removal from the place of
business of the supplier is not known,
(b) transportation of goods for job work,
(c) transportation of goods for reasons other than by way of supply, or
(d) such other supplies as may be notified by the Board.

The delivery challan, serially numbered not exceeding 16 characters, in one or multiple
series, shall contain the following details :

i. date and number of the delivery challan,

ii. name, address and GSTIN of the consigner, if registered,
iii. name, address and GSTIN or UIN of the consignee, if registered,
iv. HSN code and description of goods,
v. quantity (provisional, where the exact quantity being supplied is not known),
vi. taxable value,
vii. tax rate and tax amount -central tax, State tax, integrated tax, Union territory tax or
cess, where the transportation is for supply to the consignee,
viii. place of supply, in case of inter-State movement, and
ix. signature.

The delivery challan shall be prepared in triplicate, in case of supply of goods, in the
following manner :-
 Page 129 of 371

(a) the original copy being marked as ORIGINAL FOR CONSIGNEE;

(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and
(c) the triplicate copy being marked as TRIPLICATE FOR CONSIGNER.

Where goods are being transported on a delivery challan in lieu of invoice, the same shall
be declared in FORM [WAYBILL],

Where the goods being transported are for the purpose of supply to the recipient but the
tax invoice could not be issued at the time of removal of goods for the purpose of supply,
the supplier shall issue a tax invoice after delivery of goods.

Where the goods are being transported in a semi knocked down or completely knocked
down condition,

(a) the supplier shall issue the complete invoice before dispatch of the first consignment;
(b) the supplier shall issue a delivery challan for each of the subsequent consignments,
giving reference of the invoice;
(c) each consignment shall be accompanied by copies of the corresponding delivery
challan along with a duly certified copy of the invoice; and
(d) the original copy of the invoice shall be sent along with the last consignment.

Circulars issued by us
06/09/2018.

Sub.:- GST - Amendment to Rule 55(5) of the CGST Rules, 2017 – Permission to issue single
invoice for the consignment of goods supplied to same customer through different
vehicles – Reg….

Sometimes, a customer places a purchase order for huge quantity of goods on a

supplier and asks him to deliver the said quantity of goods within a particular time limit to
him. The said quantity of goods being huge cannot be transported in a single vehicle and
hence has to be divided into lots and the said lots are loaded into different vehicles and
then are supplied to the customer as per the schedule.

In such transactions, evenif, the entire quantity of goods is being supplied to only one
customer against a single purchase order, still (due to lack of appropriate provision in
Rule 55(5) of CGST Rules, 2017) the supplier was bound to issue separate invoice (per
vehicle) for the consignment which is being transported through the said vehicle.

For example -

i) ‘A’ has received one purchase order from ‘B’ for supply of 6,000 bags (300 Tons) of
sugar at the godown of ‘B’. The said 6,000 bags are transported through 10 trucks
[600 bags (i.e.30 Tons) per truck] on different dates and are delivered in the godown of
‘B’. In this transaction, ‘A’ was not permitted to issue one invoice in favour of ‘B’ for
entire 6,000 bags (300 Tons) and was bound to issue 10 separate invoices [for 600
bags (i.e.30 Ton) each] in favour of ‘B’.
 Page 130 of 371

ii) ‘A’ has received one purchase order from ‘B’ for supply of 300 MTs of molasses at the
factory of ‘B’. The said 300 MTs of molasses is transported through 10 tankers (30 MT
per tanker) on different dates and is delivered at the factory of ‘B’. In this transaction,
‘A’ was not permitted to issue one invoice in favour of ‘B’ for entire 300 MTs of
molasses and was bound to issue 10 separate invoices (for 30 MTs each) in favour of
‘B’.

iii) ‘A’ has received one export order for 6,000 bags (300 Tons) of sugar and accordingly
he has transported 6,000 bags to the port of export through 10 trucks [600 bags (i.e.30
Tons) per truck] on different dates. As the said 6,000 bags has not transported
simultaneously in a single vehicle but are transported through 10 vehicles, ‘A’ was not
permitted to issue one invoice for entire 6,000 bags (300 Tons) and was bound to
issue 10 separate invoices [for 600 bags (i.e.30 Ton) each].

iv) ‘A’ has received one export order for 300 MTs of molasses and accordingly he has
transported 300 MTs of molasses to the port of export through 10 tankers (30 MTs per
tanker) on different dates. As the said 300 MTs of molasses has not transported
simultaneously in a single vehicle but is transported through 10 tankers, ‘A’ was not
permitted to issue one invoice for entire 300 MTs of molasses and was bound to issue
10 separate invoices (for 30 MTs each).

v) ‘A’ has received one purchase order from ‘B’ for supply of 6,000 bags (300 Tons) of
sugar at Mumbai Port from where ‘B’ wants to export the said 6,000 bags of sugar.
The said 6,000 bags are transported through 10 trucks [600 bags (i.e.30 Tons) per
truck] on different dates and are handed over to ‘B’ at Mumbai Port. In this transaction
also, ‘A’ was not permitted to issue one invoice in favour of ‘B’ for entire 6,000 bags
(300 Tons) and was bound to issue 10 separate invoices [for 600 bags each (i.e.30
Ton)] in favour of ‘B’.

vi) ‘A’ has received one purchase order from ‘B’ for supply of 300 MTs of molasses at
Mumbai Port from where ‘B’ wants to export the 300 MTs of molasses. The said 300
MTs molasses is transported through 10 tankers (30 MTs each) on different dates and
is handed over to ‘B’ at Mumbai Port. In this transaction also, ‘A’ was not permitted to
issue one invoice in favour of ‘B’ for entire 300 MTs of molasses and was bound to
issue 10 separate invoices (for 30 MTs each) in favour of ‘B’.

[2] However, now, the Government has amended the Rule 55(5) of the CGST Rules, 2017
suitably, vide Notification No.39/2018-CT, dt.04.09.2018 and in result of the same, in the
circumstances mentioned in the above said examples, the supplier is permitted to issue
single invoice for the entire quantity of goods supplied to a customer (against single
purchase order), though the said quantity of goods is transported through different
vehicles on different dates.

However, for the above said purpose -

(a) the supplier has to issue the invoice for the entire quantity of goods before dispatch
of the first consignment;

(b) the supplier shall also issue a delivery challan (containing all details as prescribed in
Rule 55(1) of CGST Rules) for each of the subsequent consignments, giving cross
reference of the said invoice;
 Page 131 of 371

(c) each consignment shall be accompanied by copies of the corresponding delivery

challan along with a duly certified copy of the said invoice; and

(d) the original copy of the said invoice shall be sent along with the last consignment.

[3] Please note that, the e-way bill has to be generated for each consignment by giving
cross reference of the said invoice as well as the delivery challan issued under Rule 55
of CGST Rules, covering the said particular consignment.

[4] Kindly take note of the above said important amendment and to implement the same at
your end, if you are engaged in similar type of transactions.

OUR COMMENTS ON CHALLAN UNDER GST

 Rule 55 of CGST Rules, 2017 prescribes challan which can be issued for sending the
goods to job worker or for any other purpose like weighment/exhibition or for shifting of
goods to other unit/depot/office/godown within same State
 Replace of within warranty goods also can be sent under the cover of Rule 55 challan.
 While supplying goods in lots/batch or knocked down condition the same can be moved
under the cover of Rule 55 challans giving reference of the tax invoice.
 Page 132 of 371

E-WAY BILL CONCEPT UNDER GST

Rule 138 of CGST Rules - Information to be furnished prior to commencement of movement

of goods and generation of e-way bill

(1) Every registered person who causes movement of goods of consignment value exceeding
fifty thousand rupees-

(i) in relation to a supply; or

(ii) for reasons other than supply; or
(iii) due to inward supply from an unregistered person,

shall, before commencement of such movement, furnish information relating to the said
goods as specified in Part A of FORM GST EWB-01, electronically, on the common portal
along with such other information as may be required on the common portal and a unique
number will be generated on the said portal:

Provided that the transporter, on an authorization received from the registered person, may
furnish information in Part A of FORM GST EWB-01, electronically, on the common portal
along with such other information as may be required on the common portal and a unique
number will be generated on the said portal:

Provided further that where the goods to be transported are supplied through an
ecommerce operator or a courier agency, on an authorization received from the consignor,
the information in Part A of FORM GST EWB-01 may be furnished by such e-commerce
operator or courier agency and a unique number will be generated on the said portal:

Provided also that where goods are sent by a principal located in one State or Union
territory to a job worker located in any other State or Union territory, the e-way bill shall be
generated either by the principal or the job worker, if registered, irrespective of the value of
the consignment:

Provided also that where handicraft goods are transported from one State or Union territory
to another State or Union territory by a person who has been exempted from the requirement
of obtaining registration under clauses (i) and (ii) of section 24, the e-way bill shall be
generated by the said person irrespective of the value of the consignment.

Explanation 1. – For the purposes of this rule, the expression “handicraft goods” has the
meaning as assigned to it in the Government of India, Ministry of Finance, notification No.
56/2018-Central Tax, dated the 23rd October, 2018, published in the Gazette of India,
Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1056 (E), dated the 23rd
October, 2018 as amended from time to time..

Explanation 2.- For the purposes of this rule, the consignment value of goods shall be the
value, determined in accordance with the provisions of section 15, declared in an invoice, a
bill of supply or a delivery challan, as the case may be, issued in respect of the said
consignment and also includes the central tax, State or Union territory tax, integrated tax and
cess charged, if any, in the document and shall exclude the value of exempt supply of goods
where the invoice is issued in respect of both exempt and taxable supply of goods.

(2) Where the goods are transported by the registered person as a consignor or the recipient of
supply as the consignee, whether in his own conveyance or a hired one or a public
conveyance, by road, the said person shall generate the e-way bill in FORM GST EWB-
01 electronically on the common portal after furnishing information in Part B of FORM GST
EWB-01.
 Page 133 of 371

(2A) Where the goods are transported by railways or by air or vessel, the e-way bill shall be
generated by the registered person, being the supplier or the recipient, who shall, either
before or after the commencement of movement, furnish, on the common portal, the
information in Part B of FORM GST EWB-01:

Provided that where the goods are transported by railways, the railways shall not deliver the
goods unless the e-way bill required under these rules is produced at the time of delivery.

(3) Where the e-way bill is not generated under sub-rule (2) and the goods are handed over to a
transporter for transportation by road, the registered person shall furnish the information
relating to the transporter on the common portal and the e-way bill shall be generated by the
transporter on the said portal on the basis of the information furnished by the registered
person in Part A of FORM GST EWB-01:

Provided that the registered person or, the transporter may, at his option, generate and carry
the e-way bill even if the value of the consignment is less than fifty thousand rupees:

Provided further that where the movement is caused by an unregistered person either in his
own conveyance or a hired one or through a transporter, he or the transporter may, at their
option, generate the e-way bill in FORM GST EWB-01 on the common portal in the manner
specified in this rule:

Provided also that where the goods are transported for a distance of upto fifty kilometers
within the State or Union territory from the place of business of the consignor to the place of
business of the transporter for further transportation, the supplier or the recipient, or as the
case may be, the transporter may not furnish the details of conveyance in Part B of FORM
GST EWB-01.

Explanation 1.– For the purposes of this sub-rule, where the goods are supplied by an
unregistered supplier to a recipient who is registered, the movement shall be said to be
caused by such recipient if the recipient is known at the time of commencement of the
movement of goods.

Explanation 2.- The e-way bill shall not be valid for movement of goods by road unless the
information in Part-B of FORM GST EWB-01 has been furnished except in the case of
movements covered under the third proviso to sub-rule (3) and the proviso to sub-rule (5).

(4) Upon generation of the e-way bill on the common portal, a unique e-way bill number (EBN)
shall be made available to the supplier, the recipient and the transporter on the common
portal.

(5) Where the goods are transferred from one conveyance to another, the consignor or the
recipient, who has provided information in Part A of the FORM GST EWB-01, or the
transporter shall, before such transfer and further movement of goods, update the details of
conveyance in the e-way bill on the common portal in Part B of FORM GST EWB-01:

Provided that where the goods are transported for a distance of upto fifty kilometers within
the State or Union territory from the place of business of the transporter finally to the place of
business of the consignee, the details of the conveyance may not be updated in the eway
bill.

(5A) The consignor or the recipient, who has furnished the information in Part A of FORM GST
EWB-01, or the transporter, may assign the e-way bill number to another registered or
enrolled transporter for updating the information in Part B of FORM GST EWB-01 for further
movement of the consignment:
 Page 134 of 371

Provided that after the details of the conveyance have been updated by the transporter
in Part B of FORM GST EWB-01, the consignor or recipient, as the case may be, who has
furnished the information in Part A of FORM GST EWB-01 shall not be allowed to assign the
e-way bill number to another transporter.

(6) After e-way bill has been generated in accordance with the provisions of sub-rule (1), where
multiple consignments are intended to be transported in one conveyance, the transporter
may indicate the serial number of e-way bills generated in respect of each such consignment
electronically on the common portal and a consolidated e-way bill in FORM GST EWB-
02 maybe generated by him on the said common portal prior to the movement of goods.

(7) Where the consignor or the consignee has not generated the e-way bill in FORM GST EWB-
01 and the aggregate of the consignment value of goods carried in the conveyance is more
than fifty thousand rupees, the transporter, except in case of transportation of goods by
railways, air and vessel, shall, in respect of inter-State supply, generate the e-way bill
in FORM GST EWB-01 on the basis of invoice or bill of supply or delivery challan, as the
case may be, and may also generate a consolidated e-way bill in FORM GST EWB-02 on
the common portal prior to the movement of goods:

Provided that where the goods to be transported are supplied through an e-commerce
operator or a courier agency, the information in Part A of FORM GST EWB-01may be
furnished by such e-commerce operator or courier agency.

(8) The information furnished in Part A of FORM GST EWB-01 shall be made available to the
registered supplier on the common portal who may utilize the same for furnishing the details
in FORM GSTR-1:

Provided that when the information has been furnished by an unregistered supplier or an
unregistered recipient in FORM GST EWB-01, he shall be informed electronically, if the
mobile number or the e-mail is available.

(9) Where an e-way bill has been generated under this rule, but goods are either not transported
or are not transported as per the details furnished in the e-way bill, the e-way bill may be
cancelled electronically on the common portal within twenty four hours of generation of the e-
way bill:

Provided that an e-way bill cannot be cancelled if it has been verified in transit in
accordance with the provisions of rule 138B:

Provided further that the unique number generated under sub-rule (1) shall be valid for a
period of fifteen days for updation of Part B of FORM GST EWB-01.

(10) An e-way bill or a consolidated e-way bill generated under this rule shall be valid for the
period as mentioned in column (3) of the Table below from the relevant date, for the distance,
within the country, the goods have to be transported, as mentioned in column (2) of the said
Table:-

Sl. No. Distance Validity period

(1) (2) (3)
1. Upto 100 km. One day in cases other than Over
Dimensional Cargo
2. For every 100 km. or part thereof One additional day in cases other than
thereafter Over Dimensional Cargo
3. Upto 20 km One day in case of Over Dimensional
 Page 135 of 371

Cargo
4. For every 20 km. or part thereof One additional day in case of Over
thereafter Dimensional Cargo:

Provided that the Commissioner may, on the recommendations of the Council, by

notification, extend the validity period of an e-way bill for certain categories of goods as may
be specified therein:

Provided further that where, under circumstances of an exceptional nature, including trans-
shipment, the goods cannot be transported within the validity period of the e-way bill, the
transporter may extend the validity period after updating the details in Part B of FORM GST
EWB-01, if required.

Explanation 1.-For the purposes of this rule, the “relevant date” shall mean the date on
which the e-way bill has been generated and the period of validity shall be counted from the
time at which the e-way bill has been generated and each day shall be counted as the period
expiring at midnight of the day immediately following the date of generation of e-way bill.

Explanation 2.- For the purposes of this rule, the expression “Over Dimensional Cargo” shall
mean a cargo carried as a single indivisible unit and which exceeds the dimensional limits
prescribed in rule 93 of the Central Motor Vehicle Rules, 1989, made under the Motor
Vehicles Act, 1988 (59 of 1988).

(11) The details of the e-way bill generated under this rule shall be made available to the-

(a) supplier, if registered, where the information in Part A of FORM GST EWB-01 has
been furnished by the recipient or the transporter; or
(b) recipient, if registered, where the information in Part A of FORM GST EWB-01 has
been furnished by the supplier or the transporter,

on the common portal, and the supplier or the recipient, as the case may be, shall
communicate his acceptance or rejection of the consignment covered by the e-way bill.

(12) Where the person to whom the information specified in sub-rule (11) has been made
available does not communicate his acceptance or rejection within seventy two hours of the
details being made available to him on the common portal, or the time of delivery of goods
whichever is earlier, it shall be deemed that he has accepted the said details.

(13) The e-way bill generated under this rule or under rule 138 of the Goods and Services Tax
Rules of any State or Union territory shall be valid in every State and Union territory.

(14) Notwithstanding anything contained in this rule, no e-way bill is required to be generated-

(a) where the goods being transported are specified in Annexure;

(b) where the goods are being transported by a non-motorised conveyance;
(c) where the goods are being transported from the customs port, airport, air cargo
complex and land customs station to an inland container depot or a container freight
station for clearance by Customs;
(d) in respect of movement of goods within such areas as are notified under clause (d) of
sub-rule (14) of rule 138 of the State or Union territory Goods and Services Tax
Rules in that particular State or Union territory;
(e) where the goods, other than de-oiled cake, being transported, are specified in the
Schedule appended to notification No. 2/2017- Central tax (Rate) dated the 28th
June, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-
 Page 136 of 371

section (i), vide number G.S.R 674 (E) dated the 28th June, 2017 as amended from
time to time;
(f) where the goods being transported are alcoholic liquor for human consumption,
petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural
gas or aviation turbine fuel;
(g) where the supply of goods being transported is treated as no supply under Schedule
III of the Act;
(h) where the goods are being transported-
(i) under customs bond from an inland container depot or a container freight
station to a customs port, airport, air cargo complex and land customs
station, or from one customs station or customs port to another customs
station or customs port, or
(ii) under customs supervision or under customs seal;
(i) where the goods being transported are transit cargo from or to Nepal or Bhutan;
(j) where the goods being transported are exempt from tax under notification No.
7/2017-Central Tax (Rate), dated 28th June 2017 published in the Gazette of India,
Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 679(E)dated the
28th June, 2017 as amended from time to time and notification No. 26/2017Central
Tax (Rate), dated the 21st September, 2017 published in the Gazette of India,
Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1181(E) dated
the 21st September, 2017 as amended from time to time;
(k) any movement of goods caused by defence formation under Ministry of defence as a
consignor or consignee;
(l) where the consignor of goods is the Central Government, Government of any State
or a local authority for transport of goods by rail;
(m) where empty cargo containers are being transported; and
(n) where the goods are being transported upto a distance of twenty kilometers from the
place of the business of the consignor to a weighbridge for weighment or from the
weighbridge back to the place of the business of the said consignor subject to the
condition that the movement of goods is accompanied by a delivery challan issued in
accordance with rule 55.
(o) where empty cylinders for packing of liquefied petroleum gas are being moved for
reasons other than supply

Explanation. - The facility of generation, cancellation, updation and assignment of e-way bill
shall be made available through SMS to the supplier, recipient and the transporter, as the
case may be.

ANNEXURE
(See rule 138 (14)
SN Description of Goods
(1) (2)
1. Liquefied petroleum gas for supply to household and non domestic exempted
category (NDEC) customers
2. Kerosene oil sold under PDS
3. Postal baggage transported by Department of Posts
4. Natural or cultured pearls and precious or semi-precious stones; precious
metals and metals clad with precious metal (Chapter 71)
5. Jewellery, goldsmiths’ and silversmiths’ wares and other articles (Chapter 71)
6. Currency
7. Used personal and household effects
 Page 137 of 371

8. Coral, unworked (0508) and worked coral (9601)];

138A of CGST Rules - Documents and devices to be carried by a person-in-charge of a

conveyance

(1) The person in charge of a conveyance shall carry-

(a) the invoice or bill of supply or delivery challan, as the case may be; and
(b) a copy of the e-way bill in physical form or the e-way bill number in electronic form or
mapped to a Radio Frequency Identification Device embedded on to the conveyance
in such manner as may be notified by the Commissioner:

Provided that nothing contained in clause (b) of this sub-rule shall apply in case of
movement of goods by rail or by air or vessel.

Provided further that in case of imported goods, the person in charge of a conveyance shall
also carry a copy of the bill of entry filed by the importer of such goods and shall indicate the
number and date of the bill of entry in Part A of FORM GST EWB-01.

(2) A registered person may obtain an Invoice Reference Number from the common portal by
uploading, on the said portal, a tax invoice issued by him in FORM GST INV-1 and produce
the same for verification by the proper officer in lieu of the tax invoice and such number shall
be valid for a period of thirty days from the date of uploading.

(3) Where the registered person uploads the invoice under sub-rule (2), the information in Part
A of FORM GST EWB-01 shall be auto-populated by the common portal on the basis of the
information furnished in FORM GST INV-1.

(4) The Commissioner may, by notification, require a class of transporters to obtain a unique
Radio Frequency Identification Device and get the said device embedded on to the
conveyance and map the e-way bill to the Radio Frequency Identification Device prior to the
movement of goods.

(5) Notwithstanding anything contained in clause (b) of sub-rule (1), where circumstances so
warrant, the Commissioner may, by notification, require the person-in-charge of the
conveyance to carry the following documents instead of the e-way bill

(a) tax invoice or bill of supply or bill of entry; or

(b) a delivery challan, where the goods are transported for reasons other than by way of
supply.

138B of CGST Rules - Verification of documents and conveyances

(1) The Commissioner or an officer empowered by him in this behalf may authorize the proper
officer to intercept any conveyance to verify the e-way bill in physical or electronic form for all
inter-State and intra-State movement of goods.

(2) The Commissioner shall get Radio Frequency Identification Device readers installed at
places where the verification of movement of goods is required to be carried out and
verification of movement of vehicles shall be done through such device readers where the
eway bill has been mapped with the said device.

(3) The physical verification of conveyances shall be carried out by the proper officer as
authorised by the Commissioner or an officer empowered by him in this behalf:
 Page 138 of 371

Provided that on receipt of specific information on evasion of tax, physical verification of a

specific conveyance can also be carried out by any other officer after obtaining necessary
approval of the Commissioner or an officer authorised by him in this behalf.

138C of CGST Rules - Inspection and verification of goods

(1) A summary report of every inspection of goods in transit shall be recorded online by the
proper officer in Part A of FORM GST EWB-03 within twenty four hours of inspection and the
final report in Part B of FORM GST EWB-03 shall be recorded within three days of such
inspection.

Provided that where the circumstances so warrant, the Commissioner, or any other officer
authorised by him, may, on sufficient cause being shown, extend the time for recording of the
final report in Part B of FORM EWB-03, for a further period not exceeding three days.

Explanation.- The period of twenty four hours or, as the case may be, three days shall be
counted from the midnight of the date on which the vehicle was intercepted

(2) Where the physical verification of goods being transported on any conveyance has been
done during transit at one place within the State or Union territory or in any other State or
Union territory, no further physical verification of the said conveyance shall be carried out
again in the State or Union territory, unless a specific information relating to evasion of tax is
made available subsequently.

138D of CGST Rules - Facility for uploading information regarding detention of vehicle

Where a vehicle has been intercepted and detained for a period exceeding thirty minutes, the
transporter may upload the said information in FORM GST EWB-04 on the common portal.

Explanation. - For the purposes of this Chapter, the expressions ‘transported by railways’,
‘transportation of goods by railways’, ‘transport of goods by rail’ and ‘movement of goods by rail’
does not include cases where leasing of parcel space by Railways takes place.

138E. Restriction on furnishing of information in PART A of FORM GST EWB-01.-

Notwithstanding anything contained in sub-rule (1) of rule 138, no person (including a consignor,
consignee, transporter, an e-commerce operator or a courier agency) shall be allowed to furnish the
information in PART A of FORM GST EWB-01 in respect of a registered person, whether as a
supplier or a recipient, who,-

(a) being a person paying tax under section 10, has not furnished the returns for two
consecutive tax periods; or

(b) being a person other than a person specified in clause (a), has not furnished the returns for a
consecutive period of two months:

Provided that the Commissioner may, on sufficient cause being shown and for reasons to be
recorded in writing, by order, allow furnishing of the said information in PART A of FORM
GST EWB 01, subject to such conditions and restrictions as may be specified by him:

Provided further that no order rejecting the request of such person to furnish the information in PART
A of FORM GST EWB 01 under the first proviso shall be passed without affording the said
person a reasonable opportunity of being heard:
 Page 139 of 371

Provided also that the permission granted or rejected by the Commissioner of State tax or
Commissioner of Union territory tax shall be deemed to be granted or, as the case may be,
rejected by the Commissioner.

Explanation:– For the purposes of this rule, the expression “Commissioner” shall mean the
jurisdictional Commissioner in respect of the persons specified in clauses (a) and (b).
FAQ on E-Way Bill

1. FAQs-General Portal
• What is the common portal for generation of e-way bill?
The common portal for generation of e-way bill is https://ewaybillgst.gov.in
• I am not getting OTP on my mobile, what should I do?
Please check if you have activated ‘Do Not Disturb (DND)’ facility on your mobile or your
service provider network may be busy. You can also use OTP, which is sent on your email-id.
• E-way bill system is slow - how should I proceed?
Please check your internet connectivity.
• E-way bill pages or menu list are not being shown properly, what should I do?
Please check whether your system has proper version of the browser as suggested by the e-
way bill portal and also check the security settings of the browser and display property of the
system. The site is best viewed on Internet Explorer 11 or above, Firefox 43.5 or above and
Chrome 45 or above.

2. FAQs - Registration
• I have already registered in GST Portal. Whether I need to register again on the e-Way
Portal?
Yes. All the registered persons under GST need to register on the portal of e-way bill namely :
www.ewaybillgst.gov.in using his GSTIN. Once GSTIN is entered, the system sends an OTP
to his registered mobile number, registered with GST Portal and after authenticating the
same, the system enables him to generate his/her username and password for the e-way bill
system. After generation of username and password of his/her choice, he/she may proceed to
make entries to generate e-way bill.
• Whenever I am trying to register, the system is saying you have already registered,
how should I proceed?
This is indicating that you (your GSTIN) have already registered on the e-way bill portal and
have created your username and password on the e-way bill system. Please use these
credentials to log into the e-way bill system. If you have forgotten username or password,
then please use the ‘Forgot Username’ or ‘Forgot Password’ facility provided on the portal to
recollect your username or create new password accordingly.
• Whenever I am trying to register, the system is saying there is no contact (Mobile) number
with this GSTIN in GST Common Portal, how should I resolve this issue?
This is indicating that e-way bill system is unable to get the contact details (mobile number of
email address) for your GSTIN from the GST Common Portal (www.gst.gov.in). Please
contact GST helpdesk 0120-4888999.
• Whenever, I’m trying to register with my GSTIN, the system is saying ‘Invalid GSTIN’ or the
details for this GSTIN are not available in GST Common Portal. How should I resolve this
issue?
This is indicating that the GSTIN entered by you is wrong or your GSTIN details is not
available in the GST Common Portal. Please check the GSTIN entered or go to the GST
portal (www.gst.gov.in) and check the details of your GSTIN under ‘Search Taxpayer’ tab.
• Whenever I am trying to register, the system is showing wrong address or mobile number.
How should I resolve this issue?
This is indicating that you might have updated your business registration details in the GST
Common Portal recently. Please click the ‘Update from Common Portal’ button on the e-way
 Page 140 of 371

bill portal, to pull the latest data from the GST Common Portal. If even after this action, wrong
data is displaying, kindly update the details in GST common portal through amendment
process.

3. FAQs - Enrolment
• Why the transporter needs to enroll on the e-way bill system?
There may be some transporters, who are not registered under the Goods and Services Tax
Act, but such transporters cause the movement of goods for their clients. They need to enroll
on the e-way bill portal to get 15 digit Unique Transporter Id.
• What is TRANSIN or Transporter ID?
TRANSIN or Transporter id is 15 digit unique number generated by EWB system for
unregistered transporter, once he enrolls on the system which is similar to GSTIN format and
is based on state code, PAN and Check sum digit. This TRANSIN or Transporter id can be
shared by transporter with his clients, who may enter this number while generating e-way bills
for assigning goods to him for transportation.
• How does the unregistered transporter get his unique id or transporter id?
The transporter is required to provide the essential information for enrolment on the EWB
portal. The transporter id is created by the EWB system after furnishing the requisite
information. The details of information to be furnished is available in the user manual.
• I am unable to enroll as transporter as the system is saying ‘PAN details are not
validated’?
This is indicating that PAN name and Number, entered by you, are not getting validated by
the CBDT/ Income Tax system. Please enter exact name and number as in income tax
database.
• I am unable to enroll as transporter as the system is saying ‘Aadhaar details are not
validated’?
This is indicating that Aadhaar Number, name in Aadhaar and mobile number, entered by
you, are not getting validated by the Aadhaar system. Please enter correct details. However,
the Aadhaar number is not must for enrolment process and the person can enrol giving his
PAN Number also.
• Whenever, I am trying to enroll as transporter, the system is saying you are already
registered under GST system and go and register using that GSTIN.
This is indicating that you are a registered taxpayer with valid GSTIN, since a validation is
done on the PAN you have entered. You need not enroll again as transporter but use your
GSTIN to register on e-way bill portal.

4. FAQs - Login
• Whenever, I am trying to login the system says ‘Invalid Login...Please check your
username and password’. How should I resolve this issue?
This is indicating that you are trying to login to the e-way bill system with incorrect username
and password. Please check the username and password being used to login to the system.
If you have forgotten the username or password, then please use the ‘Forgot Username’ or
‘Forgot Password’ facility provided on the portal to recollect your username or create new
password accordingly.
• Whenever, I am trying to login the system says ‘Your account has been frozen’. How
should I resolve this issue?
This is indicating that your account has been frozen because you might have cancelled your
registration or your GSTIN has been de-activated in the GST Common Portal. Please visit the
GST Common Portal (www.gst.gov.in) to find the status of your GSTIN under ‘Search
Taxpayer’ tab. In case you are able to login on GST portal but not log on e-Way Bill portal,
please lodge your grievance at https://selfservice. gstsystem.in/.
• Whenever, I am trying to login the system says ‘your account has been blocked...Pl try after 5
minutes. How should I resolve this issue?
This is indicating that you had tried to login to the e-way bill system with incorrect username
 Page 141 of 371

and password for more than 5 times. Hence, the system has blocked your account for
security reasons and it will be unblocked after 5 minutes.
• What should I do, if I do not remember my username and password?
If you have forgotten the username or password, then use the ‘Forgot Username’ or ‘Forgot
Password’ facility provided on the portal to recollect your username or create new password
accordingly. The user needs to enter some details after authenticating the same via an OTP,
then, user will be provided with the username and password.

5. FAQs - E-Way Bill

• What is an e-way bill?
e-way bill is a document required to be carried by a person in charge of the conveyance
carrying any consignment of goods of value exceeding fifty thousand rupees as mandated by
the Government in terms of Section 68 of the Goods and Services Tax Act read with Rule 138
of the rules framed thereunder. It is generated from the GST Common Portal for e-Way bill
system by the registered persons or transporters who cause movement of goods of
consignment before commencement of such movement.
• Why is the e-way bill required?
Section 68 of the Act mandates that the Government may require the person in charge of a
conveyance carrying any consignment of goods of value exceeding such amount as may be
specified to carry with him such documents and such devices as may be prescribed. Rule
138 of CGST Rules, 2017 prescribes e-way bill as the document to be carried for the
consignment of goods in certain prescribed cases. Hence e-way bill generated from the
common portal is required.
• Who all can generate the e-way bill?
The consignor or consignee, as a registered person or a transporter of the goods can
generate the e-way bill. The unregistered transporter can enroll on the common portal and
generate the e-way bill for movement of goods for his clients. Any person can also enroll and
generate the e-way bill for movement of goods for his/her own use.
• What are pre-requisites to generate the e-way bill?
The pre-requisite for generation of e-way bill is that the person who generates e-way bill
should be a registered person on GST portal and he should register in the e-way bill portal. If
the transporter is not registered person under GST it is mandatory for him to get enrolled on
e-waybill portal (https://ewaybillgst.gov.in) before generation of the e-way bill. The documents
such as tax invoice or bill of sale or delivery challan and Transporter’s Id, who is transporting
the goods with transporter document number or the vehicle number in which the goods are
transported, must be available with the person who is generating the e-way bill.
• If there is a mistake or wrong entry in the e-way bill, what has to be done?
If there is a mistake, incorrect or wrong entry in the e-way bill, then it cannot be edited or
corrected. Only option is cancellation of eway bill and generate a new one with correct
details.
• Whether e-way bill is required for all the goods that are being transported?
The e-way bill is required to transport all the goods except exempted under the notifications
or rules. Movement of handicraft goods or goods for job-work purposes under specified
circumstances also requires e-way bill even if the value of consignment is less than fifty
thousand rupees. Kindly refer to the e-way bill rules for other exemptions.
• Is there any validity period for e-way bill?
Yes. Validity of the e-way bill depends upon the distance the goods have to be transported. In
case of regular vehicle or transportation modes, for every 100 KMs or part of its movement,
one day validity has been provided. And in case of Over Dimensional Cargo vehicles, for
every 20 KMs or part of its movement, one day validity is provided. And this validity expires
on the midnight of last day.
• While calculating time validity for e-way bill, how is a day determined?
This can be explained by following examples -
(i) Suppose an e-way bill is generated at 00:04 hrs. on 14th March. Then first day would
end on 12:00 midnight of 15-16 March. Second day will end on 12:00 midnight of 16-17
 Page 142 of 371

March and so on.

(ii) Suppose an e-way bill is generated at 23:58 hrs. on 14th March. Then first day would
end on 12:00 midnight of 15-16 March. Second day will end on 12:00 midnight of 16-17
March and so on.
• Which types of transactions that need the e-way bill?
For transportation of goods in relation to all types of transactions such as outward supply
whether within the State or interstate, inward supply whether from within the State or from
interstate including from an unregistered persons or for reasons other than supply also e-way
bill is mandatory.
• What is the Part-A Slip?
Part-A Slip is a temporary number generated after entering all the details in PART-A. This can
be shared or used by transporter or yourself later to enter the PART-B and generate the E-
way Bill. This will be useful, when you have prepared invoice relating to your business
transaction, but don’t have the transportation details. Thus you can enter invoice details in
Part A of e-way bill and keep it ready for entering details of mode of transportation in Part B of
e-way bill.
• When I enter the details in e-way bill form, the system is not generating e-way bill, but
showing Part-A Slip?
If you don’t enter the vehicle number for transportation by road or transport document number
for other cases, the system will show you the PART-A slip. It indicates that you have not
completed the e-way bill generation process. Only when you enter the Part-B details, e-way
bill will be generated.
• How to generate e-way bill from Part-A Slip?
Part-A Slip is entry made by user to temporarily store the document details on the e-way bill
system. Once the goods are ready for movement from the business premises and
transportation details are known, the user can enter the Part-B details and generate the e-
way bill for movement of goods. Hence, Part-B details convert the Part-A slip into e-way bill.
• What are the documents that need to be carried along with the goods being
transported?
The person in charge of a conveyance shall carry the invoice or bill of supply or delivery
challan, bill of entry as the case may be and a copy of the e-way bill number generated from
the common portal. Please refer relevant rules for details.
• How to generate the e-way bill from different registered place of business?
The registered person can generate the e-way bill from his account from any registered place
of business. However, he/she needs to enter the address accordingly in the e-way bill.
He/she can also create sub-users for a particular business place and assigned the role for
generating the e-way bill to that sub user for that particular business place.
• How does taxpayer enter Part-A details and generate e-way bill, when he is
transporting goods himself?
Sometimes, taxpayer wants to move the goods himself. E-way bill Portal expects the user to
enter transporter ID or vehicle number. So if he wants to move the goods himself, he can
enter his GSTIN in the transporter Id field and generate Part-A Slip. This indicates to the
system that he is a transporter and he can enter details in Part-B later when transportation
details are available.
• What has to be entered in GSTIN column, if consignor or consignee is not having
GSTIN?
If the consignor or consignee is unregistered taxpayer and not having GSTIN, then user has
to enter ‘URP’ [Unregistered Person] in corresponding GSTIN column.
• When does the validity of the e-way bill start?
The validity of the e-way bill starts when first entry is made in Part-B i.e. vehicle entry is made
first time in case of road transportation or first transport document number entry in case of
rail/air/ship transportation, whichever is the first entry. It may be noted that validity is not re-
calculated for subsequent entries in Part-B.
• How is the validity of the e-way bill calculated?
The validity period of the EWB is calculated based on the ‘approx. distance’ entered while
 Page 143 of 371

generating the EWB. For every 100 Kms one day is a validity period for EWB as per rule and
for part of 100 KM one more day is added. For ex. If approx. distance is 310 Kms then validity
period is 3+1 days. For movement of Over Dimensional Cargo (ODC), the validity is one day
for every 20 KM (instead of 100 KM) and for every 20 KM or part thereof one more day is
added. Please refer relevant rules for details.
• How the distance has to be calculated, if the consignments are imported from or
exported to other country?
The approximate distance for movement of consignment from the source to destination has to
be considered based on the distance within the country. That is, in case of export, the
consignor place to the place from where the consignment is leaving the country, after
customs clearance and in case of import, the place where the consignment is reached the
country to the destination place and cleared by Customs.
• Whether e-way bill is required, if the goods are being purchased and moved by the
consumer to his destination himself?
Yes. As per the e-way bill rules, e-way bill is required to be carried along with the goods at the
time of transportation, if the value is more than Rs. 50,000/-. Under this circumstance, the
consumer can get the e-way bill generated from the taxpayer or supplier, based on the bill or
invoice issued by him. The consumer can also enroll as citizen and generate the e-way bill
himself.
• Can the e-way bill be modified or edited?
The e-way bill once generated cannot be edited or modified. Only Part-B can be updated.
However, if e-way bill is generated with wrong information, it can be cancelled and generated
afresh. The cancellation is required to be done within twenty four hours from the time of
generation.
• Before submission, the system is not allowing to edit the details. What is the reason?
The system allows editing the details of e-way bill entries before submission. However, if the
products/commodities details are entered, it will not allow editing some fields as the tax rates
will change. To enable this, please delete the products and edit the required fields and enter
the products again.
• The system shows the ‘Invalid Format’ when we are trying to enter the vehicle number.
What is the reason?
The system expects you to enter the vehicle number details in proper format. Please see the
format details in the help with the vehicle entry field.
• What are the formats of vehicle number entry?
To enable proper entry of the vehicle number, the following formats have been provided for
the vehicle numbers
Format RC Numbers Example Entry
ABC1234 DEF 234 DEF0234
AB123456 UP 1 345 UP010345
AB12A1234 AP 5 P 23 AP05P0023
AB12AB1234 TN 10 DE 45 TN10DE0045
AB12ABC1234 KE 3 PEW 1265 KE03PEW1265
DFXXXXXXXXXXXXX For Defence Vehicle, start with DF DF02K123
TRXXXXXXXXXXXXX For Temp RC Vehicle, start with TR TRKA01000002
BPXXXXXXXXXXXXX For Bhutan Vehicle, start with BP
NPXXXXXXXXXXXXX For Nepal Vehicle, start with BP
• How to enter the vehicle number DL1AB123 as there is no format available for this in
e-way bill system?
If the RC book has vehicle number like DL1A123, then you enter as DL01A0123. The vehicle
entered in the e-way bill system is only for information and GST officer will accept this
variation.
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• How can anyone verify the authenticity or the correctness of e-way bill?
Any person can verify the authenticity or the correctness of e-way bill by entering EWB No,
EWB Date, Generator ID and Doc No in the search option of EWB Portal.
• How to generate e-way bill for multiple invoices belonging to same consignor and
consignee?
If multiple invoices are issued by the supplier to recipient, that is, for movement of goods of
more than one invoice of same consignor and consignee, multiple EWBs have to be
generated. That is, for each invoice, one EWB has to be generated, irrespective of the fact
whether same or different consignors or consignees are involved. Multiple invoices cannot be
clubbed to generate one EWB. However after generating all these EWBs, one Consolidated
EWB can be prepared for transportation purpose, if goods are going in one vehicle.
• What has to be done by the transporter if consignee refuses to take goods or rejects
the goods for any reason?
There is a chance that consignee or recipient may reject to take the delivery of consignment
due to various reasons. Under such circumstances, the transporter can get one more e-way
bill generated with the help of supplier or recipient by indicating supply as ‘Sales Return’ with
relevant documents, return the goods to the supplier as per his agreement with him.
• What has to be done, if the validity of the e-way bill expires?
If validity of the e-way bill expires, the goods are not supposed to be moved. However, under
circumstance of ‘exceptional nature and trans-shipment’, the transporter may extend the
validity period after updating reason for the extension and the details in PART-B of FORM
GST EWB-01.
• Can I extend the validity of the e-way bill?
Yes, one can extend the validity of the e-way bill, if the consignment is not being reached the
destination within the validity period due to exceptional circumstance like natural calamity, law
and order issues, trans-shipment delay, accident of conveyance, etc. The transporter needs
to explain this reason in details while extending the validity period.
• How to extend the validity period of e-way bill?
There is an option under e-way bill to extend the validity period. This option is available for
extension of e-way bill before 4 hours and after 4 hours of expiry of the validity. Here,
transporter will enter the e-way bill number and enter the reason for the requesting the
extension, from place (current place), approximate distance to travel and Part-B details. It
may be noted that he cannot change the details of Part-A. He will get the extended validity
based on the remaining distance to travel.
• Who can extend the validity of the e-way bill?
The transporter, who is carrying the consignment as per the e-way bill system at the time of
expiry of validity period, can extend the validity period.
• How to handle “Bill to” - “Ship to” invoice in e-way bill system?
Sometimes, the tax payer raises the bill to somebody and sends the consignment to
somebody else as per the business requirements. There is a provision in the e-way bill
system to handle this situation, called as ‘Bill to’ and ‘Ship to’.
In the e-way bill form, there are two portions under ‘TO’ section. In the left hand side - ‘Billing
To’ GSTIN and trade name is entered and in the right hand side - ‘Ship to’ address of the
destination of the movement is entered. The other details are entered as per the invoice.
In case ship to state is different from Bill to State, the tax components are entered as per the
billing state party. That is, if the Bill to location is inter-state for the supplier, IGST is entered
and if the Bill to Party location is intra-state for the supplier, the SGST and CGST are entered
irrespective of movement of goods whether movement happened within state or outside the
state.
• How to handle “Bill from” - “Dispatch from” invoice in e-way bill system?
Sometimes, the supplier prepares the bill from his business premises to consignee, but
moves the consignment from some others’ premises to the consignee as per the business
requirements. This is known as ‘Billing From’ and ‘Dispatching From’. E-way bill system has
provision for this. In the e-way bill form, there are two portions under ‘FROM’ section. In the
left hand side - ‘Bill From’ supplier’s GSTIN and trade name are entered and in the right hand
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side - ‘Dispatch From’, address of the dispatching place is entered. The other details are
entered as per the invoice. In case Bill From location State is different from the State of
Dispatch the Tax components are entered as per the State (Bill From). That is, if the billing
party is inter-state for the supplier, IGST is entered and if the billing party is intra-state for the
supplier, the SGST and CGST are entered irrespective of movement of goods whether
movement happened within state or outside the state.
• How the transporter is identified or assigned the e-way bill by the taxpayer for
transportation?
While generating e-way bill the taxpayer has a provision to enter the transporter id in the
transportation details section. If he enters 15 digits transporter id provided by his transporter,
the e-way bill will be assigned to that transporter. Subsequently, the transporter can log in and
update further transportation details in Part B of e-way bill.
• How to generate e-way bill, if the goods of one invoice is being moved in multiple
vehicles simultaneously?
Where the goods are being transported in a semi knocked down or completely knocked down
condition, the EWB shall be generated for each of such vehicles based on the delivery
challans issued for that portion of the consignment as per CGST Rule 55 which provides as
under :
(a) Supplier shall issue the complete invoice before dispatch of the first consignment;
(b) Supplier shall issue a delivery challan for each of the subsequent consignments, giving
reference of the invoice;
(c) each consignment shall be accompanied by copies of the corresponding delivery
challan along with a duly certified copy of the invoice; and
(d) Original copy of the invoice shall be sent along with the last consignment
Please note that multiple EWBs are required to be generated in this situation. That is, the
EWB has to be generated for each consignment based on the delivery challan details along
with the corresponding vehicle number.

6. FAQs - Updating Transportation/vehicle/Part-B details

• Whether Part-B is must for e-way bill?
E-Way bill is complete only when Part-B is entered. Otherwise printout of EWB would be
invalid for movement of goods. Filling up of Part-B of the e-way bill is a must for movement of
the goods, except for within the same state movement between consignor place to
transporter place, if distance is less than 50 Kms.
• Can I transport goods with the e-way bill without vehicle details in it?
No. One needs to transport the goods with an e-way bill specifying the vehicle number, which
is carrying the goods. However, where the goods are transported for a distance of less than
fifty kilometers within the State from the place of business of consignor to the place of
transporter for further transportation, then the vehicle number is not mandatory. Similar
exception up to 50 KM has been given for movement of goods from place of business of
transporter to place of business of consignee.
• Whether the e-way bill is required for movement of consignment for weighment to the
weighbridge?
No e-Way bill is required for movement of goods upto a distance of 20 Km from the place of
business of consignor to a weighbridge for weighment or from the weighbridge back to the
place of business of consignor, within the same State, subject to the condition that the
movement of goods is accompanied by a delivery challan issued in accordance with Rule 55.
• Who all can update the vehicle number for the e-way bill?
The Vehicle number can be updated by the generator of the e-way bill or the transporter
assigned by the generator for that particular e-way bill.
• Can Part-B of e-way bill entered/updated by any other transporter?
The present transporter can fill or update PART-B of the EWB. The e-way bill can be
assigned from one transporter to another transporter, for further movement of consignment.
Under this circumstance, the latest transporter, assigned for that e-way bill, can update Part-B
of EWB.
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• If the vehicle, in which goods are being transported, having e-way bill is changed, then
what is required to be done?
The e-way bill for transportation of goods should always have the vehicle number that is
actually carrying the goods. There may be requirement to change the vehicle number after
generating the e-way bill or after commencement of movement of goods, due to trans-
shipment or due to breakdown of vehicle. In such cases, the transporter or generator of the e-
way bill can update the new vehicle number in Part B of the EWB.
• What is to be done (in an EWB) if the vehicle breaks down?
If the vehicle breaks down, when the goods are being carried with an EWB, then transporter
can get the vehicle repaired and continue the journey in the same EWB. If he has to change
the vehicle, then he has to enter the new vehicle details in that EWB, on the eway bill portal,
using ‘Update vehicle number’ option in Part B and continue the journey in new vehicle, within
the original validity period of e-way bill.
• How many times can Part-B or Vehicle number be updated for an e-way bill?
The user can update Part-B (Vehicle details) as many times as he wants for movement of
goods to the destination. However, the updating should be done within the validity period.
• Can the e-way bill entry be assigned to another transporter by authorized transporter?
The authorized transporter can assign the e-way bill to any enrolled or registered transporter
for further transportation of the goods. Subsequently, the new transporter can only update the
Part-B of the EWB.
• In case of transportation of goods via rail/air/ship mode, when is user required to enter
transport document details, as it is available only after submitting of goods to the
concerned authority?
Where the goods are transported by railways or by air or vessel, the Part B of the e-way bill
can be updated either before or after the commencement of movement. But, where the goods
are transported by railways, the railways shall not deliver the goods, unless the e-way bill as
required under these rules is produced to them, at the time of delivery.
• If the goods having e-way bill has to pass through trans-shipment and through
different vehicles, how it has to be handled?
Some of the consignments are transported by the transporter through trans-shipment using
different vehicles before it is delivered to the recipient at the place of destination. Hence for
each movement from one place to another, the transporter needs to update the vehicle
number in which he is transporting that consignment in part B of the E-Way Bill.
• Can I use different modes of transportation to carry the goods having an e-way bill? If
so, how to update the details?
Yes. One can transport goods through different modes of transportation - Road, Rail, Air,
Ship. However, PART-B of e-way bill have to be updated with the latest mode of
transportation or conveyance number using ‘Update vehicle number/mode of transport ’
option in the Portal. That is, at any point of time, the details of conveyance specified in the e-
way bill on the portal, should match with the details of conveyance through which goods are
actually being transported.
• How to enter multiple modes of transportation, i.e., road, rail, ship, air for the same e-
way bill?
One e-way bill can go through multiple modes of transportation before reaching destination.
As per the mode of transportation, the EWB can be updated with new mode of transportation
by using ‘Update Vehicle Number’.
Let us assume the goods are moving from Cochin to Chandigarh through road, ship, air and
road again. First, the taxpayer generates the EWB by entering first stage of movement (by
road) from his place to ship yard and enters the vehicle number. Next, he will submit the
goods to ship yard and update the mode of transportation as Ship and transport document
number on the e-way bill system. Next, after reaching Mumbai, the taxpayer or concerned
transporter updates movement as road from ship yard to airport with vehicle number. Next the
taxpayer or transporter updates, using ‘update vehicle number’ option, the Airway Bill number.
Again after reaching Delhi, he updates movement through road with vehicle number. This
way, the e-way bill will be updated with multiple mode of transportation.
• How does transporter come to know that particular e-way bill is assigned to him?
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The transporter comes to know that EWBs are assigned to him by the taxpayers for
transportation, in one of the following ways :
• After login at EWB portal, the transporter can go to reports section and select ‘EWB
assigned to me for trans’ and see the list. He can also see these details in his
dashboard, after login to EWB portal.
• The transporter can go to ‘Update Vehicle No’ and select ‘Generator GSTIN’ option and
enter taxpayer GSTIN of taxpayer, who has assigned the EWB to him.
• How to handle the goods which move through multiple trans-shipment places?
Some of the consignments move from one place to another place till they reach their
destinations. Under this circumstance, each time the consignment moves from one place to
another, the transporter needs to enter the vehicle details using ‘Update Vehicle Number’
option in part B of the EWB, when he starts moving the goods from that place. The
transporter can also generate ‘Consolidated EWB’ with the EWB of that consignment with
other EWBs and move the consignment to next place. This has to be done till the
consignment reaches destination. But it should be within the validity period of a particular
EWB.
• How does the transporter handle multiple e-way bills which pass through
transshipment from one place to another in different vehicles, to reach the
destinations?
Some of the transporters move the consignments from one place to another place before the
goods reach the destination, as per the movement of vehicles. Sometimes the consignments
is moved to 8-10 branches of the transporter, before they reach their destination. The
consignments reach the particular branch of transporter from different places in different
vehicles. These consignments are sorted out, to be transported to different places in different
Vehicles. Now, the concerned branch user instead of updating the vehicle for each one of the
EWBs, can generate ‘Consolidated EWB’ for multiple EWBs which are going in one vehicle
towards next branch/destination.

7. FAQs - Cancelling EWB

• Can the e-way bill be deleted or cancelled?
The e-way bill once generated cannot be deleted. However, it can be cancelled by the
generator within 24 hours of generation. If a particular EWB has been verified by the proper
officer, then it cannot be cancelled. Further, e-way bill can be cancelled if either goods are not
transported or are not transported as per the details furnished in the e-way bill.
• Whether the e-way bill can be cancelled? If yes, under what circumstances?
Yes, e-way bill can be cancelled if either goods are not transported or are not transported as
per the details furnished in the e-way bill. The e-way bill can be cancelled within 24 hours
from the time of generation.

8. FAQs - Rejecting EWB

• Who can reject the e-way bill and Why?
The person who causes transport of goods shall generate the e-way bill specifying the details
of other person as a recipient of goods. There is a provision in the common portal for the
other party to see the e-way bill generated against his/her GSTIN. As the other party, one can
communicate the acceptance or rejection of such consignment specified in the e-way bill. If
the acceptance or rejection is not communicated within 72 hours from the time of generation
of e-way Bill or the time of delivery of goods whichever is earlier, it will be deemed that he has
accepted the details.
• How does the taxpayer or recipient come to know about the e-way bills generated on
his GSTIN by other person/party?
As per the rule, the taxpayer or recipient can reject the e-way bill generated on his GSTIN by
other parties. The following options are available for him to see the list of e-way bills:
• He can see the details on the dashboard, once he logs into the system.
• He will get one SMS everyday indicating the total e-way bill activities on his GSTIN.
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• He can go to reject option and select date and see the e-way bills. Here, system shows
the list of e-way bills generated on his GSTIN by others.
• He can go to report and see the ‘EWBs by other parties’.

9. FAQs - Consolidated EWB

• What is a consolidated e-way bill?
Consolidated e-way bill is a document containing the multiple e-way bills for multiple
consignments being carried in one conveyance (goods vehicle). That is, the transporter,
carrying multiple consign-ments of various consignors and consignees in one vehicle can
generate and carry one consolidated e-way bill instead of carrying multiple e-way bills for
those consignments.
• Who can generate the consolidated e-way bill?
A transporter can generate the consolidated e-way bills for movement of multiple
consignments in one vehicle.
• What is the validity of consolidated e-way bill?
Consolidated EWB is like a trip sheet and it contains details of different EWBs in respect of
various consignments being transported in one vehicle and these EWBs will have different
validity periods.
Hence, Consolidated EWB does not have any independent validity period. However,
individual consignment specified in the Consoli-dated EWB should reach the destination as
per the validity period of the individual EWB.
• What has to be done, if the vehicle number has to be changed for the consolidated e-
way bill?
There is an option available under the ‘Consolidated EWB’ menu as ‘regenerate CEWB’. This
option allows you to change the vehicle number to existing Consolidated EWB, without
changing the individual EWBs. This generates a new CEWB, which has to be carried with
new vehicle. Old CEWB will become invalid for use.
• Can the ‘consolidated e-way bill’ (CEWB) have the goods/e-way bills which are going
to be delivered before reaching the destination defined for CEWB?
Yes, the consolidated e-way bill can have the goods or e-way bills which will be delivered to
multiple locations as per the individual EWB included in the CEWB. That is, if the CEWB is
generated with 10 EWBs to move 3 consignments to destination Y and 7 consignments to
destination X, then on the way the transporter can deliver 3 consignments to destination Y out
of 10 and move with remaining 7 consignments to the destination X with the same CEWB.
Alternatively, two CEWB can be generated one for 3 consignments for destination Y and
another CEWB for 7 consignments for destination X.

10. FAQs - Other modes

• What are the modes of e-way bill generation, the taxpayer can use?
The e-way bill can be generated by any of the following methods :
o Using Web based system
o Using SMS based facility
o Using Android App
o Bulk generation facility
o Using Site-to-Site integration
o Using GSP (Goods and Services Tax Suvidha Provider)
• How can the taxpayer use the SMS facility to generate the e-way bill?
The taxpayer has to register the mobile numbers through which he intends to generate the e-
way bill on the e-way bill system. Please see the user manual for SMS based e-way bill
generation available on the portal for further details.
• How can the taxpayer use the Android App to generate the e-way bill?
The taxpayer has to register the IMEI (International Mobile Equipment Identity) number of the
mobile phones through which he intends to generate the e-way bill on the e-way bill system.
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Please see the user manual for Mobile App based e-way bill generation available on the
portal for further details.
• How to download mobile app?
The mobile app is available only for the taxpayers and enrolled transporters. It is not available
in Play Store. The main user has to login and select the ‘for mobile app’ under registration
menu. The system asks to select the user/sub-user and enter the IMEI number of the user.
Once it is entered, the concerned user gets the link in his registered mobile to download the
app through SMS. Now, the user has to download the app by clicking that link and enable it to
get installed on the mobile.
• What is bulk generation facility and who can use it?
Through this facility, user can upload multiple invoices and generate multiple e-Way bill at one
go. This facility can be used by the taxpayers or transporters who have automated their
invoice generation system. In one go, they can prepare bulk requests for e-way bills in a file
from their automated system, and upload it on the common portal and generate e-way bill in
one go. This avoids duplicate data entry into e-way bill system and avoids data entry
mistakes also. Any taxpayer or transporter can use the bulk generation facility.
• How to use the bulk generation facility?
To use the bulk generation facility, one has to prepare the e-way bill requests through JSON
file. This can be done in two ways - registered taxpayer or transporter can prepare the JSON
file directly from his automated system. If he is unable do so, he can use excel based bulk
generation tool available on the portal. The invoice and other details need to entered as per
the format and JSON file can be generated. This JSON file need to be uploaded in the portal
for generation of multiple e-Way bills. For more details, please refer to the ‘user manual of the
bulk generation’ and ‘bulk generation tools’ under tool section at EWB portal and follow the
instructions.
• Bulk generation facility can be used for what activities on e-way bill portal?
One can use bulk generation facility for
o Generation of e-way bills,
o Updation of Part-B of e-way bills
o Generation of Consolidated e-way bills
Pl refer to the user manual of the bulk generation tools on the portal.
• What are the benefits of the bulk generation facility?
Benefits of the bulk generation facility are as follows :
o Generation of multiple e-way bills in one go.
o It avoids duplicate keying in of the invoices to generate e-way bills.
o It avoids the data entry mistakes while keying in for generation of e-way bills.
• How can the registered person integrate his/her system with e-way bill system to
generate the e-way bills from his/her system?
The integration between e-way bill system and registered persons’ system can be done
through APIs. For availing this facility, the registered person should register the server details
of his/her systems (through which he wants to generate the e-way bill using the APIs of e-way
bill system) with e-way bill system. For further details, please go through the user manual.
• What is API Interface?
API interface is a site-to-site integration of two systems. Using this, the taxpayer can link his
IT system with EWB system to generate EWB directly from his IT solution without keying in
the details for EWB form in the Portal. This reduces duplicate data entry and eliminates the
data entry mistakes.
• What are the benefits of API Interface?
Presently registered person generates invoices from his IT system and logs into EWB system
and enters e-way bill details and generate e-way bills. Here, the taxpayer has to make double
entries - once for Invoice generation in his system and second time for e-way bill generation.
He can integrate his system with EWB system through API. The EWB details are sent from
taxpayer system to e-Way bill system through APIs and generation of e-way bill happens at e-
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Way bill system instantaneously. The e-Way bill data is send back to the taxpayer system by
the e-Way bill system so that EWB data can be stored in the taxpayers system itself. This will
lead saving of manpower and cost of operator for this purpose. Secondly API interface will
eliminate data entry mistakes/errors being made by operator. It also saves time. Thirdly e-way
bill number can be stored by the taxpayer system in his database with the corresponding
invoice. Even in the invoice itself, EWB number can be printed so that printout of EWB need
not be taken out and carried out along with the vehicle, separately.
• What are the pre-requisite for using API interface?
API interface is a site-to-site integration of website of taxpayer with the EWB system. API
interface can be used by large taxpayers, who need to generate more than 1000 invoices/e-
way bills per day. However, the taxpayer should meet the following criteria to use the API
interface:
• His invoicing system should be automated with IT solutions.
• He should be ready to change his IT system to integrate with EWB system as per API
guidelines.
• He should be generating at least 1000 invoices/e-way bills per day.
• His system should have SSL based domain name.
• His system should have Static IP Address.
• He should have pre-production system to test the API interface.

11. FAQs - Other Options

• How does the taxpayer become transporter in the e-way bill system?
Generally, registered GSTIN holder will be recorded as supplier or recipient and he will be
allowed to work as supplier or recipient. If registered GSTIN holder is transporter, then he will
be generating EWB on behalf of supplier or recipient. He need to enter both supplier and
recipient details while generating EWB, which is not allowed as a supplier or recipient.
To change his position from supplier or recipient to transporter, the taxpayer has to select the
option ‘Register as Transporter’ under registration and update his profile. Once it is done with
logout and re-login, the system changes taxpayer as transporter and allows him to enter
details of both supplier and recipient in EWB as per invoice.
• How does the taxpayer update his latest business name, address, mobile number or e-
mail id in the e-way bill system?
EWB System (www.ewaybillgst.gov.in) is dependent on GST Common portal (www.gst.gov.in)
for taxpayers registration details like legal name/trade name, business addresses, mobile
number and e-mail id. EWB System will not allow taxpayer to update these details directly in
the EWB portal. If taxpayer changes these details at GST Common portal, it will be updated
in EWB system within a day automatically. Otherwise, the taxpayer can update the same
instantaneously by selecting the option ‘Update My GSTIN’ in the e-Way bill system and the
details will be fetched from the GST common portal (www.gst.gov.in) and updated in the e-
Way bill system.
• Why do I need sub-users?
Most of the times, the taxpayer or authorized person himself cannot operate and generate
EWBs. He may in that case authorize his staff or operator to do that. He would not like to
avoid sharing his user credentials with them. In some firms, the business activities will be
operational 24/7 and some firms will have multiple branches. Under these circumstances, the
main user can create sub-users and assign different roles to them. He can assign generation
of EWB or rejection or report generation activities based on requirements to different sub-
users.
This facility helps him to monitor the activities done by sub-users. However, the main user
should ensure that whenever employee is transferred or resigned, the sub-user account is
frozen/blocked to avoid mis-utilisation.
• How many sub-users can be created?
For every principal/additional place of business, user can create maximum of 3 sub-users.
That is, if taxpayer has only (one) principal business place (and no additional place of
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business), he can create 3 sub-users. If taxpayer has 3 additional places and one principal
place of business (i.e. 4 places), then he can create 12 (4 X 3) sub-users.
• Why are the reports available only for a particular day?
The user is allowed to generate report on daily basis. Because of criticality of the system for
performance for 24/7 operation, the reports are limited to be generated for a day. The user
can change date and generate the report for that date. Hence, the user is advised to generate
report daily and save in his system.
• Why masters have to be entered?
EWB system has an option to enter the masters of user - client master, supplier master,
transporter master and product master. If user creates these masters, it will simplify the
generation of e-way bill for him. That is, the system auto populates the details like trade/legal
name, GSTIN, address on typing few character of client or supplier, HSN Code, tax rates etc.
It also avoids data entry mistakes by operator while keying in the details.
• Can I upload the masters available in my system?
Yes, you can upload your customers, suppliers and product details into e-way bill system by
preparing the data as per the format provided in the tools option in the portal and upload in
the master option after logging in.
• What is a detention report under grievance menu?
If the goods or the vehicle of the taxpayer or transporter has been detained by the tax officers
for more than 30 minutes, then the transporter can enter the detention report on EWB Portal,
which will reach the designated officer immediately, so that he can take an appropriate action
accordingly.
• When is a detention report to be raised?
Where a vehicle has been intercepted and detained for a period exceeding thirty minutes, the
transporter may upload the said information in the EWB system. The detention report will go
to the concerned senior GST State/Central officer to redress the grievance.

12. FAQs - Miscellaneous

• What is Over Dimensional Cargo?
Over Dimensional Cargo mean a cargo carried as a single indivisible unit and which exceeds
the dimensional limits prescribed in rule 93 of the Central Motor Vehicle Rules, 1989 made
under the Motor Vehicles Act, 1988.
• How the consignor is supposed to give authorization to transporter or e-commerce
operator and courier agency for generating PART-A of e-way bill?
It is their mutual agreement and way out to do the same. If a transporter or courier agency or
the e-commerce operator fills PART-A, it will be assumed by the department that they have
got authorization from consignor for filling PART-A.
• In case of Public transport, how to carry e-way bill?
In case of movement of goods by public transport, e-way bill shall be generated by the person
who is causing the movement of the goods, in case of any verification, he can show e-way bill
number to the proper officer.
• What is the meaning of consignment value?
It is the value of the goods declared in invoice, a bill of challan or a delivery challan, as the
case may be, issued in respect of the said consignment and also include Central tax, State or
Union territory tax, Integrated tax and Cess charged, if any. But, it will not include value of
exempt supply of goods, where the invoice is issued in respect of both exempt and taxable
supply. It will also not include value of freight charges for the movement charged by
transporter.
• In case of movement of goods by Railways, is there a requirement for railway to carry
e-way bill along with goods?
In case of movement of goods by Railways, there is no requirement to carry e-way bill along
with the goods, but railways has to carry invoice or delivery challan or bill of supply as the
case may be along with goods. Further, e-way bill generated for the movement is required to
be produced at the time of delivery of the goods. Railways shall not deliver goods unless the
e-way bill required under rules is produced at the time of delivery. But for the purposes of e-
 Page 152 of 371

way bill, the expression ‘transported by railways’ does not include the ‘leasing of parcel space
by Railways’.
• Is the e-way bill required for the movement of empty cargo containers?
No, such movement has been exempted from e-way bill.
• Does the movement of goods under Customs seal require e-way bill?
No, such movement has been exempted from e-way bill.
• Does the movement of goods which are in transit to or from Nepal/Bhutan, require e-
way bill for movement?
No, such movement has been exempted from e-way bill.
• Is the temporary vehicle number allowed for e-way bill generation?
Yes, temporary vehicle number can also be inserted as vehicle number for the purpose of e-
way bill generation.
• Whether e-way bill is required for intra-State movement of goods?
At present e-way bill is required only for inter-State movement of goods. For intra-State
movement of goods the requirement for e-way bill will be introduced in a phased manner, for
which rules will be notified by respective states separately.
• I am dealer in tractors. I purchased 20 tractors from the manufacturer. These tractors
are not brought on any motorized conveyance as goods but are brought to my
premise by driving them. Also, these tractors have not got the vehicle number. Is e-
way bill required in such cases?
E-way bill is required in such cases. The temporary number or any identifiable number with
the tractor have to be used for filling details of the vehicle number for the purpose of e-way
bill generation.
• Who is responsible for EWB generation in case DTA sales from SEZ/FTWZ?
There is no special provision for such supply and hence the registered person who causes
movement of goods shall be responsible for the generation of e-Way bill as per the rules.
• In many cases where manufacturer or wholesaler is supplying to retailers, or where a
consolidated shipment is shipped out, and then distributed to multiple consignees, the
recipient is unknown at the time the goods are dispatched from shipper’s premises. A
very common example is when FMCG companies send a truck out to supply kirana
stores in a particular area. What needs to be done in such cases?
In such cases, movement is caused on behalf of self. No supply is being made. In such
cases, delivery challan may be used for generation of e-way bills. All the provisions for
delivery challan need to be followed along with the rules for e-way bills.
• What should be the value in e-way bill in case goods are sent on lease basis as the
value of machine is much higher than leasing charges?
The value of goods needs to be mentioned as per the explanation 2 of the sub-rule (1) of rule
138.
• Expired stock has no commercial value, but is often transported back to the seller for
statutory and regulatory requirements, or for destruction by seller himself. What needs
to be done for such cases of transportation of the expired stock?
E-way bills are required even in cases where goods are moved for reasons other than supply.
Delivery Challan has to be the basis for generation of e-way bill in such cases.
• Whether shipping charges charged by E-commerce companies needs to be included
in ‘consignment value’ though the same is not mentioned on merchant’s invoice?
Consignment value of goods would be the value determined in accordance with the
provisions of section 15. It will also include the central tax, State or Union territory tax,
integrated tax and cess charged, if any. So shipping charges charged by E- by the e-
commerce companies need not be included in the ‘consignment value’.
• Where an invoice is in respect of both goods and services, whether the consignment
value should be based on the invoice value (inclusive of value of services) or only on
the value of goods. Further, whether HSN wise details of service is also required to be
captured in Part A of the e-way bill in such case.
Consignment value and HSN needs to be determined for goods only not for services as only
the goods are in movement and e-way bill needs to be generated accordingly.
 Page 153 of 371

[Source : C.B.E. & C. Website]

----X----
 Page 154 of 371

Circular No. 61/35/2018-GST

CBEC-20/13/01/2018-GST
New Delhi, Dated the 4th September, 2018

To,

The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners / Commissioners of

Central Tax (All)/The Principal Directors General / Directors General (All)

Madam/Sir,

Subject: E-way bill in case of storing of goods in godown of transporter - regarding

Various representations have been received on the matter pertaining to the textile sector and problems
being faced by weavers & artisans regarding storage of their goods in the warehouse of the transporter. It
has been stated that textile traders use transporters’ godown for storage of their goods due to their weak
financial conditions. The transporters providing such warehousing facility will have to get themselves
registered under GST and maintain detailed records in cases where the transporter takes delivery of the
goods and temporarily stores them in his warehouse for further transportation of the goods till the
consignee/recipient taxpayer’s premises. The transport industry is facing difficulties due to the same and
a request has been made to treat these godowns as transit godowns.

2. In view of the difficulties being faced by the transporters and the consignee/recipient taxpayer and to
ensure uniformity in the procedure across the sectors and the country, the Board in exercise of its power
conferred under section 168(1) of the Central Goods and Services Tax Act, 2017 (hereafter referred to as
the CGST Act) hereby clarifies the issues in the succeeding paragraphs.

3. As per rule 138 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the
CGST Rules) e-way bill is a document which is required for the movement of goods from the supplier’s
place of business to the recipient taxpayer’s place of business. Therefore, the goods in movement
including when they are stored in the transporter's godown (even if the godown is located in the recipient
taxpayer’s city/town) prior to delivery shall always be accompanied by a valid e-way bill.

4. Further, section 2(85) of the CGST Act defines the “place of business” to include “a place from where
the business is ordinarily carried out, and includes a warehouse, a godown or any other place where a
taxable person stores his goods, supplies or receives goods or services or both”. An additional place of
business is the place of business from where taxpayer carries out business related activities within the
State, in addition to the principal place of business.

5. Thus, in case the consignee/ recipient taxpayer stores his goods in the godown of the transporter, then
the transporter’s godown has to be declared as an additional place of business by the recipient taxpayer.
In such cases, mere declaration by the recipient taxpayer to this effect with the concurrence of the
transporter in the said declaration will suffice. Where the transporter’s godown has been declared as the
additional place of business by the recipient taxpayer, the transportation under the e-way bill shall be
deemed to be concluded once the goods have reached the transporter’s godown (recipient taxpayer’
additional place of business). Hence, e-way bill validity in such cases will not be required to be extended.

6. Further, whenever the goods are transported from the transporters’ godown , which has been declared
as the additional place of business of the recipient taxpayer, to any other premises of the recipient
taxpayer then, the relevant provisions of the e-way bill rules shall apply. Hence, whenever the goods
move from the transporter’s godown (i.e, recipient taxpayer’s additional place of business) to the recipient
taxpayer’s any other place of business, a valid e-way bill shall be required, as per the extant State-
specific e-way bill rules.

7. Further, the obligation of the transporter to maintain accounts and records as specified in section 35 of
the CGST Act read with rule 58 of the CGST Rules shall continue as a ware-housekeeper. Furthermore,
 Page 155 of 371

the recipient taxpayer shall also maintain accounts and records as required under rules 56 and 57 of
the CGST Rules. Furthermore, as per rule 56 (7) of the CGST Rules, books of accounts in relation to
goods stored at the transporter’s godown (i.e., the recipient taxpayer’s additional place of business) by
the recipient taxpayer may be maintained by him at his principal place of business. It may be noted that
the facility of declaring additional place of business by the recipient taxpayer is in no way putting any
additional compliance requirement on the transporters.

8. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

9. Difficulty, if any, in implementation of this Circular may please be brought to the notice of the Board.
Hindi version would follow.

Forthcoming changes in E-way Bill system

Source : https://ewaybill.nic.in, dated 25-3-2019
1. Auto calculation of route distance based on PIN code for generation of EWB
Now, E-way bill system is being enabled to auto calculate the route distance for movement of
goods, based on the Postal PIN codes of source and destination locations. That is, the e-way bill
system will calculate and display the actual distance between the supplier and recipient
addresses. User is allowed to enter the actual distance as per his movement of goods. However,
it will be limited to 10% more than the displayed distance for entry. That is, if the system has
displayed the distance between Place A and B, based on the PIN codes, as 655 KMs, then the
user can enter the actual distance up to 720 KMs (655 KMs + 65 KMs). In case, the source PIN
and destination PIN are same, the user can enter up to a maximum of 100 KMs only. If the PIN
entered is incorrect, the system would alert the user as INVALID PIN CODE. However, he can
continue entering the distance. Further, these e-way bills having INVALID PIN codes are flagged
for review by the department.

Route distance calculation between source and destination uses the data from various electronic
sources. This data employs various attributes, for example : road class, direction of travel, average
speed, traffic data etc. These attributes are picked up from traffic that is on National highways,
State highways, expressways, district highways as well as main roads inside the cities. A
proprietary logic is then used for approximating the distance between two postal pin codes. The
distance thus derived is then provided as the motorable distance at that point of time.

2. Blocking of generation of multiple E-Way Bills on one Invoice/ document

Based on the representation received by the transporters, the government has decided not to
allow generation of multiple e-way bills based on one invoice, by any party - consignor, consignee
and transporter. That is, once E-way Bill is generated with an invoice number, then none of the
parties - consignor, consignee or transporter - can generate the E-Way Bill with the same invoice
number. One Invoice, One E-way Bill policy is followed. The change will come in the next version.

3. Extension of E-Way Bill in case Consignment is in Transit

The transporters had represented to incorporate the provision to extend the E-way Bill, when the
goods are in transit. The transit means the goods could be on Road or in Warehouse. This facility
is being incorporated in the next version for the extension of E-way Bill.

During the extension of the e-way bill, the user is prompted to answer whether the Consignment
is in Transit or in Movement. On selection of In Transit, the address details of the transit place
need to be provided. On selection of In Movement the system will prompt the user to enter the
Place and Vehicle details from where the extension is required. In both these scenarios, the
destination PIN will be considered from the PART-A of the E-way Bill for calculation of distance for
movement and validity date. Route distance will be calculated as explained above.

4. Blocking of Inter-State Transactions for Composition dealers

As per the GST Act, the composition taxpayers are not supposed to do inter-State transactions.
Hence next version will not allow generation of e-way bill for inter-State movement, if the supplier is
composition taxpayer. Also, the supplies of composition taxpayers will not be allowed to enter any of
 Page 156 of 371

the taxes under CGST or SGST for intra-State transactions. In case of Composition taxpayer,
document type of Tax Invoice will not be enabled.

E-way Bill System — New enhancement in E-way Bill (EWB) generation form
Source : www.ewaybill.nic.in, dated 1-10-2018
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Indirect Taxes & Customs, New Delhi
This document will explain the new enhancements done in the E-Way Bill (EWB) generation form
and is being release on 1st of Oct., 2018. The purpose of this document is to communicate the taxpayers
and transporters the latest changes with screen shots and make them to understand and prepare them
while generating the E-Way Bills from 1st Oct., 2018.
Enhancements in E-Way Bill Form
Following are the enhancements done in the E-Way Bill generation Form :
1. Display of only relevant document types in “Document Type” drop down list based on the
selected Transaction “Supply Type” and “Sub-Type” by the taxpayers.
2. Auto-population of state name based on the pin code entered at consignor and consignee
addresses.
3. Standard rates for tax are provided in the drop down list for selection based on the type (intra-
state/inter-state) transactions.
4. Additional fields for “CESS Non-Advol Amount” & “Other Value” have been introduced to
enter CESS Non-Advol amount and any other charges (+/-) written in invoice.
5. Alerting the generator of the E-Way Bill through SMS message, in case the total invoice value
is more than Rs. 10 Crores.
6. Transporter ID is made compulsory for generating Part-A slip.
The following figure/screen illustrates the new enhancements for user’s reference.

