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GST is a win-win situation for the entire country. It brings benefits to all the stakeholders of industry, Government and the consumer. It will lower the cost of goods and services, give a boost to the economy and make the products and services globally competitive.
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Table of Contents
S.N. Description Pg.No. No. Illus.
Goods and Services Tax Goods and Services Tax
Total No. of Illustrations
Notes
Question 1 What is GST (Goods and Service Tax)? Answer GST is a destination based tax and levied at a single point at the time of consumption of goods or services by the ultimate consumer. GST is based on the principle of value added tax. GST law emphasizes on voluntary compliance and on accounts based reporting and monitoring system. It is a comprehensive levy and envisages tax collection on both goods and services at the same rate. Internationally, GST was first introduced in France and now more than 160 countries have introduced GST. Most of the countries, depending on their own socio-economic formation, have introduced National level GST or Dual GST.
GOODS & SERVICES TAX
Introduction of GST
Chap. 1 Question 2 List the taxes to be subsumed in GST? (MTP –ICAI) Answer :
Question 3 What are the taxes that will continue post GST? Answer : The taxes that will continue after GST are a. Basic Customs Duty b. Export Duties c. Stamp Duties d. Electricity Duties e.Taxes on professions, trades, callings and employments
Question 4 Explain the concept of 'Dual GST' (Nov 17 – CA final) Answer : India has adopted a dual GST which is imposed concurrently by the Centre and States, i.e. Centre and States simultaneously tax goods and services. Centre has the power to tax intra-State sales &States are empowered to tax services. GST extends to whole of India including the State of Jammu and Kashmir.
Question 5 What does CGST/SGST/IGST mean? Answer : CGST : CGST stands for Central Goods & Service tax, it is levied & collected by the central government. SGST : SGST stands for State Goods & Service tax, it is levied & collected by the state government. IGST : IGST stands for Integrated Goods & Service tax, it is levied & collected both by the central government & state government of respective states. It is basically charged on inter-state supply of goods or services.
Central levies to be subsumed
State levies to subsumed
Notes
Question 12 Mention the various components under GST act? Answer Ü Central Goods & Service Tax Act 2017 Ü State Goods & Service Tax Act 2017 Ü Integrated Goods & Service Tax Act 2017 Ü Union Territory Goods & Service Tax Act 2017
Question 11 What is the guiding principle of GST council? Answer The mechanism of GST council would ensure the following:- Ø Harmonization of different aspects of GST between Centre & the State as well as among states Ø Discharge of various functions Ø Make recommendations on various aspects of GST Ø Development of harmonized national market for goods & services
Question 13 What would be the rate structure under GST? Answer The rate structure consists for goods & services will be 5, 12, 18, 28 and 28 per cent + cess besides goods which are taxed at nil rate (fully exempt). GST Tariff may be referred to, to know tax rate for respective goods and services.
GOODS & SERVICES TAX
Question 14 What is GSTN? Answer GSTN stands for Goods and Service Tax Network (GSTN). A Special Purpose Vehicle called the GSTN has been set up to cater to the needs of GST. The GSTN shall provide a shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders for implementation of GST.
Question 15 What are the functions performed by the GSTN? Answer Ü Facilitating registration Ü Forwarding the returns to Central & State authorities Ü Computation & settlement of IGST Ü Matching of tax payment details with banking network Ü Providing various MIS reports to the Central & the State Governments based on the taxpayer return information Ü Providing analysis of taxpayers profile Ü Running the matching engine for matching, reversal & reclaim of input tax credit
Introduction of GST
Chap. 1
Notes
Question 17 What does Inward Supply mean in GST?
Answer
Inward Supply in relation to a person shall mean receipt of goods or services or both whether by purchase, acquisition or both whether by purchase, acquisition or any other means with or without consideration.
Question 18 What does Outward Supply mean in GST?
Answer
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.
Question 19 Bring out the salient features of cross utilization of Input Tax Credit (ITC) under the GST law? (Nov 17 – CA final)
Answer
Input Tax Credit (ITC) of CGST and SGST/UTGST is available throughout the supply chain,
Ü but cross utilization of credit of CGST and SGST/UTGST is not possible, i.e. CGST credit cannot be utilized for payment of SGST/UTGST and SGST/UTGST credit cannot be utilized for payment of CGST.