1. Display of only relevant document names in “Document Type” dropdown list based on
the selected Transaction “Sub-Type”
In the new version, once the user selects the Transaction type and Sub Type in ‘Transaction
Details’ section, system will display only the relevant document types in ‘Document Type’
dropdown pertaining to the selected sub-type as shown in below tables.
For example, if the user selects the Transaction Sub-Type as “Supply” for Outward supplies,
 Page 157 of 371

system will display only Tax Invoice and Bill of Supply in the ‘Document Type’ dropdown list
unlike in previous version where system used to display all the document types irrespective of
the ‘Transaction Sub-Type’ selected by the user.
Similarly if the user selects the Transaction Sub-Type as “Job Work Returns” for Inward
supplies, system will show only ‘Delivery Challan’ in the dropdown as it is the only applicable
document for Job Works.
Display of only relevant dropdown options corresponding to the selected Transaction Sub-
Type will make sure that taxpayers will select only the correct document type applicable for
the respective Transaction Sub-Type while generating the EWBs.
Ø Case I : Outward Transactions, if generator is consignor
S. Transaction Sub-Type Document Type To GSTIN (Bill To)
No.
1. Supply Tax Invoice Other GSTIN/URP
Bill of Supply Other GSTIN/URP
2. Export Tax Invoice URP
Bill of Supply URP
3. Job Work Returns Delivery Challan Other GSTIN/URP
4. SKD/CKD Tax Invoice Other GSTIN/URP
Bill of Supply Other GSTIN/URP
Delivery Challan Other GSTIN/URP
5. Recipient Not Known Delivery Challan Self
Others Self
6. For Own Use Delivery Challan Self
7. Exhibition or Fairs Delivery Challan Self
8. Line Sales Delivery Challan Self
9. Others Delivery Challan Self/Other
Others Self/Other
Ø Case II : Inward Transactions, if generator is consignee
S. Transaction Sub-Type Document Type To GSTIN (Bill From)
No.
1. Supply Tax Invoice Other GSTIN/URP
Bill of Supply Other GSTIN/URP
2. Import Bill of Entry URP
3. SKD/CKD Bill of Entry URP
Tax Invoice Other GSTIN/URP
Bill of Supply Other GSTIN/URP
Delivery Challan Other GSTIN/URP
4. Job Work Returns Delivery Challan Other GSTIN/URP
5. Exhibition or Fairs Delivery Challan Self
6. For Own Use Delivery Challan Self
7. Others Delivery Challan Self/Other
Others Self/Other
2. Auto-population of state name based on the entered PIN code
In the new version, once the taxpayer enters the pin code in “Bill From” & “Bill To” sections,
state name will be auto-populated based on the entered pin code.
In exceptional cases where one pin code belongs to more than one state (e.g. some places
 Page 158 of 371

in Hyderabad & Telangana), system will show the names of the concerning states in the drop
down. User can then select the actual state and proceed further. Auto-population of state will
avoid the chances of errors by taxpayers while generating the EWB.
In case taxpayer feels that particular pin code is genuine but not being accepted, he/she can
raise the issue with helpdesk for resolution and clarification. In the ‘PIN CODE’ sub-option
under ‘Search’ option on the e-way bill portal, the taxpayer can enter the pin code and check
the state names pertaining to that pin code.
3. Auto-population of Standard rates for tax
In the new version of EWB entry form, standard rate of tax (%) is being auto-populated in the
dropdown while entering the HSN code. Taxpayer has to select the applicable tax rate slab (in
%) from the dropdown and based on this, the system calculates and auto-populates the
CGST, SGST, IGST & CESS amount etc.
A new tax rate field namely “CESS Non-Advol Rate” has been introduced where in the ‘CESS
non-Advol Tax rate’ in Rupees can be selected by the taxpayer as applicable.
The purpose behind providing the dropdowns for applicable tax rates and introducing
additional tax fields is to avoid chances of errors in entering the tax rates and also to match
the values in the invoice and e-way bill.
The following list of rates of tax will be validated.
CGST SGST IGST CESS - Advol (%) CESS - Non-
(%) (%) (%) Advol. (Rs.)
0 0 0 0 or 1 or 3 or 5 or 11 or 12 0 or
0.05 0.05 0.1 or 12.5 or 15 or 17 or 21 or 400 or
22 or 36 or 49 or 60 or 61 or
0.125 0.125 0.25 2076 or
65 or 71 or 72 or 89 or 96 or
1.5 1.5 3 142 or 160 or 204 or 249 2747 or
2.5 2.5 5 3668 or
6 6 12 4006 or
9 9 18 4170 or
14 14 28 400
4. Additional fields for entering the invoice amount have been introduced
The additional fields for entering the amounts namely ‘CESS Non-Advol Value’ & ‘Other
Amount (+/-)’ have been introduced. ‘Other Amount’ column can be used, to enter any other
charges written in the invoice or any discount provided, so that ‘Total Invoice Value’ will match
with the Invoice for which e-way bill is being generated as shown in Figure 1.
The system will not auto-populate the CESS Non-Advol amount as it depends upon the
quantity and unit. Hence the taxpayer has to manually enter the same in ‘CESS non-Advol.
Amount’ field.
It is to be noted here that if the total invoice value is greater than sum total of taxable value,
applicable taxes and charges, the system will alert the user through pop-up and user can
proceed further for generating the EWB. But if the total invoice value is less than the sum
total of taxable value, applicable taxes and charges, system will not allow the user to proceed
further without correcting the invoice value. However, if the mismatch in the total invoice
amount with other amounts is Rs. 2.00, the system will allow to proceed.
5. Alerting the generator of the EWB through SMS and pop-up, in case the total invoice
value is more than Rs. 10 Crores.
In the new version, in addition to the pop-up displayed at the time of entering the total invoice
value in the old version, an additional pop-up will be displayed at the time of submission of
the form. A SMS will also be sent to the generator alerting him that invoice value of EWB is
more than Rs. 10 Cr. This will assist him to correct/cancel if it has been entered wrongly.
SMS and pop-up will alert the generator regarding the higher EWB value so that in case the
actual value is less than Rs. 10 Cr. but user enters the higher value due to typo mistake etc.,
the same can be acted upon accordingly.
 Page 159 of 371

6. Transporter ID is made compulsory for generating Part-A slip

As per the new e-way Bill rule, the e-way bill can be generated by the taxpayer after entering
the Part-B. If he is not having he part-B and transporter is going to update the Part-B, then
he/she has to compulsorily enter the transporter id to generate the ‘Part-A Slip’.

Government of India,
Ministry of Finance, Department of Revenue
Trade Notice No. 13/2018
Dated, Shillong the 11th June 2018

Subject: Clarifications on certain issues under GST-reg.

The Central Board of Indirect Taxes & Customs has issued a Circular No. 47/21/2018-GST dated 8 thJune,
2018 for the Trade and as well as all concerned regarding clarifications on certain refund related issues.

2. Representations have been received seeking clarification on certain issues under the GST laws. The
same have been examined and the clarifications on the same are as below:

Sl.No. Issue Clarification

4. In case of transportation of goods As per proviso to rule 138(2A) of the Central Goods and
by railways, whether goods can be Services Tax Rules, 2017 (CGST Rules for short), the railways
delivered even if the e-way bill is shall not deliver the goods unless the e-way bill is produced at
not produced at the time of the time of delivery.
delivery?
5. Whether e-way bill is required in (i) It may be noted that e-way bill generation is not dependent
the following cases- on whether a supply is inter- State or not, but on whether the
movement of goods is inter-State or not. Therefore, if the goods
(i) Where goods transit transit through a second State while moving from one place in
through another State a State to another place in the same State, an e-way bill is
while moving from one required to be generated.
area in a State to another
area in the same State. (ii) Where goods move from a DTA unit to a SEZ unit or vice
versa located in the same State, there is no requirement to
generate an e- way bill, if the same has been exempted under
(ii) Where goods move rule 133(14)(d) of the CGST Rules.
from a DTA unit to a SEZ
unit or vice versa located
in the same State.
This Trade Notice is being issued so as to sensitize the trade and field formations about the contents of
the aforesaid references and for complete details, the respective references may please be referred in the
CBIC's website www.cbec.gov.in.

All Commissioners are requested to bring the contents of the Trade Notice to the notice of all the officers
working under their charge and the assessees falling under their respective jurisdiction.
 Page 160 of 371

OUR COMMENTS ON EWAY BILL UNDER GST

 For movement of goods within State or out of State the E-way bill is bound to be issued
and is required to be carried along with invoice/challan/bill with the conveyance.
 Only if the value of the conveyance is below Rs.50,000/- (where the movement is from
one State to another State) and Rs.1,00,000/- (where the movement is within same
State) the E-way bill is not required.
 The E-way bill has two parts. Part A contains basic details like GSTIN of supplier, Place
of dispatch, GSTIN of recipient, place of delivery, Document number and date, value of
goods, HSN of goods, reason for transportation. Part B comprise of transport details like
vehicle number and transport document number etc.
 The E-way bill can be generated either by registered supplier/recipient or transporter.
 Evenif the goods are note sold but are being shifted from one unit to another unit of the
same person then also the e-way bill is required.
 In case of movement of imported goods, the person in charge of conveyance shall also
carry e-way bill generated on the basis of bill of entry.
 Where multiple consignments are intended to be transported in one conveyance and the
aggregate value of such consignment exceeds Rs.50,000/- or Rs.1,00,000/- as the case
maybe, the transport is required to first generate E-way bill for each consignment and
then based on such e-way bills is also required to generate consolidated E-way bill.
 Part A of E-way bill cannot be changed/amended after generation of e-way bill.
 Part B of the e-way bill can be changed/amended.
 E-way bill can be cancelled within 24 hours from its generation where the goods are not
being transported.
 The consignee can reject the E-way bill generated in his name within 72 hours of its
generation.
 The validity of the E-way bill can be extended before 4 hours of expiry of validity.
 W.e.f.21.06.2019 the person who has not filed the returns for 2 consecutive months will
be debarred from issuing e-way bill. (Refer Rule 138E of CGST Rules).
 Page 161 of 371

ELECTRONIC LEDGERS UNDER GST

Rule 85 of CGST Rules - Electronic Liability Register

(1) The electronic liability register specified under subsection (7) of section 49 shall be
maintained in FORM GST PMT-01 for each person liable to pay tax, interest, penalty,
late fee or any other amount on the common portal and all amounts payable by him shall
be debited to the said register.

(2) The electronic liability register of the person shall be debited by-

(a) the amount payable towards tax, interest, late fee or any other amount payable as
per the return furnished by the said person;
(b) the amount of tax, interest, penalty or any other amount payable as determined by a
proper officer in pursuance of any proceedings under the Act or as ascertained by
the said person;
(c) the amount of tax and interest payable as a result of mismatch under section 42 or
section 43 or section 50; or
(d) any amount of interest that may accrue from time to time.

(3) Subject to the provisions of section 49, section 49A and section 49B, payment of every
liability by a registered person as per his return shall be made by debiting the electronic
credit ledger maintained as per rule 86 or the electronic cash ledger maintained as per
rule 87 and the electronic liability register shall be credited accordingly.

(4) The amount deducted under section 51, or the amount collected under section 52, or the
amount payable on reverse charge basis, or the amount payable under section 10, any
amount payable towards interest, penalty, fee or any other amount under the Act shall be
paid by debiting the electronic cash ledger maintained as per rule 87 and the electronic
liability register shall be credited accordingly.

(5) Any amount of demand debited in the electronic liability register shall stand reduced to
the extent of relief given by the appellate authority or Appellate Tribunal or court and the
electronic tax liability register shall be credited accordingly.

(6) The amount of penalty imposed or liable to be imposed shall stand reduced partly or
fully, as the case may be, if the taxable person makes the payment of tax, interest and
penalty specified in the show cause notice or demand order and the electronic liability
register shall be credited accordingly.

(7) A registered person shall, upon noticing any discrepancy in his electronic liability ledger,
communicate the same to the officer exercising jurisdiction in the matter, through the
common portal in FORM GST PMT-04.

Rule 86 of the CGST Rules - Electronic Credit Ledger

(1) The electronic credit ledger shall be maintained in FORM GST PMT-02 for each
registered person eligible for input tax credit under the Acton the common portal and
every claim of input tax credit under the Act shall be credited to the said ledger.

(2) The electronic credit ledger shall be debited to the extent of discharge of any liability in
accordance with the provisions of section 49 or section 49A or section 49B.
 Page 162 of 371

(3) Where a registered person has claimed refund of any unutilized amount from the
electronic credit ledger in accordance with the provisions of section 54, the amount to
the extent of the claim shall be debited in the said ledger.

(4) If the refund so filed is rejected, either fully or partly, the amount debited under subrule
(3), to the extent of rejection, shall be re-credited to the electronic credit ledger by the
proper officer by an order made in FORM GST PMT-03.

(5) Save as provided in the provisions of this Chapter, no entry shall be made directly in the
electronic credit ledger under any circumstance.

(6) A registered person shall, upon noticing any discrepancy in his electronic credit ledger,
communicate the same to the officer exercising jurisdiction in the matter, through the
common portal in FORM GST PMT-04.

Explanation.– For the purposes of this rule, it is hereby clarified that a refund shall be
deemed to be rejected, if the appeal is finally rejected or if the claimant gives an
undertaking to the proper officer that he shall not file an appeal.

Rule 87 of CGST Rules - Electronic Cash Ledger.

(1) The electronic cash ledger under sub-section (1) of section 49 shall be maintained in
FORM GST PMT-05 for each person, liable to pay tax, interest, penalty, late fee or any
other amount, on the common portal for crediting the amount deposited and debiting the
payment therefrom towards tax, interest, penalty, fee or any other amount.

(2) Any person, or a person on his behalf, shall generate a challan in FORM GST PMT-06
on the common portal and enter the details of the amount to be deposited by him
towards tax, interest, penalty, fees or any other amount:

Provided that the challan in FORM GST PMT-06 generated at the common portal shall
be valid for a period of fifteen days.

Provided further that a person supplying online information and database access or
retrieval services from a place outside India to a non-taxable online recipient referred to
in section 14 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017) may also
do so through the Board‘s payment system namely, Electronic Accounting System in
Excise and Service Tax from the date to be notified by the Board.

(3) The deposit under sub-rule (2) shall be made through any of the following modes,
namely:-
(i) Internet Banking through authorised banks;
(ii) Credit card or Debit card through the authorised bank;
(iii) National Electronic Fund Transfer or Real Time Gross Settlement from any bank;
or
(iv) Over the Counter payment through authorised banks for deposits up to ten
thousand rupees per challan per tax period, by cash, cheque or demand draft:

Provided that the restriction for deposit up to ten thousand rupees per challan in case of
an Over the Counter payment shall not apply to deposit to be made by –

(a) Government Departments or any other deposit to be made by persons as may be

notified by the Commissioner in this behalf;
 Page 163 of 371

(b) Proper officer or any other officer authorised to recover outstanding dues from
any person, whether registered or not, including recovery made through
attachment or sale of movable or immovable properties;
(c) Proper officer or any other officer authorised for the amounts collected by way of
cash, cheque or demand draft during any investigation or enforcement activity or
any ad hoc deposit:

Provided further that a person supplying online information and database access or
retrieval services from a place outside India to a non-taxable online recipient referred to
in section 14 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017) may also
make the deposit under sub-rule (2) through international money transfer through
Society for Worldwide Interbank Financial Telecommunication payment network, from
the date to be notified by the Board.

Explanation.– For the purposes of this sub-rule, it is hereby clarified that for making
payment of any amount indicated in the challan, the commission, if any, payable in
respect of such payment shall be borne by the person making such payment.

(4) Any payment required to be made by a person who is not registered under the Act, shall
be made on the basis of a temporary identification number generated through the
common portal.

(5) Where the payment is made by way of National Electronic Fund Transfer or Real Time
Gross Settlement mode from any bank, the mandate form shall be generated along with
the challan on the common portal and the same shall be submitted to the bank from
where the payment is to be made:

Provided that the mandate form shall be valid for a period of fifteen days from the date
of generation of challan.

(6) On successful credit of the amount to the concerned government account maintained in
the authorised bank, a Challan Identification Number shall be generated by the collecting
bank and the same shall be indicated in the challan.

(7) On receipt of the Challan Identification Number from the collecting bank, the said
amount shall be credited to the electronic cash ledger of the person on whose behalf the
deposit has been made and the common portal shall make available a receipt to this
effect.

(8) Where the bank account of the person concerned, or the person making the deposit on
his behalf, is debited but no Challan Identification Number is generated or generated but
not communicated to the common portal, the said person may represent electronically in
FORM GST PMT-07 through the common portal to the bank or electronic gateway
through which the deposit was initiated.

(9) Any amount deducted under section 51 or collected under section 52 and claimed in
FORM GSTR-02 by the registered taxable person from whom the said amount was
deducted or, as the case may be, collected shall be credited to his electronic cash ledger
in accordance with the provisions of rule 87.

(10) Where a person has claimed refund of any amount from the electronic cash ledger, the
said amount shall be debited to the electronic cash ledger.
 Page 164 of 371

(11) If the refund so claimed is rejected, either fully or partly, the amount debited under sub-
rule (10), to the extent of rejection, shall be credited to the electronic cash ledger by the
proper officer by an order made in FORM GST PMT-03.

(12) A registered person shall, upon noticing any discrepancy in his electronic cash ledger,
communicate the same to the officer exercising jurisdiction in the matter, through the
common portal in FORM GST PMT-04.

Explanation 1.- The refund shall be deemed to be rejected if the appeal is finally
rejected.
Explanation 2.– For the purposes of this rule, it is hereby clarified that a refund shall be
deemed to be rejected, if the appeal is finally rejected or if the claimant gives an
undertaking to the proper officer that he shall not file an appeal.

Rule 88 of CGST Rules - Identification number for each transaction.

(1) A unique identification number shall be generated at the common portal for each debit or
credit to the electronic cash or credit ledger, as the case may be.

(2) The unique identification number relating to discharge of any liability shall be indicated in
the corresponding entry in the electronic liability register.

(3) A unique identification number shall be generated at the common portal for each credit in
the electronic liability register for reasons other than those covered under sub-rule (2).

FAQ ON ELECTRONIC LEDGERS

Q1. 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), two e-ledgers (Cash
&Input Tax Credit ledger) and an electronic tax liability register will be automatically opened
and displayed on his dash board at all times.

Q2. 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.

Q3. 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.

Q4. What is an ITC Ledger?

Ans. Input Tax Credit as self-assessed in monthly returns will be reflected in the ITC Ledger. The
credit in this ledger can be used to make payment of TAX ONLY and not other amounts such
as interest, penalty, fees etc.
 Page 165 of 371

Electronic Cash/Credit Ledgers and Liability Register in GST

C.B.E. & C. Flyer No. 17, dated 1-1-2018
Introduction
On the common portal each registered taxpayer will have one electronic register called the
Electronic liability register and two electronic ledgers namely Electronic Cash Ledger and
Electronic Credit Ledger. These register and ledgers will reflect the amount of tax payable, the
amount available to settle the tax liability online, and input credit balance. This is a handy tool
provided in the GST system wherein the registered taxpayer can have information about his
liabilities and credits at a single location which can be viewed from any place by simply logging into
the common portal. Electronic liability register, electronic cash ledger and electronic credit ledger of
taxpayer will be updated on generation of GSTR-3 by the taxpayer. A unique identification number
shall be generated at the common portal for each debit or credit to the electronic cash or credit
ledger. The unique identification number relating to discharge of any liability shall be indicated in
the corresponding entry in the electronic liability register. In case of any discrepancy in his
electronic liability ledger, electronic cash ledger or electronic credit ledger the registered person
has to communicate the same to the officer exercising jurisdiction in the matter, through the
common portal in FORM GST PMT-04.

Electronic liability register

The electronic liability register is maintained in FORM GST PMT-01 for each person liable to pay
tax, interest, penalty, late fee or any other amount on the common portal and all amounts payable
by him shall be debited to the said register. The electronic liability register will be maintained in two
parts at the common portal.

Part I will be for maintaining the return related liabilities. All liabilities accruing due to return and
payments made against the same will be recorded in this part of the register. Liabilities due to
opting for composition and cancellation of registration will also be covered in this part. Such
liabilities shall be populated in the liability register of the tax period in which the date of application
or order falls, as the case may be.

Part II will be for maintaining the complete description of the transactions of all liabilities accruing,
other than return related liabilities. Such other liabilities may include the following :

• Liabilities due to reduction or enhancement in the amount payable due to decision of appeal,
rectification, revision, review, etc.;
• Refund of pre-deposit that can be claimed for a particular demand if appeal is allowed;
• Payment made against the show cause notice or any other payment made voluntarily;
• Reduction in amount of penalty (which would be automatically shown) based on payment
made after show cause notice or within the time specified in the Act or the rules.

The electronic liability register of the person shall indicate the following-

• the amount payable towards tax, interest, late fee or any other amount payable as per the
return furnished by the said person;
• the amount of tax, interest, penalty or any other amount payable as determined by a proper
officer in pursuance of any proceedings under the Act or as ascertained by the said person;
• the amount of tax and interest payable as a result of mismatch of input tax credit
• or any amount of interest that may accrue from time to time;
• the amount deducted by the Government authorities from the payment made or credited to
the supplier of taxable goods or services or both, where the total value of such supply, under
a contract, exceeds two lakhs and fifty thousand rupees;
 Page 166 of 371

• the amount required to be collected by every electronic commerce operator on the net value
of taxable supplies made through it by other suppliers where the consideration with respect to
such supplies is to be collected by the operator;
• the amount payable on reverse charge basis;
• the amount payable under the Composition levy scheme;
• amount payable towards interest, penalty, fee;
• Any other amount under the GST Act.

Any amount of demand debited in the electronic liability register shall stand reduced to the extent
of relief given by the appellate authority or Appellate Tribunal or court and the electronic liability
register shall be credited accordingly.
The amount of penalty imposed or liable to be imposed shall stand reduced partly or fully, as the
case may be, if the taxable person makes the payment of tax, interest and penalty specified in the
show cause notice or demand order and the electronic liability register shall be credited
accordingly.

Electronic cash ledger

Every deposit made by a person by internet banking or by using credit or debit cards or National
Electronic Fund Transfer (NEFT) or Real Time Gross Settlement (RTGS) or by over the counter
deposit will be credited to the electronic cash ledger. The amount available in the electronic cash
ledger may be used for making any payment towards tax, interest, penalty, fees or any other
amount payable.

The electronic cash ledger shall be maintained in FORM GST PMT-05 for each person, liable to
pay tax, interest, penalty, late fee or any other amount, on the common portal for crediting the
amount deposited and debiting the payment therefrom towards tax, interest, penalty, fee or any
other amount. The payment required to be made by an unregistered person, can be made on the
basis of a temporary identification number generated through the common portal.

A challan in FORM GST PMT-06 can be generated on the common portal in which the details of
the amount to be deposited towards tax, interest, penalty, fees or any other amount is to be
entered. This challan will be valid for a period of fifteen days.

The deposit can be made through any of the following modes, namely :-

i. Internet Banking through authorised banks;

ii. Credit card or Debit card through the authorised bank;
iii. NEFT or RTGS from any bank; or
iv. Over the Counter payment through authorised banks for deposits up to Rs. 10,000/- per
challan per tax period, by cash, cheque or demand draft.

When the payment is made by way of NEFT or RTGS mode from any bank, the mandate form
shall be generated along with the challan on the common portal and the same shall be submitted
to the bank from where the payment is to be made. The mandate form shall be valid for a period of
fifteen days from the date of generation of challan.

On successful credit of the amount to the concerned government account maintained in the
authorised bank, a Challan Identification Number (CIN) shall be generated by the collecting bank
and the same shall be indicated in the challan.

On receipt of the CIN from the collecting bank, the said amount shall be credited to the electronic
cash ledger of the person on whose behalf the deposit has been made and the common portal
shall make available a receipt to this effect.
 Page 167 of 371

In case the bank account is debited but CIN has not been generated or generated but not
communicated to the common portal, then the person has to represent electronically in FORM
GST PMT-07 through the common portal to the bank or electronic gateway through which the
deposit was initiated.

The amount deducted under section 51 or collected under section 52 and claimed in FORM
GSTR-2 by the registered person from whom the said amount was deducted or, as the case may
be, collected will be credited to his electronic cash ledger.

Refund from cash ledger can only be claimed only when all the return related liabilities for that tax
period have been discharged. A registered person, claiming refund of any balance in the electronic
cash ledger can claim such refund in Part B of the return in FORM GSTR-3 and such return shall
be deemed to be an application filed under section 54 of the CGST Act, 2017.

Electronic credit ledger

The electronic credit ledger shall be maintained in FORM GST PMT-02 for each registered person
eligible for input tax credit on the common portal and every claim of input tax credit will be credited
to this ledger. The amount available in the electronic credit ledger can be used for making any
payment towards output tax.

In case a registered person has claimed refund of any unutilized amount from the electronic credit
ledger in accordance with the provisions of section 54, the amount to the extent of the claim shall
be debited in the said ledger.

If the refund so filed is rejected, either fully or partly, the amount debited to the extent of rejection,
shall be re-credited to the electronic credit ledger by the proper officer by an order made in FORM
GST PMT-03.

Unless otherwise allowed, entries will not be allowed to be made directly in the electronic credit ledger
under any circumstance.

OUR COMMENTS ON ELECTRONIC LEDGER UNDER GST

 Electronic Cash Ledger – A person making bank deposit of any tax, interest, penalty, late
fees though e-challan will be credited in Electronics Cash Ledger.
 Electronic Credit Ledger – A person claiming Input Tax Credit (ITC) be declaring the
same in the GSTR-3B return will be credited in Electronic Credit Ledger.
 Electronic Liability Ledger – The liability towards payment of GST, interest, late fees,
penalty etc. are declared in the Electronic Liability Ledger.

 Based upon the return filed by the assesse, the Electronic Liability Register will
be updated to determine the liability. The Electronic credit ledger will be updated
based upon the credit declared by the assesse in his GSTR-3B return. The
liability towards payment of tax will be offsetted from Electronic Credit Ledger and
the remaining difference will be offsetted from Electronic Cash Ledger. The
interest, penalty, late fees are to be debited from electronic cash edger only and
the same cannot be paid by using balance in electronic credit ledger.
 Page 168 of 371

ACCOUNTS & RECORDS UNDER GST

Sec.35 of CGST Act - Accounts and other records -

(1) Every registered person shall keep and maintain, at his principal place of business, as
mentioned in the certificate of registration, a true and correct account of —

(a) production or manufacture of goods;

(b) inward and outward supply of goods or services or both;
(c) stock of goods;
(d) input tax credit availed;
(e) output tax payable and paid; and
(f) such other particulars as may be prescribed:

Provided that where more than one place of business is specified in the certificate of
registration, the accounts relating to each place of business shall be kept at such places
of business:

Provided further that the registered person may keep and maintain such accounts and
other particulars in electronic form in such manner as may be prescribed.

(2) Every owner or operator of warehouse or godown or any other place used for storage of
goods and every transporter, irrespective of whether he is a registered person or not,
shall maintain records of the consigner, consignee and other relevant details of the
goods in such manner as may be prescribed.

(3) The Commissioner may notify a class of taxable persons to maintain additional accounts
or documents for such purpose as may be specified therein.

(4) Where the Commissioner considers that any class of taxable person is not in a position
to keep and maintain accounts in accordance with the provisions of this section, he may,
for reasons to be recorded in writing, permit such class of taxable persons to maintain
accounts in such manner as may be prescribed.

(5) Every registered person whose turnover during a financial year exceeds the prescribed
limit shall get his accounts audited by a chartered accountant or a cost accountant and
shall submit a copy of the audited annual accounts, the reconciliation statement under
sub-section (2) of section 44 and such other documents in such form and manner as
may be prescribed.

Provided that nothing contained in this sub-section shall apply to any department of the
Central Government or a State Government or a local authority, whose books of account
are subject to audit by the Comptroller and Auditor-General of India or an auditor
appointed for auditing the accounts of local authorities under any law for the time being
in force

(6) Subject to the provisions of clause (h) of sub-section (5) of section 17, where the
registered person fails to account for the goods or services or both in accordance with
the provisions of sub-section (1), the proper officer shall determine the amount of tax
payable on the goods or services or both that are not accounted for, as if such goods or
services or both had been supplied by such person and the provisions of section 73 or
section 74, as the case may be, shall, mutatis mutandis, apply for determination of such
tax.
 Page 169 of 371

Rule 56 of CGST Rules - Maintenance of accounts by registered persons.

(1) Every registered person shall keep and maintain, in addition to the particulars mentioned
in sub-section (1) of section 35, a true and correct account of the goods or services
imported or exported or of supplies attracting payment of tax on reverse charge along
with the relevant documents, including invoices, bills of supply, delivery challans, credit
notes, debit notes, receipt vouchers, payment vouchers and refund vouchers.

(2) Every registered person, other than a person paying tax under section 10, shall maintain
the accounts of stock in respect of goods received and supplied by him, and such
accounts shall contain particulars of the opening balance, receipt, supply, goods lost,
stolen, destroyed, written off or disposed of by way of gift or free sample and the balance
of stock including raw materials, finished goods, scrap and wastage thereof.

(3) Every registered person shall keep and maintain a separate account of advances
received, paid and adjustments made thereto.

(4) Every registered person, other than a person paying tax under section 10, shall keep
and maintain an account, containing the details of tax payable (including tax payable in
accordance with the provisions of sub-section (3) and sub-section (4) of section 9), tax
collected and paid, input tax, input tax credit claimed, together with a register of tax
invoice, credit notes, debit notes, delivery challan issued or received during any tax
period.

(5) Every registered person shall keep the particulars of -

(a) names and complete addresses of suppliers from whom he has received the goods
or services chargeable to tax under the Act;
(b) names and complete addresses of the persons to whom he has supplied goods or
services, where required under the provisions of this Chapter;
(c) the complete address of the premises where goods are stored by him, including
goods stored during transit along with the particulars of the stock stored therein.

(6) If any taxable goods are found to be stored at any place(s) other than those declared
under sub-rule (5) without the cover of any valid documents, the proper officer shall
determine the amount of tax payable on such goods as if such goods have been
supplied by the registered person.

(7) Every registered person shall keep the books of account at the principal place of
business and books of account relating to additional place of business mentioned in his
certificate of registration and such books of account shall include any electronic form of
data stored on any electronic device.

(8) Any entry in registers, accounts and documents shall not be erased, effaced or
overwritten, and all incorrect entries, otherwise than those of clerical nature, shall be
scored out under attestation and thereafter the correct entry shall be recorded and
where the registers and other documents are maintained electronically, a log of every
entry edited or deleted shall be maintained.

(9) Each volume of books of account maintained manually by the registered person shall be
serially numbered.
 Page 170 of 371

(10) Unless proved otherwise, if any documents, registers, or any books of account belonging
to a registered person are found at any premises other than those mentioned in the
certificate of registration, they shall be presumed to be maintained by the said registered
person.

(11) Every agent referred to in clause (5) of section 2 shall maintain accounts depicting the,-

(a) particulars of authorisation received by him from each principal to receive or supply
goods or services on behalf of such principal separately;
(b) particulars including description, value and quantity (wherever applicable) of goods
or services received on behalf of every principal;
(c) particulars including description, value and quantity (wherever applicable) of goods
or services supplied on behalf of every principal;
(d) details of accounts furnished to every principal; and
(e) tax paid on receipts or on supply of goods or services effected on behalf of every
principal.

(12) Every registered person manufacturing goods shall maintain monthly production
accounts showing quantitative details of raw materials or services used in the
manufacture and quantitative details of the goods so manufactured including the waste
and by products thereof.

(13) Every registered person supplying services shall maintain the accounts showing
quantitative details of goods used in the provision of services, details of input services
utilised and the services supplied.

(14) Every registered person executing works contract shall keep separate accounts for
works contract showing -
(a) the names and addresses of the persons on whose behalf the works contract is
executed;
(b) description, value and quantity (wherever applicable) of goods or services
received for the execution of works contract;
(c) description, value and quantity (wherever applicable) of goods or services utilized
in the execution of works contract;
(d) the details of payment received in respect of each works contract; and
(e) the names and addresses of suppliers from whom he received goods or
services.

(15) The records under the provisions of this Chapter may be maintained in electronic form
and the record so maintained shall be authenticated by means of a digital signature.

(16) Accounts maintained by the registered person together with all the invoices, bills of
supply, credit and debit notes, and delivery challans relating to stocks, deliveries, inward
supply and outward supply shall be preserved for the period as provided in section 36
and shall, where such accounts and documents are maintained manually, be kept at
every related place of business mentioned in the certificate of registration and shall be
accessible at every related place of business where such accounts and documents are
maintained digitally.

(17) Any person having custody over the goods in the capacity of a carrier or a clearing and
forwarding agent for delivery or dispatch thereof to a recipient on behalf of any
registered person shall maintain true and correct records in respect of such goods
 Page 171 of 371

handled by him on behalf of such registered person and shall produce the details thereof
as and when required by the proper officer.

(18) Every registered person shall, on demand, produce the books of accounts which he is
required to maintain under any law for the time being in force.

Rule 57 of CGST Rules - Generation and maintenance of electronic records

(1) Proper electronic back-up of records shall be maintained and preserved in such manner
that, in the event of destruction of such records due to accidents or natural causes, the
information can be restored within a reasonable period of time.

(2) The registered person maintaining electronic records shall produce, on demand, the
relevant records or documents, duly authenticated by him, in hard copy or in any
electronically readable format.

(3) Where the accounts and records are stored electronically by any registered person, he
shall, on demand, provide the details of such files, passwords of such files and
explanation for codes used, where necessary, for access and any other information
which is required for such access along with a sample copy in print form of the
information stored in such files.

Rule 58 of CGST Rules - Records to be maintained by owner or operator of godown or

warehouse and transporters

(1) Every person required to maintain records and accounts in accordance with the
provisions of sub-section (2) of section 35, if not already registered under the Act, shall
submit the details regarding his business electronically on the common portal in FORM
GST ENR-01,either directly or through a Facilitation Centre notified by the
Commissioner and, upon validation of the details furnished, a unique enrolment number
shall be generated and communicated to the said person.

(1A) For the purposes of Chapter XVI of these rules, a transporter who is registered in more
than one State or Union Territory having the same Permanent Account Number, he may
apply for a unique common enrolment number by submitting the details in FORM GST
ENR-02 using any one of his Goods and Services Tax Identification Numbers, and upon
validation of the details furnished, a unique common enrolment number shall be
generated and communicated to the said transporter:

Provided that where the said transporter has obtained a unique common enrolment
number, he shall not be eligible to use any of the Goods and Services Tax Identification
Numbers for the purposes of the said Chapter XVI.

(2) The person enrolled under sub-rule (1) as aforesaid in any other State or Union territory
shall be deemed to be enrolled in the State or Union territory.

(3) Every person who is enrolled under sub-rule (1) shall, where required, amend the details
furnished in FORM GST ENR-01 electronically on the common portal either directly or
through a Facilitation Centre notified by the Commissioner.
(4) Subject to the provisions of rule 56,-

(a) any person engaged in the business of transporting goods shall maintain records of
goods transported, delivered and goods stored in transit by him along with the Goods
 Page 172 of 371

and Services Tax Identification Number of the registered consigner and consignee
for each of his branches.
(b) every owner or operator of a warehouse or godown shall maintain books of accounts
with respect to the period for which particular goods remain in the warehouse,
including the particulars relating to dispatch, movement, receipt and disposal of such
goods.

(5) The owner or the operator of the godown shall store the goods in such manner
that they can be identified item-wise and owner-wise and shall facilitate any physical
verification or inspection by the proper officer on demand.

Sec.36 of CGST Act - Period of retention of accounts

Every registered person required to keep and maintain books of account or other
records in accordance with the provisions of sub-section (1) of section 35 shall retain
them until the expiry of seventy-two months from the due date of furnishing of annual
return for the year pertaining to such accounts and records:

Provided that a registered person, who is a party to an appeal or revision or any other
proceedings before any Appellate Authority or Revisional Authority or Appellate Tribunal
or court, whether filed by him or by the Commissioner, or is under investigation for an
offence under Chapter XIX, shall retain the books of account and other records
pertaining to the subject matter of such appeal or revision or proceedings or
investigation for a period of one year after final disposal of such appeal or revision or
proceedings or investigation, or for the period specified above, whichever is later.

FAQ on Accounts and Records under GST

Q 1. Whether every registered person is required to maintain records?

Ans. Yes, every registered person is required to keep and maintain books of account at his principal
place of business. Where more than one place of business is specified in the certificate of
registration, the accounts relating to each place of business shall be kept at such places of business
(Section 35 of the CGST Act, 2017).

Furthermore, the transporters, warehouse keepers are required to maintain records of consigner,
consignee or any relevant details even if they are not registered in GST. They need to enroll for the
purpose.

Q 2. What are the records that a registered person is mandatorily required to maintain under
the GST Act?
Ans. Every registered person should maintain a true and correct account of
(a) production or manufacture of goods;
(b) inward and outward supply of goods or services or both;
(c) stock of goods;
(d) input tax credit availed;
(e) output tax payable and paid; and
(f) Such other particulars as may be prescribed.

CGST Rules, 2017 prescribe maintaining records pertaining to goods or services imported or
exported or of supplies attracting payment of tax on reverse charge along with relevant documents,
including invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers,
payment vouchers, refund vouchers and e-way bills. Every registered person shall also keep and
maintain a separate account of advances received, paid and adjustments made thereto.
Detailed method of keeping records have been prescribed in rule 56 of CGST Rules, 2017.
 Page 173 of 371

Q 3. Where should the registered person keep the records under GST?
Ans. The accounts and records have to be maintained at the place of business mentioned in the
certificate of registration. If more than one place of business is specified in the certificate of
registration, the accounts relating to each place of business shall be kept at such places of business.
(Section 35(1) of CGST Act).

In case of supply of tea, coffee, rubber, etc. where the auctioneer claims ITC in respect of the supply
made to him by the principal before or after the auction of such goods and the said goods are
supplied only through auction, the principal and the auctioneer may maintain the books of accounts
relating to the additional place(s) of business at their principal place of business instead of such
additional place(s). Such principal or auctioneer shall intimate their jurisdictional proper officer in
writing about the maintenance of books of accounts relating to additional place(s) of business at their
principal place of business. (CBIC Circular No. 23/23/2017-GST dated 21.12.2017 and Circular No.
47/21/2018-GST dated 08.06.2018 ).

Q 4. Can a registered person maintain the records in electronic form?

Ans. Yes, the records may be maintained in electronic form and the records so maintained have to
be authenticated by means of a digital signature. However, proper electronic back-up of records is to
be maintained and preserved in such manner that, in the event of destruction of such records due to
accidents or natural causes, the information can be restored within reasonable period of time.
Registered person, on demand, provide the details of such files, passwords of such files and
explanation for codes used, where necessary, for access. (Rule 56(15) and 57 of the CGST Rules,
2017)

Q 5. For how long (period of time) should the mandatory records be maintained by the
registered person?
Ans. Every registered person required to keep and maintain books of account or other records in
accordance with the provisions of section 35(1) shall retain them until the expiry of seventy-two
months from the due date of furnishing of annual return for the year pertaining to such accounts and
records.

If a registered person is a party to an appeal or revision or any other proceedings before any
Appellate Authority or Revisional Authority or Appellate Tribunal or court, whether filed by him or by
the Commissioner, or is under investigation for an offence under Chapter XIX, then, he shall retain
the books of account and other records pertaining to the subject matter of such appeal or revision or
proceedings or investigation for a period of one year after final disposal of such appeal or revision or
proceedings or investigation, or seventy two months as specified above, whichever is later. ( Section
36 of the CGST Act, 2017)

Q 6. With respect to stock of goods, which records are required to be maintained by the
registered person?
Ans. Every registered person, other than a person paying tax under section 10, shall maintain
accounts of stock in respect of goods received and supplied by him, and such account shall contain
particulars of opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed
of by way of gift or free sample and balance of stock including raw material, finished goods, scrap
and wastage thereof. (Rule 56(2) of CGST Rules, 2017).

Q 7. Is it necessary for the registered person to keep separate record of advances received?
Ans. Yes. As per Accounts and records rules, every registered person has to keep and maintain a
separate account of advances received, paid and adjustments made thereto. (Rule 56(3) of CGST
Rules, 2017).

Q 8. Is it necessary for registered persons to maintain details of tax paid and payable?
Ans. All registered persons except persons opting to pay tax under composition levy need to
maintain such details. As per the rules, every registered person, other than a person paying
 Page 174 of 371

tax under section 10, shall keep and maintain an account, containing the details of tax payable
(including tax payable in accordance with the provisions of sub-section (3) and sub-section (4) of
section 9), tax collected and paid, input tax, input tax credit claimed, together with a register of tax
invoice, credit note, debit notes, delivery challan issued or received during any tax period. (Rule
56(4) of CGST Rules, 2017)

Q 9. What are the particulars of suppliers that need to be maintained by the registered person
under GST?
Ans. Every registered person shall keep the particulars of–
(a) names and complete addresses of suppliers from whom he has received the goods or services
chargeable to tax under the Act;
(b) names and complete addresses of the persons to whom he has supplied goods or services,
where required under these rules;
(c) the complete address of the premises where goods are stored by him, including goods stored
during transit along with the particulars of the stock stored therein. (Rule 56(5) of CGST Rules,
2017)

Q 10. What would be the consequences if the registered person fails to account for the goods
and services in accordance with the provisions of the Act?
Ans. Where the registered person fails to account for the goods or services or both in accordance
with the provisions of section 35(1), the proper officer shall determine the amount of tax payable on
the goods or services or both that are not accounted for, as if such goods or services or both had
been supplied by such person and the provisions of section 73 or section 74, as the case may be,
shall, mutatis mutandis, apply for determination of such tax. This is however, subject to the
provisions of section 17(5)(h). (Section 35(6) of CGST Act, 2017 read with Rule 56(6) of the CGST
Rules, 2017)

Q 11. What are the production accounts, which a manufacturer need to specifically maintain
under GST apart from other records?
Ans. Every registered person manufacturing goods has to maintain monthly production accounts,
showing quantitative details of raw materials or services used in the manufacture and quantitative
details of the goods so manufactured including the waste and by products thereof.

Q 12. What are the accounts that a service provider need to specially maintain, in addition to
other accounts and records?
Ans. Every registered person supplying services has to maintain the accounts showing quantitative
details of goods used in the provision of services, details of input services utilised and the services
supplied. (Rule 56(13) of CGST Rules, 2017)

Q 13. What are the accounts which a person supplying works contract need to maintain?
Ans. Every registered person executing works contract has to keep separate accounts for works
contract showing –
(a) the names and addresses of the persons on whose behalf the works contract is executed;
(b) description, value and quantity (wherever applicable) of goods or services received for the
execution of works contract;
(c) description, value and quantity (wherever applicable) of goods or services utilized in the
execution of works contract;
(d) the details of payment received in respect of each works contract; and
(e) the names and addresses of suppliers from whom he received goods or services. (Rule 56(14) of
the CGST Rules, 2017)

Q 14. What are the accounts and records that an Agent need to maintain?
Ans. Every agent referred to in section 2(5) shall maintain accounts depicting the –
(a) particulars of authorization received by him from each principal to receive or supply goods or
services on behalf of such principal separately;
 Page 175 of 371

(b) particulars including description, value and quantity (wherever applicable) of goods or services
received on behalf of every principal;
(c) particulars including description, value and quantity (wherever applicable) of goods or services
supplied on behalf of every principal;
(d) details of accounts furnished to every principal; and
(e) tax paid on receipts or on supply of goods or services effected on behalf of every principal.( Rule
56(11) of the CGST Rules, 2017)

Q 15. What are the records that an owner or operator of warehouse or godown or
transporters need to maintain under GST Rules?
Ans. Every owner or operator of warehouse or godown or any other place used for storage of goods
and every transporter, irrespective of whether he is a registered person or not, shall maintain records
of the consigner, consignee and other relevant details of the goods in the following manner. (Section
35 of the CGST Act, 2017)

Enrolment, if not already registered in GST: Every such person, if not already registered under the
Act, shall submit the details regarding his business electronically on the Common Portal in FORM
GST ENR-01, either directly or through a Facilitation Centre notified by the Commissioner and, upon
validation of the details furnished, a unique enrollment number shall be generated and
communicated to the said person.

The person enrolled as aforesaid in any other State or Union territory shall be deemed to be enrolled
in the State or Union territory.

Every person who is enrolled shall, where required, amend the details furnished in FORM GST ENR-
01 electronically on the Common Portal either directly or through a Facilitation Centre notified by the
Commissioner.

Any person engaged in the business of transporting goods shall maintain records of goods
transported, delivered and goods stored in transit by him along with GSTIN of the registered
consignor and consignee for each of his branches. The transporter (for the purpose of chapter XVI –
E way rules) who is registered in more than one State or Union Territory having the same Permanent
Account Number, he may apply for a unique common enrolment number by submitting the details
in FORM GST ENR-02 using any one of his Goods and Services Tax Identification Numbers.

Every owner or operator of a warehouse or godown shall maintain books of accounts with respect to
the period for which particular goods remain in the warehouse, including the particulars relating to
dispatch, movement, receipt, and disposal of such goods.

The owner or the operator of the godown shall store the goods in such manner that they can be
identified item wise and owner wise and shall facilitate any physical verification or inspection by the
proper officer on demand.

Q 16. What are the records which a person having custody over the goods in the capacity of
a carrier or clearing and forwarding agent need to maintain?
Ans. Any person having custody over the goods in the capacity of a carrier or a clearing and
forwarding agent for delivery or dispatch thereof to a recipient on behalf of any registered person
shall maintain true and correct records in respect of such goods handled by him on behalf of the
such registered person and shall produce the details thereof as and when required by the proper
officer.

Q 17. Is it necessary to show the records and accounts maintained under these rules to the
proper officer?
Ans. Yes. The records need to be shown on Demand. Every registered person shall, on demand,
produce the books of accounts which he is required to maintain under any law in force.
 Page 176 of 371

The registered person maintaining electronic records shall produce, on demand, the relevant records
or documents, duly authenticated by him, in hard copy or in any electronically readable format.

Where the accounts and records are stored electronically by any registered person, he shall, on
demand, provide the details of such files, passwords of such files where necessary for access and
any other information which is required for such access along with sample copy in print form of the
information stored in such files.

Q 18. Does any competent authority have the power to relax rules in regard to maintenance of
accounts and records?
Ans. Yes. Commissioner in Board (CBIC) is empowered to relax as well as prescribe additional
records for certain classes of taxable persons.

Where the Commissioner considers that any class of taxable persons is not in a position to keep and
maintain accounts in accordance with the provisions of this Section, he may, for reasons to be
recorded in writing, permit such class of taxable persons to maintain accounts in such manner as
may be prescribed. Similarly, Commissioner may notify a class of taxable persons to maintain
additional accounts or documents for such purpose as may be specified therein. (Section
35(3) and 35(4) of CGST Act, 2017)

Q 19. How are mistakes in records to be rectified?

Ans. Any entry in registers, accounts and documents shall not be erased, effaced or overwritten, and
all incorrect entries, otherwise than those of clerical nature, shall be scored out under attestation and
thereafter the correct entry shall be recorded and where the registers and other documents are
maintained electronically, a log of every entry edited or deleted shall be maintained. (Rule 56(8) of
the CGST Rules, 2017)

Q 20. Is it necessary for the registered person to get their accounts audited from a
professional?
Ans. Yes, only cases where the turnover of the registered person exceeds ₹ 2 crores during a
financial year. Every registered person whose turnover during a financial year exceeds 2 crores shall
get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of
the audited annual accounts, the reconciliation statement under section 44(2) (FORM GSTR-9C)
and such other documents in such form and manner as may be prescribed.

Q 21. In case books of accounts are maintained manually, it is necessary to serially number
the books of account?
Ans. Yes. Each volume of books of account maintained manually by the registered person shall be
serially numbered.

Q 22. Who will be responsible for keeping proper for the inputs or capital goods sent to
Jobworker?
Ans. The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the
principal.
 Page 177 of 371

OUR COMMENTS ON ACCOUNTS & RECORDS UNDER GST

 Every assessee is required to keep the record of

 Production or manufacture of goods
 Account showing quantity wise details of raw material or service used in the
manufacture of goods/waste/byproduct
 Account showing the quantity wise goods used in the provision of service as well
as input service used for supply of service
 Inward and outward supply of goods or service or both
 stock of goods
 Input Tax Credit availed on inputs/input services and capital goods
 Output tax payable and paid
 Correct account of the goods and service imported or exported or of supplies
attracting payment of tax on reverse charge
 Name and complete address of the person to whom he has supplied goods or
service
 Complete address of the premises where goods are stored by him, including
goods stored during transit along with the particulars of the stock stored therein
 Invoices, bill of supply, challans, debit note, credit note, advance receipt voucher,
refund voucher, e-way bill etc.
 The assessee who is having more than one place of business is required to maintain at
each place of business as well as the outside godowns/depots.
 The above said records are required to be retained by the assessee until the expiry of 72
months from the due date of furnishing of annual return for which the said record
pertains.
 Page 178 of 371

RETURNS UNDER GST

Sec.40 of CGST Act - First return

Every registered person who has made outward supplies in the period between the date
on which he became liable to registration till the date on which registration has been
granted shall declare the same in the first return furnished by him after grant of
registration.

Sec.37 of CGST Act - Furnishing details of outward supplies

(1) Every registered person, other than an Input Service Distributor, a non-resident taxable
person and a person paying tax under the provisions of section 10 or section 51 or
section 52, shall furnish, electronically, in such form and manner as may be prescribed,
the details of outward supplies of goods or services or both effected during a tax period
on or before the tenth day of the month succeeding the said tax period and such details
shall be communicated to the recipient of the said supplies within such time and in such
manner as may be prescribed:

Provided that the registered person shall not be allowed to furnish the details of outward
supplies during the period from the eleventh day to the fifteenth day of the month
succeeding the tax period:

Provided further that the Commissioner may, for reasons to be recorded in writing, by
notification, extend the time limit for furnishing such details for such class of taxable
persons as may be specified therein:

Provided also that any extension of time limit notified by the Commissioner of State tax
or Commissioner of Union territory tax shall be deemed to be notified by the
Commissioner.

(2) Every registered person who has been communicated the details under sub-section (3)
of section 38 or the details pertaining to inward supplies of Input Service Distributor
under sub-section (4) of section 38, shall either accept or reject the details so
communicated, on or before the seventeenth day, but not before the fifteenth day, of the
month succeeding the tax period and the details furnished by him under sub-section (1)
shall stand amended accordingly.

(3) Any registered person, who has furnished the details under sub-section (1) for any tax
period and which have remained unmatched under section 42 or section 43, shall, upon
discovery of any error or omission therein, rectify such error or omission in such manner
as may be prescribed, and shall pay the tax and interest, if any, in case there is a short
payment of tax on account of such error or omission, in the return to be furnished for
such tax period:

Provided that no rectification of error or omission in respect of the details furnished

under sub-section (1) shall be allowed after furnishing of the return under section 39 for
the month of September following the end of the financial year to which such details
pertain, or furnishing of the relevant annual return, whichever is earlier.

Provided further that the rectification of error or omission in respect of the details
furnished under sub-section (1) shall be allowed after furnishing of the return
under section 39 for the month of September, 2018 till the due date for furnishing the
 Page 179 of 371

details under sub-section (1) for the month of March, 2019 or for the quarter January,
2019 to March, 2019

Explanation.––For the purposes of this Chapter, the expression “details of outward

supplies” shall include details of invoices, debit notes, credit notes and revised invoices
issued in relation to outward supplies made during any tax period.

Rule 59 of CGST Rules - Form and manner of furnishing details of outward supplies

(1) Every registered person, other than a person referred to in section 14 of the Integrated
Goods and Services Tax Act, 2017, required to furnish the details of outward supplies of
goods or services or both under section 37, shall furnish such details in FORM GSTR-1
electronically through the common portal, either directly or through a Facilitation Centre
notified by the Commissioner.

(2) The details of outward supplies of goods or services or both furnished in FORM GSTR-1
shall include the–
(a) invoice wise details of all -
(i) inter-State and intra-State supplies made to the registered persons; and
(ii) inter-State supplies with invoice value more than two and a half lakh
rupees made to the unregistered persons;
(b) consolidated details of all -
(i) intra-State supplies made to unregistered persons for each rate of tax;and
(ii) State wise inter-State supplies with invoice value upto two and a half lakh
rupees made to unregistered persons for each rate of tax;
(c) debit and credit notes, if any, issued during the month for invoices issued
previously.

(3) The details of outward supplies furnished by the supplier shall be made available
electronically to the concerned registered persons (recipients) in Part A of FORM
GSTR2A, in FORM GSTR-4A and in FORM GSTR-6A through the common portal after
the due date of filing of FORM GSTR-1.

(4) The details of inward supplies added, corrected or deleted by the recipient in his FORM
GSTR-2 under section 38 or FORM GSTR-4 or FORM GSTR-6 under section 39 shall
be made available to the supplier electronically in FORM GSTR-1A through the common
portal and such supplier may either accept or reject the modifications made by the
recipient and FORM GSTR-1 furnished earlier by the supplier shall stand amended to
the extent of modifications accepted by him.

Sec.38 of CGST Act - Furnishing details of inward supplies

(1) Every registered person, other than an Input Service Distributor or a non-resident
taxable person or a person paying tax under the provisions of section 10 or section 51 or
section 52, shall verify, validate, modify or delete, if required, the details relating to
outward supplies and credit or debit notes communicated under sub-section (1) of
section 37 to prepare the details of his inward supplies and credit or debit notes and may
include therein, the details of inward supplies and credit or debit notes received by him in
respect of such supplies that have not been declared by the supplier under sub-section
(1) of section 37.

(2) Every registered person, other than an Input Service Distributor or a non-resident
taxable person or a person paying tax under the provisions of section 10 or section 51 or
 Page 180 of 371

section 52, shall furnish, electronically, the details of inward supplies of taxable goods or
services or both, including inward supplies of goods or services or both on which the tax
is payable on reverse charge basis under this Act and inward supplies of goods or
services or both taxable under the Integrated Goods and Services Tax Act or on which
integrated goods and services tax is payable under section 3 of the Customs Tariff Act,
1975, and credit or debit notes received in respect of such supplies during a tax period
after the tenth day but on or before the fifteenth day of the month succeeding the tax
period in such form and manner as may be prescribed:

Provided that the Commissioner may, for reasons to be recorded in writing, by

notification, extend the time limit for furnishing such details for such class of taxable
persons as may be specified therein:

Provided further that any extension of time limit notified by the Commissioner of State
tax or Commissioner of Union territory tax shall be deemed to be notified by the
Commissioner.

(3) The details of supplies modified, deleted or included by the recipient and furnished under
sub-section (2) shall be communicated to the supplier concerned in such manner and
within such time as may be prescribed.

(4) The details of supplies modified, deleted or included by the recipient in the return
furnished under sub-section (2) or sub-section (4) of section 39 shall be communicated
to the supplier concerned in such manner and within such time as may be prescribed.

(5) Any registered person, who has furnished the details under sub-section (2) for any tax
period and which have remained unmatched under section 42 or section 43, shall, upon
discovery of any error or omission therein, rectify such error or omission in the tax period
during which such error or omission is noticed in such manner as may be prescribed,
and shall pay the tax and interest, if any, in case there is a short payment of tax on
account of such error or omission, in the return to be furnished for such tax period:

Provided that no rectification of error or omission in respect of the details furnished

under sub-section (2) shall be allowed after furnishing of the return under section 39 for
the month of September following the end of the financial year to which such details
pertain, or furnishing of the relevant annual return, whichever is earlier.

Rule 60 of CGST Rules - Form and manner of furnishing details of inward supplies.

(1) Every registered person, other than a person referred to in section 14 of the Integrated
Goods and Services Tax Act, 2017, required to furnish the details of inward supplies of
goods or services or both received during a tax period under sub-section (2) of section
38 shall, on the basis of details contained in Part A, Part Band Part C of FORM GSTR-
2A, prepare such details as specified in sub-section (1) of the said section and furnish
the same in FORM GSTR-2 electronically through the common portal, either directly or
from a Facilitation Centre notified by the Commissioner, after including therein details of
such other inward supplies, if any, required to be furnished under sub-section (2) of
section 38.

(2) Every registered person shall furnish the details, if any, required under sub-section (5) of
section 38 electronically in FORM GSTR-2.
 Page 181 of 371

(3) The registered person shall specify the inward supplies in respect of which he is not
eligible, either fully or partially, for input tax credit in FORM GSTR-2 where such eligibility
can be determined at the invoice level.

(4) The registered person shall declare the quantum of ineligible input tax credit on inward
supplies which is relatable to non-taxable supplies or for purposes other than business
and cannot be determined at the invoice level in FORM GSTR-2.

(4A) The details of invoices furnished by an non-resident taxable person in his return in
FORM GSTR-5 under rule 63 shall be made available to the recipient of credit in Part A
of FORM GSTR 2A electronically through the common portal and the said recipient may
include the same in FORM GSTR-2.

(5) The details of invoices furnished by an Input Service Distributor in his return in FORM
GSTR-6 under rule 65 shall be made available to the recipient of credit in Part B of
FORM GSTR 2A electronically through the common portal and the said recipient may
include the same in FORM GSTR-2.

(6) The details of tax deducted at source furnished by the deductor under sub-section (3) of
section 39 in FORM GSTR-7 shall be made available to the deductee in Part C of FORM
GSTR-2A electronically through the common portal and the said deductee may include
the same in FORM GSTR-2.

(7) The details of tax collected at source furnished by an e-commerce operator under
section 52 in FORM GSTR-8 shall be made available to the concerned person in Part C
of FORM GSTR 2A electronically through the common portal and such person may
include the same in FORM GSTR-2.

(8) The details of inward supplies of goods or services or both furnished in FORM GSTR-2
shall include the-
(a) invoice wise details of all inter-State and intra-State supplies received from
registered persons or unregistered persons;
(b) import of goods and services made; and
(c) debit and credit notes, if any, received from supplier.

Sec.39 of CGST Act - Furnishing of returns

(1) Every registered person, other than an Input Service Distributor or a non-resident
taxable person or a person paying tax under the provisions of section 10 or section 51 or
section 52 shall, for every calendar month or part thereof, furnish, in such form and
manner as may be prescribed, a return, electronically, of inward and outward supplies of
goods or services or both, input tax credit availed, tax payable, tax paid and such other
particulars as may be prescribed.

Provided that the Government may, on the recommendations of the Council, notify
certain classes of registered persons who shall furnish return for every quarter or part
thereof, subject to such conditions and safeguards as may be specified therein.

(2) A registered person paying tax under the provisions of section 10 shall, for each quarter
or part thereof, furnish, in such form and manner as may be prescribed, a return,
electronically, of turnover in the State or Union territory, inward supplies of goods or
services or both, tax payable and tax paid within eighteen days after the end of such
quarter.
 Page 182 of 371

(3) Every registered person required to deduct tax at source under the provisions of section
51 shall furnish, in such form and manner as may be prescribed, a return, electronically,
for the month in which such deductions have been made within ten days after the end of
such month.

(4) Every taxable person registered as an Input Service Distributor shall, for every calendar
month or part thereof, furnish, in such form and manner as may be prescribed, a return,
electronically, within thirteen days after the end of such month.

(5) Every registered non-resident taxable person shall, for every calendar month or part
thereof, furnish, in such form and manner as may be prescribed, a return, electronically,
within twenty days after the end of a calendar month or within seven days after the last
day of the period of registration specified under sub-section (1) of section 27, whichever
is earlier.

(6) The Commissioner may, for reasons to be recorded in writing, by notification, extend the
time limit for furnishing the returns under this section for such class of registered persons
as may be specified therein:

Provided that any extension of time limit notified by the Commissioner of State tax or
Union territory tax shall be deemed to be notified by the Commissioner.

(7) Every registered person, who is required to furnish a return under sub-section (1) or sub-
section (2) or sub-section (3) or sub-section (5), shall pay to the Government the tax due
as per such return not later than the last date on which he is required to furnish such
return.

Provided that the Government may, on the recommendations of the Council, notify
certain classes of registered persons who shall pay to the Government the tax due or
part thereof as per the return on or before the last date on which he is required to furnish
such return, subject to such conditions and safeguards as may be specified therein.

(8) Every registered person who is required to furnish a return under sub-section (1) or sub-
section (2) shall furnish a return for every tax period whether or not any supplies of
goods or services or both have been made during such tax period.

(9) Subject to the provisions of sections 37 and 38, if any registered person after furnishing
a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (4) or
sub-section (5) discovers any omission or incorrect particulars therein, other than as a
result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall
rectify such omission or incorrect particulars in the return to be furnished for the month
or quarter during which such omission or incorrect particulars in such form and manner
as maybe prescribed, subject to payment of interest under this Act:

Provided that no such rectification of any omission or incorrect particulars shall be

allowed after the due date for furnishing of return for the month of September or second
quarter following the end of the financial year to which such details pertain, or the actual
date of furnishing of relevant annual return, whichever is earlier.

(10) A registered person shall not be allowed to furnish a return for a tax period if the return
for any of the previous tax periods has not been furnished by him.
 Page 183 of 371

Rule 61 of CGST Rules - Form and manner of submission of monthly return.

(1) Every registered person other than a person referred to in section 14 of the Integrated
Goods and Services Tax Act, 2017 or an Input Service Distributor or a non-resident
taxable person or a person paying tax under section 10 or section 51 or, as the case
may be, under section 52 shall furnish a return specified under sub-section (1) of section
39 in FORM GSTR-3 electronically through the common portal either directly or through
a Facilitation Centre notified by the Commissioner.

(2) Part A of the return under sub-rule (1) shall be electronically generated on the basis of
information furnished through FORM GSTR-1, FORM GSTR-2 and based on other
liabilities of preceding tax periods.

(3) Every registered person furnishing the return under sub-rule (1) shall, subject to the
provisions of section 49, discharge his liability towards tax, interest, penalty, fees or any
other amount payable under the Act or the provisions of this Chapter by debiting the
electronic cash ledger or electronic credit ledger and include the details in Part B of the
return in FORM GSTR-3.

(4) A registered person, claiming refund of any balance in the electronic cash ledger in
accordance with the provisions of sub-section (6) of section 49, may claim such refund in
Part B of the return in FORM GSTR-3 and such return shall be deemed to be an
application filed under section 54.

(5) Where the time limit for furnishing of details in FORM GSTR-1 under section 37 and in
FORM GSTR-2 under section 38 has been extended and the circumstances so warrant,
the Commissioner may, by notification, specify the manner and conditions subject to
which the return shall be furnished in FORM GSTR-3B electronically through the
common portal, either directly or through a Facilitation Centre notified by the
Commissioner.

(6) Where a return in FORM GSTR-3B has been furnished, after the due date for furnishing
of details in FORM GSTR-2—

(a) Part A of the return in FORM GSTR-3 shall be electronically generated on the basis
of information furnished through FORM GSTR-1, FORM GSTR-2 and based on other
liabilities of preceding tax periods and PART B of the said return shall be
electronically generated on the basis of the return in FORM GSTR-3B furnished in
respect of the tax period;
(b) the registered person shall modify Part B of the return in FORM GSTR-3 based on
the discrepancies, if any, between the return in FORM GSTR-3B and the return in
FORM GSTR-3 and discharge his tax and other liabilities, if any;
(c) where the amount of input tax credit in FORM GSTR-3 exceeds the amount of input
tax credit in terms of FORM GSTR-3B, the additional amount shall be credited to the
electronic credit ledger of the registered person.

Sec. 43A of CGST Act - Procedure for furnishing return and availing input tax credit

(1) Notwithstanding anything contained in sub-section (2) of section 16, section 37 or

section 38, every registered person shall in the returns furnished under sub-section (1)
of section 39 verify, validate, modify or delete the details of supplies furnished by the
suppliers.
 Page 184 of 371

(2) Notwithstanding anything contained in section 41, section 42 or section 43, the
procedure for availing of input tax credit by the recipient and verification thereof shall be
such as may be prescribed.

(3) The procedure for furnishing the details of outward supplies by the supplier on the
common portal, for the purposes of availing input tax credit by the recipient shall be such
as may be prescribed.

(4) The procedure for availing input tax credit in respect of outward supplies not furnished
under sub-section (3) shall be such as may be prescribed and such procedure may
include the maximum amount of the input tax credit which can be so availed, not
exceeding twenty per cent. of the input tax credit available, on the basis of details
furnished by the suppliers under the said sub-section.

(5) The amount of tax specified in the outward supplies for which the details have been
furnished by the supplier under sub-section (3) shall be deemed to be the tax payable by
him under the provisions of the Act.

(6) The supplier and the recipient of a supply shall be jointly and severally liable to pay tax
or to pay the input tax credit availed, as the case may be, in relation to outward supplies
for which the details have been furnished under sub-section (3) or sub-section (4) but
return thereof has not been furnished.

(7) For the purposes of sub-section (6), the recovery shall be made in such manner as may
be prescribed and such procedure may provide for non-recovery of an amount of tax or
input tax credit wrongly availed not exceeding one thousand rupees.

(8) The procedure, safeguards and threshold of the tax amount in relation to outward
supplies, the details of which can be furnished under sub-section (3) by a registered
person,-

(i) within six months of taking registration;

(ii) who has defaulted in payment of tax and where such default has continued for
more than two months from the due date of payment of such defaulted amount,

shall be such as may be prescribed

Sec.44 of CGST Act - Annual return

(1) Every registered person, other than an Input Service Distributor, a person paying tax
under section 51 or section 52, a casual taxable person and a non-resident taxable
person, shall furnish an annual return for every financial year electronically in such form
and manner as may be prescribed on or before the thirty-first day of December following
the end of such financial year.

(2) Every registered person who is required to get his accounts audited in accordance with
the provisions of sub-section (5) of section 35 shall furnish, electronically, the annual
return under sub-section (1) along with a copy of the audited annual accounts and a
reconciliation statement, reconciling the value of supplies declared in the return
furnished for the financial year with the audited annual financial statement, and such
other particulars as may be prescribed.
 Page 185 of 371

Explanation.-For the purposes of this section, it is hereby declared that the annual
return for the period from the 1st July, 2017 to the 31st March, 2018 shall be
furnished on or before the 30th June, 2019.

Rule 80 of CGST Rules - Annual return.

(1) Every registered person, other than an Input Service Distributor, a person paying tax
under section 51 or section 52, a casual taxable person and a nonresident taxable
person, shall furnish an annual return as specified under sub-section (1) of section 44
electronically in FORM GSTR-9 through the common portal either directly or through a
Facilitation Centre notified by the Commissioner:

Provided that a person paying tax under section 10shall furnish the annual return in
FORM GSTR-9A.

(2) Every electronic commerce operator required to collect tax at source under section 52
shall furnish annual statement referred to in sub-section (5) of the said section in FORM
GSTR -9B.

(3) Every registered person other than those referred to in the proviso to sub-section (5) of
section 35 whose aggregate turnover during a financial year exceeds two crore
rupees shall get his accounts audited as specified under sub-section (5) of section 35
and he shall furnish a copy of audited annual accounts and a reconciliation statement,
duly certified, in FORM GSTR-9C, electronically through the common portal either
directly or through a Facilitation Centre notified by the Commissioner.

Rule 63 of CGST Rules - Form and manner of submission of return by non-resident

taxable person.

Every registered non-resident taxable person shall furnish a return in FORM GSTR-5
electronically through the common portal, either directly or through a Facilitation Centre notified
by the Commissioner, including therein the details of outward supplies and inward supplies and
shall pay the tax, interest, penalty, fees or any other amount payable under the Act or the
provisions of this Chapter within twenty days after the end of a tax period or within seven days
after the last day of the validity period of registration, whichever is earlier.

Rule 64 of CGST Rules - Form and manner of submission of return by persons providing
online information and database access or retrieval services.

Every registered person providing online information and data base access or retrieval services
from a place outside India to a person in India other than a registered person shall file return in
FORM GSTR-5A on or before the twentieth day of the month succeeding the calendar month or
part thereof.

Rule 66 of CGST Rules - Form and manner of submission of return by a person required
to deduct tax at source.

(1) Every registered person required to deduct tax at source under section 51 (hereafter in
this rule referred to as deductor) shall furnish a return in FORM GSTR-7 electronically
through the common portal either directly or from a Facilitation Centre notified by the
Commissioner.
 Page 186 of 371

(2) The details furnished by the deductor under sub-rule (1) shall be made available
electronically to each of the suppliers in Part C of FORM GSTR-2A and FORM-GSTR4A
on the common portal after the due date of filing of FORM GSTR-7.

(3) The certificate referred to in sub-section (3) of section 51 shall be made available
electronically to the deductee on the common portal in FORM GSTR-7A on the basis of
the return furnished under sub-rule (1).

Rule 67 of CGST Rules - Form and manner of submission of statement of supplies

through an ecommerce operator

(1) Every electronic commerce operator required to collect tax at source under section 52
shall furnish a statement in FORM GSTR-8 electronically on the common portal, either
directly or from a Facilitation Centre notified by the Commissioner, containing details of
supplies effected through such operator and the amount of tax collected as required
under sub-section (1) of section 52.

(2) The details furnished by the operator under sub-rule (1) shall be made available
electronically to each of the suppliers in Part C of FORM GSTR-2A on the common
portal after the due date of filing of FORM GSTR-8.

Rule 78 of CGST Rules - Matching of details furnished by the e-Commerce operator with
the details furnished by the supplier.

The following details relating to the supplies made through an e-Commerce operator, as
declared in FORM GSTR-8, shall be matched with the corresponding details declared by the
supplier in FORM GSTR-1,

(a) State of place of supply; and

(b) net taxable value:

Provided that where the time limit for furnishing FORM GSTR-1 under section 37 has been
extended, the date of matching of the above mentioned details shall be extended accordingly.

Provided further that the Commissioner may, on the recommendations of the Council, by order,
extend the date of matching to such date as may be specified therein.

Rule 79 of CGST Rules - Communication and rectification of discrepancy in details

furnished by the ecommerce operator and the supplier.

(1) Any discrepancy in the details furnished by the operator and those declared by the
supplier shall be made available to the supplier electronically in FORM GST MIS-3 and
to the e-commerce operator electronically in FORM GST MIS–4 on the common portal
on or before the last date of the month in which the matching has been carried out.

(2) A supplier to whom any discrepancy is made available under sub-rule (1) may make
suitable rectifications in the statement of outward supplies to be furnished for the month
in which the discrepancy is made available.

(3) An operator to whom any discrepancy is made available under sub-rule (1) may make
suitable rectifications in the statement to be furnished for the month in which the
discrepancy is made available.
 Page 187 of 371

(4) Where the discrepancy is not rectified under sub-rule (2) or sub-rule (3), an amount to
the extent of discrepancy shall be added to the output tax liability of the supplier in his
return in FORM GSTR-3 for the month succeeding the month in which the details of
discrepancy are made available and such addition to the output tax liability and interest
payable thereon shall be made available to the supplier electronically on the common
portal in FORM GST MIS–3.

Sec.45 of CGST Act - Final return

Every registered person who is required to furnish a return under sub-section (1) of
section 39 and whose registration has been cancelled shall furnish a final return within
three months of the date of cancellation or date of order of cancellation, whichever is
later, in such form and manner as may be prescribed.

Rule 81 of CGST Rules - Final return

Every registered person required to furnish a final return under section 45, shall furnish such
return electronically in FORM GSTR-10through the common portal either directly or through a
Facilitation Centre notified by the Commissioner.

Sec.46 of CGST Act - Notice to return defaulters

Where a registered person fails to furnish a return under section 39 or section 44 or

section 45, a notice shall be issued requiring him to furnish such return within fifteen
days in such form and manner as may be prescribed.

Sec.47 of CGST Act - Levy of late fee

(1) Any registered person who fails to furnish the details of outward or inward supplies
required under section 37 or section 38 or returns required under section 39 or section
45 by the due date shall pay a late fee of one hundred rupees for every day during which
such failure continues subject to a maximum amount of five thousand rupees.

(2) Any registered person who fails to furnish the return required under section 44 by the
due date shall be liable to pay a late fee of one hundred rupees for every day during
which such failure continues subject to a maximum of an amount calculated at a quarter
per cent. of his turnover in the State or Union territory.

Rule 68 of CGST Rules - Notice to non-filers of returns.

A notice in FORM GSTR-3A shall be issued, electronically, to a registered person who fails to
furnish return under section 39 or section 44 or section 45 or section 52.

FAQ on Returns

Q1. What is the purpose of returns?

Ans. a) Mode for transfer of information to tax administration;
b) Compliance verification program of tax administration;
c) Finalization of the tax liabilities of the taxpayer within stipulated period of limitation; to
declare tax liability for a given period;
d) Providing necessary inputs for taking policy decision;
e) Management of audit and anti-evasion programs of tax administration.
 Page 188 of 371

Q2. Who needs to file Return in GST regime?

Ans. Every person registered under GST will have to file returns in some form or other. A
registered person will have to file returns either monthly (normal supplier) or quarterly basis
(Supplier opting for composition scheme). An ISD will have to file monthly returns showing
details of credit distributed during the particular month. A person required to deduct tax (TDS)
and persons required to collect tax (TCS) will also have to file monthly returns showing the
amount deducted/collected and other details as may be prescribed. A non-resident taxable
person will also have to file returns for the period of activity undertaken.

Q3. 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 supplies made in a month, namely outward supplies to registered persons,
outward supplies to unregistered persons (consumers), details of Credit/Debit Notes, zero
rated, exempted and non-GST supplies, exports, and advances received in relation to future
supply.

Q4. Is the scanned copy of invoices to be uploaded along with GSTR-1?

Ans. No scanned copy of invoices is to be uploaded. Only certain prescribed fields of information
from invoices need to be uploaded.

Q5. Whether all invoices will have to be uploaded?

Ans. No. It depends on whether B2B or B2C plus whether Intra-state or Inter-state supplies.

For B2B supplies, all invoices, whether Intra-state or Inter- state supplies, will have to be
uploaded. Why So? Because ITC will be taken by the recipients, invoice matching is required
to be done.

In B2C supplies, uploading in general may not be required as the buyer will not be taking
ITC. However still in order to implement the destination based principle, invoices of value
more than Rs.2.5 lacs in inter-state B2C supplies will have to be uploaded. For inter-state
invoices below Rs.2.5 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 worked out as prescribed and uploaded.

Q8. Can a recipient feed information in his GSTR-2 which has been missed by the
supplier?
Ans. Yes, the recipient can himself feed the invoices not uploaded by his supplier. The credit on
such invoices will also be given provisionally but will be subject to matching. On matching, if
the invoice is not uploaded by the supplier, both of them will be intimated. If the mismatch is
rectified, provisional credit will be confirmed. But if the mismatch continues, the amount will
be added to the output tax liability of the recipient in the returns for the month subsequent to
the month in which such discrepancy was communicated.
 Page 189 of 371

Q9. Does the taxable person have to feed anything in the GSTR-2 or everything is auto-
populated from GSTR-1?
Ans. While a large part of GSTR-2 will be auto-populated, there are some details that only
recipient can fill like details of imports, details of purchases from non-registered or
composition suppliers and exempt/non-GST/nil GST supplies etc.

Q10. What if the invoices do not match? Whether ITC is to be given or denied? If denied,
what action is taken against supplier?
Ans. If invoices in GSTR-2 do not match with invoices in counter-party GSTR-1, then such
mismatch shall be intimated to the supplier. 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, the ITC availed by the recipient would be
added to his output tax liability, in short, all mismatches will lead to proceedings if the
supplier has made a supply but not paid tax on it.

Q11. What will be the legal position in regard to the reversed input tax credit if the supplier
later realizes 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 the month in
which he had earlier failed to upload the invoice. The recipient shall be eligible to reduce his
output tax liability to the extent of the amount in respect of which the supplier has rectified
the mis-match. The interest paid by the recipient at the time of reversal will also be refunded
to the recipient by crediting the amount in corresponding head of his electronic cash ledger.

Q12. What is the special feature of GSTR-2?

Ans. The special feature of GSTR-2 is that the details of supplies received by a recipient can be
auto populated on the basis of the details furnished by the counterparty supplier in his
GSTR-1.

Q13. Do tax payers under the composition scheme also need to file GSTR-1 and GSTR-2?
Ans. No. Composition tax payers do not need to file any statement of outward or inward supplies.
They have to file a quarterly return in Form GSTR-4 by the 18th of the month after the end of
the quarter. Since they are not eligible for any input tax credit, there is no relevance of
GSTR-2 for them and since the credit of tax paid under Composition Levy is not eligible,
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 purchases in their quarterly return itself, most of which will be auto populated.

Q14. 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 Form 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
recipient units. Since their return itself covers these aspects, there is no requirement to file
separate statement of inward and outward supplies.

Q15. How does a taxpayer get the credit of the tax deducted at source on his behalf? Does
he need to produce TDS certificate from the deductee to get the credit?
Ans. Under GST, the deductor will be submitting the deductee wise details of all the deductions
made by him in his return in Form GSTR-7 to be filed by 10th of the month next to the month
in which deductions were made. The details of the deductions as uploaded by the deductor
shall be auto populated in the GSTR-2 of the deductee. The taxpayer shall be required to
confirm these details in his GSTR-2 to avail the credit for deductions made on his behalf. To
avail this credit, he does not require to produce any certificate in physical or electronic form.
The certificate will only be for record keeping of the tax payer and can be downloaded from
the Common Portal.
 Page 190 of 371

Q16. Which type of taxpayers need to file Annual Return?

Ans. All taxpayers filing return in GSTR-1 to GSTR-3, other than ISD’s, casual/non-resident
taxpayers, taxpayers under composition scheme, TDS/TCS deductors, are required to file an
annual return. Casual taxpayers, non- resident taxpayers, ISDs and persons authorized to
deduct/collect tax at source are not required to file annual return.

Q17. Is an Annual Return and a Final Return one and the same?
Ans. No. Annual Return has to be filed by every registered person paying tax as a normal
taxpayer. Final Return has to be filed only by those registered persons who have applied for
cancellation of registration. The Final return has to be filed within three months of the date of
cancellation or the date of cancellation order.

Q18. 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 are required to be amended. They can be amended in any of the
future GSTR- 1/2 in the tables specifically provided for the purposes of amending previously
declared details.

Q19. How can taxpayers file their returns?

Ans. Taxpayers will have various modes to file the statements and returns. Firstly, they can file
their statement and returns directly on the Common Portal online. However, this may be
tedious and time consuming for taxpayers with large number of invoices. For such taxpayers,
an offline utility will be provided that can be used for preparing the statements offline after
downloading the auto populated details and uploading them on the Common Portal. GSTN
has also developed an ecosystem of GST Suvidha Providers (GSP) that will integrate with
the Common Portal.

Q20. What precautions, a taxpayer is required to take for a hassle free compliance under
GST?
Ans. One of the most important things under GST will be timely uploading of the details of outward
supplies in 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 suppliers. This would be helpful in ensuring that the
input tax credit is available without any hassle and delay. Recipients can also encourage
their suppliers to upload their invoices on a regular basis instead of doing it on or close to the
due date. The system would allow recipients to see if their suppliers have uploaded invoices
pertaining to them. The GSTN system will also provide the track record about the compliance
level of a tax payer, especially about his track record in respect of timely uploading of his
supply invoices giving details about the auto reversals that have happened for invoices
issued by a supplier. The Common Portal of GST would have pan India data at one place
which will enable valuable services to the taxpayers. Efforts are being made to make regular
uploading of invoices as easy as possible and it is expected that an enabling eco- system will
be developed to achieve this objective. Taxpayers should make efficient use of this
ecosystem for easy and hassle free compliance under GST.
 Page 191 of 371

Q21. Is it compulsory for a taxpayer to file return by himself?

Ans. No. A registered taxpayer can also get his return filed through a Tax Return Preparer, duly
approved by the Central or the State tax administration.

Q22. What is the consequence of not filing the return within the prescribed date?
Ans. A registered 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.
For failure to furnish Annual returns by due date, late fee of Rs. One hundred for every day
during which such failure continues subject to a maximum of an amount calculated at a
quarter percent [0.25%] of his turnover in a state, will be levied.

Q23. What happens if ITC is taken on the basis of a document more than once?
Ans. In case the system detects ITC being taken on the same document more than once
(duplication of claim), the amount of such credit would be added to the output tax liability of
the recipient in the return. [section 42(6)]

Q24. Whether the amount of credit detected by the system on account of mis-match
between GSTR-1 and GSTR-2 and recovered as output tax can be reclaimed?
Ans. Yes, once the mismatch is rectified by the supplier by declaring the details of the invoices or
debit notes, as the case may be, in his valid return for the month/quarter in which the error
had been detected. The said amount can be reclaimed by way of reducing the output tax
liability during the subsequent tax period. [section 42(7)]. Similar provisions have also been
made in Section 43 of the Act in respect of the credit notes issued by the supplier.

TWITTER FAQ ON RETURNS

What would be done on tax paid on advance Advance refunded can be adjusted in return.
receipt if advance has to be refunded in any
circumstance
Do registered dealers have to upload sale Generally not. But required in case of inter-State
details of unregistered dealers also in GST? supplies having invoice value of more than ` 2.50
Lakhs.
How to incorporate two supplies in return for Returns provide for furnishing rate wise details.
Pharma with same HSN code of four digits
but having different tax rates?

GST Return Simplification — Decision in the 27th GST Council meeting held on 4-
5-2018
Press Release No. 156/2018, dated 4-5-2018
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Indirect Taxes & Customs, New Delhi
GST Council today (4th May, 2018) in its 27th meeting approved principles for filing of new return
design based on the recommendations of the Group of Ministers on IT simplification. The key elements of
the new return design are as follows -
(i) One monthly Return : All taxpayers excluding a few exceptions like composition dealer shall
file one monthly return. Return filing dates shall be staggered based on the turnover of the
registered person to manage load on the IT system. Composition dealers and dealers having
Nil transaction shall have facility to file quarterly return.
(ii) Unidirectional Flow of invoices : There shall be unidirectional flow of invoices uploaded by
the seller on anytime basis during the month which would be the valid document to avail input
tax credit by the buyer. Buyer would also be able to continuously see the uploaded invoices
during the month. There shall not be any need to upload the purchase invoices also. Invoices
 Page 192 of 371

for B2B transaction shall need to use HSN at four digit level or more to achieve uniformity in
the reporting system.
(iii) Simple Return design and easy IT interface : The B2B dealers will have to fill invoice-wise
details of the outward supply made by them, based on which the system will automatically
calculate his tax liability. The input tax credit will be calculated automatically by the system
based on invoices uploaded by his sellers. Taxpayer shall be also given user friendly IT
interface and offline IT tool to upload the invoices.
(iv) No automatic reversal of credit : There shall not be any automatic reversal of input tax
credit from buyer on non-payment of tax by the seller. In case of default in payment of tax by
the seller, recovery shall be made from the seller however reversal of credit from buyer shall
also be an option available with the revenue authorities to address exceptional situations like
missing dealer, closure of business by supplier or supplier not having adequate assets etc.
(v) Due process for recovery and reversal : Recovery of tax or reversal of input tax credit shall
be through a due process of issuing notice and order. The process would be online and
automated to reduce the human interface.
(vi) Supplier side control : Unloading of invoices by the seller to pass input tax credit who has
defaulted in payment of tax above a threshold amount shall be blocked to control misuse of
input tax credit facility. Similar safeguards would be built with regard to newly registered
dealers also. Analytical tools would be used to identify such transactions at the earliest and
prevent loss of revenue.
(vii) Transition : There will be a three stage transition to the new system. Stage I shall be the
present system of filing of return GSTR-3B and GSTR-1. GSTR-2 and GSTR-3 shall continue
to remain suspended. Stage I will continue for a period not exceeding 6 months by which time
new return software would be ready. In stage 2, the new return will have facility for invoice-
wise data upload and also facility for claiming input tax credit on self-declaration basis, as in
case of GSTR-3B now.
During this stage 2, the dealer will be constantly fed with information about gap between credit
available to them as per invoices uploaded by their sellers and the provisional credit being claimed by
them. After 6 months of this phase 2, the facility of provisional credit will get withdrawn and input tax credit
will only be limited to the invoices uploaded by the sellers from whom the dealer has purchased goods.
2. Content of the return and implementation : Return shall be simplified also by reducing the
content/information required to be filled in the return. The details of the design of the return form, business
process and legal changes would be worked out by the law committee based on these principles.
Government is keen to introduce the simplified return design at the earliest to reduce the compliance
burden on the trade in keeping with the philosophy of ease of doing business.

Press Release

Transition plan to the new GST Return

The GST Council in its 31st meeting decided that a new GST return system will be
introduced to facilitate taxpayers. In order to ease transition to the new return system, a transition
plan has been worked out. The details of the indicative transition plan are as follows: -

i. In May, 2019 a prototype of the offline tool has already been shared on the common portal to
give the look and feel of the tool to the users. The look and feel of the offline tool would be
same as that of the online portal. Taxpayers may be aware that there are three main
components to the new return – one main return (FORM GST RET-1) and two annexures
(FORM GST ANX-1 and FORM GST ANX-2).

ii. From July, 2019, users would be able to upload invoices using the FORM GST ANX1 offline
tool on trial basis for familiarisation. Further, users would also be able to view and download,
the inward supply of invoices using the FORM GST ANX-2 offline tool under the trial
program. The summary of inward supply invoices would also be available for view on the
common portal online. They would also be able to import their purchase register in the
 Page 193 of 371

Offline Tool and match it with the downloaded inward supply invoices to find mismatches
from August 2019.

iii. Between July to September, 2019 (for three months), the new return system (ANX-1 & ANX-
2 only) would be available for trial for taxpayers to make themselves familiar. This trial would
have no impact at the back end on the tax liability or input tax credit of the taxpayer. In this
period, taxpayers shall continue to fulfil their compliances by filing FORM GSTR-1 and
FORM GSTR-3B i.e. taxpayers would continue to file their outward supply details in FORM
GSTR-1 on monthly / quarterly basis and return in FORM GSTR-3B on monthly basis. Non-
filing of these returns shall attract penal provisions under the GST Act.

iv. From October, 2019 onwards, FORM GST ANX-1 shall be made compulsory and FORM
GSTR-1 would be replaced by FORM GST ANX-1. The large taxpayers (i.e. those taxpayers
whose aggregate annual turnover in the previous financial year was more than Rs. 5 Crore)
would upload their monthly FORM GST ANX-1 from October, 2019 onwards. However, the
first compulsory quarterly FORM GST ANX-1 to be uploaded by small taxpayers (with
aggregate annual turnover in the previous financial year upto Rs. 5 Crore) would be due only
in January, 2020 for the quarter October to December, 2019. It may be noted that invoices
etc. can be uploaded in FORM GST ANX-1 on a continuous basis both by large and small
taxpayers from October, 2019 onwards. FORM GST ANX2 may be viewed simultaneously
during this period but no action shall be allowed on such FORM GST ANX-2.

v. For October and November, 2019, large taxpayers would continue to file FORM GSTR-3B on
monthly basis. They would file their first FORM GST RET-01 for the month of December,
2019 by 20th January, 2020.

vi. The small taxpayers would stop filing FORM GSTR-3B and would start filing FORM GST
PMT-08 from October, 2019 onwards. They would file their first FORM GST-RET-01 for the
quarter October, 2019 to December, 2019 from 20th January, 2020.

vii. From January, 2020 onwards, all taxpayers shall be filing FORM GST RET-01 and FORM
GSTR-3B shall be completely phased out. 2. Separate instructions shall be issued for filing
and processing of refund applications between October to December, 2019.

*****
Circular No. 89/08/2019-GST
F. No. CBEC-20/16/04/2018 - GST
***
New Delhi, Dated the 18th February, 2019
To,
The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners /
Commissioners of Central Tax (All) The Principal Director Generals / Director Generals (All)

Madam/Sir,

Subject: Mentioning details of inter-State supplies made to unregistered persons in Table 3.2
of FORM GSTR-3B and Table 7B of FORM GSTR-1 – Reg.

A registered supplier is required to mention the details of inter -State supplies made to unregistered
persons, composition taxable persons and UIN holders in Table 3.2 of FORM GSTR-3B. Further, the
details of all inter-State supplies made to unregistered persons where the invoice value is up to ₹ 2.5
lakhs (rate-wise) are required to be reported in Table 7B of FORM GSTR-1.

2. It has been brought to the notice of the Board that a number of registered persons have not
reported the details of inter-State supplies made to unregistered persons in Table 3.2 of FORM
 Page 194 of 371

GSTR-3B. However, the said details have been mentioned in Table 7B of FORM GSTR-1. In order to
ensure uniformity in the implementation of the provisions of law across the field formations, the
Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax
Act, 2017(CGST Act for short), hereby issues the following instructions.

3. It is pertinent to mention that apportionment of IGST collected on inter–State supplies made to

unregistered persons in the State where such supply takes place is based on the information
reported in Table 3.2 of FORM GSTR-3B by the registered person. As such, non-mentioning of the
said information results in –

(i) non-apportionment of the due amount of IGST to the State where such supply takes place; and
(ii) a mis-match in the quantum of goods or services or both actually supplied in a State and the
amount of integrated tax apportioned between the Centre and that State, and consequent non-
compliance of sub-section (2) of section 17 of the Integrated Goods and Services Tax Act, 2017.

4. Accordingly, it is instructed that the registered persons making inter-State supplies to unregistered
persons shall report the details of such supplies along with the place of supply in Table 3.2 of FORM
GSTR-3B and Table 7B of FORM GSTR–1 as mandated by the law. Contravention of any of the
provisions of the Act or the rules made there under attracts penal action under the provisions
of section 125 of the CGST Act.

5. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

6. Difficulty, if any, in the implementation of this Circular may be brought to the notice of the Board.
Hindi version will follow.

CHART SHOWING THE RETURNS UNDER GST

RETURNS UNDER GST TO FILED BY NORMAL TAX PAYER

Form Particulars Frequency Due Date Late Fees

GSTR-1 Details of outward Monthly 11th of the Rs.200/- per day

supplies of taxable goods next month (Rs.100/- CGST +
and/or services Rs.100/- SGST) upto
maximum of Rs.5,000/-
However the said GSTR-1 will be discontinued from Oct.’19 and will be replaced with GST ANX1
GSTR-2 Details of inward supplies Monthly 15th of the
of taxable goods and/or next month
services (at present
suspended)
GSTR-3 Monthly return on the Monthly 20th of the
basis of finalization of next month
details of outward and (at present
inward supplies and suspended)
payment of tax
GSTR- Simple Return in which Monthly 20th of the Rs.200/- per day
3B summery of outward next month (Rs.100/- CGST +
supplies along with ITC is Rs.100/- SGST) upto
declared and tax liability maximum of Rs.5,000/-
to be discharged
However the said GSTR-3B will be discontinued from Oct.’19 and will be replaced with GST
PMT 08 (for small taxpayer) and GST RET-01 (for large taxpayers)
GSTR-9 Annual Return - It Annually 31st Rs.200/- per day
 Page 195 of 371

consists of details December (Rs.100/- CGST +

regarding the outward of next F.Y. Rs.100/- SGST) upto a
and inward supplies However for maximum of 0.25% of
made/received during the F.Y.2017-18 turnover
relevant previous year the due date
under different tax heads is
i.e. CGST, SGST & IGST 30.06.2019.
and HSN codes.
Basically, it is a
consolidation of all the
monthly/quarterly returns
(GSTR-1, GSTR-2A,
GSTR-3B) filed in that
year.
GSTR- Annual Reconciliation Annually 31st Rs.200/- per day
9C Statement to be filed by December (Rs.100/- CGST +
the person whose of next F.Y.. Rs.100/- SGST) upto a
aggregate turnover However for maximum of 0.25% of
exceeds Rs.2 Crores. F.Y.2017-18 turnover
The Assessee is required the due date
to file audited annual is
accounts along with said 30.06.2019.
reconciliation statement
duly certified by the
Chartered
Accountant/Cost
Accountant)
ITC – 04 Job Work Return to be Quarterly 25th of next No specific provision,
filed by Principal wherein month Hence, subject to a
details of inputs or/and succeeding general penalty of
capital goods dispatched a quarter Rs.25,000/-
or received to/from a job
worker is to be declared

NEW MONTHLY GST RETURN

Large Taxpayers (whose annual turnover is Small Taxpayers (whose annual turnover is
more than Rs.5 Crores in preceding F.Y.) less than Rs.5 Crores in preceding F.Y.)
For Oct.’19 & Nov.’19 From Dec.’19 From Oct.’19 From quarter Oct.’19
onwards onwards to Dec.’19 onwards
GST ANX-1 & GST RET-1 along GST PMT – 08 GST RET-1 along
GSTR-3B with GST ANX-1 & with GST ANX-1 &
GST ANX-2 GST ANX-2

GST ANX-1 - Details of outward supply

GST ANX-2 – Details of inward supply
GST RET-1 – Final Return
 Page 196 of 371

RETURNS UNDER GST TO FILED BY COMPOSITE TAX PAYER

Form Particulars Frequency Due Date Late Fees

GSTR-4 Return for Quarterly 18th of next Rs.200/- per day
month (Rs.100/- CGST +
succeeding a Rs.100/- SGST) upto
quarter maximum of Rs.5,000/-
GSTR-9A Annual Return - It Annually 31st December Rs.200/- per day
consists of details of next (Rs.100/- CGST +
regarding the financial year. Rs.100/- SGST) upto a
outward and inward However for maximum of 0.25% of
supplies F.Y.2017-18 turnover
made/received during the due date is
the relevant previous 30.06.2019.
year under different
tax heads i.e. CGST,
SGST & IGST and
HSN codes.
Basically, it is a
consolidation of all
the monthly/quarterly
returns filed in that
year.

RETURNS UNDER GST TO FILED BY NON-RESIDENT FOREIGN TAXABLE PERSON

Form Particulars Frequency Due Date Late Fees

GSTR-5 Details of outward supplies Monthly 20th of the next Rs.200/- per
of taxable goods and/or month day (Rs.100/-
services CGST +
Rs.100/-
SGST) upto
maximum of
Rs.5,000/-

RETURNS UNDER GST TO FILED BY INPUT SERVICE DISTRIBUTOR

Form Particulars Frequency Due Date Late Fees

GSTR-6 Input Credit received for Monthly 13th of the next No specific
distribution/ITC distributed month provision,
Hence, subject
to a general
penalty of
Rs.25,000/-
RETURNS UNDER GST TO FILED BY TDS DIDUCTOR

Form Particulars Frequency Due Date Late Fees

GSTR-7 To be filed by person Monthly 10th of the next Rs.200/- per
required to deduct TDS month day (Rs.100/-
under GST which contains CGST +
 Page 197 of 371

the details of TDS deducted, Rs.100/-

TDS liability payable and SGST) upto
paid, TDS refund claimed if maximum of
any etc. Rs.5,000/-

RETURNS UNDER GST TO FILED BY E-COMMERCE OPERATORS

Form Particulars Frequency Due Date Late Fees

GSTR-8 To be filed by e-commerce Monthly 10th of the next Rs.200/- per

operators registered under month day (Rs.100/-
GST which contains the CGST +
details of supplies effected Rs.100/-
through e-commerce SGST) upto
platform and amount of TCS maximum of
collected on such supplies Rs.5,000/-
GSTR-9B Annual Return - It consists of Annually 31st December Rs.200/- per
details regarding the outward of next financial day (Rs.100/-
and inward supplies year. CGST +
made/received during the However for Rs.100/-
relevant previous year under F.Y.2017-18 the SGST) upto a
different tax heads i.e. due date is maximum of
CGST, SGST & IGST and 30.06.2019. 0.25% of
HSN codes. Basically, it is a turnover
consolidation of all the
monthly/quarterly returns
filed in that year.

DIFFERENCE BETWEEN GSTR-9 & GSTR-9C

Points of GSTR-9 GSTR-9C

comparison Annual Return Reconciliation Statement

Nature Informational/ a consolidation of all GST returns Analytical statement on GST

returns certified by GST Auditor/
CA/CMA for GST authorities to
take necessary action

Who must GST Registered taxpayer GST registered taxpayer whose

file aggregate turnover in the F.Y.
exceeds Rs.2 Crores

Not Casual Taxable Person Those mentioned under GSTR-9

applicable to Non-Resident Taxable Person but also a registered person whose
Input Service Distributor aggregate turnover in an FY is less
Unique Identification Number Holders than Rs. 2 Crores
Online Information and Database Access Retrieval
Service providers
Composition Dealers
Persons subject to TCS or TDS provisions

Due date for 30th June 2019 for FY 2017-18 30th June 2019, either with or after
filing filing GSTR-9 for FY 2017-18

Late fees & Late fees of Rs.200 per day of delay subject to a
penalty maximum cap of an amount at 0.25% of total
turnover
Filing of the On GST portal or through facilitation centre
return
Format of Consolidated summary details of the turnover, ITC
the return and tax paid, late fees as per the GST returns filed
between July 2017 and March 2018 along with its
amendments made in F.Y.2018-19. Further,
declaration of demands/refunds, supplies from
composition dealers, Job works, goods sent on an
approval basis, HSN wise summary of outward and
inward supplies, late fees payable is required.
Who must No certification required by CA but must be attested Certification of GST Auditor is
certify/ attest by the taxpayer using a digital signature
Annexures No annexures to be attached
Page 198 of 371
Late fees of Rs.200 per day of
delay subject to a maximum cap of
an amount at 0.25% of total
turnover
On GST portal or through
facilitation centre at the time of or
after filing GSTR-9
Part-A -Reporting of reconciliation
needed between turnover, tax paid
and ITC. Report on Auditor’s
recommendation of any additional
tax liability.
Part -B -Certificate by GST
Chartered Accountant/ Cost
Accountant
required who is either a Chartered
Accountant/ Cost Accountant
through digital signature and must
be attested by the taxpayer using a
digital signature
Annexure of Audited financial
statement is required
 Page 199 of 371

INPUT TAX CREDIT UNDER GST

Sec.2 of CGST Act - Definitions

(63) “input tax credit” means the credit of input tax;

(62) “input tax” in relation to a registered person, means the central tax, State tax,
integrated tax or Union territory tax charged on any supply of goods or services or both
made to him and includes—

(a) the integrated goods and services tax charged on import of goods;
(b) the tax payable under the provisions of sub-sections (3) and (4) of section 9;
(c) the tax payable under the provisions of sub-sections (3) and (4) of section 5 of
the Integrated Goods and Services Tax Act;
(d) the tax payable under the provisions of sub-sections (3) and (4) of section 9 of
the respective State Goods and Services Tax Act; or
(e) the tax payable under the provisions of sub-sections (3) and (4) of section 7 of
the Union Territory Goods and Services Tax Act,

but does not include the tax paid under the composition levy;

(59) “input” means any goods other than capital goods used or intended to be used by a
supplier in the course or furtherance of business;

(60) “input service” means any service used or intended to be used by a supplier in the
course or furtherance of business;

(19) “capital goods” means goods, the value of which is capitalised in the books of account
of the person claiming the input tax credit and which are used or intended to be used in
the course or furtherance of business;

(52) “goods” means every kind of movable property other than money and securities but
includes actionable claim, growing crops, grass and things attached to or forming part of
the land which are agreed to be severed before supply or under a contract of supply;

(17) “business” includes––

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or

any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillaryto sub-
clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is
volume, frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection
with commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a subscription or
any other consideration) of the facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been
accepted by him in the course or furtherance of his trade, profession or vocation;
(h) activities of a race club including by way of totalisator or a license to book maker
or activities of a licensed book maker in such club; and
 Page 200 of 371

(i) any activity or transaction undertaken by the Central Government, a State

Government or any local authority in which they are engaged as public
authorities;

(47) “exempt supply” means supply of any goods or services or both which attracts nil rate
of tax or which may be wholly exempt from tax under section 11, or under section 6 of
the Integrated Goods and Services Tax Act, and includes non-taxable supply;

Sec.16 of CGST Act - Eligibility and conditions for taking input tax credit

(1) Every registered person shall, subject to such conditions and restrictions as may be
prescribed and in the manner specified in section 49, be entitled to take credit of input
tax charged on any supply of goods or services or both to him which are used or
intended to be used in the course or furtherance of his business and the said amount
shall be credited to the electronic credit ledger of such person.

(2) Notwithstanding anything contained in this section, no registered person shall be entitled
to the credit of any input tax in respect of any supply of goods or services or both to him
unless,–

(a) he is in possession of a tax invoice or debit note issued by a supplier registered

under this Act, or such other taxpaying documents as may be prescribed;
(b) he has received the goods or services or both.

Explanation.— For the purposes of this clause, it shall be deemed that the
registered person has received the goods or, as the case may be, services––

(i) where the goods are delivered by the supplier to a recipient or any other
person on the direction of such registered person, whether acting as an
agent or otherwise, before or during movement of goods, either by way of
transfer of documents of title to goods or otherwise;
(ii) where the services are provided by the supplier to any person on the
direction of and on account of such registered person

(c) subject to the provisions of section 41 or section 43A, the tax charged in respect
of such supply has been actually paid to the Government, either in cash or
through utilization of input tax credit admissible in respect of the said supply; and
(d) he has furnished the return under section 39:

Provided that where the goods against an invoice are received in lots or installments,
the registered person shall be entitled to take credit upon receipt of the last lot or
installment:

Provided further that where a recipient fails to pay to the supplier of goods or services
or both, other than the supplies on which tax is payable on reverse charge basis, the
amount towards the value of supply along with tax payable thereon within a period of
one hundred and eighty days from the date of issue of invoice by the supplier, an
amount equal to the input tax credit availed by the recipient shall be added to his output
tax liability, along with interest thereon, in such manner as may be prescribed:

Provided also that, the recipient shall be entitled to avail of the credit of input tax on
payment made by him of the amount towards the value of supply of goods or services or
both along with tax payable thereon.
 Page 201 of 371

(3) Where the registered person has claimed depreciation on the tax component of the cost
of capital goods and plant and machinery under the provisions of the Income-tax Act,
1961, the input tax credit on the said tax component shall not be allowed.

(4) A registered person shall not be entitled to take input tax credit in respect of any invoice
or debit note for supply of goods or services or both after the due date of furnishing of
the return under section 39 for the month of September following the end of financial
year to which such invoice or invoice relating to such debit note pertains or furnishing of
the relevant annual return, whichever is earlier.

Provided that the registered person shall be entitled to take input tax credit after the due
date of furnishing of the return under section 39 for the month of September, 2018 till the
due date of furnishing of the return under the said section for the month of March, 2019
in respect of any invoice or invoice relating to such debit note for supply of goods or
services or both made during the financial year 2017-18, the details of which have been
uploaded by the supplier under sub-section (1) of section 37 till the due date for
furnishing the details under sub-section (1) of said section for the month of March, 2019

Rule 36 of CGST Rules- Documentary requirements and conditions for claiming input tax
credit.

(1) The input tax credit shall be availed by a registered person, including the Input Service
Distributor, on the basis of any of the following documents, namely,-
(a) an invoice issued by the supplier of goods or services or both in accordance with
the provisions of section 31;
(b) an invoice issued in accordance with the provisions of clause (f) of sub-section (3)
of section 31, subject to the payment of tax;
(c) a debit note issued by a supplier in accordance with the provisions of section 34;
(d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or
rules made thereunder for the assessment of integrated tax on imports;
(e) an Input Service Distributor invoice or Input Service Distributor credit note or any
document issued by an Input Service Distributor in accordance with the provisions
of sub-rule (1) of rule 54.

(2) Input tax credit shall be availed by a registered person only if all the applicable particulars
as specified in the provisions of Chapter VI are contained in the said document, and the
relevant information, as contained in the said document, is furnished in FORMGSTR-2 by
such person.

Provided that if the said document does not contain all the specified particulars but
contains the details of the amount of tax charged, description of goods or services, total
value of supply of goods or services or both, GSTIN of the supplier and recipient and
place of supply in case of inter-State supply, input tax credit may be availed by such
registered person.

(3) No input tax credit shall be availed by a registered person in respect of any tax that has
been paid in pursuance of any order where any demand has been confirmed on account
of any fraud, willful misstatement or suppression of facts.
 Page 202 of 371

Rule 37 of CGST Rules- Reversal of input tax credit in the case of non-payment of
consideration

(1) A registered person, who has availed of input tax credit on any inward supply of goods
or services or both, but fails to pay to the supplier thereof, the value of such supply
along with the tax payable thereon, within the time limit specified in the second proviso
to subsection(2) of section 16, shall furnish the details of such supply, the amount of
value not paid and the amount of input tax credit availed of proportionate to such
amount not paid to the supplier in FORM GSTR-2 for the month immediately following
the period of one hundred and eighty days from the date of the issue of the invoice:

Provided that the value of supplies made without consideration as specified in

Schedule I of the said Act shall be deemed to have been paid for the purposes of the
second proviso to sub-section (2) of section 16.

Provided further that the value of supplies on account of any amount added in
accordance with the provisions of clause (b) of sub-section (2) of section 15 shall be
deemed to have been paid for the purposes of the second proviso to sub-section (2) of
section 16

(2) The amount of input tax credit referred to in sub-rule (1) shall be added to the output tax
liability of the registered person for the month in which the details are furnished.

(3) The registered person shall be liable to pay interest at the rate notified under sub-
section (1) of section 50 for the period starting from the date of availing credit on such
supplies till the date when the amount added to the output tax liability, as mentioned in
sub-rule (2), is paid.

(4) The time limit specified in sub-section (4) of section 16 shall not apply to a claim for re-
availing of any credit, in accordance with the provisions of the Act or the provisions of
this Chapter that had been reversed earlier.

Sec.17 of CGST Act - Apportionment of credit and blocked credits

(1) Where the goods or services or both are used by the registered person partly for the
purpose of any business and partly for other purposes, the amount of credit shall be
restricted to so much of the input tax as is attributable to the purposes of his business.

(2) Where the goods or services or both are used by the registered person partly for
effecting taxable supplies including zero-rated supplies under this Act or under the
Integrated Goods and Services Tax Act and partly for effecting exempt supplies under
the said Acts, the amount of credit shall be restricted to so much of the input tax as is
attributable to the said taxable supplies including zero-rated supplies.

(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed,
and shall include supplies on which the recipient is liable to pay tax on reverse charge
basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of
Schedule II, sale of building.

Explanation.-For the purposes of this sub-section, the expression ‘‘value of exempt

supply’’ shall not include the value of activities or transactions specified in Schedule III,
except those specified in paragraph 5 of the said Schedule
 Page 203 of 371

(4) A banking company or a financial institution including a non-banking financial company,

engaged in supplying services by way of accepting deposits, extending loans or
advances shall have the option to either comply with the provisions of sub-section (2), or
avail of, every month, an amount equal to fifty per cent. of the eligible input tax credit on
inputs, capital goods and input services in that month and the rest shall lapse:

Provided that the option once exercised shall not be withdrawn during the remaining
part of the financial year:

Provided further that the restriction of fifty per cent. shall not apply to the tax paid on
supplies made by one registered person to another registered person having the same
Permanent Account Number.

(5) Notwithstanding anything contained in sub-section(1) of section 16 and subsection(1)of

section 17, input tax credit shall not be available in respect of the following, namely:—

(a) motor vehicles for transportation of persons having approved seating capacity of
not more than thirteen persons (including the driver), except when they are used
for making the following taxable supplies, namely:-

(A) further supply of such motor vehicles; or

(B) transportation of passengers; or
(C) imparting training on driving such motor vehicles;

(aa) vessels and aircraft except when they are used––

(i) for making the following taxable supplies, namely:-

(A) further supply of such vessels or aircraft; or
(B) transportation of passengers; or
(C) imparting training on navigating such vessels; or
(D) imparting training on flying such aircraft;

(ii) for transportation of goods;

(ab) services of general insurance, servicing, repair and maintenance in so far as they
relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause
(aa):

Provided that the input tax credit in respect of such services shall be available-

(i) where the motor vehicles, vessels or aircraft referred to in clause (a) or
clause (aa) are used for the purposes specified therein;
(ii) where received by a taxable person engaged-

(I) in the manufacture of such motor vehicles, vessels or aircraft; or

(II) in the supply of general insurance services in respect of such
motor vehicles, vessels or aircraft insured by him;

(b) the following supply of goods or services or both-

(i) food and beverages, outdoor catering, beauty treatment, health services,
cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles,
vessels or aircraft referred to in clause (a) or clause (aa) except when
 Page 204 of 371

used for the purposes specified therein, life insurance and health
insurance:

Provided that the input tax credit in respect of such goods or services or both
shall be available where an inward supply of such goods or services or both is
used by a registered person for making an outward taxable supply of the same
category of goods or services or both or as an element of a taxable composite or
mixed supply;

(ii) membership of a club, health and fitness centre; and

(iii) travel benefits extended to employees on vacation such as leave or home
travel concession:

Provided that the input tax credit in respect of such goods or services or both
shall be available, where it is obligatory for an employer to provide the same to
its employees under any law for the time being in force.

(c) works contract services when supplied for construction of an immovable property
(other than plant and machinery) except where it is an input service for further
supply of works contract service;

(d) goods or services or both received by a taxable person for construction of an

immovable property (other than plant or machinery) on his own account including
when such goods or services or both are used in the course or furtherance of
business.

Explanation.––For the purposes of clauses (c) and (d), the expression

“construction” includes re-construction, renovation, additions or alterations or
repairs, to the extent of capitalisation, to the said immovable property;

(e) goods or services or both on which tax has been paid under section 10;

(f) goods or services or both received by a non-resident taxable person except on

goods imported by him;

(g) goods or services or both used for personal consumption;

(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free
samples; and

(i) any tax paid in accordance with the provisions of sections 74, 129 and 130.

(6) The Government may prescribe the manner in which the credit referred to in sub-
sections (1) and (2) may be attributed.

Explanation.–For the purposes of this Chapter and Chapter VI, the expression “plant
and machinery” means apparatus, equipment, and machinery fixed to earth by
foundation or structural support that are used for making outward supply of goods or
services or both and includes such foundation and structural supports but excludes—

(i) land, building or any other civil structures;

(ii) telecommunication towers; and
(iii) pipelines laid outside the factory premises.
 Page 205 of 371

Rule 38 of CGST Rules- Claim of credit by a banking company or a financial institution.

A banking company or a financial institution, including a non-banking financial company,

engaged in the supply of services by way of accepting deposits or extending loans or
advances that chooses not to comply with the provisions of sub-section (2) of section 17, in
accordance with the option permitted under sub-section (4) of that section, shall follow the
following procedure, namely,-

(a) the said company or institution shall not avail the credit of,-
(i) the tax paid on inputs and input services that are used for non-business purposes;
and

(ii) the credit attributable to the supplies specified in sub-section (5) of section 17, in
FORM GSTR-2;

(b) the said company or institution shall avail the credit of tax paid on inputs and input
services referred to in the second proviso to sub-section (4) of section 17 and not
covered under clause (a);

(c) fifty per cent. of the remaining amount of input tax shall be the input tax credit
admissible to the company or the institution and shall be furnished in FORM GSTR-2;

(d) the amount referred to in clauses (b) and (c) shall, subject to the provisions of sections
41, 42 and 43, be credited to the electronic credit ledger of the said company or the
institution.

Rule 42 of CGST Rules - Manner of determination of input tax credit in respect of inputs
or input services and reversal thereof.

(1) The input tax credit in respect of inputs or input services, which attract the provisions of
sub-section (1) or sub-section (2) of section 17, being partly used for the purposes of
business and partly for other purposes, or partly used for effecting taxable supplies
including zero rated supplies and partly for effecting exempt supplies, shall be attributed
to the purposes of business or for effecting taxable supplies in the following manner,
namely,-

(a) the total input tax involved on inputs and input services in a tax period, be denoted
as T;

(a) the amount of input tax, out of T, attributable to inputs and input services intended to
be used exclusively for the purposes other than business, be denoted as T1;

(b) the amount of input tax, out of T, attributable to inputs and input services intended to
be used exclusively for effecting exempt supplies, be denoted as T2;

(c) the amount of input tax, out of T, in respect of inputs and input services on which
credit is not available under sub-section (5) of section 17, be denoted as T3;

(d) the amount of input tax credit credited to the electronic credit ledger of registered
person, be denoted as C1 and calculated as-
 Page 206 of 371

C1 = T- (T1+T2+T3);

(e) the amount of input tax credit attributable to inputs and input services intended to be
used exclusively for effecting supplies other than exempted but including zero rated
supplies, be denoted as T4;

Explanation: For the purpose of this clause, it is hereby clarified that in case of supply
of services covered by clause (b) of paragraph 5 of Schedule II of the said Act, value of
T4 shall be zero during the construction phase because inputs and input services will be
commonly used for construction of apartments booked on or before the date of issuance
of completion certificate or first occupation of the project, whichever is earlier, and those
which are not booked by the said date

(f) T1, T2, T3 and T4 shall be determined and declared by the registered person at the
invoice level in FORM GSTR-2 and at summery level in FORM GSTR 3B;

(g) input tax credit left after attribution of input tax credit under clause (f) shall be called
common credit, be denoted as C2 and calculated as-

C2 = C1- T4;

(h) the amount of input tax credit attributable towards exempt supplies, be denoted as D 1
and calculated as-

D1= (E÷F) × C2
where,

E is the aggregate value of exempt supplies during the tax period, and

F is the total turnover in the State of the registered person during the tax period:

Provided that in case of supply of services covered by clause (b) of paragraph 5

of Schedule II of the Act, the value of „E/F‟ for a tax period shall be calculated for
each project separately, taking value of E and F as under:-

E= aggregate carpet area of the apartments, construction of which is exempt

from tax plus aggregate carpet area of the apartments, construction of
which is not exempt from tax, but are identified by the promoter to be sold
after issue of completion certificate or first occupation, whichever is
earlier;

F= aggregate carpet area of the apartments in the project;

Explanation 1: In the tax period in which the issuance of completion certificate or

first occupation of the project takes place, value of E shall also include aggregate
carpet area of the apartments, which have not been booked till the date of issuance
of completion certificate or first occupation of the project, whichever is earlier;

Explanation 2: Carpet area of apartments, tax on construction of which is paid or

payable at the rates specified for items (i), (ia), (ib), (ic) or (id), against serial number
3 of the Table in the notification No. 11/2017-Central Tax (Rate), published in the
Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) dated 28th June,
 Page 207 of 371

2017 vide GSR number 690(E) dated 28th June, 2017, as amended, shall be taken
into account for calculation of value of „E‟ in view of Explanation (iv) in paragraph 4
of the notification No. 11/2017-Central Tax (Rate), published in the Gazette of India,
Extraordinary, Part II, Section 3, Sub-section (i) dated 28th June, 2017 vide GSR
number 690(E) dated 28th June, 2017, as amended

Provided further that where the registered person does not have any turnover
during the said tax period or the aforesaid information is not available, the value of
E/F shall be calculated by taking values of E and F of the last tax period for which
the details of such turnover are available, previous to the month during which the
said value of E/F is to be calculated;

Explanation: For the purposes of this clause, it is hereby clarified that the
aggregate value of exempt supplies and the total turnover shall exclude the amount
of any duty or tax levied under entry 84 and entry 92A of List I of the Seventh
Schedule to the Constitution and entry 51 and 54 of List II of the said Schedule;

(j) the amount of credit attributable to non-business purposes if common inputs and
input services are used partly for business and partly for non-business purposes, be
denoted as D2, and shall be equal to five per cent. of C2 and

(k) the remainder of the common credit shall be the eligible input tax credit attributed to
the purposes of business and for effecting supplies other than exempted supplies
but including zero rated supplies and shall be denoted as C3, where,-
C3 = C2 - (D1+D2);

(l) the amount "C3" "D1‟ and „D2‟ shall be computed separately for input tax credit of
central tax, State tax, Union territory tax and integrated tax and declared in FORM
GSTR-3B or through FORM GST DRC-03

(m) the amount equal to aggregate of D1 and D2 shall be reversed by the registered
person in FORM GSTR-3B or through FORM GST DRC-03:

Provided that where the amount of input tax relating to inputs or input services used
partly for the purposes other than business and partly for effecting exempt supplies
has been identified and segregated at the invoice level by the registered person, the
same shall be included in T1 and T2 respectively, and the remaining amount of
credit on such inputs or input services shall be included in T4.

(2) Except in case of supply of services covered by clause (b) of paragraph 5 of the
Schedule II of the Act, the input tax credit determined under sub-rule (1) shall be
calculated finally for the financial year before the due date for furnishing of the return for
the month of September following the end of the financial year to which such credit
relates, in the manner specified in the said sub-rule and-

(a) where the aggregate of the amounts calculated finally in respect of D 1 and D2
exceeds the aggregate of the amounts determined under sub-rule (1) in respect of
D1 and D2, such excess shall be reversed by the registered person in FORM GSTR-
3B or through FORM GST DRC-03 in the month not later than the month of
September following the end of the financial year to which such credit relates and
the said person shall be liable to pay interest on the said excess amount at the rate
specified in sub-section (1) of section 50 for the period starting from the first day of
April of the succeeding financial year till the date of payment; or
 Page 208 of 371

(b) where the aggregate of the amounts determined under sub-rule (1) in respect of D1
and D2 exceeds the aggregate of the amounts calculated finally in respect of D1
and D2, such excess amount shall be claimed as credit by the registered person in
his return for a month not later than the month of September following the end of the
financial year to which such credit relates.

Rule 43 of CGST Rules - Manner of determination of input tax credit in respect of capital
goods and reversal thereof in certain cases.

(1) Subject to the provisions of sub-section (3) of section 16, the input tax credit in respect of
capital goods, which attract the provisions of sub-sections (1) and (2) of section 17, being
partly used for the purposes of business and partly for other purposes, or partly used for
effecting taxable supplies including zero rated supplies and partly for effecting exempt
supplies, shall be attributed to the purposes of business or for effecting taxable supplies
in the following manner, namely,-

(a) the amount of input tax in respect of capital goods used or intended to be used
exclusively for non-business purposes or used or intended to be used exclusively for
effecting exempt supplies shall be indicated in FORM GSTR-2 and shall not be
credited to his electronic credit ledger;

(b) the amount of input tax in respect of capital goods used or intended to be used
exclusively for effecting supplies other than exempted supplies but including zero
rated supplies shall be indicated in FORM GSTR-2 and shall be credited to the
electronic credit ledger;

(c) the amount of input tax in respect of capital goods not covered under clauses (a)
and (b), denoted as A, shall be credited to the electronic credit ledger and the useful
life of such goods shall be taken as five years from the date of the invoice for such
goods:

Provided that where any capital goods earlier covered under clause (a) is
subsequently covered under this clause, the value of A shall be arrived at by
reducing the input tax at the rate of five percentage points for every quarter or part
thereof and the amount A shall be credited to the electronic credit ledger;
Explanation.- An item of capital goods declared under clause (a) on its receipt shall
not attract the provisions of sub-section (4) of section 18, if it is subsequently
covered under this clause.

(d) the aggregate of the amounts of A credited to the electronic credit ledger under
clause (c), to be denoted as Tc, shall be the common credit in respect of capital
goods for a tax period:

Provided that where any capital goods earlier covered under clause (b) is
subsequently covered under clause (c), the value of A arrived at by reducing the
input tax at the rate of five percentage points for every quarter or part thereof shall
be added to the aggregate value Tc;

(e) the amount of input tax credit attributable to a tax period on common capital goods
during their useful life, be denoted as Tm‘ and calculated as-

Tm= Tc÷60
 Page 209 of 371

(f) the amount of input tax credit, at the beginning of a tax period, on all common
capital goods whose useful life remains during the tax period, be denoted as Tr and
shall be the aggregate of Tm for all such capital goods;

(g) the amount of common credit attributable towards exempted supplies, be denoted
as Te, and calculated as-
Te= (E÷ F) x Tr
where,

E is the aggregate value of exempt supplies, made, during the tax period, and

F is the total turnover of the registered person during the tax period:

Provided that where the registered person does not have any turnover during the said
tax period or the aforesaid information is not available, the value of E/F shall be
calculated by taking values of E and F of the last tax period for which the details of such
turnover are available, previous to the month during which the said value of E/F is to be
calculated;

Explanation.- For the purposes of this clause, it is hereby clarified that the aggregate
value of exempt supplies and the total turnover shall exclude the amount of any duty or
tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and entry
51 and 54 of List II of the said Schedule;

(h) the amount Te along with the applicable interest shall, during every tax period of
the useful life of the concerned capital goods, be added to the output tax liability
of the person making such claim of credit.

(2) The amount Te shall be computed separately for central tax, State tax, Union territory tax
and integrated tax.

Explanation: -For the purposes of rule 42 and this rule, it is hereby clarified that the
aggregate value of exempt supplies shall exclude: -

(a) the value of supply of services specified in the notification of the Government of
India in the Ministry of Finance, Department of Revenue No. 42/2017-Integrated Tax
(Rate), dated the 27th October, 2017 published in the Gazette of India, Extraordinary,
Part II, Section 3, Sub-section (i), vide number GSR 1338(E) dated the 27 th October,
2017;
(a) the value of services by way of accepting deposits, extending loans or advances in
so far as the consideration is represented by way of interest or discount, except in
case of a banking company or a financial institution including a non-banking
financial company, engaged in supplying services by way of accepting deposits,
extending loans or advances; and
(b) the value of supply of services by way of transportation of goods by a vessel from
the customs station of clearance in India to a place outside India.

(3) In case of supply of services covered by clause (b) of paragraph 5 of the Schedule II of
the Act, the input tax determined under sub-rule (1) shall be calculated finally, for each
ongoing project or project which commences on or after 1st April, 2019, which did not
undergo or did not require transition of input tax credit consequent to change of rates of
tax on 1st April, 2019 in accordance with notification No. 11/2017- Central Tax (Rate),
dated the 28th June, 2017, published vide GSR No. 690(E) dated the 28th June, 2017,
 Page 210 of 371

as amended for the entire period from the commencement of the project or 1stJuly,
2017, whichever is later, to the completion or first occupation of the project, whichever is
earlier, before the due date for furnishing of the return for the month of September
following the end of financial year in which the completion certificate is issued or first
occupation takes place of the project, in the manner prescribed in the said sub-rule, with
the modification that value of E/F shall be calculated taking value of E and F as under:

E= aggregate carpet area of the apartments, construction of which is exempt from

tax plus aggregate carpet area of the apartments, construction of which is not
exempt from tax, but which have not been booked till the date of issuance of
completion certificate or first occupation of the project, whichever is earlier:

F= aggregate carpet area of the apartments in the project;

and,-

(a) where the aggregate of the amounts calculated finally in respect of „D1‟ and „D2‟
exceeds the aggregate of the amounts determined under sub-rule (1) in respect
of „D1‟ and “D2”, such excess shall be reversed by the registered person
in FORM GSTR-3B or through FORM GST DRC-03 in the month not later than
the month of September following the end of the financial year in which the
completion certificate is issued or first occupation of the project takes place and
the said person shall be liable to pay interest on the said excess amount at the
rate specified in sub-section (1) of section 50 for the period starting from the first
day of April of the succeeding financial year till the date of payment; or

(b) where the aggregate of the amounts determined under sub-rule (1) in respect of
„D1‟ and “D2” exceeds the aggregate of the amounts calculated finally in respect
of “D1” and “D2”, such excess amount shall be claimed as credit by the
registered person in his return for a month not later than the month of September
following the end of the financial year in which the completion certificate is issued
or first occupation takes place of the project.

(4) In case of supply of services covered by clause (b) of paragraph 5 of Schedule II of the
Act, the input tax determined under sub-rule (1) shall be calculated finally, for
commercial portion in each project, other than residential real estate project (RREP),
which underwent transition of input tax credit consequent to change of rates of tax on the
1st April, 2019 in accordance with notification No. 11/2017- Central Tax (Rate), dated the
28th June, 2017, published vide GSR No. 690(E) dated the 28th June, 2017, as
amended for the entire period from the commencement of the project or 1st July, 2017,
whichever is later, to the completion or first occupation of the project, whichever is
earlier, before the due date for furnishing of the return for the month of September
following the end of financial year in which the completion certificate is issued or first
occupation takes place of the project, in the following manner.

(a) The aggregate amount of common credit on commercial portion in the project
(C3aggregate_comm) shall be calculated as under,
C3aggregate_comm = aggregate of amounts of C3 determined under sub- rule (1) for the
tax periods starting from 1st July, 2017 to 31st March, 2019, x (AC
/ AT) + aggregate of amounts of C3 determined under sub- rule (1)
for the tax periods starting from 1st April, 2019 to the date of
completion or first occupation of the project, whichever is earlier
 Page 211 of 371

Where, -
AC = total carpet area of the commercial apartments in the project
AT = total carpet area of all apartments in the project

(b) The amount of final eligible common credit on commercial portion in the project
(C3final_comm) shall be calculated as under

C3final_comm =C3aggregate_comm x (E/ F)

Where, -

E= total carpet area of commercial apartments which have not been booked till the
date of issuance of completion certificate or first occupation of the project,
whichever is earlier.

F = AC = total carpet area of the commercial apartments in the project

(c) where, C3aggregate_comm exceeds C3final_comm, such excess shall be reversed by the
registered person in FORM GSTR-3B or through FORM GST DRC-03 in the
month not later than the month of September following the end of the financial
year in which the completion certificate is issued or first occupation takes place of
the project and the said person shall be liable to pay interest on the said excess
amount at the rate specified in sub-section (1) of section 50 for the period starting
from the first day of April of the succeeding financial year till the date of payment;

(d) where, C3final_comm exceeds C3aggregate_comm, such excess amount shall be claimed
as credit by the registered person in his return for a month not later than the
month of September following the end of the financial year in which the
completion certificate is issued or first occupation takes place of the project.

(5) Input tax determined under sub- rule (1) shall not be required to be calculated finally on
completion or first occupation of an RREP which underwent transition of input tax credit
consequent to change of rates of tax on 1st April, 2019 in accordance with notification
No. 11/2017- Central Tax (Rate), dated the 28th June, 2017, published vide GSR No.
690(E) dated the 28th June, 2017, as amended.

(6) Where any input or input service are used for more than one project, input tax credit with
respect to such input or input service shall be assigned to each project on a reasonable
basis and credit reversal pertaining to each project shall be carried out as per sub-rule
(3).

Sec.18 of CGST Act - Availability of credit in special circumstances

(1) Subject to such conditions and restrictions as may be prescribed—

(a) a person who has applied for registration under this Act within thirty days from
the date on which he becomes liable to registration and has been granted such
registration shall be entitled to take credit of input tax 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 the provisions of this Act;
(b) a person who takes registration under sub-section (3) of section 25 shall be
entitled to take credit of input tax in respect of inputs held in stock and inputs
 Page 212 of 371

contained in semi-finished or finished goods held in stock on the day immediately

preceding the date of grant of registration;
(c) where any registered person ceases to pay tax under section 10, he shall be
entitled to take credit of input tax in respect of inputs held in stock, inputs
contained in semi-finished or finished goods held in stock and on capital goods
on the day immediately preceding the date from which he becomes liable to pay
tax under section 9:
Provided that the credit on capital goods shall be reduced by such percentage
points as may be prescribed;
(d) where an exempt supply of goods or services or both by a registered person
becomes a taxable supply, such person shall be entitled to take credit of input tax
in respect of inputs held in stock and inputs contained in semi-finished or finished
goods held in stock relatable to such exempt supply and on capital goods
exclusively used for such exempt supply on the day immediately preceding the
date from which such supply becomes taxable:
Provided that the credit on capital goods shall be reduced by such percentage
points as may be prescribed.

(2) A registered person shall not be entitled to take input tax credit under sub-section (1) in
respect of any supply of goods or services or both to him after the expiry of one year
from the date of issue of tax invoice relating to such supply.

(3) Where there is a change in the constitution of a registered person on account of sale,
merger, demerger, amalgamation, lease or transfer of the business with the specific
provisions for transfer of liabilities, the said registered person shall be allowed to transfer
the input tax credit which remains unutilised in his electronic credit ledger to such sold,
merged, demerged, amalgamated, leased or transferred business in such manner as
may be prescribed.

(4) Where any registered person who has availed of input tax credit opts to pay tax under
section 10 or, where the goods or services or both supplied by him become wholly
exempt, he shall pay an amount, by way of debit in the electronic credit ledger or
electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in
stock and inputs contained in semi-finished or finished goods held in stock and on
capital goods, reduced by such percentage points as may be prescribed, on the day
immediately preceding the date of exercising of such option or, as the case may be, the
date of such exemption:

Provided that after payment of such amount, the balance of input tax credit, if any,lying
in his electronic credit ledger shall lapse.

(5) The amount of credit under sub-section (1) and the amount payable under sub-section
(4) shall be calculated in such manner as may be prescribed.

(6) In case of supply of capital goods or plant and machinery, on which input tax credit has
been taken, the registered person shall pay an amount equal to the input tax credit taken
on the said capital goods or plant and machinery reduced by such percentage points as
may be prescribed or the tax on the transaction value of such capital goods or plant and
machinery determined under section 15, whichever is higher:

Provided that where refractory bricks, moulds and dies, jigs and fixtures are supplied as
scrap, the taxable person may pay tax on the transaction value of such goods
determined under section 15.
 Page 213 of 371

Rule 40 of CGST Rules - Manner of claiming credit in special circumstances

(1) The input tax credit claimed in accordance with the provisions of sub-section (1) of
section 18 on the inputs held in stock or inputs contained in semi-finished or finished
goods held in stock, or the credit claimed on capital goods in accordance with the
provisions of clauses (c) and (d) of the said sub-section, shall be subject to the following
conditions, namely,-

(a) the input tax credit on capital goods, in terms of clauses (c) and (d) of sub-
section (1) of section 18, shall be claimed after reducing the tax paid on such
capital goods by five percentage points per quarter of a year or part thereof from
the date of the invoice or such other documents on which the capital goods were
received by the taxable person.

(b) the registered person shall within a period of thirty days from the date of
becoming eligible to avail the input tax credit under sub-section (1) of section 18,
or within such further period as may be extended by the Commissioner by a
notification in this behalf, shall make a declaration, electronically, on the common
portal in FORM GST ITC-01 to the effect that he is eligible to avail the input tax
credit as aforesaid:

Provided that any extension of the time limit notified by the Commissioner of
State tax or the Commissioner of Union territory tax shall be deemed to be
notified by the Commissioner.

(c) the declaration under clause (b) shall clearly specify the details relating to the
inputs held in stock or inputs contained in semi-finished or finished goods held in
stock, or as the case may be, capital goods–

(i) on the day immediately preceding the date from which he becomes liable
to pay tax under the provisions of the Act, in the case of a claim under
clause (a) of sub-section (1) of section 18;
(ii) on the day immediately preceding the date of the grant of registration, in
the case of a claim under clause (b) of sub-section (1) of section 18;
(iii) on the day immediately preceding the date from which he becomes liable
to pay tax under section 9, in the case of a claim under clause (c) of sub-
section (1) of section 18;
(iv) on the day immediately preceding the date from which the supplies made
by the registered person becomes taxable, in the case of a claim under
clause (d) of sub-section (1) of section 18;

(d) the details furnished in the declaration under clause (b) shall be duly certified by
a practicing chartered accountant or a cost accountant if the aggregate value of
the claim on account of central tax, State tax, Union territory tax and integrated
tax exceeds two lakh rupees;

(e) the input tax credit claimed in accordance with the provisions of clauses (c) and
(d) of sub-section (1) of section 18 shall be verified with the corresponding
details furnished by the corresponding supplier in FORM GSTR-1 or as the case
may be, in FORM GSTR- 4, on the common portal.
 Page 214 of 371

(2) The amount of credit in the case of supply of capital goods or plant and machinery, for
the purposes of sub-section (6) of section 18, shall be calculated by reducing the input
tax on the said goods at the rate of five percentage points for every quarter or part
thereof from the date of the issue of the invoice for such goods.

Rule 44 of CGST Rules - Manner of reversal of credit under special circumstances.

(1) The amount of input tax credit relating to inputs held in stock, inputs contained in semi-
finished and finished goods held in stock, and capital goods held in stock shall, for the
purposes of sub-section (4) of section 18 or sub-section (5) of section 29, be determined in
the following manner, namely,-

(a) for inputs held in stock and inputs contained in semi-finished and finished goods held in
stock, the input tax credit shall be calculated proportionately on the basis of the
corresponding invoices on which credit had been availed by the registered taxable
person on such inputs;

(a) for capital goods held in stock, the input tax credit involved in the remaining useful life in
months shall be computed on pro-rata basis, taking the useful life as five years.

Illustration:
Capital goods have been in use for 4 years, 6 month and 15 days.
The useful remaining life in months= 5 months ignoring a part of the month
Input tax credit taken on such capital goods= C
Input tax credit attributable to remaining useful life= C multiplied by 5/60

(2) The amount, as specified in sub-rule (1) shall be determined separately for input tax
credit of central tax, State tax, Union territory tax and integrated tax.

(3) Where the tax invoices related to the inputs held in stock are not available, the
registered person shall estimate the amount under sub-rule (1) based on the prevailing
market price of the goods on the effective date of the occurrence of any of the events
specified in subsection (4) of section 18 or, as the case may be, sub-section (5) of
section 29.

(4) The amount determined under sub-rule (1) shall form part of the output tax liability of the
registered person and the details of the amount shall be furnished in FORM GST ITC03,
where such amount relates to any event specified in sub-section (4) of section 18 and in
FORM GSTR-10, where such amount relates to the cancellation of registration.

(5) The details furnished in accordance with sub-rule (3) shall be duly certified by a
practicing chartered accountant or cost accountant.

(6) The amount of input tax credit for the purposes of sub-section (6) of section 18 relating
to capital goods shall be determined in the same manner as specified in clause (b) of
subrule (1) and the amount shall be determined separately for input tax credit of central
tax, State tax, Union territory tax and integrated tax:

Provided that where the amount so determined is more than the tax determined on the
transaction value of the capital goods, the amount determined shall form part of the
output tax liability and the same shall be furnished in FORM GSTR-1.
 Page 215 of 371

Sec.19 of CGST Act - Taking input tax credit in respect of inputs and capital goods sent
for job work

(1) The principal shall, subject to such conditions and restrictions as may be prescribed, be
allowed input tax credit on inputs sent to a job worker for job work.

(2) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the
principal shall be entitled to take credit of input tax on inputs even if the inputs are
directly sent to a job worker for job work without being first brought to his place of
business.

(3) Where the inputs sent for job work are not received back by the principal after
completion of job work or otherwise or are not supplied from the place of business of the
job worker in accordance with clause (a) or clause (b) of sub-section (1) of section 143
within one year of being sent out, it shall be deemed that such inputs had been supplied
by the principal to the job worker on the day when the said inputs were sent out:

Provided that where the inputs are sent directly to a job worker, the period of one year
shall be counted from the date of receipt of inputs by the job worker.

(4) The principal shall, subject to such conditions and restrictions as may be prescribed, be
allowed input tax credit on capital goods sent to a job worker for job work.

(5) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the
principal shall be entitled to take credit of input tax on capital goods even if the capital
goods are directly sent to a job worker for job work without being first brought to his
place of business.

(6) Where the capital goods sent for job work are not received back by the principal within a
period of three years of being sent out, it shall be deemed that such capital goods had
been supplied by the principal to the job worker on the day when the said capital goods
were sent out:

Provided that where the capital goods are sent directly to a job worker, the period of
three years shall be counted from the date of receipt of capital goods by the job worker.

(7) Nothing contained in sub-section (3) or sub-section (6) shall apply to moulds and dies,
jigs and fixtures, or tools sent out to a job worker for job work.

Explanation.–For the purpose of this section, “principal” means the person referred to in
section 143.

Rule 45 of CGST Rules - Conditions and restrictions in respect of inputs and capital
goods sent to the job worker.

(1) The inputs, semi-finished goods or capital goods shall be sent to the job worker under
the cover of a challan issued by the principal, including where such goods are sent
directly to a job-worker, and where the goods are sent from one job worker to another
job worker, the challan may be issued either by the principal or the job worker sending
the goods to another job worker:
 Page 216 of 371

Provided that the challan issued by the principal may be endorsed by the job worker,
indicating therein the quantity and description of goods where the goods are sent by one
job worker to another or are returned to the principal:

Provided further that the challan endorsed by the job worker may be further endorsed
by another job worker, indicating therein the quantity and description of goods where the
goods are sent by one job worker to another or are returned to the principal.

(2) The challan issued by the principal to the job worker shall contain the details specified in
rule 55.

(3) The details of challans in respect of goods dispatched to a job worker or received from a
job worker during a quarter shall be included in FORM GST ITC-04furnished for that
period on or before the twenty-fifth day of the month succeeding the said quarter[or
within such further period as may be extended by the Commissioner by a notification in
this behalf:

Provided that any extension of the time limit notified by the Commissioner of State tax
or the Commissioner of Union territory tax shall be deemed to be notified by the
Commissioner.

(4) Where the inputs or capital goods are not returned to the principal within the time
stipulated in section 143,it shall be deemed that such inputs or capital goods had been
supplied by the principal to the job worker on the day when the said inputs or capital
goods were sent out and the said supply shall be declared in FORM GSTR-1 and the
principal shall be liable to pay the tax along with applicable interest.

Explanation.- For the purposes of this Chapter,-

(1) the expressions ―capital goods‖ shall include ―plant and machinery‖ as defined in
the Explanation to section 17;

(2) for determining the value of an exempt supply as referred to in sub-section (3) of
section 17-

(a) the value of land and building shall be taken as the same as adopted for
the purpose of paying stamp duty; and

(b) the value of security shall be taken as one per cent. of the sale value of
such security.

Sec.41 of CGST Act - Claim of input tax credit and provisional acceptance thereof

(1) Every registered person shall, subject to such conditions and restrictions as may be
prescribed, be entitled to take the credit of eligible input tax, as self-assessed, in his
return and such amount shall be credited on a provisional basis to his electronic credit
ledger.

(2) The credit referred to in sub-section (1) shall be utilised only for payment of self-
assessed output tax as per the return referred to in the said sub-section.
 Page 217 of 371

Sec.42 of CGST Act - Matching, reversal and reclaim of input tax credit

(1) The details of every inward supply furnished by a registered person (hereafter in this
section referred to as the “recipient”) for a tax period shall, in such manner and within
such time as may be prescribed, be matched––

(a) with the corresponding details of outward supply furnished by the corresponding
registered person (hereafter in this section referred to as the “supplier”) in his
valid return for the same tax period or any preceding tax period;
(b) with the integrated goods and services tax paid under section 3 of the Customs
Tariff Act, 1975 in respect of goods imported by him; and
(c) for duplication of claims of input tax credit.

(2) The claim of input tax credit in respect of invoices or debit notes relating to inward supply
that match with the details of corresponding outward supply or with the integrated goods
and services tax paid under section 3 of the Customs Tariff Act, 1975 in respect of goods
imported by him shall be finally accepted and such acceptance shall be communicated,
in such manner as may be prescribed, to the recipient.

(3) Where the input tax credit claimed by a recipient in respect of an inward supply is in
excess of the tax declared by the supplier for the same supply or the outward supply is
not declared by the supplier in his valid returns, the discrepancy shall be communicated
to both such persons in such manner as may be prescribed.

(4) The duplication of claims of input tax credit shall be communicated to the recipient in
such manner as may be prescribed.

(5) The amount in respect of which any discrepancy is communicated under sub-section (3)
and which is not rectified by the supplier in his valid return for the month in which
discrepancy is communicated shall be added to the output tax liability of the recipient, in
such manner as may be prescribed, in his return for the month succeeding the month in
which the discrepancy is communicated.

(6) The amount claimed as input tax credit that is found to be in excess on account of
duplication of claims shall be added to the output tax liability of the recipient in his return
for the month in which the duplication is communicated.

(7) The recipient shall be eligible to reduce, from his output tax liability, the amount added
under sub-section (5), if the supplier declares the details of the invoice or debit note in
his valid return within the time specified in sub-section (9) of section 39.

(8) A recipient in whose output tax liability any amount has been added under sub-section
(5) or sub-section (6), shall be liable to pay interest at the rate specified under sub-
section (1) of section 50 on the amount so added from the date of availing of credit till
the corresponding additions are made under the said sub-sections.

(9) Where any reduction in output tax liability is accepted under sub-section (7), the interest
paid under sub-section (8) shall be refunded to the recipient by crediting the amount in
the corresponding head of his electronic cash ledger in such manner as may be
prescribed:

Provided that the amount of interest to be credited in any case shall not exceed the
amount of interest paid by the supplier.
 Page 218 of 371

(10) The amount reduced from the output tax liability in contravention of the provisions of
sub-section (7) shall be added to the output tax liability of the recipient in his return for
the month in which such contravention takes place and such recipient shall be liable to
pay interest on the amount so added at the rate specified in sub-section (3) of section
50.

Sec.43 of CGST Act - Matching, reversal and reclaim of reduction in output tax liability

(1) The details of every credit note relating to outward supply furnished by a registered
person (hereafter in this section referred to as the “supplier”) for a tax period shall, in
such manner and within such time as may be prescribed, be matched––

(a) with the corresponding reduction in the claim for input tax credit by the
corresponding registered person (hereafter in this section referred to as the
“recipient”) in his valid return for the same tax period or any subsequent tax
period; and
(b) for duplication of claims for reduction in output tax liability.

(2) The claim for reduction in output tax liability by the supplier that matches with the
corresponding reduction in the claim for input tax credit by the recipient shall be finally
accepted and communicated, in such manner as may be prescribed, to the supplier.

(3) Where the reduction of output tax liability in respect of outward supplies exceeds the
corresponding reduction in the claim for input tax credit or the corresponding credit note
is not declared by the recipient in his valid returns, the discrepancy shall be
communicated to both such persons in such manner as may be prescribed.

(4) The duplication of claims for reduction in output tax liability shall be communicated to the
supplier in such manner as may be prescribed.

(5) The amount in respect of which any discrepancy is communicated under sub-section (3)
and which is not rectified by the recipient in his valid return for the month in which
discrepancy is communicated shall be added to the output tax liability of the supplier, in
such manner as may be prescribed, in his return for the month succeeding the month in
which the discrepancy is communicated.

(6) The amount in respect of any reduction in output tax liability that is found to be on
account of duplication of claims shall be added to the output tax liability of the supplier in
his return for the month in which such duplication is communicated.

(7) The supplier shall be eligible to reduce, from his output tax liability, the amount added
under sub-section (5) if the recipient declares the details of the credit note in his valid
return within the time specified in sub-section (9) of section 39.

(8) A supplier in whose output tax liability any amount has been added under sub-section (5)
or sub-section (6), shall be liable to pay interest at the rate specified under sub-section
(1) of section 50 in respect of the amount so added from the date of such claim for
reduction in the output tax liability till the corresponding additions are made under the
said sub-sections.

(9) Where any reduction in output tax liability is accepted under sub-section (7), the interest
paid under sub-section (8) shall be refunded to the supplier by crediting the amount in
 Page 219 of 371

the corresponding head of his electronic cash ledger in such manner as may be
prescribed:

Provided that the amount of interest to be credited in any case shall not exceed the
amount of interest paid by the recipient.

(10) The amount reduced from output tax liability in contravention of the provisions of sub-
section (7) shall be added to the output tax liability of the supplier in his return for the
month in which such contravention takes place and such supplier shall be liable to pay
interest on the amount so added at the rate specified in sub-section (3) of section 50.

Rule 69 of CGST Rules - Matching of claim of input tax credit.

The following details relating to the claim of input tax credit on inward supplies including imports,
provisionally allowed under section 41, shall be matched under section 42 after the due date for
furnishing the return in FORM GSTR-3-

(a) Goods and Services Tax Identification Number of the supplier;

(b) Goods and Services Tax Identification Number of the recipient;
(c) invoice or debit note number;
(d) invoice or debit note date; and
(e) tax amount:

Provided that where the time limit for furnishing FORM GSTR-1 specified under section 37and
FORM GSTR-2 specified under section 38 has been extended, the date of matching relating to
claim of input tax credit shall also be extended accordingly:

Provided further that the Commissioner may, on the recommendations of the Council, by order,
extend the date of matching relating to claim of input tax credit to such date as may be specified
therein.

Explanation.- For the purposes of this rule, it is hereby declared that –

(i) The claim of input tax credit in respect of invoices and debit notes in FORM
GSTR2 that were accepted by the recipient on the basis of FORM GSTR-2A
without amendment shall be treated as matched if the corresponding supplier
has furnished a valid return;
(ii) The claim of input tax credit shall be considered as matched where the amount of
input tax credit claimed is equal to or less than the output tax paid on such tax
invoice or debit note by the corresponding supplier.

Rule 70 of CGST Rules - Final acceptance of input tax credit and communication thereof.

(1) The final acceptance of claim of input tax credit in respect of any tax period, specified in
sub-section (2) of section 42, shall be made available electronically to the registered
person making such claim in FORM GST MIS-1 through the common portal.

(2) The claim of input tax credit in respect of any tax period which had been communicated
as mismatched but is found to be matched after rectification by the supplier or recipient
shall be finally accepted and made available electronically to the person making such
claim in FORM GST MIS-1 through the common portal.

Rule 71 of CGST Rules - Communication and rectification of discrepancy in claim of

input tax credit and reversal of claim of input tax credit
 Page 220 of 371

(1) Any discrepancy in the claim of input tax credit in respect of any tax period, specified in
sub-section (3) of section 42 and the details of output tax liable to be added under sub-
section (5) of the said section on account of continuation of such discrepancy, shall be
made available to the recipient making such claim electronically in FORM GST MIS-1
and to the supplier electronically in FORM GST MIS-2 through the common portal on or
before the last date of the month in which the matching has been carried out.

(2) A supplier to whom any discrepancy is made available under sub-rule (1) may make
suitable rectifications in the statement of outward supplies to be furnished for the month
in which the discrepancy is made available.

(3) A recipient to whom any discrepancy is made available under sub-rule (1) may make
suitable rectifications in the statement of inward supplies to be furnished for the month in
which the discrepancy is made available.

(4) Where the discrepancy is not rectified under sub-rule (2) or sub-rule (3), an amount to
the extent of discrepancy shall be added to the output tax liability of the recipient in his
return to be furnished in FORM GSTR-3 for the month succeeding the month in which
the discrepancy is made available.

Explanation - For the purposes of this rule, it is hereby declared that -

(i) Rectification by a supplier means adding or correcting the details of an outward
supply in his valid return so as to match the details of corresponding inward
supply declared by the recipient;
(ii) Rectification by the recipient means deleting or correcting the details of an inward
supply so as to match the details of corresponding outward supply declared by
the supplier.

Rule 72 of CGST Rules - Claim of input tax credit on the same invoice more than once

Duplication of claims of input tax credit in the details of inward supplies shall be communicated
to the registered person in FORM GST MIS-1electronically through the common portal.

Rule 73 of CGST Rules - Matching of claim of reduction in the output tax liability

The following details relating to the claim of reduction in output tax liability shall be matched
under section 43 after the due date for furnishing the return in FORM GSTR-3, namely:-

(a) Goods and Services Tax Identification Number of the supplier;

(b) Goods and Services Tax Identification Number of the recipient;
(c) credit note number;
(d) credit note date; and
(e) tax amount:

Provided that where the time limit for furnishing FORM GSTR-1 under section 37and FORM
GSTR-2 under section 38 has been extended, the date of matching of claim of reduction in the
output tax liability shall be extended accordingly:

Provided further that the Commissioner may, on the recommendations of the Council, by order,
extend the date of matching relating to claim of reduction in output tax liability to such date as
may be specified therein.
 Page 221 of 371

Explanation.- For the purposes of this rule, it is hereby declared that –

(i) the claim of reduction in output tax liability due to issuance of credit notes in
FORM GSTR-1 that were accepted by the corresponding recipient in FORM
GSTR-2 without amendment shall be treated as matched if the said recipient has
furnished a valid return.
(ii) the claim of reduction in the output tax liability shall be considered as matched
where the amount of output tax liability after taking into account the reduction
claimed is equal to or more than the claim of input tax credit after taking into
account the reduction admitted and discharged on such credit note by the
corresponding recipient in his valid return.

Rule 74 of CGST Rules - Final acceptance of reduction in output tax liability and
communication thereof

(1) The final acceptance of claim of reduction in output tax liability in respect of any tax
period, specified in sub-section (2) of section 43, shall be made available electronically
to the person making such claim in FORM GST MIS-1 through the common portal.

(2) The claim of reduction in output tax liability in respect of any tax period which had been
communicated as mis-matched but is found to be matched after rectification by the
supplier or recipient shall be finally accepted and made available electronically to the
person making such claim in FORM GST MIS-1 through the common portal.

Rule 75 of CGST Rules - Communication and rectification of discrepancy in reduction in

output tax liability and reversal of claim of reduction.

(1) Any discrepancy in claim of reduction in output tax liability, specified in sub-section (3) of
section 43, and the details of output tax liability to be added under sub-section (5) of the
said section on account of continuation of such discrepancy, shall be made available to
the registered person making such claim electronically in FORM GST MIS- 1 and the
recipient electronically in FORM GST MIS2 through the common portal on or before the
last date of the month in which the matching has been carried out.

(2) A supplier to whom any discrepancy is made available under sub-rule (1) may make
suitable rectifications in the statement of outward supplies to be furnished for the month
in which the discrepancy is made available.

(3) A recipient to whom any discrepancy is made available under sub-rule (1) may make
suitable rectifications in the statement of inward supplies to be furnished for the month in
which the discrepancy is made available.

(4) Where the discrepancy is not rectified under sub-rule (2) or sub-rule (3), an amount to
the extent of discrepancy shall be added to the output tax liability of the supplier and
debited to the electronic liability register and also shown in his return in FORM GSTR-3
for the month succeeding the month in which the discrepancy is made available.

Explanation.- For the purposes of this rule, it is hereby declared that –

(i) rectification by a supplier means deleting or correcting the details of an
outward supply in his valid return so as to match the details of
corresponding inward supply declared by the recipient;
(ii) rectification by the recipient means adding or correcting the details of an
inward supply so as to match the details of corresponding outward supply
declared by the supplier.
 Page 222 of 371

Rule 76 of CGST Rules - Claim of reduction in output tax liability more than once.

The duplication of claims for reduction in output tax liability in the details of outward supplies
shall be communicated to the registered person in FORM GST MIS-1 electronically through the
common portal.

Rule 77 of CGST Rules - Refund of interest paid on reclaim of reversals.

The interest to be refunded under sub-section (9) of section 42 or sub-section (9) of section 43
shall be claimed by the registered person in his return in FORM GSTR-3 and shall be credited
to his electronic cash ledger in FORM GST PMT-05 and the amount credited shall be available
for payment of any future liability towards interest or the taxable person may claim refund of the
amount under section 54.

Rule 41 of CGST Rules - Transfer of credit on sale, merger, amalgamation, lease or

transfer of a business.

(1) A registered person shall, in the event of sale, merger, de-merger, amalgamation, lease
or transfer or change in the ownership of business for any reason, furnish the details of
sale, merger, de-merger, amalgamation, lease or transfer of business, in FORM GST
ITC-02, electronically on the common portal along with a request for transfer of
unutilized input tax credit lying in his electronic credit ledger to the transferee:

Provided that in the case of demerger, the input tax credit shall be apportioned in the
ratio of the value of assets of the new units as specified in the demerger scheme.

Explanation - For the purpose of this sub-rule, it is hereby clarified that the “value of
assets” means the value of the entire assets of the business, whether or not input tax
credit has been availed thereon

(2) The transferor shall also submit a copy of a certificate issued by a practicing chartered
accountant or cost accountant certifying that the sale, merger, de-merger,
amalgamation, lease or transfer of business has been done with a specific provision for
the transfer of liabilities.

(3) The transferee shall, on the common portal, accept the details so furnished by the
transferor and, upon such acceptance, the un-utilized credit specified in FORM GST
ITC02 shall be credited to his electronic credit ledger.

(4) The inputs and capital goods so transferred shall be duly accounted for by the
transferee in his books of account.

Rule 41A of CGST Rules - Transfer of credit on obtaining separate registration for
multiple places of business within a State or Union territory

(1) A registered person who has obtained separate registration for multiple places of
business in accordance with the provisions of rule 11 and who intends to transfer, either
wholly or partly, the unutilised input tax credit lying in his electronic credit ledger to any
or all of the newly registered place of business, shall furnish within a period of thirty days
from obtaining such separate registrations, the details in FORM GST ITC-02A
electronically on the common portal, either directly or through a Facilitation Centre
notified in this behalf by the Commissioner:
 Page 223 of 371

Provided that the input tax credit shall be transferred to the newly registered entities in
the ratio of the value of assets held by them at the time of registration.

Explanation.- For the purposes of this sub-rule, it is hereby clarified that the ‘value of
assets’ means the value of the entire assets of the business whether or not input tax
credit has been availed thereon.

(2) The newly registered person (transferee) shall, on the common portal, accept the details
so furnished by the registered person (transferor) and, upon such acceptance, the
unutilised input tax credit specified in FORM GST ITC-02A shall be credited to his
electronic credit ledger

FAQ on Input Tax Credit

Q1. What is input tax?

Ans. Input tax means the central tax (CGST), State tax (SGST), integrated tax (IGST) or Union
territory tax (UTGST) charged on supply of goods or services or both made to a registered
person. It also includes tax paid on reverse charge basis and integrated tax goods and
services tax charged on import of goods. It does not include tax paid under composition levy.

Q2. Can GST paid on reverse charge basis be considered as input tax?
Ans. Yes. The definition of input tax includes the tax payable under the reverse charge.

Q3. Does input tax includes tax (CGST/IGST/SGST) paid on input goods, input services
and capital goods?
Ans. Yes, it includes taxes paid on input goods, input services and capital goods. Credit of tax
paid on capital goods is permitted to be availed in one instalment.

Q4. Is credit of all input tax charged on supply of goods or services allowed under GST?
Ans. A registered person is entitled to take credit of input tax charged on supply of goods or
services or both to him which are used or intended to be used in the course or furtherance of
business, subject to other conditions and restrictions.

Q5. What are the conditions necessary for obtaining ITC?

Ans. Following four conditions are to be satisfied by the registered taxable person for obtaining
ITC:
(a) he is in possession of tax invoice or debit note or such other tax paying documents
as may be prescribed;
(b) he has received the goods or services or both;
(c) the supplier has actually paid the tax charged in respect of the supply to the
government; and
(d) he has furnished the return under section 39.

Q6. Where the goods against an invoice are received in lots or instalments, how will a
registered person be entitled to ITC?
Ans. The registered person shall be entitled to the credit only upon receipt of the last lot or
installment.