Ü However, cross utilization is allowed between CGST/SGST/UTGST and IGST, i.e. credit of IGST can be utilized for the payment of CGST/SGST/UTGST and viceversa.
Question 16 Which states have been categorized as special category states under GST?
Answer
Special provision in GST have been made with respect to states of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.
Introduction of GST
Chap. 1
Table of Contents
S.N. Description Pg.No. No. Illus.
Applicability of GST Law Levy of GST - Sec 9(cgst) & Sec 5 (igst) Sec 7 : Supply - Meaning Person, Supplier & Recipient Supply in the Course or Furtherance Business Goods or Service Under GST Works Contract Under GST Consideration for Supply Schedule - I : Deemed supply without consideration Transfer of Business Asset Supply to related person or Distinct person Supply between principle and Agent Schedule II : Activity to be treated as supply of goods or supply of services Schedule III : Activity not treated as Supply Import of Services Composite and Mixed Supply
Total No. of Illustrations
Notes
Question 1 Explain the applicability of CGST & IGST Act? Whether the act also extends to the state of Jammu & Kashmir? Answer CGST & IGST Act 2017 is applicable to whole of India. Initially it was not applicable to State of Jammu & Kashmir but by special ordinance it was made applicable to the State of Jammu & Kashmir from 8th July
APPLICABILITY OF GST LAW
Charge of Tax
Chap. 2
Question 3 CASESTUDY Nitin Ltd. provided services to Jagat Oil Corporation from vessels located in the continental shelf of India for the purposes of prospecting natural gas, State briefly whether goods & service tax will be levied in this case. Answer Charging Section 7 of CGST, inter alia , provides that goods & service tax shall be levied on the services provided in the taxable territory by registered person to another. As per section 2(109), Taxable territory means the territory to which the provisions of the CGST act applies i.e. whole of territory of India. The vessels located in the continental shelf of India for the purpose of prospecting natural gas fall within the ambit of definition of 'India'. Since in the present case, Nitin Ltd. provided services to Jagat Oil Corporation from vessels located in the continental shelf of India for the purposes of prospecting natural gas, it implies that services have been provided in taxable territory by one person to another for consideration. Thus, goods & service tax is leviable on such services.
Question 2 Define Taxable territory & Non-taxable Territory? Answer As per section 2(109), Taxable territory means the territory to which the provisions of the CGST act applies i.e. whole of territory of India. Whereas a Non-taxable territory has been defined under section 2(79) of CGST act as a “non-taxable territory” means the territory which is outside the taxable territory
LEVY OF GST - SEC 9(CGST) & SEC 5 (IGST)
Question 4 What is a taxable event under GST? (ICAI Material) Answer As per section 9 of CGST Act & section 5 of IGST Act, Taxable event under GST is supply of goods or services or both. CGST and SGST/ UTGST will be levied on intra-State supplies. IGST will be levied on inter- State supplies.
Question 5 Supply of all goods and/or services is taxable under GST. Discuss the validity of the statement. (ICAI Material) Answer The statement is incorrect. Supplies of all goods and services are taxable except alcoholic liquor for human consumption. Supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be taxable with effect from a future date. This date would be notified by the Government on the recommendations of the GST Council.
Notes
SEC 7 : SUPPLY - MEANING
Question 11 When does a particular activity attract GST? Explain the scope? Answer As per section 9 of CGST act, GST is leviable on supply of goods / services or both As per section 7 of CGST act, supply includes (1) All forms of supply of goods or services or both Ü such as sale, transfer, barter, exchange, licence, rental, lease, or disposal Ü made or agreed to be made for a consideration by a person Ü in the course or furtherance of business (2) import of services for a consideration whether or not in course or furtherance of business (3) the activities specified in Schedule I, made or agreed to be made without a consideration & (4) the activities to be treated as supply of goods or supply of services as referred in Schedule II Thus, all the activities specified above falling under the scope of supply shall attract GST excluding those activities as specified in Schedule III.