Q7. Can a person take input tax credit without payment of consideration for the supply
along with tax to the supplier?
Ans. Yes, the recipient can take ITC. But he is required to pay the consideration along with tax
within 180 days from the date of issue of invoice. This condition is not applicable where tax
is payable on reverse charge basis.
 Page 224 of 371

Q8. What would happen of the ITC taken by the registered person if he has not paid the
consideration along with tax within 180 days from the date of issue of invoice?
Ans. The amount of ITC would be added to output tax liability of the person. He would also be
required to pay interest.However, he can take ITC again on payment of consideration and
tax.

Q9. Who will get the ITC where goods have been delivered to a person other than taxable
person (‘bill to’- ‘ship to ’scenarios)?
Ans. It would be deemed that the registered person has received the goods when the goods have
been delivered to a third party on the direction of such taxable person. So ITC will be
available to the person on whose order the goods are delivered to third person.

Q10. What is the time limit for taking ITC and reasons therefor?
Ans. A registered person cannot take ITC in respect of any invoice or debit note for supply of
goods or services after the due date for furnishing the return under section 39 for the month
of September following the end of financial year to which such invoice/invoice relating to
debit note pertains or furnishing of the relevant annual return, whichever is earlier. So, the
upper time limit for taking ITC is 20th October of the next FY or the date of filing of annual
return whichever is earlier.

The underlying reasoning for this restriction is that no change in return is permitted after
September of next FY. If annual return is filed before the month of September, then no
change can be made after filing of annual return.

Q11. Where the registered taxable person has claimed depreciation on the tax component
of the cost of capital goods under the provisions of the Income Tax Act,1961, will ITC
be allowed in such cases?
Ans. The input tax credit shall not be allowed on the said tax component in respect of which
depreciation has been claimed.

Q12. Is credit of tax paid on every input used for supply of taxable goods or services or
both is allowed under GST?
Ans. Yes, except a small list of items provided in the law, the credit is admissible on all items. The
list covers mainly items of personal consumption, inputs use of which results into formation
of an immovable property (except plant and machinery), telecommunication towers,
pipelines laid outside the factory premises, etc. and taxes paid as a result of detection of
evasion of taxes.

Q13. A taxable person is in the business of information technology. He buys a motor

vehicle for use of his Executive Directors. Can he avail the ITC in respect of GST paid
on purchase of such motor vehicle?
Ans. No. ITC on motor vehicles can be availed only if the taxable person is in the business of
transport of passengers or goods or is providing the services of imparting training on motor
vehicles.

Q14. Sometimes goods are destroyed or lost due to various reasons? Can a person take
ITC to the extent of such goods?
Ans. No, a person cannot take ITC with respect to goods lost, stolen, destroyed or written off. In
addition, ITC with respect of goods given as gifts or free samples are also not allowed.

Q15. Can a registered person get ITC with respect of goods or services used for
construction of a building for business purposes?
Ans. No. ITC on goods or services by a person for construction of immovable property, other than
plant and machinery, is not allowed. Plant and machinery cover only apparatus, equipment,
 Page 225 of 371

and machinery fixed to earth by foundation or structural support, and excludes land and
building, among other things.

Q16. What is the ITC entitlement of a newly registered person?

Ans. A person applying for registration can take input tax credit of inputs held in stock and inputs
contained in semi-finished or finished goods held in stock on the day immediately preceding
the date of grant of registration. If the person was liable to take registration and he has
applied for registration within thirty days from the date on which he became liable to
registration, then input tax credit of inputs held in stock and inputs contained in semi-finished
or finished goods held in stock on the day immediately preceding the date on which he
became liable to pay tax can be taken.

Q17. A person becomes liable to pay tax on 1st August, 2017and has obtained registration
on 15th August, 2017. Such person is eligible for input tax credit on inputs held in
stock as on:
(a) 1st August, 2017
(b) 31st July, 2017
(c) 15th August, 2017
(d) He cannot take credit for the past period
Ans. 31st July, 2017.

Q18. What is the eligibility of input tax credit on inputs in stock for a person who obtains
voluntary registration?
Ans. 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.
Q19. What would be input tax eligibility in cases where there is a change in the constitution
of a registered person?
Ans. The registered person shall be allowed to transfer the input tax credit that remains unutilized
in its electronic credit ledger to the new entity, provided that there is a specific provision for
transfer of liabilities.

Q20. Where goods or services or both received by a taxable person are used for effecting
both taxable and non-taxable supplies, whether the input tax credit is available to the
registered taxable person?
Ans. The input tax credit of goods or services or both attributable only to taxable supplies can be
taken by registered person. The manner of calculation of eligible credit would be provided by
rules.

Q21. If input tax credit is allowed only in respect of goods or services or both for effecting
taxable supplies, would it not lead to loss of input tax credit on exempt supplies when
exported?
Ans. Zero-rated supplies have been covered within taxable supplies for the purpose of allowing
input tax credit. The scope of zero-rated supply is provided in the Integrated Goods and
Services Tax Act which includes even exempt supplies.

Q22. 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.

 Page 226 of 371

Q23. Where goods or services received by a registered person are used partly for the
purpose of business and partly for other purposes, whether the input tax credit is
available to the person?
Ans. The input tax credit of goods or services or both attributable only to the purpose of business
can be taken by registered person. The manner of calculation of eligible credit would be
provided by rules.

Q24. A person paying tax under compounding scheme crosses the compounding threshold
and becomes a regular taxable person. Can he avail ITC and if so from what date?
Ans. He can avail ITC in respect of inputs held in stock and inputs contained in semi-finished or
finished goods held in stock and on capital goods (reduced by prescribed percentage points)
on the day immediately preceding the date from which he ceases to be eligible for
composition scheme. The manner of calculation of eligible credit would be provided by rules.

Q25. Are there any special provisions in respect of banking companies?

Ans. A banking company or a financial institution including a non-banking financial company
engaged in supply of specified services would either avail proportionate credit or avail 50%
of the eligible input tax credit.

Q26. Mr. A, a registered person was paying tax under composition scheme up to 30th July,
2017. However, w.e.f 31st July, 2017, Mr. A becomes liable to pay tax under regular
scheme. Is he eligible for ITC?
Ans. Mr. A is eligible for input tax credit on inputs held in stock and inputs contained in semi-
finished or finished goods held in stock and capital goods (reduced by such percentage
points as may be prescribed) as on 30th July, 2017.

Q27. Mr. B applies for voluntary registration on 5th June, 2017 and obtained registration on
22nd June, 2017. Mr. B is eligible for input tax credit on inputs in stock as on…………..
Ans. Mr. B is eligible for input tax credit on inputs held in stock and inputs contained in semi-
finished or finished goods held in stock as on 21st June, 2017. Mr. B cannot take input tax
credit in respect of capital goods.

Q28. What would happen to the input tax credit availed by a registered person who opts for
composition scheme or where the goods or services or both supplied by him become
wholly exempt?
Ans. The registered person has to pay an amount equal to the input tax credit in respect of stocks
held on the day immediately preceding the date of exercise of option or date of exemption. In
respect of capital goods, the payable amount would be calculated by reducing by a
prescribed percentage point. The payment can be made by debiting electronic credit ledger,
if there is sufficient balance in the credit ledger, or by debiting electronic cash ledger. If any
balance remains in the credit ledger, it would lapse.

Q29. Is there any restriction on period for availment of ITC?

Ans. In cases of new registration, change from composition to normal scheme, from exempt to
taxable supplies, the concerned person cannot avail ITC after the expiry of one year from the
date of issue of tax invoice relating to such supply.

Q30. What happens where the details of inward supplies furnished by the recipient do not
match with the outward supply details furnished by the supplier in his valid return?
Ans. In case of mismatch, the communication would be made to the both parties. If the mismatch
is not rectified, then the amount will be added to the output liability of recipient in the return
for the month succeeding the month in which discrepancy is communicated.

Q31. Is input tax credit allowed only after matching?

 Page 227 of 371

Ans. No, input tax credit is allowed provisionally for two months. The supply details are matched
by the system and discrepancies are communicated to concerned supplier and recipient. In
case mismatch continues, the ITC taken would be reversed automatically.

Q32. Can provisionally allowed ITC be used for payment of all liabilities?
Ans. No, provisionally allowed ITC can be used only for the payment of self-assessed output tax
in the return.

Q33. What will be the tax impact when capital goods on which ITC has been taken are
supplied by taxable person?
Ans. In case of supply of capital goods or plant and machinery on which input tax credit has been
taken, the registered person shall pay an amount equal to the input tax credit taken on the
said capital goods or plant and machinery 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.

Q34. What is the tax implication of supply of capital goods by a registered person who had
taken ITC on such capital goods?
Ans. The registered person would pay an amount equal to ITC reduced by prescribed percentage
point or tax on the transaction value, whichever is higher. But in case of refractory bricks,
moulds and dies, jigs and fixtures when these are supplied as scrap, the person can pay tax
on the transaction value.

Twitter FAQ on Input Tax Credit

Is SGST of Rajasthan charged by supplier on
purchase from Rajasthan can be utilize for payment
of SGST in Madhya Pradesh?
How one can use SGST credit for the payment of
IGST on another State?
Can one State CGST be used to pay another State
CGST?
In case of service supplied, should the credit be
given to the State where it is billed or the state it is
rendered?
Company is engaged in manufacturing of cement &
power. Which rule to be referred for reversal of credit
related to power business?
How will the credit/debit note from unregistered
supplier be reported to GSTN and ITC claimed in the
same?
SGST of one State cannot be utilized for
discharging of output tax liability of another State.
SGST Credit can be used for payment of IGST
liability under the same GSTIN only.
The CGST and SGST Credit for a State can be
utilized for payment of their respective
CGST/SGST liabilities within that State for the
same GSTIN only.
Tax will be collected in the State from which the
supply is made. The supplier will collect IGST and
the recipient will take IGST credit.
Detailed rules for reversal of ITC when the supplier
is providing exempted and non-exempted supplies
have been provided in ITC Rules.
Like invoice, credit/debit notes on behalf of
unregistered person will be given by registered
person only. Further, GSTR-2 provides for
reporting of same by the recipient.

How can a trader avail ITC while selling The fact that a registered person is supplying
goods/services to unregistered/exempted GST goods to an unregistered or exempted person has
traders? no consequence on availment of ITC by the
supplier.

Please clarify the procedure of availing ITC on ITC of cess can be used only for payment of cess.

Additional Compensation Cess on some products
like Tobacco, Coke, Cigarettes.
Please clarify ITC Credit status for the following
condition : If Recipient (Goods & Services) is
registered under GST & Re-seller/Supplier is under
exemption or composition schemes
Please clarify ITC Credit status for the following
condition : On GST Deducted Commission for
Distributor registered under GST Taxpayer
Please clarify ITC Credit status for the following
condition : If Commission received Without
Deducting GST in cases where distributor under
Exemption or composition Scheme
How should importers take credit of clean energy
cess paid on goods lying as stock 30-6-2017?
Since our products are under 0% and we are using
various services like telephone, professional
charges for which we will be paying GST to our
registered service providers and this amount will not
be utilized towards any payment of outward goods.
Are we eligible for refund on the services obtained
and GSTN paid for the same? If yes what is the
procedure? If no what is the accounting effect?
Whether ITC Transition provisions on goods
purchased within the State on which tax on MRP
has been paid, covered under 140(3) or 140(1)? If
covered under 140(1) then how a credit claim be
made, as presently in VAT return only the amount is
reflected and it is non-adjustable?
Please clarify on availment of input tax credit of GST
paid on trucks, commonly used for G.T.A. business,
Safex, Multi-modal and packing business?
Page 228 of 371
In case of unregistered dealer, recipient will pay
tax on reverse charge basis. He can get the ITC
provided he fulfills other conditions as mentioned
in Section 16 of the CGST Act, 2017. In case of
purchase from composition taxable person, the
composition person cannot charge any tax and
hence the question of availing ITC does not arise.
Any deductions under TDS/TCS provisions from
amount paid or credited to the supplier shall be
credited to the electronic cash ledger which can be
used for payment of tax.
The section concerning GST deduction (Section
51 of CGST Act, 2017) has not been
operationalized till now. But if the distributor is
under threshold exemption or under composition
scheme, the requirement for GST deduction
depends upon the taxable supply and value of
contract rather than the nature of the supplier.
No credit for clean energy cess can be taken.
You are not eligible for refund of unutilized Input
Tax Credit as there is no tax on output supply. Tax
paid on such services may be accounted along
with the services availed i.e. booked as expenses.
Section 140(1) of CGST Act is applicable for a
person who was registered under the existing laws
(e.g. under Central Excise, Service Tax, Value
Added Tax). And therefore, credit of taxes paid on
inputs was getting recorded in the returns filed.
Section 140(3) of CGST Act is applicable for
persons who were not liable for registration under
existing laws or who were selling/providing non-
taxable, exempt goods/services but their supplies
are liable to tax under GST. Please also refer to
Section 140 of the SGST Act of your respective
state and the associated rules.
No ITC is permitted to GTA engaged in providing
GTA services which are under RCM and are
treated as exempted supplies in the hand of GTA.
However, if GTA is also liable to pay tax under
forward charge as supplier, he is not permitted to
avail ITC if he is claiming the concessional rate of
5%. If ITC is claimed, the GST rate for GTA in
 Page 229 of 371

forward charge will be 18%.

What will be the Input Credit of newly launched ITC is permitted to pay output tax of
project of building construction after 1-7-2017? construction/work contract services. Please see
Section 17(5)(c) and (d) of CGST Act, 2017.

What are the provisions under CGST Act as to the ITC is available in terms of Section 140(5) of
eligibility of CENVAT credit of service tax on invoices CGST Act, 2017.
which are received after the appointed date for the
services received under the service tax regime?

How a service Provider can get input GST credit
benefit in pure labour Contract under Input Credit?
He needs to use input for furtherance of business
and should fulfill the conditions mentioned in
Section 16 of CGST Act, 2017. The input should
not fall within the negative list provided in Section
17(5) of the CGST Act, 2017.

GSTR-1 (Point 9) - As banks are eligible to claim Return Rules have already been notified. It is not
only 50% of Input credit consider excluding banks possible to make exception for one sector.
from reporting of exempt/non-GST supplies in
GSTR-1?

Clarification is sought for the following : Penal Penal interest is a consideration for tolerating an
Interest on loans and advances act and it is a supply of service and will be taxable.

In case of takeover of a Partnership firm by a Private If the business is transferred as a going concern,
Limited Company, then who will get the ITC credit? and liabilities are also transferred then ITC can be
And who should file the GST TRAN-1? transferred to the company. The company can file
GST TRAN-1.

OUR COMMENTS ON INPUT TAX CREDIT UNDER GST

 Every GST registered person, with some exceptions, title to credit of input tax(ITC)
charged by his supplier on any supply of goods or services or both which are used or
intended to be used in the course or of furtherance of business of such registered
person.
 Exception with regard to person, are that a registered person working under composition
scheme cannot take input tax credit (ITC) even when he has received goods or services
which are used in furtherance of his business.
 Self assessed credit has to be taken in electronic credit register provisionally after
declaring the same in GSTR-3B return.
 Credit cannot be taken after the expiry of one year from the date of issue of tax invoice
relating to such supply.[Refer to Section 18(2) of CGST Act]

Exclusion of specific goods and services on which ITC is not admissible.

 Motor vehicle and other conveyances except when they are used for transportation of
goods or further supply of taxable supplies of transportation of passengers, imparting
training on driving etc. transporting vehicle or conveyances.
 Food and beverages except where same category of goods or services is used for
making outward supply or an element of mixed or composite supply.
 Outdoor catering service except where same category of goods or services is used for
making outward supply for an element of mixed or composite supply
 beauty treatment service except the same category of goods or services is used for
making outward supply foreign element of mixed or composite supply
 Page 230 of 371

 Health services except where same category of goods or services is used for making
outward supply or element of mixed or composite supply
 Cosmetic and plastic surgery except where same category e of goods or services is
used for making outward supply or element of mixed or composite supply.
 Membership of club, health and fitness centre
 Rent a cab service except when notified as obligatory to provide such service by
employer to employee or of same category of goods or service is used for making
outward supply or an element of mixed or composite supply.
 Life Insurance services except when notified as obligatory to provide search service by
employer to employee or when same category of goods or services is used for making
outward supply or an element of mixed or composite supply.
 Health Insurance service except when notified as obligatory to provide such service by
employer to employee or when same category of goods or services is used for making
outward supply or element of mixed of composite supply.
 LTC or HTC, i.e.travel benefits extended to employees on vacation such as leave or
home travel concession.
 Work contract services when supplied for construction(including reconstruction,
renovation addition or alteration or repairs) of an immovable property(other than plant
and machinery) except where it is an input service for further supply of works contract
service.
 Goods or service or both received by a taxable person for construction including
reconstruction, renovation, addition alteration or repairs) of an immovable property(other
than plant or machinery) even if used for furtherance of business.
 Goods or services on which supplier has paid Tax under composition scheme.
 Goods or services or both used for personal consumption.
 Goods lost, stolen, destroyed, return of order post of by way of gift or free samples.
 Plant and machinery includes foundation and structural support but does not include,(i)
land, building or any other civil structure;(ii) telecommunication Towers;(iii) pipelines laid
outside the factory premises. In other words credit is also not admissible for these.

General restrictions

 If tax has been paid in pursuance of any order where any demand on account of non
levy, short levy for excess refund for excess ITC utilization has been raised on account
of any fraud, or suppression facts, receipt cannot avail credit.
 Whether the goods or services or both are used by the registered person partly for the
purpose of any business and partly for another purpose, the amount of credit shall be
restricted to so much of the input tax as is attributable to the purpose of his business.
 Where the goods or services or both are used by the registered person partly for
effecting taxable supplies and partly for effecting exempted supplies, the amount of
credit shall be restricted to so much of the input tax as it is attributable to the taxable
supplies including zero rated supplies. The value of exempted supply shall be calculated
in terms of formula prescribed in rules and shall include supplies on which the recipient
is liable to pay tax on reverse charge basis, transactions in securities, sale of land and
sale of building.
 Payment for supplies received has to be made within a maximum of 180 days, otherwise
ITC already claimed will be added with interest to output tax liability.
 If depreciation on capital goods has been claimed then ITC to that extent is not
admissible.
 ITC would also not be permissible if invoice or debit note is received after due date of
filing return for September of next financial year or filing annual return whichever is later.

Basic condition for taking credit

 Page 231 of 371

 Possession of taxpaying documents such as tax invoice, debit note etc.

 Goods/services should have actually been received/deemed to be received by the
taxable person.
 Tax charged on the invoice should have been paid to the credit of Government.
 Return should have been furnished by the taxpayer
 Credit for good against an invoice received in lots/installments can be availed only on
receipt of last lot in installment.

Documents for availing credit

 An invoice issued by the supplier of goods or services or both

 A debit note issued by a supplier
 A bill of entry
 An invoice issued under reverse charge
 A document issued by an input service distributor(ISD)

If Aforesaid documents do not contain all specified particulars but contains the details of the
amount of tax charged, description of goods or services, total value of supply of goods or
services for both GSTIN of supplier and recipient and place of supply in case of inter-state
supply, input tax credit may be availed.

Reversal of credit is required to be done in following cases

 When registered person opts out from normal scheme to composition scheme, credit on
stocks on the relevant date has to be reversed.
 When registered person gets his registration cancelled due to closure of business or
goods and services dealt with become exempt or Nil rated, credit on stocks on the
relevant date has to be reversed.
 When consideration for supplies is not made within 180 days of issuance of invoice
 When there is mismatch of Return of supplier and recipient
 When credit has been availed twice.
 When credit has been availed on common inputs, reversal has to be to the extent of
credit attributable to exempted supplies or supplies for non business purpose.
 When capital goods or plant and machinery are supplied after use, credit taken reduced
by 5 percentage points per quarter of a year or part thereof from the date of invoice etc.
has to be reversed. However this amount should not be less than tax on transaction
value. However in case of refractory bricks, moulds and dies, jigs And Fixtures the
taxable person may pay tax on the transaction value.

Common credit of inputs/ input services for taxable/ business is purpose and exempted or Nil
rated non business purpose

 Credit in such a case would be restricted to the extent of used in taxable for taxable or
business purpose
 The ratio of amount to be reversed in based on a great value of exempted/ non business
purpose supplies and total turnover in the state during the tax period. In case these
figures for the relevant tax period are not available, figures for last text period can also
be taken.
 Common credit is arrived at by deducting amount of credit of input tax used exclusively
in exempted/non business purpose supplies and taxable supplies from the total credit.
 Where supplies consists of both taxable and exempted/non taxable supplies, formula for
arriving at the amount attributable to exempted supplies is –
 Page 232 of 371

[aggregate value of exempted supply/total turnover in the state] X common credit.

This amount would be reversed from the credit availed.
 Final calculation will be made for the whole financial year before the due date of filing the
return for September of the next financial year. Difference if any, would be payable with
interest of 18% from first day of April till date of payment. If amount provisionally paid is
in excess, difference shall be claimed as credit within the month of September of next
year.
 Similar exercise would be undertaken for purpose of determining credit in respect of
capital goods. However, in this case the amount pertaining to exempted credit of
common credit would be added to output tax liability during tax period.

Matching of ITC

 the final credit is allowed only when details of supplies made by supplier match with the
recipient's return of availing credit.
 The matching has to be done in respect of GSTIN of supplier and GSTIN of recipient
w.r.t. each supplier and recipient, invoice number, debit note number, credit note
number; taxable value and Tax amount involved.
 In case the details match or the return filed by supplier is accepted by recipient, the
matter ends there. In such case an intimation of acceptance of credit would be sent to
recipient in form GST MIS-1
 If details don't match and the discrepancy is noticed, same would be communicated to
both the supplier and recipient in case fault in that of supplier, or only to the recipient in
case fault is that of recipient
 The discrepancies could be availing credit in excess of the tax declared by the supplier,
or the outward supply is not declared by the supplier, or there is a duplication of claim of
ITC by the recipient.
 In case of difference of figures of amount of supplier and recipient or non declaration of
outward supply by supplier, the supplier would be asked to rectify the discrepancy in the
return of month in which discrepancy is informed to him. In case of failure, such ITC
would be added to the output tax liability of recipient next month.
 Where ITC has been claimed in duplicate by recipient, same would be informed only to
him and rectified in the month of communication. In case of failure, same would be
added in the liability register of recipient
 Recipient is liable to pay an interest @ 18% on the amount added to the output tax
liability from the date of availing the ITC till the discrepancy is reflected in return
 In case the supplier rectifiers the discrepancies after reversal of credit by recipient ITC
can be reclaimed by recipient. In such a case interest paid if any would be refundable by
crediting the amount of recipients electronic cash ledger
 a Revised procedure for matching has been contemplated in newly inserted Section 43A
of CGST Act from the date to be notified.

Amalgamation/Transfer of business
 Details of sale, merger, de-merger, amalgamation, lease or transfer or change in
ownership of business for any reason should be furnished with a request to transfer the
unutilized input tax credit lying in his electronic credit ledger to the transferee.
 In case of de-merger, in input tax credit shall be appropriated in the ratio of the value of
the assets of the new units as per de-merged scheme. Value of the assets for this
purpose would mean value of entire assets of business whether or not ITC has been
availed on them.
 The transferor shall also submit a copy of a certificate issued by a practicing Chartered
Accountant and or Cost Accountant certifying that the sale, merger, de-merger,
 Page 233 of 371

amalgamation, lease or transfer of business has been done with a specific provision for
transfer of liabilities.
 The transferee shall, accept the details so furnished by the transferor and upon such
acceptance the unutilized credit specified in FORM GST ITC-02 shall be credited to his
electronic credit ledger.
 The inputs and capital goods so transferred shall be duly accounted for by the transferee
in his books of account.

Transfer of credit on obtaining separate registration for multiple place of business within a
State

 A registered person who has obtained separate registration for multiple place of
business in accordance with the provisions of newly substituted Rule 11 can transfer
the unutilized input tax credit lying in his electronic credit ledger to any or all of the
newly registered place of business in terms of Rule 41A of CGST Rules.
 Page 234 of 371

INPUT SERVICE DISTRIBUTOR CONCEPT UNDER GST

Sec.2 of CGST Act - Definitions

(61) “Input Service Distributor” means an office of the supplier of goods or services or both
which receives tax invoices issued under section 31 towards the receipt of input services
and issues a prescribed document for the purposes of distributing the credit of central
tax, State tax, integrated tax or Union territory tax paid on the said services to a supplier
of taxable goods or services or both having the same Permanent Account Number as
that of the said office;

Sec.20 of CGST Act - Manner of distribution of credit by Input Service Distributor

(1) The Input Service Distributor shall distribute the credit of central tax as central tax or
integrated tax and integrated tax as integrated tax or central tax, by way of issue of a
document containing the amount of input tax credit being distributed in such manner as
may be prescribed.

(2) The Input Service Distributor may distribute the credit subject to the following
conditions, namely:––

(a) the credit can be distributed to the recipients of credit against a document containing
such details as may be prescribed;
(b) the amount of the credit distributed shall not exceed the amount of credit available
for distribution;
(c) the credit of tax paid on input services attributable to a recipient of credit shall be
distributed only to that recipient;
(d) the credit of tax paid on input services attributable to more than one recipient of
credit shall be distributed amongst such recipients to whom the input service is
attributable and such distribution shall be pro rata on the basis of the turnover in a
State or turnover in a Union territory of such recipient, during the relevant period, to
the aggregate of the turnover of all such recipients to whom such input service is
attributable and which are operational in the current year, during the said relevant
period;
(e) the credit of tax paid on input services attributable to all recipients of credit shall be
distributed amongst such recipients and such distribution shall be pro rata on the
basis of the turnover in a State or turnover in a Union territory of such recipient,
during the relevant period, to the aggregate of the turnover of all recipients and which
are operational in the current year, during the said relevant period.

Explanation.––For the purposes of this section,––

(a) the “relevant period” shall be––

i) if the recipients of credit have turnover in their States or Union territories

in the financial year preceding the year during which credit is to be
distributed, the said financial year; or
ii) if some or all recipients of the credit do not have any turnover in their
States or Union territories in the financial year preceding the year during
which the credit is to be distributed, the last quarter for which details of
such turnover of all the recipients are available, previous to the month
during which credit is to be distributed;
 Page 235 of 371

(b) the expression “recipient of credit” means the supplier of goods or services or
both having the same Permanent Account Number as that of the Input Service
Distributor;
(c) the term ‘‘turnover’’, in relation to any registered person engaged in the supply of
taxable goods as well as goods not taxable under this Act, means the value of
turnover, reduced by the amount of any duty or tax levied under entry 84 and 92A
of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List
II of the said Schedule.

Rule 39 of CGST Rules - Procedure for distribution of input tax credit by Input Service
Distributor.

(1) An Input Service Distributor shall distribute input tax credit in the manner and subject to
the following conditions, namely,-

(a) the input tax credit available for distribution in a month shall be distributed in the
same month and the details thereof shall be furnished in FORM GSTR6in
accordance with the provisions of Chapter VIII of these rules;
(b) the Input Service Distributor shall, in accordance with the provisions of clause (d),
separately distribute the amount of ineligible input tax credit (ineligible under the
provisions of sub-section (5) of section 17 or otherwise) and the amount of eligible
input tax credit;
(c) the input tax credit on account of central tax, State tax, Union territory tax and
integrated tax shall be distributed separately in accordance with the provisions of
clause (d);
(d) the input tax credit that is required to be distributed in accordance with the
provisions of clause (d) and (e) of sub-section (2) of section 20 to one of the
recipients ‘R1‘, whether registered or not, from amongst the total of all the recipients
to whom input tax credit is attributable, including the recipient(s) who are engaged in
making exempt supply, or are otherwise not registered for any reason, shall be the
amount, ‘C1’, to be calculated by applying the following formula -

C1 = (t1÷T) × C

where,
“C” is the amount of credit to be distributed,
“t1” is the turnover, as referred to in section 20, of person R1 during the relevant
period, and
“T” is the aggregate of the turnover, during the relevant period, of all recipients to
whom the input service is attributable in accordance with the provisions of section
20;

(e) the input tax credit on account of integrated tax shall be distributed as input tax
credit of integrated tax to every recipient;

(f) the input tax credit on account of central tax and State tax or Union territory tax
shall-
(i) in respect of a recipient located in the same State or Union territory in which the
Input Service Distributor is located, be distributed as input tax credit of central
tax and State tax or Union territory tax respectively;
(ii) in respect of a recipient located in a State or Union territory other than that of the
Input Service Distributor, be distributed as integrated tax and the amount to be
 Page 236 of 371

so distributed shall be equal to the aggregate of the amount of input tax credit of
central tax and State tax or Union territory tax that qualifies for distribution to
such recipient in accordance with clause (d);

(g) the Input Service Distributor shall issue an Input Service Distributor invoice, as
prescribed in sub-rule (1) of rule 54, clearly indicating in such invoice that it is issued
only for distribution of input tax credit;

(h) the Input Service Distributor shall issue an Input Service Distributor credit note, as
prescribed in sub-rule (1) of rule 54, for reduction of credit in case the input tax credit
already distributed gets reduced for any reason;

(i) any additional amount of input tax credit on account of issuance of a debit note to an
Input Service Distributor by the supplier shall be distributed in the manner and
subject to the conditions specified in clauses (a) to (f) and the amount attributable to
any recipient shall be calculated in the manner provided in clause (d) and such
credit shall be distributed in the month in which the debit note is included in the
return in FORM GSTR-6;

(j) any input tax credit required to be reduced on account of issuance of a credit note to
the Input Service Distributor by the supplier shall be apportioned to each recipient in
the same ratio in which the input tax credit contained in the original invoice was
distributed in terms of clause (d), and the amount so apportioned shall be-
(i) reduced from the amount to be distributed in the month in which the credit note
is included in the return in FORM GSTR-6; or
(ii) added to the output tax liability of the recipient where the amount so apportioned
is in the negative by virtue of the amount of credit under distribution being less
than the amount to be adjusted.

(2) If the amount of input tax credit distributed by an Input Service Distributor is reduced
later on for any other reason for any of the recipients, including that it was distributed to
a wrong recipient by the Input Service Distributor, the process specified in clause (j) of
subrule (1) shall apply, mutatis mutandis, for reduction of credit.

(3) Subject to sub-rule (2), the Input Service Distributor shall, on the basis of the Input
Service Distributor credit note specified in clause (h) of sub-rule (1), issue an Input
Service Distributor invoice to the recipient entitled to such credit and include the Input
Service Distributor credit note and the Input Service Distributor invoice in the return in
FORM GSTR-6 for the month in which such credit note and invoice was issued.

Sec.21 of CGST Act - Manner of recovery of credit distributed in excess

Where the Input Service Distributor distributes the credit in contravention of the
provisions contained in section 20 resulting in excess distribution of credit to one or more
recipients of credit, the excess credit so distributed shall be recovered from such
recipients along with interest, and the provisions of section 73 or section 74, as the case
may be, shall, mutatis mutandis, apply for determination of amount to be recovered.

Rule 54 of CGST Rules - Tax invoice in special cases

(1) An Input Service Distributor invoice or, as the case may be, an Input Service Distributor
credit note issued by an Input Service Distributor shall contain the following details:-
 Page 237 of 371

(a) name, address and Goods and Services Tax Identification Number of the Input
Service Distributor;
(b) a consecutive serial number not exceeding sixteen characters, in one or multiple
series, containing alphabets or numerals or special characters- hyphen or dash
and slash symbolised as “-“, “/” respectively, and any combination thereof, unique
for a financial year;
(c) date of its issue;
(d) name, address and Goods and Services Tax Identification Number of the
recipient to whom the credit is distributed;
(e) amount of the credit distributed; and
(f) signature or digital signature of the Input Service Distributor or his authorised
representative:

Provided that where the Input Service Distributor is an office of a banking company or a
financial institution, including a non-banking financial company, a tax invoice shall include any
document in lieu thereof, by whatever name called, whether or not serially numbered but
containing the information as mentioned above.

(1A)(a) A registered person, having the same PAN and State code as an Input Service
Distributor, may issue an invoice or, as the case may be, a credit or debit note to transfer
the credit of common input services to the Input Service Distributor, which shall contain
the following details:-

(i) name, address and Goods and Services Tax Identification Number of the
registered person having the same PAN and same State code as the Input
Service Distributor;
(ii) a consecutive serial number not exceeding sixteen characters, in one or multiple
series, containing alphabets or numerals or special characters -hyphen or dash
and slash symbolised as “-“ and “/” respectively, and any combination thereof,
unique for a financial year;
(iii) date of its issue;
(iv) Goods and Services Tax Identification Number of supplier of common service
and original invoice number whose credit is sought to be transferred to the Input
Service Distributor;
(v) name, address and Goods and Services Tax Identification Number of the Input
Service Distributor;
(vi) taxable value, rate and amount of the credit to be transferred; and
(vii) signature or digital signature of the registered person or his authorised
representative.
(b) The taxable value in the invoice issued under clause (a) shall be the same as the value
of the common services.

(2) Where the supplier of taxable service is an insurer or a banking company or a financial
institution, including a non-banking financial company, the said supplier may issue a
consolidated tax invoice or any other document in lieu thereof, by whatever name called
for the supply of services made during a month at the end of the month, whether issued
or made available, physically or electronically whether or not serially numbered, and
whether or not containing the address of the recipient of taxable service but containing
other information as mentioned under rule 46.

Provided that the signature or digital signature of the supplier or his authorised
representative shall not be required in the case of issuance of a consolidated tax invoice
 Page 238 of 371

or any other document in lieu thereof in accordance with the provisions of the
Information Technology Act, 2000 (21 of 2000)

(3) Where the supplier of taxable service is a goods transport agency supplying services in
relation to transportation of goods by road in a goods carriage, the said supplier shall
issue a tax invoice or any other document in lieu thereof, by whatever name called,
containing the gross weight of the consignment, name of the consigner and the
consignee, registration number of goods carriage in which the goods are transported,
details of goods transported, details of place of origin and destination, Goods and
Services Tax Identification Number of the person liable for paying tax whether as
consigner, consignee or goods transport agency, and also containing other information
as mentioned under rule 46.

(4) Where the supplier of taxable service is supplying passenger transportation service, a
tax invoice shall include ticket in any form, by whatever name called, whether or not
serially numbered, and whether or not containing the address of the recipient of service
but containing other information as mentioned under rule 46.

Provided that the signature or digital signature of the supplier or his authorised
representative shall not be required in the case of issuance of ticket in accordance with
the provisions of the Information Technology Act, 2000 (21 of 2000)

(5) The provisions of sub-rule (2) or sub-rule (4) shall apply, mutatis mutandis, to the
documents issued under rule 49 or rule 50 or rule 51 or rule 52 or rule 53.

Rule 65 of CGST Rules – Form and manner of submission of return by an Input Service
Distributor.

Every Input Service Distributor shall, on the basis of details contained in FORM GSTR-6A, and
where required, after adding, correcting or deleting the details, furnish electronically the return
in FORM GSTR-6, containing the details of tax invoices on which credit has been received and
those issued under section 20, through the common portal either directly or from a Facilitation
Centre notified by the Commissioner

FAQ on INPUT SERVICE DISTRIBUTION

Q1. What is Input Service Distributor (ISD)?

Ans. ISD means an office of the supplier of goods or services or both which receives tax invoices
towards receipt of input services and issues a prescribed document for the purposes of
distributing the credit of central tax (CGST), State tax (SGST)/ Union territory tax (UTGST) or
integrated tax (IGST) paid on the said services to a supplier of taxable goods or services or
both having same PAN as that of the ISD.

Q2. What are the requirements for registration as ISD?

Ans. An ISD is required to obtain a separate registration even though it may be separately
registered. The threshold limit of registration is not applicable to ISD. The registration of ISD
under the existing regime (i.e. under Service Tax) would not be migrated in GST regime. All
the existing ISDs will be required to obtain fresh registration under new regime in case they
want to operate as an ISD.

Q3. What are the documents for distribution of credit by ISD?

Ans. The distribution of credit would be done through a document especially designed for this
purpose. The said document would contain the amount of input tax credit being distributed.
 Page 239 of 371

Q4. Can an ISD distribute the input tax credit to all suppliers?
Ans. No. The input tax credit of input services shall be distributed only amongst those registered
persons who have used the input services in the course or furtherance of business.

Q5. It is not possible many a times to establish a one-to-one link between quantum of
input services used in the course or furtherance of business by a supplier. In such
situations, how distribution of ITC by the ISD is to be done?
Ans. In such situations, distribution would be based on a formula. Firstly, distribution would be
done only amongst those recipients of input tax credit to whom the input service being
distributed are attributable. Secondly, distribution would be done amongst the operational
units only. Thirdly, distribution would be done in the ratio of turnover in a State or Union
territory of the recipient during the period to the aggregate of all recipients to whom input
service being distributed is attributable. Lastly, the credit distributed should not exceed the
credit available for distribution.

Q6. What does the turnover used for ISD cover?

Ans. The turnover for the purpose of ISD does not include any duty or tax levied under entry 84 of
List I and entry 51 and 54 of List II of the Seventh Schedule to the Constitution.

Q7. Is the ISD required to file return?

Ans. Yes, ISD is required to file monthly return by 13th of the following month.

Q8. Can a company have multiple ISD?

Ans. Yes, different offices like marketing division, security division etc. may apply for separate
ISD.

Q9. What are the provisions for recovery of excess/wrongly distributed credit by ISD?
Ans. The excess/wrongly distributed credit can be recovered from the recipients of credit along
with interest by initiating action under section 73 or 74.

Q10. Whether CGST and IGST credit can be distributed by ISD as IGST credit to recipients
located in different States?
Ans. Yes, CGST credit can be distributed as IGST and IGST credit can be distributed as CGST by
an ISD for the recipients located in different States.

Q11. Whether SGST / UTGST credit can be distributed as IGST credit by an ISD to
recipients located in different States?
Ans. Yes, an ISD can distribute SGST /UTGST credit as IGST for the recipients located in different
States.

Q12. Whether the ISD can distribute the CGST and IGST Credit as CGST credit?
Ans. Yes, CGST and IGST credit can be distributed as CGST credit by an ISD for the recipients
located in same State.

Q13. Whether the SGST/ UTGST and IGST Credit can be distributed as SGST/UTGST credit?
Ans. Yes, ISD can distribute SGST and IGST credit as SGST / UTGST credit for the recipients
located in same State.

Q14. How to distribute common credit among all the recipients of an ISD?
Ans. The common credit used by all the recipients can be distributed by ISD on pro rata basis i.e.
based on the turnover of each recipient to the aggregate turnover of all the recipients to
which credit is distributed.

Q15. The ISD may distribute the CGST and IGST credit to recipient outside the State
as_______ (a) IGST (b) CGST (c) SGST
 Page 240 of 371

Ans. (a) IGST.

Q16. 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.

Q17. 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.
Ans. (a) Distributed among the suppliers who used such input service on pro rata basis of
turnover in such State.

Q18. Whether the excess credit distributed could be recovered from ISD by the
department?
Ans. No. Excess credit distributed can be recovered along with interest only from the recipient and
not ISD. The provisions of section 73 or 74 would be applicable for the recovery of credit.

Q19. What are the consequences of credit distributed in contravention of the provisions of
the Act?
Ans. The credit distributed in contravention of provisions of Act could be recovered from the
recipient to which it is distributed along with interest.
-----X-----

Input Service Distributor in GST

C.B.E. & C. Flyer No. 10, dated 1-1-2018
Introduction
Input Service Distributor (ISD) means an office of the supplier of goods or services or both
which receives tax invoices towards receipt of input services and issues a prescribed
document for the purposes of distributing the Credit of Central Tax (CGST), State Tax
(SGST)/Union Territory Tax (UTGST) or Integrated Tax (IGST) paid on the said services to a
supplier of taxable goods or services or both having same PAN as that of the ISD.

It is important to note that the ISD mechanism is meant only for distributing the credit on
common invoices pertaining to input services only and not goods (inputs or capital goods).
Companies may have their head office at one place and units at other places which may be
registered separately. The Head Office would be procuring certain services which would be
for common utilization of all units across the country. The bills for such expenses would be
raised on the Head Office. But the Head Office itself would not be providing any output
supply so as to utilize the credit which gets accumulated on account of such input services.

Since the common expenditure is meant for the business of all units, it is but natural that the
credit of input services in respect of such common invoices should be apportioned between
all the consuming units. ISD mechanism enables such proportionate distribution of credit of
input services amongst all the consuming units.

The concept of ISD under GST is a legacy carried over from the Service Tax Regime. An ISD
will have to compulsorily take a separate registration as such ISD and apply for the same in
form GST REG-1. There is no threshold limit for registration for an ISD. The other locations
may be registered separately. Since the services relate to other locations the corresponding
credit should be transferred to such locations (having separate registrations) as the output
services are being provided there.
 Page 241 of 371

For the purposes of distributing the input tax credit, an ISD has to issue an ISD invoice, as
prescribed in rule 54(1) of the CGST Rules, 2017, clearly indicating in such invoice that it is
issued only for distribution of input tax credit. The input tax credit available for distribution in
a month shall be distributed in the same month and details furnished in FORM GSTR-6.
Further, an ISD shall separately distribute both the amount of ineligible and eligible input tax
credit. The input tax credit on account of central tax and State tax or UT tax in respect of
recipient located in the same state shall be distributed as central tax and State tax or UT tax
respectively. The input tax credit on account of central tax and State tax or UT tax shall, in
respect of a recipient located in a State or Union territory other than that of the ISD, be
distributed as integrated tax and the amount to be so distributed shall be equal to the
aggregate of the amount of input tax credit of central tax and State tax or Union territory tax
that qualifies for distribution to such recipient. The input tax credit on account of integrated
tax shall be distributed as integrated tax.

Let’s take an example to understand this concept. The Corporate office of ABC Ltd., is at
Bangalore, with its business locations of selling and servicing of goods at Bangalore,
Chennai, Mumbai and Kolkata. Software license and maintenance is used at all the
locations, but invoice for these services (indicating CGST and SGST) are received at
Corporate Office. Since the software is used at all the four locations, the input tax credit of
entire services cannot be claimed at Bangalore. The same has to be distributed to all the four
locations. For that reason, the Bangalore Corporate office has to act as ISD to distribute the
credit.

If the corporate office of ABC Ltd, an ISD situated in Bangalore receives invoices indicating
Rs. 4 lakh of Central tax, Rs. 4 lakhs of State tax and Rs. 7 lakh of integrated tax, it can
distribute central tax, State tax as well as integrated tax of Rs. 15 lakh as credit of integrated
tax amongst its locations at Bangalore, Chennai, Mumbai and Kolkata through an ISD
invoice containing the amount of credit distributed.

So in what ratio will the credit be distributed by the ISD?

The credit has to be distributed only to the unit to which the supply is directly attributable to.
If input services are attributable to more than one recipient of credit, the distribution shall be
in the pro rata basis of turnover in the State/Union Territory. For example, if an ISD has 4
units across the country. However, if a particular input service pertains exclusively to only
one unit and the bill is raised in the name of ISD, the ISD can distribute the credit only to that
unit and not to other units. If the input services are common for all units, then it will be
distributed according to the ratio of turnover of all the units. The following illustration will
clarify the issue.

M/s. XYZ Ltd., having its head Office at Mumbai, is registered as ISD. It has three units in
different states namely ‘Mumbai’, ‘Jabalpur’ and ‘Delhi’ which are operational in the current
year. M/s. XYZ Ltd. furnishes the following information for the month of July, 2017 & asks for
permission to distribute the below input tax credit to various units.

i. CGST paid on services used only for Mumbai Unit : Rs. 300000/-
ii. IGST, CGST & SGST paid on services used for all units : Rs. 1200000/-

Total Turnover of the units for the Financial Year 2015-16 are as follows :-
Unit Turnover (Rs.)
Total Turnover of three units = Rs. 10,00,00,000
Turnover of Mumbai unit = Rs. 5,00,00,000 (50%)
Turnover of Jabalpur unit = Rs. 3,00,00,000 (30%)
Turnover of Delhi unit = Rs. 2,00, 00,000 (20%)

Computation of Input Tax Credit Distributed to various units is as follows :

 Page 242 of 371

Credit distributed to all units

Particulars Total credit available Mumbai Jabalpur Delhi
CGST paid on services used only for Mumbai Unit. 300000 300000 0 0
IGST, CGST & SGST paid on services used in all 1200000 600000 360000 240000
units -
Distribution on pro rata basis to all the units which
are operational in the current year
Total 1500000 900000 360000 240000

Note 1 : Credit distributed pro rata basis on the basis of the turnover of all the units is as under : -

(a) Unit Mumbai : (50000000/100000000) *1200000 = Rs. 600000

(b) Unit Jabalpur : (30000000/100000000) *1200000 = Rs. 360000
(c) Unit Delhi : (20000000/100000000) *1200000 = Rs. 240000

An ISD will have to file monthly returns in GSTR-6 within thirteen days after the end of the month
and will have to furnish information of all ISD invoices issued. The details in the returns will be made
available to the respective recipients in their GSTR-2A. The recipients may include these in its
GSTR-2 and take credit. An ISD shall not be required to file Annual return. An ISD cannot accept any
invoices on which tax is to be discharged under reverse charge mechanism. This is because the ISD
mechanism is only to facilitate distribution of credit of taxes paid. The ISD itself cannot discharge any
tax liability (as person liable to pay tax) and remit tax to government account. If ISD wants to take
reverse charge supplies, then in that case ISD has to separately register as Normal taxpayer.
Conclusion

Thus the concept of ISD is a facility made available to business having a large share of common
expenditure and billing/payment is done from a centralized location. The mechanism is meant to
simplify the credit taking process for entities and the facility is meant to strengthen the seamless flow
of credit under GST.
 Page 243 of 371

JOB WORK CONCEPT UNDER GST

Sec.2 of CGST Act - Definitions

(68) “job work” means any treatment or process undertaken by a person on goods
belonging to another registered person and the expression “job worker” shall be
construed accordingly

(88) “principal” means a person on whose behalf an agent carries on the business of supply
or receipt of goods or services or both;

Sec.143 of CGST Act - Job work procedure

(1) A registered person (hereafter in this section referred to as the “principal”)may under
intimation and subject to such conditions as may be prescribed, send any inputs or
capital goods, without payment of tax, to a job worker for job work and from there
subsequently send to another job worker and likewise, and shall,–

(a) bring back inputs, after completion of job work or otherwise, or capital goods, other
than moulds and dies, jigs and fixtures, or tools, within one year and three years,
respectively, of their being sent out, to any of his place of business, without payment
of tax;

(b) supply such inputs, after completion of job work or otherwise, or capital goods, other
than moulds and dies, jigs and fixtures, or tools, within one year and three years,
respectively, of their being sent out from the place of business of a job worker on
payment of tax within India, or with or without payment of tax for export, as the
case may be:

Provided that the principal shall not supply the goods from the place of business of a job
worker in accordance with the provisions of this clause unless the said principal declares the
place of business of the job worker as his additional place of business except in a case-

(i) where the job worker is registered under section 25; or

(ii) where the principal is engaged in the supply of such goods as may be notified by the
Commissioner.

Provided further that the period of one year and three years may, on sufficient cause being
shown, be extended by the Commissioner for a further period not exceeding one year and
two years respectively.

(2) The responsibility for keeping proper accounts for the inputs or capital goods shall lie
with the principal.

(3) Where the inputs sent for job work are not received back by the principal after
completion of job work or otherwise in accordance with the provisions of clause (a) of
sub-section (1) or are not supplied from the place of business of the job worker in
accordance1 of 1944 with the provisions of clause (b) of sub-section (1) within a period
of one year of their being sent out, it shall be deemed that such inputs had been
supplied by the principal to the job worker on the day when the said inputs were sent
out.
 Page 244 of 371

(4) Where the capital goods, other than moulds and dies, jigs and fixtures, or tools, sent for
job work are not received back by the principal in accordance with the provisions of
clause (a) of sub-section (1) or are not supplied from the place of business of the job
worker in accordance with the provisions of clause (b) of sub-section (1) within a period
of three years of their being sent out, it shall be deemed that such capital goods had
been supplied by the principal to the job worker on the day when the said capital goods
were sent out.

(5) Notwithstanding anything contained in sub-sections (1) and (2), any waste and scrap
generated during the job work may be supplied by the job worker directly from his place
of business on payment of tax, if such job worker is registered, or by the principal, if the
job worker is not registered.

Explanation.––For the purposes of job work, input includes intermediate goods arising
from any treatment or process carried out on the inputs by the principal or the job
worker.

Sec.19 of CGST Act - Taking input tax credit in respect of inputs and capital goods sent
for job work

(1) The principal shall, subject to such conditions and restrictions as may be prescribed, be
allowed input tax credit on inputs sent to a job worker for job work.

(2) Notwithstanding anything contained in clause (b) of sub-section (2) of section

16[i.e.receipt of goods/service], the principal shall be entitled to take credit of input tax
on inputs even if the inputs are directly sent to a job worker for job work without being
first brought to his place of business.

(3) Where the inputs sent for job work are not received back by the principal after
completion of job work or otherwise or are not supplied from the place of
business of the job worker in accordance with clause (a) or clause (b) of sub-
section (1) of section 143 within one year of being sent out, it shall be deemed that
such inputs had been supplied by the principal to the job worker on the day when
the said inputs were sent out:

Provided that where the inputs are sent directly to a job worker, the period of one year
shall be counted from the date of receipt of inputs by the job worker.

(4) The principal shall, subject to such conditions and restrictions as may be prescribed, be
allowed input tax credit on capital goods sent to a job worker for job work.

(5) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the
principal shall be entitled to take credit of input tax on capital goods even if the capital
goods are directly sent to a job worker for job work without being first brought to his
place of business.

(6) Where the capital goods sent for job work are not received back by the principal
within a period of three years of being sent out, it shall be deemed that such
capital goods had been supplied by the principal to the job worker on the day
when the said capital goods were sent out:

Provided that where the capital goods are sent directly to a job worker, the period of
three years shall be counted from the date of receipt of capital goods by the job worker.
 Page 245 of 371

(7) Nothing contained in sub-section (3) or sub-section (6) shall apply to moulds and dies,
jigs and fixtures, or tools sent out to a job worker for job work.

Explanation.–For the purpose of this section, “principal” means the person referred to in
section 143.

Rule 45 of CGST Rules - Conditions and restrictions in respect of inputs and capital
goods sent to the job worker.

(1) The inputs, semi-finished goods or capital goods shall be sent to the job worker under
the cover of a challan issued by the principal, including where such goods are sent
directly to a job-worker, and where the goods are sent from one job worker to another
job worker, the challan may be issued either by the principal or the job worker sending
the goods to another job worker:

Provided that the challan issued by the principal may be endorsed by the job worker,
indicating therein the quantity and description of goods where the goods are sent by one
job worker to another or are returned to the principal:

Provided further that the challan endorsed by the job worker may be further endorsed
by another job worker, indicating therein the quantity and description of goods where the
goods are sent by one job worker to another or are returned to the principal.

(2) The challan issued by the principal to the job worker shall contain the details specified in
rule 55.

(3) The details of challans in respect of goods dispatched to a job worker or received from a
job worker during a quarter shall be included in FORM GST ITC-04 furnished for that
period on or before the twenty-fifth day of the month succeeding the said quarter[or
within such further period as may be extended by the Commissioner by a notification in
this behalf:

Provided that any extension of the time limit notified by the Commissioner of State tax
or the Commissioner of Union territory tax shall be deemed to be notified by the
Commissioner.

(4) Where the inputs or capital goods are not returned to the principal within the time
stipulated in section 143, it shall be deemed that such inputs or capital goods had been
supplied by the principal to the job worker on the day when the said inputs or capital
goods were sent out and the said supply shall be declared in FORM GSTR-1 and the
principal shall be liable to pay the tax along with applicable interest.

Explanation.- For the purposes of this Chapter,-

(i) the expressions ―capital goods‖ shall include ―plant and machinery as defined in
the Explanation to section 17;
(ii) for determining the value of an exempt supply as referred to in sub-section (3) of
section 17-
(a) the value of land and building shall be taken as the same as adopted for
the purpose of paying stamp duty; and
(b) the value of security shall be taken as one per cent. of the sale value of
such security.
 Page 246 of 371

Rule 55 of the CGST Rules - Transportation of goods without issue of invoice.

(1) For the purposes of-

(a) supply of liquid gas where the quantity at the time of removal from the place of
business of the supplier is not known,
(b) transportation of goods for job work,
(c) transportation of goods for reasons other than by way of supply, or
(d) such other supplies as may be notified by the Board,

the consigner may issue a delivery challan, serially numbered not exceeding sixteen
characters, in one or multiple series, in lieu of invoice at the time of removal of goods for
transportation, containing the following details, namely:-

(i) date and number of the delivery challan;

(ii) name, address and Goods and Services Tax Identification Number of the
consigner, if registered;
(iii) name, address and Goods and Services Tax Identification Number or Unique
Identity Number of the consignee, if registered;
(iv) Harmonised System of Nomenclature code and description of goods;
(v) quantity (provisional, where the exact quantity being supplied is not known);
(vi)taxable value;
(vi) tax rate and tax amount – central tax, State tax, integrated tax, Union territory tax
or cess, where the transportation is for supply to the consignee;
(vii) place of supply, in case of inter-State movement; and
(viii) signature.

(2) The delivery challan shall be prepared in triplicate, in case of supply of goods, in the
following manner, namely:–

(d) the original copy being marked as ORIGINAL FOR CONSIGNEE;

(e) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and
(f) the triplicate copy being marked as TRIPLICATE FOR CONSIGNER.

(3) Where goods are being transported on a delivery challan in lieu of invoice, the same
shall be declared as specified in rule 138.

(4) Where the goods being transported are for the purpose of supply to the recipient but the
tax invoice could not be issued at the time of removal of goods for the purpose of supply,
the supplier shall issue a tax invoice after delivery of goods.

(5) Where the goods are being transported in a semi knocked down or completely knocked
down condition or in batches or lots -

(e) the supplier shall issue the complete invoice before dispatch of the first consignment;
(f) the supplier shall issue a delivery challan for each of the subsequent consignments,
giving reference of the invoice;
(g) each consignment shall be accompanied by copies of the corresponding delivery
challan along with a duly certified copy of the invoice; and
(h) the original copy of the invoice shall be sent along with the last consignment.
 Page 247 of 371

FAQ on Job-Work

Q1. What is job work?

Ans. Job work means undertaking any treatment or process by a person on goods belonging to
another registered taxable person. The person who is treating or processing the goods
belonging to other person is called ‘job worker’ and the person to whom the goods belongs is
called ‘principal’.

This definition is much wider than the one given in Notification No. 214/86 – CE dated 23rd
March, 1986. In the said notification, job work has been defined in such 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.

Q2. Whether goods sent by a taxable person to a job worker will be treated as supply and
liable to GST? Why?
Ans. It will be treated as a supply as supply includes all forms of supply such as sale, transfer, etc.
However, the registered taxable person (the principal), under intimation and subject to such
conditions as may be prescribed send any inputs and/or capital goods, without payment of
tax, to a job worker for job work and from there subsequently to another job worker(s) and
shall either bring back such inputs/capital goods after completion of job work or otherwise
within 1 year/3years of their being sent out or supply such inputs/capital goods after
completion of job work or otherwise within 1 year / 3 years of their being sent out, from the
place of business of a job worker on payment of tax within India or with or without payment of
tax for export.

Q3. Is a job worker required to take registration?

Ans. Yes, as job work is a service, the job worker would be required to obtain registration if his
aggregate turnover exceeds the prescribed threshold.

Q4. Whether the goods of principal directly supplied from the job worker’s premises will
be included in the aggregate turnover of the job worker?
Ans. No. It will be included in the aggregate turnover of the principal. However, the value of goods
or services used by the job worker for carrying out the job work will be included in the value
of services supplied by the job worker.

Q5. Can a principal send inputs and capital goods directly to the premises of job worker
without bringing it to his premises?
Ans. Yes, the principal is allowed to do so. The input tax credit of tax paid on inputs or capital
goods can also be availed by the principal in such a scenario. The inputs or capital goods
must be received back within one year or three years respectively failing which the original
transaction would be treated as supply and the principal would be liable to pay tax
accordingly.

Q6. Can the principal supply the goods directly from the premises of the job worker
without bringing it back to his own premises?
Ans. Yes. But the principal should have declared the premises of an unregistered job worker as
his additional place of business. If the job worker is a registered person then goods can be
supplied directly from the premises of the job worker. The Commissioner may also notify
goods in which case goods sent for job work can be directly supplied from the premises of
the job worker.

Q7. Under what circumstances can the principal directly supply goods from the premises
of job worker without declaring the premises of job worker as his additional place of
business?
 Page 248 of 371

Ans. The goods can be supplied directly from the place of business of job worker without
declaring it as additional 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 by the Commissioner.

Q8. What are the provisions concerning taking of ITC in respect of inputs/capital goods
sent to a job worker?
Ans. Principal shall be entitled to take credit of taxes paid on inputs or capital goods sent to a job
worker whether sent after receiving them at his place of business or even when such the
inputs or capital goods are directly sent to a job worker without their being first brought to his
place of business. However, the inputs or capital goods, after completion of job work, are
required to be received back or supplied from job worker’s premises, as the case may be,
within a period of one year or three years of their being sent out.

Q9. What happens when the inputs or capital goods are not received back or supplied
from the place of business of job worker within prescribed time period?
Ans. If the inputs or capital goods are not received back by the principal or are not supplied from
the place of business of job worker within the prescribed time limit, it would be deemed that
such inputs or capital goods had been supplied by the principal to the job worker on the day
when the said inputs or capital goods were sent out by the principal (or on the date of receipt
by the job worker where the inputs or capital goods were sent directly to the place of
business of job worker). Thus the principal would be liable to pay tax accordingly.

Q10. Some capital goods like jigs and fixtures are non-usable after their use and normally
sold as scrap. What is the treatment of such items in job work provisions?
Ans. The condition of bringing back capital goods within three years is not applicable to moulds,
dies, jigs and fixtures or tools.

Q11. What would be treatment of the waste and scrap generated during the job work?
Ans. The waste and scrap generated during the job work can be supplied by the job worker
directly from his place of business, on payment of tax, if he is registered. If he is not
registered, the same would be supplied by the principal on payment of tax.

Q12. Whether intermediate goods can also be sent for job work?
Ans. Yes. The term inputs, for the purpose of job work, includes intermediate goods arising from
any treatment or process carried out on the inputs by the principal or job worker.

Q13. Who is responsible for the maintenance of proper accounts related to job work?
Ans. It is completely the responsibility of the principal to maintain proper accounts of job work
related inputs and capital goods.

Q14. Are the provisions of job work applicable to all categories of goods?
Ans. No. The provisions relating to job work are applicable only when registered taxable person
intends to send taxable goods. In other words, these provisions are not applicable to
exempted or non-taxable goods or when the sender is a person other than registered taxable
person.

Q15. Is it compulsory that job work provisions should be followed by the principal?
Ans. No. The principal can send the inputs or capital goods after payment of GST without
following the special procedure. In such a case, the job-worker would take the input tax credit
and supply back the processed goods (after completion of job-work) on payment of GST.

Q16. Should job worker and principal be located in same State or Union territory?
Ans. No this is not necessary as provisions relating to job work have been adopted in the IGST
Act as well as in UTGST Act and therefore job-worker and principal can be located either is
same State or in same Union Territory or in different States or Union Territories.
 Page 249 of 371

Q10. 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 existing law are returned after completion
of job work after the appointed day?
Ans. No tax will be payable by the manufacturer or the job worker under the following
circumstances: –

(i) Inputs/ semi-finished goods are sent to the job worker in accordance with the
provisions of the existing law before the appointed day.
(ii) The job worker returns the same within six months from the appointed day (or within
the extended period of maximum two months).
(iii) 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 are 141(1), 141(2) & 141 (4).

However, if the said inputs/semi- finished goods are not returned within six months (or within
the extended period of maximum two months), the input tax credit availed is liable to be
recovered.

Q11. What happens if the job worker does not return the goods within the specified time?
Ans. Tax will be payable by the job worker on the said goods if they are not returned to the place
of business of the manufacturer within six months (or within the extended period of maximum
two months) from the appointed day – Section 141(1), 141(2)

Q12. Can a manufacturer transfer have finished goods sent for testing purpose to the
premises of any other taxable person?
Ans. Yes, a manufacturer can transfer finished goods sent for testing purpose to the premise of
any other registered person on payment of tax in India or without payment of tax for exports
within six months (or within the extended period of maximum two months)– section 141(3)

Q13. If finished goods removed from a factory for carrying out certain processes under
existing law are returned on or after the appointed day, whether GST would be
payable?
Ans. No tax under GST will be payable if finished goods removed from factory prior to the
appointed day to any other premise for carrying out certain processes are returned to the
said factory after undergoing tests or any other process within six months (or within the
extended period of maximum two months) from the appointed day - section 141(3).

Q14. When tax shall become payable in GST on manufactured goods sent to a Job worker
for carrying out tests or any other process not amounting to manufacture under the
existing law?
Ans. Tax will be payable in GST on manufactured goods sent to a job worker prior to the
appointed day for carrying out tests or any process not amounting to manufacture under the
existing law if such goods are not returned to the manufacturer within six months (or within
the extended period of maximum two months) from the appointed day. Further, the input tax
credit enjoyed by the manufacturer will liable to be recovered if the aforesaid goods are not
returned within six months from the appointed day. – Section 141(3)

Twitter FAQ on Job Work

Whether the job worker (who converts barley The job worker has to pay GST on job work
into Malt) has to charge GST from the charges only.
Principal only on the Job Work charges or full
value of goods, i.e. (Value of Raw Material +
 Page 250 of 371

Job Work Charges)?

In case of job workers not operating under
Notification No. 214/86-C.E. (i.e. registered
under excise at present), whether they can
carry forward the credit availed on RM/PM
supplied to them by the principal
manufacturer? Also is there any restriction on
carry forward of the credit on input services
distributed to them by the principal as ISD
under Rule 7 of the Credit Rules and
remaining unutilized on the day of GST
implementation?
The credit on RM/PM supplied by the principal
manufacturer can be availed by the manufacturer
rather than the job worker. Section 141 of CGST
Act, 2017 refers. Further if job worker is registered
under existing law, Cenvat Credit in respect of
input services received from ISD as shown in
return can be carried forward.

Circular No. 38/12/2018

F. No. 20/16/03/2017-GST

New Delhi, Dated the 26th March, 2018

To,

The Principal Chief Commissioners/Chief Commissioners/Principal Commissioners/ Commissioners

of Central Tax (All)/The Principal Directors General/ Directors General (All)

Madam/Sir,

Subject: Clarification on issues related to Job Work

Various representations have been received regarding the procedures to be followed for
sending goods for job work and the related compliance requirements for the principal and the
job worker. In view of the difficulties being faced by the taxpayers and to ensure uniformity in
the implementation of the provisions of the law across the field formations, the Board, in
exercise of its powers conferred under section 168 (1) of the Central Goods and Services
Tax Act, 2017, (hereinafter referred to as the “CGST Act”) hereby clarifies the various issues
raised as below:

2. As per clause (68) of section 2 of the CGST Act, 2017, “job work” means any treatment or
process undertaken by a person on goods belonging to another registered person and the
expression “job worker” shall be construed accordingly. The registered person on whose
goods (inputs or capital goods) job work is performed is called the “Principal” for the
purposes of section 143 of the CGST Act.The said section which encapsulates the provisions
related to job work, provides that the registered principal may, without payment of tax, send
inputs or capital goods to a job worker for job work and, if required, from there subsequently
to another job worker and so on. Subsequently, on completion of the job work (by the last job
worker), the principal shall either bring back the goods to his place of business or supply
(including export) the same directly from the place of business/premises of the job worker
within the time specified under section 143.

3. It may be noted that the responsibility of keeping proper accounts of the inputs and capital
goods sent for job work lies with the principal. Moreover, if the time frame specified
under section 143 for bringing back or further supplying the inputs / capital goods is not
adhered to, the activity of sending the goods for job work shall be deemed to be a supply by
the principal on the day when the said inputs / capital goods were sent out by him. Thus,
essentially, sending goods for job work is not a supply as such, but it acquires the character
of supply only when the inputs/capital goods sent for job work are neither received back by
the principal nor supplied further by the principal from the place of business / premises of the
job worker within the specified time period (under section 143) of being sent out. It may be
 Page 251 of 371

noted that the responsibility for sending the goods for job work as well as bringing them back
or supplying them has been cast on the principal.

4. With respect to the above legal requirements, various issues have been raised on the
following aspects:

a. Scope / ambit of job work;

b. Requirement of registration for a principal / job worker;
c. Supply of goods by the principal from the job worker’s place of business / premises;
d. Movement of goods from the principal to the job worker and the documents and
intimation required therefor;
e. Liability to issue invoice, determination of place of supply and payment of GST; and
f. Availability of input tax credit to the principal and the job worker.

5. Scope/ambit of job work: Doubts have been raised on the scope of job work and
whether any inputs, other than the goods provided by the principal, can be used by the job
worker for providing the services of job work. It may be noted that the definition of job work,
as contained in clause (68) of section 2 of the CGST Act, entails that the job work is a
treatment or process undertaken by a person on goods belonging to another registered
person. Thus, the job worker is expected to work on the goods sent by the principal and
whether the activity is covered within the scope of job work or not would have to be
determined on the basis of facts and circumstances of each case. Further, it is clarified that
the job worker, in addition to the goods received from the principal, can use his own goods
for providing the services of job work.

6. Requirement of registration for the principal/ job worker: It is important to note that the
provisions of section 143 of the CGST Act are applicable to a registered person. Thus, it is
only a registered person who can send the goods for job work under the said provisions. It
may also be noted that the registered person (principal) is not obligated to follow the said
provisions. It is his choice whether or not to avail or not to avail of the benefit of these special
provisions.

6.1 Doubts have been raised about the requirement of obtaining registration by job workers
when they are located in the same State where the principal is located or when they are
located in a State different from that of the principal. It may be noted that the job worker is
required to obtain registration only if his aggregate turnover, to be computed on all India
basis, in a financial year exceeds the specified threshold limit as specified in sub-section (1)
of section 22 of the said Act, read with clause (iii) of the Explanation to the said section in
case both the principal and the job worker are located in the same State. Where the principal
and the job worker are located in different States, the requirement for registration flows
from clause (i) of section 24 of the CGST Act which provides for compulsory registration of
suppliers making any inter-State supply of services. However, exemption from registration
has been granted in case the aggregate turnover of the inter-State supply of taxable services
does not exceed the specified threshold limit as specified in sub-section (1) of section 22 of
the said Act, read with clause (iii) of the Explanation to the said section in a financial year
vide notification No. 10/2017 – Integrated Tax dated 13.10.2017 as amended vide notification
No 3/2019- Integrated Tax, dated 29.01.19. Therefore, it is clarified that a job worker is
required to obtain registration only in cases where his aggregate turnover, to be computed
on all India basis, in a financial year exceeds the threshold limit regardless of whether the
principal and the job worker are located in the same State or in different States.

7. Supply of goods by the principal from job worker’s place of business / premises:
Doubts have been raised as to whether the principal can supply goods directly from the job
worker’s place of business / premises to its end customer and if yes, whether the supply will
be regarded as having been made by the principal or by the job worker. It is clarified that the
supply of goods by the principal from the place of business / premises of the job worker will
 Page 252 of 371

be regarded as supply by the principal and not by the job worker as specified in section
143(1)(a) of the CGST Act.

8. Movement of goods from the principal to the job worker and the documents and
intimation required therefor:

8.1 Issues: Doubts have been raised about the documents required to be issued for sending the
goods (i) by the principal to the job worker, (ii) from one job worker to another job worker;
and (iii) from the job worker back to the principal.

8.2 Legal provisions: Section 143 of the CGST Act provides that the principal may send and/or
bring back inputs/capital goods for job work without payment of tax, under intimation to the
proper officer and subject to the prescribed conditions. Rule 45 of the CGST Rules provides
that the inputs, semi-finished goods or capital goods being sent for job work (including that
being sent from one job worker to another job worker for further job work or those being sent
directly to a job worker) shall be sent under the cover of a challan issued by the principal,
containing the details specified in rule 55 of the CGST Rules. This rule has been amended
vide notification No. 14/2018-Central tax dated 23.03.2018 to provide that a job worker may
endorse the challan issued by the principal. The principal is also required to file FORM GST
ITC-04 every quarter stating the said details. Further, as per the provisions contained in rule
138 of the CGST Rules, an e-way bill is required to be generated by every registered person
who causes movement of goods of consignment value exceeding fifty thousand rupees even
in cases where such movement is for reasons other than for supply (e.g. in case of
movement for job work). Further, the third proviso to rule 138(1) of the CGST Rules provides
that the e-way bill shall be generated either by the principal or by the registered job worker
irrespective of the value of the consignment, where goods are sent by a principal located in
one State/Union territory to a job worker located in any other State/ Union territory.

8.3 As mentioned above, rule 45 of the CGST Rules provides that inputs, semi-finished goods or
capital goods shall be sent to the job worker under the cover of a challan issued by the
principal, including in cases where such goods are sent directly to a job worker. Further, rule
55 of the CGST Rules provides that the consignor may issue a delivery challan containing
the prescribed particulars in case of transportation of goods for job work. It may be noted
that rule 45 provides for the issuance of a challan by the principal whereas rule 55 provides
that the consignor may issue the delivery challan. It is also important to note that as per the
provisions contained in rule 138 of the CGST Rules, an e-way bill is required to be generated
by every registered person who causes movement of goods of consignment value exceeding
fifty thousand rupees even in cases where such movement is for reasons other than for
supply (e.g. in case of movement for job work). The third proviso to rule 138(1)of the CGST
Rules provides that the e-way bill shall be generated either by the principal or by the
registered job worker irrespective of the value of the consignment, where goods are sent by
a principal located in one State/Union territory to a job worker located in any other State/
Union territory. It may also be noted that as per Explanation 1 to rule 138(3) of the CGST
Rules, where the goods are supplied by an unregistered supplier to a registered recipient,
the movement shall be said to be caused by such recipient if the recipient is known at the
time of commencement of the movement of goods. In other words, the e-way bill shall be
generated by the principal, wherever required, in case the job worker is unregistered.

8.4 Clarification: On conjoint reading of the relevant legal provisions, the following is clarified
with respect to the issuance of challan, furnishing of intimation and other documentary
requirements in this regard:

(i) Where goods are sent by principal to only one job worker: The principal shall
prepare in triplicate, the challan in terms of rules 45 and 55 of the CGST Rules, for
sending the goods to a job worker. Two copies of the challan may be sent to the job
 Page 253 of 371

worker along with the goods. The job worker should send one copy of the said challan
along with the goods, while returning them to the principal. The FORM GST ITC-04 will
serve as the intimation as envisaged under section 143 of the CGST Act, 2017.
(ii) Where goods are sent from one job worker to another job worker: In such cases,
the goods may move under the cover of a challan issued either by the principal or the job
worker. In the alternative, the challan issued by the principal may be endorsed by the job
worker sending the goods to another job worker, indicating therein the quantity and
description of goods being sent. The same process may be repeated for subsequent
movement of the goods to other job workers.
(iii) Where the goods are returned to the principal by the job worker: The job worker
should send one copy of the challan received by him from the principal while returning
the goods to the principal after carrying out the job work.
(iv) Where the goods are sent directly by the supplier to the job worker: In this case, the
goods may move from the place of business of the supplier to the place of
business/premises of the job worker with a copy of the invoice issued by the supplier in
the name of the buyer (i.e. the principal) wherein the job worker’s name and address
should also be mentioned as the consignee, in terms of rule 46(o) of the CGST
Rules. The buyer (i.e., the principal) shall issue the challan under rule 45 of the CGST
Rules and send the same to the job worker directly in terms of para (i) above. In case of
import of goods by the principal which are then supplied directly from the customs station
of import, the goods may move from the customs station of import to the place of
business/premises of the job worker with a copy of the Bill of Entry and the principal shall
issue the challan under rule 45 of the CGST Rules and send the same to the job worker
directly.
(v) Where goods are returned in piecemeal by the job worker: In case the goods after
carrying out the job work, are sent in piecemeal quantities by a job worker to another job
worker or to the principal, the challan issued originally by the principal cannot be
endorsed and a fresh challan is required to be issued by the job worker.
(vi) Submission of intimation: Rule 45(3) of the CGST Rules provides that the principal is
required to furnish the details of challans in respect of goods sent to a job worker or
received from a job worker or sent from one job worker to another job worker during a
quarter in FORM GST ITC-04 by the 25th day of the month succeeding the quarter or
within such period as may be extended by the Commissioner. It is clarified that it is the
responsibility of the principal to include the details of all the challans relating to goods
sent by him to one or more job worker or from one job worker to another and its return
therefrom. The FORM GST ITC-04 will serve as the intimation as envisaged
under section 143 of the CGST Act.

9. Liability to issue invoice, determination of place of supply and payment of GST:

9.1 Issues: Doubts have been raised about the time, value and place of supply in the hands of
principal or job worker as also about the issuance of invoices by the principal or job worker,
as the case may be, with regard to the supply of goods from principal to the recipient from
the job worker’s place of business / premises and the supply of services by the job worker.

9.2 Legal provisions: As mentioned earlier, section 143 of the CGST Act provides that the
inputs/capital goods may be sent for job work without payment of tax and unless they are
brought back by the principal, or supplied from the place of business / premises of the job
worker within a period of one / three years, as the case may be, it would be deemed that
such inputs or capital goods (other than moulds and dies, jigs and fixtures or tools) have
been supplied by the principal to the job worker on the day when the said inputs or capital
goods were sent out. Further, the job worker is liable to pay GST on the supply of job work
services.

9.3 The provisions relating to time of supply are contained in sections 12 and 13 of the CGST
Act and that for determining the value of supply are in section 15 of the CGST Act. The
 Page 254 of 371

provisions relating to place of supply are contained in section 10 of the IGST Act, 2017.
Further, the provisions relating to the issuance of an invoice are contained in section 31 of
the CGST Act read with rule 46 of the CGST Rules.

9.4 On conjoint reading of all the provisions, the following is clarified with respect to the issuance
of an invoice, time of supply and value of supply:

(i) Supply of job work services :The job worker, as a supplier of services, is liable to
pay GST if he is liable to be registered. He shall issue an invoice at the time of
supply of the services as determined in terms of section 13 read with section 31 of
the CGST Act. The value of services would be determined in terms of section 15 of
the CGST Act and would include not only the service charges but also the value of
any goods or services used by him for supplying the job work services, if recovered
from the principal. Doubts have been raised whether the value of moulds and dies,
jigs and fixtures or tools which have been provided by the principal to the job worker
and have been used by the latter for providing job work services would be included in
the value of job work services. In this regard, attention is invited to section 15 of
the CGST Act which lays down the principles for determining the value of any supply
under GST. Importantly, clause (b) of sub-section (2) of section 15 of the CGST
Act provides that any amount that the supplier is liable to pay in relation to the supply
but which has been incurred by the recipient will form part of the valuation for that
particular supply, provided it has not been included in the price for such supply.
Accordingly, it is clarified that the value of such moulds and dies, jigs and fixtures or
tools may not be included in the value of job work services provided its value has
been factored in the price for the supply of such services by the job worker.
(ii) Supply of goods by the principal from the place of business/ premises of job
worker:Section 143 of the CGST Act provides that the principal may supply, from the
place of business / premises of a job worker, inputs after completion of job work or
otherwise or capital goods (other than moulds and dies, jigs and fixtures or tools)
within one year or three years respectively of their being sent out, on payment of tax
within India, or with or without payment of tax for exports, as the case may be. This
facility is available to the principal only if he declares the job worker’s place of
business / premises as his additional place of business or if the job worker is
registered.

Since the supply is being made by the principal, it is clarified that the time, value and
place of supply would have to be determined in the hands of the principal irrespective
of the location of the job worker’s place of business/premises. Further, the invoice
would have to be issued by the principal. It is also clarified that in case of exports
directly from the job worker’s place of business/premises, the LUT or bond, as the
case may be, shall be executed by the principal.

Illustration: The principal is located in State A, the job worker in State B and the
recipient in State C. In case the supply is made from the job worker’s place of
business / premises, the invoice will be issued by the supplier (principal) located in
State A to the recipient located in State C. The said transaction will be an inter-State
supply. In case the recipient is also located in State A, it will be an intra-State supply.

(iii) Supply of waste and scrap generated during the job work: Sub - section (5) of
Section 143 of the CGST Act provides that the waste and scrap generated during the
job work may be supplied by the registered job worker directly from his place of
business or by the principal in case the job worker is not registered. The principles
enunciated in para (ii) above would apply mutatis mutandis in this case.