Question 12 Mention the necessary elements that shall constitute supply under CGST Act? Answer For any activity to qualify as 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 under Schedule I iii) the supply is made in the course or furtherance of business iv) the supply is made in the taxable territory
Question 14 State the types of supplies under the GST law? Answer The different types of supplies under GST law are as follows:- i) Taxable & exempt supplies ii) Inter-state & Intra-state supplies iii) Composite & mixed supplies iv) Zero rated supplies
Question 13 Whether transfer of title and/or possession is necessary for a transaction to constitute supply of goods? (ICAI Material) Answer 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) of the CGST Act. 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.
Charge of Tax
Chap. 2
Notes
Question 15 Differentiate between a taxable supply & non-taxable supply under GST? Answer
Taxable Supply As per section 2(108) of CGST Act, means supply of goods or services or both which is leviable to GST under this act
Falls under the purview of 'Supply' as per section 7 of CGST Act. For eg:- Supply of Gold jewellery or Silver Articles
Non-Taxable Supply As per section 2(78) of CGST Act, means supply of goods or services or both which is not leviable to GST under this act or under Integrated Goods & Service Tax Act. Does not fall under the purview of 'Supply' as per section 7 of CGST act. For eg:- Supply of Petrol or Diesel
Question 16 What is the difference in between 'Nil rated', 'taxable at 0%' supply of goods and services? Answer There exist a difference between a Nil rated supply and a Zero rated supply as per GST law 'Nil rated supply' means a supply of Goods or Services which has Nil rate in tariff or exempt by notification. 'Zero rated supplies' means a supply of Goods or Services for export or to SEZ units [Sec 16 of IGST]
Question 17 Discuss whether the following activities constitute 'Supply' in accordance with section 7 of CGST Act (i) Mr. Raj sold electronic gadgets to XYZ Co. (ii) Arya pvt. ltd. entered into a hire purchase agreement with AB pvt. ltd. for supply of a machine unit. (iii) Asha purchase an LED TV of 24 inch from Sony electronics store and in return gave away her old TV. (iv) VB associates a CA firm appointed Mr. Urja as an interior decorator to design it's office outlet in exchange for such service, VB associates rendered tax compliance services to Mr. Urja. (v) M/s Bharat electronics disposed scrap part of electric unit to a scrap dealer. Answer i) Yes, as term sale is included in the expression supply ii) Yes, as hire purchase involves transfer of title in goods as per Schedule II of section 7, shall be classified as supply of goods iii) Yes, as the above supply falls under barter transaction which is also included under the scope of supply iv) Yes, it is a form of exchange which is included under the scope of supply v) If the disposal is in course or furtherance of business of M/s Bharat electronics then it shall be considered as a supply.
Charge of Tax
Chap. 2
Notes
Question 20 Explain the term of 'Deemed Distinct Person’ Answer The term has not been specifically defined under GST but as per clause (4) & clause (5) of section 25 of CGST Act, has categorized certain person who shall be treated as distinct persons which states that:- Ü A person who has obtained or is required to obtain more than one registration, F whether in one State or Union territory or F more than one State or Union territory shall, F in respect of each such registration, be treated as distinct persons for the purposes of this Act. Ü 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. Question 21 CASESTUDY Smart pvt ltd has head office located in Bangalore (Karnataka). However, the branch of Smart pvt ltd is located in state of Gujarat. Will they fall under the ambit of deemed distinct person under GST Act? Answer As per clause (4) of section 25 of CGST Act, Smart pvt ltd shall be required to obtain a separate registration in State of Karnataka & Gujarat in respect of its head office & branch respectively. Thus, head office & branch shall be treated as distinct persons.
Question 22 CASESTUDY Shreya ltd is having an establishment in Goa. It has another establishment in the Union Territory of Chandigarh. Will they be treated as establishments of distinct persons under GST Act? Answer As per clause (5) of section 25 of CGST Act, Shreya ltd shall be required to obtain separate registration in Goa & Chandigarh in respect of both the establishments & shall be treated as distinct establishments.
Supply in the course or Furtherance Business
Question 23 Define the term 'Business' under CGST Act. Answer As per section 2(17) of CGST Act, '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 ancillary to 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) services provided by a race club by way of totalisator or a licence to book maker in such club ; and (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
Charge of Tax
Chap. 2
Notes
Question 25 CASESTUDY Ms Shreya buys a Mobile for her personal use and after a year sells it to a Mobile dealer. Will it constitute 'supply' & is GST leviable on such supply? Answer Legal Provision:- As per sec 7 (1)(a) When any Sale, Transfer, barter etc is made for a consideration in the course or furtherance of business then it would be treated as supply & liable to GST. In the given case sale of mobile by Ms Shreya to a Mobile dealer shall not be considered as supply, As such sale is not in course or furtherance of business of Ms Shreya. Hence, not treated as supply & no GST is payable.
Question 24 Determine whether the following activities fall under the scope of business? i) M/s X pvt ltd is engaged in the manufacture of auto parts for industrial purposes ii) M/s ABC ltd acquired capital goods lying in stock of M/s S ltd as on takeover of business of M/s S ltd. iii) ETA Star adventure club provides a free trekking camp to members of the club iv) Adlabs Imagica charges ` 1500 as an entry fee into the park to its customers Answer i) Yes, the given activity of manufacture has been included in the definition of business. ii) Yes, as per the definition of business, supply or acquisition of goods including capital goods and services in connection with commencement or closure of business. iii) No, as per the definition of business, provision of services to members as in return for subscription fee, thus in the given case as free trekking camp is organized for non-members. iv) Yes, as per definition of business, admission, for a consideration, of persons to any premises as in the given case the entry fee is charged for admission into the park.
Question 26 CASESTUDY 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 fo the answer. (CBEC FAQ) Answer No, because supply is not made by the individual in the course of 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.
Charge of Tax
Chap. 2
Notes
Question 30 Define the term 'Works Contract’ Answer As per section 2(119) of CGST Act, “works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning Ü of any immovable property Ü wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract
Question 31 CASESTUDY Aspire Ltd enters into contract with Beta Ltd for execution of works contract for ` 50,00, excluding taxes for following activities pertaining to construction of a complex. Determine whether the following activities fall under the ambit of 'works contract' i) Erection & installation of structural designs to the complex which involved material. ii) Fabrication works relating to the structure of complex no material is involved. iii) Assembling of units pertaining to movable property which involved material and goods. iv) Tiling & painting work of the entire building which involved material. Answer As per section 2(119) of CGST Act, defining the term works contract. Only if the activities fall under the definition it shall be considered as a works contract. i) Yes, the given activity is in relation to an immovable property thus qualifies as a works contract ii) No, eventhough the given activity of fabrication is in relation to immovable property thus it does not qualifies as works contract because material is not involved. iii) No, the activity of assembling units will not qualify as works contract as it is relation to a movable property. iv) Yes, the given activity is in relation to building which is immovable property & thus qualifies as works contract.
Works Contract Under GST
Charge of Tax
Chap. 2
Notes
Question 32
Shambhu Pvt. Ltd. was awarded contract in Nov.2018 for moving flooring & wall tiling services in resptect of building located in Delhi by Nath Ltd. As per terms of contract, Shambhu Pvt. Ltd. was to provide all the required material for execution of contract. Following are the particulars given by Shambhu Pvt. Ltd.?
Description Inward Supply Value Rate
Outward Supply Value Rate Granite used Cement used Other material Labour & other services
Determine GST Liability of Shambhu Pvt. Ltd. if (i) Separate charges made for supply of material services (ii) Supplied as works contract.@18%
Charge of Tax
Chap. 2
Calculation of GST liability if Separate charges is made for supplier, material & Service
Particular (^) Value Tax (`) CGST SGST Granite used Cement used Other material Labour & other services Total GST payable (a)
Less ITC on Inward Supplier Granite used Cement used Other material Labour & other services Total ITC payable (b) Net GST payable (a) - (b)
Calculation of GST liability if supplied as a works contract
Particular Value Tax (`) CGST SGST
Works Contract @ 18% Total GST payable (a)
Less ITC on Inward Supplier Granite used Cement used Other material Labour & other services Total ITC payable (b) Net GST payable (a) - (b)
Notes
Charge of Tax
Question 36 Chap. 2 Venus music world charged a late fee as a penalty for late return of a DVD compact disc to its customer. Will the late fee charged to its customer be considered as a part of consideration? Answer As per sec 2(102) Service means anything other than goods, money & securities Also as per Schedule II para 5 of CGST Act, refraining from an act or to tolerate an act is called as supply of service. Hence, late fee, fine, penalty charged by the supplier for any reason would be treated as supply of service for consideration & liable to GST.