9.5 Violation of conditions laid down in section 143: As per the provisions contained
in section 143of the CGST Act, if the inputs or capital goods (other than moulds and dies, jigs
 Page 255 of 371

and fixtures or tools) are neither received back by the principal nor supplied from the job
worker’s place of business within the specified time period, the inputs or capital goods (other
than moulds and dies, jigs and fixtures or tools) would be deemed to have been supplied by
the principal to the job worker on the day when such inputs or capital goods were sent out to
the first job worker.

9.6 Thus, if the inputs or capital goods are neither returned nor supplied from the job worker’s
place of business / premises within the specified time period, the principal would issue an
invoice for the same and declare such supplies in his return for that particular month in which
the time period of one year / three years has expired. The date of supply shall be the date on
which such inputs or capital goods were initially sent to the job worker and interest for the
intervening period shall also be payable on the tax. If such goods are returned by the job
worker after the stipulated time period, the same would be treated as a supply by the job
worker to the principal and the job worker would be liable to pay GST if he is liable for
registration in accordance with the provisions contained in the CGST Actread with the rules
made thereunder. Further, there is no requirement of either returning back or supplying the
goods from the job worker’s place of business/premises as far as moulds and dies, jigs and
fixtures, or tools are concerned.

10.Availability of input tax credit to the principal and job worker:

Doubts have been raised regarding the availability of input tax credit (ITC) to the principal in
respect of inputs / capital goods that are directly received by the job worker. Doubts have
also been raised whether the job worker is eligible for ITC in respect of inputs, etc. used by
him in supplying job work services. It is clarified that, in view of the provisions contained
in clause (b) of sub-section (2) of section 16 of the CGST Act, the input tax credit would be
available to the principal, irrespective of the fact whether the inputs or capital goods are
received by the principal and then sent to the job worker for processing, etc. or whether they
are directly received at the job worker’s place of business/premises, without being brought to
the premises of the principal. It is also clarified that the job worker is also eligible to avail ITC
on inputs, etc. used by him in supplying the job work services if he is registered.

11. It is requested that suitable trade notices may be issued to publicize the contents of this
circular.

12. Difficulty, if any, in implementation of the above instructions may please be brought to the
notice of the Board. Hindi version would follow.

Job work under GST

C.B.E. & C. Flyer No. 27, dated 1-1-2018
Introduction
Job-work sector constitutes a significant industry in Indian economy It includes outsourced
activities that may or may not culminate into manufacture. The term Job-work itself explains the
meaning. It is processing of goods supplied by the principal. The concept of job work already exists
in Central Excise, wherein a principal manufacturer can send inputs or semi-finished goods to a job
worker for further processing. Many facilities, procedural concessions have been given to the job
workers as well as the principal supplier who sends goods for job work. The whole idea is to make
principal responsible for meeting compliances on behalf of the job-worker on the goods processed
by him (job-worker), considering the fact that typically the job-workers are small persons who are
unable to comply with the discrete provisions of the law.
The GST Act makes special provisions with regard to removal of goods for job-work and
receiving back the goods after processing from the job-worker without payment of GST. The benefit
of these provisions shall be available both to the principal and the job-worker.
What is Job work?
 Page 256 of 371

Section 2(68) of the CGST Act, 2017 defines job work as ‘any treatment or process
undertaken by a person on goods belonging to another registered person’. The one who does the
said job would be termed as ‘job worker’. The ownership of the goods does not transfer to the job-
worker but it rests with the principal. The job-worker is required to carry out the process specified by
the principal, on the goods.
Job work Procedural aspects
Certain facilities with certain conditions are offered in relation to job work, some of which are
as under :
(a) A registered person (Principal) can send inputs/capital goods under intimation and
subject to certain conditions without payment of tax to a job worker and from there to
another job worker and after completion of job work bring back such goods without
payment of tax. The principal is not required to reverse the ITC availed on inputs or
capital goods dispatched to job-worker.
(b) Principal can send inputs or capital goods directly to the job worker without bringing them
to his premises, still the principal can avail the credit of tax paid on such inputs or capital
goods.
(c) However, inputs and/or capital goods sent to a job worker are required to be returned to
the principal within 1 year and 3 years, respectively, from the date of sending such goods
to the job worker.
(d) After processing of goods, the job-worker may clear the goods to-
(i) Another job-worker for further processing;
(ii) Dispatch the goods to any of the place of business of the principal without payment
of tax;
(iii) Remove the goods on payment of tax within India or without payment of tax for
export outside India on fulfilment of conditions.
The facility of supply of goods by principal to the third party directly from the premises of the
job-worker on payment of tax in India likewise with or without payment of tax for export may be
availed by the principal on declaring premise of the job-worker as his additional place of business in
registration. In case the job-worker is a registered person under GST, even declaring the premises of
the job worker as additional place of business is not required.
Before supply of goods to job-worker, principal would be required to intimate the Jurisdictional
Officer containing the details of description of inputs intended to be sent by the principal and the
nature of processing to be carried out by the job-worker. The said intimation shall also contain the
details of another job-worker, if any.
The inputs or capital goods shall be sent to the job worker under the cover of a challan issued
by the principal. The challan shall be issued even for the inputs or capital goods sent directly to the
job worker. The challan shall contain the details specified in rule 10 of the Invoice Rules.
The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the
principal.
Input Tax credit on goods supplied to job-worker
Section 19 of the CGST Act, 2017 provides that the principal (a person supplying taxable
goods to the job-worker) shall be entitled to take the credit of input tax paid on inputs sent to the job-
worker for the job work. Further, the proviso also provides that the principal can take the credit even
when the goods have been directly supplied to the job-worker without bringing into the premise of
the principal. The principal need not wait till the inputs are first brought to his place of business.
Time Limits for return of processed goods
As per section 19 of the CGST Act, 2017, inputs and capital goods after processing shall be
returned back to principal within one year or three years respectively of their being sent out. Further,
the provision of return of goods is not applicable in case of moulds and dies, jigs and fixtures or tools
supplied by the principal to job-worker.
Extended meaning of input
 Page 257 of 371

As per the explanation provided in section 143 of the CGST Act, 2017, where certain process
is carried out on the input before removal of the same to the job worker, such product after carrying
out the process to be referred as the intermediate product. Such intermediate product can also be
removed without the payment of tax. Therefore, both input and intermediate product can be cleared
without payment of duty to job-worker.
Waste clearing provisions
Pursuant to section 143(5) of the CGST Act, 2017, waste generated at the premises of the
job-worker may be supplied directly by the registered job-worker from his place of business on
payment of tax or such waste maybe cleared by the principal, in case the job-worker is not
registered.
Transitional provisions : Inputs as such or partially processed inputs which are sent to a job-
worker prior to introduction of GST under the provisions of existing law [Central Excise] and if such
goods are returned within 6 months from the appointed day, i.e. 1st July, 2017 no tax would be
payable. If such goods are not returned within prescribed time, the input tax credit availed on such
goods will be liable to be recovered.
If manufactured goods are removed, prior to the appointed day, without payment of duty for
testing or any other process which does not amount to manufacture, and such goods are returned
within 6 months from the appointed day, then no tax will be payable. For the purpose of these
provisions during the transitional period, the manufacturer and the job worker are required to declare
the details of such goods sent/received for job work in prescribed format GST TRAN-1, within 90
days of the introduction of GST.

Circulars issued by us
Dt.28.03.2018.

Sub.:- GST – Clarification on the issues related to job work procedure issued by the Govt.
vide Circular dt.26.03.2018 – Reg….

Please find enclosed herewith the copy of the Circular No.38/12/2018-GST, dt.26.03.2018
whereunder the Govt. has clarified the various issues/doubts related to the job work
procedure.

[2] I would like to highlight the important clarifications given in the said circular which are as
under, -

a) From para 3 it is clear that, the entire responsibility of keeping the proper
accounts/records of the inputs/capital goods sent for job work lies with the principal
(i.e.the person who is sending the goods to the job worker for job working).

b) From para 5 it is clear that, evenif some goods are used by the job worker in the course
of providing the job work service, still, the activity will be treated as job work and one
can’t take a stand that, since job work means processing or treating the goods belonging
to another person, the job worker should not use any of his goods in the said job work
activity. However, if the quantity/value of goods supplied by the principal is less and
quantity/value of the goods used by the job worker is more, the activity cannot be treated
as a job work activity.

c) From para 8 it is clear that, while sending the goods to the job worker, the principal is
required to issue challan (in triplicate) as specified under Rule 45 read with Rule 55 of
the CGST Rules, 2017. One copy of the said challan will remain with the principal and
two copies of the said challan will go to the job worker.
 Page 258 of 371

After completion of the job work, the job worker will return the inputs/capital goods to the
principal under the cover of second copy of the challan issued by the principal and the
third copy of the said challan will be retained by him for his record.

It is also clear that, the goods can go from one job worker to other job worker (for further
processing) on behalf of the principal and it is not necessary that the principal must
receive back the processed goods from first job worker and then only should send the
same to the second job worker for further processing.

It is also clear that, the principal can direct his supplier to directly deliver the
inputs/capital goods to his job worker and it is not necessary that the principal should first
receive the goods in his premises and then only should send the same to the job worker
for further processing. In such cases, on the duty paying document the name and
address of the job worker is bound to be declared as consignee by the supplier and after
receipt of the said goods directly by the job worker, the principal has to issue challan (in
triplicate) as per Rule 45 read with Rule 55 of the CGST Rules, 2017 in favour of the said
job worker.

The imported inputs/capital goods also can be directly supplied to the job worker from
the customs station of import with a copy of the bill of entry and after receipt of the said
goods by the job worker the principal also has to issue the challan (in triplicate) under
Rule 45 read with Rule 55 of the CGST Rules, 2017in favour of the said job worker.

It is also clear that, when the job worker is returning the processed goods (received
under one challan issued by the principal) in piecemeal, on different dates, then, he has
to issue his own delivery challans for returning the said processed goods in piecemeal
and on those delivery challans he will have to give the cross reference of the main
challan issued by the principal.

It is also clear that, every principal who is sending the goods to the job worker for
processing by issuing the challans under Rule 45 read with Rule 55 of the CGST Rules,
has to file quarterly return in the form GST ITC-04 wherein he will have to declare all the
details like name of the job worker, no/date of the challan issued for sending the goods to
the job worker, the date of receipt of the processed goods etc.etc. and once the quarterly
return in the form of GST ITC-04 is filed by the principal there is no need to file separate
intimation for sending the goods to the job worker in terms of Sec.143 of the CGST Act,
2017.

d) From 3 read with para 7 and para 9.2/9.4(iii)/9.5/9.6 it is clear that, -

- the processed goods/capital goods need not to be received back by the principal
from the job worker and the principal can supply the processed goods/capital goods
directly to his customer from the premises of the job worker (under the cover of
invoice issued by the principal) provided the said job worker is registered under GST
or the premises of the said job worker is registered as additional place of business by
the principal. (Please note that, the said clarification is also applicable to the supply
of scrap by the principal directly from the premises of the job worker). The goods
processed by the job worker/capital goods sent to the job worker also can be directly
exported by the principal from the job workers premises without payment of GST/on
payment of GST if the job worker is registered under GST or the premises of the said
job worker is registered as additional place of business by the principal.

- if the inputs/capital goods are not received back by the principal within prescribed
time limit (i.e.one year/three year) it will be deemed that the principal has supplied
the said inputs/capital goods to the job worker on the day when the said
 Page 259 of 371

inputs/capital goods were sent by him to the job worker and then, the principal has to
issue tax invoice for the said inputs/capital goods charging appropriate GST in favour
of the said job worker and has to pay the said GST along with interest (by
considering the date of sending the goods to the job worker as the date of supply)
and the job worker will be eligible for the credit of the same, if he is registered under
GST.

Subsequently, in case if the job worker wants to sent back the said inputs/capital
goods (after expiry of prescribed time limit of one year/three year), then, the said
transaction will be treated as supply of goods by the job-worker and if the job worker
is registered, then he will have to issue the tax invoice for supply of the said
inputs/capital goods and has to charge appropriate GST (applicable to the said
inputs/capital goods) while supplying the said inputs/capital goods to the principal.

e) From para 10 it is clear that, evenif, the principal has directly supplied the inputs/capital
goods to the job worker without actually receiving the same in his premises still he will be
eligible for the credit of the GST paid thereon. On the sameline, it is also clear that the
job worker if is registered and if is paying GST on his job work service, he will be eligible
for the credit of all inputs/input services and capital goods used by him for the said job
work service.

[3] Please note that, in the said Circular at para 9.4(1) it is indirectly indicated that, if the job
worker is receiving any additional consideration from the principal or if any amount which the
job worker is liable to pay is paid by the principal or any expenditure which the job work is
liable to do to provide the job work service is done by the principal then the same should
form the value of the service of the job worker and hence in cases where the job worker is
retaining the scrap generated while processing the goods and selling the same and keeping
the sale proceeds with him and hence has reduced his job charges taking into consideration
the sale proceeds to be received by him by selling the scrap, the dispute of under valuation
of his job work service is bound to arise.

Similarly, if the job worker is using the equipments/tools/dies/moulds etc. provided by the
principal for processing the goods supplied by the principal and has reduced his job charges
on that account then also the dispute of under-valuation of his job work service is bound to
arise.

[4] Kindly take note of the said important clarifications and implications thereof and implement a
proper job work procedure at your end in the light of the said clarifications.

OUR COMMENTS ON JOB WORK CONCEPT UNDER GST

 Job work has been defined to mean any treatment or process undertaken by a
person on goods belonging to another registered person.
 The Challans (under Rule 55 read with Rule 45) to be issued by the Principal while
sending the goods to the job worker. Further in case the value of the said goods is
more than Rs.50,000/- or Rs.1,00,000/- as the case maybe, the e-way bill is also
required to be generated.
 Records to be maintained by the Principal of the job work transaction.
 The principle is also required to file the quarterly ITC-04 return in respect of the
goods sent/received to/from job worker
 The details of said job work challans are also required to be declared in GSTR-1
return
 The goods are required to be received back from job worker within 1 year (for inputs)
or 3 years (for capital goods). The said time limit can be extended by the
Commissioner.
 Page 260 of 371

 However if the inputs/capital goods sent to job worker are not received back within
prescribed time period, then the transition will be treated as supply of goods on the
date when the goods were sent for ob work and the Principal will be liable to pay
GST on the said goods.
 The goods can be moved from on job worker to another job worker
 The goods can be delivered to job worker directly from the suppliers end within
bringing to the premises of receiver.
 Processed goods can be dispatched to the end customer from the job workers
premises (if the job worker is registered under GST or otherwise the Principal has to
declare the said job worker premises as his additional place of business).
 Valuation of job work service where the scrap generated at job workers end (while
processing the goods of the Principal) is retained by the job worker
 Supply of Scrap - where the scrap generated at job workers end (while processing
the goods of the Principal) is retained by the job worker
 Page 261 of 371

IMPORT/EXPORT UNDER GST

Sec.2 of IGST Act - Definitions

(4) “customs frontiers of India” means the limits of a customs area as defined in section 2
of the Customs Act, 1962;

(5) “export of goods” with its grammatical variations and cognate expressions, means taking
goods out of India to a place outside India;

(6) “export of services” means the supply of any service when,–

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier of service in
convertible foreign exchange or in Indian rupees wherever permitted by the Reserve
Bank of India; and
(v) the supplier of service and the recipient of service are not merely establishments of a
distinct person in accordance with Explanation 1in section 8;

(10) ‘‘import of goods” with its grammatical variations and cognate expressions, means
bringing goods into India from a place outside India;

(11) ‘‘import of services” means the supply of any service, where–

(i) the supplier of service is located outside India;

(ii) the recipient of service is located in India; and
(iii) the place of supply of service is in India;

(12) “integrated tax” means the integrated goods and services tax levied under this Act;

(13) “intermediary” means a broker, an agent or any other person, by whatever name called,
who arranges or facilitates the supply of goods or services or both, or securities, between
two or more persons, but does not include a person who supplies such goods or services
or both or securities on his own account;

(14) “location of the recipient of services” means,–

(a) where a supply is received at a place of business for which the registration has been
obtained, the location of such place of business;
(b) where a supply is received at a place other than the place of business for which
registration has been obtained (a fixed establishment elsewhere), the location of
such fixed establishment;
(c) where a supply is received at more than one establishment, whether the place of
business or fixed establishment, the location of the establishment most directly
concerned with the receipt of the supply; and
(d) in absence of such places, the location of the usual place of residence of the
recipient;

(15) “location of the supplier of services” means,–

 Page 262 of 371

(a) where a supply is made from a place of business for which the registration has been
obtained, the location of such place of business;
(b) where a supply is made from a place other than the place of business for which
registration has been obtained (a fixed establishment elsewhere), the location of
such fixed establishment;
(c) where a supply is made from more than one establishment, whether the place of
business or fixed establishment, the location of the establishment most directly
concerned with the provision of the supply; and
(d) in absence of such places, the location of the usual place of residence of the
supplier;

(16) “non-taxable online recipient” means any Government, local authority, governmental
authority, an individual or any other person not registered and receiving online information
and database access or retrieval services in relation to any purpose other than
commerce, industry or any other business or profession, located in taxable territory.

Explanation.–For the purposes of this clause, the expression governmental authority”

means an authority or a board or any other body,–
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government,
with ninety per cent. or more participation by way of equity or control, to carry out any
function entrusted to a Panchayat under article 243G or to a municipality under article
243W of the Constitution;

(17) “online information and database access or retrieval services” means services
whose delivery is mediated by information technology over the internet or an electronic
network and the nature of which renders their supply essentially automated and involving
minimal human intervention and impossible to ensure in the absence of information
technology and includes electronic services such as,–

(i) advertising on the internet;

(ii) providing cloud services;
(ii) provision of e-books, movie, music, software and other intangibles through
telecommunication networks or internet;
(iv) providing data or information, retrievable or otherwise, to any person in electronic
form through a computer network;
(v) online supplies of digital content (movies, television shows, music and the like);
(vi) digital data storage; and
(vii) online gaming;

(19) “Special Economic Zone” shall have the same meaning as assigned to it in clause (za)
of section 2 of the Special Economic Zones Act, 2005;

(20) “Special Economic Zone developer” shall have the same meaning as assigned to it in
clause (g) of section 2 of the Special Economic Zones Act, 2005 and includes an Authority
as defined in clause (d) and a Co-Developer as defined in clause (f ) of section 2 of the
said Act;

(21) “supply” shall have the same meaning as assigned to it in section 7 of the Central Goods
and Services Tax Act;

(22) “taxable territory” means the territory to which the provisions of this Act apply;
 Page 263 of 371

(23) “zero-rated supply” shall have the meaning assigned to it in section 16;

Rule 2(d) of CGST Rules, 2017 - “Special Economic Zone” shall have the same meaning as
assigned to it in clause (za) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);

Sec.11 of IGST Act - Place of supply of goods imported into, or exported from India

The place of supply of goods,–

(a) imported into India shall be the location of the importer;

(b) exported from India shall be the location outside India.

Sec.13 of IGST Act - Place of supply of services where location of supplier or location of
recipient is outside India

(1) The provisions of this section shall apply to determine the place of supply of services
where the location of the supplier of services or the location of the recipient of services is
outside India.

(2) The place of supply of services except the services specified in sub-sections (3) to (13)
shall be the location of the recipient of services:

Provided that where the location of the recipient of services is not available in the
ordinary course of business, the place of supply shall be the location of the supplier of
services.

(3) The place of supply of the following services shall be the location where the services are
actually performed, namely:-

(a) services supplied in respect of goods which are required to be made physically
available by the recipient of services to the supplier of services, or to a person
acting on behalf of the supplier of services in order to provide the services:

Provided that when such services are provided from a remote location by way of
electronic means, the place of supply shall be the location where goods are
situated at the time of supply of services:

Provided further that nothing contained in this clause shall apply in the case of
services supplied in respect of goods which are temporarily imported into India
for repairs or for any other treatment or process and are exported after such
repairs or treatment or process without being put to any use in India, other than
that which is required for such repairs or treatment or process

(b) services supplied to an individual, represented either as the recipient of services

or a person acting on behalf of the recipient, which require the physical presence
of the recipient or the person acting on his behalf, with the supplier for the supply
of services.

(4) The place of supply of services supplied directly in relation to an immovable property,
including services supplied in this regard by experts and estate agents, supply of
accommodation by a hotel, inn, guest house, club or campsite, by whatever name
 Page 264 of 371

called, grant of rights to use immovable property, services for carrying out or co-
ordination of construction work, including that of architects or interior decorators, shall be
the place where the immovable property is located or intended to be located.

(5) The place of supply of services supplied by way of admission to, or organization of a
cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration,
conference, fair, exhibition or similar events, and of services ancillary to such admission
or organisation, shall be the place where the event is actually held.

(6) Where any services referred to in sub-section (3) or sub-section (4) or sub-section (5) is
supplied at more than one location, including a location in the taxable territory, its place
of supply shall be the location in the taxable territory.

(7) Where the services referred to in sub-section (3) or sub-section (4) or sub-section (5) are
supplied in more than one State or Union territory, the place of supply of such services
shall be taken as being in each of the respective States or Union territories and the value
of such supplies specific to each State or Union territory shall be in proportion 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 or agreement,
on such other basis as may be prescribed.

(8) The place of supply of the following services shall be the location of the supplier of
services, namely:––

(a) services supplied by a banking company, or a financial institution, or a non-

banking financial company, to account holders;
(b) intermediary services;
(c) services consisting of hiring of means of transport, including yachts but excluding
aircrafts and vessels, up to a period of one month.

Explanation.––For the purposes of this sub-section, the expression,–

(a) “account” means an account bearing interest to the depositor, and includes a
non-resident external account and a non-resident ordinary account;
(b) “banking company” shall have the same meaning as assigned to it under clause
(a) of section 45A of the Reserve Bank of India Act, 1934;
(c) ‘‘financial institution” shall have the same meaning as assigned to it in clause (c)
of section 45-I of the Reserve Bank of India Act, 1934;
(d) “non-banking financial company” means,––
(i) a financial institution which is a company;
(ii) a non-banking institution which is a company and which has as its
principal business the receiving of deposits, under any scheme or
arrangement or in any other manner, or lending in any manner; or
(iii) such other non-banking institution or class of such institutions, as
the Reserve Bank of India may, with the previous approval of the
Central Government and by notification in the Official Gazette,
specify.

(9) The place of supply of services of transportation of goods, other than by way of mail or
courier, shall be the place of destination of such goods.

(10) The place of supply in respect of passenger transportation services shall be the place
where the passenger embarks on the conveyance for a continuous journey.
 Page 265 of 371

(11) The place of supply of services provided on board a conveyance during the course of a
passenger transport operation, including services intended to be wholly or substantially
consumed while on board, shall be the first scheduled point of departure of that
conveyance for the journey.

(12) The place of supply of online information and database access or retrieval services shall
be the location of the recipient of services.

Explanation.––For the purposes of this sub-section, person receiving such services

shall be deemed to be located in the taxable territory, if any two of the following non-
contradictory conditions are satisfied, namely:––

(a) the location of address presented by the recipient of services through internet is
in the taxable territory;
(b) the credit card or debit card or store value card or charge card or smart card or
any other card by which the recipient of services settles payment has been
issued in the taxable territory;
(c) the billing address of the recipient of services is in the taxable territory;
(d) the internet protocol address of the device used by the recipient of services is in
the taxable territory;
(e) the bank of the recipient of services in which the account used for payment is
maintained is in the taxable territory;
(f) the country code of the subscriber identity module card used by the recipient of
services is of taxable territory;
(g) the location of the fixed land line through which the service is received by the
recipient is in the taxable territory.

(13) In order to prevent double taxation or non-taxation of the supply of a service, or for the
uniform application of rules, the Government shall have the power to notify any
description of services or circumstances in which the place of supply shall be the place
of effective use and enjoyment of a service.

Sec.14 of IGST Act - Special provision for payment of tax by a supplier of online
information and database access or retrieval services

(1) On supply of online information and database access or retrieval services by any person
located in a non-taxable territory and received by a non-taxable online recipient, the
supplier of services located in a non-taxable territory shall be the person liable for paying
integrated tax on such supply of services:

Provided that in the case of supply of online information and database access or
retrieval services by any person located in a non-taxable territory and received by a
nontaxable online recipient, an intermediary located in the non-taxable territory, who
arranges or facilitates the supply of such services, shall be deemed to be the recipient of
such services from the supplier of services in non-taxable territory and supplying such
services to the non-taxable online recipient except when such intermediary satisfies the
following conditions, namely:–

(a) the invoice or customer’s bill or receipt issued or made available by such
intermediary taking part in the supply clearly identifies the service in question and
its supplier in non-taxable territory;
 Page 266 of 371

(b) the intermediary involved in the supply does not authorise the charge to the
customer or take part in its charge which is that the intermediary neither collects
or processes payment in any manner nor is responsible for the payment between
the non-taxable online recipient and the supplier of such services;
(c) the intermediary involved in the supply does not authorise delivery; and
(d) the general terms and conditions of the supply are not set by the intermediary
involved in the supply but by the supplier of services.

(2) The supplier of online information and database access or retrieval services referred to
in sub-section (1) shall, for payment of integrated tax, take a single registration under the
Simplified Registration Scheme to be notified by the Government:

Provided that any person located in the taxable territory representing such supplier for
any purpose in the taxable territory shall get registered and pay integrated tax on behalf
of the supplier:

Provided further that if such supplier does not have a physical presence or does not
have a representative for any purpose in the taxable territory, he may appoint a person
in the taxable territory for the purpose of paying integrated tax and such person shall be
liable for payment of such tax.

Sec.16 of IGST Act - Zero rated supply

(1) “zero rated supply” means any of the following supplies of goods or services or both,
namely:–

(a) export of goods or services or both; or

(b) supply of goods or services or both to a Special Economic Zone developer or a
Special Economic Zone unit.

(2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and
Services Tax Act, credit of input tax may be availed for making zero-rated supplies,
notwithstanding that such supply may be an exempt supply.

(3) A registered person making zero rated supply shall be eligible to claim refund under
either of the following options, namely:–

(a) he may supply goods or services or both under bond or Letter of Undertaking,
subject to such conditions, safeguards and procedure as may be prescribed, without
payment of integrated tax and claim refund of unutilised input tax credit; or
(b) he may supply goods or services or both, subject to such conditions, safeguards and
procedure as may be prescribed, on payment of integrated tax and claim refund of
such tax paid on goods or services or both supplied,

in accordance with the provisions of section 54 of the Central Goods and Services Tax
Act or the rules made thereunder.

FAQ on Import/Export

Q1. How will imports be taxed under GST?

Ans. Imports of Goods and Services will be treated as inter-state supplies and IGST will be levied
on import of goods and services into the country. The incidence of tax will follow the
 Page 267 of 371

destination principle and the tax revenue in case of SGST will accrue to the State where the
imported goods and services are consumed. Full and complete set-off will be available on
the GST paid on import on goods and services.

Q2. How will Exports be treated under GST?

Ans. Exports will be treated as zero rated supplies. No tax will be payable on exports of goods or
services, however credit of input tax credit will be available and same will be available as
refund to the exporters. The Exporter will have an option to either pay tax on the output and
claim refund of IGST or export under Bond without payment of IGST and claim refund of
Input Tax Credit (ITC).

Q3. What is meant by zero rated supply under GST?

Ans. Zero rated supply means export of goods and/or services or supply of goods and/or services
to a SEZ developer or a SEZ Unit.

Q4. Will import of services without consideration be taxable under GST?

Ans. As a general principle, import of services without consideration will not be considered as
supply under GST in terms of Section 7. However, import of services by a taxable person
from a related person or from any of his other establishments outside India, in the course or
furtherance of business, even without consideration will be treated as supply in terms of Sl.
No.4 of Schedule I.

Q5. If input tax credit is allowed only in respect of goods or services or both for effecting
taxable supplies, would it not lead to loss of input tax credit on exempt supplies when
exported?
Ans. Zero-rated supplies have been covered within taxable supplies for the purpose of allowing
input tax credit. The scope of zero-rated supply is provided in the Integrated Goods and
Services Tax Act which includes even exempt supplies.

Q6. Can unutilized ITC be given refund, in case goods Exported outside India are
subjected to export duty?
Ans. Refund of unutilized input tax credit is not allowed in cases where the goods exported out of
India are subjected to export duty - as per the second proviso to Section 54(3) of
CGST/SGST Act.

Q7. Today under VAT/CST merchant exporters can purchase goods without payment of tax
on furnishing of a declaration form. Will this system be there in GST?
Ans. There is no such provision in the GST law. They will have to procure goods upon payment of
tax and claim refund of the tax paid or the unutilized input tax credit in accordance with
section 54(1)/54(3) of the CGST/SGST Act.

Q8. Presently under Central law, 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. Yes. In terms of Section 16 of the IGST Act, a registered taxable person shall have the option
either to export goods/services without payment of IGST under bond or letter of undertaking
and claim refund of ITC or he can export goods/services on payment of IGST and claim
refund of IGST paid.

Q9. How will imports/exports be taxed under GST?

Ans. All imports/exports will be deemed as inter-state supplies for the purposes of levy of GST
(IGST). The incidence of tax will follow the destination principle and the tax revenue in case
of SGST will accrue to the State where the imported goods and services are consumed. Full
and complete set-off will be available as ITC of the IGST paid on import on goods and
services. Exports of goods and services will be zero rated. The exporter has the option either
to export under bond without payment of duty and claim refund of ITC or pay IGST at the

time of export and claim refund of IGST. The IGST on imports is leviable under the provisions
of the Customs Tariff Act and shall be levied at the time of imports along with the levy of the
Customs Act (Section 5 of the IGST Act).
Twitter FAQ on Import/Export
What duties will be levied on import of goods?
Present Procedures have Service Tax on Nepal, But
no Goods Tax on Nepal. But, With GST, what tax will
apply?
Are there exemptions for SEZ? How will a SEZ
transaction happen in GST regime?
How would the sale and purchase of goods to and
from SEZ will be treated? Will it be export/input?
Please clarify status of international export freight
under GST as the same was exempt under POPS
rules. It is zero rated in most countries.
When goods are being imported from SEZ who will
pay IGST?
Who will pay IGST when goods are procured from
SEZ? Today importer is paying both BCD and CVD.
Whether every registered person who intends to
export requires fresh Bond/LUT even if the same
was issued on or before 30-6-2017 and is still live
i.e. not one year old?
Some assessees had multiple central excise
registrations under the earlier regime and were
having different LUT/Bond for each premises. In
GST, there will be single registration for such
assessees. Do they require furnishing fresh
Bond/LUT for their principal place of business or the
existing Bond/LUT issued to them prior to 30-6-2017
shall be applicable for the export purpose?
With reference to clause (5) of Rule 96A of CGST
Rules, 2017 as inserted vides Ntf. No. 15/2017-
Central Tax, dated 1st July, 2017 “(5) The Board, by
way of notification, may specify the conditions and
safeguards under which a Letter of Undertaking may
be furnished in place of a bond.” It may be clarified
as to whether any conditions and safeguard has
been notified by the Board as on date, as certain
parties have filed LUT for export in this office.
Page 268 of 371
Customs duty and cess as applicable + IGST+
GST compensation cess. IGST and GST
compensation cess shall be paid after adding all
customs duty and customs cess to the value of
imports.
The export procedure for Nepal would be same as
that to other Countries.
Supplies to SEZs are zero-rated supplies as
defined in Section 16 of IGST Act.
Supply to SEZs is zero rated supplies and supplies
by SEZs are treated as imports.
POS for transport of goods determinable in terms
of Section 12(8) or Section 13(8) of IGST Act,
2017, depending upon location of service
provider/service receiver. Exports are treated as
zero rated supplies.
Such supply is treated as import and present
procedure of payment of duty continues with the
variation that IGST is levied in place of CVD.
Such supply is treated as import and present
procedure of payment continues with the variation
that IGST is levied in place of CVD.
Circular No. 4/4/2017-GST, dated 7-7-2017
clarifies this. Old LUT/bond is valid till 31-7-2017,
after which fresh LUT/Bond in the new format is
required to be submitted.
Circular No. 4/4/2017-GST, dated 7-7-2017
clarifies this. Old LUT/bond is valid till 31-7-2017,
after which fresh LUT/Bond in the new format is
required to be submitted.
Yes, conditions and safeguards have been
specified by Notification No. 16/2017-Central Tax,
dated 7-7-2017 and clarified in detail in Circular
No. 4/4/2017-GST, dated 7-7-2017. The sum and
substance of these documents is that the facility of
Letter of Undertaking in place of a bond is
available to a registered person who is either (a) a
status holder as specified in the Foreign Trade
Policy 2015-2020; or (b) who has received the due
foreign inward remittances amounting to a
minimum of 10% of the export turnover, which
should not be less than one crore rupees, in the
preceding financial year. The person should not
have been prosecuted for any offence under the

In case of export of services, who will pay the
service tax as for Bhutan, Nepal and Bangladesh?
Will GST be debited in duty credit scrips such as
Merchandise Exports from India Scheme (MEIS)
and Service Exports from India Scheme (SEIS)?
In view of definition of ‘export of goods’ given in
Section 2(5) of the IGST Act, 2017, the supply of
goods by the manufacturer to merchant-exporter
cannot be treated as exports as he is not taking out
the goods out of India. He is supplying the goods to
the merchant-exporter. Therefore, is the
manufacturer required to pay CGST and SGST in all
cases of exports by merchant-exporter even though
the goods are being sealed in container for export
from the premises of manufacturer-exporter? Does
the merchant-exporter have the option either to avail
option of Bond/LUT or to pay IGST for export of
such goods?
As per Rule 96A of CGST Rules, 2017, the LUT is to
be accepted by the Jurisdictional Commissioner,
Udaipur whereas in pre GST era the same was
accepted by the jurisdictional Deputy/Assistant
Commissioner Kota. The Commissioner of Kota
region has office at Udaipur which is 290 Kilometers
away from Kota due to which it is impractical to file
LUT at Udaipur with Commissioner as compared to
previous procedure.
As per sub-rule (5) of rule 96A of CGST Rules,
2017, Board will notify where LUT is to be furnished
in place of Bond. Since Board has not notified so far,
therefore, this office is of the view that Bond is to be
furnished in all cases as of now. Please clarify.
Whether in case of assesses exporting goods under
LUT in Central Excise Act, 1944, can export goods
after 1-7-2017 under GST on the basis of the said
LUT filed under Central Excise Act, 1944 until that
LUT expires?
There is lack of clarity in the trade regarding the
eligibility conditions for the LUT/Bond as per the
Notification No. 16/2017-Central Tax. Para i(b) of the
said notification requires the exporter to receive the
due foreign inward remittances amounting to a
minimum 10% of the export turnover, which should
not be less than one crore rupees, in the preceding
Page 269 of 371
Central Goods and Services Tax Act, 2017 (12 of
2017) or under any of the existing laws in a case
where the amount of tax evaded exceeds two
hundred and fifty lakh rupees.
The place of supply is outside India but as the
supplier is located in India, it is a case of inter-
State supply and subject to IGST. It will be zero
rated if the sale proceeds are realized in
convertible foreign exchange.
No.
Yes. The manufacturer would be liable to pay
CGST and SGST. The merchant-exporter has the
option either to avail option of Bond/LUT or to pay
IGST for export of such goods. There is no
provision on the lines of Form H under the CST
Act in the GST.
Circular No. 2/2/2017-GST, dated 4-7-2017 has
clarified that an exporter wishing to export without
payment of integrated tax may approach the
jurisdictional AC/DC for acceptance of bond/LUT.
Circular No. 4/4/2017-GST, dated 7-7-2017 has
further clarified that the bond/LUT shall be
accepted by the jurisdictional Deputy/Assistant
Commissioner having jurisdiction over the principal
place of business of the exporter.
The Board has, vide Notification No. 16/2017-
Central Tax, dated 7-7-2017, specified the
conditions and safeguards under which an
exporter may file a LUT instead of a bond.
In terms of Para 6 of Circular No. 4/4/2017, dated
7-7-2017 exports are allowed under existing
LUTs/Bonds till 31st July, 2017. Exporters shall
submit the LUTs/Bond in the revised format latest
by 31st July, 2017.
Condition i(b) in the said Notification means that:
the registered person should have received at
least 10% of his/her export turnover as foreign
inward remittance in the preceding financial year
and the foreign inward remittance in the preceding
financial year should not be less than one crore
rupees. E.g. if a registered person has an export
 Page 270 of 371

financial year. It is not clear for the exporters having turnover in FY 2016-17 of Rs. 5 crore and has
an export turnover of say Rs. 5 Crore. For such received foreign inward remittance of Rs. 5 crore
people whose 10% of the export turnover is below in the same FY, then he shall satisfy Condition i(b),
one crore, what is the implication? Are those and shall be eligible for execution of LUT.
exporters who have received their total due inward
remittance of e.g. Rs. 5 Crore eligible for availing the
facility of LUT?

Imports in GST Regime

C.B.E. & C. Flyer No. 23, dated 1-1-2018
Introduction
Under the GST regime, Article 269A constitutionally mandates that supply of goods, or of
services, or both in the course of import into the territory of India shall be deemed to be supply
of goods, or of services, or both in the course of inter-State trade or commerce. So import of
goods or services will be treated as deemed inter-State supplies and would be subject to
Integrated tax. While IGST on import of services would be leviable under the IGST Act, the
levy of the IGST on import of goods would be levied under the Customs Act, 1962 read with
the Custom Tariff Act, 1975. The importer of services will have to pay tax on reverse charge
basis. However, in respect of import of online information and database access or retrieval
services (OIDAR) by unregistered, non-taxable recipients, the supplier located outside India
shall be responsible for payment of taxes (IGST). Either the supplier will have to take
registration or will have to appoint a person in India for payment of taxes.

Supply of goods or services or both to a Special Economic Zone developer or a unit shall be
treated as inter-State supply and shall be subject to levy of integrated tax.

Importer Exporter Code (IEC)

As per DGFT’s Trade Notice No. 9, dated 12-6-2017, the PAN of an entity would be used as
the Import Export Code (IEC). Wherever an applicant applies for IEC, the PAN of the applicant
will be authorized as an IEC. The importer would only be required to declare only GSTIN
(where registered under GST).

Import of Goods
The import of goods has been defined in the IGST Act, 2017 as bringing goods into India from
a place outside India. All imports shall be deemed as inter-State supplies and accordingly
Integrated tax shall be levied in addition to the applicable Custom duties. The IGST Act, 2017
provides that the integrated tax on goods imported into India shall be levied and collected in
accordance with the provisions of the Customs Tariff Act, 1975 on the value as determined
under the said Act at the point when duties of customs are levied on the said goods under the
Customs Act, 1962. The integrated tax on goods shall be in addition to the applicable Basic
Customs Duty (BCD) which is levied as per the Customs Tariff Act. In addition, GST
compensation cess, may also be leviable on certain luxury and de-merit goods under the
Goods and Services Tax (Compensation to States) Cess Act, 2017.

The Customs Tariff Act, 1975 has accordingly been amended to provide for levy of integrated
tax and the compensation cess on imported goods. Accordingly, any goods which are
imported into India shall, in addition to the Basic Customs Duty, be liable to integrated tax at
such rate as is leviable under the IGST Act, 2017 on a like article on its supply in India.
Further, the value of the goods for the purpose of levying Integrated tax shall be assessable
value plus Customs Duty levied under the Act, and any other duty chargeable on the said
goods under any law for the time being in force as an addition to, and in the same manner as,
a duty of Customs.
 Page 271 of 371

The value of the imported article for the purpose of levying cess shall be assessable value
plus Basic Customs Duty levied under the Act, and any sum chargeable on that goods under
any law for the time being in force as an addition to, and in the same manner as, a duty of
customs. The integrated tax paid shall not be added to the value for the purpose of calculating
cess.

Let’s take an example

Suppose the assessable value of an article imported into India is Rs. 100/-. Basic Customs
Duty is 10% ad valorem. Education Cess is 3%; Integrated tax rate is 18% and Compensation
Cess is 15%
The taxes will be calculated as under :
Particulars Duty
(A) Assessable Value Rs. 100/-
(B) Basic Customs Duty @ 10% Rs. 10/-
(C) Education Cess @ 3% Rs. 0.30
(D) Value for Integrated Tax Rs. 110.30
(E) Integrated Tax @ 18% Rs. 19.85
(F) Value for Compensation Cess Rs. 110.30
(G) Compensation Cess @ 15% Rs. 16.55
(H) Total Duty (B + C + E + G) Rs. 46.70

Wherever the goods are also leviable to cess under the Goods and Services Tax
(Compensation to States) Cess Act, 2017, the same will be collected on the value taken for
levying integrated tax. Thus, in the above example, in case, cess is leviable, the same would
be levied on Rs. 110.30/-.

In cases where imported goods are liable to Anti-Dumping Duty or Safeguard Duty, value for
calculation of IGST as well as Compensation Cess shall also include Anti-Dumping Duty
amount and Safeguard duty amount.

Import as Baggage
Passenger Baggage are exempted from IGST as well as compensation cess. The basic
customs duty at the rate of 35% and the applicable education cess shall be leviable on the
value which is in excess of the duty free allowances provided under the Baggage Rules, 2016.

Tax Treatment of Goods imported into India and deposited in a warehouse and sold while
in warehouse before clearance from Customs (Circular No. 46/2017, dated 24th November,
2017)
The Customs Act, 1962 provides for removal of goods from a customs station to a warehouse
without payment of duty The said Act has been amended to include ‘warehouse’ in the
definition of “customs area” in order to ensure that an importer would not be required to pay
the Integrated tax at the time of removal of goods from a customs station to a warehouse.

However, the transaction of sale/transfer etc. of the warehoused goods between the importer
and any other person may be at a price higher than the assessable value of such goods. Such
a transaction squarely falls within the definition of “supply” and shall be taxable under the
IGST Act, 2017. It may be noted that as per sub-section (2) of section 7 of the IGST Act, any
 Page 272 of 371

supply of imported goods which takes place before they cross the customs frontiers of India,
shall be treated as an inter-State supply. Thus, such a transaction of sale/transfer will be
subject to IGST under the IGST Act, 2017. The value of such supply shall be determined in
terms of section 15 of the CGST Act, 2017 read with section 20 of the IGST Act, 2017 and the
rules made thereunder, without prejudice to the fact that customs duty (which includes BCD
and applicable IGST payable under the Customs Tariff Act) will be levied and collected at the
ex-bond stage.

Leviability of Integrated Tax on High Seas Sales Transactions (Circular No. 33/2017-
Customs, dated 1st August, 2017)
‘High Sea Sales’ is a common trade practice whereby the original importer sells the goods to a
third person before the goods are entered for customs clearance. After the High sea sale of
the goods, the Customs declarations i.e. Bill of Entry etc. is filed by the person who buys the
goods from the original importer during the said sale. IGST on high sea sale (s) transactions
of imported goods, whether one or multiple, shall be levied and collected only at the time of
importation i.e. when the import declarations are filed before the Customs authorities for the
customs clearance purposes for the first time. Further, value addition accruing in each such
high sea sale shall form part of the value on which IGST is collected at the time of clearance.

Import of goods by 100% EOU’s and SEZs

Import of goods by 100% EOU’s would be governed by Notification No. 52/2003-Cus. as
amended by Notification No. 78/2017-Cus., dated 13-10-2017. EOUs are allowed duty free
import of goods (exempt from Customs duties, IGST & Compensation Cess) under the said
notifications. However, exemption from IGST is only available till 31-3-2018.

Goods imported by a unit or a developer in the Special Economic Zone for authorised
operations are exempted from the whole of integrated tax under section 3(7) of the Customs
Tariff Act, 1975 vide Notification No. 64/2017-Cus., dated 5-7-2017.

Input tax credit of integrated tax

The definition of “input tax” in relation to a registered person also includes the integrated tax
and compensation cess charged on import of goods. Thus, input tax credit of the integrated
tax and the compensation cess, if any, paid at the time of import shall be available to the
importer and the same can be utilized by him as Input Tax credit for payment of taxes on his
outward supplies. The integrated tax and compensation cess paid at the time of import shall in
essence be a pass through to that extent. The input tax credit of compensation cess, however,
can only be used for payment of compensation cess. Furthermore, the Basic Customs Duty
(BCD) and education cess, shall, not be available as input tax credit.

HSN (Harmonised System of Nomenclature) code would be used for the purpose of
classification of goods under the GST regime.

As per section 11 of the IGST Act, 2017 the place of supply of goods, imported into India shall
be the location of the importer. Thus, if an importer say is located in Rajasthan, the state tax
component of the integrated tax shall accrue to the State of Rajasthan.

Import of services
Import of services has specifically been defined under IGST Act, 2017 and refers to supply of
any service where the supplier is located outside India, the recipient is located in India and the
place of supply of service is in India.
 Page 273 of 371

As per the provisions contained in Section 7(1)(b) of the CGST Act, 2017, import of services
for a consideration whether or not in the course or furtherance of business shall be considered
as a supply. Thus, in general, import of services without consideration shall not be considered
as supply. However, business test is not required to be fulfilled for import of service to be
considered as supply.

Furthermore, in view of the provisions contained in Schedule I of the CGST Act, 2017, the
import of services by a taxable person from a related person or from a distinct person as
defined in Section 25 of the CGST Act, 2017, in the course or furtherance of business shall be
treated as supply even if it is made without any consideration.

In view of the provisions contained in Section 14 of the IGST Act, 2017, import of free services
from Google and Facebook by individuals without any consideration are not considered as
supply. Import (Downloading) of a song for consideration for personal use would be a service,
even though the same are not in the course or furtherance of business. Import of some
services by an Indian branch from their parent company, in the course or furtherance of
business, even if without consideration will be a supply.

Thus, import of services can be considered as supply based on whether there is consideration or
not and whether the service is supplied in the course or furtherance of business. The same has
been explained in the table below :
Nature of Service Consideration Business Test
Import of services Necessarily Required Not required
Import of services by a taxable person from a related person Not required Necessarily Required
or from a distinct person

As per the provisions contained in Section 21 of the IGST Act, 2017, all import of services
made on or after the appointed day i.e. 1st July, 2017 will be liable to integrated tax regardless
of whether the transactions for such import of services had been initiated before the appointed
day However, if the tax on such import of services had been paid in full under the existing law,
no tax shall be payable on such import under the IGST Act. In case the tax on such import of
services had been paid in part under the existing law, the balance amount of tax shall be
payable on such import under the IGST Act, 2017. For instance, suppose a supply of service
for Rs. One crore was initiated prior to the introduction of GST, a payment of Rs. 20 lacs has
already been made to the supplier and service tax has also been paid on the same, the
integrated tax shall have to be paid on the balance Rs. 80 lacs.

Section 13 of the IGST Act,2017 provides for determination of place of supply in cases wherein the
location of the supplier of services or the recipient of services is outside India. Thus, this section
provides the place of supply in relation to international or cross-border supply of services. Place of
supply of a service shall determine as to whether a service can be termed as import or export of
service. The specific provisions relating to place of supply for international supply of services are
as below :
S. Situation Place of Supply
No.
1 Default Rule other than specific situations mentioned Location of the recipient of services; If
below not available, location of the supplier of
services.
 Page 274 of 371

2 Services supplied in respect of goods which are Location where the services are
required to be made physically available actually performed
Services which require the physical presence of the
recipient or the person acting on his behalf with the
supplier of services
2.1 Services are provided on goods but from a remote Location where goods are situated at
location by way of electronic means the time of supply of services
2.2 Above provisions is not applicable in respect of goods which are temporarily imported into India
for repairs and are exported after repairs
3 Services supplied directly in relation to an immovable Place where the immovable property is
property located or intended to be located
4 Admission to, or organisation of an event Place where the event is actually held
4.1 Above Services provided in more than one country India
including India
4.2 Above Services provided in more than one state Proportionate Basis
5 Services supplied by a banking company, or a financial Location of the supplier of services
institution, or a non-banking financial company, to
account holders
5.1 Intermediary services
5.2 Services consisting of hiring of means or transport,
including yachts but excluding aircrafts and vessels, up
to a period of one month
6 Transportation of goods, other than by way or mail or Place of destination of such goods
courier
7 Passenger transportation services Place where the passenger embarks
on the conveyance for a continuous
journey
8 Services provided on board a conveyance First scheduled point of departure of
that conveyance for the journey
9 Online information and database access or retrieval Location of the recipient of services
(OIDAR) services

Exports — Furnishing of Bond/Letter of Undertaking for exports — Clarification

C.B.I. & C. Circular No. 40/14/2018-GST, dated 6-4-2018
F. No. 349/82/2017-GST
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Indirect Taxes & Customs, New Delhi

Subject : Clarification on issues related to furnishing of Bond/Letter of Undertaking for

exports - Regarding.

Various communications have been received from the field formations and exporters that the
LUTs being submitted online in FORM GST RFD-11 on the common portal are not visible to
the jurisdictional officers of Central Board of Indirect Taxes and Customs and of a few States.
Therefore, a need was felt for a clarification regarding the acceptance of LUTs being
submitted online in FORM GST RFD-11.
 Page 275 of 371

2. Accordingly, in partial modification of Circular No. 8/8/2017-GST, dated 4th October, 2017,
sub-paras (c), (d) and (e) of para 2 of the said Circular are hereby replaced by the following :

“(c) Form for LUT : The registered person (exporters) shall fill and submit FORM
GST RFD-11 on the common portal. An LUT shall be deemed to be accepted as soon as an
acknowledgement for the same, bearing the Application Reference Number (ARN), is
generated online.

(d) Documents for LUT : No document needs to be physically submitted to the

jurisdictional office for acceptance of LUT.

(e) Acceptance of LUT/bond : An LUT shall be deemed to have been accepted as

soon as an acknowledgement for the same, bearing the Application Reference Number
(ARN), is generated online. If it is discovered that an exporter whose LUT has been so
accepted, was ineligible to furnish an LUT in place of bond as per Notification No. 37/2017-
Central Tax, then the exporter’s LUT will be liable for rejection. In case of rejection, the LUT
shall be deemed to have been rejected ab initio.”

3. It is requested that suitable trade notices may be issued to publicize the contents of this
Circular.

4. Difficulty, if any, in the implementation of the above instructions may please be brought to the
notice of the Board. Hindi version would follow.

Export of goods — Furnishing of Bond/Letter of Under-taking for exports —

Clarification
Circular No. 8/8/2017-GST, dated 4-10-2017
F. No. 349/74/2017-GST (Pt.) Vol. II
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi

Subject :Clarification on issues related to furnishing of Bond/Letter of Undertaking for

exports

In view of the difficulties being faced by the exporters in submission of bonds/Letter of

Undertaking (LUT for short) for exporting goods or services or both without payment of
integrated tax, Notification No. 37/2017-Central Tax, dated 4th October, 2017 has been issued
which extends the facility of LUT to all exporters under rule 96A of the Central Goods and
Services Tax Rules, 2017 (hereafter referred to as “the CGST Rules”) subject to certain
conditions and safeguards. This notification has been issued in supersession of Notification
No. 16/2017-Central Tax, dated 7th July, 2017 except as respects things done or omitted to be
done before such supersession.

2.  In the light of the new notification, three circulars in this matter, namely Circular No. 2/2/2017-
GST, dated 5th July, 2017 [2017 (2) G.S.T.L. 313], Circular No. 4/4/2017-GST, dated 7th July,
2017 [2017 (2) G.S.T.L. 564] and Circular No. 5/5/2017-GST, dated 11th August, 2017 [2017
(5) G.S.T.L. C21], which were issued for providing clarity on the procedure to be followed for
 Page 276 of 371

export under bond/LUT, now require revision and a consolidated circular on this matter is
warranted. Accordingly, to ensure uniformity in the procedure in this regard, the Board, in
exercise of its powers conferred under section 168(1) of the Central Goods and Services Tax
Act, 2017 clarifies the following issues :

(a) Eligibility to export under LUT : The facility of export under LUT has been now
extended to all registered persons who intend to supply goods or services for export
without payment of integrated tax except those who have been prosecuted for any
offence under the CGST Act or the Integrated Goods and Services Tax Act, 2017 or any
of the existing laws and the amount of tax evaded in such cases exceeds two hundred
and fifty lakh rupees unlike Notification No. 16/2017-Central Tax, dated 7th July, 2017
which extended the facility of export under LUT to status holder as specified in paragraph
5 of the Foreign Trade Policy 2015-2020 and to persons receiving a minimum foreign
inward remittance of 10% of the export turnover in the preceding financial year which
was not less than Rs. one crore.
(b) Validity of LUT : The LUT shall be valid for the whole financial year in which it is
tendered. However, in case the goods are not exported within the time specified in sub-
rule (1) of rule 96A of the CGST Rules and the registered person fails to pay the amount
mentioned in the said sub-rule, the facility of export under LUT will be deemed to have
been withdrawn. If the amount mentioned in the said sub-rule is paid subsequently, the
facility of export under LUT shall be restored. As a result, exports, during the period from
when the facility to export under LUT is withdrawn till the time the same is restored, shall
be either on payment of the applicable integrated tax or under bond with bank guarantee.
(c) Form for bond/LUT : Till the time FORM GST RFD-11 is available on the common
portal, the registered person (exporters) may download the FORM GST RFD-11 from the
website of the Central Board of Excise and Customs (www.cbec.gov.in) and furnish the
duly filled form to the jurisdictional Deputy/Assistant Commissioner having jurisdiction
over their principal place of business. The LUT shall be furnished on the letterhead of the
registered person, in duplicate, and it shall be executed by the working partner, the
Managing Director or the Company Secretary or the proprietor or by a person duly
authorised by such working partner or Board of Directors of such company or proprietor.
The bond, wherever required, shall be furnished on non-judicial stamp paper of the value
as applicable in the State in which the bond is being furnished.
(d) Documents for LUT : Self-declaration to the effect that the conditions of LUT have been
fulfilled shall be accepted unless there is specific information otherwise. That is, self-
declaration by the exporter to the effect that he has not been prosecuted should suffice
for the purposes of Notification No. 37/2017-Central Tax, dated 4th October, 2017.
Verification, if any, may be done on post-facto basis.
(e) Time for acceptance of LUT/Bond : As LUT/Bond is a priori requirement for export,
including exports to a SEZ developer or a SEZ unit, the LUT/bond should be processed
on top most priority. It is clarified that LUT/bond should be accepted within a period of
three working days of its receipt along with the self-declaration as stated in para 2(d)
above by the exporter. If the LUT/bond is not accepted within a period of three working
days from the date of submission, it shall deemed to be accepted.
(f) Bank guarantee : Since the facility of export under LUT has been extended to all
registered persons, bond will be required to be furnished by those persons who have
been prosecuted for cases involving an amount exceeding Rupees two hundred and fifty
lakhs. A bond, in all cases, shall be accompanied by a bank guarantee of 15% of the
bond amount.
(g) Clarification regarding running bond : The exporters shall furnish a running bond
where the bond amount would cover the amount of self-assessed estimated tax liability
on the export. The exporter shall ensure that the outstanding integrated tax liability on
exports is within the bond amount. In case the bond amount is insufficient to cover the
said liability in yet to be completed exports, the exporter shall furnish a fresh bond to
 Page 277 of 371

cover such liability. The onus of maintaining the debit/credit entries of integrated tax in
the running bond will lie with the exporter. The record of such entries shall be furnished
to the Central tax officer as and when required.
(h) Sealing by officers : Till mandatory self-sealing is operationalized, sealing of containers,
wherever required to be carried out under the supervision of the officer, shall be done
under the supervision of the central excise officer having jurisdiction over the place of
business where the sealing is required to be done. A copy of the sealing report would be
forwarded to the Deputy/Assistant Commissioner having jurisdiction over the principal
place of business.
(i) Purchases from manufacturer and Form CT-1 : It is clarified that there is no provision
for issuance of CT-1 form which enables merchant exporters to purchase goods from a
manufacturer without payment of tax under the GST regime. The transaction between a
manufacturer and a merchant exporter is in the nature of supply and the same would be
subject to GST.
(j) Transactions with EOUs : Zero rating is not applicable to supplies to EOUs and there is
no special dispensation for them under GST regime. Therefore, supplies to EOUs are
taxable like any other taxable supplies. EOUs, to the extent of exports, are eligible for
zero rating like any other exporter.
(k) Realization of export proceeds in Indian Rupee : Attention is invited to para A(v) Part-I
of RBI Master Circular No. 14/2015-16, dated 1st July, 2015 (updated as on 5th
November, 2015), which states that “there is no restriction on invoicing of export
contracts in Indian Rupees in terms of the Rules, Regulations, Notifications and
Directions framed under the Foreign Exchange Management Act, 1999. Further, in terms
of Para 2.52 of the Foreign Trade Policy (2015-2020), all export contracts and invoices
shall be denominated either in freely convertible currency or Indian rupees but export
proceeds shall be realized in freely convertible currency. However, export proceeds
against specific exports may also be realized in rupees, provided it is through a freely
convertible Vostro account of a non-resident bank situated in any country other than a
member country of Asian Clearing Union (ACU) or Nepal or Bhutan”.
Accordingly, it is clarified that the acceptance of LUT for supplies of goods to Nepal or
Bhutan or SEZ developer or SEZ unit will be permissible irrespective of whether the
payments are made in Indian currency or convertible foreign exchange as long as they
are in accordance with the applicable RBI guidelines. It may also be noted that the
supply of services to SEZ developer or SEZ unit under LUT will also be permissible on
the same lines. The supply of services, however, to Nepal or Bhutan will be deemed to
be export of services only if the payment for such services is received by the supplier in
convertible foreign exchange.
(l) Jurisdictional officer : In exercise of the powers conferred by sub-section (3) of section
5 of the CGST Act, it is hereby stated that the LUT/Bond shall be accepted by the
jurisdictional Deputy/Assistant Commissioner having jurisdiction over the principal place
of business of the exporter. The exporter is at liberty to furnish the LUT/bond before
either the Central Tax Authority or the State Tax Authority till the administrative
mechanism for assigning of taxpayers to the respective authority is implemented.

3.  Circular No. 2/2/2017-GST, dated 5th July, 2017, Circular No. 4/4/2017-GST, dated 7th July,
2017 and Circular No. 5/5/2017-GST, dated 11th August, 2017 are hereby rescinded except
as respects things already done or omitted to be done.

4.  It is requested that suitable trade notices may be issued to publicize the contents of this
circular.

5.  Difficulty, if any, in implementation of the above instructions may please be brought to the notice
of the Board. Hindi version would follow.
 Page 278 of 371

Deemed Exports in GST

C.B.E. & C. Flyer No. 25, dated 1-1-2018
Introduction

“Deemed Exports” refers to supplies of goods manufactured in India (and not services) which
are notified as deemed exports under Section 147 of the CGST/SGST Act, 2017. The supplies
do not leave India. The payment for such supplies is received either in Indian rupees or in
convertible foreign exchange.

Deemed exports are not zero rated supplies by default, unlike the regular exports. Hence all
supplies notified as supply for deemed export will be subject to levy of taxes i.e. such supplies
can be made on payment of tax and cannot be supplied under a Bond/LUT. However, the
refund of tax paid on the supply regarded as Deemed export is admissible to either the
supplier or the recipient. The application for refund has to be filed by the supplier or recipient
(subject to certain conditions) of deemed export supplies, as the case may be.

Categories of supply of goods notified as Deemed Exports

In exercise of powers conferred under Section 147 of the CGST Act, the Central Government has
issued Notification No. 48/2017-Central Tax, dated 18-10-2017 wherein the following categories
of supply of goods has been declared as Deemed Exports :-
Sr. Description of Supply
No.
1 Supply of goods by a registered person against Advance Authorisation
2 Supply of capital goods by a registered person against Export Promotion Capital Goods
Authorisation
3. Supply of goods by a registered person to Export Oriented Unit
4. Supply of gold by a bank or Public Sector Undertaking specified in the notification No.
50/2017-Customs, dated the 30th June, 2017 (as amended) against Advance Authorisation

For the purposes of the above notification, -

1. “Advance Authorisation” means an authorisation issued by the Director General of
Foreign Trade under Chapter 4 of the Foreign Trade Policy 2015-20 for import or
domestic procurement of inputs on pre-import basis for physical exports.
2. Export Promotion Capital Goods Authorisation means an authorisation issued by the
Director General of Foreign Trade under Chapter 5 of the Foreign Trade Policy 2015-20
for import of capital goods for physical exports.
3. “Export Oriented Unit” means an Export Oriented Unit or Electronic Hardware
Technology Park Unit or Software Technology Park Unit or Bio-Technology Park Unit
approved in accordance with the provisions of Chapter 6 of the Foreign Trade Policy
2015-20.

It may be noted that Notification no. 49/2017-Central tax, dated 18-10-2017 also lays down
the list of evidences which are required to be produced by the supplier of deemed export
supplies for claiming refund.
 Page 279 of 371

Procedure to be followed in case of Deemed Export supplies

Rule 89 of the CGST Rules, 2017 as amended vide Notification No. 47/2017-Central Tax,
dated 18-10-2017 allows either the recipient or supplier of such supplies to claim refund of tax
paid thereon.

As mentioned earlier, certain supplies of goods have been notified as deemed export supplies
vide Notification No. 48/2017-Central Tax, dated 18-10-2017. Circular no. 14/14/2017-GST,
dated 6-11-2017 provides for the following procedure and safeguards in respect of supplies to
EOU/EHTP/STP/BTP units-

i. The recipient EOU/EHTP/STP/BTP unit shall give prior intimation in a prescribed

proforma in “Form-A” (appended herewith) bearing a running serial number containing
the goods to be procured, as pre-approved by the Development Commissioner and the
details of the supplier before such deemed export supplies are made. The said intimation
shall be given to -
(a) the registered supplier;
(b) the jurisdictional GST officer in charge of such registered supplier; and
(c) its jurisdictional GST officer.
The registered supplier thereafter will supply goods under tax invoice to the recipient
EOU/EHTP/STP/BTP unit.
ii. On receipt of such supplies, the EOU/EHTP/STP/BTP unit shall endorse the tax invoice
and send a copy of the endorsed tax invoice to -
(a) the registered supplier;
(b) the jurisdictional GST officer in charge of such registered supplier; and
(c) its jurisdictional GST officer.
iv. The endorsed tax invoice will be considered as proof of deemed export supplies by the
registered person to EOU/EHTP/STP/BTP unit.
v. The recipient EOU/EHTP/STP/BTP unit shall maintain records of such deemed export
supplies in digital form, based upon data elements contained in “Form-B” (appended
herewith). The software for maintenance of digital records shall incorporate the feature of
audit trail. While the data elements contained in the Form-B are mandatory, the recipient
units will be free to add or continue with any additional data fields, as per their
commercial requirements. All recipient units are required to enter data accurately and
immediately upon the goods being received in, utilized by or removed from the said unit.
The digital records should be kept updated, accurate, complete and available at the said
unit at all times for verification by the proper officer, whenever required. A digital copy of
Form-B containing transactions for the month, shall be provided to the jurisdictional GST
officer, each month (by the 10th of month) in a CD or Pen drive, as convenient to the said
unit.
3. The above procedure and safeguards are in addition to the terms and conditions to be
adhered to by a EOU/EHTP/STP/BTP unit in terms of the Foreign Trade Policy, 2015-20
and the duty exemption notification being availed by such unit.
Form-A
[Intimation for procurement of supplies from the registered person by Export Oriented Unit
(EOU)/Electronic Hardware Technology Park (EHTP) Unit/Software Technology Park (STP)
unit/Bio-Technology Parks (BTP) Unit under deemed export benefits under section 147 of
CGST Act, 2017 read with Notification No. 48/2017-Central Tax, dated 18-10-2017]
(as per Circular…………………….……………………….……………
dated………………………)
 Page 280 of 371

Running Sr. No. of intimation and

Date………………………………………………………………
LOP No. …………………………………………….. and valid up to
………………………………..
GSTIN ………………………………….
We the, M/s. ………………………………………………………………...… (Name of EOU/EHTP/ STP/BTP
unit and address) wish to procure the Goods namely(Tariff description, Quantity and value)
……………………………….. as allowed under Foreign Trade Policy and Handbook of Procedures 2015-
2020, and approved by Development Commissioner from M/s. ……………….. …………………… [Name
of supplier, address and Goods & Services Tax Identification Number (GSTIN)]. Such supplies on
receipt would be used in manufacturing of goods or rendering services by us. We would also abide
by procedure set out in Circular no………. dated …………………….
Signatures of the
owner of
EOU/EHTP/STP/BT
P unit or
His Authorised
officer
To :
1. The GST officer having Jurisdiction over the EOU/EHTP/STP/BTP unit.
2. The GST officer having Jurisdiction over the registered person intending to supply the
goods.
3. The registered person intending to supply goods to EOU/EHTP/STP/BTP unit.

FORM-B

Form to be maintained by EOU/EHTP/STP/BTP unit for the receipt, use and removal of goods
received under deemed export benefit under section 147 of CGST Act, 2017 read with
Notification No. 48/2017-Central Tax, dated 18-10-2017
Name of EOU/EHTP/STP/BTP unit and address
GSTIN No.
Address of Jurisdiction GST Officer
Who can file refund application in case of Deemed Exports supplies
As per 3rd proviso to Rule 89(1) of CGST Rules, 2017, application for refund in case of
deemed exports can either be filed by the recipient of deemed export supplies. Alternatively,
the supplier of such deemed exports supplies can also file the refund application, in cases
where the recipient does not avail of input tax credit on such supplies and furnishes an
undertaking to the effect that the supplier may claim the refund.
It may be noted that rule 89(4A) of the CGST Rules, 2017 as amended vide Notification
no. 75/2017-Central Tax, dated 29-12-2017 (w.e.f. 23-10-2017), the recipient of deemed
export supplies can claim refund of input tax credit availed in respect of other inputs or input
services used in making zero-rated supply of goods or services or both, in case of deemed
export supplies on which the supplier has availed the benefit of notification No. 48/2017-
Central Tax, dated 18-10-2017.
Further Rule 96(9) of the CGST Rules, 2017 as amended vide Notification no. 75/2017-
Central Tax, dated 29-12-2017 (w.e.f. 23-10-2017) also provides that the recipient of deemed
export supplies on which the supplier has availed the benefit of notification No. 48/2017-
Central Tax, dated 18-10-2017 cannot export on payment of integrated tax.
Time Limit for filing refund claim
 Page 281 of 371

For obtaining refund the recipient or supplier of deemed export supplies has to file an
application in FORM GST RFD-01 through the Common Portal, either directly or through a
Facilitation Centre notified by the Commissioner before the expiry of two years from, the date
on which the return relating to such deemed export supplies is to be furnished electronically.
The application has to be accompanied by a statement containing the number and date of
invoices along with such other evidences as may be notified in this behalf.
Manual filing and processing of refund claims on account of deemed export supplies
Due to the non-availability of the refund module on the common portal, it has been
decided by the competent authority, that the applications/documents/forms pertaining to refund
claims on account of deemed export supplies shall be filed and processed manually till further
orders. Circular No. 17/17/2017-GST, dated 15-11-2017 and Circular no. 24/24/2017-GST,
dated 21-12-2017 prescribing the detailed procedure have been issued in this regard.

Procurement of supplies of goods from DTA by Export Oriented Unit (EOU)/Electronic

Hardware Technology Park (EHTP) Unit/Software Technology Park (STP) Unit/Bio-
Technology Parks (BTP) Unit under deemed export benefits under Section 147 of
CGST Act, 2017 — Procedure & Safeguards
C.B.E. & C. Circular No. 14/14/2017-GST, dated 6-11-2017
F. No. 349/21/2016 GST
Subject : Procedure regarding procurement of supplies of goods from DTA by
Export Oriented Unit (EOU)/Electronic Hardware Technology Park
(EHTP) Unit/Software Technology Park (STP) Unit/Bio-Technology
Parks (BTP) Unit under deemed export benefits under section 147 of
CGST Act, 2017 - Regarding.

In accordance with the decisions taken by the GST Council in its 22nd meeting held on 6-10-
2017 at New Delhi to resolve certain difficulties being faced by exporters post-GST, it has
been decided that supplies of goods by a registered person to EOUs etc. would be treated as
deemed exports under Section 147 of the CGST Act, 2017 (hereinafter referred to as ‘the Act’)
and refund of tax paid on such supplies can be claimed either by the recipient or supplier of
such supplies. Accordingly, Notification No. 48/2017-Central Tax, dated 18-10-2017 has been
issued to treat such supplies to EOU/EHTP/STP/BTP units as deemed exports. Further, rule
89 of the CGST Rules, 2017 (hereinafter referred to as ‘the Rules’) has been amended vide
Notification No. 47/2017-Central Tax, dated 18-10-2017 to allow either the recipient or supplier
of such supplies to claim refund of tax paid thereon.

2. For supplies to EOU/EHTP/STP/BTP units in terms of Notification No. 48/2017-Central Tax,

dated 18-10-2017, the following procedure and safeguards are prescribed -
(i) The recipient EOU/EHTP/STP/BTP unit shall give prior intimation in a prescribed
proforma in “Form-A” (appended herewith) bearing a running serial number containing
the goods to be procured, as pre-approved by the Development Commissioner and the
details of the supplier before such deemed export supplies are made. The said intimation
shall be given to -
(a) the registered supplier;
(b) the jurisdictional GST officer in charge of such registered supplier; and
(c) its jurisdictional GST officer.
(ii) The registered supplier thereafter will supply goods under tax invoice to the recipient
EOU/EHTP/STP/BTP unit.
(iii) On receipt of such supplies, the EOU/EHTP/STP/BTP unit shall endorse the tax invoice
and send a copy of the endorsed tax invoice to -
(a) the registered supplier;
 Page 282 of 371

(b) the jurisdictional GST officer in charge of such registered supplier; and
(c) its jurisdictional GST officer.
(iv) The endorsed tax invoice will be considered as proof of deemed export supplies by the
registered person to EOU/EHTP/STP/BTP unit.
(v) The recipient EOU/EHTP/STP/BTP unit shall maintain records of such deemed export
supplies in digital form, based upon data elements contained in “Form-B” (appended
herewith). The software for maintenance of digital records shall incorporate the feature of
audit trail. While the data elements contained in the Form-B are mandatory, the recipient
units will be free to add or continue with any additional data fields, as per their
commercial requirements. All recipient units are required to enter data accurately and
immediately upon the goods being received in, utilized by or removed from the said unit.
The digital records should be kept updated, accurate, complete and available at the said
unit at all times for verification by the proper officer, whenever required. A digital copy of
Form-B containing transactions for the month, shall be provided to the jurisdictional GST
officer, each month (by the 10th of month) in a CD or Pen drive, as convenient to the said
unit.

3. The above procedure and safeguards are in addition to the terms and conditions to be
adhered to by a EOU/EHTP/STP/BTP unit in terms of the Foreign Trade Policy, 2015-20 and
the duty exemption notification being availed by such unit.

4. It is requested that suitable trade notices may be issued to publicize the contents of this
circular.

5. Difficulty, if any, in implementation of the above instructions may please be brought to the
notice of the Board. Hindi version would follow.

FORM-A
(Intimation for procurement of supplies from the registered person by Export Oriented
Unit (EOU)/Electronic Hardware Technology Park (EHTP) Unit/Software Technology Park
(STP) unit/Bio-Technology Parks (BTP) Unit under deemed export benefits under section 147
of CGST Act, 2017 read with Notification No. 48/2017-Central Tax, dated 18-10-2017)
(as per Circular ------- dated ----------)
Running Sr. No. of intimation and Date_________________
LOP No. ------------ and valid upto -----------
GSTIN ---------
We the, M/s. ………………….. (Name of EOU/EHTP/STP/BTP unit and address) wish to
procure the Goods namely (Tariff description, Quantity and value) -----------------------------, as allowed
under Foreign Trade Policy and Handbook of Procedures 2015-2020, and approved by Development
Commissioner from M/s. ------------------------------ [Name of supplier, address and Goods & Services
Tax Identification Number (GSTIN)]. Such supplies on receipt would be used in manufacturing of
goods or rendering services by us. We would also abide by procedure set out in Circular no. -------
dated ----.

Signatures of the owner of

EOU/EHTP/STP/BTP unit or
his
Authorised officer
 Page 283 of 371

To :
1. The GST officer having Jurisdiction over the EOU/EHTP/STP/BTP unit.
2. The GST officer having Jurisdiction over the registered person intending to supply the
goods.
3. The registered person intending to supply goods to EOU/EHTP/ STP/BTP unit.

For the month

of…………………

FORM-B
Form to be maintained by EOU/EHTP/STP/BTP unit for the receipt, use and removal of goods
received under deemed export benefit under section 147 of CGST Act, 2017 read with
Notification No. 48/2017-Central Tax, dated 18-10-2017
(as per Circular---------- dated----------)
Name of EOU/EHTP/STP/BTP unit and address
GSTIN No.
Address of Jurisdiction GST Officer

Sr. Date of Details of Jurisdictional Invoice Details of supplies Amount of GST paid by Date of
No. prior registered GST officer no. and received supplier send-
intima- person details of date of ing
tion registered registered endor-
given person person sed
for Na- Add- GST- Desi- Jurisdic- No. DateDescrip- Val- Quan- Cen- State Integra- Cess copy of
procur- me ress IN gna- tional of tion ue tity tral Tax/ ted tax tax
ing tion Identifier Invo- tax Union invoice
deemed such as ice terri- by
export Division tory EOU
supp- name/ Tax
lies No.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Removal for processing Remarks Other removals/Returns Balance in
(The goods stock
removed for
processing shall be
accounted in a
manner that
enables the
verification of input-
output norms,
extent of waste,
scrap generated
etc)
Date & Quan- value Purpose of Date Quan- value Quan- Value
time of tity removal & time tity tity
Removal
 Page 284 of 371

18 19 20 21 22 23 24 25 26 27

OUR COMMENTS ON IMPORT/EXPORT UNDER GST

 Imported goods are liable for payment of Basic customs duty, IGST and social welfare
surcharge
 Services received by any person in India from person outside India, the person in India
is liable to pay IGST under reverse charge basis.
 In case of payment of ocean freight by the importer within India, then the importer is
liable to pay IGST on the said freight under reverse charge basis. (However the said
issue is under dispute and at present the High court has granted stay on the issue).
 The new Merchant Exporter concept is been introduced in the GST. As per Notification
No.40/2017-IT & No.41/2017-CT both dt.23.10.2017 the supplier can supply the goods
for export through merchant exporter on payment of concessional rates of GST @ 1%.
 However if the merchant exporter fails to export the goods within stipulated time period
of ninety days from the date of invoice, then the supplier will be liable to pay differential
GST along with interest and merchant exporter will not be responsible as the supply to
merchant exporter at concessional rate is not direct export of the supplier and hence
won’t be declared in return as export but to be shown as domestic supply only.
 Letter of Undertakings can be given by the exporter(manufacturer/trader/service
provider) electronically through common portal and will be valid for the Financial Year
(not for 12 months).
 Filing of ARE-1 is not mandatory yet and hence issue of export GST invoices by the
supplier will be sufficient under GST regime. Also there is no need to issue tax invoice
and export invoice separately. The tax invoice number should be mentioned on the
shipping bill. Please note that in case where the tax invoice and export invoice both are
issued and on the shipping bill the reference of export invoice is given, the refund claim
of exporter may get stuck.
 There is no need to submit proof of export separately. Mere declaration of tax invoice
(given to exporter) and shipping bill details in GSTR-1 will be held as sufficient proof of
export.
 In case of export via Merchant exporter, it is better to obtain copy of the shipping bill from
the merchant exporter showing cross reference of suppliers tax invoice issued on
merchant exporter. The supplier shall submit the same to the Department whenever
demanded.
 Under IGST law export and supplies made to SEZ unit or developer have been term as
zero rated supply.
 The export and supplies to SEZ can be made on payment of IGST (which can be
refunded subsequently) or without payment of IGST against LUT.
 SEZ refund to be filed in RFD-01 by the assessee. Whereas for GST on exported goods
there is no need to file separate Refund Application Form by the claimant.
 In case of supply made to Export Oriented units the same will be treated as Deemed
Export. On such supply the tax is payable by the supplier and either supplier or EOU can
claim refund of the said tax paid in terms of Notification No.47/2017, dt.18.10.2017 &
Notification No.48/2017, dt.18.10.2017 read with circular dt.06.11.2017.

FTP and GST

 Page 285 of 371

 Importer/exporter registered with GSTN, importer/exporter would need to declare only

GSTIN at the time of import and export of goods and the importers who are not
registered under GST would use their PAN for imports.
 GST will not be debited in duty credit scrip such as Merchandise Export from India
Scheme(MEIS) and Service Exports From India Schemes(SEIS). MEIS and SEIS scrip
would be used only for payment of basic custom duty.
 100% EOU will not get ab initio exemption of IGST for imports. In GST regime, EOUs will
have to pay IGST on imports. Refund of input tax credit(ITC) can be taken after exports
as per ITC/ refund rules.
 Only SEZs have been exempted from payment of IGST on import.
 Only basic custom duty will be exempted on imports made under advance authorization.
IGST will have to be paid on imports. IGST paid on import will be refunded on making
Exports.