Ü Sale of old gold articles by customer to jeweler – This falls out of purview of supply as the sale by customer is not in course of business.Thus, does not fall under the ambit of consideration hence no GST iii)Yes, as supply of motorbike is in response to an offer to join the cricket club. GST shall be levied iv) As per section 2(31) of CGST Act, pertaining to 'consideration' clearly excludes the value of subsidy received from the Central Government or State Government. Thus in the given case the amount of subsidy shall be excluded from the value of consideration.
v) As per section 2(31) of CGST Act, pertaining to 'consideration' clearly excludes the value of subsidy received from the Central Government or State Government. But in given case subsidy is given by the supplier and not by Govt. hence subsidy is treated as consideration.
Question 37 Will GST be applicable on any interest charged for payment after the credit period? Answer As per sec 2(102) Service means anything other than goods, money or securities. Hence, Interest charged for the following activities are liable to GST: (1) Interest for use of money (i.e. loan, advances, deposits) (2) Interest for delay payment of consideration (i.e. interest from debtors, receivables) Interest on loan advances or deposit is subject to exemption but any interest, late fee or penalty for delay payment of consideration is liable to GST.
Question 38 Whether supply of goods or services without consideration is liable to tax? Answer Normally as per Sec 7(1)(a) supply of goods or services for consideration is liable to GST. The activities enumerated in Schedule I will qualify as supply even if made without consideration. Accordingly, such supplies in the absence of consideration are liable to tax. To illustrate, following are the activities which will qualify as supply in the absence of consideration and eventually would be liable to tax:
Schedule - I : Deemed supply without consideration
Notes
Charge of Tax
Chap. 2
Question 40 Whether transfer of goods to another branch located outside the State is taxable? What would be your opinion on taxability of goods are transfer to another branch of same state. Answer In terms of Section 25(4) of the CGST Act, 2017, every person is required to obtain separate registration for every branch located in different state or union territory and shall be treated as distinct persons. Accordingly, the supply of goods (stock transfers) to a branch located outside the State would qualify as supply liable to tax in terms of para 2 to Schedule I of the CGST Act, 2017. Further, it is important to note that, supply of goods to a branch / unit located within the same State is not liable to GST if such branch is not separately registered. In case branch in a same state having separate registration then it would also be liable to tax since both such units (supplying unit and recipient unit) would qualify as distinct person in terms of Section 25(4).
Question 41 Whether gifts given by employer to employee will also qualify as supply? Answer As per definition of related person it includes employer & employee as related person. As per Sch I [Sec 7 (1) (c)] para 2 any supply of goods or services to related person shall qualify as a supply when it is made in the course or furtherance of business. Also as per proviso the gift value not exceeding ` 50,000 in a financial year by an employer to employee shall be treated as supply.
Question 39 VB associates & Co a CA firm donated old laptops to charitable schools on account of renovation of office. The firm had taken input tax credit on the laptops so donated. Does it qualify as a supply? Answer As per section 7(1)(c) read with Schedule I of CGST Act,2017, Permanent transfer or disposal of business assets where input tax credit has been availed shall be treated as supply even if made without consideration. Hence donation of old laptops to charitable schools shall qualify as supply since ITC has been availed by VB associates & co.
Question 42 Daksh gold pvt ltd. On occasion of Diwali distributes gift hamper to its employee worth 3, 00,000. Does it qualify as supply? Would your answer be different if gifts of 42,000 have been given to a employee? Answer As per section 7(1) (c) read with Schedule I of CGST Act, 2017, Supply of goods or services between related persons id treated as supply even if it is without consideration. As per explanation to section 15 of CGST Act 2017, persons shall be deemed to be as “related persons” if such persons are employer and employee. Thus, Diwali gifts to employee worth 3,00,000, will qualify as supply and such supply would be leviable to GST. If gift of 42,000 is given instead of 3,00,000 , the same will not qualify as supply since it has been specifically provided that gifts not exceeding 50,000 in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.
Transfer of Business Asset
Supply to related person or Distinct person