Warehoused goods - Applicability of IGST/GST on goods transferred.

 when goods are remain deposited in customs bonded warehouse are transferred by the
important to another person, the transaction will be subject to payment of IGST at the
value determined as per section 20 of the IGST Act read with Section 15 of the CGST
Act, 2017 and the rules made thereunder and the tax liability shall be determined as per
section 9 of the CGST Act 2017.
 however, so long as such goods remain deposited in the warehouse the custom duty to
be collected shall remain deferred. Further, it is only when such goods are ex-bonded
under section 68, deferred duty shall be collected, at the value as had been determined
under section 14 of the customs act, 1962 in addition IGST leviable, as indicated above
 position from 1-4-2018 - Sub Section (8A) has been inserted in section 3 of the Customs
Tariff Act w.e.f.31.03.2018 so as provide that the valuation for the purpose of levy of
integrated tax on warehoused imported goods at the time of clearance for home
consumption would be either the transaction value or the value as per sub section (8) of
section 3 of the CTA (i.e. Valuation done at the time of filing the into-bond bill of entry),
whichever is higher.
 Thurs the integrated tax shall be levied and collected at the time of final clearance of
warehoused goods for home consumption i.e.at the time of filing and ex-Bond bill of
entry and the value addition accruing at each stage of supply shall form part of the value
on which the integrated tax would be payable at the time of clearance of warehouse
goods for home consumption.
 In other words, the supply of goods before their clearance from the warehouse would not
be subject to the levy of integrated tax and the same would be levied and collected only
when the warehouse goods are cleared for home consumption from the customs bonded
warehouse. (Refer Circular dt.25-5-2018).
 Page 286 of 371

REFUND UNDER GST

Sec.54 of CGST Act - Refund of Tax

(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other
amount paid by him, may make an application before the expiry of two years from the
relevant date in such form and manner as may be prescribed:

Provided that a registered person, claiming refund of any balance in the electronic cash
ledger in accordance with the provisions of sub-section (6) of section 49, may claim such
refund in the return furnished under section 39 in such manner as may be prescribed.

(2) Subject to the provisions of sub-section (10), a registered person may claim refund of
any unutilised input tax credit at the end of any tax period:

Provided that no refund of unutilised input tax credit shall be allowed in cases other
than-
(i) zero rated supplies made without payment of tax;
(ii) where the credit has accumulated on account of rate of tax on inputs being
higher than the rate of tax on output supplies (other than nil rated or fully exempt
supplies), except supplies of goods or services or both as may be notified by the
Government on the recommendations of the Council:

Provided further that no refund of unutilised input tax credit shall be allowed in cases
where the goods exported out of India are subjected to export duty.

Provided also that no refund of input tax credit shall be allowed, if the supplier of goods
or services or both avails of drawback in respect of central tax or claims refund of the
integrated tax paid on such supplies.

(3) Refund application Procedure-

a) The application shall be accompanied by—

(a) such documentary evidence as may be prescribed to establish that a refund is due
to the applicant; and
(b) such documentary or other evidence (including the documents referred to in
section 33) as the applicant may furnish to establish that the amount of tax and
interest, if any, paid on such tax or any other amount paid in relation to which such
refund is claimed was collected from, or paid by, him and the incidence of such tax
and interest had not been passed on to any other person:

Provided that where the amount claimed as refund is less than two lakh rupees, it
shall not be necessary for the applicant to furnish any documentary and other
evidences but he may file a declaration, based on the documentary or other evidences
available with him, certifying that the incidence of such tax and interest had not been
passed on to any other person.

(5) If, on receipt of any such application, the proper officer is satisfied that the whole or part
of the amount claimed as refund is refundable, he may make an order accordingly and
the amount so determined shall be credited to the Fund referred to in section 57.
 Page 287 of 371

(6) Notwithstanding anything contained in sub-section (5), the proper officer may, in the
case of any claim for refund on account of zero-rated supply of goods or services or both
made by registered persons, other than such category of registered persons as may be
notified by the Government on the recommendations of the Council, refund on a
provisional basis, ninety per cent. of the total amount so claimed, excluding the amount
of input tax credit provisionally accepted, in such manner and subject to such conditions,
limitations and safeguards as may be prescribed and thereafter make an order under
sub-section (5) for final settlement of the refund claim after due verification of documents
furnished by the applicant.

(7) The proper officer shall issue the order under sub-section (5) within sixty days from the
date of receipt of application complete in all respects.

(8) Notwithstanding anything contained in sub-section (5), the refundable amount shall,
instead of being credited to the Fund, be paid to the applicant, if such amount is
relatable to—

(a) refund of tax paid on export of goods or services or both or on inputs or input
services used in making such exports;
(b) refund of unutilised input tax credit under sub-section (3);
(c) refund of tax paid on a supply which is not provided, either wholly or partially, and
for which invoice has not been issued, or where a refund voucher has been issued;
(d) refund of tax in pursuance of section 77;
(e) the tax and interest, if any, or any other amount paid by the applicant, if he had not
passed on the incidence of such tax and interest to any other person; or
(f) the tax or interest borne by such other class of applicants as the Government may,
on the recommendations of the Council, by notification, specify.

(9) Notwithstanding anything to the contrary contained in any judgment, decree, order or
direction of the Appellate Tribunal or any court or in any other provisions of this Act or the
rules made thereunder or in any other law for the time being in force, no refund shall be
made except in accordance with the provisions of sub-section (8).

(10) Where any refund is due under sub-section (3) to a registered person who has defaulted
in furnishing any return or who is required to pay any tax, interest or penalty, which has
not been stayed by any court, Tribunal or Appellate Authority by the specified date, the
proper officer may—

(a) withhold payment of refund due until the said person has furnished the return or
paid the tax, interest or penalty, as the case may be;
(b) deduct from the refund due, any tax, interest, penalty, fee or any other amount
which the taxable person is liable to pay but which remains unpaid under this Act or
under the existing law.

Explanation.-For the purposes of this sub-section, the expression “specified date”

shall mean the last date for filing an appeal under this Act.

(11) Where an order giving rise to a refund is the subject matter of an appeal or further
proceedings or where any other proceedings under this Act is pending and the
Commissioner is of the opinion that grant of such refund is likely to adversely affect the
revenue in the said appeal or other proceedings on account of malfeasance or fraud
committed, he may, after giving the taxable person an opportunity of being heard,
withhold the refund till such time as he may determine.
 Page 288 of 371

(12) Where a refund is withheld under sub-section (11), the taxable person shall,
notwithstanding anything contained in section 56, be entitled to interest at such rate not
exceeding six per cent. as may be notified on the recommendations of the Council, if as
a result of the appeal or further proceedings he becomes entitled to refund.

(13) Notwithstanding anything to the contrary contained in this section, the amount of
advance tax deposited by a casual taxable person or a non-resident taxable person
under sub-section (2) of section 27, shall not be refunded unless such person has, in
respect of the entire period for which the certificate of registration granted to him had
remained in force, furnished all the returns required under section 39.

(14) Notwithstanding anything contained in this section, no refund under sub-section (5) or
sub-section (6) shall be paid to an applicant, if the amount is less than one thousand
rupees.

Explanation. - For the purposes of this section,––

(1) “refund” includes refund of tax paid on zero-rated supplies of goods or services or
both or on inputs or input services used in making such zero-rated supplies, or
refund of tax on the supply of goods regarded as deemed exports, or refund of
unutilised input tax credit as provided under sub-section (3).

(2) “relevant date” means—

(a) in the case of goods exported out of India where a refund of tax paid is
available in respect of goods themselves or, as the case may be, the inputs or
input services used in such goods,––

(i) if the goods are exported by sea or air, the date on which the ship or the
aircraft in which such goods are loaded, leaves India; or
(ii) if the goods are exported by land, the date on which such goods pass the
frontier; or
(iii) if the goods are exported by post, the date of dispatch of goods by the
Post Office concerned to a place outside India;

(b) in the case of supply of goods regarded as deemed exports where a refund of
tax paid is available in respect of the goods, the date on which the return
relating to such deemed exports is furnished;

(c) in the case of services exported out of India where a refund of tax paid is
available in respect of services themselves or, as the case may be, the inputs
or input services used in such services, the date of––

(i) receipt of payment in convertible foreign exchange or in Indian rupees

wherever permitted by the Reserve Bank of India, where the supply of
services had been completed prior to the receipt of such payment; or
(ii) issue of invoice, where payment for the services had been received in
advance prior to the date of issue of the invoice;

(d) in case where the tax becomes refundable as a consequence of judgment,

decree, order or direction of the Appellate Authority, Appellate Tribunal or any
court, the date of communication of such judgment, decree, order or direction;
 Page 289 of 371

(e) in the case of refund of unutilised input tax credit under clause (ii) of the first
proviso to sub-section (3), the due date for furnishing of return under section 39
for the period in which such claim for refund arises;

(f) in the case where tax is paid provisionally under this Act or the rules made
thereunder, the date of adjustment of tax after the final assessment thereof;

(g) in the case of a person, other than the supplier, the date of receipt of goods or
services or both by such person; and

(h) in any other case, the date of payment of tax.

Rule 89 of CGST Rules - Application for refund of tax, interest, penalty, fees or any other
amount.
(1) Any person, except the persons covered under notification issued under section
55,claiming refund of any tax, interest, penalty, fees or any other amount paid by him,
other than refund of integrated tax paid on goods exported out of India, may file an
application electronically in FORM GST RFD-01through the common portal, either
directly or through a Facilitation Centre notified by the Commissioner:

Provided that any claim for refund relating to balance in the electronic cash ledger in
accordance with the provisions of sub-section (6) of section 49 may be made through
the return furnished for the relevant tax period in FORM GSTR-3 or FORM GSTR-4 or
FORM GSTR-7, as the case may be:

Provided further that in respect of supplies to a Special Economic Zone unit or a Special
Economic Zone developer, the application for refund shall be filed by the –

(a) supplier of goods after such goods have been admitted in full in the Special
Economic Zone for authorised operations, as endorsed by the specified officer of the
Zone;
(b) supplier of services along with such evidence regarding receipt of services for
authorised operations as endorsed by the specified officer of the Zone:

Provided also that in respect of supplies regarded as deemed exports, the application
may be filed by, -
(a) the recipient of deemed export supplies; or
(b) the supplier of deemed export supplies in cases where the recipient does not avail of
input tax credit on such supplies and furnishes an undertaking to the effect that the
supplier may claim the refund

Provided also that refund of any amount, after adjusting the tax payable by the applicant
out of the advance tax deposited by him under section 27 at the time of registration, shall
be claimed in the last return required to be furnished by him.

(2) The application under sub-rule (1) shall be accompanied by any of the following
documentary evidences in Annexure 1 in Form GST RFD-01, as applicable, to establish
that a refund is due to the applicant, namely:-

(a) the reference number of the order and a copy of the order passed by the proper
officer or an appellate authority or Appellate Tribunal or court resulting in such
 Page 290 of 371

refund or reference number of the payment of the amount specified in

subsection (6) of section 107 and sub-section (8) of section 112 claimed as
refund;
(b) a statement containing the number and date of shipping bills or bills of export
and the number and the date of the relevant export invoices, in a case where the
refund is on account of export of goods;
(c) a statement containing the number and date of invoices and the relevant Bank
Realisation Certificates or Foreign Inward Remittance Certificates, as the case
may be, in a case where the refund is on account of the export of services;
(d) a statement containing the number and date of invoices as provided in rule 46
along with the evidence regarding the endorsement specified in the second
proviso to sub-rule (1) in the case of the supply of goods made to a Special
Economic Zone unit or a Special Economic Zone developer;
(e) a statement containing the number and date of invoices, the evidence regarding
the endorsement specified in the second proviso to sub-rule (1) and the details
of payment, along with the proof thereof, made by the recipient to the supplier for
authorised operations as defined under the Special Economic Zone Act, 2005, in
a case where the refund is on account of supply of services made to a Special
Economic Zone unit or a Special Economic Zone developer;
(f) a declaration to the effect that tax has not been collected from the Special
Economic Zone unit or the Special Economic Zone developer, in a case where
the refund is on account of supply of goods or services or both made to a
Special Economic Zone unit or a Special Economic Zone developer;
(g) a statement containing the number and date of invoices along with such other
evidence as may be notified in this behalf, in a case where the refund is on
account of deemed exports;
(h) a statement containing the number and the date of the invoices received and
issued during a tax period in a case where the claim pertains to refund of any
unutilised input tax credit under sub-section (3) of section 54 where the credit
has accumulated on account of the rate of tax on the inputs being higher than
the rate of tax on output supplies, other than nil-rated or fully exempt supplies;
(i) the reference number of the final assessment order and a copy of the said order
in a case where the refund arises on account of the finalisation of provisional
assessment;
(j) a statement showing the details of transactions considered as intra-State supply
but which is subsequently held to be inter-State supply;
(k) a statement showing the details of the amount of claim on account of excess
payment of tax;
(l) a declaration to the effect that the incidence of tax, interest or any other amount
claimed as refund has not been passed on to any other person, in a case where
the amount of refund claimed does not exceed two lakh rupees:
Provided that a declaration is not required to be furnished in respect of the
cases covered under clause (a) or clause (b) or clause (c) or clause (d) or clause
(f) of sub-section (8) of section 54;

(m) a Certificate in Annexure 2 of FORM GST RFD-01 issued by a chartered

accountant or a cost accountant to the effect that the incidence of tax, interest or
 Page 291 of 371

any other amount claimed as refund has not been passed on to any other
person, in a case where the amount of refund claimed exceeds two lakh rupees:
Provided that a certificate is not required to be furnished in respect of cases
covered under clause (a) or clause (b) or clause (c) or clause (d) or clause (f) of
subsection (8) of section 54;
Explanation.– For the purposes of this rule-
(i) in case of refunds referred to in clause (c) of sub-section (8) of section 54,
the expression ―invoice‖ means invoice conforming to the provisions
contained in section 31;
(ii) where the amount of tax has been recovered from the recipient, it shall be
deemed that the incidence of tax has been passed on to the ultimate
consumer.
(3) Where the application relates to refund of input tax credit, the electronic credit ledger
shall be debited by the applicant by an amount equal to the refund so claimed.

(4) In the case of zero-rated supply of goods or services or both without payment of tax
under bond or letter of undertaking in accordance with the provisions of sub-section (3)
of section 16 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), refund of
input tax credit shall be granted as per the following formula –

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated

supply of services) x Net ITC ÷Adjusted Total Turnover
Where, -

(A) "Refund amount" means the maximum refund that is admissible;

(B) "Net ITC" means input tax credit availed on inputs and input services during the relevant
period other than the input tax credit availed for which refund is claimed under sub-rules
(4A) or (4B) or both;
(C) "Turnover of zero-rated supply of goods" means the value of zero-rated supply of goods
made during the relevant period without payment of tax under bond or letter of
undertaking, other than the turnover of supplies in respect of which refund is claimed
under sub-rules (4A) or (4B) or both;
(D) "Turnover of zero-rated supply of services" means the value of zero-rated supply of
services made without payment of tax under bond or letter of undertaking, calculated in
the following manner, namely:-
Zero-rated supply of services is the aggregate of the payments received during the
relevant period for zero-rated supply of services and zero-rated supply of services where
supply has been completed for which payment had been received in advance in any
period prior to the relevant period reduced by advances received for zero-rated supply of
services for which the supply of services has not been completed during the relevant
period;

(E) "Adjusted Total turnover" means the sum total of the value of-

(a) the turnover in a State or a Union territory, as defined under clause (112) of section
2, excluding the turnover of services; and
(b) the turnover of zero-rated supply of services determined in terms of clause (D) above
and non-zero-rated supply of services,
 Page 292 of 371

excluding-
(i) the value of exempt supplies other than zero-rated supplies; and
(ii) the turnover of supplies in respect of which refund is claimed under sub-rule (4A)
or sub-rule (4B) or both, if any,

during the relevant period

(F) Relevant period means the period for which the claim has been filed.

(4A) In the case of supplies received on which the supplier has availed the benefit of the
Government of India, Ministry of Finance, notification No. 48/2017-Central Tax dated the
18th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3,
Subsection (i), vide number G.S.R 1305 (E) dated the 18th October, 2017, refund of
input tax credit, availed in respect of other inputs or input services used in making zero-
rated supply of goods or services or both, shall be granted.

(4B) Where the person claiming refund of unutilised input tax credit on account of zero rated
supplies without payment of tax has –

(a) received supplies on which the supplier has availed the benefit of the
Government of India, Ministry of Finance, notification No. 40/2017-Central Tax
(Rate), dated the 23rd October, 2017, published in the Gazette of India,
Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1320 (E),
dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate),
dated the 23rd October, 2017, published in the Gazette of India, Extraordinary,
Part II, Section 3, Sub-section (i), vide number G.S.R 1321(E), dated the 23rd
October, 2017; or

(b) availed the benefit of notification No. 78/2017-Customs, dated the 13th October,
2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-
section (i), vide number G.S.R 1272(E), dated the 13th October, 2017 or
notification No. 79/2017-Customs, dated the 13th October, 2017, published in the
Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number
G.S.R 1299(E), dated the 13th October, 2017,

the refund of input tax credit, availed in respect of inputs received under the said
notifications for export of goods and the input tax credit availed in respect of other inputs
or input services to the extent used in making such export of goods, shall be granted.

(5) In the case of refund on account of inverted duty structure, refund of input tax credit
shall be granted as per the following formula:-
Maximum Refund Amount = {(Turnover of inverted rated supply of goods and
services) x Net ITC÷ Adjusted Total Turnover} - tax
payable on such inverted rated supply of goods
and services.
Explanation:-For the purposes of this sub-rule, the expressions –

(a) Net ITC shall mean input tax credit availed on inputs during the relevant period other
than the input tax credit availed for which refund is claimed under sub-rules (4A) or
(4B) or both; and
 Page 293 of 371

(a) Adjusted Total turnover” and “relevant period" shall have the same meaning as
assigned to them in sub-rule (4).

Rule 90 of CGST Rules - Acknowledgement

(1) Where the application relates to a claim for refund from the electronic cash ledger, an
acknowledgement in FORM GST RFD-02 shall be made available to the applicant through
the common portal electronically, clearly indicating the date of filing of the claim for refund
and the time period specified in sub-section (7) of section 54 shall be counted from such
date of filing.

(2) The application for refund, other than claim for refund from electronic cash ledger, shall be
forwarded to the proper officer who shall, within a period of fifteen days of filing of the said
application, scrutinize the application for its completeness and where the application is
found to be complete in terms of sub-rule (2), (3) and (4)of rule 89, an acknowledgement in
FORM GST RFD-02 shall be made available to the applicant through the common portal
electronically, clearly indicating the date of filing of the claim for refund and the time period
specified in sub-section (7) of section 54 shall be counted from such date of filing.

(3) Where any deficiencies are noticed, the proper officer shall communicate the deficiencies to
the applicant in FORM GST RFD-03 through the common portal electronically, requiring him
to file a fresh refund application after rectification of such deficiencies.

(4) Where deficiencies have been communicated in FORM GST RFD-03 under the State
Goods and Service Tax Rules, 2017, the same shall also deemed to have been
communicated under this rule along with the deficiencies communicated under sub-rule (3).

Rule 91 of CGST Rules - Grant of provisional refund.

(1) The provisional refund in accordance with the provisions of sub-section (6) of section 54
shall be granted subject to the condition that the person claiming refund has, during any
period of five years immediately preceding the tax period to which the claim for refund
relates, not been prosecuted for any offence under the Act or under an existing law
where the amount of tax evaded exceeds two hundred and fifty lakh rupees.

(2) The proper officer, after scrutiny of the claim and the evidence submitted in support
thereof and on being prima facie satisfied that the amount claimed as refund under sub-
rule (1) is due to the applicant in accordance with the provisions of sub-section (6) of
section 54, shall make an order in FORM GST RFD-04, sanctioning the amount of
refund due to the said applicant on a provisional basis within a period not exceeding
seven days from the date of the acknowledgement under sub-rule (1) or sub-rule (2) of
rule 90.

Provided that the order issued in FORM GST RFD-04 shall not be required to be
revalidated by the proper officer

(3) The proper officer shall issue a payment advice in FORM GST RFD-05 for the amount
sanctioned under sub-rule (2) and the same shall be electronically credited to any of the
bank accounts of the applicant mentioned in his registration particulars and as specified
in the application for refund.

Provided that the payment advice in FORM GST RFD-05 shall be required to be
revalidated where the refund has not been disbursed within the same financial year in
which the said payment advice was issued.
 Page 294 of 371

Rule 92 of CGST Rules - Order sanctioning refund.

(1) Where, upon examination of the application, the proper officer is satisfied that a refund
under sub-section (5) of section 54 is due and payable to the applicant, he shall make an
order in FORM GST RFD-06 sanctioning the amount of refund to which the applicant is
entitled, mentioning therein the amount, if any, refunded to him on a provisional basis under
sub-section (6) of section 54, amount adjusted against any outstanding demand under the
Act or under any existing law and the balance amount refundable:

Provided that in cases where the amount of refund is completely adjusted against any
outstanding demand under the Act or under any existing law, an order giving details of the
adjustment shall be issued in Part A of FORM GST RFD-07.

(2) Where the proper officer or the Commissioner is of the opinion that the amount of refund is
liable to be withheld under the provisions of sub-section (10) or, as the case may be, sub-
section (11) of section 54, he shall pass an order in Part B of FORM GST RFD-07 informing
him the reasons for withholding of such refund.

(3) Where the proper officer is satisfied, for reasons to be recorded in writing, that the whole or
any part of the amount claimed as refund is not admissible or is not payable to the applicant,
he shall issue a notice in FORM GST RFD-08to the applicant, requiring him to furnish a
reply in FORM GST RFD-09 within a period of fifteen days of the receipt of such notice and
after considering the reply, make an order in FORM GST RFD-06 sanctioning the amount of
refund in whole or part, or rejecting the said refund claim and the said order shall be made
available to the applicant electronically and the provisions of sub-rule (1) shall, mutatis
mutandis, apply to the extent refund is allowed:

Provided that no application for refund shall be rejected without giving the applicant an
opportunity of being heard.

(4) Where the proper officer is satisfied that the amount refundable under sub-rule (1) or sub-
rule (2) is payable to the applicant under sub-section (8) of section 54, he shall make an
order in FORM GST RFD-06 and issue a payment advice in FORM GST RFD-05 for the
amount of refund and the same shall be electronically credited to any of the bank accounts
of the applicant mentioned in his registration particulars and as specified in the application
for refund.

Provided that the order issued in FORM GST RFD-06 shall not be required to be
revalidated by the proper officer:

Provided further that the payment advice in FORM GST RFD-05 shall be required to be
revalidated where the refund has not been disbursed within the same financial year in which
the said payment advice was issued.

(5) Where the proper officer is satisfied that the amount refundable under sub-rule (1) or sub-
rule (2) is not payable to the applicant under sub-section (8) of section 54, he shall make an
order in FORM GST RFD-06 and issue an advice in FORM GST RFD-05, for the amount of
refund to be credited to the Consumer Welfare Fund.

Rule 93 of CGST Rules - Credit of the amount of rejected refund claim.

(1) Where any deficiencies have been communicated under sub-rule (3) of rule 90, the
amount debited under sub-rule (3) of rule 89 shall be re-credited to the electronic credit
ledger.
 Page 295 of 371

(2) Where any amount claimed as refund is rejected under rule 92, either fully or partly, the
amount debited, to the extent of rejection, shall be re-credited to the electronic credit
ledger by an order made in FORM GST PMT-03.

Explanation.– For the purposes of this rule, a refund shall be deemed to be rejected, if
the appeal is finally rejected or if the claimant gives an undertaking in writing to the
proper officer that he shall not file an appeal.

Rule 96 of CGST Rules - Refund of integrated tax paid on goods or services exported out
of India.

(1) The shipping bill filed by an exporter of goods shall be deemed to be an application for
refund of integrated tax paid on the goods exported out of India and such application
shall be deemed to have been filed only when:-
(a) the person in charge of the conveyance carrying the export goods duly files a
departure manifest or an export manifest or an export report covering the number
and the date of shipping bills or bills of export; and
(b) the applicant has furnished a valid return in FORM GSTR-3 or FORM GSTR3B,
as the case may be;

(2) The details of the relevant export invoices in respect of export of goods contained in
FORM GSTR-1 shall be transmitted electronically by the common portal to the system
designated by the Customs and the said system shall electronically transmit to the
common portal, a confirmation that the goods covered by the said invoices have been
exported out of India.

Provided that where the date for furnishing the details of outward supplies in FORM
GSTR-1 for a tax period has been extended in exercise of the powers conferred under
section 37 of the Act, the supplier shall furnish the information relating to exports as
specified in Table 6A of FORM GSTR-1 after the return in FORM GSTR-3B has been
furnished and the same shall be transmitted electronically by the common portal to the
system designated by the Customs:

Provided further that the information in Table 6A furnished under the first proviso shall
be auto-drafted in FORM GSTR-1 for the said tax period.

(3) Upon the receipt of the information regarding the furnishing of a valid return in FORM
GSTR-3or FORM GSTR-3B, as the case may be from the common portal, the system
designated by the Customs or the proper officer of Customs, as the case may be, shall
process the claim of refund in respect of export of goods and an amount equal to the
integrated tax paid in respect of each shipping bill or bill of export shall be electronically
credited to the bank account of the applicant mentioned in his registration particulars and
as intimated to the Customs authorities.

(4) The claim for refund shall be withheld where,-

(a) a request has been received from the jurisdictional Commissioner of central tax,
State tax or Union territory tax to withhold the payment of refund due to the
person claiming refund in accordance with the provisions of sub-section (10) or
sub-section (11) of section 54; or
(b) the proper officer of Customs determines that the goods were exported in
violation of the provisions of the Customs Act, 1962.
 Page 296 of 371

(5) Where refund is withheld in accordance with the provisions of clause (a) of sub-rule (4),
the proper officer of integrated tax at the Customs station shall intimate the applicant and
the jurisdictional Commissioner of central tax, State tax or Union territory tax, as the
case may be, and a copy of such intimation shall be transmitted to the common portal.

(6) Upon transmission of the intimation under sub-rule (5), the proper officer of central tax or
State tax or Union territory tax, as the case may be, shall pass an order in Part B of
FORM GST RFD-07.

(7) Where the applicant becomes entitled to refund of the amount withheld under clause (a)
of sub-rule (4), the concerned jurisdictional officer of central tax, State tax or Union
territory tax, as the case may be, shall proceed to refund the amount after passing an
order in FORM GST RFD-06.

(8) The Central Government may pay refund of the integrated tax to the Government of
Bhutan on the exports to Bhutan for such class of goods as may be notified in this behalf
and where such refund is paid to the Government of Bhutan, the exporter shall not be
paid any refund of the integrated tax.

(9) The application for refund of integrated tax paid on the services exported out of India
shall be filed in FORM GST RFD-01 and shall be dealt with in accordance with the
provisions of rule 89

(10) The persons claiming refund of integrated tax paid on exports of goods or services
should not have -

(a) received supplies on which the benefit of the Government of India, Ministry of
Finance notification No. 48/2017-Central Tax, dated the 18th October, 2017,
published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section
(i), vide number G.S.R 1305 (E), dated the 18th October, 2017 except so far it
relates to receipt of capital goods by such person against Export Promotion
Capital Goods Scheme or notification No. 40/2017-Central Tax (Rate), dated the
23rd October, 2017, published in the Gazette of India, Extraordinary, Part II,
Section 3, Sub-section (i), vide number G.S.R 1320 (E), dated the 23rd October,
2017 or notification No. 41/2017-Integrated Tax (Rate), dated the 23rd October,
2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-
section (i), vide number G.S.R 1321 (E), dated the 23rd October, 2017 has been
availed; or

(b) availed the benefit under notification No. 78/2017-Customs, dated the 13th
October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3,
Sub-section (i), vide number G.S.R 1272(E), dated the 13th October,
2017 or notification No. 79/2017-Customs, dated the 13th October, 2017,
published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section
(i), vide number G.S.R 1299 (E), dated the 13th October, 2017 except so far it
relates to receipt of capital goods by such person against Export Promotion
Capital Goods Scheme.

Rule 97A of CGST Rules - Manual filing and processing.

Notwithstanding anything contained in this Chapter, in respect of any process or procedure

prescribed herein, any reference to electronic filing of an application, intimation, reply,
declaration, statement or electronic issuance of a notice, order or certificate on the common
 Page 297 of 371

portal shall, in respect of that process or procedure, include manual filing of the said application,
intimation, reply, declaration, statement or issuance of the said notice, order or certificate in
such Forms as appended to these rules.

Sec.55 of CGST Act - Refund in certain cases

The Government may, on the recommendations of the Council, by notification, specify any
specialised agency of the United Nations Organisation or any Multilateral Financial Institution
and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947,
Consulate or Embassy of foreign countries and any other person or class of persons as may be
specified in this behalf, who shall, subject to such conditions and restrictions as may be
prescribed, be entitled to claim a refund of taxes paid on the notified supplies of goods or
services or both received by them.

Rule 95 of CGST Rules - Refund of tax to certain persons.

(1) Any person eligible to claim refund of tax paid by him on his inward supplies as per
notification issued section 55 shall apply for refund in FORM GST RFD-10 once in every
quarter, electronically on the common portal or otherwise, either directly or through a
Facilitation Centre notified by the Commissioner, along with a statement of the inward
supplies of goods or services or both in FORM GSTR-11.

(2) An acknowledgement for the receipt of the application for refund shall be issued in
FORM GST RFD-02.

(3) The refund of tax paid by the applicant shall be available if-
(a) the inward supplies of goods or services or both were received from a registered
person against a tax invoice;
(b) name and Goods and Services Tax Identification Number or Unique Identity
Number of the applicant is mentioned in the tax invoice; and
(c) such other restrictions or conditions as may be specified in the notification are
satisfied.

(4) The provisions of rule 92 shall, mutatis mutandis, apply for the sanction and payment of
refund under this rule.

(5) Where an express provision in a treaty or other international agreement, to which the
President or the Government of India is a party, is inconsistent with the provisions of this
Chapter, such treaty or international agreement shall prevail.

Sec.56 of CGST Act - Interest on delayed refunds.

If any tax ordered to be refunded under sub-section (5) of section 54 to any applicant is not
refunded within sixty days from the date of receipt of application under subsection (1) of that
section, interest at such rate not exceeding six per cent. as may be specified in the notification
issued by the Government on the recommendations of the Council shall be payable in respect
of such refund from the date immediately after the expiry of sixty days from the date of receipt of
application under the said sub-section till the date of refund of such tax:

Provided that where any claim of refund arises from an order passed by an adjudicating
authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the
same is not refunded within sixty days from the date of receipt of application filed consequent to
such order, interest at such rate not exceeding nine per cent. as may be notified by the
 Page 298 of 371

Government on the recommendations of the Council shall be payable in respect of such refund
from the date immediately after the expiry of sixty days from the date of receipt of application till
the date of refund.

Explanation.–For the purposes of this section, where any order of refund is made by an
Appellate Authority, Appellate Tribunal or any court against an order of the proper officer under
sub-section (5) of section 54, the order passed by the Appellate Authority, Appellate Tribunal or
by the court shall be deemed to be an order passed under the said sub-section (5).

Rule 94 of CGST Rules - Order sanctioning interest on delayed refunds.

Where any interest is due and payable to the applicant under section 56, the proper officer shall
make an order along with a payment advice in FORM GST RFD-05, specifying therein the
amount of refund which is delayed, the period of delay for which interest is payable and the
amount of interest payable, and such amount of interest shall be electronically credited to any of
the bank accounts of the applicant mentioned in his registration particulars and as specified in
the application for refund.

Sec.57 of CGST Act - Consumer Welfare Fund

The Government shall constitute a Fund, to be called the Consumer Welfare Fund and there
shall be credited to the Fund,—

(a) the amount referred to in sub-section (5) of section 54;

(b) any income from investment of the amount credited to the Fund; and
(c) such other monies received by it,

in such manner as may be prescribed.

Rule 97 of CGST Rules - Consumer Welfare Fund

(1) All amounts of duty/central tax/ integrated tax /Union territory tax/cess and income from
investment along with other monies specified in subsection (2) of section 12C of the
Central Excise Act, 1944 (1 of 1944), section 57 of the Central Goods and Services Tax
Act, 2017 (12 of 2017) read with section 20 of the Integrated Goods and Services Tax
Act, 2017 (13 of 2017), section 21 of the Union Territory Goods and Services Tax Act,
2017 (14 of 2017) and section 12 of the Goods and Services Tax (Compensation to
States) Act, 2017 (15 of 2017) shall be credited to the Fund:

Provided that an amount equivalent to fifty per cent. of the amount of integrated tax
determined under sub-section (5) of section 54 of the Central Goods and Services Tax
Act, 2017, read with section 20 of the Integrated Goods and Services Tax Act, 2017,
shall be deposited in the Fund.

Provided further that an amount equivalent to fifty per cent. of the amount of cess
determined under sub-section (5) of section 54 read with section 11 of the Goods and
Services Tax (Compensation to States) Act, 2017 (15 of 2017), shall be deposited in the
Fund.

(2) Where any amount, having been credited to the Fund, is ordered or directed to be paid
to any claimant by the proper officer, appellate authority or court, the same shall be paid
from the Fund.
 Page 299 of 371

(3) Accounts of the Fund maintained by the Central Government shall be subject to audit by
the Comptroller and Auditor General of India.

(4) The Government shall, by an order, constitute a Standing Committee (hereinafter

referred to as the Committee) with a Chairman, a Vice-Chairman, a Member Secretary
and such other members as it may deem fit and the Committee shall make
recommendations for proper utilisation of the money credited to the Fund for welfare of
the consumers.

(5) (a) The Committee shall meet as and when necessary, generally four times in a
year;
(b) the Committee shall meet at such time and place as the Chairman, or in his
absence, the Vice-Chairman of the Committee may deem fit;
(c) the meeting of the Committee shall be presided over by the Chairman, or in his
absence, by the Vice-Chairman;
(d) the meeting of the Committee shall be called, after giving at least ten days‘ notice
in writing to every member;
(e) the notice of the meeting of the Committee shall specify the place, date and hour
of the meeting and shall contain statement of business to be transacted thereat;
(f) no proceeding of the Committee shall be valid, unless it is presided over by the
Chairman or Vice-Chairman and attended by a minimum of three other members.

(6) The Committee shall have powers -

(a) to require any applicant to get registered with any authority as the Central
Government may specify;
(b) to require any applicant to produce before it, or before a duly authorised officer of
the Central Government or the State Government, as the case may be, such
books, accounts, documents, instruments, or commodities in custody and control
of the applicant, as may be necessary for proper evaluation of the application;
(c) to require any applicant to allow entry and inspection of any premises, from
which activities claimed to be for the welfare of consumers are stated to be
carried on, to a duly authorised officer of the Central Government or the State
Government, as the case may be;
(d) to get the accounts of the applicants audited, for ensuring proper utilisation of the
grant;
(e) to require any applicant, in case of any default, or suppression of material
information on his part, to refund in lump-sum along with accrued interest, the
sanctioned grant to the Committee, and to be subject to prosecution under the
Act;
(f) to recover any sum due from any applicant in accordance with the provisions of
the Act;
(g) to require any applicant, or class of applicants to submit a periodical report,
indicating proper utilisation of the grant;
(h) to reject an application placed before it on account of factual inconsistency, or
inaccuracy in material particulars;
(i) to recommend minimum financial assistance, by way of grant to an applicant,
having regard to his financial status, and importance and utility of the nature of
activity under pursuit, after ensuring that the financial assistance provided shall
not be misutilised;
(j) to identify beneficial and safe sectors, where investments out of Fund may be
made, and make recommendations, accordingly;
(k) to relax the conditions required for the period of engagement in consumer
welfare activities of an applicant;
 Page 300 of 371

(l) to make guidelines for the management, and administration of the Fund.

(7) The Committee shall not consider an application, unless it has been inquired into, in
material details and recommended for consideration accordingly, by the Member
Secretary.

(8) The Committee shall make recommendations:-

(a) for making available grants to any applicant;
(b) for investment of the money available in the Fund;
(c) for making available grants (on selective basis) for reimbursing legal expenses
incurred by a complainant, or class of complainants in a consumer dispute, after
its final adjudication;
(d) for making available grants for any other purpose recommended by the Central
Consumer Protection Council (as may be considered appropriate by the
Committee);
(e) for making available up to 50% of the funds credited to the Fund each year, for
publicity/ consumer awareness on GST, provided the availability of funds for
consumer welfare activities of the Department of Consumer Affairs is not less
than twenty five crore rupees per annum.

Explanation.- For the purposes of this rule,

(a) 'Act' means the Central Goods and Services Tax Act, 2017 (12 of 2017), or the Central
Excise Act, 1944 (1 of 1944) as the case may be;
(b) 'applicant' means,

i. the Central Government or State Government;

ii. regulatory authorities or autonomous bodies constituted under an Act of
Parliament or the Legislature of a State or Union Territory;
iii. any agency or organization engaged in consumer welfare activities for a
minimum period of three years, registered under the Companies Act, 2013 (18 of
2013) or under any other law for the time being in force;
iv. village or mandal or samiti or samiti level co-operatives of consumers especially
Women, Scheduled Castes and Scheduled Tribes;
v. an educational or research institution incorporated by an Act of Parliament or the
Legislature of a State or Union Territory in India or other educational institutions
established by an Act of Parliament or declared to be deemed as a University
under section 3 of the University Grants Commission Act, 1956 (3 of 1956) and
which has consumers studies as part of its curriculum for a minimum period of
three years; and
vi. a complainant as defined under clause (b) of sub-section (1) of section 2 of the
Consumer Protection Act, 1986 (68 of 1986), who applies for reimbursement of
legal expenses incurred by him in a case instituted by him in a consumer dispute
redressal agency.

(c) 'application' means an application in the form as specified by the Standing Committee
from time to time;
(d) 'Central Consumer Protection Council' means the Central Consumer Protection Council,
established under sub-section (1) of section 4 of the Consumer Protection Act, 1986 (68
of 1986), for promotion and protection of rights of consumers;
(e) 'Committee' means the Committee constituted under sub-rule (4);
(f) 'consumer' has the same meaning as assigned to it in clause (d) of sub-section (1) of
section 2 of the Consumer Protection Act, 1986 (68 of 1986), and includes consumer of
goods on which central tax has been paid;
 Page 301 of 371

(g) duty means the duty paid under the Central Excise Act, 1944 (1 of 1944) or the Customs
Act, 1962 (52 of 1962);
(h) Fund means the Consumer Welfare Fund established by the Central Government under
sub-section (1) of section 12C of the Central Excise Act, 1944 (1 of 1944) and section 57
of the Central Goods and Services Tax Act, 2017 (12 of 2017);
(i) 'proper officer' means the officer having the power under the Act to make an order that
the whole or any part of the central tax is refundable

FAQ on Refunds

Q1. What is refund?

Ans. Refund has been discussed in section 54 of the CGST/SGST Act.

“Refund” includes -

(a) any balance amount in the electronic cash ledger so claimed in the returns,
(b) any unutilized input tax credit in respect of (i) zero rated supplies made without payment
of tax or, (ii) where the credit has accumulated on account of rate of tax on inputs being
higher than the rate of tax on output supplies (other than nil rated or fully exempt
supplies),
(c) tax paid by specialized agency of United Nations or any Multilateral Financial Institution
and Organization notified under the United Nations (Privileges and Immunities) Act,
1947, Consulate or Embassy of foreign countries on any inward supply.

Q2. Can unutilized Input tax credit be allowed as refund?

Ans. Unutilized input tax credit can be allowed as refund in accordance with the provisions of sub-
section (3) of section 54 in the following situations: -

(i) Zero rated supplies made without payment of tax;

(ii) Where credit has accumulated on account of rate of tax on inputs being higher than
the rate of taxes on output supplies (other than nil rated or fully exempt supplies)
However, no refund of unutilized input tax credit shall be allowed in cases where the
goods exported out of India are subjected to export duty, and also in the case where
the supplier of goods or services or both avails of drawback in respect of central tax
or claims refund of the integrated tax paid on such supplies.

Q3. Can unutilized ITC be given refund, in case goods Exported outside India are
subjected to export duty?
Ans. Refund of unutilized input tax credit is not allowed in cases where the goods exported out of
India are subjected to export duty - as per the second proviso to Section 54(3) of
CGST/SGST Act.

Q 4. Will unutilized ITC at the end of the financial year (after introduction of GST) be
refunded?
Ans. There is no such provision to allow refund of such unutilized ITC at the end of the financial
year in the GST Law. It shall be carried forward to the next financial year.

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. The taxable person cannot adjust CGST/SGST or IGST with the wrongly paid IGST or
CGST/SGST but he is entitled to refund of the tax so paid wrongly - Sec.77 of the
CGST/SGST Act.
 Page 302 of 371

Q6. Whether purchases made by Embassies or UN are taxed or exempted?

Ans. Supplies to the Embassies or UN bodies will be taxed, which later on can be claimed as
refund by them in terms of Section 54(2) of the CGST/SGST Act. The claim has to be filed in
the manner prescribed under CGST/SGST Refund rules, before expiry of six months from
the last day of the month in which such supply was received. [The United Nations
Organization and Consulates or Embassies are required to take a Unique Identity Number
[section 26(1) of the CGST/SGST Act] and purchases made by them will be reflected against
their Unique Identity Number in the return of outward supplies of the supplier(s)]

Q7. What is the time limit for taking refund?

Ans. A person claiming refund is required to file an application before the expiry of two years from
the “relevant date” as given in the Explanation to section 54 of the CGST/SGST Act.

Q8. Whether principle of unjust enrichment will be applicable in refund?

Ans. The principle of unjust enrichment would be applicable in all cases of refund except in the
following cases: -

i. Refund of tax paid on zero-rated supplies of goods or services or both or on inputs or

input services used in making such zero-rated supplies
ii. Unutilized input tax credit in respect of (i) zero rated supplies made without payment
of tax or, (ii) where the credit has accumulated on account of rate of tax on inputs
being higher than the rate of tax on output supplies
iii. refund of tax paid on a supply which is not provided, either wholly or partially, and for
which invoice has not been issued;
iv. refund of tax in pursuance of Section 77 of CGST/SGST Act i.e. tax wrongfully
collected and paid to Central Government or State Government
v. if the incidence of tax or interest paid has not been passed on to any other person;
vi. such other class of persons who has borne the incidence of tax as the Government
may notify.

Q9. In case the tax has been passed on to the consumer, whether refund will be
sanctioned?
Ans. Yes, the amount so refunded shall be credited to the Consumer Welfare Fund - Section 57 of
the CGST/SGST Act.

Q10. Is there any time limit for sanctioning of refund?

Ans. Yes, refund has to be sanctioned within 60 days from the date of receipt of application
complete in all respects. If refund is not sanctioned within the said period of 60 days, interest
at the rate notified will have to be paid in accordance with section 56 of the CGST/SGST Act.

However, in case where provisional refund to the extent of 90% of the amount claimed is
refundable in respect of zero-rated supplies made by certain categories of registered
persons in terms of sub-section (6) of section 54 of the CGST/SGST Act, the provisional
refund has to be given within 7 days from the date of acknowledgement of the claim of
refund.

Q11. Can refund be withheld by the department?

Ans. Yes, refund can be withheld in the following circumstances:

i. If the person has failed to furnish any return till he files such return;
ii. 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
 Page 303 of 371

interest or penalty; The proper officer can also deduct unpaid taxes, interest, penalty,
late fee, if any, from the refundable amount – Section 54(10) (d) of the CGST/SGST
Act
iii. The Commissioner can withhold any refund, if, the order of refund is under appeal
and he is of the opinion that grant of such refund will adversely affect revenue in the
said appeal on account of malfeasance or fraud committed - Sec.54 (11) of the
CGST/SGST Act.

Q12. Where the refund is withheld under Section 54(11) of the CGST/SGST Act, will the
taxable person be given interest?
Ans. If as a result of appeal or further proceeding the taxable person becomes entitled to refund,
then he shall also be entitled to interest at the rate notified [section 54(12) of the
CGST/SGST Act].

Q13. How will the refunds arising out of existing law be paid?
Ans. The refund arising out of existing law will be paid as per the provisions of the existing law
and will be made in cash and will not be available as ITC.

Q14. Whether refund can be made before verification of documents?

Ans. In case of any claim of refund to a registered person on account of zero rated supplies of
goods or services or both (other than registered persons as may be notified), 90% refund
may be granted on provisional basis before verification subject to such conditions and
restrictions as may be prescribed in accordance with sub-section 6 of section 54 of the
CGST/SGST Act.

Q15. In case of refund under exports, whether BRC is necessary for granting refund?
Ans. In case of refund on account of export of goods, the refund rules do not prescribe BRC as a
necessary document for filing of refund claim. However, for export of services details of BRC
is required to be submitted along with the application for refund.

Q17. Will the principle of unjust enrichment apply to exports and supplies to SEZ Units?
Ans. The principle of unjust enrichment would not be applicable to zero-rated supplies [i.e. exports
and supplies to SEZ units]

Q18. How will the applicant prove that the principle of unjust enrichment does not apply in
his case?
Ans. Where the claim of refund is less than Rs.2 Lakh, a self-declaration by the applicant based
on the documentary or other evidences available with him, certifying that the incidence of tax
has not been passed on to any other person would make him eligible to get refund. However,
if the claim of refund is more than Rs.2 Lakh, the applicant is required to submit a certificate
from a Chartered Accountant or a Cost Accountant to the effect that the incidence of tax has
not been passed on to any other person.

Q20. Presently under Central law, 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. Yes. In terms of Section 16 of the IGST Act, a registered taxable person shall have the option
either to export goods/services without payment of IGST under bond or letter of undertaking
and claim refund of ITC or he can export goods/services on payment of IGST and claim
refund of IGST paid.

Q21. What is the time period within which an acknowledgement of a refund claim has to be
given?
Ans. Where an application relates to a claim for refund from the electronic cash ledger as per sub-
section (6) of section 49 of the CGST/SGST Act made through the return furnished for the
 Page 304 of 371

relevant tax period the acknowledgement will be communicated as soon as the return is
furnished and in all other cases of claim of refund the acknowledgement will be
communicated to the applicant within 15 days from the date of receipt of application
complete in all respect.

Q22. What is the time period within which provisional refund has to be given?
Ans. Provisional refund to the extent of 90% of the amount claimed on account of zero-rated
supplies in terms of sub-section (6) of section 54 of the CGST/SGST Act has to be given
within 7 days from the date of acknowledgement of complete application for refund claim.

Q23. Is there any specified format for filing refund claim?

Ans. Every claim of refund has to be filed in Form GST RFD 1. However, claim of refund of
balance in electronic cash ledger can be claimed through furnishing of monthly/quarterly
returns in Form GSTR 3, GSTR 4 or GSTR 7, as the case may be, of the relevant period.

Q24. Is there any specified format for sanction of refund claim?

Ans. The claim of refund will be sanctioned by the proper officer in Form GST RFD-06 if the claim
is found to be in order and payment advice will be issued in Form GST RFD-05. The refund
amount will then be electronically credited to the applicants given bank account.

Q25. What happens if there are deficiencies in the refund claim?

Ans. Deficiencies, if any, in the refund claim has to be pointed out within 15 days. A form GST
RFD-03 will be issued by the proper officer to the applicant pointing out the deficiencies
through the common portal electronically requiring him to file a refund application after
rectification of such deficiencies.

Q26. Can the refund claim be rejected without assigning any reasons?
Ans. No. When the proper officer is satisfied that the claim is not admissible he shall issue a
notice in Form GST RFD-08 to the applicant requiring him to furnish a reply in GST RFD -09
within fifteen days and after consideration of the applicant’s reply, he can accept or reject the
refund claim and pass an order in Form GST RFD-06 only.

TWITTER FAQ ON REFUND

I have a pending export refund in Service Tax. What
will happen?
As an exporter, how do I ensure that my working
capital is not blocked as refunds?
Refunds under earlier laws will be given under the
respective laws only.
Appropriate provisions have been made in the law
by providing for grant of 90% refund on provisional
basis within 7 days from filing of registration.

Circular No. 79/53/2018-GST

F. No. CBEC-20/16/04/2018 - GST

New Delhi, Dated the 31st December, 2018

To,
The Principal Chief Commissioners/Chief Commissioners/Principal Commissioners/ Commissioners of
Central Tax (All) / The Principal Directors General/ Directors General (All) / The Principal Chief Controller
of Accounts (CBIC)
Madam/Sir,

Subject: Clarification on refund related issues – Reg.

 Page 305 of 371

Various representations have been received seeking clarification on various issues relating to refund. In
order to clarify these issues and to ensure uniformity in the implementation of the provisions of law across
field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods
and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), hereby clarifies the issues detailed
hereunder:

Physical submission of refund claims with jurisdictional proper officer:

2. Due to the non-availability of the complete electronic refund module, a work around was prescribed
vide Circular No. 17/17/2017-GST dated 15.11.2017 and Circular No. 24/24/2017-GST dated 21.12.2017,
wherein a taxpayer was required to file FORM GST RFD-01A on the common portal, generate the
Application Reference Number (ARN), take print-outs of the same, and submit it physically in the office of
the jurisdictional proper officer, along with all the supporting documents. It has been learnt that this
requirement of physical submission of documents in the jurisdictional tax office is causing undue hardship
to the taxpayers. Therefore, in order to further simplify the refund process, the following instructions, in
partial modification of the aforesaid circulars, are issued:

a) All documents/undertaking/statements to be submitted along with the claim for refund in FORM GST
RFD-01A shall be uploaded on the common portal at the time of filing of the refund application. Circular
No. 59/33/2018-GST dated 04.09.2018 specified that instead of providing copies of all invoices, a
statement of invoices needs to be submitted in a prescribed format and copies of only those invoices
need to be submitted the details of which are not found in FORM GSTR-2A for the relevant period. It is
now clarified that the said statement and these invoices, instead of being submitted physically, shall be
electronically uploaded on the common portal at the time of filing the claim of refund in FORM GST RFD-
01A. Neither the application in FORM GST RFD-01A, nor any of the supporting documents, shall be
required to be submitted physically in the office of the jurisdictional proper officer.

b) However, the taxpayer will still have the option to physically submit the refund application to the
jurisdictional proper officer in FORM GST RFD-01A, along with supporting documents, if he so chooses.
A taxpayer who still remains unallocated to the Central or State Tax Authority will necessarily have to
submit the refund application physically. They can choose to do so before the jurisdictional proper officer
of either the State or the Central tax authority, as was earlier clarified vide Circular No. 17/17/2017 - GST
dated 15.11.2017.

c) The ARN will be generated only after the claimant has completed the process of filing the refund
application in FORM GST RFD-01A, and has completed uploading of all the supporting
documents/undertaking/statements/invoices and, where required, the amount has been debited from the
electronic credit/cash ledger.

d) As soon as the ARN is generated, the refund application along with all the supporting documents shall
be transferred electronically to the jurisdictional proper officer who shall be able to view it on the system.
The application shall be deemed to have been filed under rule 90(2) of the Central Goods and Services
Tax Rules, 2017 (hereinafter referred to as “CGST Rules”) on the date of generation of the said ARN and
the time limit of 15 days to issue an acknowledgement shall be counted from that date. This will obviate
the need for a claimant to visit the jurisdictional tax office for the submission of the refund application.
Accordingly, the acknowledgement for the complete application or deficiency memo, as the case may be,
would be issued by the jurisdictional tax officer based on the documents so received electronically from
the common portal. However, the said acknowledgement or deficiency memo shall continue to be issued
manually for the time being.

e) If a refund application is electronically transferred to the wrong jurisdictional officer, he/she shall
reassign it to the correct jurisdictional officer electronically within a period of three days. In such cases,
the application shall be deemed to have been filed under rule 90(2) of the CGST Rules only after it has
been so reassigned. Deficiency memos shall not be issued in such cases merely on the ground that the
applications were received electronically in the wrong jurisdiction. Where the facility of electronic re-
assignment is not available, the present arrangement shall continue.
 Page 306 of 371

f) It has already been clarified vide Circular No. 70/44/2018-GST dated 26.10.2018 that after the issuance
of a deficiency memo, taxpayers would be required to submit the rectified refund application under the
earlier Application Reference Number (ARN) only. It is further clarified that the rectified application, which
is to be treated as a fresh refund application, will be submitted manually in the office of the jurisdictional
proper officer.

3. It may be noted that the documents/statements/undertakings/invoices to be submitted along with the

refund application in FORM GST RFD-01A are the same as have been prescribed under the CGST Rules
and various Circulars issued on the subject from time to time. Only the method of submission of these
documents/statements/undertakings/invoices is being changed from the physical mode to the electronic
mode. It may also be noted that the other stages of processing of a refund claim submitted in FORM GST
RFD-01A by the jurisdictional tax officer shall continue to be carried out manually for the time being, as is
being presently done.

Calculation of refund amount for claims of refund of accumulated Input Tax Credit (ITC) on
account of inverted duty structure:

4. Representations have been received stating that while processing the refund of unutilized ITC on
account of inverted tax structure, the departmental officers are denying the refund of ITC of GST paid on
those inputs which are procured at equal or lower rate of GST than the rate of GST on outward supply, by
not including the amount of such ITC while calculating the maximum refund amount as specified in rule
89(5) of the CGST Rules. The matter has been examined and the following issues are clarified:

a) Refund of unutilized ITC in case of inverted tax structure, as provided in section 54(3) of the CGST
Act, is available where ITC remains unutilized even after setting off of available ITC for the payment of
output tax liability. Where there are multiple inputs attracting different rates of tax, in the formula provided
in rule 89(5) of the CGST Rules, the term "Net ITC‟ covers the ITC availed on all inputs in the relevant
period, irrespective of their rate of tax.

b) The calculation of refund of accumulated ITC on account of inverted tax structure, in cases where
several inputs are used in supplying the final product/output, can be clearly understood with help of the
following example:

i. Suppose a manufacturing process involves the use of an input A (attracting 5 per cent GST) and input B
(attracting 18 per cent GST) to manufacture output Y (attracting 12 per cent GST).

ii. The refund of accumulated ITC in the situation at (i) above, will be available under section 54(3) of
the CGST Act read with rule 89(5) of the CGST Rules, which prescribes the formula for the maximum
refund amount permissible in such situations.

iii. Further assume that the claimant supplies the output Y having value of ₹ 3,000/- during the relevant
period for which the refund is being claimed. Therefore, the turnover of inverted rated supply of goods and
services will be ₹ 3,000/-. Since the claimant has no other outward supplies, his adjusted total turnover
will also be ₹ 3,000/-.

iv. If we assume that Input A, having value of ₹ 500/- and Input B, having value of ₹ 2,000/-, have been
purchased in the relevant period for the manufacture of Y, then Net ITC shall be equal to ₹ 385/- (Rs. 25/-
and ₹ 360/- on Input A and Input B respectively).

v. Therefore, multiplying Net ITC by the ratio of turnover of inverted rated supply of goods and services to
the adjusted total turnover will give the figure of ₹ 385/-.

vi. From this, if we deduct the tax payable on such inverted rated supply of goods or services, which is ₹
360/-, we get the maximum refund amount, as per rule 89(5) of the CGST Rules which is ₹ 25/-.

Disbursal of refund amounts after sanction:

 Page 307 of 371

5. Section 56 of the CGST Act clearly states that if any tax ordered to be refunded is not refunded within
60 days of the date of receipt of application, interest at the rate of 6 per cent (notified vide notification No.
13/2017-Central Tax dated 28.06.2017) on the refund amount starting from the date immediately after the
expiry of sixty days from the date of receipt of application (ARN) till the date of refund of such tax shall
have to be paid to the claimant. It may be noted that any tax shall be considered to have been refunded
only when the amount has been credited to the bank account of the claimant. Therefore, interest will be
calculated starting from the date immediately after the expiry of sixty days from the date of receipt of the
application till the date on which the amount is credited to the bank account of the claimant. Accordingly,
all tax authorities are advised to issue the final sanction orders in FORM GST RFD-06 within 45 days of
the date of generation of ARN, so that the disbursement is completed within 60 days by both Central and
State Tax Authorities for CGST / IGST / UTGST / Compensation Cess and SGST respectively.

Refund applications that have been generated on the portal but not physically received in the
jurisdictional tax offices:

6. There are a large number of applications for refund in FORM GST RFD-01A which have been
generated on the common portal but have not yet been physically received in the jurisdictional tax offices.
With the implementation of electronic submission of refund application, as detailed in para 2 above, this
problem is expected to reduce. However, for the applications (except those relating to refund of excess
balance in the electronic cash ledger) which have been generated on the common portal before the
issuance of this Circular and which have not yet been physically received in the jurisdictional offices (list
of all applications pertaining to a particular jurisdictional office which have been generated on the
common portal, if not already available, may be obtained from DG-Systems), the following guidelines are
laid down:

a) All refund applications in which the amount claimed is less than the statutory limit of ₹ 1,000/- should
be rejected and the amount re-credited to the electronic credit ledger of the applicant through the
issuance of FORM GST RFD-01B.

b) For all applications wherein an amount greater than ₹ 1000/- has been claimed, a list of applications
which have not been received in the jurisdictional tax office within a period of 60 days starting from the
date of generation of ARN may be compiled. A communication may be sent to all such claimants on their
registered email ids, informing that the application needs to be physical submitted to the jurisdictional tax
office within 15 days of the date of the email. The contact details and the address of the jurisdictional
officer may also be provided in the said communication. The claimant may be further informed that if
he/she fails to physically submit the application within 15 days of the date of the email, the application
shall be summarily rejected and the debited amount, if any, shall be re-credited to the electronic credit
ledger.

7. For the applications generated on the common portal before the issuance of this Circular in relation to
refund of excess balance from the electronic cash ledger which have not yet been received in the
jurisdictional office, the amount debited in the electronic cash ledger in such applications may be re-
credited through FORM GST RFD-01B provided that there are no liabilities in the electronic liability
register. The said amount shall be re-credited even though the return in FORM GSTR-3B, as the case
may be for the relevant period has not been filed.

8. For the refund applications generated on the common portal after the issuance of this Circular, and for
the refund applications generated on the common portal before the issuance of this Circular and which
have been physically received in the jurisdictional tax offices before the issuance of this Circular, the
existing guidelines, as modified by this Circular may be followed.

Issues related to refund of accumulated Input Tax Credit of Compensation Cess:

9. Several representations have been received requesting clarifications on certain issues related to refund
of accumulated input tax credit of compensation cess on account of zero-rated supplies made under
Bond/Letter of Undertaking. These issues have been examined and are clarified as below:
 Page 308 of 371

a) Issue: A registered person uses inputs on which compensation cess is leviable (E.g. coal) to export
goods on which there is no levy of compensation cess (E.g. aluminum). For the period July, 2017 to May,
2018, no ITC is availed of the compensation cess paid on the inputs received during this period. ITC is
only availed of the CGST, SGST/UTGST or IGST charged on the invoices for these inputs. This ITC is
utilized for payment of IGST on export of goods. Vide Circular No. 45/19/2018-GST dated 30.05.2018, it
was clarified that refund of accumulated ITC of compensation cess on account of zero-rated supplies
made under Bond/Letter of Undertaking is available even if the exported product is not subject to levy of
cess. After the issuance of this Circular, the registered person decides to start exporting under bond/LUT
without payment of tax. He also decides to avail (through the return in FORM GSTR-3B) the ITC of
compensation cess, paid on the inputs used in the months of July, 2017 to May, 2018, in the month of
July, 2018. The registered person then goes on to file a refund claim for ITC accumulated on account of
exports for the month of July, 2018 and includes the said accumulated ITC for the month of July, 2018.
How should the amount of compensation cess to be refunded be calculated?

Clarification: In the instant case, refund on account of compensation cess is to be recomputed as if the
same was available in the respective months in which the refund of unutilized credit of
CGST/SGST/UTGST/IGST was claimed on account of exports made under LUT/Bond. If the aggregate of
these recomputed amounts of refund of compensation cess is less than or equal to the eligible refund of
compensation cess calculated in respect of the month in which the same has actually been claimed, then
the aggregate of the recomputed refund of compensation cess of the respective months would be
admissible. Further, the recomputed amount of eligible refund (of compensation cess) in respect of past
periods, as aforesaid, would not be admissible in respect of consignments exported on payment of IGST.
This process would be applicable for application for refund of compensation cess (not claimed earlier) in
respect of the past period.

b) Issue: A registered person uses coal for the captive generation of electricity which is further used for
the manufacture of goods (say aluminium) which are exported under Bond/Letter of Undertaking without
payment of duty. Refund claim is filed for accumulated Input Tax Credit of compensation cess paid on
coal. Can the said refund claim be rejected on the ground that coal is used for the generation of electricity
which is an intermediate product and not the final product which is exported and since electricity is
exempt from GST, the ITC of the tax paid on coal for generation of electricity is not available?

Clarification: There is no distinction between intermediate goods or services and final goods or services
under GST. Inputs have been clearly defined to include any goods other than capital goods used or
intended to be used by a supplier in the course or furtherance of business. Since coal is an input used in
the production of aluminium, albeit indirectly through the captive generation of electricity, which is directly
connected with the business of the registered person, input tax credit in relation to the same cannot be
denied.

c) Issue: A registered person avails ITC of compensation cess (say, of ₹ 100/-) paid on purchases of coal
every month. At the same time, he reverses a certain proportion (say, half i.e. ₹ 50/-) of the ITC of
compensation cess so availed on purchases of coal which are used in making zero rated outward
supplies. Both these details are entered in the FORM GSTR-3B filed for the month as a result of which an
amount of ₹ 50/- only is credited in the electronic credit ledger. The reversed amount (Rs. 50/-) is then
shown as a 'cost' in the books of accounts of the registered person. However, the registered person
declares ₹ 100/- as 'Net ITC' and uses the same in calculating the maximum refund amount which works
out to be ₹ 50/- (assuming that export turnover is half of total turnover). Since both the balance in the
electronic credit ledger at the end of the tax period for which the claim of refund is being filed and the
balance in the electronic credit ledger at the time of filing the refund claim is ₹ 50/- (assuming that no
other debits/credits have happened), the system will proceed to debit ₹ 50/- from the ledger as the
claimed refund amount. The question is whether the proper officer should sanction ₹ 50/- as the refund
amount or ₹ 25/- (i.e. half of the ITC availed after adjusting for reversals)?

Clarification: ITC which is reversed cannot be held to have been 'availed' in the relevant period.
Therefore, the same cannot be part of refund of unutilized ITC on account of zero-rated supplies.
Moreover, the reversed ITC has been accounted as a cost which would have reduced the income tax
liability of the claimant. Therefore, the same amount cannot, at the same time, be refunded to him/her in
 Page 309 of 371

the ratio of export turnover to total turnover. However, if the said reversed amount is again availed in a
later tax period, subject to the restriction under section 16(4) of the CGST Act,it can be refunded in the
ratio of export turnover to total turnover in that tax period in the same manner as detailed in para 9(a)
above. This is subject to the restriction that the accounting entry showing the said ITC as cost is also
reversed.

Non-consideration of ITC of GST paid on invoices of earlier tax period availed in subsequent tax
period:

10. Presently, ITC is reflected in the electronic credit ledger on the basis of the amount of the ITC availed
on self declaration basis in FORM GSTR-3B for a particular tax period. It may happen that the goods
purchased against a particular tax invoice issued in a particular month, say August 2017, may be declared
in the FORM GSTR-3B filed for a subsequent month, say September 2017. This is inevitable in cases
where the supplier raises an invoice, say in August, 2017, and the goods reach the recipient‟s premises in
September, 2017. Since GST law mandates that ITC can be availed only after the goods are received, the
recipient can only avail the ITC on such goods in the FORM GSTR-3B filed for the month of September,
2017. However, it has been observed that field officers are excluding such invoices from the calculation of
refund of unutilized ITC filed for the month of September, 2017.

11. In this regard, it is clarified that "Net ITC‟ as defined in rule 89(4) of the CGST Rules means input tax
credit availed on inputs and input services during the relevant period. Relevant period means the period
for which the refund claim has been filed. Input tax credit can be said to have been „availed‟ when it is
entered into the electronic credit ledger of the registered person. Under the current dispensation, this
happens when the said taxable person files his/her monthly return in FORM GSTR-3B. Further, section
16(4) of the CGST Act stipulates that ITC may be claimed on or before the due date of filing of the return
for the month of September following the financial year to which the invoice pertains or the date of filing of
annual return, whichever is earlier. Therefore, the input tax credit of invoices issued in August, 2017,
"availed‟ in September, 2017 cannot be excluded from the calculation of the refund amount for the month
of September, 2017.

Refund of accumulated ITC of input services and capital goods arising on account of inverted
duty structure:

14. Section 54(3) of the CGST Act provides that refund of any unutilized ITC may be claimed where the
credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output
supplies (other than nil rated or fully exempt supplies). Further, section 2(59) of the CGST
Act defines inputs as any goods other than capital goods used or intended to be used by a supplier in
the course or furtherance of business. Thus, inputs do not include services or capital goods. Therefore,
clearly, the intent of the law is not to allow refund of tax paid on input services or capital goods as part of
refund of unutilized input tax credit. Accordingly, in order to align the CGST Rules with the CGST
Act, notification No. 26/2018-Central Tax dated 13.06.2018 was issued wherein it was stated that the term
Net ITC, as used in the formula for calculating the maximum refund amount under rule 89(5) of the CGST
Rules, shall mean input tax credit availed on inputs during the relevant period other than the input tax
credit availed for which refund is claimed under sub-rules (4A) or (4B) or both. In view of the above, it is
clarified that both the law and the related rules clearly prevent the refund of tax paid on input services and
capital goods as part of refund of input tax credit accumulated on account of inverted duty structure.

15. All previous Circulars/Instructions issued on the subject stand modified accordingly. It is requested
that suitable trade notices may be issued to publicize the contents of this circular.

Circular No. 70/44/2018 -GST

F. No. CBEC/20/16/04/2017-GST

New Delhi, Dated the 26th October, 2018

To,
The Principal Chief Commissioners/ Chief Commissioners / Principal Commissioners / Commissioners of
Central Tax (All)/
 Page 310 of 371

The Principal Directors General / Directors General (All)

The Principal CCA, CBIC
Madam/Sir,

Subject: Clarification on certain issues related to refund – Reg.

The Board is in receipt of representations seeking clarification on certain issues relating to refund. In
order to clarify these issues and to ensure uniformity in the implementation of the provisions of law across
the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods
and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”), hereby clarifies the issues as
detailed hereunder:

2. Status of refund claim after issuance of deficiency memo and re-credit of electronic credit
ledger:

2.1 Para 7.1 of circular No. 59/33/2018-GST dated the 4th September, 2018 clarifies the intent of law in
cases where a deficiency memo is issued in respect of a refund claim. In para 7.2 of the said circular, the
practise being followed in the field formations was elaborated and it was clarified that show cause notices
are not required to be issued (and consequently no orders are required to be issued in FORM GST RFD-
04/06) in cases where refund application is not re-submitted after the issuance of a deficiency memo
(in FORM GST RFD-03). It was also clarified that once a deficiency memo has been issued against an
application for refund, the amount of Input Tax Credit debited under sub-rule (3) of rule 89 of the Central
Goods and Services Tax Rules, 2017 (hereinafter referred to as the “CGST Rules”) is required to be re-
credited to the electronic credit ledger of the applicant by using FORM GST RFD-01B and the taxpayer is
expected to file a fresh application for refund.

2.2 The issue has been re-examined and it has been observed that presently the common portal does not
allow a taxpayer to file a fresh application for refund once a deficiency memo has been issued against an
earlier refund application for the same period. Therefore, it is clarified that till the time such facility is
developed, taxpayers would be required to submit the rectified refund application under the earlier
Application Reference Number (ARN) only. Thus, it is reiterated that when a deficiency memo in FORM
GST RFD-03 is issued to taxpayers, re-credit in the electronic credit ledger (using FORM GST RFD-01B)
is not required to be carried out and the rectified refund application would be accepted by the jurisdictional
tax authorities with the earlier ARN itself. It is further clarified that a suitable clarification would be issued
separately for cases in which such re-credit has already been carried out.

3. Allowing exporters who have received capital goods under EPCG to claim refund of IGST paid
on exports:

3.1 Sub-rule (10) of Rule 96 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to
as “said sub-rule”), restricts exporters from availing the facility of claiming refund of IGST paid on exports
in certain scenarios. It was intended that exporters availing benefit of certain notifications would not be
eligible to avail the facility of such refund. However, representations have been received requesting that
exporters who have received capital goods under the Export Promotion Capital Goods Scheme
(hereinafter referred to as “EPCG Scheme”), should be allowed to avail the facility of claiming refund of
the IGST paid on exports. GST Council, in its 30th meeting held in New Delhi on 28th September, 2018,
had accorded approval to the proposal of suitably amending the said sub-rule along with sub-rule (4B) of
rule 89 of the CGST Rules prospectively in order to enable such exporters to avail the said
facility notification No. 54/2018 – Central Tax dated the 9th October, 2018 has been issued to carry out
the changes recommended by the GST Council. Alongside the amendment carried out in the said sub-
rule through the notification No. 39/2018- Central Tax dated 4th September, 2018 has been rescinded
vide notification No. 53/2018 – Central Tax dated the 9th October, 2018.

3.2 For removal of doubts, it is clarified that the net effect of these changes would be that any exporter
who himself/herself imported any inputs/capital goods in terms of notification Nos. 78/2017-
Customsand 79/2017-Customs both dated 13th October, 2017 shall be eligible to claim refund of the
 Page 311 of 371

IGST paid on exports till the date of the issuance of the notification No. 54/2018 – Central Tax dated the
9th October, 2018 referred to above.

3.3 Further, after the issuance of notification No. 54/2018 – Central Tax dated the 9th October, 2018,
exporters who are importing goods in terms of notification Nos. 78/2017-Customs and 79/2017-
Customs both dated 13th October, 2017 would not be eligible for refund of IGST paid on exports as
provided in the said sub-rule. However, exporters who are receiving capital goods under the EPCG
scheme, either through import in terms of notification No. 79/2017-Customs dated 13th October, 2017or
through domestic procurement in terms of notification No. 48/2017-Central Tax, dated 18th October,
2017, shall continue to be eligible to claim refund of IGST paid on exports and would not be hit by the
restrictions provided in the said sub-rule. All clarifications issued in this regard vide any Circular issued
earlier are hereby superseded.

4. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

5. Difficulty, if any, in implementation of this Circular may please be brought to the notice of the Board.
Hindi version would follow.

Exports related Refund claims — Clarifications

Circular No. 37/11/2018-GST, dated 15-3-2018

F. No. 349/47/2017-GST
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi

Subject: Clarifications on exports related refund issues- regarding.

Board vide Circular No. 17/17/2017-GST, dated 15th November 2017 [2017 (6) G.S.T.L. C61] and Circular
No. 24/24/2017-GST, dated 21st December 2017 [2017 (7) G.S.T.L. C27] clarified various issues in
relation to processing of claims for refund. Since then, several representations have been received
seeking further clarifications on issues relating to refund. In order to clarify these issues and with a view to
ensure uniformity in the implementation of the provisions of the law across field formations, the Board, in
exercise of its powers conferred by section 168(1) of the Central Goods and Services Tax Act, 2017
(CGST Act), hereby clarifies the issues raised as below.

2. Non-availment of drawback : The third proviso to sub-section (3) of section 54 of the CGST Act
states that no refund of input tax credit shall be allowed in cases where the supplier of goods or services
or both avails of drawback in respect of central tax.

2.1 This has been clarified in paragraph 8.0 of Circular No. 24/24/2017-GST, dated 21st December
2017. In the said paragraph, reference to “section 54(3)(ii) of the CGST Act” is a typographical error and it
should read as “section 54(3)(i) of the CGST Act”. It may be noted that in the said circular reference has
been made only to central tax, integrated tax, State/Union territory tax and not to customs duty leviable
under the Customs Act, 1962. Therefore, a supplier availing of drawback only with respect to basic
customs duty shall be eligible for refund of unutilized input tax credit of central tax/State tax/Union territory
tax/integrated tax/compensation cess under the said provision. It is further clarified that refund of eligible
Page 2 of 8 credit on account of State tax shall be available even if the supplier of goods or services or
both has availed of drawback in respect of central tax.

3. Amendment through Table 9 of GSTR-1 : It has been reported that refund claims are not being
processed on account of mis-matches between data contained in FORM GSTR-1, FORM GSTR-3B and
shipping bills/bills of export. In this connection, it may be noted that the facility of filing of Table 9 in FORM
 Page 312 of 371

GSTR-1, an amendment table which allows for amendments of invoices/ shipping bills details furnished in
FORM GSTR-1 for earlier tax period, is already available. If a taxpayer has committed an error while
entering the details of an invoice/shipping bill/bill of export in Table 6A or Table 6B of FORM GSTR-1, he
can rectify the same in Table 9 of FORM GSTR-1.

3.1. It is advised that while processing refund claims on account of zero rated supplies, information
contained in Table 9 of FORM GSTR-1 of the subsequent tax periods should be taken into cognizance,
wherever applicable.

3.2. Field formations are also advised to refer to Circular No. 26/26/2017-GST, dated 29th December,
2017 [2018 (8) G.S.T.L. C3], wherein the procedure for rectification of errors made while filing the returns
in FORM GSTR-3B has been provided. Therefore, in case of discrepancies between the data furnished
by the taxpayer in FORM GSTR-3B and FORM GSTR-1, the officer shall refer to the said Circular and
process the refund application accordingly.

6. Deficiency memo : It may be noted that if the application for refund is complete in terms of sub-rule
(2), (3) and (4) of rule 89 of the CGST Rules, an acknowledgement in FORM GST RFD-02 should be
issued. Rule 90(3) of the CGST Rules provides for communication in FORM GST RFD-03 (deficiency
memo) where deficiencies are noticed. The said sub-rule also provides that once the deficiency memo
has been issued, the claimant is required to file a fresh refund application after the rectification of the
deficiencies.

6.1. In this connection, a clarification has been sought whether with respect to a refund claim, deficiency
memo can be issued more than once. In this regard rule 90 of the CGST Rules may be referred to,
wherein it has been clearly stated that once an applicant has been communicated the deficiencies in
respect of a particular application, the applicant shall furnish a fresh refund application after rectification of
such deficiencies. It is therefore, clarified that there can be only one deficiency memo for one refund
application and once such a memo has been issued, the applicant is required to file a fresh refund
application, manually in FORM GST RFD-01A. This fresh application would be accompanied with the
original ARN, debit entry number generated originally and a hard copy of the refund application filed
online earlier. It is further clarified that once an application has been submitted afresh, pursuant to a
deficiency memo, the proper officer will not serve another deficiency memo with respect to the application
for the same period, unless the deficiencies pointed out in the original memo remain unrectified, either
wholly or partly, or any other substantive deficiency is noticed subsequently.

7. Self-declaration for non-prosecution: It is learnt that some field formations are asking for a self-
declaration with every refund claim to the effect that the claimant has not been prosecuted.

7.1 The facility of export under LUT is available to all exporters in terms of notification No. 37/2017-
Central Tax, dated 4th October, 2017, except to those who have been prosecuted for any offence under
the CGST Act or the IGST Act or any of the existing laws in force in a case where the amount of tax
evaded exceeds two hundred and fifty lakh rupees. Para 2(d) of the Circular No. 8/8/2017-GST, dated 4th
October, 2017, mentions that a person intending to export under LUT is required to give a self-declaration
at the time of submission of LUT that he has not been prosecuted. Persons who are not eligible to export
under LUT are required to export under bond.

7.2 It is clarified that this requirement is already satisfied in case of exports under LUT and asking for
self–declaration with every refund claim where the exports have been made under LUT is not warranted.

8. Refund of transitional credit : Refund of unutilized input tax credit is allowed in two scenarios
mentioned in sub-section (3) of section 54 of the CGST Act. These two scenarios are zero rated supplies
made without payment of tax and inverted tax structure. In sub-rule (4) and (5) of rule 89 of the CGST
Rules, the amount of refund under these scenarios is to be calculated using the formulae given in the said
 Page 313 of 371

sub-rules. The formulae use the phrase ‘Net ITC’ and defines the same as “input tax credit availed on
inputs and input services during the relevant period other than the input tax credit availed for which refund
is claimed under sub-rules (4A) or (4B) or both”. It is clarified that as the transitional credit pertains to
duties and taxes paid under the existing laws viz., under Central Excise Act, 1944 and Chapter V of the
Finance Act, 1994, the same cannot be said to have been availed during the relevant period and thus,
cannot be treated as part of ‘Net ITC’.

9. Discrepancy between values of GST invoice and shipping bill/bill of export : It has been brought
to the notice of the Board that in certain cases, where the refund of unutilized input tax credit on account
of export of goods is claimed and the value declared in the tax invoice is different from the export value
declared in the corresponding shipping bill under the Customs Act, refund claims are not being
processed. The matter has been examined and it is clarified that the zero rated supply of goods is
effected under the provisions of the GST laws. An exporter, at the time of supply of goods declares that
the goods are for export and the same is done under an invoice issued under rule 46 of the CGST Rules.
The value recorded in the GST invoice should normally be the transaction value as determined under
section 15 of the CGST Act read with the rules made thereunder. The same transaction value should
normally be recorded in the corresponding shipping bill/bill of export.

9.1 During the processing of the refund claim, the value of the goods declared in the GST invoice and
the value in the corresponding shipping bill/bill of export should be examined and the lower of the two
values should be sanctioned as refund.

10. Refund of taxes paid under existing laws : Sub-sections (3), (4) and (5) of section 142 of the
CGST Act provide that refunds of tax/duty paid under the existing law shall be disposed of in accordance
with the provisions of the existing law. It is observed that certain taxpayers have applied for such refund
claims in FORM GST RFD-01A also. In this regard, the field formations are advised to reject such
applications and pass a rejection order in FORM GST PMT-03 and communicate the same on the
common portal in FORM GST RFD-01B. The procedures laid down under the existing laws viz., Central
Excise Act, 1944 and Chapter V of the Finance Act, 1994 read with above referred sub-sections of section
142 of the CGST Act shall be followed while processing such refund claims.

10.1 Furthermore, it has been brought to the notice of the Board that the field formations are rejecting,
withholding or re-crediting CENVAT credit, while processing claims of refund filed under the existing laws.
In this regard, attention is invited to sub-section (3) of section 142 of the CGST Act which provides that
the amount of refund arising out of such claims shall be refunded in cash. Further, the first proviso to the
said sub-section provides that where any claim for refund of CENVAT credit is fully or partially rejected,
the amount so rejected shall lapse and therefore, will not be transitioned into GST. Furthermore, it should
be ensured that no refund of the amount of CENVAT credit is granted in case the said amount has been
transitioned under GST. The field formations are advised to process such refund applications accordingly.

11. Filing frequency of Refunds : Various representations have been made to the Board regarding the
period for which refund applications can be filed. Section 2(107) of the CGST Act defines the term “tax
period” as the period for which the return is required to be furnished. The terms ‘Net ITC’ and ‘turnover of
zero rated supply of goods/services’ are used in the context of the relevant period in rule 89(4) of CGST
Rules. The phrase ‘relevant period’ has been defined in the said sub-rule as ‘the period for which the
claim has been filed’.

11.1 In many scenarios, exports may not have been made in that period in which the inputs or input
services were received and input tax credit has been availed. Similarly, there may be cases where
exports may have been made in a period but no input tax credit has been availed in the said period. The
above referred rule, taking into account such scenarios, defines relevant period in the context of the
refund claim and does not link it to a tax period.

11.2 In this regard, it is hereby clarified that the exporter, at his option, may file refund claim for one
calendar month/quarter or by clubbing successive calendar months/quarters. The calendar
 Page 314 of 371

month(s)/quarter(s) for which refund claim has been filed, however, cannot spread across different
financial years.

12.  BRC/FIRC for export of goods : It is clarified that the realization of convertible foreign exchange is
one of the conditions for export of services. In case of export of goods, realization of consideration is not a
pre-condition. In rule 89 (2) of the CGST Rules, a statement containing the number and date of invoices
and the relevant Bank Realisation Certificates (BRC) or Foreign Inward Remittance Certificates (FIRC) is
required in case of export of services whereas, in case of export of goods, a statement containing the
number and date of shipping bills or bills of export and the number and the date of the relevant export
invoices is required to be submitted along with the claim for refund. It is therefore clarified that insistence
on proof of realization of export proceeds for processing of refund claims related to export of goods has
not been envisaged in the law and should not be insisted upon.

13. Supplies to Merchant Exporters : Notification No. 40/2017-Central Tax (Rate), dated 23rd October
2017 and notification No. 41/2017-Integrated Tax, (Rate) dated 23rd October 2017 provide for supplies for
exports at a concessional rate of 0.05% and 0.1% respectively, subject to certain conditions specified in
the said notifications.

13.1 It is clarified that the benefit of supplies at concessional rate is subject to certain conditions and the
said benefit is optional. The option may or may not be availed by the supplier and/or the recipient and the
goods may be procured at the normal applicable tax rate.

13.2 It is also clarified that the exporter will be eligible to take credit of the tax @ 0.05%/ 0.1% paid by
him. The supplier who supplies goods at the concessional rate is also eligible for refund on account of
inverted tax structure as per the provisions of clause (ii) of the first proviso to sub-section (3) of section 54
of the CGST Act. It may also be noted that the exporter of such goods can export the goods only under
LUT/bond and cannot export on payment of integrated tax. In this connection, notification No. 3/2018-
Central Tax, dated 23-1-2018 may be referred.

14. Requirement of invoices for processing of claims for refund : It has been brought to the notice
of the Board that for processing of refund claims, copies of invoices and other additional information are
being insisted upon by many field formations.

14.1 It was envisaged that only the specified statements would be required for processing of refund
claims because the details of outward supplies and inward supplies would be available on the common
portal which would be matched. Most of the other information like shipping bills details etc. would also be
available because of the linkage of the common portal with the Customs system. However, because of
delays in operationalizing the requisite modules on the common portal, in many cases, suppliers’ invoices
on the basis of which the exporter is claiming refund may not be available on the system. For processing
of refund claims of input tax credit, verifying the invoice details is quintessential. In a completely electronic
environment, the information of the recipients’ invoices would be dependent upon the suppliers’
information, thus putting an in-built check-and-balance in the system. However, as the refund claims are
being filed by the recipient in a semi-electronic environment and is completely based on the information
provided by them, it is necessary that invoices are scrutinized.

14.2 A list of documents required for processing the various categories of refund claims on exports is
provided in the Table below. Apart from the documents listed in the Table below, no other documents
should be called for from the taxpayers, unless the same are not available with the officers electronically:
Table
Type of Refund Documents
Export of Services with  Copy of FORM RFD-01A filed on common
payment of tax (Refund of portal
IGST paid on export of  Copy of Statement 2 of FORM RFD-01A
services)
 Page 315 of 371

 Invoices w.r.t. input, input services and

capital goods
 BRC/FIRC for export of services
 Undertaking/Declaration in FORM RFD-01A
Export (goods or services)  Copy of FORM RFD-01A filed on common
without payment of tax portal
(Refund of accumulated ITC  Copy of Statement 3A of FORM RFD-01A
of IGST/CGST/SGST/ generated on common portal
UTGST/Cess)
 Copy of Statement 3 of FORM RFD-01A
 Invoices w.r.t. input and input services
 BRC/FIRC for export of services
 Undertaking/Declaration in FORM RFD-01A
15. These instructions shall apply to exports made on or after 1st July, 2017. It is also advised that
refunds may not be withheld due to minor procedural lapses or non-substantive errors or omission.
16. It is requested that suitable trade notices may be issued to publicize the contents of this circular.
17. Difficulty, if any, in implementation of the above instructions may please be brought to the notice of
the Board. Hindi version would follow.

Refund claim — Manual filing and processing of refund claims on account of inverted duty
structure, deemed exports and excess balance in electronic cash ledger —
Clarification
C.B.E. & C. Circular No. 24/24/2017-GST, dated 21-12-2017
F.No. 349/58/2017-GST
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi

Subject : Manual filing and processing of refund claims on account of inverted duty structure,
deemed exports and excess balance in electronic cash ledger - Regarding.

Due to the non-availability of the refund module on the common portal, it has been decided by the
competent authority, on the recommendations of the Council, that the applications/documents/forms
pertaining to refund claims on account of inverted duty structure [including supplies in terms of notification
Nos. 40/2017-Central Tax (Rate) and 41/2017-Integrated Tax (Rate) both dated 23-10-2017], deemed
exports and excess balance in electronic cash ledger shall be filed and processed manually till further
orders. In this regard, the Board, in exercise of its powers conferred under Section 168(1) of the Central
Goods and Services Tax Act, 2017 hereby clarifies that the provisions of Circular No. 17/17/2017-GST,
dated 15-11-2017 shall also be applicable to the following types of refund inasmuch as they pertain to the
method of filing of the refund claim and its processing which is consistent with the relevant provisions of
the CGST Act, 2017 (hereafter referred to as ‘the CGST Act’) and the CGST Rules, 2017 (hereafter
referred to as ‘the CGST Rules’) :-
(i) refund of unutilized input tax credit where the credit has accumulated on account of rate of
tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully
exempt supplies) of goods or services or both except those supplies which are notified by the
Government on the recommendations of the Council [Section 54(3) of the CGST Act refers];
(ii) refund of tax on the supply of goods regarded as deemed exports; and
(iii) refund of balance in the electronic cash ledger.
2. It is clarified that refund claims in respect of zero-rated supplies and on account of inverted
duty structure, deemed exports and excess balance in electronic cash ledger shall be filed for a tax period
on a monthly basis in FORM GST RFD-01A. However, in case registered persons having aggregate
turnover of up to Rs. 1.5 crore in the preceding financial year or the current financial year are opting to file
 Page 316 of 371

FORM GSTR-1 quarterly (notification No. 57/2017-Central Tax, dated 15-11-2017 refers), such persons
shall apply for refund on a quarterly basis. Further, it is stated that the refund claim for a tax period may
be filed only after filing the details in FORM GSTR-1 for the said tax period. It is also to be ensured that a
valid return in FORM GSTR-3B has been filed for the last tax period before the one in which the refund
application is being filed. Since the date of furnishing of FORM GSTR 1 from July, 2017 onwards has
been extended while the dates of furnishing of FORM GSTR 2 and FORM GSTR 3 for such period are yet
to be notified, it has been decided by the competent authority to sanction refund of provisionally accepted
input tax credit at this juncture. However, the registered persons applying for refund must give an
undertaking to the effect that the amount of refund sanctioned would be paid back to the Government with
interest in case it is found subsequently that the requirements of clause (c) of sub-section (2) of section
16 read with sub-section (2) of sections 42 of the CGST Act have not been complied with in respect of the
amount refunded. This undertaking should be submitted manually along with the refund claim till the same
is available in FORM RFD-01A on the common portal.
3. In case of refund claim arising due to inverted duty structure, the following statements -
Statement 1 and Statement 1A of FORM GST RFD-01A have to be filled : -
Statement - 1 [rule 89(5)]
Refund Type : ITC accumulated due to inverted tax structure [clause (ii) of first proviso to section
54(3)]
(Amount in
Rs.)
Turnover of Tax payable on Adjusted Net Maximum refund
inverted rated such inverted rated total input tax amount to be
supply of supply of goods turnover credit claimed
goods [(1x43)-2]
1 2 3 4 5

Statement 1A [rule 89(2)(h)]

Refund type : ITC accumulated due to inverted tax structure [clause (ii) of first proviso to section
54(3)]
Sl. Details of Tax paid on inward Details of Tax paid on outward
No. invoices of supplies invoices of supplies
inward supplies outward
received supplies issued
No. Date Taxab Inte- Centr State/ No Dat Taxab Inte- Centr State/
le grate al Tax Union . e le grate al Tax Union
Value d Tax territor Value d Tax territor
y Tax y Tax
1 2 3 4 5 6 7 8 9 10 11 12 13

4. Whereas, the Government has issued notification No. 48/2017-Central Tax, dated 18-10-2017
under Section 147 of the CGST Act wherein certain supplies of goods have been notified as deemed
export. Further, the third proviso to rule 89(1) of the CGST Rules allows the recipient or the supplier to
apply for refund of tax paid on such deemed export supplies. In case such refund is sought by the
supplier of deemed export supplies, the documentary evidences as specified in notification No. 49/2017-
Central Tax, dated 18-10-2017 are also required to be furnished which includes an undertaking by the
recipient of deemed export supplies that he shall not claim the refund in respect of such supplies and that
no input tax credit on such supplies has been availed of by him. The undertaking should be submitted
manually along with the refund claim. Similarly, in case the refund is filed by the recipient of deemed
export supplies, an undertaking by the supplier of deemed export supplies that he shall not claim the
 Page 317 of 371

refund in respect of such supplies is also required to be furnished manually. The procedure regarding
procurement of supplies of goods from DTA by Export Oriented Unit (EOU)/Electronic Hardware
Technology Park (EHTP) Unit/Software Technology Park (STP) Unit/Bio-Technology Parks (BTP) Unit
under deemed export as laid down in Circular No. 14/14/2017-GST, dated 6-11-2017 needs to be
complied with.
4.1 Further, as per the provisions of rule 89(2)(g) of the CGST Rules, the following statement 5B
of FORM GST RFD-01A is required to be furnished for claiming refund on supplies declared as deemed
exports : -
Statement 5B [rule 89(2)(g)]
Refund type : On account of deemed exports
Sl. Details of invoices of outward Tax paid
No. supplies in case refund is claimed by
supplier/Details of invoices of inward
supplies in case refund is claimed by
recipient
No. Date Taxable Value Integrated Central State/Union Cess
Tax Tax Territory Tax
1 2 3 4 5 6 7 8

5. It is reiterated that para 2.5 of Circular No. 17/17/2017-GST, dated 15-11-2017 may be referred
to in order to ascertain the jurisdictional proper officer to whom the manual application for refund is to be
submitted. Where any amount claimed as refund is rejected under rule 92 of the CGST Rules, either fully
or partly, the amount debited, to the extent of rejection, shall be re-credited to the electronic credit ledger
by an order made in FORM GST RFD-1B until the FORM GST PMT-03 is available on the common
portal. Further, the payment of the sanctioned refund amount shall be made only by the respective tax
authority of the Central or State Government. Thus, the refund order issued either by the Central tax
authority or the State tax/UT tax authority shall be communicated to the concerned counterpart tax
authority within seven working days for the purpose of payment of the relevant sanctioned refund amount
of tax or cess, as the case may be. This time limit of seven working days is also applicable to refund
claims in respect of zero-rated supplies being processed as per Circular No. 17/17/2017-GST, dated 15-
11-2017 as against the time limit of three days prescribed in para 4 of the said Circular. It must be
ensured that the timelines specified under section 54(7) and rule 91(2) of the CGST Rules for the
sanction of refund are adhered to.
6. In order to facilitate sanction of refund amount of central tax and State tax by the respective
tax authorities, it has been decided that both the Central and State Tax authority shall nominate nodal
officer(s) for the purpose of liasioning through a dedicated e-mail id. Where the amount of central tax and
State tax refund is ordered to be sanctioned provisionally by the Central tax authority and a sanction order
is passed in accordance with the provisions of rule 91(2) of the CGST Rules, the Central tax authority
shall communicate the same, through the nodal officer, to the State tax authority for making payment of
the sanctioned refund amount in relation to State tax and vice versa. The aforesaid communication shall
primarily be made through e-mail attaching the scanned copies of the sanction order [FORM GST RFD-
04 and FORM GST RFD-06], the application for refund in FORM GST RFD-01A and the
Acknowledgement Receipt Number (ARN). Accordingly, the jurisdictional proper officer of Central or State
Tax, as the case may be, shall issue FORM GST RFD-05 and send it to the DDO for onward transmission
for release of payment. After release of payment by the respective PAO to the applicant's bank account,
the nodal officer of Central tax and State tax authority shall inform each other. The manner of
communication as referred earlier shall be followed at the time of final sanctioning of the refund also.
7. In case of refund claim for the balance amount in the electronic cash ledger, upon filing of
FORM GST RFD-01A as per the procedure laid down in para 2.4 of Circular No. 17/17/2017-GST, dated
15-11-2017, the amount of refund claimed shall get debited in the electronic cash ledger.
8. It is also clarified that the drawback of all taxes under GST (Central Tax, Integrated Tax,
State/Union Territory Tax) should not have been availed while claiming refund of accumulated ITC under
section 54(3)(ii) of the CGST Act. A declaration to this effect forms part of FORM GST RFD-01A as well.
 Page 318 of 371

9. It is requested that suitable trade notices may be issued to publicize the contents of this
circular.
10 Difficulty, if any, in implementation of the above instructions may please be brought to the
notice of the Board.
11. Hindi version would follow.

ITC — Refund of unutilized Input Tax Credit (ITC) of GST paid on inputs by exporters of
fabrics
Circular No. 18/18/2017-GST, dated 16-11-2017
F. No. 354/320/2017-TRU-Pt.1
Subject : Clarification on refund of unutilized input tax credit of GST paid on inputs
in respect of exporters of fabrics - Regarding.
Doubts have been raised regarding the restrictions of refund of unutilized input tax credit of GST
paid on inputs to manufacturer exporters of fabrics [falling under chapters 50 to 55 and 60 and headings
5608, 5801, 5806] under GST.
2.1 The matter has been examined. In this context, sub-section (3) of section 54 of the CGST
Act, 2017 provides as under :
“(3) Subject to the provisions of sub-section (10), a registered person may claim refund of
any unutilised input tax credit at the end of any tax period :
Provided that no refund of unutilised input tax credit shall be allowed in cases other than -
(i) zero rated supplies made without payment of tax;
(ii) where the credit has accumulated on account of rate of tax on inputs being higher than
the rate of tax on output supplies (other than nil rated or fully exempt supplies), except
supplies of goods or services or both as may be notified by the Government on the
recommendations of the Council.
2.2 Based on the recommendations of the GST Council, Notification No. 5/2017-Central Tax
(Rate), dated 28-6-2017 [as amended from time to time] has been issued under clause (ii) of the proviso
to sub-section (3) of section 54 of the CGST Act, 2017 restricting refund of unutilised input tax credit of
GST paid on inputs in respect of certain specified goods, including input tax credit of GST paid on inputs.
2.3 However, the aforesaid notification having been issued under clause (ii) of the proviso to sub-
section (3) of section 54 of the CGST Act, 2017, restriction on refund of unutilised input tax credit of GST
paid on inputs will not be applicable to zero rated supplies, that is (a) exports of goods or services or both;
or (b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic
Zone unit.
2.4 Accordingly, as regards export of fabrics it is clarified that, subject to the provisions of sub-
section (10) of the section 54 of the CGST Act, 2017, a manufacturer of such fabrics will be eligible for
refund of unutilized input tax credit of GST paid on inputs [other than the input tax credit of GST paid on
capital goods] in respect of fabrics manufactured and exported by him.
3. Difficulty, if any, in the implementation of this circular should be brought to the notice of the
Board.

Refunds under GST

C.B.E. & C Flyer No. 34, dated 1-1-2018
Introduction
Timely refund mechanism is essential in tax administration, as it facilitates trade through release of
blocked funds for working capital, expansion and modernization of existing business.

The provisions pertaining to refund contained in the GST law aim to streamline and standardise the
refund procedures under GST regime. Thus, under the GST regime there will be a standardised
form for making any claim for refunds. The claim and sanctioning procedure will be completely
 Page 319 of 371

online and time bound which is a marked departure from the existing time consuming and
cumbersome procedure. It has been decided, however, that since the online refund module is not
available immediately, the refund process would be handled manually and Circular No.
17/17/2017-GST, dated 15-11-2017 and Circular no. 24/24/2017-GST, dated 21-12-2017
prescribing the detailed procedure have been issued.

Situations leading to Refund Claims

The relevant date provision embodied in Section 54 of the CGST Act, 2017, provision contained in
Section 77 of the CGST Act, 2017 and the requirement of submission of relevant documents as
listed in Rule 89(2) of CGST Rules, 2017 is an indicator of the various situations that may
necessitate a refund claim. A claim for refund may arise on account of -

1. Export of Goods or services

2. Supplies to SEZs units and developers
3. Deemed Export supplies
4. Refund of taxes on purchase made by UN or embassies etc
5. Refund arising on account of judgment, decree, order or direction of the Appellate Authority,
Appellate Tribunal or any court
6. Refund of accumulated Input Tax Credit on account of inverted duty structure
7. Finalisation of provisional assessment
8. Refund of pre-deposit
9. Excess payment due to mistake
10. Refunds to International tourists of GST paid on goods in India and carried abroad at the time
of their departure from India
11. Refund on account of issuance of refund vouchers for taxes paid on advances against which
goods or services have not been supplied
12. Refund of CGST & SGST paid by treating the supply as intra-State supply which is
subsequently held as inter-State supply and vice versa.

Thus practically every situation is covered. The GST law requires that every claim for refund is to
be filed within 2 years from the relevant date.

Credit Notes
Further, Section 34 of the CGST Act, 2017 provides for issuance of credit notes for post supply
discounts or if goods are returned back within a stipulated time. When such credit notes are
issued, obviously it would call for reduction in output liability of the supplier. Hence, the taxes paid
initially on the supply would be higher than what is actually payable. In such a scenario the excess
tax paid by the supplier needs to be refunded. However, instead of refunding it outright, it is sought
to be adjusted after verifying the corresponding reduction in the input tax credit availed by the
recipient. Section 43 of the CGST Act, 2017 provides for procedure for reduction in output liability
on account of issuance of such credit notes. This is another form of refund by adjustments in the
output tax liability. Such refund is not governed under the general refund provisions contained in
Section 54 of the CGST Act, 2017.

Treatment for Zero Rated Supplies

One of the major categories under which claim for refund may arise would be, on account of
exports. All exports (whether of goods or services) as well as supplies to SEZs have been
categorised as Zero Rated Supplies in the IGST Act, 2017. “Zero rated supply” under Section 16 of
the IGST Act, 2017 means any of the following supplies of goods or services or both, namely :

(a) export of goods or services or both; or

(b) supply of goods or services or both to a Special Economic Zone developer or a Special
Economic Zone unit.
 Page 320 of 371

On account of zero rating of supplies, the supplier will be entitled to claim input tax credit in respect
of goods or services or both used for such supplies even though they might be non-taxable or even
exempt supplies. Every person making claim of refund on account of zero rated supplies has two
options. Either he can export under Bond/LUT and claim refund of accumulated Input Tax Credit or
he may export on payment of integrated tax and claim refund thereof as per the provisions of
Section 54 of CGST Act, 2017. Thus, the GST law allows the flexibility to the exporter (which will
include the supplier making supplies to SEZ) to claim refund upfront as integrated tax (by making
supplies on payment of tax using ITC) or export without payment of tax by executing a Bond/LUT
and claim refund of related ITC of taxes paid on inputs and input services used in making zero
rated supplies.

Grant of provisional Refund in Case of Zero Rated Supplies

GST law also provides for grant of provisional refund of 90% of the total refund claim, in case the
claim relates for refund arising on account of zero rated supplies. The provisional refund would be
paid within 7 days after giving the acknowledgement. The acknowledgement of refund application
is normally issued within a period of 15 days. The provisional refund would not be granted to such
supplier who was, during any period of five years immediately preceding the refund period, was
prosecuted.

Payment of Wrong Tax

Under GST it might happen that the taxable person may pay integrated tax instead of central tax
plus state tax and vice versa because of incorrect application of the place of supply provisions. In
such cases, while making the appropriate payment of tax, interest will not be charged and the
refund claim of the wrong tax paid earlier will be entertained without subjecting it to the provision of
unjust enrichment.

Claim by a person who has borne the incidence of Tax

Any tax collected by the taxable person more than the tax due on such supplies must be credited
to the Government account. The law makes explicit provision for the person who has borne the
incidence of tax to file refund claim in accordance with the provisions of Section 54 of the CGST
Act, 2017.

Refunds to Casual/Non-resident taxable persons

A casual/Non-resident taxable person has to pay tax in advance at the time of registration. Refund
may become due to such persons at the end of the registration period because the tax paid in
advance may be more than the actual tax liability on the supplies made by them during the period
of validity of registration period. The law envisages refund to such categories of taxable persons
also. But the amount of excess advance tax shall not be refunded unless such person has filed all
the returns due during the time their registration was effective. It is only after such compliance that
refund will be granted.

Refund to UN bodies and other notified Agencies

Supplies made to UN bodies and embassies maybe exempted from payment of GST as per
international obligations. However, this exemption is being operationalized by way of a refund
mechanism. So a taxable person making supplies to such bodies would charge the tax due and
remit the same to government account. However, the UN bodies and other entities notified under
Section 55 of the CGST Act, 2017 can claim refund of the taxes paid by them on their purchases.
The claim has to be made before the expiry of six months from the last day of the quarter in which
such supply was received. It may be noted that refund would be granted by Central Government
as facility of a single UIN has been made available to such agencies.

Refund to International Tourist

An enabling mechanism has been introduced in Section 15 of the IGST Act, 2017 whereby an
 Page 321 of 371

international tourist procuring goods in India, may while leaving the country seek refund of
integrated tax paid by them. The term, “tourist’’ has been defined and refers to any person who is
not normally resident in India and who enters India for a stay of not more than 6 months for
legitimate non-immigrant purposes.

Unjust Enrichment
Talking about unjust enrichment, a presumption is always drawn that the businessman will shift the
incidence of tax to the final consumer. This is because GST is an indirect tax whose incidence is to
be borne by the consumer. It is for this reason that every claim of refund (barring specified
exceptions) need to pass the test of unjust enrichment. And every such claim if sanctioned is first
transferred to the Consumer Welfare Fund. The GST law makes this test inapplicable in case of
refund of accumulated ITC, refund on account of exports, refund of payment of wrong tax
(integrated tax instead of central tax plus state tax and vice versa), refund of tax paid on a supply
which is not provided or which refund voucher is issued or if the applicant shows that he has not
passed on the incidence of tax to any other person. In all other cases the test of unjust enrichment
needs to be satisfied for the claim to be paid to the applicant. For crossing the bar of unjust
enrichment, if the refund claim is less than Rs. 2 Lakhs, then a self-declaration of the applicant to
the effect that the incidence of tax has not been passed to any other person will suffice to process
the refund claim. For refund claims exceeding Rs. 2 Lakhs, a certificate from a Chartered
Accountant/Cost Accountant will have to be given.

Standardisation of Procedure
The GST laws makes standardised provisions for making a refund claim. Every claim has to be
filed online in a standardised form. The application shall be forwarded to the proper officer who
shall, within a period of fifteen days of filing of the said application, scrutinize the application for its
completeness and where the application is found to be complete in all terms, an acknowledgement
shall be made available to the applicant through the common portal electronically. However, till the
time the refund module on the GSTN portal is operationalised, facility for manual filing of refund
claims has been provided. The claim for refund of amount lying in the credit balance of the cash
ledger can be made in the monthly returns also. The proper officer has to convey deficiencies if
any in the refund claimed in such cases the claim will be sent back to the applicant along with the
notified deficiencies and the applicant can file the refund claim again after making goods the
deficiencies. The claim, if in order, has to be sanctioned within a period of 60 days from the date of
receipt of the application of claim complete in all respect. If this mandatory period is exceeded,
interest at the rate of 6% (9% in case of refund made on order passed by an adjudicating authority
or Appellate Tribunal or court which has attained finality) will become payable along with refund
from the expiry of 60 days till the date of payment of refund. However, if the refund claim is on
account of pre-deposit made before any appellate authority, the interest becomes payable from the
date of making such payment.

Documentation
The applicant need not file elaborate documents along with the refund claim. Standardised and
easy to understand documents have been prescribed. Thus, for every claim the main document
prescribed is a statement of relevant invoices (NOT THE INVOICES ITSELF) pertaining to the
claim. In case refund is on account of export of services, apart from the statement of invoices, the
relevant bank realisation certificates or FIRC evidencing receipt of payment in foreign currency is
also required to be submitted. If it is a claim made by the supplier to the SEZ unit, an endorsement
from the proper officer evidencing receipt of such goods/services in the SEZ also needs to be
submitted. Further a declaration is also required from the SEZ unit to the effect that they have not
availed input tax credit of the tax paid by the supplier. If the claim is for refund of accumulated ITC,
only a statement containing invoice details as prescribed in the refund chapter of the CGST Rules,
2017 need to be given. In case of claim of refund on account of any order or judgment of appellate
authority or court, the reference number of the order giving rise to refund should also be given. For
crossing the bar of unjust enrichment, if the refund claim is less than Rs. 2 Lakhs, then a self-
declaration by the applicant to the effect that the incidence of tax has not been passed to any other
person will suffice to process the refund claim. For refund claims exceeding Rs. 2 Lakhs, a
 Page 322 of 371

certificate from a Chartered Accountant/Cost Accountant will have to be given.

Compliance with Natural Justice

In case the claim is sought to be rejected by the proper officer, a notice has to be given online to
the applicant stating the ground on which the refund is sought to be rejected. The applicant needs
to respond online within 15 days from the receipt of such notice. Thus no claim can be rejected
without putting the applicant to notice.

Payment to be credited Online

The refund claim, wherever due, will be directly credited to the bank account of the applicant. The
applicant need not come to the authorities to collect the cheques or for any other issues relating to
the refund claim.

Procedure for claiming Refund of IGST paid on Export of Goods

The shipping bill filed by an exporter shall be deemed to be an application for refund of integrated
tax paid on the goods exported out of India and such application shall be deemed to have been
filed only when :-

(a) the person in charge of the conveyance carrying the export goods duly files an export
manifest or an export report covering the number and the date of shipping bills or bills of
export; and
(b) the applicant has furnished a valid return in FORM GSTR-3 or FORM GSTR-3B, as the case
may be.

Since the system of filing of return in FORM GSTR-3 has not started so far, the refund of
integrated tax on export of goods would be granted based on FORM GSTR-1 and FORM GSTR-
3B for the time being. The details of the relevant export invoices contained in FORM GSTR-1 (or
Table 6A thereof) shall be transmitted electronically by the common portal to the system
designated by the Customs and the said system shall electronically transmit to the common portal,
a confirmation that the goods covered by the said invoices have been exported out of India.

Upon receipt of the information regarding the furnishing of a valid return in FORM GSTR-3 or
FORM GSTR-3B, as the case maybe and FORM GSTR-1 from the common portal, the system
designated by the Customs shall process the claim for refund and an amount equal to the
integrated tax paid in respect of each shipping bill or bill of export shall be electronically credited to
the bank account of the applicant mentioned in his registration particulars and as intimated to the
Customs authorities.

As per Rule 96, the refund of IGST paid on export of goods is processed and disbursed by
Customs. For processing such refund, GST system transmits invoice level data of Table 6A in
GSTR-1 subject to the following validations :-

1. GSTR-3B is filed for the corresponding period, with admitted tax liability under Table 3.1(b);
2. Export invoices are submitted in GSTR-1/Table 6A thereof and have correct shipping bill
number, shipping bill date and port code;
3. The admitted tax liability of IGST under table 3.1(b) of GSTR-3B, is equal to, or greater than,
the IGST amount claimed to have been paid under Table 6A of GSTR-1 of the corresponding
period.

It may be noted that Rule 96(9) has been inserted, w.e.f 23-10-2017, in CGST Rules, 2017 vide
Notification no. 75/2017-Central Tax, dated 29-12-2017 so as to provide that the refund of
integrated tax paid on export of goods or services is not permitted to such persons who have
received supplies on which the supplier has availed the benefit of Notification no. 48/2017-Central
 Page 323 of 371

Tax, dated 18-10-2017 or Notification no. 40/2017-Central Tax (Rate), dated 23-10-2017 or
notification No. 41/2017-Integrated Tax (Rate), dated 23-10-2017.

Manual filing of Refund Claims

Rule 97A has been inserted in the CGST Rules, 2017 vide Notification no. 55/2017-Central Tax,
dated 15-11-2017 to enable manual processing of refund claims. The said rule provides that any
reference to electronic filing of an application, intimation, reply, declaration, statement or electronic
issuance of a notice, order or certificate on the common portal shall, in respect of that process or
procedure, include manual filing of the said application, intimation, reply, declaration, statement or
issuance of the said notice, order or certificate in such Forms as appended to CGST Rules, 2017.

Circular no. 17/17/2017-GST, dated 15-11-2017 and Circular no. 24/24/2017-GST, dated 21-12-
2017 has been issued clarifying the procedure for filing of manual refund claims. The circular
mandates that due to the non-availability of the refund module on the common portal, it has been
decided that the applications/documents/forms pertaining to refund claims on account of zero-rated
supplies shall be filed and processed manually till further orders.

Procedure for filing refund claims (other than refund under Rule 96 on account of export of goods
and refund of unutilised ITC on account of zero rated supply)
The application for refund of integrated tax paid on zero rated supply of goods to a Special
Economic Zone developer or a Special Economic Zone unit or in case of zero-rated supply of
services is required to be filed in FORM GST RFD-01A (as notified in the CGST Rules, 2017 vide
Notification no. 55/2017-Central Tax, dated 15-11-2017) by the supplier on the common portal and
a print out of the said form shall be submitted before the jurisdictional proper officer along with all
necessary documentary evidences as applicable (as per the details in statement 2 or 4 of
Annexure to FORM GST RFD-01), within the time stipulated for filing of such refund under the
CGST Act, 2017.

Procedure for fifing refund claims of unutilised ITC on account of zero rated supply
The application for refund of unutilized input tax credit on inputs or input services used in making
such zero-rated supplies shall be filed in FORM GST RFD-01A on the common portal and the
amount claimed as refund shall get debited in accordance with sub-rule (3) of rule 86 of the CGST
Rules, 2017 from the amount in the electronic credit ledger to the extent of the claim. The common
portal shall generate a proof of debit (ARN - Acknowledgement Receipt Number) which would be
mentioned in the FORM GST RFD-01A submitted manually, along with the print out of FORM GST
RFD-01A to the jurisdictional proper officer, and with all necessary documentary evidences as
applicable (as per details in statement 3 or 5 of Annexure to FORM GST RFD-01), within the time
stipulated for filing of such refund under the CGST Act, 2017.

Where to file the refund claims?

The registered person needs to file the refund claim with the jurisdictional tax authority to which the
taxpayer has been assigned as per the administrative order issued in this regard by the Chief
Commissioner of Central Tax and the Commissioner of State Tax. In case such an order has not
been issued in the State, the registered person is at liberty to apply for refund before the Central
Tax Authority or State Tax Authority till the administrative mechanism for assigning of taxpayers to
respective authority is implemented. However, in the latter case, an undertaking is required to be
submitted stating that the claim for sanction of refund has been made to only one of the authorities.
It is reiterated that the Central Tax officers shall facilitate the processing of the refund claims of all
registered persons whether or not such person was registered with the Central Government in the
earlier regime.

Modalities/Records in respect of manual refund claims

The Circular no. 17/17/2017-GST, dated 15-11-2017 read with Circular no. 24/24/2017-GST, dated
21-12-2017 lays down the modalities for maintenance of records in respect of such manual refund
 Page 324 of 371

claims, which needs to be adhered to scrupulously. The time limits laid down in the Act need to be
followed and the prescribed forms need to be generated manually for processing of such refund
claims.

Manual filing and processing of refund claims on account of inverted duty structure, deemed
exports and excess balance in electronic cash ledger
Due to the non-availability of the refund module on the common portal, it has been decided by the
competent authority that the applications/documents/forms pertaining to refund claims on account
of inverted duty structure [including supplies in terms of notification Nos. 40/2017-Central Tax
(Rate) and 41/2017-Integrated Tax (Rate), both dated 23-10-2017], deemed exports and excess
balance in electronic cash ledger shall be filed and processed manually till further orders. The
procedure to be followed for manual filing of following type of refund claims and processing thereof
shall be in accordance with Circular no. 24/24/2017-GST, dated 21-12-2017 read with Circular no.
17/17/2017-GST, dated 15-11-2017 :-

(i) refund of unutilized input tax credit where the credit has accumulated on account of rate of
tax on inputs being higher than the rate of tax on output supplies [other than nil rated or fully
exempt supplies) of goods or services or both except those supplies which are notified by the
Government on the recommendations of the Council [section 54(3) of the CGST Act, 2017
refers];
(ii) refund of tax on the supply of goods regarded as deemed exports; and
(iii) refund of balance in the electronic cash ledger.

Manual claims in respect of inverted duty structure

Refund claims on account of inverted duty structure shall be filed for a tax period on a monthly
basis in FORM GST RFD-01A. However, the registered persons having aggregate turnover of up
to Rs. 1.5 crore in the preceding financial year or the current financial year and opting to file FORM
GSTR-1 on quarterly basis (Notification no. 71/2017-Central Tax, dated 29-12-2017 refers) shall
apply for refund on a quarterly basis. Further, it is stated that the refund claim for a tax period may
be filed only after filing the details in FORM GSTR-1 for the said tax period. It is also to be ensured
that a valid return in FORM GSTR-3B has been filed for the last tax period before the one in which
the refund application is being filed. Since the date of furnishing of FORM GSTR-1 from July, 2017
onwards has been extended while the dates of furnishing of FORM GSTR-2 and FORM GSTR-3
for such period are yet to be notified, it has been decided by the competent authority to sanction
refund of provisionally accepted input tax credit at this juncture. However, the registered persons
applying for refund is required to give an undertaking to the effect that the amount of refund
sanctioned would be paid back to the Government with interest in case it is found subsequently
that the requirements of clause (c) of sub-section (2) of section 16 read with sub-section (2) of
section 42 of the CGST Act, 2017 have not been complied with in respect of the amount refunded.
This undertaking should be submitted manually along with the refund claim till the same is
available in FORM RFD-01A on the common portal. Further the prescribed statements - Statement
1 and Statement 1A of FORM GST RFD-01A are also required to be filled.

It may be noted that Rule 89(4B) has been inserted, i.e. 23-10-2017, in CGST Rules, 2017 vide
Notification no. 75/2017-Central Tax, dated 29-12-2017 so as to provide that refund of input tax
credit, availed only in respect of inputs availed in respect of inputs received under Notification no.
40/2017-Central Tax (Rate), dated 23-10-2017 or Notification no. 41/2017-Integrated Tax (Rate),
dated 23-10-2017, or both or other inputs or input services used in making such exports shall be
granted.

Manual claims in respect of deemed Exports

The Government has issued notification No. 48/2017-Central Tax, dated 18-10-2017 under section
147 of the CGST Act, 2017 wherein certain supplies of goods have been notified as deemed
export. Further, the third proviso to rule 89(1) of the CGST Rules, 2017 allows the recipient or the
supplier to apply for refund of tax paid on such deemed export supplies. In case such refund is
 Page 325 of 371

sought by the supplier of deemed export supplies, the documentary evidences as specified in
notification No. 49/2017-CentralTax, dated 18-10-2017 are also required to be furnished which
includes an undertaking by the recipient of deemed export supplies that he shall not claim the
refund in respect of such supplies and that no input tax credit on such supplies has been availed of
by him.

The undertaking from the recipient should be submitted manually by the supplier along with his
application for refund claim. Similarly, in case the refund is filed by the recipient of deemed export
supplies, an undertaking by the supplier of deemed export supplies that he shall not claim the
refund in respect of such supplies is also required to be furnished manually The procedure
regarding procurement of supplies of goods from DTA by Export Oriented Unit (EOU)/Electronic
Hardware Technology Park (EHTP) Unit/Software Technology Park (STP) Unit/Bio-Technology
Parks (BTP) Unit under deemed export as laid down in Circular no. 14/14/2017-GST, dated 6-11-
2017 needs to be complied with.

Further, as per the provisions of rule 89(2)(g) of the CGST Rules, 2017, the statement 5B of FORM
GST RFD-01A is required to be furnished for claiming refund on supplies declared as deemed
exports.

It may be noted that Rule 89(4A) has been inserted, w.e.f. 23-10-2017, in CGST Rules, 2017 vide
Notification no. 75/2017-Central Tax, dated 29-12-2017 so as to provide that refund of input tax
credit, availed in respect of only other inputs or input services used in making zero-rated supply of
goods or services or both, shall be granted in case of supplies received on which the supplier has
availed the benefit of Notification no. 48/2017-Central Tax, dated 18-10-2017.

Refund amount to be sanctioned by respective authorities

Para 2.5 of Circular No. 17/17/2017-GST, dated 15-11-2017 may be referred to in order to
ascertain the jurisdictional proper officer to whom the manual application for refund is to be
submitted. Where any amount claimed as refund is rejected under rule 92 of the CGST Rules,
2017, either fully or partly, the amount debited, to the extent of rejection, shall be re-credited to the
electronic credit ledger by an order made in FORM GST RFD-1B until the FORM GST PMT-03 is
available on the common portal. Further, the payment of the sanctioned refund amount shall be
made only by the respective tax authority of the Central or State Government. Thus, the refund
order issued either by the Central tax authority or the State tax/UT tax authority shall be
communicated to the concerned counter-part tax authority within seven working days for the
purpose of payment of the relevant sanctioned refund amount of tax or cess, as the case may be.
This time limit of seven working days is also applicable to refund claims in respect of zero-rated
supplies being processed as per Circular No. 17/17/2017-GST, dated 15-11-2017. It must be
ensured that the timelines specified under section 54(7) and rule 91(2) of the CGST Rules, 2017
for the sanction of refund are adhered to.

Special Procedure to facilitate smooth refund of Central Tax and State Tax
In order to facilitate sanction of refund amount of Central tax and State tax by the respective tax
authorities, it has been decided that both the Central and State Tax authority shall nominate nodal
officer(s) for the purpose of liasioning through a dedicated e-mail id. Where the amount of Central
tax and State tax refund is ordered to be sanctioned provisionally by the Central tax authority and a
sanction order is passed in accordance with the provisions of rule 91(2) of the CGST Rules, 2017
the Central tax authority shall communicate the same, through the nodal officer, to the State tax
authority for making payment of the sanctioned refund amount in relation to State tax and vice
versa. The aforesaid communication shall primarily be made through e-mail attaching the scanned
copies of the sanction order [FORM GST RFD-04 and FORM GST RFD-06], the application for
refund in FORM GST RFD-01A and the Acknowledgement Receipt Number (ARN). Accordingly,
the jurisdictional proper officer of Central or State Tax, as the case may be, shall issue FORM GST
RFD-05 and send it to the DDO for onward transmission for release of payment. After release of
payment by the respective PAO to the applicant’s bank account, the nodal officer of Central tax
 Page 326 of 371

and State tax authority shall inform each other. The manner of communication as referred earlier
shall be followed at the time of final sanctioning of the refund also.

In case of refund claim for the balance amount in the electronic cash ledger, upon filing of FORM
GST RFD-01A, the amount of refund claimed shall get debited in the electronic cash ledger.

Drawback of all taxes under GST (Central Tax, Integrated Tax, State/Union Territory Tax) should
not have been availed while claiming refund of accumulated ITC under section 54(3)(ii) of the
CGST Act, 2017. A declaration to this effect forms part of FORM GST RFD-01A as well.

Power with the Commissioner to withhold refund in certain cases

GST law provides that where an order giving rise to a refund is the subject matter of an appeal or
further proceedings or where any other proceedings under this Act is pending and the
Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue in
the said appeal or other proceedings on account of malfeasance or fraud committed, he may, after
giving the taxable person an opportunity of being heard, withhold the refund till such time as he
may determine.

Conclusion
In sum, the law envisages a simplified, time bound and technology driven refund procedure with
minimal human interface between the taxpayer and tax authorities.

OUR COMMENTS ON REFUND UNDER GST

 The refund claim under GST may arise for,

 GST paid in excess due to clerical or otherwise mistake
 Export of goods or services
 Supplies to SEZ units and developers
 Deemed Exports
 Refund of accumulated ITC on account of inverted duty structure
 Refund of accumulated ITC on account of zero rated supply against LUT
 Refund arising on account of judgement, decree, order or direction of the
Appellate Authority, Appellate Tribunal or any court
 Refund of pre-deposit
 Refund claim can be filed within 2 years from the relevant date.
 Refund claim is required to be filed in RFD-01 through common portal. However, the
manual refund claim also can be filed in RFD-01A.
 As per earlier formal to claim the refund of ITC accumulated on account of inverted duty
structure, the ITC availed on inputs and input service both were considered. However
now the Government has amended the said formula (with retrospective effect) to
consider only the ITC availed on inputs. (However the said retrospective amendment is
under dispute and is pending before the HC).
 Unjust enrichment is not applicable to the refund of ITC accumulated on account of
inverted duty structure as well as refund of ITC accumulated on account of zero rated
supply against LUT.
 Page 327 of 371

OFFENCES & PENALTIES UNDER GST

Sec.122 of CGST Act - Penalty for certain offences-

(1) Where a taxable person who––

(i) supplies any goods or services or both without issue of any invoice or issues an
incorrect or false invoice with regard to any such supply;
(ii) issues any invoice or bill without supply of goods or services or both in violation
of the provisions of this Act or the rules made thereunder;
(iii) collects any amount as tax but fails to pay the same to the Government beyond a
period of three months from the date on which such payment becomes due;
(iv) collects any tax in contravention of the provisions of this Act but fails to pay the
same to the Government beyond a period of three months from the date on
which such payment becomes due;
(v) fails to deduct the tax in accordance with the provisions of sub-section (1) of
section 51, or deducts an amount which is less than the amount required to be
deducted under the said sub-section, or where he fails to pay to the Government
under sub-section (2) thereof, the amount deducted as tax;
(vi) fails to collect tax in accordance with the provisions of sub-section (1) of section
52, or collects an amount which is less than the amount required to be collected
under the said sub-section or where he fails to pay to the Government the
amount collected as tax under sub-section (3) of section 52;
(vii) takes or utilises input tax credit without actual receipt of goods or services or both
either fully or partially, in contravention of the provisions of this Act or the rules
made thereunder;
(viii) fraudulently obtains refund of tax under this Act;
(ix) takes or distributes input tax credit in contravention of section 20, or the rules
made thereunder;
(x) falsifies or substitutes financial records or produces fake accounts or documents
or furnishes any false information or return with an intention to evade payment of
tax due under this Act;
(xi) is liable to be registered under this Act but fails to obtain registration;
(xii) furnishes any false information with regard to registration particulars, either at the
time of applying for registration, or subsequently;
(xiii) obstructs or prevents any officer in discharge of his duties under this Act;
(xiv) transports any taxable goods without the cover of documents as may be
specified in this behalf;
(xv) suppresses his turnover leading to evasion of tax under this Act;
(xvi) fails to keep, maintain or retain books of account and other documents in
accordance with the provisions of this Act or the rules made thereunder;
(xvii) fails to furnish information or documents called for by an officer in accordance
with the provisions of this Act or the rules made thereunder or furnishes false
information or documents during any proceedings under this Act;
(xviii) supplies, transports or stores any goods which he has reasons to believe are
liable to confiscation under this Act;
(xix) issues any invoice or document by using the registration number of another
registered person;
(xx) tampers with, or destroys any material evidence or document;
(xxi) disposes off or tampers with any goods that have been detained, seized, or
attached under this Act,
 Page 328 of 371

he shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the
tax evaded or the tax not deducted under section 51 or short deducted or deducted but
not paid to the Government or tax not collected under section 52 or short collected or
collected but not paid to the Government or input tax credit availed of or passed on or
distributed irregularly, or the refund claimed fraudulently, whichever is higher.

(2) Any registered person who supplies any goods or services or both on which any tax has
not been paid or short-paid or erroneously refunded, or where the input tax credit has
been wrongly availed or utilised,—

(a) for any reason, other than the reason of fraud or any willful- misstatement or
suppression of facts to evade tax, shall be liable to a penalty of ten thousand
rupees or ten per cent. of the tax due from such person, whichever is higher;
(b) for reason of fraud or any wilful misstatement or suppression of facts to evade
tax, shall be liable to a penalty equal to ten thousand rupees or the tax due from
such person, whichever is higher.

(3) Any person who––

(a) aids or abets any of the offences specified in clauses (i) to (xxi) of sub-section
(1);
(b) acquires possession of, or in any way concerns himself in transporting, removing,
depositing, keeping, concealing, supplying, or purchasing or in any other manner
deals with any goods which he knows or has reasons to believe are liable to
confiscation under this Act or the rules made thereunder;
(c) receives or is in any way concerned with the supply of, or in any other manner
deals with any supply of services which he knows or has reasons to believe are
in contravention of any provisions of this Act or the rules made thereunder;
(d) fails to appear before the officer of central tax, when issued with a summon for
appearance to give evidence or produce a document in an inquiry;
(e) fails to issue invoice in accordance with the provisions of this Act or the rules
made thereunder or fails to account for an invoice in his books of account,

shall be liable to a penalty which may extend to twenty-five thousand rupees.

Sec.123 of CGST Act - Penalty for failure to furnish information return

If a person who is required to furnish an information return under section 150 fails to do so
within the period specified in the notice issued under sub-section (3) thereof, the proper officer
may direct that such person shall be liable to pay a penalty of one hundred rupees for each day
of the period during which the failure to furnish such return continues:

Provided that the penalty imposed under this section shall not exceed five thousand rupees.

Sec.124 of CGST Act - Fine for failure to furnish statistics

If any person required to furnish any information or return under section 151,—

(a) without reasonable cause fails to furnish such information or return as may be required
under that section, or
(b) willfully furnishes or causes to furnish any information or return which he knows to be
false,
 Page 329 of 371

he shall be punishable with a fine which may extend to ten thousand rupees and in case of a
continuing offence to a further fine which may extend to one hundred rupees for each day after
the first day during which the offence continues subject to a maximum limit of twenty five
thousand rupees.

Sec.125 of CGST Act - General penalty

Any person, who contravenes any of the provisions of this Act or any rules made thereunder for
which no penalty is separately provided for in this Act, shall be liable to a penalty which may
extend to twenty-five thousand rupees.

Sec.126 of CGST Act - General disciplines related to penalty

(1) No officer under this Act shall impose any penalty for minor breaches of tax regulations
or procedural requirements and in particular, any omission or mistake in documentation
which is easily rectifiable and made without fraudulent intent or gross negligence.

Explanation.––For the purpose of this sub-section,––

(a) a breach shall be considered a ‘minor breach’ if the amount of tax involved is less
than five thousand rupees;
(b) an omission or mistake in documentation shall be considered to be easily rectifiable
if the same is an error apparent on the face of record.

(2) The penalty imposed under this Act shall depend on the facts and circumstances of each
case and shall be commensurate with the degree and severity of the breach.

(3) No penalty shall be imposed on any person without giving him an opportunity of being
heard.

(4) The officer under this Act shall while imposing penalty in an order for a breach of any
law, regulation or procedural requirement, specify the nature of the breach and the
applicable law, regulation or procedure under which the amount of penalty for the breach
has been specified.

(5) When a person voluntarily discloses to an officer under this Act the circumstances of a
breach of the tax law, regulation or procedural requirement prior to the discovery of the
breach by the officer under this Act, the proper officer may consider this fact as a
mitigating factor when quantifying a penalty for that person.

(6) The provisions of this section shall not apply in such cases where the penalty specified
under this Act is either a fixed sum or expressed as a fixed percentage.

Sec.127 of CGST Act - Power to impose penalty in certain case-

Where the proper officer is of the view that a person is liable to a penalty and the same is not
covered under any proceedings under section 62 or section 63 or section 64 or section 73 or
section 74 or section 129 or section 130, he may issue an order levying such penalty after
giving a reasonable opportunity of being heard to such person.

Sec.128 of CGST Act - Power to waive penalty or fee or both -

The Government may, by notification, waive in part or full, any penalty referred to in section 122
or section 123 or section 125 or any late fee referred to in section 47 for such class of taxpayers
 Page 330 of 371

and under such mitigating circumstances as may be specified therein on the recommendations
of the Council.

Sec.129 of CGST Act - Detention, seizure and release of goods and conveyances in
transit-

(1) Notwithstanding anything contained in this Act, where any person transports any goods
or stores any goods while they are in transit in contravention of the provisions of this Act
or the rules made thereunder, all such goods and conveyance used as a means of
transport for carrying the said goods and documents relating to such goods and
conveyance shall be liable to detention or seizure and after detention or seizure, shall be
released,––

(a) on payment of the applicable tax and penalty equal to one hundred per cent. of
the tax payable on such goods and, in case of exempted goods, on payment of
an amount equal to two per cent. of the value of goods or twenty-five thousand
rupees, whichever is less, where the owner of the goods comes forward for
payment of such tax and penalty;
(b) on payment of the applicable tax and penalty equal to the fifty per cent. of the
value of the goods reduced by the tax amount paid thereon and, in case of
exempted goods, on payment of an amount equal to five per cent. of the value of
goods or twenty-five thousand rupees, whichever is less, where the owner of the
goods does not come forward for payment of such tax and penalty;
(c) upon furnishing a security equivalent to the amount payable under clause (a) or
clause (b) in such form and manner as may be prescribed:

Provided that no such goods or conveyance shall be detained or seized without serving
an order of detention or seizure on the person transporting the goods.

(2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for
detention and seizure of goods and conveyances.

(3) The proper officer detaining or seizing goods or conveyances shall issue a notice
specifying the tax and penalty payable and thereafter, pass an order for payment of tax
and penalty under clause (a) or clause (b) or clause (c).

(4) No tax, interest or penalty shall be determined under sub-section (3) without giving the
person concerned an opportunity of being heard.

(5) On payment of amount referred in sub-section (1), all proceedings in respect of the
notice specified in sub-section (3) shall be deemed to be concluded.

(6) Where the person transporting any goods or the owner of the goods fails to pay the
amount of tax and penalty as provided in sub-section (1) within fourteen days of such
detention or seizure, further proceedings shall be initiated in accordance with the
provisions of section 130:

Provided that where the detained or seized goods are perishable or hazardous in nature
or are likely to depreciate in value with passage of time, the said period of seven days
may be reduced by the proper officer.
 Page 331 of 371

Sec.130 of CGST Act - Confiscation of goods or conveyances and levy of penalty-

(1) Notwithstanding anything contained in this Act, if any person—

(i) supplies or receives any goods in contravention of any of the provisions of this
Act or the rules made thereunder with intent to evade payment of tax; or
(ii) does not account for any goods on which he is liable to pay tax under this Act; or
(iii) supplies any goods liable to tax under this Act without having applied for
registration; or
(iv) contravenes any of the provisions of this Act or the rules made thereunder with
intent to evade payment of tax; or
(v) uses any conveyance as a means of transport for carriage of goods in
contravention of the provisions of this Act or the rules made thereunder unless
the owner of the conveyance proves that it was so used without the knowledge or
connivance of the owner himself, his agent, if any, and the person in charge of
the conveyance,

then, all such goods or conveyances shall be liable to confiscation and the person shall
be liable to penalty under section 122.

(2) Whenever confiscation of any goods or conveyance is authorised by this Act, the officer
adjudging it shall give to the owner of the goods an option to pay in lieu of confiscation,
such fine as the said officer thinks fit:

Provided that such fine leviable shall not exceed the market value of the goods
confiscated, less the tax chargeable thereon:

Provided further that the aggregate of such fine and penalty leviable shall not be less
than the amount of penalty leviable under sub-section (1) of section 129:

Provided also that where any such conveyance is used for the carriage of the goods or
passengers for hire, the owner of the conveyance shall be given an option to pay in lieu
of the confiscation of the conveyance a fine equal to the tax payable on the goods being
transported thereon.

(3) Where any fine in lieu of confiscation of goods or conveyance is imposed under sub-
section (2), the owner of such goods or conveyance or the person referred to in sub-
section (1), shall, in addition, be liable to any tax, penalty and charges payable in respect
of such goods or conveyance.

(4) No order for confiscation of goods or conveyance or for imposition of penalty shall be
issued without giving the person an opportunity of being heard.

(5) Where any goods or conveyance are confiscated under this Act, the title of such goods
or conveyance shall thereupon vest in the Government.

(6) The proper officer adjudging confiscation shall take and hold possession of the things
confiscated and every officer of Police, on the requisition of such proper officer, shall
assist him in taking and holding such possession.

(7) The proper officer may, after satisfying himself that the confiscated goods or
conveyance are not required in any other proceedings under this Act and after giving
reasonable time not exceeding three months to pay fine in lieu of confiscation, dispose
 Page 332 of 371

of such goods or conveyance and deposit the sale proceeds thereof with the
Government.

Sec.131 of CGST Act - Confiscation or penalty not to interfere with other punishments-

Without prejudice to the provisions contained in the Code of Criminal Procedure, 1973, no
confiscation made or penalty imposed under the provisions of this Act or the rules made
thereunder shall prevent the infliction of any other punishment to which the person affected
thereby is liable under the provisions of this Act or under any other law for the time being in
force.

Sec.132 of CGST Act - Punishment for certain offences-

(1) Whoever commits any of the following offences, namely:—

(a) supplies any goods or services or both without issue of any invoice, in violation of
the provisions of this Act or the rules made thereunder, with the intention to
evade tax;
(b) issues any invoice or bill without supply of goods or services or both in violation
of the provisions of this Act, or the rules made thereunder leading to wrongful
availment or utilisation of input tax credit or refund of tax;
(c) avails input tax credit using such invoice or bill referred to in clause (b);
(d) collects any amount as tax but fails to pay the same to the Government beyond a
period of three months from the date on which such payment becomes due;
(e) evades tax, fraudulently avails input tax credit or fraudulently obtains refund and
where such offence is not covered under clauses (a) to (d);
(f) falsifies or substitutes financial records or produces fake accounts or documents
or furnishes any false information with an intention to evade payment of tax due
under this Act;
(g) obstructs or prevents any officer in the discharge of his duties under this Act;
(h) acquires possession of, or in any way concerns himself in transporting, removing,
depositing, keeping, concealing, supplying, or purchasing or in any other manner
deals with, any goods which he knows or has reasons to believe are liable to
confiscation under this Act or the rules made thereunder;
(i) receives or is in any way concerned with the supply of, or in any other manner
deals with any supply of services which he knows or has reasons to believe are
in contravention of any provisions of this Act or the rules made thereunder;
(j) tampers with or destroys any material evidence or documents;
(k) fails to supply any information which he is required to supply under this Act or the
rules made thereunder or (unless with a reasonable belief, the burden of proving
which shall be upon him, that the information supplied by him is true) supplies
false information; or
(l) attempts to commit, or abets the commission of any of the offences mentioned in
clauses (a) to (k) of this section,

shall be punishable–

(i) in cases where the amount of tax evaded or the amount of input tax credit
wrongly availed or utilised or the amount of refund wrongly taken exceeds five
hundred lakh rupees, with imprisonment for a term which may extend to five
years and with fine;
(ii) in cases where the amount of tax evaded or the amount of input tax credit
wrongly availed or utilised or the amount of refund wrongly taken exceeds two
 Page 333 of 371

hundred lakh rupees but does not exceed five hundred lakh rupees, with
imprisonment for a term which may extend to three years and with fine;
(iii) in the case of any other offence where the amount of tax evaded or the amount
of input tax credit wrongly availed or utilised or the amount of refund wrongly
taken exceeds one hundred lakh rupees but does not exceed two hundred lakh
rupees, with imprisonment for a term which may extend to one year and with fine;
(iv) in cases where he commits or abets the commission of an offence specified in
clause (f) or clause (g) or clause (j), he shall be punishable with imprisonment for
a term which may extend to six months or with fine or with both.

(2) Where any person convicted of an offence under this section is again convicted of an
offence under this section, then, he shall be punishable for the second and for every
subsequent offence with imprisonment for a term which may extend to five years and
with fine.

(3) The imprisonment referred to in clauses (i), (ii) and (iii) of sub-section (1) and sub-
section (2) shall, in the absence of special and adequate reasons to the contrary to be
recorded in the judgment of the Court, be for a term not less than six months.

(4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all
offences under this Act, except the offences referred to in sub-section (5) shall be non-
cognizable and bailable.

(5) The offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-
section (1) and punishable under clause (i) of that sub-section shall be cognizable and
non-bailable.

(6) A person shall not be prosecuted for any offence under this section except with the
previous sanction of the Commissioner.

Explanation.— For the purposes of this section, the term “tax” shall include the amount
of tax evaded or the amount of input tax credit wrongly availed or utilised or refund
wrongly taken under the provisions of this Act, the State Goods and Services Tax Act,
the Integrated Goods and Services Tax Act or the Union Territory Goods and Services
Tax Act and cess levied under the Goods and Services Tax (Compensation to States)
Act.

Sec.133 of CGST Act - Liability of officers and certain other persons-

(1) Where any person engaged in connection with the collection of statistics under section
151 or compilation or computerisation thereof or if any officer of central tax having
access to information specified under sub-section (1) of section 150, or if any person
engaged in connection with the provision of service on the common portal or the agent
of common portal, wilfully discloses any information or the contents of any return
furnished under this Act or rules made thereunder otherwise than in execution of his
duties under the said sections or for the purposes of prosecution for an offence under
this Act or under any other Act for the time being in force, he shall be punishable with
imprisonment for a term which may extend to six months or with fine which may extend
to twenty-five thousand rupees, or with both.

(2) Any person—

(a) who is a Government servant shall not be prosecuted for any offence under this
section except with the previous sanction of the Government;
 Page 334 of 371

(b) who is not a Government servant shall not be prosecuted for any offence under
this section except with the previous sanction of the Commissioner.

Sec.134 of CGST Act - Cognizance of offences-

No court shall take cognizance of any offence punishable under this Act or the rules made
thereunder except with the previous sanction of the Commissioner, and no court inferior to that
of a Magistrate of the First Class, shall try any such offence.

Sec.135 of CGST Act - Presumption of culpable mental state-

In any prosecution for an offence under this Act which requires a culpable mental state on the
part of the accused, the court shall presume the existence of such mental state but it shall be a
defence for the accused to prove the fact that he had no such mental state with respect to the
act charged as an offence in that prosecution.

Explanation.—For the purposes of this section,––

(i) the expression “culpable mental state” includes intention, motive, knowledge of a
fact, and belief in, or reason to believe, a fact;
(ii) a fact is said to be proved only when the court believes it to exist beyond
reasonable doubt and not merely when its existence is established by a
preponderance of probability.

Sec.136 of CGST Act - Relevancy of statements under certain circumstances-

A statement made and signed by a person on appearance in response to any summons issued
under section 70 during the course of any inquiry or proceedings under this Act shall be
relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of
the facts which it contains,–

(a) when the person who made the statement is dead or cannot be found, or is incapable of
giving evidence, or is kept out of the way by the adverse party, or whose presence
cannot be obtained without an amount of delay or expense which, under the
circumstances of the case, the court considers unreasonable; or

(b) when the person who made the statement is examined as a witness in the case before
the court and the court is of the opinion that, having regard to the circumstances of the
case, the statement should be admitted in evidence in the interest of justice.

Sec.137 of CGST Act - Offences by companies-

(1) Where an offence committed by a person under this Act is a company, every person
who, at the time the offence was committed was in charge of, and was responsible to,
the company for the conduct of business of the company, as well as the company, shall
be deemed to be guilty of the offence and shall be liable to be proceeded against and
punished accordingly.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act
has been committed by a company and it is proved that the offence has been committed
with the consent or connivance of, or is attributable to any negligence on the part of, any
director, manager, secretary or other officer of the company, such director, manager,
 Page 335 of 371

secretary or other officer shall also be deemed to be guilty of that offence and shall be
liable to be proceeded against and punished accordingly.

(3) Where an offence under this Act has been committed by a taxable person being a
partnership firm or a Limited Liability Partnership or a Hindu Undivided Family or a trust,
the partner or karta or managing trustee shall be deemed to be guilty of that offence and
shall be liable to be proceeded against and punished accordingly and the provisions of
sub-section (2) shall, mutatis mutandis, apply to such persons.

(4) Nothing contained in this section shall render any such person liable to any punishment
provided in this Act, if he proves that the offence was committed without his knowledge
or that he had exercised all due diligence to prevent the commission of such offence.

Explanation.––For the purposes of this section,––

(i) “company” means a body corporate and includes a firm or other association of
individuals; and
(ii) “director”, in relation to a firm, means a partner in the firm.

Sec.138 of CGST Act - Compounding of offences-

(1) Any offence under this Act may, either before or after the institution of prosecution, be
compounded by the Commissioner on payment, by the person accused of the offence,
to the Central Government or the State Government, as the case be, of such
compounding amount in such manner as may be prescribed:

Provided that nothing contained in this section shall apply to—

(a) a person who has been allowed to compound once in respect of any of the
offences specified in clauses (a) to (f) of sub-section (1) of section 132 and the
offences specified in clause (l) which are relatable to offences specified in
clauses (a) to (f) of the said sub-section;
(b) a person who has been allowed to compound once in respect of any offence,
other than those in clause (a), under this Act or under the provisions of any State
Goods and Services Tax Act or the Union Territory Goods and Services Tax Act
or the Integrated Goods and Services Tax Act in respect of supplies of value
exceeding one crore rupees;
(c) a person who has been accused of committing an offence under this Act which is
also an offence under any other law for the time being in force;
(d) a person who has been convicted for an offence under this Act by a court;
(e) a person who has been accused of committing an offence specified in clause (g)
or clause (j) or clause (k) of sub-section (1) of section 132; and
(f) any other class of persons or offences as may be prescribed:

Provided further that any compounding allowed under the provisions of this section shall
not affect the proceedings, if any, instituted under any other law:

Provided also that compounding shall be allowed only after making payment of tax,
interest and penalty involved in such offences.

(2) The amount for compounding of offences under this section shall be such as may be
prescribed, subject to the minimum amount not being less than ten thousand rupees or
fifty per cent. of the tax involved, whichever is higher, and the maximum amount not
 Page 336 of 371

being less than thirty thousand rupees or one hundred and fifty per cent. of the tax,
whichever is higher.

(3) On payment of such compounding amount as may be determined by the Commissioner,

no further proceedings shall be initiated under this Act against the accused person in
respect of the same offence and any criminal proceedings, if already initiated in respect
of the said offence, shall stand abated.

Rule 162 of CGST Rules - Procedure for compounding of offences

(1) An applicant may, either before or after the institution of prosecution, make an
application under sub-section (1) of section 138 in FORM GST CPD-01 to the
Commissioner for compounding of an offence.

(2) On receipt of the application, the Commissioner shall call for a report from the concerned
officer with reference to the particulars furnished in the application, or any other
information, which may be considered relevant for the examination of such application.

(3) The Commissioner, after taking into account the contents of the said application, may, by
order in FORM GST CPD-02, on being satisfied that the applicant has co-operated in the
proceedings before him and has made full and true disclosure of facts relating to the
case, allow the application indicating the compounding amount and grant him immunity
from prosecution or reject such application within ninety days of the receipt of the
application.

(4) The application shall not be decided under sub-rule (3) without affording an opportunity
of being heard to the applicant and recording the grounds of such rejection.

(5) The application shall not be allowed unless the tax, interest and penalty liable to be paid
have been paid in the case for which the application has been made.

(6) The applicant shall, within a period of thirty days from the date of the receipt of the order
under sub-rule (3), pay the compounding amount as ordered by the Commissioner and
shall furnish the proof of such payment to him.

(7) In case the applicant fails to pay the compounding amount within the time specified in
sub-rule (6), the order made under sub-rule (3) shall be vitiated and be void.

(8) Immunity granted to a person under sub-rule (3) may, at any time, be withdrawn by the
Commissioner, if he is satisfied that such person had, in the course of the compounding
proceedings, concealed any material particulars or had given false evidence. Thereupon
such person may be tried for the offence with respect to which immunity was granted or
for any other offence that appears to have been committed by him in connection with the
compounding proceedings and the provisions the Act shall apply as if no such immunity
had been granted.

FAQ on Offences, Penalties, Prosecution and Compounding

Q1. What are the prescribed offences under CGST/SGST Act?

Ans. The CGST/SGST Act codifies the offences and penalties in Chapter XVI. The Act lists 21
offences in section 122, apart from the penalty prescribed under section 10 for availing
 Page 337 of 371

compounding by a taxable person who is not eligible for it. The said offences are as follows:
-

1) Making a supply without invoice or with false/incorrect invoice;

2) Issuing 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 CGST/SGST Act 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 51;
6) Non collection or lower collection of or non- payment of tax collectible at source
under section 52;
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 20;
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 regarding registration particulars either at the time of
applying for registration or subsequently;
13) Obstructing or preventing any official in discharge of his duty;
14) Transporting goods without prescribed documents;
15) Suppressing turnover leading to tax evasion;
16) Failure to maintain accounts/documents in the manner specified in the Act or failure
to retain accounts/documents for the period specified in the Act;
17) Failure to furnish information/documents required by an officer in terms of the
Act/Rules or furnishing false information/documents during the course of any
proceeding;
18) Supplying/transporting/storing any goods liable to confiscation;
19) Issuing invoice or document using GSTIN of another person;
20) Tampering/destroying any material evidence;
21) Disposing of /tampering with goods detained/seized/attached under the Act.

Q2. What is meant by the term penalty?

Ans. The word “penalty” has not been defined in the CGST/SGST Act but judicial
pronouncements and principles of jurisprudence have laid down the nature of a penalty as:

• a temporary punishment or a sum of money 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.

Q3. 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 126 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,
• the nature of the breach is to be specified clearly in the order imposing the penalty,
 Page 338 of 371

• the provisions of the law under which the penalty has been imposed is to be specified.

Section 126 further specifies that, in particular, no substantial penalty is to be imposed for —

• any minor breach (minor breach has been defined as a violation of the provisions in a
case where the tax involved is less than Rs.5000), or
• a procedural requirement of the law, or
• an easily rectifiable mistake/omission in documents (explained in the law as an error
apparent on record) that has been made without fraudulent intent or gross negligence.

Further, wherever penalty of a fixed amount or a fixed percentage has been provided in the
CGST/SGST Act, the same shall apply.

Q4. What is the quantum of penalty provided for in the CGST /SGST Act?
Ans. Section 122(1) provides that any taxable person who has committed any of the offences
mentioned in section 122 shall be punished with a penalty that shall be higher of 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
• A sum of Rs. 10,000/-.

Further Section 122(2) provides that any registered person who has not paid tax or makes a
short payment of tax on supplies shall be a liable to penalty which will be the higher of:

10% of the tax not paid or short paid, or Rs. 10,000/-

Q5. Is any penalty prescribed for any person other than the taxable person?
Ans. Yes. Section 122(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, supplying, storing or transporting) with goods that
are liable to confiscation,
• receives or deals with supply of services in contravention of the Act,
• fails to appear before an authority who has issued a summon,
• fails to issue any invoice for a supply or account for any invoice in his books of accounts.

Q6. What is the penalty provided for any contravention for which no separate penalty has
been prescribed under CGST/SGST Act?
Ans. Section 125 of the CGST/SGST Act provides that any person who contravenes any provision
of the Act or the rules made under this Act for which no separate penalty has been
prescribed shall be punishable with a penalty that may extend to Rs. 25,000/-

Q7. What action can be taken for transportation of goods without valid documents or
attempted to be removed without proper record in books?
Ans. If any person transports any goods or stores any such goods while in transit without the
documents prescribed under the Act (i.e. invoice and a declaration) or 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.
Where owner comes forward: - Such goods shall be released on payment of the applicable
tax and penalty equal to 100% tax or upon furnishing of security equivalent to the said
amount.
 Page 339 of 371

In case of exempted goods, penalty is 2% of value of goods or Rs 25,000/- whichever is

lesser.

Where owner does not come forward: - Such goods shall be released on payment of the
applicable tax and penalty equal to 50% of value of goods or upon furnishing of security
equivalent to the said amount.

In case of exempted goods, penalty is 5% of value of goods or Rs 25,000/- whichever is

lesser.

Q8. What is the penalty prescribed for a person who opts for composition scheme despite
being ineligible for the said scheme?
Ans. Section 10(5) provides that if a person who has paid under composition levy 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 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.

Q9. What is meant by confiscation?

Ans. The word ‘confiscation’ has not been defined in the Act. The concept is derived from Roman
Law wherein it meant seizing or taking into the hands of emperor, and transferring to
Imperial “fiscus” or Treasury. The word “confiscate” has been defined in Aiyar’s Law Lexicon
as to “appropriate (private property) to the public treasury by way of penalty; to deprive of
property as forfeited to the State.”

In short in means transfer of the title to the goods to the Government.

Q10. Under which circumstances can goods be confiscated under CGST/SGST Act?
Ans. Under Section 130 of the CGST Act, goods shall be liable to confiscation if any person:

• supplies or receives any goods in contravention of any provision of this Act and such
contravention results in evasion of tax payable under the Act, or

• does not account for any goods in the manner required under the Act, or

• supplies goods that are liable to tax under the Act without applying for registration, or

• uses any conveyance as a means of transport for carriage of goods in contravention of

the provisions of CGST/SGST Act (unless used without knowledge of owner)

• contravenes any provision of the Act/Rules with the intention of evading payment of tax.

Q11. What happens to the goods upon confiscation of goods by the proper officer?
Ans. Upon confiscation, 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.

Q12. After confiscation, is it required to give option to the person to redeem the goods?
Ans. Yes. In terms of section 130(2), 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.

Q13. Can any conveyance carrying goods without cover of prescribed documents be
subject to confiscation?
Ans. Yes. Section 130 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
 Page 340 of 371

the owner of the conveyance proves that the goods were being transported without cover of
the required documents/declarations without his knowledge or connivance or without the
knowledge or connivance of his agent then the conveyance shall not be liable to confiscation
as aforesaid.

Q14. What is Prosecution?

Ans. Prosecution is the institution or commencement of legal proceeding; the process of
exhibiting formal charges against the offender. Section 198 of the Criminal Procedure Code
defines “prosecution” as the institution and carrying on of the legal proceedings against a
person.

Q15. Which are the offences which warrant prosecution under the CGST/SGST Act?
Ans. Section 132 of the CGST/SGST Act codifies the major offences under the Act which warrant
institution of criminal proceedings and prosecution. 12 such major offences have been listed
as follows:

a) Making a supply without issuing an invoice or upon issuance of a false/incorrect invoice;

b) Issuing an invoice without making supply;
c) Not paying any amount collected as tax for a period exceeding 3 months;
d) Availing or utilizing credit of input tax without actual receipt of goods and/or services;
e) Obtaining any fraudulent refund)
f) evades tax, fraudulently avails ITC or obtains refund by an offence not covered under
clause (a) to (e);
g) Furnishing false information or falsification of financial records or furnishing of fake
accounts/ documents with intent to evade payment of tax;
h) Obstructing or preventing any official in the discharge of his duty;
i) Dealing with goods liable to confiscation i.e. receipt, supply, storage or transportation of
goods liable to confiscation;
j) Receiving/dealing with supply of services in contravention of the Act;
k) tampers with or destroys any material evidence or documents
l) Failing to supply any information required of him under the Act/Rules or supplying false
information;
m) Attempting to commit or abetting the commission of any of the offences at (a) to (l)
above.

Q16. What is the punishment prescribed on conviction of any offence under the
CGST/SGST Act?
Ans. The scheme of punishment provided in section 132(1) is as follows:

Offence Involving Punishment (Imprisonment extending to)

Tax evaded exceeding 5 years and fine
Rs. 5 crore or repeat offender 250 lakh
Tax evaded between Rs. 2 crore and Rs.5 3 years and fine
crore
Tax evaded between Rs.1 crore and Rs.2 1 year and fine
crore

 False records 6 months

 Obstructing officers
 Tamper records

Q17. What are cognizable and non-cognizable offences under CGST/SGST Act?
Ans. In terms of Section 132(4) and 132(5) of CGST/SGST Act
 Page 341 of 371

 all offences where the evasion of tax is less than Rs.5 crores shall be non-
cognizable and bailable,
 all offences where the evasion of tax exceeds Rs.5 crores shall be cognizable and
non- bailable.

Q18. 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.

Q19. Is ‘mensrea’ or culpable mental state necessary for prosecution under CGST/SGST
Act?
Ans. Yes. However, Section 135 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

Q20. 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;

• the act and its implications are understood and controllable;
• the person committing the act was not coerced and even overcomes hurdles to the act
committed;
• the person believes or has reasons to believe that the act is contrary to law.

Q21. Can a company be proceeded against or prosecuted for any offence under the
CGST/SGST Act?
Ans. Yes. Section 137 of the CGST/SGST ACT provides that every person who was in-charge of
or responsible to a company for the conduct of its business shall, along-with the company
itself, be liable to be proceeded against and punished for an offence committed by the
company while such person was in-charge of the affairs of the company. If any offence
committed by the company—

• has been committed with the consent/connivance of, or

• is attributable to negligence of—

any officer of the company then such officer shall be deemed to be guilty of the said offence
and liable to be proceeded against and punished accordingly.

Q22. What is meant by compounding of offences?

Ans. Section 320 of the Code of Criminal Procedure defines “compounding” as to forbear from
prosecution for consideration or any private motive.

Q23. Can offences under CGST/SGST Act be compounded?

Ans. Yes. As per section 138 of the CGST/SGST Act, 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 6 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 6 of the 12 major offences, if the person charged

with the offence had compounded earlier in respect of any of the said offences;
 Page 342 of 371

• 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 offence had
compounded earlier in respect of any of the said offences;

• Any offence which is also an offence under NDPSA or FEMA or any other Act other than
CGST/SGST;

Compounding is to be permitted only after payment of tax, interest and penalty and
compounding shall not affect any proceeding already instituted under any other law.

Q24. Are there any monetary limits prescribed for compounding of offence?
Ans. Yes. The lower limit for compounding amount is to be the greater of the following amounts: -

• 50% of tax involved, or

• Rs. 10,000.

The upper limit for compounding amount is to be greater of the following amounts: -

• 150% of tax involved or

• Rs. 30,000.

Q25. What is the consequence of compounding of an offence under CGST/SGST Act?

Ans. Sub-section (3) of section 138 provides that on payment of compounding amount no further
proceeding to be initiated under this Act and criminal proceeding already initiated shall stand
abated.

CHART SHOWING THE PENALTIES UNDER GST

Nature of Default Penalty Remarks

GST Identification Upto Rs. 25,000 If you are regular GST dealer, GSTIN needs to be
Number (GSTIN) to mentioned on the name board. If you opted for
be mentioned on the Composition levy, you need to mention ‘Composite
name board Taxable person’ on the name board. This rule is to make
the buyer to choose the supplier on seeing the details
on the name board.

GST Registration Upto Rs. 25,000 Any registered person needs to display his GST
Certificate (GST registration certificate at prominent place of business
REG–06) to be and at all additional places of businesses also. This is to
displayed at ensure that the person is registered on seeing the
prominent place of certificate itself.
business at all places
of business

Not issuing Proper Rs. 25,000 Invoice is the document which contains all details of
Invoice supply and also an important document based on which
ITC is availed. Hence, Invoice is given utmost
importance in GST, rather any indirect tax law. So, all
details as mentioned in rules need to be mentioned on
the Invoice.
 Page 343 of 371

Not maintaining Upto Rs. 25,000 Stock record is one of the mandatory records to be
proper Stock record maintained as per Rule 56(2) of CGST Rules, 2017.
From that record, the whole operations can be known.

Availing Input Tax Rs. 10,000 or Input Tax Credit (ITC) is backbone of GST structure. To
Credit based on 100% of ITC avail ITC, proper Invoice is must.
wrong Invoice wrongly availed,
whichever is
higher + 24%
Interest from
date of availment
to date of
reversal

Paying CGST instead Pay Tax under CGST & SGST is payable for intra-state supplies and
of IGST/SGST correct head with IGST for inter-state supplies. Taxes paid under
no interest and respective heads are transferred to respective
claim refund of governments. For Example, taxes paid under SGST
Paying SGST instead tax paid under head is transferred to respective state government
wrong head. determined based on place of supply. So, Tax paid
of CGST/IGST
under wrong heads leads to transfer of tax to that
respective government which leads to wrong
accounting. correct heads is important and hence, the
Paying IGST instead penalty. However, GST portal is now generating challan
of CGST/SGST automatically after entering data in GSTR 3B. Chance
of making this mistake is reduced to great extent.

Not filing GSTR 3B on Rs. 20 (Rs.10 Timely Compliance is key to success of GST return
or before 20th of next SGST + Rs.10 process and matching. Hence, to encourage timely
month CGST) per day compliance, this penalty.
of delay in case
of NIL returns.

Not filing GSTR 1 on In other cases,

or before due date Rs. 50 (Rs. 25
CGST + Rs. 25
SGST) per day of
delay

Not obtaining Rs. 10,000 + ITC Section 22 of CGST Act, 2017 mandates every
registration within 30 during the period person to register if the aggregate turnover exceeds
days of date on which of delay is lost Rs.20 Lakhs. Every registered person needs to pay tax
he is liable to get and file returns. Hence, registration is an important
registered aspect in GST. Non-registration eventhough he is liable
or takes registration late are both wrong doings.
 Page 344 of 371

Invoice without supply Rs. 10,000 or This situation may lead to availment of higher ITC
(Accommodation 100% of tax without actually selling goods.
Bills) evaded
whichever is
higher

Supply without Rs. 10,000 or This situation may lead to supply without recording it
Invoice (Non- 100% of tax and also the buyer may lose ITC since he doesn’t
Issuance of Invoice) evaded, possess proper invoice.
whichever is
higher

Collects GST but Rs. 10,000 or In indirect taxes, the tax is collected from the consumer
doesn’t pay to 100% of tax and paid to Government. It is not an expense to
Government within 3 evaded, the supplier. So, whenever tax is collected from a
months from due whichever is third party on behalf of Government and the same is
date. higher not paid leads to mis-appropriation of public money.

If any of the provisions are defaulted and nowhere

penalty is specified, this general penalty provision may
General Penalty Upto Rs. 25,000 be resorted to.
 Page 345 of 371

NOTICE/ORDER/RECOVERY UNDER GST

Sec.73 of CGST Act, 2017 – Determination of tax not paid or short paid or erroneously
refunded or input tax credit wrongly availed or utilised for any reason other than fraud or
any wilful-misstatement or suppression of facts.

(1) Where it appears to the proper officer that any tax has not been paid or short paid or
erroneously refunded, or where input tax credit has been wrongly availed or utilised for
any reason, other than the reason of fraud or any wilful-misstatement or suppression of
facts to evade tax, he shall serve notice on the person chargeable with tax which has not
been so paid or which has been so short paid or to whom the refund has erroneously
been made, or who has wrongly availed or utilised input tax credit, requiring him to show
cause as to why he should not pay the amount specified in the notice along with interest
payable thereon under section 50 and a penalty leviable under the provisions of this Act
or the rules made thereunder.

(2) The proper officer shall issue the notice under sub-section (1) at least three months prior
to the time limit specified in sub-section (10) for issuance of order.

(3) Where a notice has been issued for any period under sub-section (1), the proper officer
may serve a statement, containing the details of tax not paid or short paid or erroneously
refunded or input tax credit wrongly availed or utilised for such periods other than those
covered under sub-section (1), on the person chargeable with tax.

(4) The service of such statement shall be deemed to be service of notice on such person
under sub-section (1), subject to the condition that the grounds relied upon for such tax
periods other than those covered under sub-section (1) are the same as are mentioned
in the earlier notice.

(5) The person chargeable with tax may, before service of notice under sub-section (1) or,
as the case may be, the statement under sub-section (3), pay the amount of tax along
with interest payable thereon under section 50 on the basis of his own ascertainment of
such tax or the tax as ascertained by the proper officer and inform the proper officer in
writing of such payment.

(6) The proper officer, on receipt of such information, shall not serve any notice under sub-
section (1) or, as the case may be, the statement under sub-section (3), in respect of the
tax so paid or any penalty payable under the provisions of this Act or the rules made
thereunder.

(7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls
short of the amount actually payable, he shall proceed to issue the notice as provided for
in sub-section (1) in respect of such amount which falls short of the amount actually
payable.

(8) Where any person chargeable with tax under sub-section (1) or sub-section (3) pays the
said tax along with interest payable under section 50 within thirty days of issue of show
cause notice, no penalty shall be payable and all proceedings in respect of the said
notice shall be deemed to be concluded.

(9) The proper officer shall, after considering the representation, if any, made by person
chargeable with tax, determine the amount of tax, interest and a penalty equivalent to
 Page 346 of 371

ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person
and issue an order.

(10) The proper officer shall issue the order under sub-section (9) within three years from the
due date for furnishing of annual return for the financial year to which the tax not paid or
short paid or input tax credit wrongly availed or utilised relates to or within three years
from the date of erroneous refund.

(11) Notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under
sub-section (9) shall be payable where any amount of self-assessed tax or any amount
collected as tax has not been paid within a period of thirty days from the due date of
payment of such tax.

Sec.74 of CGST Act, 2017 – Determination of tax not paid or short paid or erroneously
refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilfull-
misstatement or suppression of facts.

(1) Where it appears to the proper officer that any tax has not been paid or short paid or
erroneously refunded or where input tax credit has been wrongly availed or utilised by
reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, he shall
serve notice on the person chargeable with tax which has not been so paid or which has
been so short paid or to whom the refund has erroneously been made, or who has
wrongly availed or utilised input tax credit, requiring him to show cause as to why he
should not pay the amount specified in the notice along with interest payable thereon
under section 50 and a penalty equivalent to the tax specified in the notice.

(2) The proper officer shall issue the notice under sub-section (1) at least six months prior to
the time limit specified in sub-section (10) for issuance of order.

(3) Where a notice has been issued for any period under sub-section (1), the proper officer
may serve a statement, containing the details of tax not paid or short paid or erroneously
refunded or input tax credit wrongly availed or utilised for such periods other than those
covered under sub-section (1), on the person chargeable with tax.

(4) The service of statement under sub-section (3) shall be deemed to be service of notice
under sub-section (1) of section 73, subject to the condition that the grounds relied upon
in the said statement, except the ground of fraud, or any wilful-misstatement or
suppression of facts to evade tax, for periods other than those covered under sub-
section (1) are the same as are mentioned in the earlier notice.

(5) The person chargeable with tax may, before service of notice under sub-section (1), pay
the amount of tax along with interest payable under section 50 and a penalty equivalent
to fifteen per cent. of such tax on the basis of his own ascertainment of such tax or the
tax as ascertained by the proper officer and inform the proper officer in writing of such
payment.

(6) The proper officer, on receipt of such information, shall not serve any notice under sub-
section (1), in respect of the tax so paid or any penalty payable under the provisions of
this Act or the rules made thereunder.

(7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls
short of the amount actually payable, he shall proceed to issue the notice as provided for
 Page 347 of 371

in sub-section (1) in respect of such amount which falls short of the amount actually
payable.

(8) Where any person chargeable with tax under sub-section (1) pays the said tax along
with interest payable under section 50 and a penalty equivalent to twenty-five per cent.
of such tax within thirty days of issue of the notice, all proceedings in respect of the said
notice shall be deemed to be concluded.

(9) The proper officer shall, after considering the representation, if any, made by the person
chargeable with tax, determine the amount of tax, interest and penalty due from such
person and issue an order.

(10) The proper officer shall issue the order under sub-section (9) within a period of five years
from the due date for furnishing of annual return for the financial year to which the tax
not paid or short paid or input tax credit wrongly availed or utilised relates to or within
five years from the date of erroneous refund.

(11) Where any person served with an order issued under sub-section (9) pays the tax along
with interest payable thereon under section 50 and a penalty equivalent to fifty per cent.
of such tax within thirty days of communication of the order, all proceedings in respect of
the said notice shall be deemed to be concluded.

Explanation 1.- For the purposes of section 73 and this section,-

(i) the expression “all proceedings in respect of the said notice” shall not include
proceedings under section 132;
(ii) where the notice under the same proceedings is issued to the main person liable to pay
tax and some other persons, and such proceedings against the main person have been
concluded under section 73 or section 74, the proceedings against all the persons liable
to pay penalty under sections 122, 125, 129 and 130 are deemed to be concluded.

Explanation 2.––For the purposes of this Act, the expression “suppression” shall mean non-
declaration of facts or information which a taxable person is required to declare in the return,
statement, report or any other document furnished under this Act or the rules made thereunder,
or failure to furnish any information on being asked for, in writing, by the proper officer.

Rule 142 of CGST Rules, 2017 – Notice and order for demand of amounts payable under
the Act.-

(1) The proper officer shall serve, along with the

(a) notice issued under section 52 or section 73 or section 74 or section 76 or

section 122 or section 123 or section 124 or section 125 or section 127 or section
129 or section 130, a summary thereof electronically in FORM GST DRC-01,

(b) statement under sub-section (3) of section 73 or sub-section (3) of section 74, a
summary thereof electronically in FORM GST DRC-02, specifying therein the
details of the amount payable.

(2) Where, before the service of notice or statement, the person chargeable with tax makes
payment of the tax and interest in accordance with the provisions of sub-section (5) of
section 73 or, as the case may be, tax, interest and penalty in accordance with the
provisions of sub-section (5) of section 74, or where any person makes payment of tax,
 Page 348 of 371

interest, penalty or any other amount due in accordance with the provisions of the Act he
shall inform the proper officer of such payment in FORM GST DRC-03 and the proper
officer shall issue an acknowledgement, accepting the payment made by the said person
in FORM GST DRC–04.

(3) Where the person chargeable with tax makes payment of tax and interest under sub-
section (8) of section 73 or, as the case may be, tax, interest and penalty under sub-
section (8) of section 74 within thirty days of the service of a notice under sub-rule (1), or
where the person concerned makes payment of the amount referred to in sub-section (1)
of section 129 within fourteen days of detention or seizure of the goods and conveyance,
he shall intimate the proper officer of such payment in FORM GST DRC-03 and the
proper officer shall issue an order in FORM GST DRC-05 concluding the proceedings in
respect of the said notice.

(4) The representation referred to in sub-section (9) of section 73 or sub-section (9) of

section 74 or sub-section (3) of section 76 or the reply to any notice issued under any
section whose summary has been uploaded electronically in FORM GST DRC-01 under
sub-rule (1) shall be furnished in FORM GST DRC-06.

(5) A summary of the order issued under section 52 or section 62 or section 63 or section 64
or section 73 or section 74 or section 75 or section 76 or section 122 or section 123 or
section 124 or section 125 or section 127 or section 129 or section 130 shall be
uploaded electronically in FORM GST DRC-07, specifying therein the amount of tax,
interest and penalty payable by the person chargeable with tax.

(6) The order referred to in sub-rule (5) shall be treated as the notice for recovery.

(7) Where a rectification of the order has been passed in accordance with the provisions of
section 161 or where an order uploaded on the system has been withdrawn, a summary
of the rectification order or of the withdrawal order shall be uploaded electronically by the
proper officer in FORM GST DRC-08.

Sec.75 of CGST Act, 2017- General provisions relating to determination of tax.

(1) Where the service of notice or issuance of order is stayed by an order of a court or
Appellate Tribunal, the period of such stay shall be excluded in computing the period
specified in sub-sections (2) and (10) of section 73 or sub-sections (2) and (10) of
section 74, as the case may be.

(2) Where any Appellate Authority or Appellate Tribunal or court concludes that the notice
issued under sub-section (1) of section 74 is not sustainable for the reason that the
charges of fraud or any wilful-misstatement or suppression of facts to evade tax has not
been established against the person to whom the notice was issued, the proper officer
shall determine the tax payable by such person, deeming as if the notice were issued
under sub-section (1) of section 73.

(3) Where any order is required to be issued in pursuance of the direction of the Appellate
Authority or Appellate Tribunal or a court, such order shall be issued within two years
from the date of communication of the said direction.

(4) An opportunity of hearing shall be granted where a request is received in writing from the
person chargeable with tax or penalty, or where any adverse decision is contemplated
against such person.
 Page 349 of 371

(5) The proper officer shall, if sufficient cause is shown by the person chargeable with tax,
grant time to the said person and adjourn the hearing for reasons to be recorded in
writing:

Provided that no such adjournment shall be granted for more than three times to a
person during the proceedings.

(6) The proper officer, in his order, shall set out the relevant facts and the basis of his
decision.

(7) The amount of tax, interest and penalty demanded in the order shall not be in excess of
the amount specified in the notice and no demand shall be confirmed on the grounds
other than the grounds specified in the notice.

(8) Where the Appellate Authority or Appellate Tribunal or court modifies the amount of tax
determined by the proper officer, the amount of interest and penalty shall stand modified
accordingly, taking into account the amount of tax so modified.

(9) The interest on the tax short paid or not paid shall be payable whether or not specified in
the order determining the tax liability.

(10) The adjudication proceedings shall be deemed to be concluded, if the order is not issued
within three years as provided for in sub-section (10) of section 73 or within five years as
provided for in sub-section (10) of section 74.

(11) An issue on which the Appellate Authority or the Appellate Tribunal or the High Court has
given its decision which is prejudicial to the interest of revenue in some other
proceedings and an appeal to the Appellate Tribunal or the High Court or the Supreme
Court against such decision of the Appellate Authority or the Appellate Tribunal or the
High Court is pending, the period spent between the date of the decision of the Appellate
Authority and that of the Appellate Tribunal or the date of decision of the Appellate
Tribunal and that of the High Court or the date of the decision of the High Court and that
of the Supreme Court shall be excluded in computing the period referred to in sub-
section (10) of section 73 or sub-section (10) of section 74 where proceedings are
initiated by way of issue of a show cause notice under the said sections.

(12) Notwithstanding anything contained in section 73 or section 74, where any amount of
self-assessed tax in accordance with a return furnished under section 39 remains
unpaid, either wholly or partly, or any amount of interest payable on such tax remains
unpaid, the same shall be recovered under the provisions of section 79.

(13) Where any penalty is imposed under section 73 or section 74, no penalty for the same
act or omission shall be imposed on the same person under any other provision of this
Act.

Sec.76 of CGST Act, 2017 Tax collected but not paid to Government.

(1) Notwithstanding anything to the contrary contained in any order or direction of any
Appellate Authority or Appellate Tribunal or court or in any other provisions of this Act or
the rules made thereunder or any other law for the time being in force, every person who
has collected from any other person any amount as representing the tax under this Act,
and has not paid the said amount to the Government, shall forthwith pay the said
 Page 350 of 371

amount to the Government, irrespective of whether the supplies in respect of which such
amount was collected are taxable or not.

(2) Where any amount is required to be paid to the Government under sub-section (1), and
which has not been so paid, the proper officer may serve on the person liable to pay
such amount a notice requiring him to show cause as to why the said amount as
specified in the notice, should not be paid by him to the Government and why a penalty
equivalent to the amount specified in the notice should not be imposed on him under the
provisions of this Act.

(3) The proper officer shall, after considering the representation, if any, made by the person
on whom the notice is served under sub-section (2), determine the amount due from
such person and thereupon such person shall pay the amount so determined.

(4) The person referred to in sub-section (1) shall in addition to paying the amount referred
to in sub-section (1) or sub-section (3) also be liable to pay interest thereon at the rate
specified under section 50 from the date such amount was collected by him to the date
such amount is paid by him to the Government.

(5) An opportunity of hearing shall be granted where a request is received in writing from the
person to whom the notice was issued to show cause.

(6) The proper officer shall issue an order within one year from the date of issue of the
notice.

(7) Where the issuance of order is stayed by an order of the court or Appellate Tribunal, the
period of such stay shall be excluded in computing the period of one year.

(8) The proper officer, in his order, shall set out the relevant facts and the basis of his
decision.

(9) The amount paid to the Government under sub-section (1) or sub-section (3) shall be
adjusted against the tax payable, if any, by the person in relation to the supplies referred
to in sub-section (1).

(10) Where any surplus is left after the adjustment under sub-section (9), the amount of such
surplus shall either be credited to the Fund or refunded to the person who has borne the
incidence of such amount.

(11) The person who has borne the incidence of the amount, may apply for the refund of the
same in accordance with the provisions of section 54.

Sec.77 of CGST Act, 2017 – Tax wrongfully collected and paid to Central Government or
State Government.

(1) A registered person who has paid the Central tax and State tax or, as the case may be,
the central tax and the Union territory tax on a transaction considered by him to be an
intra-State supply, but which is subsequently held to be an inter-State supply, shall be
refunded the amount of taxes so paid in such manner and subject to such conditions as
may be prescribed.

(2) A registered person who has paid integrated tax on a transaction considered by him to
be an inter-State supply, but which is subsequently held to be an intra-State supply, shall
 Page 351 of 371

not be required to pay any interest on the amount of central tax and State tax or, as the
case may be, the central tax and the Union territory tax payable.

Sec.78 of CGST Act, 2017 – Initiation of recovery proceedings.

Any amount payable by a taxable person in pursuance of an order passed under this Act shall
be paid by such person within a period of three months from the date of service of such order
failing which recovery proceedings shall be initiated:

Provided that where the proper officer considers it expedient in the interest of revenue, he may,
for reasons to be recorded in writing, require the said taxable person to make such payment
within such period less than a period of three months as may be specified by him.

Sec.79 of CGST Act, 2017 – Recovery of tax.

(1) Where any amount payable by a person to the Government under any of the provisions
of this Act or the rules made thereunder is not paid, the proper officer shall proceed to
recover the amount by one or more of the following modes, namely:––

(a) the proper officer may deduct or may require any other specified officer to deduct
the amount so payable from any money owing to such person which may be
under the control of the proper officer or such other specified officer;

(b) the proper officer may recover or may require any other specified officer to
recover the amount so payable by detaining and selling any goods belonging to
such person which are under the control of the proper officer or such other
specified officer;

(c) (i) the proper officer may, by a notice in writing, require any other person from
whom money is due or may become due to such person or who holds or may
subsequently hold money for or on account of such person, to pay to the
Government either forthwith upon the money becoming due or being held, or
within the time specified in the notice not being before the money becomes due
or is held, so much of the money as is sufficient to pay the amount due from such
person or the whole of the money when it is equal to or less than that amount;

(ii) every person to whom the notice is issued under sub-clause (i) shall be bound
to comply with such notice, and in particular, where any such notice is issued to a
post office, banking company or an insurer, it shall not be necessary to produce
any pass book, deposit receipt, policy or any other document for the purpose of
any entry, endorsement or the like being made before payment is made,
notwithstanding any rule, practice or requirement to the contrary;

(iii) in case the person to whom a notice under sub-clause (i) has been issued,
fails to make the payment in pursuance thereof to the Government, he shall be
deemed to be a defaulter in respect of the amount specified in the notice and all
the consequences of this Act or the rules made thereunder shall follow;

(iv) the officer issuing a notice under sub-clause (i) may, at any time, amend or
revoke such notice or extend the time for making any payment in pursuance of
the notice;
 Page 352 of 371

(v) any person making any payment in compliance with a notice issued under
sub-clause (i) shall be deemed to have made the payment under the authority of
the person in default and such payment being credited to the Government shall
be deemed to constitute a good and sufficient discharge of the liability of such
person to the person in default to the extent of the amount specified in the
receipt;

(vi) any person discharging any liability to the person in default after service on
him of the notice issued under sub-clause (i) shall be personally liable to the
Government to the extent of the liability discharged or to the extent of the liability
of the person in default for tax, interest and penalty, whichever is less;

(vii) where a person on whom a notice is served under sub-clause (i) proves to
the satisfaction of the officer issuing the notice that the money demanded or any
part thereof was not due to the person in default or that he did not hold any
money for or on account of the person in default, at the time the notice was
served on him, nor is the money demanded or any part thereof, likely to become
due to the said person or be held for or on account of such person, nothing
contained in this section shall be deemed to require the person on whom the
notice has been served to pay to the Government any such money or part
thereof;

(d) the proper officer may, in accordance with the rules to be made in this behalf,
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; and in case,
any part of the said amount payable or of the cost of the distress or keeping of
the property, remains unpaid for a period of thirty days next after any such
distress, 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 shall render 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 or to any officer
authorised by the Government and the said Collector or the said officer, on
receipt of such certificate, shall proceed to recover from such person the amount
specified thereunder as if it were an arrear of land revenue;

(f) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2

of 1974), the proper officer may file an application to the appropriate Magistrate
and such Magistrate shall proceed to recover from such person the amount
specified thereunder as if it were a fine imposed by him.

(2) Where the terms of any bond or other instrument executed under this Act or any rules or
regulations made thereunder provide that any amount due under such instrument may
be recovered in the manner laid down in sub-section (1), the amount may, without
prejudice to any other mode of recovery, be recovered in accordance with the provisions
of that sub-section.

(3) Where any amount of tax, interest or penalty is payable by a person to the Government
under any of the provisions of this Act or the rules made thereunder and which remains
unpaid, the proper officer of State tax or Union territory tax, during the course of
recovery of said tax arrears, may recover the amount from the said person as if it were
 Page 353 of 371

an arrear of State tax or Union territory tax and credit the amount so recovered to the
account of the Government.

(4) Where the amount recovered under sub-section (3) is less than the amount due to the
Central Government and State Government, the amount to be credited to the account of
the respective Governments shall be in proportion to the amount due to each such
Government.

Explanation.––For the purposes of this section, the word person shall include “distinct persons”
as referred to in sub-section (4) or, as the case may be, sub-section (5) of section 25.

Rule 142A of CGST Rules, 2017 – Procedure for recovery of dues under existing laws. –

(1) A summary of order issued under any of the existing laws creating demand of tax,
interest, penalty, fee or any other dues which becomes recoverable consequent to
proceedings launched under the existing law before, on or after the appointed day shall,
unless recovered under that law, be recovered under the Act and may be uploaded
in FORM GST DRC-07A electronically on the common portal for recovery under the Act
and the demand of the order shall be posted in Part II of Electronic Liability Register
in FORM GST PMT-01.

(2) Where the demand of an order uploaded under sub-rule (1) is rectified or modified or
quashed in any proceedings, including in appeal, review or revision, or the recovery is
made under the existing laws, a summary thereof shall be uploaded on the common
portal in FORM GST DRC-08A and Part II of Electronic Liability Register in FORM GST
PMT-01 shall be updated accordingly.

Rule 143 of CGST Rules, 2017 – Recovery by deduction from any money owed.-

Where any amount payable by a person (hereafter referred to in this rule as “the defaulter”) to
the Government under any of the provisions of the Act or the rules made thereunder is not paid,
the proper officer may require, in FORM GST DRC-09, a specified officer to deduct the amount
from any money owing to such defaulter in accordance with the provisions of clause (a) of sub-
section (1) of section 79.

Explanation.- For the purposes of this rule, “specified officer” shall mean any officer of the
Central Government or a State Government or the Government of a Union territory or a local
authority, or of a Board or Corporation or a company owned or controlled, wholly or partly, by the
Central Government or a State Government or the Government of a Union territory or a local
authority.

Rule 144 of CGST Rules, 2017 – Recovery by sale of goods under the control of proper
officer.

(1) Where any amount due from a defaulter is to be recovered by selling goods belonging to
such person in accordance with the provisions of clause (b) of sub-section (1) of section
79, the proper officer shall prepare an inventory and estimate the market value of such
goods and proceed to sell only so much of the goods as may be required for recovering
the amount payable along with the administrative expenditure incurred on the recovery
process.
 Page 354 of 371

(2) The said goods shall be sold through a process of auction, including e-auction, for which
a notice shall be issued in FORM GST DRC-10 clearly indicating the goods to be sold
and the purpose of sale.

(3) The last day for submission of bid or the date of auction shall not be earlier than fifteen
days from the date of issue of the notice referred to in sub-rule (2):

Provided that where the goods are of perishable or hazardous nature or where the
expenses of keeping them in custody are likely to exceed their value, the proper officer
may sell them forthwith.

(4) The proper officer may specify the amount of pre-bid deposit to be furnished in the
manner specified by such officer, to make the bidders eligible to participate in the
auction, which may be returned to the unsuccessful bidders, forfeited in case the
successful bidder fails to make the payment of the full amount, as the case may be.

(5) The proper officer shall issue a notice to the successful bidder in FORM GST DRC-
11 requiring him to make the payment within a period of fifteen days from the date of
auction. On payment of the full bid amount, the proper officer shall transfer the
possession of the said goods to the successful bidder and issue a certificate in FORM
GST DRC-12.

(6) Where the defaulter pays the amount under recovery, including any expenses incurred
on the process of recovery, before the issue of the notice under sub-rule (2), the proper
officer shall cancel the process of auction and release the goods.

(7) The proper officer shall cancel the process and proceed for re-auction where no bid is
received or the auction is considered to be non-competitive due to lack of adequate
participation or due to low bids.

Rule 145 of CGST Rules, 2017 – Recovery from a third person.-

(1) The proper officer may serve upon a person referred to in clause (c) of sub-section (1) of
section 79 (hereafter referred to in this rule as “the third person”), a notice in FORM GST
DRC-13directing him to deposit the amount specified in the notice.

(2) Where the third person makes the payment of the amount specified in the notice issued
under sub-rule (1), the proper officer shall issue a certificate in FORM GST DRC-14 to
the third person clearly indicating the details of the liability so discharged.

Rule 146 of CGST Rules, 2017 – Recovery through execution of a decree, etc.-

Where any amount is payable to the defaulter in the execution of a decree of a civil court for the
payment of money or for sale in the enforcement of a mortgage or charge, the proper officer
shall send a request in FORM GST DRC- 15 to the said court and the court shall, subject to the
provisions of the Code of Civil Procedure, 1908 (5 of 1908), execute the attached decree, and
credit the net proceeds for settlement of the amount recoverable.

Rule 147 of CGST Rules, 2017 – Recovery by sale of movable or immovable property.-

(1) The proper officer shall prepare a list of movable and immovable property belonging to
the defaulter, estimate their value as per the prevalent market price and issue an order
of attachment or distraint and a notice for sale in FORM GST DRC- 16 prohibiting any
 Page 355 of 371

transaction with regard to such movable and immovable property as may be required for
the recovery of the amount due:

Provided that the attachment of any property in a debt not secured by a negotiable
instrument, a share in a corporation, or other movable property not in the possession of
the defaulter except for property deposited in, or in the custody of any Court, shall be
attached in the manner provided in rule 151.

(2) The proper officer shall send a copy of the order of attachment or distraint to the
concerned Revenue Authority or Transport Authority or any such Authority to place
encumbrance on the said movable or immovable property, which shall be removed only
on the written instructions from the proper officer to that effect.

(3) Where the property subject to the attachment or distraint under sub-rule (1) is-

(a) an immovable property, the order of attachment or distraint shall be affixed on the
said property and shall remain affixed till the confirmation of sale;

(b) a movable property, the proper officer shall seize the said property in accordance
with the provisions of chapter XIV of the Act and the custody of the said property
shall either be taken by the proper officer himself or an officer authorised by him.

(4) The property attached or distrained shall be sold through auction, including e-auction, for
which a notice shall be issued in FORM GST DRC- 17 clearly indicating the property to
be sold and the purpose of sale.

(5) Notwithstanding anything contained in the provision of this Chapter, where the property
to be sold is a negotiable instrument or a share in a corporation, the proper officer may,
instead of selling it by public auction, sell such instrument or a share through a broker
and the said broker shall deposit to the Government so much of the proceeds of such
sale, reduced by his commission, as may be required for the discharge of the amount
under recovery and pay the amount remaining, if any, to the owner of such instrument or
a share.

(6) The proper officer may specify the amount of pre-bid deposit to be furnished in the
manner specified by such officer, to make the bidders eligible to participate in the
auction, which may be returned to the unsuccessful bidders or, forfeited in case the
successful bidder fails to make the payment of the full amount, as the case may be.

(7) The last day for the submission of the bid or the date of the auction shall not be earlier
than fifteen days from the date of issue of the notice referred to in sub-rule (4):

Provided that where the goods are of perishable or hazardous nature or where the
expenses of keeping them in custody are likely to exceed their value, the proper officer
may sell them forthwith.

(8) Where any claim is preferred or any objection is raised with regard to the attachment or
distraint of any property on the ground that such property is not liable to such attachment
or distraint, the proper officer shall investigate the claim or objection and may postpone
the sale for such time as he may deem fit.
 Page 356 of 371

(9) The person making the claim or objection must adduce evidence to show that on the
date of the order issued under sub-rule (1) he had some interest in, or was in possession
of, the property in question under attachment or distraint.

(10) Where, upon investigation, the proper officer is satisfied that, for the reason stated in the
claim or objection, such property was not, on the said date, in the possession of the
defaulter or of any other person on his behalf or that, being in the possession of the
defaulter on the said date, it was in his possession, not on his own account or as his own
property, but on account of or in trust for any other person, or partly on his own account
and partly on account of some other person, the proper officer shall make an order
releasing the property, wholly or to such extent as he thinks fit, from attachment or
distraint.

(11) Where the proper officer is satisfied that the property was, on the said date, in the
possession of the defaulter as his own property and not on account of any other person,
or was in the possession of some other person in trust for him, or in the occupancy of a
tenant or other person paying rent to him, the proper officer shall reject the claim and
proceed with the process of sale through auction.

(12) The proper officer shall issue a notice to the successful bidder in FORM GST DRC-
11 requiring him to make the payment within a period of fifteen days from the date of
such notice and after the said payment is made, he shall issue a certificate in FORM
GST DRC-12 specifying the details of the property, date of transfer, the details of the
bidder and the amount paid and upon issuance of such certificate, the rights, title and
interest in the property shall be deemed to be transferred to such bidder:

Provided that where the highest bid is made by more than one person and one of them
is a co-owner of the property, he shall be deemed to be the successful bidder.

(13) Any amount, including stamp duty, tax or fee payable in respect of the transfer of the
property specified in sub-rule (12), shall be paid to the Government by the person to
whom the title in such property is transferred.

(14) Where the defaulter pays the amount under recovery, including any expenses incurred
on the process of recovery, before the issue of the notice under sub-rule (4), the proper
officer shall cancel the process of auction and release the goods.

(15) The proper officer shall cancel the process and proceed for re-auction where no bid is
received or the auction is considered to be non-competitive due to lack of adequate
participation or due to low bids.

Rule 155 of CGST Rules, 2017 – Recovery through land revenue authority.-

Where an amount is to be recovered in accordance with the provisions of clause (e) of sub-
section (1) of section 79, the proper officer shall send a certificate to the Collector or Deputy
Commissioner of the district or any other officer authorised in this behalf in FORM GST DRC-
18 to recover from the person concerned, the amount specified in the certificate as if it were an
arrear of land revenue.

Rule 156 of CGST Rules, 2017 – Recovery through court.-

Where an amount is to be recovered as if it were a fine imposed under the Code of Criminal
Procedure, 1973, the proper officer shall make an application before the appropriate
 Page 357 of 371

Magistrate in accordance with the provisions of clause (f) of sub-section (1) of section 79
in FORM GST DRC- 19 to recover from the person concerned, the amount specified
thereunder as if it were a fine imposed by him.

Sec.80 of CGST Act, 2017 – Payment of tax and other amount in installments.

On an application filed by a taxable person, the Commissioner may, for reasons to be recorded
in writing, extend the time for payment or allow payment of any amount due under this Act, other
than the amount due as per the liability self-assessed in any return, by such person in monthly
installments not exceeding twenty four, subject to payment of interest under section 50 and
subject to such conditions and limitations as may be prescribed:

Provided that where there is default in payment of any one installment on its due date, the
whole outstanding balance payable on such date shall become due and payable forthwith and
shall, without any further notice being served on the person, be liable for recovery.

Rule 158 of CGST Rules, 2017 – Payment of tax and other amounts in installments.-

(1) On an application filed electronically by a taxable person, in FORM GST DRC- 20,
seeking extension of time for the payment of taxes or any amount due under the Act or
for allowing payment of such taxes or amount in installments in accordance with the
provisions of section 80, the Commissioner shall call for a report from the jurisdictional
officer about the financial ability of the taxable person to pay the said amount.

(2) Upon consideration of the request of the taxable person and the report of the
jurisdictional officer, the Commissioner may issue an order in FORM GST DRC-
21 allowing the taxable person further time to make payment and/or to pay the amount in
such monthly installments, not exceeding twenty-four, as he may deem fit.

(3) The facility referred to in sub-rule (2) shall not be allowed where-

(a) the taxable person has already defaulted on the payment of any amount under
the Act or the Integrated Goods and Services Tax Act, 2017 or the Union Territory
Goods and Services Tax Act, 2017 or any of the State Goods and Services Tax
Act, 2017, for which the recovery process is on;

(b) the taxable person has not been allowed to make payment in installments in the
preceding financial year under the Act or the Integrated Goods and Services Tax
Act, 2017 or the Union Territory Goods and Services Tax Act, 2017 or any of the
State Goods and Services Tax Act, 2017;

(c) the amount for which installment facility is sought is less than twenty–five
thousand rupees.

Sec.81 of CGST Act, 2017 – Transfer of property to be void in certain cases.

Where a person, after any amount has become due from him, creates a charge on or parts with
the property belonging to him or in his possession by way of sale, mortgage, exchange, or any
other mode of transfer whatsoever of any of his properties in favour of any other person with the
intention of defrauding the Government revenue, such charge or transfer shall be void as
against any claim in respect of any tax or any other sum payable by the said person:
 Page 358 of 371

Provided that, such charge or transfer shall not be void if it is made for adequate consideration,
in good faith and without notice of the pendency of such proceedings under this Act or without
notice of such tax or other sum payable by the said person, or with the previous permission of
the proper officer.

Sec.82 of CGST Act, 2017 – Tax to be first charge on property.

Notwithstanding anything to the contrary contained in any law for the time being in force, save
as otherwise provided in the Insolvency and Bankruptcy Code, 2016 (31 of 2016), any amount
payable by a taxable person or any other person on account of tax, interest or penalty which he
is liable to pay to the Government shall be a first charge on the property of such taxable person
or such person.

Sec.83 of CGST Act, 2017 – Provisional attachment to protect revenue in certain cases.

(1) Where during the pendency of any proceedings under section 62 or section 63 or
section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion
that for the purpose of protecting the interest of the Government revenue, it is necessary
so to do, he may, by order in writing attach provisionally any property, including bank
account, belonging to the taxable person in such manner as may be prescribed.

(2) Every such provisional attachment shall cease to have effect after the expiry of a period
of one year from the date of the order made under sub-section (1).

Rule 159 of CGST Rules, 2017 – Provisional attachment of property.-

(1) Where the Commissioner decides to attach any property, including bank account in
accordance with the provisions of section 83, he shall pass an order in FORM GST
DRC-22 to that effect mentioning therein, the details of property which is attached.

(2) The Commissioner shall send a copy of the order of attachment to the concerned
Revenue Authority or Transport Authority or any such Authority to place encumbrance on
the said movable or immovable property, which shall be removed only on the written
instructions from the Commissioner to that effect.

(3) Where the property attached is of perishable or hazardous nature, and if the taxable
person pays an amount equivalent to the market price of such property or the amount
that is or may become payable by the taxable person, whichever is lower, then such
property shall be released forthwith, by an order in FORM GST DRC-23, on proof of
payment.

(4) Where the taxable person fails to pay the amount referred to in sub-rule (3) in respect of
the said property of perishable or hazardous nature, the Commissioner may dispose of
such property and the amount realized thereby shall be adjusted against the tax,
interest, penalty, fee or any other amount payable by the taxable person.

(5) Any person whose property is attached may, within seven days of the attachment under
sub-rule (1), file an objection to the effect that the property attached was or is not liable
to attachment, and the Commissioner may, after affording an opportunity of being heard
to the person filing the objection, release the said property by an order in FORM GST
DRC- 23.
 Page 359 of 371

(6) The Commissioner may, upon being satisfied that the property was, or is no longer liable
for attachment, release such property by issuing an order in FORM GST DRC- 23.

Sec.84 of CGST Act, 2017 – Continuation and validation of certain recovery proceedings.

Where any notice of demand in respect of any tax, penalty, interest or any other amount
payable under this Act, (hereafter in this section referred to as “Government dues”), is served
upon any taxable person or any other person and any appeal or revision application is filed or
any other proceedings is initiated in respect of such Government dues, then––

(a) where such Government dues are enhanced in such appeal, revision or other
proceedings, the Commissioner shall serve upon the taxable person or any other person
another notice of demand in respect of the amount by which such Government dues are
enhanced and any recovery proceedings in relation to such Government dues as are
covered by the notice of demand served upon him before the disposal of such appeal,
revision or other proceedings may, without the service of any fresh notice of demand, be
continued from the stage at which such proceedings stood immediately before such
disposal;

(b) where such Government dues are reduced in such appeal, revision or in other
proceedings––

(i) it shall not be necessary for the Commissioner to serve upon the taxable person a
fresh notice of demand;
(ii) the Commissioner shall give intimation of such reduction to him and to the
appropriate authority with whom recovery proceedings is pending;
(iii) any recovery proceedings initiated on the basis of the demand served upon him prior
to the disposal of such appeal, revision or other proceedings may be continued in
relation to the amount so reduced from the stage at which such proceedings stood
immediately before such disposal.

Rule 161 of CGST Rules, 2017 – Continuation of certain recovery proceedings.-

The order for the reduction or enhancement of any demand under section 84 shall be issued
in FORM GST DRC- 25.

Rule 151 of CGST Rules, 2017 – Attachment of debts and shares, etc.-

(1) A debt not secured by a negotiable instrument, a share in a corporation, or other

movable property not in the possession of the defaulter except for property deposited in,
or in the custody of any court shall be attached by a written order in FORM GST DRC-
16 prohibiting.-

(a) in the case of a debt, the creditor from recovering the debt and the debtor from
making payment thereof until the receipt of a further order from the proper officer;
(b) in the case of a share, the person in whose name the share may be standing
from transferring the same or receiving any dividend thereon;
(c) in the case of any other movable property, the person in possession of the same
from giving it to the defaulter.

(2) A copy of such order shall be affixed on some conspicuous part of the office of the
proper officer, and another copy shall be sent, in the case of debt, to the debtor, and in
 Page 360 of 371

the case of shares, to the registered address of the corporation and in the case of other
movable property, to the person in possession of the same.

(3) A debtor, prohibited under clause (a) of sub-rule (1), may pay the amount of his debt to
the proper officer, and such payment shall be deemed as paid to the defaulter.

Rule 152 of CGST Rules, 2017 – Attachment of property in custody of courts or Public
Officer.-

Where the property to be attached is in the custody of any court or Public Officer, the proper
officer shall send the order of attachment to such court or officer, requesting that such property,
and any interest or dividend becoming payable thereon, may be held till the recovery of the
amount payable.

Rule 153 of CGST Rules, 2017 – Attachment of interest in partnership.-

(1) Where the property to be attached consists of an interest of the defaulter, being a
partner, in the partnership property, the proper officer may make an order charging the
share of such partner in the partnership property and profits with payment of the amount
due under the certificate, and may, by the same or subsequent order, appoint a receiver
of the share of such partner in the profits, whether already declared or accruing, and of
any other money which may become due to him in respect of the partnership, and direct
accounts and enquiries and make an order for the sale of such interest or such other
order as the circumstances of the case may require.

(2) The other partners shall be at liberty at any time to redeem the interest charged or, in the
case of a sale being directed, to purchase the same.

Rule 154 of CGST Rules, 2017 – Disposal of proceeds of sale of goods and movable or
immovable property.-

The amounts so realised from the sale of goods, movable or immovable property, for the
recovery of dues from a defaulter shall,-

(a) first, be appropriated against the administrative cost of the recovery process;
(b) next, be appropriated against the amount to be recovered;
(c) next, be appropriated against any other amount due from the defaulter under the Act or
the Integrated Goods and Services Tax Act, 2017 or the Union Territory Goods and
Services Tax Act, 2017 or any of the State Goods and Services Tax Act, 2017 and the
rules made thereunder; and
(d) any balance, be paid to the defaulter.

Rule 157 of CGST Rules, 2017 – Recovery from surety.-

Where any person has become surety for the amount due by the defaulter, he may be
proceeded against under this Chapter as if he were the defaulter.

Rule 160 of CGST Rules, 2017 – Recovery from company in liquidation.-

Where the company is under liquidation as specified in section 88, the Commissioner shall
notify the liquidator for the recovery of any amount representing tax, interest, penalty or any
other amount due under the Act in FORM GST DRC -24.
 Page 361 of 371

CIRCULARS/FAQ
Recovery of Tax
C.B.E. & C. Flyer No. 51, dated 1-1-2018

1. All tax administration occasionally comes across a situation where the tax dues are not paid
correctly by the taxpayers, most of the times inadvertently and sometimes deliberately. To
minimise the inadvertent short payment of taxes the concept of ‘Matching’ of details of
‘Outward supplies’ of supplier with the details of ‘Inward supplies’ of recipient has been
introduced in the GST Act. Moreover, the self-assessed tax has to be paid by due date
prescribed under the GST Act and in case of any failure to pay the same by due date the
Input Tax Credit will not be available to his customers and also the taxpayer will not be able
to file any return for further period. Effectually these provisions works as a Self-Policing
system and takes care of any mis-match in the payment of taxes. However, despite these
provisions there may arise some instances where the tax was not paid correctly. To deal with
all such situations the provisions for Recovery are incorporated in any tax law. Accordingly,
the GST Act contains elaborate provisions for recovery of tax under various situations, which
can be broadly classified into following two categories :-

i. Tax short paid or erroneously refunded or input tax credit wrongly availed; and
ii. Non-payment of self-assessed tax or amount collected as representing the Tax.

2. The incidence of the short payment of tax or erroneous refund or wrong availment of input
tax credit may be because of an inadvertent bona fide mistake (Normal Cases) or it may be a
deliberate attempt (Fraud Cases) to evade the tax. Since the nature of offence is totally
different in both type of incidences, hence separate provisions for recovery of the tax and
amount of penalty have been made to deal with any of such type of cases. Besides these
there are provisions to encourage voluntary compliance such as no penalty or lesser penalty
if the tax dues along with interest, are paid within specified time limit/incidence. The Table
below gives a comprehensive chart of provisions for voluntary compliance :-

Sr. Action by Taxpayer Amount of Penalty Amount of Penalty Remarks

No. payable — payable —
Normal Cases Fraud Cases
1. Tax amount, along with No Penalty and no 15% of the Tax amount The penalty shall
interest, paid before Notice shall be issued. and no Notice shall be also be not
issuance of Notice. issued. chargeable in cases
2. Tax amount, along with No Penalty. All 25% of the Tax amount. where the self-
interest, paid within 30 proceedings deemed to All proceedings deemed assessed tax or any
days of issuance of Notice. be concluded. to be concluded. amount collected as
tax is paid (with
3. Tax amount, along with 10% of the Tax amount 50% of the Tax amount. interest) within 30
interest, paid within 30 or Rs. 10,000/-, All proceedings deemed days from the due
days of communication of whichever is higher to be concluded. date of payment.
Order.
4. Tax amount, along with 10% of the Tax amount 100% of the Tax amount.
interest, paid after 30 days or Rs. 10,000/-,
of communication of Order. whichever is higher
3. As can be seen from the foregoing para that for all types of incidences of short payment or
erroneous refund or wrong availment of Input Tax credit, there are incentive for the person
who accepts his tax liability and readily discharge the same. The law provides an opportunity
for payment of tax, interest and a Nil or nominal penalty (depending on nature of offence)
before issuance of Notice and emphatically stipulates that in all such cases no Notice shall
be issued and consequently there shall be no other consequences for any of the default.
However, this is not the end of the road and there is another chance to discharge tax and
 Page 362 of 371

interest liability with Nil or nominal penalty (depending on nature of offence) within 30 days of
issuance of the Notice and the law provides that all proceedings in respect of the said Notice
shall be deemed to be concluded. If it becomes inevitable to issue a show cause notice and
thereafter pass an Order, the GST Act ensures a timely completion of all these procedures
by providing a fixed timeline for issuance of notice and order-as follows :-

Sr. Nature of Case Time for issuance of Notice Time for issuance of Order
No.
1. Normal Cases Within 2 years and 9 months from the Within 3 years from the due date of filing
due date of filing of Annual Return for of Annual Return for the Financial Year to
the Financial Year to which the demand which the demand pertains or from date
pertains or from date of erroneous of erroneous refund.
refund.
2. Fraud Cases Within 4 years and 6 months from the Within 5 years from the due date of filing
due date of filing of Annual Return for of Annual Return for the Financial Year to
the Financial Year to which the demand which the demand pertains or from date
pertains or from date of erroneous of erroneous refund.
refund.
3. Any amount No time limit. Within one year from the date of issue of
collected as tax notice.
but not paid
4. Non-payment of No need to issue a show cause notice. Recovery proceedings can be started
self-assessed directly. Penalty, @ 10% of the Tax amount or Rs. 10,000/-, whichever is higher,
tax shall also be payable if the period of non-payment exceeds 30 days from the due
date of payment of tax.

The GST Act also ensures timely disposal of cases by further providing that if the Order is
not issued within the stipulated time limit of three years or five years, as the case may be, the
adjudication proceedings shall be deemed to be concluded. From all these provisions it is
clear that the non-payment of self-assessed tax or the amount collected as representing the
tax has been treated differently than the other short payments and in case of these two the
only opportunity for paying the same without incurring any penalty is if it is paid, with interest,
within 30 days from the due date of payment.

4. All these provisions make it clear that there are sufficient opportunities to make amend and
discharge the tax liability with nil or nominal penalties. However, there are disincentives also
for the person who fails to utilise these beneficial provisions. Besides that, the law also
provides that the Board may fix certain monetary limits for not filing an Appeal against any
order. It means if any order is passed in favour of the assessee the department will not
pursue the case further by filing Appeals if the amount involved is less than the specified
limit. At present, under the existing laws, the monetary limits for not filing an appeal to
various judicial forums are follows :-

i. Tribunal - Rs. 10 Lakhs

ii. High Courts - Rs. 20 Lakhs and
iii. Supreme Court - Rs. 25 Lakhs

5. The recovery proceedings are final step towards realisation of any tax or amount, which has
been confirmed as payable after following the due process of adjudication by the proper
officer. Therefore, if the tax dues and other amounts remain unpaid, despite all these
beneficial provisions, and the taxpayer fails to pay the dues after the orders are passed and
statutory limit of 3 months is over then the proper officer may initiate recovery proceedings.
These recovery provisions under the CGST Act, 2017 lays down a well-defined procedure
which is as follows :-
 Page 363 of 371

i. Any amount payable, in pursuance to any order passed in this matter, is required to
be paid within 3 months from the date of receipt of order and the taxpayer should pay
the same within this time limit. However, it may be mentioned that in certain cases,
considering the interest of revenue, this period of 3 months may be reduced.

ii. If the payable amount is not paid within the specified time limit of 3 months then
recovery proceedings shall be initiated and various actions may be taken by the
recovery officer, for realisation of Government dues. These options for recovery of
government dues includes deduction of money from any amount payable to such
taxpayer, by detaining and selling any goods, by directing any other person from
whom the money is due to such person, attaching any moveable (Including
Negotiable Instruments and Shares) and/or immovable property belonging to the
defaulter, etc.

iii. However, considering various business aspects the provisions for payment of all
such a mounts, other than self-assessed tax, in instalments have also been made in
the Act. A person can avail this benefit of payment in instalments, by making
application to the Commissioner by specifying reasons for such request. On receipt
of such application the Commissioner may allow payment of amount in instalments,
subject to maximum 24 monthly instalments and on payment of applicable interest.
Here it may be noted that if there is default in payment of any one instalment then the
whole outstanding balance shall become due and payable immediately.

FAQ
Q 1. Which are the applicable sections 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 73 deals with the cases where there is no invocation of fraud/suppression/mis-statement
etc. Section 74 deals with cases where the provisions related to fraud/suppression/mis-statement etc.
are invoked.
Q 2. In what form and manner will the demand notice be issued?
Ans. Demand notices can be issued under Section 73 (cases not involving fraud/suppression), Section
74 (cases involving fraud/suppression) & Section 76 (Tax collected but not paid to the Government. In
all cases, along with the notices, a summary thereof has to be served electronically to the notice
in FORM GST DRC-01.
Where a statement of demand is issued in terms of Section 73(3) or 74(3), along with the statement a
summary thereof has to be served electronically to the noticee in FORM GST DRC-02.
Q 3. What if person chargeable with tax, pays the amount along with interest before issue of
show cause notice under section 73?
Ans. A person can make payment voluntarily either before issue of notice or within thirty days of issue
of notice and file an intimation of such voluntary payment in form GST DRC-03.
In such cases if paid before issue of notice, notice shall not be issued by the proper officer {sec.73 (6)}
and if paid after issue of notice but within thirty days, all proceedings in respect of such notice shall be
deemed to be concluded. {sec.73 (8)}
Q 4. What is the form and manner in which payment of tax/interest/penalty before issue of
notice under Section 73 or 74 will be communicated by the taxable person?
Ans. In cases falling under Section 73, the taxable person has the option to discharge tax and interest
liability before issuance of notice under Section 73(1) or statement under Section 73(3). Similarly, in
cases falling under Section 74, the taxable person has the option to discharge tax/interest/penalty
equal to 15% of tax liability before issuance of notice under Section 74(1) or statement under Section
74(3). If he opts to make such payment before issuance of notice, he shall make the payment of tax
 Page 364 of 371

and interest and thereafter inform the proper officer in FORM GST DRC-03. The proper officer has to
issue an acknowledgement in FORM GST DRC–04.
Q 5. What is the form and manner in which payment of tax/interest/penalty after issue of notice
under Section 73 or 74 will be communicated by the taxable person?
Ans. In cases falling under Section 73, the taxable person has the option to discharge tax and interest
liability within 30 days of issuance of notice under Section 73(1) or statement under Section 73(3).
Similarly, in cases falling under Section 74, the taxable person has the option to discharge
tax/interest/penalty equal to 25% of tax liability within 30 days of issuance of notice under Section
74(1) or statement under Section 74(3). If he opts to make such payment within 30 days of issuance of
notice, he shall make the payment of tax and interest and thereafter inform the proper officer in FORM
GST DRC-03. In such cases, the proper officer shall issue an order in FORM GST DRC-05 concluding
the proceedings in respect of the said notice.
Q 6. What is the course of action, if the assessee has not paid the tax or short paid or
erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any
wilful misstatement or suppression of facts?
Ans. In such circumstances, the proper officer shall serve notice on the person chargeable with tax
which has not been so paid or which has been so short paid or to whom the refund has erroneously
been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to
why he should not pay the amount specified in the notice along with interest payable thereon under
Section 50and a penalty equivalent to the tax specified in the notice.
Q 7. What is the time limit for issuance of SCN in light of the above circumstances?
Ans. In such circumstances, the proper officer shall issue the notice at least six months prior to the
time limit specified in section 74(10) for issuance of the Order i.e 4 ½ years from the due date of
furnishing of annual return for the financial year to which the tax not paid or short paid or input tax
credit wrongly availed or utilised relates to or from the date of erroneous refund.
Thereafter, the proper officer is required to issue the Order under section 74 (9) within a period five
years from the due date of furnishing of annual return for the financial year to which the tax not paid or
short paid or input tax credit wrongly availed or utilised relates to or from the date of erroneous refund.
Q 8. How will the taxable person respond to the SCN issued under Section 73 or Section 74?
Ans. The taxable person shall respond to the notices issued under Section 73 or Section 74 in FORM
GST DRC-06.
Q 9. What is the form and manner in which an order determining tax liability will be issued
under Section 73 or Section 74?
Ans. The order will be a speaking order after following due process of law. A summary of the order
issued under section 73(9) or section 74(9) or section 76(3) shall be uploaded electronically in FORM
GST DRC-07, specifying therein the amount of tax, interest and penalty payable by the person
chargeable with tax.
Q 10. After issuance of order, is it necessary for the proper officer to issue a recovery notice?
Ans. No. The order itself will be treated as a recovery notice.
Q 11. Is there any time limit for adjudication the cases?
Ans:
(i) In case of section 73(cases other than fraud/ suppression of facts/wilful misstatement), the
time limit for adjudication of cases is 3 years from the due date for filing of annual return for the
financial year to which demand relates to or the date of erroneous refund/ITC wrongly availed.
{sec.73(10)}
(ii) In case of section 74(cases of fraud/suppression of facts/wilful misstatement), the time limit
for adjudication is 5 years from the due date for filing of annual return for the financial year to
which demand relates to or the date of erroneous refund/ITC wrongly availed. {sec.74(10)}
 Page 365 of 371

Q 12. If notice is issued under Section 74 and thereafter the noticee makes payment, is there
any need to adjudicate the case?
Ans. Where the person to whom a notice has been issued under sub-section (1) of section 74, pays
the tax along with interest with penalty equal to 25% of such tax within 30 days of issue of notice, all
proceedings in respect of such notice shall be deemed to be concluded. {Sec.74 (8)}
Q 13. How will rectification of order be done by the proper officer?
Ans. As per Section 161, mistakes apparent on record can be rectified and such rectification has to be
done within 3 months of the date of issue of order. However, no such rectification will be done after 6
months from the date of the order. This period of 6 months will not be applicable to rectification of
mistakes of purely clerical or arithmetic in nature arising from accidental slip or omission. Any
rectification of the order, in accordance with the provisions of section 161, shall be made by the proper
officer in FORM GST DRC-08
Q 14. What are the remedies available to the assessee who have been issued order under
section 74 of the CGST Act?
Ans. Any person served with an order issued under section 74(9) pays the tax along with interest
payable thereon under section 50 and a penalty equivalent to fifty percent of such tax within thirty days
of communication of the order, all proceedings in respect of the said notice shall be deemed to be
concluded.
Explanation 1. -For the purposes of section 73 and this section, -
(i) the expression “all proceedings in respect of the said notice” shall not include
proceedings under section 132;
(ii) (ii) where the notice under the same proceedings is issued to the main person liable
to pay tax and some other persons, and such proceedings against the main person
have been concluded under section 73 or section 74, the proceedings against all the
persons liable to pay penalty under sections 122, 125, 129 and 130 are deemed to be
concluded.
Explanation 2. ––For the purposes of this Act, the expression “suppression” shall mean non-
declaration of facts or information which a taxable person is required to declare in the return,
statement, report or any other document furnished under this Act or the rules made thereunder,
or failure to furnish any information on being asked for, in writing, by the proper officer.
Q 15. What is the time limit for initiation of recovery proceedings under CGST Act, 2017?
Ans. Any amount payable by a taxable person in pursuance of an order passed under this Act shall be
paid by such person within a period of three months from the date of service of such order failing which
recovery proceedings shall be initiated.
Provided that where the proper officer considers it expedient in the interest of revenue he may, for
reasons to be recorded in writing, require the said taxable person to make such payment within such
period less than a period of three months as may be specified.
Q 16. What is the course of recovery in cases where the tax demand confirmed is enhanced in
appeal/ revision proceedings?
Ans. The notice of demand is required to be served only in respect of the enhanced dues. In so far as
the amount already confirmed prior to disposal of appeal/revision, the recovery proceedings may be
continued from the stage at which such proceedings stood immediately before such disposal of
appeal/revision. (Sec.84(a))
Q 17. What are the provisions for recovery of the erstwhile dues in respect of default of C.Ex.
duties and Service Tax in the GST regime?
Ans. As per Section (8) of Section 142 of the GST Act,
(a) Where in pursuance of an assessment or adjudication proceedings instituted, whether,
before, on or after the appointed day, under the existing law, any amount of tax, interest, fine or
penalty becomes recoverable from the person, the same shall, unless recovered under the
 Page 366 of 371

existing law, be recovered as an arrear or tax under this Act the amount so recovered shall not
be admissible as input tax credit under this Act;
(b) Where in pursuance of an assessment or adjudication proceedings instituted, whether
before, on or after the appointed day, under the existing law, any amount of tax, interest, fine or
penalty becomes refundable to the taxable person, the same shall be refunded to him in cash
under the said law, notwithstanding anything to the contrary contained in the said law other than
the provisions of sub section (2) of Section 11B of the Central Excise Act,1944 (1 of 1944) and
the amount rejected, if any, shall not be admissible as input tax credit under this Act.
Detailed procedure for recovery of arrears under the existing law and reversal of inadmissible
input tax credit has been outlined in the CBIC circular no. 42/16/2018-GST dated 13th April,
2018. It may also be noted that recovery can now be made using FORM GST DRC-07.
The CENVAT credit of central excise duty or service tax wrongly carried forward as transitional
credit, and the arrears of central excise duty, service tax or wrongly availed CENVAT credit
thereof under the existing law shall be recovered as central tax liability to be paid through the
utilization of amounts available in the electronic credit ledger or electronic cash ledger of the
registered person.
The arrears of interest, penalty and late fee in relation to CENVAT credit wrongly carried
forward, and in relation to arrears of central excise duty, service tax or wrongly availed CENVAT
credit thereof under the existing law shall be recovered as interest, penalty and late fee of
central tax to be paid through the utilization of the amount available in electronic cash ledger of
the registered person.
Q 18. What are the modes of recovery of tax available to the proper officer?
Ans. The proper officer may recover the dues in following manner:
a) Deduction of dues from the amount owned by the tax authorities payable to such person.
b) Recovery by way of detaining and selling any goods belonging to such person;
c) Recovery from other person, from whom money is due or may become due to such person or
who holds or may subsequently hold money for or on account of such person, to pay to the
credit of the Central or a State Government;
d) Distrain any movable or immovable property belonging to such person, until the amount
payable is paid. If the dues not paid within 30days, the said property is to be sold and with the
proceeds of such sale the amount payable and cost of sale shall be recovered;
e) Through the Collector of the district in which such person owns any property or resides or
carries on his business, as if it was an arrear of land revenue;
(f) By way of an application to the appropriate Magistrate who in turn shall proceed to recover
the amount as if it were a fine imposed by him;
(g) Through enforcing the bond /instrument executed under this Act or any rules or regulations
made thereunder;
(h) CGST arrears can be recovered as an arrear of SGST and vice-versa.
Q 19. In what manner will the proper officer proceed to recover dues from the amounts owed to
the defaulter?
Ans. Where any amount payable by a defaulter to the Government under any of the provisions of the
Act or the rules made thereunder is not paid, the proper officer may require, in FORM GST DRC-09, a
specified officer to deduct the amount from any money owing to such defaulter in accordance with
the provisions of clause (a) of sub-section (1) of section 79.
For the purposes of this rule, “specified officer” shall mean any officer of the Central Government or a
State Government or the Government of a Union territory or a local authority, or of a Board or
Corporation or a company owned or controlled, wholly or partly, by the Central Government or a State
Government or the Government of a Union territory or a local authority.
 Page 367 of 371

Q 20. What is the procedure for recovery of dues by sale of goods belonging to the defaulter,
which is in the control of the proper officer?
Ans. (1) Where any amount due from a defaulter is to be recovered by selling goods belonging to such
person in accordance with the provisions of clause (b) of sub-section (1) of section 79, the proper
officer shall prepare an inventory and estimate the market value of such goods and proceed to sell only
so much of the goods as may be required for recovering the amount payable along with the
administrative expenditure incurred on the recovery process.
(2) The said goods shall be sold through a process of auction, including e-auction, for which a notice
shall be issued in FORM GST DRC-10 clearly indicating the goods to be sold and the purpose of sale.
(3) The last day for submission of bid or the date of auction shall not be earlier than fifteen days from
the date of issue of the notice referred to in sub-rule (2):
Provided that where the goods are of perishable or hazardous nature or where the expenses of
keeping them in custody are likely to exceed their value, the proper officer may sell them forthwith.
(4) The proper officer may specify the amount of pre-bid deposit to be furnished in the manner
specified by such officer, to make the bidders eligible to participate in the auction, which may be
returned to the unsuccessful bidders, forfeited in case the successful bidder fails to make the payment
of the full amount, as the case may be.
(5) The proper officer shall issue a notice to the successful bidder in FORM GST DRC-11 requiring him
to make the payment within a period of fifteen days from the date of auction. On payment of the full bid
amount, the proper officer shall transfer the possession of the said goods to the successful bidder and
issue a certificate in FORM GST DRC-12.
(6) Where the defaulter pays the amount under recovery, including any expenses incurred on the
process of recovery, before the issue of the notice under sub-rule (2), the proper officer shall cancel the
process of auction and release the goods.
(7) The proper officer shall cancel the process and proceed for re-auction where no bid is received or
the auction is considered to be non-competitive due to lack of adequate participation or due to low
bids.
Q 21. How will the dues owed by the defaulter be recovered by the proper officer from a third
person (a bank, post office, insurer etc.) who holds money on behalf of the defaulter?
Ans. (1) The proper officer may serve upon a person referred to in clause (c) of sub-section (1) of
section 79 (referred to in question as “the third person”), a notice in FORM GST DRC-13 directing him
to deposit the amount specified in the notice.
(2) Where the third person makes the payment of the amount specified in the notice issued under sub-
rule (1), the proper officer shall issue a certificate in FORM GST DRC-14 to the third person clearly
indicating the details of the liability so discharged.
Q 22. What will be the consequences, if the third person referred to above, fails to make
payment in pursuance of notice issued in FORM GST DRC-13?
Ans. in case the person to whom a notice under sub-clause (i) has been issued, fails to make the
payment in pursuance thereof to the Government, he shall be deemed to be a defaulter in respect of
the amount specified in the notice and all the consequences of this Act or the rules made thereunder
shall follow.
Further, any person discharging any liability to the person in default after service on him of the notice
issued under sub-clause (i) shall be personally liable to the Government to the extent of the liability
discharged or to the extent of the liability of the person in default for tax, interest and penalty,
whichever is less.
Q 23. How can the proper officer recover the dues from the amount payable to the defaulter as
a consequence of execution of a decree of a civil court?
Ans. Where any amount is payable to the defaulter in the execution of a decree of a civil court for the
payment of money or for sale in the enforcement of a mortgage or charge, the proper officer shall send
a request in FORM GST DRC-15 to the said court and the court shall, subject to the provisions of the
 Page 368 of 371

Code of Civil Procedure, 1908 (5 of 1908), execute the attached decree, and credit the net proceeds
for settlement of the amount recoverable.
Q 24. What is the manner in which the proper officer will recover dues from the defaulter by
sale of movable or immovable property belonging to the defaulter? (Rule 147)
Ans. (1) The proper officer shall prepare a list of movable and immovable property belonging to the
defaulter, estimate their value as per the prevalent market price and issue an order of attachment or
distraint and a notice for sale in FORM GST DRC-16 prohibiting any transaction with regard to such
movable and immovable property as may be required for the recovery of the amount due:
Provided that the attachment of any property in a debt not secured by a negotiable instrument, a share
in a corporation, or other movable property not in the possession of the defaulter except for property
deposited in, or in the custody of any Court, shall be attached in the manner provided in rule 151.
(2) The proper officer shall send a copy of the order of attachment or distraint to the concerned
Revenue Authority or Transport Authority or any such Authority to place encumbrance on the said
movable or immovable property, which shall be removed only on the written instructions from the
proper officer to that effect.
(3) Where the property subject to the attachment or distraint under sub-rule (1) is-
(a) an immovable property, the order of attachment or distraint shall be affixed on the said
property and shall remain affixed till the confirmation of sale;
(b) a movable property, the proper officer shall seize the said property in accordance with the
provisions of chapter XIV of the Act and the custody of the said property shall either be taken by
the proper officer himself or an officer authorised by him.
(4) The property attached or distrained shall be sold through auction, including e-auction, for which a
notice shall be issued in FORM GST DRC-17 clearly indicating the property to be sold and the purpose
of sale.
(5) Notwithstanding anything contained in the provision of this Chapter, where the property to be sold is
a negotiable instrument or a share in a corporation, the proper officer may, instead of selling it by public
auction, sell such instrument or a share through a broker and the said broker shall deposit to the
Government so much of the proceeds of such sale, reduced by his commission, as may be required for
the discharge of the amount under recovery and pay the amount remaining, if any, to the owner of such
instrument or a share.
(6) The proper officer may specify the amount of pre-bid deposit to be furnished in the manner
specified by such officer, to make the bidders eligible to participate in the auction, which may be
returned to the unsuccessful bidders or, forfeited in case the successful bidder fails to make the
payment of the full amount, as the case may be.
(7) The last day for the submission of the bid or the date of the auction shall not be earlier than fifteen
days from the date of issue of the notice referred to in sub-rule (4):
Provided that where the goods are of perishable or hazardous nature or where the expenses of
keeping them in custody are likely to exceed their value, the proper officer may sell them forthwith.
(8) Where any claim is preferred or any objection is raised with regard to the attachment or distraint of
any property on the ground that such property is not liable to such attachment or distraint, the proper
officer shall investigate the claim or objection and may postpone the sale for such time as he may
deem fit.
(9) The person making the claim or objection must adduce evidence to show that on the date of the
order issued under sub-rule (1) he had some interest in, or was in possession of, the property in
question under attachment or distraint.
(10) Where, upon investigation, the proper officer is satisfied that, for the reason stated in the claim or
objection, such property was not, on the said date, in the possession of the defaulter or of any other
person on his behalf or that, being in the possession of the defaulter on the said date, it was in his
possession, not on his own account or as his own property, but on account of or in trust for any other
person, or partly on his own account and partly on account of some other person, the proper officer
 Page 369 of 371

shall make an order releasing the property, wholly or to such extent as he thinks fit, from attachment or
distraint.
(11) Where the proper officer is satisfied that the property was, on the said date, in the possession of
the defaulter as his own property and not on account of any other person, or was in the possession of
some other person in trust for him, or in the occupancy of a tenant or other person paying rent to him,
the proper officer shall reject the claim and proceed with the process of sale through auction.
(12) The proper officer shall issue a notice to the successful bidder in FORM GST DRC-11 requiring
him to make the payment within a period of fifteen days from the date of such notice and after the said
payment is made, he shall issue a certificate in FORM GST DRC-12 specifying the details of the
property, date of transfer, the details of the bidder and the amount paid and upon issuance of such
certificate, the rights, title and interest in the property shall be deemed to be transferred to such bidder:
Provided that where the highest bid is made by more than one person and one of The mis a co-owner
of the property, he shall be deemed to be the successful bidder.
(13) Any amount, including stamp duty, tax or fee payable in respect of the transfer of the property
specified in sub-rule (12), shall be paid to the Government by the person to whom the title in such
property is transferred.
(14) Where the defaulter pays the amount under recovery, including any expenses incurred on the
process of recovery, before the issue of the notice under sub-rule (4), the proper officer shall cancel the
process of auction and release the goods.
(15) The proper officer shall cancel the process and proceed for re-auction where no bid is received or
the auction is considered to be non-competitive due to lack of adequate participation or due to low
bids.
Q 25. In what manner will a proper officer attach any property in a debt not secured by a
negotiable instrument, a share in a corporation, or other movable property not in the
possession of the defaulter? (Rule 151)
Ans. (1) A debt not secured by a negotiable instrument, a share in a corporation, or other movable
property not in the possession of the defaulter except for property deposited in, or in the custody of any
court shall be attached by a written order in FORM GST DRC-16 prohibiting. -
(a) in the case of a debt, the creditor from recovering the debt and the debtor from making
payment thereof until the receipt of a further order from the proper officer;
(b) in the case of a share, the person in whose name the share may be standing from transferring
the same or receiving any dividend thereon;
(c) in the case of any other movable property, the person in possession of the same from giving it
to the defaulter.
(2) A copy of such order shall be affixed on some conspicuous part of the office of the proper officer,
and another copy shall be sent, in the case of debt, to the debtor, and in the case of shares, to the
registered address of the corporation and in the case of other movable property, to the person in
possession of the same.
(3) A debtor, prohibited under clause (a) of sub-rule (1), may pay the amount of his debt to the proper
officer, and such payment shall be deemed as paid to the defaulter.
Q 26. In what manner, will attachment of any property in the custody of courts take place? (Rule
152)
Ans. Where the property to be attached is in the custody of any court or Public Officer, the proper
officer shall send the order of attachment to such court or officer, requesting that such property, and
any interest or dividend becoming payable thereon, may be held till the recovery of the amount
payable.
Q 27. How will proper officer attach an interest in partnership of the defaulter? (Rule 153)
Ans. (1) Where the property to be attached consists of an interest of the defaulter, being a partner, in
the partnership property, the proper officer may make an order charging the share of such partner in
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the partnership property and profits with payment of the amount due under the certificate, and may, by
the same or subsequent order, appoint a receiver of the share of such partner in the profits, whether
already declared or accruing, and of any other money which may become due to him in respect of the
partnership, and direct accounts and enquiries and make an order for the sale of such interest or such
other order as the circumstances of the case may require.
(2) The other partners shall be at liberty at any time to redeem the interest charged or, in the case of a
sale being directed, to purchase the same.
Q 28. How will the amounts recovered as proceeds of sale of goods or movable or immovable
property be appropriated? (Rule 154)
Ans. The amounts so realised from the sale of goods, movable or immovable property, for the recovery
of dues from a defaulter shall, -
(a) first, be appropriated against the administrative cost of the recovery process;
(b) next, be appropriated against the amount to be recovered;
(c) next, be appropriated against any other amount due from the defaulter under the Act or
the IGST/UTGST/SGST Act(s), 2017 and the rules made thereunder; and
(d) any balance, be paid to the defaulter.
Q 29. How will the proper officer make recovery of dues of the defaulter through land revenue
authority?
Ans. Where an amount is to be recovered in accordance with the provisions of clause (e) of sub-
section (1) of section 79, the proper officer shall send a certificate to the Collector or Deputy
Commissioner of the district or any other officer authorised in this behalf in FORM GST DRC-18 to
recover from the person concerned, the amount specified in the certificate as if it were an arrear of
land revenue.
Q 30. How will the amount be recovered from the defaulter, if it is to be recovered as a fine
imposed under the Code of Criminal Procedure, 1973?
Ans. Where an amount is to be recovered as if it were a fine imposed under the Code of Criminal
Procedure, 1973, the proper officer shall make an application before the appropriate Magistrate in
accordance with the provisions of clause (f) of sub-section (1) of section 79 in FORM GST DRC- 19 to
recover from the person concerned, the amount specified thereunder as if it were a fine imposed by
him.
Q 31. Can the amount due from the defaulter be recovered from the surety?
Ans. Yes. Where any person has become surety for the amount due by the defaulter, he may be
proceeded against under this Chapter as if he were the defaulter. (Rule 157)
Q 32. Whether the payment of tax dues can be made in instalments?
Ans. Yes, a person can request for payment of any amount due under the Act, other than the amount
due as per the liability self-assessed in any return, in monthly instalments not exceeding twenty-four,
subject to payment of interest under section 50 with such limitations and conditions as may be
prescribed.
However, where there is default in payment of any one instalment on its due date, the whole
outstanding balance payable on such date shall become payable and recovered without any further
notice. {sec.80of CGST Act}
Q 33. In what manner, will the Commissioner deal with a request for payment of tax and other
amounts in instalments? (Rule 158)
Ans. (1) On an application filed electronically by a taxable person, in FORM GST DRC- 20, seeking
extension of time for the payment of taxes or any amount due under the Act or for allowing payment of
such taxes or amount in instalments in accordance with the provisions of section 80, the Commissioner
shall call for a report from the jurisdictional officer about the financial ability of the taxable person to pay
the said amount.
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(2) Upon consideration of the request of the taxable person and the report of the jurisdictional officer,
the Commissioner may issue an order in FORM GST DRC-21 allowing the taxable person further time
to make payment and/or to pay the amount in such monthly instalments, not exceeding twenty-four, as
he may deem fit.
(3) The facility shall not be allowed where-
(a) the taxable person has already defaulted on the payment of any amount under the Act or
the IGST/UTGST/SGST Act(s), 2017, for which the recovery process is on;
(b) the taxable person has not been allowed to make payment in instalments in the preceding
financial year under the Act or the IGST/UTGST/SGST Act(s), 2017;
(c) the amount for which instalment facility is sought is less than twenty–five thousand rupees.
Q 34. In what manner will provisional attachment of property take place? (Rule 159)
Ans. (1) Where the Commissioner decides to attach any property, including bank account in
accordance with the provisions of section 83, he shall pass an order in FORM GST DRC-22 to that
effect mentioning therein, the details of property which is attached.
(2) The Commissioner shall send a copy of the order of attachment to the concerned Revenue
Authority or Transport Authority or any such Authority to place encumbrance on the said movable or
immovable property, which shall be removed only on the written instructions from the Commissioner to
that effect.
(3) Where the property attached is of perishable or hazardous nature, and if the taxable person pays
an amount equivalent to the market price of such property or the amount that is or may become
payable by the taxable person, whichever is lower, then such property shall be released forthwith, by
an order in FORM GST DRC-23, on proof of payment.
(4) Where the taxable person fails to pay the amount referred to in sub-rule (3) in respect of the said
property of perishable or hazardous nature, the Commissioner may dispose of such property and the
amount realized thereby shall be adjusted against the tax, interest, penalty, fee or any other amount
payable by the taxable person.
(5) Any person whose property is attached may, within seven days of the attachment under sub-rule
(1), file an objection to the effect that the property attached was or is not liable to attachment, and the
Commissioner may, after affording an opportunity of being heard to the person filing the objection,
release the said property by an order in FORM GST DRC- 23.
(6) The Commissioner may, upon being satisfied that the property was, or is no longer liable for
attachment, release such property by issuing an order in FORM GST DRC- 23.
Q 35. How will notice of tax dues be given to the liquidator in terms of Section 88?
Ans. Where the company is under liquidation as specified in section 88, the Commissioner shall notify
the liquidator for the recovery of any amount representing tax, interest, penalty or any other amount
due under the Act in Form GST DRC -24.
Q 36. How will the order for reduction or enhancement of any demand in terms of Section 84 be
given? (Rule 161)
Ans. The order for the reduction or enhancement of any demand under section 84 shall be issued
in Form GST DRC-25.
Q 37. Can recovery of arrears of a person registered in one State be effected from a distinct
person located in another state?
Ans. Yes, vide the CGST (Amendment) Act, 2018, an explanation clause has been inserted in section
79 of the CGST Act, 2017 to the effect that person in section 79 includes “distinct persons” as referred
to in sub-section (4) or, as the case may be, sub-section (5) of section 25. Thus, the tax dues are
recoverable from all the persons having the same PAN. (This provision is yet to be notified)